Working Capitl Management & Ratio Analysis

A
PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT
& RATIO ANALYSIS
For
RAYMOND UCO DENIM PVT.LTD.

Submitted in partial fulfillment of the requirements for the degree of
Master In Business Administration (Finance).
PRESENTED BY
SWAPNIL B. PAJGADE
(Batch 2009-2010)
Under the guidance of

Prof. R.G.SATHE
DEPARTMENT OF MANAGEMENT SCIENCE & RESEARCH,

MAHATEMA PHULE INSTITUTE OF MANAGEMENT
HADAPSAR, PUNE
1
PUNE UNIVERSITY, PUNE
INDEX
CHAPTER TOPIC PAGE
NO
1 INTRODUCTION
2 COMPANY PROFILE
3 OBJECTIVE OF STUDY
4 THEREOTICAL
BACKGROUND
5 RESEARCH
METHODOLOGY
6 DATA ANALYSIS AND
INTERPRETATION
7 FINDINGS AND
CONCLUSION
8 SUGGESTIONS
9 ANNEXURE
10 BIBLIOGRAPHY
2
CHAPTER 1
INTRODUCTION
Title of the study

The title of the study is “WORKING CAPITAL MANAGEMENT & RATIO
ANALYSIS AT THE RAYMOND DENIM PVT.LTD.”
3
An Introduction
Working capital management is a significant in financial management due to the

fact that it plays a vital role in keeping the wheel of business enterprises running.
Working capital management is concerned with short term financial decision. Shortage of
funds for working capital has caused many businesses to fail and in many cases, as
retarded their growth. Lack of efficient and effective utilization of working capital leads
to low rate of return on capital employed. The lead for skill working capital management
has thus become greater in recent years. A firm invests a part of its permanent capital in
fixed asset and keeping part of it for working capital i.e. for meeting a day to day
requirement.
The management of working capital is important as Sufficient liquidity is
necessary and must be achieve and maintain to provided funds and pay of the obligation
as they arises or mature. Each organization is faced with its own limits on the production
capacity and technologies it can employ there are fixed as well as variable costs
associated with production goods. In other words, the markets in which real firm
operated are not perfectly competitive. These real world facts introduce problems and
require the necessity of working capital. Working capital management is the functional
area of finance that covers all the current accounts of the firm. It is concerned with
management of the level of individual current assets as well as the management of total
working capital. Working capital management involves the relationship between a firm's
short-term assets and its short-term liabilities. The goal of working capital management is
to ensure that a firm is able to continue its operations and that it has sufficient ability to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable and
payable, and cash.
So, If the firm finds problem of manage the working capital the firm might have
liquidation problem which is harmful to the organization. Technically, working capital
management is an integral part of the overall financial management. It plays a vital role
in any business enterprises
4
So, the importance of working capital management is reflected in the fact that
financial managers spend a great deal of time in Managing current asset and current
liabilities. Arranging short term financing, negotiating favorable credit terms , controlling
cash movementr , managing account receivable, and monitoring investments in
inventories consume a great deal of time of financial managers.
RATIO ANALYSIS
Ratio analysis is a powerful tools for financial analysis. A ratio is defined as a

indicate quotient of the two mathematical expression and as the relationship between two
or more thing . In the financial analysis, ratio is use for a benchmark for evaluating the
financial position and performance of the firm. The absolute accounting figure reported
in the financial statement do not provide a meaningful understanding of the performance
and financial position of a firm. An accounting figure conveys meaning when it is related
to some other relevant information the relationship between the two accounting figure,
expressed mathematically, is known as financial ratio. Ratio helps to summaries large
quantity is of finical data and to make to quantitative judgment about the firm’s financial
performance.
Strategic information is just as important to shareholder as it is the company

management who will select ratios that help them in their daily operation. But it is worth
remembering that the management usually has access the more information concerning
the company and its competitors than person’s external to the company.
5
CHAPTER 2
COMPANY PROFILE
RAYMOND UCO DENIM PVT.LTD.
6
• 1925 - Setup of The Raymond Woollen mill in 1925 the area around Thane creek.
• 1944: Lala Kailashpat Singhania took over The Raymond Woollen Mill. The mill was
primarily making cheap and coarse woollen blankets, and modest quantities of low
priced woollen fabrics.
• 1950 - Setup of a new manufacturing activity for making indigenous engineering files
known as JK Files & Tools. This has now become the largest facility of its kind in the
world.
• 1958 - The first exclusive Raymond Retail showroom, King's Corner, was opened in
1958 at Ballard Estate in Bombay.
• 1964 - Setup of a new Combing Division. This was followed by a phase of vertical
integration, facilitating in the processing of multi-fibres and technology
improvements to make blended fabrics.
• 1968 - Raymond setup a readymade garments plant at Thane. The readymade
garments division of Raymond has since then grown rapidly. Raymond has now
become the leader among readymades, in India, achieving a business turnover of over
Rs. 2000 million.
• 1979 - A new manufacturing facility was set up at Jalgaon, to meet the increasing
demand for worsted woollen fabrics.
• 1980: Vijaypat Singhania took over the reins of the company. He injected fresh
vigour into Raymond, transforming it into a modern, industrial conglomerate.
• 1986 - Launch of "Park Avenue", the premium lifestyle brand providing a complete
wardrobe solution to the men who like to dress well & be current on styles & fashion.
• 1990 - The first showroom abroad for Raymond in Oman.
• 1991 - A new manufacturing facility was set up at Chhindwara, near Nagpur.
• 1995: Superfine pure wool collection under the Lineage Line (Super 100S to Super
140S).
• 1996: The Renaissance Collection made of Merino wool blended with polyester and
specialty fibres (Super 100S to Super 140S).
• 1996: Raymond's denim; focusing on quality, innovation and the creation of
exclusive products that have always caught the eye of some of the world's leading
denimwear brands. Its designs have always kept pace with the changing styles and
cuts found in every youngster's closet. With a 40 million meters capacity, Raymond
today ranks amongst the top 2 producers of ring denim in India
• 1999: The Chairman's Collection of Super 150S made from Merino Wool and
Cashmere followed by Super 160S to Super 190S.
• 1999: Launch of "Parx", a premium casual wear brand bringing customers a range of
semi-formal and casual clothes.
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• 2000: Launch of "Be:", exclusive prêt line of ready-to-wear designer clothing for men
and women.
• 2002: Acquisition of ColorPlus.
• 2003: Setup of 'Silver Spark Apparel Ltd.' for manufacturing suits and formal
trousers catering largely to export markets.
• 2004: Super 220S fabrics under the Chairman's Collection.
• 2005: Setup of state-of-the art jeanswear facility 'Everblue Apparel Ltd.' near
Bangalore.
• 2005: Setup of state-of-the art facility 'Celebrations Apparel Ltd.' for the
manufacturing of formal shirts.
• 2005: Raymond achieved a rare feat and a historical milestone with the creation of
the world's finest worsted-suiting fabrics from the finest wool ever produced in the
world- The Super 230s made up of 11.8 micron of wool.
• 2005: Launch of 'Expressions' an exquisite collection of all wool and polywool
suiting specially crafted using exotic fibres like Cashmere, Angora, Mohair, Bamboo,
Casein.
• 2006 Set of Raymond's third worsted unit at Vapi in Gujarat. Raymond now has 3
state of the art units with a combined capacity of 31 million meters of worsted fabric.
• 2006 Launch of design studio in Italy for cutting edge design capabilities for exports
and domestic brands.
• 2006: Set up of world class carded woollen unit, Raymond Fedora Ltd, in Jalgaon.
• 2006 Set up of greenfield shirting unit at Kolhapur producing high value cotton
shirting. This facility is set up as part of the company's JV with Gruppo Zambaiti.
• 2006 Set up of J.K. Talabot Ltd - JV with MOB, France for the manufacturing of
files and rasps.
• 2006 Launch of Zapp! our kidswear brand with first store in Ahmedabad.
• 2007 Entered into Joint Venture to retail premium brand ‘GAS’ in India.
• 2007 Launch of new brands for women’s wear.
• 2008 Launch of 'Raymond Finely Crafted Garments' – readymade apparel under
Raymond brand.
• 2008 Launch of 'Neckties & More' - New format store for accessories.
8
VARIOUS BRANDS OF RAYMOND
For over 80 years, Raymond is counted as one of the world's premier

