Professional Documents
Culture Documents
KSB 1
KSB 1
KSB 1
promoting growth of industrial sector, stability in financial market, containing deficit, both
domestic and external, promoting exports amidst global recession are the major challenges
that are faced by Indian economy.
Centre (Si'Tarc) in Coimbatore, have developed energy-efficient designs for pumps to meet
the norms of Indian standards.
The Indian pump industry has an outstanding record of indigenous research and development
in all three areas of technological intensities - from mass-produced pumps for agriculture to
gigantic pumps for interlinking rivers, and pumps for critical services such as nuclear power
generation. The Bureau of Indian Standards has developed 42 specifications for indigenous
pumps.
Per capita availability of water in Asia is less than other continents; and it will
continue to grow rapidly, thus increasing demand for delivery and treatment of that water.
Rising consumption with decreasing supplies of uncontaminated water is pushing up the
market of desalination plants for treating seawater.
Urbanization of Asia has seen relocation of more than one billion migrants from
villages to cities. This is creating pressure on the existing infrastructure including delivery
of utility water and removal and treatment of wastewater.
Most governments in Asia and in Africa are likely to increase their spending on
infrastructure projects like irrigation and drinking water schemes.
The world is moving towards energy efficient products and services to be able to
sustain the growth rates achieved in the past few years with petroleum being the primary
energy source.
2.1 PROFILE
Our technology. Your success.
KSB is the brand with the greatest technical expertise in pumps and valves. This approach
means that KSB employees are close to customers on all continents, providing them with
pumps and valves for almost all applications involving the transportation of fluids. A
comprehensive range of services rounds off this customer-focused portfolio.
KSB has been growing continuously since it was founded in 1960. Today the KSB in India is
a leading international manufacturer of pumps and valves and has a presence on all continents
with its own sales and marketing companies, manufacturing facilities and service operations.
More than 2,000 employees generate annual consolidated sales revenue of over two billion
euros.
2.2.1 ENERGY
Excellence is energy in constant motion
Energy is in high demand! Consumption continues to increase. So power stations have to run
very efficiently and reliably. Advanced technology from KSB lets Utility operators produce
more and more power from less and less fuel. They want to generate electricity with
maximum efficiency and minimum environmental impact.
Our belief is in conserving energy resources by helping produce power more safely and
economically. The KSB range of high pressure Pumps and Valves supplies and circulates
Boiler Feed Water, Condensate and Cooling Water to ensure high safety standards and cost
efficiency under the toughest and most critical conditions. Our Primary Heat Transfer Pumps,
Residual Heat Transfer Pumps, Primary Pressurizing Pumps, Main Boiler Feed Pumps,
Multistage Condensate Extraction Pumps, Re- Heater Drain Pumps and Auxiliary Boiler Feed
Pumps go about their business efficiency in thermal and nuclear power plants, refineries and
offshore oil rings.
Reliable operation of KSB power station pumps and valves
KSBs power station pumps give reliable service in primary and secondary circuits all over
the world. They reliably handle boiler feed water, condensate, cooling water and coolants and
recirculate boiler water. Our high-pressure globe, gate and butterfly valves safely shut off
these fluids.
The use of oil and gas has a long and fascinating history spanning thousands of years. The
development of oil and gas has evolved over time and its numerous uses have also expanded
and become an integral part of today's global economy. Oil and gas, also known as
hydrocarbons or petroleum, are the energy sources that power cars and aero planes, and
provide heating in many parts of the world. Oil is one of the most dynamic elements of
nature. Whenever need arises to harness this vibrant energy, KSB provides the ultimate
technology. Wherever the task, whatever the expectations!
Special metallurgy, time tested KSB designs ensure the highest standards of safety of our
Pumps and Valves, since they are often involved in transporting Oil, along with aggressive
and corrosive liquids! Whatever be your process, you can trust KSB Pumps and Valves to
handle extreme temperatures and high pressures. Our Pumps and Valves do the job with great
aplomb! After all your challenge gives us the strength and inspires us to engineer customized
solutions.
2.2.3 WATER
We move liquids and lives
As Nature's most revered elemental force, water flows freely and uninhibited, touching,
cleansing, healing and vitalizing lives.
As it flows; cascades; rises; recedes; stagnates and percolates; it blesses; admonishes or
disappoints too. KSB has developed the understanding to befriend it through innovative, ecofriendly and prudent technology by deciding its direction; its flow; its force; its volume
through engineering products and solutions.
