PROJECT REPORT

[Submitted for the degree of B. Com. Honours (CBCS) in

Accounting & Finance under the University of Calcutta]

A DETAILED STUDY OF WORKING CAPITAL MANAGEMENT

Submitted by

Name of the Candidate : HORIPADA SAU

Registration Number : 413-1111-0596-18

Roll Number : 181413-21-0013

College Roll No : 16

Name of the Supervisor : PROF. ASANTA MAITY

Month & Year of Submission

JULY, 2021

1
Annexure – l

SUPERVISOR’S CERTIFICATE

This is to certify that ... HORIPADA SAU............, a student of B. Com Honours in Accounting
& Finance of DR. KANAILAL BHATTACHARYYA COLLEGE, RAMRAJATALA under the
University of Calcutta has worked under my supervision and guidance for his project Work and
prepared a Project Report with the title......... A DETAILED STUDY OF WORKING
CAPITAL MANAGEMENT............ The project report, which he is submitting, is his
genuine and original work to the best of my knowledge.

Place : RAMRAJATALA Signature :

Date : Name : PROF. ASANTA MAITY

Designation : Assistant

Professor in Commerce.

Name of the College : DR. KANAILAL

BHATTACHARYYA COLLEGE, RAMRAJATALA.

2
Annexure-ll

STUDENT’S DECLARATION

I hereby declare that the Project Work with the title ....... A DETAILED STUDY OF
WORKING CAPITAL MANAGEMENT ............ submitted by me for the partial
fulfillment of the degree of B.Com Honours in Accounting & Finance under the University of
Calcutta is my original work has not been submitted earlier to any other University for the
fulfillment of the requirement for any course of study. I also declare that no chapter of this
manuscript in whole or in part has been incorporated in this report from any earlier work done by
other or by me. However, extracts of any literature which has been used for this report has been
duly acknowledged providing details of such literature in the references.

Place: Pantihal, Bagpara. Signature:

Date: Name : HORIPADA SAU

Address : Vill+P.O- Bargachi,

Hantal.

Pin- 711404.

DIST:- HOWRAH

Roll No:- 181413-21-0013

Registration No:- 413-1111-0596-18

College Roll No:- 16

3
 ACKNOWLEDGEMENT

The project report on the title ...... A DETAILED STUDY OF AGRICULTURAL

FINANCE & INSURANCE SCHEMES OF GOVERNMRNT OF
UTTARPRADESH ..........would not have been possible without the support of different
stakeholders of these projects who have contributed directly and indirectly during the project
work. I am grateful to our Commerce Department for giving me opportunity to work this project.
I would like to thank all the teachers and H.O.D of the Commerce Department.

I would like to thank my friends and family member for their support. Without their support it
would not have been possible for me to complete this project.

I am grateful to my collage authorities for providing the facilities of the Computer Lab as and
when required.

....................................

(Signature of the Student)

4
 CONTENTS PAGE NO.
Chapter 1: Introduction 6-8
Chapter 2: Conceptual Framework 9-17
Chapter 3: Analysis & 18-29
Interpretation
Chapter 4: Conclusion & 30-31
Recommendation
Bibliography/References 32-33

5
 INTRODUCTION

CHAPTER 1

 BACKGROUND OF THE STUDY:

The major objective of the study is to understand the working capital of ACC Ltd & AMBUJA
CEMENT suggest measures to overcome the shortfalls if any and improvement.

In ordinary parlance Working Capital is taken to be the fund required for short term need of raw
materials, payment of wages and other day to day expenses of an enterprise. Decisions relating to
working capital and short term financing are known as working capital management. It involves
managing the relationship between firm’s short-term assets and liabilities. By definition, working
capital management deals with the requirement of liquid fund, generally for the next one year
period.

The goal of working capital management is to ensure that the firm is able to continue its operation
and has sufficient cash flow to satisfy both maturing short term debt and upcoming operational
expenses.

Working Capital, the life blood of business, as is evident, signifies requirement of fund for day-
to-day operations. The management of working capital is great important because shortage of
working capital is perhaps the biggest possible cause of failure of many business units in recent
times, hence it requires particular attention.

 OBJECTIVES OF THE STUDY: The following are the main objective which has
been undertaken in the present study:

 To determine the amount of working capital requirement and to calculate various ratios
relating to working capital.

 To suggest the steps to be taken to increase the efficiency in management of working

capital.
 To review the working capital continuously in orders to maintain uninterrupted flow of
production and sales.
 To review current assets and current liabilities regularly in order to verify whether the
liquidity position of the firm is at optimum level or not.
 To know the profitability of ACC CEMENT & AMBUJA LTD and its impact on
working capital.
 To identify the financial strengths & weakness of the company.

