INDEX TABLE

SL.NO CONTENTS PAGE

NO.

1 PART – I 2 TO 6
 EXECUTIVE SUMMARY

2 PART – II 7 TO 14

 INTRODUCTION TO THE STUDY

 INDUSTRY PROFILE

PART - III 15 TO 35
3

 INTRODUCTION OF COMPANY

4 PART - IV 36 TO 39

 RESEARCH METHDOLOGY
 OBJECTIVES OF THE STUDY

6 PART - V 40 TO 66
 WORKING CAPITAL MANAGEMENT

7 PART - VI 67 TO 85

 DATA ANALYSIS AND INTERPRETATION

8 PART – VII 86 TO 89
 FINDINGS

 SUGGESTIONS &

 CONCLUSIONS.
ANNEXURE
9
90 TO 92
 FINANCIAL STATEMENT.
 BIBILOGROPHY.

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EXECUTIVE SUMMARY

INDUSTRIAL PROFILE

The chemical industry is one of the oldest domestic industries in India,

contributing significantly to both the industrial and economic growth of the country since
it achieved independence in 1947. The chemical industry currently produces nearly
70,000 commercial products, The industry covers a large spectrum of categories
including inorganic and organic chemicals, drugs and pharmaceuticals, plastics and
petrochemicals, dyes and pigments, fine and specialty chemicals, pesticides and
agrochemicals and fertilizers.

COMPANY PROFILE

Bahety chemicals and Minerals (Pvt) Limited is a small-scale industry. The

company purchased and constructed building in the year 1993. It started production in the
year 1996. Its main product is Aluminium Sulphate. It is a private company situated in the
Industrial estate, Ambewadi. On the outskirts of Dandeli city which is enjoying all the
required facilities like water, power, transport, labors and good environment and
materials.

NEED FOR THE STUDY

 The study has been conducted for gaining practical knowledge about Working Capital
Management & activities of Bahety Chemicals & Minerals pvt ltd.,

 The study is undertaken as a part of the MBA curriculum from 01 June 2010 to
31st July 2010 in the form of summer in plant training for the fulfillment of the
requirement of MBA degree.

OBJECTIVES OF THE STUDY

 To study the sources and uses of the working capital.

 To study the liquidity position through various working capital related ratios.

 To study the working capital components such as receivables accounts,

Cash management, Inventory management.

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 To make suggestions based on the finding of the study.

SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The main
scope of the study was to put into practical the theoretical aspect of the study into real life
work experience. The study of working capital is based on tools like Ratio Analysis,
Statement of changes in working capital. Further the study is based on last 5 years Annual
Reports of Bahety Chemicals & minerals pvt ltd.

LIMITATIONS OF THE STUDY

 The study duration (summer in plant) is short.

 The analysis is limited to just five years of data study (from year 2006 to year 2010)
for financial analysis.
 Limited interaction with the concerned heads due to their busy schedule.

 The findings of the study are based on the information retrieved by the selected unit.

METHDOLOGY
In preparing of this project the information collected from the following sources.

Primary data:
The Primary data has been collected from Personal Interaction with Finance manager i.e.,
Mr. Mahesh Nadkarni and other staff members.

Secondary data:
The major source of data for this project was collected through annual reports, profit and
loss account of 5 year period from 2006-2010 & some more information collected from
internet and text sources.

SAMPLING DESIGN
Sampling unit : Financial Statements.
Sampling Size : Last five years financial statements.

Tools Used: MS-Excel has been used for calculations.

-3-
FINDINGS:

 Working capital of the Bahety Chemicals & Minerals Pvt Ltd. was increasing and
showing positive working capital per year.

 The Bahety Chemicals & Minerals Pvt Ltd has higher current and quick ratios are i.e.,
2.87 and 2.30 respectively. So the company’s liquidity position is good. It shows that it is
able to meet its current obligations.

SUGGESTIONS

 Working capital of the company has increasing every year. Profit also increasing
every year this is good sign for the company. It has to maintain it further, to run the
business long term.

 The Current and quick ratios are almost up to the standard requirement. So the
Working capital management. Bahety Chemicals & Minerals Pvt Ltd. is satisfactory and
it has to maintain it further.

CONCLUSION:

The study on working capital management conducted in Bahety Chemicals &

Minerals Pvt Ltd. to analyze the financial position of the company. The company’s
financial position is analyzed by using the tool of annual reports from 2005-06 to 2009-
10.
The financial status of Bahety Chemicals & Minerals Pvt Ltd. is good. In the last year the
inventory turnover has increased, this is good sign for the company.
On the whole, the company is moving forward with excellent management.

-4-
INTRODUCTION TO THE STUDY

BACKGROUND OF STUDY

"Cash is the lifeblood of business" is an often repeated maxim amongst

financial managers. Working capital management refers to the management of current or

short-term assets and short-term liabilities. Components of short-term assets include

inventories, loans and advances, debtors, investments and cash and bank balances. Short-

term liabilities include creditors, trade advances, borrowings and provisions. The major

emphasis is, however, on short-term assets, since short-term liabilities arise in the context

of short-term assets. It is important that companies minimize risk by prudent working

capital management.      

STATEMENT OF THE PROBLEM

This project deals with the study about “Working Capital Management” in
BAHETY CHEMICALS AND MINERALS PVT. LTD

IMPORTANCE OF THE STUDY

There are numerous aspects of working capital management that makes it an important
topic for the study.
The management of assets in any organization is an essential part of overall
management. The enterprise, at the time of formation attaches great importance to fixed
assets management, as a part of investment decision-making. However, in the overall
day-to-day financial management, after the initial investment, the management gives
more importance to managing working capital. If we look at any financial statement it
will be evident that the investment in fixed assets remains more or less static but the
working capital is constantly changing. A healthy working capital position is the sine-
qua-non of a successful business. This is reflected in adequate inventories, lowest level of

-5-
debtors, minimum utilization of bank facilities for working capital, etc. thus the study of
working capital management occupies an important place in financial management.

