INTRODUCTION

The success of any organization is mainly dependent upon the four functional areas of management, namely finance, production, marketing, and personnel management. Finance is defined as a provision of money at the time it is required. Therefore, every enterprise, whether it is big, medium or small needs finance to carry on its operations and to achieve its goals. Working capital may be regarded as the lifeblood of the business. A study of working capital is so important because of its close relationship with the current day-to-day operations of a business, such as for purchasing of raw material, for meeting day to day expenditure on salaries, wages, rents, advertising etc., Working capital is defined as excess of current assets over current liabilities. Current assets are those assets, which will be converted into cash with in the current accounting period or with in the next year as a result of the ordinary operations of a business. As pointed out by

Ralph Kennedy and Steward Mc Muller: Working capital is very

essential to maintain smooth running of a business. No business can run successfully without an adequate amount of working capital. The goal of working capital management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained.
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There is always an operating cycle involved in the conversion of sales into cash. The firm should maintain a sound working capital position. It should have adequate working capital to run its business operations. Both excessive as well as inadequate working capital positions are dangerous from the firms point of view. Excessive working capital means ideal funds, which earn no profits for the firm.

NEED FOR THE STUDY

The study has great significant and provides benefits to various parties whom directly or indirectly interact with the company.

It is beneficial to management of the company by providing crystal clear picture regarding important aspects like liquidity, leverage, activity and profitability.

The study is also beneficial to employees and offers motivation by showing how actively they are contributing for companys growth.

The investors who are interested in investing in the companys shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the companys shares.

OBJECTIVES OF THE STUDY

The present study Nandi Pipes Nandyal has been undertaken to evaluate the working capital management of the organization by establishing the following objectives.

1. To review the progress and organization efficiency of Nandi Pipes.

2. To find out the working capital position of the company through financial ratios.

3. To know about cause of changes in working capital from time to time.

4. To find out the sources of working capital finance of the company.

5. To give suggestion to company for improvements of working capital position.

METHODOLOGY OF THE STUDY

DATA COLLECTION The data collection of the study consists of two kinds of data.

Primary source of data: This is first hand in nature, and is collected through. o Officers of accounts sections. o Executives and staff of finance and accounts department. o Meeting with concerned people

o Personal observation.
Secondary data:

o Annual reports of SUJALA PIPES Pvt. Ltd. o Financial management textbooks. o Printed materials o Journals & magazines. o News papers o Text books o World Wide Web. o Company maintained reports.

SCOPE OF THE STUDY

The scope of study is limited to collecting the data published in the reports of the company and opinions of the employees of the organization with reference to the objective stated above and theoretical frame work of the data with a view to suggest solutions to various problems relating to working capital

LIMITATIONS OF THE STUDY

In spite of honest and sincere efforts, there are certain discrepancies and inconsistencies.

The limitations are:

The study is restricted to limited period.

The firm refused to disclose some confidential information.

The company has restricted to give the information for more than five years.

The study was conducted with the data available and the analysis was made accordingly.

PLASTIC PIPES INDUSTRY

INTRODUCTION

Plastic is a common name for polymers. Materials are made of long strings of carbon and other elements. Each unit in a string is called a monomer and is a chemical usually derived from oil.

The monomer is made into polymer by chain-linking reactions. This is like making a daisy chain. Instead of flowers, carbon atoms are joined together. The appearance of the daisy chain will be different you use different colored flowers, and so will polymers.

There are many different types of plastics, depending on the starting monomer selected, the length of polymer chains, and the type of modifying compounds added. Each plastic has been developed for a special purpose.

PVC pipes poly vinyl chloride have become synonymous, with modern living it is undoubtedly a product which has deeply penetrated into common mans life no wonder the industry has achieved remarkable capabilities and manufacturing of machinery equipment sophistication.

This versatile materials with superior qualities such as light weight, easy processing corrosion resistance, energy conservative, etc. many substitute to a large estimate of many conventional and costly industrial materials like wood, glass, metal and leather, etc. in the future the manifold applications of plastics

in the field of automobiles, electronics, electrical, packaging and agricultural gives its immense utility in PVC plastics.

At present as percent of total requirement of raw materials and most all type of plastic machines required for the industry are not adequate available. The present investment in all the three segments of industry namely production of raw materials, expansion and diversification of raw materials.

On account of their inherent advantage in properties and versatile in adoption and use, plastics have come to play vital of applications the world over. In our country plastics are used in making essential consumer goods which are daily use for common man. Such as baskets, carry bags, bottles, pipes, pens, etc. they also have application in agriculture, building construction, Water management resources, engineering and electronics.

PROSPECTS
The production of various plastics a raw material in the country is expected to double by the end of seventh plan, the consumption of commodity plastics including LDPE, HDPE, PP, PS & PVC is immense scope for the use of plastics in agriculture, electronics, automobile, telecommunication and irrigation and thus, the plastic industry is on the threshold of an explosive growth.

ROLE OF PLASTICS IN THE NATIONAL ECONOMY

Plastics are got perceived as just simple colorful household products in the mind so common man. A dominant part of the plastics of the percent and future their utilization in the areas Agriculture, forestry and water management. Automobile and transportation Electronics and telecommunications buildings, construction and Food processing and packaging Power and gas distributor.

We shall look at the data plastics and particularly their properties, which are of use in practical working with plastic, are man made materials. The oldest raw materials for producing plastic are carbon materials obtained from coal tar. Today the majority of raw materials of raw materials are obtained from petrochemical sources and they can be economically produced in large quantities.

Please have changed our world day by day. They are becoming more & more important. They owe their success to a whole series of advantages, which they have over conventional materials such as,

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LIGHT WEIGHT EXCELLENT MOULD ABILITY ATTRACTIVE COLORS LOW ENERGY REQUIREMENTS FOR CONVERSION LOW LABOUR LESS COST OF MANUFACTURING LOW MAINTENANCE HIGH STRENGTH OF MANUFACTURING CORROSION RESISTANT AESTHETICS WITHOUT SURFACE TREATMENT COMPATIBILITY WITH REINFORCING MATERIALS

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EMERGENCE OF PVC CONCEPT AND ITS SOCIALIZATION

Growing domestic, agricultural and industrial requirements of the modern world, the quest for a new substance, which could serve the needs and wants of the todays man, became irrepressible. Although metals were meeting major chunk of the fabrication demands of the modern world, rework ability, formability and weight constraints were real impediments. In light of this situation, the substance called plastics, which has got all the desired characteristics to serve the modern man, was discovered. This carbonaceous substance with excellent rework ability and physical stability could replace most of the earlier used metals, wood, etc.

Although acceptance and socialization of this new innovation was slow it has shown a steady encroachment into the life of todays man. Now plastics are omnipresent and serving numerous fields. Agriculture, heavily modernized communication sector, fiber equipment are only few applications among the multifarious uses of the plastics.

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PVC PIPES AND ITS ECONOMIC ROLE

Chief occupation in India is agriculture. For the developing countries like, India, modernization of the agriculture practices assumes pivotal place improving the economic status and the processes of the modernization includes usage of high productive, plastics that supplement to greater extent manufacturing of tools required for new agricultural practices.

The usage of poly vinyl chloride pipes in agricultural fields, lessen water seepage, which was predominant in earlier practices. With the services of P.V.C pipes, water can be transported efficiently with lesser losses, from the place of higher water potential to the lower water potential. Presently revolutionary triad in management speaks much about drip irrigation, which developed in Israel and is practiced by all agricultural based nations in the world. Drip irrigation greatly uses P.V.C pipes as core tools of implementation with the services of this sort, P.V.C pipes one way or other strength the hands of countrys economy.

Apart from the referred uses, P.V.C pipes supplemented with fittings are used in houses for electric connections, sewage connection and other domestic purposes. Apart from these two applications, it has got wide applications even in industrial sector. P.V.C pipes with much unique heat, chemical and physical characteristics serve many industrial purposes. They are even positively used as conduits for industrial gases. Even the characteristics of weight and low price attract many more applications.

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Rigid P.V.C pipes have been manufactured in India from the sixties on imported extrusion lines and there after indigenous plans were also available. There were few pipe manufacturers up to 1978 1979 and large production capacity was created during 1979 1983, when many extrusion line were imported from Batten field, Cincinnati, krausmaffi etc. the government allowed the imports of sophisticated and high output plans which were not available indigenously.

