Project Report

STUDY ON


Working Capital Management
And
Ratio analysis


JBM Auto Ltd.











Submitted to: Submitted by:
Ankita Dhamija KULDEEP RATHI
BBA 3
r d
year



RESEARCHERS DECLARATION


I declare that the summer training report entitled Working capital management and ratio analysis
in JBM AUTO LTD is a record of independent research work carried out by me under the
supervision and guidance of Mrs. Ankita Dhamija .









DATE: Kuldeep Rathi
BBA 3
rd
year















ACKNOWLEDGEMENT

Any accomplishment requires the effort of many people and this work is not different.
Regardless of the source, I wish to express my gratitude to those who may have contributed
to this work, even though anonymously.

First I would like to express my deepest sense of gratitude to Lingaya`s University for
providing me with an opportunity for training and encouragement in conducting the research
work.

I would like to pay my sincere thanks to my project guide, Mrs. Ankita Dhamija, under
whose guidance I was able to complete my project successfully. I have been fortunate
enough to get all the support, encouragement and guidance from him needed to explore,
think new and initiate.

I also extend my sincere thanks to for providing me the opportunity to undergo summer
training in Jai Bharat Maruti LTD.


My final thanks goes out to my parents, family members, teachers and friends who
encouraged me countless times to persevere through this entire process.

KULDEEP RATHI


PREFACE
I had under gone my summer training with Jai Bharat Maruti Ltd. A student can gain this
practical knowledge when he comes to same environment. He/she must have knowledge to tackle
various types of problems, which arise in business. He/she can be able to do it, when
actually faces the problem.
This is only possible during training period. A student may have a sufficient attitude for his/her
future job, but systematic practical training is essential to bring in his confidence for job
performance, mental preparation, which enable him to take a future job responsibility.
As discussed above importance and objectives of training, besides all this, such training solves
following purposes:
Developing skills
In this ability, to perform work efficiently & effectively is being developed.
Modifying attitude.
Developing good attitude on the part of the training in regard to actual job requirement that is
management.
Transmitting information
Information about the company, its product, services & policies.
So, as total above, I had the privilege of receiving my practical training in Jai Bharat Maruti Ltd.
The management of company offered excellent learning situation & sufficient facilities, to fulfill the
objectives of the training.

Kuldeep Rathi



















Chapter 1






















Company Profile

JBM GROUP :-


The journey to excellence began in 1983, when the JBM Group entered the realm of
engineering activities with the establishment of Gurera Gas Cylinder Ltd for the manufacture
of LPG cylinder and entered into auto component industry in 1985 with the inception of Isuki
Auto India. Jay Bharat Maruti Limited a joint venture between JBM and Maruti Udhyog
Limited was formed in 1987 and is the flag ship company of the group today. With the
passing time group kept on setting new standards of excellence in the field of sheet metal
components, welded assemblies and tools manufacturing.
Last one decade has been one of consolidation and diversification. During this period Group
has embraced international system and processes, implementing them at all levels, in every
unit and across all parameters. The equipments and machines in all plants are state-of-art,
manned by highly skilled, professional workforce, ensuring the best quality and timely
delivery. Bolstered by robust bottom line and infrastructure, the range of JBM products is
vast and comprehensive shaped blanks, sheet metals stampings, welded assemblies,
exhaust system, chassis and suspension parts, rear axles, wheel rims, press tooling, jigs
and fixtures, white goods components, high tensile fasteners, ERW tubes, LPG cylinder.
With support of its partners both local and international, the company stands poised atop a
launch pad to the future. Drive by a commitment to customer satisfaction and an
international standard of quality, JBM has not only won customer confidence but also
industry recognition through several awards and accolades.Fully geared to meet new
challenges, destined to touch newer heights in excellence JBM has ventured into Special
Purpose Vehicle.









JBM AUTO LIMITED (SPECIAL PURPOSE VEHICLE)

Today, India is fifth largest manufacturer of Commercial Vehicle and is further expected to
make impressive growth. With rapid improvement in the infrastructure e.g. road network and
OEMs focus on improving the trucks and prime movers, market is looking for reliable, fast
moving and cost effective support vehicle like Tippers, Tipping trailers, liquid bulk carriers

Ceasing the opportunity and unlocking the huge potential JBM decided to venture in to
Special purpose vehicle of which above is a small part. JBM is geared up to compete with
not only local players, unorganized competitions but with the worlds best.

JBM has focused design team, dedicated vendor base, adaptation of latest manufacturing
technologies, experienced and professional team of workmen and engineering to cater
demanding customers providing them global standards, good quality at most competitive
price.

To begin with we have started manufacturing these at Faridabad and are constructing
another plant in Haryana to produce trailer, tipper and other vehicles in the range.












Group Turnover













Gurgaon
Jay Bharat Maruti Limited, Plant-I
Jay Bharat Maruti Limited, Plant-II
Neel Metal Products Limited
Thai Summit Neel Auto Pvt. Ltd.
Tamil Nadu
Neel Industries Private Limited
ThyssenKrupp JBM Private
Limited
Greater Noida
JBM Auto Components Limited,
Plant-II
Haridwar
Neel Metal Products Limited
Indore
JBM Auto Components Limited


Faridabad
JBM AUTO Limited,SPV
JBM Auto Components Limited,
Plant-I
Jay Bharat Exhaust system Limited
JBM industries Limited
Jaico Steel Fasteners Private Limited


Delhi
Neel Key Safety System Limited

Pune
TSNA Private Limited at Chakan

Nasik
JBM Auto components Limited
Pondichery
Neel Industries Pvt Limited
0
100
200
300
400
500
Turnover in MN(USD) 70 98.1 111 178 228 320 425
1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
2005-2006
(Projection)
Group Companies








Customers






















Products of J BM auto Ltd(SPV)



RESEARCH METHODOLOGY


When we talk of research methodology, we not only talk of the research methods but also
the comparison of the logic behind the methods, we used in this context of our research
study and explain why we are using a particular method or technique and why using the
others. Research methodology is a way to systematically solve the research problem. It may
be understood as a science of studying how research is done systematically. In this, we
study the various steps that are generally adopted by researcher in studying his research
problem along with the logic behind them.
The present study is based upon the case study method of research to investigate
procedures at micro level.
As the study is analyzing probing in nature, thus, entirely based on the secondary data
gathered through the annual reports of the industry. Therefore it provides a historical
perspective of decisions.





RESEARCH

Research refers to search for knowledge. Research is an original contribution to the existing
stock of knowledge making for its advancement. It is the pursuit of truth with the help of
study, observation, comparison and experiment. In short, the search for knowledge through
objective and systematic method of finding solution of the problem is research. The advance
learners dictionary of current English gives the meaning of research a careful investigation
or inquiry especially through search for new facts in any branch of knowledge.

