INTRODUCTION

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INTRODUCTION:-
Financial management means planning, organizing, directing and controlling the financial
activities such as procurement and utilization of funds of the enterprise. It means applying general
management principles to financial resources of the enterprise. Financial management refers to
the efficient and effective management of money (funds) in such a manner as to accomplish the
objectives of the organization. It is the specialized function directly associated with the top
management. The significance if this function is not seen in the ‘Line’ but also in the capacity of
‘Staff’ in overall of a company. It has been defined differently by different experts in the field.

MEANING OF FINANCE:-
The science that describe the management, creation and study of money, banking, credit,
investment assets and liabilities. Finance consists of financial system, which include the public,
private and government spaces, and the study of finance and financial instruments, which can
relate to countless assets and liabilities.
The study of finance can also take many forms. Depending on the field or area of finance which
one wishes to study? For instance, economics is considered a pillar of financial science, where
both micro and macro economic factors effect virtual levels of financial decisions and outcomes
at all levels. Additionally, the study of behavioral finance aims to study the more “human” side of
a science considered by most to be highly mathematical.

DEFINITION OF FINANCE MANAGEMENT:-

Financial management refers to the efficient and effective management of money (funds) in such
a manner as to accomplish the objectives of organization. It is the specialized function directly
associated with the top management. The significance of this function is not only seen in the
“Line” but also in the capacity of “Staff” in overall management of the company. It has been
defined differently by different experts in the field.
The term typically applies to an organization or company’s financial strategy, while personal
finance or financial life management refers to an individual’s management strategy. It includes
how to raise the capital and how to allocate capital, i.e. capital budgeting. Not only for long term
budgeting, but also how to allocate the short term resources like current liabilities. It also deals
with the dividend policies of the shareholders. CITY PREMIER COLLEGE

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FINANCIAL ANALYSIS:-
Financial analysis (also referred to as financial statement analysis or accounting analysis or
Analysis of finance) refers to an assessment of the viability, stability and profitability of a
business, sub-business or project.
It is performed by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. These reports are usually
presented to top management as one of their bases in making business decisions. Financial
analysis may determine if a business will:
Continue or discontinue its main operation or part of its business;

Make or purchase certain materials in the manufacturing of its product;

Acquire or rent/lease certain machineries and equipment in the production of its goods;

Issue stocks or negotiate for a bank loan to increase its working capital;

Make decisions regarding investing or lending capital;

Make other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.

Financial analysts often assess the following elements of a firm:

1. Profitability - its ability to earn income and sustain growth in both the short- and long-
term. A company's degree of profitability is usually based on the income statement, which
reports on the company's results of operations
2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate
obligations
Both 2 and 3 are based on the company's balance sheet, which indicates the financial
condition of a business as of a given point in time.

4. Stability - the firm's ability to remain in business in the long run, without having to sustain
significant losses in the conduct of its business. Assessing a company's stability requires the
use of both the income statement and the balance sheet, as well as other financial and non-
financial indicators. Etc.

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OBJECTIVES OF THE STUDY

Working capital is the most widely used and powerful technique of

financial Analysis .The main objective of the present study is to know
the financial Condition of the company.

 To know the overall operational efficiently and performance of the N.K

KUSUMGAR & COMPANY

 To interpret the financial position of company of is appropriate (or )not.

 To assess the long term financial viability of company .to knows whether the
management is constantly concerned about the overall profitability of the company
(or) not.

 To provide reliable financial information about economic resources and

obligation of a business enterprise.

 To provide reliable financial information those add, it’s in estimating the potential
of the enterprise.

 To disclose to the extent possible other information related to the financial

statements users.

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HYPOTHESES:

Generally hypothesis means a mere assumption or some supposition to be provided or

disproved hypostasis is usually considered as the principle instrument in research. It main
function is to suggest new experiment and observation.

The following are the hypothesis of the study

1) The firm is facing difficulty in paying short-term debt.

2) The firm is not properly managing the sundry debtor.
3) The current liabilities are increasing than current assets year by year.

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SCOPE OF STUDY :

The scope of the study is identified after and during the study is conducted.

 The main scope of the study is to check the management of working capital (current
assets and current liabilities) of only KUSUMGAR & CO.
 The study analysed the liquidity position and working capital management of a
limited sample consisting of only one companies i.e. KUSUMGAR & CO .
 The study of working capital is based on only one tool i.e. Ratio Analysis.
 Further the study is based on last 5 years Annual Reports of the company taken into
consideration.
 As only company s was studied so the findings could only be generalized to this
sector’s firms

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LIMITATION

 Tools for making comparison is limited that is ratio analysis.

 Time was also a major constrain as the complete study has to be finished within
stipulated five months of my project.

 Some internal information necessary for the project was not available by the company
properly.

 When the project is prepared includes all the aspects like company product, its
financial projection and their financial analysis helps to understand whether the
project is practically possible or not . Financial analysis gives ideas about the
profitability of the project.

Project report gives projected financial statement and on the basis of that analysis of financial
statement of the company. Financial analysis helps in judging the operation efficiency of the
management’s ability to repay short and long term loans doing inter firm comparison and to
assess the future growth of the company

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COMPANY
PROFILE

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WELCOME TO KUSUMGAR GROUP

Kusumgar group is one of the leading authorized dealers for hero Motocorp ltd. in Nagpur.
The company is engaged in sales and service of hero motorcycles and selling of genuine
spare parts. The company has grown to become one of the best and trusted dealers since the
opening of its showroom in 1985.

Kusumgar group gives its best efforts for complete customer satisfaction with its state of
the art infrastructure, fully equipped workshop, and hardworking and dedicated work force
along with customer friendly environment and reliable business.

Kusumgar group has continuously worked towards achieving complete customer

satisfaction through customer friendly practices and reliable service. Kusumgar group
looks forward towards achieving even better customer relationship in the near future with
the help of improved services and quality management.

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History of Kusumgar Group-

1918-Late Shri Kantilalji Kusumgar started with cycle distribution business.

1956-Started a branch of cycle distribution 'Bhagyalaxmi cycle co.' by Shri Naresh
Kusumgar

1976- Got the dealership of majestic auto ltd.

1984- Got the dealership of hero Honda.
23rd aug1985- opened the branch office at Medical Square.

9th sep1985- Shri Naresh Kusumgar passed away

After That Mr. Nikhil Kusumgar & Mr.Punit Kusumgar Took Over the Business

1989- Started the Vadilal Ice Cream Distribution

1990- Started the Finance Bossiness
From There Onwards Kusumgar Group Started Its Business
with 2 Divisions

AUTO Division Headed By Mr. Nikhil Kusumgar.

Fast Moving Consumable Goods [FMCG] Division

The N.K Kusumgar&Group, FMCG Division Has the Largest Distributer Of Following
Brands.

