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DESERTATION PROJECT REPORT

ON

“A study of WORKING CAPITAL OF SUBHAS JITH ENGINEERING”
Submitted for partial fulfillment of award of POST GRADUATES OF DIPLOMA IN MANAGEMENT

BY DEBASHISH ROY PGDM – l Year, 5rd trimesters 1/3/2012 To 15/3/2012

DAYANANDA SAGAR BUSINESS SCHOOL
Shavige Malleshwara Hills, kumaraswamy layout Bangalore-560078

ACKNOWLEDGEMENT
I take this as an opportunity to thank with bottom of my hear all those without whom the journey of doing my project would not have been as pleasant as it has been to me. Working on my project was a constant learning experience with all sweat and tear which was its due but not without being richly stimulating experience of life time. I am very thankful to SUSMITA SARKAR for giving me their valuable advice and guidance towards fulfillment of the project Finally I would like to convey my heartiest thanks to all my well wishers for their blessing and co-operation throughout my study. They boosted me up every day to work with a new and high spirit.

Debashish Roy

DECLARATION
I hereby declare that this Research Project entitled, “A study of WORKING CAPITAL OF SUBHAS JITH ENGINEERING “written and submitted by me, under the guidance of Mr. BASUDEB SINHA is my original work and that has not been submitted to any other University / Institute previously.

DEBASHISH ROY PGDM-3RD TRIMESTER

CERTIFICATE

This is to certify that the Research Project Report entitled, “A study of WORKING CAPITAL OF SUBHAS JITH ENGINEERING” for the award of “POST GRADUATES DIPLOMA IN MANAGEMENT from DAYANANDA SAGAR BUSINESS SCHOOL, BANGALORE, has been carried out by DEBASHISH ROY. The Report embodies result of original work and studies carried out by the student himself and the contents of the Report do not form the basis for award of any other Degree to the candidate or to anybody else.

PROF SUSMITA SARKAR DEPT. PGDM (AICTE)
DAYANANDA SAGAR BUSINESS SCHOOL DATE:-

BACK GROUND OF THE STUDY
The project undertaken is on “Working Capital Management of Subhas jith Engineerings.” It describes about how the company manages its working capital and the various steps that are required in the management of working capital. 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).

Working capital refers to the cash of a business requires for day-to-day operations or, more specifically, for financing the conversion of raw materials into finished goods, which the company sells for payment. Among the most important items of working capital are levels of inventory, accounts receivable, and accounts payable. Analysts look at these items for signs of a company's efficiency and financial strength.

The working capital is an important yardstick to measure the company‟s operational and financial efficiency. Any company should have a right amount of cash and lines of credit for its business needs at all times. This project describes how the management of working capital takes place at Subhas jith Engineerings. There are numerous instances in the history of business world where inadequacy of working capital has led to business failures when a firm finds it difficult to meetings day to day affairs. Operating expenses essential out lays may have to be postponed for want of funds, operating plans will go out of gear & enterprise objectives on investment slumps the suppliers & creditors of the firm may have to wait longer to raise their dues & will hesitate to extend further credit to the firm. Thus efficient management of working capital in an important prerequisite for successful working of a business concern it reduces the chances of business failure generates a feeling of security and confidence in the minds of personnel in the organization it assurance solvency of steady of the organization.

CONTENTS

TOPIC  Introduction  Introduction of working capital  Objective of study  Scope of study  Introduction of organization  Research Methodology  Data reduction, presentation & interpretation  Ratio analysis  Trend analysis

 Summary & Conclusion  Facts &Findings  Recommendation & Suggestion  Bibliography

INTRODUCTION OF WORKING CAPITAL
Finance is one of the major elements that activate the overall growth of the economy. Finance is the life blood of economic activity. A well - knit financial system directly contributes to the growth of the economy. An efficient financial system calls for the efficient performance of institution, financial instruments and financial markets. Finance which acts as the lifeblood in the modern business types is one of the most important consideration for an entrepreneur-company. While Implementing,expanding, diversifying, modernizing or rehabilitating any project the meaning of finance is better understood. In this section we have covered finance related information and the process of managing the same. Finance is a science of managing money and other assets. It is the process of channelization of funds in the form of invested capital, credits, or loans to those economic agents who are in need of funds for productive investments or otherwise. E.g. On one hand, the consumers, business firms, and governments need funds for making their expenditures, pay their debts, or complete other transactions. On the other hand, savers accumulate funds in the form of savings deposits, pensions, insurance claims, and savings or loan shares, etc which becomes a source of investment funds. Here, finance comes to the fore by channelling these savings into proper channel of investment. In general, finance is that business activity which is concerned with acquisition and Conservation of capital funds in meeting financial needs and over all objectives of a business entrepreneur.

Finance is the common denominator for a vast range of corporate. Projects and the major part of any corporate plan must be expressed in financial terms”. The main reasons a business needs finance are to:

• Start a business • Finance expansions to production capacity • To develop and market new products • To enter new markets

• Take-over or acquisition • Moving to new premises • To pay for the day to day running of business MEANING OF WORKING CAPITAL Working capital refers to the management of current assets. Working capital refers to that part of total capital which is used for carrying out the routine or regular business operation. In other words, it is the amount of funds used for financing the dayto-day operation. In short, it is the capital with which the business is worked over. Thus, the capital invested and locked up in various current assets, such as stocks of raw material, work in progress , stocks of finished goods account receivable and cash and bank balances constitutes the working capital. Working capital may be regarded as life blood of a business. Its effective provision can do much to ensure the success of a business while its in provision can do much to ensure the success of a business while it‟s in efficient management can lead not only to loss of profits but also to the ultimate downfall of what otherwise might be considered as a promising concerns. > According to shoo-in, “Working Capital is the amount of funds necessary to cover the cost of operating the enterprise”. Working Capital is also known as Revolving or Circulating Capital. > According to Genesterberg, “Circulating Capital means current assets of a company that are changed in the ordinary cause of business from one to another form. Example: From cash to inventory, inventories to bills receivable and bills receivable to cash.

Concept of working capital

There are five concepts of working capital: Gross Working Capital  Net Working Capital  Negative working capital  Permanent working capital  Variable working capital On the basis of the components or items comprised in working capital, working capital can be classified into the following types: Gross Working capital: Simply called as working capital, refers to the firms investment in current assets. Current assets which can be converted in to cash with in the accounting year (or operating cycle) and includes cash, short term securities, debtors, Bills receivable and stock (inventory) . Net Working Capital: Refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders, which are expected to mature for payment with in a year and include creditors, Bills payable and outsider‟s expenses. Negative working capital or working capital deficit: means the excess of current liabilities over the current assets. It accurse when the current liabilities exceed the current assets Permanent working capital or fixed working capital: refer to the minimum amount of investment in current assets required throughout the year for carrying out the business. In other words , it is the amount of working capital which remains in the business permanently in one form or other. Variable working capital or fluctuating working capital: refer to the amount of working capital which goes on fluctuating or changing from time to time with the change in the volume of business activities. Ratios : The term ratio simply means one number expressed in terms of another. It describes in mathematical terms the quantitative relationship that exists between two numbers.

