Working Capital Management 1

_____________________________________________________Working Capital Management
A PROJECT REPORT ON
Working Management
Capital
With special reference to
(Hutatma Bazar, Walwa)

Submitted by Mr. Vijay Yashawant Patil Under the guidance of
Prof. V. V. Watve
In the partial fulfillment for requirement of the degree MASTER OF BIUSNESS ADMINISTRATION(IT)
(TRIME-V)
Submitted to
BHARATI VIDYAPEETH, UNIVERSITY
INSTITUTE OF MANAGEMENT AND

B.V.U.I.M.R.D.A., Sangli________________________________________________________1
RURAL DEVELOPMENT ADMINISTRATION, SANGLI
B.V.U.I.M.R.D.A., Sangli________________________________________________________2
This is certify that, the project report entitled
Working Capital Management

This is being submitted by,
MR. VIJAY YASHAWANT PATIL

Is a record of their own work carried out by them for the award of the degree
"MASTER OF BUSINESS ADMINISTRATION"

(Trimester V)
Under my supervision & guidance during academic year 2008-2009. Prof. ARJUN P. GHATULE
(DIRECTOR)
Prof. K.SUBARAMAN Watve

(H.O.D.) (GUIDE)
Prof. V. V.
DEPARTMENT OF MANAGMENT STUDIES

B.V.U.I.M.R.D.A., Sangli________________________________________________________3
INSTITUTE OF MANAGEMENT AND RURAL DEVELOPMENT ADMINISTRATION, SANGLI

INSTITUTE OF MANAGEMENT AND RURAL DEVELOPMENT ADMINISTRATION, SANGLI
DECLARATION
I undersigned hereby declare that the project report entitled, WORKING CAPITAL MANAGEMENT written and submitted under the guidance of Prof. V. V. Watve is my original work. The empirical findings in this report are based on information collected by me. I have not copied from any report submitted to Bharati Vidyapeeth, Pune or any other university. I understand any such copying is such liable in a punishment in a way that the university authority demits this. Place: Sangli Date: Yo urs sincerely,
B.V.U.I.M.R.D.A., Sangli________________________________________________________4
ACKNOWLEDGMENT
It gives a great pleasure in bringing out the project work entitled,
Working Capital Management

I would like to place on record our extreme gratitude to our guide Prof. V. V. Watve for guiding me for successful completion of the same. I would also like to thanks to Director Prof. Mr.
Arjun P. Ghatule and our H.O.D Pro.K.Subaraman for their valuable suggestions. I also thankful to our college staff for making data
B.V.U.I.M.R.D.A., Sangli________________________________________________________5
available during project work. Without which this project work would not been possible and all those who were extremely helpful directly or indirectly in completing this project work.
B.V.U.I.M.R.D.A., Sangli________________________________________________________6
INDEX
Sr. no.
1.
Contents Introduction of the study

Introduction Objective Scope of the study Limitations of the study Methodology of the study
Page no
2 to 7
2.
Introduction of the Organization

8 to 12
Profile Area of operation
Aims & Objective of firm Sales Profile Organization structure 3.
Theoretical background of the study
13 to 26
Meaning of working capital
Nature of working capital Scope & limitation Working capital management 4.
Data
presentation
,analysis
&
27 to 38
Interpretation
Ratio determining 5. 6. Graphical presentation
Findings & suggestions Bibliography
39 to 40 41
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Introduction:
The basis financial statement i.e. the balance sheet & profit & loss account or income statement of business reveal the net effects of the operational & financial position of the company. The balance sheet gives a summary of the assets & liabilities of an undertaking at a particular point of time. It reveals the financial states of the company. The assets side of a balance sheet shows the deployment of resource & undertaking while the liabilities side of a balance sheet shows the deployment of resources & undertaking while the liabilities side indicates it obligations i.e. the manner in which these resources were obtained. The profit & loss account reflects the result of the business operations for period of time. It contains a summary of expenses incurred & the revenue realized in an accounting period. Both these statements provide the essential basic information on the financial activities of the business, but there usefulness is limited for analysis & planning purposes. But there are many transactions that take place in an understanding. There are also other important statements; working capital is one of them.
B.V.U.I.M.R.D.A., Sangli________________________________________________________8
Concept of Working Capital: There are two concepts of working capital 1. Gross 2. Net The term "Gross Working Capital", also referred to as working capital, means the total current assets. The term "Net Working Capital" (NWC) can be defined in two ways:
i.
The most common definition of is the difference between current assets & current liabilities, & Alternative definition of net working capital "that portion of a firm's current assets which is financed with long-term funds." A managing working capital efficient means to ensure
ii.
sufficient liquidity in the operation of the enterprise. The liquidity of a business firm is measured by its ability to satisfy short-term obligations as they become due.
B.V.U.I.M.R.D.A., Sangli________________________________________________________9
Objective: By considering the statement of the problems the study has some specific objective as fallow:
1. To study me short-term financial position of the firm.

