Está en la página 1de 43

Chapter- 1

INTRODUCTION

The project undertaken is on WORKING CAPITAL MANAGEMENT IN PEC


LTD.
It describes about how the company manages its working capital and the various steps
that are required in the management of working capital.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's
ability to fund operations, reinvest and meet capital requirements and payments.
Understanding a company's cash flow health is essential to making investment
decisions. A good way to judge a company's cash flow prospects is to look at its
working capital management

(WCM).

Working capital refers to the cash a business requires for day-to-day operations or,
more specifically, for financing the conversion of raw materials into finished goods,
which the company sells for payment. Among the most important items of working
capital are levels of inventory, accounts receivable, and accounts payable. Analysts
look at these items for signs of a company's efficiency and financial

strength.

The Problems
In the management of working capital, the firm is faced with two key problems:
1. First, given the level of sales and the relevant cost considerations, what are the
optimal amounts of cash, accounts receivable and inventories that a firm should choose
to maintain?
1

2. Second, given these optimal amounts, what is the most economical way to finance
these working capital investments? To produce the best possible results, firms
should keep no unproductive assets and should finance with the cheapest available
sources of funds. Why? In general, it is quite advantageous for the firm to invest in
short term assets and to finance short-term liabilities.

PURPOSE OF STUDY

The objectives of this project were mainly to study the inventory, cash and
receivable at PEC LTD., but there are some more and they are

The main purpose of our study is to render a better understanding of the

concept Working Capital Management.


To understand the planning and management of working capital at PEC.
To measure the financial soundness of the company by analyzing various

ratios.
To suggest ways for better management and control of working capital at the
concern.

Company profile
2

PEC Ltd was incorporated in April, 1971 in New Delhi, India. It is a


public sector undertaking under Ministry of Commerce and Industry,
Department of Commerce, Government of India. The company's primary
business thrusts are in exports, imports, deemed exports, third country
trading, arranging financing, logistics, project exports and management.
PEC Ltd, over last three decades, has expanded its role to become an
international business organizer and a provider of integrated trade
facilitating services. Through its diversification activities since early
nineties, it has emerged as a positive force for the exchange of
commodities, goods and services between India and the nations of the
world. PEC as a trading company, is both initiator and intermediary,
developer as well as facilitator for global trade.
PECs comprehensive, global commercial services is balanced by our
readiness to listen to the individual client and tailor our services to his
needs. Each of our people is familiar with the local market he or she
covers and have a deep appreciation for the differences in regional flavor,
national character and prevailing situations.
Our client services are geared to two objectives: conducting international
transactions and developing whole new business ventures that will
contribute to Indias trade.
PEC brings buyers and sellers from India and countries around the globe
together on the common ground of mutually profitable trade.
3

Our acquired expertise and up-to-date information are unerring guides to


rich market opportunities. Our skills in negotiation have been tested and
refined over years in various marketplaces around the world. We can
arrange for the funds required for financing a transaction and the logistics
of transporting goods to their destinations.
Three decades in international trade has taught us how rapidly and
radically global trade flows can shift. We follow and interpret these
changes for our clients benefit and also take an active part in directing
the change.
PEC knows that, as there is no routine in the complex and volatile global
market, there is no profit in simple textbook solutions. To be sure, the
basic forms of trade, such as export, import and counter-trade, are
immutable. But, with the entire world a marketplace, these basic forms
support limitless opportunities for profitable commerce.
We also know that capitalizing on the dynamics of international takes a
global outlook, openness to the possibilities of the unexpected and to try a
fresh approach.
PEC thus offers an unmatched wealth of experience, skills and product
knowledge. But we hold equally important our creative ability to select
and adapt our resources to meet the particular needs of each client as well
as the current realities of the market.

Our clients can make use of our resources and expertise at any stage of a
transaction.
PEC thus offers:
Review and refinement of trade objectives thus helping a client to
craft a strategic plan for building a profitable business.
Advising clients on adapting products, pricing and distribution to
meet local needs and preferences in new markets.
Generation of a wealth of data on any transaction that a client may
contemplate, from cost estimates to the creditworthiness of
customers.
Negotiation of transactions on behalf of a client anywhere in the
world taking into account the different cultures, customs, languages
and monetary systems prevalent in that particular market.
Prepare all the necessary and indispensable paperwork required by
each legal and regulatory jurisdiction that touches a clients
transactions.
Line up the funds required to set a clients transaction in motion
and oversee payment and collection at its conclusion.

