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The Researcher has selected following analysis methodology: a) Liquidity as by current ratios and quick ratios b) Components of working capital and their importance c) Growth of working capital and future projected levels of Working capital. d) Growth of individual components of working capital and their future projections e) Networking capital as a % of sales f) Growth of sales and growth of networking capital g) Projected sales and projected working capital needs h) To determine whether the company is in accordance with norms of Tandon committee-II norms of lending; that is. Current ratio at least 1.33 times that of current liabilities. i) To determine operating cycle and cash cycle of the company.

86

BALANCE SHEETS Rs. Crores Sl.No Particulars 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. 13. 14. 15. Shareholder's funds Loan funds Total Net block Work In Progress Investments Total Inventories Debtors Cash Loans & Advances Total Current Assets (-) Current Liabilities. = Net amount assets Total assets 1998-99 1999-00 2000-01 2001-02 1470.39 1612.35 3077.63 3048.98 4548.02 4661.33 2206.75 2723.83 1493.92 22.43 806.66 21.74 1512.27 1752.46 3037.25 3258.04 4549.52 5010.50 3039.99 3008.23 303.99 29.87 563.05 36.58

3723.10 3552.23 225.70 193.7

3372.85 3607.86 188.27 199.11

3 715.27 1066.57 110.43 132.65 114.69 120.18

1133.21 1195.70 111.08 224.54 246.18 226.05

1184.05 1495.17 359.13 386.07

1655.10 1867.04 478.43 464.44

824.92 1109.10 4548.02 4661.33

1176.67 1402.60 4549.52 5010.50

87

INCOME STATEMENTS Rs. Crores 0 1 0 2 0 3 0 4 0 5 Total Income Total Expenses Profit loss (+-) Adjustments Profit for the year 5 1375.3 8 1231.2 1 144.1 7 2 (-) 9.12 2 135.0 4 141.9 100.99 263.44 1802.7 6 1668.0 4 134.7 (-) 180.9 7.2 80.85 270.68 (-) 7.24 2024.51 2205.45 2134.28 1863.60

Objective 1: Analysis of liquidity of the company as revealed by Current Ratios and Quick Ratios. Table 1: Current assets, liabilities (Rs Crores), Current and Quick Ratios no. Of times) Year parameter Current assets Current liabilities Inventories Current assets no less of 1998-99 1184.05 359.13 225.70 958.35 3.29 2.67 ______ ______ 99-00 1495.17 386.07 193.73 1301.44 3.87 3.37 3.66 3.17 2000-01 1655.10 478.43 188.27 1466.83 3.46 3.06 _______ _______ 2001-02 1867.04 464.44 199.11 1667.93 4.02 3.59

Inventories Current Ratios,

times Quick Ratios, no of times Average Current Ratios Average Quick Ratios NOTE : Current Ratios

**= Total Current Assets / Current Liabilities
**

88

134 = 2.37 3. Minor differences between current ratios and quick ratios indicate lower levels of inventory.13 = Total Current = 3.87 No of Times.02 times and 3. which is 89 .46 3.1998-99 Similarly other years Quick Ratios Current Liabilities 1998-99 Similarly other years = 1184.67 Results are shown graphically is next page.05/359.02 (CR) 3. 4. 3.59 times during latest year by any standards.59 (Q R) 1998-99 Conclusion: Liquidity 1999-00 2000-01 2001-02 of the company is quite good as per analysis above current ratios and quick ratios are on the rise only and have reached a high of 4. a very good sign. these are quite high and good.29 2.29 Assets-Inventories / = 958.06 3.35/359.67 3. GRAPH 1: Showing Current ratios and quick ratios.

66 3.17 No of Times.Graph 2: showing average Current ratios and Quick ratios. Current Ratios Legend Quick Ratios 90 . 3.

