A STUDY ON

WORKING CAPITAL MANAGEMENT IN

MAX HYPERMARKET INDIA PVT LTD

CONTENTS

S.No CHAPTERS PAGE NO

1 CHAPTER I

INTRODUCTION
RETAIL INDUSTRY
WORKING CAPITAL

2 CHAPTER II

RESEARCH DESIGN

3 CHAPTER III

ORGANIZATION PROFILE

4 CHAPTER IV

ANALYSIS AND INTERPRETATION

5 CHAPTER V

FINDINGS & SUGGESTIONS

CONCLUSION

BIBLIOGRAPHY
INTRODUCTION
RETAIL INDUSTRY

Retail Industry is one of the growing industries in

India. Since Globalization, Liberalization and privatization,
the progress of retail industry attains and achieves huge
growth compared to other industries. A new type of
marketing channel Manufacturer – Retailers – End users
is introduced by this industry with the aims to achieve high
level of satisfaction to the customers by offering wide range
of products like Food Category, General Merchandise,
Electronics, Textiles and so on.

Expert Opinion about Retail industry

Retail industry will see huge changes in the next few

years, observed the international research conference on
retail organised by the Navi Mumbai-based Dr D.Y. Patil
University’s Department of Business Management.

“We expect the retail space to undergo constant

change over the next four years as the existing players and
the new entrants battle it out with each other,” said Mr Jay
Gupta, Managing Director, The Loot.

“We expect the planned $25 billion investments to take

the industry from the current $12 billion to $70 billion by
2011.
 This will translate into the organised retail growing at a
42 per cent CAGR over the next five years on the back of
eight per cent growth and increasing the share of modern
retail to 15 per cent from 4.1 per cent currently,” he said.

“Favourable demographics, changing consumer

preference, easy availability of credit, development of real
estate, and large investments in improving supply chain
efficiency will give a fillip to consumption and in turn to
retail,” said Mr B.S. Nagesh, Managing Director, Shoppers
Stop.

More than 100 research papers from various business

establishments as well as universities were presented on e-
retailing, retailing in financial services, retail shoppers’
behaviour, store and mall management and visual
merchandising. Research papers were presented
INDIA RETAIL INDUSTRY

India retail industry is the largest industry in India, with

an employment of around 8% and contributing to over 10%
of the country's GDP. Retail industry in India is expected to
rise 25% yearly being driven by strong income growth,
changing lifestyles, and favorable demographic patterns.

It is expected that by 2016 modern retail industry in

India will be worth US$ 175- 200 billion. India retail industry
is one of the fastest growing industries with revenue
expected in 2007 to amount US$ 320 billion and is
increasing at a rate of 5% yearly. A further increase of 7-8%
is expected in the industry of retail in India by growth in
consumerism in urban areas, rising incomes, and a steep
rise in rural consumption. It has further been predicted that
the retailing industry in India will amount to US$ 21.5 billion
by 2010 from the current size of US$ 7.5 billion.

Shopping in India have witnessed a revolution with the

change in the consumer buying behavior and the whole
format of shopping also altering. Industry of retail in India
which have become modern can be seen from the fact that
there are multi- stored malls, huge shopping centers, and
sprawling complexes which offer food, shopping, and
entertainment all under the same roof.

India retail industry is expanding itself most

aggressively, as a result a great demand for real estate is
being created. Indian retailers preferred means of expansion
is to expand to other regions and to increase the number of
their outlets in a city. It is expected that by 2010, India may
have 600 new shopping centers.

In the Indian retailing industry, food is the most

dominating sector and is growing at a rate of 9% annually.
The branded food industry is trying to enter the India retail
industry and convert Indian consumers to branded food.
Since at present 60% of the Indian grocery basket consists of
non- branded items.

India retail industry is progressing well and for this to

continue retailers as well as the Indian government will have
to make a combined effort.

SCOPE OF INDIAN RETAIL INDUSTRY

 The scope of the Indian retail market is immense for
this sector is poised for the highest growth in the next 5
years. The India retail industry contributes 10% of the
countries GDP and its current growth rate is 8.5%. In the
Indian retail market the scope for growth can be seen from
the fact that it is expected to rise to US$ 608.9 billion in
2009 from US$ 394 billion in 2005.

