COMPANY PROFILE

Introduction of the company Super Cassettes industries Ltd. Is the largest producer and publisher of music and video in India under world famous trade mark T-series. Whether it is original soundtrack from the movies or the ever-popular remix, old devotional bhajan or new age item numbers ,melodies from the 60,s or pop hits of 90,s glamorous music videos and big budget films, T-Series is the largest producer of them all. It is no wonder; the company has entered itself no. one recall in the Indian markets. This fact has been re enforced by AC Nielsen ORG-Marg consumer study. T-series music is heard, played and performed throughout India and other parts of the world by way of our sound recordings, videos or by performers. Today t-series controls more than 60% share of the Indian music market. Even in the international market t-series enjoys a turnover in excess of $4.2 million, and exports to 24 countries across six continents. Combined with Indias largest distribution network of over2500 dealers, our support system make us to take on the future. T-series TYPE: FOUNDED: HEADQUARTERS: FOUNDER: private 1983 Noida, India Lt Mr. Gulshan kumar

KEY PEOPLE

Mr. Bhushan kumar (chairman & M.D) Madam Sudesh kumara (director) Mr.Darshan kumar (director) Mr. Ved Channa (Directors) Mr. A.N Sehgal (Director) Mr. Vijay sachdeva (director) INDUSTRY: PRODUCTS: PARENTS: WEBSITE OF COMPANY: Music and entertainment Music and entertainment Super Cassettes industries Ltd. www.t-series

ABOUT FOUNDER Gulshan kumar,(August,12) was an Indian bollywood movie producer. He founded super Cassettes industries, a small video cassette pirating operation which soon grew to be very big. Later he started a music production company in noida, near Delhi. He is said to start the practice of exploiting a loophole in the Indian copyright law, and creating cover versions of popular songs. To counter exorbitantly priced poor-quality audio tapes which use to marketed by reputed music companies, Gulshan kumar brought out in the late 1970,s very reasonably priced music cassettes with adequate quality. He exported quality music cassettes when his business grew. Gulshan also introduced religious music cassettes at highly subsidized prices with the idea of promoting religion among fellow Hindus. He produced some movies and TV serials which covered Hindu Mythology. The Indian music industry use to be controlled by a few high profiled singers. Gulshan introduced young talented singers to the music world, Sonu Nigam, Anuradha paudwal and Kumar sanu being the prominent ones among them. He also introduced some new actors and music directors. Gulshan established a bhandara , serving a free style food to pilgrims who hiked to the hindu shrine of shree mata vaishnodevi. He become an example for Indian businessmen by sharing his wealth the community.

T-SERIES IN INDIAN FILM & MUSIC INDUSTRIES 42 HINDI FILMS ON THE FLOOR WHICH T-series holds the audio/video copyright. T-series counts among the biggest film release for 2004-05 and 2006. Big banner films production and theatrical distribution. Merchandising & big budget promotions. 1,482 exclusively signed artists.35000+audio tittles/ 2000 video tittles. Hindi film music -5800 film/ combination tittles. Extensive captive talent pool of authors composers and performance artists himesh reshammiya, Adnan Sami, Jagjeet sing, Lata mangeshkar, Asha Bhosle, Udit Narayan, Sonu Nigam Bombay Viking etc, New tittles of music are added almost every day in our already existing vast catalogue.

Super cassette industries are diversified group of companies having a great deal of interest in the consumer electronics, appliances and electronic components. T-series main products lines are classified into1-consimer electronic (CE) 2-consumer appliances (CA) It includes small appliances classified as utilized. Consumer electronics includes color T.V, audio/video system and audio/video pre-recorded & blank cassettes & C,D. A technical collaboration with Hyundai digital courier has already started to bear fruits VCD players, introduced in India under T-series Hyundai brand, have established a strong presence in the market.

DIVISION MEDIA DIVISION CD DIVISION Super cassettes India ltd. The CD division was started with sole aim to provide high class at competitive prices. It has high end system for CD replication, with machines from NETSTAL (Switzerland).LEYOLD (Germany), and UUBIT (France). It has capability to produce 12 million CD,s annually or 70 CD,s/ minute, give the company a competitive advantage in these fact changing the market situation. AUDIO/VIDIO DIVISION It has 65% for itself. This division of super cassette industry limited has the feature of sourcing all the components in- house. 190 million audio/video cassettes per annum. CONSUMER ELECTRONIC DIVISION The kind of infrastructure allows this company to offer consumer electronics. SCI LTD. Is the first company to introduce CD players with built-in- amplifier. PLASTIC MOLDING DIVISION T-series is the organization that is able to all the components in the house. CHONHSONG (Hong Kong). JSM (Japan) and WINDSOR machines of t-series injection molding division. EXPORT DIVISION The list of exports are : Pre- recorded Audio/video cassettes Audio/video CD,s Television sets

Music deck Mobile phones The products of t- series group of industries available. Across Australia , Bangladesh, Singapore, Nepal, Hong Kong, srilanka, UAE, USA, Kenya, Japan. CINE PRODUCTION DIVISION Four full fledged studios, two in Mumbai and noida (Golden chariot studio, Sudeep studio, Laxmi studio, film center )are equipped with the 6-DXC-30P Sony camera set-ups, 32 channels, Mackie audio mixer, professional wireless communication system (Drake)and broadcast record.

AWARDS NATIONAL CITIZEN AWARD(1990) For the sterling contribution for the promotion of music and developing new twlents in the film industry. MOTHER INDIA NATIONAL AWARD It was presented by NRI institute, in the recognigation of the field of outstanding social achievements of Mr. Gulshan Kumar in all woks of life. LIMCA BOOKS OF RECORD AWARD(1992) For the phenomenal contribution of the field of music. VIJAY RATAN AWARD Given by the international friendship society of India.

Departmental profile (Finance and accounting department) The finance & accounts departments works as a judicious manager in distribution of available funds in an optimal manner for the organization as a whole on daily, month and annual basis and also a conscious book keeper for the company going through every transaction having financial implication with complete thoroughness without acceptance of liability. It is also look after the information requirements of the company and various statutory authorities in compliance of the applicable statutory provisions. The onus of ensuring companys provisions. The onus of ensuring companys various assets adequately insured is also with this department. FINANCE AND ACCOUNTING DEPARTMENTS GENERAL ACCOUNTS This section is divided into two different subsection, viz. Raw material and stores accounting Personal related accounting

LITERATURE REVIEW
Working capital Funds needed for short term purposes for the purchase of raw material, payment of wages, and other day to day expenses, etc. These funds are known as working capital. Working capital also known as net current assets, it is the amount of funds necessary to cover the cost of operating the enterprises. It is the excess of current assets over current liabilities. All organization has to carry working capital in one form or the other. The efficient management of working capital is important from the point of both liquidity and profitability. Poor management of working capital means that funds are unnecessarily tied up in idle assets hence reducing the ability to invest in productive assets such as plant and machinery, so affecting the profitability. Working capital is the part of the firm capital which is required for financing short term or current assets such as cash marketable securities, inventories etc. So working capital is the amount of funds necessary to cover the cost of operating the enterprise. Thus working capital is the funds of capital, which are needed for short term purposes of raw material, payment of wages and other day to day expenses.

