Working Capital Management Nandi Pipes

INTRODUCTION
Capital required for a business can be classified under two main categories viz., (i) (ii) Fixed capital, and Working capital Every business needs funds for two purposes- for its establishment and to carry out its day-to-day operations. Long-term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land, building, furniture, etc. Investments in these assets represent that part of firms capital which is blocked on a permanent or fixed basis and is called fixed capital. Funds are also needed foe short-term purposes for the purchase of raw materials, payment of wages and other day-to-day expenses, etc. These funds are known as working capital. In simple words, working capital refers to tat part of the firms capital which is required for financing short term or current assets keep revolving fast and being constantly converted into cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short-term capital. In the words of Shubin, working capital is the amount of funds necessary to cover the cost of operating the enterprise. According to Genestenberg, Circulating capital means current assets of a company that are changed in the ordinary course of business from to another, as for example, from cash to inventories, inventories to receivables, receivables into cash.

Meanings and Definition of working capital

The term working capital stands for that part of the capital, which is required for the finance of working or current needs of the company. Working capital is life blood of every company whether it is manufacturing and non manufacturing one without adequate working capital, there can be no progress in the industry. The term describes a category of management decisions on
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specific types of assets and current liabilities. In turn those decisions should be routed in the overall valuation of the firm.

Definitions
According to West And Brigham, Working capital refers to a firms investment in short term assets cash, short term securities, accounts receivables and inventories. According to Hoagland, Working capital is description of that capital which is not fixed but th more common use of the working capital to consider it as the difference between book value of assets and current liabilities. According to Bonneville, Any acquisition of funds which increase the current assets increase the working capital also, for they are one and the same.

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NEED FOR THE STUDY

To maximise the shareholders wealth a firm should earn efficient returns from its operations, largely from sales. Thus adequate amount of funds are to be invested in current assets for successful sales and smooth & uninterrupted production process. Because of circulating nature of current assets, working capital is also called as Circulating Capital. The management of Working Capital should be prompt to initiate an action and correct imbalances otherwise, this lead to excess or inadequate working capital. Both the conditions are not desirable as they impact the profitability and shortterm solvency of the firm. Hence, the present study is needed to evaluate the working capital management at Sujala Pipes Pvt. Ltd.,.

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OBJECTIVES OF THE STUDY

The main objective of the study is to evaluate the working capital management at SUJALA PIPES PVT LIMITED during the period 2007-2010. The following are the sub-objectives of the study. To study the liquidity position of the Sujala Pipes Pvt. Ltd To examine the efficiency of working capital management with the help of turnover ratios. To understand the structure of operating cycle at Sujala Pipes.

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SCOPE OF THE STUDY

The scope of the study is defined below terms of concepts adopted and period under focus. First, the study management of working capital i.e gross and net is used in measuring profitability and liquidity respectively and also to arrive at various objectives of the study. Secondly, the study is based on the annual reports of the company for a period of five years from 2006-2007 to 2010-2010 (so we study 2007, 2008, 2009, 2010, 2010).

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RESEARCH METHODOLOGY
Research plan: For these study the research plan is essentially a combination of qualitative and quantitative aspects of Analytical research. Data collection: The sources of data is collected mainly from Secondary data : The profit and loss and balance sheet statements are collected from o Companys annual reports and o Finance section Tools of analysis The tools used for analysis are o Financial ratios o Operating cycle analysis

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LIMITATIONS OF THE STUDY

The study has been carried out at APCW and hence access to company level data (apart from the data available in the annual reports) was restricted. There is only one months period two finish the project, due to lack of time in depth of financial matters have not been touched. The information available in the balance sheet have taken from the published annual reports,

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WORKING CAPITAL MANAGEMENT INDUSTRIAL PROFILE

Plastics which are used for the industrial purpose is called industrial plastics. It is of 2 types. 1. 2. Structural Foams. Sheets and Films.

01. Structural Foam

It is of two Types a) Rigid Foam Rigid Foams Rigid polyether foams in sandwich foams have wide application a building component because of the stiffness imparted by the thick foam center for a given weight. They are also best insolvent known today and so have wide applicable in fitted slabs and are formed into cavities at the building site. A very important use of rigid foam is fur furniture parts to reproduce wood structures. Flexible Foams Flexible Foams, usually polyether urethane are made in slab foam up to 8 feet (2.4 meters) in which and, as much as 5 feet (1.5 meters) high, these are cut to required shapes or sizes or molded. Used almost exclusively by the automobile industry for crash pads, arm sets and dash board covers. Sheet and Films These include vinyls plastics and cellulose acetate vinyl. Plasticized poly vinyl chloride by a calendaring process, can be sawn, heat sealed or
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b) Flexible Foams.

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electrically sealed, it is used for apparel, door curtains. Protective clothing are made in many colored, transparent, translucent, or opaque. Polyvinyl chloride can be with sensitive adhesives and printed with decorative patterns. Thicker Sheet is colored and embossed for women handbags, luggage and seat covers. This film is used for packaging, especially for meat and fruits. If biaxial stretched, it forms a shrink film that retracts up to 60%. Another important use is, as a laminate for printed paper. Flooring tiles, largely made of PVC are built up by lamination and decorated either by printing or by rolling in color chips. The common title is vinyl asbestos, pressed into sheets on calendars and ten embossed and cut into titles. Rigid PVC Sheets has dimensional stability ad flame redundancy and is often used in corrugated form for building construction, partitions, drainage gutters, industrial lightening panels are the other uses. Styrene film, is widely used for rigid containers, Laminating by press and casting especially packing, molding.

Laminating by Press and Casting

Formed plastics are produced by forming gas bubbles in the molten material. Plastic Products are further shaped and finished by means of ranging from mechanical through laser machining ultrasonic welding and radiation processing. Vinyl Chloride, discovered in 1815, is formed by the reaction of acetylene with hydrochloric acid. The polymer Vinyl Chloride (PVC) was first produced in 1912. Plastic research and manufacture was proceedings on a considerable scale in the US Study of Polymers in the laboratory of E.I. DuPont De Nemours and Company from 1928 onwards, which led to the super polyamide or Nylon. Vinyl Chloride is made from ethylene and chlorine. Though acetylene can also be used. Then polymer is mainly processed in a highly plasticized from with varying degrees of flexibility, by a calendaring, extraction molding, often by dry blends , mixtures made below temperature from polymer plasticizer and pigments plasticizer are chosen to maintain flexibility at low
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temperature.

