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INTRODUCTION
INTRODUCTION
Every business needs funds for two purposes, for its establishment and to carry
outs its day-to-day operations. Long term funds are required to create production facilities
though purchase of fixed assets such as plants and machinery, land, building, furniture,
etc. investments in these assets represent that part of firms capital which is blocked in a
permanent or fixed basis funds are also needed for short-term purposes for that purchase
of raw marital, payment of wages and other day-to-day expenses, etc. these funds are
known as working capital. In simple words, working capital refers to that part of the
firms capital which is required for financing short term or current assets such as cash,
marketable securities, debtor and inventories.
In the words of SHUBIN, working capital is the amount of funds necessary to
cover the cost or operating the enterprise.
According to GENESTENBERG, circulating capital means current assets of a company
that are changed in the ordinary course of business from one form to another form, as per
example from cash to inventories, inventories to receivables, receivables into cash.
In simple words, working capital refers to that part of the firms capital which is
required for financing short term or current assets such as cash, marketable securities,
debtors and inventories. Funds, thus, invested in current asst keep revolving fast and are
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.
That working capital refer to that difference between current assets and current
liabilities, it is excess of current assets over current liabilities.
Working capital= current assets-current liabilities
capital
completes one cycle determines the requirements of working capital Longer the
Cash
Finished
Goods
Raw
Materials
Work in
Progress
CLASSIFICATION
Working capital may be classified in to two ways:
1. On the basis of concept
2. On the basis of time
ON THE BASIS OF CONCEPT
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital management
1. Gross working capital
Gross working capital refers to the firms investment in current assets. Current
assts are the assets which can be convert into cash within year includes cash, short term
securities, debtors, bills receivable and inventory.
2. Net working capital
Net working capital to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year and include creditors, bills payable and outstanding expenses. Net
working capital can be positive or negative efficient working capital management required
that firms should operate with some amount of net working capital, the exact amount varying
from firm to firm and depending, among other thins; on the nature of industries, net working
capital is necessary because the cash out flows and inflows do not coincide. The cash out
flows resulting from payment of current liabilities are relatively predictable. The cash inflow
are however difficult to predict. The more predictable the cash inflows are the less net
working capital will be required.
The concept of working capital was, first evolved by Karl Marx. Marx used the
term variable capital means outlays for payrolls advance to workers before the completion
or work. He compared this with constant capital which according to him in nothing but
dead labor. This variable capital is nothing wage fund which remains blocked in terms of
financial management, in working process along with the other operating expenses until it is
released through sale of finished goods although Marx did not mentioned that workers also
gave credit to the firm by accepting periodical payment of wages which funded a portioned of
W.I.P. the concept of working capital, as we understand today was embedded in his variable
capital.
ON THE BASIS OF TIME:
On the basis of concept working capital can be classified as gross working capital
and net working capital. On the basis of time, working capital may be classified as:
1. Permanent working capital
Permanent or fixed working capital is minimum amount which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work-in-process,
finished goods and cash balance. This minimum level of current assets is called permanent or
fixed working capital as this part of working is permanently blocked in current assets. As the
business grow the requirement of working capital also increase due to increase in current
assets.
2. Temporary working capital
Temporary or variable working capital is the amount of working capital which as
required to meet the seasonal demands and some special exigencies. Variable working capital
can further be classified as seasonal working capital and special working capital. The capital
required to meet the seasonal need of the enterprise is called seasonal working capital.
Special working capital is the part of working capital which is required to meet special
exigencies such as launching of extensive marketing of conducting research, etc. temporary
working capital differs from permanent working capital in the sense that is required for short
periods and cannot be permanently employed gainfully in the business.