manufacturers of worsted suiting fabric in fine grade wool, in the same league as the
finest that Europe has to offer.
Today, the Raymond product range includes pure wools, wool blended with exotic fibres
like camel hair, cashmere and angora and innovative blends of wool with polyester, linen
and silk. Offering suiting and trousering fabric for all occasions and needs.
Our domestic distribution is spread far and wide with more than 30,000 outlets that stock
and sell our wide range of fabrics.
Fine products, wide range, superb distribution and intelligent advertising support have
helped the company gain a dominant share of the market. No wonder, premium labels
from the world's fashion capitals prefer Raymond.
Manzoni is a luxury lifestyle brand offering the discerning customer a

super premium range of formal wear and sportswear including shirts, suits, trousers,
jackets, ties and leather accessories. Our exclusive designs provide customers the best in
contemporary international style & luxury. Each garment is crafted from the most exotic
cotton silk, linen and superfine wool, the best-in-the-world linings, interlinings and
threads sourced from around the globe.
Launched in 1986, Park Avenue is today, India's most admired formalwear brand. It
offers stylish and innovative wardrobe solutions to gentlemen for all their dressing needs,
be it Business, Evening, Leisure, Travel or Heritage Wear. The brand has received
several awards. Recently, it had the honor of being the 'Most Admired Brand' at the
Lycra Images Fashion Awards 2007 for the third consecutive year.
Crossing the gender divide, Park Avenue launched 'Park Avenue Woman' - a complete
range of Business Wear for women. ‘Park Avenue Woman’ is designed specially for the
working women professionals of today.
ColorPlus is one of India's premium and most respected casual wear brands offering
customers a range of shirts, trousers, knits and survival gear. ColorPlus constantly
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innovates processes and technologies offering buyers new worlds of comfort. Some of
the technological innovations it is well known for; include thermo-fused buttons, golf
ball wash, soft jeans, wrinkle free technology, stain-free fabric, and the cone dyed
technique.
Adding new color now to the woman’s wardrobe, ColorPlus recently launched ColorPlus
Woman - An exclusive range of smart-casual clothing.
Parx is a 'premium casual lifestyle' brand bringing customers a range of

stylish semi-formal and casual clothes that reflects the easy, relaxed attitude of the
energetic 22-30 year old. Parx was launched in 1999 to cater to the smart and fashionable
clothing segment.
The burgeoning children's wear market has now turned stylish with Zapp! -
our range of stylish and fashionable kidswear. The brand brings to 4-12 years a wide
range of clothes, accessories, bed and bath linen and more. The first Zapp! store has been
launched in Ahmedabad with ten more on their way for kids across the country.
Notting Hill reflects style and manifests originality of today's fashion- conscious and
discerning young professionals at an affordable price. The brand collection features a
spectrum of men's lifestyle products comprising of suits, shirts, trousers, jeans, t-shirts
and also accessories like ties, handkerchiefs and socks.
Be: HOME is a specialty multi brand Home Retail Chain that present elegant, soft home
furnishings & accessories which are sourced from across the globe from reputed labels
(private & International). Spanning from a mid to premium pricing range, Be: HOME
10
provides an assortment of quilts, blankets, robes, apparels, wall décor, vases, candles,
gourmet cooking range and much, much more under one roof to provide the perfect look
for your home.
The Raymond Shop is a premium retail store offering complete wardrobe solutions for
men, which includes top-of-the-line brands - Raymond, Manzoni, Park Avenue,
ColourPlus and Parx
GROUP OF COMPANY
Vision finds form...

A dream conquers reality...
11
The Raymond Group was incorporated in 1925 and within a span of a few years,
transformed from being an Indian textile major to a global conglomerate.
In our endeavor to keep nurturing quality and leadership, we always choose the path
untaken - from being the first in 1959 to introduce a polywool blend in India to creating
the world's finest suiting fabric the Super 240s made from the superfine 11.6 micron
wool.
Today, the Raymond group is vertically and horizontally integrated to provide customers
total textile solutions. Few companies globally have such a diverse product range of
nearly 20,000 varieties of worsted suiting to cater to customers across age groups,
occasions and styles.
We manufacture for the world the finest fabrics - from wool to wool-blended worsted
suiting to specialty ring denims as well as high value shirting.
After making a mark in textiles, Raymond forayed into garmenting through highly
successful ventures like Silver Spark Apparel Ltd. and Regency Texteis Portuguesa Lda
(for fine Tailored Suits, Trousers and Jackets), EverBlue Apparel Ltd. (Jeanswear) and
Celebrations Apparel Ltd. (Shirts).
We also have some of the most highly respected apparel brands in our portfolio:
Raymond, Raymond Finely Crafted Garments, Manzoni, Park Avenue, ColorPlus, Parx,
Zapp! and Notting Hill.
The Raymond Group also has an expansive retail presence established through the
exclusive chain of 'The Raymond Shop' and stand-alone brand stores for Raymond Finely
Crafted Garments, Manzoni, Park Avenue, ColorPlus, Parx, Zapp! and Notting Hill.
With a US$600 million turnover we are today one of the largest players in fabrics,
designer wear, denim, cosmetics & toiletries, engineering files & tools, prophylactics and
air charter services in national and international markets. All our plants are ISO certified,
leveraging on cutting-edge technology that adheres to the highest quality parameters
while also being environment friendly.
• Raymond Ltd.
Raymond Ltd. is among the largest integrated manufacturers of worsted fabrics in
the world.
• Raymond Apparel Ltd.
12
Raymond Apparel Ltd. has in its folio some of the most highly regarded apparel
brands in India – Raymond Finely Crafted Garments, Manzoni, Park Avenue for
Men & Women, ColorPlus for Men & Women, Parx, Be: and Zapp! and Notting
Hill.
• ColorPlus Fashions Ltd.

ColorPlus is among the largest smart casual brands in the premium category. The
company was acquired by Raymond to cater to the growing demand for a high
end, casual wear brand in the country for Men & Women.
• Silver Spark Apparel Ltd.

A garmenting facility that manufactures formal suits, trousers and jackets.
• Regency Texteis Portuguesa Lda

A facility set-up in northern Portugal bordering Spain, in Caminha for
manufacturing suits, jackets and trousers.
• EverBlue Apparel Ltd.

A state-of-the-art denim garmenting facility.
• Celebrations Apparel Ltd.

A facility set-up for the manufacture of formal shirts.
• J.K. Files & Tools

A leading player in the Engineering Files & Tools segment and the largest
producer of steel files in the world.
• Ring Plus Aqua Ltd.

A leading manufacturer in the engineering automotive components.
• J.K. Helene Curtis Ltd.

A leading player in the grooming, accessories and toiletries category.
• J.K. Investo Trade (India) Ltd.

JKIT is an investment company registered with Reserve Bank of India as Non-
Banking Financial Company.
13
• Raymond UCO Denim Pvt. Ltd.
The manufacturers and marketers of denim fabrics.
• Raymond Zambaiti Pvt. Ltd.

A Greenfield facility manufacturing high value cotton shirting.
• Gas Apparel Pvt. Ltd.

Our Joint venture with Grotto S.p.A launched the highly successful 'GAS' brand
in India.
• J.K. Ansell Ltd.

The manufacturers and marketers of KamaSutra condoms and surgical gloves.
• J.K. Talabot Ltd.

