Beruflich Dokumente
Kultur Dokumente
2014-2016
Submitted to:
Submitted by
Mamin Mushtaq
M.B.A-3rd Sem
1465850
STUDENTS DECLARATION
I hereby certify that the work which is being presented in this report entitled by
WORKING CAPITAL MANAGEMENT by Mamin Mushtaq (university roll no
1465850) in partial fulfillment of the requirement for the award of degree of MASTERS OF
BUSINESS ADMINISTRATION in the department of ARYANS GROUP OF COLLEGES
under the PUNJAB TECHNICAL UNIVERSITY, JALANDHAR
(Mamin Mushtaq)
ACKNOWLEDGEMENT
This report would not have been possible without the help of certain people unstinting
support of J&K Bank.
We offer our gratitude to all those who have spent their precious time, expressed keen interest
and given continued encouragement through the study enabled the successful completion of
my project.
Practical training in Jammu and Kashmir Zonal Office, M.A. road Srinagar was very valuable
to us and our special thanks are due to our project co-ordinator
Mr. Mohammad Ashraf (Executive Officer) for his inspiring guidance, valuable help and
angelic support for the completion of my project in WORKING CAPITAL.
In the J&K Bank, we would like to extend my gratitude to the management and staff of J&K
Zonal Office for their co-operation during our training.
(Mamin Mushtaq)
PREFACE
On the job training in business organisation infuses among students a sense of critical
analysis to apply of real managerial situation to which they are exposed. It gives them an
opportunity to apply their conceptual, theoretical and imaginative skills to the real life
situation and to evaluate the results thereafter.
I was lucky to have got an opportunity to work at J&K Bank to get the project of my interest.
I visited the concern for six weeks and prepared my project Working capital management. I
also got the practical experience in the field of management.
This report is written account of what I learnt, experienced and explored during my summer
training.
CONTENTS
Chapter -1
6-11
1.1 INTRODUCTION
1.2 HISTORY OF BANKS
Chapter-2
12-21
22-29
30-44
45-51
FINANCIAL ANALYSIS
Chapter-6
52-54
55-56
57-58
REFERENCE
59
5
CHAPTER-I
The banking system in India is significantly different from that of other Asian nations
because of the countrys unique geographic, social, and economic characteristics. India has a
large population and land size, a diverse culture, and extreme disparities in income, which are
marked among its regions. There are high levels of illiteracy among a large percentage of its
population but, at the same time, the country has a large reservoir of managerial and
technologically advanced talents. Between about 30 and 35 percent of the population resides
in metro and urban cities and the rest is spread in several semi-urban and rural centers. The
countrys economic policy framework combines socialistic and capitalistic features with a
heavy bias towards public sector investment. India has followed the path of growth-led
exports rather than the exportled growth of other Asian economies, with emphasis on selfreliance through import substitution. These features are reflected in the structure, size, and
diversity of the countrys banking and financial sector. The banking system has had to serve
the goals of economic policies enunciated in successive fiveyear development plans,
particularly concerning equitable income distribution, balanced regional economic growth,
and the reduction and elimination of private sector monopolies in trade and industry. I order
for the banking industry to serve as an instrument of state policy, it was subjected to various
nationalization schemes in different phases (1955, 1969,and 1980). As a result, banking
remained internationally isolated (few Indian banks had presence abroad in international
financial centers) because of preoccupations with domestic priorities, especially massive
branch expansion and attracting more people to the system. Moreover, the sector has been
assigned the role of providing support to other economic sectors such as agriculture, smallscale indus tries, exports, and banking activities in the developed commercial centers (i.e.,
metro, urban, and a limited number of semi-urban centers).
7
The banking systems international isolation was also due to strict branch licensing controls
on foreign banks already operating in the country as well as entry restrictions facing new
foreign banks. A criterion of reciprocity is required for any Indian bank to open an office
abroad. These features have left the Indian banking sector with weaknesses and strengths. A
big challenge facing Indian banks is how, under the current ownership structure, to attain
operational efficiency suitable for modern financial intermediation. On the other hand, it has
been relatively easy for the public sector banks to recapitalise, given the increase in
nonperforming assets (NPAs), as their Government dominated ownership structure has
reduced the conflicts of interest that private banks would face.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a
consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and
still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company
that issues stock and requires shareholders to be held liable for the company's debt) It was not
the first though. That honour belongs to the Bank of Upper India, which was established in
1863, and which survived until 1913, when it failed, with some of its assets and liabilities
being transferred to the Alliance Bank of Simla.
When
supply of cotton
to Lancashire from
the Confederate States, promoters opened banks to finance trading in Indian cotton. With
large exposure to speculative ventures, most of the banks opened in India during that period
failed. The depositors lost money and lost interest in keeping deposits with banks.