RESEARCH METHODS
Research methods may be understood as those methods/techniques that are used for
conduction of research. All those methods which are used by the researcher during the
course of studying his research problem, are termed as research methods . Keeping in
view, the research methods can be put into following three groups:
In the first group we include those methods which are concerned with the
collection of data. These methods will be used where the data already
available are sufficient to arrive at the required solution.
The second group consists of those statistical techniques which are used to
establish relationships between the data and the unknown.
The third group consists of those methods which are used to evaluate the
accuracy of the obtained results.


















Chapter 2















COLLECTION OF DATA
There are several ways of collecting the appropriate data which differ considerably in
context of money, cost, time and other sources at the disposable of the researcher.
There are two types of data:
Primary data
Secondary data

Primary data
Primary data are those which are collected afresh and for the first time, and thus happen to
be original in character. In case of descriptive research, researcher performs survey
whether sample survey or census survey, thus we obtain primary data either through
Observation
Direct communication with respondent
Personal interview

Secondary data
Secondary data are those which have already been collected by someone else and have
already been passed through statistical process.

In this project report, both types of data have been used. Mainly, secondary data is used
such as annual reports of last two years of Grasim industries.














Chapter 3




















WORKING CAPITAL




INTRODUCTION

IMPORTANCE

APPROACHES

DECISION CRITERIA

TYPES

FEATURES

DETERMINANTS

COMPONENTS

WORKING CAPITAL CYCLE








INTRODUCTION

A successful sales program is necessary for earning profits by any business
enterprise. Sales do not convert in cash instantly. There is a time lag between the sale of
goods and receipt of cash.
Therefore, there is a need for working capital in the form of current assets to
deal with the problem arising out of the lack of immediate realization of cash against goods
sold. Therefore sufficient working capital is necessary to sustain sales activity.
Working capital is a financial metric which represents the amount of day-by-day operating
liquidity available to a business. Along with fixed assets such as plant and equipment,
working capital is considered a part of operating capital. It is calculated as current assets
minus current liabilities. A company can be endowed with assets and profitability, but short
of liquidity, if these assets cannot readily be converted into cash

Definition of Working Capital:-
According to C.W. Gestenbergh-
Working capital is ordinarily defined as the excess of the current
assets over current liabilities.

According to Lawrence. J . Gitmen

The most common definition of working capital is the difference of the
firms current assets and current liabilities.






CURRENT ASSETS:-
In accounting, a current asset is an asset on the balance sheet which is expected to be
sold or otherwise used up in the near future, usually within one year, or one business cycle -
whichever is longer. Typical current assets include cash, cash equivalents, accounts
receivable, inventory, the portion of prepaid accounts which will be used within a year, and
short-term investments.
Major items in Current assets
Cash
Bank balances (Saving and short-term time deposits)
Accounts receivable
Inventories
Prepayments
Accrued income
CURRENT LIABILITIES:-
In accounting, current liabilities are considered liabilities of the business that are to be
settled in cash within the fiscal year.
For example accounts payable for goods, services or supplies that were purchased for use
in the operation of the business and payable within a normal period of time would be current
liabilities.
Bonds, mortgages and loans that are payable over a term exceeding one year would be
fixed liabilities. However the payments due on the long-term loans in the current fiscal year
could be considered current liabilities if the amount were material.


Working capital management
Decisions relating to working capital and short term financing are referred to as working
capital management. These involve managing the relationship between a firm's short-term
assets and its short-term liabilities. The goal of Working capital management is to ensure
that the firm is able to continue its operations and that it has sufficient cash flow to satisfy
both maturing short-term debt and upcoming operational expenses

Definition of working capital management:-
Working capital management involves the relationship between a firm's short-term
assets and its short-term liabilities. The goal of working capital management is to
ensure that a firm is able to continue its operations and that it has sufficient ability to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable
and payable, and cash. -From WWW.STUDYFINANCE.COM

The Importance of Good Working Capital Management
Working capital constitutes part of the Crown's investment in a department. Associated with
this is an opportunity cost to the Crown. (Money invested in one area may "cost"
opportunities for investment in other areas.) If a department is operating with more working
capital than is necessary, this over-investment represents an unnecessary cost to the
Crown.
From a department's point of view, excess working capital means operating inefficiencies. In
addition, unnecessary working capital increases the amount of the capital charge which
departments are required to meet from 1 July 1991.

Approaches to Working Capital Management
The objective of working capital management is to maintain the optimum balance of each of
the working capital components. This includes making sure that funds are held as cash in
bank deposits for as long as and in the largest amounts possible, thereby maximising the
interest earned. However, such cash may more appropriately be "invested" in other assets
or in reducing other liabilities.
Working capital management takes place on two levels:
Ratio analysis can be used to monitor overall trends in working capital and to identify
areas requiring closer management.
The individual components of working capital can be effectively managed by using
various techniques and strategies.
When considering these techniques and strategies, departments need to recognise that
each department has a unique mix of working capital components. The emphasis that
needs to be placed on each component varies according to department. For example, some
departments have significant inventory levels; others have little if any inventory.
Furthermore, working capital management is not an end in itself. It is an integral part of the
department's overall management. The needs of efficient working capital management must
be considered in relation to other aspects of the department's financial and non-financial
performance.









Management of working capital

Guided by the above criteria, management will use a combination of policies and techniques
for the management of working capital. These require managing the current assets -
generally cash and cash equivalents, inventories and debtors. There is also a variety of
short terms financing options which are to be considered.
.
Cash management identify the cash balance which allows for the business to
meet day to day expenses, but it reduces cash holding costs.
Inventory management - identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials and hence
increases cash flow; see Just In Time (JIT) and Economic order quantity (EOQ).
Debtors management - identify the appropriate credit policy, i.e. credit terms which
will attract customers, such that any impact on cash flows and the cash conversion
cycle will be offset by increased revenue and hence Return on Capital (or vice versa);
see Discounts and allowances.
Short term financing - inventory is ideally financed by credit granted by the supplier;
dependent on the cash conversion cycle, it may be necessary to utilize a bank loan (or
overdraft), or to "convert debtors to cash" through "factoring".














