A STUDY ON WORKING CAPITAL IN SRI RAGHAVENDRA

8/7/2019 A STUDY ON WORKING CAPITAL IN SRI RAGHAVENDRA

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Submitted byN.MAGESH

Reg no:SP09BAP028

Under The guidance of DR. DELECTA


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INTRODUCTION

FIN A NCEFinance is the science of funds management. The general

areas of finance are business finance , personal finance ,and public finance . Finance includes saving money andoften includes lending money. The field of finance dealswith the concepts of time , money , and risk and how they are interrelated. It also deals with how money is spent andbudgeted.


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WO RK ING CAP ITALWork ing capital , also known as "WC" , is a financial metric

which represents operating liquidity available to a business. Alongwith fixed assets such as plant and equipment , working capital is

considered a part of operating capital. It is calculated as currentassets minus current liabilities. If current assets are less thancurrent liabilities , an entity has a w ork ing capital deficiency , alsocalled a w ork ing capital deficit . Net working capital is workingcapital minus cash (which is a current asset) and minus interest

bearing liabilities (i.e. short term debt). It is a derivation of workingcapital , that is commonly used in valuation techniques such asDCFs (Discounted cash flows).

Working Capital = Current Assets Current Liabilities


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COMPANY PROFILE

OV ER V IE W SR I R AGHAVENDR A METALS initiated the trading businessin 1982 with various types of hoses in the name of SHALIMA R . Today , SR I R AGHAVENDR A METALS is one of thecompany has the widest product portfolio covering all aspects of the Kitchen making it the only brand to offer TOTAL KITCHENSOLUTION S to the customer. The product range includesPressure Cookers , Non- Stick Cookware , R ice Cookers , OTG s,

Kitchen Hoods (Chimneys) , and Hobs , LP Gas Stoves , CoffeeMakers , Kettles , Sandwich Toasters and many other smallelectrical appliances. SR I R AGHAVENDR A METALS also offersModular Kitchen solutions with the widest range of options interms of design , choice of materials , accessories and hardware


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PR O DUCTS CATE GO R IESPressure HandisInner Lid CookersNon- Stick CookwareMixer GrindersHand BlendersR ice CookersInduction Cook-TopsPop-Up ToastersSandwich ToastersElectric KettlesCoffee MakersOven , Toaster & GrillIronsJuicersKitchen Hoods (Chimney)Gas StovesTruedge KnivesKitchen ToolsModular KitchensGift Certificatesple Cookers


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OBJECTIVES OF THE STUDY

PR IM ARY OBJ ET IV E:To study the Working capital management of SR IR AGHAVENDR A METALS.

SEC O NDARY OBJ ECT IV ES:To estimate the Working capital management requirement of thecompany by analyzing the past records of the company.

To analyze the sources of and application of Working capitalmanagement of the company

To find out the status of Working capital management of thecompany


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RESEARCH METHODOLOGY

R esearch in common parlance refers to search for knowledge. It can bedefined as a scientific and systematic search for pertinent informationon a specific topic. Methodology denotes a specific method of

collection and analysis of data. It is a way to systematically solve theresearch problem. It is necessary for the researcher to know not only the research methods techniques but also the methodology.

RESEARCH DES IGN

A research design is purely a frame work or plan for a study that guidesthe collection and analysis of the data. Here , an analytical study wouldbe conducted to know the existing inventory system pertaining to scrapstoresdepartment in the organization.


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S O URCE O F DATA

o PRIMARY DATAPrimary data is the information obtained from Trial

Balance , Profit and Loss summary and Balance sheet

o SECON DARY DATA

Secondary data is the information obtained from thealready existing ones where the data are collected from thevarious books of accounts. They are as follows.

o

ANNU

AL RE

P O

RT It provides all the information about thecompany for the accounting period. This enables tounderstand the existing performance of thecompany.


