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FINANCE SPECIALISATION

ON

THE STUDY OF WORKING CAPITAL


MANAGEMENT WITH RATIO ANALYSIS

Submitted in Partial Fullfillment for the award of the


degree of
Master of Management Studies (MMS)
( University of Mumbai )

Submitted by:
Akshata ravindra patil
( Roll No. 21127 )

Under the guidance of


PROF.amit sir

Batch:-2022-2023

Swayam Siddhi College of Management and Research,


University Of Mumbai.

1
DECLARATION

I hereby declare that the Final Project Report on n THE STUDY OF WORKING
CAPITAL MANAGEMENT WITH RATIO ANALYSIS. submitted in the partial
fulfillment for the requirement of the degree of Masters of Management Studies of of
Mumbai University at Swayam Siddhi College of Management & Research, I further
declare that I have no objection and grant the rights to Swayam Siddhi College of
Management & Research to publish any chapter/project if they deem fit in
Journals/Magazines/Newspapers etc., without my permission.

PLACE: Bhiwandi Name of the Student : akshata ravindra patil

DATE: MMS Batch: 2021-2023

Roll No: 21127

Signature: ________________________

5
CERTIFICATE

This is to certify that project titled” THE STUDY OF WORKINNG

CAPITAlLMANAGEMENT WITH RATIO ANALYSIS.


is successfully completed by Ms. Akshata ravindra patil. Duringthe IV semester, in
he
partial fulfillment of the Master’s Degree in Management Studies recignized by the
University of Mumbai for the academic year 2022
2022-23 through.
This project work is original & not submitted earlier for the award of any degree,
diploma or associateship of any other university / Insitution.

Name : akshata ravindra patil

Guiding teacher:
Prof : Amit sir

Date of submission

6
TABLE OF CONTENT
CHAPTER CHAPTER OF CONTENT PAGE NO
NO.

1 INTRODUCTION

2 COMPANY PROFILE

3 RESEARCH METHODOLOGY

4 LIMITATION OF WOKING CAPITAL

5 ANALYSIS OF WORKING CAPITAL

6 SUGGESION

7 CONCLUTION

8 BIBLOGRAPHY

9 REFERENCE
INTRODUCTION TO THE PROJECT
The life or death of any business enterprise depends upon the availability of cash. A
Business firm / enterprise incurring losses still survive because of sufficiency of cash.
Similarly, lack of cash can give rise to failure in the face of actual or prospective earnings.

Efficient cash planning through a relevant and timely cash budget may enable a firm to
obtain optimum working capital and ease the strains of a cash shortage,
investment of cash and proving funds for funds for normal growth.

Many company/ factories are interested in increasing their profits. However, very few
companies worry about managing their working capital. Many companies fail due to bad
management of working capital. They may be profitable, but they are not able to pay their
bill. facilitating temporary

capital management involves the relationship between a


company’s
term assets short
and its short-term WorkingThe goal of working capital man
term- liabilities. management is
thatacompanyisabletocontinueitsoperationandthatithassufficientabilitytosatisfyboth
short-term
term debt and upcoming operational expenses. The management of working capital
involves managing inventories, accounts receivable and payable and cash management

Working capital refers to the amount of capital that is readily available to an


organization. Organization needs both
both-terms and short-term
term fund, Funds are needed for -
term purposes of fixed assets, such as plant and machinery, land building, furniture. Funds
are also required for short-term
term purpose like purchases of raw materials, payment of wages
and other day-to-day
day expenses. The objective of working capital management is to
the optimum balance of each of working capital components.

Working capital Managements takes place at two levels:

1. Ratio Analysis can be used to monitor overall trends in working capital and to identify areas
requiring management.
2. The individual components of working capital can effectively managed by using various
techniques and strategies.
When considering these techniques and strategies, company needs to recognize that
each department has a unique mix of working capital components. The emphasis that needs
to be placed on each component varies according to the department.

7
Working capital management keeps your cash flowing as quickly as possible
possible. If cash
flow is considered as the lifeblood of a business then working capital management becomes
the heart-this
this is what pumps cash around a successful business, perfectly as quickly as
possible! Pricing and costing can be considered as the lungs because they are the sys
system
takes in revenue, expels costs and makes sure you have plenty of oxygen to keep the
alive. A healthy body needs healthy lungs and in the same way to build or maintain a
business you need to:

➢ Set prices and control costs for your healthy lungs.


