A PROJECT REPORT ON “ WORKING WORKING CAPITAL MANAGEMENT OF
I.T.I Limited ,Mankapur”
SUBMITTED TO:
SUBMITTED BY: BY:
Mr. Haridas Gupta DeputyFinanceHead !"! #t. Mankapur
Mukul Saxena MBA(FS) , 3rd Se
PREFACE T$e %inter trainin& is an inte&ral part ' acadeic curriculu. Durin& t$is a student &ets
'pp'rtunity t' understand t$e practical aspects ' ari'us uncti'nal d'ains. "$ere is al%ays &ap *et%een t$e'ries and practices and t$e trainin& is aied at re'in& t$is &ap. "$is pr'+ect rep'rt is t$e 'utc'e ' t$e suer trainin& t$at ! $ae under&'ne at !"! #iited Mankapur 'r t$e partial ulillent ' Masters ' Business Adinistrati'n in Sc$''l ' c'n'ics c'n 'ics , Dei A$ilya -is$%aid$yalaya -is$%aid$yalaya , !nd're. !nd're. "$e t'pic is c'ncerned %it$ t$e /O01!NG 2A!"A# MANAGMN"4. "$is pr'+ect %'rk %'rk $as $as *een *een unde undert rtak aken en t' kn'% kn'% t$e t$e pr'c pr'ced edur ures es in' in'l led ed in t$e t$e F!NA F!NAN2 N2 DA0"MN" in !"! #iited. "$e rep'rt is %ritten acc'unt ' %$at ! $ae learnt and experienced in y trainin& and $ae tried y leel *est t' enc'pass eac$ and eery aspect ' it %$ic$ is necessary t' +ustiy t$e p r'+ect undertaken. "$e preparati'n ' t$is pr'+ect re5uires initiatie, perseerance, pr'per &uidance and directi'n. "$ere're, it *ecae andat'ry t' t' take aids r' ari'us departents.
ACKNOWLEGEMENT I %'uld like t' express y &ratitude &ratitude t' all t$'se pe'ple %$' $ae pr'ided pr'ided e supp'rt, supp'rt, c'6'perati'n and t$eir alua*le tie t' $elp e in t$e c'pleti'n ' t$is pr'+ect. ! %$'le6 $earted $eartedly ly ackn'%l ackn'%led&e ed&e t$e intell intellect ectual ual siula siulati' ti'n n ' y estee estee &uide &uide Mr. Mr. Hari Das Guptaji 'r Guptaji 'r &iin& e 'pp'rtunity t' %'rk in suc$ an ip'rtant sp$ere and s$arin& $is isi'n and experience.
!, express y deep sense ' &ratitude and sincere t$anks t' Mr t' Mr.. Tiwariji Tiwariji and Mr and Mr.. Sunil Guptaji %$' %$' $as $as pr' pr'id ided ed e %it$ %it$ t$e t$e nece necess ssary ary in' in'r rat ati' i'n n and and t$ei t$eirr alu alua*l a*lee su&&esti'n and c'ents in *rin&in& 'ut t$is rep'rt in t$e *est %ay p'ssi*le. ) 'r ! %'ul %'uld d like like t' t$an t$ank k Mr. Mr. Bhist, Human Resource Development Centre (HRDC pr'idin& e t$e 'pp'rtunity 'p p'rtunity t' c'plete y interns$ip in t$is esteeed 'r&ani7ati'n. ! als' &ie y sincere t$anks t' all t$'se pe'ple %$' directly 'r indirectly $elped e in indin& t$e %ay t' c'llect t$e re5uisite in'rati'n and c'pletin& t$e pr'+ect tiely and eectiely. At last ! %'uld als' like t' t$ank t$e entire ana&eent tea ' Finance departent in !"!, as %'rkin& %it$ t$e $as *een an enric$in& and 'tiatin& experience 'r e.
Date 8 9:"H ;<#= >?9@ lace8 MAN1A<0
( M<1<# SANA) MBA(F!NAN2!A# MBA(F!NAN 2!A# S0-!2S)
ECLARATION I, Mukul Saxena, pursuin& an Masters ' Business Adinistrati'n r' Sc$''l '
c'n'ics , Dei A$ilya -is$%aid$yalaya , !nd're, $ere*y declare t$at ! $ae c'pleted a pr'+ect 'n /O01!NG 2A!"A# MANAGMN"4 OF !"! #iited4 durin& 9st ;une >?9@ t' 9:t$ ;uly >?9@ ( %ks ) . "$e in'rati'n c'plied and su*itted in t$is rep'rt pertainin& t' t$e pr'+ect is true and 'ri&inal t' t$e *est ' y kn'%led&e. H'%eer, t$e ie%s expressed in t$is rep'rt are n't necessarily t$'se ' t$e c'pany 'r c'lle&e and all resp'nsi*ility 'r any err'rs reains %it$ t$e aut$'r.
ate ! "#T$ J%L& '(") P*a+e! MANKAP%R
M%K%L -AENA/ M0AFINANCIAL -ER1ICE-/
TA0LE OF CONTENT-*.N2. CHAT!R " CHAT!R ' CHAT!R + CHAT!R CHAT!R / CHAT!R 0
TITLE #$TR%D&CT#%$………………………... #T!RAT&R! R!)#!*………………… C%MA$ R%-#!…………………… DATA A$AS#S A$D
PAGE NO. 8-9 11-20 21-22 23-32
#$T!RR!TAT#%$ ………………………. R%B!MS, CA&S!S %- #T *#TH
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S%&T#%$S ………………… C%$C&S#%$ ............................................. B#B#%GRAH ……………………….....
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C$APTER3" INTRO%CTION TO T$E -T%&! "$is study c'prises t$e %'rkin& capital ' !"! #"D. !t *asically deals %it$ analy7in& t$e s$'rt ter li5uidity p'siti'n ' t$e c'pany %it$ t$e $elp ' ari'us rati's suc$ as #i5uidity rati', turn'er rati', pr'ita*ility rati' etc.
