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Project report Submitted To Sinhgad Institute of Management, In Partial Fulfilment of Requirement for the Award of Degree of



Under The Guidance of




Academic Year 2009-2011


I, the undersigned, hereby declare that the Project Report entitled ANALYSIS OF WORKING CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO RSWM LTD. written and submitted by me to the Sinhgad Institute of Management, Pune in partial fulfilment of the requirements for the award of degree of Post Graduate Diploma in Management under the guidance of Prof. Anirudh Chiney, is my original work and the conclusions drawn therein are based on the material collected by myself.

Place : Pune Date :



This is to certify that Preetesh Panchal, student of Sinhgad Institute of Management, Pune has undergone training for a period of 45 days starting from 15th January to 28 feb.2011 in our organization. During this period he has taken training in Finance department in our organization and completed the Project on Finance. We found him sincere and hardworking. We wish him all success in his future career. FOR RSWM LIMITED (M.P. PAREEK) DY GENERAL MANAGER (HRD)

This is to certify that project titled TRAINING AND DEVELOPMENT STUDY AT SAHARA INDIA a bonafide work carried out by Preetesh Panchal 4semester student of PGDM HR of Sinhgad Institute Of Management in partial fulfllment of PGDM HR DEGREE.He has worked under Our guidance and direction.

Director Dr. Daniel Penkar Date: Place: Pune

Project Guide Prof. John peter

Gratitude is hardest of emotions to express and often dose not find adequate words to convey all that we fell. I owe gratitude to several people who helped me in my course of project. If I were to sit down to map out all the contributors who have given time and shared their views to make this project possible. I would end up mapping out the long list. I express my gratitude to all of them. No single contribution alone lead to the success of endeavor and the same is true for this project study. My heartiest thanks are due to for providing all facilities during the project. I dont have any word to express my gratitude towards Mr. M.P. Pareek (DGM,HRD). He is true words the guiding light behind the working of division, his indispensable Banswara. I express my heart felt thanks to my project guide Mr. Ashok Sodani (Sr. MGR A/c ) for his generous guidance and full co-operation to me despite of his hectic schedule. I also thank all the employees of accounts department of RSWM Ltd. Banswara specially Mr. M.C. Jain who were a great help in my project. Finally, yet importantly I would like to give my special thanks to Mr. J.K. Bohra, Mr. Rakesh Jain, Mr. Sudhir Kulshrestha, Mr. Jorawar Singh, Mr. B.C. Gupta, Mr. Ashok Arora, Mr. Anurag Mathur, Mr. V.K. Parakh, Mr. R.K. Gupta, Mr. G. Lodha, Mr. R.K. Arora, Mr. F.L. Samriya, Mr. S.C. pandey, Mr. G.L. Kabra, Mr. C.S. Bhagat, Mr. Dinbandhu Pandya and all other employees of RSWM. Without the support of all these, this project would not have been a success. This is not just a report that I carry with. But it gives my personality some new dimensions and a better outlook of corporate world with a diverse vision, a new horizon to plan my future. It gives me a boost to think big and aim for the best cooperation, advice and concern certainly deserves extra acknowledgement. And for granting me permission to do my training in RSWM Ltd.


Books are the treasures of knowledge and a theoretical base is pivotal for understanding the realities of practical field. But, at the same time, practical knowledge is crucial for having an insight into the implementation of theory in corporate world. With the privilege of an opportunity provided to me by RSWM Ltd. Banswara, for the fulfillment of my purpose bridging the gap between theory and practical, I undertook forty-five days summer training at finance department of RSWM Ltd. Banswara. During this training, we conducted a study of project, about WORKING CAPITAL MANAGEMENT. Under the project WORKING CAPITAL MANAGEMENT, first of all I was provided with the annual report of company to analyze, so that I could get acquainted with the terms relating to the yarn business, financial condition depicted by Balance sheet and Profit and Loss Account of the company, figure relating to import and export etc. We were given the proposed cash budget and capital expenditure budget after taking into account assumption relating to credit period allowed, credit period received etc., for all the departments of RSWM Banswara. Using the financial statement, then I conducted a compare analysis of Ratios, and on basis of these, interpreted the financial position of company. I also determined the working capital operating cycle for the company, in which I made of accounts payable period, inventory period cash cycle, etc. . In my training program I also understood the technical aspects of the various units of RSWM Ltd. Banswara. And they also provide me the informations of all the departments of the industry. Finally, on the basis of the analysis and the conclusions draw a SWOT analysis has been done and recommendations given. Therefore, a financial analysis of working capital of RSWM realizes that the company has been able to manage its working capital efficiently thereby strengthening its short term financial position. However, there are certain areas where the company is lagging and is required to take some effective steps.

CHAPTER No. 1. PARTICULARS COMPANY PROFILE :Introduction of The Company Introduction of RSWM Banswara Introduction of LNJ Bhilwara Group Different Sectors of LNJ Group RESEARCH METHODOLOGY:Project Introduction Scope of The Project Objectives Methodology Limitations THEORY OF WORKING CAPITAL MANAGEMENT:Concept of The Working Capital Management Concept Operating Cycle Concept of Ratio Analysis RESULTS & FINDINGS:Assessment of Working Capital Operating Cycle of RSWM Ratio Analysis ANALYSIS OF FINDINGS:Findings of Calculations S.W.O.T. Analysis RECOMMENDATIONS CONCLUSIONS BIBILIOGRAPHY PAGE No. 9 14 25 27 39 39 40 41 42 46 55 59 61 62 64 71 73 77 79 81





6. 7.

Chapter 1



Rajasthan Spinning & Weaving Mills Ltd. (RSWM), the flagship Company of the LNJ Bhilwara Group. RSWM is primarily engaged in the manufacture of synthetic, blended, mlange and specialty yarns and fabrics. RSWM is a premier company of the Group, with a turnover of Rs.775 crore (US$ 177 million). RSWM is exporting a complete range of yarn and fabric to over 60 countries worldwide, giving RSWM a markedly visible presence across the textile world. The manufacturing capacity of the Company is upwards of 81,000 MT of Yarn per annum from its five units - Gulabpura, Banswara, Mandpam, Rishabhdev and Ringas located in Rajasthan. RSWM also manufactures 12 million meters of fabric per annum at its Gulabpura unit. All the plants are equipped with state-of-the-art machines and Captive Power Generation facilities. RSWM is the first composite textile mill in India to be accorded the ISO Certification. The Company also enjoys a prestigious Three Star Export House status and, over the years, has received several Export Awards from SRTEPC. The companys leadership in the textile industry is exemplified in the equity that their brands enjoy in the Indian market - place - Mayur Suitings . RSWM is in the process of modernization drive and increase of spindles of its all the manufacturing units. RSWM will soon introduce ready -to-wear Apparels. To 10

enhance its operating capacity, RSWM has acquired Jaipur Polyspin Ltd. for manufacturing of Synthetic Blended Yarn. RSWM has also acquired a state-of-the-art process house at Mordi, Banswara Rajasthan. Global Presence RSWM exports a complete range of yarn and fabric to over 60 countries across Europe, South Africa, Australia, Korea, Belgium, Singapore, Italy, Egypt and the Gulf countries. With nearly 30% of RSWM's production exported, the Company has a significant presence in the world of textiles. RSWM has also been recognized as a Golden Trading House by the Government of India having won the prestigious SRTEPC Export Award for several consecutive years. This makes the Company truly global, yet truly Indian. RSWM's Gulabpura unit has the distinction of being India's first composite textile mill to be accorded the coveted ISO 9002 and IS/ISO 9001:2000 certifications. ISO-certified Quality circles function across all units. Total Quality Management (TQM) has been implemented at the Banswara unit. The Group has a highly specialized Yarn Development Center, pilot plants and a Design & Development Studio for Fabric at Gulabpura, A Promise to our Heritage The 60s. A decade of tumultuous change, hope and promise saw John F. Kennedy take over as the President of the United States; the civil rights struggle; Woodstock and Neil Armstrong on the moon. The same decade saw the seeds of enterprise sown in the desert sands of Rajasthan, in 1961. Starting a small textile unit with 12,500 spindles - manufacturing Carded Cotton Hosiery Yarn, RSWM added another 13,000 spindles for Synthetic Yarn. This made RSWM the pioneer of Viscose and Polyester spinning on the modified Cotton System and Dyed Synthetic Fiber. This began the spinning of a superlative success story. A dream that started small but had the passion to grow, to lead, to show the way. A vision that saw a small textile unit pioneer bloom in the Synthetic Yarn 11

