COMPANY PROFILE

INTRODUCTION Shivalik Agro Poly Products Limited (SAPL) was established in 1976 as a pioneering venture in India for the manufacture of polyethylene wide width film for use in agriculture, agricultural/industrial storage covers & irrigation - water management. The plant is capable of making polyethylene film/ sheets up to 12 meters wide width and in thickness range from 100 Micron to 2000 Micron. The companys works is located at Parwanoo (H.P) 30 Kms from Chandigarh city on the Chandigarh Shimla national highway on 2.5 acres of land with well organized infrastructure and manufacturing facilities. The company has a good standing in the polyethylene film market and is well known for its enterprising work in the use of plastics in agriculture and water management. The company has been members of ASSOCHAM and PHD chamber of commerce and Industries since long. The company has an annual installed capacity to process 5100 M.T. of polyethylene granules and 400 M.T. of polyurethane systems. The company diversified and entered into a manufacturing agreement, in the year 2004 with Reckitt Benckiser (India) Ltd. to operate and manage their activities setup at the works of the company at plot no. 1, sector 3, industrial Area, Parwanoo to manufacture Dettol antiseptic and skin care range of bathing soaps under this unit. SAPL Accreditions

SAPL is an ISO 9001-2008 accredited Company SAPL hold BIS Manufacturing License for manufacture of LDEP Films SAPL got its financial rating done from CRISIL

HISTORY

SHIVATHENE LINOPACK (SLP) - A UNIT OF SHIVALIK AGRO POLY PRODUCTS- PU DIVISION Shivathene Linopack (A Unit of Shivalik Agro Poly Products Ltd.) manufactures polyols and PU systems for polyurethane industries at its works, located at Parwanoo (H.P) and has an installed capacity of 600 M.T. per annum. Polyurethanes are very versatile and their nature varies depending upon the additives contained in the polyol part of polyurethane system. Shivathene Linopack, is engaged in manufacturing of polyols /polyurethanes systems for Rigid Polyurethane Foam, Cold Cure Foam, Integral Skin Foam, Coating, Cable Jointing Compounds, Potting & Encapsulation Compounds for Electrical and Electronic components, Elastomers and Polymer Concrete. This unit with an aim to diversify entered into a manufacturing agreement in the year 2003 with M/s Reckitt Benckiser (India) Ltd. to operate and manage their activities setup at the works of the company at Plot No. 1-A, Sector 3, Industrial Area, Parwanoo to manufacture household liquid cleaners such as Harpic, Colin, Teepol, and Lizol.

CONCEPTALISATION

Product application division ( PAD ) SAPL through its product application division undertakes application of the products manufactured by SAPL and, SLP through a well experienced proficient technically qualified team of engineers and dedicated work force who have hands down experience in the given areas of application.

MISSION AND VISSION Our Mission To provide the best value proposition to our vendors and resellers/Consumers through innovation, and responsiveness and be the partner of choice for them. Consistent innovation and an unyielding commitment of providing impeccable quality standards are the core objective of our business. Our Vision To effectively contribute to the cause of water management & conservation, prevent sub soil water contamination and promote the use of high quality plastics for agricultural growth, to facilitate storage and protection of harvested crop in the field and provide effective high quality portable warehousing for temporary open storage of the crop. To promote the concept of Plasticulture. To make Shivathene Group the most innovative supplier of quality products, focused on highest value creation for its customers.

QUALITY POLICY Excellence in Quality, across all aspects from Raw Material to Final Product , including Packing is our basis to manufacture.

We are committed to QUALITY, ON-TIME DELIVERY and COSTEFFECTIVENESS, and will:

Provide products and services which meet or exceed customer needs and expectations: o Manufacture products which meet customer specifications. o Strive to meet customers target values. o Monitor customer satisfaction. Deliver on-time. o Ship on the date required by the customer. o Monitor on-time delivery performance.

MANAGEMENT Board of Directors 1. Mr. Pankaj K. Mahajan, Chairman & Managing Director 2. Mrs. Alka Mahajan, Vice Chairperson 3. Dr. G.D. Tyagi, Executive Director (Technical & operations) 4. Mr. Sanjay Gupta 5. Mr.Tushar Dasgupta 6. Mr. M. S. Raghav 7. Ms. Priyanka Mahajan 8. Mr. Hoshiar Singh 9. Mr. Naresh Arora 10.Nominee - Punjab State Civil Supplies Corp. Ltd. (PUNSUP) 11.Mr. Vikas Pratap, IAS 12.Finance Controller & Company Secretary 13.Mr. B.L.Jain 14.Chief General Manager 15.Mr. Ashok Mittal 16.Advisor Corporate 17.Mr. R.C.Gupta

PE COVERS FOR FUMIGATION OF FOODGRAINS Polyethylene covers, for fumigation of bulk food grains are manufactured by the company since 1978. These covers are extensively used for fumigation of food grains stored in the open or in godowns.

CAP COVERS FOR FUMIGATION OF FOODGRAINS

PE covers are fabricated from heavy duty PE film processed from PE granules, are chemically inert. PE covers are having high degree of retention of fumigants. PE covers are UV stabilized which increases the shelf life of covers. PE cover is having single seam at the side and the seam is thermally welded to provide added strength. PE films remain unaffected in temperatures ranging from -2C to + 50C. PE covers are having excellent barrier characteristics to provide total protection from rain, dust, dew and storms.

