A PROJECT REPORT ON

__________________________________________________
AT
_____________________________________________
HYDERABAD
A PROJECT REPORT SUBMITTED TO

OSMANIA UNIVERSITY
HYDERABAD
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF THE DEGREE IN
BACHELORS OF BUSINESS ADMINISTRATION
SUBMITTED
BY
_________________________________
_______________________________
VILLA MARIE PG COLLEGE FOR WOMEN
SOMAJIGUDA- 82
2014-2016

DECLARATION
I the undersigned solemnly declare that the report of the summer
training

work

entitled

study

on

_____________________________________________ is based on my work carried

out

during

the

course

of

________________________________

my
,

study

under

the

supervision

of

_____________________________________&

Mrs_______________________________, Faculty, Department of Management.

Villa Marie Degree College
I assert that the statements made and conclusions drawn are an
outcome of the project work. I further declare that to the best of my
knowledge and believe the project report does not contain any part of any
work which has been submitted for the award of any other degree/ diploma/
certificate in this university or any other university.
_______________________
(Signature of the student)
DATE:
PLACE:

ACKNOWLEDGEMENT

I am extremely grateful to Principal Dr. Y. Philomena and the Department of

B.B.A for giving me the opportunity of learning through this research
project. It has been an excellent and rewarding experience, and has
immensely increased my knowledge.
I wish to express my sincere gratitude and appreciation to my project guide
and mentor, Ms.____________________, Head of Department, Department of
Business Administration, for her support, guidance and encouragement.
I would also like to extend special thanks to my family and friends who have
been a constant source of support and encouragement. Without them, this
project would not have been materialized.

_______________________
(Signature of the student)
DATE:
PLACE:

CONTENTS

Chapter No.

TITLE

INTRODUCTION
Objectives of the Study

Page No.

4 10
3

Methodology of Research
Source of Data
Tools of Analysis
Scope of the Study
Statement of the problems
Limitations of the Study

11 20

II

INDUSTRIAL PROFILE

III

COMPANY PROFILE

IV

THEROTICAL FRAME WORK

21 39

DATA ANALYSIS AND INTERPRETATION

40 57

VI

FINDINGS & SUGGESTIONS

58 65

APPENDEX
BIBLIOGRAPHY

66 67

CHAPTER I
INTRODUCTION
OBJECTIVE OF THE STUDY
The present study in my home industries ltd is under taken to palmate the
working capital strategy in the organization by establishing the following
objections.
To study on low the liquidity of the company its profitability.
To calculate and compare the operating cycle duration of the company of

the study period.

To evaluate the recovery efficiency of the company.
To judge the cash management ability of the company.
To give flexible solution to improve the Liquidity performance of the
company.

METHODOLOGY OF RESEARCH
RESEARCH DESIGN:
In view of the objectives of the study an expletory research is one. Which
cargely interprets the already available information, and it lays particularly
explains on analysis and interpretation of the existing and available
information. It makes use of secondary dated.
SOURCES OF DATA:
The study is based on secondary data and discussing with the officials of the
company the secondary data consists of the annual reports of 'My Home
Cement Industries Ltd' ranging for the last 4 years. Yarning other reports are
collected from the company's magazines, published book and from web sites.

TOOLS OF ANALYSIS:
Ratio Analysis
Percentage Method
Regression Analysis
Operating cycle Method.
SCOPE OF THE STUDY:
There is more number of methodologies used in financial analysis present
5

study stage extended to ratio analysis of the companies' audited financial

reports.
The scope of the study is defined below in terms of concepts adopted and
period under focus.
First a study on management of working capital is unfired only to the My
Home Cement Industries Ltd.
Secondly the laniary concepts of working capital gross and Net is used in
marketing profitability and Liquidity respectively and also to arrive at varying
objectives of the study.
Thirdly the study is based on the annual reports of the company for the
period of 4 years 2003 - 04 to 2007 - 08.
Thus on the whole the purpose of the work/study is to analyze the past and
present Liquidity performance of the company on varying financial areas life
Cash management
Inventory management
Receivable management
Need of the Study:
In order to maintain forms of revenue from operating every firm needs to
maintain certain amount of current assets. For example cash required to pay
expenses or to met current obligations for services received or goods
purchased etc., by a firm on the identical plan inventories area required to
provide the link between production and sale, similarly accounts receivable
generates when goods are sold on credit.
Economics like mead, backer and field are of the optimum that the whole of
these current assets the working capital of a firm. But optimum working
capital management must be the objective of any manufacturing concern.
Optimum many there shall not be of employment and under employment of
the working capital. Therefore, the present study focus or in the My Home
Cement Industries Ltd. is working capital to improve Liquidity and Profitability.
LIMITATIONS OF THE STUDY:

The information used is primary from historical annual reports available to

the public and the same does not indicate the current situation of the firm.
Detailed analysis could not be carried for the project work because of the
limited time gone.
Since financial matters are sensitive in nature the same would not be
acquired easily.