market, emerging as a leader named RSWM Ltd., or simply RSWM. A name that now stands for class and quality in Yarn and Fabric. RSWM is the flagship of the LNJ Bhilwara Group. Today, the Company has installed over 2,42,000 spindles and over to weaving machines, with a product range that includes Polyester / Viscose Yarn and Fabric, Flame Retardant Fabric, Specialty Tencel and Lycra Blends. RSWM has also built Mayur Suitings into one of India's top textile brands. A Promise to Deliver For us, it is not enough to manufacture the finest Blended Yarn, Cotton Mlange Yarn and Synthetic Yarn and Fabric. The real goal is to ensure that the finished Yarn and Fabric reach our customers on time, every time. Over the years, we have evolved proven procedures. Our Centralized Production Planning Cell (CPPC) has an experienced team of time conscious production planners. All plants are computerized, which is a key tool towards productivity enhancement, information dissemination and development. VSAT links connect all plants and offices with all shipment points continuously tracking shipping movements, ensuring timely delivery. ERP systems have been implemented across the board. The use of Palletized cartons are a standard practice, with direct delivery on containers, proving that we mean business, and giving us the means to deliver. A Promise to Care We are an equal opportunity employer, making no distinctions between genders, religions, castes or ethnic origins. Our work force is representative of India's multi-cultural identity and rich and diverse social fabric. Our staff's welfare is not about corporate ethics but enlightened self-interest. For us they are an investment in building our business. Fostering a healthy work-culture helps us retain our competitive edge.


Workers in all our plants enjoy a host of facilities and benefits... housing, Medicare, co-operative stores, banking, loans, children's education, sports and recreation. We are committed to the enhancement of the professional skills of our workers and managers. We organize training workshops regularly and send our Engineers and other key personnel abroad to keep abreast of global trends in technology, product mix and design. Continuous training has seen RSWM emerge as the cradle of leadership within the group. Most of the CEOs of the group companies began their careers here as trainees. The other focus area is the development of in-house capabilities in maintenance and servicing. This helps ensure low downtime. To facilitate this, our engineering talents are deputed to our machinery suppliers' plants to master maintenance and servicing issues. A Promise to the Earth In a culture, where the earth is referred to as Mother, caring for the environment is ingrained. In caring for the earth we are committed to leaving our children and the generations to come a clean, green earth. A promise that we live by and live up to in everything we do. At every step in the manufacturing process, we employ eco-friendly processes not just to abide by laws but also to sustain and take forward the 'green' traditions that form a rich part of our heritage. Effluent treatment is carried out using the latest stateof-the-art technology. All the water used in fabric dyeing and finishing is recycled for use in the process-house and in horticulture. We are continuously greening all our plants, residential and other facilities, planting thousands of saplings every year. Our environmental care is executed with an eye for detail. The Banswara unit has over 42,000 square meters of greens, with over 50,000 plants having been planted on the campus and an exquisite 11-acre orchard surrounding an artificial lake. The Banswara unit was accorded the best plantation award in Rajasthan. So while we 'do' yarns and textiles, we 'think' environment.


A Promise to Perform When we make a promise, we back it with all that we have - resources, infrastructure, technology and will power. In the final analysis, what counts is the way an organization raises up to any challenge and its performance. State-of-the-art manufacturing facilities at Gulabpura, Banswara, Rishabhdev and Mandpam in Rajasthan are backed by modern testing equipment and stringent quality checks on process parameters and quality. All units and offices have implemented Enterprise Resource Planning (ERP) Management Systems ensuring timely delivery schedules. All these plants have captive in-house power generation, avoiding production downtime due to power-cuts. These facilities are totally selfsufficient in power. RSWM, Banswara, is the first textile unit in India to implement Total Quality Management (TQM) in 1997. This was made possible by empowering the team at the unit to work seamlessly together, forming one cohesive entity, driven by a single goal... that of ensuring and maintaining the highest quality, resulting in brilliant overall performance. A Promise to be One RSWM's integrated units are spread across the state of Rajasthan, each handling specialized processes, from raw fiber handling to final product delivery, on time every time. Each process smoothly collaborates with the next, ensuring a legacy of supreme quality.

Every Team Member is highly trained in all the latest trends and technologies. Together they drive themselves to work efficiently around the clock.



Established in 1989, The Banswara unit is the only one of its kind in India and the Company's largest manufacturing facility. The unit has the capabilities to produce spun gray yarn out of any kind of fiber and blend it with synthetic, regenerated cellulosic, natural, protein and cotton fiber. The Banswara Unit has the exclusive rights for spinning Tencel Fiber into yarn in India and is a modern textile-spinning unit employing state-of-theart technology from Switzerland, Germany, UK, Italy and Korea. The unit's strength is its new product development. The unit can and does manufacture any yarn delivering it in accordance with the customer's deadlines. It is a 100% Grey Yarn Spinning unit producing Cotton blended gray yarns and Polyester fibers. The unit has recently been expanded to strengthen its product portfolio and giving it a greater product mix. Raw Material Purchase POLYESTER VISCOSE COTTON ACRYLIC Products The Banswara Unit manufactures the following product range: Grey Yarn Specialty Yarn Functional Yarn Brand Specialties Regular Products Cotton 100% RELIANCE GRASIM GUJARAT, RAJASTHAN, M.P., MAHARASTRA PRASUPATI


Quality The Banswara Unit covering new set of instruments to acquire ISO accreditation in 1994. It also received the prestigious IS/ISO 9001:2000 Quality Management System Certification in 2002. Infrastructure The unit located 170 kms from Udaipur, Rajasthan is spread over 125 acres. Over 2,000 engineers, technicians and other skilled employees staff the unit. Some technical information and capabilities of the plant are given below: Production Capacity -Size of the unit 380300 in sq. meters (Total Land Area) Manpower employed Skilled - 2000 nos., Semi Skilled - 305 nos No. Of spindles 87792 Yarn - 32850 MT / Annum







































Production of yarn follows the following procedure: Different constituent such as cotton, polyester, viscose, acrylic etc. forms yarn. For polyester or viscose yarn both constituents are mixed in a definite ratio. Fiber could be painted by spraying colors. 1) BLOW ROOM LINE: It is machine that works for formation of lap. It is like a mattress of raw material i.e. polyester/viscose or cotton. After lap formation it is wounded around lap bar. In RSWM, Lakshmi Rieter & Trutzschler have launched the machine. It uses high load motor for 960 rpm of 2 kW. 2) CARDING: After lap formation sliver is formed. For it carding machine is used. Sliver is very thick and loose type thread. The sliver is stored in drums. There is a sensor, which sense the broken of the sliver and after breaking it is join by the worker. The machine is automatically stopped after breaking of the slider. In RSWM LR (Lakshmi Rieter) this process is also remove the dust particles from the sliver. It used a pulley of M-8/1006. 3) DRAWING: In this sliver is made thicker by combing 8 or 16 slivers together to form a single sliver. It produces evenness in sliver. Vouk and LR have launched it is RSWM. In this the air pressure is applied on the sliver. In this process the material is passed through the machine at two times. In which the first material is known as breaker and the other one is none as finisher. This process is also called as Draw Frame.


4) SPEED FRAME: The sliver from the draw frame is thread with fewer diameters than sliver. It is used for rowing formation. It is wounded on bobbin. This bobbin is known as S/F. Lakshmi Rieter has launched it in RSWM. The speed of speed frame machine is 1100spm. There are minimum 4 speed frames in each unit. 5) RING FRAME: This machine is used for ultimate formation of yarn. This yarn is wounded on small bobbins. This ring frame is connected with a communication system called ring data and its speed is controlled by spinmax. There is a LED and photo detector, which senses the any breakage of the yarn. The LED and photo detector is placed on the both ends of the machine. automatically stopped if any yarn is broken. The yarn made has a particular count. The roller to the drafting the rowing does this work. They give the twisting in the yarn with the help of ring and traveler. The thickness of the yarn is depending on the count. If the count is more (FINE) the yarn is thin and if the count is less closing (COARSE) the yarn is thick. LR has launched it is RSWM. 6) AUTOCONER: The function of this machine is to wind yarn from bobbin to cone. With the help of splicing the yarn is combined together from the different bobbin. The splicing procedure is carried by air pressure which of two types: (1) Wet splicing in the yarn and remove the fault by the worker. It has three models: (a) (b) (c) 138-conventional machines. 238-middle edge model. 338-electronically operated Sthalaftorft has launched it in RSWM. (2) Dry splicing. The yarn is a pass through an electronics gage, which major any type of fault It is


