A

PROJECT REPORT ON
“A STUDY OF WORKING CAPITAL MANAGEMENT WITH
REFRENCE TO HUPHEN ELECTROMECH PVT LTD”

SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY

FOR THE PARTIAL FULFILMENT OF THE

BACHELOR OF BUSINESS ADMINISTRATION

SUBMIT BY:
HRITIKA MAHENDRA LOKHANDE

TYBBA
SEAT NO.

UNDER THE GUIDANCE OF

PROF. DR. MANESH PAWAR

GOKHALE EDUCATION SOCIETY

R.N.C. ARTS, J.D.B. COMMERCE & N.S.C.
SCIENCE COLLEGE OF NASHIK ROAD.

1
 ACKNOWLEDGEMENT

It gives me great pleasure to acknowledge my deep sense of gratitude to all of those

who have helped me in completing 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 BBA Degree.
I express my sincere thanks to our Principal Dr. Dhanesh Kalal Sir & Vice Principal
Dr. Mahesh Auti Sir for their encouragement.
I express my deep sense of gratitude to all the personages who responded promptly and
enthusiastically to my requests for frank comments despite their congested schedules.
I thank them all for providing me with necessary information and also suggesting their
valuable views regarding the completion of the project.
I owe my deep gratitude and regards to my project guide Dr. Manesh Pawar Sir for his
exemplary guidance, monitoring and constant encouragement throughout the course of
this project.
Last but not least, I am thankful to my family members and friends for their
wholehearted support.

DATE: HRITIKA MAHENDRA LOKHANDE

2
 DECLARATION

I hereby declare that, I HRITIKA MAHENDRA LOKHANDE the student of R.N.C.

Arts, J.D.B. Commerce & N.S.C. Science College of Nashik Road has completed the
project report entitled “A STUDY OF WORKING CAPITAL MANAGEMENT
WITH THE REFERENCE TO HUPHEN ELECTROMECH PVT LTD,
NASHIK” submitted by me to the Savitribai Phule Pune University in partial
fulfillment of the requirements for the award of the course Bachelor Of Business
Administration under the guidance of Dr. Manesh Pawar sir. The report is my original
work and the conclusions drawn therein are based on the material collected by myself.

The project report submitted is my own work and has not been duplicated from any
other source. I shall be responsible for any unpleasure moment/situations.

HRITIKA MAHENDRA LOKHANDE

3
4
 INDEX
SR.NO. PARTICULARS PAGE NO.

1 INTRODUCTION 6-8

2 RESEARCH METHODOLOGY 9-11

3 ORGANISATION PROFILE 12-16

4 PRODUCT PROFILE 17-21

5 THEORY OF WORKING CAPITAL

MANAGEMENT 22-37

6 DATA ANALYSIS & INTERPRETATION 38-52

7 FINDINGS & RECOMMENDATIONS 53-57

8 CONCLUSION 58-59

9 BIBLIOGRAPHY 60-61

10 ANNEXURE 61-66

5
 CHAPTER NO-1
INTRODUCTION

1.1. MEANING OF PROJECT WORK:

Project work is a series of activities that allows the students to study,do research and
act by themselves using their abilities, interests, personal experience and aptitiudes.
The Project Work Progresses under the guidance and monitoring of a Teacher or other
Adviser.

6
Project work is a series of tasks that need to be completed in order to reach a specific
outcome
It aims at developing insight and capabilities in the students for in depth study,
research, interpretation and analysis on a particular chosen topic.
A project is a systematic study of real problem in an organization with a aim to resolve
it with the application of management concept and skills.
Project are applied in nature, wherein the subject is working with a company or
organization to analyze and purpose a solution to a specific problem or problems.

1.2. DEFINITION OF PROJECT:

Project Management is the art and science of working within defined constraints of
scope, time, cost, and quality. A project is an organized commitment of effort to
produce a defined outcome within defined constraints of scope, time, budget, and
quality. A project manager is a person responsible for the project, who may use project
management to deliver it.

1.3. NEED AND IMPORTANCE OF PROJECT WORK:

Each and every project may it be a long or a short one, an essay or a tough one is carried
out with certain objectives or motives in mind.
The project normally include data collection, data storing, data analysis and making
inference from it, under the guidance of the organization guides and his/her educational
institutional guide.
Such project work thus become alive platform for the student to know the current
management issues, development at the same time he/she can apply the knowledge
gained through earlier classroom learning.
The project study also provides an opportunity to develop communication skills,
analytical skills and also expose to the organization culture and actual working of the
organization.

1.4. OBJECTIVES OF THE PROJECT WORK:

The following are the objectives of the project work:
7
 ● To gain practical knowledge about the topic
● To get an over view of the topic
● To represent the data systematically for careful and
precise analysis.
● To prepare a project that is acceptable in real market.
● To know the facts of a certain company or product.
● To study different concept related to working capital.
● To study and analyse the working capital requirement of past 3 years
● To study the liquidity and efficiency of the company using ratio analysis.
● To carry out operating cycle analysis.

8
 CHAPTER NO-2
RESEARCH METHODOLOGY

2.1. RESEARCH METHODOLOGY:

9
Sr. Particulars Explanation
No.
1. Definition of “Research is a systematized effort to gain
Research new knowledge.”
“Research is a more systematic activity
directed towards discovery and the
development of an organized body of
knowledge.”
2. Types of Analytical and explanatory: Analytical
Research research includes study of collection and
analysis of financial records. The
explanatory research is used in this study
because the study involves the observation
and evolution of financial data from the last
two financial years.
3. Definition of Research methodology implies more than
Research simply the methods you intend to use to
Methodology collect data. It is often necessary to include a
consideration of the concepts and theories
which underlie the methods.
4. Type of research Qualitative and Analytical research:-
methodology
It comprises of past 3 years of financial data
and records to study the financial position
and status of Huphen Electromech Pvt Ltd.
To study the financial health of a business
certain methodology and technique used to
analyse the financial statements and accounts
therefore the analytical research
methodology is used in these project report.
5. Definition of “A research design is the logical and
research design systematic planning and directing a course of
research.”
6. Sample Method Probability sampling method:-
A probability sampling method is any
method of sampling that utilizes some form
of random selection. In order to have a
random selection method, you must set up
some process or procedure that assures that
10
 the different units in your population have
equal probabilities of being chosen.

