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Transcript of Working Capital1
CHAPTER-1
INTRODUCTION
BACKGROUND OF STUDY:
Whatever may be the organization, working capital plays an important role, as the
company needs capital for its day to day expenditure. Thousands of companies fail each
year due to poor working capital management practices. Entrepreneurs often don't
account for short term disruptions to cash flow and are forced to close their operations.
In simple term, working capital is an excess of current assets over the current liabilities.
Good working capital management reveals higher returns of current assets than the
current liabilities to maintain a steady liquidity position of a company. Otherwise,
working capital is a requirement of funds to meet the day to day working expenses. So a
proper way of management of working capital is highly essential to ensure a dynamic
stability of the financial position of an organization.
Seeing the good opportunity to study financial systems and practices of CRI PUMPS
LTD, it is relatively important take up internship assignment on ‘WORKING CAPITAL
MANAGEMENT IN CRI PUMPS LTD’. During the project work, it is being analyzed
the working capital position of this organization. Decisions relating to working capital
and short term financing are referred to as working capital management. These involve
managing the relationship between a firm's short-term assets and its short-term
liabilities. The goal of Working capital management is to ensure that the firm is able to
continue its operations and that it has sufficient money flow to satisfy both maturing
short-term debt and upcoming operational expenses.
Working capital management deals with maintaining the levels of working capital to
optimum, because if a concern has inadequate opportunities and if the working capital is
more than required then the concern will lose money in the form of interest on the
blocked funds. Therefore working capital management plays a very important role in
the profitability of a company. And also due to heavy competitions among different
organization’s it is now compulsory to look after working capital
[1]
RELEVANCE OF STUDY
At CRI PUMPS LTD a substantial part of the total assets are covered by current assets.
Current assets form around 30%- 40% of the total assets. However this could be less
profitable on the assumption that current assets generate lesser returns as compared to
fixed assets.
But in today’s competition it becomes mandatory to keep large current assets in form of
inventories so as to ensure smooth production an excellent management of these
inventories has to be maintained to strike a balance between all the inventories required
for the production.
So, in order to manage all these inventories and determine the investments in each
inventories, the system call for an excellent management of current assets which is
really a tough job as the amount of inventories required are large in number.
Here comes the need of working capital management or managing the investments in
current assets. Thus in big companies like CRI PUMPS LTD it is not easy at all to
implement a good working capital management as it demands individual attention on its
different components.
The study of working capital management is very helpful for the organisation to know
its liquidity position. The study is relevant to the organization to know the day to day
expenditure. This study is relevant to give an idea to utilise the current assets.
This study is also relevant to the student as they can use it as a reference. This report
will help in conducting further research. Other researcher can use this project as
secondary data
PROBLEM STATEMENT:
Working capital management or simply the management of capital invested in current
assets is the focus of study. So topic is to study working capital management of CRI
PUMPS LTD.
Working capital is the fund invested by a firm in current assets. Now in a cut throat
competitive era where each firm competes with each other to increase their production
and sales, holding of sufficient current assets have become mandatory as current assets
[2]
include inventories and raw materials which are required for smooth production runs.
Holding of sufficient current assets will ensure smooth and un interrupted production
but at the same time, it will consume a lot of working capital. Here creeps the
importance and need of efficient working capital management. Working capital
management aims at managing capital assets at optimum level, the level at which it will
aid smooth running of production and also it will involve investment of nominal
working capital in capital assets.
“The problem generally explains that, less attention has been paid to the area of short-
term finance, in particular that of working capital management. Such neglect might be
acceptable were working capital considerations of relatively little importance to the
firm, but effective working capital management has a crucial role to play in enhancing
the profitability and growth of the firm. Indeed, experience shows that inadequate
planning and control of working capital is one of the more common causes of business
failure.”
HYPOTHESIS OF THE STUDY:
The following are the hypothesis of the study
1) The firm is facing difficulty in paying short-term debt.
2) The firm is not properly managing the sundry debtor.
3) The current liabilities are increasing than current assets year by year.
OBJECTIVE OF THE STUDY: Everything in life holds some kinds of objectives to
be fulfilled. This study is not an exception to it. The following are a few straight
forward goals which i have tried to fulfil in my project:
1) To study the various components of working capital.
2) To analyze the liquidity trend.
3) To analyze the working capital trend.
4) To appraise the utilization of current asset and current liabilities and find out short-
comings if any.
5) To suggest measure for effective management of working capital.
[3]
LIMITATIONS OF THE STUDY:-
Following are the limitations of the study:
1) The topic working capital management is itself a very vast topic yet very important
also. Due to time restraints it was not possible to study in depth in get knowledge what
practices are followed at CRI PUMPS LTD.
2) Many facts and data are such that they are not to be disclosed because of the
confidential nature of the same.
3) Since the financial matters are sensitive in nature the same could not acquired easily.
4) The study is restricted to only the Four Year data of CRI PUMPS LTD.
CHAPTERISATION:
Following are the chapterisation of the study:
Chapter-1 represents the background of the study, relevance of the study, problem
statements, hypothesis, objectives as well as limitations of the study.
Chapter-2 represents company profile of CRI PUMPS LTD.
Chapter-3 represents review of literature.
Chapter-4 represents research methodology of the study including sources of data
collection, formulas and statistical tools used for data analysis.
Chapter -5 represents results and findings.
Chapter -6 represents conclusion and suggestion.
Chapter -7 represents implication for future research.
[4]
CHAPTER-2
COMPANY PROFILE
[5]
CHAPTER-3: REVIEW OF LITERATURE
The purpose of this chapter is to present a review of literature relating to the working
capital management. The following are the literature review by different authors and
different research scholars.
Pass C.L., Pike R.H1 (1984), studied that over the past 40 years major theoretical
developments have occurred in the areas of longer-term investment and financial
decision making. Many of these new concepts and the related techniques are now being
employed successfully in industrial practice. By contrast, far less attention has been paid
to the area of short-term finance, in particular that of working capital management. Such
neglect might be acceptable were working capital considerations of relatively little
importance to the firm, but effective working capital management has a crucial role to
play in enhancing the profitability and growth of the firm. Indeed, experience shows
that inadequate planning and control of working capital is one of the more common
causes of business failure.
Herzfeld B2 (1990), studied that “Cash is king”--so say the money managers who
investors the responsibility of running this country's businesses. And with banks
demanding more from their prospective borrowers, greater emphasis has been placed on
those accountable for so-called working capital management. Working capital
management refers to the management of current or short-term assets and short-term
liabilities. In essence, the purpose of that function is to make certain that the company
has enough assets to operate its business. Here are things you should know about
working capital management.
Samiloglu F.and Demirgunes K3 (2011), studied that the effect of working capital
management on firm profitability. In accordance with this aim, to consider statistically
significant relationships between firm profitability and the components of cash
conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed
1 Pass C.L., Pike R.H: “An overview of working capital management and corporate financing” (1984).2 Herzfeld B; “How to Understand Working Capital Management” (1990).3 Samiloglu F. and Demirgunes K., “The Effect of Working Capital Management on Firm
Profitability: Evidence from Turkey” (2008)
[6]
Appuhami, Ranjith B4 (2011), studied impact of firms' capital expenditure on their
working capital management. The author used the data collected from listed companies
in the Thailand Stock Exchange. The study used Schulman and Cox's (1985) Net
Liquidity Balance and Working Capital Requirement as a proxy for working capital
measurement and developed multiple regression models. The empirical research found
that firms' capital expenditure has a significant impact on working capital management.
The study also found that the firms' operating cash flow, which was recognized as a
control variable, has a significant relationship with working capital management.
Hardcastle J5 (2012)., studied that Working capital, sometimes called gross working
capital, simply refers to the firm's total current assets (the short-term ones), cash,
marketable securities, accounts receivable, and inventory. While long-term financial
analysis primarily concerns strategic planning, working capital management deals with
day-to-day operations. By making sure that production lines do not stop due to lack of
raw materials, that inventories do not build up because production continues unchanged
when sales dip, that customers pay on time and that enough cash is on hand to make
payments when they are due. Obviously without good working capital management, no
firm can be efficient and profitable.
Thachappilly G6 (2012)., “Working Capital Management Manages Flow of Funds”,
(2012) describes that Working capital is the cash needed to carry on operations during
the cash conversion cycle, i.e. the days from paying for raw materials to collecting cash
from customers. Raw materials and operating supplies must be bought and stored to
ensure uninterrupted production. Wages, salaries, utility charges and other incidentals
must be paid for converting the materials into finished products. Customers must be
allowed a credit period that is standard in the business. Only at the end of this cycle
does cash flow in again
4 Appuhami, Ranjith B A; “The Impact of Firms' Capital Expenditure on Working Capital
Management: An Empirical Study across Industries in Thailand”, (2008)5 Hardcastle; “Working Capital Management”,(2009).6 Thachappilly G. Working Capital Management Manages Flow of Funds”,(2009)
[7]
Beneda, Nancy; Zhang, Yilei7 (2011), studied impact of working capital management
on the operating performance and growth of new public companies. The study also
sheds light on the relationship of working capital with debt level, firm risk, and
industry. Using a sample of initial public offerings (IPO's), the study finds a significant
positive association between higher levels of accounts receivable and operating
performance. The study further finds that maintaining control (i.e. lower amounts) over
levels of cash and securities, inventory, fixed assets, and accounts.
Dubey R8 (2011)., studied The working capital in a firm generally arises out of four
basic factors like sales volume, technological changes, seasonal , cyclical changes and
policies of the firm. The strength of the firm is dependent on the working capital as
discussed earlier but this working capital is itself dependent on the level of sales volume
of the firm. The firm requires current assets to support and maintain operational or
functional activities. By current assets we mean the assets which can be converted
readily into cash say within a year such as receivables, inventories and liquid cash. If
the level of sales is stable and towards growth the level of cash, receivables and stock
will also be on the high.