The range of applications of flexible poly vinyl chloride is

enormous and cover flouring, wire insulation, home furnishing, piping etc., Acrylonitrile Butanide Styrene posses a wide range of properties, notably scuff resistance, refrigerator linings, food and detergent, containers because of its chemical resistance to heat. Thick acroconistsle butanide-styrene sheet is used for sports car, bodies and automobiles door. Nylon films mostly from nylon 6.6 are ideal for food packaging, because of strength, impermeability to oils and Greases and high melting point. As such film is stream strippable; they find many uses in hospitals. They are frequently used in laminations. Acrylic films have resistance to ultraviolet light and external exposure, there prime use in surfacing laminations..

PVC PIPES IN INDIA

Chief occupation in India is agriculture. For the developing country like India, modernization of the agriculture practices has a pivotal place in improving the economy states and the process of modernization includes usage of high productive tools and agriculture practices. By using pipes, water can be transported efficiently with lesser no wastages, from the place where there is plenty of water available to the place where there is no less scarcity necessity of water. Pipes have been manufactured in India from the 1960s on imported lines and thereafter indigenous plans were also established. There are few pipe manufactures up to 1978 to 1979 and production capacity was increased rustically during 1979 1983 Cement pipes were the conventional pipes used for irrigation in the lift irrigation schemes. Now a days PVC pipes replaced the conventional pipes and they constitute almost 90% in the respect (because of breakdowns, difficulty in immovability etc.). The use of polymer Vinyl Chloride pipes in agricultural fields has lessened the water seepage which was predominant in earlier days. The Government of India allowed the imports of sophisticated machinery of technology, which are not available indigenously.
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The

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companies Europe and West Germany have competition in machinery producing plastics and it is an essential need for them to carry out continuous research for the up-to-date technology, which given higher output and good quality products. The State Government of A.P. is using rigid PVC pipes for irrigation and water supplies for the past few years. The State Government is producing PVC Pipes through APSIDC (Andhra Pradesh State Irrigation Development Corporation) for its lift irrigation schemes and other development schemes. The Panchayatraj Development is procuring pipes for the public water supply schemes. The main distributors and individual connections can use these pipes.

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COMPANY PROFILE
Mr.S.P.Y.Reddy (MP) started with a small plastic container manufacturing around 30 years ago and soon graduated into pipes manufacturing. With focus on quality and innovative marketing the group had grown into a mutli product, mutli vocational entity. We are into Manufacturing of PVC Pipes, HDPE Pipes, Storage Containers, Flexible Hoses, Fittings and processing of dairy products. The group had acquired majority stake in Panyam Cements two years ago. After resolving all issues, production was restarted in the month of May 2007. We believe with infrastructure and construction boom all around, the prospects are excellent for this unit. We have also initiated construction of Ethanol unit. vertical entities plastics. Cement and Ethanol by 2008. Our aim is to provide quality products, service to our customers and enhance living standards of workforce. We hope to

commence production by January, 2008. Our Vision is to have three successful

ORIGIN
Rayalaseema, economically backward part of the Andhra Pradesh (state) was has been identified fro-rapid industrialization to boost up the economic level of the region. Nandyal Town in Rayalaseema was industrially developed by the dynamic entrepreneur Sri.S.P.Y.Reddy, who is basically a Mechanical Engineer, by setting up an Unit at Nandyal and manufactured black pipes in 1977. His determination and hard work has helped to him in overcoming the problems faced in the initial years. With the financial assistance by the local commercial banks. Later he started a manufacturing of black pipes. This resulted in the formation of a private limited company called Sujala Pipes Private Limited,
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by S.P.Y.Reddy as the Managing Director and group promoter.

He got

financial assistance and Institutional assistance, which motivated him to setup a unit at Nandyal. With a great hope and expectations he has started production PVC Pipes for improving the water transport system. Nandi Pipes, which are famous all over the country, stand for testimony to Zeal, Perseverance, and hard work and for sighted vision of the one individual. He is Mr.S.P.Y. Reddy, the Founder and Managing Director and eminent techno entrepreneur and excellent mechanical engine. He left his plum job at bar to bring to dynamism and energy and aspirations started manufacturing of LDPE Pipes and later switched to PVC achieving incomparable success. Sujala Pipes Private Limited is the Manufacturing of the largest and most comprehensive range of UPVC Pipes in India.

PRODUCTION CAPACITY
Production Capacity of 22,200 metric tones per annul. Nandi rigid PVC at a glance: Color Length Pressure Rating Range Available : : : : Light Gray 6 Meters 2.5 Kg., 4Kg, 6Kg, 10Kg, & 15 Kg/cm*cm. 20mm to 400mm O.

Manufactured with ISI mark is 4985: 2000

ESTEEMED CUSTOMERS
Nandi Pipes are proud to present list of customer, which includes big water pipe line projects, dot projects panchayati Raj and industrial development corporation. Etc., Satya Sai Water Schemes Lorhen Project
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NABARD Water Schemes Karnataka Land Army Department And also we undertake turkey projects for pipelines.

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GROWTH AND DEVELOPMENT OF THE ORGANIZATION

The Sujala Pipes Private Limited to record an excellent growth from 1977 onwards.

1977

Nandyal Region (Polythene Pipes) P.V.C. Pipes Rayalaseema Region. Rayalaseema, Telangana Region. Andre and Karnataka Region. Andre, Tamilnadu and Karnataka States. Andre, Kerala and Karnataka States.

1984 1985 1985 1987 1987 1988 1989 1990 1990 1992 -

Sizes
Various sizes rangin from to 10 are offered to Customers. But for the purpose of cubic space utilization in truck while transport organization is adopting the technique like pipe in pipe.

Payment Period
The Company adopts zero credit policy and goods are not delivered unless cash remittance is made. The same policy is also applicable to authorized dealers of Sujala Pipes Private Limited.

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TECHNICAL DETAILS ABOUT PVC PIPES

INGRADIENTS PVC Resin D.B.L.S. T.B.L.S. L.S. C.S. Static Acid Hydro Carbon Calcium Carbonate Titanic Dioxide.

FUNCTIONAL DEPARTMENT OF THE COMPANY

Financial Department Though initially the company approached the external sources for financial aid, now the financial status of the company is very sound and is being run only with self-finance except the loans taken on hypothecation of machinery and stock from S.B.I. Nandyal and Karur Vysya Bank, Nandyal. The Financial Departments is headed by the Financial Manager with the help of four Accountants and other Clerks of the Department. The company follows cash & carry policy. The product is not delivered until the cash is paid and these transaction are look after financial department with the help of marketing department.

Marketing Department
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Executive Director heads Marketing Department. Marketing Manager is in charge of all the operations who reports to Executive Director. Marketing Manager and 35 Sales Representatives are under immediate control of Executive Director. There are also 20 Salesmen who have to report to the sales representatives above them.