Objectives
The primary objective of working capital management is to ensure that sufficient
cash is available to:
1. Meet day to day cash flow needs.
2. Pay wages and salaries when they fall due
3. Pay creditors to ensure continued suppliers of goods and services
4. Pay government taxation and providers of capital dividends
5. Ensure the long term survival of the business entity.
It is critical to understand that profits is not cash. A company can be very
profitable but it can collapse simply because it has insufficient cash/liquidity to pay its
relevant bill (as stated above)
Always remember that any company liabilities are settled with cash and not by profit
Use of working capital
Working capital is the measure of a companys ability to pay off its short term debt
is the deference between current assets and current liabilities.
Working capital is used to finance the following:
To replenish inventory.
For day to day operations of a business and payroll (expect owners salary).
For down payment assistance on the purchase of real estate for the business.
4. AVAILABILITY OF CREDIT
Creditors also affect the working capital requirement of a firm. A firm will need
less wronging capital if liberal credit terms are available to it.
5. OPERATING EFFICIENCY
The operating efficiency of the firm relates to the optimum utilization of resources
at minimum costs. The firm will be effectively contributing in keeping the working
capital investment at a lower level if it is efficient to controlling operating costs and
utilizing current assets. The use of working capital is improved and pace of a cash
conversion cycle is accelerated with operating efficiency.
6. BUSINESS FLUCTUATIONS
Most firm experience seasonal and cyclical fluctuation in the demand for their
products and services. This business variation effects the working capital requirements
especially the temporary working capital requirement of the firm. When there is an
upward swing in the economy, sales will increase and vice-versa.
7. PRODUCTION POLICY
A steady production policy will cause inventories to accumulate during the offseason periods and the firm will be exposed to greater inventory cost and risk. Thus, if the
cost and risks of maintaining a constant production schedules are high, the firm may
adopt the policy of varying its production schedules in accordance with change in
demand.
8. GROWTH AND EXPANSION ACTIVITIES
The working capital needs of firm increases it growth in terms of sales of fixed
assets. It it is difficult to precisely determine the relationship between volume of sales and
the working capital needs. The critical fact however that is the need for increased working
capital funds does not follow growth in business activities but precedes it.
CHAPTER - II
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
Good research is carefully planned and is conducted professionally and generates
dependable data. Data generated from good research can be used reliably for managerial
decision making.
1. The research should be described in details. Each step in the research process should
be explained in details so that another researcher will be able to repeat the research.
The sources of the data should be revealed and the means by which they were
obtained should be made clear.
2. Researcher should take care to protect the privacy of the respondents. The researcher
should be taking into consideration the welfare of the participants of the studies as
well as that of their client.
3. Data obtained from research should be used to justify the conclusion. Personal
interpretations or experiences of the researcher should be avoided.
4. Any drawback in the design should be revealed by the researcher and its effects on the
finding should be estimated.
BENEFITS OF RESEARCH:
1. Research can help businesses to communicate with their stake holders like customers,
suppliers etc. they can device important conclusions through business research.
2. Research helps businesses to identify the opportunities and threats.
3. Risks and uncertainties can be minimized through business research. Research is very
important for evaluating the progress of the business and to exploit more opportunities
4. It can help the business to track their benchmark and to avoid any loss which they can
incur without having market and business information.
COLLECTION OF DATA
Research methodology is a systematic procedure of collecting information in order to
analyze and verify a phenomenon. Data collection is a term used to describe a process of
preparing and collecting data.
Data collection is important aspects of any type of research study, inaccurate data can
impact the result of the study and ultimately lead to invalid results.
Data collection sources are two types:
1 .primary data
2. Secondary data
1. Primary Data:
In primary data collection, the data will be collected by using questionnaires and interviews.
There are many methods of collecting primary data and the main methods include:
1. Interviews
2. Observation
2. Secondary Data:
Secondary data available from publishers, in-house database, research
agencies etc. it constitutes readymade information that can be used for research
purpose with minimal analysis. However, the research should bear in mind secondary
data is published for purpose other than the current research.
Secondary data helps researchers to save time. While primary research takes a
considerable amount of time in the form of collecting and analyzing the data,
secondary data offers readymade solutions.
