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Summer training Project report

On
ANALYSIS OF WORKING CAPITAL MANAGEMENT
OF
SHRIRAM PISTONS & RINGS LTD
Submitted for the partial fulfllment of the
award
Of
Master of Business Administration
DEGREE
Session 2012-2013
SUBMITTED BY:
Mohd Ahmad Ansari
ROLL No. 1103270088
.
UDER T!E GUIDA"E #$
Internal Gide! Ms Manisha G"ta
Department of Management
A#$S $NGIN$$RING %OLL$G$
G&A'IA#A(
1

A$$I%IATED T#
MA!AMAYA TE"!I"A% UI&ERSITY' #IDA
2
C andidates Declaratin!Certi"icate
I hereby declare that the Work which is being presented in this report entitled
# Anal$sis " M%t%al F%nds and Ran&in' T(e) * is an authentic record of my work
carried out under the supervision of Mrs+,AYA PANDEY
The matter embodied in this report has not been submitted by me for the award of any
other degree
Dated MOHD+AHMAD+ANSARI
De-art)ent. M/A

This is certifying that the above statements made by the candidate are correct to the best of
my knowledge.
PROF+ RAKESH PASSI Mrs+ ,AYA PANDEY
0Head " De-art)ent1 Desi'natin. Assistant Pr"essr
Date . 2222222++ De-art)ent. M/A
Date.22222222

3
PREFACE
uring !aster in "usiness #dministration program$ %tudents comes direct contact with the
real corporate world through the industrial training. # &'! program provides its students
with an in(depth study of various managerial activities that are performed in any
organi)ation.
# detailed research*analysis of managerial activities conducted in various departments like
finance$ marketing$ human resources$ production department etc. gives the student the
conceptual idea of what they are e+pected to manage and how to manage and how to obtain
the ma+imum output through minimum inputs of resources available and how to minimi)e
the wastage of resources.
#s !"# students$ I have taken my summer internship training in SHRIRAM PISTONS
AND RINGS LTD+
+


,
ACKNOWLEDGEMENT
I feel immense pleasure and privilege to e+press my sincere thanks to my &ro-ect 'uide Mr+
SAN,AY MAHESHWARI 0Finance Mana'er1 for his incessant invaluable and
indispensible guidance throughout. #t the same time$ I cannot forget the courtesy and timely
help provided by &ro-ect Coordinator Mr+ SAMEER P3NHANI+
I also e+press my sincere depth of gratitude to the .inance and #ccount / #dministrative
epartment staff members in providing me with all the necessary information in carrying
out my pro-ect study. I also e+tend my thanks to Ms+ Di4$a A'ar5al who helped me to
clear the concepts and also made valuable comments and suggestions$ while preparing my
pro-ect.
S%d(eer K%)ar
M/A6III Se)+
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TA/LE OF CONTENT
E7EC3TI8E S3MMARY
The management had to depend upon certain relevant information for taking various
strategic decisions. The information is made useful by its analysis and interpretation. !y
pro-ect is related to A#nalysis of Working Capital !anagement A
It was found that the operating cycle of the company is bit disturbed and is continuously
increasing due to which company is having the decreasing working capital position. "y
adopting various calculation and analysis and then making interpretation with the solution of
specific problem I put my efforts in giving appropriate suggestion to the company. To this
conte+t I adopted various methods and techniBues like Trend analysis by using statistical
tool$ a work towards the optimal level of working capital$ estimation of working capital$
analy)ing of operating cycle and use of various ratio to put an e+act picture of company.
The report also consists of Bualitative and Buantitative analysis of Working Capital
!anagement of %;5I5#! &I%T87% #7 5I7'% :I!IT1$ 'ha)iabad .In the course of
study$ I found that the organi)ation faces the problem of liBuidity.

@
INTROD3CTION
Wr&in' Ca-ital.
Working capital in simple terms means the amount of funds that a company reBuires for
financing its day (to( day operations. Working Capital includes the current assets and current
liabilities areas of the balance sheet.
Working Capital !anagement is concerned with the problems that arise in attempting to
manage the current assets$ the current liabilities and the interrelationship that e+ists between
them. Working Capital !anagement is the process of planning and controlling the level and
mi+ of current assets of the firm as well as financing these assets. #nalysis of working
capital is of ma-or importance to internal and e+ternal analysis because it is closely related to
the current day (to( day operations.
Concept of Working CapitalC(
There are two concepts of working capitalsC (
1. 'ross Working capitalC ( It means the current assets which represent the proportion of
investment that circulates from one form to another in the ordinary conduct of business.
2. 7et Working CapitalC ( It is the difference between current assets and current liabilities or
alternatively the portion of current assets financed with long(term funds.
Constituents of Current #ssetsC(
1. Cash in hand and cash at bank.
2. "ill receivables.
3. %undry debtors.
<
,. %hort term loans and advances.
0. Inventories.
?. &repaid 1+penses.
@. #ccrued Income.
<. !arketable %ecurities.
Constituents of Current :iabilitiesC(
1. #ccrued and outstanding e+penses.
2. %hort term loans$ advances and deposits.
3. ividends payable.
,. "ank overdraft.
0. &rovision for ta+ation.
?. %undry Creditors.
@. "ills payable.
D
The gross concept is sometimes preferred to the concept of working capital for the following
reasonsC
1. It enables the enterprise to correct amount of working capital at correct time.
2. 1very management is more interested in total current assets with which it has to operate
then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital. The net working capital concept$ ;owever$ is also important
for following reasonsC
ItEs a Bualitative concept$ which indicates the firmEs ability to meet its operating
e+penses and short term liabilities.
It indicates the margin of protection available to the short term creditors.
It is an indicator of the financial soundness of enterprise.
It suggests the need of financing a part of working capital reBuirement out of the
permanent sources of funds.
1>
C:#%%I.IC#TI87 8. W85=I7' C#&IT#:
Working capital may be classified in two waysC
8n the basis of concept.
8n the basis of time.
8n the basis of concept working capital can be classified as gross working capital and net
working capital. 8n the basis of time$ working capital may be classified asC
&ermanent or .i+ed working capital.
Temporary or variable working capital.
&15!#717T 85 .I21 W85=I7' C#&IT#:
&ermanent or fi+ed working capital is minimum amount which is reBuired to ensure
effective utili)ation of fi+ed facilities and for maintaining the circulation of current assets.
1very firm has to maintain a minimum level of raw material$ work( in(process$ finished
goods and cash balance. This minimum level of current assets is called permanent or fi+ed
working capital as this part of working is permanently blocked in current assets. #s the
business grow the reBuirements of working capital also increases due to increase in current
assets.
T1!&85#56 85 4#5I#":1 W85=I7' C#&IT#:
Temporary or variable working capital is the amount of working capital which is necessary
to meet the seasonal demands and some special necessities. 4ariable working capital can
further be categori)ed as seasonal working capital and special working capital. The capital
11
necessary to meet the seasonal need of the enterprise is called seasonal working capital.
%pecial working capital is that part of working capital which is reBuired to meet special
demands.
Temporary working capital differs from permanent working capital in the sense that is
reBuired for short periods and cannot be permanently employed profitably in the business.
I!&85T#7C1 8. #1F3#T1 W85=I7' C#&I#T#:
%8:417C16 8. T;1 "3%I71%%C ( #deBuate working capital helps in maintaining
the solvency of the business by providing uninterrupted of production.
'88WI::C ( %ufficient amount of working capital enables a firm to make prompt
payments and makes and maintain the goodwill.
1%#6 :8#7%C ( #deBuate working capital leads to high solvency and credit standing
can arrange loans from banks and other on easy and favorable terms.
C#%; I%C837TC #deBuate working capital also enables a concern to avail cash
discounts on the purchases and hence reduces cost.
51'3:#5 %3&&:6 8. 5#W !#T15I#:C ( %ufficient working capital ensures
regular supply of raw material and continuous production.
51'3:#5 &#6!17T 8. %#:#5I1%$ W#'1% #7 8T;15 #6 T8 #6
C8!!IT!17T%C ( 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.
12
12&:8IT#TI87 8. .#485#":1 !#5=1T C87ITI87%C ( If a firm is having
adeBuate working capital then it can e+ploit the favorable market conditions such as
purchasing its reBuirements in bulk when the prices are lower and holdings its
inventories for higher prices.
#"I:IT6 T8 .#C1 C5I%1%C ( # concern can face the situation during the depression.
F3IC= #7 51'3:#5 51T357 87 I741%T!17T%C ( %ufficient working capital
enables a concern to pay Buick and regular of dividends to its investors and gains
confidence of the investors and can raise more funds in future.
;I'; !85#:1C ( #deBuate working capital brings an environment of securities$
confidence$ high morale which results in overall efficiency in a business.
I%#4#7T#'1% 8. 12C1%%I41 W85=I7' C#&IT#:
1. 1+cessive working capital means ideal funds which earn no profit for the firm and
business cannot earn the reBuired rate of return on its investments.
2. 5edundant working capital leads to unnecessary purchasing and accumulation
of inventories.
3. 1+cessive working capital implies e+cessive debtors and defective credit policy which
causes higher incidence of bad debts.
,. It may reduce the overall efficiency of the business.
0. If a firm is having e+cessive working capital then the relations with banks and other
financial institution may not be maintained.
13
?. ue to lower rate of return n investments$ the values of shares may also fall.
@. The redundant working capital gives rise to speculative transactions.
W85=I7' C#&IT#: I% 7111 .85 T;1 .8::8WI7' &35&8%1%C (
.or the purpose of raw material$ components and spares.
To pay wages and salaries.
To incur day(to(day e+penses and overload costs such as office e+penses.
To meet the selling costs as packing$ advertising$ etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material$ work(in(progress$ stores and spares and
finished stock.
1,
.#CT85% 1T15!I7I7' T;1 W85=I7' C#&IT#: 51F3I5!17T%
1. 7#T351 8. "3%I71%%C ( The reBuirements 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. 8n
the other hand the trading and financial firms reBuires less investment in fi+ed assets but
have to invest large amt. of working capital along with fi+ed investments.
2. %IG1 8. T;1 "3%I71%%C ( 'reater the si)e of the business$ greater is the reBuirement of
working capital.
3. &583CTI87 &8:IC6C ( If the policy is to keep production steady by accumulating
inventories it will reBuire higher working capital.
,. :17'T; 8. &583CTI87 C6C:1C ( 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. %o working capital
is directly proportional to the length of the manufacturing process.
0. %1#%87#:% 4#5I#TI87%C ( 'enerally$ during the busy season$ a firm reBuires larger
working capital than in slack season.
?. W85=I7' C#&IT#: C6C:1C ( The speed with which the working cycle completes one
cycle determines the reBuirements of working capital. :onger the cycle larger is the
reBuirement of working capital.
10
.ig. ( 1
@. 5#T1 8. %T8C= T3578415C ( There is an inverse co(relationship between the
Buestion of working capital and the velocity or speed with which the sales are affected. #
firm having a high rate of stock turnover will needs lower amt. of working capital as
compared to a firm having a low rate of turnover.
<. C51IT &8:IC6C ( # concern that purchases its reBuirements on credit and sales its
product * services on cash reBuires lesser amt. of working capital and vice(versa.
D. "3%I71%% C6C:1C ( In period of boom$ when the business is prosperous$ there is need
for larger amt. of working capital due to rise in sales$ rise in prices$ optimistic e+pansion of
business$ etc. 8n the contrary in time of depression$ the business contracts$ sales decline$
1?
C#%;
5#W !#T15I#: W85= I7 &58'51%%
.I7I%;1 '88%
1"T85%
difficulties are faced in collection from debtor and the firm may have a large amt. of
working capital.
1>. 5#T1 8. '58WT; 8. "3%I71%%C ( In faster growing concern$ we shall reBuire large
amt. of working capital.
11. 1#57I7' C#&#CIT6 #7 I4I17 &8:IC6C ( %ome firms have more earning
capacity than other due to Buality of their products$ monopoly conditions$ etc. %uch firms
may generate cash profits from operations and contribute to their working capital. The
dividend policy also affects the reBuirement of working capital.
12. &5IC1 :141: C;#7'1%C ( Changes in the price level also affect the working capital
reBuirements. 'enerally rise in prices leads to increase in working capital.
!#7#'1!17T 8. W85=I7' C#&IT#:
!anagement 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 adeBuate nor e+cessive as
both the situations are bad for any firm. There should be no shortage of funds and also no
working capital should be ideal.
W85=I7' C#&IT#: !#7#'1!17T &8:IC1% of a firm has a great on its probability$
liBuidity and structural health of the organi)ation. %o working capital management is three
dimensional in nature asC
1. It concerned with the formulation of policies with regard to profitability$ liBuidity and
risk.
1@
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.
O/,ECTI8E OF ST3DY
This pro-ect was undertaken to analy)e the working capital policies$ working capital
management of the company and to reduce down their problems and to find the solutions
with respect to the working capital management of the company.
The ob-ective of the study is to provide the solutions for reducing down the duration of the
operating cycle$ to analy)e the working capital position of the company and the liBuidity
position$ finding out the problems that the company is facing in managing the working
capital and showing trend of particular ratios in future and at the same suggesting them to
solve their problems. There are Two types of 8b-ectives in this studyC(
1. Pri)ar$ O9:ecti4e C( &rimary 8b-ectives is to A#nalysis of Working Capital
!anagement A
2. Secndar$ O9:ecti4e C( There are few secondary ob-ectives C (
To see whether the company is prepared with enough working capital to face any kind of
contingencies.
To identify the financial strength and weakness of the company
To see how the day(to(day operations of the company takes place.
To compare the performance of working capital for a particular year with previous years.
To assess :iBuidity position$ :ong term solvency$ operational efficiency$ and overall
profitability of %;5I5#! &I%T87% #7 5I7'% :td.
1<
&roviding suggestions to solve the problems of the company.

