ANALYSIS & FINDINGS

(1) Raw Material Conversion Period (RMCP) = Average Raw Material Stock Average Raw Materials consumed during the year PARTICULARS Average 2011-12 2010-11 33352213.5 2009-10 20819151 2008-09 13076062.5 2007-08 9471720.12

raw 33065118

material stock Raw material 314166.03 213093.45 107464.04 218371.65 121729.46

consumed during the year RMCP 105.25 156.52 193.73 59.88 77.80

250 200 156.52 150 105.25 100 59.88 50 0 2011-12 2010-11 2009-10 2008-09 2007-08 77.8
RMCP

193.73

(2)

Work in Progress Conversion Period (WIPCP) = Average stock in progress Average Cost of Production

PARTICULARS

2011-12

2010-11 8313099.5

2009-10 5586013

2008-09 4818821.5

2007-08 3634639.5

Average stock in 7834151.50 progress Avg. Cost of 190952.86

211273.02

194248.64

180015.22

136824.55

production WICP 41.03 37.93 28.75 26.77 26.56

45 40 35 30 25 20 15 10 5 0

41.03 37.93 28.75

26.77

26.56
WICP

2011-12

2010-11

2009-10

2008-09

2007-08

(3)

Finished Goods Conversion Period (FGCP) = Average finished goods inventory Average Cost of goods sold
PARTICULARS Average finished inventory Cost of goods 1955523.98 sold FGCP 7.63 7.98 3.58 5.08 5.92 1648540.72 1398222.17 1260173 989215.18 goods 2011-12 14911159 2010-11 13149905.5 X X 360 360 2009-10 5004497 2008-09 6396225 2007-08 5858384.5

9 8 7 6 5 4 3 2 1 0 2011-12 7.63

7.98 5.92 5.08

3.58

FGCP

2010-11

2009-10

2008-09

2007-08

(4)

Debtors Conversion Period (DCP) = Days in year company operating Debtors turnover PARTICULARS Days in year 2011-12 360 2010-11 360 2009-10 360 2008-09 360 2007-08 360

company operating Debtors turnover DCP 21.66 16.62 22.89 15.72 18.41 19.55 15.82 22.76 18.38 19.59

25 20 16.62 15.72 19.55

22.76 19.59

15
10 5 0 2011-12 2010-11 2009-10 2008-09 2007-08
DCP

(5)

Credit Conversion Period (CCP) = Days in year company operating Creditors turnover PARTICULARS Days in year 2011-12 360 2010-11 360 2009-10 360 2008-09 360 2007-08 360

company operating Creditors turnover Avg. consumption period OR CCP 27.15 13.26 26.02 13.84 39.50 9.11 22.77 15.81 23.30 16.14

18 16 14 12 10 8 6 4 2 0

15.81 13.26 13.84

16.14

9.11
CCP

2011-12

2010-11

2009-10

2008-09

2007-08

GROSS OPERATING CYCLE FOR VARDHMAN GENERAL AND SPINNING MILLS : YEAR 2011-12 2010-11 2009-10 2008-09 2007-08 RMCP 105.25 156.52 193.73 59.88 77.80 WICP 41.03 37.93 28.75 26.77 26.56 FGCP 7.63 7.98 3.58 5.08 5.92 DCP 16.62 15.72 19.55 22.76 19.59 GOC 170.53 217.84 245.61 114.49 129.87

300 250 200 150 100 50 0 2011-12 2010-11 2009-10 2008-09 2007-08 170.53 114.49 129.87
GOC

245.61 217.84

NET OPERATING CYCLE: YEAR 2011-12 2010-11 2009-10 2008-09 2007-08 GOC 170.53 217.84 245.61 114.49 129.87 CCP OR APP 13.26 13.84 9.11 15.81 16.14 NOC 157.27 204.31 236.5 98.68 113.73