SOURCES OF DATA
Methodology is systematic process of collecting information in order to analyze and
verify a phenomenon, the collection of the data two principles process.
1. Primary data
2. Secondary data
1. Primary data
The data that is collected first time for any statistical investigation and is used in
the statistical analysis is termed as primary data.
The primary data is obtained by having personal interviews with the officials of the
company, interacting with the manager & other concerned executives at the
administrative office of the company.
2. Secondary data
the data whether published, which have been already collected and processed by
some agency or person and take over from them and used by any other agency or
person for their statistical work are termed as secondary data.
The secondary data was collected mainly from the following source.
1. Annual report
2. Manuals and magazines.
3. Reference to journals, text books and news papers.
4. Company website http://www.cipla.com
CHAPTER - III
COMPANY PROFILE
HISTORY
Ciplas journey began in 1935 when our founder, Dr. K. A. Hamied, set up an enterprise with
the vision to make India self-sufficient in healthcare. Over the past 77 years, we have
emerged as one of the worlds most respected pharmaceutical names, not just in India but
worldwide.
We have 34 state-of-the-art manufacturing facilities that make Active Pharmaceutical
Ingredients (APIs) and formulations, which have been approved by major international
Regulatory Agencies. We have over 2000 products in 65 therapeutic categories; with over 40
dosage forms, covering a wide spectrum of diseases ranging from communicable, noncommunicable, common and emerging diseases to even rare diseases. Our Research and
Development (R&D) centre is focused on developing innovative products and drug delivery
systems,
giving
the
country
and
the
world
many
Firsts'.
Today, we are one of the worlds largest generic pharmaceutical companies with a strong
presence in over 170 countries. We maintain world-class quality across all our products and
services.
Whether its for millions or for just a few hundreds, our journey to care for all humanity
continues.
Milestones
In 1935, our founder, Dr. K. A. Hamied set up Cipla to make India self-reliant in
healthcare.
In 1939, Mahatma Gandhi visited Cipla and inspired our founder to make essential
medicines for the country, and strive for self-sufficiency. During World War II, when
India was dependent on imported medicines and there was an alarming shortage of lifesaving drugs, we manufactured them for the country.
In the 1960s, we pioneered API manufacturing in the country and helped lay the
foundation for the bulk drug industry in India.
In 1978, we pioneered inhalation therapy in India with the manufacture of MeteredDose Inhaler (MDI), at a time when the country stopped receiving imported supplies.
Today, we have the worlds largest range of inhaled medication and devices.
In 1994, we launched Deferiprone, the worlds first oral iron chelator which
revolutionized the treatment for thalassemia. For the first time patients with
thalassemia had an option that was affordable, painless and convenient.
In 1996, we gave the world the first transparent dry powder inhaler which was so
simple and easy to use, it changed the face of inhalation therapy in India.
During the 2005 Bird Flu epidemic, we produced an anti-flu drug within a period of
2-3 months, which would have normally taken at least 3 years to develop.
In 2012, we made a breakthrough in reducing the prices of cancer drugs, thus making
world-class medicines affordable and accessible to cancer patients.
We are committed to addressing the unmet medical needs of the world by venturing
into newer challenges in platform technologies, biotechnology and stem cells.
We will continue to support, improve and save millions of lives with our high-quality drugs
and innovative devices. And with the dedication of 20,000 employees, we are ready to face
the future challenges of healthcare.
AT A GLANCE
Cipla was established in 1935 with the vision of making India self-reliant and self-sufficient
in healthcare. Today, we are one of the worlds largest generic pharmaceutical companies
with a presence in over 170 countries. We are renowned for making affordable, world-class
medicines that meet the needs of patients across therapies. We also offer services like
consulting, commissioning, plant engineering, technical know-how transfer and support.
Incorporated
1935
Corporate Office
Chairman
Managing Director
Employees*
20,000
Approvals
agencies.
Continuous innovation in R&D; over 20 world firsts.
