WORKING CAPITAL MANAGEMENT IN Wahid sandhar sugars LTD.

A SUMMER INTERNSHIP REPORT

Submitted by
KURRA RANGA NAIK
Registration no: 11502076
In partial fulfilment of Summer Internship for the award of the degree of
MASTERS OF BUSINESS ADMINISTRATION

School of Business
LOVELY PROFESSIONAL UNIVERSITY
Phagwara, Punjab
July, 2016

ACKNOWLEDGEMENT
Whatever we do and whatever we achieve during the course of our limited life is just not done
only by our own efforts, but by efforts contributed by other people associated with us directly or
indirectly. Words are indeed inadequate to convey my deep sense of gratitude to all those who
have helped me in completing this summer project to the best of my ability. Being a part of this
project has certainly been a unique and a very productive experience.
I sincerely thank Mr Shukhvir singh (HR manager, Wahid sandhar sugar Ltd.) person of amiable
personality, for assigning such a challenging project work which has enriched my work
experience and getting me acclimatized in a fit and final working ambience in the premises of
WSS Ltd.
I acknowledge my gratitude to Mr. Mahesh kumar Sarva (Lovely Professional University) my
mentor, for making all kinds of arrangements to carry the project successfully and for guiding
and helping me to solve all kinds of queries regarding the project work. His systematic way of
working and incomparable guidance has inspired the pace of the project to a great extent.
Last but not least I would like to thank all the employees of Wahid sandhar sugar Ltd. and my
friends for their cooperation, valuable information and feedback during my project.

RANGA NAIK
MBA

WAHID SANDHAR SUGAR LTD. PHAGWARA

Full Name of the Company - Wahid Sandhar Sugars Limited

Address in full - Sugar Mill Complex, G. T. Road, Phagwara
Date of establishment of the - 06-10-2000 ,Company Constitution - Public Limited
Company
Registration Detail - 2943/SIA/IMO/2000 Dated 21.12.00 ,Director of Industries,
Chandigarh
Tin no - 03241041119

Introduction

The Sugar Plant originally established in 1933 by Narang Group of Industries which was later on
taken over by Oswal Group in 1989. The Oswal Group had expanded the crushing capacity of
Plant for sugar cane from 1500 Ton per day to 4500 Ton per day with the latest state of art
technology. The Plant was later on taken over by Wahid and Sandhar Group in the year 2000 and
commenced its operation under the Flagship of M/s Wahid Sandhar Sugars Ltd. Since
incorporation the promoters are running the business very successfully

Promoters
The Plant was taken over by Wahid and Sandhar Group with equal contribution. S. Soukhbir
Singh Sandhar the Chairman of the Company is an NRI and experienced business man. He along
with his brothers is running the franchise in textile and garment sector in the State of U.K.
They have very good business set up in U.K. and properties of handsome value in India. He
has more than 20 years of experience in the business line. His business skill helped in the fast
growth of the Company. S. Jaswinder Singh Bains Vice chairman of the Company is an
agriculturist . S. Jarnail Singh Wahid, Managing Director of the group is a Law Graduate and
heading the farmer community before the takeover. He is very prominent personality in the city
of Phagwara and its surrounding's and very popular among the farmer community.

He had vast experience in handling and tackling their problems and being the point of attraction,
prevails among them. This is because of his influence and command over the farmers community
that the company has not experienced any shortfall in the supply of sugar cane. Besides this he is
now also an experienced Industrialist.

The Board comprises of equal number of Directors from both the groups. Mr. Jarnail Singh
Wahid is also the Chairman of Markfed , which is the largest cooperative society in the Asia.

Main Activities of Company

The Company is mainly engaged in the business of manufacturing and sale of Sugar. At present
the capacity of the Plant is 5500 M.T. for crushing of sugar cane at Phagwara (Punjab) and 2500
M.T At Bhuna Disst Fatehabad (Haryana). Sugarcane being the seasonal crop available only for
5 to 6 months. The Company has also started the Co generation plant of 12 MW.

Brief Manufacturing Process

The sugarcane received from the farmers are downloaded in the carriers, with the automatic
crushing the juice is produced from the sugarcane, purification of juice is performed, and then
with high temperature process the juice is transformed in the sugar crystals. The sugar is
manufactured according to the grading i.e. Large, Small or medium.

