A

PROJECT REPORT ON
“WORKING CAPITAL & RATIO ANALYSIS”
AT DALMIA CEMENT (BHARAT) LTD, RAJGANGPUR

Submitted to
Savitribai Phule Pune University
In Partial fulfillment of Requirement for the award of Degree of
MASTER OF BUSINESS ADMINISTRATIVE (MBA)

BY
Mr. NIRMAL KUMAR SHARMA

Under the Guidance of

Ms. Gopa Das (College)

Mr. Prakash Agarwal (Finance Manager, DCBL)
Mr. Devendra Kumar Parida (Guide, DCBL)

SINHGAD INSTITUTE OF MANAGEMENT

(2018 – 2020)
 DECALARTION
This is to declare that I, Nirmal Kumar Sharma, student of Master in Business
Administrative (course period 2018-2020). Have given original data and
information to the best of my knowledge in the project report titled “WORKING
CAPITAL MANAGEMENT“ under the guidance of Gopa Das and that, no part of
this information has been used for any other assignment for the partial fulfillment
of the requirement towards the completion of the said course.

I have prepared this report independently and I have gathered all the relevant
information personally. I have prepared this project for partial fulfillment of
M.B.A (Finance) post graduate course.

I was regular contact with my faculty guide for discussing my project work.

The information and the data provided in the report is authentic to the best of

my knowledge.
 ACKNOWLEDGEMENT

It is a great pleasure to me in acknowledging my deep sense of gratitude to all

those who have helped me in competing this project successfully.

First of all I would like to thank “University of Pune” for providing me an

opportunity to undertake a project as a partial fulfillment of MBA degree.

Special thanks to Mr. G.N Bajpai (chairman), Mr. Mahendra Singhi (Managing &
CEO), Mr. Gautam Dalmia , Mr. Prakash Agarwal (G.M FINANCE),Mr.Devendra
Parida(DCBL, Guide) for providing me an opportunity to work with such a
esteemed organization like DALMIA CEMENT (BHARAT) LTD and providing me
necessary information’s about their organization, operations, providing guidance
for completing the whole project.

I would also like to thank Project Guide Mrs. Gopa Das whose valuable guidance
and encouragement at every phase of the project has helped to prepare this
project successfully.

Finally, I would like to express my sincere thanks to my family members, all the
faculties, office staff, and library staff of and my friends who helped me in some
or other way in preparing this report.
 EXECUTIVE SUMMARY

This project “Working Capital Analysis” is carried on for two months in Dalmia
cement (Bharat) ltd. This located at Rajgangpur, Odisha. The idea behind
selection of this project is mainly due to its nature and importance in the overall
management of any organization. The management is not satisfied with only total
figures recorded in the financial statements.

The primary uses of financial statements are evaluating past performance &
predict future performance and both of these are facilitated by comparison.
Therefore, the focus of financial analysis is always on the crucial information
contained in the financial statements. This depends on the objective & purpose
of such analysis.

The purpose of evaluating such financial statement is different from person

depending upon its relationship . In other words, even though the business unit
itself & shareholder , debenture holder, investor etc. all undertake financial
analysis ; the purpose , mean & the extent of such analysis differs.

It is necessary for management to know the financial strength of the company

such the liabilities, profitability and solvency position of the firm ratio analysis
in the process of identifying the financial strength and weakness of the
company by properly establishing relationship between the two variables. the
figure recorded in the financial statement are analyzed, interrelated and then
they are interpreted i.e. the conclusion are drawn.
 Chapter 1

“INTRODUCTION TO MANAGEMENT”

“WORKING CAPITAL MANAGEMENT”

The net working capital of business is its current assets less its current liabilities

Current assets include:

1. Stock of raw material (limestone, gypsum, fly ash, slag, etc. )

2. Work in progress (clinker, raw meal, crushed limestone)
3. Finished goods (factory, warehouse)
4. Prepayments
5. Cash balances
6. Debtors

Current liabilities include:

1. Trade creditors ( Material supplier, Transporters, Contractors retention

money, O/S expenses, Contactors payables)
2. Security deposits from Customers, Contractors .
3. Taxation payable
4. Dividends payable
5. Short term loan

Every business need adequate liquid resources in order to maintain day to day cash
flow. Its needs enough cash to buy wages and salaries as they fall and due to pay
creditors if it is to keep its workforce and ensure its supplies. Maintaining adequate
working capital; is not just important in the short term.
 Management of working capital is one of the most significant areas in
the day to day management of the firm. It is that financial area of finance
which covers all the current account of the firm. It deals with management
of the level of individual current assets and total working capital.
Financial management means procurement of funds and its judicious
use. Procurement of funds is required to finance working capital as well as
fixed assets. This capital deals with different issues relating to financial and
management of working capital
Net working capital is defined as “Excess of current assets over current
liabilities”. Working capital is the capital required for daily operations of the
business. It comprises of current assets and current liabilities.

Therefore, Net working capital = current assets – current liabilities

Objectives of the project

1. To study the various components of Working capital management at

Dalmia cement (bharat) ltd.
2. To analyze the liquidity trend is managed at Dalmia cement (bharat) ltd.
3. To study the financial stability and financial status of Dalmia cement
(bharat) ltd.
4. To appraise the utilization of current assests and current liabilities and find
out short-comings if any.
5. To evaluate financial performance of Dalmia cement by using ratio’s to
estimate the liquidity, solvency, profitability.
 CHAPTER-2 : Company Profile

ABOUT DALMIA CEMENT

The company is being the leader in cement manufacturing since 1939. And,
though the modern cement manufacturing market in India is getting more and
more competitive with each passing day, the company is growing over time. The
cement plants in India have grown manifolds in terms of capacity; the company is
also acquiring some new plants to increase the volume and expand further.

The company have cement manufacturing plants in southern states of Tamil Nadu
(Dalmiapuram & Ariyalur) and Andhra Pradesh (Kadapa), with a capacity of 9
million tonnes per annum. A leader in cement manufacturing since 1939, DCBL is
a multi spectrum Cement player with double digit market share and a pioneer in
super specialty cements used for Oil wells, Railway sleepers and Air strips. It also
hold a stake of 74 % in OCL India Ltd., a major cement Player in the Eastern
Region. Recently it had acquired the brands like Adhunik Cement & Calcom
Cement in North East.

Apart from world-class cement manufacturing plants in India, what makes dalmia
cement unique as a cement manufacturer is their constant ability to innovate. On
the key efficiency parameters, the company rank right up as one of the best
cement companies in India.It has set up over 53 windmills in Muppandal (Tamil
Nadu) to generate inexpensive and eco-friendly captive power for the plant. This
power is wheeled through the State utility transporter for consumption at the
plant.
As the cement plants are located close to the source of raw materials, the
company keep it’s freight and transport costs low, giving it an edge over
competition. Over 65 per cent of the cement consumption in India is catered by
the retail segment where branding and distribution are the critical drivers for
leadership. And it is in this that it enjoy an edge over the competitors. DCBL is the
only single unit cement manufacturer to successfully market their brands in core
markets at prices on par with those of large national players. The brands enjoy a
very high recall among consumers and influencer while the relationships with it’s
dealers are also strong. In fact, in some cases these relationships go back three
generations.
The name of Chairman, CEO, CFO, Management Team, Board of
Directors and Key Executives of Dalmia Group.

Name Designation

Gautam Dalmia Director

Jai Hari Dalmia CEO

Jai Hari Dalmia Managing Director

Jayesh Doshi WholeTime Director & CFO

N Gopalaswamy Director

Pradip Kumar Khaitan Chairman

Puneet Yadu Dalmia Director

Sanjeev Gemawa Co. Secretary & Compl. Officer

Sanjeev Gemawa Secretary

Sudha Pillai Director

Virendra Singh Jain Director

Y H Dalmia Chief Executive Officer

Yadu Hari Dalmia Managing Director

COMPANY’S HISTORY

Founded in 1935 by Jaidayal Dalmia; the cement division of DCBL was established
in 1939 and enjoys a heritage of 70 years of expertise and experience. It’s
headquarter is in New Delhi with cement, sugar, travel agency, magnesite,
refractory and electronic operations spread across the country.

