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CHAPTER I
INTRODUCTION OF THE STUDY

1.1 INTRODUCTION
Working capital plays an important role in any organization, as the company needs
capital for its day to day expenditure .Thousands of companies fail each year due to poor
working capital management practices. Entrepreneurs often don’t account for short term
disruptions to cash flow and are forced to close their operations .In simple term, working
capital is an excess of current asset than the current liabilities .Good working capital
management reveals higher returns of current asset than the current liabilities to maintain a
steady liquidity position of company .Otherwise, working capital is requirement of funds to
meet the day to day working expenses. So a proper way of management of working capital is
highly essential to ensure a dynamic stability of the financial position an organization.
Yashashri polyextrusion ltd, Jaysingpur is one of the well-known company in
Kolhapur district. Seeing the good opportunities to study financial system and practices of
Yashashri polyextrusion, it is relatively important take up internship assignment on
“WORKING CAPITAL MANAGEMENT IN YASHASHRI POLYEXTRUSION LTD,
JAYSINGPUR. Decisions relating to working capital and short term financing are referred to
as working capital management .These involve managing the relationship between firm’s
short-term assets and its short-term liabilities .The goal of working capital management is to
ensure that the firm is able to continue its operations and that it has sufficient money flow to
satisfy both maturing short term debt and upcoming operational expenses.
The project is mainly focus on the industry profile, company profile, SWOT analysis,
annual report and about working capital and financial ratios. The study covers analysis and
interpretation of working capital statements of industry for last five years. Capital required
for a business can be classified under two main categories via, 1) Fixed Capital 2) Working
Capital.
Current assets and current liabilities include three accounts which are of special
importance. These accounts represent the areas of the business where managers have the most
direct impact.
-Account receivable (current assets)
-Inventory (Current assets), and
-Account payable (current liabilities)

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The current portion of dept. (payable within 12 months) is critical, because it

represents a short-term claim to current assets and is often secured by long term assets
common type of short-term debt are bank loans and lines of credit an increase in working
capital indicates that the business has either increased or decreased current liabilities, for
example has paid of short term credit.

1.2 TITLE OF THE PROJECT

Statement of the project is "A study of working capital Management with special
Reference to Yashashri Polyextrusion Ltd, Jaysingpur.”

1.3 OBJECTIVES OF THE STUDY

1) To study the working capital management of the organization.
2) To study the management of short term borrowings.
3) To study working capital management practice being followed by company.
4) To study the working capital and short term financial position of organization.
5) To analyze the working capital management by using ratio analysis.

1.4 SCOPE OF THE STUDY-

The scope of the study related to the Yashashri Polyextrusion ltd, Jaysingpur. The
research scope is limited to calculations of working capital statement and comparison of the
same the study has covered the ratio analysis part for the purpose the study has covered last
four years data to analysis and interpretation of Yashashri Polyextrusion ltd, Jaysingpur.

1.5 LIMITATIONS OF THE STUDY –

1) The study is limited to 50 days. It is difficult to collect all the data with the short
period of time
2) The scope of working capital management is so wide .However this study is only
limited to Yashashri Polyextrusion ltd, Jaysingpur.
3) As the certain documents were confidential, it was not possible to collect all the
information necessary for the deep study.

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1.6 RESEARCH METHODOLOGY

DATA COLLECTION METHOD:
The methodology of data collection pertains to information to how the data
Collected i.e. either from primary sources or secondary sources. It explains the methods
utilized
And the instrument used in data collection.

1.7 SOURCE OF DATA:-

The source of data can be classified into two categories.
1) Secondary data –
Secondary data:-Researcher has collected the data from following sources from Company’s
record.
1) Balance sheet.
2) Profit and loss Account
3) Organization’s internet web site.

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CHAPTER II
COMPANY PROFILE

2.1 COMPANY PROFILE

YASHASHRI POLYEXTRUSION PVT.LTD
Popularly known as “YASHPOLY “,Yashashri Polyextrusion Pvt .Ltd ,a pioneer in
uPVC profile extrusion in India was establish in 1996 .Dedicated to a “Greener and Better
Planet “ They relentlessly strive to provide the best in class uPVC and WPC profiles for
Windows, doors and pre-fab structure.
The dynamic entrepreneurship and vision of Mr. Rajesh Patil has led “YASHASHRI
POLYEXTRUSION PVT.LTD. Properly known as Yashpoly, to a remarkable success in a
short span. The key for this success is to provide "Uncompromising Quality at competitive
Prices.
A Visionary and an influential leader. Mr. Rajesh Patil Industries (I) Pvt. Ltd. in
1996. Within 15 years of its inception, the Group achieved a turnover Rs.20 cores under his
able leadership. Having spread its products and branches more than 75 + fabrication unit
across India. The Group today enjoys a total strength of 175 employees.
Starting with the main division in 1996-uPVC profile manufacturing company has
diversified into various industries over a period of time under his guidance. The company
made 80+ fabrication units across INDIA, BHUTAN and DUBAI.
The Company diversified into manufacturing of four panel sliding doors, Casement
Doors, uPVC Walls ,Sliding Window and doors , casement window ,Georgian bar
window ,Celling and partition, WPC DOOR ,Sliding Window and Door ,BI-Fold Doors,
Vertical Sliding Winding ,Celling ,Villa Window ,Corner glass to glass window ,Balcony
window with grill. With that In-house they are manufacturing TPE rubber gasket, profile
foiling Machine, GI reinforcements, Yashpoly window software.

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2.2 ABOUT COMPANY:

Chairman & Managing Director Mr. Rajesh Patil.

Year of Establishment of 1996

YASHPOLY

Turnover of Yashpoly 20 Cr

No. of Shifts 3 shifts per day

Total No. of workers 150

Total No. of Temporary Employees 75

Total No. of Permanent Employees 75

No of Staff Members 25

Office Hours 10.00 am to 6.00 pm

weekly Holiday Monday

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2.3 VISION, MISSION & CULTURE

Vision:
To lead the way to a better and greener world .By carrying out vision at every level of
our organization, we will be recognized by our products, employees as well as our customers
as the best UPVC Window-Door making company in the world resulting in value for all.

