A STUDY ON CASH MANAGEMENT ON

THE FLAVORS INDIA (P) LTD,PUDUCHERRY

 CHAPTER-I

INTRODUCTION:

The need for Cash to run the day-to-day business activities cannot be
overemphasized. One can hardly find a business firm, which does not require any
amount of Cash. Indeed, firms differ in their requirements of the Cash.

A firm should aim at maximizing their wealth. In its endeavor to do so, a

firm should earn sufficient return from its operation. The firm has to invest enough
funds in current asset for generating sales. Current asset are needed because sales
do not convert into cash instantaneously.

There is always an operating cycle involved in the conversion of sales into

cash. The objectives are to analyze the Cash management and to determine
efficiency in cash, inventories, debtors and creditors. Further, to understand the
liquidity and profitability position of the firm. These objectives are achieved by
using ratio analysis and then arriving at conclusions, which are important to
understand the efficiency / inefficiency of Cash.

The company goes in insufficient manner in the past five years. So the
company takes steps to improve the performance and concentrate in local areas.
The company financial capacities are low and borrow funds from the government
and outsiders. It creates liabilities for the company. The working capital is
reducing from year to year. So they should take some necessary steps for adding
more amounts to working capital.
 Cash is the important current asset for the operations of the business. Cash
is the basic input needed to keep the business running on a continuous basis; it is
also the ultimate output expected to be realized by selling the service or product
manufactured by the firm. The firm should keep sufficient cash, neither more nor
less. Cash shortage will disrupt the firm’s manufacturing operations while
excessive cash will simply remain idle, without contributing anything towards the
firm’s profitability. Thus, a major function of the financial manager is to maintain
a sound cash position.

Cash is the money which a firm can disburse immediately without any
restriction. The term cash includes coins, currency and cheques held by the firm,
and balances in its bank accounts. Sometimes near-cash items, such as marketable
securities or bank times deposits, are also included in cash. The basic
characteristic of near-cash assets is that they can readily be converted into cash.
Generally, when a firm has excess cash, it invests it in marketable securities. This
kind of investment contributes some profit to the firm.

FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of:

(i) Cash flows into and out of the firm,

(ii) Cash flows within the firm, and
(iii) Cash balances held by the firm at a point of time by financing deficit or
investing surplus cash.

It can be represented by a cash management cycle. Sales generate cash which has
to be disbursed out. The surplus cash has to be invested while deficit this cycle at
a minimum cost. At the same time, it also seeks to achieve liquidity and control.
 Cash management assumes more importance than other current assets
because cash is the most significant and the least productive asset that a firm’s
holds. It is significant because it is used to pay the firm’s obligations. However,
cash is unproductive. Unlike fixed assets or inventories, it does not produce goods
for sale. Therefore, the aim of cash management is to maintain adequate control
over cash position to keep the firm sufficiently liquid and to use excess cash in
some profitable way.

Cash management is also important because it is difficult to predict cash

flows accurately, particularly the inflows, and there is no prefect coincidence
between the inflows and outflows of cash. During some periods, cash outflows
will exceed cash inflows, because payments for taxes, dividends, or seasonal
inventory build up. At other times, cash inflow will be more than cash payments
because there may be large cash sales and debtors may be realized in large sums
promptly. Further, cash management is significant because cash constitutes the
smallest portion of the total current assets, yet management’s considerable time is
devoted in managing it. In recent past, a number of innovations have been done in
cash management techniques. An obvious aim of the firm these days is to manage
its cash affairs in such a way as to keep cash balance at a minimum level and to
invest the surplus cash in profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of
synchronization between cash receipts and payments, the firm should develop
appropriate strategies for cash management. The firm should evolve strategies for
cash management. The firm should evolve strategies regarding the following four
facets of cash management.
  Cash planning: Cash inflows and outflows should be planned to project
cash surplus or deficit for each period of the planning period. Cash budget
should be prepared for this purpose.
 Managing the cash flows: The firm should decide about the properly
managed. The cash inflows should be accelerated while, as far as possible,
the cash outflows should be decelerated.
 Optimum cash level: the firm should decide about the appropriate level of
cash balances. The cost of excess cash and danger of cash deficiency should
be matched to determine the optimum level of cash balances.
 Investing surplus cash: The surplus cash balances should be properly
invested to earn profits. The firms should decide about the division of such
cash balances between alternative short-term investment opportunities such
as bank deposits, marketable securities, or inter-corporate lending.
MOTIVES FOR HOLDING CASH

The firm’s need to hold cash may be attributed to the following three
motives:

 The transactions motive

 The precautionary motive
 The speculative motive
TRANSACTION MOTIVE

The transactions motive requires a firm to hold cash to conduct its business
in the ordinary course. The firm needs cash primarily to make payments for
purchases, wages and salaries, other operating expenses, taxes, dividends etc. The
need to hold cash would not arise if there were perfect synchronization between
cash receipts and cash payments, i.e., enough cash is received when the payment
has to be made. But cash receipts and payments are not perfectly synchronized.
For those periods, when cash payments exceed cash receipts, the firm should
maintain some cash balance to be able to make required payments. For
transactions purpose, a firm may invest its cash in marketable securities. Usually,
the firm will purchase securities whose maturity corresponds with some anticipated
payments, such as dividends or taxes in the future. Notice that the transactions
motive mainly refers to holding cash to meet anticipated payments whose timing is
not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE

The precautionary motive is the need to hold cash to meet contingencies in

the future. It provides a cushion or buffer to withstand some unexpected
emergency. The precautionary amount of cash depends upon the predictability of
cash flows. If cash flows can be predicted with accuracy, less cash will be
maintained for an emergency. The amount of precautionary cash is also influenced
by the firm’s ability to borrow at short notice when the need arises. Stronger the
ability of the firm to borrow at short notice, less the need for precautionary
balance. The precautionary balance may be kept in cash and marketable securities.
Marketable securities play an important role here. The amount of cash set aside for
precautionary reasons is not expected to earn anything; the firm should attempt to
earn some profit on it. Such funds should be invested in high-liquid and low-risk
marketable securities. Precautionary balances should, thus, be held more in
marketable securities and relatively less in cash.

SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-
making opportunity to make profit may arise when the security prices change. The
firm will hold cash, when it is expected that interest rates will rise and security
prices will fall. Securities can be purchased when the interest rate is expected to
fall; the firm will benefit by the subsequent fall in interest rates and increase in
security prices. The firm may also speculate on materials prices. If it is expected
that materials prices will fall, the firm can postpone materials purchasing and make
purchases in future when pric4e actually falls. Some firms may hold cash for
speculative purposes. By and large, business firms do not engage in speculations.
Thus, the primary motives to hold cash and marketable securities are: the
transactions and the precautionary motives.

CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm
needs cash to invest in inventory, receivable and fixed assets and to make payment
for operating expenses in order to maintain growth in sales and earnings.

It is possible that firm may be making adequate profits, but may suffer from
the shortage of cash as its growing needs may be consuming cash very fast. The
‘poor cash’ position of the firm cash is corrected if its cash needs are planned in
advance. At times, a firm can have excess cash may remain idle.

Again, such excess cash outflows. Such excess cash flows can be
anticipated and properly invested if cash planning is resorted to.

Cash planning is a technique to plan and control the use of cash. It helps to
anticipate the future cash flows and needs of the firm and reduces the possibility of
idle cash balances ( which lowers firm’s profitability ) and cash deficits (which can
cause the firm’s failure).

Cash planning protects the financial condition of the firm by developing a

projected cash statement from a forecast of expected cash inflows and outflows for
a given period. The forecasts may be based on the present operations or the
anticipated future operations. Cash plans are very crucial in developing the overall
operating plans of the firm.