Personnel Department
The Personal Department consists the details of the Executives and Workers of the Organization. The organization in formed with Sri.S.P.Y.Reddy. The General Manager of Executive Director who reports to Managing Director. Two Marketing Managers. Financial Manager, Public Relations Officer and Quality Control Officer who all Reports to Executive Director. Other than Executives there are 1,500 Workers in the organization. Panel consisting of Managing Director, Executive Director, General Manager and Managers of concerned department makes the Recruitment and selection. Apart from the attractive salaries company provides meals and health care facilities.

Purchasing Department
The Perplexing situation that is confronted by the Manufacturer of the PVC Pipes is Scarcity of resin. Though the Government of India has taken various steps to improve Supply Conditions of PVC resin, the Indian Manufacturers could meet only 50% of demand and remaining 50% is met from imports.

The Major Petrochemical Companies are

Sri ram Vijay Limited. Chem. Plast Limited. Reliance Petro Chemicals Ltd., National Organic Chemical Industries Ltd.,
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Finale
Indina Petro Chemical Industries Ltd., The lead time for the acquisition of raw material is 4 days.

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HUMAN RESOURCES POLICIES AND PRACTICES

The following lines are highlights the human resources policies and practices. Effective Utilization of Manpower To Provide good working condition. To Promote industrial development.

Nandi Group of Organizations

1. Sujala Pipes Private Limited, Nandyal. 2. Sri Kanth Water Containers, Nandyal. 3. Mahanandi SWR Fitters, Nandyal. 4. Nandi Solvent Cement, Nandyal. 5. Mahanandi Mineral Water, Nandyal. 6. Nandi Milk Dairy Products, Nandyal. 7. S.P.Y.Reddy Educational Institutions, Nandyal.

PVC Pipes
Sujala Pipes Private Limited, Nandyal a premier enterprise of Nandi Group is the well known manufacturer of the largest and most comprehensive range of UPVC Pipes in India. Nandi Gold Pipes, with a diameter upto 400mm are suitable for water tranportations, irrigation, plumbing, drainage, cable ducting, bore wells, transfer of industrial effluents and electrical conduits. The gamut of products covers all applications in which PVC Pipes can be used. Nandi UPVC Systems are more cost effective than conventional. GI, CI or AC systems besides being light in weight, durable and no corrosive. They are also easy to handle, offer excellent flow characteristics and can be transported and installed anywhere. With world class quality and customized
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product development support, they enjoy the satisfaction of millions of customers.

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The unit also has world class qualify assurance systems ensuring products of uncompromising excellence, meeting all relevant ISI, BS, DIN and ASTM standards. In addition to these features, extensive R & D facilities provide reliable and committed support for new product development, implying that even if a Nandi Customer is unable to acquire his precise requirement from our elaborate ranges, Nandi also could supply customized products as per his own exclusive specifications. The two major types of plastics are Thermosetting resins. Thermoplasting resins.

THERMOSETTING RESINS
They become insoluble and infusible on heating. They are phonetic resins, furnaresins amino plastics, alkyls and polyesters of unsaturated acids, epoxy resins, polytehanes and silicones.

THERMOPLASTICS RESINS
These can be melted and solidified repeatedly, unlikely thermosetting resins. They include cellulose derivates and additional polymers. Other types of resins include oil soluble or modified resins, plastics such as casein and lignin extracted from natural products and special application synthetics such as resins used as adhesives and as additives to paper and textiles.

Pipes Manufacturer in A.P.

The Major PVC Manufacturers in A.P. Nandi Pipes Finolex Pipes Supreme Pipes Monarch Pipes
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Jam Sudhakar Pipes Sri Lakshmi Venkateshwara PVC Pipes Hasthi Pipes And Many local manufacturers. Factors contribution to the boom of PVC pipes market: Less Weight Non Corrosiveness Excellent pressure resistance Good Chemical and thermal Stability Simple installation probability in handing Super Weathering and Economical. Present Marketing Situation of PVC pipes: Existence of large number of firms Product differentiation. Freedom of entry and exist of firms Easy Availability.

BENEFITS OF PVC PIPES

Corrosion Resistance Amuse to galvanic or electrolyte corrosion. Chemical Resistance PVC Pipes are not attacked by low or high concentration of acids. Oxidizing agents, alkalis, oils facts and halogens.
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Maintenance free No Painting coating required. Fire Resistance Self Extinguishing Flexibility Flexibility in underground piping. Variety of Joining Methods Cementing, Heat Fusing, Threading, Flanged Compression fitting. Biological Resistance Fit for high purity water applications, and resist to rodent attack.

DETAILS OF NANDI PVC PIPES

Pipe Diameter mm 20 25 32 40 50 63 75 90 110 140 160 180 inches 0.5 0.75 1 1025 1.5 2 2.5 3 4 5 6 7 class 5 5 5 3 3 2 2 2 2 2 2 2 Class Pressure 10 10 10 6 4 4 4 4 4 4 4 4 Flow Range liter/sec. 0.07 0.13 0.13 0.25 0.25 0.50 0.50 1.00 1.00 1.80 1.80 3.00 3.00 5.00 5.00 15.00 8.00 15.00 15.00 20.00 20.00 30.00 30.00 40.00

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200 225 250

8 9 10

2 2 2

4 4 4

40.00 50.00 50.00 60.00 60.00 70.00

HDPE PIPES
SALIENT FEATURES OF NANDI HDPE PIPES Manufactured as per ISI 4948: 1995 onwards Pipes are manufactured either in long coils or 6 meter length Depending on pipe dimension and customer requirements. Best Quality pipes at most reasonable prices. Pipes that meet your needs. Special customer requirements are accepted.

STANDARD PIPE COIL LENGTHS OF VARIOUS SIZES

Pipe Size 20 25mm 30 40mm 50mm 63 75mm 90 110mm 125mm & above Available Coil Length 1000mtrs. 600 mtrs. 400 mtrs. 300 mtrs. 50mtrs. 12 & 6 mtrs (single length)

WHAT NANDI OFFERS YOU...?

Our job goes beyond just selling pipes, as we are committed to the complete customer service. We take up pipeline projects on TURNKEY basis.
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We offer HDPE pipes solutions in place of conventional pipes (PVC, GI, Concrete etc.,) at competitive prices guaranteed service. We provide water lines for agricultural needs with free but jointing and testing. We extend service free of cost any future leakages / defects in the pipe line caused by faculty manufacturing or faulty jointing for a period of 20 years. We offer proclaim facility (for earth work) to farmers who buy minimum 100 lengths (6mtrs length) at concessional rates. Physical and Chemical Properties of Nandi HDPE Pipes: More Flexible Light in Weight Corrosion Resistant Chemically Inert Economical Smooth inner and outer finishing resulting in low flow resistance and low power consumption. Availability of pipes in long coils reduces much of the cost of laying. Jointing and additional couplers.

