CHAPTER-1

INDUSTRY PROFILE

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INTRODUCTION OF INDUSTRY
Paper industry in India is the 15th largest paper industry in the world. It provides employment to
nearly 1.5 million people and contributes Rs 25 billion to the government's kitty. The
government regards the paper industry as one of the 35 high priority industries of the country.
Paper industry is primarily dependent upon forest-based raw materials. The first paper mill in
India was set up at Sreerampur, West Bengal, in the year 1812. It was based on grasses and jute
as raw material. Large scale mechanized technology of papermaking was introduced in India in
early 1905. Since then the raw material for the paper industry underwent a number of changes
and over a period of time, besides wood and bamboo, other non-conventional raw materials have
been developed for use in the papermaking. The Indian pulp and paper industry at present is very
well developed and established. Now, the paper industry is categorized as forest-based, agrobased and others (waste paper, secondary fibre, bast fibers and market pulp).

In 1951, there were 17 paper mills, and today there are about 515 units engaged in the
manufacture of paper and paperboards and newsprint in India. The pulp & paper industries in
India have been categorized into large-scale and small-scale. Those paper industries, which have
capacity above 24,000 tonnes per annum are designated as large-scale paper industries. India is
self-sufficient in manufacture of most varieties of paper and paperboards. Import is confined
only to certain specialty papers. To meet part of its raw material needs the industry has to rely on
imported

wood

pulp

and

waste

paper.

Indian paper industry has been de-licensed under the Industries (Development & Regulation)
Act, 1951 with effect from 17th July, 1997. The interested entrepreneurs are now required to file
an Industrial Entrepreneurs' Memorandum (IEM) with the Secretariat for Industrial Assistance
(SIA) for setting up a new paper unit or substantial expansion of the existing unit in permissible
locations. Foreign Direct Investment (FDI) up to 100% is allowed on automatic route on all
activities except those requiring industrial licenses where prior governmental approval is
required.
Growth of paper industry in India has been constrained due to high cost of production caused by
inadequate availability and high cost of raw materials, power cost and concentration of mills in

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one particular area. Government has taken several policy measures to remove the bottlenecks of
availability of raw materials and infrastructure development. For example, to overcome short
supply of raw materials, duty on pulp and waste paper and wood logs/chips has been reduced.

Following measures need to be taken to make Indian paper industry more competitive:
Improvements of key ports, roads and railways and communication facilities.
Revision of forest policy is required for wood based paper industry so that plantation can be
raised by industry, cooperatives of farmers, and state government. Degraded forest land should
be made available to the industry for raising plantations.
Import duty on waste paper should be reduced.
Duty free imports of new & second hand machinery/equipment should be allowed for technology
up gradation.
Outlook for paper industry in India looks extremely positive as the demand for upstream market
of paper products, like, tissue paper, tea bags, filter paper, light weight online coated paper,
medical grade coated paper, etc., is growing up.

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CHAPTER-2
COMPANY PROFILE

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HISTORY AND BACKGROUND

Shree Gopal Unit of Ballarpur industries Ltd was originally established by The English
companies known as Foundation Company of England in 1925.
As the time of its establishment its name was Punjab pulp and paper mills and its
production capacity was 15-20 tones of paper per day.
This was based on grass and street collected rags as a basic raw material. Since there was
no electricity in the area those days, it had its turbine and generator. Financial position of the
company was not sound; so all these factors forced the mill to shut down. The mill remained shut
for nearly 11 year. Despite of the sporadic efforts by the management, the mill could not be
restored and was ultimately brought under liquidation.
The mill was auctioned in 1936 and purchased by Lala Karam Chand Thapar, In 1951,
the group of Madhya Pardesh, on the recommendation of shroff committee, offered in 1988
Himachal Pradesh, Boilers and Power plant and TG Turbine was installed. The production of
electricity was raised to 18mw. In 1991, the ABL recovery boilers started functioning and
pollution was controlled.
Today, this unit has got 6 paper machines and 1 coating plants & a sophisticated specialty
plant. It has also taken first step for environment protection with the installation of electrostatics
precipitator for pollution control.

INTRODUCTION
BALLARPUR INDUSTRIES LIMITED, popularly known as BILT is efficiently managed,
financially sound, and self sufficient and self made company with paper as its core business
and also having interest in chemicals, foods and IT. (BILT) promoted by L.M Thapar is the
leader in Indian paper industry with and annual production capacity of 480000 MT spread over
in five manufacturing facilities produces ordinary and superior varieties of writing, printing, and
specialty papers etc. BILT, which is originally incorporated in 1945 as Ballarpur straw Board
Mills, has changed its name in march 1946 to Ballarpur paper and straw board mills and again it
was changed to the present name in October 1975.since then the company has grown to be a

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leader in paper industry by continuous expansion and modernization of its capacity and plant and
strategic acquisition expansion and modernization of its capacity and plant and strategic
acquisition. In 1969 the company has merged Shree Gopal paper mills with itself and the
company which has acquired the sinar mass pulp and paper (India) Ltd. (BGPL) which has state
of the art 145000TPA paper plant and a market leader in the high end coated art paper and art
paper board segment in India is planning to bring the paper unit of BGPL into its fold and
consolidating its paper operation under one umbrella. The company which was one of the most
diversified companies in the preliberalization era of industrial licensing with interests in paper,
chemicals (phosphoric Acid, STPP, Chlor, Alkalies), Vanaspati &Edible oils and glass has
decided to focus on its core competence that is paper and exit form non-core business,. First
major steps on these lines were initiated in the year 1994-1995 with having off glass business,
therefore the company sold its vananspati and edible oils business in 1996-97 and is 1998, the
chemical division of the company with its plant at Karwar, karnatka and which has interests in
phosphates, Chlor Alkali and Bromine Chemicals Ltd. (now solaries Chem. Tech.ltd.)To
complement its restructuring and to enable it to emerge as a stronger and more competitive
organization, the company is implementing a project involving modernization and expansion of
capacity at its unit in Shree Gopal, Ballarpur and sewa by 105000 TPA is planned over a two
year period from 2000-01 to 2000-06 for Unit Sewa and Shree Gopal,In the second phase,
42000TPA of capacity is expected to come on stream at Unit Sewa resulting in increasing in
capacity by 37 tones from the earlier 125 tones of unbleached pulp per day. The company has
also completed installation of a 2.4 meter wide blade coater at Unit Shree Gopal in FY 200102.BILTenterd into strategic alliance with IIansol of South korea to provide world class blade
coated paper to the Indian customer. It is the first company in the world to commercially exploit
the fractionation of bamboo and has applied for the world patent for this process. It has also
entered into direct retail distribution with the launch of A4 size 100-sheet pack of Royal
Executive Board.Mr.Gautam Thapar, Chairman of BILT, has been associated with Bilt since
1986 when joined the company as shop floor management apprentice paper mills and was
instrumental in turning around BILT in the late 1990s.
1) Ballarpur Unit, Distt. Chanderpur , Maharashtra
2) Shree Gopal Uint, Yamunanagar, Haryana

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3) Sewa Unit, Orissa

4) Unit Ashti in maharastra
Location of BILT
Unit Shree Gopal is situated in the heart of Yamuna Nagar city, The Unit is spread over an area
of 3sq. Km and also has modern residential colony for its employees with all modern amenities
like-hospital, school, club, playground, community hall etc.
The Unit is situated in the midway to the railway station and the bus stand. It has got its own
residential colony. There is no problem of waste disposal. The unit has its own railway line
running inside so that transportation of raw material is facilitated. BILT is a small town itself
with all facilities available.

UNIT SHREE GOPAL YAMUNA NAGAR

Yamuna Nagar is 230km away from Delhi & 90km from chandigarh. The city is well connected
with chandigarh, Delhi and Saharanpur by Rail & road.
Unit Shree Gopal is at Yamunanagar in Haryana, which is contributing 22% towards total
production of paper by BILT. This mill was taken by thapars in 1937, over years with the
process of rebuilding, expansion and diversification.
The unit employee 2064 and manufactures the wide variety of paper like writing, printing
and coated paper. The unit has 6 paper and machines with the capacity of producing 225 tones of
paper per day. The unit also has two paper coating machines with capacity of producing 90tones
per day of coated paper.
In the recent years market demand for the paper quality is becoming more & more
stringent. High speed of printing machine requires paper high strength, brightness and uniform
quality. With the liberalization the competition has become even stiffer. In the view of this new
pulp mill has been installed with the targeted brightness level of 88 degree ISO.
PRODUCT:

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1. Our product range largely includes.

