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Contents

1) Analysis of liquidity position of the firm

2) Approaches to financing Current Assets

3) Calculation of gross operating cycle and cash conversion cycle

4) Investment of short-term surplus funds

5) Working capital management policy

6) Long term sources of finance


Industry: Hospital and Healthcare Services

Company 2: Narayana Hrudayalaya

1. Analysis of liquidity position of the firm

 The percentage of current assets to total assets and current liabilities to total liabilities.

Title FY17-18 FY16-17


Current Assets/Total Assets 18.90% 18.31%
Current Liability/Total Liability 33.99% 47.19%

 Percentage of each component of current assets to total current assets

Components of current assets and their FY17-18 FY16-17


% with total current assets

(a) Inventories 17.45% 17.36%


(b) Financial assets
Trade receivables 58.21% 52.03%
Cash and cash equivalents 6.95% 8.70%
Bank balances other than above 0.40% 2.61%

Loans 1.72% 1.00%


Other financial assets 2.90% 11.70%
(c) Other current assets 12.38% 6.60%

Liquidity ratios of the company:

Cash Ratio 0.065 0.081


Current Ratio 0.940 0.935
Total Debt/Equity 0.708 0.196
Total Debt/Assets 0.289 0.114

Liquidity position of the company:


2. Approaches to financing Current Assets
Short term Financing:
1. Bank overdrafts --- Rs. 375.81(as on 31st March 2018)
--- Rs. 90.22(as on 31st March 2017)
2. Long Term Financing:
Term Loans from Bank – 7639.61

Permanent current assets

Temporary current assets

1. Matching/hedging approach
2. Conservative approach
3. Aggressive approach
3. Calculation of gross operating cycle and net operating cycle/cash
conversion cycle.
Changes in Inventory (from BS of FY18 and FY17) FY2018 FY2017
Inventory at the beginning of the year 523.60 497.47
Inventory at the end of the year 836.24 523.60
Average 679.92 510.535

Inventory Turnover 8.37 8.60


Inventory Conversion period 43.61 42.46

Account payable (from BS of FY18 and FY17) FY2018 FY2017


Trade payable at the beginning of the year 2,065.81 1610.34
Trade payable at the end of the year 2,961.92 2,065.81
Average 2,513.87 1,838.08

A/P turnover 2.39 2.40


A/P conversion period 152.85 151.96

Account receivable (from BS of FY18 and FY17) FY2018 FY2017


Trade receivable at the beginning of the year 1,569.10 1518.31
Trade receivable at the end of the year 2,789.76 1,569.10
Average 2,179.43 1,543.71

A/R turnover 10.47 12.17


A/R conversion period 34.88 30.00

Total Operating cycle 78.49 72.46


Cash Conversion cycle -74.36 -79.50
4. Investment of short-term surplus funds
5. Working capital management policy
6. Long term sources of finance

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