Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
On
Re*(irement of t)e
Neetu Bhadoria
DECL"R"TION
! do hereby de"lare that the #ro$e"t entitled 2Working Capital Management3 i% an authenti" or& de'eloped by me at () Tyre and !ndu%trie% *td. under the guidan"e of Mr. #+,-../ G0#T, %ubmitted in partial fulfillment of the re1uirement% for the a ard of the degree of Ma%ter of 2u%ine%% ,dmini%tration by the #un$ab Te"hni"al 0ni'er%ity, (alandhar (#un$ab), from the *o"al Centre The City College, G alior ! al%o de"lare that, any or all "ontent% in"orporated in thi% #ro$e"t ha'e not been %ubmitted in any form for the a ard of any degree or diploma of any other in%titution or uni'er%ity.
"CKNOWLED5EMENT
!t i% a great %en%e of %ati%fa"tion and a matter of pri'ilege to me to INDUSTRIES LTD !"NMORE TYRE #L"NT or& at JK TYRE "ND
(H+D), (.). Tyre% 2anmore for pro'iding me the opportunity to undergo training in the
e%teemed organi4ation. 0nder %u"h a ni"e en'ironment, %y%temati" ta%& management of thi% di'i%ion pro'ided me ith mu"h de%ired training e3perien"e needed for future.
My %pe"ial than&% to
Mr. #ra'een
Gupta
2anmore ho a""epted me a% a trainee in hi% group and helping in the pro$e"t% ith ord% of
en"ouragement and ha% %ho n full "onfiden"e in my abilitie%. ! ill be failing in my obligation if to not than&% my family for their %upport and en"ouragement.
%Neet( !)a+oria&
#RE'"CE
,% an integral of the "our%e "urri"ulum, all M2, %tudent% are re1uired to undergo %ummer training in an indu%try or organi4ation. The main ob$e"ti'e% are to %upplement Student7% theoreti"al &no ledge ith an e3po%ure to the or&ing en'ironment of an organi4ation. ! ha'e "ho%en to a"ti'itie% of the "ompany. !t ha% been my be%t effort to pre%ent thi% report in the %y%temati" manner to ma&e dry material "ome ali'e. or& ith () T8+. ,/D !/D0ST+!.S *TD., 2anmore (Di%t. Morena, M#) hi"h pro'ided me ith an in%ight of elfare
NEETU !6"DORI"
Content%
Company #rofile
JK T7re .'er %in"e it% in"eption it ha% been () Tyre:% belief in the 'alue of te"hnologi"al %uperiority that ha% made it gro by leap% and bound%. Thi% di'i%ion produ"e% and %ell% tyre% and tube% under the brand name ;() Tyre; for Tru"&, 2u%e%, #a%%enger Car%, (eep%, *ight Commer"ial -ehi"le%, Multi 0tility -ehi"le% and Tra"tor%.
The "ompany pioneered Steel +adial Te"hnology in !ndia in <=>> and "ontinue% to be the indu%try leader in the +adial %egment in !ndia. () Tyre i% the only Tyre Manufa"turer in the "ountry to produ"e high performan"e :T: 6 :H: ?rated %teel radial tyre%.
() Tyre ha% "on%"iou%ly follo ed a poli"y of "ontinuou%ly moderni4ing and e3panding it% tyre manufa"utring fa"ilitie% to retain it% edge in the mar&et pla"e. Our "u%tomer ba%e "o'er% 'irtually the entire Original .1uipment Manufa"turer% (O.M%) in !ndia together ith +epla"ement Mar&et for four heeler 'ehi"le%, Defen"e and State Tran%port 0nit%. 2e%ide% !ndia, e ha'e a orld ide "u%tomer ba%e in o'er @A "ountrie% a"ro%% all B "ontinent%. To &eep pa"e ith the mar&et demand a% ell a% te"hnologi"al leader%hip in !ndian mar&et, (.).