NEED FOR WORKING CAPITAL Every business undertaking requires funds for two purposes, investments in fixed assets & investment in current assets. Funds required for investing in inventory, debtors & other current assets keep changing in shape & volume. Company has some cash in the beginning; this cash may be the source of raw material, keeping the labor cost & other overheads. These three combined would generate work in progress, which will be converted into finished goods on the completion of the production process into debtors & when the debtor pay, the firm may generate cash. Working capital is needed for sustaining (i.e., maintaining) the sales activities. If adequate working capital is not maintain for this period ,the firm will not be able to sustain or maintain the sales , since it may not be in a position to purchase raw material and pay wages and other expenses and produce the goods required for the sales. NATURE OF WORKING CAPITAL In ordinary parlance, Working Capital is taken to be the fund available for meeting day-to-day requirements of enterprises. It cannot be denied that a part of the fixed or permanent capital is invested in assets, which are kept in the business or for a long period for the purpose of earning profit. These are usually known as fixed assets viz. Land & buildings, plant & machinery, furniture & fitting & intangibles like goodwill, patents, trademarks & long-term investment. Another part of permanent capital left in the business for supporting the day-to-day normal operation is known as the “Working Capital”. This Working Capital generates the important element of cost viz. Material, wages & expenses. These cost usually lead to production & sales in case of manufacturing concerns & sales alone in others. These costs occur gradually in a flow & do not come into being abruptly at a given moment.

Hence the initial investment of cash as working capital for this specific purpose has to be continued until the sales revenue commences flowing in substantially & in a regular way. From this stage the business is found to acquire a momentum of its own. The flow of revenue is expected to continue to replace the cost lost in its day-to-day out flow for the generation of the revenue mentioned above.

SOURCE OF WORKING CAPITAL The financial manager is always interested in obtaining the working capital at the right time, at a reasonable cost and at the best possible favorable terms. A part of the working capital investment are permanent investments is fixed assets. The following is snapshot of various source of working capital. Sources of working capital divided into two • Long –term • Short –term Sources of long term working capital • Issue of shares • Floating of debentures • Ploughing back of profit • Loans • Public deposit Sources of short-term working capital Internal sources • Depreciation • Taxation • Accured expenses

External sources • Trade credit • Credit papers • Bank credit • Customer‟s credit • Govt. Assistances • Loans from director • Security of employees

WORKING CAPITAL CYCLE:The working capital of a concern goes on changing in shape and volume. For Instance, a concern may have some cash in the beginning. The cash may be used by the concern for the purpose of purchase of raw material, payment of wages and other expenses‟. These elements of cost or items of expenses, raw material , wages and overheads , will result in work- in-progress during the process of manufacture. On the in compilation of the production process, the work- in –progress becomes finished goods. Meaning The length of time involved in this cycle of conversion of cash into raw material, raw material into work-in progress, work-in-progress into finished goods, finished goods into debtors and debtors into cash again is called the operating cycle or working capital cycle of the firm, in other words, it is period between the date raw material are purchased and the date the sale proceeds of finished goods are realized by concern. INTER-DEPENDENCE OPERATING CYCLE : A company starting with cash purchase raw materials, components etc., on a cash or credit basis. These materials will be converted into finished goods after undergoing various stages of work-inprocess. For this purpose the company has to make payments towards wages, salaries and manufacturing costs. Payments to suppliers have to be made on purchases in the case of cash purchases and on the expiry of the credit purchases. Further, the company has to meet other operating costs such as selling and distribution costs, general administration costs and nonoperating costs described as financial costs (interest on borrowed capital). In case the company sells its finished goods on cash basis, it will pass through one more stage, viz, accounts receivable and gets back cash along with profit on expiry of credit period. Once again the cash will be used for the purchase of materials and / or payments to suppliers and the whole cycle is termed as working capital or operating cycle repeats itself. This process indicates the dependents of each stage or components of working capital on its previous stage or component. AMOUNG COMPONENTS OF WORKING CAPITAL

WORKING CAPITAL MANAGEMENT Introduction Working capital management is one of the most important aspects of financial management. It forms a major function of the finance manager. Meaning: Working capital management means management or administrating of all aspect of working capital, i.e., currents assets and currents liabilities. In other words of Smith, “working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the inter-relationship that exists between them”. BASIC OBJECTIVE OF WORKING CAPITAL MANAGEMENT: The basic objective of working capital management is to manage the firm‟s working capital (i.e., currents assets and currents liabilities) in such a way that a satisfactory level of working capital (i.e., neither excessive nor inadequate working capital) is maintained. This is necessary because, if the working capital is excessive or large, the liquidity position of the firm would, no doubt, improve, but its profitability would be adversely affected, as funds would remain idle. Conversely, if the working capital is too small, the, profitability of the firm may improve, but the liquidity position of the firm would be adversely affected. Advantages of working capital: • It helps the business concern in maintaining the goodwill. • It can arrange loans from banks and others on easy and favorable terms. • It enables a concern to face business crisis in emergencies such as depression. • It creates an environment of security, confidence, and overall efficiency in a business. • It helps in maintaining solvency of the business. Disadvantages of working capital: • Rate of return on investments also fall with the shortage of working capital. • Excess working capital may result into over all inefficiency in organization.

• Excess working capital means idle funds which earn no profits. • Inadequate working capital cannot pay its short term liabilities in time.

OBJECTIVES OF THE PROJECT
The objectives of study
1) To identify the financial strengths & weakness of the company. 2) Through the net profit ratio & other profitability ratio, understand the profitability of the company. 3) Evaluating company s performance relating to financial statement analysis. 4) To know the liquidity position of the company with the help of current ratio. 5) To find out the utility of financial ratio in credit analysis & determining the financial capacity of the firm.

Scope of the study
1. From this project we would study the various methods of the working capital management. 2. The project will be a learning of planning and financing working capital. 3. The project would also be an effective tool for future policies of the companies. 4. This will show different methods of holding inventory and dealing with cash and receivables. 5. This will show the liquidity position of the company and also how do they maintain a particular liquidity position.

