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Project Study Report

Training Undertaken at



Submitted in partial fulfillment for the

Award of degree of
Master of Business Administration


Submitted By: - Suman Singh Submitted To:-Sweety jain

MBA III sem.

Advent Institute of Management Studies

“Knowledge Park”, Fernio ka Guda,
Badi, Udaipur (Raj.)

The industrial training has been an integral part of MBA program .This has an
everlasting impact on the trainee & helps in setting himself in industrial environment
when he takes up a job.
For a management student theoretical knowledge as well as practical orientation
exposes oneself to experiences, one can again be mastering it is best possible time.
MBA curriculum has been fine tuned in such a way that students not apply the
theoretical knowledge but also gain it in a practical sense. Thus objectives can be
attained through application of theory tools concepts and techniques of

Balanced theoretical and practical knowledge are essential for every student and
MBA curriculum is conceived in such a way so as to facilitate practical purpose.

During this project report I have tried my best to gain some valuable knowledge &
experience & also tried to give some valuable suggestion to the organization.

I express my sincere thanks to my project guide, Mr.Rajiv Loadha (F&A Manager) &
B.L. Salvi, Deputy Manager, HRD, RSMML. For guiding me right form the inception
till the successful completion of the project.

I sincerely acknowledge him/her/them for extending their valuable guidance, support

for literature, critical reviews of project and the report and above all the moral
support he/she/they had provided to me with all stages of this project.
I would also like to thank the Director Prof N.S.Rao for their help and cooperation
throughout our project.

Suman Singh

Stewart H. Britt rightly said, “Doing business without knowing problems is like
winking at a girl in the dark, you know what you are doing but nobody else does”.
The very objective of the company is to achieve cost effective technological
innovations in the mining of minerals and to diversify into mineral based downstream

RSMML occupies a place of pride in non metallic of India. RSMML is a multi mineral
and multi location enterprises engaged in mining and marketing of rock phosphate,
SMS grade lime stone, Gypsum and Salanite.

I had taken the project “the study of working capital of management” At RSMML.
It was a grate experience for me to come in close contact, communication skills and
overall interaction capabilities have improved.

This training report has been an effort to summarize all the piece of information
gathered by me during my training session.

The early topics in this training report include the introduction of working capital of
management, industry and organization, its group companies, its journey to reach
acme of success and its organization structure, products, board of directors etc.

In this project I have shown the details with the Research Methodology. It includes
the rationale of the study followed by the research objective, planning of the project
and how the data collection was performed. Further it explains the research design,
analysis of data. Primary and secondary data collection was performed for the
purpose. Channel distribution was also done; observation was divided in the time
slots. A table format was designed to collect the data.

In the next session of this report is follow the analysis of various ratio & calculation
of working capital ,managing working capital ,working capital financing, working
capital management ,financial mix of RSMML etc.

In the next session of this report is concerned collected data was interpreted to find
the results. The first hand collected data was analyzed using tables and graphs.

In the last part of this training report includes my conclusions & suggestions ,which
will be beneficial for the company. Financial analysis is the process of identifying the
strength& weakness of the firm .SWOT analysis has been drawn and I have tried to
give suggestions from my side after undertaking this research or project.
Certificate from the Organization
Executive Summary
1. Introduction to the Industry
1.1 Introduction to RSMML
1.2 Corporate profile of RSMML
1.3 Amalgamation
1.4 Strategic business unit & profit centers
2. Introduction to the Organization
2.1Board of director
2.2 Product
2.3 Research & development
2.4 Environment & safety
2.5 Social responsibility
3. Research Methodology
0 3.1 Title of the Study
1 3.2 Duration of the Project
2 3.3 Objective of Study
3 3.4 Sources of data
4 3.5 Reliability of data
5 3.6 Scope of Study
6 3.7 Limitation of Study
4. Financial Management
4.1 Objective
4.2 Financial Affairs of RSMML
4.3 Investment Decision
5. Working Capital Management
5.1 Meaning
5.2 Classification
5.3 Need
5.4 Factor’s affecting
6. Managing Working Capital
7. Working Capital Financing
8. Data Analysis and Interpretation
Charts &Graphs
9. SWOT Analysis
10. Conclusion
11. Bibliography

Rajasthan state mines & minerals limited (in short RSMML) is one of the leading and
progressive undertakings of the government of Rajasthan. It occupies a place of
pride in production and marketing of non-metalistic minerals of India. RSMML is
multi minerals and multi location enterprise engaged in mining of Rock Phosphate,
lignite, SMS grade Limestone and gypsum. RSMML is not only leader in mining &
selling of Rock Phosphate, gypsum across the country, but also global pioneer in
technology in open cast mining & mineral beneficiation of carbonate Rock

Besides minerals, RSMML has also forayed into Energy Sector and setup 15 MW
installed capacity Wind Power Project at Jaisalmer, Rajasthan.


Rajasthan State Mines & Minerals Limited (RSMML) is one of the premier public
sector enterprises of the Government of Rajasthan, primarily engaged in mining and
marketing of industrial minerals in the State. The very objective of the company is to
achieve cost effective technological innovations in the mining of minerals and to
diversify into mineral based downstream projects. Apart from the above, the
Company is also aiming at long term fuel supply to lignite based power projects,
apart from setting up wind energy farms at Jaisalmer. This company is
professionally managed and remains focused towards increasing productivity and


Year 2003, witnessed completion of amalgamation of Rajasthan State Mineral

Development Corporation Limited (RSMDC), another Rajasthan State Government
PSU with Rajasthan State Mines & Minerals Limited (RSMML) was issued by the
Department of Company Affairs, Government of India (Order No. S.O.207(E) dated
19th February 2003) under Section 396 of the Companies Act, 1956 and the same
has come into effect from 20th February, 2003, the date of its publication in the
Gazette of India (Extraordinary).


After amalgamation, the following four mineral based Strategic Business Units &
Profit Centres (SBU & PC) namely Rock Phosphate, Lignite, Gypsum and
Limestone have been set up as a part of corporate restructuring: -

 Strategic Business Unit and Profit Centre – Rockphosphate at Udaipur.

 Strategic Business Unit and Profit Centre – Gypsum at Bikaner
 Strategic Business Unit and Profit Centre – Limestone at Jodhpur
 Strategic Business Unit and Profit Centre – Lignite at Jaipur

Rock Phosphate continued its prime position in the business profile of the Company
and catered to almost 94% of the indigenous demand. The capacity of industrial
beneficiation plant was increased from 1500 TPD to 3000 TPD and the production
got streamlined. The production of lignite was streamlined at Giral and the company
is gearing up fast for providing one million tonnes of lignite for the lignite based
thermal power plant at Giral under state owned Company, Rajasthan Vidyut
Utpadan Nigam Ltd. Being pioneer in the lignite field, RSMML has ensured its strong
presence in the lignite based power sector in Rajasthan. Despatches of gypsum
touched 3.39 million ton in 2008-09. Renewed emphasis on environmental
management was stressed upon for the management of gypsum mines. Supply of
SMS grade limestone to the steel plants of India touched the record level of 2.30
million tonnes in 2008-09.
In the year 2008-09, company has achieved the profit before tax Rs. 177.89 crores
in comparison to profit before tax of Rs. 186.75 crores in 2007-08. The Company
started a number of R&D activities to further strengthen its R&D activities. Generous
contributions were made for creation of life saving medical infrastructure in 8 project
districts. The dividend of Rs. 15,51,03,000/- was declared for the year 2008-09.
RSMML today has broken away from its monopolistic moorings and welcomes
competition. From a small backwaters company, it is now rated as a technologically
advanced company and an innovator. It boasts of a highly trained and competent
workforce and strong financial base. It has established itself as the most successful
public sector company in Rajasthan.


He revenue of the company has increased from Rs. 6364 millions to Rs. 9723
millions in the year 2008-09.
Revenue Pie- Share of Various Minerals (Rs. Crore)

Limestone Lignite
64.1 49.29
13% 10%

85.63 Rock
17% Phosphate
Rajphos 229.76
Bneficiated 47%
4.56 Rock
1% Phosphate

1. The company has achieved highest ever production and sales

during in the year 2004-05.

2. The revenue of the company has increased from Rs. 4301 million
to Rs. 5108 million.

3. RSMML declared the highest ever dividend to the Government of

Rajasthan for Rs. 15,50, 82,956 being presented to Hon’ble Chief
Minister Smt. Vasundhara Raje.

4. Completion of the project for doubling the capacity of the industrial

beneficiation Plant from 1500 TDP to 3000 TDP for beneficiation
of low grade rock phosphate ore to high – grade concentrate.

5. Successful commissioning of the third phase of 5 MW Wind Power

Project at Jaisalmer. Together with two plants already in
operation, the total capacity is now 15 MW and the power
generated is of grid quality.

6. Registration of company’s Wind Power Project with Executive

Board of Clean Development Mechanism under UNFCCC.


