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Submitted to
INSTITUTE OF MANAGEMENT AFFILIATED WITH GUJARAT TECHNOLOGICAL UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION
Guided by (company):-
Guided by (college):-
MRS. MR. KRISHNA Gaud Agrawal sir VISHAL JAIN (faculty of IM) (Assistant general manager) (Sr.officer finance)
INSTITUTE OF MANAGEMENT, MBA PROGRAMME, OPP. TOWNHALL, NR.GRID, bharuch JUNE - 2011
PREFACE
Being , An M.B.A. Student , it gives me great pleasure to prevent my report for industrial training. Focusing on the area of management such as FINANCIAL MANAGEMENT. Of industry I hope that my report will be able to satisfy the partial requirement of curriculum. GUJARAT TECHNOLOGICAL UNIVERSITY has given golden opportunity to be
those student who are interested in starting their own business and want to develop a leadership , quality in themselves, industrial training gives practical knowledge to each and every student of M.B.A. Programme industrial training is considered as a separate subject in M.B.A. course and it consist of equal weight age as other. The details presented in my report indicate the different aspects of industry like its history, location, establishment year, type of industry & structure of company, functioning of the top manager, products, equipment, technology & others.
ACKNOWLEDGEMENT
Any kind of theoretical knowledge can be use in the practical study or use. Theoretical guidance or knowledge can help for know about Performa of work but how it can be apply & to take react & response from it. So, as per my view the practical training is vital role in management study. I would like to express my sincere thanks to MR N.N.PATEL (principal & director) Anand institute of management. Faculty MISS KRISHNA GOR (incharge) in financial management subject from Anand institute of mgt. who can give me this opportunity to step in to the real world. I can express myself to extremely thankful MISS. SWATI BHAVSAR executive of H.R. who can give me permission for training & MRS.DEEPTI SHARMA (assistant general manager) finance department, MR. VISHAL JAIN (sr.officer finance dept) who can guide me about finance. I extremely thankful to my friends who can help me for taking interest me whenever needed lastly.
DECLARATION
I HIMA VYAS student of the two year MBA programme at Anand Institute of Management, hereby declare that the report on summer training and project work entitled working capital management is the result of our own work and my indebtedness to other work publications, if any, have been duly acknowledged.
HIMA VYAS
EXECUTIVE SUMMARY
The project report is about Working Capital Management of Banco Product (I) LTD. The project report is mainly divided in two parts, the first part is about basic information of company and the second part is primary study.
In the first part of the report the basic information about the company is mention. Its included the Banco profiles, the history, organizational structure. Apart from these the information about Human Resource department, production department, R&D Department is given. In the primary study, the purpose of study, the concept of working capital management, receivable management, cash management, inventory management and ratio analysis is included. In Annexure last three years balance sheet & profit & loss account is included.
TABLE OF CONTENTS
Preface Acknowledgement Declaration Executive summery I II III IV
Sr. No.
Particulars
Part 1 General Information 1 About the company 2 About the functional department
Page No.
1 10 16 18 19 20 30 36 38 40 42 44 46 48 49 V VI
Part 2 Working capital management 3 Introduction of finance Sources of finance 4 Working capital management Concept Operating cycle 5 Main function of working capital 6 Analysis Current ratio Quick ratio Debtors Turnover ratio Creditors Turnover ratio Inventory Turnover ratio Working capital Turnover ratio 7 Results & Findings 8 Conclusion Bibliography Annexure
LIST OF TABLES
Sr. No. 1 Certifications 2 Shifts Particular Table no. Table no. 1 Table no. 2 Page no. 5 7
3 Strength of employees 4 Raw material conversion period 5 Work in process conversion period 6 Finished goods conversion period 7 Debt collection period 8 Creditors deferral period 9 Operating cycle 10 Receivable management 11 Cash management 12 Inventories management 13 Statement of current ratio 14 Statement of Quick ratio 15 Statement of Debtors turnover ratio 16 Statement of Creditors turnover ratio 17 Statement of Inventory turnover ratio 18 Statement of Working capital turnover ratio
Table no. 3 Table no. 4 Table no. 5 Table no. 6 Table no. 7 Table no. 8 Table no. 9 Table no. 10 Table no. 11 Table no. 12 Table no. 13 Table no. 14 Table no. 15 Table no. 16 Table no. 17 Table no. 18
9 20 21 23 25 26 28 31 33 35 36 38 40 42 44 46
LIST OF GRAPHS
Sr. No. 2 Particular 1 Organizational structure Human resource department Chart no. Chart no. 1 Chart no. 2 Chart no. 3 Chart no. 4 Page no. 6 13 20 22
5 Finished Goods conversion period 6 Debt collection period 7 Creditors collection period 8 Operating cycle 9 Current ratio 10 Quick ratio 11 Debtors turnover ratio 12 Creditors turnover ratio 13 Inventory turnover ratio 14 Working capital turnover ratio
