A STUDY ON CASH MANAGEMENT IN CASTWEL AUTO PARTS

PRIVATE LIMITED CHENNAI.

CHAPTER -I

1.1 INTRODUCTION

Cash is one of the current assets of a business. It is needed at all times to keep
the business going. A business concern should always keep sufficient cash for
meeting its obligations. Any shortage of cash will hamper the operations of a concern
and any excess of it will be unproductive. Cash is the most unproductive of all the
assets. While fixed asset like machinery, plant etc. and current assets such as
inventory will help the business in increasing its earning capacity, cash in hand will
not add anything to the concern. It is in this context that cash management has
assumed much important.

Cash itself does not produce goods or services. It is used as a medium to

acquire other assets. It is the other assets which are asset in manufacturing foods or
providing services. The idle cash can be desalted in bank to earn interest.

A business has to keep required cash for meeting various needs. The assets
acquired by cash again help the business in producing cash. The goods manufactured
or services produce dare sold to acquire cash. A. firm will have to maintain a critical l
level of cash it at a time does not have sufficient cash with it, it true borrow from the
marked for reaching the required level.

The firm has to maintain a minimum amount of cash for setting the dues in
time Cash is needed to purchase raw materials pay creditors pay creditors day to day
expenses. Dividend etc. and to meet various obligation it is done on the basis of past
experiences and future expectation if higher cash balance maintain an opportunity to it
earn is lost.

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1.2 INDUSTRY PROFILE

Indian Die casting industry pays a major role in the country's economy. Indian
is the third producer of tools. The Indian Die casting tools industry has been focusing
on International markets and International products. Indian Die casting tools industry
brats the competition and makes world market.

Indian Die casting tools industry is considered as the mother industry. And
tools are the largest marketing sector in India. India is the II'1' largest producer of
quality tools availability in India.

According to the survey the cost of power for the Indian Die casting tools
industry has been focused to be highest among competitors.

The Indian Die casting tools industry the largest single industry in India holds
second place among the countries of the world in tools production with in investment
Rs. 184,300 corers in 6615 Die casting tools companies in India.

India provides direct employment to nearly 12 lakhs workers. It also provides

indirect employment many millions like the who are estimated to be over three
million and innumerable. Tools and dies.

The industry contributes in increasing measures to the central and state

government by way of taxes and duties. This birth of this industry dates back to 1932
when the first Die casting tools were established at sort gloster near Calcutta with
English capital. The real growth of the industry however started with the setting up
the Bombay Indian Die casting tools industry in 1945 with Paris capital. These
industry mainly manufacture the pressure die casting, Auto parts, tools, Die casting
moulds, electrical goods.

1.3 COMPANY PROFILE

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 Castwel Autoparts Pvt. Ltd company (CAPL)is one of the leading company
around the world in producing the autoparts. And it has been a trail blazer in the auto
component sector. This organization has a great reputation for producing the good
quality of the auto products among the other companies, casket autoparts pvt ltd was
established in the year 1985 , as a partnership concern and then moved on to become a
private limited company in the year 2006.

The company is currently having two manufacturing locations near chennai,

with the development capability for precision parts , which are supplied to leading
global automobile and auto parts manufacturers in India. CAPL is engaged in
manufacturing of high precision automotive machine components of FDC & GDS
including assemblies.

CAPL is a 100% subsidiary company of M.K auto\ components ltd ., labuan ,

malaysia. In which 51 of shares are owned by UMV & 49 of shares are owned by
MKI.

CAPL is also a member of UMW and MK joint venture company .Lets see
the business structure of UMW in an automotive. It has UMW Toyota & perodua ih
equipment manufacturing It helps in producing heavy equipments , industrial, main &
power.
In oil & gas it helps in manufacturing of pipes, helps in oil & gas exploration ,
fabrican, oil field services , oil filed products.

Machine shop:
1. Critical measuring machine (CMM)
2. Pressure dei-casting machine shop (PDC)
3. Computer numerical concept (CNC) lathe
4. Vertical machining concept (VMC) machine
5. Spectro max

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CAPL has a great reputation of dealing with the customers who are famous
throughout the world.

The major customers of CAPL are:

 BOSCH
 TAFE
 SONA
 AVTEC
 RANE
 MAHINDRA
 SUNDARAM-CLAYTON LTD
 PANASONIC
 SAME
 TVS&
 FAIVELESY TRANSPORT

MISSION & VISION OF CAPL

‘create value to shareholders and all other stake holders by cost efficiency
& timely delivery of products adopucts adopting best manufacturing practices’
Shareholding structure of castwel auto parts pvt ltd shareholding structure is as
follows,

 100% subsidiary of MK auto components ltd, Malaysia

 Jointly owned by UMW and MK
 CAPL capabilities span wide range of products in automotive sector and the
company stands as a perfect amalgam of people, technology and resources
reinforced with through knowledge of nuances of automotive industry.