!ndu%trie% a"1uired -i&rant Tyre% *imited, My%ore in <==>. (.). !ndu%trie% and -i&rant Tyre% *imited are the only tyre "ompanie% in !ndia to ha'e re"ei'ed all three !SO =CC<, DS =CCC and !SO <@CC< "ertifi"ate%. Thi% indeed i% a true refle"tion of our "ommitment to %y%tem oriented approa"h. The "ompany ha% a te"hni"al "ollaboration ith ME% Continental ,G, Germany, hi"h i% among the top fi'e tyre manufa"turer% in the orld to &eep pa"e ith late%t te"hnologi"al de'elopment%. To %tay at the forefront of te"hnologi"al ad'an"ement% a %tate of art +e%ear"h 6 De'elopment Centre, H,S.T+!, a% %et up, hi"h remain% the ner'e "entre for pro'iding "utting edge te"hnology. !n a %hort %pan of time it ha% emerged a% the <>th large%t tyre manufa"turer in the orld an a"hie'ement in it%elf. Fith three plant% lo"ated in +a$a%than, Madhya #rade%h and )arnata&a, () Tyre i% the large%t manufa"turer of tru"& and bu% tyre% in !ndia. The tru"& and bu% tyre% produ"ed a""ount for nearly >@G of the total tyre bu%ine%% in !ndia, thu% gi'ing () Tyre an undi%puted po%ition. ,dditionally, () Tyre i% the only manufa"turer of tru"&E bu% %teel radial tyre%, and the %e"ond large%t manufa"turer of @? heeler tyre% in the "ountry. ,l%o, () Tyre i% the large%t e3ported tyre brand from !ndia. !t a% a arded the C,#.H!*:% Highe%t .3port , ard for <==>?=> by 5!.O. !t en$oy% preferred premium brand %tatu% in Tru"& 2ia% mar&et in 0S, and a"ro%% many mar&et% in ,fri"a, Middle .a%t and South .a%t ,%ia.
Hi%tory of () Tyre% CORE 8"LUES4 () Organi4ation ha% been a forerunner in the e"onomi" and %o"ial ad'an"ement of !ndia. !t al ay% aimed at "reating $ob opportunitie% for a multitude of "ountrymen and to pro'ide high 1uality produ"t%. !t ha% %tri'en to ma&e !ndia %elf reliant by pioneering the produ"tion of a number of indu%trial and "on%umer produ"t%, by adopting the late%t te"hnology a% ell a% de'eloping it% o n &no ?ho . !t ha% al%o underta&en indu%trial 'enture% in %e'eral other "ountrie%. () Organi4ation i% an a%%o"iation of indu%trial and "ommer"ial "ompanie% and "haritable tru%t%. !t% member "ompanie%, employing nearly AC,CCC per%on% are engaged in the manufa"ture of a 'ariety of produ"t% and in di'er%e field% of "ommer"e. Tru%t% are de'oted to promoting indu%trial, te"hni"al and medi"al re%ear"h, edu"ation, religiou% 'alue% and pro'iding better li'ing and re"reational fa"ilitie%. Fith the %pirit of %o"ial "on%"iou%ne%% uppermo%t in mind, (.). Organi4ation i% "ommitted to the "au%e of human ad'an"ement.
<=II
5ir%t in !ndia to manufa"ture Cali"o #rint%? (uggilal )amlapat Cotton Spinning and Fea'ing Mill% Co. *td., )anpur. 5ir%t in !ndia to manufa"ture %teel 2ailing Hoop% for $ute and "otton and to ma&e the "ountry %elf %uffi"ient by meeting the entire demand?(.). !ron 6 Steel Co. *td., )anpur. 5ir%t in !ndia to produ"e ,luminium 'irgin Metal from !ndian 2au3ite?,luminium Corporation of !ndia *td., (ay&aynagar.
<=@C
<=@@
<=@=
<=A=
<=BC
5ir%t to manufa"ture a Hydrauli"ally Operated Cane Cru%hing Mill for )hand%ari Sugar #lant and "ompleted <CC ton plant?(.). !ron 6 Steel Co. *td., )anpur.