Subsequently, banking in India remained the exclusive domain of Europeans for next several
decades until the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself
in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade
of the British Empire, and so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established
in Lahore in 1895, which has survived to the present and is now one of the largest banks in
India.
Around the turn of the 20th Century, the Indian economy was passing through a relative
period of stability. Around five decades had elapsed since the Indian Mutiny, and the social,
industrial and other infrastructure had improved. Indians had established small banks, most of
which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange banks
and a number of Indian joint stock banks. All these banks operated in different segments of
the economy. The exchange banks, mostly owned by Europeans, concentrated on financing
foreign trade. Indian joint stock banks were generally undercapitalized and lacked the
experience and maturity to compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into
separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established then
have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi district which were unified earlier and known by the name South
Canara ( South Kanara ) district. Four nationalised banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle
of Indian Banking".
10
During the First World War (1914-1918) through the end of the Second World War (19391945), and two years thereafter until the independence of India were challenging for Indian
banking. The years of the First World War were turbulent, and it took its toll with banks
simply collapsing despite the Indian economy gaining indirect boost due to war-related
economic activities. At least 94 banks in India failed between 1913 and 1918.
11
CHAPTER-II
12
MUSHTAQ AHMAD
CHAIRMAN
Arnab Roy
DIRECTOR
13
Sudhanshu Pandey
DIRECTOR
NISAR ALI
DIRECTOR
14
as
per
the
provisions
of
Indian
Companies
Act
1956.
It was in the year 1971 that Jammu and Kashmir Bank was granted the status of a 'Scheduled
Bank'. Five years later, it was declared as "A" Class Bank, by the Reserve Bank of India
(RBI). As the years passed on, the bank started achieving more and more success. Today, it
boasts of more than 500 branches across the country. It was only recently that Jammu and
Kashmir Bank became a billion dollar company. Governed by the Companies Act and
Banking Regulation Act of India, it is regulated by RBI and SEBI. It finds a listing on the
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) as well.
Unique Characteristics & Services
Inspite of a government equity holding of 53 per cent, Jammu & Kashmir Bank
(J&K Bank) is regarded as a private sector bank
15
J&K Bank is the one and only banker and lender of last resort to the Government of
J&K
Plan and non-plan funds, taxes and non-tax revenues are routed through the J&K
Bank
J&K Bank claims the distinction of being the only private sector bank that has been
designated as agent of RBI for banking
The services of J&K Bank are utilized for the purposes of disbursing the salaries of
Government officials
J&K Bank collects taxes pertaining to Central Board of Direct Taxes, in Jammu &
Kashmir
Products+&+services
Support Services
Anywhere Banking
Internet Banking
SMS Banking
ATM Services
Debit Cards
Credit Cards
Merchant Acquiring
Depository Services
Demat Account
16
Other Services
Mutual Funds
Remittance Services
Weakness
1. Lack of stress on research and development.
2. Lack of innovation.
3. Lack of commercial schemes.
Opportunities
1. Arrival of new technology.
2. New market.
3. J&K Bank is not stressing on its advertising for attracting the customers.
Threats
1. Cut-throat competition in industry.
2. The other banks because of their large financial base, better technology are threat to
the J&K banking sector.
17
As a corporate process, the uniqueness and distinct culture of the Jammu Central Cooperative Bank is our experience specialisation in the field of agricultural credit and vast
clientele base. Therefore, as a corporate mission, our focus would be agricultural finance and
needs of the rural people. In light of above, the corporate mission would be to double the
flow of Agriculture Credit during the next three years.
The
organisational
mission
would
be to
inculcate
sense
of
belongingness by
bringing professionalization in true sense to introduce and upgrade technology based skill
with human face and strengthen its resource base by broadening its customer base.
2.5 ACHIEVEMENTS
Emerging as topper, the J&K Bank has disbursed Rs 631.76 crore out of the total credit of Rs
914.73 crore extended by the banks operating in J&K during Q1 of FY 2011-12.
J&K Bank has been awarded as the best Bank in the prestigious Dun & Bradstreet (D&B)
Polaris Software Banking Awards 2011. The award was conferred in the category for Rural
Reach- Private Sector. The award was presented by R Bandyopadhyay, IAS (Retd.), Former
Secretary, Ministry of Corporate Affairs, Government of India. J&K Bank Zonal Head
(Mumbai) Surjeet Singh Sehgal received the award on Banks behalf in presence of Mohan
Ramaswamy, Chief Operating Officer, Dun & Bradstreet India and Subhash Chand
Aggarwal, Chairman & Managing Director, SMC Global Securities Limited. at a function
19
held at ITC Maratha in Andheri (E) Mumbai that also marked the launch of the fifth edition
of D&B Indias study on Indias Top Banks 2011.