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 DEPARTMENT PROFILE

MRS Section
Material Receipt Section. This section receives the raw materials and issues to
Processing and Production.
E.g.: Raw materials like Casting, Aluminum etc.

INSPECTION
All the materials received from MRS section are inspected here using various
instruments.

STORE
All the approved materials are stored here and sent for further processing.
Store consists of three divisions
(a) Process store

Certain processing is done for raw materials.

(b)Hardware store
Materials are purchased from outside and stored here.
(c) Component store
The approved and rejected materials are segregated and approved
materials are sent for production.

PURCHASE DEPARTMENT:
Identifying the supplier based upon the advertisement, internet and contacts.
They also determine the materials to be purchased and fix the rate.

EDP (IT) DEPARTMENT

It stores whatever data related to the company. In this department data are
stored and processed electronically. The software used in this company is FOXPRO.
FOXPRO is a text-based procedural programming language and DBMS, originally
published by Microsoft, for MS-DOS, Microsoft Windows, Macintosh, and UNIX.

5
They store the details of goods and raw materials, details of supplier and employee
etc.

ASSEMBLY DEPARTMENT
For assembly of the components are received from store and the components
are assembled as per the flow chart / work instructions.

TESTING
Testing is done after assemble of the product. Testing is carried out to check
whether the products are assembled properly.

PACKING
In this department the assembled material are Packed, and a pre-despatch
inspection is carried out. After the inspection the materials are dispatched for sale.

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 PHASES OF DEVELOPMENT
MRS
Material Receipt Section. This section receives the raw materials and issues to
the processing and production. The materials are received based upon the Purchase
Order (PO).The SECURITY STAFF checks for Quantity, Item code, Invoice number
etc., and enters the
 Supplier name

 Date

 Voucher number

 Item name and

 Quantity in the GATE INWARD REGISTER.

After receiving the materials, the MRS assistant checks the

 DC(Delivery Challan) copy with Security seal

 Purchase order number

 Supplied quantity

 Item description

 Validation of PO.

The validation of Purchase Order must be 30 days for local purchase and 45
days for outstation.The Unit Head prepares the CCIP/CCIL ( Challan Cum
Invoice Purchase/ Challan Cum Invoice Labour) and enters the necessary details
and the goods are handed over to Inspection department.

INSPECTION

All the materials are received from MRS section through the CCIP/CCIL and
they are kept in YELLOW bags /bins with suitable tag. All the materials are
subject to inspection as per RAW MATERIAL INSPECTION PLAN. The

7
inspection is carried out using Gauge /Calibrated instruments.

They also check for visual defects such as cracks, holes, thread damage, air
holes etc.,They enter the necessary details in CCIP / CCIL.The rejected materials are
separated in RED colored bags / bins and handed over to store through CCIP/CCIL
for corrective action.The approved materials are kept in GREEN colored bags / bins
and handed over to store through CCIP / CCIL.

STORES
Receive materials from Inspection. The materials are preserved in this section.
The materials are protected from heat and sunlight. Sufficient fire extinguishers are
provided at some required places. There are three types of store. They are
 Process store

 Component store

 Hardware store.

(a) PROCESS STORE

The raw materials are received and necessary processing is done in process
store.

(b)COMPONENT STORE
In this store the approved and rejected materials are separated and the
approved materials are sent for rework and the rejected goods were sent for
rework / disposed.

(c)HARDWARE STORE

Materials required are purchased from outside and stored. The quotations are
received from the different departments as the material requirement.

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PURCHASE

In purchase department, they identify the supplier based upon the

advertisement, web, internet, contacts, experience etc. Register form is sent to
suppliers for required materials. The new suppliers are monitored for three months
based on performance during trial period. Based upon the performance during trial
period they are approved or rejected. The purchase requisition is received from store
for procurement of materials. The HOD scrutinizes the purchase requisition. In case
of capital purchase like the purchase of machinery, equipments are ordered after the
approval of GM.

EDP
Electronic Data Processing. It stores whatever data related to the company. It
is also known as IT department. It stores the production details, details of raw
materials purchased, total production and sale. It helps to store data such as the

 Date of purchase

 Supplier name

 Sales / purchase order

 Date of delivery date

 Supplier address

 Service period

 Accounting data so on.

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This department also stores all the employee details such as

 Employee name

 Employee salary

 Employee detail

 Date of joining

 Employee address

 Employee contact number and so on

The software used in the company is FOXPRO. It is a DBMS (Data Base

Management System).LINUX OS is used. Now the department is shifting the data to
use with Oracle as back end and Java as front end. The head of department is EDP
manager. The EDP manager is the senior software engineer. The EDP manager directs
the Maintenance engineer (Software engineer) in the development of software. The
senior software engineer helps in the development of software.