The Dalmia Group had established four cement plants in pre-independence years,
two of which were affected by the partition and Independence. The two
remaining plants operate as Dalmia Cement and it have also strategic investment
in Odisha Cements Limited (OCL). Managed by a professional team, the company
sustained the path to innovate and growth for seven decades.

Early on in the history it is learnt that a strong business is an amalgamation of

strong relationships. The key to establishing such relationships is to learn from
each other, to enjoy a spirit of camaraderie, and to recognize and identify with
their needs of the people who work with them. Today with their rich experience it
had been able to broaden it’s horizons to include a holistic approach to the best
practices in the industry.

DCBL prides itself on having been at the forefront of pioneering and introducing
many new technologies, which exist today, which are followed by others in the
industry. DCBL has been and continues to be an industry leader in the niche
market segments.
 COMPANY’S ESSENCE

The year 1939 saw the establishment of one of India's first cement plants with an
installed capacity of 250 tonne cement per day- whereas DCBL had just arrived.
The plant today has grown by manifolds in terms of capacity. As a group too it has
expanded both in terms of vision as well as business interests ranging from
harnessing of the bounty of iron-ore and magnesite in the country, travel and
export activities. These diversification's were an effort to build and contribute to
the development of basic industrial materials. The year 1993 saw its foraying into
the Sugar business with an installed capacity of 2500 tonne. Today along with the
Cement business, Sugar business is one of the key growth engines of DCBL.

Apart from establishing the footprints across various business segments it had
also kept up the pace of excellence. In 1993, DCBL became the first company in
South India to obtain ISO 9002 certification and second in the country among the
Indian Cement Plants. In 2004, it became an ISO 14001 Certified company. It’s
efforts in sustaining growth with responsibility have merited it many notable
awards form Energy Conservation & Efficiency, Safety, Health & Environment
issues from the Government and other reputed agencies.

Today, it stand as one of the most profitable players in the cement industry, with
sustainable high margins and strong financial backing it’s efforts. It’s vision which
balanced the changing needs with the corporate imperatives, the organization has
grown over the years taking it to new heights and building onto it’s strengths.
Today the company stand on a strong foundation of high organizational values
and business ethics through which it has cemented the growth.

The company has year on year moved up the value chain with a consistent record
of making profits and paying dividends, making the company financially strong
and stable. With a total income of over Rs 2194 crores DCBL has interests in two
major segments, Cement and Sugar. The main objective is to grow further and be
among the top manufacturing industry. In this course, cement business has grown
with an increased production capacity from 1.5 million tonnes [MT] in the past to
the current installed capacity of 9 MT. Also sugar business since its
commencement in 1994, has grown to have three Integrated Sugar Mills in the
State of Uttar Pradesh with total installed capacity of 22,500 tonnes of cane crush
per day leading to sugar manufacturing of about 300,000 MT per annum, distillery
capacity of 80 KL per day & cogeneration facility. With the launch and
commencement of its two Greenfield projects in the Kadapa district of Andhra
Pradesh and Ariyalur in Tamil Nadu with a total 5MN tonnes capacity, DCBL has
expanded its cement footprint in the Southern India. DCBL also holds a stake of
45.4 % in OCL India Ltd., a major cement Player in the Eastern Region. Dalmia
Cement now controls a cement capacity of 21.8 million tonnes & has a strong
presence in Southern & Eastern Regions of the Country. This parabolic growth in
last few years is a testament of determination to grow into a leadership position.

The aim of DCBL is to sustain the growth that it have witnessed for the past years
as well as forge ahead with the ambitious plan it have envisioned for the company
with the help of professional Management team under the guidance of the
experienced promoters of the Group.

Quality of the products and Innovation is what has made us, unique in the Indian
Cement Industry. It has given India several vital projects from dams to critical
defense installations and created special cements for special applications with
newer and innovative technologies. This spirit of innovation has fuelled the
development of specialty cements for special needs, – which includes
strengthening Airstrips, concretizing Railway Sleepers, cementing Oil Wells, etc. In
this journey of success the company have always been the benchmark of the
latest and best technology with an endurance to achieve noteworthy milestones.

The homegrown talent of its people has fueled the commendable growth of the
company. DCBL has been and is committed to its people, and considers them to
be vital for success. To this end it focus on creating opportunities for growth and
diversity for all employees. It foster an environment that is supportive of their
personal and professional development, so that they may maximize the
opportunity to achieve their career goals.

Being a value based organization it’s approach has been based on guiding
principles of mutual respect, dignity, responsibility, ownership, commitment,
honesty, initiative, innovation, collaboration, and faith. This strong foundation is
what has been leveraged for attracting the best talents in the industry for
decades to be part of success and growth. Looking ahead, the company expects to
create leaders at every level, and evolve the company into a high productivity
organization based on its strong ethos. The company aspire to create an
organization that will continue to lead and strive to meet the expectations of its
customers, employees and shareholders for generations to come.

VISION OF THE COMPANY

To be a Leader in Building Materials Which Evokes Pride in All Stakeholders

through Customer Centricity, Sustainability, Innovation and Our Values.

Product Supplied by DCBL.

1. DALMIA PPC CEMENT

Dalmia cement gives you the 'cent percent' confidence to build a 'cent percent
home'. Buildings are protected from the chemical effects of sulphates, chlorides,
etc. as standard fly ash is used in the manufacture of Dalmia cement. The higher
level of Impermeability in the PPC cement helps prevent corrosion in rods used in
construction.
Dalmia cement is PERFECT:

For hot climatic Conditions

For Mass concrete due to a low heat of hydration

For plastering due to low heat of hydration as it prevents cracking due to heat A
perfect combination of quality, strength and colour. Quality that you can trust.
Tremendous strength that will never let you down. And colour that you recognize
as the best. So much so, the home you build will perfect in every-way. Scoring
CENT PERCENT! So, make sure you always count on Dalmia PPC cement when
building your dream home.

2. DALMIA SRPC CEMENT

The Sulphate Resisting Cement of Dalmia is a unique product specially designed to

stand the challenges of aggressive environments leading to 100 years of life to the
concrete construction. The salient features which sets it apart are -
1. Exposure to aggressive environments:

The chlorides and other acidic pollutants in today’s atmosphere gradually and
incessantly attack the contained in our ordinary cement leading to deterioration
of concrete structures. Similarly the sulphate infested soil conditions also lead to
disintegration of concrete structures, reducing the life of construction to 5- 7
years depending upon the concentration of the aggressive elements.

The C3A is the most vulnerable component in ordinary cements. The proportion
of this component is reduced to a bare minimum of 3% in Dalmia SRC cement,
making it chemical resistant even to the most aggressive environments.

The Bureau of Indian standards have specified the use of such Sulphate Resisting
Cement for aggressive environments and they specified the maximum limit of 5%
C3A in such cements. But to make it totally fool proof against the chemical
attacks, they have formulated a design to reduce the C3A content to a bare
minimum of 3%. Apart from this they have also taken utmost care in a few more
essential parameters which affect durability of the product.

2. Volume stability:

Volume stability is another important character of the cement that affects the
durability. The volume stability of the cement is mainly influenced by two
parameters viz. Free Lime and Magnesia. These ingredients, when present in
cement, exhibit a strange phenomenon as explained below. While other
components undergo normal hydration, they remain dormant in the beginning
and goes for a late reaction which involves expansion after a period of 5-7 years,
when the whole structure has totally hardened. The stress exerted by such
expansion reaction leads to cracks and damage of the construction.

3. Corrosion Resistance:

Chloride is another deleterious content in ordinary cement that attacks the steel
re-inforcement of RCC. The chloride contained in ordinary cements are highly
soluble and hence the corrosion reaction initiates even when the concrete is
green. The corrosion reaction of steel takes place in several stages, finally leading
to the formation of Hydrated ferric Oxide, which has 6 times higher volume than
original steel, which results in de-lamination of concrete cover from the underside
exposing the re-inforcements to further atmospheric attacks.