62 Nil Nil Nil Nil 2001-02 1867.43 132.33 7.06 91 1998-99 1184.10 Nil Nil Nil Nil .04 13. % Average Loan & Advance / gross current assets.70 246.18 226.05 9.70 715.03 13.71 13.11 1195.70 =19.67 8. % Average Inventories/gross current assets.23 2000-01 1655. % = 225.32 11. cash.69 120.65 19.08 224.18 12.22 11.40 9.Objective 2: Components of working capital and their importance Table 2: Showing gross amount assets. % NOTE: There were calculated as under a) Inventories/gross current assets.21 111.18 12.27 1133.57 114.37 68.06 60.10 188. loans & advances is Rs Crores and their importance in % Year /Parameter Gross current assets Inventories Debtors Cash Loan & advances Inventories/gross current assets % Debtors/gross current assets % Cash/gross current assets.73 1066.66 64. % Loan & Advances/gross current assets.46 6.54 11. % Average Cash/gross current assets.27 110.05 225.95 71.17 193.04 199.51 66. debtors.05 10.20 Nil Nil Nil Nil 1999-00 1495. % Average Net/gross current assets. inventories.

Rs Crores 92 . Loan & Advance.51 % Graph 3: Graph Showing Gross Current Assets. + 11.06 + 12. Results are shown graphically as under.1184.05 Similarly all others and over different years b) Averages were calculated as under: Average Inventories / Gross Current Assets = 19. Inventories. cash.37+10. debtors.95 4 Similarly all others and over different years.66 = 13.

43 120.70 193.05(L &A 199.65 120.04 GCA 113.73 132.18 111.27 1195.57 715.Rs Crores 1184.10 1867.18(Cash) 225.11 (Inventories) 110.54 226.08 1998-99 1999-00 2000-01 2001-02 Graph 4: Showing Components of Working capital averages is % 93 .05 1495.70(Debtors) 246.27 224.21 1066.17 1655.18 188.

this has formed around 66. the most major component of working capital of the company is debtors. 94 . On an average. Inventories and others follow this.Legend Dbts I Ch L&A = Debtors = Inventories = Cash = Loans & Advances Conclusions: As per analysis above.05% of Gross Current Assets.

32 to 13. This may be due to increasing quantity of employee welfare measures. similarly debtors are also on the decline (from a high of 71.18% of Gross Current Assets and 11. Controlling out standings.33% to 64. Crores) 95 . similarly loans and advances are also on the rise.06% of Gross Current Assets to 10. could improve profitability of the company to a large extent mainly because amount involved with debtors is quite high.66 % of Gross Current Assets). But cash and loans & advances are on the rise (9. bad debts and agricultural dues. Current Liabilities and Net Working capital (Rs.10% of Gross Current Assets respectively. at least 1 month of credit is allowed to all consumers. Objective 3: Growth of working capital and future projected needs of working capital. Table 3: showing Gross Current Assets.20 to 12.Inventories are on the decline (19.) High level of debtors in understandable because universally.04% of Gross Current Assets). Therefore the company has to concentrate on debtors the maximum.

17-1184.10 478. % Projected Gross Current Assets Projected Current Liabilities Projected Net Working Capital There were calculated as under. b) Average GCA.05 1495.05 Similarly all others and different periods.92 6.07 Working 824.59 508.80 16.27 % 1184.60 NA Capital= GCA – NA 26.09 (-) 2.10 176.58 % 3 96 1999-00 2000-01 1655.92 19. % = 26.67 1402.92 1109.27 10.50 34. % Growth.04 464. Gross Current Assets = 1495. Net Working Capital.50 (Average) 19. Current Liabilities % Growth.85 .43 2001-02 1867.80 = 16.27+10.69 12.20 9.44 2002-03 NA NA 1184. a) Growth rate.91 (Average) NA NA NA NA NA NA NA NA NA NA NA NA 2176.69+12.17 359.45 23.Their growth rate and projected levels (2002-03) Year / Parameters 1998-99 Gross Current Assets Current Liabilities Net CL Growth.56 1681.05= 26.58 (Average) NA NA 7. Gross Current Assets.13 386.

6:Graph showing growth rates of Gross Current Asset.45 26.07 478.Similarly all others.43 464.67 7. Graph No.5 6.09 12.13 386. % 34.1 824.92 02 97 .01 2001 --2.1 1495.44 1998-99 Gross Current Assets 1999-00 Current Liabilities 2000-01 2001-02 Net Working Capital= GCA –CL Graph No.8 1999 -00 2000 . 1867. 5: Showing Gross Current Assets.04 1655.6 1109.2 GCA 10.92 19.05 1176. Current Liabilities and Net Working Capital.27 23.67 1402. Rs Crores. Projected Current Liabilities and Net Working Capital.17 1184. c) Projections were calculated as under Projected Gross Current Assets Similarly all others Results are shown graphically as under.92 Rs Crores 359.

it was found out that growth of networking capital is more than that of gross current assets. Current Liabilities & Net Working Capital 19.5 Gross Current Ratios net Working Capital Current Liabilities Conclusions: Considering previous trends. (19.58 Average Growth Rate 9.91% against 16. 98 .58%).NWC CL Graph No 7: Graph Showing Average growth rates of Gross Current Assets. Hence is order to maintain present level of liquidity. the company has to either liabilities or increase gross current assets.91 16.

