Project 01

CHAPTER -1
INTRODUCTION
STUDY ON WORKING CAPITAL MANAGEMENT
INTRODUCTION
DEFINITION:
According to I.M.PANDEY “Financial management is that managerial
activity which is concerned with the planning and controlling of the financial
resources”. Before we begin our odyssey, let us get a bird’s eye view of
financial management, also referred to as ‘corporate finance’ or ‘managerial
finance’, beginning with its evolution, goal, its system and the statements.
INTRODUCTION OF THE FINANCIAL MANAGEMENT:

Finance function is a process of planning, organizing and controlling the
financial activities of an organization.
 Henry ford once remarked “Money is Arm or Leg, You either use it or
loss it”.
 The Sanskrit saying “Aartha Sachivah” which means finance is
‘Supreme’. It has been rightly said that “Business needs money to more
money management of finance. Financial management is nothing but
management of finance function.
EVALUATION OF FINANCIAL MANAGEMENT:

Financial management emerged as a distinct field of study at the turn of 20th
century its evolution may be divided into three broad phases ‘the traditional
phase’, ‘the transitional phase’ and ‘the modern phase’. The traditional phase
lasted for about four decades. The features are the focus of financial
management was mainly on certain episodic events like formation, issuance of
capital, major expansion, merger, liquidation: etc.
SVU CCM&CS Page 1

The approach was mainly descriptive and institutional. The outsiders point of
you was dominate financial management was viewed mainly from the point of
view of the investment bankers, leaders, and other outside interest. The
transitional phase began around the yearly 1940 and continued through the
yearly 1950s. Though the nature of financial management during this phase was
similar to that of the traditional phase, greater emphasis was placed on the day-
to day problems faced by financial managers in the area of funds analysis,
planning and control. The focus shifted to working capital management.
The modern phase began in the mid1950s and has witnessed an accelerated
phase of development with the infusion of ideas from economic theory and
application of quantitative. The central concern of financial management is
considered to be rational matching of funds to their uses so as to maximize the
wealth of current shareholders.
GOALS OF FINANCIAL MANAGEMENT
 Maximize the value of the firm to its equity shareholders. This means that
the Goals of the firm should be to maximize the market value of its equity
shares (Which represent the value of the firm to its equity shareholders)
 Maximization of profit.
 Maximization of earnings per share.
 Maximization of return on equity (defined as equity earnings/net worth).
 Maintenance of liquid assets in the firm.
 Ensuring maximum operational efficiency through planning, directing
and Controlling of the utilization of the funds i.e., through the effective
employment of funds.
 Enforcing financial discipline in the use of financial resources through the
coordination of the operation of the various divisions in the organization.
SVU CCM&CS Page 2

INTRODUCTION TO WORKING CAPITAL MANAGEMENT:
Working capital is that amount of funds which is required to carry out the day-
to – day operations of an enterprise. It may also regards as that position of an
enterprise total capital, which is employed in its short – term operations. This
operation consists of primarily such items such as raw materials, semi – finished
goods, finished goods, sundry debtors, short – term investments etc., Thus
working capital also refers to all the short – term assets known necessary. There
is no such a business for which working capital is not needed. The main aim
every firm is to maximize shareholders wealth.
Firm must earn sufficient returns to increase the shareholder wealth. To earn
steady amount of profit, a successful sales activity is necessary. Firm can
generate sales if sufficient amount is invested in Current assets. The need of
current assets is necessary because sales do not convent into cash immediately.
There is always an operating cycle involved in the conversion of sales into cash.
Working capital management is one of the most important aspects of financial
management. It forms a major function of the finance manager and accountant.
It is concerned with the problems that arise In attempting to manage the current
assets, the current liabilities and the interrelation ship that exists between them.
The management of current assets is similar to that of fixed assets in the sense
that in both cases a firm analyses their effects on its return and risk.
Meaning of working capital:

Working capital management means, a firm’s investment in short-term assets
like cash, marketable securities, inventory and accounts receivables. Working
capital is the excess of current assets over current liabilities. It represents the
investment of a company’s funds in assets which are expected to be realized
within a relatively short period of time.
SVU CCM&CS Page 3
All current assets and current liabilities are the components of working
capital. It is necessary to measure the increase or decrease there in, by preparing
a schedule of changes in working capital. This statement is prepared with
current assets and current liabilities as appearing in the balance sheets. The
statement shows the changes in individual items of current assets and current
liabilities and their effect of working capital.
Every business needs funds for two purposes for it’s establishment and to
carryout it’s day-to-day operations. Long –term funds are required to create
production facilities. Funds are also needed for short-term purposes for the
purchase of raw-materials, payments of wages and other day-to-day expenses
etc., these funds are known as working capital.
Working capital refers to that part of the firm’s capital which is required for
financing short term or current assets such as cash, marketable securities,
debtors and inventories. Investing in current assets keep revolving fast and are
being constantly converted into cash.
Definitions:
1. “Working capital the amount of funds necessary to cover the cost of
operating the enterprise”
-SHUBIN
2. “Circulating capital means current assets of a company that are changed in
the ordinary course of business from one form to another”
-GERESTENBERG
SVU CCM&CS Page 4

3. “Working capital is descriptive of that capital which is not fixed. But, the
more common use of working capital is to consider it as the difference between
the book value of the current assets and the current liabilities. ”
-HOAGLAND
4.”Working capital refers to a firm’s investment in short term asset, cash, short
term securities, accounts receivable & inventories.”
-WEST & BRIGHAM
5.“Any acquisition of funds which increases the current asset increase the
working capital also, for they are one & the same.”
-BONNEVILLE
Theoretical background
One of the most important areas in the day-to-day management of the firm is
the management of working capital. Working capital management is the
functional area of the finance that covers all the current accounts of the firm. It
is concerned with management of the level of individual current assets as well
as the management of total working capital. Financial management means
procurement of funds and effective utilization of these procured funds.
Procurement of funds is firstly concerned for financing working capital
requirement of the firm and secondary for financing fixed assets.
SVU CCM&CS Page 5

Classifications of working capital:

Working capital may be classified in to two ways.
Working capital
On the basis of concept On the basis of time
Gross working capital Net working capital Permanent or Temporary or

Fixed working variable
Capital working capital
Concepts of working capital

The term working capital can be used in two different ways: they are
1. Gross Working Capital:
The gross working capital refers to investment in all the current assets taken
together. The total of investments in all current assets is known as gross
working capital.
2. Net Working Capital:
The term net working capital refers excess of total current assets over total
current liabilities. It may be noted that the current assets refers to these
liabilities which are payable with in a period of one year.
Types of working capital:

From the point of view of time, the term working capital can be divided into
two categories.
SVU CCM&CS Page 6

1. Permanent working capital:

It is also refers to the hard core working capital. It is the minimum level of
investment in the current assets that is carried by the business at all times to
carries our minimum level of its activities.
2. Temporary working capital:
It refers to the part of total working capital which is required by a business over
and about permanent working capital. It is also called variable working capital.
Since the volume of the temporary working capital keeps on fluctuating from
time to time according to the business activities it may be financed from short
term resources.
Permanent working capital can be further divided into:

1. Regular Working Capital
2. Reserve Working Capital
1. Regular Working Capital:

It is the minimum amount of liquid capital needed to keep up the circulation of
the capital from cash to inventories to receivables and again to cash. This would
include sufficient minimum bank balance to discount all bills, maintain
adequate supply of raw materials etc..
2. Reserve Working Capital:
It is the excess over the needs or regular working capital that should be kept in
reserve for contingencies that may arise at any time these contingencies include
rising prices, business depression, strikes and special operations such as
experiments with new products.
Importance of working capital:

 Adequate working capital helps in maintaining solvency of the business
by providing uninterrupted flow of production.
SVU CCM&CS Page 7

 Sufficient working capital enables a business concern to make prompt

payments & hence helps in creating & maintaining goodwill.
 A concern having adequate working capital, high solvency & good credit
standing can arrange loans from banks & others on easy & favourable
terms.
 Adequate working capital also enables a concern to avail cash discount
on the purchase & hence it reduces costs.
 Sufficient working capital ensures regular supply of raw materials &
continuous production.
 Adequate working capital enables a concern to face business crisis in
emergencies such as depression because during such periods, generally,
there is much pressure on working capital.
Disadvantages of working capital:

 It stagnates growth. It becomes difficult for the firm to undertake
profitable projects due to inadequate of funds.
 It becomes difficult to implement operating plans & achieve firms profit
targets.
 Operating efficiencies creep in & it becomes difficult even to meet day-
to-day commitments.
 Fixed assets are not efficiently utilized for the lack of working capital
funds. Thus the firm’s profit would deteriorate.
 Paucity of working capital fund renders the firm unable to avail attractive
credit opportunities.
 The firms losses its reputation when it is not in a position to honour its
short term obligations. As a result, the firm tight credits terms.
SVU CCM&CS Page 8

Working capital cycle (or) operating cycle:

The normal business operations of a manufacturing & trading company start
with cash, go through with the successive segments of the operating cycle, via,
raw materials storage period, conversion period, finished goods storage period
& average collection period before getting back cash along with profit. The total
duration of all segments mentioned above is known as gross operating cycle.
Operating cycle is the time duration required to convert sales after the
conversion of resources into inventories into cash. In other words, an operating
cycle refers to length of time necessary to complete. Working capital cycle is
popularly known as Operating cycle.
The following cycle of events is:
1. Conversion of cash into raw materials.
2. Conversion of raw materials into work in progress.
3. Conversion of work in progress into finished goods.
4. Inversion of finished goods into bills receivable through sales..
5. Conversion of bills receivable into cash.
Working capital cycle:
Cash
Bills Raw
receivable materials
Finished Work in
goods progress
SVU CCM&CS Page 9

Nature of working capital:

Working capital management is concerned with the problems that arise in
attempting to manage the current assets, the current liabilities and the
interrelationship that exists between them. The term current assets refers to
those assets which in the ordinary course of business can be, or will be,
converted into cash within one year without undergoing a diminution in value
and without disrupting the operations of the firm.
The major current assets are cash, marketable securities, accounts receivables
and inventory. Current liabilities are those liabilities which are intended, at their
inception, to be paid in the ordinary course of business, within a year, out of the
current assets or earnings of the concern. The basic current liabilities are
accounts payables, bills payable, bank overdrafts, and outstanding expenses.
The goal of working capital management is to manage the firm’s current assets
and liabilities in such a way that a satisfactory level of working capital is
maintained. This is so because if the firm cannot maintain a satisfactory level of
working capital, it is likely to become insolvent and may even be forced into
bankruptcy. The current assets should be large enough to cover its current
liabilities in order to ensure a reasonable margin of safety. Each of the current
assets must be managed effectively in order to maintain the liquidity of the firm
while not keeping too high a level of any one of them.
 For the purpose of raw materials, components and spares.
 To pay wages and salaries.
 To incur day-to-day expenses etc.
 To meet the selling costs such as packing and advertising.
SVU CCM&CS Page 10

