CHAPTER 1

INTRODUCTION

The aim of the study is to know the working capital management of the cement industry.

The present chapter include a brief profile of the company .The chapter also includes

objectives, scopes of the study and detailed methodology used in the research.

1.1. Research Problem

In the research area there are five different company that i have study their working

capital management Birla Corporation, JK Lakshmi Cement ltd, Acc limited, Ultra Tech

Limited, Manglam Cement.

1.11. Birla Corporation Limited

Birla Corporation limited is the flagship company of the M.P Birla Group. Incorporated

as Birla jute manufacturing company limited in 1919, it was Late Mr. Madhav Prasad

Birla who gave shape to it. As a chairman of the company he transformed it from a

manufacturer of the jute goods to a leading multi product corporation with a widespread

activities.

After the demise of Mrs. Priyamvada Birla the company continued to consolidate in

terms of profitability , competitiveness and growth under the Leadership of the Mr.

Rajendra S. Lohia , late chairman of the M.P. Birla Groups.

1
Under his leadership, the company posted its best ever results in the years ended

31.3.2007 and 31.3.2008. The company continued to record the growth in 2008-09 and

2009-10. M.R HV lodha is now Chairman of the company Birla Corporation Limited.

i. Turnover of the Birla Corporation

During the year 2013-14 Birla Corporation limited recorded its turnover of RS. 41711

crore. Profit before tax is Rs 347792.22 crore .

ii.ProductRange of the Company

Units Products BIS Brand Name

Specification

Birla cement Portlandpozzolana Is 1489 (part I) Birla Samrat Cement

works chanderia cement (PPC) 43 GR IS

cement works Ordinary Portland 8142,53 Gr IS

cement (OPC) 43 12269 SRC IS

Gr, 53 Gr OPC- 12330

SRC

Satna Cement PPC IS 1486 (part 1) BirlaSamratCement

Work
OPC( GR43) IS 8112 BirlaSamratUltimateCemen

Raebareli PPC IS 1489 (Part I) Birla Samrat Cement

Cement Works

2
Table no.1 ProductRange of the company

1.12 Prism cement Limited

Prism cement limited is one of the Indias Leading integrated Building Materials

company, with a wide range of the products from cement , ready-mixed concrete, tiles,

bath product to kitchens. The company has three Division ,viz Prism Cement company ,

H&R Johnson (India). The equity shares of the company are listed on the Bombay and

National Stock Exchanges.

i. Turnover of Prism Cement Limited

During the year 2013-14, Prism Cement limited recorded its turnover of RS 651296

crores. Profit before tax is Rs. 5344.82 crores.

ii. ProductRange Prism cement limited

Prism Cement manufactures and markets Portland Pozzplland Cement (PPC) with the

brand name champion and the full range of the ordinary Portland cement (OPC) of the

3,343 and 53 Grades. champion Prism Largest selling product is a general purpose

cement popular for al application like high rise buildings, bridge, manufacturing AC

3
sheets, pipes, pools etc. Rich deposits of high quality limestone, highly automated and

sophisticated controls ensure that the cement manufactured by Prism meets the highest

quality standards. All the cement manufactured by Prism cement carry the BIS

Certification Mark. In fact, the strength and Other characteristics are much higher than

requirements Excellent Quality has placed Prism Cement in the premium price segment.

a. Champion cement

b. Ordinary Portland cement

c. Hi Tech cement

1.1.3 JK lakshmi cement ltd

JK cement limited was found in year 1982 and as it has completed more than 32 years of

its glorious existence the company is renewed for its strength, quality and performance.

One of the established names in the cement industry , JK lakshmi cement ltd. has state of

the art plant at Jyakaypuram, dist, Sirohi, Rajasthan with the capacity expansion and

further commissioning of spilt location grinding units at Motibhoyan, Kalol (Gujrat),

&Bajitpur, jhajjar (Haryana) the combined capacity of the combined capacity of the

company today stands at 5.60 Mn. Mt per annum.