APPLICATIONS OF NANDI HDPE PIPES

Agriculture and Drinking water lines. As delivery pipes for single phase & 3 phase submersible pumps. As suction and delivery pipes for jet pumps As suction and delivery for centrifugal & monoblock pumps
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As delivery pipe for open well submersible pumps. Telecom & Electrical ducting. Slurry disposal. Industrial Flow applications.
Sewage Pipe Systems.

PRODUCT PROFILE
We shall look at the basic data about plastics and particularly these properties. Which are of use in practical working with plastics, plastics are manmade materials. The oldest raw materials for producing plastics are carbon materials obtained from coal tar. Today the majority of raw materials are obtained from petrochemicals sources and they can be economically produced in large quantities. Plastics have change out world day by day. They are become more important. They own their success to whole series of advantages, which they have over conventional materials such as Light Weight Excellent Mouldability Attractive Colours Low Energy Requirement for Conversion Low Labour Less Cost of Manufacturing Low Maintance
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High Strength of Manufacturing Corporation Resistant Aesthetics without Surface Treatment Compatibility with Reinforcing Materials

EMERGENCY OF PVC CONCEPT AND ITS SOCIALIZATION

Growing domestic agricultural and industrials requirements of the modern Words werer in quest for the new substance, which could serve the needs and wants of the to days man although metals were meeting major chunk of the fabrication demands of the modern world, formability and weight

constraints were real impediments in light of this situation the substance called plastic which has got all desired characteristics to serve the modern man was discovered this carbonaceous substance with excellent physical stability could replace most of the earlier used metals wood etc., Although acceptance and socialization or this new innovation or this new innovation was slow it has shown a study encroachment into the life of the todays an Now plastics are omnipresent and serving numerous fields agricultural heavily modernized communication, optical liners in

communication sector fiber equipment are only few application in multi various uses of the plastic.

PVCPIPES AND ITS ECONOMICROLE

Chief occupation in India is agriculture. For the developing countries like India, modernization of the agricultural practices assumes pivotal place in improving the economic status and the processes of modernization include
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usage of high productive plastic supplement of great extent manufacturing of tools required for new agricultural practices. The usage of Poly Viny Chloride pipes in agricultural fields, lessen water seepage, which was predominate in earlier practices. With the services of PVC pipes, water can be transported efficiently with lesser losses. From the place or higher water potential to the place of lower potential. Presently the revolutionary tried in water management speaks much about drip irrigation, which is developed in Israel and is practiced by all agriculture based nations in the world. Drip irrigation greatly used PVC pipes as core tools of implementation with the service or this sort, PVC pipes one way or the other strengthening the hands of countrys economy. A part with the referred PVC pipes supplemented with fitting used in houses for electric connections. Sewage connections and other domestic purposes. A part from these two applications it has got wide application even in industrial sector. PVC pipes with much unique heart, chemical and physical characteristics serve many industrial purposes.

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STERICAID HYDROCARBON CALCIUM CARBONATE TITANIC DIOXIDE MANUFACTURING PROCESS Hot forward extrusion is employed for the manufacturing of PVC pipes resin with weighted amounts of other ingredients, which are carried to the hot chambers, the high temperature of hot chamber melts ingredient and content of the given forward transit to get hallow pipes of required dimension. As the pipes come out of the heat chamber, cool the pipes immediately. Pipes of desired length are cut with the aid of stop and power hacksaw. Production is made in various sizes ranging from to 10 according to usage. REINFORCED PLASTIC Although plastic have high strength to ratio, they are not as strong as metals and deform permanently under load it cannot he placed under extremely high or low temperature like metals and other and black as reinforcing fillers have a way for making strength bearing plastic and they are at a times replace steel. ALLOYS

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Physical mixture of two polymers is termed as alloys physical blending of two polymers is needed because every polymer has certain set of good properties design of a specials products which should have specific set properties may not obtain if it is made only from one polymer by blending two polymers is highly amorphous and rigid but has low impact strength if it is blended with, materials product will he of high strength rigid Thus by alloying a wide range of product can be made although ugh alloys are physical mixture of polymers hydrogen bonds formed between some special ionic groups with hydrogen atom of the carbon of the chain such a bound is very useful in alloy formation because it impacts processing flexibility with and use of cross linked products.

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ORGANISATION STRUCTURE OF NANDI BRAND PIPES PVT. LTD.,

Managing Director

Financial Manager

Purchase Manager

Production Manager

Marketing Manager

Public Relation

FFF

Officer

Production Supervisor

Machine Technician

Quality Control

Foreman

Machine Operator

Lab Technician

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REVIEW OF LITERATURE
Classifications of working capital Working capital may be classified in two ways: (a) On the basis of concept. (b) On the basis of time. On the basis of concept,working capital may be classified as: Gross working capital Net working capital Gross working capital The gross working capital refers to the firms' investment in the total current assets of the enterprise. The current assets are those assets with in the ordinary course of business can converted into cash with in the short period of normally one accounting year. Net working capital The net working capital can be defined into two ways the most common definition of working capital is difference between current assets and current liabilities. Net working capital can also be defined as that portion of firm's current assets. Which are financed with long-term funds? On the basis of concept, working capital is classified as gross working capital and net working capital as discussed earlier. This classification is important from the point of view of the financial manager. On the basis of time, working capital may be classified as: 1. Permanent or fixed working capital. 2. Temporary or variable working capital.
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1. Permanent or fixed working capital. Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprise to carry out its normal business operations.. 2. Temporary or variable working capital. Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Most of the enterprises have to provide additional working capital to meet the seasonal and special needs. The capital required to meet the seasonal needs of the enterprise is called seasonal working capital. IMPORTANCE OR ADVANTAGES OF ADEQUATE WORKING CAPITAL Working capital is the life of blood and nerve canter of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantages of maintaining adequate amount of working capital are as follows: 1. Solvency of the business. Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. 2. Good will. Sufficient working capital enables a business concern to make prompt payments and hence helps in creating and maintaining goodwill.

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3.

Easy loans. A concern having adequate working capital, high solvency and good credit standing can arrange loans from banks and others on easy and favourable terms.

4.

Cash discounts. Adequate working capital also enables a concern to avail cash discounts on the purchase and hence it reduces costs.