➢ Manage working capital for your healthy heart.

Liquidity and profitability are two more important and major aspects of corporate
business life. No firms can survive, if it has no liquidity. A firm may exist without making
profits but cannot survive without liquidity may soon meet with its downfall and ultimately
die. Working capital management is thus a basic and broad measure of judging the
performance of a business.

Further more working capital management is not an end in itself. It is an integral part
a company’s overall management. The needs of efficie
efficient
nt working capital
be considered in relation to other aspects of the company’s financial and non-financial
performance.

attempt has been made to study the management of working capital of ““Mula
Thus, an

Sahkari Sakhar Karkhana Ltd. Sonai”.

8
COMPANY PROFILE
MULA SAHKARI SAKHAR KARKHANA LTD.

9
Location:-
SonaiGhodegaon Road
Sonai, Tal: Newasa, Dist: Ahmednagar.

Pin: 414105
Ph: (02427) 231303/4/5/6

Fax: (02427) 231307

E-mail
mail ID:

[email protected]
[email protected]

no:AAAAM1145M

Vat teen no:27840410669


no:27840410669-V

G.S.T.REG. NO:27AAAAM1145M1ZL

Registration No:-A.N.G/P.R.G./(A)
A.N.G/P.R.G./(A)-3 Date:-27-7-1970

No. of Share:

Chairman: Mr.Nanasaheb Kashinath Tuwar

Vice Chairman: Mr. B. N. Mote

Managing Director: Mr. S. B. Thomabre

Chief Accountant:: Mr. T. R. Raut

10
BOARD OF DIRECTORS
Mr. N. K. Tuwar Mr. B. N. Mote
Mr. K. K. Dafal Mr. D. A. Darandale
Mr. M. H. Yelwande Mr. B. D. Choudhary
Mr. E. M. Jagtap Mr. B. A. Jagtap
Mr. E. V. Raundal Mr. S. P. Jangale
Mr. B. P. Bhange Mr. N. S. Lokhande
Mr. B. D. Patil Mr. D. C. Shelke
Mr. J. G. Phatke Mr. K. K. Gaikwad
Mr. B. E. Bankar Mr. B. B. Pardeshi
Miss. A. D. Darandale Miss. U. B. Darandale

Bankers:

• Ahmednagar District Central Co


Co-Operative
Operative Bank Ltd.(Ahmednagar)

• Union Bank Of India,


(Branch
(Branch-Sonai)

• Bank Of Baroda,
(Branch-Ghodegaon)
• Bank OfIndia,
(Branch-Ahmednagar)
Ahmednagar)

• UCOBank
• Bank Of Maharashtra
(Branch
(Branch-sonai)

11
Product:
• Sugar Production
Processing:
The harvested Sugar cane material is crushed and the juice is collected and filtered the
liquid is then treated to remove impurities; this is then neutralize with Sulphur dioxide.
then boiled sediment settles the bottom and can be dredged out, usually while being
e sugar crystals. Resultant sugar is then either sold as it for use or processed further to
lighter grades.

Products:-
Sugar

• We produce two grades of sugar, M-30 30, and S-30,, which is of export quality with an International Commission
for Uniform Methods of Sugar Analysis (ICUMSA) value less than.
• We use Double Sulphitation Process for sugar production, where the clarified sugarcane juice is treated and
mixed with Sulphur Di-oxide
oxide in tanks and the outcome is known as ‘Sulphur Syrup’ which is further sent to
be converted as sugar crystals.

Sugar crystals of grade S-30come


come in 6 to 0.8 mm size and M-30 in 1.2 to 1.70 mm.
mm S-30 grade sugar has
polarization above 99.8,, the moisture of about 0.03% and SO2 content below 20 ppm.
ppm

12
Molasses

Molasses is the by-product


product separated from ‘C’ grade sugar during the centrifuging of sugar crystals. The
yield of molasses per ton of cane is in the range of 4 to 4.5%. The entire quantum of molasses produced is
being used for captive consumption in our distilleries.

Bagasse

Bagasse is the fibrous residue from the sugar cane after extracting cane juice. We produce Steam and
Power by using bagasse as fuel for the high pressure boilers in the Cogeneration power plants.

