Mayur Project

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NEW HORIZON COLLEGE 07VFC08057

CHAPTER 1

INTRODUCTION


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FINANCE

FINANCE AND RELATED CONCEPTS:

Meaning of Finance:

Finance is the support to any business in terms of money or moneys worth. It is the

lifeblood of the economy. Finance includes determining what has to be paid for raising the

money on the best term available funds in the best possible way.

Definition of Business Finance:

The activity concerned with planning, raising, controlling and administering of fund in

business

-Guttmann and

Dongall.

Finance is also the science and art of determining if the funds of an organization are being

used properly. Through financing analysis, companies and businesses can take decisions and

corrective action towards the sources of income and the expenses and investments that

need to be made in order to stay competitive.

FINANCIAL MANAGEMENT:-

Financial management is that managerial activity which is concerned with planning and

controlling of the firms financial resources.

According to phillipatusfinancial management is concerned with managerial decisions that

result in the acquisitions and financing of long term and short term credit for the firm.


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FINANCIAL ANALYSIS:-

Analysis is the process of critically examining in detail accounting information given in the

financial statements. For the purpose of analysis, individual items are studied, their

interrelationship with other relater figures established, the data is sometimes rearranged to

have better understanding of the information with the help of different techniques or tools

for the purpose.

OBJECTIVE OF FINANCIAL ANALISYS:-

The present future earning capacity or profitability of a concern.

The operational efficiency of the concern as a whole and of its various parts or

departments.

The short term and the long term solvency of the concern for the benefit of

debenture holders and trade creditors.

The comparative study in regard to one firm with another firm or one department

with another department.

The possibility of developments in the future by making forecast and preparing

budgets.

The financial stability of business concern.

The real meaning and significance of financial data

The long term liquidity of its funds.


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SOURCE OF FINANCE


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Function of Finance:

1) Investment Design.

Capital Budgeting

Working Capital Management:

working Capital is the amount of funds necessary to cover the cost of

operating the enterprise

- Shubin

Circulating Capital means current assets of a company that are changed in the ordinary

course of business from one from to another, as for example, from cash to inventories,

inventories to receivable, receivables into cash.

- Genestenberg

2) Financial Decision.

3) Dividend Policy Decision.

Financial Statement s:

They refer to two statements, which are prepared by an organization at the end of the year:

Income statement or profit and loss account to know the earned and loss sub stained during

a specific period.

Position statement or balance sheet in order to known its financial position as on a

particular point of time usually one year.


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Analysis of Financial Statement Interpretation

By Myer:

Financial Statements analysis is largely a study of relationship among the various

financial factors in a business as disclosed by single set of statement and a study of the

trend if these factor as shown in a series of statements

Tools of Financial Analysis:

1 Comparative Statement Analysis

2 Common Size Statement Analyses

3 Trend- Percentage Analysis

4 Ratio Analysis

5 Fund Flow Statement Analysis

LIMITATIONS OF Financial Statement Analysis:

Historical nature of financial statements.

Non substitute for judgment

Reliability of figures

Single year analysis is not of much value and useful

Result may have different interpretations

Change in accounting methods

Pitfalls in inter firm comparison

Price level changes reduce validity of analysis

Financial Analysis becomes a need, a requirement due to the above significant it

provides to the people involved.


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Financial accounting:-

It is concerned with the recording of financial transactions and analyzing the effect of

such transactions to assist in the development of business decisions. In addition, financial

accounting provides information in the form of balance sheets, income statements, and

other financial statements to users outside of businesses that are in some way concerned

or affected by the performance of the businessstockholders, creditors, lenders,

governmental agencies, and other outside users.

Hospitality management accounting :-

is concerned with providing specialized internal information to managers who are

responsible for directing and controlling operations within the hospitality industry. Internal

information is the basis for planning alternative short- or long-term courses of action and

the decision as to which course of action is selected. Specific detail is provided as to how the

selected course of action will be implemented. Managers direct the needed material

resources and motivate the human resources needed to carry out a selected course of

action. Managers control the implemented course of action to ensure that the plan is being

followed and, as necessary, modified to meet the objectives of the selected course of

action.


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MEANING OF WORKING CAPITAL:

Capital required for a business can be classifies under two main categories:

Fixed Capital

Working Capital

Every business needs funds for two purposes for its establishments and to carry out day to

day operations. Long term funds are required to create production facilities through

purchase of fixed assets such as plant and machinery, land and building, furniture etc.

Investments in these assets are representing that part of firms capital which is blocked on a

permanent or fixed basis and is called fixed capital. Funds are also needed for short term

purposes for the purchasing of raw materials, payments of wages and other day to day

expenses etc. These funds are known as working capital. In simple words, Working capital

refers to that part of the firms capital which is required for financing short term or current

assets such as cash, marketable securities, debtors and inventories.

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:

Balance Sheet concepts

Operating Cycle or circular flow concept


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BALANCE SHEET CONCEPT:

There are two interpretation of working capital under the balance sheet concept:

Gross Working Capital

Net Working Capital

The term working capital refers to the Gross working capital and represents the amount of

funds invested in current assets . Thus, the gross working capital is the capital invested in

total current assets of the enterprises. Current assets are those assets which are converted

into cash within short periods of normally one accounting year. Example of current assets is:

Constituents of Current Assets:

Cash in hand and Bank balance

Bills Receivable

Sundry Debtors

Short term Loans and Advances

Inventories of Stock as:

Raw Materials

Work in Process

Stores and Spaces

Finished Goods

Temporary Investments of Surplus Funds Prepaid Expenses

Accrued Incomes

The term working capital refers to the net working capital. Net working capital is the excess

of current assets over current liabilities or say:

Net Working Capital = Current Assets

Current Liabilities.


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NET WORKING CAPITAL MAY BE NEGATIVE OR POSITIVE:

When the current assets exceed the current liabilities, the working capital is positive and the

negative working capital results when the current liabilities are more than the current

assets. Current liabilities are those liabilities which are intended to be paid in the ordinary

course of business within a short period of normally one accounting year of the current

assets or the income of the business. Examples of current liabilities are:

CONSTITUENTS OF CURRENT LIBILITIES:

Bills Payable

Sundry Creditors or Account Payable

Accrued or Outstanding Expenses

Short term Loans, Advances and Deposits

Dividends Payable

Bank Overdraft

Provision for Taxation, If does not amount to appropriation of profits

The gross working capital concept is financial or going concern concept whereas net working

capital is an accounting concept of working capital.

OPERATING CYCLE OR CIRCULATING CASH FORMAT:

Working Capital refers to that part of firms capital which is required for financing short

term or current assets such as cash, marketable securities, debtors and inventories. Funds

thus invested in current assets keep revolving fast and being constantly converted into cash

and these cash flows out again in exchange for other current assets. Hence it is also knownas revolving or circulating capital. The circular flow concept of working capital is based upon


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this operating or working capital cycle of a firm. The cycle starts with the purchase of raw

material and other resources.

And ends with the realization of cash from the sales of finished goods. It involves purchase

of raw material and stores, its conversion into stocks of finished goods through work in

progress with progressive increment of labor and service cost, conversion of finished stocks

into sales, debtors and receivables and ultimately realization of cash and this cycle

continuous again from cash to purchase of raw materials and so on. The speed/ time of

duration required to complete one cycle determines the requirements of working capital

longer the period of cycle, larger is the requirement of working capital.