COMPANY PROFILE
%hriram &istons and 5ings :td. is one of the largest and the most sophisticated
manufacturers of &recision #utomobile Components i.e. pistons$ piston rings$ pistons $pins
and engine valves in India$ the products are sold under brand name H3%;#*%&5E I7 T;1
markets.
%&5: manufacturing unit is located at !eerut 5oad in 'ha)iabad I20 km from 7ew elhiJ.
%&5 employs ?>>>K skilled employees$ has an annual turnover of appro+. 3%L1@? million
and has recently set up a second$ most modern new &lant at &athredi$ ne+t to "hiwadi
Industrial #rea I5a-asthanJ$ about ?> kms from elhi$ to e+pand capacity and to offer the
latest technological products to all customers in India and abroad.
The plant has been recogni)ed as one of the most modern and sophisticated plants in 7orth
India in the field of automobile the production capacity of plant is as underC
Pistn . 10.1, million per year
Pin . 13.> million per year
Rin's . @>.0 million per year
En'ine 4al4es. 2D.0 million per year
#Ttal C%st)er Satis"actin T(r%'( ;%alit$ Mana'e)ent and Cntin%%s
I)-r4e)ent+*
;3ALITY O/,ECTI8ES.
1. 8rgani)ation which is sensitive and interactive to the needs of customer.
2. Continuous upgrading of Buality and process to meet changing needs of customer.
1D
3. 8ptimi)ation of return on investment byC
Continuous improvement
Technology development
8rgani)ational and personnel development
Cost reduction efforts
1ffective use of all resources
;armonious and safe working conditions
,. Work to international norms of Buality and management.
The company has successfully practiced the best work ethics and technology
along with the T&! / =ai)en approach and harmony through teamwork.
ACHIE8EMENTS 0In Ter)s O" ;%alit$1.

%&5 received the I%8( D>>1 certificate from 5WT34$ 'ermany in 1DD,.Technology
from the collaborators was supplemented with in(house efforts and by implementing
world(class practices.
The company received F%(D>>> certificate from T34$ 'ermany in the year 1DDD.
The company received I%8(1,>>1 certificate in the year 2>>1
%&5: has received the "est 4endor #wards from !aruti %u)uki for , consecutive
times$ "est %upplier &erformance awards from Tata Cummins ltd for3 consecutive
years. #nd has self(certified status with most of the 81!%.
1+cellence #ward in 1+port by government of India.
1+cellence #ward in &roductivity by #C!#.
1+cellence #ward in Fuality by ;onda scooters and motors limited$ ;onda %eil and
#C!#.
5eceived iamond #ward(8verall "est performance in FC!.
5eceived %ilver Trophy(Technology from #C!# in 2>>D(1>.
%&5 received the T%(1?D,D certificate in the year 2>>3.
The company received the 8;%#%(1<>>1 certificates in the year 2>>3
"est foundry awards from the Institute of Indian .oundry men in the year 2>>3
'reen rating award by CII$ 3&. &ollution board / World "ank in 2>>,.
The company received the T&! e+cellence award in the year 2>>,
The company received T&! special award in march(2>1>
2>
FEAT3RES OF SPR FACTORY.
Total area covered by the factory is 2@ acres.
The factory has manufacturing facilities for pistons$ rings$ pins and engine valves.
Classification of the premisesC
P+T+E M &roduction Technology and 1ngineering
C+A+A( Commercial #dministration and #ccounts.
R &D( 5esearch and evelopment
Total strength of the company is 0@23 nos. consisting of officers$ staff$ /workers.
The turnover* sales for the year 2>11(12 are 5s.D>>.> crores.
The company is e+porting to more than 30 countries.
1+ports have risen up to 5s.102 crores the year 2>1>(2>11.
8ver 1>N of the production is e+ported to sophisticated markets such as 1urope$
3=$ and :atin #merica etc.
%&5 has been investing 3>N of its retained earnings in Buality up gradation and
moderni)ation.
Collaborations
8n our path to great Buality$ we walk hand(in(hand with global technology leaders$ who
share our commitment to product Buality and performance.
We have uniBue distinction of having , collaborations with World leaders in their respective
fields. We have Technical Collaborations with =olbenschmidt #' of 'ermany for &istons$
5iken Corporation of 9apan for &iston 5ings and .u-i 8o)+ of 9apan for 1ngine 4alves. We
also have a technical collaboration with ;onda .oundry of 9apan for the manufacture of
&istons for engines produced by ;onda and its -oint ventures in India.
21

=8:"17%C;!IT #'$ founded in 1D1>$ is part of the 5hinemetal 'roup$ 'ermany. It is
one of the worldOs largest manufacturers of pistons. They have production facilities around
the world producing &istons with diameter range upto ?2> mm. Their products are e+ported
to over 12> countries around the world.

