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Working Capital Management: Kss PG Center of Studies in Commerce College Vidyanagar Hubli
Working Capital Management: Kss PG Center of Studies in Commerce College Vidyanagar Hubli
CHAPTER 1
INTRODUCTION
Working capital in simple terms is the amount of funds, which a company, must
have to finance its day-to-day operation, it can be regarded as part/portion of capital, which
is, employed in short operation .The amount invested in the assets like Plant and Machinery,
Building, Furniture etc, Blocked on permanent basis and is called Fixed Capital.
Organization not only requires Fixed Capital, but also need of fund to meet day to day
operations for short term purpose, such funds is called Working Capital. A Study of
Working Capital is of major part of the external and internal analysis because of its close
relationship with the current day to day operation of business. Working Capital consists
broadly for that position/the assets of a business that are used at related current operations
and is represented by raw materials, stores, work in process and finished goods
merchandise, note/bill receivable. Working Capital management is the management of
assets that are current in nature .Current assets, by accounting definition are the assets
normally converted in to cash in a period of one year. Hence working capital management
can be considered as the management of cash, market securities receivable, inventories and
current liabilities. In fact, the management of current assets is similar to that of fixed assets
the sense that is both in cases the firm analyses their effect on its profitability and risk
factors, H differ on three major aspects.
1. In managing fixed assets, time is an important factor discounting and compounding
aspects of time play an important role in capital budgeting and a minor part in the
management of current assets.
2. The large holdings of current assets, especially cash, may strengthen the firm’s
liquidity position, but is bound to reduce profitability of the firm as ideal car yield
nothing.
3. The level of fixed assets as well as current assets depends upon the expected sales, but
it is only current assets that are ad the fluctuation in the short run u a business.
To study the sources and uses of the working capital.
To study the liquidity position through various working capital related
ratios.
To study the working capital components such as recievables account, Cash
management, Inventory management.
To make suggestions based on the finding of the study.
Need of Study:
The main purpose of our study is to render a better understanding of the concept
"Working capital Management". To understand the planning and management of working
capital at JOHN DEERE. To measure the financial soundness of the company by analyzing
various ratios. Proper management of working capital is essential to a company’s
fundamental financial health and operational success as a business. A hallmark of good
business management is the ability to utilize working capital management to maintain a solid
balance between growth, profitability and liquidity.
Scope of Study
The scope of the study is identified after and during the study is conducted. The main
scope of the study was to put into practical the therotical aspects of the study into real life
work experience.
The study of working capital is based on tools like Ratio Analysis, statement of changes in
working capital.
Further the study is based on previous year Annual Reports of Basava Equipments Pvt Ltd.
Research Methodology:
In preparing of this project the information collected from the following sources.
Primary data:
A primary data source is an original data source, that is, one in which the data are collected
first hand by the researcher for a specific research purpose or project. Primary data can be
collected in a number of ways. However, the most common techniques are self-administered
surveys, interviews, field observation, and experiments. Primary data collection is quite
expensive and time consuming compared to secondary data collection
Secondary data:
The data collection method in this project is by using the secondary sources of data such as,
Balance sheet.
Limitations of the St
The study duration (summer in plant) is short.
The analysis is limited to just five years of data study for financial analysis.
Limited interaction with the concerned heads due to their busy schedule.
The findings of the study are based on the information retrieved by the selected unit.
Chapter 2
INDUSTRY PROFILE
INDUSTRY PROFILE
The company is guided today, as it has been since 1837, by John Deere's original
values: a commitment to product quality, customer service, business integrity, and a high
regard for individual contribution. The company strives to create shareholder value through
its pursuit of continuous improvement and profitable growth.
The story of John Deere (who developed the world's first commercially successful,
self-scouring steel plow) closely parallels the settlement and development of the Midwestern
United States. This was an area that the homesteaders of the 19th century considered the
golden land of promise.
John Deere was born in Rutland, Vermont, February 7, 1804. He spent his boyhood
and young adulthood in Middlebury, Vermont, where he received a common school
education and served a four-year apprenticeship learning the blacksmith's trade.