CHAPTER II
INDUSTRY PROFILE
HISTORY :
The cement industry occupies a position of predominance not only as a
one of the basic infrastructure industries for development but also because it
is the eight largest in the world. (Which directly about 1.31 lakhs persons)
7

The first cement factory was established around 1890 in both Canada
and Australia, while it was found in 1889 in New Zealand. However in India it
came to be established only during the beginning of present cattery.
In India the cement era commercial in fact with the establishment of
small cement factory at 'Washerman Per' in madras in 1904, by South India
Industrial Ltd. a company that dates back to 1879.
The potential capacity of this plant was only 1000 Metric tones per
annum.
Almost the entire capital (Rs. 9 lakhs) invested was owned by the
Indians. This was the first attempt of manufacturing Portland cement with the
calcareous seashells as principal raw materials. There was sufficient demand
for the product but use of technological defects and inadequate supply of raw
materials, There was sufficient demand for the product but use of
technological defects and inadequate supply of raw materials, this plant did
not operate economically and ultimately collapsed.
Then the real production stone of the present industry was laid in the
year of 1912 where small factory was established at probandar in kathiway
by Indian Cements Ltd. this factory commercial its production in 1914 at the
rate of about 100 meters tones per day.
Dr. Rameshwar Rao. J. was appointed as chairman & MD of the
company for period of 5 years, 5/9/2001 on a remunerative Rs. 1,50,000/- per
month along with others perks and the menleg have duly approvel the name
at the 18th Annual General Meeting hold on 30.06.2007. his term of
appointment expires on 4/9/08.
BOARD OF DIRECTORS
1DR. RAMESWAR RAO. J

CHAIRMAN AND MANAGING

DIRECTOR (FINANCE & COMMERCIAL)

DIRECTOR
2SHRI S SAMBA SIVA RAO

3SHRI V S NARANG

DIRECTOR (TECHNICAL)

4SHRI K V KESAVA RAO,MLC

- DIRECTOR

5SHRI B V KAMALAKR RAO

- DIRECTOR

6SHRI N RAGHUNTH

- DIRECTOR

7SHRI J JGAPATHI RAO

- DIRECTOR

8HRI D R JWAHAR

- DIRECTOR

9COMPANY SECRETR

- SHRI B. MURALIDHARA RAO.

REGISTERED OFFICE :
9th FLOOR, BLOCK 3, MY HOME HUB, MADHAPUR, HYDERABAD 500 081.
AUDITORS :
K REDDY & ASSOCIATES; CHARTED ACCOUNTANTS, HYDERABAD
COST AUDITORS :
PARANKUSAM & COMPANY
COST ACCOUNTANTS
HYDERABAD.

CHAPTER - III
COMPANY PROFILE
HISTORY :
My Home Industries Limited (MHIL) is a public limited company originally
incorporated as Devi Cements Limited under the Companies Act, 1956 with
the main objects of manufacturing and selling of cement and cement related
products.
9

In the year 1998, Dr. J. Rameswar Rao, one of the promoters has acquired the
shareholding interest of other promoters. Consequent to the change in the
management, the name of the company was changed to My Home Cement
Industries Limited and since then there was substantial growth in the
operations of the company. The company is an ISO 9001:2000 certified
company.
Unit & Capacity :
The company has 3 Units located at Mellacheruvu Village, Kodad Taluq,
Nalgonda District, Andhra Pradesh. Unit-I was set up in the year 1998 with a
capacity of 1.98 lakh MT per annum. Over a period of time the capacity was
increased to 8.25 lakh MT per annum. Unit II was established in 2002 with a
capacity of 6.60 lakh MT per annum and the same was increased to 10.15
lakh MTs per annum, by modifications and additions to plant & machinery and
other assets and also by production of blended cement. Unit III with a
capacity to manufacture 13.60 lakh MTs of cement per annum was set up
during March 2007. Thus, the total capacity of 3 units works out to 32.00 lakh
MTs per annum.

Production & Sales :

The company has operated at optimum capacity utilization during last 3
years.
The details of production and sales during the last 3 years are as given below
:

The Companys cement is marketed under the brand MAHA, which is highly
reputed in South India. The company has established very wide market net
work with 1800 dealers and 12 regional offices in the States of Andhra
Pradesh, Tamil Nadu, Karnatak, Orissa, Maharashtra, Kerala and Chettishgarh.
The brand MAHA Cement has been well accepted and acknowledged as
premium brand and hence the demand for the same is continuously
increasing.

Operations :
The company is managing its operations excellently with high growth rate in
terms of production, sales, turnover and profit. The company has been
continuously making profits for the last 7 years. During 2014-15, the
company has achieved a turnover of Rs. 502.50 crores and earned net profit
before tax of Rs. 140.32 crores and net profit after tax of Rs.90.97 crores on
its 2 Units. As the company commenced production of its Unit III at the end
of 2013-14its full production and sales will be reflected in 2014-15 financial
statements. Accordingly it is estimated that the company may achieve Rs.
9000 crores turnover during the year 2014-15.
Dividend :
The company has paid a dividend of 10% on the equity share capital for the
financial year 31st March 2006. For the year ended 31 st March 2007 the
company has paid a divide3nd of 25% to the equity shareholders. The Board
has declared an interim dividend of 20% on the equity share capital of the
company for the financial year 2014-15.
Captive Power Plant :
The company has established a 15 MW Captive Power Plant (CPP) which
started generating power with effect from 24th March 2014. The power
generated by the CPP is entirely utilized for the cement plants resulting in
11

substantial saving in the cost of power.