13
Press Mud

Press mud, the solid waste produced while processing sugar cane is rich in potassium, calcium,
phosphorous and organic matters. Press mud is also a base material for producing bio
bio-earth which is done
by composting with spent wash, a liquid
liquid- waste generated out of distillery operation.

Distillery

MulaS.S.K.Ltd. is engaged in manufacturing of Alcohol from molasses by state state-of-


of-art plant having
production capacity of 30000 litres per day, at Nanglamal (Meerut). The plant incorporates atmospheric
distillation and integral evaporation technology to produce high quality product and simultaneously reduce
the effluent being generated from the plant.
This plant is capable of producing Rectified Spirit and Denatured Spirit as per international quality
standards. Our strengths are adequate inin-house
house availability of molasses from own sugar factories and large
dispatch & storage facility.

14
The distillery is employs bio composting process as the effluent treatment method to produce organic
manure for soil enrichment.

Rectified Spirit (RS)

We produce Rectified Spirit (RS) as per BIS specif


specification (IS-323).
323). RS is used by potable liquor producers
for producing country liquor or can be further processed to produce Extra Neutral Alcohol. We supply RS
to buyers all over India.

Denatured Spirit (DS)

We produce denatured spirits as per the requirement of buyer. Denatured Spirit is mainly used by Alcohol
Based Chemical Industries and Pharmaceutical manufacturers. We are regular supplier of DS to all major
alcohol based chemical producers.

15
Organic Manure

Our bio-composting
composting facility can produce about MT organic manure per month. We have adequate in-
in
house availability of press mud, key raw material, from own sugar factories to ensure smooth production
of good quality organic manure. Our main customers of organic manure are farmers.

Fusel Oil

Fusel oil, containing 60-70


70 percent of amyl alcohol, is a byproduct and produced in small volumes. Fusel
oil is a good solvent and diluent for printing inks, gums and hydraulic fluids.

16
Co-generation

Bagasse-based Cogeneration
MSSK has cogeneration facilities at its sugar units at Sonai. The plant generates GREEN POWER using
bagasse produced as a residue from cane sugar processing. It is called green power or a renewable power
since it is a self-replenishing
replenishing source of energy.
The Green Power so produced not only caters to the captive requirement of the sugar plant but is also
exported to the state grid to replace the coal
coal-dominated power.
Sustainable development
• Saves generation of the same amount of power in grid
grid-connected,
connected, fossil fuel dominated power plants
• Reduces GHG emissions due to reduced usage of conventional fossil fuels like coal, oil, natural gas;
thereby helps conserve these finite natural resources
• Truly carbon-neutral, since CO2emission due to combustion of bagasse is more than offset by
itsabsorption, thanks to the surrounding canfields
• Efficientutilizationoflocallyavailablebagassegivessustainablecompetitiveadvantagetothe
cultivation of sugarcane
• Sets an example for other sugar mills by making bagasse
bagasse-based
based cogeneration seem more attractive due
to its revenue potential
• Increasedpoweravailabilityduetodistributedelectricitygenerationimprovesthequalityoflifeinthe
surrounding villages

By Product:
• Distillery
• Rectified spirit
• Molasses
Sub Product:
• Electricity Power Plant.

17
Social Ability:
• Mula Education Society,Sonai.
• Medical Facility
• Library
• Cultural Center
Economical Activity:
• Mula Co-Operative
Operative Bank,Sonai.

• MulaSahakariGrahakBhandar. (Mulabajar)

Total No. Of Employee::00947

18
❖RESEARCH OBJECTIVE

❖ To study and analyses the concept of working capital


❖ To study the operating cycle.
❖ To study the different ratios related to working capital.

19
RESEARCH METHODOLOGY

❖ AREA:
Finance

❖SOURCES OF DATA

➢Primary Data:-
The primary data has been collected personally by visiting all the department of
factory. Materials, Finance and Production etc.

Secondary Data:-
The secondary data has been collected from
❖ The sugar factory’s divisional balance sheet
❖ The sugar factory MIS Accounts over last five
five-year.
❖ Annual Reports and Journals.

20
LIMITATION

1. Some Information is confidential those information may not be made available in the
project.
2. The research conducted was only regarding the information available till the duration of
project.
3. Information is based on Balance Sheet figures, which has some inherent limitations .

