PREFACE

As a new paradigm based on proper integration of formal teaching and actual practice,
this Summer Training has been introduced under the Degree of Master of Business
Administration (M.B.A) to get a feel of actual Business Environment.

To bridge the gap between theory & practice and to cultivate proper temperament and
generate much needed morale i.e. to help the students to identify their strong and week
points in the following and appreciating various organizational activities. So that
appropriate measures can be taken at an earliest time.

Finance is the heart of any organization. Proper utilization of financial resources is

necessary for any organization to survive. With the purpose of getting myself well
dressed with the atmosphere of Prevailing industry, I went for eight week training at
“Bundy India Limited”.
Limited”.

This report presents the workings, findings and recommendations from the study of
working capital management at Bundy India Limited. It gives the better understanding of
the financial position of Bundy India Limited.
Limited

Finally I shall consider my hard work worthwhile if this endeavor is able to satisfy all
those concerned and proves useful to anyone or for any further study in future.
 ACKNOWLEDGEMENT

I would like to take this opportunity to express my gratitude towards all those who have
helped me in directly or indirectly in conducting this study.

First of all, I am very grateful to the NRIBM for granting me this precious opportunity of
learning by way of this study.

I would like to thank my research guide Prof. Viral Pandya and Prof. Poonam Nair
who has been a source of professional guidance and support in the completion of this
study.

I am also thankful to all the respondents of this study for their cooperation in the study
and also indebted to them for their advices and suggestions.

I also would express my gratitude to staff of Bundy India Ltd, for their co-operation and
immense support especially to Mr. Anand for his help and support.

Last but not the least I would like to thank my family & friends without whom this thesis
would not be possible.
 Executive Summary

The project on Working Capital Management has been a very good

experience. Every manufacturing company faces the problem of Working
Capital Management in their day to day processes. An organization’s cost
can be reduced and the profit can be increased only if it is able to manage its
Working Capital efficiently. At the same time the company can provide
customer satisfaction and hence can improve their overall productivity and
profitability.
This project is a sincere effort to study and analyze the Working Capital
Management of Bundy india ltd. The project was focused on making a
financial overview of the company by conducting a Working Capital
analysis of Bundy India ltd for the years 2006 to 2009 and Ratios & various
components of working capital & for the year 2008 in a cma(cash
monitoring arrangement) format emphasizing on Working Capital.
 Role of Financial Managers:

The role of a financial manager can be discussed under the

following heads:

1. Nature of work

2. Working conditions

3. Employment

4. Training, Other qualifications and Advancement

5. Job outlook

6. Related occupations

Let us discuss each of these in a detailed manner.

1. Nature of work

Almost every firm, government agency and organization has

one or more financial managers who oversee the preparation of financial
reports, direct investment activities, and implement cash management
strategies. As computers are increasingly used to record and organize data,
many financial managers are spending more time developing strategies and
implementing the long-term goals of their organization.

The duties of financial managers vary with their specific titles,

which include controller, treasurer or finance officer, credit manager, cash
manager, and risk and insurance manager. Controllers direct the preparation
of financial reports that summarize and forecast the organization’s financial
position, such as income statements, balance sheets, and analyses of future
earnings or expenses. Regulatory authorities also in charge of preparing
special reports require controllers. Often, controllers oversee the accounting,
audit, and budget departments. Treasurers and finance officers direct the
organization’s financial goals, objectives, and budgets. They oversee the
investment of funds and manage associated risks, supervise cash
management activities, execute capital-raising strategies to support a firm’s
expansion, and deal with mergers and acquisitions. Credit managers oversee
the firm’s issuance of credit. They establish credit-rating criteria, determine
credit ceilings, and monitor the collections of past-due accounts. Managers
specializing in international finance develop financial and accounting
systems for the banking transactions of multinational organizations.

Cash managers monitor and control the flow of cash receipts

and disbursements to meet the business and investment needs of the firm.
For example, cash flow projections are needed to determine whether loans
must be obtained to meet cash requirements or whether surplus cash should
be invested in interest-bearing instruments. Risk and insurance managers
oversee programs to minimize risks and losses that might arise from
financial transactions and business operations undertaken by the institution.
They also manage the organization’s insurance budget.

Financial institutions, such as commercial banks, savings and

loan associations, credit unions, and mortgage and finance companies,
employ additional financial managers who oversee various functions, such
as lending, trusts, mortgages, and investments, or programs, including sales,
operations, or electronic financial services. These managers may be required
to solicit business, authorize loans, and direct the investment of funds,
always adhering to State laws and regulations.

Branch managers of financial institutions administer and

manage all of the functions of a branch office, which may include hiring
personnel, approving loans and lines of credit, establishing a rapport with
the community to attract business, and assisting customers with account
problems. Financial managers who work for financial institutions must keep
abreast of the rapidly growing array of financial services and products.

In addition to the general duties described above, all financial

managers perform tasks unique to their organization or industry. For
example, government financial managers must be experts on the government
appropriations and budgeting processes, whereas healthcare financial
managers must be knowledgeable about issues surrounding healthcare
financing. Moreover, financial managers must be aware of special tax laws
and regulations that affect their industry.

Financial managers play an increasingly important role in

mergers and consolidations and in global expansion and related financing.
These areas require extensive, specialized knowledge on the part of the
financial manager to reduce risks and maximize profit. Financial managers
increasingly are hired on a temporary basis to advise senior managers on
these and other matters. In fact, some small firms contract out all accounting
and financial functions to companies that provide these services.
 The role of the financial manager, particularly in business, is
changing in response to technological advances that have significantly
reduced the amount of time it takes to produce financial reports. Financial
managers now perform more data analysis and use it to offer senior
managers ideas on how to maximize profits. They often work on teams,
acting as business advisors to top management. Financial managers need to
keep abreast of the latest computer technology in order to increase the
efficiency of their firm’s financial operations.

2. Working conditions

Financial managers work in comfortable offices, often close to

top managers and to departments that develop the financial data these
managers need. They typically have direct access to state-of-the-art
computer systems and information services. Financial managers commonly
work long hours, often up to 50 or 60 per week. They generally are required
to attend meetings of financial and economic associations and may travel to
visit subsidiary firms or to meet customers.

3. Employment

While the vast majority is employed in private industry, nearly

1 in 10 works for the different branches of government. In addition, although
they can be found in every industry, approximately 1 out of 4 are employed
by insurance and finance establishments, such as banks, savings institutions,
finance companies, credit unions, and securities dealers.
4. Training, Other qualifications and Advancement

A bachelor’s degree in finance, accounting, economics, or

business administration is the minimum academic preparation for financial
managers. However, many employers now seek graduates with a master’s
degree, preferably in business administration, economics, finance, or risk
management. These academic programs develop analytical skills and
provide knowledge of the latest financial analysis methods and technology.

Experience may be more important than formal education for

some financial manager positions—notably, branch managers in banks.
Banks typically fill branch manager positions by promoting experienced
loan officers and other professionals who excel at their jobs. Other financial
managers may enter the profession through formal management training
programs offered by the company.

