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In this procedure firstly we can calculate the or estimate the working capital requirements in the year 2008 to 2010...
Current Assets: Cash and bank balances Cash in hand of Mehtiana Cash in hand of branch Cash at banks In current a/c and others Sundry debtors Advances to vendors inventories loan and advances securities deposits advance income tax expenses pre-paid employee accounts excise duty rent advances interest accrued 3686921.60 26222027.55 1265513.96 1659165.74 8480359.92 267000.00 20313.36 4866912.86 208221954.88 4756880.16 515568532.81 4421602.51 32276.13
excise duty (pending claim) income tax refund group gratuity Amount recoverable D.E.P.B recoverable Fringe benefit taxes Service tax cenvat Commission receivable Excise duty recoverable Deposits with GNA UDYOG Advances against land Vat recoverable Insurance recoverable Freight clearing Advances against fixed assets Insurance claim employee Customer clearing
4643713.71 53566.00 88496.00 6000.00 804749.00 2994474.00 1148012.10 353440.00 8701.00 _ 70000.00 1137470.16 31407.00 _ 483024.75 3543.00 475717.10 _______________
791771775.30
Less current liabilities: Sundry creditors Advance received from customer Sundry payable Sundry expenses payables Income tax debt. At recourses I.T.C.S on scrap Bonus payable Leave with wages payables Share application money Service tax payable 20080039.14 1629975.00 12095.00 3497655.00 20816.00 343.52 4483.00 _______________ Total of current liabilities: ( CL) 265103651.53 237321451.79 2536793.08
Current Assets: Cash and bank balances Cash in hand of Mehtiana Cash in hand of branch Cash at banks In current a/c and others Sundry debtors Advances to vendors inventories loan and advances securities deposits advance income tax expenses pre-paid employee accounts excise duty 3798721.10 42851469.55 1106850.16 1603772.27 2712528.98 7943463.65 211378426.43 6109885.23 400060868 2409340.47 21051.63
rent advances interest accrued excise duty (pending claim) income tax refund group gratuity Amount recoverable D.E.P.B recoverable Fringe benefit taxes Service tax cenvat Commission receivable Excise duty recoverable Deposits with GNA UDYOG Advances against land Vat recoverable Insurance recoverable Freight clearing Advances against fixed assets Insurance claim employee Customer clearing
267000.00 20313.36 5212500.00 578171.00 23557.84 _ 967305.00 2994474.00 1345842.81 _ 41249.00 5480000.00 70000.00 4527817.29 29803.00 29320.46 _ _ _ _______________
701583830.44 _______________
Less current liabilities: Sundry creditors Advance received from customer Sundry payable Sundry expenses payables Income tax debt. At recourses I.T.C.S on scrap Bonus payable Leave with wages payables Share application money Service tax payable 20104843.00 1814654.78 4449.11 3190708.00 26236.00 343.52 80729.00 177513567.84 10790539.95
_______________ Total of current liabilities: ( CL) 232894071.24 468689759.24 Net working capital required ( CA-CL ) _______________
2.) MEASURE THE CHANGES IN THE AMOUNT OF WORKING CAPITAL OF TWO BALANCE SHEET DATES
IN this statement we can calculate and measure the changes in the working capital of the two year and find out where the working capital increased and where it decreased so we can prepare the following statement.