J&K Bank has been awarded as the best Bank in the prestigious Dun & Bradstreet (D&B)
Polaris Software Banking Awards 2011. The award was conferred in the category for Rural
Reach- Private Sector.
J&K Banks Annual Report 2013-09 has won three awards at the prestigious LACP 2014
Vision Awards the worlds largest award programme for Annual Reports, organised by
California-based League of American Communications Professionals (LACP), USA.
IDENTITY
The new identity for J&K Bank is a visual representation of the Banks philosophy and
business strategy. The three colored squares represent the regions of Jammu, Kashmir and
Ladakh. The counter-form created by the interaction of the squares is a falcon with
outstretched wings a symbol of power and empowerment.
Executive Director
(Chief Operating
Officer)
Sr.
President
(HRD/Reg.)
Human
Resourc
es
President
(Strategy &
Bus .Sup.)
Executive Director
(Chief Financial
Officer)
President
(Fin.
Services)
President
(Bus.
Supt/Tech)
President
(Comp.Sec.)
President
(Adv.& asset
plng )
President
(CTC)
Treasury
Law &
Regulator
y
Supervision
& Controls
Finance &
Risk
Financial
Services
Strategy
&
Business
Technology
&
Information
Business
Support
Company
Secretary
Advanc
es &
Asset
Deposit
s&
Liability
Concurrent
Audit
Credit
Audit
Departmen
ts
Depository
Departme
Services
nts
Departme
nts
Departme
nts
Departme
nts
Distributio
n
Empanelm
ent Of
Valuers
IS Audit
Insurance
RBI
Departme
nts
Departme
nts
Departme
nts
Departme
nts
Departme
nts
Departme
nts
Departme
nts
21
CDW
Person
al
Trainin
g
Recruit
ment
Termin
al
Benefit
s
I&V
KYC
Law
Lead
Bank RBI
Comp &
Regulator
y Matters
Sponsore
d Banks
Card
Issuing
&
Acquirin
g
ALM
Balance
sheet
Branches
Credit Risk
Financial
Reporting
IBR
Risk Mgmtt
Portfolio
Rating
Rem. & St.
Structured
Risk
Corporate
commun
ic-ation
Data
Mining
Financial
Products
Macro
Economic
s Policy
ATM
Switch
Deposito
ry
Services
Distributi
on
Insuranc
Call
Centre
Estates &
Engineeri
ng
Connectivit
General
Compa
ny
Secreta
ry
Zonal
Office
Kmr
(Centr
al)
Asset
Monitor
i-ng &
Inform
ation
y
Database
EBanking
Finacle
Hardware
Public
Relations
&
Customer
Care
R&D
Security
Informatio
n
Technology
Manageme
nt &
Informatio
Corporat
e Credit
Financial
Inclusion
Micro
Credit &
Priority
sector
Retail
Credit
Small &
Mediu
m
CHAPTER-III
22
Corpor
ate
Deposit
Retail
Deposit
Debi
t
Fore
x
Mon
ey
Deri
vativ
e
23
3- The research done by, Samiloglu F. and Demirgunes K., The Effect of Working Capital
Management on Firm Profitability: Evidence from Turkey (2008) describes that the
effect of working capital management on firm profitability. In accordance with this aim,
to consider statistically significant relationships between firm profitability and the
components of cash conversion cycle at length, a sample consisting of Istanbul Stock
Exchange (ISE) listed manufacturing firms for the period of 1998-2007 has been analysed
under a multiple regression model. Empirical findings of the study show that accounts
receivables period, inventory period and leverage affect firm profitability negatively;
while growth (in sales) affects firm profitability positively.
4- The research done by, Appuhami, Ranjith B A, The Impact of Firms' Capital Expenditure
on Working Capital Management: An Empirical Study across Industries in Thailand ,
International Management Review,(2008), The purpose of this research is to investigate
the impact of firms' capital expenditure on their working capital management. The author
used the data colleted from listed companies in the Thailand Stock Exchange. The study
used Shulman and Cox's (1985) Net Liquidity Balance and Working Capital Requirement
as a proxy for working capital measurement and developed multiple regression models.
The empirical research found that firms' capital expenditure has a significant impact on
working capital management. The study also found that the firms' operating cash flow,
which was recognized as a control variable, has a significant relationship with working
capital management.
5- The research done by, Hardcastle J., Working Capital Management,(2007) describes
that Working capital, sometimes called gross working capital, simply refers to the firm's
total current assets (the short-term ones), cash, marketable securities, accounts receivable,
and inventory. While long-term financial analysis primarily concerns strategic planning,
working capital management deals with day-to-day operations. By making sure that
production lines do not stop due to lack of raw materials, that inventories do not build up
because production continues unchanged when sales dip, that customers pay on time and
that enough cash is on hand to make payments when they are due. Obviously without
good working capital management, no firm can be efficient and profitable.