Decision criteria
By definition, Working capital management entails short term decisions - generally, relating
to the next one year period - which are "reversible". These decisions are therefore not taken
on the same basis as Capital Investment Decisions (NPV or related, as above) rather they
will be based on cash flows and / or profitability.
One measure of cash flow is provided by the cash conversion cycle - the net number
of days from the outlay of cash for raw material to receiving payment from the
customer. As a management tool, this metric makes explicit the inter-relatedness of
decisions relating to inventories, accounts receivable and payable, and cash.
Because this number effectively corresponds to the time that the firm's cash is tied up
in operations and unavailable for other activities, management generally aims at a
low net count.
In this context, the most useful measure of profitability is Return on capital (ROC).
The result is shown as a percentage, determined by dividing relevant income for the
12 months by capital employed; Return on equity (ROE) shows this result for the
firm's shareholders. Firm value is enhanced when, and if, the return on capital, which
results from working capital management, exceeds the cost of capital, which results
from capital investment decisions as above. ROC measures are therefore useful as a
management tool, in that they link short-term policy with long-term decision making.
See Economic value added (EVA).









TYPES

Working capital can be classified either on the basis of concept or on the
basis of periodicity of its requirement.

1) ON THE BASIS OF CONCEPT
On the basis of concept working capital is of 2 types.

A) Gross working capital - Gross working capital is represented by the total Current
assets.

Gross working capital = Total current assets

B) Net working capital - Net working capital is the excess of current assets over current
liabilities.

Net working capital = Current assets Current liabilities

2) ON THE BASIS OF REQUIREMENT
On the basis of requirement working capital is also of two types:
A) Permanent working capital - It is that amount of investment which should always be
there in the fixes or minimum current assets like inventory, accounts receivables or
cash balance etc. to carry out business smoothly. Such an amount cant be reduced if
the firms wants to carry on business operations without interruption.


B) Variable working capital - The excess the amount of working capital over permanent
working capital is known as variable working capital. It may also be subdivided into two
parts.

a) Seasonal working capital - Such capital is required to meet out the
seasonal demands of busy periods occurring at stated intervals.

b) Special working capital - Such capital is required to meet out the extra-
ordinary needs for contingencies. Events like strike, fire, unexpected
competition, rising price tendencies, or initiating a big advertisement
campaign require such capital.



FEATURES:-

1) Working capital is regarded as the excess of current assets over current liabilities.

2) Working capital indicates circular flow of funds in the day-to-day activities of business.
Thats why it is also called circulating capital.

3) Working capital represents the minimum amount of investment in raw materials, work-in
progress, finished goods, stores and spares, accounts receivables and cash balance.











DETERMINANTS

1) Nature of business The effect of the general nature of the business on working
capital requirements cant be exaggerated. Rail, roads and other public utility services
have large fixes investment so they have the lower requirements of current assets.
Industrial and manufacturing enterprises, on the other hand, generally require a large
amount of working capital.

2) Production policies if the production is evenly spread over the entire year, working
capital requirements are greater, because the inventories will be unnecessarily
accumulated during of season period. But if the production schedule favours a varying
production plan as per the seasonal requirements, working capital is required to a
greater extent during a specified season only. The production policies are affected by
so many factors availability of raw materials, labour, stocking facility etc & therefore,
whatever the productions policies are, the firm has to arrange its working capital
requirements accordingly.

3) Proportion of the cost of raw materials to total cost - In those industries where cost
of proportion is a large proportion of total cost of the goods produced, requirements of
working capital will be comparatively large.

4) Length of period of manufacturing The time which elapses between the
commencement and end of the manufacturing process has an important bearing upon
the requirements of working capital. The manufacturing cycle may be shorter for
certain concerns & longer for others- it depends on the type of the product to be
manufactured, work to be done through machine labour & hand

5) Terms of purchase - If suppliers allow continuous credit, payment can be postponed
for some time and can be made out of the sale proceeds of the goods produced. In
such a case, the requirements of working capital will be reduced.

6) Dynamic Attitudes As a company grows, it is logical to expect the large amount of
working capital will be required.


COMPONENTS OF WORKING CAPITAL:-

Main components of working capital are as follows:

1) Cash Cash is the most liquid and important component of working capital. Holding
cash involves cash in the sense that the present worth of cash held for a year is less
than the value of cash on today. During inflationary situations as exist today the cost of
holding includes the deterioration in the value of the cash due to inflation. Cash,
therefore, results in enhanced liquidity, but lower profitability. Despite in the cost
involved it is pertinent to hold cash because it facilitates the attainment of some
important motives.

2) Marketable Securities Though marketable securities provides a such lower yield
that the firms operation assets. They serve two useful functions. Firstly, they act as a
substitute for cash, and secondly, are used as temporary investment. Where these
securities are held in lieu of the cash balance, they act as a substitute for transactional
or precautionary balances. Normally, these arent used as speculative balances, but
only as a guard against the possible shortage of bank credit.
Marketable securities (as temporary investment) may be held for one of the following
reasons:

Seasonal or cyclical operations
To meet known financial requirements. Construction of an additional
plant.
Immediately after the sale of long-term securities.

3) Account Receivable - Though accounts receivable are a vital investment of any
business organization, little analytical work as been done to determine credit policies.
Maintaining account receivable has its cost implications in that the firms monetary
resources are tied up. This is of greater significance in the inflationary economy,
because of the depreciation in the value of money. Basically, this is a two-step
account. When goods are shipped, inventories are reduced and accounts receivable is
created. When payment is made, this account is reduced and the cash level increases.
Accounts receivables are, therefore a function of the volume of credit sales and the
average length of time between sales and collections.

4) Inventory Inventories represent a substantial amount of a firms current assets.
Management of inventories should be efficiently carried out so that this investment
doesnt become too large, as it would result in blocked capital which could put to
productive use elsewhere. On the other hand, having too small an inventory could
result in loss of sale or loss of customer goodwill. An optimum level of inventory should
therefore be maintained.

















WORKING CAPITAL CYCLE


Working capital cycle indicates the length of time between a firms paying for
materials entering into stock and receiving the cash from sale of finished goods. In a
manufacturing firm, the duration of time required to complete the sequence of events is
called operating cycle.

In case of a manufacturing company, the operating cycle is the length of time
necessary to complete the following cycle of events: -

1) Conversion of cash into raw materials
2) Conversion of raw materials into work-in-progress
3) Conversion of work-in-progress into finished goods
4) Conversion of finished goods into accounts receivable
5) Conversion of accounts receivable into cash

The above operating cycle is repeated again & again over the period depending upon the
nature of the business & type of product etc. the duration of the operating cycle for the
purpose of estimating working capital is equal to the sum of duration allowed by the
suppliers.