Chart no. 5 Chart no. 6 Chart no. 7 Chart no. 8 Chart no. 9 Chart no. 10 Chart no. 11 Chart no. 12 Chart no. 13 Chart no. 14
24 25 27 28 37 39 41 43 45 47
GENERAL INFORMATION
In 1967, company pioneered in Indian market to develop engine cooling module for 30000 H.P. rated engines for Indian traction locomotives there after company diversified in to manufacturing of copper/brass radiators for off road equipments, agricultural tractors, commercial vehicles and passenger cars. The company was listed on Indian stock exchange in 1987 and around which time started second manufacturing site at Ankhi for supplying exclusively Indian OMEs as well as export to Western Europe. Expertise gained through 3 decades of manufacturing experience makes Banco one of the most preferred manufacturing facilities. Spread were there modern factories producing of over 10000 qualities. Indian auto industries during the year 2005-06 registered. Substantial in domestic and in export sales in numbers over that of last year and the growth. Appear to continue in the similar fashion for the year 2007-08 mean while substation in use of co-brass radiators continues as the same is being repaired by aluminum radiators in majority of the OEM applications. Gaskets & radiators helps Banco product one of the widest ranges for the alternative sector. The company has its technical collaboration with Exing Klinger of Germany and Japan metal. Gasket of Japan or fulfilling the needs of the Indian and international automobiles. Industries with product like Gaskets and Radiators.
EMPLOYEE SERVICES
Table no. 3
ASSISTANT
Human resource department is concerned with the people dimension in management. Since every organization is made up of people acquiring their services, developing their skills, motivating them to high levels of performance and ensuring that they continue to maintain their commitment to the organization are essential to achieving organizational objectives. This is true regardless of the organization government, business, education, health, recreation or social acting. Getting and keeping good people is critical to the success of every organization, whether profit or nonprofit public or private.
concerned department Personnel department share obtain, job mass specification as per recruitment. There are two sources of recruitment in BANCO, -
Advertisement Internet
Then the process of collecting application forms companys data bank trainees from training center, display internal and external. Selection is the second step in the process of procurement of people. The selection process begins with screening of applications and ends with hiring decision and placement. In BANCO, the process of screening of application is done by the concerned department. Then all the basis of the job description, qualification experience and criteria is to be followed as per job specification mentioned in the advertisement. When a candidate reports for the duty, a person is given an appointment letter and placed on probation for a period of 6 months after complication of joining formalities and induction training subject to clearing medical examiner.
There is training center, which will make plan for new employee/training that is what information is to be given to them about BANCO INDIA. History General Information Information about highlights Information about all department
Picnics.
INTRODUCTION OF FINANCE
with the
planning and controlling of the firms financial resources. It was branch of economics till
1890 and as a separate discipline, it is of recent origin. Still, it has no unique body of knowledge of its own, & draw heavily, on economics for its theoretical concepts even today. The subject of financial management is of immense interest to both academicians & practicing managers. It is of great and there are still certain areas where controversies exist for which no unanimous solution has been reached as yet. Practicing managers are interested in this subject because among the most crucial decision of the firm are those which relate to finance, and an understanding the theory of financial management provides them with conceptual and analytical insights to make those decisions skillfully.
The theory of finance makes two crucial assumptions to provide guidance to the financial manager in making these decisions.
First:The objective of the firm is to maximize the wealth of share Holders. It is argued that share holders are the ultimate owners of the firms & the role of the manager is that of an agent acting on their behalf. It is therefore imperative on the part of financial manager to make decision that will increase the value of share holders in the firm.
Second:Capital markets are efficient. An efficient capital market implies that investors have free access to the market with full knowledge, zero transaction cost and that individual investors are unable to influence prices. The efficient capital market enable investors to lend or borrow funds, this helps them to make choice between consumption & investment.