2. Coated wood free paper.
3. Business stationery-- Royal Executive Bond and Sunlit Bond.
4. Packaging Boards.
5. Specialty & fine paper.
6. Uncoated Hi-bright paper (BILT CLASSIC).
7. Copier paper.
8. Packaging Paper.

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SWOT ANALYSIS
STRENGTHS:
Maximum variety of paper and high quality.
New pulp mill.
Good employer employee relationship.
Efficient management.
Totally computerized.
Team building.
Fulfilling social responsibility by keeping environment clean.

OPPORTUNITIES:
BILT has 34%share in paper business in Hybrid Segment in India.
BILT has reached in growth stage.

WEAKNESS
Large structure of organization
Old machines
Fixed cost

THREATS:
Import of paper.

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 Raw material availability

Government policies.
Increasing competitive market.

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BRIEF PROCESS FLOW DIAGRAM OF UNIT SHREE GOPAL YAMUNA NAGAR

PURCHASING OF RAW MATERIAL

PULPING

STOCK PREPARED

PAPER MACHINES

PAPER CUTTING

PAPER FINISHING

STICKING IN GO DOWN

DISPATCHED TO CUSTOMERS

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BRAND MASTER REPORT

BRAND NAME 1

BRAND NAME 2

SUNSHINE

SUNSHINE SUPER PRINTING

SUNLIT

SUNLIT ACCOUNT BOOK PAPER

RISING SUN

RISING SUN DUPLICATING

ROYAL

ROYAL EXECUTIVE BOND

SUPER

SUPER SKY ART BOARD

LUCKY PRINTING

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VARIOUS DEPARTMENTS AT
UNIT SHREE GOPAL
ADMINISTRATIVE DEPARTMENT
1.

HR Human Resource :- This department is primarily concerned with the training,

selection recruitment, promotion, demotion, labour welfare, retirement , work culture and
awareness.
2.

Accounts Department:- the function of this department is to maintain record detail and

record of all the transaction covered by different department

3.

General Store department: - these people are concerned with procurement and storage of

process material.
4.

Marketing & Sales department:-Production Planning , Logistics & Inventory

Management being the main activity.

5.

Raw material department:- each and every product required for paper making is arranged

/purchased by this department

6.

Traffic department: - this department includes wing section, raw material section,

transport section etc.

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PROCESS DEPARTMENT
1.

PULP MILL:-its function includes manufacturing of pulp and stock preparation.

2.

MACHINE HOUSE:-it controls the working of various paper machines and prepares the
paper o required quantity.

3.

COATING PLANT: - primary function of this department concern with coating of paper
as per requirements.

ENGINEERING DEPARTMENTS:1.

Electrical engineering:- This department attaches itself with the maintenance of

installation of electrical machine, distribution and generation of electrical energy and
various other electrical installations at the unit.

2.

Civil engineering:- All the construction work like building of roads sanitary, waste
disposal , water supply etc. are under their control.

3.

Instrumentation engineering:-maintenance of all the electrical controls of the machines is

carried out ender the expert guidance.

4.

Power house:- Having the total installed capacity of 25MW and maintain by two power
house old and new. This department backups the total power demand of the unit
efficiently and effectively.

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POLICIES OF OBTAINING
LEADERSHIP THROUGH QUALITY
BILT aims to be a world class organization with a clear head way in terms of consistent
quality, low cost, on time Delivery.
We will focus on adding value at all point of intersection with of our customers internal
and external.
For this, we will redefine standards in responsiveness, excellence in performance and
application of world class technology that ensure zero defect output.
Quality improvement is the job of every BILT employee.

COMPETITOR OF THE COMPANY

J.K Paper Mill
I.I.C. Paper Mill
Centuri Paper Mill
Pundamjee Paper Mill
Star Paper Mill

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INTRODUCTION OF TOPIC
Financial statement refers to such statements which contains financial information about an
enterprise. They report the profitability and the financial position of the business at the end of the
accounting period. The term financial statement includes at least two statements which the
accountant prepares at the end of an accounting period. The two statements are:
1.

The Balance Sheet or A Statement Of Financial Positions

2.

The Income Statement or Profit And Loss Account.

They provide some extremely useful information to the extent that Balance Sheet mirrors the
financial position on a particular date in terms of the structure of assets, liability and owners
equity, and so on and the Profit and Loss account ts shows the results of operations during a
certain period of time in terms of the revenues obtained and the cost incurred during the year.
Thus, the financial statements provide a summarized view of financial positions and operations
of a firm.

ANALYSIS OF FINANCIAL STATEMENT:

Financial statement presents a mass of complex data in absolute terms and reveal about
the liquidly, solvency and profitability of the business. Actually the figure given in financial
statement do not speak anything themselves. The process of giving tongue to these mute heaps of
figures is known as financial analysis. The focus of financial analysis is on key figures in the
financial statement and the significant relationship that exists between them. The Analysis of
Financial Statement is a process of evaluating the relationship between component parts of
financial statement to obtain a better understanding of firms position and performance. The first
task of financial analysis is to select the information relevant to the decision under consideration
to the total information contained in the financial statement. The second step is to arrange the
information in a way to highlight significant relationship. The final step is interpretation and
drawing of inferences and conclusions. Financial statement is the process of selection, relation
and evaluation.

PURPOSE OF ANALYSIS OF FINANCIAL STATEMENTS:

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 To know the Earning capacity or Profitability.

To know the solvency.
To know the financial strengths.
To know the capability of payment of interest and dividends.
To make comparative study with other firms.
To know the efficiency of Management.
To provide useful informations to the Management.

USERS OF ANALYSIS OF FINANCIAL STATEMENTS:

Management
In a company form of organization the owners or the shareholders elect a group of people to
manage the day-to-day affairs of the company. Since the managers are ultimately responsible for
the financial performance, they must periodically compile and interpret the financial statements.
Shareholders, Security Analyst and Investors
As the major users of financial statements business they range from individuals with limited
shareholding to institutions like insurance companies and mutual funds, which have high volume
of funds at their disposal. The focus of this class of users is either on investment or stewardship.
The shareholders through the financial statements know the financial position of the company,
which states the profit gained or loss suffered and the measure of its assets and liabilities.
A realistic estimation of the safety of the intended investment and the return expected to be
earned as the result of such investors can be made with support of financial statements.

LENDERS
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Banks, financial institutions and other lenders would willingly part with their
Money only if they are assured of the profitability and long-term solvency of the business in
which they are asked to invest. The lenders to judge for themselves the profitability and liquidity
of the business and to assure themselves of the security available for the monies lent normally
use financial statements.

SUPPLIERS/CREDITORS
Suppliers of raw material, etc.to the company also would be interested in the short-term liquidity
of the company. The financial statements facilitate the creditors in ascertaining the capacity of
the organization, to pay on time the consideration for the goods/services to be supplied. The
primary documents for estimating the health of the firm is derived from such statements.

Customers
Legal association associated with guarantees, warranties and after sales a service contract tends
to establish long-term relationships between a business and its customers. The customers to draw
inferences about the long term viability of the firm may use the financial statements.

Employees
Employees have a vested interest in the continued and profitable operations of the organization
in which they work. Financial statements can be used as important source for obtaining
information regarding the current and future profitability and solvency. Sometimes, contracts
tying remuneration to profits or payments of incentives based on certain financial measure would
tend to magnify this interest.
Government and RKegulatory Agencies

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The correct assessment of income tax, sales tax, excise duty, etc. requires a close scrutiny of the
financial statements of an organization especially to detect tax evasion, if any. When contracts
are made with the government, the business needs to supply all the financial information to the
former. Government, as the guardian of public interest, must also keep a close watch over the
various business firms to detect profiteering and creation of monopolies. A lot of information in
this regard can be gathered from a scrutiny of the financial statements of business enterprise.
National Income accounting used in macroeconomics analysis derives its fundamental inputs
from financial statements. The tax payable by the enterprise as well as the compilation of the
country wide statistics is discerned using the financial statements.

Research
Scholars undertaking research into management science covering diverse facets of business
practices look into the financial statements for the information eventually used for analysis. Such
statements serve as mirrors of the entity represented by them and thus are of great value to
persons searching for company specific information.
Diverse persons such as academicians, researchers and analysts may approach business firms for
information regarding their financial performance. To draw proper conclusions, these persons
would have to study the financial statements in depth.

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CHAPTER-3
INTRODUCTION
TO TOPIC

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WORKING CAPITAL MANAGEMENT

Working Capital Management forms day-to-day business of a firm and occupies a crucial
position in financial management. Though working capital management is primarily concerned
with management of current assets and current liabilities, its concepts and methodology differ
substantially from the management of long term assets and long term liabilities and financial
manager have to devote a major portion of their time in managing working capital in some form
or other.

