Professional Documents
Culture Documents
Working Capital Management Project
Working Capital Management Project
Working Capital Management Project
ON
BALASORE
GUIDE CERTIFICATE
submitted
Management BITS
affiliated
to
Fakir Mohan
BITS
DECLARATION
I Soni Khandelwal hereby declare that the Summer-Training Project of FINANCE
Date:
Signature
Soni Khandelwal
Roll No-63204B10006
ACKNOWLEDGEMENT
Words are indeed inadequate to convey my deep sense of gratitude to all those who
have helped me in completing this project to the best of my ability. Being a part of
this project has certainly been a unique and a very productive experience on my
part.
I am really thankful to Mr. Dhirendra Kumar Jena for making all kinds of
arrangements to carry the project successfully and for guiding and helping me to
solve all kinds of quarries regarding the project work. His systematic way of working
and incomparable guidance has inspired the pace of the project to a great extent.
I would also like to thank my mentor and project coordinator, Mr. Parminder
Singh, Asstt. Manager, (Finance & Accounts) for assigning me a project of such a
great learning experience and acquainting me with real life project financing and
appraisal.
Last but not least I would like to thank all the Friends of BITS who have directly or
indirectly helped me with their moral support for the completion of my project.
Soni Khandelwal
TABLE OF CONTENTS
CHAPTERS
PAGES
1) Introduction
7-14
2) Industry Profile
15-18
18-28
4) Conceptual Framework
29-49
50-70
6) Major Findings
71-72
7) Conclusion
73
74
9) Bibliography
75
10) Appendices
76-85
ABSTRACT
This project is based on the study of working capital management in
Sintech Precision Product Ltd. An insight view of the project will
encompass what it is all about, what it aims to achieve, what is its purpose
and scope, the various methods used for collecting data and their sources,
including literature survey done, further specifying the limitations of our
study and in the last, drawing inferences from the learning so far.
Sintech Precision Products Ltd., founded in 1986, by an enterprising
technocrat Mr. N.C.Dhingra is recognized as one of the largest pumping
solutions provider today in India. Sintech is an advanced pumping solution
provider for water intensive heavy industries. With a very diverse product
portfolio, Sintech provides solutions for multifarious applications like clear
water, process, slurry, liquid with suspended solids, sewage, acids, alkalies,
seawater and many more. Sintech has branch offices and dealership
network in throughout the nation as well as catering the international
market.
The working capital management refers to the management of working
capital, or precisely to the management of current assets. A firms working
capital consists of its investments in current assets, which includes shortterm assetscash and bank balance, inventories, receivable and
marketable securities.
This project tries to evaluate how the management of working capital is
done in Sintech through inventory ratios, working capital ratios, trends,
INTRODUCTION
The problems
Purpose of study
Research methodology
Scope of the study
Data sources
Limitations
INTRODUCTION:
The project undertaken is on WORKING CAPITAL MANAGEMENT IN
SINTECH PRECISION PROUCT LTD.
It describes about how the company manages its working capital and the
various steps that are required in the management of working capital.
Cash is the lifeline of a company. If this lifeline deteriorates, so does the
company's ability to fund operations, reinvest and meet capital
requirements and payments. Understanding a company's cash flow health
is essential to making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management
(WCM).
Working capital refers to the cash a business requires for day-to-day
operations or, more specifically, for financing the conversion of raw
materials into finished goods, which the company sells for payment. Among
the most important items of working capital are levels of inventory,
accounts receivable, and accounts payable. Analysts look at these items for
signs
of
company's
efficiency
and
financial
strength.
The Problems
In the management of working capital, the firm is faced with two key
problems:
1. First, given the level of sales and the relevant cost considerations, what are
the optimal amounts of cash, accounts receivable and inventories that a
firm should choose to maintain?
2. Second, given these optimal amounts, what is the most economical way to
finance these working capital investments? To produce the best possible
results, firms should keep no unproductive assets and should finance with
the cheapest available sources of funds. Why? In general, it is quite
advantageous for the firm to invest in short term assets and to finance
short-term liabilities.
PURPOSE OF STUDY
The objectives of this project were mainly to study the inventory, cash
and receivable at SINTECH PRECISION PRODUCT LTD., but there
are some more and they are The main purpose of our study is to render a better understanding of
the concept Working Capital Management.
To understand the planning and management of working capital at
SINTECH.
To measure the financial soundness of the company by analyzing
various ratios.
To suggest ways for better management and control of working
capital at the concern.
RESEARCH METHODOLOGY
This project requires a detailed understanding of the concept
Working Capital Management. Therefore, firstly we need to
have a clear idea of what is working capital, how it is managed in
SINTECH, what are the different ways in which the financing of
working capital is done in the company.
The
management
of
working
capital
involves
managing
inventory
management
and
receivables
management.
Then comes the financing of working capital requirement, i.e. how
the working capital is financed, what are the various sources
through which it is done.
And, in the end, suggestions and recommendations on ways for
better management and control of working capital are provided.
DATA SOURCES:
The following sources have been sought for the preparation report:
Primary sources such as business magazines, current annual
reports, book on Financial Management by various authors and
internet websites the imp amongst them being :
www.sintechpumps.com, www.indiainfoline.com,
www.studyfinance.com .
Secondary sources like previous years annual reports, CMA Data,
reports on working capital for research, analysis and comparison
of the data gathered.
While doing this project, the data relating to working capital, cash
management, receivables management, inventory management
and short term financing was required.
This data was gathered through the companys websites, its
corporate intranet, Sintechs annual reports and CMA Data of the
last three years.
A detailed study on the actual working processes of the company
is also done through direct interaction with the employees and by
timely studying the happenings at the company.