COMPANY PROFILE
SUBHAS JITH ENGENEERINGS is a multi-division and multi-location conglomerate. It possesses 15 manufacturing plants in India. The company was promoted by Subhas jith is the Managing Director of the Company. It is headquartered in Kolkata, India, and its shares are listed in the Calcutta Stock Exchange. SUBHAS JITH ENGENEERINGS specialises in the manufacture of Ship Repairer, Fabricator, Engineering, metal products. The company's metal packaging products Large Diesel Engine, Gene-sets, Air-compressors, Pumps of all types, heat-exchangers, Electrical machines, limited to 440 volts, any sort of fabrication jobs, like small M. S. Reservoirs, M. S. Gates or similar structures, according to Customers Specifications. Kindly note that our Organisation is fully equipped with all types machines Needed for repairs, including Machine Shop, good nos of welding sets. Etc. We are having a team of highly skilled operatives, well experienced in all sorts repair jobs, as detailed above, and a team of Marine Engineers & Naval Architects in our Consulting as well as in supervising panels. The company has now diversified into the production of rolled products, secondary specification alloys and galvanised steel. The company‟s wholly owned subsidiary in Raipur, and is the market leader in ROPP caps and crown corks in Raipur. It has also set up facilities for the manufacture of galvanised steel, metal colour coated sheets and coils and secondary specification alloys. The main markets of Subhas jith Engineerings:        North America South America Western Europe Eastern Europe South east Asia Mid East Africa Oceania

RESEARCH DESIGN
General Methodology
The study was carried on an explorative basis using accounting and financial data. The procedures followed in this study consist of following steps: 1) The research includes figurative and diagrammatic interpretation for the ease of comparison. 2) Understanding of ship building industry in domestic scenario. 3) Determining the demand and supply in near future to understand the future prospect of the industry.

Research Methodology
 Research methodology that is used here was purely exploratory because we know it is used when one is seeking insight in to the general nature of the problem possible decision alternatives and relevant variables that need to be considered.  This resistance also help full / use full for establishing priorities among research questions and for learning about practical problems of carrying out the research.

DATA ANALYSIS, PRESENTATION AND INTERPRETATION
Data source
Data collection was through literature survey and expert opinion. Literature survey includes the collection of data from various sources like bank agreement and statement, handbooks as well as study material. A part of data` s was collected from primary data and other was collected from the secondary data.

Primary sources
Information gathered by interview and discussions with the head and employees of various departments and my project guide.

Secondary sources
    Company annual report. Published information on finance. Internal circulation booklets. Company Websites

DATA ANALYSIS AND INTERPRETATION
 Ratio Analysis is a powerful tool of financial analysis. Alexander Hall first presented it in 1991 in Federal Reserve Bulletin. Ratio Analysis is a process of comparison of one figure against other, which makes a ratio and the appraisal of the ratios of the ratios to make proper analysis about the strengths and weakness of the firm‟s operations. The term ratio refers to the numerical or quantitative relationship between two accounting figures. Ratio analysis of financial statements stands for the process of determining and presenting the relationship of items and group of items in the statements.  Ratio analysis can be used both in trend analysis and static analysis. A creditor would like to know the ability of the company, to meet its current obligation and therefore would think of current and liquidity ratio and trend of receivable.  Major tool of financial are thus ratio analysis and Funds Flow analysis. Financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit account

The financial analyst may use ratio in two ways. First he may compare a present ratio with the ratio of the past few years and project ratio of the next year or so. This will indicate the trend in relation that particular financial aspect of the enterprise. Another method of using ratios for financial analysis is to compare a financial ratio for the company with for industry as a whole, or for other, the firm‟s ability to meet its current obligation. It measures the firm‟s liquidity. The greater the ratio, the greater the firms liquidity and vice-versa.

A ratio can be defined as a numerical relationship between two numbers expressed in terms of (a) proportion (b) rate (c) percentage. It is also define as a financial tool to determine an interpret numerical relationship based on financial statement yardstick that provides a measure of relationship between two variable or figures.

Meaning and Importance:

Ratio analysis is concerned to be one of the important financial tools for appraisal of financial condition, efficiency and profitability of business. Here ratio analysis id useful from following objects. 1) Short term and long term planning 2) Measurement and evaluation of financial performance 3) Studs of financial trends 4) Decision making for investment and operations 5) Diagnosis of financial ills.

ADVANTAGES & DISADVANTAGES OF RATIO ANALYSIS: Advantages:
The following are the main advantages derived of ratio analysis, which are obtained from the financial statement via Profit & Loss Account and Balance Sheet. a) The analysis helps to grasp the relationship between various items in the financial statements. b) They are useful in pointing out the trends in important items and thus help the management to forecast c) With the help of ratios, inter firm comparison made to evolve future market strategies. d) Out of ratio analysis standard ratios are computed and comparison of actual with standards reveals the variances. This helps the management to take corrective action.

e) The communication of that has happened between two accounting the dates are revealed effective Action. f) Simple assessments of liquidity, solvency profitability efficiency of the firm are indicted by ratio analysis. Ratios meet comparisons much more valid.

Disadvantages:
Ratio analysis is to calculate and easy to understand and such statistical calculation stimulation thinking and develop understanding. But there are certain drawbacks and dangers they are. i)There is a trendy to use to ratio analysis profusely. ii)Accumulation of mass data obscured rather than clarifies relationship. iii) Wrong relationship and calculation can lead to wrong conclusion. 1. In case of inter firm comparison no two firm are similar in size, age and product unit.(for example) one firm may purchase the asset at lower price with a higher return and another firm witch purchase the asset at asset at higher price will have a lower return) 2. Both the inter period and inter firm comparison are affected by price level changes. A change in price level can affect the validity of ratios calculated for different time period. 3. Unless varies terms like group profit, operating profit, net profit, current asset, current liability etc., are properly define, comparison between two variables become meaningless.

4. Ratios are simple to understand and easy to calculate. The analyst should not take decision should not take decision on a single ratio. He has to take several ratios into consideration.

STANDARDS OF COMPARISION: 1. Ratios calculated from the past financial statements of the same firm.

2. Ratio developed using the projected or perform financial statement of the same firm 3. Ratios of some selected firm especially the most progressive and successful, at the same point of time. 4. Ratios of the industry to which the firm belongs.

IMPORTANCE OF RATIO ANALYSIS
In the preceding discussion in the form, we have illustrated the compulsion and implication of important ratios that can be calculated from the Balance Sheet and Profit & Loss account of a firm. As a tool of financial management, they are of crucial significance. The importance of ratio analysis lies in the fact and enables the drawing of inferences regarding the performance of a firm. Ration analysis is a relevant in assessing the performance of a firm in respect of the following aspect.

