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Project Report
On
THE STUDY OF WORKING CAPITAL MANAGEMENT IN
VAYUDOOT ROAD CARRIER PVT LTD PUNE
Submitted To
SAVITRIBAI PHULE PUNE UNIVERSITY
Submitted By
Ms. SHRUTIKA KAILAS KADU
2016-2018
CERTIFICATION
COMPANY CERTIFICATE
ACKNOWLEDGEMENT
It would be grateful on my part to go ahead with this report expressing my gratitude to all those
who have helped me in completion of my Project.
At the same time I am also highly grateful to all the employees who spend their valuable time
and help me in my project.
Finally I am thankful to my project guide Dr. REVATI DESHPANDE of JSPM’s, JSCOE who
help me in the step of my project. Without her guidance I could not have been completed my
project within the stipulated time. I also thanks to DR.A.N. GANBOTE SIR.
My whole hearted thanks to all other persons who directly or indirectly helped in completing my
project. I really derived immense benefit to all round exposure to various aspects during my
project work.
Sign :
DECLARATION
I hereby declare that the project entitled ‘working capital management’ for
Vayudoot Road Carrier being submitted by me at JSCOE-MBA, Hadapsar towards the
partial fulfillment of the requirement for the award of Degree of Master of Business
Administration (MBA). I hereby also declare that this Project work is my original work. The
matter embodied in this project report has not been submitted to any other Institution or
University for the award of any degree, diploma, certificate etc.
Place:........................................
Date:.........................................
INDEX
The project on Working Capital Management has been a very good experience. Every company
faces the problem of Working Capital Management in their day-to-day processes. An
organization’s cost reduced and the profits increased only if it is able to manage its Working
Capital efficiently. At the same time, the company can provide customer satisfaction and hence
can improve profitability.
This project is a sincere effort to study and analyze the Working Capital Management of
Vayudoot Road Carrier Pvt.Ltd. The project focused on making a financial overview of the
company by conducting a Working Capital analysis of VAYUDOOT ROAD CARRIER PVT
LTD for the year 2016-17 and Ratios & various components of working capital & format
emphasizing on Working Capital.
The internship is a bridge between the institute and the organization. This made me to be
involved in a project that helped me to employ my theoretical knowledge about the myriad and
fascinating facets of finance. Moreover, in the process I could contribute substantially to the
organization’s growth. The experience that I gathered over the past two months has certainly
provided the orientation, which I believe will help me in shouldering any responsibility in future.
CHAPTER 1
INTRODUCTION
1
CHAPTER 2
COMPANY PROFILE
Vayudoot is set to become a market leader in the Supply Chain System and Transportation
Industry in India & International market. Vayudoot offers Multi-Model Logistics Service,
Speed, Promptness and Accuracy as a supply chain partner for your supply chain needs.
Vayudoot Road Carrier Pvt. Ltd. Has over 25 years‟ experience in transportation business.
Vayudoot is all set to carve a niche for itself. Vayudoot deals with the other companies to
transport their goods. It also gets his brand image in logistic industry. Vayudoot achieved
many awards in his business carrier. Vayudoot Road Carriers Private Limited is a Private
incorporated on 13 April 2000. It is classified as Non-govt. Company and is registered at
Registrar of Companies, Pune. Its authorized share capital is Rs. 2,000,000 and its paid up
capital is Rs. 1,395,100
Email: vlpl_ho@vayudootlogistics.com
ashwani.s@vayudootlogistics.com
Board of Directors:
2
Directors: Mr.Ashwani Singhal.
Email: ashwani.s@vayudootlogistics.com
Mr.Arun Singhal.
Email: arun.s@vayudootlogistics.com
Mr.Abhay Agrawal.
Mr.Pawan Gupta
Email:-pawan.g@vayudootlogistics.com
Vayudoot Road Carriers Pvt. Ltd. provides services to some of the most respected and
best known companies in the World.
Below is a partial list:
PepsiCo India Holdings Pvt.
Ltd. (Frito Lays Division)
Manjushree Techno packs Ltd.