5.

Regular supply of raw materials. Sufficient working capital ensures regular supply of raw materials and continuous production.

6.

Regular payment of salaries, wages and other day-to-day commitments. A company which has ample working capital can make regular payment of salaries, wages and other day-to-day commitments which raises the morale of its employees, increases their efficiency, reduces wastages and costs and enhances production and profits.

7.

Exploitation of favorable market conditions. Only concerns with adequate working capital can exploit favorable market conditions such as purchasing its requirement in bulk when the prices are lower and by holding its inventories for higher prices.

8.

Ability to face crisis. Adequate working capital enables a concern to face business crisis in emergencies such as depression because during such periods, generally, there is much pressure on working capital.

THE NEED OR OBJECTS OF WORKING CAPITAL The needs for working capital cannot be over emphasized. Every business needs some amount of working capital. The needs for working capital arises due to the time gap between productions and realization of cash from sales. There is an operating cycle involved in the sales and realization of cash. There are time gaps in purchase of raw materials and production; production
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and sales; and sales and realization of cash. Thus working capital is needed for the following purpose: 1. For the purchase of raw materials, components and spares. 2. To pay wages and salaries. 3. To incur day- to-day expenses and overhead costs such as fuel, power and office expenses, etc. 4. To meet the selling costs as packing, advertising, etc. 5. To provide credit facilities to the customers. 6. To maintain the inventories of raw material, work-in-progress, stores and spares and finished stock. FACTORS DETERMINING THE WORKING CAPTIAL

REQUIREMENTS 1. Nature or Character of Business. The working capital requirements of a firm basically depend upon the nature of its business. Public utility undertakings like Electricity, Water Supply and Railways need very limited working capital because they offer cash sales only and supply services, not products, and as such no funds are tied up in inventories and receivables. 2. Size of Business/Scale of Operations. The working capital requirements of a concern are directly influenced by the size of its business which may be measured in terms of scale of operations. Greater the size of a business unit, generally larger will be the requirements of working capital. 3. Production Policy. In certain industries the demand is subject to wide fluctuations due to seasonal variations. The requirements of working capital, in such cases, depend upon the production policy. The production could be kept either steady by accumulating inventories during slack periods with a view to meet high demand during the peak season or the production could be curtailed during the slack season and increased during the peak season.
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4. Manufacturing Process/Length of 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, larger is the amount of working capital required 5. Seasonal Variations. In certain industries raw materials is not available throughout the year. They have to buy raw materials in bulk during the season to ensure an uninterrupted flow and process them during the entire year. A huge amount is, thus, blocked in the form of material inventories during such season, which gives rise to more working capital requirements. 6. Working Capital Cycle. In a manufacturing concern, the working capital cycle starts with the purchase of raw material and ends with the realization of cash from the sale of finished products. The cycle involves purchase of raw materials and stores, its conversion into stocks of finished goods through work-in-progress with progressive increment of labour and services costs, conversion of finished stock into sales, debtors and receivables and ultimately realization of cash and this cycle continues again from cash to purchase of raw material and so on. ESTIMATED WORKING CAPITAL REQUIREMENT Working capital is the life-blood and controlling nerve centre of business. No business can be successfully run without an adequate amount of working capital. To avoid the shortage of working capital at once, an estimate of working capital requirements should be made in advance so that arrangements can be made to procure 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. COMPONENTS OF CURRENT ASSETS: (i) (ii) Cash (in hand, in bank, and in transit) Investments (short-term only, and not long-term)

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Working Capital Management Nandi Pipes

(iii)

Inventories (raw materials and consumable stores and spares, work-in-process, and finished goods)

(iv)

Sundry Debtors (also known Bills Receivable and Accounts Receivable)

(v)

Loans and advances (granted by the Company)

COMPONENTS OF CURRENT LIABILITIES (i) Sundry Creditors (also known as Bills Payable and Accounts Payable) (ii) Trade Advances (given to the company for supply of goods) (iii) (iv) Short-term Borrowings from Banks and Others Provisions (for taxes, bad debts, exchange rate

fluctuations, etc.) Better business sense, however, calls for keeping the currents assets at the minimal level, whereby minimum sources of funds, (both current and noncurrent Liabilities), may be required to finance them, and thereby, the inventory carrying Costs, and the interests outgo may as well be kept at the minimal level WORKING CAPITAL MANAGEMENT Effective management and control of the various components of working capital has been rated as one of the most important and vital functions of financial management in any of the industrial and business units, based on varied parameters, discussed hereunder: A. Flexibility: Working capital Management is highly flexible in nature, so much so that it can very easily be adapted to suit even extreme conditions, like rising and falling demands in peak and off seasons, buoyant and sluggish economic
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and market conditions, etc. Further, if some inappropriate policy or procedure is detected at a later stage, remedial and right steps can be adopted henceforth, any time. This, however, is not the position in the case of project management.

B. Level of investments in various components of current assets Investments in current assets constitute a very substantial percentage (Usually more than 50%) of the total investments in most of the Indian companies and firms. C. Criticality The under mentioned fact itself can bring home the extent of crucially and Criticality of Working Capital Management. One of the components of the Working Capital can make such a dramatic difference, the importance of meticulous management of all the components of the Working Capital (viz. Current Assets, Current Liabilities and even a portion of the deferred liabilities) can very well be imagined and appreciated D. Quantum of efforts and time Empirical study and observations have revealed that a major portion of the time of the Finance Managers, in most of the companies, is devoted (and rightly so) towards the management of the various components of the working capital, with a view to maximizing their profitability, and the prospects and prosperity therewith. Working capital Operating cycle

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Cash

Working Capital Management Nandi Pipes

Inventory

Debtors

SemiFinished Goods

,
Sales Finished s Goods

Working capital cycle is more popularly known as the cycle . The

Operating

title is more expressive in the sense that the normal business

operations of a manufacturing and trading company start with cash , go through with the successive segments of the operating cycle, viz, raw materials storage period conversion period, finished goods storage period and average collection period before getting back cash along with profit. The total duration of all segments mentioned above is known as gross operating cycle . in case the company is placed in an advantageous position of being able to sell its products for cash then the segment of average collection period will disappear from the gross operating cycle period and to that extent the total duration of the cycle gets reduced. In case advance payments are to be made for procuring materials, the operating cycle period increases. The purchase of raw materials, components etc., are usually made on a credit basis, thereby giving rise to the spontaneous current liability , viz, accounts payable. When the average payment period of the company to its suppliers is deducted from the gross operating cycle period the resultant period or simply operating cycle period. It becomes obvious that shorter the duration of operating cycle period , faster will be transformation of current assets into cash. The operating cycle approach is quite useful both in controlling and forecasting working capital. The duration time required to complete the following sequence of events, in case of manufacturing firm is called the operating cycle. 1. Conversion of cash into raw materials.
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2. Conversion of raw materials into work in progress. 3. Conversion of work in progress into finished goods. 4. Conversion of finished goods into debtors and bills receivables through sale. 5. Conversion of debtors and bills receivables into cash. The firm needs working capital because the production sales and cash flows are not instantaneous. The firm needs cash to purchase raw materials and pay expenses as there may not be perfect matching between each inflow and outflow. cash may also be held to meet the future exigencies

