CASH MANAGEMENT

IN
UNIMECH SEALS INDIA
PVT LTD

SECOND REVIEW

SUBMITTED TO SUBMITTED BY

DR.PADMASANI PRIYA.V
DEPARTMENT OF COMMERCE II M.COM FA
BHARATHIAR UNIVERSITY DEPARTMENT OF COMMERCE
COMPANY PROFILE

 Company : Unimech Seals (India) pvt limited

 Address : 3/556, Gandhinagar,
Coimbatore-641017
 Proprietor : Mr.D.Ashwin
 Contact : 0422-4397207, 9843520107
 Bank : Indian Bank
 No of employees : 290
 Experience in Trade : 8 years
 Working Hours : 8 am to 5 pm
 Capital : 50,00,000
 Accounting System : Computerized Accounting Tally
 Types of Manufacturing : Mechanical Seals
 
 CASH MANAGEMENT

INTRODUCTION
Cash management is concerned with managing the Cash flows in and
out of the firm, cash flows within the firm and cash balances held by the
firm at a point of time by financing deficit or investing surplus cash.
It refers to the efficient management of cash in a business in order to
put the cash to work more quickly and to keep the cash in applications that
produce profitable income.
REVIEW OF LITERATURE

 Jeffrey P. Davidson et al, 1992 indicated in their book that cash flow can
be a problem even when a small business has numerous clients, offers a
superior product to its customers, and enjoys a sterling reputation in its
industry. Companies suffering from cash flow problems have no margin
of safety in case of unanticipated expenses. They also may experience
trouble in finding the funds for innovation or expansion. Finally, poor
cash flow makes it difficult to hire and retain good employees.
 Davidson (1992:13-12), The minimum cash balance is established by
taking into consideration the basic safety cushion needed, minimum bank
balance requirements, and the rate of daily cash collections and
disbursements. Cash balances should be maintained at the lowest practical
minimum because excess cash earns nothing and loses purchasing power
in period of rising prices.
 Waltson and Head (2007) explained Cash management as the concept
which is concerned with optimizing the amount of cash available,
maximizing the interest earned by spare funds not required immediately and
reducing losses caused by delays in the transmission of funds.
 zimmerer et al (2008) cash management is the process of forecasting,
collecting, disbursing, investing, and planning for cash a company needs to
operate smoothly. They further added that cash management is a vital task
because it is the most important yet least productive asset that a small
business owns. A business must have enough cash to meet its obligations or
it will be declared bankrupt. Creditors, employees and lenders expect to be
paid on time and cash is the required medium of exchange.
STATEMENT OF THE PROBLEM

 Cash management is imperative in every business organisation as cash

said to be the lifeblood of any business and today managing it has
been significantly influenced by the growing developments in business
over the years. Poor cash management is the main reason for business
failure and also stumbling block for entrepreneurs. Therefore, here in
this project an effort has been made to evaluate the cash management
of Unimech Seals India Private Ltd.
OBJECTIVES OF THE STUDY

The objectives are:

 To study the cash position of Unimech Seals India Private Ltd.
 To find out the sources of funds and their applications.
 To analyze the cash conversion cycle of the company.
RESEARCH METHODOLOGY

Sources of data
The study is mainly based on secondary data and the informations are
collected from:
 Profit & loss account published by the company
 Balance sheet published by the company
 Annual reports of Unimech seals (India) Pvt ltd
 Periodicals, books, manuals of the company
PERIOD OF STUDY
The period of study is from the year 2010 to 2014.

TOOLS FOR ANALYSIS

 Ratio Analysis:
Liquid Ratio
Net cash flow to Current Liabilities
Cash to Current Asset Ratio
Cash to Sales Ratio
 Cash Conversion Cycle
 Cash Flow Statement
SIGNIFICANCE OF CASH MANAGEMENT

Cash management ensures that the firm has sufficient cash during peak
times, for purchases and for other purposes and it helps to meet the
obligatory cash outflows when they fall due. It assist in planning capital
expenditure projects and also helps to invest surplus cash for short and long
term periods to keep the idle funds fully employed.
SCOPE OF THE STUDY

The scope of the study is about the proper cash management by

managing inflow and outflow of cash in a better way. This study will help
to identify the areas related to reduction of expenses, purpose of cash
management, activities and techniques used to cash management. The task
of the financial manager in managing working capital efficiently is to
ensure sufficient liquidity in the operations of the enterprise. The liquidity
of the business firm is measured by its ability to satisfy short-term
obligations of the firm.
LIMITATIONS OF THE STUDY