Term Loans :
The company has availed term loans of Rs. 59.16 crores and R. 57.00 crores
for implementation of Unit I and unit II respectively, out of which Rs. 97.34
crores were repaid and there is an outstanding balance of Rs. 18.82 crores.
The Company ha set up Unit III with a cost of Rs. 270 crores out of which
term loans of Rs. 140 crores availed from various banks and spent internal
accruals to the extent of Rs. 130 crores. The company ha also availed a term
loan of Rs. 22.40 crore for Captive Power Plant (CPP).
Incentives :
The company has got sales tax deferment of Rs. 77.37 crore and sales tax
exemption of R. 34.81 crores in respect of Unit I and Rs. 116.87 crore in
respect

of

Unit

II.

The

company

ha

availed

the

sales

tax

exemption/deferment of Rs. 198.51 crores and still there is a balance of Rs.

30.54 crores to be availed.
The project Unit III is eligible for the following incentives under Andhr
Pradesh State Industrial Investment Promotion Policy 2005 10.
1.Power rebate of 0.75 paise up to 31.03.2010.
2.VAT grant of 25% on the VAT paid in the previous year, for a period of 5
years.

Background Promoter :
Dr. Rameswar Rao Jupally aged about 52 years is a graduate in Science and
DHMS. He is the main promoter of the company. He ha acquired entire
shareholding in Devi Cements Limited and consequently the name of the

company ha been changed to My Home Cement Industries Limited. Under his

able leadership the company has grown from a capacity of 1.98 lakh tone
p.a. during 1998 99 to 32.00 lakh tones p.a. during 2014-15.
He has first promoted My Home Constructions Private Limited (MHCPL) with
the object of constructing commercial and residential complexes. MHCPL was
incorporated in the year 1992. the apartment and shopping complexes built
by the company are known for high quality, architectural elegance, functional
efficiency and cozy interiors and set a new idiom in construction business.
The following are some of the prestigious constructions of MHCPL.
My Home Fern Hill, My Home Madhubhan, My Home Sarovar, My Home
Rainbow,
My Home Tcoon, My Home Jupally and My Home Navadweepa, My
Home Hub.
He has also acquired shares in M Home Power Limited a 9 MW biomass power
plant situated at patancheru, Medak District, Andhra Pradesh.

CHAPTER IV
THEORETICAL FRAMEWORK
13

INTRODUCTION :
Working capital may be regarded as the lifeblood of a business. Its
effective provisions can do much to ensure the success of business, which its
inefficient management can lead not only to loss of projects but also the
ultimate downfall of what otherwise, might be considered as promising
concern. Thus, its management is considered as one of the most important
aspects of firm's Financial Management.
The term working capital stands for that part of the capital which is
required for the financial working of the company in simple words, we can
say that working capital is the investment needed for carrying out day to day
operations of the business smoothly.
Working capital refers to a firm's investment in short term assets, viz.
cash short term securities, Accounts receivable (debtors) and inventories of
raw materials, work in progress and finished goods.
It can be regarded as that portion of the firm's total capital, which is,
employed in short-term operations. Funds thus invested in current assets
keep revolving false and are being constantly concerted in to cash and this
cash flow out again in exchange for other current assets. Hence, it is also
known as revolving or circulating capital.
According to genestenberg, "circulating capital means current assets of
a company that are changed in the ordinary course of business from one
form to another, as for example from cash to inventories, inventories to
receivable, receivables into cash".
These are invariably a time lag between the sale of gods and the
receipt of cash. There is there fore need for working capital in the form of
current assets to deal with the problem arising out of lack of immediate
realization of cash against goods sold. Therefore sufficient working capital is
necessary to sustain sales activity.
CLASSIFICATION OF WORKING CAPITAL

Working capital can be classified into two ways.

1) On the basis of concept
2) On the basis of time.
CONCEPT OF WORKING CAPITAL
1) Gross working capital
2) Net working capital
GROSS WORKING CAPITAL
The gross working capital refers to the firms' investment in the total
current assets of the enterprise. The current assets are those assets with in
the ordinary course of business can converted into cash with in the short
period of normally one accounting year.
NET WORKING CAPITAL
The net working capital can be defined into two ways the most
common definition of working capital is difference between current assets
and current liabilities.
Net working capital can also be define as that portion of firm's current
assets. Which are financed with long-term funds.
NEED FOR WORKING CAPITAL
The need for working capital to run the day to day activities cannot be
over emphasized we will hardly find a business firm, which does not require
any amount of working capital. Indeed, every firm differs in these
requirements of the working capital.
The main objective of financial decision making is to maximize
shareholders wealth and to endeavor this firm should earn sufficient returns
requires a successful sales activity. For a successful sales activity the firm has
15

to invest sufficient funds in current assets. Current assets are needed

because sales do not concert into cash instantaneously. There, is always an
"operating cycle" involved in the conversion of sales into cash.
OPERATING CYCLE
Operating cycle is the time duration required to convert sales after the
conversion of resources into inventories into cash. In other words, an
operating cycles refers to 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 receivables.
5) Conversion of accounts receivable into cash
Raw material
Working progress
Cash
Finished goods
Accounts receivables

Sales

ON THE BASIS OF TIME

1) Permanent or fixed working capital

2) Temporary or variable working capital

PERMANENT WORKING CAPITAL:
Permanent working capital is the minimum amount or minimum level of
current assets. Which is continuously required by the enterprise to carry out
its normal business operation. For e.g., every enterprise has to maintain a
minimum level of raw materials. Work-in-progress, finished goods and cash
balance for paying Wages, Salaries, Rent et. during the year. This minimum
level of current assets is called permanent or fixed working capital as this
part of capital is permanently blocked in current assets.
Regular working capital is the amount of working capital needed for the
continuous operations of the business of the company without any breakage.
TEMPORARY OR VARIABLE WORKING CAPITAL:
Temporary working capital is the amount of working capital, which is
required to meet the seasonal and special needs of the business.
1) Seasonal working capital refers to that financial requirement that
crop up during a particular season behind the regular working capital most
business require at stated intervals large amount of current assets to fill the
demands of the seasonal busy periods.
2) Special working capital refers to that part of the working capital,
which is required to meet special extengencies such as launching of
extensive marketing campaigns or conducting research etc.,