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Receivable conversion period Raw material storage

(RCP) Conversion period(RMSCP)

Cash received form

Debtors and paid to suppliers

Of raw materials

Sales of finished Raw materials

Goods introduced into process

Finished Goods

Produced

Finished goods conversion Work in process

Period (FGCP) Conversion period

(WPCP)


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The gross operating cycle of a firm is equal to the length of the inventories and receivables

conversion periods. Thus,

Where,

RMCP = Raw Material Conversion Period

WIPCP = Workin- Process Conversion Period

FGCP = Finished Goods Conversion Period

RCP = Receivables Conversion Period

However, a firm may acquire some resources on credit and thus defer payments for certain

period. In that case, net operating cycle period can be calculated as below:

Further, following formula can be used to determine the conversion periods.

Raw Material Conversion Period = Average Stock of Raw Material.

Raw Material Consumption per day

Work in process Conversion Period = Average Stock of Work-in-Progress

Total Cost of Production per day

Finished Goods Conversion Period = Average Stock of Finished Goods

Total Cost of Goods sold per day

Receivables Conversion Period = Average Accounts Receivables

Net Credit Sales per day

Payable Deferral Period = Average Payable

Net Credit Purchase per day

Gross Operating Cycle = RMCP + WIPCP + FGCP + RCP

Net Operating Cycle Period = Gross Operating Cycle Period Payable Deferral period


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CLASSIFICATION OR KIND OF WORKING CAPITAL:

Working capital may be classified in two ways:

On the basis of concept

On the basis of time

Om the basis of concept, working capital is classified as gross working capital and net working

capital. The classification is important from the point of view of the financial manager.

On the basis of time, working capital may be classified as:

Permanent or Fixed working capital

Temporary or Variable working capital.


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t

Seasonal Working

Capital

On the basis of concept On the basis of time

Net Working

Capital

Gross Working

Capital

Temporary or

Variable Working

Capital

Kinds of Working Capital

Reserve Working

Capital

Regular

Working Capital

Special Working

Capital

Permanent or

Fixed Working

Capital


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1. PERMANENT OR FIXED WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount which is required to ensure

effective utilization of fixed facilities and for maintaining the circulation of current assets.

There is always a minimum level of current assets which is continuously required by the

enterprises to carry out its normal business operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:

Temporary or variable working capital is the amount of working capital which is required to

meet the seasonal demands and some special exigencies.Varibles working capital can be

further classified as second working capital and special working capital. The capital required

to meet the seasonal needs of the enterprises is called the seasonal working capital.

Temporary working capital differs from permanent working capital in the sense that is

required for short periods and cannot be permanently employed gainfully in the business

IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL:

Working capital is the life blood and nerve centre of a business. Just a circulation of a blood

is essential in the human body for maintaining life, working capital is very essential to

maintain the smooth running of a business. No business can run successfully without an

adequate amount of working capital. The main advantages of maintaining adequate amount

of working capital are as follows:

Solvency of the Business

Goodwill

Easy Loans

Cash discounts

Regular supply of Raw Materials

Regular payments of salaries, wages & other day to day commitments.

Exploitation of favorable market conditions

Ability of crisis


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Quick and regular return on investments

High morals

THE NEED OR OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some amount of

working capital. The need of working capital arises due to the time gap between production

and realization of cash from sales. There is an operating cycle involved in the sales and

realization of cash. There are time gaps in purchase of raw materials and production,

production and sales,

And sales, and realization of cash, thus, working capital is needed for the following

purposes:

For the purchase of raw materials , components and spaces

To pay wages and salaries

To incur day to day expenses and overhead costs such as fuel, power and office

expenses etc.

To meet the selling costs as packing, advertising etc.

To provide credit facilities to the customers.

To maintain the inventories of raw materials, work in- progress, stores and spares

and finished stock.

FACTORS DETERMING THE WORKING CAPITAL REQUIRMENT:

The working capital requirements of a concern depend upon a large number of factors such

as nature and size of the business, the characteristics of their operations, the length of

production cycle, the rate of stock turnover and the state of economic situation. However

the following are the important factors generally influencing the working capital

requirements.


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NATURE OR CHARACTERSTICS OF A BUSINESS: The nature and the working capital

requirement of enterprises are interlinked. While a manufacturing industry has a

long cycle of operation of the working capital, the same would be short in an

enterprises involve in providing services. The amount required also varies as per the

nature, an enterprises involved in production would required more working capital

then a service sector enterprise.

MANAFACTURE PRODUCTION POLICY: Each enterprises in the manufacturing sector

has its own production policy, some follow the policy of uniform production even if

the demand varies from time to time and other may follow the principles of demandbased production in which production is based on the demand during the particular

phase of time. Accordingly the working capital requirements vary for both of them.

OPERATIONS: The requirement of working capital fluctuates for seasonal business.

The working capital needs of such business may increase considerably during the

busy season and decrease during the

MARKET CONDITION: If there is a high competition in the chosen project category

then one shall need to offer sops like credit, immediate delivery of goods etc for

which the working capital requirement will be high. Otherwise if there is no

competition or less competition in the market then the working capital requirements

will be low.

AVABILITY OF RAW MATERIAL: If raw material is readily available then one need

not maintain a large stock of the same thereby reducing the working capital

investment in the raw material stock. On other hand if raw material is not readily

available then a large inventory stocks need to be maintained, there by calling for

substantial investment in the same.

GROWTH AND EXAPNSION: Growth and Expansions in the volume of business

result in enhancement of the working capital requirements. As business growth and


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expands it needs a larger amount of the working capital. Normally the needs for

increased working capital funds processed growth in business activities.

PRICE LEVEL CHANGES : Generally raising price level require a higher investment in

the working capital. With increasing prices, the same levels of current assets needs

enhanced investments.

MANAFACTURING CYCLE: The manufacturing cycle starts with the purchase of raw

material and is completed with the production of finished goods. If the

manufacturing cycle involves a longer period the need for working capital would be

more. At time business needs to estimate the requirement of working capital in

advance for proper control and management. The factors discussed above influence

the quantum of working capital in the business. The assessment of the working

capital requirement is made keeping this factor in view. Each constituents of the

working capital retains it form for a certain period and that holding period is

determined by the factors discussed above. So for correct assessment of the working

capital requirement the duration at various stages of the working capital cycle is

estimated. Thereafter proper value is assigned to the respective current assets,

depending on its level of completion. The basis for assigning value to each

component is given below:


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Each constituent of the working capital is valued on the basis of valuation

Enumerated above for the holding period estimated. The total of all such valuation becomes

the total estimated working capital requirement.

The assessment of the working capital should be accurate even in the case

of small and micro enterprises where business operation is not very large. We

know that working capital has a very close relationship with day-to-day

operations of a business. Negligence in proper assessment of the working capital, therefore,

can affect the day-to-day operations severely. It may lead to cash crisis and ultimately to

liquidation. An inaccurate assessment of the working capital may cause either under-

assessment or over-assessment of the working capital and both of them are dangerous.