INVENTORY MANAGEMENT
Inventories constitute the most significant part of constitute of a large majorities of company in India. On an average, inventories are approximately 60% of the current assets in public limited companies in India. Because of the large size of industries maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. Nature of inventories: Inventories are stock of the product a company is manufacturing for sale and components that makeup the product the various firms in which inventories exist in a manufacturing company are raw materials, work-in-process and finishes goods. Raw materials are those basic inputs that are converted in to finished products through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future production. Work-in- process .inventories are semi- manufactured products. They represent products that need more work before they become finished products for sale.
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Finished goods inventories are those completely manufactured products which are ready for sale. Stocks of raw materials work-in-process facilitate production, while stock of finished goods is required for smooth marketing operations. Thus, inventory serves as a link between the production and consumption of goods. The levels of three kinds of inventories of a firm depend on the nature of its business. Firms also maintain a forth kind of inventory, supplies or stores and spares. Supplies include office and plant cleaning materials like soaps, brooms, oil, fuel, light bulbs etc. These materials do not directly enter production but are necessary for production process. Objectives of inventory management In the context of inventory management the firm is faced with the problem of meeting two conflicting needs. To maintain a large size of inventories of large materials and work-inprocess for efficient and smooth production and of finished goods for uninterrupted sales operations. To maintain a minimum investment to maximize profitability.

CASH MANAGEMENT
Cash is the important current asset for the operations of the business . Cash is the basic input needed to keep the business running on a continuous basis. It is also the ultimate output needed to keep the business running on the continuous basis. It is also ultimate output expected to be realized by selling the service or product manufacturing by the firm. The firm should keep sufficient cash neither more nor less Cash is the vital component of working capital. Steady and healthy circulation of cash in entire business operations is the basis of managing of Cash management.
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business

running on a continuous basis. Cash management is concerned with the

Working Capital Management Nandi Pipes

Cash flows into and out of the firm Cash flows within the firm

Cash balance held by the firm at a point of time.

Need of cash management: Cash, either in hard or at bank, is the most

liquid of all the current assets. Thus larger cash and bank balances indicates high liquidity position of a company. It must, however, be noted that cash lying in the current account of banks fetches no return to the company. Consequently, the higher liquidity position attained by holding a large amount of cash will result in lower profitability as idle cash fetches no return, while the same when invested in the assets of the company will results in profits. The firm should evolve strategies regarding the following four facts of cash management. Cash planning Managing the cash flows Optimum cash level Investing idle cash Objectives of cash management To make short term forecasts about to cash inflows and outflows of the firm. To find profitable avenues for investing surplus cash. Arranging finance

Receivables Management
Trade credit arises when a firm sales its products or services on credit and does not receive cash immediately. Trade credit is used by firm to protect its sales from competitors and to attract potential customers to buy products and favorable terns. Trade credit creates receivables or book debts that the firm
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is expected to collect in the near future. The customers from whom book debts have to be collected in the future are known as trade debtors. Receivables helps the firm in the increasing sales level as clients will prefer credit sales to cash helps the firm in sales. It also helps the firm in maintaining the sales at an appropriate level in situation where there is intense competition. As credit sales comprise a high profit margin. They generate more profit than cash sales. The objective of receivables management is to help the firm to manage the receivables in an efficient manner such that the benefits arising as the result of extending credit sales should be more than the cost associated with it. The Receivables arising out of delivery of goods or rendering of services on credit and include Book debts or accounts Notes and bills Accrued receivables However in a broader sense the term receivables is used to include further. o Any pre payents made against purchase and expense contract. o Advances to subsidiaries employees and officers Purpose of Receivables The purpose of receivables is directly connected with the companies objectives of making credit sales which are To increase total sales: because when a company sells goods on credit it will be in a position to sell more goods than if it insist on immediate cash payment.

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To increase profits: Because this results in an increasing sales not only in volume but also because company charge a higher margin of profit on credit sales as compared to cash sales. To meet increasing competition: For this the company may have to grant better credit facilities than those offered by its competitors. Goals of credit management The basic goal of credit management is to maximize the value of firm achieving the trade of between equitability and profitability. The purpose of credit management is not to maximize sales, not to minimize the risk of bad debt. If the Objective was to maximize sales then the firm would sell on credit to all.

To achieve the goal of maximizing the value the firm should manage its trade credit: To obtain optimum volume of sales. To control the cost of credit and keep it at minimum To maintain investment in debtors at optimum level. The purpose of credit management is not sales maximization. But efficient and effective credit management does help to expand sales and can prove to be an effective tool of marketing.

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DATA ANALYSIS AND INTERPRETATIONS

Statement showing changes in working capital during the period 2007-08 PARTICULARS Current assets Inventories Sundry debtors Cash & bank Loans & advances Total current assets Current liabilities Liabilities Provisions Total current liabilities NET Working capital CHANGES IN W.C 398.35 Interpretation: The above statement reveals that the net working capital decreases 188.88 crores. Due to the loans and advances are deceased more by 166.93 crores and also the current liabilities are increased by 101.44 crores 415.43 23.87 439.30 398.35 516.87 39.18 556.05 216.47 188.88 398.35 188.88 283.68 283.68 101.44 15.31 283.71 171.95 56.26 325.73 837.65 379.57 172.55 61.60 158.80 772.52 95.86 0.60 5.34 166.93 2006-07 2007-08 CHANGES IN W.C INCREASE DECREASE

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Working Capital Management Nandi Pipes

Statement showing changes in working capital during the period 2008-09 PARTICULORS Current assets Inventories Sundry debtors Cash & bank Loans & advances Total current assets Current liabilities Liabilities Provisions Total current liabilities NET Working capital CHANGES IN W.C 216.47 Interpretation: In this above statement the total current assets are increased by Rs.187.65 crores and current liabilities are increased by Rs.199.13 crores. Hence the working capital is decreased by Rs.11.48 crores. 516.87 39.18 556.05 216.47 736.7 18.47 755.18 204.99 11.48 216.47 11.48 219.83 219.83 20.71 219.83 379.57 172.55 61.60 158.80 772.52 433.58 183.50 89.59 253.50 960.17 54.01 10.95 27.99 94.7 2007-08 2008-09 CHANGES IN W.C INCREASE DECREASE