What is Working Capital ?

There is a different opinion among authors about the definition of working capital considering
the objective and scope of working capital. It can be defined in 2 ways:-

Gross concept.

Net concept

Gross Concept:
According to gross concept working capital means total of all the current assets of a business. It
also called gross working capital.

Gross Working Capital = Total Current Assets

Net Concept:
According to the net concept of working capital, net working capital means the excess of current
assets over current liabilities. If current assets = current liabilities then according to the concept
working capital will be zero and in case of current liabilities are more than current assets then
working capital will be called negative.

Net working capital = Current assets = Current liabilities

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TABLE1.1
Constituents of Current Assets

Constituents of Current Liabilities

1.

Cash and bank balances

1.

Bills payable

2.

Bills receivables

2.

Sundry creditors or accounts payable

3.

Sundry debtors (less provision for bad

3.

Accrued or outstanding expenses.

4.

Short term loans, advances and deposits.

debts.)
4.

Inventories of stocks as:

Raw material
Work in Progress

Stores and spares

Finished goods

5.

Short term loans and advances.

5.

Dividend payable

6.

Temporary investments of surplus

6.

Bank overdraft

7.

Prepaid expenses

7.

Provision for taxation, if it does not amount to

appropriation of profits.

8.

Accrued Income

TABLE 1.1 CURRENT ASSETS VS CURRENT LIABILITIES

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OPERATING CYCLE OR CIRCULAR FLOW OF WORKING

CAPITAL

Operating cycle means that time period which is required to convert raw material into cash. In a
manufacturing enterprise raw material is purchased with cash, then raw material is converted into
W.I.P., which in term gets converted into finished goods, both receivables though sales and lastly
cash is received from debtors and bills receivables.
In operating cycle following events are included:-

Conversion of cash into raw material.

Conversion of raw material into work-in-progress.

Conversion of work-in-progress into finished goods.

Conversion of finished goods into debtors.

Conversion of debtors and B/R into cash.

Working capital Cycle : Circular Flow Concept

Cash

Bills Receivables

Raw Material

Sunday Debtors

W.I.P

Finished Goods
FIG 1.1 CASH CONVERSION CYCLE

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The gross operating cycle of a firm is equal to the length of the inventories and receivable
conversion periods. Thus

Gross Operating Cycle= RMCP+WIPCP+FCCP=RCP

Where
RMCP

Raw material conversion period.

WIPCP

Work in progress conversion period.

FGCP

Finished goods conversion period.

RCP

Receivables conversion period.

However, a firm may acquire some sources on credit and thus defer payments for certain period.
In that case, net operating cycle period can be calculated as below:Net operating cycle = Gross operating cycle period Payable deferral period

THE NEED OR OBJECTS OF WORKING CAPITAL

The need for working capital arises due to the time gap between production and realization of
cash from sales. There is an operating cycle involved in the sales and realization of cash. There
are time gap in purchase of raw material and production; production and sales; and sales and
realization of cash. Thus working capital is needed for the following purposes:1.

For the purchase of raw material components and spares.

2.

To pay wages and salaries.

3.

To incur day to day expenses and overhead cost such as fuel, power and office expenses
etc.

4.

To meet the selling cost as packing, advertising etc.

5.

To provide credit facilities to the customers.

6.

To maintain the inventories of raw material, work in progress, stores and spares and
finished stock.

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CLASSIFICATION OR KINDS OF WORKING CAPITAL

Working capital may be classified in 2 ways:

On the basis of concept.

On the basis of time.

FIG 1.2 KINDS OF WORKING CAPITAL

1.

Permanent of Fixed Working Capital:

Permanent or fixed working capital is the minimum amount which is required to ensure

the circulation of current assets.

Regular working capital: is required to ensure circulation of current asses assets

from cash to inventories, from inventories to receivables and from receivables to cash
and so on.

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Reserve working capital: is the excess amount over the requirement for regular
working capital which may be provided for contingencies that may arise at unstated
periods such as strikes, rise in prices, depression etc.

2.

Temporary or variable working capital: It is the amount of working capital which

is required to meet the seasonal demands and some special exigencies. It can be further classified
as:

Seasonal working capital: Most of the enterprises have to provide additional

working capital to meet the seasonal and special needs.

Special working capital: Special working capital is required to meet special

exigencies such as launching of extensive marketing campaigns for conducting
research etc.

FACTORS AFFECTING WORKING CAPITAL

1) Nature of business: Nature of business affects the working capital requirement of the business. BILT are a
producing and trading unit. So that it requires more working capital because they have
to keep adequate stock, cash and debtors in business and some times not able to get
immediate payments.

2) Growth and expansion: BILT are a large sized business so that it requires more working capital in comparison to small
business. It is a growing company so that working capital requirement increases.

3) Production cycle: Production cycle means the gap between the purchase and converting in to finished goods. In
BILT production cycle is annually. So that working capital is required in huge amount.

4) Credit policy: BILT receive money from his customers within three month so more working capital is required.

5) Availability of raw material: -

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Raw materials are purchased in bulk quantity. BILT So that requires more working
capital because they have to purchase all raw materials.

6) Availability of credit: BILT has good credit limit. It can take loan from State Bank of Patiala of rs. 50 cr. @ 8% p.a.,
from Bank of Maharashtra of rs. 50 cr. @ 6.6% p.a., and from State Bank of India of rs. 600 cr.
So less working capital is required because firm can arrange money from bank easily.

Importance of Advantages of Adequate Working Capital:

No business can run successfully without an adequate amount of working capital. The main
advantages of maintaining adequate amount of working capital are as follows:-

1.

Solvency of the business:

Adequate working capital helps in maintaining solvency of the business by providing
uninterrupted flow of production.

2.

Goodwill:
Sufficient working capital enables a business concern helps in creating and maintaining
goodwill.

3.

Easy Loans:
A concern having adequate working capital, high solvency and good credit standing can
arrange loan from banks and others on easy and favourable terms.

4.

Cash discounts:
Adequate working capital also enables a concern to avail cash discounts on the purchases
and hence it reduces costs.

5.

Regular supply of raw materials:

Sufficient working capital ensures regular supply of raw materials and continuous
production.

6.

Regular payment of salaries, wages and other day-to-day commitments:

A company which has ample working capital can make regular payment of salaries,
wages and other day-to-day commitments which raises the morale of its employees,

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increases their efficiency, reduces wastages and costs and enhances production and
profits.
7.

Exploitation of favorable market conditions:

Only concerns with adequate working capital can exploit favourable market conditions
such as purchasing its requirements in bulk when the prices are lower and by holding its
inventories for higher

8.

Ability to face crisis:

Adequate working capital enables a concern to face business crisis in emergencies such
as depression because during such periods, generally, there is much pressure on working
capital.

9.

Quick and regular return on investment:

Every investor wants a quick and regular return on his investment. Sufficiency of
working capital enables a concern to pay quick and regular dividends to its investors as
there may not be much pressure to plough back profits. This gains the confidence of its
investors and creates a favourable market to raise additional funds in the future.

10.

High Morale:
Adequacy of working capital creates an environment of security, confidence, high morale
and creates overall efficiency in a business.

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EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate working capital to run its business operations. It
should have neither redundant or excess working capital nor inadequate nor shortage of working
capital. Both excess as well as short working capital positions are bad for any business.
However, out of the two, it is the inadequacy of working capital which is more dangerous from
the point of view of the firm.

Disadvantages of Redundant or Excessive Working Capital

1.

Excessive Working Capital means idle funds which earn no profits for the business and
hence the business cannot earn a proper rate of return on its investments.

2.

When there is a redundant working capital, it may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theft, waste and losses.

3.

Excessive working capital implies excessive debtors and defective credit policy which
may cause higher incidence of bad debts.

4.

It may result into overall inefficiency in the organization.

5.

When there is excessive working capital, relations with banks and other financial
institutions may not be maintained.

6.

Due to low rate of return on investments, the value of shares may also fall.

7.

The redundant working capital gives rise to speculative transactions.

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WORKING CAPITAL POLICIES

In deciding an appropriate level of working capital requirement, a firm has to evaluate the
tradeoff between profitability and the risk associated with likely failure to meet financial
obligation. Profitability is measured by the rate of return on total assets i.e.
Profitabil ity

Earning Before Interest and Tax

Total assets

The risk that the firm will face financial difficulties is related to the firms
working capital level.
In this connection, a firm can adopt three types of policies: Conservative Policy
Aggressive Policy
Moderate Policy

Conservative Policy:
In case of conservative policy a firm will hold a relatively high level of working capital to play
safe to meet any contingency. As the rate of return on fixed assets, this policy will lead to lower
profitability but at the same time it will signify a lower risk of failure to meet financial
obligation.