Continuing education is vital for financial managers, who must

cope with the growing complexity of global trade, changes in State laws and
regulations, and the proliferation of new and complex financial instruments.
Firms often provide opportunities for workers to broaden their knowledge
and skills by encouraging employees to take graduate courses at colleges and
universities or attend conferences related to their specialty. Financial
management, banking, and credit union associations, often in cooperation
with colleges and universities, sponsor numerous national and local training
programs. Persons enrolled prepare extensively at home and then attend
sessions on subjects such as accounting management, budget management,
corporate cash management, financial analysis, international banking, and
information systems. Many firms pay all or part of the costs for employees
who successfully complete courses. Although experience, ability, and
leadership are emphasized for promotion, this type of special study may
accelerate advancement.

In some cases, financial managers also may broaden their skills

and exhibit their competency by attaining professional certification. There
are many different associations that offer professional certification
programs. For example, the Association for Investment Management and
Research confers the Chartered Financial Analyst designation on investment
professionals who have a bachelor’s degree, pass three sequential
examinations, and meet work experience requirements. The Association for
Financial Professionals (AFP) confers the Certified Cash Manager credential
to those who pass a computer-based exam and have a minimum of 2 years of
relevant experience. The Institute of Management Accountants offers a
Certified in Financial Management designation to members with a BA and
at least 2 years of work experience who pass the institute’s four-part
examination and fulfill continuing education requirements. Also, financial
managers who specialize in accounting may earn the Certified Public
Accountant (CPA) or Certified Management Accountant (CMA)
designations.

Candidates for financial management positions need a broad

range of skills. Interpersonal skills are important because these jobs involve
managing people and working as part of a team to solve problems. Financial
managers must have excellent communication skills to explain complex
financial data. Because financial managers work extensively with various
departments in their firm, a broad overview of the business is essential.

Financial managers should be creative thinkers and problem-

solvers, applying their analytical skills to business. They must be
comfortable with the latest computer technology. As financial operations
increasingly are affected by the global economy, financial managers must
have knowledge of international finance. Proficiency in a foreign language
also may be important.

Because financial management is critical for efficient business

operations, well-trained, experienced financial managers who display a
strong grasp of the operations of various departments within their
organization are prime candidates for promotion to top management
positions. Some financial managers transfer to closely related positions in
other industries. Those with extensive experience and access to sufficient
capital may start their own consulting firms.

5. Job outlook

Some companies may hire financial managers on a temporary

basis, to see the organization through a short-term crisis or to offer
suggestions for boosting profits. Other companies may contract out all
accounting and financial operations. Even in these cases, however, financial
managers may be needed to oversee the contracts.

Computer technology has reduced the time and staff required to

produce financial reports. As a result, forecasting earnings, profits, and
costs, and generating ideas and creative ways to increase profitability will
become a major role of corporate financial managers over the next decade.
Financial managers who are familiar with computer software that can assist
them in this role will be needed.

6. Related occupations

Financial managers combine formal education with experience

in one or more areas of finance, such as asset management, lending, credit
operations, securities investment, or insurance risk and loss control. Workers
in other occupations requiring similar training and skills include accountants
and auditors; budget analysts; financial analysts and personal financial
advisors; insurance underwriters; loan counselors and officers; securities,
commodities, and financial services sales agents; and real estate brokers and
sales agents.
 Need of working capital management

The need for working capital gross or current assets cannot be over emphasized As
already observed, the objective of financial decision making is to maximize the
shareholders wealth. To achieve this, it is necessary to generate sufficient profits
can be earned will naturally depend upon the magnitude of the sales among other
things but sales can not convert into cash. There is a need for working capital in
the form of current assets to deal with the problem arising out of lack of immediate
realization of cash against goods sold. Therefore sufficient working capital is
necessary to sustain sales activity. Technically this is refers to operating or cash cycle. If
the company has certain amount of cash, it will be required for purchasing the raw
material may be available on credit basis. Then the company has to spend some
amount for labour and factory overhead to convert the raw material in work in
progress, and ultimately finished goods. These finished goods convert in to sales on
credit basis in the form of sundry debtors. Sundry debtors are converting into cash after
expiry of credit period. Thus some amount of cash is blocked in raw materials,
WIP, finished goods, and sundry debtors and day to day cash requirements. However
some part of current assets may be financed by the current liabilities also. The amount
required to be invested in this current assets is always higher than the funds available
from current liabilities. This is the precise reason why the needs for working capital arise
Objectives of the study

Study of the working capital management is important because unless the working capital
is manged effectively monitored efficiently planed properly and reviewed periodically at
regular intervals to remove bottlenecks if any the company can not earn profirs and
increase its turnover. With this primary objective of the study, the following further
objectives are framed for a deprth analysis
• To study the working capital management of Bundy India ltd

• To study the optimum level of current assets and current liabilities of the
company

• To study the liquidity position through various working capital related ratios

• To study the working capital components such as receivables accounts, cash

management, inventory positions

• To estimated the working capital requirement of bundy india ltd

• Evaluation of liquidity position and working capital utilization

• Analysis of relationship between working capital and profitability

 METHODOLOGY

The information is collected through secondary sources during

the project. That information was utilized for calculating performance
evaluation and based on that, interpretations were made.

Sources of secondary data:

1. Most of the calculations are made on the financial statements of

the company provided statements.

2. Referring standard texts and referred books collected some of

the information regarding theoretical aspects.

3. Method- to assess the performance of he company method of

observation of the work in finance department in followed.
 COMPANY PROFILE

Register office: Plot No.2, GIDC Industrial Estate, Makarpura, Vadodara, Gujarat

Co-operate Office :

Plot Area :

Build up Area :

Product : Double Wall tubes, Single wall Plated tubes (Rigid and
Flexible Tubes)

Brand Name : Bundy India

Collaborator :

Telephones :

Fax No :
Web site : WWW. Tiautomotive.com

TI Group
Global Specialised Engineering

“TI Group’s Strategy is to be an international engineering

group concentrating on specialized engineering businesses,
operating in selected on a global basis.

Key businesses must be able to command positions of

sustainable technological and market share leadership.

They will have a high knowledge and service content and

will be able to anticipate and meet customer’s needs.”
 TI Group
Global Specialised Engineering

BASIC BELIEFS
♦ LEADERSHIP
♦ CLEAR PURPOSE AND DIRECTION
♦ QUALITY OF MANAGEMENT
♦ FEWER LEAVELS
♦ DECENTRALISED
♦ SAMLL HQ
♦ OPERATING COSTS AND DECISIONS
CLOSED TO THE SHARP END
♦ MARKETING DRIVEN
♦ CLOSED TO CUSTOMERS
♦ STRONG FINANCIAL CONTROLS
♦ COMPENSATION AND INCENTIVES
♦ DEMANDING
♦ EXCITING
History

1920, USA Bundy Tubing was invented and Mr. Harry Bundy founded the Bundy Tubing
Company in the 1920s.

1970 Company was incorporated as “Bundy Tubing of India Limited”. It

manufactured small diameter double walled copper steel tubes for automotive
and refrigeration industries.

1975, India Commercial production commenced. Company quickly established itself as

high quality producer of tubes.

1985-87, Company doubled its capacity and introduced Zinc coating and also entered
India value added businesses in a small way in 1991-92.