O0JECTI1E- OF T$E RE-EARC$! "$e '*+ectie ' t$is pr'+ect %'rk is t' 'cus 'n t$e %'rkin& situati'n ' !"! #it. and expl'rin& its p'tential in t$e c'pany. "$e pr'+ect c'ntain t$e *asic p'stulates ' %'rkin& capital, pr'cedure ' analysis ' %'rkin& c apital, rati's *ein& used t' deine t$e %'rkin& capital and its ipact 'n t$e c'pany in case ' excess 'r inade5uacy. • • • • • • • •
"' study a*'ut %'rkin& capital ' !"! #t. "' +ud&e t$e eiciency and eectieness ' ana&eent. "' kn'% a*'ut cas$ l'%. "' kn'% a*'ut acc'untin& p'licy. "' study t$e inancial p'siti'n ' c'pany. "' study t$e pr'ita*ility p'siti'n ' c'pany. "' ind 'ut t$e inancial stren&t$s and %eakness ' c'pany. "' &ie suita*le su&&esti'n 'n t$e *asis ' indin&s.
RE-EARC$ E-IGN "$e researc$ desi&n 'r t$e study is ' e4p*2rat2r5 type and t$e 'cus is &ien t' disc'er t$e p'ssi*le easures, *y detailed analysis, 'r t$e c'pany %$ic$ %'uld *e $elpul up t' s'e extent t' ac$iee a &''d p'siti'n in t$e c'petitie arket. "$e researc$ desi&n is n't 'ral and ri&id 'ne as t$e 'cus depends up'n t$e aaila*ility ' ne% ideas and relati'ns$ip a'n& aria*les.
ATA COLLECTION MET$O "$ere are t%' types ' data8 Primar5 data 6 riary data are t$'se data %$ic$ are c'llected ares$ and 'r t$e irst tie, and t$us $appen t' *e 'ri&inal in c$aracter. -e+2ndar5 data 6 Sec'ndary data are t$'se data %$ic$ $ae already *een c'llected and pr'cessed t$r'u&$ statistical pr'cesses. F'r t$e purp'se ' study *'t$ priary as %ell as sec'ndary data $ae *een used. "$e Sec'ndary data $ae *een c'llected r' ne%spapers, c'pany annual rep'rts, and %e*sites. F'r t$e c'llecti'n ' priary data 5uesti'ns %ere asked pers'nally r' any pe'ple%it$in t$e 'r&ani7ati'n.
TOOL- FOR ANAL&-I"$e 'll'%in& statistical t''ls $ae *een used 'r an aly7in& t$e data8 2'lun Dia&ra 0ati's
RE-EARC$ LOCATION "$is pr'+ect is a part %inter trainin& at t$e sae c'pany and $as *een d'ne durin& t$e trainin& peri'd.
-COPE OF T$E -T%& "$e sc'pe ' t$e study is c'ncerned %it$ t$e pr'per ana&eent ' unds, as uc$ t' kn'% $'% eectiely unds are utili7ed 'r eetin& s$'rt6ter and l'n&6ter needs. "$e *asic sc'pe ' t$e researc$ is t' disc'er t$e irCs in'leent in raisin& unds and t$eir eectie
LIMITATION- OF T$E -T%& a) "$e Study is ainly *ased 'n t$e in'rati'n &at$ered r' sec'ndary data. *) "$e indin&s ' t$e study are *ased 'n $ist'rical data. Hence, accuracy cann't *e ascertained.
C$APTER ' LITERAT%RE RE1IEW
AN INTRO%CTION TO T$E WORKING CAPITAL MANAGEMENT!
6!n
c''n parlance, %'rkin& capital is t$at part ' capital, %$ic$ is in %'rkin& 'r %$ic$ is used t' eet day6t' day expenses ' t$e ir.4 "' understand t$e exact eanin& ' t$e ter /'rkin& 2apitalC, it %ill *e appr'priate t'
EFINING WORKING CAPITAL! "$e ter %'rkin& capital reers t' t$e a'unt ' capital %$ic$ is readily aaila*le t' an 'r&ani7ati'n. "$at is, %'rkin& capital is t$e dierence *et%een res'urces in cas$ 'r readily c'nerti*le int' cas$ (2urrent assets) and 'r&ani7ati'nal c'itents 'r %$ic$ cas$ %ill *e s''n re5uired (2urrent lia*ilities). "$us, WORKING CAPITAL 7C%RRENT A--ET- 3 C%RRENT LIA0ILITIE/$ere, Current A88et8! #i5uid Assets (cas$ and *ank dep'sits) !nent'ry De*t'rs and 0eceia*les Ot$ers
Current Lia9i*itie8! Bank 'erdrat 2redit'rs and paya*les Ot$er s$'rt ter lia*ilities
/'rkin& 2apital ay *e re&arded as t$e lie *l''d ' *usiness. /'rkin& capital is ' a+'r ip'rtance t' internal and external analysis *ecause ' its cl'se relati'ns$ip %it$
t$e current day6t'6day 'perati'ns ' a *usiness. ery *usiness needs und 'r t%' purp'ses8 #'n& ter unds are re5uired t' create pr'ducti'n acilities t$r'u&$ purc$ase ' ixed assets suc$ as plants, ac$ineries, lands, *uildin&s, etc. S$'rt ter unds are re5uired 'r t$e purc$ase ' ra% aterials, payent ' %a&es, and t' eet 't$er day6t'6day expenses. !t is 't$er%ise kn'%n as re'lin& 'r circulatin& capital.
O0JECTI1E- OF WORKING CAPITAL MANAGEMENT! /'rkin& capital ana&eent is essential 'r any *usiness t' succeed. !t is *ec'in& increasin&ly ip'rtant t' $ae access t' 're capital %$en %e need it. !n siple %'rds, /'rkin& capital is t$e excess ' current assets 'er current lia*ilities. !t is t$e $eart ' t$e *usiness. ! it is %eak *usiness cann't pr'sper and surie. 2as$ is t$e lieline ' t$e c'pany. ! t$is lieline deteri'rates s' d'es t$e c'panyCs a*ility t' und 'perati'ns, reinest t' eet capital re5uireents and payent. 2rkin? +apita* mana?ement i8 t2 en8ure t:at 8u;;i+ient +a8: i8 a=ai*a9*e t2! Meet day t' day cas$ l'% needs ay %a&es and salaries %$en t$ey all due ay credit'rs t' ensure c'ntinued supplies ' &'' ds and serices ay &'ernent taxati'n and pr'ider ' capital E diidends nsure t$e l'n& ter surial ' t$e *usiness entity
NEE FOR WORKING CAPITAL! ery *usiness needs s'e a'unt ' %'rkin& capital. "$e need 'r %'rkin& capital arises due t' t$e tie &ap *et%een pr'ducti'n and reali7ati'n ' cas$ r' sales. !t ay $ae t' pass t$r'u&$ ari'us sta&es t' c'plete its 'peratin& cycles. "$is can *e cate&'ri7ed int' anuacturin& irs and tradin& irs.
