Certificate This is to certify that the project titled MANAGEMENT”
“WORKING CAPITAL CAPITAL
by P.Ram .Ramak akri rish shna naRa Rao o bear bearin ing g the the roll roll nu numb mber er
07J4 07 J41E 1E00 0026 26 of Dept Dept.. of MBA MBA is a bo bona nafi fide de work work do done ne un unde derr the the guid gu idanc ancee of __ ____ ____ _____ _____ ____ ____ __ and and submi submitte tted d to Jawah Jawaharl arlal al Nehru Nehru Technological University Hyderabad.
Place: Date:
Head of the Dept. examiner
Internal guide
External
DECLARATION
I here by declare that this project work titled WORKING CAPITAL CAPITAL MANAGEMENT” with LIMITED,
“ A PROJECT REPORT ON
special reference to PRAGA
TOOLS
Secundrabad, is original in has been carried out by me as a student of
DEP DEPART MENT MENT OF MANAGEME MANAGEMENT NT STUDIES STUDIES ,
K.G.R. K.G.R.L. L. INSTIT INSTITUTE UTE OF
MANAGEMENT BHIMAV BHIMAVARAM, W.G.Dt. During 1st may to 30 June Ju ne 2007. And has not been submitted elsewhere for the Award of any degree of diploma either in part time or in full time to other university.
Date: Place:
V. BALA BALAJI
ACKNOWLEDGEMENT
I am highly thankful to Principal and Faculty of K.G.R.L.In K.G.R.L.Institute stitute of Management Studies for giving me this opportunity to under take my project work in the Praga tools Limited. Li mited. Balanagar, Secundrabad.
I am grateful to Mr. Uma Maheswara Reddy for giving me permission to do the project in PRAGA TOOLS LIMITED. I would express my sincere thanks to Mrs. Padmini for helping me a lot in gathering information for my project.
I also express my gratitude to my Father, Mother and my friends who had been a constant source of encouragement and provided me the necessary help during the period of my project.
Last but not least, I express my sincere thanks to the God Almighty for showering his blessings upon me and also all those who helped me directly or indirectly throughout my project work.
(BALA BALAJI.V) Place Date:
CHAPTERS
CONTENTS
PAGE NO:
ACKNOWLEDGEMENT
I
LIST OF TABLES
II
LIST OF GRAPHS
III
CHAP HAPTER TER-I
INT INTRODUC ODUCTI TION ON TO THE STUD TUDY
•
Need for the study
2
3
•
Scope of the study
4
•
Objectives of the study
5
•
Methodology of the study
6
•
Limitations of the study
7
CHAPTER-II
INDUSTRY PROFILE
8-14
CHAPTER-III
COMPANY PROFILE
15-23
CHAPTER-IV
THEORETICAL FRAME WORK
24-40
CHAPTER-V
DAT DATA ANALYSIS ANALYSIS & INTERPRETAION 41-72 41-7 2
CHAPTER-VI
FINDINGS
73-78
SUGGESTIONS
BIBILIOGRAPHY
79
CHAPTER 1 INTRODUCTION
INTRODUCTION 1. WORKING CAPITAL CAPITAL MANAGEMENT
The success of business, among other things depends upon the manner in whic which h its its capit apital al is manag anaged ed in the the dy dyna nami micc bu busi sine ness ss sett settin ing, g, the the composition of working capital mismanaged, in the dynamic business setting, the diffe differen rence ce betwee between n the curren currentt assets assets and curren currentt liabilit liabilities. ies. Consta Constantly ntly changes in relation to the level of activity of the business concern and rates at which the current assets of current current liabilities keep changing in relation relation to each othe otherr and and other other things things are are signi signific fican antt fact factors ors also also conti continuo nuous us revie review w and and direction of the financial manager. It is the task of the financial maintain an appropriate level of working capital capital that is enough current assets to pay off current liabilities liabilities neither excess nor less because because excessive excessive working capital capital leads to interruption interruption in the smooth functioning of the business concern. There are numerous instances in the history of business world where inadequacy inadequacy of working capital has led to business failures when a firm finds it difficult to meetings day to day. 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 Th us effi effici cien entt mana manage geme ment nt of work workin ing g capi capita tall in an impo import rtan antt prerequisite for successful working of a business concern it reduces the chances of business failure generates a felling of security and confidence in the minds of pers personn onnel el in the the orga organiz nizat ation ion it assur assuran ance ce solv solven ency cy of stea steady dy of the organization.
1.1 NEED AND IMPORTANCE OF THE STUDY:
1.The 1.Their ir proje project ctss is helpf helpful ul in kn knowi owing ng the the comp compan anie iess positi position on of funds funds maintenance and setting the standards for working capital inventory levels, curren currentt ratio ratio level, level, quick quick ratio, ratio, curren currentt amount amount turnover turnover level level & web torn torn turnover levels. 2. This project is helpful to the managements managements for expanding the dualism & the project viability & present availability of funds. 3. This project is also useful as it companies the present year data with the previous year data and there by it show the trend analysis, i.e. increasing fund or decreasing fund. 4. The project is done entirely as a whole entirely. It will give overall view of the organization and it is useful in further expansion decision to be taken by management.
1.2 OBJECTIVE OF THE STUDY: 1. To examin examinee the effect effective iveness ness of working working capita capita managem management ent polices polices with the help of accounting ratio. 2. To study liq liquid uidity posit sition ion of the company by taking ing variou ious measurements. 3. To evaluation evaluation the financi financial al performanc performancee of the company company.. 4. To make make sugg sugges estio tions ns for for polic policy y make makers rs for for effe effect ctive ive mana manage geme ment nt of working capital.
1.3 METHODOLOGY Primary Data
DEF: DEF: Th Thee first first hande handed d inform informat atio ion/F n/Fre resh sh data data coll collec ected ted thro through ugh vario various us methods is known as primary data. In respect of primary data which the researchers is directly collects data that have not been previously collected. The primary data was gathered through personal interaction with various functional functional heads heads and other technic technical al personnel. personnel. Some information information was also also collected by observation.
Secondary Data :
DEF: The data which have been already collected & comprised for another purpose. Seconda Secondary ry data data was collec collected ted various various report reportss / annual annual report reports, s, docume documents nts charts, management information systems, etc in PRAGA. And also collected various magazines, books, newspapers and internet.
The analysis of the information gathered has been made on the basis of the clarifications sought during the personal discussions with the concerned peo people ple and and perc percep epti tion on du duri ring ng the the pers person onal al visit visitss to the impo import rtan antt area areass o services.
In marking observations identifying problems and suggesting certain remedies such emphasis was given on the basis of opinions gathered during the p per erso sona nall disc discuss ussion ionss and and with with the the pers persona onall expe experi rien ence ce gaine gained d durin during g the the academic study of M.B.A course.
1.4 SCOPE OF THE STUDY 1. The scope scope is limited limited to to operations operations of Praga tools Ltd, Ltd, Hyderabad. Hyderabad. 2. Th Thee peri period od cons conside iderr 2 month monthss
The scope of the study is limited to collecting the financial data published in the annual reports of the company with reference to the objectives stated above and an analysis of the data with a view to suggest favorable solution solution to various problems related to financial performance.
1.5 LIMITATION OF THE STUDY: 1. The following are the various aspects involved in the analysis of the study.
2. The study in limited 4 years (2004-2005) to (2005-2006) performance of the company.
3. The data used in this study have been taken from published annual report only.
4. This study in conducted conducted within a short period. During During the limited limited period the study may not be retailed, full fledged and utilization in all aspects.
5. Financial accounting does not take into account the price level changes.
CHAPTER – II MACHINE TOOLS INDUSTR INDUS TRY Y – AN OVER OVE RVIEW
MACHINE TOOLS INDUSTRY – AN OVERVIEW
India ranks nineteenth in production and sixteenth in consumption of machine tools in the world. The Indian machine tool industry averaged more than 35 percent growth in 2004-05. Imports exceeded production in the year 2004 20 04 with with us$35 us$356 6 mill million ion worth worth mach machin inee tools tools bein being g impo import rted ed while while the production was only us$225 million. Machine tools from I percent of Indies engineering industry and contributes 0.3 Percent of total machinery exports. Thee Indi Th Indian an mach machin inee tool tool indu indust stry ry curr curren entl tly y cons consis ists ts abou aboutt 45 450 0 manufacturi manufacturing ng units of which approximately approximately 33 percent percent (150 units) Fall under the organized category. Further ten Major Indian companies constitute also most 70 percent of the total production. The government Owned Hindustan Machine tools Limited (HMT) alone accounts for Nearly 32% of Machine tools Manuf Manufac actur tured ed in India India Appro Approxi xima mate tely ly 75 75% % of the the Indi Indian an Mach Machin inee tool tool pro produc ducer erss have have rece receiv ived ed the cove covete ted. d. 150 cert certif ific icat atio ion n while while the the larg largee organized players cater to Indian’s Heavy and Medium industries, the small scale sectors meets the demand of ancillary and and other units World wide the total modify locations are 3,336. First highest modify location location country is United States in 1333 lowest Modify Modify location countries are Bela Belaru rus, s, Bosn Bosnia ia and and Merz Merzeg egov ovin ina, a, Bulg Bulgar aria ia,, Croa Croati tia, a, Malt Malta, a, Russ Russia ian n Federation in only one Modify Location. 51 modify location are located in India India.. Mo Mode dern rn Mach Machine ine
Tool in India India’’s lead leadin ing g Indus Industr tria iall Maga Magazi zine ne on
machin machinee tools tools and Ancillar Ancillary y industri industries. es. Publishe Published d in affe affecta ctation tion with the countr country’ y’ss apex apex
Body Body for the machine machine tools industry industry.. Indian Indian machine machine tool
Manufacture’s Manufacture’s association (IMMA)
With a healthy readership base of over 2 lakhs, this Premium quarterly magazine is regularly referred to by the key decision makers in the machine tool, cutting and other manufacturing Industries that include CEOs. Directors, senior managers, managers, as well as engineers engineers and shop. Floor technical technical personal personal apart from students. It serves as the bench mark and with word it this ever growing sector of Indian industry. industry. In addi additio tion n to manuf manufac actu ture res, s, this this pu publi blica catio tion n also also reac reache hess out to expo export rter ers, s, deal dealer ers, s, distr distribu ibutor tors, s, R&D R&D pers personn onnel el Ed Educ ucat ation ional al insti institut tution ion,, consultants, industry associations and trade commissions almost every entry in the industry.