MISSION

To trade in the international market in a manner to create an image of quality,


reliability, ethical values and sustained long term relationship with the
customers and other business partners by

Export of engineering projects and equipment specially from small and


medium enterprises.

Export and Import of bulk items viz. commodities, raw materials and bullion
etc. and develop new products and new markets.

VISION

To be a highly market focused company engaged in international and domestic


trade; an organisation which is lean and flexible; capable of responding to the
changing environment and always conscious of its obligations of delivering
value to stakeholders.

A company capable of providing total service to the customers related to


international trade.
OBJECTIVES

To focus on export of engineering projects and equipment specially from small


and medium enterprises.

To trade internationally in commodities such as agricultural products,


industrial raw materials, chemicals and bullion.

To see new opportunities in the global and domestic market in order to sustain
a reasonable rate of growth in business.

PECs present line of business includes:

Exports of Projects, Capital goods, Engineering items, Software and IT related


services and pharmaceutical items & medical equipment/disposables.

Trading in Agricultural Commodities.

Import of Industrial Raw Materials.

Import of Bullion.

Chapter-2
6

RESEARCH METHODOLOGY

This project requires a detailed understanding of the concept Working


Capital Management. Therefore, firstly we need to have a clear idea of what
is working capital, how it is managed in PEC ltd. what are the different ways
in which the financing of working capital is done in the company.

The management of working capital involves managing inventories, accounts


receivable and payable and cash. Therefore one also needs to have a sound
knowledge about cash management, inventory management and receivables
management.

Then comes the financing of working capital requirement, i.e. how the
working capital is financed, what are the various sources through which it is
done.

SCOPE OF THE STUDY


This project is vital to me in a significant way. It does have some importance for the
company too. These are as follows

This project will be a learning device for the finance student.

Through this project I would study the various methods of the working
capital management.

The project will be a learning of planning and financing working capital.

The project would also be an effective tool for credit policies of the
companies.
7

This will show different methods of holding inventory and dealing with
cash and receivables.

This will show the liquidity position of the company and also how do they
maintain a particular liquidity position.

DATA SOURCES:
The following sources have been sought for the preparation report:

Primary sources such as business magazines, current annual reports, book


on Financial Management by various authors and internet websites the imp

amongst them being :www.indiainfoline.com, www.studyfinance.com .


Secondary sources like previous years annual reports, CMA Data, reports
on working capital for research, analysis and comparison of the data

gathered.
While doing this project, the data relating to working capital, cash
management, receivables management, inventory management and short

term financing was required.


This data was gathered through the companys websites, its corporate

intranet, PECs annual reports and CMA Data of the last three years.
A detailed study on the actual working processes of the company is also
done through direct interaction with the employees and by timely studying

the happenings at the company.


Also, various text books on financial management like

Khan& Jain,

Prasanna Chandra and I.M.Pandey were consulted to equip ourselves with


the topic.

LIMITATIONS OF THE STUDY:


8

We cannot do comparisons with other companies unless and until we have the

data of other companies on the same subject.


Only the printed data about the company will be available and not the back

end details.
Future plans of the company will not be disclosed to the trainees.
Lastly, due to shortage of time it is not possible to cover all the factors and
details regarding the subject of study.
The latest financial data could not be reported as the companys websites have
not been updated.

.
WORKING CAPITAL MANAGEMENT
CONCEPTUAL FRAMEWORK

Introduction to working capital

Working Capital is the Life-Blood and Controlling Nerve Center of a business

The working capital management precisely refers to management of current assets. A


firms working capital consists of its investment in current assets, which include
short-term assets such as:

Cash and bank balance,

Inventories,

Receivables (including debtors and bills),

Marketable securities.

Working capital is commonly defined as the difference between current assets


and current liabilities.

Working Capital = Current Assets-Current Liabilities

There are two major concepts of working capital:

Gross working capital

Net working capital

Gross working capital:

It refers to firm's investment in current assets. Current assets are the assets, which
can be converted into cash with in a financial year. The gross working capital
points to the need of arranging funds to finance current assets.

10

Net working capital:

It refers to the difference between current assets and current liabilities. Net
working capital can be positive or negative. A positive net working capital will
arise when current assets exceed current liabilities. And vice-versa for negative net
working capital. Net working capital is a qualitative concept. It indicates the
liquidity position of the firm and suggests the extent to which working capital
needs may be financed by permanent sources of funds. Net working capital also
covers the question of judicious mix of long-term and short-term funds for
financing current assets.