COMPONENTS OF WORKING CAPITAL BASIS OF VALUATION

Stock of Raw Material Purchase of Raw Material

Stock of Work -in- Process At cost of Market value which is lower

Stock of finished Goods Cost of Production

Debtors Cost of Sales or Sales Value

Cah Working Expenses


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PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY:

The following are the general principles of a sound working capital management policy:

PRINCIPLES OF WORKING CAPITAL MANAGEMNT POLICY

PRINCIPLES OF

RISK

VARIATIONS

PRINCIPLES OF

COST OF

CAPITAL

PRINCIPLES OF

EQUITY

PRINCIPLES

PRINCIPLES OF

MATURITY OF

PAYMENTS


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1. PRINCIPLE OF RISK VARAITAION (CURRENT ASSETS POLICY):

Risk here refers to the inability of a firm to meet its obligations as and when they become

due for payment. Larger investment in current Assets with less dependence on short term

borrowings, increase liquidity, reduces risk and thereby decreases the opportunity for gain

or loss. On the other hand less investments in current assets with greater dependence on

short term borrowings, reduces liquidity and increase profitability. In other words there is a

definite inverse relationship between the degree of risk and profitability. In other words,there is a definite inverse relationship between the risk and profitability. A conservative

management prefers to minimize risk by maintaining a higher level of current assets or

working capital while a liberal management assumes greater risk by reducing working

capital. However, the goal of management should be to establish a suitable trade off

between profitability and risk.

2. PRINCIPLES OF COST OF CAPITAL: The various source of raising working capital finance

have different cost of capital and the degree of risk involved. Generally, higher and risk

however the risk lower is the cost and lower the risk higher is the cost. A sound working

capital management should always try to achieve a proper balance between these two.

3.PRINCIPLE OF EQUITY POSITION: The principle is concerned with planning the total

investments in current assets. According to this principle, the amount of working capital

invested in each component should be adequately justified by a firms equity position. Every

rupee invested in current assets should contribute to the net worth of the firm. The level of

current assets may be measured with the help of two ratios:

1. Current assets as a percentage of total assets and

2. Current assets as a percentage of total sales


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While deciding about the composition of current assets, the financial manager may consider

the relevant industrial averages.

4. PRINCIPLES OF MATURITY OF PAYMENT: The principle is concerned with planning the

source of finance for working capital. According to the principles, a firm should make every

effort to relate maturities of payment to its flow of internally generated funds. Maturity

pattern of various current obligations is an important factor in risk assumptions and risk

assessments. Generally shorter the maturity schedule of current liabilities in relation to

expected cash inflows, the greater the inability to meet its obligations in time.

CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL:

Growth may be stunted. It may become difficult for the enterprises to undertake

profitable projects due to non availability of working capital.

Implementations of operating plans may brome difficult and consequently the profit

goals may not be achieved.

Cash crisis may emerge due to paucity of working funds.

Optimum capacity utilization of fixed assets may not be achieved due to non

availability of the working capital.

The business may fail to honour its commitment in time thereby adversely affecting its

creditability. This situation may lead to business closure.

The business may be compelled to by raw materials on credit and sell finished goods on

cash. In the process it may end up with increasing cost of purchase and reducing selling

price by offering discounts . both the situation would affect profitable adversely.

Now avaibility of stocks due to non availability of funds may result in production stoppage.

While underassessment of working capital has disastrous implications on business over

assessments of working capital also has its own dangerous.


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CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING CAPITAL:

Excess of working capital may result in un necessary accumulation of inventories.

It may lead to offer too liberal credit terms to buyers and very poor recovery system

& cash management.

It may make management complacent leading to its inefficiency.

Over investment in working capital makes capital less productive and may reduce

return on investment.

Working Capital is very essential for success of business & therefore needs efficient

management and control. Each of the components of working capital needs proper

management to optimize profit.

INVENTORY MANAGEMNT: Inventory includes all type of stocks. For effective working

capital management, inventory needs to be managed effectively. The level of inventory

should be such that the total cost of ordering and holding inventory is the least.

Simultaneously stock out costs should be minimized. Business therefore should fix the

minimum safety stock level reorder level of ordering quantity so that the inventory costs is

reduced and outs management become efficient.


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CHAPTER 2

COMPANY PROFILE


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COMPANY PROFILE

Shapoorji Pallonji & Co. Ltd. will be the company of first choice in the Construction Industry.

We shall be driven by our commitment to Customer Satisfaction."

For the past 140 years, Shapoorji Pallonji has been striving hard to embrace the aforesaid

objective. The proof of the same lies in our impressive list of repeat clients who have trusted

us time and again for their construction requirements. These include Tata Motors, Birla,

Skoda, Mahindra & Mahindra, WIPRO, ICICI, RBI, BOI, TCS, The American School and

Siemens, just to name a few. This unwavering trust of our clients has since long become our

trademark.

Fostering an environment that helps in the creation of knowledge and its application to

work, we seek to excel in all of our business activities and strive to build Shapoorji Pallonji

into a creative organization.

The greatest asset of any organization is the sum total of knowledge existing across the

length and breadth of its employees and operations. Information in any form is only useful if

it is accessible to the right person at the right time without any procedural delay.

Acknowledging the importance of streamlining and centralizing its organizational data,

Shapoorji Pallonji embarked upon building two cutting-edge knowledge banks that make us

the unique organization that we are.

In an industry where innovations are made constantly at each and every site, this portal

documents and preserves each of these for future reference. These can then be shared and

implemented across other sites, thus translating into considerable savings on manpower,

material and other resources


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140 years ago Mumbai was largely an uninhabited cluster of islands. To fulfill the water

supply needs of the city a reservoir was built, in the famous Malabar Hills. Not only did the

reservoir sustain the needs of Mumbai for the next 100 years, it also witnessed the growth

of Mumbai as the Commercial Capital of India.

The reservoir was built by a company called Little wood Pallonji & Co., which today is

Shapoorji Pallonji Co. & Ltd. one of the leading construction giants in India and abroad.

Over the next hundred years, the companys expertise has been repeatedly showcased on

projects which involved a major advance in construction technology or whose size was

beyond the capacity of most others. Blessed with a rich legacy and heritage, it has marched

into the new millennium with modern management skills, state-of-the-art technology and

the ideals of innovation and customer satisfaction.

Over time, Shapoorji Pallonji has built diverse civil and structural engineering masterpieces

like factories, nuclear research establishments, nuclear waste handling, scientific and

research establishments, stadia and auditoria, airports, hotels, hospitals, giant skyscrapers,

housing complexes, townships, water treatment plants, roads, expressways, power plants

and biotech facilities.

When the Sultan of Oman decided to build a palace around his throne, he placed his trust in

Shapoorji Pallonji.

Shapoorji Pallonji & Co. Ltd. is just one of the jewels in the SP crown. It draws vital support

from other group companies to be able to execute turnkey projects swiftly and efficiently.

These include SP Fabricators, AFCONS, Forbes, Sterling and Wilson, SP Construction

Materials Group, SP Real Estate and Samalpatti Power Company Private Limited. Together,

this conglomerate continues to strive towards perfection, quality and commitment virtues.

Shapoorji Pallonji is the largest private shareholder (18.5%) of TATA SONS LIMITED, the

Holding Company of the TATA Group. The Annual turnover of the TATA Group is over $15

billion.