With the use of latest technology from M/s Blue circle Industries and modern equipment

from M/s fuller International of USA, the company is going from strength. It is also the

first cement producer of northern India to be awarded an ISO 9002 certificate and be

accredited by NABL (Department of science & technology, government of India).

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Award for Environmental excellence & energy management 2007, Golden Peacock

Award for corporate social responsibility 2007, ICWAI award 2007 for excellence in cost

management. The Pinnacle cement 2006 award by MTECH Zee TV, group tech safety

award and a place The company has won the productivity excellence Award 2007-08,

energy conversation Award 2008, NCB award 2007, building leadership award 2007,

Building leadership Award 2007, National of pride amongst the top ten companies in

India in HR practice .Its wide network of 70,80 cement dumps and over 2200 dealers

spread across the states of Rajasthan , Gujrat , Delhi, Haryana , U.P , Punjab, J&K, MP,

Pune and the vast pool of highly trained & dedicated Marketing and Technical service

team helps the company to service its customers at their door step.

JK Lakshmi Cement, member of blue chip company operating in India. Launched in

1982, Lakshmi Cement, an ISO9001:2000 company, is built over an area of about 8

square kilometers at Jakaypuram in the Sirohidistrict of Rajasthan (24.690N 73.003E).

It is a public company listed on the Bombay Stock Exchange.

As one of the large manufacturers in the Indian cement industry, JK Lakshmi Cement has

acquired the ultra modern equipment from Fuller International of the United States of

America, and electronic packers from Ventomatic in Italy. The annual installed plant

capacity was 3.4 million tones per annum in 2007, but was being expanded to 5 million

tones per annum during 2008.In January,2015 one more unit at Durg, Chhattisgarh came

into operations with a capacity of 10 million tones per annum.

i. Vision annMissionof JK Lakshmi Cement

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a. vision of JK lakshmi cement

To be a profitably growing innovative and caring company.Aspiring to double the market

share and be among top 7 in the cement industries.

b. Mission of Jk Lakshmi Cement

Double sales every 4 years, Profit every 5 years Achieve operational excellence. Create

superior value for customer through Premium Products & Brand Positioning .Be a

workplace of choice-Attract, Retain and grow talent pool. Continuously enhance

shareholder wealth and be a preferred portfolio among investor. Socially responsible

corporate decision

ii. Turnover of the JK LAKSHMI

During the year 2013-2014, JK Lakshmi cement ltd. recorded its RS2293.59crs.

iii.. Product range JK Lakshmi

Upholding the tradition of JK Organisation for maintaining the highest standards in

quality, JK Lakshmi Cement today is one of the most preferred brands in its marketing

area with a network of about 3000 dealers spread in the states of Rajasthan, Gujarat,

Delhi, Haryana, U.P., Punjab, J&K, MP, West Bengal, Chhattisgarh, Orissa, Vidarbha,

and Mumbai. Our endeavour is always to give our best and maintain the highest standards

of customer satisfaction. No wonder the discernible buyers prefer this cement over other

brands owing to its consistency, higher level of quality and impeccable customer service.

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Also not surprising is the fact that the decision makers of the nation's important projects

like IGNP, SardarSarvorar Dam and major corporations like L&T, Reliance, Essar and

Airport Authority of India chose JK Lakshmi Cement over other brands.JK Lakshmi

Cement Ltd is also the first Cement Manufacturer in North India to use colored bags to

help the customer in segregating different products. It also has a regular contact program

with masons, dealers and architects to keepwith their needs and requirements. One of the

many innovative initiatives the company took was to have a mason's club that now has

over 45,000 members. Under this program the masons are given an insurance cover

against accidents absolutely free of cost, besides educating them on the latest in

construction activities.The high standard of advertising has been another feather in the

cap of JK Lakshmi Cement Ltd. This has not only helped it to reach out to

1.14 ACC Limited

ACC Limited (Formerly the Associated Cement Companies Limited) one of the largest

producers of cement in India. It's registered office is called Cement House. It is located

on Maharishi Karve Road, Mumbai. The stock price of company contributes in

calculating BSEsensex.