The present constitution of the Board is as under:

i. Shri T Srinivasan IAS – Chairman Chief Secretary to the Government of


ii. Shri S Ahmed, IAS Additional Chief Secretary to the Government of

Rajasthan, Department of Agriculture,Jaipur

iii. Shri C.K. Mathew, IAS Principal Secretary to the Government of Rajasthan,
Department of Finance, Jaipur

iv. Shri Sunil Arora, IAS Principal Secretary to the Government of Rajasthan,
Department of Industries, Jaipur

v. Dr. Govind Sharma, IAS Principal Secretary to the Government of

Department of Mines & Petroleum, Jaipur
vi. Dr. Shreemat Pandey, IAS Principal Secretary to the Government of
Rajasthan, Department of Energy, Jaipur

vii. Shri Akhil Arora, IAS Managing Director, Udaipur

viii. Shri Ajitabh Sharma, IAS Director, DMG Udaipur

We are producing following products: -
• Lignite

 It is suitable for power production, cement and agriculture


• Gypsum

We are producing following products:-

 Run of Mine (ROM) Gypsum

It is used for manufacturing of cement and land reclamation.

 Gypsum Powder

It is used for manufacturing of cement and land reclamation.

 ROM Selenite
It is used for manufacturing of Plaster of Paris and Ceramics.

• Limestone
We are producing following products: -

• Low Sillica Limestone

Low Sillica Limestone is used in steel plant with BOF
technology as a flux.

• Chemical Grade Limestone

Chemical Grade Limestone is used mainly in chemical
industries producing quick lime and hydrated lime. It is also
used in White Cement and Grey Cement plants for the same

• Rock Phosphate

We are producing following products:-

 Crushed – ½” size High Grade Rock Phosphate

(SSP Manufacturing Units)

 Crushed – ½” size High Grade Rock Phosphate

(DAP/ Nitro Phosphate Manufacturing Units)

 Crushed – ½” size High Grade Rock Phosphate

(DAP/ Nitro Phosphate Manufacturing Units)

 Beneficiated Rock Phosphate Concentrate

(Fertilizer Plants)

 Ground Low Grade Rock Phosphate (RAJPHOS)

(Fertilizer for Direct Application to Acidic Soils)

 Crushed – ½” Size Medium Grade Rock Phosphate

(SSP Manufacturing Units)


The company has developed the organic fertilizer called Phosphate Rich Organic
Manure (PROM) by using high grade rock phosphate with farm yard waste and
other organic matter. The field trials conducted through the different agricultural
universities in the country have shown that the agronomic efficacy of this new P-
fertilizer is higher than that of the complex phosphatic fertilizers available in the
market today. ‘PROM’ is suitable to neutral and alkaline soils, which will prove to be
a boon to the Indian farmers. In the long run, this product will be a winner as it has
significant price advantage vis-à-vis the other chemical fertilizers. Commercialization
of the PROM technology will help utilization of waste and also help in conservation
of the mineral rock phosphate as PROM shows good residual effect.

The company has put a major thrust on the R&D activities in the recent past and
several new R&D projects have been taken up.

Research project taken up for development of fused Ca-Mg phosphate to utilize the
vast reserves of low-grade ore of rock phosphate.

• Converting tailing rejects of IBP to Direct Application Fertilizer for Magnesium

deficient soils.
• Research project taken up for possible commercial production of Bio-Diesel
from Jetropha plant.

• Beneficiation of low grade gypsum for producing high grade 80% + material
for cement industry.
• R&D efforts on apatite mineral to be used in jewelry and decoration. (moving
towards value added product)
• Company has started a Training and Consultancy Center at Jaipur,


As a responsible corporate citizen, RSMML accords equal importance to ecological
and social sectors. The company is concerned about not only the economic bottom-
line reflected by the impressive performance on all quarters and higher profitability
but also the benefits and impacts of our operations, processes and products on the
environment and the health and safety of our employees and the community.
M/s National Safety Council (NSC), Mumbai was engaged by the company to carry
out the safety audit of all the SBUs during the year 2005-06.

A Comprehensive energy audit of all the units of the company has been carried out
by Petroleum Conservation Research Association (PCRA).

RSMML has constructed a huge dam of 200 mcft. Fresh water storage capacity on
Jhamari River, which has helped in recharging the regional water table.

Extensive afforestation / planatation work is being done in and around all mines.
Industrial Beneficiation Plant is "Zero discharge plant". The waste water is treated at
acid water Treatment plant, resulting in an saving of about 1.5 million CuM of fresh

Regular monitoring and control of different environmental parameters i.e. air, water,
dust, noise and heat etc.
Installation of dust extraction system at crushing and screening plant and at Central
Gypsum Grinding Unit, Rawla, Bikaner.
The mined out area is being back filled simultaneously to reclaim the land.
Sajjan Niwas Garden established in 1883 has been adopted by RSMML and is
being restored to its pristine glory.

Company has a safety and health policy. Company follows statutory requirements
as per Mines Act 1952. Every year Safety week celebrated at different units under
the aegis of Director General of Mines Safety (DGMS).
A well equipped vocational training center at Phosphate SBU caters to need of
various training regarding safety and occupational health for the employees.

As a responsible corporate entity committed to discharge its social obligations,
RSMML has been contributing generously towards the development of the areas
located near its mining sites and other areas of operation.
These contributions have been in the areas of –
• Medical & Health Care
• Drinking water
• Education
• Environment
• Development of village infrastructure
Medical Facilities at Project Districts

• The Company has been providing medical, educational and other facilities to
the villages situated around its mines.
• To improve the medical infrastructure of Udaipur region, which is
predominantly a tribal district, RSMML has contributed Rs. 13.15 crores in
last six years for establishment of Cardio-Thoracic Surgery Centre, Neo-Natal
Special Care Unit, 64-Slice CT Scan Centre, Central Oxygen supply system
and other facilities at the M.B. Government Hospital, Udaipur.

• A contribution of nearly Rs. 20.00 crores in last six years has been made to
Chief Minister Fund for development of Medical and Health infrastructure
facilities at Medical colleges / District Hospitals at project districts :- Udaipur,
Bikaner, Jodhpur, Barmer, Sri Ganganagar, Jaisalmer, Hanumangarh,
Jhalore and Nagaur.

• Memorandum of Understanding has also been entered with Government of

Rajasthan for utilization of these funds.

• Medical Camps are being regularly organized in the villages around the mine
location and project areas of the company where free check-up and
medicines are provided.

RSMML has provided land for the project for setting up a 100-beded multi super
specially hospital at Udaipur under a JV arrangement with M/s American
International Health Management Limited, Total capital investment on the hospital
envisaged – Rs. 20 millions.

Other work for development of village infrastructure includes:

• Contribution to panchayats for school.
• Improvement in village Goshalas.
According high priority to fulfill its social responsibilities, the company regularly takes
up works related to socio – economic development along with environment
restoration and management in the area where the company has major mining
operations and other business activities.

Supplying 7 million liters per day of potable water from Jhamarkotra

mines to city of Udaipur since 1994-95.

Recently company has commenced supply of 6 million liters per day of

portable water from Kanpur mines in addition to the present supply of 7
million liters per day. With this, RSMML caters to the potable water
needs of more than 2 lacs people of the water-starved Udaipur City.
Supply of potable water from Jhamarkotra mines to 7 near by village on
a permanent basis since last 8 year.

Adequate potable water supply is ensured through a permanent pipeline

& 75,000 liters capacity GLR in each village.

Full Fledged dispensaries at mine site and corporate office;

Managed by Qualified Doctor and Paramedical staff
Regular annual Monitoring of Occupational Health
Health facilities extended to employee’s dependents at mine site
Company also extends medical facility to village population in & around
mine site Recently, comprehensive health check-up, covering all the
2200 employees, has been conducted with the help of National Institute
of Miners, Nagpur, India


4, Meera Marg, Udaipur – 313004 India.

Phone : +91-294-2528681 to 85
Fax : +91-294-2523170
E-mail :
C-89-90, janpath, Lal Kothi Scheme,
Jaipur – 302004, INDIA
Phone : +91-141-2743734
Fax : +91-141-274373
E-mail :


A systematic approach is essential in any project work. Each and every step must
be so planned, so that each step leads to next step. The project has been divided
into number of procedural steps. Planning and organizing are the part of this
systematic approach with lot of emphasis given to the interdependence of various

Research is a carefully inquiry or examination to discover new information or

relationship and to expand and to verify existing knowledge.

According to “FRANCIS RUMMEL “

Research means search for knowledge. Research can also be defined as,
systematic, scientific objective collection, analysis and recording of information in
relation to some subject or problem.
Methodology adopted to collect the information from various sources for the
preparation of the report was both from primary as well as secondary data. The
research methodology adopted for conducting research was as following as given
by Philip kotler and illustrated as:






The purpose of Research is to discover answers to questions through the

application of scientific procedures. The main aim of the Research is to find out the
truth which is hidden and which has not been discovered.


Research Design constitutes the blue print for the collection, measurement and
analysis of data. As such, the design includes an outline of what the researcher will
do from writing the hypothesis and its operational implications to the final analysis of

“Research Design is the plan, structure and strategy of investigation concern so as

to obtain answers to research questions and to control variations.”
- According to Kerlinger.

The Research Methodology of this project report is as under:-

1. Title of the study
2. Duration of the project
3. Objectives of the study
4. Scope of the study
5. Sources of Data
6. Reliability of data
7. Limitations of The Study

“Working Capital Management” of RSMML


Following is the significance felt by the researcher while doing this project.
From 1 july to 08 august.


The present study aims to contribute towards the broad objectives, which are as
• To put into practice the tool and technique learned theoretically in the
class room.
• To have practical exposure to the field and face the ground reality.
• To understand the real company.
• To gain maximum insight into the working of R.S.M.M.L in order to
understand the practical functioning of a corporate government enterprise.
• To study the functioning of the finance department in R.S.M.M.L.
• To analyze the financial statements of R.S.M.M.L and their interpretation.
• To assess the financial condition and performance of the firm. Analysis
technique has been used for analyzing that.