24
6- The research done by, Thachappilly G., Working Capital Management Manages Flow of
Funds,(2009) describes that Working capital is the cash needed to carry on operations
during the cash conversion cycle, i.e. the days from paying for raw materials to collecting
cash from customers. Raw materials and operating supplies must be bought and stored to
ensure uninterrupted production. Wages, salaries, utility charges and other incidentals
must be paid for converting the materials into finished products. Customers must be
allowed a credit period that is standard in the business. Only at the end of this cycle does
cash flow in again.The research done by, Beneda, Nancy; Zhang, Yilei, Working Capital
Management, Growth and Performance of New Public Companies.
7- The research done by, Dubey R.,Working Capital Management-an Effective Tool for
Organisational Success (2008) describes that The working capital in a firm generally
arises out of four basic factors like sales volume,technological changes,seasonal , cyclical
changes and policies of the firm.The strenghth of the firm is dependent on the working
capital as discussed earlier but this working capital is inteslf dependent on the level of
sales volume of the firm.The firm requires current assets to support and maintain
operational or functional activities.By current assets we mean the assets which can be
converted readily into cash say within a year such as receivables,inventories and liquid
cash.If the level of sales is stable and towards growth the level of cash,receivables and
stock will also be on the high.
8- The research done by, McClure B., Working Capital Works describes that Cash is the
lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund
operations, reinvest and meet capital requirements and payments. Understanding a
company's cash flow health is essential to making investment decisions. A good way to
judge a company's cash flow prospects is to look at its working capital management
(WCM). Cash is king, especially at a time when fund raising is harder than ever. Letting it
slip away is an oversight that investors should not forgive. Analyzing a company's
working capital can provide excellent insight into how well a company handles its cash,
and whether it is likely to have any on hand to fund growth and contribute to shareholder
value.
9- The research done by, Gass D., How To Improve Working Capital Management (2006)
"Cash is the lifeblood of business" is an often repeated maxim amongst financial
managers. Working capital management refers to the management of current or short-term
assets and short-term liabilities. Components of short-term assets include inventories,
25
loans and advances, debtors, investments and cash and bank balances. Short-term
liabilities include creditors, trade advances, borrowings and provisions. The major
emphasis is, however, on short-term assets, since short-term liabilities arise in the context
of short-term assets. It is important that companies minimize risk by prudent working
capital management.
On the basis of concept, working capital is classified as Gross Working capital and Net
Working capital. On the basis of time, working capital is classified as permanent or fixed
working capital and temporary and variable working capital.
26
Gross working: It represents the amount of funds invested in current assets. Thus the
Gross working capital is the capital invested in the total current assets of the
enterprise. Current assets are those assets which in the ordinary course of business
can be converted into cash within a short period of normally one accounting year.
Examples of current assets are:
1. Cash in hand and bank balance.
2. Bills receivables
3. Sundry debtors(less provision for bad debts).
4. Short term loans and advances.
5. Inventories of stock.
6. Temporary investment in surplus goods.
7. Prepaid expenses.
8. Accrued incomes.
Net working capital: It is the excess of current assets over current liabilities. Net working
capital may positive or negative. When the current assets exceed the current liabilities, the
working capital is positive and the negative working capital results when the current
liabilities are then the current assets. Current liabilities are those liabilities which are intended
to paid in the ordinary course of business within a short period of normally one accounting
year out of the current assets or the income of the business.
Examples of current liabilities are:
9. Bills payables
10. Sundry creditors.
27
11.
12.
13.
14.
28
A business enterprise with ample working capital is always in a position to avail advantages
of any favorable opportunity either to buy raw materials or to implement a special order or to
wait for enhanced market status.
Cash is needed to carry out day-to-day workings and buy inventories etc. The shortage of
cash may badly affect the position of a business concern. The receivables management is
related to the volume of production and sales. For escalating sales there may be a need to
offer additional credit facilities. While sales may ascend but the danger of bad debts and cost
involved in it may have to be considered against the benefits.
Inventory control is also a significant constituent in working capital management. The
deficiency of inventory may cause work stoppage. On the other hand, surplus inventory may
result in blocking of money in stocks.
The overall success of the company depends upon its working capital position. So, it should
be handled properly because it shows the efficiency and financial strength of company.
29
CHAPTER-IV
30
32
The information gathered are the policies and practices regarding management of the
working capital. Analysis is done in terms of the theoretical concepts. Analysis of the
working capital performance is done with the help of percentages by showing graphs,
ratios and operating cycles etc.