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Shapoorji Pallonji has emerged as one of the most quality-conscious construction

companies. With over 1250 dedicated and qualified engineers employed by the

organization, it's not hard to imagine why Shapoorji Pallonji is:

The oldest Indian construction company with a legacy of 140 years.

The first Indian construction company to enter the Middle East (Oman Palace) in the

1970s.

The first Indian construction company to have earned the ISO 9001 Certification.

The first Indian company to construct two, sixty-storey residential towers in the

heart of Mumbai.

Today, as Shapoorji Pallonji moves towards a new chapter of progress, it will continue to

undertake and accomplish projects that will stand as proud testimony to their times.

Shapoorji Pallonji Construction

Shapoorji Pallonji Constructions are not limited to India; they have stormed the Middle East

including Muscat, Dubai, Abu Dhabi, Qatar and also Guyana in South America. ShapoorjiPallonji Co. Ltd. builds the palace around the Throne of the Sultan of Oman on the very call

of the Sultan himself.

Shapoorji Pallonji Company is also the oldest and the largest construction company in India.

It was the first Indian construction company to get ISO 9001 certification. They were also

the firsts in building two sixty-storey residential towers - Imperial Towers, with a nine - level

parking system in the very heart of Mumbai. It is also the tallest residential buildings in


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India. Another first was the construction of a Desulphurization Plant.

The company has managed the legacy set up by Pallonji Mistry, founder of Shapoorji Pallonji

& Co. by adhering to the basic quality norms set by the man himself. Shapoorji Pallonji is a

name synonymous to quality, reliability and integrity. Each foundation brick by Shapoorji

Pallonji promises the highest standards and an assurance of the very best.

The overseas projects by Shapoorji Pallonji include:

Ebene Cyber City, Mauritius

Hotel Kabul Serena, Kabul, Afghanistan

Les Pailles Exhibition Centre, Mauritius

Providence Cricket Stadium, Guyana

Stone Palace, Oman

Between Two Bridges Hotel, Abu Dhabi, UAE

Jumeirah Lake Towers, Dubai

Seat of Government, Ghana

P Infocity projects are brought to you by Shapoorji Pallonji & Company Limited. The

Shapoorji Pallonji Group is one of Indias leading construction and real estate

conglomerates. With an impeccable track record of over 143 years, the group is

known for quality & reliability. Our portfolio includes a wide range of projects; be

them residential, commercial, industrial, infrastructure, hotels or hospitals. Our

projects have stood the test of time, redefining benchmarks time and again. It is this

consistency which has led to many of our creations being considered landmarks.

Our reputation as a leader in Indias construction scenario is based on our ability in

offering only the very best in terms of management expertise, architectural design &

construction techniques. Landmarks like the Indira Gandhi International Airport

New Delhi, World Trade Centre Mumbai, Reserve Bank of India Mumbai, OberoiTowers Mumbai, Ebene Cybercity Mauritius and the Palace of the Sultan of Oman


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in Muscat are a few of our prestigious projects. The Imperial, a project in the heart of

Mumbai, comprising of 60 storied residential towers defining the ultimate in

luxurious living is also a Shapoorji Pallonji construction.

Shapoorji Pallonji Group has been associated with numerous IT companies and has

the unique distinction of having successfully constructed approximately ten million

square feet of IT complexes across the country for various leading organizations.

After gathering such vast expertise in the field, Shapoorji Pallonji is now constructing

IT Parks/IT SEZs under the brand name SP Infocity. As part this venture, we are

constructing quality spaces for the IT/ITeS sector on a pan-India basis. The first suchdevelopment is at Pune, where SP Infocity is already home to MNC's like IBM and

Honeywell.

SP Infocity projects across the country have a combined area of approximately 40

million square feet and are located at Pune, Chennai, Gurgaon, Manesar, Nagpur,

Mohali, Mysore, Kolkata and Durgapur.

The Shapoorji Pallonji Group comprises of companies which help us in excellent

backward integration and providing turnkey solutions. These are SP Fabricators

(Facades), SP Construction Materials Group (Interiors), Sterling & Wilson

(Electromechanical),Afcons (Infrastructure projects) and the Forbes Group (Multiple

products and services). With over a 2000 engineers on board and the best of systems

& management practices in place, we are looking forward to raising the bar many

more times.

It is the policy of Shapoorji Pallonji & Co. Ltd. to :

Provides a safe working environment to enable all company activities to be performed in a

manner that reduces risk to all employees, other workers and the public;


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To achieve this the Company will :

Comply with all central, state and local statutory provisions pertaining to Safety, Health

and Environment;

Maintain all equipment, office and job site conditions in ways that eliminates risk;

Provide such information, instruction, supervision and training to ensure the Health and

Safety at work of all employees ;

Use relevant techniques and methods such as Safety Audits and risk assessment for

periodical assessments of the status of Health, Safety and Environment.

Correspondingly, it is required that;

Each employee of company will be responsible for Safety and Health;

All Safety equipment issued by the company must always be used as intended ;

Each employee must be familiar with and observe all safety rules, procedures and policies,

as may be in force from time to time;

Supervisors will see that rules, procedures are observed by their crews, and immediatelyenforce appropriate corrective measures whenever violations are observed

MISSSION of the Company:-

Shapoorji Pallonji & co.Ltd. will be the company of first choice in the construction industry.

We shall be driven by our commitment to Customer Satisfaction.


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Group Vision:-

Fostering an environment that helps in the creation of knowledge and its application to

work, we seek to excel in all our business activities and strive to build SHAPOORJI PALLONJI

into a creative organization.

Quality Policy Statement:-

We are committed to meet the expectations of our customers, through our well- designed

and established service delivery system, that is sensitive and accommodative to continuous

technology up gradation and value analysis. We shall continuously strive to improve the

effectiveness of our quality system.

Objectives:-

Optimal utilization of men, machine, finance and resources.

Provision of safe working environment.

Planning systems for effective implementation.

Strong organizational support through human resource development.

Development of reliable vendor for higher degree of Quality Assurance.

Adherence to project completion schedules.

Project Experience:-

Like the city of birth, the company has grown and expanded at an unparalleled pace in last

century to its present status. Shapoorji pallonji is a firm that is proud of its past. The

company today is not only a force within the country but abroad also. It has been an

achievement for the group to sustain its name at forefront of the construction over the

years.


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Today when a brick is laid by Shapoorji Pallonji, the client knows that the highest quality

standards are going to be met.

The company has adapted to changing times and has accelerated the momentum of its

growth by using modern management skills with state-of-the-art technology.

Moving resolutely forward the company is poised to raise the bar even further in terms of

quality, reliability and integrity.

International Tech Park was the first project to be executed on a publicprivate partnership

with the Govt.of Karnataka, tatas & Accendas of Singapore.

Shapoorji Pallonji takes pride in the fact that they are a part of shaping Indias youth into

capable citizens of tomorrow. One of their most prestigious was the Birla Resident School

Bangalore, while another campus to be mentioned is BITS, Goa.

Shapoorji Pallonji has also constructed the world-renowned Tata Institute of Fundamental

Research (TIFR), which is one of the country s leading research institutions, while the

American Embassy School at Delhi and Mumbai deserves special mention for excellent

quality construction.

In the 1970s, Shapoorji Pallonji was asked to build the palace for the Sultan of Oman which

was the first international project for any Indian construction company.

