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MUTUAL FUND
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PROJECT REPORT ON
WORKING CAPITAL
WORKING CAPITAL
Capital required for a business can be classified
under two main categories via,
1)
Fixed Capital
2)
Working Capital
2.
2)
Bills receivables
3)
Sundry debtors
4)
5)
a.
Raw material
b.
Work in process
c.
d.
Finished goods
1.
2.
3.
Dividends payable.
4.
Bank overdraft.
5.
Provision for taxation , if it does not amt. to
app. Of profit.
6.
Bills payable.
7.
Sundry creditors.
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3.
It take into consideration of the fact every
increase in the funds of the enterprise would
increase its working capital.
4.
This concept is also useful in determining the
rate of return on investments in working capital.
The net working capital concept, however, is also
important for following reasons:
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3.
Excessive working capital implies excessive
debtors and defective credit policy which causes
higher incidence of bad debts.
4.
It may reduce the overall efficiency of the
business.
5.
If a firm is having excessive working capital
then the relations with banks and other financial
institution may not be maintained.
6.
Due to lower rate of return n investments, the
values of shares may also fall.
7.
The redundant working capital gives rise to
speculative transactions
DISADVANTAGES OF INADEQUATE WORKING
CAPITAL
Every business needs some amounts of working
capital. The need for working capital arises due to
the time gap between production and realization of
cash from sales. There is an operating cycle
involved in sales and realization of cash. There are
time gaps in purchase of raw material and
production; production and sales; and realization of
cash.
Thus working capital is needed for the following
purposes:
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For the purpose of raw material, components
and spares.
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DEBTORS
CASH
RAW MATERIAL
FINISHED GOODS
WORK IN PROGRESS
7.
RATE OF STOCK TURNOVER: There is an
inverse co-relationship between the question of
working capital and the velocity or speed with
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Ratio analysis.
2.
3.
Budgeting.
1.
RATIO ANALYSIS
4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio.
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.
2.
a.
Preparing schedule of changes of working
capital
b.
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3.
Liquidity ratios.
2.
A) LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its
current obligations as and when these become
due. The short-term obligations are met by
realizing amounts from current, floating or
circulating assts. The current assets should either
be liquid or near about liquidity. These should be
convertible in cash for paying obligations of shortterm nature. The sufficiency or insufficiency of
current assets should be assessed by comparing
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1.
CURRENT RATIO
2.
QUICK RATIO
3.
1.
CURRENT RATIO
1)
CURRENT ASSETS
2)
CURRENT LIABILITES
2011
2012
2013
83.12
13,6.57
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Current Liabilities
Current Ratio
27.42
20.58
33.48
Marketable Securities
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2)
3)
Debtors.
(Rupees in Crore)
2011
Quick Assets
2012
2013
44.14
47.43
Current Liabilities
27.42
61.55
20.58
33.48
Interpretation :
A quick ratio is an indication that the firm is
liquid and has the ability to meet its current
liabilities in time. The ideal quick ratio is 1:1.
Companys quick ratio is more than ideal ratio. This
shows company has no liquidity problem.
3. ABSOLUTE LIQUID RATIO
Although receivables, debtors and bills receivable
are generally more liquid than inventories, yet
there may be doubts regarding their realization
into cash immediately or in time. So absolute liquid
ratio should be calculated together with current
ratio and acid test ratio so as to exclude even
receivables from the current assets and find out
the absolute liquid assets. Absolute Liquid Assets
includes :
ABSOLUTE LIQUID RATIO =
ASSETS
ABSOLUTE LIQUID
CURRENT
LIABILITES
ABSOLUTE LIQUID ASSETS = CASH & BANK
BALANCES.
e.g.
Crore)
(Rupees in
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Year
2011
2012
2013
27.42
1.79
20.58
5.06
33.48
Interpretation :
These ratio shows that company carries a
small amount of cash. But there is nothing to be
worried about the lack of cash because company
has reserve, borrowing power & long term
investment. In India, firms have credit limits
sanctioned from banks and can easily draw cash.
B) CURRENT ASSETS MOVEMENT RATIOS
Funds are invested in various assets in business to
make sales and earn profits. The efficiency with
which assets are managed directly affects the
volume of sales. The better the management of
assets, large is the amount of sales and profits.
Current assets movement ratios measure the
efficiency with which a firm manages its resources.
These ratios are called turnover ratios because
they indicate the speed with which assets are
converted or turned over into sales. Depending
upon the purpose, a number of turnover ratios can
be calculated. These are :
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1.
2.
3.
4.