INVENTORY
TOTAL
INVENTORY
(IN RS)
ASSETS
IN % AGE
2013
3597158
15814404
22.75
2014
4646596
16540326
28.09
2015
2456396
17871565
32.02
33
2013
2014
2015
Inventory in %age
35
30
25
Inventory in %age
20
15
10
5
0
2013
2014
2015
ANALYSIS
34
The percentage of inventory is clearly depicted in the table from the year 2013 to
2015. From 2013 to 2014 the percentage of the total inventory to total assets has increased
from 22.7% to 28.09% and this has been further increased to 30.02%.
INTERPRETATION:The level of inventory is continuously increasing in the J&K Bank because of banks
successful marketable strategies and its continuous increased market base.
DEBTORS
(Rs in 000)
YEARS
DEBTORS
TOTAL
DEBTORS IN
2013
2014
2015
(IN RS)
879660
1122564
1314231
ASSETS
15814404
165403326
17871565
%AGE
5.56
6.78
8.84
35
DEBTORS IN %AGE
5.56
2013
8.84
2014
2015
6.78
10000000
8000000
6000000
4000000
2000000
0
2013 2014 2015
ANALYSIS:From the above table it is very evident that the debtors are increasing from
2013 to 2015. In 2013 debtors are 5.58% and in 2014 it is 6.78% and in 2014 %age of debtors
to total assets has increased to 8.84%.
36
INTREPRETATION:In the year 2015, debtors have increased from 1122564 thousand to 1314231 thousand
indicating an increase from 6.78% to 8.84% of total assets. Such increase has been gained by
bank due to increase in sales followed by expansion activities in spinning, weaving and
processing units respectively.
CASH BALANCE
YEARS
CASH
TOTAL
CASH
2013
2014
2015
2124541
1176715
1331970
ASSETS
15814404
16540326
17871565
%AGE
13.43
7.11
10.95
BALANCE
37
10.95
2013
13.43
2014
2015
7.11
20000000
18000000
16000000
14000000
12000000
10000000
CASH BALANCE
8000000
TOTAL ASSETS
6000000
4000000
2000000
0
2013
2014
2015
LOANS
2013
2014
2015
ADVANCES
40,247.62
35626.96
30,902.19
AND TOTAL
ASSETS
8,334.12
10,418.42
13676.39
LOANS
AND
ADVANCES %AGE
20.7
29.24
44.25
38
25000
TOTAL ASSETS
20000
15000
10000
5000
0
2013
2014
2015
ANALYSIS
From the above table it is clear that the loans and advances are continuously decreasing but
consecutively its total assets are increasing. It is due to the reason that bank is using
conservative mode of issuing loans and advances and is recovery the loans and advances by
the effective means.
INTERPRETATION
39
From the table since loans and advance to total assets is consecutively increasing from 20.7%
in 2013, 29.24% in 2014 and 42.25% in 2015, it means banks are optimally using their
assets to gain the maximum profits and is relatively trying to attracting the more customers.
COMPOSITION AND LEVEL OF CURRENT LIABILITIES:PARTICULARS
Current liabilities
Sundry creditors
2013
Amt.
206132
Security deposits
Int. accrued
Adv.
%
1.95
2014
Amt.
346960
3329
.0315
2596
From 18382
%
3.06
2015
Amt.
338128
%
3.72
42160
.0372
42999
.473
.0245
2039
.0180
426
.0045
.174
5211114
4.600
11369
.125
customers
Stat liabilities
90155
.853
74619
.658
57720
.635
Other liabilities
214454
2.02
359291
3.172
342748
3.77
Unclaimed
214454
2.029
3592691
3.172
342748
3.77
dividend
Provisions
46838
.4432
46838
.4135
46838
.515
Total
584686
5.533
1398012
12.34
847318
9.329
Total liabilities
10567023
11326723
9082216
ANALYSIS:The above table shows the composition and level of current liabilities. The position of
creditors of J&K Bank is revealed from the table. The creditors remain fluctuating in 2013,
the creditors are of Rs 206132 and company has projected increase in creditor level in 2014
are 346960, in 2015 creditors are 338128. Advances from the customers have been increased
immensely from 2013 to 2015.
INTERPRETATION:The table shows that the creditors have been increased in 2014
with rise in inventory level. And in the year 2015, the level of inventory is decreased due to
less prominent schemes.
40
2013
3597158
879660
2124541
1462490
2014
4646596
1122564
1176715
1208673
2015
5456396
1314231.
2331970
1814990
advances
GROSS
8063849
8154548
10917587
WORKING
CAPITAL
INTERPRETATION:From the table it is evident that the gross working capital is constantly
increasing in J&K Bank, this increase is due to the fact that in every successive year the J&K
Bank has introduced or updated the new schemes for its customers and has efficiently
improve the their service for customers. It is clear that in 2013 the GWC was 8063849, in
2014 it was 8154548 and in 2015 it has drastically increased to 10917587.