2. To study the total current assets. 3. To study the total current liabilities.
4. To study the change in working capital.

5. To study the internal sources of working capital. 6. To study the external sources of working capital.
B.V.U.I.M.R.D.A., Sangli________________________________________________________10
Scope of the study: 1. This study helps to know all the financial based aspects of the organization. 2. This study is a test of effective use of working capital in organization during a particular period. 3. To find out the funds in the company we study the sources and applications of the organization.
B.V.U.I.M.R.D.A., Sangli________________________________________________________11
Limitations of the study:-
1. The foremost limitation of this study is the fact that no

product Conducting such study.
2. The
boundaries of the study are restricted to Hutatma
Bazaar only. 3. Time was the biggest constraint in the study as the area to be converted has very broad. 4. It is difficult to keep minimum bias during the interview.
B.V.U.I.M.R.D.A., Sangli________________________________________________________12
Methodology of the study:The information collected directly for the first time is primary data; it is the first hand information. 1. Primary Data: Following are the sources Interviews of the managers & employees. Information observation. 2. Secondary Data: Secondary data is second hand information which is collected from different books and annual reports of Hutatma Bazaar related to the subject of the study. Reference books & Magazines.
obtained
at
the
location
by
Hutatma Bazaar manuals. Balance sheet, various report & pamphlets.
B.V.U.I.M.R.D.A., Sangli________________________________________________________13
INTRODUCTION OF THE HUTATMA BAZAAR
PROFILE:-
1. Name of the company 2. Name of the organization Contact 3. Establishment 4. Address :
: HUTATMA BAZAAR. :
NANDINI V. NAYKWADI.
: April 2006 KamgarBhawan near Hutatma Colony Walwa. Tal. - Walwa Dist-Sangli Ph: 267136,267138 (02342)
B.V.U.I.M.R.D.A., Sangli________________________________________________________14
BRIEF HISTORY:Hutatma Madhyavarti co-operative Grahak Bhandar ltd. is a departmental store which is a consumer co-operative society? This society is established for providing goods at lower price, to process on goods and sale them to the members of the firm and other customers. Hutatma Madhyavarti Sahakari Grahak Bhandar ltd. is established under the head of great dynamic leader shri Vibhav Nayakwadi. He is ex-chairman of Hutatma cooperative sugar factory in Walwa. He sponsored the consumer co-operative store with twin object. The store is apart from running a departmental store proposes to run the satellite store in the coming years at the door step of the members. For the purpose of establishing Hutatma Bazaar the sugar factory has provided a plot of land of 40,000 sq. ft. from which they construct business premises of 8,000 sq. ft. the proposed site is just adjoining to the Kamgar bhavan near Hutatm karkhana colony. Hutatma Madhyavarti co-operative Grahak Bhandar ltd. is registered 02/11/1996 and opened on 15th August 1997. The register number of the firm is SAN/WVA/CON/105. The firms total authorized share capital is Rs. 11, 75,500/-
B.V.U.I.M.R.D.A., Sangli________________________________________________________15
LOCATION:Hutatma Madhyavarti Shakari Grahak Bhandar ltd. Kamgar bhavan near Hutatm karkhana colony, near petrol pump also there is a Hutatma Co-operative Sugar Factory. At this place no other retail or wholesale shops. So, Bazaar receives more opportunity to sale goods articles to the people who lives or comes at this place.
AREA OF OPERATION:The area of operation of the Hutatam Bazaar is covers only 15 villages but for villages Hutatma Bazaar Branchs. The firm allotted their shares to all the people lives in the Walwa Taluka area i.e. area of operation of the firm. AIMS & OBJECTIVES OF THE FIRM:The establishment of Hutatma Bazaar is because ofAll types of goods articles are available at one place To provide more qualitative goods at lower price. To give free choice of goods to the customers. The market is so long to the people who live in karkhana colony. PRODUCT PROFILE:The Hutatma Bazaar is a departmental store. However, it deals with the food grains, grocery, cosmetics, detergents, cleaners, household articles, stationery material and agricultural requirements. In Hutatma Bazaar purchase and sales all of these goods. The Bazaar gives self service to
B.V.U.I.M.R.D.A., Sangli________________________________________________________16
customers for selecting goods. Also the Bazaar handles grocery textiles and stationery at controlled counter.
OFFICE STAFF:The total staff of the Bazaar is 10. They works full day. There are no shifts in the organization. The work time of the staff members are 9.00am to 7.00 pm with one hour lunch break at afternoon. The number of staff is as follows.
Manager Clerk Cahier Salesman
1 3 2 7
Godown Keeper 3
B.V.U.I.M.R.D.A., Sangli________________________________________________________17
Theoretical background of the Study