It is essential for the company to carryout continuous research and development to update technology, higher output, loss energy cost per Kg of output, quality of products of etc.

POLY VINYL CHLORIDE (PVC)

Production of PVC pipes in 1961, against first production of PVC in the world. In 1927 at present there are 6 units manufacture of PVC resins. PVC pipes have been synonymous; with modern living it is undoubtedly a product, which has deeply penetrated in to common mans life. No wonder the industry has achieved remarkable progress in the terms of supply of raw materials and diversification of processing capabilities and manufacturing of machinery and ancillary equipment sophistication. This versatile material with superior qualities such as light weight easy processing corrosion resistance, energy conservative, non taxis, etc may substitute to a large estimate of many conventional and costly industrial materials like wood, glass, metal and leather, etc in future the manifold applications of plastics in the field of automobiles,

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electronics, electrical, packaging and agriculture give its immense utility in PVC plastics.

At present as percent of total requirement of raw material and almost all type of plastic machines required for the industry are not adequate available, the present investment in all the three segments of industry namely production of raw materials, expansion & diversification of raw materials. Expansion and diversification of processing capacities, manufacturing of processing machinery, equipment is 1250crores and it provides employment at more than 8lakhs peoples.

Plastics have been subjected to leaves not only at the central level but also the state and local government. These levels have effected in the price of the plastic products adversely.

The per capita consumption of plastics is very low at 0.5Kg as against the world average of 11Kgs. The per-capita consumption is 68Kgs in FRANCE, 33Kgs in UK, and even in Asian countries like South Korea it is 8.5Kgs.

These PVC pipes are widely sued by the farmers their farming and agriculture for water supply in their fields through PVC pipelines. The property of UV stability is incorporated into other wise rigid PVC resin by mixing butyl tin stabilizer. This property is important in tropical countries like ours were high temperature fluctuations in the daily temperature are quite common. The UV stabilizer prevents expansion and contradiction longitudinally in the pipes. When expansion and contraction takes place in the pipes they bend. As a result
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the joints get loosened because they are fixed to walls with the help of the clamps. This results in the subsequent leakage. This is prevented in PVC swr pipes. In PVC swr products, fittings are of two types they are injection blow molded and sealed ring cab fittings; the groups are inherent in the mould. In seal ring cap fittings, the groove is formed when a seal ring cap is made to fit over a plain-ended pipe coupling as well as rubber ring pipe coupling. It is a multi purpose product.

Another variety of plastics that requires artificial manufacturing relates to true engineering plastics, which is used as an alternative to or replacement of metals in load needing applications. Modified P.P.O Nylon, Polycot, Polycarbonates, and Polyester (PBT/PET) phendic are same of the plastics materials following under the category of engineering plastics. Engineering plastics are being increasingly used for various applications in automatic, electronic, telecommunication and other industries. The plastics are classified into two major classes.

The plastics are classified into two major classes. Thermo plastics Thermostats The thermo plastics become sufficiently soft as the applications of heart. The thermostats are the initial application of heart and pressure of heat and pressure subjected to fire. But up on further application of heat pressure. They cured to hard price, which cannot be resofted, the reheating.

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LDPE: LOW DENSITY POLY ETHYLENE

Production of LDPE was stated in the year in 1955 at present there are 3 units manufacturing LDPE with a total capacity of 1.15lakh tones. Products targeted for LDPE by the end of 1999 are placed at 1.86lakh tones.

HDPE: High Density Poly Ethylene

Production of HDPE in India commenced in 1968, at present there is a unit (play defines industries limited.) in India producing HDPE by the end of 1989-1990 was producing 1.25lakh tones.

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IMPORTANCE OF PIPES INDUSTRY

PVC products have found wide acceptance in India and abroad. PVC is one of the most versatile plastics. It can be extruded, molded, calendared, or thermoform into a multitude of furnished products. The PVC resin can be formulated to give a wide range of propertied from hard, tough materials for products as diverse as wires and insulation and sheathing and flooring.

We shall look at the basic data about plastics and particularly those properties, which are of using practical working with plastics. Plastics are man made materials, the oldest raw materials for producing plastics are carbonaceous materials obtained from stagnant at around Rs.60-70crores per annum double to Rs.129crores.The plastic industry as taken up the economy of achieving an export target of Rs.7crores.

Major export markets for plastics related products are Australia, Bangladesh, Canada, Egypt, Hong Kong, Hungary, Italy, Kuwait, Sri Lanka, Federal Republic of Germany, Sweden, Taiwan, U.K., U.S.A., & Russia.

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PROSPECTS
The production of various plastics raw materials in the country is expected to double by the end of the 2010. The consumption of the commodity plastics including LDPE, HDPE, & PVC is immense scope for the use of plastics in agriculture, electronics, automobiles, telecommunications & irrigation & thus, the plastics industry on the threshold of the explosive growth.

UTILITIES OF PVC PRODUCTS:

PVC products cater to both interiors and exteriors. Interiors are as follows:

In interiors it can be used for 1. Floorings 2. Profile and cable trays 3. Wall covering 4. Modular office systems 5. House & furniture Exteriors are as follows For exterior it can be used for 1. Doors & windows 2. Fencing partitions & paneling 3. Roofing & rain system

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The other external applications are:

In the field of irrigation Portable water supplies and public water supplies

In the field of irrigation there are several methods to irrigate the fields. There are major and minor irrigation projects apart from the individual sources like wells, tube wells, & bore wells. Major irrigation projects will have canals and lift irrigation schemes etc. like pipelines; cement and GGI pipes were conventional methods of irrigation in the lift irrigation schemes. Now a days PVC pipes replaced the conventional pipes and they constitute almost 90% in this respect.

Drip irrigation has become a wide concept in agricultural sector especially in the field of horticulture, commercial cropping and green and poly houses. The drip irrigation concept is becoming more popular with its advantages like high yield, water conservation, less labour cost, fewer fertilizers, less pest management cost, less power cost and many more. The demand for this concept is increasing at a pace of 30% to 40% per annum.

Agriculture, a sunrise industry in India economy is essentially on PVC for the seawater suction and pumping to their aqua ponds. They are using pipelines of 4-5 kg of 10-16 diapipes.

The state and central governments are using these pipelines for the public water supply schemes. The state government of A.P is using PVC pipes for the irrigation water supplies for the past few years. The state govt. is
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providing pipes through APSIDC (Andhra Pradesh state irrigation development schemes). These pipes can be sued for the main distributors, sub-distributors and individual connections.

TECHINICAL DETAILS ABOUT P.V.C.PIPES:

1. P.V.C. resin (poly vinyl chloride) 2. D.B.L.S. (die basic lead sulphate) 3. T.B.L.S. (tri basic lead sulphate) 4. L.S. (lead steric) 5. C.S. (calcium steric) 6. STEARIC ACID 7. HYDRO CARBON 8. CALCIUM CARBONATE (ca ca3) 9. TITANIC DIOXIDE

MANUFACTURING PROCESS

Hot forward extrusion is employed for the manufacture of P.V.C. pipes resign with weighted amounts of other ingredients, which are carried to the hot chambers. The high temperature of hot chamber melts ingredients and contents and then given forward transit to hallow pipes of required dimension. As the pipe comes out of the hot chamber, cool water jet is directed towards it to cool the pipe immediately. Pipes of desired length are cut with the aid of stop and power hacksaw. Production is made in various sizes ranging from 1/2 to 10 according to usage.
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REINFORCED PLASTICS

Although plastics have high strength to weight ratio, they are not as strong as metals and deform permanently under load. They cannot bear

extremely high or low temperature like metals and other materials such as refractory bricks. Modern invention of glass of carbon black as reinforcing fillers has a way for making high strength beating plastics and replace steel.

ALLOYS

Physical mixture of two or more polymer is termed as alloys. Physical blending of two polymers is needed because every polymer has certain set of good properties. Design of a special product, which should have specific set of properties, may not be obtained if it is made only from one polymer. By blending two polymers we can get the required combination of properties. For example, polystyrene is highly amorphous and rigid but has low impact strength. It is blended with a rubbery material, product will be of high strength, and shall also have high impact properties.

