Summer Training Report on

“A STUDY ON THE WORKING CAPITAL MANAGEMENT OF

LEARNOVATE ECOMMERCE ”

A Training Report Submitted In Partial Fulfillment of the Requirements the

Degree of

MASTER OF BUSINESS ADMINISTRATION (BANKING & INSURANCE)

2021-2023

By

SAUMYA SRIVASTAVA

(211145161010)

Under the Guidance of

DR. SANDEEP AGARWAL, ASSISTANT PROFESSOR (IEF BU JHANSI)

MR. RAVI SINGH, FOUNDER (Industry Guide)

INSTITUTE OF BANKING, ECONOMICS & FINANCE

BUNDELKHAND UNIVERSITY, JHANSI (2021-2023)

[1]
 DECLARATION

I, SAUMYA SRIVASTAVA, hereby declare that the Summer Training Report,

entitled “A Study on the Working Capital Mangement of Learnovate Ecommerce”
submitted to the Institute of Banking Economic & Finance, Bundelkhand University
in partial fulfillment of the requirements for the award of the Degree of MASTER OF
BUSINESS ADMINISTRATION (Banking & Insurance) is a record of original
training undergone by me during the period July-August 2022 under the supervision
and guidance of Dr. Sandeep Agarwal, Assistant Professor, Institute of Economic &
Finance, Bundelkhand University and it has not formed the basis for the award of any
Degree/Fellowship or other similar title to any candidate of any University.

Place: Jhansi Signature of the Student

Date: Saumya Srivastava

MBA (Banking & Insurance)

Institute of Economics & Finance,
Bundelkhand University, Jhansi

[2]
 INSTITUTE OF BANKING, ECONOMICS AND FINANCE, BUNDELKHAND
UNIVERSITY, JHANSI

CERTIFICATE

This is to certify that the Summer Training Report entitled “A Study on the Working
Working Capital Mangement of Learnovate Ecommerce”, in partial fulfillment of
the requirements for the award of the Degree of Master of Business Administration is
a record of original training undergone by SAUMYA SRIVASTAVA (211145161010)
during the year 2022-23 of his study in the Institute of Economic & Finance,
Bundelkhand University, under my supervision and the report has not formed the basis
for the award of any Degree/Fellowship or other similar title to any candidate of any
University.

Place: Jhansi Signature of Guide

Date : Dr. Sandeep Agarwal, Assistant Professor

Institute of Banking, Economic and Finance,

Bundelkhand University, Jhansi

[3]
[4]
 ACKNOWLEDGEMENT

Behind every study their stands a myriad of people whose help and contribution make it
successful.

Firstly, I would hereby like to offer my sincere thanks to my project guide , DR

SANDEEP AGARWAL, ASSISTANT PROFESSOR of Institute of Economics &
Finance, Bundelkhand university Jhansi, who helped me as a torch bearer, a friend and
guide during my entire project duration. I Would hereby like to offer my sincere thanks
to MR RAVI SINGH, FOUNDER (LEARNOVATE ECOMMERCE). I would also
like to thanks Dr. C.B. SINGH (H.O.D) of Institute of Economics & Finance,
Bundelkhand university Jhansi, who provided me an opportunity to work in Internship
Project.

I deem it to be my proud privilege to work under the talented and inspiring guidance
of DR SANDEEP AGARWAL express my deepest sense of gratitude not only for
solving the problem but also for showing keen interest during the course of
investigations without his untiring help present work never have been possible.

SAUMYA SRIVASTAVA

MBA (BANKING & FINANCE)

Roll no- 211145161010

[5]
 INDEX

Chapter No. CONTENTS Page No.

Declaration 2
Certificate 3
Company Certificate 4
Acknowledgement 5
Index 6
1 Introduction To The Study 7-14
2 Company Profile 15-18
3 Objective & Scope of the Study 19
4 Research Methodology 20-23
5 Data collection & Data Analysis 24-55

Findings 56-57

Conclusions 58

Suggestions 59

Limitations 60

Bibliography 61

[6]
 1. INTRODUCTION OF WORKING CAPITAL

Working Capital :-

Working capital (abbreviated WC) is a financial metric which

represents operating liquidity available to a business, organization or other entity,
including governmental entity. Along with fixed assets such as plant and equipment,
working capital is considered a part of operating capital. Gross working capital equals to
current assets. Net working. If current assets are less than current liabilities

[7]
 Working capital (WC) is calculated as current assets minus current liabilities.
Current assets such as cash, account receivable, inventory, etc. And current liabilities
such as creditor, expenses paid etc.