7. Duration of 50 Hours
Research
8. Definition of Primary data collection:-
Data Collection
Data collected by the investigator for his own
purpose, for the first time, from beginning to
end, is called primary data.
Secondary data collection:-
Secondary data means data that are already
available i.e. they refer to the data which they
have already been collected and analysed by
someone else.
9. Type of Data Secondary sources:-
Collected
The secondary data has been collected
through annual reports like:
Annual reports.
Profit and loss account.
Balance Sheet.
Website referencing.
Research papers.
Magazines.

11
 CHAPTER NO-3
ORGANIZATION PROFILE

12
3.1. INTRODUCTION:

Huphen Electromech Pvt Ltd was established in the year 1990

to provide quality solutions for our customers in electrical
field.

lt has since, achieved a position of being a leading firm in the

field of current transformers,potential transformers and
metering cubicles.

The company is located in the industrial belt of Nasik.

13
3.2. PROFILE:

Name of the company: Huphen Electromech Pvt Ltd

Name of the Proprietor: Sudhir Rane

Address: Huphen Electromech Pvt Ltd, J-47,48 and 49,M.I.D.C, Ambad,

Nasik , Maharashtra

District: Nasik

Status: Sole Trading Concern

Branch Office: M.I.D.C, Ambad,Nasik

Constitution: Registered under Companies Act 1956

3.3. VISION OF THE COMPANY:

To become most admired brand by creating one stop for

electrical metering and distribution network.

This will be achieved by valuing respect to"excellence in

every field"'through empowered,honest and integrated team efforts.

3.4. ACHIEVEMENTS:

Huphen Electromech Pvt Ltd.,an ISO 9001-2008 certified

company.

Have all necessary product's type test reports certified by

well-known accredited laboratory-ERDA(Baroda,Gujarat).

The company has achieved prestigious IEEMA SME quality

award(2009)for its strong commitment towards quality
systems.

14
3.5. FACILITIES:

They have five ovens,used for pre-heating as well as curing

process.

Three potential transformer winding machines are available

whereas current transformer winding is done manually to
maintain accuracy and to comply with customer
specifications.

They also have Resin impregnation process(RIP)in vacuum

chambers for insulation purpose.

To ensure quality of fabricated panels,they have started their

own fabrication and powder coating in 2004.

3.6. QUALITY CONTROL:

There are well qualified and trained engineers to perform all

routine tests.

All products are type tested at NABL accredited lab at times

as per customer requirements.

To meet the market demands and schedules,we have three

separate testing bridges for testing primary winding,
secondary winding,all PT windings,RIP and all final epoxy
cast products.

15
3.7. ORGANISATION STRUCTURE:

MANAGING DIRECTOR: S.S RANE

PURCHASE: KARKERA

ACCOUNT: LALITA PANCHAKASHRI

PRODUCTION: KARVE

MARKETING / SALES: ABHIJIT DANI

QUALITY / DESIGN: NEETA BHAVSAR

16
 CHAPTER NO-4
PRODUCT PROFILE

17
4.1. PRODUCT PROFILE:

4.1.1. METERING CUBICLES:

6.6 KV HT metering cubicle into 0.2S class of accuracy as

per customer requirement.

11 KV HT metering cubicle O.2S class of accuracy as

per customer requirement.

22 KV HT metering cubicle upto 0.2S class of

accuracy customer requirement.

33 KV HT metering cubicle upto 0.2S class of accuracy as

per customer requirement.

18
4.1.2. HTCT:

High Tension Current Transformers (HTCT)

Metering CT
Protection CT
Bushing CT
Interposing CT

19
4.1.3. PT (POTENTIAL TRANSFORMERS):

66 V.11 KV, 22KV and 33 KV Pts.

4.1.4. EPOXY COMPONENTS:

Various types of terminal bushings. (6.6 KV , 11 KV ,33 KV)

Epoxy cast support insulators

Tap changer board for transformers (33 KV )

20
4.1.5. LTCT:

Low tension current Transformers

Manufacturing of LTCT’s for metering and protection.

Ring type : 100/5 A to 2000/5 A , Epoxy cast or tape wound

3 phase block type LTCT’s for various meters.

Wound primary current transformer : 50/5A to 300/5A, resin cast.

Square type/Window type : 200/5A to 2000/5A.

3 phase CT for motor protection relay specifically designed and developed for
Schneider Electric.

21
 CHAPTER NO-5
THEORY OF WORKING CAPITAL
MANAGEMENT

22
5.1. INTRODUCTION:

Working capital management is significant in financial management. It plays a vital

role in keeping the wheel of the business running. Every business requires capital
,v;ithout it can't be promoted. Investment decisions is concerned with investment in
current assets and fixed assets. working capital plays a key role in a business enterprise
just as the role of heart in human body . it acts as grease to run the wheels of fixed
assets .its effective provision can ensure the success of business while its inefficient
management can lead not only to loss but also to the ultimate downfall of what
otherwise might be considered as a promising concern . Efficiency of a business
enterprise depends largely on its ability to its working capital .working capital
management is one of the important facts of affirms overall financial management

For increasing shareholder's wealth a firm has to analyze the effect of fixed assets and
current assets on its return and risk.working capital management of current assets . the
management of current assets on the basis of the following points:

1.current assets are for short period while fixed assets are for more than one year

2.The large holding of current assets ,especially cash, strengthens liquidity position but
also reduce overall profitability ,and to maintain an optimal level of liquidity and
profitability , risk return trade off is involved holding current assets

3.Only current assets can be adj usted with sales fluctuating in the short run. thus the
firm has greater degree of flexibility in managing current assets. The management of
current assets help affirm in building a good market reputation regarding its business
and economic conditions.

WORKING CAPITAL =CURRENT ASSETS – CURRENT

LIABILITIES

According to J.S. Mill

“The sum of current assets is the working capital of the business.