250 204.31 200 157.27 150 100 50 0 2011-12 2010-11

236.5

98.68

113.73
NOC

2009-10

2008-09

2007-08

INTERPRETATION It claimed that gross operating cycle of Vardhman General and Spinning Mills is increasing in year 2007-08 and in the year 2008-09 it decreasing up to certain extent. In year 2007-08, it is 129.87 days then it decreased to 114.49 days in year 2008-09 due to contraction in raw material. In 2009-10, it is on the highest point of 245.61 days. The main reason of increasing gross operating cycle in 2009-10 is due to more availability of raw material in the stores. In year 2009-10 the company purchased a bulk of raw material due to market variations the GOC is increased. However, when we came to year 2010-11 the GOC for has shown a significant decrement of 204.31 days from the year 2009-10 to 245.61. When in next year 2011-12, it came out to be 170.53 days. The GOC for satisfactory as it Varies as the market requirements and changes in form of meet the customers requirements largely.

But when we came to the NOC of Vardhman General and Spinning Mills it we can see that Creditors payment period OR Average payment period of Vardhman is on a

average of 15 days in each (5) five years so does not make more effect on GOC. Therefore, it is somehow near of the GOC. That is why the companys NOC 113.73, 98.68, 236.5, 204.31, and 157.27 in the years 2008, 2009, 2010, 2011 and 2012. Therefore, we can say that there is a significant change in the NOC of the Vardhman General and Spinning Mills.

RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making decisions. It only means of better understanding of financial strengths and weaknesses of a firm. The main emphasis has been on calculating the ratios related to a working capital management.

LIQUIDITY RATIOS: -These are the ratios which measures the short term solvency or financial position of a firm. In other words, it refers to the ability of a concern to meet its current obligations as and when these become due. To measure the liquidity of a firm, the following ratios can be calculated. CURRENT RATIO: It may be defined as the relationship between current assets and current liabilities. This ratio is also known as working capital ratio and measures the ability of the firm to meet current liabilities. High current ratio indicates firm is liquid and has the ability to pay its current obligations in time as and when they become due. A ratio equal or near to the rule of thumb of 2:1 i.e. current assets double the current liabilities is considered to be satisfactory. Current Ratio = Current Assets Current Liabilities
YEAR 2011-12 2010-11 2009-10 2008-09 2007-08 CURRENT ASSETS 115612673.56 141934492.00 97761075.20 72335450.22 72171734.06 CURRENT LIABILITIES 18528617.22 35172584.20 12343214.74 13758132.09 21676428.69 CURRENT RATIO 6.24 4.04 7.92 5.26 3.33

9 8 7 6 5 4 3 2 1 0 2011-12 2010-11 4.04 6.24

7.92

5.26 3.33 CR

2009-10

2008-09

2007-08

INTERPRETATION The current ratio of the Vardhman General and Spinning Mills is above the standard and it guarantees the payment of dues in time. The current ratio of the company has been considerably high because they had made over investment in inventories, which is the main reason for the high ratio of current assets. Inventories are high because of seasonal availability of raw material. The overall position of current ratio for Vardhman General and Spinning Mills is satisfactory.

The current ratio of Vardhman General and Spinning Mills has shown a remarkable increment from 3.33 in 2007-08 to 5.26 in 2008-09 and then to 7.92 in 2009-10. Initially in 2007-08, the ratio was not satisfactory but it is quite satisfactory for the years after 2010-11 and especially for the year 2009-10. LIQUID RATIO This ratio is also known as quick ratio or acid test ratio. It is a more rigorous test of liquidity than the current ratio. It is based on those current assets which are highly liquid. Inventory and prepaid expenses are excluded because they are deemed to be least liquid component of current assets. A high quick ratio is the indication that the firm is liquid and has the ability to meet its current liabilities in time and on the other hand low ratio represents liquidity position is not good. Quick Ratio = Quick or Liquid Assets Current Liabilities Quick Assets = Current Assets Inventory Prepaid Expenses
7