Modern Mod ern machine machine tools tools provide provide an intelli intelligen gentt balanc balanced ed and cohesi cohesive ve insight into the machine tools and ancillary industries in India in terms of the death editorial editorial content. content. It includes includes the latest trends and technolog technologies ies highly useful technical articles and case studies. Business strategies views and vision of industry leaders and one of the largest ranges of machines tools/cuttings tools. tools. This apart, apart, there there is exhausti exhaustive ve covera coverage ge of the current current nation national al and international news, upcoming projects, tenders, events and much more that help the readers to effectively manage their business in a facilitator and guide for this burgeoning industry.
Modern machine tools strives to facilitate effective interaction among several fatuities of the machine tool, cutting and user industries by enabling them in reaching out to their prospects buyers and sellers through better trade contacts and more business opportunities.
Machine tool industry has undergone a radical shift in its paradigm thinking, the Indian machine tool industry is now recognized as a provider of low-cost low-cost high quality quality learn learn manufac manufacturing turing solutions. solutions.
The industry industry resilient resiliently ly
supp ppo orts all its users to enhance prod produ uctivit vity as well as improve competitiveness, for the betterment of the final customer. Being an integral sector, growth of the machine tool industry has an immens immensee bearin bearing g on the entire entire econom economy y, especi especiall ally y India’ India’ss manufa manufactu cturing ring industry. And is even more crucial for development of the country’s strategic segments such as Defense, railways, space and atomic ato mic energy. energy. World over too, industrialized-advanced countries have created market inches on the back of a well- developed and supportive machine tool sector. In India as well, indigenous machine tools have the highest impact on capital capital output output ratios ratios.. Machine Machine tool consum consumptio ption n of Rs. 1,000 Crore Crore truly truly supports the advancement of the country’s engineering sector, output of which is estimated to be worth over Rs. 1,50,000 crore. 2.2 Manufacturing range:
The Indian machine tool industry manufactures almost the complete range of metal cutting and metal forming machine tools complete range of metal-cutting and metal-forming machine tools. Customized in nature, the products from the Indian basket comprise and conventional machine tools as well as computer numerically controlled (CNC) mach machin ines es.. There There are are other other vari varian ants ts offe offere red d by Indi Indian an manuf manufac actur tures es too, too, includi including ng specia speciall purpose purpose machi machines, nes, robotc robotcsrob srobotic otics, s, handlin handling g system systemss and TPM friendly machines. Efforts within the industry, are now on to better the features of CNC machines, and provide further value additions at lower costs, to meet specific requir requireme ements nts of users. users. Based Based on the percep perception tion of the curren currentt trends trends,, and emer emergin ging g dema demands nds,, CNC CNC segm segmen entt coul could d be the the driv driver er of growt growth h for the machine tool industry in India.
2.3 Current trends :
A slowdown in the Indian economy since mid-1999 had its fallout on prospe prospects cts of Indian Indian machine machine tool manufa manufactu ctures res.. The Indian Indian machin machinee tool indus industr try y is besie besiege ged d by lack lack of adeq adequa uate te busin busines esss opp oppor ortun tunit itie iess that that has has stemmed from sluggish demand in the home market of all user industries. Output by domestic metal working machine tool manufacturers in 2001 calendar year declined by 14 pr cent to Rs.5, 137 million marking the fourth yeast of decline, since 1997, for the Indian machine tool industry. Much of this fall was due to subdued investment by all the major users segments of machine tools, tools, except except the Defense Defense
industr industry y, primar primarily ily because because of a higher higher capital capital
expenditure outlay. outlay. Whil Whilee decr decrea ease se in do dome mest stic ic prod produc ucti tion on was was do dorm rman antt in case case of conventional conventional metalworking metalworking machine tools computer computer numerically numerically conventional conventional metalworking machine tools, computer numerically controlled (CNC) machine tool manufa manufactu cturer rerss too suffer suffered, ed, althoug although h margi marginal nally ly.. Lathes Lathes,, machini machining ng centers, special purpose machines, and grinding machines were among the machine tools that sustained much of the order inflow during 2001.even though thes thesee segm segmeents nts regi regist steered red decl declin ine, e, in comp compar aris ison on with with the the pre previou viouss corresponding year. year. 2.4 Export Performance:
In view of an imminent slowdown in the Indian economy, most Indian machine tool manufactures focused on potential overseas markets for business opportunities. Sustenance on Indian market alone did not look feasible enough.
Further, Further, there has off late been a perceptible perceptible change in the image of the made made in India India brand brand in overse overseas as market marketss partic particula ularly rly true true for IndianIndian-buil builtt machine tools. Enhanced features, competitive pricing, and marketing focus has increased increased demand demand for Indian –made –made machine machine tools in overseas overseas markets, particularly in Europe, United states, and East-Asian regions.
And And this this is what
India Indian n mach machin inee tool tool manufa manufact ctur ures es are hoping hoping to
leverage so as to post an optimistic export turnover in the next few years. Indian-made Indian-made machine tools are currently exported exported to over 50 countries: countries: major ones being United states, Italy, Brazil. Germany and the middle East. Lathes Lathes and automa automats, ts, presses presses,, electr electro-di o-disch scharg argee machin machines, es, and machin machining ing cente centers rs form formed ed the the bu bulk lk of expor exportt orde orders rs for for India Indian n manu manufa fact ctur ures es.. Th Thes esee machines from the Indian basket are generally favored in overseas markets prima primarily rily due to their their cost-c cost-comp ompeti etitive tivenes ness, s, as compar compared ed to that availa available ble elsewhere compared to those available elsewhere. This vision of the Indian machine tool industry is now to step out and establish a relative presence in, other potential markets. World-over, market leaders have been those who have looked to increase their market presence beyond their national frontiers. 2.5 Industry Structure
Machine tool industry in India comprises about 450 manufactures with 150 units in the organized sector. Almost 70 percent of production in India is contributed by ten major companies of this industry. And over three-quarters of tota totall mach machine ine tool tool produ product ction ion in the the coun country try come comess out of ISO ISO cert certifi ified ed companies. companies. Many machine machine tool manufacturers manufacturers have also obtained CE marking marking certif certifica ication tion,, in keeping keeping with with requir requireme ements nts of the Europe European an market markets. s. The industry has an installed capacity of over Rs. 10,000 million and employs a workforce totaling 65,000 skilled and unskilled personnel. Machine tool industry in India is scatted all over the country. The hub of manufacturing activities, however, is concentrated in places like Mumbai and Pune in Maharashtra; Maharashtra; Batala, Batala, Jullunder and Ludhiana in Panjab; Ahmedabad, Ahmedabad, Baoada Baoada,, Jamnag Jamnagar ar,, Rajkot Rajkot and Surend Surendran ranaga agarr in Gujarat Gujarat,, Combat Combatore ore and Chennai (Madras) in Tamilandu: some parts in East India; and Bangalore in Karnataka.
Bangalore is considered as the hub for the Indian machine tool industry. The city, for instance, house HMT machines Tools limited, a company that manufactures nearly 32 percent of the total machine tool industry’s output.
2.6 User Industries Services
Thee indu Th industr stry’ y’ss pros prospe pect ctss mainl mainly y depe depend nd on growt growth h of engin enginee eerin ring g industries. The user sectors of machine tools are the automotive, automobile and ancillaries, ancillaries, Railways, Railways, Defense, Agricult Agriculture, ure, steel, Fertilizers, Fertilizers, Electrical, Electrical, Electr Electronic onics, s, Telecom elecommun munica icatio tion, n, textile textile machin machinery ery,, ball ball & roller roller bearin bearings, gs, industrial values, power-driven pumps, multi-product engineering companies, earth earth moving moving machine machinery ry,, compre compressor ssorss and consum consumer er durabl durablee like washing washing mach machin ines es,, refr refrige igera rato tors rs,, tele televi visio sion n sets sets,, watc watche hes, s, dishdish-wa washe shers, rs, vacu vacuum um cleaners, air conditioners, etc.
CHAPTER – III PROFILE OF PRAGA TOOLS LIMITED
ORGANISATION PROFILE
3.1 INTRODUCTION
Praga is once of the leading machine tool manufacturing units in India established in the year 1943, Praga’s production are well known in the field of machine tools the company in organized in four divisions via the machine tools forge foundry and CNC division which pulsated with the activities of 697 employees turning out a wide range of production the four divisions equipped with the modern facilities for design development of manufacture of machine tools, tools, are manned manned by qualifi qualified ed personn personnel el with proven proven record record of technic technical al knowledge and exquisite craft smashup acquitted over a period of year.
Praga is proud of its diverse of machine tools the cutler& tools venders milling machines machines copy lathes thread rolling machines machines & Praga CNC machines machines which keep pace with the ever changing technology in addition the company also also manufa manufactu ctures res a wide wide of industr industrial ial forgin forgings gs for railwa railway y automot automotive ive & ordnance applications.
Praga’s wriest investment has been in its excellent collaboration with world famous names like Jones & shipman of UK for surface grinding and cutter of tool vendors gamin of France for milling machines scoffers of grace for thread rolling machines George finisher of Switzerland for coping lather Mitsubishi Heavy industries of Japan for machining centers of Kayo spiky of Japan for CNC lather the collaboration have culminated in Praga producing machine tools of the highest quality conforming to international standards by virtue of their dependability prevision engineering & proven.