Year Brand Products

1992 Dealership of
hero

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2000 Cadbury

2001 Colgate

2005 GSK

2005 Reckitt
Benckiser

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Journey of Achievements

AUTO FMC
DIVISION GDIVISION

1992- Dealership of Hero Punch 1993- Distribution For

Godrej&PG1994-PowerSegment 1996- Nestle Distribution ship

1995-96- Mrs. Shushma Nikhil Kusumgar 1998- Mother Dairy Distribution ship
Joined the Kusumgar Group As
The Administrative Head

2000- Finance Segment Expansion 2000- Cadbury

Also Running Successfully 2003- Sify Internet Solution

Kusumgar Finance‘ Offices At
Pulgaon, Gadchiroli And
Hinganghat
2003- Idea Cellular
In Year 2000 Kusumgar
Trade links Was
Established In Which CNF
Super Stockiest and
Consignee Work Was
Done.
Parle Int. CNF

Super Stockiest For Reckitt

Benckiser, Philips & Heinz India

Luminous Power's Consignee

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Human Resource:

Today, the Kusumgar family comprises 300+ skilled workers, 100 marketing professionals,
10 research professionals and 15 management professionals that work in integrity towards
achieving a common goal of taking N.K.Kusumgar & com. towards greater heights.

CSR
In Kusumgar, CSR is a concept wherein we think of many different ecological, social and
economic issues.

1. Our Social Responsibilities

 The Company Runs charitable organization under the name of late

Naresh bhai Kusumgar, for helping poor people.
 Gave donation to Humanity Trust - Development of Humanity Hospital
for Poor Patients.
 N.K. Kusumgar & com. Gives Kusumgar Awards to 10th& 12thStudents
for their Academic Performance & various Scholarships.

2. National sovereignty and local communities

Ensure respect for the national sovereignty and local communities.

3.Labour

 Respect and ensure the freedom of association and right to collective

bargaining.
 Do not engage or support the use of forced labour.
 Contribute to the abolition of child labour.
 Do not discriminate with respect to employment and occupation.

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4. Consumer protection

 Ensure access to essential goods and services.

 Ensure the right to safety, with respect to: physical safety & safety and quality
of consumer goods and services
 Ensure the right to information.
 Ensure the right to choice in the marketplace.
 Ensure the right to be heard.

5. Economic Aspects

 Contribute to equal access to health facilities.

 Contribute to access to basic food, housing, sanitation and sufficient safe
drinking water.
 Promote respect for other socio-economic rights, like the right to work, social
security and maternity leave, to take part in cultural life.

6. Fair competition

 Conduct activities in a competitive manner.

 The company has to put in their best efforts and work as one cohesive unit with
focused attention on:-

1) Sound corporate Governance

2) Timely completion of new projects and advance planning for

opening new mines.
3) Efficient utilization of all available resources with more trust on
human resource, the most precious one.
4) High priority to consumer satisfaction.
5) Economizing cost and Maximizing Profitability as a true commercial
Organization.
6) Achieving high standards of safety of men, material and vital
installations.

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COMPANY’S PHILOSOPHY:

 To be a Successful Profit Making Organization.

 To Conduct its Operations- with Honesty, Integrity and Transparency.

 To be the Market Leader in its Field of Operations through Continual Improvement

in efficiency and Quality of Products &Services.

 To have Concern for Employees, Shareholders, Customers and Business Associates

alike.

 To Serve Society through Industry.

 To care for the Environment and the World in which we live.

BOARD OF DIRECTORS

 Managing Director : Mr. Nikhil Kusumgar

 General Managing Director: Mr. Punit Kusumgar

 General Manager: Mr. Anand Malokar

 Accounts Manager Mr. Sachin Gulhane

 Finance Manager: Mr.Vinod Sharma

 Sales Manager: Miss. Tara Verma

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THEORITICAL
BACKGROUND

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WORKING CAPITAL MANAGEMANT
MEANING AND DEFINATION

A part from investment in fixed assets, every enterprise has to arrange for adequate funds for
meeting day (operations) expenses to keep it a concern. So originally speaking working
capital refers to the flow funds , necessary for working of enterprise however these is no
agreement among the financial experts regarding the meaning of working capital. They
define working capital in the following ways.

ACCORDING TO WESTON AND BRIGHAM:

―Working Capital refers to a firm investment in short term assets, cash, short term securities,
accounts receivable and inventories

-Working capital is descriptive of that capital which is not fixed. But the more common use
of working capital is to consider it as the difference between the book value of the current
asserts and the current liabilities.”
---“Hoagland”

“Working capital is the amount of funds necessary to cover the cost of operating the
enterprise” --- “Shubin”

CONCEPT OF WORKING CAPITAL

There are 2 concepts of working capital: gross and net.

The term gross working capital also referred to as a working capital means
the total current assets.

The term net working capital can be defined in 2 ways.

1. The most common definition of net working capital is the different between
current assets and current liabilities
2. Alternate definition of net working capital is that portion of current assets

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 which is financed with long term funds.

The task of the financial manager in managing working capital efficiency is to

ensure sufficient liquidity in the operation of the enterprise. The liquidity of a

business firm is measured by its ability to satisfy short term obligations as they

become due. The three basics measure of a firm‘s overall liquidity is

1. The acid test ratio

2. The net working capital

3. The current ratio

In brief, they are useful in inter firm comparison of liquidity. Net working capital as a

measure of liquidity is not very useful for comparing the performance of different firms,

but it is quite useful for internal control. The net working capital helps in comparing the

same firm over time.

NEED FOR WORKINGCAPITAL:-

In order earn sufficient profits, a firm has to depend on its sales activities apart from others.
We know that sales are not analysis converted into cash immediately. i.e, there is a time lack
between the sale of a product and the realization of cash so, an adequate amount of working
capital is required by a firm in the form of different current assets for its activities to continue
un interrupted and to tackle the problem that may arise because of the time lay. Practically
this happens simply owing to the ―operating cycle‖(or) ― cash cycle‖, involves the following
steps.
(a) Conversion of cash into inventory.

(b) Conversion of inventory into receivables.

(c) Conversion of receivables into cash

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NATURE OF WORKING CAPITAL:-

The term working capital refers to current assets which may be defined as
(1) Those which are convertible in to cash or equivalents with in a period of one year
and

(2) Those which are required to meet day operations.

This fixed assets as well as current assets, both required investment of funds. So, the
management of working capital and of fixed assets, apparently seen to involve same type of
consideration but it is not so. The management of capital involves different concepts and
methodology than the techniques used in fixed assets management. The reason for this
different is obvious. The very basics of fixed assets decision process (i.e the capital
budgeting ) and the working capital decision process are different. The fixed assets involve
long period perspective and therefore, the concept of time value of money is applied where
as in working capital the time horizon is limited, in general, to one year only and the time
value of money concept is not considered. The fixed assets the long term profitability of the
while the current assets affect the short term liquidity position. Managing current assets may
require more attention than managing fixed assets. The financial manager must.

Therefore continuously monitor the assets to ensure that the desire levels are being
maintained. Since the amount of money invested in current assets can change rapidly. So
does the financing required. Miss management of current assets can be costly. Too large
an investment in current means tying up funds that can be productively used elsewhere (or
it means added interest cost if the firm has borrowed funds to finance the investment in
current assets). Excess investment may also expose the firm to undue risk e.g.In case, the
inventory cannot be sold or the receivable cannot be collected.
On the other hand, too little investment also can be expensive for ex:- insufficient
inventory may mean that sales are lost as the goods which a customer wants are not
available. The results is that financial managers spend a large chunk of their time managing
the current assets because level of these assets changes quickly and a lack of attention paid
to them may result in appreciably lower profits for firm. So, in the working capital
management, a financial manageris faced with decisions involving some consideration
asfollows:

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 1. What should be the total investment in working capital of the firm

2. What should be the level of individual current assets?

3. What should be the relative proportion of different sources to financial the

working capital requirements?

