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A Project Report on “Working Capital”

A
PRODUCT PROJECT REPORT
ON
WORKING CAPITAL
Prepare by
CHAUHAN HIREN V.

Class
T.Y.B.B.A.

Academic Year
2016-17

Institution
SHRI K.M. & K.K. SAVJANI COLLEGE, VERAVAL

Guided By

Jalpa medam

Submitted To
Saurashtra University

PREPARED BY:-CHAUHAN HIREN V. -1-


A Project Report on “Working Capital”

Declaration

I the undersigned, Chauhan Hiren a student of T.Y.B.B.A.


here by declare that the project work presented in this report is my
own work and has been carried out under the supervision of
professor ----------of shri k.m. & k.k. savjani B.B.A. college,
veraval.

The work was not been submitted to any other University for
any other examination purpose.

Date:-
Place: - Veraval

Signature:

(chauhan hiren)

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A Project Report on “Working Capital”

 Acknowledgement
It is really a pleasure for me to prepare a report at this stage,
it is my sincere they to thank all those who helped me directly or
indirectly during my research process.
After I would like to thank executive to ajmera cement
private limited for granting me permission for my practical
training. I am very thankful to executives for his valuable
guidance, co-operation and sparing his valuable time also.
At last but not least I am very thankful to our college and I
would like to sincere thanks to Mr.-------- for help me to prepare
this project report and solving my drought.

Date: -
Place: -veraval
(Chauhan hiren)
PREPARED BY:-CHAUHAN HIREN V. -3-
A Project Report on “Working Capital”

Preface

Practical training is an important part in the management

studies. Only bookies knowledge is not the right way of learning

anything especially for the management student. Thus by practical

training of business management, student comes to know that how

management theories apply in the modern business world.

Industrial training has developed awareness in the students

about industrial environment and practice.

During this academic year 2015 – 2016 as a part of my

studies, I have undergone 15 days practical training in ajmera

cement private limited to knowledge about financial condition.

It was really a great experience for me to get practical

training in such a reputed unit.


PREPARED BY:-CHAUHAN HIREN V. -4-
A Project Report on “Working Capital”

SR.NO PARTICULAR Pg.NO.


1 Company profile 7
2 Name&address of the company 8
3 Organization structure I 10
4 Organization chart 11
5 Size&form of organisation 12
6 manufacturing process 14
7 Production process 15
8 Time keeping system 17
9 Employees walfarservices 18
10 Introduction of working capital 19
11 Scope of the study 20
12 Working capital management theory 21
Nature of inventories
13 25

14 Need of hold inventories 26


15 Policies for financing current assets 27

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A Project Report on “Working Capital”
16 Source of working capital 28
17 Use of working capital 29
18 Data interpretation of 5-year 30
19 findind 45
20 Suggestion 46
21 coclusion 47

Company Profile

Introduction

“Ajmera Cement pvt.ltd.” is unique project and none of its kind


found in Gujarat. It manufactures cement. The concept of manufacturing
from lime stone, clay, coal. It was established in 1985. It was started by Mr.
Chootu bhai Ajmera.

“Ajmera cement pvt.ltd.” produce only cement.

It Situated At:-

Village :- Bhanduri

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A Project Report on “Working Capital”
Taluka :- Maliya hatina,
District: - Junagadh

2) NAME & ADDRESS OF THE COMPANY:-

Name of the unit: Ajmera Cement pvt.ltd


Year of establishment 1985
Form of organization Private Limited
Address: Ajmera Cements Pvt. Ltd.
Villege Bhanduri,

Taluka Maliya Hatina

Dist. Junagadh

Register Office 19, Station Plot, Gondal-360311


Banker State Bank Of India
Auditor Prakash & Association of Mumbai
Promoter Ajmera Group
Head office Ajmera group of companies,
Citimall, Andheri (west),

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A Project Report on “Working Capital”
Link road, Mumbai-400058
Area covered by the company 10 Hectors
Telephone (02870) 201482
No. of employees 64 including staff

“Ajmera Cement pvt.ltd.” Industry first year produce 13052


M.T. cement and last year cement during this time company adopt new
technology for the best quality of it’s product there are Installed electrical
weigh feeder and cost of technology is about Rs. 12 lacs. In rainy season for
easy grading of raw material company established hotter air generator, cost
of it is Rs. 6 lacs.