YEAR

LIQUID ASSETS

CURRENT LIABILITIES

LIQUID RATIO

2011-12 2010-11 2009-10 2008-09 2007-08

71845029.56 74081279.00 56583851.20 50693352.22 45231614.06

18528617.22 35172584.20 12343124.74 13758132.09 21676428.69

3.88 2.11 4.58 3.68 2.09

5
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2011-12 2010-11 2.11 3.88

4.58 3.68

2.09

LR

2009-10

2008-09

2007-08

INTERPRETATION According to rule of thumb, it should be 1:1. For Vardhman General and Spinning Mills, the liquid ratio present a uneven change over the past four years. It was 2.09 in 2007-08 and increased to 4.58 in 2009-10 and then to 2.11 in 2010-11. The decrement in the ratio is not satisfactory, however the ratio 2.11 in 2010-11 is more than the rule of thumb but it should be quite more than the rule of thumb. WORKING CAPITAL TURNOVER RATIO Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio measures the efficiency with which the working capital is being used by a firm. Working Capital Turnover Ratio = COGS OR Sales Net Working Capital
8

YEAR

SALES

NET

WORKING

WCTR

CAPITAL 2011-12 2010-11 2009-10 2008-09 2007-08 703988634.61 593474659.66 503359979.46 453662278.70 356117465.20 97084056.34 106761907.80 85417950.46 453662278.70 50495305.37 7.25 5.56 5.89 7.74 7.05

9 8 7 6 5 4 3 2 1 0 2011-12 2010-11 2009-10 2008-09 2007-08

WCTR

7.25 5.56 5.89

7.74 7.05

INTERPRETATION This ratio indicates the number of times the working capital is turned over in the course of a year. A high working capital ratio indicates the effective utilization of working capital and less working capital ratio indicates less utilization. For Vardhman General and Spinning Mills, the ratio is quite same for the past five years. It is 7.05 in 2007-08, 7.74 in years 2008-09 and in 2009-10 there was a slight change came over here and the ratio decreased to 5.89. And in the next year in 2010-11 the ratio stand at 5.56 For Vardhman General and Spinning Mills, the ratio is increasing once more in the very next year in 2011-12, It shows increment to 7.24. The ratio of the company is satisfactory.

STOCK TURNOVER RATIO his ratio tells the story by which stock is converted into sales. A high stock turnover ratio reveals the liquidity of the inventory i.e., how many times on an average, inventory is turned over or sold during the year. STOCK OR INVENTORY TURNOVER RATIO = COGS OR SALES AVERAGE STOCK YEAR SALES AVERAGE STOCK 2011-12 2010-11 2009-10 2008-09 2007-08
30
25 20 15 10 5 0 2011-12 2010-11 2009-10 2008-09 2007-08 12.61 24.75 18.68 16.03
STR

STR or ITR

703988634.61 593474659.66 503359979.46 453662278.70 356117465.20

55810428.5 23981268.5 31409661 24291109 18964744.11

12.61 24.75 16.03 18.68 18.78

18.78

INTERPRETATION By analyzing the five-year data it seen, that it follows an uneven trend. We see that from the year 2008 to 2009 & 2009 to 2010, it moves on a slow pace means, the ratio is increased in very nominal figures i.e. (.10) times and (2) times, which has been rectified in the year 2011. In 2011 there is a huge increase in inventory due to this ratio the company maintains is very high in 2011 and the company is required to take measures to lower down this ratio as it affects the working capital cycle of company and the flow of cash in the company. In 2012, we saw company take measure to lower down its ratio which is good for company because a low stock turnover ratio reveals undesirable accumulation of obsolete stock.
10

DEBTORS TURNOVER RATIO: DEBTORS TURNOVER RATIO = CREDIT SALES AVERAGE DEBTORS YEAR CREDIT SALES AVERAGE DEBTORS 2011-12 2010-11 2009-10 2008-09 2007-08 703988634.61 593474659.66 503359979.46 453662278.70 356117465.20 32503373 25923481.52 27348823.87 28677098.13 19374123.96 21.66 22.89 18.41 15.82 18.38 DTR

25 20 15 10 5 0

21.66

22.89 18.41 15.82 18.38

DTR

2011-12

2010-11

2009-10

2008-09

2007-08

INTERPRETATION Generally a low debtors turnover ratio implies that it considered congenial for the business as it implies better cash flow. The ratio indicates the time at which the debts are collected on an average during the year. Needless to say that a high Debtors Turnover Ratio implies a shorter collection period which indicates prompt payment made by the customer.