Working capital management may be defined as the management of firm‘s sources and uses
of working capital in order to maximize the wealth of the share holders. The proper working
capital management requires both the medium term planning (say up to 3 years) and the
immediate to changes arising due to fluctuation in operating levels of the firm.

THE OPERTING CYCLE AND THE WORKING CAPITAL

NEEDS:-

The working capital requirement of a firm depends, to a great extent up on the operating
cycle of the firm. The operating cycle may define as the duration from the procurement of

goods or raw materials and ending with sales realization. The length and nature of the
operating cycle may differ from one firm to another depending up or the size and nature of
the firm.
In a treading concern there is a serious of activities starting from procurement of goods
ending with realization of sales revenue. Similarly in case manufacturing concern . This
serious start form procurement of raw material and ending with the sales realization of

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finished foods. In both the cases however there is a time gap between the happening of the
first event and the happening of last event. This time gap is called operating cycle. Thus the
operating cycle of a firm consists of time required for the completion of chronological
sequence of some or all of the following.

1. Procurement of raw material and services

2. Conversion of raw material in the work in progress.

3. Conversion of work in progress in to finished goods.

4. Sales of finished goods. (Cash or credit).

5. Conversion of receivable into cash.

The firm is after required to extend credit facilities to customers. The finished goods
must be kept in store to take care of the orders and minimum cash balance must be
maintained. It must also have minimum of raw material to have smooth and
uninterrupted production process. So in order to have a proper and smooth running of
the business activities, the firm must make investment in all these current assets. This
requirement of funds depends up on the operating cycle period of the firm and also
denoted as the working capital needs of the firm.

OPERATING CYCLE PERIOD:-

The length of time duration of the operating cycle of any firm can be defined as the sum of its
inventory conversion period and the receivable conversion period.

INVENTORY
CONVERSION PERIOD:-

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It is the time required for the conversion of raw material in to finished goods sales. In a
manufacturing concern the ICP is consisting of raw materials conversion period.
(RMCP), work in progress conversion period (WPCP), and the finished goods conversion
period (FGCP). The RMCP refers to the period for which the raw material is generally kept
in store before is issued to the production department. The WPCP refers to the period for
which the raw material remains in the production process before it is taken out as a finished
unit. The FGCP refers to the period for which finished units remain in stores before being
sold to the customers.

Operating Cycle
The duration of time required for completing the following sequences of events
in case of manufacturing firm s called the operating cycle.
1. Conversion of cash into raw material.

2. Conversion of raw material into work in progress.

3. Conversion of work in progress into finished goods.

4. Conversion of finished goods into debtors & bills receivable through sale.

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5. Conversion of debtors & bills receivable into cash.

CASH

ACCOUNTS RAW MATERIAL

RECEIVABLE

FINISHED GOODS WORK IN

PROGRESS

The duration of the operating cycle for the purpose of estimating working capital
requirement is equal and to the sum of duration of each of these tables less the credit
period allowed by the suppliers of the firm.

TYPES OF WORKING CAPITAL

1. NET WORKING CAPITAL:

The net working capital is the different between current assets and current
liabilities. The concept of net working capital enables a firm to determine how
much amount is left for operational requirements.

2. GROSS WORKINGCAPITAL:
Gross working capital is the amount of funds invested in the various components of

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current assets.
3. PERMANENT WORKINGCAPITAL:
Permanent working capital is the minimum amount of current assets which is needed to
conduct a business even during the dullest season of the year. The amount varies from year
to year depending up on the growth of the company and stage of business cycle in which it
operates. It is the amount of funds required to produce goods and services which are
necessary to satisfy demand at a particular point.

4. TEMPORARY OR VARIABLE WORKING CAPITAL:

It is represents the additional assets which are required at different times during the
operating year additional inventory, extra cash etc., seasonal working capital is the
additional amount of current assets particularly cash, receivables and inventory which is
required during the more active business seasons of the year.

5. BALANCE SHEET WORKING CAPITAL:

The balance sheet working capital is one which calculated from the items appearing in the
balance sheet. Gross working capital which is represented by the excess of current assets,
and net working capital which is represented by the excess of current assets over current
liabilities are examples of balance sheet working capital.

6. CASH WORKING CAPITAL:

Cash working capital is one which is calculated from the appearing in the profit and loss
account. It shows the real flow of money or value at a particular time and is considered to
be the most realistic approach in working capital management. It is the basis of the
operating cycle concept which has assumed a great importance in financial management in
recent years. The reason is the working capital indicates the adequacy of the cash flow.
Which is an essential pre-requisite of a business?

7. NEGATIVE WORKING CAPITAL:

Numbers working capital emerges when current liabilities exceed current assets. Such a

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situation is not absolutely theoretical, and occurs when a firm is nearing a crisis of some
magnitude.

DETERMINANTS OF WORKING CAPITAL:-

Numbers of rules are formulated to determine the working capital requirement of the
firm. a large number of factors influence the working capital needs of the firm. All these
factors have different importance, also the importance of the factor change for a firm over
time. Therefore analysis of the relevant factor should be made in order to determine the
total investment in working capital requirements of the firm.

1. Nature and size of business

2. Seasonality of operation

3. Production policy

4. Marketing conditions

5. Business cycle fluctuation

6. Credit policy

7. Conditions of supply

8. Working capital policy

9. Current assets in relation to sales

Nature of Business:-
The working capital requirement of a firm is closing related to the nature of its business. A
services firm likes electricity. A service firm like an electricity undertaking of a transport
corporation, which has short operating cycle and sells on cash basis, has modest working
capital requirement. On the other hand manufacturing concern like machine tools units
which has long operating cycle and which sells largely on credit had varied substantial

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 working capital management.

Seasonality of Operation:-
Firms which have market seasonally in their operation usually have highly function
working capital requirement. For a sugar industry the raw material i.e., sugar cane is
available in particular season only. So sugar industry mainly depends upon seasonality
of operations.

Production Policy:-
A firm marked by pronounced seasonal fluctuations in its sales many pursue a production
policy which many reduce the shape variation is working capital requirement.

Marketing Conditions:-
In view of competitive conditions prevailing in the firm may have to offer liberal credit
terms, to customs resulting in higher debtors, even large inventories many be maintain to
serve an order as and when received. Thus the working capital tends to be high as a result of
investors in inventions & receivable.

Business Cycle Fluctuations:-

Different phases of business cycle i.e. boom, recession, recovery etc, also effect working
capital requirement. In case of born conditions inflationary pressure appears and business
activities expand. As a result the overall need for cash, inventories etc., and increase
resulting more and more funds blocked in these current assets. In case of recession period.
However, there is usually dullness in business activities and there will be opposite effect
on the level of working capital.