Working capital cycle can be expressed as:
R+W+F+D-C

Where,

R=Raw Material Storage Period = Average Stock of Raw Material / Average Cost of
production per day

W=Work in Progress Holding Period = Average Work in Progress Inventory/Average Cost of
Production per day

F=Finished Goods Storage Period = Average Stock of Finished Goods / Average. Cost of
Goods Sold per day

D=Debtors Collection Period = Average Book Debts/
Average Credit Sales per day

C=Credit Period Availed = Average Trade Creditors/Average Credit Purchases per day


















OPERATING CYCLE OF MANUFACTURING BUSINESS








REALIZATION Accounts SALES
Receivables




Cash Finished Goods



PURCHASES PRODUCTION
PRODUCTION PROCESS
Raw Materials Work-in-Process
PROCESS




THEORTICAL ASPECTS OF WORKING CAPITAL
MANAGEMANT


NATURE OF WORKING CAPITAL MANAGEMENT

Working capital management is three dimensional in nature-

1) It is concerned with the formulation of policies with regard to profitability, liquidity and risk.

2) It is concerned with the decisions about the composition and level of current assets.

3) It is concerned with the decisions about the composition and level of current liabilities.



Policies regarding to Profitability
Liquidity and Risk
Composition of
Level of Current
Liabilities



















GOAL OF WORKING CAPITAL MANAGEMENT


Working capital management is concerned with the problems that arise in
attempting to manage the current assets, the current liabilities and the interrelationship that
exists between them.

Current assets refer to those assets, which in the ordinary course of business
can be converted into cash within one year. Major current assets are:

Cash
Marketable securities
Accounts receivable
Inventory.

Current liabilities are those liabilities, which are intended, at their inception, to
be paid in the ordinary course of business within a year, out of the current assets or
earnings of the concern. Current liabilities are:
Composition of Level
of Current Assets

Accounts payable
Bills payable
Bank overdraft
Outstanding expenses.

Working capital is that portion of firms assets which is financed by long-term funds.
Interaction between current assets and current liabilities is the main theme
of the theory of working capital management.
Goal of working capital management is to manage the firms current assets and
liabilities in such a way so that a satisfactory level of working capital is maintained.
The second important segment of working capital management is deciding the optimum
level of investment in various current assets. There are three important current assets
cash, accounts receivables and inventory
























OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital is managed
effectively, monitored efficiently planed properly and reviewed periodically at regular intervals to
remove bottlenecks if any the company cannot earn profits and increase its turnover. With this
primary objective of the study, the following further objectives are framed for a depth analysis.
1. To study the working capital management of JBM Auto Ltd.
2. To study the optimum level of current assets and current liabilities of the company.
3. To study the liquidity position through various working capital related ratios.
4. To study the working capital components such as receivables accounts, cash management,
Inventory position.
5. To study the way and means of working capital finance of the JBM Auto Ltd.
6. To estimate the working capital requirement of JBM Auto Ltd.
7. To study the operating and cash cycle of the company.



BENEFITS


Investments in receivables involve both benefits and costs. The extension of trade
credit has a major impact on sales, costs and profitability. Other things being equal, a relatively
liberal policy and, therefore, higher investments in receivables, will produce larger sales. However,
costs will be higher with liberal policies than with more stringent measures.
Therefore, accounts receivables management should aim at a trade-off between
profit (benefit) and risk (cost).








CREDIT POLICIY

The credit policy of a firm provides the framework to determine:
1) Credit standards
2) Credit terms
3) Credit Analysis

Credit Standard
The term credit standards represent the basic criteria for the extension of credit to those
customers to whom goods could be sold on credit. If a firm has more slow-paying customers, its
investment in accounts receivables will increase. The firm will also be exposed to higher risk of
default.

Credit Terms
Credit terms specify duration of credit and terms of payment by customers. Investment in
accounts receivables will be high if customers are allowed extended time period for making
payments.

Credit Analysis
Credit analysis and investigation is an aspect of credit policies of a firm. Two basic steps are
involved in the credit investigation process:
A. Obtaining credit information
B. Analysis of credit information

It is on the basis of credit analysis that the decisions to grant credit to a customers as well as
the quantum of credit would be taken.




INVENTORY MANAGEMENT

INTRODUCTION

Inventories constitute the principal item in the working capital of the
majority of trading and industrial companies. In inventory we include raw materials,
finished goods, work-in-progress, supplies and other accessories. To maintain the
continuity in the operations of business enterprises, a minimum stock of inventory is
required.

Management of inventory is designed to regulate the volume of investment in
goods on hand and the types of goods carried in stock to meet the needs of production
and sales while at the same time, the investment in them is to be kept at a reasonable
level.


CONCEPT

The inventory management is used in two ways- Unit Control and Value
Control. Production and purchase officials use this word in term of unit control whereas in
accounting this word is used in term of value control .Investment in inventory is one the
largest asset item of business enterprises particularly those engaged in manufacturing.

The proper management and control of the capital invested in the inventory
should be the prime responsibility of accounting department because resources invested in
inventory arent earning a return for the company. Rather, on the other hand, they are
costing the firm money both in terms of capital costs being incurred and loss of opportunity
income that is being foregone.



TECHNIQUES OF INVENTORY CONTROL

1) The Selective Inventory Control or ABC System of Control
2) Maximum Stock Limit
3) Minimum Stock Limit
4) Re-ordering Level
5) Economic Order Quantity
6) Just In Time
7) Supply Chain Management






ABC System of Control:-

The various inventory items are, according to this system, categorized into three classes-
I. A
II. B
III. C

The item included in-group involve the largest investment. Therefore, inventory
control should be the most rigorous and intensive and the most sophisticated inventory
control techniques should be applied to these items. The C group consists of items of
inventory which involve relatively small investments although the numbers of items is
fairly large. These items deserve minimum attention. The B group stands midway. It
deserves less attention than A but more than C. It can be controlled by employing less
sophisticated techniques.


Maximum Stock Limit:-

This represents the quantity if inventory above which it should not be allowed to be kept.
The following formula may be applied to calculate the maximum stock-

Maximum Stock = Reorder Level Minimum Consumption during Minimum
Lead Time + Lot Size.
Minimum Stock Limit:-
imum This represents the quantity below which stock should not be allowed to fall. The
main purpose of this level is to ensure that production isnt held up due to storage of any
material.
Minimum Stock Limit = Re-order Level Normal storage during Lead Time

Re- Ordering Level:-
It is the point at which if stock of the material in store reaches, the storekeeper
should initiate the purchase requisition for fresh supplies of the material. This level is fixed
somewhere between the maximum and minimum levels in such a way that the difference of
quantity of the material between the reordering level and the minimum level will be sufficient
to meet requirements of production upto the time of fresh supply of the material.
The reorder point = Lead time in days * Average daily usage of inventory