The TI (Tube Investment) Group purchased the Bundy Corporation and

1987, India restructured it.
TI Group’s main activities were in:
• Automotive and Refrigeration Tubing
• Seals (for the petrochemical industry)
• Aircraft landing gear
• Specialty plastics
1993, India “Bundy Tubing of India Ltd” was changed to “Bundy India Ltd”
TI UK took controlling interest in the company by increasing their equity
stake to 51%

TI and Smiths group got merged. The merger was conditional upon
demerging the automotive business. Specifically, Smith’s Group’s main
2000, UK interest in TI was in its non-automotive assets. The “TI” name went with the
automotive business and the other former TI businesses became Smith’s
companies. Smith’s is still the major shareholder in TI but are not involved in
the day-to-day running of the business.

Bundy India Ltd. has time to time faced challenges due to highly dynamic or vibrant
environment. It has continuously paced with the challenges without being adamant.
Which can be sent with fledged implementation of various activities in the organization.
With an appropriate blend of infrastructure and professionalism it is progressing
continuously and exploring new horizons by setting new standards for self.
MISSION
“To maintain a leadership position by providing consistent profitable growth as an
integrated manufacturer of fluid carrying system in global niche market.”

“Target markets must require a high degree of knowledge and service.”

“Customer needs must be anticipated and satisfied.”

BIL Quality objective and strategies
 Maintain a quality system based on International quality standards (such as ISO
9000) industry standards (such as QS 9000) and the relevant regional or industry
specific requirement in addition to any other customer requirements.
 Support a standardized approach to quality procedures and implementation of
systems throughout Bundy India Ltd including all units.
 Develop a customer/supplier relationship for internal Bundy customers which
benchmarks best practices and achieve performance targets set forth from year to
year.
 Manage the continous improvement process, using a structured approaches like
TPM/CSM in order to improve quality, reduce cost and waste in supply chain and
increase customer satisfaction through timely delivery, continuous reduction in
customer complaints and retaining long term business. The management of each
Bundy unit will set objective and time frame for TPM/CSM in their respective
units.
 Attract and develop superior, highly motivated and trained personnel organized
into an appropriate structure.
 Emphasize prevention activities with a target of Zero effect.
HR objectives and policies
 Creating learning and development climate through continuous training.
 Nurturing a healthy respect towards ideas and suggestion of employees through
suggestion scheme.
 Encouraging employees for participating in continuous improvement activities
through CSM (common sense manufacturing) and lean manufacturing approach
etc.
 Creating awareness among the employees through display boards, e-mail,
employee satisfaction survey etc- internal communication.
 Inducting socializing and placing the new hires through induction programme for
new recruits.
 Evaluate changing skills and competencies and design appropriate training inputs
through skill/competence matrix of employees.
Quality policies
 Bundy is dedicated to becoming a globally preferred supporter through achieving
total customer satisfaction in an environment of prevention and continuous
improvement.

 This is executed by accountable and responsible employee and supplier working

in flexible and responsive team dedicated to ensuring the satisfaction of internal
and external customers
Environment policy
Bundy is committed to conserve natural resources and protecting the global environment.
We are committed to comply with relevant environmental legislations and regulation and
strive to shape our operational processes and products to bring sustainable social and
ecological benefits wherever we operate.
Implementation of this policy is a primary management objective and the responsibility
of every employee.
Specifically we are committed to
 Introduce ISO 14001 throughout the group units in India.
 Incorporate sensitivity to environmental issues and objectives in all appropriate
business decisions.
 Monitor and review our performance on a regular basis.
 Assess, if necessary revise environmental target periodically.
 Train our employees in environmental awareness and encourage them to
contribute voluntarily.
 Develop and market products that are environment friendly.
 Respond positively to customer environmental programmes.
 Encourages suppliers to apply standards compatible with our own.
 Pursue a policy of continuous improvement and prevention of pollution the will to
enhance environmental management.
TI Automotive safety policy

We consider employee safety of prime importance in the conduct of our business. Our
employees are over most important Asset and their safety is our greatest collective
responsibility.
The foundation for providing a clean and safe environment is based upon
 Establishing local safety committees that develop and direct a proactive safety
programme for each location.
 Top corporate and plant executives meeting regularly with safety committees.
 Encouraging all employees to take an active part in safety performance.
 The president and other appropriate executive reviewing all cost time injury
reports within 24 hours of the occurrence.
 ORGANOGRA

GM (O) GM (O) GM (O)

Gurgaion Baroda Chennai

Finance HR Marketing Production

and system Administration
and security

Q & E and Sourcing and Maintenance Packing and

Environment Retailer Dispatch
Department

PRODUCT OFFERINGS
Double wall Single wall Electro Auto parts CPP
galvanitors

 Single wall tubes

  Plain electric tubes
 Copper coated
 Hot dip zinc coated
 Electro galvanized coating
 Olive green passivation
 Yellow passivation
 PVF coating

 Double wall tubes

 Plain bundy weld
 Electro galvanized coating
 Olive green passivation
 Yellow passivation
 PVF coating

 Automotive components
 Brake lines
 Fuel and vapour lines
 Clusters / Bundles
 Clutch lines
 Power steering line

 Internal products range through import

 Fluororesin coated tubes
 Epoxy coated tubes
 Rilsan coated tubes
BUNDY INTERNATIONAL
World leader in fluid carrying
 Automotive – fully integrated system for brake, fuel and power train
 World leadership
 Titeflex and Techno flow – high performance brake and fuel hose
 Huron quick connect technology
 Over 150 facilities in 29 countries on 5 continents
 Roll – Bond and waveline – new technology
 Compressor component
 Over 50 satelite facilities offering just-in-time delivery to
customers
 20,000 employee – worldwide customer service

GLOBAL CUSTOMER SERVICE

Over 150 facilities in 29 countries on 5 continents. Bundy – the growth continues

New facilities recently added

 Brazil – Minasgerais satellite to support fiat sa Paulo refrigeration component
facility
 China – Wuhan satellite to support citroen
 Germany – Additional techno flow facility at fuldabruck Neukirchen facility to
support ford and Audi
 Korea – satellite facility near Inchon to support Daewoo
 Poland – Bievko Baila satellite to support fiat
 South Africa – Tube manufacturing plant in king William’s Town and satellite in
Pretoria, Durban, East London and uitenhage support fiat
 UK – Telford satellite to support rover, Ford & Toyota
 USA – Greenville satellite to support BMW, Nissan, Mercedes-Benz, GM and
Chrysler.
 MANAGEMENT STYLE

♦ HIGH DRIVE AND ENERGY

♦ CONFIDENNCE – CONSIDERED RISKS
♦ UNDERSTAND HOW TO MAKE MONEY
♦ HUNGRY – HIGH ACHIEVABLE GOALS
♦ LOYALTY – TEAM PLAYERS
♦ ADD VALUE
♦ NO SURPRISES
♦ INTERNATIONALIS
An Introduction To Working Capital Management

“Working capital means the part of the total assets of the business that change
from one form to another form in the ordinary course of business operations.”

Concept of working capital:-

The word working capital is made of two words 1.Working and 2. Capital
The word working means day to day operation of the business, whereas the word
capital means monetary value of all assets of the business.

Working capital : -

Working capital may be regarded as the life blood of business. Working capital is
of major importance to internal and external analysis because of its close
relationship with the current day-to-day operations of a business. Every business
needs funds for two purposes.