COMPOSITION OF WORKING CAPITAL

The individual composite items of working capital consist of current
asset and current liabilities.
17

CURRENT ASSETS
Current assets are those, which can be converted into cash within one
year without effecting the operations of the firm.
List of current assets:
1) Cash in hand & bank balance
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances
5) Investment
a) Government other trustee securiti9es
b) Fixed deposits with the banks
6) Inventories of stock
a) Raw materials
b) Work in Progress
c) Stores and spares
d) Accrued income

CURRENT LIABILITIES
Current liabilities are those, which are intended to be paid in the
ordinary course of business within a short period of normally one year out of
the current assets or the income of the business.

LIST OF CURRENT LIABILITIES:

1) Bills payable
2) Sundry creditors or accounts payable
3) Short term borrowings
a) Banks
b) Others
a. Unsecured loans
b. Public deposits maturing one year
c. Deposits from dealers, selling again.
4) Dividends payable
5) Bank overdraft
6) Accrued or outstanding expenses
7) Provision for taxation
8) Sales tax and excise tax.

THEME OF WORKING CAPITAL

Working capital management is considered as one of the most
important aspects of firm's financial management. The goal of working
capital management is to manage the firm's current assets and current
liabilities in such a way that the satisfactory level of working capital is
maintained. Each of the current assets should be managed efficiently in order
to maintain the liquidity the firm while not keeping too high a level of any one
of them.
The success of business concerns among other depends upon the
19

manner in which its working capital is managed. The interaction between the
current assets and current liabilities is there fore the main theme of the
theory of working capital.
It is a task of financial manager to maintain an appropriate level of
working capital i.e. enough current assets to pay-off current liabilities, either
excess nor less because in either cases the result could be the failure of the
business. Excessive working capital impairs firm's profitability, as ideal
investment earns nothing. On the other hand, inadequate amount of working
capital can threaten the solvency of the firm because of its inability to meet
its current obligations.

OPTIMUM WORKING CAPITAL POSITION:

The firm should maintain a sound working capital position. It should
have adequate working capital to run its business operations. Both excessive
as well as inadequate working capital positions are dangerous from the firm's
point of view.
Excessive working capital means idle funds, which earn no profits for the
firm. Paucity of working capital not only impairs the firm's profitability but
also results in production interruption and inefficiencies.

The Danger of excessive working capital are as follow:

1. It results of unnecessary accumulation of inventories. Thus, chance
of inventories handling, wastage, theft and losses increase.
2. It is an indication of defective credit policy and slag credit collection
period. Consequently higher incidence of bad debts results, which adversely
affects profits.
3.

It makes management complacent, which degenerates into

managerial inefficiency.
4.

Tendencies of accumulating inventories tend to make speculative

profits grow. This may tend to make dividend policy liberal and difficult to
cope with when firm is unable to make speculative profits.
Inadequate working capital is also bad causes following:
It stagnates growth. It becomes difficult for the firm to undertake
profitable projects due to inadequate of funds.
It becomes difficult to implement operating plans and achieve firms profit
targets.
Operating inefficiencies creep in and it becomes difficult even to meet day
- to - day commitments.
Fixed assets are not efficiently utilized for the lack of working capital
funds. Thus the firm's profit would deteriorate.
Paucity of working capital fund renders the firm unable to avail attractive
credit opportunities.
The firms losses its reputations when it is not in a position to honor its
short-term obligations. As a result, the firm tight credits terms.

LIQUID RATIOS
21

The purpose of liquidity ratio is to measure the ability of the firm to

meet its current obligations and to provide a quick measure of liquidity by
current ratio and quick ratio. Infact, analysis of liquidity needs the
preparation of cash budget, cash flow and funds flow statements, but
liquidity ratios by establishing relationship between cash and other current
assets to current obligations, provide a quick measure of liquidity. A firm
should ensure that it does not suffer from lack of liquidity and also that it
does not excess liquidity.
The most common ratios, which indicate the extent of liquidity or lack
of it, are:
1. Current ratios
2. Quick ratios
3. Net working capital ratios etc.,

Overall Working Capital

FINANCING OF WORKING CAPITAL

There are different types of financing policies in vague for financing

working capital requirements. The requirements of working capital may be for
fixed working capital and variable working capital requirements.
The fixed proportion of working capital should be generally financed
from the fixed capital sources while the variable working requirements of a
concern may be met the short - term sources of capital.
The various sources of financing of working capital are as follows:
Sources of working capital

Long - term financing

Short term FinancingSpontaneous

Financing
Finance Institutions

Short - term Credits

Debenture

Loan from Banks

Public Deposits

Commercial papers

Shares

Trade Creditors

Outstanding Expenses

Factoring

WORKING CAPITAL POLICIES:

The financial manager should determine the optimum level of current
assets, so that the wealth of shareholders is maximized. A firm needs fixed
current assets to support a particular level of output. However, to support the
same level of output, the firm can have different levels of current assets to
fixed assets. Dividing current assets by fixed assets give CA/FA ratio.
23

CONSERVATIVE WORKING CAPITAL POLICY:

If firm's maintains higher investment on current assets to a constant
investment on fixed assets, i.e. assuming a constant level of fixed assets, a
higher CA/FA ratio indicates conservative current assets policy it implies
greater liquidity and lower risks.
AGGRESSIVE WORKING CAPITAL POLICIES:
If a business firm maintains the lower level of current asses to a
constant fixed assets that is a lower CA/FA ratio means an aggressive current
policy. Assuming other factors constant. It indicates higher risks and poor
liquidity.

