Project - 2
Project - 2
Project - 2
ON
Submitted by:
Akshata ravindra patil
( Roll No. 21127 )
Batch:-2022-2023
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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.
Signature: ________________________
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CERTIFICATE
Guiding teacher:
Prof : Amit sir
Date of submission
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TABLE OF CONTENT
CHAPTER CHAPTER OF CONTENT PAGE NO
NO.
1 INTRODUCTION
2 COMPANY PROFILE
3 RESEARCH METHODOLOGY
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
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.
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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:
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
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COMPANY PROFILE
MULA SAHKARI SAKHAR KARKHANA LTD.
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Location:-
SonaiGhodegaon Road
Sonai, Tal: Newasa, Dist: Ahmednagar.
Pin: 414105
Ph: (02427) 231303/4/5/6
E-mail
mail ID:
[email protected]
[email protected]
no:AAAAM1145M
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:
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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:
• Bank Of Baroda,
(Branch-Ghodegaon)
• Bank OfIndia,
(Branch-Ahmednagar)
Ahmednagar)
• UCOBank
• Bank Of Maharashtra
(Branch
(Branch-sonai)
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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.
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Molasses
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.
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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
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The distillery is employs bio composting process as the effluent treatment method to produce organic
manure for soil enrichment.
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.
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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
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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.
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Social Ability:
• Mula Education Society,Sonai.
• Medical Facility
• Library
• Cultural Center
Economical Activity:
• Mula Co-Operative
Operative Bank,Sonai.
• MulaSahakariGrahakBhandar. (Mulabajar)
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❖RESEARCH OBJECTIVE
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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.
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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 .
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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.
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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 :
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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.
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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.
liabilities to enable the firm to meet its day to day financial obligation.
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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.
• 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’.
1. Acquisition of resourc
resources
es such as raw material, labour ,power and fuel.
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:
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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.
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.
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Collect receivables You release cash from
(Debtors) Faster the cycle
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Operating Cycle of Sugar Factory
Operating Cycle
Period Time
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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.
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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.
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ANALYSIS OF WORKING CAPITAL
Year 2018-19
19 2019-20 2020-21
Rs In 210.199 209.19 119.33
Crore
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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.
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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.
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
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4) Separated Current Liabilities:
Interpretation:
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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.
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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.
(Rs. In Crore)
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2) Quick Ratio:
This ratio is also known as ‘liquid ratio’ or ‘acid ratio’ it express the relationship
between quick current asset ¤t 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.
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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.
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4) Current asset Turnover Ratio:
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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.
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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
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WEBLIOGRAPHY
E-mail :
[email protected]
www.google.comwww.y
ahoo.co
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