Thus by allowing wide range of products can be made, although alloys are physical mixture of polymers. Sometimes hydrogen bonds are formed between some special ionic groups with hydrogen atom of the carbon chain. Such a bond is very useful in alloy formation because it impacts processing flexibility with and use of cross-linked products.

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PVC POLY VINYL CHLORIDE

Production of PVC started in 1961, against first production of PVC in the world, 1927. At present there six units manufacture of PVC resins. The total installed capacity comes to 1.7lakhs tones. The production target of PVC by the end of 1989-1990 is placed of 2.33lakhs tones.

POLYSTYRENE

Polystyrene was first manufactured in India in May 1987.

The

production target of polystyrene by end of 1989-1990 is set out to 29,000 tones.

POLY PROPYLENE

The first production of polypropylene in India commenced in 1978. The end of 1993-1994 achieves the production target of 36,000 tones.

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EXPORT OF PLASTICS GOOD

Plastics have excellent potentialities. Our country is equipped with all kind of processing machinery and skilled labor and undoable, and extra to boost export, finished plastics products, which yield rich dividend.

Today India exports plastic products to as many as 80 countries all over the world. The exports, which are stagnant at ground, rest 60 to70 cores per annum double to 129 creators. The plastic industry has taken up the challenge of achieving an export target of Rs.17cores.

Major export markets for plastic products and linoleum are Australia, Bangladesh, Canada, Egypt, Hong Kong, Italy, Kuwait, Federal Republic of Germany, Sri Lanka, Sweden, Taiwan, U.K., U.S.A., and Russia.

With view to boosting the export, the plastics and linoleums export promotion council has urged the government to reduce import duty of plastics raw materials, supply indigenous raw materials at international prices, fix duty, draw backs on weighted average basis and charge freight rate on plastic products on weight basis instead of volume basis.

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PROBLEMS
Raw material is always being a problem to be recorded with the plastics industry. The situation was slightly improved and is expected to charge

considerably by commissioning the major petrol chemical project in the pipeline by the year 1990, the Maharastra gas cracker complex. Haldia petrol chemical & reliance petrol chemicals together with the expansion of existing giants will go a long way to mitigate the long problems. By the terminal year the plan the install capacity is targeted are almost 8lakh tones.

The step rise in the way material as the result of imposition of duties and taxed poses another problem to the plastic industry. On account of this domestic price of finished goods are higher than the rest of world. Apart from this the administrated prices for basic raw materials have not been implemented with a balanced view to accommodating the interest of both consumers and manufacturers. And chloride 85% of the polymers it made from naphtha feedstock. Hence the pricing naphtha by the government has a cascading effect.

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COMPANY PROFILE

Rayalaseema, an economically backward area in Andhra Pradesh, was rarefied region for industries. A dynamic entrepreneur Sri.S.P.Y. Reddy who is basically a mechanical engineer started a unit at Nandyal, which manufactures black pipes in 1977. The determination and hard work of Sri.S.P.Y.Reddy helped him to overcome the problems.

Later the company started manufacturing of PVC pipes, which terminated the manufacturing of black pipes. This resulted in the formation of a private limited called NANDI PIPES PVT.LTD. with Sri. S.P.Y. Reddy as the managing director

GROWTH
Nandi Pipes Pvt Ltd. is commissioned with the objectives of catering to the agricultural needs of the region. In earlier days, tools used for water flow were very ineffective with high percentage of loses. To counter this drawback P.V.C. pipes were favorably welcomed. This has been the mission of Nandi pipes Pvt. Ltd., the major irritants in agricultural practice like lack of rainfall, ground water lifting. Water transport within the fields has provided magnificent thrust to P.V.C. Pipes market. These factors helped Nandi pipes ltd., to record an excellent growth since 1977 onwards. Quality is the dominating factor in the growth of sales. Well-equipped laboratory and quality control office looks after the quality. The department people are always striving to improve the quality.

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The company has now only improved the brand name but is also undertaking takeovers of the competitors brands. In 1977 the company took over the Sagar brand. The manufacturing plant of Sagar brand was at Medak district. The Nandi pipes has not stopped with that victory, the company has taken over another main competitors brand i.e., monarch in 1999. The manufacturing plant of monarch plant lies in East Godavari District.

The threats of the old companies are turned to opportunities to the company by its excellent management. After the change of management the brand image of these brands has improved. At present Nandi Pipes Pvt. Ltd., stands in the market leader position. The only major competitor to the company is Sudhakar Pipes, Maharaja Pipes. The only backdrop to it is the competition from local brands

As the majority of customers belong to farmer, they consider price above quality. The company has to create awareness of the companys quality standards to them.

M\S Somali Pipes Private Limited, which is now the premier company in the Nandi group, was started with a capital of Rest 10lakh in the year 1988 Nandi group has group in the size and emerged as the leading industrial group in Andhra Pradesh in the past 18 years. It has made rapid strides in its growth and been maintaining its fair name for its quality and standard products throughout south India and in the other states. Most of the products enjoy ISI and ISO recognition.

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VISION AND MISSION Vision

To serve people through providing good quality products at reasonable cost.

Mission

To achieve companys growth innovation and development of resources to meet organizational goals. To provide products and services of best value possible to customers, thereby gaining their respects.

TECHNICAL INFORMATION

ITL rigid PVC pipes are manufactured in accordance with Indian standards specification 4985:1998 and other international specification. The company also manufactures special ranges of commercial pipes under different ranges to satisfy the customer requirements. ITL PVC pipes are normally manufactured in uniform length of 6 meters with plain ends both the sides also with self-socked one side. Varied length can be manufactured according to the customer requirements. Integrated Thermoplastics Limited is manufacturing rigid PVC pipes from 20mm to 400mm in conformity to ISI 4985: 2000 and other international specification.

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QUALITY CONTROL ASSURANCE

Integrated Thermoplastics Limited is having well equipped quality testing machines in their labs as per the ISI standards for testing of all diameter and gets excellent result. We at ITL pipes are proud to say that we follow world class QCM (Quality Control Management) techniques is our quality control lab to achieve the best quality. Stringent quality control tests are regularly conducted to ensure top quality production of PVC products.

MAINTENANCE AND SERVICE

This company is better equipped with excellent workshop to provide maintenance and service of machinery in electrical, mechanical, and civil lines all the time. We assure service at any time to enable our equipment and machinery to perform efficiently, thus reducing production down time.

EXPLORING NEW HORIZONS: EXPORTS

Integrated Thermoplastics Limited is trying hard in exploring their products like rigid PVC pipes of water, electrical conduits, and SWR pies to Middle East, Europe, Africa, and other Asian countries. Taking an example our esteemed overseas customers, we are proud to say that we are associate with CEYLON ELECTRICITY BOARD SRILANKA supplying electrical conduits to there project requirements.

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GENERATING EMPLOYMENT

The integrated Thermoplastics Limited has the work force of more than 400 workers working at our manufacturing plant located at Manoharbad Village, Toopran Mandal, and Medak District. generates employment to several people. In this way the company

DYNAMIC WORK FORCE

The dynamic work force is the strong base for the success of the company. The administrative as well as the technical staff are well qualified and skilled. The company follows the specialization of work, which helps the company to assign the right job to right person. The technical staff at the manufacturing units is well versed in the field of production, which generates new innovative ideas and concepts. All the workers are dedicated to work and responsible for their job work done.

DISTRIBUTION NETWORK

One of the most important parts of the companys effective functioning in the competitive market is its distribution network. The company has its own dealers network with a number of nearly more than 100 dealers through out the state.

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The company has its own vehicles for transportation, which helps the sales department to cater the needs of the customers at the right time at the right place.

REGIONS COVERED IN INDIA

Andhra Pradesh Southern States of Karnataka, Goa, Pondicherry, Maharastra, Orissa, Kerala, Gujarat, Chattisgarh, & Thailand. Are in ambit of Nandi groups There has been expansion of product base from him alone PVC pipes and presently the groups products include follows

PRODUCT LINE
UPVC potable water pipes, UPVC SWR pipes, UPVC blue sensing pipes, Submersible pipes, Rigid Electrical conduits, HDPE pipes, Garden pipes, Suction pipes,

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Water tanks Agricultural & SWR fittings, Drip Irrigation equipment, Cement, Milk products, Mineral water, Solvent Cement & Plastics. This group also has successfully into trading business and been maintaining Super Bazaar departmental stores and Hardware at the groups principal place, Nandyal.