PROFILE OF PRAGA The Praga Tools is one of the oldest, machine Tools industries in India and and has has enti entire re its its go gold lden en jubi jubile leee year ear in 19 1993 93-9 -94. 4. Th Thee comp compan any y has has incorporated has the joint stock company is 1943 has a private company with objective of manufacturing, instruments with the Technical assistance of a few Czechoslovak Czechoslovakia ia Engineers. The company was incorporated incorporated in Many 1943 as a public limited company in private sector. The name PRAGA symbolizes the technical co-operation extended in the initial phase by some Czechoslovakian engineers who suggested the naming of the company as PRAGA after their capital city PRAGUE (PRAGA).
In Marc March h 199 1995, 5, the Gover Governm nmen entt of Indi Indiaa acqui acquire red d the the cont contro rolli lling ng inte intere rest st in the the comp compan any y by acqu acquir irin ing g majo majori rity ty shar shares es and and plac placed ed the the administrative control under the ministry of commerce and industry from May 1995 19 95 to Dece Decemb mber er 19 1963 63.. Th Thee mana managi ging ng agen agents ts M/S M/S un unit ited ed indu indust stri rial al corporation limited initially managed the company. Administrative control of the company has been transferred transferred from the defense minister to the department department of pu publi blicc ente enterp rpri rise se un unde derr mini ministr stry y of indus industr try y on the 25th of April 1986. Presently the company enjoys the status of being a subsidiary of HMT LTD. Bangalore when a paid up capital of the company was transferred in its name from the government.
The company has four manufacturing nits located with in the twin cities of Hyderabad Hyderabad at Kavadiguda at Secunderabad Secunderabad it manufacture manufacturess a wide range of machine Tools, accessories and defiance items. A unit of forge and foundry divisions is located at Kukatpally Hyderabad where manufactures castings and forgings are.
A CNC project was established with advance technology like numerical control machines like automobiles CNC lathes, VNC mailing machines etc are manufactures with the qualified personnel’s in the fields of engineering of technology.
The company has manpower of 2000 employees turning out wide range of products.
The company has organized into four divisions viz., the machine Tools Tools division (MT-I), machine Tools Tools II (MT-II), forge and foundry division, divisi on, and the t he CNC division.
Perfor Performan mance ce Praga Praga machine machine tools tools ate penetr penetrati ating ng large large segmen segments ts of foreig foreign n markets markets includi including ng UK CIC Canada Canada,, Bulgar Bulgaria, ia, Indones Indonesia, ia, German Germany y, Japan.
PRAGA is even mote proud of the fact that it has contributed to the development of thee machine tools industry in the development of the machine tool toolss indu indust stry ry in the the coun countr try y and and the the crea creati tion on of a vast vast band band of skil skille led d technicians thus Praga to day in name of techno, within the machine tool industry.
3.2 CORPORATE VISION OF PRAGA TOOL
VISION STATEMENT:
Praga tools to be the provider of choice for total machine tools solution to customers and a significant provider of service in Indian industry of oversees too the strong market position in to be sustained by the provision of integrated products and services and the aggressive marketing of machine tool knowledge expensive and support services.
COMPANY STATRATEGY:
1. To mainta maintain in good good custom customer er relat relation ion 2. Providi Providing ng after after seller seller servic servicee 3. Increa Increasing sing the boo book k order order position position 4. To maintain maintain good quality quality and and loyalty loyalty of the customer customerss on their products products 5. Maintain Maintain better better research research and development development activities activities 6. Relation Relation to company company and other other customer customer service servicess through conducting conducting the product exhibition within the company preview
QUALITY VALUE:
•
Commitment of the management of the quality at all stager. stager.
•
To create quality culture among all employees to maintain quality leadership in all products.
•
To maintain quality leadership in all products and services.
•
Total customer satisfaction through quality goods and services.
•
Total quality through performance leadership.
3.3 MANUFACTURING FACILITIES
The company has two manufacturing units the order manufacturing unit is located at Kavadiguda in Secunderabad, the heart of the city these unit hous ho uses es the the mach machin inee toil toilss divi divisi sion on and and the the corp corpor orat atee head head offi office ce and and accompanies and area of slightly s lightly over 1 acres the company. Has its second manufacturing has is at balanagar in Hyderabad, about 5 to 6 kilometers from Hyderabad, airport the CNC division forge shop of foundry division are located in the balanagar unit the total and available with the currently utilized by the CNC division forge shop and foundry division leaving a surplus of nearly 100 acres. 3.4 PRODUCT RANGE:
The company has three manufacturing division viz., can pavilion forge shop and foundry division. MACHINE TOOLS DIVISION:
The major products manufactured by the company in its machine toll division are cutler of fool grinders, milling machines, thread rotting machine, lather chuckn etc. There products were developed with the technical assistance of the world-renowned machine tool manufacture by entering into collaboration agreements with M/s. Escofier, SA, France, M/s. F. F. Pratt and Co. and U.K. There machines enjoy good reputation in the market. FORCE DIVISION:
Railway Duplication Auto dialer pants Tractors links
Other carting BOUNDARY DIVISION:
Carting for companies machine tools :
Thee soph Th sophist istic icat ated ed mach machin ines es like like CNC CNC mach machini ining ng cent center er sidew sideway ay,, grindin grinding g machin machines, es, univers universal al grindin grinding g machine machines, s, jigs jigs boring boring machine machine with coordinated system been added at a cost of Rs. 1,107.05 lacks.
PRAGAS VALUES:
Underlying our minion in a set of core corporate valued which deliver praga priorities. This set of values creates an overall framework for determining our derived future and developing plans to achieve it.
We take take adva advanta ntage ge of exis existin ting g syne synerg rgie iess and and fore forese seei eing ng highe higherr leve levell of competitiveness. Safety in the priority value for all aspects of our business.
SWOT Analysis: STRENGTHS: •
Proven products and brand image.
•
High brand loyalty of customer.
•
High market shares in few of the products categories.
•
Skilled work force.
•
ISO 9001 accredited company.
WEEKNESSES: •
Limited product gage.
•
Low volume production.
•
Out dead technology. t echnology.
•
Inadequacy of working capital.
•
Aberrance of MIS.
•
Board needs to be board bared and must include.
•
Financial expensive.
•
Obralete machinery. machinery.
•
High man power cost.
•
Poor marketing plants.
OPPORTUNITIES: •
Prospects of improved in auto and automotive sector.
•
Export potential for exports of machines.
•
Foreign and components(with up gradation)
Opportunity to from joint venture update up date technology. And use technical manicuring experience for globalization through venture partnership. Diversification into related areas where ever synergy exists.
Threats: •
Dwindling market for some of the products server.
•
Competition from imports of latest technology machines.
•
A threat from second hand machine imparts.
•
Shrinking resources of traditional customers, defense and railways.
The above analysis indicates ample scope and prospects for the company subject to corrective steps being taken early.
CHAPTER – IV CONCEPTUAL & METHODOLOGLCAL FRAME WORK
4.1 NATURE OF WORKING CAPITAL CAPITAL
Working capital management management in concerned with the problem that arises arises in attempting to manage the current assets current liabilities and the inter relationship the exist between them the term current assets refers to those assets which in ordinary course of business can be or will be turned into cash within one year without undergoing diminution in value and without undergoing in value and without disrupting the operations of the firm.
Thee major Th major curr curren entt asse assets ts are are cash cash mark market etab able le secu securi ritie tiess acco account untss receivable and inventory, current liabilities those liabilities, which are intended at their inception to be paid in the ordinary course of business with in a year curr curren entt liabil liabiliti ities es are are amoun amountt paya payable ble,, bills bills paya payable ble bank bank ov over erdr draf aftt and and outstanding expenses.
4.2 DEFINITION OF WORKING CAPTIAL:
According to MY Khan and P.K Jain “Working capital refers to manage the firm current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. Acco Accordi rding ng to the the Shub Shubin in “wor “workin king g capi capita tall is an amoun amountt of fun fun is necessary to cover the cost of operating the enterprise”. Working capital management is concerned with the problems is that arise in attempting to manage the current assets and the current liabilities and their inter relationship they arise between them. Current assets refer to those assets which to ordinary course of business can be or will be turned into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. Thee major Th major curr curren entt asse assets ts are are cash cash mark market etab able le secu securi ritie tiess acco account untss receivable and their inception to be paid in the ordinary course of business within a year out of Current Assets or earnings of the concern. The basic Curr Curren entt Liab Liabil iliti ities es are are Bill Bill paya payabl bles es,, Bank Bank Over Overdr draf afts ts and and Outst Outstan andin ding g expenses. Thee go Th goal al of work working ing capi capita tall mana manage geme ments nts is to mana manage ge the firm firmss Current Assets. And Current Liabilities in such a way that a satisfactory level of working capital is maintained.
Thus the current assets should be large enough to cover its current Liabilities in order to ensure a reasonable margin of safety. Each of the current assts must be efficiently in order to maintain the liquidity of the short term be managed efficiently in order to maintain the liquidity of the short term sources of financing must be continuously managed to ensure that they are obtained and used in a best possible way. Therefore interaction between current assets and current liabilities in the main theme of working capital Management. The current assets should be large enough to cover is current liabilities in order order to ensure ensure a reasona reasonable ble margin margin of safety safety.. The interac interaction tion betwee between n current assets and current liabilities in therefore the main theme of the threat of working capital management. The two concepts of working capital are: 4.3 Methodological Framework
The data for the period 2001-2005 used in this study have been taken from primary and secondary sources. The necessary primary data have been collected from corporate office of the organization; secondary data have been collected from the financial statements published in the report of the PRAGA TOOLS LTD. Data was analyzed through various established techniques of working capital and personal observation. Editing the data, clarification and tabulation of the financial data collection from the above mentioned source have been done as per the requirements of the study. Data has been analyzed using various comparative statements and working capital ratios. The data is analyzed in the chapter-4 ‘Analysis of Working Working Capital PRAGA TOOLS LTD’ under the following head.