11

Significance Of Working Capital Management

The management of working capital is important for several reasons:

For
thing,

one
PAYMENT TO SUPPLIERS

EASY LOAN FROM BANKS

the

DIVIDEND DISTRIBU-TION

SIGNIFICAN--CE OF WORKING CAPITAL

INCREASE EFFECIENY

INCREASE DEBT CAPACITY

INCREASE IN FIX ASSETS

current assets of a typical manufacturing firm account for half of its total assets.
For a distribution company, they account for even more.

Working capital requires continuous day to day supervision. Working capital has
the effect on company's risk, return and share prices,

There is an inevitable relationship between sales growth and the level of current
assets. The target sales level can be achieved only if supported by adequate
working capital Inefficient working capital management may lead to insolvency
of the firm if it is not in a position to meet its liabilities and commitments.

Liquidity Vs Profitability: Risk - Return trade off

Another important aspect of a working capital policy is to maintain and provide


sufficient liquidity to the firm. Like the most corporate financial decisions, the
12

decision on how much working capital be maintained involves a trade off- having a
large net working capital may reduce the liquidity risk faced by a firm, but it can
have a negative effect on the cash flows. Therefore, the net effect on the value of the
firm should be used to determine the optimal amount of working capital.
Sound working capital involves two fundamental decisions for the firm. They are the
determination of:

The optimal level of investments in current assets.

The appropriate mix of short-term and long-term financing used to support


this investment in current assets, a firm should decide whether or not it
should use short-term financing. If short-term financing has to be used, the
firm must determine its portion in total financing. Short-term financing
may be preferred over long-term financing for two reasons:

The cost advantage

Flexibility

But short-term financing is more risky than long-term financing. Following table
will summarize our discussion of short-term versus long-term financing

13

Maintaining a policy of short term financing for short term or temporary assets
needs (Box 1) and long- term financing for long term or permanent assets needs
(Box 3) would comprise a set of moderate risk profitability strategies. But what one
gains by following alternative strategies (like by box 2 or box 4) needs to weighed
against what you give up.

14

CLASSIFICATION OF WORKING CAPITAL


Working capital can be classified as follows:

ON THE BASIS OF TIME


ON THE BASIS OF CONCEPT

KIND OF WORKING CAPITAL

ON THE BASIS
OF CONCEPT

ON THE BASIS
OF TIME

GROSS
WORKING
CAPITAL

NET
WORKING
CAPITAL

REGULAR
WORKING
CAPITAL

FIXED
WORKING
CAPITAL

RESERVE
WORKING
CAPITAL

VARIABLE
WORKING
CAPITAL

SEASONAL
WORKING
CAPITAL

SPECIAL
WORKING
CAPITAL

Types of Working Capital Needs


15

Another important aspect of working capital management is to analyze the total


working capital needs of the firm in order to find out the permanent and temporary
working capital. Working capital is required because of existence of operating cycle.
The lengthier the operating cycle, greater would be the need for working capital. The
operating cycle is a continuous process and therefore, the working capital is needed
constantly and regularly. However, the magnitude and quantum of working capital
required will not be same all the times, rather it will fluctuate.

The need for current assets tends to shift over time. Some of these changes reflect
permanent changes in the firm as is the case when the inventory and receivables
increases as the firm grows and the sales become higher and higher. Other changes
are seasonal, as is the case with increased inventory required for a particular festival
season. Still others are random reflecting the uncertainty associated with growth in
sales due to firm's specific or general economic factors.

The working capital needs can be bifurcated as:

Permanent working capital

Temporary working capital

Permanent working capital:

There is always a minimum level of working capital, which is continuously required


by a firm in order to maintain its activities. Every firm must have a minimum of
cash, stock and other current assets, this minimum level of current assets, which
16

must be maintained by any firm all the times, is known as permanent working
capital for that firm. This amount of working capital is constantly and regularly
required in the same way as fixed assets are required. So, it may also be called fixed
working capital.3

Temporary working capital:


Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable working capital. The position of the required working capital
is needed to meet fluctuations in demand consequent upon changes in production
and sales as a result of seasonal changes.

The permanent level is constant while the temporary working capital is fluctuating
increasing and decreasing in accordance with seasonal demands as shown in the
figure. In the case of an expanding firm, the permanent working capital line may not
17

be horizontal. This is because the demand for permanent current assets might be
increasing (or decreasing) to support a rising level of activity. In that case line would
be rising.

FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

There are many factors that determine working capital needs of an enterprise. Some
of these factors are explained below:

Nature or Character of Business.