McClure B9 (2010)., “Working Capital Works” describes that Cash is the lifeline of a
company. If this lifeline deteriorates, so does the company's ability to fund operations,
reinvest and meet capital requirements and payments. Understanding a company's cash
flow health is essential to making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management (WCM).
Cash is king, especially at a time when fund raising is harder than ever. Letting it slip
away is an oversight that investorss should not forgive. Analyzing a company's working
capital can provide excellent insight into how well a company handles its cash, and
whether it is likely to have any on hand to fund growth and contribute to investors.
7 Beneda, Nancy; Zhang, Yilei, “Working Capital Management, Growth and Performance of New
Public
Companies”, Credit & Financial Management Review, (2008)8 Dubey R, “Working Capital Management-an Effective Tool for Organisational Success” (2008)9 McClure B, Working Capital Works” (2007)
[8]
Gass D10 (2009)., studied "Cash is the lifeblood of business" is an often repeated maxim
amongst financial managers. Working capital management refers to the management of
current or short-term assets and short-term liabilities. Components of short-term assets
include inventories, loans and advances, debtors, investments and cash and bank
balances. Short-term liabilities include creditors, trade advances, borrowings and
provisions. The major emphasis is, however, on short-term assets, since short-term
liabilities arise in the context of short-term assets. It is important that companies
minimize risk by prudent working capital management.
Maynard E. Refuse11 (1996), Argued that attempts to improve working capital by
delaying payment to creditors is counter-productive to individuals and to the economy
as a whole. Claims that altering debtor and creditor levels for individual tiers within a
value system will rarely produce any net benefit. Proposes that stock reduction
generates system-wide financial improvements and other important benefits. Urges
those organizations seeking concentrated working capital reduction strategies to focus
on stock management strategies based on “lean supply-chain” techniques.
Thomas M. Krueger12 (2005), studied distinct levels of WCM measures for different
industries, which tend to be stable over time. Many factors help to explain this
discovery. The improving economy during the period of the study may have resulted in
improved turnover in some industries, while slowing turnover may have been a signal
of troubles ahead. Our results should be interpreted cautiously. Our study takes places
over a short time frame during a generally improving market. In addition, the survey
suffers from survivorship bias – only the top firms within each industry are ranked each
year and the composition of those firms within the industry can change annually.
10 Gass D, “How To Improve Working Capital Management” (2006)11 Maynard E. Rafuse, “ Working capital management: an urgent need to refocus” Management
Decision, (1996)12 Thomas M. Krueger, “An Analysis of Working Capital Management Results Across Industries”
American Journal of Business, (2005)
[9]
Eljelly13 (2002) empirically examined the relationship between profitability and
liquidity, as measured by current ratio and cash gap (cash conversion cycle) on a sample
of 929 joint stock companies in Saudi Arabia. Using correlation and regression analysis,
Eljelly [9]found significant negative relationship between the firm's profitability and its
liquidity level, as measured by current ratio. This relationship is more pronounced for
firms with high current ratios and long cash conversion cycles. At the industry level,
however,he found that the cash conversion cycle or the cash gap is of more importance
as a measure of liquidity than current ratio thataffects profitability. The firm size
variable was also found to have significant effect on profitability at the industry level.
Lazaridis and Tryfonidis 14(2004), conducted a cross sectional study by using a sample
of 131 firms listed on the Athens Stock Exchange for the period of 2001 - 2004 and
found statistically significant relationship between profitability, measured through gross
operating profit, and the cash conversion cycle and its components (accounts
receivables, accounts payables, and inventory). Based on the results analysis of annual
data by using correlation and regression tests, they suggest that managers can create
profits for their companies by correctly handling the cash conversion cycle and by
keeping each component of the conversion cycle (accounts receivables, accounts
payables, and inventory) at an optimal level.
Raheman and Nasr15 (2004), studied the effect of different variables of working capital
management including average collection period, inventory turnover in days, average
payment period, cash conversion cycle, and current ratio on the net operating
profitability of Pakistani firms. They selected a sample of 94 Pakistani firms listed on
Karachi Stock Exchange for a period of six years from 1999 - 2004 and found a strong
negative relationship between variables of working capital management and
profitability of the firm. They found that as the cash conversion cycle increases, it leads
to decreasing profitability of the firm and managers can create positive value for the
investors by reducing the cash conversion cycle to a possible minimum level.
13 Eljelly; “ cash conversion cycle” year (2002.)14 Lazaridis and Tryfonidis, “ cash conversion cycle” year (2004)15 Raheman and Nasr;” variables of working capital management” year ( 2004).
[10]
Garcia-Teruel and Martinez-Solano16(1996) collected a panel of 8,872 small to
medium-sized enterprises (SMEs) from Spain covering the period 1996 - 2002. They
tested the effects of working capital management on SME profitability using the panel
data methodology. The results, which are robust to the presence of endogeneity,
demonstrated that managers could create value by reducing their inventories and the
number of days for which their accounts are outstanding. Moreover, shortening the cash
conversion cycle also improves the firm's profitability.
Falope and Ajilore17 (2003), used a sample of 50 Nigerian quoted non-financial firms
for the period 1996 -2005. Their study utilized panel data econometrics in a pooled
regression, where time-series and cross-sectional observations were combined and
estimated. They found a significant negative relationship between net operating
profitability and the average collection period, inventory turnover in days, average
payment period and cash conversion cycle for a sample of fifty Nigerian firms listed on
the Nigerian Stock Exchange. Furthermore, they found no significant variations in the
effects of working capital management between large and small firms.
Kouma Guy18, (2001) in a study on, “Working capital management in healthcare”,
Working capital is the required to finance the day to day operations of an organization.
Working capital may be require to bridge the gap between buying of stocked items to
eventual payment for goods sold on account. Working capital also has to fund the gap
when products are on hand but being held in stock. Products in stock are at full cost,
effectively they are company cash resources which are out of circulation therefore
additional working capital is required to meet this gap which can only be reclaimed
when the stocks are sold (and only if these stocks are not replaced) and payment for
them is received. Working capital requirements have to do with profitability and much
more to do with cash flow.
16
? Garcia-Teruel and Martinez-Solano; ”working capital management of SMEs” year 1996.17 Falope and Ajilore: “utilisation of resources” year 2003
18 ) Kouma Guy, (2001)“Working capital management in healthcare” [email protected] Volume 5; page No 76-89
[11]
Mehmet SEN, Eda ORUC (2005)19 in the study “Relationship between the efficiency
of working capital management and company size”, As it is known, one of the
reasons which cause change in working capital from one period to another is the change
in management efficiency. The change in management efficiency will affect the change
in working capital in a way as increaser or reducer from on period to another. In this
study, the effect of change in management efficiency in working capital management in
to the change in working capital is compared by company size and sectors. The data of
this study covers sixty periods as the total of quarterly financial statement of 55
manufacturing companies which were in operation in Istanbul Stock exchange (ISE)
between the years 1993 and 2010. In every period we studied, for inventories short term
commercial receivables and short term commercial liabilities, and calculated the effect
of change in management efficiency on to the effect of working capital change. In all
sectors considered, in the change in working capital, and observed the effect of reducing
of efficiency in inventory management. It is also observed that efficiency change in the
management of the short term commercial receivables and the short term commercial
liabilities by the company sizes and sectors make a positive effect in to the change in
working capital
Brealey, R., (1997)20 in a study on, “Working Capital management concepts work
sheet university of phoenix”. Concept application of concept in the Simulation
reference to concept in reading cash conversion cycle cash conversions is the process of
managing a company’s cash inflows and outflows. In the simulation, the finance
manager was responsible for balancing sales with collections or accounts receivables
(cash inflows) and purchases with payments or accounts payables (cash outflows). This
delicate balance maintains the company’s balance sheet keeping the cash and loans in a
situation of financial stability and keeping the money from being tied up. Principles of
corporate finance. Working capital management. New York: McGraw-Hill.
19 Mehmet SEN, Eda ORUC (2005) “Relationship between the efficiency of working capital management and company size”, [email protected] Volume 2; Pages No 32-42
20 Brealey, R., (1997) “Working capital management Working Capital management concepts work sheet university of phoenix”. Volume 1; Pages No 123-128
[12]
CHAPTER-4
RESEARCH METHODOLOGY
Research methodology is a systematic approach in management research to achieve
pre-defined objectives. It helps a researcher to guide during the course of research work.
Rules and techniques stated in research methodology save time and labour of the
researcher as researcher know how to proceed to conduct the study as per the objective.
SELECTION OF TOPIC: The selection of topic is a crucial factor in any research
study. There should be newness and it should give maximum scope to explore the ideas
from different angles.
In present day due to increase in competition, working capital is becoming necessary for
the organisation. It is that part of capital which is necessary to undertake day to day
expenditure of the business organization. Whatever may be the organization, working
capital plays an important role, as the company needs capital for its day to day
expenditure. Thousands of companies fail each year due to poor working capital
management practices. Entrepreneurs often don't account for short term disruptions to
cash flow and are forced to close their operations. Working capital is the fund invested
by a firm in current assets. Now in a cut throat competitive era where each firm
competes with each other to increase their production and sales, holding of sufficient
current assets have become mandatory as current assets include inventories and raw
materials which are required for smooth production runs. Holding of sufficient current
assets will ensure smooth and un interrupted production but at the same time, it will
consume a lot of working capital. Here creeps the importance and need of efficient
working capital management. After due to consultation with the external guide /internal
guide, the topic was finalized and titled as-“A STUDY ON WORKING CAPITAL
MANAGEMENT IN CRI PUMPS LTD”
SELECTION OF LOCATION FOR THE STUDY: The location for study was
selected as the corporate office of CRI PUMPS LTD, Bhubaneswar.
RESEARCH DESIGN: “A Research design is the arrangement of conditions for
collection and analysis of data in a manner that aims to combine relevance to the
research purpose with economy in procedure” The research design followed to study the
[13]
working capital management in CRI PUMPS LTD)is Descriptive and Analytical
Research Design.
