A PROJECT

ON
CASH MANAGEMENT WITH REFERENCE TO PARLE PRODUCTS
PVT LIMITED

(University Logo)

SUBMITTED BY
(VIDYA SHREE.P)

(2021-22)

REG No. 20TUCMD142

UNDER THE GUIDANCE OF:

GUIDE NAME:

SUBMITTED TO
(UNIVERSITY NAME AND ADDRESS IN CAPITAL LETERS)

1
 CERTIFICATE

This is to certify that (_________________NAME) has satisfactory completed the project

work entitled, “PROJECT ON CASH MANAGEMENT WITH REFERENCE TO
PARLE PRODUCTS PVT LIMITED” is based on the declaration made by the candidate
and me association as a guide for carrying out this project work, I recommended this project
for evaluation as a part of the MBA programme of _________(UNIVERSITY NAME)

Place: ____________

Date: PROF: ____________

2
 ACKNOWLEDGEMENT

My debts are many and I acknowledge them with much pride and delight. This project Report
was undertaken for the fulfilment of MBA Programme pursuing at (BANGALORE
UNIVERSITY) I would like to thank my institute and PARLE PRODUCTS PVT
LIMITED which has provided me the opportunity for doing this project work.
I am extremely great full to (________________Guide Name)
(__________________________Designation and College/institute name), for his invaluable
help and guidance throughout my work. He kindly evinced keen interest in my work and
furnished some useful comments, which could enrich the work substantially.
In fact it is very difficult to acknowledge all the names and nature of help and encouragement
provided by them. I would never forget the help and support extended directly or indirectly
to me by all.

(_________FULL NAME)

3
 STUDENT DECLARATION

I,VIDYASHREE.P Student of M.B.A FINANCE BANGALORE UNIVERSITY_hereby

declare that the “PORJECT ON CASH MANAGEMENT WITH REFERENCE TO
PARLE PRODUCTS PVT LIMITED” is been result of my own work and has been
carried out under supervision of__________________ (GUIDE NAME)
I declare that this submitted work is done solely by me and to the best of my knowledge; no
such work has been submitted by any other person for the award of post graduation degree or
diploma.
I also declare that all the information collected from various secondary sources has been duly
acknowledged in this project report.

PLACE: (NAME)
DATE:

4
 TABLE OF CONTENTS
S. No. CHAPTER TITLE PAGE NO.

1. INTRODUCTION OF THE PROJECT 6

2. OBJECTIVES OF THE STUDY 13

Need of the Study
Scope of the Study
Limitations of the Study
3. INDUSTRY AND COMPANY PROFILE 15

4. REVIEW OF LITERATURE 25

5. RESEARCH METHODOLOGY 50

6. DATA ANALYSIS AND INTERPRETATION 51

7. FINDINGS OF THE STUDY 63

8. CONCLUSION 64

9. RECOMMENDATION 65

BIBLIOGRAPHY 66

5
CHAPTER NO. 1
INTRODUCTION OF THE PROJECT
This project is based on the study of cash management analysis. “The corporate process of
collecting, managing and (short-term) investing cash. A key component of ensuring a
company’s financial stability and solvency. Frequently, corporate treasurers or a business
manager is responsible for overall cash management.” Without a cash management system or
at least closely monitoring cash, a business can become non-solvent very quickly because
they do not have available cash for regular or unforeseen expenses.
Cash management is very important because it allows businesses to be solvent enough to
keep the company in business even during slow activity or economic downturns. The largest
goal of good cash management systems is to reduce or eliminate any surprises when meeting
cash requirements. Good cash management influences the efficiency of operations and
reduces overall cost of doing business.
The project titled is “A study of cash management analysis with reference to Parle P”. Is
being conducted to identify and analysis cash management analysis of Parle Products Pvt Ltd.
This project report begins with a brief overview of the product category being dealt with
mainly all categories. It also dwells briefly on the history of the company and its current
position and activities.
INTRODUCTION OF THE PROJECT
Cash is the important current asset for the operations of the business. Cash is the basic input
needed to keep the business running on a continuous basis; it is also the ultimate output
expected to be realized by selling the service or product manufactured by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firm’s profitability. Thus, a major function of the financial manager is
to maintain a sound cash position. Cash is the money which a firm can disburse immediately
without any restriction. The term cash includes coins, currency and cheques held by the firm,
and balances in its bank accounts. Sometimes near-cash items, such as marketable securities
or bank time’s deposits, are also included in cash. The basic characteristic of near-cash assets
6
is that they can readily be converted into cash. Generally, when a firm has excess cash, it
invests it in marketable securities.

MEANING AND DEFINATION OF CASH

In the words of I. M. Pandey:
“The term cash includes coins, currency and cheques held by the firm and balances in its
bank accounts. Sometimes near-cash items such as marketable securities or bank time-
deposits are also included in cash. The basic characteristics of near cash assets is that they
can readily be converted into cash. Generally, when a firm has excess cash, it invests it in
marketable securities. This kind of investment contributes some profits to the firm.” Cash is
both the beginning and the end of the working capital cycle, i.e., cash, inventories,
receivables and cash.

In the words of P. V. Kulkarni:

“Cash in the business enterprise may be compared to the blood of the human body; blood
gives life and strength to the human body, and cash imparts life and strength to the business
organization”.

According to J. M. Keyens:
“It is the cash which keeps a business going. Hence every enterprise has hold necessary cash
for its existence”. In a business firm, ultimately, a transaction results in either an inflow or an
outflow of cash. In an efficiently managed business, static cash balance situation generally
does not less. Cash shortage will disrupt the firm’s manufacturing operation, while excessive
cash will simply remain idle, without contributing anything towards the firm’s profitability.
Therefore, for its smooth running and maximum profitability proper and effective cash
management in a business is of paramount importance.

WHAT IS CASH MANAGEMENT?

Cash management is the process of collecting and managing cash flows. Cash management
can be important for both individuals and companies. In business, it is a key component of a
company's financial stability. For individuals, cash is also essential for financial stability
while also usually considered as part of a total wealth portfolio. Individuals and businesses
have a wide range of offerings available across the financial marketplace to help with all
7
types of cash management needs. Banks are typically a primary financial service provider for
the custody of cash assets. There are also many different cash management solutions for
individuals and businesses seeking to obtain the best return on cash assets or the most
efficient use of cash comprehensively.
Cash management is a broad term that refers to the collection, concentration, and
disbursement of cash. The goal is to manage the cash balances of an enterprise in such a way
as to maximize the availability of cash not invested in fixed assets or inventories and to do so
in such a way as to avoid the risk of insolvency. Factors monitored as a part of cash
management include a company's level of liquidity, its management of cash balances, and its
short-term investment strategies. In some ways, managing cash flow is the most important
job of business managers. If at any time a company fails to pay an obligation when it is due
because of the lack of cash, the company is insolvent. Insolvency is the primary reason firms
go bankrupt. Obviously, the prospect of such a dire consequence should compel companies to
manage their cash with care. Moreover, efficient cash management means more than just
preventing bankruptcy. It improves the profitability and reduces the risk to which the firm is
exposed. Cash management is particularly important for new and growing businesses. Cash
flow can be a problem even when a small business has numerous clients, offers a product
superior to that offered by its competitors, and enjoys a sterling reputation in its industry.
Companies suffering from cash flow problems have no margin of safety in case of
unanticipated expenses. They also may experience trouble in finding the funds for innovation
or expansion. It is, somewhat ironically, easier to borrow money when you have money.
Finally, poor cash flow makes it difficult to hire and retain good employees. It is only natural
that major business expenses are incurred in the production of goods or the provision of
services.
In most cases, a business incurs such expenses before the corresponding payment is received
from customers. In addition, employee salaries and other expenses drain considerable funds
from most businesses. These factors make effective cash management an essential part of any
business's financial planning. Cash is the lifeblood of a business. Managing it efficiently is
essential for success. When cash is received in exchange for products or services rendered,
many small business owners, intent on growing their company and tamping down debt, spend
most or all of these funds. But while such priorities are laudable, they should leave room for
businesses to absorb lean financial times down the line. The key to successful cash
management, therefore, lies in tabulating realistic projections, monitoring collections and

8
disbursements, establishing effective billing and collection measures, and adhering to
budgetary restrictions.

UNDERSTANDING CASH MANAGEMENT

Cash is the primary asset individuals and companies use to pay their obligations on a regular
basis. In business, companies have a multitude of cash inflows and outflows that must be
prudently managed in order to meet payment obligations, plan for future payments, and
maintain adequate business stability. For individuals, maintaining cash balances while also
earning a return on idle cash are usually top concerns. In corporate cash management, also
often known as treasury management, business managers, corporate treasurers, and chief
financial officers are typically the main individuals responsible for overall cash management
strategies, cash related responsibilities, and stability analysis. Many companies may
outsource part or all of their cash management responsibilities to different service providers.
Regardless, there are several key metrics that are monitored and analyzed by cash
management executives on a daily, monthly, quarterly, and annual basis. The cash flow
statement is a central component of corporate cash flow management. While it is often
transparently reported to stakeholders on a quarterly basis, parts of it are usually maintained
and tracked internally on a daily basis. The cash flow statement comprehensively records all
of a business’s cash flows. It includes cash received from accounts receivable, cash paid for
accounts payable, cash paid for investing, and cash paid for financing. The bottom line of the
cash flow statement reports how much cash a company has readily available.

KEY TAKEAWAYS
 Cash management is the process of managing cash inflows and outflows.
 There are many cash management considerations and solutions available in the
financial marketplace for both individuals and businesses.
 For businesses, the cash flow statement is a central component of cash flow
management.

THE CASH FLOW STATEMENT

9
The cash flow statement is broken down into three parts: operating, investing, and financing.
The operating portion of cash activities will vary based heavily on net working capital which
is reported on the cash flow statement as a company’s current assets minus current liabilities.
The other two sections of the cash flow statement are somewhat straighter forward with cash
inflows and outflows pertaining to investing and financing.

INTERNAL CONTROLS
There are many internal controls used to manage and ensure efficient business cash flows.
Some of a company’s top cash flow considerations include the average length of account
receivables, collection processes, write-offs for uncollected receivables, liquidity and rates of
return on cash equivalent investments, credit line management, and available operating cash
levels. In general, cash flows pertaining to operating activities will be heavily focused on
working capital which is impacted by accounts receivable and accounts payable changes.
Investing and financing cash flows are usually extraordinary cash events that involve special
procedures for funds.