Mission:
To build enduring relationships with customers, suppliers, employees and peer groups
Leveraging the very latest technology and providing high quality products and services and
company intends to bring the best of uPVC eco-friendly profiles across the world

Strengths:
 Extrusion Technology: Kraussmaffie (Austria) and Cincinnati (Germany)
 80+ Fabrication units across India BHUTAN and DUBAI
 40+ high Grade uPVC profile for windows. Doors .and prefab cabins
 Pioneer in WPC (Wood Polymer Composite) Multicity Extrusion doors in India.

2.4 APPROVALS AND CERTIFICATE -

An ISO 2001 :2015 (QMS) company , products is approved by various organization
including CIDCO ,MHADA,B&C,CPWD ,GOVT OF HARYANA & HIMCHAL
PRADESH ,POLICE HOUSING CORPORATION-HARIYANA ,EWS etc.

2.5 TECHNOLOGY:
Four highly precise and advanced European machinery from Cincinnati (Germany)
and Krusussmaffic (Austria) give our profiles and edge over others. High grade raw material
and experience of over two decade in uPVC compounding are our unique selling prepositions
Along with this best in class in-house lamination unit, GI reinforcement, TPE and
EPDM Gasket manufacturing plant and dedicated window manufacturing software division
makes us a one stop shop for all uPVC and WPC requirements.

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2.6 INTERNATIONAL STANDARD

Extrusion of profile and raw material used for manufacturing are based on
International standards and are manufactured under strict vigilance of experienced staff
giving us the comfort of sharing 15 years warranty for products.

2.7 COMPANY PRODUCTS

1. WINDOWS

2. PROFILE DESIGN

3. PARTITIONS

4. uPVC DOORS

5. CABINS

6. uPVC ceiling

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2.8 ORGANIZATION CHART

MANAGING DIRECTOR
Mrs Rajesh Patil

GENERAL
GENERAL MANAGER (sales)
MANAGER

FINANCIAL PURCHASE WORKS

MANAGER MANAGER MANAGER

ACCOUNTANT PURCHASE
MANAGER

HR MANAGER

FACTORY
MANAGER

PRODUCTION
MANAGER

STORE MANAGER

QUALITY CONTROL

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CHAPTER III
THEORETICAL BACKGROUND

3.1 INTRODUCTION
One of the most important areas in day-to-day management of the firm deals
with the Management of working capital. Which is defined as all the short-term assets used in
daily Operations. These consist primarily of cash, marketable. Securities. Account receivable
and Inventories. Some of the decisions taken in working capital management are-
1) An adequate supply of raw materials.
2) Cash to meet the operation Payments.
3) The ability to grant credit to customers.
4) The capacity to wait for market for its finished products.
5) Investments in various current assets.
6) Appropriate sources of fund to finance current assets.
7) Proportion of long term and short term funds to finance current assets.
It may be clear that the objective of working capital management is to
maintain a satisfactory level to working capital. In other words, the current assets should not
only be sufficient enough to cover the current liabilities but at the same Time should also
ensure the reasonable amount of safety margin. This is possible only when the different
components of working capital are properly balanced.

The working capital needs arises for the following purpose:

1. for purchasing row material, components and spare parts.
2. for paying wages and salaries.
3. To insure day- to-expenses and overhead costs like fuel, power and office expenses, etc.
4. To provide credit facilities to the customer.
5. Maintain inventories of row materials, work in progress, and finished goods.

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Definitions of working capital

 “A working capital is excess of current assets over current liabilities”
-Gath Mann Daughli.

 “A working capital is the amount funds necessary to cover the cost of operating
Enterprises”.
-Shan
 “Working capital refers to a firm’s investment in short term asset cash short Term
Securities account receivable inventories”.
-Weston& Brigham.

 “The sum of the current asset in the working capital of the business.”
-J.S. Mill.

Concept of working capital-

There are two main concepts of the working capital. They are
1. Gross working capital concept:

Gross working capital refers to the firm’s investment in current assets are the Assets
which can be converted into cash within an accounting year and include cash short Term
securities, debtors, bill receivables and inventories.

2. Net working capital concept:

It is difference between the current assets and current liabilities or the excess of
Total current assets over total current liabilities. It can also be defined as that part of a Firm’s
current asset which is financed with long term funds. It may be either negative or Positive.
When the current assets exceed the current liabilities, the working capital is Positive and
vice-versa.

Net Working Capital = Current Asset – Current Liabilities

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Difference between gross working capital and net working capital

Sr Gross working capital Sr Net working capital
No No
1 GWC is concept of quantitative in 1 NWC is concept of qualitative in
nature. nature

2 It is pointing out total amount 2 It is including the firm’s ability to

available for finishing the current meet its operating expenses and
asset. current liabilities.
3 It includes the total sum of current 3 It expressed current asset means
asset. current liabilities.

4 It is concept very popular in financial 4 It is concept very popular in

management. accounting management.

5 Gross concept suitable for 5 Net concept suitable for sole trader
companies. and partnership firm.

6 It cannot revel the true financial 6 It is very useful to find out true the
position of the company. financial position of a company

7 Every increasing in borrowing 7 Increasing in bank loan cannot

will increase the gross working increase working capital. Retained
capital profit, sales of fixed asset, will
increase net working capital

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Current Asset-
Components of current asset
a) Stock of material in trade.

b) Sundry debtors.

c) Bill of exchange.

d) Loan and advances.

e) Deposits.

f) Cash and bank balance.

g) Investment in government and other securities.

h) Amount due from subsidiary companies

i) Prepaid expenses.

j) Outstanding income.