Current Assets: Cash and bank balances Cash in hand of Mehtiana Cash in hand of branch Cash at banks In current a/c and others Sundry debtors Advances to vendors inventories loan and advances securities deposits advance income tax expenses pre-paid employee accounts excise duty rent advances interest accrued excise duty (pending claim) income tax refund group gratuity Amount recoverable D.E.P.B recoverable Fringe benefit taxes Service tax cenvat Commission receivable Excise duty recoverable 3798721.10 42851469.55 1106850.16 1603772.27 2712528.98 267000.00 20313.36 5212500.00 578171.00 23557.84 _ 967305.00 2994474.00 1345842.81 _ 41249.00 3686921.60 26222027.55 1265513.96 1659165.74 8480359.92 267000.00 20313.36 4643713.71 53566.00 88496.00 6000.00 804749.00 2994474.00 1148012.10 353440.00 8701.00 353440.00 __ 64938.16 6000.00 162556.00 158663.8 55393.47 5767830.94 __ __ 568786.29 524605.00 111799.5 16629442.00 7943463.65 4866912.86 3076550.79 3156471.55 13530050.07 115507664.81 2409340.47 21051.63 4421602.51 32276.13 2012262.04 11224.5
197830.71
32548.00
Deposits with GNA UDYOG Advances against land Vat recoverable Insurance recoverable Freight clearing Advances against fixed assets Insurance claim employee Customer clearing
_ 70000.00 1137470.16 31407.00 _ 483024.75 3543.00 475717.10 __ __ __ 1604.00 __ 483024.75 3543.00 5480000.00 __ 3390347.13 __ 29320.46 __ __ __
____________ _____________ 475717.10 Total of current Assets : (CA) 701583830.44 791771775.30 ____________ Less current liabilities: Sundry creditors Advance received from customer Sundry payable Sundry expenses payables Income tax debt. At recourses I.T.C.S on scrap Bonus payable Leave with wages payables Share application money Service tax payable 20104843.00 1814654.78 4449.11 3190708.00 26236.00 343.52 80729.00 20080039.14 1629975.00 12095.00 3497655.00 20816.00 343.52 4483.00 24804.00 184679.78 --5420.00 -177513567.84 237321451.79 10790539.95 2536793.08 -8253746.87
59807883.95 --
____________ _____________ 76246.00 Total of current liabilities(CL) Net working capital required (CA-CL) 232894071.24 265103651.53_ 468689759.24_ 526668123.77
Interpretation:
This Schedule shows the changes in the amount of Working Capital in year 2009 and 2010. In year 2010 the working capital is 468689759.24 and in year 2010 it increases i.e. 468689759.24 it means the Net Working Capital increases by 57978364.53 in year 2010... So its shows the company have average working capital to carry out its working expenses..
3.) TO
ANALYSE
SHORT
TERM
FINANCIAL
POSITION
OF
GNA
RATIO ANALYSIS:
Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making decisions. The main emphasis has been on calculating the ratios related to a working capital management.
MAINLY TWO TYPES OF RATIOS ARE CALCULATED TO KNOW THE SHORT TERM FINANCIAL POSITION OF THE COMPANY
1. Liquidity Ratios 2. Current Assets Movement or Efficiency/Activity Ratios
Liquidity Ratios
1. Current Ratio 2. Quick or Acid Test or Liquid Ratio
If current assets can pay off current liabilities, then liquidity position will be satisfactory. If current liabilities may not be easily met out of current assets then liquidity position will be bad.
To measure the liquidity of a firm, the following ratios can be calculated:
I. CURRENT RATIO:
It may be defined as the relationship between current assets and current liabilities. This ratio is also known as working capital ratio and measures the ability of the firm to meet current liabilities.
High current ratio indicates firm is liquid and has the ability to pay its current obligations
in time as and when they become due.
Current Ratio
Year
2009
2010
791771775.30 265103651.53
2.987
3.012
2.987
Current Ratio
2009
2010
Interpretation: The current ratio of GNA DURAPART in 2009 is 3.012 and it is decreased in
2010 and that is 2.987 and current ratios in both years satisfied rule of thumb. This shows current ratio of GNA DURAPART quite satisfactory
A high quick ratio is the indication that the firm is liquid and has the ability to meet its current liabilities in time. Low ratio represents liquidity position is not good.
RULE OF THUMB: Rule of thumb for acid test ratio is1:1 i.e. It is better to have current assets equal to current liabilities however the little lower is also acceptable depending on certain factors.