Our Joint venture with MOB Outillage SA, manufacturing files and rasps for
international markets.
• Our Group Companies
• Our Joint Ventures
RELATIONSHIP OF MANAGEMENT
Raymond UCO Denim is a Joint Venture between Raymond Ltd, India's largest textile
and apparel major and UCO NV of Belgium. We produce and market specialty ring
colour and stretch denim.
14
With a combined capacity of 80 million and manufacturing facilities across 3 continents
– US, Europe and Asia, Raymond UCO will be in a best position to develop an optimal
and flexible service to meet global requirements of large international brands.
Our Winter 2007 collection is focusing on darker denims, tighter warps without too much
yarn effects, like slubs, thick and thin places and/or streakiness. The darker look can also
be enhanced by chemical treatments like coatings or overdyeing. Coatings have the
advantage that the hand can be influenced which helps to create a feeling for heavier,
sturdier material. To this effect we introduced our GALAXY finish, a colourless coating
with an ingenious mix of various components that enhance the hand and performance of
the fabric. Highly resistant to aggressive industrial and household washes. This finish is
meant to last. It is like a knife-egded coating giving the fabric a veneer hand without
getting sticky, it also helps to stabilize the fabric, add weight and provide a flat surface.
Another finish is our BLINK finish, an engineered coating that gives denim a new
dimension through its black waxy layer, which provides the fabric with a smart and
elegant leather-like hand.
Colour denim remains a hot topic. UCO produces a wide number of colour denim
qualities, rigid and stretch and offers a colour card of 24 colours, which can be delivered
without minimums, to lower the threshold for brands and makers-up to introduce a new
range into their collection.
Flat fabrics are mainly focusing on qualities with weaving fantasies, some leaning very
closely to denim qualities, to create a total collection for the jeanswear industry.
Raymond UCO Denim has state of the art manufacturing facilities in Ghent (Belgium),
Giurgiu (Romania), Rockingham and Snyder (US) and Yavatmal (India). All our
15
facilities produce differentiated ring spun denim, specialty denim and other niche
products for the global fashion market.
Raymond UCO Denim, Yavatmal, Maharashtra, India

Capacity: 40 million meters
UCO Sportswear NV, Ghent, Belgium

Capacity: 18 Million meters
UCO Tesatura, Giurgiu, Romania

UCO Fabrics Inc- Rockingham, North Carolina, USA

To ensure the manufacture of products of international quality, this unit uses state-of-the-
art equipment, systems and practices. These include:
• Tensorapid equipment to measure Tensile and tear strengths.
• Uster testing to control the evenness of all yarns.
• Each & every bale of yarn is tested and passed through a double passage draw for
effective quality blending.
• Marzoli ring spinning frames and open-end spinning are equipped with auto doffing
and auto bobbin transfer systems. Together with Caipo and Amsler devices, these
systems produce creative denim yarns.
• Indigo and sulphur dyeing is achieved through two-slasher dye ranges.
• Suker Muller & Masters slasher dye ranges support Picanol & Vamatex high speed
looms to produce 20 million meters per annum.
• The Denim Fabrics & Apparels is finished on the Cibitex range with micro
processing to stabilize shrinkage & skew. The stenter finish stabilizes shrinkage &
width of stretch products.
• Routine Testing and checking at every stage of the manufacturing process.
16
• Shade standards and consistency are maintained via a system of wash blankets tested
from every roll of Fabrics & Apparels.
• The Raymond water treatment plant purifies and recycles all indigo effluent using
reverse osmosisystem This enables the company to use all the water for land projects.
The entire 105-acre site of the Denim facility in Yavatmal has been designated with a
'greenbelt' status
• Creative denims are developed with specialist finishing, fancy yarn devices and other
equipment necessary to achieve world-class products.
• The onsite laundry facility enables experimentation with creative finishing
• demonstrating the full potential of each individual denim Fabrics & Apparels.
We offer buyers of denim fabric, a state of the art Jeanswear facility to convert fabric into
high fashion garments at our jeans wear facility 'EverBlue Apparel Ltd' near Bangalore.
The unit converts fabric to Jeanswear supplying to customers the world over.
17
CHAPTER 3
OBJECTIVES OF STUDY
Objectives
18
• To study the working capital management system of Raymond Denime private ltd.
by the Working capital.
• To study the various ratio used to analysis the balance sheet of Raymond Denime
private Ltd.
• To study the cash management, receivable management, credit management and

management of inventory to determining the relationship between the current asset
and current liabilities Raymond Pvt. Ltd.
• Through the net profit ratio & other profitability ratio, understand the profitability of
the company.
19
CHAPTER 4
Theoretical Background
Finance is the starting point of every economic activity. It is called “the science of
money. Finance is the basic requirement for starting and running every human activity in
an objective manner. It is the lifeblood of business. So, the important decision that is to
be taken by the finance manager is about the investment of the funds. These decisions are
normally related to the following area:
1. Fixed asset
2. Working capital
Investment in fixed asset is made with long term perceptive and the main
objective behind this decision is to enhance the earning capacity. While working capital s
20
required for day to day requirements of business organization .It is defined as the excess
of current assets over current liabilities.
Working capital, also known as net working capital, is a financial metric which
represents operating liquidity available to a business. Along with fixed assets such as
plant and equipment, working capital is considered a part of operating capital. As
mention above it is calculated as current assets minus current liabilities. If current assets
are less than current liabilities, an entity has a working capital deficiency, also called a
working capital deficit.
A company can be endowed with assets and profitability but short of liquidity if
its assets cannot readily be converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable and
payable and cash.
So, “Decisions relating to working capital and short term financing are referred
to as working capital management.” These involve managing the relationship between a
firm's short-term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming operational
expenses.
Need for working capital:

Working capital refers to that part of firm’s capital which is required for financing
short term or current assets such as cash, marketable securities, debtors, and inventories.
In other words working capital is the amount of funds necessary to cover the cost of
operating the enterprise. The working capital is needed for the following purpose:
1. To purchase of raw materials, components and spares.

2 To pay wages and salaries.
21
3 To incur day-to-day expenses and overhead costs.
4 To meet the saving costs as packing, advertisement etc.
5 To provide credit facilities to the customers.
6 To maintain the inventory of raw material, work-in-progress, store and
Spares and finished goods
Concept of working capital:

The concept of working capital can be broadly divided into two categories:
A. Balance sheet or traditional concept

B. Operating cycle concept
WORKING
CAPITAL
ON THE BASIS
ON THE BASIS
OF
OF
B/S
TIME CONCEPT
CONCEPT
GROSS FLACTUATING
WORKING NET WORKING FIXED WORKING WORKING
CAPITAL CAPITAL CAPITAL CAPITAL
A. Balance sheet or traditional concept:

It shows the position of the firm at certain point of the firm at certain point
of time. It is calculated on the basis of balance sheet prepared at a specific date. In this
method there are two types of working capital
1. Gross working capital:

This concept implies the total of all current asset of a business firm. A current
asset is that asset which can be converted into cash within an accounting year or an
22
operating cycle. The current assets includes cash and bank balances, debtors, and bills
receivable, inventories prepaid expenses and short term investments.
2. Net working capital:

This concept of working capital is the difference between current asset and
current liabilities. While current asset have been defined above, current liabilities can be
explained as those liabilities which are expected to mature for payment within an
accounting year and include creditors ,bills payable, outstanding expenses, bank
overdraft, other short term loans.
The net working capital can be positive or negative. If current asset exceed
current liabilities, the difference is positive net working capital and when current
liabilities exceeds current asset, the difference is negative net working capital.
Net working capital = current assets - current liabilities
B. Operating cycle concept:

The duration or time required to complete the sequence of events right from
purchase of raw material for cash to realization of sales in cash is called the operating or
working capital cycle.
Fig: OPERATING CYCLE
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The operating cycle begins with the acquisition of materials and ends with the collection
of receivables. It may be broadly classified into the following four stages:
(i) Raw materials and stores storage stage.