Current liabilities.
Current liabilities include all the obligations of the concern that are maturing
Within accounting year.
Components of current liabilities-
a) Sundry creditors.

b) Loans from bank and others.

c) Provision for taxation, dividend, etc.

d) Liabilities towards gratuity, etc.

e) Outstanding expenses.

Incomes received in advances.

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3.2 CLASSIFICATION OF WORKING CAPITAL–

The operating cycle is continuous process and therefore the need for
current asset is felt constantly. The magnitude of current asset need not always be the same; it
increase or decrease over time depending on the business transaction.

1) Permanent or fixed working capital

A part of the investment in current assets is as permanent as the investment in
fixed Assets. It covers the minimum amount necessary for maintaining the circulation of the
current Assets. Working capital invested in the circulation of the current assets and keeping
it moving is permanently locked up.

a) Initial working capital –

It is extra capital required to meet unforeseen contingencies that may arise in
future. These contingencies may crop up on account of rise in prices, business depression,
strikes, lock-Outs, fires and unexpected competition. It is needed over and above the regular
working capital Requirements.

b) Regular working capital

It is the minimum amount of liquid capital required to keep up the circulation of
the capital from cash to inventories to receivables and back again to cash. This would include

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a sufficient amount of Cash to maintain reasonable quantities of raw materials for processing
into Finished goods to ensure quick delivery etc.

2) Variable working capital-

Variable or temporary working capital goes on flection from time to time within
Asset The change in the volume of the business. It is the additional investment in Current
asset required at different times during the operating year.

(a)Seasonal working capital-

Beyond initial and regular working capital, most businesses will require at stated
Intervals a large amount of current assets to fill the demands of the seasonal busy perilous
During the season, the business enterprises have to push up purchase of raw materials And
employ more people to convert them into finished goods and thus require large amount of
working capital.

(b)Special working capital –

It is that part of the variable capital which is needed for financing special
operations such as the organization of special campaigns for increasing sales through
advertisement or other sale Promotion activities for conducting research experiments or
execution of special orders of Government that will have to be financed by additional
working capital. The distinction between Permanent and variable Working capital is
important in arranging the finance for an enterprise. Permanent working Capital should be
raised in the same way as fixed capital is period.

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Permanent and temporary working capital of stable firm

Temporary working Capital

Amount
Permanent working capital

Time
Temporary working capital the above figure illustrate that the permanent working capital is
stable overtime. While temporary working capital is fluctuating, sometimes increasing and
sometimes decreasing However the permanent working capital line need not be horizontal, if
the firm’s requirement for Permanent working capital is increasing or decreasing over a
period.

Permanent and Temporary working capitals of growing

Temporary working Capital

Amount Permanent working capital

Time

A firm must have to invest sufficient funds in working capital i.e. as much as needed
by the firm. It should neither be excessive nor inadequate. Both situations are dangerous.
Excessive working Capital means the firm has idle funds, which earns nothing for the firm. In
adequate working Capital means the firm does not have sufficient fund to meet its current

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obligations, which ultimately affect the production process and all operations of the firm, and
ultimately checks the Bottom line.

3.3 SOURCES OF WORKING CAPITAL

Sources of working capital

Long term sources Short term sources

Issue of share Internal and External Short-term Working

Issue of debentures
Deprecation funds Trade credit
Retained earnings Credit paper
Sale of fixed asset Provisions for taxation Bank credit
Public deposits
Security firm
Government
Employee and form Accrued expenses
Assistance
Customers Customer credit

Working capital cycle/ operating cycle

The duration or time required to complete the sequence of events right from the
purchase of raw materials for cash to the realization of sales in cash is called operating cycle
or working Capital cycle. The operating cycle consists of three. Phases:
In phase 1, cash gets converted into inventory. This would include purchase of
raw materials, conversion of raw materials into work-in-progress, finished goods and
terminate in the Transfer of goods to stock at the end of the manufacturing process. In the
case of trading Organization, this phase would be shorter as there would be no manufacturing
activity and cash will be converted into inventory directly. The phase will, of course, be
totally absent in case of Service organizations.
In phase 2 of the cycle, the inventory is converted into receivables as credit sales
are made to customer. Firms which do not sell on credit will obviously not have phase 2 of
operating cycle.

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The last phase, phase 3, represents the sage when reworking capital cycle/
operating cycle. Thus the firm has moved from cash to inventory, to receivables and to cash
again.

Cash

Account Raw
Receivable Material

Finished Work-in-
Goods progress

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3.4 PRINCIPLES OF WORKING CAPITAL

1. Principles of Risk Variation-
Risk refers to the inability of a fire to maintain sufficient current assets to Pay
for Its Obligations. If working capital is varied relative to sales to amount of risk that a firm
is Also Varied and the Opportunity for gain or loss is increase ln other words there is definite
Relationship between the degree of risk and the rate of return.

2. Principles of Equity position

According to this principle. The amount of working capital invested in each
compact should be adequately justified by a firm’s equity Position. Every rupees invested in
the working Capital should contribute to the worth of the firms.

3. Principles of Cost of Capital-

This principle of cost of capital emphasizes the different cost of capital. It should
be remembered that the cost of capital moves inversely with risk. Thus the additional risk
capital Results in the decline in the cost of capital.

4. Principles of Maturity of Payment-

A company should make every efforts to relate matures of payments to its flow or
internally generated funds there should be the lease disparity between maturates of a firm.
Short Term that debt instruments and its flow of internally generated lands because a greater
risk is generated with greater disparity.

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3.5 FACTORS DETERMINING WORKING CAPITAL

REQUIREMENT-
There is no set |universally applicable rules to ascertain working capital of
organization. The factor which influence the need level are discussed below Business
organization.
1. General nature of business
2. Size Of business operations/scale of operations
3. Sales
4. Length of Operating Cycle
5. Terms of Credit
6. Seasonal Variations
7. Turnover of Inventories
8. Nature of Production Technology
9. Contingencies

1) General nature of business

The working capital requirements of an enterprise are basically related to the
conduct or the business. Enterprises fall into some board categories depending on the nature
of their Business. For instance, public utilities have certain features which have a bearing on
their working capital needs. The two important features are (1) cash sales and (2)) sale of
services rather than commodities.