Relations with the Labour & Staff

The management has very cordial relations both with the labour and staff members. Total
employment with the Company both for staff and workers vary in the range of 500-800 for on
and off season. At present the management has built
up for Labour Colony, Staff Colony and Officer Colony in 7 to 10 acres of Land at different site
near to the factory site.

Moreover, the company is providing other amenities like water, electricity, furniture and fixture,
either free or at nominal charges according to the category

Bankers
At present the Company is dealing with the State Bank of India, commercial Branch, Jalandhar.
The dealing with the banks are quite satisfactory and even the bankers are very much satisfied
with the promoters.

Financials
Since commencement the Company is doing comparatively good business and it is widely
famous n good financial position of company and efficient use of resources are there according
to need.

Infrastructure & Utilities

The Company has well equipped infrastructure and utilities in terms of own generation of Power,
transportation, vehicles. Etc.

Infrastructure is likely by all the employees and well satisfied with the infrastructure of company
and give regular feedback to management how to improve and management is also ready to
change the infrastructure according to employees need so that employees feel secure and satisfy.

List of Directors

S. Soukhbir Singh Sandhar S. S. Jaswinder Singh Bains s.s jarnail singh wahid
s.s . sandeep singh wahid
( chairman)
(Vice-Chairman)
( Managing Director )
( Director )

Sugar production
Normally, the sugar production is graded in three standards i.e., L, M & S. L-Grade stands for
large crystal size sugar and is retained on 6/7mesh wire nettings. M-Grade stands for medium
crystal size sugar and is retained on 8/10 mesh wire nettings. S-Grade stands for small crystal
size sugar retained on 16 mesh wire nettings for the purpose of above stated sugar gradation,The
mill has the latest most modern IC make sugar sizes /grader.
The mill has for long been known for its premium quality of sugar production. It has a good
command over sizeable portion of sugar market in Phagwara and its surrounding areas. Its LGrade sugar is widely preferred.

Co Generation
Wahid Sandhar Sugar is a leading organization in the North India. This mill has developed its
strength in power generation and raw sugar processing in addition to the production of white
sugar in this mill from decade. We have capability to generate 12 MW with single turbine and
export power to grid upto 8MW. Moreover, we have taken initiative to use biomass as fuel,
which has given direct boost to the farmer's economy. Farmers have started to supply fuel to this
mill rather than to burn in their field, which ultimately has increased their revenue. It is great
initiative towards the development of area Wahid Sandhar Sugar is also capable to process raw
sugar in this plant. Precision and modern technique has been adopted to process raw sugar in the
off-season as well as in the crushing season. This mill has its competency to produce ultra white
sugar.

Molasses
The molasses from which residual sugar cannot be economically recovered is termed as final
molasses. Its quality, in general various from 4.5% on cane crushed and it depends upon the cane
quality and processing. The mill has enough capacity for its storage. A good arrangement for its
preservation also exists. As per the requirement, it is disposed off from time to time, to molasses
based distilleries. it is also supplied to foundries cattle feed industries etc. against their demands.
The quality of molasses is determined on the basis of its T.R.S. content. T.R.S. stands for Total
Reducing Sugars. In cane sugar industry T.R.S. in general, is found to vary from 40 to 45.

Sugar Process
The sugar industry is essentially an agro industry basad on availability of sugarcane in the
surrounding area.
The sugarcane contains not only sucrose but also numerous other dissolved substances, as well
as cellulose or woody fibre .The percentage of sugar in the cane varies from 8 to 16 and depends
to a great extent on the variety of cane, its maturity , condition of the soil , climate and
agriculture practices followed

Composition of cane

Sugar - : 10 to 14%
Redncing sugar - : 0.5 to 2%
Organic matter - : 0.5 to 1%
Inorganic compounus - : 0.2 to 0.6%
Nitrogenous soules - : 0.5 to 1%
Ash - : 0.3 to 0.3%
Fibre - : 12 to16%

Juice extracted from cane is an opague liquid due to air bubbles entangled in it. The colour of the
juice Various from light grey to dark green depending on the colouring matter in the rind of the
cane crashed . It contains a solution of all the soluble substances like sucrose fare particles of
bagasse ,wax ,clay (adhering to cane), coloring matter and albumen.