* Long term funds are required to create production facilities through purchase of
fixed assets such as plants, machineries, lands, buildings & etc

* Short term funds are required for the purchase of raw materials, payment of
wages, and other day-to-day expenses.
. It is other wise known as revolving or circulating capital

It is nothing but the difference between current assets and current liabilities. i.e.

Working Capital = Current Asset – Current Liability.

Businesses use capital for construction, renovation, furniture, software, equipment,

or machinery. It is also commonly used to purchase inventory, or to make payroll.
Capital is also used often by businesses to put a down payment down on a piece of
commercial real estate. Working capital is essential for any business to succeed. It
is becoming increasingly important to have access to more working capital when
we need it.
Concept of working capital

• Gross Working Capital = Total of Current Asset

• Net Working Capital = Excess of Current Asset over Current Liability
Current Assets Current Liabilities
• Cash in hand / at bank • Bills Payable
• Bills Receivable • Sundry Creditors
• Sundry Debtors • Outstanding expenses
• Short term loans • Accrued expenses
• Investors/ stock
• Bank Over draft
• Temporary
investment
• Prepaid expenses

• Accrued incomes

FACTORS DETERMINING WORKING CAPITAL

REQUIREMENTS:-
With the type of business and the ambition of proprietors the amount is
bound to vary. For instance, a small business would need lesser amount
of working capital than a larger business engaged in the same line. As
the business expands the amount needed would grow. Similarly,
business with seasonal demand would require larger amount of working
capital. Therefore, an estimate of requirements of working capital will
differ from concern and from industry to industry. Further, cyclical
changes, periods of prosperity and depression cause wide variations in
the demand for working capital. Other unexpected happenings are likely
to create unusual demands for working capital.
There is no concrete formula to decide the amount of workings capital
required by a business. There are also business in which fixed is small
ion relation to working capital.
The Major determinants of the proportion of fixed to working capital are
as follows:-
1.Nature of Business:-
Business units selling service (like public utilities) instead of a
commodity, have little need for working capital, as they have little
demand for large inventories. Generally they operate in cash and prepay
basis. But trading concerns (merchandising companies) make a greater
use of working capital, since inventory represents a major item of
investment. A relatively small proportion will consist of working capital
in case of manufacturing concerns. Larger working capital will require in
labor intensive industries than in highly mechanized industries. In
chemical or engineering industries, working capital would be relatively
larger.
1)Size of Business :
The working capital requirements of a concern are directly influenced by
the size of the business which may be measured in terms of scale of
operations. Greater the size of a business unit generally larger will be the
requirement of working capital. However, in some cases even a smaller
concern may need more working capital due to high overhead charges
Insufficient use of available resources and other economic disadvantages
of small size.
Production Policy:-
In certain industries the demand is subject to wide fluctuation due to
seasonal variation. The requirement of working capital, in such cases
depends upon the production policy. The production could be kept either
steady by accumulating inventories during slack period with a view to
meet high demand during the peak season or the production could be
curtailed during the slack season and increased during peak season. If the
policy is to keep production steady by accumulation inventories it will
require higher working capital. A company should have some production
policy i.e. to maintain the production is a considerable range in order to
meet the changing demand. A company like RIL whose productive
capacities can be utilized for manufacturing varied products can have the
advantages of diversified activities and solve their working capital
problem.
2)Manufacturing Process/ Length of the production cycle:-
In manufacturing business, the requirements of working capital increase
in direct proportion to length of manufacturing process, longer the
process period of manufacture, longer is the amount of working capital
required. The longer the manufacturing time, the raw materials and other
supplies have to be carried for a longer period in the process with
progressive increment of labor and service costs before the finished
product is finally obtained. Therefore, if there is alternative process of
production, the process with the shortest production period should be
chosen.
3)Working Capital Cycle:-
In manufacturing concern, working capital cycle starts with the purchase
of raw materials and ends with realization of cash from the sale of
finished goods. The cycle involves the purchase of raw materials and
ends with the realization of cash from the sale of finished products. The
cycle involves purchase of raw materials and stores, its conversion in to
stock of finished goods through work in progress with progressive
increment of labor and service cost, conversion of finished stick in to
sales and receivables and ultimately realization of cash and this cycle
continuous again from cash to purchase of raw materials and so on.
4)Market Condition:-
The degree of competition prevailing in the market places has an
important bearing on working capital needs. When competition keen, a
larger inventory of finished goods is required to promptly serve customer
who may not be inclined to wait because other manufacturers are ready to
meet their needs, further, generous credit terms may have to be offered to
attract customers in a highly competitive market. Thus, working capital
needs tends to be high because of greater investment in finished goods
inventory and accounts receivable.
If the market is strong and completion weeks a firm can manage with a
smaller inventory of finished goods because customers can be served
with some delay. Further in such situation the firm can insist
on cash payment and avoid lock – up of funds in accounts receivable, it
can even ask for advance payment, partial or total.
5)Credit Policy:-
The credit policy is concerned in its dealings with debtors and creditors
influence considerably the requirements of the working capital. A
concern that purchases its requirements on credit and sells its
products/services on cash requires lesser amount of working capital. On
the other hand a concern buying its requirements for cash and allowing
credit to its customers, shall need larger amount of funds are bound to be
tied up in debtors or bills receivables.
6)Business Cycle:-
Business Cycle refers to alternate expansion and contraction in general
business activities. In a period of born i.e. when the business is
prosperous there is a need for larger amount of working capital due to
increase in sales, rise in prices, optimistic expansion of business etc. On
the country at he time of depression i.e. when there is a down swing of
the cycle, business contracts, sales decline, difficulties are faced in
collections from debtors and firms may have a large amount of working
capital lying ideal
7)Rate of Growth Of business:-
The working capital requirements of a concern increase with the growth
and expansion of its business activities. Although it is difficult to
determine the relation between growth in the volume of the business and
in the growth of the working capital of the business, yet it may be
concluded that for normal rate of expansion in the volume of the
business, we may have retained profits to provide for more working
capital but in the first growing concerns, we shall require larger amount
of capital.

8)Earning Capacity And Dividend policy:-

 Some firms have more earning capacity than others due to
the quality of their products, monopoly conditions etc. Such firms with
high earning capacity may generate cash profits from operations and
contribute to their capital. The dividend policy of a concern also
influences the requirements of the working capital. A firm that maintains
steady high rate of cash dividend irrespective of its generation of profits
needs more capital than the firm retains larger part of its profits and does
not pay high rate of cash dividend.
9)Price Level Changes:-
Changes in the prices level also effects the working capital requirements.
Generally the rising prices will require the firm to maintain larger amount
of working capital as more funds will require maintaining the same
current assets. The effect of rising prices may be different for different
firms. Some firms may be affected much while some other may not be
affected at all by the rise in prices.
10) Other Factors:-
Certain other factors such as operating efficiency, management ability,
irregularities a supply, import policy, asset structure, importance of labor,
banking facilities etc. also influences the requirement of working capital.

Working capital In terms of five components:

1. Cash and equivalents: - This most liquid form of working capital requires
constant supervision. A good cash budgeting and forecasting system provides
answers to key questions such as: Is the cash level adequate to meet current
expenses as they come due? What is the timing relationship between cash inflow
and outflow? When will peak cash needs occur? When and how much bank
borrowing will be needed to meet any cash shortfalls? When will repayment be
expected and will the cash flow cover it?