Cash planning may be done on daily, weekly or monthly basis. The period
and frequency of cash planning generally depends upon the size of the firm and
philosophy of management. Large firms prepare daily and weekly forecasts.
Medium-size firms usually prepare weekly and monthly forecasts. Small firms
may not prepare formal cash forecasts because of the non-availability of
information and small-scale operations. But, if the small firms prepare cash
projections, it is done on monthly basis. As a firm grows and business operations
become complex, cash planning becomes inevitable for its continuing success.

OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit:

To avoid holding unnecessary large balances of cash, most firms attempt to

make arrangements at borrow money is case of unexpected needs. With such an
agreement, the firm normally pays interest only during the period that the money is
actually used.

2. Money market rates:

If money will bring a low return a firm may choose not to invest it. Since the
loss or profit is small, it may not be worth the trouble to make the loan. On the
other hand, if interest rates are very high, every extra rupee will be invested.

3. Variation in cash flows:

Some firms experience wide fluctuation in cash flows as a routine matter. A

firm with steady cash flows can maintain a fairly uniform cash balance.
4. Compensating balance:

If a firm has borrowed money from a bank, the loan agreement may require
the firm to maintain a minimum balance of cash in its accounts. This is called
compensating balance. In effect this requires the firm to use the services of bank a
guaranteed deposit on which it pays no interest. The interest free deposit is the
bank’s compensation for its advice and assistance.

CASH MANAGEMENT – BASIS STRATEGIES

The management should, after knowing the cash position by means of the
cash budget, work out the basic strategies to be employed to manage its cash.

CASH CYCLE:

The cash cycle refers to the process by which cash is used to purchase
materials from which are produced goods, which are them sold to customers.

Cash cycle=Average age of firm’s inventory

+Days to collect its accounts receivables

-Days to pay its accounts payable.

The cash turnover means the numbers of times firm’s cash is used during each
year.

360

Cash turnover = ----------------

Cash cycle
The higher the cash turnover, the less cash the firm requires. The firm should,
therefore, try to maximize the cash turn.

MANAGING COLLECTIONS:

a) Prompt Billing:

By preparing and sending the bills promptly, without a time log between the
dispatch of goods and sending the bills, a firm can ensure earlier remittance.

b) Expeditious collection of cheques:

An important aspect of efficient cash management is to process the cheques

receives very promptly.

c) Concentration Banking:

Instead of a single collection center located at the company headquarters,

multiple collection centers are established. The purpose is to shorten the period
between the time customers mail in their payments and the time when the company
has use of the funds are then to a concentration bank – usually a disbursement
account.

d) Lock-Box System:

With concentration banking, a collection center receives remittances,

processes them and deposits them in a bank. The purpose is to lock-box system is
to eliminate the time between the receipt of remittances by the company and their
deposit in the bank. The company rents a local post office box and authorizes its
bank in each of these cities to pick up remittances in the box. The bank picks up
the mail several times a day and deposits the cheque in the company’s accounts.
The cheques are recorded and cleared for collection. The company receives a
deposits the cheque in the company’s accounts. The cheques are recorded and
cleared for collation. The company receives a deposit slip and a lift of payments.
This procedure frees the company from handling a depositing the cheques.

CONTROL OF DISBURSMENT

a) Stretching Accounts Payable

A firm should pay its accounts payables as late as possible without

damaging its credit standing. It should, however, take advantages of the cash
discount available on prompt payment.

b) Centralized Disbursement

One procedure for rightly controlling disbursements is to cenrealise payables

in to a single account, presumably at the company’s headquarters. Such an
arrangement would enable a firm to delay payments and can serve cash for several
reasons. Firstly, it increases transit time. Secondly, if a firm has a centralized
bank account, a relatively smaller total cash balances will be needed.

c) Bank Draft

Unlike an ordinary cheque, the draft is not payable on demand. When it is

presented to the issuer’s bank for collection, the bank must present it to the issuer
for acceptance. The funds then are deposited by the issuing firm to cover
payments of the draft. But suppliers prefer cheques. Also, bank imposes a higher
service charge to process them since they require special attention, usually manual.

d) Playing the float

The amount of cheques issued by the firm but not paid for by the bank is
referred to as the “payment float”. The differences between “payment float” and
“collection float” are the net float. So, if a firm enjoys a positive “net float”, it may
issue cheques even if it means having an ever drown account in its books. Such an
action is referred to as “playing the float”, within limits a firm can play this game
reasonably safely.

Thus management of cash becomes essential and it should be seen to, that
neither excessive nor inadequate cash balances are maintained.

CASH FLOW ANALYSIS

The cash flow analysis is done with the help of cash flow statement. A cash
flow statement is a statement depicting changes in cash position from one period to
another. It is an important planning tool. Cash flow statement gives a clear picture
of the source of cash, the uses of cash and the net changes in cash. The primary
purpose of cash flow statement is to show that as to where from the cash to be
acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its
chief advantages are as follows.

1. Helps in efficient cash management

Cash flow analysis helps in evaluating financial policies and cash position.
Cash is the basis for all operation and hence a projected cash flow statement will
enable the management to plan and co-ordinate the financial operations properly.
The management can know how much cash is needed from which source it will be
derived, how much can be generated, how much can be utilized.

2. Helps in internal financial management

 Cash flow analysis information about funds, which will be available from
operations. This will helps the management in repayment of long-term debt,
dividend policies etc.,

3. Discloses the movements of Cash

Cash flow statement discloses the complete picture of cash movement. The
increase in and decrease of cash and the reasons therefore can be known. It
discloses the reasons for low cash balance in spite of heavy operation profits on for
heavy cash balance in spite of low profits.

4. Discloses success or failure of cash planning

The extent of success or failure of cash planning be known by comparing the

projected cash flow statement with the actual cash flow statement and necessary
remedial measures can be taken.

DETERMINE THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a

sound liquidity position of the firm so that the dues are settled in time. The firm
needs cash to purchase raw materials and pay wages and other expenses as well as
for paying dividend, interest and taxes. The test of liquidity is the availability of
cash to meet the firm’s obligations when they become due.

A firm maintains the operating cash balance for transaction purposes. It may
also carry additional cash as a buffer or safety stock. The amount of cash balance
will depend on the risk-return trade-off. If the firm maintains small cash balance,
its liquidity position weakens, but its profitability improves as the released funds
can be invested in profitable opportunities (marketable securities). When the firm
needs cash, it can sell its keeps high cash balance, it will have a strong liquidity
position but its profitability will be low. The potential profit foregone on holding
large cash balance is an opportunity cost to the firm. The firm should maintain
optimum – just to enough, neither too much nor too little – cash balance. How to
determine the optimum cash balance if cash flows are predictable and if they are
not predictable.

CASH FLOW STATEMENT:

A cash flow statement is used in conjunction with the other financial statements,
provides information that enables users to evaluate the change in net assets of an
enterprise, its financial structure (including its liquidity and solvency), and its ability to
affect the amounts and timing of cash flow in order to adapt to changing circumstance
and opportunities. Cash flow information is useful in assessing the ability of the
enterprises to generate cash and cash-equivalents and enables users to develop models to
assess and compare the present value of the future cash flows of different enterprises. It
also enhances the comparability of the reporting of operating performance by different
because it eliminates the effects of using different accounting treatments for the same
transactions and events.
OBJECTIVES OF STUDY:

 To make Payment According to Payment Schedule:-

Firm needs cash to meet its routine expenses including wages, salary, taxes etc.
Following are main advantages of adequate cash-
To prevent firm from being insolvent.
The relation of firm with bank does not deteriorate.
Contingencies can be met easily.
It helps firm to maintain good relation’s with suppliers.

NEED FOR THE STUDY:

The importance of Cash management in any industrial concern cannot be

overstressed. Under the present inflationary condition, management of Cash is
perhaps more important than even management of profit and this requires greatest
attention and efforts.

It needs vigilant attention as each of its components require different types

of treatment and it throws constant attention on exercise of skill and judgment,
awareness of economic trend etc, due to urgency and complicacy the vital
importance of Cash.