INDUSTRIAL PROFILE

HISTORY

The chemical industry is one of the oldest domestic industries in India,

contributing significantly to both the industrial and economic growth of the country since

it achieved independence in 1947. The chemical industry currently produces nearly

70,000 commercial products, ranging from cosmetics and toiletries, to plastics and

pesticides.

The wide and diverse spectrum of products can be broken down into a number of
categories, including inorganic and organic (commodity) chemicals, drugs and
pharmaceuticals, plastics and petrochemicals, dyes and pigments, fine and specialty
chemicals, pesticides and agrochemicals, and fertilizers.

The Indian pesticide industry has advanced significantly in recent years, producing more
than 1,000 tons of pesticides annually. India is the 13th largest exporter of pesticides and
disinfectants in the world, and in terms of volume, is the 12th largest producer of
chemicals. The Indian agrochemical, petrochemical, and pharmaceutical industries are
some of the fastest growing sectors in the economy. With an estimated worth of $28
billion, it accounts for 12.5 percent of the country's total industrial production and 16.2
percent of the total exports from the Indian manufacturing sector.

Having a strong focus on modernization, the Indian government actively promotes the
advancement of the domestic chemical industry. Policy, planning, development, and
regulation of the industry is all coordinated by the Department of Chemicals and Petro-
chemicals, which has been part of the Ministry of Chemicals and Fertilizers since 1991.
Several organizations in the private sector are working towards growth of the industry
and the export of Indian chemicals. Among these are the Indian Chemical Manufacturers

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Association, the Chemicals and Petrochemicals Manufacturers Association, and the
Pesticides Manufacturers and Formulators Association of India.

INTRODUCTION OF THE COMPANY

COMPANY PROFILE

HISTORY OF THE COMPANY

Bahety chemicals and Minerals (Pvt) Limited is a small-scale industry. The

company purchased and constructed building in the year 1993. It started production in the
year 1996. It is a private company situated in the Industrial estate, Ambewadi. On the
outskirts of Dandeli city which is enjoying all the required facilities like water, power,
transport, labors and good environment and materials.

The company is achieving its sales target with some ups and downs. The company has
been receiving good response from customers and expected to achieve better sales in
coming years .The Company has its nature of business.

The company has not accepted any deposits from public as per the provisions of
section 58A of the company Act, 1956.

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PROFILE OF AWADH CHEMICALS AND MINERALS PVT. LTD

Name of the company BAHETY CHEMICALS AND MINERALS PVT.LTD,

DANDELI – 581325.

Year of establishment 1993.

Chairman Shri Chandrashekhar. J. Bahety

Type of company Private Limited.

Bahety Chemicals and Minerals (Pvt) Ltd.,
Area of operation
C – 1, Industrial Estate,
Ambewadi, Dandeli – 581325. Dist: Karwar ( u.k ),

Karnataka State. Tel:-08284 - 232342.

Nature of Business Production and Sale of Alumina Sulphate (Alum).

Export places Dandeli, Harihar, Goa, Hyderbad, Hubli, Dharwad,

Banglore, Nagpur, Belgaum.

No. of departments 6 [Six] Departments.

Number of employees 127

Number of working days 6 days in a week.

Production capacity 800 MT of Aluminium sulphate (Alum) per month as per the
2009-2010 report.

Storage Capacity 1000 Metric TON.

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CAPITAL STRUCTURE OF BCM.CO.LTD

SHARE CAPITAL:-

1. Authorized capital Rs. 10,00,000

10,000 equity shares of Rs. 100 each.
2. Subscribed/ paid-up share capital Rs. 10,00,000
10,000 equity shares of Rs .100 each.

BORROWED FUND:-

The Company has taken long term loans from Corporation Bank Dandeli. It has also

taken unsecured loans from its joint associate Shri. Raghavendra Chemicals. The

company has also received government subsidy of 25% on capital investments.

TABLE SHOWING THE LONG TERM LOANS TAKEN BY BCM.CO.LTD

Loan
Year Secured Loan Unsecured Loan
2005 -2006 2019216.00 569734.00
2006 - 2007 3651599.00 115000.00
2007 - 2008 3742360.00 2664000.00
2008 - 2009 2238845.00 2651471.00
2009 - 2010 2574672.00 3049192.00

INVESTMENT IN FIXED ASSETS IS SOWN BELOW

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 SL.NO Fixed Assets Total Investment (Rs.)
1 Land and Building 30,00,000.00
2 Machinery 12,00,000.00
3 Adjacent Building 15,00,000.00

VISION AND MISSION OF BCM .CO.LTD

“VISION”

“To fulfill the growing demand of Alum and increasing the production”

“MISSION”

1. To provide employment.

2. Quality product,

3. Maximum satisfaction to customers.

4. To ensure enterprise growth.

5. To create clean and healthy environment.

6. To develop the establishing the organization in the city.

- 10 -
 SCOPE OF THE STUDY

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

scope of the study was to put into practical the theoretical aspect of the study into real life

work experience. The study of working capital is based on tools like Ratio Analysis,

Statement of changes in working capital. Further the study is based on last 5 years Annual

Reports of Awadh Chemicals & minerals pvt ltd.

OBJECTIVES OF THE STUDY

 To study the sources and uses of the working capital.

 To study the liquidity position through various working capital related ratios.

 To study the working capital components such as receivables accounts,

Cash management, Inventory management.

 To make suggestions based on the finding of the study.

RESEARCH METHDOLOGY

INTRODUCTION:

Research methodology is a way to systematically solve the research problem. It May be

understood as a science of studying now research is done systematically. In that various
steps, those are generally adopted by a researcher in studying his problem along with the
logic behind them.

“The procedures by which researcher go about their work of describing, explaining and
predicting phenomenon are called methodology”.

TYPE OF RESEARCH:

This project “A Study on Working Capital Management of Awadh chemicals &

minerals Private Ltd” is considered as an analytical research.

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Analytical Research is defined as the research in which, researcher has to use facts or
information already available, and analyze these to make a critical evaluation of the facts,
figures, data or material.