(ii) Work- in process stage.
(iii) Finished goods inventory stage.
(iv) Receivables collection stage.
The duration of the operating cycle for the purpose of estimating working capital
requirements is equivalent to the sum of the durations of each of these stages less the
credit period allowed by the suppliers of the firm.
This can also categorize into two types as:

1. Fixed working capital
2. Fluctuating working capital
1. Fixed working capital:
24
Every business require some minimum amount of working capital in spite of the
level of operation, throughout the year, this amount represent the fixed amount of
working capital.
2. Fluctuating working capital:

In many business firms, the level of operations fluctuates from time to time
depending upon the demand pattern. In case, the demand picks up in a particular season,
the need for working capital also increases and during low demand periods, the need for
working capital also comes down.
Factors affecting working capital

The working capital needs of a firm are affected by numerous factors. The
important factors are as listed below:
1. Nature of business:
In manufacturing concerns, usually the operating cycle is very long and a firm has
to give credit to customers for improving sales. In such cases, the working capital
requirement is more. While in service industries, the working capital requirement is
comparatively less.
2. Volume of sales:
As the sales grow, the working capital also goes up and vice versa. Actually it is
very difficult to establish the exact proportion of increase or decrease in current assets, as
a result of increase or decrease in sales. Advance planning of working capital becomes
essential.
3. Production policy:
Working capital requirements also fluctuate according to production policy.
Some products have seasonal demand but in order to eliminate the fluctuation in working
capital, manufacturer plan the production in a steady through the year. This policy will
even out the fluctuations in working capital.
4. Market condition:
Due to competition in the market, the demand for working capital fluctuates.
25
5. Operating efficiency:
The operating efficiency of the firm relates to the optimum utilization of
resources at minimum cost. The firm will be effectively contributing to its working
capital if it Is efficient in controlling operating costs. The working capital is better
utilizes and cash cycle is reduced which decrease working capital needs.
7. Credit policy:
The working capitals requirements of firms depend to a great extend on credit
policy followed by a firm for its debtor. A liberal credit policy followed by a firm will
result in huge funds blocked in debtors who will enhance the need of working capital and
vice versa. The need of working capital is also affected by credit policy followed by the
creditors. If the creditors are ready to supply the materials and goods on liberal credit,
working capital requirement are substantially reduced and vice versa.
Sources of working capital:

The company can choose to finance its current assets by:
1. Long term sources
2. Short term sources
1. Long term sources:

A long term source of working capital includes equity and preference share,
retained earning, debenture and other long tem debts from public deposits and financial
institute. The long term working capital needs should meet through long term means of
financing. Financing through long term means provide stability, reduce risk or payment.
And increase liquidity of the business concern. Various types of long term sources of
working capital are summarized as follows:
I. Issue of share:
26
It is the primary and most important sources of regular or permanent working capital.
Issuing equity shares as it does not create and burden on the income of the concern nor
the concern is obliged to refund capital should preferably raise permanent working
capital.
II. Retained earning:

Retain earning accumulated profits are a permanent sources of regular working
capital. It is regular and cheapest. It creates not charge on future profits of the enterprises.
III. Issue of debenture:

It creates a fixed charge on future earning of company. Company is obliged to pat
the interest. Management should make a wise choice in procuring fund by issue of
debenture.
IV. Long term debts:

Company can raise funds from accepting public deposits, debts from financial
institute like banks, corporations etc. the cost is higer than the other financial tool.
Other sources are sale of fixed asset, securities received from employees and customer
are examples of other sources of finance.
2. Short term sources of temporary working capital:

Temporary working capital is required to meet the day to day business
expenditures. The variable working capital would finance from short term sources of
funds. It has the benefit of low cost and establishes closer relation with the banker. Some
of the sources are listed are:
I. Commercial bank:
27
A commercial bank constitutes a significant source for short term or temporary
working capital. This will in the form of short term loans, cash credit, and overdraft and
though discounting the bills of exchanges.
II. Public deposits:

Most of the companies in recent years depend on this source to meet their short
term working capital requirements ranging from six month to three years.
III. Various credits:

Trade credit, business credit papers and customer credit are other sources of short
term working capital. Credit from supplier, advances from supplier, bills of exchange
promissory notes, etc helps to raise temporary working capital.
IV. Reserve and other funds:
Various funds of the company like depreciation for tax and other provisions kept
with the company can use as temporary working capital.
The company should meet its working capital needs through both long term and short
term funds. The working capital financing mix should be designed in such way that the
overall cost of working capital is the lowest, and the funds are available on time and for
the period the really required.
Management of working capital:
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Management will use a combination of policies and techniques for the
management of working capital. These policies aim at managing the current assets
(generally cash and cash equivalents, inventories and debtors) and the short term
financing, such that cash flows and returns are acceptable.
1. Cash management.
Identify the cash balance which allows for the business to meet day to day expenses, but
reduces cash holding costs
Importance of Cash:
 Cash is the balancing figures between debtors, stock and creditors.
 Without adequate cash to meet working capital demands, it is impossible to extend

credit, order stock or pay creditors.
1. Cash management involved the following:
I. Efficient banking-making sure money received is banked as soon as possible, making

payments the most efficient way, and ensuring any surplus balances are put to interest
earning use. Here the liquidity, risk and return of investments must all come into play
with the length of time before funds are needed playing an important role.
II. The basic in cash flow control is to ensure funds are available when needed.
A. For the immediate short term trend:
Weekly or monthly forecasts are prepared for comparison with actual results. If
these forecasts indicate unacceptable balances or deficits are likely at some point,
it will be necessary to decide how these can be covered. Immediate solutions will
include increased borrowing, rescheduling plans and payments, or even sale of an
asset.
B. For the longer term trend:
Longer term cash flow control will include all aspects of the business including
working capital and fixed capital control, capitalization, trading and dividend
29
policy. For example it may be able to improve cash flow by improvements in
operating efficiency or higher sales prices, improved working capital control, or
revised fixed asset investment plans.
III. Cash flow forecasts:
An integral part of the budgeting process
The objectives of the cash budget are to:
• integrate trading and capital expenditure budgets with cash plans;
• anticipate cash surpluses and deficits in time to generate plans to deal with these; and
• Provide a facility for comparison between budget and actual outcomes.
IV. Cash management by ratio analysis like current ratio or liquidity ratio.
2. Inventory management.
Identify the level of inventory which allows for uninterrupted production but reduces the
investment in raw materials - and minimizes reordering costs - and hence increases cash
flow. Tools for inventory management are Supply chain management; Just In Time
(JIT); Economic order quantity (EOQ); Economic production quantity.
Objective of Managing Stock is to:
 Establish the proper stock control levels so as to ensure that excessive stocks are
never carried (and working capital thereby sacrificed) but that they never fall below
the level at which they can be replenished before they run out.
 Failing to maintain proper stock level will mean that working capital is tied up in the
business.
 Keeping levels to the minimum required for efficient operations will keep costs
down. Stock control involves in many aspects like the controlling of buying,
handling, and storing, issuing, and recording stock.
30
1. Debtors management.
Identify the appropriate credit policy, i.e. credit terms which will attract
customers, such that any impact on cash flows and the cash conversion cycle will
be offset by increased revenue and hence Return on Capital (or vice versa). The
management of debtors which is also known as credit management
4. Short term financing.
Identify the appropriate source of financing, given the cash conversion cycle: the
inventory is ideally financed by credit granted by the supplier; however, it may be
necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through
"factoring"
Scope of the study

The study of working capital helps us to know the current assets and current
liability of an organization. If working capital is excess then the excess amount of
working capital is idle. If the working capital is not sufficient for meeting the daily
31
expenses then it creates a problem. So it is necessary to maintain exact working capital
according to the expenses for the organization.
In this project, the study of working capital analysis is done through working
capital budget and ratio analysis, which are wide spread and some ratios creates relations
with whole casting industry, but it is very essential to note that this study is limited to
only to “Raymond Pvt. Ltd., Yavatmal.”
Limitation of the study

1. Data analysis is based on the statement of the annual reports and so researcher may
miscalculate it due to human efforts.
2. The ratios can’t be taken as ultimate judgment of any companies of financial position.
3. The time constraint of the project of two months is not sufficient to study each
element of the working capital analysis of the company.
4. The analysis is done on previous three years only.
32
CHAPTER 5
RESERCH MEDTHODOLOGY
Sources of Data for Data Collection