The group had over 200 transport vehicles and heavy earth moving equipment facilitating easy and planning to expand its business further and is poise to touch the Rs1000crores mark annual turn over in the next 4-5 years.

The group has floated a public company of ethanol and industrial Alcohol with a capital of Rs14500 liters per day using maize and other agro products as raw materials at the New Industries Estates, Nandyal at a capital outlay of Rs156crores. The company is confident of commissioning the

project as early as possible.

SIZES
Various sizes ranging from to 10 are offered to customers. Even pipes with different gauges and sizes are manufactured to suit specific conditions.

PACKING
Packing plays less important role in the products like PVC pipes because the hollow space inside can be utilized. For the purpose of cubic space

utilization in trucks while transport, organization is adopting the technique like pipe in pipe

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WARRANTIES
No written warranties are given to customers except an assurance that the product is reliable.

PAYMENT PERIOD

For Mandy brand the company adopts zero credit policy and goods are not delivered unless cash remittances are made. For Monarch and Sagar

brands credit is entitled up to a week. The difference between these brines is due to brand image.

CHANNELS OF DISTRIBUTION
Mandy pipes Pvt.Ltd. has got zero level, one level channels distribution for Monarch and Sagar,

MANUFACTURER

CUSTOMER

MANUFACTURER

DEALER

CUSTOMER

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Nandi pipes Pvt. Ltd. Has an extensive network of 300 dealers in Andhra Pradesh who are directly serviced by company sales force and 500 dealers in South India.

TRANSPORTATION

Transportation of Nandi pipes Pvt. Ltd. is very admirable. This unique strength of the organization enables the delivery system to be efficient. This even helps the dealers to reduce inventory levels to the minimum. Thus dealers are also supplemented with the dealers to reduce inventory levels to the minimum. Thus dealers are also supplemented with the benefit of the lower tied up capital in the form of inventory.

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GENERAL INFORMATION ABOUT THE COMPANY

The company is equipped with sophisticated laboratory to carry on the tests to ascertain outgoing quality level of the pipes. Nandi pipes have got ISI Trademark, which speaks for itself for the quality of the pipes. Numbers of statistics quality control techniques are applied to sustain the quality level of the product. Managers at the company are dynamic and well qualified. Supervisory staff or intermediate managerial staff is adept in tackling their area though not highly qualified. Most of the skilled or unskilled labours are duty minded. Company E.S.I. (Employment State Insurance) and provident fund facilitates to all its employees. Uniqueness of workers of Nandi pipes Pvt. Ltd. Is their nonindulgence in trade union activities. As the company is located in the industrial estate of Nandyal, it is facilitated with good communication networks, which includes telex, fax machine and Internet. Company has also got the Electronic Data Processing.

The companys major strength is considered to be transportation vehicles. Huge investment is made on transportation vehicles; a unique cash outflow justifies itself by providing good reputation for the company through improved customer service.

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ORGANIZATIONAL CHART

CHAIRMAN

MANAGING DIRECTOR

GM(FINANCE) GM(PRODUCTION) GM(MARKETING) GM (ENGINEERING)

ACCOUNTS FOREMAN MANAGER

PRODUCTION MANAGER

MARKETING MANAGER

HR MANAGER

CLERKS

SUPERVISORS MECHANICS OPERATORS

EXECUTIVES

EXECUTIVES

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FINANCIAL DEPARTMENT

Though initially the company approached the external sources of financial aid, now the financial status of the company is very sound and is being run only with self financial excepting for loans taken on hypothecation of machinery and stock from SBI, Nandyal.

The financial manager with the help of accounts and other clerks of the department head the financial department. The company follows cash & carries policy for Nandi brand. The products are not delivered until the cash is paid and financial department with the help of marketing department looks after these transactions.

MARKETING DEPARTMENT

Marketing manager who reports to the executive Director, an Assistant marketing Manager who reports to the Marketing Manager and 20 salesmen headed by 30 sales representatives who are headed by an Assistant Marketing Manager, heads the marketing department. Marketing mix and advertising particulars of Nandi pipes Pvt. Ltd. Indicate the departments effectiveness of the Marketing Department in the organization.

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PERSONNEL DEPARTMENT

The personnel department consist the details of the executives and workers of the organization. The organization is formed with Sri.S.P.Y.Reddy as the managing director and executive director. Two Marketing Managers, financial manager, a public relations officer and a quality control officer all of whom report to the Executive Director. Other than Executives there are 1000 works in the all organization. A panel consisting of Managing Director, Executive Director and Manger of the concerned departments makes the recruitment and selection of personnel. Apart from the attractive salaries, the company provides health card facility etc.

PURCHASING DEPARTMENT

The perplexing situation that is confronted by the manufactures of the PVC pipes is scarcity of resin. Though the Government of India has taken various steps to improve supply conditions of PVC resin, the Indian manufacturers could meet only 50% of demand and remaining 50% is met from imports. The major petrochemical companies are: Sri Ram Vinyl Ltd. Chem. plast Ltd Reliance perto Chemicals National Organic Chemical Industries Ltd.Indian perto Chemical industries Ltd.

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INTRODUCTION TO FINANCE
Finance is a specialized, functional field under the general classification of business administration. The term Finance can be defined as the management of the flows of money through as organization whether it is a corporation, bank, Govt., agency; etc. Finance concerns itself with the actual flows of money, as well as any claims against money. As a business discipline, finance can be differentiated from accounting and economics. Accounting is concerned with the recording, reporting and measuring of business transaction, where as finance uses the information provided by the accounting system to make decision to help organizations to achieve their objectives. Economies are concerned with analyzing the allocation of resources in a society. It studies transactions, among people involving in a society. It studies transaction, among people involving goods and services with or without the exchange of money. Individual businesses are face problems dealing with the acquisition of funds to carry on their activities and with the determination of optimum methods of employing funds. In competitive market place, businessman must actively manage their funds to achieve their goals. The financial tools help the management. Determine which sources offer the lowest cost of funds and which activities will provide the greatest return on invested capital. A successful business manager for enterprise uses a goal oriented financial structure. The financial manager performs certain tasks that help to achieve its operating objective. The important goals of financial management are: Wealth maximization of shareholders. Liquidity. Profitability of the firm.

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FUNCTIONS OF FINANCIAL MANAGEMENT

Although it may be difficult to separate the finance functions from production, marketing and other functions, yet the functions themselves can be readily identified. The functions of raising funds, investing in assets and distributing returns earned from assets, shareholders respectively known as financing, investment and dividend decision. While performing these functions, a firm attempts to balance cash inflows and cash outflows. This is called liquidity decision and we add it to the list of important finance decisions or functions.

Investment or long-term asset mix decision. Financing or capital mix decision Dividend or profit allocation decision. Liquidity or short term asset mix decision.

A firm performs finance functions simultaneously and continuously in the normal course of the business. They do not necessarily occur in a sequence. Finance function call for skillful planning, control and exception of a firms activities. Let us note that outset that share holders are made better off by a finance decision, which increase value of their shares. Thus while performing the finance functions, the financial manager should strive to maximize the market value of shares.

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INVESTMENT DECISION

Investment decision or capital budgeting involves the decision of allocation of capital or commitment of funds to long-term assets, which would yield, benefits in future. Its one very significant aspect is the task of measuring the prospective profitability of new investments. Future benefits are difficult future; capital budgeting decision involves risk. Investment proposals should, therefore be evaluated in terms of both expected return and risk, besides the decision to commit funds in new investment proposal; capital budgeting also involves decision of recommitting funds when an asset becomes less productive or non profitable.

FINANCING DECISION
Financing decision is the second important function to be performed by the financial manager. Broadly, he must decide when, where and how to acquire funds to meet the firms investment needs, the central issue before him is to determine the proportion of equity and debt. The mix of debt and equity is known as the firms capital structure. The financial manager must strive to obtain the best financing mix or the optimum capital structure for this firm.

