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WORKING CAPITAL MANAGEMENT IN DABUR

Acknowledgement

Nothing concrete can be achieved without an optimal combination inspiration and perspiration.

No work can be accompanied without taken the guidance of experts. It is only critics from

ingenious that help transform a product into a quality product.

For this, I am grateful to MISS. BUSHRA KHAN for his constant encouragement and

invaluable critical suggestions given during the review meetings. His timely advice and help

proved his commitment and welfare of his students and the institute as a whole.

Last but not the least, our sincere thanks to all the members who were a vital thrust to our

thoughts and needs throughout the functions assigned to group to get done and prove our best.

Finally thanks to others at KCMT, who put in numerous hours to make the intangible tangible

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PREFACE

A comprehensive study of “WORKING CAPITAL” is a supplement to the theoretical classroom


knowledge. It helps to understand the subject more precisely and practical implications of
various concepts.

This report tries to outline idea of professional world and helps in understanding the pragmatic
aspect of management function. Own observations are significant towards the contribution in
learning the subject. The report is therefore designed as a reference of organization functioning
rather than copy down instrument.

THE PURPOSE OF PROJECT IS TO MAKE ME FAMILIAR WITH DAY TO DAY


FUNCTIONING OF BUSINESS. THE PRESENT REPORT IS AN EFFORT IN THIS
DIRECTION.

My humble endeavor and motive in presenting the project report is to impart a balanced
introduction and knowledge of Financial Analysis, which is an important integral part of
financial management.

It is hoped that this project will serve as supportive document to research worker as efforts has
been tired to make this report an informative, stimulating, and self-explanatory.

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INDEX

 Declaration 1

 Acknowledgement 1

 Preface 2

 Index 3

1. INTRODUCTION ` 4

a) About DABUR

b) Overview of Financial Analysis

2. OBJECTIVE OF STUDY 7

3. VISION 8

4. INTRODUCTION OF WORKING CAPITAL 16

5. RESEARCH METHODOLOGY 41

6. INTERPRETATION & ANALYSIS 42

a) Data at a glance

b) Data Interpretation and analysis

6. RECOMMENDATIONS 67

7. CONCLUSION 68

8. BIBLIOGRAPHY 69

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COMPANY PROFILE
Dabur India Limited came into existence over 100 years ago in 1884 in Calcutta. The
founder of Dabur India Limited-Dr.S.K.Burman (1856-1907) was a physician who
brought Ayurvedic medicines for the masses of Bengal. His off quoted dictum is the
guiding spirit behind Dabur even today:

"What is the life worth which cannot bring comfort to others"

And the Vision of DIL is:

"Dedicated to the health and well being of every household"

Dabur India Limited came into existence over 100 years ago in 1884 at Calcutta. The founder,
Dr.S.K.Burman, was a practicing allopathic doctor. At that time Malaria, Cholera and Plague
were the common diseases. He was a physician who brought ayurvedic medicines to the
masses of Bengal. Initially established as a proprietary firm for the manufacture of chemicals
and ayurvedic drugs it was later on 19th November 1930 incorporated as private limited
company. Late Shri C.L.Burman, son of late Dr S.K. Burman and his son late Shri
P.C.Burman in the name of Dr S.K.Burman Pvt.Ltd. to expand the operations by setting up
production facilities at Garia and Narendrapur, West Bengal and Daburgram, Bihar.
Dabur (Dr.S.K.Burman) Pvt. Ltd. was merged with Vidogum and Chemicals Ltd. w.e.f. 1st
July1985 and the amalgamated company was renamed DABUR INDIA LIMITED and a fresh
certificate of incorporation was issued to that effect. In 1970,the bulk of manufacturing facilities
were shifted from West Bengal to Faridabad in Haryana.

In 1975,vidogum and chemicals were incorporated in technical collaboration with Unipekin


AG (Switzerland) for the manufacture of edible grade and industrial grade Guargum powder at
Alwar in Rajasthan.

In 1977,a modern automated plant was set up in Sahibabad (U.P.) for the manufacture of
Chyawanprash, Asavrishthas, Hair oil, Tooth powders, Hajmola, and other Ayurvedic

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specialties. Certification for production of toiletries and food grade products was issued on
13th October 1986 by the registrar of Delhi and Haryana to the company, Dabur Private
Limited, a closely held Public Limited Company.

It was incorporated as a Private Ltd. Company in the name of Dabur (Dr. S.K. Burman)
Pvt. Ltd. From a humble beginning in 1884, a manufacture of traditional medicine in Calcutta,
Dabur has come a long way to become a multifaceted multinational, multi-product, modern
Indian corporation with a global presence. It now enjoys the distinction of being the 2nd
largest FMCG Company and is praised to become a true Indian Multinational.

The main plant was set up in Sahibabad (U.P.) in 1977 for manufacturing of
Chyawanprash, hair oil, tooth powder, hajmola and other ayurvedic medicines and food
products etc. Dabur's main line of business is in the sphere of Health care, Personal care and
Beauty care. Its strength lies in natural and herbal preparations.

Dabur's corporate philosophy has always been ahead of its time. The founder's initial
success was mainly due to his direct main campaigns- a technique that became very popular
nearly a century later. The company was one of the earlier Indian companies to have fully
equipped R & D lab as early as in 1919. Today, the company has its own mainframes and
computers are a way of life here.

Dabur is also an ISO 9002 certified company. The certification was obtained in 1995 by
SGS YARSLEY international services Limited U.K. Dabur's revenue today exceed Rs.800
crores with plans to achieve Rs.2, 000 crores by year 2003. Dabur has 34,000 shareholders
with market capitalization of over Rs.1, 400 crores.

Dabur has 11 manufacturing plants in India and Nepal and a licensee in the Middle East.
It has manufacturing base in Egypt also. The company has over 4,000 employees with around
1,500 looking after sales and marketing functions.

The Indian market is being served through a transactional network of sales offices and
carrying and forwarding agents. The company has its offices in London, New York and
Moscow. Dabur products are being exported to around 50 countries. Dabur portfolio is
exceeding 500 products of FMCG and health care products.

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The Board of Directors of Dabur India Limited (DIL) met on July 23, 2003 to consider
the unaudited financials of the company for the first quarter that ended on June 30, 2003.
Company has recorded a growth of 36 per cent in its net profit per cent growth in its turnover
during April-June 2003.
The turnover of DIL, during the three-month period, has increased to Rs 266 crore to
Rs 300 crore while the net profit has increased 11.5 crore to Rs 16 crore during the same
period.
The first quarter results should not be annualized as sales usually improve in
subsequent quarters.