23
5.2. CONCEPT OF WORKING CAPITAL MANAGEMENT:

Working capital management can be conceptualized under two categories:

1. Quantitative

2. Qualitative
These concepts are well known as “gross working capital” concept and “net working
capital” concept. In quantitative working capital concept, current assets are considered
as working capital which is termed as gross working capital too.
In qualitative, current assets and current liabilities are taken into account, working
capital is defined as excess or deficit of current assets over current liabilities.
It becomes essential to know and understand the current assets components and current
liabilities components in the working capital management:

⮚ Current assets – This is imperative to facilitate “Current assets have a short life
span. These types of assets are connected in current operation of a business and
normally used for short–term operations of the firm. The two important
characteristics of these assets are; (i) short life span, and (ii) swift conversion
into other form of assets. Cash balance may be held idle for few weeks, account
receivable may have a period of 30 to 60 days”

⮚ Current liabilities – Business generates liability for purchasing raw material and
other essential things on credit, these are called as creditors or account payable.
Until remittances towards creditors are made, it is categorized under liabilities
section of balance sheet. Current liabilities are explained as all obligations that
are due in near future for payment.

5.3. WORKING CAPITAL STRUCTURE:

24
Various current assets and current liabilities components make up the working capital
composition. Each component plays important part in any business firm. If any
component of working capital is not adequate, it may bring down efficiency and
profitability of the company. Current asset and current liabilities which constitute
working capital structure are shown in table below.

Working Capital Structure

Current Liabilities Current Assets

Creditors Inventories
Bank Overdraft Cash and Bank Balance
Bills Payable Accounts Receivables
Outstanding Expenses Bills Receivables
Short-term Loans Accrued Income
Provision for Taxation Prepaid Expenses
Other Current Liabilities Other Current Assets

25
5.4. OBJECTIVES OF WORKING CAPITAL MANAGEMENT:

It means raw material should be present on the requirement and it should not be a cause
to stoppages of production.

All other requirements of production should be in place before time.

The finished goods should be sold as early as possible once they are produced and
inventoried.

The accounts receivable should be collected on time.

Accounts payable should be paid when due without any delay.

Cash should be available as and when required along with some cushion

5.5. IMPORTANCE OF WORKING CAPITAL MANAGEMENT:

Solvency of the business:-Adequate working capital helps in maintaining the solvency

of the business by providing uninterrupted of production.

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

payments and this helps in maintaining goodwill in the marker.

Easy loans:-Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and others financial services organizations on easy and
favorable terms.

Cash discount:-Adequate working capital also enables a concern to avail cash discounts
on the purchases and hence reduce cost.

26
5.6. TYPES OF WORKING CAPITAL MANAGEMENT:

27
5.6.1. ON THE BASIS OF CONCEPT:

The working capital can be classified into two types under based on concept. They are:
● Gross working capital.
● Net working capital.
Gross working capital:
Gross working capital means an amount of funds invested in the various forms of
current assets in total. Current assets are those assets which are bought in the ordinary
course of business and converted into cash within a short period which is normally one
accounting year.

Net working capital:

Net working capital is the excess of current assets over current liabilities. Again, the
net working capital is divided into two types. They are:

• Positive net working capital.

• Negative net working capital.

The positive net working capital exists, whenever the current assets exceeds current
liabilities.

The negative net working capital exists whenever the current liabilities exceeds the
current assets. Current liability means a liability payable within one accounting year in
the ordinary course of business or payable out of the current assets within a short period
normally one year or payable out of the revenue income of the business.

5.6.2. ON THE BASIS OF TIME:

The working capital can be classified into two types under based on time. They are:
● Permanent/fixed working capital.
● Variable working capital.
Permanent working capital:
Permanent working capital implies the base investment amount in all types of current
resources which is respected at all times to carry on business activities. The value of
current assets have been increased or decreased over a period of time. Even though,
there is a need of
28
having minimum level of current assets at all times in order to carry on the business
activities effectively. Again, the permanent working capital is divided into two parts.
They are:

● Regular Working Capital:

The minimum amount of working capital to be maintained in normal condition is called
Regular Working Capital.

● Reserve Working Capital:

It is otherwise called as Cushion Working Capital. It refers to the short term financial
arrangement made by the business units to meet uncertain changes or to meet
uncertainties.

Variable working capital:

It is otherwise called as Fluctuating or Variable Working Capital. There is a close

relationship prevailing between temporary working capital and the level of production
and sales. There is no uniform production and sales throughout the year. If heavy order
is received for production and there is a large amount of credit sales, there is a need of
more amount of temporary working capital. At the same time, if production is carried
on in anticipation of demand in near future, temporary working capital is required.
Again, the variable working capital is divided into two parts. They are:

● Seasonal Working Capital:

Some products have seasonal demand. Seasonal demand arises due to festival. In this
way, seasonal working capital means an amount of working capital maintained to meet
the seasonal demand of the product.

● Special Working Capital:

Special programs may be conducted for business development. The programs may
be advertisement campaign, sales promotion activities, product development
activities, marketing research activities, launching of new products, expansion of
markets and the like. Therefore, special working capital means an amount of working
capital maintained to meet the expenses of special programs of the company.

29
5.7. DETERMINANTS OF WORKING CAPITAL:

5.7.1. INTERNAL FACTORS:

Nature and size of the business- The working capital requirement of a firm is basically
influenced by the nature and size of the business. Size may be measured in terms of the
scale and operations. A firm with larger scale of operations will need more working
capital than a small firm.

Growth and expansion of business- Working capital requirement of the business firm
tend to increase in correspondence with growth in sales volume and fixed assets.

Profit margin- A higher rate of profit margin due to quality products or good marketing
management or monopoly power in the market, reduces the working capital
requirement of the firm, as a profit earned in cash is a source of working capital.

Dividend policy- If management follows conservative dividend policy and retains

larger portion of net profit in the business, the working capital position will be stronger.

Credit policy- A concern that purchases its requirement on credit and sales its
products/services on cash requires less amount of working capital.

5.7.2. EXTERNAL FACTORS:

Business fluctuations- Most firms experiences fluctuations in demand for their product
and services. These business variations affect the working capital requirements.

Change in technology- The technology changes and development in the area of

production can have immediate effect on the need for working capital.