T&PE- OF WORKING CAPITAL! On 9a*an+e 8:eet 9a8i8! "$ere are t%' types ' %'rkin& capital 'n t$e *asis ' *alance s$eet6 Gr'ss %'rkin& capital and Net %'rkin& capital.
GRO-- WORKING CAPITAL 8 "$e ter &r'ss %'rkin& capital reers t' t$e irCs inestent in current assets.
G0OSS /O01!NG 2A!"A# "O"A# 2<00N" ASS"S "$e c'nsiderati'n ' t$e leel ' t$e inestent in current assets s$'uld a'id t%' dan&er p'ints6 excessie and inade5uate inestents in arran&in& unds t' inance current assets. NET WORKING CAPITAL 8 !t reers t' t$e dierence *et%een current assets and current lia*ilities. "$us, NWC7 Current A88et83Current Lia9i*itie8
•
•
Net %'rkin& capital can *e p'sitie 'r ne&atie. !t is p'sitie 8 /$en current assets current lia*ilities !t is ne&atie 8 /$en current assetcurrent lia*ilities !t is a 5uantitatie c'ncept %$ic$8 !ndicates t$e li5uidity p'siti'n ' t$e ir o o Su&&ests t$e extent t' %$ic$ %'rkin& capital needs ay *e inanced *y eranent s'urces ' unds.
On t:e 9a8i8 2; time! "$ere are t%' types ' %'rkin& capital 'n t$e *asis ' tie ('r need) 6 ixed 'r peranent %'rkin& capitaland aria*le 'r tep'rary %'rkin& capital. PERMANENT WORKING CAPITAL8 !t is t$e iniu a'unt ' inestent in all current assets %$ic$ is re5uired at all ties t' carry 'ut iniu leel ' *usiness actiities. "an d'n 2'ittee $as resered t' t$is type ' %'rkin& capital as 2're 2urrent Assets4. C$ARACTERI-TIC- OF PERMANENT WC! •
•
A'unt ' peranent %'rkin& capital reains in t$e *usiness in 'ne 'r 'r an't$er. !t als' &r'%s %it$ t$e si7e ' t$e *usiness. !t is peranently needed 'r t$e *usiness, and t$ere're, it s$'uld *e inanced 'ut ' l'n& ter unds.
1ARIA0LE WORKING CAPITAL! "$e a'unt ' %'rkin& capital 'er peranent %'rkin& capital is kn'%n as aria*le %'rkin& capital. "$e a'unt ' suc$ %'rkin& capital keeps 'n luctuatin& r' tie t' tie 'n t$e *usiness actiities. !t ay a&ain *e su*diided int' seas'nal %'rkin& capital and special %'rkin& capital.
Seas'nal %'rkin& capital is re5uired t' eet t$e seas'nal deands ' *usy peri'ds 'ccurrin& at stated interals 'n t$e 't$er $and, special %'rkin& capital is re5uired t' eet extra'rdinary needs 'r its c'ntin&encies.
.
ETERMINANT- OF WORKING CAPITAL! /'rkin& capital re5uireents ' a c'ncern depends 'n a nu*er ' act'rs, eac$ ' %$ic$ s$'uld *e c'nsidered careully 'r deterinin& t$e pr'per a'unt ' %'rkin& capital. !t ay *e $'%eer *e added t$at t$ese act'rs aect dierently t' t$e dierent units and t$ese keeps aryin& r' tie t' tie. !n &eneral, t$e deterinants ' %'rkin& capital %$ic$ are c''n t' all 'r&ani7ati'ns can *e suari7ed as under8 ". NAT%RE OF 0%-INE--! "$e c'p'siti'n ' current assets is a uncti'n ' t$e si7e ' a *usiness and t$e industry t' %$ic$ it *el'n&s. Sall c'panies $ae saller pr'p'rti'n ' cas$, receia*les and inent'ry t$an lar&e c'rp'rati'n. A pu*lic utility c'ncerns 'stly epl'y ixed assets in its 'perati'ns, %$ile a erc$andisin& 'r anuacturin& departent depends &enerally 'n inent'ry and receia*les. '. PRO%CTION POLICIE-! "$e pr'ducti'n p'licies pursued *y t$e ana&eent $ae a si&niicant eect 'n t$e re5uireent ' %'rkin& capital in t$e *usiness, in case ' la*'ur intensie industries t$e %'rkin& capital re5uireent %ill *e 're *ut in case ' $i&$ly aut'atic plant, t$e re5uireent ' l'n& ter unds %ill *e 're and %'rkin& capital %ill *e less. @. -IE OF 0%-INE--! "$e si7e ' t$e *usiness unit $as an ip'rtant ipact 'n its %'rkin& capital needs. Si7e ay *e easured in ters ' scale ' 'perati'n. A ir %it$ lar&er scale ' 'perati'n %ill need 're %'rkin& capital t$an a ir %it$ saller scale ' 'perati'n. #. LENGT$ OF OPERATING C&CLE! Operatin& cycle ' t$e ir als' inluences t$e %'rkin& capital. #'n&er t$e 'peratin&cycle, t$e $i&$er %ill *e t$e %'rkin& capital re5uireent ' t$e 'r&ani7ati'n and ie6ersa.
). TERM- OF P%RC$A-E AN -ALE! "ers ' purc$ase and sales aect t$e a'unt ' %'rkin& capital. "$e practice ' cas$ purc$ases %it$ credit sales re5uire 're %'rkin& capital %$ile t$e practice ' credit purc$ases %it$ cas$ sales re5uires less %'rkin& capital. B. 0%-INE-- FL%CT%ATION! 2yclical c$an&es in t$e ec'n'y als' inluence t$e leel ' %'rkin& capital. Durin& *'' peri'd, t$e tendency ' ana&eent is t' pile up inent'ries ' ra% aterials andinis$ed &''ds t' aail t$e adanta&e ' risin& prices. "$is creates deand 'r 'recapital. Siilarly, durin& depressi'n %$en t$e prices and deand 'r anuactured &''ds are l'%, t$edeand 'r %'rkin& capital is als' l'%. . C%RRENT A--ET- POLICIE-! "$e 5uantu ' %'rkin& capital ' a c'pany is si&niicantly deterined *y its currentassets p'licies. A c'pany %it$ c'nseratie assets p'licy ay 'perate %it$ relatiely$i&$ leel ' %'rkin& capital t$an its sales 'lue. A c'pany pursuin& an a&&ressie assets p'licy 'perates %it$ a relatiely l'%er leel ' %'rkin& capital.