The position of the normal cane juice falls within the following limits.

Water - : 75 to88%
Sucross - : 10 to 21%
Reducing sugar - : 0.3 to 3.0%
Organic matter than - : 0.5 to 1.0%

REVIEW OF LITERATURE

Eljelly(2002) empirically examined the relationship between profitability and liquidity,

as measured by current ratio and cash gap on a sample of 929 joint stock companies in
Saudi Arabia. Using correlation and regression analysis he found significant negative
relation between firms profitability and its liquidity level, as measured by current ratio.
This relationship is more pronounced for firms with high current ratio and long cash
conversion cycles. At the industry level, he found that cash conversion cycle is of more
importance as a measure of liquidity than current ratio that affects profitability. The firm
size variable was also found to have significant effect on the profitability at the industry

level.
Falope and Agilor(2003), used a sample of 50 Nigerian quoted non- financial firms for
the period 1996-2005. Their study utilized panel data econometrics in a pooled
regression, where time series and cross sectional observations were combined and
estimated. They found a significant negative relationship between net operating
profitability and the average collection period, inventory turnover in days, average
payment period and cash conversion cycle of sample of fifty Nigerian firms listed on the
Nigerian stock exchange. Furthermore, they found no significant variations in the effects
of working capital management between large and small firms.

Raheman and Nazr (2004) studied the effect of different variables of working capital
management including average collection period, inventory turnover in days, average
payment period, cash conversion cycle, and the current ratio on the net operating
profitability of Pakistani firms. They selected a sample of 94 Pakistani firms listed on
Karachi stock exchange for the period of six years from 1999-2004 and found a strong
negative relationship between variables of working capital management and profitability
of the firm. They found that as the cash conversion cycle increases, it leads to decreasing
profitability of the firm and the managers can create positive value for the shareholders
by reducing the cash conversion cycle to a possible minimum level.

Lazaridis and Tryfonidis(2004), conducted a cross sectional study by using a sample of

131 firms listed on the Athens stock exchange for the period of 2001-2004 and found
significant relationship between profitability, measured through gross operating profit,
and the conversion cycle and its components. Based on the results analysis of the annual
data using correlation and regression tests, they suggest that managers can create profits
for their companies by correctly handling the cash conversion cycle and by keeping each
component of the conversion cycle at optimum level.

Gass D (2006), studied cash is the lifeblood of business is an often repeated maxim
amongst financial managers. Working capital management refers to the management of
current or short term assets and short term liabilities. Components of short term assets
include inventories, short term advances, debtors, investments and cash and bank
balances. Short term liabilities include creditors, trade advances, borrowings and
provisions. The major emphasis is however on short term assets, since short term
liabilities arise in the context of short term assets. It is important that companies
minimize risk by prudent working capital management.

MC Clure B (2007), Working capital works describes that cash is the lifeline of the
company. If the life line deteriorates, so does the companys ability to fund operations,
reinvest and meet capital requirements and payments. Understanding a companys cash
flow health is essential to making investment decisions. A good way to judge companys
cash flow prospects is to look at its working capital management. Cash is king, especially
at a time when fund raising is harder than ever. Letting it slip away is an oversight that
investors should not forgive. Analyzing a companys working capital can provide
excellent insight into how well a company handles its cash, and whether it is likely to
have any on hand to fund growth and contribute to shareholder value.

Samiloglu F. and Demirgunes K. (2008), studied that the effect of working capital
management on firms profitability. In accordance with this aim, to consider significant

relationships between firms profitability and components of cash conversion cycle at

length, a sample consisting of ISE listed manufacturing firms for the period of 1998-2007
has been analyzed under a multiple regression model. Empirical findings of the study
show that accounts receivables period, inventory period and leverage affect firm
profitability negatively; while growth affects firm profitability positively.

Beneda, Nancy, Zhang, Yilie(2008), studied impact of working capital management on

operating performance and growth of new public companies. The study also sheds light
on the relationship of working capital with debt level, firm risk and industry. Using a
sample of initial public offerings, the study finds a significant positive association
between high levels of accounts receivables and operating performance. The study further
finds that maintaining control levels of cash and inventories, fixed assets and accounts.

