WORKING CAPITAL MANAGEMENT AT DABUR INDIA LIMITED SAHIBABAD A Summer Training Project Report

Submitted to the Mahamaya Technical University, Noida in partial fulfillment of The requirements for the award of the degree Of Master of Business Administration In (Finance)

Gopal verma 1222570018 MBA Batch (2012-14) Accurate Institute of Management & Technology, Gr. Noida 22 / Oct/ 2013

SUPERVISORS CERTIFICATE
This is to certify that the Summer Training Project Report titled WOEKING CAPITAL MANAGEMENT is an original work carried out by GOPAL VERMA under my supervision, in the partial fulfillment of the requirement for the award of MBA degree by the Mahamaya Technical University, Noida. This is to further certify, to the best of my knowledge, that this work was neither published nor submitted to any other institution for award of any other degree or diploma.

Signature

Date:

DIRECTORS CERTIFICATE
This is to certify that the Summer Training project titled . is carried out by ... (Name of the student), a student of MBA II year at Accurate Institute of Management & Technology, Gr. Noida, under the supervision of .. (Name & designation of company supervisor). This is an original work carried out by the said student to the best of my knowledge and I recommend for the submission of this Summer Training Project report to Mahamaya Technical University, Noida in the partial fulfillment of the requirement for the award of MBA degree. Prof (Dr) (HOD-MBA Deptt.) AIMT,Gr. Noida Date: ( DIRECTOR) AIMT, Gr Noida

STUDENTS DECLARATION
I hereby declare that the survey, data collection and analysis work related to Summer Training Project report titled WORKING CAPITAL MANAGMENT has been carried out exclusively on my efforts under the guidance of Mr. R.S DANI ADDITIONAL GENRAL MANAGER FINANCE. I, further declare that this work was neither published nor submitted to any other institution for award of any other degree or diploma.

GOPAL VERMA 1222570018 Accurate Institute of Management & Technology, Gr. Noida Day/month/year

PREFACE
As a part the academic curriculum, all the students have to undertake a project based on their in the end of second semester of this program in any industry to get first hand experience on what they have studied throughout the course. I got an opportunity to do a project on WORKING CAPITAL MANAGEMENT at DABUR INDIA Ltd., Kaushambi Sahibabad. Working capital constitutes part of the Crown's investment in a department. Associated with this is an opportunity cost to the Crown. (Money invested in one area may "cost" opportunities for investment in other areas.) If a department is operating with more working capital than is necessary, this over-investment represents an unnecessary cost to the Crown. Working capital management takes place on two levels: Ratio analysis can be used to monitor overall trends in working capital and to identify areas requiring closer management The individual components of working capital can be effectively managed by using various techniques and strategic

ACKNOWLEDGEMENT
Gratitude is a hearts memory and putting the feelings of heart into words, is an art. Those who excel in this art are ultimately successful. Determination, hard work, and patience are the key to success. Completing a project of this magnitude would not have been possible without the encouragement & support of many people. At this point of time I would like to acknowledge all those who have made a major contribution in its development. I feel great pleasure in expressing my gratitude to my company Guide Mr. R.S Dani Additional General Manager Finance and Anil Mehrotra Senior Executive Excise Department on whose guidance, comments and suggestions, I have relied. They entertained all the queries amidst their hectic schedule. I also express my sincere regards to all the executives & staff members of finance & other departments of the company who immensely cooperated in completion of my project report. Lastly, I would like to thank the god almighty, my family members, my friends, my faculty members and all those left unknowingly without whom the completion of this project would not have been possible.

GOPAL VERMA MBA-III Sem

TABLE OF CONTENT

1. Introduction 10 i. ii. iii. iv. Brief history of the organization..............................................11 Organizational structure...........................................................13 Performance..............................................................................31 Products....................................................................................38

2. Industry overview41 i. SWOT analysis.......................................................................42

3. Survey, analysis and interpretation.....................................................47 4 Findings49 5. Recommendations96 7. Bibliography.98 8. Annexure.100

EXECUTIVE SUMMARY

EXECUTIVE SUMMURY OF DABUR INDIA LIMITED

The highlights of Dabur India Limiteds (DILs) stand - alone result for 2012 2013 are : Revenue from operations increased by 8% from Rs. 1,269 crore in 2011 2012 to Rs.1,370 crore in 2009 2010. Operating profit [EBIDTA] increased by 29.5% from Rs. 188 crore in 2008 2009 to Rs.243 crore in 2009 2010. Profit after Tax (PAT) increased by 27.7% from Rs. 148 crore in 2008 2009 to Rs. 189 crore in 2009 2010. Return on Capital Employed (ROCE) increased from 38.7 % in 2008 2009 to 43.1% in 2009 2010. Return on Net worth (RONW) increased from 44.5 % in 2008 2009 to 45.5 % in 2009 2010.

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INTRODUCTION

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History
Dabur India Ltd. - Corporate Profile Dabur India Ltd is one of Indias leading FMCG Companies with Revenues of about US$750 Million (over Rs 3416 Crore) & Market Capitalisation of over US$3.5 Billion (over Rs 16,000 Crore). Building on a legacy of quality and experience of over 125 years, Dabur is today Indias most trusted name and the worlds largest Ayurvedic and Natural Health Care Company. Dabur India is also a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes five flagship brands with distinct brand identities -- Dabur as the master brand for natural healthcare products, Vatika for premium personal care, Hajmola for digestives, Ral for fruit juices and beverages and Fem for fairness bleaches and skin care products. Dabur today operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The company has a wide distribution network, covering over 2.8 million retail outlets with a high penetration in both urban and rural markets. Dabur's products also have a huge presence in the overseas markets and are today available in over 60 countries across the globe. Its brands are highly popular in the Middle East, SAARC countries, Africa, US, Europe and Russia. Dabur's overseas revenues stands at over Rs 500 Crore in the 2008-09 fiscal, accounting for about 20% of the total turnover. The 125-year-old company, promoted by the Burman family, had started operations in 1884 as an Ayurvedic medicines company. From its humble beginnings in the bylanes of Calcutta, Dabur India Ltd has come a long way today to become one of the biggest Indian-owned consumer goods companies with the largest herbal and natural product portfolio in the world. Overall, Dabur has successfully transformed itself from being a family-run business to become a professionally managed enterprise . What sets Dabur 11 | P a g e

` apart from the crowd is its ability to change ahead of others and to always set new standards in corporate governance & innovation.

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DABURMILESTONE
Dabur India Ltd. made its beginnings with a small pharmacy, but has continued to learn and grow to a commanding status in the industry. The Company has come a long way in popularising and making easily available a whole range of products based on the traditional science of Ayurveda. And Dabur has set very high standards in developing products and processes that meet stringent quality norms. As it grows even further, Dabur will continue to mark up on major milestones along the way, setting the road for others to follow... Milestones To Success 1884 - Established by Dr. S K Burman at Kolkata 1896 - First production unit established at Garhia 1919 - First R&D unit established Early 1900s - Production of Ayurvedic medicines Dabur identifies nature-based Ayurvedic medicines as its area of specialisation. It is the first Company to provide health care through scientifically tested and automated production of formulations based on our traditional science. 1930 - Automation and upgradation of Ayurvedic products manufacturing initiated 1936 - Dabur (Dr. S K Burman) Pvt. Ltd. Incorporated 1940 - Personal care through Ayurveda Dabur introduces Indian consumers to personal care through Ayurveda, with the launch of Dabur Amla Hair Oil. So popular is the product that it becomes the largest selling hair oil brand in India. 1949 - Launched Dabur Chyawanprash in tin pack Widening the popularity and usage of traditional Ayurvedic products continues. The ancient restorative Chyawanprash is launched in packaged form, and becomes the first branded Chyawanprash in India. 1957 - Computerisation of operations initiated 1970 - Entered Oral Care & Digestives segment Addressing rural markets where homemade oral care is more popular than 13 | P a g e

