Beruflich Dokumente
Kultur Dokumente
-1-
Submitted By:
SUMAIYA DALAL 68
RAHUL MAHABARE 88
HIMSHREE SHELAR 105
PRASHANT SONI 108
DEEPAK SUKPAL 109
CERTIFICATE
SUMAIYA DALAL
RAHUL MAHABARE
HIMSHREE SHELAR
PRASHANT SONI
DEEPAK SUKPAL
UNDER MY GUIDANCE AND THIS HAD NOT FORMED A BASIS FOR THE
AWARD OF ANY OTHER DEGREE OF THIS INSTITUTE/UNIVERSITY.
PLACE:
DATE:
---------------
L. N. CHOPDE
FINANCIAL MANAGEMENT
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ACKNOWLEDGEMENT
CONTENTS
1. Introduction………………………………………………………………6
2. Definition…………………………………………………………………..6
12. Conclusion..……………………………………………………………… 23
13. Bibliography………….…………………………………………………… 24
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INTRODUCTION:
DEFINITION:
In order to maintain flow of revenue from operations, every firm needs certain amount of
current assets. For example, funds required either to pay for expenses or to meet
obligation for service received or goods purchased etc by a firm. These funds are known
as Working Capital.
Working Capital is defined as the excess of current assets over current liabilities and
provisions. That is, the amount of surplus of current assets which remain after deducting
current liabilities from total current assets which is equal to the amount invested in
working capital consisting of work in progress, raw materials and component stocks,
consumable items amounts owing by customers and cash at the or bank in hand.
According to shubin define working capital is the amount of funds necessary for the cost
of operating the enterprise. Working capital in a going concern is a revolving fund, it
consist of cash receipts from sales which are used to cover the cost of operation.
It is descriptive of that capital which is not fixed. But the more common user of working
capital is to consider it as the difference between the book value of the current assets and
the current liabilities.
In Accounting working capital is the different between the inflow and outflow of funds.
In other words, it is the net cash inflow. Working capital is also known as Circulating
Capital, Fluctuating Capital and Revolving Capital. The magnitude and composition keep
on changing continuously in the course of business.
The term working capital refers to the net working capital. Net working capital is the
excess of current assets over current liabilities. It can be expressed as:
Current assets refer to those assets which in the ordinary course of business can be or will
be, turned in to cash with in one year without under going a diminution in value and
without disrupting the operations of the firm. On the other hand, current liabilities are
those liabilities which are intended at their inception to be paid in the ordinary course of
business, with in a year, out of the current assets or earnings of the concern.
The components of current assets and current liabilities are listed below:
Receivables or debtors are the one of the most important parts of the current assets which
is created if the company sells the finished goods to the customer but not receive the cash
for the same immediately. Trade credit arises when firm sells its products and services on
credit and dose not receive cash immediately. It is essential marketing tool, acting as
bridge for the movement of goods through production and distribution stages to
customers. Trade credit creates receivables or book debts which the firm is expected to
collect in the near future. The receivables include three characteristics
1) It involve element of risk which should be carefully analysis.
2) It is based on economic value. To the buyer, the economic value in goods or services
passes immediately at the time of sale, while seller expects an equivalent value to be
received later on.
3) It implies futurity. The cash payment for goods or serves received by the buyer will be
made by him in a future period.
Inventory Management
The term ‘inventory’ is used to designate the aggregate of those items of tangible assets
which are
1. Finished goods (‘saleable’)
2. Work-in-progress (‘convertible’)
3. Material and supplies (‘consumable’)
In financial view, inventory defined as the sum of the value of raw material and supplies,
including spares, semi-processed material or work in progress and finished goods. The
nature of inventory is largely depending upon the type of operation carried on. For
instance, in the case of a manufacturing concern, the inventory will generally comprise
all three groups mentioned above while in the case of a trading concern, it will simply be
by stock- in- trade or finished goods.
