CHAPTER-I

1. INTRODUCTION OF THE STUDY

Cash Management

Cash management is the process of collecting and managing cash flows. Cash management can be important
for both individuals and companies. In business, it is a key component of a company's financial stability. For
individuals, cash is also essential for financial stability while also usually considered as part of a total wealth
portfolio.

Individuals and businesses have a wide range of offerings available across the financial marketplace to help
with all types of cash management needs. Banks are typically a primary financial service provider for the custody of
cash assets. There are also many different cash management solutions for individuals and businesses seeking to
obtain the best return on cash assets or the most efficient use of cash comprehensively.

Understanding Cash Management

Cash is the primary asset individuals and companies use to pay their obligations on a regular basis. In
business, companies have a multitude of cash inflows and outflows that must be prudently managed in order to meet
payment obligations, plan for future payments, and maintain adequate business stability. For individuals, maintaining
cash balances while also earning a return on idle cash are usually top concerns.

The Importance of Cash

Cash is the primary asset individuals and companies use regularly to settle their debt obligations and
operating expenses, e.g., taxes, employee salaries, inventory purchases, advertising costs, and rents, etc.

Cash is used as investment capital to be allocated to long-term assets, such as property, plant, and equipment
(PP&E) and other non-current assets. Excess cash after accounting for expenses often goes towards dividend
distributions. Companies with a multitude of cash inflows and outflows must be properly managed to maintain
adequate business stability. For individuals, maintaining cash balances is also a major concern.

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Causes of Problems with Cash Management

1. Poor understanding of the cash flow cycle

Business management should clearly understand the timing of cash inflows and outflows from the entity,
such as when to pay for accounts payable and purchase inventory. During rapid growth, a company can end up
running out of money because of over-purchasing inventory, yet not receiving payment for it

2. Lack of understanding of profit versus cash

A company can generate profits on its income statement and be burning cash on the cash flow statement.
When a company generates revenue, it does not necessarily mean it already received cash payment for that revenue.
So, a very fast-growing business that requires a lot of inventory may be generating lots of revenue but not receiving
positive cash flows on it.

3. Lack of cash management skills

It is crucial for managers to acquire the necessary skills despite the understanding of the abovementioned
issues. The skills involve the ability to optimize and manage the working capital. It can include discipline and putting
the proper frameworks in place to ensure the receivables are collected on time and that payables are not paid more
quickly than is needed.

4. Bad capital investments

A company may allocate capital to projects that ultimately do not generate sufficient return on investment or
sufficient cash flows to justify the investments. If such is the case, the investments will be a net drain on the cash
flow statement, and eventually, on the company’s cash balance.

TYPES OF CASH MANAGEMENT

Cash Flow from Operating Activities: It is found on an organization’s cash flow statement and does not include
cash flow from investing.

Free Cash Flow to Equity: Free Cash Flow to Equity represents the cash available after the capital is reinvested.

Free Cash Flow to The Firm: It is used for valuation and financial modeling.

The Net Change in Cash: It refers to the movement in the cash flow from one accounting period to another.

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Roles and Functions of Cash Management

1. Inventory Management

Cash management helps an organization in managing its inventories. Higher inventory in hand indicates
trapped sales, leading to less liquidity. Therefore, a company must always focus on fast pacing its stock out to allow
cash movement.

2. Receivables Management

The organization has recorded all its sales, but the money concerning these transactions has not yet been
received. In such a scenario, cash management’s function will ensure faster recovery of all the receivables to avoid a
probable cash crunch. It also includes a follow-up mechanism that provides more rapid recovery and will make the
company aware of future contingencies like bad debts, etc.

3. Payables Management

This is also an essential function of cash management where the companies can avail of benefits like cash discounts
and credit periods.

Basic Principles of Cash Management

1. Maintaining lower inventory levels: Keeping a more significant inventory level can often lead to a scenario
where cash gets unnecessarily stuck. Even the warehouse space gets occupied unnecessarily. Companies must come
up with appropriate techniques and strategies to be able to maintain lower levels of inventory successfully.

2. Speeding up the process of cash receivables: The companies must encourage their clients and customers to pay
their dues quicker and offer them lucrative discounts and other schemes that motivate them to pay as early as
possible.

Cash Management Strategies

The strategies for cash management are:

 One must always ask for a milestone or deposit payment

 The customers must be encouraged to clear their bills faster
 One must always ensure the expenses are always bare minimum or even delayed.
 One must request the vendors to modify their payment terms
 Finance and fulfil purchase orders
 Idle equipment must be put for sale or on lease
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  Boost profit margins
 Invoice factoring/ invoice discounting/ invoice financing/ sale invoices.

Different Types of Cash Management Tools

 Short-term instruments include money market instruments and mutual funds, Treasury Bills, certificates of
deposit (CD), etc.
 Checking account
 Savings account
 Long-term low-risk savings instrument

Advantages and Disadvantages

The advantages listed below are as follows:

 Cash management allows estimating the cash profits and not just profits from outstanding incomes and credit
sales.
 It helps in detecting cash embezzlement.
 It allows for speeding up the working capital cycle.
 It helps in rewarding such debtors that make quicker payments.
 It speeds up the operations of an organization.

Disadvantages

The disadvantages listed below are as follows:

 Management of cash requires the specified skills of the person managing it.
 It is a time-consuming process.

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1.2 INDUSTRY PROFILE

Steel is an alloy of iron and other elements, including carbon. When carbon is the primary alloying
element, its content in the steel is between 0.002% and 2.1% by weight. The following elements are always
present in steel: carbon, manganese, phosphorus, sulfur, silicon, and traces
of oxygen, nitrogen and aluminium

Alloying elements intentionally added to modify the characteristics of steel include:

manganese, nickel, chromium, molybdenum,boron, titanium, vanadium and niobium. Carbon and other
elements act as a hardening agent, preventing dislocations in the iron atom crystal lattice from sliding past
one another. Varying the amount of alloying elements and the form of their presence in the steel (solute
elements, precipitated phase) controls qualities such as the hardness, ductility, and tensile strength of the
resulting steel. Steel with increased carbon content can be made harder and stronger than iron, but such
steel is also less ductile than iron.

Alloys with a higher than 2.1% carbon (depending on other element content and possibly on
processing) are known as cast iron. Because they are not malleable even when hot, they can be worked only
by casting, and they have lower melting point and good castability. Steel is also distinguishable
from wrought iron, which can contain a small amount of carbon, but it is included in the form
of slag inclusions.

Though steel had been produced in a blacksmith's forge for thousands of years, its use became more
extensive after more efficient production methods were devised in the 17th century. With the invention of
the Bessemer process in the mid-19th century, steel became an inexpensive mass-produced material.
Further refinements in the process, such as basic oxygen steelmaking (BOS), lowered the cost of production
while increasing the quality of the metal.

Today, steel is one of the most common materials in the world, with more than 1.3 billion tons
produced annually. It is a major component in buildings, infrastructure, tools, ships, automobiles, machines,
appliances, and weapons. Modern steel is generally identified by various grades defined by
assorted standards organizations.

Iron-carbon

Iron is found in the Earth's crust only in the form of an ore, usually an iron oxide, such
as magnetite, hematite etc. Iron is extracted from iron ore by removing the oxygen and combining the ore

5
with a preferred chemical partner such as carbon. This process, known as smelting, was first applied to
metals with lower melting points, such astin,

which melts at approximately 250 °C (482 °F) andcopper, which melts at approximately 1,100
°C(2,010 °F). In comparison, cast iron melts at approximately 1,375 °C (2,507 °F). Small quantities of iron
were smelted in ancient times, in the solid state, by heating the ore buried in a charcoal fire and welding the
metal together with a hammer, squeezing out the impurities. With care, the carbon content could be
controlled by moving it around in the fire.

Steel is an alloy of iron with typically a few present of carbon to improve its strength and fracture
resistance compared to iron. Many other additional elements may be present or added. Stainless steels that
are corrosion and oxidation resistant need typically an additional 11% chromium. Because of its
high tensile strength and low cost, steel is used
in buildings, infrastructure, tools, ships, trains, cars, machines, electricalappliances, and weapons.

Iron is the base metal of steel and it can take on two crystalline forms (allotropic forms): body
centred cubic and face-centred cubic. These forms depend on temperature. In the body-centred cubic
arrangement, there is an iron atom in the centre and eight atoms at the vertices of each cubic unit cell; in the
face-centred cubic, there is one atom at the centre of each of the six faces of the cubic unit cell and eight
atoms at its vertices. It is the interaction of the allotropes of iron with the alloying elements, primarily
carbon, that gives steel and cast iron their range of unique properties.