Godrej and Boyce Mfg. Co. Ltd.
Tata Motors Ltd.
United Breweries Ltd.
Balmer Lawrie Co. Ltd.
Samsung Electronics India.
3M Global
Whirlpool of India Ltd.
LG Electronics India Pvt. Ltd.
Hindustan Unilever Ltd.
3
2.3 TRANPORTATION
VAYUDOOT has set a huge base in Containerized movements across India, basically
in 32 Ft closed body containers, with a own fleet of 200 vehicles and 300+ containers
directly attached with us, applying across India
We have a dedicated fleet of own and attached 20 Ft closed body containers (Carrying
capacity of around 6 to 8.5 Tons), with services in West and South Indian Major
Cities.
4
2.5 FLEET MANAGEMENT AND CONSULTANCY:
We provide consultancy to fleet owners for cost reductions, Efficiency and Reduction in
down time etc.
With the motive to serve the Transport Industry we have got into Sales of Lubricants Oils and
Automotive parts to our Transport Trade partners in the lowest Cost possible in the industry
with the passing of the know-how for cost reductions and bringing in huge efficiencies
resulting in increased profits (This is offered through our Group Company M/S Accurate
Trading Co.).
5
Fleets Management:
and well managed Fleets of 370 quality containerized vehicles (owned 210
A strong
and
Attached with all types of vehicles with different capacity.
34 Ft Closed Body Containers (Single Axle) (300 Vehs)
(9 Ft width and 10.5 Ft Height, Carrying Capacity 6.5 to 7 Tons)
34 Ft Closed Body Containers (Multi Axle) (25 Vehs)
(9 Ft width and 10.5 Ft Height, Carrying Capacity 15 Tons)
20 Ft Closed Body Containers (45 Vehs)
(7.5 Ft width and 8 Ft Height, Carrying Capacity 7.5 to 8 Tons)
24 Ft Closed Body Containers (10 Vehs)
Daily Status Tracking of Every Consignment
and Pro-Active MIS
for Consignments ETD and Actual Delivery.
6
Good quality vehicles and 95% + On Time Delivery.
Branches:
Chennai, Bangalore, Trichy, Pondicherry, Hyderabad, Cochin, Hubli,
Mumbai, Bhiwandi, Goa, Delhi-Faridabad, Indore, Ahmadabad, Sonipat,
Kolkata.
Service Network: Jaipur, Punjab,
Nagpur, Raipur, Cuttack,
Vijayawada, Aurangabad, Nasik.
Annual Turnover (Group):
200 crores.
Our bankers:
CITI Bank Ltd, ICICI Bank Ltd
7
CHAPTER 3
3.1 OBJECTIIVE :
Study of the working capital management is important because unless the working capital is
managed effectively, monitored efficiently planed properly and reviewed periodically at
regular intervals to remove bottlenecks if any the company cannot earn profits and increase
its turnover. With this primary objective of the study, the following further objectives are
framed for a depth analysis.
1. To study the calculation of working capital of Vayudoot Road Carrier.
2. To analyze the liquidity position through various working capital related ratios.
4. To learn practical skill in the analysis of financial position of the company and to
8
3.2 SCOPE OF THE STUDY :
9
CHAPTER 4
THEORECTICAL BACKGROUND
The management of working capital is concerned with two problems that arise in
attempting to manage the current assets, current liabilities and the inter relationship that
asserts between them.
The basic goal is working capital management is to manage current assets and current
liabilities of a firm in such a way that a satisfactory of optimum level of working capital is
maintained i.e. it is neither inadequate nor excessive. This is so because both inadequate as
well as excessive working capital position is bad for business.
The capital of a business which is used in its day-by-day trading operations, calculated as the
current assets minus the current liabilities. Working capital is also called operating assets or
net current assets.
Definition
“ working capital refers to a firm‟s investment in short term assets, such as cash
amounts receivables, inventories”.