<=B<
5ir%t in orld to %et up a plant for produ"tion of Hydro%ulphite of %oda by Sodium ,malgam #ro"e%%? (.). Chemi"al% *td., 2ombay.
<=BA
5ir%t to produ"e Sodium Sulpho3ylate 5ormaldehyde (+angolite C of 5ormo%ul) in !ndia ? (.). Chemi"al% *td., 2ombay
<=BK
5ir%t to manufa"ture T- Set% in !ndia? (.). .le"troni"%, )anpur. 5ir%t to manufa"ture Metalli" Cop% for Syntheti" 5ilament yarn indu%trie% in !ndia? Synte3 tube or&%, )anpur.
<=B=
5ir%t to manufa"ture ,"ryli" 5ibre%? (.). Syntheti"% *td. )ota 5ir%t to de'elop differentially Dyeable /ylon? (.). Syntheti"% *td., )ota
<=>I
5ir%t in !ndia to li"en%e Syntheti" 5ibre Te"hnology to third party a% ell a% the fir%t to manufa"ture Syntheti" 5ibre Ma"hinery 5ibrete"h .ngineer% 6 Manufa"turer%, Dadri.
<=>B
5ir%t in !ndia to produ"e %teel belted +adial Tyre% for pa%%enger "ar%, tru"&% and bu%e%? (.). Tyre #lant, )an&roli.
<=KC
5ir%t in orld to ma&e Steel 2elted +adial Tyre% for three heeler%? (.). Tyre #lant, )an&roli.
<=K@
5ir%t in !ndia to produ"e hite "ement through dry pro"e%%? (.). Fhite "ement. Gotan.
<=KA
5ir%t in !ndia to produ"e Cathoni" Dyeable #olye%ter 5ibre? (.). Syntheti"% *td., )ota. 5ir%t in !ndia to produ"e /ylon Tyre Cord ba%ed on Spin Dra Te"hnology? (.). Syntheti"% *td., )ota.
<=K=
5ir%t in !ndia to produ"e magneti" tape% ith "obalt te"hnology (.). magneti"%, Sura$pur.
<==<
2anmore Tyre #lant (2T#) %et?up ith a "apa"ity of A.> la"% tyre% p.a.
<==L
<==@
!ndia:% fir%t T?+ated tyre laun"hed 2anmore Tyre #lant (2T#) "ro%%ed <CC T#D.
<==A
Mer"ede% 2en4 *aun"hed on () %teel radial% 5ir%t tyre manufa"turer in the orld to get !SO =CC<
<==B
!ndia:% fir%t dual "onta"t high tra"tion %teel radial? a1ua%oni" laun"hed. !ntrodu"ed %teel heel%.
<==>
, arded the /ational .3port , ard for =B?=>. -i&rant Tyre% (-T*) a"1uired. !ndia:% fir%t H rated tyre laun"hed. Only Tyre manufa"turer to get :.: Mar& "ertifi"ation. H,S.T+! be"ame the fir%t re%ear"h in%titute in ,%ia to get !SO =CCL.
<==K
5ir%t tyre manufa"turer in the orld to get DS =CCC. , arded C,#.H!*:% highe%t e3port a ard for <==>?=K.
<===
Synergy ith -T* in pro"urement, mar&eting and produ"tion fle3ibility. Completion of %tate of the art moderni%ation of tru"& radial%. () Tyre% ran&ed <Bth large%t Tyre Company in the orld. !S, ? <@CCC a""redition for en'ironment 6 %afety.
LCCC
LCC<
+e"ie'ed C,#.H!* a ard. (.). !ndu%trie% re"ie'ed 5OC0S *,C e3port a ard for the year <===?LCCC. Commendation Certifi"ate of C!! .3im. !!nd /ational Go?)arting Champion%hip% held.