In pure iron, the crystal structure has relatively little resistance to the iron atoms slipping past one
another, and so pure iron is quite ductile, or soft and easily formed. In steel, small amounts of carbon, other
elements, and inclusions within the iron act as hardening agents that prevent the movement of dislocations.

The carbon in typical steel alloys may contribute up to 2.14% of its weight. Varying the amount of
carbon and many other alloying elements, as well as controlling their chemical and physical makeup in the
final steel (either as solute elements, or as precipitated phases), slows the movement of those dislocations
that make pure iron ductile, and thus controls and enhances its qualities. These qualities include
the hardness, quenching behaviour, need for annealing, tempering behaviour, yield strength, and tensile
strength of the resulting steel. The increase in steel's strength compared to pure iron is possible only by
reducing iron's ductility.

Steel was produced in bloomer furnaces for thousands of years, but its large-scale, industrial use
began only after more efficient production methods were devised in the 17th century, with the introduction
of the blast furnace and production of crucible steel. This was followed by the open-hearth furnace and then

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the Bessemer process in England in the mid-19th century. With the invention of the Bessemer process, a
new era of mass-produced steel began. Mild steel replaced wrought iron.

Further refinements in the process, such as basic oxygen steelmaking (BOS), largely replaced earlier
methods by further lowering the cost of production and increasing the quality of the final product. Today,
steel is one of the most common manmade materials in the world, with more than 1.6 billion tons produced
annually. Modern steel is generally identified by various grades defined by assorted standards
organisations.

Definitions and related materials

The carbon content of steel is between 0.002% and 2.14% by weight for plain carbon steel (iron–carbon
alloys). [Citation needed] Too little carbon content leaves (pure) iron quite soft, ductile, and weak. Carbon contents
higher than those of steel make a brittle alloy commonly called pig iron. Alloy steel is steel to which other alloying
elements have been intentionally added to modify the characteristics of steel.
Common alloying elements include: manganese, nickel, chromium, molybdenum, boron, titanium, vanadium,
tungsten, cobalt, and niobium. In contrast, cast iron does undergo eutectic reaction. Additional elements, most
frequently considered undesirable, are also important in steel: phosphorus, sulphur, silicon, and traces of oxygen,
nitrogen, and copper.

Plain carbon-iron alloys with a higher than 2.1% carbon content are known as cast iron. With
modern steelmaking techniques such as powder metal forming, it is possible to make very high-carbon (and
other alloy material) steels, but such are not common.

Cast iron is not malleable even when hot, but it can be formed by casting as it has a lower melting
point than steel and good cast ability properties. Certain compositions of cast iron, while retaining the
economies of melting and casting, can be heat treated after casting to make malleable iron or ductile
iron objects. Steel is distinguishable from wrought iron (now largely obsolete), which may contain a small
amount of carbon but large amounts of slag.

To inhibit corrosion, at least 11% chromium is added to steel so that a hard oxide forms on the metal
surface; this is known asstainless steel. Tungsten interferes with the formation of steel, allowing martensite
to preferentially form at slower quench rates, resulting in high speed steel. On the other hand,
sulfur, nitrogen, and phosphorus make steel more brittle, so these commonly found elements must be
removed from the ore during processing.

The density of steel varies based on the alloying constituents but usually ranges between 7,750 and
8,050 kg/m3 (484 and 503 lb/cu ft), or 7.75 and 8.05 g/cm3 (4.48 and 4.65 oz/cu in).

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 Even in the narrow range of concentrations that make up steel, mixtures of carbon and iron can form a
number of different structures, with very different properties. Understanding such properties is essential to
making quality steel. At room temperature, the most stable form of iron is the body-centered cubic (BCC)
structure α-ferrite. It is a fairly soft metal that can dissolve only a small concentration of carbon, no more
than 0.021 wt% at 723 °C (1,333 °F), and only 0.005% at 0 °C (32 °F). If steel contains more than 0.021%
carbon at steelmaking temperatures it transforms into a face-centered cubic (FCC) structure,
called austenite or γ-iron. It is also soft and metallic but can dissolve considerably more carbon, as much as
2.1%carbon at 1,148 °C (2,098 °F), which reflects the upper carbon content of steel.

PEST ANALYSIS
PEST Analysis is a measurement tool which is used to assess markets for a particular product or a business at
a given time frame. PEST stands for Political, Economic, Social, and Technological factors. Once these factors are
analysed organisations can take better business decisions.
It is part of an external analysis when conducting a strategic analysis or doing market research, and gives an
overview of the different macro-environmental factors to be taken into consideration. It is a strategic tool for
understanding market growth or decline, business position, potential and direction for operations.
Porter's Five Forces
Porter's Five Forces Framework is a method of analysing the operating environment of a competition of a
business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive
intensity and, therefore, the attractiveness (or lack thereof) of an industry in terms of its profitability.
An "unattractive" industry is one in which the effect of these five forces reduces overall profitability. The
most unattractive industry would be one approaching "pure competition", in which available profits for all firms are
driven to normal profit levels. It is a model that identifies and analyses five competitive forces that shape every
industry and helps determine an industry's weaknesses and strengths. Five Forces analysis is frequently used to
identify an industry's structure to determine corporate strategy.

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1.7 ABOUT THE COMPANY
The temple city of Madurai houses a world class foundry “Aruna Alloy Steels Pvt. Ltd.”, a versatile company
which laid down its roots in the memorable year of 1961 as a small scale industry.
From 1999 Aruna is forging ahead to dedicate itself exclusively to the valve industry. Aruna has excelled
itself in the faultless supply of high performance valve castings ranging from 5 kg to 14,000 kg that have a maximum
pressure rating of 5000 PSI and up to 72″ in size. Aruna is a sought after supplier of high quality steel valve castings
manufactured in Carbon Steel, Alloy Steel, Stainless Steel and Nickel Alloy, copper alloys for the ‘Oil’, ‘Gas’,
‘Thermal and Hydro Power’, ‘Nuclear Power’, and ‘Chemical’ Industry .
The company is now a world class certified supplier of steel castings to reputed valve castings manufacturers
both in Domestic and in International Arena. The company’s dedication and focus is reflected in our strengthening
competitive position and growth. Aruna is emerging as a customer-centric entrepreneurial company focused on
sustainable value creation for all stakeholders. Aruna’s current production capacity is 5,000 tonnes of steel castings
per year. Aruna has emerged as one of the effective and reliable steel casting foundry’s in the World for the
manufacture of critical alloys and castings for critical applications. It operates 2 foundry plants with a diverse
capacity. A new machining facility also has been added for the supply of machined castings to Valve manufacturers.
Vision and Mission
Safe, Environmentally friendly and dependable World Class Steel Foundry manufacturing machined valve
castings for severe and critical application in complex materials.
Continually delight the customer with quality and on-time delivery for forging long term sustainable win-
win partnerships Continuously improvise effectiveness of management to strengthen the system and focus people on
data driven decision analysis and problem solving

Continuously invest and develop people with core skills to improve competency and organizational
involvement Enhance capabilities and invest in new technology to improve productivity and supply finished products
for severe and critical applications
2022
QSC Certificate renewed up to Apr’2024
- 20”1500 Check Valve Body Inconel material developed short delivery
- Added DS 450 TREVISAN Machining
- LPG conversion for Heat Treatment furnace [ partially]
- Control Valve Body 12”3500 BWE alloy steel with SS309 welding 4 MT / Toshiba Project –Short delivery pattern
to final machining
- Angle Valve Body 36”x56” development large size 12.5MT – Short delivery pattern to final machining
- COVID Safety => All the employees are fully vaccinated
2020
- Added DS 350 TREVISAN Machining
- Added Virat 2030 machine to Pattern manufacturing