SOURCES OF DATA COLLECTION:
1. Secondary data collection
Secondary data collection:
The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, journals, annual reports of the company
etc. It will save the time, money and efforts to collect the data. Secondary data also
made available through trade magazines, annual reports, books etc.
This project is based secondary data collected through annual reports of the
organization. The data collection was aimed at study of working capital management of
the company.
Project is based on
1. Annual report of CRI PUMPS LTD. 2009-2010
2. Annual report of CRI PUMPS LTD 2010-2011
3. Annual report of CRI PUMPS LTD. 2011-2012
4. Annual report of CRI PUMPS LTD. 2012-2013
FORMULAS OF RATIO ANALYSIS & DEFINITION
RATIO:
Ratio analysis is the pumpsful tool of financial statements analysis. A ratio is define as
“the indicated quotient of two mathematical expressions” and as “the relationship
between two or more things”. The absolute figures reported in the financial statement do
not provide meaningful understanding of the performance and financial position of the
firm. Ratio helps to summaries large quantities of financial data and to make qualitative
judgment of the firm’s financial performance.
[14]
ROLE OF RATIO ANALYSIS
Ratio analysis helps to appraise the firms in the term of there profitability and efficiency
of performance, either individually or in relation to other firms in same industry. Ratio
analysis is one of the best possible techniques available to management to impart the
basic functions like planning and control. As future is closely related to the immediately
past, ratio calculated on the basis historical financial data may be of good assistance to
predict the future. E.g. On the basis of inventory turnover ratio or debtor’s turnover ratio
in the past, the level of inventory and debtors can be easily ascertained for any given
amount of sales. Similarly, the ratio analysis may be able to locate the point out the
various arias which need the management attention in order to improve the situation.
E.g. Current ratio which shows a constant decline trend may be indicate the need for
further introduction of long term finance in order to increase the liquidity position. As
the ratio analysis is concerned with all the aspect of the firm’s financial analysis
liquidity, solvency, activity, profitability and overall performance, it enables the
interested persons to know the financial and operational characteristics of an
organization and take suitable decisions.
LIQUDITY RATIO:
Liquidity refers to ability of a concern to meet its current obligations as and when these
become due. The short-term obligations are met by realising amounts from current,
floating or circulating asset. The current asset either be liquid or near liquidity. These
should be convertible into cash for paying obligation of short-term nature. To measure
the liquidity of a firm, following ratios can be calculated:
A) CURRENT RATIO: Current assets include cash and those assets which can be
converted in to cash within a year, such marketable securities, debtors and inventories.
All obligations within a year are include in current liabilities. Current liabilities include
creditors, bills payable accrued expenses, short term bank loan income tax liabilities and
long term debt maturing in the current year. Current ratio indicates the availability of
current assets in rupees for every rupee of current liability.
CURRENT RATIO = CURRENT ASSET/ CURRENT LIABILITIES
[15]
B) QUICK RATIO OR ACID TEST: Quick ratios establish the relationship between
quick or liquid assets and liabilities. An asset is liquid if it can be converting in to cash
immediately or reasonably soon without a loss of value. Cash is the most liquid
asset .other assets which are consider to be relatively liquid and include in quick assets
are debtors and bills receivable and marketable securities. Inventories are considered as
less liquid. Inventory normally required some time for realizing into cash. Their value
also be tendency to fluctuate. The quick ratio is found out by dividing quick assets by
current liabilities.
QUICK RATIO = total liquid asset/ total current liabilities
C) ABSOLUTE LIQUID ASSET: Even though debtors and bills receivables are
considered as more liquid then inventories, it cannot be converted in to cash
immediately or in time. Therefore while calculation of absolute liquid ratio only the
absolute liquid assets as like cash in hand cash at bank, short term marketable securities
are taken in to consideration to measure the ability of the company in meeting short
term financial obligation. It calculates by absolute assets dividing by current liabilities.
ABSOLUTE LIQUID RATIO=absolute liquid asset/ total current liabilities
EFFICIENCY RATIO: Funds are invested in various assets in business to make sales
and earn profits. The efficiency with which assets are managed directly affects the
volume of sale. Activity ratios measure the efficiency and effectiveness with which a
firm manages its resources or assets. These ratios are also called turnover ratios.
A) DEBTORS TURNOVER RATIO: Receivable turnover ratio provides relationship
between credit sales and receivables of a firm. It indicates how quickly receivables are
converted into sales.
DEBTORS TURNOVER RATIO= SALES/ AVERAGE ACCOUNT RECEIVABLES.
AVERAGE A/C RECEIVABLES= opening trade debtor+ Closing trade debtor/2
AVERAGE COLLECTION PERIOD= (365/DTR) days
Or RECEIVABLES * 365/ sale
[16]
B) WORKING CAPITAL TURNOVER RATIO: It signifies that for an amount of
sales, a relative amount of working capital is needed. If any increase in sales
contemplated working capital should be adequate and thus this ratio helps management
to maintain the adequate level of working capital. The ratio measures the efficiency with
which the working capital is being used by a firm. It may thus compute net working
capital turnover by dividing sales by net working capital.
WORKING CAPITALTURNOVER RATIO=cost of sales/ net working capital
CURRENT ASSET TURNOVER RATIO:
CURRENT ASSET TURNOVER RATIO= sales / current asset
STATISTICAL TOOLS USED FOR DATA ANAYLSIS:
The various statistical tools used for data analysis is as follows:
a) Tables:
b) Bar-chart
c) Graphs
d) Correlation
ANALYTICAL TOOLS USED:
The analytical tools used for data analysis is as follows:
a) Ratio analysis
b) Schedule of change in working capital
c) Cash flow statements
[17]
CHAPTER-5
RESULTS AND FINDINGS
The result and discussion of the study is presented in five different sections. The first
sections explain about the various components of working capital, variable of working
capital. The second section explains about the liquidity trend of the organization. The
third section explains about the working capital trend .The fourth section explains the
utilization of current assets and current liabilities. The fifth section explains the measure
to effective management of working capital.
The first section explains about the various components of working capital and variables
of working capital. The components of working capital are presented in Table 5.1.
(TABLE 5.1: COMPONENTS OF WORKING CAPITAL)
Table 1.1 2009-
2010(rs)
2010-2011(Rs) 2011-2012(Rs) 2012-2013(Rs)
Cash 648,276,812 490,881,183 907,019,750 727,106,129
Debtors 798196201 1,05,24,79,982 1,05,50,97,473 1,05,56,31,698
Inventories 751064690 76,68,65,262 80,85,19,278 96,90,56,460
sundry
Creditors
61,03,22,496 66,51,67,980 68,95,26,597 72,40,51,456
Provisions 83,08,65,819 1,30,45,17,744 4,81,70,02,603 5,69,56,67,475
An insight into the table reveals that:
a) Cash and bank balances in 2009-2010 were Rs 648276812. It is decreased to Rs
490,881183. With a-24.27% growth. In 2011-2012 it increased to Rs 907,019,750. And
then it suddenly decreased to Rs 727,106,129.
b) Debtors increases which was not a good sign. In 2009-2010 debtors were Rs
79,81,96,201 and it increased Rs 105,24,79,982 a total increase in Rs 254283781. In
2011-2012 it was Rs 1,05,50,97,473. And in 2012-2013 it again increased to Rs
1,05,56,31,698.
c) Inventories were increased at a good speed. The inventories were Rs 79,81,96,201 in
2009-2010. In 2010-2011 it increased to Rs 76,68,65,262, ultimately increase in Rs
[18]
15800572, with the percentage growth 2.10%. In 2011-2012 it increased to Rs
80,85,19,278 with the increase in 7.7% . in 2012-2013 it again increased to
96,90,56,460 with a increase in 29%.
d) Sundry creditors also increased a lot. In 2009-2010 it was Rs 61, 03, 22,496. Then it
increased by Rs 5,4 8,45,484 which ultimately amounted to Rs 66,51,67,980 with a
increase of 8.99%. in the year 2010-2011. In 2011-2012 it increased to Rs 68,95,26,597
with a percentage increase of 12.98%. in 2012-2013 it again increase to Rs
72,40,51,456.
e) Provisions also increased throughout this 4years. In 2009-2010 it was
Rs83,08,65,819. Then it increased to Rs 1,30,45,17,744 with a percentage increase of
57%. In 2011-2012 it again increased to Rs4,81,70,02,603 with a percentage increase in
479%. In 2012-2013 it again increased to Rs 5,69,56,67,475.
(Table 5.2: Variables of Working Capital Management)
VARIABLES YEARS
2009-2010 2010-2011 2011-2012 2012-2013
ROTA (Return on Total Assets)
0.15 0.16 0.22 0.10
OPM (operating profit margin)
61.55% 56.40% 27.78% 34.65%
GEAR (Gearing Ratio i.e. financial debt / total assets)
0.64:1 0.55:1 0.43:1 0.33:1
CR (Current Ratio) 1.28:1 0.94:1 0.86:1 0.62:1
QAR (Quick Assets Ratio)
0.58:1 0.46:1 0.27:1 0.22
CA/TA (Current Assets to Total Assets)
0.13 0.12 0.21 0.16
CL/TA (Current Liabilities to Total
0.11 0.13 0.24 0.26
[19]
Assets)
SK/CA (Stocks to Current Assets)
0.23 0.25 0.13 0.19
TD/CA (Trade Debtors to Current Assets)
0.25 0.34 0.17 0.21
CA_TURN (Current Assets Turnover is Sales/Current Assets)
1.10 1.29 1.08 0.60
The various variables of working capital is presented in table 5.2. An analysis of data
presented in the table reveals the following findings;
A) Return on total asset came 0.15 in 2009-2010, 0.16 in 2010-2011, 0.22 in 2011-2012
and 0.10 in 2012-2013.
B) Operating profit margin was 61.55% in 2009-2010 then it reduced to 56.40%,
27.78%, and 34.65% in 2010-2011, 2011-2012, and 2012-2013 respectively. Anything
between 65% to 85% is known as a good operating margin. And for CRI PUMPS LTD
is a sign of alarm.