 To suggest on the basis of conclusion, innovation in the management of working capital

of AMBUJA CEMENT & ACC LIMITED

6
 BRIEF REVIEW OF LITERATURE :
Working capital policy refers to the firm's policies regarding

1. Target levels for each category of current operating assets and liabilities, and

2. How current assets will be financed.

Generally good working capital policy (i.e. under conditions of certainty) is considered to be one
in which holdings of cash, securities, inventories and payables are minimized. The level of
accounts receivables should be used as a means of stimulating sales and other income. Under
conditions of certainty (i.e. sales, costs, lead times, payment periods, and so on, are known)firms
have little reason to hold more working capital than a minimum level. Larger amounts would
increase the level of operating assets, increase the need for external funding, resulting in lower
return on assets and equity, without any increase in profit.

This study focuses on understanding how companies manage their working capital and other
balance sheet items to support subsequent growth. This study supports and contributes the existing
literature on working capital by examining a sample of AMBUJA CEMENT & ACC LIMITED
which has a wider range of growth levels. Our study examines the impact of working capital
management on the operating performance and growth of the company. The study also finds that
maintaining control over levels of cash, securities, inventory, fixed assets and accounts payables
is associated with higher operating performance.

 RESEARCH METHODOLOGY:
Research Methodology is the process which is used to collect information and data for the purpose
of making important business decisions. It is a way to find out the results of a given problem on a
specific matter or problem that is also referred as research problem. In Methodology, researcher
uses different criteria for solving/searching the given research problem. For conducting a research
work, different sources or different type of methods are used to collect data for solving the
problem. The sources of data collection may include primary data and secondary data.
 Primary Data:
Primary data is original research that is obtained through first-hand investigation. It includes
information collected from interviews, experiments, surveys, questionnaires, focus groups and
measurements.

7
 Secondary Data:
Information that has been collected by someone else but is being used for a researcher’s own
research work is secondary data. It can be found through various Books, Publications, Journals,
newspapers and internet.
My Study is based on the following Research Methodology -

 For the purpose of my Study, I have taken the help of secondary data sources in the form of
different Books, Journals, Articles, Websites and Annual Reports of the Company.
 For overall execution of the work, the software used by me includes MS-Word and MS-Excel.
 For diagrammatic representation of data, various tables, graphs and charts were used..
 My Study is based on two companies i.e. AMBUJA CEMENT & ACC LIMITED.

 LIMITATIONS OF THE STYDY:

 We cannot do comparisons with other companies unless and until we have the data of other
companies on the same subject.

 Different companies operate in different industries each having different environmental

condition such as regulation, market structure, etc. Such factors are so significant that a
comparison of two companies from different industries might be misleading.
 The latest financial data could not be reported as the company’s websites have not been
updated.

 There may be fractional difference in calculation

 There were limitations of primary data collection because of confidentiality.

 CHAPTER PLANNING
The study has been divided into following chapters:-
 CONCEPTUAL FRAMEWORK
 PRESENTATION OF DATA, ANALYSIS AND FINDINGS
 CONCLUSION, SUGGESTION & RECOMMENDATION
 BIBILOGRAPHY OR REFERENCES

8
 CHAPTER-2
CONCEPTUAL FRAMEWORK
 HISTORY OFAMBUJA CEMENT:
AMBUJA CEMENTS was set up in 1986. In the last decade the company has grown tenfold. The
total cement capacity of the company is 18.5 million tones. Its plants are some of the most efficient
in the world. With environment protection measures that are on par with the finest in the developed
world. The company's most distinctive attribute, however, is its approach to the business.
AMBUJA follows a unique homegrown philosophy of giving people the authority to set their own
targets, and the freedom to achieve their goals. This simple vision has created an environment
where there are no limits to excellence, no limits to efficiency and has proved to be a powerful
engine of growth for the company. As a result, AMBUJA is the most profitable cement company
in India, and one of the lowest cost producers of cement in the world.

When the company started out, it approached the cement business with an open mind. To compete
with the older, established players who had already written off their plant cost, it was important to
have the lowest capital cost per ton of cement. Their plants would have to be set up in record time.
Their capacity utilization would have to be above 100%. And their power consumption would have
to set a record low these were the main theme of company.

Today, AMBUJA is the 3rd largest cement company in India, with an annual plant capacity of 16
million tones including AMBUJA Cement Eastern Ltd. and revenue in excess of Rs.3298 crore.

In 1993, AMBUJA Cement set up a complete system of transporting bulk cement via the sea route.
Making it the first company in India to introduce bulk cement movement by sea. Others followed
and today, about 10% cement travels by this new route.

Port terminal of the company is situated at Muldwarka, Gujarat: It’s an all weather port, 8 kms
from the company’s Ambujanagar plant. Handles ships with 40,000 DWT. It is also equipped to
export clinker and cement and import coal and furnace oil.

In 2013 the company approved a proposal, wherein Ambuja will first acquire from Holderind
Investments Ltd., Mauritius (Holcim), a 24% stake in Holcim India for a cash consideration of Rs
3,500 crores, followed by a merger of Holcim India into Ambuja. These intra–group transactions
will result in Ambuja holding 50.01% stake in ACC.In addition, the Board also provided its
approval for Ambuja to make commercially reasonable efforts to invest up to Rs 3,000 crores to
acquire an economic ownership in ACC of up to 10% without triggering a mandatory open offer,
subject to shareholders and regulatory approvals as applicable.