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Working capital management Working capital in general practice refers to the excess of current assets over current liabilities. Management of working capital therefore, is concern with problems that arise in attempting to manage the current assets, the current liabilities and the inter-relationship that exists between them. In other words it refers to all aspects of administration of both current assets and current liabilities. The basic goal of working capital management is to manage the current assts and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained means it is neither inadequate nor excessive. This is so because both inadequate as well as excessive working capital position is bad for any business. Inadequacy of working capital may lead the firm to insolvency and excessive working capital implies idle funds which earn no profit for the business. NEED OR OBJECT OF WORKING CAPITAL Working capital is required to sustain the sales activity. In case adequate working capital is not available the company will not be in position to sustain he sales since it may not be in position to purchase the raw material, components and spares, to pay wages and salaries, to incur day to day expenses and overhead costs such as fuel, power and office expenses, to meet the selling costs as packing, advertising, etc. to provide credit facilities to the customers and to maintain the inventories of raw material, work-in-progress, stores and spares and finished stock

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TYPES OF WORKING CAPITAL Working capital is classified as Gross working capital and net working capital this classification is important from the point of view of financial manager. Gross working capital: the term working capital refers to the gross working capital and represents the amount of funds invested in current assets. Thus the gross working capital is the capital invested in total current assets of the enterprise. Net working capital: the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities. Or say Net working capital= current assets current liabilities

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IMPORTANCE OF WORKING CAPITAL Solvency of the business Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. Goodwill Sufficient working capital enables a business concern to make prompt payments and hence helps in creating and maintain goodwill. Easy loans A concern having adequate working capital, high solvency and good credit standing can arrange loan from banks and others on easy and favorable terms. Regular payments of salaries, wages and other day to day commitments A company which has ample working capital can make regular payments of salaries, wages and other day to day commitments which raises the morale of its employee, increase their efficiency, reduces wastages and costs and enhances production and profits. Ability to face crises Adequate working capital enables a concern to face business crises in emergencies such as depression because during such period, generally, there is much pressure on working capital.

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ANALYSIS OF WORKING CAPITAL AND MEASURING THE EFFICIENCY IN THE MANAGEMENT WORKING CAPITAL As pointed out earlier, the working capital magnitude of concern should neither be too inadequate nor to excessive as compared to its requirements. Maintaining adequate level of working capital ensures the improvements of profitability. Thus financial manager all the time strive to strike a balance between working capital requirements and the working capital magnitude. This is done by analyzing and examining the changes in individual components of working capital, i.e., item of CA and CL. When we make a deep examination of various components of working capital with an objective to ensure its adequacy or otherwise, it is known as analyzing of working capital for such an analysis, the following techniques are used. schedule changes in working capital fund statement ratio analysis

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CONSTITUENTS OF CURRENT ASSETS

1)

Cash in hand and cash at bank

2)

Bills receivables

3)

Sundry debtors

4)

Short term loans and advances.

5)

Inventories of stock as:

a.

Raw material

b.

Work in process

c.

Stores and spares

d.

Finished goo

6)

Temporary investment of surplus funds.

7)

Prepaid expenses

8)

Accrued incomes.

9)

Marketable securities.

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CONSTITUENTS OF CURRENT LIABILITIES

1.

Accrued or outstanding expenses.

2.

Short term loans, advances and deposits.

3.

Dividends payable.

4.

Bank overdraft.

5.

Provision for taxation , if it does not amt. to app. Of profit.

6.

Bills payable.

7.

Sundry creditors

The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits.

The gross concept is sometimes preferred to the concept of working capital for the following reasons:

1. It enables the enter price to provide correct amount of working capital at correct time

2. Every management is more interested in total current assets with which it has to operate then the source from where it is made available.

3. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital.

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4. This concept is also useful in determining the rate of return on investments in working .

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL

Excessive working capital means ideal funds which earn no profit for the firm and business cannot earn the required rate of return on its investments.

Redundant working capital leads to unnecessary purchasing and accumulation of inventories. Excessive working capital implies excessive debtors and defective credit policy which causes higher incidence of bad debts.

It may reduce the overall efficiency of the business. If a firm is having excessive working capital then the relations with banks and other financial institution may not be maintained.

Due to lower rate of return n investments, the values of shares may also fall. The redundant working capital gives rise to speculative transactions.

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DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in sales and realization of cash. There are time gaps in purchase of raw material and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

For the purpose of raw material, components and spares. To pay wages and salaries To incur day-to-day expenses and overload costs such as office expenses. To meet the selling costs as packing, advertising, etc. To provide credit facilities to the customer. To maintain the inventories of the raw material, work-in-progress, stores and spares and finished stock.

For studying the need of working capital in a business, one has to study the business under varying circumstances such as a new concern requires a lot of funds to meet its initial requirements such as promotion and formation etc.

These expenses are called preliminary expenses and are capitalized. The amount needed for working capital depends upon the size of the company and ambitions of its promoters. Greater the size of the business unit, generally larger will be the requirements of the working capital.

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The requirement of the working capital goes on increasing with the growth and expensing of the business till it gains maturity. At maturity the amount of working capital required is called normal working capital.

There are others factors also influence the need of working capital in a business.

MANAGEMENT OF CASH Cash is the most liquid assets, is of vital importance to the daily operation of business firms. Cash is the basic input needed to keep the business running on a continuous basis. It is also the ultimate output expected to the realized by selling the service or the product manufactured by the firm. In views of its importance it is retrieved as the Life blood of a business enterprise. The firm needs cash for two primary reason. To meet the needs of day-to-day transaction. To protect the firms again uncertainties characterizing its cash flows.

The firms should keep sufficient cash neither more nor less. Shortage of cash will disrupt the firms manufacturing operations, while excessive. Cash will simply remain idle without contributing towards firm profitability. Thus a major function of a finance manager is to maintain a sound cash position cash manage is concern with the managing of : Cash flow in and out of the firm Cash balance held out by the firm at a point of time financing deficit or investing surplus cash.
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Instruments used for collection The main instruments used : Cheques Draft Letter of credit

Motives for holding cash Transaction motives Precautionary motives Speculative motives Compensation motives

RECEIVABLES MANAGEMENT Receivables management is the process of making decision relating to investment in trade debtors. Certain investment in receivables is necessary to increase the sales and the profit of a firm. But at the same time investment in these assets involves costs considerations also. Further, there is always a risk of bed debts too. Thus, the objective of receivables management is to take sound decision as regards investment in debtors.

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Dimensions of receivables management Forming of credit policy For efficient management of receivables, a company must adopt a credit policy. Credit standards Length of credit period Discount period

1. Executing credit policy: After formulating the credit policy, its proper execution is very important. The evaluation of credit application and findings out the credit worthiness of customers should be undertaken. Collection credit information Credit analysis Credit decision Financing investments in receivables and factoring

2. Formulating and executive collection policy: The collection of amount due to the customer is very important. The concern should device procedures to be followed when account. Become due after the expiry. A collection policy should be strict or consent. A strict collection policy involves more efforts on collection This early collection of dues and will reduce bad debts losses.

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Management of inventory Inventory constitutes a significance of current assets. About 26% of the companies capital us tied up form of inventories effective and efficiently in order to invite unnecessary. Inventory includes the following things Raw material Work in progress or semi finished goods Consumables Finished goods Spares etc.

Nature of inventory Inventories are stock of the products of a firm is manufacturing for sale and components thats make up the products. The purpose of inventory management is to keep the stock in such a way that neither there is overstocking nor under stocking. Inventory management is determine. What to produce How much to produce From where to produce Where to store etc.

Inventory control Inventory control can be mainly done by these tools and techniques.