 To provide credit facilities of raw materials, work-in-progress, stores, shares

and finished stock.
CHAPTER – 2
PROFILES
SVU CCM&CS Page 11

2.1 INDUSTRY PROFILE
INTRODUCTION:
A battery is an electrochemical device in which about the free energy of

chemical reactions is converted into the electrical energy. The chemical energy
contained in the active materials is converted into electrical energy by means of
electrochemical oxidation-reduction reaction.
Introduction to battery manufacturing process: -
The manufacturing process involved in production of maintenance free value

regulated lead acid storage batteries is explained below.
 Grid casting
 Plate production
 Pasting
 Assembling
 Formation
 Dispatch
Grid casting:
Positive and negative grids required for batteries are made for different alloya.
Besides providing the necessary support to hold the active material together, the
grids serve as a conductor of current required for the electro chemical reactions
that take place at the active material/ electrolyte interface in the battery.
Grids are obtained by pouring molten lead alloy in to special water cooled grid
coulds. Casting is done on sophisticated automatic casting machines which
SVU CCM&CS Page 12

control the parameters within narrow tolerance to produce consistently good

quality grids.
Plate production:
The lead oxide produced by the barton process is mixed with water, sulphuric
acid and special additives like synthetic flock and expanders. The paste mixing
is done in tub mixture dry lead oxide along with the additive is added to the tub.
Distilled water is first dispensed into the tub when it is in rotation.
After a fixed quantity of water addition, sulphuric acid is slowly dispensed into
the tub at a slower rate to avoid temperature rise in the mixer. The lead oxide
along with the water and acid from a thick and crunchy paste. This paste is then
moved and sent to the pasting section. The pasting is done on an automatic
pasting machine. The paste is dumped into a hopper which is located at the grid
feeding end of the pasting machine. Grids are automatically fed into the
machine by a mechanical feeder. The quantity of paste dispersed through the
hopper is mechanically adjusted and a pasted plated comes out on a conveyor
belt at the other end of the pasting machine.
From the pasting machine. The plates are passed through a flash drier which
removes surface moisture from the plates. Drying is accomplished by
recirculation of heated air, next sent to the curing operation. In their process, the
plates are maintained at a specified temperature and relative humidity. Curing
for positive plate is done in an oven at a temperature around 80-90◦c. The
negative plates are cured in a humidity room at a lower temperature.
Assembling:
The process of assembly is different for power plus and power stack. Plates are
first stacked into groups with the negative and positive plates alternating with
SVU CCM&CS Page 13

the glass absorbent separator inters read between the plates. Theses separators
are wrapped around individual plates.
The stacked plates are next burned together in a group burning machine. In the
case of smaller batteries, this operation is done on a cast on strap machine. The
group of plates with separator is inserted into a mould where in a strap and the
inter cell posts are cast separately and placed on the burning mixture. The
positive and negative straps are burned manually using an oxyacetylene torch.
The completed elements are then introduced into cell jars or battery mono block
containers. Mini module batteries pass through the inter cell welding stage
wherein adjacent elements in the battery are interconnected by welding the
respective lead posts through a hole in the partition of the plastic. The welding
is accomplished by a two-stage process.
The welding electrodes will press on the lead alloy posts in the first stage.
Under the pressure the lead extrudes through the hole in the partition of the
container. When the two posts make contact, a very high welding current is
passed which fuses and welds the two parts. The weld is next tested on a shear
tester. This internal cell welding operation is not necessary for the large single
cell units. These cells are connected externally to sit various configurations by
using lead plated copper connectors.
The batteries next pass through the process of a cover sealing on a heat sealing
machine. Here, a plastic cover is heat sealed onto the plastic container. The
sealing is accomplished by melting the bottom surfaces of the cover and top
surface of the container with the help of heating plates and then pressing the two
parts together allowing the molten plastic to fuse together and form a leak proof
SVU CCM&CS Page 14

joint. Batteries are further checked on a leak tester to confirm the soundness of
the sealing operation.
Formation: The assembled batteries are filled with a specified grades and
quantity of suphuric acid and left on stand to enable the absorbent separators to
soak. Then electricity is passed through the grids for formation. During the
formation, the active material on the positive plate is converted into lead oxide
and is converted into spongy lead on the negative plate. Time of formation and
charging current depends on the size and the number of the plates. After
formation, the batteries are cleaned and the resalable vent plugs are fixed
finished operations like labelling stamping final cleaning and inspection are
being carried out before packing. The mini-modules can be kept on mild steel
racks or inside the system as per the requirement.
Dispatch: After completing the battery manufacturing, packed and label to

that battery and transport to the various places.
PASTING: Among all the stages, we are mainly concentrating on the
PASTING of the plates. In pasting process we have some stages:
SVU CCM&CS Page 15

PASTING PROCESS
CURING
DRYING
DRY CYCLING
2.2 COMPANY PROFILE
Amara Raja Batteries Private Limited (ARBL) was incorporated under

the company’s act, 1956 on 13th February 1985, and converted into public
limited company on 6th September 1990. Amara Raja Batteries Ltd, (ARBL) is
the largest manufacturer of standby Valve Regulated Lead Acid (VRLA)
batteries in the Indian Ocean Rim comprising the area ranging from Africa and
the Middle East to South East Asia. Based in Chennai, with a fully integrated
manufacturing unit for its industrial batteries at Tirupati, Amara Raja has
reached a position of leadership in a short span of 7 years.
Amara Raja is in a strategic partnership with Johnson Controls Inc., USA. With
this, ARBL is in Global Supply Alliance with Varta AG of Europe and Enertec,
who are joint venture partners of JCI in South America and Mexico. The
Business Group of Amara Raja is categorized as Industrial Battery Division,
Automobile Battery Division and Power System Division.
SVU CCM&CS Page 16

ARBL is the largest supplier of stand-by power systems, catering to Indian

utilities such as Departments of Telecommunication, Indian Railways, Power
Generation Stations, MTNL, VSNL, ITI and HTL. The company has
preferential status with most MNC-OEMs such as ABB, Alcatel, Ericsson,
Fujitsu, Lucent, Motorola, Nokia, Tata Liebert and Siemens.
ARBL has prestigious Automotive OE clients including Ford, GM, Daimler

Chrysler, Ashok Leyland, TELCO, and Mahindra & Mahindra. Amara Raja has
a replacement Battery Brand Amaron hi-life. ARBL has a capacity for
manufacturing around 1,000,000 units in its facility located in located at
Tirupati with an investment of US $ 10 million.
A Greenfield project is planned at the same site with an additional investment of

US $6 million to augment capacity to 2 million batteries. The Amaron hi-life
battery is a product of the collaborative efforts of engineers at Johnson Controls
Inc. and Amara Raja.
ARBL has also designed custom-built power electronics products like

Industrial Battery Chargers, Charge Discharge Circuits, Formation Chargers,
AC/DC distribution boards etc. Progressive conformance of Amara Raja to
changing global standards and processes made it to achieve ISO 9001 and the
QS 9000 Certifications.
VISION:
“To transform our spheres of influence and to improve the quality of life by
building institutions that provide better access to better opportunities, goods and
services to more people……all the time.”
 Introduce latest generation technologies.

 Adapt these technologies to suit the operating environment.
SVU CCM&CS Page 17

 Develop and manufacture globally competitive, customer-focused

products of world-class quality.
 Responsibly introduce these products into relevant markets.
 Provide world-class customer support.
BOARD OF DIRECTORS:
The company has a non-executive chairman and there number of independent

directors representing 33.33% of the total number of directors i.e. more than
one-third of the total number of directors. The number of the total non-
executive directors are 8 i.e. 88.89% which is more than 50% of the total
number of directors. Hence the board of the company has an optimum
combination of executive and non-executive directors in conformity with the
provisions clause 49 of the listing agreement.
None of the members of the board is holding membership in more than 10

committees or chairmanship in more than 5 committees as specified in clause 49
of the listing agreement.
The composition and category of the board of directors as on March 31, 2008
and the number of other directorships/committee memberships held by them are
as under:
S.no. Name of the Director Category
1 Dr. Ramachandra N Galla Chairman

2 Ms. Bhairavi Tushar jani Ind. Non –Executive Director
3 Mr.T R Narayanaswamy Ind. Non –Executive Director
4 Mr. N sri Vishnu Raju Ind. Non –Executive Director
5 Mr. Nagarjun valluri palli Ind. Non –Executive Director
6 Mrs. Ramadevi Gourineni Non –Executive Director
SVU CCM&CS Page 18

7 Mr. jayadev Vice Chairman& Managing

Director
AWARDS FOR AMARA RAJA BATTERIES LTD
 “The Spirit of Excellence” – awarded by Academy of Fine Arts,

Tirupati.
 “Best Entrepreneur of the Year, 1998” – awarded by Hyderabad
management Association, Hyderabad.
 “Industrial Economist Business Excellence Award”—in 1991
awarded by the Industrial Economists, Chennai.
 “Excellence award” – by the Institution of Economics Studies, New
Delhi.
 “Excellence in Environmental Management” for the year 2001- 2002
from the Andhra Pradesh State Control Board
 “Indus towers”- Gold Award in 2013,2016&2018
 Most Promising Company of the year in 2017 –Awarded by CNBC
TV18 IBLA
 Environmental Leadership Award in 2017 BY CUMMINS
 Andhra Pradesh Green award in 2018
 Best vendor Rating and System Audit Award in 2018 BY
MARUTHI SUZUKI INDIA
HISTORY OF THE ORGANISATION
 DEC 1985 -Foundation stone laid for Amara raja.
 MAY 1992 -Designed and implemented the most advanced battery

manufacturing facility in India.
 FEB 1997 -Received the ISO 9001 certification.
 DEC 1997 -Commissioned own plastics and tool room sections.
SVU CCM&CS Page 19