` multinational brands, Dabur introduces Lal Dant Manjan. With this a conveniently packaged herbal toothpowder is made available at affordable costs to the masses. 1972 - Shifts base to Delhi from Calcutta 1978 - Launches Hajmola tablet Dabur continues to make innovative products based on traditional formulations that can provide holistic care in our daily life. An Ayurvedic medicine used as a digestive aid is branded and launched as the popular Hajmola tablet. 1979 - Dabur Research Foundation set up 1979 - Commercial production starts at Sahibabad, the most modern herbal medicines plant at that time 1984 - Dabur completes 100 years 1988 - Launches pharmaceutical medicines 1989 - Care with fun The Ayurvedic digestive formulation is converted into a children's fun product with the launch of Hajmola Candy. In an innovative move, a curative product is converted to a confectionary item for wider usage. 1994 - Comes out with first public issue 1994 - Enters oncology segment 1994 - Leadership in health care Dabur establishes its leadership in health care as one of only two companies worldwide to launch the anti-cancer drug Intaxel (Paclitaxel). Dabur Research Foundation develops an eco-friendly process to extract the drug from its plant source 1996 - Enters foods business with the launch of Real Fruit Juice 1996 - Real blitzkrieg Dabur captures the imagination of young Indian consumers with the launch of Real Fruit Juices - a new concept in the Indian foods market. The first local brand of 100% pure natural fruit juices made to international standards, Real becomes the fastest growing and largest selling brand in the country. 1998 - Burman family hands over management of the company to professionals 2000 - The 1,000 crore mark Dabur establishes its market leadership status by staging a turnover of Rs.1,000

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` crores. Across a span of over a 100 years, Dabur has grown from a small beginning based on traditional health care. To a commanding position amongst an august league of large corporate businesses. 2001 - Super specialty drugs With the setting up of Dabur Oncology's sterile cytotoxic facility, the Company gains entry into the highly specialised area of cancer therapy. The state-of-the-art plant and laboratory in the UK have approval from the MCA of UK. They follow FDA guidelines for production of drugs specifically for European and American markets. 2002 - Dabur record sales of Rs 1163.19 crore on a net profit of Rs 64.4 crore 2003 - Dabur demerges Pharmaceuticals business Dabur India approved the demerger of its pharmaceuticals business from the FMCG business into a separate company as part of plans to provider greater focus to both the businesses. With this, Dabur India now largely comprises of the FMCG business that include personal care products, healthcare products and Ayurvedic Specialities, while the Pharmaceuticals business would include Allopathic, Oncology formulations and Bulk Drugs. Dabur Oncology Plc, a subsidiary of Dabur India, would also be part of the Pharmaceutical business. Maintaining global standards As a reflection of its constant efforts at achieving superior quality standards, Dabur became the first Ayurvedic products company to get ISO 9002 certification. Science for nature Reinforcing its commitment to nature and its conservation, Dabur Nepal, a subsidiary of Dabur India, has set up fully automated greenhouses in Nepal. This scientific landmark helps to produce saplings of rare medicinal plants that are under threat of extinction due to ecological degradation. 2005 - Dabur aquires Balsara As part of its inorganic growth strategy, Dabur India acquires Balsara's Hygiene and

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` Home products businesses, a leading provider of Oral Care and Household Care products in the Indian market, in a Rs 143-crore all-cash deal. 2005 - Dabur announces bonus after 12 years Dabur India announced issue of 1:1 Bonus share to the shareholders of the company, i.e. one share for every one share held. The Board also proposed an increase in the authorized share capital of the company from existing Rs 50 crore to Rs 125 crore. 2006 - Dabur crosses $2 bln market cap, adopts US GAAP. Dabur India crosses the $2-billion mark in market capitalisation. The company also adopted US GAAP in line with its commitment to follow global best practices and adopt highest standards of transparency and governance. 2006 - Approves FCCB/GDR/ADR up to $200 million Moving forward on the inorganic growth path, Dabur India decides to raise up to $200 million from the international market through Bonds, FCCBs, GDR, ADR, QIPs or any other securities.The capital raised will be used to fund Dabur's aggressive growth ambitions and acquisition plans in India and abroad. 2007 - Celebrating 10 years of Real Dabur Foods unveiled the new packaging and design for Real at the completion of 10 years of the brand. The new refined modern look depicts the natural goodness of the juice from freshly plucked fruits. 2007 - Foray into organised retail Dabur India announced its foray into the organised retail business through a whollyowned subsidiary, H&B Stores Ltd. Dabur will invest Rs 140 crores by 2010 to establish its presence in the retail market in India with a chain of stores on the Health & Beauty format. 2007 - Dabur Foods merged with Dabur India Dabur India decides to merge its wholly-owned subsidiary Dabur Foods Limited with 16 | P a g e

` itself to extract synergies and unlock operational efficiencies. The integration will also help Dabur sharpen focus on the high growth business of foods and beverages, and enter newer product categories in this space. 2008 - Acquires Fem Care Pharma Dabur India acquires Fem Care Pharma, a leading player in the women's skin care market. Besides an entry into the high-growth skin care market with an established brand name FEM, this transaction also offers Dabur a strong platform to enter newer product categories and markets. 2009 - Dabur Red Toothpaste joins 'Billion Rupee Brands' club Dabur Red Toothpaste becomes the Dabur's ninth Billion Rupee brand. Dabur Red Toothpaste crosses the billion rupee turnover mark within five years of its launch.

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"Dedicated to the health and well being of every household"

This is our company. We accept personal responsibility, and accountability to meet business needs.

We all are leaders in our area of responsibility, with a deep commitment to deliver results. We are determined to be the best at doing what matters most.

People are our most important asset. We add value through result driven training, and we encourage & reward excellence.

We have superior understanding of consumer needs and develop products to fulfill them better.

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` We work together on the principle of mutual trust & transparency in a boundary-less organisation. We are intellectually honest in advocating proposals, including recognizing risks.

Continuous innovation in products & processes is the basis of our success.

We are committed to the achievement of business success with integrity. We are honest with consumers, with business partners and with each other.

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Accolades 2012-13

Dabur stock ranked 14th in Value 100 list, a ranking of attractively-priced stocks of firms with 'real' earnings

Dabur Amla Hair Oil & Ral voted as Most Loved FMCG Brands with highest top-of-the-mind recall

Dabur Chairman Dr Anand Burman amongst India's Most Powerful CEOs, placed at No. 41 on the list

Dabur India Ltd ranked as India's Most Customer Responsive FMCG Company

Dabur Uveda ranked amongst most successful brands launched in 2009 Brand Derby

2011-2012

2010-11

2009-10

2008-09

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ORGNIZATION STURUCTURE

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Organization Structure
Dabur has an illustrious Board of Directors who are committed to take the company to newer levels of corporate governance. The Board comprises of:

Chairman Dr. Anand Burman

Vice-Chairman Mr. Amit Burman

Whole Time Directors

Mr. P.D. Narang

Mr. Sunil Duggal

Mr. Pradip Burman

Non Whole Time Promoters, Directors

Mr. Mohit Burman

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Independent Directors

Mr. Bert Paterson Mr. P. N. Vijay Mr. R C Bhargava

Dr. S. Narayan

Mr. Analjit Singh

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OFFICES
Corporate Office Registered Office Kaushambi, Ghaziabad Asaf Ali Road, New Delhi

Corporate Affairs Zonal Headquarters North Zone : South Zone East West : : :

Rouse Avenue, New Delhi

New Delhi Hyderabad Calcutta Mumbai AHMEDABAD Bangalore Chandigarh Chennai Cuttack Guwahati Indore Jaipur Kanpur Kochi Patna Kathmandu Russia United Kingdom

Branch Offices

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COMPANY PROFILE

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COMPANY PROFILE OVER HUNDRED YEARS OF CARING

Dabur commenced operation in 1884 and is today a multi locational, multi product enterprise. The company has major interest in health and beauty care. Dabur is leader in Ayurveda - the traditional Indian health care system. The company manufactures and markets a range of oncologicals. Dabur is one of the companies in the world to product PACLITAXEL AN ANTI CANCER DRUG. The company has developed its own Eco friendly process to manufacture this drug from raw material stage. The company has 12 manufacturing plants in India, Nepal and Egypt. Dabur products are also manufactured in Dubai. Dabur has transactional network of 19 offices serving both rural and urban markets in India. The company has sales and marketing offices in Dubai and London. Dabur products are available in over 50 countries.