Aggressive Policy:
Here, the firm opts for a relatively lower level of working capital thereby investing in current
assets at a lower proportion to the total capital employed. As the return on fixed assets is likely to
be high, the firm concerned targets a high profitability at a cost of higher risk that it will face
financial difficulties in meeting its obligation or to match with the desired level of production.

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Moderate Policy
This approach is in-between the conservative policy and aggressive policy. The investment in
current asset is moderate neither too high nor too low and the associated expected profitability is
also normal, generally of average magnitude. Here, the element of risk is also moderate.
Expressed in terms of ratios conservative policy will yield a high current ratio and aggressive
policy will yield low current ratio with different degrees of financial flexibility.
Taking the maximization of shareholders wealth as the goal of a company, it should aim to fix a
level, which will be adequate to satisfy the above goal.

Profitability Vs Risk Trade off for alternative financing strategies6

Alternative strategies of working Capital

The hedging or matching

strategy

The conservative strategy

The aggressive strategy

FIG 1.3 PROFITABILITY VS RISK TRADE OFF

1.

Hedging or Matching Approach:

This approach suggest that the permanent working capital requirements should be financed with
funds from long term sources while temporary or seasonal working capital requirements should
be financed with short term funds.

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2.

Conservative Strategy:

According to this concept entire estimated investments in current assets should be financed from
long term sources and the short term sources should be used only for emergency requirements.

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3.

The Aggressive Strategy:

The aggressive approach suggests that the entire estimated requirements of current asset

should be financed from short term sources. This approach makes the finance-mix more risky,
less costly and more profitable.

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Management of different components of working capital

Working capital management involves management of different components of working capital
such as cash, inventories, accounts receivable, creditors, etc.

MANAGEMENT OF CASH
It is the duty of the finance manager to provide adequate cash to all segments of the organization.
He also has to ensure that no funds are blocked in idle cash since this will involve cost in terms
of interest to the business. A sound cash management scheme, therefore, maintains the balance
between the twin objectives of liquidity and cost.

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Meaning of cash
The term cash with reference to cash management is used in two senses. In a narrower sense it
includes coins, currency notes, cheques, bank drafts held by a firm with it and the demand
deposits held by it in banks.
In a broader sense it also includes near-cash assets such as, marketable securities and time
deposits with banks. Such securities or deposits can immediately be sold or converted into cash
if the circumstances require. The term cash management is generally used for management of
both cash and near-cash assets.

Objectives of cash management

There are two basic objectives of cash management:

To meet the cash disbursement needs as per the payment schedule;

To minimize the amount locked up as cash balances.

1.Meeting cash disbursements

The first basic objective of cash management is to meet the payments Schedule. In other words,
the firm should have sufficient cash to meet the various requirements of the firm at different
periods of times. The business has to make payment for purchase of raw materials, wages, taxes,
purchases of plant, etc. The business activity may come to a grinding halt if the payment
schedule is not maintained. Cash has, therefore, been aptly described as the oil to lubricate the
ever-turning wheels of the business, without it the process grinds to a stop.

2.Minimizing funds locked up as cash balances

The second basic objective of cash management is to minimize the amount locked up as cash
balances. In the process of minimizing the cash balances, the finance manager is confronted with
two conflicting aspects. A higher cash balance ensures proper payment with all its advantages.
But this will result in a large balance of cash remaining idle. Low level of cash balance may
result in failure of the firm to meet the payment schedule.
The finance manager should, therefore, try to have an optimum amount of cash balance keeping
the above facts in view

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Inventory
Inventories constitute the most important part of the current assets of large majority of
companies. On an average the inventories are approximately 60% of the current assets in public
limited companies in India. Because of the large size of inventories maintained by the firms, a
considerable amount of funds is committed to them. It is therefore, imperative to manage the
inventories efficiently and effectively in order to avoid unnecessary investment.

Nature of Inventories
Inventories are stock of the product of the company is manufacturing for sale and components
make up of the product. The various forms of the inventories in the manufacturing companies
are:

Raw Material

Work-in-progres

Finished Goods

The specific benefits of holding inventories can be put as follows:

(i) Avoiding losses of sales
(ii) Reducing ordering cost
(iii) Achieving efficient production runs
Risks and costs associated with inventories
Holding of inventories exposes the firm to a number of risks and costs. Risk of holding
inventories can be put as follows:
(i) Price decline
This may be due to increase in the market supply of the product, introduction of a new
competitive product, price cutting by the competitors, etc.
(ii) Product deterioration
This may due to holding a product for too long a period or improper storage conditions.
(iii) Obsolescence
This may be due to change in customers taste, new production technique, improvements in the
product design, specifications, etc.

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The costs of holding inventories are as follows:

(i) Materials cost
This includes the cost of purchasing the goods, transportation and handling charges less any
discount allowed by the supplier of the goods.
(ii) Ordering cost
This includes the variable cost associated with placing an order for the goods. The fewer the
orders, the lower will be the ordering costs for the firm.
(iii) Carrying cost
This includes the expenses for storing the goods. It comprises storage costs, insurance costs,
spoilage costs, cost of funds tied up in inventories, etc.
TABLE 1.2
Key Working Capital Ratios:
The following, easily calculated, ratios are important measures of working capital utilization.
Ratio
Stock Turnover
(in days)

Receivables
Ratio
(in days)
Payables Ratio
(in days)

Current Ratio

Quick Ratio

Working capital

Formulae

Result

Average Stock
* 365/
Cost of Goods
Sold
Debtors * 365/
Sales

=x
days

Creditors *
365/
Cost of Sales
(or Purchases)
Total Current
Assets/
Total Current
Liabilities

=x
days

(Total Current
Assets Inventory)/
Total Current
Liabilities

=x
times

=x
days

=x
times

Interpretation
On an average, your stock turnover is in x
days.
Obsolete stock, slow moving lines will extend
overall stock turnover days.
It takes your average x days to collect
receivables due to you. Effective debtor
management will minimize the days
On an average, you pay your suppliers every
x days. If you negotiate better credit terms
this will increase. If you pay earlier, say, to
get a discount this will decline.
Current Assets are assets that you can
readily turn in to cash or will do so within 12
months in the course of business. Current
Liabilities are amount you are due to pay
within the coming 12 months.
Similar to the Current Ratio but takes
account of the fact that it may take time to
convert inventory into cash

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SCOPE OF THE WORKING CAITAL MANAGEMENT

BILT is a very big organization has turnover of Rs.250 Crores Per annum. Being a
manufacturing Industry working capital Management is supposed to be the most important
activity in all its units.

Working Capital management is one of the important activities.

First, with in the organization it helps in estimating demand of the raw material required for
manufacturing which can be seen from the previous records,
What are the dormant outstanding, helps to find the funds available to carry out the further
production activities.

Secondly, outside the organization it helps in finding the day sales outstanding (DSO).Because
the interest of the investors largely relies on the DSO.
It is the credit period allowed to the customers. Low DSO is often seen as a reflection of overall
management performance Companies with the lowest DSO tend to be known as the best
managed in any given sector. Consequently, DSO has become an important metric for many
financial analysts, and a strong driver of shareholder confidence. It also helps to suppliers to
know the financial position of the company and whether the payments are made regularly or not
and whether the number of Creditors are increasing or decreasing.

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KEY TO SUCCESSFUL WORKING CAPITAL MANAGEMENT

The Chief Financial Officer is concerned with the concept of Working Capital
Management and he makes sure that the organization can find out the difference between
short-term assets and short term liabilities. He identifies the core working capital drivers
and the appropriate level of working capital. Companies will be able to minimize risk,
prepare for uncertainty and improve the overall performance by understanding the role
and drivers of working capital management and by taking steps to reach the right working
capital level. CFOs are mainly concerned with the identification of factors that are not
under their direct control and influence them to get a complete view of the needs of the
company. Although corporate finance has some influence over the operating units, the
CFOs control is limited to functional silos.

Generally, the organizations focus on the right processes like cash, payables and their
supply chain, but they ignore the internal and external constraints which explain how
these processes are executed. Another significant consideration is the human factor. If
top-line growth alone is considered by the management, then it diverts the attention from
cash flow management and picture of the working capital and can lead to a
counterproductive behavior.

For successful working capital management, appropriate cash flow forecasting is

necessary, which can be achieved by considering internal and external working capital
drivers and taking should also take into account the requirement of additional working
capital investments along with the cash flow impact of potential events, because some
events can affect the non-operational requirements like investments, credit ratings and the
ability to service debt, inventory, payables and receivables.