;87# .oundry$ 9apan$ founded in 1D?3 is a wholly owned subsidiary of ;onda !otors$
9apan. It has a fully automatic &iston casting plant and they also manufactures Intake
!anifolds$ Cylinder ;eads and intricate aluminum castings.
5iken Corporation$ established in 1D2@$ is the undisputed world leader in steel &iston 5ings.
It also holds more than 0>N market share of overall &iston 5ing market within 9apan. &iston
5ings are produced within diameter range of 2> mm to 31>> mm.
"esides &iston 5ings$ they also manufacture Cam %hafts$ =nuckles$ 4alve %eats$ &iston
Inserts$ &re(combustion Chambers$ 5ocker #rms$ Tappets etc.
22
.u-i 8o)+ is the largest 1ngine 4alve manufacturer in 9apan. They have multiple production
facilities including fully automatic state(of(the(art plant.
They have -oint ventures in Thailand$ %outh =orea$ Taiwan and the &eoplesO 5epublic of
China.
23
RESEARCH METHODOLOGY
!ethodologyC
A+ T$-e " St%d$C
The study carried out here is basically analytical in nature. This type of study relies on
data which is already available.
/+ T$-e " Data %sed.
The methodology involved for data collection was mainly through secondary data
and was obtained from the companyEs financial statements and the companyEs website.
The "alance %heets and the &rofit / :oss #ccounts for the last 3 years was the
source based on which forecasting was done which was from the companyEs archives. 1+treme
care was taken in collecting the data from the financial statements and only
relevant data was taken for the analysis based on.
C+ S%rces " Data.
The source of data has been companyEs "alance %heet and &rofit and :oss #ccounts
over a period of past 3 years.
D+ Tls %sed "r Data CllectinC
The data has been collected mainly from the companyEs "alance %heet and &rofit /
:oss #ccount for the past 3 years. Interview schedule was taken to understand how the
.inance epartment is working and what are the various policies followed in the
8rgani)ation.
E+ Tls and tec(ni<%es %sed "r anal$sis.
4arious tools and techniBues have been used to fulfill the aforesaid ob-ectives. #
thorough study of the organi)ation has been along with in depth study of the
functioning of .inance and #ccounts epartment of %5&:. .urther for the analysis
2,
of Working Capital !anagement$ study of working Capital cycle * 8perating cycle
has been made along with 8perating cycle of %&5:. Thereafter analysis of working capital
has been done by taking into consideration past 3 years Current #ssets and current
:iabilities. #fter this component wise analysis has been done$ to have in depth view of working
capital reBuirements and its trend. To find out the efficiency of Working Capital
management$ 5atio analysis tool has been used for the evaluation of inventory$ Cash
!anagement and 5eceivables !anagement at %5&:. Trend &ro-ection of Working
Capital 5eBuirements has also been done to assess the future reBuirements of
Working Capital.
20
ANALYSIS OF WORKING CAPITAL MANAGEMENT
Met(ds ad-ted "r Wr&in' Ca-ital anal$sis.
The broad range of pro-ect management and financial advisory services includeC
Working Capital policy
.inancial 5atio analysis for Working Capital !anagement
!anaging the components of Working Capital of %;5I5#! &I%T87% #7
5I7'% :T.
etermination of operating cycle of %;5I5#! &I%T87% #7 5I7'% :T.
%tatement of change in Working Capital
1stimating Working Capital needs$ &ermanent / 4ariable Capital
Trend #nalysis of Working Capital !anagement
2?
FINANCIAL RATIO ANALYSIS FOR WORKING CAPITAL
MANAGEMENT
Ret%rn n Wr&in' Ca-ital.
5eturn on Working Capital I58WCJ P &"IT * Working Capital Q 1>>
Ta9le=. Ret%rn n Wr&in' Ca-ital
Ret%rn n Wr&in' Ca-ital Fr S(rira) Pistns
2>>D(1> @D3.0<*13D3.0<Q1>> 0?.D,N
2>1>(11 ?,D.D1*1133.2@Q1>> 0@.3,N
2>11(12 1221.,<*10?>.<3Q1>> @<.20N
Fi'%re >. Ret%rn n 5r&in' ca-ital
7oteC C%rrent Lia9ilities P Working Capital borrowings from "anks K Current :iabilities K
&roposed ividend K &rovision for Ta+.
2@
C%rrent Assets P Inventories K ebtors K Cash / "ank balance K Current
Investments K #dvance Income Ta+ K #dvance recoverable in Cash.
Anal$sis.
There has been a decline in 58WC between the two years M it reduces 2>N during 2>>D(1>.
This situation arises because of increase in current liabilities in past years as company is
having proposal of lots of investment due to which company is financing its pro-ect and
there is less tendency of free cash flow.
LI;3IDITY RATIOS.
Snapshot of Liquidity Ratios:
Ta9le >. Li<%idit$ ratis
/asic Ratis =??@6A? =?A?6AA =?AA6A=
Current ratio 2.?> 2.1@ 2.,3
#cid test ratio 1.?? 1.2< 1.0@
Cash ratio >.>0 >.>1 >.3>
C%rrent Rati.
The current ratio is also known as the 5r&in' ca-ital rati and is normally presented as a
real ratio.
Ta9leB. C%rrent Rati
2>>D(1> Current #sset C Current :iability 2.?>C1
2>1>(11 Current #sset C Current :iability 2.1@C1
2>11(12 Current #sset C Current :iability 2.,3C1
2<
Fi'%re B. C%rrent Rati
Anal$sis.
The current ratio is the measure of whether a company has enough short(term assets to cover
its short(term debt and is inde+ of strength of working capital. #nything below 1 indicates
negative W*C Iworking capitalJ. While anything over 2 means that the company is not
investing e+cess assets. # ratio of greater than one means that the firm has more current
assets then current claims. Current ratio of the company has increased from 2.1@ in 6ear
2>1>(11 to 2.,3 in 6ear 2>>D(1>. Current 5atio of the company depicts that for every 5e.1
worth of current liability there are assets worth 5s.2.,3. The company has sufficient
liBuidity as the ratio is increasing. This year there is an increase in ratio due to almost double
inventory level in current year in comparison with previous year.
S%''estins.
.irstly the company should try to increase their inventory levels as money gets blocked.
2D
In order to increase current ratio current assets should be increased. If we look into the
detailed schedule of current assets then we can find out that ma-or portion of current
assets is due to debtors and inventories.
Company should make market survey and should decide first that what should be the
optimum amount of finished goods so that ma-or portion of it can be sold off in the
market. This will help in reducing the locking of funds or working capital in the finished
goods.
Acid Test Rati.
Ta9le C. Acid Test Rati "r S(rira) Pistns
Acid Test Rati Fr S(rira) Pistns
2>>D(1> Current #ssets ( %tocksC Current :iabilities 220<.21(<1,.1D*<?@.>> 1.??
2>1>(11 Current #ssets ( %tocksC Current :iabilities 2>DD.@0(<0@.20*D?0.@3 1.2<
2>11(12 Current #ssets ( %tocksC Current :iabilities 2?0>.>,(D2D.0@*1><D.21 1.0@


Fi'%re C. Acid Test Rati "r S(rira) Pistns
3>

Anal$sis.
#cid test ratio is a more rigorous test of liBuidity than the current ratio and when used in
con-unction with it$ gives a better picture of the firm s ability to meet its short(term debts out
of short(term assets. This ratio is used to determine risk that is not detected by the Working
Capital ratio. # Buick or liBuid ratio of 1C1 is considered as satisfactory as the firm can easily
or readily meets all of its current liabilities. ;ere %hriram &istons have its last year ratings of
which is constant from last three years$ which indicates company is not having satisfactory
financial position and not able to pay its current liabilities and should be looked at with
e+treme care and also implies that current assets are highly dependent on inventory.

C)-arisn 9et5een C%rrent Rati & Acid Test Rati.
Ta9le D. C)-arisn 9et5een c%rrent rati and acid test rati
31
C)-arisn C%rrent Acid Test
2>>D(1> 2.1> 1.??
2>1>(11 1.@2 1.2<
2>11(12 1.D1 1.0@
%;5I5#! &I%T87% #7 5I7'% liBuidity position had worsened when looked at its
current ratio. The acid test ratio has fallen from 2>1> to 2>11. Current assets might not be
that liBuid since most of them are debtors. The fact that the differences between the current
and acid test ratio is around .,$ which is large$ tells us that the %;5I5#! &I%T87% stocks
are large. This is a huge level of stock holding. #dditionally$ the acid test ratio has decreased
over the three(year period$ meaning that %;5I5#! &I%T87% has a weak liBuidity position
than it had before. 7ormally that is not a good thing.
Cas( Rati.
Ta9le E. Cas( rati "r %;5I5#! &I%T87%
Cas( Rati Fr S(rira) Pistns
2>>D(1> CashC Current
:iabilities
,?.32*<?@.>> >.>0C1
2>1>(11 CashC Current
:iabilities
1@.0D*D?0.@3 >.>1C1
2>11(12 CashC Current
:iabilities
33,.??*1><D.21 >.3>C1

Fi'%re D. Cas( Rati "r S(rira) Pistns
32
Anal$sis.
#s cash is being the most liBuid asset$ Buoted investment has been taken as marketable
securities. In our case the company is showing an increasing trend but still it is not a
favorable cash ratio. .rom the above calculation it is clear that companyEs cash ratio had
remained very low. It is the notable point for the company as its current liabilities are much
higher than the cash in hand. It can create problems in the future payments of current
liabilities. !a-or portion of companyEs current assets goes to inventory and debtors$ which
only increase the carrying cost. Company need to reduce these assets to their optimum level.

33
OTHER SNAPSHOT OF WORKING CAPITAL MANAGEMENT
RATIO S
Ta9le F. Wr&in' ca-ital )ana'e)ent ratis
S(rira) Pistns Fr t(e t(ree $ears
Asset 3sa'e =??@6A? =?A?6AA =?AA6A=
.i+ed #sset Turnover >.DD times >.D1 times 1.>3 times
Current #sset Turnover 2.?@ times 3.>, times 2.D2 times
Capital 1mployed Turnover 2.03 times 2.,0 times 2.,2Times
Working Capital Turnover ,.33times 0.?0 times ,.D0times
E""icienc$
Working capital to 'ross %ale >.23 times >.1@ times >.2> times
3,
Working Capital to Cost of %ale >.2< times >.2< times >.20 times
Stc&!De9trs!Creditrs
ebtorsE Turnover 0.1@ times ?.30 times ?.D> times
#verage Collection &eriod ?D.?1 days 0?.?D days 02.1@ days
CreditsE Turnover 3.33 times 2.?0 times 3.3? times
Credit &ayment &eriod 1><.1>days 130.<,days 1>@.1, days
Inventory Turnover ?.>D times ?.3@ times ?.?3 times
Inventory ;olding 0D.11 days 0?.1? days 0,.2D days
Conversion &eriod IIn aysJ 0D.11 days 0?.01 days 0,.2D days
Rati t anal$Ge WC Str%ct%re
Current #sset to Total #ssets 5atio >.3< times >.33 times >.3< times
Cash to Current #sset 5atio >.>2> times >.>>< times >.12 times
Inventory to Current #sset 5atio >.3? times >.,> times >.30 times
Current :iabilities to Total :iabilities >.,< times >.,3 times >.,D times
.inished goods to Inventory 5atio >.,>> times >.,>3 times >.3,> times
5aw !aterial to Inventory 5atio 1.?D times 1.?2 times 1.<1 times
:oan / #dvances to C# ratio >.1> times >.1> times 1.>> times
Wr&in' Ca-ital Mana'e)ent I. Asset 3sa'e
C%rrent Asset T%rn4er.
C%rrent Asset T%rn4er P
Turnover
Current #ssets
30
Ta9le @. C%rrent asset t%rn4er "r S(rira) Pistns
Current #sset Turnover .or %hriram &istons
2>>D(1> ?>3<*22?>.0< P 2.?@times
2>1>(11 ?,>>*2>DD.@0 P 3.>, times
2>11(12 @@3D*2?0>.>, P 2.D2 times