Board of Directors
Founder
Dr. K.A.Hamied
Chairman
Executive Vice-Chairman
Whole-time Director
Mr. S. Radhakrishnan
Non-Executive Directors:
Dr. H.R.Manchanda
Mr. V.C.Kotwal
Mr. M.R.Raghavan
Mr. Pankaj Patel
Dr. Ranjan Pai
Mr. Ashok Sinha
(1898-1972)
CODE OF CONDUCT
As required under revised Clause 49 of the Listing Agreement the following code of conduct has been
approved by the Board of Directors and is applicable to the Directors and Senior Management of the
Company.
1. Ethical conduct
All directors and senior management employees shall deal on behalf of the Company with
professionalism, honesty, integrity as well as high moral and ethical standards. Such conduct shall be
fair and transparent and be perceived to be as such by third parties.
2. Conflict of interest
Any director or senior management employee of the Company shall not engage in any business,
relationship or activity, which might detrimentally conflict with the interest of the Company.
3. Transparency
All directors and senior management employees of the Company shall ensure that their actions in the
conduct of business are totally transparent except where the needs of business security dictate
otherwise. Such transparency shall be brought about through appropriate policies, systems and
processes.
4. Legal compliance
All directors and senior management employees of the Company shall at all times ensure compliance
with all the relevant laws and regulations affecting operations of the Company. They shall keep
abreast of the affairs of the Company and be kept informed of the Company's compliance with
relevant laws, rules and regulations. In the event that the implication of law is not clear, the course of
action chosen must be supported by eminent legal counsel whose opinion should be documented.
5. Rightful use of the Companys assets
All the assets of the Company both tangible and intangible shall be employed for the purpose of
conducting the business for which they are duly authorized. None of the assets of the Company
should be misused or diverted for personal purpose.
6. Cost consciousness
All the directors and senior management employees of the Company should strive for optimum
utilization of available resources. They shall exercise care to ensure that costs are reasonable and there
is no wastage. It shall be their duty to avoid ostentation in Company expenditure.
7. Confidential information
All directors and senior management employees shall ensure that any confidential information gained
in their official capacity is not utilized for personal profit or for the advantage of any other person.
They shall not provide any information either formally or informally to the press or to any other
publicity media unless specifically authorized to do so. They shall adhere to the provisions of SEBI
(Prohibition of Insider Trading) Regulations, 1992.
8. Relationships with Suppliers and Customers
The directors and senior management employees of the Company during the course of interaction
with suppliers and customers, shall neither receive nor offer or make, directly and indirectly, any
illegal payments, remuneration, gifts, donations or comparable benefits which are intended or
perceived to obtain business or uncompetitive favours for the conduct of its business. However, this is
not intended to include gifts of customary nature.
9. Interaction with Media
The directors and senior management employees other than the designated spokespersons shall not
engage with any member of press and media in matters concerning the Company. In such cases, they
should direct the request to the designated spokespersons.
10. Safety and Environment
The directors and senior management employees shall follow all prescribed safety and environmentrelated norms.
Sustainability
Sustainability is an integral part of Ciplas business strategy. We believe in the responsible
management of our growth. This goes hand in hand with caring for the environment and improving
the quality of life for society at large.
Caring for Health, Safety and Environment
Occupational Health, Safety and Environment (HSE) initiatives are an important part of our business
activities. All our facilities maintain high standards of occupational HSE practises and most of them
are certified for ISO 14001 and OHSAS 18001 standards. We also have a defined environmental
strategy that focuses on reducing our carbon footprint by saving energy, and following water and
waste management procedures. We were among the first companies to manufacture CFC-free inhalers
a good 10 years before the Montreal Protocol January 2010 deadline.
HIV/AIDS and several neglected diseases, available at affordable prices. We also provide medicines
to treat over a million poor, aged patients in slums and villages through non-profit organizations. In
addition, we support several health, educational and welfare activities in communities surrounding the
companys factories, both directly and through our Charitable Trusts, by providing healthcare
education, improvement of community infrastructure, scholarships, etc. This is part of our
commitment to improve the quality of life for these communities.