The liquidity position of the business is depend on the investment in current

assets, the more the better whereas the role of fixed assets as far as liquidity is
concerned, negligible.

Working capital management involved not only managing the different

component of current assets but also managing the current liabilities. Working capital
can be define in simple words as that part of total capital which is required and necessary
for daily working of business.

The term working capital is also defined as excess of current assets over current
liabilities. The concept of working capital is useful to know whether the current assets
are sufficient or not to meet the current liabilities. It also indicates that whether solvency
of the business.

There are two aspect of working capital and these are follows:

1) Gross working capital.

2) Net working capital.

1) Gross working capital:

Gross working capital refer to the firm’s investment in current assets.

Current assets are the assets which can be converted into cash within an
accounting year and include cash, short term securities, debtors, bills receivable
and stock.

2) Net working capital:

Net working capital refer to the difference between current assets and
current liabilities. Current liabilities are those claim outsider claims which are
expected to mature for payment within an accounting year and include creditors
(account payable), bills payable, and outstanding expenses.

Net working capital can be positive or negative. A positive net working capital will arise
when current assets exceed current liabilities. A negative net working capital occurs
when current liabilities are excess of current assets.

[8]
  Objective of working capital:

1) To minimize the amount of capital employed in financing the current assets.

Thus will also lead to an improvement in the “return on capital employed”.
2) To manage the current assets in such a way that the marginal return on
investment in these assets is not less than the cost of capital acquired to finance
them. This will ensure the maximization of the business unit.
3) To maintain the proper balance between the amount of current assets and current
liabilities in such a way that the firm is always able to meet its financial
obligation whenever due. This will ensure the smooth working of the unit
without any production held ups due to paucity of fund.

 Requirement Of Working Capital:

1. Nature of Business:

The nature of business concern has got a bearing on its working capital
requirement. In certain types of enterprise like public utilities and railway’s current
capital requirement when compared to fixed capital is small, while in manufacturing
concerns a larger amount of working capital is needed.

2. Size of the Business:

The amount of working capital required depends upon the volume of

business, large size, is the need of working capital. However if the company is very
small its need of working capital us large due to its high overhead charges high cost
of buying and selling, less efficient technical equipment.

3. Production Cycle:

Another factor which has a strong bearing on the quantum of working

capital is the production cycle. The term production cycle refer to the time lag
between the procurement of raw material and completion of finished product. During
this process of converting raw material into finished product some funds are
inevitable locked up. The longer the time span in production cycle the large shall be
the requirement of fund and vice versa.

4. Terms of Purchase and Sale:

The requirement of working capital depend upon the term of purchase.

Cash purchases are more working capital as compared to credit purchases. Similarly
policy of credit sales need more working capital than that of cash sales. Cash
purchased and credit sales require still more working capital as compare to credit

[9]
 purchase and credit sales – on the contrary cash sales and credit purchases require
less working capital.

5. Degree of Seasonally:

Companies that experiences strong seasonal movement have special

working capital problem in controlling the internal financial saving that may take
place. Aggregating this difficulty is the fact that no matter how clearly define a
pattern may distort ordinary relationship. Although seasonally may pull a financial
manager from the security of fixed programmers meet recurring requirements,
flexible arrangement are preferable to guard against unforeseen contingencies.

6. Large Stock of Raw Material

Some of the companies are require to store large quantities of raw

material for the production. The reasons for keeping such large reserves of raw materials
may be seasonal nature of raw material, long distance scarcity etc. In such a case the
working capital needed is comparatively more.

7. Rapidity of Turnover:

There is a high degree of inverse correlation between the quantum of

working capital and the velocity with which the sales are effected when a company
has to carry on a large slow moving stock, it needs a larger working capital as
against another whose turnover is rapid.

8. Expansion:

If expansion of the business is being made a normal rate retained profit

can be made use of for the purpose however for rapid sudden growth such profits are
not available and this necessitates provision of more working capital.

9. Sales Policy:

Working capital needs vary on the basis on the sales policy of the same
industry. A department store which caters to the “carrier trade” by carrying a quality
line of merchandise and offering extensive charge accounts will usually have a
slower turnover of assets a higher margin on sales, and respectively larger account
receivable than many of its non carriage, usually have a rapid turnover, a low margin
on sales, and small or no account receivable.

10. Dividend Policy:

[10]
 A desire to maintain an established dividend policy may affect the
volume of working capital or change in working capital may bring about an
adjustment of dividend policy in either event the relationship between dividend
policy and working capital is well established and a very few companies ever declare
dividend without giving consideration to its effect on cash and their needs for cash.