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Founding Thoughts

"What is that life worth which cannot bring comfort to others" The doorstep Daktar The story of Dabur began with a small, but visionary endeavour by Dr. S. K. Burman, a physician tucked away in Bengal. His mission was to provide effective and affordable cure for ordinary people in far-flung villages. With missionary zeal and fervour, Dr. Burman undertook the task of preparing natural cures for the killer diseases of those days, like cholera, malaria and plague. Soon the news of his medicines traveled, and he came to be known as the trusted 'Daktar' or Doctor who came up with effective cures. And that is how his venture Dabur got its name - derived from the Devanagri rendition of Daktar Burman. Dr. Burman set up Dabur in 1884 to produce and dispense Ayurvedic medicines. Reaching out to a wide mass of people who had no access to proper treatment. Dr. S. K. Burman's commitment and ceaseless efforts resulted in the company growing from a fledgling medicine manufacturer in a small Calcutta house, to a household name that at once evokes trust and reliability.

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PERFORMANCE

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PERFORMANCE INDICATORS
Good growth momentum was witnessed across categories and geographies with the domestic FMCG business reporting strong volume-driven growth.

NET PROFIT 763.4 CRORS

US$ 5 billion crossed
MARKET CAPITALISATION
Up 18.3 robust profitable growth translated into superior shareholder returns with daburs market cap touching an all time high. Total employee count 6,154 employee Field resource 2 fold over increase Sales up 16.3% project double retail footprint ` 6,146.4 crore 30,000 + villages 5.8 million outlets India limited performance indicators robust profitable growth translated into superior shareholder returns with Daburs market cap touching an all time high. Up 18.3% net profit field resources total employee count ` 763.4 crores market capitalisation us$ 5 billion crossed mark over 2-fold increase 6,154 employees

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PERFORMANCE HIGHLIGHTS WITH THE HELP OF GRAPH

SALES (Rs. CRORE)

1600 1400 1200 1000 800 600 400 200 0 2008 2009 2010 2011 2012 Pharma FMCG FMCG+Pharma

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PROFIT AFTER TAX (Rs. CRORE)

200 180 160 140 120 100 80 60 40 20 0 2008 2009 2010 2011 2012

Pharma FMCG FMCG+Pharma

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RETURN ON CAPITAL EMPLOYED (%)

50 40 30 20 10 0 2008 2009 2010 2011 2012 Pharma FMCG FMCG+Pharma

RETURN ON NET WORTH (%)

50 40 30 20 10 0 2008 2009 2010 2011 2012 FMCG+Pharm a Pharma FMCG

NET WORKING CAPITAL (Rs.crore)

300 200 100 0 -100 2008 2009 2010 2011 2012

FMCG+Pharma

FMCG

Pharma

PRODUCTS

PRODUCTS

Dabur India Limited has marked its presence with some very significant achievements and today commands a market leadership status. Our story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to our partners and stakeholders. The results of our policies and initiatives speak for themselves.

Leading consumer goods company in India amongest turnover of Rs.1899.57 Crore (FY02)

2 major strategic business units (SBU) - Consumer Care Division (CCD) and Consumer Health Division (CHD)

3 Subsidiary Group companies - Dabur Foods, Dabur Nepal and Dabur International and 3 step down subsidiaries of Dabur International - Asian Consumer Care in Bangladesh, African Consumer Care in Nigeria and Dabur Egypt.

13 ultra-modern manufacturing units spread around the globe Products marketed in over 50 countries Wide and deep market penetration with 47 C&F agents, more than 5000 distributors and over 1.5 million retail outlets all over India

CCD, dealing with FMCG Products relating to Personal Care and Health Care

Leading brands -

Dabur - The Health Care Brand Vatika-Personal Care Brand Anmol- Value for Money Brand Hajmola- Tasty Digestive Brand and Dabur Amla, Chyawanprash and Lal Dant Manjan with Rs.100 crore turnover each

Vatika Hair Oil & Shampoo the high growth brand Strategic positioning of Honey as food product, leading to market leadership (over 40%) in branded honey market

Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share.

Leader in herbal digestives with 90% market share Hajmola tablets in command with 75% market share of digestive tablets category

Dabur Lal Tail tops baby massage oil market with 35% of total share

CHD (Consumer Health Division), dealing with classical Ayurvedic medicines

Has more than 250 products sold through prescriptions as well as over the counter Major categories in traditional formulations include:

-AsavArishtas -RasRasayanas -Churnas

- Medicated Oils Proprietary -NatureCare Isabgol -Madhuvaani - Trifgol Ayurvedic medicines developed by Daburinclude:

INDUSTRY OVERVIEW

SWOT Analysis of dabur India SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is an important tool often used to highlight where a business or organisation is, and where it could be in the future. It looks at internal factors, the strengths and weaknesses of a business, and external factors, the opportunities and threats facing the business. The process can give you on overview of where the business, and the environment it operates in, is strategically. This is an important, yet to simpleton understand, tool used by many students, businesses and organisations for analysis. The following SWOT analysis looks at dabur India which is operating in FMCG industry. The analysis shows dabur Indias Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis will give you a clear picture of the business environment dabur India is operating in at the present time. Strengths: The strengths of a business or organisation are positive elements, something they do well and are under their control. The strengths of a company or group and value to it, and can be what gives it the edge in some areas over the competitors. The following section will outline main strengths of dabur India. Having alliances with other strong and popular businesses is a major plus point for dabur India as it helps bring in new customers and make business more effective. Being a market leader, as dabur India is, is key to their success as it boosts reputation, profit and market share. Competitive pricing is a vital element of dabur Indias overall success, as this keeps them in line with their rivals, if not above them. Riding high in the niche market in FMCG industry has helped boost dabur India and raised reputation and turnover. Keeping costs lower than their competitors and keeping the cost advantages helps dabur India pass on some of the benefits to consumers. The services/products offered by dabur India are original, meaning many people will return to dabur India to obtain them. Dabur Indias marketing strategy has proved to be effective, helping to raise profiles and profits and standing out as a major strength. Dabur Indias innovation keeps it a front-runner in FMCG as it is regularly turning out new patents/proprietary technology. Experienced employees are key to the success of dabur India helping to drive them forward with expertise and knowledge.

High quality machinery, staff, offices and equipment ensure the job is done to the utmost standard, and is strength of dabur India. Dabur India has an extensive customer base, which is a major strength regarding sales and profit. Dabur Indias reputation is strong and popular, meaning people view it with respect and believe in it. Being financially strong helps dabur India deal with any problems, ride any dip in profits and out perform their rivals. A strong brand is an essential strength of dabur India as it is recognised and respected. Dabur India has a high percentage of the market share, meaning it is ahead of many competitors. Dabur Indias distribution chain can be listed as one of their strengths and links to success. High quality products/services are a vital strength, helping to ensure customers return to dabur India. Dabur Indias international operations mean a wider customer base, a stronger brand and a bigger chunk of the global market. Development and innovation are high at dabur India with regard to their products/services, which is a sure strength in its overall performance. Dabur Indias position in the market is high and strong a major strength in this industry they are ahead of many rivals. Having little competition, being one of very few companies providing this service/product is a major factor in dabur Indias performance. The online presence of dabur India is strong, meaning it is ahead of many competitors. The lucrative location of dabur India adds to its strengths due to its accessibility (road, rail, air etc). Supplier relationships are strong at dabur India, which can only be seen as strength in their overall performance.Weaknesses: Weaknesses of a company or organisation are things that need to be improved or perform better, which are under their control. Weaknesses are also things that place you behind competitors, or stop you being able to meet objectives. This section will present main weaknesses of dabur India. Reputation is important, and a damaged one like dabur Indias is a major weakness as consumers will not trust the firm enough to spend money with them. A serious weakness for dabur India is the fact their products/services are of low quality, meaning people will have better-quality substitutes. Not reducing costs in the same way as their competitors\' means dabur India is outlaying more of their profits. Having higher costs than competitors is a major weakness. Dabur Indias R&D work is low and insignificant, which is a major weakness in FMCG asset is constantly creating new products. The lack of staff experience is a major downfall for dabber India as it could lead to mistakes or negligence. Old and outdated technologies hold dabur India back and limits success, as other firms are making use of better and more reliable technologies. Not having an effective marketing strategy seriously hampers the success of dabur India. Over pricing, setting too high prices for dabur India products/services makes them

