ANALYSIS OF PPL WORKING CAPITAL MANAGEMENT

The entire analysis of working capital management has been done using the Ratio Analysis, but at first we can have a brief idea of the working capital position of PPL. WORKING CAPITAL: Working Capital refers to the difference between Current Asset are the assets which can be converted into cash within an accounting year (or operating cycle) and includes cash, short term securities, debtors, (account receivable or book debts) bills receivable and stock (inventory). Current Liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year and include creditors (account payable), bills payable, and outstanding expenses. Net working capital can be positive or negative. A positive net working capital will arise when current liabilities exceed current assets. It indicates that the current liabilities finance the long term assets.

CURRENT ASSETS:
CURRENT ASSET IN PPL INCLUDES THE FOLLOWING: INVENTORIES SUNDRY DEBTORS CASH AND BANK BALANCE LOANS AND ADVANCES

INVENTORIES: Raw Material (including goods in transit) i. Phosphoric Acid ii. Ammonia iii. Rock phosphates iv. Sulphur v. Sulphuric Acid vi. MOP Finished Goods: i. DAP ii. NPK Intermediaries: i. Phosphoric Acid

ii.

Sulphuric Acid

Packing Materials: i. HDPE Bags ii. Polythene etc Stores & Spares i. Chemicals ii. Consumable Stores & Misc

SUNDRY DEBTORS: Trade debtors CASH AND BANK BALANCES: Cash in hand Current Accounts Cash Credit Accounts Term Deposit Accounts OTHER CURRENT ASSETS:
Fertilizer companies GOI Special Bond Interest Receivable on GOI Bonds, deposits, investments etc

LOANS AND ADVANCES Advance recoverable in cash or in kind or to be received or pending adjustment Advance Income Tax/ Tax deducted at source Claims Receivable Sales Tax and Entry Tax deposits Other Deposits

CURRENT LIABILITIES:
CURRRENT LIIABILITIES OF PPL INCLUDES THE FOLLOWING: Sundry creditors Other Current Liabilities Provision

SUNDRY CREDITORS: Foreign Suppliers Local Suppliers Warehousing Contractors Handling & Transport Contractors Other Service Contractors

OTHER CURRENT LIABILITIES: Earnest Money / Securities Deposits Forward Contract payable Interest Accrued But not due on loans Advance From Customers Temporary Bank Overdraft From Banks PROVISIONS: Post Retirement Medical Benefits Leave salary Provision For Taxation

WORKING CAPITAL MANAGEMENT

Fertilizers are seasonal demand products. There are two seasons for agriculture, one is Kharif that starts from April to September, and another is Rabi that starts from October to March. Kharif and Rabi are peak season for agriculture. It varies state to state. During peak season the company does not face any liquidity problem because of higher sales and quicker realization. But during other season i.e. off-season the Company faces liquidity problem due to lower sales and lower realization which ultimately affects the working capital.