Economic Order Quantity:-
It is the quantity of inventory, which can be reasonably ordered at a time and
purchased economically. It is also known as Standard Order Quantity or Economic Lot Size.
By definition Economic Order Quantity is that size or order at which the total cost of
ordering and holding are the minimum.
In determining the economic order quantity the problem is one to set a balance
between two opposing costs, namely, namely ordering costs and carrying costs. The
ordering costs are basically the costs of getting an item into the firms inventory.
Carrying costs, sometimes also known as holding costs are the costs of
possessing the materials. These costs are combined known as Associated Costs.
Hence, the management tries to reconcile them and this reconciliation point is
economic order quantity.
Just In Time:-
Just-in-time inventory system is designed to ensure that materials or supplies arrive at a
facility just when they are needed so that storage and holding costs are minimized. The just-
in-time system requires considerable cooperation between the supplier and the customer.
The customer must specify what will be needed, when, and in what amounts. The supplier
must be sure that the right supplies arrive at the agreed-on time and location.
Just In Time (business), an inventory strategy that reduces in-process inventory
Just-in-time compilation, a technique for improving the performance of bytecode-
compiled programming systems
Just in Time (Code Lyoko episode), an episode of the French animated television
series Code Lyoko
Jit (Corvette), An abbreviation for "Jawvette", also known as a Corvette.

Supply chain management:-
Supply chain management (SCM) is the process of planning, implementing, and
controlling the operations of the supply chain with the purpose to satisfy customer
requirements as efficiently as possible. Supply chain management spans all movement and
storage of raw materials, work-in-process inventory, and finished goods from point-of-origin
to point-of-consumption. The term supply chain management was coined by consultant
Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 1982.








Chapter 4








Analysis of working capital of management


JBM AUTO Ltd.
BALANCE SHEET AS ON 31 MARCH, 2012



Schedule As at
31st march
2007
(Amt in Rs.)

1. SOURCES OF FUNDS
1 Shareholder's funds 1
Capital

-
Reserve & Surplus

938600


938600

Secured Loans 2

13748555
Unsecured Loans
Inter-Unit Account 74421425


89108580
2. APPLICATION OF FUNDS
1 Fixed Assets 3
A. Gross Block

8275731
Less: Depreciation

689659
Net Block

7586072
Capital work in Progress

2681047
2 Current assets, loans & advances 4
a. Inventories

41922540
b. Sundry Debtors

57628053
c. Cash & Bank Balances

222046
d. Inter Unit Account

14557551
e. Loans & Advances

20717747


135047937
Less: Current Liabilities & Provisions
Current Liabilities 5

56206476
Net Current assets

78841461
Deferred Tax Assets (Net)

-

3 MISCELLANEOUS EXPENDITURE
(to the extent not written
off or adjusted) 6
Total

89108580


-
JBM AUTO LIMITED
Profit & Loss Account For The Period 31st MARCH, 2012

Schedule As at
31st march
2007
(Amt in Rs.)
INCOME
Sales 7

340223218
Less : Excise Duty

34496942


305726276
INCREASE (DECREASE) IN WIP

222849
Other Income

1398143


307347268
EXPENDITURE
Material & Manufacturing expenses 8

283273743
Employees' remuneration and benefits 9

12202991
Adminsitrative expenses 10

9363913
Financial Charges 11

1939831


306780478

Profit before depreciation &

566790
Amortisation

Less:
Depreciation
Profit before tax

566790

As at
31st march
2007
(Amt in Rs.)

b. Reserve & Surplus
OPENING BALANCE

371810
General Reserve
Add : Transferred from Profit & Loss Account
Securities Premium Account
Profit & Loss account

566790



938600

a) Vehicle Loans
1 ICICI Bank Limited
2 Citicorp
3 Stanchart Bank
4 Citi Bank
b)Other loans
1. Cash Credit from Bank from banks
-HDFC

13748555
2 Forign Currency Loan
- External Commercial Borrowing
c) Deferred Payment Credit
1. Sale Tax Intrest free loan

-


13748555

a. Inter Corporate Deposit(JBES)
Interest accrued on ICD


-

As at
31st march
2007
(Amt in Rs.)
Sheet Metal
a. Inventories
(as taken, valued and certified by the
Management)
Raw Material

26449965
Stock in process

14468639
Stores &spares

1003936
Scrap


41922540

b.Sundry Debtors(Unsecured)
Debts outstanding or more than six months
- Considered Good

-
Less: Provision for Doubtful Debts

-


-
Other Debts, Considered Good


-
c. Cash & Bank Balances
Cash in hand

122046
With scheduled banks in :
Current Account
Fixed Deposits Account including
interest accrued (under banks' lien)

100000


222046

Less: Unclaimed Dividends
Net Cash & Bank Balances

222046

d. Loans & Advances (Unsecured,Considered good)
Advances recoverable in cash or
in kind or for value to be received

1968400
Advances to suppliers

1598952
Security deposits

1055000
Balance Of Modvat/ Cenvat

16048013
Balances With Excise Authority
47382
Advance Income Tax (Net of Provision)


20717747

31st march
2007
(Amt in Rs.)

Sundry Creditors

50701885
Other liabilities

5504591
Interest accrued but not due


56206476

Proposed Dividend
Corporate Dividend Tax


56206476

(to the extent not written off or adjusted)

Exibition expenses

Sales
Finished Goods

339632961
Other Sales

590257
Job Work/ Other Receipts
Profit on sale of Fixed Assets

-
Interest received


340223218
Other Income
Miscellaneous Income

41962
Notice Pay

23709
Fright Outward Received

1332472


1398143

As at
31st march
2007
(Amt in Rs.)

Raw material Consumed

271925005
Stores Consumed

2959774
Manufacturing Expenses

5144320
Power & Fuel

2519015
Packing Material

69461
Machinery repair & maintenance

656168


283273743

Opening Stock :-
Work in process

14245790
Finished goods

-
Scrap

-


14245790

Closing Stock : -
Work in process

14468639
Scrap


14468639
Increase in Stocks

(222849)


283050894

As at
31st march
2007
(Amt in Rs.)

Salary & wages

10769406
Contribution to ESI, PF & other Funds

858652
Staff & Workers Welfare

574933
Directors' Remuneration

-


12202991

Travelling & Conveyance

1673043
Communication in Expenses

386391
Printing & Stationary

256508
Rent (including Land Lease Rent)

4200000
Rates & Taxes

211165
Insurance

91277
Repair & Maintenance
Building

5135
Others

364174
Auditors' Remuneration
Audit fee

-
Tax Audit Fees

-
Others

9027
Legal & Professional

11800
Vehicle Running & Maint.

300556
Advertisement & Business Promotion

161217
Bad Debts Written off
Bad & Doubtful Debts
Loss On Sale Of Vehicle
Loss On Sale Of Assets Other Than Vehicles
Exchange Fluctuation
Demerger Expenses
Freight Outward

1313818
Bank Charges

197582
Miscellaneous Expenses

182220


9363913


Interest - Term Loans

-
Interest Banks

1939074
Interest Others

757


1939831







JBM AUTO LIMITED
GROUPING FORMING PART OF PROFIT & LOSS A/C.
For the year
31st march
2007
(Amt in Rs.)