The uncertainty can be managed by these approaches: Controlling, predicting and

reacting. Uncertainty is well managed by companies with the ability to control supply,
minimize inventory and apply payment pressure on customers. Companies should fix an
objective that is related to the business-driven role of working capital. True working

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capital drivers are essential not only to produce a good consolidated forecast but also to
produce a divisional, operating unit or even a product line forecast.

The other effective way of improving working capital performance and forecasting is to
go beyond the local organization and take the broader corporate environment into
consideration. Under corporate investment and financing arrangements, the cash is
delivered in one location and used in another. Cash generated in one place may have
different value from the cash generated in another place. So compass should go beyond
local balance sheets and plan for the use of cash in global working capital environment.

For improving working capital management, companies should identify the drivers of
working capital and the obstacles of efficient cash flow poor links between production
and treasury operations.

Companies should develop an entrepreneurial mindset, think beyond the finance

organization, combine operational and financial skills, and implement the strategies
which generate short-term cash for long term projects. They should identify the persons
who will be responsible for setting targets and performance levels.

Finally, companies should set up goals which can be measured. They must agree on the
success criteria, give priority to the contributions of the criteria and measure the
performance continuously. As working capital forecasting is critical to a companys
ability to make informed strategic business decisions. CFOs need to identify the
underlying drivers of working capital needs. By understanding the true working capital
needs, companies can reduce their financial risk, face uncertainty and create a ready cash
reserve which will provide flexibility and security on critical times.

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Theoretical Framework
Construct:

To measure the impact of working capital on profitability of the

company.

DEPENDENT VARIABLE
Gross operational profit

INDEPENDENT VARIABLES
the period of cash transformation
average period of collection of receivables
average period of inventory retention.
Average period of the settlement of debts.
Admin expenses
Finance cost

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CHAPTER-4
LITERATURE REVIEW

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Once the problem is formulated a brief summary of it should be written down. The researcher
should undertake extensive literature survey connected with the problem. For this problem, the
abstracting and indexing journals and published or unpublished bibliographic are the first place
to go to. Academic journals, conference proceedings, government reports, books etc must be
tapped depending upon nature of problem.

Bana Abuzayed, (2012) ," Working capital management and firms performance in emerging
markets: the case of Jordan", International Journal of Managerial Finance, Vol. 8 Iss: 2.The
purpose of this paper is to examine the effect of working capital management on firms
performance for a sample of firms listed on a small emerging market, namely Amman Stock
Exchange. The paper includes a conceptual as well as empirical analysis, in which data from a
sample of listed firms for the period from 2000 to 2008 are analyzed to examine if more efficient
working capital management improves firms accounting profitability and firms value. Cash
conversion cycles as well as its components are used as measures of working capital
management skills

Dauda Ibrahim Adagye , This study examines the effects of working capital management on

the profitability of Deposit Money Banks (DMBs) quoted on the Nigerian Stock Exchange for
single period of year 2013. The paper adopts Returns on Equity (ROE) and Returns on Assets
(ROA) as dependent variables for profitability while Current ratio (CRR), Profit before taxation
to current liabilities (PCL), Operating cash flow to current liabilities (OCL) and Cash balance to
total liabilities (CTL) are proxies for working capital and as well independent variables. The
annual account and report of all the eleven banks quoted on the Nigerian Stock exchange as at
2013 served as the sources of data, regression was used to determine the relationship between the
dependent and the independent variables, and the study finds that significant and positive
relationship exist between the working capital management and the profitability of the DMBs in
Nigeria.
Paul Aondona Angahar,Agbo Alematu, This study empirically examined the impact of
working capital management (Measured by: the number of days accounts receivable are
outstanding-DAR, the number of days inventory are held-DINV, and the cash conversion cycle-

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CCC), on profitability (measured by return on assets-ROA) of Nigerian Cement Industry for a

period of eight (8) years (2002-2009).

Osundina Jacob Ademola, The main objective of this research was to investigate the
relationship between working capital management and profitability of food and beverages
manufacturing firms listed on the Nigerian Stock Exchange. The study used secondary data of
120 firm-year observationsbetween 2002 and 2011. Survey research design was adopted. The
data were analysed using Descriptive Statistics, Correlation Analysis and Multiple Regression
Analysis.The variables for this study were categorized into three: Dependent variables (Net
Operating Profit), independent variables (Working Capital Management), and control variables.
Trivedi SA vita, oct2011, Impact of Working Capital Management on the Profitability of
Limited Companies Advances in management, vol.4 (10). This journal has given the researcher
knowledge about the effect of working capital management on the profitability of manufacturing
firms.
Debasish Sur and Kaushik Chakraborty, 2011,Evaluating Relationship of Working Capital
and Profitability: A Study of Select Multinational Companies in the Indian Pharmaceutical
Sector,journal of management research, Vol. X, No. 2. This journal has given the researcher
knowledge about relationship of various components with profitability of companies.
Vida Mojtahedzadeh, Seyed Hossein Alavi Tabari, Rezvan Mosayebi , 2011, The
Relationship between Working Capital Management and Profitability of the Companies
International Research Journal of Finance and Economics - Issue 76. This journal has given the
researcher knowledge about the relationship
Prabath Suranga Morawakage DETERMINANTS OF PROFITABILITY UNDERLINING
THE WORKING CAPITAL MANAGEMENT AND COST STRUCTURE OF SRI LANKAN
COMPANIES, Faculty of Commerce and Management Studies, University of Kelaniy, Sri
Lanka. This journal has given the knowledge about the factors affecting working capital.

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Thomas Korankye , 2013, Empirical Analysis of Working Capital Management and its Impact
on the Profitability of Listed Manufacturing Firms in Ghana, Research Journal of Finance and
Accounting, Vol.4, No.1, 2013. This journal has given the knowledge about the effects of
working capital on profitability of the company.
Swati Modi, 2012, A Study on the Adequacy and Efficacy of Working Capital in Automobile
Industry in India, the IUP Journal of Accounting Research & Audit Practices, Vol. XI, No. 2.
This journal has given the knowledge about the importance of working capital in the company.
M Deloof - Journal of business finance & Accounting, 2003 ,Most firms have a large amount
of cash invested in working capital, as well as substantial
amounts of short-term payables as a source of financing. For instance, according to the National
Bank of Belgium, in 1997 accounts receivable and inventories.
P Juan Garca-Teruel, International Journal of , 2007 ,The object of the research
presented in this paper is to provide empirical evidence on the effects of working
capital management on the profitability of a sample of small and medium-sized
Spanish firms.

Dr. Muhammad AZAM, SEPTEMBER 2011, Impact of Working Capital Management on

Firms

Performance:

Evidence

from

Non-Financial

Institutions

of

KSE-30

index,

INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS,

VOL 3, NO 5. This journal has given the knowledge about the relationship between working
capital management and profitability.

Professor IOANNIS LAZARIDIS, Ph.D. and DBVNTRIOS TRYFONIDIS, M.Sc., 2006,

RELATIONSHIP

BETWEEN

WORKING

CAPITAL

MANAGEMENT

AND

PROFITABILITY OE LISTED COMPANIES IN THE ATHENS STOCK EXCHANGE,

JOURNAL OF FINANCIAL MANAGEMENT AND ANALYSIS, 19(l). This journal focuses
on the direct impact of working capital management on profitability and liquidity.

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CHAPTER-5
RESEARCH
METHODOLOGY AND
OBJECTIVES OF THE
STUDY

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RESEARCH METHODOLOGY
Research is defined as a scientific & systematic search for pertinent information on a specific
topic. Research is an art of scientific investigation. Research is a systemized effort to gain new
knowledge. It is a careful inquiry especially through search for new facts in any branch of
knowledge. The search for knowledge through objective and systematic method of finding
solution to a problem is a research.

RESEARCH METHODOLOGY is a way to systematically solve the problem. It may be

understood has a science of studying how research is done scientifically. In it we study the
various steps that all generally adopted by a researcher in studying his research problem along
with the logic behind them. The scope of research methodology is wider than that of research
method. Thus when we talk of research methodology we not only talk of research methods but
also consider the logic behind the method we use in the context of our research study and explain
why we are using a particular method.

RESEARCH DESIGN
The research design is a pattern or an outline of research project working. It is a statement of
only essential elements of study, those that provide basic guidelines for the details of the project.
The function of research design is to provide for the collection of relevant evidence with minimal
expenditure of effort ,time and money.