The anti-inflationary measure taken up creating a tight money condition has

placed working capital in the most challenging zone of management and it requires
a unique skill for its management. Today, the problem of managing Cash has got
the recognition of separate entity, so its study and management is of major
importance to both internal and external analyst to judge the current position of the
business concerns. Hence, the present study entitled “A study on Cash
Management” has been taken up.

SCOPE IF THE STUDY

Cash management attempts, among other things, to decrease the length and
impact of these current periods.

A collection receipt point closer to the customer-;perhaps with an outside

third-party vendor to receive, process, and deposit the payment (check)-;is one way
to speed up the collection.

The effectiveness of this method depends on the location of the customer;

the size and schedule of its payments; the firm's method of collecting payments;
the costs of processing payments; the time delays involved for mail, processing,
and banking; and the prevailing interest rate that can be earned on excess funds.

The most important element in ensuring good cash flow from customers,
however, is establishing strong billing and collection practices.
LIMITATIONS OF THE STUDY:

However, there can be a number of issues with utilizing the statement of

cash flows as an investor speculating about different organizations. The simplest
drawback to a cash flow statement is the fact that cash flows can (but not always)
omit certain types of non-cash transactions. As the name implies, the statement of
cash flows is focused exclusively on tangible changes in cash and cash equivalents.
 CHAPTER-II

PROFILE OF THE COMPANY

The Flavors India (p) Ltd is a well established and systematically organized
company engaged in the manufacture of food flavours, food colours and caramel. The
genesis of flavors India dates back to 1975 after an in-depth and intensive market survey
to cater to the needs of high demand areas
The promoter late shri R.Bramanandam and his team had the business acumen,
professional background obtained after serving a long stint in flavors industry, sound
business ethics, skills and had brought this to bear in the discipline and systems required
to maintain and sustain quality in such a mass production.
The Flavors India (p) Ltd operates from puducherry (India) previously a French
colony and now the union territory capital, about 120kms from Chennai airport, south
India. Garnering and utilizing the skilled low-cost manpower strength that puducherry
offer, flavors India has staff strength of 100 personnel headed by the board of directors,
who control the different divisions of the organization.
Quality:

For the Flavors India with 30 years of standing, quality is the day to success. Our
plant has fully equipped quality control laboratories where the raw materials, in process
and finished products are rigorously tested for their quality standards.
Our qualified manufacturing and technical personnel deal with material handling,
shop floor and production activities. We maintain stringent quality control measure and
hygienic condition as per the specification of Bureau of India Standards. The research
and development wing devotes its fulltime towards better product development, cost
.effective methods and new products.
The Flavors India (p) Ltd is an ISO 9001_2000 certified company ensuring the
quality systems practiced .with a commitment towards safe environment we have
development an efficient Effluent Treatment Plant fulfilling the pollution control Board
needs.

CUSTOMER BASE:

Our motto being “customer is our Boss” a good amount of time and skill is put in
and translated into action by formulating new products as demands by the customers.
Our products command its reputation in the market for the past 3decades and
more in leading food processing companies throughout the country and overseas.
Our customer service is always prompt and sure as the” sun –rises and sun set”

AWARDS:

The Flavors India (p) Ltd believes in the concepts of “the company as a family
“and “working together towards the future” with various welfare programmes for the
employees.
It was a moment of pride when government of puducherry bestowed on us thrice
the Good Industries Relations Award for the consecutive years 2001, 2002and 2003.
We promise to march towards the future with the same zeal and motive.
OUR PRODUCTS

TOP SOFT DRINK CONCENTRATES,

TOP MIST,
TOP LIQUID PRESERVATIVE,
TOP CONCENTRATED OILS,
TOP FOOD COLOURS WITH ISI MARK,
TOP FLAVORS,
TOP DRY MIX POWDER FLAVORS,
TOP LIQUOR FLAVORS,
TOP CARAMEL WITH ISI MARK,
TOP CULINARY FLAVORS,
TOP FLAVORS,
TOP DRY MIX POWDER FLAVORS,
TOP ENCAPSULATED FLAVORS,
TOP FLAVORS,
TOP DUST-ON POWDER FLAVORS,
TOP FLAVORS.
 ORGANISATIONAL CHART

MANAGING DIRECTOR

FACTORY INCHARGE

PRODUCTION QUALITY FINANCE MARKETING

DEPARTMENT DEPARTMENT DEPARTMENT
CONTROL

INCOME TAX
ACCOUNTS

SENIOR

ASSISTANT

JUNIOR

ASSISTANT
FINANCE DEPARTMENT:

The accounts department of The Flavors India (p) ltd functions so as to keep as a system
record of the daily events of the business. It maintain records of all financial transaction to find
out the profit and loss according during the year and to financial status of the company, which
helps them to take quick and correct policy decision.
OBJECTIVE OF FINANCE DEPARTMENT:

 To determine the financial status of the company balance sheet, profit and loss
accounts.
 To help the management to analyses the financial standard of the company so that
they can take quick correct decision.
 To provide useful information to management.
 Analysis the cash flow of the company it will useful for new ventures.

SYSTEM OF ACCOUNTING:
All the transaction in the company is enter into to the system. There is more lapse of
time in the company to do the other work. The daily transaction of the company is registered
under the computer. The invoice, Quotation etc are sending through the system.
FUNCTING FINANCE DEPARTMENT OF THE FIRM
The work performed by the account department has follows.
1. Preparation of cash and bank vouchers ( both debtors and creditors)
2. Maintaining cash and bank book.
3. Bank reconciliation statement.
4. Preparing purchasing journal, salaries, wages etc.
5. Preparing debtors and creditors notes.
6. Posting journal to journal books.
7. Maintaining general ledger accounts.
8. Maintaining subsidiary books.
9. Preparing trial balance, profit and loss account and balance sheet.
10. Filling of return of income tax both company and employers to income tax departments
 CHAPTER-III