The working capital requirement of a firm is closely related to the nature
of its business. A service firm, like an electricity undertaking or a transport
corporation, which has a short operating cycle and which sells
predominantly on cash basis, has a modest working capital requirement.
Oh the other hand, a manufacturing concern like a machine tools unit,
which has a long operating cycle and which sells largely on credit, has a
very substantial working capital requirement.
PEC is a manufacturing concern so this requires them to keep a
very sizeable amount in working capital.

Size of Business/Scale of Operations.


PEC has a good position in its segment and they are also spending their
operations in the domestic market as well as in foreign market. The scale
of operations and the size it holds in the market makes it a must for them
to hold their inventory and current asset at a huge level.

Rate of Growth of Business.


The rate of growth of sales indicates a need for increase in the working
capital requirements of the firm. As the firm is projected to increase their
sales by 69% from what it was in 2013, it is required to guard them against
18

the increasing requirements of the net current asset by way of efficient


working capital management. The sales and projected sales level determine
the investment in inventories and receivables.

Price Level Changes.


Changes in the price level also affect the working capital requirements. It
was the reduced margins in the price of the raw materials that had prompted
them to go for bulk purchases thus making on additions to their net current
assets. They might have gone for this large-scale procurement for availing
discounts and anticipating a rise in prices, which would have meant that
more funds are required to maintain the same current assets.

SOURCES OF WORKING CAPITAL

PEC has the following banks available for the fulfillment of its working capital
requirements in order to carry on its operations smoothly:
Banks:
These include the following banks
o Indian Bank
o Syndicate Bank

19

NAME OF BANK

FUND BASED

NON - FUND BASED

INDIAN BANK

300

250

SYNDICATE BANK

200

100

TOTAL

500

350

WORKING CAPITAL CYCLE

The upper portion of the diagram below shows in a simplified form the chain of
events in a manufacturing firm. Each of the boxes in the upper part of the diagram
can be seen as a tank through which funds flow. These tanks, which are concerned
with day-to-day activities, have funds constantly flowing into and out of them.

20

RAW MATERIAL
CASH
OPERATING CYCLE

& BILLS RECEIVABL-ES

SALES

WORK IN PROGRESS

FINISH GOODS

The chain starts with the firm buying raw materials on credit.

In due course this stock will be used in production, work will be carried out on the
stock, and it will become part of the firms work-in-progress.

Work will continue on the WIP until it eventually emerges as the finished product.

As production progresses, labor costs and overheads need have to be met.

Of course at some stage trade creditors will need to be paid.

When the finished goods are sold on credit, debtors are increased.

They will eventually pay, so that cash will be injected into the firm.
21

Each of the areas- Stock (raw materials, WIP, and finished goods), trade debtors, cash
(positive or negative) and trade creditors can be viewed as tanks into and from
which funds flow.
Working capital is clearly not the only aspect of a business that affects the amount of
cash.

The business will have to make payments to government for taxation.


Fixed assets will be purchased and sold
Lessors of fixed assets will be paid their rent

Shareholders (existing or new) may provide new funds in the form of cash

Some shares may be redeemed for cash

Dividends may be paid

Long-term loan creditors (existing or new) may provide loan finance, loans will

need to be repaid from time-to-time, and


Interest obligations will have to be met by the business

Unlike, movements in the working capital items, most of these non-working capital
cash transactions are not every day events. Some of them are annual events (e.g. tax
payments, lease payments, dividends, interest and, possibly, fixed asset purchases and
sales). Others (e.g. new equity and loan finance and redemption of old equity and loan
finance) would typically be rarer events.

22

INVENTORY MANAGEMENT

Inventories

Inventories constitute the most important part of the current assets of large majority of
companies. On an average the inventories are approximately 60% of the current assets
in public limited companies in India. Because of the large size of inventories
maintained by the firms, a considerable amount of funds is committed to them. It is
therefore, imperative to manage the inventories efficiently and effectively in order to
avoid unnecessary investment.

Nature of Inventories

Inventories are stock of the product of the company is manufacturing for sale and
components make up of the product. The various forms of the inventories in the
manufacturing companies are:

Raw Material: It is the basic input that is converted into the finished product
through the manufacturing process. Raw materials are those units which
have been purchased and stored for future production.

23

Work-in-progress: Inventories are semi-manufactured products. They


represent product that need more work they become finished products for
sale.