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COST OF GOOD
AVERAGE INVENTORY
Inventory turnover ratio measures the speed with
which the stock is converted into sales. Usually a
high inventory ratio indicates an efficient
management of inventory because more frequently
the stocks are sold ; the lesser amount of money is
required to finance the inventory. Where as low
inventory turnover ratio indicates the inefficient
management of inventory. A low inventory turnover
implies over investment in inventories, dull
business, poor quality of goods, stock
accumulations and slow moving goods and low
profits as compared to total investment.
AVERAGE STOCK =
CLOSING STOCK
OPENING STOCK +
(Rupees in Crore)
Year
2011
2012
2013
103.2
36.42
96.8
55.35
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1.5 times
2.8 times
Interpretation :
These ratio shows how rapidly the inventory is
turning into receivable through sales. In 2012 the
company has high inventory turnover ratio but in
2013 it has reduced to 1.75 times. This shows that
the companys inventory management technique is
less efficient as compare to last year.
2. INVENTORY CONVERSION PERIOD:
INVENTORY CONVERSION PERIOD = 365 (net
working days)
INVENTORY TURNOVER RATIO
e.g.
Year
2011
2012
Days
365365365
2013
243 days
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Interpretation :
Inventory conversion period shows that how
many days inventories takes to convert from raw
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b)
2011
2012
2013
Sales
166.0
151.5
169.5
Average Debtors
17.33
18.19
9.6 times
22.50
8.3 times
7.5
Interpretation :
This ratio indicates the speed with which
debtors are being converted or turnover into sales.
The higher the values or turnover into sales. The
higher the values of debtors turnover, the more
efficient is the management of credit. But in the
company the debtor turnover ratio is decreasing
year to year. This shows that company is not
utilizing its debtors efficiency. Now their credit
policy become liberal as compare to previous year.
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Ratio
The average collection period ratio represents the
average number of days for which a firm has to
wait before its receivables are converted into cash.
It measures the quality of debtors. Generally,
shorter the average collection period the better is
the quality of debtors as a short collection period
implies quick payment by debtors and vice-versa.
Average Collection Period =
Days)
Ratio
Year
2011 2012 2013
Days
365365365
Debtor Turnover Ratio 9.6 8.3 7.5
Average Collection Period 38 days44 days49 days
Interpretation :
The average collection period measures the
quality of debtors and it helps in analyzing the
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Cost of
Net
Working Capital
Working Capital Turnover
Sales
Networking
Capital
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e.g.
Year
2011
2012
2013
Sales
166.0
151.5
169.5
62.52
103.09
3.08
2.4 1.64
Interpretation :
This ratio indicates low much net working
capital requires for sales. In 2013, the reciprocal of
this ratio (1/1.64 = .609) shows that for sales of Rs.
1 the company requires 60 paisa as working
capital. Thus this ratio is helpful to forecast the
working capital requirement on the basis of sale.
INVENTORIES
(Rs. in Crores)
Year
Inventories 37.15
35.69
75.01
Interpretation :
Inventories is a major part of current assets. If
any company wants to manage its working capital
efficiency, it has to manage its inventories
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efficiently. The graph shows that inventory in 20102011 is 45%, in 2011-2012 is 43% and in 20122013 is 54% of their current assets. The company
should try to reduce the inventory upto 10% or
20% of current assets.
CASH BANK BALANCE :
(Rs. in Crores)
Year
1.79
5.05
Interpretation:
Cash is basic input or component of working
capital. Cash is needed to keep the business
running on a continuous basis. So the organization
should have sufficient cash to meet various
requirements. The above graph is indicate that in
2011 the cash is 4.69 crores but in 2012 it has
decrease to 1.79. The result of that it disturb the
firms manufacturing operations. In 2013, it is
increased upto approx. 5.1% cash balance. So in
2013, the company has no problem for meeting its
requirement as compare to 2012.
DEBTORS :
(Rs. in Crores)
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Year
Debtors17.33
19.05
25.94
Interpretation :
Debtors constitute a substantial portion of
total current assets. In India it constitute one third
of current assets. The above graph is depict that
there is increase in debtors. It represents an
extension of credit to customers. The reason for
increasing credit is competition and company
liberal credit policy.
CURRENT ASSETS :
(Rs. in Crores)
Year
83.15
136.57
Interpretation :
This graph shows that there is 64% increase in
current assets in 2013. This increase is arise
because there is approx. 50% increase in
inventories. Increase in current assets shows the
liquidity soundness of company.
CURRENT LIABILITY :
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(Rs. in Crores)
Year
Current Liability27.42
20.58
33.48
Interpretation :
Current liabilities shows company short term
debts pay to outsiders. In 2013 the current
liabilities of the company increased. But still
increase in current assets are more than its current
liabilities.
NET WORKING CAPITAL :
(Rs. in Crores)
Year
62.53
103.09
Interpretation :
Working capital is required to finance day to
day operations of a firm. There should be an
optimum level of working capital. It should not be
too less or not too excess. In the company there is
increase in working capital. The increase in working
capital arises because the company has expanded
its business.