Credit Policy:-
The credit policy means the totality of terms and conditions on which goods are sold
and purchased. At firm has interact with 2 types of credit policies at a time one, the credit
policy of the supplier of raw material, goods etc, and two the credit policy relating to credit
which it contends to its customer. In both the cases, however, the firm while deciding its
credit policy has to take care of credit policy of the market for example affirm might be

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 purchasing goods and services on credit but selling foods only for cash the working capital
requirement of this firm will be lower than that of a firm which is purchasing cash, but has
to sell on credit basis.

Conditions of Supply:-

If the supply is prompt and adequate the firm can manage with small inventory,
if the supply is unpredicted and service then the firm has to ensure continuity of
production.

Working Capital Policy:-

Two important issues in formulation the working capital policy are:

1. What should be the ratio of current assets to sales?
2. What should be the ratio of short term financing to long-term financing.

Current Assets In Relation To Sales:

It usually does the investment in current assets cannot be specified unequally. In sales of
uncertainty the outlook on current assets would consist of base component meant to meet
normal requirement and safety component mean to copy with unusual demands and
requirements. The safety assets policy of the firm.
1. If the firm pursues a very conservation current assets policy is should carry a high
level of current assets in relation to sales.
2. If the adopts a moderate current assets policy it would carry a moderate level of
current assets in relation to assets.

Ratio Of Short Term Financing To Long Term Financing:-

What would be the relative proportions of short-term bank financing on one hand and
long-term sources of finance and the other hand. The board policy alternatives in the
respect are:

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 1. A conservative current assets financing policy.
2. An aggressive current assets financing policy. Conservative current assets
financing policy refills less on short-term bank financing and more long on term
sources like debentures. An aggressive current financing policy relies heavily on short-
term bank finance and seeks to reduce dependants on long –term financing

Choosing The Working Capital Policy:-

The overall working capital policy adopted by the firm may broadly:-
1. Conservative
2. Moderate
3. Aggressive

Conservative:

A conservative overall working capital policy means that the firm chooses conservative
current assets policy along with conservative current assets financing policy.

Moderate:

A moderate overall working capital policy reflects a combination of a conservative current

assets policy and aggressive current assets financing policy or a combination of an
aggressive current assets policy and conservative current assets financing policy.
Aggressive:
An aggressive overall working capital consists of an aggressive current assets policy
and aggressive current assets financing policy.

Financing Of Working Capital:-

Normally, financing arrangements are planned for a combination of needs including capital
expenditure and working capital investment the assessment of sources of funds from a
package and rarely will be possible to concept upto a particular shows to a specific

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application or use at the same time financing manager does make an assessment of the
investment needs as well as current assets and decider an a proper mix of long and short
term funds. Taking note of the internal generation of funds for 56 &57 the period in
question be decisions on the extent to which the firm would resort to issue of share or long
short-term borrowing to mobile the required sources.
Typically the current assets of a firm are supported by the combination of long
term and short term sources of financing long term sources of finance are equity,
preference term loans and debentures which primarily are fixed assets and secondarily
provide working capital margin.

Where the commitments are certain but cash flows are not clearly predictable, it
would wise to cut down drastically the number and extent of short term debts to
manageable levels and prefer longer maturity schedules for debts.
Short term debts can take care of the seasonal needs of the organization even here to
take care of vagaries in cash flow; a part of the funds required may be obtained from
sources with longer maturity schedules of the debts. Thus usually permanent and long-
term finance is used to finance the permanent requirements or fixed assets and the net
permanent current assets and a apart of the reasonable short term needs.
The important sources of finance which more or less exclusively support current
assets are:
1. Trade credit
2. Working capital advances by commercial bank.
3. Public corporate deposits
4. Inter corporate deposits
5. Short term loans from financial institutions.
6. Rights debentures for working capital.
7. Emerging sources commercial paper and factoring.

Of all the above the most significant sources of working capital finance are trade credit
and bank borrowings, after trade credit bank borrowing are the next important sources of
financing working capital requirements of firms in India. Tandon committee has suggested
guidelines for the ratio allocation and optimum use of the bank credit for the working
capital requirement.

Tandon Committee Recommendations:-

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 1. The borrowers should indicate the likely demand for credit. For this purpose, he
should draw operating plans for the ensuring year and supply them bankers. This
procedure will facilitate credit planning at the bankers credit needs in a realistic
manner and the periodic follow up during the ensuring year

2. The bankers should finance only the genuine production needs of the borrower.
The borrower should maintain the reasonable levels of the investor and receivable.
He should hold just enough to carry on his targets production. Efficient
management of resources should, therefore, be ensured to eliminate slow moving
and flabby inventories.

3. The working capital needs of the borrower cannot be entirely financed by the
bankers. They will finance only a reasonable part for the remaining borrower
should depend upon his own funds, generated internally and externally.

Chore Committee Recommendations:-

1. Borrowers should submit quarterly projection of cash credit banks.

2. The banks while assessing the credit requirements from borrowers should fix
separate limits where as feasible.
3. As far as possible the borrowers should be discouraged for approaching
the bank frequently limitation in excess of sanction limits.
4. Suitable provision should be made for charging of Pena rate of interest in even
of any defaults in the timely repayment of working capital loan.

Changes in Working Capital:-

The working capital of a concern is subject to changes due to several reasons. As we

know that the gross working capital is equal to current assets. But net working capital we

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 mean the excess of current assets over current liabilities. The net working capital is
therefore, affected by the following transactions.
1. Which increase the current but not the current liabilities?
2. Which decrease the current assets and current liabilities both increase in the same
direction by a transaction it does not bring any change in the net working capital of
the concern. Only the total of current assets and current liabilities increase and
decrease.

Reasons for Changes in Working Capital:-

1. Changes in the level of sales and\ or operating expenses.

2. Policy changes.
3. Changes in the technology.

Statement of Changes in Working Capital:-

Until now any increase decrease in any individual item of current assets and current
liabilities was shown in the funds flow statement. But now a statement is prepared to deficit
the changes in working capital. The net increase or decrease is then carried forward to the
funds flow statement.
The statement of working capital is prepared with the help of current assets and
current liabilities of the two periods the figures of 2 periods are compared. If there is an
increase in the amount of any current liabilities in the current year in comparison to that in
that in the previous year, it will result to an increase in the working capital. Similarly, a
decrease in the amount of any current assets or an increase in amount of current liabilities
in the current year in comparison to that in the previous year and total decrease in the end
is compared and the different of total increase and total decrease shows net increase or
decrease in the working capital.
Net increase in working capital is an application of funds and net decrease in
working capital in the source of funds. A form of statement is shown below.

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 WORKING CAPITAL MANAGEMENT AND CONTROL

INTRODUCTION

Working capital is taken to be a life blood of the business lack of working capital may lead
a business to technical insolvency and ultimately to liquidation. That is why working
capital management of a firm is considered to be one of the most important tasks of the
financial managers working capital management decisions involves decision relating to
current assets including decision about how these current assets are too be financed , what
should be the volume of the current assets.