LEADERS IN DRUG DELIVERY
Cipla's Research & Development (R&D) is focused towards developing new products, improving
existing products as well as drug delivery systems and expanding product applications. Hundreds of
scientists work on all facets of pharmaceutical development and technology.
In-house R&D forms the backbone of our operations. With almost 5-6% of the company turnover
being invested towards R&D each year, our strategy focuses on:
Developing new drug formulations for existing and newer drug substances.
Improving processes for existing API and formulation products.
Developing new drug delivery systems for existing and newer active drug substances, as well
In addition, for our international business, our R&D team works with our strategic partners to file
Drug Master Files (DMFs) and Abbreviated New Drug Applications (ANDAs) in the US, and seek
marketing authorizations in Europe and file product registrations in other jurisdictions.
We have earned a name for maintaining world-class quality across all our manufacturing units,
products and services. We have consistently introduced more than 40 products annually, over the last
decade.
We have been granted about 100 patents. Patent filing includes drug substances, drug products,
platform technologies, IP on polymorphs and crystallinity, and medical devices.
139 DMFs, 87 registered ANDAs and 25 ANDAs under review in the US.
About 1000 DMFs for a total of 101 APIs; 49 COS approved.
Over 700 marketing authorizations in Europe.
Over 10,000 product registrations globally.
49 products pre-qualified by World Health Organization (WHO).
Supported 2 NDA filings for our partners and have 16 NDAs of our own.
We also leverage our R&D efforts to provide our customers with technical dossiers, plant layouts for
pharmaceutical product manufacturing, development of processes and regulatory batches.
including:
Liposome Injection
Microsphere Injection
Topical Delivery System
Inhalation Technology:
Metered-Dose Inhaler
Dry Powder Inhaler & Respiratory Solutions
Nasal Drug Delivery
Ophthalmic Solutions
Pre-filled Syringe
Hormone Injection
Nanotechnology
Melt Extrusion & Hot Melt Granulation
Particle Engineering
Cipla was among the first Indian companies to develop and manufacture Active Pharmaceutical
Ingredients (APIs), the vital raw material for making the drug products. Thus helping lay the
foundation for the pharmaceutical industry in India.
Today, we manufacture over 200 generic APIs. This formidable portfolio covers a broad spectrum of
therapeutic categories, reaching out to over 170 countries around the world. We meet stringent
international standards of quality to deliver API. Thats the Cipla benchmark.
We have three API manufacturing plants in India, located at Patalganga, Kurkumbh and Bengaluru
which rank among the best in the world. Approved by major international regulatory agencies, they
are capable of producing synthetic high potency APIs in grams and tonnes.
To meet the increasing demand for APIs in the future, we are multiplying our efforts and gearing up to
deliver uncompromising quality and customized solutions.
COLLABORATIONS
The core of our international business is strategic alliances for product development, registration and
distribution of our products. In addition, we also maintain long-standing relationships with nongovernment organizations and institutions globally.
Our international business continues to be a major revenue driver for the company. Our overseas sales
have consistently grown and represent almost 53% of our total income. In order to meet the increasing
demand, we are continuously expanding and modernizing our Manufacturing and Research &
Development facilities.
We collaborate with others in industry, academia, government and non-government organizations and
healthcare providers as a strategy to develop a diversified global business, and deliver more products
of value through:
We are one of the largest exporters of pharmaceutical products from India, exporting API and
formulation products to over 170 countries. This includes the U.S., Canada and countries in Europe,
Africa, Australasia, Latin America and the Middle East.
