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CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION
Every business enterprise needs sufficient funds for its day to day operations.
Working capital is the life blood and nerve center of any business concern. The need and for
working capital arises due to the time gap between the production and realization of the cash
from sales.
The goal of the working capital management is to manage the firms current assets
and current liabilities in such a way that a satisfactory level of working capital is maintained.
The company gives almost attention to its working capital and manages the same in an
efficient manner.
Computation of Working Capital:
The two components of working capital are current assets and current liabilities.
They have a bearing on the cash operating cycle. In order to calculate the working capital
needs what is required is the holding period of various types of inventories, the collection
period, and the credit payment period.
The working capital also defends upon the budgeted level of activity in terms of
production sales. The calculation of working capital is based on the assumption that the
production sales are carried on evenly throughout the year and all costs accrue similar.
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STATEMENT SHOWING WORKING CAPITAL PROFORMA
Particulars Amount in
(Rs.)
Estimation of current assets [A]
(I) Inventories
Raw Materials
Work In Progress
Finished Goods
(II) Debtors
(III) Minimum cash and bank balance
(IV) Payment in advance
Total current Assets [A]
Estimation of current liabilities [B]
I. Creditors
(II) Lag in payment of wages
I. Lag in payment of overheads
II. Other expenses lag
Total current Liabilities [B]
Net Working Capital [A-B]
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XXX
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XXX
XXX
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LEVELS OF WORKING CAPITAL OF
FROM 2008-09 TO 2012-13
(in lakhs)
Particulars 2007-08 2008-09 2009-10 2010-11 2011-12
Current assets
Stocks 274152852 449178242 50516589 54110919 54802111
Receivables againstsupply of power
Cash and BankBalances
761262 1495095 930517 1571290 1400402
Loans and advances 99255878 73268852 72191998 35849331 39202694
Other current assets 2712014 2721285 3174257 3196430 3209364
Total Current
Assets376882007 526663475 126813361 94727970 98614571
Current liabilities
Short term
borrowings(2859063) 561350 222018 725301 1242639
Trade payables 65708618 86639208 17236488 9027660 8990272
Other Current
Liabilities69953961 61325933 41387220 91302240 94190992
Short term
provisions1045415 2447966 3135526 111558 84357
Total current
liabilities133848930 150974457 61981252 101166759 104508260
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Net working capital
Net working capital
(sources:jindal stainless limited)
From the table it was observed that the size of the current assets is
increasing year to year in connection with sales the Excess of current assets are showing
positive liquidity position of the firm.From the above table it can be said that the level of
current asstes has continously growing in the study period the current assets of jindal
stainless limited increased by 34.46% from 2007-08 to 2011-12 representing 3768,82,007 in
the year 2007-08 went upto 986,14,571 in the year 2011-12. It was decreased to 382.06% ,the
amount of cash and cash equalients are 7,61,262 in the year 2007-08 and it grow upto14,00,402 in the year 2011-12.Hence the company is having suffiecent liquidity position to
maintain its current obligations. The current liabilities are increasing year to year. The
current liabilities were at 1338,48,930 lakhs in the year 2007-08 it was decreased to
1045,08,260 lakhs in the year 2011-12.
The company has been continuously maintaining high level of
positive net working capital in the year 2008-09 3756,89,018 lakhs and in 2011-12 the
working capital position is (58,93,689) it represents the liquidity position of the firm is not
satisfactory and the firm is in maintaining with supply of short term funds the liquidity
position infact is much high whem we understand provisions made by the firm.