Hardcastle J (2009), studied that working capital sometimes called gross working
capital, simply refers to the firms total current assets, cash, marketable securities,
accounts receivables and inventory. While long term financial analysis primarily concerns
strategic planning, working capital management deals with day-to-day operations. By
making sure that production lines do not stop due to lack of raw materials, that
inventories do not build up because production continues unchanged when sales dip, that
customers pay on time and that enough cash is on hand to make payments when they are
due. Obviously, without good working capital management, no firm can be efficient and
profitable.

RESEARCH METHODOLGY
The term research refers to the systematic method consisting of enunciating the problem,
formulating the hypothesis, collecting the data, analysing the facts and reaching a certain
conclusions either in the form of solution towards the concern problem or in certain

generalisation for some theoretical formulation. Research methodology is a way to solve

systematically the research problem. It may be understood as a science of studying how research
is done scientifically.
The research methodology, I have adopted is the various tools which basically analyse the
financial position of the organisation which are as follows:

Common size profit &loss A/c

Common size Balance sheet
Comparative profit & loss A/C
Comparative balance sheet
Ratio analysis

TIME PERIOD OF THE STUDY

The present study was undertaken during a period of 6 weeks from 1st June 2016- 15th July 2016.
RESEARCH DESIGN
Descriptive research procedure is used for describing the recent situations in the JCT Ltd. and
analytical research to analyse the results by using research tools.
Descriptive research also known as statistical research, describes data and characteristics about
population or phenomenon being studied. Descriptive research answers the questions who, what,
where, when, and how It deals with everything that can be counted and studied.

DATA SOURCES AND COLLECTION METHODS

There are two types of data:

Primary data
Secondary data

PRIMARY DATA: The first handed information collected through various methods is known as
primary data. The researcher directly collects the data that have not been previously collected.

SECONDARY DATA: It is the data that have already been collected by someone else before the
current needs of a researcher. The present researcher only uses these data with related reference
and never collects it from the field.
For the preparation of report on working capital management, I use both primary as well as
secondary data. Primary data:Information gathered through interview and discussions with the
head and employees of various departments and my project guide.
Secondary data:Information gathered through company annual report, published information on
finance, internal circulation booklets, company website.
TOOLS USED
I use different tools to analyse the working capital management of JCT Ltd.

Analysis through working capital ratios

Analysis through schedule change in working capital
Analysis through gross operating cycle and net operating cycle
Analysis through various components of working capital

BACKGROUND OF
WORKING
CAPITAL
MANAGEMENT

THEORETICAL BACKGROUND OF WORKING CAPITAL MANAGEMENT

MEANING OF WORKING CAPITAL
Working capital refers to that part of total capital which is used for carrying out the routine or
regular business operations. In other words, it is the amount of funds used for financing the dayto-day operations. In short, it is the capital with which the business is worked over. Thus, the
capital invested and locked up in various current assets such as stock of raw materials, work in
progress, stock of finished goods, account receivables and cash and bank balance constitute the
working capital.

Working capital may be regarded as life blood of a business. Its effective provision can do much
to ensure the success of a business while its inefficient management can lead not only to loss of
profits but also to the ultimate downfall of the organisation.

According to shoo-in, Working Capital is the amount of funds necessary to cover the
cost of operating the enterprise. Working Capital is also known as Revolving or

Circulating Capital.
According to Genesterberg, Circulating Capital means current assets of a company that
are changed in the ordinary cause of business from one to another form. Example: From
cash to inventory, inventories to bills receivable and bills receivable to cash.
Working capital= Current assets Current liabilities

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 firms 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.
BASIC OBJECTIVE OF WORKING CAPITAL MANAGEMENT:
The basic objective of working capital management is to manage the firms working capital (i.e.,
currents assets and currents liabilities) in such a way that a satisfactory level of working capital
(i.e., neither excessive nor inadequate working capital) is maintained. This is necessary because,
if the working capital is excessive or large, the liquidity position of the firm would, no doubt,
improve, but its profitability would be adversely affected, as funds would remain idle.
Conversely, if the working capital is too small, the, profitability of the firm may improve, but the
liquidity position of the firm would be adversely affected.