The study that is conducted being descriptive one the research source of data used is of
two types:
 Primary Data
 Secondary Data
33
Primary Data-
o The primary information is collected through discussion with the Asst finance
managers of Raymond UCO Denim Private limited , staff members of finance
department.
Secondary Data-
For conducting the detailed study of this topic it is necessary to have some of the
secondary information which is collected from:
ο Balance Sheet of the Raymond UCO Denim Private limited for last 3 years
ο CMA reports of Raymond UCO Denim Private limited for last 3 years.
ο Profit and Loss Account for last 3 years.
ο Website(www.raymondindia).
Research Design
Research Design involves the descriptive study. It analyzes the financial resources and
financial position of the “Raymond UCO Denim Private limited – Yavatmal plant”.
wherein the past project data and financial statements are being used to know the working
capital position of the company.
34
CHAPTER 6
DATA ANALYSIS AND INTERPRETATION
1.Amounts of current asset:

A. Current asset of Raymond uco Denim Pvt. Ltd. For the year ended
31st mar.
TABLE NO 1
Current asset 2005-06 2006-07 2007-08
Inventories 44337.78 43347.47 55673.82
Sundry debtors 40899.35 49243.76 34969.26
Cash and bank balance 3648.76 1783.16 2913.49
35
Loans and advances 7328.84 10880.40 7473.81
Total 96214.73 105254.79 101030.38
Contribution to current assets (pie charts):
Graph
CONTRIBUTION OF CURRENT ASSET (2005-06)
8
4
%
%
45
%
43
%
Inventorie Sundry Cash and bank Loans and

s debtors balance advances
2
006
-07
1
0%
2
%
4
1%
4
7%
In
ven
torie
s S
und
ryd
ebto
rs C
asha
ndb
ankb
ala
nce L
oan
san
dad
van
ces
Graph
36
2
007
-0
8
3
% 7
%
3
5% 5
5%
In
ven
to
rie
s S
und
ryd
ebto
rs
C
as
h a
ndb
ankb
ala
nce L
oan
san
dad
van
ces
Interpretation:
As we can see from above graphs, it is seen that,
1. Inventories of the company are 45%, 41%, and 55% of the total current asset for the
year 2006, 07 and 08 respectively.
2. Sundry debtors of the company are 43%, 47%, and 35% of the total current asset for
the year 2006, 07 and 08 respectively.
3. Cash and bank balance is maintained in between 2-4% and loans and advances are
maintained in between 7-10% of the total current assets.
B. Current liabilities of Raymond uco Denim Pvt. Ltd. For the

year ended 31st march
TABLE NO 2
Current liabilities 2005-06 2006-07 2007-08
Current liabilities 63972.14 57856.65 47983.25
Provisions 4148.53 7697.05 2475.98
Total 68120.67 65553.70 50459.23
• Contribution to current liabilities (pie charts):

Graph
37
2005-06
6%
94%
Current liabilities Provisions
Graph
2006-07
12%
88%
Graph
38
2007-08
5%
95%
Interpretation:
From above graphs, we can see that current liabilities are broadly divided into two parts
that is current liabilities and provision .in which 5-12% are the provisions and other parts
for other current liabilities.
AMOUNTS OF WORKING CAPITAL:

TABLE NO 3
2005-06 2006-07 2007-08
91214.73 100254.79 96030.38
61120.67 59553.70 38453.38
- - -
40701.09 52577.00
GRAPH
39
60000 52577
50000
40701.09
40000
30094.06
30000
Workingcapital
20000
10000
0
2005-06 2006-07 2007-08
Interpretation:
As we can see the trend of working capital, it is growing year by year. In 2006-07, it was
grown by 35.24% and in 2007-08; it was grown by 29.17%But these figures are
contradicting with the sales figure .sales are decreasing year by year. But the other factor
like market condition as we know recession period, credit policy, and production policy
may be reason of growth in working capital amount.
Analysis of various component of working capital:

• Inventory analysis:
Inventory is total amount of goods and materials content in a store of factory at any given
time. Inventory means stock of three things:
1. Raw materials
2. Semi finished goods
3. Finished goods
Position of inventory in Raymond uco Denim Pvt. Ltd.:
TABLE NO 4
Particulars/Year- 2005-06 2006-07 2007-08
Raw materials 8475.26 7677.87 24900.18
Work in process 35094.06 35199.01 16210.99
40
Finished goods 360.07 337.9 100.00
Fuel, oil & other 408.99 609.75 20401.47
consumable
Total 44136.38 43824.53 61612.64
GRAPH
INVENTROY
70000 61612.64
60000
50000 44136.38 43824.53
40000
RS.
30000
20000 3-D Column 1
10000
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
By analyzing the 3 years data we see that the inventories are increased. We are looking
increasing pattern in inventories. We can see that inventories are decrease by only
0.70%and 40.58 % in 06-07 and 07-08 respectively from previous year.
• Sundry debtor’s analysis:

Debtors or an account receivable is an important component of working capital and fall
under current assets. Debtors will arise only when credit sales are made.
Position of sundry debtors in Raymond uco Denim Pvt. Ltd.:
TABLE NO 5
Particulars/years 2005-06 2006-07 2007-08
sundry debtors 39699.39 48293.06 37909.16
Total 39699.39 48293.06 37909.16
41
GRAPH
SUNDRYDEBTORS
50000 48193.06
39699.39 37909.16
40000
30000
Rs.
20000
10000
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
In the table and figure we see that there is up and downs in the debtors of Raymond uco
Denim . ltd. Debtors are increased by 21% in year 2006-07, and drastically decreased by
21 % in the year 2007-08. A simple logic is that debtors increase or decrease with the
sales and credit policy of company. But in 2006-07, there is contradiction in sales and
debtors figure as sales are decline by 8%. But credit policy of company may effect on
debtors while in 2007-08 the reason of decline in debtors was the decline in sales amount.
The main reason of decreased sales may be recession but it is not a good sign for
companies’ percept
• Cash and bank balance analysis:

Cash is called the most liquid asset and vital current assets; it is an important component
of working capital. In a narrow sense, cash includes notes, bank drafts, cheaque, etc.
42
while in border sense it includes near cash, assets such as marketable securities and time
deposits with bank.
Position of cash and bank balance in Raymond uco Denim Pvt. Ltd.:
TABLE NO 6
Particulars/year- 2005-06 2006-07 2007-08
Cash at bank 3547.19 2567.48 2413.44
Cash in hand 96.50 234.39 254.14
Total 3643.69 2801.87 2667.58
GRAPH
CASH
4000 3643.69
3000 2801.87 2667.58
Rs. 2000
1000 3-D Column 1
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
If we analyze the above table and chart we find that it follows up and downs. In
the year 2006, it had maintained sufficient amount of cash and bank balance which has
fallen hugely in the year 2007 but there is again growth in cash balance between the years
2007-08. It is necessary to company to maintain adequate cash balance for maintaining
liquidity position but it should be remember that, holding cash should not be ideal
because ideal cash is nothing but opportunity cost for company. This can be utilizing for
investments projects for company growth
• Loans and advances
43
Loans and advances here refers to any to amount given to different parties, companies,
employees for a specific period of time and in return they will be liable to make timely
repayment of that amount in addition to interest on that loan.
Position of other loans and advances in Raymond uco Denim Pvt. Ltd.
TABLE NO 7
Particulars/year 2005-06 2006-07 2007-08
Income tax and tax deducted at source 4245.36 5474.96 1054.67
Advances to supplier 1252.83 1317.53 2987.79
Other advances and receivable 578.75 424.18 2623.38
Central excise account balance 1461.72 1877.77 494.75
Deposits 2498.69 1697.76 2325.54
Total 10037.37 10792.2 9490.13
GRAPH
LOANSAND ADVANCE
11000 10792.2
10500
10037.37
10000
RS 9490.13
9500
3-D Column 1
9000
8500
2005-06 2006-07 2007-08
YEAR
Interpretation:
If we analyze the above table and chart we find that it follows up and downs. In the year
2006-07 it was grown by 7.5% and again it was drastically decreased by 12%.
• Current liability analysis:

Current liabilities are any liabilities that are incurred by the firm on a short term basis or
current liabilities that has to pay by the firm within one year.
44
Position of current liabilities in Raymond uco Denim Pvt. Ltd.:
TABLE NO 8
Sundry liabilities 2358.97 2433.74 1360.48
Sundry creditors 50414.47 39669.61 34257.58
Advances from customer 849.55 1456.89 3738.43
Total 53622.99 43560.24 39356.49
GRAPH
CURRENT LIABILITY
60000 53622.99
50000 43560.24 39356.49
40000
RS. 30000
20000
3-D Column 1
10000
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
As we can see from graph the current liability of Raymond uco Denim is decreasing year
by year. It is decreased by 18% and 9.6% in year 2006-07 and 2007-08 respectively. It is
because decreasing in sundry creditors. It is very necessary to maintain current liability
proportionate with the current asset so liquidity should be maintained.
• Provision analysis:
45
TABLE NO 9
Income tax 3306.54 7410.64 540.00
Expenses 16459.73 43476.21 14485.38
Total 19766.27 50886.85 15025.38
GRAPH
PROVISION
60000
50886.85
50000
40000
RS. 30000
19766.27
20000 15025.38
10000
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
As we see provisions of Raymond uco Denim Pvt. ltd, it shows up and downs. In 2006-
07 it was drastically increased by 61% and again it was decreased by 70%. It is because
fluctuation in amount of provision of income tax.
2. Ratio analysis:
It is a simple arithmetical expression of one number to another. The technique of ratio
analysis can be employed for measuring short term liquidity or working capital position
of the firm. The following ratios may be calculated for this purpose:
1. CURRENT RATIO
2. QUICK/ACID TEST RATIO
3. ABSOLUATE LIQUID RATIO
4. INVENTORY TURNOVER RATIO
46
5. DEBTORS TURNOVER RATIO
6. CREDITORS TURNOVER RATIO
7. WORKING CAPITAL TURNOVER RATIO
8. CURRENT ASSET TO TOTAL ASSET RATIO
9. CURRENT ASSET TO SALES RATIO
10. CURRENT ASSET TO FIXED ASSET RATI
47
1. Current ratio:
This compares assets which will become liquid within approximately twelve months
with liabilities which will be due for payment in the same period and is intended to
indicate whether there are sufficient short term assets to meet the short- term liabilities.
Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face
liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the
entity is under utilizing its current assets.
Current ratio =
The following are the statistic of last three years Current ratios data.
TABLE NO 10
Year 2005-06 2006-07 2007-08

Current assets 96214.73 105254.79 101030.38
TABLE
current ratio 1.41 1.60 2.00

GRAPH
c
urre
ntra
tio
2
2
1
.6
1
.41
1
.5
%a
ge 1
0
.5
0
2
005
-06 2
006
-07 2
007
-08
y
ear
Interpretation:
As we know the company’s current ratio is 1.42, 1.60 and 2.00 in the year 2005-06,
2006-07, and 2007-08 respectively.The standard current ratio should be 2:1. In the last
48
year (2008) company reached up to the standard which is satisfactory but it should
remain at that level that is to be stable and should not extend the ratio more than this.
2. Quick/ acid test ratio:

This shows that, provided creditors and debtors are paid at approximately the same
time, a view might be made as to whether the business has sufficient liquid resources to
meet its current liabilities.
A company in the service industry will not have inventories as such current ratio will not
significantly be different from the current ratio.
This ratio should ideally be 1 for companies with a slow inventory turnover. For
companies with a faster inventory turnover, a quick ratio can be less than 1 without
suggesting that the company should be in cash flow trouble.
Both current and quick ratio offer an indication of the company's liquidity position, but
the absolute figures should not be interpreted too literally. It is often theorized that an
acceptable figure should be 2:1 for current ratio and 1: 1 for quick ratio but these should
only be used as a guide. Different businesses operate in very different ways. A
supermarket group for example might have a current ratio of .5 and quick ratio of .17.
Supermarkets have low receivables (as sales are usually made on credit), low cash,
medium inventories (high inventories but quick turnover). While as in a manufacturing
company these ratios may be regarded as showing solvency problems.
Quick/acid test ratio =
The following are the static’s of last three years acid test ratios data.
TABLE NO 11
Year 2005-06 2006-07 2007-08

Quick assets 51876.95 61907.32 45356.56
Acid test ratio 0.76 0.94 0.95
GRAPH
49
A
cidte
st ra
tio
0
.94 0
.95
1
0
.76
0
.8
0
.6
%age
0
.4
0
.2
0
2
005
-06 2
006
-07 2
007
-08
y
e ar
Interpretation:
This ratio indicates the availability of quick assets to pay for current liabilities. It should
be 1:1.as we computed the company’s acid test ratio as 0.76, 0.94, and 0.95 for the
respected year as shown in graph. That is growing from the last three year which is
satisfactory but it was remains lower than standard, need to be little improvement.
3. Absolute liquid ratio:

Absolute liquid assets include cash in hand and at bank and marketable securities or
temporary investments. The acceptable norm for this ratio is 50% or 0.5:1.
Absolute liquid ratio should also be calculated together with current ratio and acid test
ratio. As exclude receivables from the current assets and find out the absolute liquid
assets.
Absolute liquid ratio =
The following are the static’s of last three years Absolute liquid ratios data.
TABLE NO 12
Year 2005-06 2006-07 2007-08
Cash and bank balance 3648.75 1783.16 2913.49
Absolute liquid ratio 0.054 0.027 0.058
GRAPH
50
Abso
luteliqu
idratio
0
.06
0
.05
0
.04
%
age
0
.03 0
.05
4 0
.05
8
0
.02
0
.02
7
0
.01
0
2
005
-06 2
006
-07 2
007
-08
y
ear
Interpretation:
As we know the company’s absolute liquid ratio is 0.054, 0.027 and 0.058 in the year
2005-06, 2006-07, and 2007-08 respectively.
The standard ratio should be 0.5:1. we see the graph;that this ratio is not satisfactory,
need to improve to make sure liquidity position.
4. Inventory turnover ratio:

The ratio is aimed at checking how vigorous the entity is trading. It measures
approximately the number of times an entity is able to acquire the inventories and
convert them into sales. A lengthening inventory turnover period from one
accounting year to the next indicates:
1. A slowdown in trading; or
2. A build in inventory levels, perhaps suggesting that the investment in inventories is

becoming excessive.
The higher turnover ratio is good for the firm, but several aspects of inventory holding
policy have to be balanced.
• Lead times
• Seasonal fluctuations in orders.
• Alternative use of warehouse space.
• Bulk discounts.
51
• Inventory turnover ratio also known as stock velocity is normally calculated as
sales/average inventory or cost of goods sold.
Inventory turnover ratio =
The following are the static’s of last three years Inventory turnover ratios data.
TABLE NO 13
Year 2005-06 2006-07 2007-08

Net Sales 224061.79 139530.79 140837.47
Average Inventory 43748.81 43842.63 49510.65
Inventory turnover ratio 5.12 3.18 2.84
GRAPH
Inventoryturnover ratio
6
5.12
5
4
3.18
2.84
Times 3
1
0
2005-06 2006-07 2007-08
Year
Interpretation
From the graph, as we can see the inventory ratio is decreasing from 5.12 to 2.04 times
from last three years, it is not good indication for company. Company should need to
improve this ratio so company can able to acquire the required inventories to convert
them into sales.
5. Debtor’s turnover ratio:
Another asset management ratio which is used estimates how long it takes for the
credit customers to settle their balances. As outlined above it is very difficult to establish
the optimum level of receivables days, it will always depend with the nature of the
business an enterprise is involved. For this company receivable of 6 to 7 times will be
52
considered as to operate on cash basis. When setting the receivable days, an enterprise
should also consider how long its major suppliers demand their payments.
Increase in receivable days may also indicate overtrading especially when the profit
levels increases, together with receivable amounts but there is no improvement in
collection of receivables.
The enterprise should always strive to be within the industrial averages because if they
are too loose with their customers they run a risk of increasing the bad debtor’s levels.
Some of the reasons for improvement may be:
a. Aggressive debt collection by the company.
b. Strict rules on credit transactions.
c. Offering cash discounts for early settlement.
Debtors/receivable turnover ratio =
The following are the static’s of last three years debtor’s turnover ratios data.
TABLE NO 14
Year 2005-06 2006-07 2007-08

