The city of Gwalior, one of the favorite tourist destinations in India is located in the state of Madhya Pradesh at a distance

of 122 km to the south of Agra. If you are willing to know about Gwalior, you will find that the city, with a strong historical backdrop, is deeply associated with the various highs and lows of Indias past.

History History about Gwalior says that it owes its name to a sage of former times. The story goes thus - Suraj Sen, a prince of the Kachhwaha clan of the 8th century had lost his way in the jungle and ultimately wandered up to a secluded hill. Thereafter he met an old man, Sage Gwalipa, whose influence almost took him by surprise. On asking the sage for some drinking water he was led to a pond. The pool waters not only quenched his thirst but cured him of leprosy as well. Out of gratefulness he wished to offer something in return to the sage and the sage asked him to build a

fort on the hill. Thus came up the fort named Gwalior, and eventually the city that developed around it got its name. Best Season, Climate, and Clothing Hot summers and cold winters characterize the climate of Gwalior. During the summers mercury soars as high as 46C, while in the winters it can reach below 5C. Monsoons hit the land from the first week of June and continue till August/September. Gwalior is best visited from the months of October to March. Light cotton clothing is fitting for summers and woolens are good for winters.

Fast Facts Area Population Altitude Languages 289.85 sq km 8,26,919 212 meters above sea level Hindi and English

Best Time to Visit October-March STD code 0751

Chocolate The very word makes your mouth water. Chocolate is more than just a food: its a state of mind.

CADBURY

How Cadbury Chocolate is made

John Cadbury

Milk chocolate for eating was first made by Cadbury in 1897 by adding milk powder John paste to the dark chocolate recipe of cocoa mass, cocoa butter and sugar. By today's standards this chocolate was not particularly good: it was coarse and dry and not sweet or milky enough for public tastes. There was a great deal of competition from continental manufacturers, not only the French,but also the Swiss, renowned for their milk chocolate.

Led by George Cadbury Junior, the Bournville experts set out to meet the challenge. A considerable amount of time and money was spent on research and on new plant designed to produce the chocolate in larger quantities. A recipe was formulated incorporating fresh milk, and production processes were developed to produce a milk chocolate 'not merely as good as, but better than' the imported milk chocolate'. Four years of hard work were invested in the project and in 1905 what was to be Cadbury's top selling brand was launched. Three names were considered: Jersey, Highland Milk and Dairy

Maid. Dairy Maid became Dairy Milk, and Cadbury's Dairy Milk, with its unique flavour and smooth creamy texture, was ready to challenge the Swiss domination of the milk chocolate market. By 1913 Dairy Milk had become the company's best selling line and in the mid twenties Cadbury's Dairy Milk gained its status as the brand leader, a position it has held ever since.

COMPANY OVERVIEW OF CADBURY INDIA Cadbury began its operations in 1948 by importing chocolates and then re-packing them before distribution in the Indian market. After 59 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.

Currently Cadbury India operates in three sectors viz. Chocolate Confectionery, Milk Food Drinks and in the Candy category.

In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years. Some of the key brands are Cadbury Dairy Milk, 5 Star, Perk, clairs and Celebrations. Cadbury enjoys a value market share of over 70% the highest Cadbury brand share in the world! Their flagship brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in India. The pure taste of CDM defines the chocolate taste for the Indian consumer. In the Milk Food drinks segment their main product is Bournvita - the leading Malted Food Drink (MFD) in the country. Similarly in the medicated candy category Halls is the undisputed leader. The Cadbury India Brand Strategy has received consistent support through simple but imaginative extensions to product categories and distribution. A good example of this is the development of Bytes. Crispy wafers filled with coca cream in the form of a bagged snack, Bytes is positioned as "The new concept of sweet snacking". It delivers the taste of chocolate in the form of a light snack, and thus heralds the entry of Cadbury India into the growing bagged Snack Market, which has been dominated until now by Salted Bagged Snack Brands. Bytes was first launched in South India in 2003. Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades, it has worked with the Kerala Agriculture University to undertake cocoa research and released clones, hybrids that improve the cocoa yield. Today, Cadbury is poised in its leap towards quantum growth and new categories of business, namely gums, mints, snacking and gifting. It is a part of the Cadbury Schweppes Group, world's No.1 Confectionery Company.