 A broad study could not be done as study was confined only to a

limited period.
 The study is limited only to the cash management of the firm.
 Analysis could not be made monthly as only year wise data has been
provided.
CHAPTER SCHEME

 The first chapter deals with introduction of the study

 The second chapter deals with profile of the company.
 The third chapter deals with study on cash management of Unimech seals
India PVT LTD.
 The fourth chapter deals with findings, suggestions and conclusion.
 DATA ANALYSIS AND INTERPRETATION

3.1 Quick Ratio

Quick Ratio is a financial ratio used to gauge a company’s liquidity. It is
also known as acid test ratio.
Quick ratio=Quick asset/current liabilities.

Year Quick Current Ratio

Quick ratio
Liabilities(Rs.in
Assets( 1.4
Cr)
Rs in 1.17
1.2
Cr)
1 0.93 0.82000000000000
0.85000000000000
1 1 0.74000000000000
2010 2025.92 2167.75 0.93
0.8 1 Quick ratio

2011 2393.72 2897.86 0.82 0.6

0.4
2012 3850.06 4496.86 0.85
0.2
2013 4032.76 5431.32 0.74
0
2010 2011 2012 2013 2014
2014 4597.13 3924.46 1.17
3.2 NET CASH FLOW TO CURRENT LIABILITIES RATIO

It can be obtained by matching current obligation with net

cash flows. This ratio is also called “Test of Actual Liquidity”.
Net cash flow to current liabilities = Net Cash Flow / Current Liabilities

Year Net Cash Current Ratio

(Rs. In Cr) Liabilities( NET CASH FLOW TO CURRENT LIABILITIES
RATIO
Rs. In Cr)
0.25
0.21 0.21
0.2
2010 445.42 2167.75 0.21
0.15
2011 605.77 2897.86 0.21
0.1 0.09
2012 388.47 4496.86 0.09
0.05
2013 34.18 5431.32 0.007 0.007 0.01
0
2014 36.49 3924.46 0.01 2010 2011 2012 2013 2014
 3.3 CASH TO SALES RATIO

It is the comparison of cash balance at the end of the period to the

sales revenue in that period.

Cash to sales Ratio= Average cash balance/Sales revenue

Year Average Cash Sales Ratio

CASH TO SALES RATIO
balance Revenue(Rs. in
0.16
Cr) 0.141
Assets(Rs in 0.14
Cr)
0.12
0.109
2010 445.42 4079.05 0.109
0.1
0.084
0.08
2011 605.77 4295.90 0.141
0.06

2012 388.47 4625.68 0.084 0.04

0.02
2013 34.18 4999.26 0.006 0.006 0.007
0
2010 2011 2012 2013 2014
2014 36.49 5475.63 0.007
3.4 CASH TO CURRENT ASSET RATIO
It is the current value of marketable securities and cash divided by the company’s
current liabilities. It is also known as cash ratio.

Cash to Current Asset Ratio = Cash & cash equivalent + Marketable securities
/Total Current Asset

Year Cash & cash Current Ratio

Equivalent +Mar Asset (Rs. in
CASH TO CURRENT ASSET
RATIO
securities Cr) 0.9
0.83000000000000
1
Assets(Rs in Cr) 0.8
0.7
2010 445.42+1349.83 3375.75 0.41
0.6 0.58
0.52
2011 605.77+1963.92 4357.64 0.58 0.5 Series1
0.41 0.43
0.4
2012 388.47+2243.92 6093.98 0.43 0.3
0.2
2013 34.18+2903.02 5560.84 0.52 0.1
0
2014 36.49+3349.16 4060.78 0.83 2010 2011 2012 2013 2014
3.5 CASH CONVERSION CYCLE

It is a Cash flow calculation that attempts to measure the time taken by the
company to convert its investment in inventory and other resource inputs into cash

CCC = DSI + DSO – DPO

CASH CONVERSION CYCLE

Year DSI (Days) DSO (Days) DPO (Days) CCC (Days)

2010
133.00 155.72 213.51 75.21
2011
181.48 165.22 267.78 78.91
2012
187.08 288.60 374.91 100.77
2013
230.13 31.77 47.99 213.92
2014
206.31 31.95 22.63 215.63
 3.6.1 CASH FLOW STATEMENT FOR YEAR ENDED 31-03-2011

It is a financial statement that shows how changes in balance sheet accounts and income
affect cash and cash equivalents, and breaks the analysis down to operating, investing and
financing activities
CURRENT PREVIOUS
PARTICULARS
YEAR 2010-2011 YEAR 2009-2010
Rs in crs Rs in crs