The organized retailing sector in India is only 3%

and is expected to rise to 25- 30% by the year 2010. There
are under construction at present around 325 departmental
stores, 300 new malls, and 1500 supermarkets. This proves
that there is a tremendous scope for growth in the Indian
retail market.

The growth of scope in the Indian retail market is mainly

due to the change in the consumers behavior. For the new
generation have preference towards luxury commodities
which have been due to the strong increase in income,
changing lifestyle, and demographic patterns which are
favorable.

The scope of the Indian retail market have been seen

by many retail giants and thats the reason that many new
players are entering the India retail industry. The major
Indian retailers are:

• Pantaloons Retail India Ltd

• Shoppers Stop
• Bata India Ltd
• Music World Entertainment Ltd
• SPART INTERNATIONAL

Judging the scope for growth in the India retail industry

many global retail giants are also entering the Indian retail
market. They are :

• Tesco
• Metro AG
• Wal- Mart

The scope for growth in the Indian retail market is

seen mainly in the following cities:
 • Mumbai
• Delhi
• Pune
• Ahmedabad
• Bangalore
• Hyderabad
• Kolkata
• Chennai

The scope of the Indian retail market is very vast. And

for it to reach its full potential the government and the
Indian retailers will have to make a determined effort.

GROWTH FACTORS IN INDIA

 The growth factors in Indian organized sector are
various but it is mainly due to the fact that India's economy
is booming. Also, the rise in the working population which is
young, pay- packets which are hefty, more nuclear families
in urban areas, rise in the number of women working, more
disposable income and customer aspiration, western
influences and growth in expenditure for luxury items. All
these are the factors for the growth in Indian organized retail
sector.

In fact, India retail industry is the fastest growing

industry in India and it accounts for 10% of the country's
GDP. In 2006, the retail industry in India amounted to US$
200 billion and out of this, the organized retail sector in India
amounted to US$ 6.4 billion. By 2010, the Indian organized
retail sector is expected to rise to US$ 23 billion. In 2003, the
Indian organized retailing sector accounted for more than
4.5 million sq. ft of space absorption by malls.

Many Indian companies have entered the retail industry

in India and this is also a factor in the growth of Indian
organized retail sector. Reliance Industries Limited is
planning to invest US$ 6 billion in the organized retail sector
in India by opening 1500 supermarkets and 1000
hypermarkets. Bharti Telecoms is planning a joint venture
worth £ 750 million with Tesco a global retail giant.
Pantaloons is planning to invest US$ 1 billion in order to
increase its retail space to 30 million square feet. Such huge
investments is also a factor in the growth of the organized
retail sector in India.

Global retail giants are also entering the retail industry

in India and this is also one of the factors in the growth of
the organized retail sector in India. The global retail
giants who are entering the organized retail sector in India
are:

• Wal- Mart
• Tesco
• Carrefour SA
• Metro AG

The factors for growth in Indian organized retail sector

are many and thats the reason behind its massive growth.
But for this to continue both the Indian retailers and the
government will have to work together.
TRENDS IN INDIAN RETAIL SECTOR

The emerging trends in the Indian organized retail

sector would help the economic growth in India.

There is a fantastic rise in the Indian organized retail

sector in a very short period of time between 2001 and
2006. Eventually, out of the shadows of the unorganized
retail sector, India has a chance of tremendous economic
growth, both in India and abroad.

The emerging trends in the Indian organized

retail sector are also adding up to the development of the
Indian organized retail sector. The relaxation by the
government on regulatory controls on foreign direct
investments has added to the process of the growth of the
Indian organized retail sector.

The infrastructure of the retail sector will evolve

radically in the recent future. The emergence of shopping
malls are increasing at a steady pace in the metros and
there are further plans of expansion which would lead to 150
new ones coming up in India by 2008. As the count of super
markets is going up much faster than rate of growth in retail
sector, it is taking the lions share in food trade.
 The growth of the Indian organized retail sector is
anticipated to be heavier than the growth of the gross
domestic product. Alterations in people's lifestyle, growth in
income levels, and encouraging conventions of demography
are proving favorable for the new emerging trends in the
Indian organized retail sector.