Gained Fame as a Blacksmith
There was much to be done - shoeing horses and oxen, and repairing the plows and
other equipment for the pioneer farmers. From them he learned of the serious problem they
encountered in trying to farm the fertile soil of the Midwest. The cast-iron plows they had
brought with them from the East were designed for the light, sandy New England soil. The
rich Midwestern soil clung to the plow bottoms and every few steps it was necessary to
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WORKING CAPITAL MANAGEMENT
scrape the soil from the plow. Plowing was a slow and laborious task. Many pioneers were
discouraged and were considering moving or heading back east.
John Deere studied the problem and became convinced that a plow with a highly
polished and properly shaped moldboard and share ought to scour itself as it turned the
furrow slice. He fashioned such a plow in 1837, using the steel from a broken saw blade, and
successfully tested it on the farm of Lewis Crandall near Grand Detour.
Deere's steel plow proved to be the answer pioneer farmers needed for successful
farming in what was then "the West." But his contribution to the growth of American
agriculture far exceeded just the development of a successful steel plow.
It was the practice of that day for blacksmiths to build tools on order for customers.
But John Deere went into the business of manufacturing plows before he had orders for them.
He would produce a supply of plows and then take them to the country to be sold - an entirely
new approach to manufacturing and selling in those early pioneer days, and one that quickly
spread the word of John Deere's "self-polishers."
In 1846, the first slab of cast plow steel ever rolled in the United States was made for
John Deere and shipped from Pittsburgh to Moline, Illinois, where it was ready for use in the
factory Deere opened there in 1848 to take advantage of the water power and transportation
offered by the Mississippi River.
Ten years after he developed his first plow, John Deere was producing 1,000 plows a
year. In those early years of his business, Deere laid down several precepts that have been
Followed faithfully since then by the company he founded. Among them was his insistence
on high standards of quality. John Deere vowed: "I will never put my name on a plow that
does not have in it the best that is in me."
One of his early partners chided him for constantly making changes in design. His
partner said his work was unnecessary because the farmers had to take whatever they
produced. Deere replied: "No, they don't have to take what we produce. If we don't improve
our product, somebody else will." Deere & Company has continued throughout its history to
place a strong emphasis on product development and improvement. It has consistently
devoted a higher share of its income to product research and development than most other
companies in its industries. In 1868, Deere's business was incorporated under the name Deere
& Company. The following year John Deere's son, Charles, who was later to succeed him as
president, was elected vice president and treasurer.
Charles Deere Expanded Company:
Company Profile:
The Basava Equipments company came into existence on 2009. This company is located
Bhairidevarakoppa Hubli in the middest of Hubli-Dharwad highway near ro APMC.
Dharwad is 21kms from Hubli. Which is covered many rural areas for John Deere tractors
with customers network. In 2009 the company started with a authorized capital of
Rs. 35.15.000/- and the trial sales & service commenced with effect from 2009 from partners,
Mr. Manjunath S. Jadhav
Manju B. Dyamannavar
Vasanthkumar K.S.
Thereafter regular Partnership continued in the year of 2009. They are pioneer dealers in
Bhairidevarkoppa area. The availability of spares is abundant in Hubli-Dharwad area which
is considered as commercial areas to easy availability of raw materials/spares. The John
Deere tractor’s company was the dream project to these three honorable persons to establish
in the Hubli, which should avail tractors easily to farmers and to cover entire Hubli-Dharwad
rural areas.
2. Services
Goods/Spares :- The spare department is situated within the company which inventory
capacity of 26.65.000/- Rs. per month.
Services :- The company has large service hall which 5-10 can make repair at a time with
sufficient works for the service of the John Deere Tractots.
OBJECTIVES:
To be a best service provider in the Dharwad District.
To enhance the value and relationship between internal and external customers.
Vision:
Company vision is to become the first choice in marketing the highest quality
agricultural equipment and providing superior product support.
Mission:
Provide agricultural machinery, implements and irrigation equipment that combines
quality performance with value pricing thereby increasing quality and productivity in the
agricultural sector of the country. Provide reliable and efficient technical back-up services
(training, maintenance and spare part).
The company is committed to provide quality products and services at optimum cost and to
continually improve the quality management system through TQM approach for ensuring
customers satisfaction on a sustained basis.
First in Hubli to install John Deere tractors company. Recipient “The Best Productivity and
Energy conservation awards” from the twin cities of Hubli-Dharwad Dealership council,
Government of India.