AVERAGE WORKING CAPITAL POLICIES:

If a business firms maintains moderated level of current assets to
constant fixed assets. That is the current assets policy of the most of the firm
may fall between in conservative and aggressive working capital policy,
which is called average working capital policy. It indicates moderate liquidity
and risks.

Working capital can be done in the following main methods:

1. Cash Management
2. Receivable Management
3. Inventory Management
CASH MANAGEMENT
Cash, the most liquid asset, is of vital importance to the daily
operations of business firms. While the proportion of corporate assets held in

the form of cash is very small, often between 1&3 percent its efficient
management is crucial to the solvency of business in very important sense
cash is the focal point of fund flows in business. In view of its importance, it is
generally referred to as the 'Life blood of a business enterprise'.
NEED FOR HOLDING THE CASH:
John May nard Keynes put forth, there are possible motives for holding cash.
Transaction Motive: Firms need cash to meet their transactions needs.
The collection of cash (from sale of goods and services, sale of assets and
additional financing) is not perfectly synchronized with the disbursement of
cash (for purchase of goods and services acquisition of capital assets and
meeting other obligation). Hence, some cash balance is required as a buffer.
Precautionary Motive: There may be some uncertainty about magnitude
and timing of cash inflows from sale of goods and services, sale of assets and
issuance of securities. Like wise there may be uncertainty about cash out
flows on account of purchases and other obligation. To protect it against such
uncertainities, a firm may require some cash balance.
Speculation Motive: Firm would like to tap profit making opportunities
arising form fluctuations is commodity prices, security prices, interest rates
and foreign exchange rates. Cash rich firm is better prepared to exploit such
bargains. Hence firms, which have such speculative earnings, may require
additional liquidity. However, for the most firms there reserve borrowing
capacity and marketable securities would sufficient to meet their speculative
needs.

GOALS OF CASH MANAGEMENT:

25

Precisely speaking, the primary goal of cash management in firm is to

trade off between liquidity and profitability in order to maximize long-term
profit. This is possible only when the firm aims at optimizing the use of funds
in he working capital pool. This overall objective can be translated in to the
following operation goals.
To satisfy day business requirements
To provide for schedule major Payments
To face un expected cash drains
To seize Potential opportunities for profitable long term investments
To meet requirements of bank relationships
To build image of credit worthiness
To earn on cash balances
To build reservoir for net cash in flows till the availability of better uses of
funds by conscious planning
To minimize the operating cost of cash management

IMPORTANCE OF CASH MANAGEMENT:

Cash management is one of the critical areas of working capital
management and assumes greater significance because it is most liquid
asset used to satisfy the firm's obligations but it is a sterile asset, as it does
not yield anything. Therefore finance manager has to manage cash that the
firm maintains its liquidity position without jeopardizing the profitability.
Problem of prognosticating cash flows accurately and absence of
perfect to incidence between the in flows and out flows of cash added to the
significance of cash management. In view of above, at one time affirm may
experience dearth of cash because payment of taxes, dividends, seasonal
inventory etc., build up while at othe times, it may have surfeit of cash
stemming out of large sales and quick collections of receivables.
It is interesting to observe that in real life management spends his
considerable time in managing cash, which constitutes relatively small
portion of firm's current assets. This is why in recent years a number of new
techniques have been evolved to manage to cash holding of the firm.

27

RECEIVABLE MANAGEMENT
The term "receivable" refer to the debt owned by the customers for
goods purchase from the firm or services rendered by the ordinary course of
business.
The firm is said to have granted trade credit to customers when it sells
its products or services and does not receive cash for it immediately. Trade
credit is an essential marketing tool acting as a bridge for the movement of
goods

from

production

and

distribution

stage

to

customers

finally.

Receivables are also known as accounts receivables, trade receivables or

book debts.
The purpose of maintaining or investing in receivables is to meet
competition and to increase the sales and projects.
BASIC FEATURES OF RECEIVABLES ARSING OUT OF CREDIT
1. They involve an element of risk as cash payment has yet to be received.
2.

They are based on economic value, which is passed to the buyer

immediately at the time of sale of goods, services while the seller expects an
equivalent value to be received later on.
3. The imply futurity as payment for goods or services received by the buyer
will be made by him at future date.
4.

Granting credit and creating debtors amount to the blocking of firms

funds, thus, there is a need for careful analysis and proper management of
receivables as substantial amounts are tied up in trade debtors.