7) CHEESE WINDER: In this machine two or more than two yarn are combined together on the cheese. So this process is known as cheese winding. It only combines not produce any twist. Texttool, has launched it in RSWM. 8) T.F.O. (two for one twister): As it indicate in this machine two yarn are combined as well as twisted. These processes minimize the unwanted knots in the yarn. Star Volkamann VTS-07 has launched it is RSWM. 9) DOUBLING MACHINE: It is used for twisting two yarn found from cheese winder. This machine works same as ring frame machine and the yarn is again wound on the bobbin. 10) WINDING: The yarn from the doubling process is against wounded on the cone by which the weight and length of the yarn is same. 11) PACKAGING: After through checking all the cones are packed in cartoons or bags as per process and sent to the yarn go-down. In packing department relative humidity is quite high viz. 90% to provide adequate moisture to the yarn. Although it will be increase the yarn package. There are two types of packages: Domestic use Export oriented There are two types of packing: Pilot packing. Cartoon packing


A Checking procedure is followed to ensure that material should not be mixed with another. For this purpose cones on a trolley are checked by ultra violet light in a dark chamber. If the material is mixed or any other variations like count/blend etc. are there it will be reflected by shade variation in the cones and under UV lamp, the reflectance would be different for normal and defective portion by virtue of which we can attest the cones. INSPECTION BY THE PACKING INVESTIGATOR Each cone and final yarn shall be inspected in packing department for its quality before packing. Packing investigator shall segregate4 the cone having defective yam, wrong label. The weighting man shall check net yam content to be packed in a cartoon bag before packing and adjust the weight as tolerance limit.


Flow chart of spinning, finishing & packaging departments

Fiber Godown

Mixing & Welding

Blow Room


Sliver Lap. Ribbon

Draw Frame First Time Draw Frame Second Time Speed Frame


Ring Frame Cheese Winding





Finished Goods in Godown Winding Market


Foundations that inspire "To me, the LNJ Bhilwara Group is not a business house, I see it as an institution that is committed to seeking excellence." L.N.Jhunjhunwala Chairman Emeritus

To continuously grow on sustainable basis and be a major, innovative, profitable and the most admired textile manufacturer in Asia.

Our vision is to forge ahead into the new millennium with an immediate sense of purpose and to be seen as the undisputed leader, fully equipped to deliver the best, across the diverse spectra of our many businesses, fuelled by a commitment to invest in plants, machinery, processes and, most importantly, our people - Team Bhilwara: all towards satisfying and fulfilling our customers needs in todays global environments. Ravi Jhunjhunwala Group Chairman





The LNJ Bhilwara Group, founded in 1961, has today grown into a strong global presence worth Rs. 2049 crores. The Group has been nurtured into a successful growth track by the able guidance of the Founder and Chairman-Emeritus, Mr. L. N. Jhunjhunwala. Currently, the LNJ Bhilwara Group stands as one of the largest firms on the corporate horizon in India with over 20,000 employees and 21 production units positioned at strategic locations across the country. The Groups export earnings comprise of 46% of the Groups turnover. The LNJ Bhilwara Group is a well-diversified conglomerate. It has been actively seeking growth and profitability by investing in a variety of systematically identified businesses making it a multi-product conglomerate with interests in a range of industries such as textiles, graphite electrodes, power generation, power engineering consultancy services, steel and IT enabled services. Textiles The pioneering textile division of the Group is not only a key player in the industry but also has many firsts to its credit. The textile division has the sole distinction of producing a unique fire retardant yarn called Trevira CS (now known as Lenzing, Austria). It is also the sole licensee for the highly specialized yarn called Tencel. The Group has time and again been acknowledged for its world-class quality products in the domestic market such as Mayur Suitings, BSL Suitings, La Italia Fashions and Geoffrey Hammond superfine suitings. At the same time, their services to several leading global brands for knitted garments have been recognized with the units garnering top export awards in different fields for several years in a row.


Graphite Electrodes The LNJ Bhilwara Group also has the largest integrated graphite electrodes manufacturing plant in South-east Asia with a reputed clientele comprising of major steel plants in the world. Graphite exports constitute 70% of total sales volume. An evidence of their success can be seen in the fact that HEG, an integral part of the Group, is all set to undertake a Rs. 450 crore expansion plan to tap opportunities in the export market. The expansion of the Mandideep plant would double the capacity from 30,000 TPA to 60,000 TPA. Power Sector Following the success of its earlier hydro-electric power project of 15 MW at Tawa Nagar (MP) in 1997, the Group has commissioned, Indias first IPP Hydroelectric Malana Power Project of 86 MW in a record time of 30 months at Kullu (HP), in July, 2001 and is set to commence work on 200 MW Allain-Duhangan Hydro Electric Project at Manali (HP). Little wonder then, that the LNJ Bhilwara Group of companies have been awarded IS/ISO 9001:2000 standards in quality. & ISO 14001 certification for setting exemplary



The LNJ Bhilwara Group has come a long way from its humble beginnings in 1971 and has grown successively into a strong conglomerate that continues to spread its wings into highly competitive domains ranging from textiles to power to ITenabled services.


The LNJ Bhilwara Group has been in the business of clothing people around the world with the following companies: Rajasthan Spinning & Weaving Mills Ltd. Maral Overseas Limited Bhilwara Melba De Witte Pvt. Ltd. BSL Ltd Bhilwara Spinners Ltd.

Maral Overseas Ltd., a part of the LNJ Bhilwara Group, a conglomerate with a global presence. Maral is the countrys largest Vertically-Integrated knitwear company located in the heart of Indias cotton producing region near Indore, Madhya Pradesh. Its other units are located in Jammu and Noida (NCR-Delhi). Maral is Indias first 100% Export Oriented-Unit to get the prestigious ISO certification. Maral has been accorded a Trading House status, and is an internationally preferred


manufacturer and supplier of Cotton Yarn, Knitted Fabrics, Knitwears and Sweaters. Maral has been accredited by Marks & Spencer. Maral has stringent quality checks at every stage of its production. Maral is equipped with state-of-the-art technology and full captive power back up at all units. Maral is committed to maintain eco-friendly environmental standards throughout its operations. Maral has won several prestigious awards and is recognized for quality, safety and standards. Maral caters to many international customers scattered in major global textile consuming markets like USA, Europe, Japan etc. Maral is always committed to its customers for quality and service.

Bhilwara Melba De Witte Pvt. Ltd. (BMD) was established in 1998. It is a joint venture of LNJ Bhilwara Group and De Witte Lietaer, a part of Gamma Holding of Belgium, to manufacture high performance specialized furnishing fabrics. BMD has its manufacturing plant at Banswara in Rajasthan. It has fully integrated state-ofthe-art facility for automotive textiles, which is equipped with Air-texturing, yarn dyeing, warping, weaving, warp & circular knitting, processing and lamination. BMD has a production capacity of 1000 MT per annum of Air-texturised yarn and 3.0 million Linear Meters of fabrics. Today, the company enjoys an accreditation of IS/TS 16949 certification and supplies its products to leading automotive companies in India. The wide product range of BMD covers like automotive furnishing fabrics, Decorative Furnishing Fabric, Contract Furnishing, Flame Retardant Fabric, Technical Textiles and Air Texturised yarn-Grey & Dyed.


BSL Ltd. established in 1971 at Bhilwara, Rajasthan. Today, BSL has emerged as a strong global player producing over 12 million meters of fabric every year. BSL is equipped with state-of-the-art technology. Right from raw material sourcing to product finishing, meticulous attention is paid to detail at every stage of production. The emphasis is to achieve shorter lead times and greater efficiency by following integrated yarn preparation, spinning, weaving and finishing processes. BSL offers a discerning range of Polyester / Viscose blended fabrics, wool and wool blended fabrics. BSL Yarn spun from the finest Australian Merino wool incorporating latest manufacturing systems and technologies, which enable BSL to spin yarn up to 2/100 NM, popularly known as Super 140s. Specialized processing machines provide the fabric its final make up, shade, depth, finish and overall appearance. In line with the latest international trends, BSL has also developed multi functional and specialized fabrics, like stay fresh, wrinkle free, stain and water repellent, anti radiation. Keeping up with the emerging trend of branded ready-to-wear, BSL has launched the La Italia & Louis Burton brands of ready-made garments. The company is setting up a P/v spinning unit of 8448 spindles mainly to cater to its yarn requirement for export of fabrics.