JK T7re9$ No 1 market po$ition !n hat i% being "on%idered a% a landmar& de"i%ion in the highly "ompetiti'e !ndian tyre indu%try, the
,d'erti%ing Standard% Coun"il of !ndia (,SC!) ha% upheld () !ndu%trie% *td:% "laim of being !ndia:% /o < tyre manufa"turer in the four? heeler tyre %egment, reaffirming ():% leader%hip po%ition in the mar&et. .3pre%%ing hi% happine%% o'er ,SC!:% $udgement, () Tyre mar&eting dire"tor T ) 2aner$ee %ay%: ::Thi% i% a fabulou% e3ample of hy all of u% need to ha'e faith in bodie% li&e ,SC!. Fe belie'e that the pro"e%% of %elf? or&ing for both "ompanie% and agen"ie%. Fe al%o hope that thi% ould regulation in !ndian ad'erti%ing i%
en"ourage 'ariou% player% to bring %uperior te"hnology and "on%umer %er'i"e %tandard% and "laim leader%hip in a more healthier and "ompetiti'e manner.:: The "a%e in a% %tarted hen fe "ompetitor% filed a "omplaint ith ,SC! again%t () Tyre:% print ad'erti%ement,
hi"h () Tyre announ"ed it% numero uno po%ition in the four? heeler tyre %egment, 1uoting produ"tion
figure% "ompiled by ,utomoti'e Tyre Manufa"turer ,%%o"iation and other authenti" indu%try %our"e%. 2ut the "ompetitor% "ontradi"ted the "laim, %tating the fa"t that mar&et figure% from a "ompany:% annual report %hould be u%ed a% authenti" data to "laim one:% leader%hip, not the produ"tion figure%. 2ut ,SC! "on%idered the "a%e at the Con%umer Complaint% Coun"il on LI May LCCL and upheld () Tyre:% "ontention that produ"tion figure%, a% "ompiled by authenti" indu%try %our"e% and u%ed by () Tyre to "laim it% leader%hip, i% a 'alid and appli"able "ompari%on platform. Hen"e, () Tyre:% "laim a% /o < tyre manufa"turer in !ndia i% a perfe"tly 'alid and "orre"t %tatement. Thi% al%o refle"t% ,SC!:% agreement to () Tyre:% 'ie point that figure%, a% %tated in the one:% annual report, "ould a"tually be mi%leading and "ould in"lude re'enue% from non?tyre?related bu%ine%%e% al%o. () Tyre, pioneer% of radial te"hnology in !ndia, i% today !ndia:% large%t manufa"turer of tyre% in the four? heel %egment, in"luding tyre% for tru"&% and bu%e%, *C-%, pa%%enger "ar%, $eep%, tra"tor%, ,D-% and OT+%. ,fter LA year% of pioneering orld?"la%% te"hnologie% in !ndia, () Tyre ha% re"ently laun"hed the "ountry:% fir%t e"o? friendly "oloured tyre% a% ell a% %teel?belted tra"tor rear radial%.
Mi$$ion & 8i$ion 8i$ion4 To be among%t the mo%t admire "ompanie% in !ndia "ommitted to be e3"ellen"e Mi$$ion4 a. 2e a "u%tomer ob%e%%ed "ompany b. ". d. e. f. /o.< Tyre brand in !ndia Deli'er enhan"ed 'alue at all %ta&eholder% Mo%t profitable Tyre Company in !ndia .nhan"e global pre%en"e through a"1ui%ition Moti'ated and "ommitted team de'elopment for high performan"e organi4ation
Marketing Strateg7