Table 4: Showing components of working capital (Rs. Objective 4: Growth of individual components of working capital future needs. Further. Networking capital is on the rise (Rs. Crores).59 Crores Rs.508. Year/Parameter 1998 -1999 19992000 20002001 20012002 99 Projections .1681. for the year 2002-2003 Gross current assets Current Liabilities Networking capital = = = Rs. Crores). growth rates (%) and future projections (Rs.85 Crores.60 Crores) and is much more than amount liabilities.92 Crores to Rs.1402. the present liquidity of the liquidity of the company is very good.2176.Considering their growth rates. is proved by this analysis also.824.56 Crores Rs.

77 (Average) 26.29 (Average) 40.18 226.69 120.73 199.21 10.21 NA NA NA 1195. % Projections Inventories Debtors Cash Loan & Advance 5 225.5 5.43 132.43 132.14 86.82 6. 8: Showing components of working capital (Rs.66 1438.11 110. 85 -9. 11 3.6 NA NA NA NA 114.69 120.70 NA NA NA NA NA NA NA NA 191.05 346.7 0 246.89 715. 51 121.2 199.1 8 226. % Growth.66 2002-03 100 Debtors laon & Advances .7 193. % Growth.55 284.30 346.55 284. 11 1195.03 (Average) 73 7 715.83 111.27 2000-01 Cash 2001-02 191.Crores) 246. 05 5.16 49. Inventories.74 (Average) 20.2 5 (-) 3.27 066.6 7 1438. Cash.08 224.70 111. 188.08 224.18 188. 75 NA NA NA NA (-) 3.25 225.30 NA NA 1066.89 These are graphically shown as under: Graph No.65 1998-99 1999-00 Inventories 114.54 193.40 4 (-) 2.Crores) and Projected levels (Rs. 62 0.57 1133.57 NA NA NA 1133.Inventories 0 Debtors Cash Loan & advances Growth. debtors. 18 (-) 14. % Growth Loan&Advance.

83 3.82 -3.85 -9.11 86.14 2000-01 5.67 2001-02 CASH 101 .51 0.25 5.16 6.25 -2.RS Crores 121.62 Graph 9:Showing growth rates of components of working capital in % 49.40 1999-00 -14.

Growth Rate DEBTORS L&A INVENTORIES 44.74 102 Inventories Debtors Cash Loan & Advances .77 Graph 10: Showing average growth rates (%) of components of working capital.03 20.29 -3. 26.

2 8 1867. Again.0 4 20022003 NA NA 103 .66 Crores.Average Growth rate in % Conclusions: Considering previous trends. projections and growth rates.29%. cash 40.51 1655.30 Crores.0 5 1802. Cash 346. average growth rate of inventors is (-) 3.284. debtors Rs1438.38 1184. Crores) Year /Parameter Sales revenues Gross Current Assets 375. Objective 5: Analysis of networking capital as a % of sales revenues.55 Crores.191.03%.76 1495.17 024. future projected levels of inventories are Rs. Table 5: Showing networking capital.89 Crores. Earlier conclusion that the company has to concentrate on debtors is proved here also.74% debtors 20.77% and loans and advances 26.1 0 19981999 19992000 20002001 20012002 2134. the company has to control growth of loans and advances using these growth rates. loan and advances Rs. sales revenues (Rs.