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OBJECTIVE OF STUDY

 To analyze the financial position of DABUR

 To analyze the liquidity position of DABUR

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VISION

"Dedicated to the health and well being of every house hold."

Dabur is a company with a set of established business values, which direct it's functioning as well
as all its operations. The guiding forces for Dabur are the words of its founder, Dr.S. K. Burman,
"what is that life worth that can not give comfort to others." The Company offers its customers, the
products to suit their needs and give them good values for money. The company is committed to
follow the ethical practices in doing business. At Dabur, nature acts as not only the source of raw
materials but also an inspiration and the company is committed to product the ecological balance.

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PRINCIPLES

 OWNERSHIP:

This is our company. We accept responsibility and accountability to meet business needs.

 PASSION FOR WINNING:

We all are leaders in our responsibility, with a deep commitment to deliver the results. We are
determined to be the best at doing what matters the most.

 PEOPLE DEVELOPMENT:

People are our most important asset. We add value through result- driven training and we
encourage rewards and excellence.

 CONSUMER FOCUS:

We have superior understanding of consumer needs and develop products to fulfill their
demands.

 TEAM WORK:

We work together on the principle of mutual trust and transparency in a boundary less
organization.

 INNOVATION:

Continuous innovation in products and processes and is the base of our success.

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DABUR OVER THE YEARS

More than a century ago, a young doctor started with a vision to provide innovative and
affordable health care products to Indian masses. Thus, was born an organisation today known
as Dabur India Limited. The twelve hundred crores corporate today started with a small
dispensary at Calcutta, the noble thoughts of Dr.S.K.Burman being the main source of
inspiration behind the project. From that humble beginning, the company has grown into
India’s leading manufacturer of consumer health care, personal care and food products. This
phenomenal progress has seen many milestones, some of which are mentioned below:

 1884: Dr.S.K.Burman lays the foundation of what is known as Dabur India Limited. Started
from a small shop at Calcutta, he began a direct mailing system to send his medicines to even
the smallest of villages in Bengal. The brand name Dabur is derived from the words "DA" for
Daktar or doctor and "BUR" from Burman.
 1896: As the demand for Dabur products grows, Dr. Burman felt the need for mass
production for some of his medicines. He set up a small manufacturing plant at Garhai near
Calcutta.
 Early 1900s: The next generation of Burman's take a conscious decision to enter the
Ayurvedic medicines market, as they believe that it is only through ayurveda that the
healthcare needs of poor Indians can be met.
 1919: The search for processes to suit mass production of ayurvedic medicines without
compromising on basic ayurvedic principles lead to the setting up of the first Research and
Development laboratory at Dabur. This initiate a pain staking study of ayurvedic medicines as
mentioned in age old scriptures, their manufacturing processes and how to utilize modern
equipment to manufacture these medicines without reducing the efficacy to manufacture these
medicines without reducing the efficacy of these drugs.
 1920s:A-manufacturing facility for Ayurvedic Medicines is set up at Narendrapur and
Daburgram. Dabur expands its distribution network to Bihar and northeast.
 1936: Dabur India (Dr. S.K.Burman) Pvt.Ltd. is incorporated.

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 1940: Dabur diversifiers into personal care products with the launch of its Dabur Amla Hair
Oil. This perfumed hair oil catches the imagination of the common man and film stars alike
and becomes the largest hair oil brand in India.
 1949: Dabur Chyawanprash is launched in a tin pack and becomes the first branded
Chyawanprash of India.
 1956: Dabur buys its first computer. Accounts and stock keeping are one of the first
operations to be computerized.
 1970: Dabur expands its personal care portfolio by adding oral care products. Dabur Lal Dant
Manjan is launched and captures the Indian rural market.
 1972: Dabur shifts base to Delhi from Calcutta. Starts production from a hired manufacturing
facility at Faridabad.
 1978: Dabur launches the Hajmola tablets. This is the first time that a classical ayurvedic
medicine is branded from Shudhabardhak bati to Hajmola tablets.
 1979: The Dabur Research Foundation (DRF), an independent company is set up to spearhead
Dabur's multi-faceted research. Commercial production starts at Sahibabad. This is one of the
largest and most modern production facilities for ayurvedic medicines in India at this time.
 1984: The Dabur brand turns 100 but is still young enough to experiment with new offerings
in the market.
 1986: Dabur becomes a public Limited company through reverse merger with Vidogum
Limited, and is re-christened Dabur India Limited.
 1989: Hajmola Candy is launched and captures the imagination of children and establishes a
large market share.
 1992: Dabur enters into a joint venture with Agrolimen of Spain far manufacturing and
marketing confectionery items such as bubble gums in India.
 1993: Dabur set up the oncology formulation plant at Baddi, Himachal Pradesh.
 1994: Dabur India Limited comes out with its first public issued at a premium of Rs.85 per
share. The issue is subscribed over 21 times.
 1994: Dabur enters the oncology (anti-cancer) market with the launch of Intaxel (Pacitaxel).
Dabur becomes only the second company in the world to launch this product. The Dabur
Research Foundation develops the unique eco-friendly process of extracting the drug from the

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leaves of the Asian Yew Tree.


 1995: Dabur enters into a joint venture with Osem of Israel for food and Bongrain of
France for cheese other dairy products.
 1996: Dabur launches Real fruit juices, which heralds the company's entry into the processed
food market.
 1997: The foods division is created, compromising of real fruit juices and Homemade
cooking paste to form the core of this division's product portfolio.
 1998: Project STARS (Strive To Achieve Record Successes) is initiated by the company to
achieve accelerated growth in the coming years. The scope of this project is strategic,
structural and operational changes to enables efficiencies and improves growth rates.
 1998: The Burman family hands over the reins of the company to a professional, Mr. Ninu
Khanna joins Dabur, as the Chief Executive Officer.
 1999-2000: Dabur achieves the Rs.1000 crores turnover mark.
 2001-2002: Launched Amla Light, new flavors in Real Juices-grapes, guava, apple active,
orange active, homemade pappad, Vatika- an anti-dandruff shampoo.
 2002: New launches homemade coconut milk (in south), Tang, Tomato puree, Vatika light.
 2003: Dabur achieves Rs.1,232 crores turnover mark with an increase of 6 per cent. Turnover
of FMCG reaches to Rs l048.5crores, which shows a profit of Rs. 72 crores. Turnover of
pharmaceuticals reaches to Rs 184 crores with a profit of Rs.13 crores.
 2007: Dabur Foods to merge with Dabur India Ltd.
 2008: Growth rate of company is 12.4% to Rs. 1378.85 crores from Rs. 1226.58 crores a year
earlier.