OBJECTIVES OF RECEIVABLES MANAGEMENT

The purpose of credit management is not to max sales (if so, firms
would sell on credit to all); nor to min risk (if so, firms would not sell on credit
to anyone).
The objective of the firm is to manage its credit a way that sale are
expanded to such an extend to which risk remain with is an acceptable limit.
Main Objectives are:
Obtain optimum values of sales
Control the cost of credit and keep it at minimum.
INVENTORY MANAGEMENT
INVENTORY AND ITS PERIMETTER:
The term "inventory" is used to designate aggregate of those items of
tangible assets, which are
1) Held for sale in the ordinary course of business.
2) In the process of production for such sale, or
3) To be currently consumed in the production of goods or services to
be available for sale.
Thus, inventory means and includes any one of the following:
Finished goods (saleable)
Working progress (convertible)
Materials and suppliers (consumable)
The above definition is called operational definition of inventory. In
financial parlance, inventory is defined as the sum of the value of raw
materials and suppliers includes spares, semi processed materials or working
progressed and finished goods. The inventory is largely depending on the
carried on.
29

INVENTORY: SOME SPECIAL FEATURES

A comparison of inventory with other positive components of working
capital would revels that it has some special features of its own.
Firstly, on an average, it accounts for lions share of firms investment in
working capital.
Secondly, the risk factor in holdings inventory generally is higher than
of holding other items of current assets.
Thirdly, although holding of a more and more inventory may be
desirable from the point of view of functional managers, it affects adversely
short-term liquidity.
Fourthly, it involves many types of costs associated with it viz: acquit
ion cost, carrying cost, short cost, etc.
Fifthly, it is the only item of current assets, which has direct influence
on the process, and income of firm.
Finally, it involves almost all the functional areas of management, viz,
purchasing, production, marketing and finance.
OBJECTIVES OF INVENTORY MANAGEMENT
There should be optimum level of investment for any asset, whether it
is plant, cash or inventories. Again, in adequate inventories will disrupt
production and lose sales.
All this calls far an effective inventory program the main objectives are:
1. To ensure that materials are available for use in production and production
services, as and when required.
2. To ensure that finished goods are available for delivery to customers to
fulfill orders.
3. To minimize investment in inventories.

4. To protect the inventory against deterioration, obsolescence and un

authorized us

Chapter - V
Data Analysis & Interpretation
Production
Year

Sales
Production

Year

Sales

2008-09

4.54

2008-09

4.50

2009-10

50.79

2009-10

5.77

2010-11

10.64

2010-11

10.71

2011-12

12.47

2011-12

12.42

2012-13

13.76

2012-13

13.73

2013-14

16.27

2013-14

16.13

2014-15

17.19

2014-15

16.99

60

50.79

50
40
30
20
10

Production
4.54
4.5

5.77

10.64
16.13 17.19
10.7112.47
12.4213.76
13.7316.27
16.99

Sales

Production Sales
TURNOVER
Turnover
Year

Turnover

31

Crores
2008-09

99

2009-10

123

2010-11

201

2011-12

235

2012-13

278

2013-14

351

2014-15

562

Turnover Crores
2008-09
123

2009-10

99
562

201

2010-11
2011-12
2012-13
2013-14

235

2014-15
278

Net Profit (Before tall)

Turnover
Net Profit
Year

Crores

2008-09

7.06

2009-10

14.74

2010-11

13.41

351

2011-12

25.17

2012-13

42.44

2013-14

24.72

2014-15

140.32

Net Profit Crores

2014-15

140.32

2013-14

24.72

2012-13

42.44

2011-12

Net Profit Crores

25.17

2010-11

13.41

2009-10

14.74

2008-09

7.06
0

20

40

60

80

100

120

140

160

Chapter VI
Findings, Suggestions & Conclusion

The production of sales performance of MAHA CEMENT., has increased from

Rs.4.54 (P&L) lakhs is in 2008-09 to Rs.17.19 & Rs.16.99 lakhs in 2014-2015.
This is a good performance by the support all Director all level managers and
all workers of the company.
The Net Profit (Before back) performance of Maha Cement., has been
33

increased from Rs.7.06 crores in 2008-09to Rs.140.32 crores in 2014-15. It

has got good position in market by the well performance of company. With in
6 years it increase Net Profit above 100% completed.
In the previous year in last year (2008-09) estimated however the Net Profit
performance excellent in 2014-15.
The turnover of my home cement including has been increased from Rs.99
crores in 2014-15 to Rs.502 crores in 2013-14. It is a good performance
increasing with other carrying the company turnover growth rate is
appreciated.

Statement of changes in working capital for the year 2011-12 and

2012-13
Table No.4
2011-12 2012-13
Changes in working
Particulars

capital
Increase

Decrease

Inventories

1255.79 1831.26

575.47

Sundry Debtors

1759.76 1256.97

502.79

Cash & Bank Balance

Loans & Advances

125.74

190.63

35.79

1676.75 2956.30

279.11

Total (A)

4918.04 6235.16

1317.12

Current Liabilities
Liabilities

332.39

493.87

161.48

Provisions

318.12

541.13

223.01

Total (B)

650.51 1034.90

384.49

Working Capital (A B)

4267.58 5200.16

Net Increase in Working Capital

Net Working Capital

932.63
5200.16 5200.16

932.63
1317.12

1317.12

35

Interpretation:
The above table reveals the following information.
Generator has been increased Rs.5750.47 Lakhs so this make availability
of working capital.
Sundry Debtors have been increased by Rs. 502.79 lakhs due to high
credit sales. This increase the working capital.
Cash & Bank balances have been increased by Rs.35.11 lakhs. It indicates
the working capital availability.
Loans & Advances have been increased Rs.279.11 lakhs. It indicates the
working capital availability.
The current liabilities have been decreased by Rs.161.49 lakhs. Which
effects the positive sign on working capital.
Provisions have been decreased by Rs.230.01 lakhs. Which effects the
positive sign on working capital by decreasing Liquidity requirements for
provisions.