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A Project Report on “Working Capital”

ORGANIZATION STRUCTURE

Organization basically invests analysis of activities to be


performed for achieve organizational objective, grouping them into various
department and sections so that these can be assigned to various individual
and delegating the appropriate authority so that they can carry their work
properly.

In the ACPL there is functional type of organization. It is clear


from above chart that authority mores from bottom to top. Here managing
directors are responsible for all activities of organization. They are assisted
by general manager such as manufacturing quality control, administrative,
structure.

In this form of organization each department reports to a man


specially qualified for a particular function.

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A Project Report on “Working Capital”
A manger having functional authority is a specialist in his own
area but he may be either as staff or a line manager. The delegation of
authority forms the top to down ward in according with function to be
performed.

ORGANIZATION CHART

Chairman

MANAGING
DIRECTOR

GOVERNMENT
MARKETING FINANCE & PROJECTS PURCHASE
LISONNING
& SALES ACCOUNTS & LEGAL

GENRAL
MANAGER GENRAL MANAGER
MANAGER
EXECUTIVES CAS/MBAS ADVOCATES
MANAGER
EXICUTIVE
SOLICITORS MANAGER
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EXECUTIVES
A Project Report on “Working Capital”

Size & Form of Organization

Size of the unit


According to the government there are three types of the of the
unit as per their size, which are as under.

A) Small scale
B) Medium scale
C) Large Scale

Small Scale Industry:


If the money invested in the organization in near about 1 crore then the
organization is classified under the small scale industry.

Medium Scale Industry:

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A Project Report on “Working Capital”
If the money invested in the organization is about more then 1 but
less then 10 crore then the organization is classified under medium scale
industry.

Large Scale Industry:


If the money invested in the organization is more than 10 crore then
the organization is classified under large scale industry.

Out of this three the Ajmera cement pvt.ltd is large scale


industry because its investment is more than 10 corers.

Form of the organization:-

There are many type of organization. Different company uses different


type of organization as per its requirement. When two or more person,
workers comes together to work a common goal. Authority and
responsibilities are assigned among so that it can be called organization.

The form of business organization could never satisfied all the


demand of growing nation economy and this wild industrial look after by
model industrial and commercial authority. When they failed to satisfy the
maximum needs, the co-operative organization is come into picture.

There are mainly six forms of organization which are as under:

 Sole proprietorship
 Partnership
 Joint stock company

1. Public enterprise
2. Private enterprise

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A Project Report on “Working Capital”
 Co-operative society
 Non-profit organization

“Ajmera cement pvt. ltd” is Private Company Ltd. Because


the company is owned by the private ownership.

Manufacturing Process
Ajmera Cement Private Limited is entirely manufacture unit. It
is produce only cement.
The two main type of cement which are as under:

43
Portland
cement

Cement
Cement

53
Portland
Cement

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A Project Report on “Working Capital”

Manufacturing process is heart of any organisation. It is


converting raw material into finish good. Which are ready to use. The whole
manufacturing process is divided into various stages.

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A Project Report on “Working Capital”

Production Process:

1. Introduction stage
Here, all raw materials are collected from different place, this
raw material are kept in the company ground and stored there and as per
requirement they are brought in the plant for the production.

2. First stage
In this stage all raw materials like limestone, clay, and coals are
crushed in the crushing machine and then after they are stored in the raw
material silos thrown the conveyer belt.

3. Second stage
In this stage all the raw material are taken into a raw mill
through the conveyer belt where all the raw material are mixed in a standard
quality then after all these raw material are grinded and formulated into
power. After laboratory checking this power is dispatched to the store silos
the nodules are formulated by mixing the power with water through,. the
miller the nodules are checked in the laboratory.

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A Project Report on “Working Capital”

4. Third stage
In this stage all the nodules are brought into Killen with the
help of pipe and high degree of temperature is given. Then after the nodules
are converted into black clinkers are stored in the hopper. These clinkers are
crushed through the laboratory machine and converted into powder.

5. Forth Stage
In this stage clinkers and nodules are grinded and converted
into the powder in the cement mill. This powder is taken into the cement
silos. Through the screw conveyer. This powder is known as cement.