WORKING CAPITAL
A company’s working capital is the result of its current assets minus current liabilities.
Working capital balances are an important part of cash flow management because they show
the amount of current assets a company has to cover its current liabilities. Companies strive
to have current asset balances that exceed current liability balances. If current liabilities
exceed current assets a company would likely need to access its reserve lines for payables. In
general working capital includes the following:
 Current assets: cash, accounts receivable within one year, inventory.
 Current liabilities: all accounts payable due within one year, short-term debt payments
due within one year.
Current assets minus current liabilities results in working capital. On the cash flow statement,
companies usually report the change in working capital from one reporting period to the next
within the operating section of the cash flow statement. If net change in working capital is
positive a company has increased its current assets available to cover current liabilities which
increases total cash on the bottom line. If a net change in working capital is negative, a
company has increased its current liabilities which reduces its ability to pay them as
efficiently. A negative net change in working capital reduces the total cash on the bottom

10
line. There are several things a company can do to improve both receivables and payables
efficiency, ultimately leading to higher working capital and better operating cash flow.
Companies operating with invoice billing can reduce the day’s payable or offer discounts for
quick payments. They may also choose to use technologies that facilitate faster and easier
payments such as automated billing and electronic payments. Advanced technology for
payables management can also be helpful. Companies may choose to make automated bill
payments or use direct payroll deposits to help improve payables cost efficiency.

CASH COLLECTION AND DISBURSEMENT

Cash collection systems aim to reduce the time it takes to collect the cash that is owed to a
firm. Some of the sources of time delays are mail float, processing float, and bank float.
Obviously, an envelope mailed by a customer containing payment to a supplier firm does not
arrive at its destination instantly. The payment is not processed and deposited into a bank
account the moment it is received by the supplier firm. And finally, when the payment is
deposited in the bank account oftentimes the bank does not give immediate availability of the
funds. These three "floats" are time delays that add up quickly, and they can force struggling
or new firms to find other sources of cash to pay their bills.

Cash management attempts, among other things, to decrease the length and impact of these
"float" periods. A collection receipt point closer to the customer-;perhaps with an outside
third-party vendor to receive, process, and deposit the payment (check)-;is one way to speed
up the collection. The effectiveness of this method depends on the location of the customer;
the size and schedule of its payments; the firm's method of collecting payments; the costs of
processing payments; the time delays involved for mail, processing, and banking; and the
prevailing interest rate that can be earned on excess funds. The most important element in
ensuring good cash flow from customers, however, is establishing strong billing and
collection practices. Once the money has been collected, most firms then proceed to
concentrate the cash into one center. The rationale for such a move is to have complete
control of the cash and to provide greater investment opportunities with larger sums of money
available as surplus. There are numerous mechanisms that can be employed to concentrate
the cash, such as wire transfers, automated clearinghouse (ACH) transfers, and checks. The
tradeoff is between cost and time. Another aspect of cash management is knowing a
company's optimal cash balance. There are a number of methods that try to determine this
magical cash balance, which is the precise amount needed to minimize costs yet provide
11
adequate liquidity to ensure bills are paid on time. One of the first steps in managing the cash
balance is measuring liquidity, or the amount of money on hand to meet current obligations.
There are numerous ways to measure this, including: the Cash to Total Assets ratio, the
Current ratio, the Quick ratio and the Net Liquid Balance.

CASH MANAGEMENT IN TROUBLED TIMES

During downturns in the economy, declines in sales and poor cash management can spell the
death knell to a small or startup business. In tough times, such as the recession of 2008-09,
banks may tighten up the revolving credit or short-term loans that businesses often rely on to
sort out cash management troubles. Some business owners resort to trying to keep their
companies afloat by raiding their personal finances mortgaging their homes, maxing out
credit cards. At times like these, business managers or owners need to sit down and undertake
cash management analysis so that they can address shortfalls, increase revenues, and cut
spending -- before it's too late. They need to meet with department heads and employees and
take control and adopt a better cash management plan. The plan may call for some harsh
measures, but if employees are involved they will understand that these are needed for the
business's survival. But entrepreneurs and managers can take steps to minimize the impact of
such problems and help maintain the continued viability of the business. Suggested steps to
address temporary cash flow problems include:
 Create a realistic cash flow budget that charts finances for both the short term (30-60
days) and longer term (1-2 years).
 Contact creditors and attempt to negotiate mutually satisfactory arrangements that will
enable the business to weather its cash shortage.
 Redouble efforts to collect outstanding payments owed to the company. "Bill
promptly and accurately," counseled the Journal of Accountancy. "The faster you
mail an invoice, the faster you will be paid. If deliveries do not automatically trigger
an invoice, establish a set billing schedule, preferably weekly." Businesses should
also include a payment due date.
 Consider compromising on some billing disputes with clients. Small business owners
are understandably reluctant to consider this step, but in certain cases, obtaining some
cash-; even if your company is not at fault in the dispute-; for products sold/services
rendered may be required to pay basic expenses.

12
CHAPTER NO. 2
OBJECTIVES OF THE STUDY
 To evaluate how cash is being managed.
 To gain knowledge about the system prevailing in Parle Products Pvt Ltd.
 To suggest methods for improving cash management in Parle Products Pvt Ltd.

NEEDS OF THE STUDY

Cash management is concerned with management of cash in such a way as to achieve the
generally accepted objectives of the firm- maximum profitability with maximum liquidity of
the firm. It is the management's ability to recognize cash problems before they arise, to solve
them when they arise and having made solution available to delegate someone carry them
out. An effective and efficient cash management is considered to be important for the
following reasons:
 Cash management helps to meet obligatory cash out flows when they fall due.
 Cash management ensures that the firm has sufficient cash during peak times for
purchase and for other purposes.

SCOPE OF THE STUDY

 Cash is first of all a very important asset for a firm. it helps the firm to meet their
immediate obligations such as payment of salary, rent, wages, etc. Holding cash is
important for the firm but holding excessive cash causes loss of interest to the firm, so
when firm has excessive cash, it should invest it in marketable securities and earn
interest. But by investing the firm has to meet fixed transaction cost. So cash
management is a very important aspect in financial management. All the firms must
see their total cash requirement and thereafter invest their money keeping in mind
prospects of the company.

LIMITATION OF THE STUDY

13
 The study was relatively insufficient, keeping in mind the long duration it can take at
times, to close a particular corporate deal.
 The study might not produce absolutely accurate results as it was based on a sample
taken from the population.
 It was difficult getting time and access to senior level Finance / HR managers (who
had to be talked to, to get required information) due to their busy schedules and prior
commitments.
 A few of the managers refrained from giving the required information as he
considered me to be from their confidential domains.

14
CHAPTER NO. 3
INDUSTRY AND COMPANY PROFILE
FMCG INDUSTRY IN INDIA

Introduction
Fast-moving consumer goods (FMCG) sector is India’s fourth largest sector with household
and personal care accounting for 50% of FMCG sales in India. Growing awareness, easier
access and changing lifestyles have been the key growth drivers for the sector. The urban
segment (accounts for a revenue share of around 55%) is the largest contributor to the overall
revenue generated by the FMCG sector in India. However, in the last few years, the FMCG
market has grown at a faster pace in rural India compared to urban India. Semi-urban and
rural segments are growing at a rapid pace and FMCG products account for 50% of the total
rural spending.

Market Size

15
The retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion
in 2017, with modern trade expected to grow at 20-25% per annum, which is likely to boost
revenue of FMCG companies. Revenue of FMCG sector reached Rs 3.4 lakh crore (US$
52.75 billion) in FY18 and is estimated to reach US$ 103.7 billion in 2020. FMCG market is
expected to grow at 9–10% in 2020.
Rise in rural consumption will drive the FMCG market. It contributes around 36% to the
overall FMCG spending. FMCG urban segment witnessed growth rate of 8%, whereas, rural
segment grew at 5% in the quarter ended September 2019.
Investments/ Developments
The Government has allowed 100% Foreign Direct Investment (FDI) in food processing and
single-brand retail and 51% in multi-brand retail. This would bolster employment, supply
chain and high visibility for FMCG brands across organised retail markets thereby bolstering
consumer spending and encouraging more product launches. The sector witnessed healthy
FDI inflow of US$ 16.28 billion during April 2000–March 2020.
Some of the recent developments in the FMCG sector are as follows:
 In September 2020, Orkla, a Norway based consumer goods company acquired 68%
stake in eastern Condiment
 In May 2020, Tata Consumer Products Limited (TCPL) acquired PepsiCo’s stake in
NourishCo Beverages Limited.
 In March 2020, Hindustan Unilever Limited (HUL) signed an agreement with
Glenmark Pharmaceuticals Ltd to acquire its intimate hygiene brand VWash.
 In March 2020, Venture Catalysts made an investment in OM Bhakti, an organised
brand in the puja cotton-wicks market during its seed-funding round.
 In November 2019, ITC Ltd acquired 33.42% stake in Delectable Technologies,
which is a vending machine start-up.
 Nestle plans to invest Rs 700 crore (US$ 100.16 million) to open a new plant in
Sanand for Maggi.
 ITC to invest Rs 700 crore (US$ 100 million) in food park in Madhya Pradesh.
 Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya
Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.

Government Initiatives
Some of the major initiatives taken by the Government to promote the FMCG sector in India
are as follows:

16
  The Government of India has approved 100% FDI in the cash and carry segment and
in single-brand retail along with 51% FDI in multi-brand retail.
 The Government has drafted a new Consumer Protection Bill with special emphasis
on setting up an extensive mechanism to ensure simple, speedy, accessible, affordable
and timely delivery of justice to consumers.
 The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of
the FMCG products such as soap, toothpaste and hair oil now come under the 18% tax
bracket against the previous rate of 23–24%. Also, GST on food products and hygiene
products have been reduced to 0–5% and 12–18% respectively.
 GST is expected to transform logistics in the FMCG sector into a modern and
efficient model as all major corporations are remodelling their operations into larger
logistics and warehousing.

COMPANY PROFILE

Since 1929, we have grown to become India's leading manufacturer of biscuits and
confectionery.
As the makers of the world's largest selling biscuit, Parle-G, and a host of other very popular
brands, the Parle name symbolizes quality, nutrition and superior taste.
An in-depth understanding of the Indian consumer psyche has helped us develop a marketing
philosophy that reflects the needs of the Indian masses. We have made it a tradition to deliver
both health and taste, with a value-for-money positioning that allows people from all classes
and age groups to enjoy Parle products to the fullest.