DIVIDEND DECISION
Dividend decision is the third major financial decision. The financial manager must decide whether the firm should distribute of all profits, or retain them, or distribute a portion and retain the balance. Like the Debt policy, the

41

dividend policy should be determined in terms of its impact on the shareholders value. The optimum dividend policy is one, which maximizes the market value of the firms shares. Thus, if shareholders are not in different to the firms dividend policy, the financial manager must determine the optimum dividendpay out ratio.

LIQUIDITY DECISION
Current assets management, which affects a firms liquidity, is yet another important finances function, in addition to the management of longterm assets. Current assets should be managed efficiently for safeguarding the firm. Against the dangers of insolvency, investment in current asset affects firms profitability, liquidity and risk. A conflict exists between profitability and liquidity while managing current assets. If the firm does not invest sufficient funds in current assets, it may become illiquid. But it would lose profitability, as idle current assets would not earn anything. Thus, a proper trade-off must be achieved between profitability and liquidity. In order to ensure that neither insufficient nor unnecessary funds are invested in current assets, the financial manager should develop sound techniques of managing current assets and make sure that funds would be made available.

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WORKING CAPITAL MANAGEMENT INTRODUCTION

Every business needs funds for two purposes for its establishment and to carry out its day-to-day operations. Working capital refers to that part of the firms capital, which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories.

The goal of working capital management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. Working capital is the difference between the inflow and outflow of funds. Net cash inflow defines as the excess of current liabilities over current assets. Working capital is also revolving or circulating capital or short-term capital.

DEFINITIONS
Working capital is defined as the difference between current assets and current liabilities. -I.M.PANDEY

Working capital is the amount of funds necessary to cover the cost of operating the enterprise. SHUBIN

Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another as for example, cash to inventories, inventories to B/R, B/R to cash. Working capital is also called as revolving and short-term capital. _ GENESTEN BERG

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OPERATING CYCLE CONCEPT

A company operating cycle typically consists of three primary activities purchasing resources, producing the product and distributing (selling) the product. These activities create funds flows that are both unsynchronized and uncertain. They are uncertain because future sales and costs, which generate the respective receipts and disbursement, cannot be forecasted with complete accuracy. If the firm is to maintain liquidity and function properly it has to invest funds in various short-term assets (working capital) during this cycle. It has to maintain a cash balance to pay the bills as they come due. In addition, the company must invest in inventories to fill customer orders promptly and finally the company invests in accounts receivables to extend to its customers.

RAW MATERIALS WORK-IN-PROGRESS FINISHEDGOODS SALES DEBTORS CASH RAW MATERIALS

The operating cycle is equal to the length of the inventory and receivables conversion periods.

OPERATING CYCLE
Inventory conversion period + Receivables conversion period. The inventory conversion period is the length of time required to produce and sell the products it is defined as follows. Inventory conversion period = Average inventory cost of sales / 365. The receivable conversion period or average collection period represents the length of time required to collect the sales receipts it is calculated as follows.

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DEBTORS

SALES

FINISHED GOODS

CASH

RAW MATERIA

WORK-INPROGRESS

Receivables conversion period = Account receivable Account receivable = Annual Credit sales / 365.

The payables deferred period is of the time the firm is able to differ payment on its various resource purchases (For example materials, wages, and taxes) equation is used to calculate the payables deferral period. Payables deferral period = A/Cs payable + salaries, benefits and payroll &taxes payable. (Cost of sales + selling general and administration. expenses) / 365

Finally, the cash conversion cycle represents the net time interval between the collections of cash receipts from product sales and the cash payments for the companies various receipts purchases. It is calculated as follows cash conversion cycle operating cycle-payables deferral period.

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TYPES OF WORKING CAPITAL

Gross working capital. Net working capital.

Gross working capital

It is the broad sense the term working capital refers to the gross working capital and represents the amount of funds invested in the current assets. Thus, the gross working capital is the capita; invested in total current assets of the enterprise which in the ordinary course of business can be converted into cash within a short period of time. Gross working capital = total current assets.

Net working capital

This refers to the difference between current assets and current liabilities. Net working capital can be either positive or negative. A positive net working will arise when current assets exceed current liabilities. A negative working capital occurs when current liabilities are in excess of current assets. Net working capital = Total of current assets Total of current Liabilities.

MEASURING THE WORKING CAPITAL

Working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. However, it must also be noted that working capital is a means to run the business smoothly and profitably, and not an end. Thus, concept of
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working capital has its own importance in a going concern. The analysis of working capital can be conducted through a number of devices, such as Ratio Analysis. Funds flow analysis. Capital Budgeting.

LIST OF CURRENT ASSETS AND CURRENT LIABILITIES:

Current Assets:

Cash in hand. Cash at bank. Bills receivables Sundry debtors Stock. Prepaid expenses. Accrued income. Short-term investment.

Current Liabilities:
Bills payable. Sundry creditors. Accrued expenses. Short term loans. Dividends payable. Bank overdraft. Provision taxation.

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OBJECTIVES OF WORKING CAPITAL

The need for working capital cannot be over emphasized. Every business needs some amount of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. For the purchase of raw materials, components and spares. To pay wages and salaries. To incur day-to-day expenses and overheads costs such as fuel, power and office expenses, etc. To meet the selling costs as packing, advertising, etc. To provide credit facilities to the customers. To maintain the inventories of raw materials, work-in-progress, store and spares and finished stock.

SOURCE OF WORKING CAPITAL

There are two sources of working capital they are: Permanent or Fixed working capital

The fixed proportion of working capital should be generally financed from the fixed capital sources like: Shares, debentures Public deposits. Plugging back of profits. Loans from financed institutions.

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Temporary or Variable working capital Variable or temporary working capital requirements of a concern may be met from the short-term sources of capital like: Commercial bankers. Indigenous bankers. Trade creditors. Advances. Accrued expenses Commercial papers. Accounts receivables.

USES OF WORKING CAPITAL Losses from business operations. Purchases on non-current assets. Redemption of debentures and / or preference shares.

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CLASSIFICATION OF WORKING CAPITAL Working capital may be classified in two ways: On the basis of concept, On the basis of time,

ON THE BASIS OF CONCEPT Gross working capital. Net working capital

ON THE BASIS OF TIME A. Permanent or Fixed working capital. Regular Working Capital. Reserve working capital.

B. Temporary or Variable working capital. Seasonal working capital. Special working capital.

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DETERMINANTS OF WORKING CAPITAL

Nature of size of business These kinds of institutions require limited working capital to produce goods and services. (Ex: public utility organization)

These are the institutions, which require of working capital turnover. (Ex: trading concerns) This kind of institutions issues shares into orders to moderate the capital (Ex: manufacturing concern.)

Manufacturing cycle The manufacturing comprises as a purchase and use of raw materials and the production of finished goods, larger will be the firms working capital requirements.

Firms credit policy The credit policy of the firm affects the working capital by influencing the level of debtors. The credit terms to be granted to customers may depend upon the norms of the industry to which the firm belongs.

Price level changes The increasing shifts in price level make functions of financial manager difficult. He should anticipate the effect of price level changes on working capital.

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REQUIREMENTS OF THE FIRM

1. Operating efficiency The operating efficiency of the firm relates to the optimum utilization of resources at minimum cost. The firm will be effectively contributing in keeping the working capital investment at a lower level; it is efficient in controlling operating cost and utilizing current assets.

2. Earning capacity and dividend policy Earning capacity more in quality and monopoly conditions operates high working capital; high profits in it have required influencing dividend policy.

3. Rate of stock turnover Stock turnover depends upon size and growth business expansion. If small size organization requires little working capital, if it is larger size requires high working capital.

4. Business Cycle In case of boom requires low capital, in case of depression requires high capital. In 1991 Indias position in market level will face inflation.

Estimating working capital needs The most appropriate method of calculating the working capital needs of a firm is the concept of operating cycle. However we shall illustrate here three approaches, which have been successfully applied in practice.

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Current assets holding period To estimate the working capital requirements on the basis of average holding period of current assets and relating them to cost based on the companies experience in the previous years. This method is essentially based on operating cycle concept.

Ratio of sales To estimate working capital requirements as ratio of sales on the assumption that current assets change with sales.

Rate of fixed investment To estimate working capital requirements as percentage of fixed investments.