Also, various text books on financial management like Khan &
Jain, Prasanna Chandra and I.M.Pandey were consulted to equip
ourselves with the topic.
INDUSTRY PROFILE
Indian Economy
Pump Industry
Global pump market outlook and
growth driver
Pumps Industry
Indian pumps, catering to a range of sectors from agriculture to
nuclear power generation, are expected to capture a bigger slice of
the world market. With exports already reaching around 70
countries, the Indian pump industry is poised to register a faster
growth rate than the global average, says an industry study. The
Indian pump industry is set to grow at 6-7 percent over the next
three years (against the 4 percent of the world pump market).
The growth witnessed by the Pumps Industry was in line with the
performance of the Indian economy. The growth in these sectors
mainly came from Energy sector. This was the result of capacity
additions in Super Critical plants including Ultra Mega Plants. On
the other hand, increased forays from Chinese contractors into
Energy Sector continued to exert pressure on the demand. Demand
for Submersible pumps is weather dependent and varies with
geographical location. Growth in standard industrial pumps is
closely linked to the development in the industrial sector of the
economy. Trends in waste water sewage market are encouraging
due to increased Government spending. The earlier buoyant
demand for industrial valves tapered off in the latter part of the year
due to drop in activities in Steel and General Industry.
The industry, now holding euro 500 million worth of global market
share, "is expected to grow at a rate faster than the world pump
market growth, capturing a larger share of the market," states the
study released by the Confederation of Indian Industry
(CII). According to industry estimates, India produces around one
million pumps of various kinds. There are around 800 large,
medium and small units producing the pumps for sectors from
agriculture to nuclear power generation. "Indian pump
Companys Profile
Vision, Misson & Quality
Product Range
Key Players
Sectoral Overview
Company Profile
Sintech Precision Products Ltd., founded in 1986, by an enterprising
technocrat Mr. N.C.Dhingra is recognized as one of the largest pumping
solutions provider today in India. With headquarters located in NCR of India,
Ghaziabad, Sintech Precision Products Ltd has built a strong presence in the
domestic market over the past three decades.
Sintech is an advanced pumping solution provider for water intensive heavy
industries. With a very diverse product portfolio, Sintech provides solutions
for multifarious applications like clear water, process, slurry, liquid with
suspended solids, sewage, acids, alkalies, seawater and many more. Sintech
has branch offices and dealership network in throughout the nation as well as
catering the international market.
With tremendous growth potential in future pumping technology market,
Sintech Precision Products Ltd has acquired certification from Moody
International based in UK, who operates in terms of the UKAS license
requirements. Our system is regularly audited for compliance to these
International Standards.
Sintech Precision Products Ltd. an ISO 9001 certified company is now a
leading & respected pump manufacturer in India. Sintech make pumps are
manufactured as per DIN-24256/ISO-2858/IS 5120 /HIS/IS - 1520 standards
and tested as per IS-9137, API-610 & ISO 2548 standards. Sintech make
pumps constitutes of highly standardized and is designed with modular
structures and offers the best possible interchangeability. This largely reduces
spares inventory. Sintech has a high production system with two
Manufacturing units.
Sintech Precision Products Ltd. has now expanded in all type of pumps
suitable for diverse multifarious applications like clear water, process, slurry,
liquid with suspended solids, sewage, acids, alkalies, sea water and many
more application.
Till date SINTECH has supplied thousands of pumps for various critical and
non critical applications, which are working quietly and efficiently to the entire
customer satisfaction.
Vision
Sintech seeks to be recognised as the Innovator and thought leader of
pumping related products and technologies in domestic and global markets.
Mission
Quality
Sintech Precision Products Ltd s Q3 model is a move in that direction.
Principally based on three quality-integrated pillars, the Q3 model reflects the
inside out approach of the organization, that incorporates Q1 Applied engineering expertise
Q2 Superior pumping capabilities
Q3 Exceptional service
Product Range
Type
Design
Rating
SMS
Multistage Pump
SCS &
SCSD
Horizontal Split
Casing Pump
SWP &
CPS
Water Pump
Process Pump
SAF
Axial Flow Pump
Application/Sector
Boiler Feed
Mine De-watering
Water Supply
Jockey
Condensate Transfer
Descaling Operations
Industrial and
Municipal Water
Supply
Cooling Towers
Injection Water
Spray Pond
Air-conditioning
Water
Treatment Plant
Fire Fighting
Irrigation
Water Supply
Drip Irrigation
Cooling Tower
Condensate handling
Air-conditioning
Fire Fighting
Service Water
Chemical Process
Effluent Treatment
Hydrocarbon
Viscous Liquid
Acids Juice Pump
Distillery
Sea Water
River Water
Canal Water
Sewage
SSHQ
Non Clog Pump
SMF
Mixed Flow Pump
SVT
SVMF
SVAF
Vertical Turbine
Vertical Mixed
Flow
Vertical Axial Flow
SV
Liquid Ring
Vacuum
Pump
SGP
Gear Pump
Sewage
Effluent Treatment
Unscreened Juice
Slurry
Drainage
River water
Sludge
Grain Wash
Syrup
Melt
Mud
Injection Water
Sewage
Effluent Treatment
Drainage
River Water
Water Supply
General Water
Supply
Cooling Tower
Spray and Injection
Water
Irrigation
Hydropower
Chemicals
Pharmaceuticals
Food
Sugar
Plastic
Paper
Pulp
ST
Lobe Pump
/ Star Pump
STF
Torque Flow
Pump
EB
&
EBM
Thick Mollasses
Highly Viscous Liquid
Abrasive Slurries
Sewage
Industrial Waste
Sugar
Pulp and Paper
Steel
Power
Fibre
Textile
Waste Water
Grain Wash
Solid Handling
Cement Aquaculture
Massecuite
Magma
Sump Drainage
Dewatering
Ash Slurry
Wet Scrubber
Rota Pump
SSPL
Self Priming
Pump
SECTORAL OVERVIEW
Power
This business group caters to the needs of power industry - conventional and
renewable. Considering the chronic shortage of power, this sector is bound to
emerge as a major market driver for decades to come. The Power group is
proud
to have successfully completed the sump model test of cooling water system
for India's first ultra mega power project of 4000 MegaWatt (5 x 800 MW) at
Kirloskarvadi. Orders received include:
Raka Saudia Power & Water
Co. Ltd.