Now if we analyze the five year data we can say that it holds a good position while receiving its money from its debtors. The ratios are in variation trend, which implies that recovery position is good and company should maintain these positions.

11

CREDITORS TURNOVER RATIO: Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers throughout the year. Generally a low creditors turnover ratio implies favorable since the firm enjoys lengthy credit period. CREDITORS TURNOVER RATIO = NET CREDIT PURCHASE AVERAGE CREDITORS YEAR 2011-12 2010-11 2009-10 2008-09 2007-08
45 40 35 30 25 20 15 10 5 0

CREDIT PURCHASE 567750535.58 505412322.46 421557817.32 358037616.35 300672597.42

39.5

AVERAGE CREDITORS 20914713.21 19426820.02 10672311.95 15724391.01 12906200.48

CTR 27.15 26.02 39.50 22.77 23.30

27.15

26.02

22.77

23.3
CTR

2011-12

2010-11

2009-10

2008-09

2007-08

INTERPRETATION Actually, this ratio reveals the ability of the firm to avail the credit facility from the suppliers throughout the year. Generally, a low creditors turnover ratio implies favorable since the firm enjoys lengthy credit period. Now if we analyze the three years data we find that in the year 2010 the ratio was very high which means that its position of creditors that year was not good only in the year 2010, when we turn ahead the other years creditors turnover ratio is in pretty good position. In the all four years it has followed, a decreasing trend, which is very good, sign for the company. Therefore, we can say it enjoys a very good credit facility from the suppliers.
12

ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS CURRENT ASSETS: Inventories S. debtors Cash & Bank Balances Loans & Advances Total current assets (A) CURRENT LIABILITIES: S. creditors Provisions Security deposits & Retention money Total current liabilities (B) Working capital (A-B) Net increase in working capital

2008-09

2009-10

INCREASE

DECREASE

21642098.00 30359548.69 3407307.32

41177224.00 22158429.16 2297697.88

19535126 8201119.53 1109609.44

16926496.21

32127724.16

15201227.95

72335450.22

97761075.20

11585162.05 2072970.04 100000

9759461.84 2483662.90 100000

1825700.21 410692.86 ----------

13758132.09

12343124.74

58577318.13

85417950.46

36562054.16

9721421.83

26840632.33

26840632.33

85417950.46

85417950.46

36562054.16

36562054.16

13

ANALYSIS ON THE BASIS OF SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS CURRENT ASSETS: Inventories S. debtors Cash & Bank Balances Loans & Advances Total current assets (A) CURRENT LIABILITIES: S. creditors Advance from customers Provisions Security deposits & Retention money Total current liabilities (B) Working capital (A-B) Net Decrease in working capital

2010-11

2011-12

INCREASE

DECREASE

67853213 27508864 3665403.60

43767644 37497882 6891449.29 9989018 3226045.69

24085569

42907011.40

27455698.27

15451313.13

141934492.00

115612673.56

29094178.20 2439050

12735248.22 722054

16358929.98 1716996

3539356.00 100000.00

4971315.00 100000 -----

1431959 -----

35172584.20

18528617.22

106761907.8

97084056.34

31290989.67

40968841.13

9677851.46

9677851.46

106761907.8

106761907.8

40968841.13

40968841.13

14

FOR YEARS 2009 AND 2010: As we have a look on the schedule of changes in working capital for the Vardhman General and Spinning Mills over the years 2008-09 and 2009-10, we find that, among current assets, inventories, loans and advances have shown increment from year 2009-10 to year 2009-10. The sundry debtors and cash & bank balances have decreased in the same years. Among the current liabilities, the sundry creditors and other liabilities have decreased and provisions were increased. Therefore, the overall net working capital has increased.

FOR YEARS 2010-11 AND 2011-12: Among the current assets, debtors and cash & bank balances have increased and inventories and loans & advances have shown decrement. The total current assets have increased. Among the current liabilities, sundry creditors and other liabilities have decreased which made a positive effect on networking capital and it increases, on the other hand, the provision increased which not directly but overall made a good effect on company. Therefore, the net working capital has also increased.