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- Initiated internal calibration lab added
- Check Valve Body 48x42x48” 600 Body large size casting 10.2 MT -> Short delivery
- Super Duplex Steel [6A] 6”cl 900 GLV Body -1no supplied 11 days LT with final machining also
- Nickel Alloy material development for Gate,Check and Globe valve Bodies and components
2019
- Cladding welding development - 18” to 24” cl 300/600/1500 GLV & Butterfly valve Body & Bonnet
- Code Casting 42”900 BWE Body [WC6] largest wt - 13.5 MT => Pattern to machining
- 20”1500 control valve Body & Bonnet development SS material => Pattern to Final machining short delivery
- 4” Turbine Body –Full assembly development –European customer
- Butterfly Valve Body development 56” - 21 pcs –with short delivery
2018
- Automation of Hard facing Overlay with Plasma Transferred arc welding
- QSC Certified Company
- Brick manufacturing unit for re-cycling the left out residues from reclamation plant
- High frequency grinding facility introduction
-BODY CAST 16" HAG 955 CK3MCUN, casting weight 1888 Kg.
- BODY grade WCC NRV 24" 3000 largest pourde casting weight 9210 Kg.
-BODY 38" C600 GV BW grade WCC largest size casting poured.
2017
- Merging of Unit 2 foundry with unit 3
- Continuous sand discharge unit for un-interrupted mulling of moulding sand.
- Aluminium melting facility for in-house pattern manufacturing.
- Addition of 2 Ton induction melting furnace
- ARUNA Logistic facility development.
- 16"900 41K Body, CW6MC casting weight 2070 Kg
2016
- Provision for R&D with Induction melting furnace 25Kg & 50Kg.
- Construction of New ADMIN Building
- 100 tons crane capacity upgrading
- 33 KvA power addition
- Free In-House Canteen facility for employees.
- DS1500 TREVISAN machining facility
- Centralised in-house pattern manufacturing facility
- Addition of 10 Ton induction melting furnace with tri-track facility.
- 6.5 ton auto quench diesel fired Heat treatment furnace
- Gate Body 30"150 FLG CW6MC casting weight 1670 Kg
2015

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- Centralised ware house for pattern storage
2014
DS-600 TREVISAN Turn Mill centre machining facility added
Puma 400 & 550 - Vertical Turning lathe facility added
Horizontal Machining Centre (NHM 5000)
2013
- Modern lab facility with Hi-tech infrastructure
2012
- Addition of sand reclamation plant for recycling the foundry used sand.
2011
- Largest C12A Casting 24” 1500 GTV weighing 5,500 Kg manufactured successfully
- 36 Strainer bodies with short delivery supplied for ARAMCO Karan Gas Project
- Steel castings machining facility with Hydro Test upto 24” 2500 & 36” 300 started
- 100 Curie Radiography Co 60 Bunker constructed
Corporate Citizenship
 Blind
 Ralley
 Blind Ralley Conducted By Aruna Alloy Steel.
 Blood Donation
 Blood Donation Conducted By Aruna Alloy Steel.
 Orphanage Through Mrt
 Borphanage Through Mrt Conducted By Aruna Alloy Steel.
 Chennai
 Flood Relief
 Aruna Alloy Steel Donate For Chennai Flood Relief
 School Infrastructure Buildup

Magnetic Particle Inspection

Magnetic Particle Testing is 100% performed on Carbon Steel Castings and Low Alloy Steel Castings
to identify cracks, surface discontinuities and sand entrapment in the surface. Magnetic Particle Testing is done as per
customer specification in accesible Areas. Both Yoke and Prod method are available for testing.
Melting
All medium & large size castings weighing from 250 kgs upto 14000 kgs are poured using bottom pouring
ladles. There are 15 Ladles in all the 2 units ranging from 250 Kgs to 22,000 Kgs Liquid metal Capacity. The
adequate capacity and flexibility in transporting liquid metal to the mold helps in planning to tap only sufficient
quantity of metal required for pouring. As pouring weight varies based on casting size and pressure class, a consistent
rate of pouring is maintained by using the appropriate ladle to manufacture a clean casting.

11
 To pour Duplex and Gaseous type of materials and Argon Purging facilities in the ladle are provided to inject
argon gas into the bottom of ladle. The bottom pour ladles enhance the metal quality, improves the head pressure, and
provides a consistent flow rate with minimal air entrapment due to operator variation. Small castings ranging from 5
Kg - 250 Kg in weight are poured using Tea-spout ladle to reduce the rate of pouring to avoid erosion of the mould.
ULTRASONIC INSPECTION
Ultrasonic testing is a non-destructive examination (NDE) technique that involves sound waves travel at
known constant velocities through wall of component to find internal soundness.
Research and Development
Equipped with 25kg, & 50 Kg Induction melting furnaces for the New grade and special requirement
development in the shortest lead time.
Dispatch & Packing
Finished products are sorted, tagged, packed and loaded for transportation in this area. For export customers,
un-machined castings are packed into Wooden Crates or Wooden Boxes depending on the customer's preference.
Quality Policy
Achieving customer satisfaction by providing products conforming to customer requirements through timely
delivery and continual improvements in the quality management system by effective training of our employees
Our Certifications
 ISO 9001: 2015 by Lloyds
 IBR Approval (Unit I,III): Central Boiler Board Govt. of India
 Foundry Approval, PED 2014/68/EU
 Foundry Approval, WO/TRD 100
 Foundry Approval, NORSOK M-650 Rev. 4 QUALIFICATION for Super Duplex(4A/5A/6A) by National
Institute of Technology, Norway
 ASME Sec III - Quality System Certificate from the American Society of Mechanical Engineers: QSC-810 -
Unit 3
 Supplier of Nuclear Castings French Code RCC-M
 HAF 604, Foundry Approval for Castings supplied to China Nuclear Proj
 Approved Supplier Classification Level 1, ALSTOM
 DNV-GL Marine Certification

OUR CLIENTS

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PRODUCTS PROFILE
Round

We hold expertise to offer a range of Cold Drawn Bright Round Bar. These are manufactured using supreme-grade
raw material with advanced technologies. Our products are available in various dimensions of length, thickness and
sizes. We make sure that the offered products are delivered to the clients within the stipulated time-frame.
Square

We have comprehensive assortment of Cold Drawn Bright Square Bar. These are manufactured in various lengths
and thickness. Apart from this, we also manufacture and supply bars to meet the varied requirements of the patrons.
Our products are fabricated using quality-tested raw material with world class technology. Owing to the optimum
quality and competitive prices, our products are in highly demanded across engineering related industries.

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Flats

We have enabled us to come with an excellent collection of Cold Drawn Bright Flat Bar. The professionals
of our firm use high-grade mild steel that is procured from trusted vendors of the market to manufacture these
products. Clients can avail our product range in various dimensions as per their requirements. We offer our products
at market-leading prices.
Hexagon

Steels have been able to bring forth a remarAbsara le range of Cold Drawn Bright Hex Bar. These are
designed and manufactured using qualitative raw material and by following international quality standards. Our
products are highly demanded by the clients for their affordable prices and salient features like durability,
dimensional accuracy, corrosion and oxidation resistance.

Peeled and Ground Bars

Available with us, is a wide range of Peeled and Grounded Bars. The high resistance power, length tolerance

14
and dimensional accuracy of these products have made them the most sought after products in the market. These
peeled or turned bars are widely used for rolling, centre grinding and burnishing purposes.
Ground Bars
When a layer of the outer surface is removed by processing it in centre less grinders, a silvery bright surface
is obtained. This process is known as grinding and the product ground bars

1. MACHINE SHOP
a) Machined & Turned Components

We offer a wide range of Machined and Turned Component Parts that is especially designed in accordance to
quality standards. These parts feature sturdy construction, higher efficiency and long service life. Offered at most
affordable rates, these Machined and Turned Parts are available in different shapes, sizes, and finishes to suit the
specifications of the clients. We offer these quality parts to our clients in customized packing’s.

Low Alloy Steel

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Stainless Steel

Nickel Alloy

Copper Alloys

1.4 STATEMENT OF PROBLEM

The problem of investing this excess amount of cash arises simply because it contributes nothing towards
profitability of the firm as idle cash precisely earns no returns. Further permanent disposal of such cash is not
possible, as the concern may again need this cash after a short while. But, if such cash is deposited with the
automotive, it definitely would earn a nominal rate of interest paid by the firm. A much better returns than the bank
interest can be expected if a company deploys idle cash in marketable securities. There are yet another group of
enterprise that neither invest in marketable securities nor willing to get interest instead do they prefer to deposit
excess cash for improving relations with helping them in meeting bank requirements for compensating balances for
services

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1.5 OBJECTIVES OF THE STUDY

 To analyze the concept of cash management

 To examine whether the ability to generate daily cash has any effect on the ability to repay financial
obligation
 To study the cash to debt service ratio of the company
 To know the Short term Solvency Position and the trend
 To make Suggestion and recommendation to improve the cash position of the company

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1.6 SCOPES OF THE STUDY

The scope of the study describes the geographic area in which the researcher conducted his investigation. For
appropriate research, the scope of study must be specified, which describes the topic of inquiry. Diverse research has
a broad impact, but it is not feasible to cover all disciplines of study owing to constraints such as time, information,
and so on. In the current study, the researcher selects the region of investigation by taking into account a number of
factors. The study's scope is limited to India's five industrial sectors

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1.7 LIMITATIONS OF THE STUDY

 The study is only based on the facts and figures obtained from the company annual reports.
 Difficulty of getting access to some important data due to its sensitivity and secretive nature.
 The non- uniformity in the accounting periods of the years under study made it difficult to interpret the data
concisely.
 The study was restricted only to four months where in the details for the past five years only considered for
the study.
 Cash analysis is a record of past events only. Past can never forecast the future accurately and also the
analysis and interpretation of the cash is based on the past performance.