6. Fifth stage
This cement is taken into the packaging room, where it is
packed by an alternative packing machine.

Now, cement produces by unit is sold as an ordinary Portland


cement with the brand name “SHREEJI CEMENT” with the ISI 269
conformation. It is available in 50 K.G. bags.

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A Project Report on “Working Capital”

TIME KEEPING SYSTEM

The time keeping is introduced to check the entry and exit of


employees in the organisation and depending on the wages, salaries, bonus
etc. of each employee are calculated.

The company run in three shifts

Shift Time

A 6:00 a.m. to 2:00 p.m.


B 2:00 p.m. to 10:00 p.m.
C 10:00 p.m. to 6:00 p.m.

The company also have general shift, it begins from 8 A.M .to 6
P.M. with recess from 12:30 P.M to 2 P.M. to the worker.

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A Project Report on “Working Capital”

EMPLOYEES WALFARE SERVICES

The profitability and productivity of any organization depend


upon the industrial relation between administrative and employees of the
unit.
various types of facilities for its employees as under.
1. Medical Faclities
When any accidents take place at that time company gives first
aid treatment to the workers and the company for employee’s benefits also
takes insurance policy.

2. Housing Facilities
Ajmera cement Pvt. ltd. provides quarter for operating staff in
Company’s colony and also provide hosing facility.

3.Leave facility: -
In ajmera cement pvt. Ltd. according to company act, 30 days
leave are taken during the year & 1 leave for each during 1 week.
4.loan facility: -
This unit also gives loan for purchasing cycle and scooter
rs.1000 to rs.10000 respectively. This loan facility is available for only
operative staff.

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A Project Report on “Working Capital”

INTRODUCTION OF THE PROJECT REPORT


Objective of Study
The concept of working capital management is as older as the
human understand to do business. One simple day – to – day life example
makes it clear. One housewife bought a new cooker, raw rice and adds water
to the cooker. She had put that on the stove without ignition ting the stove.
After half an hour she came back and check weather the rice has cooked or
not. What do you think about the rice?

The objective of the study is to focus on the very much


importance function of the finance department. The main objective of the
study of Working Capital Management is bifurcated into sub objective like

 Receivable Management
 Debtor Management
reade
r in understanding the importance of the working capital and effect of the
change

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A Project Report on “Working Capital”
SCOPE OF THE STUDY
As it is mentioned earlier that the management of the working
capital requires a great sense of a understanding because the excess working
capital leads to less profitability and ineffective use of the capital, while the
inadequate working capital drags the company under the danger of liquidity.

Thus in other word, the Working Capital Management means to


optimize between the profitability and liquidity. Many company works with
excess working capital. Same is doing in ajmera cement pvt. Ltd.

This shows that the company has aggressive approach towards the
management of working capital, which further creates the scope for the
study.

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A Project Report on “Working Capital”

Working Capital Management Theory

CONCEPTS OF WORKING CAPITAL:-


There are two concepts of working capital

 Gross working capital


 Net working capital

Gross working capital: -


Simply called as working capital, 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 : -


It refers to the difference between current assets and current
liability. Current liabilities are those claims of outsiders, which are expected
to mature for payment within an accounting year and include creditors, bills
payable and outstanding expenses. Net working capital can be positive or
negative.

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A Project Report on “Working Capital”

Focusing on Management of current Assets:-


The gross working capital concept focuses attention on two
aspects of current assets management: (a) How to optimize investment in
current assets? (b) How should current be financed?

Inability to meet its current obligations. It should be realize that


the working capital needs of the firm might be fluctuating with changing
business activity. This may cause excess or shortage of working capital
frequently. The management should be too prompt to initiate an action and
current imbalances.

Focusing on liquidity management:-


Net working capital, being the difference between the current
assets and liabilities, is a qualitative concept. Current assets should be
sufficiently in excess of current liability to constitute a margin or buffer for
maturing obligation within the ordinary operating cycle of a business.

