CONTENTS

INDEX
CHAPTER – I
 INTRODUCTION
 NEED FOR THE STUDY
 SCOPE OF THE STUDY
 OBJECTIVES OF THE STUDY
 METHOLOGY OF THE STUDY
 LIMITATIONS OF THE STUDY

CHAPTER – II
 INDUSTRIAL PROFILE

CHAPTER – III
 COMPANY PROFILE

CHAPTER – IV

 REVIEW OF LITTERATEUR

CHAPTER – V
 DATA ANALYSIS & INTERPRETITION

CHAPTER – VI
 FINDINGS
 SUGGESTIONS
 CONCLUSION
 BIBLOGRAPHY

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 CHAPTER – I
 INTRODUCTION
 NEED FOR THE STUDY
 SCOPE OF THE STUDY
 OBJECTIVES OF THE STUDY
 METHOLOGY OF THE STUDY
 LIMITATIONS OF THE STUDY

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 INTRODUCTION

SIGNIFICANCE OF WORKING CAPITAL MANAGEMENT

A study of working capital is of major importance to internal and

external analysis because of its close relationship with the current day-to- day
operations of a business. As pointed out by Ralph Kennedy and steward Mc
Muller, the inadequacy or mismanagement is the leading cause of business
with are used in or related to current operations, and represented at any one
time by the operating cycle of such items as against receivables, inventories of
raw materials, stores, work in progress and finished goods merchandise, notes
or bills receivables and cash. The assets of this type are relatively temporary in
nature. In accounting “working capital is the difference between inflow and
outflow of funds other works, it is the net cash inflow” it is defining as the
access of current assets over current liabilities and provisions.

Investment in current assets level of current liabilities has to be released

quickly to changes in sales, to be sure, fixed assets investments, and long term
financing are also responsive to variation in sales. However, this relationship
is not as close and direct as if it is in the case of working capital components.

The importance of working capital management is reflected from the

fact that financial manager spends a great deal of tune in managing short term
financing, negotiating favorable credit terms, controlling the movement of cash
administration, accounts receivable and monitoring the investment in
inventories consume a great deal of time of financial manager.

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The Need for Working Capital

The firms aim at maximizing shareholders’ wealth. In order to minimize

the wealth of the firms should require each sufficient return from its operation.
Raising a study amount of profit require successful sales activity. The firms
have to invest enough funds in current assets for the success of the sales
activity, current assets are required because sales don’t convert into cash
directly. There is always an operating cycle involved in the conversion of
sales into cash. Thus, the need per working capital to run the day-to-day
business activities cannot be over emphasized.

Different type of working capital

Working capital management or that term financial management is

conversion with decisions relating to current assets and current liabilities. The
key of difference between long-term financial management and short-term
management is in terms of the timing of cash.

Working capital management is a significant of financial management

its important stems from 2 reasons.

Investment in current assets represents a substantial portion of total

investment.
Investment in current assets the level of current liabilities has to be
quickly to charge in sales. Fixed assets investment and long- terms financing
are also responsive to variation in sales.

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Gross Working Capital: - Sum of current assets in the firm is commonly
known as G.W.C. include cash, bank, trade debtors, bills receivables etc. it is
simply called as Working Capital refers to the firm’s investment in current
assets. Current assets are the assets, which can be converted in to cash which
in an accounting year and include cash short-term securities, bills receivables,
and stock.

Net Working Capital: - It refers to the difference between current assets and
current liabilities. Current liabilities are those claims of outsiders. Which are
expected to nature for payment with in an accounting year and include
creditors bills payable and outstanding expenses N.W.C. can be position.

Current assets more than

Positive Net W.C.=current liabilities

Negative Net W.C. = current assets less than current liabilities.

Permanent Working Capital: - Permanent working capital is the minimum

amount of current assets, which is needed to conduct a business even during

the dull season of the year. It is the amount of funds required to produce the

goods and services, which are necessary to satisfy demand at a particular

point.

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Characteristics

a) It is classified based on time factor.

b) It constantly from one assets to another and contain use to remain in

business process.
c) Its rise in increases with the growth of business operations
Temporary (or) Variable working Capital

It represents the additional assets, which are required at different time

during the operating year additional inventory etc.

Characteristic of Current Assets

There are 2 characteristics of Current Assets

Short use span

1. Current Assets have short life span cash balances may be held idle for a

week. Or.

2. Accounts receivables may span for 30 to 60 days and inventories may

be held for 30 to 100days.

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2. Shift transformation in to other asset forms

Each current asset is shift transformed into other asset forms. Cash is
used for acquiring raw material. Raw materials are; transferred into finished
goods. Generally, sold on credit are converted into receivables and finally A/C
receivable will realization in generating cash.

CURRENT ASSETS CYCLE

Finished

Account Work in
Wages Salaries
Factory OH

Cash Raw

Supplier
s

The working capital needs of are influenced by numerous factors. They

are as follows.

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1. Nature of Business

The W.C. requirements of firms are closely related to the nature of its
business. A business firm likes electricity or a transport corporation, which has
a short operating cycle, and which sells predominately on cash basis had
modest working capital requirements.

A manufacture concern like machine tools unit, which has a long

operating cycle and sells largely on credit has a very substantial working
capital requirements.

2. Seasonality of Operations

Firms, which have market seasonality in their operations usually, have

highly fluctuating have highly fluctuating we requirements for example: -
considered firm manufacturing ceiling fans. The sale of ceiling fans reaches a
peak business the summer months drops sharply during winter. The working
capital need of such a firm is increase in summer months and decrease in the
winter period.

3. Production Policy

A firm marked by pronounced reasonable fluctuations in its sales might

fuss a production policy, which may reduce the short variations in we
requirements.

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 Forge: - a manufactures of ceiling fans may maintain steady production
throughout the year rather than intensity the production activity during the
peak business season.

4. Market Conditions

The degree of competition prevailing in the market place has an

important bearing on working capital needs when competition is keep a largest
inventory of finished goods is required to promptly serve customers who may
not unlimited to wait because, other manufactures are ready to meet this needs.
Generous credit terms may have to be offered to attract customers in a highly
competitive market working capital needs tend to be high because of greatest
investment is finished goods inventory and accounts receivable.

5. Conditions f Supply

The inventory of raw materials spares and stores depends on the

conditions of supply is prompt and edible the firm can manage with small
inventory. If the supply is unpredictable and sent them the firm to ensure
continuity of production and would have to gives stocks as and when they are
available and carry largest, inventory on an average similar policy is applied to
raw materials also.

6. Changes in Technology

Technology development related to the production process has a sharp

impact on the end for working capital.

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7. Volume of Sales

This is the most important factor offering the size and components of
working capital. A firm maintained current assets because they are needed to
support the operational activities, which results in sales. As volume of sales
increases there is an increase in investments of working capital.

8. Liquidity and Profitability

If a firm desire to take a greater risk for bigger gains in losses it reduces
the size of its working capital in relations to its rarely. If it is interested in
importing its liquidity, it increases the level of its working capital.

9. Credit Control

Working capital turn over is improved with a better operational and

financial efficiency of firms with a greater working capital turnover it may be
able to reduce its working capital requirements.

10. Operational and financial efficiency

Working capital turnover is improved with a better operational and

financial efficiency of firms with a greater working capital turnover it may be

able to reduce its working capital requirements.

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Management of liquidity and profitability

Working capital

Investme Financing
nt

Liquidity Profitabilit Liquidit Profitabilit

y y y
Working Capital Management

Current assets investment policies

It is always true that different combinations of current assets can achieve

a given level of sales. The firm always enjoys combine a high, a low, or a
moderate level of current asset investment with a given level of fixed assets to
realize a given sales target. This is technically known as working capital
leverage.

The ratio of current assets to fixed assets (CA/ FA ratio) of (CA/ TA

ratio) indicates that the firm is pushing a conservative current asset investment
policy. This conservative approach lowers both risk and profitability. Other
things being equal the higher the level of current assets investment lower
would be the risk arising out of liquidity however it erodes profitability as
current assets are relatively less profitable than fixed assets.