REVIEW OF LITERATURE

Agrawal (1983) in his study relating to 34 large manufacturing and trading

public limited companies, observed the use of modern control techniques in the
areas of inventory, receivables and cash management. His study revealed that there
exist sufficient scope for reduction in investment in almost all the segments of
working capital. However the study tried to draw only general conclusions for all
categories of industries and businesses covered in the sample.
Khandelwal (1985) in his study analyzed the performance of working capital
management in 40 small scale industries located in Jodhpur Industrial Estate. This
study made a detailed analysis of performance of management of inventory,
receivables, cash and financing aspects in the selected units from 1975-76 to 1979-
80.
Rajeswara Rao (1985) thoroughly examined the managerial aspects of
inventories, receivables and advances and cash of certain Central Public
Enterprises in India during 1971-72 to 1976-77. The study concluded that the
policies and practices of working capital management in Public Enterprises are not
useful for achieving the working capital management objectives.
Panda (1986) studied the problems of working capital in 26 selected small
manufacturing companies in the State of Orissa. The study covered the problems of
adequacy, the choice, sources and problems of raising working capital.
Kamta Prasad Singh et.al’s(1986) study analyzed the effectiveness with
which the working capital has been utilized in Indian Industries in general and the
Fertilizer Industry in particular.
Panda and Satapathy’s(1988) study relates to the analysis of the structure of
working capital in 10 selected private sector Cement Companies which are listed in
different stock exchanges in India. This study was mainly based on the data
obtained from the Stock Exchange Official Directory during 1969 to 1985. This
study covered only broader aspects of working capital but failed to study
intensively each component of working capital.
Jain (1988) studied the current practices in the management of working
capital in ten selected State Enterprises of Rajasthan and examined the
management performance in this sphere. It also studied the possible remedial
measures that could be used efficiently and effectively during 1980-84. It offered
various suggestions for the improvement of working capital management enabling
State Enterprises reduce their dependence on outside funds.
Mukharjee (1988) studied the performance of management of working
capital and its components in twenty Central Industrial and Manufacturing
Undertakings which are engaged in the production of non-homogeneous items.
This study covered a period of five years from 1974-75 to 1978-79.
Verna’s (1989) study on working capital management covered selected
units both in public sector and the integrated steel plants in private sector in the
country. He made a detailed comparative study of the management of various
components of working capital between the selected public and private sector units
during the period from 1978-79 to 1985-86.
Rao(1990) in his study analyzed the performance of working capital
management in five public enterprises engaged in manufacturing activity and
which are owned and managed by the Andhra Pradesh Government during the
decade 1969-70 to 1978-79.
This study analyzed inventory, receivables and cash management and the
financing pattern of the working capital. Apart from these aspects, impact of
inflation on working capital management had also been analyzed in their study.
Mohan Reddy’s (1991) study relates to the management of working capital
in six selected large scale manufacturing undertaking in the private sector in
Andhra Pradesh during 1977 to 1986. This study covered one unit each in Cement,
Cotton Textiles, Fertilizers, Food products, Paper and Plastic industries.
Jain (1993)studied the performance of working capital management in
selected units of Paper Industry during 1981-82 to 1987-88. He made a comparison
between two public sector and five private sector paper mills. This study also
analyzed the performance of payables management, apart from the usual areas,
such as inventory, receivables, cash management and financing pattern of working
capital during the study period.
Bairathi (1993) studied the performance of working capital management in
selected units of Non-ferrous Metal Industries in Public Sector during 1981-82 to
1985-86. This study analyzed the liquidity and financing aspects of working capital
apart from a thorough analysis of inventory, receivables and cash management.
Apart from the above published works, many other contributions have appeared in
different issues of leading journals and periodicals, from time to time, throwing
light on chosen aspects in the management of working capital. These include the
following;
 Iyer (1974) on “The funds flow and cash flow analysis”, Mishra (1976) on
“Cash Management in Public Enterprises”, Bazle Karim and Bahadur (1978) on
“Spare parts management in public enterprises”, Prakash (1979) on” Unused
Inventories in Central Government Enterprises”, Mathur (1979) on ” Management
of Inventories in Public sector steel plants”, Vijayasaradhi and Raeswara Rao
(1980) on ” Management of Advances of Public Enterprises in India”, Mishra
(1980) on ” Bank Financing of Working capital in public enterprises”, Wahi (1980)
on “Organization of Materials Management Function”, Banga (1980) on
“Importance of Material Handling in Corporate System”, Vijayasaradhi and
Rajeswara Rao (1980) on “Cash Management in a Multi-division Enterprise”, Rao
and Rao (1990) on “Inventory Management in Public Sector Units”, Vijayasaradhi
(1981) on “Problems of Working Capital management in public enterprises”,
Panda (1981) on “Inventory Management”, Rajeswara Rao (1983) on” Working
capital Problems of public enterprises”, Sharma and Agrawal (1986) on “Working
Capital Management in a State Transport Undertaking”, Khatri (1990) on
“Working finance in Atlas Cycle Industries Ltd”, Rao and Chinta Rao (1991) on
“Evaluating Efficiency of Working Capital Management – Are the conventional
Techniques adequate?”, Patro (1992) on “Working capital Management in State
Transport Undertakings; with special reference to GSRTC”, Das (1993) on
“Working Capital Management in the Public Sector Undertakings in India”,
Siddharth (1994) on “Working Capital Turnover in Pharmaceutical Companies”,,
Debasish Banarjee et.al (1994) on “Working capital management: a overview of
Tobacco Companies”, Bag (1994) on “Current Funds Analysis”, Sukamal Datta
(1994) on “Cash Working capital requirement by using Operating cycle concept –
A case study”, Mohan (1995) on “Working capital management of the cooperative
Spinning Mills”, Banday (1996) on “Inventory Management in Indian Industry;
 A study of Textile industry ”, Hossain (1996) on “Receivables Management
in Public Sector Textile Industry of Bangladesh: a case study”, Hyderabad (1996)
on “Management of Trade credit as a source of finance”, Aramvalarthan (1996) on
“Estimating working capital requirements”, Dr. Ghosh (2007) on “Working Capital
Management Practices in some selected Industries in India”, Dr. Hitesh (2007) on
“A Study of Receivables Management of Indian Pharmaceutical Industry”, Ghosh
(2008) on Liquidity Management :
A case study of TISCO”, Singh (2011) on “Effects of Size on Working
Capital Levels of the Firms’ in Steel Industry in India”, Rakesh Kumar and
Kulkarni (2012) on “Working Capital Structure and Liquidity Analysis: An
Empirical Research on Gujarat Textiles Manufacturing Industry”.

RESEARCH METHODOLOGY

RESEARCH DESIGN:

The research approach used for the study is descriptive. The form of the study is on
the financial statement analysis in general and specific to the cash position.

DATA COLLECTION

PRIMARY DATA:

The primary data is collected from the personnel interview.

SECONDARY DATA:

The study has been made using secondary data, which are obtained from annual
reports and statements of accounts. The study is period for the annual reports and
statements of accounts extended form the year 2011-12 to 2015-16.

4.3 ANALYTICAL TOOLS FOR THE STUDY:

The researcher for the purpose of analysis and interpretation of the following tools have
been need

 CASH FLOW STATEMENT

 RATIO ANALYSIS
 CASH BUDGETING

PERIOD OF STUDY:

The study includes 5 years (2011-12 to 2015-16) financial rates of the firms. The study
was conducted for 1 month’s period.

CHAPTER-IV

DATA ANALYSIS AND INTERPRETATIONS

CASH FLOW STATEMENT:

A cash flow statement is used in conjunction with the other financial

statements, provides information that enables users to evaluate the change in net
assets of an enterprise, its financial structure (including its liquidity and solvency),
and its ability to affect the amounts and timing of cash flow in order to adapt to
changing circumstance and opportunities. Cash flow information is useful in
assessing the ability of the enterprises to generate cash and cash-equivalents and
enables users to develop models to assess and compare the present value of the
future cash flows of different enterprises. It also enhances the comparability of the
reporting of operating performance by different because it eliminates the effects of
using different accounting treatments for the same transactions and events.

CASH FLOW STATEMENT (2011-2012)

TABLE NO: 5.1

31-03- 31-03-
PARTICULARS 2011 2012

OPENING BALANCES

Cash in Hand 61738

SOURCE OF CASH

Central Excise 2151 779 1372

Secured Loan 3363880 3406134 42254

CASHFROMOPERATION

Net Profit 247341 206964 40377

ADD: Increase in Sundry

Creditors 3363458 3747384 383926

Increase in Other Liabilities 300217 300466 249

Less Increase in Inventories 7310787 7466168 155381

 -
Increase in Sundry Debtors 2154425 2473039 318614 49443

TOTALCASHAVAILABLE 16742259 17600934 55921

APPLICATION OF CASH

Purchases of Fixed Assets 744630 749327 4697

Loans & Advance 162581 194320 31739

Income Tax 77494 84556 7062

CLOSING BALANCE

Cash in Hand 12423

TOTALAPPLICATION
AVAILABLE 984705 1028203 55921
 CASH FLOW STATEMENT (2012-13)

TABLE NO-5.2

31-03-
PARTICULARS 2012 31-03-2013

OPENING BALANCES

Cash in Hand 12423

SOURCE OF CASH

Income Tax 194320 206000 2650

Sale of Fixed Assets 726292 749327 23035

CASH FROM
OPERATION

Net Profit 247341 261547 14206

ADD Increase in Other

Liabilities 300466 379275 78809

Decrease in Inventories 7466168 5698609 1767559

3747384 2470569 1276815

LESS Decrease in Sundry
Creditors

Increase in Sundry
Debtors 2473039 2651776 178737 405022

TOTAL CASH
AVAILABLE 15155010 12417103 443130

APPLICATION OF
CASH

Loans & Advance 194320 206000 11680

Secured Loan 3406134 3135484 270650

Unsecured Loan 1255000 1105000 150000

Central Excise 779 5313 4534

CLOSING BALANCE

Cash in Hand 6266

TOTAL APPLICATION
AVAILABLE 4856233 4451797 443130
 CASH FLOW STATEMENT (2013-2014)