19
 CHAPTER-II

2. REVIEW OF LITERATURE

According to (Davidson et al, 2016), cash is any medium of exchange, which is immediately negotiable. It must be
free of restriction for any business purpose. Cash has to meet the prime requirements of general acceptability and
availability for instant use in purchasing and payment of debt. Acceptability to a bank for deposit is a common test
applied to cash items. This is a process of Planning, controlling, and accounting for cash transactions and cash
balances. It is channeling available cash into expenditures that enhance productivity, directly or indirectly

(Pandey, 2017) Cash is the money which a firm can disburse immediately without any restriction. The term cash
includes coins, currency held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as
marketable securities or bank time’s deposits, are also included in cash. The basic characteristic of near-cash assets is
that they can readily be converted into cash. Generally, when a firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm

Abdirizak Mohamed Jama and others (2017), showed a study on effect of cash management practices on the
profitability of bottled refined companies. Sample of 46 was used to gather the data through questionnaire, document
analysis and interviews. Correlation and regression analysis were used to evaluate the data. Slovene’s formula was
also used in this study. Researcher establishes that cash budgeting has significantly guidance the profitability of the
water purified companies.

Parmar (2018) showed an investigation study on a comparative study of cash management practice of Indian
corporate sector analysis of selected companies. In his research work, seven different industries out of which five
companies from each industry were selected with a suitability sampling system with a study period of ten years from
2018-20. To analyses the cash management practices, seven ratios are considered by the scholar on the basis of data
together and then on that ratios Pearson correlation and Regression is applied to analyze the data. This study
displayed that the selected samples’ cash management practices show more alteration industry wise because as per
the different industries, many things are changing automatically.

Ivan Klyuchankin (2018), researcher conducted this study on Trading company with the objective to analyze the
cash flow management. For this, researcher use empirical research design. Data for the study was collected through
interview of manager, employees and reports & documents of selected company. Study found that there were no any
problem with cash flow and its management and company can manage better cash flow by create a subdivision for
internal control for financial activity of company.

20
Carlos Arangoetal. (2019) surveyed in Canada, France, Germany and Netherlands for testing the hypothesis that
cash was still the most efficient payment appliance and people hold cash for protective reasons when facing
uncertainty about their future purchases. End shown that two reasons namely minimum cash holdings and cash first
were significant causes of the high shares of low-value cash payments in Canada, France and Germany but in
Netherlands significant share of low value card deal were found.

GamzeVuraletal (2019) initiate in their research that upsurge in the level of leverage will lead to decline in the
profitability of the firm and the assessment of the firm. 75 manufacturing firms listed on Istanbul stock exchange
market were used to gather the secondary data for the period of 2012 to 2019 with the objective to check the
relationship between working capital management components and performance of the firm by using dynamic panel
data analysis. The outcomes for the same had shown that by shortening gathering period of books receivable and cash
conversion cycle firms can growth profitability measured by gross operating profit

Mamoun M. Al-Debi'e (2020), under the title, "Cash Management and Profitability: The Case of Industrial Firms in
Jordan", the aim of this paper is to examining the relationship between profitability and working capital management
measures for industrial companies listed on Amman Stock Exchange in Jordan during the period 2015-20

TalatAfza and MianSajidNazir (2020), under the title “Cash Management Efficiency of Textile Sector ", the aim of
this paper is to test the speed of achieving the target level of efficiency by an individual firm during the period of
study using industry norms as the target level of efficiency. Findings of the study indicate that the textile sector as a
whole did perform well during the study period

Mohammad Neab and Noriza BMS (2021) worked on crating the relationship between Working Capital
Management (WCM) and performance of firms. For their analysis they chose the Malaysian listed companies. They
administered the perspective of market valuation and profitability. They used total of 172 listed companies from the
databases of Bloomberg.

SaswataChatterjee (2021) focused on the importance of the fixed and current assets in the successful running of any
organization. It poses direct impacts on the profitability liquidity. There have been a phenomenon observed in the
business that most of the companies increase the margin for the profits and losses because this act shrinks the size of
working capital relative to sales

Mehta Bharat J (2022) In the study “Working Capital Management under Inflationary Conditions observes that the
additional working capital is required due to inflation and the gap of such additional working capital can be financed
by alternative long term sources like loans from financial institutions, floating of debentures, accepting public
deposit, issue of equity shares by operational results. The profits can be estimated to meet interest charges, dividend
to shareholders and plough back of profit for financing additional working capital. Some other measures of cost
control and reduction like reducing cash operating cycle, rationalizing the inventory stocks by proper planning of
21
purchases, production and selling and using depreciation funds to finance the gaps are suggested in the study.

Mishra N (2022) In the study of “Problems of Working Capital Management during Inflation” discussed the crucial
facets of working capital like amount of working capital, composition of current assets and liabilities and ways of
financing it. Working capital is needed more with increase in operations and overstatement of profits leads to the
distribution of dividends out of capital and tax payment on capital leads to increase in working capital requirements
and fund gets exhausted. The internal and external sources are not freely available or are available with some
restrictions. Again a tradeoff between risk and profitability is required to be maintained. Some measures are required
to be taken by financial manager for price changes, controlling costs, managing inventories, controlling new
investments, improving turnover, managing credit, creditors and collection. The study concluded that the whole
organization is required to take effective measures to control the demand of funds and scarce resources

22
 CHAPTER-III

3. RESEARCH METHODOLOGY

Research Methodology

Methodology is the systematic, theoretical analysis of the methods applied to a field of study, or the
theoretical analysis of the body of methods and principles associated with a branch of knowledge. It, typically,
encompasses concepts such as paradigm, theoretical model, phases and quantitative or qualitative techniques.

Research Design
Research is a process in which the researchers wish to find out the end result for a given problem and thus the
solution helps in future course of action. The research has been defined as “A careful investigation or enquiry
especially through search for new facts in branch of knowledge”

Period of Study

The duration taken by the researcher for the data collection and evaluation regarding the Aruna Alloy Steels
Pvt. Ltd., The data used are of last five years from 2017-22.

Area of the Study: The survey was conducted in Madurai.

Sources of the study

The nature of data collected for the study is secondary. All the necessary data required for various
computations into course of evaluation were taken from the published annual report of the Aruna Alloy Steels Pvt.
Ltd., comprising of the profit and loss account and the balance sheet

Data Evaluation

In order to the objectives of the study ,the present study evaluation the data drawn from the set sources in
different ways, the data obtained have been duly classified and analysed as per the required of the study. Statistical
measures like mean, co-efficient of variation, have been applied.

TOOLS FOR ANALYSIS

 Ratio Analysis
 Trend Analysis

23
RATIO ANALYSIS

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm's
financial performance in several key areas. The ratios are categorized as Short-term Solvency Ratios, Debt
Management Ratios, Asset Management Ratios, Profitability Ratios, and Market Value Ratios. Ratio Analysis as a
tool possesses several important features. The data, which are provided by financial statements, are readily available.
The computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used to compare a
firm's financial performance with industry averages.

TREND ANALYSIS

Trend analysis is the process of comparing business data over time to identify any consistent results or trends.
You can then develop a strategy to respond to these trends in line with your business goals. Trend analysis helps you
understand how your business has performed and predict where current business operations and practices will take
you. Done well, it will give your ideas about how you might change things to move your business in the right
direction.

 Identifying areas where your business is performing well so you can duplicate success
 Identifying areas where your business is underperforming
 Providing evidence to inform your decision making this guide explains how you can use historical data to
analyses trends and improve your business.

Cash Management Models

Baumol Model (1952) – EOQ Model

• William J. Baumol proposed a model similar to EOQ for cash management too.

• The model helps in determining the cash conversion size which means how much cash should be arranged by
selling marketable securities in each transaction.

• This model assumes that cash can be arranged through selling marketable securities which the firms hold in the
time of needs.

• There are two types of cost involved in holding cash.

• Opportunity cost

• Transaction cost also known as conversion cost

24
 • The purpose of the model to minimise the total cost of cash holding which is summation of opportunity cost
and transaction cost.