Fi'%re E. C%rrent Asset T%rn4er
Anal$sis.
3?
;igh current assets turnover ratio is more -udicious and shows efficiency of management
and proper utili)ation of the assets. The graph shows the company has managed to higher the
ratio during the previous year however this year due to non(proportionate change in current
assets and turnover the ratio declines to 2.D2. ue to more inventories this ratio falls.
Wr&in' Ca-ital T%rn4er. This ratio signifies how effectively working capital is
being used in terms of the turnover.
Wr&in' Ca-ital T%rn4er P
%ales
Working Capital
Ta9le A?. Wr&in' ca-ital t%rn4er "r S(rira) Pistns
Fi'%re F. Wr&in' Ca-ital T%rn4er "r S(rira) Pistns
3@
Wr&in' Ca-ital T%rn4er Fr S(rira) Pistns
2>>D(1> ?>3<*13D3.0< ,.33 times
2>1>(11 ?,>>*1133.2@ 0.?0 times
2>11(12 @@3D*10?>.<3 ,.D0 times
Anal$sis.
What this ratio tries to highlight is how effectively working capital is being used in terms of
the turnover it can help to generateC no ideal values here but the higher the better$ surely. The
declining working capital turnover ratio in %;5I5#! &I%T87% indicates that working
capital is not being utili)ed properly over the period of time. !anagement may think of
increasing the sales in the market or it is going for certain e+pansion plans.
Wr&in' Ca-ital Mana'e)ent II. E""icienc$
Wr&in' Ca-ital t Grss Sale.
Wr&in' Ca-ital t Grss Sale P
Working Capital
'ross %ale
Ta9le AA. Wr&in' ca-ital t 'rss sale "r S(rira) Pistns
Working Capital to 'ross %ale for the %hriram &istons
2>>D(1> 13D3.0<*?>3< >.23
2>1>(11 1133.2@*?,>> >.1@
2>11(12 10?>.<3*@@3D >.2>
3<
Fi'%re @. Wr&in' Ca-ital t Grss Sale "r t(e S(rira) Pistns
Anal$sis.
The Company was showing decline in the year 2>11 but now as the ratio increased to >.1@
from >.2> there is a matter of concern but here also %;5I5#! &I%T87% is far better than
the industryEs average. In previous year companyEs working capital was very low but now
they are trying to improve it for liBuidity purposes.
Wr&in' Ca-ital t Cst " Sale.
Ta9le A=. Wr&in' ca-ital t cst " sale "r S(rira) Pistns
3D
Wr&in' Ca-ital t Cst " Sale P
Working Capital
Cost of %ale
S

Fi'%re A?. Wr&in' Ca-ital t Cst " Sale "r t(e S(rira) Pistns
Anal$sis.
The Company was showing decline in the year 2>11 but now as the ratio increased to >.20
from >.2> there is a matter of concern but here also %;5I5#! &I%T87% is far better than
the industryEs average. In previous year companyEs working capital was very low but now
they are trying to improve it for liBuidity purposes.
Wr&in' Ca-ital Mana'e)ent III. Stc&!De9trs!Creditrs
,>
Wr&in' Ca-ital t Cst " Sale "r t(e S(rira) Pistns
2>>D(1> 13D3.0<*,D?> >.2<
2>1>(11 1133.2@*0,?2 >.2>
2>11(12 10?>.<3*?1?< >.20
De9trHs T%rn4er.
De9trHs T%rn4er P
%ales
ebtors

Ta9le A>. De9trHs t%rn4er rati "r S(rira) Pistns

Fi'%re AA. De9trHs T%rn4er Rati "r t(e S(rira) Pistns
Anal$sis.
.irstly$ the ratio seems to have change by going from 0.1@ to ?.30 times in the two yearsR
and it means that$ on average$ the companyEs debtors are taking fewer days to pay their
accounts. %oundness of this ratio is more dependent on the business policy and the terms
with the clients. 8n the other side turnover is increasing over the years$ which implies higher
,1
De9trHs T%rn4er Rati "r t(e S(rira) Pistns
2>>D(1> ?>3<*11?@.0? 0.1@ times
2>1>(11 ?,>>*1>>@.3< ?.30 times
2>11(12 @@3D*112>.,1 ?.D> times
the turnover$ shorter the time between sales and collecting cash. It shows the companyEs
debt(collecting machinery has improved through years.
A4era'e Cllectin Perid.
A4'+ Cllectin Perid P
3?>
ebtor Turnover
Ta9le AB. A4era'e cllectin -erid "r S(rira) Pistns
A4era'e Cllectin Perid "r t(e S(rira) Pistns
2>>D(1> 3?> * 0.1@ ?D.?1days
2>1>(11 3?> * ?.30 0?.?D days
2>11(12 3?> * ?.D> 02.1@ days

Fi'%re A=. A4era'e Cllectin Perid "r t(e S(rira) Pistns
,2
Anal$sis.
The average collection period measures the Buality of debtors since it indicates the speed of
their collection. The shorter the average collection period$ the better the Buality of debtors$
as a short collection period implies the prompt payment by debtors. The trend of %;5I5#!
&I%T87 is showing that the company was a success in decreasing the average collection
period$ which represent sound collection policy of the company. &revious year it was 0?.?D
being debtors were less but now it is on the previous trend.
CreditrHs T%rn4er.
CreditrHs T%rn4er P
&urchases
Creditors
Ta9le AC. CreditrHs t%rn4er rati "r S(rira) Pistns
,3

Fi'%re A>. CreditrHs T%rn4er Rati "r t(e S(rira) Pistns
Anal$sis.
In 2>1> creditors turnover ratio increased from 2.?0 to 3.3? times that shows company was
having improved credit paying ability through proper working capital management while in
2>11 the ratio decreased which implies terms of credit allowed by the suppliers are liberal
and creditors are not paid promptly. This shows company keeps its obligation for long time.
Credit Pa$)ent Perid.
Credit Pa$)ent Perid P 3?>
,,
CreditrHs T%rn4er Rati "r t(e S(rira) Pistns
2>>D(1> 13@<*,13.?D 3.33
2>1>(11 13D>.1>*023.D0 2.?0
2>11(12 1?<0*0>>.<3 3.3?
&ayable turnover ratio
Ta9le AD. Credit -a$)ent -erid "r S(rira) Pistns
Credit &ayment &eriod for the %hriram &istons
2>>D(1> 3?> * 3.33 1><.1> days
2>1>(11 3?> * 2.?0 130.<, days
2>11(12 3?> * 3.3? 1>@.1, days

Fi'%re AB. Credit Pa$)ent Perid "r t(e S(rira) Pistns
Anal$sis.
%ince in 2>1> and 2>1> the average payment period of the company was less compared to
2>11 i.e. 130.<, days which implies that 2>11 company was less prompt in making payment
to suppliers compared to other years. #s again it improved its criteria and kept fewer
,0
obligations in the year 2>1>. The same shows that reduction in the payment period is
responsible for the creditworthiness of the company.
In4entr$ T%rn4er Rati.
In4entr$ T%rn4er P
Cost of 'oods %old
Closing %tock

Ta9le AE. In4entr$ t%rn4er rati "r S(rira) Pistns
In4entr$ T%rn4er Rati "r t(e S(rira) Pistns
2>>D(1> ,D?>*<1,.1D ?.>D
2>1>(11 0,?2*<0@.20 ?.3@
2>11(12 ?1?<*D2D.0@ ?.?3
Fi'%re AC. In4entr$ T%rn4er Rati "r t(e S(rira) Pistns
,?
Anal$sis.
It measures appro+imately the number of times an entity is able to acBuire the inventories
and convert them into sales. The %hriram &istons shows higher turnover ratio which is good
for the company while a low turnover is usually a bad sign because products tend to
deteriorate as they sit in a warehouse$ but several aspects of inventory holding policy have to
be balanced like lead time$ seasonal fluctuations in orders$ alternative use of warehouse
space.
In4entr$ Hldin' Perid.
In4entr$ Hldin' Perid P
3?>
Inventory Turnover
Ta9le AF. In4entr$ (ldin' -erid
,@
In4entr$ Hldin' Perid "r t(e S(rira) Pistns
2>>D(1> 3?> * ?.>D 0D.11 days
2>1>(11 3?> * ?.,1 0?.1? days
2>11(12 3?> * ?.?3 0,.2D days
Fi'%re AD. In4entr$ Hldin' Perid "r t(e S(rira) Pistns
Anal$sis.
,<
;ere$ the company shows a decreasing trend in which there inventory holding ratio falls
down$ which is good for the company as it avoids the unnecessary locking up of working
capital in the inventory and it shows efficiency of the management.
Wr&in' Ca-ital Mana'e)ent I8. Rati t anal$Ge W!C Str%ct%re
C%rrent Asset t Ttal Assets Rati.
Ta9le A@. C%rrent asset t ttal asset rati "r S(rira) Pistns
C%rrent Asset t Ttal Asset Rati "r t(e S(rira) Pistns
2>>D(1> 22?>.0<*0D,?.2? >.3<
2>1>(11 2>DD.@0*?2??.<@ >.33
2>11(12 2?0>.>,*?<,3.20 >.3<
,D
Fi'%re AE. C%rrent Asset t Ttal Asset Rati "r t(e S(rira) Pistns
Anal$sis.
If we analy)e the structural health of working capital for %;5I5#! &I%T87%$ the
proportion of current assets to total assets has been showing almost constant trend
continuously over the years$ which shows that the company is having certain problems with
its current asset management. "ut as this picture is showing less declining so itEs very clear
that this can be due to some investment for long(term return.
Cas( t C%rrent Asset Rati.
Cas( t C%rrent
Asset
P
Cash
Current asset
0>
Cas( t C%rrent Asset Rati "r t(e S(rira) Pistns
2>>D(1> ,?.32*22?>.0< >.>2>
2>1>(11 1@.0D*2>DD.@0 >.>><
2>11(12 33,.??*2?0>.>, >.12>
Ta9le =?. Cas( t c%rrent asset rati
Fi'%reAF. Cas( t C%rrent Asset Rati "r t(e S(rira) Pistns
Anal$sis.
The company shows an increasing trend in 2>1> / again it decrease in 2>11 but as this
recovered again the increasing trend of cash in the current assets was observed. ;owever in
the year 2>11 it decreased drastically. We can say that it will effect liBuidity position of the
firm but on the other hand it is observed that they do not keep any ideal cash with them$
which is a positive sign for the company.
01
In4entr$ t C%rrent Asset Rati.
In4entr$ t C%rrent Asset P
Inventory
Current asset
A
Ta9le =A. In4entr$ t c%rrent asset rati "r S(rira) Pistns
In4entr$ t C%rrent Asset Rati "r t(e S(rira) Pistns
2>>D(1> <1,.1D*22?>.0< >.3?
2>1>(11 <0@.20*2>DD.@0 >.,>
2>11(12 D2D.0@*2?0>.>, >.30
Fi'%re. A@ In4entr$ t c%rrent asset rati
Anal$sis.
;ere$ the company shows an unfavorable trend of increase in the proportion of the inventory
to current assets in 2>1>(11$ which represents that the company is locking up the working
02
capital unnecessarily in the inventory. .ortunately$ the ratio rises in the year 2>1> which is a
good sign.
C%rrent Lia9ilities t Ttal Lia9ilities.
Current :iabilities to Total :iabilities P
Current :iabilities
Total :iabilities
Ta9le ==. C%rrent lia9ilities t ttal lia9ilities rati "r S(rira) Pistns
C%rrent Lia9ilities t Ttal Lia9ilities Rati "r t(e S(rira) Pistns
2>>D(1> <?@.>>*1>@0.0@ >.<>
2>1>(11 D?0.@3*1210.2D >.@D
2>11(12 1><D.21*13<2.1, >.@<

