Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
1. Introduction
2. Objectives
3. Company Profile
4. Research Methodology
5. Data Collection
6. Data Analysis
7. Conclusion
8. Suggestion
9. Limitation
10.
Bibliography
INTRODUCTION:
A study of working capital is of major importance to internal and external analysis
because of its close relationship to current operations of the business. The term working capital
originated at the time when most industries were closely related to agriculture. The amount of
fund required for operating need varies from time to time in every business. But certain amount
of assets in the form of working capital is always required if the business has to carry out its
function efficiently and without a break.
The requirement of finance in business arises mainly due to two factors,
acquisition of fixed assets and provision of working capital. Fixed assets such as land, funds,
broadly known as working capital, buildings, plant and machinery, equipments, etc. are essential
for carrying on sales and production. The working capital is necessary to meet day to day
revenue expenses like purchase of materials, wage payment, meeting overhead expenses, etc.
Working capital keeps the business going. In short
CURRENT LIABILITY
Cash In Hand
Sundry Creditors
Cash At Bank
Bills Payable
Sundry Debtors
Bank Overdraft
Bills Receivable
Stock/ Inventories
Outstanding Expenses
Dividend Payable
Prepaid Expenses
DEFINITION:
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The fixed assets are required to be retained in the business over a period of time and they
yield the returns over their life, whereas the current assets loose their identity over a short
period of time; say one year.
In case of current assets, it is always necessary to strike a proper balance between the
liquidity and profitability principles which is not the case of the fixed assets. Eg. If the
size of the current assets is large, it is always beneficial from the liquidity point of view
as it ensures smooth and fluent business operations. Sufficient raw material is always to
cater to the production needs, sufficient finished goods are available to cater to any kind
of demand of customers, liberal credit period can be offered to the customers to improve
the sales, sufficient cash is available to pay off the creditors and so on. However,
investments in current assets more than ideally required, it affects the profitability as it
may not be able to yield sufficient rate of return on investment. On the other hand, if the
size of current assets is to small, it always involves the risk of frequent stock out, inability
of the company to pay its dues in time.
Working capital management is concerned with the problem arising out of the
attempts to manage current assets, current liabilities and inter-relationship between them. The
intention is not to maximize the investment of working capital nor is it to minimize the same.
The intention is to have optimum investment in working capital.
Adequacy of working capital creates a feeling of security and confidence:The proprietor of a concern or the officials of the company who can go home at night and can
sleep in peace and comfort without worrying about how wages and salaries are going to be
met the next day enjoy the position in business that can come only as a result of efficient
management that has provided adequate working capital.
Adequacy of working capital is must for maintaining solvency and to
Easy availability of cash discount:- Advantage may be taken of cash discounts in the
purchase of raw materials or merchandise, resulting in a saving in interest charges on the
amount of working capital employed.
Easy loans from the bank:- Banks are also favorably inclined in granting seasonal
loans if the business is adequately financed in the first place and has good credit standing and
trade reputation. In order to borrow from banks, a business must keep itself in fairly liquid
condition. Thus the adequacy of working capital contributes a lot in raising the credit
standing of company.
Facility of off- season purchasing:- Only concerns with adequate working capital can
take advantages of purchasing the raw materials, coal and other factor supplies in a sharply
advancing market, or in off/seasons periods, resulting in substantial savings where storage
costs are not prohibitive.
Quick and steady return to the investor:- Everybody excepts quick return in his
investments in the form of a withdrawal (in the case of an owner), or dividend (in the case of
a share holder). In the case of insufficiency of working capital the profit to be retained in the
business, but the case of their adequacy, ample dividend can be paid to the shareholder.
sales. This time span can be split into the following parts comprising the chronological sequence
of events:
Time spend in conversion of finished goods into debtors and bills receivables
through sales.
Time spend in conversion of finished goods into debtors into bills receivables
through sales.
Finally, the time taken to convert debtors and bills receivables into cash.
Credit
Debtors
Debtors
Finished Goods
Work -inprogress
Raw Material
Wages and
Overheads
Work
In
Progress
Receivable
s
Finished
Goods
Raw
Material
Cash/Bank
The cycle shows that the current assets are acquired either for resale or for conversion into
finished goods which are converted into cash. Thus, once the cycle is complete, the current assets
become cash. In other words, the current assets are self-liquidating in nature.