SOURCES
1. Long term financial need -Equity share or share capital
-Preference shares -Retained earnings -Debenture -Loans from financial institution -Venture capital funding
In this part issues relating to management of current assets will be discussed. The management of current assets is similar to that of fixed assets in the sense that in both cases a firm analyses their effects in its return and risk. The management of fixed & current assets, however differs in three important ways.
2. NET WORKING CAPITAL. Gross working capital refers to the firms investment in current asset. Current assets are the assets which can be converted in to the cash within an accounting year and include cash, short term securities, debtors, bills receivable and stocks.
Net working capital refers to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and includes creditors, bills payable and outstanding expenses.
RM consumption per day = RM cons./365 RM inventory= Closing RM inventory RM holding day = RM inv./ RM Consumption per day
21231.86 16083.31 17403.11 58.17 44.06 48 5667.25 3679.10 2528.70 97d 84d 53d
CHART NO.3
Interpretation
In 2009-2010 there is high RM conversion period. Its take 97days to convert inventory in WIP, which is 13days more than 2008-2009.
The main variable is purchase of RM during the year. It is 5000 more than last year. And the consumption of RM l is also very slow. So its taken more time to convert RM in to WIP.
per day
CHART NO.4
2007-2008
2 008-2009 Y ear
2009-2010
Interpretation
RM consumption period is high in 2009-2010 still in all the year the WIP conversion period is same. The minored changes are there in conversion period.
The main reason is the cost of production which is increased by more than 6000rs. Because of that the cost of production per day is also increased so its reduced the WIP inventory holding day.
The main variable in cost of production is other manufacturing expenses. The labour charges are increased by 1000rs nearly.
Table no. 6
C 1 2 3 4
Finished goods conversion period Cost of goods sold Cost of goods sold per day finished goods inventory Finished goods inventory holding per day
09-10 08-09 07-08 26621.13 20011.15 20993.79 73 55 58 682.68 1058.93 996.49 9d 19d 17d
CHART NO.5
Interpretation
There is huge change in F.G. conversion period. As compare to 2008-2009 there is 10days decreased in 2009-2010. So it is very beneficial for the company. Now its change the whole process of operating cycle.
The main variable is closing stock of F.G inventory. It is decreased in 2009-2010 so it is reduced the holding days of F.G. inventory.
40714.98 28791.44 29885.09 112 79 82 8789.93 6458.85 7356.17 78d 82d 90d
CHART NO.6
Interpretation
The collection period is decreased by 4 days in 2009-2010 as compare to 20082009. But in 2008-2009 it was reduced by 8 days. The reason was the debtors were decreased in particular year and the sales was also reduced. In 2009-2010 is decreased so it is good for company to collect money on short period and to reduced the period to convert into cash.
CHART NO.7
Interpretation
In 2009-2010 the credit purchase is high so the Creditors are also increased. Because of that the creditors outstanding days are also increased so now company can get more time for payment so it is good for company because it can hold money on hand more days.
CHART NO.8
OperatingC ycle
200 150 Days 100 50 0 2007-2008 2008-2009 Y ear 2009-2010 123 155 137
Operating cycle is highest in the year 2008-2009 because it has more debtors collection period. Operating cycle is lower in 2009-2010 because its debtors collection period is lower. In 2008-2009 the creditors payment is low so its affects the operating cycle. It is very significant change in the year 2009-2010 with regard to finished goods inventory. In 2009-2010 the Raw material conversion period is very high but finished goods conversion period covered it.
RECEIVABLE MANAGEMENT
Trade credit arises when a firm sells its products or services in credit and does not receive cash immediately. It is an essential making tool as a bridge for the movement of goods through production and distribution stages to customers. A firm grants trade for credit to protect its sales from the competitors and to attract the potential customers to buy its products as favorable terms.
Trade credit creates accounts receivable or trade debtors that the firm is expected to collect in near future. The customers from whom receivable or book debts have to be collected in the future are called trade debtors or simply as debtors and represents the firms claim or assets.
======== ========
CASH MANAGEMENT
Cash, the most liquid asset, is of vital important to the daily operations of the business firm. While the proportion of corporate assets held often between 1 and 4 percent, its efficient management is crucial to the solvency of the business because in a very important sense in a business.