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Determination of stocks levels Max level Min level Re-order level Danger level Average stock level

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ABC analysis This technique is based on this assumption that a firm should not exercise the same degree of control on items which are more costly as compared to those items which are less costly. This can be applied as follows: Class A B C ABC analysis categorization at t-series The classification of material into A,B,C is based on the following demarcation. A .category- cost above Rs.500/-piece B . category-cost above Rs.100/-piece C. category- cost less than Rs.100/-piece no.of items 10 20 70 value of items 70 20 10

This classification is arbitrary.

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Working capital policy followed at t- series There are three types of working capital policies which a firm may adopt I,e. Moderate working capital policy Conservative working capital policy Aggressive working capital policy.

These policies are describe the relationship between sales and the level of current assets.

CURRENT ASSET

FIGURE1: RELATIONSHIP BETWEEN SALES & LEVEL OF CURRENT ASSETS T-series follows the aggressive working capital policy.

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FINANCIAL RATIOS A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.

Ratios can be expressed as a decimal value, such as 0.10, or given as an equivalent percent value, such as 10%. Some ratios are usually quoted as percentages, especially ratios that are usually or always less than 1, such as earnings yield, while others are usually quoted as decimal numbers, especially ratios that are usually more than 1, such as P/E ratio; these latter are also called multiples. Given any ratio, one can take its reciprocal; if the ratio was above 1, the reciprocal will be below 1, and conversely. The reciprocal expresses the same information, but may be more understandable: for instance, the earnings yield can be compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20 corresponds to an earnings yield of 5%.

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Purpose and types of ratios

Financial ratios quantify many aspects of a business and are an integral part of the financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt.[2] Activity ratios measure how quickly a firm converts non-cash assets to cash assets.[3] Debt ratios measure the firm's ability to repay long-term debt.[4] Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return.[5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock.[6] These are concerned with the return on investment for shareholders, and with the relationship between return and the value of an investment in companys shares.

Financial ratios allow for comparisons

between companies between industries between different time periods for one company between a single company and its industry average

Ratios generally hold no meaning unless they are benchmarked against something else, like past performance or another company. Thus, the ratios of firms in different industries, which face different risks, capital requirements, and competition are usually hard to compare.

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" Working capital is an excess of current assets over current liabilities. In other words, The amount of current assets which is more than current liabilities is known as Working Capital. If current liabilities are nil then, working capital will equal to current assets. Working capital shows strength of business in short period of time . If a company have some amount in the form of working capital , it means Company have liquid assets, with this money company can face every crises position in market. "

Formula of Calculating Working Capital Working Capital = Current Assets - Current Liabilities Current Assets Current assets are those assets which can be converted into cash within One year or less then one year . In current assets, we includes cash, bank, debtors, bill receivables, prepaid expenses, outstanding incomes . Current Liabilities Current Liabilities are those liabilities which can be paid to respective parties within one year or less than one year at their maturity. In current liabilities, we includes creditors, outstanding bills, bank overdraft, bills payable and short term loans, outstanding expenses, advance incomes .

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Important things about Working Capital 1. Working Capital can be negative. At that time, We add one word " deficiency" in the back of working capital . It means if Current Liabilities are more than current assets, it is known as working capital deficiency or inverse working capital or negative working capital. 2. Working capital can be easily adjusted, if Accounts manager knows different techniques of managing working capital . He can try to get short term loan or he can increase working capital by proper management of inventory and outstanding incomes and debtors . 3. Working capital can also change by Changing in Cash Conversion period. Cash conversion period is a period in which company changes current assets into cash or bank. 4. Working capital can also positive by increasing growth rate of company. If company does not invest more money and increase profit, the same amount will increase in the cash position of company and with cash company can increase their working capital position.

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Importance of Working Capital Some time, If creditors demands their money from company, at this time company's high working capital saves company from this situation . You know that selling of current assets are easy in small period of time but Company can not sell their fixed assets with in small period of time. So, If Company have sufficient working capital , Company can easily pay off the creditors and create his reputation in market . But If a company have zero working capital and then company can not pay creditors in emergency time and either company becomes bankrupt or takes loan at higher rate of Interest . In both condition , it is very dangerous and always Company's Account Manager tries to keep some amount of working capital for creating goodwill in market . Positive working capital enables also to pay day to day expenses like wages, salaries, overheads and other operating expenses. Because sufficient working capital can not only pay maturity liabilities but also outstanding liabilities without any more delay. One of advantages of positive working capital that Company can do every risky work without any tension of self security.

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Introduction of Working Capital Management Working capital management is the device of finance. It is related to manage of current assets and current liabilities. After learning working capital management, commerce students can use this tool for fund flow analysis. Working capital is very significant for paying day to day expenses and long term liabilities. Meaning and Concept of Working Capital and its management Working capital is that part of companys capital which is used for purchasing raw material and involve in sundry debtors. We all know that current assets are very important for proper working of fixed assets. Suppose, if you have invested your money to purchase machines of company and if you have not any more money to buy raw material, then your machinery will no use for any production without raw material. From this example, you can understand that working capital is very useful for operating any business organization. We can also take one more liquid item of current assets that is cash. If you have not cash in hand, then you can not pay for different expenses of company, and at that time, your many business works may delay for not paying certain expenses. If we define working capital in very simple form, then we can say that working capital is the excess of current assets over current liabilities.

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Types of Working Capital 1. Gross working capital Total or gross working capital is that working capital which is used for all the current assets. Total value of current assets will equal to gross working capital. 2. Net Working Capital Net working capital is the excess of current assets over current liabilities. Net Working Capital = Total Current Assets Total Current Liabilities This amount shows that if we deduct total current liabilities from total current assets, then balance amount can be used for repayment of long term debts at any time. 3. Permanent Working Capital Permanent working capital is that amount of capital which must be in cash or current assets for continuing the activities of business. 4. Temporary Working Capital Sometime, it may possible that we have to pay fixed liabilities, at that time we need working capital which is more than permanent working capital, then this excess amount will be temporary working capital. In normal working of business, we dont need such capital.

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In working capital management, we analyze following three points Ist Point What is the need for working capital? After study the nature of production, we can estimate the need for working capital. If company produces products at large scale and continues producing goods, then company needs high amount of working capital. 2nd Point What is optimum level of Working capital in business? Have you achieved the optimum level of working capital which has invested in current assets? Because high amount of working capital will decrease the return on investment and low amount of working capital will increase the risk of business. So, it is very important decision to get optimum level of working capital where both profitability and risk will be balanced. For achieving optimum level of working capital, finance manager should also study the factors which affects the requirement of working capital and different elements of current assets. If he will manage cash, debtor and inventory, then working capital will automatically optimize. 3rd Point What are main Working capital policies of businesses? Policies are the guidelines which are helpful to direct business. Finance manager can also make working capital policies.

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1st Working capital policy Liquidity policy Under this policy, finance manager will increase the amount of liquidity for reducing the risk of business. If business has high volume of cash and bank balance, then business can easily pays his dues at maturity. But finance manger should not forget that the excess cash will not produce and earning and return on investment will decrease. So liquidity policy should be optimized.

2nd Working Capital Policy Profitability policy Under this policy, finance manger will keep low amount of cash in business and try to invest maximum amount of cash and bank balance. It will sure that profit of business will increase due to increasing of investment in proper way but risk of business will also increase because liquidity of business will decrease and it can create bankruptcy position of business. So, profitability policy should make after seeing liquidity policy and after this both policies will helpful for proper management of working capital.