Net credit annual sales 224061.79 139530.79 140837.47
Average trade debtors 31820.25 45071.56 42106.51
Debtors turnover ratio 7.04 3.10 3.34
GRAPH
53
D
ebto
rstu
rno
verratio
8 7.04
7
6
5
Times 4 3.1 3.34
3
2
1
0
2
005
-06 20
06-07 20
07-08
Y
ear
Interpretation:
As we can see the debtors’ turnover ratio, it shows the decreasing trend from last three
year. The debtor’s turnover ratio comes down from 7.04 times to 3.10 times and again
slight fall in this and comes down to 3.34 times in year 2007 and 2008 respectively.
When the debtor’s turnover decreases the average credit period of company is
lengthened.
6. Creditor’s turnover ratio:

Measures how long it takes for an entity to settle its creditors. The payable days
should always be more than the receivable days. Remember the cash received from the
customers will be used in settling the suppliers so it is imperative that the company
should always ensure than they secure more payable days than the days they allow their
customers.
Increase in payable days may indicate that the business is facing cash flow problems and
will deter new and old suppliers from extending credit supplies to the business. On the
other hand the business with short payable days indicates that it is not trusted by its
suppliers. Usually if the payment record of the business has been bad suppliers will
always insist cash purchases from the business in service industries the ratio is of little
relevance than in trading organizations. The service industries purchase consumables
which are not the core of their business unlike in trading activities where the performance
is based on the level of purchases made.
54
Creditors/payable turnover ratio =
The following are the static’s of last three years Creditors turnover ratios
data
TABLE NO 15
Year 2005-06 2006-07 2007-08
Net credit annual purchase 150016.6 99475.27 90341.76
Average trade creditors 47606.59 57391.45 48064.3
Creditors turnover ratio 3.15 1.73 1.88
GRAPH:
Creditorsturnoverratio
3.5 3.15
3
2.5
1.88
2 1.73
Times
1.5
1
0.5
0
2005-06 2006-07 2007-08
Year
Interpretation:
As we can see the creditors turnover ratio 3.15, 1.73 and 1.88 times in 2006, 2007, 2008
respectively. The creditor’s turnover ratio is satisfactory because the average payable
period is more than average collection period.
7. Working capital turnover ratio :

Working capital of a concern is directly related to sales. The current assets like
debtors, bills receivable, cash, stock etc. change with the increase or decrease in sales.
The ratio indicates the number of times the working capital is turned over the course of a
year. This ratio measures the efficiency with which the working capital is being used by a
firm.
55
Working capital turnover ratio: =
The following are the static’s of last three years Working capital turnover ratios data.
TABLE NO 16
Year 2005-06 2006-07 2007-08

Cost of sales 224061.79 139530.79 140837.47
Net working capital 28094.06 39701.09 50571.15
Working capital turnover ratio 7.98 5.27 2.78
GRAPH
Workingcapital turnov
erratio
7.98
8
7
6 5.27
5
Times 4 2.78
3
2
1
0
2005-06 2006-07 2007-08
Y
ear
Interpretation:
As we can see in graph, the working capital ratio is decreasing year by year. It was
decreased by 2% in 2006 and 3 % approx. in year 2006-07 and 2007-08 respectively. A
higher ratio indicates efficient utilization of working capital and vice-versa. But it is
decreasing, need to improve.
8. Current asset to total asset ratio:

Current assets play an important role in day-to-day functioning of an organization.
So, every firm should maintain adequate current assets so as to meet the daily
requirements of business. If the proportion of current assets in total assets exceeds then
the required limit, there will be some idle investments on such assets. At the time, the
proportion of current assets in total should not less than requirements. So, every firm
should maintain the adequate quantity of current assets. But during the situations of peak
demand, should employ more current assets and vice-versa. Particularly in case of
56
production organizations, there is heavy importance to the current assets than fixed
assets. This kind of analysis will enable the managers to understand the working capital
position of the firm.
Data relating to the proportion of working capital in total assets is depicted as follows-
TABLE NO 17
Year 2005-06 2006-07 2007-08
Current asset 96214.73 105254.79 101030.38
Total assets 125389.28 135024.43 136470.35
Current asset to total assets ratio 0.78 0.78 0.74
GRAPH
Current asset tototal assets ratio
0.78 0.78
0.78
0.77
0.76
%age 0.75 0.74
0.74
0.73
0.72
2005-06 2006-07 2007-08
year
Interpretation:
From the current asset to total asset ratio graph, it can be inferred that the proportion of
current assets to total assets had constant from last three years while we can see slight fall
in ratio in 2008.
9. Current asset to sales ratio:

The current assets are used for the purpose of generating sales. A ratio of current
assets to sales reveals that how best the assets are applied in business for turnover. As per
57
the above said ratio, a low proportion of current assets in relation to sales indicates better
turnover of the company and vice-versa, which will show positive impact on profitability.
The data relating to this aspect is provided as follows and it is calculated as follows.
TABLE NO 18
Year 2005-06 2006-07 2007-08
Current assets 96214.73 105254.79 101030.38
Sales 224061.79 139530.79 140837.47
Current asset to sales ratio 0.42 0.50 0.56
GRAPH
CURRENT ASSET TO SALES
0.56
0.6 0.5
0.5 0.42
0.4
%AGE 0.3
0.2
0.1
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
As per the above said ratio, a low proportion of current assets in relation to sales indicates
better turnover of the company and vice-versa but the actual figure 0.42, 0.50 and 0.56 in
the year 2006, 2007 and 2009 respectively are contradicting this stateme.
10. Current asset to fixed asset ratio:

Total assets in any business contain both fixed and current assets. For properly
functioning of the organization in terms of production and marketing it is necessary to
maintain a properly balance between them. If the proportion of fixed assets increases, it
will be a negative impact on the firm’s liquidity and if current assets increase, production
58
increases and which causes impact on the demand for the product. In view of effective
management of funds and to invest on both fixed and current assets, it is necessary to
take the decision as soon as possible.
Data relating to the ratio between current assets to fixed assets is depicted as follows.
TABLE NO 19
Year 2005-06 2006-07 2007-08
Current assets 96214.73 105254.79 101030.38
Fixed assets 29169.56 29764.63 35439.97
Current assets to fixed asset ratio 3.3 3.54 2.85
GRAPH
CURRENT ASSET TOFIXED ASSET RATIO
4 3.54
3.3
2.85
3
%AGE 2
0
2005-06 2006-07 2007-08
YEAR
Interpretation:
As per the above said ratio, the ratios are 3.3, 3.54 and 2.85 in the year 2006, 2007 and
2008 respectively. For properly functioning of the organization in terms of production
and marketing, it is necessary to maintain a properly balance between the current asset
and fixed asset.
59
CHAPTER 7
FINDING & CONCLUSION
FINDINGS
• As per the ratio calculated above it is observed that though the company has
increased revenue during the year 2007-2008 but there was fall in profitability
also it is observed that the company employed capital during the year on long
term project which may result into profit in coming future to company.
• Company also have much more current assets over the current liabilities which is
too reduced/recovered and invest the same in other available project.
60
• Overall view, company in the previous year it has poor performance resulting into
fallen down all profitability ratio.
• In the last year (2008) company reached up to the standard which is satisfactory
but it should remain at that level that is to be stable and should not extend the
ratio more than this.
• The liquid acid ratio is increase in the year2008.The standard ratio should be
0.5:1. we see the graph;that this ratio is not satisfactory, need to improve to make
sure liquidity position.
• In the case of inventory ratio company should need to improve this ratio so
company can able to acquire the required inventories to convert them into sales.
• As we can see the debtors’ turnover ratio, it shows the decreasing trend from last
three year.
• When the debtor’s turnover decreases the average credit period of company is
lengthened.
• The creditor’s turnover ratio is satisfactory because the average payable period is
more than average collection period.
• The working capital ratio is decreasing year by year. A higher ratio indicates
efficient utilization of working capital and vice-versa. But it is decreasing, need to
improve
• It can be inferred that the proportion of current assets to total assets had constant
from last three years while we can see slight fall in ratio in 2008.As per the above
said ratio, a low proportion of current assets in relation to sales indicates better
turnover of the company and vice-versa
CONCLUSION
61
The importance of efficient Working Capital Management is indisputable.
Moreover, adequate Working Capital Management is essential as it has a direct impact on
‘EBIT’ and liquidity. An attempt has been made in the present study to investigate the
relationship between Working Capital Management efficiency and ‘EBIT’ of Indian
paper companies. In the matter of Working Capital Management, three indexes and net
EBIT have been computed for all
The firms over the period of study – three-years. From the study it is
concluded that the textile company perform remarkably well during the period. Though
some of the sample units had successfully improved efficiency during these years, the
existence of a very high degree of inconsistency in this matter clearly points out the need
for adopting sound Working Capital Management policy in these firms.
62
CHAPTER 8
SUGGESTION
SUGGESTION
• The company should increase the quality to attract the customers because it is obvious
that there is a lot of competition in market
63
• The company should always try to minimize the rate because other branded textile
company like Siyaram,Mayur,Read and tailor & Belmont provide there product at
low prise as compare to Raymond
• The company should expand its branches to facilitate maximum customers
• The Company should establish their factory outlet in various cities to enhance
the perchasing power of customer
• Worker should be well treated with the best facilities in order to inhance their
efficienc
• Every product should be affordable and accesable for the layman
• There should advance and innovative ideas to adhere customer ,with genuine product
• Company should provide feedback facilities to the customer to ensure productivity of
material
64
CHAPTER 9
ANNEXURE
PROFIT & LOSS ACCOUNT
65
2007- 2006- 2005- 2004-
Perticulars 08 07 06 05 2003-04
28814. 24456. 21036.