Financing of working capital The current assets of the firm are supported by spontaneous current liabilities (trade creditors and provisions others etc) short-term bank financing and long-term sources of finance (mainly debentures and equity) the working capital policy of the firm has to decide between two alternatives. Current asset financing policy. Conservative Aggressive current assets financing policy. A conservative current assets financing policy relies less on short term bank financing and more on long-term sources such as debentures and internal sources like reserves and surpluses. The highly conservative policy may seek to replace even long-term debt by equity. An aggressive current asset financing policy relies on short-term bank finance and seeks to reduce dependence on long-term financing.
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The consequence of those policies is that the conservative current asset financing policy reduces the risk of the firm from being unable to repay or replace its short-term debt periodically. But it may result in enhanced cost of financing as the long-term sources finances debt and equity have an associated with them. An aggressive current asset financing on the other hand may have opposite effects; it exposes the firm to higher of risk but minimizes the average cost financing.

The working capital policy adopted by a firm can be broadly conservative, moderate or aggressive with conservative or aggressive current asset financing policy. The choice of overall working capital policy depends on the risk disposition of the management.

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ADEQUACY OF WORKING CAPITAL

Working capital should be adequate for the following reasons, It protects the business from the adverse effects of shrinkage in the value of current assets. It is possible to pay all the current obligations promptly and to take advantage of cash discounts. It ensures to greater extent the maintenance of a companys credit standings & provides for such emergencies like strike floods etc. It permits the carrying of inventories at a level that would enable a business to serve satisfactory. It enables a company to extend factorable credit terms to customers.

It enables a company to operate its business more efficiently become there is no delay in obtaining materials etc, business of credit difficulties. It enabled a business firm to withstand in periods of depression smoothly. There may be operating losses or decreased retained earnings. There may be excessive non-operating or extraordinary loses. The management may fail to obtain funds from other sources for purpose of extension. There may be an unwise dividend policy. Current funds may be invested in non-current assets.

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DANGER OF INADEQUATE WORKING CAPITAL

It is not possible for it to utilize production facilities fully for want of working capital.

A company may not be able to take advantage of cash discount facilities.

A company may not be able to take advantage of profitable business opportunities.

The modernization of equipment and even routine repairs and maintains facilities may be difficult to administer

A company will not be able to pay its dividend because of the nonavailability of funds.

A company cannot afford to increase its credit sales and may have to restrict its activity to cash sales.

A company may have to borrow funds at excessive rate of interest.

Its low liquidity may head to low profitability in the same way as low profitability leads to low liquidity.

Low liquidity would positively threaten the solvency of the business.

A company is considered illiquid where it is unable to pay its debts on maturity.

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DANGERS OF EXCESSIVE WORKING CAPITAL

Too much working capital is dangerous as too little of it. Excessive working capital raises the following problems.

A company may be tempted to over trade and lose heavily.

A company may keep very big inventories and tie up its funds unnecessarily.

There may be an imbalance between liquidity and profitability.

A company may enjoy high liquidity and at the some time suffer from low profitability.

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ISSUES IN WORKING CAPITAL MANAGEMENT

The financial manager must determine the levels and composition of current assets. He must see that right resources are tapped to finance the current assets and current liabilities are paid in time. There are many aspects of working capital management can be which make it an important function of financial manager.

Time Investment Criticality Growth

Time Working capital management requires much of the financial managers time. Investment Working capital management requires the large portion of total investments in assets Criticality Working capital management has great significance for all firms but it is very critical for small firms. Growth The need for working capital is directly related to the firms growth.

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RATIO ANALYSIS
One of the techniques of analysis of financial statements is to calculate ratios. Ratio is a numerical or arithmetic relationship between two figures. It is expressed when one figure is divided by another. Absolute figures are valuable but they standing alone convey no meaning unless compared with another. Accounting ratios show inter-relationships, which exist among various accounting data. When relationships among various accounting data supplied by financial statements are worked out, they are known as accounting ratios.

DEFINITION OF RATIO

According to Webster A Ratio shows the relationship between two or more things, the relationship between two accounting figures, expressed mathematically, is known as financial Ratio

NATURE OF RATIO ANALYSIS

A Ratio is known as the indicated quotient of two mathematical expressions. Ratio analysis is a powerful tool of financial analysis. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of firm. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information.

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Ratio help to summaries large quantities of financial data and make quantitative judgment about the firms financial performance for example, consider current ratio. It is calculated by dividing current asset by current liabilities; the ratio indicates a relationship- a qualified judgment- to be formed about the firms ability to meet its current obligations. It measured about the firms liquidity. The greater the ratio, the greater the firms liquidity and vice verse. The point to note is that a ratio reflecting a quantitative relationship helps to form a quantitative judgment-such is the nature of all financial ratios.

SIGNIFICANCE OF RATIO ANALYSIS

Ratios are significant both in vertical and horizontal analysis. The vertical analysis, ratios help the analyst to form a judgment whether performance of the corporation at a point of time is good, questionable or poor. Likewise, use of ratios in horizontal analysis indicates whether the financial condition of the corporation is improving or deteriorating and whether the cost, profitability or efficiency is showing and upward or downward trend analysis of ratio involves two types of comparisons.

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CLASSIFICATION OF RATIOS
Ratios may be classified in a number of ways keeping in view the particular purpose. Several ratios calculated from the accounting data, label grouped into various classes according to the financial activity or function to be evaluated. The parties, which generally undertake financial analysis, are short and long-term creditors, owners and management. Profitability ratios. Coverage ratios. Turnover ratios. Financial ratios. Leverage ratios.

The most common ratios are,

CURRENT RATIO

This ratio is most widely used ratio. It is the ratio of current assets to current liabilities. It shows a firms ability to cover its current liabilities with its current assets. It is expressed as follows:

Current ratio=current assets/current liabilities

Generally 2:1 is considered ideal for concern i.e. current assets should be twice of the current liabilities. If the ratio is less than two, difficulty may be experienced in the payment of current liabilities and day-to-day operations of

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the business may suffer. If the ratio is higher than two, it is very comfortable for the creditors but for the concern, it is indicator of idle funds and a lack of enthusiasm for work.

QUICK RATIO
This ratio establishes a relation ship between quick or liquid assets and current liabilities and current assets is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset other assets, which are considered to be relatives liquid and included in quick assets, are book debts marketable securities. Inventories are considered to be less liquid. Dividing the total of the quick assets by total current liabilities forms the quick ratio.

Quick

ratio

current

assets

(inventories+prepaid

expenses)/current liabilities

1:1 ratio is considered ideal ratio for a concern because it is wise to keep the liquid assets at least equal to the liquid liabilities at all times.

CASH RATIO
Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may be included in the computation of cash ratio.

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Cash + Marketable security Cash Ratio = -----------------------------------------------Current liabilities.

INVENTORY TURNOVER RATIO

This ratio indicates the efficiency of the firm in selling its product. It is calculated by dividing the cost of goods sold by the average inventory. The higher the ratio, the more efficient the marketing of inventories and vice versa. Inventory turnover ratio = sales/inventory

NET WORKING CAPITAL RATIO

The difference between current assets and current Liabilities is called Net working capital. Networking capital is used as a measure of a firms liquidity. Net working capital measures the firms potential reserving of funds. It can be related assets or capital employed.

Networking Capital Networking ratio = ------------------------------Net Asset.

RECEIVABLES TURNOVER RATIO

Receivables (or) debtors constitute an important constitute of current assets and therefore the quality of receivables to a great extent determines the firms liquidity. Receivables turnover ratio=sales/receivables

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THE FOLLOWING TABLE IS A STATEMENT SHOWING NET WORKING CAPITAL OF THE SUJALA PIPES FOR THE YEAR 2005 & 2006 ASSETS Inventory Debtors Cash & Bank balance Loans & Advances Total Current Assets LIABILITIES Current Liabilities Provision Total Current Liabilities Working Capital (CA CL) Increase in Working Capital NET WORKING CAPITAL 8419.78 8419.78 1751.03 1751.03 729.34 729.34 3373.80 156.37 3530.17 7690.44 2716.03 499.89 3215.92 8419.78 657.77 343.52 2005 3065.56 6238.55 1031.21 885.29 11220.61 2006 3443.01 5564.41 1747.02 881.26 11635.7 INCREASE DECREASE 377.45 715.81 674.14 4.03

INTERPRETATION

Inventory and cash & bank balance has been increased in 2005. Debtors and loans & advance have been decreased. Current liabilities have been

decrease. Finally there is increase in working capital.