9
 HISTORY OF ACC LIMITED:
ACC is India foremost manufacturer of cement and concrete and was established on August 1,
1936. ACC operations are spread throughout the country with 14 modern cement factories, more
than 30 ready mix concrete plants, 20 sales offices, and several zonal offices. It has a workforce
of about 10,000 persons and a countrywide distribution network of over 9,000 dealers. ACC's
research and development facility has a unique track record of innovative research, product
development and specialized consultancy services. Since its inception in 1936, the company has
been a trendsetter and important benchmark for the cement industry in respect of its production,
marketing and personnel management processes. Its commitment to environment–friendliness, its
high ethical standards in business dealings and its on–going efforts in community welfare
programs have won it acclaim as a responsible corporate citizen. ACC has made significant
contributions to the nation building process by way of quality products, services and sharing its
expertise.

In the 70 years of its existence, ACC has been a pioneer in the manufacture of cement and concrete
and a trendsetter in many areas of cement and concrete technology including improvements in raw
material utilization, process improvement, energy conservation and development of high
performance concretes.

The company's various businesses are supported by a powerful, in–house research and technology
backup facility – the only one of its kind in the Indian cement industry. This ensures not just
consistency in product quality but also continuous improvements in products, processes, and
application areas.

ACC has rich experience in mining, being the largest user of limestone, and it is also one of the
principal users of coal. As the largest cement producer in India, it is one of the biggest customers
of the Indian Railways, and the foremost user of the road transport network services for inward
and outward movement of materials and products.

ACC has also extended its services overseas to the Middle East, Africa, and South America, where
it has provided technical and managerial consultancy to a variety of consumers, and also helps in
the operation and maintenance of cement plants abroad.

ACC is among the first companies in India to include commitment to environmental protection as
one of its corporate objectives, long before pollution control laws came into existence. The
company installed pollution control equipment and high efficiency sophisticated electrostatic
precipitators for cement kilns, raw mills, coal mills, power plants and coolers as far back as 1966.
Every factory has state–of–the art pollution control equipment and devices.

ACC demonstrates the practices of being a good corporate citizen undertaking a wide range of
activities to improve the living conditions of the under–privileged classes living near its factories.

10
 DEFINITION & CONCEPTS OF WORKING CAPITAL:
Every business needs investment to procure fixed assets which remain in use for a longer period.
Money invested in these assets is called Fixed Capital. Business also needs funds for short-term
purposes to finance current operations. Investment in short term assets like cash, inventories,
debtors etc. are called Working Capital which is required for carrying out day-to-day operations
of the business smoothly. While managing the working capital, two characteristics of current
assets should be kept in mind viz.
(I) Short life span.
(II) Swift transformation into other form of current asset.
Each constituent of current asset has comparatively very short life span and the investment
remains for a short period. The life span of current assets depends upon the time required in the
activities of procurement, production, sales and collection and degree of synchronization among
them.

→Working capital is commonly defined as the difference between current assets and current
liabilities.

FORMULA:

Working capital = current assets –current liabilities

There are two types of working capital:

Gross working capital:

It refers to firms investment in current assets. Current assets are the assets which can be
converted into cash in a financial year. The gross working capital points to be need of arranging
funds to finance current assets.

FORMULA:

Gross working capital = shareholder’s fund +long term debts +current liabilities-fixed assets

Net working capital:

Net working capital is a qualitative concept. It indicates the liquidity position of the firm and
suggests the extent to which working capital needs may be financed by permanent source of
funds.Net working capital also financing current assets.

FORMULA:

NET WORKING CAPITAL = SHAREHOLDER’S FUND +LONG TERM DEBTS-FIXEDASSETS

NET WORKING CAPITAL=TOTAL CURRENT ASSETS-TOTAL CURRENT LIABILITIES

11
CLASSIFICATION OF WORKING CAPITAL
WORKING CAPITAL CAN BE CLASSIFIED AS FOLLOWS:

On the basis of time

On the basis of concept

KINDS OF WORKING
CAPITAL

ON THE ON THE
BASIS OF BASIS OF
CONCEPT TIME

TEMPORARY
GROSS NET PERMANENT/FIX
/VARIABLE
WORKING WORKING ED WORKING
WORKING CAPITAL
CAPITAL CAPITAL CAPITAL

REGULAR SEASONAL Special

RESERVE
WORKING WORKING working
WORKING
CAPITAL CAPITAL
CAPITAL capital

12
 STOCK

DEBTORS

BILLS RECEIVABLES

CURRENT
PREPAID EXPENSES

ASSETS
ACCRUED INCOMES

CASH IN HAND & BANKBANK

MARKETABLE SECURITIES

CREDITORS

BILLS PAYABLE

PROPOSED DIVIDEND

CURRENT
BANK OVERDRAFT

LIABILITIES
OUTSTANDING EXPENSES

ADVANCE INCOME

PROVISION FOR TAXATION

13
 FACTORS WHICH DETERMINES WORKING CAPITAL
REQUIREMENT:
The needs of working capital of a business are influenced by numerous factors. The important once are
discussed below in brief:
 NATURE OF ENTERPRISE: The nature and the working capital requirements of an enterprise are
interlinked .while a manufacture industry has a long cycle of operation of working capital, the same
would be short in an enterprise involved in providing services.
 Demand of creditors: Creditors are interested in the security of loans .They want their advances to be
sufficiency covered. They want the amount of security in assets which are greater than liabilities
.
 Manufacturing /production cycle: Each enterprise in the manufacturing sector has its own
production policy, some follow the uniform production policy and others may follow the principle of
‘demand based production’. Accordingly the working capital requirements vary both for them.
 CASH REQUIREMENTS: Cash is one of the current assets which are essential for the successful
operations of the production cycle .Cash should be adequate and properly utilized. A minimum level
of cash is always needed to keep the operations going.
 WORKING CAPITAL CYCLE: Working capital cycle refers to the period which starts with the
purchase of materials to the realization if cash out of the finished goods. The speed with which
the working capital cycle determines the requirement of working capital.

 VOLUME OF SALES: Volume of sales affects the requirements of working capital to a large extent.
They have direct relationship with each other. As volume of sales increases, there is an increase in the
investment of working capital and vice versa in the case where volume of sales decreases.
 MARKET CONDITION: The working capital requirements will be high if there is high competition in
the working capital requirements will be low.
 CREDIT POLICY: The credit policy in dealings with debtors and creditors influence considerably the
requirements of the working capital.
 BUSSINESS CYCLE: Business cycle refers to alternative expansion and contraction in general business
activities. In a boom period there is a need for larger amount of working capital. On the country at the
time of depression, difficulties are faced in collections from debtors and firms may have a large amount
of working capital lying idle.
 AVAILABILITTY OF RAW MATERIALS: If the material is readily available the working capital
investment in a raw material will be less. If raw material is not readily available then a large
stock needs to be maintained, thereby calling for substantial investment in the same.
 LIQUIDITY AND PROFITIBILITY:
There is a negative relationship between liquidity and profitability .when working capital in
relation to sales is increased it will reduce risk and profitability on one side and will increase
liquidity on the other side.
 OTHER FACTORS: Certain other factors such as changes in price level, operating efficiency,
management ability, irregularities of supply, import policy, asset structure, importance of
labour, banking facilities etc. Also influence the requirement of working capital.

14
 COMPONENTS OF WORKING CAPITAL-
BASIS OF VALUATION:
 Stock of raw materials and cost of purchase.
 Stock of work in process at cost or market value, which is lower.
 Stock of finished goods and cost of production.
 Debtors cost or sales value.
 Cash working expenses.

Each constituent of the working capital is valued on the basis of valuation. The
total of such valuation becomes the total estimated working capital requirement.

 WORKING CAPITAL MANAGEMENT:

The interaction between current assets and current liabilities is, therefore, the
main theme of the theory of working capital management. Working capital
management is considered with the problem that arises in attempting to
manage the current assets, the current liabilities and the inter relationship
that exists between them. The goal of working capital management is to
manage a firm’s current assets and current liabilities in such a way that a
satisfactory level of working capital is maintained.

Funds are needed in every business for carrying on day to day operations.
Working capital funds are regarded as the life blood of a business firm. A
firm can exists and survive without making profit but cannot survive without
working capital funds. If a firm is not earning profit it may be termed as
‘sick’, but, not having working capital may cause its bankruptcy working
capital in order to survive. The alternatives are not pleasant. Bankruptcy is
one alternative. Being acquired on unfavourable term as another . Thus,
each firm must decide how to balance the amount of working capital its
holds, against the risk of failure. Importance of working capital management
stems from two reasons, viz., (i) A substantial portion of total investment is
invested in current assets, and (ii) Level of current liabilities will change
quickly with the variation in sales.

15
INJECTION OF CASH CASHWITHDRAWALS

CASH

PAYEMENT-
GOODS SOLD
to suppliers
Debtors
for row
generated &
matirials
then cash
received to workers-
Wages

GOODS
PRODUCED

16
  FINANCING OF WORKING CAPITAL: A firm to arrange necessary finance
after determining of the level of working capital. It has to arrange finance both for its
permanent or fixed working capital as well as for temporary or variable working capital. The
fixed assets proportion of working capital should generally be financed from the fixed source
of capital while the temporary or variable working capital requirement of a concern may be
arranged from the short term source of capital .Whatever source is selected by the firm,the cost
of financing, flexibility, risk of financing, taxes and return are to be taken into account.