Advantages of working capital:

It helps the business concern in maintaining the goodwill.
It can arrange loans from banks and others on easy and favourable terms.
It enables a concern to face business crisis in emergencies such as depression.
It creates an environment of security, confidence, and overall efficiency in a business.
It helps in maintaining solvency of the business.
Disadvantages of working capital:

 Rate of return on investments also fall with the shortage of working capital.
Excess working capital may result into overall inefficiency in organization.
Excess working capital means idle funds which earn no profits.
Inadequate working capital cannot pay its short term liabilities in time.
CLASSIFICATION OF WORKING CAPITAL
Working capital can be classified as follows:

On the basis of time

On the basis of concept

On the basis of concept working capital is of two types:

Gross working capital

Net working capital

GROSS WORKING CAPITAL:

It refers to firm's investment in current assets. Current assets are the assets, which can
beconverted into cash with in a financial year. The gross working capital points to the need of
arranging funds to finance current assets.

NET WORKING CAPITAL:

It refers to the difference between current assets and current liabilities. Net working capital can
be positive or negative. A positive net working capital will arise when current assets exceed
current liabilities and vice-versa for negative net working capital. Net working capital is a
qualitative concept. It indicates the liquidity position of the firm and suggests the extent to which
working capital needs may be financed by permanent sources of funds. Net working capital
alsocovers the question of judicious mix of long-term and short-term funds for financing current
assets.
On the basis of time working capital is of two types:

Permanent working capital

Temporary working capital

PERMANENT WORKING CAPITAL:

There is always a minimum level of working capital, which is continuously required by a firm in
order to maintain its activities. Every firm must have a minimum of cash, stock and other current
assets, this minimum level of current assets, which must be maintained by any firm all the times,
is known as permanent

working capital for that firm. This amount of working capital is constantly and regularly required
in the same way as fixed assets are required. So, it may also be called fixed working capital.
TEMPORARY WORKING CAPITAL:
Any amount over and above the permanent level of working capital is temporary, fluctuating or
variable working capital. The position of the required working capital is needed to meet

fluctuations in demand consequent upon changes in production and sales as a result of

seasonalchanges.
The permanent level is constant while the temporary working capital is fluctuating increasing
and decreasing in accordance with seasonal demands as shown in the figure. In the case of an
expanding firm, the permanent working capital line may not be horizontal. This is because the
demand for permanent current assets might be increasing (or decreasing) to support arising level
of activity. In that case line would be rising.

MAJOR DECISIONS IN WORKING CAPITAL MANAGEMENT

There are two major decisions that management has to take regarding management of working
capital:

What should be the ratio of current assets to sales?

What should be the appropriate mix of short term financing and long term financing
for financing these current assets?

Having dealt with the size of investments in current assets, the methods of financing of working
capital needs our attention. Working capital is financed both internally as well as externally
through long term and short term funds, through debt and ownership funds. In financing working
capital, the maturity pattern of sources of finance depended much coincide with credit period of
sales for better liquidity.
Generally, it is believed that the funds for acquiring the fixed assets should be raised from long
term sources and short term sources should be utilized for raising working capital. But in recent
organisations, both the type of sources is utilized for financing both fixed and current assets.

There are basically three approaches to financing working capital:-

HEDGING APPROACH
This approach is also called matching approach. In this approach there is proper matching of
expected life of asset with the duration of funds. Usually, according to this approach long term
sources are used for financing permanent current assets and fixed assets; and short term sources
are used for financing temporary current assets.

CONSERVATIVE APPROACH
This approach suggests that the entire estimated investments in current assets should be financed
from long term sources and short term sources should be used only for the emergency
requirements. The distinct features of this approach are:

Liquidity is greater
Risk is minimized
The cost of financing is relatively more as interest has to paid even on seasonal
requirements for entire period.

Trade-off between Hedging approach and Conservative approach

The hedging approach implies low cost, high profit and high risk while the conservative
approach leads to high cost, low profits and low risk. Both the approaches are the two extremes
and neither of them serves the purpose of efficient working capital management. A trade-off
between the two will then be an acceptable approach. The level of trade off may differ from case
to case depending upon the perception of risk by the persons involved in financial decision
making. However, one way of determining the trade-off is by finding the average of maximum

and the minimum requirements of current assets. The average requirements so calculated may be
financed out of long-term funds and excess over the average from short-term funds.