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A Project Report on “Working Capital”

MANAGEMENT FUNCTION IN WORKING CAPITAL

 Management of cash

 Management of inventories

 Management of account receivable

 Financing current assets

Management of cash

To managing cash is one of the most and significant factor for


operation of business. To manage cash it requires deftful knowledge of
managing cash. Though cash fund takes very small part of the total current
assets of the organization. So the organization should contain neither more
Motive of Cash Holdings:

Generally any organization holds the cash for transaction motive,


precautionary motive and for the speculative motive. In ajmera cement pvt.
Ltd., it holds cash only for the transaction motive. It holds the cash for
smoothing the day-to-day operation only.
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A Project Report on “Working Capital”

Cash management cycle:

The key issue in the organization is to manage the cash. The


revenue generated from the sales should be mange in such manner that the
distribution of the cash allotted at the proper place. The cash is significant in
the organization because it used for the payment of needed expenses. The
main aim of any organization is to maintain the minimum cash balance and
invest the surplus fund in opportunity areas. For this purpose the division
transfer its surplus to the finance dept. and that dept. invests that cash in
various opportunity areas.
Managing the flow of cash

Managing the cash flow is very important task that company


should do effectively. Company need to look at cash inflow and cash
outflow about whether it is going in right way or not..
INVENTORY MANAGEMENT

Inventories constitute the most significant part of current assets of


a large majority of companies in India. On an average, inventories are
approximately 60 % of current assets in public limited companies in India.

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A Project Report on “Working Capital”

NATURE OF INVENTORIES

Raw materials

In Ajmera cement pvt. Ltd., it holds a large amount of the raw


material for it’s manufacturing of the raw material for its manufacturing of
VRY and other chemicals,

Semi Finished Goods

Some inventories are semi – manufactured products. They


represent products that need more work before they become finished
products for sale.
Finished Goods

Inventories are those completely manufactured products, which


are ready for sale. Stock of raw materials and work – in – progress facilities
production, while stock of finished goods is required for smooth marketing
operations.

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A Project Report on “Working Capital”

NEED OF HOLD INVENTORIES

The question of managing inventories arises only when the


company holds inventories. Maintaining involves tying up of the company’s
funds and incurrence of storage and handling costs. If it is expensive to
maintain inventories, why do companies hold inventories? There are three
general motives for holding inventories.

o Transactions motive: - emphasizes the need to maintain


inventories to facilitate smooth production and sales operations.

o Precautionary motive: - necessitates holding of inventories to


guard against the risk of unpredictable changes in demand and supply forces
and other factors.

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A Project Report on “Working Capital”

POLICIES FOR FINANCING CURRENT ASSETS.

A firm can adopt different financing policies vise –a – verse


current assets. Three types of financing may be distinguished:-

Long term financing: - The source of long – term financing


include ordinary share capital, preference share capital debenture, long –
term borrowing from financial institutions and surplus (retained earnings).

Short – term financing: - The short – term financing is obtained


for a period less than one year. It is arranged in advance from banks and
other suppliers of short – term finance in the money mar

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A Project Report on “Working Capital”

SOURCE OF WORKING CAPITAL

The typical sources of working are summarized below:

1) Funds from operations (adjusted net income)


2) Sale of non – current assets

i. Sale of long-term investments (shares, bonds/debentures etc.)

ii. Sale of tangible fixed assets like land building, plant, or


requirements
iii. Sales of intangible fixed assets like goodwill, plants, or
copyrights.

3) Long term financing

i. Long-term borrowings (institutional loans, debentures, bonds


etc.)

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A Project Report on “Working Capital”
ii. Issuance of equity and preferences shares.

USES OF WORKING CAPITAL

The typical uses of working capital are as follows:

1) Adjusted net loss from operations.


2) Purchase of non – current assets:

i. Purchase of long – term investments like shares,


bonds/debentures etc.

ii. Purchase of tangible fixed assets, like land, building,


plant, machinery, equipment etc.

iii. Purchase of intangible fixed assets, like goodwill,


patents, copyrights etc.

3) Repayment of long term debt (debentures or bonds) and


short term debt (bank borrowing).
4) Redemption of redeemable preference share.