CADBURY WORLD WIDE Cadbury is the world's largest confectionery company and have a strong regional presence in beverages in the Americas and Australia. With origins stretching back over 200 years, today their products - which include brands such as Cadbury, Schweppes, Halls, Trident, Dr Pepper, Snapple, Trebor, Dentyne, Bubblicious and Bassett - are enjoyed in almost every country around the world. We employ around 60,00 people.

Their heritage starts back in 1783 when Jacob Schweppe perfected his process for manufacturing carbonated mineral water in Geneva, Switzerland. And in 1824 John Cadbury opened in Birmingham selling cocoa and chocolate. These two great household names merged in 1969 to form Cadbury Schweppes plc. Since then they have expanded their business throughout the world by a programme of organic and acquisition led growth. Concentrating on their core brands in beverages and confectionery since the 1980s, they have strengthened their portfolio through almost fifty acquisitions, including brand icons such as Mott's, Canada Dry, Halls, Trident, Dentyne, Bubblicious, Trebor, Bassett, Dr Pepper, 7 Up and Snapple. It employ 60,000 people in over 200 countries Worlds No 1 Confectionery company World's No 2 Gums company World's No 3 beverage company

Cadbury Brands: Chocolates Snacks Beverages Candy SNACKS: Bytes BEVERAGES Bournvita CANDY Halls CHOCOLATES Dairy Milk 5 Star Perk Celebrations Temptation Eclairs Gems

DAIRY MILK

The story of Cadbury Dairy Milk started way back in 1905 at Bournville, U.K., but the journey with chocolate lovers in India began in 1948. The variants Fruit & Nut, Crackle and Roast Almond, combine the classic taste of Cadbury Dairy Milk with a variety of ingredients and are very popular amongst teens & adults. Cadbury Dairy Milk has exciting products on offer - Cadbury Dairy Milk Wowie, chocolate with Disney characters embossed in it, and Cadbury Dairy Milk 2 in 1, a delightful combination of milk chocolate and white chocolate. Giving consumers an exciting reason to keep coming back into the fun filled world of Cadbury. Today, Cadbury Dairy Milk alone holds 30% value share of the Indian chocolate market. 5 STAR

the second largest after Cadbury Dairy Milk with a market share of 14%, Cadbury 5 Star moves from strength to strength every year by increasing its user base.

Launched in 1969 as a bar of chocolate that was hard outside with soft caramel nougat inside, Cadbury 5 Star has re-invented itself over the years to keep satisfying the consumers taste for a high quality & different chocolate eating experience. One of the key properties that Cadbury 5 Star was associated with was its classic Gold colour. And through the passage of time, this was one property that both, the brand and the consumer stuck to as a valuable association. More recently, to give consumers another reason to come into the Cadbury 5 Star fold, Cadbury 5 Star Crunchy was launched. The same delicious Cadbury 5 Star was now available with a dash of rice crispies. PERK

Cadbury launched Perk in 1996. With its light chocolate and wafer construct, Cadbury Perk targeted the casual snacking space that was dominated primarily by chips & wafers. With the rise of more value-for-money brands in the wafer chocolate segment, Cadbury Perk unveiled two new offerings - Perk XL and XXL. In 2004, with an added dose of 'Real Cadbury Dairy Milk' and an 'improved wafer', Perk became even more irresistible

CELEBRATIONS

Cadbury Celebrations was aimed at replacing traditional gifting options like Mithai and dry- fruits during festive seasons. Cadbury Celebrations is available in several assortments: An assortment of chocolates like 5 Star, Perk, Gems, Dairy Milk and Nutties and rich dry fruits enrobed in Cadbury dairy milk chocolate in 5 variants, Almond magic, raisin magic, cashew magic, nut butterscotch and caramels. The super premium Celebrations Rich Dry Fruit Collection which is a festive offering is an exotic range of chocolate covered dry fruits and nuts in various flavours and the premium dark chocolate range which is exotic dark chocolate in luscious flavours. TEMPTATION