Working Capital
Fixed Working Capital
Regular
Reserve Margin
Seasonal
Special
capital; it is
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ii)
Reserve margin is the excess over the need for regular working capital that
should be provided for contingencies that arise at unstated periods. The
contingencies include (a) rising price, which may make advisable to increase
inventories (b) business depression, which may arise the amount of cash
required to ride out usually stagnant periods (c) strikes, fires and
unexpectedly serve competition, which use up extra supplies of cash (d)
special operation such as experiments with products or with methods of
distribution war contracts, to supply new business and the like, which can be
undertaken only if sufficient funds are available which in many cases mean
the survival of business.
2. Variable Working Capital: The variable working capital changes with the
volume of business. In many lines of business (e.g., Gur or Khandsari making an
fur industry) operations are highly seasonal and as a result, working capital
requirement vary greatly during the year. The capital required to meet the
distinction between permanent and variable working capital should be raised in
same way as fixed capital is procured, through a permanent investment of the
owner or through long-term borrowing. As business expands, this regular capital
will necessarily expand..
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OBJECTIVES
To study the accounting system followed by Sunflag Iron and Steel Co. Ltd.
To study accounts maintained through SAP(system application & product for data
processing
To study regarding all the documents required for various transactions and the need of
it
To understand the flow of funds through working capital in such a way that the firm
would always be able to meet its financial obligations when due.
To understand the adequate working capital maintained for the operations of the
business
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Sunflag Iron and Steel Co. Ltd. is a prestigious unit of the SUN FLAG GROUP. It has set up a
state-of-art integrated plant at Bhandara, India. The plant has a capacity to produce 360,000
tonnes per annum of high quality special steel using liquid pig iron and sponge iron as basic
inputs.
The plant comprises 2,62,000 tonnes per annum Direct Reduction Plants, to produce sponge iron
for captive consumption in the Steel Melting Shop. This shop comprises a 50/60 tonnes ultra
high power Electric Arc Furnace with Eccentric bottom arrangement; Ladle refining furnace,
Tank Degassing and Bloom/Billet double radius caster with AMLC & EMS and T type tundish.
The billets produced at the steel melting shop are rolled at the Mannesmann Demag Designed
ultra modern 20 stand Continous mill. This mill has a dual fuel type walking hearth reheating
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furnace, quick roll-changing facilities, a 65 metres long walk and wait type modern cooling bed
and above all computerised process control linking and controlling the various stages.
Within a short period of its inception in 1989, the SUNFLAG STEEL has established itself as a
major global force. This modern complex pulsating with world-class technology, expert human
resources and a commitment to excellence, has created a distinct niche in Alloy Steel, Stainless
Steel & Microalloyed Steel and attained the position of market leader in the segment. Today
SUNFLAG STEEL has also embarked on an export thrust and is regularly receiving prestigious
orders from Japan and many other Far East, Afro-Asian and Middle-East countries.
The ASM commenced production in the year 1997, enabling Sunflag to expand their product
range upto 90 mm dia Rounds; 75 mm RCS. A captive Power Plant of 30 MW capacity has
already been comissioned using waste gases.
The Blooming Mill, state of an art commenced Production in the year 2012 with wide range of
rolling covering from 75 Rcs / Round to 160 Rcs / Round in all category of steel.
Sunflag is Actively engaged in Pollution Control and accrediated by EMS Award.
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RESEARCH METHODOLOGY
Financial research is a systematic design, collection and analysis of data & findings
relevant to specific aspect of the company.
The data was collected through financial statement like:
Annual Report
Balance Sheet
Profit & Loss A/C
Other Articles
Along with the above sources the personal interview with official of the company also
revealed some useful information required foot he project report.
The calculation were done for three consecutive year via, 2010-2011, 2011-2012, 20122013
Working capital analysis itself is a techniques to asses the financial surrounding of the
company. Methods like ratio analysis and balance sheet analysis also helps to study the financial
condition of the organization.