The management control of company was taken over by Swiss cement major in 2004.

On 1 September 2006 the name of The Associated Cement Companies Limited was

changed to ACC Limited. The company is only cement company to get Superbrand status

in India.

i. Visions of ACC Limited

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Tobe one of the most respected companies in India; recognized for challenging

conventions and delivering on our promises.

ii. Turnover of the ACC Limited

The sales turnover of the company during the year 2013-14 Rs.12639.44 Cr.

iii.. Product range of the Company

Our endeavour is always to give our best and maintain the highest standards of

customer satisfaction. No wonder the discernible buyers prefer this cement over other

brands owing to its consistency, higher level of quality and important customer service.

Also not surprising is the fact that the decision makers of the nation's important projects

like IGNP, SardarSarvorar Dam and major corporations like L&T, Reliance, Essar and

Airport Authority of India.

1.15 Ultra Tech Cement Limited

Ultta Tech cement limited (BSE: 532538) is India's biggest cement company and Indias

largest exporter based in Mumbai, India The company is part of the Aditya BirlaGroup

and division of Grasim Industries. It has an annual capacity of 64 million tonnes.

UltraTech cement has been awarded the Super brand status.]It manufactures and markets

ordinary Portland cement, Portlandblast furnace slag cement, white cement and Portland

Pozzolana cement. It also manufactures ready-mix concrete (RMC) and Autoclaved

Aerated Concrete Blocks (AAC Blocks) with brand name Ultra tech Xtra lite. The export

markets span countries around the Indian Ocean, Africa, Europe and the middle East.

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UltraTech is India's largest exporter of cement clinker. The company's production

facilities are spread across twelve integrated plants, one white cement plant, one

clinkerisation plant in UAE, sixteen grinding units, and five terminals four in India

and one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001and OHSAS 18001

certification. In addition, two plants have received ISO 27001 certification and four have

received SA 8000 certification. The process is currently underway for the remaining

plants. The company exports over 2.5 million tones per annum, which is about 30 per

cent of the country's total exports. The export market consists of countries around the

Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area in the

company's strategy for growth. Ultra Tech's products include Ordinary Portland cement,

Portland Pozzolana cement and Portland blast furnace slag cement.

Ordinary Portland cement Portland blast furnace slag cement Portland Pozzolana cement

Cement to European and Sri Lankan norms Ordinary Portland cement Ordinary Portland

cement is the most commonly used cement for a wide range of applications. These

applications cover dry-lean mixes, general-purpose ready-mixes, and even high strength

pre-cast and pre-stressed concrete.

Portland blast furnace slag cement Portland blast-furnace slag cement contains up to 70

per cent of finely ground, granulated blast-furnace slag, a nonmetallic product consisting

essentially of silicates and alumino-silicates of calcium. Slag brings with it the advantage

of the energy invested in the slag making. Grinding slag for cement replacement takes

only 25 per cent of the energy needed to manufacture Portland cement. Using slag cement

to replace a portion of Portland cement in a concrete mixture is a useful method to make

9
concrete better and more consistent. Portland blast-furnace slag cement has a lighter

color, better concrete workability, easier finish ability, higher compressive and flexural

strength, lower permeability, improved resistance to aggressive chemicals and more

consistent plastic and hardened consistency. Portland Pozzolana cement Portland

pozzolana cement is ordinary Portland cement blended with pozzolanic materials (power-

station fly ash, burnt clays, ash from burnt plant material or silicious earths), either

together or separately. Portland clinker is ground with gypsum and pozzolanic materials

which, though they do not have cementing properties in themselves, combine chemically

with Portland cement in the presence of water to form extra strong cementing material

which resists wet cracking, thermal cracking and has a high degree of cohesion and

workability in concrete and mortarPlants

Ultra Techs presence along with its subsidiaries is recorded at 12 composite plants, one

white cement plant, two wall care putty plants, one clink plant in UAE, 16 grinding units;

12 in India, 2 in UAE, 1 in Bahrain and Bangladesh each, 6 bulk terminals; 5 in India and

1 in Sri Lanka and 101 concrete plants as per the company website. These facilities

gradually came up over the years, as indicated below:

Ultra Tech Cement Middle East Investments Limited, a wholly owned subsidiary of the

Company has acquired management control of ETA Star Cement together with its

operations in the UAE, Bahrain and Bangladesh

The cement business of Grasim emerged and vested in Samruddhi Cement Limited in

May, 2010. Subsequently, Samruddhi Cement Limited amalgamated with Ultra Tech

Cement Limited in July 2010.