Organization Structure
Partners/Directors
Manager’s Administration
Labours Drivers
‘
Sonalika
HMT
Mahindra
New Holland
Massey
Power track
CORPORATE INFORMATION
Company Partners/Directors
Shri. Manjunath S. Jadhav
Shri. Manju B. Dyamannavar
Shri. Vasanthkumar K.S.
Management Team:
Shri. Prakash Nayar (office Manager)
Shri. Chandrashekar Kanavi ( Sales Manager)
Shri. Riyaz Nadaf (Sales Executive)
Shri. S K Ullagaddi (Sales Executive)
Shri. Neelakanth Pattar (Sales Executive)
Shri. Madavali. Ulannavar (Spares Incharge)
Shri. Manjunath Dharekar (Admistretion)
Shri. Ramesh Hosmani (Labour)
Shri. Veeresh Sutagatti (Labour)
Shri. Kareppa koradigudda (Labour)
Shri. Khajuhusain Peerajde (Labour)
Bankers:
Corporation Bank of Hubli
Registered Office:
DEPARTMENTAL STUDY:
PURCHASE DEPARTMENT:
Purchase department plays an important role in management of the company. Any big
concern has a separate department known as purchase department. The efficiency of this
department can save more money by purchasing the right quality of items at the right time
and at a right price. This department is under the charge of purchase officer and he has a staff
under him to assist in carrying the various activities of the department. This department is of
great importance as the company has to perform all its activities efficiently and smoothly.
2. On the basis of indents, enquiries are floated on the approved sub contractors or per
decision taken by manager
5. To negotiated with suppliers for finalization of best possible rate the proposals are
kept for approval for high value orders.
STORES DEPARTMENT:
2. The second objective of the storage is that the materials should be arranged in a
proper fashion and well preserved
3. Economy in investment
The department has to perform various important functions which are has follows
a) Fixing code number to each material.
ACCOUNT DEPARTMENT
Office manager
Senior manager
Accounts
Senior account assistance
Account assistance
The accounts department deals with all financial aspects of the firm. It is the many
department responsible for maintaining all accounts of the company all receipt &
exependiture relating to the company or recorded it is the many department which prepares
budgets and assists management in investment decisions.
3. Pay slips
7. Dealing on T.D.S
SALES DEPARTMENTS
The marketing system at Basava Equipments is handled by the marketing Department which
is located in the administrative office at Hubli this is marketing department procures order
from different zones. Then copy of confirmation order will be sent to the sales department.
As per the demand of the party. Sales department will give dispatch order to the basava
Equipment company godown and the it is dispatched from the godown after the complection
of formalities.
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WORKING CAPITAL MANAGEMENT
2. Additional discount
3. Quantity discount
The sales department will produce the final bill by deducting the required deductions and
adding some expenses like the excise duty, freight charges (if any) insurance charges etc.
A copy of such bill will be sent to the party and concerned branches after recording the
transactionsin the sales ledger
Basically the sales account department is accounts related to the sales made by the company.
A copy of challen or exice invoice is received from the Spares godown department.Then the
trade discount, special discount additional discount or cash discount provided to the
customers, if alloved, will be maintained in the customer order. Such deductions are
respectively made. After deducting all discounts, on the remaining amount Excise duty of
16% basic excise and 0.125% cess is charged. In case the goods are being transmited outside
Karnataka then CST also charged.
In ase the goods or exported the invoice is being prepared in the same maner but there will be
exemptions provided on the excise duty.
Finally after providing for all adjustment, the commercial invoice is prepared and is sent to
the concerned party or distributor for the payment of goods sold them.
SWOT ANALYSIS.
Strengths:
a) They have strong history of 10 years.
b) Availability of Labor.
c) Strong Dealership network
d) Quick decision making process.
Weakness:
a) No proper HRD management
a) Low safety level
b) Technological Obsolescence.
c) Old thoughts only & no induction of fresh blood in the Company.
d) Delay in getting jobs done.
e) Need for Empowerment – for the employees.
f) Unwillingness of the staff to change to new practices
Opportunities:
a) Technological up gradation
d) Online ordering process.
a) Performance based evaluation, Promotion, & increments in the salary.
b) Implementation of LAN for connectivity.
c) Planning for Personnel Relations Activity.
Threats:
b) Excess man power
d) Use of best available technology (BAT) by the competitors.