17
With a reach spanning the remotest villages of India and major cities across the world, the
House of Parle has become synonymous with trust, globally.
1928-30
Mr. Mohanlal Dayal founded the House of Parle in 1928
Our first factory was set up in 1929 with just 12 people making confectionery.
Parle Products Pvt. Ltd. engages in the manufacture and marketing of biscuits and
confectionaries. It offers glucose, milk, sweet and salted cream, wafer crème, cumin seed,
and cheese biscuits; chocolate, mint, cola, and tropical fruit flavored toffees and candies; and
snacks. The company offers its products in India, the Middle East, Africa, South East Asia,
the United States, the United Kingdom, Canada, Australia, and New Zealand. Parle Products
Pvt. Ltd. was founded in 1929 and is based in Mumbai, India.
Parle Products Ltd. entered the snack market with the launch of Musst Chips and Musst Stix
in Maharashtra. It is selling these two new products at price points of INR 10 and INR 5 but
giving more quantity as compared to competition. The company has set up a unit in Nashik
for manufacturing the new brands. It intends to promote these two products by extending its
distribution network.
Parle Products Private Limited announced that it has launched new product-Parle 20-20.
Parle's new 20-20 cookies promised to be a combination of crunch and scrumptious delicacy.
This summer experience the richness in taste with Parle's brand new 20-20 cookies. Each
biscuit is baked to perfection and comes in two variants-Butter & Cashew Butter. Consumers
especially the young adults are looking for a tastier and crunchier variety of cookies than ever
before. Parle 20-20 cookies are aimed towards young adults-the 'now' generation. This is the
generation that wants to live right now, and is in a hurry to cram a medley of experiences into
life. The now mantra of the day is 'instant gratification' which 20-20 delivers without
compensating on quality or taste.
Parle Ltd. has decided to unveil butter and cashew cookies under the 20:20 brand. The new
20:20 brand would have the baseline Choice of Champions.

PARLE PRODUCTS

MONACO BITES KISMI BAR

18
 FUN CENTRE MANGO BITE

HIDE & SEEK MELODY

JEFFS MAGIX

KRACK JACK ORANGE CANDY

MARIE CHOICE POPPINS

MONACO ROL-A-COLA

Parle-G TOFFES

SIXER MILK SHAKTI

Parle Products
Biscuit Goodies:
Parle-G Hide & Seek
Kackjack Hide & Seek Milano
Magix Digestive Marie
Monaco Parle Marie
Kreams Milk Shakti
Parle 20-20 cookies Goldenarcs
Nimkin Kreams Gold
Chox Monaco Jeera
Sweats :

19
Melody Kismi Gold
Mango Bite Orange Candy
Kaccha Mango Xhale
Poppins 2 in 1 Éclair
Kismi Toffee Golgappa
Kisme Toffee Bar Melody Softee
Mazelo Pale Lites
Snacks :
Musst Bites Jeffs
Cheeslings Musst stix & Musst Chips
Sixer Sixer Zeera

QUALITY OF PARLE
Parle Quality:- Hygiene is the precursor to every process at Parle. o husking the wheat and
melting the sugar to delivering the final products to the supermarkets and store shelves
nationwide, care is taken at every step to ensure the best product of long-lasting freshness.
Every batch of biscuits and confectioneries are thoroughly checked by expert staff, using the
most modern equipment hence ensuring the same perfect quality across the nation and
abroad.
Concentrating on consumer tastes and preferences, the Parle brand has grown from strength
to strength ever since its inception. The factories at Bahadurgarh in Haryana and Neemrana in
Rajasthan are the largest biscuit and confectionery plants in the country. The factory in
Mumbai was the first to be set up, followed soon by the one in Bangalore, Karnataka. Parle
Products also has 14 manufacturing units for biscuits and 5 manufacturing units for
confectioneries, on contract.
Quality Commitment:- Parle Products has one factory at Mumbai that manufactures biscuits
& confectioneries while another factory at Bahadurgarh, in Haryana manufactures biscuits.
Apart from this, Parle has manufacturing facilities at Neemrana, in Rajasthan and at
Bangalore in Karnataka. The factories at Bahadurgarh and Neemrana are the largest such
manufacturing facilities in India. Parle Products also has 14 manufacturing units for biscuits
& 5 manufacturing units for confectioneries, on contract.

20
All these factories are located at strategic locations, so as to ensure a constant output & easy
distribution. Each factory has state-of-the-art machinery with automatic printing & packaging
facilities.
All Parle products are manufactured under the most hygienic conditions. Great care is
exercised in the selection & quality control of raw materials; packaging materials & rigid
quality standards are ensured at every stage of the manufacturing process. Every batch of
biscuits & confectioneries are thoroughly checked by expert staff, using the most modern
equipment.

MARKETING DEPARTMENT
The extensive distribution network, built over the years, is a major strength for Parle
Products. Parle biscuits & sweets are available to consumers, even in the most remote places
and in the smallest of villages with a population of just 500. Parle has nearly 1,500
wholesalers, catering to 4,25,000 retail outlets directly or indirectly. A two hundred strong
dedicated field force services these wholesalers & retailers. Additionally, there are 31 depots
and C&F agents supplying goods to the wide distribution network. The Parle marketing
philosophy emphasizes catering to the masses. They constantly endeavor at designing
products that provide nutrition & fun to the common man. Most Parle offerings are in the
low & mid-range price segments. This is based on their understanding of the Indian
consumer psyche. The value-for-money positioning helps generate large sales volumes for
the products.
However, Parle Products also manufactures a variety of premium products for the up-market,
urban consumers. And in this way, caters a range of products to a variety of consumers.
Parle’s Core Value:- An in-depth understanding of the Indian consumer psyche has helped
Parle evolve a marketing philosophy that reflects the needs of the Indian masses. With
products designed keeping both health and taste in mind, Parle appeals to both health
conscious mothers and fun loving kids. The great tradition of taste and nutrition is consistent
in every pack on the store shelves, even today. The value-for-money positioning allows
people from all classes and age groups to enjoy Parle products to the fullest.

The Customer Confidence:- The Parle name conjures up fond memories across the length
and breadth of the country. After all, since 1929, the people of India have been growing up on
Parle biscuits & sweets.

21
Today, the Parle brands have found their way into the hearts and homes of people all over
India & abroad. Parle Biscuits and confectioneries, continue to spread happiness & joy
among people of all ages.

The consumer is the focus of all activities at Parle. Maximizing value to consumers and
forging enduring customer relationships are the core endeavors at Parle.

Their efforts are driven towards maximizing customer satisfaction and this is in synergy with
their quality pledge. " Parle Products Limited will strive to provide consistently nutritious &
quality food products to meet consumers' satisfaction by using quality materials and by
adopting appropriate processes. To facilitate the above we will strive to continuously train
our employees and to provide them an open and participative environment."

Corporate Social Responsibility:-

Parle Products with its wide platter of offering of biscuits and sweets like Parle-G, Krackjack,
Monaco, Melody, Mango bite and many others since 1929 is also actively engaged to change
& uplift the social face of India. As a part of Corporate Social Responsibility Policy Parle is
keenly involved in the overall development of younger generation with focused endeavor to
built New Face of India and spread happiness & joy all over.

Parle Centre of Excellence as an institution is dedicated to enrich the lives of people through
conducting various cultural programs across all region to facilitate the all round development
of the children. Every year, Parle organises Saraswati Vandana in the state of West Bengal
during the festival of Saraswati Puja, inviting schools from all across the state to participate.
The event is one of much fanfare and celebration, keeping alive the culture and traditions of
ages. Our involvement in cultural activities has seen the inception of Golu Galata in Tamil
Nadu, held during Navratri. Its gives a platform to all the members of a household to
showcase their creativity and being judged by immanent personalities. Thousands of families
participate and celebrate the occasion on a grand scale.

22
These events give us a chance to interact with children on a one-to-one basis, and promote
our belief of fun and health for the whole family.

Parle Awards:-

Parle products have been shining with the golds and silvers consistently at the Monde
Selection ever since they were first entered in 1971. Monde Selection is an international
institute for assessing the quality of foods and is currently the oldest and most representative
organization in the field of selecting quality foods worldwide.

Parle Products Pvt. Ltd. Is a US $ 450 million conglomerate started in India in 1929. We are
in the business of manufacturing and marketing biscuits and confectionaries.
We have State-of-the-art machinery with automatic printing and packaging facilities. Our
biscuit baking oven is the largest of its type in Asia.
Over the decades the efforts of our Research & Development wing have made the repertoire
of our products grow manifold. In biscuits we have Glucose, Milk, sweet and salted cream,
wafer crème, cumin seed and cheese categories.
In confectionery, we have a range of toffees and hard-boiled candies available in chocolate,
mint, cola, and tropical fruit flavors. Some of these are double layered toffees and center
filled candies packed in rolls or pillow packs, or have single or double twist wrapping.
Almost all of our products are market leaders in their category and as recognition of their
quality, have won Gold, Silver and Bronze Monde Selection medals since 1971.
Parle enjoys a 40% share of the total biscuit market and a 15% share of the total
confectionary market, in India.

23
CHAPTER NO. 4
REVIEW OF LITERATURE
The Transaction Motives:
The transaction motive requires a firm hold cash to conduct its business in the ordinary
course. The firms need cash primarily to make payment for purchases, wages, operating
expenses, taxes, dividends etc. A firm needs a pool of cash because its receipts and payments
are not perfectly synchronized. A pool of cash is also known as ‘transaction balance’. A cash
budget is often used to decide what the transaction balance should be.

The precautionary motive:

The precautionary motive is to hold cash to meet any contingencies in future. It provides a
cushion or buffer to withstand some unexpected emergency. The precautionary amount of
cash depends upon the predictability of cash flows. If cash flows can be predicted with
accuracy, less cash will be maintained against an emergency. On other hand, unpredicted the
cash flows, the larger the need for such balances.

The speculative Motives:

The financial manager would like to take advantage of unexploited opportunities. Some
reserve of money is always essential to enable the firm to take advantage of cash when such
opportunities arise. The speculative motives helps to take advantage of an opportunity to
purchase raw materials at a reduced price on payment of immediate cash. A chance to
speculate on interest rate movements by buying securities when interest rates are expected to
decline. Three primary motives of holding cash balance, the two of them are important viz.:
the transaction motive and the precautionary motive. Business firm normally do not speculate
and need not have speculative balances. The firm must decide the quantum of transitions and
precautionary balance to be held. This depends upon the following factors. The expected cash
inflows and outflows based on the cash budget and forecasts, encompassing long and short
term cash requirements of the firm. The degree of deviation between the expected and actual
net cash flows. The firm’s ability to borrow at short notice, in the event of any emergency.

24
The philosophy of management regarding liquidity and risk of insolvency. All these factors,
analyses together, will determine the appropriate level of the transactions and precautionary
balances.

FACETS OF CASH MANAGEMENT

Cash management is concerned with the managing of:
 Cash flows into and out of the firm
 Cash flows within the firm
 Cash balances held by the firm
At a point of time by financing deficit or investing surplus cash. Sales generate cash which
has to be disbursed out. The surplus cash has to be invested while deficit has to be borrowed.
Cash management seeks to accomplish this cycle at a minimum cost. At the same time, it also
seeks to achieve liquidity and control. Cash management assumes more importance than
other current assets because cash is the most significant and the least productive asset that a
firm holds. It is significant because it is used to pay the firm’s obligations. However, cash is
unproductive. Unlike fixed assets or inventories, it does not produce goods for sale.
Therefore, the aim of cash management is to maintain adequate control over cash position to
keep the firm sufficiently liquid and to use excess cash in some profitable way. Cash
management is also important because it is difficult to predict cash flows accurately,
particularly the inflows, and there is no perfect coincidence between the inflows and outflows
of cash. During some periods, cash outflows will exceed cash inflows, because payment of
taxes, dividends, or seasonal inventory builds up. At other times, cash inflow will be more
than cash payments because there may be large cash sales and debtors may be realized in
large sums promptly. Further, cash management is significant because cash constitutes the
smallest portion of the total current assets, yet management’s considerable time is devoted in
managing it. In recent past, a number of innovations have been done in cash management
techniques. An obvious aim of the firm these days is to manage its cash affairs in such a way
as to keep cash balance at a minimum level and to invest the surplus cash in profitable
investment opportunities.