To protect the construction and the customer happiness, BIS has restricted the
presence of chloride in cement to 0.1%, whereas Dalmia SRC is a special
product, unique by itself, with only 0.009% of chloride in it making it
thoroughly chloride resistant.
3. Dalmia DSP Cement

Dalmia DSP is a specialized, one-of-its-kind offering by Dalmia Cement. Specifically

engineered for concreting or Dhalai, Dalmia DSP offers a number of advantages so
you can build the best possible home.

From packaging to the product’s technical properties, learn how Dalmia DSP
offers you a number of advantages!

BENEFITS OF USING Dalmia DSP

1. Lower cement consumption resulting in economical mixes.

2. High-quality concrete and long term strength.

3. Protects against chlorides and sulphates by delivering dense concrete.

4. Protects against cracks caused by seepage and corrosion.

4. Dalmia PSC Cement

High Quality Slag

HIGH QUALITY SLAG CEMENT

Dalmia slag cement satisfies almost all the requirements of high grade OPC
without sacrificing on strength and setting time parameters. In addition, it
provides certain other additional benefits towards durability of structures. It is
an interground mixture of high quality. Portland cement clinker and a
proportioned quantity of high quality granulated blast furnace slag. Imported
high quality gypsum is also added to regulate setting time.

HIGH QUALITY CLINKER

High quality Clinker in Dalmia PSC is produced in a modern sophisticated plant

with latest quality control and quality assurance facilities to have proper and
balanced chemical composition.
 HIGH QUALITY SLAG

Good & highly consistent quality Slag in Dalmia cement is sourced from the
most trusted steel maker of India "Sail" .Slag is a by product in the manufacture
of hot metal (Iron) during smelting (a pyro-metallurgical process) in the blast
furnace. The molten slag when properly granulated by rapid quenching,
becomes a very useful additive to cement and called granulated blast furnace
slag. Granulated Slag contains similar oxide compositions that of cement but
proportions are varying. The slag compositions should be transformed to glassy
structure to have proper hydraulicity. Slag has chemical composition that is
closer to cement chemical composition.

Superiority of High Quality Dalmia Slag Cement

1) Higher long term strength due to secondary/reinforcing gel formation

during hydration.

2) Resulting in higher protection against chemical attacks and weathering

effects.

3) Compactability and lesser thermal expansion and cracks.

4) Inherent characteristics of low reactivity with chlorides, sulphates and

reactive aggregates.

5) High ultimate strength results in saving of cement 'consumption through

scientific mix design.
 Application of High Quality Dalmia Slag Cement

1) High quality Dalmia slag cement can be used in all types of construction
works i.e., Plain & Reinforced with advantage.

2) Its superior features and its inherent characteristics make Dalmia PSC the
ideal choice for safe and durable construction in hot and humid coastal
areas.

3) For concrete structures in polluted sub-soil or Marine environments, Dalmia

PSC offers greater protection compared to Ordinary Portland Cement.

4) For all mass concreting jobs, it should be always specified and preferred over
OPC due to its low heat of hydration.

It can be safely concluded from the above details that Dalmia Portland
Slag Cement is beneficial in many ways to tackle the environmental effect
to contribute higher durability of structures. In the increasing level of
pollution in modern days due to large scale industrialization, it is always
advantageous to use blended cement like PSC . Dalmia PSC due to its
inherent characteristics protect the structure against environmental
attacks through higher density of concrete and lower reactivity with
chemicals and fumes.
 COMPETITORS OF DALMIA CEMENT BHARAT LTD.
COMPANY LEADERSHIP EMPLOYEES REVENUE

 ACC Neeraj Akhoury(CEO) 7422 $2.1B

 ADITYA BIRLA K.K Maheshwari(M.D) 19681 $4.6B
 AMBUJA CEMENT Bimlendra Jha (CEO) 5328 $5.2B
 The INDIA CEMENT Sri N.Srinivasan (M.D) 7500 $2B
 HEIDELBERGCEMENT Bernd Scheifele (CEO) 5000 $1.9B
 HOLCIM Jan Jenisch ( CEO) 81000 $26.8B
 CEMEX Fernando A. Gonzalex(CEO) 41853 $14.1B
 JK LAKSHMI Bharat Hari Singhania(M.D) 1288 $546M
 LAFARGEHOLCIM Jan Jenisch(CEO) 80373 $27.9B
SWOT ANALYSIS

Strengths Weakness

Opportunities Threats

STRENGTH:-
Positive demand of company’s product.
Reputed brand
Best quality product.
Good market campaign.
Regular visit by sales officer.
WEAKNESS:-
High dependence on imported
Need for better sales promotion.
OPPORTUNITIES:-
Strong growth of economy.
Increase in infrastructure project.
Cement demand will increase as the economy grows.
THREATS:-
Market becomes challenging due to increase in competition.
Regularly tight for quarrying of limestone over environmental issue.
Production may be low due to increase in price of freight, coal & diesel.
 Chapter 3: LITERATURE REVIEW pol

The purpose of this review is to describe working capital concepts, to outline he

existing performance and to identify value that have been identify, analyzed, and
tested. WCM is no longer seen as a discipline aim is to maintain sufficient liquidity
in the event of liquidation, rather its purpose is to underpin a company operating
cycle. Since the positive impact on working capital management of firm
profitability has been substantiated in various empirical studies.

Working capital management is the key area of financial management and plays
an important role in any industry, this chapter is an overview of research that has
been carried.

1. Rao and Rao & Ramachandran (2010) (Published in Asia Pacific Journal of
Management)
Main aim of his study is to evaluate the trends and parameters of effectiveness of
working capital and its utilization in terms of volume of the firms of cotton textiles
industry in India. For that three parameters are taken i.e. different indices first
one performance Index, utilization index and efficiency Index. For the study
industry is divided in three category means small, medium and large. The output
of the study is like that linear growth rate model is used to find out the
significance with working capital and PI,UI and EI are significant in respect of small
size companies while in medium size only UI is significant. On an average we can
say that working capital efficiency was not so satisfied despite having PI in growth
mode. The reason behind is that continuous factors are declining.
2. Feroz & et al. (2003) “Financial ratio analysis: A Data Envelopment Analysis
Approach” Journal of the Operational Research Society, Volume- 24, February-
2003, Pp.299-319.
Ratio analysis is a commonly used analytical tool for verifying the performance of
a firm. While ratios are easy to compute, which in part explains their wide appeal,
their interpretation is problematic, especially when two or more ratios provide
conflicting signals. Indeed, ratio analysis is often criticized on the grounds of
subjectivity that is the analyst must pick and choose ratios in order to assess the
overall performance of a firm. In this paper they demonstrate that Data
Envelopment Analysis (DEA) can augment the traditional ratio analysis. DEA can
provide a consistent and reliable measure of managerial or operational efficiency
of a firm. They test the null hypothesis that there is no relationship between DEA
and traditional accounting ratios as measures of 25 performance of a firm. Their
results reject the null hypothesis indicating that DEA can provide information to
analysts that is additional to that provided by traditional ratio analysis. They also
apply DEA to the oil and gas industry to.

3. Dr. Kaddumi Thair A. and Dr Ramadan Imad Z. (2012):- www.researchgate.net

Profitability and Working Capital Manant The Jordanian 962-795-004-334.
The evaluation was made in 49 jordanian companies they are listed in Amman
Stock Exchange, The carried with topic like effect of working capital management
on the profitability in a targeted companies for the period 2005 to 2009. This goal
could be achieved with help of two different measures one is for profitability and
another one is for performance of working capital management i.e. proxy and five
proxies use full for respective goal. For the estimation two regression models
fixed effects model and ordinary least model are used.
4. Mahum Bukhari and Mohammad Shaukat Malik (2014) ISSN: 2249-9563 Vol. 4, No.5,
October 2014 Study on the Working Capital Management Efficiency in Indian
Leather Industry- An Empirical Analysis 5,
with an objective found that positive and insignificant relationship of average
collection period and profitability while negative and insignificant relationship
between profitability and average age of inventory and also found that the
relationship between the average payment period and profitability is negative
and significant. Moreover, operating cycle has positively insignificant while cash
conversion cycle is positively significant relationship with profitability. The
authors suggest that managers of these companies should spend more time to manage cash
conversion cycle of their firms and make strategies of efficient management of
working capital. To fulfill above objective author.