Strategi" thin&ing i% &ey to the e'olution of %u""e%%ful mar&eting %trategie% of () tyre. Thi% in'ol'e% the follo ing analy%e%: i. ii. iii. i'. '. Un+er$tan+ing market$4 Strategi" per%pe"ti'e of the mar&et re1uire% %&ilful analy%i% of the trend and ho they affe"t the mar&et %i4e and demand for the firm7% produ"t. 'in+ing market ni,)e$4 #ri"e, %er'i"e, "on'enien"e and te"hnology are %ome of the ni"he% in !ndian mar&et. #ro+(,t an+ $er:i,e planning4 ,naly%i% of the "u%tomer7% promotion of the brand, both of the firm and "ompetitor%, be%ide% an analy%i% of the %ituation in hi"h the "u%tomer u%e% the produ"t. Di$tri;(tion4 Stru"tural "hange% in in'entory management, mobile di%tribution are %ome of the &ey fa"tor% that are going to affe"t the di%tribution pro"e%% in the !ndian mar&et. Managing for re$(lt4 Fith pre%%ure on "o%t%, pri"e%, and margin%, mar&eter% ill ha'e to ma&e effe"ti'e utili4ation of e'ery rupee %pent in mar&eting. Market opport(nit7 of JK4 !dentifi"ation of mar&et opportunity i% "riti"al before the management of affirm ta&e% a de"i%ion to laun"h or di'er%ify in any produ"t area. Thi% in'ol'e% analy%i% of the follo ing: Si4e of the mar&et Mar&eting %trategie% and the e3tent and 1uality of %er'i"e% rendered by other firm in the indu%try. Mar&et programmed re1uired to %ati%fy mar&et ant% !dentifi"ation of &ey %u""e%% fa"tor% in an indu%try and lin&ing them to a firm7% %trength% and ea&ne%%
Mar&et opportunity a. Si4e of the mar&et b. Ho ell the mar&et i% %er'ed ". #ro%pe"ti'e in"he% d. Mar&eting mi3 re1uired to %u""eed e. Core "ompeten"ie% re1uired
!ndu%try analy%i%
Competition analy%i%
Demand Condition %
Trade analy%i%
Market opportunity Si4e of the mar&et Ho ell the mar&et i% %er'ed #ro%pe"ti'e in"he% Mar&eting mi3 re1uired to %u""eed Core "ompeten"ie% re1uired
Si<e of t)e market4 Si4e% of the mar&et are.... Deman+ anal7$i$4 i% the "ore a%pe"t of mar&et opportunity.
Segmentation anal7$i$4 i% the pro"e%% of di'iding the mar&et into homogeneou% %ub unit%. In+($tr7 anal7$i$4 .ntry 2arrier%: High The entry barrier% are high for the tyre indu%try. !t i% a highly "apital inten%i'e indu%try. , plant ith an annual "apa"ity of <.A million "ro%%?ply tyre% "o%t% bet een +%. @,CCC and +%. A,CCC million. , %imiliar plant produ"ing radial tyre% "o%t% +%. K,CCC million.
2argaining #o er of the Supplier%: High !nter 5irm +i'alry: *o The tyre indu%try in !ndia i% fairly "on"entrated, ith the top eight "ompanie% a""ounting for more than KCG of the total produ"tion of tyre%
The tyre indu%try "on%ume% nearly ACG of the natural rubber produ"ed in the "ountry. The pri"e of natural rubber i% "ontrolled by +ubber Control 2oard and the dome%ti" pri"e% of natural rubber ha'e regi%tered a %ignifi"ant in"rea%e in re"ent time%.
O.M% ha'e total trol o'er pri"e%. !n , the O.M% fa"ed ith lining profitability e al%o redu"ed the mber of "omponent plier% to ma&e the ply "hain more "ient.
Threat of Sub%titute%: *o but !n"rea%ing During the 58LCCL, o'er <,<C,CCC pa%%enger "ar tyre% ere imported. Thi% "on%titute% o'er LG of total radial pa%%enger "ar tyre produ"tion in the "ountry. Ho e'er, ith the redu"tion of pea& "u%tom duty, the import of tyre% i% li&ely to in"rea%e. In+($tr7 "nal7$i$ 0 #orter9$ Mo+el Competitor anal7$i$4 analy%i% of "ompetition ho ell the mar&et i% %er'ed.