C) Gearing ratio came 0.64:1 in 2009-2010 and in 2010-2011 it is 0.55:1 and 0.43:1 and
0.33:1 in 2011-2012 and 2012-2013.
D) Current ratio generally reduced for the organisation, in 2009-2010 it was 1:28 and it
reduced to 0.94:1 in 2010-2011 and then it again reduced to to0.86:1 and 0.62 in 2011-
2012 and 2012-2013 respectively.
E) Quick asset ratio in 2009-2010 as it was 0.58:1, in 2010-2011 it became 0.46:1 and
in 2011-2012 and in 2012-2013 it became 0.27:1 and 0.22:1.
F) Current asset to total asset ratio came 0.13, 0.12, 0.21 and 0.16 in the year 2009-
2010, 2010-2011, 2011-2012, and 2012-2013.
G) Current liability to total asset ratio came 0.11 in 2009-2010, in 2010-2011 it came
0.13, and in 2011-2012 and 2012-2013 it came 0.24:1 and 0.26:1 respectively.
[20]
H) Stock to current asset is 0.23, 0.25, 0.13, and 0.19 in respective years.
I) Trade debtors in 2009-2010 is 0.25, in 2010-2011 is 0.34, in 2011-2012 is 0.17 and in
2012-2013 is 0.21.
J) Current asset turnover is 1.10 in 2009-2010, 1.29 in 2010-2011, 1.08 in 2011-2012
and become 0.60 in 2012-2013
Table 5.3: Components of Current ratio, quick ratio and Absolute Liquid Ratios
2009-2010 2010-2011 2011-2012 2012-2013
Current ratio1.28:1 0.94:1 0.86:1 0.62:1
Quick ratio 0.58:1 0.46:1 0.27:1 0.22
Absolute liquid ratio
0.25:1 0.15:1 0.12:1 0.08:1
SK/CA 0.23 0.25 0.13 0.19
TD/CA 0.25 0.34 0.17 0.21
CA/TA 0.13 0.12 0.21 0.16
CL/TA 0.11 0.13 0.24 0.26
CCC( cash conversion cycle)
Inventory days 77 days 70 days 43 days 115days
Debtor turnover days
125days 85days 57days 126days
Creditors turnover days
63 days 61days 37 days 86days
Table-5.3 revels the components of current ratio, quick ratio and absolute quick ratio. From the table following things can be derived:
[21]
a) In 2009-2010 it is found that the current ratio is 1.28:1 which is just below the
standard of 2:1. In 2010-2011, it is found that the current ratio of CRI PUMPS LTD is
10.94:1. It is below the standard of 2:1 and it is due to a decrease in total current assets
from previous year and an increase in current liability this year. The cash and bank
balance is found to be decreased this year in comparison to that of previous year where
as the current liabilities and provisions both have increased this year. In 2011-2012, it is
found that the current ratio of CRI PUMPS LTD is 0.86:1. . It is a not good indication
according to the rule of thumb. Because the firm has more current liabilities than current
assets. The firm may not be able to meet its short term obligations in time. In 2012-
2013, it is found that the current ratio of CRI PUMPS LTD was 0.62:1 it was not a
good indication according to rule of thumb.
b) Quick ratio in 2009-2010 it was 0.58:1 and 0.46:1, 0.27:1 and 0.22:1 in 2010-2011, 2011-
2012, and 2012-2013 respectively.
c) In the year 2009-2010 the Absolute Liquid Ratio is found to be 0.25:1. In the year
2010-2011 the Absolute Liquid Ratio of CRI PUMPS LTD is found to be 0.15:1. The
Absolute Liquid Ratio of the firm for the financial year 2011-2012 is found to be 0.12:1
which is below the normal standard of 1:2 or 0.5:1. This is due to less cash and bank
balances of the organization in comparison to the Current Liabilities. In the year 2012-
2013, the absolute liquid ratio found to be 0.08:1.
d) Stock to current asset is 0.23, 0.25, 0.13, and 0.19 in respective years.
e) Trade debtor to current asset ratio come 0.25, 0.34, 0.17 and 0.21 respectively.
f) Current asset to total asset ratio came 0.13, 0.12, 0.21 and 0.16 in the year 2009-2010,
2010-2011, 2011-2012, and 2012-2013.
Current liabilities to total asset came 0.11 in 2009-2010 and in 2010-2011 it came 0.13 ,
in 2011-2012 it came 0.24:1 and in 2012-2013 it came 0.26:1.
h) Cash conversion ratio for inventory came 77days, 70 days, 43 days and 115 days.
[22]
Cash conversion for debtor comes 125 days in 2009-2010, and it reduced to 85 and 57
days in 2010-2011, 2011-2012 respectively. But in 2012-2013 it increases to 126 days.
Cash conversion ratio came 63days, 61days, 37days and 86days respectively.
[23]
THE SECOND SECTION EXPLAINS ABOUT THE LIQUIDITY TREND OF THE ORGANIZATION.
LIQUIDITY RATIO
CURRENT RATIO
Table5.4CURRENT RATIO- (CURRENT ASSETS/CURRENT LIABILITY)
YEAR CURRENT ASSET(IN RUPEES)
CURRENT LIABILITY(IN RUPEES)
RATIO
2009-2010 3,21,50,26,429 2,50,80,12,516 1.28:1
2010-2011 3,10,61,19,303 3,35,96,86,508 0.94:1
2011-2012 6,30,63,13,319 7,29,34,88,649 0.86:1
2012-2013 5,07,93,75,378 8,21,36,64,274 0.62:1
From the table 5.4 and diagram of Current Ratios of different financial years of CRI
PUMPS LTD, various results can be made.
A) 2009-2010 it was found that the current ratio was 1.28:1 which is below the standard
of 2:1. It is due to a decrease of total current assets from the previous year to current
year. Still it is manageable and also the condition was under the control.
B) In 2010-2011, it was found that the current ratio of CRI PUMPS LTD was 0.94:1. It
was below the standard of 2:1 and it is decrease in total current assets from previous
year and an increase in current liability this year. The cash and bank balance is found to
be decreased this year in comparison to that of previous year where as the current
liabilities and provisions both have increased this year.
C) In 2011-2012, it was found that the current ratio of CRI PUMPS LTD was 0.86:1. .
It is a not good indication according to the rule of thumb. Because the firm has more
[24]
2009-2010 2010-2011 2011-2012 2012-2013
current ratio 1.28 0.94 0.86 0.62
1.28
0.940.86
0.62
0
0.2
0.4
0.6
0.8
1
1.2
1.4
RATI
O
CURRENT RATIO
current assets than current liabilities. The firm may be able to meet its short term
obligations in time.
D) In 2012-2013, it was found that the current ratio of CRI PUMPS LTD was 0.62:1. It
was not a good indication according to rule of thumb. Because the firm has more current
assets than current liabilities. The firm was not able to meet its short term obligation in
time.
E) Because of increase in administrative overhead expenses, super annuity benefits and
payment of past loan etc. are the major factor for increasing of current liabilities.
F) Situation can be controlled. So more emphasis can be given on these areas to reduce
current liabilities and to increase current assets so that the actual standard of 2:1 can be
achieved.
In addition to, company should make clear cut strategic planning to sell electricity to
major industries at industrial rate to achieve higher revenue
TABLE5.5 Quick Ratio - (Liquid Asset/ Current Liability)
YEAR LIQUID ASSET CURRENT LIABILITY RATIO
2009-2010 1,44,64,73,013 2,50,80,12,516 0.58:1
2010-2011 1,54,33,61,165 3,35,96,86,508 0.46:1
2011-2012 1,96,21,17,223 7,29,34,88,649 0.27:1
2012-2013 1,78,27,37,827 8,21,36,64,274 0.22:1
FROM THE TABLE 2.2 FOLLOWING THINGS ARE DERIVED:
A) The Quick Ratio or the Acid Test Ratio of CRI PUMPS LTD for the financial year
2009-2010 was found to be 0.58:1 and the normal standard for is 1:1. So it is a
manageable situation.
B) In the year 2010-2011 it was found that the Quick Ratio of CRI PUMPS LTD was
0.46:1 which was below the normal standard. It was due to a little bit increase in current
liabilities in comparison to that of previous year. Still it was also in a manageable
position and by giving a small effort the normal standard of 1:1 can be achieved.
[25]
0.58
0.46
0.270.22
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2009-2010 2010-2011 2011-2012 2012-2013
RATI
O
YEARS
QUICK RATIO
C) In the year 2011-2012 it Is found that the QUICK ratio of CRI PUMPS LTD IS
0.27:1, which is just normal standard. It is due to a little bit increase in current
liabilities.
D) In the year 2012-2013 it is found that the Quick ratio was 0.22:1. Which is below
standard of 1:1? Management should have an eye on to that.
TABLE 5.6
ABSOLUTE LIQUID RATIO- (ABSOLUTE LIQUID ASSET/CURRENT LIABILITY):
YEAR Absolute Liquid Asset Current Liability Ratio
2009-2010 64,82,76,812 2,50,80,12,516 0.25:1
2010-2011 49,08,81,183 3,35,96,86,508 0.15:1
2011-2012 90,70,19,750 7,29,34,88,649 0.12:1
2012-2013 72,71,06,129 8,21,36,64,274 0.08:1
[26]
By going through the table 5.6 & diagram of Absolute Liquid Ratio, balance sheet of
CRI PUMPS LTD the following results can be drawn.
A) In the year 2009-2010 the Absolute Liquid Ratio was found to be 0.25:1. Though it
is below the normal standard still it is in a manageable condition.
B) In the year 2010-2011 the Absolute Liquid Ratio of CRI PUMPS LTD was found to
be 0.15:1 which is below from the previous year. It is due to a decrease in cash and bank
balances and also a slightly increase in Current Liabilities.