The success of this retail sector would also lie in the

degree of penetration into the lower income strata to tap the
possible customers in the lowest levels of society. The
demands of the buyers would also be enhanced by more
access to credit facilities.

With the arrival of the Transnational Companies (TNC),

the Indian retail sector will undergo a transformation. At
present the Foreign Direct Investments(FDI) is not
encouraged in the Indian organized retail sector but
once the TNC'S get in they inevitably try to oust their Indian
counterparts. This would be challenging to the retail sector
in India.
The trends to follow in the future:

• The Indian Organized retail sector will grow up to

10% of total retailing by 2010.

• No one single format can be assumed as there is a

huge difference in cultures regionally.

• The most encouraging format now would be the

hypermarts.

• The hypermart format would be further encouraged

with the entry of the TNCs.

Formats in Indian Organized Retail Sector -

• Supermarkets
• Hypermarkets
• Department Stores
• Modern format individual retailers
• Shopping malls
• Specialty Chains
 Formats in Indian Organized Retail Sector and its
subsequent successful operation is credited to India
Economic System reform earnest in July 1991. Formats in
Indian Organized Retail Sector is at its nascent stage. The
Central Government have ultimately realized the need to
remove the insulation out of the Indian retail sector. Skeptics
opines opening up Indian retail industry would jeopardize
way of income for the poor small retailers. In fact, the actual
story is quite heartening for the small time retailer and its
vendors.

• It is the second fastest growing economy of the world

• Potential to be the third largest economy in terms of
GDP in next few years
• It ranks high amongst the top 10 FDI destinations of
the world
• Fastest growing tourist market in Asia
• World bank states, India to be worlds second
largest economy after China by the year 2050
• Stable and investor friendly Central Government
at the helm of affairs
• Introduction of Value Added Tax or VAT and tax
reforms
• High degree of professionalism and corporate ethics
• Excellent Investment opportunities in Indian retail
sector and in allied sectors; sure and high returns on
investments
 • To invest US $130 billion for the development of
infrastructure, by year 2010
• To attract US $ 10 billion FDI for infrastructure
development by the end of year 2008
• Bullish stock markets
• Hordes of foreign investors are thronging in to invest
in Indian retail markets
• Highly educated English speaking young workforce
• Vibrant and multi cultured cities
• Huge opportunity exists, especially in semi-rural and
rural areas
• Till date the second largest employer after agriculture
sector, for the huge semi-skilled Indian population
• Offers highest shop density in the whole world
• Having almost 1,20,000 shops, across the length and
breadth of the country
• In a nascent stage of development as an organized
industry

CHALLENGES
 The challenges facing the Indian organized retail sector
are various and these are stopping the Indian retail
industry from reaching its full potential. The behavior
pattern of the Indian consumer have undergone a major
change. This have happened for the Indian consumer is
earning more now, western influences, women working force
is increasing, desire for luxury items and better quality. He
now wants to eat, shop, and get entertained under the same
roof. All these have lead the Indian organized retail sector to
give more in order to satisfy the Indian customer.

The biggest challenge facing the Indian organized retail

sector is the lack of retail space. With real estate prices
escalating due to increase in demand from the Indian
organized retail sector, it is posing a challenge to its growth.
With Indian retailers having to shell out more for retail space
it is effecting there overall profitability in retail.

Trained manpower shortage is a challenge facing the

organized retail sector in India. The Indian retailers have
difficultly in finding trained person and also have to pay
more in order to retain them. This again brings down the
Indian retailers profit levels.
 The Indian government have allowed 51% foreign
direct investment (FDI) in the India retail sector to one brand
shops only. This have made the entry of global retail giants
to organized retail sector in India difficult. This is a challenge
being faced by the Indian organized retail sector. But the
global retail giants like Tesco, Wal-Mart, and Metro AG are
entering the organized retail sector in India indirectly
through franchisee agreement and cash and carry wholesale
trading. Many Indian companies are also entering the Indian
organized retail sector like Reliance Industries Limited,
Pantaloons, and Bharti Telecoms. But they are facing stiff
competition from these global retail giants. As a result
discounting is becoming an accepted practice. This too bring
down the profit of the Indian retailers. All these are posing as
challenges facing the Indian organized retail sector.