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Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks. Although it is in principle different from managerial finance which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms.

The discipline can be divided into long-term and short-term decisions and techniques. Capital investment decisions are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. On the other hand, short term decisions deal with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers).

The terms corporate finance and corporate financier are also associated with investment banking. The typical role of an investment bank is to evaluate the company's financial needs and raise the appropriate type of capital that best fits those needs. Thus, the terms corporate finance and corporate financier may be associated with transactions in which capital is raised in order to create, develop, grow or acquire businesses.

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Capital investment decisions

Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria. (1) Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate in consideration of risk. (2) These projects must also be financed appropriately. (3) If no such opportunities exist, maximizing shareholder value dictates that management must return excess cash to shareholders (i.e., distribution via dividends). Capital investment decisions thus comprise an investment decision, a financing decision, and a dividend decision.

The investment decision

Management must allocate limited resources between competing opportunities (projects) in a process known as capital budgeting. Making this investment, or capital allocation, decision requires estimating the value of each opportunity or project, which is a function of the size, timing and predictability of future cash flows.

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Project valuation

In general, each project's value will be estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV) will be selected (applied to Corporate Finance by Joel Dean in 1951; see also Fisher separation theorem, John Burr Williams#Theory). This requires estimating the size and timing of all of the incremental cash flows resulting from the project. Such future cash flows are then discounted to determine their present value (see Time value of money). These present values are then summed, and this sum net of the initial investment outlay is the NPV. See Financial modeling. The NPV is greatly affected by the discount rate. Thus, identifying the proper discount rate often termed, the project "hurdle rate" is critical to making an appropriate decision. The hurdle rate is the minimum acceptable return on an investmenti.e. the project appropriate discount rate. The hurdle rate should reflect the riskiness of the investment, typically measured by volatility of cash flows, and must take into account the project-relevant financing mix. Managers use models such as the CAPM or the APT to estimate a discount rate appropriate for a particular project, and use the weighted average cost of capital (WACC) to reflect the financing mix selected. (A common error in choosing a discount rate for a project is to apply a WACC that applies to the entire firm. Such an approach may not be appropriate where the risk of a particular project differs markedly from that of the firm's existing portfolio of assets.)

In conjunction with NPV, there are several other measures used as (secondary) selection criteria in corporate finance. These are visible from the DCF and include discounted payback period, IRR, Modified IRR, equivalent annuity, capital efficiency, and ROI. Alternatives (complements) to NPV include MVA / EVA (Joel Stern, Stern Stewart & Co) and APV (Stewart Myers).
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Valuing flexibility

In many cases, for example R&D projects, a project may open (or close) various paths of action to the company, but this reality will not (typically) be captured in a strict NPV approach. [6] Management will therefore (sometimes) employ tools which place an explicit value on these options. So, whereas in a DCF valuation the most likely or average or scenario specific cash flows are discounted, here the flexible and staged nature of the investment is modelled, and hence "all" potential payoffs are considered. The difference between the two valuations is the "value of flexibility" inherent in the project.

The two most common tools are Decision Tree Analysis (DTA) and Real options analysis (ROA); they may often be used interchangeably:

DTA values flexibility by incorporating possible events (or states) and consequent management decisions. (For example, a company would build a factory given that demand for its product exceeded a certain level during the pilot-phase, and outsource production otherwise. In turn, given further demand, it would similarly expand the factory, and maintain it otherwise. In a DCF model, by contrast, there is no "branching" each scenario must be modelled separately.) In the decision tree, each management decision in response to an "event" generates a "branch" or "path" which the company could follow; the probabilities of each event are determined or specified by management. Once the tree is constructed: (1) "all" possible events and their resultant paths are visible to management; (2) given this knowledge of the events that could follow, and assuming rational decision making, management chooses the actions corresponding to the highest value path probability weighted; (3) this path is then taken as representative of project value. See Decision theory#Choice under uncertainty.
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ROA is usually used when the value of a project is contingent on the value of some other asset or underlying variable. (For example, the viability of a mining project is contingent on the price of gold; if the price is too low, management will abandon the mining rights, if sufficiently high, management will develop the ore body. Again, a DCF valuation would capture only one of these outcomes.) Here: (1) using financial option theory as a framework, the decision to be taken is identified as corresponding to either a call option or a put option; (2) an appropriate valuation technique is then employed usually a variant on the Binomial options model or a bespoke simulation model, while Black Scholes type formulae are used less often; see Contingent claim valuation. (3) The "true" value of the project is then the NPV of the "most likely" scenario plus the option value. (Real options in corporate finance were first discussed by Stewart Myers in 1977; viewing corporate strategy as a series of options was originally per Timothy Luehrman, in the late 1990s.)

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Quantifying uncertainty

Further information: Sensitivity analysis, Scenario planning, and Monte Carlo methods in finance

Given the uncertainty inherent in project forecasting and valuation, analysts will wish to assess the sensitivity of project NPV to the various inputs (i.e. assumptions) to the DCF model. In a typical sensitivity analysis the analyst will vary one key factor while holding all other inputs constant, ceteris paribus. The sensitivity of NPV to a change in that factor is then observed, and is calculated as a "slope": NPV / factor. For example, the analyst will determine NPV at various growth rates in annual revenue as specified (usually at set increments, e.g. -10%, -5%, 0%, 5%....), and then determine the sensitivity using this formula. Often, several variables may be of interest, and their various combinations produce a "value-surface", (or even a "valuespace"), where NPV is then a function of several variables. See also Stress testing.

Using a related technique, analysts also run scenario based forecasts of NPV. Here, a scenario comprises a particular outcome for economy-wide, "global" factors (demand for the product, exchange rates, commodity prices, etc...) as well as for company-specific factors (unit costs, etc...). As an example, the analyst may specify various revenue growth scenarios (e.g. 5% for "Worst Case", 10% for "Likely Case" and 25% for "Best Case"), where all key inputs are adjusted so as to be consistent with the growth assumptions, and calculate the NPV for each.

40

Note that for scenario based analysis, the various combinations of inputs must be internally consistent (see discussion at Financial modeling), whereas for the sensitivity approach these need not be so. An application of this methodology is to determine an "unbiased" NPV, where management determines a (subjective) probability for each scenario the NPV for the project is then the probability-weighted average of the various scenarios. A further advancement is to construct stochastic or probabilistic financial models as opposed to the traditional static and deterministic models as above. For this purpose, the most common method is to use Monte Carlo simulation to analyze the projects NPV. This method was introduced to finance by David B. Hertz in 1964, although it has only recently become common: today analysts are even able to run simulations in spreadsheet based DCF models, typically using an add-in, such as @Risk or Crystal Ball. Here, the cash flow components that are (heavily) impacted by uncertainty are simulated, mathematically reflecting their "random characteristics". In contrast to the scenario approach above, the simulation produces several thousand random but possible outcomes, or "trials"; see Monte Carlo Simulation versus What If Scenarios. The output is then a histogram of project NPV, and the average NPV of the potential investment as well as its volatility and other sensitivities is then observed. This histogram provides information not visible from the static DCF: for example, it allows for an estimate of the probability that a project has a net present value greater than zero (or any other value).

41

Continuing the above example: instead of assigning three discrete values to revenue growth, and to the other relevant variables, the analyst would assign an appropriate probability distribution to each variable (commonly triangular or beta), and, where possible, specify the observed or supposed correlation between the variables. These distributions would then be "sampled" repeatedly incorporating this correlation so as to generate several thousand random but possible scenarios, with corresponding valuations, which are then used to generate the NPV histogram.