Miller-Orr Model
 It is an improvement over Baumol’s model.
 On the basis of empirical data, Miller and Orr argued that the cash balances fluctuate randomly. It does not
follow a constant consumption rate.
 Baumol modes tells how much to be the optimum transaction size but it does not talk about treatment of
surplus cash balance. When is the surplus of cash balances

CASH CYCLE

Flow of cash that being with payment for raw materials and ends with receipt of cash on goods sold. Shorter
the number of days in the cycle, more the amount of available cash and lesser the need to borrow Also called as cash
conversion cycle or cash flow cycle

Cash Cycle = Inventory Conversion Period + Debtor Conversion Period +

Creditor Conversion Period

COMPOUND ANNUAL GROWTH RATE - CAGR

The year-over-year growth rate of an investment over a specified period of time The compound annual growth rate is
calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period
being considered.

This can be written as follows:

25
 CHAPTER- IV

DATA ANALYSIS AND INTERPRETATION

ANALYSIS OF DATA

The analysis of data requires a number of closely related operations such as

establishment of categories, the application of these categories to raw data through coding,
tabulation and then drawing inferences. The unwieldy data should necessarily condense into a
manageable groups and tables for further analysis.

Thus, researcher should classify the raw data into some purposeful and usable
categories. Analysis work after tabulation is generally based on the computation of various
percentages, coefficients, etc., by applying various well defined statistical formulae.

INTERPRETATION OF DATA

The real value of research lies in its ability to arrive at certain generalizations. If the
researcher had no hypothesis to start with, he might seek to explain his findings on the basis of
some theory. It is known as interpretation. The process of interpretation may quite often trigger
off new questions which in turn may lead further researches.

RATIO ANALYSIS

TURNOVER RATIOS

The turnover ratios or activity ratios indicate the efficiency with which the capital
employed is rotated in the business. The overall profitability of the business depends on two
factors: (i) the rate of return of capital employed; and (ii) the turnover, i.e., the speed at which
the capital employed in the business rotates.

26
4.1 WORKING CAPTIAL TURNOVER RATIO

Working capital of a concern is directly related to sales (i.e.) the current assets like
debtors, bills receivables, cash, stock etc., and change with the increase (or) decrease in sales.

Working capital =Current assets-Current liabilities

This excess of current assets over current liabilities is referred to as net working capital.
Working capital turnover ratio indicated the velocity of the utilization of net working capital.
This ratio indicated the number of times the working capital is turned over in the course of a
year. A higher ratio indicates efficient utilization of working capital and a low ratio indicated
otherwise.

Sales
WORKING CAPITAL TURNOVER RATIO = --------------------------
Working capital

27
 TABLE: 4.1
WORKING CAPITAL TURNOVER RATIO

Year Sales Networking capital Ratio

2017-18 316.00 35.81 8.82

2018-19 592.99 97.99 6.05

2019-20 773.40 101.23 7.64

2020-21 844.47 188.72 4.47

2021-22 654.39 164.32 3.98

Sources: Secondary data

INTERPRETATION:
The above table shows that the working capital turnover ratio is 8.82 in the year 2017-
2018 and decreased to 6.05 in the year 2018-19 and then it is increased to 7.64 in the year 2019-
20 and then it is decreased to 4.47 in the year 2020 - 2021 and then it is decreased to 3.98. This
shows working capital turnover ratio is decrease level.

28
 CHART –- 4.1
WORKING CAPITAL TURNOVER RATIO

8.82
9
7.64
8
7 6.05
6
4.47
RATIO

5 3.98
4
3
2
1
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

29
4.2 INVENTORY TURNOVER RATIO
Inventory turnover ratio implicates the number of times the stock has been turned over
during the period and evaluates the efficiency with which a firm is able to manage its inventory.

Cost of goods sold

INVENTORY TURN OVER RATIO = ---------------------------------
Average stock

Opening stock + closing Stock

Average Stock = ---------------------------------------------
2

TABLE: 4.2
INVENTORY TURNOVER RATIO

Year Cost of goods sold Average stock Ratio

2017-18 20.17 15.67

316.00

2018-19 592.99 22.78 26.03

2019-20 773.40 28.60 27.04

2020-21 28.92 29.20

844.47

2021-22 654.39 47.35 13.82

Sources: Secondary data

INTERPRETATION:
The above table shows the inventory turnover ratio. From this it is inferred that in the
year 2017-18 the ratio is 15.67, in the year 2018-2019 the ratio is 26.03, in the year 2019-2020
the ratio is 27.04, in the year 2020-2021 the ratio is 29.20, in the year 2021-2022 the ratio is
13.82. From this it is inferred that in the year 2021-2022 it has decreased to 13.38.

30
 CHART – 4.2
INVENTORY TURNOVER RATIO

29.2
30 27.04
26.03
25

20
15.67
RATIO

13.82
15

10

0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

31
 TABLE: 4.3
INVENTORY CONVERSION PERIOD

Year No. Of Days Inventory

Inventory Conversion
turnover ratio period
(in days)

2017-18 365 15.67 23

2018-19 365 26.03 14

2019-20 365 27.04 13

2020-21 365 29.20 12

2021-22 365 13.82 26

Sources: Secondary data

INTERPRETATION:
The above table shows that the inventory conversion period. From that in the year 2017-
2018 in the conversion period is 23days, in the year 2018-2019 ,2021-22. The period shows
increasing trend by every year. The highest period is 26 days in the year 2021-22 and lowest
period is 12 days in the year 2020-21.

32
 CHART – 4.3
INVENTORY TURNOVER RATIO

30
26
25 23

20
RATIO

14 13
15 12

10

0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

33
4.4 DEBTORS TURNOVER RATIO

The liquidity position of a concern to pay its short term obligations in time depends
upon the quality of its debtors. Debtors turn ratio indicates the velocity of debtors collection
firm (i.e.) it indicates the number of times average debtors are turned over during a year.

Sales
DEBTORS TURN OVER RATIO = ---------------------------------------------------
Average Debtors + Bills Receivable

TABLE: 4.4
DEBTORS TURNOVER RATIO

Year Sales Average Debtors Ratio

2017-18 64.57 4.89

316.00

2018-19 592.99 80.62 7.35

2019-20 773.40 128.9 6.00

2020-21 153.77 5.49

844.47

2021-22 654.39 161.39 4.05

Sources: Secondary data

INTERPRETATION:
The above table shows the Debtors turnover ratio. From this it is inferred that in the year
2017-2018 the ratio is 4.89, in the year 2018-2019 the ratio is 7.35, in the year 2019-2020 the
ratio is 6.00, in the year 2020-2021 the ratio is 5.49 in the year 2021-2022 the ratio is 4.05.
Finally inferred that the debtors turnover ratio is decreased to 4.05 in the year 2021-2022.

34
 CHART – 4.4
DEBTORS TURNOVER RATIO

8 7.35
7
6
5.49
4.89
5 4.05
RATIO

4
3
2
1
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

35
4.5 DEBTORS COLLECTION PERIOD
Debtor’s conversion period or Debtor Collection Period is the average time taken to
convert debtors into cash.

Debtors Collection Period = Days in Year

Receivable Turnover Ratio

TABLE NO 4.5
DEBTORS COLLECTION PERIOD

YEAR NO.OF.DAYS IN RECEIVABLE DEBTORS

YEAR TURNOVER RATIO COLLECTION
PERIOD
(in days)
2017-18 365 4.89 75

2018-19 365 7.35 50

2019-20 365 6.00 61

2020-21 365 5.49 66

2021-22 365 4.05 90

Sources: Secondary Data

INTERPRETATION
The above table shows the Debtor Collection Period. From this it is inferred that
in the year 2017-2018 the ratio is 4.89 the period is increased in 75 days, in the year 2018-
2019the ratio is 7.35 the period is decreased in 50 days, in the year 2019-2020 the ratio is 6.00
the period is increased in 61 days, in the year 2020-2021 the ratio is 5.49 the period is increased
in 66 days, in the year 2021-2022 the ratio is 4.05 the period is increased in 90 days.

36
 CHART NO 4.5
DEBTORS COLLECTION PERIOD

90
90
80 75
66
70 61
60 50
50
RATIO

40
30
20
10
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

37
4.6 GROSS PROFIT RATIO
The gross profit ratio is also known as gross margin ratio, trading margin ratio etc., it is
expressed as a “percent ratio”. The different between net sales and cost of goods sold is known
as gross profit.