ASSEMBLY
For assembly of die components are received from stores and certain materials
are received from varnishing department, as some materials are varnished to prevent
the water leakage. The components are assembled as per the flow chart/ work
instruction. During assembly the assembly details are recorded in the daily production
report. During assembly if any components are found defective it is returned to stores
through replacement indent and recorded in the Non-conformance register. After
assembly of die components they are sent to testing department separately and, testing
is carried out as per testing plan and testing work instructions.

3.8 PACKING
Receives from testing. Name plate is fixed. Final inspection is carried out.
Dispatched. After the final product testing the materials are received for final
assembly. The product is cleaned. necessary assessories, safety measures are taken.
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Name plates are received from store and product serial number is punched in the
name plate of the product. The packing materials are drawn from store and the
packing of the material are done in carton/wooden boxes as per work instruction.
Guarantee cards, Manual and packing slip is put into box indicating the serial number.
Identification and safety stickers are fixed. During and after completion of packing
the correctness are verified by carrying out a pre dispatch inspection plan.

PRE DESPATCH INSPECTION

Stickers, Serial numbers are checked. Name plate detail is verified. Bursting
strength is checked.MRP details are checked. Verification of instruction manuals,
guarantee cards etc. Verification of cable length is done. The material are set
separately with their corresponding serial number. Packed boxes that are ready for
dispatch are moved to finished goods area and stacked neatly. Package details are
recorded. The non conformities are identified are recorded and disposed.

1.4 REVIEW OF LITERATURE

Kaith V. Smith say’s that financial managers Can consider a series of seven
strategies for handling the excess cash balance with the firm (i) Do noting (ii) Make
adhoc investments (iii) ride the yield curve (iv) develop guidelines (v) Utilize control
limits (vi) manage with a part folio prospective and (vii) follow a mechanical
procedure

The liquid resources of a firm may be kept in various firm Michel Lazare
posted about the public cash management and the supreme loan crisis he say’s that Be
aware of financial investment risks. Effective cash management is one of the basis
pillars of sound public financial management is one of the basis pillars of sound
public financial management is conservation of cash. This includes minimizing idle
cash balances by : (a)Keeping on the governments account only the working cash
balances needed to face day – to –day routine expenditures and the cash needed to
face immediate financial obligations: (b) investing the remaining cash on liquid and
interest – earning financial assets. But, like any other financial investment, investing
cash may present risks.

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 Denise Ryan Discover new cash management strategies by seeking cash
management education and training. He says that by utilizing effective cash
management techniques. you’ll be able to maximize any available cash by
immediately reinvesting it into your business or allocating it or allocating it for future
expenses. Seeking training to fine tune your business cash flow management enables
you to avoid risky investments and strike a successful balance between saving and
spending. Cash management techniques cover everything from simple budgeting.

There have been a harmful of studies that have examined Senior Officials
from African Countries Discuss cash Management Issues in a workshop Organized by
IMF African East.

Africa East, the regional technical assistance center of the IMF in east Africa,
in collaboration with the Africa Capacity Building Foundation, conducted a workshop
on cash management reforms, at the Kenya school o Monetary Studies in Nairobi
from September 22-26 2008. It was arrended by 31 mid- and senior – level officials –
including. Heads of Departments of Treasury , Fiscal policy Units, Macroeconomic
Management Units, Financial Controllers, Senior Economists. Principal Finance and
Accounting Officers, and Budget Officers – from 9 countries (Ethiopia, Kenya,
Lesotho. Malawi Mozambique, Namibia, Rwanda, Uganda, and Zanzibar). The
workshop was facilitated by AFRTAC East advisors and staff from the IMF
Headquarters. It was inaugurated by the permanent Secretary to the Treasury of the
Ministry of Finance of Kenya, and closed by the AFRITAC East Center Coordinator.

A new IMF FAD Technical Guidance Note on Cash Management, Prepared

by lan Lienert of Fiscal Affairs Department, explores how countries can improve the
or cash management practices and eliminate some of the inefficiencies in current
practices he says that do you manage your own cash well? Can you always pay your
bills in time? Do you borrow unnecessarily? Do you have balance in bank accounts
that aree not receiving the interest rate ? just as individuals are concerned about
managing their cash well, so are governments. In practices, however, not all
governments manage cash well. some countries have unremunerated balances in
thousands of bank accounts, yet at the same , they are borrowing from domestic or

12
external creditors at market interstates. Commercial bank and other purchasers of
government bonds are very happy with such arrangements.