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CORPORATE PHILOSOPHY

Knowledge is the key to growth in today's world. Whatever be the industry, it is the
knowledge, which provides cutting edge to individual and organisations. For more than a century
nature has been a rich source of knowledge for DABUR. Nature has not only gives it the
ingredients for all its products but also has taught it how to create a harmony within and outside
the organisation. Nature has inspired DABUR in all its acts. Ayurveda - the science of life is
based on principles of nature. All ayurvedic preparation has their ingredients derived from
nature. Dabur has converted the healing properties of natural ingredients and the age-old
knowledge of ayurveda into contemporary health care to eliminate health problems of its
consumers.

Dabur is committed to expand the reach of its age-old knowledge of ayurveda and Nature
through web. Through web the aim is to overcome the physical boundaries to take ayurvedic way
of life to global frontiers. Dabur India limited understands its responsibility as a corporate house.
It has not only set a sight on increasing turnover and profitability of the company but also on
propagating Ayurveda - The Indian System of Medicine.

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LOCATION OF OPERATIONS

Head office : Sahibabad, Ghaziabad (U.P.)

Regd. Office : Asaf Ali Road, New Delhi

Corporate office : Kaushambi, Ghaziabad (U.P.)

Sales & Marketing: New Delhi


OFFICES:

Chandigarh (H.P.), New Delhi (Delhi), Jaipur (Rajasthan), Kanpur (U.P.), Patna (Bihar),
Ahemadabad (Gujarat), Indore (M.P.), Cuttak (Orissa), Mumbai (Maharashtra), Hydrabad (A.P.),
Chennai (TamilNadu), Bangalore (Kamatka), Kochi (Kerela), Guwahati (Assam), Kathmandu
(Nepal), Russia, U.K.

FACTORY:

Baddi (H.P.), Ghaziabad (U.P.), Alwar (Rajasthan), Daburgram (Bihar), Kalyani&


Narendrapur (West Bengal), Katni (M.P), Birgunj (Nepal), Egypt.

C&F:

Jammu, Chandigarh (HP) Ambala (Punjab), New Delhi (Delhi), Ghaziabad (U.P.), Dehradun (U.P.),
Lucknow (UP), Rachi, Patna (Bihar), Guwahati (Assam), Calcutta (West Bengal), Jaipur (Rajasthan),
Ahemadabad (Gujarat), lndore (M.P.) Raipur (M.P.), Bhubaneshwar (Orissa), Cuttak (Orissa),
Mumbai (Maharashtra), Hydrabad

(A.P.), Chennai (TamilNadu), Bangalore (Karnataka), Cochin (Kerela).

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THE COMPANY BUSINESS ACTIVITIES COMPRISES OF:

HEALTH CARE PRODUCTS: Markets a range of OTC health care: products based on
ayurveda, some of its products like Chyawanprash, Hajmola, Hajmola Candy, Pudinhara are
market leaders with over 65 per cent market share in their respective categories.

PERSONAL CARE PRODUCTS: It includes hair care, oral care and honey. Dabur Amla as a
brand has made its mark beyond India; it is a leading hair oil brand in Middle East and Africa.
Other well-known brands are Vatika, Dabur Lal Dant Manjan.
AYURVEDIC SPECIALITIES: There is a range of over 400 Ayurvedic medicines. It has vast
range of classical ayurvedic drugs and priority ayurvedic medicines developed by own R&D.
PHARMACEUTICAL DIVISION: It includes a range of natural ethical products like Livfit,
Lionitus, Legal etc, and angel of contract media and gynecological. This division has a major
presence in Anti-thronbolytic, Anti-migrane therapy and radio opaque dyes.

ONCOLOGY: The formidable range includes brands such as Intel, Docetaxel that were
manufactured in India for the first time by Dabur. The company is a market leader in this
category in India and plans to establish itself as a general Oncology player in selective global
market.
BULK DRUGS AND CHEMICALS: Dabur manufactures synthetic and semi-synthetic bulk
pharmaceutical substances, bulk natural compounds and intermediaries. Isolation of pure natural
compounds and custom synthetics are focus areas.

FOODS DIVISION: One of the youngest divisions of the company markets a range of sauces,
ethnic pastes and foods. Real fruit juices gave Indian consumer for the first time, fruit juices with
nothing artificial, no preservatives, no colour and no flavors added. Launched two years back,
the range includes Real Juices and cooking pastes under the brand name Home Made.

NATURAL GUMS: This division manufactures and process Guar gums, Gum Karaya, tamarind
based gums and psyllium husk. The division produces a range of industrial and grade natural
gums to meet the customer specifications.
AYURVEDIC VETERINARY: It deals exclusively in animal hea1thcare. Markets safe and
non-toxic herbal veterinary products for poultry.

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INTRODUCTION OF WORKING CAPITAL


The net working capital of business is its current assets less its current liabilities.

Current Assets include:

• Stock of Raw Material

• Work in Progress

• Finished Goods

• Trade Debtors

• Prepayments

• Cash Balances

Current Liabilities include:

• Trade Creditors

• Accruals

• Taxation Payable

• Dividends Payable

• Short term Loans

Every business needs adequate liquid resources in order to maintain day to day cash flows. It

needs enough cash to by wages and salaries as they fall due and to pay creditors if it is to keep

its workforce and ensure its supplies. Maintaining adequate working capital; is not just

important in the short term.

Sufficient liquidity must be maintained in order to ensure the survival of business in the

long term as well. Even a profitable business may fail if it does not have adequate cash flows to

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meet its liabilities as tyhey fall a due. Therefore when business make investment decisions they

must not only consider the financial outlay involved with acquiring the new machine or the

new building etc, but must also take account of the additional current assets that are usually

involved with any expansion of activity .

Increase production tends to engender a need to hold additional stocks of raw material & work

in progress.

Increased sales usually mean that the level of debtor will increase. A general increase in the

firm’s scales of operation tends to imply a need for greater level of cash.

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THEORY OF WORKING CAPITAL


MEANING OF WORKING CAPITAL:

Capital required for a business can be classifies under two main categories:

• Fixed Capital

• Working Capital

Every business needs funds for two purposes for its establishments and to carry out day to day

operations. Long term funds are required to create production facilities through purchase of fixed

assets such as plant and machinery, land and building, furniture etc. Investments in these assets

are representing that part of firm’s capital which is blocked on a permanent or fixed basis and is

called fixed capital. Funds are also needed for short term purposes for the purchasing of raw

materials, payments of wages and other day to day expenses etc. These funds are known as

working capital. In simple words, Working capital refers to that part of the firm’s capital which

is required for financing short term or current assets such as cash, marketable securities, debtors

and inventories.