45 NA 478. Graph 11: Showing sales revenues and Networking 1998-99 1999-00 2000-01 2024.6 7 12.1 386.78 Note: The above were calculated as under.76 .38 =31.3 1402.0 9 NA 0 2 464. sales = 1802.51 2001-02 .52 2 NA 58.85 67.07+12.2 NA NA 16.4 43 1176. 1802.26 (Average) 19. Networking Capital.4 19.97 NA 61.1 NA 65.6 2002-03 104 Sales Rrevenues Networking Capital 1681.6 0 5.4 4 1402. % Projected sales Projected Networking Capital Networking Capital/Sales.28 (1. % 2 359.2134.10 NA NA NA 31.1 1176.67 Projected sales= Rs.31 NA 59.30+5.8 b) Averages were calculated as under. The above are graphically shown as under.28 2481.38 31. a) Growth %.269. % Sales Growth. 824.42 = 16. c) Projections were calculated as under.2481.76 2134.3 0 6.1626)=Rs. 3 1375.1375.92 1109.Current Loans 3 Net Working Capital Growth.9 1109.07 % 1375-38 Similarly all others.07 824.07 34.72 1681.91 (Average) NA 2481.31 Crores.

42 NWC SALES 1999-00 2000-01 2001-02 105 . 34.2 12.45 31.09 5.Rs Crores Graph 12: Showing growth rates (%) of sales revenues and Networking Capital.07 Growth Rate % 19.3 6.

91 Average Growth rate 16. this has to put move money into working capital.62% of sales. This supports earlier conclusions too.26 sales Revenue sales Revenue Conclusions: Networking capital Networking capital Networking is growing at a rate faster than that of sales.85 crores of working capital. Hence if the company wants to maintain same level of liquidity and support-projected sales. projected sales revenues are Rs. On an average.Graph No. (59.1681.72+67.12+65.78) 5 106 . of sales revenues and Networking Capital 19. for the year 2002-03.97+61. 13: Graph showing average growth rates in % .52+58.2481. networking capital for this company is around 62. for which it requires at least Rs.31 Crores. Considering previous growth rates.

67 13.Objective 6: Analysis of operating cycle and cash cycle of the company in days.09 60 Days 1999-00 1802.70 715.38 225.07 9.11 1195. Of times) turn over period (days) and similarly for debtors.43 10.13 6.79 15.72 18.43 132. Table 6: Table showing sales. inventories.27 140.65 359.78 1.69 120.92 1.51 188.18 226.73 1066. cash.22 8.44 10.05 466. Year/Parameter Sales Inventories Debtors Cash Loan & advances Current liabilities ITR= Sales/Inventories a) I T P = 365 / I T R D T R = Sales / debtors b) D T P =365 / D T 190 Days R C T R = Sales / 9.25days 2000-01 2024. loans and advances.08 224.18 386.79 1998-99 1375.28 199.10 216 Days 205 Days 205 Days 204 Days 1.21 111.72 34 Days Averages NA NA NA NA NA NA 9.57 114.78 1.69 1.27 1133.70 246.54 478.30 39.125 42 Days 107 .75 34 Days 2001-02 2134.76 193. and inventory term over ratio (no.

63 15.53 (-) 629.05 0.50Days 38.75 9.04 8.67 6.09Days 30.29 0.Cash c) C T P = 365 / C TR L & A TR = Sales / L&A d) L& ATP = 365/L & A TR C T R = Inventories 37. Graph No.393 928.22 15.01 9.08 in days = (-)e These are graphically shown as under.3 9.502 727.487 773 309.80 (-) 424.44 10.09 L&ATR CTR 1.02 CL e) C T P = 365 / C T 579.33Days 40.03Days 42.75 299.65days 10.36 R 322.75 (-) 537.69 1.09 302.78 108 1998-99 1999-00 2000-01 2001-02 .72 15 No of Times 10.98 (-) 463.95 24.79 10.78 1.66Days 33.28Days 23.00 9. Creditor Turn-over Ratios (No.72 9.426 856. cycle = a+b+c+d in days Cash cycle a+b+c+d (-) 257.36 35 Days 0.22 0. 14: Graph showing Inventories Turn-over Ratios.92 1.22Days 20.01 ITR 10.80 319. Loans & Advances Turnover Ratios.28 Op. Cash Turn-over Ratios.36 9. Debtors Turn-over Ratios.33Days 0. of times) 18.