If the firm can forecast accurately the factors, which effect the working capital, the
investment in current assets, can be designed uniquely. When uncertainty characteristics the
above factors, as it usually does the investment in current assets cannot be specified uniquely.
In case of uncertainty, the outlay on current assets should consist of base component meant to
meet normal requirement and a safety component meant to cope with unusual requirement.
The safety component depends upon low conservative or aggressive in the current assets
10
policy of a firm. If the firm purchases a very conservative current asset policy it would carry
a high level of current assets in relation to sales. If a firm adopts a moderate current assets
policy it would carry moderate level of current assets in relation to sales, finally is a firm
follows a highly aggressive current assets policy, it would carry a low level of current assets
in relation to sales.
following current assets policy showing moderate level of current assets in relation to sales
as is evident from ratio analysis.
4.2.2. Determining a Short Term and Long Term Financing Mix for Financing of
current assets:-
There are three approaches in this regard, which are discussed below:
A
term financing
S
11
4.4 CONSERVATIVE APPROACH: -
In this approach there is more reliance on short term financing and even a part of
permanent current assets is financed from short-term finance.
E
Permanent current assets Long term financing
T
Fixed Assets
12
4.5. CLASSIFICATION OF WORKING CAPITAL
Types of working
capital
13
sufficient liquidity in the operations of the enterprise. The liquidity of a business firm is
measured by its ability to satisfy short term obligations as they become due. Net working
capital as a measure of liquidity is not very useful for comparing the performance of different
irms, but it is quite useful for internal control. The net working capital helps in comparing
the liquidity of the same firm overtime. For purpose of working capital management,
therefore, net working capital can be said to measure the liquidity of the firm. In other words,
the goal of working capital management is to manage the current assets and liabilities in such
a way that an acceptance level of net working capital is maintained.
Working capital consists with the two main components which describe as follow.
Current Assets:-
Current Assets are resources which are in cash or will soon be converted into cash in "the
1. Inventories:
Raw Material & Components
Work in process
Finished goods
2. Sundry Debtors
4. Investments
Current Liabilities:-
14
Current Liabilities are commitments which will soon require cash settlement in "the ordinary
course of business"
4. Bank Overdraft
5. Provision
Working capital for an industry is needed due to the time gap between the production of the
goods and their actual realization after sales. This gap is technically referred as the “Working
Capital Cycle” or „Operation cycle‟ of the business.
The concept of the operating cycle is based on the amount of the capital invested in fixed
assets is expected to be recovered after a long period of time. On the other hand, amount
15
blocked in current assets is expected to as recover as early as possible. The concept of
operating cycle is based on this aspect. The time period that is required from the time cash is
put in the business along with the other inputs and input like raw material are purchased with
the help of cash. The raw material is converted in to finished product and for this additional
cash is required.
The finished product is sold in to the market for cash; the pirating cycle is complete as cash is
recovered. On the other hand is sales are on the credit, sales are converted into debtors and
debtors are converted into cash.
16
CHAPTER 5
RESEARCH METHODOLOGY
Research in common parlances refers to search for knowledge. As the process of analysis the
financial statement is a thought provoking process, it is totally based on the secondary data
that is being obtained from the audited balance sheet of the division and then this data is
being processed using various techniques of analysis. Research methodology describes the
research procedure.
It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for,
when the unknown confronts us, we wonder & our inquisitiveness makes us probe &attain
full &fuller understanding of the unknown. This inquisitiveness is the mother of all
knowledge &the method, which man employs for obtaining the knowledge of whatever the
unknown, can be termed as research.
DEFINATION: - “A careful investigation or inquiry specially though search for a new facts.
In any branch of knowledge”
17
5.2 RESEARCH DESIGN :
Descriptive research & analytical procedure is used for describing the recent situations in the
organization and analytical research to analyze the results by using research tools.
DESCRIPTIVE RESEARCH:
Descriptive research, also known as statistical research, describes data and characteristics
about the population or phenomenon being studied. Descriptive research answers the
questions who, what, where, when and how...