Shapoorji Pallonji has made its contribution in Sports by electing some of the finest stadiums

in India and abroad. The Brabourne Stadium in Mumbai is the work of Shapoorji Pallonji,

along with the Providence cricket Stadium at Guyana, which hosted the 2007 world cup.

AUTOMOTIVE:-

SHAPOORJI PALLONJI has often been the force that set wheels rolling on Indian roads. The

VOLVO Factory was a turnkey green field project the construction of its state-of-the-art

trucks.


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In the year 1996 the company constructed the mammoth indica plant in TATA MOTERS

PUNE.

The most recent and prized automotive project for Shapoorji Pallonji has been the SKODA

AUTO FACTORY at Aurangabad. This was a design and build project, with the entire factory

being completed in an astonishing record time of six months.

When it comes to hospitality, Shapoorji Pallonji has always extended a warm welcome to

such related projects.

The TAJ MAHAL HOTEL IN MUMBAI is one of the finest and most renowned hotel structures

worldwide. Shapoorji Pallonji was also involved on the expansion of the MAURYA

SHERATON TOWERS, as well as the final touches of the TAJ WELLINGTON MEWS, the first

luxury service apartment in India.

Branches:-

Corporate office Mumbai

Corporate HR division Mumbai

Regional offices:-

Ahmadabad

Bangalore

Chennai

Delhi

Hyderabad

Kolkata

Mumbai

Pune

Nasik


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CHAPTER 3

RESEARCH

AND

DESIGN


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Research DesignAccording to Pauline V. Young, a research design is "the logical and systematic planning and

directing a piece of research". The design, according to her "results from translating a general

scientific model into varied research procedures". It gives an outline of the structure and

process of the research programmers. Without such a plan of study no scientific study is

possible.

Russel Ackoff has defined it as "Design is the process of making decisions before a situation

arises in which the decision has to be carried out. It is a process of deliberate anticipation

directed towards bringing unexpected situation under control".

A report is based on the STUDY OF THE WORKIN CAPITAL MANAGEMENT AT SHAPOORJI

PALLONJI & CO. LTD.

RESEARCH DESIGN:

CLASSIFICATION

Research Design

Exploratory

Research

Design

Conclusive

Research

Design

Descriptive

Research

Casual

Research

Cross-Sectional

Design

Longitudinal

Design

Single

Cross-Sectional

Design

Multiple

Cross-Sectional

Design


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DESIGN OF THE STUDY

1.STATEMENT OF PROBLEM :-

Working capital is either taken as current assets or as the excess of current assets

over current liabilities. Working capital management is concern with the problem

that arise in attempting to manage the current liabilities and the inter relationship

that exist between them.

In any industry the working capital is most important as it plays a significant role

starting from procuring raw material until it is covered into finished goods. If the

working capital is under invested it results in delay in input of finished products

which is reduces sales and profits or if it is over invested, the interest has to be paid

on the amount. The payables rate of the field of working capital management, raw

materials, receivables, cash and its management system is very vast.

It is evident that a study on working capital management is very important what are

the procedures and method followed? Problems faced by the same, these questions

call for an empathic study. Hence, an attempt has been made in this direction to

study working capital management in Shapoorji Pallonji.

2.SCOPE OF THE STUDY:-


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The field of working capital management comprising capital management, raw

materials, receivables, cash and its management and work in progress system is very

vast. The study was confined to SHAPOORJI PALOONJI.

To make a study of working capital management-systems, procedure and methods

SHAPOORJI PALOONJI and to study the components of working capital i.e., inventory

management, receivable, raw material, cash and its management and work in progress.

Analyze the financial performance with reference to working capital with the help of tables,

ratios, graphs and suggestions for improving working capital procedures and systems in the

firm.

3.OBJECTIVES OF THE STUDY :-

The main objectives of this study of working capital management in SHAPOORJI

PALOONJI are:

To study the inventory management of SHAPOORJI PALOONJI in details with

reference to raw material inventory, work in progress inventory and finished goods

inventory.

To know the details of the consumption of the raw material to produce the good s of

the firm.

To study the components of current assets and measures its impact on the working

capital.

To evaluate the performance of SHAPOORJI PALOONJI over a period of 5 years.

To suggest possible solution for the better management of working capital


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To know the inflow and outflow of cash in details.

To know the credit balance of the company and its working capital.

4.HYPOTHESIS:-

As this organizational and financial study, there are no assumptions to be proved

or disproved.

5.OPERATIONAL DEFINITION:-

NET WORKING CAPITAL:

It stands for excess of over current over current liabilities.

CURRENT ASSETS:

Represents shorter life span, includes inventorys sundry-debtors, short-

term investment and others.

CURRENT LIABILITIES:


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It also represents shorter life includes acceptance sundry-creditors,

Advances and deposits and other liabilities.

CASH:

The term cash with reference to cash management is used in two senses, in a narrow sense

it includes coins, currencies notes, cheques, bank drafts, in broader sense it includes near

cash assets such as marketable securities and time deposit with banker.

INVENTORY:

They are the goods held for eventual sale by the firm inventories are those one of the major

elements held by the firm in obtaining the desired level of sales.

RECEIVABLES:

When firm sales good on credit, the payments are postponed to future dates and

receivables are created.

WORKING-IN-PROGRSS:

Firm incurring only normal process losses partial automation and reasonable maintenance

system is in vague. The productivity per employee. The holding of inventories in the form of

work in progress.

STOCK-OUT COST:-

When the requires materials are not in the stock, it is called STOCK-OUT the cost associated

with the required stock-out is called STOCK-OUT COST.

6.METHODOLOGY:


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To achieve the objective of study, both primary and secondary data are used. Primary data

comprises of personal interviews, annual reports of company inventory holding, cash credit

management, receivables system etc. and discussion with the executives of the firm. These

are the main of information of the study. Secondary data comprises of books, journals and

necessaries for the collection of theoretical data.

To draw the meaningful inference the data collected are analyzed with the help of financial

ratios.

7.SAMPLING:-

Samples are not required for the study.

8.PLAN OF ANALYSIS (INTERPRETETION):-

Tables, charts, ratios and schedule of changes in working capital are used in interpretation

module.

9.LIMITATIONS OF THE STUDY :-

The study is limited to SHAPOORJI PALOONJI.

The data provided by the management does not affect its secrecy

The authenticity of the data utilized for analysis is fully depended on the information

provided by the company.

This study is based on secondary data.


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10. CHAPTER SCHEME:-

After the completion of the study, a report has been submitted in the form of the

following chapter:

Introduction

Company profile

Research design

Analysis and interpretation

Findings

Suggestions and conclusion.

CHAPTER 4


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ANALYSIS

AND

INTERPRETATION

THEORY OF WORKING CAPITAL


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RECEIVABLE MANAGEMENT: Given a choice, every business would prefer selling its produce

on cash basis. However, due to factors like trade policies , prevailing market conditions etc.