TABLE NO: 5.3

31-03-
PARTICULARS 2013 31-03-2014

OPENING BALANCES

Cash in Hand 6266

SOURCE OF CASH

Central Excise 5313 2596 2717

CASH FROM
OPERATION

Net Profit 261547 267548 5999

ADD Increase in Sundry

Creditors 2470569 3553092 1082523
Increase in Other
Liabilities 379275 530420 151145

Decrease in Inventories 5698609 4378883 1319726

LESS Increase in Sundry

Debtors 2651776 4542399 1890623 668770

TOTAL CASH
AVAILABLE 11467089 13274938 677753

APPLICATION OF
CASH

Purchases of Fixed Assets 726292 991175 264883

Loans & Advance 206000 332424 126424

Secured Loan 3135484 3088824 46660

Unsecured Loan 1105000 900000 205000

Income Tax 81906 107401 25495

CLOSING BALANCE

Cash in Hand 9291

TOTAL APPLICATION
AVAILABLE 5254682 5419824 677753
 CASH FLOW STATEMENT (2014-15)

TABLE NO-5.4

31-03-
PARTICULARS 2014 31-03-2015

OPENING BALANCES

Cash in Hand 9291

SOURCE OF CASH

Sale of Fixed Assets 991175 792972 198203

Unsecured Loan 900000 1200000 300000

CASH FROM
OPERATION

Net Profit 267546 309347 41801

ADD Increase in Other

Liabilities 530420 531981 1561

Decrease in Sundry
Debtors 4542399 3652395 890004

Decrease in Inventories 4378883 3950640 428243

LESS Decrease in Sundry

Creditors 3553092 3258702 294390 1067219

TOTAL CASH
AVAILABLE 15163515 13696037 1574713
 APPLICATION OF
CASH

Loan & Advance 332424 377608 45184

Unsecured Loan 3088824 15892601 1499564

Central Excise 2596 24695 22099

Income Tax 107401 108612 1211

CLOSING BALANCE

Cash in Hand 6655

TOTAL APPLICATION
AVAILABLE 3531245 16403516 1574713
 CASH FLOW STATEMENT (2015-16)

TABLE NO-5.5

PARTICULARS 31-03-2015 31-03-2016

OPENING BALANCES

Cash in Hand 6655

SOURCE OF CASH

Central Excise 24695 9867 14828

Secured Loan 1589260 1163089 350000

CASH FROM
OPERATION

Net Profit 309347 413155 103808

ADD Increase in Other

Liabilities 531981 735107 203126

Decrease in Sundry Debtors 3652395 3596559 55836

LESS Decrease in Sundry

Creditors 3258702 3250590 8112

Increase in Inventories 3950640 4018625 67985 286673

TOTAL CASH
AVAILABLE 13317020 13186992 658156

APPLICATION OF
CASH
Purchases of Fixed Assets 792972 944278 151306

Loans & Advance 377608 432320 54712

Secured Loan 1163089 1589260 426171

Income Tax 108612 114142 5530

CLOSING BALANCE

Cash in Hand 20437

TOTAL APPLICATION
AVAILABLE 2442281 3080000 658156
 CASH FLOW STATEMENT

TABLE NO-5.6

PARTICULARS 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

OPENING BALANCES
Cash in Hand 0.61 0.124 0.06 0.09 0.06
SOURCE OF CASH
Central Excise 0.013 0.02 0.14
Secured Loan 0.422
Income Tax 0.02
Sale of Fixed Assets 0.23 1.98
Unsecured Loan 3 3.5
CASH FROM
OPERATION
NET PROFIT 0.4 0.14 0.05 0.42 1.04
ADD Increase in Sundry
Creditors 3.84 - 10.82
Increase in Other
Liabilities 0.002 0.78 1.51 0.015 2.03
Decrease in Inventories 17.67 14 4.28
Decrease in Sundry
Debtors 3.18 8.9 0.56
LESS Increase in
Inventories 0.68
Increase in Sundry Debtors 1.78 18.9
Decrease in Sundry
Creditors 12.76 2.94 0.08
TOTAL CASH
AVAILABLE 0.55 4.42 6.76 15.7 6.57
 APPLICATION OF
CASH
Purchases of Fixed Assets 0.046 2.65 1.51
Loans & Advance 0.31 0.11 1.26 0.45 0.54
Secured Loan 2.7 0.46 4.26
Unsecured Loan 1.5 2.05 15
Central Excise 0.04 0.22
Income Tax 0.07 0.25 0.012 0.055
CLOSING BALANCE
Cash in Hand 0.12 0.06 0.09 0.22 0.2
TOTAL APPLICATION
AVAILABLE 0.55 4.42 6.76 15.7 6.57
INTERPRETATION:

 Theabove table explains that the beginning of the (2011-2012) opening

balance is in0.61 but in the other year it reduced gradually. So the concern
should take necessary step to overcome the default.
 The concern is purchase the fixed assets in the year 2011-2012,2012-
2013,2013-2014,2014-2015,2015-2016 at 0.046,2.65 and 1.51. The concern
purchase high asset in the year 2013-2014 at 2.65 it clearly determine the
outflow of cash in the concern.
 The borrowing of concerns high in the year 2013-2014 at 1.26 it indicates
that the concern uses more loan. The concern should reduce to borrow the
money from the various resources. It leads to take more advantage to the
borrowers.
 The closing balance is not high than the opening balance .it indicates that the
cash is not properly managed in the concern.
 5.2 CASH BUDGETING:

A firm is well advised to hold adequate cash balance but should avoid
excessive balances. The firm has, therefore, to assess its need for cash properly.
The cash budget is probably the most important tool in cash management. It is
device to help a firm to plan and control the use of cash. It is a statement showing
the estimated cash inflows and cash outflows over the planning horizon. In the
other words, the net cash position of a firm as it moves from one budgeting sub
period to another is highlighted by the cash budget

CASH BUDGET

TABLE NO – 5.7

PARTICULARS 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

a) OPENING CASH
BALANCE 61738 12423 6266 9291 6655

b Receipts 16315437 18064710 19929244 20520232 23938082

c Payments 16093407 17892478 19664631 20253149 23608102
d NET CASH FLOW
(b-c) 222030 172232 264613 267083 329980
e Cumulative Net Cash
Flow 222030 394262 658875 925958 1255938
f (a+e) 283768 406685 665141 935249 1262593
g Minimum Cash Balance
Requirement 100000 100000 100000 100000 100000
SURPLUS RELATION
TO THE MINIMUM
CASHBALANCE
REQUIREMENT(F-G) 183768 306685 565141 835249 1162593
 CHART NO –5.1

12

10

6
cash
4 required

0
2011- 2012- 2013- 2014- 2015-
2012 2013 2014 2015 2016

INTERPRETATION:

In the above table it clearly determines the availability of the cash balance in
the subsequent year. It will clearly determine the minimum cash balance
requirement of the concern. In the 2015-16 leads to higher need of cash balance
11.62 lakhs. The cash balance is highly required for the day- to day transaction.
5.3 RATIO ANALYSIS:

An analysis of financial statements based on ratios is known as ratio analysis.

Ratio analysis involves the process of computing determining and resenting the
relationship of items or group of items of financial statements. Ratio analysis is a widely
– used tool of financial analysis. It can be used to compare the risk and return relationship
of firms of different sizes. It is defined as the systematic use of ratio to interpret the
financial statements so that the strengths and weaknesses of a firm as well as its historical
performance and current financial condition can be determined. The term ratio refers to
the numerical or quantitative relationship between two items.