CAUTION IN USING RATIOS:

1. It is difficult to decide on the proper bases of comparison. 2. The comparison rendered difficult because of difference in situation of two companies or of one-company for different years. 3. The price level change makes the interpretation of ratios invalid. 4. The difference in the definition of items in the balance sheet and Profit & Loss statement make the interpretation of ratios difficult. 5. The ratios calculated at a point of time are less informative and defective as they suffer from sort term changes. 6. The ratios are generally calculated from the past financial statement and thus are no indicators of future

CURRENT RATIO : The relationship of current assets to current liabilities is known as current
ratio. It is also known as banker‟s ratio or working capital ratio. 1. CURRENT RATIO It is relationship between firm‟s current assets and current liability. Current assets Current ratio = _______________________________ Current liability

TABLE – 1 STATEMENT SHOWING CURRENT RATIO Rs in lakhs
YEAR CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO 1.58 1.46 1.38 1.30 1.32 1032002 1442000 2002230 2833290 3244172 2006 -2007 1633078 2007-2008 2106400 2008-2009 2770400 2009-2010 3690107 2010-11 4293481

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION
The current ratio is a test of the short term solvency of the business enterprise since this ratio assumes current assets could be converted into cash to meet current liabilities.
It is often accepted that current assets should be 2times the current liabilities.

Current ratio during the year 2006 -2007 was 1.58 and its come down in 1.46 at 2007-2008 and its again decreased 2008–2009 and 2009-2010 and its slightly increased in 1.32 at 2010-2011. The standard norm for this ratio is 2:1 required. SUBHAS JITH ENGENEERINGS should maintain sufficient amount of current assets in order to maintain the standard form of current ratio.

CHART – 1 CURRENT RATIO

current ratio
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 current ratio

QUICK RATIO: It establishes the relationship of a company‟s current assets that can be quickly
converted into cash and its current liabilities. QUICK RATIO It is relationship between liquid assets and current liabilities. Liquid assets Quick ratio = _________________________ Liquid Liabilities

TABLE –2 STATEMENT SHOWING QUICK RATIO Rs in lakhs
YEAR LIQUID ASSETS LIQUID LIABILITIES LIQUID RATIO 1.22 1.17 1.10 1.03 1.04 2006 -2007 1258640 1032002 2007-2008 1684600 1442000 2008-2009 2216978 2002230 2009-2010 2906405 2833290 2010-2011 3369935 3244172

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS INTERPRETATION It is in fact the measure of the “Instant” debt paying ability of the business enterprise.

The quick ratio in the year 2006-2007 was 1.22 and its decreased 0.04% at 2007 and 2008 (1.17) and in 2008-2009 get decreased 0.06% (1.10) and 2009-2010 get decreased 0.063% (1.03) and its get increase in slightly on 2010-2011 at 0.001%(1.04). The standard norm for this ratio is 1:1, means for every 1 rupee of current liability, company must have 1 rupee of quick assets.

CHART –2 LIQUID RATIO

liquid ratio
1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 liquid ratio

CASH MANAGEMENT

Introduction: Cash management is one of the key areas of working capital management. Cash is the liquid current asset. The main duty of the finance manager is to provide adequate cash to all segments of the organization. The important reason for maintaining cash balances is the transaction motive. A firm enters into variety of transactions to accomplish its objectives which have to be paid for in the form of cash.
Meaning of cash:

The term “cash” with reference to cash management used in two senses. In a narrower sense it includes coins, currency notes, cheques, bank drafts held by a firm. N a broader sense it also includes “near-cash assets” such as marketable securities and time deposits with banks.

Objectives of cash management:

There are two basic objectives of cash management. They are To meet the cash disbursement needs as per the payment schedule.  To minimize the amount locked up as cash balances.

Basic problems in Cash Management: Cash management involves the following four basic problems.  Controlling level of cash  Controlling inflows of cash  Controlling outflows of cash and  Optimum investment of surplus cash.  Determining safety level for cash: The finance manager has to take into account the minimum cash balance that the firm must keep to avoid risk or cost of running out of funds. Such minimum level may be termed as “safety level of cash”. The finance manager determines the safety level of cash separately both for normal periods and peak periods. Under both cases he decides about two basic factors. They areDesired days of cash: It means the number of days for which cash balance should be sufficient to cover payments. Average daily cash flows: This means average amount of disbursements which will have to be made daily.

Criteria for investment of surplus cash: In most of the companies there are usually no formal written instructions for investing the surplus cash. It is left to the discretion and judgment of the finance manager. While exercising such judgment, he usually takes into consideration the following factorsSecurity: This can be ensured by investing money in securities whose price remains more or less stable. Liquidity: This can be ensured by investing money in short term securities including short term fixed deposits with banks. Yield: Most corporate managers give less emphasis to yield as compared to security and liquidity of investment. So they prefer short term government securities for investing surplus cash. Maturity: It will be advisable to select securities according to their maturities so the finance manager can maximize the yield as well as maintain the liquidity of investments.

Cash Management in Subhas jith Engineerings : The cash management is carried out in seaways by CTM (Corporate Treasury Management). CTM is a commonly followed procedure in most of the companies. Now we see the cash ratio / quick ratio in Subhas jith Engineerings CASH RATIO It is relationship between cash and current liabilities. Cash Cash ratio = _______________________ Current liabilities

STATEMENT SHOWING CASH RATIO TABLE – 3 Rs in lakhs
YEAR CASH CURRENT LIABILITIES CASH RATIO 0.40 0.40 0.42 0.36 0.30 2006 -2007 413398 1032002 2007-2008 580900 1442000 2008-2009 838600 2002230 2009-2010 1031467 2833290 2010-2011 979008 3244172

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS INTERPRETATION The Cash ratio of SUBHAS JITH ENGENEERINGS in the 2006-2011 was fluctuation in 2010-2011 it was 0.30 times and in 2007-2008 it was 0.40 times and 2008-2009 it was reduced to 0.42.

The standard norms of absolute quick ratio are 0.5:1. From the above table the firms not maintain the sufficient level of quick assets because of the day-to-day expenses .It is fluctuating between the standard norms for this ratio is 1:2 means for every 2 rupees of current Liabilities,

Company must have 1 rupee of cash and bank balance and marketable securities.

CHART- 3 CASH RATIO

cash ratio
0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 cash ratio

RECEIVABLES MANAGEMENT Introduction:

Receivables constitute a significant portion of the total assets of the business. When a firm seller goods or services on credit, the payments are postponed to future dates and receivables are created. If they sell for cash no receivables created. Meaning:

Receivable are asset accounts representing amounts owed to the firm as a result of sale of goods or services in the ordinary course of business.

Purpose of receivables: Accounts receivables are created because of credit sales. The purpose of receivables is directly connected with the objectives of making credit sales. The objectives of credit sales are as follows   Achieving growth in sales. Increasing profits. Meeting competition.