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 Working capital investment policies of majority of firms may fall in
between these two extreme policies, such an intermediate approach is called
average or moderate policies, a policy which is moderate as to risk and return.

Current Assets Financing Policies

A firm must tap the right source in financing its current assets
requirements. A source is said to be spontaneous when its use automatic or
arises in the normal course of business activities as for example the trade
credit. Bill or notes payable etc.,

A source is said to be negotiable when its use depends on prior

deliberations between the borrower and the tender examples are various types
short-term and long-term sources as shown is fig –1

FINANCING MIX OF CAPITAL

Spontaneous Negotiated
sources

Short-term Long-term

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Financing Mix Of Capital

1. Bad / Cash Credit

2. Public deposits

3. Short term- Loans indebtedness

4. Bills Discounting

5. Commercial Papers

6. Factoring etc.,

1) Retained Earnings

2) Debentures

3) Other long -term

Since spontaneous sources are automatic, the real choice in determining

financing mix is with regard to the propositions of short term and long-term
funds. There are varying financing policies producing various propositions
between them. Such varying policies are

1) Matching Policy

2) Conservative Policy

3) Aggressive Policy

4) Highly Aggressive or Highly Conservative Policy

The matching policy is an optimum policy, which uses short-term funds

for short-term purposes and long-term sources for long-term purposes. Such a
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perfect matching between the lives of assets and the lies of sources of
financing is sell-high impossible is practice. As such firms practice and up
using conservative policy or an aggressive policy.
A firm is said to be using conservative policy when it relies levelly on
long-term sources to the extent that even a part or short terms or temporary
working capital needs are financed out of long-term funds.

The equations will be.

Long term Funds

Raises a part of = fixed assets, permanent working capital.

Short term funds = balancing portion of temporary working capital

Operating Cycle Period

Operating or working capital cycle is the length of time between a

companies paying for materials into stock and receiving the inflow of cash

form sales.

The determination of operating cycle is helpful for control purpose with

a view of improving previous working capital ratios secondly this analysis
emphasis the total time lag within the operation cycle by indicating the relative
significance of its constituent parts for reducing working capital tie-up by
action appropriate to cash relevant. Thirdly, it provides services of days
equivalents, which can be used in budgeting or forecasting sales and cost
budget into budgets of working capital value.

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 The duration of the operating cycle is equal to the sum of the duration of
each of these stages less the credit period allowed by the suppliers of the firm.

O = R+W+F=D-C

Where O = Duration of operating cycle

R = Raw material& stores storage period
W = Work-in- process period.

F = Finished goods storage period

D = Debt collection period

C = Creditors payment period

Estimation of Operating Cycle Period

R = Average stock of Raw Materials stored/Avg. Raw

Material & Stores Consumption per day

W = Avg. Work- in- process/ Avg.Costof Production per day.

F = Avg. Finished Goods Inventory stored/ Avg. Cost of

Goods Sold per day

D = Avg. Book debts/ Avg. credit sales per day

C =Avg. trade Creditors/ Avg. credit Purchases per day.

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 Need for the Study

Andhra Paper Limited; Unit: Kadiyam is the well growing organization

in the market especially in the paper product area. It computes with the similar
companies in marketability as well as technology.

Every firm has to undergo to its financial analysis such as common size
statements, financial statements, ratio analysis, trend analysis and working
capital statements to determine the financial position of that firm.

The present study was concentrated on working capital management at

Andhra Paper Limited; Unit: Kadiyam beverages and industries limited.
Because working capital is very important for every organization, either it is
big or small. It shows the liquidity position of the company, as it involves
only current assets and current liabilities are those which can be converted
into cash in days or weeks. So studying the current cash position, etc. is very
useful in planning future activities of the organization.

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 SCOPE OF THE STUDY

The Scope of my study is confined to one of the key areas finance i.e.,

inventory management, which plays a vital role in the working capital

management.

The study concentrates on the methods and techniques followed Andhra

Paper Limited; Unit: Kadiyam for its inventory management and its relative

merits and demerits.

This present study also concentrates on the importance of inventory

management for effective management of working capital management of the

company.

The date required for the study inventory management and its impact on

working capital is collected form the previous years published annual reports

of the company

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 OBJECTIVES OF THE STUDY

1. To know the working capital management of the firm through operating

cycle period.

2. To study sensitivity of components of operating cycle period.

3. To make relationship between different components in operating cycle

period.

4. To find out the current assets investment policy of the firm.

5. To the reasons to increase/decrease current assets in the firm.

6. To know networking capital of the firm.

7. To know the fluctuation operating cycle period influence of turnover of

the firm.

8. To study the working capital systems in general.

9. To study the working capital systems followed by APL

10.To find out the working capital management of APL through using

networking capital and operating cycle period.

11.To compare the working capital changes in the consecutive years.

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 Methodology

 Had discussions with concerned executives of Accounts Department

regarding the APL, its performance, and its system of working capital

management with regard to current assets and changes in working

capital gap.

 Made a relative study of the concepts in practice in APL.

 Basing upon the information provided by the annual reports from the

year last 5 years the changes are working capital has been worded out.

 Finally conclusions and suggestions have been drawn based upon the

calculations.

 To achieve the above objectives information was collected from both

primary and secondary sources. Data was collected from the annual

reports and records of APL discussions were held with the personnel of

the marketing and production departments of the company.

The material was gathers about the paper industry from various

magazines papers and books about the paper industry.

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Limitations

1. The data made available by the APL to the extent of annual reports,

which are used extensively throughout report.

2. Due to time constraint it has not been possible to have a study of other

fields in finance.

3. The executives to could not spend much time due to their routine

workload.

4. The time limit for project is only their 60 days for that does not cover

all related fields.

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 CHAPTER - II

INDUSTRY PROFILE

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 HISTORY OF INDIAN PAPER INDUSTRY

Unlike Iron & steel, textile and sugar industry the paper making industry

didn’t exist in ancient India for writing purpose ancient Indian’s used Bhoja

patras (bark of tree) and tal patras (bark of palm) were used some of the old

man scripts and many grand has preserve up to the present times were written

on these materials which are not prevalent now a day.

The modern art of paper making came to India quite late the foundations

of latest papers industry gained momentum from late 1870’s prior to the latest

technology, people used different techniques.

Ancient Egyptians (the couriers of paper making to India) used papyrus

sheets made from stem tissue of the plant papyrus. The oldest written sheets,

which are present, now a day, can be dated back to as many as five thousand

years. The Aryans used derived and processed palm leaves and thin bark

sheets of the Bhoja patras for writing.

First successful paper mill in India “the tata ghar” paper mills was

established in the year 1891 in Bengulor, East India from this year onwards,

the paper industry in India has gained much movements and speed through out

the country and increased in number.

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SIZE AND CAPACITY OF PAPER INDUSTRY

The economic size of a paper industry is determined by the availability

of raw materials and density of market’s availability of power and transport

facilities etc. The beginning of 1V plan there were only 19 paper and paper

board mills with a total annual capacity of about 1.39 lakh tons and production

was 1.34 lakh tons. At present there are 106 mills with total annual capacity of

1394 lakh tons and production is about 11.12 lakh tones although there has

been a several spreading of mills in large dimensions. There are some units

well organized and well equipped with a production capacity of more than

50,000 tons and units too small with a capacity of 1,000 tons.

In India the growth of paper industry after independence is satisfactory

under the guidance of 5 year plans.

Its growth is reflected by the fact that from a major 17 mills with annual

capacity of 1.37 lakh tones. In 1957, the industry has been enlarged to 319

mills with annual capacity of 32.31 lakh tones at the end of 7th 5-year plan.

And in 1994 the paper and paper board production was 380 units and

with the total installed capacity of 37.09 lakh tons, file the production

excluding news print is about 22 lakh tons. The lack of a large of large

investment in their industry by “the Indian paper corporation” in the public

sector to give importance to the growth of the industry to meet the requirement

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to the near future with effect from much 1987 paper industry preview of

“MODVAT” scheme during the last few years Govt. has made efforts to

reduce the importance of news point and forced the new paper and magazines

to use some of the cultural varieties of paper manufactured by Indian mills.