Millions of people have inadequate water supplies. Millions more live in areas frequently
flooded by rivers or oceans. State-of-the-art KSB technology is good news in both cases.
Where people and crops need water transported over vast distances, our pumps and butterfly
valves ensure the job is done to perfection. Whether its water for agriculture, industry
community water supply or waste water disposal, our wide range of submersible pumps, non
clog submersible pumps, end suction and axially split water pumps and even our vertical inline pumps move water from any place, any depth, and any height with ease.
At KSB, we are not simply familiar with waste water; we know it inside out. For over 140
years, KSB has been writing one success story after another with its pumps and valves,
worldwide.
In India, this unparalleled experience has helped us in offering the finest solutions through
our waste water products. Whether in industrial, municipal or domestic waste water
applications, the absolute reliability of components is a pre-condition for the efficiency of the
whole process.
Wherever and whenever waste water has to be handled, look to us for first-class solutions:
pumps, valves, automation, drives and systems with an impressive availability and economic
efficiency for every application!
Providing effective solutions for handling municipal sewage & industrial effluent and for
waste water management reflects our commitment to a cleaner and greener earth.
Powerful performance
Efficient
Long service life
Environment-friendly
2.2.6 CONSTRUCTION
Elevation is an art of controlled movement
Whatever may be the needs of your building, our products rise to the occasion. Our range
of pumps and valves keeps water flowing wherever it's needed even to the top of high rise
buildings. From water and circulation pumps, pressure boosting units, drainage and waste
water pumps to butterfly valves, we meet all the needs of private and commercial buildings.
KSB sets its sights high. Building services are a case in point. Our pumps are at home in
skyscrapers across the globe. They are, for example, cooling the world's tallest tower, the
Burj Dubai.
KSB pumps and valves are at the heart of numerous hot water, heating, air-conditioning,
drinking water and waste water systems in domestic apartments, offices, airports and
industrial complexes. Automation solutions like the Pump Drive Variable Speed System or
the Level Control system make life easier in high-rise blocks; complex water handling,
cooling and heating systems. And, if the needs are to drain cellars and pits, or keep parks and
tennis courts green, KSB is right there with effective solutions.
2.2.7 KSB products are used to transport or shut off fluids, including
2.3 SUSTAINABILITY
KSBs business activities are focused on achieving sustainable, profitable growth to ensure
the long-term financial independence of the Group. KSBs social responsibility to its
employees and society is one of the foundations of the companys activities.
2.4 HISTORY
Heir To A Lofty Tradition
Mr. F. K. Heller is ranked amongst those personalities who have decisively influenced IndoGerman Economic relations in the post war era. Mr. Heller, together with the German Consul
General Mr. Von Pochhammer and Mr. V. C. Setalvad, founded the Indo-German Chamber
of Commerce in India, in the year 1956.
On 11th April 1960, the foresight of Mr. F. K. Heller and Mr. V. C. Setalvad gave birth to
KSB Pumps Limited. They had the vision to recognize that KSB AG on the verge of its
centenary, had through an Indian company a vital role to play in India's development by
supplying the diverse requirements of the pump market. Modern pump technology from
Germany made inroads into India as KSB established its presence with the setting up of a
factory at Pimpri, Pune in 1960.
2.5 MILESTONES
2.6.2 VALUES
Trust
Trust has to be earned. It requires level of credibility, which each of us should seek to achieve
& actively develop through reliability and professionalism in our day to day work
Honesty
The overall interest of the company has top priority in our work & ranks ahead of
departmental & individual interests. What we do should therefore not serve to gain advantage
at the expense of others. Integrity and an appropriate level of modesty are defining elements
of the way we present ourselves.
Responsibility
Responsibility means accepting the consequences of ones actions. This especially applies to
each and every one of us in our work. And it also applies to our company in its business and
social relations.
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Professionalism
We have a good command of the techniques and methods we need for our work, and seek to
continually acquire further knowledge to improve our effectiveness and efficiency. In the
search for solutions to problems we apply due care and act with foresight.
Appreciation
We are attentive to others and further our cooperation by showing respect and appreciation.
Remaining receptive and open to other people and ideas enables us to learn from each other
and to develop together.