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Mar '13
Mar '12
Mar '11
Mar '10
12 mths
12 mths
12 mths
12 mths
162.20
162.20
162.20
162.20
162.20
162.20
162.20
162.20
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
319.37
331.87
312.50
251.40
0.00
0.00
0.00
0.00
Networth
481.57
494.07
474.70
413.60
Secured Loans
345.88
448.55
338.43
184.32
76.39
82.56
98.65
144.50
Reserves
Revaluation Reserves
Unsecured Loans
Total Debt
422.27
531.11
437.08
328.82
Total Liabilities
903.84
1,025.18
911.78
742.42
Gross Block
Mar '13
Mar '12
Mar '11
Mar '10
12 mths
12 mths
12 mths
12 mths
1,300.77
1,010.94
896.82
883.30
650.27
594.01
551.85
512.36
Net Block
650.50
416.93
344.97
370.94
7.67
236.25
197.36
28.35
326.93
7.65
7.58
7.56
0.00
391.84
299.03
254.89
155.62
149.60
140.90
121.69
53.40
52.68
5.45
6.05
209.02
594.12
445.38
382.63
163.45
229.34
150.78
183.09
0.00
0.00
29.10
23.59
372.47
823.46
625.26
589.31
0.00
0.00
0.00
0.00
392.22
346.61
192.22
191.09
61.51
112.50
71.17
62.64
453.73
459.11
263.39
253.73
-81.26
364.35
361.87
335.58
0.00
0.00
0.00
0.00
Total Assets
903.84
1,025.18
911.78
742.43
Contingent Liabilities
253.11
211.44
157.15
304.27
29.69
30.46
29.27
25.50
Sundry Debtors
Cash and Bank Balance
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Miscellaneous Expenses
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(Rs. In Crore)
Particular
A. CURRENT ASSETS
2013 (Mar)
2012 (Mar)
2011 (Mar)
Inventories
61.42
45.80
27.39
Sundry Debtors
23.63
15.56
16.02
1.02
2.88
3.30
11.46
10.83
5.56
97.53
75.07
52.27
55.62
43.61
31.42
2.89
1.98
3.13
58.51
44.59
34.55
39.02
30.48
17.72
B. CURRENT LIABILITIES
Current Liability
Provisions
Total Current Liability
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1) Ratio Analysis of Working Capital of Asoka Leyland Company Industries from 20122013 and 2011.
The Ratio of Gross Working Capital to Asset Determined the relationship between gross
working capital to total asset. Gross working capital Represent total amount of investment in
current asset. Total asset include current asset and Fixed Asset.
Gross Working Capital
Gross W. C. to total Assets =
x 100
Total Assets
Year 2013 :
58.39
x 100
104.15
=
56.06%
Year 2012 :
34.83
x 100
92.33
=
37.72%
Year 2011 :
26.73
x 100
67.32
=
39.71%
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2013
2012
2011
Gross Working Capital to total asset ratio varied between 39.71 to 56.06 during three
years period of review.
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2) CURRENT RATIO :.
Current Assets
Current Ratio =
Current Liability
Year 2013 :
92.53
=
58.51
=
1.67%
Year 2012 :
75.07
=
44.59
=
1.68%
Year 2011 :
52.27
34.55
=
1.51%
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Current Ratio :
2013
2012
2011
INTERPRETATION :Ideal Current Ratio is 2:1 Thus from the above we can say that company was almost in its ideal
position in the year 2012-2013, but current ratio in 2011-2012 has decrease.
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x 100
Fixed Asset
Year 2012 :
58.39
x 100
14.78
=
395.06%
Year 2011 :
34.83
x 100
11.17
=
311.82%
Year 2010 :
26.73
x 100
08.78
=
304.44%
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2013
a)
2012
2011
Gross Working capital to Fixed Asset Ratio is decrease row 304.44 in 2010 to 395.06 in
2012.
b)
The fixed asset were continually decrees from 0.78 crore in 2011 Rs. 395.06 crore in
2013.
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x 100
Net Working Capital
Year 2013 :
22.08
x 100
39.02
=
56.59%
Year 2012 :
22.45
x 100
30.48
=
73.65%
Year 2011:
24.06
x 100
17.72
=
135.78%
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2013
2012
2011
29
x 100
Net Working Capital
Year 2013 :
61.42
x 100
39.02
=
157.41%
Year 2012 :
45.80
x 100
30.48
=
150.26%
Year 2011 :
27.39
x 100
17.72
=
154.57%
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2013
2012
2011
The Ratio of inventories to Net Working Capital varied between 154.57 to 157.41 during the
three years review period the inventory to Net Working Capital ratio is highest of 157.41.