SALES - JOB WORK / OTHER RECEIPTS
Sales- Job Work
Other Receipts
Tool Modification/ Other Charges
SERVICE TAX RECOVERED
SERVICE TAX RECOVERED-CESS
Sales - Job Work - Stock Transfer


-

SALES - FINISHED GOODS
Sales Components

304095427
Sales Return Finished Goods
Excise Duty Recovered

34635040
Excise Duty Recovered-Sec&Higher Edu

96435
Excise Duty Recovered-cess

806059


339632961

SALES OTHERS
Sales Scrap

507440
Excise Duty Recovered Scrap

81191
Excise Duty Recovered - Cess Scrap

1626
Sales Others


590257

MISCELLANEOUS INCOME
Cash Discount Received
Insurance Claim Received
Liabilities W/Back W/Off
Sundry Balance W/Back / W/Off
Shortage & Excess
Miscellaneous Income

41962
Profit On Sale Of Fixed Assets
Rent - Tube investment

-
Rent on vehicle
Exchange Fluctuation Income


41962
RAW MATERIAL CONSUMED
Opening stock

10900257
Add: Purchases

287474713

Less: Closing stock

26449965
Stock in Transit


271925005
RAW MATERIAL PURCHASES
Raw Material Expenses
Raw Material Sheet

10542134
Raw Material Pipe

1910382
Raw material- Stock Transfer Sheet
Raw material- Paint

4780566
Raw Material Others

106694
Raw Material-Hyd

4080236
Less: Sales - Raw Material

8636070
Raw Material - Components Tools & Dies

273098205
Stock Transfer-in transit
Sales - Raw Material- Stock Transfer
Material Procurement Expenses
Freight & Cartage Inward

1089362
Others
Custom Duty - Raw Material

475840
Samples

27364


287474713

MANUFACTURING EXPENSES
Job Charges Outside

803425
Job Charges contractor

4337895
Job Charges -Sales JBM FBD
Design & Drawing Charges

3000
Machinery Hire Charges


5144320


CONSUMABLE EXPENSES
Opening Stock

80406
Add: Purchases

3789043


3869449
Less: Closing Stock

909675


2959774

CONSUMABLES PURCHASED
Consumables - Oil & Lubricant

61376
Consumables - Paint, Chemical, Thinner & AdhESIves

30999
Consumables - Welding & Gases

1825867
Consumables - Hand Tools & Abrasives

198308
Consumables Hardware
Consumables - Safety Items

101646
Consumables - MEASURING INSTRUMENTS

522
Consumables Others

1570325
Custom Duty Consumables
Clearing Charges- Consumables


3789043

REPAIR & MAINTENANCE - PLANT & MACHINERY
Opening stock

9734
Add : Purchases

740695


750429
Less : Closing Stock

94261


656168

REPAIR & MAINTENANCE - P&M PURCHASE
Repair & Maintenance - Plant & Machinery

727230
Repair & Maintenance - Electric Installation

13465
Repair & Maintenance - Tools & dies
Repair & Maintenance - Stock Transfer
Clearing Charges- Spares


740695

REPAIR & MAINTENANCE OTHERS
Repair & Maintenance - General Electrical

92944
Repair & Maintenance - Office & Furniture

61833
Repair & Maintenance Computers

78553
Repair & Maintenance Others

130844


364174

AUDIT FEES
Audit Fees Statutory
Audit Fees - Tax Audit
Audit Fees - Company Law Matter
Audit Fees Certification
Audit Fees - Out Of Pocket Expenses

9027


9027

EMPLOYEE COSTS & BENEFITS
Salaries & Allowances
Wages

900
Salary

4982477
Production Incentive Worker

137985
Production Incentive Staff
Special Allowance

1250976
House Rent Allowance

1968699
Conveyance Allowance

515302
Deputation Allowance
Stipend

-
Amenities
Bonus
Ex Gratia
Leave Encashment

12875
Compensation / Notice Pay
Leave Travel Assistance

95941
Leased House Expenses
Gratuity

269501
Medical Reimbursement

269286
Gift
Group Insuarnce
Group Mediclaim Insurance

66607
Group Insurance Policy

43211
Contractual Wages
Contractor Wages

731174
Security Charges

184498
House Keeping & Sanitation Expenses

239974


10769406

CONTRIBUTION TO ESI, PF ETC.
Employers Contribution To FPF

319656
Employers Contribution To PF

358730
Employers Contribution To ESI

113437
Employers Contribution To Welfare Fund
Link Insurance PF(LIC)
Link Insurance PF

155
Administrative Charges PF

56715
ESI Deducted From Contractors

55323
PF Deducted From Contractors
Employees Contribution To PF

45364
Employees Contribution To ESI


858652
STAFF & WORKERS WELFARE
Staff & Workers Welfare

41631
Uniform Expenses

11462
Medical Expenses

16298
Food & Beverage

206869
Staff Recuitment/ Training Expenses
Staff Recruitment Expenses

192467
Staff Training Expenses

106206



574933

DIERCTORS' REMUNERATION
Directors Remuneration
Directors Sitting Fees


-

TRAVELLING & CONVEYANCE
Travelling - Domestic Employees

683003
Travelling - Domestic Others

30097
Travelling - Domestic Directors
Travelling Foreign

699836
Travelling - Foreign Directors
Conveyance

259532
Taxi Charges

575


1673043

RATES & TAXES
Rates, Fees & Taxes

211165
Filing Fees
Listing Fees
LAD Paid
Sales Tax Paid
Testing Fees
Calibration Charges
Service tax Paid on Good Tranport
Service tax -Cess Paid on Good Tranport
Sales Tax Paid
LAD Paid


211165

LEGAL & PROFESSIONAL CHARGES
Legal & Professional Charges Retainership

7500
Legal & Professional Charges

4300
Stamp Paper Expenses


11800

VEHICLE RUNNING & REPAIR
Vehicle Running & Repair

204031
Drivers Salary
Vehicle Hire Charegs

96525


300556

ADVERTISEMENT & BUSINESS PROMOTION
Advertisement & Publicity

8000
Business Promotion

53324
Entertainment

89893
Exhibition Expenses

10000


161217

PACKING MATERIAL CONSUMED
Opening Balance

-
Add : Purchase

69461
Closing Stock

-


69461

PACKING EXPENSES
Packing Expenses Corrugated
Packing Expenses Polythene
Packing Expenses Others