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:

• Balance Sheet concepts

• Operating Cycle or circular flow concept

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BALANCE SHEET CONCEPT:

There are two interpretation of working capital under the balance sheet concept:

• Gross Working Capital

• Net 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 enterprises. Current assets are those assets which are converted into cash within

short periods of normally one accounting year. Example of current assets is:

Constituents of Current Assets:

• Cash in hand and Bank balance

• Bills Receivable

• Sundry Debtors

• Short term Loans and Advances

• Inventories of Stock as:

 Raw Materials

 Work in Process

 Stores and Spaces

 Finished Goods

• Temporary Investments of Surplus Funds

• Prepaid Expenses

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• Accrued Incomes

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.

NET WORKING CAPITAL MAY BE NEGATIVE OR POSITIVE:

When the current assets exceed the current liabilities, the working capital is positive and the

negative working capital results when the current liabilities are more than the current assets.

Current liabilities are those liabilities which are intended to be paid in the ordinary course of

business within a short period of normally one accounting year of the current assets or the

income of the business. Examples of current liabilities are:

CONSTITUENTS OF CURRENT LIBILITIES:

• Bills Payable

• Sundry Creditors or Account Payable

• Accrued or Outstanding Expenses

• Short term Loans, Advances and Deposits

• Dividends Payable

• Bank Overdraft

• Provision for Taxation, If does not amount to appropriation of profits

The gross working capital concept is financial or going concern concept whereas net working

capital is an accounting concept of working capital.

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OPERATING CYCLE OR CIRCULATING CASH FORMAT:

Working Capital refers to that part of firm’s capital which is required for financing short term or

current assets such as cash, marketable securities, debtors and inventories. Funds thus invested in

current assets keep revolving fast and being constantly converted into cash and these cash flows

out again in exchange for other current assets. Hence it is also known as revolving or circulating

capital. The circular flow concept of working capital is based upon this operating or working

capital cycle of a firm. The cycle starts with the purchase of raw material and other resources.

And ends with the realization of cash from the sales of finished goods. It involves purchase of

raw material and stores, its conversion into stocks of finished goods through work in progress

with progressive increment of labor and service cost, conversion of finished stocks into sales,

debtors and receivables and ultimately realization of cash and this cycle continuous again from

cash to purchase of raw materials and so on. The speed/ time of duration required to complete

one cycle determines the requirements of working capital longer the period of cycle, larger is the

requirement of working capital.

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Receivable conversion period Raw material storage

(RCP) conversion period (RMSCP)

Cash received form

Debtors and paid to suppliers

Of raw materials

Sales of finished Raw materials

Goods introduced into process

Finished Goods

Produced

Finished goods conversion Work in process

Period (FGCP) Conversion period

(WIPCP)

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The gross operating cycle of a firm is equal to the length of the inventories and receivables

conversion periods. Thus,

Gross Operating Cycle = RMCP + WIPCP +


FGCP + RCP
Where,

RMCP = Raw Material Conversion Period

WIPCP = Work –in- Process Conversion Period

FGCP = Finished Goods Conversion Period

RCP = Receivables Conversion Period

However, a firm may acquire some resources on credit and thus defer payments for certain

period. In that case, net operating cycle period can be calculated as below:

Net Operating Cycle Period = Gross Operating Cycle Period –


Payable Deferral period

Further, following formula can be used to determine the conversion periods.

 Raw Material Conversion Period = Average Stock of Raw Material.

Raw Material Consumption per day

 Work in process Conversion Period = Average Stock of Work-in-Progress

Total Cost of Production per day

 Finished Goods Conversion Period = Average Stock of Finished Goods

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Total Cost of Goods sold per day

 Receivables Conversion Period = Average Accounts Receivables

Net Credit Sales per day

 Payable Deferral Period = Average Payable

Net Credit Purchase per day

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CLASSIFICATION OR KIND OF WORKING CAPITAL:

Working capital may be classified in two ways:

• On the basis of concept

• On the basis of time

Om the basis of concept, working capital is classified as gross working capital and net working capital.

The classification is important from the point of view of the financial manager.

On the basis of time, working capital may be classified as:

• Permanent or Fixed working capital

• Temporary or Variable working capital.

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t Kinds of Working
Capital

On the basis of
On the basis of concept
time

Permanent
or

Fixed Temporary or
Gross Net
Working Working Variable
Working
Capital Working
Capital

Seasonal
Regular Reserve Working Special
Working Working
Working Capital

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1. PERMANENT OR FIXED WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount which is required to ensure effective

utilization of fixed facilities and for maintaining the circulation of current assets. There is always

a minimum level of current assets which is continuously required by the enterprises to carry out

its normal business operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:

Temporary or variable working capital is the amount of working capital which is required to

meet the seasonal demands and some special exigencies.Varibles working capital can be further

classified as second working capital and special working capital. The capital required to meet the

seasonal needs of the enterprises is called the seasonal working capital.

Temporary working capital differs from permanent working capital in the sense that is required

for short periods and cannot be permanently employed gainfully in the business

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IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING

CAPITAL:

Working capital is the life blood and nerve centre of a business . just a circulation of a blood is

essential in the human body for maintaining life, working capital is very essential to maintain the

smooth running of a business. No business can run successfully without an adequate amount of

working capital. The main advantages of maintaining adequate amount of working capital are as

follows:

• Solvency of the Business

• Goodwill

• Easy Loans

• Cash discounts

• Regular supply of Raw Materials

• Regular payments of salaries, wages & other day to day commitments.

• Exploitation of favorable market conditions

• Ability of crisis

• Quick and regular return on investments

• High morals

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THE NEED OR OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some amount of

working capital. The need of working capital arises due to the time gap between production and

realization of cash from sales. There is an operating cycle involved in the sales and realization of

cash. There are time gaps in purchase of raw materials and production, production and sales,

And sales, and realization of cash, thus , working capital is needed for the following purposes:

 For the purchase of raw materials , components and spaces

 To pay wages and salaries

 To incur day to day expenses and overhead costs such as fuel, power and office expenses

etc.

 To meet the selling costs as packing, advertising etc.

 To provide credit facilities to the customers.

 To maintain the inventories of raw materials, work –in- progress, stores and spares and

finished stock.