Statement of changes in working capital for the year 2012-13 and

2013-14

Table No.5
2012-13 2013-14
Change in Working Capital

Particulars

Increase
Inventories

1831.26 2394.20

Sundry Debtors
Cash & Bank Balance

1256.97

765.58

190.63

349.05

Loans & Advances

2956.30 3816.49

Total (A)

6235.16 7325.32

Decrease

562.94
491.39
158.42

860.19

Current Liabilities
Liabilities

493.87 1724.14

Provisions

541.13

903.39

Total (B)

1034.90 2627.53

Working Capital (A B)

5200.16 4697.79

Net Increase in Working Capital

Net Working Capital

1230.27
362.26

502.37

502.37

5200.16 5200.16

2083.92

2083.92

37

Interpretation:
The above table reveals the following information.
Inventory has been increased Rs.562.94 Lakhs. It indicates the working
capital availability.
Sundry Debtors have been decreased by Rs. 491.39 lakhs. it shows the
negative effect will decrease the working capital.
Cash & Bank balances have been increased by Rs.156.42 lakhs. It
indicates the working capital availability.
Loans & Advances have been increased by Rs860.19 lakhs. So this effect
the increase the working capital.
The current liabilities are reduced by Rs.1230.27 lakhs. So this increase
the working capital. It means the requirement of Liquidity for payments of
short term.
Provisions have been decreased by Rs.362.46 lakhs. Which effects the
positive sign on working capital by decreasing Liquidity requirements for
provisions.

Statement of changes in working capital for the year 2013-14 and

2014-15
Table No.5
2013-14
2010 202014Change in Working Capital

Particulars

Increase
Inventories

Decrease

2394.20

3501.23

1107.03

Sundry Debtors

765.58

1142.23

376.65

Cash & Bank Balance

349.05

582.24

233.19

Loans & Advances

3816.49 12287.58

8471.09

Total (A)

7325.32 17513.58

491.39

Current Liabilities:
Liabilities

1724.14

3952.60

2228.46

Provisions

322.20

3822.85

3500.65

Proposed dividend

581.19

703.55

122.36

Total (B)

2627.53 8479.00

Working Capital (A B)

4697.79

Net Increase in Working Capital

4336.79

Net Working Capital

9034.58

9034.58.16 9034.58

4336.79
10187.96

10187.96

39

Interpretation:
The above table reveals the following information.
Inventory has been increased by Rs.1107.03 Lakhs. So this make
availability working capital.
Sundry Debtors have been decreased by Rs. 376.65 lakhs. Due to big
credit sales. This increase the working capital.
Cash & Bank balances have been increased by Rs.233.19 lakhs. It
indicates the working capital availability.
Loans & Advances have been increased by Rs.847.09 lakhs. So this
effect the increase the working capital.
The liabilities have been decreased by Rs.1228.46 lakhs. Which efforts
the positive sign on working capital.
Provisions have been decreased by Rs.350.65 lakhs. Which effects the
positive sign on working capital by decreasing Liquidity requirements
for provisions.
Here in this year proposed dividend also there and it has been
decreased by Rs. 122.36 lakhs. Efforts in working capital.

Current Ratio:
Source: Annual Reports of My Home Industries Ltd.
Table No.7
Year

Current Ratio

2011-12

0.13

2012-13

0.16

2013-14

0.35

2014-15

0.48

Fig. No.4
The actual ratio provided in the above table is then the standard ratio.
In other words, in none of the year, the actual current ratio is greater than
the standard ratio. However there is an improvement in the ratio during the
study period.
Current Ratio has increased from 0.13 in 2011-12 0.48 in 2014-15.
There may two reasons for the poor current ratio.
Due to high stock turnover the amount of current assets diluted from
time to time. Poor investment in current assets, which will lead to poor sales
and profitability.

Quick Ratio:
This Ratio establishes a relation ship between of liquid assets and
current liabilities. It is an absolute measure of liquidity management of the
concern. As asset is liquid if it can be converted in to cash immediately or
reasonably soon with out a loss of value, it ignores totally the stocks.
Because inventories normally require some time for realizing into cash. Their
value also has a tendency to fluctuate.
41

Table No.8

Year

Quick Ratio

2011-12

0.17

2012-13

0.23

2013-14

0.54

2014-15

0.61

Fig. No.5
Quick Ratio is also including the same performance on per with the current
ratio. Quick Ratio has increased from 0.17 in 2011-12to 0.61 in 2014-15. A
greater that actual quick ratio than the standard is recorded only in the latest
two years. Therefore it may be conclude that the liquidity performance of the
company has been improved in the latest years of the study period.