The resultant statistics (average NPV and standard deviation of NPV) will be a more accurate mirror of the project's "randomness" than the variance observed under the scenario based approach. These are often used as estimates of the underlying "spot price" and volatility for the real option valuation as above; see Real options valuation: Valuation inputs. A more robust Monte Carlo model would include the possible occurrence of risk events (e.g., a credit crunch) that drive variations in one or more of the DCF model inputs.

42

The financing decision

Achieving the goals of corporate finance requires that any corporate investment be financed appropriately. The sources of financing are, generically, capital self-generated by the firm as well as debt and equity financing sourced form outside investors. As above, since both hurdle rate and cash flows (and hence the riskiness of the firm) will be affected, the financing mix will impact the valuation of the firm (as well as the other long-term financial management decisions). There are two interrelated decisions here:

Management must identify the "optimal mix" of financingthe capital structure that results in maximum value. (See Balance sheet, WACC, Fisher separation theorem; but, see also the Modigliani-Miller theorem.) Financing a project through debt results in a liability or obligation that must be serviced, thus entailing cash flow implications independent of the project's degree of success. Equity financing is less risky with respect to cash flow commitments, but results in a dilution of share ownership, control and earnings. The cost of equity is also typically higher than the cost of debt (see CAPM and WACC), and so equity financing may result in an increased hurdle rate which may offset any reduction in cash flow risk.

Management must attempt to match the long-term financing mix to the assets being financed as closely as possible, in terms of both timing and cash flows. Managing any potential asset liability mismatch or duration gap entails matching the assets and liabilities according to maturity pattern ("Cashflow matching") or duration ("immunization"); managing this relationship in the shortterm is a major function of working capital management, as discussed below. Other techniques, such as securitization, or hedging using interest rate- or credit derivatives, are also common. See Asset liability management; Treasury management; Credit risk; Interest rate risk.

43

One of the main theories of how firms make their financing decisions is the Pecking Order Theory, which suggests that firms avoid external financing while they have internal financing available and avoid new equity financing while they can engage in new debt financing at reasonably low interest rates. Another major theory is the Trade-Off Theory in which firms are assumed to trade-off the tax benefits of debt with the bankruptcy costs of debt when making their decisions. An emerging area in finance theory is right-financing whereby investment banks and corporations can enhance investment return and company value over time by determining the right investment objectives, policy framework, institutional structure, source of financing (debt or equity) and expenditure framework within a given economy and under given market conditions. One last theory about this decision is the Market timing hypothesis which states that firms look for the cheaper type of financing regardless of their current levels of internal resources, debt and equity.

44

The dividend decision

Whether to issue dividends, and what amount, is calculated mainly on the basis of the company's unappropriated profit and its earning prospects for the coming year. The amount is also often calculated based on expected free cash flows i.e. cash remaining after all business expenses, and capital investment needs have been met.

If there are no NPV positive opportunities, i.e. projects where returns exceed the hurdle rate, then finance theory suggests management must return excess cash to investors as dividends. This is the general case, however there are exceptions. For example, shareholders of a "growth stock", expect that the company will, almost by definition, retain earnings so as to fund growth internally. In other cases, even though an opportunity is currently NPV negative, management may consider investment flexibility / potential payoffs and decide to retain cash flows; see above and Real options.

Management must also decide on the form of the dividend distribution, generally as cash dividends or via a share buyback. Various factors may be taken into consideration: where shareholders must pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both cases increasing the value of shares outstanding. Alternatively, some companies will pay "dividends" from stock rather than in cash; see Corporate action. Today, it is generally accepted that dividend policy is value neutral i.e. the value of the firm would be the same, whether it issued cash dividends or repurchased its stock (see Modigliani-Miller theorem).

45

Working capital management

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. In general this is as follows: As above, the goal of Corporate Finance is the maximization of firm value. In the context of long term, capital investment decisions, firm value is enhanced through appropriately selecting and funding NPV positive investments. These investments, in turn, have implications in terms of cash flow and cost of capital. The goal of Working Capital (i.e. short term) management is therefore to ensure that the firm is able to operate, and that it has sufficient cash flow to service long term debt, and to satisfy both maturing short-term debt and upcoming operational expenses. In so doing, firm value is enhanced when, and if, the return on capital exceeds the cost of capital; See Economic value added (EVA).

46

Decision criteria

Working capital is the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets), and cash requirements (Current Liabilities). As a result, the decisions relating to working capital are always current, i.e. short term, decisions. In addition to time horizon, working capital decisions differ from capital investment decisions in terms of discounting and profitability considerations; they are also "reversible" to some extent. (Considerations as to Risk appetite and return targets remain identical, although some constraints such as those imposed by loan covenants may be more relevant here).

Working capital management decisions are therefore not taken on the same basis as long term decisions, and working capital management applies different criteria in decision making: the main considerations are (1) cash flow / liquidity and (2) profitability / return on capital (of which cash flow is probably the more important).

The most widely used measure of cash flow is the net operating cycle, or cash conversion cycle. This represents the time difference between cash payment for raw materials and cash collection for sales. The cash conversion cycle indicates the firm's ability to convert its resources into cash. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims at a low net count. (Another measure is gross operating cycle which is the same as net operating cycle except that it does not take into account the creditors deferral period.)

47

In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm's shareholders. As above, firm value is enhanced when, and if, the return on capital, exceeds the cost of capital. ROC measures are therefore useful as a management tool, in that they link short-term policy with long-term decision making.

Management of working capital

Guided by the above criteria, 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.

Cash management. Identify the cash balance which allows for the business to meet day

to day expenses, but reduces cash holding costs.

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; see Supply chain management; Just In Time (JIT); Economic order quantity (EOQ); Economic production quantity (EPQ).

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); see Discounts and allowances.

48

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".

Relationship with other areas in finance

Investment banking Use of the term corporate finance varies considerably across the world. In the United States it is used, as above, to describe activities, decisions and techniques that deal with many aspects of a companys finances and capital. In the United Kingdom and Commonwealth countries, the terms corporate finance and corporate financier tend to be associated with investment banking i.e. with transactions in which capital is raised for the corporation. These may include

Raising seed, start-up, development or expansion capital Mergers, demergers, acquisitions or the sale of private companies Mergers, demergers and takeovers of public companies, including public-to-private deals Management buy-out, buy-in or similar of companies, divisions or subsidiaries

typically backed by private equity

Equity issues by companies, including the flotation of companies on a recognised stock

exchange in order to raise capital for development and/or to restructure ownership

Raising capital via the issue of other forms of equity, debt and related securities for the

refinancing and restructuring of businesses

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Financing joint ventures, project finance, infrastructure finance, public-private

partnerships and privatizations

Secondary equity issues, whether by means of private placing or further issues on a stock

market, especially where linked to one of the transactions listed above.

Raising debt and restructuring debt, especially when linked to the types of transactions

listed above

Financial risk management

Risk management is the process of measuring risk and then developing and implementing strategies to manage that risk. Financial risk management focuses on risks that can be managed ("hedged") using traded financial instruments (typically changes in commodity prices, interest rates, foreign exchange rates and stock prices). Financial risk management will also play an important role in cash management.

This area is related to corporate finance in two ways. Firstly, firm exposure to business and market risk is a direct result of previous Investment and Financing decisions. Secondly, both disciplines share the goal of enhancing, or preserving, firm value.