11. Cash Requirement:

When more cash is require for payment of taxes interest dividends other
expenses more working capital is necessary. Discount policies cost reduction
programs, price increase, changes in stock levels etc. also affect the cash position
and in turn the working capital.

12. Operating Efficiency:

Another important determinant of working capital is the operating

efficiency of a business firm. The operational efficiency implies the optimum
utilization of resources at minimum possible cost by eliminating waste improve co-
ordination and proper planning. It results in higher profits, improve the internal
generation of funds and hence releases the pressure on working capital due to other
factors as price rise etc.

 Working Capital Cycle:

[11]
 u rch
P as es
a sh
C r o
P cti o
u
d n
e b
D rs
to Sales

The need of working capital arises mainly because of time gap between the production
of goods and their actual realization after sales this gap is technically referred as the
“working capital cycle” of the business.

Working capital consists of the following 6 steps:

1) Conversion of cash into raw material.

2) Conversion of raw material into work-in-process.
3) Conversion of work-in-process into finished goods.
4) Time for sale of finished goods-cash sales and credit sales.
5) Time for realization form debtor and bill receivable into cash.
6) Credit period allowed by creditors for credit purchase for raw materials
inventory.

 Source Of Working Capital:

The following sources are available for financing the working capital.

[12]
 a. Loan from financing institution.
b. Floating debentures.
c. Public deposit.
d. Issue of share.
e. Retained earning or internal resources.
f. Trade creditors and advance from customer.
g. Bank credit.

While selecting the source of finance, the cost of financing flexibility,

risk of financing taxes and return are to be taken into account.

TABLE SHOWING CALCULATION OF NET WORKING CAPITAL

Particular Amount

(A) Current Assets:

i) Cash in hand & Bank .....

ii) Debtors .....

iii) Marketable Securities .....

iv) Inventory .....

v) Short term loan .....

vi) Prepaid expenses .....

vii) Account receivable .....

viii) Any other .....

Total Current Assets .....

Less: (B) Current Liabilities:

i) Creditors .....

ii) Outstanding expenses .....

iii) Account Payable .....

iv) Bank overdraft .....

[13]
 v) Dividend paid .....

vi) Any other (if any) .....

Total Current Liabilities .....

Working capital (A-B) .....

Add: Contingency .....

Net Working Capital .....

[14]
2. COMPANY PROFILE

[15]
 LEARNOVATE is an online venture to severe pre-owned, second hand books & study
equipment’s. We offer a wide range of titles both used & unused which undergo a
thorough 5 step quality check where everything from the page count to the binding of
the book are checked and approved before being offered to our reader. We offer our
customer both the options of buying low priced new books or even lower priced second
hand books.

Services

WordPress

We design new themes as well as customize available according to the customer need.

Design

We create visual content to communicate messages. We use different tool for graphics
designing.

[16]
Finance

We deals with activities associated with banking, leverage or debt, credit, capital
markets, money, and investments.

Internship

We offer students and recent graduates the opportunity to gain direct practical
experience. We provide internship based on our services.

Digital Marketing

Digital marketing is a broad field, including attracting customers via email, content
marketing, search platforms, social media, and more.

HR

HRM is designed to maximize employee performance in service of an employer's

strategic objectives.

[17]
  VISION AND MISSION OF LEARNOVATE ECOMMERCE :-

To be a developed company in a developing country, Pursuing market leadership in their

chosen fields of Ecommerce, Process Control and Utilities Management.

Dedicated to growth and an increasing international presence, committed role model

organization for our customers, suppliers, society and members.

To be an organization that continuously achieves economic value by optimizing

resourcesthrough operational excellence, powered by technology, driven by innovation
creating customer delight.

OBJECTIVE OF THE STUDY

1. To study the working capital management of Learnovate Ecommerce.

2. To study the various element of working capital of Learnovate Ecommerce, such
as, receivables, cash management, inventory etc.
3. To study the liquidity position of the Learnovate Ecommerce.
4. To estimate the working capital requirement of Learnovate Ecommerce.

SCOPE OF STUDY

[18]
 The study was directed towards the analysis of working capital management in
Learnovate Ecommerce which includes the analysis of the various components
maintained in Learnovate Ecommerce, determination of operating cycle and the cash
conversion cycle, the companies policy towards its various suppliers and customers. The
study further includes ratio analysis to determine the various liquidity and profitability of
the firm.

Data from the primary and secondary sources has been taken in to consideration the
organization. The data from 2018-19, 2019-20, 2020-21 years has been used for the
study of comparative analysis and ratio analysis of the organization.