69461
Packing Charges Recovered


69461

FREIGHT & CARTAGE OUTWARD

Freight & Cartage Outward NCR

4120
Freight & Cartage Outward Export

1275594
Export Expenses

34104


1313818

POWER & FUEL
Electricity _State Electricity

802366
Fuel DG Set

1639932
Fuel - Logistics & Others

66634
Water Charges

10083


2519015

INTEREST ON TERM LOAN
Interest - Term Loans
Interest - Vehicle Finance


-

OTHER FINANCIAL CHARGES
Bank Charges BG
Bank Charges

60889
Limit Processing Charges
Exchange Fluctuation Expense

467
Bank Charges LC

136226


197582

BANK INTEREST
Interest - Cash Credit

1800000
Interest - FCNR (B)
Interest - LC Usance

139074


1939074

OTHER INTEREST
Interest - ICD'S
Interest Others

757


757

COMMUNICATION EXPENSES
Telephone Expenses

201995
Cellular Expenses

155361
Internet / E-Mail Expenses

3180
Postage Expenses

596
TELEPHONE/CELL SET EXPENSES

881
Courier Charges

24378


386391

PRINTING & STATIONERY
Computer Stationery

270
Computer Consumables

40412
Photocopy Charges

41157
Legal Forms
General Stationery

174669


256508

RENT
Lease Rent

4200000
Lease Rent Others


4200000

MISCELLANEOUS EXPENDITURE
Meeting Expenses
Shortage & Excess

1371
Newspapers, Books & Periodicals

9070
Prior Period Expenses
Charity & Donation
ISO & QS Expenses
Agm Expenses
Meeting Expenses
Shareholders Service Expenses
Diwali Expenses

79877
Liabilities W/Back W/Off
Auditor's expenses m
Commission & Brokerage

40409
Membership & Subscription

4228
Miscellaneous Expenditure

47265


182220

EXCISE DUTY PAID
Excise Duty Paid

34847220
Excise Duty Recovered - Raw Material Sales

1349419
Excise Duty Recovered cess

26992
Service Tax Paid
Service Tax Cess Paid
Cess Paid

1026133


34496942

INSURANCE PREMIUM
Insurance Premium Fixed Assets

19634
Insurance Premium Stock

44445
Insurance Premium Vehicle
Insurance Premium Transit

2432
Insurance Premium Others

24766


91277









METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements but BHIWANI TEXTILE
MILL used the following techniques:-

Comparative size statements
Trend analysis
Cash flow statement
Ratio analysis
A detail description of these methods is as follows:-

COMPARATIVE SIZE STATEMENTS:-
When two or more than two years figures are compared to each other than we called
comparative size statements in order to estimate the future progress of the business,it is
necessary to look the past performance of the company.These statements show the
absolute figures and also show the change from one year to another .

Benefits of this method to the JBM:-
To indicate the trends,these statements show the change in production, sales, and
expenses.
To make the data simple and more understandable.

TREND ANALYSIS:-
To analyse many years financial statements BTM uses this method.This indicates the
direction on movement over the long time and help in the financial statements.

Procedure for calculating trends:-
1. Previous year is taken as a base year.
2. Figures of the base year are taken 100.
3. Trend % are calculated in relation to base year.


Benefits :-
It is beneficial to find out the long run changes .
It is helpful in future forecasting.


CASH FLOW STATEMENT:-

Cash flow statements are the statements of changes in the financial position prepared on
the basis of funds defined in cash or cash equivalents. In short cash flow statement
summaries the cash inflows and outflows of the firm during a particular period of time.

Benefits for the JBM:-

To prepare the cash budget.
To compare the cash budgets .
To show the position of the cash and cash equivalents.


























Chapter 5











RATIO ANALYSIS:-

Ratios provide very useful tools for the manager to assess the organization by making two
basic types of comparisons. First, the analyst can compare a present ratio with past (or
expected ) ratios for the organization to determine if there has been an improvement or
deterioration or no change over time. Second, the ratios of one organization may be
compared with similar organizations or with industry averages at the same point in time
making sure that "apples are compared with apples and oranges with oranges." This is a
type of "benchmarking" so that one may determine whether the organization is "average" in
performance or doing better or worse than others.
Ratios are simple measures or comparisons of one thing to another. These tools allow
vital comparisons that are not possible when dealing with a single number. The insights
gained by ratio analysis will assist in gaining vital understanding but ratios will never give
answers, only clues. Ratios are found in all types of organizations from sports to education
to business to the military to . . . . You are probably well aware of some and have been
using them without really thinking that you were actually using ratio analysis. For example,
when you were looking at different colleges, did you consider the student - faculty ratio?








FINANCIAL RATIOS

Perhaps the most commonly used ratios in business are financial ratios. These are
developed by use of the income statement and the balance sheet. No one ratio will give
sufficient information to judge the financial condition and performance of the firm. Other
factors such as any seasonal businesses, accounting differences and the like must also be
considered. Again, ratio analysis will give clues but not answers. Financial ratios cover
four areas of concern as follows:

Liquidity --the ability to have
cash ready when needed and
these include

Debt (Leverage)-- reveal the
relationship of your sources of
capital such as
Current Ratio
Quick (Acid-test) Ratio Debt to Equity
Liquidity of Receivables Debt to Assets
Average collection period Debt to Net Worth
Receivables turnover
Aging of Accounts Payable
Inventory Turnover
The liquidity and leverage (debt) ratios represent as assessment of the risk of the company.
Activity (profitability) ratios are measures of the return generated by the assets of the
company.
Only a few ratios will be covered in this note. This note was first prepared in 1986 by
Dr. W. Blaker Bolling, Professor of Management, Marshall University, for classroom
use only. Comments and suggestions are welcomed. Revised in January, 1992.
Revised with assistance from graduate assistants Amy McHenry and Sunil Anand in
June, 1996.
Profitability (Activity) measure profit
in relation to sales, assets, or some other
base as indicators of efficiency such as

Coverage -- indicate ability to pay
your debts given the amount of
money coming in such as

Profitability to Sales Times Interest Earned
Gross Profit Margin Cash Flow to Debt Maturities
Net Profit Margin Doomsday Ratio
Profitability to Investment
Rate of Return on Equity
Return on Assets
Turnover Ratio
Two terms often used in conjunction with financial ratios are
Working Capital = Current Assets - Current Liabilities
This simply gives a measure of how much capital (money) will be
left after the bills are paid.
Cash Flow = Net Income + Depreciation
This simplified look at cash flow gives a measure of the actual cash
on hand since depreciation is an accounting method to estimate the
use of resources over time but does not involve actual cash.
More detailed cash flow analysis is possible.