TYPES OF PAPER PRODUCT

Paper industry supplies various types of paper board, special paper to a

no. of uses which include Government education, companies packing, news

paper & magazines etc.

The Indian paper industry produces a number of varieties of papers &

paper boards. These include glassine paper, art paper, carbon papers,

insulation papers, draft papers, maplitho papers, quoted papers, quoted board,

duplex boards, triplex boards, straw boards, paper boards, lottery paper, Xerox

paper, decorative paper etc.

PRESENT STATUS

In 1974 Government of India introduced the paper control order to

regulate the prices and qualities of paper boards with the withdrawal of paper

control order. The industry has received some receipt and its hope to achieve

higher profitability by producing these blends of paper and paper board which

are supported by terrible demand.

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 A significant term around has been achieved by a large no. of units

during the past two or three years. However, the paper industry put a lot of

something conflicting signals during 1992.

The Government has taken the following step of encourage and enhance

production of paper and paper boards in the country they are

1. Paper units based on the use of minimum 75% of pulp derived from

baggage’s, agricultural, residues and other non contravention raw materials

have been exempted for industrial licensing subjected to 10 caution angles.

2. Manufacture of writing and printing paper and unquoted craft paper

containing not less than 75% by weight of pulp made for rice, wheat,

straws, jute, and baggage mix of more pulps of the above mentioned

materials exempted for excise duty.

3. Import of water paper has been freely allowed without the need import

license at low rate of customs duty (20%). In recent years the Government

in other certain concessions with a review to help the industries to improve

its capacity utilization and financial liability. These include liberalized

import of raw materials board sanding of different vacant of paper and

paperboards and de-licensing the manufacturing of certain varieties of

paper.

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4. FUTURE PROSPECTS

The challenges to be met by the paper industry include production of

stronger paper and paperboards. Cost reduction through modernization

encouragement of the use of non conventional materials for the production of

paper and paperboards and striking and equilibrium between demand and

supply. Both the Central and State Government along with the private sector

should strive the basic input for papers and paper boards and implement

research and development.

The above measures should be used in order to improve the technology

used and also measures must be taken to increase the productivity of the paper

industry in this country through safe methods.

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 Company Profile - III

~ 27 ~
 GENESIS OF ANDHRA PAPER LTD; UNIT: KADIYAM:

Andhra Paper Ltd; Unit: Kadiyam was established under The

Companies Act in December, 1974 at Madhavarayudupalem near Kadiyam in East
Godavari district, A.P. At the established time, the company had one m.f. as initial
unit, It was commenced its commercial production of Kraft varieties of paper
during March 1977. hi the year 1980 the company expansion its unit by importing
m.g. machine from Sweden country in July, 1982, then the m.f. machine produced
the collateral varieties like cream wove, azure wove, duplicating, azure laid etc., and
m.g. is used for production of craft varieties of paper. The Kraft and cultural
varieties of paper production by the CEL became as the main consumer's for Kraft
varieties within very short span of time. After that APL Limited introduced
different Kraft varieties like deface Kraft ribbed Kraft so on.

After a very long period gap, the APL started another unit, MF-II by
March, 1999. It is used for manufacturing of newsprint. Because newsprint has
more demand from those days. APL has satisfied the customer. Dealer needs and.
Wants with presenting suitable requirements size, recently in December, 2000, the
company became as subsidiary to Andhra Paper Limited; (APL) and later it was
emerged in Andhra Paper Ltd in the Year 2011. The company used agricultural
residues like rice straw, wheat straw, bagasse, gunny, jute, waste, imported pulp. As
major raw material and also they supplement imported wastepaper and wood pulp to
maintain the good quality.

The company has got provision its raw materials to protect from damages as
they are available seasonally and also it has the paper go down to store the finished
goods in the Forms of reels and sheets.

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 The company follows ISO & FSC management standards with the help of
laboratory at the plant. This laboratory tests all the characteristic problems of paper
by its experts. This company has more dealers all of southern states and its
surroundings satisfy their customer needs in that areas. The present capacity of
production of APL is 12 tones per day on machine MF-I, 50 tones per day on MG-
II, 160 tones per day, on machine, MF-III. Through the year, the company is
contributing its substantially struggling towards the self-sufficiency in paper
verities.

World Wide Paper Producing Areas

Paper industry is in all tropical and many sub-tropical countries. The

major producers of paper are India, China, USA, Canada, British and
Australia are other producers.

Operational performance

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 The performance of the mill was good among medium size agro paper mills,
although the mill was established with indigenous plant and machinery with
entrepreneur's own know-how. The operational performance of whole plant and
machines were good. In operational performance, this mill obtained cent percent of
capacity utilization at its first operation year. By expanding its units, the mill started
another unit, name MF-III for Newsprint. Through that period of time, the mill
started getting profits.

APL Produces the following qualities of paper, at KADIYAM &

Rajahmundry. Printing & Writing Paper:

 MF White Pulp Board 110-180 gsm

 MF Azure Wove 52-60gsm

 MF Azure Laid 70-90 gsm.

 MF Duplicating >60 gsm.

 MF Colour Printing 45-56 gsm.

 DLX Cream Wove 50-60 gsm.

 Eco Cycle Office Paper 75 gsm.

 MF Cream Wove 50-60 gsm.

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News Print

 DLX News Print (R) 45-48 gsm.

 DLX News Print (S) 45-48 gsm.

Industrial Packing Grades '

 MG Plain Kraft 16BF to 24BF 90-180 gsm.

 MG Core Liner 15BF 280-300 gsm.

Objective

Mission

Our mission is to be a powerful force in the world economy in paper

technology through productivity and excellence, a shared vision for which shared
responsibility lies with all stakeholders.

Values

Employment Empowerment for commitment to total quality: team efforts

and increased productivity: Ethical Management for esteem,; credibility life
and public Image.

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Guiding Principles

Integrity of management, union, staff, workers and all people associated

with us. Eco friendly process, Innovative value Engineering, Technology for
better Quality and cost effectiveness, customer satisfaction for untrained growth
and business. Consistently increased profitability for prosperity and growth of
the individual and industry. Corporate citizenship for meeting societal
objectives.

Towards a cleaner environment

The APL LTD; is far away from habitat areas. The company has the belief that
the cost pollution control is an inherent part of the manufacturing cost. The
company, if financed by the ICICI, SCICI, IDBI so on.

The environment of APL its free from pollution control and abatement
company spend substantial runs of money by providing full-fledged effluence
treatment facilitate incorporating separation of colored effluent for land treatment
to avoid color problems.

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SAILENT FEATURES OF APL:

The operational performance of APL LTD; is rich.

The capacity utilized by this company is cent percent.

Sustained dividend payment.

Rich in Kraft strength and quality writing and printing papers and quality of
news print.

Locally availability of raw materials, straw, bagasses etc.,

The company is free from pollution control.

Lowest capital investment. Minimum use of capital per unit out put and per work
place.

Rich debt services record and advanced repayment of term loans.

PRESENT CAPACITY OF APL:

The present capacity of APL is 3, 50,000 tones per annum achieved by

management with the successful affords of workmen, junior staff, senior staff,
they are followed new technology methods for production. There are three paper
machines are working.

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The capacity levels of three machines are as follows:
PARTICULAS Machine–I Machine-II Machine–III
(Machine (Machine (Machine finished-
finished - I) Glazed) III)
Capacity 10TPD 50 TPD 100-160 TPD

Deckle 135 Cms. 240 Cms. 365 Cms

Name Open head box Open head Pressurized head box Beloit-
inclined slice box inclined 148 vertical slice.
slice
Wire part Four drinier Four drinier Four drinier

Speed (Max) 100-200M/Min 100-220 M/Min 600 M / Min

Running 150-170 M/Min 100-.180M/Min 550-580 M/Min

Speed

Dryers 2&No,s (Four 23 No’s and 1 40 No.s (Six Group)

Groups) M.G cylinder;

Transfer to Open draw Open draw Open draw

press selection

ion

Size Pres Nil Nil 1

Calendars Provision for six Not required Provision for six roll, 3 NIP
roll and 3 NIP or 1 NIP Calendar
Calendar
Raw material Agro based Rice Agro based Rice Recycled paper, waste
Straw, Gunny, Straw,bagassa, paper, magazine trimmings,
Jute and pulp gunny Waste, coated book stock, news &
imported waste, palm sold newsprint
Kraft cutting indigenous imported.