Import policy- import policy of the government may affect the level of working capital
of a firm since they have to arrange funds for importing goods at specified times.

Infrastructure facilities- The firm may require additional funds to maintain the level of
inventory and other current asset.
Taxation policy- The tax policy of the government will influence the working capital
decision. If the government follows regressive taxation policy i.e. imposing heavy tax
burdens on business firms, they are let with very little profit for distribution and
retention purpose.

30
5.8. TYPES OF WORKING CAPITAL FINANCING:

Cash Credit /
Working
Trade Credit Bank
Capital Loans
Overdraft

Purchase /
Discount of Bank
Bills Guarantee

● Trade Credit
This is simply the credit period which is extended by the creditor of the business. Trade
credit is extended based on the creditworthiness of the firm which is reflected by its
earning records, liquidity position, and records of payment. Just like other sources of
working capital financing, trade credit also comes with a cost after the free credit
period. Normally, it is a costly source as a means of financing business working capital.

● Cash Credit / Bank Overdraft

Cash credit or bank overdraft is the most useful and appropriate type of working capital
financing extensively used by all small and big businesses. It is a facility offered by
commercial banks whereby the borrower is sanctioned a particular amount which can
be utilized for making his business payments.

● Working Capital Loans

Working capital loans are as good as term loan for a short period. These loans may be
repaid in installments or a lump sum at the end. The borrower should take such loans
for financing permanent working capital needs. The cost of interest would not allow
using such loans for temporary working capital.

31
 ● Purchase / Discount of Bills
For a business, it is another good service provided by commercial banks for working
capital financing. Every firm generates bills in the normal course of business while
selling goods to debtors. Ultimately, that bill acts as a document to receive payment
from the debtor. The seller who requires money will approach the bank with that bill
and bank will apply the discount on the total amount of the bill based on the prevailing
interest rates and pay the remaining amount to the seller. On the date of maturity of
that bill, the bank will approach the debtor and collect the money from him

● Bank Guarantee
It is primarily known as non-fund based working capital financing. Bank guarantee is
acquired by a buyer or seller to reduce the risk of loss to the opposite party due to non-
performance of the agreed task which may be repaying the money or providing of some
services etc.

32
5.9. WORKING CAPITAL CIRCULATION:
Current assets along with current liabilities present in all the businesses every time. It’s
like stimulating current which flow every time. “Working capital plays pivotal role of
heart in any firm as in human body. Working capital resources are created and
distributed in the business firm, and if circulation of working capital stops, business
tends to get unresponsive.” It is very essential to circulate resources to enable long life
and efficient run of any business.

Chart 1.1 depicts cycle of working capital which represents it very apparent so as to
the overall cash is gathered primarily through issuance of shares or debentures,
borrowings as well as operation. Cash is utilized in the direction of procuring raw
material, fixed assets and paying due amount to creditors. Raw materials then
processed; operating expenses are paid that further results in production of finish
product up for sale.
Chart 1.1

33
RATIO ANALYSIS:

Ratio analysis is a tool used by individuals to conduct a quantitative analysis of

information in a company’s financial statement. Ratios are calculated from current year
numbers and are then compared to previous years, other companies, the industry, or
even the economy to judge the performance of the company. Ratio analysis is
predominantly used by proponents of fundamental analysis.
It is defines as the systematic use of ratio to interpret the financial statement so that the
strength and weaknesses of a firm as well as its historical performances and current
financial position can be determined.
Ratios can be expressed in two ways:
Time- when one value is divided by another, the unit used to express the quotient is
termed as “time”. For ex, if out of 100 students in a class, 90% are present, the
attendance ratio can be expressed as follows:
90/100= 9 times.
Percentage- if the quotient is multiple by 100, the units of expression is termed as
“percentage”

Definition:
According to H.G. Guttmann:
“Ratio is the relationship or proportion that one amount bears to another,
the first number being the numerator and the later denominator.”

34
MERITS AND DEMERITS OF RATIO ANALYSIS:

MERITS OF RATIO ANALYSIS:

● It guides the management in formulating future financial planning and policies.

● It throws light on the efficiency of business organization.

● It measures profitability and solvency of a concern.

DEMERITS OF RATIO ANALYSIS:

● A single ratio would not be able to convey anything, as the single ratio in itself
is meaningless, it does not furnish a complete picture. Neither it can be
explained, nor can any decision can be taken on the basis.

● There is a possibility of window-dressing i.e. manipulation of accounts in a way

to present a better picture that what it actually is. By doing so, it is possible to
cover up bad financial position.

● Ratios have to be interpreted, but different people may interpret the same ratio
in different ways. It should be clearly noted that ratios are only tools and personal
judgment of the analyst is more important. If the analyst does not possess
requisite qualifications or is based in interpreting the ratios, the conclusions
drawn will prove misleading.

35
CLASSIFICATION OF RATIOS:

WORKING
DEBTORS
LIQUIDITY RATIO CAPITAL
TURNOVER RATIO
TURNOVER RATIO

CREDITORS INVENTORY
TURNOVER RATIO TURNOVER RATIO

● Liquidity ratio:
It refers to the firm’s ability to meet its current financial obligations as they arise. The
liquidity ratios measure the short term financial solvency of the firm.
Current ratio- Current ratio is the relationship between current assets and current
liabilities. The ideal ratio for current assets is 2:1. It is calculated by dividing current
assets by current liability.

Current ratio - Current Assets

Current liability
Liquidity or quick ratio- The liquidity or quick ratio is an alternative measure of
liquidity that does not include inventory in the current assets. The quick ratio is defines
as follows:

Liquidity/quick ratio = current assets – inventory

Current liabilities

● Working capital turnover ratio:

Working capital turnover ratio is also known as “inventory
turnover ratio”. The indication given by this ratio is the number of times working
capital is turned around in particular period.
36
 Working capital turnover ratio = sales
Net working capital

● Debtors turnover ratio:

It is determined by dividing net credit sales be average debtors
outstanding during the year. The analysis of debtor’s turnover ratio supplements the
information regarding the liquidity of one item of current assets of the firm. The ratio
measures how rapidly debts are collected. A higher ratio is indicative of shorter time-
lag between credit sales and cash collection.
Debtors turnover ratio = Net credit sales
Average debtors

Average debtors = opening + closing/2.