1. Trend Trendss in Net Net Work Working ing Capi Capital tal 2. Workin orking g Capit Capital al Rati Ratios os a) Curr Curren entt Rati Ratios os b) b) Quic Quick k or Aci Acid d test test Ratio Ratio c) Curren Currentt Asse Assert rt Turn Turnove overr Ratio Ratio d) Current Current Asserts Asserts to Total Total Asserts Asserts Turnover Turnover Ratio Ratio e) Working orking Capita Capitall Turno Turnover ver Rati Ratio o
3. Cash Cash Mana Manage geme ment nt a) Percen Percentag tagee of Cash Cash to Current Current Assert Assertss 4. Rece Receiv ivab ables les Man Manag agem emen entt a) Debt Debtors ors Turnov urnover er Rat Ratio io b) Debtors Debtors Collec Collection tion Period Period 5. Inve Invento ntory ry Mana Manage geme ment nt a) Invento Inventory ry to Tota Totall Current Current Asse Asserts rts b) Invento Inventory ry Tu Turnov rnover er Ratio Ratio c) Invento Inventory ry Holdi Holding ng Peri Period od in in Days Days 4.4 NEED FOR WORKING CAPITAL:
Working capital is the amount of funds necessary to cover the cost of operating the enterprise. Working capital in a going concern is revolving funds; it consists of cash receipts from sales which are used to cover the cost of current operations. Thee nee Th need of work workin ing g capit apitaal aris arises es beca becaus usee of tim time gaps aps in manufacturing and marketing cycle of business operations. This time gap is due to time gaps between Cash and purchase of Raw-Materials. a) Purc Purcha hase se and and pro produc ducti tion on b) Produ Product ction ion and and sale saless c) Sales Sales and and Real Realiza ization tion of cash cash.. During During these these interv intervals, als, the compan company y should should have have ready ready working working or operating funds to keep their business going. Thus every business concern
should have sufficient liquidity funds as its disposal to buy Raw-Materials, stores etc to pay wages to personnel and to meet incidental expenses with the installed plant equipment, tools and other fixed assets, the concerned would be able able to prod produc ucee fini finish shed ed go good odss by spend pendin ing g cash ash or Raw Raw Mater ateria ials ls,, intermediate intermediate goods Labor remuneration remuneration etc. The goods so produced will swell into inventories or stock soon, the stock will take the form of debtors or Bill Receivable on maturity. maturity. There is therefore, a need for working capital, because the production Sales and cash payment and realization of cash are not instantaneous, the company needs cash to purchase Raw material and to meet expenses as there may not be helps to meet future agencies. Thee stoc Th stocks ks or Raw Raw mate materi rial alss are are kept kept in orde orderr to assu assure re smoo smooth th production and protect against the risk of Non availability of raw material. Similarly, stocks of finished goods have to be carried to meet the demands of the customers on continuous basis and sudden demand. Thus, an adequate amou amount nt of fund fundss has has to be inve invest steed in curre urrent nt asset ssetss for for smoot mooth h and and uninterrupted. Production and sales process, which is refers to as operating cycle or cash cycle. The operating cycle determines the need for working capital. The operating cycle represents the period during which investment of one unit of remain blocked till recovery out of revenue, in other words, the operating cycle refers to the time necessary to complete.
a) Conver Conversion sion of of cash cash into Raw Raw Mater Material ial.. b) Conversion Conversion of of Raw Raw Material Material into finished finished goods. c) Conversion Conversion of finished finished goods into cash cash sales sales or credit sales. d) Conversion Conversion to credit credit sales or receivab receivable le into cash.
Thus, it is said Management must know the length of time required to convert cash into resource used by the firm, the resource into the resource used the firm
the resource into final product. The final product into receivable bank into cash. This is the operating cycle of an enterprise. Thus, it is said Management must know the length of time required to convert cash into resource used by the firm, the resource into the firm the resource into final product. The final product into receivable bank into cash. This is the operating cycle of an enterprise. The pattern of operating cycle depends upon the nature of the enterprise. The financial institution may have a shorter cycle while trading concern has and extended one. The usual operating cycle of manufacturing concern is shown. In real business situation, the operating or cash flow cycle in not as simple and smooth going as the depicted above. A going concern by nature undergoes the process of liquidity the besides, a circular flow among working capital itself, all process of liquidity valued added to the product of the firm. Therefore, we can say that, working capital in needed not only for fina financ ncin ing g curr curren entt asse assets ts but also also to meet meet vari variou ouss other other requi require reme ments nts like like payment of dividends, interest etc. Therefore, it is recovery for a product financial manager to provide correct amount of working capital at the time to provide for operating reach.
5.5 SCOPE OF WORKING CAPITAL MANAGEMENT
Since a firm has to maintain a sound working position position and there should be optimum optimum investm investment ent in working working capita capital, l, effec effective tive manage managemen mentt involv involves es manages of current assets and current liability. Current asserts management involves management of current assets like Cash.
Marketable Securities, Account Receivable, inventories etc. effective in orde orderr to main mainta tain in liqu liquid idit ity y of the the firm firm.. Th Thee proc proces esss of curr curren entt asse assert rtss management can be as follow management of cash and Marketable Securities. a) Management Management of cash and Marketable Marketable Securities. Securities.
b) Mana Manage geme ment nt of of Cash. Cash.
Curr Curren entt liabil liabilit ity y mana manage geme ment nt is conc concer erne ned d with with the mana manage geme ment nt of curr3e curr3ent nt liabili liabilitie tiess like, like, trade trade Credit Credit or Account Account Payabl Payable, e, Accrua Accruals ls etc. etc. which which repr repres esen ents ts shor shortt term term fina financ ncia iall sour source ce and and must must be cauti cautious ously ly management to ensure that they are obtained and used in the best way possible. 4.6 OBJECTIVES OF WORKING CAPITAL
The main if working capital management in to attain trade off between pro profit fitab abil ility ity and and risk. risk. Here Here risk risk refe refers rs to the prof profita itabi bilit lity y that that a firm firm will will become technically involvement that is unable to pay obligation promptly. Risk is commonly measured by using either the amount of net working capital of the current ratio. Thus more the net working capital the more liquidity is associated with increasing levels of risks. To have higher profit the firm may have to sacrifice solvency that is take the risk of technical insolvency and maintain relatively low level of current assets. When the firm does so, its profitability would improve but greater risk of technical insolvency. insolvency. Thus, if a firm wants to increase profitability it must also increases its risk and if it want to decrease risk, it must decrease profitability. Thus, working capital management involves trade off between risk and profitability.
4.7 COMPONENTS OF WORKING CAPITAL
The main components components of working capital capital are currents assets & currents currents liabilities.
A. CURRENT ASSETS:
Current assets comprised items that would get converted in to cash in short short term, term, within within a year, year, through through the busines businesss operat operations ions curren currentt assert assertss include. Inventories including stock of raw material, work in progress, finished goods & factory supplies. Packing, shipment material, office supplies etc Loan & advances, other balances; include sundry debtors, bills receivables and others including loans and advances, prepaid expenses etc. Marketable securities including government securities and semi government securities, cash and bank balances. B. CURRENT LIABILITIES:
Current liabilities are those which are expected to fall due of mature for payment in short period of one year and they represent short term source of funds. They include: C. SHORT TERM BORROWINGS:
Include bank borrowings other than those against own debentures and othe otherr mort mortga gage ges, s, trade trade cred credito itors rs and and othe otherr labi labial aliz izes es sundr sundry y cred credit itor ors, s, outstanding expenses and advances received etc. Provision for taxation, dividends and other current provisions.
4.8 GROSS WORKING CAPITAL:
Gross working capital in represented by the sum total of all current assets of the enter price adequate funds have to be provided to sustain the movement of the row material through the work in process to the finished goods stage and then to receivables and up to realization of cash. NET WORKING CAPITAL: CAPITAL:
Net working capital in excess of current assets over current liabilities the concept of net working capital highlights the character of serves from which the funds have been obtained to support that position of current liabilities.
PRORIETORS
NEED FOR WORKING CAPITALS
Business firms aim at maximizing the wealth of shareholders. In its endeavor to maximize shareholder’s wealth a firm should earn sufficient return from its operation earning a steady amount of profits required successfully sales activity. The firm has to invest enough funds in current assets for the success of sales activity current assets are needed because sales don’t convert into cash instantaneously there is always an operating cycle involved in the conversion of sales into cash. PERMANENT AND TEMPORARY WORKING CAPIT CA PITAL: AL:
Thee above Th above figur figuree shows shows perm perman anen entt leve levell is fair fairly ly cons consta tant, nt, whil whilee temporary working capital is fluctuating some times increasing and some time decreasing in accordance with seasonal demands, in the case an expanding firm the permanent working capital may not be horizontal. This is because the demand demand for perman permanent entss curren currentt asserts asserts might might be increa increasing sing or decrea decreasing sing support a rising level of activity. In that the line should be a rising one.
Temporary or Fluctuating Permanent
TIME
PERMANENT AND TEMPORARY WORKING CAPIT CA PITAL. AL.
Both kinds of working capital are necessary to facilitate the sale process through the operation cycle. Temporary working capital is created is created to meet liquidity requirements that are purely transient nature.
4.9 THE DANGERS OF EXCESSIVE WORKING CAPITAL
1. It results results in unnecessa unnecessary ry accumul accumulatio ation n of invent inventori ories es thus chances chances of inventory mishandling waste theft and losses increases. 2. It is an indicat indication ion of defectiv defectivee credit credit policy and and slack collect collection ion period. period. Consequently higher incidence of bad debts results, which adversely effect degenerated into management co placement, which degenerated into managerial inefficient. 3. Ex Exce cess ssiv ivee work workin ing g capi capita tall make makess manag anagem emen entt comp compla lace cent nt,, whic which h degenerates into managerial efficiency. efficiency. 4. Tende endenc ncie iess of accu accumu mula latin ting g inven invento torie riess to make make spec specula ulatio tion n prof profits its grow this may tend to make dividend policy liberal and difficult to cope with in future when the firm is unable to make speculative profits. INADEQUATE WORKING CAPTIAL
1. It stag stages es grow growth th and and beco become me dif difficu ficult lt for for the the firm firm to un unde dert rtak aken en profitable projects for non-availability of working capital funds. 2. It becomes becomes difficult difficult to implement implement operating operating plans plans and achieve achieve the firms profit target. 3. Operating Operating inefficie inefficiencies ncies creep creep in when when it becomes becomes difficult difficult even even to meet day-to-day commitments.