Although the data description is factual, accurate and systematic, the research cannot describe
what caused a situation. Thus, Descriptive research cannot be used to create a causal
relationship, where one variable affects another. In other words, descriptive research can be
said to have a low requirement for internal validity.
In short descriptive research deals with everything that can be counted and studied. But
there are always restrictions to that. Your research must have an impact to the lives of the
people around you. For example,finding the most frequent disease that affects the children of
a town. The reader of the research will know what to do to prevent that disease thus, more
people will live a healthy life.
Sampling Size : 2015-2017 balance sheet and profit and loss account
18
5.4 DATA SOURCE & COLLECTION METHODS:
DATA
DISCUSSIONS OFFICE MANUALS
FINANCIAL
STATEMENT
WEB SITE
Data : Data is information that has been translated into a form that is more convenient to
Primary Data:-
The data collected by the research himself for finding solution of a particular problem
or situation is known as primary data.
Discussion with the employees of the department.
Discussion with the head of the department.
19
Secondary Data:-
Secondary data are those which have already been collected by someone else and which have
already been passed through the statistical process. The Secondary data consist of reality
available compendices already complied statistical statements. Secondary data consists of not
only published records and reports but also unpublished records.
20
CHAPTER 6
2015-16& 2016-17
Table no 6.1
21
Working Capital
30000000
25000000
20000000
15000000
Working Capital
10000000
5000000
0
2016 2017
Fig 6.1
Interpretation :
From the above chart we can determine that the working capital ratio of the VAYUDOOT
ROAD CARRIERS is increasing, for the year 2015-16 it was Rs.1,66,99,946 and for the year
2016-17 it is Rs.2,62,21,784. The working capital of company is increased by Rs.92,21,83.
22
6.2 WORKING CAPITAL TURNOVER RATIO
Working capital turnover ratio indicates the velocity of utilization of the net working capital.
This ratio indicates the number of times the working capital is turned over in the course of the
year. This ratio measures the efficiency with which the working cap[ital is used by the firm.
A higher ratio indicates efficient utilization of working capital and a low ratio indicates
otherwise. But a very high working capital turnover is not a good situation for any firm.
23
WORKING CAPITAL TURNOVER RATIO
40
35
30
25
20 WORKING CAPITAL
TURNOVER RATIO
15
10
0
2015-16 2016-17
Fig.6.2
Interpretation
A high working capital ratio indicates the effective utilization of working capital and low
working capital ratio indicates less utilization. For vayudoot road Carriers the ratio is not that
much satisfactory for the years 2016-17. It is (34.87) in 2015-16 and, (24.33) in years 2016-
17. Its is decreased by (10.54) in 2016-17.
24
6.3 CURRENT RATIO
Table no.6.3
25
CURRENT RATIO
3
2.5
1.5
CURRENT RATIO
0.5
0
2015-16 2016-17
Fig 6.3
Interpretation:
The current ratio of company has shown a remarkable increment, form the above table in
year 2015-16 it was (1.98) to 2016-17 (2.6). The ratio is increased in the year 2016-17 it is
increased to (0.62).Normally it is expected that the ratio should be 2:1 ,which indicates that
current asset should be twice as compared to the current liabilities.
26
6.4 GROSS PROFIT RATIO
Gross working capital is the sum of all of a company's current assets (assets that are
convertible to cash within a year or less). Gross working capital includes assets such as cash,
checking and savings account balances, accounts receivable, short-term investments,
inventory and marketable securities. From gross working capital, subtract the sum of all of a
company's current liabilities to get net working capital.
SALES
Table no 6.4
27
GROSS PROFIT RATIO
13.01
13
12.99
12.98
12.97
12.96
GROSS PROFIT RATIO
12.95
12.94
12.93
12.92
12.91
2015-16 2016-17
Fig 6.4
Interpretation
From the above table and chart we can analyze that the gross profit ratio of Vayudoot Road
carriers in the year 2016-17 it is decreased. For the year 2015-16 (13) to 2016-17 (12.94). It
is decreased to (0.06).