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i. Vision and mission of ultra Tech Cement

a. Vision of Ultra Tech Cement

To be a premium global conglomerate with a clear focus on each of the business.

b. Mission of Ultra Tech cement

To deliver superior value to our customers; Shareholder, Employees and society at

large.Ultra Tech Cement total turnover for the year ended 31-Dec-2014, of Rs 20078 cr.

ii. ProductRange of Ultra tech

Cement, Concrete, Building Products, Building solution

1.5 Mangalam Cements

Mangalam Cement Limited was promoted in the year 1978 by the famed House of B.K.

Birla, the most eminent and illustrious industrialist of the country. It is a professionally

managed and well established cement manufacturing company enjoying the confidence

of consumers because of its superior quality product and excellent customer service. We

offer a wide range of quality products to consistently meet the needs of the

customers.This is a special blended cement, produced by inter-grinding higher strength

Ordinary Portland Cement clinker with high quality processed fly ash - based on norms

set by the company's R&D division. This unique, value-added product has hydraulic

binding properties not found in ordinary cements.This is an Ordinary Portland Cement

which surpasses the requirements of IS: 8112 -1989. This is the most commonly used

11
cement in all Constructions including plain and reinforced cement concrete, brick

andstone masonry, floors and plastering. It is also used in the finishing of all type of

buildings, bridges, culverts, roads, water retaining structures, etc

i. Turnover of the Mangalam Cement

The annual turnover of the company is recorded as a its profit of 32010171 cr.

ii. Product range of the company

a. PortlandPozzolana Cement ( PPC )

b. 43 Grade Cement

1.2. Company Profile of Cement Industries

Cement industries in India are sustainable construction and renewable energy projects

undertaken by it have creating a blue print for sustainable development in India as a

brand for ordinary cement. Well-balanced presence in 90 countries and a focus on

cement, Aggregate and concrete leaders in the building material industry. The group has

115,000 employees around the world and combined net sales .Industry bench mark in R

& D and serves from the individual home builder to the largest and most complex project

with the widest range of value adding products, innovative service and comprehensive

building solutions.

1.3. Objectives of the Study

The objectives of the study are as follows

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 a. to find identify the relationship between WCM and Profitability

b. To study the factor affecting WC requirements in cement industry

1.4. Scope of the study

The study decision relating WC current asset- current liability & Short term financing the

goal of working capital management is to ensure that the firms is able to continue its

operation & that it has sufficient cash flow to satisfy maturing short terms debts &

upcoming operational objectives.

1.5. Methodology of the study

The data for this study has been collected from various research papers and article

Published in journal, magazines, newspapers and the company annual report .Companies

which have been taken into concern are listed on BSE.

a. Data Collection

The data for this study has been collected from various research papers and the article

published in journals, magazine and newspaper.

b. Data Analysis

The above Objectives of the study has been analyzed using the methods of statistical

analysis and through ratio analysis.

c. Theoretical Frame work

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Study of this research is basically depend upon the following i.e. inventory conversion

period debtor collection period, creditors payment period cash conversion cycle, return

on asset, current ratio, quick ratio, inventory turnover rate.

i. Inventory Conversion Period

Inventory conversion period reports us about the average time to convert our total

inventory into sales. It is relationship between total days in year and inventory turnover

ratio. In other words it measure the length of time on average between the acquisition

and sales of merchandise.

Inventory Conversion Period = Days in year

-------------

Inventory Turnover Ratio

ii. Debtor Collection Period

Debtor control period indicate the average time taken to collect the debts .In other words

a reducing period f the time is an indicator increasing efficiency .It enable the enterprise

to compare the real collection period with the granted credit period.