13
 CHAPTER - II
RESEARCH METHODOLOGY

2.1 Title of the Project

The title is “A study on Cash Management in Castwel Auto parts Private Ltd
Chennai.

2.2 Scope of the study

The scope of finance is indeed vast and it is determined by the financial needs
of an enterprise. The study aims to find out the most favorable way to manage cash
which is most unproductive of all the .assets and also used as a medium to acquire
other assets and also find out the must feasible way if maintain a balance between
cash in flow and out flow.

2.3 Objectives :
a) To analyze the cash balances held by the firm in a certain point of time.
b) To analyze the cash in flows and out flows.
c) To make a detail planning of cash requirements.
d) To manage the fund flow by accelerating the cash collection.
e) To analyze the day to day working capital position.

2.4 Types of research

This study is an analytical research based secondary data. The researcher has
to use facts or information already available, and analyze these to make a critical
evaluation the material.

2.5 Tools used for Analysis

The statistical tools used for analysis of the data are
1. Correlation analysis.
2. Trend analysis
3. Regression Analysis

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Financial Tools

1. Fund flow statement Analysis

2. Ratio analysis

2.6 Sources of data collection

Secondary data in Castwel Auto Parts Private Ltd.,

2.7 Limitations of the study

• The data collected for the study was historic in nature so all the limitation
of secondary data apply to the same.
• Data taken for analysis to last 5 years

CHAPTER - III
15
 DATA ANALYSIS & INTERPRETATION

RATIO ANALYSIS

Ratio analysis is the systematic process of determining and interpreting the

numerical relationship of various pairs of items derived from the finance statements of
another number.

Ratio analysis involves the use of various methods for calculating and
interpreting financial analysis to assess the performance and status of the business
unit. It is a tool of financial analysis, which studies the numerical or quantitative
relationship between two variable and item.

The primary use of financial statement is evaluated past performance and

predicting future performance arid bother of these are facilitated by comparison.
There focus on financial analysis is always on the crucial information contained the
financial statement.

CURRENT RATIO
Current ratio may be defined as the relationship between current assets and
current liabilities. This ratio also known as working capital ratio, is a measure of
general liquidity and is most widely used to make the analysis of a short-term
financial position or liquidity of a firm. It is calculated by dividing the total of current
assets by total of the current liabilities.

QUICK OR ACID TEST OR LIQUID RATIO

Quick Ratio, also known as Acid Test or liquid Ratio, is a more rigorous test
of liquidity than the current ratio. The term ‘liquidity’ refers to the ability of a firm to
pay its short-term obligations as and when they become due. The two determinants of
current ratio, as a measure of liquidity , are current assets and current liabilities.
Current assets include inventories and prepaid expenses which are not easily
convertible into cash within a short period.

Quick ratio may be defined as the relationship between quick/liquid assets and
current or liquid liabilities. An assets is said to be liquid if it can be converted into
16
cash within a short period without loss of value. In that sense, cash in hand and cash
at bank are the most liquid assets.

The other assets which can be included in the liquid assets are bills
receivable, sundry debtors, marketable securities and short-term or temporary
investment. Inventories cannot be termed to be liquid asset because they cannot be
converted into cash immediately without a sufficient loss of value.

In the same manner, prepaid expenses are also excluded from the list of
quick/liquid assets because they are not expected to be converted into cash. The quick
ratio can be calculated by dividing the total of the quick assets by total current
liabilities.

ABSOLUTE LOQUID RATIO OR CASH RATIO

Although receivables, debtors and bills receivable are generally more liquid
than inventories, yet there may be doubts regarding their realization into cash
immediately or in the time. Hence, some authorities are of the opinion that the
absolute liquid ratio should also be calculated together with current ratio and acid test
ratio sp as to exclude even receivables from the current and find out the absolute
liquid assets.

DEBT-EQUITY RATIO
Debt- Equity Ratio, also known as External – Internal Equity Ratio is
calculated to measure the relative claims of outsiders and the owners (i.e.,
shareholders) against the firm’s assets. This ratio indicates the relationship between
the external equities or the outsiders funds and the internal equities. or the
shareholders’ funds.

OPERARING RATIO
Operating ratio establishes the relationship between cost of goods sold and
other operating expenses on the one hand and the sales on the other. In other words, it
17
measures the cast of operations per rupee of sales. The ratio is calculated by dividing
operating costs with the net sales and is generally represented as a percentage.

CASH PROFIT RATIO

The net profit of a firm are affected by the amount/method of depreciation
charged. Further, depreciation being a non- cash expense, it is to calculate cash profit
ratio. This ratio measures the relationship between cash generated from operations
and the net sales.