[19]
 3. RESEARCH METHODOLOGY

 Research Methodology:

When we talk about research methodology, we not only talk of the

research methods but also the comparison of the logic behind the methods, we used in
this context of our research study and explain why we are using a particular method or
technique and why using the others. Research methodology is a way to systematically
solve the research problem. It may be understood as a science of studying how research
is done systematically. I this, we study the various steps that are generally adopted by
researcher in studying his research problem along with the logic behind them. “The
present study based upon the case study method of research to investigate procedures at
micro level”. As the study is analyzing probing in nature, thus, it is based on the

[20]
secondary data gathered through the financial data provided by account department of
the Learnovate Ecommerce. Therefore it provides a historical prescriptive of decision.

Area of the research: Finance.

Topic of the Research: Working Capital Management.

Period of Research: 2018-21

 DATA COLLECTION:

Type of data: Primary and Secondary Data.

 Method of data collection:

1. Primary Data:

By visiting concern department in the company. This also helped to know

the operating cycle in the company.

2. Secondary Data:

This project is based on primary data collected through personal

interview of head of account department of Learnovate Ecommerce. But primary
data collection had limitation such as matter confidential information thus project is
based on secondary information collected through three years financial statements of
the company, supported by various books and internet sides. The data collection was
aimed at study of working capital management of the company.

 Limitation Of Research:

[21]
1. The main limitation for the research is the data source. The data is collected from
the audited financial statements, which are prepared on the historical cost basis.
2. Confidential data was not allowed to be accessed or published in the project
report..

 Total Working Capital:

Total working capital

2018-19 2019-20 2020-2021

Particular Amount in
rs.
Current Assets

Sundry Debtors 1,84,35,270 2,10,53,973 2,44,29,347

Inventory 28,64,000 1,48,81,000 42,36,000

Cash & Bank 6,85,700 5,50,724 1,97,909

Loan & Advances 17,70,086 6,82,735 9,99,462

Total Current Assets 2,21,62,056 3,71,68,432 2,98,62,718

Current Liabilities

Trade creditors 5,56,651 95,35,257 13,43,835

Provision - - -

Outstanding Expenses 2,06,403 3,45,171 16,98,637

Other Liabilities - - -

Total Current Liabilities 7,63,054 98,80,428 30,42,472

[22]
[23]
4. DATA COLLECTION

&

DATA ANALYSIS

[24]
 A. DATA COLLECTION
TABLE NO. – 4.1 Current Asset (In Rs.)

Particulars 2018-19 2019-20 2020-21

Bank Balance 190,028,711 194,067,577 323,755,903

Inventories 763,125,970 538,489,241 821,597,701

Sundry Debtors 621,176,511 780,498,201 1,318,610,623

Loan & Advance 287,536,477 277,077,729 320,250,424

Other Current Assets 50,735,386 23,174,262 10,552,939

Total 1744603055 1,813,667,010 2,794,767,590

Current Assets (In 10 Lacs)

3000

2500

2000

1500 Series1

1000

500

0
2018-19
1 2019-20
2 2020-21
3

Interpretatio :- the position of current assets is high in the year 2020-21 as

Compared to other years.

[25]
 TABLE NO. – 4.2 Current liabilities

(In Rs.)

Particulars 2018-19 2019-20 2020-21

Sundry Creditors 16,325,317 99,302,950 25,737,871

Provisions 69,338,926 97,551,537 147,734,446

Other Current 1,580,485,007 1,114,639,176 2,105,398,070

Liabilities

Total 1,666,149,250 1,311,493,663 2278870387

Current Liabilities (In 10 Lacs)

2500

2000

1500

Series1

1000

500

0
2018-19
1 2019-20
2 2020-21
3

Interpretation: - in the year 2020-21 the current liabilities is high. Due to increase
in provisions in this year.

[26]
 TABLE NO. – 4.3 Net Working Capital (in Rs.)

(Current Asset- Current Liabilities = Working Capital )

Year Current Assets Current Liabilities Working Capital

2018-19 1915603055 1,666,149,250 249,453,805

2019-20 1813667010 1,311,493,663 502,173,347

2020-21 2794767590 2,145,870,387 648,897,203

Working Capital (In Lacs)

7000

6000

5000

4000
Series1
3000

2000

1000

0
2018-19
1 2019-20
2 2020-21
3

Interpretation : - The net working capital of the company has increased in 2020-
21. This has happened due to increase in current assets. The working capital
increased due to the increase in the sales. In 2018-19 the net working capital is

[27]
decreased due to decrease in sales. As for day to day working we require more
working capital.

Working Capital Turnover Ratio :

The ratio compares the net sales with net working capital. The indication given by
this ratio is the number of times working capital is turned around in a particular
period. It measures the efficiency with which working capital is being used by from.
A higher ratio indicates better use of working capital.