Optimum Utilisation of Operating Cash

Implementation of a sound cash management programmed is based on rapid generation,
efficient utilisation and effective conversation of its cash resources. Cash flow is a circle. The
quantum and speed of the flow can be regulated through prudent financial planning
25
facilitating the running of business with the minimum cash balance. This can be achieved by
making a proper analysis of operative cash flow cycle along with efficient management of
working capital.

Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business regarding expected
cash problems, which it may encounter, thus assisting it to regulate further cash flow
movements. Lack of cash planning results in spasmodic cash flows.

Cash Management Techniques:

Every business is interested in accelerating its cash collections and decelerating cash
payments so as to exploit its scarce cash resources to the maximum. There are techniques in
the cash management which a business to achieve this objective.

Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If one does the
autopsies of the businesses that failed, he would find that the major reason for the failure was
their inability to remain liquid. Liquidity has an intimate relationship with efficient utilisation
of cash. It helps in the attainment of optimum level of liquidity.

Profitable Deployment of Surplus Funds

Due to non-synchronization of ash inflows and cash outflows the surplus cash may arise at
certain points of time. If this cash surplus is deployed judiciously cash management will itself
become a profit center. However, much depends on the quantum of cash surplus and
acceptability of market for its short-term investments.

Economical Borrowings
Another product of non-synchronization of cash inflows and cash outflows is emergence of
deficits at various points of time. A business has to raise funds to the extent and for the period
of deficits. Raising of funds at minimum cost is one of the important facets of cash
management. The ideal cash management system will depend on the firm’s products,
organization structure, competition, culture and options available. The task is complex, and
decisions taken can affect important areas of the firm. For example, to improve collections if
the credit period is reduced, it may affect sales. However, in certain cases, even without
26
fundamental changes, it is possible to significantly reduce cost of cash management system
by choosing a right bank and controlling the collections properly.

FUNCTIONS OF CASH MANAGEMENT

In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should devlope some strategies for cash
management. Efficient cash management requires proper cash planning, an organisation for
managing receipts and disbursement, and an efficient control and review mechanism. The
firm should evolve strategies regarding the following four function of cash management:

Cash planning
Cash planning can help anticipate future cash flows and needs of the firm and reduces the
possibility of idle cash balances and cash deficits. Cash planning is a technique for planning
and controlling the use of cash. Cash plans are very crucial in developing the overall
operating plans of the firm. Cash planning may be done on daily, weekly or monthly basis.
The period and frequency of cash planning generally depends upon the size of the firm and
philosophy of management. Cash budget should be prepared for this proposes.

In the words of Van Horne:

“A cash budget is a summary statement of the firm’s expected cash inflows and outflows
over a projected time period. It gives information on the timing and magnitude of expected
cash flows and cash balances over the projected period. The information helps the financial
manager to determine the future cash needs of the firm, plan for financing of these needs, and
exercise control over the cash and liquidity of the firm”. Cash forecasts are needed to prepare
cash budget. Cash forecasting may be done on a short-term or long-term basis. It is
comparatively easy to make short-term forecasts. Short-terms cash forecasts, routinely
prepared by business firms, are helpful in:

 Estimating cash requirements

 Planning short-term financing
 Scheduling payments in connection with capital expenditure projects
 Planning purchases of materials

27
  Developing credit policies
 Checking the accuracy of long –term forecasts.
Long-term cash forecasts are generally prepared for a period ranging from 2 to 5 years and
serve to provide a rough picture of firm’s financing needs and availability of investable
surplus in future. Long-term cash forecasts are helpful in:
 Planning the outlays on capital expenditure projects
 Planning the rising of long-term funds.
Managing the cash flows:
The twin objectives in managing the cash flows are: cash inflows and cash outflows. The
inflows of cash should be accelerated while, as far as possible, the out flow of the cash should
be decelerated. A firm can conserve cash and reduce its requirements for cash balances, if it
can speed up its cash collections. Cash collections can be accelerated by reducing the lay or
gap between the time a customer pays his bills and the time the cheque is collected and funds
become available for the firms use.
Within this time gap, the delay is caused by the mailing time, e.g., the time taken by cheque
in transit and the processing time, e.g., the time taken by the firm processing cheque for
internal accounting purpose. The amount of cheques sent by customers but not yet collected
is called deposit floats. The greater will be the firm’s deposit float, the longer the time taken
in converting cheques into usable funds. In India, these floats can assume sizeable
proportions, as cheques normally take a longer time to go realised, than in most countries. An
efficient financial manager will attempt to reduce the firm’s deposits float by speeding up the
mailing, processing and collections time. There are mainly two techniques which can be used
to save mailing and processing times decentralized collections and lock box system. In
decentralisation collection system affirm sets up collection centers in various marketing
centers of the country instead of a single collection center.
The customers are instructed to remit their payments to the collection center of their region.
The collection center deposits the cheques in the local bank. These cheques are collected
quickly because many of them originate in the very city in which the bank is located. Surplus
money of the local bank can then be transferred to the company’s main bank. Another
technique of speeding up mailing processing and collection times is ‘Lock Box System’. In
this system, the local post office box is rented by the company in a city and customers of the
nearby area are asked to send their remittances to it. Local bank is authorised to pick up
remittances from the box and deposit them in the account of the company, ultimately to be

28
transferred to the central bank account of the company. It may be concluded that the major
advantage of accelerating collections is to reduce the firm’s total financing requirements.
Determining the optimum cash balance:
One of the primary responsibilities of the financial manager is to maintain a sound liquidity
position of the firm so that dues may be settled in time. The test of liquidity is really the
availability of cash to meet the firm’s obligations when they become due. Thus, cash balance
is maintained for day to day transactions and an additional amount may be maintained as a
buffer or safety stock. The financial manager should determine the appropriate amount of
cash balance. Such a decision is influenced by a tradeoff between risk and return. If the firm
maintains a small cash balance, its liquidity position becomes week and suffers from a
paucity of cash to make payments. But at the same time a higher profitability can be attained
by investing runs out of cash it may have sell its marketable securities, released funds in
some profitable opportunities.
When the firm runs out of cash it may have to sell its marketable securities, if available, or
borrow. This involves transaction costs. On the other hand, if the firm maintains cash balance
at a high level, it will have a sound liquidity position but forgo the opportunities to earn
interest. The potential interest lost on holding large cash balance involves an opportunity cost
to the firm. Thus, the firm should maintain an optimum cash balance, neither a small nor a
large cash balance. To find out the optimum cash balance, the transaction costs and risk of
too small a balance should be matched with the opportunity costs of too large a balance. But
the opportunity costs would increase. At point x the sum of the two costs is minimum. This is
the point of optimum cash balance which a firm should seek to achieve.

Investing Idle Cash:

The idle cash or precautionary cash should be properly and profitably invested. The firm
should decide about the division of cash balances between marketable securities and bank
deposits. The management of the investment in marketable securities is an important
financial management responsibility because of the close relationship between cash and
marketable securities. Therefore, the investment in marketable securities should be properly
managed. Excess cash should normally be invested in marketable securities which can be
conveniently and properly managed. Excess cash should normally be invested in marketable
securities which can be covalently and promptly converted into cash. Cash in excess of
working capital cash balance requirements of firm may fluctuate because of the element of
seasonality and business cycles. Secondly, excess cash may be as a buffer to meet
29
unpredictable financial needs. A firm holds extra cash because cash-flows cannot be
predicated with certainty. Cash balance held to cover the future exigencies is called the
precautionary balance ad usually is invested in marketable securities until needed. Instead of
holding excess cash for the above mentioned purpose, the firm may meet its precautionary
requirements as and when they arise by making short-term borrowings. The choice between
the short-term borrowings and liquid asset holding will depend upon the firm’s policy
regarding the mix of short-term and long-term financing.

GENERAL PRINCIPLES OF CASH MANAGEMENT:

Harry Gross has suggested certain general principles of cash management that, essentially
add efficiency to cash management. These principles reflecting cause and effect relationship
having universal applications give a scientific outlook to the subject of cash management.
While, the application of these principles in accordance with the changing conditions and
business environment requiring high degree of skill and tact which places cash management
in the category of art. Thus, we can say that cash management like any other subject of
management is both science and art for it has well-established principles capable of being
skill fully modified as per the requirements. The principles of management are follows as

Contingency Cash Requirement:

There may arise certain instances, which fall beyond the forecast of the management. These
constitute unforeseen calamities, which are too difficult to be provided for in the normal
course of the business. Such contingencies always demand for special cash requirements that
was not estimated and provided for in the cash budget. Rejections of wholesale product, large
amount of bad debts, strikes, lockouts etc. are a few among these contingencies. Only a prior
experience and investigation of other similar companies prove helpful as a customary
practice. A practical procedure is to protect the business from such calamities like bad-debt.