2) Scale of operations
The larger will be the amount of working capital required as because the larger
business Units are required to maintain huge inventories and also spend more in carrying out
then Business operations smoothly. A business unit carrying on activities on a small scale
needs less working capital.

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3) Sales
Among the various factors, size of the sales is one of the important factors in
determining the amount of working capital. In order to increase sales volume, the enterprise
needs to maintain its current assets. In the course of period, the enterprise becomes in the
position to keep a steady ratio of its current assets to annual sales. As a result, the turnover
ratio, i.e., current assets to turnover increases reducing the length of operating cycle. Thus,
less the operating cycle period, less will be requirements for working capital and vice versa.

4) Length of Operating Cycle

Conversion of cash through various stages viz., raw material, semi-processed goods,
finished goods, sales, debtors and bills receivables into cash takes a certain period of time
that is known as ‘length of operating cycle’. Longer the operating cycle time, the more is the
working capital required.

5) Terms of Credit
Another important factor that determines the amount of working capital requirements
relates to the terms of credit allowed to the customers. For instance, an enterprise may allow
only 15 days credit, while another may allow 90 days credit to its customers. Besides, an
enterprise may extend credit facilities to its all customers, while another enterprise in the
same business may extend credit only to select and those too reliable customers only

6) Seasonal Variation

The seasonal enterprises, i.e., the enterprise whose operations pick up

seasonally may require more working capital to meet their increased operations during the
particular season. A popular example of seasonal enterprise may be sugar factory whose
operations are highly seasonal.

7) Turnover of Inventories
If inventories are large in size but turnover is slow, the small-scale enterprise
will need more working capital. On the contrary, if inventories are small but their turnover is
quick, the enterprise will need a small amount of working capital.

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8) Nature of Production Technology

In case of labor intensive technology , the unit will need more amount to pay
the wages and, therefore, will require more working capital. On the other hand, if the
production technology is capital- intensive, the enterprise will have to make less payment for
expenses like wages. As a result, enterprise will require less working capital.

9) Contingencies
If the demand for and price of the products of small- scale enterprises are
subject to wide variations or fluctuations, the contingency provisions will have to be made for
meeting the fluctuations. This will obviously increase the requirements for working capital of
the small enterprises. While one can add certain other factors to this list, the said factors
appear to be the major ones in determining the requirement of working capital of a small-
scale enterprise

3.6 LIMITATION OF WORKING CAPITAL

1) Need for Comparison

The working capital ratio requires cither 1historical figures or numbers

relating to the industry standard For Comparison. While an owner can determine how well
the company working capital. The number is otherwise meaningless. For example, assume a
company working capital of 9.7percent. While this is better mathematically than 8 percent the
current Number meaningless. If the current percent represents last month’s ratio, the current
number has more Value.

2) Use of Accounting Data-

All accounting or finance ratio use standard financial statements. The
information presented in those statements typically follows generally accepted accounting
principles GAAP). Problems can exist, however, if an accountant improperly records
business Transactions. The number in the financial statement may have distortions, leading to
Skewed Ratio results. Owners, executives and other stakeholders may be unaware of the
errors and make Decision using flawed data.

3) Lack of Included Data

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The standard working capital productivity ratio includes sales, current asset and
Current liabilities. This information is all short- term data a company generates during normal
Business operations. The data is subject to wide variations through each month and year. The
Working capital productivity ratio has limit as long -term information has no inclusion in this
Formula. Therefore, other ratios are necessary to assess other parts of the company’s
operations

4) Considerations
Accountants can usually prepare ratio at any time by reviewing the general
leader For requisite information. Internal stakeholder can use up-to-date ratio information to
Assess business operations at a given time. The issue, however, is the possibility that
Information is not 100 percent accurate during the month. Companies that use ratios Outside
of the normal financial statement data may also experience distorted information.

3.7 ADVANTAGE AND DISADVANTAGE OF ADEQUATE WORKING

CAPITAL
1) Helps in maintaining goodwill of the firm

2) Maintaining Solvency of the firm.

3) Helps the firm in getting regular supply if raw material.

4) Helps the firm in getting regular return on investment.

5) Helps the firm in getting payment.

6) Helps the firm to face the crisis.

7) Helps the firm in getting loan easily from the banks.

8) Helps the firm in getting cash discount.

Disadvantages of inadequate working capital

1) The company is unable to take advantage of new opportunities or adapt to change

2) Trade discounts is lost. A company with sample working capital is able to finance

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Large stocks and can therefore place large order.

3) Cash discounts are lost. Some companies will try to customers are foregone.

4) The advantages of being able to offer a credit line to customer are forgone

5) Financial reputation is lost result in non- cooperation from trade creditors in time of

Difficulty

6) There may be concerned action by creditors and will apply to court for winding up

3.8 ESSENTIAL CHARACTERSTIC OF WORKING CAPITAL

1) Needs that are short term: working capital is being utilized in acquiring current asset which
will be converted to cash for a short period of time.
2) Circular moment: working capital is being converted to cash constantly which will just be
turned as a working capital all over again.
3) Permanency: Although it is just a kind of short term capital, working capital is needed by a
business forever and always.
4) Fluctuation: Working style fluctuates every now and the even something permanent
liquidity; it is very liquid for it can be convers the as cash in time without losing anything
5) Less risky: Investment is current asset such as working capital comes with less risk for it is
just for short term.
6) No need for special accounting system: Since working capital is short term asset that last
for a year only, there will be any need for adoption of a special accounting system.

3.9 Components management of working capital-

1. Cash Management
2. Inventory Management
3. Receivable Management
1. Cash Management-
Cash management is one of the key areas of working capital management. A part
from the fact that is the most liquid current asset can be reduced because the major liquid
asset i.e. receivable and inventory get eventually converted into credit
-Cash management concern with the managing
-Cash flow into and out of firm

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-Cash flow within the cash balance held by firm appoint of time by deficit investing surplus
cash.