Net Sales

Working turnover ration = ________________

Working capital

[28]
 TABLE NO. 4.4 Working capital Turnover Ratio(in Rs.)

Year Net Sales Working Capital Turnover Ratio

2018-19 5,230,820,000 249,453,805 20.97

2019-20 6,341,540,000 502,173,173,347 12.63

2020-21 8,609,250.00 648,897,203 13.27

Working capital turnover ratio

25

20

15

Series1

10

0
2018-19 1 2019-20 2 2020-21 3

Interpretation: A higher ratio will indicate number of times working capital is

turned into net sales. For the given period working capital turnover ratio is

[29]
highest in the year 2018-19 due to increase in the sales., Ratio is less in period
2019-20. This has happened because of increase in the net sales is not
proportionate with increase in the working capital. So company needs to pay
attention to increase the sales.

Current Ratio :-

Current ratio is measure of firms, short term solvency. This ratio is also known
solvency ratio. It indicates the availability of current assets in Rs. for every one
rupee of current liability. A ratio of more than one means that the firm has more
current assets than current claims against them.

Current assets

Current ratio = ________________

Current liabilities

[30]
 TABLE NO. -4.5 Current Ratio

Year Current Assets Current Liabilities Current Ratio

2018-19 1,915,603,055 1,666,149,250 1.14

2019-20 1,813,667,010 1,311,493,663 1.38

2020-21 2,794,767,590 2,145,870,387 1.30

Current Ratio

1.4

1.2

0.8
Series1
0.6

0.4

0.2

0
2018-19
1 2019-20
2 3 2020-21

Interpretation: - A current ratio 1.38 indicates solvent position, for period 2018-19
high amount of current assets are maintained compare to firms current liabilities,
which has resulted in very high current ratio. Here inventory constitute major

[31]
proportion of current assets., It shows that large inventory remains idle and also
company is having huge amount of debtors, so company needs to reduce both
inventories and debtors in order to have sound ratio.

CASH MANAGEMENT

The company does follow scientific methods of cash management techniques

like the preparation of budget. They prepare budget for ach item on periodical
basis. The cash positions are adjusted by drawing against book debt for their
banks. The company directs their dealers, remit their collections directly to their
bank and they withdraw as when need arises.

Current assets

Cash management ratio = _______________

Current liabilities

[32]
 TABLE NO. – 4.6 Size of cash compare to current assets

Year Current Assets Current Liabilities Current Ratio

2018-19 190,028,711 1,915,603,055 0.099

2019-20 194,067,577 1,813,667,010 0.107

2020-21 323,755,903 2,794,767,590 0.116

Size of cash compare to current assets

0.14

0.12

0.1

0.08
Series1
0.06

0.04

0.02

0
2018-19
1 22019-20 3 2020-21

[33]
Interpretation: - Ratio goes on increasing from the period 2018-19 to 2020-21, The
ratio is highest in the year 2020-21 i.e. 0.116 as compare to their previous year. It
indicates the satisfactory cash current ratio.

[34]
 TABLE NO. – 4.7 Cash Profit Ratio

Year Cash Current Liabilities Cash to Current

2018-19 207,765,918 5,219,780,000 3.98

2019-20 400,348,266 5,230,820,000 7.65

2020-21 420,587,625 6,341,540,000 6.63

Cash X 100

Cash profit ratio = ________________

Current liabilities

Cash Profit =Net Profit + Depreciation

[35]
 9
8
7
6
5
Series1
4
3
2
1
0
1 2 3

Cash Profit Ratio

The ratio evaluates efficiency of operations in terms of cash generation and is not
affected by method of depreciation charged.

Interpretation: Higher cash profit ratio is better from firm’s point of view. Firm
has small amount of cash profit ratio compared to net sales volume. This indicates
mismanagement in some areas. The ratio is satisfactory in year 2020-21. In the
year 2019-20 the ratio is high i.e. 7.65 Firm needs to take effort in the remove
mismanagement and increase cash profit ratio.
2018-19 2019-20 2020-21

Payables Management :

The company follows the policy of purchasing raw material on credit basis.
They follow policy of making its payment at the right time as and when it's
become due. The credit period falls between 30 to 45 days. They obtain funds
through commercial paper and commercial bank loan.

[36]
1) Creditors- Turnover Ratio :

This ratio is also known as creditor's velocity or account payable ratio. It

indicates credit period allowed to firm by its creditors. The high turnover ratio
indicates that payment to creditors is prompt but it also indicates firm is not
taking full advantage of credit facility given by its creditors.