Factors affecting the size of Receivables: The main factors that affect the size of the receivables are   Level of sales. Credit period. Cash discount.

Costs of maintaining receivables: The costs with respect to maintenance of receivables are as followsCapital costs: This is because there is a time lag between the sale of goods to customers and the payment by them. The firm has, therefore to arrange for additional funds to meet its obligations. Administrative costs: Firm incur this cost for manufacturing accounts receivables in the form of salaries to the staff kept for maintaining accounting records relating to customers. Collection costs: The firm has to incur costs for collecting the payments from its credit customers.

Defaulting costs: The firm may not able to recover the over dues because of the inability of customers. Such debts treated as bad debts.

Receivables management: Receivables are direct result of credit sale. The main objective of receivables management is to promote sales and profits until that point is reached where the ROI in further funding of receivables is less than the cost of funds raised to finance that additional credit (i.e.; cost of capital). Increase in receivables also increases chances of bad debts. Thus, creation of receivables is beneficial as well as dangerous. Finally management of accounts receivable means as the process of making decisions relating to investment of funds in this asset which result in maximizing the overall return on the investment of the firm. Receivables management and Ratio Analysis: Ratio Analysis is one of the important techniques that can be used to check the efficiency with which receivables management is being managed by a firm. The most important ratios for receivables management are as follows-

DEBTORS TURNOVER RATIO: Debtors constitute an important constituent of current assets and therefore the quality of the debtors to a great extent determines a firm‟s liquidity. It shows how quickly receivables or debtors are converted into cash. In other words, the DTR is a test of the liquidity of the debtors of a firm. The liquidity of firm‟s receivables can be examined in two ways they are DTR and Average Collection Period. It indicates the number time debtors turned over each year. Generally the higher value of debtor‟s turnover shows high efficiency to manage the credit management.

Total sales Debtors turnover ratio = ______________________________ Debtors

TABLE –4 STATEMENT SHOWING DEBTORS TURNOVER RATIO Rs in lakhs
YEAR TOTAL SALES DEBTORS DEBTOR TURNOVER RATIO 1.87 1.78 1.61 1.64 1.59 2006 -2007 1337403 716806 2007-2008 1723753 969582 2008-2009 1930464 1197487 2009-2010 2621233 1597550 2010-2011 3286144 2068875

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION Debtors constitute an important constituent of current assets and therefore the quality of the debtors to a great extent determines a firm‟s liquidity. It shows how quickly receivables or debtors are converted into cash. In other words, the DTR is a test of the liquidity of the debtors of a firm. The liquidity of firm‟s receivables can be examined in two ways they are DTR and Average Collection Period. .The higher the ratio, the better it is, since it would indicate that debts are being collected promptly.
In the year 2010 - 2011 the debt is 1.59 comparing to the previous year came downwards.

CHART- 4 DEBTOR TURNOVER RATIO

debtor turnover ratio
1.9 1.85 1.8 1.75 1.7 1.65 1.6 1.55 1.5 1.45

debtor turnover ratio

DEBT COLLECTION PERIOD
Debtor‟s collection period is nothing but the period required to collect the money from the customers after the credit sales. A speed collection reduces the length of operating cycle and vice versa. The more quickly the customers pay, the less risk from bad debts, the lower the expenses of collection and more liquid the nature of of this asset.

It indicates the speed with which debts are collected. Days/months in a year Debt collection period = _______________________________ Debtor‟s turnover ratio

TABLE – 5 Rs in lakhs

YEAR DAYS DEBT TURNOVER RATIO DEBT COLLECTION PERIOD

2006 -2007 365

2007-2008 365

2008-2009 365

2009-2010 365

2010-2011 365

1.87

1.78

1.61

1.64

1.59

195

205

227

223

230

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION

The debt collection period of SUBHAS JITH ENGENEERINGS in the 2005-2006 was 195 days and in goes to 2010 - 2011 it was increased in (0.18%) 230 days. Standard Debt Collection Period of a firm is less than 90 days. But, above tables consists of increased of DCP in rapidly.

CHART – 5 DEBT COLLECTION PERIOD

debtor collection period
230 220 210 200 190 180 170 debtor collection period

CREDITORS TURNOVER RATIO
The ratio shows on an average the number of times creditors turned over during the year. Credit purchase Creditors turnover ratio = ________________________ Average creditors

TABLE – 6 Rs in lakhs

YEAR CREDIT PURCHASE SUPPLIERS CREDITORS CREDITORS TURNOVER RATIO /

2006 -2007

2007-2008

2008-2009

2009-2010

2010-2011

709940

1018186

1182087

1762005

2067232

280409

353895

442400

585285

757980

2.53

2.88

2.67

3.01

2.73

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS INTERPRETATION

The Creditors turnover ratio of SUBHAS JITH ENGENEERINGS was fluctuating during the year 2006 – 2011. It was upward in (2009– 2010) was 3.01 times and it was downward in 2010 – 2011 is 2.73 times. Greater the CTR the more time firm has to pay to their creditors.

CHART -6 CREDITORS TURNOVER RATIO

creditor turnover ratio
3.1 3 2.9 2.8 2.7 2.6 2.5 2.4 2.3 2.2

creditor turnover ratio

TABLE –7 CASH TO CURRENT ASSETS RATIO Rs in lakhs
YEAR CASH CURRENT ASSETS CAS CURRENT ASSETS RATIO SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS INTERPRETATION TO 0.25 0.27 0.30 0.28 0.23 2006 -2007 413398 1633078 2007-2008 580900 2106400 2008-2009 838600 2770400 2009-2010 1031467 3690107 2010-2011 979008 4293481

The Cash to current assets turnover ratio of SUBHAS JITH ENGENEERINGS was fluctuating during the year 2006 – 2010. It was upward in (2006– 2009) was 0.25 times to 0.30 times and it was downward in 2009 – 2011 is 0.23 times.