The challenges facing the Indian organized retail sector

are there but it will have to be dealt with and only then this
sector can prosper.

WORKING CAPITAL

Working capital management is an integral part of

overall corporate management. It plays important role in the
retail industry. Since the business model of Retail Company
is huge as compared to other companies, the requirement of
funds also will be more. So the importance of working capital
analysis must to this business to ensure the liquidity and
solvency.

Working capital can be defined as the amount of funds

which a company must have to finance its day to day
operations. In other words, it is the process of administration
of current assets and current liabilities, within the policy
guidelines of the company and maintenance of an optimal
balance between the objectives of profitability and liquidity.

IMPORTANCE

Working capital management is an important tool and

valuable evaluator to the retail business for analyzing and
measuring the funds utilization. With the help of working
capital, the funds allocation and utilization can be put into
right way. It ensures the liquidity and solvency of the
business organization.

OBJECTIVES

 To study the financial structure of the company

 To evaluate and measure the working capital efficiency

 To predict the future trends of this business

 To suggest to the management with regard to

unmovable products and find out the way to liquidate

Period of Study

The study covered only financial year 2008-09

Limitations of the Study

 The study is done on only one company and there is

no comparison found with other company.
 The information only contains Quantitative only
 The study doesn’t look into the profitability of the
company.
  The study has just taken only one year

CHAPTER SCHEME

The first chapter describes the retail scenario in India

and importance, objectives of the working capital.

The second chapter contains Research design

The third chapter deals with Company profile and their

nature of business.

The fourth chapter covers the analysis and

interpretation of working capital management of Max
Hypermarket India Pvt. Ltd

The findings and suggestions are given in the fifty

chapter
RESEARCH DESIGN

METHODOLOGY

The study was based on “ANALYTICAL RESEARCH’, in

which the researcher used facts and information already
available analyze those in his own words to make a critical
evaluation.

TOOLS USED FOR THE COLLECTION OF DATA

The following tools are used for measuring the

efficiency of working capital management.

 Ratio Analysis
 Paid up stock analysis
 Stock aging analysis and stock composition mix

The study is mainly based on the secondary source of

data collected from the financial report for the year 2008-09
of M/s. Max Hypermarket India Pvt. Ltd

ORGANIZATION PROFILE

Max Hypermarket India Pvt ltd ,a Bangalore based

company and the part of Asia Retail Giant “Landmark
Group, Dubai”. This company is one of the fastest growing
companies in the retail industry. Currently It runs the
business in the name of “SPAR HYPERMARKET” after the tied
up with SPAR International, which is Netherlands based
company and one of the leading companies in the Global
retail market.

It has stared its operation with one store at Bangalore

on 27.09.07. Now, it operates two stores at Bangalore and
one store at Hyderabad. In future, it has planned to open
one more at Bangalore and another one at Mangalore and
Coimbatore by end of 2010.

NATURE OF BUSINESS

It deals with all range of products. These are

classified into below mentioned the groups. The format of
this company is basically hypermarket model.
 1. Food Division
2. General Merchandise Division
3. Textiles Division
4. Electronics Division

Food Division is the major division in this company. It

includes Staples, Sea foods, Liquor, Tobacco, Meat & Poultry,
Fruits & Vegetables, Snack foods, Beverages, Ready foods,
Frozen, processed foods and other non food items like
personal products, cleaning aids and so on.

General Merchandise includes Utensils, Toys,

Stationery, Travelling kids, plastics etc.

Textile division includes Men wear, Children wear,

ladies wear and others.

Electronics division includes Home appliances, Home

entertainment, IT accessories, Personal care, Personal
entertainment etc.

Analysis and Interpretation

Ratio Analysis

Ratios are relationships expressed in mathematical

terms between figures which are connected with each other
in some manner. Ratio analysis is one of the techniques of
financial analysis where ratios are used as a yardstick for
evaluating the financial condition and performance of a
business concern.