FACTORS DETERMING THE WORKING CAPITAL REQUIRMENT:

The working capital requirements of a concern depend upon a large number of factors such as

nature and size of the business, the characteristics of their operations, the length of production

cycle , the rate of stock turnover and the state of economic situation. However the following are

the important factors generally influencing the working capital requirements.

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NATURE OR CHARACTERSTICS OF A BUSINESS:

The nature and the working capital requirement of enterprises are interlinked. While a

manufacturing industry has a long cycle of operation of the working capital, the same

would be short in an enterprises involve in providing services. The amount required also

varies as per the nature, an enterprises involved in production would required more

working capital then a service sector enterprise.

 MANAFACTURE PRODUCTION POLICY:

Each enterprises in the manufacturing sector has its own production policy, some follow

the policy of uniform production even if the demand varies from time to time and other

may follow the principles of demand based production in which production is based on

the demand during the particular phase of time. Accordingly the working capital

requirements vary for both of them.

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OPERATIONS:

 The requirement of working capital fluctuates for seasonal business. The working capital

needs of such business may increase considerably during the busy season and decrease

during.

 MARKET CONDITION:

If there is a high competition in the chosen project category then one shall need to offer

sops like credit, immediate delivery of goods etc for which the working capital

requirement will be high. Otherwise if there is no competition or less competition in the

market then the working capital requirements will be low.

 AVABILITY OF RAW MATERIAL:

If raw material is readily available then one need not maintain a large stock of the same

thereby reducing the working capital investment in the raw material stock . On other hand

if raw material is not readily available then a large inventory stocks need to be

maintained, there by calling for substantial investment in the same.

 GROWTH AND EXAPNSION:

Growth and Expansions in the volume of business result in enhancement of the working

capital requirements. As business growth and expands it needs a larger amount of the

working capital. Normally the needs for increased working capital funds processed

growth in business activities.

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PRICE LEVEL CHANGES :

Generally raising price level require a higher investment in the working capital. With

increasing prices, the same levels of current assets needs enhanced investments.

 MANAFACTURING CYCLE:

The manufacturing cycle starts with the purchase of raw material and is completed with

the production of finished goods. If the manufacturing cycle involves a longer period the

need for working capital would be more. At time business needs to estimate the

requirement of working capital in advance for proper control and management. The

factors discussed above influence the quantum of working capital in the business. The

assessment of the working capital requirement is made keeping this factor in view. Each

constituents of the working capital retains it form for a certain period and that holding

period is determined by the factors discussed above. So for correct assessment of the

working capital requirement the duration at various stages of the working capital cycle is

estimated. Thereafter proper value is assigned to the respective current assets, depending

on its level of completion. The basis for assigning value to each component is given

below:

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COMPONENTS OF WORKING CAPITAL BASIS OF VALUATION

Stock of Raw Material Purchase of Raw Material

Stock of Work -in- Process At cost of Market value which is lower

Stock of finished Goods Cost of Production

Debtors Cost of Sales or Sales Value

Cah Working Expenses

Each constituent of the working capital is valued on the basis of valuation

Enumerated above for the holding period estimated. The total of all such valuation becomes the

total estimated working capital requirement.

The assessment of the working capital should be accurate even in the case

of small and micro enterprises where business operation is not very large. We know that working

capital has a very close relationship with day-to-day operations of a business. Negligence in

proper assessment of the working capital, therefore, can affect the day-to-day operations

severely. It may lead to cash crisis and ultimately to liquidation. An inaccurate assessment of the

working capital may cause either under-assessment or over-assessment of the working capital

and both of them are dangerous.

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PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY:

The following are the general principles of a sound working capital management policy:

PRINCIPLES OF WORKING CAPITAL MANAGEMNT POLICY

PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF PRINCIPLES


OF
RISK COST OF EQUITY MATURITY

1. PRINCIPLE OF RISK VARAITAION (CURRENT ASSETS POLICY):

Risk here refers to the inability of a firm to meet its obligations as and when they become due for

payment. Larger investment in current Assets with less dependence on short term borrowings,

increase liquidity, reduces risk and thereby decreases the opportunity for gain or loss. On the

other hand less investments in current assets with greater dependence on short term borrowings,

reduces liquidity and increase profitability. In other words there is a definite inverse relationship

between the degree of risk and profitability. In other words, there is a definite inverse

relationship between the risk and profitability. A conservative management prefers to minimize

risk by maintaining a higher level of current assets or working capital while a liberal

management assumes greater risk by reducing working capital. However, the goal of

management should be to establish a suitable trade off between profitability and risk.

2. PRINCIPLES OF COST OF CAPITAL: The various source of raising working

capital finance have different cost of capital and the degree of risk involved. Generally, higher

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and risk however the risk lower is the cost and lower the risk higher is the cost. A sound working

capital management should always try to achieve a proper balance between these two.

3.PRINCIPLE OF EQUITY POSITION: The principle is concerned with planning the

total investments in current assets. According to this principle, the amount of working capital

invested in each component should be adequately justified by a firm’s equity position. Every

rupee invested in current assets should contribute to the net worth of the firm. The level of

current assets may be measured with the help of two ratios:

1. Current assets as a percentage of total assets and

2. Current assets as a percentage of total sales

While deciding about the composition of current assets, the financial manager may consider the

relevant industrial averages.

4. PRINCIPLES OF MATURITY OF PAYMENT: The principle is concerned with

planning the source of finance for working capital. According to the principles, a firm should

make every effort to relate maturities of payment to its flow of internally generated funds.

Maturity pattern of various current obligations is an important factor in risk assumptions and risk

assessments. Generally shorter the maturity schedule of current liabilities in relation to expected

cash inflows, the greater the inability to meet its obligations in time.

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CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL:

 Growth may be stunted. It may become difficult for the enterprises to undertake

profitable projects due to non availability of working capital.

 Implementations of operating plans may brome difficult and consequently the profit goals

may not be achieved.

 Cash crisis may emerge due to paucity of working funds.

 Optimum capacity utilization of fixed assets may not be achieved due to non availability

of the working capital.

The business may fail to honour its commitment in time thereby adversely affecting its

creditability. This situation may lead to business closure.

The business may be compelled to by raw materials on credit and sell finished goods on cash. In

the process it may end up with increasing cost of purchase and reducing selling price by offering

discounts . both the situation would affect profitable adversely.

Now avaibility of stocks due to non availability of funds may result in production stoppage.

While underassessment of working capital has disastrous implications on business

overassesments of working capital also has its own dangerous.

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CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING CAPITAL:

 Excess of working capital may result in un necessary accumulation of inventories.