 Signed Joint Venture with Johnson controls.
 MAY 1999-Received QS 9000 certification.
 JAN 2000- Launched Amaron batteries.
 April 2001-Launched the new corporate logo.
 Sep 2001-Awarded the ISO 14001 certification
 May 2002-commissioned phase-I of new automotive battery plant with a

capacity of 2 million batteries.
 JUL 2002-Launched Quanta UPS batteries.
 AUG 2002-Launched Amaron Hi -way and Harvest batteries.
 MAR 2004-Received Ford World Excellence Award.
 SEP 2004-Launched Amaron PRO,GO and FRESH automotive batteries
 OCT 2004-OE agreement with MaruthiUdyog Ltd.
 JUN 2005-OE agreement with Hyundai Motors.
 AUG 2005-NK series limited edition batteries launch.
 DEC 2007-Launched power zone. Launched new-look Amaron range

with Amaron Black, Flo batteries.
 MAY 2008-Launched Amaron PRO BIKE RIDER 2w batteries.
 2012- MVRLA (ISBU) UPS Battery
 2013-ARGC Amararaja Growth Corridor
 2014- Automative Battery division (ABD-2)
SVU CCM&CS Page 20

 2015- Tubular battery division
 2019- Bipolar battery division
AMARA RAJA BATTERIES LIMITED (ARBL)
INDUSTRY BATTERY DIVISION (IBD)
Amara Raja has become the bench mark the manufacture of Industrial
batteries. India is one of the largest and fastest growing markets for Industrial
batteries in the world and Amara Raja is leading in the front, with an 80%
market share for stand by VRLA batteries. It is also having the facility for
producing plastic components required for Industrial batteries. ARBL is the first
company in india to manufacture VRLA batteries (SMF). The company has set
up Rs. 1920 lakhs plant in 18acres in Karakambadi Village, Renigunta mandal.
The project site is notified under ‘B’ category.
Capacity:
The actual installed capacity of IBD is 4 lakhs cells per annum and utilization
capacity is reached to 3, 25,000 cell per annum.
Product: Types of VRLA batteries manufactured in IBD are:
Power Stack
1. Kombat (UPS Battery)

2. Brute
3. Genpro
Customers: Amara Raja being the first entrant in this Industry had the
privilege of pioneering VRLA technology in India. Amara Raja has established
itself as a reliable supplier of high- quality products to major segments like
Telecom, Railways and power.
SVU CCM&CS Page 21
Competitors:
The major competitors for Amara Raja Batteries Products are Exide
Industries Ltd. Hyderabad batteries Ltd., and GNB.
AUTOMOTIVE BATTERY DIVISION (ABD):
ASBL has inaugurated its new automotive plant at Karakambadi in Tirupati

on Sep 24,2001. This plant is of the most completely integrated battery
manufacturing in India with all critical components, including plastics
sources in- house from existing facilities in site. In this project, Amara
Raja’s with their India counterparts to put together the latest advances in
manufacturing technology and plant engineering. It is also having the facility
for producing plastic components required for automotive batteries.
CAPACITY:
With an existing production capacity of 5 lakhs unit of automotive batteries,

the new Greenfield plant will now be able to produce 1 million batteries per
annum. This is the first phase in the enhancement of Amara Raja’s
production capacity in which the company as investedRs.45 cores. In the
next phase, at an additional cost of Rs.25 cores, production capacity will
increase to 2 million units estimated to single largest facility for battery
manufacture in Asia.
PRODUCTS:
The products of ABD are
 Amaron Hi-Way.
 Amaron Harvest.
 Amaron Shield.
SVU CCM&CS Page 22

 Amaron Highlife.
 CUSTOMERS
ARBL has prestigious OEM (Original Equipment manufacturer) clients like

FORD, General Motors, Daewoo Motors, Mercedes Benz, Daimler Chrysler,
MarutiUdyog Ltd., Premier Auto ltd., and recently acquired a preferential
supplier alliance with Ashok Leyland, Hindustan Motors, Telco, `Mahindra &
Mahindra and Swaraj Mazda
COMPETITORS
Exide, Prestolite and AMCO
SMALL BATTERY DIVISION:
With a current creation limit of 5 lakhs units of car batteries. While

beginning of the plant with focus of dispatching the batteries with 2 lakhs for
each month. Presently, this is biggest maker of batteries in Asia Reams with a
limit of 4.5 lakhs batteries for each month.
CAPACITY:
With an existing production capacity of 4.5 lakhs units of Motor cycles

batteries. While starting of the plant with target of dispatching the batteries with
1.5 lakhs per month. Now, this is largest manufacturer of batteries in Asia
Reams with a capacity of 4 lakhs batteries per month.
PRODUCTS:
The products of SBD are
 AM- After Market brands

i. Amaron (probike rider)
ii. Power zone
SVU CCM&CS Page 23

 Pl- Private Label brands

i. Lucas
ii. Bosh
 OEM- Original equipment manufacture

i. Honda
ii. Hero
iii. Bajaj
iv. Mandarin & Mantra
CUSTOMERS:
ARBL motor cycle batteries prestigious OEM clients like HERO , HONDA,
BAJAJ ,Mahindra
2.3 PRODUCT PROFILE
VRLA (Value-regulated lead-acid battery) batteries manufactured in the

industrial battery division and their applications are as follows:
POWER STACK
Applications: Power plants, process and service industry, Railways,

Telecommunication, Uninterrupted power supply (UPS) systems, electronic
private automatic branch exchange (EPABX), Defence (Onshore & Off share
wireless communication cellular radios), Motive power.
KOMBAT (UPS BATTERY)

Applications: UPS, EPBX, Engine starting, emergency lighting, SPV, portable
power, security systems
BRUTE:
Applications: Forklifts, pellet truck, stackers, 8platforms trucks.
SVU CCM&CS Page 24

PRODUCTION FACILITIES
During the year under review ARBL has priorities and directed its objectives
towards streamlining the production process by assimilating and synchronizing
capacities of different section of plant to optimize the capacity utilization. As a
part of this programme, ARBL has proposed to increase the capacity of
assembly and formation section. The reasons for the capacity are as follow:
EXPANSIONS IN ARE AS UNDER

 To meet the growing demand for the power stack batteries.
 To cope-up with the peak level operations during the second half of the
fiscal year’
 To improve the overall productivity & quality/
 To balance the “line capacity” of the plant with essential utilities & facilities.
 To achieve the above, ARBL had conducted an elaborate study on the
capacities of different sections and identified the section wide requirements.
 This had clearly spelt out the need for capacity expansion in power stack
assembly line formation section, on completion of the expansion programme
the capacity will increase from 1,00,000 to 1,60,000 batteries per annum.
FLOW CHART BATTERIES PROCESS FLOW
Converting pure Paste mixing by

Lead into Lead Adding sulphuric Acid
Oxide and water
SVU CCM&CS Page 25
Gird Casting
Pasting Gird with

Lead Oxide Paste
Winding the pasted

Grid with Separator
Group insertion jar
Sealing the jar
Formation
AMARA RAJA’S STRENGHTS
 Proven technology from GNB and being a pioneer.

 Strong and well organized customer base.
 Full organized infrastructure in place.
 Manufacturing facilities perceived as a benchmark in India.
 Complete range of VRLA batteries.
 Proven field performance in all user segments,
 Approved vendor status in major user segments.
ARBL’s FUTURE PLAN ACTION
 Commercialization of motor-cycle batteries.

 Development of new range high integrity VRLA cell design.
 Establishment of products for new application segment.
 Studies on paste additives to enhance the battery performance.
SVU CCM&CS Page 26

 Stream of new models.

 Maximize export of its batteries.
Amara Raja Group of companies
 Amara Raja Batteries Ltd

 Amara Raja Electronics Ltd
 Amara Raja Power Systems Ltd
 Amara Raja Infra(P) Ltd
 Amara RajaIndustrial Services (P) Ltd
 Mangal Industries Ltd
 Galla Foods
 SILVER LINING Storage Solution.
CHAPTER -3
REVIEW OF LITERATURE
SVU CCM&CS Page 27

REVIEW OF LITERATURE
Working capital of a firm may be different as the amount by which its current
assets exceed its current liabilities. Working capital management is concerned
with the problem that arises attempting to manage current assets, current
liabilities and the interrelationship that exists between them. The current assets
to those assets, which in the ordinary course of the business can be, or will be,
turned into cash with in 1 year without disrupting the operations of the firm.
The major current assets are cash marketable securities account receivable and
inventories. Current liabilities are those liabilities, which are intended at their
inception to be payee in the ordinary course of business with in the year, out of
current assets or earning of the concern. The basic current liabilities are account
payable, bills payable, bank overdraft and outstanding expenses.
The goal of working capital management is to manage the firm’s current assets
SVU CCM&CS Page 28

and current liabilities in such a way that the satisfactory level of the working
capital is maintained. The Interaction between the current assets and current
liabilities is the main theme of the theory of the working capital management.
The important elements of working capital includes inventory management,

cash management, credit and collection policy and short term borrowings where
as long term financial analysis is primarily concerned with strategic planning,
working capital management is primarily concerned with day to day operations
making shore, production lines out stop as firms run out of the raw material and
thus preventing the slowing down of the process. Obviously without good
working capital management no firm can be efficient and profitable.
The purpose of this chapter is to present a review of literature relating to the

working capital management. The following are the literature review by
different authors and different research scholars.
Pass C.L., Pike R.H (1984)
Studied that over the past 40 years major theoretical developments have
occurred in the areas of longer-term investment and financial decision making.
Many of these new concepts and the related techniques are now being employed
successfully in industrial practice. By contrast, far less attention has been paid
to the area of short-term finance, in particular that of working capital
management. Such neglect might be acceptable were working capital
considerations of relatively little importance to the firm, but effective working
capital management has a crucial role to play in enhancing the profitability and
growth of the firm. Indeed, experience shows that inadequate planning and
control of working capital is one of the more common causes of business
failure.
SVU CCM&CS Page 29