C) The Absolute Liquid Ratio of the firm for the financial year 2011-2012 is found to
be 0.12:1 which is below the normal standard of 1:2 or 0.5:1. This is due to less cash
and bank balances of the organization in comparison to the Current Liabilities.
D) In the year 2012-2013, the absolute liquid ratio found to be 0.08:1. This is due to less
cash and bank balances of the organization in comparison to the Current liabilities.
(Table 5.7)
CASH FLOW STATEMENTS
(2012-2013) (2011-2012) (2010-2011) amount in (Rs) amount in (Rs) amount in (Rs)
profit/loss before tax & extraordinary items -71,37,17,644 -18,30,29,883 -3,64,99,383adjustment for:
appropriation to reserves and surpluses 1,18,36,39,044 6,33,87,383 11,15,56,818interest and finance charges 54,16,01,198 97,24,54,617 1,10,65,54,318
Depreciation 1,08,22,03,592 1,09,74,37,879 1,09,90,58,990preliminary expenses W/O 30,26,423 30,26,423 30,26,423
excess provision written back -1,04,00,87,510 -47,574 -209interest income -4,55,13,310 -6,90,09,008 -5,03,60,383
provisions for wealth tax 27,846 46,318 46,305provision/write off against theft materials 15,22,603 29,50,312 28,65,292
provisions for obsolete stock-store etc 1,11,96,801bad and doubtful debt 4,47,68,652 11,63,525 92,89,278
provisions for fringe benefit tax -------------------- -23,96,915 -21,13,256OPERATING PROFIT BEFORE
WORKING CAPITAL CHANGE (A) 1,05,74,70,893 1,88,59,83,078 2,25,46,20,994
WORKING CAPITAL CHANGEstores and spares -16,20,59,785 -4,46,04,328 -2,98,62,664
[27]
sundry debtors -4,53,02,877 -37,81,016 -26,35,73,059other current assets -59,43,581 -1,43,98,325 -2,44,71,317loan and advances 1,20,34,71,087 -2,72,53,85,618 24,60,67,167current liabilities 4,93,59,037 42,88,03,928 42,01,27,401
Provisions 1,91,87,52,382 3,52,31,00,656 47,36,52,134NET WORKING CAPITAL CHANGES
(B)2,95,82,76,263 1,16,37,35,296 82,19,39,662
CASH GENERATED FROM THE OPERATION (A)+(B)
4,01,57,47,156 3,04,97,18,374 3,07,65,60,656
CASH FLOW FROM INVESTING ACTIVITIES:
capital expenditure (CAPEX) -93,41,57,641 -91,68,37,432 -1,03,91,08,694Interest received revenue 4,55,13,310 6,90,09,008 5,03,60,383
CASH GENERATED FROM INVESTING ACTIVITIES ( C )
-88,86,44,331 -84,78,28,424 -98,87,48,311
CASH FLOW FROM FINANCING ACTIVITIES:
proceeds from secured loan -1,06,41,24,474 -1,05,96,33,683 -1,02,66,95,328proceeds from unsecured loan 32,39,10,165 -6,95,82,948 -36,86,01,393
interest paid -2,61,68,02,137 -88,70,89,752 -83,19,11,252proceed from investors capital 5,00,00,000 23,05,55,000 -----------------
CASH FLOW FROM FINANCING ACTIVITIES (D)
-3,30,70,16,446 -1,78,57,51,383 -2,24,52,07,973
NET CASH GENERATED FROM ALL ACIVITIES (A+B+C+D)
-17,99,13,621 41,61,38,567 -15,73,95,628
Cash and cash equivalent at the beginning of the year
90,70,19,750 49,08,81,183 64,82,76,812
cash equivalent at the end of the period 72,71,06,129 90,70,19,750 49,08,81,184
Table 5.7 defines the following:
a) Cash generated from investing activities, Rs-88,86,44,331 , Rs-84,78,28,424 and
Rs-98, 87, 48,311 in the year 2012-2013, 2011-2012 and 2010-2011 respectively.
b)Hence, there is a generation of Rs.4,01,57,47,156 cash flow from its operating
activities for the year 2012-2013, where as in 2011-2012, it was Rs.3,04,97,18,374. And
in 2010-2011 it was 3,07,65,60,656.
c) The net cash flow of Rs-3,307,016,446 from financing activities in 2012-10. where it
was -1,78,57,51,383 and -2,24,52,07,973 in 2011-2012 and 2011-2010 respectively.
[28]
d)That, the net cash flow from its operating, investing and financing activities for the
year 2012-2013 is a negative figure of Rs.-17,99,13,621. It became positive in the year
2011-2012, which was Rs 41, 61, 38,567. And in 2010-2011 it becameRs-1573, 95,628.
The third section explains about the working capital trend
Table-5.8
Size of Working Capital:
CURRENT ASSETS(CA) 2010(rupees) 2011(rupees) 2012(rupees) 2013(rupees)
Stores and spares 751064690 76,68,65,262 80,85,19,278 96,90,56,460
Sundry debtors 798196201 1,05,24,79,982 1,05,50,97,473 1,05,56,31,698
Cash and bank balances 648276812 49,08,81,183 90,70,19,750 72,71,06,129
Other current assets 628081987 65,25,53,304 66,69,51,629 74,48,94,758
Loan and advances 389406739 14,33,39,572 2,86,87,25,189 1,58,26,86,333
Total 3,21,50,26,429 3,10,61,19,303 6,30,63,13,319 5,07,93,75,378
Less: CURRENT LIABILITIES(CL)
2010(rupees) 2011(rupees) 2012(rupees) 2013(rupees)
Sundry creditors 61,03,22,496 66,51,67,980 68,95,26,597 72,40,51,456
Deposits and retention from suppliers/contractors
12,50,63,350 13,71,54,497 14,91,29,269 12,89,91,075
Interest accrued but not due on loans
6,27,33,789 2,05,82,149 1,30,49,185 51,73,055
Liabilities for wealth tax 37,299 47,240 47,253 28,781
Electricity duty payable 2,12,903 49,092 1,82,269 1,56,113
Liabilities for fringe benefit tax
23,41,534 44,54,790 68,51,705 68,51,705
Other liabilities 87,64,35,326 1,22,77,13,016 1,61,76,99,768 1,65,27,44,614
Total 1,67,71,46,697 2,05,51,68,764 2,47,64,86,046 2,51,79,96,799
Provisions 83,08,65,819 1,30,45,17,744 4,81,70,02,603 5,69,56,67,475
Total 2,50,80,12,516 3,35,96,86,508 7,29,34,88,649 8,21,36,64,274
working capital( CA-CL) 70,70,13,913 -25,35,67,205 -98,71,75,330 -3,13,42,88,896
From the table -5.8 following things are derived:
In 2009-2010, working capital was Rs70,70,13,913 because current asset was more than
current liabilities. In 2010-2011 working was became negative due to the fact that
[29]
(Amount. In Rs.)
current liabilities exceeds current assets. In 2011-2012 it became Rs -98,71,75,330 due
to excessive of provisions. In that year current liabilities exceeds current assets. In
2012-2013, working capital again became negative.
WORKING CAPITAL TREND ANALYSIS: In working capital analysis the
direction at changes over a period of time is of crucial importance. Working capital is
one of the important fields of management. It is therefore very essential for an analyst to
make a study about the trend and direction of working capital over a period of time.
Such analysis enables as to study the upward and downward trend in current assets and
current liabilities and its effect on the working capital position. “The term trend is very
commonly used in day-today conversion trend, also called secular or long term need is
the basic tendency of population, sales, income, current assets, and current liabilities to
grow or decline over a period of time” “The trend is defined as smooth irreversible
movement in the series. It can be increasing or decreasing.” Emphasizing the
importance of working capital trends, “analysis of working capital trends provide as
base to judge whether the practice and privilege policy of the management with regard
to working capital is good enough or an important is to be made in managing the
working capital funds.
TABLE-5.9
Working Capital Size trend
Years 2009-2010 2010-2011 2011-09 2012-10
Net W.C (A-B) 70,70,13,913 25,35,67,205 -98,71,75,330 -3,13,42,88,896
W.C. Indices 100 35.86 -139.62 -443.31
[30]
(Amount. In Rs.)
From the table 5.9 followings things are derived: It is observed that in 2009-2010, working capital indices was very high due to current assets exceeded current liabilities. In 2010-2011indices was also high because current asset were more than current liabilities. In 2010-2011 the company was able to manage their working capital efficiently. But in 2011-2012 and 2012-2013 it became negative. Here in the year 2011-2012 and 2012-2013 current liabilities exceeded current assets.
TABLE-5.10
WORKING CAPITAL TURN OVER RATIO- (SALES/NET WORKING CAPITAL)
Working capital turnover ratio
YEAR Cost of Sales Net working capital Ratio
2010 3553494401 707013913 5.03times
2011 3997558798 -25,35,67,205 -15.7times
2012 6789295427 -98,71,75,330 -6.88times
2013 3051627568 -3,13,42,88,896 -0.97 times
From the table 5.10 following things derived:
A) In the year 2009-2010, there was an increased in working capital turnover ratio to
5.03.
[31]
5.03
-15.7
-6.88
-0.97
-20
-15
-10
-5
0
5
10
2009-2010 2010-2011 2011-2012 2012-2013
ratio
YEARS
WORKING CAPITAL TURNOVER RATIO
B) However, in the year 2010-2011, it was -15.7 which indicates there was a decrease in
net current assets due to increase in current liabilities.
C) In the year 2011-2012, it was -6.88 which is better than the previous year.
D) But in 2012-2013, working capital turnover was -0.97, which indicates there was
decrease in net current assets due to increase in current liabilities.