Collaboration:
At a cross-functional level, we work together to achieve our shared objectives. To ensure the
successful fulfillment of our tasks, we clarify roles and reach clear agreements. We also
observe our values in our collaboration with customers and partners.
Leadership means maximizing the contribution of the entire team towards the success of the
company. To this end, our managers develop their staff and support them in optimizing their
performance. We rely on fairness and sincerity in our dealings with each other.
Communication:
Our communications are clear, fact-based and geared to an open exchange of ideas. By
considering different standpoints and addressing conflicts constructively, we arrive at the best
solutions and results. We deal with information responsibly.
Regular feedback helps us to make a realistic assessment of our actions and their effect, and
helps us with course correction.
Evolution:
By questioning the status quo in a targeted and logical manner, we are able to develop new
solutions while safeguarding proven ideas and methods. The ultimate aim is to achieve a
continuous improvement in our products and services, as well as in our work processes.
Flexibility, innovativeness and willingness to learn are important prerequisites for making a
success of any change.
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We believe that, individuals best is articulated, only when there is a good platform for ideas
to flow freely and opinions to be shared explicitly.
KSB provides such opportunities to young and experienced professionals to join and grow
with us. Currently we have around 42% of young and dynamic Management staffs which is
below 40 years of age. The right mix of diversified and multicultural professionals has helped
us to understand our global customers and strengthen our competitive edge.
Open communication forums, planned work priorities, positive work environment, and well
established Learning and Leadership development Programmes are key features highly talked
about by our employees who express KSB as a place where work balances the life and life
balances the work.
2.9 MANAGEMENT
Introducing the management team
Responsible company management and controlling, innovative technology and excellent
service rank highly at KSB India. This philosophy is backed by people committed to it in
their daily work.
Meet the management of KSB India:
Mr. Werner Spiegel, Managing Director, KSB India & Regional Executive Officer - Region
Asia West
Mr. Dinesh Khanna, Director (Marketing & Sales)
Mr. Nandan Paranjape, Director (Operations)
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2.10 LOCATIONS
KSB develops and manufactures bespoke solutions and offers first-class service on a global
scale. In India, KSB supports its customers as a competent regional partner.
In India, KSB operates through its 5 own manufacturing facilities and 24 sales and service
sites. The factories are situated at Pimpri, Chinchwad, Vambori, Sinnar and Coimbatore.
While the zonal sales offices are located in NOIDA, Kolkata, Mumbai and Chennai the
service stations are located in NOIDA, Raipur, Odhav and Chennai. Here,
over 2000 employees ensure faultless production, optimal customer support and excellent
service.
KSB Indias factories cover a total area of 50,000 sq. mtrs. On this area, KSB manufacturers
comprehensive range of standard Industrial end suction and high pressure multistage pumps,
submersible motor pumps and monobloc pumps and necessary spare parts.
Information on Authorised Dealers & Service Centres
KSB India maintains trustful business relations with it's over 700 Authorised Dealers and
more than 100 Authorised Service Centers (ASCs) to be able to give all customers spread
across in India comprehensive support and assistance at any time.
14
KSB stands for active commitment to corporate social responsibility. In all our business
activities, we are guided by the principles of sustainability and fairness in the way we
deal with people and the environment.
This is how KSB applies corporate social responsibility day after day:
Global Compact
KSB is a signatory to the United Nations Global Compact. The principles defined by the UN
are to promote sustainability and fairness in the business environment.
Environmental protection
KSB supports the goals of the Kyoto Protocol and places great value on optimal energy
efficiency for all products and technologies. In addition, our work processes and working
environment are designed to require as little energy and as few raw materials as possible.
Occupational health and safety for employees
In order to ensure maximum safety in the workplace, KSB has defined its own EHS
guidelines (Environmental Health and Safety) while also meeting national and international
15
standards.
Social commitment
KSB has an objective as to provide sustainable solutions to improve quality of life in a
proactive and sensitive manner by undertaking projects especially for the Underprivileged,
Children, Women and Elders. Our approach has been to identify the projects in and around
our Manufacturing locations and complete the projects within reasonable period of time.
We are proud of our efforts to contribute to this social change.