CHAPTER 3
CONCEPTUAL
FRAMEWORK
Working capital in simple terms is the amount of funds, which a company, must
have to finance its day-to-day operation, it can be regarded as part/portion of capital, which
is, employed in short operation.
1. FIXED CAPITAL.
2. WORKING CAPITAL
The amount invested in the assets like Plant and Machinery, Building, Furniture etc,
Blocked on permanent basis and is called Fixed Capital. Organization not only requires
Fixed Capital, but also need of fund to meet day to day operations for short term purpose,
such funds is called Working Capital.
A Study of Working Capital is of major part of the external and internal analysis
because of its close relationship with the current day to day operation of business. Working
Capital consists broadly for that position/the assets of a business that are used at related
current operations and is represented by raw materials, stores, work in process and finished
goods merchandise, note/bill receivable.
“Working capital refers to a term investment in short term assets cash, short term
securities accounts receivables and inventories.”
J. SMITH: -
“The Sum of the current assets is the working capital of the business.”
“Working Capital = Current Assets – Current Liabilities”.
The period of time which elapses between the point at which cash begins to be expended on
the production of a product and the collection of cash from a customer
Diagram below illustrates the working capital cycle for a manufacturing firm
The upper portion of the diagram above shows in a simplified form the chain of events in a
manufacturing firm. Each of the boxes in the upper part of the diagram can be seen as a tank
through which funds flow. These tanks, which are concerned with day-to-day activities, have
funds constantly flowing into and out of them.
• The chain starts with the firm buying raw materials on credit.
• In due course this stock will be used in production, work will be carried out on the stock,
and it will become part of the firm’s work in progress (WIP)
• Work will continue on the WIP until it eventually emerges as the finished product
• When the finished goods are sold on credit, debtors are increased
• They will eventually pay, so that cash will be injected into the firm
Each of the areas – stocks (raw materials, work in progress and finished goods), trade
debtors, cash (positive or negative) and trade creditors – can be viewed as tanks into and from
which funds flow.
Working capital is clearly not the only aspect of a business that affects the amount of cash:
• Shareholders (existing or new) may provide new funds in the form of cash
Unlike movements in the working capital items, most of these ‘non-working capital’ cash
transactions are not everyday events. Some of them are annual events (e.g. tax payments,
lease payments, dividends, interest and, possibly, fixed asset purchases and sales). Others
(e.g. new equity and loan finance and redemption of old equity and loan finance) would
typically be rarer events.
LITERATURE OF REVIEW
Bansal S.P.(1999)
Review of this study on working capital management refers to the management of current
assets and current liabilities to be maintain the various components to increasing the
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WORKING CAPITAL MANAGEMENT
profitability of the firm.The author persists on application of various methods and techniques
for management of working capital and its three main cash ,receivables and inventors.
Eljelly(2004)
Identified the relation between profitability and liquidity who was examined, as measured ny
current ratio and cash gap(cash conversion cycle) on a sample of joint stock firms in Saudi
Arabia. The study found that the cash conversion cycle was of moreimportance as a measure
of liquidity than the current ratio that effect profitability.
Have explored the relationship between corporate profitability and WCM in the Athens Stock
Exchange. The finding of results shows a nagative relationship between profitability and
working capital indicators lick days of accouts receivable, account payaand cash conersion
cycle. Theyconcluded that firms can create profites by effectively handling each component
of the cash conversion cycle.
Used Bloombergs database of 172listed copanies randomly selected from Bursa Malaysia
main board for five year period from 2003 to 2007 .Appliying correlations and multiple
regression analisis, they found that current assets to totall asset ratio shows positive
significant relationship with Tobin Q,ROA and ROA.Cash conversion cycle,current asset to
current liabilities ratio and current liability to total aseet ratio illustrate nagative sinificanct
relations with Tobin Q, ROA and ROIC.
Ensures Liquidity
Evades interruptions in operations
Enhance Profitability
Improves Financial health
Cash discounts are lost. Some firms will try to persuade their debtors to pay early by
offering a cash discount.
The advantages of being able to offer a credit line to customers are forgone.
Financial reputation is lost due to non-payment of trade creditors on time.
Creditors may apply to the court for winding up if the firm fails to pay their
obligations on time.