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x 100
Current Asset
Year 2013 :
61.42
x 100
97.53
=
62.98%
Year 2012 :
45.80
x 100
75.07
=
61.00%
Year 2011 :
27.39
x 100
52.27
=
52.40%
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DATA ANALYSIS
The data serve as the bases or raw material for analysis. Data collection is a term
used to describe a process of preparing and collecting data - for example as part of a process
improvement or similar project. The purpose of data collection is to obtain information to keep
on record, to make decisions about important issues, to pass information on to others. Primarily,
data is collected to provide information regarding a specific topic.
There are mainly 2 types of data:-
1.
PRIMARY DATA This includes the data collected directly by the researcher. They
are those which are collected afresh and for the first time and thus happen to be original
in character.
2.
your business, you can implement only the software you need to solve your unique business
challenges in your own time and without expensive upgrades.
ADVANTAGES OF SAP
Drive strategy and growth and improve the quality of business decisions for all employees,
bridging analysis and planning with strategic execution
Manage risk and compliance through embedded controls and real-time monitoring and
exception-based analysis
Optimize working capital to accelerate cash flows, manage liquidity, and improve control
over cash balances
The following are the sources from where I have collected my data:
PRIMARY DATA: SAP has been planned to use from 2010-2011 but it has started utilizing in almost
full swing in BSIL from 2012-2013
SAP is one of the ERP. But It is the leader of all ERP
There are different modules for different department such as sales, purchase,
finance etc.
SAP is very useful and has various advantages such as time saving, minimum
risk, no need for repeated entries
When raw materials are purchased, the purchase department makes entries in
journal through SAP and that entry automatically is also seen in financial books as
well. thus there is no need for finance department to make repeated entries
IN CASE OF INPUT:35
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CONCLUSION
Working Capital Management involves deciding upon the amount and composition of
current assets and how to finance these assets. The greater the relative proportion of liquid assets,
the less the risk of running out of all cash, all other things being equal. However the profitability
also will be less. Similarly, the larger the proportion of long-term funds to finance the firm, the
lesser the risk of cash insolvency all other things being equal. However, the profit of the firm is
likely to be less. Thus, while making decisions about composition and the extent of current assets
and financing the structure the firm has to resolve the trade off between the risk and profitability.
Therefore in the working capital management , it is very much crucial to consider the assets and
financial mixes.
Decisions relating to working capital and short term financing are referred to as
working capital management. These involve managing the relationship between a firm's shortterm assets and its short-term liabilities. The goal of working capital management is to ensure
that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both
maturing short-term debt and upcoming operational expenses.
Decision criteria
By definition, working capital management entails short term decisions - generally, relating to
the next one year period - which are "reversible".
One measure of cash flow is provided by the cash conversion cycle - the net number of
days from the outlay of cash for raw material to receiving payment from the customer. As
a management tool, this metric makes explicit the inter-relatedness of decisions relating
to inventories, accounts receivable and payable, and cash.
In this context, the most useful measure of profitability is Return on capital (ROC). The
result is shown as a percentage, determined by dividing relevant income for the 12
months by capital employed; Return on equity (ROE) shows this result for the firm's
shareholders.
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SUGGESTION
Sunflag Iron & Steel Industries should trust to update the technology
Sunflag Iron & Steel Industries should constructed of full resources utilization.
Sunflag Iron & Steel Industries should constructed on there look product and price
consistency.
Sunflag Iron & Steel Industries should relia on cost efficiency and strong financial
resources.
Operating expenses can be reduced by making effective operating system.
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LIMITATIONS
1)
2)
3)
4)
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BIBLOGRAPHY
Books:Financial Management- G. Sudarshan Reddy
Management accounting- R. S. N. Pillai AND Bagavathi
Financial management- Rustogi
Financial Management P. V. Ratnam
Financial Management P. V. Kulkarni
ANNUAL REPORT
ARTICALS
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