In company there should be an optimum level of investment for any asset, whether it is
plant, cash or inventories. Again inadequate disrupts production and causes losses in
sales. Efficient management of inventory should ultimately result in wealth maximization
of owner’s wealth. It implies that while the management should try to pursue financial
objective of turning inventory as quickly as possible, it should at the same time ensure
sufficient inventories to satisfy production and sales demand. The objectives of inventory
management consist of two counterbalancing parts:
1. To minimize the firms investment in inventory
2. To meet a demand for the product by efficiently organizing the firms production and
sales operation.
This two conflicting objective of inventory management can also be expressed in term of
cost and benefits associated with inventory. That the firm should minimize the
investment in inventory implies that maintaining an inventory cost, such that smaller the
FINANCIAL MANAGEMENT
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inventory, the better the view point .obviously, the financial manager should aim at a
level of inventory which will reconcile these conflicting elements. Some objective as
follow
1. To have stock available as and when they are required.
2. To utilize available storage space but prevents stock levels from exceeding space
available.
3. To maintain adequate accountability of inventories assets.
4. To provide, on item – by- item basis, for re-order point and order such quantity as
would ensure that the aggregate result confirm with the constraint and objective of
inventory control. To keep low investment in inventories carrying cost an obsolesce
losses to the
minimum.
Inventory components
The manufacturing firm’s inventory consist following components
I) Raw material
ii) Work- in-progress
iii) Finished goods
To analyze the level of raw material inventory and work in progress inventory held by the
firm on an average it is necessary to examine the efficiency with which the firm converts
raw material inventory and work in progress into finished goods.
Cash Management
Cash is common purchasing power or medium of exchange. As such, it forms the most
important component of working capital. The term cash with reference to cash
management is used in two senses, in narrow sense it is used broadly to cover cash and
generally accepted equivalent of cash such as cheques, draft and demand deposits in
banks. The broader view of cash also induce hear- cash assets, such as marketable sense
as marketable securities and time deposits in banks. The main characteristics of this
deposits that they can be really sold and convert in to cash in short term. They also
provide short term investment outlet for excess and are also useful for meeting planned
outflow of funds. We employ the term cash management in the broader sense.
Irrespective of the form in which it is held, a distinguishing feature of cash as assets is
that it was no earning power. Company have to always maintain the cash balance to
fulfill the dally requirement of expenses. There are four primary motive for maintain the
cash as follow.
Precautionary Motive
Cash flows are somewhat unpredictable, with the degree of predictability varying among
firms and industries. Unexpected cash needs at short notice may also be the result of
following:
1. Uncontrollable circumstances such as strike and natural calamities.
2. Unexpected delay in collection of trade dues.
3. Cancellation of some order for goods due unsatisfactory quality.
4. Increase in cost of raw material, rise in wages, etc.
The higher the predictability of firm’s cash flows, the lower will be the necessity of
holding this balance and vice versa. The need for holding the precautionary cash balance
is also influenced by the firm’s capacity to have short term borrowed funds and also to
convert short term marketable securities into cash.
Speculative Motive:
Speculative cash balances may be defined as cash balances that are held to enable the
firm to take advantages of any bargain purchases that might arise. While the
precautionary motive is defensive in nature, the speculative motive is
aggressive in approach. However, as with precautionary balances, firms today are more
likely to rely on reserve borrowing power and on marketable securities portfolios than on
actual cash holdings for speculative purposes.
OPERATING CYCLE:
Finished Work in
Goods Progress
Factory &
Sales Administrativ
e Overheads
Accounts Raw
Cash
Receivable Materials
1. Gross Working Capital: The term Gross Working Capital refers to the total of all
current assets. In other words, the firm’s investments in total current assets or circulating
assets. Current assets are the assets which can be converted into cash with in the
accounting year. It represents short term securities, sundry debtors, bills receivables,
stock, etc. The concept of working capital is very suited to company organization where
ownership is separated from management and control.
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2. Net working Capital: The net concept of working capital is qualitative, indicating the
firm’s ability to meet its operating expenses and current liability. The term Net Working
Capital refers to the difference between current assets and current liabilities.