15

ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL INVENTORY ANALYSIS

Inventory is total amount of goods and materials. Inventory means stock of three:1. Raw materials 2. Semi finished goods. 3. Finished goods. Position of inventory in Vardhman General and Spinning Mills: PARTICULARS Raw material W.I.P Finished goods TOTAL
80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 2011-12 2010-11 2009-10 2008-09 2007-08
STOCK

2011-12 28833211 5912280 9022153 43767644

2010-11 37297025 9756023 20800165 67853213

2009-10 29407402 6270176 5499646 41177224

2008-09 12230900 4901850 4509348 21642098

2007-08 13921225 4735793 8283102 26940120

INTERPRETATION By analyzing the 5 years data we see that the inventories are increased/decreased year by year. We can look increasing pattern in inventories. We can see that inventories are grown in 2009-10 and 2010-11 respectively from previous year in figures it increases up to19535126 in 2010 and in year 2011 it increases to 26675989 in comparison of 2010. By this growth we can say that the company is growing. A company uses inventory when they have demand in market and Vardhman General and Spinning Mills is having a demand in industry market. That is biggest reason for increase in Inventories. From other point of view we can say that the liquidity of firm is blocked in inventories but to stock is very good due to uncertainty of availability of raw material in time.
16

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under current assets. Debtors will arise only when credit sales made. Position of Sundry Debtors in Vardhman General and Spinning Mills PARTICULARS DEBTS O/S FOR A PERIOD OF SIX MONTHS OTHER DEBTS TOTAL
40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2011-12 2010-11 2009-10 2008-09 2007-08

2011-12 0.00

2010-11 203547.00

2009-10 118028.00

2008-09 85124.00

2007-08 262290.00

37497882.00 27305317.00 22040401.16 30274424.69 26732357.57 37497882.00 27508864.00 22158429.16 30359548.69 26994647.57

DEBTORS

INTERPRETATION In the table and figure, we see that there are continuous variations in the debtors of Vardhman General and Spinning Mills in five (5) successive years. A simple logic is that debtors increase only when sales increase and if sales increases it is good sign for growth. We can see that in the year 2007-08 the Debtors are at minimum level. Moreover, in next two years in 2009 & 2011 the debtors are continuously increasing. We can say that it is a good sign as well as negative also. Company policy of debtors is very good but a risk of bad debts is always present in high debtors. When sales are increasing with a great speed the profit also increases. If company decreases the Debtors, they can use the money in many investment plans. So, this variation is good from the firm prospect.

17

CASH AND BANK BALANCE ANALYSIS

Cash called the liquid asset and vital current assets; it is an important component of working capital. In a narrow sense, cash includes notes, bank draft, cheque etc. Position of Cash and Bank Balance in Vardhman General and Spinning Mills: PARTICULARS Cash & Bank TOTAL 2011-12 6891449.29 6891449.29 2010-11 3665403.60 3665403.60 2009-10 2297697.88 2297697.88 2008-09 3407307.32 3407307.32 2007-08 6617777.19 6617777.19

8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2011-12 2010-11 2009-10 2008-09 2007-08
CASH & BANK

INTERPRETATION If we analyze the above table and chart we find that it follows an increasing trend. In the year 2007, it had maintained a huge amount of cash and bank balance which has decreases in the year 2009, 2010 and 2011. Although companys cash position in the year 2009, 2010 & 2011 was not sound so, this is not a very good sign for company. The analysis shows that the fix deposits of company are rapidly fallen in the year as 42.3% in 2009-10 respectively from year 2008 that is why company is have minimum balance in 2010 in comparison of all. Through analysis, we got that company is utilizing the fixed cash for exploding the Projects that is good for growth.

18

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees for a specific period of time and in return they will be liable to make timely repayment of that amount in addition to interest on that loan. PARTICULARS LOANS & ADVANCES TOTAL 27455698.27 42907011.40 32127724.16 16926496.21 11619189.30 2011-12 2010-11 2009-10 2008-09 2007-08

27455698.27 42907011.40 32127724.16 16926496.21 11619189.30

50000000 45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2011-12 2010-11 2009-10 2008-09 2007-08

LOANS &

INTERPRETATION If we analyze the table and the chart we can see that it follows an increasing trend which is a good sign for the company. We can see that the increase of loans and advances are increases year by year except the year 2012. In the year 2011 there is more than Rs 4 crore given as loan, due to this a lot of amount was blocked. But it used for expansion of business. The increasing pattern shows that company is giving advances for the expansion of plants and machinery which is good sign for better production. Although companys cash is blocked but this is good that company is doing modernization of plan competitors in market.