Cadbury Temptations is a range of delicious premium chocolate in five flavours variants - Roast Almond Coffee, Honey Apricot, Mint Crunch, Black

Forest and Old Jamaica. History of Cadbury Cadbury, the global leader in the chocolate confectionery market, began in 1824 when a young Quaker named John Cadbury opened up a shop in Birmingham. John sold coffee, tea, drinking chocolate and cocoa at his shop. Believing that alcohol was a main cause of poverty, John hoped his products might serve as an alternative. He also sold hops and mustard. Like many Quakers John had high quality standards for all of his products. At that time in England, Quakers were prohibited from attending university, since it was affiliated with the established church, and their pacifist beliefs kept them from joining the military. With few opportunities available, Quakers often went into business-related fields and/or devoted their time to missions of social reform. By 1842 John was selling 11 kinds of cocoa and 16 kinds of drinking chocolate. Soon Johns brother Benjamin joined the company to form Cadbury Brothers of Birmingham. The Cadbury brothers opened an office in London and received a Royal Warrant (one of many) as manufacturers of chocolate and cocoa to Queen Victoria in 1854. Six years later the brothers dissolved their partnership because of Johns failing health and the death of his wife. They left the business to John's sons George and Richard. John devoted the rest of his life to social work and died in 1889.

George and Richard continued to expand the product line, and by 1864, they were pulling Essence, a profit. which Cadburys was Cocoa as

advertised

"absolutely pure and therefore best," was an all-natural product made with pure cocoa butter and no starchy ingredients. Cocoa Essence was the beginning of Packing room at Cadbury's Bournville chocolate as we know it today. The factory.. brothers soon moved their manufacturing operations to a larger facility four miles south of Birmingham. The factory and area became known as Bournville. With Cadburys continued success in chocolate, George and Richard stopped selling tea in 1873. Master confectioner Frederic Kinchelman was appointed to share his recipe and production secrets with Cadbury workers. This resulted in Cadbury producing chocolate covered nougats, bonbons delices, pistache, caramels, avelines and more. Cadbury manufactured its first milk chocolate in 1897. Two years later the Bournville factory employed 2,600 people and Cadbury was incorporated as a limited company. During World War I, more than 2,000 of Cadburys male employees joined the Armed Forces. Cadbury supported the war effort, sending warm clothing, books and chocolate to the soldiers. Cadbury supplemented the government allowances to the dependants of their workers. When the workers returned, they were able to return to work, take educational courses, and injured or ill employees were looked after in convalescent homes. During this period trade overseas increased, and

Cadbury opened its first overseas factory near Hobart, Tasmania. The next year Cadbury merged with JS Fry & Sons, a past market leader in chocolate. Cadbury supported the war effort during World War II by converting parts of its factory into workrooms to manufacture equipment like milling machines for rifle factories and parts like pilot seats for Defiant fighter planes. Workers plowed football fields to grow crops, and the Cadbury St. Johns Ambulance unit helped people during air raids. Chocolate was considered essential for the Armed Forces and civilians. Rationing finally ended in 1949. In 1969 Cadbury merged with Schweppes to form Cadbury Schweppes. Schweppes was a well-known British brand that manufactured carbonated mineral water and soft drinks. The merged companies would go on to acquire Sunkist, Canada Dry, Typhoo Tea and more. Schweppes Beverages was created, and the manufacture of Cadbury confectionery brands was licensed to Hershey. Today Cadbury Schweppes is the largest confectionery company in the world, employing more than 70,000 employees. In 2006 the company had over $15 billion in overall sales. In March of 2007, Cadbury Scheweppes announced that it intends to separate its confectionery and beverage businesses. With almost 200 years in the business, Cadbury Schweppes will continue to prosper in the coming decades. Cadbury Product Timeline