2. Inventory Management
Inventory is stocks of product a company manufacturing or sale and components that make
up the project. The various forms in which inventory exists in a manufacturing company are
Raw Material
Finished Goods and Spare parts
 Objective of inventory Management
 To minimize the firm investment inventory to maximize profitability.
 To ensure a continuous supply of materials.
Maintain sufficient finished goods inventory for smooth sale operations and sufficient
finished
Goods inventory Tor smooth sale operations and efficient customer service.

3. Receivable Management
Trade credit is most prominent force of modern business. It is considered as
an essential marketing too1. Firms grant trade credit to protect its sale from competitor’s and
to attract the potential customers Receivable constitute a substantial of current assets of
several firms.to its products buy at interesting term. Trade debuts after investing credit and
crediting debtors amount to blocking of firms funds the interval between the dates of sale and
date of payment has to be financed out of working capital, As substantial amounts are tied up
in trade debtors it needs careful analysis and proper management.

3.10 IMPORTANCE OF WORKING CAPITAL

1) Solvency of the business
Adequate working capital helps in maintaining the solvency of the business by
providing uninterrupted of production.

2) Goodwill-
Sufficient amount of working capital enables a firm to make prompt payments and
maintain the goodwill.

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3) Easy loans
Adequate working capital leads to high solvency and credit standing can arrange
Banks and other on easy and favorable terms. From banks and other on easy and favorable
terms

4) Cash Discounts –
Adequate working capital also enables a concern to avail cash discounts on the
purchases and hence reduces cost.

5) Regular Supply of Raw Material-

Sufficient working capital ensures regular supply of raw material and continuous
production

6) Regular Payment of Salaries

Wages And Other Day TO Day Commitments: It leads to the satisfaction of the
employees Raises the morale of its employees, increases their efficiency, reduces wastage
and costs and Advances production and profits.

7) Exploitation of Favorable Market Conditions

If a firm is having adequate working capital then it can exploit the favorable market
conditions Such as purchasing is requirements in bulk when the prices are lower and
Holdings
It’s Inventories for higher prices.

8) Ability to Face Crises

A concern can face the Situation during the depression.

9) Quick and Regular Return On Investments

Sufficient working capital enables a concern to pay quick and regular of divided And
gains confidence of the investors and can raise more funds in future.

10) High Morale

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Adequate working capital brings an environment of securities, confidence, and high

morale Which results in overall efficiency in a business.

3.11 FORMAT OF WORKING CAPITAL-

Particular Amount(Rs) Amount(Rs)

A ) Current Assets

a)Raw Material XXX

b)Work in Progress

-Raw Material XXX

-Labor XXX

-Overheads XXX XXX

c)Stocks of Finished Goods

-Raw Material XXX

-Labor XXX

-Overheads XXX XXX

d)Sundry Debtors

-Raw Material XXX

-Labor XXX

-Overheads XXX XXX

e)Expenses paid in advance XXX

Total of (A) XXX

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Less (B) Current Liabilities

a)Creditors XXX

b)Bills Payable XXX

c)Outstanding expenses XXX
Total of (B) XXX
Working Capital(A-B) XXX
(+)Contingency XXX
Net Working Capital XXX

3.12 WORKING CAPITAL ANALYSIS

As we know Working capital is the life blood and the center of a business.
Adequate Amount of working capital is very much essential for the smooth running of the
business. And the most important Part is the efficient management of working capital is right
time. The liquidity position of the firm is totally effected by the management of working
capital so, a study of changes in the uses and sources of working capital is necessary to
evaluate the efficiency with which the working capital is employed in a business .This
involves the need of working capital analysis
The analysis of working capital can be conducted through a number of devices, such as
1 Ratio analysis.
2. Fund flow analysis.
3. Budgeting.

1) Current Ratio = Current Assets

_______________
Current Liabilities

2) Gross profit Ratio = Gross profit *100

Net sale

3) Net profit Ratio = Net Profit *100

_____
Net Sales

4) Total asset turnover ratio = Sales

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Total Assets

5) Current assets Turnover Ratio = Sales

Current Assets

6) Net Working Capital Turnover Ratio= Sales

Average Working Capital

CHAPTER IV
DATA ANALYSIS
TABLE NO.4.1
Particular 2018-19 2019-20 2020-21 2021-22

(A)Current Assets

Current Investments 924451 924451 2024648 920341

Sundry Debtors 12038249 13238249 10875034 16887058

Cash at Bank 94632 94632 201440 95737

Cash in Hand 65671 65671 77140 62141

Short term loan and advances 15000 35600 877500 95600

Inventories 4515328 4206830 3611696 3823909

Total(A) 17653331 18565433 17667458 21884786

(B)Current liabilities

Sundry creditors 5618171 561871 1731212 2812224

provision 28441 28441 27176 29448

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Other current liabilities - - - -

Total (B) 5646612 5646612 1758388 2841672

Net Working Capital 12006719 12918821 15909070 19043114

Statement showing requirement of working capital from FY 2018-19 to FY 2021 to 2022

(Source: Secondary Data: Financial Statement)

Graphical representation of change in working capital

Table No-4.1

Year Change in working capital

2018-2019 12006719
2019-2020 12918821
2020-2021 15909070
2021-2022 19043114
(Secondary Data: Financial Statement)

Graphical Representation

Change in working capital

20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

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From the above table it can observe that there is change in working capital position. In
FY 2018-2019 working capital has Rs. 12006719/- From the above calculation it can
see there is increase in net working capital by Rs. 912102/- From the above table it is
observed that in FY 2020-2021 working capital is increase by Rs. 2990249/- then in
FY 2021-2022 working capital increase by Rs. 3134044/- and so as compare to the
FY 2018-2019 and FY 2021-2022 working capital has increased.