In the working capital management, the following

ratios are used for evaluating the liquidity and identifying
the strengths in the management of sales and inventory.

1. Current Ratio
2. Liquidity Ratio

3. Stock turnover ratio

4. Cash ratio
5. Net working capital turnover ratio
6. Debtors turnover ratio and Debtors collection period

Current Ratio

It helps to measure the ability of the business concern

to meet the short term debts. The Current ratio is an index
of the concern’s financial stability .It is expressed as follows

Current ratio = Current Assets / Current Liabilities

TABLE 1
 Statement of Current Assets and Current Liabilities
(Amount in Lacs)
Period Current Assets Current Liabilities Ratio

Apr-08 1,182 1,034 1.14

May-08 3,716 1,167 3.18

Jun-08 3,243 935 3.47

Jul-08 2,896 917 3.16

Aug-08 2,770 1,138 2.43

Sep-08 2,294 1,059 2.17

Oct-08 2,259 1,570 1.44

Nov-08 1,504 1,427 1.05

Dec-08 2,000 1,447 1.38

Jan-09 2,203 1,303 1.69

Feb-09 1,920 1,373 1.40

Mar-09 1,599 1,341 1.19

Interpretation

The solvency position i.e. current is ratio 3.47 in Jun-08

that is highest in the study period.1.14 and 1.05 are the
lowest ratio in the month of Apr-08 and Nov-08. The
company should try to meet 2:1, which is optimal ratio
generally.
 CHART 1
Chart of Liquidity ratio

R a t io

R a t io

4 .0 0
3 .5 0 3 .4 7
3 .1 8 3 .1 6
3 .0 0
2 .5 0 2 .4 3
2 .0 0 2 .1 7
1 .6 9
1 .5 0 1 .4 4 1 .3 8 1 .4 0
1 . 1 4 1 .0 5 1 .1 9
1 .0 0
0 .5 0
-
A p r -M0 8a Jy u- n -J 0u 8l - 0A 8u g S- e pO - c t N- 0 o8 v -D0 e8 cJ a- n - F0 e9 b M- a r -
08 08 08 08 09 09
Liquidity Ratio

This ratio can be called as Acid test ratio or Quick ratio.

As the name indicates that it purpose to measure the short
term debt paying ability by measuring short term liability.
This ratio is ascertained by comparing the liquid assets,
which can be immediately converted into cash with quick
liabilities .Prepaid expenses and stocks are not taken as
liquid assets and overdraft should not be taken into quick
liabilities. The ratio is expressed as follows. It is an index of
the concern’s solvency stability.

Liquid Ratio = Quick Assets / Quick Liabilities

 TABLE 2
Statement of Quick Assets and Quick Liabilities

Period Quick Assets Quick Liabilities Ratio

Apr-08 188.06 1,034 0.18

May-08 2584.41 1,167 2.21

Jun-08 2129.88 935 2.28

Jul-08 1784.79 917 1.95

Aug-08 1681.79 1,138 1.48

Sep-08 1384.76 1,059 1.31

Oct-08 1666.56 1,570 1.06

Nov-08 1008.73 1,427 0.71

Dec-08 1142.57 1,447 0.79

Jan-09 1486.33 1,303 1.14

Feb-09 1639.37 1,373 1.19

 Mar-09 1221.16 1,341 0.91

Interpretation

It shows company does not have enough liquidity to

meet current liability. This is mainly due to company is
working towards attainment of zero working capital. i.e –
Funding of all stocks with creditors outstading.
 CHART 2
Chart of Quick Assets and Current Liabilities

3000.00

2500.00

2000.00
Quick Assets
1500.00 Quick Liabilities
Ratio
1000.00

500.00

0.00
Ju 8

D 08
Au 8

9
N 8
Se 8
Ju 8

Fe 9

M 9
M 8

O 8

Ja 8
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n-

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ar
ay

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Ap
Stock Turnover Ratio

It can also be called Inventory turnover ratio. It purposes to

evaluate the liquidity of inventory and adequacy of inventory
controls. It is expressed in the followings.