What is Working Capital? Firms need cash to p-ay for all their day-to-day activities. Pay bills & so on. The money available to them to
B.V.U.I.M.R.D.A., Sangli________________________________________________________18
do this is known as the firm's working capital. The main sources of working capital are the current asset as these are the short term assets that the firm uses to generate cash. However, the firm also has current liabilities & so these have to be taken account of when sorting out how much working capital a firm has at its disposal. So, Working capital=Current Assets-current liabilities Thus working capital is the same as net current assets, & is an important part of the top half on the firm's balance sheet. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because there were unprofitable, but because they suffered from shortage of working capital.
B.V.U.I.M.R.D.A., Sangli________________________________________________________19
Nature of Working Capital:l. Gross Working Capital (or total working capital): The gross working capital refers to the firm's investment in all current assets taken together. The total of investments in all the individual current assets in the gross working capital. For example, if a firm has a cash balance of Rs.50000, debtors of Rs. 70000, & inventory of raw material & finished goods has been assessed at Rs. 100000, then the gross working capital of the firm is Rs. 220000 (i.e. Rs.50000+Rs. 70000+ Rs. 100000). 2. Net Working capital: The term net working capital may be defined as "the excess of total current assets over total current liabilities". It may be noted that the current liabilities refer to those liabilities which are payable within a period of 1 year. The extent, to which the payments to these current liabilities are delayed, the firm gets the availability of funds for the period. So, a part of the funds required to maintain current assets is provided by the current assets which are not financed by the current liabilities. The net working capital may either be positive or negative. If the total current assets are more then total current liabilities, then the difference is known as positive net working capital, otherwise the difference is known as negative net working capital.
B.V.U.I.M.R.D.A., Sangli________________________________________________________20
Scope & Limitations of the Working capital: As working capital is the lifeblood of the business organization it helps in managing the day-to-day activities of the business and therefore it should be maintained effectively and efficiently. The effective management of working capital means: 1) To keep the receivables low. 2) To keep the inventory low. 3) To keep the advances with suppliers low. 4) To keep the advances from customers high. 5) To keep the suppliers credit period high. 6) To keep the production time low. Sources of additional working capital: Sources of additional working capital include the following: 1) Existing cash reserves. 2) Profits (When you secure it as cash!) 3) Payables (credit from suppliers) 4) New equity or loans from shareholders. 5) Bank overdraft or lines of credit. 6) Long-terms loans. If there is insufficient working capital and we want to increase the sales, then we should over stretch the financial resources of the business. This is called as overtrading.
B.V.U.I.M.R.D.A., Sangli________________________________________________________21
Early warning signs include: 1) Pressure on existing cash. 2) Exceptional cash generating activities e.g., offering high discount for early cash payment. 3) Bank overdraft exceeds authorized limit. 4) Seeking greater overdraft or lines of credit 5) Part-paying suppliers or other creditors. 6) Paying bill in cash to secure additional supplies. 7) Management pre-occupation with surviving rather than managing. Inadequate Working capital has following limitations: 1) It becomes difficult to the firm to undertake profitable projects for non-availability of the working capital funds.
2) It becomes difficult to implement operating plans &
achieve the firms profit target. 3) Operating inefficiency creep in when it becomes difficult even to meet the day-today commitments. 4) Fixed assets are not inefficiently utilized for the lack of working capital funds. Thus the rate of return on investment slumps. 5) Paucity of working capital funds renders the firm unable to avail attractive credit opportunities etc. 6) The firm loses its reputation when it is not in position to honor its short-term obligations. As a result, the firm faces tight credit terms.
B.V.U.I.M.R.D.A., Sangli________________________________________________________22
Limitations of the working capital The limitations of working capital are classified into two categories 1. Excess working capital & 2. Inadequate working capital The dangers /limitations of excess working capital are as follow:1) No proper return to investors: -When there are excess working capital some capital remains idle it does not earn anything so proper return is not give to the shareholders in the form of dividend 2) Unnecessary and careless purchasing affect profits: -Because of the excess working capital sometime unnecessary purchases are made and materials are wasted when they are more than needed.
3) Possibility of over capitalization is created because of
huge amount of working capital