Standard Specification of PE Cover

PE cover standard size is : 32x21x17 for stack of food grains having capacity of 3200 bags of 50 kgs. each. PE cover thickness is 300 micron or 1200 gauges or 0.30 mm. PE cover weight is approximate is 60-62 kg. PE covers can also be fabricated as per customers specifications.

COST SAVINGS Unserviceable covers can be sold as scrap for partial recovery of original investment. DURABILITY Even after two years usage and folding, due to strong welding, the joints will not break and leaks or cracks will not appear at the folding of the Cover.

POLY TARPAULINS Black Tarpaulins are manufactured out of PE Granules of size 30x40 having thickness of 300 micron+/-20% and having weight of around 30-34 kgs. These are meant for outside storage of food grains, particularly for paddy.

U.V.STABILIZED POLYETHYLENE FILM FOR GREEN HOUSES & TUNNELS PE film used for green houses and tunnels is having two to three years life. PE is available up to 12 meters width and thickness range from 100 microns to 250 microns. Colour-transparent or translucent-The colour of green house film is considered based on the percentage of required sun light. PE green house film is having excellent tensile strength and elongation. CONVERSION TABLE (Thickness V/s Area)(Density-0.93 g/cc) Approx. Area Coverage Per Kg. of PE Film Thickness in Microns 100 150 200 MM 0.10 0.15 0.20 Gauge 400 600 800 Sq. Mtrs. 10.75 7.17 5.38 Sq. Ft. 115.67 77.15 57.89

PE SHRINK WRAP FILM The concept of shrink wrapping consumer products is prevalent in most of the technologically advanced countries. The process achieved remarkable success as a technique for functional applications such as bundling, tray packing and pallet-load utilization. Today it is one of the most accepted packaging system for a wide range of consumer and industrial products. Shrink wrap film is available in thickness ranging from 25 Microns to 250 microns in different width as per individual customer requirements. It is available in the form of lay flat tubing and also single ply wide width film. Areas of application

Cosmetics & pharmaceuticals Paper products & stationery Items Soaps and detergents Food products Engineering goods

CO EXTRUDED MULTILAYER (THREE LAYER) PE FILMS The film meets growing demand in the flexible packaging segment of the market. The multilayer film finds extensive application in industries such as dairy, sugar, processed food, edible oils, poly laminates, detergents, etc. Areas of application

Dairy: Packing of liquid / powder Milk Sugar: Packing of sugar Processed Food: Packing of foodstuff Edible Oils: Packing of Ghee Detergents: Packing of detergents in pouches/ bags
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PE FILM FOR OTHER APPLICATIONS LIKE LINNING OF RESERVOIRS/TANKS/PONDS/CANELS ETC Poly lining has made it easier to develop captive ponds for storage of water for irrigation, industry and domestic uses both in hills and plains.

POLY FILM & GEOMEMBRANE LINING APPLICATION PE GEOMEMBRANE PE thick sheets are referred to as geomembranes. PE sheets upto 7.0 meters width and thickness ranging from 0.50 mm - 2.0 mm are manufactured at SAPL; these sheets are normally available in accordion fold/bundle of length 30 meters or as per individual customer requirement. The prime application of these geomembrane is linning of water storage tanks/ ponds, large reservoirs, effluent tanks, fish farming ponds landfills, ash dike, etc. POLYOLS AND P.U. SYSTEMS Polyols and P.U. systems manufactured and marketed by Shivathene Linopack (A Unit of SAPL) find extensive application in the following areas.

Rigid foam: Hot and cold Insulation Integral skin: Automobile and furniture Coating/Paints: Water proofing for buildings and anticorrosive for metallic and non metallic surfaces Polymer concrete: Industrial floorings Potting and encapsulation compound: Electronic and electrical components Grouting: grouting of machines Sealants: Civil application for expansion and contraction joints
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PRODUCTS

Thermo Plastic SHIVAPRIME* C5 CRYSTALEX* (TDS) SHIVAPRIME* C5 (TDS)

ABOUT US Shivalik Prismo India Private Ltd. (SPIPL) was incorporated in the year 1999 and established to manufacture and promote the use of hot applied Thermoplastic Road Marking materials of the highest quality for the Indian subcontinent. SPIPL has in the past couple of years established itself as Indias leading manufacturer and supplier of Thermoplastic Road Marking material with supplies being made to the large number of prestigious projects and customers. The company has supplied Thermoplastic Road Marking Material to over 90 NHAI Projects. The company is a 50:50 joint venture between Prismo Ltd., U.K and Shivalik Agro Poly Products Ltd. (SAPL), India. SPIPL brought the combined expertise of both these companies while offering the world class quality products in the thermoplastic road markings sector. SPIPL is committed to quality, safety, environment protection and value for money. The Company aim to offer complete solutions to the consumers need in thermoplastic products and allied services with 100% customer satisfaction.

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SPIPL Accredition The Company is an ISO 9001-2008 accredited Company. Copyright 2011 Shivalik Prismo India Pvt. Ltd. All Rights Reserved. | Disclaimer Designed and Developed By Pugmarks MISSION AND VISSION Our Vision To promote the application of hot applied retro reflective thermoplastic road marking materials of the highest quality for the Indian subcontinent. To be a part of highway road safety campaign in providing well demarcated visible lanes and road signage. To offer complete solution to the need of thermoplastic road marking products and allied services. Our Mission To provide all weather day night road visibility for sane lane driving and clear demarcation and linage on roads and highways to minimize accidents. Aim at complete consumer satisfaction, Highways & Road safety, and highest quality standards thru consistent innovation. QUALITY POLICY SPIPL is committed to produce quality Road Marketing Materials and Road products that meet and satisfy customer requirements and expectations at minimum cost by efficient utilization of its technological, human and material resources. Our means to continually improve are by enhancing product quality, minimizing material wastage and providing a framework from establishing and reviewing quality object.