Bhilwara Spinners Ltd. (Bhilspin) established in 1980 manufacturers Synthetic Blended Grey and Dyed yarns at its manufacturing unit at Bhilwara in Rajasthan. Today, the company has 30,000 spindles to manufacture 12,000 MT per annum. Bhilspin has been accorded " Export House" status and conferred "Niryat Shree for its export performance. Bhilspin also enjoys IS/ISO 9001:2000 certification.


A premier company of the LNJ Bhilwara Group, is Indias leading Graphite Electrodes manufacturer and an established global player in the sector. It is the single largest integrated Graphite Electrodes manufacturing facility in South Asia, South East Asia and the Middle East. HEG is also the only one of its kind in the region to process the sophisticated UHP (Ultra High Power) Electrodes with technology from SERS a subsidiary of Pechinery, France.



HEG Ltd. had set up a steel manufacturing plant with an annual production capacity of 60000 TPA consisting of two modules of 30000 TPA each. Each Kiln is of 40meter length and 2.6 meter effective dia with an output of 100-105 tons per day. Temperature inside the kiln during the process ranges from 600oC to 950oC. This unit was commissioned and put in to commercial production during Feb 1992. The coal based process technology was imported from Steel India Ltd, Hyderabad that is also known as Lurgi process conceived in 1960 for production of High Grade Direct Reduced Iron (DRI). Power to manufacture billets through Induction Furnace and Continuous Casting Machine. Company will soon be producing 1 lac Ton of Steel.


Malana hydroelectric project is a run-of-the-river scheme implemented by the Malana Power Company Ltd, an LNJ Bhilwara group company, on the river Malana in the Kullu district of Himachal Pradesh.


The construction of the 86 MW project was started in January 1999 and it was commissioned in a record period of 30 months at a total cost of Rs 332 Crores. By successful commissioning in a record time & at a cost of less than Rs. 40 million per MW the Malana hydroelectric project has exploded the myths surrounding hydel power. Malana hydroelectric project is an exemplary and path hydropower generation in the country. The 192 MW Allain Duhangan hydroelectric project is a run-of-the-river scheme being implemented by the AD Hydro Power Ltd, an LNJ Bhilwara group company, on the rivers Allain & Duhangan in the Kullu district of Himachal Pradesh and is scheduled to be completed in 2008.The project is being financed by the International Finance Corporation and is designed to generate 821 million units per annum at an estimated cost of Rs. 922 Crores. breaking achievement in the field of


Indo Canadian Consultancy Services Ltd. (ICCS) is a joint venture company incorporated in 1995 by LNJ Bhilwara Group and RSW, Canada. RSW is a Consultancy engineering firm providing services for multi disciplinary projects. The company was founded in 1970 by a group of senior engineers drawn from large Canadian Consulting organizations and public utilities.


ICCS is currently offering services to over 25 projects across the country in the states of Himachal Pradesh, Uttaranchal, West Bengal, Karnataka, Sikkim, Madhya Pradesh, Chattisgarh, Arunachal Pradesh and Maharashtra. ICCS has successfully designed and engineered 15MW Tawa hydropower project and 86 MW Malana Hydro Power Project. Other achievements include Design & Engineering services for 3 MW Vajra HEP, 10 MW Bhandardhara HEP, 10 MW Gangrel HEP and 4.5 MW Baragran HEP. ICCS is also providing services for Detailed Design & Engineering for 100 MW Chuzachen HEP in Sikkim and 24 MW Balason HEP in West Bengal, Detailed Project Report for 100 MW Rangit-IV HEP in Sikkim, Detailed Project Report for 100 MW Tidong HEP, 60 MW Harsar HEP and 45 MW Bharmour HEP in Himachal Pradesh, Detailed Project Report for 50 MW Hanol Tiuni HEP & 24 MW BhilanganaIII HEP In Uttaranchal. In addition to Hydro Projects, ICCS is also providing assistance in the implementation of Wind Power Projects, Captive Thermal Plant, Transmission Lines & Substations.


Nationwide Network

Gulabpura Banswara Mandpam Rishabhdev Ringas Bangalore Synthetic, Regenerated Cellulosic, Blended, Dyed Yarn & Fabric Synthetic, Regenerated Cellulosic & Cotton-Blended Grey Yarn Cotton Mlange Yarn, Cotton-Blended Mlange & Dyed Yarn Synthetic, Blended & Grey Yarn Synthetic & Blended Dyed Yarn

Apparels Mordi (Banswara) Process House 35

HEG Ltd.
Mandideep Durg Durg Tawa Graphite Electrodes Steel Waste Heat Recovery Power Hydro Electric Power

Maral Overseas Ltd.

Maral Sarovar Jammu Noida Cotton Yarn, Cotton-Knitted (100% EOU) Fabric & Cotton Knitwear Cotton-Knitted Fabric, Cotton Knitwear & Sweaters Knit wears

BSL Ltd.
Mandpam: Yarn, Worsted & Synthetic Fabric, Readymade Garments & Accessories

Bhilwara Spinners Ltd.

Bhilwara Synthetic, Blended Grey & Dyed yarn

Bhilwara Melba De Witte Pvt. Ltd.

Mordi (Banswara) Specialized Automotive Fabric, Furnishing Fabric

Bhilwara Processors Ltd.

Mandpam Processing of Synthetic & Worsted Fabric, Tops Fiber Dyeing

Malana Power Company Ltd.

Malana Hydro Electric Power (Kullu)

AD Hydro Power Ltd.

Manali Allian-Duhangan Hydro Electric Power


Indo-Canadian Consultancy Services Ltd.

Noida Power Engineering Services

Bhilwara Scribe Pvt. Ltd.

Bhopal IT-Enabled Services

Corporate Office
Noida National Capital Region and Delhi

Regional / Marketing Offices

Mumbai Kolkata Bangalore Delhi Ludhiana


The LNJ Bhilwara Group not only has several firsts to its credit but also recognition for its commitment to quality and excellence with several national awards and certifications. Graphite Electrode HEG is the winner of CAPEXIL Highest Export Award for Graphite Electrodes for the last 18 consecutive years. HEG bagged "Rajiv Gandhi National Quality Commendation" and National Export Awards. HEG- Graphite Division bagged National Export Award. HEG bagged 3 National Awards for Quality Circles. Textiles


RSWM is the winner of SRTEPC Highest Export Award for polyester/viscose yarn exports for the last several consecutive years, which includes two gold and one bronze in March 2005. Maral is Indias fully integrated 100% EOU cotton knitwear unit and winner of TEXPROCIL Silver trophy in 100% EOU / EPZ category. Maral has also been awarded Silver Trophy by AEPC. Maral is the recipient of Rajiv Gandhi National Quality Award. Maral bagged "Greentech Safety Award". RSWM, Rishabhdev unit bagged National Export Award. Rishabhdev unit also bagged SRTEPC Excellence award for highest production in export of 100% Polyester spun yarn. BSL received the "National Certificate of Merit" for outstanding export performance. Bhilwara Spinners has been accorded the prestigious Niryat ShreeCertificate of Excellence for Outstanding export performance. Power Malana Power bagged Greentech Environment Excellence Award.


The LNJ Bhilawara Group, in its quest for excellence and growth has partnered with the following international companies: Stat Kraft Norfund Invest Ltd., Norway-Setting up a 192 MW Hydroelectric Project at Manali. RSW International, Canada -Power Consultancy Services. International Finance Corporation, Washington -Equity holders in AD Hydro Power Project De Witte Lietaer, Belgium -Specialized Automotive Furnishing Fabrics Tencel, UK (now Lenzing, Austria)-Tencel Yarn Spinning Hoechst (now Trevira CS), Germany-Flame Retardant Yarns & Fabrics eScribe Inc., USA -IT Enabled Services


Enercon (India) a subsidiary of Enercon (Germany)- Setting up Wind Energy Project

Chapter 2




Working capital is as import in business firm as blood in a human life. Each and every business concern should have adequate funds to meet out day-to-day expenses and to finance current assets, debtors, receivables and inventories. Proper management of working capital is necessary to maintain both liquidity and profitability. The goal of working capital management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. It is the process of planning and controlling the level and mix of the current assets of the firm as well as financing these assets.

Scope of project is to determine the short-term debt paying capacity of the firm through a financial analysis of Working capital. It tends to find out the effectiveness in the management of Working capital at RSWM LTD. For this purpose data were collected from the past financial statements of the company.