2. Accounts receivable: - Many businesses extend credit to their customers. If you

do, is the amount of accounts receivable reasonable relative to sales? How rapidly
are receivables being collected? Which customers are slow to pay and what should
be done about them?

3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets,

so naturally it requires continual scrutiny. Is the inventory level reasonable
compared with sales and the nature of
your business? What's the rate of inventory turnover compared with other
companies in your type of business?

4. Accounts payable:- Financing by suppliers is common in small business; it is

one of the major sources of funds for entrepreneurs. Is the amount of money owed
suppliers reasonable relative to what you purchase? What is your firm's payment
policy doing to enhance or detract from your credit rating?

5. Accrued expenses and taxes payable: - These are obligations of your company
at any given time and represent a future outflow of cash.
Two different concepts of working capital are:-

• Balance sheet or Traditional concept

• Operating cycle concept.

Balance sheet or Traditional concept:- It shows the position of the firm at certain
point of time. It is calculated in the basis of balance sheet prepared at a specific date.
In this method there are two type of working capital:-
• Gross working capital
• Net working capital

Gross working capital:- It refers to the firm’s investment in current assets. The sum
of the current assets is the working capital of the business. The sum of the current
assets is a quantitative aspect of working capital. Which emphasizes more on quantity
than its quality, but it fails to reveal the true financial position of the firm because
every increase in current liabilities will decrease the gross working capital.

Net working capital:- It is the difference between current assets and current liabilities
or the excess of total current assets over total current liabilities

Working capital= current assets - current liabilities.

Net working capital: - It is also can defined as that part of a firm’s current assets
which is financed with long term funds. It may be either positive or negative. When
the current assets exceed the current liability, the working capital is positive and vice
versa.

Operating cycle concept:- The duration or time required to complete the sequence
of events right from purchase of raw material for cash to the realization of sales in
cash is called the operating cycle or working capital cycle.
 CASH RAW MATERIAL

DEBTORS & OPERATING CYCLE WORK IN

BILLS
PROGRESS
RECEIVABLES

SALES FINISH GOODS

Types of Working Capital:-
SIGNIFICANCE OF WORKING CAPITAL:-
Estimate of working capital requirements:
To avoid the storage of working capital at once an estimate of working
capital requirements should be made in advances so that arrangement
can be made to procedure adequate working capital. But estimation of
working capital requirements is not an easy task and a large number of
factors have to be considered before starting this exercise.
Factors requiring consideration while estimating working capital:-
Total costs incurred on materials, wages and overheads.
1) The length of time for which raw materials are to remain in stores
before they are issued for production.

2) The length of the production cycle or work in progress, i.e. the time
taken for conversion of raw materials into finished goods.

3) The length of sales cycle during which finished goods are kept
waiting for sales.

4) The average period of credit allowed to customers.

5) The amount of cash required to pay day-to-day expenses of the

business.

6) The average amount of cash required to make advance payment.

7) The average period expected to be allowed by suppliers.

8) Time lag in the payment of wages and other expenses.

Importance of Working Capital Ratios

Ratio analysis can be used by financial executives to check upon the efficiency
with which working capital is being used in the enterprise. The following are the
important ratios to measure the efficiency of working capital. The following, easily
calculated, ratios are important measures of working capital utilization.

Ratio Formulae Result Interpretation

Stock Average Stock= x days On average, you turn over the value of your
Turnover * 365/ entire stock every x days. You may need to
(in days) Cost of Goods break this down into product groups for
Sold effective stock management.
Obsolete stock, slow moving lines will
extend overall stock turnover days. Faster
production, fewer product lines, just in time
ordering will reduce average days.
Receivables Debtors * 365/= x days It takes you on average x days to collect
Ratio Sales monies due to you. If your official credit
(in days) terms are 45 day and it takes you 65 days.
One or more large or slow debts can drag out
the average days. Effective debtor
management will minimize the days.
Payables Creditors * 365/= x days On average, you pay your suppliers every x
Ratio Cost of Sales days. If you negotiate better credit terms this
(in days) (or Purchases) will increase. If you pay earlier, say, to get a
discount this will decline. If you simply defer
paying your suppliers (without agreement)
this will also increase - but your reputation,
 the quality of service and any flexibility
provided by your suppliers may suffer.

Current Total Current= xCurrent Assets are assets that you can readily
Ratio Assets/ times turn in to cash or will do so within 12 months
Total Current in the course of business. Current Liabilities
Liabilities are amount you are due to pay within the
coming 12 months. For example, 1.5 times
means that you should be able to lay your
hands on $1.50 for every $1.00 you owe.
Less than 1 times e.g. 0.75 means that you
could have liquidity problems and be under
pressure to generate sufficient cash to meet
oncoming demands.
Quick Ratio(Total Current= xSimilar to the Current Ratio but takes
Assets -times account of the fact that it may take time to
Inventory)/ convert inventory into cash.
Total Current
Liabilities
Working (Inventory +As %A high percentage means that working
Capital Receivables -Sales capital needs are high relative to your sales.
Ratio Payables)/
Sales

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

 SOLVENCY OF THE BUSINESS: Adequate working capital helps in
maintaining the solvency of the business by providing uninterrupted of
production.

 Goodwill: Sufficient amount of working capital enables a firm to make

prompt payments and makes and maintain the goodwill.

 Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable
terms.

 Cash Discounts: Adequate working capital also enables a concern to avail

cash discounts on the purchases and hence reduces cost.

 Regular Supply of Raw Material: Sufficient working capital ensures

regular supply of raw material and continuous production.

 Regular Payment Of Salaries, Wages And Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage and
costs and enhances production and profits.

 Exploitation Of Favorable Market Conditions: If a firm is having

adequate working capital then it can exploit the favorable market conditions
such as purchasing its requirements in bulk when the prices are lower and
holdings its inventories for higher prices.

 Ability To Face Crises: A concern can face the situation during the
depression.
 Quick And Regular Return On Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and
gains confidence of the investors and can raise more funds in future.

 High Morale: Adequate working capital brings an environment of

securities, confidence, high morale which results in overall efficiency in a
business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run
its business operations. It should have neither redundant or excess working
capital nor inadequate nor shortages of working capital. Both excess as well as
short working capital positions are bad for any business. However, it is the
inadequate working capital which is more dangerous from the point of view of
the firm.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING
CAPITAL

1. Excessive working capital means ideal funds which earn no profit for
the firm and business cannot earn the required rate of return on its
investments.

2. Redundant working capital leads to unnecessary purchasing and

accumulation of inventories.

3. Excessive working capital implies excessive debtors and defective

credit policy which causes higher incidence of bad debts.

4. It may reduce the overall efficiency of the business.

5. If a firm is having excessive working capital then the relations with

banks and other financial institution may not be maintained.

6. Due to lower rate of return n investments, the values of shares may also
fall.

7. The redundant working capital gives rise to speculative transactions

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working
capital arises due to the time gap between production and realization of cash from
sales. There is an operating cycle involved in sales and realization of cash. There
are time gaps in purchase of raw material and production; production and sales;
and realization of cash.