The scope of present research work was to collect data and information from
RAJASTHAN STATE MINES AND MINERALS LTD having its Jamarkotra office in
Udaipur. For the purpose of this study R.S.M.M.L. Udaipur (the jamarkotra Office)
was selected keeping in view of the easy accessibility and convenience in collecting
data/ information. The period covered under the study is three accounting years, i.e.,
2006-2007, 2007-2008 & 2008-2009. Since the annual accounts of the company for
the accounting year 2009-2010 were under finalization that’s why not covered.


There are two types of sources from which data can be collected, these are as

(i) Primary Data

(ii) Secondary Data

PRIMARY DATA:- Primary Data are those, which are collected for the first time by
the researcher for any particular problem. Since there was not much scope for
collecting primary data on consumer’s attitude towards Rock phosphate (RP) so the
primary data collected from regional customers only which were very few in

SECONDARY DATA:- Those data, which are collected for some earlier research
work and are applicable or usable in the study researcher has primarily undertaken.
The primary data in one research work may take the form of secondary data. The
following sources of data have been consulted by me for the purpose of research.


Last five years of the annual reports are taken into consideration for the
purpose of research proved to be great help as it makes me as easier to
understand the trends of the market.

RSMML has its own library where large number of books, magazines and
papers are present on mines and minerals. These played a vital role in my


All kinds of information given by the marketing executives helped me a lot in
my project work. A face to face conversation with the executives clicked for
me and result is in front of you.
 Various survey reports which RSMML has conducted over the years.
 Dealer satisfaction reports.
 Khanij Sanskar (RSMML family magazine).
 Handbook on fertilizers technology.

For my research work I have taken only the Secondary Data because this study is
about knowing the financial performance of the company, which can only be done
by the past records of the company.


Secondary Data can be collected from different sources, these different types of
Secondary Data are as follows:-


Internal Sources External Sources

Various Internal Reports

Prepared by the firm Govt. Commercial Industry Miscellaneous
Sources Sources Sources

Accounting Sales Force Miscellaneous

Reports Reports Reports

For the purpose of my study only Internal Sources of Secondary Data are being
used here.
Data Collection Sources for the Study:-
In order to achieve the objectives of my study, different methods are adopted
• Review of relevant literature on Ratio Analysis,
• Study of published annual reports of R.S.M.M.L.,
• Discussions with company’s management, etc.
These exercises helped a lot in collecting relevant data and requisite information in
time for the purpose of the present study and also to interpret and analyze the
results as also for getting important classifications about various aspects of the

Financial are meaningful to judge financial condition and profitability performance of

the corporation only when there is comparison.


A fairly good reliability of data/ information can be ascertained from the following,
which has duly been taken into consideration from the following sources:-

• Study of relevant literature, project reports and articles.

• Examination and study of published annual accounts of the company such
as, Annual Reports of the company.
• Since the financial are computed on the basis of audited results, its reliability
is enhanced.
• Personal discussions with company’ management.
• Discussion with the academicians and professionals.


There are some limitations also in conducting this research work, some of the
limitations are as follows:-

• Since the annual accounts of the company for the current year, i.e., 2009-
2010 was under finalization, so the calculation of ratios and financial
performance of the company for the current year couldn’t be done.
• Since for calculation of ratios secondary data were used and the basis to
calculate ratios is historical financial statements. The financial analyst is
more interested in what happens in future, while the ratios indicate what
happens in the past.

• There are many types of ratios, which can be calculated, but information
and data regarding all these ratios were not available, so they were not

• Availability of time was also a constraint to the study.

• Caution needs to be applied while interpreting working capital as they are

calculated from the accounting numbers. Accounting numbers suffer from
accounting policy changes and inflation etc.
Finance – Finance is one of the basis functions of all economic activity business
needs money to make more money but it should be properly managed. Finance
refers to money or funds available to a firm.

Financial Management - may be defined as planning, organizing and controlling of

financial activities in business enterprises.
“Financial Management is concerned with efficient use of an important economic
resource, namely, Capital Fund.”
- According to Solomon
Financial Management is concerned with rising of funds at optimum cost and their
effective utilization with a view to maximize the wealth of the shareholders.
It involves decision making in three areas:-
1. Investment of funds
2. Financing of different activities
3. Disposal of profits
The finance manager is primarily concerned with arranging finances in desired
quantity, critical analysis of the available investment opportunities and controlling the
Thus, management of finance is crucial for success of business. The financial
manager must see that funds are procured in a manner that risks, cost and control
considerations are properly managed in a firm and there is optimum utilization of
Objective – The objective provide a framework for optimal financial decision


1. To provide general knowledge of company’s approach to resource


2. To get familiar with the company’s management process and procedures to

plan, estimate, implement, monitor and evaluate; including internal control
3. To acquire knowledge and skills to be applied in leadership roles to financial
and resource management activities.


1. To acquire general knowledge of the company, manages organization

structure and responsibilities for resource management.

2. To know how the company establishes goals and objectives at various levels
of the organization and how plans are developed to accomplish these objectives.

3. To understand how the company establishes standards to measure

performance and identify deviations and other problems. How are solutions
implemented and monitored.

4. To understand management standard techniques and procedure; including

analytical techniques used to perform trend analysis and performance

5. To become familiar with the application of various management information

systems that supports the operations of the company and the relationship of the
various systems.

6. To acquire knowledge of data management techniques and procedures,

including potential capabilities to interface with other organizations.

7. To understand the human resource programs formulated by management; to

include lessons learned, incorporation of future training, program etc.

Financial Affairs of RSMML

Finance affairs of RSMML are managed through drafting short term & long term
budgets, which are the company estimates of the requirements of funds in the
particular budget period short term budget are usually for period of one month to six
month while company consider budget for months & above to be long term
budget .Every department prepares its budget as per requirements .The budgets are
then presented to finance controller ,one month before the budget period or next
financial controller ,one month before the budget period or next financial year for
preparation of master budgets this assists the financial controller in decision making
One of the most important decision that finance manager has to take
is investment decision.

Investment decision
The decision related to selection of assets in which, funds will be invested
by a firm. Long term assets –Those assets which yield return over a period of in
future. Short term & current assets – Those assets which in normal course of
business are convertible into cash within a year.
Financial decision making with reference to long term asset is known as capital
budgeting. Financial decision making with reference to current asset & short – term
asset is know as working capital decision.
Capital budgeting is probably the most crucial financial decision for a firm .It relates
to the selection of an asset or investment proposal or course of action whose
benefits are likely to be available in future over the lifetime of the project whether the
assets will be accepted or not will depends upon the relative benefits and return, as
well as the risk associated with it.
Working Capital is concerned with the management of current assets. If a firm
does not have adequate Working Capital, it may become illiquid and consequently
may not have ability to meet its current obligations and thus invite the risk of
bankruptcy. If the current assets are to large, profitability is adversely affected.

Meaning & Definition of Working Capital

Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry
out its day- to-day operations. Long terms funds are required to create production
facilities through purchase of fixed assets such as p&m, land, building, furniture, etc.
Investments in these assets represent that part of firm’s capital which is blocked on
permanent or fixed basis and is called fixed capital. Funds are also needed for
short-term purposes for the purchase of raw material, payment of wages and other
day – to- day expenses etc.
These funds are known as working capital. In simple words, working capital
refers to that part of the firm’s capital which is required for financing short- term or
current assets such as cash, marketable securities, debtors & inventories. Funds,
thus, invested in current assts keep revolving fast and are being constantly
converted in to cash and this cash flows out again in exchange for other current
assets. Hence, it is also known as revolving or circulating capital or short term
Working capital management is the device of finance. It is related to manage of
current assets and current liabilities. After learning working capital management,
commerce students can use this tool for fund flow analysis. Working capital is very
significant for paying day to day expenses and long term liabilities.
“Working capital management is concerned with the problems that arise in
attempting to manage the current assets, current liabilities and the inter relationship
that exits between them.”
According to Smith,K.V.

“Working Capital means current assets “

According to Mead , Mellot & Field
“The sum of current assets in the working capital of the business”
According to J.S.Mill

Meaning and Concept of Working Capital and its management

Working capital is that part of company’s capital which is used for purchasing raw
material and involve in sundry debtors. We all know that current assets are very
important for proper working of fixed assets. Suppose, if you have invested your
money to purchase machines of company and if you have not any more money to
buy raw material, then your machinery will no use for any production without raw
From this example, you can understand that working capital is very useful for
operating any business organization. We can also take one more liquid item of
current assets that is cash. If you have not cash in hand, then you can not pay for
different expenses of company, and at that time, your many business works may
delay for not paying certain expenses. If we define working capital in very simple
form, then we can say that working capital is the excess of current assets over
current liabilities.


There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the
enterprises current assets are those Assets which can convert in to cash within a
short period normally one accounting year.