Fi'%re =?. C%rrent lia9ilities t Ttal lia9ilities
03
Anal$sis.
The company shows a decreasing trend in the proportion of the current liabilities in the total
liabilities$ this means company is taking fewer loans to meet its liability and pro-ect
investments are there$ hence this shows a less burden on the management of %;5I5#!
&I%T87. This ratio is not the only means of reviewing a companyOs debt structure.
Lan & Ad4ances t C%rrent Asset Rati.
:oan / #dvances to Current #sset P
:oan / #dvances
Current #sset
Ta9le =>. Lan & Ad4ances t C%rrent assets rati "r S(rira) Pistns
0,
:oan / #dvances to Current #sset Rati "r t(e S(rira) Pistns
2>>D(1> 22D.D3*22?>.0< >.1>
2>1>(11 21@.03*2>DD.@0 >.1>
2>11(12 2?0.,>*2?0>.>, 1.>>
Fi'%re ==. Lan & Ad4ances t C%rrent Asset

Anal$sis.
The increase in this ratio in the year 2>1> shows the efficiency of the management. ;owever
this much increases in the ratio is not suggestible.
INTERPRETATION 0RATIO ANALYSIS1.
00
The utili)ation rate of net working capital as depicted by working capital turnover ratio
is fluctuating during the period. It shows that working capital has not been effectively
used over the period of years e+cept in the year 2>1>.
#s shown by current assets turnover ratio$ the utili)ation of current assets in terms of
sales has shown an increasing trend which shows that current assets has been effectively
used to achieve sales.
#gain if we look at the efficiency with which individual elements of working capital
have been utili)ed$ the picture of inventory turnover is bright.
#s we look at the e+tent of liBuidity of working capital$ we notice that the ratio shows a
decreasing trend. This indicates$ problem on the liBuidity front.
MANAGEMENT OF C3RRENT ASSETS
0?
Alternati4e C%rrent Asset In4est)ent -licies
Three alternative policies are there regarding the total amount of current assets. 1ssentially$
these policies differ with regard to the amount of current assets carried to support any given
level of sales$ hence in the turnover of those assets. The line with the steepest slope
represents a rela+ed current asset investment Ialso known as Afat catSJ &olicy$ where
relatively large amounts of cash$ marketable securities$ and inventories are carried$ and
where sales are stimulated by the use of a credit policy that provides liberal financing to
customers and a corresponding high level of receivables. Conversely$ with the restricted
current asset investment Ialso known as Alean and meanSJ policy$ the holdings of cash$
securities$ inventories and receivables are minimi)ed. 3nder the restricted$ current assets are
turned over more freBuently$ so each dollar of current assets is forced to Awork harderS. The
moderate current asset investment policy is between the two e+tremes.
3nder the conditions of certainty$ all firms would hold only minimal levels of current assets.
#ny larger amounts would increase the need for e+ternal funding without a corresponding
increase in profits$ while any smaller holdings would involve late payments to suppliers
along with lost sales due to inventory shortages and an overly restrictive credit policy.
When uncertainty is introduced the firm reBuires some minimum amount of cash and
inventories. # restricted lean and mean current asset investment policy often provides the
highest e+pected return on this investment$ but it entails the greatest risk$ while the reverse is
true under a rela+ed policy.


Alternati4e C%rrent Assets In4est)ent Plicies.