It is common for large corporations to have risk management teams. While it is impractical for many small firms to have formal risk management teams, many still practice risk management principles through informal teams. There is a fundamental debate on the value of "Risk Management" and shareholder value that questions a shareholder's desire to optimize risk versus taking exposure to pure risk (a risk event that only has a negative side, such as loss of life or

50

limb). The debate links value of risk management in a market to the cost of bankruptcy in that market.

Derivatives are the instruments most commonly used in financial risk management. Because unique derivative contracts tend to be costly to create and monitor, the most cost-effective financial risk management methods usually involve derivatives that trade on well-established financial markets or exchanges. These standard derivative instruments include options, futures contracts, forward contracts, and swaps. More customized and second generation derivatives known as exotics trade over the counter aka OTC.

Personal and public finance

Corporate finance utilizes tools from almost all areas of finance. Some of the tools developed by and for corporations have broad application to entities other than corporations, for example, to partnerships, sole proprietorships, not-for-profit organizations, governments, mutual funds, and personal wealth management. But in other cases their application is very limited outside of the corporate finance arena. Because corporations deal in quantities of money much greater than individuals, the analysis has developed into a discipline of its own. It can be differentiated from personal finance and public finance.

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Alternate Approaches

A standard assumption in Corporate finance is that shareholders are the residual claimants and that the primary goal of executives should be to maximize shareholder value.

Recently, however, legal scholars (e.g. Lynn Stout) have questioned this assumption, implying that the assumed goal of maximizing shareholder value is inappropriate for a public corporation.

This criticism in turn brings into question the advice of corporate finance, particularly related to stock buybacks made purportedly to "return value to shareholders," which is predicated on a legally erroneous assumption.

Ratio-analysis is a concept or technique which is as old as accounting concept. Financial analysis is a scientific tool. It has assumed important role as a tool for appraising the real worth of an enterprise, its performance during a period of time and its pit falls. Financial analysis is a vital apparatus for the interpretation of financial statements. It also helps to find out any cross-sectional and time series linkages between various ratios.

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Unlike in the past when security was considered to be sufficient consideration for banks and financial institutions to grant loans and advances, nowadays the entire lending is need-based and the emphasis is on the financial viability of a proposal and not only on security alone. Further all business decision contains an element of risk. The risk is more in the case of decisions relating to credits. Ratio analysis and other quantitative techniques facilitate assessment of this risk. Ratio-analysis means the process of computing, determining and presenting the relationship of related items and groups of items of the financial statements. They provide in a summarized and concise form of fairly good idea about the financial position of a unit. They are important tools for financial analysis.

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Table1: Balance Sheet P&L Ratio or Income/Revenue Balance Sheet and Profit & Loss Ratio Ratio Statement Ratio

Financial Ratio Current Ratio Quick Ratio Proprietary Ratio Debt Ratio Equity

Operating Ratio Gross Profit Ratio

Composite Ratio Fixed Asset Turnover Ratio, Return on Total Resources Ratio, Return on Own Funds Ratio, Earning per Share Ratio, Debtors Turnover Ratio

Asset Operating Ratio Expense Ratio Net profit Ratio Stock Turnover Ratio

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Table2: LIABILITIES NET FUNDS Share ASSETS

WORTH/EQUITY/OWNED FIXED ASSETS : LAND & BUILDING, PLANT & MACHINERIES Capital/Partners Original Value Less Depreciation

Capital/Paid up Capital/ Owners Net Value or Book Value or Written down value Funds Reserves ( General, Capital,

Revaluation & Other Reserves) Credit Balance in P&L A/c LONG LIABILITIES/BORROWED TERM NON CURRENT ASSETS Investments in quoted shares & securities

FUNDS : Term Loans (Banks & Old stocks or old/disputed book debts Institutions) Debentures/Bonds, Long Term Security Deposits Unsecured Other Misc. assets which are not current or fixed in

Loans, Fixed Deposits, Other Long nature Term Liabilities

55

CURRENT LIABILTIES

CURRENT ASSETS : Cash & Bank Balance,

Bank Working Capital Limits such Marketable/quoted Govt. or other securities, Book as CC/OD/Bills/Export Credit Sundry Creditors/Creditors/Bills Debts/Sundry Debtors, Bills Receivables, Stocks & /Trade inventory (RM,SIP,FG) Stores & Spares, Advance Payable, Payment of Taxes, Prepaid expenses, Loans and Advances recoverable within 12 months

Short duration loans or deposits Expenses payable &

provisions INTANGIBLE ASSETS Patent, Goodwill, Debit balance in P&L A/c, Preliminary or Preoperative expenses

against various items

56

Current Ratio : It is the relationship between the current assets and current liabilities of a concern. Current Ratio = Current Assets/Current Liabilities If the Current Assets and Current Liabilities of a concern are Rs.4,00,000 and Rs.2,00,000 respectively, then the Current Ratio will be : Rs.4,00,000/Rs.2,00,000 = 2 : 1

The ideal Current Ratio preferred by Banks is 1.33 : 1 Net Working Capital : This is worked out as surplus of Long Term Sources over Long Tern Uses, alternatively it is the difference of Current Assets and Current Liabilities. NWC = Current Assets Current Liabilities ACID TEST or QUICK RATIO : It is the ratio between Quick Current Assets and Current Liabilities. The should be at least equal to 1. Quick Current Assets : Cash/Bank Balances + Receivables upto 6 months + Quickly realizable securities such as Govt. Securities or quickly marketable/quoted shares and Bank Fixed Deposits Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities

57

RESEARCH METHODOLOGY

58

The conceptual framework of the summer training project. It has been explained under the following subhead: Objective of selection of this topic Source of data Instruments and methods of data collection Tabulation, processing and trend analysis of data

Objective To know the working capital management of t-series. To know the earning capacity and efficiency of t-series company. To know the performance efficiency and managerial ability by the management of the t- series company. To know the short term and long term solvency of the t-series company. To know about the financial position and ability to pay of the concern seeking loans and credits. To know the profitability and future prospectus of the t- series company. To know the future potential of the t-series company.

59

Research Method Used: Descriptive Method Source of data Secondary data: collected from the following ways : Studying and analyzing the data obtained from the organization which include the financial statement , different literature and its website. Studying the annual reports, prepared by the organization. Use of external sources of information such as reference on working capital management. Related website on the internet, etc. Applying various ratio analysis techniques. Data analysis based on the study carried. Study would be mainly focused on the analysis and use of secondary data. Extensive use

of various journals, magazines and different online resources would be used to construct the analysis pattern. Various analysis tools are used to generate report. Resource used Technical resource Computer software(ms office) Human resource

Data analysis The data collected through annual report of the company, balance sheet was further analyzed using the financial data as gross profit, net profit ,share holders funds etc. Then the Trend analysis is done.
60

METHOD OF LEAST SQUARES: The method of least square is very useful for fitting mathematical function to a given set of data. The method is objective, and therefore gives correct and accurate estimation of trend, once the form of eqation representing trend is determined. An examination of graphical plot of the time series often provides an adequate basis for deciding the functional form of the trend. Some of the common curves used for representing trend are: (1) (2) (3) Y= a+bx Y=a+bx+cx2 Y=abx ,
,

Linear or straight line trend Parabolic or quadratic trend Exponential trend

Fitting linear or straight line trend The simplest type of trend equation is the linear equation of the form Y= a + b x (1)

Where x represents time and y the value of the variable. Here y is the dependent and x is an independent variable. Now for the set of given data (x1, y1), (x2, y2).., ( xN , yN)the constant a and b are determined by solving simultaneously the equations: y = Na + b x x y =a x + b x2 (2)

61

The equation in (2), called normal equation for the least square line in (1), gives A= (y)( x2)-( x) ( x y )/N x)2 .............(3)

B=N x y - ( x)( y)/N x2-( x)2

.(4)

If the values of x are equidistant, the calculation involved in the estimation of a and b can be further simplified by shifting the origin to the appropriate mid-point in time, so that x=0. Obviously, the normal equation in (2) becomes. y = Na x y = x2 Therefore, a = y/y and b = x y/ x2 (5) ..(6)

Substituting the estimated values of a and b in (1), the fitted linear trend will be Y = a + b x. ..(7)

We can find the trend values, say, y by putting different values of x in (7). When writing the trend equation, the origin and unit of time must be clearly specified, as an equation without such specification will be useless.