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 Pulping Chemical pulping Chemical De-inking
of Agricultural pulping of
residues Agricultural
residues.
Rewinders Centre shaft - Twin drum winder Jagen gurg
winders Rewinder (SWD)

Capacity 6-10TPD 40-35 TPD 80-120 TPD Out put

depends on GSM, roll
condition and sizes, Move
the G.S.M better the out put.
The machine has 5 stand -5
rolls - back, 2 rolls front by
adjusting.
Cutters Duplex Cutter Duplex Gutter jagenborg
Houbold Chemniz Two Stations for Chopping
Cap: 10 - 15 TPD 50 size can be controlled
Deckle length-135 Capacity: 50 TPD (8 -11
Cms. rolls) Output depends on
Grammage and Cutter load
(deckle length -365 Cms.)
SIMPLEX MASENSCOT
Located at PMC - III
Finishing house at present
being used for cutting both
PMC - HI And M.G. Kraft
(capacity on the Deckle
utilization.

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 ANDHRA PAPER LIMITED; UNIT: KADIYAM

(PERSONAL ACTIVITIES)

MISSON:

The company mission is to be an excellent major paper mills in the Indian

economy in paper production through productivity, customers / dealers
satisfaction.

VALUES:

Employee employments for commitment to total quality team affords and

increase productivity and profits, ethical management, practices for esteem
and creditability.

GUIDING PRINCIPLE:

Integrity of management, union, staff, workers and other associated

with us. Eco friendly process, innovative value engineering, human
engineering, technology for better quality, cost effectiveness and money is
saving.

PRODUCTION PROCESS

The production process does on three machines at IPIP APL. For

production; the raw materials are not used directly. First, the raw materials to be
processed then resulted material are used as pulp. The process of raw material is
as follows:

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I. PULPING:

1.Pulping of Straw:

Here, the, straw of paddy is cut into the required size through chopper
and it is cooked in cylindrical tumbling digesters using eight percent caustic
soda. After the completion of cooking, the made pulp is blown into a blow
tank form there it is pumped to brown stock washer. The pulp is washed
making it free, it free form black liquor by displacement of washing under
vacuum. The washed pulp is present to screening and dickered to high density
stock chart. Thus, made pulp is bleached by single stage hypo bleaching
system for getting the required brightness. After that the pulp is washed over a
vacuum filter then, is stored in high-density tower.

2.Waste Paper Pulping:

Waste paper pulping is also an important pulping of IP APL. Here, the

waste paper like magazine trimmings, journals, etc, is cutted by the cutter into
small pieces. It is charged to a hydro pulper. The pulp is sent through defalker
and high density cleaner. Finally, it is stored in stored in storage chests. Chests
are used for store pulp.

DE-INKING PROCESS:

De-inking process is an important process for MF-III machine. In this

process, the company used local news papers and imported news papers,
magazine trimmings, quoted book stock. All these papers are separated a forms
the pins, clips and other unwanted materials, which placed in the magazines

~ 37 ~
through different stages of de-inking process. Finally the ink is removed from
magazine and other paper writing by using machines.

The several stages of de-inking process are controlled by the computer.

The stages are described below.

Pulping :
<

a) Chain conveyer
b) Bale breaker
c) Belt conveyer
d) Fiber flow drum

Pre-Screening:

a) Chest lend indicators

b) Fiber sorter
c) Reject sorter

Floatation:

 Sand traps
 Eco Primary cell(mixed cell)
 Eco secondary cell

Cleaning:

a) Primary centri diameter

b) Secondary centri diameter
c) Trummer screen

~ 38 ~
 Thickening:

 Thickness feed box

Hot dispersion-Oxidative bleaching:

Floatation-II:

I) 11numbers float notation cell

II) 2 numbers secondary cell
Bleaching :

a) Bleaching tube
b) Tower storage
Sludge handling system

a) Sludge conveyers-sludge tank

10. Utility:

a) Micro filter

STOCK PREPATION:

It is central department between paper machine and pulp. The stock

preparation units are separated to MF-I & MG-II and MF-III. After pulp made
from the above specified any method. It is blended into requisite proportions and
this blended into requisite proportions and this blended from is processed by the
refiners and finally, chemicals and dyes are mixed with the pulp to pass for
production unit.

~ 39 ~
 The various dyes followed by the stock preparation department are
Metallic - violet, plum, Starches, Tonopah, Victoria blue, M-blue, Rhoda mine,
auromine, etc.

The various chemicals blended at the stock preparation are as follows:

 Sodium hydroxide (Caustic soda)

 Ferric alum
 Non ferric alum
 Hydro choric acid
 Sulphuric acid
 Ivax
 Sodium silicate
 Sodium hydro sulphite
 Hydorogen peroxide paste and etc..

III. MACHINE PROCESS:

The mixed stock pulp is passing on through machines by

diluting it. With it one percent consistency and reaches through head
box. The fibers are woven in to a sheet of paper on a four-drainer
section. Then it is passed on to the press section -II. The drainers are
used to evaporate the moisture on the pulp. Each drainer must reduce
the moisture than previous one. After press section, it goes to
calendar. Finally, it reaches the paper feel where the paper is rolled.

~ 40 ~
 The rolled paper is cutted into sheets or reels by rewinders /
cutters in required size by the dealer. The reels / sheets are packed at
finishing house and sent to paper go down to dispatch for dealers.

PACKING

Packing of pager means to protect paper from, damages in the

transportation. So, packing of paper is one important activity for the
company.

The APL LTD; has two types of packaging in paper.

l.Reels
2. Sheet
l. Reels:

Reels are in the form of roll paper. It is packing at finishing

house depending upon the order specified by the dealers/customers.
Before packing or reels, the rolls are converting into the reels required
by the dealers with the help of rewinders and also they remove the
damage papers, if it occurred in the machine process. After packing of
reel, they notes the lot number, lot size, net weight, etc., on the packing
cover of reels.

2. Sheets:

Sheets are in the form of reels. At finishing house, the rolls are
cutted into the sheets by the paper cutters. One ream consists on 500
sheets. If the ream is Kraft paper, then 480 sheets of paper are
considered as one ream to maintain standard weighty. All these sheets
~ 41 ~
are packing into bundles regarding standards weights. After bundle the
reams, it will be tagged into the bails by putting size, serial no, Kraft
variety number, etc., on it. Finally all these bails come to the paper go
down.

Paper Godown

After the completion of packing of paper, it comes to paper

godown. The paper godown is a house where the company stores the
packaging, paper up to deliver time.

At paper godown , the paper packaging details noted on the

cover will be feeded by the computer for verification purpose. Then
they match the details of packaging with the orders specified by
dealers. If it is matched with the dealers order, then they end the
packaging paper by the vehicle to reach dealer at specified time.

Product Mix The product mix of IP APL LTD;is as follows:

Machine name Product

MF-I Cream wove

Azure wove

Azure laid

Duplicating paper

MG-II Kraft paper

Deluxe Krift paper

~ 42 ~
 Super deluxe paper

Ribbed Krift

Map-litho

MF-III News print

Paper boards

PILOTS OF INTERNATIONAL PAPER IP APL LTD. UNIT:

KADIYAM:

BOARD OF DIRECTORS
Mr. SK Bangur, Chairman & MD

Mr. Saurabh Bangur - CEO

Mr. Anish Mathew – Director - Commercial

Mr. M.S. Ramachandran

Mrs. Ranjana Kumar

Mr. M.K. Sharma

Mr. Adhiraj Sarin

Mr. Milind Sarwate

Mr. Praveen P Kadle

COMPANY SECRETARY
C.PRABAKAR

~ 43 ~
AUDITORS: KPMG.,

Chartered accountants,

Hyderabad.