Bhakra Beas Management
Board (P.W.)
Shri Chamundeswari Sugars
Clear Water Limited
Clear Water Limited
Sugar Industry
Some prestigious projects in sugar industry are:
Khumbi Project
Gularia Project
Kinauni Project
Kinauni Expansion
Barkatpur Project
Shermau Project
Panipat Project
Bhiwadi Project
Kanoria Chemical &
Indus.Ltd.
Ghaziabad Project
FMC Satnam Agro Project
Bombay Rayon Fashion
Steel
Some prestigious projects in steel industry are:
Maa Chinnamastika Steel &
Rourkela Project
Mines
Some prestigious projects in mines industry are:
15 HP
40 HP
75 HP
125 HP
Introduction
Inventory management
Cash management
Receivables management
EASY
LOAN
FROM
BANKS
INCREASE
EFFECIENY
PAYMENT
TO
SUPPLIER
S
SIGNIFICA
N--CE OF
WORKING
CAPITAL
INCREASE
IN FIX
ASSETS
DIVIDEND
DISTRIBUTION
INCREASE
DEBT
CAPACITY
The need for current assets tends to shift over time. Some of these
changes reflect permanent changes in the firm as is the case when the
inventory and receivables increases as the firm grows and the sales
become higher and higher. Other changes are seasonal, as is the case
with increased inventory required for a particular festival season. Still
others are random reflecting the uncertainty associated with growth in
sales due to firm's specific or general economic factors.
Sintech has the following banks available for the fulfillment of its
working capital requirements in order to carry on its operations
smoothly:
Banks:
These include the following banks
o Indian Bank
o Syndicate Bank
FUND BASED
NON-FUND BASED
INDIAN BANK
300
250
SYNDICATE BANK
200
100
TOTAL
500
350
The upper portion of the diagram below shows in a simplified form the
chain of events in a manufacturing firm. Each of the boxes in the upper
part of the diagram can be seen as a tank through which funds flow.
These tanks, which are concerned with day-to-day activities, have
funds constantly flowing into and out of them.
CASH
DEBTORS &
BILLS
RECEIVABLES
RAW
MATERIAL
OPERATING CYCLE
WORK IN
PROGRESS
SALES
FINISH
GOODS
The chain starts with the firm buying raw materials on credit.
In due course this stock will be used in production, work will be
carried out on the stock, and it will become part of the firms work-inprogress.
Work will continue on the WIP until it eventually emerges as the
finished product.
Each of the areas- Stock (raw materials, WIP, and finished goods), trade
debtors, cash (positive or negative) and trade creditors can be viewed
as tanks into and from which funds flow.
Working capital is clearly not the only aspect of a business that affects
the amount of cash.
The business will have to make payments to government for taxation.
Fixed assets will be purchased and sold
Lessors of fixed assets will be paid their rent
Shareholders (existing or new) may provide new funds in the form of
cash
Some shares may be redeemed for cash
Dividends may be paid
Long-term loan creditors (existing or new) may provide loan finance,
loans will need to be repaid from time-to-time, and
Interest obligations will have to be met by the business
Unlike, movements in the working capital items, most of these nonworking capital cash transactions are not every day events. Some of
them are annual events (e.g. tax payments, lease payments, dividends,
interest and, possibly, fixed asset purchases and sales). Others (e.g.
new equity and loan finance and redemption of old equity and loan
finance) would typically be rarer events.
INVENTORY MANAGEMENT
Inventories
Inventories constitute the most important part of the current assets of
large majority of companies. On an average the inventories are
approximately 60% of the current assets in public limited companies in
India. Because of the large size of inventories maintained by the firms, a
considerable amount of funds is committed to them. It is therefore,
imperative to manage the inventories efficiently and effectively in order
to avoid unnecessary investment.
Nature of Inventories
Inventories are stock of the product of the company is manufacturing for
sale and components make up of the product. The various forms of the
inventories in the manufacturing companies are:
ABC System:
ABC system of inventory keeping is followed in the factories.
Various items are categorized into three different levels in the
order of their importance. For e.g. items such as memory, high
capacity processors and royalty are placed in the A category.
Large number of firms has to maintain several types of
inventories. It is not desirable the same degree of control all the
items. The firm should pay maximum attention to those items
whose value is highest. The firm should therefore, classify
inventories to identify which items should receive the most effort
in controlling. The firm should be selective in approach to control
investment in various types of inventories. This analytical
approach is called ABC Analysis. The high-value items are
classified as A items and would be under tightest control. C
items represent relatively least value and would require simple
control. B items fall in between the two categories and require
reasonable attention of management.
CASH MANAGEMENT
Sources of Cash:
Sources of additional working capital include the following:
Existing cash reserves
Profits (when you secure it as cash!)
Payables (credit from suppliers)
New equity or loans from shareholders
Bank overdrafts or lines of credit.
Long-term loans
If you have insufficient working capital and try to increase sales, you
can easily over-stretch the financial resources of the business. This is
called overtrading.
Early warning signs include:
Pressure on existing cash
Exceptional cash generating activities e.g. offering high
discounts for early cash payment
Bank overdraft exceeds authorized limit.