Liquidity Ratios:

Current Ratio
This ratio is a measure of the ability of a firm to meet its short-term obligations. It is perhaps
the best known measure of financial strength at a given point in time. In general, a ratio of 2
to 3 is usually considered good. Too small a ratio indicates that some potential difficulty in
covering obligations may exist. A high ratio may indicate that the firm has too may assets
tied up in current assets and is not making efficient use to them.

Current Ratio = Current Assets
Current Liabilities
Current Ratio= 135048/56206
=2.4
Quick (Acid-Test) Ratio
The Quick (or Acid-Test) Ratio is the same as the current ratio except that it excludes
inventories from the current assets. Inventories are usually the least liquid portion of the
current assets and may be difficult to dispose of -- especially if they are slow-moving and/or
become obsolete. A typical quick or acid-test ratio would be about 1.0 for American
industries. However, this ratio must be used with caution as certain industries may carry a
great deal of inventory and others very little so this should be compared to others in the
same business.
Quick Ratio = Current Assets - Inventories
Current Liabilities
Quick Ratio= 93125/56206
=1.7

Average Collection Period
This ratio simply indicates how long the average account is outstanding in days. It measures
how efficiently you collect money due you from your customers. If this indicates that
payments are taking a long time to collect, then collection/billing procedures should be
reviewed. On the other hand, too short a period could cause customers to move to another
supplier that has more reasonable collection policies.
Average Collection Period = Receivables x Days in Year
Annual Credit Sales
=57628 x 12/ 340223
=2 months
The "days in year" would be 365 if your company is open all the time. More frequently, it is
less.
Average Receivables Turnover
This ratio simply indicates how may times a year the accounts turn over. Please note this
ratio is the inverse of the average collection period. Some organizations will prefer this ratio,
others will prefer using the previous one.
Average Receivables Turnover = Annual Credit Sales
Receivables
=340223/57628
=5.9 times


Average Age of Payables
This ratio will indicate how long it is taking the average account to be paid by the firm. This
may then compared to industry averages and management goals. An 86 would, for
example, indicate that the organization is taking almost three months to pay the bills and
probably not taking advantage of various discounts offered to prompt payers. Note that this
ratio is very useful in credit checks of firms applying for credit. Note also that others may be
checking your firm's average age of payables and this could affect your credit ratings and
your reputation with suppliers!
Average Age of Payables = Accounts Payable x 365
Annual Purchases
=50702 x 12/287475
=2 months
Inventory Turnover
This widely used ratio tells you how fast your inventory is moving. It is an indicator of the
liquidity of inventory, since it tells the rapidity with which the inventory is turned over into
receivables through sales. The norm for American industries is about 9 but this will vary
from industry to industry. The higher the ratio, the more efficient the inventory management
of the firm, but too high a ratio could indicate a level of inventory that is too low with resulting
frequent stockouts and the potential of losing customers. It could also indicate inadequate
production levels to meet customer demand. Caution must be used with this ratio (as with all
of the others) since ratios reveal hidden meaning and must be interpreted correctly. A ratio
by itself will never give an answer! The preferred way to calculate this ratio is
Inventory Turnover = Cost of Good Sold
Average Inventory
=56949/26450
=2 times
Note: Average Inventory = (beginning inventory + ending inventory) / 2
Since it is often impossible or difficult to obtain beginning and ending inventories and/or
abbreviated financial statements may not show cost of goods sold, a more frequent
(common) way to estimate inventory turnover is
Inventory Turnover = Sales
Inventory
=340223/41923
=8 times
Debt (Leverage) Ratios:
Debt to Assets
This ratio is often called the debt ratio since it compares what is owed to the value of the
assets used by the organization. This monitors use of debt used to build your business. It
tells what percentage of your firm's assets are financed by borrowing. A firm reporting a
debt ratio greater that 100% is functionally bankrupt. As long as some equity exists, this
ratio has to be less that 100%. What may be considered an "acceptable" debt ratio changes
from time to time as well as from industry to industry so be very careful in using this ratio.
Debt to Assets = Total Liabilities x 100
Total Assets
=69955 x 100/145315
=48.14%




Profitability (Activity) Ratios:
Gross Profit Margin
This shows the average amount of profit considering only sales and the cost of the items
sold. This tells how much profit the product or service is making without overhead
considerations. As such, it indicates the efficiency of operations as well as how products are
priced. Wide variations occur from industry to industry. For example, movie theater
concessions may exceed 90% while retail grocery margins may only be a few percentage
points.
Gross Profit Margin = Sales - Cost of Goods Sold x 100
Net Sales
=283274 x 100/340223
=83.26%









FINDINGS:-

In JBM Auto Ltd. They have overdraft facility of 50lacs.
Debtors are allowed 2 months credit.
For working capital management they have conservative approach that is the all
liabilities are financed through long term funds.
They have sufficient current assets to pay for the current liabilities.
They dont have share capital they transfer the fund through inter unit.





















CONCLUSION
The ideal current ratio is 2:1. The greater the ratio better will be the short term
solvency of the firm and safer will be the interest of the short term creditors. so from
this we can say the current ratio of the JBM is ideal.
The quick ratio of JBM is 1.7:1. The ideal quick ratio of 1:1 is considered a standard
ratio the higher the ratio more will be the short term solvency of the business. So
quick ratio of JBM is ideal
Average collection period of debtors is two months. This indicates that debts are
realized in less time.
Inventory turnover ratio is two times this indicated that goods have not been retained
in the godown for a longer period.
Gross profit ratio is 83.26%. this is a sign of efficient management.
Average payable period of JBM is two months. This indicates that creditors have
followed liberal credit policy.
Average receivable turnover ratio is 5.9 times. This means that after the credit sales
the debts are realized in less time.

















LIMITATIONS:-

Based on financial statements, these statements suffer from certain limitations.
Affected by window dressing.
Company provides only secondary data, so certain type of bias is in study.
Unsuitable for forecasting.
This report is prepared with the help of secondary data.
Short time period.
Casual attitude of management towards trainees.
No appropriate working seat for trainees.
No stipend given to trainees by companies hence no responsibility is given
to the trainees.


















BIBLIOGRAPHY

Financial Management
By N.K. Goyal
Research Methodology
By C. R. Kothari
Statutory Auditors
By Mehra Goel & Co., Chartered Accountants

Annual Reports of JBM AUTO Ltd.

Wikipedia.com

Moneycontrol.com

Yahoo.com