AWARDS TAKEN BY COMPANY

 Certificate of merit for capacity for 1989-1990 from Indian Paper
Maker’s Association (IPMA), in report of Large Paper Mills.
 Second prize for Water consumption for the year 1995
 Special Export Award (CAPEXEL) for 1994-1995.
 “INDEPENDENCE DAY AWARD” by State and District
Administration for Social Forestry.

~ 44 ~
 FLOW DIAGRAM OF PAPER MAKING PEOCESS

WHITE LIQUOR

RAW

MATERIAL

SCREEING AND WASHING

DIGESTER HOUSE

De-inking plant

UNBLD

PULP

HYPO

EVAPORATIONS

BLEACHING

STEAM TO

STOCK PREPERATION

RECOVERY BOILERS

POWER BLOCK

PAPER M/C

CAUSTICIZING

LIME KILN
LIME

CONVERTIN AND FINISHING

~ 45 ~
 RAW
MATERIA
SCREEING
De-inking DIGESTER HOUSE
AND WASHING
plant
U
N
HYP
B
BLEACHIN
L
G
D STOCK STEAM
P PREPERATION RECOVERY
U TO
BOILERS POWER BLOCK
L
PAPER CAUSTICIZI
M/C NG
CONVERTI VP
N AND S&E
LIM
LIME KILN
FINISHING

GM GM GM
EAST KKT AP & TN

AM DM
AM/DM AM/DM Accou AM/DM AM/DM TN
Sales Sales nts Cochin AP Sales Sales

AM/DM W/H W/H Sr.Office

After sales AM Inchar Incharg r W/H
(E) Accounts ge - 1 e-1 SAP Op. Incharge
SAP SAP
(Op.) (Op.)
W/H AM
Incharge - Sr.Officer AM/DM Account
1 SAP Op. After s
sales (S)
W/H
Incharge - Officer
2

~ 46 ~
 VP
S&
E

GM GM
North West

AM/DM AM/DM AM/DM AM/DM

Sales Sales Sales Sales

AM/DM Manager
AM/DM After
After AM sales Account
sales (E) Accounts (E) s

W/H Sr.
AM/DM
Incharge - Sr.Officer Officer
After
1 SAP Op. SAP Op.
sales

Peon Driver
Peon Driver

~ 47 ~
COMPANY AT A GLANCE:

Name of the firm : International Paper IP APL Ltd. Unit: Kadiyam

Year of Incorporation : 1975

Nature of the company : Public Limited Company.

Machinery

Aaditi (MF) : 15 (TPD)

Avanthi (MG) : 55 (TPD)

Ananya (MF : 160 (TPD)

Status : joint sector

Raw material

(Continuous/Seasonal) : Continuous supply

 Waste Paper
 Rice straw
 Wet Pulp
Name of the finished Product:

Paper

Recruitment Policy of the Firm :Board of Directors and managing

Committee through formal Interview.

~ 48 ~
Number of Employees:

Regular : Below 1450

Seasonal : 1450

Initial Investment : Rs. 189.55 lacks

Source of founds : Share capital, resources and

Surplus Shareholder funds,

borrowings.

Accounting Procedures : General Process Journal accounts,

Trading and Profit& loss account

Balance Sheet.

Financial Assistance : State finance Corporation Industrial

Development Corporation

Principal Bankers : State Bank of India, Canara Bank

Major Deposits of A.P.L.: Delhi, Mumbai, Kolkata and Secunderabad.

Registered office and mills: Rajahmundry,

East Godavari District,

Andhra Pradesh.

Corporate Office: Krishi Saffaire

Hyderabad.

~ 49 ~
 MISSION, VALUES AND GUIDING PRINCIPLES OF
ANDHRA PAPER LTD LTD;

UNIT: KADIYAM

MISSION

“Our mission is to be powerful force in the world economy in

technology through productivity and excellence, a shared vision for which
shared responsibility lies with all stake holders”.

VALUES :

Employee empowerment for commitment to total quality team efforts

and increased productivity, ethical management practices for esteem
credibility and public image.

GUIDING PRINCIPLES

 Integrity of Management, union, staff, workers and all people

associated with us.
 Eco-friendly Process. Innovative Value Engineering.
 Human Engineering.
 Technology for better quality and cost effectiveness.
 Customer satisfaction for untainted growth.

~ 50 ~
  Consistently increased profitability for the prosperity and growth of the
individual and the industry corporate citizenship for meeting social
objective.

ENVIRONMENT POLICY :

Andhra Paper Limited; Unit: Kadiyam, shall continue to pursue the

policy of modifying and upgrading the existing technologies and processes.
Implementing eco-friendly measures for minimizing waste generation,
resource conservation and prevention of pollution of contribute to wars
environmental improvement.

PAPER SALES AND PRICE OF APL, KADIYAM:

Andhra Paper Limited; Unit: Kadiyam has been producing different

high quality writing and printing grades of papers and industrial grades of
paper like coating base, Kraft paper, white and color posters and boards. Paper
production, sales, turnover and are presented in table.

In 2014-15 and 2015-16 production is less to the paper sales and sales
are fluctuated during this period.

Turnover is decreased in 2014-15 and 2011-12 with that of its

respective previous years. In 2014-15 recorded as highest turnover during the
period 2012-2013.

The price paper increased gradually during the period 2009-2013 was
as in 20012 it is decreased.

~ 51 ~
Major Players Capacity in TPA Product mix

International Paper IP APL Ltd;52,500 News Print, Cream wove,

Unit: Kadiyam Maplitho, Kraft,

Ballarpur Industries 198,368 Maplitho, cream wove,

bond, others

Hindustan Paper Corp 200,000 Cream wove

ITC Bhadrachalam 3,00,000 Duplex board,

Maplitho,

Kraft

JK Corp 75,500 Maplitho, bond, board,

security paper

COUNTRIES OF EXPORT

AUSTRALIA

BENIN

BANGLADESH

IRON

KENYA

MALDIVES

MYANMAR

~ 52 ~
MALTA

OMAN

SRILANKA

SEYCHELLES

SINGAPORE

SUDAN

TANZANIA

MALESHIA

NIGERIA

NEW ZEALD

UAE

EGYPT

GHANA

SPAIN

LAGOSSUDAN

EUTHOPIA

UK

WEST GERMANY

AND YEMEN

~ 53 ~
 ORGANISATION CHART OF IPAPL; UNIT: Kadiyam

CHAIR MAN

DIRECTORS

EXECUTIVE DIRECTORS

EXRCUTIVES
EXICUTIVES
(Corporate

VICE VICE VICE VICE

PRESIDENT
PRESIDENT PRESIDENT PRESIDENT
(FINANCE)
(COMMERCIAL ) (Personnel& (works)
Administration)

GENERA
MANAGER
(WORKS)

Dy.
GENRAL Dy. GENRAL
MANAGER
MANAGER (Product development
(Production) & Consumer Services)

Dy. GENERAL
MANAGER
(Technical)
~ 54 ~
 QUALITY POLICY

To be a powerful force in the pulp and paper industry

Through:

 High level of productivity and excellence;

 Continual improvement in the quality of Human resources, Products,

services and technology.

 Customer satisfaction;

 Concern for occupational health and safety. And

 Commitment to environment management.

SK Bangur – Chairman

~ 55 ~
 ENVIRONMENTAL POLICY

Andhra Paper LtdLimited remained to:

1. Adopting environment friendly and non-polluting processes

based on techno-economic liability.
2. Complying with applicable legal and other requirements to
which the company subscribes, related to environmental
aspects.
3. Conserving chemicals, coals, limestone, power, steam and
water.
4. Improving the competence of employees for effective
implementation of environmental management system.
5. Promoting and propagating social and form forestry, and
6. Reviewing environmental performance periodically for
achieving continual improvement.

SK Bangur – Chairman

~ 56 ~
 OCCUPATIONAL HEALTH & SAFETY POLICY

The Management remains committed to provide and maintain

safe and healthy working conditions to prevent injury and ill
health to its employees by continually improving the work
environment with the active cooperation and participation of the
employees at all levels and by complying with applicable legal
and other requirements that relate to Occupational Health and
Safety performance.