19

CURRENT LIABILITIES ANALYSIS Current liabilities are any liabilities that are incurred by the firm on a short term basis or current liabilities that has to be paid by the firm within one year.

CREDITORS: PARTICULARS SUNDRY CREDITORS TOTAL 12735248.22 29094178.20 9759461.84 11585162.05 19863619.97 2011-12 2010-11 2009-10 2008-09 2007-08

12735248.22 29094178.20 9759461.84 11585162.05 19863619.97

30000000 25000000 20000000 15000000

CREDITORS

10000000
5000000 0
2011-12 2010-11 2009-10 2008-09 2007-08

INTERPRETATION If we analyze the above table then we can see that it follow an uneven trend in the sundry creditors and other liabilities. In 2009 it decreased by 75% and in 2010 it further decreased by more then100%. In 09-10 it was increased because of growth in other liabilities. This is done because in the year 2011 company purchased a bulk of raw material due to market variations. When company has minimum liabilities it creates a better goodwill in market. High current liabilities indicate that company is using credit facilities by creditors.

20

PROVISIONS ANALYSIS

Position of Other Provisions in Vardhman General and Spinning Mills

PARTICULARS PROVISIONS TOTAL

2011-12 4971315.00 4971315.00

2010-11 3539356.00 3539356.00

2009-10 2483662.90 2483662.90

2008-09 2072970.04 2072970.04

2007-08 1812808.72 1812808.72

6000000 5000000

4000000
3000000 2000000 1000000 0 2011-12 2010-11 2009-10 2008-09 2007-08
PROVISIONS

INTERPRETATION From the above table we can see that provision shows a growing trend and the huge amount is being kept in these provisions. Though the profits of the company are increased, income tax is Also increased. Therefore, there is a great need of maintaining proper provisions, which is good that company is creating in time. The provisions are increasing as the tax increases. Although company is paying more income tax that is why because company also earning more. This is good sign for Company.

21

Chapter 6

Limitations

22

LIMITATIONS
i. The training session held was of short period, so proper data of concern into depth could not be gathered. ii. iii. iv. The accuracy of data cant be achieved due to the various restrictive policies of the firm. The research is only a means not end. Due to more reliance on the primary source of data collection subjectively is bound to period. v. Firms respondents or officers might not have responded truly in order to hide the actual information of the firm. vi. There is difficulty of adequate timely assistance. Since the officers are busy in their own work and delays in the completion and research studies.

23

Chapter 7

Suggestions

24

SUGGESTIONS
Management should make the proper use of inventory control techniques like fixation of minimum, maximum and ordering levels for all the items for less blockage of money. The company should also adopt proper inventory control like ABC analysis etc. This inventory system can make the inventory management more result oriented. The EOQ should also follow in stores. The company should train its work force properly, which would enable the company to utilize its resources properly and in the interim help in minimizing wastage, and hence result in the expansion of its market share. Due to competition, prices are market driven and for earning more margin company should give the more concentration on cost reduction by improving its efficiency. The investments of surplus funds made by the corporate office and the units are not generally involved while taking decisions with regard to structure of investment of surplus funds. The corporate office should involve the units to better ascertain the future requirements of funds and accordingly the investments made in different securities. The company is losing its overseas customers due to decrease in exports so; the sufficient amount of exports should the maintained. Companys Average debtor collection period of company is 19 days. Therefore, it would be the one of the positive point for company and company should maintain it for future.