SOURCE OF RESEARCH DATA:

There are mainly two through which the data required for the research is collected.

PRIMARY DATA:

The primary data is that data which is collected fresh or first hand, and for first time

which is original in nature.

In this study the Primary data has been collected from Personal Interaction with Finance

manager i.e., Mr. Mahesh Nadkarni. and other staff members.

SECONDARY DATA:

The secondary data are those which have already collected and stored. Secondary data

easily get those secondary data from records, annual reports of the company etc. It will

save the time, money and efforts to collect the data.

The major source of data for this project was collected through annual reports, profit and
loss account of 5 year period from 2006-2010 & some more information collected from
internet and text sources.

SAMPLING DESIGN

Sampling unit : Financial Statements.

Sampling Size : Last five years financial statements.

Tool Used for calculations: - MS-Excel.

- 12 -
TOOLS USED FOR ANALYSIS OF DATA

The data were analyzed using the following financial tools. They are

 Ratio analysis.

 Statement of changes in working capital.

LIMITATIONS OF THE STUDY

 The study duration (summer in plant) is short.

 The analysis is limited to just five years of data study (from year 2006 to year 2010)

for financial analysis.

 Limited interaction with the concerned heads due to their busy schedule.

 The findings of the study are based on the information retrieved by the selected unit.

CAPITAL

Introduction:
Capital is the keynote of economic development. In this modern age, the level

of economic development is determined by the proportion of capital available.

Meaning of Capital:
In the ordinary sense of the word Capital means initial investment invested by

businessman or owner at the time of commencing the business.

Capital (economics), a factor of production that is not wanted for itself but for its

ability to help in producing other goods.

Definition:

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Capital is a factor of production with a specific, changeable value attached to it that
could, potentially, provide its owner with more wealth.  It is an abstract economic
concept, and, as such, has many different definitions and classifications, but the unifying
feature of capital is that it has a certain value, so it in itself is a type of wealth, and it has
the potential of generating more wealth.

Features of Capital:
Capital has the following features.
1. Capital is a man made.

2. Capital is a perishable.

3. Capital is a human control possible.

4. Capital is a mobile.

5. Capital is a human sacrifice.

6. Capital is a scarce.

7. Capital is a passive factor.

INTRODUCTION OF WORKING CAPITAL:

Working capital is the life blood and nerve centre of a business. Just as circulation of

blood is essential in the human body for maintaining life, working capital is very essential

to maintain the smooth running of a business. No business can run successfully without

an adequate amount of working capital.

There is operative aspects of working capital i.e. current assets which is known as funds
also employed to the business process from the gross working capital Current asset
comprises cash receivables, inventories, marketable securities held as short term
investment and other items nearer to cash or equivalent to cash. Working capital comes
into business operation when actual operation takes place generally the requirement of
quantum of working capital is determined by the level of production which depends
upon the management attitude towards risk and the factors which influence the amount of

- 14 -
cash, inventories, receivables and other current assets required to support given volume of
production.

Working capital management as usually concerned with administration of the current

assets as well as current liabilities. The area includes the requirement of funds from
various resources and to utilize them in all result oriented manner. It can be stated without
exaggeration that effective working capital management is the short requirement of long
term success.

The importance of working capital management is indisputable; Business liability relies

on its ability to effective management of receivables, inventory, and payables. By
minimizing the amount of funds tied up in current assets. Firms are able to reduce
financing costs or increase the funds available for expansion. Many managerial efforts are
put into bringing non-optimal level of current assets and liabilities back towards their
optimal levels.

MEANING OF WORKING CAPITAL

Working capital means the funds (i.e.; capital) available and used for day to day

operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets of a

business which are used in or related to its current operations. It refers to funds which are

used during an accounting period to generate a current income of a type which is

consistent with major purpose of a firm existence.

In Accounting:

Working capital = Current assets - Current liabilities

DEFINITIONS:

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 Many scholars’ gives many definitions regarding term working capital some of

these are given below.

According to Weston & Brigham

“Working capital refers to a firm’s investment in short-term assets cash, short

term securities, accounts receivables and inventories.

Mead Mallott & Field

“Working capital means current assets”.

Bonnerille

“Any acquisition of funds which increases the current assets increases

working capital for they are one and the same”.

Positive working capital means that the company is able to pay off its short-term

liabilities companies that have a lot of working capital will be more successful since they

can expand and improve their operations.

Negative working capital means that a company currently is unable to meet its short-term

liabilities with its current assets. . Companies with negative working capital may lack the

funds necessary for growth

OBJECTIVES OF WORKING CAPITAL MANAGEMENT

Effective management of working capital is means of accomplishing the firm’s goal of

adequate liquidity. It is concerned with the administration of current assets and current

liabilities. It has the main following objectives-

- 16 -
 1. To maximize profit of the firm.

2. To help in timely payment of bills.

3. To maintain sufficient current assets.

4. To ensure adequate liquidity of the firms.

5. It protects the solvency of the firm.

6. To discharge current liabilities.

7. To increase the value of the firm.

8. To minimize the risk of business.

THE NEED FOR THE WORKING CAPITAL

The need for working capital arises due to the time gap between production and

realization of cash from sales. Working capital is must for every business for purchasing

raw-materials, semi finished goods, stores & spares etc and the following purposes.

1. To purchase raw materials, spare parts and other component.

A manufacturing firm needs raw-materials and other components parts for the

purpose of converting them in to final products, for this purpose it requires working

capital. Trading concern requires less working capital.

2. To meet over head expenses.

Working capital is required to meet recurring over head expenses such as cost
of fuel, power, office expenses and other manufacturing expenses.

3. To hold finished and spare parts etc.

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 Stock represents current asset. A firm that can afford to maintain stock of

required finished goods, work in progress & spares in required quantities can

operate successfully. So for that adequate quantity of working capital is required.

4. To pay selling & distribution expenses.

Working capital is required to pay selling & distribution expenses. It includes

cost of packing, commission etc.

5. Working capital is required for repairs & maintenance both machinery as well as

factory buildings.