Table No-4.2
Particular 2018-2019 2019-2020 Increase Decrease

(A)Current Assets

Current Investments 924451 924451 - -

Sundry Debtors 12038249 13238249 1200000 -

Cash at Bank 94632 94632 - -

Cash in Hand 65671 65671 - -

Short term loan and advances 15000 35600 20600 -

Inventories 4515328 4206830 - 308490

Total(A) 17653331 18565433 912102 -

(B)Current liabilities

Sundry creditors 5618171 561871 - -

provision 28441 28441 - -

Other current liabilities - - - -

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Total (B) 5646612 5646612 - -

Net Working Capital 12006719 12918821 912102 -

Statement showing changes in working capital FY2017-2018

(Source: Secondary Data: Financial Statement)

Graphical representation of change in working capital

Table No-4.2

Year Change in working capital

2018-2019 12006719
2019-2020 12918821
(Source: Secondary Data: Financial Statement)

Graphical Representation

Change in working capital

13000000

12800000

12600000

12400000

12200000

12000000

11800000

11600000

11400000
2018-2019 2019-2020

Interpretation

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The above table shows the current asset for the FY 2018-2019 was Rs. 17653331/- on the
other hand for FY 2019-2020 it was Rs. 18565433/- It indicates those current assets were
increased by Rs. 912101/- Current liabilities were for the FY 2018-2019 was Rs. 5646612/-
and for FY 2019-2020 it was Rs. 5646612/- It shows that the current liabilities were remains
same .Hence Net Working Capital is increased by Rs 912102/-

Statement showing changes in working capital FY2019-2022

Table No-4.3
Particular 2019-2020 2020-2021 Increase Decrease

(A)Current Assets

Current Investments 924451 2024648 1100197 -

Sundry Debtors 13238249 10875034 - 2363215

Cash at Bank 94632 201440 106808 -

Cash in Hand 65671 77140 11459 -

Short term loan and advances 35600 877500 841900 -

Inventories 4206830 3611696 - 595134

Total(A) 18565433 17667458 - 897975

(B)Current liabilities

Sundry creditors 561871 1731212 1169341 -

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provision 28441 27176 - 1265

Other current liabilities - -

Total (B) 5646612 1758388 - 3888224

Net Working Capital 12918821 15909070 2990249 -

(Source: Secondary Data: Financial Statement)

Graphical representation of change in working capital

Table No-4.3

Year Change in working capital

2019-2020 12918821
2020-2021 15909070
(Source: Secondary Data: Financial Statement)

Graphical Representation

Change in working capital

18000000
15909070
16000000
14000000 12918821
12000000
10000000
8000000
6000000
4000000
2000000
0
2019-2020 2020-2021

Interpretation

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The above table shows the current asset for the FY 2019-2020 was Rs. 18565433 /- on the
other hand for FY 2020-2021 it was Rs. 17667458 /- It indicates those current assets were
decreased by Rs. 897975 /- Current liabilities were for the FY 2019-2020 was Rs.56466122 /-
and for FY 2020-2021 it was Rs. 1758388/- It shows that the current liabilities were increased
by 3888224 /- .Hence Net Working Capital is increased by Rs 2990249/-

Statement showing changes in working capital FY2021-2022

Table No-4.4

Particular 2020-2021 2021-2022 Increase Decrease

(A)Current Assets

Current Investments 2024648 920341 - 1104307

Sundry Debtors 10875034 16887058 6012024 -

Cash at Bank 201440 95737 - 105703

Cash in Hand 77140 62141 - 14999

Short term loan and 877500 95600 - 781900

advances
Inventories 3611696 3823909 212213 -

Total(A) 17667458 21884786 4217328 -

(B)Current liabilities

Sundry creditors 1731212 2812224 1081012 -

provision 27176 29448 2272 -

Other current liabilities - -

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Total (B) 1758388 2841672 1083284 -

Net Working Capital 15909070 19043114 3134044 -

Graphical representation of change in working capital

Table No-4.4

Year Change in working capital

2020-2021 15909070

2021-2022 19043114

(Source: Secondary Data: Financial Statement)

Graphical Representation

Change in working capital

20000000

19043114
19000000

18000000

17000000

16000000
15909070

15000000

14000000
2020-2021 2021-2022

Interpretation

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The above table shows the current asset for the FY 2020-2021 was Rs. 17667458/ - on the
other hand for FY 2021-2022 it was Rs. 21884786/- It indicates those current assets were
increased by Rs. 4217328/- Current liabilities were for the FY 2021-2022 was Rs. 1758388 /-
and for FY 2019-2020 it was Rs. 2841672/- It shows that the current liabilities were increased
by 1083284/- .Hence Net Working Capital is increased by Rs 3134044/-

4.5 Calculation Ratios-

4.5.1 Current ratio:-

Current Ratio- Current asset/Current Liabilities

Table no 4.5.1

Year 2018-2019 2019-2020 2020-2021 2021-2022

Current asset 17653331 18565433 17667458 21884786
Current liabilities 5646612 5646612 1758388 2841672
Current Ratio 3.12:1 3.28:1 10:1 7.7:1
(Source: Secondary Data: Financial Statement)

Graphical Representation-

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Current Ratio
12

10
10

8 7.7

4 3.12 3.28

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

The ratio falls under the category of short term solvency ratio .As a conventional rule, a
current ratio of 2:1 or more is considered satisfactory. In the FY 2018-2019 it was 3.12:1 in
FY 2019-2020 it was increased to 0.16:1, In the FY 2020-2021 it was increased by 6.72:1
and in the FY 2021-2022 it was decreased by 0.02:1 This shows company’s short term
solvency position is healthy.