INVENTORY MANAGEMENT
There are three types of inventories. 1. Raw material:Raw material and components that are inputs in making the final products. 2. Work-in-process:It also called stock-in-process refers to goods in the intermediate stages of production. 3. Finished-goods:It consists of final products that are ready for sale. While manufacturing firms generally hold all the three types of inventories, distribution firms hold mostly finished goods.
INVENTORIES OF BANCO PRODUCTS (I) LIMITED STATEMENT FOR INVENTORY MANAGEMENT Table no. 12
(Rs In lacs)
AS AT PARTICULAR Inventories :Raw-materials(at cost) Work-in-process(at cost) Finished products(at cost ) Sundry debtors(at cost) TOTAL 31-03-10
AS AT 31-03-09
AS AT 31-03-08
ANALYSIS
1. CURRENT RATIO (TIMES)
Function:The ratio measures the ability of a company to discharge its day-to-day bills of current liabilities, as and when they fall due, out of the cash or near, cash or current assets that it possesses. Computation:Current ratio= Current assets, loans & advances + short term investment ---------------------------------------------------------------------------Current liabilities + provisions + short term debt
STATEMENT OF CURRENT RATIO Table no. 13 (RS. IN Lacs) Current Assets 13,259.62 14,417.95 17956.78 Current liabilities 4219.16 4212.14 5951.14 Current Ratio 3.14:1 3.42:1 3.02:1
CHART NO.9
CURRENTRATIO
3.5 3.4 3.3 3.2 3.14 RAT IO 3.1 3 2.9 2.8 2007-2008 3.42
3.02
2008-2009 YE AR
2009-2010
Interpretation: As per data of the company it was interpret that there was changes in current ratio. In 09-10 it was decrease, the main reason is cash and bank balances of Banco. The liabilities are also increase so it was also affect the ratio. So the margin of safety is also reduced so it is not good for the creditors. The main variable is the huge increased in micro small & medium enterprises.
2 .QUICK RATIO:Function:The ratio measures as to quick is the ability of a company to discharge its current liabilities net of working capital limits, as and when they fall due, out of cash, or current assets of inventories that is possesses. Inventory takes the longest of the current assets to convert into cash. Computation:Quick ratio = quick assets (quick) Quick liabilities
Years
CHART NO.10
QUIC RAT K IO
3.5 3 2.5 2 R ATIO 1.5 1 0.5 0 3.18 2.22 2.59
2007-2008
2008-2009 Y EAR
2009-2010
Interpretation:
As per data the companys position is higher with current ratio as well as more realistic properties In 09-10 it was decrease, the main reason is cash and bank balances of Banco. The liabilities are also increase so it was also affect the ratio.
So it is good for the company. The main variable is the huge increased in micro small & medium enterprises.
3 .Debtors TURNOVER RATIO:Function:The ratio measures the credit period allowed to the customer on credit sales or how fast a company realize its outstanding dues. It is also known as days sales in receivable ratio. Computation:Debtors turnover ratio = Credit sales Average debtors
(Rs.in Lacs)
Years Credit sales 07-08 08-09 09-10 2,988,5.03 2,879,1.44 4,071,4.98 735,4.67 645,8.85 878,9.93 Debtor Debtors Turnover Ratio 4.06 times 4.46 times 4.63times
CHART NO. 11
Interpretation: As per above ratio it can known that in how many times taken by debtors can pay their debt. For the business it is require to pay in minimum times in a year so as per above in (09-10). It was constantly increase year by year. The main reason is increasing sales constantly. In 2009-2010 it is higher the value of debtors turnover, the more efficient is the management of credit.
(Rs. In Lacs)
Year s Credit Purchase A/c Payable Credit Turn over Ratio 7.34 times 8.43 times 6.08times
CHART NO.12
Interpretation:
Creditors turnover ratio means how many times period we take to pay debt to creditors. Here the ratio is not constant. In 09-10 there is huge decrease as compare to other years. It was happened because of purchase. It was huge credit purchase in this year. And the creditors also more than 08-09.
So it is not good for the company. Company cannot get sufficient time for payment.