Determinable Variations of Cash Needs:

A reasonable portion of funds, in the form of cash is required to be kept aside to overcome
the period anticipated as the period of cash deficit. This period may either be short and
temporary or last for a longer duration of time. Normal and regular payment of cash leads to
small reductions in the cash balance at periodic intervals. Making this payment to different
employees on different days of a week can equalize these reductions. Another technique for
balancing the level of cash is to schedule I cash disbursements to creditors during that period
30
when accounts receivables collected amounts to a large sum but without putting the goodwill
at stake.
Availability of External Cash:
Another factor that is of great importance to the cash management is the availability of funds
from outside sources. There resources aid in providing credit facility to the firm, which
materialized the firm's objectives of holding minimum cash balance. As such if a firm
succeeds in acquiring sufficient funds from external sources like banks or private financers,
shareholders, government agencies etc., the need for mash reserves diminishes.
Maximizing Cash Receipts
Every financial manager aims at making the best possible use of cash receipts. Again, cash
receipts if tackled prudently results in minimizing cash requirements of a concern. For this
purpose, the comparative cost of granting cash discount to customer and the policy of
charging interest expense for borrowing must be evaluated on continuous basis to determine
the futility of either of the alternative or both of them during that particular period for
maximizing cash receipts. Yet, the under mentioned techniques proved helpful in this
context:
Concentration Banking:
Under this system, a company establishes banking centers for collection of cash in different
areas. Thereby, the company instructs its customers of adjoining areas to send their payments
to those centers. The collection amount is then deposited with the local bank by these centers
as early as possible.
Local Box System:
Under this system, a company rents out the local post offices boxes of different cities and the
customers are asked to \ forward their remittances to it. These remittances are picked by the
authorized lock bank from these boxes to be transferred to the company's central bank
operated by the head office.
Reviewing Credit Procedures:
It is aids in determining the impact of slow payers and bad-debtors on cash. The accounts of
slow paying customers should be reviewed to determine the volume of cash tied up. Besides
this, evaluation of credit policy must also be conducted for introducing essential amendments.
Minimizing Credit Period:
Shortening the terms are allowed to the customers would definitely accelerate the cash inflow
side-by-side revising the discount offered would prevent the customers from using the credit
for financing their own operations profitably.
31
Others:
Introducing various procedures for special handling of large to very large remittances or
foreign remittances such as, persona! Pick up of large sum of cash using airmail, special
delivery and scimitars techniques to accelerate such collections.
Minimizing Cash Disbursements:
The motive of minimizing cash payments is the ultimate benefit derived from maximizing
cash receipts. Cash disbursement can be brought under control by preventing fraudulent
practices, serving time draft to creditors of large sum, making staggered payments to
creditors and for payrolls etc.
Maximizing Cash Utilization:
Although a surplus of cash is a luxury, yet money is costly. Moreover, proper and optimum
utilization of cash always makes way for achievement of the motive of maximizing cash
receipts and minimizing cash payments. At times, a concern finds itself with funds in excess
of its requirement, which lay idle without bringing any return to it. At the same time, the
concern finds it unwise to dispose it, as the concern shall soon need it. In such conditions,
efforts should be made in investing these funds in some interest bearing securities. There are
certain basic strategies suggested by Gitman, which prove evidently helpful in managing cash
if employed by the cash management. They are: "Pay accounts payables as late as possible
without damaging the firm's credit rating, but take advantage of the favorable cash discount,
if any. Collect accounts receivables as early as possible without losing future loss sales
because of high-pressure collections techniques.
ADEQUACY OF CASH
Adequacy of cash resources has to be judged in relation to operational and liquidity
requirements of a firm. Both these functions are of great significance for smooth functioning
and well-being. Sufficiency of cash for operational requirement of a firm’s judged by
computation of turnover ratio of cash. The resultant turnover rate divided into 365, gives the
number of days for which the available cash resources were sufficient to finance the normal
operational requirements of the firm.
In the word of Hunt etal:
“Financial analyst uses various liquidity ratios as through indices of the likely most widely
used ratio is the current ratios and acid test ratio.”
Professor James E. Walter:
32
Has proposed that instead of matching current assets with current liabilities, i.e. current ratio
or quick assets with current liabilities, i.e. quick ratio, better results can be obtained by
matching current obligations with net cash flows. In growing concern net cash flows are more
important since they are flows, whereas current liabilities only indicate the outstanding
obligations on particulars date which are continuously being replaced. In this context, he has
also suggested the computations of coverage of current liabilities ratio, which takes into
account the turnover rate of current liabilities and margin of profit on sale. Coverage of
current liabilities is the product of turnover of current liabilities and profit margin. Professor
Walter calls these computations as test actual liquidity while current and quick ratios are
classified as test of only technical liquidity and solvency.
CASH PLANNING
Cash flows are inseparable parts of the business operations of firms. A firm needs cash to
invest in inventory, receivable and fixed assets and to make payment for operating expenses
in order to maintain growth in sales and earnings. It is possible that firm may be taking
adequate profits, but may suffer from the shortage of cash as its growing needs may be
consuming cash very fast.
The ‘cash poor’ position of the firm can be corrected if its cash needs are planned in advance.
At times, a firm can have excess cash with it if its cash inflows exceed cash outflows. Such
excess cash may remain idle. Again, such excess cash flows can be anticipated and properly
invested if cash planning is resorted to. Cash planning is a technique to plan and control the
use of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the
possibility of idle cash balances (which lowers firm’s profitability) and cash deficits (which
can cause the firm’s failure). Cash planning protects the financial condition of the firm by
developing a projected cash statement from a forecast of expected cash inflows and outflows
for a given period. The forecasts may be based on the present operations or the anticipated
future operations.
Cash plans are very crucial in developing the operating plans of the firm. Cash planning can
be done on daily, weekly or monthly basis. The period and frequency of cash planning
generally depends upon the size of the firm and philosophy of management. Large firms
prepare daily and weekly forecasts. Medium-size firms usually prepare weekly and monthly
forecasts. Small firms may not prepare formal cash forecasts because of the non-availability
of information and small-scale operations. But, if the small firm prepares cash projections, it
is done on monthly basis. As a firm grows and business operations become complex, cash
planning becomes inevitable for its continuing success.
33
CASH FORECASTING AND BUDGETING
Cash budget
Cash budget is the most significant device to plan for and control cash receipts and payments.
A cash budget is a summary statement of the firm’s expected cash inflows and outflows over
a projected time period. It gives information on the timing and magnitude of expected cash
flows and cash balances over the projected period. This information helps the financial
manager to determine the future cash needs of the firm, plan for the financing of these needs
and exercise control over the cash and liquidity of the firm. The time horizon of the cash
budget may differ from firm to firm. A firm whose business is affected by seasonal variations
may prepare monthly cash budgets.
Cash forecasts
Cash forecasts are needed to prepare cash budgets. Cash forecasting may be done on short or
long-term basis. Generally, forecasts covering periods of one year or less are considered
short-term; those exceeding beyond one year are considered long term.
SHORT-TERM CASH FORECASTS
It is comparatively easy to make short-term cash forecasts. The important functions of
carefully developed short-term cash forecasts are:
 To determine operating cash requirements
 To anticipate short-term financing
 To manage investment of surplus cash.
The short-term forecast helps in determining the cash requirements for a predetermined
period to run a business. If the cash requirements are not determined, it would not be possible
for the management to know-how much cash balance is to be kept in hand, to what extent
bank financing be depended upon and whether surplus funds would be available to invest in
marketable securities. To know the operating cash requirements, cash flow projections have
to be made by a firm. As stated earlier, there is hardly a perfect matching between cash
inflows and outflows. With the short-term cash forecasts, however, the financial manager is
enabled to adjust these differences in favor of the firm. It is well known that, for their
temporary financing needs, most companies depend upon banks. One of the significant roles
of the short-term forecasts is to pinpoint when the money will be needed and when it can be
repaid. With such forecasts in hand, it will not be difficult for the financial manager to
negotiate short-term financing arrangements with banks. This in fact convinces bankers about
34
the ability of the management to run its business. The third function of the short-term cash
forecasts is to help in managing the investment of surplus cash in marketable securities.
Carefully and skillfully designed cash forecast helps a firm to:
 Select securities with appropriate maturities and reasonable risk.
 Avoid over and under-investing.
Short-run cash forecasts serve many other purposes. For example, multi-divisional firms use
them as a tool to coordinate the flow of funds between their various divisions as well as to
make financing arrangements for these operations. These forecasts may also be useful in
determining the margins or minimum balances to be maintained with banks. Still other uses
of these forecasts are:
 Planning reductions of short and long-term debt
 Scheduling payments in connection with capital expenditures programmers
 Planning forward purchases of inventories
 Checking accuracy of long-range cash forecasts.
 Taking advantage of cash discounts offered by suppliers
SHORT-TERM FORECASTING METHODS
Two most commonly used methods of short-term cash forecasting are:
 The receipt and disbursements method
 The adjusted net income method.
The receipts and disbursements method is generally employed to forecast for limited periods,
such as a week or a month. The adjusted net income method, on the other hand, is preferred
for longer durations ranging between few months to a year. Both methods have their pros and
cons. The cash flows can be compared with budgeted income and expenses items if the
receipts and disbursements approach is followed. On the other hand, the adjusted income
approach is appropriate in showing a company’s working capital and future financing needs.
RECEIPTS AND DISBURSEMENTS METHOD:
Cash flows in and out in most companies on a continuous basis. The prime aim of receipts
and disbursements forecasts is to summarize these flows during a predetermined period. In
case of those companies where each item of income and expense involves flow of cash, this
method is favored to keep a close control over cash. Three broad sources of cash inflows can
be identified:
 Operating
 Non-operating
 Financial
35
Cash sales and collection from customers form the most important part of the operating cash
inflows. Developing a sales forecast is the first step in preparing cash forecast. All
precautions should be taken to forecast sales as accurately as possible. In case of cash sales,
cash is received at the time of sale. On the other hand, cash is realized after sometime if sale
is on credit. The time realizing cash on credit sales depends upon the firm’s credit policy
reflected in the average collection period. It can easily be noted that cash receipts from sales
will be affected by changes in sales volume and the firm’s credit policy. To develop a
realistic cash budget, these changes should be accounted for. If the demand for the firm’s
products slackens, sales will fall and the average collection period is likely to be longer which
increases the chances of bad debts.
In preparing cash budget, account should be taken of sales discounts, returns and allowances
and bad debts as they reduce the amount of cash collections from debtors. Non-operating
cash inflows include sale of old assets and dividend and interest income. The magnitude of
these items is generally small. When internally generated cash flows are not sufficient, the
firm resorts to external sources. Borrowings and issuance of securities are external financial
sources. These constitute financial cash inflows. The next step in the preparation of a cash
budget is the estimate of cash outflows. Cash outflows include:
 Operating outflows: cash purchases, payment of payables, advances to suppliers,
wages and salaries and other operating expenses
 Capital Expenditures
 Contractual payments: repayment of loan and interest and tax payments
 Discretionary payments: ordinary and preference dividend.
 In case of credit purchases, a time lag will exist for cash payments. This will depend
on the credit terms offered by the suppliers.
It is relatively easy to predict the expenses of the firm over short run. Firms usually prepare
capital expenditure budgets; therefore, capital expenditures are predictable for the purposes of
cash budget. Similarly, payments of dividend do not fluctuate widely and are paid on specific
dates. Cash out flow can also occur when the firm repays its long-term debt. Such payments
are generally planned and, therefore, there is no difficulty in predicting them. Once the
forecasts for cash receipts and payments have been developed, they can be combined to
obtain the net cash inflow or outflow for each month. The net balance for each month would
indicate whether the firm has excess cash or deficit. The peak cash requirements would also
be indicated. If the firm has the policy of maintaining some minimum cash balance,
arrangements must be made to maintain this minimum balance in periods of deficit.
36
The cash deficit can be met by borrowings from banks. Alternatively, the firm can delay its
capital expenditures or payments to creditors or postpone payment of dividends. One of the
significant advantages of cash budget is to determine the net cash inflow or out flow so that
the firm is enabled to arrange finances. However, the firm’s decision for appropriate sources
of financing should depend upon factors such as cost and risk. Cash budget helps a firm to
manage its cash position. It also helps to utilize ideal funds in better ways. The virtues of the
receipt and payment methods are:
 It gives a complete picture of all the items of expected cash flows.
 It is a sound tool of managing daily cash operations.
 Its reliability is reduced because of the uncertainty of cash forecasts.
 It fails to highlight the significant movements in the working capital items.
ADJUSTED NET INCOME METHOD:
This method of cash forecasting involves the tracing of working capital flows. It is sometimes
called the sources and uses approach. Two objectives of the adjusted net income approach are
To show whether the company can generate the required funds internally, and if not, how
much will have to be borrowed or raised in the capital market. To project the company’s need
for cash at a future date. As regards the form and content of the adjusted net income forecast,
it resembles the cash flow statement discussed previously. It is, in fact a projected cash flow
statement based on preformat financial statements. It generally has three sections: sources of
cash, uses of cash and the adjusted cash balance. This procedure helps in adjusting estimated
earnings on an accrual basis to a cash basis. It also helps in anticipating the working capital
movements. In preparing the adjusted net income forecasts items such as net income,
depreciation, taxes, dividends etc., can easily be determined from the company’s annual
operating budget.
Normally, difficulty is faced in estimating working capital changes; especially the estimates
of accounts receivable (debtors) and inventory pose problem because they are influenced by
factors such as fluctuations in raw material costs, changing demand for the company’s
products and possible delays in collections. Any error in predicting these items can make the
reliability of forecast doubtful. One popularly used method of projecting working capital is to
use ratios relating accounts receivable and inventory to sales. For example, if the past
experience tells that accounts receivable of a company range between 32 percent to 36
percent of sales, an average rate of 34 percent can be used. The benefits of the adjusted net
income method are:

37
  It highlights the movements in the working capital items, and thus helps to keep a
control on s firm’s working capital.
 It fails to trace cash flows, and therefore, its utility in controlling daily cash operations
is limited.
LONG-TERM CASH FORECASTING
Long-term cash forecasts are prepared to give an idea of the company’s financial
requirements in the distant future. They are not as detailed as the short-term forecasts are.
Once a company has developed long-term cash forecast, it can be used to evaluate the impact
of, say, new product developments or plant acquisitions on the firm’s financial condition
three, five, or more years in the future. The major uses of the long-term cash forecasts are:
 It indicates as company’s future financial needs, especially for its working capital
requirements.
 It helps to evaluate proposed capital projects. It pinpoints the cash required to finance
these projects as well as the cash to be generated by the company to support them.
 It helps to improve corporate planning. Long-term cash forecasts compel each
division to plan for future and to formulate projects carefully.
Long-term cash forecasts may be made for two, three or five years. As with the short-term
forecasts, company’s practices may differ on the duration of long-term forecasts to suit their
particular needs. The short-term forecasting methods, i.e., the receipts and disbursements
method and the adjusted net income method, can also be used in long-term cash forecasting.
Long-term cash forecasting reflects the impact of growth, expansion or acquisitions; it also
indicates financing problems arising from these developments.
DETERMINING THE OPTIMUM CASH BALANCE
One of the primary responsibilities of the financial manager is to maintain a sound liquidity
position of the firm so that the dues are settled in time. The firm needs cash to purchase raw
materials and pay wages and other expenses as well as for paying dividend, interest and
taxes. The test of liquidity is the availability of cash to meet the firm’s obligations when they
become due. A firm maintains the operating cash balance for transaction purposes. It may
also carry additional cash as a buffer or safety stock. The amount of cash balance will depend
on the risk-return trade-off.

38
FEATURES OF INSTRUMENTS OF COLLECTION IN INDIA

POINTS PROS CONS

 No charge  Can bounce

 Payable through clearing  Collection times can be long
Cheques  Can be discounted after
 Collection charge
receipts
 Low discounting charge  
 Payable in local clearing  Cost of collection
Drafts  Chances of bouncing are  Buyers account debited on day
less one
 Low discounting charge  Not payable through clearing
 Theoretically, goods are
not released till payments
 High collection cost
Documentary bills are made or the bill is
accepted
   Long delays
   
 No charge except stamp  Procedure is relatively
duty cumbersome
 Buyers are reluctant to accept
Trade bills  Can be discounted
the due date discipline
 Discipline of payment on
due date

OPTIMUM CASH BALANCE UNDER CERTAINTY:

BAUMOL’S MODEL
The Baumol model of cash management provides a formal approach for determining a firm’s
optimum cash balance under certainty. It considers cash management similar to an inventory
management problem. As such, the firm attempts to minimize the sum of the cost of holding
cash (inventory of cash) and the cost of converting marketable securities to cash. The
Baumol’s model makes the following assumptions:

39
  The firm is able to forecast its cash needs with certainty.
 The firm’s cash payments occur uniformly over a period of time.
Baumol’s model for cash balance
Cash balance
C

C/2
Average

Time
0 T1 T2 T3

The firm incurs a holding cost for keeping the cash balance. It is an opportunity cost; that is,
the return foregone on the marketable securities. If the opportunity cost is k, then the firm’s
holding cost for maintaining an average cash balance is as follows:
Holding cost = k(C/2) (1)
The firm incurs a transaction cost whenever it converts its marketable securities to cash. Total
number of transactions during the year will be total funds requirement, T, divided by the cash
balance, C, i.e. T/C. The per transaction cost is assumed to be constant. If per transaction cost
is c, then the total transaction cost will be:

Transaction cost = c(T/C) (2)

The total annual cost of the demand for cash will be:
Total cost = k(C/2) + c(T/C) (3)
What is the optimum level of cash balance, C*? We know that the holding cost increases as
the demand for cash, C, increases. However, the transaction cost reduces because with
increasing C the number of transactions will decline. Thus, there is a trade-off between the
holding cost and the transaction cost.

40
Cost trade-off: Baumol’s model

Cost
Total cost

Holding cost

Transaction cost
Cash balance

41
OPTIMUM CASH BALANCE UNDER UNCERTAINTY:
THE MILLER-ORR MODEL
The limitation of the Baumol model is that it does not allow the cash flows to fluctuate. Firms
in practice do not use their cash balance uniformly nor are they able to predict daily cash
inflows and outflows. The Miller-Orr (MO) model overcomes this shortcoming and allows
for daily cash flow variation. It assumes that net cash flows are normally distributed with a
zero value of mean and standard deviation. The MO model provides for two control limits—
the upper control limit and the lower control limit as well as a return point. If the firm’s cash
flows fluctuate randomly and hit the upper limit, then it buys sufficient marketable securities
to come back to a normal level of cash balance (the return point). Similarly, when the firm’s
cash flows wander and hit the lower limit, it sells sufficient marketable securities to bring the
cash balance back to the normal level (the return point).
Miller- Orr model

Cash balance

Upper limit

Purchase of securities

Return point
Sale of securities
Lower point

Time

The firm sets the lower control limit as per its requirement of maintaining minimum cash
balance. At what distance the upper control limit will be set? The difference between the
upper limit and the lower limit depends on the following factors:
 The transaction cost (c)

42
  The interest rate, (i)
 The standard deviation of net cash flows.
The formula for determining the distance between upper and lower control limits (called Z) is
as follows:
(Upper Limit—Lower Limit) =
(3/4 * transaction cost * cash flow variation/ interest per day)⅓ (5)
We can notice from equation (5) that the upper and lower limit will be far off from each other
(i.e. Z will be larger) if transaction cost is higher or cash flows show greater fluctuations. The
limits will come closer as the interest increases. Z is inversely related to the interest rate. It is
noticeable that the upper limit is three times above the lower control limit and the return point
lies between the upper and the lower limit. Thus,
Upper Limit = Lower Limit + 3Z (6)
Return point = Lower Limit + Z (7)
The net effect is that the firms hold the average cash balance equal to:
Average Cash Balance = Lower Limit +4/3 Z
The MO model is more realistic since it allows variation in cash balance within lower and
upper limits. The financial manager can set the lower limit according to the firm’s liquidity
requirement. The past data of the cash flow behavior can be used to determine the standard
deviation of net cash flows. Once the upper and lower limits are set, managerial attention is
needed only if the cash balance deviates from the limits. The action under these situations are
anticipated and planned in the beginning.

INVESTING SURPLUS CASH IN MARKETABLE SECURITIES

There is a close relationship between cash and money market securities or other short-term
investment alternatives. Investment in these alternatives should be properly managed. Excess
cash should normally be invested in those alternatives that can be conveniently and promptly
converted into cash. Cash in excess of the requirement of operating cash balance may be held
for two reasons. First, the working capital requirements of the firm fluctuate because of the
elements of seasonality and business cycles. The excess cash may build up during slack
seasons but it would be needed when the demand picks up. Thus, excess cash during slack
season is idle temporarily, but has a predictable requirement later on. Second, excess cash
may be held as a buffer to meet unpredictable financial needs. A firm holds extra cash
because cash flows cannot be predicted with certainty. Cash balance held to cover the future
exigencies is called the precautionary balance and is usually invested in the short-term money
43
market investments until needed. Instead of holding excess cash for the above-mentioned
purpose, the firm may meet its precautionary requirements as and when they arise by making
short-term borrowings. The choice between the short-term borrowings and liquid assets
holding will depend upon the firm’s policy regarding the mix of short-term financing. The
excess amount of cash held by the firm to meet its variable cash requirements and future
contingencies should be temporarily invested in marketable securities, which can be regarded
as near moneys. A number of marketable securities may be available in the market.