Conducted the present study:-

is based on secondary data collected from secondary source named as “Industry;

Financial Aggregates and Ratios” the corporate database (PROWS) of the Centre
for monitoring Indian economy (CMIE) and then various issues of magazines and
journals, working papers and newspapers were also accessed for the relevant and
covering the period from 1997-98 to 2010-11 (14 years) as a part of study
designed to an evaluation of profitability and working capital management of
Leather Industry based on the following statistical tools were used: Summary
Statistics, Correlation Analysis, multiple regressions Analysis, “t” test, “f” test and
Analysis of variance (ANOVA) and SSPS.The study had dependent variable and the
inventory conversion period (ICP), the average collection period (ACP), the
average payment period (APP), and the cash conversion Cycle (CCC) are used as
independent variables and are considered for measuring working capital
management.

The empirical analysis:-

are presented from quantitative data analysis using SPSS 20 version. Descriptive
analysis is presented first followed by the Pearson’s correlation and regression
analysis. The result is also consists from the regression analysis, we can find that
the average payment period shows a negative relationship with profitability and it
is statistically significant at 5% level. i.e. 0.020

From the study it was concluded the results show that for overall leather industry,
working capital management has significant impact on profitability of the firms.

These results suggest that managers can create value for their shareholders by
reducing the number of day’s accounts receivable and increasing the account
payment period and inventories to a reasonable maximum and also suggests that
managers of these firms should spend more time to manage cash conversion
cycle of their firms and make strategies of efficient management of working
capital. We may further conclude that these firms properly manage components
of working capital like cash, marketable securities, receivables and inventory
management should be explored and their relationship with more proxies of
profitability should be examined.
5. Gurumurthy N. and Reddy Jayachandra K. (2014):-
https://www.worldwidejournals.com
April_2014_1397564396_76a32_3.p...Volume : 3 | Issue : 4 | April 2014 • ISSN No
2277 – 8160
He has conducted serve and observed working capital management position in four
pharmaceutical companies APSPDCL, APEPDCL, APNPDCL and APCPDCL and come
out with fact that working capital management was not so good in position and
need to do beteer.

6. Amalendu Bhunia (2010) “Financial Performance of Indian Pharmaceutical

Industry – A case study”, Asian Journal of Management Research, 2010, ISSN 2229
– 3795, Pp.427-451,
Has undertaken an analysis of financial performance of pharmaceutical
companies to understand how management of 31 finance plays a crucial role in
the growth. The study covers to public sector drug & pharmaceutical enterprises
listed on Bombay Stock Exchange (BSE). The study has been undertaken for the
period of twelve year from 1997-98 to 2008-09. In order to analysis financial
performance in terms of liquidity, solvency, profitability and financial efficiency,
various accounting ratios have been used. Statistical measures namely Liner
Multiple Regression Analysis and Test of Hypothesis – t test has been used.

7. Seyed Mohammad Alavinasab and Esmail Davoudi (2013)“Studying the

relationship between working capital management and profitability of listed
companies in Tehran stock exchange”, Business Management Dynamics,
Volume.2, No.7, January 2013, Pp.01-08,
To study and examined the relationship between working capital management
and profitability for listed companies on Tehran stock exchange. Hundred forty
seven companies were selected for the period of 2005-2009. The effect of various
variables of working capital management including cash conversion cycle, the
current ratio, current asset to total asset ratio, current liabilities to total asset
ratio and debt to total asset ratio on return on assets and return on equity are
studied. Multivariate regression and Pearson correlation are used to test the
hypothesis. The results of the statistical test of the hypothesis show a negative
significant relationship exist between cash conversion cycle and return on assets
and cash conversion cycle and return on equity. However, the relationship
between current ratio and return on equity is insignificant.

8. Sumathi (2009) A Study on Relationship and Factors influencing the Profitability

of selected Textile Companies in Coimbatore District”, Finance India, Volume 23,
Issue 4, December.2009, Pp.1325-1334.
Stated that the Indian Textile industry occupies an important place in the
economy of the country because of its contribution to the industrial output,
employment generation and foreign exchange earnings. One of the earliest to
come into existence in India, it accounts for 14 per cent of the total Industrial
production, contributes to nearly 30 per cent of the total exports and is the
second largest employment generator after agriculture. Profit earning is the aim
of business. In the course of analysis of this study various Statistical techniques
have been made. The Statistical techniques used are correlation, t-test, and
Multiple Regression analysis to find out the relationship between the variable and
to identify the factor influencing the profitability. Based on the analysis net sales
and net profit have some relationship and working capital management was a
highly influencing factor to find out profitability of selected textile companies in
Coimbatore district. Companies must concentrate with other influencing factor
for better profit of the company.
9. Srinivasa Rao and Indrasena Reddy (1995) “Financial Performance in Paper
Industry- A Case Study”, The Management Accountant, May 1995, Pp. 327-336.
A Case Study” stated that the financial position of the company had been
improving from year to year. The company‟s performance in relation to
generating internal funds in the form of reserves and surplus was excellent and
also was doing well in mobilizing outside funds. The liquidity position of the
company was sound as it was revealed by current and liquid ratios which were
above the standard. The solvency ratios showed that the company had been
following the policy of low capital gearing from 1990-91 as these ratios had been
decreasing from this year. The performance of the company 22 in relation to its
profitability was not up to the expected level. The company‟s ability to utilize
assets for generation of sales had not been improved much during the study
period as it was revealed by its turnover ratios.

10. RamachandranAzhagaiah and JanakiramanMuralidharan (2009):- National

Publishing House Volume 7 · Number 12009.
In this study author examine the relationship among working capital
management proficiency and earnings before interest and tax. The study was
made on Paper industry in India during 1997 to 2005. For the measurement of
working capital management three indexes are taken into consideration
performance index, utilization index and efficiency index, and EBIT of the selected
companies for the study period are taken. As a conclusion of the study says paper
companies of india performed well during period. Some having very good index
and some of them need to improve the working capital management give proper
attention on that particular area also.
 Chapter 4 : Research methodology

What is Research…?

Research methodology is the specific procedures or techniques used to identify, select,

process, and analyze information about a topic. In a research paper, the methodology
section allows the reader to critically evaluate a study’s overall validity and reliability. The
methodology section answers two main questions: How was the data collected or
generated? How was it analyzed?
 RESEARCH DESIGN

Types :

The research design adopted in this study is DESCRIPTIVE RESEARCH DESIGN.

Descriptive research - A descriptive study is one in which information is collected without

changing the environment ( i.e. nothing is manipulated). It is used to obtain information
concerning the current status of the phenomena “what exists” with respect to variables or
conditions in a situation.

Descriptive research includes survey and fact findings enquiries of different kinds. The
researcher used this research design to find out the response of the employee, by the
research the researcher can only give suggestion but implementing these suggestions
depends upon the interest of the company.

Descriptive research helped me to find out facts and details of the Dalmia Cement Bharat
ltd. I have been enquired to manager and senior employees about what has happened and
what is happening in the company.
 SAMPLING DESIGN

Sampling Method:

I have been used appropriate sample to collect right data from respondents. For research in
finance we cannot ask information to everyone regarding finance. We should concern the
person who is aware about the company finance. So that I have used Convenience sampling
under this. I have concerned the one those who aware about company’s working capital i.e.
debtors, creditors, receivables, payables, stock cycle etc.

Sampling Framework:

It is the process of obtaining information about an entire population by examining only a

part of it. The item selected from the population is known as a sample.

Population: - 4

Sample: - 3
 Sources of Data:

There were mainly two major sources of data namely;

Primary Data:
Primary data has been obtained through personal discussions and interviews
with managers and senior officials in the finance department of the organization.