Maynard E. Refuse (1996)
Argued that attempts to improve working capital by delaying payment

tocreditors are counter-productive to individuals and to the economy as a whole.
Claim that altering debtor and creditor levels for individual tiers within a value
system will rarely produce any net benefit. Proposes that stock reduction
generates system-wide financial improvements and other important benefits.
Urges those organizations seeking concentrated working capital reduction
strategies to focus on stock management strategies based on “lean supply-chain”
techniques
Kouma Guy (2001)
In a study on, “Working capital management in healthcare”, Working capital

is the required to finance the day to day operations of an organization. Working
capital may be require to bridge the gap between buying of stocked items to
eventual payment for goods sold on account. Working capital also has to fund
the gap when products are on hand but being held in stock. Products in stock
are at full cost, effectively they are company cash resources which are out of
circulation therefore additional working capital is required to meet this gap
which can only be reclaimed when the stocks are sold (and only if these stocks
are not replaced) and payment for them is received. Working capital
requirements have to do with profitability and much more to do with cash flow.
Eljelly (2002)
Empirically examined the relationship between profitability and liquidity, as

measured by current ratio and cash gap (cash conversion cycle) on a sample of
929 joint stock companies in Saudi Arabia. Using correlation and regression
analysis, Eljelly [9]found significant negative relationship between the firm's
profitability and its liquidity level, as measured by current ratio. This
relationship is more pronounced for firms with high current ratios and long cash
conversion cycles. At the industry level, however,he found that the cash
SVU CCM&CS Page 30
conversion cycle or the cash gap is of more importance as a measure of liquidity

than current ratio thataffects profitability. The firm size variable was also found
to have significant effect on profitability at the industry level.
Falope and Ajilore (2003)
Used a sample of 50 Nigerian quoted non-financial firms for the period 1996 -
2005. Their study utilized panel data econometrics in a pooled regression,
where time-series and cross-sectional observations were combined and
estimated. They found a significant negative relationship between net operating
profitability and the average collection period, inventory turnover in days,
average payment period and cash conversion cycle for a sample of fifty
Nigerian firms listed on the Nigerian Stock Exchange. Furthermore, they found
no significant variations in the effects of working capital management between
large and small firms.
Raheman and Nasr (2004)
Studied the effect of different variables of working capital management

including average collection period, inventory turnover in days, average
payment period, cash conversion cycle, and current ratio on the net operating
profitability of Pakistani firms. They selected a sample of 94 Pakistani firms
listed on Karachi Stock Exchange for a period of six years from 1999 - 2004
and found a strong negative relationship between variables of working capital
management and profitability of the firm. They found that as the cash
conversion cycle increases, it leads to decreasing profitability of the firm and
managers can create positive value for the shareholders by reducing the cash
conversion cycle to a possible minimum level.
Mehmet SEN, Eda ORUC (2005)
SVU CCM&CS Page 31

In the study “Relationship between the efficiency of working capital

management and company size”, As it is known, one of the reasons which
cause change in working capital from one period to another is the change in
management efficiency. The change in management efficiency will affect the
change in working capital in a way as increaser or reducer from on period to
another. In this study, the effect of change in management efficiency in working
capital management in to the change in working capital is compared by
company size and sectors. The data of this study covers sixty periods as the total
of quarterly financial statement of 55 manufacturing companies which were in
operation in Istanbul Stock exchange (ISE) between the years 1993 and 2007. In
every period we studied, for inventories short term commercial receivables and
short term commercial liabilities, and calculated the effect of change in
management efficiency on to the effect of working capital change. In all sectors
considered, in the change in working capital, and observed the effect of
reducing of efficiency in inventory management. It is also observed that
efficiency change in the management of the short term commercial receivables
and the short term commercial liabilities by the company sizes and sectors make
a positive effect in to the change in working capital
Gass D (2006)
Studied "Cash is the lifeblood of business" is an often repeated maxim amongst

financial managers. Working capital management refers to the management of
current or short-term assets and short-term liabilities. Components of short-term
assets include inventories, loans and advances, debtors, investments and cash
and bank balances. Short-term liabilities include creditors, trade advances,
borrowings and provisions. The major emphasis is, however, on short-term
assets, since short-term liabilities arise in the context of short-term assets. It is
important that companies minimize risk by prudent working capital
management.
McClure B (2007)
SVU CCM&CS Page 32

“Working Capital Works” describes that Cash is the lifeline of a company. If

this lifeline deteriorates, so does the company's ability to fund operations,
reinvest and meet capital requirements and payments. Understanding a
company's cash flow health is essential to making investment decisions. A good
way to judge a company's cash flow prospects is to look at its working capital
management (WCM). Cash is king, especially at a time when fund raising is
harder than ever. Letting it slip away is an oversight that investors should not
forgive. Analyzing a company's working capital can provide excellent insight
into how well a company handles its cash, and whether it is likely to have any
on hand to fund growth and contribute to shareholder value.
Dubey R (2008)
Studied The working capital in a firm generally arises out of four basic factors
like sales volume, technological changes, seasonal , cyclical changes and
policies of the firm. The strength of the firm is dependent on the working capital
as discussed earlier but this working capital is itself dependent on the level of
sales volume of the firm. The firm requires current assets to support and
maintain operational or functional activities. By current assets we mean the
assets which can be converted readily into cash say within a year such as
receivables, inventories and liquid cash. If the level of sales is stable and
towards growth the level of cash, receivables and stock will also be on the high.
Thachappilly G (2009)
“Working Capital Management Manages Flow of Funds”,(2009) describes

that Working capital is the cash needed to carry on operations during the cash
conversion cycle, i.e. the days from paying for raw materials to collecting cash
from customers. Raw materials and operating supplies must be bought and
SVU CCM&CS Page 33

stored to ensure uninterrupted production. Wages, salaries, utility charges and

other incidentals must be paid for converting the materials into finished
products. Customers must be allowed a credit period that is standard in the
business. Only at the end of this cycle does cash flow in again
METHODS FOR ESTIMATING WORKING CAPITAL

Three widely used methods for determining working capital requirements of a
firm are:
1. PERCENTAGE OF SALES METHOD
In this method, level of working capital requirements is decided on the basis of
past experience. The past relationship between sales and working capital is
taken as a base for determining the size of working capital requirements for
future. It is, however, presumed that the relationship between sales and working
capital that has existed in the past has been stable. This may be explained with
the help of the following illustration.
Percentage of sales method is a simple and easily understood method and

practically used for ascertaining short-term changes in working capital in future.
However this method lacks reliability inasmuch as its basic assumption of linear
relationship between sales and working capital does not hold true in all the
cases. As such, this method cannot be recommended for universal application
2. REGRESSION ANALYSIS METHOD

This is a statistical method of determining working capital requirements by
establishing the average relationship between sales and working capital and its
various components in the past years. In this regard the method of least squares
is employed and the relationship between sales and working capital is expressed
by the equation:
Y= a+bx
SVU CCM&CS Page 34

The values of ‘a’ and ‘b’ is obtained by the solution of simultaneous linear
equations given as under
Where a=fixed component
b=variable component
x=sales
y=inventory
n=number of observation
3. OPERATING CYCLE
Working capital cycle indicates the length of time between companies paying
for materials, entering into stock and receiving the cash from sales of finished
goods. It can be determined by adding the number of days required for each
stage in the cycle.
For e.g., a company holds raw materials on an average for 60 days, it gets credit
from the supplier for 15 days, production process needs 15 days, finished goods
are held for 30 days and 30 days credit is extended to debtors. The total of all
these 120 days, i.e., 60-15+15+30+30 days is the total working capital cycle.
The determination of working capital cycle helps in the forecast, control and
management of working capital. It indicates the total time lag and the relative
significance of its constituting parts. The duration of working capital cycle may
vary depending on the nature of the business
FACTORS INFLUENCING WORKING CAPITAL NEEDS
SVU CCM&CS Page 35

1) Nature of Business: -
The amount of working capital is basically related to the nature and
volume of the business. In concerns, where the cost of raw materials to be
used in the manufacture of a product is very large in proportion to its total
cost of manufacture the requirements of working capital will be very
large. For instance, a cotton or sugar mill requires a large amount of
working capital. On the contrary, concerns having large investments in
fixed assets require less amount of working capital.
2) Size of Business Unit: -

Size of the business unit is also a determining factor in estimating the
total amount of working capital. The general principle in this regard is
that the bigger the size the larger will be the amount of working capital
required as because the larger business units are required to maintain big
inventories for the flow of the business.
3) Seasonal Variations: -
Strong seasonal movements create certain special problems of working
capital in controlling the internal financial swings. A great many
companies have to carry on seasonal business such as sugar mills, oil
mills or woolen mills etc. and therefore they require large amount of
working capital in the season to purchase the raw materials in large
quantities and utilize them throughout the year.
4) Time Consumed in Manufacture: -
The average time taken in the process of manufacture is also an important
factor in determining the amount of working capital. The longer the
period of manufacture the large the investor required.
5) Turnover of Circulating Capital: -

SVU CCM&CS Page 36
Turnover means the ratio of annual gross sales to average working assets.
In simple words, it means the speed with which circulating capital
completes its rounds or the number of times the amount invested in
working assets has been converted into cash by sales of the finished
goods and reinvested in working assets during a year.
6) Labour Intensive Vs Capital Intensive Industries: -
In labour intensive industries, large working capital is required because or
regular payment of heavy wage-bills and more time taken in completing
the manufacturing process. Conversely, the capital intensive industries
require lesser amount of working capital because of the heavy investment
in fixed and shorter period in manufacturing process.
7) Need to Stockpile Raw Material and Finished Goods: -
In industries where it is necessary to stockpile the raw materials and
finished goods increase the amount of working capital lied up in stocks
and stores in certain lines of business where the materials are bulky and
best purchasable in large quantities such as cements stockpiling of raw
material is very usual or where labour stoppage is frequent finished goods
stock have to be large in stored quantities.
8) Terms of Purchase and Sales: -
Terms of purchase and sales also affect the amount of working capital. If
a company purchases all goods in cash and sells its finished product on
credit also naturally it will require large amount of working capital. On
the contrary a concern having credit facilities and allowing no credit to its
customers will require lesser amount of working capital
9) Conversion of Current Assets Into Cash: -

The need of having cash in hand to meet the day to day requirements
payment of wages and salaries rent rates has an important bearing in
SVU CCM&CS Page 37

deciding the adequate amount of working capital. The greater the cash
requirement the higher will be the need of working capital but if a
company has ample stock of liquid current assets will require lesser
amount of working capital because the company can en cashes such
assets immediately in the open market.
10) Growth and Expansion of Business: -
Growing concerns require more working capital than those that are static.
It is logical to expect larger amount of working capital in a growing
concern to meet its growing needs of funds for its expansion
programmers though it varies with economic condition and corporate
practices.
Sources of Working Capital
Working Capital Sources
Short-term sources
Long – term sources
INTERNAL EXTERNAL
Sale of shares
Sale of Debentures Depreciation Trade credit

funds
Sale of idle fixed assets Credit papers
Long-term loans Provision of
Taxation
Customer’s credit Public Deposits
Loans from directors Accrued Expenses
Security of employee
Factoring
SVU CCM&CS Page 38
The working capital needs of a firm are determined & influenced by various
factors. A wide variety of considerations may affect the quantum of working
capital required & these considerations may vary from time to time. The
working capital needed at one point of time may not be good enough for some
other situation. The determination of working capital requirements is a
continuous process & must be undertaken on a regular basis in the light of the
changing situations.
CHAPTER-4
SVU CCM&CS Page 39
RESEARCH METHODOLOGY
4.1 NEED FOR THE STUDY