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A Project Report on “Working Capital”
Data interpretation
BALANCE SHEETS OF LAST 5 YEARS

PARTICULAR 31ST MARCH 2015 31ST MARCH 2014


EQUITY & LIABILITY
Shareholder’s funds share
capital 229365130 229365130
reserve and surplus (98475652) (82500611)

Non-current liability
Other long term lies. 1720262405 1989977510
long term provision 5297264 4829433

Current liability
Trade payables 1638938 4230991
Other current liability 289189910 13093707
Short-term provision 496376 741963
TOTAL 2147769371 2159738123

Assets
Non-current assets
Fixed assets 10117795 10896989
Tangible assets 208202835 208202835
Long term loans & advances
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A Project Report on “Working Capital”
Other non-current assets 1894844572 1399236076
493600000

Current Assets
Inventories 17808776 22913479
Trade receivable 4411519 5712321
Cash and cash equivalent 4030216 11867360

TOTAL 2147769371 2159738123

PARTICULAR 31ST MARCH 2012 31ST MARCH 2011


EQUITY & LIABILITY
Shareholder’s funds share

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A Project Report on “Working Capital”
capital 229365130 229365130
reserve and surplus (65696544) (50936176)

Non-current liability
Other long term lies. 1876656790 1462084507
long term provision 4237717 3613142

Current liability
Trade payables 3877880 2662909
Other current liability 18118 1008859
Short-term provision 554637 386515
Total 2049013728 1648184885

Assets
Non-current assets
Fixed assets
Tangible assets 11705971 13347012
Long term loans & advances
Other non-current assets 1272038511 888728290
Non-current investment 493600000 493600000
208202835 208202835

Current Assets

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A Project Report on “Working Capital”
Inventories 16903788 17184151
Trade receivable 4787115 9175273
Cash and cash equivalent 33733835 10263610
Short-term loans and
advances 8041671 7683714

Total 2049013728 1648184885

Particular 31ST MARCH 2010


Sources of fund
Shareholder’s funds share capital 229365130
reserve and surplus 283283
TOTAL 232188413
Application of fund
Fixed assets 105214869
- depreciation 89281410
15933459

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A Project Report on “Working Capital”
Investment
Current assets, loans and advances
Inventories 19374256
Sundry debtors 38469775
Cash and bank balance 5445520
Loan and advance 1048304588

Less: Current liability and provision


Current liability 1143545834
Provision 3419419
Net current assets (31951695)
Add: P & L A/c 40003814
TOTAL 232188413

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A Project Report on “Working Capital”

Statement showing working capital of 2011

Particular Amount Amount


Current assets (a)
Inventories 19374256
Sundry debtors 38469775
Cash and bank balance 5445520
Loan and advance 1048304588
Total 1111594139

Current liability (b)


Current liabilities 1143545834
Provision 3419419
1146965253
(A-B) Working capital (35371114)

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A Project Report on “Working Capital”

Statement showing working capital of 2012

Particular Amount Amount


Current assets (a)
Inventories 17184151
Trade receivable 9175273
Cash and bank equivalent 10263610
Short term loans and advances 7683714
Total 44306748

Current liability (b)


Trade payable 2662909
Other current liability 10008859
Short term provision 386515
Total 4058283
(A-B) Working capital 40248465

Statement showing working capital of 2013


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A Project Report on “Working Capital”

Particular Amount Amount


Current assets (a)
Inventories 16903788
Trade receivable 4787115
Cash and bank equivalent 33733835
Short term loans and advances 8041671
Total 63466409

Current liability (b)


Trade payable 3877880
Other current liability 18118
Short term provision 554637
Total 4450635
(A-B) Working capital 59015774

Statement showing working capital of 2014

Particular Amount Amount


Current assets (a)
Inventories 22913479
Trade receivable 5712321
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Cash and bank equivalent 11867360
Short term loans and advances 7309066
Total 47802226

Current liability (b)


Trade payable 4230991
Other current liability 13093707
Short term provision 741963
Total 18066661
(A-B) Working capital 29735565

Statement showing working capital of 2015

Particular Amount Amount


Current assets (a)
Inventories 17808776
Trade receivable 4411519
Cash and bank equivalent 4030216
Short term loans and advances 8353657
Total 34604168

Current liability (b)


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A Project Report on “Working Capital”
Trade payable 1638938
Other current liability 289184910
Short term provision 496376
Total 291320224
(A-B) Working capital (256716056)

Data interpretation: - Statement Showing Working Capital of last 5 years

Particular 2011 2012 2013 2014 2015


Current Assets 1111594139 44306748 63466409 47802226 34604168
Less: Current 1146965253 4058283 4450635 18066661 291320224
Liabilities
Working -35371114 40248465 59015774 29735565 -256716056
Capital

Interpretation

1. In the year of 2011 current liabilities are more then current assets. So, company’s
working capital position is not good.