Gross profit / Loss

GROSS PROFIT RATIO = -------------------------------------
Net Sales

TABLE – 4.6
GROSS PROFIT RATIO

Year Gross Profit / Loss Net Sales Ratio

2017-18 1.65 0.52

316.00
2018-19 2.94 592.99 0.49

2019-20 4.00 773.40 0.52

2020-21 5.61 0.66

844.47
2021-22 -8.03 654.39 -1.23

Sources: Secondary data

INTERPRETATION:
The above table shows the gross profit ratio. From this it is inferred that in the year
2017-2018 the ratio is increased to 0.52, in the year 2018-2019 the ratio is decreased to 0.49, in
the year 2019-2020 the ratio is increased to 0.52, in the year 2020-2021 the ratio is increased to
0.66, in the year 2021-2022 the ratio is decreased to -1.23.

38
 CHART – 4.6
GROSS PROFIT RATIO

0.8 0.66
0.52 0.49 0.52
0.6
0.4
0.2
0
2017-18 2018-19 2019-20 2020-21 2021-22
RATIO

-0.2
-0.4
-0.6
-0.8
-1
-1.2
-1.4 -1.23
YEAR

39
4.7 NET PROFIT RATIO
It establishes a relationship between net profit (after tax) and sales. It is determined by
dividing the net income after tax to the sales for the period and measures the profit per rupee of
sales.
Net profit / Loss
NET PROFIT RATIO = -------------------------------------------------- X 100
Net Sale

TABLE – 4.7
NET PROFIT RATIO

Net Profit / Loss Net Sales

Year Ratio (%)

2017-18 1.04 316.00 0.32

2018-19 1.81 592.99 0.30

2019-20 2.64 773.40 0.34

2020-21 3.63` 844.47 0.43

2021-22 -8.35 654.39 -1.27

Sources: Secondary data

INTERPRETATION:
The above table shows the Net profit ratio for the period of 2017-18 to 2021-22. The
ratio shows that (0.32) at 2017-18 and increased to (0.34) at 2018-19 and then it was increased
to -0.43 in 2020-21 and then Decrease to -1.27 in 2021-22. So the Net Profit Ratio is fluctuated
trend and decreasing trend.

40
 CHART – 4.7
NET PROFIT RATIO

0.6 0.43
0.32 0.3 0.34
0.4
0.2
0
-0.2 2017-18 2018-19 2019-20 2020-21 2021-22
RATIO

-0.4
-0.6
-0.8
-1
-1.2
-1.4 -1.27
YEAR

41
CURRENT RATIO:
Current ratio is the most common ratio for measuring liquidity. The current ratio is the
ratio of total current assets to total current liabilities. Current ratio of affirm measures its term
solvency i.e. ability to meet short term obligations. Current assets mean assets that will either be
used up or converted into cash within a year’s time or during the normal operating cycle of the
business, whichever is longer.

Current assets
Current assets = ------------------------------
Current liabilities

TABLE – 4.8
CURRENT RATIO

Year Current Assets Current liabilities Ratio

2017-18 57.48 21.67 2.65

2018-19 164.86 66.87 2.46

2019-20 157.11 55.88 2.81

2020-21 217.11 28.39 7.65

2021-22 211.95 47.63 4.45

Sources: Secondary data

INTERPRETATION:
The above table shows the current ratio is an indicator of the firm’s ability to meet its
current obligations. The lowest ratio (2.46) was obtained during the period 2018-19 and the
highest ratio (7.65) value obtained during the period 2020-21. The current asset ratio is above
than the Fluctuated in year by year. Therefore the current ratio is considered not satisfactory.

42
 CHART – 4.8
CURRENT RATIO

7.65
8
7

5 4.45
RATIO

4
2.65 2.81
3 2.46

2
1
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

43
4.9 CREDITOR TURNOVER RATIO
The accounts payable turnover ratio is a short term liquidity measures used to quantify
the rate at which a company pays off its suppliers. Accounts payable turnover ratio is calculated
by taking purchases and purchase made from the suppliers and dividing it by the average trade
debtors.

Creditor Turnover Ratio = Purchase

Average Creditors

TABLE NO: 4.9

CREDITORS TURNOVER RATIO

YEAR PURCHASE AVERAGE CREDITORS

(in thousand) CREDITORS TURNOVER RATIO
(in thousand)
2017-18 308.18 35.14 8.77

2018-19 581.00 43.58 13.33

2019-20 747.62 60.37 12.38

2020-21 767.35 41.57 18.46

2021-22 586.01 38.01 15.42

Source: Secondary Data

INTERPRETATION
The table shows creditor turnover ratio. Higher payable turnover ratio may
indicate the less period of credit enjoyed by the business and the business has a better liquidity
position. In the financial year 2020-21 creditor turnover ratio is high when compared to other
years. Then the creditor turnover ratio is decreased in the year 2021-22. Currently, the company
has 15.42 of creditor turnover ratio and ratio level is decreased when compared to previous
years.

44
 CHART NO: 4.9
CREDITORS TURNOVER RATIO

20 18.46
18
15.42
16
13.33
14 12.38
12
RATIO

10 8.77
8
6
4
2
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

45
4.10 CREDITOR COLLECTION PERIOD
Creditor Collection Period is the average time taken by the firm in paying its suppliers.

Creditors Collection Period = Days in Year

Creditor Turnover Ratio

TABLE NO: 4.10

CREDITOR COLLECTION PERIOD

YEAR NO.OF.DAYS IN CREDITORS CREDITOR

YEAR TURNOVER RATIO COLLECTION
PERIOD
2017-18 365 8.77 42

2018-19 365 13.33 27

2019-20 365 12.38 29

2020-21 365 18.46 20

2021-22 365 15.42 24

Sources: Secondary data

INTERPRETATION
The above table shows the creditor collection period. From this it is inferred that
in the year 2017-2018 the ratio is 8.77 the period is increased to 42, in the year 2018-2019 the
ratio is 13.33 the period is decreased to 27, in the year 2019-2020 the ratio is 12.38 the period is
increased to 29, in the year 2020-2021 the ratio is 18.46 the period is increased to 20, in the year
2017-2018 the ratio is 15.42 the period is increasing.

46
 CHART NO: 4.10
CREDITOR COLLECTION PERIOD

45 42
40
35
29
30 27
24
25
RATIO

20
20
15
10
5
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

47
4.11 CURRENT ASSET TURNOVER RATIO:
The ratio between sales and the current assets is call current assets turnover ratio.

Current Asset Turnover Ratio = Sales / Current Asset

TABLE – 4.11
CURRENT ASSET TURNOVER RATIO

Year Sales Current asset Ratio

2017-18 316.00 57.48 5.50

2018-19 592.99 164.86 3.60

2019-20 773.40 157.11 4.92

2020-21 844.47 217.11 3.89

2021-22 654.39 211.95 3.09

Source: Annual Report

INTERPRETATION
The above table it is inferred that in the year 2017-2018 the current asset turnover
ratio 5.50, in the year 2018-2019 the current asset turnover ratio 3.60, in the year 2019-2020 the
current asset turnover ratio 4.92 in the year 2020-2021 the current asset turnover ratio 3.89, in
the year 2021-2022 the current asset turnover ratio 3.09

48
 CHART – 4.11
CURRENT ASSET TURNOVER RATIO

6 5.5
4.92
5
3.89
4 3.6
3.09
RATIO

0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

49
4.12 FIXED ASSETS TURNOVER RATIO
This ratio determines efficiency of utilization of fixed assets and profitability of a
business concern. Higher the ratio more is the efficiency in utilization of fixed assets. A lower
ratio is the indication of underutilization of fixed assets.
Formula
Sales
Fixed assets turnover ratio = -------------------------
Net fixed assets

Where net fixed assets = Fixed assets – Depreciation

TABLE – 4.12
FIXED ASSET TURNOVER RATIO

Year Fixed asset Sales Ratio

2017-18 0.87 316.00 0.003

2018-19 1.01 592.99 0.002

2019-20 0.88 773.40 0.001

2020-21 0.91 844.47 0.001

2021-22 0.92 654.39 0.001

Source: Annual Repor

INTERPRATATION
The above table shows the Fixed Asset Turnover Ratio for the period 2017 to 2022. In the
year 2017 – 2018 it is 0.003, and further 4 years it is been decreased to 0.002 and 0.001.so the
fixed asset turnover ratio is fluctuating and it is in decreasing trends.