4.5.2 Debtors Turnover Ratio:-

Debtors Turnover Ratio - Sales/Trade Debtors

Table no 4.5.2

Year 2018-2019 2019-2020 2020-2021 2021-2022

Sales 36379662 32679662 37595011 47190509
Trade Debtors 12038249 13238249 10875034 16887058
Debtors Turnover Ratio 3.0 Times 2.4 Times 3.4 Times 2.7 Times
(Source: Secondary Data: Financial Statement)

Graphical Representation

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Debtors Turnover Ratio

4

3.5 3.4
3
3
2.7
2.5 2.4

1.5

0.5

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of Activity Ratio. Debtors’ turnover ratio from the
year 2018-2019 is 3.0 Times and year 2019-2020 is 2.4 Times so ratio is decreased by
0.6 Times, Debtors turnover ratio from the year 2019-2020 is 2.4 Times and year
2020-2021 is 3.4 Times so ratio is increased by 1.0 Times .Debtors turnover ratio in
2020-2021 is 3.4 Times in 2021-2022 is 2.7 Times so ratio is decreased by 0.7 Times.

4.5.3 Debtors Velocity:-

Debtors Velocity - Trade Debtors /Sales*365

Table no 4.5.3
Year 2018-2019 2019-2020 2020-2021 2021-2022
Trade Debtors 12038249 13238249 10875034 16887058
Sales 36379662 32679662 37595011 47190509
Debtors Velocity 120 Days 147 Days 105 Days 130 Days
(Source: Secondary Data: Financial Statement)

Graphical Representation

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Debtors Velocity
160
147
140 130
120
120
105
100

80

60

40

20

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of activity ratio it shows how many days customer
takes to pay amount In the FY 2018-2019 customer takes 120 Days, In the FY 2019-
2020 Take 147 Days to pay the amount and in the FY 2020-2021 customer takes 105
Days in the FY 2021-2022 Takes 130 Days to pay the amount.

4.5.4 Credit Turnover Ratio

Credit Turnover Ratio - Net Purchase /Trade Creditor

Table no 4.5.4

Year 2018-2019 2019-2020 2020-2021 2021-2022

Net Purchase 28633619 21505710 22402879 29143402
Trade Creditor 5618171 5618171 1731212 2812224
Credit Turnover Ratio 5.0 Times 3.82 Times 12.94 Times 10.36 Times
(Source: Secondary Data: Financial Statement)

Graphical Representation

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Credit Turnover Ratio

14
12.94
12
10.36
10

6 5
3.82
4

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of Activity Ratio. Credit’ turnover ratio from the
year 2019-2020 is 5.0 Times and year 2019-2020 is 3.82 Times so ratio is decreased
by 1.18 Times, Debtors turnover ratio from the year 2019-2020 is 3.82 Times and
year 2020-2021 is 12.94 Times so ratio is increased by 9.12 Times .Debtors turnover
ratio in 2020-2021 is 12.94 Times in 2021-2022 is 10.36 Times so ratio is decreased
by 2.58 Times.

4.5.6 Creditors Velocity:-

Creditors Velocity - Trade Creditors /Net Purchase *365

Table no 4.5.6
Year 2018-2019 2019-2020 2020-2021 2021-2022
Trade Creditor 5618171 5618171 1731212 2812224
Net Purchase 28633619 21505710 22402879 29143402
Creditor Velocity 71 Days 95 Days 28 Days 35 Days
(Source: Secondary Data: Financial Statement)

Graphical Representation

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Creditor Velocity
100 95
90
80
71
70
60
50
40 35
30 28

20
10
0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of activity ratio it shows a measure of how often a
particular company pays off its debts to suppliers within giving accounting period In the FY
2018-2019 customer takes 71 Days, In the FY 2019-2020 Take 95 Days to pay the amount
and in the FY 2020-2021 customer takes 28 Days in the FY 2021-2022 Takes 35 Days to pay
the amount.

4.5.6 Stock Turnover ratio:-

Stock Turnover Ratio- Sales /Stock

Table no 4.5.6
Year 2018-2019 2019-2020 2020-2021 2021-2022
Sales 36379662 32679662 37595011 47190509
Stock 4515328 4206830 3611696 3823909
Stock Turnover Ratio 8.0 Times 7.7 Times 10.4 Times 12.3 Times
(Source: Secondary Data: Financial Statement)

Graphical Representation

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Stock Turnover Ratio

14
12.3
12
10.4
10
8 7.7
8

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of activity ratio Stock turnover ratio from the year
2018-2019 is 8.0 Times and year 2019-2020 is 7.7 Times so ratio is decreased by 0.7
Times stock turnover ratio from the year 2019-2020 is 7.7 Times and year 2020-2021
is 10.4 Times so ratio is increased by 2.7 Times .Stock turnover ratio in 2020-2021 is
10.4 Times in 2021-2022 is 12.3 Times so ratio is increased by 12.3 Times.

4.5.7 Stock Velocity:-

Stock Velocity Ratio- Stock /Sales*365

Table no 4.5.7
Year 2018-2019 2019-2020 2020-2021 2021-2022
Stock 4515328 4206830 3611696 3823909
Sales 36379662 32679662 37595011 47190509
Stock Velocity 45 Days 46 Days 35 Days 29 Days
(Source: Secondary Data: Financial Statement)

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Graphical Representation

Stock Velocity
50
45 46
45
40
35
35
30 29

25
20
15
10
5
0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of activity ratio. It shows how many days are required to
turn the raw material into finished goods or within how many days finished goods laying in
the go-down In FY 2018-2019 it Takes 45 days and in the FY 2019-2020 it takes 46 Days In
the FY 2020-2021 takes 35 days and and in the FY 2021-2022 it Takes 29 Days.