CHAPTER - IV
DATA ANALYSIS
AND
INTERPRETATION
(Rs. In Crores)
As on 31st December
2007(Rs)
2008(Rs)
Increase(Rs)
Decrease(Rs)
Inventories
978.60
1120.49
4.11
---
Sundry Debtors
1028.78
131.49
1393.91
---
21.04
79.28
---
50.33
1115.81
---
17.53
2809.85
3709.49
4.11
88.90
Current liabilities
18.11
18.02
0.9
---
Provisions
39.51
4.33
35.18
---
57.62
22.35
35.27
---
80.29
30.77
39.38
88.90
---
49.52
49.52
----
80.29
80.29
88.90
88.90
PARTICULARS
CURRENT ASSETS
670.98
CURRENT LIABILITIES
INTERPRETATION:
From the above table, it can be observed that
As on 31st December
2008(Rs)
2009(Rs)
Increase(Rs)
Decrease(Rs)
34.51
54.81
20.30
---
7.28
22.84
15.56
---
1.78
1.26
---
0.52
9.55
17.70
8.15
---
53.12
96.61
44.01
0.52
Current liabilities
18.02
18.49
---
0.47
Provisions
4.33
15.16
---
10.83
22.35
33.65
---
11.03
30.77
62.96
44.01
11.82
32.19
---
---
32.19
62.96
62.96
44.01
44.01
PARTICULARS
CURRENT ASSETS
Inventories
Sundry Debtors
Cash and Bank Balance
Loans and advances
Capital
TOTAL
INTERPRETATION:
From the above table, it can be observed that
1. Inventories were increased by Rs.20.30 crores, due to increased purchase of
chemicals.
2. Sundry debtors were increased by Rs.15.56 crores, due to increase in credit sales.
3. Cash and bank balances were decreased by Rs.0.52 crores, due to increase in
advances provided to suppliers.
4. Loans and advances were increased by Rs.8.15 crores, due to the company provided
loans to the employees.
5. Current liabilities were increased by Rs.0.47 crores, due to the credit purchases of raw
materials.
6. Provisions were increased by Rs.10.83 crores, due to increased current liabilities.
7. The overall net working capital has been increased by Rs.32.19 crores, due to
increased current assets.
8. The net working capital position of the company was satisfactory.
As on 31st December
PARTICULARS
2009(Rs)
2010(Rs)
Increase(Rs)
Decrease(Rs)
Inventories
54.81
70.25
15.44
---
Sundry Debtors
22.84
62.01
39.17
---
1.26
3.57
2.31
---
17.70
35.68
17.98
---
96.61
171.51
74.90
---
Current liabilities
18.49
26.58
---
8.09
Provisions
15.16
11.10
4.06
---
33.65
37.68
4.06
8.09
62.96
133.83
78.96
8.09
70.87
---
----
70.87
133.83
133.83
78.96
78.96
CURRENT ASSETS
Capital
TOTAL
INTERPRETATIONS:
From the above table, it can be observed that
1. Inventories were increased by Rs.15.44 crores, due to increased purchases.
2. Sundry debtors were increased by Rs.39.7 crores, due to increase in credit sales.
3. Cash and bank balances were increased by Rs.2.31 crores, due to increased cash sales.
4. Loans and advances were increased by Rs.17.98 crores, due to the company have
provided more loans to the employees and also advanced to the suppliers of raw
materials.
5. Current liabilities were increased by Rs.8.09 crores, due to increase in creditors.
6. Provisions were decreased by Rs.4.06 crores, due to increased cash and bank
balances.
7. Total current assets were increased by Rs.74.9 crores, due to increased debtors and
loans and advances.
8. The overall net working capital has been increased by Rs.70.87 crores. Hence, the
working capital position of the company satisfactory.
As on 31st December
PARTICULARS
2010(Rs)
2011(Rs)
Increase(Rs)
Decrease(Rs)
Inventories
70.25
74.50
4.25
---
Sundry Debtors
62.01
67.01
5.0
---
3.57
4.53
0.96
---
35.68
45.34
9.66
---
171.51
191.38
19.87
---
Current liabilities
26.58
31.06
---
4.48
Provisions
11.10
8.55
2.55
---
37.68
39.61
2.55
4.48
133.83
151.77
22.42
4.48
17.94
---
---
17.94
151.77
151.77
22.42
22.42
CURRENT ASSETS
Capital
TOTAL
INTERPRETATION:
From the above table, it can be observed that
1. Inventories were increased by Rs.4.25 crores, due to increased purchases.
2. Sundry debtors were increased by Rs.5.00 crores, due to increase in credit sales.
3. Loans and advances were increased by Rs.9.66 crores, due to company provided
advances to suppliers.