RESEARCH METHODOLOGY
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I.
II.
III.
IV.
V.
TREND ANALYSIS
VI.
RATIO ANALYSIS
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Composite ratios
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PROJECT REPORT ON
LIFE INSURANCE POLICY
INTRODUCTION
Life Insurance or life assurance is a contract
between the policy owner and the insurer, where
the insurer agrees to pay a sum of money upon the
occurrence of the insureds death. In return, the
policy owner (or policy payer) agrees to pay a
stipulated amount called a premium at regular
intervals. Life Insurance is a contract for payment
of money to the person assured (or to the person
entitled to receive the same) on the occurrence of
the event insured against.
Usually the contract provides for:
1. Payment of an amount on the date of maturity or
at specified periodic intervals or at death if it
occurs earlier.
2. Periodical payment of insurance premium by the
assured, to the corporation who provides the
insurance.
Who can take Life insurance policy?
1. Any person above 18 years of age, who is
eligible to enter into valid contract,
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economic
reform
process,
the
insurance
Companies have given boost to the
socio - economic development process. The huge
amount of funds that are disposal of insurance are
directed as desired avenues like housing safe
drinking water, electricity primary education and
infrastructure. Above all the policyholders gets
better pricing of products from competitive
insurance companies.
Liberalization:
The opening up of insurance Sector was a part of
the ongoing liberalization in the financial sector of
India. The domain of state-run insurance
companies was thrown open to private enterprise
on December 7, 1999, with the introduction of the
Insurance Regulatory Authority (IRDA) Bill. The
opening up of the sector gave way to the world
known names in the industry to enter the Indian
market through tie-ups with the eminent business
houses. What was once a quiet business is
becoming one of the hottest businesses today?
Post Liberalization:
The changing face of financial sector and the entry
of several companies in the field of life insurance
segment are one of the key results of these
liberalization efforts. Insurance business by way of
generating premium income adds significantly to
the GDP. Estimates show that a meager 35-40
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Key Achievements:
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Life insurance as a form of protection is the singlemost important financial product any earning
member of a family must have. Having said this, a
well-diversified
portfolio is one of the first rules of financial
planning, and as such one should consider different
instruments as the ability to save increases.
Certainly ULIPs successfully
combine the first and most important need of
protection, with savings, and hence are an
excellent addition to your portfolio. These can be
combined with various other products, after taking
into account your risk appetite, financial goals and
need for portfolio diversification.
Possible investment options range from bank
deposits and government small saving schemes to
mutual funds, stocks and property. Buying a ULIP is
quite different from buying a traditional insurance
product; and sometimes there are cases of people
who believe they have been mis-sold a ULIP, the
complaint most often being that they were not
aware of the risks or the charges. All financial
products have a certain amount of risk and
charges, be it a mutual fund, property, or even a
bank deposit. It would be unrealistic to assume
that the features and benefits of a ULIP come at no
cost, though the charges are considerably lower
than that of a traditional product. In fact, the very
reason the product is transparent is because the
customer knows the charges and risks. Further,
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Working Mechanism
Working Mechanism of ULIPs includes the following
steps:
Sales: Agents and other channel sales people
collect premium from customers.
Allocation: Once sales people collect premium
from customers, all that money is not invested at
once. Part of it is deducted towards administration
expenses, insurance
expenses (Mortality Charges as they are usually
called),
and
management
expenses.
After
deducting money for the AIM (admin, insurance,
management expenses),
the rest of the money is invested into the fund
choice chosen by the customer.
Administration Expenses: is the expense for
making the policy document / bond making Stamp
duty (insurance is a legal document subject to
Indian stamp act), agent
commission and other fixed over heads spread.
Admin charges are deducted IMMEDIATELY after
premium is paid. Not at the end of the year.
Insurance Expenses or mortality charges:
These are nothing but the Term Insurance Charges
chosen by the customer (for example, let us say,
Rs.10 lakh), for a given
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Amortized cost
Market value
Usage: Investors might want to know if a company
is cheap or expensive to invest in. One possibility is
to compare its current market capitalization with its
net asset value since, all things being equal; one
might expect them to be the same. There are
reasons why this might not be true.
NAV covers the companys current asset and
liability position. Investors might expect the
company to have large growth prospects, in which
case they
would be prepared to pay more for the company
than the NAV suggests.