1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working
capital is the excess of current assets over current liability, or, say:
Net working capital can be positive or negative. When the current assets exceeds
the current liabilities are more than the current assets. Current liabilities are those
liabilities, which are intended to be paid in the ordinary course of business within a
short period of normally one accounting year out of the current assts or the income
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation , if it does not amt. to app. Of profit.
6. Bills payable.
7. Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net
working capital is an accounting concept of working capital. Both the concepts have
their own merits.
The gross concept is sometimes preferred to the concept of working capital for the
following reasons:
1. It enables the enterprise to provide correct amount of working capital at correct
2. Every management is more interested in total current assets with which it has to
operate then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise
would increase its working capital.
4. This concept is also useful in determining the rate of return on investments in
working capital. The net working capital concept, however, is also important for
following reasons:
 It is qualitative concept, which indicates the firm’s ability to
meet to its operating expenses and short-term liabilities.
 IT indicates the margin of protection available to the short term
 It is an indicator of the financial soundness of enterprises.
 It suggests the need of financing a part of working capital
requirement out of the permanent sources of funds.
Working capital may be classified in to ways:
 On the basis of concept.
 On the basis of time.
On the basis of concept working capital can be classified as
1. Gross working capital :
2. Net working capital.
On the basis of time, working capital may be classified as:
1. Permanent or fixed working capital.
2. Temporary or variable working capital
Gross working capital
Total or gross working capital is that working capital which is used for all the current
assets. Total value of current assets will equal to gross working capital.
Net Working Capital
Net working capital is the excess of current assets over current liabilities.
Net Working Capital = Total Current Assets – Total Current Liabilities
This amount shows that if we deduct total current liabilities from total current assets,
then balance amount can be used for repayment of long term debts at any time.
Permanent /fixed Working Capital
Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-
process, finished goods and cash balance. This minimum level of current assts is
called permanent or fixed working capital as this part of working is permanently
blocked in current assets. As the business grow the requirements of working capital
also increases due to increase in current assets.
Permanent working capital is that amount of capital which must be in cash or current
assets for continuing the activities of business.
Temporary / variable Working Capital
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable
working capital can further be classified as seasonal working capital and special
working capital. The capital required to meet the seasonal need of the enterprise is
called seasonal working capital. Special working capital is that part of working
capital which is required to meet special exigencies such as launching of extensive
marketing for conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that
is required for short periods and cannot be permanently employed gainfully in the

Sometime, it may possible that we have to pay fixed liabilities, at that time we need
working capital which is more than permanent working capital, then this excess
amount will be temporary working capital. In normal working of business, we don’t
need such capital.
In working capital management, we analyze following three points
1. What is the need for working capital?
After study the nature of production, we can estimate the need for working capital. If
company produces products at large scale and continues producing goods, then
company needs high amount of working capital.

2. What is optimum level of Working capital in business?

Have you achieved the optimum level of working capital which has invested in
current assets? Because high amount of working capital will decrease the return on
investment and low amount of working capital will increase the risk of business. So,
it is very important decision to get optimum level of working capital where both
profitability and risk will be balanced. For achieving optimum level of working capital,
finance manager should also study the factor which affects the requirement of
working capital and different elements of current assets. If he will manage cash,
debtor and inventory, then working capital will automatically optimize.

3. What are main Working capital policies of businesses?

Policies are the guidelines which are helpful to direct business. Finance manager
can also make working capital policies.


1. Solvency of the business: Adequate working capital helps in maintaining
the solvency of the business by providing uninterrupted of production.
2. Goodwill: Sufficient amount of working capital enables a firm to make prompt
payments and makes and maintain the goodwill.
3. Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable
4. Cash Discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
5. Regular Supply of Raw Material: Sufficient working capital ensures regular
supply of raw material and continuous production.
6. Regular Payment of Salaries, Wages and Other Day TO Day
Commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage and
costs and enhances production and profits.
7. Exploitation Of Favorable Market Conditions: If a firm is having adequate
working capital then it can exploit the favorable market conditions such as
purchasing its requirements in bulk when the prices are lower and holdings
its inventories for higher prices.
8. Ability to Face Crises: A concern can face the situation during the
9. Quick And Regular Return On Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and
gains confidence of the investors and can raise more funds in future.
10. High Morale: Adequate working capital brings an environment of securities,
confidence, high morale which results in overall efficiency in a business.


Every business concern should have adequate amount of working capital to run its
business operations. It should have neither redundant or excess working capital nor
inadequate nor shortages of working capital. Both excess as well as short working
capital positions are bad for any business. However, it is the inadequate working
capital which is more dangerous from the point of view of the firm.
1. Excessive working capital means ideal funds which earn no profit for the firm and
business cannot earn the required rate of return on its investments.
2. Redundant working capital leads to unnecessary purchasing and accumulation of
3. Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.
4. It may reduce the overall efficiency of the business.
5. If a firm is having excessive working capital then the relations with banks and other
financial institution may not be maintained.
6. Due to lower rate of return n investments, the values of shares may also fall.
7. The redundant working capital gives rise to speculative transactions
Every business needs some amounts of working capital. The need for working
capital arises due to the time gap between production and realization of cash from
sales. There is an operating cycle involved in sales and realization of cash. There
are time gaps in purchase of raw material and production; production and sales; and
realization of cash.
Working Capital is needed for the following purposes:
a. For the purpose of raw material, components and spares.
b. To pay wages and salaries
c. To incur day-to-day expenses and overload costs such as office expenses.
d. To meet the selling costs as packing, advertising, etc.
e. To provide credit facilities to the customer.
f. To maintain the inventories of the raw material, work-in-progress, stores and
spares and finished stock.
For studying the need of working capital in a business, one has to study the
business under varying circumstances such as a new concern requires a lot of funds
to meet its initial requirements such as promotion and formation etc. These
expenses are called preliminary expenses and are capitalized. The amount needed
for working capital depends upon the size of the company and ambitions of its
promoters. Greater the size of the business unit, generally larger will be the
requirements of the working capital.
The requirement of the working capital goes on increasing with the growth and
expensing of the business till it gains maturity. At maturity the amount of working
capital required is called normal working capital. There are others factors also
influence the need of working capital in a business.


1. Nature of business: The requirements of working is very limited in public utility
undertakings such as electricity, water supply and railways because they offer cash
sale only and supply services not products, and no funds are tied up in inventories
and receivables. On the other hand the trading and financial firms requires less
investment in fixed assets but have to invest large amt. of working capital along with
fixed investments.
2. Size of business / scale of operations: Greater the size of the business, greater is
the requirement of working capital.
3. Production Policy: If the policy is to keep production steady by accumulating
inventories it will require higher working capital.
4. Length of production cycle/ Manufacturing process: The longer the
manufacturing time the raw material and other supplies have to be carried for a
longer in the process with progressive increment of labor and service costs before
the final product is obtained. So working capital is directly proportional to the length
of the manufacturing process.
5. Seasonal variations: Generally, during the busy season, a firm requires larger
working capital than in slack season.
6. Working capital cycle: The speed with which the working cycle completes one
cycle determines the requirements of working capital. Longer the cycle larger is the
requirement of working capital.
a) debtors
b) cash
c) Finished goods
d) Raw material
e) Work in progress
7. Rate of stock turnover: There is an inverse co-relationship between the question
of working capital and the velocity or speed with which the sales are affected. A firm
having a high rate of stock turnover will needs lower amt. of working capital as
compared to a firm having a low rate of turnover.
8. Credit cycle: A concern that purchases its requirements on credit and sales its
product / services on cash requires lesser amt. of working capital and vice-versa.
9. Business cycle: In period of boom, when the business is prosperous, there is
need for larger amt. of working capital due to rise in sales, rise in prices, optimistic
expansion of business, etc. On the contrary in time of depression, the business
contracts, sales decline, difficulties are faced in collection from debtor and the firm
may have a large amt. of working capital.
10. Rate of growth of business: In faster growing concern, we shall require large amt.
of working capital.
11. Earning capacity and dividend policy: Some firms have more earning capacity
than other due to quality of their products, monopoly conditions, etc. Such firms may
generate cash profits from operations and contribute to their working capital. The
dividend policy also affects the requirement of working capital. A firm maintaining a
steady high rate of cash dividend irrespective of its profits needs working capital
than the firm that retains larger part of its profits and does not pay so high rate of
cash dividend.
12. Price level changes: Changes in the price level also affect the working capital
requirements. Generally rise in prices leads to increase in working capital.
Others Factors:
 Operating efficiency.
 Management ability.
 Irregularities of supply.
 Import policy.
 Asset structure.
 Importance of labor.
 Banking facilities, etc.
Sources of Additional Working Capital
Sources of additional working capital include the following:
* Existing cash reserves
* Profits (when you secure it as cash !)
* Payables (credit from suppliers)
* New equity or loans from shareholders
* Bank overdrafts or lines of credit
* Long-term loans
If you have insufficient working capital and try to increase sales, you can easily over-
stretch the financial resources of the business. This is called overtrading. Early
warning signs include:
* Pressure on existing cash
* Exceptional cash generating activities e.g. offering high discounts for early cash
* Bank overdraft exceeds authorized limit
* Seeking greater overdrafts or lines of credit
* Part-paying suppliers or other creditors
* Paying bills in cash to secure additional supplies
* Management pre-occupation with surviving rather than managing
* Frequent short-term emergency requests to the bank (to help pay
wages, pending receipt of a cheque).
Working capital policy
1. Liquidity policy
under this policy, finance manager will increase the amount of liquidity for reducing
the risk of business. If business has high volume of cash and bank balance, then
business can easily pays his dues at maturity. But finance manger should not forget
that the excess cash will not produce and earning and return on investment will
decrease. So liquidity policy should be optimized.