21
INTRODUCTION TO WORKING CAPITAL

➢ Definition:-
Working capital is defined as “Excess of current liabilities and provisions” it is that
of the capital with which the busine
business is worked over.
Working capital is also called as circulating capital.
A firm invests a part of its permanent capital in fixed asset and keeps a part of it
working i.e. for meeting the day to day requirements. We will hardly find a firm which
require any amount of working capital for its normal operations. The requirements of
capital vary from firm to firm depending upon the nature of Business, Production , Market
conditions. Seasonality of operations, conditions of supply etc.
A company invests its fund for long
long-term
term purposes and for short-term
short operation.
portion of a company’s in short
short-term
term current assets to carry on its day to day operation
smoothly is called the working capital.

Investment in short-term
term assets, cash, short
short-term
term securities, amounts receivable
inventories of raw materials, work in process and finished goods.

In simple words, working capital refers to that of firm’s capital, which is required
financing short term or current assets such as cash marketable securities, debtors
inventories.

22
Working capital=current
=current Asset
Asset-Current Liabilities

Debtors Trade
Stock Creditor
Cash Bills Payable
Investment Short-term
term
Loan&advances Loans

Taxation

Dividend

The primary objective of working capital management is to ensure that sufficient cash is
available :

1. Meet day to day cash flow needs


2. Pay wages and salaries
3. Pay creditors to ensure continued supplies of goods and services
4. Ensure ling-term
term survival of the business entity

23
CONCEPT OF WORKING CAPITAL
Working capital differs from fixed capital in terms of time required to recover
the investment in a given asset. In case of fixed capital or long
long-term
term asset 9such as
land, building and equipment, a firm usually needs several year or more to recover
the initial, investment in contrast, working capital is turned over or circulated at a
relatively repaid rate.

There are to concept of working capital gross and net working capital.
Generally the working capital has its significance in two perspectives. There are
gross working
orking capital and net working capital are called “Balance sheet Approach”
of working capital.

GROSS WORKING CAPITAL


The terms ‘gross working capital’ refers to the firm’s investment in current
asset. According to this concept working capital refers to firm’s investment in
current asset. The amount of current liabilities is not deducted from total of current
asset.

NET WORKING CAPITAL


The term ‘net working capital’ refers to the excess of current assets over
current liabilities. It refers to the difference between current assets and current
liabilities the net working capital is qualitative concept which indicates the liquidity
position of a firm and the extend to which working capital needs may be financed by
permanent source of fund.

The ‘positive net working ’represents the eexcess


xcess of current assents over
current liabilities.
The net working capitals turn to be negative when current liabilities are
exceeding the current asset. The negative ‘working capital’ position will adversely
affect the operation of the firm and its profitability.

Working capital is also to of permanent and temporary working


capital.

24
OBJECTIVE OF WORKING CAPITAL
MANAGEMENT
By optimizing the investment in current assets and by reducing the reducing
the level of current liabilities. The company can reduce the looked
looked-up of the fund in
working capital thereby. It can improve the return on capital employed in the business.
The second important objective of working is that the company should always
be in a position to meet. It’s current oblig
obligation
ation which should properly be supported by
current asset available with the firm. But maintaining excess funds in working capital
means locking of fund without return.

The firm should manage its current assets in such way that the

Marginal return on investment in these assets is not less than the cost of capital
employed to financial the current asset.

The firm should


ould maintain proper balance sheet current assets and current

liabilities to enable the firm to meet its day to day financial obligation.

25
IMPORTANCE OF WORKING CAPITAL
MANAGEMENT
Working capital is the lifeblood and nerve canter 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 the business. No business
can run successfully without an adequate amount of working capital. The main
advantages of maintaining adequate amount of working capital is as follows:

• Solvency of business:
Adequate working capital helps in maintaining solvent of the business by providing
uninterrupted flow of production.

• Goodwill:
Sufficient working capital enables a business concern to make prompt
payment and helps in creating and maintaining goodwill.

• Easy loan:
A concern having adequate working capital, high solvency and good credit

Standing can arrange loans from banks and other on easy and favourable terms.

• Cash credit:
Adequate working capital also enables a concern to avail cash discounts on
the purchases and hence it reduce the cost.

• Regular supply of raw material:


Sufficient working capital en
ensures
sures regular supply of raw material and
continuous production.

• Regular payments of day to day commitments:


Working capital can make regular payments of salaries, wages and other day
day-
to day commitment, which raise morale of its employees, increase their efficiency,
reduces wastage’ and costs and enhances production and profit.