Stock Turnover ratio = Cost of Goods sold /

Inventory * No. of days

TABLE 3
Statement of Inventory and COGS
Days
Period Inventory COGS coverage
Apr-08 1,061 613 52
May-08 1,119 704 48
Jun-08 1,072 748 43
Jul-08 1,077 625 52
Aug-08 1,054 774 41
Sep-08 1,073 706 46
Oct-08 1,114 873 38
Nov-08 1,099 816 40
Dec-08 1,116 889 38
Jan-09 1,098 877 38
Feb-09 970 816 36
 Mar-09 842 961 26

Interpretation

Stock turnover ratio has come down to 26 days in the

month of Mar-09 from peak of 52 days, this shows that
company inspite of increase in sales has reduced inventory
holding, which shows good inventory management.
 CHART 3
CHART OF STOCK TURNOVER

1 ,2 0 0 60

1 ,0 0 0 50

800 40
In v e n t o r y
600 30 COGS
D a y s c o ve ra g e
400 20

200 10

0 -
A p Mr - a Jy u- nJ -u lA- u Sg -e pO - c Nt - o Dv - e Jc a- nF - e bM - a r -
08 08 08 08 08 08 08 08 0809 09 09
Cash Reserve Ratio

This is termed as “Absolute Liquidity Ratio”. This ratio

measures the relationship between cash and cash terms on
the one hand and immediately maturing obligations on the
other. This is more rigorous measure of firm’s liquidity
position.

Cash reserve ratio = Cash / Current liabilities

TABLE 4
Statement of Cash and Current Liabilities(In lacs)
Current
Period Cash Liablities Cash ratio
Apr-08 -116 1,034 -0.1
May-08 2,298 1,167 1.7
Jun-08 1,835 935 1.61
Jul-08 1,505 917 1.35
Aug-08 1,268 1,138 0.94
Sep-08 810 1,059 0.62
Oct-08 588 1,570 0.33
Nov-08 -180 1,427 -0.11
Dec-08 399 1,447 0.24
Jan-09 520 1,303 0.34
Feb-09 236 1,373 0.15
Mar-09 221 1,341 0.14
Interpretation
There was high cash reserve 1.70, 1.61 and 1.35 in the
period between May-08 to Jul-08, mainly due to non
utilization of excess cash reserved for capital expenditure
Low cash ratios gradually come down from Aug 08 to Mar09

CHART 4
CHART OF CASH RESERVE RATIO
2500

2000

1500

1000

500

0
A p r M- 0 a8 y J- u0 n8 - J0 u8 l - 0A 8u g S- 0e 8p O- 0 c8 t -N0 o8 v D- 0 e 8 c J- 0a 8n -F0 e9 b -M0 9a r - 0 9
-5 0 0

C a s h C u r r e n t L i Ca ba lsi t hi e rs a t i o
Working Capital Turnover ratio

This is also called as working capital leverage ratio. This

indicates whether working capital has been effectively
utilized in making sales. In the retail company, the turnover
includes sales, sub lease and other marketing income.

Working capital Turnover ratio = Turnover / Working

capital

TABLE 5
Statement of Working Captial and Turnover (In Lacs)

Current Workin Other

Current Liablitie g Net incom Sub lease Turnove
Period Assets s Capital Sales e income r
Apr-08 1,182 1,034 148 695 24 36 755
May-08 3,716 1,167 2,549 810 35 23 868
Jun-08 3,243 935 2,308 852 38 24 914
Jul-08 2,896 917 1,979 721 29 25 775
Aug-08 2,770 1,138 1,632 895 23 23 941
Sep-08 2,294 1,059 1,235 800 29 24 853
Oct-08 2,259 1,570 689 983 5 57 1,045
Nov-08 1,504 1,427 77 929 32 36 997
1,03
Dec-08 2,000 1,447 553 0 29 38 1,097
1,01
Jan-09 2,203 1,303 900 7 29 31 1,078
Feb-09 1,920 1,373 547 925 28 20 973
1,09
Mar-09 1,599 1,341 258 1 44 26 1,162
 W/C turnover
Period Turnover Working Capital ratio