4. Fixed Fixed assets assets are not efficient efficiently ly utilized utilized for the lack lack of working working capital capital funds thus the firms profitability would deteriorate. 5. Pauc Paucit ity y of work workin ing g capi capita tall fund fundss rend render erss the the firm firm un unab able le to avai availl attractive credit opportunities etc. 6. The firm firm losses losses its reputation reputation when it is not in position to honor its short short term obligation as result the firm faces tight credit terms. Thus, enlightened management should therefore maintains a right amount of working capital on a continuous basis which helps to develop the organization effectively and efficiently. efficiently.
4.10 4.10 ROLE ROLE OF FINA FINANC NCIAL IAL MANA MANAGER GER IN WO WORKI RKING NG CAPIT CAPITAL AL MANAGEMENT:
1. Working orking capital capital managem management ent requires requires must of the finance finance manger manger time as it represent a large position of investment is assets. 2. Working capital capital manageme management nt requires requires much of the finance finance managem management ent time as it represent larger position of investment in assets. 3. Acti Action on shoul should d be take taken n to curt curtai aill un unne nece cessa ssary ry inve investm stmen entt in curr curren entt assets. 4. All All prec precau auti tion onss shou should ld be take taken n for for the the effe effect ctiv ivee and effici ficien entt management of working capital. 5. Larger Larger firms firms have have to manage manage their current current assets assets and current current liabilitie liabilitiess very carefully and should see that the work should be done properly in order to achieve predetermined organization goals.
6. The financi financial al manger manger should pay specia speciall attention attention to the manag manageme ements nts of current assets on continuing basis.
FUNDS FLOW STATEMNET
Funds flow analysis design effective management toll to study how funds have been procured for the business and how they have been employed. The statement of variation in working capital is based fundamentally on the same approach used for the preparation of funds flow statement. This technique helps to analyses changes in working capital between dated or two balance sheets. The comparison of current assets and current liabilities as shown in the balance sheet at the beginning and the ending of a specific period.
The statement of changes in working workin g capital reveals to manage to way in which working capital was obtained and use with this insight management to can prepare the estimates of the working capital flows. A project statement of changes in working capital is very much useful in the firm long planning.
CONCEPT OF FUND
Thee work Th workin ing g capi capita tall flow flow or fund fund aris arises es when when the the net net affe affect ct of a transaction is to increase or decrease the amount of working capital a firm will have same transactions transactions that will change net working capital and same that will cause no change in net working capital transaction which change net working capital include most of items of the profit & loss account and those business events which simultaneously effect both current and not current balance sheet item items. s. On the othe otherr base based d tran transa sact ctio ion, n, whic which h do no nott incre increas asee or decr decrea ease se
working capital include those which effect only current accounts or only non current accounts.
USES AND SIGNIFICANCE OF THE FUND FLOW STATEMENT
1. A Funds Funds Flow state statemen mentt show how the resourc resourcee has been obtained obtained and and the uses to which are put it helps in analyzing the financial operations.
2. It help helpss in dete determ rmin inin ing g the the fina financ ncia iall cons conseequ quen ence cess of bu busi sine ness ss operations.
3. It is useful useful in judging judging whether whether the fund fund has expande expanded d at too faster faster rate and whether financing is trained.
4. It points points out the effec effective tiveness ness with with which the managem management ent has handled handled working capital during the period under review.
5. Th Thee stat stateement ment can can assi assist st the the fina financ ncia iall manag anagem emen entt in plan planni ning ng intermediate intermediate and long-term finance to obtaining obtaining resources in the further and determining how they are used.
6. It gives gives an insight insight into the the evaluation evaluation of the present present situation situation it provides provides certain useful information about the firm financial policies to out side world.
Thee fund Th fundss flow flow stat statem emen entt is beco becomi ming ng pop popul ular ar with with the the management because it helps to explain why in spite of earn sizeable
amou amount nt of profi profits ts the the comp compan any y is expe experi rien enci cing ng diff diffic icult ulty y in maki making ng payment to creditors the rate of dividend on equi9ty shares cannot be increased and bank balance is getting thinner.
OBJECTION OF FUND FLOW FLO W ANLA ANLAYSIS: YSIS:
1. To indicate indicate the result result of current current financial financial position. position. 2. To lay lay empha emphasis sis on the most most signi signific fican antt chan change ge that has take taken n place place during specified period. 3. To show show ho how w gene genera rall expa expansi nsion on in busine business ss has been been financ financed ed or to describe the sources from which additional funds were derived. 4. To know the the relationship relationship betwee between n profits from from operating operating distribut distribution ion of dividing and rating a new capital or contracting of loans. 5. To give reorga reorganizati nization on to the fact fact that a business business exists exists on flow of funds and is not a static management.
MANAGEMENT OF CASH CASH MANAGEMENT:-
Cash is the important assets for the operations of the business cash is the basis input to keep the business running on continuous basis. Cash shortage will disrupt the firms manufacturing operations while excessive cash will simply remain ideas without contribution any thing towards the firm’s profitable way. Cash management is concerned with the managing of cash flow into and out of the firm cash flow with in the firm and cash balances held by the firm at appoint of time by financing depict investing surplus cash. Cash management is to obtain adequate control over cash position to keep the firm sufficiently liquidate and to use excess cash in some profitable way. CASH PLANNING:-
Cash planning is technique to plan and control of the use of funds. It protect protect the financial condition condition of them firm by developing a projected projected cash statement from a forecast of plans are very crucial and developing the overall operating plans of the firm. USES OF CASH MANAGEMENT:-
1. It indicates indicates company’ company’ss future future financi financial al need especiall especially y for its working working capital requirement.
2. To help help to evaluate evaluate proposed proposed capital capital projects. projects. 3. It pinpoi pinpoints nts the cash cash requ requir ired ed to fina financ ncee thes thesee proj projec ects ts as well well as the cash to be generated by the company to support them. 4. It helps helps to impr improve ove corp corpora orate te planni planning. ng.
5. Cash forecas forecasting ting helps to to future and and to formulate formulate projects projects carefu carefully lly..
CHAPTER –V DATA DATA ANAL ANALYS YSIS IS & INTERPRETATION
Table-1 STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN 31-03-2001 & 31-03-2002
Rs. in Lakhs S.No.
Particulars
31-03-2001
31-03-2002
Increase
Decrease
(a) Current Assets Inventories
1,44,120.00
1,19,395.00
24,725.00
7 1 , 97 0 .0 0
61,278.00
10,692.00
1 ,2 1 3 .0 0
1,252.00
31 , 31 7 . 00
22,180.00
Total (a)
2,48,620.00
2,04,105.00
Current Liabilities
3,41,037.00
3,70,306.00
29,269.00
8 2 ,4 2 4 .0 0
83,160.00
736.00
4,23,461.00
4,53,466.00
-1,74,8,741.0 0
-2,49,361.00
Sundry debtors Cash & Bank balance Loan & Advance
3 9 . 00 9,137.00
(b) Current Liabilities Provisions Total (b) Working Capital Net increase in W.C Total of N.W.C
ANALYSIS:
(a-b)
-7,74,841.00
74, 74,520. 20.00
74,52 4,520. 0.0 00
-1,74,841.00
74,559.00
74,559.00
Above table explaining that working capital shows the continuous increase in the net working capital through in the year 31-03-2000 to the year of comparing the balance sheet is the year 31-03-2001 to 31-03-2002. So, this is due to the sale of invent inventory ory and reduc reducing ing the debto debtors rs and increa increasi sing ng the curre current nt liabi liabilit lities ies and provisions.
Rs. in Lakhs S.No.
Particulars
31-03-2002
31-03-2003
Increase
Decrease
(a) Current Assets Inventories
1,19,395.00
72,230.00
47,165.00
611,278.00
28,478.00
32,800.00
1,252.00
7,041.00
22,180.00
13,205.00
Total (a)
2,04,105.00
1,20,954.00
Current Liabilities
3,70,306.00
3,10,123.00
60,183.00
83,120.00
71,062.00
12,099.00
Total (b)
4,53,466.000
3,81,185.00
(a-b)
-2,49,361.00
-2,60,231.00
Sundry debtors Cash & Bank balance Loan & Advance
5,789.00 8,975.00
(b) Current Liabilities Provisions
Working Capital Net decreased in W.C Total of N.W.C
ANALYSIS:
10,870.00 -2,49,361.00
-2,49,361.00
88,940.00
88,940.00
Above table discloses that working capital shows the continuous increase in the net working capital through in the year 31-03-2002 to the year of comparing the balance sheet is the year 31st March. So, this is due to the sale of inventory and reducing the debtors and decreasing the current liabilities and provisions.
Table-2 STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN 31-03-2003 & 31-03-2004.
Rs. in Lakhs S.No.
Particulars
31-03-2003
31-03-2004
Increase
Decrease
(a) Current Assets Inventories
72,230.00
50,765.00
Sundry debtors
28,478.00
34,042.00
5,564.00
4,932.00
4,932.00
7,041.00
1,56,398.00
1,49,357.00
13,205.00
11,368.00
Total (a)
1,02,954.00
2,57,505.00
Current Liabilities
3,10,123.00
3,77,829.00
67,706.00
71,062.00
71,793.00
6 71 .00
3,81,185.00
4,49,562.00
-2,60,231.00
-1,92,057.00
Other current Assets Cash & Bank balance Loan & Advance
- --
21,465.00
1,837.00
(b) Current Liabilities Provisions Total (b) Working Capital Net decreased in W.C Total of N.W.C
(a-b)
68,174.00
68,174.00
1,59,853.00
1,59,853.0 0
ANALYSIS:
The above table discloses in this working capital as that was the Net decrease in working capital in this year 31-03-2003 to 31-03-2004 is Rs.68,174.00 due to majo majorr reason reasonss of adjus adjusti ting ng curren currentt assets assets as increa increase se and the curre current nt liabi liabili litie tiess decrease but the provision decreased.