Debtor collection period = Average Debtors* 365

------------------------

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Credit Sales

iii. Current Ratio

Current ratio is a financial ratio that investor and analysis use to examine the current

liquidity of a company and its liability to pay short-term liabilities (debt and payable )

with its short term assets (cash, inventory, receivable).

Current ratio = Currentassets/currentliabilites

iv. Quick Ratio

Quick ratio is anindicate of company short term liquidity. The quick ratio measure a

company ability to meet its short term obligation with its most liquid assets. For this

reason, the ratio excludes inventories from current assets and is calculated as-

Quick Ratio = (CurrentAssets- Inventories)

------------------------------------

Currentliabilities

15
 CHAPTER 2

LITERATURE REVIEW

This chapter includes the abstract of all the Research papers on working capital

management. Different research papers are included in this literature review.

PASS C.L.. Pike R.H.,(2006),Over the past 40 years major theoretical developments

have occurred in the areas of longerterm investment and financial decision making.

Many of these new concepts and the related techniques are now being employed

successfully in industrial practice. By contrast, far less attention has been paid to the area

of shortterm finance, in particular that of working capital management. Such neglect

might be acceptable were working capital considerations of relatively little importance

to the firm, but effective working capital management has a crucial role in enhancing the

profitability and growth of the firm. Indeed, experienceshows that inadequate planning

and control of working capital is one of the more common causes of business failure.

NorizaBintiMohdSaadThe paper is made with an attempt to bridge the gap in the

literature by offering empirical evidence about working capital management and its effect

to the performance of Malaysian listed companies from the perspective of market

16
valuation and profitability. The secondary data for analysis is retrieved from Bloombergs

Database of 172 listed companies randomly selected from BursaMalaysia main board for

five year period 2003 to 2007. The study aims to explore the effects of working capital

component i.e cash conversion cycles (CCC), current ratio (CR), current asset to total

asset ratio (CATAR), current liabilities to total asset ratio (CLTAR), and debt to asset ratio

(DTAR) to the firms performance by looking at firms value i.e Tobin Q (TQ) and

profitability i.e. return on asset (ROA) and return on invested capital (ROIC). Applying

correlations and multiple regression analysis, the result shows that there are significant

negative associations between working capital variables with firms performance. Thus

it highlights the importance of managing working capital requirements to ensure an

improvement in firms market value and profitability and this aspect must form part of

the company's strategic and operational thinking in order to operate effectively and

efficiently. Keywords: Working Capital Management, Profitability, Tobin-Q and Cash

Conversion Cycle.

SAMILOGLU f. andDemirgunes K.., (2008)The aim of this study is to analyze the

effect of working capital management on firm profitability. In accordance with this aim,

to consider statistically significant relationships between firm profitability and the

components of cash conversion cycle at length, a sample consisting of Istanbul Stock

Exchange (ISE) listed manufacturing firms for the period of 1998-2007 has been

analysed under a multiple regression model. Empirical findings of the study show that

accounts receivables period, inventory period and leverage affect firm profitability

negatively; while growth (in sales) affects firm profitability positively.

17
Appuhami, Ranjith B A. (2008) The purpose of this research is to investigate the impact

of firms' capital expenditure on their working capital manaAppuhami, B. A. Ranjith,

International Management ReviewThe purpose of this research is to investigate the

impact of firms' capital expenditure on theirworking capital management. The author

used the data colleted from listed companies in theThailand Stock Exchange. The study

used Shulman and Cox's (1985) Net Liquidity Balance andWorking Capital Requirement

as a proxy for working capital measurement and developedmultiple regression models.

The empirical research found that firms' capital expenditure has management

.Asignificantimpact on working capital management. The study also found that the

firms'operating cash flow, which was recognized as a control variable, has a significant

relationship management.