uncompetitive, which is a major weakness. The lack of business alliances is a major weakness for dabur India, as they will struggle to get deals, favours and partnerships. Dabur India is in a poor financial position which makes it weaker than its competitors. Dabur Indias lack of innovation limits its success, as there is no forward thinking. Good companies need loyal employees, but dabur India has a poor relationship with staff which affects performance. Dabur India does not function internationally, which has an effect on success, as they do not reach consumers in overseas markets. Problems with stock are a weakness for dabur India as they need to keep up with demand. Online presence is vital for success these days, and lack of one is a limitation for dabur India. Dabur India\'s underdeveloped distribution chain has a marked effect on performance as it affects the distribution of their products/services. The lack of original products/services is a major flaw in dabur Indias future success, as it shows a blinkered outlook. Dabur India\'s location is weakness for the firm, as it means they miss out on many opportunities. Dabur Indias lack of patents/proprietary technology puts it behind its rivals and is deemed as one of their weaknesses. The weak brand name compromises success for dabur India as it does\'t inspire people to buy their products/services. A limited customer base is a major weakness for dabur India as it means they have less people to sell or market to. The weak market position of dabur India is a limitation to their overall success, as they are well behind their rivals. Dabur Indias limited product line is a major weakness. Dabur Indias weak supplier relationships also have an adverse effect on success, as it cuts ability to negotiate. Dabur India is behind its competitors with a low share of the market, which in turn leads to lower turnover. Opportunities: Opportunities are external changes, trends or needs that could enhance the business or organisations strategic position, or which could be of a benefit to them. This section will outline opportunities that dabur India is currently facing. Dabur India could benefit from Governmental support, in the form of grants, allowances, training etc. Looking at export opportunities is a way for dabur India to raise profits. Changes in technology could give dabur India an opportunity to bolster future success. Dabur India could benefit from expanding their online presence and making more money from online shoppers/internet users. The changes in the way consumers spend and what they buy provides a big opportunity for dabur India to explore. Dabur India is in good financial position, which is an opportunity for them to explore interims of investment in new projects.

 Decrease in taxation gives an opportunity for dabur India to reduce prices or increase profits. The growth of the FMCG industry is an opportunity for dabur India to grasp. New market opportunities could be a way to push dabur India forward. As the economic climate improves, so do the opportunities for dabur India. Dabur India has the opportunity to enter a niche market, gain leading position and therefore boost financial performance. Reaching out into other markets is a possibility for dabur India, and a big opportunity. Grasping the opportunity to expand the customer base is something dabur India can aim for, either geographically or through new products. Takeover and merger opportunities could be explored for dabur India and used to acquire new customers, new resources and enter new markets. Expanding the product/service lines by dabur India could help them raise sales and increase their product portfolio. Reduction in interest rates could benefit dabur India as business costs would come down. Expanding into other markets could be a possibility for dabur India. Forming strategic alliances and joint ventures is an opportunity for dabur India to maximise profit and gain new business. Dabur India has a number of highly skilled staff, which is an opportunity for them to explore as expertise of their staff can help dabur India to bring the business forward. Structural changes in the industry open other doors and opportunities for dabur india.Threats: Threats are factors which may restrict damage or put areas of the business or organisation at risk. They are factors which are outside of the company's control. Being aware of the threats and being able to prepare for them makes this section valuable when considering contingency plans and strategies. This section will outline main threats dabur India is currently facing. Consumer lifestyle changes could lead to less of a demand for dabur India products/services. Tax increases placing additional financial burdens on dabur India could be a threat. Change in demographics could threaten dabur India. The financial burden of increasing interest rates could be a threat to dabur India. Regulations requiring money to be spent or measures to be taken could put financial or other pressure on dabur India. New products/services from rival firms could lead to dabur India\'s products/services being less in demand. Changes in the way consumers shop and spend and other changing consumer patterns could be a threat to dabur India\'s performance. Being undercut by low-cost imports is a major threat for dabur India. Not keeping up with changes in technology could be detrimental to the future of dabur India as they could slip behind their rivals. Slow growth and decline of the FMCG market is a threat to dabur India. Increased competition from overseas is another threat to dabur India as it could lead to lack of interest in their products/services. Extra competition and new competitors entering the market could unsteady dabur Indian be a threat.

 The actions of a competitor could be a major threat against dabur India, for instance, if they bring in new technology or increase their workforce to meet demand. Price wars between competitors, price cuts and so on could damage profits for dabur India. A slow economy or financial slowdown could have a major impact on dabur India business and profits. A decline in demand for dabur India products, with no likelihood of resurgence could pose a threat. The rise and/or fall of the foreign exchange rate could threaten dabur India with regard to importing and exporting. Rising costs could be a major downfall for dabur India as it would eat into profit. Dabur India could be threatened by the growing power customers have to set the price of their products/services. Structural changes in the industry could be a threat for dabur India Dabur India could be threatened by the growing power their suppliers have to set their prices. Substitute products available on the market present a major threat to dabur India

SURVEY ANALYSIS AND INTERPRETATION

MANUFACTURING FACILITIES

AWARDS Archive

Dabur CEO of the Best India's truly world class managers

Dabur CFO

Dabur wins ICSI Dabur amongst top 'HOT FMCG' Companies

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amongst 25 Best amongst India's National Award top three CFOs for Excellance in Corporate Governance

Dabur India in Forbes "Best

Dabur amongst top 10 Great

Dabur India

Dabur India

India's most valuable companies

ranks 53rd Most rated IInd most Company company

under a Billion" Place to Work Valuable Indian dynamic FMCG

LDM into Limca Book of records 2008

WORKING CAPITAL

WORKING CAPITAL
DEFINING WORKING CAPITAL
The term working capital refers to the amount of capital which is readily available to an organisation. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets) and organisational commitments for which cash will soon be required (Current Liabilities). Current Assets are resources which are in cash or will soon be converted into cash in "the ordinary course of business". Current Liabilities are commitments which will soon require cash settlement in "the ordinary course of business". Thus: WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES In a department's Statement of Financial Position, these components of working capital are reported under the following headings: Current Assets

Liquid Assets (cash and bank deposits) Inventory Debtors and Receivables Current Liabilities

Bank Overdraft Creditors and Payables Other Short Term Liabilities

Financial ratio analysis calculates and compares various ratios of amounts and balances taken from the financial statements. The main purposes of working capital ratio analysis are: To indicate working capital management performance; and To assist in identifying areas requiring closer management

Three key points need to be taken into account when analyzing financial ratios: The results are based on highly summarised information. Consequently, situations which require control might not be apparent, or situations which do not warrant significant effort might be unnecessarily highlighted; Different departments face very different situations. Comparisons between them, or with global "ideal" ratio values, can be misleading; Ratio analysis is somewhat one-sided; favourable results mean little, whereas unfavourable results are usually significant. The following ratios are of interest to those managing working capital:

Working Capital Ratio; Liquid Interval Measure; Stock Turnover; Debtors Ratio; Creditors Ratio.