Thus working capital is needed for the following purposes:

 For the purpose of raw material, components and spares.

 To pay wages and salaries

 To incur day-to-day expenses and overload costs such as office

expenses.

 To meet the selling costs as packing, advertising, etc.

 To provide credit facilities to the customer.

 To maintain the inventories of the raw material, work-in-progress, stores

and spares and finished stock.

For studying the need of working capital in a business, one has to study the
business under varying circumstances such as a new concern requires a lot of
funds to meet its initial requirements such as promotion and formation etc.
These expenses are called preliminary expenses and are capitalized. The
amount needed for working capital depends upon the size of the company and
ambitions of its promoters. Greater the size of the business unit, generally larger
will be the requirements of the working capital.

The requirement of the working capital goes on increasing with the growth and
expensing of the business till it gains maturity. At maturity the amount of
working capital required is called normal working capital.
PERMANENT OR FIXED SOURCES OF WORKING CAPITAL:-
1)Shares
2)Debentures
3)Public Deposits
4)Ploughing back of profits
5)Loans from financial institutions

TEMPORARY OR VARIABLE SOURSES

OF WORKING CAPITAL:-
1) Commercial banks
2) Indigenous bankers
3) Trade creditors
4) Installment credit
5) Advances
6) Accounts receivable- credit/factoring
7) Accrued expenses
8) Commercial paper
Commercial banks are the most important sources of short term capital. The major
portions of working capital loans are provided by commercial banks. They provide
of wide variety of loans tailored to meet the specific
requirements of a concern. The different forms in which the banks normally provide
loans and advances are as follows:-
A) Loans
b) Cash credits
c) Overdrafts
D) Purchasing and discounting of bills
 In addition to the above mentioned forms of direct finance, commercial banks help
their customers in obtaining credit form their suppliers through the letter of credit
arrangements.
It is always a test to the prudence of a financial manager to obtain the correct
amount of working capital at the right time, at a reasonable cost and at the most
favorable terms.
• MANAGEMENT OF INVENTORY

• MANAGEMENT OF CASH

• MANAGEMENT OF RECEIVABLES

MANAGEMENT OF INVENTORY:-
Inventories constitute the most significant part of current assets of a large
majority of companies in India. On an average, inventories are approximately 60 %
of current assets in public limited companies in India.
Because of the large size of inventories maintained by firms maintained by firms, a
considerable amount of funds is required to be committed to them. It is, therefore
very necessary to manage inventories efficiently and effectively in order to avoid
unnecessary investments. A firm neglecting a firm the management of inventories
will be jeopardizing its long run profitability and may fail ultimately.
The purpose of inventory management is to ensure availability of materials in
sufficient quantity as and when required and also to minimize investment in
inventories at considerable degrees, without any adverse effect on production and
sales, by using simple inventory planning and control techniques.
 Need to Hold Inventories:-
There are three general motives for holding inventories:-
1) Transaction motive emphasizes the need to maintain inventories
to facilitate smooth production and sales operation.

2) Precautionary motive necessities holding of inventories to guard against the

risk of unpredictable changes in demand and supply forces and other factors.

3) Speculative motive influences the decision to increases or reduce inventory

levels to take advantage of price fluctuations and also for saving in re-ordering
costs and quantity discounts etc.

Objective of Inventory Management:-

The main objectives of inventory management are operational and financial. The
operational mean that means that the materials and spares

Should be available in sufficient quantity so that work is not disrupted for want of
inventory. The financial objective means that investments in inventories should not
remain ideal and minimum working capital
Should be locked in it. The following are the objectives of inventory management:-
1) To ensure continuous supply of materials, spares and finished goods.

2) To avoid both over-stocking of inventory.

3) To maintain investments in inventories at the optimum level as required by

the operational and sale activities.
4) To keep material cost under control so that they contribute in reducing cost of
production and overall purchases.

5) To eliminate duplication in ordering or replenishing stocks. This is possible with

the help of centralizing purchases.

6)To minimize losses through deterioration, pilferage, wastages and damages.

7)To design proper organization for inventory control so that management. Clear
cut account ability should be fixed at various levels of the organization.

8)To ensure perpetual inventory control so that materials shown in stock ledgers
should be actually lying in the stores.

9)To ensure right quality of goods at reasonable prices.

10) To facilitate furnishing of data for short-term and long term planning and
control of inventory
MANAGEMENT OF CASH:-

Cash is the important current asset for the operation of the business.
Cash is the basic input needed to keep the business running in the continuous basis,
it is also the ultimate output expected to be realized by selling or product
manufactured by the firm.
The firm should keep sufficient cash neither more nor less. Cash shortage will
disrupt the firm’s manufacturing operations while excessive cash will simply
remain ideal without contributing anything towards the firm’s profitability. Thus a
major function of the financial manager is to maintain a sound cash position.
Cash is the money, which a firm can disburse immediately without any restriction.
The term cash includes coins, currency and cheques held by the firm and balances
in its bank account. Sometimes near cash items such as marketing securities or
bank term deposits are also included in cash. Generally when a firm has excess
cash, it invests it is marketable securities. This kind of investment contributes some
profit to the firm.
NEEDTO HOLD CASH:

The firm’s need to hold cash may be attributed to the following three motives:-
The Transaction Motive: The transaction motive requires a firm to hold cash to
conduct its business in the ordinary course. The firm needs cash primarily to make
payments for purchases, wages and salaries, other operating expenses, taxes,
dividends, etc.
The Precautionary Motive: A firm is required to keep cash for meeting various
contingencies. Though cash inflows and outflows are anticipated but there may be
variations in these estimates. For example a debtor who pays after 7 days may
inform of his inability to pay, on the other hand a supplier who used to give credit
for 15 days may not have the stock to supply or he may not be in opposition to give
credit at present.
Speculative Motive: - The speculative motive relates to the holding of cash for
investing in profit making opportunities as and when they arise.
The opportunities to make profit changes. The firm will hold cash, when it is
expected that interest rates will rise and security price will fall.
Statement showing change in working capital for Bundy india ltd for the year
2009-2008 :-

Particulars 09 08 Increase ( + ) Decrease (- )

Current Assets
Inventories 732.22 724.58 7.64
Sund. Debtors 1049.05 1033.22 15.83
Cash & Bank 39.78 106.43 66.65
Loan & Advances 750.33 712.43 37.9
Total ( A ) 2562.38 2576.66

Current
Liabilities
C.L. 1108.32 1725.23 616.91
Provisions 144.50 118.50 26
Total ( B ) 1252.82 1843.73

( A-B ) 1309.56 732.93

↑ in working 576.63 576.63
capital
Total 1309.56 1309.56 664 683.56

Statement showing change in working capital for Bundy india ltd for the year
2007-2006 :-
Particulars 07 06 Increase ( + ) Decrease (- )
Current Assets
Inventories 581.85 802.42 220.57
Sund. Debtors 2589.31 1272.93 1316.38
Cash & Bank 264.11 335.38 71.27
Loan & Advances 606.60 363.63 242.97
Total ( A ) 4041.87 2774.36

Current
Liabilities
C.L. 2630.75 1940.57 690.18
Provisions 151.75 133.79 17.96
Total ( B ) 2782.50 2074.36