2.12 QUALITY
Premium Quality Standards At KSB National & International Certificates
As a leading supplier of Pumps, Valves and related systems, KSB India is committed to
provide its customers high quality, energy efficient and safe products and services. This is
achieved through effective implementation of Integrated Management system consisting of
Quality,Environment, Occupational Health & Safety
Our Sustainability policy and the principles of the Integrated Management system Maximum customer satisfaction with reasonable product and service cost, high competence
and satisfaction of our - employees sets the standards of our Quality and Financial success.
Environmental consideration is a key element in all our operations. We always strive to
prevent or minimize effects of our products, processes and services on the environment.
With the application of this comprehensive Integrated Management system in all sectors of
our company, we ensure the continuous improvement of our Customer-to-Customer processes
and satisfy our customers expectations.
For non-destructive testing such as ultrasonic test magnetic particle test inspection is carries
out through external reputed agencies.A well laid test field for performance testing having
sophisticated flow meter with digital display by which flow of the liquid can be tested
accurately is available at our works.
3.1 INTRODUCTION
The project undertaken is on WORKING CAPITAL MANAGEMENT IN KSB Pumps 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).
17
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 working capital is an important yardstick to measure the companys operational and
financial efficiency. Any company should have a right amount of cash and lines of credit for
its business needs at all times.
This project describes how the management of working capital takes place at
KSB.
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.
18
3.3 OBJECTIVES
The objectives of this project were mainly to study the inventory, cash and receivable at KSB
PUMPS LTD.
To analyse the above, the required objectives are:
1. To understand the planning and management of working capital at KSB PUMPS LTD .
The following objectives are formulated:
Working Capital Management Analysis at KSB PUMPS Ltd.
Working Capital Ratio Analysis at KSB PUMPS Ltd.
2. To suggest ways for better management and control of working capital at KSB PUMPS
LTD.
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.
Through this project I would study the various methods of the working
capital management.
The project would also be an effective tool for credit policies of the companies.
This will show different methods of holding inventory and dealing with cash and
20
receivables.
The following sources have been sought for the preparation report:
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,
KSBs 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.
1. The branch offices of the company at various locations hold the collection of cheques of the
customers.
2. Those cheques are either handed over to the CMS agencies or bank of the particular location
take charge of whole collection.
3. These CMS agencies or bank send those cheques to the clearing house to make them realized.
These cheques can be local or outstation.
21
4. The CMS agencies or bank send information to the central hub of the company regarding
realization/cheque bounced.
5. The central hub passes on the realized funds to the company as per the agreed agreements.
6. The CMS agencies or concerned bank provides the necessary MIS to the company as per
requirement.
In cash management the collect float taken for the cheques to be realized into cash is irrelevant and
non-interfering because banks such as Standard Chartered, HDFC and CitiBank who give credit on
the basis of these cheques after charging a very small amount. These credits are given to immediately
and the maximum time taken might be just a day. The amount they charge is very low and this might
cover the threat of the cheque sent in by two or three customers bouncing. Even otherwise the time
taken for the cheques to be processed is instantaneous. Their Cash Management System is quite
efficient.
Slow payment has a crippling effect on business; in particular on small businesses whom can least
afford it. If you don't manage debtors, they will begin to manage your business as you will gradually
lose control due to reduced cash flow and, of course, you could experience an increased incidence of
bad debt.
The following measures will help manage debtors:
1.
Have the right mental attitude to the control of credit and make sure that it gets the priority it
deserves.
2.
3.
Make sure that these practices are clearly understood by staff, suppliers and customers.
4.
5.
Check out each customer thoroughly before you offer credit. Use credit agencies, bank references,
industry sources etc.
6.
7.
Continuously review these limits when you suspect tough times are coming or if operating in a
volatile sector.
8.
9.
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.
4.
5.
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.
23
Creditors are a vital part of effective cash management and should be managed carefully to
enhance the cash position.
Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity
problems.
Who authorizes purchasing in your company - is it tightly managed or spread among a number of
(junior) people?
Do you use order quantities, which take account of stock holding and purchasing costs?
Are you in a position to pass on cost increases quickly through price increases to your customers?
If a supplier of goods or services lets you down can you charge back the cost of the delay?
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
25
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.