Working Capital Ratio:

Current Assets divided by Current Liabilities The working capital ratio (or current ratio) attempts to measure the level of liquidity, that is, the level of safety provided by the excess of current assets over current liabilities. The "quick ratio" a derivative, excludes inventories from the current assets, considering only those assets most swiftly realisable. There are also other possible refinements. There is no particular benchmark value or range that can be recommended as suitable for all government departments. However, if a department tracks its own working capital ratio over a period of time, the trends-the way in which the liquidity is changing-will become apparent. Liquid Interval Measure: Liquid Assets divided by Average Operating Expenses This is another measure of liquidity. It looks at the number of days that liquid assets (for example, inventory) could service daily operating expenses (including salaries). Stock Turnover Cost of Sales divided by Average Stock Level This ratio applies only to finished goods. It indicates the speed with which inventory is sold-or, to look at it from the other angle, how long inventory items remain on the shelves. It can be used for the inventory balance as a whole, for classes of inventory, or for individual inventory items. The figure produced by the stock turnover ratio is not important in itself, but the trend over time is a good indicator of the validity of changes in inventory policies.

In general, a higher turnover ratio indicates that a lower level of investment is required to serve the department. Most departments do not hold significant inventories of finished goods, so this ratio will have only limited relevance. Debtor Ratio There is a close relationship between debtors and credit sales to third parties (that is, sales other than to the Crown). If sales increase, debtors will increase, and conversely, if sales decrease debtors will decrease. The best way to explain this relationship is to express it as the number of days that credit sales are carried on the books: Credit Sales per Period x Days per period Average Debtors The debtor ratio does not solve the collection problem, but it acts as an indicator that an adverse trend is developing. Remedial action can then be instigated. Creditor Ratio This ratio is much the same as the debtor ratio. It expresses the relationship between credit purchases and the liability to creditors. It can be stated as the number of days that credit purchases are carried on the books. Credit Purchases per Period x Days per period Average Creditors

INTRODUCTION OF WORKING CAPITAL MANAGEMENT

Working capital management is the device of finance. It is related to manage of current assets and current liabilities. After learning working capital management, commerce students can use this tool for fund flow analysis. Working capital is very significant for paying Meaning day and to day expenses of Working and long term and its liabilities. management

Concept

Capital

Working capital is that part of companys capital which is used for purchasing raw material and involve in sundry debtors. We all know that current assets are very important for proper working of fixed assets. Suppose, if you have invested your money to purchase machines of company and if you have not any more money to buy raw material, then your machinery will no use for any production without raw material. From this example, you can understand that working capital is very useful for operating any business organization. We can also take one more liquid item of current assets that is cash. If you have not cash in hand, then you can not pay for different expenses of company, and at that time, your many business works may delay for not paying certain expenses. If we define working capital in very simple form, then we can say that working capital is the excess of current assets over current liabilities. Types of Working Capital 1. Gross working capital Total or gross working capital is that working capital which is used for all the current assets. Total value of current assets will equal to gross working capital. 2. Net Working Capital Net working capital is the excess of current assets over current liabilities.

Net Working Capital = Total Current Assets Total Current Liabilities This amount shows that if we deduct total current liabilities from total current assets, then balance amount can be used for repayment of long term debts at any time. 3. Permanent Working Capital Permanent working capital is that amount of capital which must be in cash or current assets for continuing the activities of business. 4. Temporary Working Capital Sometime, it may possible that we have to pay fixed liabilities, at that time we need working capital which is more than permanent working capital, then this excess amount will be temporary working capital. In normal working of business, we dont need such capital. In working capital management, we analyze following three points Ist Point What is the need for working capital? After study the nature of production, we can estimate the need for working capital. If company produces products at large scale and continues producing goods, then company needs high amount of working capital. 2nd Point What is optimum level of Working capital in business? Have you achieved the optimum level of working capital which has invested in current assets? Because high amount of working capital will decrease the return on investment and low amount of working capital will increase the risk of business. So, it is very important decision to get optimum level of working capital where both profitability and risk will be balanced. For achieving optimum level of working capital, finance manager should also study the factors which affects the requirement of working capital and different elements of current assets. If he will manage cash, debtor and inventory, then

working capital will automatically optimize.

3rd Point What are main Working capital policies of businesses? Policies are the guidelines which are helpful to direct business. Finance manager can also make working capital policies. 1st Working capital policy Liquidity policy Under this policy, finance manager will increase the amount of liquidity for reducing the risk of business. If business has high volume of cash and bank balance, then business can easily pays his dues at maturity. But finance manger should not forget that the excess cash will not produce and earning and return on investment will decrease. So liquidity policy should be optimized. 2nd Working Capital Policy Profitability policy Under this policy, finance manger will keep low amount of cash in business and try to invest maximum amount of cash and bank balance. It will sure that profit of business will increase due to increasing of investment in proper way but risk of business will also increase because liquidity of business will decrease and it can create bankruptcy position of business. So, profitability policy should make after seeing liquidity policy and after this both policies will helpful for proper management of working capital.

CONCEPT OF WORKING CAPITAL

There are two concepts of Working Capital: GROSS WORKING CAPITAL It refers to the firms investment in total current or circulating assets. NET WORKING CAPITAL The term Net Working Capital has been defined in two different ways: (i) It is the excess of current assets over current liabilities. This is, as a matter of fact, the most commonly accepted definition. Some people define it as only the difference between current assets and current liabilities. The former seems to be a better definition as compared to the latter. (ii) It is that portion of a firms current assets which is financed by long-term funds. For example, a business requires investment in current assets such as cash, accounts receivable and short-term investment etc., to the extent of Rs. 15,000. A part of this requirement can be financed by the firm by purchasing on credit of this requirement can be financed by the firm by purchasing on credit or postponing certain payments or, in other words, by creation of current liabilities such as accounts payable, outstanding expenses, etc. Suppose the amount of current liabilities comes to Rs. 10,000. This means the business still needs Rs. 5,000 for its working purposes. This amount will have to be financed from long-term sources of funds as indicated in the definition of Net Working Capital given above.

NEED FOR WORKING CAPITAL

It has already been stated in the preceding chapter that the basic objective of financial management is to maximize shareholder wealth. This is possible only when the company earns sufficient profit. The amount of such profit largely depends upon the magnitude of sales. However, sales do not convert into cash instantaneously. There is always a time gap between the sale of goods and receipt of cash. Working Capital is required for this period in order to sustain the sales activity. In case adequate working capital is not

available for this period, the company will not be in a position to purchase raw materials, pay wages and other expenses required for manufacturing the goods to be sold.

OPERATING CYCLE
From the above, it is clear that working capital is required because of the time gap between the sales and their actual realization in cash. This time gap is technically termed as operating cycle of the business. In case of a manufacturing company, the operating cycle is the length of time necessary to complete the following cycle of events : (i) (ii) (iii) (iv) (v) Conversion of cash into raw material; Conversion of raw materials into work-in-process; Conversion of work-in-process into finished goods; Conversion of finished goods into accounts receivable, and Conversion of accounts receivable into cash.

This cycle will be repeated again and again. The operation cycle of manufacturing business can be shown as in the following chart.

Accounts Receivable

Cash

FINISHED GOODS

RAW MATERIALS

WORK-INPROCESS

OPERATING CYCLE OF A MANUFACTURING BUSINESS.

In the case of a trading firm the operating cycle will include the length of time required to convert (i) cash into inventories, (iii) accounts receivable into cash. In the case of a financing firm, the operating cycle includes the length of time taken for (i) conversion of cash into debtors, and (ii) conversion of debtors into cash. (ii) inventories into account receivable, and

PERMANENT WORKING CAPITAL

This refers to that minimum amount of investment in all current assets which is required at all times to carry out minimum level of business activities. In other words, it represents the current assets required on a continuing basis over the entire year. Tandon Committee has referred to this type of working capital as core current assets. The following are the characteristic of this type of working capital : 1. Amount of permanent working capital remains in the business in one form or one form or another. This is particularly important from the point of view of financing. The suppliers of such working capital should not expect its return during the life-time of the firm. 2. It also grows with the size of the business. In other words, greater the size of the business, greater is the amount of such working capital and vice versa. Permanent working capital is permanently needed for the business and therefore it should be financed out of long-term funds. This is the reason why the current ratio has to be substantially more than 1, as explained in the Chapter Ratio Analysis earlier.