The various sources from which financing of working capital can be done is shown in below:-

Sources of working
capital

Fixed working capital TEMPORARY

VARIABLE WORKING
CAPITAL

Internal EXTERNAL
source: SOURCE:
EXTERNAL
INTERNAL
(1)PROV FOR (1)ISSUE OF SOURCE:
DEPRICIATION SOURCE:
SHARES (1)LOAN FROM
(2)PROV FOR (1)PLOUGHI BANKS
(2)ISSUE OF
TAXATION NG BACK OF
DEBENTURE (2)LOAN FROM
PROFIT/RETE FINANCIAL
(3)OUTSTANDI
(3)LOAN FROM NTION INSTITUTION
NG WAGES
AND SALARIES FINANCIAL
(3)PUBLIC
INSTITUTION DEPOSIT

(4) TRADE
CREDITORS

(5)COMMERCIAL
PAPER

(6)GOVT AND

17
 CHAPTER-3

PRESENTATION OF DATA, ANALYSIS AND FINDINGS

 BALANCE SHEET Of ACC LTD :- (Rs: Cr)

Particulars Dec-19 Dec-18 Dec-17 Dec-16 Dec-15

I EQUITY & LIABILITIES
(1) Shareholder’s fund
(a)share capital 187.5 187.5 187.5 187.5 187.5

(b)reserves & surplus 8255.09 8047.66 7636.89 7194.85 7004.32

(2)share application money pending - - - - -
allotment
(3)Non-current liabilities
(a)Long-terms borrowings 0.00 0.00 0.00 85.03 506.08
(b)Deferred tax liabilities (net) 469.16 535.57_ 507.27 516.92 518.36
(c)Other long term liabilities 0.00 0.00 406.75 381.09 372.26
(d)Long term provisions 119.86 115.94 89.09 157.21 123.06

(4)Current liabilities
(a)Short-term borrowings 35.50 0.00 0.00 0.00 0.00
(b)Trade payables 874.11 750.23 639.20 660.49 710.26
(c)Other current liabilities 2259.82 2096.71 1545.69 1515.81 1517.06
(d)Short-term provisions 639.33 937.27 1080.75 1226.88 1049.94
TOTAL 12840.82 12671.33 12093.59 11926.23 11989.29
II ASSETS
(1) Noncurrent assets
(a)Fixed assets
(i)Tangible assets 5,284.78 5,597.75 5,503.13 5,858.86 6,206.26
(ii)Intangible assets 0.20 0.64 0.83 5.01 1.27
(iii)capital work-in-progress 2,370.96 1,914.63 819.61 311.30 365.63
(iv)Intangible assets under
development
(b)Noncurrent investment 274.55 290.90 176.81 194.67 445.10
(c)Deferred tax assets(net)
(d)long term loans and advances 1,073.38 855.56 866.83 564.20 447.88
(e)other noncurrent assets 466.30 360.71 308.24 165.84 56.14
(2)Current assets
(a)current investment 1,201.15 1,282.08 2,017.21 2,358.88 1,179.85
(b)Inventories 1,188.60 1,255.59 1,121.47 1,133.55 1,099.54
(c)Trade receivables 484.35 410.71 397.22 303.45 187.74
(d)cash and cash equivalents 91.60 304.30 503.38 678.38 1,652.56
(e)short term loans and advances 349.84 383.92 359.39 323.29 332.32
(f)other current assets 55.11 14.54 19.47 28.80 15.00
TOTAL 12,840.82 12,671.33 12,093.59 11,926.23 11,989.29

18
 BALANCE SHEET Of AMBUJA CEMENT :- (Rs:Cr)

Particulars Dec-19 Dec-18 Dec-17 Dec-16 Dec-15

I EQUITY & LIABILITIES
(1) Shareholder’s fund
(a)share capital 310.38 309.95 309.17 308.44 306.87

(b)reserves & surplus 9,996.49 9,793.38 9,176.37 8,496.62 7,762.56

(2)share application money 0.00 0.00 0.00 0.00 0.01

pending allotment
(3)Non-current liabilities
(a)Long-terms borrowings 22.68 19.09 29.15 34.63 42.80
(b)Deferred tax liabilities (net) 564.90 589.04 564.32 548.25 643.60
(c)Other long term liabilities 5.99 9.22 17.58 4.91 3.82
(d)Long term provisions 35.40 32.57 24.80 20.89 17.91

(4)Current liabilities
(a)Short-term borrowings
(b)Trade payables 679.82 618.49 974.52 934.54 951.16
(c)Other current liabilities 1,461.93 1,352.89 792.39 655.87 639.77
(d)Short-term provisions 1,084.34 1,176.22 1,076.29 1,420.53 1,173.34

TOTAL 14,161.93 13,900.85 12,964.59 12,424.68 11,541.84

II ASSETS
(1) Noncurrent assets
(a)Fixed assets
(i)Tangible assets 6,091.72 6,226.78 6,062.16 5,861.93 6,184.61
(ii)Intangible assets 0.31 0.33 0.37 0.44 1.85
(iii)capital work-in-progress 414.12 690.17 694.88 520.12 486.82
(iv)Intangible assets under
development
(b)Noncurrent investment 106.90 105.73 104.51 112.01 95.37
(c)Deferred tax assets(net)
(d)long term loans and advances 720.71 593.32 320.55 647.31 506.76
(e)other noncurrent assets 279.57 289.31 245.08 8.02 2.15
(2)Current assets
(a)current investment 2,119.23 2,067.00 1,683.94 1,543.83 768.94
(b)Inventories 895.45 888.39 933.94 983.93 924.97
(c)Trade receivables 286.36 227.98 231.51 213.37 240.85
(d)cash and cash equivalents 2,848.39 2,458.12 2,341.09 2,253.72 2,069.08
(e)short term loans and advances 336.26 308.32 289.41 249.05 236.51
(f)other current assets 62.91 45.40 57.15 30.95 23.93
TOTAL 14,161.93 13,900.85 12,964.59 12,424.68 11,541.84