The design is such studies must be rigid and not flexible and most focus attention on the
following;

What is the study about?

Why is the study being made?
Where will the study be carried out?
What type of data is required?
Where can be required data be found?
What period of time will the study include?
What will be sample design?
What techniques of data collection will be used?
How will the data be analyzed?
In what style will the report be prepared?

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TYPES OF RESEARCH DESIGN

FIG5.1

The present study is Descriptive in nature. It seeks to determine the answers to who ,
what, where ,when, and how questions . It is based on some previous understanding of the
matter.

PROBLEM STATEMENT:
The research problems, in general, refers to sum difficulty with a researcher experience in the
contest of either a particular or a theoretical situation and want to obtain a salutation for same.

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TIME HORIZON
FIG5.2

The time horizon for my study is Cross Sectional ,the two years time period.

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Study Setting:

FIG5.3

This includes field study and lab experiment. My study is using Non Contrived as in same
natural environment/data.
In present project a sample size of past two years (2013-2014 to 2014-2015) is taken for
analysis.

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Objective of the study

To find out the working capital position of the company for the last two financial years.

To know the liquidity position of the firm.

To study the profitability of the company

The objectives of this project were mainly to study the inventory, cash and

receivable at BILT, but there are some

more and they are
To measure the financial soundness of the company by analysing various
ratios.
To suggest ways for better management and control of working capital at
the concern.

SCOPE OF THE STUDY

This project is vital to me in a significant way. It does have some
Importance for the company too. These are as follows

This project will be a learning device for the finance student.

Through this project the various methods of the working

capital management are studied.

The project will be a learning of planning and financing working capital.

This will show different methods of holding inventory and dealing with

cash and receivables.

This will show the liquidity position of the company and also how do

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SIGNIFICANCE OF THE STUDY

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

2. It is beneficial to management of the company by providing crystal clear picture regarding

important aspects.

3. The study is also beneficial to employees and offers motivation by showing how actively they
are contributing for companys growth.
4. The investors who are interested in investing in the companys shares will also get benefited
by going through the study and can easily take a decision whether to invest or not to invest in the
company.

LIMITATIONS OF THE STUDY

TIME CONSTRAINT: The duration of the training was not sufficient to lay down
through emphasis on the various aspects of cash flow in the company.
RESOURCE CONSTRAINT: Resources available for the analysis of the cash
management were not sufficient as mainly the annual report was provided by the
company which was not revealing the detailed aspects of financial matters in the
company
PERIOD OF ANALYSIS: The period of five financial years was taken for the analysis
and this duration was not sufficient to conclude about any of the aspect.
SECONDARY DATA: The data used for the analysis was secondary in nature as it was
taken from the annual reports of the company.

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 LACK OF COMPARATIVE DATA: There was no other organization by which we

can compare the data of OLAM for effective analyses.
CONSOLIDATED AMOUNTS: The amounts taken for the analyses are consolidated
figures of the whole BILT(India) pvt ltd .Thus the standalone analysis could not be done.
SECRECY OF INTERNAL DATA: There were various issues regarding working
capital management which were not revealed by the company due to their privacy policy.
WIDE AREA TO STUDY: There was the wide scope of the study but could not be
covered completely due to the lack of time and resources.

SOME OTHER LIMITATIONS

We cannot do comparisons with other companies unless and until we have the data of
other companies on the same subject.
Only the printed data about the company will be available and not the backend details.
Future plans of the company will not be disclosed to the trainees.
Lastly, due to shortage of time it is not possible to cover all the factors and details
regarding the subject of study.
The latest financial data could not be reported as the companys websites have not been
updated.

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CHAPTER-6
DATA ANALYSIS AND
INTERPRETATION

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AVERAGE PERIOD OF INVENTORY RETENTION:

This ratio means that the total period of time required by the company to sell its inventory. The
lower the period is better the position of the company.

Formula:
Average period of inventory retention= inventory/cost of goods sold*365
TABLE6.1
Year

Ratio

2013-14

50

2014-15

42

FIG6.1
Interpretation: The minimum the ratio, the better the position of the firm. This ratio is
minimum in 2014-15 and maximum in the year of 2013-14. After that it is seen in decreasing
trend which means that firm position is improving. Before the year 2014-15 the firm showing
that the period is increasing.

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AVERAGE PERIOD OF COLLECTION OF RECEIVABLES: Debt Collection

Period ratio, is the year's sales which were outstanding at the balance sheet date, expressed in
days. A rough measure of the days of credit that a firm's offers to its suppliers/clients. The

lower the period, the better it is for the firm.

Formula:
No of days A/R= Accounts Receivables/sales*365
TABLE6.2

Year

Ratio

2013-14

72

2014-15

63

FIG6.2

Interpretation:

A low number indicates speedy collection, while a higher number indicates a

pattern of slow or late customer payments. The lowest period of debtors collection is in the year

2014-15, and the highest period of debtors collection is in the year 2013-14. After 2013-14 firm
starts improving.

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AVERAGE PERIOD OF DEBT SETTLEMENT: It means that the total amount

of time required by company to make payment to its creditors.
Formula:
No of days A/P= Accounts Payables/cost of goods sold*365
TABLE6.3

Year

Ratio

2013-14

104

2014-15

86

FIG6.3

Interpretation: this ratio indicates that the higher the period, the better the position of the
company. The average period of debt settlement is lowest in the year 2014-15 and the highest
period of debt settlement is in the year 2013-14. After 2013-14 firm starts improving.

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Cash conversion cycle: The total amount of time required by the company to convert its
input resources into cash. Inputs resources include inventory, debtors, creditors etc.

Formula:
Cash conversion cycle= No. of days A/R+ No. of days inventory retention+ No. of
days of A/P
TABLE6.4

Year

Ratio

2013-14

23

2014-15

18

FIG6.4
Interpretation: The lower the cash conversion cycle, the better the position of the company.
In the year 2014-15, there is negative cash conversion cycle which means that the firm is having
good position. But in order to satisfy their supplier they have to make early payment. In 20132014 cash conversion period is highest.

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Gross operating profit

Formula:
Gross operating profit= (sales-COGS)/ (Total assets- financial assets)
TABLE6.5

Year

Ratio

2013-14

53

2014-15

64

FIG6.5
Interpretation: The higher the value ratio of gross operating profit, it is better for
the company. Highest gross operating profit is in the year 2014-15. The ratio is
lowest in the year 2013-14.

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Statement of changes in Working capital for the year (2014-2015)

TABLE6.1
NET WORKING CAPITAL (CURRENT ASSETS CURRENT LIABILITIES)
YEAR

31.03.2015

31.03.2014

CURRENT ASSETS
Inventories

60,553,512.00

18,999,844.00

Trade receivable

796,415.13

37,466,021.52

Cash and bank balances

16,152,275.66

37,466,021.52

and 44,313,489.57

13,066,191.58

Other current assets

17,655.30

5,242,713.00

TOTAL CURRENT

121,833,347.66

112,240,791.62

CURRENT LIABILITIES
Short term borrowings

22,817,341.86

17,468,760.02

Trade payables

12,231,569.05

3,047,624.51

Other current liabilities

28,414,422.41

9,787,445.72

BILT

23,885,643.45

Short

term

loans

advances

ASSETS
Less:

TOTAL

CURRENT 87,348,976.77

30,303,830.25

34,484,370.89

81,936,961.37

LIABILITIES
NET WORKING
CAPITAL

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WORKING CAPITAL POSITION

ANALYSIS THROUGH CHART

DATA INTERPRETATION
If we analysis the two years working capital position of the company, we find out that company
has sufficient working capital to meets its short term liability, it is good indicator for the
company but if we compare between two years i.e. 2015 and 2014 it can be seen that there is
more sufficient net working capital in 2014 i.e. Rs. 81,936,961.37 than in 2015 i.e. Rs.
34,484,370.89
INVENTORY ANALYSIS
Inventory means stock of three things:1. Raw materials
2. Semi-finished goods.
3. Finished goods.
Position of inventory in BILT
YEAR
INVENTORY

31.03.2015
60,553,512.00

31.03.2014
18,999,844.00

ANALYSIS THROUGH CHART

INTERPRETATION:
By analysing the 2 years data, We are looking increasing pattern in inventories. We can see that
inventories are increased from Rs18,999,844.00 in 2014 to 60,553,512.00 in 2015. By seeing
this pattern we can say that the company is managing the inventory according to the sale.