6. Working capital is required to pay wages, salaries and other charges.

7. It is helpful in maintain uncertainties involved in business field.

WORKING CAPITAL MANAGEMENT

Working Capital Management refers to management of current assets and current

Liabilities. The major thrust of course is on the management of current assets .This
Is understandable because current liabilities arise in the context of current assets.
Working Capital Management is a significant fact of financial management. Its
Importance stems from two reasons:-
 Investment in current assets represents a substantial portion of total investment.
 Investment in current assets and the level of current liabilities have to be geared
quickly to change in sales. To be sure, fixed asset investment and long term financing are
responsive to variation in sales. However, this relationship is not as close and direct as it
is in the case of working capital components.

CLASSIFICATION OF WORKING CAPITAL

On The Basis of Concepts
1) Gross Working Capital
Gross working capital is the amount of funds invested in various components of

current assets. Current assets are those assets which are easily / immediately converted

- 18 -
 into cash within a short period of time say, an accounting year. Current assets includes

Cash in hand and cash at bank, Inventories, Bills receivables, Sundry debtors, short term

loans and advances.

This concept has the following advantages:-

i. Financial managers are profoundly concerned with the current assets.

ii. Gross working capital provides the correct amount of working capital at the right

time.

iii. It enables a firm to realize the greatest return on its investment.

iv. It helps in the fixation of various areas of financial responsibility.

v. It enables a firm to plan and control funds and to maximize the return on investment.

For these advantages, gross working capital has become a more acceptable concept in

financial management.

2) Net Working Capital

This is the difference between current assets and current liabilities. Current
liabilities are those that are expected to mature within an accounting year and include
creditors, bills payable and outstanding expenses.

Working Capital Management is no doubt significant for all firms, but its significance is
enhanced in cases of small firms. A small firm has more investment in current assets than
fixed assets and therefore current assets should be efficiently managed.

The working capital needs increase as the firm grows. As sales grow, the firm needs to
invest more in debtors and inventories. The finance manager should be aware of such
needs and finance them quickly.

I. On The Basis of Concepts

1) Permanent / Fixed Working Capital

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 Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current assets.
Every firm has to maintain a minimum level of raw material, work- in-process, finished
goods and cash balance. This minimum level of current assts is called permanent or fixed
working capital as this part of working is permanently blocked in current assets. As the
business grow the requirements of working capital also increases due to increase in
current assets.
a) Initial working capital
At its inception and during the formative period of its operations a company must
have enough cash fund to meet its obligations. The need for initial working capital
is for every company to consolidate its position.

b) Regular working capital

Regular working capital refers to the minimum amount of liquid capital required to
keep up the circulation of the capital from the cash inventories to accounts
receivable and from account receivables to back again cash. It consists of adequate
cash balance on hand and at bank, adequate stock of raw materials and finished
goods and amount of receivables.

2) Temporary / Fluctuating Working Capital

Temporary / Fluctuating working capital is the working capital needed to meet
seasonal as well as unforeseen requirements. It may be divided into two types.
a) Seasonal Working Capital
There are many lines of business where the volume of operations are different
and hence the amount of working capital vary with the seasons. The capital required to
meet the seasonal needs of the enterprise is known as seasonal Working capital.

b) Special Working Capital

The Capital required to meet any special operations such as experiments with
new products or new techniques of production and making interior advertising campaign
etc, are also known as special Working Capital.

- 20 -
A] NET WORKING CAPITAL
An analysis of the net working capital will be very help full for knowing the
operational efficiency of the company. The following table provides the data relating to
the net working capital of BCM.
NET WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIS 
Years Current Asset Current NWC
Liabilities
2005-06 4563099.00 2041543.00 2521556.00
2006-07 9599646.00 3887765.00 5711881.00
2007-08 9077617.00 2829079.00 6248538.00
2008-09 11003428.00 3889899.00 7113529.00
2009-10 11946666.00 4165659.00 7781007.00

Chart Showing NWC

9000000

8000000

7000000

6000000

5000000

4000000

3000000

2000000

1000000
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:-

- 21 -
 The above chart shows that during the year 2005-06 the company has 2521556.00
N.W.C. In the year 2006-07 huge increase in the N.W.C is 5711881.00 and in the year
2007-08 the company has 6248538.00 N.W.C in the year 2008-09 the company has
7113529.00 N.W.C the N.W.C of the company is increasing compared to the previous
years, in the year 2009-10 the company has 7781007.00 N.W.C this means the company
in a positive position & N.W.C has improved vary fast as compared to the previous years
which show liquidity Position of the Bahety chemicals & minerals Pvt Ltd has always
more & sufficient working capital available to pay off its current liabilities.
B] RATIO ANALYSIS

INTRODUCTION:
Ratio Analysis is a powerful tool of financial analysis. Alexander Hall first
presented it in 1991 in Federal Reserve Bulletin. Ratio Analysis is a process of
comparison of one figure against other, which makes a ratio and the appraisal of the ratios
of the ratios to make proper analysis about the strengths and weakness of the firm’s
operations. The term ratio refers to the numerical or quantitative relationship between two
accounting figures. Ratio analysis of financial statements stands for the process of
determining and presenting the relationship of items and group of items in the statements.

Note: I have used the ratio analysis in this project in order to substantiate the managing
of working capital. For this, I used some of the ratios to get the required output.

Various working capital ratios used by me are as follows:

1. LIQUIDITY RATIOS:
Liquidity refers to the ability of a firm to meet its current obligations as and
when these become due. The short-term obligations are met by realizing amounts
from current, floating or circulating assets.
Following are the ratios which can help to assess the ability of a firm to meet its
current liabilities.

1. Current ratio
2. Acid Test Ratio / Quick Ratio / Liquidity Ratio
3. Absolute liquid ratio
2. TURNOVER/ACTIVITY RATIOS:

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 These are the ratios which indicate the speed with which assets are converted or
turned over into sales.
1. Inventory Turnover Ratio.
2. Debtors/ Accounts receivables Turnover Ratio.
3. Creditors/Accounts Payables Turnover Ratio.
4. Working Capital Turnover Ratio.