TABLE 5.11
STATEMENT SHOWING CHANGES IN WORKING CAPITAL(2010 and 2011)
(2009-2010)(Rs)
(20102011)(Rs)
Increase in working capital
(Rs)
Decrease in working capital
(Rs)
Current assetsStores and spares 751064690 766865262 15800572 -Sundry debtors 798196201 1052479982 254283781 -Cash & bank
balances648276812 490881183 - 157395629
Other current assets 628081987 652553304 24471317 -
Loans & advances 389406739 143339572 - 246067167Total 3215026429 3106119303
Current liabilities
Current liabilities 1677146697 2055168764 - 378022067Provisions 830865819 1304517744 - 473651925
Total 2508012516 3359686508
960581118
Working capital(currentassets-
current liabilities)
707013913 -253567205
Net decrease in working capital
-960581118
-253567205 -253567205 1255136788 1255136788
From the table 5.11 following things are derived:
By going through the statement showing changes in working capital the following
results can be made.
[32]
A) that, the total current asset of the year 2010-2011 is decreased to Rs. 3,10,61,19,303
from a previous year’s figure of Rs. 3215026429.
B) The total value of stores and spare is increased from the previous year’s figure and
the value of sundry debtors is also increased from the previous year’s figure.
C) The cash and bank balances of the organization have a decrease of Rs. 157395629
from the previous year’s figure. Similarly the figure for loans and advances is also
decreased to Rs. 143339572 from the previous year’s figure of Rs. 389406739.
D) The other current assets like prepaid expenses and sundry receivables have also
increased from the previous year’s figure.
E) The total current liabilities of the year 2010-2011 are increased to Rs.3359686508
from a previous year’s figure of Rs.2508012516.
F)That, the increase for current liabilities is due to increase in the figure of sundry
creditors, deposits and retention from suppliers/contractors, liabilities for wealth tax,
liabilities for fringe benefit tax and other liabilities from the previous year’s figure.
G) Due to increase in the value of stores and spares, sundry debtors, and other current
assets, there is a sign of increase in working capital. However, due to a decrease in the
figure of cash, bank balances, loan and advances etc, there is a clear sign of decrease in
the working capital.
H) Due to increase in current liabilities and provisions for pension and gratuity and
retrospective revision of pay, there is a sign of decrease in working capital.
I)As per the analysis, it is observed that, the ratio of increase of working capital is
drastically reduced than the previous year’s and the decrease sign of working capital is
Rs.960581118(2010-2011), which has impacted the steady increase of current working
capital & negatively affected the profitability of the organization.
J) It is found that the current asset’s figure is decreased from the previous year’s figure
& the current liabilities figure is increased from the previous year. As a result of which,
there is a net decrease (negative figure) in working capital this financial year (2010-
2011).
[33]
K) That, some more emphasis can be given on current assets to increase its figure and to
decrease current liabilities’ figure as a result of which the figure for working capital can
be increased.
TABLE-5.12
STATEMENT SHOWING CHANGES IN WORKING CAPITAL
(2012 TO 2013)
(2011-2012)(Rs)
(2012-2013)(Rs)
Increase in working capital
(Rs)
Decrease in working capital
(Rs)Current assets
Stores and spares 808,519,278 96,90,56,460 160537182 -Sundry debtors 1,055,097,473 1,05,56,31,698 534225 -Cash & bank
balances907,019,750 72,71,06,129 179913621
Other current assets
66,69,51,629 74,48,94,758 77943129 -
Loans & advances 2,86,87,25,189 1,58,26,86,333 - 1,28,60,38,856Total 6,30,63,13,319 5,07,93,75,378
Current liabilities
Current liabilities 2,47,64,86,046 2,51,79,96,799 - 4,15,10,753Provisions 4,81,70,02,603 5,69,56,67,475 - 87,86,64,872
Total 7,29,34,88,649 8,21,36,64,274
2147113566
Working capital(current assets-
current liabilities)
-98,71,75,330 -3,13,42,88,896
Net decrease in working capital
-2147113566
-3,13,42,88,896 -3,13,42,88,896 2386128102 2386128102By going through the table5.12 showing changes in working capital the following
results can be made:
a) That, the total current asset of the year 2012-2013 is decreased to Rs. 5,07,93,75,378
From a previous year’s figure of Rs. 6,30,63,13,319 .
[34]
b) The total value of stores and spare is increased from the previous year’s figure and
the value of sundry debtors is also increased from the previous year’s figure.
c) The cash and bank balances of the organization have a decrease of
Rs.17,99,13,621from the previous year’s figure. Similarly the figure for loans and
advances is also decreased to Rs.1,58,26,86,333 from the previous year’s figure of Rs.
2,86,87,25,189.
d) The other current assets like prepaid expenses and sundry receivables have also
increased from the previous year’s figure.
e) The total current liabilities of the year 2012-2013 are increased to Rs8, 21,36,64,274
From a previous year’s figure of Rs. 7,29,34,88,649.
f)That, the increase for current liabilities is due to increase in the figure of sundry
creditors, deposits and retention from suppliers/contractors, liabilities for wealth tax,
liabilities for fringe benefit tax and other liabilities from the previous year’s figure.
g)Due to increase in the value of stores and spares, sundry debtors, and other current
assets, there is a sign of increase in working capital. However, due to a decrease in the
figure of cash, bank balances, loan and advances etc, there is a clear sign of decrease in
the working capital.
h)Due to increase in current liabilities and provisions for pension and gratuity of pay,
there is a sign of decrease in working capital.
i)As per the analysis, it is observed that, the ratio of increase of working capital is
drastically reduced than the previous year’s and the decrease sign of working capital is
Rs. -2147113566 (2012-2013), which has impacted the steady increase of current
working capital & negatively affected the profitability of the organization.
j)It is found that the current asset’s figure is decreased from the previous year’s figure &
the current liabilities figure is increased from the previous year. As a result of which,
there is a net decrease (negative figure) in working capital this financial year (2012-
2013).
[35]
k)That, some more emphasis can be given on current assets to increase its figure and to
decrease current liabilities’ figure as a result of which the figure for working capital can
be increased.
SECTION-4 EXPLAINS ABOUT CURRENT ASSETS AND CURRENT LIABILITIES
CURRENT ASSETS
Total assets are basically classified in two parts as fixed assets and current assets. Fixed
assets are in the nature of long term or life time for the organization. Current assets
convert in the cash in the period of one year. It means that current assets are liquid
assets or assets which can convert in to cash within a year.
TABLE 5.13
CURRENT ASSETS SIZE
Current assets(CA) 2010(rupees) 2011(rupees) 2012(rupees) 2013(rupees)
Stores and spares 751064690 76,68,65,262 80,85,19,278 96,90,56,460
Sundry debtors 798196201 1,05,24,79,982 1,05,50,97,473 1,05,56,31,698
Cash and bank balances
648276812 49,08,81,183 90,70,19,750 72,71,06,129
Other current assets 628081987 65,25,53,304 66,69,51,629 74,48,94,758
Loan and advances 389406739 14,33,39,572 2,86,87,25,189 1,58,26,86,333
Total of CA 3,21,50,26,429 3,10,61,19,303 6,30,63,13,319 5,07,93,75,378
CA indices 100 99.61 196.15 157.99
[36]
(Amnt. In Rs.)
2009-2010 2010-2011 2011-2012 2012-2013
current asset 100 99.61 196.15 157.99
100 99.61
196.15
157.99
0
50
100
150
200
250
indices
CURRENT ASSET INDICES
From the table-5.13 followings things are derived: The current asset indices show
growth in the year 2009-2010. In 2010-2011 it declines marginally and in 2011-2012 it
again increase and in 2012-2013 it declines.
TABLE-5.14
CURRENT ASSET TURNOVER RATIO - (sales/current Assets)
YEAR SALES CURRENT ASSETS RATIO
2010 3,55,34,94,401 3,21,50,26,429 1.10
2011 3,99,75,58,798 3,10,61,19,303 1.29
2012 6,78,92,95,427 6,30,63,13,319 1.08
2013 3,05,16,27,568 5,07,93,75,378 0.60
[37]
1.1
1.29
1.08
0.6
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2009-2010 2010-2011 2011-2012 2012-2013
RA
TIO
YEAR
CURRENT ASSET TURNOVER RATIO
From the table 5.14 following things are derived: In the year 2009-2010, the current
asset turnover was 1.10 which became 1.29, 1.08, and 0.60 in the year 2010-2011,
2011-2012 respectively. But in the year 2012-2013, the current asset turnover was 0.60
due to sale was less than the current assets.
COMPONENTS OF CURRENT ASSETS
Analysis of current assets components enable one to examine in which components the
working capital fund has locked. A large tie up of funds in inventories affects the
profitability of the business or the major portion of current assets is made up cash alone,
the profitability will be decreased because cash is non earning assets.
TABLE 5.15 (No. in %)
Current assets(CA) 2010 2011 2012 2013
Stores and spares 23.37 24.69 12.82 19.08
Sundry debtors 24.82 33.89 16.73 20.78
Cash and bank balances 20.16 15.80 14.38 14.31
Other current assets 19.54 21.01 10.58 14.67
Loan and advances 12.11 4.61 45.49 31.16
Total of CA 100 100 100 100
2010(rupees) 2011(rupees) 2012(rupees) 2013(rupees)
[38]
0
5
10
15
20
25
30
35
40
45
50
2009-2010 2010-2011 2011-2012 2012-2013
percentage
year
stores and spares
sundry debtors
cash and bank
other current assets
loans and advances
Sundry creditors 61,03,22,496 66,51,67,980 68,95,26,597 72,40,51,456
Deposits and retention from suppliers/contractors
12,50,63,350 13,71,54,497 14,91,29,269 12,89,91,075
Interest accrued but not due on loans
6,27,33,789 2,05,82,149 1,30,49,185 51,73,055
Liabilities for wealth tax 37,299 47,240 47,253 28,781
Electricity duty payable 2,12,903 49,092 1,82,269 1,56,113
Liabilities for fringe benefit tax 23,41,534 44,54,790 68,51,705 68,51,705
Other liabilities 87,64,35,326 1,22,77,13,016 1,61,76,99,768 1,65,27,44,614
Total 1,67,71,46,697 2,05,51,68,764 2,47,64,86,046 2,51,79,96,799
Provisions 83,08,65,819 1,30,45,17,744 4,81,70,02,603 5,69,56,67,475
Total 2,50,80,12,516 3,35,96,86,508 7,29,34,88,649 8,21,36,64,274
Current liabilities indices 100 133.96 290.81 327.50
CURRENT LIABILITIES:-
TABLE 5.16
TABLE 5.17
CURRENT LIABILITIES SIZE
[39]
100133.96
290.81327.5
0
100
200
300
400
2009-2010 2010-2011 2011-2012 2012-2013
indi
ces
years
CURRENT LIABILITIES
current liabilities
From the table 5.17 following things are derived: The current liabilities graph shows
a rapid growth. In 2009-2010 ,the current asset indices is 100 and thereafter it increases
to 133.96, 290.81, 327.5 in 2010-2011, 2011-2012, 2012-2013 respectively. The
current liabilities increased at a speed.