Table-3 STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN 31-03-2004 & 31-03-2005.
Rs. in Lakhs S.No.
Particulars
31-03-2004
31-03-2005
Increase
Decrease
(a) Current Assets Inventories
50,765.00
43,429.00
4,932.00
5,313.00
381.00
34,042.00
36,681.00
2,639.00
1,56,398.00
51,469.00
1,04,929.00
11,368.00
10,466.00
9 02 . 00
Total (a)
2,57,505.00
1,47,358.00
Current Liabilities
3,77,829.00
3,90,548.00
71,733.00
57,232.00
4,49,562.00
4,47,780.00
-1,92,057.00
-3,00,422.00
Other current Assets Sundry debtors Cash & Bank balance Loan & Advance
7,336.00
(b) Current Liabilities Provisions Total (b) Working Capital Net decreased in W.C Total of N.W.C
ANALYSIS:
(a-b)
-1,92,057.00
12,719.00 14,501.00
1,08 1,08,3 ,365 65.0 .00 0
1,08 1,08,3 ,365 65.0 .00 0
-1,92,057.00
1,25,886.00
1,25,886.00
In this above table of working capital discloses that as the net increase in working capital in this 31-03-2004 to 31-03-2005 is Rs.1,08,365.00 due to major reasons of adjusting current assets as increase and the current liabilities decreases but the provision decreased.
THE STATEMENT SHOWING CHANGES IN WORKING CAPITAL BETWEEN 31-3-2005 TO 31-3-2006
S.No (a) Current Assets
Particulars
31-03-2005
31-03-2006
Increase
Decreased
Inventories
43,429.00
40,255.00
--------
3,174.00
Sundry Debtors
5,313.00
5,837.00
524.00
--------
Cash & bank balances
36,681.00
37,282
601.00
-------
Loans & advances
51,469.00
1,34,653.00
83,184.00
-------
Total (a)
1,47,358.00
2,34,274.00
Current liabilities
3,90,548.00
2,71,304.00
1,19,244.00
-------
Total
57,232.00 4,47, ,47,7 780.00 .00
69,406.00 3,40 ,40,71 ,710.0 0.00
(a-b)
-3,0 -3,00, 0,42 422. 2.00 00
-1,0 -1,06, 6,43 436. 6.00 00
(b) Current Liabilities
Provisions
Working capital Net decrea rease in W.C
1,93,986.00
Total of N.W.C
1,06,436.00
12,174.00
1,93,986.00 1, 1 ,06,436.00
2, 2,09,334.00
2,09,334.00
ANALYSIS ANALYSIS :-
Lastly in this year the statement of working capital shows the continued decreased in the net working capital through in the year 31st March 2005 to the year of comparing the balance sheet is the year 31st March 2006. So, this is due to funds flow statement.
FUND,S FLOW STATEMENT AS ON 31ST MARCH, 2001.
SOURCES
Increased in secured Loans Increased in Un-secured Loans
AMOUNT
APPLICATIONS
Purchased of Fixed Assets Net increased in working 14,062.00 capital
2,39,919.00
Funds Lost in operation Total
AMOUNT
2,53,981.00
Total
108.00 85,948.00 1,67,925.00 2,53,981.00
ANALYSIS:
During this year 2000-2001 the funds flow statement the losses of the PRAGA TOOLS LIMITED is still continuing. The company has has mobilized his funds increased figures of the secured and unsecured unsecured loans. The company has has adjusting their losses through these areas and in this year the purchasing power of the company is also decreased.
FUND’S FLOW STATEMENT AS ON 31ST MARCH, 2002.
SOURCES
Increased in secured Loans Increased in Un-secured Loans Work in Progress Total
AMOUNT
APPLICATIONS
AMOUNT
Purchased of Fixed Assets Net increased in working 8,237.00 capital
2,64,416.00
746.00 Funds Lost in operation 2,73,399.00
Total
33.00 85,948.00 1,87,418.00 2,73,399.00
ANALYSIS:
In this last year of comparing there is the funds flow statement is still includi including ng the losses from the operati operation. on. The compan company y has procur procured ed huge amount from borrowing loans in the from of secured and unsecured loans. The company company has Wright off their losses in operations operations which is the major thread of the company that’s need to be ratified by the management of the PRAGA TOOLS Limited.
FUND’S FLOW STATEMENT AS ON 31ST MARCH, 2003.
SOURCES
Increased in secured Loans Increased in Un-secured Loans
Total
AMOUNT
APPLICATIONS
Purchased of Fixed Assets Net increased in 13,764.00 working capital
4,07,033.00
4,20,779.00
AMOUNT
652.00 10,870.00
Funds Lo Lost in in op operation
4,09,284.00
Total
4,20,779.00
ANALYSIS:
During this year 2002-2003 the funds flow statement the losses of the PRAGA TOOLS LIMITED is still continuing. The company has mobilized his funds increased figures of the secured and un-secured loans. loans. The company has adjusting their losses through these areas and in this year the purchasing power of the company is also decreased.
FUND’S FLOW STATEMENT AS ON 31ST MARCH, 2004.
SOURCES
Increased in un-secured Loans Sales of fixed assets
AMOUNT
13,747.00
Decreased in secured loans
AMOUNT
1,05,789.00
9,211.00
Net decreased in working capital
68,174.00
Funds lost in operations
14,657.00
Total
APPLICATIONS
1,05,789.00
10,870.00 Total
1,05,789.00
ANALYSIS:
During this year 2003-2004 the funds flow statement the losses of the PRAGA TOOLS LIMITED is still continuing. The company has mobilized his fund fundss from from incre increas ased ed figur figures es of the secur secured ed and and un-se un-secu cure red d loan loans. s.
Thee Th
company has adjusting their losses through these areas and in this year the purchasing power of the company is also decreased.
FUND’S FLOW STATEMENT AS ON 31ST MARCH, 2005.
SOURCES
Increased in Share Capital funds. Increased secured loans
AMOUNT
Net increased in working capital Funds lost in 2,12,657.00 operations 1,700.00
Increased un-secured loans
13,746.00
Sales of fixed assets
15,266.00
Total
APPLICATIONS
2,43,369.00
Total
AMOUNT
1,08,365.00 1,35,004.00
2,43,369.00
ANALYSIS:
During this year of comparing there is the funds flow statement is still includi including ng in losses losses from the operation operations. s.
The company company has procure procured d huge
amount from borrowing loans in the form of secured and unsecured loans. The company has Wright off their losses in operations in operations which is the major thread of the company that’s need tobe ratified by the management of the PRAGA TOOLS Limited.
Funds Flow statement as on 31 st March 2006 SOURCES
AMOUNT
Sales of fixed assets 2,043.00 Net decreased working capital Funds lost in operations Total
1,93,986.00
APPLICATIONS Decreased Security loans Decreased unsecurity loans
AMOUNT
18,45,247.00
24,806.00
16,74,024.00 18,70,053.00
Total
18,70,053.00
ANALYSIS:-
In this year 2005-2006 the funds flow statement the losses of the PRAGA TOOLS LIMITED is still continuing. The company has mobilized his funds increased figures of the secured and unsecured loans. The company has adjusting their losses through these areas and in this year the purchasing power of the company is also decreased.
Funds Flow statement as on 31 st March 2006
SOURCES
AMOUNT
AMOUNT
Decreased Security
Sales of fixed assets 2,043.00 Net decreased working capital
APPLICATIONS
loans
18,45,247.00
Decreased unsecurity 1,93,986.00
loans
24,806.00
Funds lost in operations Total
16,74,024.00 18,70,053.00
Total
18,70,053.00
ANALYSIS:-
In this year 2005-2006 the funds flow statement the losses of the PRAGA TOOLS LIMITED is still continuing. The company has mobilized his funds increased figures of the secured and unsecured loans. The company has adjusting their losses through these areas and in this year the purchasing power of the company is also decreased.
CHART – 1
TRENDS IN NET WORKING CAPITAL
Series1 120 12 0 100 10 0 80 60 40 20 0 2002-03
2003-04
2004- 05 05
2005- 06 06
INTERPRETATION:-
Net working capital had shown an increasing trend since, 2002, which in taken as a base year from 100% to 98.40% in 2006. Which appears to be a normal trend. A careful analysis analysis into the components components of the working capital would reveal the changes in NWC the current assets decreased in the next years that is 2003-04 and at the next consecutive assets increased in the next consecutive year to a good extent, but there is a decreasing trend in the year 2005-06 as the current liabilities are covered their in a increase in the next two year, year, 2003-04 & 2004-05 but there is gradual decrease in the year 2005-06 which is good sign to the company.
This is calculated on the basis of the prevision year i.e. the net working capital shown a decreasing trend compare to the year 2002-03 then the net working capital increaser gradually from 2003-04 & 2005-06.
TYPES OF O F RATIOS RATIOS
Several ratios calculated from the accounting data, can be grouped into various classes according to financial activity or function to be evaluated the parties interested in financial analysis are short and long term creditors owners and managements short term creditors main interested is in the liquidity position or short term solvency of the form long term creditors on the other other hand hand.. Are Are more more inte intere rest sted ed in the long-t long-ter erm m solve solvenc ncy y and and profitability of the form. Similarly owners are more interested on the form profitability and conditions. Management is interested in evaluating every aspect of the forms performance. They have protect interested of all the parties.
The ratios are classified into three types. (a).
Liquidity Ra Ratios
(b).