• Exploitation of favourable market conditions:


1
Only concerns with adequate working capital can exploit favourable market
conditions such as purchasing its requirements in bulk when the prices are lower and by
holding its investment for higher prices.

• Ability to face crisis:


Adequate working capital enables a concern to face business crisis in
emergencies such as depression because during such period, generally, there is a much
pressure on working
Capital.

• Quick and regular return on investment:

Every investor wants a quick and regular return on investment. sufficient of


working capital enables a concern to pay quick and regular dividends to its investors, as
there may not be much creates the favourable market to raise addition fund in future.

• Highmorale:
Adequacy of working capital creates an environment of security, confidence,
and high morale and creates overall efficiency in business.

2
OPERATING CYCLE CONCEPT
Working capital is the life blood of any business, without which the fixed
assets inoperative. Working capital circulates in the business, and the current assets
change from to other. Cash is used for procurement of row materials and stores items
and for payment of operating expenses, and then converted into workwork-in-progress, then
to finished good. When the finished goods are sold on credit terms receivables balances
will be formed. When the receivable are collected, it is again converted into cash. The
need for working capital arises because of time gap between production of good their
because of time production of good and their actual realization after sales. This time gap
is called technically called as ‘operating cycle ’or ‘working capital cycle’.

If a business is operating profitably, than in theory it should generate cash


surplus. If it doesn’t generate surplu
surpluss , the business will eventually run out of cash and
expire.

The operating cycle involves three phase:

1. Acquisition of resourc
resources
es such as raw material, labour ,power and fuel.

2. Manufacture of the product which includes conversion of raw material into


work-in-progress
progress into finished goods.
3. Sale of the product either for cash or on credit. Credit sale create accounts
receivable for collection.

The factor a business expands the more cash it will need for working capital
and investment. Good management of working capital will generate cash, which will
help improve profits and reduce risks.

3
Following is the operating cycle:

4
The investment in current asset is circulating in nature. This changes the
shape from raw material to semi finished goods, debtors and finally to cash. Thus,
conversion of working capital in to cash may result in the profit or loss. Cash thus,
conversion of working capital in to cash may result in the profit or loss.

Working capital cycle consists of following five steps:

➢ Conversion of cash to raw material.


➢ Conversion of raw material into work
work-in-progress.
➢ Conversion of work
work-in-progress into finished goods.
➢ Time for sale of finished goods.(cash and credit sales)
➢ Time for realization from debtors and bills receivable into cash.

A short operating cycle is a sign of goods working capital m


management.
anagement. Conversely ,a
Long cash operating cycle indicate that capital is tied up which the business waits for
customer to pay.

It is quite possible for a business to have a negative cash operating cycle. I.e.
receiving payment from customer before it has pay su suppliers.
Example: typically companies, which employ just in time practices such as
dell, and companies that buy on extended credit term and sale for such as Tesco.

The longer the production process, the more cash firm must keep tied up in
inventories.Similarly, the longer it takes customers to pay their bills, the higher the value
of account receivable. On the other hand if a firms can delay paying for its won material it
may reduce the amount of cash it needs. In simple words accounts payable reduce
networking capital.

5
Collect receivables You release cash from
(Debtors) Faster the cycle

Collect receivables Your receivables stock


(Debtors) Slower cash

Get better creditors (in You increase your


terms of duration or
amount) from suppliers cash resources

Shift inventory (Stock) You free up cash


Faster

Move inventory (Stock) You consume more


Slower cash

6
Operating Cycle of Sugar Factory

Operating Cycle

Raw Raw Finished Finished Cash

Material Material Goods Goods Received

Purchase Introduce Completed Sold on From


On Credit into Process Credit Debtors

Raw Material WIP Finished Goods Debtors

Holding Period Period Holding Period Collection

Period Time

Creditor’s Payment Period

7
RATIO ANALYSIS

Definition:-
The accounting ratios indicate a quantitative relationship which is used for analysis and decision
making.

The primary uses of financial statements are evaluating past performance and predicting future
facilitated by comparison. Therefore, the focus of financial analysis is always on the crucial information
contained in the financial statement. Thus depends on the objectives and purposes of such analysis. The purpose
of evaluating such financial statements is different form person depend
depending
ing on its relationship.