TEMPORARY WORKING CAPITAL

The amount of such working capital keeps on fluctuating from time to time on the basis of business activities. In other words, it represents additional current assets required at different times during the operating year. For example, extra inventory has to be maintained to support sales during peak sales period. Similarly, receivable also increase and must be financed during period of high sales. On the other hand investment in inventories, receivables, etc., will decrease in periods of depression. Suppliers of temporary working capital can expect its return during off season when it is not required by the firm. Hence, temporary working capital is generally financed from short-term sources of finance such as bank credit. The diagrams given below illustrates the difference between permanent and temporary working capital. In Gif. 1, permanent working capital is fixed over a period of time, while temporary working Capital is fluctuating. In Fig. 2, the permanent working capital is increasing over a period of time with increase in the level of business activity. This happens in case of a growing company. Hence, the permanent working capital line is not horizontal with the base line as in Fig. 1.

The Importance of Good Working Capital Management Working capital constitutes part of the Crown's investment in a department. Associated with this is an opportunity cost to the Crown. (Money invested in one area may "cost" opportunities for investment in other areas.) If a department is operating with more working capital than is necessary, this over-investment represents an unnecessary cost to the Crown. From a department's point of view, excess working capital means operating inefficiencies.

Approaches to Working Capital Management The objective of working capital management is to maintain the optimum balance of each of the working capital components. This includes making sure that funds are held as cash in bank deposits for as long as and in the largest amounts possible, thereby maximising the interest earned. However, such cash may more appropriately be "invested" in other assets or in reducing other liabilities. Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to identify areas requiring closer management The individual components of working capital can be effectively managed by using various techniques and strategies When considering these techniques and strategies, departments need to recognise that each department has a unique mix of working capital components. The emphasis that needs to be placed on each component varies according to department. For example, some departments have significant inventory levels; others have little if any inventory.

Furthermore, working capital management is not an end in itself. It is an integral part of the department's overall management. The needs of efficient working capital management must be considered in relation to other aspects of the department's financial and non-financial performance.

COMPONENTS OF WORKING CAPITAL

The key components of working capital are as follows: Stocks These consists stocks of raw materials, work-in-progress and finished goods, together with stocks of consumables and spare parts. Nan-manufacturing concerns will not carry raw material and work-in-progress stocks. Debtors Debtors represent money owed at any point in time to the firm in respect of goods and services which it has supplied on the credit to its customers. Debtors will also include any prepayments in respect of goods and services (e.g. pre payments of rents and insurance). Investment These will include short-term, easily liquidated, investments such as marketable securities. Marketable securities are financial assets on which a company can earn a rate of return by investing temporarily surplus cash and which are readily and quickly convertible back into cash with minimal risk of loss to their value, for e.g. treasury bill (Tbs) and certificate of deposits (Cds).

Cash This will include cash in hand, cash held in current bank account, and cash held in demand deposit accounts with bank and other financial institutions. Cash plus marketable securities collectively represent a firms liquid assets. Current Liabilities These represent the amount actually owed at any point in time by the firm and technically due to be paid within one year of balance sheet date. They will include amounts due to trade creditors for goods and services supplied, interest and principal due ton any shortterm borrowings, and payments due in respect of taxes, dividends, and so forth.

WORKING CAPITAL POLICIES

Matching Approach When a firm follows matching approach (also known as hedging approach), long-term financing will be used to finance fixed assets and permanent current assets and short-term financing to finance temporary or variable current assets. Conservative Approach The financing policy of the firm is said to be conservative when it depends more on longterm funds for financing needs. Under a conservative plan, the firm finances its permanent assets and also a part of temporary current assets with long-term financing. In the period when the firm has no need for temporary current assets, the idle long-term funds can be invested in tradable securities to conserve liquidity. Aggressive Approach An aggressive policy is said to be followed by the firm when it uses more short-term financing than warranted by the matching plan. Under this, the firm finances a part of its permanent current assets with short-term financing. The relatively more use of short-term financing makes the firm more risky.

WORKING CAPITAL FINANCING

TRADE CREDIT: It refers to the credit extended by the supplier of goods and services in the normal course of transaction/business/sale of the firm. Although most of the trade credit is on open account as accounts payable, the suppliers of goods do not extend credit indiscriminately. BANK CREDIT: It is primarily institutional source of working capital finance. It is provided by banks in five ways: Cash credits/overdrafts, Loans, Purchase/discount bills, Letter of credit, and Working capital term loans. COMERCIAL PAPERS (CP): It is a short term unsecured negotiable instrument, consisting of usance promissory notes with a fixed maturity. It is issued on a discount on face value basis but it can also be issued in interest-bearing form. A CP when issued by a company directly to the investor is called a direct paper. Companies which are able to raise funds through CPs have better financial standing.

FACTORING: It provides resources to finance receivables as well as facilitates the collection of receivables. It can be defined as an agreement in which receivables arising out of sale of

goods/services are sold by a firm (client) to the factor (a financial intermediary) as a result of which the title of the goods/services represented by the said receivables passes on the factor. Realization of credit sales is the main function of factoring services. CASH MANAGEMENT The term cash with reference to cash management is used in two senses. In a narrow sense, it is used broadly to cover currency and generally accepted equivalents of cash, such as cheques, drafts and demand deposits in bank. The broad view of cash also includes near-cash assets, such as marketable securities and time deposits in banks. There are three primary motives for maintaining cash balances: 1. Transaction Motive: This refers to the holding of cash to meet routine cash requirements to finance the transactions which a firm carries on in the ordinary course of business . Such motives refers to the holding of cash to meet anticipated obligations whose timing is not perfectly synchronized with cash receipts. 2. Precautionary Motive: A firm may have to pay cash for purposes which cannot be predicted or anticipated. This cash balance held in reserve for such random and unforeseen fluctuations in cash flows. 3. Speculative Motive: It refers to the desire of the firm to take advantage of opportunities which presents themselves at unexpected moments and which are typically outside the normal course of business. BASIC STRATEGIES The cash budget, as a cash management tool, would throw light on the net cash position of a firm. After knowing the cash position, the management should work out the basic strategies to the employed to manage its cash. These strategies are essentially related to the cash cycle together with the cash turnover. The cash cycle refers to the process by which cash is used to purchase materials from which are produced goods, which are then sold to

customers, who later pay the bills. The cash turnover means the number of times cash is used during each year. Cash management strategies are intended to minimize the operating cash balance requirement. The basic strategies that can be employed are: Stretching Accounts Payable, Efficient Inventory-Production Management, Speedy Collection of Accounts Receivable, and Combined Cash Management Strategies.

RECIEVABLE MANAGEMENT The term receivables is defined as debt owed to the firm by customers arising from sale of goods or services in the ordinary course of business. When a firm makes an ordinary sale of goods or services and does not receive payment, the firm grants trade credit and creates accounts receivable which could be collected in the future. Receivable management is also called trade credit management.

CREDIT POLICIES The credit policy of a firm provides a framework to determine: a. Whether or not to extend credit to a customer and b. How much credit to extend? The credit policy decision of a firm has two broad dimensions: 1. Credit Standards: it represents the basic criteria for the extension of credit to customers. The trade-off with reference to credit standards covers: I. II. III. IV. The collection cost, The average collection period/cost of investment in accounts receivable, Level of bad debt losses, and Level of sales.