S'e B. FL%CT%ATION- OF -%PPL& AN -EA-ONAL 1ARIATION-! c'panies need t' keep lar&e a'unt ' %'rkin& capital due t' t$eir irre&ular salesand interittent supply. Siilarly c'panies usin& *ulky aterials als' aintain lar&ereseres ' ra% aterial inent'ries. "$is increases t$e need ' %'rkin& capital. S'ec'panies anuacture and sell &''ds 'nly durin& certain seas'ns. /'rkin& capitalre5uireents ' suc$ industries %ill *e $i&$er durin& certain seas'ns. .GROWT$ AN EPAN-ION! Gr'%in& c'ncerns re5uire 're %'rkin& capital t$an t$'se t$at are static. !t is l'&ical t' expect lar&er a'unt ' %'rkin& capital in a &r'%in& c'ncern t' eet its &r'%in& needs ' unds. D.I1IEN POLIC&! Diidend p'licy and %'rkin& capital are interrelated. Mana&eent takes a ie% ' current assets *e're declarin& a diidend. .PRICE LE1EL C$ANGE-! 0isin& price leel re5uires 're %'rkin& capital t' aintain t$e sae leel ' current assets. "(. TAE-! realent rent ' taxes ' t$e c'untry plays a ital r'le in deterinin& t$e re5uireents ' %'rkin& capital. ! t$e rate ' tax is l'%, t$en need ' %'rkin& capital is als' l'% 't$er%ise 're *ecause a a+'r cas$ &'es t' t$e &'ernent in t$e 'r ' tax.
-O%RCE- OF WORKING CAPITAL! -O%RCE- OF WORKING CAPITAL
-$ORT TERM -O%RCE-
LONG TERM -O%RCE-
!ndi&en'us *ankers
!ssues s$ares
Adances
!ssue ' de*entures
Deerred inc'e
u*lic dep'sits
2'ercial *anks
pl'u&$in& *ack ' pr'it
!nstituti'n
#'ans r' inancial
!nstalent credit AIcCs receia*les creditIact'rin& -O%RCE- OF LONG TERM WORKING CAPITAL!
"$e l'n& ter %'rkin& capital re5uireents can *e et r' t$e 'll'%in& s'urces. I88ue 2; -:are8! !t is t$e saest %ay ' pr'curin& peranent and re&ular %'rkin& capital %it$'ut any ixed c$ar&es. I88ue 2; e9enture! 0e&ular and l'n& ter %'rkin& capital ay *e '*tained at l'%er c'st ' trade 'n e5uity. Retained Pr2;it8! Accuulated lar&e pr'its are als' c'nsidered t' *e a &''d s'urce ' inancin& l'n& ter %'rkin& capital re5uireents. !t is t$e *est and c$eapest s'urce ' inance. -a*e 2; Fi4ed A88et8! ! t$ere is any idle ixed assets in t$e ir can *e s'ld 'ut and t$e pr'ceeds ay *e utili7ed 'r inancin& t$e %'rkin& capital re5uireents. -O%RCE- OF -$ORT TERM WORKING CAPITAL !
"$e s'urces ' s$'rt6ter %'rkin& capital ay *e c lassiied in t%' $eads8 9.!nternal s'urces >.xternal s'urces Interna* -2ur+e8!
A++rued E4pen8e8! "$e 2'pany s'eties p'stp'nes t$e payent ' certain expenditure due t' inali7ati'n ' t$e acc'unts. "$ese accrued expenses als' c'nstitute an ip'rtant s'urce ' %'rkin& capital.
E4terna* -2ur+e8! xternal s'urces ean t$e s'urces pr'idin& inance 'r c'panyCs %'rkin& capital 't$er t$an t$'se ' internal s'urces. "$ese ay *e enuerated as &ien *el'%8 N2rma* Trade Credit! 2redit'rs pr'ide s$'rt6ter inance t' t$e c'pany *y sellin& t$e &''ds, inent'ries and e5uipent 'n t$e *asis ' deerred payent. !t is ery c''n s'urce ' s$'rt ter inance and n'rally eery c'ncern use t$is s'urce as a n'ral trade practice. Credit Paper8! Bills paya*le 'r pr'iss'ry n'te %$ic$ ay *e disc'unted r' *ankers 'r eetin& s$'rt ter capital need *y t$e dra%er. 0ank Credit! "$e &reater part ' t$e %'rkin& capital is supplied *y c'ercial *anks t' t$eir cust'ers t$r'u&$ direct adances in t$e s$ape ' l'ans, cas$ credit 'r 'er drat and t$r'u&$ disc'untin& t$e credit, papers, e.&. *ills paya*le and pr'iss'ry n'tes etc. Cu8t2mer Credit! Adance ay als' *e '*tained r' cust'ers a&ainst t$e c'ntracts entered int' *y t$e enterprise suc$ adances are &enerally asked 'r, *y t$e c'panies anuacturin& lar&e plants and ac$inery in'lin& l'n&er tie in c'pletin& t$e pr'cess ' anuacturin& e.&. s$ip *uildin& industries. "$e a'unt can *e used 'r purc$asin& ra% aterials. Pu9*i+ ep28it8! M'st ' t$e c'panies in recent years depend 'n t$is s'urce t' eet t$eir %'rkin& capital re5uireents. @K ' paid up capital and ree reseres *y t$is s'urce. G2=ernment A88i8tan+e! 2entral and state &'ernents ' t$e c'untry pr'ide s$'rt6ter inances t' industries 'r *usinesses *y all'%in& tax c'ncessi'ns, sancti'nin& direct l'ans 'r &rants t' industries 'r a class ' industries t' assist t$eir pr'ducti'n pr'&ras etc.