Apr-08 755 148 5.11

May-08 868 2,549 0.34

Jun-08 914 2,308 0.40

Jul-08 775 1,979 0.39

Aug-08 941 1,632 0.58

Sep-08 853 1,235 0.69

Oct-08 1,045 689 1.52

Nov-08 997 77 12.99

Dec-08 1,097 553 1.98

Jan-09 1,078 900 1.20

Feb-09 973 547 1.78

Mar-09 1,162 258 4.50

Interpretation

From Oct-08 onwards, the working capital has been utilized

properly for developing the sales.
Debtor Turnover ratio

Debtor is one of the important elements of the current

assets. Therefore the qualitiy of debtors to a great extent
determines a firm’s liquidity. It can be expressed as follows.
sales to debtor ratio indicates that the efficiency of the
company entrusted with collection of book debts. The higher
the ratio, the better it is, since it would indicate that debts
are being collected more promptly.

Debtor Turnover ratio = Total Sales / Account receivables

Debt collection Period Ratio

The ratio indicates the extent to which the debts have

been collected in time. An increase in the period will result
greater blockage of funds in debtors.
The ratio may be calculated by any of the following methods:

Months or days in a year / Debtors’ turnover

(or)

Average account receivables X months or days in a year

_______________________________________________________
Total sales for the year
 TABLE 6
Statement of Turnover and Debtors

Period Turnover Debtor D/C turnover Debt collection Period

Apr-08 755 86 8.73 3.44

May-08 868 94 9.24 3.35

Jun-08 914 104 8.82 3.40

Jul-08 775 88 8.80 3.52

Aug-08 941 230 4.09 7.57

Sep-08 853 185 4.61 6.51

Oct-08 1,045 217 4.81 6.24

Nov-08 997 281 3.54 8.46

Dec-08 1,097 231 4.76 6.51

Jan-09 1,078 234 4.61 6.73

Feb-09 973 269 3.62 7.73

Mar-09 1,162 207 5.61 5.53

 10
9
8
7
6
D /C tu rn o ve r
5
D e b t c o lle c t io n P e rio d
4
3
2
1
0
A p r M- J u nJ -u lA- u Sg -e Op -c Nt - o Dv - e Jc a- nF - e bM - a r -
0 8 a y -0 8 0 8 0 8 0 8 0 8 0 8 0 8 0 9 0 9 0 9
08

Interpretation

There was the lot of fluctuation in the turnover ratio during

the year.
However, the good performance again recovered in the
month of Mar-09
Paid up stock analysis

It measures the efficiency of working capital

management with regard to inventory level and creditors’
payment. It is the indicator to management to maintain
optimal level of inventory and also helps to create the credit
policy effectively and efficient manner.

Paid up stock = Inventory - Trade Creditors

 TABLE 7
Statement of Paid up stock

Trade
Period Inventory Creditors Paid up stock
Apr-08 1,061 440 621
May-08 1,119 510 609
Jun-08 1,072 456 617
Jul-08 1,077 368 709
Aug-08 1,054 527 527
Sep-08 1,073 502 570
Oct-08 1,114 613 501
Nov-08 1,099 522 578
Dec-08 1,116 695 421
Jan-09 1,098 488 610
Feb-09 970 478 492
Mar-09 842 547 295

Interpretation

Significantly Paid up stock was come down to INR 295 lacs in

the month of Mar-09 as compared to previous months. This
shows improved working capital management.
 Chart 5
Chart of Paid stock analysis

1 ,2 0 0

1 ,0 0 0

800
In v e n to r y
600 T r a d e C r e d i to r s
P a id u p s to c k
400

200

-
A p r -M a y J- u n -J u l- A u g S- e p O- c t-N o v D- e c J- a n -F e b M- a r -
08 08 08 08 08 08 08 08 08 09 09 09

Stock Aging Report

 91- 121- 181- 271-
Category Name 0-30 31-60 61-90 120 180 270 365 >365

Food & 307. 83. 39. 28. 2 7.

Grocery 86 37 64 90 4.37 5.83 3.52 27

General 54. 27. 19. 13. 3 1 1 17.