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CURRENT ASSETS ANALYSIS

Position of current assets in BILT
YEAR
CURRENT ASSETS

31.03.2015
121,833,347.66

31.03.2014
112,240,791.62

ANALYSIS THROUGH CHART

INTERPRETATION
If we analyse the above table then we can see that total current assets increased from the last
year. So, it is to be known that in 2014 current assets were Rs. 112,240,791.62and in 2015, Rs.
121,833,347.66.
CURRENT LIABILITIES ANALYSIS
Position of current assets in BILT
YEAR
CURRENT LIABILITIES

31.03.2015
87,348,976.77

31.03.2014
30,303,830.25

ANALYSIS THROUGH CHART

INTERPRETATION
If we analyse the above table then we can see that current liabilities are slightly more in 2015 as
compared to 2014.This is liability for company so this should be less. when company have
minimum liabilities it creates a better goodwill in market. High current liabilities indicate that
company is using credit facilities by creditors.

Working capital

bilt

mba GNKCTIMTC

WORKING CAPITAL RATIOS AND ITS INTERPRETATION

Ratios which are calculated are as follows:

Working capital ratio

Quick ratio

Current ratio

CA to FA ratio

Debt to equity ratio

Inventory turnover ratio

Position of working capital ratio in BILTPvt. Ltd.

FORMULA
Working capital ratio= inventory + receivable - payable
sales
YEAR
WORKING CAPITAL
RATIO

31.03.2015
35.5

31.03.2014
48.8

ANALYSIS THROUGH CHART

INTERPRETATION
This ratio indicates whether the investments in current assets or net current assets (i.e.Working
capital) have been properly utilized. Higher the ratio lower is the investment in working capital
and higher is the profitability. But too high ratio indicates over trading. This ratio is an important
indicator about the working capital position. Now if we analyse here that the working capital
ratio is being same from two years.

Working capital

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mba GNKCTIMTC

Position of Quick ratio in BILTPrivate Limited

FORMULA
Quick ratio: Total Current Assets - Inventories
Total Current Liabilities

YEAR
QUICK RATIO

31.03.2015
2.15

31.03.2014
3.07

ANALYSIS THROUGH CHART

INTERPRETATION
It is the ratio between quick liquid assets and quick liabilities. The normal value for such ratio is
taken to be 1:1. It is used as an assessment tool for testing the liquidity position of the firm. By
analysing the two years data it can be said that its position is not good & stable.

Position of current ratio in BILT

FORMULA
Current ratio: Total current assets
Total current liabilities

YEAR
CURRENT RATIO

31.03.2015
1.39

31.03.2014
3.7

ANALYSIS THROUGH CHART

INTERPRETATION
This ratio reflects that company has sufficient current assets to pay its current liabilities in
previous year which reflects good liquidity position of the company as compare to current year.

Working capital

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mba GNKCTIMTC

Position of current asset to fixed asset ratio in BILTprivate limited

FORMULA

CA to FA ratio: Current assets

Fixed assets

YEAR
CA TO FA RATIO

31.03.2015
8.765810396

31.03.2014
4.808961515

ANALYSIS THROUGH CHART

INTERPRETION
This ratio differs from industry to industry. The increase in the ratio means that trading is slack
or mechanization has been used. A decline in the ratio means that debtors and stocks are
increased too much or fixed assets are more intensively used. If current assets increase with the corresponding
increase in profit, it will show that the business is expanding.
Assuming a constant level of fixed assets, a higher CA/FA ratio indicates a conservative current
assets policy and a lower CA/FA ratio means an aggressive current assets policy assuming other
factors to be constant. A conservative policy i.e. higher CA/FA ratio implies greater liquidity and
lower risk; while an aggressive policy i.e. lower CA/FA ratio indicates higher risk and poor
liquidity. Now if we analyse the two year data we find the CA TO FA Ration in decreasing
pattern.
Position of debt to equity ratio in BILTprivate limited
FORMULA

Debt to equity ratio: Debt

Equity

YEAR
DEBT TO EQUITY RATIO

31.03.2015
1.89

31.03.2014
0.65

ANALYSIS THROUGH CHART

INTERPRETATION
By having the graph, it is easily interpreted about the debt to equity ratio of the company. It is
comparatively less than in 2015 in 2014.

Working capital

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mba GNKCTIMTC

Position of inventory turnover ratio in BILT

FORMULA
Stock turnover ratio: Average Stock 365
Cost of Goods Sold
YEAR
INVENTORY TURNOVER
RATIO

31.03.2015
2.28460176

31.03.2014
5.759323813

ANALYSIS THROUGH CHART

INTERPRETATION
This ratio tells the story by which stock is converted into sales. By analysing the two year data it
seen that it follows an uneven trend. We see that it is reduced. Company should have to reduce
the inventory conversion period in order to reduce the cost.

Working capital

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mba GNKCTIMTC

CHAPTER-7
FINDINGS, SUGGESTIONS
AND CONCLUSION

Working capital

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mba GNKCTIMTC

MAJOR FINDINGS

By analysing the 2 years data, We are looking increasing pattern in inventories. We can
see that inventories are increased from Rs18,999,844.00 in 2014 to 60,553,512.00 in
2015. By seeing this pattern we can say that the company is managing the inventory
according to the sale.

The total current assets increased from the last year. So, it is to be known that in 2014
current assets were Rs. 112,240,791.62and in 2015, Rs. 121,833,347.66.

The current liabilities are slightly more in 2015 as compared to 2014.This is liability for
company so this should be less. when company have minimum liabilities it creates a
better goodwill in market. High current liabilities indicate that company is using credit
facilities by creditors.

The investments in current assets or net current assets (i.e.Working capital) have been
properly utilized. Higher the ratio lower is the investment in working capital and higher is
the profitability. But too high ratio indicates over trading. This ratio is an important
indicator about the working capital position. Now if we analyse here that the working
capital ratio is being same from two years.

It is the ratio between quick liquid assets and quick liabilities. The normal value for such
ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity position of
the firm. By analysing the two years data it can be said that its position is not good &
stable.

This ratio reflects that company has sufficient current assets to pay its current liabilities in
previous year which reflects good liquidity position of the company as compare to
current year.

The debt to equity ratio of the company. It is comparatively less than in 2015 in 2014.

This ratio tells the story by which stock is converted into sales. By analysing the two year
data it seen that it follows an uneven trend. We see that it is reduced. Company should
have to reduce the inventory conversion period in order to reduce the cost.

Working capital

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Statement Showing Difference from Previous Year

NET WORKING

DECREASING

Rs.47,452,590.48

INVENTORY

INCREASING

Rs. 41,553,668.00

CURRENT ASSETS

INCREASING

Rs. 9,592,556.04

CURRENT LIABILITIES

INCREASING

Rs.57,045,146.52

CONSTANT

13.3

QUICK RATIO

DECREASING

0.92

CURRENT RATIO

DECREASING

2.3

CA TO FA RATIO

INCREASING

3.95

DEBT TO EQUITY

INCREASING

1.24

DECREASING

3.474722053

CAPITAL POSITION

WORKING CAPITAL
RATIO

RATIO
INVENTORY
TURNOVER RATIO

Working capital

bilt

mba GNKCTIMTC

RECOMMENDATIONS

BILT are undoubtly holding a very good market share, and enjoying a status of Indias
No.1 Auto components manufacturing company. But no one is perfect in this world
except all mighty God. So some recommendations given below can help it to perform
more efficiently.

The company should take steps like reduce paper work, overstaffing, bank transactions
etc. to control administrative expenses and finance cost.

The company should also take steps like offer discount, remind debtors time to time etc.
to control Debt collection period is 86 days which shows lenient debt policy. Debt policy
should make strict to reduce the risk of bad debts.

Organizations credit payment period is 63 days, which is more than enough. It should
pay its debt as soon as possible to create a better image among creditors.

The company has acquired most of the fixed assets for its smooth functioning. The
company should now make use of that much assets for running its business instead of
investing more money in purchasing new assets as the existing one still have some more
capacity which is not yet fully utilized.

The company should try to reduce the cash conversion period. So that the cash can be
utilize it better.

Cost reduction measures should be strictly laid down in the company to increase the
profitability.

The company should makes effort to clear its inventory stock as soon as possible.

There is inverse relationship between cash conversion period, debtors collection period
and inventory retention period, so the company should try to reduce the period in order to
increase its profitability.