Alternatively, it can be defined as the portion of a firm’s current assets which is financed
with long term funds. This concept is commonly used for proprietary firms. Net working
capital can be grouped into positive net working capital and negative net working capital.
It can be expressed as :
3. Permanent Working Capital: The minimum amount of current assets which are kept by
a firm over the entire year to ensure uninterrupted course of operation. The minimum
level of current assets is referred to as permanent working capital. It is also termed as
Regular Working Capital or Core Working Capital or Fixed Working Capital. It may be
noted that this amount of fixed working capital varies from year to year, depending upon
the changes in production and sales as a result of seasonal changes.
4. Temporary Working Capital: Any amount over and above the permanent level of
working is Temporary or Fluctuating or Variable Working Capital. It also represents
additional current assets required to meet fluctuations during the operating year. As it
fluctuates according to the level of operation, it is termed as Fluctuating Working Capital.
5. Balance Sheet Working Capital: The balance sheet working capital is one which is
calculated from the items appearing in the Balance Sheet. Gross working capital, which is
represent by current assets which have to be ensure continuity of production. Net working
capital, which is represented by the excess of current assets over current liabilities. Both
gross and net working capital are the examples of the balance sheet working capital.
6. Cash Working Capital: The narrow concept of cash refers to working capital. A firm’s
cash working capital is required to make payments to its suppliers, to incur day to day
expenses and to pay salaries, wages, interest and dividends. The items of cash working
capital appearing in the profit and loss account. Cash working capital shows the impact of
various transactions on cash position of a firm.
The changes in the level of working capital occur for the following reasons:
A. Internal Factors:
B. External Factors
1) Business Cycle Fluctuation: This is another factor which determines the need
level. Barring exceptional cases, there are variations in the demand for goods
handled by any organization. Economic boom / recession have their influence on
the transaction and consequently on the quantum of working capital required.
2) Technological Development: Changes in technologies may lead to improvements
in processing raw materials, minimizing wastages, greater productivity, more
speed of production. All these improvements may enable the firm to reduce
investments in Inventory.
3) Seasonal Fluctuation: Seasonal fluctuation in sales affect the level of variable
working capital. Often the demand for products may be of a seasonal nature. Yet
inventories have got to be purchased during certain seasons only. The size of
working capital in one period may therefore, be bigger than that in another.
4) Environment Factors: Political stability in its wake bring in stability in money
market and trade world, things mostly go smooth. Risk ventures are possible with
enhanced need for working capital finance. Similarly, availability of local
infrastructural facilities, road, transport, storage and market etc influence business
and working capital need as well.
5) Taxation Policy: Taxes must be paid out of profits. Tax liability is unavoidable
and adequate provision should be made for it in working capital planning. If the
tax liability increases, it will impose an additional strain on working capital. The
finance manager must do tax planning in order to avail the benefits of all sorts of
tax concession and incentives.
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ESTIMATION OF WORKING CAPITAL REQUIREMENT:
The working capital requirements can be determined by the following three techniques:
3) Operating Cycle (or) Cash Working Capital: According to this approach, the
requirements of working capital depend upon the operating cycle of the business.
The operating cycle begins with the acquisition of raw materials and ends with the
collection of receivables. It may be broadly classified into the following four stages viz.
i) Raw materials and stores storage stage.
ii) Work-in-progress 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.
Symbolically the duration of the working capital cycle can be put as follows: -
O=R+W+F+D-C
Where,
O=Duration of operating cycle;
R=Raw materials and stores storage period;
W=Work-in-progress period;
F=Finished stock storage period;
D=Debtors collection period;
C=Creditors payment period.