2. Credit Analysis: It involves two basic steps: I. Obtaining credit information internally (filling forms and documents giving details about financial operations) and externally (through bank references, financial statement, trade references etc.) II. Analysis of credit information through qualitative and quantitative aspects. CREDIT TERMS The stipulations under which goods are sold on credit are referred to as credit terms. It has three components: 1. Credit period, 2. Cash discount, and

3. Cash discount period.

INVENTORY MANAGEMENT
The term inventory refers to the stockpile of the products a firm is offering for sale and the components that make up the products. The basic responsibility of the financial manager is to make sure the firms cash flows are managed efficiently. Efficient management of inventory should ultimately result in the maximization of the owners wealth. The objective of inventory management consist of two counter balancing parts: (a) To minimize investments in inventory, and (b) To meet a demand for the product by efficiently organizing the production and sales operations.

COST OF HOLDING INVENTORY One operating objective of inventory management is to minimize cost. Excluding the cost of merchandise, the costs associated with inventory fall into two basic categories: Ordering or acquisition or Set-up costs, and Carrying Costs

BENEFITS OF HOLDING INVENTORY Inventory is to act as a buffer to decouple or uncouple the various activities of a firm so that all do not have to be pursued at exactly the same rate.

The key activities are: I. II. III. Purchasing Production, and Selling.

Since inventory enables uncoupling of the key activities of a firm, each of them can be operated at the most efficient rate.

TECHNIQUES
The major problem areas that comprise the heart of inventory control are: I. II. III. IV. The classification problem to determine the type of control required, The order quantity problem, The order point problem, and Safety stocks.

CLASSIFICATIN PROBLEM: A B C SYSTEM The A B C system is a widely used classification technique to identify various items of inventory control. This technique is based on the assumption that a firm should not exercise the same degree of control on items of inventory. ORDER QUANTITY PROBLEM: ECONOMIC ORDER QUANTITY (EOQ) MODEL While purchasing raw materials or finished goods, the questions to be addressed are: How much inventory should be bought in order on each replenishment? Should the quantity should be purchased be large or small? Or, should the requirements of materials during a given period of time be acquired in one lot or should be it required in installments or in several small lots? Such inventory problems are called order quantity problems. All such problems are answered by the economic order quantity (EOQ). It is the inventory management technique for determining item optimum order quantity which is one that minimizes the total of its order and carrying costs; it balances fixed ordering costs against variable ordering costs.

ORDER POINT PROBLEM Another important question pertaining to efficient inventory management is: when should the order to procure inventory be placed? This aspect of inventory management is covered under the recorder problem. It is stated in terms of the level of inventory at which an order should be placed replenishing the current stock of inventory. Recorder point = lead time in days * Average daily usage of inventory The term lead time refers to the time normally taken in receiving the delivery after placing orders with the suppliers. The average usage means the quantity of inventory consumed daily.

SAFETY STOCKS It implies extra inventories that can be drawn down when actual lead time and/or usage rates are greater than expected. It involves two types of costs: a. Stock-out costs, and b. Carrying costs. The stock-out and the carrying costs are counter balancing. If the firm minimizes the carrying costs, the stock-costs are likely to rise and vice-versa. The safety stock with the minimum carrying and stock-out costs is the economic (appropriate) level which financial manager should aim at. The Importance of Good Working Capital Management Working capital constitutes part of the Crown's investment in a department. Associated with this is an opportunity cost to the Crown. (Money invested in one area may "cost"

opportunities for investment in other areas.) If a department is operating with more working capital than is necessary, this over-investment represents an unnecessary cost to the Crown. From a department's point of view, excess working capital means operating inefficiencies.

Approaches to Working Capital Management The objective of working capital management is to maintain the optimum balance of each of the working capital components. This includes making sure that funds are held as cash in bank deposits for as long as and in the largest amounts possible, thereby maximising the interest earned. However, such cash may more appropriately be "invested" in other assets or in reducing other liabilities. Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to identify areas requiring closer management The individual components of working capital can be effectively managed by using various techniques and strategies When considering these techniques and strategies, departments need to recognise that each department has a unique mix of working capital components. The emphasis that needs to be placed on each component varies according to department. For example, some departments have significant inventory levels; others have little if any inventory. Furthermore, working capital management is not an end in itself. It is an integral part of the department's overall management. The needs of efficient working capital management must be considered in relation to other aspects of the department's financial and non-financial performance.

BLUE PRINT FOR A GOOD WORKING CAPITAL MANAGEMENT POLICY

GENERAL ACTIONS Set planning standards for stock days, debtor days and creditors days; Having set planning standards (as above) KEEP TO THEM. Impress on staff that these targets are just as important as operating budgets and standard costs; Instill an understanding amongst the staff that working capital management produces profits. ACTIONS ON STOCKS Keep stock levels as low as possible, consistent with not running out of stock and not ordering stock in uneconomically small quantities. Just-in-Time stock management is fine, as long as it is Just-in-Time and never fails to deliver on time; Consider keeping stock in suppliers warehouses, drawings on it as needed and saving warehousing costs. ACTION ON DEBTORS / CUSTOMERS Asses ALL significant new customers for their ability to pay. Take references, examine accounts, and ask around. Try not to take on new customers who would be poor payers; Re-asses ALL significant customers periodically. Stop supplying existing customers who are poor payers you may lose sales, but you are QUALITY of business rather than QUANTITY of business. Sometimes poor paying customers suddenly (and magically!!) find cash to settle invoices if their supplies are being cut off. If customers cant pay / wont pay your competitors have them give your competitors a few more problems;

 Consider factoring sales invoices the extra cost may be worth it in terms of quick payment of sales revenue, less debtor administration and more time to carry out your business (rather than spend time chasing debts); Consider offering discounts for prompt settlement of invoices, but only if the discounts are lower than the costs of borrowing the money owed from other sources. ACTION ON CREDITORS Do NOT pay invoices too early - take advantage of credit offered by suppliers its free; Only pay early if the supplier is offering a discount. Even then, consider this to be an investment. Will you get a better return by using working capital to settle the invoice and take the discount than by investing the working capital in some other way? ; Establish a register of creditors to ensure that creditors are paid on the correct date not earlier and not later.

WORKING RESULT -1

DETAILS OF CURRENT ASSETS

(Rs. In lacs) PARTICULARS Inventories Difference % Increase S. Debtors Difference % Increase Cash & Bank Difference % Increase Loans & Adv. Difference % Increase 2011 10,951.93 2012 12,802.57 1,850.64 16.89 4,928.27 721.05 17.13 1,065.38 -123.34 -10.37 6,400.96 816.62 14.62 2013 11,560.90 -1,241.67 -9.69 2,694.25 -2,234 -45.33 3,804.41 2,739.03 257.09 10,376.66 3975.7 62.11

4,207.22

1,188.72

5,584.34

CHANGE IN CURRENT ASSETS

14,000.00 12,000.00 10,000.00 8,000.00 6,000.00 4,000.00 2,000.00 0.00 2010 2011 2012 Inventory S. Debtors Cash&bank Loans&Adv.

DETAILS OF CURRENT LIABILITIES

(Rs. In Lacs) Particulars Creditors Difference % Increase Security Deposits Difference % Increase Amount due Difference % Increase Advance from customer Difference % Increase Provisions Difference % Increase 2011 11,511.44 2012 13,359.71 1,848.27 16.05 47.24 23.43 98.40 876.01 111.13 14.52 53.71 -47.37 -46.86 7,169.81 8,384.94 1,215.13 16.94 2013 13,169.08 -190.60 -1.42 12.65 -34.59 -73.22 1,041.54 165.53

23.81

764.88

101.08

51.24 -2.47 -4.59 11,388.94 3004 35.82

Other liabilities Difference % Increase

4,050.86

9,501.38 5,450.52 134.55

5,067.55 -4,433.83 -46.66

CHANGES IN CURRENT LIABILITIES

14000 12000 10000 8000 6000 4000 2000 0

creditors security deposits amount due advance from customers provisions

2010

2011

2012

other liability

CHANGES IN WORKING CAPITAL 0 -10 -20 -30 -40 -50 -60 -70 -80 working capital ratio 2011 2012 2013

RATIO ANALYSIS

INTRODUCTION
Financial ratio analysis calculates and compares various ratios of amounts and balances taken from the financial statements. The main purposes of working capital ratio analysis are: To indicate working capital management performance; and To assist in identifying areas requiring closer management

Three key points need to be taken into account when analyzing financial ratios: The results are based on highly summarised information. Consequently, situations which require control might not be apparent, or situations which do not warrant significant effort might be unnecessarily highlighted; Different departments face very different situations. Comparisons between them, or with global "ideal" ratio values, can be misleading; Ratio analysis is somewhat one-sided; favourable results mean little, whereas unfavourable results are usually significant. The following ratios are of interest to those managing working capital:

Working Capital Ratio; Liquid Interval Measure; Stock Turnover; Debtors Ratio; Creditors Ratio.