Seeking greater overdrafts or lines of credit
Part-paying suppliers or other creditors
Paying bills in cash to secure additional supplies
Management pre-occupation with surviving rather than
managing
Frequent short-term emergency requests to the bank (to help
pay wages, pending receipt of a cheque).
RECEIVABLES MANAGEMENT
Cash flow can be significantly enhanced if the amounts owing to a
business are collected faster. Every business needs to know.... who
owes them money.... how much is owed.... how long it is owing.... for
what it is owed.
1. Have the right mental attitude to the control of credit and make
sure that it gets the priority it deserves.
2. Establish clear credit practices as a matter of company policy.
3. Make sure that these practices are clearly understood by staff,
suppliers and customers.
4. Be professional when accepting new accounts, and especially
largerones.
5. Check out each customer thoroughly before you offer credit. Use
credit agencies, bank references, industry sources etc.
6. Establish credit limits for each customer and stick to them.
7. Continuously review these limits when you suspect tough times
are coming or if operating in a volatile sector.
8. Keep very close to your larger customers.
9. Invoice promptly and clearly.
10. Consider charging penalties on overdue accounts.
11. Consider accepting credit /debit cards as a payment option.
12. Monitor your debtor balances and aging schedules, and don't let
any debts get too old.
Debtors due over 90 days (unless within agreed credit terms) should
generally demand immediate attention. Look for the warning signs of a
future bad debt. For example..
1. Longer credit terms taken with approval, particularly for smaller
orders.
2. Use of post-dated checks by debtors who normally settle within
agreed terms.
3. Evidence of customers switching to additional suppliers for the
same goods.
4. New customers who are reluctant to give credit references.
5. Receiving part payments from debtors.
Here are few ways in collecting money from debtors:
Dont feel guilty asking for money... Its yours and you are entitled
to it.
Make that call now. And keep asking until you get some
satisfaction.
In difficult circumstances, take what you can now and agree terms
for the remainder, it lessens the problem.
When asking for your money, be hard on the issue but soft on the
person. Dont give the debtor any excuses for not paying.
Make that your objective is to get the money, not to score points or
get even.
There is an old adage in business that "if you can buy well then you
can sell well". Management of your creditors and suppliers is just as
important as the management of your debtors. It is important to look
after your creditors- slow payment by you may create ill feeling and
can signal that your company is inefficient (or in trouble!).
Remember that a good supplier is someone who will work with you to
enhance the future viability and profitability of your company.
The firm has to decide about the sources of funds, which can be
availed to make investment in current assets.
Long term financing:
It includes ordinary share capital, preference share capital, debentures,
long term borrowings from financial institutions and reserves and
surplus.
Short term financing:
It is for a period less than one year and includes working capital funds
from banks, public deposits, commercial paper etc.
Depending on the mix of short and long term financing, the company
can follow any of the following approaches.
Matching Approach
In this, the firm follows a financial plan, which matches the expected
life of assets with the expected life of source of funds raised to finance
assets. When the firm follows this approach, long term financing will
be used to finance fixed assets and permanent current assets and
short term financing to finance temporary or variable current assets.
Conservative Approach
In this, the firm finances its permanent assets and also a part of
temporary current assets with long term financing. In the periods when
the firm has no need for temporary current assets, the long-term funds
can be invested in tradable securities to conserve liquidity. In this the
firm has less risk of facing the problem of shortage of funds.
Aggressive Approach
In this, the firm uses more short term financing than warranted by the
matching plan. Under an aggressive plan, the firm finances a part of its
current assets with short term financing.
31.03.10
31.03.11
31.03.12
CURRENT ASSETS
INVENTORIES
SUNDRY DEBTORS
CASH AND BANK
OTHER CURRENT ASSETS
LOANS & ADVANCES
TOTAL CURRENT ASSESTS
180.26
114.33
10.81
6.67
21.44
-------------333.51
--------------
291.13
390.84
34.30
28.08
78.74
-------------823.09
--------------
653.95
219.79
28.22
21.99
83.92
--------------1008.67
---------------
94.54
159.49
336.70
256.33
315.76
25.30
21.56
14.66
16.82
--------------
18.16
59.05
21.11
29.36
--------------
59.88
64.05
72.00
70.34
-----------
332.37
----------------
720.71
----------------
888.02
------------
1.14
102.38
120.65
52
140
120.65
AMOUNT(IN LACKS)
120
102.38
100
80
60
40
20
1.14
0
2010
2011
YEAR
2012
Data Interpretation
If we analysis the three years working capital position of the company, we find out that
company has sufficient working capital to meets its short term liability, it is good
indicator for the company but in 2011, working capital is increased by 101.24 lacs which
shows that a sufficient amount has been blocked in working capital which could be used
for some other more beneficial purpose.
53
INVENTORY ANALYSIS
Inventory means stock of three things :1. Raw materials
2. Semi finished goods.
3. Finished goods.
31.03.10
31.03.11
10.10
.87
37.04
26.93
78.74
184.53
54.38
--------------180.26
-------------------
31.03.12
78.80
---------------291.13
----------------
--------------653.95
-------------
700
600
500
AMOUNT (IN
LACKS)
400
300
200
100
0
2010
2011
2012
YEAR
54
INTERPRETATION:
By analyzing the 3 years data, We are looking increasing pattern in inventories. We can
see that inventories are increased from 180.26 lacs to 291 lacs in the year 2008 and in the
year 2009 it is increased from 291 lacs to 653 lacs. By seeing this pattern we can say that
the company is managing the inventory according to the sale. Company has a great
demand for the pump in the year 2010 that is biggest reason for increase in inventories.
From other point of view we can say that the liquidity of firm is blocked in inventories but
to stock is very good due to uncertainty of availability of raw material in time.