While pursuing PGDM degree we are required to go for a practical training in order to have some work experience, to learn the process and procedure, to understand the work process and to expose our creativity, keeping this perspective in mind, offered for training in RSWM, Banswara an organization of LNJ Group. The objectives of my study are: To analyze financial position of the organization to execute the routine operations and meet for contingencies. To study the working capital management of RSWM Ltd., Banswara. To practically understand the concept of working capital studies in academic session. To study the Financing of it W.C. needs. To study the trends & reasons for deviation.


1) Preliminary Discussion: Preliminary discussions were held with members of Materials Management Department, Sale Dept. and Finance Dept. to understand the accounting of creditors, debtors, assets, expenses and inventory control, and cash flow procedure. The basic idea was to get acquainted with the full procedure of accounting of various assets and liabilities affecting balance sheet. 2) Referring to Books: Books were also referred to have understanding of working capital management and ratio analysis. 3) Discussions: Discussions were held with Mr. Ashok Sodoni, Mr. Manak Jain and members of Finance Dept. for understanding the report preparation and projections. 4) Referring to Documents: After all these learning and understanding, documents were referred to namely Balance Sheet, Profit & Loss Account. 5) Data Collection: For this study, secondary data are used available from various documents. The following documents have assisted in the project: Annual Report of the company. Annual completion registers comprising detailed description of profit and loss accounts and balance sheet of RSWM Banswara. Quarterly Balance Sheet and P&L accounts.



Preparation of Project Report: Finally, On the basis of preliminary discussions and referring to document Projects were prepared and final reports were analyzed through ratio analysis. Definitive views about the entire gamut of working capital management were formed. The various issues connected with working capital management were understood.


This study was restricted to RSWM Ltd. (Banswara Unit) only and therefore, the result of this study cannot be generalized to other parts of the units. The study was relayed upon the information given by the respondents at the time of interview. Due to confidentially of certain information all the details could not be obtained from the company.


Chapter 3




Meaning: Capital is the life and blood of a business organization Capital required for a business can be classified under two main categories. Kind of Working Capital

On the basis of concept

On the basis of time

Gross or Working Capital

Net working capital

Fixed or permanent Working Capital

Temporary Variable Working capital

Regular Working Capital

Reverse Working Capital

Special Working Capital

Season W.C

Long-term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land and building, furniture and fixtures etc. Investments in these assets are blocked on a permanent or fixed basis and are called fixed capital. Funds are also needed for short-term purposes for the purchase of raw materials, payment of wages and other day-to-day expenses, etc. These funds are known as Working Capital (WC). It 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 asset keep revolving fast and


are being constantly converted into cash and this cash flow out again in exchange for other current assets. Hence it is also known as revolving or circulating capital or short-term capital. The need of WC 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 material and production, production and sales and realization of cash. Thus, WC is needed to meet various expenses during these times. A business undertaking requires funds for two purposes: To create productive capacities through purchase of fixed assets etc. and To finance current assets required for day to day running of the business. Working capital refers to the funds invested in current assets, i.e., investment in stock. Sundry debtors, cash and other current assets, Current assets are essential to use fixed assets profitably. For example: A machine cannot be used without raw material. investment on the purchase of raw material is identified as working capital. The



There are two concepts of working Capital Gross Concept Net Concept GROSS WORKING CAPITAL: Simply called as working capital, it refers to the firms investment in current assets. Current assets are the assets, which can be converted into cash within an accounting year (or operating cycle), and include cash, short-term securities, debtors, bills receivables and stock (inventory). NET WORKING CAPITAL (NWC) NWC = Current Assets Current Liabilities Current liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year (or operating cycle) and include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative. A positive net working capital will arise when current assets exceed current liabilities. On the other hand, negative working capital occurs when current liabilities are in excess of current assets. The gross working capital concept focuses attention on two aspects of current assets management. Optimum investment in current assets. Financing of current assets. The consideration of the level of investment in current assets should avoid two danger points 1) 2) Excessive investment. Inadequate investment in current assets.


Excessive investment in current assets should be avoided because it impairs firms profitability, as idle investment earns nothing. On the other hand, inadequate amount of working capital can threaten solvency of the firm because of its inability to meet its current obligations. Net working capital being the difference between current assets and current liabilities is a qualitative concept. It indicates the liquidity position of the firm and it suggests the extent to which working capital needs may be financed by permanent sources of the funds. From the point of view of TIME working capital can be divided into two categories: 1) 2) Permanent working capital. Temporary working capital.

Permanent working capital: Refers to that minimum level of investment in the current asset that is carried by the business at all times to carry out minimum level of its activities. Since permanent working capital remains in the business on long-term basis, it should be financed from long-term sources. Temporary working capital: Refers to that part of total working capital, which is required by a business over and above permanent working capital. It is also called as variable working capital. Since the volume of temporary working capital keeps on fluctuating from time to time according to the business activities it may be financed from short-term sources. Working capital management policies have a great effect on the firms Profitability. Liquidity Structural health. Gross working capital consists of cash, receivables and inventory. If a firm has relatively high investment in these assets in comparison to a firm, which is transacting the same volume of sale, it will have lower profitability in comparison to the latter. 49

Therefore, a firm, which has high working capital turnover, will have higher profitability. The current ratio and quick ratio indicate liquidity aspect of the firm. If current assets are reduced beyond limit, the current and quick ratio will have adversely affected leading the firm to poor liquidity. Therefore, it is essential that a proper balance be struck between profitability and liquidity. In fact profitability and liquidity are inversely related, when one A firm having high liquidity will have a lower increases the other decreases. profitability and vice versa. Working capital management policies also have a great impact on the structural health of the organization. If different components of working capital are not properly balanced then in spite of the fact that current and quick ratios may indicate satisfactory financial position in respect of the liquidity of the firm. It may not in fact be as liquid as indicated by the current and quick ratios.



Proper management of working capital is very essential for the smooth functioning of the business. Optimum utilization of fixed assets can only be done when we have proper management of working capital working capital is required for purchasing raw material in to finished, sales expenses, distribution expenses etc. Both excessive as well as inadequate working capital positions are harmful from the firms point of view. Excessive working capital leads to idle funds and company has to pay huge amount as interest and opportunity cost for this idle fund. One the other hand, inadequate working capital not only impairs firms profitability but also result in production interruption and inefficiencies. So a firm should have adequate. Working capital should be adequate for the following reasons: 1) 2) 3) 4) 5) 6) 7) Quick payment to suppliers. Increase in debt capacity & goodwill. Cash discount. Easy availability of bank loans. Exploitation of favorable opportunity. Meeting unseen contingencies. Distribution of adequate dividends.

Determinants of Working Capital 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) Nature & size of the business. Production cycle. Business cycle Credit policy Volume of sales. Price level change Profit level Seasonal operation Production policy. Managements ability.



The main components of the Working Capital Management are as follows: Receivable Management. Cash Management Inventory Management Payables Management RECEIVABLE MANAGEMENT: Receivable management highlights the importance of account receivable in the day-to-day operations of a business enterprise and the role of receivable management in improving profitability and liquidity of an enterprise. Various dimension of receivable management viz. Credit Standards, Credit Analysis, Credit Terms and Collection Policies are included in receivable management. The Average Collection Patterns are the methods of monitoring accounts receivable. Account receivables represent the amount due from its customers to whom the company has extended the credit. CASH MANAGEMENT: Cash the most liquid asset, is of vital importance to the daily operations of the business firms. While the proportion of corporate assets held in the form of cash is very small, often between 1% and 3%, its efficient management is crucial to the solvency of the business because in a very important sense cash is the focal point of fund flow in a business. In view of its importance, it is generally referred to as the life blood of a business enterprise. The evidence suggests that the existing practices of cash inflows and outflows predictions remain much to be desired. Concentration banking is the most popular technique employed by the business forms to intensify cash inflows. Usually the local sales office or a branch of the company performs this function. The management at the head Office utilizes these funds on the basis of daily collection reports.