0ALANCE WORKING CAPITAL! "$e ir s$'uld aintain a s'und %'rkin& capital p'siti'n. !t s$'uld $ae ade5uate %'rkin& capital t' run its *usiness 'perati'ns. B't$ excessie and inade5uate %'rkin& capital p'siti'ns are dan&er'us r' t$e irCs p'int ' ie%. xcessie %'rkin& capital eans $'ldin& c'sts and idle unds %$ic$ earn n' pr'its 'r t$e ir. aucity ' %'rkin& capital n't 'nly ipairs t$e irCs pr'ita*ility *ut als' results in pr'ducti'n interrupti'ns and ineiciencies and sales Disrupti'ns. •
"$e dan?er8 2; !"#!$$i%! &'(i*+ #apita, are as 'll'%s8
xcessie %'rkin& capital eans ideal unds %$ic$ earn n' pr'it 'r t$e ir and
*usiness cann't earn t$e re5uired rate ' return 'n its inestents. 0edundant %'rkin& capital leads t' unnecessary purc$asin& and accuulati'n ' inent'ries.
xcessie %'rkin& capital iplies excessie de*t'rs and deectie credit p'licies
and t$is causeCs $i&$er incidence ' *ad de*ts. !t ay reduce t$e 'erall eiciency ' t$e *usiness. ! a ir is $ain& excessie %'rkin& capital t$en t$e relati'ns %it$ *anks and
't$er inancial instituti'n ay n't *e aintained. Due t' l'%er rate ' return 'n inestents, t$e alues ' s$ares ay als' all. "$e redundant %'rkin& capital &ies rise t' speculatie transacti'ns.
•
"$e dan?er8 2; i*a!uat! &'(i*+ #apita, are as 'll'%s8
!t leads t' sta&nati'n ' &r'%t$. !t *ec'es diicult 'r t$e ir t' undertake
pr'ita*le pr'+ects due t' n'n6aaila*ility ' %'rkin& capital unds. !t *ec'es diicult t' ipleent 'peratin& plans and ac$iee t$e irCs pr'it tar&et. Operatin& ineiciencies creep in %$en it *ec'es diicult een t' eet day t' day c'itents. Fixed capital cann't *e utili7ed due t' t$e lack ' %'rkin& capital unds. "$us t$e irCs pr'ita*ility %'uld deteri'rate. aucity ' %'rkin& capital unds render t$e ir una*le t' aail attractie credit 'pp'rtunities etc. "$e ir l'ses its reputati'n %$en it is n't in a p'siti'n t' $'n'r its s$'rt ter '*li&ati'ns. As a result t$e ir aces ti&$t credit ters. An enli&$tened ana&eent s$'uld, t$ere're, aintain t$e ri&$t a'unt ' %'rkin& capital 'n t$e c'ntinu'us *asis. Only t$en a pr'per uncti'nin& ' *usiness 'perati'ns %ill *e ensured. S'und inancial and statistical tec$ni5ues, supp'rted *y +ud&ent, s$'uld *e used t' predict the quantum of working capital needed at dierent time periods. A rm’s net working capital position is not only important as an index of liquidity but it is also used as a measure of the rm’ s risk. Risk in this regard means chances of the rm being unable to meet its obligations on due date. The lender considers a positie net working capital as a measure of safety. All other things being equal! the more the net working capital a rm has! theless likely that it will default in meeting its current nancial obligations. "enders such ascommercial banks insist that the rm should maintain a minimum net working capital position.
C$APTER3@ COMPAN& PROFILE
A0O%T ITI LIMITE !"! #iited (F'rally kn'%n as !ndian "elep$'ne !ndustries) is t$e irst pu*lic sect'r enterprises. !t %as esta*lis$ed in 9J:L +ust ater t$e independence. "$e irst !"! setup at Ban&al're. "$e pr'ducts ' !"! are extensiely inte&rated int' t$e nati'nal telec' net%'rk and $ae esta*lis$ed a track rec'rd 'r dependa*ility c'ntri*utin& 'er ?K' t$e existin& !ndian "ele c'unicati'n inrastructure.
/it$ its 'cused tec$nical expertise, tar&eted reac$ 'ut capa*ilities and net%'rk excellence, !"! $as !ndias 'nly ertically inte&rated telec' pr'ile seen state ' art anuacturin& acilities t$ree inn'atie 0PD centers and a c'untry%ide net%'rk ' 're t$an 'rty arketin&Iserices 'utlets.
!n 't$er %'rds, !"! is a sel6reliant c'pany %it$ ade5uate res'urces 'r c'nceptuali7in&, desi&nin&, ipleentin& and *ackin&6up t'tal telec' s'luti'ns includin& annual aintenance c'ntract 'r its aried cust'ers.
#nriched with the experience of pioneering telecom $ndia! $T$ oers leading edge technology through strong in house R%& and select collaborations strategic alliances
and
'oint
entures
with
global
leaders
underline $T$ as an emerging power on the global
telecom
hori(on!
ensuring
complete
reliable
communication anywhere! eerywhere.
ITI LIMITE, MANKAP%R %NIT IGITAL CIT& OF INIA/ Mankapur unit ' !"! #td. %as setup in year 9JL> 'r anuacturin& ' di&ital electr'nic s%itc$in& e5uipent in c'lla*'rati'n %it$ MIS 2!", A#2A"# France t' anuacture E"(0 type ' s%itc$in& syste 'r t$e irst tie in c'untry. "$is unit $as *een setup 'r in re'te area t' *rin& up s'ci'6ec'n'ic &r'%t$ in eastern part ' <. . !"! Mankapur unit setup %it$ an inestent c'st ' 0s. 9.?> cr'res. "$is unit is lar&ely pr'ducin& 2SN6MM exc$an&e. E"(0 type is a ne% 'utdated and 'nly repairin& ' t$is exc$an&e is d'ne $ere. !t $as deel'ped its '%n inrastructure acilities 'r %ater supply c'ni&urati'n, edical, educati'n, transp'rt, telec'unicati'n and entertainent etc. "$ere are :? $'stels, 3??? residential 5uarters. Mankapur plant $as exp'rted pr'ducts like su*scri*er c'nnecti'n e5uipent, line c'rds, MDF, "ester and ari'us 't$er e5uipent. T:e %nit8 2; I.T.I. Ltd. Are!3 0an?a*2re!3 "$e a+'r pr'ducts are SS2ON 0O;2"4 'r Deense purp'se, MS2 r'ducts, 2DMA (Handsets). Pa*?:at!3 Scratc$in& cards, GSM, MS. Naini %.P./!3 #atest "ransissi'n e5uipent (ADS#). Rai9arei*5 %.P./!3 B.".S. and '%er plant. Mankapur %.P./!3 GSM, B"S, 26D't and #andline c'unicati'n. -rina?ar Jammu Ka8:mir/!3 resently S$ut D'%n.