SK Bangur – Chairman

~ 57 ~
 CHAPTER-IV

Theoretical Framework of working Capital

~ 58 ~
 WORKING CAPITAL
MANAGEMENT THEORETICAL CONCEPTS

Meaning of working capital:

Capital required for the business is divided into two aspects

 Fixed capital
 Working capital

Fixed capital:

It is the amount of money required to maintain the fixed assets of

the concern.

Working capital:

The amount of money to meet the day-to-day transactions of the

business is termed as working capital.

Concepts of Working Capital:

The concepts of working capital are:

 Gross Working Capital
 Net Working Capital

Gross Working Capital

It refers to the firm’s investment in the current assets. Current assets

are the assets, which can be easily converted into cash within one
accounting year. The gross working capital focuses attention on two
aspects of current assets management.

~ 59 ~
 1. The way to optimize the investment in current assets.
2. The opportunity to finance the current assets.

Net Working Capital:

It is the excess of current assets over the current liabilities. Current

liabilities are those claims of outsiders, which are expressed to mature for
payment within one accounting year. Net working capital can be positive or
negative. A positive Net Working Capital indicates the excess of current
assets over the current liabilities. A negative Net Working Capital is a
qualitative concept and indicates the liquidity position of the firm. It suggests
the extent to which the working capital may be financed by permanent sources
of funds.

Approaches of Working Capital:

Depending on the mix of short and long-term financing, the approach

followed by any company fall under these three categories-

 Matching Approach
 Conservation Approach
 Aggressive Approach

Matching Approach:

It refers to the adoption of a financial plan, which matches the expected

life of the assets with the expected life of the source of funds raised to finance
assets. In this approach the long-term financing is used to finance the fixed

~ 60 ~
assets and permanent current assets. The short-term financing will be used if
the firm has the need of only fixed current assets.

Conservative Approach:

In this approach the financing of permanent assets and a part of

temporary current assets the idle amount of long-term financing can be
invested in the tradable securities and conserve liquidity.

Aggressive Approach:

In this approach the short-term financing is used more to finance a part

of its permanent current asserts. Sometimes in a more aggressive way the
short-term financing is used for financing the fixed assets.

SOURCES OF WORKING CAPITAL:

The sources of finance for working capital are of two types. They are
permanent and temporary sources of working capital. The working capital
investments in minimum level of current assets are permanent working
capital. The working capital required to meet the seasonal contingencies is
called temporary (or) variable working capital.

The fixed proportion of working capital should be generally financed

from the fixed capital sources while the temporary (or) variable working
capital requirements of a concern from the short-term sources of finance.

~ 61 ~
Permanent Sources of Working Capital:

The permanent working capital source of finance is done for having an

uninterrupted finance of a long period. There are five important sources of
permanent working capital they are:

1. Shares
2. Debentures
3. Public Deposits.
4. Ploughing back of profits
5. Loans from financial institution.

1. Shares:

Generally a company should raise the maximum amount of working

capital by the issue of shares. The preferences carry a preferential right in
respect of the divided at a fixed rate. Equity shares do not have such
obligation. A company should not issue different shares according to the
companies act.

2. Debentures:

Debentures are an instrument issued by the company acknowledging

its debt to the holder. A fixed rate of interests is paid on the debentures
secured or paid in prior to the unsecured debenture holders. The company
enjoys tax benefits.

3. Public Deposits:

~ 62 ~
 They are the fixed deposits accepted by the business directly from the
public. It has both advantages and dangers. The R.B.I has also down certain
limits on the non-banking concerns.

4. Ploughing Back of Profits:

It is an internal source of finance and reinvestment of the surplus

earnings of the business. It is the cheapest and cost-free sources of finance.
Excessive resort to ploughing back of profits leads to over capitalization and
speculation.

Loans and financial institutions:

Financial institutions like commercial banks, IFCI, LIC provide

short-term, medium-term, long-term source of finance suitable to meet the
demand of working capital. A fixed rate of interest is charged against such
loans and is paid by way of installments.

Temporary Sources of working Capital:

The temporary sources of working capital are:

1. Indigenous Bankers.
2. Trade Credits.
3. Installment Credits
4. Advances
5. Accounts Receivable Credits.
6. Accrued Expenses
7. Deferred Expenses
8. Commercial Paper

~ 63 ~
9. commercial Banks

~ 64 ~
 1. Indigenous Bankers:

These are the private moneylenders who charge high rate of interest for
the loan given by them. These Bankers are more prior to the establishment of
the commercial banks. Now we can fine a few.

2. Trade Credit:

It is the credit extended by the suppliers of goods in the normal course

of business. The credit worthiness of a firm and the confidence or its suppliers
is the main basis of securing trade credit. There are some advantages such as
convenient method of finance, flexibility as the credit increases

3. Installment Credit:

In this method the assets are purchased and the possession of goods
is taken immediately but the payment is made in installments over a
predetermined period of time.

4. Advances:

Firms having ling production cycle take advances from their customers
and agents against their orders. This acts as a cheap source of finance and
minimizes their investment in working capital.

5. Account Receives able Credit:

It is the services offered to manage the financing of debts arising out of

the credit sales. This service is now available in India only on recourse basis;
it has certain limitations such as the cost of factoring is high perception of
financial weakness about the firm availing these services.
~ 65 ~
 6. Accrued Expenses:

These are the expenses, which have incurred but not yet pain. It varies
wi th the change I the level of the activity of the firm, the frequency and
magnitude of accruals is beyond the control of the management.

7. Deferred Incomes:

These are the funds of incomes received by the firm for which it has to
supply goods in future. These funds increase the liquidity of a firm and
constitute an important source of short-term finance.

8. Commercial paper:

It is unsecured promissory notes issued by the firm to raise short-

term funds. The maturity period of a commercial paper ranges from 91 to 180
days. The draw back is that can be redeemed only after the maturity date.
9. Commercial Banks:

The commercial Banks are the most important short-term source

of finance that provides the major part of working capital loans. The
different forms in which the bank’s normally provide loans and advances
are- loans, cash credits overdrafts, purchasing and discounting bills.

The working capital management or short-term financial management

is concerned with decisions relating to current assets and current liabilities.
The key difference between long-term financial management and short-term
financial management is in terms of timing of cash. Long term financial

~ 66 ~
decisions (like buying capital equipment or issuing debentures) involve cash
flow an extended period of time (5 t0 15 or more) short-term financial
decisions typically involve cash flows within a year or within the operation
cycle of the firm. The working capital management is a significant facet of the
financial management. It is Important stems from two reasons. Investment in
current assets and the level of current liabilities have to gear quickly to
changes in sales.

The important of working capital management is reflected in the fact

that financial managers spend a great deal of time in managing current assets
and current liabilities. Arranging short-term financing, negotiating favorable
credit terms, controlling movement of cash, administrating accounts
receivable, and monitoring the investment in inventories consume a great deal
of time financial managers. The management of working capital depends upon
certain basic principles.

Principles of working Capital Management:

In examining the management of current assets (i.e. working capital

management) certain principles have to be borne in the mind. These principles
are the answers that are to be sought to the following questions.

 The need of invests funds in the current assets.

 Amount of funds to be invested in each type of current assets.
 The required proportions of the long-term and short-term funds to
finance current assets.
 The appropriate sources of funds needed to finance the current
assets.
~ 67 ~
  Constituent of Current Assets and Current Liabilities.

CURRENT ASSETS CURRENT LIABILITIES

Inventories Sundry Creditors
Raw material and components Trade advances
Work in progress Borrowings
Finished Goods Commercial Banks

Others Others
Trade debtor’s Provisions
Loans and Advances
Investments
Cash and Bank Balances

Short life Span and swift transaction:

In management of working capital two characteristics of current assets

must be borne in mind.

 Short life span

 Shift transformation into other assets form.

Current assets have a short life span. Cash balances are held idle for a
week or two, accounts receivable may have a life span of 30 to 60 days, and
inventories may be held for 30 to 100 days. The life span of current assets
depends upon the time required in the activities of procurement, production
sales and collection and the degree of synchronization among them.