28
6.5 NET PROFIT RATIO
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining profit
after all costs of production, administration, and financing have been deducted from sales, and
income taxes recognized. As such, it is one of the best measures of the overall results of a firm,
especially when combined with an evaluation of how well it is using its working capital. The measure
is commonly reported on a trend line, to judge performance over time. It is also used to compare
the results of a business with its competitors.
SALES
Table no 6.5
29
NET PROFIT RATIO
3
2.5
1.5
NET PROFIT RATIO
1
0.5
0
2015-16 2016-17
Fig 6.5
Interpretation :
From the above chart we find out that in the year 2015-16 ratio was (2.28). It is increase in
the year 2016-17 that is (2.78). It is increased to (0.5).It means that the company become
financially sound. The company is in a better position to face any adverse situation arising in
future.
30
6.6 ASSET TURNOVER RATIO
Asset turnover ratio is the ratio of the value of a company‟s sales or revenues generated
relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator
of the efficiency with which a company is deploying its assets in generating revenue.
TOTAL ASEET
Table no 6.6
31
ASSET TURNOVER RATIO
3.895
3.89
3.885
3.88
3.87
3.865
3.86
2015-16 2016-17
Fig 6.6
Interpretation
From the above table and chart we find out that it follows increasing trend. In the year 2015-
16 ratio was (3.87) and in the 2016-17 ratio is (3.89). It is increased by (0.02).
32
6.7 FIXED ASSET TURNOVER RATIO
The fixed asset turnover ratio compares net sales to net fixed assets. The concept of the fixed asset
turnover ratio is most useful to an outside observer, who wants to know how well a business is
employing its assets to generate sales. A corporate insider has access to more detailed information.
about the usage of specific fixed assets, and so would be less inclined to employ this ratio about the
usage of specific fixed assets, and so would be less inclined to employ this ratio.
FIXED ASSET
Table no 6.7
33
FIXED ASSET TURNOVER RATIO
3
2.5
0.5
0
2015-16 2016-17
Fig 6.7
Interpretation:
If we analyze from the above table and chart we find that it follows increasing trend. In the
year 2015-16 fixed asset turnover ratio was (5.13), and in the year 2016-17 it is (5.40).It
increased to (0.17). That means there an improvement of earning capacity of business.
34
6.8 Return on asset
Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives an idea as to how efficient management is at using its assets to
generate earnings. Calculated by dividing a company's annual earnings by its total assets,
ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".
TOTAL ASSET
Table no.6.8
35
RETURN ON ASSET
12
10
6
RETURN ON ASSET
4
0
2015-16 2016-17
Fig 6.8
Interpretation
From the above chart we analyze that the ratio of return on asset in the year 2015-16 is
(8.81) and in the year 2016-17 the ratio has been increased that is (10.81). The ratio has been
increased to (1.99).
36
6.9 CURRET ASEET TO FIXED ASSET
The current assets to fixed assets ratio measures how many current assets are bought or utilized
through fixed assets. There's no specific agreed ratio on this.it measures the proportion between
the current assets and fixed assets the company acquires.
FIXED ASSET
Table no 6.9
37
CURRENT ASSET TO FIXED ASSET
0.37
0.36
0.35
0.34
0.33
0.32 CURRENT ASSET TO FIXED
0.31 ASSET
0.3
0.29
0.28
0.27
2015-16 2016-17
Fig 6.9
Interpretation
From the above table and graph we can analyze that the current asset to fixed asset ratio is
increasing in the year 2016-17. The ratio was (0.30) in the year 2015-16 and it is (0.36) in the
year 2016-17 its increased to (0.06).
38
FINDINGS
1 The working capital of vayudoot road carriers is increasing in the year 2016-17 there
may be several reasons for the changes in working capital , may be the changes in sale
or operating expenses, changes in technology. The company has been maintaining
sufficient amount of working capital.
2 The current ratio of company is increasing for the year 2016-17 it is increase by (0.62)
there for it shows the extent to which the current asset which are convertible in to cash
quickly. Current ratio of 2 times or 2:1 is considered to be satisfactory.