The NAV is usually below the market price
because the current values of the funds assets are
higher than the historical financial statements used
in the NAV calculation. But in the case of, for
example, Liberty Media Corporation, analysts and
management have estimated that it is actually
trading for 30- 50% below its net asset value (or
core asset value).The NAV of an open-end fund
will always equal its price. But the price of a
closed-end fund may not equal its NAV as closedend funds are traded in the secondary market and
the above reasons cause price to vary from NAV
(premium or discount applied) Net assets are
sometimes the same as net worth, or shareholders
equity assets minus liabilities. In Return on Net
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PROJECT REPORT ON
RATIO ANALYSIS
Ratio Analysis
a) Debt Equity Ratio
b) Current Ratio
c) Debt Service Ratio
d) Profit ratio such as Gross profit margin, Net profit
margin and retained profit ratio
Break-even Point
Margin of safety and operating and financial leverages
Project evaluation and Discounted Cash Flow
Techniques such as
1. Pay back method
2. Average rate of return
3. Profitability Index
4. Net Present Value
5. IRR
In addition in large infrastructure projects a social cost
benefit analysis is also done.
Component of Cost of the Project
The various components of the cost of the project, which
are required to be financed by long term funds covers the
following: The cost referred here could vary considerably
depending upon the location, topography and such other
factors.
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5. Preliminary expenses
Expenses incurred on project identification, market
research, and feasibility report, company formation are
considered as Preliminary Expenses.
6. Capital Issue Expenses
Expenses like underwriting and brokerage fees, printing
and postage expenses, advertising and publicity
expenses, listing fee, stamp duty etc. incurred to raise
capital from the market are referred to capital issue
expenses.
7. Pre-operative expenses
Expenses, which are incurred before commercial
production, are referred to as pre-operative expenses and
they include i. Establishment expenses
ii. Rent, rates and taxes
iii. Traveling expenses
iv. Interest and commitment charges on borrowings
v. Insurance charges
vi. Mortgage expenses
vii. Interest on deferred payments
8. Provision of contingencies
Contingencies provision made to cover unforeseen
expenses and escalation are provided for normally at
i. 10% of total cost if implementation period is a year or
less and
ii. An additional 5% provision is made for every additional
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FINANCIAL ASPECTS:
Intimate Project cost and Means of finance
Specify
Margin
money/promoters
contribution
requirements Advise on Capital structure and Promoters
equity/stake Provide Detailed Financial Analysis for term
Loan/Working Capital Loan Provide Profitability and rate of
returns and Pay Back etc.
Calculate Break-even point Work out Ratio Analysis, Cash
flow/Funds flow Indicate Diversion of funds (if any)
From one unit to another
From current to Fixed Assets.
Spell out Credit/collection policies Provide information on
Trends in financial markets Specify control measures on
Cost/Time over runs Indicate labour requirements, wage
levels and cost, Indicate working capital requirements,
Specify actions plan for execution of project and
expenditure control during construction, Analyze
profitability
MARKETING ASPECTS:
Estimate demand for product, market size, market share
List details of competition Advise on Pricing, Distribution
and Promotion
MANAGEMENT ASPECTS:
Draft Promoters Vision/Mission Spell out the experience
of the promoters in execution of projects in the
past. Provide Information on Management style &
Response Organization Building & Climate
Organization Structure - Person/System oriented
Succession policy/problems
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TECHNICAL ASPECTS:
Should list required equipment by type, size, and cost,
specification of sources Specify in broad terms input and
outputs norms Indicate Technology, alternate techniques
of production, choices in process Indicate plant size, Plant
capacity, Indicate raw materials Spares/components
needed with sourcing details, List and describe alternative
locations, Detail Collaboration tie up, Collaborator Detail
and Collaborator Track Record Provide Detailed Project
Engineering, Logistics and Maintenance information
Information on Back-ups, Quality orientation, and Quality
standards List of buildings required and structures by type,
size and cost, Inform specifically supply sources and costs
of transportation services, water & power Supply and
preparation of layout Advice on pollution control
norms/methods
Regulatory social-public issues
Examine Policy in respect of the specific industry in the
areas of
Economic & Industrial
Financial & Taxation
Law and order & Environmental
Manpower availability & Employment generation
Social Advantages/disadvantages
Environmental impact
Distribution/Disbursed impact
The DPR should conduct a sensitivity analysis to
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PROJECT REPORT ON
HOUSING LOAN
Banking Introduction
During the 1950s in India, Banks were very
conservative and inward looking, concerned with
their profits. As a matter of fact, competition was
not in existence.
On the one side of the fence was state bank of
India alone, enjoying Govt. patronage and on the
other side were private commercial banks, local by
orientation, primarily serving the interest of the
controlling business houses. Therefore, neither
State Bank of India nor others cared much for the
public they had limited range of services which
include current accounts, terms deposit
accounts and savings bank account in deposit area.
In the area of advances , limit were sanctioned on
the basis of security by way of lock and key
accounts and bills purchase limits , their
miscellaneous services I included issuance of
drafts, collection of outstation cheques , executing
standing instructions and lockers facility at a few
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www.icicibank.com
www.sbi.com
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