The financial analysts always need certain yardsticks to evaluate the efficiency and performance of any
business unit. The one of the most frequently used yardsticks is ratio analysis. Ratio analysis involves the use of
various methods for calculating and interpreting financial ratio to assess the performance and status of the
business unit. It studies the numerical of quantitative relationship between two variables or items.

8
ADVANTAGES OF RATIO ANALYSI
I. Ratio analysis reflects the working efficiency of a concern.
II. Ratio analysis facilitates comparison between one firm and another in the same
industry over a number of year to ascertain profitability.
III. Since ratio analysis reflect the financial health of a concern, bank, insurance and
other financial institution relay on them while judging loan application and in
taking vital investment decisions.
IV. Ratio analysis helps in establish
establishing
ing trend, since the results are analyzed over a
number of years. Tread analysis is fruitful in preparing plans for the future.
V. Ratio analysis is helpful in forecasting likely events in future.

9
ANALYSIS OF WORKING CAPITAL

1) Total Current Asset:


Asset:-

Year 2018-19
19 2019-20 2020-21
Rs In 210.199 209.19 119.33
Crore

10
Interpretation :-

The current assets are gradually increasing. This can also be seen diagrammatically. In
the year 2019-20,it
20,it has decreasing as compare to previous year Rs,1.009 corer in the
year 2018-19 it has also decreasing in current asset.

2)Separated current Assets

Sr.No Particular 2018-19 2019-20 2020-21


Rs Rs Rs
1. Inventory 107.89 98.40 42.94
2. Debtors 23.09 10.38 36.12
3. Advances 0.479 15.05 20.83
4. Cash& Bank 78.74 85.36 19.44

Total 210.199 209.19 119.33

11
Interpretation:

The table shows that, major part of current assets is covered by stock
every year. After stock the major part is covered by debtors. In the year 2019-20 the
cash and bank increased as compare 2018
2018-19 but, in the year 2020-2121 the cash and
bank in decreased.

3)Total Current Liabilities:

Years 2018-19
19 2019-20 2020
2020-21
Rs In crore 118.02 138.84 67.35

Interpretation:
In the year 2019
2019-20
20 the current liabilities are increases as compare to
. In the year the 2020-21
21 the current liabilities decreased in 71.49 crore as compare to

12
4) Separated Current Liabilities:

year Particular 2018-19 2019-20 2020-21


Rs in crore RS in crore Rs in crore
1. Creditors 24.34 37.50 (-) 8.64

2. Other current Liability 75.40 61.55 66.80

3 Provisions 18.28 39.79 9.19

Total 118.02 138.84 67.35

Interpretation:

13
This graph shows the separation of creditors, provision, and other current
liabilities.
The table show that, major part of current liabilities is covered by creditors
every years small part of amount is covered by other current liabilities is increasing
every year.

5) Net Working Capital

Sr. No Particular 2018-19 2019-20


20 2020-21
Rs in crore RS in crore Rs in crore
1. Stock 107.89 98.40 42.94
2. Debtors 23.09 10.38 36.12

3. Advances 0.479 15.05 20.83


4. Cash & Bank 78.74 85.36 19.44

Total (A) 210.199 209.19 119.33

1. Creditors 24.34 37.50 (-)8.64

2. Provisions 18.28 39.79 9.19


3 Others Current Liabilities 75.40 61.55 66.80

Total (B) 118.02 138.84 67.35

Net working Capital (A


(A-B) 92.179 70.35 51.98

14
Analysis of Working Capital Through Different Ratios

1) Current Ratios:
This ratio is a measure of the ability of firm to meet its short
short-term
term obligation. It is perhaps the best-
best
known measure of financial strength at a given point of time. In general, a ratio of 2:1 is usually
considered good. Too small ration indicates that some potential difficulty in covering obligation may
exist. A high ratio may indicate that the company has too many assets tied up in current assets and is
not making efficient use of them.

Current Ratio = Current Assets/ Current Liabilities.

(Rs. In Crore)

Years Current Assets Current Liabilities Ratios

2018-19 210.199 118.02 1.78

2019-20 209.19 138.84 1.50

2020-21 119.33 67.35 1.77

16
2) Quick Ratio:

This ratio is also known as ‘liquid ratio’ or ‘acid ratio’ it express the relationship
between quick current asset &current liabilities. This ratio is a more refined tool and
measure the liquidity it is a better test of financial strength than the current ratio. A
quick ratio of 1:1 is usually considered satisfactory.