(TABLE 5.18)
DEBTOR TURN OVER RATIO- (NET SALES/AVERAGE DEBTORS)
YEAR Net Sales Average Debtors Ratio Average Collection
Period
(365/DTR)days
2010 3,55,34,94,401 1216845410 2.92 125
2011 3,99,75,58,798 925338091.5 4.32 85
2012 6,78,92,95,427 1,05,37,88,728 6.44 57
2013 3,05,16,27,568 1,05,53,64,586 2.89 126
[40]
2.92
4.32
6.44
2.89
0
1
2
3
4
5
6
7
2009-2010 2010-2011 2011-2012 2012-2013
ratio
years
DEBTOR TURN OVER RATIO
Debtor Turn Over Ratio- By going through our calculation table and diagrams of
Debtor Turn over Ratio, profit and loss accounts and balance sheets of CRI PUMPS
LTD the following results can be drawn.
A) In the year 2009-2010 the debtor turnover ratio is 2.92 times and the average
collection period is found to be 125 days. This year, there is a higher value of debtor
turn over and a shorter average collection period in comparison to that of previous year.
This is a good indication.
B) In the year 2010-2011 the debtor’s turnover ratio is 4.32 times and the average
collection period is 85 days. This year, the value of debtor’s turnover is higher than the
previous year due to decrease in average debtors and an increase in net sales. And the
average collection period is also shorter than the previous year’s figure.
C) In the year 2011-2012 the debtor turnover ratio is 6.44 times and the average
collection period is 57 days. This year, the value of debtor turnover is higher than the
previous year due to decrease in average debtor.
D) In the year 2012-2013 the debtor turnover is 2.89 times and the average collection
period is found to be 126 days. This year, there is higher value of debtor turn over.
E) CRI PUMPS LTD used to collect pending dues directly from consumers for which,
substantial delay in getting payment was . However, the present average period of
collection is decreased due to involvement of NESCO, SOUTHCO, CESCO, WESCO
[41]
0
50
100
150
2009-2010 2010-2011 2011-2012 2012-2013
125
85
57
126
DAYS
YEARS
AVERAGE COLLECTION PERIOD
etc. for collection of revenue on behalf of CRI PUMPS LTD and the same has been
made through banks.
The shorter the average collection period, the better the quality of debtors, since a short
collection period implies the prompt payments by debtors. So this is a good indication
for the organization.
Section five generally defines Measures to Improve Working Capital Management
at CRI PUMPS LTD: The essence of effective working capital management is proper
cash flow forecasting. This should take into account the impact of unforeseen events,
market cycles, loss of a prime customer and actions by competitors. So the effect of
unforeseen demands of working capital should be factored by company. This was one of
its reasons for the variation of its revised working capital projection from the earlier
projection.
a) It pays to have contingency plans to tide over unexpected events. While market-
leaders can manage uncertainty better, even other companies must have risk-
management procedures. These must be based on objective and realistic view of the role
of working capital.
b) Addressing the issue of working capital on a corporate-wide basis has certain
advantages. Cash generated at one location can well be utilized at another.
c) An innovative approach, combining operational and financial skills and an all-
encompassing view of the company’s operations will help in identifying and
implementing strategies that generate short-term cash. This can be achieved by having
the right set of executives who are responsible for setting targets and performance
levels. They could be then held accountable for delivering, encouraged to be
enterprising and to act as change agents.
d) Working capital management is an important yardstick to measure a company
operational and financial efficiency. This aspect must form part of the strategic and
operational thinking. Efforts should constantly be made to improve the working capital
position. This will yield greater efficiencies and improve customer satisfaction.
e) Cash should be managed properly.
[42]
f) Effort should be made to reduce the current liabilities and to increase the current
asset.
g) Placing the responsibility for collecting the debt upon the centre that made the sale
HYPOTHESIS TESTING:
generally hypothesis means a mere assumption or some supposition to be proved or
disproved. Hypothesis is usually considered as the principle instrument in research. Its
main function is to suggest new experiments and observations.
Hypothesis: 1- The firm is facing difficulty in paying short-term debt.
The following table contains the details about the average collection period from
debtors and
average payment period to creditors from the period 2009-2010 to 2012-2013.
Years Average collection period (x)
Average payment period(y)
XY X2 y2
2009-2010 125 63 7875 15625 3969
2010-2011 85 61 5185 7225 3721
2011-2012 57 37 2109 3249 1369
2012-2013 126 86 10836 15876 7396
∑x= 393 ∑ Y=247 XY=26005
∑ x2 =
41975∑ y2 =16455
KARL PEARSONS’S COFFICIENT OF CORRELETION:
By putting the values in the formula the “r” came =0.86
[43]
From the calculation value of “r” come =0.86 which is a positive one. As the correlation
came a positive one which ensures that the firm is facing difficulty in paying short-term
debt. It is the case where current liabilities are increased throughout the financial years
from, 2009-2010, 2010-2011, 2011-2012 and 2012-2013.
HYPOTHESIS:2 THE FIRM IS NOT PROPERLY MANAGING THE SUNDRY
DEBTOR.
The following table contains average collection period from debtors and sundry debtors
(in crore) from the period 2009-2010 to 2012-2013.
years Average collection period (x)
sundry debtors(in crore)
XyX2 y2
2009-2010 125 80 10000 15625 6400
2010-2011 85 105 8925 7225 11025
2011-2012 57 106 6042 3249 11236
2012-2013 126 106 13356 15876 11236
∑x= 393 ∑Y=394 XY=38323∑ x2 =41975 ∑ y2 =39897
KARL PERSON’S COFFICIENT OF CORRELETION:
The correlation came negative to the second hypothesis.
[44]
After putting the data “r” is found= -0.52. So the hypothesis is rejected. As the firm is
able to manage the sundry debtor.
HYPOTHESIS: 3- THE CURRENT LIABILITIES ARE INCREASING THAN
CURRENT ASSETS YEAR BY YEAR.
The following table contains the amount of current liabilities(in crore) and current assets
(in crore) from the period 2009-2010 to 2012-2013.
years CURRENT LIABILITIES(in crore)
CURRENT ASSETS(in crore) XY
X2 y2
2009-2010 251 322 80822 63001 103684
2010-2011 336 321 107856 112896 103041
2011-2012 729 631 459999 531441 398161
2012-2013 821 508 417068 674041 258064
∑x=2137 ∑Y=1782 XY= 1065745
∑ x2 = 1381379 ∑ y2 = 862950
KARL PERSON’S COFFICIENT OF CORRELETION:
=0.88
As the hypothesis is positive which ensures that the current liabilities of firm is
increased at a speed than current assets. So the firm should have an eye to this one.
[45]
FINDINGS OF THE STUDY
Following are the findings of the study:
a) Working capital of three years i.e., (2010-2011, 2011-2012, 2012-2013) is in negative
figure. The reason is that the company’s current liabilities exceeds current assets from
2009-2010 to 2012-2013. The company created more provisions throughout this 3
years. Sundry creditors increased at a speed in these 3 years. It is an alarm sign for the
company. Besides these sundry creditors, other current liabilities also increased like
deposits and retention from supplies, liability for wealth tax, electricity duty payable.
b) The standard current ratio is 2:1. And for CRI PUMPS LTD it is not satisfactory.
The reason behind such result is that the current liabilities exceed current assets. The
standard current ratio for 2009-2010 is satisfactory but in the year 2010-2011, 2011-
2012, 2012-2013 situations becomes worst. The reason behind the increase in current
liabilities and provisions. It is not a good sign for the company.
[46]
c) The standard quick ratio is 1:1. And for CRI PUMPS LTD it is not satisfactory. The
reason behind CRI PUMPS LTD did not achieve the rule of thumb. The current
liabilities exceed the liquid assets. There is an increase in current liabilities like sundry
creditor, interest accrued but not due on loans, liability for wealth tax and liabilities for
fringe benefit tax than of liquid assets.
d) Absolute liquid test ratio is below 1:2, which are worries for CRI PUMPS LTD. The
reason is that liquid assets fall very short than current liabilities. The current liabilities
again exceed the absolute liquid assets. There is not significant increase in absolute
current assets like cash and bank balances from 2009-2010 to 2012-2013. But there is a
rapid increase in case of current liabilities like sundry creditors, deposits and retention
from suppliers, liabilities for fringe benefit tax and provisions.
e) Debtors of the company were high; they were increasing year by year, so more funds
were blocked in debtor. As the company is selling electricity to the sundry debtors and
the cash is not immediately received so some amount of cash is blocked in that matter.
f) The current asset trend increased from 2010 to 2012, but in 2013 it declines. The
current assets like stores and spare increased in 2009-2010 to 2010-2011 but in 2011-
2012 it declined and then it is increased in 2012-2013. Sundry debtors increased from
2009-2010 to 2010-2011 but it declined in 2011-2012 but again it is increased in 2012-
2013.
g) The current liabilities trend increasing at a speed which is worried thing for company.