CHART -7 CASH TO CURRENT ASSETS RATIO

caash to current assets ratio
0.3 0.25 0.2 0.15 0.1 0.05 0 caash to current assets ratio

TABLE –8 CASH TURNOVER RATIO Rs in lakhs
YEAR SALES 2006 -2007 1337403 2007-2008 1723753 2008-2009 1930464 2009-2010 2621233 2010-2011 3286144

CASH

413398

580891

838602

1031467

979008

CASH TURNOVER RATIO SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS INTERPRETATION 3.24 2.97 2.31 2.54 3.36

The cash turnover ratio in the years 2006-2010 it was on fluctuating ratios, in the year 20010-2011 it was increased (0.037%) 3.36.

cash turnover ratio
4 3.5 3 2.5 2 1.5 1 0.5 0 cash turnover ratio

INVENTORY MANAGEMENT

Introduction: Inventories are stock of the product a company is manufacturing for sale and components. That makeup the products. The various forms in which inventories exist in a manufacturing company are: Raw-materials, work-in-process, finished goods. Raw-Materials: - Are those basic inputs that are converted into finished products through the manufacturing process. Raw-materials inventories are those units, which have been purchased and stored for future production. Work-In-Process inventories are semi-manufactured products. The represent products that need more work before they become finished products for sale. Finished Goods inventories are those completely manufactured products, which are ready for sale. Stocks of raw-materials and work-in-process facilitate production which stock of finished goods is required for smooth marketing operations. These inventories serve as a link between production and consumption of goods. Stores and spares are also maintained by some firms. This includes office and plant cleaning materials like soaps, brooms, oil, fuel, light, bulbs etc. These materials do not directly enter in production. But are necessary for production process.

Need to holding inventory The question of managing inventories arises only when the company holds inventories. Maintaining inventories involves tying up of the company's funds and incurrence of storage and handling cost. It is expensive to maintain inventories, why does company hold inventories? There are three general motives for holding inventories. 1. Transaction Motive: - Emphasizes the need to maintain inventories to facilitate smooth production and sales operations. 2. Precautionary motive: - Necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.

3. Speculative motive: - Influences the decision to increase or reduce inventory levels to take advantages of price influences. A company should maintain adequate stock of materials for a continuous supply to the factory for the uninterrupted production. It is not possible for a company to procure raw materials whenever it is needed. A time lag exists between demand for materials and its supply. Also there exists uncertainty in procuring raw materials in time on many occasions. The procurement of materials may be delayed because of such factors as strike, transport disruption or short supply. Therefore, the firm should maintain sufficient stock of raw materials at a given time to stream line,production.

Objective of Inventory Management In the context of inventory management the firm is faced with the problem of meeting two conflicting needs; To maintain a large size of inventory for sufficient and smooth production and sales operations. To maintain a minimum investment in inventories to maximize profitability. Both excessive and inadequate inventories are not desirable. These are two dangerous points within which the firm should operate. The objective of inventory management should be to determine and maintain optimum level of inventory investment. The optimum level of inventory will lie between the two danger points of excessive and inadequate inventories. The firm should always avoid a situation of over investment or under investment in inventories. The major dangerous of over investment are, Unnecessary tie-up of the firms funds losses of profit Excessive carrying cost Risk of quality The aim of inventory management thus should be to avoid excessive and inadequate levels of inventories and to maintain sufficient inventory for smooth production and sales operations. Efforts should be made to place an order at the right time with the right source to acquire the right quantity at the right price and quality. An effective inventory management should

Ensure a continuous supply of raw materials to facilitate uninterrupted production. Maintain sufficient stock of raw materials in periods of short supply and anticipate price changes. Maintain sufficient finished goods inventory for smooth sales operations and efficient customer service. Minimize the carrying cost and time. Control investment in inventories and keep it at an optimum level. Inventory management techniques : In managing inventories the firm objective should be in consonance with the shareholders' wealth maximization principle. To achieve this firm should determine the optimum level of inventory. Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in unbalanced inventory and inflexibility-the firm ma sometimes run out of stock and sometimes may pileup unnecessary stocks. This increases level of investment and makes the firm unprofitable.

To manage inventories efficiency, answers should be sought to the following two questions. 1) How much should be ordered? 2) When should it be ordered? The first question how much to order, relates to the problem of determining economic order quantity (EOQ), and is answered with an analysis of costs of manufacturing certain level of inventories. The second question when to order arise because of determining the reorder point. When the order is placed for raw material certain raw material is in transit, such raw material is called as raw material in transit. Example –Raw material on overseas. The raw material can be transfer from unit to another unit or from one department to another is called transfer-in –transit. It is nothing but to the transfer of raw material among the inter-firm units of SUBHAS JITH ENGENEERINGS.

The raw material, which is production process, is called work-in process. The work in process becomes finished goods inventory. The finished should not be kept for a longer time. They should be sold off to clear off the entire inventory. However, finished goods inventory is not there for SUBHAS JITH ENGENEERINGS, since production is mainly done on customer order and specifications. The raw material is purchased and the whole process is repeated again which we call it as inventory cycle. Inventory turnover Ratio:Inventory turnover ratio indicates the efficiency of the firm in producing and selling its products. It is calculated by dividing the cost of goods sold by the average inventory. The average inventory is the average of open and closing balance of inventory.

Balance sheet of the company
Balance Sheet as at March 31, 2010
1 2 3 4 31.3.2011 Schedule AS AT 31.03.2010 AS AT 31.03.2009 SOURCES OF FUNDS Shareholders’ Fund Share Capital Reserves & Surplus Loan Funds Secured Loans Unsecured Loans APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation/Amortisation to-date Less : Lease Adjustment Account Net Block Capital Work-in-Progress Investments Deferred Tax Assets Net (Refer note no. 23 of Schedule 19) Current Assets, Loans and Advances Current Assets Inventories Sundry Debtors Cash & Bank Balances Other current assets Loans and advances Less: Current Liabilities & Provisions Current Liabilities Provisions Net current assets

489.52 489.52 15427.84 0.00 127.75

15917.36

127.75

5

6 7

6580.14 4150.52 2429.62 14.22 2415.40 1529.55

1470.40 3944.95 79.84 1527.23

8 9235.46 20688.75 9790.08 406.85 2813.67 42934.81

9

10 11

28023.74 4417.98 32441.72 10493.09 16045.11

Profit and loss of the company
Profit & Loss Account for the year ended 31st March, 2011
For the year ended For the year ended Schedule
EARNINGS Turnover (Gross) Less: Excise duty & Service Tax Turnover (Net) Other income Accretion/Decretion to Work-in-progress & Finished Goods OUTGOINGS Consumption of Material, Erection and Engineering Expenses Employees’ remuneration & benefits Other expenses of Manufacture, Administration, Selling and Distribution Provisions (net) Interest & other borrowing costs Depreciation and amortisation Less: Cost of jobs done for internal use Profit before prior period items Add/(Less): Prior period items (Net) Profit before tax Less: Provision for taxation For Current Year - Current Tax (incl. wealth tax Rs. 0.14 crore (Previous year Rs. 0.17 crore)) - Fringe Benefit Tax - Deferred Tax For earlier years - Tax (incl. Income Tax abroad Rs. 26.77 crore (prev. year Rs. 8.48 crore)) - Fringe Benefit Tax 12

31.03.2011
34153.76 1292.32 32861.44 12A 13 1648.29 786.65 35296.38

14 15 16 17 18 5

20672.32 6449.17 2155.02 -934.15 33.50 458.01 120.87 28713.00 6583.38 7.27 6590.65