GROSS WORKING CAPITAL:
TABLE NO 4.1:GROSS WORKING CAPITAL (IN LAKHS)
PARTICULARS 2007-08 2008-09 2009-10 2010-11 2011-12
Gross working
capital
3768.82 5266.63 1268.13 947.27 986.14
Net working
capital
2430.33 3756.89 64.32 (64.38) (58.93)
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Net working capital = Current Assets Current Liabilities
TABLE 4.2: NET WORKING CAPITAL OF ( in lakhs)
YEAR
TOTAL
CURRENT
ASSETS
TOTAL
CURRENT
LIABILITIES
NET WORKING
CAPITAL
2007-08 3768.82 1338.48 2430.33
2008-09 5266.63 1509.74 3756.89
2009-10 1268.13 619.81 648.32
2010-11 947.27 1011.66 (64.38)
2011-12 986.14 1045.08 (58.93)
(sources:jindal stainless limited)
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From the table 4.2 the net working capital of jindal stainless.ltd is flucting from 2007-08
to 2011-12 and the net working capital has reached a highest level in year 2008-09 at
375689018 lacs due to increase in current assets. The firm should maintain sufficient
current assets to meet its current liabilities and also it can fulfill the clients of outsiders
which are expected to mature for payment with in an accounting year.
-1000
0
1000
2000
3000
4000
5000
6000
2007-08 2008-09 2009-10 2010-11 2011-12
TOTAL CURRENT ASSETS
TOTAL CURRENT LIABILITIES
NET WORKING CAPITAL
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WORKING CAPITAL TURNOVER RATIO:
It signifies that for an amount of sales, a relative amount of working capital is needed.
If any increase in sales contemplated working capital should be adequate and thus this ratio
helps management to maintain the adequate level of working capital. The ratio measures the
efficiency with which the working capital is being used by a firm. It may thus compute net
working capital turnover by dividing sales by working capital.
Sales
Working capital Turnover Ratio =
Net working capital
TABLE NO.4.3: WORKING CAPITAL TO SALES RATIO (in lakhs)
Year Sales Working Capital
Working capital
turnover ratio
(in times)
2007-08 17896.01 2430.33 7.363
2008-09 19729.84 3756.89 5.251
2009-10 5759.99 648.32 8.88
2010-11 138.71 (64.38) (2.15)
2011-12 5561.28 (58.93) (94.36)
(sources:jindal stainless limited)
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High working capital turnover ratio indicates the capability oforganization to achieve maximum sales with minimum investment in working capital,
companies working capital turnover ratio shows more than two except for the years
2010-11 and 2011-12.it shows negative during the period 2007-08 and 2009-10 the ratios
shows 7.363 and 8.88 respectively it indicates that the capacity of the company to
achieve maximum sales with minimum investment in working capital,by the end of the
study period it was recorded as negative (94.36) due to proportionate decrease in
working capital and sales.
SALES TO INVENTORY RATIO:
-5000
0
5000
10000
15000
20000
25000
2007-08 2008-09 2009-10 2010-11 2011-12
Sales
Working Capital
Working capital turnover ratio (in
times)
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This ratio reveals the relationship between sales and Inventory. This indicates the
efficiency of the firm in producing and selling its products. It is calculated by dividing the
sales by sales.
TABLE NO.4.4: SALES TO INVENTORY RATIO (in lakhs)
Year Sales InventoryInventory to Sales
Ratio
(in times)
2007-08 17896.01 2741.52 6.527
2008-09 19729.84 4491.78 4.392
2009-10 5759.99 5051.65 11.402
2010-11 138.71 541.10 0.256
2011-12 5561.28 548.02 1.024
(sources:jindal stainless limited)
0
20004000
6000
8000
10000
12000
14000
16000
18000
20000
2007-08 2008-09 2009-10 2010-11 2011-12
Sales
Inventory
Inventory to Sales Ratio (in
times)
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This ratio shows how rapidly the sales are turning into investing on inventory
.from the table 4.4 the sales to inventory ratio fluctuating between 1.02% to
11.40%,during the study period it was maximum in the year 2009-10 with 11.40% and
minimum in the year 2010-11 with 0.256%, due to more investment on inventory the
ratio recorded as 6.527 by the end of study period
CURRENT ASSETS TURNOVER RATIO:
Current assets turnover ratio is calculate to know the firms efficiency of utilizing the
current assets .current assets includes the assets like inventories, sundry debtors, bills
receivable, cash in hand or bank, marketable securities, prepaid expenses and short term
loans and advances. This ratio includes the efficiency with which current assets turn into
sales. A higher ratio implies a more efficient use of funds thus high turnover ratio indicate to
reduced the lock up of funds in current assets. An analysis of this ratio over a period of time
reflects working capital management of a firm .