0@
Fi'%re =>. Alternate c%rrent assets in4est)ent -licies
Current #ssets

0>
SHRIRAM PISTONS
,> 5ela+ed
3> !oderate
2>
5estricted
1>
> 0> 1>> 10> %ales
Ta9le s(5in' Alternati4e C%rrent Assets In4est)ent Plicies.
Ta9le =B. Ta9le s(5in' alternati4e c%rrent assets in4est)ent -licies
&olicy Current asset to support
%ales of I75 1>>*(
Turnover of
Current #ssets
5ela+ed 3> 3.3
!odified 23 ,.3
5estricted 1? ?.3
%;5I5#!
&I%T87%
32.0@ 3.>@
7oteC ( The %ales*current assets relationship is shown here as being linear$ but the
relationship is often curvilinear
MANAGING THE COMPONENTS OF WORKING CAPITAL OF
SHRIRAM PISTONS
.our main components.
0<
Cash
!arketable securities*#ccount &ayables
Inventory
#ccounts 5eceivables
Cas( Mana'e)ent in SHRIRAM PISTONS.
Cash management system adopted by .inance epartment in %;5I5#! &I%T87% is very
reliable and transparent. #s cash is a very important activity for a good operation of
company here in %;5I5#! &I%T87% cash is monitored every day and intimated to
.inance epartment. The daily cash report includes all the details of cash inflows and
outflows. !onthly cash budgets are maintained for the estimated of monthly cash inflows
and outflows. .inally the annual cash budget is made by the .inance epartment in the
corporate head office.
The corporate office allocates different amount of each to different manufacturing units as
per their reBuirement. Corporate office acts as a linkage between the manufacturing unit and
creditors. Corporate office has determined the credit facility for every units of the company
and this keeps on changing from year to year depending up on companyEs position
transactions$ profitability and inventory position.
The corporate office provides cash to manufacturing units but there most function is
controlled in unit itself. #ll the need related to inventory are met through corporate office as
well as individual efforts of unit.
F%nd Allcatin.
;ere the initial allocation for manufacturing units is done by corporate office and all
supplementary reBuirements are to look upon by Commercial department.
F%nd 3tiliGatin.
0D
Company operates an annual HCash "udgetE and a rolling HCash &lanE drawn up every
month. #lthough specific forecasting techniBue is used$ funds are deployed to different
departments as per their reBuirements. aily reports on cash transaction are prepared by
&rocurement department to keep a track of all payments made in the days work. 1very
month cash transaction report is sent to .inance department in the corporate office showing
all the transaction of cash$ Iinflow and outflowsJ actual utili)ation of cash and allocation of
fund is compared. If the utili)ation of cash is more than the allocation of fund$ then the plant
has to -ustify its more utili)ation.
To meet the reBuirement of cash$ company approach to bank and present the reBuired
detailed by the bank. %;5I5#! &I%T87% kept less cash in hand$ to meet the entire cash
reBuirement it depends on financing process.
E4al%atin " cas( )ana'e)ent -er"r)ances.
To assess the cash management performance this phase is divided as followsC
a1 %i)e of Cash
91 :iBuidity and #deBuacy of cashC
This is depicted by the current ratio and acid test ratio$ as calculated in part ratio analysis for
working capital management and respective position is shown in graph.
c1 Control of cash
8ne of the ma-or ob-ectives of cash management from the stand point of increasing return
on investment is to economi)e on the cash holding without impairing the overall liBuidity
reBuirements of the firms. This is possible by effecting tighter controls over cash flows. The
following ratios have been applied to assess the efficiency of cash controlC
Cash to Current #ssets ratio
Cash turnover ratio
Cash to current liabilities ratio
Ta9le =C. Ta9le s(5in' di""erent cas( ratis
SHRIRAM PISTONS Fr t(e $ear ended Mn!Rs+
E""icienc$ " cas( cntrl =??@6A? =?A?6AA =?AA6A=
?>
Cash to Current #sset 5atio ,?.32*220<
P>.>2>
1@.0D*2>DD
P>.>><
33,.??*2?0>.>,
P>.12 times
Cash to Current liability 5atio ,?.32*<?@.>>
P>.>0 times
1@.0D*D?0.@3
P>.>1 times
33,.??*1><D.21
P>.3> times
#verageC >.>,D
#verageC >.12
S%))ar$.
It can be inferred from the above table that cash to current assets ratio is increasing which
shows improving position of liBuidity but it again starting decline from 2>11$ which
ultimately affect the operational efficiency of the firm. Cash to current liability ratio shows
the cash balance maintained by company at a certain point of time for meeting its current
liabilities. The cash to current liability ratio is nearly on decreasing trend shows the
efficiency of operations$ but this year it increases which is not a good sign.
Pa$a9le Mana'e)ent in SHRIRAM PISTONS.
!ostly the creditor comprises of the bank that is financing the working capital needs and the
suppliers to whom payments are to be given. This is basically done as per terms and
condition with the respective parties. The company is not able to make proper payment to its
creditors as year on year companyEs creditors are increasing.
E4al%atin " Pa$a9les Mana'e)ent.
The evaluation for payable management is done with the help of ratiosC
CreditorEs turnover ratio
#verage &ayment &eriod
Ta9le =D. Ta9le s(5in' -a$a9les )ana'e)ent
SHRIRAM PISTONS Fr t(e $ear ended Mn!Rs+
?1
Pa$a9le Mana'e)ent =??@6A? =?A?6AA =?AA6A=
CreditrHs rati 3.33 times 2.?0 times 3.3? times
A4era'e Pa$)ent -erid 1><.1> days 130.<,days 1>@.1, days
#verageC 11@.>2 days
S%))ar$.
The analysis shows that the minimum average creditor period is 1>@ days and ma+imum is
130 days. "y analysis reveals the increasing and decreasing trend in average payment
period$ which shows company is provided with liberal and strict credit payment period over
the year and according to the market situation.
In4entr$ Mana'e)ent.
;ere the inventory is categori)ed in toC
0A1 # " C analysis
0=1 2 6 G analysis
A1 A/C Anal$sis. 6 Items which constitutes to @>N of total consumption Iof stores and
sparesJ value when arranged in descending order of consumption value will be termed as H#E
class items. 7e+t 2>N of total consumption value will be termed as H"E class items and the
rest 1>N as the HCE class items.
=1 7YI Anal$sis. 6 Items which constitute top @>N of total stock of stores and spares
holding value when arranged in descending order of stock holding will be termed a H2E class
items ne+t 2>N of total stock holding value is H6E class items and the rest 1>N as the HGE
class.
;igher than necessary stock levels tie up cash and cost more in insurance$ accommodation
costs and interest charges.
.our basic levels will need to be established for each line*category of stock. There are theC
a1 !a+imum level M achieved at the point a new order of stock is physically receivedR
91 !inimum level M the level at point -ust prior to delivery of a new order Isometimes
called buffer stocks M those held for short term emergenciesJR
c1 5eorder level M point at which a new order should be placed so that stocks will not fall
below the minimum level before delivery is receivedR and the
?2
d1 5eorder Buantity or economic order Buantity M the Buantity of stock$ which must be
reordered to replenish the amount held at the point delivery$ arrives up to the ma+imum
level.
8nce these controls are implemented an efficient system of recording receipts and issues is
vital to e+ercise full control of inventories.
In4entr$ Mana'e)ent at SHRIRAM PISTONS.
Inventory is stock of a company$ which is manufacturing the components that make up the
products$ for sale. In managing inventories the ob-ective of the company is to determine and
maintain optimum level of inventory investment. The optimum level of inventory lies
between two danger points of e+cess and inadeBuate inventories.
Inventory is monitored differently for raw material$ work in progress$ finished goods and
spares. !onthly inventory report is sent to the finance department in the corporate office.
8bviously the inventory report is prepared at plant level. &rocurement epartment gives the
date of closing stock of raw materials$ finished goods as well as the work in progress.
In4entr$ T%rn4er Rati.
Ta9le =E. ta9le s(5in' In4entr$ t%rn4er rati
SHRIRAM PISTONS Fr t(e $ear ended Mn!Rs+
=??@6A? =?A?6AA =?AA6A=
Inventory Turnover ?.>D times ?.3@ times ?.?3 times
#verageC ?.3?
S%))ar$.
Inventory turnover ratio establishes a relationship between the total sales during a period and
average inventory hold to meet that Buantum at ?.?3 times in 2>1> and on average it is ?.3?
times$ that signifies the average moving of inventory. In other words$ the stock held during
2>1> is for 0D.11 days as comparison of average at 0?.02 days.
Recei4a9le Mana'e)ent.
?3
#t a plant level mostly the finished goods are sold on credit to increase upon the market
share and retain the customers but the ma-or portion of debtors are dealt by !arketing
3nit of the Commercial epartment and the .inance epartment. It is consideration as
an essential marketing tool.
Control of the debtorsE element Ithe amount owed the business in the short termJ involves a
fundamental trade(off between the cost of providing credit to customers Iwhich includes
financing bad debts and administrationJ$ and the additional net revenue that can be earned by
doing so. The former can be kept to a minimum with effective credit control policies$ which
will reBuireC
%etting and enforcing credit termsR
4etting customers prior to allowing them creditR
%etting and reviewing individual credit limitsR
1fficient invoicing and statement generationR
&rompt Buery resolutionR
Continuous review of debtors position Igenerating Haged debtorsE reportJR
1ffective chasing and collection proceduresR and
:imits beyond which legal action will be pursued.

"efore allowing credit to a new customer trade and bank references should be sought.
#ccounts can be asked for and analy)ed and a report including any county court -udgments
#gainst the business and a credit score asked for from a credit rating business. %alesmenEs
views can also be canvassed and the premises of the potential customer visited.
The e+tent to which all means are called upon will depend on the amount of the credit
sought$ the period$ past e+periences with this customer or trade sector$ and the importance of
the business that is involved. "ut this is not a one(off reBuirement. 8ne classic fraud is to
start off with small amounts of credit$ with invoices being settled promptly$ eventually
building up to a huge order and a disappearing customer.
?,
Credit checking$ even for established customers$ should therefore feature in regular
procedures.
When the creditworthiness of a new customer is established$ positive credit control calls for
the setting of a credit limit$ any settlement discounts$ the credit period$ and credit charges Iif
anyJ.
The :ate &ayment of Commercial ebts IInterestJ #ct now allows small businesses to
charge large interest on late payment of business debts by companies and public sector
organi)ations. 7evertheless$ it is wise to inform customers this right will be e+ercised.
Collection is a vital element of credit control and must include standard$ polite and well(
constructed reminder letters and effective telephone or e(mail follow up. 3se of collection
agencies should be considered$ as could factoring M in its most comprehensive form a loan
facility based on outstanding invoices plus a sales ledger and debtors control service.
1fficient control of debtors will assist cash flow$ and help keep overdraft or other loan
reBuirements down$ and hence reduce interest costs.
ebtors represent future cash M or they should do if proper credit control policies are
pursued. :ikewise stock will eventually become cash$ but in the meantime represents
working capital tied up in the business. =eeping levels to the minimum reBuired for efficient
operations will keep costs down. This means controlling buying$ handling$ and storing$
issuing$ and recording stock.
Inherent in any system of inventory control is the concept of appropriate stock levels M
normally e+pressed in physical units sometimes in monetary terms.
The ob-ective of establishing control levels is to ensure that e+cessive stocks are never
carried Iand working capital thereby sacrificedJ but that they never fall below the level at
which they can be replenished before they run out.
Recei4a9les Mana'e)ent in SHRIRAM PISTONS.
Corporate office and the commercial department in coordination do the management of
receivables. The management of receivable is dealt on ma-or part by corporate office and
minor part by commercial department of the company.
?0
%;5I5#! &I%T87% in matter of granting a credit period to customers tightens their policy
and reduce credit period to 1>@ days to its debtors. Total ebtors amounted to 5s. 11?@.0?
by the end of 2>1>$ which further decreased to 5s. 1>>@.3< in 2>11.
??
DETERMINATION OF OPERATING CYCLE OF SHRIRAM PISTONS.
The determination of length of the operating cycle of a manufacturing firm is the sum ofC
The broad range of pro-ect management and financial advisory services includeC
inventory conversion period IIC&J$ /
debtors conversion period IC&J
A1 In4entr$ cn4ersin -erid.
It is the total time needed for producing and selling the product. Typically$ it includesC
a1 raw material conversion period I5!C&J
91 work(in(process conversion period IWI&C&J$ and
c1 .inished goods conversion period I.'C&J.

In4entr$ Cn4ersin -erid J RMPC K WIPCP K FGCP
The raw material conversion period is depends onC
A1 raw material consumption per day$ /
=1 raw material inventory
Ra5 Material Cns%)-tin -er da$ J Ttal Ra5 Material Cns%)-tin!N%)9er "
da$s in t(e $ear
Ra5 Material Cn4ersin -erid J Ra5 Material In4entr$!Ra5 Material
Cns%)-tin -er da$
%imilar calculations can be made for other inventories$ debtors and creditors.
/1 De9trsH cn4ersin -erid.
It is the time reBuired to collect the outstanding amount from the customers. The total of
inventory conversion period and debtorsE conversion period is referred to as gross operating
cycle I'8CJ.
?@
Grss O-eratin' C$cle J ICP K DCP
C1 Pa$a9le De"erral -erid.
This is very common to get gross operating cycle but in practice$ a firm may acBuire
resources Isuch as raw materialsJ on credit and temporarily postpone payment of certain
e+penses. &ayables$ which the firm can defer$ are spontaneous sources of capital to finance
investment in current assets. The payables deferral period I&&J is the length of time the
firm is able to defer payments on various resource purchases.