COMPUTATION OF NET WORKING CAPITAL:PARTICULARS
2013
2014
2015
Total current
8088407
8168078
8229289
584689
1398012
847318
7503718
6770066
7381971
assets
INTERPRETATION:Net working capital is the excess of current assets over the current
liabilities. And from the table it is clear that in 2013, the NWC was 7503718 and it decreased
41
to 6770066 in 2014 and again increased to 7381971 in 2015. The reason for this increase is
the banks intervention in different financial fields (mutual funds, insurance, etc) and the
profound customer base infra-structure.
OPERATING CYCLE AND CASH CYCLE
All business firms aim at maximizing the wealth of the shareholder for which they need to
earn sufficient return on their operations. To earn sufficient profits they need to do enough
sales, which further necessitates investment in current assets like raw materiel etc. There is
always an operating cycle involved in the conversion of sales into cash.
The duration of time required to complete the following sequences of events in case of a
manufacturing firm is called the operating cycle:1. Conversion of cash into raw material
2. Conversion of raw material into WIP
3. Conversion of WIP into FG
4. Conversion of FG into debtors and bills receivable through sales
5. Conversion of debtors and bills receivable into cash
Each component of working capital namely inventory, receivables and payables has
two dimensions time and money. When it comes to managing working capital - Time Is
Money. Therefore, if cash is tight, consider other ways of financing capital investment loans, equity, leasing etc. Similarly, if you pay dividends or increase drawings, these are cash
outflows remove liquidity from the business.
If you .......
Then ......
You release cash from the cycle
Your receivables soak up cash
You increase your cash resources
42
CASH
CASH
DEBTORS
STOCK OF
FINISHED
GOODS
Operating cycle of non-manufacturing firm like the wholesaler and retail includes conversion
of cash into stock of finished goods, stock of finished goods into debtors and debtors into
cash. Also the operating cycle of financial and service firms involves conversion of cash into
debtors and debtors into cash.
Thus we can say that the time that elapses between the purchase of raw material and
collection of cash for sales is called operating cycle whereas time length between the
payment for raw material purchases and the collection of cash for sales is referred to as
cash cycle. The operating cycle is the sum of the inventory period and the accounts
receivables period, whereas the cash cycle is equal to the operating cycle less the accounts
payable period.
STOCK ARRIVES
ORDER PLACED
INV. PERIOD
A/CS Pay.
Period
CASH RECD.
43
OPERATING CYCLE
CASH CYCLE
SALES
SALES PER DAY
BOOK DEBTS
DCP
2013
9077526
25215
879660
35 DAYS
2014
8792218
24423
1122564
46 DAYS
2015
100317765
27866
1314231
47 DAYS
ANALYSIS:
In the year 2013 the DCP is 35 days which increases to 45 days in 2014. In 2014
there has been slight increase in DCP and it rises to 47 days.
INTERPRETATION:
In the year 2013 bank is able to maintain its satisfactory debtors
collection period but in the year 2014 and 2015, debtors collection period has been increased
to 46 days and further to 47 days in 2015. This shows the bank is not able to maintain its debt
collection policy. However bank enjoys its good debtor status.
44
CHAPTER-V
45
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strength & weakness of
the firm by establishing relationship between the items of the balance sheet & profit & loss
account. The purpose of financial analysis is to diagnose the information contained in
financial statements so as to judge the profitability and financial soundness of the firm.
Financial analysis is done on the basis of the published balance sheet and profit and
loss account.
Ratio analysis and Trend analysis is done to know the financial position of the
company.
46
2014
2015
CHANGE
Share capital
Reserve
Long term
48.49
2,574.37
552.34
48.490
2,961.97
714.95
-387.6
162.61
15.5
29.44
Liabilities
Current
1,069.67
1,198.97
129.3
12.05
4245.12
4924.38
679.26
16.01
552.34
517.94
10,736.33
10,080.96
21887.57
714.95
561.35
13,956.25
12,091.51
27324.06
162.61
43.41
3219.19
2015.55
5436.49
29.44
8.38
29.98
19.9
24.38
liabilities
TOTAL
ASSETS
Current assets
Fixed assets
Investment
Misc. expenses
TOTAL
%CHANGE
--
RATIO ANALYSIS:
A ratio is the simple arithmetic expression of the relationship of one
number to another. Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios for the helping in
making certain decisions.
47
Current ratio =
PARTICULARS
2013
TOTAL CURRENT 486.47
2014
552.34
2015
714.95
ASSETS
TOTAL CURRENT
1,102.02
1,069.67
1,198.97
LIABLITIES
CURRENT RATIO
0.44 : 1
0.5 : 1
0.59 : 1
ANALYSIS:
The current ratio is consecutively increasing from the year 2013 to 2015. In 2013
it was 0.44 :1 , in 2014 it went up to 0.5 : 1 and in 2015 it reached to 0.59 : 1.