3 The company has good net profit ratio that means the company exercising good cost
control. The net profit ratio of the company for the year is 2015-16 is (2.28) and in the
year 2016-17 it is increased by(0.5) .
4 The working capital turnover ratio of the company is decreasing in the year 2016-17. It
is (34.87) in the year 2015-16 and (24.33) in the year 2016-17 it is decrease to (10.54)
its means that the company is not proper utilizing its working capital.
5 The return on asset ratio is increasing by (2.01) in the year 2016-17 it means that
investment are profitable to company.
6 The gross profit ratio of the company in the year 2015-16 is (13) and in the year 2016-
17 it is (12.94).It is decrease (0.06) in the 2016-17.The company was good margin in
year 2015-16.
7 A higher CA/FA ratio indicates a conservative current assets policy and a lower
CA/FA ratio means an aggressive current assets policy assuming other factors to be
constant. A conservative policy i.e. higher CA/FA ratio implies greater liquidity and
lower risk; while an aggressive policy i.e. lower CA/FA ratio indicates higher risk and
poor liquidity.
8 Asset turnover ratio of the company is increasing in the year 2016-17 by (0.02).
9 By analyze the two year data we find the CA TO FA Ratio in increasing pattern, we
can say that company is following the conservative policy to finance its short term
capital requirement.
10 The fixed asset are acquired basically for improving the earning capacity of the
business. The fixed asset turnover ratio of Vayudoot road carriers is increase in the
year 2016-17 by (0.27). It means that fixed asset turnover ratio of Vayudoot Road
Ratio indicates higher sales generated of investment in fixed asset.
39
SUGGESTION
The management of working capital plays a vital role in running of a successful business.
So, things should go with a proper understanding for managing cash, receivables. Vayudoot
Road Carrier Ltd. is managing its working capital in a good manner, but still there is some
scope for improvement in its management. This will ultimately improve the efficiency of its
operations. Following are few recommendations given to the company in achieving its
desired objective.
1. The working capital turnover ratio of the company is decrease in the year 2016-17
because the company is not utilizing its working capital properly.
2. current ratio is maintain at a satisfactory level. So that the company peruse this much
of current assets to meet the objective of the firm.
3. The company should train its work force properly, which would enable the company
to utilize its resources properly and in the interim help in minimizing wastage, and
hence result in the expansion of its market share.
4. 3.The gross profit ratio of the company is decreasing in year 2016-17. Therefore,
higher the ratio, the better it is. It is important for a business to maintain this ratio
higher side ; it is difficult to cover expense.‟
5. The company have to control its administrative expenses to increased gross profit.
40
LIMITATION
41
CONCLUSION
By conducting the study about working capital management, I found out that working capital
management of VAYUDOOT ROAD CARRIER is good. VAYUDOOT ROAD CARRIER
has sufficient funds to meet its current obligation every time, which is due to sufficient
profits and efficient management of VAYUDOOT ROAD CARRIER.
Several ratio calculated from the balance sheet and profit and loss account of the company.
Ratio analysis is very useful for ranking management decision and highlights the
performance in the area of profitability and operational efficiency. I have calculated current
ratio, working capital turnover ratio, net profit ratio gross profit ratio etc. it helps the
company to analyzing its performance.
42
BIBLIOGRAPHY
WEBLIOGRAPHY
www.accountingformanagement.org
www.Study.com
www.investopedia.com
www.acoountingtools.com
43
ANNEXURE
582345460.00
582345460.00
Indirect Expenses 66,211,439.71 Gross Profit b/f 75704909.80
44
Balance Sheet
1-Apr-2015 to 31-Mar-2016
45
VAYUDOOT ROAD CARRIERS PVT LTD
MAGARPATTA CITY,
HADAPSAR, PUNE-411028
1-Apr-2016 to 31-Mar-2017
637990900.00
637990900.00
Indirect Expenses 68,486,799.00 Gross Profit b/f 82543477.00
46
Balance Sheet
1-Apr-2016 to 31-Mar-2017
47