MEASURES TO IMPROVE WORKING CAPITAL MANAGEMENT AT VARDHMAN GENERAL AND SPINNING MILLS
The essence of effective working capital management is proper cash flow forecasting. This should take into account the impact of unforeseen events, market cycles, loss of a prime customer and actions by competitors. So, the effect of unforeseen demands of working capital should be factored by company. This was one of its reasons for the variation of its revised working capital projection from the earlier projection. It pays to have contingency plans to tide over unexpected events. While market-leaders can manage uncertainty better, even other companies must have risk-management

25

procedures. These must be based on objective and realistic view of the role of working capital. Addressing the issue of working capital on a corporate-wide basis has certain advantages. Cash generated at one location can well be utilized at another. For this to happen, information access, efficient banking channels, good linkages between production and billing, internal systems to move cash and good treasury practices should be in place. An innovative approach, combining operational and financial skills and an allencompassing view of the companys operations will help in identifying and implementing strategies that generate short-term cash. This can be achieved by having the right set of executives who are responsible for setting targets and performance levels. They could be then held accountable for delivering, encouraged to be enterprising and to act as change agents. Effective dispute management procedures in relation to customers will go along way in freeing up cash otherwise locked in due to disputes. It will also improve customer service and free up time for legitimate activities like sales, order entry and cash collection. Overall, efficiency will increase due to reduced operating costs. Working capital management is an important yardstick to measure a company operational and financial efficiency. This aspect must form part of the strategic and operational thinking. Efforts should constantly be made to improve the working capital position. This will yield greater efficiencies and improve customer satisfaction.

26

Chapter 7

Conclusion

27

CONCLUSION
By conducting the study about working capital management, I found out that working capital management of Vardhman General and Spinning Mills is good. Vardhman

General and Spinning Mills has sufficient funds to meet its current obligation every time, which is due to sufficient profits and efficient management of Vardhman General and Spinning Mills . Raw material for all the units of Vardhman General and Spinning Mills purchased by corporate office in bulk, which is a major problem for the company as it increases the inventory cost. Company is cash rich but as there are expansion and diversification plans under the pipeline, company is not utilizing these funds. For meeting the working capital needs and capacity expansion needs, it has borrowed from banks. Lack of advertisement can be considered to be a weak point for the Vardhman General and Spinning Mills. The amount of stock is increasing per year, which is a good sign, as it would help them in the tough competition coming ahead. Firm profitability can be increase by shortening accounts receivables and inventory periods.

28

References

i 29

REFERENCES
BOOKS AND JOURNALS Anand, M. 2001. Working Capital performance of corporate India: An empirical survey, Management & Accounting Research, Vol. 4(4), pp. 35-65 Berryman, J. 1983. Small Business Failure and Bankruptcy: A survey of the Literature, European Small Business Journal, 1(4), pp47-59 Bhattacharya, H. 2001. Working Capital Management: Strategies and Techniques, Prentice Hall, New Delhi. Grablowsky, B. J. 1976. Mismanagement of Accounts Receivable by Small Business, Journal of Small Business, 14, pp.23-28 Grablowsky, B. J. 1984. Financial Management of Inventory, Journal of Small Business Management, July, pp. 59-65 Shields, Patricia and Hassan Tajalli. 2006. Intermediate Theory: The Successful Student Scholarship. Journal of Public Affairs Education. Vol. 12, No. 3. Pp. 313-334. WEBSITES Lazaridis, Ioannis and Tryfonidis, Dimitrios, Relationship between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange. Journal of Financial Management and Analysis, Vol. 19, No. 1, January-June 2006. Available at SSRN: http://ssrn.com/abstract=931591 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931591&rec=1& srcabs=966188 http://www.emeraldinsight.com/Insight/ViewContentServlet?contentType=Article&Vard hman ename=/published/emeraldfulltextarticle/pdf/2910030202.pdf

ii 30

Annexure

iii 31

BALANCE SHEET AS AT

PARTICULARS SOURCES OF FUNDS Sh. Sanchit Jain

2011-12
52.25 51.00

2010-11
52.25 51.00 19901000.00

2009-10
52.25 51.00 19901000.00 15253853.53

2008-09
52.25 51.00 19901000.00 21829192.29

2007-08
52.25 51.00 19901000.00 20785949.94

SHARE CAPITAL RESERVE AND SURPLUS LOAN FUNDS SECURED LOANS DEFERED TAX LIABILITY UNSECURED LOANS TOTAL APPLICATION OF FUNDS FIXED ASSETS A: GROSS BLOCK B: less DEPRICIATION C: NET BLOCK D:CURRENT ASSETS INVENTORY SUNDRY DEBTORS CASH IN HAND & BANK LOANS AND ADVANCES E:CURRENT LIABILITIES SUNDRY CREDITORS ADVANCE FROM CUSTOMERS/DLRS PROVISIONS (D-E)NET CURRENT ASSETS MISCELLANEOUS EXPENSES TOTAL