AGGRESSIVE APPROACH
The aggressive approach suggests that entire estimated requirements of current asset should be
financed from short-term sources even a part of fixed assets investments be financed from shortterm sources. This approach makes the finance mix more risky, less costly and more profitable.

Risk preferences of management shall decide the approach to be adopted. The risk neutral will
adopt the hedging approach, the risk averse will adopt the conservative approach and risk seekers
will adopt the aggressive approach.

In wss Ltd. the current assets are financed from short term sources as well as from long
term sources. So they follow the Conservative approach of working capital management.

DATA ANALYSIS
AND
INTERPRETATION

WORKING CAPITAL ANALYSIS OF Wahid Sandhar Sugar LIMITED

A. OPERATING CYCLE ANALYSIS

Operating cycle refers to the time period which starts from the raw material purchases and ends
with the realization of receivables. So it is total time gap between raw material purchases to total
debtors collection period. This is also known as working capital cycle. Operating cycle is
therefore expressed in terms of months or weeks or days. The higher the operating cycle period,

the higher will be the working capital requirement. It comprises of raw material conversion
period, work in progress conversion period, finished goods conversion period, debtors collection
period and creditors payment period.
The basic reason for calculating operating cycle is to find out the means for reducing the duration
of operating cycle because if duration of operating cycle will be less than only working capital
requirement will be less.
Operating cycle = R+W+F+D-C
Where,
R= Raw material conversion period

W= Work in progress conversion period

F= Finished goods conversion period

D= Debtors collection period

C= Creditors payment period

1. RAW MATERIAL CONVERSION PERIOD ( RMCP)

Average raw material stock
Raw material consumed during year

X 360
(in Rs.

Lakhs)
PARTICULARS

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

Opening stock of

1,384.02

3,612.22

1,948.36

1,496.95

2,060.95

raw material
Closing sock of raw 3,612.22
material
Average stock of
2,498.12
raw material
Raw material
38,409.25
consumed during the
year
Raw material
23.4 days
conversion period

1,948.36

1,496.95

2,060.13

2,114.98

2,780.29

1,722.65

1,778.54

2,087.55

43,675.05

59,335.88

23,345.15

45,485.81

22.9 days

10.4 days

27.4 days

16.5 days

RMCP
30
25
20
15

RMCP
23.4

27.4
22.9
16.5

10
10.4

5
0
2010-11

2011-12

2012-13

2013-14

2014-15

2. WORK IN PROGRESS CONVERSION PERIOD (WPCP)

Average stock progress
cost of production

X 360
(in Rs. Lakhs)

PARTICULARS

2010-11

2011-12

2012-13

2013-14

2014-15

Opening stock in
progress

3,368.69

4,880.20

4,195.27

3,531.01

4,508.23

Closing stock in
progress

4,880.20

4,195.27

3,531.01

4,508.23

4,082.39

Average stock in
progress

4,124.44

4,537.73

3,863.14

4,019.62

4295.31

Cost of production

88,349.2

101,804.75

100,490.5

83,981.30

95,451.33

Work in progress
conversion period

16.81 days

16.05 days

13.83 days

17.23 days

16.20 days

WPCP
18

16.81

17.23

16.05

16

16.2

13.83

14
12

WPCP

10
8
6
4
2
0
2010-11

2011-12

2012-13

2013-14

2014-15

3. FINISHED GOODS CONVERSION PERIOD (FGCP)

Average finished goods inventory
cost of goods sold

X 360
(In Rs. Lakhs)