19
  WORKING CAPITAL POSITION ANALYSIS IN ACC
LIMITED.:-
 Net Working Capital = (Current Assets – Current Liabilities)(Rs: Cr)
Current assets Dec 19 Dec 18 Dec 17 Dec 16 Dec 15

Current investment 1,201.15 1,282.08 2,017.21 2,358.88 1,179.85

Inventories 1,188.60 1,255.59 1,121.47 1,133.55 1,099.54

Sundry debtors 484.35 410.71 397.22 303.45 187.74

Cash & bank 91.60 304.30 503.38 678.38 1,652.56

balance

Short term loan & 349.84 383.92 359.39 323.29 332.32

advances
Other current asset 55.11 14.54 19.47 28.80 15.00

Total (A) 3,370.65 3,651.14 4,418.14 4,826.35 4,467.01

Current Dec 15 Dec 14 Dec 13 Dec 12 Dec 11

liabilities
Short term 35.50 0.00 0.00 0.00 0.00
borrowing

Sundry creditors 874.11 750.23 639.20 660.49 710.26

Other current 2,259.82 2,096.71 1,545.69 1,515.81 1,517.06

liabilities

Short term provision 639.33 937.27 1,080.75 1,226.88 1,049.94

Total (B) 3,808.76 3,784.21 3,265.64 3,403.18 3,277.26

WORKING (438.11) (133.07) 1152.5 1423.17 1189.75

CAPITAL (A-B)

20
  WORKING CAPITAL POSITION ANALYSIS IN AMBUJA
CEMENT.:-
 Net Working Capital = (Current Assets – Current Liabilities)(Rs: Cr)
Current assets Dec 19 Dec 18 Dec 17 Dec 16 Dec 15

Current investment 2,119.23 2,067.00 1,683.94 1,543.83 768.94

Inventories 895.45 888.39 933.94 983.93 924.97

Sundry debtors 286.36 227.98 231.51 213.37 240.85

Cash & bank 2,848.39 2,458.12 2,341.09 2,253.72 2,069.08

balance
Short term loan & 336.26 308.32 289.41 249.05 236.51
advances
Other current asset 62.91 45.40 57.15 30.95 23.93

Total (A) 6,548.60 5,995.21 5,537.04 5,274.85 4,264.28

Current Dec 15 Dec 14 Dec 13 Dec 12 Dec 11

liabilities
Short term
borrowing

Sundry creditors 679.82 618.49 974.52 934.54 951.16

Other current 1,461.93 1,352.89 792.39 655.87 639.77

liabilities

Short term provision 1,084.34 1,176.22 1,076.29 1,420.53 1,173.34

Total (B) 3,226.09 3,147.60 2,843.20 3,010.94 2,764.27

WORKING 3322.51 2847.61 2693.84 2263.91 1500.01

CAPITAL (A-B)

21
TREND OF WORKING CAPITAL OF ACC LIMITED.

PARTICULARS Dec 19 Dec 18 Dec 17 Dec 16 Dec 15

CURRENT ASSETS 3,370 3,651 4,418 4,826 4,467

(A)
CURRENT 3,808 3,784 3,265 3,403 3,277
LIABILITIES (B)
TREND OF (438) (133) 1153 1423 1190
WORKING
CAPITAL(A-B)

TREND OF WORKING CAPITAL OFAMBUJA CEMENT.

PARTICULARS Dec 19 Dec 18 Dec 17 Dec 16 Dec 15

CURRENT ASSETS (A) 6,548 5,995 5,537 5,274 4,264.

CURRENT
3,226 3,147 2,843 3,010 2,764
LIABILITIES(B)

22
 TREND OF WORKING 3322 2848 2694 2264 1500
CAPITAL (A-B)

FINAL INTERPRETATION OF THE TWO COMPANIES:-

The working capital of the two companies shows that ACC CEMENT is using a very low
amount of working capital because the difference between the current assets and the current
liabilities is very low showing that it has used a little amount as its working capital whereas the
investment in working capital by AMBUJA CEMENT.Is very high which is increasing its cost
of capital because the company is unable to utilize the fund from its creditors .so AMBUJA
CEMENT is not in a better position than ACC CEMENT regarding its optimum use of working
capital

 KEY OF WORKING CAPITAL RATIOS:

The following, easily calculated, ratios are important measures of working capital utilization

Ratio Formulae Result Interpretation

23
Stock Average stock = x days On average, you turn over the value of your
Turnover of finished entire stock every x days. You may need to
Ratio goods * 365/ break this down into product groups for
(in days) Cost of Goods effective stock management.
Sold Obsolete stock, slow moving lines will
extend overall stock turnover days. Faster
production, fewer product lines, just in time
ordering will reduce average days.
Receivables Average Tread = x days It takes you on average x days to collect
Ratio Debtors * 365/ monies due to you. If you’re official credit
(in days) Annual Credit terms are 45 day and it takes you 65 days...
Sales One or more large or slow debts can drag out
the average days. Effective debtor
management will minimize the days.