31.03.10
31.03.11
114.33
390.84
------------114.33
---------------
------------390.84
----------------
31.03.12
-------219.79
----------
55
400
350
300
250
AMOUNT ( IN
200
LACKS)
150
100
50
0
2010
2011
2012
YEAR
INTERPRETATION
In the table and figure we see that there is rise in the debtors in the year 2010 and
decrease in the year 2011. A simple logic is that debtors increase only when sales
increase and decrease if sales decrease. In the year 2008, sales is increased by 72.30%
and decreased by 19.24% in the year 2012.
We can say that it is a good sign as well as negative also. Company policy of debtors is
very good but a risk of bad debts is always present in high debtors. When sales is
increasing with a great speed the profit also increases. If company decreases the
Debtors they can use the money in many investment plans.
56
31.03.10
31.03.11
1.45
9.36
------------10.81
-------------
27.30
7.00
------------34.30
-------------
31.03.12
2.90
26.12
-----------29.02
------------
35
30
25
AMOUNT ( IN 20
LACKS )
15
10
5
0
2010
2011
2012
YEAR
INTERPRETATION
If we analyze the above table and chart we find that it follows a uneven pattern. In the
year 2010 it had maintained a low amount of cash and bank balance. But in the year
2011, cash and the bank balances has increased from 10.81 lacs to 34.30 lacs which is
not a good sign for the company because it shows that company is not using its cash for
beneficial activities. Although, in the year 2012, cash has reduced from 34.30 lacs to
29.02 lacs but this is very good sign for company because they are not holding the cash
in hand but using the cash for better projects, but still it is not conducive. From the other
point of view, company will not face the problem of liquidity as company is maintaining
the cash balance.
57
31.03.10
Advances to suppliers
44.62
Advances
39.30
Deposits
31.03.11
10.91
10.53
31.03.12
39.69
39.05
6.67
--------------28.11
--------------
28.08
--------------106.82
----------------
21.99
-----------105.91
-----------
120
100
80
AMOUNT ( IN
LACKS )
60
40
20
0
2010
2011
2012
YEAR
INTERPRETATION
If we analyze the table and the chart we can see that it follows an increasing trend which
is a good sign for the company. We can see that from the year 2010 to 2011 it increased
more than triple. We can see that the increase of 275% and 6.08% in 07-08 and 10-11
respectively from previous year.
The increasing pattern shows that company is giving advances for the expansion of
plants and machinery which is good sign for better production of pumps and other
goods. Although companys cash is blocked but this is good that company is doing
modernization of plants In time to compete with other competitors in market.
58
31.03.10
31.03.11
31.03.12
159.49
94.54
25.30
21.56
16.82
-----------------
256.33
336.70
18.16
59.05
29.36
-----------------
305.99
315.76
59.88
64.05
70.34
----------------
332.37
-----------------
720.71
-----------------
888.02
----------------
1000
800
AMOUNT ( IN 600
LACKS )
400
200
0
2010
2011
2012
YEAR
INTERPRETATION
If we analyze the above table then we can see that it follow an uneven trend. The
important component of current liabilities is sundry creditors and other liabilities. In 0708 it decreased from 359.41 lacs to 256.33 lacs and in 11-12 it increased from 256.33 lacs
to 305.99 lacs. This is liability for company so this should be less. when company have
minimum liabilities it creates a better goodwill in market. High current liabilities indicate
that company is using credit facilities by creditors.
59
31.03.10
Sundry Creditors
305.99
31.03.11
31.03.12
159.49
256.33
------------159.49
------------256.33
--------305.99
---------------
----------------
----------
350
300
250
AMOUNT ( IN 200
LACKS)
150
100
50
0
2010
2011
2012
YEAR
INTERPRETATION
In the table and figure we see that there is continuous rise in the creditors in the
company in the successive years. A simple logic is that creditors increase only when
purchases increase and if purchase increases on credit it is not good sign for growth.
This is liability for company so this should be less. When company has minimum
liabilities it creates a better goodwill in market. High current liabilities indicate that
company is using credit facilities by creditors.
60
31.03.10
31.03.11
31.03.12
94.54
25.30
--------------122.84
--------------
336.70
18.16
--------------354.86
----------------
315.76
59.88
-----------375.64
-----------
400
350
300
250
AMOUNT ( IN
200
LACKS )
150
100
50
0
2010
2011
2012
YEAR
INTERPRETATION
If we analyze the table and the chart we can see that it follows an increasing trend which
is not a good sign for the company. We can see that from the year 2010 to 2011 it
increased more than double. The increasing pattern shows that company is taking loan
for the expansion of plants and machinerecy which is not a good sign because company
depends on the external source. On the other hand, company has reduced the bank loan
in 2012 and increase in advances received from the customer; this is good sign for
company.
61
PROVISIONS ANALYSIS
Position of Other Provisions in Sintech Precision Product Limited
(Rs.in lacks)
YEAR
31.03.10
31.03.11
31.03.12
21.56
--------------21.56
---------------
59.05
--------------59.05
----------------
64.05
------------64.05
------------
70
60
50
AMOUNT ( IN
LACKS )
40
30
20
10
0
2010
2011
2012
YEAR
INTERPRETATION
From the above table we can see that provision shows an increasing trend and the huge
amount is being kept in these provisions. Though the profits of the company are
increased income tax is also increased which is good that company is creating goodwill
in market by paying income tax in time. Although company is paying more income tax
but also they are earning more. Other provisions are also for the benefit of employees
and public. This is good sign for Company growth.