4) Excess working capital is an example formal financial
administration so banks will not be ready to give loans when they are not properly used
5) Excess working capital is an indication of defective
credit policy and slack collection period consequently higher incidence of bad debts results which adversely 6) Excess working capital makes management into co placement, inefficiency
7) Tendencies
which of
degenerates
managerial to take
accumulating
inventories
speculative profits grow this may tend to make the dividend policy liberal and difficult to cope with in future when the firm is unable to make speculative
B.V.U.I.M.R.D.A., Sangli________________________________________________________23
profits. From the point of view of time, the term working capital can be divided into two categories: 1. Permanent working capital: It also refers to the hard core working capital. It is that minimum level of investment in the current assets that is carried by the business at all times to carry out minimum level of its activities. 2. Temporary working capital: It also refers to the part of total working capital which is required by a business over & above permanent working capital. It is also called variable working capital. Since the volume of temporary working capital keeps on fluctuating from time to time according to the business activities it may be financed from short term source. The following diagram shows Permanent & Temporary or Fluctuating or Variable working capital.
B.V.U.I.M.R.D.A., Sangli________________________________________________________24
Working Capital Needs: Your obligation working such as capital your is used to pay short-term & buying
accounts
payable
inventory. If your working capital dips too low, you risk running out of cash. Even very profitable business can into trouble if they lose the ability to meet their short-term obligations. The calculator assists you in determining working capital needs for the next year. We know that firms aim at maximizing the wealth of shareholders. In its endeavor to maximize shareholders wealth, the firm should earn sufficient return from its operations. Earning steady amount of profit require successful sales activity. The firm has to invest enough funds in current assets for the success of the sales activity. Current assets are needed because sales do not in the conversion of sales in cash. convert in to cash instantaneously. There is always an operating cycle involved
B.V.U.I.M.R.D.A., Sangli________________________________________________________25
Working Capital Management: The working capital management refers to management of the working capital, or to be more precise it refers to the management of current assets. A firm's working capital consists of its investment in current assets which includes short term assets such as cans & bank balance, inventories, receivables(include debtors & bills),& marketable securities. So, the working capital management refers to the management arises from two considerations. First, existence of working capital is imperative in any firm. The fixed assets which usually require a large chunk of total funds can be used at an optimum level only if supported by sufficient working capital. Second, the working capital involves investment of funds of the firm. If the working capital level is not properly maintained & managed, then it may result in unnecessary blocking of scarce resources of the firm. The insufficient working capital, on the other hand, put different hurdles in smooth working of the firm. Therefore, the working capital management requires for smooth running of company operations. The working capital management includes the management of the level of individual current assets as well as the management of the working capital. However, each individual current asset has unique characteristics which the financial manger must consider in deciding how much money should be invested in each of these current assets. In other words, he must decide the level of the current assets.
B.V.U.I.M.R.D.A., Sangli________________________________________________________26
Different
components
of
working
capital
management: 1. Management of cash: Cash is the most important component of current assets. All other components such as debtors & inventories ultimately get converts into cash & this fact further emphasizes the important of management of cash. The goal of cash management is to maintain the minimum cash balance that provides the firms with sufficient liquidity needed to meet its financial obligation. At the same time, it involves trade-off between risk & profitability. The term cash includes not only currency but also near cash assets such as marketable i. ii. iii. iv. v. securities & demand deposits in bank. Management of cash is primarily concerned with following: Determination of minimum level of cash that an enterprise should hold. Controlling cash outflows. Controlling cash inflows. Matching cash outflows & cash inflows through cash budgeting. Proper investment of surplus cash.
2) Management of Receivables: Accounts receivable represents the debts owned to the company by customers for selling goods or services. They take two forms, i.e. trade credit & consumer credit. Trade credit is the credit extended to other firms by the company & consumer credit is the credit, which the firm extends to its ultimate consumers.