5.3.1 NET WORKING CAPITAL:

Net working capital represents the excess of current assets over current
liabilities. The term current assets refers to assets which in the normal course of
business get converted into cash without dimunition in value over a short period
,usually not exceeding one year or length of operation cycle whichever is more.
The greater is the amount of net working capital, the greater is the liquidity of the
firm, accordingly net working capital is a measure of liquidity, and inadequate
working capital is the first sign of financial problem for a firm.

FORMULA:

NET WORKING CAPITAL = CURRENT ASSETS-CURRENT

LIABILITIES.
 RATIO ANALYSIS
TABLE 4.21
CURRENT RATIO:
Year Current asset Current Ratio
Liabilities

2011-2012 1,910.48 704.59 2.71

2012-2013 2,157.99 851.18 2.54

2013-2014 2,659.86 1,183.63 2.25

2014-2015 2,489.10 1,346.81 1.84

2015-2016 2,767.82 1,209.43 2.29

INTERPRETATION:

From the above table 4.21 current ratio analysis it was found that in the year
2011-2012 current ratio is 2.71, in the year 2012-2013 current ratio is 2.54,
decreased compare 2011-2012, in the year 2013-2014 current ratio is 2.25, in the
year 2014-2015 current ratio is 1.84 and in the year 2015-2016 current ratio is 2.29
increased compare to above 4 years.
 CHART 4.1

CURRENT RATIO:

Current Ratio

4,000.00
3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Current asset Current Liabilities Ratio

 TABLE 4.22

CURRENT ASSET TO FIXED RATIO

Year Current asset Fixed asset Ratio

2011-2012 1,910.48 2,195.16 0.87

2012-2013 2,157.99 2,335.52 0.92

2013-2014 2,659.86 2,774.68 0.96

2014-2015 2,489.10 2,496.27 0.99

2015-2016 2,767.82 2,488.35 1.11

INTERPRETATION:

From the above table 4.22 current asset to fixed asset ratio analysis it was
found in the year of 2011-2012 current asset to fixed asset ratio is 0.87, in the year
of 2012-2013 current asset to fixed asset ratio is 0.92 and the next year of 2013-
2014 current asset to fixed asset ratio is 0.96, in the year of 2014-2015 current
asset to fixed asset ratio is 0.99 and the year of 2015-2016 current asset to fixed
asset ratio is 1.11.
 CHART 4.2

CURRENT ASSET TO FIXED ASSET

Current Asset To Fixed Asset

6,000.00

5,000.00

4,000.00

3,000.00

2,000.00

1,000.00

0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Current asset Fixed asset Ratio

 TABLE 4.23

INVENTORY TO CURRENT ASSET RATIO

Year Inventory Current asset Ratio

2011-2012 1,315.23 1,910.48 0.69

2012-2013 1,499.44 2,157.99 0.69

2013-2014 1,871.54 2,659.86 0.70

2014-2015 1,636.73 2,489.10 0.66

2015-2016 1,809.12 2,767.82 0.65

INTERPRETATION:

From the above table 4.23 is Inventory to Current Asset ratio analysis it was
found that in the year 2011-2012 Inventory to Current Asset ratio is 0.69, in the
year of 2012-2013 is Inventory to Current Asset ratio is 0.69, and the next year of
2013-2014 Inventory to Current Asset ratio is 0.70,in the year of 2014-2015
Inventory to Current Asset ratio is 0.66,and in the year of 2015-2016 in the year of
Inventory to Current Asset ratio is 0.65.
 CHART 4.3

INVENTORY TO CURRENT ASSET RATIO

Inventory To Current Asset Ratio

5,000.00

4,000.00

3,000.00

2,000.00

1,000.00

0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Inventory Current asset Ratio

 TABLE 4.24

LOAN TO CURRENT ASSET RATIO

Year Loan Current asset Ratio

2011-2012 377.75 1,910.48 0.19

2012-2013 657.62 2,157.99 0.30

2013-2014 648.72 2,659.86 0.24

2014-2015 568.50 2,489.10 0.23

2015-2016 480.87 2,767.82 0.17

INTERPREATATIONS:

From the above table 4.24 is Loan to Current Asset ratio analysis it was
found that in the year 2011-2012 Loan to Current Asset ratio is 0.19, in the year of
2012-2013 is Loan to Current Asset ratio is 0.30, and the next year of 2013-2014
Loan to Current Asset ratio is 0.24, in the year of 2014-2015 Loan to Current
Asset ratio is 0.23,and in the year of 2015-2016 in the year of Loan to Current
Asset ratio is 0.17.
 CHAR 4.4

LOAN TO CURRENT ASSET RATIO

Loan To Current Asset

3500
3000
2500
2000
1500
1000
500
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Loan Current asset Ratio

 TABLE 4.25

CASH TO CURRENT ASSET RATIO

Year Cash Current asset Ratio

2011-2012 58.42 1,910.48 0.03

2012-2013 26.63 2,157.99 0.01

2013-2014 52.75 2,659.86 0.02

2014-2015 175.55 2,489.10 0.07

2015-2016 276.77 2,767.82 0.09

INTERPRETATION:

From the above table 4.25 is Cash to Current Asset ratio analysis it
was found that in the year 2011-2012 Cash to Current Asset ratio is 0.03, in the
year of 2012-2013 is Cash to Current Asset ratio is 0.01, and the next year of 2013-
2014 Cash to Current Asset ratio is 0.02, in the year of 2014-2015 Cash to Current
Asset ratio is 0.07, and in the year of 2015-2016 in the year of Cash to Current
Asset ratio is 0.09.
 CHART 4.5

CASH TO CURRENT ASSET RATIO

Cash To Current Asset Ratio

3500
3000
2500
2000
1500
1000
500
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Cash Current asset Ratio

 TABLE 4.26

CASH TO SALES RATIO

Year Cash Sales Ratio

2011-2012 58.42 3,826.63 0.02

2012-2013 26.63 4,081.86 0.01

2013-2014 52.75 5,063.69 0.01

2014-2015 175.55 5,606.70 0.03

2015-2016 276.77 5,468.15 0.05

INTERPRETATIONS:

From the above table 4.26 is Cash to Sales ratio analysis it was found that in
the year 2011-2012 Cash to Sales ratio is 0.02, in the year of 2012-2013 is Cash to
Sales ratio is 0.01, and the next year of 2013-2014 Cash to Sales ratio is 0.01, in
the year of 2014-2015 Cash to Sales ratio is 0.03, and in the year of 2015-2016 in
the year of Cash to Sales ratio is 0.05.
 CHART 4.6

CASH TO SALES RATIO

Cash To Sales Ratio

6000

5000

4000

3000

2000

1000

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Cash Sales Ratio

 CHART 4.27

GROSS PROFIT RATIO

Year Gross profit Net Sales Ratio

2011-2012 3,956.35 3,826.63 1.03

2012-2013 4,317.17 4,081.86 1.06

2013-2014 5,018.49 5,063.69 0.99

2014-2015 5,274.92 5,606.70 0.94

2015-2016 5,586.48 5,468.15 1.02

INTERPRETATIONS:

From the above table 4.27 is Gross profit ratio analysis it was found that in
the year 2011-2012 Gross profit ratio is 1.03, in the year of 2012-2013 is Gross
profit ratio is 1.06, and the next year of 2013-2014 Gross profit ratio is 0.99, in the
year of 2014-2015 Gross profit ratio is 0.94,and in the year of 2015-2016 in the
year of Gross profit ratio is 1.02.
 CHART 4.7

GROSS PROFIT RATIO

Gross Profit Ratio

12,000.00

10,000.00

8,000.00

6,000.00

4,000.00

2,000.00

0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Gross profit Net Sales Ratio