Leverage Ra Ratios
(c).
Profi ofitabili ility Ratios
LIQUIDITY RATIOS:-
Liquidity Ratios measure the ability of the firm to meet its current obligations. The analysis of liquidity needs the preparation of cash budget and cash fund flow statement statement but liquidity liquidity ratios by establishi establishing ng relationship relationship between cash and other current asset of current obligation, provide a quick measures of
liquidity. A firm should ensure that it does not suffer form.
LIQUIDITY OR SHORT TERM SOLVENCY RATIOS:RATIOS:-
Liquidity ratio measures the short-term sh ort-term solvency of the firm. The following are the important liquidity ratios.
4.2 WORKING CAPITAL RATIOS:-
Current Assets Current Ratio =
----------------------------------------- -Current Liabilities
The current Ratio is calculated by dividing current assets by current liability. The current ratio is a measure of the firm’s short term solvency a current ratio of 2 or more in considered satisfactory.
TABLE – 2
CURRENT RATIO (In Lakhs) Year
Current Assets
Current Liabilities
Current Ratios
2002-03
17846.14
4652.24
4.10
2003-04
15800.00
5117.81
3.09
2004-05
20272.00
11485.00
1.76
2005-06
1377.11
5130.73
2.69
CHART – 2
CURRENT RATIO
Current Ratios Ratios 5.00 4.00 s o i t a R
3.00 2.00 1.00 0.00 2002-03
2003-04
2004-05
2005-06
Year
INTERPRETATION:-
Generally 2:1 2:1 in considered ideal for a concern from the ratios we can observe that the ratios are above the standard in the year 2002-03 & 2003-04 but in the year 2004-05 the firm in not able to maintain a standard level of liquidity so the current assets ratio has been directed below standard level that is by 1.76 but in the year 2005-06 the company is able to regain its standard level and can obtain its current assets ratio by 2.69 compared to its current liabilities.
Quick Assets Quick or Acid Test Test Ratio = ----------------------------------------- -----Current Liabilities
The quick Ratio is more penetrating test of Liquidity than Current Ratio, this Ratio measures the firms liability to meet short term liabilities from its liquid assets that is current assets inventories.
TABLE – 3
QUICK RATIO
Year
Quick Assets
Current Liabilities
Quick Ratios
2002-03
10141.00
4352.00
2.33
2003-04
8697.00
5118.00
1.64
2004-05
15335.00
11486.00
1.34
2005-06
9722.00
5130.00
1.89
CHART-3
QUICK RATIO
Quick Ratio
2.5 2 1.5 o i t a R 1
Series1
0.5 0 2002-0 02-03 3
2003-0 03-04 4
2004 2004-0 -05 5
200 2005-06 5-06
Year
INTERPRETATION:
Quick ratio is ascertained by comparing the liquid assets this ratio shows the immediately available assets which can be easily converted in to cash to meet the shor shortt term term solv solven ency cy of the the comp compan any y the the norm normal al valu valuee whic which h show showss the the non non availability of assets for immediate conversion into liquid cash in the later year the figures were a little.
ABSOLUTE LIQUIDITY RATIO:-
It is the ratio of absolute liquidity assets to quick liabilities. However, for calculation calculation purpose it is taken as ratio of absolute assets includes cash in hand at bank and short term or temporary inventory investments.
Absolute Liquidity Assets Absolute Liquidity Ratio
=
-------------------------------Current Liabilities
Absolute Liquidity Assets = Cash in hand + Cash at bank + Short term investments
The ideal Absolute Liquidity Ratio is taken as 1:2 or 0.5
S.No
Year
Absolute Liquid
Current
Current
Assets
Liabilities
Ratio
1
2001-2002
23,432,000.00
453,466,000.00
0.05:1
2
2002-2003
20,246,000.00
381,185,000.00
0.05:1
3
2003-2004
167,776,000.00
449,562,000.00
0.37:1
4
2004-2005
61,935,000.00
447,780,000.00
1.14:1
5
2005-2006
150,900,000.00
340,710,000.00
0.44:1
ANALYSIS:-
The above tables shows the Absolute Liquidity Ratio during the study period the ratio was 0.08:1 in 2002 and gradually decreases to 0.05 in 2003, which in 2003, which to too below from the standard 0.05:1 so the company, should try to improve and also maintain this ratio
LEVERAGE OR CAPITAL STRUCTURES RATIOS:-
Leverage ratios indicate, the relative interest of owner and creditors in a business. The significant Leverage ratios are 1.DEBIT EQUITY RATIO:-
The ratio examines the relationship between funds and owner’s funds of a firm. In other words it measures the relative claims of creditors and shareholders against the assets of a business. Debit, usually refers to the long-term liabilities. Equity and performance share capitals and reserves. Long Term Liabilities Debit Equity Ratio
=
-----------------------------------------Share Holders Funds
S.No
Year
Long Term
Share Holders
Debit equity
Liabilities
funds
ratio
1
2001-2002
1,978,031,000.00
361,731,000.00
5.47
2
2002-2003
2,398,602,000.00
361,731,000.00
6.63
3
2003-2004
2,306,560,000.00
361,731,000.00
6.38
4
2004-2005
2,532,963,000.00
363,431,000.00
6.97
5
2005-2006
662,910,000.00
1,237,367,000.00
0.54
ANALYSIS:-
A high debt equity ratio means a high claim of outsider on the assets of business and very highly debt financed from will be under great pressure to pay the interest charges charges and it is unfavorable to the firm. A firm with a debt equity ratio of two or less exposes its creditors to relatively less risk a firm a high debt equity ratio exposes its creditors to grater risk so this firm should minimize this ratio.
Net Sales WORKING CA CAPITAL TURNOVER RA RATIO
=
----------------------Working Capital
This ratio in computed by dividing net sales by working capital this ratio helps to measure the efficiency of the utilization of net working capital is needed if any increase in sales is contemplated working capital should be a adequate and thus this ratio helps management to maintain the adequate level of working.
CHART-4
WORKING CAPITAL TURNOVER RATIO
Year
Net Sales
Working Capital
Working Capital Turnover Ratio
2002-03
15192.02
13493.9
1.1
2003-04
16283.04
10682.82
1.49
2004-05
23993.07
8786.15
2.56
2005-06
24610.98
8646.38
2.85
CHART -5
INTERPRETATION:
This ratio maker a comparison between net sales and net working capital in order to find the working capital turnover ratio the working capital turnover ratio for the year 2002-03 in 1.10 hence there is increase in working capital turnover ratio for the next 3 year has increased in a gradual way in the last year the net sales has been increased and the working working capital capital in being being similarly similarly that of previous previous year hence hence the working that of previous year hence the working that capital turnover ratio is at 2.82 in the year 2005-06.
4.4 RECEIVABLES MANAGEMENT
1. DEBTORS TURNOVER RATIO:
Debtor constitute an important constitute of current assets & their fore the quality of debtor to great extent determines a firm liquidity of a firm use two ratio. They are debtors turnover ratio & debt collection period ratio. This ratio indication the speed with which debtors receivable are being collected there it is indicative of the efficiency efficiency of trade credit management. management. The higher higher the turnover ratio the better the trade credit management & the better the liquidity of debtors.
TABLE-5
DEBTORS TURNOVER RATIO
(In Lakhs) Year
Total Sales
Account Receivables
Debtors Turnover Ratio
2002-03
15191.02
3803.54
3.99
2003-04
16283.04
4513.34
3.66
2004-05
24948.18
10325.48
2.42
2005-06
25884.26
5143.55
5.03
CHART-5
DEBTORS TURNOVER RATIO
Debtors Turnover Ratio 6 5 4
o i t 3 a R
Debtors Turnover
2 1 0 2002-03
2003- 04
2004- 05
Year
2005-06
INTERPRETATION:
From the date of interpretation it in observed that both the rates & account revisable are going up, we see that in the year 2002-2003 the division was in a very good portion regarding the collection but in the year 2004-2005 due to increase in the amount of average payables the ratio has come down drastically. drastically.
In the year 2005-06 the decrease in the previous year has been reduced by the increased in the ratio of current year 2005-06.
2.DEBITORS COLLECTION PERIOD:
Their ratio indication the extent to which the debts have been collected in time it gives the average debt collection period the ratio is very helpful to the lenders because it explain them whether borrowers are collating money in a reasonable time an increase in the period reflects grater blockage of funds in debtors a very long collec collectio tion n perio period d would would imply imply eithe eitherr powe powerr credi creditt select selection ion or and and inadeq inadequat uatee collection effort. TABLE-6
DEBTORS COLLECTION PERIOD (In Lakhs) Debtors Collection
Year
No of Days
Debtors Turnover Ratio
2002-03
364
3.99
91
2003-04
365
3.66
100
2004-05
365
2.42
151
2005-06
365
5.03
73
Period in Days
CHART-6 DEBTORS COLLECTION PERIOD
INTERPRETATION
During the year year 2005-2006 average collection period is very low which indicates the better quality of debtors as the quick payments by them with in a shot period
During the year 2004-2005 average collection period is very high as 151 days which indicate ting the inefficient performance of the debtor as by laet payments.
2. INVENTORY TURNOVER RATIO
This ratio indicates whether inventory has been efficiently used or not. This ratio checks whether only the required minimum has been looked up in inventory.
Cost of good Sold I.T.R =
------------------------------------------- -Average Inventory
Cost of goods of Sold = Opening Stock + Purchase + Direct expenses - Closing
Opening Stock + Closing Stock Average stock =
------------------------------------------------------------- -------------------2
TABLE-7
INVENTORY TURNOVER RATIO (In Lakhs) Year
Cost of Goods sold
Avg. Inventory
Inventory Turnover Ratio
2002-03
10711.19
7704.71
1.39
2003-04
11850.37
7554.4
1.57
2004-05
18665.5
6170.48
3.02
2005-06
16358.92
4495.96
3.46
CHART-7
INVENTORY TURNOVER RATIO
Inventory Turnover Ratio 4 3.5 3 o i t a R
2.5 2
Inventory Turnover Ratio
1.5 1 0.5 0 2002 2002--03
2003 2003-0 -04 4
2004 2004--05
2005 2005--06
Year
INTERPRETATION:-
From the above figure given in the table we can interpret that the inventory to the cost of goods sold for the year 2002-03 in 1-39 their ratio has been increasing continuously in an exponential manner in all the year which in a good sign to the company. This shows the effective utilization of the inventory by the company.