Finished Goods: Inventories are those completely manufactured products


which are ready for sale. Stocks of raw materials and work-in-progress
facilitate production, while stock of finished goods is required for smooth
marketing operations. Thus, inventories serve as a link between the
production and consumption of goods.

24

Inventory Management Techniques

In managing inventories, the firms objective should be to be in consonance with the


shareholder wealth maximization principle. To achieve this, the firm should determine
the optimum level of inventory. Efficiently controlled inventories make the firm
flexible. Inefficient inventory control results in unbalanced inventory and
inflexibility-the firm may sometimes run out of stock and sometimes pile up
unnecessary stocks.

Economic Order Quantity (EOQ): The major problem to be resolved is how


much the inventory should be added when inventory is replenished. If the
firm is buying raw materials, it has to decide lots in which it has to purchase
on replenishment. If the firm is planning a production run, the issue is how
much production to schedule. These problems are called order quantity
problems, and the task of the firm is to determine the optimum or economic
lot size. Determine an optimum level involves two types of costs:Ordering Costs: This term is used in case of raw material and
includes all the cost of acquiring raw material. They include the costs incurred in
the following activities:
Requisition
Purchase Ordering
Transporting
Receiving
Inspecting
Ordering cost increase with the number of orders placed; thus the more frequently
inventory is acquired, the higher the firms ordering costs. On the other hand, if
the firm maintains large inventorys level, there will be few orders placed and
25

ordering costs will be relatively small. Thus, ordering costs decrease with the
increasing size of inventory.

Carrying Costs: Costs are incurred for maintaining a given level of


inventory are called carrying costs. These include the following activities:
Warehousing Cost
Handling
Administrative cost
Insurance
Deterioration and obsolescence
Carrying costs are varying with inventory size. This behavior is contrary to that
of ordering costs which decline with increase in inventory size. The economic
size of inventory would thus depend on trade-off between carrying costs and
ordering cost.

ABC System: ABC system of inventory keeping is followed in the


factories. Various items are categorized into three different levels in the order of
their importance. For e.g. items such as memory, high capacity processors and
royalty are placed in the A category. Large number of firms has to maintain
several types of inventories. It is not desirable the same degree of control all the
items. The firm should pay maximum attention to those items whose value is
highest. The firm should therefore, classify inventories to identify which items
should receive the most effort in controlling. The firm should be selective in
approach to control investment in various types of inventories. This analytical
approach is called ABC Analysis. The high-value items are classified as A
items and would be under tightest control. C items represent relatively least

26

value and would require simple control. B items fall in between the two
categories and require reasonable attention of management.

27

Chapter 3
DATA ANALYSIS AND INTRPRETATION

3.1 Ratio analysis


1. Current ratio :
The current ratio is a liquidity ratio that measures a company's
ability to pay short-term and long-term obligations. To gauge this
ability, the current ratio considers the current total assets of a
company (both liquid and illiquid) relative to that
company's current total liabilities.
CURRENT RATIO = CURRENT ASSETS /CURRENT LIABILITIES

YEARS

2011

2012

2013

2014

2015

CR

1.044

1.062

1.074

1.095

1.042

Table 1.1

1.1
1.09
1.08
1.07
1.06
Column3

1.05
1.04
1.03
1.02
1.01
2011

2012

2013

2014

2015

Figure 1.1
28

Interpretation:

2. ABSOLUTE LIQUIDITY RATIO :


Liquidity ratios are a class of financial metrics used to determine a
companys ability to pay off its short-terms debts obligations. Generally, the
higher the value of the ratio, the larger the margin of safety that the company
possesses to cover short-term debts.

ABSOLUTE LIQUIDITY RATIO = CURRENT ASSETS STOCK PREPAID


EXPENSE / CURRENT LIABILITIES

YEARS

2011

2012

2013

2014

2015

LR

0.789

0.915

0.399

1.026

0.971

29

1.2
1
0.8
0.6

Column3

0.4
0.2
0
2011

2012

2013

2014

2015

Figure 1.2

Interpretation:

3. Return on current assets :


30

The return on assets (ROA) ratio illustrates how well management is


employing the company's total assets to make a profit. The higher
thereturn, the more efficient management is in utilizing
its asset base. The ROA ratio is calculated by comparing net income
to average total assets, and is expressed as a percentage.

Return on current assets = net income / total assets

years

2011

2012

2013

2014

2015

ROA

0.024

0.027

0.029

0.011

0.038

0.04
0.04
0.03
0.03
0.02

Column3

0.02
0.01
0.01
0
2011

2012

2013

2014

2015

Interpretation:

31

4. Debtors turnover ratio:


The receivables turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets. Receivables turnover ratio can be calculated by dividing
the net value of credit sales during a given period by the average accounts
receivable during the same period.