31.03.07
31.03.08
31.03.09
INVENTORIES
180.26
291.13
653.95
SUNDRY DEBTORS
114.33
390.84
219.79
10.81
34.30
28.22
6.67
28.08
21.99
CURRENT ASSETS
26
21.44
-------------333.51
--------------
78.74
-------------823.09
--------------
83.92
--------------1008.67
---------------
94.54
336.70
315.76
159.49
256.33
305.99
18.16
59.88
Advanced received
25.30
Provisions
21.56
59.05
64.05
14.66
21.11
72.00
16.82
-------------332.37
---------------1.14
29.36
-------------720.71
-------------102.38
27
70.34
-------------888.02
--------------120.65
140
120.65
120
102.38
100
80
AMOUNT(IN LACKS)
60
40
20
0
1.141 1
2007
2 2
2008
3 3
2009
YEAR
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
2008, 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.
(Rs.in lacks)
YEAR
Stores, Spare Parts etc.
31.03.07
31.03.08
31.03.09
10.10
0 .87
25.57
37.04
78.74
26.93
184.53
41.76
340.08
Stock In trade-
Finished Goods
Raw Materials
Material under process
54.38
------------180.26
--------------
78.80
-------------291.13
---------------
29
246.54
------------653.95
-------------
700
600
500
400
AMOUNT (IN LACKS)
300
200
100
0
2007
2008
2009
YEAR
DATA 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 have 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.
30
31.03.07
31.03.08
31.03.09
114.33
390.84
219.79
------------114.33
-------------
-----------390.84
------------
-----------219.79
------------
31
400
350
300
250
AMOUNT ( IN LACKS)
200
150
100
50
0
2007
2008
2009
YEAR
DATA INTERPRETATION
In the table and figure we see that there is rise in the debtors in the year 2008 and decrease in the year
2009. 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 2009. 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.
Cash is called the most liquid asset and vital current assets, it is an important component of working
capital. In a narrow sense, cash includes notes, bank draft, cheque etc while in a broader sense it
includes near cash assets such as marketable securities and time deposits with bank.
YEAR
31.03.07
31.03.08
1.45
31.03.09
27.30
9.36
------------10.81
-------------
7.00
------------34.30
-------------
2.90
26.12
-----------29.02
-----------
35
30
25
20
AMOUNT ( IN LACKS )
15
10
5
0
2007
2008
2009
YEAR
DATA INTERPRETATION
If we analyze the above table and chart we find that it follows a uneven pattern. In the year 2007 it
had maintained a low amount of cash and bank balance. But in the year 2008, 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
2009, 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.
Loans and Advances here refers to any to amount given to different parties, company, employees for
a specific period of time and in return they will be liable to make timely repayment of that amount in
addition to interest on that loan.
31.03.07
Advances to suppliers
Advances
Deposits
10.91
10.53
6.67
--------------28.11
----------------
31.03.08
39.69
39.05
28.08
--------------106.82
-------------
31.03.09
44.62
39.30
21.99
------------105.91
-------------
120
100
80
AMOUNT ( IN LACKS )
60
40
20
0
2007
2008
YEAR
DATA INTERPRETATION
34
2009
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 2007 to 2008 it increased more than triple. We
can see that the increase of 275% and 6.08% in 07-08 and 08-09 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.
YEAR
Current Liabilities
Sundry Creditors
Bank Loan
Advance Received
Provisions for taxes
Other Liabilities
(Rs.in lacks)
31.03.07
159.49
94.54
25.30
21.56
16.82
----------------332.37
-----------------
35
31.03.08
256.33
336.70
18.16
59.05
29.36
---------------720.71
-----------------
31.03.09
305.99
315.76
59.88
64.05
70.34
--------------888.02
---------------
DATA 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 07-08 it decreased from
359.41 lacs to 256.33 lacs and in 08-09 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.
Creditors or an account payable is an important component of working capital and fall under current
liability. Creditors will arise only when credit purchases are made.
Position of Sundry Creditors in KSB PUMPS LTD.
(Rs.in lacks)
YEAR
31.03.07
Sundry Creditors
31.03.08
159.49
------------159.49
--------------
256.33
-------------256.33
----------------
31.03.09
305.99
-------------305.99
--------------
150
100
50
0
2007
2008
2009
YEAR
DATA 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 have minimum liabilities it creates a better goodwill in market. High current
liabilities indicate that company is using credit facilities by creditors.
31.03.07
94.54
25.30
--------------122.84
31.03.08
336.70
18.16
--------------354.86
31.03.09
315.76
59.88
------------375.64
200
150
100
50
0
2007
2008
2009
YEAR
DATA 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 2007 to 2008 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 2009 and increase in advances received from the customer, this
is good sign for company.