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STAT IST ICAL T OO LS USED

o RATI O AN ALY S I S A ratio is an arithmetical relationship between two figures. The

study of ratio between various items (or) groups or items in financialstatements is known as financial ratio analysis. It is the principle tool of analysisof financial statements.

o I NVEN T O RY T U RNOVE R RATI O This ratio should be compared against industry averages. A low

turnover implies poor sales and , therefore , excess inventory. A high ratioimplies either strong sales or ineffective buying. High inventory levels areunhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall.

Inventory Turnover R atio = Cost of Goods SoldAvg Inventory Stock


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o CU RREN T RATI OThe ratio of current assets towards liabilities is called current ratio . The

current assets includes cash , securities , sundry debtors and inventory , currentliabilities includes bills of payable , deposits , advances , and then short term loans ,including cash creditors and provisions.Current R atio = current assets

current liability

o LIQ U IDITY RATI OLiquid ratio calculated by comparing the quick assets with currentliabilities. Quick or liquid assets refer to assets , which are quickly convertible into cash.Liquid ratio= Quick assets

Current liabilities


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o W O RKI NG C APITAL T U RNOVE R RATI OWorking capital ratio measures the effective utilization of working

Capital. It also measures the smooth running of business or otherwise , theR atio establishes relationship between cost of sales and working capital.

o DEB T O R T U RNOVE R RATI O

Debtor Turnover R atio = Net Credit SalesAverage Account R eceivables

o AVE RAGE CO LLEC TI ON P E RI O DThis ratio is inter related to and depends upon the debtors turnover

ratio. It can be calculated by following formula

Av. Collection period= days in a year/ debtor turnover ratio


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FINDINGS

y The inventory turnover ratio in 2004-05 was 1.72 gradually increased up to2006-07 and from 2007-08 the ratio was decreased as like 2.15.

y During 2004 the amount has been collected from inventory in 87.23 days but ithas been increased to 211.3 days during 2008-09.

y During 2004 current assets was 0.92 has been gradually increased up to 2007-08 and 2008-09 as like 1.1.

y During 2004 quick asset was R s. 0.6 it has been gradually decreased to R s. 0.49in 2008-09

y The cash position was 0.26 in the year of 2007-08 and the lowest cash positionwas 0.08 in 2005-06.

y During 2004-05 working capital turnover ratio is 44.13 it has been increasedwhen compare to other working capital ratios.


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The debtorcollection period ratio in the year of 2008-09 & 2006-07 was 158.6.

The creditor collection period ratio in the year of 2006-07 is like 462 it willdecrease in 2008-09 was 357.8

The gross profit ratio in the year of 2005-06 was 25.1 as well as in the year of 2007-08 increased the gross profit value of 36.5.

The net profit/ loss ratio in the year of 2004-08 the trend value was 34.4 to 17.6losses and it has earned the profit was 3.0 in the year of 2008-09.

Fixed asset turnover ratio has been increasing up to the year 04-05 , and then itstarts declining in nature in the year & 07-08.

Operating ratio have been constantly decreasing from the year 2004-05 to 2008-09was like 100.6 to 48.6.


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SUGGESTIONS

y Suggestions can be use by the firm for the betterment increased of the firm afterstudy and analysis of project report on study and analysis of working capital. Iwould like to recommend.

y 1.Company should raise funds through short term sources for short termrequirement of funds , which comparatively economical as compare to long termfunds.

y 2. Company should take control on debtor s collection period which is major part of current assets.

y 3. Company has to take control on cash balance because cash is non earning assetsand increasing cost of funds.

y 4. Company should reduce the inventory holding period with use of zero inventory concepts.


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CONCLUSION

y 1. Working capital of the company was increasing and showing positiveworking capital per year. It shows good liquidity position.

y 2. Positive working capital indicates that company has the ability of paymentsof short terms liabilities.

y 3. Working capital increased because of increment in the current assets is morethan increase in the current liabilities.

y 4. Company s current assets were always more than requirement it affect onprofitability of the company.

y 5. Current assets are more than current liabilities indicate that company usedlong term funds for short term requirement , where long term funds are mostcostly then short term funds


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THANK YOU

A STUDY ON WORKING CAPITAL IN SRI RAGHAVENDRA

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