Purchases

Creditors Turnover Ratio = ________________

Creditors

[37]
 TABLE NO.- 4.8 Creditors Turnover Ratio (in Rs.)

Year purchase Creditors Cash to Current

2018-19 93,852,555 16,325,317 5.748

2019-20 65,359,162 99,302,950 0.658

2020-21 37,361,207 25,737,871 1.451

Credit turnover ratio

6
5

4
Series1
3

2
1

0
2018-19
1 22019-20 32020-21

Generally credit purchase amount is used to calculate this ratio, but because of non-
availability assumed all purchase as credit purchase.

Interpretation: In the year 2018-19 the creditor's turnover ratio was so high. It
indicates firm paid to creditors very promptly & did not use credit facility
efficiently. From the year 2019-20 to 2020-21 the creditor's turnover ratio is
satisfactory.

[38]
MANAGEMENT OF INVENTORY

The engineering store of lumax Industries Ltd. holds the inventory of general store
items breeder seed foundation seed and bio-products etc. All the items received at
the store are checked against suppliers' document for quantity. Department
representative ensure that items are intact, and he inspects the stock items randomly
on periodic basis. Details are recorded in stock inspection register.

 Size of Inventory :
The size of inventory depends on many factors, like scarcity of raw material,
market conditions, change in prices of inventory items etc. A company should
maintain adequate stock of materials for a continuous supply of material to
factory. Stock of finished seeds has to be held because production and sales are
instantaneous. Thus it is better to have high inventory to total assets ratio.

1) Inventory to Total Assets Ratio :

The ratio shows proportion of inventory in total assets.

Inventory

Inventory to total assets ratio = ________________

Total assets

[39]
 TABLE NO. 4.9 Inventories to Total Assets Turnover Ratio

Year Inventory Total Assets Inventory To

Total Assets

2018-19 763,125,970 392,607,639 1.944

2019-20 538,849,241 295,130,463 1.826

2020-21 821,597,701 355,971,067 2.308

Inventory to total asset ratio

2.5

1.5
Series1
1

0.5

0
2018-19
1 22019-20 3
2020-21

Interpretation : - The ratio for above three years indicates that, large proportion of total
assets is blocked in inventory in year 2020-21 which is harmful from firm's perspective.

[40]
2) Inventory Turnover Ratio :

The ratio establishes relationship between cost of goods sold during given period
and average inventory held in that period. Inventory turnover ratio indicates
efficiency of firm in producing and selling its products.

Sales - Gross profit

Inventory turnover ratio = ________________

Average Inventory

Usually a high inventory turnover ratio indicates efficient management of inventory

because more frequently the goods are sold, the lesser money required to finance
inventory. A law ration indicates inefficient management of inventory.

[41]
 TABLE NO. 4.10 Inventory Turnover Ratios

Year Net Sales Gross Profit Inventory Inventory

Turner Ratio

2018-19 5,233,320.000 279,120,000 763,125,970 6.492

2019-20 6,341,540.00 517,560.000 538,849,241 10.808

2020-21 8,609,250.000 517,410,000 821,597,701 9.845

Inventory turnover ratio

12

10

6 Series1

0
2018-19
1 2019-20
2 2020-21
3

Interpretation : - If inventory turnover ratio has decreased from past, it means sales
is dropping. Over the year's sales has continuously increased, but in the year 2018-
19 the ratio is law because of less gross profit. For years ratio is satisfactory.

[42]
3) Inventory Conversion Period :

The reciprocal of inventory turnover ratio gives inventory holding in percentage,

when number of days in year divided by turnover ratios, we obtain the days of
inventory holding.

365

Inventory conversion period = ________________

Inventory turnover ratio

TABLE NO. 4.11 Inventory Conversion Period

Year No of Days in Inventory Inventory

Year Turnover Ratio Conversion Period

In days

2018-19 365 6.492 56

2019-20 365 10.808 34

2020-21 365 9.845 37

[43]
 Inventory conversion period

60

50

40

30 Series1

20

10

0
2018-19
1 2019-20
2 2020-21
3

Interpretation: - :

Lower inventory conversion period is always better, which implies inventory holding
time is law.

Inventory conversion period is very high in 2018-19 i.e. 56.22 respectively

indicates that long period taken to convert inventory to cash.

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3) Debtors Turnover Ratio :

This ratio shows credit policy followed by firm for its customers. Higher this

ratio, lower is the collection period, on the other hand lower ratio indicates

higher collection period.

COGS

Debtors Turnover ratio = ________________

Average Debtors

(Generally credit sales amount is used in calculating this ratio, but because of

non-availability we have assumed all sales as credit sales)

This ratio should not exceed the ratio decided by credit policy of the firm.