In the year 2002-03 the percentage percentage of inventory in current assets 42.17% which is not beneficial sign to the company. In the next year has increased by nearly 3% more than the previous year at that time the company retained not to block the current assets with inventory, in the year 2004-05 it has decreased drastically to 24%. In the following year this has increased by 5% but this is not sufficient on the increase in the recent past was much more than that.
3. INVENTORY HOLDING PERIOD (IN DAYS):
Days in i n Year Year Inventory Holding Period (in days)
=
---------------------------------Inventory Turnover Ratio
Thee rati Th ratio o repr repres esen ents ts the the leng length th of time time requ requir ired ed for for conv conver ersi sion on of investments in inventoried for conversion of investments in invests airier to cash of a firm as a result, the firm will be able to forecast its working capital requirements. Lower Lower ratio ratio suggeste suggested d better better inventor inventory y managem management ent their their ratio ratio is calcula calculated ted by dividing the number of days of year by inventory turnover ratio.
TABLE-8
INVENTORY HOLDING PERIOD (IN DAYS)
(In Lakhs) Year
No. of Days
Inventory Turnover Ratio
Collection Period
2002-03
365
1.93
189 Days
2003-04
365
1.39
263 Days
2004-05
365
2.27
161 Days
2005-06
365
3.29
111 Days
CHART-8
INVENTORY HOLDING PERIOD
Collection Period in Days 300 250 200
s y150 a D 100
Collection Period in Days
50 0 2002 2002-03 -03 2003 2003-04 -04 2004 2004-05 -05 2005 2005-06 -06 Year
INTERPRETATION:
In general the inventory inventory ratio ratio of any company should be as low as foible. foible. The reason reason being being the the occurren occurrence ce of the block blockage age of money money due to holdin holding g of the inventory. The figure shows in the year 2004-05 and 2005-06 also would have been for the company if they were similar to the velour in the year 2002-03 & 2003-04.
7. AVERAGE COLLECTION PERIOD:-
The ratio is another device to measure the quality of debtors. It shows the nature of the firm credit policy to the shorter period. The The better the quality of debtors since since the short short term term colle collect cting ing perio period d impli implies es prompt prompt payme payment nt by debto debtors rs and excessively long period implies a too long and liberal and inefficient credit and collection performance where as too low period indicates a very strict credit and collection period. Months in i n a Year Average Collection Period
=
---------------------Debtors Turnover
S.No.
Year
No. of Months in a
Debtors
Average Collection
year
period
9.52
1.
20 01 -
12.00
Turnover Ratio 1 .2 6
2.
2002 20 02 -
12.00
0 .8 1
14.81
3.
2003 20 03 -
12.00
2 .3 1
4.76
4.
2004 20 04 -
12.00
2 .5 2
4.76
5.
2005 20 05 -
12.00
3 .1 7
3.79
2006 ANALYSIS:-
The table shows that the average collection period of the company the average collection period was 9.52 month in 2002, which is decreased to 4.76 in the month of 2005 it shows the company is unable to collect the money in proper time or company is extending more credit period to the customer. customer. The company should try to reduce this credit period.
CHAPTER – VI
FINDINGS & SUGGESTIONS
FINDINGS
1. The company company is not having having suffic sufficient ient working capital capital 2. Invent Inventorie oriess are decre decrease ased d by year year by year year 3. Loans & advances advances are decreases decreases by y year ear by y year ear 4. current current liabiliti liabilities es are are more more than current current assets. assets. 5. The worki working ng capita capitall is negative negative workin working g capital capital 6. Curren Currentt liabiliti liabilities es are decrea decreased sed by ever year year but in 2003-04 2003-04 to 14.12% and again in 2004-2005 decreased from 14-42% to 13.39% 7. long – term liabil liabilitie itiess are increas increased ed by every every year but in 2003.04 2003.04 year year long term liabilities are decreased from 76.356 to 73.989 and again increased from 74.98% to 7-8-76% 8. The Quick Quick Ratio Ratio > 1 which which shows shows the sound short-term short-term solvency. solvency. 9. Th Thee sugg sugges este ted d curr curren entt rati ratio o is 2:1. 2:1. But But it is not not fixe fixed d as it vari variou ouss from from;; industry. industry. Here in this case the current ration is more than 1 and it is enough to meet the current liability. 10. When comparing comparing Working Working capital is compared compared with net sales it is in increasing trend indicating the effective utilization of the net working capital. 11. 11. Th Thee debtor’ debtor’ss turnov turnover er ration ration is high high and it show showss the the better better trade trade credit credit management. 12. Debtor’ Debtor’ss collect collection ion period is very less which shows the better better trade credit credit management. 13. Debtor’ Debtor’ss collecti collection on is very less it shows the better better collection collection of funds funds from debtors. 14. Inventory holding holding period is less; it shows the better management management of inventory. inventory.
15. Through the preparation preparation of funds flows statement analysis analysis it is cleared that the Company is losing its funds through its operating. But the positive positive Elements is the losses through its operations operations and its decreasing decreasing year by year. That is when the losses where in the year 2000-01. 16. It is understa understand nd that that from from the year year 2000-01 2000-01 to the year 2004-05 2004-05 there there was decreased in working capital position in the major circumstances this cleared that company is trying to procure the funds all the times in order to compensate on wipe on the losses.
17.. It is to be ob 17 obse serv rved ed that that the the comp compan any’ y’ss new new wort worth h is decr decrea ease sess considerably. Through this increase in procurement of secured loans. 18. The decrease in figures of sources and applications from the year 2000101 to the year 20002-03 makes at clear that the company is no activity increasing or standardizing of its operations.
CONCLUSION The company is performing exceptionally well due to the up wising in the global market followed by the domestic market. It is an up coming one with good go od and and innov innovat ative ive idea ideass and and belie believe ved d in impr improvi oving ng all all the the area areass of its its operations. The company has a good liquidity position and does not delay its commitment in case of both its creditors and debtors. The company being mostly dependent dependent on the working capital facilities, facilities, it is maintaining maintaining very good relationship with their banks and their working capital management is well balanced.
SUGGESTIONS:-
1. The manpow manpower er needs needs to be assessed assessed in relation relation to product production ion and sales sales.. The excess of employees should be removed through various measures like like VRS, VRS, reti retire reme ment nt’’s and and dest destru ruct ctin ing g the the requ requir irem emen entt of new new employees. 2. There There are various various global global challen challenges ges that are are faced by every every company company n the present competitive environment and PRAGA TOOLS is not any exemption. To face the present global challenges the human resources depart departmen mentt should should be develo develop p to improv improvee various various skills among among the employ employees ees specia specially lly the motiva motivation tional al skills skills and having having the regula regular r training for the employees about various developments in the market. 3. The marketi marketing ng departm department ent should should be restruct restructure ured d on profit profit center center and product line basis. The new marketing strategy should also make efforts to regain the agents in Germany and UK. They should also make efforts to regain the defiance and railways and find new markets for expansion. 4. There There are various various devel developm opment ent taking taking in the industr industry y to change it the comp compan any y should should deve develo lop p a full full fled fledge ged d rese resear arch ch and and deve develop lopme ment nt depart departmen mentt for bringin bringing g technol technologic ogical al change change and improve improvemen mentt in design and process. 5. The policy policy of develo developme pment nt new market market with the accred accredita itation tion of ISO 9001 and C.E. making for certain products should be continuous as it will help in development the confidence of foreign buyers. 6. The sund ndrry debtor tors sho hou uld be efficiently tly manag naged so tha that the outstanding are to be cleared at short intervals. The company should appoint on different areas on a success fees basis to collect the debtors.
7. The cost cost of holding holding inventory inventory is too high high so the inventory inventory holding holding period period is to be reduced and to build up inventory in anticipation of export orders from Russia Russi a and Germany. 8. Th Thee comp compan any y has has to make make new new joint joint ventur venturee with with other other comp compan anie iess in order to reduce the losses. 9. The curren currentt assets assets should be manage managed d more effect effectivel ively y so as to avoid avoid unnecessary blocking of capital that could be used for other purposes. 10. The Working Working Capital Capital requirement requirement is to be assessed based on the norms circulated by RBI for the machine tools industry. 11. The inventory turnover turnover ratio has decreased decreased considerably considerably from the year 2001-02 to 2004-05. This was due to the huge average stock holding even when there was a decrease in sales figure this clears that inventory should be managed appropriately appropriately moreover moreover it was improved in the year 2003-04. 12. The company has maintained maintained proper records records showing full particulars, particulars, quantitative quantitative details and solutions solutions of fixed assets are indicated for major items in the register, the managements during the year has conducted a random verification in respect of fixed assets, which in our opinion is reasonable, having regard to the size of the company and the nature of tits assets. 13. The management has physically verified verified the stock of finished goods and work in progress at the end of the year. 14. In respect of service activities there is a reasonable system for recording receipts issues and consumption of materials and stores and collection of materials consumed to the relative jobs, commensurate with the size and nature of its business.
BIBILOGRAPHY BOOKS Financial management Financial management Management accounting Financial Management and polices Financial Management
Khan and Jain, Tata Mcgrw Hill Prasanna Chandra, Tata Mcgrw Hill R.K. Sharma and K. Gupta V.K. Bhalla, ANMOL Publication Pvt., Ltd., K. Rajeswari, Sultan chand & sons
Catalogues & Boucher Bou cher PRAGA Tools Tools Ltd.,
Web sites www. www. Pragatools.org www.machinetoolsindustry.com