Working capital

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CONCLUSION
Success is achieved by those who try where there is nothing to loose by trying and a great deal
to gain if successful, by all means try.
Working Capital Management concerned with the problems that arise in attempting to manage
the current assets, current liabilities and the interrelationship that exists between them. The goal
of working capital management is manage the firms current assets and current liabilities in such
a way that a satisfactory level of working capital is maintained to boost the production. If a
company could not maintain a satisfactory level of working capital it is likely to become
insolvent and may even be forced into bankruptcy.
The analysis made in BILT reveals that a satisfactory level of working capital maintained in
company. The operating cycle of the company is also in the favourable position. The liquidity
position of the company is more than satisfactory level. So it can easily be concluded that overall
working capital position of the company is good and company should try to maintain more
favourable working position.
Its inventory and current assets are increasing which is a very good indicator for the
company.
Current liabilities of the company are also increasing and High current liabilities indicate
that company is using credit facilities by creditors.
The various ratios calculated are an indicator as to the fact that company is going on
smoothly.
The inventory turnover ratio is increasing so it acts as the deletion of the inefficiencies in
the working capital management.
As studied, most of the ratios are constant that depicts the stable condition of the
company.

Working capital

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mba GNKCTIMTC

SUGGESTIONS
The management of working capital plays a vital role in running of a successful business. So,
things should go with a proper understanding for managing cash,
receivables and inventory.
BILTprivate limited is managing its working capital in a good manner, but
still there is some scope for improvement in its management. This can help the company
in raising its profit level by making less investment in accounts receivables and stocks
etc. This will ultimately improve the efficiency of its operations.
The company should keep more current assets such as cash & bank balances short-term
investment to meet its increasing liabilities. By that the company can able to have a
better liquidity position.
The company has to take necessary steps to establish effective working capital
management (which maintains adequate working capital required for the business). In
the view of increasing current liabilities and less allocations of resources towards
working capital. As of now, the company has maintained good financial position by
controlling the current liabilities and other expenses.
The business runs successfully with adequate amount of the working capital but the
company should see to it that the cash should not be tied up in excessive amount of
working capital.
Holding of excessive and insufficient stock must be avoided as it creates a burden on the
cash resources of a business and results in lost sales, delays for customers, etc
respectively.

Working capital

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mba GNKCTIMTC

BIBLIOGRAPHY
Books
1. Pandey I.M. (1), (9th edition) ,Financial Management,
2. Goel D.K (2), (4th edition), page no.7,Analysis of financial statement,
3. Donald R. Cooper and Pamela S. Schindler(3), (8th edition), page no.55,Business
Research Methodology,
4. Jain T.R. and Aggarwal, Dr. S.C.(4),(10th edition),page no,2Statistics For M.B.A,
5. Gupta S.P. and Gupta M.P.(5),(12th edition), page no.12Business Statistics,
6. Khan M.Y. & Jain P.K. (6), (5th edition), Financial Management,
7. Kothari C.R. (7), (2th edition),Research methodology methods & techniques,
8. SekranUma (9), (8th edition), Business Research Methodology
9. Mittal. R.K(10),(latest edition)Management Accounting & Financial Management,
10. Beri G.C. (12), (3rd edition), Marketing Research,
11. Chandra Prasanna (13), (7th edition) Financial Management.
12. Zikmund G. William(14),(7th edition), Business research methods,

Journals
13. 11.Arunkumar O.N., T. Radharamanan (25), oct2011-mar2012, Volume 5/ Issue 1
Analysis of Effects of Working Capital Management.
14. 12.Trivedi SA vita (16), oct2011, vol.4 (10) Impact of Working Capital Management.
15. 13.Debasish Sur and Kaushik Chakraborty (17), 2011, Vol. X, No. 2,journal of
management research.
16. Vida Mojtahedzadeh, Seyed Hossein Alavi Tabari, Rezvan Mosayebi (18), 2011,
International Research Journal of Finance and Economics - Issue 76.

Working capital

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17. Thomas Korankye , 2013, Vol.4, No.1, 2013 Research Journal of Finance and
Accounting.
18. Raiyani R.Jagdish, vol.4 (11) (November 2011) Advances in Management.
19. J P Singh and Shishir Pandey, 2008, Vol. VI, No. 4 Journal of Financial Economics.

websites
20. http://www.businessdictionary.com/definition/working-capital.html. The Researcher has
finding definition of working capital.
21. http://accountlearning.blogspot.in/2011/06/meaning-and-conceptofworkingcapital.html.
The Researcher has taken meaning and concept of working capital.
22. http;//money.rediff.com/companies/BILTbalance-sheet. The Researcher has taken the
information regarding stocks of the company.
23. http://www.moneycontrol.com/financial/BILT-sheet/BILT.The Researcher has taken
financial data of the company.
24. http://timesofindia.indiatimes.com/topic/BILT. The Researcher has taken the current
happening and their impact in share price.
25. http://economictimes.indiatimes.com/BILTstocknews/companyyid10506cms. The
Researcher has taken the latest stock news.

Working capital

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mba GNKCTIMTC

ANEXTURE

Profit and loss account and balance sheet of the company

BILT Balance Sheet
Mar 15

Mar 14

Mar 13

Mar 12

Mar 11

Share Capital +

246.16

246.16

223.4

127.84

127.97

Reserves & Surplus +

5779.07

4915.07

3849.58

1310.08

1271.84

Total Shareholders Funds

6025.23

5161.23

4072.98

1437.92

1399.81

Secured Loans +

2454.48

145

167.5

Unsecured Loans +

6871.10

1257.96

74.39

1313.55

1633.47

Total Debt
Total Liabilities

9325.58
15350.81

1402.96
6564.19

241.89
4314.87

1313.55
2751.47

1633.47
3033.28

Gross Block +

336.24

298.63

375.71

541.25

541.45

Less: Accumulated
Depreciation

231.61

214.52

207.36

327.71

284.35

Net Block

104.63

84.11

168.35

213.54

257.1

Capital Work in Progress

17.45

14.6

13.13

13.05

18.97

Investments +

4715.39

2434.34

2230.62

1644

1541.41

SOURCES OF FUNDS :

APPLICATION OF FUNDS :

Fixed Assets

Current Assts.,Loans &

Advances

Working capital

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Current Assets +

1079.94

429.92

236.16

313.89

471.03

Loans & Advances +

10480.47

3819.04

1818.82

625.46

1214.46

Less: Current Liabilities &

Provisions+

1144.80

217.82

152.21

58.47

469.69

Net Current Assets

10415.61

4031.14

1902.77

880.88

1215.8

Miscellaneous Expenses not

w/o +

97.73

Total Assets

15350.81

6564.19

4314.87

2751.47

3033.28

Contingent Liabilities +

553.41

86.99

89.64

148.17

251.06

BILT Profit / Loss Account

Mar 15

Mar 14

Mar 13

Mar 12

Mar 11

INCOME :
Operating Income +

1978.70

887

670.81

290.52

335.65

Other Income +

101.09

8.83

4.6

20.9

21.14

Stock Adjustment

Total Income

2079.79

895.83

675.41

311.42

356.79

Interest & Financial Charges

+

408.15

42.63

45.2

151.08

200.39

Operating & Administrative

Expenses +

483.10

100.98

33.06

5.63

8.52

Less: Preoperative
Expenditure Capitalized

Profit before Depreciation &

Tax

1188.54

752.22

597.15

154.71

147.88

EXPENDITURE :

Working capital

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Depreciation

17.09

19.04

46.54

43.5

42.09

Profit Before Tax

1171.45

733.18

550.61

111.21

105.79

Tax
Profit After Tax

146

87

13

5.4

1025.45

646.18

537.61

105.81

105.79

Adjustment below net profit +

-3.41

21.93

P & L Balance brought

forward

873.36

499.69

204.7

188.49

166.81

Appropriations +

465.68

294.44

242.62

89.6

84.11

P & L Balance carried down

1429.72

873.36

499.69

204.7

188.49

Equity Dividend

135.10

85.97

71.32

38.19

36.92

Preference Dividend

Corporate Dividend Tax

29.94

14.61

10

5.45

4.73

Equity Dividend (%)

55

35

32

30

29

Earnings Per Share (Rs.)

40.73

25.66

23.62

7.85

7.91

Book Value

244.77

209.67

182.32

112.48

109.49

Extraordinary Items +

1.23

6.59

1.99

Working capital

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Cash Flow Statement

Mar 15

Mar 14

Mar 13

Mar 12

Profit before tax

27.82

20.24

17.93

8.76

Net cash flowoperating activity

46.31

16.51

21.14

4.8

-50.19

-8.42

-9.51

-1.98

6.15

-9.72

-8.23

-3.2

1.68

-1.8

2.78

-0.37

2.94

4.25

1.47

1.85

4.62

2.45

4.25

1.47

Net cash used in

investing activity
Net cash used in fin.
activity
Net inc/dec. in cash
and equivalent
Cash and equivalent
begin of year
Cash and equivalent
end of year

Working capital

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mba GNKCTIMTC