 TABLE 4.28

WORKING CAPITAL ANALYSIS

Year Current asset Current Ratio

Liabilities

2011-2012 1,542.80 704.59 2.19

2012-2013 1,911.47 851.18 2.25

2013-2014 2,037.27 1,183.63 1.72

2014-2015 1,621.97 1,346.81 1.20

2015-2016 2,028.12 1,209.43 1.68

INTERPRETATION:

From the above table 4.28 current ratio analysis it was found that in the year
2011-2012 current ratio is 2.19, in the year 2012-2013 current ratio is 2.25,
increased compare 2011-2012, in the year 2013-2014 current ratio is 1.72, in the
year 2014-2015 current ratio is 1.20, in the 2013-2014 year and in the year 2015-
2016 current ratio is 1.68 increased compare to above 4 years.
 CHART 4.8

WORKING CAPITAL ANALYSIS

Working Capital Analysis

3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Current asset Current Liabilities Ratio

 TABLE 4.29

FIXED ASSET TURNOVER RATIO

Year Sales Fixed asset Ratio

2011-2012 3,826.63 2,195.16 1.74

2012-2013 4,081.86 2,335.52 1.75

2013-2014 5,063.69 2,774.68 1.82

2014-2015 5,606.70 2,496.27 2.25

2015-2016 5,468.15 2,488.35 2.19

INTERPRETATION:

From the above table 4.29 Fixed asset turnover ratio analysis it was found
that in the year 2011-2012 Fixed asset turnover ratio is 1.74, in the year 2012-2013
Fixed asset turnover ratio is 1.75, increased compare 2011-2012, in the year 2013-
2014 Fixed asset turnover ratio is 1.82,in the year 2014-2015 Fixed asset turnover
ratio is 2.25, in the 2013-2014 year and in the year 2015-2016 Fixed asset turnover
ratio is 2.19 increased compare to above 4 years.
 CHART 4.9

FIXED ASSET TURNOVER RATIO

Sales To Fixed Asset Turnover Ratio

9,000.00
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Sales Fixed asset Ratio

 TABLE 4.30

CURRENT RATIO TREND

Year Ratio Trend

2011-2012 2.71 100

2012-2013 2.54 93.73

2013-2014 2.25 83.03

2014-2015 1.84 67.89

2015-2016 2.29 84.50

INTERPRETATION:

From the above table 4.30 found that the current ratio trend analysis in the
year 2011-2012 to 2012-2013 is increasing the trend and again decreasing the
trend in the year 2015-2016.
 CHART 4.10

CURRENT RATIO TREND

Current Ratio Trend

120

100 100
93.73
83.03 84.5
80
67.89
60

40

20

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.31

INVENTORY TO CURRENT ASSET RATIO TREND

Year Ratio Trend

2011-2012 0.69 100

2012-2013 0.69 100

2013-2014 0.70 101.45

2014-2015 0.66 95.65

2015-2016 0.65 94.20

INTERPRETATION

From the above table 4.31 found that the Inventory to current asset ratio trend
analysis in the year 2011-2012 to 2013-2014 is increasing the trend. And 2014-
2015 to 2015-2016 decreasing the trend.
 CHART 4.11

INVENTORY TO CURRENT ASSET TURNOVER RATIO TREND

Current Asset Turnover Ratio Trend

102
101.45

100 100 100

98

96
95.65

94 94.2

92

90
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.32

CURRENT RATIO TO FIXED RATIO TREND

Year Ratio Trend

2011-2012 0.87 100

2012-2013 0.92 105.75

2013-2014 0.96 110.34

2014-2015 0.99 113.79

2015-2016 1.11 127.59

INTERPRETATION

From the above table 4.32 found that the current ratio to fixed ratio trend analysis
in the year 2011-2012 to 2015-2016 is increasing the trend.
 CHART 4.12

CURRENT RATIO TO FIXED RATIO TREND

Current Ratio To Fixed Ratio Trend

140
127.59
120
110.34 113.79
105.75
100 100

80

60

40

20

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.33

LOAN TO CURRENT ASSET RATIO TREND

Year Ratio Trend

2011-2012 0.19 100

2012-2013 0.30 157.89

2013-2014 0.24 126.32

2014-2015 0.23 121.05

2015-2016 0.17 89.47

INTERPRETATION

From the above table 4.33 found that the Loan to current asset ratio trend analysis
in the year 2011-2012 to 2012-2013 is increasing the trend. And 2012-2013 to
2015-2016 decreasing trend.
 CHART 4.13

LOAN TO CURRENT ASSET RATIO TREND

Loan To Current Asset Ratio Trend

180
160 157.89
140
126.32
120 121.05
100 100
89.47
80
60
40
20
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.34

CASH TO CURRENT ASSET RATIO TREND

Year Ratio Trend

2011-2012 0.03 100

2012-2013 0.01 33.33

2013-2014 0.02 66.67

2014-2015 0.07 233.33

2015-2016 0.09 300

INTERPRETATION

From the above table 4.34 found that the Cash to current asset ratio trend
analysis in the year 2011-2012 to 2013-2014 is decreasing the trend. And 2014-
2015 increasing trend, and again 2015-2016 increasing the trend.
 CHART 4.14

CASH TO CURRENT ASSET RATIO TREND

Cash To Current Asset Ratio Trend

350

300 300

250
233.33
200

150

100 100
66.67
50
33.33
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.35

CASH TO SALES RATIO TREND

Year Ratio Trend

2011-2012 0.02 100

2012-2013 0.01 50

2013-2014 0.01 50

2014-2015 0.03 150

2015-2016 0.05 250

INTERPRETATION

From the above table 4.35 found that the Cash to Sales ratio trend analysis in the
year 2011-2012 to 2012-2013 is decreasing the trend. And 2012-2013 to 2013-
2014 ratio of the trend is same, and again 2014-2015 to 2015-2016 increasing the
trend.
 CHART 4.15

CASH TO SALES RATIO TREND

Cash To Sales Ratio Trend

300

250 250

200

150 150

100 100

50 50 50

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.36

GROSS PROFIT RATIO TREND

Year Ratio Trend

2011-2012 1.03 100

2012-2013 1.06 102.91

2013-2014 0.99 96.12

2014-2015 0.94 91.26

2015-2016 1.02 99.03

INTERPRETATION

From the above table 4.36 found that the Gross profit ratio trend analysis in the
year 2011-2012 to 2013-2014 is increasing the trend. And 2014-2015 to 2015-2016
decreasing trend.
 CHART 4.16

GROSS PROFIT RATIO TREND

Gross Profit Ratio Trend

104
102.91
102
100 100
99.03
98
96 96.12
94
92
91.26
90
88
86
84
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.37

WORKING CAPITAL ANALYSIS TREND

Year Ratio Trend

2011-2012 2.19 100

2012-2013 2.25 102.74

2013-2014 1.72 78.54

2014-2015 1.20 54.79

2015-2016 1.68 76.71

INTERPRETATION

From the above table 4.37 found that the working capital ratio trend analysis in the
year 2011-2012 to 2013-2014 is increasing the trend. And 2014-2015 Decreasing
the trend again 2015-2016 in the year decreasing the trend.
 CHART 4.17

WORKING CAPITAL RATIO TREND

Working Capital Ratio Trend

120

100 100 102.74

80 78.54 76.71

60
54.79

40

20

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 TABLE 4.38

FIXED ASSET TURNOVER RATIO

Year Fixed asset Trend

2011-2012 1.74 100

2012-2013 1.75 100.57

2013-2014 1.82 104.59

2014-2015 2.25 129.31

2015-2016 2.19 125.86

INTERPRETATION:

From the above table 4.37 found that the fixed asset turnover ratio trend analysis in
the year 2011-2012 to 2015-2016 is increasing the trend.
 CHART 4.18

FIXED ASSET TURNOVER RATIO TREND

Fixed Asset Turnover Ratio Trend

140
129.31 125.86
120

100.57 104.59
100 100

80

60

40

20

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
 CHAPTER-V

FINDINGS, SUGGESTION, CONCLUSION

FINDINGS:

1. The net working capital of the organization is not satisfactory.

2. The current ratio for the four year it is as per the standard norms (2:1)
concept for the year 2015-16 which is 1.9:1. On an average current ratio is
formed to be satisfactory.
3. Quick ratio of the company is not satisfactory as it is not up to the standard
norms (1:1).
4. Cash turnover ratio is found to be not satisfactory as it is maintain low cash.
5. Debtor turnover ratio is decline indicates it is not satisfactory.
6. Creditor’s turnover ratio showing increasing ratio indicates that the company
is enjoying. Its credit facilities to the possible amount.
7. In the year 2015-16 is leads to higher requirement of cash balance 11.62
lakhs.
8. Cash reflects the liquidity position of the concern is reduced in the year
2015-2016 is 0.06 lakhs decreasing cash position indicated that the company
is not managing its cash position satisfactorily.
SUGGESTION & RECOMMENDATION:

The various suggestions are followed after analyzing the main finding of this
study.