INTERPRETATION:
As a rule 2:1 ratio is referred to as bankers thumb rule. Since the current ratio of the firm
for the past 3 years is more than 2:1, therefore the firm has been in good liquid position. So,
this implies that the funds of the company since last 3 years have been decreased to pay off
liabilities.
LIQUID ASSETS RATIO = LIQUID ASSETS / CURRENT LIABILITIES.
PARTICULARS
Total liquid assets
Total current assets
Liquid Ratio
2013
4231077
584689
7.20:1
2014
3084654
1398012
2.20:1
2015
4023228
847318
4.70:1
ANALYSIS:
In the year 2013 the liquidity ratio is 7.20:1 which has decreased in the 2014.
And in the year 2015 the ratio is increased to 4.70:1
48
INTERPRETATION:
As a convention ratio of 1:1 is considered satisfactory, hence
company is enjoying satisfactory liquidity position. In the year 2014 ratio has been decreased
to 2.20:1 from 7.20:1. This is due to the decreasing cash balance and increasing debtors
PARTICULARS
2013
2014
Sales
9077576
8792218
OC
7653262
7944110
OR
84.30%
90.35%
OPERATING RATIOS = Operating cost / Net sales*100
2015
10031765
9491037
94.60%
ANALYSIS:
From the above table it shows that in 2013 the OR was 84.30% and in
2014 OR has been increased to 90.35. in year 2015 it reached to 94.60
INTERPRETATION:
As the above table shows that the operating cost of the bank increased over
three years, this is mainly due to increasing sales of schemes and term loans.
Profitability ratio:Gross profit ratio:- Gross profit / net sales * 100
Particulars
Sales
(-)COGS
GP
GPR
ANALYSIS:-
2013
9077576
6943782
2133794
23.50%
2014
8792218
7076586
1715632
19.51%
2015
10031765
8589141
1442624
14.38%
From the above table it shows that the GP ratio was 23.50% in 2013 and it
decreases to 19.51% in 2014. In 2015 GPR has been further decreased to 14.38.
Net profit ratio= Net profit / net sales * 100
Particulars
SALES
NP
2013
9077576
678633
2014
8792218
23664
2015
10031765
42875
49
NPR
ANALYSIS:-
1%
1.03%
1.04%
In the year 2013 the NP ratio of the company is 1% but in the year 2014 the
companys NP has increased immensely to 1.03% and in 2015 it reached to 1.04%
INTERPRETATION:The companys increasing NP ratio is due to its strong support and
easy providence of term loans to the different class of customers.
TREND ANALYSIS:The financial statements may be analysed by computing trend series
information. The method determines the direction upward and downward and involves the
computation of the percentage relationship that each statement item bears to the same in the
base year. The information for the number of years has been taken up and one year generally
1st year is taken as the base year. The figures of the base year have been taken as 100 and
trend ratios for the other years are calculated on the basis of the base year. The analysis is
able to see the trend of figures, whether upward or downward.
SALES TREND
YEARS
SALES IN RS
TREND IN %AGE
2013
9090163
100
2014
8837285
97
2015
10067849
110.7
50
CHAPTER-VI
51
Year 2014 has revealed an increase of cash and balance of the Bank from 3.43% to
7.11% of total of the company as huge amount of the cash has been diverted to higher
loan disbarments and mortgage loans. In the year 2015 the bank was able to gain an
increase of liquidity position by 2.84% of the total assets as the major expansion
different schemes.
The J&K Bank should also take an edge in the other states as we can see that there is
a cut-throat competition at the national level but there is also a chance of huge
52
6. 2 CONCLUSION
Most of the banking companies make substantial investments in current assets so proper
management of working capital in a large concern assumes importance as it reflects the sound
financial health of the corporation. Achieving budgeted growth rate and excelling past
performance n sales turnover do not necessarily indicate the proper management of working
capital as even a highly working capital as even a highly profitable company may be having a
poor cash position. A thorough analysis of the working capital position, drawing of
appropriate action plans for improvement, thorough revamping of existing system.