Merchandise 75 82 98 16 5.03 8.07 0.23 81

39. 9. 1. 5. 2 1 34.
Electronics 16 93 77 90 1.61 2.32 8.88 97
23. 7. 6. 6. 1.
Textiles 12 44 32 30 8.89 4.51 2.00 53
Packing 3. 3. 7. 1. 1.
Material 94 38 12 16 5.67 2.04 0.57 69

428. 131. 74. 55. 9 4 2 63.

All Divisions 82 94 83 42 5.58 2.77 5.20 27

Interpretation

Stock value of Rs. 226.82 lacs crossed more than 120 days
because of GM and Electronics divisions’ stock holdings. It
almost covered the 24.71 % of entire stock holdings
 Chart 6
Chart of Stock Aging Report

5 0 0 .0 0
4 5 0 .0 0
4 0 0 .0 0
3 5 0 .0 0 P a c k in g M a t e r ia l
3 0 0 .0 0 T e x t ile s
2 5 0 .0 0 E le c t ro n ic s
2 0 0 .0 0 G e n e r a l M e r c h a n d is e
1 5 0 .0 0 F o o d & G ro c e ry
1 0 0 .0 0
5 0 .0 0
-
0 - 3 0 3 1 - 6 06 1 -9 09 1 - 1 2 01 2 1 - 1 8 1 - 2 7 1 - > 3 6 5
180 270 365
Stock Composition Mix

DIVISION NAME Grand Total Divison Mix

500.7
Food & Grocery 5 55%
196.8
General Merchandise 6 21%
134.5
Electronics 4 15%
60.1
Textiles 1 7%
25.5
Packing Material 7 3%
917.8
All Divisions 3 100%
 G ra n d T o t a l

G e n e ra l
E le c t r o n ic s
M e r c h a n d is e
15%
21%
T e x t ile s F o o d & G ro c e ry
7% G e n e r a l M e r c h a n d is e

P a c k in g M a t e r i a l E le c t r o n ic s
3% T e x t ile s
P a c k in g M a t e r ia l
F o o d & G ro c e ry
54%
FINDINGS, SUGGESTIONS AND CONCLUSION

Based on the analysis and interpretation of the financial

statements the findings are made in the following aspects

Findings

• General Merchandise and textiles are slow moving

as compared to food division. Electronics division
has more aged stocks compared to other divisions.

• Revenue generation through cash , which

contributes 50% of the sales, 40% through Credit
card, 10% of the sales through coupons

• Sodexho and Ticket restaurant are major debtors

to the company since these are issuing the
coupons. Coupons realization covers 15 days to 25
days. Credit card realization covers 2-3 days.

• Company has improved the working capital by

increasing the credit days to the vendors and
reducing the stock holding days.Stock turnover
ratio has come down to 26 days from the 52 days
 • Credit days to food division covers 15 days to
30days, Electronics division covers 1 days to 30
days and credit days for others covers 40 days to
65 days.
• The cash outflows are very high due to new
projects, trade payment and other administration
expenditures.

Suggestions and Recommendations:

o Working capital of the company has to be still

strengthened by increasing the revenues and

changing the composition of mix of current assets

o The company has to take very careful in utilization

of over draft and always make ensure that the

cash reserve ratio should not fall into negative.

o Inventories, which are more than 120days, have to

be liquidate immediately. So that further paid
stocks can be controlled.
Conclusion:

The study has taken points to highlight the working

capital performance of the Max Hypermarket India Pvt. Ltd
during the year 2008-09. The performance of the company
has increased gradually every month in terms of working
capital turnover ratio, Cash reserve ratio, Paid up stock ,
stock turnover ratio,Current and quick ratios. The study
suggest that there must be very careful in utilization of bank
over draft and requires the plan for liquidating the more than
120 days inventories.

Bibliography

Dr. S.N. Maheshwari – Financial Management (Principles and

Practices), Sultan Chand & Sons Educational Publizhers, New
Delhi..

Prasanna Chandra – Financial Management Theory and

Practice, Tata McGraw Hill Publishing company Ltd, New
Delhi
I.M.Pandey, Essentials of Financial Management, Vikash
Publishing Houses Pvt. Ltd.