62

LIMITATIONS
Every scientific study has certain limitations and the present study is no more exception. These are: 1. Interviewing of the executive of top echelon position who are making recruitment is busy in the Organization State of affair. So it is not possible to contact all of those every busy executives. 2. The terminology used in the subject is highl y technical in nature and creates a lot of ambiguit y. 3. Confidentialit y of the management is the strongest hindrance to the collection of data and scientific anal ysis of the study. 4. All the secondary data are required were not available. In spite of all these limitations, the investigator has made an humble attempt to present an anal ytical picture of the study with some suggestion for the long run implementation.

63

ANALYSIS & INTERPRETATION

64

RATIO ANALYSIS
Working capital analysis with the help of ratios may be undertaken with an objective to examine the following. a) Efficiency in the use of working capital b) Liquidity of working capital elements c) Structure health of working capital

LIQUIDITY RATIO

Liquidity refers to the ability of a concern to meet its current obligations as and when these become due. Liquidity ratios are calculated to measure short term financial soundness of the business. The short term obligation is met by realizing amounts from current, floating or circulating assets. To measure the liquidity of a firm, the following ratios can be calculated.

12-

Current ratio or working capital ratio Quick or acid test or liquid ratio

65

SCHEDULE OF WORKING CAPITAL CHANGES This technique is based on current item, i.e., current assets and current liability only. As mentioned earlier net working capital is defined using only current items as excess of current assets over current liability. Thus, Net working capital= current assets current liability

Significance: Accounting point of view working capital represents the excess of current assets over current liability. Net working capital of the t-seriesTable3(a) Particulars Net working capital 28 38 60 80 96 FY-2006 FY-2007 FY-2008 FY-2009 (Rs. In crore ) FY-2010

INTERPRETATION: Over the years the net working capital of the t- series is increasing and this is good for the company.

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Table3(b)

Net Year X

working x=(X-2008)/1

xY

x2

Trend Values

capital(in crores) Y Y= a+bx Y= 60.4 + 17.8 x

28 2006 38 2007 60 2008 80 2009 96 2010 N=5 Y=302

-2

-56

24.8

-1

-38

42.6

60.4

80

78.2

192

96

x=0

xY= 178

x2=10

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Let the trend line to be fitted be Y = a + bX For suitably shifting the origin, we use the transformation x=(X-2008)/1 Thus, the transformed trend line becomes Y = a + bx The normal equations giving the values of a and b are Y= Na + bx xY = ax + bx2

Putting the values from the table in above equations , one gets 302=5a a = 60.4 178= 10b b = 17.8 Thus the fitted trend line is obtained by putting the values of a and b in Y= a + b x Y= 60.4 + 17.8 x

68

X axis: time in years Y axis: net working capital in crores

Graph1.1 Trend of working capital

120 100 80 60 40 20 0 2006 2007 actual data 2008 2009 2010 Linear (actual data)

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EFFICIENCY OF OVERALL WORKING CAPITAL Two accounting ratio which may be used for causing the efficiency in the use of overall working capital are: working capital turnover= cost of sales or sales net/working capital

SIGNIFICANCE: Accounting point of view working capital turnover indicates the rate of working capital utilization in the company. .

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(Table: 4a)

Working capital turnover of t-series

No. of years

Sales

Working capital

Working capital turnover=net sales/working capital 56/28=2

2006

56

28

2007

95

38

95/38=2.5

2008

180

60

180/60=3

2009

220

80

220/80=2.75

2010

336

96

336/96=3.5

INTERPRETATION Over the years the working capital turnover of T-SERIES limited raising

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Table4(b) Year X w.capital turnover Y x=(X2008)/1 xY x2 Trend Values Y= a+bx Y= 2.75 + 0.325 x

2.0 2006 2.5 2007 3.0 2008 2.75 2009 3.5 2010 N= 5 Y= 13.75

-2 -1 0

-4 -2.5 0

4 1 0

2.1 2.425 2.75

2.75

3.075

2 x=0

7.0 xY= 3.25

4 x2=10

3.4

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Let the trend line to be fitted be Y = a + bX For suitably shifting the origin, we use the transformation x=(X-2008)/1 Thus, the transformed trend line becomes Y = a+bx The normal equations giving the values of a and b are Y= Na + bx xY= ax + bx2 Putting the values from the table in above equations , one gets 13.75=5a a = 2.75 3.25= 10b b = 0.325 Thus the fitted trend line is obtained by putting the values of a and b in Y= a + b x
Y= 2.75+ 0.325 x

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graph2 Trend of working capital turnover

4 3.5 3 2.5 2 1.5 1 0.5 0 2006 2007 Actual data 2008 2009 2010 Linear (Actual data)

X axis: time in years Y axis: working capital turnover

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CURRENT ASSETS TURNOVER= COST OF SALES OR SALES NET CURRENT ASSETS

SIGNIFICANCE: A higher ratio is generally considered as indicator of better efficiency and a lower ratio may be indicative of efficiency or poor efficiency. Current assets turnover ratio of t- series-

Table:5a

Current assets turnover of t-series

Current asset turnover=net sales/current asset 56/37=1.5

No. of years

Sales

Current asset

2006

56

37

2007

95

48

95/48=1.9

2008

180

84

180/84=2.1

2009

220

122

220/122=1.8

2010

336

153

336/153=2.1

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INTERPRETATION Over the years the current assets turnover ratio is fluctuated during the year 2009 it was low. So we can say that it is not satisfactory.

Table5(b) Year X Current assets turnover Y 1.5 2006 1.9 2007 2.1 2008 1.8 2009 2.1 2010 N=5 Y=9.4 x=0 xY= 1.1 x2 =10 2 4.2 4 2.1 1 1.8 1 1.99 0 0 0 1.88 -1 -1.9 1 1.77 x = (X2008)/1 xY x2 Trend Values Y= a+bx Y= 1.88 + 0.11 x 1.66

-2

-3

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Let the trend line to be fitted be Y = a + bX For suitably shifting the origin, we use the transformation x=(X-2008)/1 Thus, the transformed trend line becomes Y = a+bx The normal equations giving the values of a and b are Y= Na + bx xY= ax + bx2

Putting the values from the table in above equations , one gets 9.4 =5a a = 1.88 1.1= 10b b = 0.11

Thus the fitted trend line is obtained by putting the values of a and b in Y= a + b x Y= 1.88 + 0.11 x

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graph3 Trend of current assets turnover

2.5 2 1.5 1 0.5 0 2006 2007 Actual data 2008 2009 2010 Linear (Actual data )

X axis: time in years Y axis: current assets turnover

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QUICK RATIO Quick ratio represents the ratio between quick assets to the current liability. It is rigorous measure and superior to the current ratio.