( A-B ) 1259.37 700

↑ in working 559.37 559.37
capital
Total 1259.37 1259.37 2267.49 291.84

1. CALCULATION OF WORKING CAPITAL FOR BIRLA

CORPORATION LIMITED

YEAR 06 07 08 09
Current assets
Inventories 802.42 581.85 724.58 732.22
Sundry debtor 1272.93 2589.31 1033.22 1049.05
Cash & Bank 335.38 264.11 106.43 39.78
Loan & 363.63 606.60 712.43 750.33
Advances
Total current 2774.36 4041.87 2576.66 2562.38
assets

Current
liabilities and
provisons
Current 1940.57 2630.75 1725.23 1108.32
liabilities
Provisions 133.79 151.75 118.50 144.50
Total current 2074.36 2782.50 1843.73 1252.82
assets
Net current 700 1259.37 732.93 1309.56
assets

1
400
1
200
1
000
8
00
6
00 NetW orking
4
00 Capital
2
00
0
2
006 2
007 2
008 2
009
 ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials content in a store of factory at any
given time. Inventory means stock of three things :-

1. Raw materials
2. Semi finished goods.
3. Finished goods.
 2. Position of inventory in Birla Corporation Limited

(rs. In lacs)
Year 2009 2008
Stores, spare parts etc 108.114 126.80
Raw material 469.20 388.29
Work in progress 127.33 200.95
Finished goods 18.55 8.54
Total 723.22 724.58

725

724.5

724
Total
723.5

723

722.5
2008 2009
 INTERPRETATION:

By analyzing this data inventories for the year 2009 is slightly declined by only
0.18% . this will shows company is try to minimize its inventory level and
company has no plan for expansion in the time of recession.
 3. SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and

fall under current assets. Debtors will arise only when credit sales are made.

Debts outstanding for a 2009 2008

period more than six
months
Considered good 36.01 257.31
Consider doubtful 23.99 6.04
Other debts consider good 1013.04 775.91
Other debts consider 1073.04 1039.26
doubtful
Less
Provison for doubtful 23.99 6.04
debts
1049.05 1033.22

1050

1045

1040

1035

1030

1025
2008 2009

INTERPRETATION

In the table and figure we see that there is continuous rise in the debtors of Bundy
india Limited in the successive years. A simple logic is that debtors increase only
when sales increase and if sales increases it is good sign for growth. We can see
there is a 1.532% increase in debtors from previous years.
We can say that it is a good sign as well as negative also. Company policy of
debtors is very good but a risk of bad debts is always present in high debtors.
when sales is increasing with a great speed the profit also increases. If company
decreases the Debtors they can use the money in many investment plans.

4. CASH AND BANK BALANCE ANALYSIS

Cash is called the most liquid asset and vital current assets, it is an important
component of working capital. In a narrow sense, cash includes notes, bank draft,
cheque etc while in a broader sense it includes near cash assets such as marketable
securities and time deposits with bank.

Position of Cash and Bank Balance in Bundy India Limited

2009 2008 2007 2006

Cash on hand 1.42 1.32
Balances with 38.19 103.18
scheduled
bank
Money deposit 0.17 1.93
Cash and bank 39.78 106.43 264.11 335.38
balances
 350
300
250
200
150 Cashandbank balances

100
50
0
2006 2007 2008 2009

INTERPRETATION

If we analyze the above table and chart we find that it follows a decreasing trend.
In the year 2006 it had maintained a huge amount of cash and bank balance which
has fallen in the year 2007 but there is huge fall between the year 2007 and 2008
and also fallen drastically in 2009 . Although company’s cash is decreasing but this
is very good sign for company because they are not holding the cash in hand but
using the cash for better projects. The analysis shows that the fix deposits of
company are rapidly fallen in last three years as 21.25% and 59.70% and 62.62%
in 06-07 ,07-08 and 08-09 respectively from previous year. Company is utilizing
the fixed cash for exploding the projects that is good for growth.

5. LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties,
company, employees for a specific period of time and in return they will be liable
to make timely repayment of that amount in addition to interest on that loan.

2009 2008 2007 2006

Advances recoverable in cash 115.49 100.54
Sundry deposit 90.45 97.28
Balances with excise and govt. 262.99 255.29
authority
Advance payment of tax 281.40 259.32
750.33 712.43 606.60 363.63
 800
700
600
500
400
loans and advances
300
200
100
0
2006 2007 2008 209

INTERPRETATION

If we analyze the table and the chart we can see that it follows an increasing trend
which is a good sign for the company. We can see that the increase of
66.83%,17.44%, and 0.53 % in 06-07 , 07-08, 08-09 respectively from previous
year.

The increasing pattern shows that company is giving advances for the expansion of
plants and machinery which is good sign for better production of other goods.
Although company’s cash is blocked but this is good that company is doing
modernization of plants In time to compete with other competitors in market.

6. CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term
basis or current liabilities that has to be paid by the firm with in one year.

2009 2008 2007 2006

Acceptance 98.18 57.21
Outstanding dues 970.23 1519.2
4
Advances from customer 4.77 0.27
Other liabilities 35.14 148.21

1108.3 1725.2 2630.7 1940.57

2 3 5

3000
2500
2000
1500
current liabilities
1000
500
0
2006 2007 2008 2009
Interpretation

If we analyze the above table then we can see that it follow an uneven trend. The important
component of current liabilities is sundry creditors and other liabilities. In 07 it increased by
26.23% and in 08 it increased by 52.48%. In 08 it was decreased because by 55.56%.This is
liability for company so this should be less. when company have minimum liabilities it creates a
better goodwill in market. High current liabilities indicate that company is using credit facilities
by creditors.
 7. PROVISIONS ANALYSIS

2009 2008 2007 2006

Provison for 66.61 50.04
gratuity
Provison for 77.89 68.46
compensated
absences
144.50 118.50 151.75 133.79

Provisons

160

140

120

100

80

60

40

20

0
2006 2007 2008 2009
INTERPRETATION

From the above chart we can analyze that it has uneven trend and we can see that
in 2007 provison is increased by 13.42%, and in 2008 it decreased drastically by
21.91% and in 2009 it again increases by 21.94%.
WORKING CAPITAL RATIOS AND ITS INTERPRETATION

8. Position of RECEIVABLE RATIO in Bundy india limited

FORMULA
DEBTORS
RECEIVABLE RATIO = ---------------- * 365
SALES

This ratio shows the proportion of sales to average receivables. It shows the
efficiency of the collection policy of the firm. The higher the ratio, the less
satisfactory position of the firm. Higher ratio indicates weak collection policy of
the firm.
 2009 2008 2007 2006
Receivable ratios in days 62.95 77.61 116.65 61.79

120
100
80
60
Receivableratiosindays
40
20
0
2006 2007 2008 2009

INTERPRETATION
Generally a low debtors turnover ratio implies that it considered congenial for the
business as it implies better cash flow. The ratio indicates the time at which the debts are
collected on an average during the year. Needless to say that a high Debtors Turnover Ratio
implies a shorter collection period which indicates prompt payment made by the customer.