1. CURRENT RATIO:-
It is a ratio, which express the relationship between the total current Assets and
current liabilities. It measures the firm’s ability to meet its current liabilities. It indicates
the availability of current assets in rupees for every one rupee of current liabilities. A
ratio of greater than one means that the firm has more current assets than current
liabilities claims against them. A standard ratio between them is 2:1.

Current Ratio: Current Assets

Current Liabilities
Year Current Assets Current Liabilities Current Ratio
2015-16 4563099.00 2041543.00 2.23
2016-17 9599646.00 3887765.00 2.47
2017-18 9077617.00 2829079.00 3.21
2018-19 11003428.00 3889899.00 2.83
2019-20 11946666.00 4165659.00 2.87

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 Chart showing Current Ratio
3.5
3
2.5
2
1.5
1
0.5
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:-
It is seen from the above chart that during the year 2005-06 the current ratio
was 2.23, during the year 2006-07 it was 2.47 and in the year 2007-08 it was 3.21.
This shows the current ratio increases every year but in the year 2008-09 the current
ratio was dropped to 2.83 due to increase in current liabilities. In the year 2009-10
the current ratio has increases 2.87. The current ratio is above the standard ratio i.e.,
2:1. Hence it can be said that there is enough current assets in Bahety chemicals &
minerals Pvt Ltd to meet its current liabilities.
2. ACID TEST RATIO / QUICK RATIO / LIQUIDITY RATIO:-
This ratio establishes a relationship between quick/liquid assets and current
liabilities. It measures the firms’ capacity to pay off current obligations immediately. An
asset is liquid if it can be converted in to cash immediately without a loss of value;
Inventories are considered to be less liquid. Because inventories normally require some
time for realizing into cash. This ratio is also known as acid-test ratio. The standard quick
ratio is 1:1. Is considered satisfactory.

Quick Ratio = Quick Assets (current assets - Inventory)

Current Liabilities

- 24 -
Year Current Assets Inventories Quick Assets Current Liabilities Quick Ratio
2015-16 4563099.00 1532455.00 3030644.00 2041543.00 1.48
2016-17 9599646.00 2161071.00 7438575.00 3887765.00 1.91
2017-18 9077617.00 3336430.00 5741187.00 2829079.00 2.03
2018-19 11003428.00 2622901.00 8380527.00 3889899.00 2.15
2019-20 11946666.00 2360611.00 9586055.00 4165659.00 2.30

Chart showing Quick Ratio

2.5

1.5

0.5

0
2015-16 2016-17 2017-18 2018-19 2009-10

Year

INTERPRETATION:-
During the year 2005-06 the quick ratio was 1.48, in the year 2006-07 it increases
to 1.91 This shows the company maintains satisfactory quick ratio, in the year 2007-08
the quick ratio increases to 2.03, in the year 2008-09 it increases 2.15, in the year 2009-10
it increases 2.30, due to increase in quick assets. The quick ratio is above the standard
ratio i.e., 1:1. Hence it shows that the liquidity position of the company is adequate.
3. ABSOLUTE LIQUID RATIO:-
Absolute liquid ratio may be defined as the relationship between Absolute liquid
assets and current liabilities. Absolute liquid assets include cash in hand and cash at bank.
The standard ratio is 0.5: 1.

Absolute Liquidity Ratio = Cash & Bank Balance

Current Liabilities
Years Cash & Bank Balance Current Liabilities Absolute Liquidity
Ratio
2015-16 493742.00 2041543.00 0.24
2016-17 1205660.00 3887765.00 0.31
2017-18 1033152.00 2829079.00 0.36
2018-19 1720815.00 3889899.00 0.44
2019-20 1978938.00 4165659.00 0.47

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 Chart showing Absolute Liquidity Ratio
0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
During the year 2005-06 the Absolute liquidity ratio was 0.24, during the year
2006-07 it was 0.31 and in the year 2007-08 it was 0.36, in the year 2008-09 it was 0.44
This shows the Absolute liquidity ratio increases every year but it is below the standard
ratio. In the year 2009-10 the Absolute liquidity ratio has increases 0.47.
Hence it shows that the liquidity position of the company is satisfactory.

1. INVENTORY TURNOVER RATIO:-

Inventory turnover ratio is the ratio, which indicates the number of times the stock is
turned over i.e., sold during the year. This measures the efficiency of the sales and stock
levels of a company. A high ratio means high sales, fast stock turnover and a low stock
level. A low stock turnover ratio means the business is slowing down or with a high stock
level.
Inventory Turnover Ratio = Net Sales
Closing Inventory
Yea Net Sales Closing inventory Inventory Turnover ratio
r
2015-16 19542081.00 1532455.00 12.75 Times
2016-17 31321229.00 2161071.00 14.49 Times
2017-18 27894285.00 3336430.00 8.36 Times
2018-19 38496046.00 2622901.00 14.68 Times
2019-20 42345651.00 2360611.00 17.94 Times

- 26 -
 Chart showing Inventory Turnover Ratio
20
18
16
14
12
10
8
6
4
2
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
It is seen from the above chart that During the year 2005-06 the Inventory t/o ratio
is 12.75 times, in the year 2006-07 it increased to 14.49 times, But in the year 2007-08 it
decreased to 8.36 times . There was a subsequent increase in the year 2008-09 and 2009-
10 to 14.68 times and 17.94 times respectively.
This shows the company has more sales.
2. INVENTORY HOLDING PERIOD :-
This period measures the average time taken for clearing the stocks. It indicates
that how many days’ inventories take to convert from raw material to finished goods.