YEAR
Provision for Taxes
31.03.07
31.03.08
21.56
--------------21.56
---------------
59.05
--------------59.05
---------------
31.03.09
64.05
------------64.05
-----------
70
60
50
40
AMOUNT ( IN LACKS )
30
20
10
0
2007
2008
2009
YEAR
DATA 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.
FORMULA
INVENTORY + RECIVEABLE - PAYABLE
WORKING CAPITAL RATIO= ------------------------------------------------------------(AS % OF SALES)
SALES
YEAR
31.03.07
31.03.08
18
31.03.09
32
53
30
20
10
0
2007
2008
2009
YEAR
DATA 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.
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.
FORMULA
TOTAL CURRENT ASSETS
CURRENT RATIO= -------------------------------------------TOTAL CURRENT LIABILITIES
YEAR
CURRENT RATIO
31.03.07
31.03.08
31.03.09
1.00
1.14
1.14
1.2
1.15
1.1
1.05
1
0.95
0.9
2007
2008
2009
YEAR
DATA 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.
FORMULA
TOTAL CURRENT ASSETS - INVENTORIES
QUICK RATIO= ----------------------------------------------------------------TOTAL CURRENT LIABILITIES
YEAR
31.03.07
QUICK RATIO
31.03.08
0.46
31.03.09
0.74
0.40
2008
2009
YEAR
DATA 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 2007 but it
improved significantly in the next year and again it is declined during the 2009. It is to be said that it
does not meet with the standard but in the year 2008 it was very close to the standard and it can be
said that its liquidity position is not good & stable.
42
31.03.07
31.03.08
1.65
2.93
31.03.09
3.21
3.5
3
2.5
2
DAYS
1.5
1
0.5
0
2007
2008
YEAR
43
2009
DATA 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.
31.03.07
31.03.08
104
79
44
31.03.09
227
100
50
0
2007
2008
2009
YEAR
DATA 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 2008 and in 2009 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.
FORMULA
DEBTORS
RECEIVABLE RATIO = ---------------- * 365
SALES
YEAR
31.03.07
31.03.08
45
31.03.09
54
70
104
120
100
80
DAYS
60
40
20
0
2007
2008
2009
YEAR
DATA 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 an decreasing ternd, which implies that recovery position is
not good company and Company have to reduce the receivable period.
FORMULA
CREDITORS
PAYABLE RATIO= ----------------------------- * 365
46
COST OF SALES
YEAR
31.03.07
31.03.08
92
31.03.09
69
135
2008
2009
YAER
DATA 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 2008 the ratio was very
high which means that its position of creditors that year was not good, but in the 2009 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.
47
2007-08
104
54
158
2008-09
79
70
149
2009-10
227
104
431
92
66
69
80
135
296
350
300
250
200
Days
150
100
50
0
2007-08
2008-09
2009-10
YEAR
DATA 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 2007 it
was 1.02 but in the year 2009 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 have to reduce the ratio.
48
Particulars
Working Capital
07-08
08-09
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
Current Liabilities
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%
49
888
by
23%
Working Capital is increased by 19% only in 2008-09 as compare to 5000% increase in 2007-08
and if we analysis the working capital with sales, the sales is decreased by 19% in 2008-09, thats
why working capital is increased by 19% only.
Current assets and Current liabilities are increased by 23% in 2008-09 as compare to previous
year but current assets are increased by 146% in 2007-08 as compare to 117% increase in current
liabilities, so we can say that working capital is increased because of increase in current assets.
i)
Inventory is increased by 125% in 2008-09 as compare to 2007-08, so we can say that current
assets are increased due to the increase in the inventory.
ii)
Cash and the bank balances are decreased by 15% which shows company might face the
liquidity problem.
iii)
Debtors are decreased by 44% in 2008-09 whereas creditors are increased by 19.37% in 200809, which shows that company enjoys the good payable period and goodwill among the
creditors.
iv)
Bank loan and Advances are increased by 6% only as compare to 196% increase in 2007-08,
which shows that company using more of its debt to fund the short term requirements.
3. Operating cycle of the company is increasing which shows the poor receivable collection
policy.
5.2 CONCLUSIONS
The working capital position of the company is sound and the various sources
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.
50
We cannot do comparisons with other companies unless and until we have the data of
Only the printed data about the company will be available and not the backend
details.
51