 It may lead to offer too liberal credit terms to buyers and very poor recovery system &

cash management.

 It may make management complacent leading to its inefficiency.

 Over investment in working capital makes capital less productive and may reduce return

on investment.

Working Capital is very essential for success of business & therefore needs efficient

management and control. Each of the components of working capital needs proper management

to optimize profit.

INVENTORY MANAGEMNT: Inventory includes all type of stocks. For effective

working capital management, inventory needs to be managed effectively. The level of inventory

should be such that the total cost of ordering and holding inventory is the least. Simultaneously

stock out costs should be minimized. Business therefore should fix the minimum safety stock

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level reorder level of ordering quantity so that the inventory costs is reduced and outs

management become efficient.

RECEIVABLE MANAGEMENT: Given a choice, every business would prefer selling

its produce on cash basis. However, due to factors like trade policies , prevailing market

conditions etc. Business are compelled to sells their goods on credit. In certain circumstances a

business may deliberately extend credit as a strategy of increasing sales. Extending credit means

creating current assets in the form of debtors or account receivables. Investment in the type of

current assets needs proper and effective management as, it gives rise to costs such as :

 Cost of carrying receivables

 Cost of bad debts losses

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Thus the objective of any management policy pertaining to accounts receivables would be to

ensure the benefits arising due to the receivables are more then the costs incurred for the

receivables and the gap between benefit and costs increased resulting in increase profits. An

effective control of receivables

Help a great deal in properly managing it. Each business should therefore try to find out

coverage credit extends to its clients using the below given formula:

Average Credit = Total amount of receivable

(Extend in days) Average credit sale per day

Each business should project expected sales and expected investments in receivable based on

various factor, which influence the working capital requirement. From this it would be

possible to find out the average credit days using the above given formula. A business should

continuously try to monitor the credit days and see that the average. Credit offer to clients is

not crossing the budgeted period otherwise the requirement of investment in the working

capital would increase and as a result, activities may get squeezed. This may lead to cash

crisis.

CASH BUDGET: Cash budget basically incorporates estimates of future inflow and

outflows of cash cover a projected short period of time which may usually be a year, a half or

a quarter year . effective cash management is facilated if the cash budget is further broken

down into months, weeks or even a daily basis.

There are two components of cash budget are:

1. Cash inflows

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2. Cash outflows

The main source for thses flows are given here under:

1. Cash Sales

2. Cash received from debtors

3. Cash received from Loans, deposits etc.

4. Cash receipts other revenue income

5. Cash received from sale of investment or assets.

CASH OUTFLOWS:

1. Cash Purchase

2. Cash payments to Creditors

3. Cash payment for other revenue expenditure

4. Cash payment for assets creation

5. Cash payments for withdrawals, taxes.

6. Repayments of Loan etc.

A suggestive for, at for cash budget is given below:

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MONTHS

PARTICULARS JANUARY FERBUARY MARCH

Estimated cash inflows

………………………………

………………………………….

I. Total cash inflows

Estimated cash outflows

……………………………..

…………………………..

II. Total cash outflows

III. Opening cash balances

IV. Add/deduct surplus/deflictduring the month ( I-II)

V. Closing cash balances (III -IV)

VI. Minimum level of cash balance

VII. Estimated excess or short fall of cash (V-VI)

RESEARCH METHODOLOGY

Secondary Data:

Any data, which have been gathered earlier for some other purpose, are secondary data in the
hands of researcher. Those data collected first hand, either by the researcher or by someone
else, especially for the purpose of the study is known as primary data.

The data collected for this project has been taken from the secondary source. Sources of
secondary data are:-

 Internet

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 Magazines

 Publications

 Newspapers

 Broachers

DATA ANALYSIS

ssssssz WORKING CAPITAL ESTIMATION

Current assets Loans & advances FY 05-06 FY 06-07 FY 07-08

Currents assets

Inventories

stock in trade 223.94 662.87 1176.85

work in progress 2528.4 4563.76 8714.56

raw materials 7224.96 8145.37 9242.58

stores and spare parts 1131.8 1463.13 1810.73

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Total Inventories 11109.1 14835.13 20944.72

Debtors 5516.14 7402.6 14211.12

Cash & Bank balances 1027.1 8042.12 5225.01

(subtracting FCCB issue unutilized -6910.46 -5272.52

money as it amounts to long term

liability)

loans and advances 3249.1 7529.5 8647.1

Net current assets 20901.44 30898.89 43755.43

Current Liabilities FY 05-06 FY06-07 FY 07-08

Sundry Creditors 1476.37 1589.57 3748.82

Creditors for capital expenditure 1456.05 365.64 258.4

other liabilities 342.26 645.34 621.04

unclaimed dividend 21.33 31.66 35.29

sundry deposits 174.14 229.23 321.66

advances from customers 217.21 362.59 73.55

interest accrued but not due on loan 7.04 20.05 32.12

Net current liabilities 3694.404 3244.08 5090.88

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INVENTORIES
In the context of DABUR the major increase in the present three financial years has been of the

inventor

INVENTORIES

25000

20000
stock in trade
15000 work in progress
raw materials
10000 stores and spare parts
Total Inventories
5000

0
FY 05-06 FY 06-07 FY 07-08

Reasons:

 The pile up of inventory that is used in trial run, before hand to be used in the checking

the machinery & the newly installed production capacity.

 The increased inventory to produce more goods so as to utilize the new plant set up .

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DEBTORS AND AVERAGE RECEIVABLES

The debtors are increasing heavily in the financial year 06-07 because of a sales boom that has

accounted for huge accounts receivables increase.

DEBTORS AND AVERAGE RECEIVABLES

16000
14000
12000
10000
8000 Debtors
6000
4000
2000
0
FY 05-06 FY 06-07 FY 07-08

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CASH AND BANK BALANCES

Cash and bank balance as per the balance sheet it is seen to be increasing but from the above

chart it is seen to be decreasing. This discrepancy can be attributed to the fact that balance sheet

figures carry additional cash balance of unutilized FCCB issue proceeds which amount to long

term liability as well. Thus the actual figures are distorted because the money from FCCB issue

has to be returned and it is a kind of long term loan which the company has sought for expansion

purpose. As a result to find the actual outlay of cash the unutilized money has been subtracted.

Also we should take note of the fact that the FCCB money can only be used for expansion

purpose and not as money for usual application of working capital.