The nature of current assets is that they are swiftly transformed into
other assets form. Cash is used for acquiring raw material. Raw materials are
transformed into finished goods, finished are generally sold on credit are
converted into accounts receivable finally accounts receivable, on realization,
generate cash.
~ 68 ~
 The swift transaction of current assets and the short life span of the
components of working capital can be seen in the current assets cycle.
However, this short life span and swift transformation has certain
implications.

 Decisions relating to working capital management are repetitive and

frequent.
 The difference between profits and present value is insignificant.
 The close interaction among working capital components implies
that efficient management of one component cannot be undertaken
without simultaneous consideration of other components.

CURRENT ASSETS CYCLE

Finished

Working progress
Account
Receivable
RAW

Wages, Salaries
Factory

Cash Suppliers

~ 69 ~
OPERATION CYCLE AND CASH CYCLE

Investment in working capital is influenced by four key events

in the production and sales cycle of the company.

Purchase of raw material

Payment of raw material

Sale of finished goods

Collection of cash for sales

These keys events affect the cash flows. The firm begins with the
purchase of raw material which is pain for after a delay, which is paid for
after delay and which represents the accounts payable period. Customers
pay their bills sometime after the sales the period that elapses between the
date of sales and the date of collection of receivables is the accounts
payable period (debit period).

OPERATION CYCLE:

The time that elapses between the purchase of raw material and

the collection of cash for sales is referred as operating cycle. The operating

cycle is the sum of the inventory period and the accounts receivable period.

The behavior of the overall operating cycle and its individual

components of a firm are monitored through time series analysis and cross

section analysis. In time series analysis the duration of the operating cycle

and its individual components is compared over a period of time for the

~ 70 ~
same firm. In the cross section analysis the duration so the operation cycle

and its individual components is compared with that of firms of a

comparable nature.

Operating cycle

Operating Cycle

Cash

Work in progress

Debtors

Finished Goods

Sales

~ 71 ~
 CASH MANAGEMENT

Cash, the most liquid asset, is of vital importance to the daily

operations of the company. Cash management is concerned with the
managing of

1. Cash flows into and out of the firm.

2. Cash flows within the firm.
3. Cash balance held by the firm at a point of time by financing deficit of
inventing surplus cash.

COLLECTIONS

INFORMATION
BRROW OR
AND CONTROL
INVEST

PAYMENTS

~ 72 ~
CASH MANAGEMENT CYCLE

Sales generate cash, which has to be disturbed out. The surplus cash
has to be invested while deficit has to be followed. Cash management
seems to accomplish this cycle at a minimum cost. At the time, it also
seeks to achieve liquidity and control. The management of cash is
important because it is difficult to predict cash flows accurately,
particularly the inflows and that there is no perfect coincidence between
the inflows and outflows of the cash.

In order to resolve the uncertainness about the cash flows, the firm
should develop appropriate for cash management. The firm should evolve
strategies regarding the following four facts of cash management.

 Cash planning; cash inflows and outflows should be planned to

project cash surplus or deficit for each period of the planned period.
 Managing the cash flows: the flows of the cash should be properly
managed.
 Optimum cash level: the firm should decide about the appropriate
level of cash balance.
 Investing surplus cash: the surplus cash balance should be properly
invested to earn profits.
 Cash will be maintained as per budged amount.

~ 73 ~
MOTIVES FOR HOLDING CASH:

There are three possible motives for holding cash:

 Transitive.

 Precautionary

 Speculative.

Transitive Motive:

Firm needs cash to meet their transaction needs. The collection of

cash is not perfectly synchronized with the disbursement of cash. Hence,
some cash balance is required as buffer.

Precautionary Motive:

There may be some uncertainty about the magnitude and timing of

cash inflows from sales of goods and services, sales of goods and services,
sales of assets, and issuance of securities. To project it against such
uncertainties, a firm may require some cash balance.

Speculation Motive:

Firms would like to tap profit-making opportunities arising from

fluctuations in commodity prices, security prices, interest rates, and foreign
exchange rates. A cash rich firm is better prepared to exploit such bargains.
Hence, the financial manager should establish reliable forecasting and

~ 74 ~
reporting system improve cash collections and disbursements and achieve
optimal conservations and utilization of funds.

CASH BUDGETING:

Cash budgeting or short-term cash forecasting is the principle tool of

cash management. Cash budgets, routinely prepared by business firms are
helpful in:

 Estimating cash requirements

 Planning short-term financing.
 Scheduling payments in connection with capital expenditure
projects.
 Planning purchases of materials.
 Developing credit policies.

Long term cash forecasting:

Long-term forecasting are generally prepared for a period ranging

from two to five years and serve to provide a broad brush picture of a firms
financing needs and availability of invest bile surplus in the future, the
receipt and disbursements method is used for preparing the long-term cash
forecast.

Monitoring collections and receivables:

The efficiency of cash management can be enhanced by properly

monitoring the collection and disbursements.’

The followings are useful:

Prompt billing:

~ 75 ~
 By preparing and sending the bills promptly, a firm can ensure
remittance. It should be realized that it is in the area of billing that the
company’s controls are high and there is a sizeable opportunity and others in
accelerating invoice date, mailing bills promptly, and identifying payment
locations.

Control of payable:

When a firm issues a cheque it reduces the balance in its books. The
balance in the banks books is not reduced till the bank makes the payment.

The amount of cheques issued by the company but not paid for by
the referred to as the “payment float”. The amount of cheques deposited by
the firm in the bank but not cleared is referred to as the “collection float”. The
difference between “payment float and collection float is referred to as net
float”.

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 CHAPTER-V

DATA ANALYSIS AND INTERPRETATION

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 Table #1
Current Ratio = Current Assets / Current Liabilities
Current Current
Years Ratio
Assets Liabilities

2016 - 17 13865.78 7983.24 1.74

2017 - 18 15233.97 8111.85 1.88
2018 - 19 15300.09 8771.21 1.74
2019 - 20 15602.95 14487.13 1.08
2020 - 21 18165.08 12562.96 1.45
Source: Annual Reports

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Graphical representation of current ratio:

INTERPRETATION:

According to conventional rule a current ratio of 2:1 is considered

satisfactory the company is maintaining a current ratio of 1.88 in the financial
year 2017-18 which is high in all the five financial years but it decreases to
1.08 in the year 2019-20 which is low. Current ratio maintained by the
company is satisfactory because it is slowly reaching the standard ratio i.e.,
2:1.

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 Table #2

Quick Ratio = Quick Assets / Current Liabilities

Quick Assets = Current Assets - Inventory
Quick Current
Years Ratio
Assets Liabilities

2016 - 17 5888.55 7983.24 0.74

2017 - 18 6530.03 8111.85 0.80
2018 - 19 6675.8 8771.21 0.76
2019 - 20 7509.67 14487.13 0.52
2020 - 21 9218.79 12562.96 0.73
Source: Annual Reports

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 Graphical representation of Quick ratio:

INTERPRETATION:

According to conventional rule a quick ratio of 1:1 is considered

satisfactory. The company’s quick ratio is 0.80 in the year 2017-18 which is
high in all the five financial years. It decreases to 0.52 year 2019-20. The
quick ratio maintained by the company is satisfactory because it is slowly
reaching the standard ratio i.e., 1:1. The current year quick ratio is 0.56.

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 Table #3

Inventory Proportion of Total Current

Assets = Inventory / Total Current Assets

Years Inventory Total Current Assets Ratio

2016 - 17 7977.23 13865.78 0.58

2017 - 18 8703.94 15233.97 0.57

2018 - 19 8524.29 15300.09 0.56

2019 - 20 8093.28 15602.95 0.52

2020 - 21 8946.3 18165.08 0.49

Source: Annual Reports

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 Graphical representation of Inventory proportion ratio:

INTERPRETATION:

According to conventional rule Inventory proportion ratio of 1:1 is

considered satisfactory. The company’s Inventory ratio is 0.58 in the year
2017-18 which is high in all the five financial years. It decreases to 0.49 year
2020-21. The quick ratio maintained by the company is satisfactory because it
is slowly reaching the standard ratio i.e., 1:1. The current year quick ratio is
0.56.