1865 Cadbury Cocoa Essence 1875 Cadbury Easter Eggs 1897 Cadbury Milk Chocolate 1905 Cadbury Dairy Milk 1908 Cadbury Bournville Chocolate 1915 Cadbury Milk Tray 1920 Cadbury Flake 1923 Cadbury Crme Eggs 1929 Cadbury Crunchie 1938 Cadbury Roses 1948 Cadbury Fudge 1968 Cadbury Picnic 1960 Cadbury Buttons 1970 Cadbury Curly Wurly 1983 Cadbury Wispa 1985 Cadbury Boost 1987 Cadbury Twirl 1992 Cadbury Timeout 1996 Cadbury Fuse 2001 Cadbury Brunchbar, Dream & SnowFlake Interesting Facts about Cadbury

chocolate boxes. Cadbury didnt want to take mothers away from their children, so he developed a company rule that women had to leave work when they got married. Each married woman was given a bible and a carnation as wedding gifts.

irst firms to have dining rooms with kitchens and food for sale.

turtle) was given away with specially designed cocoa tins in 1934. In the same year, Cadbury's tokens, which came with packs of cocoa, could be redeemed for lamps, kettles and saucepans.

in 1936.

its first year.

Financial & Position

Dec '09 12 mths ------------------- in Rs. Cr. ------------------Dec '08 Dec '07 Dec '06 Dec '05 12 mths 32.18 32.18 0.00 0.00 432.22 0.00 464.40 32.02 9.68 41.70 506.10 Dec '08 12 mths 586.94 335.55 251.39 123.86 2.92 222.81 19.67 269.59 512.07 69.82 0.00 581.89 0.00 433.56 20.40 453.96 127.93 0.00 12 mths 12 mths 33.20 34.36 33.20 34.36 0.00 0.00 0.00 0.00 372.94 357.73 0.00 0.00 406.14 392.09 1.28 3.26 7.48 6.75 8.76 10.01 414.90 402.10 Dec '07 Dec '06 12 mths 12 mths 544.77 430.21 299.18 265.13 245.59 165.08 25.58 82.18 298.49 253.42 151.02 122.08 13.14 11.37 8.90 11.20 173.06 144.65 72.34 44.27 0.62 0.62 246.02 189.54 0.00 0.00 370.89 275.84 29.91 25.96 400.80 301.80 -154.78 -112.26 0.00 13.68 12 mths 35.71 35.71 0.00 0.00 398.10 0.00 433.81 3.71 4.51 8.22 442.03 Dec '05 12 mths 395.50 234.88 160.62 29.55 258.21 102.33 10.68 18.40 131.41 53.39 0.00 184.80 0.00 205.09 13.41 218.50 -33.70 27.35

Balance Sheet of Cadbury India

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

31.07 31.07 0.00 0.00 499.73 0.00 530.80 2.28 9.89 12.17 542.97 Dec '09 12 mths 724.75 372.09 352.66 152.53 18.01 199.82 31.09 271.50 502.41 74.20 0.00 576.61 0.00 534.02 22.83 556.85 19.76 0.00

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses

Total Assets Contingent Liabilities Book Value (Rs)

542.96 150.97 1,708.53

506.10 113.74 144.30

414.88 106.12 122.32

402.10 84.75 114.12

442.03 66.54 121.48

Source : Dion Global Solutions Limited

Vision, Mission & Values Our Vision The Barrow Cadbury Trusts vision is of a peaceful, equitable society, free from discrimination and based on the principle of social justice for all. Our Mission The Barrow Cadbury Trusts mission is to promote social justice through grant making, research, influencing public opinion and policy and supporting local communities. Our Values

Promotion of social justice the Trust aims to put fairness and equality at the heart of all its work Empowerment the Trust seeks to uphold and extend the rights of marginalised groups, to reflect the grassroots experience of local communities and to support them in making their voices heard Partnership the Trust works in partnership with other grant-makers and with stakeholders at international, national, regional and local levels Local focus the Trust values its historic relationship with Birmingham and the West Midlands

Relationship with funded groups the Trust aims to be an approachable, fair and responsive grant-make Valuing learning the Trust aims to be a learning organisation open to the exchange of information and ideas, with its work grounded in a solid evidence base Innovation and Independence as an independent grant-maker, the Trust is alive to emerging needs and new ideas and ways of working and is willing to take risks in pursuit of social justice Quaker ethos while there is no requirement for Trustees or staff to be Quakers, and most are not, the Trust values its historical roots within the Quaker ways of working and tradition of social and penal reform.