Net profit before tax 5.21 5.10

Adjustment for expenses and provision 78.43 57.91

Adjustment for liabilities and asset 62.11 66.83

Cash flow from operating activities 109.37 102.77

Cash flow from investing activities 32.12 19.45

Cash flow from financial activities 113.01 109.64

Effect of exchange fluctuation on translation reserves 0

0

Net increase/decrease in cash and cash equivalents 23.42

28.48

Opening cash and cash equivalent 15.09 12.51

Closing cash and cash equivalent 25.09

43.47
3.6.2 CASH FLOW STATEMENT FOR YEAR ENDED 31-03-2012

CURRENT PREVIOUS
PARTICULARS
YEAR 2011-2012 YEAR 2011-2010
Rs in lakhs Rs in lakhs

Net profit before tax 17.61 5.21

Adjustment for expenses and provision 79.23 78.43

Adjustment for liabilities and asset 64.57 62.11

Cash flow from operating activities 114.98 109.37

Cash flow from investing activities 33.06 32.12

Cash flow from financial activities 119.46 113.01

Effect of exchange fluctuation on translation reserves 0 0

Net increase/decrease in cash and cash equivalents

29.80 28.48

Opening cash and cash equivalent 18.57 15.09

Closing cash and cash equivalent 46.5 43.47

3.6.3 CASH FLOW STATEMENT FOR YEAR ENDED 31-03-2013
CURRENT YEAR PREVIOUS YEAR
PARTICULARS 2012-2013 2012-2011
Rs in Cr Rs in Cr

Net profit before tax 17.41 17.11

Adjustment for expenses and provision 80.34 79.23

Adjustment for liabilities and asset 68.68 64.57

Cash flow from operating activities 118.24 114.98

Cash flow from investing activities 36.01 33.06

Cash flow from financial activities 121.83 119.46

Effect of exchange fluctuation on translation reserves 0

0

Net increase/decrease in cash and cash equivalents

31.64 29.80

Opening cash and cash equivalent 19.5 18.57

Closing cash and cash equivalent 48.8 46.5

3.6.4 CASH FLOW STATEMENT FOR YEAR ENDED 31-3-2014

PARTICULARS CURRENT YEAR 2014- PREVIOUS YEAR

2013 2013-2012
Rs in crs Rs in Crs

Net profit before tax 81 .88 17.41

Adjustment for expenses and provision 129.28

80.34

Adjustment for liabilities and asset 77.86 68.68

Cash flow from operating Activities 92.16

118.24

Cash flow from investing activities 314.88 36.01

Cash flow from financial activities 253.19 121.83

Effect of exchange fluctuation on translation reserves 0

0

Net increase/decrease in cash and cash equivalents 30.47

31.64

Opening cash and cash equivalent 33.86 19.5

Closing cash and cash equivalent 25.7 48.8

SUGGESTIONS
 Quick ratio of the firm is below the ideal ratio. The firm can improve
its liquid ratio by increasing their cash and bank balances and also by
investing in easily marketable securities, thereby their income can be
enhanced.
 The firm has to improve their current cash position by increasing the
sales and through effective utilization of current assets like stock,
debtors, bills receivables ,etc.,
 The company should be prompt in making payments so as to enjoy
cash discount opportunities.
 The company should try to prepare a proper schedule for debtors. This
will help them to reduce the bad debts.
 The company has more cash which is kept idle. Therefore, it must take
proper steps to invest the cash in other profitable ways.
 The Company should take necessary steps to increase sales and reduce
debtors by giving discounts for prompt payments.
 There should be a net increase in cash & cash equivalents, as the cash
flow statement shows negative balance for year 2014.
CONCLUSION
An analysis of cash management in Unimech seals found that the
company has been earning profit in an increasing trend. The ratio
analysis of the company shows a favorable trend during the period of
this study. Unimech seals is nurtured by quality consciousness,
passion for hard work and the will to succeed. The net working
capital of the concern shows an increasing trend in the last year, ie.
Current assets of the Unimech seals were more than the current
liabilities.
The company shows a positive working capital during the period of
analysis. Hence cash management of the company is good. The
company’s performance in cash management was going efficiently
for the years starting from 2010 – 2013. During 2014 there was a
slight fall because of non balance in cash inflow and outflow. From
the above study, it is hoped that “Unimech seals can achieve a greater
heights in the coming years”.