Secondary data :

It is provided by the organization. The needed information is collected from:

 Books of Accounts from F.Y 2014-15 to F.Y. 2017-18

 Balance sheet from F.Y. 2014-15 to F.Y. 2017-18
 Annual tax audit reports from F.Y to F.Y. 2017-18
 Manual of concerned departments
 Consultants and personnel of DCBL.
 Internet site like www.google.com
 METHOD OF QUANTITATIVE ANALYSIS

1. Calculation of net working capital

2. Ratio analysis
3. Cash flow analysis
4. Operating cycle and cash cycle
5. Statistical tools like graphical presentation.
6. Determining the finance mix

Limitations:
1. The data is mostly secondary in nature.
2. While computing ratios, percentage, the figure are appropriate to
two decimal places. Therefore sometimes the total may not exactly
tally.
3. Data has been recalculated and regrouped whenever necessary
4. The study is based only on last 4 year records.
5. Absence of sufficient data personnel judgement have been taken on
assumptions
6. Study is only made on one organization its cannot help in compare
with other organizations.
 7. Absence of sufficient data in depth because it is not possible (cash,
inventories, receivable).

CONCEPTUAL BACKGROUND

MEANING OF WORKING CAPITAL

Capital required for business can be classified under two main categories:

1. Fixed Capital

2. Working Capital

Every business need adequate funds for its establishment & to carry out day to
day operations. Long term funds are required to create production facilities
through purchase of fixed assets such as plant & machinery, land & building,
furniture etc. Investment in these asset represent that part of firm’s capital that is
permanently blocked & is called fix capital. Funds are also needed for short-term
purposes for the purchase of raw material, payment of wages & other day to day
expenses etc. These funds are known as working capital.

CONCEPT OF WORKING CAPITAL

There ares two concepts of working capital:

1. Gross working capital

2. Net working capital

The gross working capital represent the amount of funds invested in the total
current assets of enterprises.
In narrow sense, the term working capital refers to the net Working. Net working
capital can be defined as the excess of current assets over current liabilities i.e,

Net working capital= Current Assets - Current Liabilities

Current assets are those assets which are expected to be converted into cash
within the current accounting period or within one year as a result of the ordinary
operations of the business. These include:

1) Sundry Debtors

2) Cash in hand & cash at bank

3) Bills Receivables

4) Inventory

-Raw materials

-Work in progress

-Stores & spares

-Finished goods

5) Prepaid expenses

6) Temporary Investment

-Prepaid Expenses

-Accrued Income

On the other hand, current liabilities are those liabilities of the business that have
to be settled or paid within the current fiscal year i.e. One year. These include:
 1) Sundry creditors

2) Bills payable

3) Taxes & dividend payables

4) Short term borrowings

5) Outstanding expenses etc.

Working capital to a company is like the blood to human body. It is the most vital
ingredient of a business. If working capital management is carried out effectively,
efficiently & consistently it will assure the health of an organization. Working
capital is also known as circulating capital, fluctuating capital & revolving capital.

OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The basic objectives of working capital management are as follows:

1. By optimizing the investment in current assets & by reducing the level of

current liabilities, the company can reduce the locking-up of funds in working
capital thereby; it can improve the return on capital employed in the business.

2. The firm should maintain a proper balance between current assets & current
liabilities to enable the firm to meet its day to day financial obligations.

3. The company should always be in a position to meet its current obligations

which should properly be supported by the current assets available with the firm.
But maintaining excess funds in working capital means lacking of funds without
returns.
 CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in two ways:

 On the basis of concept

 On the basis of time

On the basis of concept working capital can be classified as gross working capital
& net working capital which we have already discussed.

On the basis of time, working capital may be classified as:

 Permanent or fixed working capital

 Temporary or variable working capital

PERMANENT WORKING CAPITAL

Permanent or fixed working capital is the minimum amount which is required to

carry out day to day activities of the business irrespective of change in level of
sales or production. As the business grow the requirements of working capital
also increases due to increase in current assets. Fixed working capital is further
classified into regular & reserve working capital.

TEMPORARY WORKING CAPITAL

It is also called fluctuating working capital. Temporary working capital is the

amount of working capital which is required to meet the seasonal demands or the
extra working capital needed to support the changing business activities. It can be
further classified into seasonal & special working capital.

ADVANTAGE OF ADEQUATE WORKING CAPITAL

Every business concern is to have adequate amount of working capital as it is the

life blood of a business. It should neither have excess nor inadequate of working
capital as because both are bad for any business. However, it is the inadequate
working capital which is more dangerous from the point of view of the firm.

a. Regular supply of raw materials: Sufficient working capital ensures regular

supply of raw material & continuous production.
b. Solvency of the business: Adequate working capital helps in maintaining the
solvency of the business by providing uninterrupted production.

c. Goodwill: Sufficient amount of working capital enables a firm to make prompt

payments & maintain the goodwill of the firm.

d. Easy loans: Adequate working capital leads to high solvency. The credit
standing of the firm can arrange loans from financial institutions on easy &
favourable terms.

e. Cash discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases & hence reduces cost.

f. Ability to face crises: A concern can face the situation during the depression if
it has adequate working capital.

g. Regular payment of salaries, wages & other day to day operations: It leads to
the satisfaction of the employees & raises the morale of its employees,
increases their efficiency, reduces wastage & costs & enhances production &
profits.

h. Quick & regular return on investments: Sufficient working capital enables a

concern to pay quick & regular dividends to its investors & gain confidence of
the investors which may lead to raise more funds in future.

i. High morale: Adequate working capital brings an environment of securities,

confidence, high morale which may result in overall efficiency in the business.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

i. Excessive working capital means ideal funds which earn no profit for the firm
& business cannot earn the required rate of return on its investments.

ii. Redundant working capital leads to unnecessary purchasing & accumulation

of inventories.

iii. Excessive working capital implies excessive debtors & defective credit policy
which causes higher incidence of bad debts.

iv. If a firm is having excessive working capital then the relations with banks &
other financial institution may not be maintained.

FACTORS DETERMINING WORKING CAPITAL REQUIREMENT:

1. Nature of a business- The requirement of working capital depends upon the

nature of the business In manufacturing business it takes a lot of time in
converting raw material into finished goods therefore capital remains invested for
a long time. Whereas, in case of trading business the goods are sold immediately
after purchasing therefore very little working capital is required So the enterprises
involved in production would require more working capital than service sector.

2.Scale of operations- There is a direct link between working capital & the scale of
operations. In other words , more working capital is required in case of big
organizations while less working capital is needed in case of small organizations.
3. Business cycle- The need for the working capital is affected by various stages of
business cycle. During the boom period, the demand & sales of a product
increases. Therefore, more working capital is needed On the other hand during
the period of depression the demand declines & it affects both the production &
sales of goods. In that situation less working capital is required.
4. Market condition- Due to competition in the market, the demand for working
capital fluctuate. The firm shall need to offer credit, immediate delivery of goods
etc to customers for which the working capital requirement will be high.

5. Production cycle- Production cycle means the time involved in converting raw
material into finished product .The longer this period, the more will be the time
for which the capital remains blocked in raw material & semi finished goods.
more working capital will be needed. On the contrary, where period of production
cycle is little, less working capital will be needed.

6. Availability of raw material- Availability of raw material also influences the

amount of working capital. If the enterprise makes use of such raw material which
is available easily throughout the year, then less working capital will be required.
On the contrary, if the enterprise makes use of such raw material which is
available only in some particular months of the year whereas for continuous
production it is needed all the year round, then large quantity of it will be
stocked. Under that circumstances, more working capital will be required.

7. Growth prospects- Growth means the development of the scale of business

operations (production, sales etc). The organizations which have sufficient
possibilities of growth require more working capital, while the case is different in
respect of companies with less growth prospects.

8. Credit availed- If raw material & other inputs are easily available on credit, less
working capital is needed. On the contrary, if these things are not available on
credit then to make cash payment quickly large amount of working capital will be
needed.
9. Operating Efficiency- Operating efficiency means efficiently completing the
various business operations. Operating efficiency of every organization happen to
be different. Some of the examples are:(a) converting raw material into finished
goods at the earliest, (b)selling the finished goods quickly & (c)quickly getting
payments from the debtors. A company which has a better operating efficiency
has to invest less in stock & in debtors. Therefore, it requires less working capital,
while the case is different in respect of companies with less operating efficiency.