Quick Ratio: liquid assets/liquid liabilities

Year Quick assets Quick liability Ratio

2018-19 102.309 118.02 0.86

2019-20 110.79 138.84 0.79

2020-21 76.39 67.35 1.13

17
3) Working Capital Turnover Ratio:

This ratio helps to measure the efficiency of utilization of net working capital. It
significant that for an amount of sales relative amount of working capital should bbe
adequate and thus, this ratio helps management to maintain the adequate level of
working capital.

Working Capital Turnover Ratio=Sales/working capital


Year Sales Working Capital Ratio
2018-19 (-)225.79
)225.79 92.179 (
(-)2.449

2019-20 71.01 70.35 1.009


2020-21 44.30 51.98 0.852

18
4) Current asset Turnover Ratio:

A higher asset turnover ratio indicates capability of organization to achieve


maximum sales within minimum investment in current asset. It indicates that current
assets turned over in the forms of sales more no. of times Higher current asset in
turnover ratio better will be the situation.

Current Asset Turnover Ratio=Sales/Current Assets

Year Sales Current Assets Ratio


2018-19 (-)225.79
)225.79 210.199 (
(-)1.074
2019-20 71.01 209.19 0.339

2020-21 44.30 119.33 0.371

19
Research Finding
The sugar factory has maintained their working capital position. In the year 2018
2018-
19 the working capital was very high but after that in year 2020
2020-21
21 the working capital
is decreasing by 40.19 crores.
Current ratio:
The current ratio recommended is 2:1 and for manufacturing company is 1.33 but
the ratio of the sugar factory is more than 2. Hence sugar factory is better position to
meet their current obligation.
Liquid ratio:-
Liquid ratio checks the immediate liquidity of the firm i.e. availability of the firm
to pay its debts with the available most liquid funds. The recommend ratio is 1:1 in the
case of sugar factory liquid ratio is 0.84 which highlights they are trying to maintain
balance.
Working capital turnover ratio:
In the year 2019-2020 and 2020
2020-21
21 working capital turnover ratios is 1.009 and
0.852 respectively.
Current Asset Turnover Ratio:
Sugar factory shows that ability of using the current asset is up to the minimum
level. In the year 2018-19
19 the current asset turnover ratio gone negatively. But in the
year 2019-20 and 2020-21 21 ratio is 0.33 & 0.37 It means the position is going on
positively. But, the
he company should maintain and proper utilisation of the current
assets.

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SUGGESTION
Working Capital:
Sugar factory is a seasonal industry. Hence their working capital is very
high but last three year company has decreased their working capital. To improve the
working capital, the sugar factory should try to adopt latest/approaches to improve the
working capital.

Quick Ratio:
The ratio should be 1:1 whe
whenn the ratio goes below 1; it is a sign of danger.
So this ratio must be 1 or more than. It means the quick assets are equal to current
liabilities. In the last two year sugar factories ratio is less than 1. Thus it is required to
improve.

Current Asset Turnover Ratio:


The sugar factory should maintain their Current Asset Turnover Ratio. Last
two year ratio is less than 1. Hence it means not sufficient sale. Sugar factory should
maintain their sales level. Sugar factory should careful about the market condition,
government policy.

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CONCLUSION
To conclude I would like to mention here that this project work out is very
helpful to me. This is a unique opportunity to discuss the concept of text book with an
organization. This is provided a break through to apply theoretical knowledge in
practical corporate word. And this experience will be helpful for future performing.

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BIBLIOGRAPHY

➢ I M PNADY,2009, Financial Management, Published by Vikas Publication


th
9 edition, page no.579-582.
582.
➢ PRASHANNT CHANDRA ,2009, Financial Management , Publication by MC
Craw Hill professional series in finance , 7thedition , pageno.661--679
➢ M Y KHAN and P K JAIN , 2008 , financial management publication by the
MCGROW HILL companies 5thedition pageno.17.4.
➢ V K BHALLA ,2009 ,Financial management and policy published by AMOL
PUBLICATION PRIVAT ELIMITEDN ,8thedition page no.792--794.

Financial Management Ravi M Kishore


Financial Management I M Pandy
Financial Management MaheshKulkarni

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WEBLIOGRAPHY

E-mail :
[email protected]
www.google.comwww.y
ahoo.co

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