Quick ratio

Quick Assets Quick Liability

or

current assest-stock overdraft

The ideal quick ratio is said to be 1:1

OBJECTIVE The objective of computing this ratio is to measure the ability of the firm to meet its short term obligation as and when due its without relying upon the realization of stock. SIGNIFICANCE The quick ratio or acid teat ratio takes into consideration the liquidity level of the components of the current assets. It can also be used by establishing the relationship between quick assets and quick liability. Quick assets mean current assets reduced by inventories and prepaid expenses.

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Table: 6a

Quick ratio of t-series

No. of years

stock

Over draft

Quick ratio = current assetsstock /current liabilities-over draft

2006

2,59,00000

27,00000

34,41,00000/8,73,00000=3.94

2007

3,36,00000

30,00000 44,64,00000/9,70,00000=4.6

2008

5,88,00000

72,00000 78,12,00000/23,28,00000=3.35

2009

8,54,00000

1,26,00000 113,46,00000/40,74,00000=2.78

2010

10,72,00000

1,71,00000 142,28,00000/55,29,00000=2.57

INREPRETATION The quick ratio of the t-series group shows that the financial condition of the enterprise is round and very good. As it continued to increase but during the year 2007 it is found maximum. But it also represent that more liquid assets are blocks within the company which should be avoided.

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Table6(b)

Quick ratio Year X Y

x = (X- xY 2008)/1

x2

Trend Values Y=a+bx Y= 3.448 -0.456 x

3.94 2006 4.6 2007 3.35 2008 2.78 2009 2.57 2010 N=5 Y= 17.24

-2

-7.88

4.36

-1

-4.6

3.904

3.448

2.78

2.992

5.14

2.536

x=0

xY = - x2=10 4.56

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Let the trend line to be fitted be Y = a + bX For suitably shifting the origin, we use the transformation x=(X-2008)/1 Thus, the transformed trend line becomes Y = a+bx The normal equations giving the values of a and b are Y= Na + bx xY= ax + bx2

Putting the values from the table in above equations , one gets 17.24=5a a = 3.448

-4.56= 10b b = -0.456

Thus the fitted trend line is obtained by putting the values of a and b in Y= a + b x Y= 3.448 -0.456 x

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graph4 Trend of quick ratio

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006 2007 Actual data 2008 2009 2010 Linear (Actual data)

X axis: time in years Y axis: quick ratio

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Current ratio
This ratio establishes a relationship between current assets and current liability Objectivethe objective of computing this ratio is to measure the ability of the firm to meet its short term obligations and to reflect the short term financial strength/solvency of a firm. In other words the objective is to measure the safety margin available for short term creditors.

Current ratio= Current assets Current liability

As a general rule which is internationally accepted that the relationship between current assets and current liability must be 2:1.

SIGNIFICANCE A satisfactory current ratio indicates a firms ability to meet its obligation, even if the value of the current assets declines. It is however a quantitative index of liquidity, as it does not differentiate between the components of current assets, such as cash and inventories (which are not equally liquid).

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Table: 7a Current ratio of t-series

No. of years

Current assets

Current liabilities

Current ratio=current assets /current liabilities 37/9=4.1

2006

37

2007

48

10

48/10=4.8

2008

84

24

84/24=3.1

2009

122

42

122/42=2.9

2010

153

57

153/57=2.6

INTERPRETATION The current ratio of the t-series shows the situation of the company is good and favorable because company has better liquidity to pay its current liabilities.

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Table7(b) Year X Current ratio Y x =(X2008)/1 xY x2 Trend Values Y= a+bx Y=3.598-0.476 x

4.11 2006 4.8 2007 3.5 2008 2.9 2009 2.68 2010 N=5 Y=17.99

-2 -1 0

-8.22 -4.8 0

4 1 0

4.55 4.074 3.598

2.9

3.122

2 x = 0

5.36 xY = -4.76

4 x2 = 10

2.646

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Let the trend line to be fitted be Y = a + bX For suitably shifting the origin, we use the transformation x=(X-2008)/1 Thus, the transformed trend line becomes Y = a+bx The normal equations giving the values of a and b are Y= Na + bx xY= ax + bx2 Putting the values from the table in above equations , one gets 17.99=5a a = 3.598 -4.76= 10b b = -0.476 Thus the fitted trend line is obtained by putting the values of a and b in Y= a + b x Y= 3.598 -0.476 x

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Graph 5 Trend of Current Ratio

5 4 3 2 1 0 2006 2007 Actual data 2008 2009 Linear (Actual data) 2010

X axis: time in years Y axis: current ratio

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FINDINGS

o T-series has an appropriate working capital. o The company can pay the current debts because its have optimum level of the current assets. o The length of the manufacturing cycle of firms is short term, so it is not demand more working capital because the time gap or interval between production and sales is not take more time. o The cost of financial through current liabilities is less than the cost of financing through long term funds, so as such the profitability point of view, the proportion of current liabilities in total liabilities is higher. o The liquidity position of the company is good by this Company can easily evaluate the risk and save the loss of risk. Thus it can be said that t-series enjoys a round financial position. The company has an appropriate working capital and the management of the working capital is good the overall performance of the company is satisfactory and it will further improve when the facilities at the disposal of the company are fully utilized however the management must remain cautions towards the financial position of the company. The management should take all possible steps in the near future to improve the financial position of the company.

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Table8: SWOT ANALYSIS

STRENGTH Has appropriate working capital. Has optimum level of current assets. Liquidity position is good. Large brand basket.

WEAKNESS Wide brand- basket which might lead to conflicts of interest unless effectively managed.

OPPORTUNITIES Avenues for expansion in the untapped market for mobile phones/tv displays in India. Acquisitions/ tie-ups with other MNCs in the consumer electronics segment looking to enter the Indian market.

THREATS From competitors From technology advancements. Fall in market demand due to economic recession.

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SUGGESTIONS
The management should try to improve more working capital which is beneficial for the future. The company should take the advantage of financial position very carefully as it also increase financial risk. Company has better liquidity so company can take risk. Company can improve the manufacturing cycle of the production cycle and sales company can increase the sales volume and turnover of the working capital.

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CONCLUSION
o T-Series has an effective working capital management strategy. The trend analysis show an increasing trend. Thus the company has better liquidity so company can take risk. o The length of the manufacturing cycle of firms is short term, so it is not demand more working capital because the time gap or interval between production and sales is not take more time. o The cost of financial through current liabilities is less than the cost of financing through long term funds, so as such the profitability point of view, the proportion of current liabilities in total liabilities is higher. o The liquidity position of the company is good by this Company can easily evaluate the risk and save the loss of risk. Thus it can be said that t-series has a round financial position. The company has an appropriate working capital and the management of the working capital is good the overall performance of the company is satisfactory and it will further improve when the facilities at the disposal of the company are fully utilized however the management must remain cautions towards the financial position of the company. The management should take all possible steps in the near future to improve the financial position of the company.

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BIBLIOGRAPHY
BOOKS REFERRED Financial Management --- I.M PANDAY Financial Management --- A.K RUSTOGI Financial Management --- KHAN & JAIN Ratio Analysis --- S.P GUPTA

WEBSITE REFERRED www.t-series.com

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Thanking you

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