10. Inflation- Inflation means rise in prices. In such a situation more capital is
required than before in order to maintain the previous scale of production &
sales. Therefore, with the increasing rate of inflation, there is a corresponding
increase in the working capital.

PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY

1. Principle of risk variation- There is a direct relationship between risk &
profitability. If the firm makes large investment in current assets then it increase
liquidity, reduces risk & as a result of which decrease the opportunity for gain of
the firm. On the contrary, if the firm makes less investment in current assets then
it decrease liquidity, increase risk & as a result of which increase the opportunity
for gain of the firm. The firm may have conservative management policy which
means to minimize the risk or aggressive management policy which means to
maximize the risk or moderate management policy which means balance
between the risk & profit.

2. Principle of cost of capital- Different sources of working capital finance have

different cost of capital. Generally there is negative relationship between the risk
& cost of capital, which means more the risk less will be the cost & less the risk
more will be the cost. So there should be balance between the two.

3. Principle of equity position- As per this principle every investment in the

current assets should contribute to the net worth of the firm. The position of
current assets can be well judged by the two ratios: current assets to total asset &
current asset to total sales.

4. Principle of maturity of payment- As per this principle the firm should make an
every effort regarding the maturity of payment. In case the period to pay back the
liabilities is short than it becomes difficult for the firm to meet it obligations in
time.
 Chapter 5: Data Analysis and Interpretation
A) STATEMENT SHOWING CHANGES IN WORKING CAPITAL
F.Y.2016-17 (Rs.in Cr.)

Particular 2014-15 2015-16 Increase Decrease

A) Current assets
Inventories 362.61 338.10 -- 24.51
Investment 1058.67 1395.54 336.87
Trade receivable 188.58 162.05 -- 26.53
Cash and cash equi. 88.20 28.47 -- 59.73
Bank balance 1.07 2.11 1.04 --
Loan 1.63 1.50 -- 0.13
Other financial 14.95 67.81 52.86 --
Other current assets 81.76 70.69 -- 11.07
A 1797.47 2066.27
B) CURRENT LIABILITIES
Borrowing (S.T) 121.88 92.38 29.5 --
Trade payable 279.92 321.76 -- 41.84
Other financial liabilities 275.40 276.11 -- 0.71
Other current liabilities 82.50 128.56 -- 46.06
(s.t debt, accured
liabilities)
Provision 9.78 13.41 -- 3.36
Current tax liabilities -- 83.19 -- 83.19
B 769.48 915.41
C = A-B 420.27 297.94
Analysis: There is a Net increase in working capital of Rs. 122.33 Cr.
Interpretation:
 B) STATEMENT SHOWING CHANGE IN WORKING CAPITAL
F.Y. 2017-18 (Rs.in Cr.)
Particular 2016-17 2017-18 Increase Decrease
A) Current Assets
Inventories 576 695 119 --
Investment 1997 2150 153 --
Trade receivable 464 465 1 --
Cash & cash equivalent 108 287 179 --
Bank balance 6 10 4 --
Loans 980 628 352
Other financial asset (bond, 497 675 196 --
deposits)
Income tax -- 13 13 --
Other current assets 350 402 52 --
(securities, prepaid expenses)
A
B) Current liabilities
Borrowing 1530 1033 497 --
Trade payable:
o/s of micro and small 1 5 -- 4
enterprises
Creditors 779 816 -- 37
Other financial liabilities 1196 1464 -- 268
Government grants 4 18 -- 14
Other current liabilities (debt, 328 411 -- 83
accrued liabilities, etc)
Provisions 76 35 41 --
B
1255 758
Analysis: There is a increase in network working capital of Rs. 497

Interpretation:
 ESTIMATION OF WORKING CAPITAL:

A) Working capital as a percentage of net sales:

(Rs. in Cr.)

Particular 2015 2016 2017 2018

Net sales 3028.90 3267.42 7543 7886

Total current assets 1797.47 2066.27 4960 5325
Total current 769.48 915.41 3914 3782
liabilities
Current assets as a 59.34% 63.24% 65.75% 67.52%
% of sales
Current liabilities as 25.40% 28.02% 51.89% 47.96%
a % of sales
Interpretation: Here the calculation is made by taking net sales of each year and
being compared with current assets and current liabilities in percentage.

The average of current assets as a % of sales is _ 63.96%

i.e. (59.34% + 63.24% + 65.75% + 67.52%)/4

The average of current liabilities as a % of sales is _38.81%

i.e. (25.40% + 28.05% + 51.89% + 49.96%)/4

Therefore, net working capital as a sales is _25.15% i.e. (63.96% - 38.81%)

 Calculation of ratios:

A) Liquidity ratios:

Liquidity is the sense of the ability of a firm to meet current/short term

obligations of a firm when they become due for a payment can hardly be
stressed. The short term creditors of the firm are interested in short term
solvency and liquidity of a firm.

A proper balance balance between the two contradictory requirements, that is,
liquidity and profitability, is required for efficient financial management. The
liquidity ratios measure the ability of a firm to meet its shot-term obligations and
reflect the short-term financial solvency of a firm.

1. Net working capital ( NWC):

Net working capital represent the excess of current assets over current
liabilities. Although NWC is really not a ratio, it is frequently employed as a
measure of company liquidity position. An enterprise should have sufficient NWC
in order to meet claims of the creditors and day to day needs of business. The
greater is the amount of NWC the greater is the liquidity of the firm.
 Net working capital = Current assets – Current liabilities

(Rs. in Cr.)

F.Y. Current assets – Current liabilities Net working capital

2014-15 1797.47 – 769.48 1027.99

2015-16 2066.27 – 915.41 1150.86
2016-17 4960 – 3914 1046
2017-18 5325 – 3782 1543

NET WORKING CAPITAL

1800
1600
1400
1200
1000
800
600
400
200
0
2014-15 2015-16 2016-17 2017-18

Net Working Capital (Rs. in Cr.)

Analysis: There is continuous increase in net working capital for given years of
DCBL (except yr. 16-17) As it shows the good liquidity of the company for given
period of time.

Interpretation: There is seen good position in its capital base year by year. And
current assets are also being seen in an increasing trend. A constant growth in the
graph is also can also be see
 Current ratio:
The current ratio is the ratio of total current assets and total current liabilities. Calculated by
dividing current ratio by current liabilities. Its measures short term solvency, that seen its ability
to meet short term obligations. The higher the current ratio, the larger is the amount of rupees
available per rupee of current liability, the firm able to meet current obligations and the greater
is the safety of funds and short term creditors, it’s a way to measure the margin of safety to
the creditors. Current ratio = current assets / current liabilities

F.Y. Current asset / current liabilities Current ratio

2014-15 1797.47 / 769.48 2.33
2015-16 2066.27 / 915.41 2.26
2016-17 4920 / 3914 1.26
2017-18 5325 / 3782 1.41

CURRENT RATIO
2.5

1.5

0.5

0
2014-15 2015-16 2016-17 2017-18

Analysis: As of current ratio of year 2014-15 is higher than others. And company has sufficient
amount of asset to tackle their current liabilities.
Interpretation: From the above chart it is evident that company current ratio is some time
standard and sometime not (2:1) and has been changing. Its measure the solvency of company.
However it does not mean that short term liquidity position is poor, as its debt collection period
and creditors payment indicate good and sound liquidity position. It also measures the MOS of
creditor.
 Turnover ratio:

1. Inventory turnover ratio:

Its calculated by dividing the cost of good sold by average inventory. The ratio shows how fast
stock is sold. A low ratio shows that inventory does not sell fast and stay on the shelf or in the
warehouse for long time and high ratio indicates a foody viewpoint of liquidity.

Inventory turnover ratio = cost of good sold / average debtor (Rs in Cr.)