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 (a) RATIO ANALYSIS

3.a.(1) QUICK RATIO

Quick assets
Quick Ratio =
Quick liability

3.a (1)Table showing quick ratio for CAPL (RS in Lakhs).

Year Quick Asset Quick liability Result

2004-2005 1981 1228 1.613

2005-2006 944 1542 0.612
2006-2007 542 1402 0.386
2007-2008 534 1253 0.426

2008-2009 655 1741 0.376

Interpretation:
From the above table ,shows the quick Ratio for 2004-2005 is 1.613 and
2005-2006 Ratio is 0.612 2006-2007 Ratio is 0.386 where as in 2007-2008 the quick
ratio is 0.426 and 2008-2009 Ratio is 0.376.

3.a.(1) The Figure Showing Quick Ratio

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 3 .a (2) OPERATING RATIO

Operating Ratio = Cost of goods sold

20
 Net sales

3.a. (2) Table showing operating ratio for CAPL (RS in

Lakhs)..

Year Cost of goods sold Net Sales Result

2004-2005 11717 12634 0.927
2005-2006 12668 13697 0.924
2006-2007 13126 15148 0.866
2007-2008 12969 15760 0.822
2008-2009 13679 14931 0.916

Interpretation:
Operating ratio table shows in the year 2004-2005 it is 0.927 2005-2006
0.924, 2006-2007 0.866, 2007-2008 0.822,the last year ratio 2008-2009 is 0.916.

3.a (2)The Figure Showing Operating Ratio

21
Operating Ratio

3.a(3) . DEBT EQUATY RATIO

Debt equity Ratio = Debt

22
 Equity

3.a (3) Table showing Debt Equity Ratio (RS in Lakhs).

Year Debt Cash Profit Equity Result

2004-2005 2378 4127 0.576
2005-2006 2141 4127 0.518
2006-2007 1599 4127 0.387
2007-2008 701 4127 0.169
2008-2009 394 5000 0.0788

Interpretation:
The above Debt equity ratio table shows in the year 2004-2005 it is
0.576,2005-2006 0.518, 2006-2007 0.387,2007-2008 0.169, the last year ratio
2008-2009 is 0.0788.

3.a. (3)The Figure Showing Debt Equity Ratio

23
Debt Equity Ratio

3.a(4) . CASH RATIO

Cash + Marketable securities

Cash ratio =
Current liability

24
3.a.(4)Table showing cash ratio (RS in Lakhs).

Year Cash + Current liabilities Result

Marketable
securities
2004-2005 212 1228 0.172
2005-2006 574 1542 0.372
2006-2007 1356 1402 0.961
2007-2008 2165 1253 1.728
2008-2009 2305 1741 1.323

Interpretation:

From the table, cash ratio shows in the year 2004-2005 it is 0.172,2005-2006
0.372,2006-2007 0.961, 2007-2008 1.728, the last year ratio 2008-2009 is 1.323

3.a.(4)The Figure Showing Cash Ratio

25
Cash Ratio

3.a.(5) . CURRENT RATIO

Current Ratio = Current Assets

26
 Current Liabilities

3.a.(5) The Table showing Current Ratio (RS in Lakhs).

Year C.A C.L Ratio

2004-2005 5019 1228 4.087
2005-2006 4481 1542 2.905
2006-2007 3952 1402 2.818
2007-2008 3500 1253 2.793
2008-2009 4167 1741 2.39

Interpretation:
Current ratio table shows in the year 2004-2005 it is 4.087,2005-2006
2.905,2006-2007 2.818,2007-2008 2.793 the last year ratio 2008-2009 is 2.39.

3.a.(5) The Figure Showing Current Ratio

27
Current Ratio

3.a(6) . CASH PROFIT RATIO

Cash profit Ratio = Cash profit

Sales
28
3.a.(6)Table showing Cash profit Ratio (RS in Lakhs).

Year Cash Profit sales Result

2004-2005 1957 25268 0.07744
2005-2006 2120 27393 0.0773
2006-2007 4057 30296 0.1339
2007-2008 5753 31519 0.1825
2008-2009 2990 29861 0.1001

Interpretation:
Above table shows in the year 2004-2005 it is 0.07744, 2005-2006 0.0773,
2006-2007 0.1339, 2007-2008 0.1825 the last year ratio 2008-2009 is 0.1001.

3.a. (6)The Figure Showing Cash Profit Ratio

29
Cash Profit Ratio

3.(b) FUND FLOW STATEMENT

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 The Funds flow Statement is a statement which shows the movement of funds
and is a report of the financial operations of the business undertaking. It indicates
various means by which funds were obtained during a particular period and the ways
in which these funds were employed. In simple words, it is a statement of sources and
applications of funds.