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THE FOLLOWING TABLE IS A STATEMENT SHOWING NET WORKING CAPITAL OF SUJALA PIPES FOR THE YEAR 2006 & 2007 PARTICULARS ASSETS Inventory Debtors Cash & Bank balance Loans & Advances Total Current Assets LIABILITIES Current Liabilities Provision Total Current Liabilities Working Capital (CA CL) Decrease in Working Capital NET WORKING CAPITAL 2716.03 499.89 3215.92 8419.78 8419.78 3862.57 385.72 4248.29 7804.64 615.14 8419.78 615.14 1810.9 1810.9 114.17 1146.54 3443.01 5564.41 1747.02 881.26 3316.98 6581.79 1208.69 945.47 1017.38 64.21 126.03 538.33 2006 2007 INCREASE DECREASE

11635.7 12052.93

INTERPRETATION

There is decrease in inventory and cash & bank balances, where debtors and loans & advances have been increased therefore current liabilities have increased. Finally there is decrease in working capital.

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THE FOLLOWING TABLE IS A STATEMENT SHOWING NET WORKING CAPITAL OF THE SUJALA PIPES FOR THE YEAR 2007 & 2008 PARTICULARS ASSETS Inventory Debtors Cash & Bank balance Loans & Advances total current assets LIABILITIES Current Liabilities Provision Total Current Liabilities Working Capital (CA CL) Increase in Working Capital 3862.57 385.72 4248.29 7804.64 5189.13 5671.67 484.67 6156.34 12993.77 7097.18 5189.13 7097.18 1809.1 98.95 3316.98 6581.79 1208.69 945.47 5318.73 11502.3 1238.7 1090.38 2001.75 4920.51 30.01 144.91 2007 2008 INCREASE DECREASE

12052.93 19150.11

NET WORKING CAPITAL 12993.77 12993.77

INTERPRETATION

The current assets have been increased in the year of 2007 .The current liabilities have been increased. The working capital position has been increased when compared to previous table. Finally there is increase in working capital.

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THE FOLLOWING TABLE IS A STATEMENT SHOWING NET WORKING CAPITAL OF SUJALA PIPES FOR THE YEAR 2008& 2009 PARTICULARS ASSETS Inventory Debtors Cash & Bank balance Loans & Advances total current assets LIABILITIES Current Liabilities Provision Total Current Liabilities Working Capital (CA CL) Decrease in Working Capital 5671.67 484.67 6156.34 6491.81 7232.30 13724.11 820.14 6747.63 5318.73 11502.3 1238.7 1090.38 6767.92 13834.34 2471.74 1902.97 1449.19 2332.04 1233.04 812.59 2008 2009 INCREASE DECREASE

19150.11 24976.97

12993.77 11252.86 1740.91 1740.91 7567.77

-

NET WORKING CAPITAL 12993.77 12993.77

7567.77

INTERPRETATION

The current assets and current liabilities have been increased in 2008 than 2007 so there are fewer requirements for source of working capital hence there is decrease in working capital.

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CURRENT RATIO
Current Ratio = Current Assets Current Liabilities

YEAR

CURRENT ASSETS

CURRENT LIABILITIES 3530.17 3215.92 4248.29 6156.34 13724.11

CURRENT RATIO

2005 2006 2007 2008 2009

4 3.5 3 2.5 2 1.5 1 0.5 0 2005

11220.61 11635.7 12052.93 19150.11 24976.97

3.18:1 3.62:1 2.84:1 3.11:1 1.82:1

Current Ratio

2006

2007

2008

2009

Interpretation
There is fluctuation in year by year. By 2008 it has reduced to 1. 82. In 2005 is best as the whole.
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from 3.18

QUICK RATIO
Quick Ratio = Current Assets - Inventory Current Liabilities

YEAR 2005 2006 2007 2008 2009

QUICK RATIO 2.31:1 2.55:1 2.06:1 2.25:1 1.33:1

3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 2009 QUICK RATIO

Interpretation
Quick ratio establishes relationship between quick assets & current liabilities. It is found that the company is maintaining the quick ratio more than 1 for last five years.

Generally quick ratio is in the form of 1:1

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NET WORKING CAPITAL

Net Working Capital = Current Assets Current Liabilities YEAR 2005 2006 2007 2008 2009 NET WORKING CAPITAL 7690.44 8419.78 7806.64 12993.77 11252.86

14000 12000 10000 8000 6000 4000 2000 0 2005 2006 2007 2008 2009 QUICK RATIO

Interpretation
The net working capital shows the result positively. The net working capital has been increased slowly and decreased at the end of 2008. At the end of 2008, SUJALA PIPES net working capital was 11252.86 where current assets are more than current liabilities.

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INVENTORY TURNOVER RATIO:

Inventory Turnover Ratio = Sales / Inventory

Year

Sales

Inventory InventoryTurnover Ratio

2005 2006 2007 2008 2009

15213.49 17760.69 17111.34 28598.66 37092.11

3065.56 3443.01 3316.98 5318.73 6767.92

4.97 5.19 5.16 5.38 5.48

5.5 5.4 5.3 5.2 5.1 5 4.9 4.8 4.7 2005 2006 2007 2008 2009 Inventory Turnover

Interpretation: The inventory turnover ratio is showing positive results. In inventory

turnover it is reflecting growth stage.

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DEBTORS TURNOVER RATIO: Debtors Turnover Ratio = Sales / Debtors

YEAR

Sales

Debtors Debtors Turnover Ratio

2004 2005 2006 2007 2008

15213.49 17760.69 17111.34 28598.66 37092.11

6238.55 5564.41 6581.79 11502.3 13834.34

2.44 3.19 2.60 2.49 2.68

3.5 3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 2009 Debtors tunover Ratio

Interpretation Debtors Turnover Ratio has been increased from 2.44 to 2.68 in the
last five years. The ratio was very high during the year of 2005.

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Cash Management:
Cash is the most important factor in financial management. It is also the most important current assets for the operation of the business. Every activity in an enterprise revolves round the cash. Since cash is limited in every enterprise and it cannot be raised as and when required. It is therefore, desirable that available cash must be management properly.

Cash is the most liquid asset, is of vital importance to the daily operations of the business. While the proportion of corporate assets held in the form of cash is very small often in between 1% to 3%, its efficiency management is crucial to the solvency of the business because in a very important sense cash is the focal point of hand in business. In view of its importance, it is generally referred to as the lifeblood of a business enterprise.

Meaning of Cash: The term cash is used in two senses. In a narrower sense it includes coins. Currency not, cheques, bank drafts held by a firm with it and the demand deposits held by it in banks. In a broader sense it also includes near cash assets such

marketable securities and time deposits with bank. Here are two main reasons for a firm hold cash: 1. 2. To me needs of day-to-day transactions. To protect the firm against uncertainties characterizing its cash flows. While cash serves these functions, it is can idle resource which has an opportunity cost. The liquidity provided by cash holding is at the expense of profits sacrificed by foregoing alternative opportunities. Hence, the finance manager should carefully plan and control cash.

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Objectives of Cash Management: There are two basic objectives of cash management. 1. To meet the cash disbursement need as per the payment schedule i.e. the first basic objective of cash management is to meet the payments schedule. In other words the firm should have sufficient cash to meet the various requirements of the firm at different period of time. 2. The second basic objective of cash management is to minimize the amount locked up as cash balances. In the process of minimizing the cash balances, the finance manager is confronted with two conflicting aspects. A higher cash balance ensures proper payment will all its advantages. But this will result in a large balance of cash in failure of the firm to meet the payment schedule.

Motives for holding cash: Cash is the most liquid asset, but it does not earn any substantial return for the business. Nobody earns any income on the cash balance or currently being

maintained however some interest income may be earned on short-term deposits but still everybody and every firm maintain some cash balance. The three motives of holding cash are Transaction motive Precautionary motive Speculative motive

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 Transaction motive: Business firms as well as individuals keep cash because they require it for meeting demand for cash flow arising out of day-to-day transactions.