62
63
FORMULA
INVENTORY + RECIVEABLE - PAYABLE
WORKING CAPITAL RATIO= ------------------------------------------------------------(AS % OF SALES)
SALES
YEAR
31.03.10
18
31.03.11
31.03.12
32
53
60
AS %
50
40
30
20
10
0
2010
2011
2012
YEAR
INTERPRETATION
This ratio indicates whether the investments in current assets or net current assets ( i.e.,
working capital ) have been properly utilized. In order words it shows the relationship
between sales and working capital. Higher the ratio lower is the investment in working
capital and higher is the profitability. But too high ratio indicates over trading.
64
This ratio is an important indicator about the working capital position. Now if we analyze
the three years data, we find that it follows an increasing trend which means that its
investment in working capital is lower and the company is utilizing more of its profit. But
we find that ratio is increasing at a very fast rate which is not a good sign for the
company and the company is required to look into these matters closely.
YEAR
CURRENT RATIO
31.03.10
31.03.11
1.00
1.14
31.03.12
1.14
1.2
1.15
1.1
1.05
1
0.95
0.9
2010
2011
2012
YAER
INTERPRETATION
This ratio reflects the financial stability of the enterprise. The standard of the normal
ratio is 2:1 but in most of companies standard is taken according to Tandon Committee
which is taken as 1.33:1.
Now if we analyze the three years data it can be predicted that it holds a stable position
all through out period but it is seen that it holds a low position than the standard one and
the company is required to improve its position.
65
YEAR
31.03.10
QUICK RATIO
0.46
31.03.11
0.74
31.03.12
0.40
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2010
2011
2012
YEAR
INTERPRETATION
It is the ratio between quick liquid assets and quick liabilities. The normal value for such
ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity position
of the firm. It indicates the relationship between strictly liquid assets whose realizable
value is almost certain on one hand and strictly liquid liabilities on the other hand. Liquid
assets comprise all current assets minus stock.
By analyzing the three years data it can be said that its position was weak in the year
2010 but it improved significantly in the next year and again it is declined during the
2012. It is to be said that it does not meet with the standard but in the year 2011 it was
very close to the standard and it can be said that its liquidity position is not good &
stable.
66
31.03.10
31.03.11
1.65
2.93
31.03.12
3.21
3.5
3
DAYS
2.5
2
1.5
1
0.5
0
2010
2011
2012
YEAR
INTERPRETATION
Assuming a constant level of fixed assets, a higher CA/FA ratio indicates a conservative
current assets policy and a lower CA/FA ratio means an aggressive current assets policy
assuming other factors to be constant. A conservative policy i.e. higher CA/FA ratio
implies greater liquidity and lower risk; while an aggressive policy i.e. lower CA/FA ratio
indicates higher risk and poor liquidity.
Now if we analyze the three year data we find the CA TO FA Ration in increasing pattern,
so we can say that company is following the conservative policy to finance its short term
capital requirement.
67
FORMULA
AVERAGE STOCK
STOCK TURN OVER RATIO ( IN DAYS )= --------------------------------------- * 365
COST OF GOODS SOLD
YEAR
31.03.10
104
31.03.11
79
31.03.12
227
250
DAYS
200
150
100
50
0
2010
2011
2012
YEAR
INTERPRETATION
This ratio tells the story by which stock is converted into sales. A high stock turnover
ratio reveals the liquidity of the inventory i.e., how many times on an average, inventory
is turned over or sold during the year. If a firm maintains a minimum stock level in order
to maximize sales by quick rotation of inventory and the holding cost of inventory will be
minimum. A low stock turn over ratio reveals undesirable accumulation of obsolete
stock.
By analyzing the three year data it seen that it follows an uneven trend. We see that it is
reduced to 79 from the 104 days in 2011 and in 2012 it is increased by 148 days, Which is
not a good indicator for the company. Company should have to reduce the inventory
conversion period in order to reduce the cost.
68
31.03.10
54
31.03.11
70
31.03.12
104
120
100
DAYS
80
60
40
20
0
2010
2011
2012
YEAR
INTERPRETATION
Generally a low debtors turnover ratio implies that it considered congenial for the
business as it implies better cash flow. The ratio indicates the time at which the debts
are collected on an average during the year. Needless to say that a high Debtors
Turnover Ratio implies a shorter collection period which indicates prompt payment made
by the customer.
Now if we analyze the three year data we can say that it holds a good position while
receiving its money from its debtors. The ratios are in a decreasing ternd, which implies
that recovery position is not good company and Company have to reduce the receivable
period.
69
YEAR
31.03.10
92
31.03.11
69
31.03.12
135
DAYS
160
140
120
100
80
60
40
20
0
2010
2011
2012
YAER
INTERPRETATION
Actually this ratio reveals the ability of the firm to avail the credit facility from the
suppliers throughout the year. Generally a low creditors turnover ratio implies favorable
since the firm enjoys lengthy credit period
Now if we analyze the three years data we find that in the year 2011 the
ratio was very high which means that its position of creditors that year was not good, but
in the 2012 it is seen that it has followed a decreasing trend which is very good sign for
the company. So we can say it enjoys a very good credit facility from the from the
suppliers.
70
2010-11
104
54
158
2011-12
79
70
149
2012-13
227
104
431
92
66
69
80
135
296
Days
350
300
250
200
150
100
50
0
2010-11
2011-12
2012-13
YEAR
Interpretation
When a company has lower d/e ratio, it means that company is utilizing its own funds
and reserves rather than taking loans from outsiders. Company have a uneven trend in
d/e ratio. In the year 2010 it was 1.02 but in the year 2011 it is declined to .55 so we can
say that now company is using more its fund as compare to previous year, but still the
ratio is high. Company has to reduce the ratio.