● Creditor’s turnover ratio:
Creditor’s turnover ratios is computed by dividing the net credit
purchases by average accounts payable. It measures the number of times, on average,
the accounts payable are paid during a period.

Creditor’s turnover ratios = Credit purchases

Average creditors
Average creditors = opening + closing /2.

● Inventory turnover ratio:

Inventory turnover is a ratio showing how many times a company
has sold and replaced inventory during a given period. A company can then divide
the days in the period by the inventory turnover formula to calculate the days it
takes to sell the inventory on hand. Calculating inventory turnover can help
businesses make better decisions on pricing, manufacturing, marketing and
purchasing new inventory.
Inventory turnover ratio = Cost of goods sold
Average inventory

Average inventory = opening stock + closing stock/2

37
 CHAPTER NO-6
DATA ANALYSIS & INTERPRETATION

38
CURRENT ASSET

PARTICULARS 2016- 17 2017-18 2018-19

A)CURRENT
ASSETS:
1)Inventories 18343458 16275323 15826273
2)Trade Receivables 39551521.28 34518973.45 32628796.73
3) Cash and Cash 32523549.22 29462472.34 42638378.25
equivalents
4)Short – Term Loans 21534935.18 15311159.18 18477355.18
and advances
5)Other Current Assets 2509280 1845683.84 1605993.84
TOTAL CURRENT 109426243.63 96918611.76 105776796.95
ASSETS

Column1, 2016-
CURRENT
17, 109426243.6 ASSET
Column1, 2018-
19, 105776797

Column1, 2017-
18, 96913611.76

2016-17 2017-18 2018-19

Column1 109426243.6 96913611.76 105776797

INTERPRETATION:
As per the graph above there is decrease in the current asset of 2018 from 10.9 cr to
9.6 (approx) as compared to the F.Y because there is decline observed in trade
receivables ,cash, short term loans and other current assets. Then there is again an
increase in current assets of 2019 from 9.6 cr to 10.5 cr due to increase in cash and cash
equivalent
39
CURRENT LIABILITIES

PARTICULARS 2016- 17 2017-18 2018-19

A)CURRENT
LIABILITIES:
1)Short term borrowing 16217609.87 6607076.03 16287817.03
2)Trade Payables 21820809.21 18110779.65 18888816.02
3) Other Current 25853946.87 19467356.47 17935860.16
Liabilities
4)Short – Term 1107587 1161798 993217
Provisions
TOTAL CURRENT 64999952.95 45307010.15 45105710.17
LIABILITIES

Column1, 2016-
CURRENT
17, 64999952.95 LIABILITIES

Column1, 2017- Column1, 2018-

18, 45307010.15 19, 45105710.17

2016-17 2017-18 2018-19

Column1 64999952.95 45307010.15 45105710.17

INTERPRETATION:
As shown in the above graph there is a decreasing trend in Current Liabilities from
2017 to 2018 fro 6.5cr to 4.53 cr , and a marginal decrease from 2018 to 2019 to 4.51
cr. The reason for the same can be attributed to decrease in trade payables and other
current liabialities during these respective years.

40
WORKING CAPITAL
PARTICULARS 2016- 17 2017-18 2018-19
A)TOTAL CURRENT 109462743.63 96918611.76 105776796.95
ASSETS
B)TOTAL CURRENT 64999952.95 45307010.15 45105710.17
LIABILITIES
Net Working Capital 44462790.68 51606601.61 60671086.78
(A-B)

NET WORKING CAPITAL

Column1, 2018-
19, 60671086.78

Column1, 2017-
18, 51606601.61
Column1, 2016-
17, 44462790.68

2016-17 2017-18 2018-19

Column1 44462790.68 51606601.61 60671086.78

INTERPRETATION:
As it can be observed from the above graph, there is an increasing trend in the working
capital of the company .From 4.4cr 2017 it increases to 5.1 cr in 2018, and there is a
further increase to 6.6cr in 2019. The working capital of the company is increasing
since past three years which is due to increase in current asset and decrease in the
current liabilities.It is good because the company has enough funds to carry out its daily
operations and bad as it has idle cash and debtors.

41
RATIO ANALYSIS:

CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES

YEAR CURRENT CURRENT CURRENT

ASSET LIABILITIES RATIO
2016-17 109462743.63 64999952.95 1.6840:1
2017-18 96918611.76 45307010.15 2.1890:1
2018-19 105776796.95 45105710.17 2.3450:1

Column1, 2018-
CURRENT RATIO 19, 2.345
Column1, 2017-
18, 2.139

Column1, 2016-
17, 1.684

2016-17 2017-18 2018-19

Column1 1.684 2.139 2.345

INTERPRETATION:
⮚ The current ratio is increasing in pas three years and it meets the standard ratio
of 2:1.
⮚ It increases from1.6 to 2.1 and further in the third year it increases to 2.3 which
means the liquidity position of the company is good that is the company is able
to pay of its short term liabilities.
42
QUICK RATIO:

QUICK RATIO =CURRENT ASSETS -INVENTORY/CURRENT

LIABILITIES – BANK OVERDRAFT
YEAR QUICK QUICK QUICK
ASSET LIABILITIES RATIO
2016-16 96119285.63 50334968.63 1.9095:1
2017-18 80638288.76 40537293.16 1.9892:1
2018-19 89950523.95 34770580.19 2.5869:1

QUICK RATIOColumn1, 2018-

19, 2.5869

Column1, 2017-
Column1, 2016- 18, 1.9892
17, 1.9095

2016-17 2017-18 2018-19

Column1 1.9095 1.9892 2.5869

INTERPRETATION:
The Figure of the quick ratio shows an increasing trend from 1.9 in the F.Y. to 1.9 in
the S.Y. to 2.5 in T.Y. which is due to decrease in current liabilities.