C$APTER # ATA ANAL&-I- AN INTERPRETATION /'rkin& capital p'siti'n ' a ir is analysed s' as t' detect trends and take c'rrectie acti'ns %$en t$e analysis indicates need 'r t$e sae. A sec'nd reas'n 'r it is t' see %$at c$an&es $ae taken place in t$e c'pany 'er a peri'd ' tie s' t$at t$is kn'%led&e can *e used in settin& &uidelines. "$ere are t%' ip'rtant t''ls 'r analy7in& t$e %'rkin& capital p'siti'n ' an enterprise. One is t$e unds l'% analysis and t$e 't$er is rati' analysis. ". Fund8 F*2> Ana*58i8 2; W2rkin? Capita*H "$is analysis s$'%s $'% unds $ae *een pr'cured 'r a *usiness and $'% t$ey $ae *een epl'yed. "$is tec$ni5ue $elps t' analy7e c$an&es in %'rkin& capital c'p'nents *et%een t%' data. "$e c'paris'n ' current assets and current lia*ilities, as s$'%n in t$e *alance s$eet at t$e *e&innin& and at t$e end ' a speciic peri'd, s$'%s c$an&es in eac$ type ' current assets as %ell as t$e s'urces r' %$ic$ %'rkin& capital $as *een '*tained. H'%eer, t$is tec$ni5ue d'es n't t$r'% li&$t 'n t$e 5uesti'n %$et$er t$e %'rkin& capital is *ein& used 'st eectiely and %$et$er t$e current inancial p'siti'n ' t$e enterprise $as ipr'ed. '. Rati2 Ana*58i8 2; W2rkin? Capita*H "$is is t$e 'st c''nly used tec$ni5ue %$ic$ deals practically %it$ eac$ and eery aspect ' %'rkin& capital analysis. !n t$is tec$ni5ue, 'r eac$ aspect ' analysis certain rati's are c'puted and t$en results are dra%n 'n t$e *asis ' trends s$'%n *y t$e a&ainst t$'se ixed as &uide p'sts. -ari'us rati's are used in analy7in& t$e ari'us aspects ' t$e %'rkin& capital p'siti'n ' an enterprise8
a/Liuidit5 2; W2rkin? Capita*H An analysis ' t$e li5uidity ' %'rkin& capital is ' use 'r *'t$ t$e s$'rt6ter credit'rs and internal ana&eent 'r a *usiness enterprise. "' t$e 'rer it c'unicates 6 t$e c$ances ' receiin& payent at t$e tie ' aturity, t$e ar&in ' saety, i t$e unexpected s$'uld arise %$ic$ ay indicate %$et$er t$e %'rkin& capital is suicient, t$e extent t' %$ic$ a c'ncern $as 'er6 'r under6inested t$e cas$ in its 'peratin& cycle. "%' appr'priate tests ' t$is ip'rtant eature ' t$e %'rkin& capital analysis are t' *e 'und in t$e c'putati'n ' current and 5uick rati's. "$e details ' t$e current and 5uick rati's $ae *een discussed in t$e c$apter %$ere rati's $ae *een c'puted and analy7ed. 9/ Cir+u*ati2n 2; >2rkin? +apita*H An analysis ' circulati'n ' %'rkin& capital $i&$li&$ts t$e eiciency %$ic$ %'rkin& capital is *ein& utili7ed. F'r t$is purp'se
ari'us turn'er rati's suc$ as inent'ry turn'er rati', 0eceia*les turn'er rati', cas$ turn'er rati' etc. are calculated %$ic$ s$'% eiciency ' t$e use ' %'rkin& capital in eac$ 'r its c'p'nents as %ell as 'n t$e %$'le. Generally t$e $i&$er t$e leel ' t$ese turn'er rati's, t$e saller %'uld *e t$e %'rkin& capital re5uireents ' an enterprise.
RATIO ANAL&-I-! "/ Liuid Rati2! A irCs a*ility t' eet s$'rt ter '*li&ati'ns %$en t$ey *ec'e due 'r payent can *e easured t$r'u&$ li5uidity rati's. #i5uidity is a per5uisite t' t$e surial ' t$e ir and relects t$e s$'rt6ter inancial stren&t$ and s'lency ' a ir. "$e li5uidity rati's are8
9.9 2<00N" 0A"!O8 "$is is t$e 'st %idely used rati'. !t is t$e rati' ' current assets and current lia*ilities. !t s$'%s a irCs a*ility t' c'er its current lia*ilities %it$ its current assets. !t expresses t$e relati'ns$ip *et%een current assets and current lia*ilities and can *e expressed as 'll'%s8 Current rati27 Current a88et83 Current *ia9i*itie8 89.
&EAR '("@ '("#
TA0LE NO. "." C%RRENT C%RRENT A--ETLIA0ILITIE>:@::9 >3:@ >:>@99 >3J?
C%RRENT RATIO ?.J3 ?.J9
2HA0" NO. 9.9
INTERPRETATION! "$e standard rati' 'r c'paris'n is >89. !n >?9: it is 'nly ?.J9 %$ic$ eans t$at c'panyCs li5uidity p'siti'n in ters ' current rati' is n't t$at s'und. H'%eer, $i&$er current rati' is n't al%ays a'ra*le 'r t$e c'pany. !t ay *e iplied t$at t$ey $ae excess cas$ 'r inent'ry %$ic$ reains idle 'r l'n& peri'd due t' %$ic$ t$eir und ay *e *l'cked 'r inent'ry ay *ec'e '*s'lete.
".' ui+k Rati2! !t depicts t$e relati'ns$ip *et%een 5uick assets and current lia*ilities. !t reers t' all current assets %$ic$ can *e c'nerted in t' cas$ at a s$'rt n'tice %it$'ut diinuti'n ' alue. "$us current assets %$ic$ are excluded in t$e calculati'n ' 5uick assets are prepaid expenses and inent'ries. ui+k Rati2 7 ui+k A88et8 Current Lia9i*itie8
&EAR
'("@ '("#
"AB# NO. 9.> %ICK C%RRENT A--ETLIA0ILITIE>:3:L >3:@ >:?L >3J?