Shulman and coxs (2009)Theauthor used the data colleted from listed companies in the

Thailand Stock Exchange. The study used Shulman and Cox's (2009) Net Liquidity

Balance and Working Capital Requirement as a proxy for working capital measurement

and developed multiple regression models. The empirical research found that firms'

capital expenditure has a significant impact on working capital management. The study

also found that the firms' operating cash flow, which was recognized as a control variable,

has a significant relationship with working capital management, which is consistent with

findings of previous similar researches. The findings enhance the knowledge base of

working capital management and will help companies manage working capital efficiently

in growing situations associated with capital expenditure.

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Dubey R (2008)8., The working capital in a firm generally arises out of four basic

factors like sales volume, technological changes, seasonal , cyclical changes and policies

of the firm. The strength of the firm is dependent on the working capital as discussed

earlier but this working capital is itself dependent on the level of sales volume of the firm.

The firm requires current assets to support and maintain operational or functional

activities. By current assets we mean the assets which can be converted readily into cash

say within a year such as receivables, inventories and liquid cash. If the level of sales is

stable and towards growth the level of cash, receivables and stock will also be on the

high.

McClure B (2007)., Working Capital Works describes that Cash is the lifeline of a

company. If this lifeline deteriorates, so does the company's ability to fund operations,

reinvest and meet capital requirements and payments. Understanding a company's cash

flow health is essential to making investment decisions. A good way to judge a company's

cash flow prospects is to look at its working capital management (WCM). Cash is king,

especially at a time when fund raising is harder than ever. Letting it slip away is an

oversight that investors should not forgive. Analyzing a company's working capital can be

managed.

Thomas M. Krueger (2005) studied distinct levels of WCM measures for different

industries, which tend to be stable over time. Many factors help to explain this discovery.

The improving economy during the period of the study may have resulted in improved

turnover in some industries, while slowing turnover may have been a signal of troubles

ahead. Our results should be interpreted cautiously. Our study takes places over a short

time frame during a generally improving market. In addition, the survey suffers from

19
survivorship bias only the top firms within each industry are ranked each year and the

composition of those firms within the industry can change annually.

Eljelly (2002)Theyexamined the relationship between profitability and liquidity, as

measured by current ratio and cash gap (cash conversion cycle) on a sample of 929 joint

stock companies in Saudi Arabia. Using correlation and regression analysis, Eljellyfound

significant negative relationship between the firm's profitability and its liquidity level, as

measured by current ratio. This relationship is more pronounced for firms with high

current ratios and long cash conversion cycles. At the industry level, however,he found

that the cash conversion cycle or the cash gap is of more importance as a measure of

liquidity than current ratio thataffects profitability. The firm size variable was also found

to have significant effect on profitability at the industry level.

Lazaridis and Tryfonidis (2004), conducted a cross sectional study by using a sample of

131 firms listed on the Athens Stock Exchange for the period of 2001 - 2004 and found

statistically significant relationship between profitability, measured through gross

operating profit, and the cash conversion cycle and its components (accounts receivables,

accounts payables, and inventory). Based on the results analysis of annual data by using

correlation and regression tests, they suggest that managers can create profits for their

companies by correctly handling the cash conversion cycle and by keeping each

component of the conversion cycle (accounts receivables, accounts payables, and

inventory) at an optimal level.

Raheman and Nasr (2004) studied the effect of different variables of working capital

management including average collection period, inventory turnover in days, average

20
payment period, cash conversion cycle, and current ratio on the net operating profitability

of Pakistani firms.

Falope and Ajilore (2003)Their study utilized panel data econometrics in a pooled

regression, where time-series and cross-sectional observations were combined and

estimated. They found a significant negative relationship between net operating

profitability and the average collection period, inventory turnover in days, average

payment period and cash conversion cycle for a sample of fifty Nigerian firms listed on

the Nigerian Stock Exchange. Furthermore, they found no significant variations in the

effects of working capital management between large and small firms.

Kouma Guy, (2001) in a study on, Working capital management in healthcare,

Working capital is the required to finance the day to day operations of an organization.