18A

2006.14 313.07 2319.21

-34.58 -77.72 -4.62 0.56

2280.01 Profit after tax 4310.64 Add: Balance of profit brought forward from last year 595.46 Foreign Project Reserves written back 1.38 Profit available for appropriation 4907.48 Less: Appropriation- General Reserve 3000.00 - Dividend (incl interim dividend of Rs. 538.47 crore, previous year Rs.440.57 crore) 1140.58 - Corporate Dividend tax (incl Rs. 91.51 crore on 191.51 4332.09 interim dividend, previous year Rs.74.87 crore) Balance carried to Balance Sheet 575.39 Basic and Diluted Earning per share (in Rs.) 88.06 (Refer note no. 22 of Schedule 19) Notes to Accounts 19 Schedules 5,12 to 19 & Significant accounting policies form an integral part of the Profit & Loss Account Basic and Diluted Earning per share (in Rs.) 88.06 64.11

TABLE –9 INVENTORY TURNOVER RATIO
It indicates the inventories turning into receivables through sales. Sales Inventory turnover ratio =__________________________ Inventory

Rs in lakhs
YEAR 2006 -2007 2007-2008 2008-2009 2009-2010 2010-2011

SALES

1337403

1723753

1930464

2621233

3286144

INVENTORY

374437

421767

573640

783702

923546

INVENTORY TURNOVER RATIO SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORT 3.57 4.09 3.37 3.34 3.56

INTERPRETATION This ratio indicates the liquidity of the inventory, that is, how quickly, on the average, the inventory was sold during the year and consequently the significance of the inventory for the debt paying purposes.

A high stock turnover ratio is generally considered desirable because it is indicative of efficient performance since an improvement in the ratio shows hat volume of sales has been either maintained or increased without additional investment in stock. Inventory turnover of SUBHAS JITH ENGENEERINGS for 2007 – 2008 was 4.09. In 20082009 the inventory turnover ratio was high up to 3.37 and it was high in 2010-2011 at 3.56.

CHART –9

INVENTORY TURNOVER RATIO

inventory turnover ratio
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

inventory turnover ratio

TABLE –10 INVENTORY HOLDING PERIOD Rs in lakhs

YEAR DAYS / MONTH IN YEAR INVENTORY TURNOVER RATIO INVENTORY HOLDING PERIOD

2006 -2007

2007-2008

2008-2009

2009-2010

2010-2011

365

365

365

365

365

3.57

4.09

3.37

3.34

3.56

102

89

108

109

103

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION Inventory holding period of subhas jith Engineerings is varying on every year. In the year of 200607 to 2008-09 it‟s increased in 0.06% (102 to 108) and 2010-11 it‟s decreased by 0.047 %.

CHART –9 INVENTORY HOLDING PERIOD

inventory holding period
120 100 80 60 40 20 0 inventory holding period

TABLE-11 WORKING CAPITAL TURNOVER RATIO

Rs in lakhs
YEAR SALES NET WORKING 2006 -2007 1337403 2007-2008 1723753 2008-2009 1930464 2009-2010 2621233 2010-2011 3286144

CAPITAL WORKING CAPITAL TURNOVER RATIO

601076

664286

788388

856817

1049309

2.23

2.59

2.45

3.06

3.13

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION Working capital turnover ratio for the year 2010 - 2011 was 3.13 times. It is higher when comparing the past four years. The working capital management has to improve by more concentration on collection strategies.

CHART-11 WORKING CAPITAL TURNOVER RATIO

working capital turnover ratio
3.5 3 2.5 2 1.5 1 0.5 0 2006-20072007-20082008-20092009-20102010-2011 working capital turnover ratio

TABLE –12 WORKING CAPITAL FOR TREND ANALYSIS Rs in lakhs
YEAR CURRENT ASSETS CURRENT LIABILITIES WORKING CAPITAL 601076 664286 788388 856817 1049309 2006 -2007 2007-2008 2008-2009 2009-2010 2010-2011

1633078

2106297

2770472

3690107

4293481

1032002

1442011

1982084

2833290

3244172

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION In this current asset is increasing during the period of study. Current liability is also increased during the period of study. And working capital is also increasing..

CHART – 12 WORKING CAPITAL FOR TREND ANALYSIS
5000000 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 current assets current liabilities working capital

TABLE –13 ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL CURRENT ASSETS

Rs in lakhs Particulars inventories Sundry debtors C& B balance Other assets Loans and advances Total
SOURCE: SECONDARY DATA 2006 2007 - 20072008 20082009 20092010 20102011

22.93 43.90 25.30 0.52 7.35 100

20.03 46.03 27.58

20.71 43.22 30.27

21.24 43.29 27.95 0.95 6.57 100

21.52 48.18 22.80 0.95 6.55 100

0.95 1.52 5.41 100 4.28 100

INTERPRETATION In this period 2006 – 2011 Sundry debtors and other current assets was only maintained in stable for the period of study. Subhas jith engeneerings must be extra care about cash and bank balance in future. In the period of 2008-2011 inventory ratios are increased. All about Subhas jith

engeneerings should be very care and must maintain in adequate current assets in future.

CHART – 13 ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL GRAPH 13 .1 INVENTORY

inventory
23 22 21 20 19 18 inventory

inventory

GRAPH 13 .2 SUNDRY DEBTORS

sundry debtor
49 48 47 46 45 44 43 42 41 40 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 sundry debtor

GRAPH 13 CASH AND BANK BALANCES

C& B balance
40 30 20 10 0 C& B balance C& B balance

GRAPH 13 OTHER CURRENT ASSETS

other assets
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

other assets

GRAPH 13 LOANS AND ADVANCES

Loans and advances
8 6 4 2 0 Loans and advances Loans and advances

GROSS PROFIT RATIO : Gross profit margin shows the company can return income at the gross level. This ratio helps to control inventory usage and production performance and fixing unit price of goods.

TABLE – 14

ANALYSIS OF GROSS PROFIT RATIO Rs in lakhs Particulars Gross Profit /
2006-2007 2007-2008 2008 - 2009 2009-2010 2010-2011

Profit before tax Total Sales Gross Profit ratio

256435 1337403 0.192

373607 1723753 0.217

443039 1930464 0.230

484885

659065

2621233 3286144 0.185 0.201

GRAPH 14 - GROSS PROFIT RATIOS

GROSS PROFIT RATIO
2006 -2007 2007-2008 2008-2009 2009-2010 2010-11

20%

19%

18%

21%

22%

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION In the analysis of Gross profit ratio Subhas jith Engineerings must control production expenses in future. Comparison of 2007-08 to 2009-10 margin profit ratio will goes down in 2 %. Firm will be control in production cost in next coming years, such as raw material, freight and transport expenses. Otherwise, Subhas jith Engineerings must increase in sales unit price. NET PROFIT RATIO: As every business is to earn profit, this ratio is very important because it measures the profitability of sales. A business may yield high gross income but low net income because of increasing operating and non-operating expenses. This situation can easily be detected by calculating this ratio.