Business are compelled to sells their goods on credit. In certain circumstances a business

may deliberately extend credit as a strategy of increasing sales. Extending credit means

creating current assets in the form of debtors or account receivables. Investment in the type

of current assets needs proper and effective management as, it gives rise to costs such as :

Cost of carrying receivables

Cost of bad debts losses

Thus the objective of any management policy pertaining to accounts receivables would

be to ensure the benefits arising due to the receivables are more then the costs incurred

for the receivables and the gap between benefit and costs increased resulting in

increase profits. An effective control of receivables

Help a great deal in properly managing it. Each business should therefore try to find out

coverage credit extends to its clients using the below given formula:

Average Credit = Total amount of receivable


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(Extend in days) Average credit sale per day

Each business should project expected sales and expected investments in receivable

based on various factor, which influence the working capital requirement. From this it

would be possible to find out the average credit days using the above given formula. A

business should continuously try to monitor the credit days and see that the average.

Credit offer to clients is not crossing the budgeted period otherwise the requirement of

investment in the working capital would increase and as a result, activities may get

squeezed. This may lead to cash crisis.

CASH BUDGET: Cash budget basically incorporates estimates of future inflow and

outflows of cash cover a projected short period of time which may usually be a year, a

half or a quarter year . effective cash management is facilated if the cash budget is

further broken down into months, weeks or even a daily basis.

There are two components of cash budget are:

1. Cash inflows

2. Cash outflows

The main source for thses flows are given here under:

1. Cash Sales

2. Cash received from debtors

3. Cash received from Loans, deposits etc.

4. Cash receipts other revenue income

5. Cash received from sale of investment or assets.


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CASH OUTFLOWS:

1. Cash Purchase

2. Cash payments to Creditors

3. Cash payment for other revenue expenditure

4. Cash payment for assets creation

5. Cash payments for withdrawals, taxes.

6. Repayments of Loan etc.

A suggestive for, at for cash budget is given below:


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INVENTORIES

MONTHS

PARTICULARS JANUARY FERBUARY MARCH

Estimated cash inflows

.

I. Total cash inflows

Estimated cash outflows

..

..

II. Total cash outflows

III. Opening cash balances

IV. Add/deduct surplus/deflictduring the month ( I-

II)

V. Closing cash balances (III -IV)

VI. Minimum level of cash balance

VII. Estimated excess or short fall of cash (V-VI)


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In the context of Shapoorji Pallonji the major increase in the present three

financial years has been of the inventory.

Reasons:

The pile up of inventory that is used in trial run, before hand to be used

in the checking the machinery & the newly installed production capacity.

The increased inventory to produce more goods so as to utilize the new

plant set up

DEBTORS AND AVERAGE RECEIVABLES

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

2009 2008 2007 2006 2005

Stock in Trade

Construction Work in

Progress


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The debtors are increasing heavily in the financial year 2009 because of

a sales boom that has accounted for huge accounts receivables increase.

CASH AND BANK BALANCES

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

2009 2008 2007 2006 2005

Sundry Debtors

Sundry Debtors


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Cash and bank balance as per the balance sheet it is seen to be increasing per

yearly. And in 2009 it highly increases.

This discrepancy can be attributed to the fact that balance sheet figures carry

additional cash balance of unutilized FCCB issue proceeds which amount to

long term liability as well. As a result to find the actual outlay of cash the

unutilized money has been subtracted. Also we should take note of the fact

that the FCCB money can only be used for expansion purpose and not as

money for usual application of working capital.

LOANS AND ADVANCES :-

1,634,695,427

1,701,537,4851,605,956,532

1,212,015,324

177,758,508

Cash & Bank Balance

2009

2008

2007

2006

2005


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Loans & advances are increasing on the part of increased advances that are

given to pile up inventory when the company went for the expansion mode

CURRENT ASSETS

9,185,648,742

5,987,990,922

3,254,625,336

1,372,174,357

960,278,264 Loans & Advances

2009

2008

2007

2006

2005


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Current assets includes cash & those assets which can be easily converted into

cash within a short period generally one year such as marketable securities ,bills receivables, sundry debtors, inventories, work in progress, prepaid

expenses etc .The total current assets are the sum of below contingency i.e.

Current Assets = Stock/ Inventory + Sundry Debtors + Advances + Cash and

bank balances + other current assets+ Construction work in Progress

02,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

2009

20082007

2006

2005


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NET CURRENT ASSETS:-

Conclusions:

The trend of the current assets in Shapoorji Pallonji throughout the period

from 2005-09 are shown in the pie-chart .it is evident from the table that the

current assets in Shapoorji Pallonji has increased except in year 2008-09.

CURRENT LAIBILITIES

44.52%

29.99%

11.80 %

8.32%

5.37%

2009

2008

2007

2006

2005


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These are those obligations which are payable within a short period of

generally one year and includes outstanding expenses, bills payable, sundrycreditors, accrued expenses, bank overdraft, short term advances, income tax

payable.

Conclusion:

The trend of Current Liabilities of Shapoorji Pallonji throughout the period

from 2005-2009 are shown in the table. It is evident from the table that it

shows increasing trends in the year 2005 to 2009. It shows that Shapoorji

Pallonji has stability in trends of Current Liabilities.

RATIO ANALYSIS

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

2009 2008 2007 2006 2005

Total Current Liabilities & Provisions

Total Current Liabilities &

Provisions


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LIQUIDITY RATIOS

CURRENT RATIO

Current ratio is defined as the relationship between current assets and current

liabilities. It is a measure of general liquidity & is most widely used to make the

analysis of short term financial position of a firm. Current ratio is the ratio of

current assets to current liabilities. A relatively higher ratio is an indication that

the firm is liquid and has the ability to pay its current obligations on time. On

the other hand a low current ratio indicates that the

Liquidity position of the firm is not good and shall not be able to pay its current

liabilities in time. Current Ratio:

The Current ratio is calculated by dividing current assets by current liabilities:

Current ratio: Current Assets

Current Liabilities

Year Current Assets in (Rs.) Current liability in Current Ratio in


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(Rs.) %

200925,100,668,504 11,748,494,991

2.14

2008 19,801,668,140 10,807,317,809 1.83

2007 13,212,910,786 9,672,453,543 1.37

2006 7,561,746,750 5,066,884,535 1.49

2005 4,230,103,561 2,619,003,899 1.62

-

0.50

1.00

1.50

2.00

2.50

2009 2008 2007 2006 2005

total current Ratio

total current Assets


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CURRENT SCENERIO INTERPRETATION:-

The trend of Current Ratio of Shapoorji Pallonji throughout the period from

2005-2009 are shown in the table. It is evident from the table that it shows

increasing trends in the year 2005 (1.62%)to 2009.( 2.14%) . In 2009 it

increases at. It shows that Shapoorji Pallonji has stability in trends of Current

Ratio.


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QUICK RATIO: Quick ratio or liquid ratio is a more rigorous test of liquidity

than the current ratio. The term liquidity refers to the ability of the firm to payshort term obligations as and when they become due. Quick ratio may be

defined as ration of quick assets to quick liabilities. Liquid assets include all the

current assets excluding inventories & prepaid expenses. Liquid liabilities mean

all liabilities excluding bank overdraft. Inventories & prepaid expenses are not

termed as liquid assets because they cannot be converted into cash.

FIANANCIAL YEAR Quick Assets in

(Rs.)