Particular COGS / Average inventory Inventory turnover ratio

2014-15 446.67 / 181.305 2.46

2015-16 514.81/ 169.05 3.04
2016-17 1056 / 288 3.67

2017-18 1215 / 347.5 3.49

INVENTORY TURNOVER RATIO

4
3.5
3
2.5
2
1.5
1
0.5
0
2014-15 2015-16 2016-17 2017-18

Inventory turnover ratio ( in % )

Analysis: year 2016-17 was more than other years as; there is good combination between sales
and its inventory management. As the year 2014-15 is seen low performance of inventory
Interpretation: as the higher ratio of year 2016-17 shows the quick movement of stock within
the process of sell. It shows the higher liquidity in the inventory turnover .and fast convert in to
cash. The higher point is more efficient year for company regarding its Inventories issues.
 Inventory Holding Period :

Its shows whether inventory is moving fast or not.

Inventory turnover ratio = 365 days / stock turnover ratio (in days)

F.Y. 365 / stock turnover ratio Inventory turnover ratio

2014-15 365 / 2.46 148 days
2015-16 365 / 3.04 120 days
2016-17 365 / 3.67 99 days
2017-18 365 / 3.49 105 days

INVENTORY TURNOVER RATIO

160
140
120
100
80
60
40
20
0
2014-15 2015-16 2016-17 2017-18

Inventory turnover ratio (in days)

Analysis: year 2016-17 is lower days inventory holding period i.e. (99 days) is best to move the
inventories.

Interpretation: It move the stocks rapidly and make them converted into cash flow cycle of the
company. It can remove the blockage of funds. The longest days seen are may be adverse effect
on the working capital of company.
 Debtors turnover ratio:
The analysis of debtors turnover ratio supplements information regarding liquidity of one item
of current assets of firm. It calculated by dividing net credit sales by average debtors.it measure
how speed debt is collected. A high ratio indicative of short- time lag credit sales and cash
collection. The low ratio shows that debts are not collected rapidly.

Debtors turnover ratio = Net credit sales / Average debtors (Rs in Cr.)

F.Y. Net credit sales /Average debtor Debtors turnover ratio

2014-15 3028.90 / 188.58 16.061
2015-16 3267.42 / 175.315 18.637
2016-17 7543 / 313.025 24.097
2017-18 7886 / 464.5 16.977

DEBTORS TURNOVER RATIO

30

25

20

15

10

0
2014-15 2015-16 2016-17 2017-18

Debtors turnover ratio (in %)

Analysis: year 2016-17, the higher debtor turnover ratio i.e. 24.097 shows good gap between
the credit transactions and its cash collection time .
Interpretation: the company pay attention over the low performing years. It shows the long or
short time lag of debtors turnover fastly or slowly, its shows the shorter credit period a better
credit policy and the longer credit period shows insufficient credit policy of firm.
 Debt collection period:
Is shows how long it takes to collect amount from debtors, for which a firm has to wait before
their receivables are converted into cash. ratio represent the average number of days.

Debt collection period = 365 / Debtors Turnover ratio

F.Y. 365 / Debtors Turnover Ratio Debt collection period

2014-15 365 / 16.061 23 days
2015-16 365 / 18.637 19 days
2016-17 365 / 24.097 15 days
2017-18 365 / 16.977 21 days

DEBT COLLECTION PERIOD(IN DAYS)

25

20

15

10

0
2014-15 2015-16 2016-17 2017-18

Debt collection period (in days)

Analysis: The lower i.e 15 days (2016-17) period is good for firm. The debt collection shows
the time taken by company to collect the amount from debtors.

Interpretation: The short period is good for firm because it helps in proper flow of fund in
business. The higher the day taken for collection of debtor, company indicates blockage of fund
in the transaction with their debtor. In DCBL 15days 2016-17 shows a good sign for firm but it
increases in 2017-18. company should opt a same policy like 16-17 for a better flow of fund.
 Creditor turnover ratio:
The creditors turnover ratio is an important tool of analysis as a firm can reduce its requirement
of current assets by relying on supplier credit. Low ratio indicates a high credit are available and
credit term granted by suppliers, a high ratio shows that account are to be settled rapidly.

*Credit purchase= COGS + closing inventory – opening inventory (Rs. in Cr.)

F.Y. Purchases / Average creditor Creditor Turnover Ratio

2014-15 809.28 / 279.92 2.89
2015-16 490.3 / 300.84 1.63
2016-17 818.1 / 560.88 1.46
2017-18 1096 /800.5 1.37

CREDITOR TURNOVER RATIO

3.5
3
2.5
2
1.5
1
0.5
0
2014-15 2015-16 2016-17 2017-18

Creditor turnover ratio ( in % )

Analysis: The higher credits are available for the given year i.e. 2017-18 because it shows the
lowest creditor turnover ratio as per financial statement

Interpretation: The higher amount of 2.89 % shows the fast settlement of creditors as the
credit are less allowed. So, it can effect the operation process of firm because long credit period
help firm to purchase high quantity and have to pay that amount after a certain period of time
which helps to earn more profit.
 Average payment period:
Its shows that average time taken to pay for goods and services purchased by the
company. The longer credit period achieved the better, delays in payment mean
operation of company are financed interest free by suppliers funds .

Average Payment Period = 365 / Creditors Turnover Ratio (in days)

F. Y. 365 / Creditors turnover ratio Average payment period

2014-15 365 / 2.89 126 days

2015-16 365 / 1.63 223 days
2016-17 365 / 1.43 255 days
2017-18 365 / 1.37 266 days

AVERAGE PAYMENT PERIOD (IN DAYS)

300

250

200

150

100

50

0
2014-15 2015-16 2016-17 2017-18

Average payment Period (in days)

Analysis: Payment period for the 2017-18 is in favor of company of 266 days

Interpretation: Longest credit period shows the better utilization of finance which consist the
free interest made by suppliers. Year 2017-18 is more profitable to company (266 days).
 Gross Profit Ratio :
It shows profit relative to sales after the deduction of production cost. Its reflects to each unit
of product. High gross profit implies that firm is able to produce the goods at lower cost
whereas low gross profit reflect higher cost of goods sold its mainly cause is fall in prices in
market or reduction in selling price or due to inability to purchase of raw materials at favorable
terms, inefficient utilization of plant and machinery, over investment in plant and machinery its
resulting higher cost of production.

Gross profit ratio = Gross profit / sales * 100 (Rs. in Cr.)

F. Y. Gross Profit Sales GP Ratio

2014-15 281.16 3037.87 9.26 %

2015-16 303.16 3028.90 10.08 %
2016-17 530.39 3267.42 16.23 %
2017-18 319 7886 4.05 %

GP RATIO
18
16
14
12
10
8
6
4
2
0
2014-15 2015-16 2016-17 2017-18

Analysis: Year 2016-17 has higher GP ratio of 16.23 %. It shows the profitable year for
company.
.Interpretation: As the year 2017-18 shows the lower profit to company because of its cost of
goods sold or may be any other market condition.
 Net profit ratio:
Its indicates the firm capacity to with stand adverse economic condition. It measure the firm
ability to turn each rupee sales into net profit. Higher net margin ratio would indicates position
to survive in the falling of selling price, rising in cost of production. If the net margin is adequate
the firm achieve the satisfactory to return on share holder funds.

Net Profit Ratio = Net Profit / Sales * 100 (Rs. in Cr.)

F.Y. Net profit Sales Net profit ratio

2014-15 237.87 3037.87 7.83

2015-16 246.18 3028.90 8.13
2016-17 383.87 3267.42 11.75
2017-18 230 7886 2.92

NET PROFIT RATIO

14
12
10
8
6
4
2
0
2014-15 2015-16 2016-17 2017-18

Net Profit Ratio (in %)

Analysis: As observed the Net profit ratio in year 2017-18 was higher as compare to others.

Interpretation: The net profit shows a real condition of an organization.