!t %ho % the po%ition of the firm at a "ertain point of time. !t i% "al"ulated on the ba%i% of balan"e %heet prepared at a %pe"ifi" date. !n thi% method there are t o type% of or&ing "apital. Gro%% or&ing "apital /et or&ing "apital
Generally the importan"e of 'ariable or&ing "apital i% more a"ute in bu%ine%% "on"ern ha'ing %ea%onal mar&et demand%. -ariable or temporary or&ing "apital may be further %ub? di'ided into (a) %ea%onal or&ing "apital and (b) %pe"ial or&ing "apital. The additional or&ing "apital re1uired by a "on"ern to "arry out it% operating a"ti'itie% in bu%y %ea%on% of high mar&et demand% i% &no n a% %ea%onal or&ing "apital. 2u%ine%%e% hi"h mo%tly ha'e %ea%onal demand% of their produ"t% li&e i"e? "ream, "old drin&%, ool and li&ely produ"t% manufa"turing "on"ern may need huge amount of %ea%onal or&ing "apital. !n other bu%ine%% "on"ern% too the mar&et may ri%e to the pea& in %ome parti"ular time period. So in all type% of bu%ine%% a portion of or&ing "apital may be pre%er'ed for meeting %ea%onal need%. On the other hand, the portion of or&ing "apital that i% needed by a "on"ern to meet the e3traordinary re1uirement% of %pe"ial %ituation% i% &no n a% %pe"ial or&ing "apital. Thi% i% "alled %pe"ial or&ing "apital be"au%e it i% needed in %pe"ial %ituation% and not in normal "ir"um%tan"e%.
of ra
The ade1uate re%er'e of or&ing "apital indi"ate% the good %ol'en"y po%ition of the "on"ern and help% it to get loan from the mar&et at fa'orable term%. The ade1uate %to"& of or&ing "apital ma&e% it po%%ible for a "on"ern to pur"ha%e the trading good% in
"a%h and "a%h pur"ha%e al ay% "arrie% the benefit of getting "a%h di%"ount. , %trong or&ing "apital ba%e i% probably the only remedy to o'er"ome the odd %ituation% li&e dull material% and other "omponent% in "a%e of any emergen"y, %udden
, bu%ine%% "on"ern "an e3ploit the mar&et opportunitie% ith the help of ade1uate or&ing "apital. The regular flo of ade1uate or&ing "apital ma&e% po%%ible effi"ient u%e of fi3ed a%%et%, redu"e%
a%tage, en%ure% 1ui"& replying of "urrent a%%et%, and e%tabli%h a ell? tuned or&ing en'ironment.
, 1ui"& rotation of
and in"rea%e% produ"tion and %ale%. The "ombined effe"t of all the%e fa'orably add to the profitability of the "on"ern The ade1uate amount of or&ing "apital and it% 1ui"& rotation in"rea%e% profit. The rate of di'idend of
the %hareholder% al%o in"rea%e% a% a re%ult of %u"h in"rea%e in profit. Suffi"ient or&ing "apital help% in re%ear"h and de'elopment to fa"e the pre%ent era of "ut throat
The total or&ing "apital re1uirement i% determined by a ide 'ariety of fa"tor%. !t %hould be, ho e'er, noted that the%e fa"tor% affe"t different enterpri%e% differently. They al%o 'ary from time to time. !n general, the follo ing fa"tor% are in'ol'ed in a proper a%%e%%ment of the 1uantum of or&ing "apital re1uired:?
#RODUCTION CYCLE4
,nother fa"tor hi"h ha% a bearing on the 1uantum of or&ing "apital i% the produ"tion "y"le. The term Mprodu"tion or manufa"turing "y"le9 refer% to the time in'ol'ed in the manufa"ture of good%. !t "o'er% the time? %pan bet een the pro"urement of ra material% and the "ompletion of the manufa"turing pro"e%% leading to the produ"tion of fini%hed good%. To %u%tain %u"h a"ti'itie% the need of or&ing "apital i% ob'iou%.
!USINESS CYCLE4
The or&ing "apital re1uirement% are al%o determined by the nature of the bu%ine%% "y"le. The 'ariation% in bu%ine%% "ondition% may be in t o dire"tion%: (i) (ii) up ard pha%e hen boom "ondition% pre'ail do n ard pha%e hen e"onomi" a"ti'ity i% mar&ed by a de"line. During the up% ing of the bu%ine%% a"ti'ity the need of or&ing "apital i% more a% oppo%ed to the do n ard pha%e of the bu%ine%%.