Working capital may berequireto bridge the gap between buying of stocked items to

eventual payment for goods sold on account. Working capital also has to fund the gap

when products are on hand but being held in stock. Products in stock are at full cost,

effectively they are company cash resources which are out of circulation therefore

additional working capital is required to meet this gap which can only be reclaimed when

the stocks are sold (and only if these stocks are not replaced) and payment for them is

received. Working capital requirements have to do with profitability and much more to do

with cash flow.

Mehmet SEN, Eda ORUC (2005) The study Relationship between the efficiency of

working capital management and company size, As it is known, one of the reasons

21
which cause change in working capital from one period to another is the change in

management efficiency.

Brealey, R. (2003) . A business enterprise requires not only fixed assets but also current

assets for its efficient functioning. Current assets are required to make effective

utilization of fixed assets. The amount invested in fixed assets is called fixed capital (long

term). The amount invested in current assets is known as working capital (short term).

Thus the business enterprise requires two type of capital, namely, fixed and working

capital. Working capital management involves the relationship between a short term

liabilities. The goal working capital management is to ensure that a firm is able continue

its operations and that it has sufficient ability to satisfy both maturing short term debt and

upcoming operational expenses. The management of working capital involves managing

inventories, account receivables and account payables and cash. According to smith,

working capital management is concerned with the problems that arise in attempting to

manage the current assets, current liabilities and the interrelationship that exist between

them, It involves both formulating working capital policy and carrying policy in day-

today operations. The objectives of working capital management are two fold maintaining

of working capital and availability of sufficient funds at the time of needed Working

capital management ensures a company has sufficient cash flow in order to meet its short-

term debt obligations and operating expenses.

22
 Chapter-3

Data Presentation & Analysis

The present chapter incorporates data presentation and data analysis. The chapter is

divided into two parts i.e. part A consists of data presentation and part B consists of data

analysis.

1.1. Data Presentation

Working capital ratios has been calculated from 2013-14 to 2014-15. The data

has been collected from6 cement companies. It involves working capital ratios of

Birla Corporation Ltd., Prism cement Ltd., J.K. Lakshmi cements Ltd., ACC,

Ultra Tech cement Ltd. and J.K cement Ltd.

A. Birla corporation Ltd

Years Inventory Debtor Creditor Current Liquid

conversion collection payment ratio Ratio

period period period

2013-14 194.5 68.72 3908.5 2.57 1.91
2014-15 245.6 72.18 1005.1 3.79 3.5

Table no. 3.1: WCR of Birla Corporation Ltd

Interpretation

23
In the given table of Birla Corporation Ltd., Inventory conversion period has increased

from 194.5 to 211.69; it states that company is focusing on good techniques and

technology followed by faster conversion of stock into finished product. Debtor

collection period has been reduced to 58.27 from 68.72. It states that company has

adopted good methods of collecting cash from debtors. Creditor payment period has been

reduced from 3908.5 to 3606. It states that company has reduced the time payment to the

creditors. Current ratio has been reduced from 2.57 to 2.2, it states that current assets

have been reduced or current liability has enhanced. Liquid ratio has been reduced from

1.91 to 1.26, it means that liquid assets have been reduced or current liability has

increased.

4000
3500
3000
2500
2000
1500
1000
500
0 2014-2015
2013-2014

Figure No.3.1WCR of Birla Corporation Ltd

24
 B. PRISM cement industry

Years Inventory Debtor Creditor Current Liquid

conversion collection payment ratio Ratio

period period period

2013-14 139 33.5 299.5 0.86 0.24
2014-15 71.5 8.77 429.25 1.83 1.57
Table no. 3.2: WCR of PRISM

Interpretation

In the given table of Prism, Inventory conversion period has been decreased from 159 to

139. It states that company is not focusing on good techniques and technology followed

by faster conversion of stock into finished product. Debtor collection period has been

reduced from 36 to 33.5. It states that company has adopted good methods of collecting

cash from debtors. Creditor payment period has been increased from 250.34 to 299; it

states that company has increased the time payment to the creditors. Current ratio has

been reduced from 0.94 to 0.86, it states that current assets have been reduced or current

liability has enhanced. Liquid ratio has been reduced 0.27 to 0.24, it means that liquid

assets have been reduced or current liability has increased.