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 Table #4

Debtors Turnover Ration = Sales / Debtors

Years Sales Debtors Ratio

2016 - 17 44943.88 2791.08 16.1

2017 - 18 44339.06 2687.77 16.50

2018 - 19 44577.62 2632.95 16.93

2019 - 20 48702.68 3489.86 13.96

2020 - 21 57888.64 4587.70 12.62

Source: Annual Reports

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Graphical representation of Debtors turnover ratio:

INTREPRETATION:

The above table shows that the debt turnover ratio is decreasing. It was
16.10 during the year 2015-2016 and reached to 16.50 during the year 2017-
2018. In 2018-19 increased to 16.93. A higher ratio is an indicator of high
speed with which debtors / accounts receivables are collected. This company
has been adopting conservative credit policy and possessing small percentage
of credit sales on total sales in every year this is the main reason behind high
debtor’s turnover ratio.

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 Table #5

Average Collection Period Ratio

= No. of Days in a Year / Debtors Turnover

No. of Days Debtors Average

Years
In a Year Turnover Collection

2016 - 17 366 16.10 22.36

2017 - 18 365 16.50 21.82

2018 - 19 365 16.93 21.26

2019 - 20 365 13.96 25.79

2020 - 21 366 12.62 28.53

Source: Annual Reports

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Graphical representation of Average collection period:

INTREPRETATION:

This ratio shows that the firm collected its debtors either in short time
or not the average collection period had least i.e., 49 days in 2017-2018. But it
has an improvement collection period has 82 days in 2018-2019 indicating an
improvement collection of debtors from 2017-2018. The company shows
effective collection methods had introduced reducing its collection period
gradually. In 2020-2021 the Avg. collection period has 28 days.

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 Table #6

Total Assets Turnover Ratio

= Sales / Total Assets

Years Sales Total Assets Ratio

2016 - 17 44943.88 15233.97 2.95

2017 - 18 44339.06 15300.09 2.90

2018 - 19 44577.62 15602.95 2.86

2019 - 20 48702.68 18165.08 2.68

2020 - 21 57888.64 22010.34 2.63

Source: Annual Reports

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Graphical representation of Total assets turnover ratio:

INTERPRETATION:

Total asset turnover ratio is the relationship between Total assets and
sales. Company maintains high total assets turnover ratio in the Financial year
2018-2019 that is generate a sales of Rs. 2.86 for one rupee investment in
fixed and current assets together and it is maintaining, which is low in the
present year 2020-2021.

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 Table #7

Working Capital Turnover Ratio

= Sales / Net Current Assets

Years Sales Net Current Assets Ratio

2016 - 17 44943.88 7122.12 6.31

2017 - 18 44339.06 6528.88 6.79
2018 - 19 44577.62 1115.82 39.95
2019 - 20 48702.68 5602.12 8.69
2020 - 21 57888.64 8665.77 6.68
Source: Annual Reports

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Graphical representation of working capital turnover ratio:

INTREPRETATION:

The working capital turnover ratio indicates the relationship between

sales and net current assets APL Limited has the ratio of 6.31in the year 2016-
2017 and 8.69 in the year 2019-2020 indicated the increase in ratio which
means that for one rupee of sales the company needs 6.4 worth of net current
assets for last two years which means the company was maintaining more
working capital for generating of sales.

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 Table #8

Gross Profit Ratio

= Gross Profit / Sales

Years Gross Profit Sales Ratio

2016 - 17 2662.76 44943.88 16.88

2017 - 18 6738.85 44339.06 6.58

2018 - 19 7390.14 44577.62 6.03

2019 - 20 7630.18 48702.68 6.38

2020 - 21 8033.14 57888.64 7.21

Source: Annual Reports

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Graphical representation of Gross profit ratio:

INTERPRETATION:

Normally the ideal Gross Profit Ratio is 35 percent. The gross profit
ratio maintain the company in the financial year 2016-17 was 16 percent
which was high in, all the financial years but it decreases in the year 2018-19
which is low. It shows that the position of the company is bad. The company
maintain same gross profit ratio in 2020-2021, which was high in previous
year.

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 Table #9

Inventory Turnover Ratio

= Net Sales / Inventory

Years Net Sales Inventory Ratio

2016 - 17 46169.47 8703.94 5.3

2017 - 18 44339.06 8524.29 5.20
2018 - 19 44577.62 8093.28 5.51
2019 - 20 48702.68 8946.30 5.44
2020 – 21 57888.64 10481.36 5.52
Source: Annual Reports

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Graphical representation of Inventory turnover ratio:

INTERPRETATION:

The company maintaining 5.51 in the financial year 2018-2019 and

5.20 is the lowest ratio in the period of 2016-17. The company maintaining
same net profit ratio in 2019-2020 i.e., 5.44, which was in 2017-2018 ratio
5.20.

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 Table #10

Inventory Holding Period

= No of Days in a Year / Inventory Ratio

Years No. of Days Inventory Ratio Ratio

2016 - 17 366 5.30 67.92

2017 - 18 365 5.20 69.23
2018 - 19 365 5.51 65.34
2019 - 20 365 5.44 66.18
2020 – 21 366 5.52 65.22
Source: Annual Reports

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Graphical representation of Inventory holding ratio:

INTERPRETATION:

The company maintaining 0.11 in the financial year 2018-2019 which

was low. And it is increases to 0.34 in the year 2019-2020 which in high. The
current year current ratio is 0.13.

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 CHAPTER – VI
FINDINGS, SUGGESTIONS AND SUMMARY

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 FINDINGS

Based on the analysis of various financial ratios applied, statement

showing change in working capital in analyzing financial data relating to APL
and the conclusions arrived at the following suggestions are made.

 Regarding the current ratio, it is found that the APL is running its
business in good position for the last five years of the study, as it is able
to maintain current ratio at all level more than the minimum that
required to be maintained i.e., 2:1 ratio it is suggested that the company
should maintain the good position current assets over current liabilities
for the solvency of the business.

 The company is not utilizing its current assets more efficiently. Even
though there are adequate current assets, its turnover ratio is very low.

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 SUGGESTIONS

 The company working capital reserves are very high as current assets
earn nothing so it is advisable to reduce it current assets to reinvest the
founds in other productive way.
 The cash reserve position in the company is very low which may create
shortage of funds to meet short termoblligations so it is advisable to
maintain adequate reserves of cash and bank.
 The company is advised to maintain adequate level of stock so as to
ensure smooth running of the production.
 The company’s debtor’s position is very high it is advised to reduce the
credit sales so as to minimize un-necessary costs.
 The debt collection period of the firm is very high due to this policy
company may lose inters for long period on its debtors so it is advised
to rearrange their debt policy.
 At the end it is the human resource which can be miracles for the
satisfaction of workers good promotional policy and incentive system
should be adopted by the management.
 A mission is needed to control current assets and current liabilities.
 To improve liquidity position of APL Ltd.
 The company must give training to the plant engineer to fight pollution.
 International export of paper for wide range of opportunities.

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 SUM MARY:

The APL Limited is leading mini paper mill and also agro based which

is located it venders in E.G. District of A.P. This has been running under

professional management and also producing wide range of papers the present

study was undertaken to evaluate the financial performance of APL Limited

for the period of five years through financial ratio analysis the details

regarding the financial performance of the company are the liquidity current

to meet the contingencies the debt also creating problem of payment of high

interest. The firm has been maintained high ratio inventory turnover 1 which

is always desirable. The firm is unable to set more percentage of grow profit

on sales due to high cost production. Which is effected net earning of the

company on every year. The firm has not been obtained more net profit and in

some years the firm incurred net losses also due to high burden of interest and

taxes.

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 BIBLIOGRAPHY

FINANCIAL MANAGEMENT

--I. M . Pandey

FINANCIAL MANAGEMENT

--Prasanna Chandra

MANGERIAL ACCOUNTING

--M . Mutyala Naidu

--Y . Chandra Sekhara Rao
--G . Prasad

FINANCIAL MANAGEMENT

--Eugene F .Brigham
--Louige Gapenski

PREVIOUS ANNUAL REPORTS OF APLLIMITED

DALIES:
1.Hindu
2.Business Line
3. Business Economic facts for you (Magazine).

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