 The cash management of the company is failed to strengthen the cash

position so the company so required to table steps to improve the cash
position by concentrating on receivables, inventories avoiding to much on
borrowings.
 The company failed to manage the receivable in the normal level because of
poor performance of the collection procedure and inefficient performance
related with managing the receivables.
 The inventories play a major role in production. So, the concern should take
measure to maintain the inventories that are required to in order reduce the e
cost, and keep the production flow continuously.
 In 2014-15 the net profit is increased compare to the other four year. So the
concern should maintain the same position to improve the net profit.
 The cash and bank balance indicate high liquidity position of a company,
The maintain cash including bank balance is at a optimum level and it is
enough to meet day to day requirement.
 CONCLUSION

Analysis and Interpretation of the financial data of , ascertain the cash

position of the firm. The results explores that the firm is unable toe meet its short
term obligations.

The concern should reduced the long term loan and obtain the profit.

The concern should take various measures to increase the net profit.
 BIBLIOGRAPHY
Khan M.Y and P.K. Jani

Financial Management, New Delhi, Tata Mc Graw Hill, 1992.

Dr.S.N. Maheshwari, Principles of Management Accounting.

Prasanna Chandra, Financial Management Theory and Practice

Websites:

http://www.flavorsindia.com/
 BALANCE SHEET

2016 2015 2014 2013 2012

Sources Of Funds
Total Share Capital 63.65 63.65 63.65 63.65 63.65
Equity Share Capital 63.65 63.65 63.65 63.65 63.65
Reserves 3,589.53 3,019.73 2,784.67 2,212.92 1,932.37
Net worth 3,653.18 3,083.38 2,848.32 2,276.57 1,996.02
Secured Loans 1,888.33 1,772.23 2,722.57 2,741.13 2,402.89
Unsecured Loans 65.38 13.58 37.99 1.48 35.68
Total Debt 1,953.71 1,785.81 2,760.56 2,742.61 2,438.57
Total Liabilities 5,606.89 4,869.19 5,608.88 5,019.18 4,434.59
2016 2015 2014 2013 2012
Application Of Funds
Gross Block 5,586.48 5,274.92 5,018.49 4,317.17 3,956.35
Less: Accum. Depreciation 3,098.13 2,778.65 2,243.81 1,981.65 1,761.19
Net Block 2,488.35 2,496.27 2,774.68 2,335.52 2,195.16
Capital Work in Progress 84.83 76.78 84.58 212.90 181.91
Investments 1,005.61 674.17 712.34 559.30 514.72
Inventories 1,809.12 1,636.73 1,871.54 1,499.44 1,315.23
Sundry Debtors 681.93 676.82 735.57 631.92 536.83
Cash and Bank Balance 276.77 175.55 52.75 26.63 58.42
Total Current Assets 2,767.82 2,489.10 2,659.86 2,157.99 1,910.48
Loans and Advances 480.87 568.50 648.72 657.62 377.75
Total CA, Loans & Advances 3,248.69 3,057.60 3,308.58 2,815.61 2,288.23
Current Liabilities 1,209.43 1,346.81 1,183.63 851.18 704.59
Provisions 11.14 88.82 87.68 52.96 40.84
Total CL & Provisions 1,220.57 1,435.63 1,271.31 904.14 745.43
Net Current Assets 2,028.12 1,621.97 2,037.27 1,911.47 1,542.80
Total Assets 5,606.91 4,869.19 5,608.87 5,019.19 4,434.59
Contingent Liabilities 844.89 962.91 308.97 595.33 735.87

Book Value (Rs) 573.93 484.41 447.48 357.66 313.58

PROFIT AND LOSS BALANCE SHEET:

 2016 2015 2014 2013 2012
INCOME
Revenue From Operations [Gross] 5,468.69 5,607.30 5,064.25 4,082.92 3,828.09
Less: Excise/Sevice Tax/Other Levies 0.54 0.60 0.56 1.06 1.46
Revenue From Operations [Net] 5,468.15 5,606.70 5,063.69 4,081.86 3,826.63
Other Operating Revenues 118.99 135.34 107.62 77.88 91.37
Total Operating Revenues 5,587.14 5,742.03 5,171.31 4,159.74 3,918.00
Other Income 227.32 158.07 64.58 54.90 60.57
Total Revenue 5,814.46 5,900.10 5,235.89 4,214.64 3,978.57
EXPENSES
Cost Of Materials Consumed 2,667.15 2,900.52 2,512.39 2,096.37 2,200.34
Purchase Of Stock-In Trade 67.15 74.42 57.13 26.90 31.02
Changes In Inventories Of FG,WIP And
12.20 131.03 -229.47 -89.81 126.90
Stock-In Trade
Employee Benefit Expenses 410.38 350.83 320.17 268.34 221.13
Finance Costs 86.85 121.54 151.83 174.35 173.22
Depreciation And Amortisation Expenses 361.92 488.85 294.13 253.86 234.67
Other Expenses 1,344.16 1,343.65 1,250.34 1,029.80 845.83
Total Expenses 4,949.82 5,410.83 4,356.51 3,759.80 3,833.11
2015 2014 2013 2012 2011
Profit/Loss Before Exceptional,
864.64 489.27 879.38 454.84 145.46
ExtraOrdinary Items And Tax
Profit/Loss Before Tax 864.64 489.27 879.38 454.84 145.46
Tax Expenses-Continued Operations
Current Tax 221.82 186.00 188.50 106.82 29.75
Deferred Tax -10.23 -55.84 39.00 24.29 6.05
Total Tax Expenses 211.59 130.16 227.50 131.11 35.79
Profit/Loss After Tax And Before
653.05 359.11 651.88 323.73 109.67
ExtraOrdinary Items
Profit/Loss From Continuing
653.05 359.11 651.88 323.73 109.67
Operations
Profit/Loss For The Period 653.05 359.11 651.88 323.73 109.67
2016 2015 2014 2013 2012
OTHER ADDITIONAL INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 102.60 56.42 102.41 50.86 17.23
Diluted EPS (Rs.) 102.60 56.42 102.41 50.86 17.23
VALUE OF IMPORTED AND INDIGENIOUS
RAW MATERIALS
Imported Raw Materials 246.40 210.74 209.90 157.46 116.18
Indigenous Raw Materials 2,415.13 2,680.76 2,322.24 1,949.04 2,070.31
STORES, SPARES AND LOOSE TOOLS
Imported Stores And Spares 57.60 83.05 54.86 50.16 46.78
Indigenous Stores And Spares 370.60 341.56 327.92 259.11 154.70
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 95.48 63.65 70.02 38.19 28.64
Tax On Dividend 1.08 13.32 10.11 6.49 4.65
Equity Dividend Rate (%) 150.00 100.00 110.00 60.00 45.00