MEANING AND CONCEPT OF FUNDS

The term ‘funds’ has been defined in a number of ways
(a) In a narrow sense, it means cash only and a funds flow statement
prepared on this basis is called a cash flow statement. Such a statement
enumerates net effects of the various business transactions on cash and
takes into account receipts and disbursements of cash.

(b) In a broader sense, the term ‘funds’ refers to money values in whatever
form it may exist. Here ‘funds’ means all financial resources, used in
business whether in the form of men, material money machinery and
others.

(c) In a popular sense, the term ‘finds’ , means working capital, i.e., the
excess of current over current liabilities. The working capital concept
of funds has emerged due to the fact that total resources of a business
are invested partly in fixed assets in the form of fixed capital and partly
kept in from of liquid or near liquid form as working capital.

The narrower concept of ‘funds’, i.e., cash or working capital concept, fails to
reveal the changes in the total financial resources of a business. Some significant
items., such as purchase of building in exchanges of shares or payment of bonus in the
form of shares, which do not directly affect cash or working capital are not revealed
from the analysis based on these concepts.

However, the concept of funds as working capital is the most popular one and
in this chapter we shall generally refer to ‘funds’ as working capital and a funds flow
statement as a statement of sources and application of funds.

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MEANING AND CONCEPT OF ‘FLOW OF FUNDS’
The term ‘flow’ means movement and includes both ‘inflow’ and ‘outflow’.
The tern ‘flow of funds’ means transfer of economic values from one asset of equity
to another. Flow of funds is said to have taken place when any transaction makes
changes in the amount of funds available before happening of the transaction.

It the effect of transaction results in the increase of funds, it is called a source

of funds and if it results in the decrease of funds, it is known as an application of
funds. Further, in case the transaction does not change funds, it is said to have not
resulted in the flow of funds.

According to the working capital concept of funds, the term ‘flow of funds’
refers to the movement of funds in the working capital. If any transaction results in
the increase in working capital, it is said to be a source or inflow of funds and if it
results in the decrease of working capital, it is said to be an application or out-flow of
funds.

RULE
The flow of funds occurs when a transaction changes on the one hand a non-
current account and an the other a current account and vice-versa.

When a change in a non-current account e.g., fixed assets, long-term liabilities,

reserves and surplus, fictitious assets, etc., is followed by a change in another non-
current account, it does not amount to flow of funds. This is because of the fact that in
such cases neither the working capital increase nor decreases. Similarly, when a
changes in one current account results in a change in another current account, it does
not affect funds.

Funds move from non- current to current transactions or vice-versa only. In

simple language funds move when a transaction affects (i) a current asset and a fixed
asset, or (ii) a fixed and a current liability, or (iii) a current asset and a fixed liability,
or (iv) a fixed liability and current liability; and funds do not move when the

32
transaction affects fixed assets and fixed liability or current assets and current
liabilities.

CURRENT AND NON-CURRENT ACCOUNTS

To understand flow of funds, it is essential to classify various accounts and
balance sheet items into current and non-current categories.
Current Accounts can either be current assets or current liabilities. Current
assets are those assets which in the ordinary course of business can be or will be
converted into cash within a short period of normally one accounting year.
Current liabilities are those liabilities which are intended to be paid in the
ordinary course of business within a short period of normally one accounting year out
of the current assets or the income of the business.

3.b.(1) The Schedule showing changes in working capital

(2005-2006 and 2006-2007)

(RS in
Lakhs).
Capital 2005-2006 2006-2007 Changes in working capital
33
 Particulars Increase Decrease
Current Assets
Inventories 3038 3537 499
Debtors 1977 1234 - 743
Cash 212 574 362
Other current 1 4 3
assets
5228 5349

1228 1542

Current Liabilities
4000 3807

W.C (CA-CL)
193
Net decrease in 193
4000 4107 1057 1057
Current Cash

Fund from operations (RS in Lakhs). .

Particulars Amount Amount

Transfer to general reserve 69
Provision 169

Fund from operation 238

3.b.(2) Fund flow statement 2005-2006

(RS in
Lakhs).
Sounds Amount Application Amount

34
Issue of share capital - Decrease in seared loan 23
Fund from operation 238 Decrease in 214
Net decrease in W.C 193 Unsecured loans
Increase in purchase of Net block 245
miscellaneous 61 Increase in WIP 93
expenses
Increase deferred tax 189 Decrease in loans and
liabilities advances 106
681 681

3.b.(3) Schedule Showing Changes in working capital

(2006-2007 and 2007-2008)
(RS in
Lakhs).
Particulars 2006-2007 2007-2008 Changes in working capital
Increase Decrease
Current Assets
Inventories 3537 3410 127
Debtors 1234 796 438
Cash 574 1356 782
Other Current Assets 4 12 8
5349 5574
Total Current assets
140
1542 1402
Current Liabilities
1542 1402
Total Current Liabilities
3807 4172
Working capital(CA-CL)
365
Increase in work in Capital 365

Fund From operations

(RS in Lakhs).