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BOARD OF DIRECTORS (INDIA BASED) 1. Mr. Pankaj K. Mahajan 2. Dr. G.D. Tyagi THERMO PLASTIC ROAD MARKINGS YELLOW TPR MARKING

GRADE: MORTH & BS o Reflective thermoplastic marking material is recommended for use with the thermoplastic screed application prams, motorised marking machines etc. These products of reflective screed are ideal for high output marking on highways. o SPECIFICATION AS PER BS: 3262 with White Reflective (Crystallex) and Yellow Reflective (Crystallex) o SPECIFICATION AS PER MORTH: 803.4 with White Reflective (Crystallex) and Yellow Reflective (Crystallex) SHIVAPRIME* C5

INTRODUCTION SHIVAPRIME C5 is a specially formulated, single component air dying road marking clear primer used on RCC or cemented Roads. The road marking material can be easily applied on the primed surface. OTHER AREAS OF APPLICATION SHIVAPRIME can be also find a wide range of application on concrete, asbestos, bricks, tiles, parapets, RCC, drainage pipes, FRP surface, stone slabs, Pyrex slab. The product has good adhesion properties for various surface like Bituminous & Concrete roads.

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CRYSTALEX* - TECHNICAL DATA SHEET INTRODUTION CRYSTALLEX is a specially formulated, hot applied fast drying thermoplastic road marking materials. It has thickness control, skid resistance and long life than conventional road marking materials. AREAS OF APPLICATION CRYSTALEX can be applied on all type of surfaces likes Bitumen, RCC/Cemented roads with Shiva prime. COLOURS White and Yellow PROPERTIES (AS PER MORTH SPECIFICATIONS) Colour Binder contents (% min) Glass Beads (% min) Titanium (% min) Yellow Pigment Drying time (minutes) Luminance at 45deg. Angle (% min) Skid resistance (% mim) Coverage (Kg. /me, at 2.5mm thickness) White 18 30 10 5-10 65 45 5 Yellow 18 30 As required 5-10 45 45 5 AVAILABLE

RECOMMENDED COVERAGE: 5 Kg per sq. meter for 2.5 mm thickness on smooth surface. METHOD OF APPLICATION PROCESS CONDITIONS

Road Temperature: Ambient Safe Healing Temperature: 160 200C Optimum Heating Temperature: 180C (+ /- 10C)
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OBJECTIVES OF STUDY

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OBJECTIVES OF STUDY

Working capital is necessary to run day to day business activities. There is hardly any company which does not require working capital. It is also helpful in knowing the capabilities of company and company is running well or not. The objective of the study is as follow: To know the daily operations of the company. To find out the liquidity ratio, activity ratio, profitability ratio and long term solvency ratio. To assess the cash management of shivalik agro poly product private limited. To know that how the company fulfill its monetary requirement on the time of shortage. How to utilize Working Capital in the company in order to maximize the performance of the company?

To know how resources can be efficiently utilized.

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SCOPE AND RATIONALE OF THE

STUDY

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SCOPE AND RATIONALE OF THE STUDY

Working capital is the difference between current assets and current liabilities. In the present study the working capital management has been analyzed using ratios. The working capital management is studied in respect of: Cash management Receivables management Inventory management Liquidity ratio Activity ratio Profitability ratio Solvency ratio These ratios help to analyze how well the working capital is being managed over the period.

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INTRODUCTION OF THE WORKING CAPITAL MANAGEMENT

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WORKING CAPITAL MANAGEMENT Working Capital management is the management of assets that are current in nature. Current assets, by accounting definition are the assets normally converted into cash in a period of one year. Hence working capital

management can be considered as the management of cash, market securities receivables, inventories and current liabilities. CONCEPTS OF WORKING CAPITAL There are two concepts of working capital: Gross Working Capital Net Working Capital

1. GROSS WORKING CAPITAL Gross working capital refers to the firms investment in current asset. Thus, it is the capital invested in total current assets of the enterprise. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in current assets.

2. NET WORKING CAPITAL Net working capital is the excess of current assets over current liabilities.Net working capital may be positive or negative. Positive working capital refers to the situation where current assets exceed current liabilities and negative working capital refers to the situation current liabilities exceed current assets. NET WORKING CAPITAL = CURRENT ASSETSCURRENT LIABILITIES
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CONSTITUENTS OF CURRENT ASSETS 1. Cash in hand and bank balances 2. Bills Receivables 3. Sundry Debtors(less provision for bad debts) 4. Short-term loans and advances 5. Inventories of stocks, as: a) Raw materials b) Work-in-process c) Stores and spares d) Finished goods 6. Temporary Investments of surplus funds 7. Prepaid Expenses 8. Accrued Incomes

CONSTITUENTS OF CURRENT LIABILITIES 1. Bills Payable 2. Sundry Creditors or Accounts Payable 3. Accrued or Outstanding Expenses 4. Short-term loans, advances and deposits 5. Dividends Payable 6. Bank Overdraft 7. Provision for Taxation, if it does not amount to appropriation of profits

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KINDS OF WORKING CAPITAL Permanent or Fixed Working Capital Temporary or Variable Working Capital

1. PERMANENT OR FIXED WORKING CAPITAL Permanent or Fixed Working Capital is the minimum level of current assets. It is permanent in the same way as the firms fixed assets are. It can be further classified as: o Regular working capital to ensure circulation of current assets from cash to inventories, from inventories to receivables and from receivables to cash and so on. o Reserve working capital is the excess amount over the requirement for regular working capital which may be provided for contingencies that may arise at unstated periods such as strikes, rise in prices etc.