Conventional Method
According to the conventional method, cash inflows and outflows are matched with
each other. Greater emphasis is laid on liquidity and greater importance is attached to
current ratio, liquidity ratio, etc., which pertain to the liquidity of a business.
CASH
CASH
RAW
RAW
DEBTORS
DEBTORS MATERIALS
MATERIALS
SALES WORK
WORK IN
IN
SALES PROGRESS
PROGRESS
FINISHED
FINISHED
GOODS
GOODS
The company first invests its cash in purchase of raw materials, and then these materials are
used for prouction of goods which is called as work-in-progress stage. From this stage
finished goods are produced then these finished goods are sold or dispatched to customers
and money is collected from them.
Then again same process continues i.e.
Conversion of cash into raw materials.
Conversion of raw materials into work-in-progress.
Conversion of work-in-progress in to finished goods.
Conversion of finished goods into sales.
Conversion of sales into debtors and into cash.
Working Capital management refers to all aspects of the administration of both Current
Assets and Current Liabilities fresh capital management is concerned with the problems that
arise in attempting to manage the Current Assets and Current Liabilities and the inter
relationships that exist between Current Assets and Current Liabilities.
Ratio Analysis
Ratio Analysis is an important Qualitative technique used for the analysis and interpretation
of financial statements. It is the most widely used tool of financial analysis. It is the most
common method and very simple arithmetical expression, which shows the relationship of
number to another.
In short, it is the technique of interpretation of financial statements with the help of the
accounting ratios derived from the financial statements.
Current ratio is a ratio between current assets and current liabilities of a firm for a Particular
period. This ratio establishes a relationship between current assets and Current liabilities. The
objective of computing this ratio is to measure the ability of the firm to meet its short term
liability. It compares the current assets and current liabilities of the firm. This ratio is
calculated as under:
2.Current Assets
A current asset is an item on an entitys balance sheet that is either cash, a cash equivalent,
or which can be converted into cash within one year. If an organization has an operating
cycle lasting more than oneyear, an asset is still classified as current as long as it is conveted
into cash within the operating cycle
3:Current Liabilities
Current liabilities are a companys debts or obligations that are within one year or within a
normal operating cycle. Furthermore, current liabilities are settled by the use of a current
asset ,such as cash ,or by the creating a new current labitity. Current liabilities appear on a
companys balance sheet and include short-term debt,accounts payable, accrued liabilities ,and
other similar debts
Gross working capital is the sumof all of a companis current assets that are convertible to
cash within a year or less. Gross working capital includes assets such as cash, accounts
receivables, inventory, short-term investments and marketable securities.
Net sales include sales after returns, if any, both cash as well as credit. Current assets include
the assets like inventories, sundry debtors, bills receivables, and cash in hand or at bank,
marketable securities, prepaid expenses and short term loans and advances.
Working Capital turnover ratio is the ratio between Working Capital and turnover. Working
Capital turnover ratio is also known as “Sales to Working Capital Ratio.” This ratio shows
the number of times Working Capital is turned over in a specified period. The higher the
ratio, lower the investment in Working Capital and greater is the profit. A very high turnover
of Working Capital is a sign of over trading and may lead to financial difficulties. A low
turnover indicates that the Working Capital is not efficiently utilized.
Debtor’s turnover ratio is the ratio, which indicates the relationship between debtors and
sales. It is the ratio, which indicates the number of times the debts are collected in a year.
Debtor’s collection period indicates the speed at which debts are collected or velocity with
which book debts are collected into cash. It also indicates the efficiency or otherwise firm’s
credit collection policy.
This ratio establishes the relationship between quick assets and quick liabilities to measure
the ability of the firm to meet its short term obligations and when they become due without
reeling upon the realization of stock.
However, firms with the ratio of more than 1:1 need not be liquid and those
having less than the standard need not, necessarily, be illiquid. It depends more on the
composition of liquid assets. Does not including Bank over Draft & Cash Credit.
Net Working Capital is a defined as current assets minus Current liabilities. Current assets
include stocks, debtors, cash and equivalents and other current assets .Current liabilities
include all the short term borrowings.