50
 CHART– 4.12
FIXED ASSET TIRNOVER RATIO

0.0035
0.003
0.003
0.0025
0.002
0.002
RATIO

0.0015
0.001 0.001 0.001
0.001
0.0005

0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

51
4.13 FIXED ASSET RATIO
The ratio establishes the relationship between fixed assets and long-term funds. The
objective of calculating this ratio is to ascertain the proportion of long-term funds invested in
fixed assets. The ratio is calculated as given below:

Formula
Fixed assets
Fixed assets ratio = ----------------------------
Long – term funds

The ratio should not generally be more than ‘1’. If the ratio is less than one it indicates
that a portion of working capital has been financed by long – term funds. It is desirable in that
part of working capital is core working capital and it is more or less a fixed item.
An ideal fixed assets ratio is 0.67

TABLE NO 4.13
FIXED ASSETS RATIO

Year Fixed Assets Long Term Funds Ratio

2017-18 0.87 0.00 0

2018-19 1.01 17.97 0.06

2019-20 0.88 30.62 0.03

2020-21 0.91 23.96 0.04

2021-22 0.92 27.36 0.03

Source: Secondary data

INTERPRETATION
The above table shows the fixed asset ratio for the period 2017-2022. In the year 2017 –
2018 the fixed asset ratio is 0.00, in the year 2018 – 2019 it is been increased to 0.06, in the last
three years it is been increased to 0.03, 0,04, 0,03

52
 CHART NO 4.13
FIXED ASSETS RATIO

0.06
0.06

0.05
0.04
0.04
0.03 0.03
RATIO

0.03

0.02

0.01
0
0
2017-18 2018-19 2019-20 2020-21 2021-22
YEAR

53
 TABLE NO: 4.14
TREND ANALYSIS OF CASH AND BANK

YEAR X X² CASH AND XY Y = a + Bx

BANK
(Y)
2017-2018 -2 4 0.07 -0.14 -2.77

2018-19 -1 1 -6.75 6.75 -4.57

2019-20 0 0 -7.89 0 -6.37

2020-21 1 1 -9.95 -9.95 -8.17

2021-22 2 4 -7.32 -14.65 -9.97

TOTAL 0 10 -31.84 -17.99

2021 3 -11.77

2022 4 -13.57

a = -31.84 / 5 b = -17.99/ 10

a = -6.37 b = -1.80

INTERPRETATION
This table indicates that the volume has been increased every year. It must be
increased for every year, it should not be decreased. It is negative in the company. Cash and
Bank value in the year 2022 will be Rs. -11.77 (in thousand) and in the year 2023 will be Rs. -
13.57 (in thousand).

54
 CHART NO: 4.14
TREND ANALYSIS OF CASH AND BANK

0
-1 2017-18 2018-19 2019-20 2020-21 2021-22
-2
-3
-4
RATIO

-5
-6
-7
-8
-9
-10
YEAR

55
 TABLE NO: 4.15
TREND ANALYSIS

CURRENT ASSETS CURRENT LIABILITIES WORKING CAPITAL

TREND TREND TREND
YEAR AMOUNT AMOUNT AMOUNT
% % %
2017-18 57.48 100 21.67 100 35.81 100
2018-19 164.86 286.81 66.87 308.58 97.99 273.64
2019-20 157.11 273.32 55.88 257.86 101.23 282.69
2020-21 217.11 377.70 28.39 131.01 188.72 527.01
2021-22 211.95 368.72 47.63 219.80 164.31 458.87
Sources: Secondary Data

INTERPRETATION
The Current assets have increased to 368.72% over the Five‐years period while the
current liabilities have increased to 219.80 and the working capital is 458.87. These trend
percentages reflect an unfavorable impact on net income because cost increased at a faster rate
than sales.

56
 CHART NO -4.15
TREND ANALYSIS

600 527.01
500 458.87
377.7 368.72
400
28360273.64
.88.158 273282.69
RATIO

300 25.73.286
219.8 CURRENT ASSETS
200 131.01 CURRENT LIABILITIES
1010100
100 WORKING CAPITAL

YEAR

57
4.16 CASH CYCLE
Flow of cash those beings with payment for raw materials and ends with receipt of cash
on goods sold. Shorter then number of the days in the cycle, more then the amount of available
cash and lesser then the need to borrow, and also ‘called as cash conversion cycle or cash flow
cycle’.

TABLE NO: 4.16

CASH CYCLE FOR THE YEAR 2017-2021

Year Inventory Debtor Conversion Creditor Cash Cycle

Conversion Period Period (B) Conversion Period (A+B+C)
(A) (C)
23 75 42 140
2017-18

14 50 27 91
2018-19

13 61 29 103
2019-20

12 66 20 98
2020-21

26 90 24 140
2021-22

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FORMULA
Cash Cycle = Inventory Conversion Period + Debtor Conversion Period +
Creditor Conversion Period
TURNOVER = No. of Working Days / Cash Cycle
2017-2018 = 365 / 140 = 2.61 times
2018-2019= 365 / 91 = 4.01 times
2019-2020 = 365 / 103 = 3.54 times
2020-2021 = 365 / 98 = 3.72 times
2021-2022 = 365 / 140 = 2.61 times
AVERAGE TURNOVER = 2.61+4.01+3.54+3.72+2.61
= 16.49 / 5
= 3.30 TIMES

INTERPRETATION
The cash position in the year 2020 and 2021 is low and it is upward process on
during the year 2022 and 2023. In 2023 the cash position is 3.30 times.

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 TABLE NO: 4.17
CASH FLOW STATEMENT

Cash flow from operations:

Net earnings 654.39
Additions to cash:
Depreciation 0.36
Decrease in Account receivable 17.77
Increase in account payable 19.24 37.37
Increase in taxes payable -
691.76
Subtractions from cash:
Increase in inventories 12.65
Net cash from operations -7.32 5.33
Cash flow from investing:
Equipment 586.01 586.0
591.34
Cash flow from financing
Notes payable -
Cash flow for year ended 31 mar. 2022 100.42

60
 CHAPTER – V
FINDINGS, SUGGESTION AND CONCLUSION

5.1 FINDINGS

 The working capital turnover ratio is 8.82 in the year 2017-2018 and decreased to 6.05
in the year 2018-19 and then it is increased to 7.64 in the year 2019-20 and then it is
decreased to 4.47 in the year 2020 - 2021 and then it is decreased to 3.98. This shows
working capital turnover ratio is decrease level.
 The inventory turnover ratio. From this it is inferred that in the year 2017-18 the ratio is
15.67, in the year 2018-2019 the ratio is 26.03, in the year 2019-2020 the ratio is 27.04,
in the year 2020-2021 the ratio is 29.20, in the year 2021-2022 the ratio is 13.82. From
this it is inferred that in the year 2021-2022 it has decreased to 13.38.
 The inventory conversion period. From that in the year 2017-2018 in the conversion
period is 23days, in the year 2018-2019 ,2021-22. The period shows increasing trend by
every year. The highest period is 26 days in the year 2021-22 and lowest period is 12
days in the year 2020-21.
 The Debtors turnover ratio. From this it is inferred that in the year 2017-2018 the ratio is
4.89, in the year 2018-2019 the ratio is 7.35, in the year 2019-2020 the ratio is 6.00, in
the year 2020-2021 the ratio is 5.49 in the year 2021-2022 the ratio is 4.05. Finally
inferred that the debtors turnover ratio is decreased to 4.05 in the year 2021-2022.
 The Debtor Collection Period. From this it is inferred that in the year 2016-2017 the
ratio is 4.89 the period is increased in 75 days, in the year 2017-2018 the ratio is 7.35 the
period is decreased in 50 days, in the year 2018-2019 the ratio is 6.00 the period is
increased in 61 days, in the year 2019-2020 the ratio is 5.49 the period is increased in 66
days, in the year 2020-2021 the ratio is 4.05 the period is increased in 90 days.
 The gross profit ratio. From this it is inferred that in the year 2016-2017 the ratio is
increased to 0.52, in the year 2017-2018 the ratio is decreased to 0.49, in the year 2018-
2019 the ratio is increased to 0.52, in the year 2019-2020 the ratio is increased to 0.66,
in the year 2020-2021 the ratio is decreased to -1.23.
 The Net profit ratio for the period of 2016-17 to 2020-21. The ratio shows that (0.32) at
2016-17 and increased to (0.34) at 2017-18 and then it was increased to -0.43 in 2019-20
and then Decrease to -1.27 in 2020-21. So the Net Profit Ratio is fluctuated trend and
decreasing trend.