Precautionary motive: It is the need to hold cash to meet contingencies in the future. It provides a cushion (or) buffer to withstand some unexpected emergency. The precautionary amount of cash depends upon the predictability of cash flows.

Speculative motive: The Speculative motive relates to the holding of cash for investing in profit making opportunities us and when they arise. The opportunity to make profit may arise when the security process change.

Cash Management Basic Problems: The problems associated with the cash management are: 1. Control 0 level of cash:

Level of cash can be fixed by taking into account the following considerations: Predictable discrepancies through the technique of cash budget. Unpredictable discrepancies. Sources of funds-external as well as internal Relations with banks.

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2.

Controlling inflow of Cash: It is necessary to check the fraudulent diversion of cash receipts and to collect

the receipts speedily.

Fraudulent diversion can be controlled by internal check

system. Speedily collection of receipts may be arranged through. Lock box system and Regional offices of the company. 3. Controlling outflow of Cash: Controlling of outflow of cash is equally important. For this purpose,

centralized payments, avoidance of early payments, float and accruals should be taken recourse.

4.

Investment of Surplus Cash: Investment of surplus cash available with the company depends upon the

discretion of the executive of the company. Investment made on Temporary basis and on Permanent basis. In taking investment decisions. Following points are usually given weightage. Security Liquidity Yield Maturity

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Advantages of Ample Cash Funds: Firms having ample cash reserves may derive the following advantages: A shield for technical inefficiency. Maintenance of goodwill. Availing of cash discount. Good bank relations. Exploitation of business opportunities. Encouragement to new investment. Increase in efficiency. Overcoming abnormal financial situations.

Factors of Cash Management: The following are the four factors of cash management 1. Cash Planning: Cash inflows and outflows should be planned to project ash surplus or deficit for each period of planning period. Cash planning is a technique to plan for and control the use of cash. Cash plans are very crucial in developing the overall plans of the firm. Cash planning may be done on daily, weekly or monthly basis. Cash budget is prepared for this purpose.

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2.

Managing the Cash Flows: The flow of cash should be properly managed for efficient use of cash. The

cash inflows should be accelerated while, as far as possible decelerating the cash outflows. 3. Optimum Cash Level: The firm should decide about the appropriate level of cash balance. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances. 4. Investment Surplus Cash: The surplus cash balance should be properly invested to earn profits. The firm should decide about the division of such cash balance between bond deposits, marketable securities and corporate lending. Tool of Cash Planning: These include methods, which establish the future level in a firm.

1.

Net Cash Forecast: Forecast of net cash means forecast of cash inflows and outflows for a given

period. There are two methods of forecasting cash position. Cash flow method, which plots out, estimated receipts and payments. Adjusted earning method, on the basis of estimate inflow of cash, expenditure or cash inflow is planned.

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2.

Cash Budget: Cash budget is the second toll of cash planning. It is a systematic forecast of

cash requirements i.e., forecast or cash inflows and outflows and thus shows the probable surplus or deficiency of cash. In forecasting the cash flow, policies regarding other functions such as sales, production, marketing, personnel etc. are taken into consideration.

Method of Preparing Cash Budget: 1. Receipt and payments method: Cash budget is divided in two parts showing cash receipts and cash payments. Total cash receipts are estimated taking into account the cash received from business operations, from non-estimated likewise, in preparing cash budget total receipts are added to and disbursements deducted from the opening cash balance. Profit and loss adjustment method. Balance sheet method. 2. Forecasting on Overall Working Capital Position: Forecast of the overall working capital position is also an important tool of cash planning. Working capital analysis forecast the value of current assets and current liabilities to know the cash position of business.

Inventory Management:
Inventories constitute the most significant part of current assets of a large majority of companies in India. The term inventory refers to the stock pile of the product. The assets which firms store as inventory are:

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 Raw materials: Inputs that are converted into finished products through manufacturing process. Work in progress: Semi finished products that require more work before they are for sale. Finished goods: Goods which are completely manufactured products and/or ready for sale. Need to hold inventories: There are three general motives for holding inventories The Transaction Motive: Which emphasis the need to maintain inventories to facilitate smooth production and sales operation. The Precaution Motive: Which necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. The Speculative Motive: Which influences the decision to increase or reduce inventory level to take advantage of price fluctuation.

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Receivable Management:
Account receivable constitutes a significance portion of the total current assets of the business. They are direct consequences of trade credit. Which has become as essential marketing tool in modern business.

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

Meaning of Receivables Management: It may be define as the process of making decision relating to the investment of fund on this aspect, which will result in maximizing the overall return on the investment of the firm.

The problem of management of receivables is basically a problem of balancing profitability and liquidity. Soft credit terms are attraction for higher sales and hence longer the time a company allows its customers to pay, resulting in greater sales as higher profits. However, on the other hand the longer the period of credit, the greater the risk, greater the level of debt and greater the strain on the liquidity of the company.

Characteristics of Maintaining Receivables:

Expansion of Sales Increased Profit Financing Receivables Administrative Expenses Cost of Collection Bad 81 debt

SUMMARY
Proper allocation of funds in current asset is necessary to increase the productivity and to achieve the target sales.

Working capital is needed for its day-to-day workings in business without any breakouts. In Sujala Pipes the working capital position is good.

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FINDINGS

In financial year 2006, the firm is satisfactory regarding the position of working capital.

Working capital management of SUJALA PIPES is increased in every year.

The current ratio is more than one in five financial years, so current assets are high compared to current liabilities.

Debtor turnover ratio was in the peak during the year 2005 due to high sales and decreased debtors in the year 2005. Profit of SUJALA PIPES is increasing it indicate that company is working with high performance and better management.

The company overall financial performance both in long run and short run is adequate and acceptable.

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SUGGESTIONS
As the firms networking capital increase or decrease in relation to sales value. There is need to concentrate on control over current assets and current liabilities.

In SUJALA PIPES, net working capital shows increasing trend.

The company overall financial performance both in long and short run is acceptable Current ratio of the company has been fluctuating this is due to change in liability.

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BIBLOGRAPHY

REFERENCE

AUTHORS

FINANCIAL MANAGEMENT

I.M.PANDEY

FINANCIAL MANAGEMENT

PRASANNA CHANDRA

RESEARCH METHODOLOGY

R.C.KOTHARI

WEBSITES:
WWW.NANDIPIPES.COM WWW.SUJALAPIPES.COM

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BALANCE SHEET OF SUJALA PIPES PRIVATE LIMITED AS ON 31ST MARCH Particulars 2005 2006 2007 2008 2009 sources Share holders funds Share capital 2007.23 2007.23 2007.23 2007.23 2007.23 Reserves & surplus 6993.56 7726.03 8177.41 9672.46 16822.61 Loan funds Secured loans 5087.87 5704.15 4964.5 9283.23 11852.69 Unsecured loans 944.73 1245.34 1328.17 1938.13 2153.81 Deferred tax Deferred income tax 244.5 314 478.45 671.08 766.22 TOTAL 15277.89 16996.75 16955.76 23572.13 33605.56 Application of funds Fixed assets 8021.77 9517.98 10980.26 12693.18 16157.47 (-)depreciation 1675.53 2095.11 2575.47 3138.53 3803.59 Net fixed assets 6346.24 7422.87 8404.79 9554.65 12353.88 Capital works in 690.78 807.29 502.4 763.53 1812.94 progress Current assets, loans & advances Inventory 3065.56 3443.01 3316.98 5318.73 6767.92 Debtors 6238.55 5564.41 6581.79 11562.3 13834.34 Cash & Bank 1031.21 1747.02 1208.69 1238.7 2471.74 Loans & advances 885.29 881.26 945.47 1090.38 1902.97 TOTAL 11220.61 11635.7 12052.93 19210.11 24976.97 (-)Current liabilities & Provisions Current Liabilities 3373.8 2716.03 3862.57 5671.67 6491.81 Provisions 156.37 499.89 385.72 484.67 732.3 TOTAL 3530.17 3215.92 4248.29 6156.34 7224.11 Net Current Assets 7690.44 8419.78 7804.64 13053.77 17752.85 Welfare revenue 212.04 159.98 107.91 55.85 expenses TOTAL 15277.89 16996.76 16955.76 23572.16 33805.58

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