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TABLE NO. – 4.12 Debtors Turnover Ratio(in Rs.)

Year Net Sales Debtors Debtors Turnover

Ratio

2018-19 5,233,320,000 624,176,511 8,384

2019-20 6,341,540,000 780,498,201 8,124

2020-21 8,609,250.000 1,318,610,623 6,529

Debtors Turnover Ratio

9
8
7
6
5
Series1
4
3
2
1
0
2018-19
1 2019-20
2 2020-21
3

Interpretation : The higher this ratio, lower is the collection period. On the other hand,
a lower ratio indicates, a higher collection period. The ratio is highest in year 2018-19 &
2019-20 indicates lower collection period in these two years.

5) Average Collection Period :

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The average collection period represents the time taken for collection from debtors.
Generally, the shorter collection period, better is the quality of debtors.

365

Average collection period = ________________

Debtor’s turnover ratio

TABLE NO. -4.13 Average Collection Period

Year No of Days In Debtors Turnover Average

Year Ratio Collection Period

2018-19 365 8.384 43.53

2019-20 365 8.124 44.92

2020-21 365 6.529 55.90

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 Average Collection Period

60

50

40

30 Series1

20

10

0
2018-19
1 2019-20
2 2020-21
3

Interpretation : - Generally firm allows credit period of 60 days to its customers,

but every year collection period is less than 60, which implies that quality of debtors
is good.

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 B. DATA ANALYSIS

INTERPRETATION AND ANALYSIS ON THE BASIS OF FINANCIAL

STATEMENT :

LIQUIDITY ANALYSIS :

Liquidity refers to the ability of firm to meet its current obligations as and when

they become due. The short term obligations are met by releasing cash from

current or circulating assets. The liquidity of the firm can be measured by

different ratios.

1) Absolute Liquid Ratio :

The absolute liquidity is represented by cash and near cash items. In the

computation of this ratio, only absolute liquid assets are compared with the

liquid liabilities. The absolute liquid assets are cash, bank and marketable

securities.

Cash & Bank balance

Absolute Liquid ratio = ________________

Current liabilities

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 TABLE NO. – 4.14 Absolute Liquid Ratios

Year Cash and Bank Current Liabilities Absolute Liquid

Balance Ratio

2018-19 190,028,711 1,666,149,250 0.114

2019-20 194,067,577 1,311,493,663 0148

2020-21 323,755,903 2,145,870,387 0.151

Absolute Liquid Rations :

0.16

0.14

0.12

0.1

0.08 Series1

0.06

0.04

0.02

0
2018-19
1 2019-20
2 2020-21
3

Interpretation - In the year 2018-19 the position of liquidity is law due to fewer
amounts of cash balances it indicates that firm carries small amount of cash, which is

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insufficient to meet its current obligations. In the other years the liquid ratio is
satisfactory.

 PROFITABILITY ANALYSIS
Profitability is measured by comparing profit with some other parameters like
sales, capital employed, total assets etc, The profitability ratio measures the
overall performance and effectiveness of the firm.

1) Gross Profit Ratio :

The gross profit ratio shows relationship between gross profit and net sales. The
gross profit ratio shows the effectiveness production and manufacturing
department. A high gross profit ratio means a high margin for covering other
expenses like administrative selling and distribution etc. The firm should
compare its gross profit ratio with industry average to find out where it stands.

Gross profit X 100

Gross profit ratio = ________________

Net Sales

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 TABLE NO. – 4.15 Gross Profit Ratios

Year Gross Profit Net ales Gross Profit

Ratio

2018-19 279,120,000 5,233,320.00 5.333

2019-20 517,560,000 6,341,540,000 8.16

2020-21 571,410,000 8,609,250,000 6.637

Gross Profit Ratios

4
Series1
3

0
2018-19
1 2019-20
2 2020-21
3

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Interpretation : Higher the ratios better it is over the years, there has been consistency
observed in gross profit ratio. Almost every year company has managed to earn good
percentage of gross profit, which will be beneficial to cover other expenses like
administration, selling, distribution etc.

2) Return on Capital Employed

The ratio reveals the relationship between net profit and capital employed. It
reflects the overall efficiency with which capital is used. It also reflects the
earning capacity of capital employed in business. It is the important tool of
measuring performance.

Net profit X 100

Return on capital Employed = ________________

Capital Employed

 Turnover Ratio

1) Current Assets Turnover Ratio :

Assets are used to manufacture the product and generate the sales. Therefore, a
firm should manage its assets efficiently to maximize the sales. The relationship
between sales and current assets is current asset turnover ratio.