From the study of working capital management of J&K Bank , it concluded that:
The level of inventory is increased in 2014 from 22.75% to 28.09% due to huge
disbursement of loans. And in the year 2015, the level of inventory is decreased to
16.51% due to less production and that is why there is an excess of opening stock in
53
Mar '15
Mar '14
Mar '13
Mar '12
Mar '11
12 mths
12 mths
12 mths
12 mths
12 mths
48.49
48.49
48.49
48.49
48.49
48.49
48.49
48.49
48.49
48.49
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Reserves
6,061.56
5,675.12
4,816.20
4,044.69
3,430.19
Net Worth
6,110.05
5,723.61
4,864.69
4,093.18
3,478.68
Deposits
65,756.1
9
69,335.86
64,220.62
53,346.90
44,675.94
Borrowings
2,339.67
1,765.00
1,075.00
1,240.96
1,104.65
Total Debt
68,095.8
6
71,100.86
65,295.62
54,587.86
45,780.59
1,879.54
1,795.25
1,583.00
1,588.18
1,248.88
Total Liabilities
76,085.4
5
78,619.72
71,743.31
60,269.22
50,508.15
Mar '15
Mar '14
Mar '13
Mar '12
Mar '11
12 mths
12 mths
12 mths
12 mths
12 mths
2,373.06
3,045.59
2,695.15
2,783.65
2,974.96
1,360.71
1,168.31
2,709.18
1,670.21
573.85
Advances
44,585.8
2
46,384.60
39,200.41
33,077.42
26,193.64
Assets
54
25,124.3
0
26,195.07
25,741.07
21,624.32
19,695.77
654.75
506.52
443.50
415.09
391.64
Revaluation Reserves
0.00
0.00
0.00
0.00
0.00
Accumulated Depreciation
0.00
0.00
0.00
0.00
0.00
654.75
506.52
443.50
415.09
391.64
34.16
27.29
12.68
5.18
2.13
Other Assets
1,952.66
1,292.35
941.33
693.34
676.17
Total Assets
76,085.4
6
78,619.73
71,743.32
60,269.21
50,508.16
Contingent Liabilities
22,870.3
3
17,376.61
33,178.79
15,986.41
26,979.34
0.00
0.00
0.00
0.00
0.00
126.04
1,180.67
1,003.49
844.34
717.58
Investments
Gross Block
Net Block
Capital Work In Progress
55
ammu and
Kashmir
Bank
Standalone Profit & Loss
account
Previous Years
Mar '14
Mar '13
Mar '12
Mar '11
12 mths
12 mths
12 mths
12 mths
12 mths
7,061.13
6,767.00
6,136.80
4,835.58
3,713.13
Other Income
593.97
390.26
483.73
334.12
364.76
Total Income
7,655.10
7,157.26
6,620.53
5,169.70
4,077.89
4,410.22
4,082.52
3,820.76
2,997.22
2,169.47
894.03
743.91
652.26
521.41
523.61
1,747.75
1,070.52
1,042.68
803.86
731.68
94.50
77.86
49.73
43.95
37.93
0.00
0.00
0.00
0.00
0.00
Operating Expenses
1,409.05
1,175.00
989.01
802.14
758.93
1,327.23
717.29
755.66
567.08
534.29
Total Expenses
7,146.50
5,974.81
5,565.43
4,366.44
3,462.69
Mar '15
Mar '14
Mar '13
Mar '12
Mar '11
12 mths
12 mths
12 mths
12 mths
12 mths
Income
Interest Earned
Expenditure
Interest expended
Employee Cost
Selling, Admin & Misc Expenses
Depreciation
Preoperative Exp Capitalised
56
508.60
1,182.47
1,055.10
803.25
615.20
Extraordinary Items
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
508.60
1,182.47
1,055.10
803.25
615.20
0.00
0.00
0.00
0.00
0.00
101.80
242.39
242.39
162.40
126.04
20.35
41.19
41.19
26.36
20.94
10.49
243.92
217.65
165.69
126.90
210.00
500.00
500.00
335.00
260.00
126.04
1,180.67
1,003.49
844.34
717.58
386.44
898.89
771.52
614.49
468.22
0.01
0.00
0.00
0.00
0.00
122.15
283.58
283.58
188.76
146.98
0.00
0.00
0.00
0.00
0.00
508.60
1,182.47
1,055.10
803.25
615.20
Total
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Earning Per Share (Rs)
Appropriations
Transfer to Statutory Reserves
Transfer to Other Reserves
Proposed Dividend/Transfer to
Govt
Balance c/f to Balance Sheet
Total
57
REFERENCE
BOOKS
KHAN, M.Y. JAIN, P.K, Financial management, TATA MCGRAW HILL PUBLISHERS, I/e,
20000
Shashi k gupta, Neeti gupta, Financial management, Kalyani publishers / lyall bk depot 2013
Mir Geelani and Afsal khan financial outlook, MAMTA PUBLISHERS.
Showkat Rah and Abdul Rahim, banking, MAMATA PUBLISHERS.
COMPANY ANNUAL REPORTS
Balance sheet
Profit and Loss Account
Notes and Accounts.
WEBLINKS
WWW.JKBANK.COM
Netbanking@jkbmail.com
www.jkbankonline.com
jkbmail.com
58