DEFINITION

Current assets minus current liabilities. Working capital measures how much in liquid
assets a company has available to build its business. The number can be positive or
negative; depending upon how much debt the company is carrying. In general, companies
that have a lot of working capital will be more successful since they can expand and
improve their operations. Companies with negative working capital may lack the funds
necessary for the growth. Also called net current assets or current capital.

WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital

1. Gross working capital

It refers to the firm‘s investment in current assets. Current assets, which can be converted
into cash within an accounting year or operating cycle and include cash, short term
securities, debtors, bills receivables and stoc

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 2. Net working capital

Technically it is the difference between the current assets and current liabilities. 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.

In short current assets have a positive relationship with working capital and current
liabilities have a negative relationship with working capital. Current credit soundness is
indicated by positive Net Working Capital position and is of major concern to investors and
bankers. It is measured by the current ratio obtained by dividing rupee value of current
assets by the rupee value of current liabilities. Larger the ratio the more solvent the firm,
i.e., in the event of bankruptcy, falling prices of inflated values, the book value of current
assets could shrink considerably and the firm creditors would still be assured of payment.

However from management point of view, a high ratio may indicate poor planning
since excessive amounts are tied up in unproductive current assets, which tend to
produce a lower income. In a firm‘s statement of Financial Position, these components
of working capital are reported under the following headings.

Current Assets
Liquid Assets (cash and bank deposit)

Inventory

Debtor and Receivable

Current Liabilities

Bank Overdraft

Creditors and Payables

Other Short Term Liabilities

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 WORKING CAPITAL CYCLE

MANAGEMENT OF WORKING CAPITAL

Working Capital is the life blood of any business big or small. However, smaller
businesses might find it more trying to maintain a comfortable level of capital. Managing
working capital is an important factor for them.

Working Capital Management is important because maintaining a balance of income to

debt can be difficult and owner must be diligent to assure that it is kept. Sometimes it takes
a little assistance to maintain levels of fluidity or make major purchases.

Working Capital Management involves the relationship between a firm‘s short term
assets and its short term liabilities. The goal of working capital management is to ensure
that a firm is able to continue its operations and that it has sufficient ability to satisfy both

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maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.

RATIO ANALYSIS
Several ratios calculated from the accounting date, can be grouped into various
classes according to financial activity or function to be evaluated. As stated earlier, the
parties interested in financial analysis are short and short and long-term creditors, owners
and management.
―Short-term creditors‖ main interest is in liquidity position or the short-term
solvency of the firm. Long-term creditors, on the other hand, and more interested in the
long- term solvency and profitability of the firm. Similarly, owners concentrate on the
firm‘s profitability and financial conditions. Management is interested on in evaluating
every aspect of the firm‘s performance. They have to protect the interests of all parties and
see that the firm grows profitably. In view of the requirements of the various users of ratio,
we may classify them into the following four important categories.

Types of Ratio:-

 Liquidity ratios
 Leverage ratios
 Activity ratios
 Profitability ratios

Liquidity Ratio:-

The liquidity refers to the maintenance of cash, bank balance and those assets, which are
easily convertible into cash in order to meet the liabilities as and when arising. So, the
ratios study the firm‘s short-term solvency and its ability to pay off the liabilities.

1) Current Ratio:-

Current ratio is the ratio of current and current liabilities. Current assets are assets which
can be converted into cash within one year and include cash in hand and at bank, bills
receivable, net sundry debtors, stock of raw materials, finished goods and work in
progress, prepaid expenses, outstanding and occurred incomes, and short term or
temporary investments. Current liabilities are liabilities, which are to be repaid within a

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period of 1 year and include bills payable, sundry creditors, bank over drafts, and
outstanding expenses, Income received in advanced, proposed dividend, provision for
taxation, unclaimed dividends and short term loans and advances repayable within 1 year

Current assets
Current Ratio= -----------------------------------------------

Current liabilities

A current ratio 2:1 is considered as ideal: if a business has an undertaking with its
bankers to meet its working capital requirements short notices, a current ratio of is
adequate.

2) Quick Ratio:-

Quick assets

Quick ratio= --------------------------------------------------

Quick liabilities

A quick ratio of 1 is considered as ideal. A quick ratio of less than 1 is indicated of

inadequate liquidity of the business. A very high ratio is also not available as funds can
be profitability employed.

3) Absolute Liquid Ratio:-

It is ratio of absolute liquid ratio assets to quick liabilities. However, for calculation
purposes, it is taken as ratio of liquid assets of current liabilities. Trade investment or
marketable securities are equivalent of cash therefore; they may be included in the
computation of absolute liquid ratio.
Absolute liquid ratio
Absolute quick ratio=
Current liabilities

Leverage Ratios:

Leverage ratio indicates the relative interest of owners and creditors in a business. It

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shows the proportions of debt and equity in financing the firm‘s assets the long- term
solvency of a firm can be examined by using leverage ratio. The long-term creditors like
debenture holders, financial institutions etc. Are more concerned with firms long –term
financial strength.
There are two aspects of the long-term solvency of a firm
1) Ability to repay the principal when due, and
2) Regular payment of the interest they leverage ratio are calculated to measure the
financial rest and firms abilities of using debt.

4) Total Debt Ratio:-

Total debt will include short and long-term borrowing from financial institution
debentures bonds. Capital employed will include total debt and net worth.
The firm may be interested in knowing the proportion of the interest bearing debt in
the capital structure by calculating total debt ratio. A highly debt burdened firm difficulty in
raising funds from creditors and owners in future. Creditors treat the owner‘s equities as a
margin of safety.

Total Debt
Total Ratio= ----------------------------------------------
Capital Employed

5) Debt –Equity Ratio:-

It reflects the relative claims of creditors and shareholders against the assets of the
business. Debt, usually, refers to long-term liabilities. Equity include preference share
capital and reserves.
The relationship describing the lenders contribution for each refers of the
owner‘s contribution is called debt equity ratio.
A high ratio shows a large share of financing by the creditors relative to the owner‘s
and therefore, large claim against the assets of the firm.

A low ratio implies a smaller claim of creditors. The equity indicates the margin of satisfy
to the creditors so, there is no doubt the Beth high and low debt equity ratios are not

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desirable. What is needed is a ratio, which strikes a proper balance between debt and
equity.

Total Debt
Debt-Equity =-------------------------------------
Net worth

Some financial experts opine that debt should indicate current liabilities also. However,
this is not a popular practice. In case of preference share capital, it is treated as a part of
shareholders funds, but if the preference shares are redeemable, they are taken as a part of
long-term debt shareholder funds are also known as proprietor funds and it indicates
items equity share capital, reserve, and surplus. A debt equity ratio of 3:1 is considered
ideal.

4) Proprietary Ratio:-
It expresses the relation between net worth and total assets.

Net worth
Property ratio= ----------------------------------------
Total assets
Net worth= equity share capital + preference share capital + reserves – fictitious assets.
Total assets= fixed assets + current assets (excluding fictitious assets)
Reserve earmarked specifically for a particular purpose should not be
included in calculation of net worth.

5) Fixed Assets Ratio:-

Fixed assets
Fixed Assets = -----------------------------------------
Capital employed

Advantage Of Financial Ratios

 Useful of evaluation performance in terms of profitability and financial stability.