4.5.8 Working Capital Turnover ratio:-

Working Capital Turnover Ratio- Sales /Working capital turnover

Table no 4.5.8

Year 2018-2019 2019-2020 2020-2021 2021-2022

Sales 36379662 32679662 37595011 47190509
Net Working Capital 12006719 12918821 15909070 19043114
Working Capital 3.0 Times 2.5 Times 2.3 Times 2.4 Times
Turnover Ratio
(Source: Secondary Data: Financial Statement)

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Graphical Representation

Working Capital Turnover Ratio

3.5
3
3
2.5 2.4
2.5 2.3

1.5

0.5

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

Working capital turnover ratio from the year 2018-2019 is 3.0 Times and year 2019-2020 is
2.5 Times so ratio is decreased by .05 Times working capital turnover ratio from the year
2019-2020 is 2.5 Times and year 2020-2021 is 2.3 Times so ratio is decreased by 0.3 Times.
Working capital turnover ratio in 2020-2021 is 2.3 Times, in 2021-2022 is 2.4 Times so ratio
is increased by 0.1 Times .

4.5.9 Current Assets Turnover:-

Current Asset Ratio- Sales /Current Asset

Table no 4.5.9

Year 2018-2019 2019-2020 2020-2021 2021-2022

Sales 36379662 32679662 37595011 47190509
Current Assets 17653331 18565433 17667458 21884786
Current Assets 2.0 Times 1.76 Times 2.12 Times 2.15 Times
Turnover
(Source: Secondary Data: Financial Statement)

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Graphical Representation
Current Assets Turnover
2.5
2.12 2.15
2
2
1.76

1.5

0.5

0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of efficiency ratio. This shows the amount invested in the
current assets to generate the sales volume. Here in financial year 2018-2019 the ratio is 2.0
Times then in FY 2019-2020 the ratio decreased by 0.24 Times after that in FY 2020-2021
is increased by 0.36 Times then in FY 2021-2022 increased by 0.3 Times

4.5.10 Quick Ratio:-

Quick Ratio- Quick Asset /Quick Liability

Table no 4.5.10

Year 2018-2019 2019-2020 2020-2021 2021-2022

Quick Asset 13138003 14358603 14055762 18060877
Quick Liability 5646612 5646612 1758388 2841672

Quick Ratio 2.3 2.5 7.9 6.3

(Source: Secondary Data: Financial Statement)

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Graphical Representation

Quick Ratio
9
7.9
8
7
6.3
6
5
4
3 2.5
2.3
2
1
0
2018-2019 2019-2020 2020-2021 2021-2022

Interpretation

This ratio falls under the category of Liquidity ratio. It’s ideal ratio is 1:1. Here in financial
year 2018-2019 the ratio is 2.3:1 then in FY 2019-2020 the ratio 2.5:1 after that in FY 2020-
2021 is i 7.9:1 then in FY 2021-2022 increased by 6.3:1 Here quick ratio is more than ideal
ratio so company’s short term solvency position is healthy

CHAPTER V
FINDINGS AND SUGGESTIONS
5.1 FINDINGS
1) It is found from table no 4.1 that the working capital has increased over the period and
company is able to meet its short term financial requirement.
2) It is observed that from table no 4.2 FY 2019-2020 current asset value where consistently
increase. And liabilities are remaining same.
3) It is found that from Table No 4.3 Both current assets and liabilities are decreased in FY
2020-2021.And net working capital increased.

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4) It is found that from Table No 4.3 Both current assets and liabilities are increased in FY
2021-2022.And net working capital also increased.
5) It is found that from Table no 4.5.1 Current ratio is more than ideal ratio i.e.2:1, this shows
company’s short term solvency ratio is healthy.
6) It is found that from Table no 4.5.2 and 4.5.3 that company’s debtors require more days to
change debts into cash during one financial year.
7) It is found that from Table no 4.5.4 and 4.5.5 that how often a particular company pays off
its debts to suppliers within giving accounting period in that company require more days pay
off its debts.
8) It is found that from Table no 4.5.6 and 4.5.7 that company able to quickly turn its
inventory into sales.
9) It is found that from Table no 4.5.8, company’s working capital turnover ratio is good, and
indicates that a company is able to generate a larger amount of sales.
10) It is found that from Table no 4.5.9, current asset turnover ratio of company is good, as it
indicates a more efficient use of assets.
11) It is found that from Table no 4.5.10, companies quick ratio is more than ideal ratio so
company’s short term solvency position is healthy.

5.2 SUGGESTIONS

1) It has been suggested that the company should take measures to control the current
liabilities as the current liabilities are increasing over the years.
2) It has been suggested that the company should use its working capital optimally to increase
its advances.
3)Company should focus and ensure that it collects the full amount of debts from average
accounts receivables at least once during a period, as company’s debtors are taking more
time to pay their debts during financial year.

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4) It is suggested that, company should focus on increasing current asset turnover ratio,
because the more the amount of current asset turnover ratio, the better the ability of the
company to generate sales.
5) It is suggested that the company should work on to improve its working capital turnover
ratio as this may help the company to efficiently utilize its short term assets and liabilities to
support its sales levels.

5.3 CONCLUSION

Working capital may be regarded as lifeblood of a business. Its effective provision

can do much to ensure of a company, while its inefficient management can lead not only to
lose a profit but also to the ultimate down fall of what otherwise might be considered as a
processing concern. A study of working capital is of major importance to internal and
external analysis because of its close relationship with the current day to day operations of
company.

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As per calculation current asset are the main part of the working of the company. So,
the company should use its working capital optimally to increase its advances. So it
concluded that the short term solvency position of the company strengthen by investing
owners fund more in working capital.

BIBLOGRAPHY

Sr .No Name of Books Name of Author Publisher

1 Financial Management Prasanna Chandra Tata MeGRAW-Hill

Publishing Company
Ltd,seventh edition

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2 Financial Management- M.Y.Khan and Jain Tata McGrew-Hill Publishing

Text and Problem Ltd, Fifth edition

3 Financial Management Dr.Grigh jakotiya Himalaya Publishing house

4 Financial Management L.M.Pandey Vikas Publishing house Ninth

edition

5 Research Methodology C.R.Kothari New age international

Publishers, second edition

 Annual Financial report of Yashashri Polyextrusion Ltd, Jaysingpur.

 Website:
 www.wickipedia.com
 www.investopedia.com
 www.momeycontrol.com

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