19901000.00

345519604.82 29625127.98

72686105.58 3383097.00 43486673.00

88539002.13 3449412.00 46947616.00

94535519.74 3080483.00 28872233.00

55323395.23 662332.00 15703501.00

54399581.72 --------14408414.70

173976583.65 188462261.36 171643192.52 113419523.77 109495049.61

178453951.93 172240571.18 164888412.68 126570061.76 123370584.96 101561424.62 90540217.62 76892527.31 81700353.56 78663170.62 86225242.06 71729938.62 54840123.14 64380715.62 58989869.34

43767644.00 37497882.00 6891449.29 27455698.27

67853213.00 27508864.00 3665403.60 42907011.40

41177224.00 24338099.04 2297697.88 32127724.16

21642098.00 30359548.69 3407307.32 16926496.21

26940120.00 26994647.57 6617777.19 11619189.30

12735248.22 822054.00

29094178.20 2539050.00

9759461.84 100000.00

11585162.05 100000.00

19863619.97 --------------

4971315.00 97084056.34 ---------

3539356.00

2483662.90

2072970.04 58577318.13 2082.50

1812808.72 50495305.37 9874.90

106761907.80 85417950.46 ----------------

173976583.65 188462261.36 171643192.52 113419523.77 10945049.61

32 iv

PROFIT AND LOSS

PARTICULARS (A) INCOME 1: NET SALES 2: OTHER INCOME TOTAL (B) EXPENSES 1:RAW MATERIAL,FINISHED GOODS & WORK IN PROGRESS 2:MANUFACTURING EXPENSES 3:SALARY & OTHER EMP.BENEFITS 4: ADMINISTRATIVE EXPENSES 5: SELLING EXPENSES 6: FINANCIAL EXPENSES 7: OTHER EXPENSES 8:DEPRICIATION TOTAL

2011-12

2010-11

2009-10

2008-09

2007-08

703988634.61 593474659.66 503359979.46 453662278.70 356117465.20 436106.42 3913796.87 172310.00 13234.00 33965.73

704424741.03 597388456.53 503532289.46 453675512.70 356151430.93

591836104.58 478736333.46 402022691.32 36335638.35

284721845.65

68743029.05

76058287.24

69929616.64

64805480.37

49256838.95

4115744.00

3845617.00

3348712.00

3336648.00

2678327.00

3232698.41

3229712.90

3352674.68

2742302.31

2066811.17

4646428.28 13455947.36 446187.51 11021207.00

4114634.84 13038713.28 324537.36 11877047.00

3276473.48 7292587.41 731402.50 6933232.00

3183784.89 6731948.84 38487.59 7349223.00

1610635.56 4803871.78 42963.40 10608658.72

697497346.19 591224883.08 496887390.03 451523513.35 355789952.72

PROFIT BEFORE TAX DEFERRED TAX PROVISION FOR FBT PROVISION FOR TAXATION PROFIT AFTER TAX PROFIT AS PER LAST YEAR BALANCE SHEET CARRIED TO CURRENT YEAR BALANCE SHEET

6927394.84 -66315.00 99521.00 1999712.00 4894476.84 18406627.98

6163573.45 368929.00 90342.00 1333028.00 4371274.45 14035353.53

6644899.43 2418151.00 56529.41 745557.78 3424661.24 10610692.29

2151999.35 662332.00 0.00 446425.00 1043242.35 9567449.94

361478.70

58160.00 303318.70

23301104.82

18406627.98

14035353.53

10610692.29

303318.70 v 33