#RODUCTION #OLICY4
The re1uirement of or&ing "apital al%o depend% on the produ"tion poli"y of the firm. !n manufa"turing "on"ern% ha'ing mo%tly %ea%onal demand for the produ"t the produ"tion poli"y i% a %ignifi"ant determinant of or&ing "apital
DI8IDEND #OLICY4
The payment of di'idend "on%ume% "a%h re%our"e% and, thereby, affe"t% or&ing "apital to that e3tent. Con'er%ely, if the firm doe% not pay di'idend but retain% the profit%, or&ing "apital ill in"rea%e.
DE#RECI"TION #OLICY4
Depre"iation poli"y al%o e3ert% an influen"e on the 1uantum of or&ing "apital. Depre"iation "harge% do not in'ol'e any "a%h outflo . The effe"t of depre"iation poli"y on or&ing "apital i%, therefore indire"t. ,t DS# depre"iation i% pro'ided on %traight line method at the rate% %pe"ified in %"hedule? H!- to the "ompanie% a"t, <=AB. Ho e'er here the hi%tori"al "o%t of the depre"iable a%%et undergoe% a "hange, the depre"iation on the re'i%ed amorti4ed depre"iable amount i% pro'ided pro%pe"ti'ely o'er the re%idual u%eful life of the a%%et ba%ed on the rate% %pe"ified in %"hedule? H!- to the "ompanie% a"t, <=AB. Depre"iation on a%%et% in%talledE di%po%ed off during the year i% pro'ided ith re%pe"t to the month of additionE di%po%al thereof.
CURRENT "SSETS4
The li%t of "urrent a%%et% "ompri%e% in'entorie% (in"luding ra material%, or&?in?progre%% and fini%hed good% and %pare%), %undry debtor% in"luding re"ei'able%, readily reali4able %e"uritie% and ta3 re%er'e "ertifi"ate%, %hort? term in'e%tment%, a""rued in"ome%, prepaid e3pen%e% (not in the nature of deferred "harge), "a%h at ban&, and "a%h in hand. !n Durgapur Steel #lant "urrent a%%et% are: !n'entorie% (%tore% 6 %pare%, ra material%, %emi?fini%hed produ"t%) Sundry debtor% Ca%h 6 ban& balan"e% !ntere%t re"ei'ableEa""rued *oan% 6 ad'an"e% et".
CURRENT LI"!ILITIES4
The li%t of liabilitie% in"lude% trade "reditor%, a""ount% payable, out%tanding or a""rued e3pen%e%, ban& o'erdraft, out%tanding liabilitie%, %hort?term loan% and borro ing% and "ertain obligation% in"luding different pro'i%ion%, i.e., pro'i%ion for ta3ation, propo%ed di'idend et". !n Durgapur Steel #lant "urrent liabilitie% are: Sundry "reditor% ,d'an"e% from "u%tomer% Se"urity depo%it Other liabilitie% et".
The length of time for hi"h ra material% remain in %tore% before they are i%%ued to produ"tion. or&?in?progre%%, i.e., the time ta&en for "on'er%ion of ra material%
The a'erage period of "redit allo ed to "u%tomer%. The amount of "a%h re1uired to pay day?to?day e3pen%e% of the bu%ine%%. The amount of "a%h re1uired for ad'an"e payment% if any. The a'erage period of "redit to be allo ed by %upplier%.
SOURCE O' WORKIN5 C"#IT"L 'OR JK TYRE #L"NT " #ermanent OR 'I=ED <. Share% L. Debenture% I. #ubli" Depo%it% @. #loughing 2a"& of profit% (+etained .arning)
A. *oan% from 5inan"ial !n%titution ! Temporar7 Or 8aria;le <. Commer"ial 2an&% L. !ndigenou% 2an&er% I. Trade Creditor% @. !n%tallment% Credit A. ,d'an"e !n%titutuion% B. ,""ount% +e"ei'able CreditE 5a"toring >. ,""rued .3pen%e% K. Commer"ial #aper
",i+0Te$t Ratio
NH time%
Similar to the Current +atio but ta&e% a""ount of the fa"t that it may ta&e time to "on'ert in'entory into "a%h.