INTRODUCTION

Introduction Working capital management

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 & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital. Working capital management is concerned with the problems arise in attempting to manage the current assets, the current liabilities and the inter relationship that exist between them. The term current assets refers to those assets which in ordinary course of business can be, or, will be, turned in to cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware those liabilities which intended at there inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses. The goal of working capital management is to manage the firms current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. Definition:According to Guttmann & DougallExcess of current assets over current liabilities. According to Park & GladsonThe excess of current assets of a business (i.e. cash, accounts receivables, inventories) over current items owned to employees and others (such as salaries & wages payable, accounts payable, taxes owned to Government).

Capital required for a business can be classified under two main categories via, 1) 2) Fixed Capital Working Capital

Every business needs funds for two purposes for its establishment and to carry out its day- to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that part of firms capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purposes for the purchase of raw material, payment of wages and other day to- day expenses etc.

CONCEPT OF WORKING CAPITAL There are two concepts of working capital: 1. 2. Gross working capital Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises current assets are those assets which can convert in to cash within a short period normally one accounting year. CONSTITUENTS OF CURRENT ASSETS 1) 2) 3) 4) 5) Cash in hand and cash at bank Bills receivables Sundry debtors Short term loans and advances Inventories of stock as: a. b. c. d. Raw material Work in process Stores and spares Finished goods

6. Temporary investment of surplus funds. 7. Prepaid expenses

8. Accrued incomes. 9. Marketable securities. In a narrow sense, the term working capital refers to the net working. Net working capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business. CONSTITUENTS OF CURRENT LIABILITIES 1. 2. 3. 4. 5. 6. 7. Accrued or outstanding expenses. Short term loans, advances and deposits. Dividends payable. Bank overdraft. Provision for taxation, if it does not amt. to app. of profit. Bills payable. Sundry creditors.

CLASSIFICATION OF WORKING CAPITAL Working capital may be classified in to ways: o o On the basis of concept. On the basis of time.

On the basis of concept working capital can be classified as gross working capital and net working capital. On the basis of time, working capital may be classified as: Permanent or fixed working capital. Temporary or variable working capital

Amount of Working Capital capital Tempo rary

Permanent Capital

Time

PERMANENT OR FIXED WORKING CAPITAL Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of raw material, workin-process, finished goods and cash balance. This minimum level of current assts is called permanent or fixed working capital as this part of working is permanently blocked in current assets. As the business grow the requirements of working capital also increases due to increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research, etc. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business. IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

PAYMENT TO SUPPLIERS

EASY LOAN FROM BANKS

DIVIDEND DISTRIBUTION

SIGNIFICA N--CE OF WORKING CAPITAL

INCREASE EFFECIENCY INCREASE DEBT CAPACITY

INCREASE IN FIX ASSETS

SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the solvency of the business by providing uninterrupted of production. Goodwill: Sufficient amount of working capital enables a firm to make prompt payments and makes and maintain the goodwill.

Easy loans:

Adequate working capital leads to high solvency and credit standing can arrange loans from banks and other on easy and favorable terms. Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence reduces cost. Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw material and continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day Commitments: It leads to the satisfaction of the employees and raises the morale of its employees, increases their efficiency, reduces wastage and costs and enhances production and profits. Ability to Face Crises: A concern can face the situation during the depression.

FACTORS

DETERMINING

THE

WORKING

CAPITAL

REQUIREMENTS 1. NATURE OF BUSINESS: The requirements of working is very limited in public utility undertakings such as electricity, water supply and railways because they offer cash sale only and supply services not products, and no funds are tied up in inventories and receivables. On the other hand the trading and financial firms requires less investment in fixed assets but have to invest large amt. of working capital along with fixed investments. 2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the requirement of working capital. 3. PRODUCTION POLICY: If the policy is to keep production steady by accumulating inventories it will require higher working capital. 4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw material and other supplies have to be carried for a longer in the process with progressive increment of labor and service costs before the final product is obtained. So working capital is directly proportional to the length of the manufacturing process.