 Findings:

 It is also found that, the lower i.e. 99days Inventory holding period is the
best to move the inventories faster as it isIt is found that, there is
continuous increase in net working capital for given years of Dalmia cement
(Bharat) ltd. As the year as it shows the good liquidity of the firm for given
period of time.
 According to financial statement of DBCL found that year 2017-18 was
higher than earlier. So company has sufficient amounts of assets to tackle
their current liabilities.
 Net working capital is company increases every year, due to increase of
business.
 The company wealth is increasing as the earning per share is increasing
every year
 In case of current ratio year 2014-15& 2015-16 is more benefited for DCBL
because it shows the ratio required 2:1 ratio which indicates the company
has excess current asset to of year 2016-17 which shows the good signal
for company to meet the supply of its product according to its marketing
demand.
 It is also found that, Year 2016-17 was more than other years as; there is
good combination between sales and its inventory management.as the year
2015-16 & 2014-15 shows the low performance of inventory.
 The debt collection period means the company wait for the time period for
recovery of amount. The lower i.e.15days period is good for company
 transactions which shows in year 2016-17 of DCBL, its good for flow of
funds and recovery of debt in short time period.
 The debtor turnover ratio (higher) shows the good gap between credit
transactions and its cash collection time, i.e. 24.017 % in 2016-17.
 The lowest creditor turnover ratio shows that, the higher credits are
available for the given year i.e. 2017-18 (1.37 %) & highest ratio show the
low credits are available i.e. shown in year 21014-15 (2.89%).
 The average payment period for the year 2017-18 is in favor of company of
266 days.in average payment longer period is beneficial for company.
 Year 2017-18 has higher Gross profit ratio of 16.23 % shows the profitable
year for DCBL.
 Inventory turnover ratio is fluctuating in last three years.
 Year 2016-17 has higher Net profit ratio of 11.75 % shows the profitable
year for DCBL but in 2017-18 the net profit is decreases it may causes
market condition, investment (merge).
 Suggestions:

 Company should raise fund through short term sources for short term
requirement of funds, which comparatively as compare to long term funds.
 They have to reduce the inventory holding period with use of zero
inventory concept, and maintain its inventory at a certain level neither it
would incur unnecessary block of the funds which result in heavy increase
in working capital.
 The company should strictly monitor on its debtors and vigorous follow up.
after analysis it is seen that debtors are not getting converted into cash
quickly after grant credit period of averagely 15 days so company has to
take an action for those type of inconvenience.
 If creditor payment period is decreasing every year. then company has to
take full advantage of credit allowed by creditors, but for this company has
to maintained a credit payment policy.
 Company should implement the cost saving measures effectively at all
stages of its operations i.e. for raw material procurement, production
process, material handling process, administrative cost and better
management of finance resources.
 Company should make yearly contact with vendors at fixed rates.
 Company also should take of their operating expenses in order to increase
its productivity (by purchase in bulk which consist low cost)
 Company should stop supplying goods to those customers which do not pay
the cash in given period of time it sometime decreases the sales, but it will
also reduce the chances of bad debts.
 Company has to give more attention towards less current liabilities and
manage it properly for more profit.
 Company have to increase its market share by offering competitive prices in
local as well as in global market.
 Company try to collect funds in proper time, after collection utilize and
reinvest it in proper manner for more profitability.
 Conclusion:

This project was conducted to analyze the working capital of DALMIA CEMENT
(BHARAT) LTD. for the last F.Y. 2014-18. During this project work and project
report I came to some conclusion are as follows:-

1) The Net Working capital of the company is showing an increase in each year
(except 2016-17) because of merger, the increment indicates that DCBL has
sufficient Net working capital to meet the claims of creditors and day to day
needs of business.
2) After study of each part of Working Capital it help to evaluate and to drawn
the ratios. It helps to shown the current situation and projections for future
can be made in respect of companies life. Ratio analysis shows the
Qualitative and Quantitative relationship between each aspect of Working
Capital.
3) The theoretical information also gives a good knowledge about “Working
Capital Analysis” and also its implement in the system of DCBL.
4) The efficiency of the company to use its assets has increased every year
resulting into increase in its sales volume.
5) The analysis or calculation of the statement showing changes in Working
Capital of F.Y. gives the information about the increase and decrease of
each year respectively ( 2014-18)
6) Working capital is the amount of fund necessary to cover the cost for
operating the enterprise smoothly and profitability. Working Capital is very
essential to maintain the smooth running of a business.
7) The holding period of Raw Material, Finished Good and W.I.P being lower in
the year, 2016-17 than the previous year, it shows that the company have
to bear less cost in case of warehousing and follow the same.
8) Company Current Ratio was below the standard in last year, so company
needs to work on this by maintain proportionately ratio i.e. (2:1) between
current assets and current liabilities which is helpful for tackle the liabilities.
 Bibliography:

Before and at the time of preparing the project report following books were
referred which supported me with some important guidelines for the analysis and
the documentation of project report.

The books used for this purpose are :-

Financial management – Prasanna Chandra

Financial management - Khan & Jain
Financial Statements of Dalmia Cement Bharat Ltd. (OCL)
Research Methodology – C R Kothari
Financial Management - Shashi. K. Gupta & R.K.S

Webliography:

www.google.com
www.moneycontrol.com
www.Economictimes.com
www.dalmiacement.com
 ANNEXURE

Questionnaire

Name: Date: …………

Designation:

(Tick as Appropriate)
Section-A: Personal Data

1. Your Age
1) Bellow 25 yrs. 2)25-29 yrs. 3) 30-34 yrs. 4) 35 yrs. & Above

2. Gender
1) Male 2) Female

3. What is Your Qualification?

1) Undergraduate 2) Graduate 3) Post-Graduate

4. How long have you been working in this company?

1) Less than 3 yrs. 2)3-5 yrs. 3) Above 5 yrs.

Section-B: Working Capital

5. How would you rate the level of importance by which working capital is
placed in the organization?
1) High 2) Average 3) Low 4) Not at all

6. How many days credit do you give to Customers/ Debtors?

1) 0-30 days 2) 30-60 days 3)60-90 days 4) Above 90 days
7. Do you charge interest if customers/ debtors will pay you after due date?
1) Yes 2) No

8. How many days credit do you take from Suppliers/ Creditors?

1) 0-30 days 2) 30-60 days 3)60-90 days 4) Above 90 days

9. How often does your company remind customers to pay the balance
amount?
1) Weekly 2) Monthly 3) Quarterly 4) Annually

10. Do you give discount offer to customers/ Debtors for early payment?
1) Yes 2) No

11. What is stock cycle in your company?

1) Less than 30 days 2) 31 days – 60 days 3) more than 60 days

12. Rate the percentage of credit risk in your company.

1) Less than 5% 2) 5-10% 3) Over 10%

13. What is the bad debt level in your accounts receivable?

1) Less than 1% 2) 1% - 5% 3) 6% - 10% 4) Over 10%

14. How many days do you take to convert into finished goods from the date of
purchase of raw materials?
1) Less than 10 days 2) 10 days - 20 days 3) more than 20 days

15. Do you use banking source to finance your working capital?

1) Yes 2) No

16. How often does your company review its working capital policy?

1) Weekly 2) Monthly 3) Quarterly 4) Whenever necessary

 EXECUTIVE SUMMARY
This project “Working Capital Analysis” is carried on for two months in Dalmia cement (bharat) ltd. This
located at Rajgangpur,Odisha.

The idea behind selection of this project is mainly due to its nature and importance in the overall
management of any organization. The management is not satisfied with only total figures recorded in
the financial statements.

The primary uses of financial statements are evaluating past performance & predict future
performance and both of these are facilitated by comparison. Therfore, the focus of financial analysis is
always on the crucial information contained in the financial statements. This depends on the objective &
purpose of such analysis.

The purpose of evaluating such financial statement is different from person depending upon its
relationship . In other words, even though the business unit itself & shareholder , debenture holder,
investor etc. all undertake financial analysis ; the purpose , mean & the extent of such analysis differs.

It is necessary for management to know the financial strength of the company such the liabilities,
profitability and solvency position of the firm ratio analysis in the process of identifying the financial
strength and weakness of the company by properly establishing relationship between the two variables.
the figure recorded in the financial statement are analyzed, interrelated and then they are interpreted
i.e. the conclusion are drawn.