The quick ratio of company is good as it is in increasing every year which means that
not much money is blocked in inventory
43
ABSOLUTE LIQUID RATIO:

ABSOLUTE LIQUID RATIO = CASH +MARKETABLE SECURITIES/

CURRENT LIABILITIES

YEAR Absolute Current Absolute

Liquid Asset LIABILITIES Liquid Ratio
2016-17 32523549.22 64999952.95 0.6919:1
2017-18 29462472.34 45307010.15 0.6502:1
2018-19 42638378.25 45105710.17 0.9452:1

Column1, 2018-
ABSOLUTE 19, 0.9452
LIQUID RATIO

Column1, 2016-
17, 0.6919 Column1, 2017-
18, 0.6502

2016-17 2017-18 2018-19

Column1 0.6919 0.6502 0.9452

INTERPRETATION:

The above graph shows a marginal decrease in absolute liwuid ratio from 0.69
in F.Y. to 0.65 in the S.Y. to 0.94 in T.Y. due to incline in absolute liquid
asset.
This shows that the company has much cash to meet its daily working capital
requirement. But it also means that the company has a lot of cash kept idle
which can be utilized somewhere else.

44
INVENTORY TURNOVER RATIO
Inventory Turnover Ratio = ROGS/Average Inventory

YEAR COGS Average Inventory

inventory Turnover
Ratio(Times)
2016-17 183345344.92 18343458 18.7404
2017-18 198317764.69 19809390.5 10.0151
2018-19 1610354896.33 16050798 7.5408

Column1, 2016-
17, 13.7404 INVENTORY TURNOVER RATIO

Column1, 2017-
18, 10.0151

Column1, 2018-
19, 7.5408

2016-17 2017-18 2018-19

Column1 13.7404 10.0151 7.5408

INTERPRETATION:
It can be observed from the above graph that there is a decreasing trend in inventory
turnover ratio reasoning a decrease in COGS an increase in average inventory in the
past three years.
The period pf conversion process of raw materials to finished goods in decreasing over
the past three years which means that the company is taking more time to convert raw
materials to finished goods which shows its inefficiency.

45
DEBTORS TURNOVER RATIO:
Debtors Turnover Ratio =Total Credit Sales/Average Debtors
YEAR Credit Sales Average Debtors Debtors Turnover
Ratio(Times)
2016-17 194029168 39551521.28 4.9057
2017-18 155520264 19235247.36 8.0851
2018-19 166577006 33573885.09 3.7701

DEBTORS
Column1, TURNOVER
2017-18, RATIO
8.0851

Column1, 2016-17,
4.9057

Column1, 2018-19,
3.7701

2016-17 2017-18 2018-19

Column1 4.9057 8.0851 3.7701

INTERPRETATION:
The graph above shows the increase in F.Y. to S.Y. from 4.9 times to 8 times due to
decrease in sales and average debtors.Further ,in the T.Y. it decreases to 3.7 times due
to incline in average debtors.
The Trend shows that the recovery from debtors is not fast and money is blocked in
debtors.
46
CREDITORS TURNOVER RATIO:
Creditors Turnover Ratio =Credit Purchases/Average Creditors

YEAR Credit Purchases Average Creditors Creditors

Turnover
Ratio(Times)
2016-17 169198734.69 21820809.21 5.9208
2017-18 98202727.7 19965794.43 4.9185
2018-19 198690482.46 15999797.83 9.2932

Column1, 2018-19,
CREDITORS TURNOVER
9.2932 RATIO

Column1, 2016-17,
5.9208

Column1, 2017-18,
4.9185

2016-17 2017-18 2018-19

Column1 5.9208 4.9185 9.2932

INTERPRETATION:
The graph above shows that there is a decline in creditors turnover period from F.Y.
i.e. 5.9 times to 4.9 times in S.Y. due to decrease in average creditors. A further increase
in the T.Y. is seen due to increase in purchases.
It shows that the company is paying its creditors frequently and therefore the
creditworthiness of the company is increasing.

47
NET WORKING CAPITAL TURNOVER RATIO:
Net Working Capital Turnover Ratio= Sales / NWC
YEAR Sales Net Working Net Working
Capital Capital turnover
ratio (Times)
2016-17 194029168 44462790.68 4.3638
2017-18 155520264 51606601.61 3.0185
2018-19 166577006 60671086.78 2.0862

Column1, 2016-17,
4.3638
NET WORKING CAPITAL TURNOVER RATIO

Column1, 2017-18,
3.0135

Column1, 2018-19,
2.0862

2016-17 2017-18 2018-19

Column1 4.3638 3.0135 2.0862

INTERPRETATION:
The figure of net working capital turnover ratio are showing a constant decline in the
pas three years reasoning in increase of sales and comparative decreases in working
capital
It can be said the company is not utilizing its working capital effectively to increase its
sales.

48
OPERATING CYCLE ANALYSIS:
Inventory Holding Period = 360/Inventory turnover ratio

YEAR Inventory Turnover Inventory Holding

Ratio(Times)
Period (Days)
2016-17 18.7404 26.20
2017-18 10.0151 35.94
2018-19 7.5408 47.74

Column1, 2018-19,
47.74
INVENTORY HOLDING PERIOD

Column1, 2017-18,
35.94

Column1, 2016-17,
26.2

2016-17 2017-18 2018-19

Column1 26.2 35.94 47.74

INTERPRETATION:
The graph above shows that Inventory Holding period is getting increased in the last
three years which is due to decrease in inventory
In the F.Y. the company takes 20 days , S.Y. 36 days , T.Y. 48 days to convert its raw
material into finished goods i.e. the raw materials stays as stock in the company for a
longer period of Time.

49
Debt collection Period = 360/Debtors turnover ratio

YEAR Debtors Turnover Debtor collection

Ratio(Times)
Period (Days)
2016-17 4.9057 73.38
2017-18 8.0851 44.52
2018-19 3.7701 95.48

Column1, 2018-19,
95.48
INVENTORY HOLDING PERIOD

Column1, 2016-17,
73.38

Column1, 2017-18,
44.52

2016-17 2017-18 2018-19

Column1 73.38 44.52 95.48

INTERPRETATION:
The graph above shows that debtors collection period has increased in the past three
years from F.Y. to S.Y. it decreased from 73 days to 45 days because of increase in
debtors turnover ratio which is actually good for the company as it is recovering in
debts faster.
From S.Y. to T.Y. there is an increase in debtors collection period because of decrease
in debtors turnover ratio which is not good for the company as their recovery from
debtors is not fast.