TYPES OF SHORT-TERM INVESTMENT OPPORTUNITIES

The following short-term investment opportunities are available to companies in India to
invest their temporary cash surplus:
Treasury bills
Treasury bills (TBs) are short-term government securities. The usual practice in India is to
sell treasury bills at a discount and redeem them at par on maturity. The difference between
the issue price and the redemption price, adjusted for the time value of money, is return on
treasury bills. They can be bought and sold any time; thus, they have liquidity. Also, they do
not have the default risk.
Commercial papers
Commercial papers (CPs) are short-term, unsecured securities issued by highly credit worthy
large companies. They are issued with a maturity of three months to one year. CPs are
marketable securities, and therefore, liquidity is not a problem.
Certificates of deposits
Certificates of deposits (CDs) are papers issued by banks acknowledging fixed deposits for a
specified period of time. CDs are negotiable instruments that make them marketable
securities.
Bank deposits
A firm can deposit its temporary cash in a bank for a fixed period of time. The interest rate
depends on the maturity period. For example, the current interest rate for a 30 to 45 days
deposit is about 3 percent and for 180 days to one year is about 6-7 percent. The default risk
of the bank deposits is quite low since the government owns most banks in India.
Inter-corporate deposits
Inter-corporate lending borrowing or deposits (ICDs) is a popular short-term investment
alternative for companies in India. Generally a cash surplus company will deposit (lend) its
funds in a sister or associate companies or with outside companies with high credit standing.
44
Money market mutual funds
Money market mutual funds (MMMFs) focus on short-term marketable securities such as
TBs, CPs, CDs, or call money. They have a minimum lock-in period of 30 days, and after this
period, an investor can withdraw his or her money any time at a short notice or even across
the counter in some cases. They offer attractive yields; yields are usually 2 percent above
than on bank deposits of same maturity.
CASH MANAGEMENT SERVICES GENERALLY OFFERED
The following is a list of services generally offered by banks and utilised by larger businesses
and corporations:
Account Reconcilement Services:
Balancing a checkbook can be a difficult process for a very large business, since it issues so
many checks it can take a lot of human monitoring to understand which checks have not
cleared and therefore what the company's true balance is. To address this, banks have
developed a system which allows companies to upload a list of all the checks that they issue
on a daily basis, so that at the end of the month the bank statement will show not only which
checks have cleared, but also which have not.
Armored Car Services:
Large retailers who collect a great deal of cash may have the bank pick this cash up via an
armored car company, instead of asking its employees to deposit the cash.
Advanced Web Services:
Most banks have an Internet-based system which is more advanced than the one available to
consumers. This enables managers to create and authorize special internal logon credentials,
allowing employees to send wires and access other cash management features normally not
found on the consumer web site.
Automated Clearing House:
Services are usually offered by the cash management division of a bank. The Automated
Clearing House is an electronic system used to transfer funds between banks. Companies use
this to pay others, especially employees (this is how direct deposit works). Certain companies
also use it to collect funds from customers. This system is criticized by some consumer
advocacy groups, because under this system banks assume that the company initiating the
debit is correct until proven otherwise.
Balance Reporting Services:
Corporate clients who actively manage their cash balances usually subscribe to secure web-
based reporting of their account and transaction information at their lead bank. These
45
sophisticated compilations of banking activity may include balances in foreign currencies, as
well as those at other banks.
Cash Concentration Services:
Large or national chain retailers often are in areas where their primary bank does not have
branches. Therefore, they open bank accounts at various local banks in the area. To prevent
funds in these accounts from being idle and not earning sufficient interest, many of these
companies have an agreement set with their primary bank, whereby their primary bank uses
the Automated Clearing House to electronically "pull" the money from these banks into a
single interest-bearing bank account.
Lockbox services:
Often companies which receive a large number of payments via checks in the mail have the
bank set up a post office box for them, open their mail, and deposit any checks found. This is
referred to as a "lockbox" service.
Positive Pay:
Positive pay is a service whereby the company electronically shares its check register of all
written checks with the bank. The bank therefore will only pay checks listed in that register,
with exactly the same specifications as listed in the register. This system dramatically reduces
check fraud.
Sweep Accounts:
Are typically offered by the cash management division of a bank. Under this system, excess
funds from a company's bank accounts are automatically moved into a money market mutual
fund overnight, and then moved back the next morning. This allows them to earn interest
overnight. This is the primary use of money market mutual funds.
Zero Balance Accounting:
Can be thought of as somewhat of a hack. Companies with large numbers of stores or
locations can very often be confused if all those stores are depositing into a single bank
account. Traditionally, it would be impossible to know which deposits were from which
stores without seeking to view images of those deposits. To help correct this problem, banks
developed a system where each store is given their own bank account, but all the money
deposited into the individual store accounts are automatically moved or swept into the
company's main bank account. This allows the company to look at individual statements for
each store.

46
Wire Transfer:
A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple bank
account transfer, or by a transfer of cash at a cash office. Bank wire transfers are often the
most expedient method for transferring funds between bank accounts. A bank wire transfer is
a message to the receiving bank requesting them to effect payment in accordance with the
instructions given. The message also includes settlement instructions. The actual wire transfer
itself is virtually instantaneous, requiring no longer for transmission than a telephone call.
Controlled Disbursement:
This is another product offered by banks under Cash Management Services. The bank
provides a daily report, typically early in the day, that provides the amount of disbursements
that will be charged to the customer's account. This early knowledge of daily funds
requirement allows the customer to invest any surplus in intraday investment opportunities,
typically money market investments. This is different from delayed disbursements, where
payments are issued through a remote branch of a bank and customer is able to delay the
payment due to increased float time. In the past, other services have been offered the
usefulness of which has diminished with the rise of the Internet. For example, companies
could have daily faxes of their most recent transactions or be sent CD-ROMs of images of
their cashed checks.
PURPOSE OF CASH MANAGEMENT
Cash management is the stewardship or proper use of an entity’s cash resources. It serves as
the means to keep an organization functioning by making the best use of cash or liquid
resources of the organization. The function of cash management at the U.S. Treasury is
threefold:
 To eliminate idle cash balances. Every dollar held as cash rather than used to augment
revenues or decrease expenditures represents a lost opportunity. Funds that are not
needed to cover expected transactions can be used to buy back outstanding debt or can
be invested to generate a flow of funds into the Treasury’s account.
 To deposit collections timely. Having funds in-hand is better than having accounts
receivable. The cash is easier to convert immediately into value or goods. A
receivable, an item to be converted in the future, often is subject to a transaction delay
or a depreciation of value. Once funds are due to the Government, they should be
converted to cash-in-hand immediately and deposited in the Treasury's account as
soon as possible.

47
 To properly time disbursements. Some payments must be made on a specified or legal
date, such as Social Security payments. For such payments, there is no cash
management decision. For other payments, such as vendor payments, discretion in
timing is possible. Government vendors face the same cash management needs as the
Government. They want to accelerate collections. One way vendors can do this is to
offer discount terms for timely payment for goods sold.

48
CHAPTER NO. 5
RESEARCH METHODOLOGY
Research Design
Research is a systematic process of collecting and analyzing information (data) in order to
increase our understanding of the phenomenon about which we are concerned or interested. A
Research Design is the framework or plan for a study which is used as a guide in collecting
and analyzing the data collected. It is the blue print that is followed in completing the study.
The basic objective of research cannot be attained without a proper research design. It
specifies the methods and procedures for acquiring the information needed to conduct the
research effectively. It is the overall operational pattern of the project that stipulates what
information needs to be collected, from which sources and by what methods.

Types of Data Collected

There are two types of data used. They are primary and secondary data. Primary data is
defined as data that is collected from original sources for a specific purpose. Secondary data
is data collected from indirect sources.

 Primary Sources
These include the Balance sheet and Profit and loss Account method.

 Secondary Sources
These include books, the internet, company brochures, the company website, competitor’s
websites etc. newspaper articles etc.

49
CHAPTER NO. 6
DATA ANALYSIS AND INTERPRETATION
BALANCE SHEET
Particulars   Years  
  2020 2019 2018
Equity and liabilities      
Shareholders’ funds      
Share capital 1,039,939,765 1,039,939,765 1,039,939,765
Reserve and surplus 1,289,920,931 1,330,242,671 1,410,215,741
  2,329,860,696 2,370,182,436 2,450,155,506
Share application money pending
   
allotment  
Non-current liabilities      
Long term borrowing 375,971,569 355,690,357 346,441,847
Deferred tax liabilities (net) - -  
Other long term liabilities 218,124,972 32,57,88,979 372,623,974
Long term provisions 27,321,161 25,228,322 26,682,000
  621,417,702 706,707,658 747,747,821
Current liabilities      
Short term borrowing 368,495,542 300,023,735 304,516,203
Trade payables 1,245,675,628 1,986,490,310 1,967,479,731
Other current liabilities 150,822,775 39,530,439 73,078,406
Short term provisions 134,135,450 136,119,389 116,664,877
  1,899,129,395 2,462,163,873 246,17,39,216
Total 4,850,407,793 5,539,053,967 565,96,42,543
Assets    
Non-current assets    
a) Fixed assets    
i) Tangible assets 2,477,506,139 2,314,858,681 2,280,511,429
ii) Intangible assets 4,163,925 5,656,703  
iii) Capital work in progress   176,337,360 191,824,040
  2,481,670,064 2,496,852,743 2,472,335,469
b) Non-current investments 21,476,940 21,476,940 21,476,940
c) Deferred tax assets (net)   1,78,03,360 36,108,849
d) Long term loans and advances 184,974,747 191,934,988 188,055,228
e) Other non-current assets 66,464,805 281,516,301 422,055,338
  2,754,586,556 3,009,584,333 3,140,031,824
Current assets      
a) Current investments      
b) Inventories 1,087,588,405 1,356,407,164 1,664,150,391
c) Trade receivables 400,497,644 659,223,336 411,433,969
d) Cash and cash equivalents 18,566,728 29,996,457 25,768,781
e) Short term loans and advances 304,298,359 184,714,405 157,518,135
f) Other current assets 28,4,870,101 299,128,273 260,739,443
  2,095,821,237 2,529,469,634 2,519,610,720
Total 4,850,407,793 5,539,053,967 5,659,642,543
PROFIT AND LOSS ACCOUNT

50
Sr.
Particulars   Years  
No.
    2020 2019 2018
  Income      
1 Revenue from operation (gross) 5,734,806,718 6,336,048,456 10,944,649,232
  Less:- Excise duty 6,05,143,905 497,174,792 560,098,922
  Revenue from operation (net) 512,96,62,813 583,88,73,663 10,384,550,310
2 Other income 52,146,810 104,709,272 99,003,129
3 Total revenue (1+2) 5,181,809,623 5,943,582,936 10,483,553,439
4 Expenditure      
  a)      Cost of materials consumed 3,805,290,777 3,163,101,843 4,434,090,575
  b)      Purchase of stock in trade 323,565,623 1,770,185,893 5,073,013,743
c)      Changes in investments of
  finished goods, work in progress -333,578,325 -335,995,134 -589,541,198
and stock in trade
  d)      Employee benefits expense 178,732,303 213,615,124 207,677,447
  e)      Finance costs 110,298,251 98,572,432 94,797,735
f)       Depreciation and amortization
  153,088,368 179,198,892 183,628,723
expense
  g)      Other expenses 923,639,402 832,308,251 1,017,816,953
  Total expenses 5,161,033,399 5,920,987,301 10,421,483,978
Profit/loss before exceptional
5 and extraordinary items and tax 20,776,224 22,595,635 62,069,461
(3-4)
6 Exceptional items      
Profit/loss before extraordinary
7 20,776,224 22,595,635 62,069,461
items and tax (5+6)
8 Extraordinary items    
9 Profit/loss before tax (7+8) 20,776,224 22,595,635 62,069,461
10 Tax expenses:-    
a)      Current tax expenses for
     
current year
b)      Less:- MAT credit ( where
     
applicable)
c)      Current tax expense relating  
    -324,625
to prior years 430,000
  d)      Net current tax expense 430,000   -324,625
  e)      Deferred tax   17,803,360 18,305,489
    430,000 17,803,360 17,980,864
11 Profit/loss after tax (9+10) 21,206,224 40,398,995 80,050,325
Earning per equity share of face
       
value of 1/- each
  Basic and diluted (in Rs.) 0.05 0.1 0.2

DATA ANALYSIS AND INTERPRETATION

51
1. CURRENT RATIO
Formula:-
Current Assets
Current Ratio =
Current Liabilities

Chart:-
Years Current Assets Current Liabilities Total Ratio
2018-19 2,095,821,237 1,899,129,395 1.1
2019-20 2,529,469,634 2,462,163,873 1.03
2020-21 2,519,610,720 2,461,739,216 1.02

Graph:-

Interpretation:-
This graph is shows to current financial position of Parle Products Pvt Ltd on the basis of
current ratio. In 2019 the current ratio is 32 % and 2020 the current ratio is 33% will be
increase with the value of 1 % on previous year. In 2021 the current ratio is 35% will be
increase with the value of 2 % on previous year.