As regards the control of cash outflows, firms have a tendency to defer payment till the last moment. Funds are arranged only on the day cheques are expected be presented by the payee and for the amount necessary to honour the cheques. In the case of local payment, cheques are many times handed over after the banking hours. At RSWM cash management is essence; means it is the main component of working capital management, all efforts are made to contain the length of the operating cycle to a reasonable level. In particular, the company has been able to reduce substantially the overall inventory levels through proper vendor selection and development. What is more striking is the fact that the company takes as much care of its suppliers as it does for its customers. As a result the suppliers readily come forward to accommodate any temporary delay in payments. INVENTORY MANAGEMENT: Working Capital as net concept is defined as the difference between current assets and current liabilities. Current assets being those assets that are likely to be converted into liquidity within a year are time or so. These include items like inventories of raw materials, semi manufactured articles or work-in-progress and finished goods, accounts receivables handier or bills receivables, bank balance and cash balance etc. Current liabilities are in essence short-term liabilities, which have to be settled in a years time. These include accounts payable or amount payable to suppliers of goods and services for goods and services delivered on credit, bills payable, bank overdraft etc. since inventories constitute a major item of current assets, the management of inventories is crucial to successful working capital management. Working capital requirements are influenced by inventory holding the period during which raw materials remains in store, during which processing takes place and that during which finished goods lie in the warehouse prior to sale. The level of inventory invested affects the total investment in working capital. Thus, operating ratio of turnover or sales to Working Capital are affected by it as well.


PAYABLES MANAGEMENT: A substantial part of purchases of goods and services in business are on credit terms rather than against cash payment. White the supplier of goods and services tends to perceive credit as a lever for enhancing sales or as a form of non-price instrument of competition; the buyer tends to look upon at as a loaning of goods or inventory. The suppliers credit is referred to as accounts payable, trade credit, trade acceptance, commercial draft or bills payable depending on the nature of credit provided. The extend to which this buy now, pay latter facility is provided will depend upon a variety of factors such as the nature, quality and volume of items to be purchased, the prevalent practices in the trade, the degree of competition and the financial status of the parties concerned. Trade credit or payables constitute a major segment of current liabilities in many business enterprises and they primarily finance inventories, which form a major component of current assets in many cases.



After determining the level of working capital, a firm has to decide how it is to be financed. Although long-term funds partly finance current assets and provide the margin money for working capital, such working capitals are virtually exclusively supported by short-term sources. Funds available for a period of one year or less are called short-term finance. In India, short-term funds are used to finance working capital. The organization can go for various sources, which can be discussed below: Spontaneous sources: (a) Trade Credit: (b) Outstanding Expenses: Trade credit refers to the credit that customers get from supplier of goods in the normal course of business The company is able to get the benefit of the services without paying for the same for immediately, thus getting the finance for working capital purposes. This may apply to salaries wages, telephone expenses etc. Inter-corporate Deposits: It indicates the amount of funds borrowed by one company from another company, usually both the companies being under the same management Commercial Papers: Banks: (a) Non-Fund Based Lending (1) (2) (1) (2) (3) (4) (5) Bank Guarantees Letter of Credit Loan Cash credit Bills Purchased/discounted Working Capital Term Loans Packing Credit. It is an unsecured promissory note issued at discount.

(b) Fund-Based Lending


Banks provide credit on the basis of the following modes of security. 1) HYPOTHECATION: Under this mode of security, the banks provide credit to borrowers against the security of movable property, usually inventory of goods. The goods hypothecated, however continues to be in the possession of the owner of these goods (i.e. borrowers). 2) PLEDGE: Pledge, as a mode of security, is different from hypothecation in that, in the former unlike the later, the goods that are offered as security are transferred to the physical position of the lender. 3) LIEN: The term Lien refers to the right of a party to retain goods belonging to another party until the debt due to him is paid. Lien can be of two types: Particular Lien: Particular Lien is of a right to retain goods until a claim pertaining to these goods is fully paid. General Lien: This Lien can be applied till all due of the claimant are paid. Banks enjoy general lien. 4) MORTGAGE: It is the transfer of interest in specific immovable property for securing the payment of money advanced. 5) CHARGE: Where immovable property of one person is by the act of properties or by the operation of the law made security for the payment of money to another and the transaction does not amount to mortgage, the latter person is said to have a charge on the property and the provision of simple mortgage will apply to such a charge. At RSWM security given to the banks is in the form of Hypothecation


Working Capital Operating Cycle:

The WC Cycle starts with the purchase of raw materials and ends with the realization of cash from the sale of finished products. It plays an important part in determining WC requirements: longer the period of this cycle, larger is the requirement of WC. Various phase involved in WC operating cycle are as follows: 1) Acquisition of resources: It companies of 2) Purchase of raw materials: Payment of raw material to raw-material suppliers after the credit period allowed by them. Manufacture of the product: 3) 4) Conversion of raw material to work in progress. Conversion of work in progress to finished goods.

Sale of Finished goods. Realization of cash from debtors after the credit period allowed to them.

Operating Cycle

Receivables + Cost

Raw Material + Cost

Finished Goods + Cost

Stock in Process + Cost



Accounts Payable period: This is the period from the day of acquisition of raw material to the payment of raw materials. In other it is the credit period allowed to the organization by raw material suppliers.


Cash Cycle: The period from the day of payment for raw material purchased till the realization of cash against sales. Cash Cycle = WC Operating Cycle Accounts Payable Period


Inventory Period: The period is beginning from the day of receipt of raw materials in the factory till the day of dispatch of finished goods.


Accounts Receivable Period: The period beginning from day of dispatch of finished goods to the buyer and ending on the day of realization of cash against sales.


Operating Cycle: The time that elapses between the purchase of raw materials and the collection of cash for sales is referred to as operating cycle. Operating Cycle = Inventory Period + Accounts Receivable Period.


There are two concepts of operating cycle. 1) 2) Gross operating cycle period Net operating period.

GROSS OPERATING CYCLE PERIOD: The successive segments of the operating cycle are: 1) 2) 3) 4) Raw material storage period. Conversion period. Finished goods storage period. Average Collection period. The total duration of the entire segment mentioned above is known as gross operating period.


CASE-I In case the company sells its products for cash then the segment of average collection period will disappear from the gross operating cycle period and to that extent the total duration of the cycle gets reduced. CASH-II In case advance payments are to be made for procuring materials, the operating cycle period increases. NET OPERATING CYCLE PERIOD: When the average payment period of the company to its suppliers is deducted from the gross operating cycle period the resultant period is called net operating cycle period or simply operating cycle. It becomes obvious that the shorter the duration of operating cycle period, the faster will be the transformation of current assets into cash. The operating cycle approach is quite useful in: Managing Controlling and Forecasting working capital.



The operating cycle (working capital cycle) consists of the following event, which continues through out the life of business. 1) Conversion of cash into raw materials. 2) Conversion of raw materials into work-in-progress. 3) Conversion of work-in-progress into finished stock. 4) Conversion of finished stocks into accounts receivables through sale and 5) Conversion of accounts receivables into cash. The duration of the operating cycle for the purpose of estimating working capital is equal to the sum of the duration of each of above said events, less the credit period allowed by the suppliers. In the form of an equation, the operating cycle process can be expressed as follows: Operating cycle = R + W + F + D C Where, R = Raw material and stores storage period. W = Work-in-Progress period. F = Finished goods storage period. D = Debtors collection period C = Credit payment period. The various components of operating cycle may be calculated as: Raw Material Work-in Progress holding period Finished goods storage period Debtors collection period Credit payment period = = = = = Average stock of raw material Average cost of production per day Average W-I-P inventory Average cost of production per day Average stock of finished goods Average cost of goods sold per day Average book debts Average sales per day Average trade creditors Average purchase per day


The importance of working capital management cannot be over-emphasized in view of the time and energy spent by company management on such decision. For any future corrective action analysis of past performance of the firm on the working capital front is essential. This requires knowledge and use of certain tools and techniques that may help management to spot out problem areas for future action. Among many such analytical tools. Ratio analysis is a simple but effective tool available to the management. Working capital management, is concerned with maintaining an adequate amount of working capital, proper balance of current assets vis--vis non-current assets in the asset structure and a reasonable mix of short term and long-term sources in the financial structure of the firm. Ratio analysis can be used by management as a tool to verify the level and composition of working capital held by management in the business as against its operations, the extent of liquidity present in its asset structures, well as financial structure and the efficiency with which working capital is being used in the business. In other words, management can employ ratios to analyze three facts of working capital management, namely, liquidity and its structural health. To analyze the level of current assets, current liabilities held and working capital position of RSWM Banswara various ratios are used. These ratios when compared with the ratios of past years show the improvement and financial strength achieved by the company. The company is constantly refining its working capital management process and reducing cost and risk.