Debtors turnover ratio= net credit sales / average debtors


Where, average debtors =opening debtors + closing debtors / 2

years

2011

2012

2013

2014

2015

DTR

3.38

2.98

0.55

3.20

2.33

32

3.5
3
2.5
2
Column3
1.5
1
0.5
0
2011

2012

2013

2014

2015

Interpretation:

5. Creditors turnover ratio :

33

The accounts payable turnover ratio is a short-term liquidity measure used to


quantify the rate at which a company pays off its suppliers.Accounts payable
turnover ratio is calculated by taking the total purchases made from suppliers
and dividing it by the average accounts payable amount during the same
period.

Creditors turnover ratio = net credit purchases / average creditors

years

2011

2012

2013

2014

2015

CTR

2.10

0.417

3.047

3.341

3.5
3
2.5
2
Column3
1.5
1
0.5
0
2011

2012

2013

2014

2015

Interpretation:

34

6. Debt equity ratio :


The debt-to-equity ratio (D/E) is a financial ratio indicating the relative
proportion of shareholders' equity and debt used to finance a
company's assets. Closely related to leveraging, the ratio is also
known as Risk, Gearing or Leverage.

Debt equity ratio = total liability / total equity

YEARS

2011

2012

2013

2014

2015

D/E

20.1

16.80

14.81

9.66

22.19

35

25

20

15
Column3
10

0
2011

2012

2013

2014

2015

INTERPRETATION:

7. NET PROFIT RATIO :


36

A profitability ratio is a measure of profitability, which is a way to measure a


company's performance. Profitability is simply the capacity to make a profit, and a profit
is what is left over from income earned after you have deducted all costs and expenses
related to earning the income. The formulas you are about to learn can be used to judge
a company's performance and to compare its performance against other similarlysituated companies.

NET PROFIT RATIO= net profit / net sales * 100

years
NPR

2011

2012

2013

2014

2015

0.711

0.720

0.832

0.007

-3.370

1
0.5
0
-0.5
-1

2011

2012

2013

2014

2015

Column3

-1.5
-2
-2.5
-3
-3.5

37

Interpretation:

8. Working capital turnover ratio :


The working capital turnover ratio shows the relationship between the funds used
to finance a company's operations and the revenues a company generates as a
result of conducting these operations. A higher working capital turnover ratio
indicates that a company generates a higher dollar amount of sales for every
dollar of the working capital used.

Working capital turnover ratio = working capital/sales*100

years
WCTR

2011

2012

2013

2014

2015

2.60

3.11

3.19

3.42

2.32

38

3.5
3
2.5
2

WCTR

1.5
1
0.5
0
2011

2012

2013

2014

Interpretation:

9. Net working capital ratio :


Net working capital is the aggregate amount of all current assets and current
liabilities. It is used to measure the short-term liquidity of a business, and can
also be used to obtain a general impression of the ability of company
management to utilize assets in an efficient manner.

Net working capital ratio = current assets current liabilities/ sales

39

years

2011

2012

2013

2014

2015

NWC

0.026

0.031

0.03

0.034

0.023

0.04
0.03
0.03
0.02
Column3
0.02
0.01
0.01
0
2011

2012

2013

2014

2015

Interpretation:

CONCLUDING ANAYSIS

40

The working capital position of the company is sound and the various sources
through which it is funded are optimal.
The company has used its purchasing, financing and investment decisions to good
effect can be seen from the inferences made earlier in the project.
The debts doubtful have been doubled over the years but their percentage on the
debts has almost become half. This implies a sales and collection policy that get
along with the receivables management of the firm.
The various ratios calculated are an indicator as to the fact that the profitability of
the firm and sales are on a rise and also the deletion of the inefficiencies in the
working capital management.
The firm has not compromised on profitability despite the high liquidity is
commendable.
PEC ltd. has reached a position where the default costs are as low as negligible and
where they can readily factor their accounts receivables for availing finance is
noteworthy.

BIBLIOGRAPHY

41

Following sources have been sought for the preparation of this report:

Corporate Intranet

Financial Statements (Annual Reports)

CMA Data

Direct interaction with the employees of the company

Internet ----

www.PEC.co.in

www.scribd.com

Textbooks on financial management I.M.Pandey


Khan and Jain

42

43

También podría gustarte