Company Profile:
There is more to Jain Irrigation than irrigation. The Corporation has multi product
industrial profile and manufacturers of Drip and Sprinkler Irrigation Systems and
Components; PVC, Polyethylene (HDPE, MDPE) & Polypropylene Piping Systems;
Plastic Sheets (PVC & PC sheets); Dehydrated Onions and Vegetables; Processed Fruits;
Tissue Culture, Hybrid & Grafted Plants; Greenhouses, Poly and Shade Houses; Bio-
fertilizers; Solar Water Heating Systems and Solar Photovoltaic Appliances (Solar
lighting systems) and Bio-Energy sources. We render consultancy for complete or partial
project planning and implementation e.g. Watershed or Wasteland and / or Crop
Selection and Rotation.
Jain Irrigation has been named as one of the eight Indian companies expected to emerge
as challengers to the World’s leading companies by Standard and Poor recently in May
2007.
Rewards:
Achievements
Pipe Division
• The largest manufacturer of PVC & PC sheets in India and globally amongst first
5 Companies.
• The only manufacturer producing widest range of Plastic Sheets (PC & PVC)
under one roof.
History
The Roots
Our journey began in 1887 when our forefathers left the deserts of Rajasthan, their home
state, in search of water and food and reached Wakod, at the foothills of the famous
Ajanta Caves. They started farming as a means of livelihood.
In 1963 selling kerosene in pushcart, the young law graduate, Bhavarlal Jain, founded the
family business in trading. The family partnership with a meager Rs. 7,000, accumulated
savings of three generations, as capital. Soon, agencies for two wheelers, auto vehicles
and automobile accessories were established in quick succession.
Story of Success
Trading : Inspired by a quote, "Agriculture : a profession with future" young Jain added
dealership of tractors, sprinkler systems, PVC pipes and other farm equipment. In order
to broad base the agri-business, agencies for farm inputs such as Fertilizers, Seeds,
Pesticides were also added. Sales grew from Rs. 1 million in 1963 to Rs. 110 millions in
1978, a phenomenal increase of 110 times. These formative years helped us build a
unique and lasting enterprise. This was achieved through consistent high standards of
performance and personal behavior on the one hand and a strong sense of commitment
for meeting targeted volumes and for payment of debts in time, on the other. Dealings
with national and international principals was a contributing factor towards building these
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attitudes. In time, we came to be recognized as a reputable, trustworthy and prestigious
house. This background augured well for an entry into industrial ventures.
Refined Papain : We took over a 14 year-old sick Banana Powder Plant in April 1978 at
a high auction price of Rs. 3 million while we only had Rs. 0.2 million as inevitable
surplus. The plant was quickly modified for the production of Papain from Papaya latex.
In December 1978, the founder traveled to New York in search of customers for Jain
Papain. The competition for purchase of raw materials at home and for sale of Papain
abroad was stiff and stifling. However, we developed purified Papain through ceaseless
in-house R&D and emerged as the `Number One’ supplier of the highest purity refined
Papain. Thus Papain put us on the international map.
PVC Pipes : In 1980, manufacturing of PVC Pipes commenced with a small annual
capacity of 300 MT's which was increased to over 35,600 MT's per annum by 1997,
making us the largest single producer of PVC Pipes in the country. A close-knit dealer
distribution network in the rural areas coupled with continuous automation and up
gradation of product facilities and in-house R&D for maximum capacity utilization has
kept us at the forefront. This further helped us to expand the range to Casing & Screen
Piping Systems thereby continuing to contribute to the growing export volumes.
Food Processing : In 1994 we set-up world class food processing facilities for
dehydration of onion, vegetable and production of fruit purees, concentrates and pulp.
These plants are ISO 9001 & HACCP certified and Meet International FDA statute
requirements. Combining the modern technologies of the west with the vast, mostly
untapped agriculture resources of India, using the local human resources and inculcating
the culture of excellence in quality and total customer service. We have set ourselves a
goal 'to become a major and reliable global supplier of food ingredients of finest quality.'
Today with over 3000 committed employees strength worldwide, we have established our
Leadership in diverse products like Micro & Sprinkler Irrigation, Agricultural Inputs,
Agro-Processed Products, Plastic Pipes & Sheets.