In the present competitive environment all organizations are trying to improve
their profitability. The efficient working capital management will help the
organization to improve profitability. The concept of working capital is very
important because the term is used for the capital needed for day to day
operations. Adam Smith “The goods of the merchant yield him no revenue or
profit, till he sell them for money & the money yields him as little till it is again
exchanged for goods
The working capital management is management for the short-term. This is the
critical importance to a firm. Working capital is necessary evil of the business &
if not controlled it spreads like white ants & eat away the profits. Quality of
various components of working capital must be constantly reviewed.
SVU CCM&CS Page 40

4.2 SCOPE OF THE STUDY
 To study on working capital position of the company

 In order to maintain flow of revenue for operations every firm need
certain amount of current assets, for example cash is required to pay for
expenses to meet obligations.
 So this study is undertaken to know to what extend the company is
successful in trade-off liquidity and profitability.
SVU CCM&CS Page 41

4.3 OBJECTIVES OF THE STUDY
 To study the changes in working capital position of the Amar raja power
systems batteries Ltd.
 To ensure the organization has sufficient working capital resources to
function and to grow.
 To know liquidity position of the company.
 To study the optimum level of investment in current assets.
 To know the working capital turnover of the company.
SVU CCM&CS Page 42

4.4 RESEARCH METHODOLORY
The objective of the study is to analyse the working capital position of the
company for the past five years from 2015-2020 from and to achieve those
objective the following methodology was adopted.
 Firstly to find out liquidity and solvency position of the company through
working capital ratios.
 Secondly, to estimate the working capital requirement of the company by
using Operating cycle.
 Finally Analysis of current assets and current liabilities.
DATA COLLECTION METHOD:

SECONDARY DATA:-
The major source of data for this project was collected through annual reports,
profit and loss account of 5 years period from 2015-20 some more information
collected from internet and text sources
SVU CCM&CS Page 43

4.5 LIMITATIONS OF THE STUDY
 Time has been one of the limiting factors because the period of the study
was only two months.
 The information provided in the company’s balance sheet is only the data
source available.
 The study is based on annual financial reports only.
 Period of the study was 5years.
 Working capital standards pertain to relevant is also a limiting factor for
comparative analysis.
 The study does not cover the all aspects of working capital.
 The study is based on only the past records.
SVU CCM&CS Page 44

CHAPTER-5
DATA ANAYSIS AND INTERPRETATION
SVU CCM&CS Page 45
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2015-16

(Rs. In CRORES)
Effect of working
capital
PARTICULARS 2015 2016
Increase Decrease
CURRENT ASSETS:
Inventories 418.1 601.6 183.5 ******
Trade Receivables 554.1 592.1 38.0 ******
Short term loans & Advance 66.0 52.7 13.3
Cash & Bank balance 222.1 150.2 ****** 71.9
Other current assets 8.9 11.2 2.3 ******
TOTAL CURRENT ASSETS 1269.2 1407.8

(A)
CURRENT LIABILITIES:
Trade payable
Other current liabilities 260.9 330.0 ****** 69.1
Short term provisions 150.9 247.0 ****** 96.1
SVU CCM&CS Page 46

119.5 52.2 67.3 ******

TOTAL CURRENT 531.3 629.2
LIABILITIES (B)
NET 738 778.6 291.1 250.4

WORKING CAPITAL (A-
B)
NET INCREASE IN
WORKING 40.6 ----- 40.6
CAPITAL
TOTAL 742.4 742.4 220.2 220.2
(Sources: company annual reports)
INTERPRETATION:-
 In this financial year the current assets increases to compared to the previous year
 Under current assets cash and bank balance decreased by 71.9 crores
 And the Net working capital was an increased to at 40.6 crores

(Rs. In CRORES)
Effect of working
capital
Increase Decrease
CURRENT ASSETS:
Inventories 601.64 816.95 215.31 ******
Trade Receivables 592.15 570.49 ****** 21.66
Other financial assets 9.70 7.51 ****** 2.19
Cash & Bank balance 150.25 170.92 20.67 ******
Other investments ----- 127.78 127.78 ******

(A)
Trade payable 349.29 418.44 ****** 69.15
SVU CCM&CS Page 47


Short term provisions 54.63 53.66 0.97 ******
Other financial liabilities 129.41 146.63 ****** 17.22
LIABILITIES (B)
NET 770.34 999 375.3 146.64
WORKING CAPITAL (A-
B)
NET INCREASE IN
WORKING 228.66 ----- 228.66
CAPITAL
TOTAL 999 999 375.3 375.3
INTERPRETATION:
 Under current assets cash and bank balance increased by 20.67crores
 And the Net working capital was an increased to at 228.66crores

(Rs. In CRORES)
Effect of working
capital
Increase Decrease
CURRENT ASSETS:
Inventories 816.95 1049.71 232.76 ******
Trade Receivables 570.49 782.45 211.96 ******
Other financial assets 7.51 9.15 1.64 ******
Other investments 127.78 15.33 ****** 112.45
TOTAL CURRENT ASSETS (A) 1758.62 2152.30
SVU CCM&CS Page 48

Trade payable 418.44 592.26 ****** 173.82
LIABILITIES (B)
NET 999 1159.32 565.77 405.45
WORKING CAPITAL (A-
B)
NET INCREASE IN
WORKING 160.32 ----- 160.32
CAPITAL
TOTAL 1159.32 1159.32 565.77 565.77
INTERPRETATION:
 Under current assets cash and bank balance decreased by 59.64crores
 And the Net working capital was an increased to at 160.32crores

(Rs. In CRORES)
Effect of working
capital
Increase Decrease
CURRENT ASSETS:
Inventories 1049.71 1061.42 11.71 ******
Trade Receivables 782.45 768.58 ****** 13.87
Other financial assets 9.15 8.59 ****** 0.56
Other investments 15.33 0.30 ****** 15.03
SVU CCM&CS Page 49


(A)
Trade payable 592.26 510.44 81.82 ******
Other current liabilities 176.32 159.62 16.7 ******
LIABILITIES (B)
NET 1159.32 1301.6 219.28 77
WORKING CAPITAL (A-
B)
NET INCREASE IN
WORKING 142.28 ----- 142.28
CAPITAL
TOTAL 1301.6 1301.6 219.28 219.28
INTERPRETATION:
 In this financial year the current assets increases to compared to the previous year.
 Current assets increased to at 2152.30crores.
 Under current assets cash and bank balance decreased by 39.53crores.
 And the Net working capital was an increased to at 142.28crores.

(Rs. In CRORES)
Effect of working
capital
Increase Decrease
CURRENT ASSETS:
Inventories 1061.42 1142.69 81.27 ******
Trade Receivables 768.58 ****** 132.30
636.28
Other financial assets 8.59 11.53 2.94 ******
SVU CCM&CS Page 50

84.51
Cash & Bank balance 71.75 12.76 ******
Other current assets 293.43 205.64 ****** 87.79
Other investments 0.30 142.25 141.95 ******

(A)
630.32
Trade payable 510.44 ****** 119.88
Short term provisions 61.89 ****** 37.52
99.41

LIABILITIES (B)
NET 1301.6 1120.94 238.92 419.58
WORKING CAPITAL (A-
B)
NET DECREASE IN 180.66 180.66
WORKING
CAPITAL
TOTAL 1301.6 1301.6 419.58 419.58
 INTERPRETATION: In this financial year the current assets decreased when
compared to the previous year.
 Under current assets cash and bank balance increased by 12.76Crores.
 And the Net working capital was decreased to at 180.66crore.
A. LIQUIDITY RATIOS:
1. CURRENT RATIO: The current ratio establishes the relationship between
current assets and current liabilities. The objective of computing this ratio is to
measure the ability of the firm to meet its short term financial strength / solvency of a
firm..
Current Assets
SVU CCM&CS Page 51
Current liabilities
Current Ratio = --------------------------------- (Rs in crores)
Table 4.1:-
Year Current assets Current liabilities Current ratio
2015-2016 1408.14 637.80 2.20
2016-2017 1758.62 759.62 2.31
2017-2018 2152.30 992.98 2.16
2018-2019 2204.07 902.47 2.44
2019-2020 2222.90 1101.96 2.01
GRAPH 4.1:
CURRENT RATIO
3
2.5
2
CURRENT RATIO
1.5
0.5
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION: -
From the above table the standard norm for current ratio is (2:1). It is evident that in the
every year . Current Ratio is satisfactory in every year from 2015-16 To 2019-20 .Therefore
this ratio can be calculated that the liquidity performance of the company. Current ratio is
high during the year 2018-19.
2. QUICK RATIO
Quick Ratio also known as acid test ratio or liquid ratio is more rigorous test of liquidity
than the current ratio Current Assets - Inventory
Quick Ratio = ---------------------------------

Current Liabilities
Table 4.2 (Rsincrores)
SVU CCM&CS Page 52

Year Current assets Inventory Current Quick ratio

liabilities
2015-2016 1408.14 601.64 637.80 1.26
2016-2017 1758.62 816.65 759.62 1.24
2017-2018 2152.30 1049.71 992.98 1.10
2018-2019 2204.07 1061.42 902.47 1.26
2019-2020 2222.90 1142.69 1101.96 0.98
GRAPH 4.2:
QUICK RATIO
1.4
1.2
0.8 QUICK RATIO
0.6
0.4
0.2
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTER PRETATION:
From the above table no 4.2. Generally a quick ratio is 1:1 it considered to represent a
satisfactory current financial condition. The quick ratio has exceeded the standard ratio in
every year except in year 2020 .So the company is sufficiently able to meet their short –term
liabilities. Quick ratio is high during the year 2018-19.
3. CASH RATIO:
Cash + Marketable Securities
Cash Ratio = ---------------------------------------------
Current Liabilities
TABLE 4.3: CASH RATIO (Rs. Incrores)