Sales 8 8 22503 7 18728.22
Other Income 774.34 702.5 930.73 940.53 349.66
3622.7
Increase in Stock 9 -19.88 -999.99 -780.59 2272.12
33211. 25139. 22433. 21196.
Total Income 9 4 7 7 21350
26523. 19121. 17276. 16451.

Purchases 9 7 9 8 16867.01
1250.6 1248.6 1389.2 1095.2
Consumption of Proc. Material 5 7 7 6 1059.56
1216.7 1287.7 1166.2
Processing Expenses 8 8 4 962.83 755.46
1678.2 1256.6
Salary & Allowances 2 1457.8 1387.7 3 1191.89
Selling & Distribution Expenses 794.96 813.86 894.18 597.55 469.76
Interest & Bank Charges 68.16 66.67 95.72 177.49 78.25
Admin. & Other Expenses 356.59 345.63 377.04 369.95 403.86
Provision for doudbtful debts 35 75 0 0 0
Remission of Subsidy 0 0 0 0 190.95
Depreciation 130.12 145.84 164.92 181.13 203.46
32054. 24562. 21092.

Total Expenses 3 9 22752 7 21220.2
1157.5
Profit/(Loss) Before taxation 7 576.53 -318.25 103.99 129.8
Provision for taxation -470 -161.28 0 -8.52 -49.73

Fringe Benefit Tax -9.77 -13.02 -13.84 0 0
Deferred Tax Asset/Liability -33.58 10.56 63.9 -18.39 4.46
Profit After Taxation 644.22 412.79 -268.19 77.08 84.53
Balance Sheet
66
Particulars 2007-08 2006-07 2005-06 2004-05 2003-04
LIABILITIES
Share Capital 418.45 418.45 418.45 418.45 418.45

Reserve & Surplus 5441.29 4864.36 4235.57 4408.72 4282.48
Secured loans 2549.8 1890.01 953.68 1826.78 1808.76
Unsecured Loans 500 500 500 500 500
Current Liabilities 13741.36 10234.11 9438.51 8965.05 7516.07

Provisions 1388.42 945.07 738.66 619.27 710.4
Deferred Tax Liability 0 0 0 40.88 22.49

16284.8 16779.1
Total Liability 24039.32 18852 7 5 15258.65
ASSET
Fixed Asset 3952.85 3923.27 3914.51 3901.73 3840.43

Depreciation -2717.31 -2587.2 -2442.12 -2283.47 -2103.91
Capital Wirk in Progress 25.6 9.45 9.45 9.45 10.55
Investment 0.06 0.06 0.06 0.06 0.06
Inventories 9277 5634.79 5907.2 6754.37 7285.12
Sundry Debtor 614.41 938.09 744.38 365.57 372.64
Cash & Bank Balance 6647.53 4260.78 2602.21 1116.03 930.85
Other Current Asset 57.56 31.5 7.26 0.06 0.08
Loans & Advances 6181.62 6582.22 5468.66 6837.69 4815.72
Deferred Tax Asset 0 33.58 23.02 0 0
Misc. Expenditure Written
off 0 25.46 50.24 77.66 107.11
16284.8 16779.1
Total Assets 24039.32 18852 7 5 15258.65
67
CHAPTER 10
BIBLIOGRAPHY
Bibliography
68
Financial Management by I.M. Pende
Financial Management by N. M Vechalekar
Financial Management by Jain & Khan
Referred sites
Search engine
www.google.com
Web site
WWW.indiastudy.com
WWW.paradise.com
WWW.raymondindia.com
69
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A

RAYMOND UCO DENIM PVT.LTD.

Under the guidance of

DEPARTMENT OF MANAGEMENT SCIENCE & RESEARCH,

Title of the study

Working capital management is a significant in financial management due to the

Ratio analysis is a powerful tools for financial analysis. A ratio is defined as a

Strategic information is just as important to shareholder as it is the company

RAYMOND UCO DENIM PVT.LTD.

For over 80 years, Raymond is counted as one of the world's premier

Manzoni is a luxury lifestyle brand offering the discerning customer a

Parx is a 'premium casual lifestyle' brand bringing customers a range of

Vision finds form...

• Raymond Apparel Ltd.

• ColorPlus Fashions Ltd.

• Silver Spark Apparel Ltd.

• Regency Texteis Portuguesa Lda

• EverBlue Apparel Ltd.

• Celebrations Apparel Ltd.

• J.K. Files & Tools

• Ring Plus Aqua Ltd.

• J.K. Helene Curtis Ltd.

• J.K. Investo Trade (India) Ltd.

• Raymond Zambaiti Pvt. Ltd.

• Gas Apparel Pvt. Ltd.

• J.K. Ansell Ltd.

• J.K. Talabot Ltd.

• Our Group Companies

• Our Joint Ventures

Raymond UCO Denim, Yavatmal, Maharashtra, India

UCO Sportswear NV, Ghent, Belgium

UCO Tesatura, Giurgiu, Romania

UCO Fabrics Inc- Rockingham, North Carolina, USA

• To study the cash management, receivable management, credit management and

Need for working capital:

1. To purchase of raw materials, components and spares.

Concept of working capital:

A. Balance sheet or traditional concept

A. Balance sheet or traditional concept:

1. Gross working capital:

2. Net working capital:

Net working capital = current assets - current liabilities

B. Operating cycle concept:

Fig: OPERATING CYCLE

(i) Raw materials and stores storage stage.

This can also categorize into two types as:

1. Fixed working capital:

2. Fluctuating working capital:

Factors affecting working capital

Sources of working capital:

1. Long term sources:

II. Retained earning:

III. Issue of debenture:

IV. Long term debts:

2. Short term sources of temporary working capital:

II. Public deposits:

III. Various credits:

Management of working capital:

 Without adequate cash to meet working capital demands, it is impossible to extend

1. Cash management involved the following:

I. Efficient banking-making sure money received is banked as soon as possible, making

A. For the immediate short term trend:

B. For the longer term trend:

Working Capitl Management & Ratio Analysis

Working Capitl Management & Ratio Analysis