2. Profitability policy
under this policy, finance manger will keep low amount of cash in business and try
to invest maximum amount of cash and bank balance. It will sure that profit of
business will increase due to increasing of investment in proper way but risk of
business will also increase because liquidity of business will decrease and it can
create bankruptcy position of business. So, profitability policy should make after
seeing liquidity policy and after this both policies will helpful for proper management
of working capital.
Working capital may be regarded as the life blood of business. Working capital is of
major importance to internal and external analysis because of its close relationship
with the current day-to-day operations of a business. Every business needs funds
for two purposes.
Management of working capital is concerned with the problem that arises in
attempting to manage the current assets, current liabilities. The basic goal of
working capital management is to manage the current assets and current liabilities
of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it
is neither adequate nor excessive as both the situations are bad for any firm. There
should be no shortage of funds and also no working capital should be ideal. Long
term funds are required to create production facilities through purchase of fixed
assets such as plants, machineries, lands, buildings & etc. Short term funds are
required for the purchase of raw materials, payment of wages, and other day-to-day
expenses. . It is other wise known as revolving or circulating capital
It is nothing but the difference between current assets and current liabilities. i.e.
Working Capital = Current Asset – Current Liability.
Businesses use capital for construction, renovation, furniture, software, equipment,
or machinery. It is also commonly used to purchase inventory, or to make payroll.
Capital is also used often by businesses to put a down payment down on a piece of
commercial real estate. Working capital is essential for any business to succeed. It
is becoming increasingly important to have access to more working capital when we
need it.
One of the most important areas of finance to monitor is your company's working capital,
which is the difference between current assets and current liabilities. As a small business
owner, you must constantly be alert to changes in working capital and their implications;
otherwise, you may miss some warning signs that can lead to business failure. The most
important component of working capital is cash, far the most important asset of any business,
particularly a small business. Without it, the business will fail. So it is of paramount
importance for you as the business owner to control all cash transactions.

Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable
to meet its short-term liabilities with its current assets (cash, accounts receivable,
Also known as "net working capital". If a company's current assets do not exceed its
current liabilities, then it may run into trouble paying back creditors in the short term.
The worst-case scenario is bankruptcy. A declining working capital ratio over a
longer time period could also be a red flag that warrants further analysis. For
example, it could be that the company's sales volumes are decreasing, and as a
result, its accounts receivables number continues to get smaller and smaller.

Working capital also gives investors an idea of the company's underlying operational
efficiency. Money that is tied up in inventory or money that customers still owe to the
company cannot be used to pay off any of the company's obligations. So, if a
company is not operating in the most efficient manner (slow collection), it will show
up as an increase in the working capital. This can be seen by comparing the working
capital from one period to another; slow collection may signal an underlying problem
in the company's operations.

Any change in the working capital will have an effect on a business's cash flows. A
positive change in working capital indicates that the business has paid out cash, for
example in purchasing or converting inventory, paying creditors etc. Hence, an
increase in working capital will have a negative effect on the business's cash
holding. However, a negative change in working capital indicates lower funds to pay
off short term liabilities (current liabilities), which may have bad repercussions to the
future of the company.
g. To provide credit facilities to the customer.
h. To maintain the inventories of the raw material, work-in-progress, stores and
spares and finished stock.
For studying the need of working capital in a business, one has to study the
business under varying circumstances such as a new concern requires a lot of funds
to meet its initial requirements such as promotion and formation etc. These
expenses are called preliminary expenses and are capitalized. The amount needed
for working capital depends upon the size of the company and ambitions of its
promoters. Greater the size of the business unit, generally larger will be the
requirements of the working capital.
The requirement of the working capital goes on increasing with the growth and
expensing of the business till it gains maturity. At maturity the amount of working
capital required is called normal working capital. There are others factors also
influence the need of working capital in a business.


of a firm has a great on its probability, liquidity and structural health of the
organization. So working capital management is three dimensional in nature as
1. It concerned with the formulation of policies with regard to profitability, liquidity and
2. It is concerned with the decision about the composition and level of current assets.
3. It is concerned with the decision about the composition and level of current


1. MATCHING / HEDGING APPROACH: In this approach each assets in

the balance sheet assets side would be offset with a financing instrument of
the same approximate maturity. Therefore we have analyzed that the
company follows the aggressive strategy to meet its working capital
2. AGGRESSIVE APPROACH: In this approach current assets are
maintained up to a level to meet current liabilities.
3. CONSERVATIVE APPROACH: This strategy suggest not to be take
any risk & to carry high level of current assets in relation to sales.


Cash flows in a cycle into, around and out of a business. It is the business's life
blood and every manager's primary task is to help keep it flowing and to use the
cash flow to generate profits. If a business is operating profitably, then it should, in
theory, generate cash surpluses. If it doesn't generate surpluses, the business will
eventually run out of cash and expire.
The faster a business expands the more cash it will need for working capital and
investment. The cheapest and best sources of cash exist as working capital right
within business. Good management of working capital will generate cash will help
improve profits and reduce risks.
Bear in mind that the cost of providing credit to customers and holding stocks can
represent a substantial proportion of a firm's total profits. There are two elements in
the business cycle that absorb cash - Inventory (stocks and work-in-progress) and
Receivables (debtors owing you money). The main sources of cash are Payables
(your creditors) and Equity and Loans.
Each component of working capital (namely inventory, receivables and payables)
has two dimensions ........TIME ......... and MONEY. When it comes to managing
working capital - TIME IS MONEY. If you can get money to move faster around the
cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of
money tied up (e.g. reduce inventory levels relative to sales), the business will
generate more cash or it will need to borrow less money to fund working capital. As
a consequence, you could reduce the cost of bank interest or you'll have additional
free money available to support additional sales growth or investment. Similarly, if
you can negotiate improved terms with suppliers e.g. get longer credit or an
increased credit limit; you effectively create free finance to help fund future sales.

If you ....... Then ......

 Collect receivables (debtors) You release cash from the cycle
 Collect receivables (debtors) Your receivables soak up cash
 Get better credit (in terms of You increase your cash resources
duration or amount) from
 Shift inventory (stocks) faster You free up cash
 Move inventory (stocks) slower You consume more cash
It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant,
vehicles etc. If you do pay cash, remember that this is now longer available for
working capital. Therefore, if cash is tight, consider other ways of financing capital
investment - loans, equity, leasing etc. Similarly, if you pay dividends or increase
drawings, these are cash outflows and, like water flowing down a plug hole, they
remove liquidity from the business.
Sources of cash -
Sources of additional working capital include the following:
 Existing cash reserves
 Profits (when you secure it as cash )
 Payables (credit from suppliers)
 New equity or loans from shareholders
 Bank overdrafts or lines of credit
 Long-term loans
If you have insufficient working capital and try to increase sales, you can easily over-
stretch the financial resources of the business. This is called overtrading. Early
warning signs include:
 Pressure on existing cash
 Exceptional cash generating activities e.g. offering high discounts for early
cash payment
 Bank overdraft exceeds authorized limit
 Seeking greater overdrafts or lines of credit
 Part-paying suppliers or other creditors
 Paying bills in cash to secure additional supplies
 Management pre-occupation with surviving rather than managing
Frequent short-term emergency requests to the bank (to help pay wages, pending
receipt of a checkup).

Handling Receivables (Debtors)

Cash flow can be significantly enhanced if the amounts owing to a business are
collected faster. Every business needs to know.... who owes them money.... how
much is owed.... how long it is owing.... for what it is owed.
Slow payment has a crippling effect on business, in particular on small businesses
who can least afford it. If you don't manage debtors, they will begin to manage your
business as you will gradually lose control due to reduced cash flow and, of course,
you could experience an increased incidence of bad debt. The following measures
will help manage your debtors:
1. Have the right mental attitude to the control of credit and make sure that it
gets the priority it deserves.
2. Establish clear credit practices as a matter of company policy.
3. Make sure that these practices are clearly understood by staff, suppliers and
4. Be professional when accepting new accounts, and especially larger ones.
5. Check out each customer thoroughly before you offer credit. Use credit
agencies, bank references, industry sources etc.
6. Establish credit limits for each customer... and stick to them.
7. Continuously review these limits when you suspect tough times are coming or
if operating in a volatile sector.
8. Keep very close to your larger customers.
9. Invoice promptly and clearly.
10. Consider charging penalties on overdue accounts.
11. Consider accepting credit /debit cards as a payment option.
12. Monitor your debtor balances and ageing schedules, and don't let any debts
get too large or too old.
Recognize that the longer someone owes you, the greater the chance you will never
get paid. If the average age of your debtors is getting longer, or is already very long,
you may need to look for the following possible defects:
 Weak credit judgment
 Poor collection procedures
 Lax enforcement of credit terms
 Slow issue of invoices or statements
 Errors in invoices or statements
 Customer dissatisfaction.
Debtors due over 90 days (unless within agreed credit terms) should generally
demand immediate attention. Look for the warning signs of a future bad debt. For
 Longer credit terms taken with approval, particularly for smaller orders
 Use of post-dated checks by debtors who normally settle within agreed terms
 Evidence of customers switching to additional suppliers for the same goods
 New customers who are reluctant to give credit references
 Receiving part payments from debtors.
The act of collecting money is one which most people dislike for many reasons and
therefore put on the long finger because they convince themselves there is
something more urgent or important that demand their attention now.
Here are a few ideas that may help you in collecting money from debtors:
 Develop appropriate procedures for handling late payments.
 Track and pursue late payers.
 Get external help if your own efforts fail.
 Don't feel guilty asking for money.... its yours and you are entitled to it.
 Make that call now. And keep asking until you get some satisfaction.
 In difficult circumstances, take what you can now and agree terms for the
remainder. It lessens the problem.
 When asking for your money, be hard on the issue - but soft on the person.
Don't give the debtor any excuses for not paying.
 Make it your objective is to get the money - not to score points or get even.