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38
  Useful for intra & inter firm comparison.

 Useful forecasting and budgeting.

 It is just in tabular form over a period of years indicated the trend of business.

 Smile to understand rather than the reading but the figures of financial statement.

 Key tool in the hand of modern financial management.

 Enable outside parties to assess the strength and weakness of the firm.

 Ratio analysis is very useful for ranking management decisions and also highlights
the performance in the area of profitability financial stability and operational
efficiency.

Limitations of Financial Ratios

The ratio analysis is widely used of technique to evaluate the financial position and
performance of business. But there are certain problems in using ratios.
The analyst should be aware of these problems the following are some of the limitations
of ratio analysis.

 It is difficult to decide on the proper basis of comparison.

 The comparison is rendered difficult because of differences in situations of two
companies or of one company over years.
 The price level changes make the interpretation of ratios invalid. The
differences in the definitions of items in the balance sheet and the profit &
loss statement make the interpretation of ratios difficult.
 The ratios calculated at a point of time or less informative and defective as they
suffer from short term changes.
 Difference in accounting policies and accounting period make the accounting data
of firms non comparable as also the accounting ratios.
 It is very difficult to generalize weather a particular ratio is good or bad.
 For ex: a low current ratio may be said bad from the point of view of low
liquidity. Buta high current ratio may not be good. As this may results from in
efficient working capital management.

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 RESEARCH
METHODOLOGY

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40
RESEARCH METHODOLOGY:

A Research design is simply a plan for study collecting data and analyzing
the data. It helps the Researcher to conduct the study in economical method
and relevant condition to the problem. The methodology should combine
company with efficiency. The questionnaires method is for collecting the
primary data is collected from the companies journals.
Research is the process of systematic and in-depth study or search for any
particular topic, subject or area of investigation, backed by collection,
compilation, presentation and interpretation of relevant details or data.
Research methodology is a way to systematically solve the research
problem. It may be understood as a science of studying how research is done
scientifically. Research may develop hypothesis and test it.

Definition:-
―Research Methodology is a systematic way of investigation
directed to the discovery of some facts by careful study of a subject, a
course of critical and scientific inquiry.‖

Research methodology is a systematic approach in management research to achieve pre-

defined objectives. It helps a researcher to guide during the course of research work. Rules
and techniques stated in research methodology save time and labour of the researcher as
researcher know how to proceed to conduct the study as per the objective.

SELECTION OF TOPIC: The selection of topic is a crucial factor in any research study.
There should be newness and it should give maximum scope to explore the ideas from
different angles. In present day due to increase in competition, working capital is becoming
necessary for the organization. It is that part of capital which is necessary to undertake day
to day expenditure of the business organization. Whatever may be the organization,
working capital plays an important role, as the company needs capital for its day to day
expenditure. Thousands of companies fail each year due to poor working capital
management practices. Entrepreneurs often don't account for short term disruptions to cash
flow and are forced to close their operations. Working capital is the fund invested by a

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firm in current assets. Now in a cut throat competitive era where each firm competes with
each other to increase their production and sales, holding of sufficient current assets have
become mandatory as current assets include inventories and raw materials which are
required for smooth production runs. Holding of sufficient current assets will ensure
smooth and uninterrupted production but at the same time, it will consume a lot of working
capital. Here creeps the importance and need of efficient working capital management.
After due to consultation with the external guide /internal guide, the topic was finalized and
titled as-“A STUDY ON WORKING CAPITAL MANAGEMENT OF N.K
KUSUMGAR &CO.”

SELECTION OF LOCATION FOR THE STUDY: The location for study was selected as the
corporate office of N.K KUSUMGAR & CO. Nagpur.

RESEARCH DESIGN: “A Research design is the arrangement of conditions for

collection and analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure‖ The research design followed to study the working
capital management of N.K KUSUMGAR & CO. is Descriptive and Analytical Research
Design.

DATA COLLECTION:

 Data collection is a term used to describe a process of preparing and collecting data
 Systematic gathering of data for a particular purpose from various sources, that has
been systematically observed, recorded , organized.
 Data are the basic inputs to any decision making process in business

Secondary data collection:

The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, journals, annual reports of the company etc. It
will save the time, money and efforts to collect the data. Secondary data also made
available through trade magazines, annual reports, books etc.

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This project is based secondary data collected through annual reports of the organization.
The data collection was aimed at study of working capital management of the company.

Project is based on SECONDARY Data

1 Annual report of N.K.K CO.2012-2013

2. Annual report of N.K.K CO.2013-2014
3. Annual report of N.K.K CO.2014-2015
4. Annual report of N.K.K CO.2015-2016

TOOLS USED IN ANALYSIS:

Ratio analysis
Comparative balance sheet

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DATA ANALYSIS &
INTERPRETATION

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44
RATIO ANALYSIS

 Current Ratio:

Current Ratio = Current Assets

Current Liabilities

STATEMENT OF CURRENT ASSETS & LIABILITY OF 4 YEARS PERIOD

Year Current assets Current liabilities Ratio

2011-12 143,769,303 31,984,701 4.49

2012-13 112,402,072 33,874,411 3.32

2013-14 120,168,153 35,293,118 3.40

2014-15 133,183,187 28,323,568 4.70

2015-16 127,868,217 41,730,900 3.06

CURRENT RATIO
5

2 current ratio

0
2011-12 2012-13 2013-14 2014-15 2015-16

Interpretation of Current Ratio

From the above table we can notice there is an increase the current ratio in the last
five years. In general 2:1 is the ideal ratio for current ratio. The company‘s current ratio is
more than the ideal ratio. In average the company is in liquid position because in average
the current ratio equal to the ideal ratio.

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  Quick Ratio:
Quick Ratio = Current Assets –Inventories

CurrentLiabilities

(Current Assets- Current Liabilities

Year Ratio
inventories) in Rs.

2011-12 121,539,748 31,984,701 3.8

2012-13 104,603,230 33,874,411 3.09

2013-14 112,943,693 35,293,118 3.2

2014-15 98,301,437 28,323,568 3.47

2015-16 99,947,717 41,730,900 2.4

QUICK RATIO
4

3.5

2.5

2
quick ratio
1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Interpretation of Quick Ratio

Generally a quick ratio of 1:1 is considered to represent a satisfactory current
financial condition and has sound liquidity position. The above table shows Quick ratio is
very high in the year of 2012-13 it was 3.80
The Ratio was more than 1:1 in all the years. It has sound liquidity position. The above table
shows Quick ratio. However, the company is in liquidity position

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  Debtors Turnover Ratio:-

Sales

Debtors Turnover Ratio = Debtors

Years Credit sales (Rs.) Average Debtors (Rs.) Ratios

2011-12 723,224,811 116,905,050 6.19
2012-13 762,480,593 112,674,091 6.77
2013-14 858,890,511 107,182,464 8.01
2014-15 1,013,898,378 103,860,320 9.76
2015-16 995,503,080 95,148,436 10.46

DEBTORS TURNOVER RATIO

12

10

6 DEBTORS TURNOVER RATIO

0
2011-12 2012-13 2013-14 2014-15 2015-16

Interpretation of Debtor Turnover Ratio

Debtors‘ turnover ratio indicates the number of times debtors turnover each
year. Generally higher value of debtor‘s turnover, the more efficient is the
management of credits .