71
MAJOR FINDINGS
Statement Showing Difference from Previous Year
(amt. in lacks)
Particulars
Working Capital
10-11
11-12
102
by 5000%
121
by
19%
-1069
by
19.10%
1009
by
23%
Sales
1323
by 72%
Current Assets
Sundry Debtors
823
by 146%
Inventories
391
by 243%
220
by 44%
291
by 62%
654
by 125%
34
by 209%
-29
by 15%
107
by 269%
106
by .93
721
by 117%
Sundry Creditors
256
by 42%
306
by 19.53%
355
by 196%
376
by 6%
Provisions &
Deposits
80.16
by121.31%
136
by70%
Other Liabilities
29.36
by 74.55%
70.34
by 139.5%
888
by
23%
72
2. Current assets and Current liabilities are increased by 23% in 2011-12 as compare
to previous year but current assets are increased by 146% in 2010-11 as compare
to 117% increase in current liabilities, so we can say that working capital is
increased because of increase in current assets.
1. Inventory is increased by 125% in 2011-12 as compare to 2010-11, so
we can say that current assets are increased due to the increase in
the inventory.
2. Cash and the bank balances are decreased by 15% which shows
company might face the liquidity problem.
73
CONCLUDING ANAYSIS
The working capital position of the company is sound and the various
sources through which it is funded are optimal.
The company has used its purchasing, financing and investment decisions to
good effect can be seen from the inferences made earlier in the project.
The debts doubtful have been doubled over the years but their percentage
on the debts has almost become half. This implies a sales and collection
policy that get along with the receivables management of the firm.
The various ratios calculated are an indicator as to the fact that the
profitability of the firm and sales are on a rise and also the deletion of the
inefficiencies in the working capital management.
The firm has not compromised on profitability despite the high liquidity is
commendable.
Sintech Precision Product Ltd. has reached a position where the default
costs are as low as negligible and where they can readily factor their
accounts receivables for availing finance is noteworthy.
74
75
BIBLIOGRAPHY
Following sources have been sought for the preparation of this report:
Corporate Intranet
Financial Statements (Annual Reports)
CMA Data
Direct interaction with the employees of the company
Internet ---o www.sintechpumps.co.in
o www.scribd.com
o www.indianpumpsindustry.com
Textbooks on financial management I.M.Pandey
Khan and Jain
76
77
Sheet 1
Sintech Precision Products
Limited
CURRENT LIABILITIES
2012
Est.
III
2013
Proj
IV
0.00
336.70
400.00
400.00
94.54
0.00
0.00
0.00
94.54
336.70
400.00
400.00
159.49
256.33
90.77
133.33
25.30
18.16
20.00
50.00
21.56
59.05
8.05
30.68
Deposits/instalments of term
loans/DPGs/Debentures,etc.
(due within one year)
Other current liabilities &
provisions(due within 1 Yr)
14.66
58.55
43.76
24.53
16.82
16.82
29.36
29.36
25.00
25.00
30.00
30.00
237.83
421.45
187.58
268.54
332.37
758.15
587.58
668.54
Dividend payable
Other statutory liabilities
(due within one year)
SUB-TOTAL (B)
TOTAL CURRENT LIABILITIES
78
TERM
LIABILITIES
Aud
Rs. In
Lacs
2010
Aud
2011
Aud
2012
Est.
2013
Proj
5.84
0.00
0.00
0.00
16.20
95.93
27.97
3.44
68.51
60.25
180.25
180.25
0.00
0.00
0.00
0.00
90.55
156.18
208.22
183.69
422.92
914.33
795.80
852.23
24.91
24.91
44.91
44.91
73.56
85.50
112.45
204.50
15.13
0.70
0.00
23.32
0.00
0.00
23.32
0.00
80.00
23.32
0.00
80.00
NET WORTH
114.30
133.73
260.68
352.73
TOTAL LIABILITIES
Closing Balance Of TL(Check)
537.22
20.50
1048.06
58.55
1056.48
43.76
1204.96
24.53
79
Rs. in
Lacs
2010
2011
2012
2013
Aud
Aud
Est.
Proj
228.40
255.94
285.94
285.94
29.41
47.86
66.46
85.06
198.99
208.08
219.48
200.88
3.61
16.70
73.20
13.20
0.00
0.00
0.00
0.00
2.72
13.50
70.00
10.00
0.89
3.20
3.20
3.20
1.11
0.00
0.00
0.00
4.72
16.70
73.20
13.20
0.00
0.00
0.00
0.00
537.22
1047.87
1056.29
1204.77
FIXED ASSETS
machinery, work-in-process)
Depreciation to date
NET BLOCK
Investment/bookdebts/advances/
deposits which are not current
assets
(i) a) Investment in subsidiary
Co./affiliates
b) Other Investments
(ii) Advances to suppliers of
capital goods & contractors
(iii)Deferred receivables (maturity
exceeding one year)
(iv)Others (a) Debtors> 6 months
(b) Security Deposits
(c) Others
Non-consumables stores &
spares
Other non-current assets including dues from Directors
80
Lacs
2010
2011
2012
2013
Limited
Aud
Aud
Est.
Proj
II
III
IV
871.45
1458.04
1529.71
2206.00
GROSS SALES
1
i.
Domestic sales
ii.