2. QUICK RATIO

52
 Formula:-
Quick Assets
Quick ratio =
Quick Liabilities

Chart:-

Years Quick Assets Quick Liabilities Total Ratio

2018-19 723,362,731 1,899,129,395 0.38
2019-20 873,934,198 2,462,163,873 0.35
2020-21 594,720,885 2,461,739,216 0.24

Graph:-

Interpretation:-
This graph is related to quick ratio of Parle Products Pvt Ltd. In 2019 the quick ratio is 25 %
and 2020 the quick ratio is 36 % will be increase with the value of 11 % on previous year. In
2021 the quick ratio 39 % will be increase with the value of 3 % on previous year.

3. DEBT-EQUITY RATIO

53
 Formula:-
Long term loan
Debt-equity ratio =
Shareholders fund

Chart:-

Years Long Term Loan Shareholders’ funds Total Ratio

2018-19 744,467,111 2,329,860,696 0.32
2019-20 655,714,092 2,370,182,436 0.28
2020-21 650,958,050 2,450,155,506 0.27

Graph:-

Interpretation:-
This graph shows debt-equity ratio of Parle Products Pvt Ltd. In 2019 the debt-equity
ratio is 31 % and 2020 the debt-equity ratio is 32 % will be increase with the value of 1 %
on previous year. In 2021 the debt-equity ratio 37 % will be increase with the value of 5
% on previous year.

4. DEBT TO CAPITAL EMPLOYED RATIO

54
 Formula:-
Long term debt
Debt to capital employed ratio =
Capital employed (net assets)

Chart:-

Years Long Term Debt Net Assets Total Ratio

2018-19 375,971,569 196,691,842 1.91
2019-20 355,690,357 67,305,761 5.28
2020-21 346,441,847 57,871,504 5.99

Graph:-

Interpretation:-
This graph shows debt to capital employed ratio of Parle Products Pvt Ltd. In 2019 the
debt to capital employed ratio is 45 % and 2020 the debt to capital employed ratio is 40 %
will be decrease with the value of 5 % on previous year. In 2021 the debt to capital
employed ratio 15 % will be decrease with the value of 25 % on previous year.

5. PROPRIETARY RATIO

55
 Formula:-
Shareholders’ funds
Proprietary ratio =
Capital employed (net assets)

Chart:-
Years Shareholders’ Funds Net Assets Total Ratio
2018-19 2,329,860,696 196,691,842 11.85
2019-20 2,370,182,436 67,305,761 35.22
2020-21 2,450,155,506 57,871,504 42.34

Graph:-

Interpretation:-
This graph shows proprietary ratio of Parle Products Pvt Ltd. In 2019 the proprietary ratio is
47 % and 2020 the proprietary ratio is 40% will be decrease with the value of 7 % on
previous year. In 2021 the proprietary ratio 13 % will be decrease with the value of 27% on
previous year.

6. TOTAL ASSETS TO DEBT RATIO:-

Formula:-
56
 Total assets
Total assets to debt ratio =
Long term debts

Chart:-
Years Total Assets Long Term Debtors Total Ratio
2018-19 4,850,407,793 375,971,569 12.9
2019-20 5,539,053,967 355,690,357 15.57
2020-21 5,659,642,543 346,441,847 16.34

Graph:-

Interpretation:-
This graph shows total asset to debt ratio of Parle Products Pvt Ltd. In 2019 the total asset to
debt ratio is 36 % and 2020 the total asset to debt ratio is 35% will be decrease with the value
of 1 % on previous year. In 2021 the total asset to debt ratio 29 % will be decrease with the
value of 6 % on previous year.

7. INVENTORY TURNOVER RATIO

Formula:-

57
 Cost of revenue from operations
Inventory turnover ratio =
Average inventory

Chart:-
Cost of Revenue
Years Average Inventory Total Ratio
From Operation
2018-19 5,734,806,718 400,497,644 14.32
2019-20 6,336,048,456 659,223,336 9.61
2020-21 10,944,649,232 411,433,969 26.6

Graph:-

Interpretation:-
This graph shows inventory turnover ratio of Parle Products Pvt Ltd. In 2015 the inventory
turnover ratio is 53 % and2016 the inventory turnover ratio is 19% will be decrease with the
value of 34 % on previous year. In 2017 the inventory turnover ratio 28 % will be increase
with the value of 9% on previous year.
8. TRADE RECEIVABLES TURNOVER RATIO

Formula:-

58
 Net credit revenue from operations
Trade receivable turnover ratio =
Average trade receivable

Chart:-
Net Credit Revenue
Years Average Trade Receivable Total Ratio
From Operations
2018-19 10,384,550,310 411,433,969 25.24
2019-20 5,838,873,663 659,223,336 8.86
2020-21 5,129,662,813 400,497,644 12.81

Graph:-

Interpretation:-
This graph shows trade receivable turnover ratio of Parle Products Pvt Ltd. In 2019 the
trade receivable turnover ratio is 27 % and 2020 the trade receivable turnover ratio is 19%
will be decrease with the value of 28 % on previous year. In 2021 the trade receivable
turnover ratio is 54 % will be increase with the value of 31 % on previous year.

9. GROSS PROFIT RATIO

Formula:-
Gross profit
Gross Profit Ratio = X 100

59
 Net revenue of operations

Chart:-

Net Revenue of
Years Gross Profit Total Ratio
Operation
2018-19 5,734,806,718 5,129,662,813 1.12
2019-20 6,336,048,456 5,838,873,663 1.09
2020-21 10,944,649,232 10,384,550,310 1.05

Graph:-

Interpretation:-
This graph shows gross profit ratio of Parle Products Pvt Ltd. In 2019 the gross profit
ratio is 32 % and 2020 the gross profit ratio is 34% will be increase with the value of 1 %
on previous year. In 2021 the gross profit ratio 34 % will be the same value of the
previous year.
10. NET PROFIT RATIO
Formula:-

Net Profit
Net Profit Ratio = X 100
Revenue from operations

60
 Chart:-

Years Net Profit Net Sales Total Ratio

2018-19 2,120,622,400 5,129,662,813 0.41
2019-20 4,039,899,500 5,838,873,663 0.69
2020-21 8,005,032,500 10,384,550,310 0.77

Graph:-

Interpretation:-
This graph shows net profit ratio of Parle Products Pvt Ltd. In 2019 the net profit ratio is 41
% and 2020 the net profit ratio is 37% will be decrease with the value of 7 % on previous
year. In 2021 the net profit ratio 22 % will be decrease with the value of 15% on previous
year.

CHAPTER NO. 7
FINDINGS OF THE STUDY
 Current ratio analysis of Parle Products Pvt Ltd shows recurring surplus in itself.
Since 2019 it increasing continuously.
 Quick ratio provides positive signs since 2019 it are going increasing continuously.

61
  Debt equity proportion of Parle Products Pvt Ltd improving year by year but it is not
satisfactory.
 The proportion of debt to capital employed shows distinct losses after 2019.
 The proprietary ratio also decreases at huge proportion.
 The ratio of total asset to long term debts ratio will be decrease with huge losses on
company financial statements.
 Inventory turnover ratio will be not satisfactory for company position that’s why
company faces various losses.
 Due to sudden increment in stock turnover ratio there it also affected to debtors
turnover ratio. It also improve up to 54%.
 There are not satisfactory signs in gross profit ratio. It reducing by 1% in 2020-21 as
compared to in 2019.
 Due to decrement in gross profit it affects net profit of the company but it's no
strongly influence.

CHAPTER NO. 8
CONCLUSION
The cash management Analysis done on the financial position of the company has provided a
clear view on the activities of the futuristic Parle Products Pvt Ltd. The use of the cash flow
Statement, Cash inflow & outflow and ratio calculations of ratio, financial management

62
helped in this study to find out the financial soundness of the company. This project was very
for the judgment of the financial status of the company from the management point of
view .this evaluation proved a great deal to the management to make a decision on the
regulation of the funds to increase the sales and bring profit to the company .

CHAPTER NO. 9
RECOMMENDATION
 Current ratio of Parle Products Pvt Ltd its growing good that’s why it is better for
company poisons.
 Quick ratio of possessions is better Parle Products Pvt Ltd.

63
 Debt equity proportion of Parle Products Pvt Ltd is not satisfactory but increases in
revenue of Parle Products Pvt Ltd can keep the ratio stable.
 The debt to capital employed ratio of Parle Products Pvt Ltd is faces huge losses in
company position but company can also manage this ratio with the help of proper asset
management techniques
 The proprietary ratio was not favorable for company position after company analysis.
 The ratio of total asset to long term debts growing slowly but this situation is not superior
for company growth
 Inventory turnover ratio is not superior for company growth the company will reduce his
non profitable product that time the inventory ratio create positive signs
 Stock turnover ratio affects to debtors turnover ratio that why this ratio is an growing
position and this situation is better for company growth.
 The gross profit ratio proportion of Parle Products Pvt Ltd is not satisfactory but company
analyses all profit margins that time company can keep the ratio on incremental situation.
 Gross profit ratio affects to net profit ratio that why this ratio is an unfavorable and this
situation is not good for company growth but company can remove its unprofitable
product, reduce inventories and reduce overheads that time the net profit ratio will be
superior for company growth.

BIBLIOGRAPHY
BOOKS:
 S.N. Maheshwari, Financial management, Eleventh Edition 2006, Sultan Chaqnd
& Sons, Educational Publishers. New Delhi.
 I.M Pandey, Financial management, Ninth Edition, Vikas publishing house pvt
Ltd.
64
  M.Y Khan- P.K Jain, Management Accounting, Third edition, Tata Mc Graw-Hill
Publishing co. Ltd
 B.L. Gupta, Management of Liquidity and Profitability, Arihant Publishing
House, Jaipur.

WEBSITE:
 www.financeindia.org
 www.fao.org
 https://www.parleproducts.com/about

********************Thank You***********************

65