Sources of working capital

The company can choose to finance its current assets by 1. Long term sources 2. Short term sources 3. A combination of them. Long term sources of permanent working capital include equity and preference shares, retained earning, debentures and other long term debts from public deposits and financial institution. The long term working capital needs should meet through long term means of financing. Financing through long term means provides stability, reduces risk or payment and increases liquidity of the business concern. Various types of long term sources of working capital are summarized as follow: 1. Issue of shares: It is the primary and most important sources of regular or permanent working capital. Issuing equity shares as it does not create and burden on the income of the concern. Nor the concern is obliged to refund capital should preferably raise permanent working capital. 2. Retained earnings: Retain earning accumulated profits are a permanent sources of regular working capital. It is regular and cheapest. It creates not charge on future profits of the enterprises. 3. Issue of debentures: It crates a fixed charge on future earnings of the company. Company is obliged to pay interest. Management should make wise choice in procuring funds by issue of debentures.

Short term sources of temporary working capital Temporary working capital is required to meet the day to day business expenditures. The variable working capital would finance from short term sources of funds. And only the period needed. It has the benefits of, low cost and establishes closer relationships with banker.

Some sources of temporary working capital are given below: 1. Commercial bank: A commercial bank constitutes significant sources for short term or temporary working capital. This will be in the form of short term loans, cash credit, and overdraft and though discounting the bills of exchanges.

2. Public deposits: Most of the companies in recent years depend on this source to meet their short term working capital requirements ranging fro six month to three years. 3. Various credits: Trade credit, business credit papers and customer credit are other sources of short term working capital. Credit from suppliers, advances from customers, bills of exchanges, etc helps to raise temporary working capital 4. Reserves and other funds: Various funds of the company like depreciation fund. Provision for tax and other provisions kept with the company can be used as temporary working capital.The company should meet its working capital needs through both long term and short term funds. It will be appropriate to meet at least 2/3 of the permanent working capital equipments form long term sources, whereas the variables working capital should be financed from short term sources. The working capital financing mix should be designed in such a way that the overall cost of working capital is the lowest, and the funds are available on time and for the period they are really required.

SOURCES OF ADDITIONAL WORKING CAPITAL Sources of additional working capital include the following1. Existing cash reserves 2. Profits (when you secure it as cash) 3. Payables (credit from suppliers) 4. New equity or loans from shareholder 5. Bank overdrafts line of credit 6. Long term loans If we have insufficient working capital and try to increase sales, we can easily over stretch the financial resources of the business. This is called overtrading. Early warning signs include 1. Pressure on existing cash 2. Exceptional cash generating activities. Offering high discounts for clear cash payment 3. Bank overdraft exceeds authorized limit 4. Seeking greater overdrafts or lines of credit 5. Part paying suppliers or there creditor. 6. Management pre occupation with surviving rather than managing. Different Aspects of Working Capital Management

MANAGEMENT OF INVENTORY Inventories constitute the most significant part of current assets of a large majority of companies. On an average, inventories are approximately 60% of current assets. Because of large size, it requires a considerable amount of fund. The inventory means and includes the goods and services being sold by the firm and the raw material or other components being used in the manufacturing of such goods and services.

Nature of Inventory: The common type of inventories for most of the business firms may be classified as raw-material, work-in-progress, finished goods.

Raw material: it is basic inputs that are converted into finished products through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions. Workinprocess: Work-in-process is semi-manufactured products. They represent products that need more work before them become finished products for sale.

Finished goods: These are completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production, while stock of finished goods is required for smooth marketing operations. Thus inventories serve as a link between the production and consumption of goods.The levels of three kinds of inventories for a firm depend on the nature of business. A manufacturing firm will have substantially high levels of all the three kinds of inventories. While retail or wholesale firm will have a very high level of finished goods inventories and no raw material and work-in-process inventories.