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Working Capital Management Nandi Pipes

Statement showing changes in working capital during the period 2009-10 PARTICULORS Current assets Inventories Sundry debtors Cash & bank Loans & advances Total current assets Current liabilities Liabilities Provisions Total current liabilities NET Working capital CHANGES IN W.C 204.99 736.7 18.47 755.18 204.99 1153.01 125.55 1278.56 25.33 179.67 204.99 179.67 523.39 523.39 416.31 107.08 433.58 183.50 89.59 253.50 960.17 609.76 216-61 100.69 376.83 1303.89 176.18 33.11 11.1 123.33 2008-09 2009-10 CHANGES IN W.C INCREASE DECREASE

Interpretation: This statement reveals that the net working capital decreases to 179.67 crores due to the liabilities and provisions are increased by 523.39.

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Working Capital Management Nandi Pipes

Statement showing changes in working capital during the period 2010-11 PARTICULORS Current assets Inventories Sundry debtors Cash & bank Loans & advances Total current assets Current liabilities Liabilities Provisions Total current liabilities NET Working capital CHANGES IN W.C 1153.01 125.55 1278.56 25.33 113.52 138,85 138.85 141.25 1128.97 122.18 251.15 138.85 113,52 141.25 24.04 3.37 609.76 216-61 100.69 376.83 1303.89 705.55 188.88 104.68 390.89 1390.00 3.99 14.06 95.79 27.73 2009-10 2010-11 CHANGES IN W.c INCREASE DECREASE

Interpretation: This statement reveals that the net working capital increases to 113.52 crores due to the decrease in sundry debtors and current liabilities

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Working Capital Management Nandi Pipes

RATIO ANALYSIS
TYPES OF RATIOS: Several ratios calculated from the accounting data can be grouped in to various classes according to financial activity or function to be evaluated. As stated earlier, the parties interested in financial analysis are short-term and long-term creditors, owners and management. Short-term creditors. Main interest in the liquidity position or the short-term solvency of the firm long term creditors on the other hand are more interested in the long term solvency and profitability of the firm. We may classifies them in to the following from important categories 1. Liquidity ratios 2. Leverage ratios 3. Activity ratios 4. Profitability ratios 1. LIQUIDITY RATIOS Liquidity ratios measure the firms ability to meet current obligations. 2. LEVERAGE RATIOS Leverage ratios show the proportion of debt and equity in financing the firms assets. 3. ACTIVITY RATIO Activity ratios reflect the firms efficiency in utilizing its assets 4. PROFITABILITY RATIOS Profitability ratios measure overall performance and Effectiveness of the firm.

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Working Capital Management Nandi Pipes

Current ratio Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as working capital ratio. Current assets include cash and these assets which can be converted in to cash with in a one year such as cash & bank, marketable securities, debtors, inventories, prepaid expenses include the represent the payments that will be made in future obligation like creditors, bills payable etc. Current assets Current ratio = ------------------------------Current liabilities A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligation in time as ad when they become due. On the other hand a relatively low current ratio represents that the liquidity of the is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. Standard ratio= current assets : current liabilities = 2:1 The following table shows the result of the current assets and current liabilities of Sujala Pipes Pvt. Ltd.,

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Table No.4.1 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Graph No.4.1 Current assets 837.65 772.52 960.17 1303.89 1390.00 Current liabilities 439.30 556.05 755.18 1278.56 1251.15 Current ratio 1.90 1.38 1.27 1.01 1.11

2 1.5 1 0.5 0

c urrent ra tio

2006-07 2007-08 2008-09 2009-10 2010-11

Interpretation : The current ratio gradually decreases due to increasing current liabilities and decreasing loans and advances. For the last five years the liquidity position of the firm is precarious.

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QUICK RATIO It is defined as the relationship between quick assets and current liabilities. This ratio is also known as acid-test ratio. While computing current ratio, inventory is included as a of current assets.. Quick ratio provides a better measure of liquidity unlike current ratio; it does not take inventories into account. Standard ratio=1:1 Current assets-inventories Quick ratio= -------------------------------------Current liabilities The following table shows the result of the Quick Ration of Sujala Pipes Pvt. Ltd., Table No.4.2 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Graph No.4.2
1.5 1 0.5 0 2006-07 2007-08 2008-09 2009-10 2010-11 Queckra tio

Quick assets 553.94 392.95 526.59 694.13 684.45

current liabilities 439.30 556.05 755.18 1278.56 1251.15

Quick ratio 1.26 0.70 0.69 0.54 0.55

Interpretation:

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The Quick ratio gradually decreases from 2007 10 due to increasing in inventories year by year. The Quick ratio was better in the year 2006-06 when compare with the other years Cash Ratio Cash is the most important liquid asset, a financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investment and marketable securities are equivalent of cash. Cash+ marketable securities Cash ratio = ---------------------------------------Current liabilities Table No.4.3 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Cash 56.26 61.60 89.59 100.69 104.68 Current Liabilities 439.30 556.05 755.18 1278.56 1251.15 Cash Ratio 12.81 11.08 11.86 7.88 8.37

Graph No.4.3
14 12 10 8 6 4 2 0 2006-07 2007-08 2008-09 2009-10 2010-11 Ca s hra tio

Interpretation:
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Working Capital Management Nandi Pipes

During the period 2006-11 the cash ratio declined gradually due to the current liabilities are more than the cash but it highly declines in the year 2008-09.

Net working capital ratio The difference between current assets and current liabilities excluding short-term borrowings is called Net working capital (NWC) Or net current assets (NCA). NWC is sometimes used as a measure of a firm liquidity. Net working capital Net working capital ratio =------------------------------------Net current assets Table No.4.4 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Net working capital 398.35 216.47 204.99 25.33 138.85 Net assets 837.65 772.52 960.17 1303.89 1390.00 Net working capital ratio 0.47 0.28 0.21 0.01 0.09

Graph No.4.4
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Working Capital Management Nandi Pipes

0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 2008-09 2009-10 2010-11 Net work ingca pita l ra tio

Interpretation The net working capital ratio was decreases gradually because of increasing Net assets. But specifically in the year 2009-10 the working capital highly decreased due to current assets are approximately equals to current liabilities.