Chapter 4



RSWM LTD. BANSWARA (RAJ.) Assessment of Working Capital

(Rs. In Lakhs) Particulars Current Assets: Inventory Sundry Debtors Cash and Bank Balances Other Current Assets Loans & Advances (A) Total Current Assets Current Liabilities Provision Working Capital Loans (B) Total Current Liabilities (A-B) Net Increase/ Decrease in Working Capital 2007-2008 4605.62 2372.83 75.98 1092.39 279.18 8495 959.99 72.72 4636.70 5669.41 2756.59 2008-2009 4868.82 2279.98 14.04 935.56 385.05 8483.45 1170.12 0.00 3480.89 4651.01 4865.91 2009-10 4487.42 2788.93 17.23 995.72 196.10 8485.42 981.17 76.22 4506.13 5563.52 2921.9

The net working capital is increasing every year. It shows that every year increase in current assets is greater than increase in current liabilities and it shows that the company has sufficient fund to meet its short-term obligation as they become due. In year 2008-2009 current assets and current liabilities both are decreased but still net working capital was increased, this is due to the % change in C.A. is less then % change in C.L.



(Rs. In Lakhs)
S. Particulars No. 1. Raw Material & Stores Storage Period (R) Opening Balance of Raw Material Closing Balance of Raw Material Average Stock of Raw Material (a) Raw Material Consumed p.a. Average Raw Material Consumed/day (b) R= a/b (Days) 2007-08 2555.21 2984.56 2769.89 16601.6 45.48 61 2008-09 2984.56 3510.24 3247.40 20290.0 6 55.59 58 2009-10 3510.24 2899.00 3204.62 22280.96 60.77 53

S. No. 2.

Particulars Work in Progress Holding Period (W) Opening Balance of W I P Closing Balance of W I P Average W I P Inventory (a) Cost of Production Average Cost of Production/day (b) W= a/b (Days)

2007-08 391.14 418.12 404.63 4897.05 13.41 30

2008-09 418.12 529.44 473.78 5499.03 15.06 31

2009-10 529.44 655.82 592.63 5831.11 247.27 37

S. No. 3.

Particulars Finished Goods Storage Period (F) Opening Balance of Finished Goods Closing Balance of Finished Goods Average Stock of Finished Goods (a) Cost of Sales/ Goods Average Cost of Goods Sales/day (b) F= a/b (Days)

2007-08 702.30 922.04 812.17 7783.17 21.32 38

2008-09 922.04 581.40 751.72 9480.81 25.97 29

2009-10 581.4 720.50 650.95 10952.85 28.9 37


S. No. 4.

Particulars Debtors Collection Period (D) Opening Debtors Closing Debtors Average Debtors (a) Sales Average Sales/day (b) D= a/b (Days)

2007-08 3016.82 4018.48 3517.65 25343.00 69.43 51

2008-09 4018.48 5985.40 5001.94 30601.5 1 83.84 60

2009-10 5985.40 7781.52 6883.46 36303.09 99.46 69

S. No. 5.

Particulars Creditors Payment Period (C) Opening Creditors Closing Creditors Average Creditors (a) Total Purchases Average Credit Purchases /day (b) C= a/b (Days)



2009-10 64.32 121.03 92.68 22600.65 61.92 2

30.45 52.34 52.34 64.32 41.40 58.33 18312.16 20207.98 50.17 55.36 1 1

S. No. *

Particulars Operating Cycle Analysis Raw Material & Stores Storage Period (R) Work in Progress Holding Period (W) Finished Goods Storage Period (F) Debtors Collection Period (D) Creditors Payment Period (C) Operating Cycle Period (R+W+F+D-C) in Days

2007-08 49 24 44 51 (1) 167

2008-09 61 19 38 60 (1) 177

2009-10 58 19 29 69 (2) 173

Raw material and storage period is slightly less in comparison to previous years. Working in progress period is almost same as compare to the last year, and company has achieved success in constantly reducing the finished goods inventory, it shows the efficient management of the company. Creditor collection period is increased by one day and debtors collection period is increasing every year, which can be dangerous for the company. This highly needs attention.



(Rs. In Lakhs)
S. Particulars No. 1 LIQUIDITY RATIOS : A. a) b) B. a) b) c) d) C. a) b) 2. A. a) b) Current Ratio :Current Assets Current Liabilities * Current Ratio (a/b) Liquid Ratio :Current Assets Inventory Prepaid Expenses Current Liabilities * Liquid Ratio [(a b c)/d] Cash Ratio: Cash Current Liabilities * Cash Ratio (a/b) ACTIVITY RATIOS: Inventory Turnover Ratio (Times): Cost of Goods Sold Average Stock *Inventory Turnover Ratio (a/b) Debtors Turnover Ratio (Times): Annual Credit Sales Average Debtors Average Bills Receivables *Debtors Turnover Ratio [a/(b+c)] Receivable Collection Period (365/DTR) Working Capital Turnover Ratio :Net Sales Working Capital * Working Capital Turnover Ratio (a/b) Current Assets Turnover Ratio :Cost of Goods Sold Current Assets 32563.15 4724.58 6.86 27527.64 4191.17 6.57 14.04 4653.34 0.30 75.98 5669.41 1.34 31.03.2010 31.03.2009

9519.25 4653.34 2.05:1 9519.25 4843.53 0.72 4653.34 1:1

10103.68 5669.41 1.78:1 10103.68 4605.62 50.58 5669.41 0.96:1

B. a) b) c)

36303.09 2326.41 4557.06 5.27 69 Days 36303.09 4865.91 7.46

30601.51 1956.46 3045.49 6.12 60Days 30601.51 4434.21 6.90

C. D. a) b)

E. a) b)

32563.15 9519.25

27527.64 10103.68


* Current Assets Turnover Ratio (a/b) F. a) b) G. a) b) H. a) b) 3. A. a) b) Fixed Assets Turnover Ratio :Net Sales Fixed Assets * Fixed Assets Turnover Ratio (a/b) Total Assets Turnover Ratio :Net Sales Total Assets * Total Assets Turnover Ratio (a/b) Capital Employed Turnover Ratio :Net Sales Capital Employed * C.E.TOR (a/b) STRUCTURAL RATIOS: Current Assets To Total Assets: Current Assets Total Assets * Current Assets To Total Assets (a/b) Current Liabilities to Total Liabi. : Current Liabilities Total Liabilities * C L To T L (a/b) Cash To Current Assets: Cash Current Assets * Cash To Current Assets (a/b) Receivables to Current Assets: Receivables Current Assets * Receivables to Current Assets (a/b) Inventory to Current Assets :Inventory Current Assets * Inventory to Current Assets (a/b) PROFITABILITY RATIOS : Profit Margin :-



36303.09 13597.61 2.67 36303.09 23116.86 1.57

30601.51 11974.17 2.56 30601.51 22077.85 1.39

36303.09 18463.52 1.97

30601.51 16408.44 1.86

9519.25 23116.86 0.41

10103.68 22077.85 0.46

B. a) b) C. a) b) D. a) b)

4653.34 26766.79 0.17 14.04 9519.25 0.001 5501.54 9519.25 0.58

5669.41 26651.78 0.21 75.98 10103.68 0.008 3612.57 10103.68 0.36

E. a) b) 4. A.

4843.53 9519.25 0.51

4605.62 10103.68 0.46


a) b) B. a) b) 5. a) b)

Profit Before Interest & Tax Net Sales * Profit Margin Ratio [(a/b)*100] Return on Investment (ROI) :Profit Before Interest & Tax Total Investment * ROI [(a/b)*100] SOLVENCY RATIO :Total Assets Total Debts * Solvency Ratio (a/b)

3739.94 36303.09 10.30% 3739.94 23116.86 16.18% 23116.86 15514.56 1.49

3073.87 30601.51 10.04% 3073.87 22077.85 13.92% 22077.85 15114.56 1.46


-: LIQUIDITY RATIOS :3 2.5 2 1.5 1 0.5 0 2007-08 2008-09

1.1 2.33 2.05 1.78 1.34 0.96 1 0.3 2.62

Current Ratio Liquid Ratio Cash Ratio


Current & Quick Ratios of 2007-08 is increased from 2008-09, whereas Cash Ratio is decreasing every year.

-: ACTIVITY RATIOS :8 7 6 5 4 3 2 1 0 2007-08 2008-09 2009-10

6.99 7.20 6.95 6.57 6.12 6.90 6.86 7.46


Inventory Turnover Ratio Debtors Turnover Ratio Working Capital Ratio

Increases in Inventory Turnover Ratio & the Working Capital Turnover Ratio as compare to last years, whereas Debtors Turnover Ratio is decreasing every year.