Managing Payables (Creditors)

Creditors are a vital part of effective cash management and should be managed
carefully to enhance the cash position.
Purchasing initiates cash outflows and an over-zealous purchasing function can
create liquidity problems. Consider the following:
 Who authorizes purchasing in your company - is it tightly managed or spread
among a number of (junior) people?
 Are purchase quantities geared to demand forecasts?
 Do you use order quantities which take account of stock-holding and
purchasing costs?
 Do you know the cost to the company of carrying stock ?
 Do you have alternative sources of supply ? If not, get quotes from major
suppliers and shop around for the best discounts, credit terms, and reduce
dependence on a single supplier.
 How many of your suppliers have a returns policy ?
 Are you in a position to pass on cost increases quickly through price
increases to your customers?
 If a supplier of goods or services lets you down can you charge back the cost
of the delay ?
 Can you arrange (with confidence !) to have delivery of supplies staggered or
on a just-in-time basis ?

There is an old adage in business that if you can buy well then you can sell well.
Management of your creditors and suppliers is just as important as the
management of your debtors. It is important to look after your creditors - slow
payment by you may create ill-feeling and can signal that your company is
inefficient (or in trouble!).

Inventory Management

Managing inventory is a juggling act. Excessive stocks can place a heavy burden on
the cash resources of a business. Insufficient stocks can result in lost sales, delays
for customers etc.
The key is to know how quickly your overall stock is moving or, put another way,
how long each item of stock sit on shelves before being sold. Obviously, average
stock-holding periods will be influenced by the nature of the business. For example,
a fresh vegetable shop might turn over its entire stock every few days while a motor
factor would be much slower as it may carry a wide range of rarely-used spare parts
in case somebody needs them.
Nowadays, many large manufacturers operate on a just-in-time (JIT) basis whereby
all the components to be assembled on a particular today, arrive at the factory early
that morning, no earlier - no later. This helps to minimize manufacturing costs as JIT
stocks take up little space, minimize stock-holding and virtually eliminate the risks of
obsolete or damaged stock. Because JIT manufacturers hold stock for a very short
time, they are able to conserve substantial cash. JIT is a good model to strive for as
it embraces all the principles of prudent stock management.
The key issue for a business is to identify the fast and slow stock movers with the
objectives of establishing optimum stock levels for each category and, thereby,
minimize the cash tied up in stocks. Factors to be considered when determining
optimum stock levels include:
 What are the projected sales of each product?
 How widely available are raw materials, components etc.?
 How long does it take for delivery by suppliers?
 Can you remove slow movers from your product range without compromising
best sellers?
Remember that stock sitting on shelves for long periods of time ties up money which
is not working for you. For better stock control, try the following:
 Review the effectiveness of existing purchasing and inventory systems.
 Know the stock turn for all major items of inventory.
 Apply tight controls to the significant few items and simplify controls for the
trivial many.
 Sell off outdated or slow moving merchandise - it gets more difficult to sell the
longer you keep it.
 Consider having part of your product outsourced to another manufacturer
rather than make it yourself.
 Review your security procedures to ensure that no stock "is going out the
back door !"

Higher than necessary stock levels tie up cash and cost more in insurance,
accommodation costs and interest charges.

Key Working Capital Ratios

The following, easily calculated, ratios are important measures of working capital
Ratio Formulae Result Interpretation
Stock Average Stock = x On average, you turn over the value of your
entire stock every x days. You may need to break
this down into product groups for effective stock
* 365/ management.
Cost of Goods days Obsolete stock, slow moving lines will extend
(in days)
Sold overall stock turnover days. Faster production,
fewer product lines, just in time ordering will
reduce average days.
It take you on average x days to collect monies
due to you. If your official credit terms are 45 day
Debtors * 365/ =x and it takes you 65 days... why ?
Sales days One or more large or slow debts can drag out the
(in days)
average days. Effective debtor management will
minimize the days.
On average, you pay your suppliers every x days.
If you negotiate better credit terms this will
Creditors * increase. If you pay earlier, say, to get a discount
Payables Ratio 365/ =x this will decline. If you simply defer paying your
(in days) Cost of Sales days suppliers (without agreement) this will also
(or Purchases) increase - but your reputation, the quality of
service and any flexibility provided by your
suppliers may suffer.
Current Assets are assets that you can readily
turn in to cash or will do so within 12 months in
the course of business. Current Liabilities are
Total Current amount you are due to pay within the coming 12
Assets/ =x months. For example, 1.5 times means that you
Current Ratio
Total Current times should be able to lay your hands on $1.50 for
Liabilities every $1.00 you owe. Less than 1 times e.g. 0.75
means that you could have liquidity problems and
be under pressure to generate sufficient cash to
meet oncoming demands.
Quick Ratio (Total Current =x Similar to the Current Ratio but takes account of
Assets - times the fact that it may take time to convert inventory
Inventory)/ into cash.
Total Current
(Inventory +
Working Receivables - As % A high percentage means that working capital
Capital Ratio Payables)/ Sales needs are high relative to your sales.
Other working capital measures include the following:
 Bad debts expressed as a percentage of sales.
 Cost of bank loans, lines of credit, invoice discounting etc.
 Debtors concentration - degree of dependency on a limited number of
Once ratios have been established for your business, it is important to track them
over time and to compare them with ratios for other comparable businesses or
industry sectors.

The assessment of working capital is always made for future period while the
financial statement reveals the financial position of a concern at some point of time
in the past. The calculation based on such statements is not workable. Forever the
newly established units may not provide any financial statement of the past. The
working capital is always assessed on the basis of projection for next year. The
projection which is submitted to the banks is critically for the ultimate product,
production capacity & rate of inflation .Therefore it requires careful scrutiny in
different data.
After determining the level of working capital, a firm has to decide how it is to be
financed .The need for working capital materials, work in progress, finished goods &
receivable typically fluctuates during the year .Although long term funds partly
finance current assets and provide the margin money for working capital, such
assets are virtually exclusively supported by short term sources. The main sources
of working capital are: Trade credit, Bank credit, Commercial papers.
The main sources of working capital are:
1. Trade credit
2. Bank credit
3. Commercial paper
Trade credit refers to the credit that customer gets from supplier of goods in the
normal course of business. The buying firms do not have to pay cash immediately
for the purchase made. This deferred payment is a short term financing called trade
credit. It is a major source of financing.
Particularly small firms are heavily dependent on Trade credit as a source of finance
since they find it difficult to raise funds from banks and other sources in the capital
Trade credit is mostly an informal arrangement and is granted on an open account
basis. A supplier sends goods to the buyer on credit, which the buyer accepts,and
thus in effects, formally acknowledges it as a debt, he does not sign any legal
instrument. Once the trade links have been established between the buyer and the
seller, they have each other’s mutual confidence and Trade credit becomes a
routine activity which may be periodically reviewed by the supplier. Trade credit
appears as a sundry creditor on the buyer’s balance sheet. Trade credits also take
the form bills payable. When the buyer’s signs a bill a negotiable instrument to
obtain it appears on the buyer’s B/S as bills payable.
Benefits of Trade credit
1. Trade credit is relatively easy to obtain except in case of financially very
unsound firms.
2. Flexibility is another advantage of Trade credit. Trade credit grows with the
growth in firm sales.
3. Trade credit is an informal, spontaneous source of finance.

Banks are the main institutional sources of working capital finance in India .A bank
considers a firm, sales and production plans and desirables levels of current assets
in determining its working capital requirement. The approved by bank for the firm’s
working capital is called credit limit. Credit limit is the maximum funds which a firm
can obtain from the banking system banks may fix separate limits for the ‘peak level’
credit requirements and ‘normal non-peak level’ credit requirements indicating the
periods during which the separate limits will be utilized by the borrower.
Forms of banks finance -
A firm can draw funds in following forms
a) Overdrafts – Under the overdrafts facility, the borrower is allowed to
withdraw funds in excess of the balance in his current account up to a certain
specific limit during a stipulated period. Through overdrawn amount is repayable on
demand, the generally continue for a long period by annual renewals of the limits. It
is a very flexible arrangement from the borrower point of view since he can withdraw
and repay funds whenever he desires within the overall stipulations. Interest is
charge on daily balances on the amount actually withdraw subject to some minimum
changes. The borrower operates the account through cheques.

b) Cash credit – The cash credit facility is similar to the overdraft

arrangement .Under the cash credit facility, a borrower is allowed to withdraw
funds from the bank up to the sanctioned credit limit. He is not required to
borrower the entire sanctioned credit once. Rather he can draw periodically to
the extent of his requirements and repay by depositing surplus is payable on the
amount utilizes by borrower. There is no commitment charge therefore interest is
payable on the amount actually utilizes by the borrower. Cash credit limits are
sanctioned against the security of current assets. Though funds are repayable on
demand, banks usually do not recall such advances unless they are compelled
by adverse circumstances.

c) Purchase or discounting of bill –Under discounting of bill a borrower obtains

credit from a bank against its bills. The bank purchases or discounted the
borrower‘s bills. The amount provided under this agreement is covered within
the overall cash credit or overdraft limit. Before purchasing the bills the banks
satisfies itself as to the credit worthiness of the drawer. Through the term ‘bills
purchased’ implies that the banks becomes owner of the bills, bank hold bills as
security the credit. When a bill is discounted the borrower is paid the discounted
amount of the bill. The bank collects the full amount of maturity.

d) Working capital loan – A borrower may sometimes require ad hoc or

temporary accommodations in excess of the sanctioned credit limit to meet
unforeseen contingencies. Banks provide such loans through a demand loan
account or a separate ‘non –operable ‘cash credit account. The borrower is
required to pay a higher rate of interest above the normal rate of interest on
such additional credit.