Payables Average Tread = x days On average, you pay your suppliers every x
Ratio Creditors * 365/ days. If you negotiate better credit terms this
(in days) Annual Credit will increase. If you pay earlier, say, to get a
Purchases discount this will decline. If you simply defer
paying your suppliers (without agreement)
this will also increase - but your reputation,
the quality of service and any flexibility
provided by your suppliers may suffer.
Current Total Current = x times Current Assets are assets that you can readily
Ratio Assets/ turn in to cash or will do so within 12 months
Total Current in the course of business. Current Liabilities
Liabilities are amount you are due to pay within the
coming 12 months.
Quick Ratio (Total Current = x times Similar to the Current Ratio but takes
Assets – account of the fact that it may take time to
Inventory- convert inventory into cash.
Prepaid
Expenses)/
(Total Current
Liabilities- Bank
Overdraft)

 SOME IMPORTANT RATIOS :

CURRENT RATIO (TIMES)
FORMULA- TOTAL CURRENT ASSETS / TOTAL CURRENT LIABILITIES

24
 YEAR CURRENT RATIO(IN TIMES)

ACC LIMITED AMBUJA CEMENT

Dec 19 0.88 2.03
Dec 18 0.96 1.90
Dec 17 1.35 1.95
Dec 16 1.42 1.75
Dec 15 1.36 1.54

 FINAL INTERPRETATIONOF TWO COMPANIES:

The current assets to current liabilities of two companies reflects that ACC CEMENT is
maintaining a low current ratio than the standard norm 2:1 which shows that the company may
face shortage of funds while it needs to pay its current liabilities. on the other hand, AMBUJA
CEMENT is maintaining nearly the standard norm but its investment in current assets is more
and it may not utilize the fund optimally for its working capital.
QUICK RATIO(TIMES)
FORMULA- CURRENT ASSETS-STOCK-PREPAID EXPENSES / CURRENT
LIABILITIES-BANK OVERDRAFT

YEAR QUICK RATIO(IN TIMES)

ACC LIMITED AMBUJA CEMENT

Dec 19 0.57 1.75
Dec 18 0.63 1.62
Dec 17 1.01 1.62

25
 Dec 16 1.09 1.43
Dec 15 1.03 1.21

 FINAL INTERPRETATIONOF TWO COMPANIES: The

quick ratio of ACC limited is much below standard norm which is 1:1 but it is maintaining a
steady quick ratio .Through the company may face trouble I repaying its current liabilities
but it seems that the company is having a good monitoring system regarding managing its
quick assets and quick liabilities. On the other hand the quick ratio of AMBUJA CEMENT is
more or less near the standard norm but it seems that the company is not taking the risk of
fund shortage while repaying its current liabilities. AMBUJA CEMENT should give more
stress and should take risk by lowering the ratio to utilize its Working capital optimally.

STOCK TURNOVER RATIO (IN TIME)

YEAR STOCK TURNOVER RATIO(IN TIMES)

ACC LIMITED AMBUJA CEMENT

Dec 19 9.92 10.57
Dec 18 9.35 11.23
Dec 17 9.96 9.81
Dec 16 10.02 9.89
Dec 15 8.79 9.25

26
  FINAL INTERPRETATIONOF TWO COMPANIES:
The stock turnover ratio of the two companies reveals that AMBUJA CEMENT is
having a good stock turnover showing that the inventory management is very prudent
because it is using the stock to a maximum possible than that increase its stock of
ACC LIMITED. The recommendation for ACC CEMENT should try to turnover
so that too much investment is not blocked in its working capital.

 WORKING CAPITAL TURNOVER RATIO (IN TIMES)

FORMULA- SALES / WORKING CAPITAL

YEAR WORKING CAPITAL TURNOVER RATIO (TIMES)

ACC LIMITED AMBUJA CEMENT

Dec 19 -26.93 2.85
Dec 18 -88.21 3.5
Dec 17 9.69 3.4
Dec 16 7.98 4.30
Dec 15 8.12 5.7

27
FINAL INTERPRETATIONOF TWO COMPANIES: The
working capital turnover ratio of ACC CEMNT is high except in 2015 &2014 showing that the
company is utilizing its working capital to a maximum possible manner to achieve its sales while
AMBUJA CEMENT is utilizing at a low pace showing that the company is not giving its stress
to use the funds properly and the ploughing back of capital is not properly effected by the
management