%ICK RATIO
?.J> ?.J9
2HA0" NO. 9.>
INTERPRETATION! "$e 5uick rati' is uc$ 're exactin& easure t$an t$e current rati' t' pay E' t$e de*t ' t$e c'pany. "$e 5uick rati' ' 989 is c'nsidered t' *e satisact'ry. !n >?93 and >?9: t$e c'panyCs p'siti'n in ters ' 5uick rati' %as &''d *ut ater t$at it started t' all c'nsidera*ly %$ic$ iplies t$at t$e inent'ries i&$t n't *e c'nerted int' cas$ and t$ere're lead t' reducti'n in 5uick rati'. !t is als' indicatin& t$at t$e a+'r p'rti'n ' current assets is inent'ry. ".@ Ca8: Rati2! 2as$ is t$e 'st li5uid asset. A inancial analyst exaines t$e cas$ Ratio and its equialent to current liabilities in order to get the actual liquidity position of the rm in case of contingency. )ash Ratio depicts the relationship between cash andcurrent liabilities and shows the ability of the rm to meet its current obligations with cash and cash equialents. Trade inestments or marketable securities are equialent ofcash and therefore! may be included in the computation of cash ratio. $t can be calculated as 8
Cash Ratio= (Cash and equivalent+ Marketable Securities)/Current Liabilities
TA0LE NO. ".@ CA-$
C%RRENT
9> @
LIA0ILITIE>3:@ >3J?
&EAR
CA-$ RATIO ?.???: ?.???>
'("@ '("#
2HA0" NO. 9.3
INTERPRETATION! "$e c'pany is c'nstantly acin& li5uidity t$reat. 2as$ $as crunc$ed and t$e c'pany needs t' put 're e'rt 'n t$e issue as it is uc$ *el'% t$e industry standard. ' WORKING CAPITAL T%RNO1ER RATIO! /'rkin& capital rati' easures t$e eectie utili7ati'n ' %'rkin& capital. !t als' easures t$e s''t$ runnin& ' t$e *usiness 'r 't$er%ise. "$e rati' esta*lis$es relati'ns$ip *et%een c'st ' salesIsales and %'rkin&capital. !t is calculated %it$ t$e $elp ' 'll'%in& 'rula8 W2rkin? +apita* turn2=er rati2 7 -a*e8 Net W2rkin? Capita*
*et +orking )apital , )urrent Assets - )urrent "iabilities
TA0LE NO. ' &EAR
-ALE-
'("@
9@
NET WORKING CAPITAL (9L?3:)
WC T%RNO1ER RATIO (?.3:)
L:J9
'("#
(>9>J)
(?.3J)
2HA0" NO. >
INTERPRETATION! 2'nenti'nally a $i&$er /2 rati' eans $i&$er eiciency, *ut t$ere is al%ays a lipside ' t$e c'in. xtreely $i&$ rati' ay als' *e due t' inade5uate %'rkin& capital. Since t$e c'pany $as excess ' current lia*ilities 'er current assets $ence it is als' $aperin& t$e %'rkin& capital turn'er rati' ' t$e c'pany.
@ CAPITAL T%RNO1ER RATIO! 2apital turn'er rati' easures t$e eiciency ' t$e ana&eent. Mana&eent eiciency t$r'u&$ capital turn'er rati' is calculated *y esta*lis$in& t$e relati'ns$ip *et%een c'sts ' sales %it$ a'unt ' capital inested in t$e *usiness. 2apital turn'er rati' is calculated %it$ t$e $elp ' t$e 'll'%in& 'rula8 Capita* Turn2=er Rati2 7 -a*e8 Capita* Emp*25ed 2apital pl'yed "'tal Assets E 2urrent #ia*ilities
TA0LE NO. @ &EAR
-ALE-
CAPITAL
CAPITAL
EMPLO&E
T%RNO1ER RATIO
'("@ '("#
9@ L:J9
?>9L @J>
?.9? ?.9:
2HA0" NO. 3
INTERPRETATION! 2apital turn'er rati' durin& >?936>?9: is l'% %$ic$ indicates t$e ineiciency ' t$e ana&eent. !t ust *e due t' p''r inancial p'siti'n ' !"!. # FIE A--ET- T%RNO1ER RATIO! "$is rati' deterines eiciency ' ixed assetsand pr'ita*ility ' a *usiness c'ncern. Hi&$er t$e rati' 're is t$e eiciency in utili7ati'n ' ixed assets. A l'%er rati' is t$e indicati'n ' underutili7ati'n ' ixed assets. Fi4ed A88et8 Turn2=er Rati2 7 Net -a*e8 Net Fi4ed A88et8
"AB# NO. : &EAR
NET -ALE-
NET FIE A--ET-
'("@ '("#
:@ LJLJ
>@9@J >:9>
2HA0" NO. :
FIE A--ET- T%RNO1ER RATIO
?.> ?.3
INTERPRETATION! "$e ixed asset turn'er rati' ' t$e c'pany is l'% %$ic$ indicates t$e underutili7ati'n ' ixed assets. ). C%RRENT A--TE- T%RNO1ER RATIO! "$is rati' deterines eiciency ' current assets and pr'ita*ility ' a *usiness c'ncern. Hi&$er t$e rati' 're is t$e eiciency in utili7ati'n ' current assets. A l'%er rati' is t$e indicati'n ' underutili7ati'n ' ixed assets. Current A88et8 Turn2=er Rati2 7 Net -a*e8 Current A88et8
"AB# NO. @ &EAR
NET -ALE-
C%RRENT A--ET-
'("@
:@
'("#
LJLJ
>:@::9 >:>@99
C%RRENT A--ETT%RNO1ER RATIO ?.?>
?.?3
2HA0" NO. @
INTERPRETATION! "$e current assets turn'er rati' is inc'nsistent *ut since t$e ariati'ns are n' t t'' $i&$, it can *e c'ncluded t$at t$e current assets are *ein& eiciently utili7ed. B. TOTAL A--TE- T%RNO1ER RATIO! "$is rati' deterines eiciency ' t'tal assets and pr'ita*ility ' a *usiness c'ncern. Hi&$er t$e rati' 're is t$e eiciency in utili7ati'n ' t'tal assets. A l'%er rati' is t$e indicati'n ' underutili7ati'n ' t'tal assets. Total Assets Turnover Ratio = Net Sales / Total Assets
"AB# NO. &EAR
NET
TOTAL
TOTAL A--ET-T%RNO1ER
-ALE-
A--ET-
RATIO
'("@
:@
'("#
LJLJ
3>3J3 3>3:9
?.?>? ?.?>
2HA0" NO. @
INTERPRETATION! "$e t'tal assets turn'er rati' is n't satisact'ry and indicates t$e underutili7ati'n ' t$e t'tal assets t$e reas'n sae %it$ t$at ' t$e capital turn'er rati' and ixed assets turn'er rati'. . IN1ENTOR& T%RNO1ER RATIO! !nent'ry "urn'er 0ati' indicates t$e nu*er ' ties t$e inent'ry is r'tated durin& t$e releant acc'untin& peri'd and ealuates t$e eiciency %it$ %$ic$ a ir is a*le t' ana&e its inent'ry. "$e rati' indicates %$et$er inestent in st'ck is %it$in pr'per liit 'r n't. ITR7COG- 2r Net -a*e8A=era?e In=ent2r5
&EAR
"AB# NO. NET -ALEA1ERAGE IN1ENTOR&
IN1ENTOR& T%RNO1ER RATIO
'("@
:@
(>@:.9)
(>.9:)
'("#
LJLJ
L9
99?.J
2HA0" NO.