The banks which have finance, the working capital need of RSMML is
• Bank of Rajasthan
• State bank of India
• Bank of Baroda
• Punjab national bank
• Oriented bank of commerce
The limit sanctioned 13; different banks for working RSMML are as follows-

Name of bank Sanctioned limit(in Rs corer)

Bank of Rajasthan 3000
State bank of India 1000
Bank of Baroda 600
Punjab national bank 600
Oriented bank of commerce 600
TOTAL 5800

Commercial paper is an important money market instruments in advances countries
like the USA to raise short – term funds in India, reverse bank of India introduced
the Commercial paper scheme in the Indian money market in 1989. Commercial
paper as it is known in advances countries, is a form of unsecured promissory note
issued by firms to raise short – term funds. The Commercial paper market in USA is
a blue chip market where financially sound and higher rated companies are able to
issue Commercial paper. The buyers of Commercial paper include banks, insurance
companies, unit trust and firms with surplus funds to invest for a short period with
minimum of risk.

Advantages of commercial paper

a) It is an alternatives source of raising short term finance, and proves to be
handy during periods of tight bank credit.
b) It is a cheaper source of finance in comparison to the bank credit .Usually
interest yield on Commercial paper is less than the prime rate of interest.
c) From investor point of view it provides an opportunity to make a safe, short
term investment of surplus funds.

Framework of Indian CP market:

The Commercial paper emerged as source of short term financing in the early
nineties. It is regulates by RBI .The present framework is given below-
a) CPs can be issued for periods ranging between 15 days and one year.
Renewal of CPs is treated as fresh issue.
b) The maximum amount that a company can raise by way of CPs is 100%
c) The minimum size of issue is Rs 25 lacks and the minimum unit of
subscription is Rs 5 lacks.
d) A company can issue CPs only if it has minimum tangible net worth of Rs 4
corer a fund based working limits of Rs 4 corer or more.

RSMML has adopted the conservative approach for determining its financial
– mix

The dictionary meaning of inventory is “stock of goods”. Inventory includes –raw
material, work- in- progress, consumables, finished goods& spares. The amount of
investment is sometimes more in inventory than in other assets. About 90% part of
working capital invested in inventories. It is necessary for every management to give
proper attention to inventory management. A proper planning of purchasing,
handling, storing and accounting should form a part of inventory management. The
purpose of inventory management is to keep the stocks in such a way that neither
there is over –stocking nor under-stocking.
Functions of inventory management:-
1. Inventory helps in smooth & efficient running of business.
2. Learn the features & set up inventory management
3. Enter inventory items and kits
4. Enter transactions for inventory items
5. Efficiently use the related tools for counting and updating inventory
Inventory management in RSMML
Company maintains inventory management system at its phosphate and limestone
divisions. It has adopted selective inventory control-ABC analysis .it tends to
measure the significance of each item of inventory in terms of its value.
The high value items are classified as “A item” and would be under
tightest control. “B item” fall in between these two categories and require reasonable
attention of management. “C item” represent relatively least value and would be
under simple control. The ABC analysis concentrated on important items & also
known as control by importance and exception.

Sr. no. A class item B class item C class item

1 High consumption value moderate consumption Low consumption value
2 A class item handled by A class item handled by A class item are fully
senior officers middle management delegated
3 Maximum follow up & periodical follow up follow up & expediting in
expending exceptional cases
4 Frequent ordering Less Frequent ordering bulk ordering

In RSMML there held’s a monthly meeting to review total inventory

Receivable management is the process of making decisions relating to investment
in trade debtors. Certain investment in receivable is necessary to increase the sales
and the profits of a firm. There is always a risk of bad debts too.

Functions Receivable management

1. Establish clear credit practices as a matter of company policy
2. Make sure that these practices are clearly understood by staff suppliers &
3. One should be prompts while accepting new accounts and especially a large
4. Check out each customer thoroughly before credit
5. Actions plans for recovery should be implemented in case of defaulting

Creditors are vital of effective cash management & should be managed carefully to
enhance the cash positions management of creditors is just as important as the
management of debtors .The major prerequisite of payables management are the
finalization of the procurement plan.

It also involve
1. Formulating general and specific policies and norms for payment which has
to be followed while finalizing all procurement costs.
2. Making financial management like L/C s or BCs to exploit benefits of cash
discount immediate delivery.
3. The system should also enable timely review of payable, monitoring delays &
review of policies.

Payables management in RSMML

In RSMML company prepares ageing schedule. It follows FIFO system i.e. first
come first out i.e. the creditors who lends credit first, payment are made-first to them
and so on. If the company offers credits, a company enjoys it & in case, discounts
are offered company utilize it.

Cash is a life blood of business & its task of manager to manage cash efficiently
keeping in view safety liquidity and profitability.
The firm should involve strategies regarding the following five facts of cash
1. Cash inflows and outflows should be planned to projects surplus or deficit for
each period of the planning period.
2. The flow of cash should be properly managed.
3. The firms should decide about the appropriate level of cash balances.
4. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash balances.
5. The surplus cash balances should be properly invested to earn profits. The
firm should decide about the division of such cash balance between deposits,
marketable securities and interoperate lending.
Cash Management in RSMML
RSMML prepares its monthly cash budget on the basis of cash /capital budget
prepares in advance. Every department has to inform their requirements a month
earlier & marketing department has to ensure the collection.


The ratio reveals the relation, current assets & current liability. The current ratio
measures the extent to which the claims of short-term creditor are covered by
assets that can be quickly converted into cash. The current ratio is calculated by
dividing current assets by current liabilities. Current assets include cash and those
assets ,which can be converted into cash within a year ,such as marketable
securities ,debtors ,and inventories .prepaid expenses are also included in Current
assets .CA as they represent the payments that will not be made by the firm in
future .All obligation maturing within a year are included in current liabilities. Current
liabilities include creditors, bills payable, accrued expenses ,short term bank loan ,
income tax liability and long – term debt maturing in current liabilities. A ratio of
greater than one means that the firm has more CA them claims against them.
 If ratio will higher show the solvency position(2:1)
 If ratio will lower show the insolvency position(less than 2).

Current Ratio can be calculated as follows:-


2006-2007 42850.01/16361.67 2.61
2007-2008 50527.77/20569.70 2.45
2008-2009 67161.95/30187.92 2.22
2.7 2.61
2.5 2.45
RATIO 2.4 Ratio
2.3 2.22
2006-2007 2007-2008 2008-2009

Ratio 2:1 is considered ideal.
If current ratio 2 or more means the company has ability to meet the obligation.
If current ratio is less than 2 means company difficulty in meeting its current
RSMML has current ratio is more than 2:1 in the all the three year.
2008 and 2008-2009 Current Ratio was high depicting value of current assets very
high than current liabilities, i.e., 2.45 & 2.22 respectively.


The Quick Ratio reveals the relationship between quick assets & current liability.
The ratio is to measures the ability of the firm to meet its short term obligation &
without relying upon the realization of the stock. This ratio establishes a relationship
between quick and liquid assets and Current Liabilities .An assets is liquid if it can
be converted into cash immediately or reasonable soon without a loss of value.
Cash is the most liquid assets .Other assets which are considered to be relatively
liquid and included in Quick Assets are book debts and marketable securities
inventories are considered to be less liquid. Inventories normally require some time
for realizing into cash their value also has a tendency to fluctuate .The quick ratio is
found out by dividing quick assets by current liabilities.