NH time%
, Higher For&ing Capital +atio mean% lo er in'e%tment in or&ing "apital and better profitability.
Sale%E!n'entory
NH day%
On a'erage, you turn o'er the 'alue of your entire %to"& e'ery 3 day%. 8ou may need to brea& thi% do n into produ"t group% for effe"ti'e %to"& management.
Sale%ECurrent ,%%et%
NH time%
@ A T6E D"N5ERS O' E=CESSI8E WORKIN5 C"#IT"L <. !t re%ult% in unne"e%%ary a""umulation of in'entorie% thu% "han"e% of in'entory mi%handling a%te theft and lo%%e% in"rea%e%.
L. !t i% an indi"ation of defe"ti'e "redit poli"y and %la"& "olle"tion period. Con%e1uently higher in"iden"e of bad debt% re%ult%, hi"h ad'er%ely effe"t degenerated into management "o pla"ement, hi"h degenerated into managerial ineffi"ient. I. .3"e%%i'e effi"ien"y. @. Tenden"ie% of a""umulating in'entorie% to ma&e %pe"ulation profit% gro thi% may tend to ma&e di'idend poli"y liberal and diffi"ult to "ope %pe"ulati'e profit%. IN"DE?U"TE WORKIN5 C"#TI"L <. !t %tage% gro th and be"ome diffi"ult for the firm to underta&en profitable pro$e"t% for non? a'ailability of or&ing "apital fund%. L. !t be"ome% diffi"ult to implement operating plan% and a"hie'e the firm% profit target. I. Operating ineffi"ien"ie% "reep in "ommitment%. @. 5i3ed a%%et% are not effi"iently utili4ed for the la"& of profitability ould deteriorate. A. #au"ity of et". B. The firm lo%%e% it% reputation hen it i% not in po%ition to honor it% %hort term obligation a% or&ing "apital fund% render% the firm unable to a'ail attra"ti'e "redit opportunitie% or&ing "apital fund% thu% the firm% hen it be"ome% diffi"ult e'en to meet day?to?day ith in future hen the firm i% unable to ma&e or&ing "apital ma&e% management "ompla"ent, hi"h degenerate% into managerial
re%ult the firm fa"e% tight "redit term%. Thu%, enlightened management %hould therefore maintain% a right amount of or&ing "apital on a "ontinuou% ba%i% hi"h help% to de'elop the organi4ation effe"ti'ely and effi"iently. @ 1. ROLE O' 'IN"NCI"L M"N"5ER IN WORKIN5 C"#IT"L M"N"5EMENT4
<. For&ing "apital management re1uire% mu%t of the finan"e manger time a% it repre%ent a large po%ition of in'e%tment i% a%%et%. L. For&ing "apital management re1uire% mu"h of the finan"e management time a% it repre%ent larger po%ition of in'e%tment in a%%et%. I. ,"tion %hould be ta&en to "urtail unne"e%%ary in'e%tment in "urrent a%%et%. @. ,ll pre"aution% %hould be ta&en for the effe"ti'e and effi"ient management of or&ing "apital. A. *arger firm% ha'e to manage their "urrent a%%et% and "urrent liabilitie% 'ery "arefully and %hould %ee that the or& %hould be done properly in order to a"hie'e predetermined organi4ation goal%. B. The finan"ial manger %hould pay %pe"ial attention to the management% of "urrent a%%et% on "ontinuing ba%i%.
C,*C0*,T!O/ Current ratioN Current ,%%et% E Current *iabilitie% D.SC+!#T!O/ LCCK LCC= B<II LIKK L.AB
5!/D!/GS <. Current +atio in"rea%ing in the year LCCA O CB ith re%pe"t to LCCB?C> L. Dui"& +atio i% %ho ing in"rea%ing trend% in the year LCCA?CB ith re%pe"t to year LCCB?C> I. ,% Current +atio 1ui"& +atio and "a%h ratio i% al%o in"rea%ing in the year LCCA?CB ith re%pe"t to year LCCB?C>