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3) Management of inventory: Inventories can be referred to as sum of the nature of raw materials, fuel & lubricants, spare parts, maintenance consumables, semi processed materials & finished goods stock & any point of time. Inventories are primarily maintained for operational smoothness. The average business has about 30% of its working capital tied yup in inventories. Objectives of inventory management are to reconcile the two conflicting requirements: i. ii. For maximization of shareholders wealth, it is essential to minimize the firms investment in inventories, & Sufficient inventory must be available to prevent stockouts & production hold-ups. These two counter balancing objectives can also be referred to as costs & benefits associated with inventory thus, inventory management attempts determination of optimum level of inventory on the basis of a tradeoff between costs & benefits associated levels of inventories. 4) Management of accounts payable:' Management of accounts payable is as between the approaches to be adopted by the finance manager in these two cases. The objective in case of accounts payable is to slow down the payment process as much as possible. But it should be remembered that they delay in payment of accounts payable may result in saving of some interest costs but it can prove very costly to the firm in the form of loss of credit in the market.
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5) Management of treasury: The main function of the treasurer concern managing the company's funds & keeping the company solvent by providing sufficient sources of finance to meet all likely contingencies treasury function involves forecasting the need & requirements of the firm & managing its cash flow. The treasurer must maintain effective business & personal relationships responsible with for the firm's bankers short-term because & long he is processing term
requirement for funds based on financial forecasts. He also responsible for issuing & handling the firm's corporate securities including shareholders registration & managing the corporate debt.
B.V.U.I.M.R.D.A., Sangli________________________________________________________29
Important of working capital management:The important of working capital management can be expressed by the following points:
i.
The level of current assets changes constantly & regularly depending upon the level of actual & forecasted sales. This requires that the decisions to bring levels of current assets to the desired levels of current assets should be made at the earliest opportunity & as frequently as required.
ii.
The changing level so current assets may also require review of the financing pattern. How much working capital needs to be financed by different sources of financing must be periodically reviewed.
iii.
Inefficient working capital management may result in loss of sales & consequently decline in profit of the firm.
iv.
Inefficient working capital may also lead to insolvency of the firm if it is not in a position to meet its liabilities & commitments.
v.
Current assets usually represent a substantial portion of the total assets of the firm, resulting in investment of a larger chunk in the current assets.
B.V.U.I.M.R.D.A., Sangli________________________________________________________30
Working capital cycle: Working capital is vital to a business. They have to have funds available to pay there day to day bills, wages & so on. The Working capital is made up of the current assets net of the current liabilities. It is particularly true where there is a substantial time lag between making the product & receiving the money for it. In this situation the has paid out all the costs associated with making the product (labor raw material & so on) but not yet any money for it. The way Working capital moves around the business in modeled by the Working capital cycle. Between each stage of this Working capital cycle there is a time delay. For some business this will be very long where it takes them a long time where it takes them a long time to make & sell the product. They will need a substantial amount of Working capital. Other though may receive their cash very quickly after paying out for raw materials etc. OPERATING CYCLE: In a trade concern, there is a series of activities starting from procurement of goods & ending with the realization of sales revenue (at the time of sale it self in cash of cash sales & at the time of debtors realizations in cash of credit sales). Similarity, in case of manufacturing concern, this series starts from procurement of raw material & ending with the sales realization of finished goods (after going through the different stages of production) in both the cases; however, there is a time gap between the happening of the first event & the happening of the last event. This time is called the
operating cycle. WORKING CAPITAL CYCLE
Cash
Creditors
Raw material
Sales
Work in progress
Finished goods
Thus, the operating cycle of a firm consists of the time required for the completion of the chronological sequence of some all of the following: 1. Procurement of raw materials & services. 2. Conversion of raw materials into work-in-process. 3. Conversion work-in-process into finished goods. 4. Sales of finished goods (cash or credit). 5. Conversion of receivable into cash.
Data presentation analysis and interpretation