2. TEMPORARY 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. It can be further classified as: o Seasonal working capital is the capital required to meet the seasonal needs of the enterprise. o Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research etc.
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IMPORTANCE OF ADEQUATE WORKING CAPITAL Management of working capital is very much important for the success of the business. It has been emphasized that a business should maintain a sound working capital position and also that there should not be an excessive level of investment in the working capital components. The main advantages of maintaining adequate amount of working capital are as follows: 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 maintaining goodwill. REGULAR SUPPLY OF RAW MATERIALS Sufficient working capital ensures regular supply of raw materials and continuous production. REGULAR PAYMENT OF SALARIES,WAGES AND OTHER DAY-TO-DAY COMMITMENTS A company which has ample working capital can make regular payment of salaries, wages and other day-to-day commitments which raises the morale of its employees, increases their efficiency, reduces wastages and costs and enhances production and profits.

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EXCESS OR INADEQUATE WORKING CAPITAL The firm should maintain a sound working capital position. It should have adequate working capital to run its business operations. Both excessive as well as inadequate working capital positions are dangerous from firms point of view.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL Excessive working capital means idle funds which earn no profits for the business and hence the business cannot earn a proper rate of return on its investment. It may result into overall inefficiency in the organization.

DISADVANTAGES OF INADEQUATE WORKING CAPITAL It cannot buy its requirements in bulk and cannot avail discounts. The firm cannot pay day-to-day expenses of its operations and it creates inefficiencies, increases costs and reduces the profits of the business. It becomes impossible to utilize efficiently the fixed assets due to nonavailability of liquid funds.

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DETERMINANTS OF WORKING CAPITAL There is no specific method to determine working capital requirement for a business. There are a number of factors affecting the working capital requirement. The following is the description of factors which generally influence the working capital requirements of firms: Nature of business This is an important factor in determining the working capital requirements. There are some businesses which require a very nominal amount to be invested in fixed assets but a large chunk of the total investment is in the form of working capital. Size of business The working capital requirements of a concern are directly influenced by the size of its business which may be measured in terms of scale of operations. Manufacturing Process Manufacturing cycle comprises of the purchase and use of raw material and the production of finished goods. Longer the manufacturing cycle, larger will be firms working capital requirements. Credit Policy The credit policy of a firm affects the working capital by influencing the level of debtors. A concern that purchases its requirements on credit and sells its products or services on cash requires lesser amount of working capital.

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Availability of Credit The terms on which a company is able to manage its credit also affects the working capital requirement. If a company in a position to get credit on liberal terms and in a short span of time then it will be in a position to work with less amount of working capital. Seasonal Variations In certain industries raw material is not available throughout the year. They have to buy raw materials in bulk during the season to ensure an interrupted flow and process them during the entire year. Price level changes Changes in the price level affect the working capital requirements. Generally, the rising prices will require the firm to maintain higher amount of working capital. Same levels of current assets will need increased investment when prices are increasing. Operating Efficiency The operating efficiency of the firm relates to the optimum utilization of all its resources at minimum costs. The efficiency in controlling operating costs and utilizing fixed and current assets leads to operating efficiency.

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TYPES OF WORKING CAPITAL The working capital is of following types:CASH MANAGEMENT RECEIVABLES MANAGEMENT INVENTORY MANAGEMENT

CASH MANAGEMENT Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. Thus, a major function of the financial manager is to maintain a sound cash position. Cash Planning Cash inflows and cash outflows should be planned to project cash surplus or deficit for each period of the planning period. Cash budget should prepare for this purpose. Managing the cash flows The flow of cash should be properly managed. The cash inflows should be accelerated while, as far as possible, the cash outflows should be decelerated. Investing surplus cash The surplus cash balances should be properly invested to earn profits. The firm should decide about the division of such cash balance between bank deposits, marketable securities and inter corporate lending.
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MOTIVES FOR HOLDING CASH There are four primary motives for maintaining cash balances: Transaction motive Speculative motive Compensating motive Transaction motive The transaction motive requires a firm to hold cash to conduct its business in the ordinary course. The need to hold cash would not arise if there were perfect synchronization between cash receipts and cash payments, i.e. enough cash is received when the payment has to be made. Speculative motive The speculative motive relates to holding of cash for investing in profitable opportunities as and when they arise. Such opportunities do not come in a regular manner. Such opportunities can be availed of if a firm has cash balance with it. Compensation motive Another motive to hold cash balances is to compensate banks for providing certain services and loans. Banks provide a variety of services to business firms, such as clearances of cheques, supply of credit information, transfer of funds, etc. To be compensated for their services indirectly in this form, they require the clients to always keep a bank balance sufficient to earn a return equal to the cost of services.
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MANAGING CASH FLOWS The following methods of cash management will help in better cash management: Prompt payment by customers In order to accelerate cash inflows, the collections from customers should be prompt. This will be possible by prompt billing. The customers should be promptly informed about the amount payable and the time by which it should be paid. Quick conversion of payment into cash Cash inflows can be accelerated by improving the cash collecting process. Once the customer writes a cheque in favor of the concern the collection can be quickened by its collection. There is a time gap between the cheque sent by the customer and the amount collected against it. Decentralized collections A big firm operating over wide geographical area can accelerate collections by using the system of decentralized collections. A number of collecting centers are opened in different areas instead of collecting receipts at one place. This system saves mailing and processing time and thus, reduces the financial requirements.