Absolute Quick Ratio:

Since cash is the most liquid assets necessary to examine the ratio of
cash and its equivalent to current liabilities, Trade investment or Marketable
Securities are equivalent of cash. Therefore they may be included in the
consumption of Absolute Quick Ratio.
Table No.9
Year

Quick Ratio

2011-12

0.17

2012-13

0.23

2013-14

0.54

2014-15

0.61

Fig. No.6
The statistical data in the above table reveals that the actual Absolute
Quick Ratio is greater than the standard ratio. Absolute Quick Ratio has
increased from 0.17 in 2014-15 to 0.61 in 2011-12. Therefore it can be
concluded that through actual current ratio is lesser than the standard ratio,
the firm's absolute liquid position can be viewed as satisfactory.
Stock Turn Over Ratio:
It is computed by dividing the cost of goods sold by the average
inventory thus.
Inventory Turnover Ratio = Cost of goods sold / average inventory
The cost of goods sold means sales minus gross profit. The average
inventory refers to the simple average of the opening stock and closing stock.
The ratio indicates how fast inventory is sold. A high ratio in the viewpoint of
liquidity and vice versa. A low ratio would dignify that inventory does not sell
fast and stays on the self or in the warehouse for a long time.

Table No.10
Cost of Goods
Year
Sold
2011-12
23551.43

Avg.

STR

Inventory
10136.51

2.32

2012-13

27776.67

11570.86

2.40

2013-14

35121.73

13980.86

2.51
43

2014-15

50250.15

15190.43

3.30

Fig. No.7
Data pertaining to stock turnover ratio provided in the table inclivaty a wineel
performance during the study period. Stock turnover ratio has been recorded
at 2.32 time in 2014-15 further it has increased to 3.30 times in 2011-12.
There for the terminal capacity of the company can be vieweel as satisfactory
during the latest years of the study period.
Debtors Turnover Ratio
It is determined by dividing the net credit sales by average debtors
outstanding during the year. Debtors Turnover Ratio = Net sales /
Average Debtors.
Net credit sales consist of gross credit sales minus returns if any from
customers. Average debtors we the simple average of debtors at the
beginning and at the end of year. The analysis of the Debtors Turnover Ratio
supplements the information regarding the liquidity of one item of current
assets of the firm. The ratio rapidly debits we controlled. A high ratio is
indicative of short time between credit sales and cash collection. A low ratio
shows that debts are not being collected rapidly.

Table No.11
Debtors Turnover (Times)
Year
2011-12

13.38

2012-13

22.09

2013-14

45.87

2014-15

43.99

Fig. No.8
Debtors velocity indicates the number of times the debtors are turned over
during year. The higher the value of debtors turnover the more efficient is the
management if debtors / sales as more liquid are the debtors. Debtors
turnover ratio provided in the above table is witnessing a very good
performance in the year 2011-12 it is 13.38 time and the same has been
increased to 45.87 time in 2013-14 and further it has been fallen to 43.99
times in 2014-15 . On the whole the debtors turnover capacity of the
company can be viewed as satisfactory.

45

Working Capital Turnover Ratio

Working Capital turnover ratio : Net Sales / Net Working Capital
Table No.12
Year

Net Sales
Networking Capital

Ratio

2011-12

(in Lakhs)
23551.43

(in Lakhs)
4267.58

5.57

2012-13

27776.67

5200.16

5.34

2013-14

35121.73

4697.79

7.47

2014-15

50250.15

9034.58

5.56

Fig. No. 9

Net Working Capital

Working capital turnover ratio measures the efficiency with which the
working capital is being used by a firm. The company working capital
turnover ratio is fluctuations. It is low during the period 2014-15 the next
year 2012-13 the next year 2013-14 it was increased and it was low during
the next year period (2014-15). Their ratio that the company was not
maintained proper standard utilization of funds. The higher working capital
turnover ratio indicate efficient funds.

Table No.13
Year
Current AssetsCurrent Liabilities
Net working Capital

(in Lakhs)

(in Lakhs)

(in Lakhs)

2011-12

4918.04

650.51

4267.53

2012-13

6235.16

1035.00

5200.16

2013-14

7325.32

4697.79

2627.53

2014-15

17513.58

9034.58

8479.00

Fig. No.10
During the last four years the company Net working capital fluctuating.
But the current Assets were always greater than the current Liability. This
indicates that the company is in better position.
FINDINGS & SUGGESTIONS
In the present chapter some of the important conclusions drawn from the
study of short-term financial management of MAHA CEMENT., are summed
up. Further some variable and appropriate measures, which can be adopted
by the company, are also suggested for bettering its performance.
There is low current ratio when compared to the standard ratios; this is
due to higher stock turnover of the company.
A study on the absolute quick ratio reveals a poor cash base of the
company but, the further study witness a low recovery from debtors and
early payments creditors is causing for poor cash balance in the company.
There is a poor raw material stock turnover and a high finished goods
stock

turnover

of

the

company.

Therefore,

companies

inventory

management position may be viewed as dissatisfactory.

Most of the current assets are in the form of debtors, followed by
inventory. That is the amount of investment in debtors is highs in the
whole investment of the working capital. This is because of the new
system of loaning to former.
The recent performance of the debtor's turnover indicates a speedy
recovery of debtors and it may be viewed as a positive working capital
47

performance of the company.

The company has its largest share of the working capital blocked in
receivables. The utilization of investment in receivables points satisfactory.
The study of the composing of receivables points out that company
invested much of amount of receivables in debts.
Debt collection period is showing a fluctuating trend. But on the whole it
may be viewed as satisfactory

BIBLIOGRAPHY

Book Name

Author

Financial Management

Tata MC Graw Hill

Publisher
Tata MC Graw Hill

Theory and Practice

Financial Management

Khan & Jain

Khan & Jani

And
Published Annual Reports of
Iconpaint industries.

www.Maha Cement.com
www.indianpaint.com
www.google.com

49