Ratios determining working capital management:On the basis of operating cycle various Conversion periods of material may be calculated using the following formulas:
NOC RMCP WPCP FGCP RCP DP NOC
= = = = = = =
Total Days-credit allowed by creditors. Raw material conversion period. work-in-process conversion period. finished goods conversion period. Receivables conversion period. Deferral period. Net operating cycle.
Graphically presentations:Liquidity ratio:Current ratio= current asset/current liabilities Year Current asset Currant liabilities Ratio 2006-07 984953 725536 2007-08 1337841 670245
21:36
12:00
1400000 1200000 1000000 800000 600000 400000 200000 0 2006/07 2007/08 Assets Liabilities Ratio
Interpretation Currant ratio of the company is not satisfied because the ratio in 2007 21.36 is much bellow accepted standard ratio of 12.00 but in 2008 the currant ratio is favorable.
Acid test ratio = liquid asset /liquid liabilities
Year
200607 87209 2 12215 6 20:24
200708 72553 6 67024 0 15:47
liquid asset
liquid liabilities Ratio

900000 800000 700000 600000 500000 400000 300000 200000 100000 0 2006/07 2007/08
Assets Liabilities Ratio
Interpretation: As a rule or thumb as a conversion quick ratio of 1.1 is considered satisfactory companies liquidity ratio in 2007 1.138 is satisfactory and in2008 1.2 is also good therefore it measures firms capacity pay of currant obligation immediately and is more a rigors test of liquidity that a
currant ratio.
Turn over ratio Current asset turnover ratio= Net sales /currant assets
YEAR
200607 15061 21 98495 3 1.52
200708 252964 3 133784 1 1.89
Net sales
Currant asset
Ratio
3000000 2500000 2000000 1500000 1000000 500000 0 2006-07 2007-08
Net sales Currant asset Ratio
Interpretation Current asset turn over ratio indicates the capabilities of the organization to achieve maximum sales with the maximum investment in currant asset it indicates that the currant asset is turn over in the sales more number of times as such higher the Current asset turn over ratio better
position for organization Working capital turnover ratio= Sales/net working capital
Year
200607 150612 1 259417
200708 25296 43 66759 5 3.78
Sales
Net capital
working
Ratio
3000000 2500000 2000000 1500000 1000000 500000 0 2006-07 2007-08
5.80
Sales Net working capital Ratio
Interpretation: Working capital turn over ratio how much sales are generated by one rupee invest in working capital
Inventory turn over ratio = cost of goods sold/average inventory
year
2006-07 08
2007-
Sales 1 Average inventory Ratio