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MANAGEMENT OF RECEIVABLES Receivables represent amounts owed to the firm as a result of sale of goods or services in the ordinary course of business. Receivables are also termed as trade receivables, accounts receivables, customer receivables, book debts; trade acceptance, debtors and bills receivables. The purpose of maintaining or investing in receivables is to meet competition and to increase the sales and profits. COSTS OF MAINTAINING RECEIVABLES The concern incurs the following costs on maintaining receivables: Cost of Financing Receivables When goods and services are provided on credit then concerns capital is allowed to be used by the customers. The receivables are financed from the funds supplied by shareholders for long term financing and through retained earnings. The concern incurs some cost for collecting funds which finance receivables. Cost of Collection A proper collection of receivables is essential for receivables management. The customers who do not pay the money during a stipulated credit period are sent reminders for early paymentsAll these costs are known as collection costs which a concern is generally required to incur. Bad Debts Some customers may fail to pay the amounts due towards them. The amounts which the customers fail to pay are known as bad debts. Though a concern may be able to reduce bad debts through efficient collection machinery but one cannot altogether rule out this cost.
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FACTORS INFLUENCING THE SIZE OF RECEIVABLES Size of Credit Sales The volume of credit sales increases or decreases the size of receivables. If a concern sells only on cash basis, then there will be no receivables. The higher the part of credit sales out of total sales, then receivables will be more and vice versa. Credit Policies A firm with conservative credit policy will have a low size of receivables while a firm with liberal credit policy will have a high size of receivables. Relation with Profits The credit policy is followed with a view to increase sales. When sales increase beyond a certain level the additional costs incurred are less than the increase in revenues. The increase in profits will be followed by an increase in the size of receivables or vice versa. Credit Collection Efforts The customers should be sent periodical reminders if they fail to pay in time. On the other hand, if adequate attention is not paid towards credit collection then the concern can land itself in a serious financial problem. Efficient credit collection machinery will reduce the size of receivables.
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MANAGEMENT OF INVENTORY Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60 per cent of current assets in public limited companies in India. A firm neglecting the management of inventories will be jeopardizing its long run profitability and may fail ultimately. It is possible for a company to reduce its levels of inventories to a considerable degree. The reduction in excessive inventories carries a favorable impact on a companys profitability.

NATURE OF INVENTORY Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories exist in a manufacturing company are: Raw Material Raw Materials are those basic inputs that are converts into finished product through the manufacturing process. Raw Materials inventories are those units, which have been purchased and stored for future productions. Work in progress Work in progress inventories are semi-manufactured products. They represent products that need more work before they become finished products for sale.
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 Finished goods These are completely manufactured products which are ready for sale. Stocks of raw materials and work in progress facilitate production while stock of finished goods is required for smooth marketing operations. Consumables These are the materials which are needed to smooth the process of production. These materials do not directly enter production but they act as catalysts. These may be classified according to their consumption and critically.

PURPOSE OF HOLDING INVENTORY A firm also needs to maintain inventories to reduce ordering costs and avail quantity discounts. There are three main purposes or motives of holding inventories: Transactions motive It emphasizes the need to maintain inventories to facilitate smooth production and sales operations. Precautionary motive It necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply force and other factors.
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 Speculative motive It influences the decision to increase or reduce inventory levels to take advantage of price fluctuations.

OBJECTIVES OF INVENTORY MANAGEMENT The main objectives of inventory management are operational and financial. The operational objectives mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objective means that investments in inventories should not remain idle and minimum working capital should be locked in it. The following are the objectives of inventory management: To ensure continuous supply of raw materials, spares and finished goods so that production should not suffer at any time and the customers demand should also be met. To minimize losses through deterioration, pilferage, wastages and damages. To keep material cost under control so that they contribute in reducing cost of production and overall costs.

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INVENTORY MANAGEMENT TECHNIQUES Effective inventory management requires an effective control system for the inventories. In managing inventories, the firms objective should be in consonance with the shareholder wealth maximization principle. To achieve this, the firm should determine the optimum level inventory. This increases the level of investment and makes the firm unprofitable. To manage inventories efficiency, answers should be sought to the following two questions: How much should be ordered? When should it be ordered? The first question, how much to order, relates to the problem of determining economic order quantity (EOQ) and is answered with an analysis of costs of maintaining certain level of inventories. The second question, when to order, arises because of uncertainty and is a problem of determining the re-order point. ECONOMIC ORDER QUANTITY One of the major inventory management problems to be resolved is how much inventory should be added when inventory is replenished. If the firm is buying raw materials, it has to decide lots in which it has to be purchased on each replenish.

Determining an optimum inventory level involves two types of costs: o Ordering costs o Carrying costs

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ORDERING COST These are the costs which are associated with the purchasing or ordering of materials. They include costs incurred in the following activities: purchase ordering, transporting, receiving, inspecting and storing.