C ASH & B AN K B ALAN C E

5225.01
FY 07-08

8042.12
FY 06-07 Cash & B ank balances

1027.1
FY 05-06

0 2000 4000 6000 8000 10000

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LOANS AND ADVANCES

Loans & advances are increasing on the part of increased advances that are given to pile up

inventory when the company went for the expansion mode

LOANS AND ADVANCES

FY 05-06
17%

FY 07-08 FY 05-06
44% FY 06-07
FY 07-08
FY 06-07
39%

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CURRENT ASSETS Current Assets includes cash & those assets which can be easily

converted into cash within a short period generally one year such as marketable securities , bills

receivables, sundry debtors, inventories, work in progress, prepaid expenses etc .The total

current assets are the sum of below contingency i.e.

Current Assets = Stock/ Inventory + Sundry Debtors + Advances + Cash and bank

balances + other current assets

CURRENT ASSETS

loans and advances


FY 07-08
Cash & Bank balances
Debtors
Total Inventories
FY 06-07
stores and spare parts
raw materials
work in progress
FY 05-06
stock in trade

0 5000 10000 15000 20000 25000

NET CURRENT ASSETS

FY 05-06
22%

FY 07-08
46%

FY06-07
32%

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Conclusions: The trend of the current assets in DABURthroughout the period from 2005-08

are shown in the pie-chart .it is evident from the table that the current assets in DABURhas

increased except in year 2006-07.

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CURRENT LAIBILITIES
These are those obligations which are payable within a short period of generally one year and

includes outstanding expenses, bills payable, sundry creditors, accrued expenses, bank overdraft,

short term advances, income tax payable.

TOTAL CURRENT LAIBILITIES


Sundry Creditors
4000
Creditors for capital
3500
expenditure
3000 other liabilities
2500
2000 unclaimed dividend

1500
sundry deposits
1000
500 advances from
0 customers
FY 05-06 FY06-07 FY 07-08 interest accrued but not
due on loan

NET CURRENT LAIBILITIES

6000

5000

4000

3000 Net current liabilities

2000

1000

0
FY 05-06 FY06-07 FY 07-08

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Conclusion: The trend of Current Liabilities of DABURthroughout the period from 2005-

2008 are shown in the table. It is evident from the table that it shows increasing trends in the year

2005 to 2008. It shows that the DABURhas stability in trends of Current Liabilities.

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CREDITORS OF CAPITAL EXPENDITURE

Creditors of DABUR limited are increasing from 70 Cr (FY 05-06) to 18 Cr (FY 06-07) to 12

Cr (FY 07-08). The main reason for the increase in can be attributed to the heavy purchase of

the inventory for stocking it up for trial run & use before the expansion mode.

Creditors for capital expenditure seem to be decreasing over the three years i.e. from 18Cr (FY

05-06) to 12 Cr (FY 06-07) which is in sync with the fact that the expansion work that has been

in process and all preparations for that are coming to an end.

CREDITORS FOR CAPITAL EXPENDITURE

1600
1400
1200
1000 Creditors for capital
800 expenditure
600
400
200
0
FY 05-06 FY06-07 FY 07-08

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RATIO ANALYSIS

FY 05-06 FY 06-07 FY 07-08

Current assets 29843.52 47163.72 61410.49

current liabilities 7611.44 6597.95 7459.4

quick assets 12759.32 14530.46 20880.64

quick liabilities 7611.44 6597.95 7459.4

Net turnover (sales) 45503 52527.1 81786.93

working capital 22232.08 40565.77 53951.09

average inventory (average of opening & closing stock


of year) 8594.615 14476.465 22666.83

cost of goods sold = cost of sales 37398 47018.31 67855.4

total assets 87666 124436.12 138465.6

total annual expenses -(depreciation +debt expenses) 37313.16 27364.06 23898.65

average gross income 97754.89 63633.37 51858

PROFIT before interest and taxes 5998 8120.16 14612.92

Total interest 747.8 2653.75 5214.77

Net Profit after tax (NPAT) 4115 3893.37 7383.56

capital employed (FA+CA-CL ) 89529.68 106917.71 111772.7

investment (FA+CA) 97141.12 113515.66 119232.1

Fixed assets 67297.6 66351.94 57821.59

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LIQUIDITY RATIOS

CURRENT RATIO

Current ratio is defined as the relationship between current assets and current liabilities. It is a

measure of general liquidity & is most widely used to make the analysis of short term financial

position of a firm. Current ratio is the ratio of current assets to current liabilities. A relatively

higher ratio is an indication that the firm is liquid and has the ability to pay its current obligations

on time. On the other hand a low current ratio indicates that the

Liquidity position of the firm is not good and shall not be able to pay its current liabilities in

time. Current Ratio:

The Current ratio is calculated by dividing current assets by current liabilities:

Current ratio: Current Assets

Current Liabilities

FIANANCIAL CURRENT CURRENT


YEAR ASSETS LAIBILITIES CURRENT RATIO

FY 2005-2006 29843.52 7611.44 3.92

FY 2006-2007 47163.72 6597.95 7.14

FY2007-2008 61410.49 7459.4 8.23

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CURRENT RATIO

20%

43% FY 2005-2006
FY 2006-2007
FY2007-2008

37%

QUICK ASSETS
QUICK
FIANANCIAL YEAR LIABILITITES CURRENT LAIBILITIES QUICK RATIO

FY 2005-2006 12759.32 7611.44 1.67

FY 2006-2007 14530.46 6597.95 2.2

FY2007-2008 20880.64 7459.4 2.78

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QUICK RATIO: Quick ratio or liquid ratio is a more rigorous test of liquidity than the

current ratio. The term liquidity refers to the ability of the firm to pay short term obligations as

and when they become due. Quick ratio may be defined as ration of quick assets to quick

liabilities. Liquid assets include all the current assets excluding inventories & prepaid expenses.

Liquid liabilities mean all liabilities excluding bank overdraft. Inventories & prepaid expenses

are not termed as liquid assets because they cannot be converted into cash immediately without a

loss of value.

QUICK RATIO

25%

42% FY 2005-2006
FY 2006-2007
FY2007-2008

33%

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CURRENT SCENERIO INTERPRETATION


While interpreting the figures of both the above ratios we should keep in mind the following one

point

 DABUR is a manufacturing concern

Since it is manufacturing concern the an excess of inventory as compared to other industry

models such as the services sector is an integral fact. As a result it is bound to have higher

current ratio and quick ratio as compared to other industries.