Working Capital Ratio:

Current Assets divided by Current Liabilities The working capital ratio (or current ratio) attempts to measure the level of liquidity, that is, the level of safety provided by the excess of current assets over current liabilities. The "quick ratio" a derivative, excludes inventories from the current assets, considering only those assets most swiftly realisable. There are also other possible refinements. There is no particular benchmark value or range that can be recommended as suitable for all government departments. However, if a department tracks its own working capital ratio over a period of time, the trends-the way in which the liquidity is changing-will become apparent.

Liquid Interval Measure: Liquid Assets divided by Average Operating Expenses This is another measure of liquidity. It looks at the number of days that liquid assets (for example, inventory) could service daily operating expenses (including salaries).

Stock Turnover Cost of Sales divided by Average Stock Level This ratio applies only to finished goods. It indicates the speed with which inventory is sold-or, to look at it from the other angle, how long inventory items remain on the shelves. It can be used for the inventory balance as a whole, for classes of inventory, or for individual inventory items.

The figure produced by the stock turnover ratio is not important in itself, but the trend over time is a good indicator of the validity of changes in inventory policies. In general, a higher turnover ratio indicates that a lower level of investment is required to serve the department. Most departments do not hold significant inventories of finished goods, so this ratio will have only limited relevance.

Debtor Ratio There is a close relationship between debtors and credit sales to third parties (that is, sales other than to the Crown). If sales increase, debtors will increase, and conversely, if sales decrease debtors will decrease. The best way to explain this relationship is to express it as the number of days that credit sales are carried on the books: Credit Sales per Period x Days per period Average Debtors The debtor ratio does not solve the collection problem, but it acts as an indicator that an adverse trend is developing. Remedial action can then be instigated. Creditor Ratio This ratio is much the same as the debtor ratio. It expresses the relationship between credit purchases and the liability to creditors. It can be stated as the number of days that credit purchases are carried on the books. Credit Purchases per Period x Days per period Average Creditors

WORKING RESULT -2

PARTICULARS 1.Working Capital Ratio 2. Liquid Ratio 3. Stock Turnover Ratio 4. Debtors Turnover Ratio 5.Creditors Turnover Ratio 6. Liquid Interval Measure 7. Net Working Capital Ratio 8. Fixed Assets Turnover Ratio

2012 0.781 0.186 5.02 27.77 4.64 0.126 -18.05 0.274

2013 0.925 0.211 6.35 35.93 4.49 0.063 -59.68 2.890

RECOMMENDATIONS

RECOMENDATIONS
Working Capital Ratio is lower than the ideal one and a lower ratio indicates the lack of liquidity. Dabur must maintain enough cash balance or other liquid assets so that it never faces problem of payments to liabilities. Liquid Ratio is lower than the ideal ratio which indicates that the liquidity of the firm is very unsatisfactory. There is a decline in liquid ratio of Dabur and the decline in the liquid ratio indicates over trading which, if serious, may land the company in difficulties. Stock Turnover Ratio is increased by 1.32 times which means that more sales are being produced by a rupee of investment in stocks. The company should maintain the high ratio trend to produce more sales by a unit of investment in stocks. A proper Inventory Turnover ratio enables the business to earn a reasonable margin of profits. Debtors Turnover Ratio has been increased by 8.16 times which means that debts are being collected more quickly. The company should get the ratio higher so that the economy and efficiency in collection of amounts is maintained. A standard ratio should be set up for measuring the efficiency. A ratio lower than the standard would indicate inefficiency. Creditors Turnover Ratio has been decreased by 0.15 times which means that the company is not taking the full advantage of credit facilities. The firm should try to increase this ratio as the high ratio indicates that the firm is enjoying actually the credit promised by the suppliers. Net Working Capital Turnover Ratio has been decreased by 77.73 times which is not a good sign for the firm. Dabur India Limited Should try to maintain this ratio high as the high ratio is better for the firm. This ratio indicates the efficiency or otherwise utilization of short term funds in making the sales. Fixed Assets Turnover Ratio has been increased by 2.616 times which shows that firm is utilising the fixed assets. The firm should try to maintain this ratio high because a low ratio indicates that fixed assets is remained idle

BIBLIOGRAPHY

BIBLIOGRAPHY
Books: Financial Management, I.M. Pandey Financial Management, R.P. Rastogi Financial Management, Khan & Jain Financial & Management Accounting, S.N. Maheshwari Websites: www.google.com www.studyfinance.com www.dabur.com Others: Annual Reports

ANNEXURE

CONSLIDATED BALANCE SHEET

S.N. Particulars As per at march 31,2013 Amount in Rs lacks exempt share capital As at march As at march 31,2013 31,2012

(I)

Equity & Libilities

a) Share capital b) Reserve and surplus 17229 195009 1206 53993 3621 12 4919 61142 74430 43196 18684 473641 17421 154297 303 72718 2740 20566 34091 47681 50840 19376 420033

1. Share holder fund 2. Minority Interest 3. Non Current Liabilities

a) b) c) d) a) b) c) d) Long term Borrowing Deffered tax Liabilities Other Long Term Provision Long Term Provision Short Term Borrowing Trade Payables Other Current Liabilities Short Term Provision TOTAL

4. Current Liabilities

(II) ASSETS
1. Non Currents Assets
a) Fixed Assets I. Tangible assets II. Intangle assets III. Capital working in Progress b) Non Current Investment c) Long Term Loans and Advances d) Other non-current assets 94568 63620 9257 13047 1577 31268 50141 84386 48413 51281 20150 5933 473641 84225 79898 2676 8928 2584 10192 39324 82392 46168 41842 18583 3221 420033

2. Currents Assets
a) b) c) d) e) f) Current Investment Inventory Trade Receivables Cash and Cash Equivalents Shorts term Loans and advance Other current assets

TOTAL

CONSOLIDATED STATEMENT OF PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED MARCH 31, 2013 (All amounts in ` Lacs, except share data) Sl. No. Particulars For the For the year ended year ended Mar 31, 2013 Mar 31,2012 I Revenue from operations 6,17,612 5,30,542 I Other Income I II Total Revenue (I +II) I IV Expenses Cost of materials consumed Purchase of stock in trade Changes in inventories of FG, WIP & Stock in Trade Finished Goods Work in Progress Stock in trade Employee benefits expenses Finance costs Depreciation and Amortisation Expenses Other Expenses Total Expense V Profit before exceptional and extraordinary items and tax (III IV) VI Exceptional Items VII Profit before extraordinary items and tax (V - VI) VIII Extraordinary Items IX Profit before tax (VII VIII) X Tax expense 1. Current tax 2. Deferred tax 3. Earlier year tax XI Profit/(Loss) for the year from continuing operations (IX X) XII Minority interest XIII Profit after Minority interest XIV Earnings per equity share ` (Before Extraordinary items) 9,450 6,27,062 2,42,211 59,922 (3,028) (87) 2916 47,123 5890 11,240 165575 5,31,762 95300 466 94834 8 94,842 17278 881 104 76579 237 76342 5,740 5,36,282 227880 51665 (5454) (2571) (2280) 38742 5384 10324 133543 457233 79049 79049 79049 13829 809 64411 (78) 64489

(1) Basic (2) Diluted XV Earnings per equity share ` (After Extraordinary items) (1) Basic (2) Diluted

4.38 4.35 4.38 4.35

3.70 3.68 3.70 3.68