Inventory Holding Period = Days in a year

Inventory turn over ratio
Year Days in a Year Inventory Turnover Ratio Inventory Holding Period
2015-16 365 12.75 Times 28.63 Days
2016-17 365 14.49 Times 25.19 Days
2017-18 365 8.36 Times 43.66 Days
2018-19 365 14.68 Times 24.86 Days
2019-20 365 17.94 Times 20.34 Days

- 27 -
 Chart showing Inventory Turnover Ratio
50
45
40
35
30
25
20
15
10
5
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
Inventory holding period fluctuating over the years. It was 28.63 days in the year
2005-06. It decreased to 25.19 days in the year 2006-07, it increased to 43.66 days in the
year 2007-08, there was a subsequent decrease in the year 2008-09 and 2009-10 to 24.86
days and 20.34 days respectively.
This shows the company is minimizing these inventory-holding days thereby to increase
the sales.
3. DEBTORS / ACCOUNTS RECEIVABLES TURNOVER RATIO:-
Debtor’s turnover ratio indicates the speed of debt collection of the firm. This ratio
computes the number of times debtors (receivables) has been turned over during the
particular period.
Debtors Turnover Ratio = Net Sales
Average Debtors

Note: in BCM, we have taken the total net sales instead of the credit sales, because the
credit sales information has not available for the calculation of DTR.

Year Net Sales Average Debtors Debtors Turnover Ratio

2015-16 19542081.00 2201381.00 8.88 Times
2016-17 31321229.00 4958527.00 6.32 Times
2017-18 27894285.00 1805948.00 15.44 Times
2018-19 38496046.00 3787274.00 10.16 Times

- 28 -
 2019-20 42345651.00 4355365.00 9.72 Times

Chart showing Debtors Turnover Ratio

18
16
14
12
10
8
6
4
2
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
It is clear that debtor turnover ratio fluctuating over the years. It was 8.88 times in
the year 2005-06. It decreased to 6.32 times in the year 2006-07, It again increased to
15.44 times in the year 2007-08 but it decreased to 10.16 times and 9.72 Times in the
year 2008-09 and 2009-10 respectively. This shows the company is not collecting debt
rapidly.
4. DEBTORS COLLECTION PERIOD :-
Debtors collection period measures the quality of debtors since it measures the
rapidity or the slowness with which money is collected from them a shorter collection
period implies prompt payment by debtors. It reduces the chances of bad debts. A longer
collection period implies too liberal and inefficient credit collection performance.

Average Collection Period = Days in a Year

Debtors Turnover Ratio
Year Days in a Year Debtors Turnover Ratio Debtors Collection Period
2015-16 365 8.88 Times 41.10 Days
2016-17 365 6.32 Times 57.75 Days
2017-18 365 15.44 Times 23.64 Days
2018-19 365 10.16 Times 35.92 Days
2019-20 365 9.72 Times 37.55 Days

- 29 -
 Chart showing Debtors Collection Period
70

60

50

40

30

20

10

0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
Debt collection period changing over the years. It was 41.10 days in the year
2005-06. It increased to 57.75 days in the year 2006-07, but in the year 2007-08 it
decreased to 23.64 days. There was a subsequent increase in the year 2008-09 and 2009-
10 to 35.92 days and 37.55 days respectively.
This shows the inefficient credit collection performance of the company.
5. CREDITORS/ACCOUNTS PAYABLES TURNOVER RATIO:-
Creditor’s turnover ratio is the ratio, which indicates the number of times the debts
are paid in the year. This ratio is calculated as follows.

Creditors Turnover Ratio = Net Purchases

Average Creditors

Note: In the BCM, we have taken the total Purchases instead of the credit purchases,
because the credit purchases information has not available for the calculations of CTR.

Yea Net Purchases Average Creditors Creditors Turnover Ratio

r
2015-16 11691090.00 1673515.00 6.98 Times
2016-17 17778675.00 3492127.00 5.09 Times
2017-18 18896828.00 2649781.00 7.13 Times
2018-19 23605773.00 2658999.00 8.88 Times
2019-20 27146639.00 3057849.00 8.88 Times

- 30 -
 Chart showing Creditors Turnover Ratio
10
9
8
7
6
5
4
3
2
1
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
It is clear that creditor turnover ratio changing over the years. It was 6.98 times in the
year 2005-06. It decreased to 5.09 times in the year 2006-07, there was a subsequent
increase in the year 2007-08 and 2008-09 to 7.13 times and 8.88 times respectively. In
the year 2009-10 it is same as compared to 2008-09. It shows that company has making
prompt payment to the creditors.
6. CREDITORS PAYMENT PERIOD:-
The Creditors Payment Period represents the average number of days taken by
the firm to pay the creditors and other bills payables.

Average Payment Period = Days in a Year

Creditors Turnover Ratio

Year Days in a Year Creditors Turnover Ratio Average Payment Period

2015-16 365 6.98 Times 52.29 Days
2016-17 365 5.09 Times 71.71 Days
2017-18 365 7.13 Times 51.19 Days
2018-19 365 8.88 Times 41.10 Days
2019-20 365 8.88 Times 41.10 Days

- 31 -
 Chart showing Creditors Payment Period
80

70

60

50

40

30

20

10

0
2015-16 2016-17 2017-18 2018-19 2019-20

Year

INTERPRETATION:
Average payment period changing over the years. It was 52.29 days in the year
2005-06. It increased to 71.71 days in the year 2006-07, But in the year 2007-08 and
2008-09 it decreased to 51.19 days and 41.10 days respectively. In the year 2009-10 it is
same as compared to 2008-09. It indicates that the company has taken the steps to prompt
payment to the creditors.
7. WORKING CAPITAL TURNOVER RATIO:-
This ratio indicates the number of times the working capital is turned over in the
course of the year. This ratio measures the efficiency with which the working capital is
used by the firm. A higher ratio indicates efficient utilization of working capital and a
low ratio indicates otherwise. But a very high working capital turnover is not a good
situation for any firm.