Included in this category of Current Assets are: -

Thus, the current assets which are excluded here are:-
Prepaid Expenses and Inventory
 Higher Ratio, i.e., more than 1:1 indicates sound financial position.
 Lower Ratio, i.e., less than 1:1 indicates financial difficulty
Quick Ratio can be calculated as follows:-


2006-2007 38481.49 / 16361.67 2.31
2007-2008 46697.45 / 20569.70 2.27
2008-2009 63692.42 / 30187.92 2.11

2.35 2.31
2.3 2.27
2.2 Ratio
RATIOS 2.15 2.11
2006-2007 2007-2008 2008-2009


Generally a Quick Ratio 1:1 is considered to be ideal. The Quick Ratio of R.S.M.M.L
has decreased from 2.31 in 2006-2007 to 2.27 in 2006-2007 but it also decreased to
2.11 in the year 2007-2008. Still the liquidity position is good because it is more than


It ratio known as super quick ratio or cash position ratio. The difference between
Current Assets and Current Liabilities excluding short-term borrowings is called Net
Working Capital. The greater is the amount of Net Working Capital, the greater is
the liquidity of the firm. The greater is the amount of Net Working Capital, the
greater is the liquidity of the firm. It is considered that , between two firm’s the one
having the larger Net Working Capital has the greater ability to meet its current
obligation .This is not necessarily so the measure of liquidity is a relationships ,
rather than the difference between current assets and current liabilities .
Net Working Capital can be calculated as follows:-



2006-2007 42850.01 – 16361.67 26488.34

2007-2008 50527.77 – 20569.70 29958.07

2008-2009 67161.95 – 30187.92 36974.08



20000 Net working capital
2006-2007 2007-2008 2008-2009

The amount of Working Capital has increased over the three years and is highest in
the year 2008-2009 which is Rs. 36974.08. That is the result of increase in current
assets, though current liabilities has also increased but the proportion of increase in
current assets was greater than current liabilities, the result is increased Working

This ratio indicates the relationship between the cost of goods during the year and
average stock kept during that year. This ratio measures the number of times
inventory is turned over, i.e., the efficiency of the firm in selling its product. It
measures the relationship between the cost of goods sold and the inventory level.

Inventory Turnover Ratio may be calculated as follows:-


2006-2007 53088.19 / 2868.46 18.50
2007-2008 60153.99/2172.78 27.68
2008-2009 94414.84/18641.01 50.64


60 50.64
27.68 Ratio
Times 30
2006-2007 2007-2008 2008-2009

The higher the ratio, the better it is, since it indicates that stock is selling quickly. In a
business where stock turnover ratio is high, goods. Generally, a high inventory
turnover is indicative of good inventory management. A low inventory turnover
implies excessive inventory levels than warranted by production and sales activities
or a slow moving or obsolete inventory.
R.S.M.M.L Company’s efficiency in turning its inventories is very satisfactory. The
Inventory Turnover Ratio of R.S.M.M.L was 18.50 times in the year 2006-2007
which increased to 27.68 times in the year 2007-2008 and it again increased to
50.64 in the year 2008-2009. It is a good sign for the company.

A. DEBTORS TURNOVER RATIO: - It indicates the number of times debtors

turnover each year, i.e., it shows how quickly receivables or debtors are converted
into cash.
The liquidity of a firm’s receivables can be examined in two ways:-




The Debtors Turnover shows the relationship between sales and debtors of a firm.
The higher the ratio, the better it is, since it indicates that amount from debtors is
being collected more quickly.
2006-2007 53088.19 / 5249.68 10.11
2007-2008 60153.99 / 6593.03 9.12
2008-2009 94414.84 / 72497.13 13.02


14 13.02
10 9.12
Times 6
2006-2007 2007-2008 2008-2009


The higher the ratio, the better it is, since it indicates that amount from debtors is
being collected more quickly & the more efficient for the management of credit.
The Debtors Turnover Ratio of R.S.M.M.L was 10.11 times in the year 2006-2007
which decreased to 9.12 times in the year 2007-2008 and it increased to 13.02
times in the year 2008-2009. This is a measure of efficient credit management


The Average Collection Period measures the quality of debtors, since it indicates the
speed of their collection. The average number of days for which book remains
outstanding is called the average collection period. Shorter the Average Collection
Period, the better the quality of debtors, as a short collection period implies the
prompt payments by the debtors. Higher the Turnover Ratio and shorter the
Average Collection Period, better the trade credit management and better the
liquidity of debtors.

The Average Collection Period can be calculated as follows:-




2006-2007 360 / 10.11 35.60
2007-2008 360 / 9.12 39.47
2008-2009 360 / 13.02 27.64


40 35.6
30 27.64

Days 20 Days

2006-2007 2007-2008 2008-2009


R.S.M.M.L is going well with its average collection period of debtors over the three
years. Where, the Average collection Period was 35.60 days in the year 2006-2007,
it has increased to 39.47 days in 2007-2008 and it further decreased to 27.64 days
in the year 2008-2009.

Thus, it shows the shorter collection period, which shows the better quality of
debtors, and it implies the prompt payments by debtors.


Working capital turnover ratio measures the efficiency for the firm in maintaining &
utilizing its capital .Higher the ratio more efficient, utilization of capital. Lower the
ratio under utilization of available resources & production capacity.
a. A higher ratio will indicate effective utilization and more profit.
b. A Higher Working Capital Turnover Ratio shows that there is low investment
in working capital and vice-versa.

Working Capital Turnover Ratio can be calculated as follows:-




2006-2007 53088.19 / 42850.01 1.23
2007-2008 60153.99 / 50527.77 1.19
2008-2009 94414.84 / 67161.95 1.40


1.25 Ratio
Times 1.2 1.23 1.19
2006-2007 2007-2008 2008-2009

The Working Capital Turnover Ratio for R.S.M.M.L was 1.23 times in the year
2006-2007 which declined to 1.19 times in 2007-2008 and increased to 1.40 times in
the year 2008-2009. Thus, it shows higher investment in the working capital and
lower profits.
A modern tool for systematic analysis that facilities matching the external threats
and opportunities with the internal weakness and strengths of the organization.
SWOT analysis of R.S.M.M.L is done in the following way for the better
understanding of the company’s position:-


• Jhamarkotra rock phosphate mines of R.S.M.M.L is one of the largest well

-mechanized open cast mines of Asia, which is most modern and
scientifically laid out mine.

• Industrial beneficiation plant of R.S.S.M.L converting low grade ore of rock

phosphate into higher grade concentrate is the only plant of its kind in the

• In R.S.S.M.L, research and development activities are integral part of the

business activities. Extensive computerization along with advanced software
is being used for evaluation of natural resources and financial analysis to
optimize resource utilization.

• The service condition and welfare facilities given to the workmen are
attractive and handsome. The employees are satisfied with the facilities and
services given by the company. The rate of labor or employee turnover is
almost zero and since its inception, no strike or lock- out in the organization.

• R.S.M.M.L |is having a HRD department who is arranging training and

development programmes for their executives and workmen, refresher
courses are being arranged by their vocational training centre, VTC at
Jhamarkotra mines under the supervision of manager rank executives.

• R.S.M.M.L has its own and separate marketing department at corporate

office in Udaipur.


• Optimum capacity utilization is not done at the mines.

• The prices of rock phosphate offered by R.S.M.M.L are very high in
comparison to the other suppliers including the foreign suppliers.

• The services offered by R.S.M.M.L to their customers, especially after sales

services is not very satisfactory. The quality of service should be improved.

• The supplies of material by R.S.M.M.L to the parties are not proper. The
supply is not regular which may be due to the non- availability of transport
medium, i.e., railway wagons that often restrict the production process.


• In the era of economic liberalization, R.S.M.M.L may expedite the matter for
obtaining ISO- 9000 or 9002 in order to access an extra mileage for their
brand quality.

• Most of the customers have strong faith on the quality of materials offered by
R.S.S.M.L. R.S.M.M.L may convert this faith into business by targeting
potential & occasional buyers and by improving the quality of the present

• The management of R.S.S.M.L may periodically get the first hand information
about the existing products and services offered by R.S.S.M.L. This may
increase the market reputation of the company.

• There are many opportunities for the organization for expansion and
diversification of its activities in India as well as abroad.


• The government of India has controlled entire business of phosphatic

fertilizers and as such any change in the government policies in future may
adversely affect the company business.

• The national reserves are of depleting nature. It is a threat of exhaustion of

the deposits in future.
70% of the total demand of rock phosphate is being full filled by import from foreign
suppliers. Any reduction in prices by the foreign suppliers may adversely affect
the Indian market.
Following conclusions are made:-
 The company is using more owners’ funds than the outsiders’ funds for its
 Cash & bank balance has been increased from Rs 17983.89 lacks in 2006-2007
to Rs. 22019.47 lacks in 2007 -2008
 The Inventory Turnover Ratio of the company is showing an increasing trend,
which implies that the company is very efficiently turning its inventory into sales.
 Current Assets of the company are adequate in relation to Current Liabilities, i.e.,
in case if the current liabilities increase they have enough funds to meet those
current obligations.
 The Average Collection Period of Debtors of the company is showing an
increasing trend, i.e., longer collection period shows the lower efficiency of the
company needs better quality of debtors.
 No funds raised on short-term basis have been used for long-term investment
and no long-term funds have been used to finance short-term assets.
 The company has neither accumulated losses as at 31st March, 2008 nor has it
incurred any cash losses during the financial year ended on that date or in the
immediate preceding financial year.
 Current ratio of 2:1 is considered satisfactory .But it has been seen that
current ratio of RSMML is very high which is not favorable, as more investment
in current assets & idle investment earns nothing .So the company should try to
find avenues where this idle funds can be invested to yield maximum profit to the
 Working capital management needs to be more strengthened. There is
possibility of managing the current assets & liabilities in a more effective and
efficient manner.
 As far as financing of working capital is concerned it reveals a satisfactory
 The collection period must be reduced for the benefits of the firm.
 A quick ratio of 1:1 is considered to represent satisfactory current financial
condition .as a firm can easily meet, current claim .The firm should try to
maintain 1:1 ratio.

1. Financial Management by – “I. M. Pandey”

2. Financial Management by – “Khan & Jain”

3. Management Accounting by- ‘ Rao, Heda & gupta’

4. Profile of the company

5. Annual reports of the company

a. Balance sheet
b. Profit & loss account

6. Website of the company – “”