Current Liabilities in (Rs.) Quick Ratio in

%

2009 14,038,689,073 11,748,494,991 1.19

200811,062,110,236 10,807,317,809 1.02

2007 8,336,007,054 9,672,453,543 0.86

2006 5,075,831,609 5,066,884,535 1.00

2005 2,610,676,945 2,619,003,899 1.00


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While interpreting the figures of both the above ratios we should keep in mind

the following one point

Shapoorji Pallonji is a construction concern.

Since it is construction concern the an excess of inventory as compared to

other industry models such as the services sector is an integral fact. As a result

it is bound to have higher current ratio and quick ratio as compared to other

industries.

The sharp rise of quick Ratio from (2005) 1.00% to (2006)1.00% to

(2007)1.02% (2008) to 0.86% to (2009) 1.19% can be attributed to

a. Higher pile up of inventory which was to be used up for trial run in

producing new products from the new plant set up.

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2009 2008 2007 2006 2005

Quick Ratio

Quick Ratio


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b. Higher prepaid expenses related to advances given so as to pile up the

inventory so that when the inventory is needed for trial run, itsavailable.

c. An increase in average receivables which was in sync with increased

capacity of production and also increased sales.

An important point to note here is that an excess of cash balance arising out of

idle money coming out of FCCB issue expense has been deducted ascorrespondingly it accounts for long term liability (debentures) which have no

effect on working capital management.

The quick ratio is a more important indicator of liquid position of

Shapoorji Pallonji as it hardly varies from 19.72 %( FY 06-07) to 20.15 %

(FY 07-08) to 23.53(FY08-09). Obviously the effect of inventories has

been negated.


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ABSOLUTE LIQUID RATIO

Absolute Liquid Ratio is also known as quick Ratio or Cash Ratio. Absolute liquid assets

include cash at bank; cash in hand, and marketable securities or temporary investments.

ABSOLUTE RATIO= cash in hand+ short term marketable securities

Current liabilities

years Liquid assets in (Rs.) Current liabilities in (Rs.) Absolute ratio in %

2009 1,634,695,427 11,784,494,991 0.14

2008 1,701,537,485 10,807,317,809 0.16

2007 1,605,956,532 9,672,453,543 0.17

2006 1,212,015,324 5,066,884,535 0.24

2005 1,77,758,508 2,619,003,899 0.07


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Interpretation:-

In calculating this ratio, inventory, debtors, etc. are delectated from current assets to arrive

at absolute liquid assets such as cash and easily marketable investments in securities. Higher

the ratio, the higher is the cash liquidity. Since, in this process the absolute ratio of2005

is0.07:1 2006 is 0.24:1, 2007 is 0.17:1, 2008 is 0.16:1, and 2009 is 0.14:1. Therefore, these

absolute ratios are satisfactory.

0.00

0.05

0.10

0.15

0.20

0.25

20092008

20072006

2005

Absolute Ratio

Absolute Ratio


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EFFICIENCY RATIO :-

From the perspective of working capital management we would be discussing

three important ratios they are.

Sales to working capital ratio

Inventory turnover ratio

Current assets turnover ratio.

SALES TO WORKING CAPITAL RATIO

This ratio is computed by dividing working capital by sales. This ratio helps to measure

efficiency of the utilization of net working capital. It signifies that for an amount of sales. A

relative amount of working capital is needed. If any increase in sales in contemplated,

working capital should be adequate & thus this ratio helps management to maintain the

adequate level of working capital.

year 2009 2008 2007 2006 2005

total working

capital (Rs)

13,352,173,513 8,994,350,331 3,540,457,243 2,494,862,215 1,611,099,662

Sales(Rs) 53,643,674 49,568,673 67,105,793 42,117,236 46,114,406

sales to total

working

capital

43.1 31.4 9.1 10.3 6.1


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CURRENT SCENERIO INTERPRETATION

As seen from the above table the ratio has increased from 2006 to 2007

and then Decrease to 4.2(FY07-09). This ratio is again indicative of the fact

that the year in which the expansion took place the sales did not match up

with the scale of expansion. Otherwise it would have remained intact and

increase in 2008-2009 at 43.1%. The slight increase from 6.1 to 43.1 is

indicative of the fact that the full impact of expansion is being highly

realized & sales are highly increasing.

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2009 2008 2007 2006 2005

sales to total working capital

sales to total working

capital


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INVENTORY TURNOVER RATIO

This ration indicates the effectiveness and efficiency of inventory

management. This ratio is calculated as cost of goods sold: average inventory

shows how speedily the inventory is turned into accounts receivables through

sales. The higher the inventory turnover ratio (also called stock velocity) the

more the efficient inventory management.

Year 2008 2007 2006 2005

average stock in

trade

in (Rs.)

6,152,252,338 5,037,304,043 3,572,708,209 2,641,432,966

Sales in (Rs.) 49,568,673 67,105,793 42,117,236 46,114,406

INVENTORIESTURN RATIO 34.48 23.29 26.31 15.91


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The stock velocity is decreasing subsequently from 15.91 (FY 06-07) to 34.48

(FY 08-09) which shows inefficiency on the part of inventory management.

Partly the reason for the fall can be attributed to stocking up of inventory for

the trail run & using them in testing the expansion mode machinery.

15.91%

26.31%

23.29%

34.48%

INVENTORIES TURN RATIO

2009

2008

2007

2006


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CURRENT ASSETS TURNOVER RATIO

This ratio is indicated by sales upon current assets. This ratio indicates the

efficiency with which the current assets turn into sales & higher current assets

turnover ratio implies by & large a more efficient use of funds in current

assets. Thus, a high turnover rate indicates reduced lock up of funds in current

assets. An analysis of this ratio over a period reflects working capitalmanagement of the firm.

YEAR Current Assets

in (Rs.)

Sales in (Rs.) Currents Assets

Turnover Ratio

2009 14,038,689,073 53,643,674 261.70

2008 11,062,110,236 49,568,673 223.17

2007 8,336,007,054 67,105,793 124.22

2006 5,075,831,609 42,117,236 120.52

2005 2,610,676,945 46,114,406 56.61


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The ratio is increase(FY 05-06)56.61 to 261.70(FY 08-09) which shows that

sales increase is not matched by the increase in current assets in the

expansion phase of Shapoorji Pallonji. The reason can be well attributed to the

piling up of trial stock and not full use of the expanded production capacity.

0.00

50.00

100.00

150.00

200.00

250.00

300.00

2009 2008 2007 2006 2005

Current Assets Turnover Ratio

Current Assets Turnover

Ratio


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OPERATING RATIOS:-

Operating Ratio establishes the relationship between cost of goods sold and

other operating expenses on the hand and the sales on the other.

Operating Ratio = operating expenses

Sales

Year Operating

Expenses in (Rs.)

Sales in (Rs.) Operating Ratio

2009 47,403,092 53,643,674 88.36

2008 10,402,497 49,586,673 20.98

2007 41,960,056 67,105,793 62.52

2006 54,466,012 42,117,236 129.32

2005 25,474,876 46,114,406 55.24


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The ratio consistently has been below 1 which means company can very well

take out its operating costs, though the margin of comfort is slightly decreasing

because of the increase in expenses of Shapoorji Pallonji.

0

50

100

150

2009 2008 20072006

2005

operating Ratio

operating Ratio


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TOTAL LIABILITIES TO TOTAL ASSETS RATIO:-

TOTAL LIABILITIES TO TOTAL ASSETS RATIO = Total liabilities to outsiders*100

Total assets

Years Total liabilities to

outsiders in (Rs.)