So operating cycle can be known as following:-

Raw Material

Work in Progress

Cash Collection from Debtors

Sales
Finished Goods

Credit Sales

Cash Sales

CASH

BOOK DEBTS

RAW MATERIALS

FINISHED GODS

WIP

Need to hold inventories Maintaining inventories involves trying up of the companys funds and incurrence of storage and holding costs. There are three general motives for holding inventories: Transactions Motive: IT emphasizes the need to maintain inventories to facilitate smooth production and sales operation. Precautionary Motive: It necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. Speculative Motive: It influences the decision to increase or reduce inventory levels to take advantage of price fluctuations.

Management of Receivables/Debtors The Receivables (including the debtors and the bills) constitute a significant portion of the working capital. The receivables emerge whenever goods are sold on credit and payments are deferred by customers. A promise is made by the customer to pay cash within a specified period. The customers from whom receivable or book debts have to be collected in the future are called trade debtors and represents the firms claim or assets. Thus, receivable is s type of loan extended by the seller to the buyer to facilitate the purchase process. Receivable Management may be defined as collection of steps and procedure required to properly weight the costs and benefits attached with the credit policy. The Receivable Management consist of matching the cost of increasing sales (particularly credit sales) with the benefits arising out of increased sales with the objective of maximizing the return on investment of the firm.

Nature The term credit policy is used to refer to the combination of three decision variables: 1. Credit standards: It is the criteria to decide the type of customers to

whom goods could be sold on credit. If a firm has more slow paying customers, its investment in accounts receivable will increase. The firm will also be exposed to higher risk of default.

2. Credit terms: It specifies duration of credit and terms of payment by Customer Investment in accounts receivable will be high if customers are allowed extended time period for making payments. 3. Collection efforts: It determine the actual collection period. The lower the collection period, the lower the investment in accounts receivable and vice versa.

Management of Cash Cash management refers to management of cash balance and the bank balance and also includes the short terms deposits. Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis. It is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The term cash includes coins, currency, and cheque held by the firm and balance in the bank accounts. Factors of Cash Management: Cash management is concerned with the managing of 1. Cash flows into and out of the firm 2. Cash flows within the firm and 3. Cash balance held by the firm at a point of time by financing deficit or investing surplus cash. Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit has to borrow. Cash management seeks to accomplish this cycle at a minimum cost and it also seeks to achieve liquidity and control.

Motives of holding cash A distinguishing feature of cash as an asset is that it does not earn any substantial return for the business. Even though firm hold cash for following motives: Transaction motive: Precautionary motive Speculative motives Compensatory motive

Transaction motive: This refers to the holding of cash to meet routine cash requirement to finance. The transactions, which a firm carries on in the ordinary course of business. 1.Precautionary motive: This implies the needs to hold cash to meet unpredictable contingencies such as strike, sharp increase in raw materials prices. If a firm can borrow at short notice to pay them unforeseen contingency, it will need to maintain relatively small balances and vice-versa. 2. Speculative motives: It refers to the desire of the firm to take advantage of opportunities which present themselves at unexpected movements and which are typically outside the normal course of business. 3. Compensatory motive: Bank provides certain services to their client free of cost. They therefore, usually require client to keep minimum cash balance with them to earn interest and thus compensate them for the free service so provided.

Management of Payables/Creditors Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Consider the Following:

-is it tightly managed or spread among a number of people? -holding and purchasing costs?

increase? MANAGEMENT OF WORKING CAPITAL Management of working capital is concerned with the problem that arises in attempting to manage the current assets, current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations are bad for any firm. There should be no shortage of funds and also no working capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its probability, liquidity and structural health of the organization. So working capital management is three dimensional in nature as 1. It concerned with the formulation of policies with regard to profitability, liquidity and risk. 2. It is concerned with the decision about the composition and level of current assets.

3.

It is concerned with the decision about the composition and level of current liabilities.