3000000 2500000 2000000 1500000 1000000 500000 0 2006-07
150612 3 564308 5 2.66
252964
114568
2.20
Sales Average inventory Ratio
2007-08
Average inventory =
opening
stock+
closing
stock/2 = 1128616+1162746/2 = = 2291362/2 1145681
Interpretation inventory turn over ratio measure the velocity conversion of stock in to sales usually high inventory turn over ratio indicates efficient management inventory because more frequently the stock are should lesser amount money is required finance the indicates in efficient to management of inventory implies over investment in inventories. Therefore company inventory ratio in 2007 2.66 in 2008 2.20 is satisfactory and in 2007the ratio is good as compare in 2008
Debtors turnover ratio = sales/debtors
year 07 Sales Debtors Ratio

300000 250000 200000 150000 100000 50000 0 2006-07 2007
2006-
2007
150612 54763 2.75
252964 80965 3.12
Sales Debtors Ratio
Interpretation Debtors velocity indicates the number of firms debtors are turn over during a year generally the higher value of debtors turnover is the more efficient is the management debtors sales or more liquid are the debtors so companies debtors turnover ratio 2007- 2.75 satisfactory as compare to 2008- 3.12
Average collection period =365/Debtors turnover
Year Debtors turnover Period
2006-07 2.75
2007-08 3.12
133 days
117 days
140 120 100 80 60 40 20 0 2006/07 2007/08 Debtors Period
Interpretation The average collection period ratio represents the average number of days for which firm has to weight its receivable is convert in to cash
Creditors turn over ratio=purchases/creditors
Year 07 Purchases 19 Creditors 06 Ratio

900000 800000 700000 600000 500000 400000 300000 200000 100000 0
2006-
200708 83025 6 51077 1 1.62
7078
5433
1.30
Purchases Creditors Ratio
2006-07
2007-2008
Interpretation The above ratio indicates purchases are increase as comparer to previous year
Net profit ratio: Gross profit margin ratio= profit after tax/ Sales *100
year
200607 1839 87 1506 12 81.86 %
200708 482585
profit after tax Sales
252964 3 524%
Ratio
3000000 2500000 2000000 1500000 1000000 500000 0 profit after tax Sales Ratio
2006-07
2007-08
Net profit margin ratio=Net profit before tax/net sales
year
200607 28061 7 15061 2 53.67 %
200708 75640 0 25296 4 33.44 %
profit before tax Sales
Ratio
800000 700000 600000 500000 400000 300000 200000 100000 0 2006-07 2007-08 profit before tax Sales Ratio
Interpretation This is the profitability ratio its shows currant financial position of the company the ratio is satisfactory the work efficiency are increased in 2008 the ratio are satisfactory
FINDINGS:
1. The currant ratio is slightly satisfactory in 2008and in 2007 and less than stand red ratio. 2. The liquidity ratio of the company is satisfactory and liquid asset are more than liquid liabilities. 3. The company has more investment in inventory. 4. Debtors collection period is good as compare to previous year. 5. The financial position of the company is very good. 6. The turn over of the company is increased.
SUGGESTIONS:1. Company should improve financial position.

2. The company should increase the current asset.
3. Company should decrease the debtors collection period. 4. The firm should decide to mention a limit of credit sales because firms debtors increases year to year. 5. The firm should try to mention cash and bank balance in control.
Bibliography:Financial management I.M.Pandey. Financial management K.D.Basava. Management Accounting M.G.Patkar. Annual Reports of the Hutatma Bazaar, Walwa 2006-2008

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_____________________________________________________Working Capital Management

With special reference to

(Hutatma Bazar, Walwa)

BHARATI VIDYAPEETH, UNIVERSITY

INSTITUTE OF MANAGEMENT AND