50
Credit Payment Period = 360/Creditors Turnover Ratio

YEAR Creditors Turnover Creditors Payment

Ratio(Times)
Period (Days)
2016-17 5.9208 60.80
2017-18 4.9185 73.19
2018-19 9.2932 38.73

Column1, 2017-
CREDITORS
18, 73.19
PAYMENT PERIOD

Column1, 2016-
17, 60.8

Column1, 2018-
19, 38.73

2016-17 2017-18 2018-19

Column1 60.8 73.19 38.73

INTERPRETATION:
The Graph above shows a decreasing trend. From the F.Y. to S.Y. there an incline seen
in creditors payment period due to decrease in creditors turnover ratio which shows
that the company is paying its creditors faster.
From S.Y. to T.Y. there is a downfall in creditors payment period because of increase
in creditors turnover ratio which means that the company takes time to pay its creditors.

51
Net Operating Cycle = Inventory holding period + Debt collection
period – Creditors Payment period
Particulars 2016-2017 2017-2018 2018-2019
Inventory holding 26.20 35.94 47.74
period
Debt collection period 73.38 44.52 95.48
Gross Operating Cycle 99.58 80.46 193.22
Creditors Payment 60.80 73.19 38.73
Period
Net Operating Cycle 39 7.27 104.49
(Days)

NET OPERATING CYCLE

Column1, 2013-14,
104.49

Column1, 2011-12,
39

Column1, 2012-13,
7.27

2011-12 2012-13 2013-14

Column1 39 7.27 104.49

INTERPRETATION:
From the above graph the Net operating cycle shows an increasing trend in the past
three years. From F.Y. to S.Y. a decrease in operating cycle can be observed due to
decrease in debt collection period and increase in creditors payment period which
means that the company takes less time to convert its raw materials to finished good
and further to sales.
From S.Y. to T.Y. a great increase in operating cycle is observed due to increase in
debt collection period and decrease in creditors payment period which means that the
company takes longer time to convert its raw materials to finished good and further to
sales.
52
 CHAPTER NO.7
FINDINGS AND RECOMMENDATIONS

53
7.1. FINDINGS:

LIQUIDITY AND EFFICIENCY POSITION

Particulars 2016-2017 2017-2018 2018-2019

Liquidity Position
Ratios

1)Current Ratio 1.6840:1 2.1890:1 2.3450:1

2)Quick Ratio 1.9095:1 1.9892:1 2.5869:1

3)Absolute Liquid 0.6919:1 0.6902:1 0.9452:1

Ratio
Efficiency Position
Ratios (Times)
1)Inventory 18.7404 10.0151 7.5408
Turnover Ratio
2)Debtors 4.9057 8.0851 3.7701
Turnover Ratio
3)Creditors 5.9208 4.9185 9.2932
Turnover Ratio
4)Net working 4.3638 3.0185 2.0862
Capital turnover
Ratio

54
LIQUIDITY POSITION

2018-19, QUICK
RATIO, 2.5869
2018-19, CURRENT
RATIO, 2.345
2017-18, CURRENT
RATIO, 2.139 2017-18, QUICK
2016-17,RATIO,
QUICK1.9892
RATIO, 1.9095
2016-17, CURRENT
RATIO, 1.684

2018-19, ABSOLUTE
LIQUID RATIO, 0.9452
2016-17, ABSOLUTE
2017-18, ABSOLUTE
LIQUIDLIQUID
RATIO, RATIO,
0.6919 0.6902

CURRENT RATIO QUICK RATIO ABSOLUTE LIQUID RATIO

2016-17 1.684 1.9095 0.6919
2017-18 2.139 1.9892 0.6902
2018-19 2.345 2.5869 0.9452

INTERPRETATION:
The liquidity position of the firm is satisfactory as the firm has sufficient amount of
current assets and liquid assets against its current liabilities and liquid assets.
However quick ratio has increased to 2.5:1 in the year 2019 which shows the liquidity
position of the firm is slightly unsound
The graph shows a good liquidity position of the company but has excess amount of
liquid assets which indicates that the firm has its liquid assets lying idol.

55
EFFECIENCY POSITION:

2016-17, INVENTORY
TURNOVER RATIO,
13.7404

2017-18, INVENTORY
TURNOVER RATIO,
2018-19, CREDITORS
10.015
TURNOVER RATIO,
9.2932
2017-18, DEBTORS
2018-19, INVENTORYTURNOVER RATIO,
TURNOVER RATIO, 8.085
7.5408
2016-17, CREDITORS
TURNOVER RATIO,
2016-17, DEBTORS 5.9208 CREDITORS 2016-17, NET
2017-18,
TURNOVER RATIO, TURNOVER RATIO, WORKING CAPITAL
4.905
2018-19, DEBTORS 4.9185 TURNOVER RATIO,
2017-18, NET
4.3638
TURNOVER RATIO,
WORKING CAPITAL
3.7701
2018-19,
TURNOVER NET
RATIO,
WORKING
3.0135 CAPITAL
TURNOVER RATIO,
2.0862

INVENTORY TURNOVER DEBTORS TURNOVER CREDITORS TURNOVER NET WORKING CAPITAL

RATIO RATIO RATIO TURNOVER RATIO
2016-17 13.7404 4.905 5.9208 4.3638
2017-18 10.015 8.085 4.9185 3.0135
2018-19 7.5408 3.7701 9.2932 2.0862

INTERPRETATION:
Efficiency ratio indicates the working efficiency of the company. In Huphen
electromech Pvt. Ltd. the inventory turnover ratio is good. Company is utilizing stock
efficiently the debtor’s turnover ratio is in decreasing trend which is not good for the
company as it is not collected in cash from debtors on time
The creditors turnover ratio has an increasing trend which means that the company is
able to pay off its creditors.
Working capital turnover ratio is in decreasing trend which indicates that the company
is not investing in working capital properly so as to increase its sales.