WORKING CAPITAL ANALYSIS As we know working capital is the life blood and the centre of a business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of devices, such as: 1. 2. 3. Ratio analysis. Fund flow analysis. Budgeting.

METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements but RIL LTD used the following techniques: Comparative size statements Trend analysis

 Cash flow statement Ratio analysis A detail description of these methods is as follows:-

COMPARATIVE SIZE STATEMENTS:When two or more than two years figures are compared to each other than we called comparative size statements in order to estimate the future progress of the business, it is necessary to look the past performance of the company. These statements show the absolute figures and also show the change from one year to another.

TREND ANALYSIS:To analyze many years financial statements RIL LTD uses this method. This indicates the direction on movement over the long time and help in the financial statements.

Procedure for calculating trends:1. Previous year is taken as a base year. 2. Figures of the base year are taken 100. 3. Trend % are calculated in relation to base year. CASH FLOW STATEMENT:Cash flow statements are the statements of changes in the financial position prepared on the basis of funds defined in cash or cash equivalents. In short cash flow statement summaries the cash inflows and outflows of the firm during a particular period of time.

Benefits for the RIL LTD:

To prepare the cash budget. To compare the cash budgets . To show the position of the cash and cash equivalents.

RATIO ANALYSIS:-

Ratio analysis is the process of the determining and presenting the relationship of the items and group of items in the statements.

Benefits of ratio analysis to RIL LTD:-

1. Helpful in analysis of financial statements. 2. Helpful in comparative study. 3. Helpful in locating the weak spots of the RIL LTD. 4. Helpful in forecasting. 5. Estimate about the trend of the business. 6. Fixation of ideal standards. 7. Effective control. 8. Study of financial soundness. Types of ratio:-

Liquidity ratio: They indicate the firms ability to meet its current obligation out of current resources. Current ratio:- Current assets / Current liabilities

 Quick ratio:-

Liquid assets / Current liabilities

Liquid assets =Current assets Stock -Prepaid expenses Leverage or Capital structure ratio: This ratio discloses the firms ability to meet the interest costs regularly and long term solvency of the firm. Debt equity ratio:- Long term loans / Shareholders funds or net Worth Debt to total fund ratio:- Long terms loans/ share holder funds +long term loan Proprietary ratio:- Shareholders fund/ shareholders fund+long term loan Activity ratio or Turnover ratio:- They indicate the rapidity with which the resources available to the concern are being used to produce sales. Stock turnover ratio:- Cost of good sold/Average stock (Cost of good sold= Net sales/ Gross profit, Average stock=Opening stock+closing stock/2) Debtors turnover ratio:- Net credit sales/ Average debtors +Average B/R Average collection period:- Debtors+B/R /Credit sales per

(Credit sales per day=Net credit sales of the year/365) Creditors Turnover Ratio:- Net credit purchases/ Average Creditors + Average B/P

 Average Payment Period: - Creditors + B/P/ Credit purchase per day. Fixed Assets Turnover ratio:- Cost of goods sold/Net fixed Assets (Net Fixed Assets = Fixed Assets depreciation) Working Capital Turnover Ratio:- Cost of goods sold/ Working Capital (Working capital= current assets current liability) Profitability Ratios or Income ratios:- The main objective of every business concern is to earn profits. A business must be able to earn adequate profit in relation to the risk and capital invested in it. Gross profit ratio:- Gross profit / Net Sales * 100 (Net sales= Sales Sales return) Net profit Ratio:- Net profit / Net sales * 100 (Operating Net Profit= operating net profit/ Net Sales *100 or operating Net profit= gross profit operating expenses)

Operating Ratio :- Cost of goods sold + Operating expenses/Net Sales * 100

(Cost of goods sold = Net Sales Gross profit, Operating expenses = office & administration expenses + Selling & distribution expenses + discount + bad debts + interest on short term loans)

 Earning per share(E.P.S.) :- Net Profit dividend on preference share / No. of equity shares Dividend per share (D.P.S.):- Dividend paid to equity share Holders / No. of equity shares *100. Dividend Payout ratio(D.P.) :- D.P.S. / E.P.S. *100