Net sales

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 Current Assets Turnover ratio = ________________

Current Assets

TABLE NO. – 4.16 Current Assets Turnover Ratio(in Rs)

Year Net Sales Current Assets Current Assets

Turnover Ratio

2018-19 5,233,320,000 1,915,603,055 2.73

2019-20 6,341,540.00 1,813,667,010 3.49

2020-21 8,609,250.00 2,794,767,590 3.08

Current Assets Turnover Ratio

3.5

2.5

2 Series1

1.5

0.5

0
2018-19
1 2019-20
2 2020-21
3

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Interpretation : Higher Current assets turnover ratio is always better. The ratio is
maximum in the year 2019-20 i.e. 3.49 indicating the efficient use of current assets as
compare to other years is generating the sales.

6.FINDINGS

1. Working capital position of the firm has increased from the period 2020-21. It
must be result of increase in current assets and decrease of current liability.

2 In the year 2019-20 the company has high current ratio. Need to reduce the
inventory and debtors

3 Working capital turnover ratio is satisfactory in year 2019-20 & 2020-21, because
ratio is highest in these two years.

4 Firm has maintained small amount of cash profit (ratio), compare to net sales
volume.

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 5 In the year 2018-19 the creditor's turnover ratio was so high. It indicates firm
paid to creditors very promptly & did not use credit facility efficiently.

6 In the year 2020-21 large proportion of total assets is blocked in inventory, which
may have bad impact on profitability.

7 In the year 2018-19 & 2020-21 inventory turnover ratio is low, indicates that
management of inventory is not satisfactory in these two year.

8 Inventory holding period was very high in the year 2018-19 .due to size of
inventory is high

9 Average collection period was good in all the years; it indicates good quality
of debtors.

10 Absolute liquid ratios are below the standard in year 2019-20 and it is average in
the year 2018-19 & 2020-21.

11 Every year company has managed to earn good percentage of gross profit& it is
increasing every year. It ranges from 5.33 to 6.63 percent.

12 As compare to gross profit ratio Net profit ratio of the firm is very low in all
years, which indicates inefficient management in areas like selling, distribution
and administration.

13 The year 2018-19 shows very low return on the capital employed i.e. 175.09
due to net loss in this year.

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 7.CONCLUSION

From the study it can be concluded that, working capital requirement of the firm
can be estimated for every year and it is also possible to estimate the same for
future period. Similarly performance of working capital management can be
evaluated by using different tools. The study can help to measure performance in
profitability and liquidity of the firm. Findings of the study indicate that over the
years company has shown increasing of net sales and net profit. But the increase
in both net sales and net profit is not satisfactory.

Moreover growth in net profit is not proportionate with growth in net sales.
Management has failed to keep appropriate cash and inventory, most of the time
they have kept either more or insufficient cash or inventory with them, which has

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resulted in low profitability. Marketing and selling departments have achieved
insufficient sales.

So in order to achieve substantial increment in profitability, the company should

pay attention towards attributes of management like cash, inventory, liquidity,
administration, selling etc.

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 8.SUGGESTIONS

 Management should pay more attention towards the management of current

assets. Company holds very high amount of current assets as compare to current
liabilities. This severely affects the profitability of the company.

 Inventory holding period in few years was very high. It implies that management
should try to eliminate inventory holding period & increase inventory turnover
ratio.

 For few years proportion of inventory as compare to current assets is very high
This high amount should be reduced to fair amount.

 Though sales position & gross profit ratio of the firm is good. It has managed to
earn very small percentage of net profit. It clearly indicates firm should pay
attention in managing selling, distribution & administration department.

 The company should concentrate on cash management, because ratio has shown
irregular or non-specific trend in cash holding.

 The firm should efficiently use credit facility given by creditors, in order to have
good creditor's turnover ratio.

 To increase the inventory turnover ratio and working capital turnover ratio
efficiency of production and selling department should be increased.

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 9.LIMITATIONS

 The project conducted was only based on the financial database available during
the duration of project.

 The duration of project work is not sufficient 10 understand the complete

mechanism of working capital in the firm.

 As the project is based on the data recorded by the company we face the
limitations of extracting the particular data our access is limited for the sake of
confidential information of the company.

[60]
 BIBLIOGRAPHY

1) Khan & Jain, "Financial Management", P.K. published by Tata MC Graw

Hill Co. Ltd. Delhi, 4th Edition.

2) R.P. Rustogi "Financial Management" Dalbotia Publication' 3rd Edition.

 Report
Annual Report LEARNOVATE ECOMMERCE

 WEBSITES
https://www.learnovatecentre.org/

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