INTERPRETATION!
"AB# NO. 9? &EAR
GRO-PROFIT
NET -ALE-
'("@ '("#
?.?? ?.??
:@ LJLJ
GRO-PROFIT RATIO ? ?
INTERPRETATION!
"$e c'pany $as ? &r'ss pr'it rati'. M're e'rts are re5uired t' %it$stand a&ainst t$e $u&e l'sses.
"". OPERATING RATIO! Operatin& rati' s$'%s t$e 'perati'nal eiciency ' t$e *usiness. #'%er 'peratin& rati' s$'%s $i&$er 'peratin& pr'it and ice ersa. An 'peratin& rati' ran&in& *et%een @K and L?K is &enerally c'nsidered as standard 'r anuacturin& c'ncerns. "$e 'rula 'r Operatin& 0ati' is8 OR 7 COG- Q Operatin? E4pen8e8Net 8a*e8S"((
"AB# 99 &EAR
COG-QOPERATING EPEN-E-
NET -ALE-
OPERATING RATIO
'("@ '("#
99>:?
:@
9.J
9?LJ
LJLJ
9.L
2HA0" NO. 99
INTERPRETATION!
"$e c'pany needs t' put 're e'rts t' increase t$e 'perati'nal eiciency ' t$e 'r&anisati'n. Since t$e standard is @K6L?K s' &reatest e'rts are re5uired in t$is in 'rder t' attain 'erall eiciency and eectieness.
"(. NET PROFIT RATIO! N 0ati' is used t' easure t$e 'erall pr'ita*ility ' t$e ir and $ence it is ery useul t' t$e pr'priet'rs. "$e rati' als' indicates t$e irCs a*ility t' ace aderse ec'n'ic c'nditi'ns suc$ as price c'petiti'n, l'% deand, etc. O*i'usly, $i&$er t$e rati' t$e *etter is t$e pr'ita*ility. "$e 'rula 'r N 0ati' is8 NPR7 Net pr2;itNet 8a*e8/"((
"AB# 9> &EAR
NET PROFIT
NET -ALE-
NET PROFIT RATIO
'("@ '("#
?
:@
?
?
LJLJ
?
INTERPRETATION! "$is indicates t$at t$e pr'ita*ility ' t$e ir in >?93 and >?9: is ? and c'pany is incurrin& $u&e l'sses.
PRO0LEM-, CA%-E- AN -OL%TION IN T$E IMPLEMENTATION
PRO0LEM! 2'pany takes l'ts ' tie 'r dispatc$in& t$e &''ds. #iited cust'ers. #iited xp'rts. 2'pany d'es n't p'ssess a pr'per *ud&etin& and 'nit'rin& syste. "radin& $as increased %$ereas anuacturin& $as decreased %$ic$ resulted in
decrease in c'ntri*uti'n. /it$ relati'n t' ixed assets, t$e c'pany $as t' incur l'sses.
CA%-E-! #ack ' pr'per ana&eent ' inent'ry i.e. inent'ry la& peri'd is $i&$. #ack ' pr'per distri*uti'n net%'rk. #'% eiciency %'rk 'rce. #ack ' pr'per sales pr''ti'nal sc$ee and adertiseent. O*s'lete tec$n'l'&y. Fierce c'petiti'n %it$ &l'*al arket.
-OL%TION- ! !pleentati'n ' inn'atie tec$n'l'&y in t$e c'pany. r'per inent'ry ana&eent s$'uld *e 'll'%ed. Dedicated researc$ and deel'pent pe'ple are needed. M'tiati'nal classes s$'uld *e arran&ed 'r t$e epl'yees. r'per trainin& pr'cess is needed. !nternal transer ' t$e epl'yee is needed.
CONCL%-ION !n t$is study ' %'rkin& capital ana&eent ' t$e c'pany dierent rati's are ealuated s' as t' easure t$e s$'rt ter li5uidity p'siti'n ' t$e c'pany. "$e analysis and interpretati'n ' t$ese rati's are suari7ed in t$e rep'rt clearly and precisely. On t$e *asis ' a*'e analysis t$is can *e c'ncluded t$at t$e s$'rt ter li5uidity p'siti'n ' t$e c'pany is s'und en'u&$ t$'u&$ e'rts need t' *e put t' stren&t$en it 're. "$e li5uidity rati's su&&est t$at t$ere is excess ' current lia*ilities 'er current assets %$ic$ acc'rdin& t' t$e standard n'rs are n't a &''d si&n 'r t$e c'pany. But t$ere is als' a lipside ' t$e c'in. "$e current assets are less due t' t$e strin&ent credit p'licies ' t$e c'pany due t' %$ic$ its de*t'rs are ery less and cas$ sales are ery $i&$. On t$e c'ntrary due t' t$e str'n& arket presence %'rld%ide t$e c'pany is a*le t' &et its re5uireent 'n credit due t' %$ic$ t$e current lia*ility ' t$e c'pany &ets sur'unted %$ic$ can *e paid later 'n. "$ere're t$is is iplyin& a a'ra*le p'siti'n 'r t$e c'pany. "$e turn'er rati's ' t$e c'pany are su&&estin& a &''d p'siti'n ' t$e c'pany. "$e c'pany als' $as ne&atie 'peratin& cycle %$ic$ iplies t$at it $as ery eectie li5uidity ana&eent. H'%eer, t$e assets turn'er rati' indicates t$at t$e assets are n't eectiely utili7ed. But t$is is als' due t' t$e $eay inestent in expansi'n pr'+ect %$ic$ %as n't a*le t' earn reenue due t' t$e pr'*les related t' inin& appr'als and land ac5uisiti'n. "$e pr'ita*ility rati's ' t$e c'pany are suicient en'u&$ *ut t$ere is al%ays a r'' 'r ipr'eent. The gures also suggest inadequate working capital but this might be because of the aboe reasons. ence! there is no doubt in the fact that company is in a good position and continuously oercoming the aderse situations. oweer more eorts are required to strengthen its current position.