Sales
Current assets Turnover Ratio =
Current assets
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TABLE NO.4.5: CURRENT ASSETS TURNOVER RATIO
Year Sales Current Assets
Current Assets
Turnover Ratio
(in times)2007-08 17896.01 3768.82 4.748
2008-09 19729.84 5266.63 3.746
2009-10 5759.99 1268.13 4.542
2010-11 138.71 947.27 0.146
2011-12 5561.28 986.14 5.639
(sources:jindal stainless limited)
From the table 4.5 it was observed that the current assets turnover ratio fluctuates year
by year from 2007-08 to 2011-12 due to increase in sales volume. It represents that the
% of investment in current assets gradually reduced during the study period. The
current assests turnover ratio of jindal stainless limited is showing highest in the year
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Sales
Current Assets
Current Assets Turnover
Ratio (in times)
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2011-12 that is 5.639 and 2007-08 it shows 4.748 in 2009-10. And it was recorded least in
the year 2010-11 by 0.146.
CURRENT RATIO:
The current ratio is a measure of the firms` short-term solvency. The higher the
current ratio, the larger is the amount of rupees available per Rupee of current liability, the
more is the firms` ability to meet current obligations and the greater is the safety of funds of
short-term creditors.
Current assets include cash and those assets, which can be converted into cash within
a year, such as Marketable Securities, Debtors and Inventories. Prepaid expenses are also
include in current assets as they represent the payments that will not be made by the firm in
future. Current Liabilities include Creditors, Bill payable, Accrued expenses, Short-term
bank loan, and Income Tax Liability and Long-term debt maturing in the current year. The
current ratio is calculated by dividing current assets by current liabilities.
Current Assets
Current Ratio = ---------------------------
Current Liabilities
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TABLE NO.4.6: CURRENT RATIO (in lakhs)
Year Current Assets Current Liabilities Current Ratio
2007-08 3768.82 1338.48 2.815
2008-09 5266.63 1509.74 3.488
2009-10 1268.13 619.81 2.045
2010-11 947.27 1011.66 0.936
2011-12 986.14 1045.08 0.943
(sources:jindal stainless limited
From the table 4.6 it was identified that the current ratio fluctuates year by year from
2007-08 to 2011-12 that is from 0.9632 to 3.488 .It was 2.815 in the year 2007-08 and
increased to 3.488 in 2008-09 from 2009-10 if we observe the current ratio of jindal
stainless limited decreasing due to sudden increase in current liabilities, it was further
observed that the ratio is highest in 2008-09 with 3.488 due to major investment in
current assets rather than fixed assets
0
1000
2000
3000
4000
5000
6000
2007-08 2008-09 2009-10 2010-11 2011-12
Current Assets
Current Liabilities
Current Ratio
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Company quick ratio is more than ideal ratio in 2009-2010 that is 1.23 and the ratio is least in
2010-2011 that is 0.40due to decrease in liquid assets and especially decrease in cash and
bank balances through out the study period the quick ratio is not satisfactory
STATEMENTS OF CHANGES IN WORKING CAPITAL OF
FOR THE YEAR 2008-09 (in lakhs)
Particulars 2007-08 2008-09 Increase Decrease
CURRENT ASSETS
Stocks 2741.52 4491.78 1750.25
Cash and Bank Balances 7.61 14.95 7.33
Loan and advances 992.55 732.68 259.87
Other current asstes 27.12 27.21 0.09
Total Current Assets 3768.82 5266.63 1497.81
CURRENT LIABILITIES