-: ACTIVITY RATIOS :3.5 3 2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10

1.37 1.57 1.29 2.24 3.42 3.23 2.72 2.56 2.67

Current Assets Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio

Current Assets Turnover Ratio, Fixed Assets Turnover Ratio & Total Assets Turnover Ratios of 2009-10, are increased from last years.

-: PROFITABILITY RATIO :18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2007-08 2008-09 2009-10
8.42 11.53 10.04 10.30 16.18 13.92

Profit Margin


Profitability ratios like profit margin and return on investment are increasing every year, which is good for firm.


-: SOLVENCY RATIO :1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 Solvency ratio of the firm is under control and increasing decimal wise yearly.
1.49 1.46 1.53


Chapter 5



ANALYSIS OF FINDINGS OF VARIOUS CALCULATIONS:1) Assessments of Working Capital:Since, the Working Capital of RSWM Banswara is increasing every year but the Current Assets & Current Liabilities are decreasing from the last year, these is due to following reasons: In Current Assets, Inventory & Loans & Advances are increases from the last years. But Other Current Assets & Cash & Bank balance is decreases, specially there is a drastically change in Cash & Bank Balance. If we see the figures of Cash & Bank in Balance-Sheet, we can find that there is increase in Cash in hand & Saving a/c of the company, but decrease in fixed deposits of the firm in 2009-2010 from Rs. 70.40 lakhs to Rs. 7.12 Lakhs. All these Cash are invested in the Fixed Assets or Inventory of the firm and this is happening every year. This shows that company is running at the high risk. So company should increase its cash & bank balance for good liquidity. Current Liabilities was also decreased from 5669.41 to 4643.34 in 20092010, this is due to the no provision made in the year 2009-2010 & also the low Working Capital loans. If we see the changes we find that Current Assets & Current Liabilities of 2008-2009 is increased from 2007-2008. Such a volatility in current assets & current liabilities indicates poor working capital management of the company and it must be controlled, other wise it must be harmful in future for the company.

2) Ratio Analysis: Current Ratio measures short term solvency of the company. Current Ratio of 2009-10 is more when compared to 2008-2009 and equal to its ideal ratio i.e. 2:1, which clearly indicates that is good for firms ability to meet current obligation.


Cash Ratio is decreases due to the less bank balance of the company in every year. These is not a good indication for the company is future & provides the high risk for company. Increase in inventory turnover and decrease in debtors turnover ratio is due to sluggishness in the market. Average collection period is increase year by year. Company should try to reduce the collection period days to utilize its working capital operating cycle. Working capital turnover Ratio is increasing which shows that working capital is more active i.e. it is supportive, comparatively higher level of production sales is present. Assets turnover ratios are showing improvement in the year under review, which reflects management efficiency. Structural ratios need attention, current assets to total assets has reduced. Cash to current assets is also reduced year by year, which can be harmful for the liquidity position of the firm and working capital requirement. There is also increase in receivables and inventory level.



Demand of blended yarn will increase as the production of cotton is (limited attraction of PV is replacing cotton, great share in exports one of the biggest earners). Won SRTEPC highest export award for PV yarn exports it was also accorded golden trading house status. Experienced & enthusiastic marketing team. Strong sales depots & marketing offices at Mumbai, Delhi, Bhilwara, Ludhiana, Ahemadabad. Brand Reputation Global Marketing LNJ Bhilwara group is famous in textiles in all over the world. Well-equipped R&D SQC lab. Modern machinery with latest techniques. Not depended for power & water RSWM Banswara has its own power generation plant & presently there are about 20000 surplus units of power is available. The daily requirement of power for weaving project is only 93111 units per day. Water is also available in plenty at companys own campus & presently company has adequate water storage capacity. Wide product range & flexibility in production according to requirement of market. RSWM Banswara manufacturers various type of yarn of different counts & blends. All the units are connected through V-SAT Gulabpura, Mumbai, Delhi, and Indore & Rishabdev. The company has a great share in exports, one of the biggest earners. Quality conscious approach as per ISO product & TQM gulabpura unit was the first India composite textile unit to be specially in the European in US market. certified with ISO 9002 1 st September 1993, ISO certificate is necessary to penetrate in the export market



Banswara is not connected through railway line & condition of roads is also poor so there is an infrastructure problem. Skill labour is not available at Banswara. Purchase Raw Material from one typed of organization only.

OPPORTUNITIES: After starting weaving project, Rajasthan spinning & weaving mills Ltd. Banswara may further go for forward integration in garments sector, as people in domestic market are gradually moving towards ready-made garments. To develop & improve working environment of processing by using EcoFriendly methods. The company can rush into retail business. Strategic alliances: Tie-ups with global manufacturers & brands for technology & market. Tilt towards ready-made. India can become a major player in the textile export market at a global market at a global level given the declining share of south-east Asian countries in this niche market & rising wages in ASEAN region, wiping out their competitive edge. RSWM may be innovating new product using different types of yarn & fiber like lyre & tennel. Increased export demand is expected from planning out of capacities in developed world. Efficiency can increase with the help of IT & ERP.


Post-MFA as on January-1, 2007, the world trade in textile & clothing will be fully liberalized. It can capture a large market share if it provides quality product as reasonable price. Market share of India is world trade of textile is only 2.8% therefore, another advantage that India could have is that for countries which are not the member of WTO, imposing countries will have obligation to proceed with removal of quota restriction. This is especially important with respect to China, Taiwan, who accounts for 32% of world trade in textile, but are still not a member of WTO.

THREATS: Today textile industry is planning through in unpredicted recession. The reason for that is supply is more than demand. Cheap imports textiles from China, that is increasing free trade & competition. Removal of quotas after 2007. Changing trend in textile industry, changing requirement as people now preferring ready-made garments. Polyester Viscose is a substitute of cotton & is made from wood pulp & its supply is also limited.


Chapter 6




Improved co-ordination: Better co-ordination among purchase, production, marketing finance department and effective communication will help in achieving greater efficiency in working capital management. Prompt payment by customers: Prompt payment by customers can be ensured by prompt billing. What the customers has to pay and the period of payment should be notified accurately and in advance. The use of mechanical device for billing along with the enclosure of a selfaddressed return envelope will speed up the payment by customers. Efficient inventory production management: Another strategy is to increase the inventory turnover, avoiding stock-outs, Le., and shortage of stock. This can be done in the following way: Increasing the raw materials turnover. Decreasing the production cycle. Increasing the finished goods turnover. Discounting policy should be liberalized by giving more cash discount to the customers. Adopting of changing nouns: Company should benchmark with global competitors and should use ideas like Just-in-Time (JIT) to improve inn~ntoll11 management. And 14 Sigma would prove to be more effective in improving quality and 100% defects free finished products. Concentration Banking would help to speed up the cash collection. Active disposal of obsolete, surplus inventories: Efforts should be made to dispose obsolete and surplus inventories at reasonable and profitable price under a buy back arrangement with suppliers to avoid cost of charging it to profit & loss A/c. To increase the cash: RSWM Banswara, should increase the cash level to reduce the risk of it in future, if company has low cash it is difficult to work in future for more effectively. Since the cash ratio is decreasing year by year.


Chapter 7



RSWM Banswasra is one of the most leading companies of LNJ Bhilwara Group. It has proper resources to manage its production cycle. All the departments of RSWM Banswara are well coordinated with each other. It has its customers in both global and domestic market. RSWM has the latest technology for the production. The SQC and CPPC departments are also strong. RSWM has policies like Environment Policy & Quality Policy. It has a good brand image and good brands. RSWM has also dad considerable success with major modernization schemes involving almost total replacement of outdated equipments & production methods, achieving capacity utilization. Also, RSWM has carried out many engineering & maintenance improvements, resulting in lower operating costs. In order to conclude, it can be said that Working Capital Management is effective only through proper blend of Cash Management, Receivables Management, Inventory Management & Payables Management. Companys policy regarding management of all these are clean set. Company keeps its position secure in both Debtors & Creditors dealings. The profit & turnover of the company is increasing every year. The structural health of Working Capital is improving continuously. It is a prosperous, growing firm which would attain heights in coming years.





BOOKS:1) I.M. Pandey, Financial Management, 9th Edition, Vikas Publishing House, New Delhi.2004. 2) M.Y. Khan & P.K. Jain, Financial Management, 4th Edition, Tata McGraw-Hill, New Delhi, 2004. 3) MS-41 Working Capital Management (IGNU Study Material), Young Printing Press, New Delhi, 1997. .

WEB SITES :1) 2)

JOURNALS :1) Textiles Magazines. 2) Company Annual Report.