Particulars Amount Amount

Transfer to general reserve 267
593
Provisions
Fund from operation 860

35
 3.b.(4) Fund Flow Statement 2006-2007
(RS in Lakhs)
.
Sources Amount Application Amount
Issue of share capital - Decrease In secured loans 527
Fund from operation 860 Decrease in unsecured loans 10
Decrease in work in process 242 Purchasing of Net block 686
Increase in Loans and Advances 107 Net increasing working
Increase differed tax and Liabilities 455 capital 365
Decrease in miscall igneous
Expenses 76

1664 1664

3.b.(5). The Schedule Showing changes in working capital

(2007-2008 and 2008-2009)

(RS in Lakhs)
.
Changes in working
Particulars 2007-2008 2008-2009 capital
Increase Decrease

36
Current Assets
Inventories 3410 3534 125
Debtors 796 718 78
Cash 1356 2165 809
Other current assets 12 17 5

5574 6434
Total current assets
Current Liabilities 1402 1253
149
1402 1253
Working capital (C.A – 4172 5182
C.L) 1010
1010
Net increase in working
capital
5182 5182 1088 1088

Fund from Operations

(RS in
Lakhs).
Particulars Amt Amt
Transfer to General Reserve 872
- provision 135
Funds from Operation 1007

3.b.(6)Fund flow statement for the year 2007-2008

(RS in
Lakhs).
Sources Amt Applications Amt
Issue of share Capital - Decrease in secured loan 558
Fund from operation 1007 Increase in WIP 8
decrease in Net block 823 Decrease in Loans and Advances 171
Decrease the deferred Tax 83
Net increase in working capital 1010
1830 1830

37
 3.b.(7) . Schedule of changes in working capital

(2008-2009 and 2009-2010)

(RS in
Lakhs).
Changes in working
Particulars 2008-2009 2009-2010 capital
Increase Decrease
Current Assets
Inventories 3534 3512 22
Debtors 718 442 276
Cash 2165 2305 140
Other Current Assets 17 25 8
6434 6284
Total Current assets
1253 1741 488
Current Liabilities
1253 1741
Total Current Liabilities
5181 4543
W.C (CA-CL)
638
Net Decrease in working 638
Capital 5181 5181 786 786

Funds from Operations

(RS in
Lakhs).
Particulars Amt Amt
Transfer to General Reserve 284
- provision 161
Funds from Operation 123

3.b.(8)Fund flow statement for the year 2008-2009

(RS in Lakhs).
Sources Amt Applications Amt
Increasing the Capital 873 Decrease in secured loan 607
Fund from operation 123 Purchase of net block 591
Net decrease in W.C 638 Increase in WIP 596

38
Increase the deferred tax 227 Decrease in Loans and Advances 67
liabilities
1861 1861

3.b. (9)Yearly Changes in working capital (2005-2006 to 2008- 2009)

(RS in
Lakhs).
Year Changes in Increase Decrease
working capital
2005-2006 193 193
2006-2007 365 365
2007-2008
1010 1010

2008-2009 638 638

Interpretation
The working capital is increase two years that is 2006-2007,2007-2008 and
two years decrease the work capital for 2005-2006,2008-2009

39
 3.b. (9)The figure Showing Changes in working capital

(2004-2005 to 2007- 2008)

Changes of working capital

Year

40
 3.1 TREND ANALYSIS

Trend analysis is apple usual tool for the management. Since it reduces large
amount of absolute data in to a simple and easily from. This method determines the
direction up ward and down ward and involves the computation of the percentage
relationship that statement item bears to the same item in base year.

3.1 (a) The Table showing Five Year Cash Profit and Deficit

Year Cash profit Deviations xy X2 Trend

and deficit from the value
(y) year (y)
2005 978 -2 -1956 4 1117.4
2006 1060 -1 -1060 1 1402.4
2007 2028 0 0 0 1687.4
2008 2876 1 2876 1 1972.4
2009 1495 2 2990 4 2257.4
∑y 8437 ∑x 0 ∑xy 2850 ∑x2 10

Yc = a+bx

A = ∑y = 8437 a = 1687.4
n 5

B == ∑xy =2850 b = 285

∑x2 10

41
 Yc = a+bx

=1687.4 + 285x

Estimated the profit and deficit for 2011

For 2012 x = 5 so we have

Y2012 = 1687.4 +285x

Y2012 = 1687.4 +285(5)