Net O-eratin' C$cle J Grss O-eratin' C$cle L Pa$a9le De"erral -erid
If depreciation is e+cluded from e+penses in the computation of operating cycle$ the net
operating cycle also represents the cash conversion cycle. It is net time interval between
cash collections from sale of the product and cash payments for resources acBuired by the
firm. It also represents the time interval over which additional funds$ called working capital$
should be obtained in order to carry out the firmEs operations.
A1 In4entr$ cn4ersin -erid.
a1 Ra5 Material Cn4ersin Perid.
6ears 2>>D(1> 2>1>(11 2>11(12
5aw material consumed
#vg. 5aw material inventory 13@<.?3
@>1.22
13@<.?3*@>1.22
P1.D? times
13D>.1>
@22.@0
13D>.1>*@22.@0
P1.D2 times
1?<0
<D3.,1
1?<0*<D3.,1
P1.<< times
?<
5C!& 3?>*1.D?
P1<3.?@ days
3?>*1.D2
P1<@.0 days
3?>*1.<<
P1D1.,< days
91 Wr&6In6Pr'ress Cn4ersin Perid.
c1 Finis(ed Gds Cn4ersin Perid.
?D
6ears 2>>D(1> 2>1>(11 2>11(12
Cost of &roduction
#vg.Work in progress
2>?1.@3
102.00
2>?1.@3*102.00
P13.01 times
231>.>3
11D.D3
231>.>3*11D.D3
P1D.2? times
12,<.<2
1,<.30
12,<.<2*1,<.30
P<.,1 times
WI&C& 3?>*13.01
P,2.<> days
3?>*1D.2?
P1<.?D days
3?>*<.,1
P2?.?, days
6ears 2>>D(1> 2>1>(11 2>11(12
%ales
Closing stock
?>3<
320.??
?>3<*320.??
P1<.0, times
?,>>
3,?.22
?,>>*3,?.22
P1<.,< times
@@3D
321.33
@@3D*321.33
P2,.>< times
.'C& 3?>*1<.0,
P1D.,1 days
3?>*1<.,<
P1D.,< days
3?>*2,.><
P1,.D0 days
/1 De9trs Cn4ersin.
C1
Pa$a9les Cn4ersin.
@>
6ears 2>>D(1> 2>1>(11 2>11(12
%ales
Closing debtors
?>3<
11@>.1,
?>3<*11@>.1,
P0.1? times
?,>>
1>>@.3<
?,>>*1>>@.3<
P?.30 times
@@3D
112>.,1
@@3D*112>.,1
P?.D> times
C& 3?>*0.1?
P?D.@? days
3?>*?.30
P0?.?D days
3?>*?.D>
P02.1@ days
6ears 2>>D(1> 2>1>(11 2>11(12
&urchases
Closing creditors
13@<.?3
,13.?D
13@<.?3*,13.?D
P3.33 times
13D>.1>
023.D0
13D>.1>*1>>@.3<
P2.?0 times
1?<0
0>>.<<
1?<0*0>>.<<
P3.3? times
&C& 3?>*3.33
P1><.1> days
3?>*2.?0
P130.< days
3?>*3.3?
P1>@.1, days
O-eratin' C$cle.
'ross 8perating Cycle I'8CJC
6ears 2>>D(1> 2>1>(11 2>11(12
5C!&KWI&C&K.'C&KC& 2DD.,< days 2<2.3? days 3>1.,> days
7et 8perating Cycle I78CJC
6ears 2>>D(1> 2>1>(11 2>11(12
'8C(&C&
2DD.,<(1><.1>
P1D1.3< days
2<2.3?(130.<>
P1,?.0? days
3>1.,>(1>@.1,
P1D,.2? days
Anal$sis.
The operating cycle of the firm is disturbed$ as it is continuously increasing which is not
good for the company.
The company policy had a significant change for the year with regard to inventory as it
had increased continuously but this policy has a cost to the company in the presence of a
significant decrease in payables deferral period$ will have to negotiate higher working
capital funds.
Company has tighten its steps towards the credit policy which signifies that in the
current year company is proving itself more efficient but other side it as well shows a
decline in the market share of the company.
@1
The company had reduced down its payables deferral period significantly which
strengthens its creditworthiness in the market and helps the company in getting the loans
on liberal terms. This represents the efficiency of the management.
8ne can have a vastly different working capital outlay while performing the same activity.
;aving a large amount invested in stocks and debtors does not necessarily mean large
profits$ but it can mean a drop in the prime calculation that every businessman is interested
in the return on investment. The ob-ect of working capital management is to trim down on
stocks and debtors and get the cash coming faster within the comfort )one of the business. In
the normal periods of business activity$ cash that had completed the working capital cycle
would be reinvested in stock and the whole process would begin again.
@2
Anal$sis " Asset Percenta'e.
Ta9le =F. Ta9le s(5in' anal$sis " asset -ercenta'e
%;5I5#! &I%T87% Years
Partic%lars =??@6A? =?A?6AA =?AA6A=
Current asset 220< 2>DD 2?0>.>,
Total asset 0D,?.2? ?2??.<@ ?<,3.20
&ercentage of current assets over fi+ed
assets
3@.>2N 2D.DDN 30.,DN
Current ratios 2.?> 2.1@ 2.,3
Fi'%re =B. Percenta'e " C%rrent Asset t FiMed Asset
@3
Anal$sis. .rom the above calculation it can be analy)ed that company is following an
adeBuate policy of working capital from last 2 years. When we give a thought to the current
ratio of last three years we can very easily depict that its current ratio is more than the
standard one i.e. of 2C1. This type of approach also gives the adverse impact on the liBuidity
of the company.
Anal$sis " C(an'e in Wr&in' Ca-ital.
Ta9le =@. Ta9le s(5in' anal$sis " 5r&in' ca-ital
%;5I5#! &I%T87% Fr t(e $ear ended Mn!Rs+
Partic%lars =??@6A? =?A?6AA =?AA6A=
Current asset 220< 2>DD 2?0>.>,
Current :iabilities 1>02.>3 11DD.2< 1301.D1
7et Working Capital 12>0.D@ <DD.@2 12D<.13
Fi'%re =C. Net 5r&in' Ca-ital
Anal$sis.
@,
#s we can see from the above table and graph that companyEs 7et Working Capital has
been showing variation in its trend as from last two years working capital is showing
positive trend in increasing order.
The above situation shows that company management is efficient in management of
working capital.
!aking the comparison of current assets and current liabilities in 2>1> / 2>11 current
liabilities are less than current assets which leads the working capital in positive range
which is good for the company.

Anal$sis " C%rrent Assets.
Ta9le >?. Ta9le s(5in' anal$sis " c%rrent assets
%;5I5#! &I%T87% Fr t(e $ear ended Mn!Rs+
Partic%lars =??@6A? =?A?6AA =?AA6A=
ebtors 11?@.0? 1>>@.3< 112>.3<
Inventory <1,.1D <0@.20 D2D.0@
Cash / "ank balance ,?.32 1@.0D 33,.??
:oans / #dvances 22D.D3 21@.03 2?0.,>
Total 220< 2>DD.@0 2?0>.>1
Anal$sis.
Composition of all parts seems to be distributing but almost each component is showing
increasing trend which has both kind of influence for the financial performance of the
company so company need to manage these components very carefully.
Inventory is showing an increasing trend that is the signal of danger for companyEs
profitability and these are not giving any return by locking up working capital.
S%''estins.
@0
.irst and foremost suggestion for the company is that$ it should look into the idle funds$
which are engaged in inventory. Company should withdraw money from this locked up
working capital and invest it in some other assets.
Anal$sis " C%rrent Lia9ilities.
Ta9le =D. Ta9le s(5in' anal$sis " c%rrent lia9ilities
Partic%lars =??@6A? =?A?6AA =?AA6A=
%undry Creditors ,13.?D 023.D0 0>>.<3
#dvances from customers 1,.@? 1>.2@ 1?.12
8ther provisions 2><.0@ 2,D.0? 2D2.D3
8ther Current liabilities ,10.>1 ,10.0> 0,2.>3
Total 1>02.>3 11DD.2< 1301.D1
Anal$sis.
#s we can see from the graph and table that ma-or portion of current liabilities are with
sundry creditors and every year it keeps on increasing.
#s the company obligations are increased so company need to put certain measure to
control current liabilities.
"y looking the three years position of company in current assets and current liabilities it
can be seen that current liabilities are increasing over current assets so within the time
company need to manage its liability portion and need to make safer decisions.
S%''estins.
@?
ue to the huge amount of current liabilities company has to lock up its funds in current
assets. Therefore$ it should reduce its current liabilities by paying them off so that
regular cash outflow of cash get restricted and outflow gets converted into inflow to
increase in profitability of the firm.
8ne suggestion that could be made to the company is that$ it should pay off its creditors
by withdrawing some cash from its debtors$ which is idle at this point of time and some
amount from its inventory.
STATEMENT OF CHANGE IN WORKING CAPITAL
@@
Ta9le >>. Ta9le s(5in' state)ent " c(an'e in 5r&in' ca-ital
%;5I5#! &I%T87% Years
Partic%lars =??@6A? =?A?6AA =?AA6A=
Ttal C%rrent assets 0A1 220< 2>DD 2?0>.>,
Ttal C%rrent Lia9ilities 0/1 1>02.>3 11DD.2< 1301.D1
Wr&in' Ca-ital S(rt"all 0A6/1 12>0.D@ <DD.@2 12D<.13
Anal$sis.
# statement of changes in working capital helps us in locating where these changes took
place. %ince working capital is measured by subtracting current liabilities from current
assets. #ny increase in current asset and any decrease in current liabilities show an increase
in working capital similarly$ a decrease in current assets and an increase in current liabilities
represent a decrease in working capital.
This table shows the changes in net working capital of %;5I5#! &I%T87%. # wise
financial policy of a firm reBuires that long(term funds be used to finance .i+ed #ssets and
short term funds are used to finance Current #ssets. The statement of changes in working
capital shows that there was a tremendous continuous increase in current liabilities. It is
clear that our debtors are increasing in the previous year so it implies that company is losing
the interest on the working capital locked into it. There is a decrease in working capital
mainly because of the locking of working capital funds in inventories and receivables and
due to the increase in the liabilities.
ESTIMATING WORKING CAPITAL NEEDS
@<
The most appropriate method of calculating the working capital needs of a firm is the
concept of operating cycle. ;owever$ a number of other methods may be used to determine
working capital needs in practice. We shall illustrate here three approaches$ which have
been successfully applied in practiceC
C%rrent assets (ldin' -erid. To estimate working capital reBuirements on the basis
of average holding period of current assets and relating them to costs based on the
companyEs e+perience in the previous years. This method is essentially based on the
operating cycle concept.
Rati " sales. To estimate working capital reBuirements as a ratio of sales on the
assumption that current assets change with sales.
Rati " "iMed in4est)ent. To estimate working capital reBuirements as a percentage of
fi+ed investment.
Esti)atin' O-ti)al Need " Wr&in' Ca-ital
a1 Ra5 )aterial cns%)ed -er )nt(.
P 1?<0*12 P1,>.,> !n*5s.
@D
91 Wr& in -r'ress.
5aw material per month K ICost of &roduction *2J
P (((((((((((((((((((((((((((((((((((((((((((((((((((((((((
12
1,>.,> K I12,<.<2* 2J
P ((((((((((((((((((((((((((((( P 1,>.,> K ?2,.,1P @?,.<1 !n*5s.
c1 Finis(ed Gds.
321.33
Total cost per month P ((((((((((((((( P 2?.@@ !n*5s.
12
d1 Ttal In4entr$ Needs.
P 1,>.,> K @?,.<1 K 2?.@@ P D31.D< !n*5s.
e1 De9trs.
@@3D
%ales per month P ((((((((((((((((( P ?,,.D1 !n*5s.
12
"1 O-eratin' Cas(.
?2,.,1
Total cost per month P (((((((((((((((((( P02.>3 !n*5s.
12
T(ere"reN Ttal Wr&in' Ca-ital Re<%ired
P D31.D< K ?,,.D1 K 02.>3
P 1?2<.D2 !n*5s.
The first method gives details of the working capital items. This approach is sub-ect to error
if markets are seasonal.
<>
# number of factors will govern the choice of methods of estimating working capital.
.actors such as seasonal variations in operations$ accuracy of sales forecasts$ investment
cost and variability in sales price would generally be considered. The production cycle and
credit and collection policy of the firm would have an impact on working capital
reBuirements. Therefore$ they should be given due weightage in pro-ecting working capital
reBuirements.
<1
TREND ANALYSIS FOR WORKING CAPITAL MANAGEMENT
Trend analysis is comparative analysis of companyEs ratios over time. It tries to predict the
future movement based on past data. Trend analysis is based on idea what is happened in
past and given the idea what would happen in past. In trend analysis$ industry ratios are
compared over time$ typically years. 6ear(to(year comparisons can highlight trends and
point up the need for action. Trend analysis works best with five years of ratios.
TWith the past$ we can see tra-ectories into the future ( both catastrophic and creative
pro-ections.T
The Trend #nalysis module allows plotting aggregated response data over time. This is
especially valuable on the basis of five(year data and a result of long survey.
The following data points can be measured I6(#+isJ
A+ !ean and !ean &ercentile
=+ %tandard eviation and 4ariance
>+ 5atio
The TTime .actorT I2(#+isJ can have the following granularity
A+ aily
=+ Weekly
>+ !onthly
B+ Fuarterly I9an(!ar$ #pr(9un$ 9ul(%ept$ 8ct(ecJ
C+ 6early