Total assets in (Rs.) Total liabilities to total

assets Ratio

2009 17,362,667,967 14,038,689,073 123.68

2008 11,514,695,578 11,062,110,236 104.09

2007 5,642,721,307 8,336,007,054 67.69

2006 4,122,643,342 5,075,831,609 81.22

2005 2,954,540,176 2,610,676,945 113.17


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This ratio indicates the relationship between the total liabilities to outsiders to total

assets of the firm. In 2005 the ratio is 113.17, in 2006 it is 81.22, in 2007 it is 67.69,

in 2008 it is 104.09, in 2009 it is123.68. Lower the ratio of the liabilities to total

assets, more satisfactory or stable is the long term solvency position. Hence thesolvency position of the firm is good.

0.00

50.00

100.00

150.00

2009 2008 2007 2006 2005

Total liabilities to total assets Ratio

Total liabilities to total

assets Ratio


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FIXED ASSETS TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO= sales

Fixed assets

Year Sales in (Rs.) Fixed assets in

(Rs.)

Fixed assets turnover ratio

2009 53,643,674 1,797,875,755 1.31

2008 49,568,673 1,766,792,115 1.28

2007 67,105,793 1,,441,942,252 0.47

2006 42,117,236 947,974,421 0.44

2005 46,114,406 651,705,844 0.71


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This ratio states that the usage of the fixed assets is proper. The fixed assets are

utilized properly. In 2005 the ratio is0.71, in 2006 it is 0.44, in 2007 it is 0.47, in 2008

it is 1.28, and in 2009 it is 1.31. From the above tables we can see that the firm

experienced the usage of the assets. Thus it can be said that the firm is utilizing the

fixed assets to the maximum.

0.00

0.200.40

0.60

0.80

1.00

1.20

1.40

2009 2008 2007 2006 2005

Fixed assets turnover ratio

Fixed assets turnover

ratio


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PROPRIETARY RATIO:-

Proprietary Ratio = Share holders Fund

Total Assets

Year Share Holders

Fund in (Rs.)

Total Assets in

(Rs.)

Proprietary Ratio in %

2009 6,210,117,406 14,038,689,073 0.44

2008 5,008,191,248 11,062,110,236 0.45

2007 1,722,701,507 8,336,007,054 0.21

2006 1,295,342,749 5,075,831,609 0.26

2005 1,072,964,231 2,610,676,945 0.41


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This ratio indicates the relationship between the Share holders Fund to total assets

of the firm. In 2005 0.41 the ratio is 0.26, in 2006 it is 0.21, in 2007 it is 0.45, in 2008

it is in 2009 it is0.44. Lower the ratio of the liabilities to total assets, more satisfactory

or stable is the long term solvency position. Hence the solvency position of the firm isgood.

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

2009 2008 2007 2006 2005

Proprietary Ratio

Proprietary Ratio


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CHAPTER 5

FINDINGS

&

SUGGESTIONS


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SUMMARY OF FINDINGS

Operating Ratio increased highly in Last as compared to four the previous

years. It shows good and efficient management of the concern.

The firm had quite good operating ratio in first to last year and in 2009 it is in

very good position.

Here, the firm is trying to maintain the balance in the stock turn over ratios

between the previous years and the next years.

There hasnt been a good management in maintaining the capital turn overs

ratio. As it is seen the ratio goes on increasing in the successive years and

that too with no very much change in it.

Here, the firm is not able to maintain a good and consistent percentage of

the working capital ratio in the five years. It is struggling in maintaining the

ratio properly. All the years are witnessing a lightly decrease tendency. It

must be consistent.


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In the first two year it shows that there is over trading of assets. In the next

year it is fine. But it highly increases in last three year it highly increase that is

a sign of idle capacity.

The firm has kept the normal balance of the debtors turnover ratio in every

year. Its neither higher nor very low. The firm has good efficiency

management of debtors. And it has tried to maintain the stability in the

debtors turnover ratio over five years.

The liquidity of the firm is good in all the five years.


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RECCOMMENDATIONS

After a thorough study and analysis of financial statement several drawbacks were

detected. To overcome these drawbacks the following suggestions are made:-

The firm should try to achieve greater sales efficiency for maximizing the return on

investment. A high net profit of the firm indicates the overall profitability and

improved efficiency of the firm.

Accumulation of extra stock should be avoided.

Fixed assets should be used be managed properly.

The working capital should be managed properly.

The firm should adopt effective marketing strategies to overcome the demerits faced

by in the competition.

Unnecessary expenses like stationeries and all should be avoided.

The company can reduce its unwanted human resource and make productive use of

the present personnel.

The financial department of the concern must be centralized so as to avoid

unnecessary wastage of time in fund transfer.


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CONCLUSION

Working capital management is an important aspect of any business.

Every business concern should have adequate working capital to run its

business operation. Every concern should have neither redundant of

excess working capital nor inadequate or shortage of working capital.

Both excess as well as short working capital positions are bad for any

business.

The three elements of working capital management are cash

management receivable management and inventory management. If a

finance manager maintains these three elements of working capital

management properly means the concern will get dramatic

improvement in their sales volume and also in business. Working capital

policies of a firm have a great effect on its profitability, liquidity and

structured health of the organization.

Every concern should adopt some new tread management strategies

that will help in greater productivity, inventory optimization and alsobetter working capital management. So, it is noted that working capital

is a means to run business smoothly and profitability. Thus, the concept

of working capital has its own important in a going concern.


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Good management of working capital is part of good finance

management effective use of working capital will contribute to theoperational efficiency of a department; optimum use will help to

generate maximum return.

Shapoorji Pallonji also using SAP 6.0 versions which is very advanced

to do every transaction of any organization. SAP 6.0 also applicable for

e-transaction.

LIQUIDITY POSITION:-

O the basis of current Ratio, Liquid Ratio and Absolute Liquid Ratio; the Liquidity position of

the firm is very much stable and does conform the standard norms.

PROFITABILITY POSITION:-

Profitability of the company is very good and it decrease middle of the year due to the

increase in the operating expenses like rent, rise in price of the material etc..

ACTIVITY RATIO:-

The ratio indicates that the assets are efficiently utilized. The assets are not kept idle not

under used. They have been efficiently utilized. Not only in the stock turnover ratio but

debtors turnover ratio is also been utilized productively.


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CHAPTER 6

BIBLOGRAPHY


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BIBLOGRAPHY

BOOKS:

Managing Human Resources Bohlander, snell

Keeping Good People Roger Herman

Human Resource Management Shashi k. Gupta

Human Resource Management p. subba Rao

BROCHURES:

Shapoorji Pallonji & co. Ltd. Corporate brochures

Shapoorji Pallonji & co. Ltd. Induction brochures

WEBSITES:

www.shapoorji.in

www.themanagementmemtor.com

www.google.com

www.livemint.com
http://www.shapoorji.in/http://www.shapoorji.in/http://www.themanagementmemtor.com/http://www.themanagementmemtor.com/http://www.google.com/http://www.google.com/http://www.livemint.com/http://www.livemint.com/http://www.livemint.com/http://www.google.com/http://www.themanagementmemtor.com/http://www.shapoorji.in/

Mayur Project

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