= 3112.4

Estimated the profit and deficit for 2012 = 3112.4

3.1.(a)The Figure Showing Five year Cash Profit and Deficit

2500

2000
Trend value

1500
Series1
1000

500

0
2005 2006 2007 2008
Year

3.1.(b) Estimates the Cash Profit and deficit for fourth coming year

Year Estimate the cash profit and Deficit

2009-2010 2542.4
2010-2011 2827.4
2011-2012 3112.4
2012-2013 3367.4
2013-2014 3682.4

Interpretation

42
 The fourth coming year cash profit increasing the trend.

3.1.(b) The figure Showing Estimates the Cash Profit and deficit for

fourth coming year

Estimate the cash profit and Deficit

Year

43
 CHAPTER –IV

FINDINGS,

1. Quick Ratio is high in 2004-2005 and the continuous years is fell down bad
position of the company.
2. The operating Ratio of a company is fluctuating . The variation is 0.1. This
Ratio is does not affect the company.
3. The cash profit ratio also goes on fluctuating movement that depicts the
company has good profit earnings for present and future years.
4. The organization debt equity ratio is goes on downward movement this shows
that the company does not maintain the debt and equity proportion as 1:1.
5. The current ratio is shows the bad position of the company, The ratio does not
have the good liquidity position.
6. Schedule of changes in working capital of a company is increasing 2006-2007,
2007-2008 .decrease the working capital 2005 – 2006 , 2008 - 2009.
7. The fund from operation cost is increasing . But the last year is decreasing
(2007-2008) .
8. The cash profit, sales turn over, cash balance, fixed assets year by year
increasing in trend.
9. Estimate the forthcoming years Trend is Cash Profit and deficit , Cash balance
, Sales Turnover is increase.

44
 CHAPTER - V

SUGGESTIONS

1. The company must take care of the Quick ratio during the last year in 2008.
2. Castwel auto parts private limited does not have a correlation between sales and
cash. The company must care about the sales and cash.
3. The current Ratio of 2:1 is considered normally satisfactory. Castwel auto parts
private limited should try to improve the current ratio.
4. The company followed an aggressive policy of financing working capital should try
to finance 50% of their working capital using long term source and improve their
status.
5. The company must take care of fund from operation for the last year 2008-2009..
6. The company must take care of the current ratio and cash profit ratio during the
last year.
7. They need to kept more money in reserve and surplus, because the industry has
quick profit as well as quick losses.
8. The enhance the efficiency of cash management collection and disbursement must
be properly monitored.

45
46
 CHAPTER - VI

CONCLUSION

The Cash Management Analysis done on the financial position of the

company has provided a clear view on the activities of the company. The use of the
ratio analysis, trend analysis, Fund Flow Statement and other accounting and financial
management helped in this study to find out the financial soundness of the company.
This project was very useful for the judgment of the financial status of the company
from the management point of view.

This evaluation proved a great deal to the management to make a decision on

the regulation of the funds to increase the sales and bring profit to the company. . So
this study will helps the management to eradicate such a negative impact of Quick
ratio , Current ratio, and also helps the organization to take necessary actions in
areas where they are needed. Overall the company cash management is effectively.
The company have a strong solvency position.

BIBLIOGRAPHY
47
 • Shashi K. Gupta and R.K. Sharma “Financial Management” in Kalyani
Publishers. Sixth Edition.
• Company annual report
• K.V. Smith “Management of working capital”
• Google search
o www.financial management.com
• Statistical Methods Gupta S.T. New Delhi, Sultan Chand and Sons, 1998.

ANNEXTURE

48
 Balance sheet of Castwel Auto parts Pvt.Ltd.
(RS in Lakhs).
Particulars March-05 March-06 March-07 March- March-
08 09
Source of funds
Share capital 4127 4127 4127 4127 5000
Reserve and surplus 5450 5519 5786 6658 6942

9577 9646 9913 10785 11942

Total
Loans funds
Secured loans 2019 2086 1559 1001 394
Unsecured loans 269 55 40 - -
Deferred tax liabilities 1243 1432 1887 1504 1731
13198 13219 13399 13290 14067
Total
Fixer assets
Net block 7769 8014 8700 7887 11837
WIP 183 276 34 42 638
7952 8290 8734 7919 9116
Total
Investments - - - - -
Inventors 3038 3537 3410 3534 3512
Debtors 1977 1234 296 718 442
Cash 212 574 1356 2165 2305
Other current assets 1 4 12 17 25
Loans and advances 1332 1226 1333 1162 1095
6560 6575 6907 7596 7379
Total
Current Liabilities 1228 1542 1402 1253 1741
Provisions 314 483 1076 941 780
Net current assets 5019 4481 3952 3500 4167
Miscellaneous Expenses 77 138 62 - -
13198 13219 13399 13290 14067
Total

49