The debtor‘s turnover ratio of the company in the year2012-2013 is 10.46 it has
found that very high.It has been found that in all financial year the ratio were
increasing.

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  Inventory Turnover Ratio
Cost of Sales
Inventory Turnover Ratio =
Average Inventory

Cost of goods sold Average

Years Ratio
(Rs.) Inventory (Rs.)

2011-12 690,099,553 29,644,203 23.28

2012-13 726,729,179 15,014,199 48.4

2013-14 832,061,052 7,511,651 110.77

2014-15 1,018,553,198 21,053,105 48.38

2015-16 965,695,835 31,401,125 30.75

INVENTORY TURNOVER ( IN TIMES)

2015-16

2014-15

2013-14 INVENTORY TURNOVER ( IN

TIMES)
2012-13

2011-12

0 20 40 60 80 100 120

Interpretation of Inventory Turnover Ratio

Inventory turnover indicates the number of times the stock has turned over during the
period and evaluates the efficiency with which the firm is able to manage its inventory. The
inventory turnover is high during the year 2010-11. High inventory turnover indicates good
inventory management. On the whole the turnover is high it indicates efficient management
of inventory by the company. The stocks are sold more frequently and lesser amount is
required to finance the inventory.

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  Working Capital Turnover Ratio

Sales
Net Working Capital
Working Capital TurnoverRatio =

Sales Working Capital

Years Ratio
Rs. Rs.

2011-12 723,224,811 111,784,602 6.74

2012-13 762,480,593 78,527,661 9.71

2013-14 858,890,511 84,875,035 10.12

2014-15 1,013,898,378 104,859,619 9.67

2015-16 995,503,080 86,137,317 11.56

SALES TO WORKING CAPITAL

12

10

8
SALES TO WORKING
6
CAPITAL
4

0
2011-12 2012-13 2013-14 2014-15 2015-16

Interpretation of Sales to Working Capital Ratio

If working capital turnover ratio of the company in the year 2011-12 was 6.74it has been
increased in all the year. It has been increased at higher level in the year 2015-16 at 11.56
times showing the efficiency in working capital of company.

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  Average Collection Period

Average Collected Period = 360 days / Debtors turnover Ratio

Debtors Turnover Average Collection

Year Days
Ratio Period

2011-12 360 6.19 58.16

2012-13 360 6.77 53.18

2013-14 360 8.01 44.94

2014-15 360 9.76 36.89

2015-16 360 10.46 34.42

AVERAGE COLLECTION PERIOD

2015-16
2014-15
2013-14 AVERAGE COLLECTION PERIOD
2012-13
2011-12

0 10 20 30 40 50 60

Interpretation of Average Collection Period:

As shown in the table and in the diagram the avg. collection period of the company is less
that indicates the cash collection efficiency management of the company. In the year 2012-
13 the collection period were 58 days & it decreased up to 34 days in the year 2015-16

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  Fixed Assets Turnover Ratio:-
Net sales
Fixed assets turnover ratio =

Fixed assets

Years Net Sales (Rs.) Fixed Assets(Rs) Ratios

2011-12 723,224,811 12,721,495 56.85

2012-13 762,480,593 12,453,987 61.22

2013-14 858,890,511 13,375,027 64.22

2014-15 1,013,898,378 12,659,868 80.09

2015-16 995,503,080 13,084,493 76.08

Series 1

100

80

60
Series 1
40

20

0
2011-12 2012-13 2013-14 2014-15 2015-16

Interpretation of Fixed Assets Turnover Ratio:

The fixed assets turnover ratio indicates the best possible utilization of the fixed assets
of the company in gaining the high turnover. As in the year 2015-16 the ratio was high
80.09
In all the year the fixed assets turnover ratio of the company was high

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  Net Profit Ratio

Profit after tax

Net profit ratio =

Net sales

Years Net Sales (Rs.) Profit (Rs) Ratios

2011-12 723,224,811 16,645,463 2.302
2012-13 762,480,593 16,743,019 2.196
2013-14 858,890,511 23,082,712 2.688
2014-15 1,013,898,378 25,383,068 2.504
2015-16 995,503,080 26,455,934 2.658

NET TURNOVER RATIO

3

2.5

1.5
NET TURNOVER RATIO
1

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Interpretation of Net Profit Ratio:

A firm with high net profit margin can make better use of favorable conditions. Such as
rising selling prices, falling cost of products or increasing demand for the product. Such a
firm will be able to accelerate its profits at a faster rate than a firm with a low net profit
margin.
It was found that the profit ratio of the company remains constant as it not decrease
and increase. in all five years the profit stood at between 2% to 3%

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 FINDINGS

1. Current assets for the year 2011/12 is decreases and its application for the company and
current liabilities of the company is increased by 61,151,066and by putting formula
(W.C= C.A- C.L) working capital of the company for year 2011/12 is111,784,600.

2. Current assets for the year 2012/13 is increases and it is good condition for the
company and current liabilities of the company is decreased that‘s shows the working
capital of the company is increased. Here debtors increased means cash balance of
company decreased.

3. Current assets for the year 2013/14 are increases and it is good condition for the
company and current liabilities of the company are increased that‘s shows working
capital of company decreased. Here debtors decreased that‘s good for company it
shows cash of company increased.

4. Current ratio (C.R) of fiscal year 2012/13 to 2014/15 showed slightly increase i.e. 4.49
to 4.70 But in fiscal year 2015/16 C.R decreased.

5. Cash and Bank balance to current assets ratio of the company is in 2012/13 decreased
and in 2015/16 it increased.

6. The above figure depicts that the cash and bank balance to total deposit of has been
slightly decreasing in FY 2012/13, 2013/14, 2014/15.

7. Net profit to total asset ratio is increasing slightly in financial year 12-13, 13-14
2014/15 & 2015/16.

8. The debtor‘s turnover ratio was increasing in all five financial year from 12-13 to
2015/16 Ratios 6.19 to10.46.
9. The creditors turnover ratio was 1.17 times in the year 2008/09& decreased to 1.13
times in the year 2012-2013 but creditor turnover will be remain same two year
2012/13 and 2013/14.

10. The working capital ratio of the company was 6.74, 9.71, 10.12, 9.67 & 11.56 times
were increasing all the years from the year 2012/13 to2015/16.

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 CONCLUSION
At the end it is stated that the working capital management is a part of money invested in
the business. Working capital may be regarded as lifeblood of a business. Its effective
provision can do much to ensure the success of a business.
The Working Capital Management contributes much in the overall management of the
organization affairs, efficiency of organization operations depend on how it manages its
short term business dealings. Working Capital management contributes for the firm
efficiency as well as the finance manager is proper utilizing the available wealth and
maintaining the required liquidity.
On the basis of data analysis on working capital management in N.K.K CO., the following
conclusions arrived.