MASTER CHART OF ACC LIMITED:-

RATIO Dec-19 Dec-18 Dec-17 Dec-16 Dec-15

CURRENT 0.88 0.96 1.35 1.42 1.36
RATIO
QUICK 0.57 0.63 1.01 1.09 1.03
RATIO
WORKING -26.93 -88.21 9.69 7.98 8.12
CAPITAL
TURNOVER
RATIO
STOCK 9.92 9.35 9.96 10.02 8.79
TURNOVER
RATIO

FINAL INTERPRETATION: The Overall performance of ACC CEMENT shows that with a
low amount of working capital the company with its tremendous stock turnover ratio shows a
high amount of sales. The management of the company is efficient and able enough to prudently

28
manage its current assets and at the same time the company is engaging a huge amount of current
liabilities and hence it is utilizing its own fund optimally. The company is able to do its business
depending on the funding of its creditors. Through they are managing efficiently but the
company is at a high risk while the company needs to repay its current liabilities.

MASTER CHART OFAMBUJA CEMENT:-

RATIO Dec-19 Dec-18 Dec-17 Dec-16 Dec-15

CURRENT 2.03 1.90 1.95 1.75 1.54
RATIO
QUICK 1.75 1.62 1.62 1.43 1.21
RATIO
WORKING 2.85 3.5 3.4 4.30 5.7
CAPITAL
TURNOVER
RATIO
STOCK 10.57 11.23 9.81 9.89 9.25
TURNOVER
RATIO

FINAL INTERPRETATION:- The working capital management of AMBUJA CEMENT is

not enough efficient but it is moderately managed. The company should give more stress
regarding depending on more credit providing agencies to reduce its fund engagement on the
working capital. The company should improve the turnover ratio by collecting funds from the

29
debtors at a regular and fast interval. Again it should try to improve its sales not by investing its
own funds but from the funds provided by its creditors.

CHAPTER 4
CONCLUTION
From the analysis it may be concluded that working capital management is very
much useful to ensure better productivity, good profitability of an enterprise .In spite
of all these, for managerial decision making regarding the creation of sufficient
surplus for its growth and survival stability in the present competitive environment.
From our observation it is also cleared that the overall financial health of an
enterprise not only depends on the profitability of the concern but also it depends on
the liquidity position of the firm .Liquidity & profitability are two close concept in
a firm in the way of achieving its desired goals. After studying the components of
working capital management system of two companies it is found that the company
has a sound and effective policy and its performance is very good even in this bad
recession Situation Company has manage to post good profit.

 The various ratios calculated are an indicator as to the fact that the profitability
of the firm and sales are on a rise and also the deletion of the inefficiencies in the
working capital management.
 The working capital position of ACC LIMITED is sound and the various sources
through which it is funded are optimal. But the working capital management of
AMBUJA CEMENT is moderate and there is scope of improvement in managing
its current assets and current liabilities more efficiently.
 The companies has used its purchasing, financing and investment decisions to
good effect can be seen from the inferences made earlier in the project.
 The debts doubtful have been doubled over the years but their percentage on the
debts has almost become half. This implies a sales and collection policy that get
along with the receivables management of the firm.
 The firm has not compromised on profitability despite the high liquidity is
Commendable.

30
 SUGGESTIONS AND RECOMMENDATION

The management of working capital plays a vital role in running of a successful

business. So things should go with a proper understanding for managing cash,
receivables and inventory.

ACC LIMITED is managing its working capital in a good manner, but still there is
some risk while the condition of repayment of the liabilities arises. Both the
companies have the scope for improvement in its working capital, inventories,
debtors and receivables management. This can help the companies in raising their
profit levels by making less investment in accounts receivables and stock etc. This
will ultimately improve the efficiency of its operations. Following are few
recommendations given to the company in achieving its desired objectives:

 The business runs successfully with adequate amount of the working capital but
the company should see to it that the cash should not be tied up in excessive
amount of working capital.

 Though the present collection system is near perfect, the company as due to the
increasing sales should adopt more effective measures so as to counter the threat
of bad debts.

 The over purchasing function should be avoided as it could lead to liquidity

problems.

 The investment of cash in marketable securities should be increased, as it is very

profitable for the company.

 Holding of excessive and insufficient stock must be avoided as it creates a burden

on the cash resources of a business and results in lost sales, delays for customers,
etc respectively.

31
 BIBLIOGRAPHY OR REFERENCES
 Following sources have been sought for the preparation of this report:
1. Financial Management- I M Pandey Vikas. Publishing house Pvt. Ltd. 10th Edition, 2011.

2. Financial Management- Prasanta Chandra. Tata McGraw-Hill Publication. 8th Edition, 2011.

3. Khan & jain, financial management

4. www.workingcapitalmanagement.com

5. Annual report of AMBUJA CEMENT

6. Annual report of ACC LIMITEED
7. www,google.com
8. www.ambujacement.com (official website of AMBUJA CEMENT)
9. www.acclimited.com (official website of AMBUJA CEMENT)

10. Corporate Intranet.

32
THANK YOU

33