CARRYING COST Costs incurred for maintaining a given level of inventory are called carrying costs. They include storage, insurance, taxes, deterioration and obsolescence. This behavior is contrary to that of ordering costs which decline with increase in inventory size It is that order size at which annual total costs of ordering and holding are the minimum. EOQ = 2AS I Where, A = ANNUAL CONSUMPTION IN RUPEES S = COST OF PLACING AN ORDER I = INVENTORY CARRYING COSTS OF ONE UNIT RE-ORDER POINT The problem, how much to order, is solved by determining the economic order quantity, yet the answer should be sought to the second problem, when to order. To determine the re-order point under certainty, we should know: (a) Lead time (b) Average usage (c) Economic order quantity
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That is: Re-order point= Lead Time* Average usage SAFETY STOCK It is difficult to predict usage and lead time accurately. The demand for material may fluctuate from day to day or from week to week. Similarly, the actual delivery time may be different from the normal lead time. If the actual usage increases or the delivery of inventory is delayed, the firm can face a problem of stock-out which can prove to be costly for the firm. ABC ANALYSIS Large numbers of firm have to maintain several types of inventories. It is not desirable to keep the same degree of control on all of the items. This analytical approach is called ABC analysis and tends to measure the significance of each item of inventories in terms of its value. Combine items on the basis of their relative value to form three categories A, B and C. The data in the following table illustrate the ABC analysis.

CLASS

NO.

OF VALUE ITEMS (%) 70 20 10

OF

ITEMS (%) A B C 10 20 70

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RESEARCH METHODOLOGY

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RESEARCH METHODOLGY RESEARCH Research comprises defining and redefining problems, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, making deductions and reaching conclusions and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis.

RESEARCH METHODOLOGY Research methodology is a way to systematically solve the problems. It is a way of studying how research is done scientifically. It consists of various steps that are generally adopted by the researcher in studying his research problems along with the logic behind them.

RESEARCH DESIGN Research design is a framework or the blue print for conducting the research project. Research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. It includes an outline of what the researcher will do from writing the hypothesis and its operational implications to the final analysis of data.

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TYPES OF RESEARCH DESIGN Exploratory research design Descriptive research design Experimental research design

EXPLORATORY RESEARCH DESIGN It is also termed as formulate research design. The main purpose of the study is to formulate a problem for more precise investigation.

DESCRIPTIVE RESEARCH DESIGN In descriptive research design, those studies are taken which are concerned with describing the characteristics of a particular individual or a group.

EXPERIMENTAL RESEARCH DESIGN In this casual relationships between the variables are tested. It is also known as hypothesis testing research design.

SAMPLE DESIGN Sample design is a technique or the procedure which the researcher would adopt in selecting items for the sample. So, he selects small portion of the universe, which is its true representative. This group known is sample and this process is called Sampling.

Sample designs are basically of two types:

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 Non Probability Sampling Probability Sampling

NON- PROBABILITY SAMPLING In this items for the sample are selected deliberately by the researcher, by using his own judgment. In this every item of universe does not have equal chances of inclusion in the sample. It can be of following type: Convenience Sampling Judgment Sampling Quota Sampling

PROBABILITY SAMPLING It is also known as Random Sampling or Chance Sampling. In this, each population element has equal chance of selection. It can be of following type: Random Sampling Stratified Sampling Cluster Sampling Multi stage Sampling

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METHODS OF DATA COLLECTION It is of two types: Primary Data Secondary Data

PRIMARY DATA Primary data are those data, which is originally collected. It is of following types questionnaire, interview, observation etc.

SECONDARY DATA Secondary data are those data which are collected and which has been passed through statistical research.

In this project, secondary data has been collected from following sources:Annual Reports Books Internet Other material and report published by company

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STUDY OF RATIO ANALYSIS

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CLASSIFICATION OF RATIOS LIQUIDITY RATIOS Current Ratio Quick Ratio Cash Ratio or Absolute Liquid Ratio ACTIVITY RATIOS Inventory or Stock Turnover Ratio Debtors Turnover Ratio Average Collection Period Working Capital Turnover Ratio

PROFITABILITY RATIOS (In relation to Sales) Operating Profit Ratio Net Profit Ratio

LONG TERM SOLVENCY RATIOS Debt Equity Ratio Debt Service Ratio or Interest Coverage Ratio LIQUIDITY RATIOS Liquidity refers to the ability to meet its current obligation as and when these become due. The short term obligations are met by releasing amounts from current, floating or circulating assets.

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 CURRENT RATIO Current ratio may be defined as the relationship between current assets and current liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity firm. IDEAL RATIO = 2:1

CURRENT RATIO = CURRENT ASSESTS / CURRENT LIABILITIES

COMPONENTS OF CURRENT RATIO Current Assets Cash in hand Marketable securities Short term Investments Bills receivable Sundry debtors Inventories Work in process Prepaid expenses Current Liabilities Bills Payable Outstanding expenses Sundry Creditors Short Term Advances Income Tax Payable Dividends Payable Bank Overdraft

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 QUICK RATIO The term liquidity refers to the ability of the firm to pay its short term obligations as and when they become due. Quick ratio may be defined as the relationship quick or liquid acids and current liabilities. IDEAL RATIO = 1:1

QUICK RATIO = QUICK ASSESTS / CURRENT LIABILITIES

COMPONENTS OF QUICK OR LIQUID RATIO Quick / Liquid Assets Cash in hand Marketable securities Cash at Bank Bills Receivables Sundry Debtors Temporary Investments Current Liabilities Bills Payable Outstanding expense Sundry Creditors Short Term Advances Income Tax Payable Dividends Payable Bank Overdraft

ABSOLUTE LIQUID RATIO OR CASH RATIO Absolute liquid assets include cash in hand and cash at bank and marketable securities or temporary investments. The acceptable norm for this ratio is 50% or 0.5: 1 or 1:2.