Cash marketable Current Cash
Year
securities Liabilities Ratio
SVU CCM&CS Page 53

2015-2016 150.25 637.80 0.23
2016-2017 170.92 759.62 0.22
2017-2018 111.28 992.98 0.11
2018-2019 71.75 902.47 0.079
2019-2020 84.51 1101.96 0.076
GRAPH 4.3:
CASH RATIO
0.25
0.2
0.15
CASH RATIO
0.1
0.05
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION
In all the above years the Cash Ratio is very low. The standard norm for Cash ratio is
1:2. The company is failed in keeping sufficient cash, bank balances and marketable securities.
The cash ratio is not satisfactory in all the above years.
4. NET WORKING CAPITAL RATIO:
The difference between current assets and current liabilities excluding short term bank
borrowing is called net working capital it is sometimes used as a measure of a firm’s
liquidity. It means that company has enough current assets to meet it’s current liabilities are
to be settled. A high net working capital is good sign for the company.
Net Working Capital
Net working capital = --------------------------------
Net Assets
SVU CCM&CS Page 54

Table 4.4:-
(Rs in crores)
Year Net working capital Net assets Net working capital

ratio
2015-2016 770.34 2950.76 0.26
2016-2017 999 3584.57 0.27
2017-2018 1159.32 4168.55 0.27
2018-2019 1301.6 4495.94 0.28
2019-2020 1120.94 5000.59 0.22
GRAPH 4.4:
NETWORKING CAPITAL RATIO

0.3
0.25
0.2
NETWORKING CAPITAL RATIO
0.15
0.1
0.05
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION: In the above graph the net working capital ratio has changed from
year to year. In the year of 2015-16 it was at 0.26 and in 2020 it was 0.22. The net working
capital is decreasing every year which shows the ideal funds are used for most productive
purpose and company continues doing it.
5. Net working capital turnover ratio: The net working capital turnover ratio tells that
how many numbers of times working capital funds are utilized in generation of sales. A
higher working capital turnover ratio indicates the efficient turn of the company.
Net sales
Net working capital turnover ratio = -------------------
Net working
Table 4.5:- capital (Rsincrores)
SVU CCM&CS Page 55

Year Net sales Net working capital Net working capital

turnover ratio
2015-2016 5184.34 770.0 6.7
2016-2017 5981.39 999 5.98
2017-2018 6232.98 1159.32 5.37
2018-2019 6793.11 1301.6 5.21
2019-2020 6839.46 1120.94 6.10
GRAPH4.5
NET WORKING CAPITALTURNOVER RATIO

8
5
NET WORKING CAPI-
TALTURNOVER RATIO
4
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION: In the above graph the net working capital turnover ratio is
increasing year by year. In 2015-16 the turnover ratio is increased to 6.7times. The year
2016-17 to 2018-19 was gradually goes to decreases to 5.21times.This ratio measures how
well a company is utilizing it’s working capital to support a given level of sales. High
turnover ratio indicates that management is being efficient in running.
B. SOLVENCY RATIO OR LEVERAGE RATIO:
1. DEBT RATIO: Debt ratio may be used to analyze the long-term solvency of firm. The
firm may be interested in knowing the proportion of the interest bearing debt (also called
funded debt) in the capital structure.
Total Debts
Debt Ratio = ---------------------------------
SVU CCM&CS Equity Page 56

Table 4.6:- (Rs in crores)
Year Total debts Equity Debt ratio

2015-2016 72.47 2115.87 0.034
2016-2017 69.01 2593.07 0.026
2017-2018 58.43 2937.39 0.019
2018-2019 46.30 3335.32 0.014
2019-2020 34.34 3655.61 0.009
GRAPH 4.6:
DEBT EQUITY RATIO

0.04
0.035
0.03
0.025
DEBT EQUITY RATIO
0.02
0.015
0.01
0.005
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION: The total debt to equity is 0.034 in 2015-16and 0.026 in 2015-16

and 0.009 in the year 2019-20. the company is not giving for debt capital. The low debt –
equity ratio is generally good sign for company. All the above years company maintain low
debt –equity ratio.
2. INTEREST COVERAGE RATIO: This ratio measure the ability of a company to pay
the interest on it’s outstanding debt . A high ratio indicates that a company can pay for it’s
interest expense several times over , while a low ratio is a strong indicator that a company
may default on its loan payments.
EBIT
Interest coverage ratio = ---------------------------
Interest expense
SVU CCM&CS Page 57

Table 4.7:-
Year EBIT Interest Interest coverage

ratio
2015-2016 722.69 0.49 1474.87
2016-2017 707.98 5.77 122.70
2017-2018 719.26 5.06 142.14
2018-2019 737.32 6.95 106.0
2019-2020 840.68 12.19 68.96
GRAPH 4.7:
INTEREST COVERAGE RATIO

1600
1400
1200
1000
INTEREST COVERAGE RATIO
800
600
400
200
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
The inter coverage ratio is very high in 2015-16,after 2015-16 on wards the interest
coverage ratio start decreasing to 68.96 in 2019-20. The high interest coverage ratio is
better indicators for interest payments within due date.
C. ACTIVITY RATIOS :
1.FIXED ASSETS TURNOVER RATIO
The effective utilization of fixed assets will result in increased production and reduced
cost. It also ensures whether investment. In the assets have been judicious (or) not:
Sales
Fixed Assets Turnover Ratio = --------------------------
Fixed assets
SVU CCM&CS Page 58

Table 4.8:-
( Rs in crores)
Year Sales Fixed assets Fixed assets turnover

ratio
2015-2016 5184.34 1401.93 3.6
2016-2017 5981.39 1634.78 3.6
2017-2018 6232.98 1785.91 3.4
2018-2019 6793.11 2030.67 3.3
2019-2020 6839.46 2777.69 2.46
GRAPH 4.8:
FIXED ASSEST TURNOVER RATIO

4
3.5
2.5
FIXED ASSEST TURNOVER RATIO
2
1.5
0.5
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION: The fixed assets ratio high in during 2015-17 is 3.6 times. After
start decreasing year to year. High fixed assets turnover ratio is better for company
2 .NET ASSETS TURNOVER RATIO
Sales
Net Assets Turnover Ratio = --------------------------
Net Assets
SVU CCM&CS Page 59

Table 4.9:- (Rs in crores)
Year Sales Net assets Net assets turnover

ratio
2015-2016 5184.34 2950.76 1.75
2016-2017 5981.39 3584.57 1.68
2017-2018 6232.98 4168.55 1.49
2018-2019 6793.11 4495.94 1.51
2019-2020 6839.46 5000.59 1.36
GRAPH 4.9:
NETASSET TURNOVER RATIO

2
1.8
1.6
1.4
1.2
NETASSET TURNOVER RATIO
1
0.8
0.6
0.4
0.2
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
The asset turnover is high during the year 2015-16. Afterward start decreasing from
1.76times To 1.36times. The high turnover ratio indicates the more efficient a company and
low asset turnover ratio indicates the company failing to efficiently employ it’s assets to
generate sales.
3. CURRENT ASSETS TURNOVER RATIO: This indicates current assets are

turned over in the form of sales more number of times.
Sales
Current assets Turnover Ratio = ------------------------
Current assets (Rs in crores)
SVU CCM&CS Page 60

Table 4.10:-
Year Sales Current assets Current assets

turnover ratio
2015-2016 5184.34 1408.14 3.6
2016-2017 5981.39 1758.2 3.4
2017-2018 6232.98 2152.30 2.8
2018-2019 6793.11 2204.07 3.0
2019-2020 6839.46 2222.90 3.07
GRAPH 4.10:
CURRENT ASSET TURNOVER RATIO

4
3.5
2.5
CURRENT ASSET TURNOVER RATIO
2
1.5
0.5
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
The current asset turnover ratio is high during 2015-16. So the company maintaining
current assets in order to generate the more sales. High current asset turnover indicates
the capability of the organization to achieve maximum sales with minimum
investment in current assets.
4.ACCOUNT RECEIVABLE TURNOVER RATIO: This ratio described as a ratio of

average account receivable for period divided by the net credit sales for that same period .this
ratio gives the business a solid idea of how efficiently it collect on debts owned toward credit
it extended , with a lower number showing higher efficiency.
Net credit Sales
Account Receivable turnover ratio = ------------------------------
Average Debtors
SVU CCM&CS Page 61

TABLE NO 4.11: ACCOUNT RECEIVABLE TURNOVER RATIO (Rs in crores)
Year Credit Sales Average Account

debtors receivable
turnover
Ratios
2015-16 5184.34 573.12 9.0
2016-17 5981.39 581.32 10.2
2017-18 6232.98 676.47 9.2
2018-19 6793.11 775.51 8.7
2019-2020 6839.4 636.28 10.70

GRAPH 4.11:
ACCOUNT RECEIVABLE TURNOVER RATIO

12
10
8
ACCOUNT RECEIVABLE TURNOVER
RATIO
6
0
2015-16 2016-17 2017-18 2018-19 2019-2020
INTERPRETATION:
The debtors turnover ratio is good in all these years .The debtors turnover is high during
2019-20 is 10.70 times. The higher turnover ratio indicates company efficiently to collect it’s
receivables and good quality of debtors.
5. AVERAGE COLLECTION PERIOD: The average collection period is the

amount of time it takes for a business to receive payments owned by it’s clients in
terms of account receivable . Companies calculate the average collection period to
make sure they have enough cash on hand to meet their financial obligations .
365
Average collection period = --------------------------------------------------
Account receivable turnover ratio
SVU CCM&CS Page 62

TABLE NO 4.12: ACCOUNT RECEIVABLE TURNOVER RATIO (Rs in crores)
Year No. days in a Average Average

year receivable collection
turnover ratio period
2015-16 365 9.0times 40.0 Days
2016-17 365 10.28times 35.5 Days
2017-18 365 9.2times 39.6 Days
2018-19 365 8.75times 41.7Days
2019-2020 365 10.70times 34.11Days

GRAPH 4.12:
AVERAGE COLLECTION PERIOD

45
40
35
30
25 AVERAGE COLLECTION PERIOD
20
15
10
0
2015-16 2016-17 2017-18 2018-19 2019-2020
INTERPRETATION:
Generally a lower average collection period is more favourable than a higher average
collection period . a low average collection period indicates the organization collect payments
faster . There is downside to this , though , as it may indicates it’s credit term are too strict.
So the company maintain good collection period.
6.INVENTORY TURNOVER RATIO
Inventory turnover ratio indicates the efficiency of the firm in producing and selling
its product. It is calculated by dividing the cost of goods sold by the average inventory or
sales by inventories.
Cost of goods sold
SVU CCM&CS Page 63