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Profit and Loss Account
(Rs. In Millions)
Particulars 31st March, 31st March, 31st March, 31st March, 31st March,
2006 2007 2008 2009 2010
Income:
Sales and Operating 10931.000 12084.864 16710.550 21789.450 27229.110
Income
Other Income -- 308.851 293.047 169.67 247.42
Increase in Stock -- 372.356 1028.144 17.550 1037.18
Total 10931.00 12766.071 18031.742 21976.670 28513.710
Expenditure:
Cost of Materials 7902.624 10808.378 12897.940 16905.380
Consumed, Purchases,
etc
Manufacturing Expenses 924.262 1395.139 1536.930 2209.960
Payments to and 462.436 657.989 809.590 1036.560
Provisions for Employees
Selling and Distribution 899.514 1184.554 1446.580 1744.700
Expenses
Administrative Expenses 311.820 390.715 537.180 681.160
Differences in Foreign -- -- 777.220 (711.080)
Exchange Rate (Net)
Total -- 10500.656 14436.775 18005.440 21866.680
(Rs. In Millions)
Particulars 31st March, 31st March, 31st March, 31st March, 31st March,
2006 2007 2008 2009 2010
A) Current Assets
i) Inventories
Raw Materials 1,260.892 2,245.098 2,004.958 2,122.790
Stock in Progress 1.880 6.017 5.425 4.850
Finished Goods 1,031.777 2,068.676 2,151.457 3,215.790
Other Inventories 448.549 524.047 1,033.331 718.110
Total of Inventory 1,837.300 2,743.098 4,843.838 5,195.171 6,061.540
ii) Sundry Debtors 2,830.600 4,405.135 5,956.300 7,816.006 8,876.000
iii) Cash and Bank 2,261.900 356.687 732.735 879.145 4,378.130
Balance
iv) Other Assets 57.200 101.034 173.682 220.578 251.540
v) Loans and Advance 757.800 1,075.195 2,253.555 3,235.546 4,844.160
Total of A – Gross 7,744.800 8,681.149 13,960.110 17,346.447 24,411.370
Working Capital
B) Current Liabilities
i) Current Liabilities 3,078.900 4,320.335 5,250.847 6,878.566 7,722.680
ii) Provisions 301.800 259.456 516.251 785.828 1,605.710
Total of B 3,380.700 4,579.791 5,767.098 7,664.394 9,328.390
Net Working Capital 4,364.100 4,101.358 8,193.012 9,682.053 15,082.980
Working Capital 100 93.98 187.74 221.86 345.61
Indices
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150
100 93.8
100
50
0
2006 2007 2008 2009 2010
Observations
It was observed that major source of working capital of Jain Irrigation Systems for five
years is as follow:
It was observed that in the year 2006-07 current assets increased by around 12% and
current liabilities increased by 35% which affect as working capital decrease by 7%.
In the year 2007-08 net working capital increased to Rs 8,193.012 millions from Rs.
4,101.358 millions the increase in working capital is close to 99%. While current assets
increased by 61% and current liabilities by 26%. It shows that management is using long
term funds to short term requirements. And it has risen to Rs. 15,082.980 millions in the
year 2010 because current assets gone up from Rs. 9,682.053 millions to Rs. 15,082.980
millions, current liabilities grown from Rs. 7,664.394 millions to Rs. 9,328.390 millions
This two together pushed up the net working capital to the present level. The rise in
working capital is a clear indication that the company is utilizing its long term resources
with efficiency.
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WORKING CAPITAL RATIO:
Particulars 31st March, 31st March, 31st March, 31st March, 31st March,
2006 2007 2008 2009 2010
i) Working Capital 2.50 2.94 2.02 2.25 1.81
Turnover Ratio =
Sales / Net Working
Capital
CONCLUSION:
Working capital of the company was increasing and showing positive working capital per
year. It shows good liquidity position.
Positive working capital indicates that company has the ability of payments of short
terms liabilities.
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Working capital increased because of increment in the current assets is more than
increase in the current liabilities.
Company’s current assets were always more than requirement it affect on profitability of
the company.
BIBLIOGRAPHY:
http://www.jains.com/