PAYABLE RATIO

2009 2008 2007 2006

Payable ratios 114 221
in days

FORMULA
CREDITORS
PAYABLE RATIO= -----------------------------
COST OF SALES
Creditor’s turnover ratio shows the proportion of purchase to account payable
number of days within which we make payment to our creditors for credit
purchases estimated the creditors ratio if this ratio is higher it means company has
to check whether company is making payment within credit period available. If it
is making payment before the due date means the company is not taking full
advantage of it credit period and if company making the payment the period that
indicates that the company is not taking the benefit of discount allowed.

Position of CURRENT RATIO in Bundy india limited

It is also known as “working capital ratio” .It is a measures of short-term financial

strength of the business and shows whether the business will be able to meet it’ s
current liabilities as when they mature.

Current Assets including assets which can be converted in to cash easily and itself
like market securities debtors, inventory, prepaid expenses etc.
Current Liabilities included creditors, bills payable, accrual expenses, short term
bank loan, income tax liabilities and long term debt maturity in current year. In
short it can be said as all obligation within a year are included in current liabilities.
Current ratio is a measure of the firm’s short term solvency. It indicate the
availability of current assets in rupee of current liabilities. As a conventional rule, a
current ratio should be or slightly more. It focuses the strong of weak position of
the company.
 9. Position of CURRENT RATIO in Bundy India Limited

FORMULA
TOTAL CURRENT ASSETS
CURRENT RATIO= --------------------------------------------
TOTAL CURRENT LIABILITIES

(Rs. in Lacs)

Current Ratio

Year Current Assets Current Liabilities Ratio

2006 2774.36 2074.36 1.34

2007 4041.87 2782.50 1.45
2008 2576.66 1843.73 1.40
2009 2562.38 1252.82 2.05

1.8
1.6
1.4
1.2
1
0.8 Current ratio
0.6
0.4
0.2
0
2006 2007 2008 2009
INTERPRETATION

This ratio reflects the financial stability of the enterprise. The standard of the
normal ratio is 2:1 but in most of companies standard is taken according to Tandon
Committee which is taken as 1.33:1.
Now if we analyze the three years data it can be predicted that it holds a stable
position all through out period but it is seen that it holds a low position than the
standard one and the company is required to improve its position.
 10.Position of QUICK RATIO in Bundy india limited

FORMULA

TOTAL CURRENT ASSETS - INVENTORIES

QUICK RATIO= -----------------------------------------------------------------
TOTAL CURRENT LIABILITIES

The measure of absolute liquidity may be obtained only cash and bank balance as
well as only ready marketable security with liquid liabilities. This is every existing
standard of liquidity and it is satisfaction if the ratio is 1.50:1
 (Rs. in Lacs)

Quick Ratio

Year Quick Assets Current Liabilities Ratio

2006 1971.94 2074.36 0.95

2007 3460.02 2782.50 1.24
2008 1852.08 1843.73 1.00
2009 1839.16 1252.82 1.47

1.6
1.4
1.2
1
0.8
RATIO
0.6
0.4
0.2
0
2006 2007 2008 2009
INTERPRETATION

It is the ratio between quick liquid assets and quick liabilities. The normal value for
such ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity
position of the firm. It indicates the relationship between strictly liquid assets
whose realizable value is almost certain on one hand and strictly liquid liabilities
on the other hand. Liquid assets comprise all current assets minus stock.

By analyzing the four years data it can be said that its position was strong enough
in 2006.And in 2007 it increases much higher and in 2008 slighltly week and in
2009 again it stick on a strong position . it was very close to the standard and it can
be said that its liquidity position on an average is stable.
 11.WORKING CAPITAL TURNOVER RATIO

(Rs. in Lacs)

Working Capital Turnover Ratio

Year Cost of good sold Working Capital Ratio

2006 3764.28 833.79 4.51

2007 4217.16 1411.12 3.00
2008 2796.69 851.43 3.28
2009 3608.86 1454.06 2.48

GRAPHICAL REPRESENTATION

5
4.5
4
3.5
3
2.5
RATIO
2
1.5
1
0.5
0
2006 2007 2008 2009
Interpretation

Higher the ratio more efficient is Inventory management & vice versa. In 2006,
working capital turnover ratio was 4.51 which were good for the company. In
2007, it was declined to 3.00 because of increasing in working capital. In 2009,
ratio was 2.48 where cost of good sold was similar to 2006 but large increased in
working capital and that’s why decreased in ratio. So it is necessary to increase.
 12.DEBTORS TURNOVER RATIO

(Rs. in Lacs)
Debtors turnover Ratio

Year Net sales Average debtors Ratio

2006 6469.57 - -
2007 6953.71 1931.12 3.60
2008 4859.08 1811.27 2.68
2009 6082.53 1041.14 5.84

GRAPHICAL REPRESENTATION

3
RATIO
2

0
2006 2007 2008 2009
Interpretation

Higher the Debtor Turnover Ratio higher the credit management efficiency of the

firm and the company is able to convert its receivables into cash. In 2008, ratio was

decreased to 2.68 because of decreasing in net sales. And in 2009, ratio was

increased to 5.84 because of increasing in net sales and decreasing in average

debtors which shows efficiency of the company to convert its receivables into cash.
FINDINGS, SUMARRY & CONCLUSION

1. The net current asset of the company shows uneven trend but it increasing in 2008 and
2009 both the years so, its good sign for company and it shows company’s strong
financial position
2. Company’s inventory is slightly declined by only 0.18% , and its due to recession, and
company don’t have any expansion plan in future, and it’s good for company to minimize
its inventory level
3. There is 1.50% increases in debtor of the company which is due to increase in sales, but
some how company has to minimize its debtor by his policy, and it will decrease chance
of bad debt
4. The analysis shows that the fix deposits of company are rapidly fallen in last three years
as 21.25% and 59.70% and 62.62% in 06-07 ,07-08 and 08-09 respectively from
previous year. And company will invest in some better project rather than holding.
5. If we analyze the table and the chart we can see that it follows an increasing trend which
is a good sign for the company. We can see that the increase of 66.83%,17.44%, and
0.53 % in 06-07 , 07-08, 08-09 respectively from previous year. no doubt company’s
money is blocked but company is invest in some projects which is good sign for the
company
6. In 07 it increased by 26.23% and in 08 it increased by 52.48%. In 08 it was decreased
because by 55.56%.This is liability for company so this should be less.and company’z
minimum liability will create goodwill in the market..
7. From the above chart we can analyze that it has uneven trend and we can see that in 2007
provison is increased by 13.42%, and in 2008 it decreased drastically by 21.91% and in
2009 it again increases by 21.94%. . and it shows company is provison is according to its
policy and according to market condition
8. It shows an uneven trend , and company needs to modify its policy to collect its money as
quickly as possible to run operating cycle quickly
9. The current ratio has shown in a fluctuating trend as 1.34, 1.45, 1.40, and 2.05 during
2006-09 of which indicates a decreased in both current assets and current liabilities of
2009 as compare to 2006.

10. The quick ratio is also in a fluctuating trend through out the period 2006 – 09 resulting as
0.95, 1.24, 1.00, and 1.47. The company’s present liquidity position is satisfactory

11. The working capital decreased from 4.51 to 2.48 in the year 2006-09.

12. The debtors’ turnover ratio was 3.60 in 2007, 2.68 in 2008 and 5.84 in 2009. Ratio
increased as compare to 2007