PARTICULARS

2010-11

2011-12

2012-13

2013-14

2014-15

Opening stock of
finished goods

4,844.58

3,374.86

3,765.42

3,360.64

3,764.43

Closing stock of
finished goods

3,374.86

3,765.42

3,360.64

3,764.43

4,278.14

Average stock of
finished goods

4,109.72

3,570.14

3,563.03

3,562.53

4,021.28

Cost of goods sold

89,818.95

100,697.98

111,573.22

71,346.25

73,692.77

Finished goods
conversion period

16.47 days

14.04 days

11.49 days

17.97 days

19.6 days

FGCP
19.6
17.97

20

16.47

18

14.04

16
14

11.49

FGCP

12
10
8
6
4
2
0
2010-11

2011-12

2012-13

2013-14

2014-15

4. DEBTORS CONVERSION PERIOD (DCP)

Average debtors
X 360
Credit sales
(In Rs. Lakhs)
PARTICULARS

2010-11

2011-12

2012-13

2013-14

2014-15

Opening debtors

3,360.09

5,996.83

4,791.76

5,652.10

6,723.18

Closing debtors

5,996.83

4,791.76

5,652.10

6,723.18

8,070.88

Average debtors

4,678.46

5,394.29

5,221.93

6,187.64

7,397.03

Credit sales

73,597.33

80,399.17

127,012.78

47,062.69

98,369.77

Debtors
conversion period

22.88 days

24.15 days

14.80 days

47.33 days

27.07 days

DCP
30
25
20
15

DCP
27.07

24.15

22.88

10

22.64
14.8

5
0
2010-11

2011-12

2012-13

2013-14

1014-15

5. CREDITORS CONVERSION PERIOD (CCP)

Average creditors
Credit purchases

X 360
(In Rs.

Lakhs).

PARTICULARS

2010-11

2011-12

2012-13

2013-14

2014-15

Opening creditors

13,562

14,260.46

12,867.13

10,150.76

12,636.95

Closing creditors

14,260.46

12,867.13

10,150.76

12,636.95

12,577.20

Average creditors

13,911.23

13,563.79

11,508.94

11,393.85

12,607.07

Credit purchases

40,638.25

42,749.05

59,082.71

23,206.27

45,955.41

Creditors
payment period

123.23 days

114.22 days

70.12 days

176.75 days

98.75 days

CCP
180
160
140
120
100
80
60
40
20
0

CCP
176.75
123.23

114.22

98.75

70.12

2010-11

2011-12

2012-13

2013-14

2014-15

GROSS OPEARTING CYCLE = RMCP + WPCP + FGCP + DCP

YEAR

RMCP

WPCP

FGCP

DCP

2010-11

23.4

16.81

16.47

22.88

GROSS
OPERATING
CYCLE-Days
79.56

2011-12

22.9

16.05

14.04

24.15

77.14

2012-13

10.4

13.83

11.49

14.80

50.16

2013-14

27.4

17.23

17.97

22.64

85.24

2014-15

16.5

16.20

19.6

27.07

79.37

Gross operating cycle

100
80
60
40

Gross operating cycle

79.56

85.24

77.14

79.37

50.16

20
0
2010-11

2011-12

2012-13

2013-14

2014-15

ANALYSIS:
Operating cycle is the length of time between a firm's purchase of inventory and the receipt of
cash from accounts receivable. It is basically the time required for a business to turn purchases
into cash receipts from customers. In the year 2010-11, operating cycle of company was 79.56
days and in the year 2011-12, it reduced to 77.14 years. The reason for this reduction was that as
compared to previous year, in year 2010-11 the company has managed to convert its stock be it
was raw material stock, work in progress inventory or finished goods faster into cash as
compared to previous year. In the year 2012-13, company has managed to reduce its operating
cycle to 50.16 days; it was just approximately 1.7 months. The reason for this was faster
conversion of inventory into saleable goods. The reason behind this is the more and abundant
availability of raw material by the company and moreover in that financial year company has
managed to collect cash from its debtors in short span of time as compared to previous financial
years. Again in financial year 2013-14 and financial year 2014-15, the operating cycle of
company has increased due to relaxed credit policy for its customers and increased inventory
conversion period.
Thus it can be analysed that the operating cycle of WSS Ltd. is almost consistent in the past 5
years as the company has managed to turn its purchases into cash receipts in approximately
between 2.5 months to 3 months. And it can be also analysed that financial position of WSS Ltd.
is quite good as its shorter operating cycle allows it to acquire cash more quickly as company is
using this cash in making further purchases and in making payment of its short term debts.

Conclusion
As I have come to the end of my study I have had the following experiences while
conductingthis study.
It was a very enlightening experience for me as I got to learn many new things
throughthis study.
Various visits to the companies (Luxmi group & Zedpoint) and ample interaction withthe
people has broaden my horizon and taught me as to how are the HR policies in such big
organizations made.
I will thus always keep in mind the basic points necessary in our day-to-day life and
thank all the people who have helped me in the completion of my project