29 -537. 15: Graph showing Operating Cycle and Cash Cycle of 302.22 109 Operating Cycle Cash Cycle . 1998-99 1999-00 2000-01 2001-02 -257.75 Graph No.05 -629. days.53 322.28 the company.DTR 319.08 -424.8 299.

loan & advances 33. If the company is able to clear off its debts quickly. its reputation will rise. Hence debtor requires tight controlling. On an average. debtors take 204 days to. 110 .65 days.33 days. Further. inventories just 42 days. cash 30. C TP is on the decline and L&A T P is on the decline. DTP is on the increase (requires controlling). But creditor term over period is very high. ITP is on the decline (a welcome sign).Conclusions: The earlier conclusion that debtors require special attention in proved here also.98 days. An average operating cycle works out to 309.

87 3. Year 1998-99 1999-00 2000-01 2001-02 Average Current ratio no of times.33 times over this period.66 Conclusion: As per above analysis.e. i..46 4. current ratio is at least 1. the company is well within Tandon Committee Method-2 norms. Table 7: Table showing current ratios. An at least current ratio of 1. 3.33 times is 111 .02 3.Objective (7) To determine whether the company is in accordance with Tandon Committee method-2 of lending.29 3.

66%).67 to 3. these are quite good. Inventories are on the decline (19. Liquidity of the company is extremely good. This is a welcome sign.02 and 2.29 to 4.32 to 13. loans & advances are on the increase (9. Negligible differences between C/R and Q/R indicate low levels of inventories. maximum credit allowed to customers is 1-2 months only on an average. 112 .required as per norms but the company has a current ration of 3.04% but cash.06% to 10.18% and 11.33% to 64. Most major component of working capital is debtors (66.05% on an average) followed by inventories and others.59 times with latest year. debtors (71.66 times. 2.10% respectively). Salient conclusions and recommendations 1.20 to 12. they have increased from 3. By any standards. Very good position of liquidity is mainly due to the reason than these products are extremely essential in nature and hence customer payment position is quite well. Current ratios and quick ratios are on the rise only.

Further the projected levels (for Year 2002-03) a) b) c) GCA = Rs.2176. it was found that growth of networking capital is more than that of gross current assets (19. Networking capital position is quite comfortable and is also on the rise (Rs.92 Crores to Rs. Hence the company has to concentrate on debtors to a large extent.91% as against 16. 508. Similarly loans and advances are on the rise probably due to increasing levels of employee 3. 1681.59 Crores CL = Rs. all customers.824. 113 .60 Crores) and is much more than that of current liabilities. even a slight improvement of debtor could improve profitability quite high. it has either to reduce current liabilities or increase gross current assets). the analysis that liquidity of the company is extremely good in proved by analysis of this objective also. control outstanding and bad debts. Hence if the company wants to maintain its present level of liquidity.56 Crores NWC= Rs. Considering previous trends. Since amount involved in debtors is quite high.58%). agricultural and rural debts.85 Crores.1402.High level of debtors is due to the reason that cash sales are almost nil and universally 1 ½ month of credit is given to welfare measures. Also.

cash 30. 5.30 Crores cash Rs. Considering previous trends. inventories just 42 days. As per analysis. On an average. debtors 20. Hence debtor requires tight controlling. loan advances 26. Considering previous trends.4.85 Crores of networking capital and networking capital is approximately around 62. This supports earlier conclusions too. cash 40. DTP is on the size (requires attention). for the year 2002-2003. this has to put more money into working capital. Further.65 days. ITP is on the decline (a welcome sign). similarly the company has to control growth of loans and advances. Networking capital is growing at a rate faster than that of sales.98 days.03%.1438. average growth of inventories is (-) 3. using these growth rates. Earlier conclusion that the company has to concentrate on debtors is proved here also.284. the company is well within Tandon Committee norms-method (2).31 Crores for which it requires at least Rs.74%. 114 . Debtors Rs. The earlier conclusion that debtors require special attention is proved here also. Loan & advances 33.89 Crores (For the year 2002-03).77%. But creditor turn over period is very high.346. cash TP and L and ATP are on the decline. Hence if the company wants to maintain same level of liquidity.33 days. debtors take 204 days to day. projected sales revenues are Rs. loans and advances Rs.62% of sales. On an average. projected levels of inventories are Rs. operating cycle works out to 309. 7. and also to support projected sales.29%.2481.191. 6. its reputation will rise.1681. If the company is able to clean off its debts quickly.66 Crores.55 Crores.

66 times on average. This is a welcome sign. 115 .33 times is required as per norms but the company has a current ratio of 3.At least a current ratio of 1.

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