As on 31st December
PARTICULARS
2011(Rs)
2012(Rs)
Increase(Rs)
Decrease(Rs)
Inventories
74.50
69.19
---
5.31
Sundry Debtors
67.01
55.17
---
11.84
4.53
6.80
2.27
---
45.34
49.21
3.87
---
191.38
180.37
6.14
17.15
Current liabilities
31.06
18.72
12.34
---
Provisions
8.55
9.56
---
1.01
39.61
28.28
12.34
1.01
151.77
152.09
18.48
18.16
0.32
---
---
0.32
152.09
152.09
18.48
18.48
CURRENT ASSETS
INTERPRETATION:
From the above table, it can be observed that
1. Inventories were decreased by Rs.5.31 crores, due to decreased purchases.
2. Sundry debtors were decreased by Rs.11.84 crores, due to decrease in credit sales.
3. Cash and bank balances were increased by Rs.2.27 crores, due to collection of amount
from sundry debtors.
4. Loans and advances were increased by Rs.3.87 crores, due to the company provided
loans to the employees.
CURRENT RATIO:
Current ratio is the common ratio for measuring liquidity, being related to working
capital analysis; it is also called as the current ratio, which expresses the relationship
between current assets and current liabilities. The current ratio is the ratio of total current
asset to total current liabilities. It is calculated by dividing current assets by current
liabilities.
FORMULA:
Current Assets
Current ratio= --------------------------Current Liabilities
Standard Current Ratio: Generally 2:1 is considered as ideal for the concern
( Rs.
In
Crores)
Years
Current Assets(Rs)
Ratio
2007-2008
53.12
22.35
2.37
2008-2009
96.61
33.65
2.87
2009-2010
171.51
37.68
4.55
2010-2011
191.38
39.61
4.83
2011-2012
180.37
28.28
6.37
692.99
161.57
4.28
INTERPRETATION:
1. The analysis shows that the current ratio of the company has been showing an
increasing trend during the period of the study.
2. The increase in the current ration is 4.28:1 due to the increase of current assets over
the current liabilities.
3. The average current ratio is 4.28:1. So the companys liquidity position is satisfactory.
4. The current ratio reveals that the companys short-term funds are locked in current
assets.
5. It shows the inefficient management of current assets.
QUICK RATIO:
Quick ratio is also known as liquidity ratio or acid test ratio or near money ratio. It is
the ratio between quick or liquid and current liabilities. This ratio is calculated by
dividing the quick assets by the current liabilities.
FORMULA:
Quick Assets
Quick ratio= -------------------------------Current Liabilities
Standard for Quick Ratio: Generally 1:1 is considered as ideal for the concern.
(Rs. In Crores)
Ratio
2007-2008
18.61
22.35
0.83
2008-2009
41.8
33.65
1.24
2009-2010
101.26
37.68
2.68
2010-2011
116.88
39.61
2.95
2011-2012
111.18
28.28
3.93
389.73
161.57
2.41
INTERPRETATION:
1. The analysis shows that the quick ratio was increasing from year to year during the
period of the study.
2. In the year 2011-2012 the ratio was satisfactory, because of increased quick assets.
3. The average quick ratio is 2.41:1. So, the liquidity position of the company is
satisfactory.
4. Ever though the liquidity position is good, the analysis showing that there are idle
funds locked in quick assets.