DEBTORS TURNOVER RATIO

The ratio indicates the average time in number of days between sales and cash collections from debtors. It explains the number of days of credit enjoyed by the debtor Net credit sales Debtors turnover =-----------------------Average debtors Opening debtors +closing debtors Average debtors =-----------------------------------------------2 Table No.4.5 Year 2006-07 2007-08 2008-09 2009-10 sales 2681.05 3299.45 4910.83 5509.22 average debtors 174.76 172.25 178.02 200.05 Debtors turnover ratio 15.34 19.15 27.58 27.53

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2010-2011 Graph No.4.5

40 30 20 10 0 2006-07

6563.64

195.75

33.53

Debtor turnover ra tio

2007-08

2008-2009

2009-10

2010-11

Interpretation: The debtors turnover ratio gradually increases year-by-year. It shows that management is efficient in maintaining debtors.

Inventory turnover ratio

The inventory turnover ratio indicates the efficiency of the firm in providing and selling its product. It is calculated by dividing cost of good sold by the average inventory. The average inventory is the average of opening and closing balances of inventory. Cost of goods sold Inventory turnover ratio= ----------------------------Average inventory Table No.4.6 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Graph No.4.6
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cost of goods sold 1772.61 2004.14 2468.23 2760.72 3741.52

Average inventory 253.44 331.64 406.57 521.67 662.60

Inventory turnover ratio 6.9 6.04 6.07 5.29 5.64

Working Capital Management Nandi Pipes

7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 2009-10 2010-11 In ven tory tu rn over ratio

Interpretation The inventory turnover ratio gradually decreases because of increasing cost of goods sold as well as inventory.

CURRENT ASSETS TURNOVER RATIO

Assets are used to generate sales. Therefore, the firm should manage its assets efficiently to maximize sales. The relationship between sales and current assets called as current assets turnover ratio. Sales Current assets turnover ratio =--------------------Current assets Table No.4.7 Year 2006-07 2007-08 2008-09 2009-10 2010-11 sales 2681.05 3299.45 4910.83 5509.22 6563.64 Current assets 837.65 772.52 960.17 1303.89 1390.00 Current assets turnover ratio 3.20 4.27 5.11 4.22 4.72

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Graph No.4.7
6 5 4 3 2 1 0 2006-07 2007-08 2008-09 2009-10 2010-11 Cur r ent a ssets tur n over r a tio

Interpretation: In the 2008-08, the current assets as well as sales are increases highly that will leads to increasing the current assets turnover.

WORKING CAPITAL TURNOVER RATIO

This ratio measures the relationship between working capital and sales. The ratio shows the number of times the working capital results. In sales working capital as usual is the excess of current assets over the current liabilities. Sales Working capital turnover ratio = -------------------------Working capital

Table No.4.8 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Graph No.4.8
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Sales 2681.05 3299.45 4910.83 5509.22 6563.64

working capital 398.35 216.47 204.99 25.33 138.85

WCTR 6.73 15.24 23.95 217.49 47.27

Working Capital Management Nandi Pipes

250 200 150 100 50 0 2006-07 2007-08 2008-09 2009-10 2010-11 work ingca pita l turnov er ra tio

Interpretation: This ratio gradually increases because of increasing sales. But in the year 2009-09 the working capital decreases to 25.33 this will leads to highly increases in working capital turnover

DEBTORS COLLECTION PERIOD

It indicates the time taken to collect money from the debtors. If this average collection period is more than credit period granted to the debtors, it indicates liberal policy and the firm is inefficient in collecting the due and vice versa. It is computed as follows. 360 Holding period = -----------------------Debtors turnover Table No.4.9 Year 2006-07 2007-08 2008-09 2009-10 2010-11
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Debtors turnover ratio 15.34 19.15 27.58 27.53 33.53

Debtors collection period 23 19 13 13 11

Working Capital Management Nandi Pipes

Graph No.4.9
25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-11 Debtor collectionperiod

Interpretation: The debtors collection period gradually decreases from 23 days to 11days.for the last five years. It indicates that the firm is efficient to collect money from debtors. Hence, it is more profitable to the firm.

CREDITORS TRNOVER RATIO Purchases Creditors turnover ratio= -------------------------Average creditors Table No.4.10 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Purchases 243.25 284.06 403.68 556.60 709.70 Average creditors 317.99 283.89 391.06 620.39 749.94 Creditors turnover ratio 0.76 1.00 1.03 0.90 0.95

Graph No.4.10

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1.2 1 0.8 0.6 0.4 0.2 0 2006-07 2007-08 2008-09 2009-10 2010-11 Ceditor turnover ra tio

Interpretation: The creditors turnover gradually increases from 2006 to 08 and then it slightly decreases because the purchases are increases year by year.

FINDINGS
1. The current ratio and quick ratio of the firm for the last five years it is found that the liquidity position of the company is precarious. Protection for short term lenders is very marginal. 2. Inventory turnover has marginally declined from 6.9 times to 5.6 times during the period 2006-11 indicating higher blockage of funds in inventory. 3. Debtors collection period has come down from 23 days to11 days in the last five years. This is a good sign as it improves profitability of the firm. 4. The payment deferral period is very high in this firm (380-560 days). Sujala is enjoying trade credit from its group and subsidiary companies and this do not have any pressure to pay up. This is not a good practice as it leads to lethargy and managerial complacency in the organization.
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5. The cash ratio gradually declined from 12.81 to 8.37 during the period 2006-11 due to current liabilities more than the cash. 6. The debtors turnover ratio gradually increases year-by-year. It shows that management is efficient in maintaining debtors. 7. In the year 2008-09 the current assets are approximately equals to current liabilities, that means the firm does not maintain standard current ratio

SUGGESTIONS
Company should decreases reliance on funds from group and subsidiary companies for working capital needs as this will affect the profitability of those companies Suggested to improve its current assets in relation to current liabilities to improve liquidity and safety for trade and short term creditors The working capital management is not proactive, the company needs to concentrate on forecasting the working capital needs based on sales and manage the current assets in a better way to improve liquidity as well as profitability of the firm.
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The company may reduce the length of operating cycle to improve the asset utilization and profitability.

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CONCLUSION
Under the light of the inferences drawn from the analysis, it is no exaggeration to conclude with information that the overall working capital management of Sujala pvc pipes pvt ltd is fair and reasonably good and thus promising future awaits the company.

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BIBLIOGRAPHY

Bhattacharya,Hrishikes, Short term funds ManagementStrategies and Techniques,2001 Pandey,I M(1978), Financial management , 2009 Damodran, Aswath ,Corporate finance,2004 ICMR , Financial Management, 2007 www.google.com www.wikipidia.com

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