Inventory turnover ratio is a ratio between cost of goods sold and the average stock or
inventory. Every firm has to maintain a certain level of inventory of finish goods. But the
level of inventory should neither be too high nor too low. It evaluates the efficiency with
which a firm is able to manage its inventory. This ratio establishes relationship between costs
of goods sold and average stock
Chapter 4
DATA ANALYSIS &
INTERPRETATION
Data collection
DATA ANALYSIS
Current Ratio:
2.25
2.2
2.15
2.1
2.05
1.95
1.9
1.85
1.8
2013-14 2014-15 2015-16
INTERPRETATION
The table shows the information regarding current ratio of the company of last 3
years.2016 is increasing.The current asset turnover of the company over the 3 years
has been fluctuating.
Current assets
CURRENT ASSET
570
560
550
540
530
520
510
500
490
480
470
2013-14
2014-15
2015-16
INTERPRETATION
The table shows that the current asset turnover ratio. The current asset turnover of
the company over the 3 years 2014,2015,2016.has been fluctuating.
Current Liabilities
2016-17 257.34
2017-18 287.21
2018-19 238.60
current assets
570
560
550
540
530
520
510
500
490
480
470
2013-14
2014-15
2015-16
INTERPRETATION
The table shows that the current asset turnover ratio. The current asset turnover of
the company over the 3 years 2014,2015,2016.has been fluctuating.
300
290
280
270
260
250
240
230
220
2013-14 2014-15 2015-16
INTERPRETATION
The table shows Goss working capital over the last 3 years. 2014,2015,2016 .It
shows the net working capital of the company declines year by year because of
current assets are more than the current liabilities and continuous decreases in
current asset
0.45
0.4
0.35
0.3
0.25
0.2 0.41
0.15 0.31
0.27
0.1
0.05
INTERPRETATION
The table shows that current asset turnover ratio over the last 3 years.
2014,2015,2016 .It shows the net working capital of the company declines year by
year because of current assets are more than the current liabilities and continuous
decreases in current assets
Working capital turnover Ratio:
0.8
0.7
0.6
0.5
0.4
0.74
0.3 0.64
0.55
0.2
0.1
INTERPRETATION
The table shows that the company’s working capital turnover ratio. The working
capital turnover ratio of the company over the 3 years has been increasing.
Company’s present working capital turnover ratio is more than the previous year.
Working capital turnover ratio is increases year by year, it means the company is
efficiently utilizing its working capital so it is good for the company.
7.9
7.8 7.77
7.7
7.64
7.6
7.5
7.4 7.35
7.3
7.2
7.1
INTERPRETATION
The table shows the reveals the information about Debtors Turnover Ratio for the
last 3 years. The debtors Turn Over ratio is increasing year by year. It shows the net
credit sales and average debtors are increasing every year. In the year 2013-14 the
Debtors Turnover Ratio was 7.35. The present Debtors Turnover Ratio is 7.77 it is
more than the previous years. It shows deputes the improving in debt collection.
Table No: 4.6 Showing Quick Ratios as on 2011-12, 2012-13 & 2013-14 (INR
lakhs)
3 2.78
2.5
2.01
2
1.5
1.24
1
0.5
0
2013-14
2014-15
2015-16
INTERPRETATION
The table shows that represents the quick ratio of the company. The quick ratio also
declines year by year, it is not good results for the company. The main reason for
this is company’s inability to maintain the liquid assets against its liquid liabilities.
It clearly shows that company doesn’t have 100%quick assets to meet the short term
requirements.
Table Showing Net Working Capital as on 2011-12, 2012-13 & 2013-14 INR lacks
Year Total Current Assets Total Current Liabilities Net Working capital
2013-14 505.30 257.34 247.96
2014-15 561.34 289.21 272.13
2015-16 536.03 238.60 297.43
300 297.43
290
280
272.13
270
260
247.96
250
240
230
220
2013-14
2014-15
2015-16
INTERPRETATION
The table shows net working capital over the last 3 years. 2014,2015,2016 .It shows the net
working capital of the company declines year by year because of current assets are more than
the current liabilities and continuous decreases in current assets
I.CURRENT ASSET
temporary investment
Trade receivables
Debtors
Bills receivables
Outstanding income
Creditors
Bills payable
Outstanding expenses
Dividend payable
Proposed dividend
capital
I.CURRENT ASSET
current investment
temporary investment
inventories :stock
Debtors
Bills receivables
Cash balance
Bank balance
Outstanding income
II. CURRENT
LIABILITY
Short term borrowing
Creditors
Bills payable
Outstanding expenses
Dividend payable
Proposed dividend
CHAPTER 5
In the year 2015-16 current ratio is 2:1. The ideal current ratio is 1:1 because in this
year the company is not satisfied.