Current liabilities 1328.03 1485.26 157.22
Provisions 10.45 24.47 14.02
Total Current Liabilities 1338.48 1509.74 171.25
Working capital 2430.33 3756.89
Decrease in Working Capital 1326.55
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2430.33
There is net increase in working capital of 1326 lakhs due to increase in all
current assets; those are inventory, other current assets, cash and bank balance etc.The increase in current assets compensate the simultaneous increase in
current liabilities It results increase in working capital
STATEMENTS OF CHANGES IN WORKING CAPITAL OF FOR THE YEAR 2009-
10
Particulars 2008-09 2009-10 Increase Decrease
CURRENT ASSETS
Stocks 4491.78 505.16 3986.61
Cash and Bank Balances 14.95 9.30 5.64
Loans and advances 732.68 721.91 10.76
Other current assets 27.21 31.74 4.52
Total Current Assets 5266.63 1268.13 3998.50
CURRENT LIABILITIES
Current liabilities 1485.26 588.45 896.80
Provisions 24.47 31.35 6.87
Total Current Liabilities 1509.74 619.81 889.93
Working capital 3756.89 648.32 3108.56
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Increase in Working Capital
There is net decrease in working capital of 4405 lakhs due to sharp fall in
inventory and also decrease in other current assets.
The decrease in current assets compensates the simultaneous decrease in
current liabilities. It resulted in decrease in working capital
STATEMENTS OF CHANGES IN WORKING CAPITAL OF
FOR THE YEAR 2010-11 ( in lakhs)
Particulars 2009-10 2010-11 Increase Decrease
CURRENT ASSETS
Stocks 505.16 541.10 35.94
Cash and Bank Balances 9.30 15.71 6.40
Loans and advances 721.91 358.49 363.42
Other current asstes 31.74 31.96 0.22
Total Current Assets 1268.13 947.27 320.86
CURRENT LIABILITIES
Current liabilities 588.45 1010.55 422.09
Provisions 31.35 1.11 30.23
Total Current Liabilities 619.81 1011.66 391.85
Working capital 648.32 (64.38) 583.93
Increase in Working Capital
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Net decrease in working capital increased and reported a net decrease of
7127 lakhs due to decrease in current assets sharply. Mainly loans and advances which
decreased from 721 lakhs to 358 lakhs.
The decrease in current assets compensates the simultaneous decrease in
current liabilities. It resulted in decrease in working capital
STATEMENTS OF CHANGES IN WORKING CAPITAL OF FOR THE YEAR 2011-
12
Particulars 2010-11 2011-12 Increase Decrease
CURRENT ASSETS
Stocks 541.10 548.02 6.91
Cash and Bank Balances 15.71 14.001.71
Loans and advances 358.49 392.0233.53
Other current assets 31.96 32.090.12
Total Current Assets 947.27 986.1438.86
CURRENT LIABILITIES
Current liabilities 1010.55 1044.23 33.68
Provisions 1.11 0.84 0.27
Total Current Liabilities 1011.66 1045.08 33.42
Working capital (64.38) (58.93) 5.45
Increase in Working Capital
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There is net increase in working capital of 54 lakhs due to increase in
current assets thoses are inventory, loans and advances etc
The increase in current assets compensate the simultaneous increase in
current liabilities It results increase in working capital
STATEMENTS OF CHANGES IN WORKING CAPITAL OF
FOR THE YEAR 2007-08
Particulars 2006-07 2007-08 Increase Decrease
CURRENT ASSETS
Stocks 1924.88 2741.52
Cash and Bank Balances 153.26 7.61
Loans and advances 754.76 992.55
Other current assets 28.44 27.12
Total Current Assets 2861.36 3768.82
CURRENT LIABILITIES
Current liabilities
Provisions 9.10 10.45
Total Current Liabilities 1545.98 1338.48
Working capital
Increase in Working Capital