61
 The current asset ratio is an indicator of the firm’s ability to meet its current obligations.
The ratio (2.46) was obtained during the period 2017-2018 and the highest ratio (7.65)
value obtained during the period 2019-2020. The current asset ratio is above than the
fluctuated in year by year. Therefore the current ratio is considered not satisfied.
 Then the creditor turnover ratio is decreased in the year 2022 – 2022. Currently, the
company has 15.42 of creditor turnover ratio and is ratio level is decreased when
compared to previous years.
 The creditor collection period. From this it is inferred that in the year 2017-2018 the
ratio is 8.77 the period is increased to 42, in the year 2018-2019 the ratio is 13.33 the
period is decreased to 27, in the year 2019-2020 the ratio is 12.38 the period is increased
to 29, in the year 2020- 2021 he ratio is 18.46 the period is increased to 20, in the year
2017-2018 the ratio is 15.42 the period is increasing.
 The current assets turnover ratio it is inferred that in the year 2017-2018 current turnover
ratio is 5.50, in the year 2018-2019 the current asset ratio 3.60, in the year 2019-2020
the current asset turnover ratio 4.92 in the year 2020-2021 the current asset turnover
ratio 3.89, in the year 2021-2022 the current asset turnover ratio 3.09.
 In the financial years the fixed asset turnover ratio for the period 2017-2022. In the year
2017 – 2018 it is 0.003, and further 4 years it is been decreased to 0.002 and 0.001. 80
the fixed asset turnover ratio is fluctuating and it is in decreasing trends.
 Fixed assets ratio during the period 2017-18 to 2021-22. The table indicates that the
company has 0.00 in the year of 2017-18 Then next year Increased to 0.06 in 2018-19.
The last year Decreased 0.03 in the year of 2021-22. The Fixed asset ratio is Fluctuating
trend.
 The fixed asset ratio for the period 2017 – 2022. In the year 2017 – 2018 the fixed asset
ratio is 0.00, in the year 2018 – 2019 if is been increased to 0.06, in the last three year it
is been increased to 0.03, 0.04, 0.03.
 Cash and Bank value in the year 2021 will be Rs. -11.77 (in thousands) and in the year
2022 will be Rs. -13.57 (in thousands). It is negative in the company.

62
 The Current assets have increased to 368.72% over the Five‐years period while the
current liabilities have increased to 219.80 and the working capital is 458.87. These
trend percentages reflect an unfavourable impact on net income because cost increased
at a faster rate than sales.
 The cash position in the year 2019 and 2020 is low and it is upward process on during
the year 2021 and 2022. In 2022 the cash position is 3.30 times.

63
5.2 SUGGESTIONS

1. The company needs to minimize its cash expenses in order to increase its cash in hand,
cash at bank and other short term securities.
2. There is a need to maintain balance between profitability and liquidity which is only
possible if the company is having adequate cash balance.
3. The company should plan to maximize its net income after tax which in turn will help
the company to have adequate cash balance.
4. The company should have a check on its cash conversion cycle so that it can have proper
flow of cash throughout the year.
5. The company may try to improve its working capital position through long term sources.
It will create free flow of funds. So that the cash management and the company
performance will be in a good position.
6. The company should provide more credit facilities to the customer’s sales and also to
yield a good profit.
7. The company should concentrate on local sales over sales by export sales and
profitability of the concern.

64
5.3 CONCLUSION

This shows that the firm needs to further streamlined its cash management system and
also needs to frame better cash management policies. Mere cash balance in excess of
requirement will not add anything to the concern. If it is not being put to use in proper manner,
it definitely have an adverse effects in its profitability.

The surplus cash which is at the disposal of the firm should be invested in various
financial instruments or it can be utilized in other purpose. If the firm takes proper care about its
cash management system and manage its excess liquidity (i.e. over the optimum cash balance
level) by having proper investment policies, it will definitely enhance its profitability and also
help in enriching its capital base. Cash management practice is relatively better in the halls of
residence, although the researcher is of the opinion that much improvement could be made if
Bursars are challenged and well-motivated by the appropriate authorities.

65
 BIBLIOGRAPHY

Books

1. Marfo-Yiadom, E. A Survey of Cash Management Practices of Selected Firms in

Accra-Tema Metropolitan area of Ghana, The Oguaa Journal of Social Studies,

Vol.3,(June), pp.165-182.

2. Richards, N.D. and Laughlin, E.L. A Cash Conversion Cycle Approach to Liquidity

Analysis, Financial Management (Spring), pp.32-38

3. John K. M. “Cash Management Practices of Small Business Owners in the Cape Coast

Metropolitan Area of Ghana”. Asian Economic and Financial Review, Vol.2,

No.1,pp.40 – 58.

4. W.J. Baumol, The Transactions Demand for Cash: An Inventory Theoretical Approach,

“Quarterly Journal of Economics, Vol. 66, No. 4, pp. 545-556.

5. R.R. Bari Cash Planning & Management, (New Delhi: Triveni Publications,), P.2

6. Surendra S. Singhri & John A. Kaupisch: Review of Management, Economic &

Political Weekly, "Cash Management in a Developing Economy.” Vol 5, No.35,

(August 29,), P.95.

66
PROFIT AND LOSS ACCOUNT OF ARUNA ALLOY STEELS PVT.LTD
ON MARCH 2018-2022
Particulars 2018 2019 2020 2021 2022
Income
Sales Turnover 316.00 592.99 773.40 844.47 654.39
Net Sales 316.00 592.99 773.40 844.47 654.39
Other Income 0.93 1.89 1.65 1.14 0.87
Stock Adjustments 0.00 0.00 0.00 24.22 12.66
Total Income 316.93 594.88 775.05 869.83 667.92
Expenditure
Raw Materials 308.18 581.00 747.62 767.35 586.01
Power & Fuel Cost 0.00 0.00 0.00 0.03 0.19
Employee Cost 0.63 1.40 1.63 2.45 3.10
Miscellaneous Expenses 6.06 7.53 14.58 83.03 75.19
Total Expenses 314.87 589.93 763.83 852.86 664.49
Operating Profit 1.13 3.06 9.57 15.83 2.56
PBDIT 2.06 4.95 11.22 16.97 3.43
Interest 0.41 2.01 7.22 11.36 11.46
PBDT 1.65 2.94 4.00 5.61 -8.03
Depreciation 0.10 0.26 0.27 0.43 0.36
Profit Before Tax 1.55 2.68 3.73 5.18 -8.39
PBT (Post Extra-ord Items) 1.55 2.68 3.73 5.18 -8.39
Tax 0.51 0.87 1.11 1.54 -0.04
Reported Net Profit 1.04 1.81 2.64 3.63 -8.35
Total Value Addition 6.69 8.94 16.21 85.51 78.47
Per share data (annualised)
Shares in issue (lakhs) 77.50 77.50 77.50 77.50 77.50
Earning Per Share (Rs) 1.34 2.33 3.40 4.69 -10.77
Book Value (Rs) 19.60 21.95 25.35 29.89 18.93

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 BALANCE SHEET OF ARUNA ALLOY STEELS PVT.LTD AS
ONMARCH 2018-2022
Particular 2018 2019 2020 2021 2022
Sources Of Funds
Total Share Capital 7.60 7.61 7.61 7.61 7.61
Equity Share Capital 7.60 7.61 7.61 7.61 7.61
Reserves 7.59 9.40 12.04 15.56 7.06
Net worth 15.19 17.01 19.65 23.17 14.67
Secured Loans 0.00 17.97 30.62 23.96 27.36
Unsecured Loans 21.49 64.02 51.84 142.49 123.20
Total Debt 21.49 81.99 82.46 166.45 150.56
Total Liabilities 36.68 99.00 102.11 189.62 165.23
Application Of Funds
Gross Block 1.73 2.13 2.27 2.69 3.05
Less: Accum. Depreciation 0.86 1.12 1.39 1.78 2.13
Net Block 0.87 1.01 0.88 0.91 0.92
Inventories 5.16 40.40 16.81 41.03 53.68
Sundry Debtors 40.77 120.54 137.26 170.28 152.51
Cash and Bank Balance 0.07 -6.75 -7.89 -9.95 -7.32
Total Current Assets 46.00 154.19 146.18 201.36 198.87
Loans and Advances 11.48 10.67 10.93 15.75 13.08
Total CA, Loans & Advances 57.48 164.86 157.11 217.11 211.95
Current Liabilities 21.17 65.99 54.75 28.39 47.63
Provisions 0.50 0.88 1.13 0.00 0.00
Total CL & Provisions 21.67 66.87 55.88 28.39 47.63
Net Current Assets 35.81 97.99 101.23 188.72 164.32
Total Assets 36.68 99.00 102.11 189.63 165.24
Contingent Liabilities 0.00 0.23 0.23 0.23 0.00
Book Value (Rs) 19.60 21.95 25.35 29.89 18.93

68
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