In the year 2015-16 quick ratio is 1:2. T he ideal quick ratio is 1:1 because in this year
the company is satisfied.
In the Year 2013-14 current assets turnover ratio is 0.27.This ratio is fluctuating year
by year.
In the year 2013-14 net working capital turnover ratio is 0.54. It is increased year by
year so
it is good for company.In the year 2015-16 debtors turnover ratio is 7.77.It is
increased year by year. This is good for company. It shows the deputes of the is
improving in debt collection.
CONCLUSION:
The examination of the current assets ratio could reveal that it is below the standard of 2:1
ratio. It is indicative of the fact that BASAVA EQUIPMENTS may be witnessing shortage of
working capital to meet out its current liabilities. As it is public limited company there may
not be any strict rules to maintain the ratios.
The overall working capital of the company is good but they have to take care about the each
components of working capital which plays vital role in managing day today activities of the
company.
SUGGESTIONS:
1. The survey has revealed that the current ratio is below the standard of 2:1 ratio. It is,
therefore, suggested that JOHN DEERE TRACTORS LIMITED should endeavor its
efforts in strengthening its working capital base and succeed in meeting out its current
liabilities.
2. The survey has revealed that the Absolute liquidity ratio is below the standard of 0.5:1
ratio. It is, therefore, suggested that the JOHN DEERE TRACTORS should endeavor
its efforts in maintaining its adequate cash balance
3. The survey has revealed that the current ratio is below the standard of 2:1 ratio. It is,
therefore, suggested that JOHN DEERE TRACTORS LIMITED should endeavor its
efforts in strengthening its working capital base and succeed in meeting out its current
liabilities.
4. The survey has revealed that the Absolute liquidity ratio is below the standard of 0.5:1
ratio. It is, therefore, suggested that the JOHN DEERE TRACTORS should endeavor
its efforts in maintaining its adequate cash balance.
BIBLIOGRAPHY
BOOKS AUTHORS
1. Financial management by Prasanna Chandra
2. Financial management by I.M Panday
3. Financial management by Khan & Jain
ANNEXURE:
Comparative analysis of balance sheet and profit & loss a/con 2013-2014
Particulars Sedule No As on As on
31.03.2014 31.03.2015
Sources of funds
Share holders fund
Share capital A 999000 999000
Reserves & surplus B 3749845 5079509
Loan funds
Secured loan C 11944647 12702365
Unsecured loan D 2955787 414345
Deferred tax liability 6002 29584
Toatal 19655281 19165635
Application of funds
Fixed assets E 3360452 3643444
Less:depreciation 1373376 1852031
1987076 1791413
Capital work in progress
Net current asset
Current asset loan and F
advance
Inventories 9922771 9922771
Sundry debtors 7805290 7805290
Cashand bank balance 58123 116152
Loan and advance 1923463 23566726
Deposits 1436834 1246745
21146481 21695520
Less:current liability G 3478276 4321298
&provisions
Net current assets 17668205 17374222
Miscellaneous expenses
Notes on accouts H
Asset
Non current asset
Fixed assets
Tagible assets 8 1791413 1700092
In tangible asset
Capital work in progress
Non current assets
Differed tax assets,net 29584 48857
Long term loans and
advances
Other non current assets 9 1246745 612622
Current investment
Inventories
Trade receivable 10 11420736 18260383
Cash and cash equipment 11 5224708 8020641
Short term loan and advances 12 1446605 318333
Othe current assets 13 125857
14 2356726 617771
Total 23516517 29704556
As at As at Increase Decrease
31-3-2014 31-3 2015
I.CURRENT ASSET
current investment
temporary
investment
short term
investment
inventories :stock
Trade receivables 11420736 18260383 6839647
Debtors
Bills receivables
Cash and cash equivalents 5224708 8020641 1295933
Cash balance
Bank balance
Short term loans and
investment
Prepaid expenses
Other current assets
Outstanding income
TOTAL CURRENT 119645444 26281024
ASSETS
II. CURRENT
LIABILITY
DECLARATION
ACKNOWLEDGEMENT