Working Capital Turnover Ratio = Net Sales

Net Working Capital

Year Net Sales Net Working Capital WCTR

2015-16 19542081.00 2521556.00 7.75 Times
2016-17 31321229.00 5711881.00 5.48 Times
2017-18 27894285.00 6248538.00 4.46 Times
2018-19 38496046.00 7113529.00 5.41 Times
2019-20 42345651.00 7781007.00 5.44 Times

- 32 -
 Chart showing Working Capital Turnover Ratio
9
8
7
6
5
4
3
2
1
0
2015-16 2016-17 2017-18 2018-19 2019-20

Year
INTERPRETATION:
The working capital t/o ratio is fluctuating year to year that was high in the year
2005-06, 7.75 times; there was a subsequent decrease in the year 2006-07 and 2007-08 to
5.48 times and 4.46 times. But it increases in the year 2008-09 and 2009-10 to 5.41 and
5.44 times respectively. This shows the company is utilizing working capital effectively.
C] FUND FLOW STATEMENTS

Principles of working capital for calculation purpose

CURRENT ASSETS

If the current assets increase as a result of this, working capital also increases.
If the current assets decreases as a result of this working capital decreases.

CURRENT LIABILITIES

If the current liabilities increases as a result of this working capital decreases.

If the current liabilities decreases as a result of this working capital Increase.

- 33 -
Statement of Changes in Working Capital:

The purpose of preparing this statement is for finding out the increase or decrease in
working capital and to make a comparison between two financial years.

Table 1: Statement of Changes in Working Capital for the Year 2005-2006

Effect on working capital

Particulars As on 31-3- As on 31-3-
2005 2006
Increase Decrease
CURRENT ASSETS
Inventories 2001305.00 1532455.00 __ 468850.00
Sundry debtors 1438810.00 2201381.00 762571.00 __
Cash & Bank balance 503667.00 493742.00 __ 9925.00
Other current assets 134364.00 148822.00 14458.00 __
Loans and Advances 193081.00 186699.00 __ 6382.00
(A)Total Current Assets 4271227.00 4563099.00

CURRENT LIABILITIES
Sundry creditors 1606195.00 1673515.00 __ 67320.00
Provisions 511561.00 368028.00 143533.00 __
(B)Total Current Liabilities 2117756.00 2041543.00
(A)-(B) Net Working Capital 2153471.00 2521556.00

Increase in Working Capital 368085.00* __ __ 368085.00*

TOTAL 2521556.00 2521556.00 920562.00 930487.00

- 34 -
INTERPRETATION:

In the above table, it is seen that during the year 2004-05 and 2005-06 there was a net
increase in working capital of Rs 368085.00. It indicates an adequate working capital in
Bahety chemicals & minerals pvt ltd.,
This is because of
1. Increase current assets such as Sundry debtors by Rs 762571.00, other current assets
by Rs 14458.00. And decrease in Inventories by Rs 468850.00, Cash & Bank balance
by Rs 9925.00, Loans and Advances by Rs 6382.00.

2. Increase in current liabilities such as in Sundry creditors by Rs 67320.00 and

decrease in Provisions by Rs 143533.00.
Table 2: Statement of Changes in Working Capital for the Year 2006-2007

Effect on working capital

Particulars As on 31-3- As on 31-3-
2006 2007
Increase Decrease
CURRENT ASSETS
Inventories 1532455.00 2161071.00 628616.00 __
Sundry debtors 2201381.00 4958527.00 2757146.00 __
Cash & Bank balance 493742.00 1205660.00 711918.00 __
Other current assets 148822.00 78260.00 __ 70562.00
Loans and Advances 186699.00 1196128.00 1009429.00 __
(A)Total Current Assets 4563099.00 9599646.00

CURRENT LIABILITIES
Sundry creditors 1673515.00 3492127.00 __ 1818612.00
Provisions 368028.00 395638.00 __ 27610.00
(B)Total Current Liabilities 2041543.00 3887765.00
(A)-(B) Net Working Capital 2521556.00 5711881.00
Increase in Working Capital 3190325.00* __ __ 3190325.00*
TOTAL 5711881.00 5711881.00 5107109.00 5107109.00

INTERPRETATION:

In the above table, it is seen that during the year 2005-06 and 2006-07 there was huge net
increase in working capital by Rs 3190325.00 As Compare to 2004-05 and 2005-06.
This is because

- 35 -
 1. There is Increase in current assets such as Inventories by Rs 628616.00, Sundry
debtors by Rs 2757146.00, Cash & Bank balance by Rs 711918.00, Loans and
Advances by Rs 1009429.00. And decrease in other current assets by Rs 70562.00.

2. There is Increase in current liabilities such as Sundry creditors by Rs 1818612.00,

Provisions by Rs 27610.00.
Table 3: Statement of Changes in Working Capital for the Year 2007-2008

Effect on working capital

Particulars As on 31-3- As on 31-3-
2007 2008
Increase Decrease
CURRENT ASSETS
Inventories 2161071.00 3336430.00 1175359.00 __
Sundry debtors 4958527.00 1805948.00 __ 3152579.00
Cash & Bank balance 1205660.00 1033152.00 __ 172508.00
Other current assets 78260.00 189683.00 111423.00 __
Loans and Advances 1196128.00 2712404.00 1516276.00 __
(A)Total Current Assets 9599646.00 9077617.00

CURRENT LIABILITIES
Sundry creditors 3492127.00 2649781.00 842346.00 __
Provisions 395638.00 179298.00 216340.00 __
(B)Total Current Liabilities 3887765.00 2829079.00
(A)-(B) Net Working Capital 5711881.00 6248538.00
__ __
Increase in Working Capital 536657.00* 536657.00*
TOTAL 6248538.00 6248538.00 3861744.00 3861744.00

INTERPRETATION:

In the above table, it is seen that during the year 2006-07 and 2007-08 there was also net
increase in working capital by Rs 536657.00. As compare to 2005-06 and 2006-07.
This is because
1. There is Increase in current assets such as Inventories by Rs 1175359.00, other
current assets by Rs 111423.00, Loans and Advances by Rs 1516276.00 and decrease in
Sundry debtors by Rs 3152579.00, Cash & Bank balance by Rs 113618.00.

2. There is Decrease in current liabilities such as Sundry creditors by Rs 842346.00,

Provisions by Rs 216340.00.