CASH RATIO = CASH AND BANK / CURRENT LIABILITIES

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 ACTIVITY RATIO Activity ratios measure the efficiency or effectiveness with which a firm manages it resources or assets. Theses ratios are also called turnover ratios because they indicate the speed with which assets are converted into sales. For example: inventory turnover ratio indicates the rate at which the funds invested in inventories are converted into sale. Depending upon the purpose, a number of turnover ratios are calculated. INVENTORY TURNOVER RATIO OR STOCK TURNOVER RATIO Inventory turnover ratio indicates whether inventory has been efficiently used or not. Turnover ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. INVENTORY TURNOVER RATIO = NET SALES / INVENTORY

DEBTORS TURNOVER RATIO Debtors turnover ratio indicates the velocity of debt collection of firm. In simple words, it indicates the number of times average debtors (receivables) are turned over during a year. DEBTORS TURNOVER RATIO = TOTAL SALES / DEBTORS

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 AVERAGE COLLECTION PERIOD The average collection period represents the average number of days for which a firm has to wait before its receivables are converted into cash. AVERAGE COLLECTION PERIOD = NUMBER OF WORKING DAYS/ DEBTORS TURNOVER RATIO WORKING CAPITAL TURNOVER RATIO Working capital of a concern is directly related to sales. The current assets like debtors, bills receivables, cash, stock etc. change with the increase or decrease in sales. Working capital = Current Assets Current Liabilities It indicates the velocity of the utilization of net working capital. This ratio indicates the number of times the working capital is turned over in the course of a year. This ratio measures the efficiency with which the working capital is being used by a firm.

WORKING

CAPITAL

TURNOVER

RATIO

SALES/NET

WORKING CAPITAL

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 PROFITABILITY RATIO Profits to the management are the test of the efficiency and a measurement of a control; to owners, a measure of worth of their investment; to the creditors, the margin of safety; to employees, and a source of fringe benefits; to government a measure of tax paying capacity and the basis of the legislative action etc. OPERATING PROFIT RATIO This ratio is calculated by dividing operating profit by sales.

OPERATING PROFIT RATIO = OPERATING PROFIT X 100 SALES Operating profit = Net profit + Non operating expenses- Non operating income NET PROFIT RATIO It establishes the relationship between net profits (after interest) and sales, sand indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of firms profitability.

NET PROFIT RATIO = NET PROFIT AFTER TEX X 100 NET SALES

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 LONG TERM SOLVENCY RATIOS The term solvency refers to the ability of a concern to meet its long term obligations. It indicates a firms ability to meet the fixed interest and costs and repayment schedules associated with its long-term borrowings. DEBT EQUITY RATIO Debt equity ratio also known as External Internal Equity Ratio is calculated to measure the relative claims of outsiders and the owners (i.e. shareholders) against the firms assets. DEBT EQUITY RATIO = OUTSIDERS FUND/SHAREHOLDERS FUND INTEREST COVERAGE RATIO Net income to debt service ratio or simply debt service ratio is used to test the debt servicing capacity of a firm. The ratio is also known as Interest Coverage Ratio or Fixed Charges Cover ratio or Time Interest Earned.

INTEREST COVERAGE RATIO = NET PROFIT BEFORE INTEREST AND TEXES FIXED INTEREST CHARGES

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DATA ANALYSIS AND INTERPRETATIONS

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 LIQUIDITY RATIOS CURRENT RATIO LIABILTIES YEAR Current Assets Current Liabilities Current Ratio 1.99 2.06 1.89 = CURRENT ASSETS/CURRENT

2008-2009 5,06,58,00,000 2,54,56,80,000

2009-2010 6,15,47,80,000 2,99,40,1,0,000

2010-2011 6,25,89,40,000 3,29,79,60,000

2.5 2 1.5 1 0.5 0 2008-2009 2009-2010 2010-2011

Current Ratio

INTERPRETATION IDEAL CURRENT RATIO IS 2:1. The current ratio has increased from 1.99 to 2.06 between the year 2008-2009 and 2009-2010. But it decreased to 1.89 in the year 20102011.

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 QUICK RATIO = QUICK ASSETS/CURRENT LIABILITIES

YEAR Quick Assets Current Liabilities Quick Ratio

1.4

2008-2009 3,09,59,87,000 2,54,56,80,000

2009-2010

2010-2011

2,82,41,89,000 3,08,46,70,000 2,99,40,10,000 3,29,79,60,000

1.22

0.94

0.93

1.2 1 0.8
0.6 0.4 0.2 0 2008-2009 2009-2010 2010-2011
Quick Ratio

INTERPRETATION THE IDEAL QUICK RATIO IS 1:1. The quick ratio has decreased from 1.22 to 0.94 between the year 2008-2009 and 2009-2010. But it decreased to 0.93 in the year 20102011.

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CASH RATIO = CASH AND BANK/CURRENT LIABILITIES

YEAR Cash Current Liabilities Cash Ratio

0.3 0.25 0.2 0.15 0.1 0.05 0

2008-2009 59,08,80,000 2,54,56,80,000

2009-2010 82,19,10,00 2,99,40,10,000

2010-2011 83,93,87,000 3,29,79,60,000

0.23

0.27

0.25

Cash Ratio

2008-2009

2009-2010

2010-2011

INTERPRETATION The cash ratio has first increased from 0.23 to 0.27 between the year b2008-2009 and 2009-2010. But it decreased to 0.25 in the year 2010-2011.