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A Project Report on “Working Capital”
2. In year of 2012 current assets increase then current assets of the year 2012
3. In the year of 2012 current liabilities increase then current liabilities of the year 2012
The reasons behind the increase in current assets are
(a) cash and bank balance in 2013 is increase then 2012
(b) increase in inventories because of expansion

The reasons behind the increase in current liabilities are

Table showing current ratio of the company


Current ratio = Current Assets
Current Liabilities

Year Current assets Current liabilities Ratio


2010 1111594139 1146965253 0.96
2011 44306748 4058283 10.92
2012 63466409 4450635 14.26
2013 47802226 18066661 2.64
2014 34604168 291320224 0.12

Interpretation
1. The current ratio shows fluctuating trend during the review period.

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A Project Report on “Working Capital”
2. The ideal ratio is 2:1 but company had more the 2:1 ratio in 2011, 2012,
and 2013.
3. This indicates company was not utilizing current assets properly during
the review period.
4. In 2013 company make the efficient use of current assets.

Table showing quick ratio position


Quick ratio = Quick Assets
Current Liabilities

Year Quick assets Current liabilities Ratio


2010 1073124364 1146965253 0.93
2011 27122597 4058283 6.68
2012 46562621 4450635 10.46
2013 24888747 18066661 1.37
2014 16795392 291320224 0.05

Interpretation
1. The quick ratio is showing fluctuating
2. In 2011, 2012 and 2013 quick ratio found more then ideal ratio of 1:1.
3. The above clearly indicate that firm is highly liquid.

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A Project Report on “Working Capital”

Table showing current assets to fixed assets


Current Assets to Fixed Assets = Current Assets
Fixed Assets

Year Current assets Fixes assets Ratio


2010 1111594139 105214869 10.56
2011 44306748 13347012 3.32
2012 63466409 11705971 5.42
2013 47802226 208202835 0.23
2014 34604168 208202835 0.16

Interpretation
1. The fixed turn over ratio showing fluctuating trend.
2. In 2010 fixed turn over ratio is higher then compare to all.
3. a high turn over ratio includes better utilization of the firm fixed assets

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A Project Report on “Working Capital”

Finding
1. It is clear form the study that firm working capital is fluctuated in last 5
years current assets is decreasing comparatively and current liabilities
increasing comparatively.

2. It is clear form the study that in 2010 current liabilities is higher as compare
to all and then it has increased respectively.

3. It is observed that current assets of the firm fluctuated during the review
period.

4. Fixed turnover ratio is high which is satisfactory.

5. Quick ratio is lower in last 2 year compare to 1:1 ratio.

6. Current ratio is much lower in last year.

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A Project Report on “Working Capital”

Suggestion
It is suggested that the company has to maintain sufficient inventory and
which should be on par with the working capital requirement for strengthen
it.

It is clear form the study that liquidity position is increase which has
satisfactory. The company has to maintain the same in future.

The company has to utilize its current assets efficiently only its maintaining
as smooth liquidity position.

Company should try to maintain the fixed turnover as same.

PREPARED BY:-CHAUHAN HIREN V. - 44 -


A Project Report on “Working Capital”

Conclusion
The Ajmera cement pvt. Ltd. is the large scale manufacturing
organization and successful player in cement industry. The company has the
good financial structure and has a good reputation in the market.

The company mange its working capital very effectively. For cash
management it has Corporate Finance Division. It collects the cash from
various centers. While for the payment are paid through two centers.

Being a manufacturing organization, it has to invest large chunk of


amount in its inventory. So here inventory management takes the significant
management time in the operation.

The company follows the accounting laws and standard in its


accounting. The accounting department for the internal and external
disclosure of the accounting statement regularly prepares the books of
accounts.

Form the study I concluded that company should require using its
current assets in more effective way.

PREPARED BY:-CHAUHAN HIREN V. - 45 -


A Project Report on “Working Capital”

Bibliography

 By reference book:

1. Marketing management
- Philip Kotler

2. Financial management
- I.M. pandey

3. Human resource management

- Ashvathappa

4. annual reports of Ajmera cement pvt. Ltd.

www.google.com

PREPARED BY:-CHAUHAN HIREN V. - 46 -

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