Export sales
Add other revenue income
Job Work
Total
0.00
0.00
0.00
0.00
3.73
875.18
3.14
1461.18
5.00
1534.71
8.50
2214.50
107.19
137.86
129.71
206.00
767.99
1323.32
1405.00
2008.50
75.59
72.31
6.17
42.95
476.99
682.05
874.00
1210.00
(b) Indigenous
476.99
682.05
874.00
1210.00
72.87
111.85
139.00
193.00
(b) Indigenous
72.87
111.85
139.00
193.00
iii)
12.53
17.34
21.85
31.25
iv)
8.34
61.24
74.25
78.75
v)
Direct labour
(Factory wages & salary)
Other mfg. Expenses
64.42
99.52
124.00
172.00
vi)
Depreciation
9.56
18.45
18.60
18.60
vii)
644.71
990.45
1251.70
1703.60
viii)
72.46
54.38
78.80
148.25
717.17
1044.83
1330.50
1851.85
5
i.)
ii)
Other spares
(a) Imported
Sub-total
81
ix)
x)
xi)
Form II : Sheet 2
Sintech Precision Products
Deduct : Closing stocks-inProcess
2010
Aud
54.38
Cost of Production
Add : Opening stock of
finished goods
SUB-TOTAL
xii)
xiii)
6
2011
Aud
2012
Est.
2013
Proj
78.80
148.25
205.75
662.79
966.03
1182.25
1646.10
3.19
37.04
26.93
71.35
665.98
1003.07
1209.18
1717.45
37.04
26.93
71.35
100.88
628.94
976.14
1137.83
1616.57
82.59
143.09
158.00
190.00
711.53
1119.23
1295.83
1806.57
56.46
204.09
109.17
201.93
Interest
12.31
60.23
76.17
81.20
10
44.15
143.86
33.00
120.73
0.15
1.43
2.00
2.00
0.15
1.43
2.00
2.00
0.09
0.00
0.00
0.00
0.09
0.00
0.00
0.00
0.06
1.43
2.00
2.00
11
(i)
(a)
(b)
(c)
(d)
(ii)
(a)
Sub-total ( income )
(b)
Sub-total ( expenses )
(iii)
12
44.21
145.29
35.00
122.73
13
14
17.13
0.00
12.62
0.00
8.05
0.00
30.68
0.00
15
27.08
132.67
26.95
92.05
16
17
27.08
132.67
26.95
92.05
18
100.00
100.00
100.00
82
2010
Aud
Lacs
2011
Aud
2012
Est.
2013
Proj
a.
27.08
132.67
26.95
92.05
b.
Depreciation
9.55
18.45
18.60
18.60
0.00
0.00
100.00
0.00
d.
46.75
65.63
52.04
0.00
e.
Decrease in
i.) Fixed Assets
0.00
0.00
0.00
0.00
3.94
0.00
0.00
60.00
Others
2.20
7.41
0.00
0.00
g.
Total
89.52
224.16
197.59
170.65
USES
a.
Net Loss
0.00
0.00
0.00
0.00
b.
0.00
0.00
0.00
24.53
c.
Increase in
86.19
27.54
30.00
0.00
0.00
11.98
56.50
0.00
d.
Dividend Payment
0.00
0.00
0.00
0.00
Others
0.00
0.00
0.00
0.00
Total
86.19
39.52
86.50
24.53
2010
Aud
3.33
Lacs
2011
Aud
184.64
2012
Est.
111.09
2013
Proj
146.12
119.17
489.58
227.08
86.63
32.54
-29.21
183.62
305.96
121.32
-59.48
233.87
174.39
-63.30
0.00
29.21
242.16
63.30
0.00
i) Fixed Assets
Particulars
Long Term Surplus/Deficit
ii
5
6
iii
iv
vi
80.96
146.12
83
2011
2012
2013
Particulars
Aud
Aud
Est.
Proj
89.52
86.19
3.33
224.16
39.52
184.64
197.59
86.50
111.09
170.65
24.53
146.12
2010
2011
2012
2013
Particulars
Aud
Aud
Est.
Proj
Opening balance
Add.
i Profit/(-)Loss after Tax
ii Increase in Capital
iii Dec./(-) Inc.in Intangible Assets
iv Inc../(-) \ Dec.in Reserves
v. Adjust prior year expenses
Less
Div Paid(Incl.Div.Tax)/ Withdrawals
84.93
108.61
248.69
375.64
27.08
0.00
0.09
2.20
-0.07
132.67
0.00
0.00
7.41
0.00
26.95
100.00
0.00
0.00
0.00
92.05
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
114.30
248.69
375.64
467.69
TNW
Aud
2010
Aud
Lacs
2011
Aud
2012
Est.
2013
Proj
a.
0.00
132.67
26.95
92.05
b.
Depreciation
9.55
18.45
18.60
18.60
0.00
0.00
100.00
0.00
d.
0.00
65.63
52.04
0.00
e.
Decrease in
i.) Fixed Assets
0.00
0.00
0.00
0.00
0.00
0.00
0.00
60.00
Others
0.00
7.41
0.00
0.00
g.
Total
9.55
224.16
197.59
170.65
84
USES
a.
Net Loss
5.69
0.00
0.00
0.00
b.
0.00
0.00
0.00
24.53
c.
Increase in
i) Fixed Assets
0.00
27.54
30.00
0.00
0.00
11.98
56.50
0.00
d.
Dividend Payment
0.00
0.00
0.00
0.00
Others
0.00
0.00
0.00
0.00
Total
5.69
39.52
86.50
24.53
2010
Lacs
2011
2012
2013
Est.
111.0
9
Proj
146.1
2
227.0
8
Particulars
Au
d
Aud
3.86
ii
0.00
iii
i
v
0.00
Inc./Dec. in WC Gap
0.00
v
v
i
3.86
0.00
7
8
Aud
184.6
4
489.5
8
183.6
2
305.9
6
121.3
2
242.1
6
-59.48
233.8
7
174.3
9
80.96
146.1
2
-63.30
0.00
63.30
0.00
Particulars
Au
d
2010
2011
2012
2013
Aud
Aud
Est.
Proj
224.1
6
39.52
184.6
4
197.5
9
86.50
111.0
9
170.6
5
24.53
146.1
2
9.55
5.69
Surplus/Deficit
3.86
85