Inventory turnover ratio = ----------------------------

Average Inventory
TABLE NO 4.12: INVENTORY TURNOVER RATIO (Rs in crores)
Year Cost of goods Average Inventory

sold Inventory turnover Ratios
2015-16 4103.67 491.26 8.71
2016-17 4658.41 636.39 7.32
2017-18 5406.26 910.14 5.94
2018-19 6102.56 953.52 6.40
2019-2020 6053.83 1010.65 5.99

GRAPH 4.12:
INVENTORY TURNOVER RATIO

10
9
8
7
6
INVENTORY TURNOVER RATIO
5
4
3
2
1
0
2015-16 2016-17 2017-18 2018-19 2019-2020
INTERPRETATION:
The inventory turnover is very high during 2015-16 is 8.71 times and start decreasing to 5.99
in 2019-20.But still company is maintaining good inventory turnover. Higher Inventory
turnover ratio is better because inventories are liquid form of asset.
D.PROFITABILITY RATIOS:
1. GROSS PROFIT RATIO:
Gross Profit
Gross Profit Ratio = ------------------------------*100
Sales
SVU CCM&CS Page 64

TABLE 4.13: GROSS PROFIT RATIO (Rs in crores)

Year Gross Profit Sales Gross Profit Ratio
2015-2016 671.29 5184.34 14.43%
2016-2017 740.49 5981.39 12.38%
2017-2018 748.10 6232.98 10.77% GR
AP H
2018-2019 574.84 6793.11 10.16%
2019-2020 798 6839.46 11.66%
4.13:
GROSSPROFIT RATIO
16.00%
14.00%
12.00%
10.00%
GROSSPROFIT RATIO
8.00%
6.00%
4.00%
2.00%
0.00%
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
This ratio indicates the relationship of gross profits on sales. During the period 2015-
20, the gross profits are 14.43%,12.38%,10.77%,10.16 % and 11.66%.In the year 2019-20 the
gross profit ratio is Increased to 11.66%.
2.NET PROFIT RATIO:
Profit After Tax

Net Profit Ratio = ------------------------------------*100
Sales
SVU CCM&CS Page 65

TABLE 4.14: NET PROFIT RATIO (Rs. In crores)
Year Net Profit Sales Net Profit Ratio

2015-2016 491.63 5184.34 9.48%
2016-2017 478.49 5981.39 7.99%
2017-2018 471.32 6232.98 7.56%
2018-2019 483.49 6793.11 7.17%
2019-2020 652 6839.46 9.66%
GRAPH 4.14:
NETPROFIT MARGIN
12.00%
10.00%
8.00%
NETPROFIT MARGIN
6.00%
4.00%
2.00%
0.00%
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
During the period 2014-20, the Net profits are 9.48%, 7.99%, 7.56% , 7.17% and 9.66%,In
the year 2019-20 ARBL have large amount of profits, it is increased to 9.66% in the year
2019-20.
3.RETURN ON CAPITAL EMPLOYED : It is financial ratio that measure a company ‘s
profitability and the efficiency with which it’s capital is used . In other words , the ratio
measure how well a company is generating profits from it’s capital .
EBIT
Return on Capital employed = --------------------------------------------- *100
Total assets – Total current liabilities
SVU CCM&CS Page 66

TABLE 4.15: RETURN ON CAPITAL EMPLOYED (Rs. In crores)

Return on
Total assets –Total
Year EBIT Capital
current liabilities
employed
2015-2016
722.69 2312.9 31.24
2016-2017 707.98 2824.9 25.06
2017-2018
719.26 3175.57 22.64
2018-2019 737.32 3592.57 20.52
2019-2020
841 3898.63 21.57
GRAPH 4.15:
RETURN ON CAPITAL EMPLOYED

35
30
25
20 RETURN ON CAPITAL EMPLOYED
15
10
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
During the period 2015-20, Return on capital employed are 31.24, 25.06, 22.64 , 20.52 and
21.57%.Return on Investment is high in the year 2015-16, i.e. 31.24. But it is decreased to
21.57 in the year 2019-20.
4.RETURN ON TOTAL ASSETS: This ratio measure a company ‘s earning before interest
and taxes(EBIT) relative to it’s total net assets . The ratio is considered to be an indicator ofn
how effectively a company is using it’s assets to generate earning.
Net Income
Return on Total Assets = --------------------------------------------- *100
Total Net assets
TABLE 4.16: RETURN ON TOTAL ASSETS (Rs. In crores)
Year Net Income Total Assets Return on
SVU CCM&CS Page 67

Total assets
2015-2016
491.63 2950.76 16.66
2016-2017 478.49 3584.57 13.34
2017-2018
471.32 4168.55 11.30
2018-2019 483.49 4495.94 10.75
2019-2020
661 5000.59 13.21
GRAPH 4.16
RETURN ON ASSETS
18
16
14
12
10 RETURN ON ASSETS
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
During the period 2015-20, Return on Total assets are 16.6, 13.34, 11.3, 10.75 and 13.21%
Return on Investment is high in the year 2015-16, i.e. 16.66%. But it is decreased to 13.21%
in the year 2019-20.
5.RETURN ON EQUITY: This is profitability ratio that measure the ability of the firm to
generate profits from it’s shareholders investment in the company. In other words ,the return
on equity ratio shows how much profits each dollar of common stockholder’s equity
generates.
PAT
Return on equity = --------------------------------------------- *100
Shareholder’s funds
TABLE 4.17: RETURN ON INVESTMENT (Rs. In crores)
SVU CCM&CS Page 68

Return on
Year PAT Shareholder’s Funds
Equity
2015-2016 489.45 2115.87 23.13
2016-2017 478.49 2593.07 18.43
2017-2018 471.32 2937.39 16.04
2018-2019 483.49 3335.32 14.49
2019-2020 660.82 3655.61 18.07
GRAPH 4.17:
RETURN ON EQUITY
25
20
15
RETURN ON EQUITY
10
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
During the period 2015-20, Return on Equity are 23.13, 18.43, 16.0, 14.49 and
18.07%.Return on Investment is high in the year 2015-16, i.e. 23.13%. But it is decreased to
18.07%in the year 2019-20.
6. EARNING PER SHARE:
Profit After Tax

Earning Per Share = --------------------------------------
Number of Equity Shares
TABLE 4.18: EARNING PER SHARE (Rs .in crores)

Number of
Year Profit After Tax Earning Per Share
Shares
2015-2016 489.45 17.08 28.65
SVU CCM&CS Page 69

2016-2017 478.49 17.08 28.0

2017-2018 471.32 17.08 27.59
2018-2019 483.49 17.08 28.30
2019-2020 660.82 17.08 38.69
GRAPH 4.18
EARNING PER SHARE

45
40
35
30
25 EARNING PER SHARE
20
15
10
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
Earning per Share reveals how much income available to the equity share holders. Earning Per
Share is Rs.28.65 in the year 2015-16, and further it is decrease to Rs.27.59in the year 2017-18,
and again it is increased to 38.69 in the year 2019-20.It gives a view of the comparative earnings
of a firm.
7.DIVIDEND PER SHARE:
Dividend
Dividend Per Share = ----------------------------------
Number of Shares
TABLE 4.19 DIVIDEND PER SHARE (Rs. Crores)
SVU CCM&CS Page 70

Dividend Per
Year Dividend Number of Shares
Share
2015-2016
72.60 17.08 4.25
2016-2017
72.60 17.08 4.25
2017-2018
70.88 17.08 4.15
2018-2019
120.92 17.08 7.08
2019-2020
187.88 17.08 11.00
CHART 4.19: DIVIDEND PER SHARE
DIVIDEND PER SHARE

12
10
8
DIVIDEND PER SHARE
6
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
During the period 2015-2020, Dividend per Share is 4.25,4.25,4.15,7.08 and 11.00 . In the
year 2019-20 dividend per share is high when compared to remaining years.
8. DIVIDEND PAYOUT RATIO:
Dividend Per Share

Dividend Pay out Ratio = ---------------------------------- *100
Earnings Per Share
TABLE 4.20: DIVIDEND PAYOUT RATIO (Rs. In crores)

Dividend
Year Dividend Per Share Earnings Per Share
Payout Ratio
SVU CCM&CS Page 71

2015-2016
4.25 28.65 14.83%
2016-2017
4.25 28.0 15.17%
2017-2018
4.15 27.59 15.04%
2018-2019
7.08 28.30 25.01%
2019-2020
11.00 38.69 28.43%
CHART 4.20: DIVIDEND PAYOUT RATIO
DIVIDEND PAYOUT RATIO

30.00%
25.00%
20.00%
DIVIDEND PAYOUT RATIO
15.00%
10.00%
5.00%
0.00%
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
INTERPRETATION:
During the period 2015-20, Dividend payout ratio is 14.83%,15.17%,15.04%,25.01%

and28.43%.Dividend payout ratio is very high in year 2019-20 .
SVU CCM&CS Page 72

CHAPTER-6
SUMMMARY
6.1 FINDINGS
 The current ratio of company is above the standard norm of 2:1

consistently throughout the period 2015-2020 as follows: 2.20, 2.31,
2.16, 2.44 and 2.01. Average current ratio during the period 2.22.
SVU CCM&CS Page 73

 The quick ratio of the company is above the standard norm of 1:1
consistently throughout the period 2015-2020 as follows: 1.26, 1.24,
1.10, 1.2, 0.98 and it is maintained good.
 It has been identified that cash ratio is below the standard norm of
0.5:1 consistently throughout the period 2015-2020 as follows : 0.23,
0.22, 0.11, 0.079,0.076 ,So company is not maintaining cash .
 The working capital turnover ratio of company is good throughout the
period 2015-2020.So business uses it’s working capital efficiently to
produce sales.
 The company debt ratio is not satisfactory during period 2015-2020.
 Current assets turnover ratio is decreasing year by year from3.6times
in 2015-16 To 3.0 times in 2019-20. Company maintain it’s current
assets consistently.
 The gross profit margin ratio of company is good during period 2015-
2020.
 The inventory turnover ratio is down failing .The inventory turnover
ratio during the period 2015-2020 is 8.71, 7.32, 5.94, 6.40,5.99 and
average inventory turnover is 6.8 times.
 The debtors turnover ratio was fluctuation during period 2015-2020 as
it follows: 9.0, 10.2, 9.2, 8.7, 10.70 and collection period was also
increasing .So it is not good for the organization.
 Net profit ratio of the company is decreasing gradually during period
2015-19,after increased in 2020. As it follows : 9.48%, 7.99%,
7.56%,7.17%,9.66%
 The earning per share of the company is increasing gradually during
period 2015-2020 as follows :Rs.28.65 in 2015-16 To Rs.38.69 in
2019-20.
SVU CCM&CS Page 74