Statement of Inventory turnover ratio Table no. 17 (Rs. In Lacs) Years Net Sales 07-08 2,988,5.03 08-09 2,879,1.44 09-10 4,071,4.98 4,226.04 5,522.30 7,593.31 Inventory Inventory Turn over Ratio 6.96 times 5.21 times 5.36times
CHART NO.13
INV ENTOR TUR OV R Y N ER ATIO 8 7 6 R ATIO 5 4 3 2 1 0 2007-2008 2008-2009 Y EAR 200 9-2010
Interpretation: Higher the ratios of inventory can idea about higher capacity of business to convert into cash up to (07-08). Banco continuous increases its convertibles capabilities. So, in that situation company have more W.C. but in (08-09) its decrease & in 09-10 it is increase. The sale of the Banco is increased constantly. In 09-10 the inventory is increased very much as compare to past years. It was increased nearly 2000.
Statement of Working capital turnover ratio Table no. 18 (Rs. In lacs) Years Net Sales Working Capital Working Capital Turn over Ratio 3.31 times 2.82 times 3.39times
CHART NO.14
2007-2008
20 08-2009 Y AER
2009-2010
Interpretation: The working capital compare with its net sales, in portion of net sales. How much net current assets considered. Up to (07-08). Banco can continuous increase its ratio so, that time its capabilities goes high but at (08-09) its decrease but in 0910 it is again increased. The main reason is increased in sales in 2009-2010. The working capital is also increased but not more than sales. Because the liabilities are increased more.
BIBLIOGRAPHY
For, the preparing report and include some topics and some theoretical of financial mgt., working capital mgt. so, I refer following books,
=> FINANCIAL MANAGEMENT :BY I. M. PANDAY. Ninth edition Vikas publication house pvt ltd. Ch no.25 Financial statement analysis page no. 518-521 Ch no.27 Principles of working capital page no. 579-583 Ch no.28 Receivables management and factoring page no. 601-615 Ch no.29 Inventory Management page no. 624-635 Ch no.30 Cash Management page no. 640-646 Ch no.31 Working capital finance page no. 658-665 => ANNUAL REPORT :47th ANNUAL REPORT 2007-2008
48th 49th
ANNUAL REPORT
2008-2009 2009-2010
ANNUAL REPORT -
ANNEXURE
1 2 3 4
TOTAL APPLICATION OF FUNDS 1.fixed assets A) Gross block B) Less depri C) Net block D) Capital WIP including capital advances 2.Investment
3.CURRENT ASSETS, LOANS& ADVANCES 1.Inventories 2.Sundry debtors 3.Cash & ban balance 4.Loan & advances Less:current liabilities & provisions:1.Liabilities 2.provisions Net current assets
7 8 9 10 11
7593.31 8789.93 550.38 1023.16 17956.78 3999.79 1951.35 5951.14 1200577 33644..64
5522.30 6458.85 1055.72 1161.71 14198.58 2706.25 1505.89 4212.14 9986.44 18730.10
4296.04 7354.67 147.34 1461.57 13259.62 2818.87 1400.29 4219.16 9040.46 16409.26
Total
(Rs. In Lacs)
PARTICULARS SCH AS AT 31-032010 43178.26 2463.28 40714.98 1016.31 (114.36) 41616.91 21231.86 1658.09 AS AT 31-032009 31451.98 2660.54 28791.44 679.54 14.33 29485.31 16083.31 1494.45 AS AT 31-032008 33362.64 3477.61 29885.03 728.97 224.90 30838.90 17403.17 1295.03
INCOME Gross sales Less: Excise duty on sales Net sales Other income Increased/decreased in stock Total EXPENDITURE Material consumed Payment to and provision for employees
12 13
14 15
Research and development Manufacturing exp Adm. & general exp. Selling & distribution exp Interest & finance charges Depreciation Less: charges to revolution reserve Total PBT Provision for current tax Mat credit entitlements Provision for fringe benefit tax Provision for deferred tax PAT BALANCE AVAILABLE FOR APPR. APPROPRIATION Total Earnings per share face value of Rs2 Notes forming part of account
16 17 18 19 20
288.16 4319.87 466.25 2655.99 215.20 955.05 1.39 953.66 31789.08 9827.83 1950.00 37.08 1987.08 15131.23 15131.23 10.96
256.01 3063.58 486.06 2173.18 261.31 878.56 1.51 877.05 24694.95 4790.36 550.26 (117.00) 15.00 195.99 644.25 9195.58 9195.58 5.80
164.61 3080.97 456.09 2172.53 402.75 734.55 2.18 732.37 25707.52 5131.38 720 000 13.15 68.31 801.46 6606.08 6606.08 6.10
21