5. It reflects the inefficient management of short-term funds, it should be avoided.
FORMULA:
Cost of goods sold
Working capital turnover ratio =
--------------------------Working capital
Current Assets
Ratio
(Rs)
2007-2008
107.82
30.77
3.50
2008-2009
151.37
62.96
2.40
2009-2010
160.78
133.83
1.20
2010-2011
204.46
151.77
1.34
2011-2012
269.64
152.09
1.77
894.07
531.42
1.68
Average Working
Capital Turnover Ratio
INTERPRETATION:
1. By observing the above working capital turnover ratio table, the ratio was showing
fluctuating trend during the study period.
2. The ratio was showing an increasing trend from 2010-2011 to 2011-2012, due to
increased net sales.
3. In the year 2009-2010. It is having a less working capital turnover ratio of 1.20 times,
because of increased expenses.
4. The average working capital turnover is 1.68:1. So, the company is not efficiently
managing its working capital.
Formula:
Absolute liquidity ratio = ( Cash In Hand and Bank + Marketable Securities )/
Current Liabilities
Absolute liquid
(Rs. In Crores)
Ratio
Assets (Rs)
2007-2008
1.78
53.12
0.033
2008-2009
1.26
96.61
0.013
2009-2010
3.57
171.51
0.021
2010-2011
4.53
191.38
0.024
2011-2012
6.80
180.37
0.038
17.94
692.99
0.026
Ratio
INTERPRETATION:
1. By observing the above absolute liquid ratio table, it is fluctuating year to during the
period of the study.
2. The ratio was showing an decreasing trend from 2007-2008 to 2008-2009, due to
decreased cash and bank balances.
3. In the year 2010-2011 to 2011-2012, the absolute liquid ratio is in better position by
comparing the other years.
4. The average absolute liquid ratio is 0.026 times. So, the companys liquidity position
of the company is satisfactory.
INVENTORY RATIO:
In order to ascertain that there is no overstocking, the ratio of inventory to working
capital should be calculated. It is worked out as follows:
FORMULA:
Inventory
Inventory Ratio =
------------------------Working capital
(Rs. In Crores)
Inventory (Rs)
Ratio
2007-2008
30.40
80.29
0.37
2008-2009
34.51
30.77
1.12
2009-2010
54.81
62.96
0.87
2010-2011
70.25
133.83
0.52
2011-2012
74.50
151.77
0.49
264.47
459.62
0.674
Inventory Ratio
INTERPRETATION:
1.
The analysis shows that the Inventory Ratio was decreased from year to year
during the period of study.
2.
In the year 2008 to 2009 the inventory was satisfactory, because of increased
inventory ratio.
3.
4.
5.
CHAPTER - V
CONCLUSIONS
AND
SUGGESTIONS
CONCLUSIONS
1. During the study period inventories have been showing an increasing trend, except in the
year
2011-2012.
2. Current assets were increased during the study period.
3. The analysis reveals there are more idle funds in current assets.
4. The analysis shows that the company is showing more funds in quick assets than the
required
5. Loans and advances were increased during the study period.
6. During the study period sundry debtors have been showing an increasing trend, except in
the
Year 2011-2012.
7. Cash and bank balances were increased during the study period.
8. During the study period the company is having more funds in current assets. It shows that
there are Non Performing Assets with company.
SUGGESTIONS
1. The company has to take proper measures to improve its working capital position.
2. It is better to offer credit facility to the same extent to its customers in order to
increase the sales.
3. The company has to maintain cash balances to meet daily requirements as per
standards.
4. The company has to manage current assets properly to improve liquidity position.
5. The company has to manage its funds in quick assets properly.
6. The company has to make policies to improve its efficiency in managing inventory
and Debt management services.
7. The idle funds, which were locked in current assets, should be utilized properly.
BIBLIOGRAPHY
BIBLIOGRAPHY
AUTHOR
PUBLISHERS
Management Accounting,
Kalyani
Financial Management,
Tata McGraw-Hill
Financial Management,
S.N. Maheshwari
WEBSITES
www.cipla.com
www.moneycontrol.com