Current liabilities like sundry creditors, deposits and retention from suppliers, interest
accured but not due on loans, liabilities for wealth tax, electricity duty payable,
liabilities for fringe benefit tax increased from 2009-2010 to 2012-2013.
h) Debtor’s turnover ratio improved from 2010 to 2012 and so number of collection
period decreases. But in 2013 debtor’s turnover ratio decreases and collection period
increases. In 2009-2010 it was 126 days. Then it is reduced to 85 and 57 days in 2010-
2011 and 2011-2012 respectively. But in 2012-2013 it again increased to 125 days.
j) Current asset ratio decrease throughout the year. It was 1.10 in 2009-2010 then it
increased to 1.29 then a fall down occurred as it was 1.08 in 2011-2012 and 0.60 in
2012-2013.
k) Working capital turnover ratio was positive in 2009-2010; it became negative in
2010-2011, 2011-2012 and 2012- 2013. It was 5.03 times in 2009-2010 then is sloped
[47]
downward and it was -15.7, -6.88, -0.97 in 2010-2011, 2011-2012, 2012-2013
respectively.
CHAPTER -6
CONCLUSION AND RECOMMENDATION
: CONCLUSION:
On the basis of data analysis on working capital management in CRI PUMPS LTD, the
following conclusions arrived.
a) The company has gross profit for the past four years (2009-07, 2010-08, 2011-09,
and 2012-10) in negatives and the current liabilities are increasing, in comparison to
current assets position. Hence, it is an alarming sign for the smooth working capital
management.
b) The CRI PUMPS LTD didn’t manage the liquidity position of the company. The
liquidity position was in a good condition and in 2009-07, it was also satisfactory. But,
in the year 2010-08, 2011-2012, 2012-10 the situation of liquidity position was
[48]
alarming due to increase in total current liabilities and decrease in total current assets
which led to the decrease in the net working capital of the company.
c) During the year 2009-07, 2010-08, 2011-2012 and 2012-2013 the company’s liquid
assets were not satisfactory.
d) The average collection period of the company during the year 2009--2010 is 125
days, it is reduced to 85 days in 2010-2011 and again it reduced to 57days in 2011-
2012, but the average collection period again increases to 126 days in 2012-2013.
e) There is also satisfactory net cash flow from the operating, investing and financing
activities of the organization.
f)Though the net working capital of the company is decreased, still the company is in a
better manageable position and the company’s present status of maintaining current
assets and current liabilities are satisfactory.
g) They are unable to manage their cash, funds and debts.
By adapting better management practices, the company may attain a sound financial
position in future and able to manage its working capital efficiently
RECOMMENDATION
CRI PUMPS LTD is the soul of Orissa’s pumps transmission and is playing a pivotal
role in making surplus pumps consumption state through efficiently administering the
system of transmission. For improvement of organization’s profitability, much emphasis
is needed to improve the better working capital management by decreasing the current
liabilities through reducing of unplanned over head expenses. In such process, current
assets position will be improved through collection of revenue from pumps transmission
as well as recovery of past dues from consumers, Govt. and other agencies etc. The
company should give more attention on increasing its collection of revenue from
wheeling of pumps and should give more emphasis to curtail unplanned expenses to
decreases the loss. Further, the management should focus on shortening its average
collection period by changing its credit terms and conditions.
[49]
By taking the above remedial measures, the organization can be an EVA+ company
with due emphasis on proper way of managing the working capital.
.
CHAPTER -7
IMPLICATION FOR FUTURE RESEARCH:
This study is the foundation stone for carrying out further research in the field of
working capital management. Further research can be also be carried out the study of
working capital management. This one of such preliminary research work and further
review of this research work can open up many dimensions for researchers. Although
the objective taken in research study is diverse, yet a trend can be observed from the
findings for future research work.
One of the major drawbacks of the study is the lack of time. Working capital
management is a very vast topic and hence in a limited time it is impossible to know
[50]
every aspects of working capital management. And also it was study that depended on
4years of data. There is future scope for studying these things.
[51]
DISCLAIMER
The present study of working capital management in CRI PUMPS LTD is purely
academic in nature. The analysis of the data and interpretation of the matters in the
project report are purely academic purpose and nobody should take it as a fact finding
conclusion for lodging any claim or submission of above facts for their personal
benefits for which the undersigned will not be held responsible. The views suggestions,
conclusions etc. are the bonfied work of mine and nobody should claim or copy it for
their benefit without permission.
……………...
[52]
BIBLIOGRAPHY
TEXT BOOKS:
1. Maheswari Dr S.n “Financial management”, Ninth edition, 2009 sultan chand & sons,
New Delhi
2. Pandey I.M., “Financial Management”, Vikas Publishing House Pvt.Ltd. 8th Edition
1999.
3. Prasanna Chandra, “Financial management”, Fourth edition 1999, Tata Mc.graw hill
publishing company ltd, New Delhi.
4. Gupta, sashi., “financial management”, 4th edition,2010, kalyani publisher, new delhi
5. Kothari C.R. “Research Methodology”, Wishva prakashan, New Delhi, 2001.
ARTICLES:
An overview of working capital management and corporate financing.
Working capital management.
Working Capital Management Manages Flow of Funds” (Year 2012)
“Working Capital Management-an Effective Tool for Organisational Success” Year
(2011)
Website:
www.cripumps.com
www. Google.com
www. Investopedia.com
www.moneycontrol.com
www.wikipedia.com
[53]
: ANNEXTURE:
BALANCE SHEETS OF CRI PUMPS LTD
PROFIT & LOSS ACCOUNTS OF CRI PUMPS LTD
BALANCE SHEETs OF CRI PUMPS LTD(IN RUPEES)
as on 31st march2013
as on 31st march 2012
as aon 31st march 2011
as on 31st march 2010
i)sources of funds 1.investors funds Investors capital 881,255,000 831,255,000 600,700,000 600,700000
investors reserves and surplus 6,824,666,950 5,531,676,826 5,368,362,657
5,143,178,990
7,705,921,950 6,362,931,826 5,969,062,657
5,743,878,990
2.loans funds Secured loans 2,970,843,099 4,034,967,573 5,094,601,256 6,121,296,584
Unsecured loans 7,338,214,991 9,081,629,634 9,058,314,752 9,128,121,4393. others funds
Consumer security deposit455,334
83,334 83,334
83,334
ii)application of funds 1.fixed assets 26,037,473,415 24,152,614,57
122,725,369,68
620,664,373,798
Gross block Less: accumulated depreciation 12,519,750,138 11,437,546,54
410,340,108,66
8 9,241,049,678
Net block 13,517,723,277 12,715,068,027
12,385,261,018
11,423,324,120
Capital work-in-progress 5,760,703,817 6,711,033,019 7,221,440,474 8,243,327,6672.investments 270,550,000 270,550,000 270,550,000 270,550,000
3.current assets, loans and advances
Stores and spaces 969,056,460 808,519,278 766,865,262 751,064,690Sundry debtors 1,055,631,698 1,055,097,473 1,052,479,982 798,196,201
Cash and bank balance 727,106,129 907,019,750 490,881,183 648,276,812Other current assets 744,894,758 738,951,177 652,553,304 628,081,987Loans and advances 1,582,686,333 2,786,157,419 143,339,572 389,406,739
Less: Current liabilities and provisions
Current liabilities 2,517,996,799 2,476,486,046 2,055,168,764 1,677,146,697
Provisions 5,695,667,475 4,817,002,603 1,304,517,744 830,865,819
[54]
Net current assets -3,134,288,896 -997,743,553 -253,567,205 707,013,9134(a) miscellaneous expenditure to the extent not written off or
adjustedare not written off or adjusted
3,026,423
6,052,846
9079269
(b)profit and loss account (1,600,747,175) (777,678,451) (492,324,866) (340,085,378)
PROFIT AND LOSS
ACCOUNTS
FOR THE YEAR ENDED
31.03.2013 31.03.2012 31.03.2011 31.03.2010
INCOME
Revenue from wheeling of Pumps 3,05,16,27,568 6,78,92,95,427 3,99,75,58,798 3553494401
Other Income 1,36,62,18,959 36,84,47,083 28,21,03,171 168611550
Total 4,41,78,46,527 7,15,77,42,510 4,27,96,61,969 3722105951
EXPENDITURE
Administrative, General & Other
Expenses
3,49,84,56,298 5,27,76,66,633 2,39,99,88,627 1,42,31,94,067
Depreciation 1,08,03,34,520
1,09,82,4
1,352 1,08,54,85,700
986,381,451
Total 4,57,87,90,818 6,35,79,07,985 3,48,54,74,327 2,40,95,75,518
Profit/ (Loss) before interest & finance
charges
-16,09,44,291 78,18,34,525 79,41,87,642 1,31,25,30,433
Interest & Finance Charges -54,16,01,198 -97,24,54,617 -1,10,65,54,318 -1,16,23,12,531
Net prior period income/(expenditure) -1,11,72,155 75,90,209 27,58,67,293 -15,59,79,199
Profit/(Loss) before Taxation &
Contingency
-71,37,17,644 -18,30,29,884 -3,64,99,383 -57,61,297
Provision for taxation:-
Current year 0 0 0 0
Fringe Benefit Tax 0 0 -2113256 -2341534
Profit After Tax -71,37,17,644 -23,96,915 -38612639 -8102831
Reserve Appropriation ------------ -18,54,26,799 ------------ -------------
Appropriation to Contingencies Reserve -10,93,51,080 -9,99,26,786 -11,36,26,849 -8,24,85,483
Profit/(Loss) After Taxation & -82,30,68,724 -28,53,53,585 -15,22,39,488 -9,05,88,314
[55]
Contingency Reserve
Balance of P&L Account Brought
Forward from Last Year
-77,76,78,451 -49,23,24,866 -34,00,85,378 -24,94,97,064
Balance Carried over to Balance Sheet -1,60,07,47,175 -77,76,78,451 -49,23,24,866 -34,00,85,378
[56]