- 36 -
Table 4: Statement of Changes in Working Capital for the Year 2008-2009

Effect on working capital

Particulars As on 31-3- As on 31-3-
2008 2009
Increase Decrease
CURRENT ASSETS
Inventories 3336430.00 2622901.00 __ 713529.00
Sundry debtors 1805948.00 3787274.00 1981326.00 __
Cash & Bank balance 1033152.00 1720815.00 687663.00 __
Other current assets 189683.00 206206.00 16523.00 __
Loans and Advances 2712404.00 2666232.00 __ 46172.00
(A)Total Current Assets 9077617.00 11003428.00

CURRENT LIABILITIES
Sundry creditors 2649781.00 2658999.00 __ 9218.00
Provisions 179298.00 1230900.00 __ 1051602.00
(B)Total Current Liabilities2829079.00 3889899.00
(A)-(B) Net Working Capital 6248538.00 7113529.00
__ __
Increase in Working Capital 864991.00* 864991.00*
TOTAL 7113529.00 7113529.00 2667512.00 2667512.00

INTERPRETATION:

In the above table, it is seen that during the year 2007-08 and 2008-09 there was also net
increase in working capital by Rs 864991.00 As compare to 2006-07 and 2007-08.
This is because
1. There is Increase in current assets such as Sundry debtors by Rs 1981326.00, Cash
& Bank balance by Rs 687663.00, Other current assets by Rs 16523.00 and decrease in
Inventories by Rs 713529.00, Loans and Advances by Rs 46172.00.

2. There is Increase in current liabilities such as Sundry creditors by Rs 9218.00,

Provisions by Rs 1051602.00.

Table 5: Statement of Changes in Working Capital for the Year 2009-2010

Effect on working capital

Particulars As on 31-3- As on 31-3-
2009 2010
Increase Decrease

- 37 -
 CURRENT ASSETS
Inventories 2622901.00 2360611.00 __ 262290.00
Sundry debtors 3787274.00 4355365.00 568091.00 __
Cash & Bank balance 1720815.00 1978938.00 258123 .00 __
Other current assets 206206.00 185585.00 __ 20621.00
Loans and Advances 2666232.00 3066167.00 399935.00 __
(A)Total Current Assets 11003428.0 11946666.00
0

CURRENT LIABILITIES
Sundry creditors 2658999.00 3057849.00 __ 398850.00
Provisions 1230900.00 1107810.00 123090.00 __
(B)Total Current Liabilities 3889899.00 4165659.00
(A)-(B) Net Working Capital 7113529.00 7781007.00

Increase in Working Capital 667478.00* __ __ 667478.00*

TOTAL 8270981.00 8270981.00 1349239.00 1349239.00

INTERPRETATION:
In the above table, it is seen that during the year 2008-09 and 2009-10 there was also net
increase in working capital by Rs 1157452.00 As compare to 2007-08 and 2008-09.
This is because
1. There is Increase in current assets such as Sundry debtors by Rs 568091.00, Cash &
Bank balance by Rs 258123.00 Loans and Advances by Rs 399935.00 and decrease in
Inventories by Rs 262290.00, other current assets by Rs 20621.00.

2. There is Increase in current liabilities such as Sundry creditors by Rs 398850.00 and

decrease in Provisions by Rs123090.00.

FINDINGS.

 Working capital of the Awadh Chemicals & Minerals Pvt Ltd. was increasing and
showing positive working capital per year.

- 38 -
 The Awadh Chemicals & Minerals Pvt Ltd has higher current and quick ratios are i.e.,
2.87 and 2.30 respectively.

 Inventory turnover ratio is very low in the year 2007-08. In the year 2008-09 it has
increased by 6.32 times as compared to 2007-08 and in the last year 2009-10 it has again
increased by 3.26 times as compared to 2008-09.

 Debtor’s turnover ratio is very high in the year 2007-08. In the year 2008-09 it has
decreased by 5.28 times as compared to 2007-08 and in the last year 2009-10 it has again
decreased by 0.44 times as compared to 2008-09.

 Creditor’s turnover ratio has increased in the years of 2007-08 and 2008-09. It is same
in the last year 2009-10 as compared to 2008-09.

 Working capital turnover ratio is very low in the year 2007-08. In the year 2008-09 it
has increased by 0.95 times as compared to 2007-08 and in the last year 2009-2010 it has
again increased by 0.03 times.

SUGGESTIONS.

 Working capital of the company has increasing every year. Profit also increasing
every year this is good sign for the company. It has to maintain it further, to run the
business long term.

 The Current and quick ratios are almost up to the standard requirement. So the
Working capital management. Awadh Chemicals & Minerals Pvt Ltd. is satisfactory and
it has to maintain it further.

 The company has sufficient working capital and has better liquidity position. By
efficient utilizing this short-term capital, then it should increase the turnover.

- 39 -
 The company should take precautionary measures for investing and collecting funds
from receivables and to reduce the bad debts.

 The company has sufficient working capital and has better liquidity position. By
efficient utilizing this short-term capital, then it should increase the turnover.

 Creditor’s turnover ratio has increasing from 2007-08 to 2008-09 and in the last year
2009-2010 it is same as compared to 2008-09. Company is making prompt payment
to its creditors. This is good sign for the company. On-time payment to suppliers will
increase the credibility of the firm. It has maintain it further to survive in the market.

 The company is utilizing working capital effectively this is good for the company. It
has to maintain it further.

CONCLUSIONS.
The study on working capital management conducted in Awadh Chemicals &
Minerals Pvt Ltd. to analyze the financial position of the company. The company’s
financial position is analyzed by using the tool of annual reports from 2005-06 to 2009-
10.

The financial status of Awadh Chemicals & Minerals Pvt Ltd. is good.
In the last year the inventory turnover has increased, this is good sign for the company.
The company’s liquidity position is very good With regard to the investments in current
assets there are adequate funds invested in it. Care should be taken by the company not to
make further investments in current assets, as it would block the funds, which could
otherwise be effectively utilized for some productive purpose. On the whole, the company is
moving forward with excellent management.

- 40 -
- 41 -