 The company has gross profit for the past five years (2011-12, 2012-13, 2013-14,
2014- 15, & 2015-16) in positive gaining at a constant rate and the current liabilities
are increasing, in comparison to current assets position in the year 2011-12, 2012-
13 &2015-16. Hence, it is an alarming sign for the smooth working capital management.
 The N.K.K CO. Manage the liquidity position of the company. The liquidity
position was in a good condition and in 2011-12, it was also satisfactory. But, in the
year 2013-14, 2014-15 & the ratio was lowest in year 2015-16. The situation of
liquidity position was alarming due to increase in total current liabilities and
decrease in total current assets which led to the decrease in the net working capital
of the company. Still company maintains the liquidity ratio above 1:1 in allyear.
 During the year 2011-2012, 2012-2013& 2015-16 the company‘s liquid assets were
not satisfactory.

The average collection period of the company during the year 2011-12 was 58 days, it
is reduced to 53 days in 2012-2013 and again it reduced to 45 days in 2013-2014, the
average collection period standing at the satisfactory level in the year 2012-13 to
34day.
There is also satisfactory net cash flow from the operating, investing and financing
activities of the organization.

 Though the net working capital of the company is decreased, in 3 out of 5 years still the
company is in a better manageable position and the company‘s present status of
maintaining current assets and current liabilities are satisfactory.

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SUGGESTIONS

 Suggested the company should follow the present working capital.

 Company should maintain high quick assets to overcome current liabilities for
better results.

 For better results company has to maintain cash inflows to overcome current
liabilities of the firm.

 To gain good profits company has to improve the sales through inventory
management.

 The company b should try to reduce external liabilities, having paid high EPS &DPS.

 The company should make arrangement of receivables and cash.

 By adapting better management practices, the company may attain a sound financial
position in future and able to manage its working capital efficiently

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55
BIBLOIGRAPHY

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56
BIBLIOGRAPHY

Financial Management By CA P.H Mitkary

Working Capital Management Control By Satish B.Mathur

Principles On Working Capital Management By Dr. J.BGupta

Financial Management By CMA Ravi M.Kishore

Working Capital Management CA V.Murli

WWW.KUSUMGARGROUP.COM
WWW.WORKINGCAPITAL.COM

WWW.CFA.COM

WWW.ICAI.ORG

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 STATEMENT OF WORKING CAPITAL OF N.K KUSUMGAR& CO.FOR THE
PERIODCOMMENCING FROM 1ST APRIL, 2012 TO 31ST MARCH, 2013

Particulars 31/03/2011 31/03/2012 Increase Decrease

Current Assets
Sundry Debtors
120,855,171 112,954,928 7,900,243
Cash& bank balance
6,950,153 412,437 6,537,716
Inventories
37,058,851 22,229,555 14,829,296
Loans & Advances
8,692,482 8,172,381 520,101

Total Current Assets (A)

173,556,657 143,769,301

Current
Liabilities
Sundry Creditors
48,619,673 24,421,668 24,198,005
Other Payables &
Provisions 12,531,393 7,563,033 4,968,360

Total Current Liability (B)

61,151,066 31,984,701

Working Capital [ A-B ]

112,405,591 111,784,600 29,166,365
DECREASE IN
WORKING CAPITAL 620,991 620,991
112,405,591 112,405,591 29,787,356 29,787,356

Page
58
 STATEMENT OF WORKING CAPITAL OF N.K KUSUMGAR& CO.FOR THE
PERIOD COMMENCING FROM 1ST APRIL, 2013 TO 31ST MARCH, 2014

Particulars 31/03/2012 31/03/2013 Increase Decrease

Current Assets
Sundry Debtors
121,127,309 104,220,873 16,906,436
Cash& bank balance
412,438 382,357 30,081
Inventories
22,229,555 7,798,842 14,430,713

Total Current Assets (A)

143,769,302 112,402,072

Current
Liabilities
Sundry Creditors
24,421,669 25,888,202 1,466,533
Other Payables &
Provisions 7,563,033 7,986,209 423,176

Total Current Liability (B)

31,984,702 33,874,411

Working Capital [ A-B ]

111,784,600 78,527,661
DECREASE IN
WORKING CAPITAL 33,256,939 33,256,939
TOTAL 111,784,600 111,784,600 33,256,939 33,256,939

Page
59
 STATEMENT OF WORKING CAPITAL OF N.K KUSUMGAR& CO.FOR THE
PERIOD COMMENCING FROM 1ST APRIL, 2014 TO 31ST MARCH, 2015

Particulars 31/03/2013 31/03/2014 Increase Decrease

Current Assets
Sundry Debtors
104,220,873 110,144,055 5,923,182
Cash& bank balance
382,357 2,799,638 2,417,281
Inventories
7,798,842 7,224,460 574,382

Total Current Assets (A)

112,402,072 120,168,153

Current
Liabilities
Sundry Creditors
25,888,202 28,851,981 2,963,779
Other Payables &
Provisions 7,986,209 6,441,137 1,545,072

Total Current Liability (B)

33,874,411 35,293,118

Working Capital [ A-B ]

78,527,661 84,875,035
INCREASE IN WORKING
CAPITAL 6,347,374 6,347,374

TOTAL 84,875,035 84,875,035 9,885,535 9,885,535

Page
60
 STATEMENT OF WORKING CAPITAL OF N.K KUSUMGAR& CO.FOR THE
PERIOD COMMENCING FROM 1ST APRIL, 2015 TO 31ST MARCH, 2016

Particulars 31/03/2014 31/03/2015 Increase Decrease

Current Assets
Sundry Debtors
110,144,055 97,576,585 12,567,470
Cash& bank balance
2,799,638 724,851 2,074,787
Inventories
7,224,460 34,881,750 27,657,290

Total Current Assets (A)

120,168,153 133,183,186

Current
Liabilities
Sundry Creditors
28,851,981 20,177,013 8,674,968
Other Payables &
Provisions 6,441,137 8,146,555 1,705,418

Total Current Liability (B)

35,293,118 28,323,568

Working Capital [ A-B ]

84,875,035 104,859,618
INCREASE IN WORKING
CAPITAL 19,984,583 19,984,583

TOTAL 104,859,618 104,859,618 36,332,258 36,332,258

Page
61
 STATEMENT OF WORKING CAPITAL OF N.K KUSUMGAR& CO.FOR THE
PERIOD COMMENCING FROM 1ST APRIL, 2015 TO 31ST MARCH, 2016

Particulars 31/03/2015 31/03/2016 Increase Decrease

Current Assets
Sundry Debtors
97,576,585 92,720,341 4,856,244
Cash& bank balance
724,851 7,227,376 6,502,525
Inventories
34,881,750 27,920,500 6,961,250

Total Current Assets (A)

133,183,186 127,868,217

Current
Liabilities
Sundry Creditors
20,177,013 34,868,003 14,690,990
Other Payables &
Provisions 8,146,555 6,862,897 1,283,658

Total Current Liability (B)

28,323,568 41,730,900

Working Capital [ A-B ]

104,859,618 86,137,317
DECREASE IN
WORKING CAPITAL 18,722,301 18,722,301

TOTAL
104,859,618 104,859,618 26,508,484 26,508,484

Page
62