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 ACTIVITY RATIOS INVENTORY INVENTORY TURNOVER RATIO = NET SALES /

YEAR Net Sales Inventory Inventory Turnover Ratio

2008-2009 9,45,96,94,000 2,09,63,80,000 4.51

2009-2010 9,61,89,60,000 3,37,73,80,000 2.85

2010-2011 9,91,85,70,000 3,60,11,80,000 2.75

5 4
Inventory Turnover Ratio

3 2 1 0 2008-2009 2009-2010 2010-2011

INTERPRETATION The inventory turnover ratio has decreased from 4.51 to 2.85 between the year 2008-2009 and 2009-2010. But it decreased to 2.75 in the year 2010-2011.

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DEBTORS TURNOVER RATIO = SALES/DEBTORS

YEAR Sales Debtors Debtors Turnover Ratio

4 3.5 3 2.5 2 1.5 1 0.5 0

2008-2009 9,45,96,94,000 2,47,65,40,000 3.82

2009-2010 9,61,89,60,000 3,01,23,65,000 3.19

2010-2011 9,91,85,70,000 3,00,12,96,000 3.30

Debtors Turnover

2008-2009 2009-2010 2010-2011

INTERPRETATION The debtor turnover ratio has decreased from 3.82 to 3.19 between the year 2008-2009 and 2009-2010. But it increased to 3.30 in the year 2010-2011.

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 WORKING CAPITAL TURNOVER RATIO = SALES / NET WORKING CAPITAL YEAR Sales Net Capital Working Capital Turnover Ratio
3.5 3 2.5 2 1.5 1 0.5 0 2008-2009 2009-2010 2010-2011

2008-2009 9,45,96,94,000

2009-2010 9,61,89,60,000 2,87,69,83,000

2010-2011 9,91,85,70,000 3,13,29,76,000

Working 3,29,87,60,000

2.87

3.34

3.17

Working Capital Turnover Ratio

INTERPRETATION The working capital turnover ratio has increased from 2.87 to 3.34 between the year 2008-2009 and 2009-2010. But it decreased to 3.17 in the year 2010-2011.

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NET PROFIT RATIO = NET PROFIT AFTER TAX X 100 NET SALES

YEAR

2008-2009

2009-2010 98,45,91,000

2010-2011 1,06,55,30,000

Net Profit After 87,56,45,000 Tax Net Sales Net Profit Ratio
12 10 8 6 4 2 0 2008-2009 2009-2010

9,45,96,94,000 9.26

9,61,89,60,000 10.24

9,91,85,70,000 10.74

Net Profit Ratio

2010-2011

INTERPRETATION The net profit ratio has increased from 9.26 to 10.24 in the year 2008-2009 and 2009-2010.Then it increased to 10.74 in the year 2010-2011.

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LONG TERM SOLVENCY RATIOS DEBT EQUITY RATIO = OUTSIDERS FUNDS/SHAREHOLDERS FUNDS

YEAR Outsiders funds Shareholders funds Debt Equity Ratio

2008-2009 1,15,87,75,000

2009-2010 1,95,34,21,000

2010-2011 2,35,39,40,000

6,95,30,18,000 0.17

7,65,32,09,000 0.26

9,58,27,60,000 0.25

0.3 0.25 0.2 0.15 0.1 0.05 0 2008-2009 2009-2010 2010-2011

Debt Equity Ratio

INTERPRETATION The debt equity ratio has increased from 0.17 to 0.26 in the year 2008-2009 and 2009-2010. But it decreased to 0.25 in the year 2010-2011.

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CONCLUSION

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CONCLUSION

After studying the various ratios it is concluded that. The current ratio has decreased over the period. This means the company will not be able to meet its current liabilities. However, the cash position of the company is quiet favorable as it has not decreased to much extent.

The inventory management system is not efficient as the amount of inventory is not properly utilized to generate sales. The debtor management system has been declining in the efficiency as revealed, by the decreasing debtor turnover ratio and average collection period.

There is a high dependence on external debt which brings in inflexibility in companys operation. But still the company is in a stronger position because profits have increased with sales.

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LIMITATIONS OF THE STUDY

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LIMITATIONS Although every effort has been made to collect the relevant information through the sources available, still some relevant information could not be gathered. The time duration could not provide ample opportunity to study every detail of management in the company. There are restrictions not to visit some specific areas. The concerned executives were having very busy schedule. As some figures have not been disclosed by the company on account of confidential report. Estimates are based upon predictions.

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SUGGESTIONS AND RECOMMENDATIONS

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SUGGESTIONS AND RECOMMENDATIONS 1. It is necessary to prepare the cash budget and try to achieve the actual target and budgeted figures. 2. Companies should control, review and improve their discount policy so as to improve companys image. 3. More attention should be paid to customers complaints and efforts should be made to remove them. 4. Some special planning on appointment of dealers should be there to avoid the complications. 5. Funds should be available in smooth and steady flow so that construction at the site is not affected and proper balance is maintained if more than one site is going on in the same time. 6. Terms and conditions with the suppliers should be decided in advance in order to get rid of the future problems. 7. Stock should be verified more frequently to avoid differences between book figures and actual figures. 8. Every department should be made cost conscious to increase profitability.

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BIBLIOGRAPHY

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BIBLIOGRAPHY Books Pandey, I.M., Financial Management, Ed. 2007, Vikas Publishing House Private Ltd., New Delhi. Gupta, Shashi K., Management Accounting, Ed. 2007, Kalyani Publishers, New Delhi. Kothari, C.R., Research Methodology, Ed. 2007, New Age International (P) Limited, Publishers, New Delhi. Manual Annual reports Websites www.shivathin .com.in

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