 The dividend per share and dividend payout ratio are increasing
during period 2015-20.
 Return on capital employed ,return on equity and return on total assets
are gradually decreasing during period 2015-2020.
6.2 SUGGESTIONS
As per the above analysis, interpretation and findings following suggestions are
made. So, these suggestions are may not be effective but these may help for a
narrow scope of improvements regarding working capital of AMARAJA power
systems LIMITED.
 The cash is in idle position so maintain it in the required norms

SVU CCM&CS Page 75
 The company has to implement strict credit policy & procedures to

collect the dues from debtors in time.
 The company has to achieve its set targets by striving for its
fulfilments.
 The company has to utilize its fixed assets properly to generate sales.
 The company can make use of its financial strength to borrow and
improve returns for the share holder
 Current assets and current liabilities should be efficiently utilized in
order to increase the Working Capital Ratio.
 The company may follow the increase level of working Capital in
Future Ratio.
 To improve current assets and decrease current liabilities, stock
debtors should be properly utilized.
 Efforts should be made to improve sales level so as to increase funds
from operations.
 Steps should be initiated in order to cut down the expense of the
company which are found to affect profitability of the company.
6.3 CONCLUSION
 The working capital position of the company (Amara raja power systems
Ltd) is satisfactory. It should focus on sales and marketing. The company
is maintaining normal levels of current assets and current liabilities. So
the working capital can be heavy in feature also, which is not required.
SVU CCM&CS Page 76
 The company can utilize the reserves and surplus by either capitalizing or
invest the money somewhere as investment to get benefit. They should
concentrate on debtors collection within a specified time, so that they can
discharge some of its creditors or current liabilities and avoid payment of
interest.
The long term borrowings have increase within increase in long term provisions
the Provision amount may be kept at statutory minimum and funds can be
diverted to working capital management
ANNEXURE
PROFIT AND LOSS ACCOUNT OF AMARA RAJA PRIVATE LIMITED (2015-
2019) (Rs. In crores)
PARTICULARS 2015-16 2016-17 2017-18 2018-19 2019-20
INCOME
Sales 5242 5981 6233 6793 6839.46
Less: Excise Duty (551) (664) (174) (0) (0)
SVU CCM&CS Page 77

4691 5317 6059 6793 6839.46

Other Income 46 49 66 47 55.05
TOTAL 4737 5366 6125 6840 6894.51
EXPENDITURE
Cost of materials 2742 3452 3921 4603 4219.07
consumed
Purchase of stock in 325 207 221 170 175.89
trade
Changes in inventories of
finished goods, works in (103) (171) (27) (129) 52.17
progress and stock in
trade
Employee benefits 243 278 309 345 385.18
expense
Finance cost 0.48 5.77 5.0 6.95 12.19
Depreciation and 140 191 230 261 300.74
amortisation expense
Other expenses 666 701 751 852 908.59
TOTAL 4013 4663 5410 6109 6053.83
Profit / (Loss 724 707 715 731 840.68
before tax
Tax expenses 233 224 243 247 180

Profit / (Loss) after tax 491 483 472 484 651
Earnings per share 28.65 28.78 27.60 28.31 38.69
BALANCE SHEET AS ON MARCH 31, 2016 (Rs in crores)

Particulars Note As at 31.03.2016 As at 31.03.2015
No. Amount Amount Amount Amount
EQUITY AND LIABILITIES
Share Capital 2 `17.08 17.08
Reserves and Surplus 3 2098.79 1682
2115.87 1699.5
Non-current Liabilities
SVU CCM&CS Page 78

Long-term borrowings 4 72.47 74.1

Deferred tax liabilities (net) 5 53.75 36.8
Long – term provisions 6 38.29 44.3
Other current liabilities 32.58 -
197.09 155.2
Current Liabilities
Short –term borrowings 7 129.41 -
Trade payables 8 349.29 152
Other current liabilities 9 104.47 261.5
Short-term provisions 6 54.63 637.80 119.5
533
Total 2950.76 2388.0
ASSETS
Non-current Assets
Fixed Assets 10
Tangible Assets 1347.95 939.8
Intangible Assets 4.23 4.36
Capital work-in-progress 122.68 86.1
Non-current investments 11 20.00 16.0
Long-term loans and 12 9.52 65.4

advances
Other non-current assets 13 38.24 0.07
1542.62 1112.1
Current Assets
Inventories 14 601.64 418.1
Trade receivables 15 592.15 554.1
Cash and bank balances 16 150.23 222.1
Short-term loans and advances 12 9.70 74.0
Other current assets 13 54.40 7.3
1408.14 1275.8
Total 2950.76 2388.0

Share Capital 2 `17.08 `17.08
Reserves and Surplus 3 2575.99 2098.79
2593.07 2115.87
SVU CCM&CS Page 79


231.88 197.09
Current Liabilities
Short –term borrowings 8 146.63 129.41
Trade payables 9 418.44 349.29
Short-term provisions 11 53.66 54.63 637.80
759.62
Total 3584.57 2950.76
ASSETS
Non-current Assets
Fixed Assets 12

advances
1825.95 1542.62
Current Assets
Inventories 16 816.95 601.64
1758.62 1408.14
Total 3584.57 2950.76

2937.39 2593.07
SVU CCM&CS Page 80


238.18 231.88
Current Liabilities
Short-term provisions 11 55.96 53.66
992.98 759.62
Total 4168.55 3584.57
ASSETS
Non-current Assets
Fixed Assets 12

advances
2016.25 1825.95
Current Assets
Inventories 16 1049.71 816.95
2152.30 1758.62
Total 4168.55 3584.57

3335.32 2937.39
SVU CCM&CS Page 81


258.15 238.18
Current Liabilities
902.47 992.98
Total 4495.94 4168.55
ASSETS
Non-current Assets
Fixed Assets 12

advances
2291.87 2016.25
Current Assets
Inventories 16 1061.42 1049.71
2204.07 2152.30
Total 4495.94 4168.55

EQUITYANDLIABILITIES
Share Capital 2 17.08 `17.08
3655.61 3335.32
SVU CCM&CS Page 82


243.02 258.15
Current Liabilities
1101.96 902.47
Total 5000.59 4495.94
ASSETS
Non-current Assets
Fixed Assets 12 1647.61
Tangible Assets 1809.05

advances
2777.69 2291.87
Current Assets
Inventories 16 1142.69 1061.42
2222.90 2204.07
Total 5000.59 4495.94
BIBLIOGRAPHY
BOOKS
FINANCE MANAGEMENT I.M. PANDEY
Vikas Publishing House
SVU CCM&CS Page 83

New Delhi.
FINANCE MANAGEMENT M.Y KHAN & P.K. JAIN vikas

Publishing House New Delhi.
FINANCE MANAGEMENT
THEORY & PRACTICES PRASANNA CHANDRA Tata McGraw

Hill Publishing Company Ltd. New
Delhi.
WEB-SITE
 www.amararaja.com
 www.amararajabatteries.com
 www.amararajapowersystems.com
SVU CCM&CS Page 84

Project 01

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Project 01

Uploaded by

Copyright:

Available Formats

CHAPTER -1

INTRODUCTION OF THE FINANCIAL MANAGEMENT:

EVALUATION OF FINANCIAL MANAGEMENT:

SVU CCM&CS Page 1

SVU CCM&CS Page 2

INTRODUCTION TO WORKING CAPITAL MANAGEMENT:

Meaning of working capital:

SVU CCM&CS Page 4

SVU CCM&CS Page 5

Classifications of working capital:

On the basis of concept On the basis of time

Gross working capital Net working capital Permanent or Temporary or

Concepts of working capital

Types of working capital:

SVU CCM&CS Page 6

1. Permanent working capital:

Permanent working capital can be further divided into:

1. Regular Working Capital:

Importance of working capital:

SVU CCM&CS Page 7

 Sufficient working capital enables a business concern to make prompt

Disadvantages of working capital:

SVU CCM&CS Page 8

Working capital cycle (or) operating cycle:

SVU CCM&CS Page 9

Nature of working capital:

SVU CCM&CS Page 10

 To provide credit facilities of raw materials, work-in-progress, stores, shares

SVU CCM&CS Page 11

2.1 INDUSTRY PROFILE

A battery is an electrochemical device in which about the free energy of

Introduction to battery manufacturing process: -

The manufacturing process involved in production of maintenance free value

SVU CCM&CS Page 12

control the parameters within narrow tolerance to produce consistently good

SVU CCM&CS Page 13

SVU CCM&CS Page 14

Dispatch: After completing the battery manufacturing, packed and label to

SVU CCM&CS Page 15

2.2 COMPANY PROFILE

Amara Raja Batteries Private Limited (ARBL) was incorporated under

SVU CCM&CS Page 16

ARBL is the largest supplier of stand-by power systems, catering to Indian

ARBL has prestigious Automotive OE clients including Ford, GM, Daimler

A Greenfield project is planned at the same site with an additional investment of

ARBL has also designed custom-built power electronics products like

 Introduce latest generation technologies.

SVU CCM&CS Page 17

 Develop and manufacture globally competitive, customer-focused

The company has a non-executive chairman and there number of independent

None of the members of the board is holding membership in more than 10

S.no. Name of the Director Category

1 Dr. Ramachandra N Galla Chairman

3 Mr.T R Narayanaswamy Ind. Non –Executive Director

4 Mr. N sri Vishnu Raju Ind. Non –Executive Director

5 Mr. Nagarjun valluri palli Ind. Non –Executive Director

6 Mrs. Ramadevi Gourineni Non –Executive Director

SVU CCM&CS Page 18

7 Mr. jayadev Vice Chairman& Managing

AWARDS FOR AMARA RAJA BATTERIES LTD

 “The Spirit of Excellence” – awarded by Academy of Fine Arts,

HISTORY OF THE ORGANISATION

 DEC 1985 -Foundation stone laid for Amara raja.

 MAY 1992 -Designed and implemented the most advanced battery