The sharp rise of current ratio from 20% (FY 05-06) to 37% (FY 06-07) to 43 %( FY 07-08)

Can be attributed to

a. Higher pile up of inventory which was to be used up for trial run in producing new

products from the new plant set up.

b. Higher prepaid expenses related to advances given so as to pile up the inventory so that

when the inventory is needed for trial run, it’s available.

c. An increase in average receivables which was in sync with increased capacity of

production and also increased sales.

An important point to note here is that an excess of cash balance arising out of idle money

coming out of FCCB issue expense has been deducted as correspondingly it accounts for long

term liability (debentures) which have no effect on working capital management.

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The quick ratio is a more important indicator of liquid position of DABURas it hardly varies

from 25% (FY 06-07) to 33% (FY 07-08). Obviously the effect of inventories has been

negated.

EFFICIENCY RATIO

From the perspective of working capital management we would be discussing three important

ratios they are.

 Sales to working capital ratio

 Inventory turnover ratio

 Current assets turnover ratio.\

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SALES TO WORKING CAPITAL RATIO


This ratio is computed by dividing working capital by sales. This ratio helps to measure

efficiency of the utilization of net working capital. It signifies that for an amount of sales. A

relative amount of working capital is needed. If any increase in sales in contemplated, working

capital should be adequate & thus this ratio helps management to maintain the adequate level of

working capital

Financial Year FY 05-06 FY 06-07 FY 07-08

Sales to working capital ratio 2.046727 1.294863 1.51595

SALES TO WORKING CAPITAL RATIO

2.046727

2.5 1.515946
1.29486264
2
1.5
1
0.5
0
FY 05-06 FY 06-07 FY07-08

Sales to working capital ratio

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CURRENT SCENERIO INTERPRETATION


As seen from the above table the ratio has decreased from 2 (FY 05-06) to 1.29 in (FY 06-

07) and then increased to 1.5 (FY 07-08). This ratio is again indicative of the fact that the

year in which the expansion took place the sales did not match up with the scale of

expansion. Otherwise it would have remained intact and not decreased. The slight increase

from 1.29 to 1.51 is indicative of the fact that the full impact of expansion is being slowly

realized & sales are slowly increasing.

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INVENTORY TURNOVER RATIO

This ration indicates the effectiveness and efficiency of inventory management. This ratio is

calculated as cost of goods sold: average inventory shows how speedily the inventory is turned

into accounts receivables through sales. The higher the inventory turnover ratio (also called stock

velocity) the more the efficient inventory management.

Financial Year FY 05-06 FY 06-07 FY07-08

inventory turnover ratio/ stock velocity 4.351329 3.2479138 2.9936

INVENTORY TURNOVER RATIO

FY07-08

inventory turnover ratio/


FY 06-07
stock velocity

FY 05-06

0 1 2 3 4 5

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CURRENT SCENERIO INTERPRETATION

The stock velocity is decreasing subsequently from 4.35 (FY 06-07) to 2.99 (FY 07-08) which

shows inefficiency on the part of inventory management.

Partly the reason for the fall can be attributed to stocking up of inventory for the trail run &

using them in testing the expansion mode machinery.

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CURRENT ASSETS TURNOVER RATIO


This ratio is indicated by sales upon current assets. This ratio indicates the efficiency with which

the current assets turn into sales & higher current assets turnover ratio implies by & large a more

efficient use of funds in current assets. Thus, a high turnover rate indicates reduced lock up of

funds in current assets. An analysis of this ratio over a period reflects working capital

management of the firm

Financial Year FY 05-06 FY 06-07 FY07-08

current assets turnover ratio 1.52472 1.11371834 1.331807

CURRENT ASSETS TURNOVER RATIO

1.6 1.52472
1.4 1.331807
1.2 1.11371834
1
0.8 current assets turnover
ratio
0.6
0.4
0.2
0
FY 05-06 FY 06-07 FY07-08

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CURRENT SCENERIO INTERPRETATION

The ratio is slightly decreasing from 1.52 (FY 05-06) to 1.11 (FY 06-07) & then increasing to

1.33 (FY 07-08) which shows that sales increase is not matched by the increase in current assets

in the expansion phase of DABUR. The reason can be well attributed to the piling up of trial

stock and not full use of the expanded production capacity.

OPERATING RATIOS

 Working ratio

 Interest coverage ratios

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WORKING RATIO

A ratio used to measure a company's ability to recover operating costs from annual revenue.

This ratio is calculated by taking the company's total annual expenses (excluding

depreciation and debt-related expenses) and dividing it by the annual gross income. A

working ratio below 1 implies that the company is able to recover operating costs, whereas a

ratio above 1 reflects the company's inability to do so.

Financial Year FY 05-06 FY 06-07 FY07-08

working ratio 0.381701 0.43002689 0.460848

WORKING RATIO

FY07-08 0.460848

FY 06-07 0.43002689 working ratio

FY 05-06 0.381701

0 0.1 0.2 0.3 0.4 0.5

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CURRENT SCENERIO INTERPRETATION

The ratio consistently has been below 1 which means company can very well take out its

operating costs, though the margin of comfort is slightly decreasing because of the increase in

expenses of the United Engineering Services.

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RECMONDATION

• Making available just adequate quantum of working capital. Some of the existing

machinery is new with absolute equipments requiring modernization and rebuilding.

• The company should administrate their credit on the basis of certain well recognized and

established principle of credit administration.

• The company should maintain an optimum level of cash in the business in order to

maintain a proper liquidity in the business.

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COCLUSION

Working capital management is an important aspect of any business. Every business concern

should have adequate working capital to run its business operation. Every concern should have

neither redundant of excess working capital nor inadequate or shortage of working capital. Both

excess as well as short working capital positions are bad for any business.

The three elements of working capital management are cash management receivable

management and inventory management. If a finance manager maintains these three elements of

working capital management properly means the concern will get dramatic improvement in their

sales volume and also in business. Working capital policies of a firm have a great effect on its

profitability, liquidity and structured health of the organization.

Every concern should adopt some new tread management strategies that will help in greater

productivity, inventory optimization and also better working capital management. So, it is noted

that working capital is a means to run business smoothly and profitability. Thus, the concept of

working capital has its own important in a going concern.Good management of working capital

is part of good finance management effective use of working capital will contribute to the

operational efficiency of a department; optimum use will help to generate maximum return.

DABURis also using “SAP” 6.0 versions which is very advanced to do every transaction of any

organization. ‘SAP’ 6.0 also applicable for e-transaction.

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BIBLOGRAPHY

 www.dabur.com

 www.moneycontrol.com

 www.google.com

 Financial Management theory and practice by Prassanna Chandra

 Financial Management theory and practice by Shashi .K. Gupta & R.K.

Sharma

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