<2
Projection of Ratios through Trend Analysis
Fi'%re =D. C%rrent Rati Trend
Fi'%re =E. Cas( Rati Trend
<3
Fi'%re =F. Ttal Asset T%rn4er Trend
Fi'%re =@. C%rrent Asset T%rn4er Trend
<,
Fi'%re >?. Wr&in' Ca-ital T%rn4er Trend
Fi'%re >A. De9tr T%rn4er Trend
<0
Fi'%re >=. Creditr T%rn4er Trend
Fi'%re >>. In4entr$ T%rn4er Trend
<?
Anal$sis n t(e 9asis " Trend.
Trend of current ratio put a picture of company that company is not having short term
fund in hand to meet short term debt hence it put a threat in meeting current obligations.
Cash 5atio trend shows that company is having high amount of cash for paying current
liability which can influence the financial position of company in upcoming period.
Total asset turnover implies the asset base of company and this pro-ection is in favour of
the company that shows efficacy of company in handling asset.
Current asset turnover trend of company is decreasing which shows inefficiency in
handing assets.
Working capital is decreasing over the period that can lead company to face liBuidity
crunch / shows inefficiency in use of working capital. It needs to analy)e the root cause
of the same to take reBuired corrective action.
ebtorEs turnover trend is showing an increase in future that signifies that there is shorter
time period in sales and collecting cash.
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#s the CreditorEs turnover ratio trend is decreasing which shows that payments of
company are prompt and do not keep its obligation for long time.
Inventory is showing good position in hand of company but still company need to keep a
check over it as inventory is influenced by seasonal fluctuations and market conditions.

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C3RRENT ASSET FINANCING
Prcess " 5r&in' ca-ital "inancin'.
A1 &redictions are made based on sales.
=1 Company has Credit !onitoring #rrangement IC!#J with banks. #ccordingly
.orms are prepared and sent to consortium of banks for approval.
a+ .orm I contains information about Current #ssets$ this .orm I should be sent
one week before beginning of Fuarter.
9+ .orm II contains details about operationsR this .orm II should be sent si+
weeks from entering the Fuarter.
>1 #ccordingly margins are decided. The company itself should meet margin amount.
1.g. Inventory M 20N$ 5eceivables M 30N. 7ormally margins are 20(30N.
B1 #dvances are received.
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FINDING & S3GGESTIONS
Findin's.
The study conducted on working capital management of %;5I5#! &I%T87% #7
5I7'% :T shows the evaluation of management performance in this conte+t. !a-or
findings and suggestions thereon are narrated as underC
1. #s current ratio is showing an increasing trend year on year$ which implies that
current asset$ are more compared to current liabilities.
2. ;igh current assets turnover ratio is more -udicious and shows efficiency of
management and proper utili)ation of the assets.
3. %;5I5#! &I%T87% #7 5I7'% :T has not a sufficient amount of working
capital during the past two years. #s company is showing decreasing trend of working
capital$ which shows that company$ kept its obligation for long time and less cash in
hand to pay off its obligations.
,. Current ratio I2.,3C1J and Buick ratio I1.0@C1J of the year 2>11(12 are little bit more
than that of the ideal figures i.e. ideal current ratio is 2C1 while Buick ratio is 1C1.
0. Inventory turnover ratio depicts the increasing trend which indicates the faster sale of
inventory which is good for the company.
?. ebtors Turnover ratio reveals an increasing trend during the period of study and
average collection period came down from ?D to 02 days which shows that company
is having specific policy for debtorsE management.
@. The operating cycle of the firm is disturbed$ as it is continuously increasing which is
not good for the company.
<. The optimum need for working capital on an average basis company roughly will
reBuire more than 1?2<.D2 !n*5s. as its working capital.
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S%''estins. =eeping in view of detailed analysis for the 3 years of study and findings
mentioned in above paragraphs$ the following suggestions shall be helpful in increasing the
efficiency in working capital management.
1. In case of inventory management #"C analysis$ .%7 techniBue$ 41 techniBue
should be adopted to increase the efficiency of inventory management. .urther a
inventory monitoring system should be introduced to avoid holding of e+cess
inventory.
2. It is suggested to maintain a favorable current and Buick ratios which shows a lesser
than ideal figures. It can be done either through increasing current assets or
decreasing liabilities.
3. With the help of proper inventory management systems$ like demand(based
management$ etc. the company can reduce the need for working capital and
inventories can be financed through accounts payable.
,. The company should try and maintain an optimum level of working capital in order
to improve upon the workings of the company.

D1
LIMITATIONS
1. #vailability of the financial data was very limited which is not disclosed due to
sensitive nature for the company.
2. The main component of working capital is cost of capital$ which is not described in
the pro-ect because of confidential nature.
3. 1+ternal environment influence was not considered while doing the theoretical
standard rather than the industrial standard because of unavailability of any such
specific standard.
,. The scope of the study was limited to %;5I5#! &I%T87% #7 5I7'% :T

D2
REFERENCES
#nnual reports of %hriram &istons and 5ings :td.
=han !.6$ .inancial !anagement.
.inancial accounting$ Weygandt$ =eiso$ kimmel .
.undamental of financial management . chandra "ose
.inancial management$ &aresh %hah
.inancial !anagement $ =han / 9ain ( 2>11 1dition
www.spr.g)bUshrirampistons.com
www.google.com

D3
GLOSSARY
A/C Anal$sis. #n approach of inventory management$ which classifies inventories
according to their monetary values. Inventory items are thus categori)ed as IiJ #( itemsC
high value items for which careful management is neededR IiiJ "(itemsC moderate value
items for which rules of thumb such as past inventory turnover are adeBuate
management techniBues$ and IiiiJ C(itemsC low value items which can be maintained at a
flat minimum amount.
Accr%ed Lia9ilit$. 6 #lso known as outstanding liabilities or e+penses. .or e+ample$
accrued wages$ accrued rent$ accrued ta+es and accrued interest and so on. They
typically represent obligations for certain services for which payments are yet to be
made and are indirect sources of financing.
A'ein' Sc(ed%le. It is a tabular classification of receivables which showing the length
of time which the account has been outstanding.
An A''ressi4e Plic$. It resorts to short(term liabilities to finance temporary and also
part or the entire permanent current assets reBuirement.
A4era'e Cllectin Perid. #ccounts receivables * Iannual credit sales*3?>J.# ratio that
e+press how rapidly the firm is collecting its credit accounts.
/alanced Plic$. This policy is that balances the trade(off between risk and profitability
in a manner consistent with its attitude towards bearing risk.
/ills Pa$a9le. "ills &ayable is a current liability and arises when the bills written by
creditors are accepted by the firm.
Ca-ital Cst. The cost of the use of additional capital to support credit sales$ which
alternatively could be profitably employed elsewhere is$ therefore a part of the cost of
e+tending credit or receivables and are called capital costs.
Carr$in' Csts. These costs arise due to the storing of inventory and e+penses made in
raising funds to finance the acBuisition of inventory.
Cas( /%d'et. It is statement of the e+pected cash flows for a firm over a specified
period of time.
D,
Cas( C$cle. This is length of the time between the purchase of raw materials and
collection of receivables in the sale of the final product.
Cas( Disc%nt. # percent reduction in sales or purchase price allowed for early
payment of invoices. It is an incentive for credit customers to pay invoices in a timely
fashion.
Cllectin Cst. These costs are administrative costs or legal costs incurred in
collecting the receivables from the customers to whom credit sales have been made.
Cnser4ati4e Plic$. # conservative policy ignores the distinction between temporary
and permanent current assets$ by financing almost all assets investments with long term
capital.
Cns%)er Credit. Credit granted to an individual is referred to as consumer credit.
Credit Perid. It is total length of time period over which credit is e+tended to a
customer to pay bill.
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