The profits used for this purpose may be profits after/before tax. To obtain this ratio, the figure of net profits after tax is divided by the figure of net profits after tax is divided by the figure of sales the ratio is also known as sales margin as we can ascertain with its help the margin which the sales leave later deducting all the expenses. The unit of expression is percentage, as is the case with profitability ratios.
TABLE – 15

ANALYSIS OF NET PROFIT RATIO Rs in lakhs Particulars Net Profit Profit after tax Net Sales Net Profit ratio /
2006-2007 2007-2008 2008 - 2009 2009-2010 2010-2011

167916 1337403 0.126

241470 1723753 0.140

285934 1930464 0.148

313821

431064

2621233 3286144 0.120 0.131

GRAPH 15

NET PROFIT RATIOS

net profit ratio
0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0

net profit ratio

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION
In this period of research of study Net profit of the Subhas jith engeneerings company goes downwards from 2008 – 2010 comparing previous year achievements. Gross Profit to Net Profit Ratio: Analysis of ratio‟s G.P. to N.P is very important in every firm. It helps to find out the cost of expense increased in production or administrative level and other hand it helps to control in overall financial expenses.

TABLE – 16

ANALYSIS OF G.P. TO N.P RATIO Rs in lakhs Particulars Gross Profit Net Profit G.P. - N.P. RATIO GRAPH 16 G.P. TO N.P. RATIO
2006-2007 2007-2008 2008 - 2009 2009-2010 2010-2011

256435 167916 1.53

373607 241470 1.55

443039 285934 1.55

484885 313821 1.55

659065 431064 1.53

GP.NP
1.55 1.545 1.54 1.535 1.53 1.525 1.52 GP.NP

SOURCE: SECONDARY DATA FROM SUBHAS JITH ENGENEERINGS ANNUAL REPORTS

INTERPRETATION In this period of research of study Gross Profit and Net Profit are equal. Subhas jith engeneerings control his marginal and administrative cost in his control. There is no variation and its goes to stable.

TREND ANALYSIS

Particulars

2006

2007

2008

2009

2010

Current Assets : Inventories / Stock 100 112.64 153.20 209.30 246.65

Debtors 100 135.26 167.06 222.87 288.62

Cash and Bank Balances 100 140.52 202.86 249.51 236.82

Other Current Assets 100 236.33 498.33 414.45 481.48

Loans & Advances 100 95.08 98.87 201.99 234.50

Current Liabilities : Liabilities 100 135.08 188.20 265.19 318.17

Provisions 100 166.79 214.54 329.01 292.14

INTERPRETATION
Above Table Inventory and debtors goes to growth level in all the years. Loans and Advances and Other Current assets show high level of improvement in all the years. Cash and Bank balances are fluctuating ratio in the year 2009 – 2011. Current Liabilities are increasing in all the years and Provisions are fluctuating in the year 2010 compared to previous years.

FINDINGS

1) Standard current ratio is 2:1 and for industry it is 1.33:1. SUBHAS JITH ENGENEERINGS „S ratio satisfactory. 2) Acid test ratio is more than one but it does not mean that company has excessive liquidity & firm quick ratio is declining from 2006-07 to 2010-11 3) Debtors of the company were high; they were increasing year by year, so more funds were blocked in debtors. But now recovery is becoming faster. 4) Debtors turnover ratio is fluctuating from 2006-07 to 2010-11, which means inventory is not utilized in better way so it is not a good sign for the company. 5) Inventory turnover ratio is improving from 2006-07 to 2008-09.increase in ratio is beneficial for the company because as ratio increases the number of days of collection for debtors decreases. 6) Working capital turnover ratio is continuously increasing that shows increasing needs of working capital. 7) Production capacity is not utilized to the full extent

CONCLUSION
The study is basically done to have a deep knowledge about WORKING CAPITAL of the SUBHAS JITH ENGENEERINGS . SUBHAS JITH ENGENEERINGS, is having an appropriate working capital management of the organizations. NET PROFIT growth rate is 13.10% in 20102011, it is showing a nominal increase in net profit as compared to last year. The GROSS PROFIT of SUBHAS JITH ENGENEERINGS more or less is maintaining same margin of profit. The firm DCP is rising every year which is major concern for firm as larger the DCP greater the chances of bad debts. DTR is also decreasing in 2006-07 it was 1.87times now it has drop down to 1.59times.

Current ratio is also below the standard norm in the financial year 2007-08 it was 1.58 now it has decreased up to 1.32.The firm should maintain the adequate level of current assets in order to discharge its current liabilities.

As far as cash ratio is concerned the firms not maintain the sufficient level of quick assets because of the day-to-day expenses. It is fluctuating between the standard norms for this ratio is 1:2 means for every 2 rupees of current Liabilities.

Company must have 1 rupee of cash and bank balance and marketable securities.

SUGGESTIONS
1)It can be said that overall financial position of the company is normal but it is required to be improved from the point of view of profitability.

2) Net operating cycle is increasing that means there is a need to make Improvements in Receivables/debtors management. 3) Company should stretch the credit period given by the suppliers. 4) Company should not rely on Long-term debts. 5) Company should try to increase Volume based sales so as to stand in the competition.

Since the SUBHAS JITH ENGENEERINGS is a profit making company and the interests of the investors are also safe so for making more profit and for increasing the net profit as well as gross profit the organization should curtail its operating, administrative & non productive expense. Company is having good marketability, profitability and liquidity so the company can raise its fund. Company should not forget its „Quality Policy‟ i.e. we at SUBHAS JITH ENGENEERINGS, should aim to achieve and sustain excellence in all our activities. We are committed to total customer satisfaction by providing producers and services which meet or exceed the customer expectation.

Modernization of the manufacturing facilities, stress on technological innovation and training of employees at all levels shall be continuous process in SUBHAS JITH ENGENEERINGS.

LIMITATIONS

The study does not consider the market fluctuations in all its calculations.

Analysis is very much dependent on the companies‟ internal bulletin.

BIBLIOGRAPHY

Reports
  Annual Report (2006-2011) Bonus issue bulletin 2006

Websites
 www.SUBHAS JITH ENGENEERINGS.com

Books
  Basic corporate accounting – CA Dr. Girish Ahuja Financial Management – R.P Rustagi,