56
7.2 RECOMMENDATION:

To avoid unnecessary block up of the fund ,company should maintain its inventory at certain
level to avoid this blockage there are two recommendations
1.Concept of Reorder Level
2.EOQ may be applied

1. Reorder point- The reorder point (ROP) is the level of inventory which
triggers an action to replenish that particular inventory stock. It is a
minimum amount of an item which a firm holds in stock, such that, when stock falls to this amount,
the item must be reordered.
Formula: The basic formula for the Reorder Point is to multiply the average daily usage rate for an
inventory item by the lead time in days to replenish it.

Reorder point = Avg. Daily usage x Lead time(days)

2. EOQ CONCEPT = In corporate finance, economic order quantity (EOQ) is the order quantity that
minimizes the total holding costs and ordering costs. It is one of the oldest classical production
scheduling models. The framework used to determine this order quantity is also known as Wilson
EOQ Model.

The company should increase the period of conversion of raw material to finished goods and further
to sales, the average period taken by them is 60 days but bringing to it to 40 day will be more
beneficial.

The company should increase it sales by properly investing in working

capital; it can be done by issuing common stock or preferred stock for cash or selling long-term assets
for cash.

57
CHAPTER NO.8
CONCLUSION

58
8.1. CONCLUSION RELATED TO PROJECT WORK:

Since this project was conducted to analyse the working capital of fluphen occtromech
Pvt Ltd. for the last three years 2016-2017, 2017-2018, 2018-2019. During this project
work and project report I came to the conclusions which are as follows:
•The company has good liquidity position but has excess amount of liquid assets which
should be utilised efficiently.
•The debtors turnover ratio should be improved, the company should increase the
recovery of cash from debtors
•The company has good creditworthiness in market as it pay off its creditors on time.
•The firm needs to improve its efficiency in business operations.

8.2. CONCLUSION RELATED TO LEARNING BENEFIT:

We thank our college faculty for giving us opportunity to visit the industry which has been a great
exposure for us as it has been a practical experience to look throughout the working capital of the
company, etc. we were inspired by them as they strictly follow certain principal due to which
they are well known as they maintain trust or their customer.

● The project was very beneficial for me. Because it gave a practical experience and idea of
working in an industry. My doubts and confusion were cleared through this project.
● This project helped in learning even the theoretical concept how it been practically
implemented in the industries.

59
CHAPTER NO-9
BIBLIOGRAPHY

60
BIBLIOGRAPHY

Financial Management – I.M. Pandey

Financial Management – M.R. Agarwal
www.huphen.com

61
CHAPTER NO-10
ANNEXURE

62
 HUPHEN ELECTROMECH PVT. LTD
BALANCE SHEET AS ON 31st MARCH ,2019

Particulars Note Figures as at Figures as at

No. the end of the end of
31.03.2019 31.03.2018
1 2 3 4

EQUITY AND LIABILITIES

1 Shareholder’s Funds

a. Share Capital 01 4500000.00 3453000.00

b. Reserves and surplus 02 95056977.74 86876524.41

2 Non-Current liabilities

a) Long –term borrowings 03 663813.00 900540.00

b) Deferred tax liabilities (Net) 04 1886528.00 2345523.00

3 Current liabilities

a) Short–term borrowings 05 12287817.03 6607076.03

b) Trade payables 06 13888816.02 18110779.65

c) Other current liabilities 07 17935860.12 19467356.47

d) Short Term Provisions 08 993217.00 1121798.00

TOTAL 147213028.88 138882597.56

63
 HUPHEN ELECTROMECH PVT. LTD
BALANCE SHEET AS ON 31st MARCH ,2018

Particulars Not Figures as at Figures as at

e the end of the end of
No. 31.03.2018 31.03.2017
1 2 3 4
EQUITY AND LIABILITIES
1 Shareholder’s Funds

c. Share Capital 01 3453000.00 2453000.00

d. Reserves and surplus 02 86876524.41 77413564.93

2 Non-Current liabilities

c) Long –term borrowings 03 900540.00 347376.00

d) Deferred tax liabilities (Net) 04 2345523.00 2811834.00

3 Current liabilities

e) Short–term borrowings 05 6607076.03 16217609.87

f) Trade payables 06 18110779.65 21820809.21

g) Other current liabilities 07 19467356.47 25853946.87

h) Short Term Provisions 08 1121798.00 1107587.00

TOTAL 138882597.56 148025727.88

64
 PARTICULARS Refer Figures for the Figures for the
Note year ended year ended
No. 31.03.2018 31.03.2017

1. Revenue from operations 16 155520264.00 194029168.00

2. Other Income 17 3522447.17 2827383.49

3. Total Revenue ( 1+2) 159

159042711.17 196856551.49

4. Expenses .49

Cost of materials consumed 18 97112183.70 130267761.69

Purchase Stock in trade,
Change in inventories of finished goods,
Work-in-progress and stock-in-trade 19 (-1841321.00) (-2365375.00)
Employee benefits expenses 20 11623704.00 10303164.00
Finance costs 21 2963355.60 5812604.17
Depreciation and amortization expense 22 5400991.13 5189830.83
Other expenses 23 33058851.26 34137359.23
148317764.69 183345344.92

5. Profit before exceptional and extraordinary 10724946.48 13511206.57

Items and tax (3-4)

6. Exceptional items 24 1305013.00 6023102.00

7. Profit before extraordinary items and tax (5-6) 12029959.48 19534308.57

8. Extraordinary Items 25 0.00 0.00

9. Profit before tax (7-8) 12029959.48 19534308.57

10. Tax expenses

(1)Current Tax 26 4067000.00 4335000.00
(2)Deferred Tax 27 0.00 0.00

11. Profit(loss) for period from continuing operations 7962959.48 15192640.57

(7-8)

65
12. Profit/(loss) from discontinuing operations 28 0.00 0.00

13. Tax expenses of discontinuing operations 29 0.00 0.00

14. Profit/(loss) from discontinuing operations 0.00 0.00

(after tax) (12-13)

15. Profit/(Loss) for the period (11+14) 7962959.48

23 15192640.57

16. Earning per equity share:

1)Basic 30 23.06 61.93
2)Diluted 31

66