25
 450
400
350
300
250
200
150
100
50 2014-2015
0
2013-2014

Figure No.3.2 WCR of PRISM

C. J.K Lakshmi

Years Inventory Debtor Creditor Current Liquid

conversion collection payment ratio Ratio

period period period

2013-14 395 12.4 11412 1.14 0.59
2014-15 389.9 8.77 10093.4 1.83 1.57

Table no. 3.3:WCR of J.K Lakshmi

Interpretation

In the given table of J.K. Lakshmi, Inventory conversion period has been decreased from

122.6 to 102. It states that company is on focusing on good techniques and technology

followed by faster conversion of stock into finished product. Debtor collection period has

been increased from 9.25 to 10.25. It states that company has not been able improve the
26
payment collection cycle of debtors. Creditor payment period has been reduced from 344

to 249. It states that company has reduced the time payment to the creditors. Current ratio

has been kept constant. Liquid ratio has been reduced from 0.96 to 0.81, it means that

liquid assets have been reduced or current liability has increased.

12000

10000

8000

6000

4000

2000 2013-2014
0 2014-2015

Figure No.3.3: WCR of J.K Lakshmi

D. ACC cement

27
Years Inventory Debtor Creditor Current Liquid Ratio

conversion collection payment ratio

period period period

2013-14 347 9.6 220.78 1.41 1.12

2014-15 195.39 58.9 1009.34 0.48 0.46

Table no. 3.4: WCR of ACC cement

Interpretation

In the given table of ACC cement, Inventory conversion period has been decreased from

347 to 254, it states that company is not focusing on good techniques and technology

followed by faster conversion of stock into finished product. Debtor collection period has

been increased from 7 to 9.6. It states that company has not been able improve the

payment collection cycle of debtors. Creditor payment period has been reduced from 220

to 149; it states that company has reduced the time payment to the creditors. Current ratio

has been reduced from 1.4 to 1.3, it states that current assets have been reduced or current

liability has enhanced. Liquid ratio has been reduced from 1.12 to 0.8, it means that liquid

assets have been reduced or current liability has increased.

28
 1200
1000
800
600
400
200
2014-15
0
2013-14

Figure no. 3.4: WCR of ACC Cement

E. Ultra Tech cement

Years Inventory Debtor Creditor Current Liquid

conversion collection payment ratio Ratio

period period period

2013-14 747.7 20.22 2821 1.25 0.71
2014-15 1069.04 10.71 1708 1.48 0.66
Table no. 3.5: Ultra Tech cement

Interpretation

In the given table of Ultra Tech cement, Inventory conversion period has been increased

from 290 to 747.7, it states that company is focusing on good techniques and technology

followed by faster conversion of stock into finished product. Debtor collection period has

been increased from 16.12 to 20.22. It states that company has not been able to improve

the payment collection cycle of debtors. Creditor payment period has been reduced from

29
3319 to 2821. It states that company has reduced the time payment to the creditors.

Current ratio has been reduced from 1.57 to 1.25, it states that current assets have been

reduced or current liability has enhanced. Liquid ratio has been reduced from 0.9 to 0.7, it

means that liquid assets have been reduced or current liability has increased.

3000
2500
2000
1500
1000
500
2014-15
0
2013-14

Figure no. 3.5WCR of Ultra tech Cement

30
 F. J.K cement

Company Inventory Debtor Creditor Current Liquid

Name conversion collection payment ratio Ratio

period period period

2013-14 395 12.4 1141.2 1.14 0.59
2014-15 422 12.5 2479 1.18 0.55
Table no. 3.6 WCR of JK Cement

Interpretation

In the give table of J.K cement, Inventory conversion period has been increased from 395

to 422, it states that company is focusing on good techniques and technology followed by

faster conversion of stock into finished product. Debtor collection period has been

increased from 12.4 to 12.5. It states that company has not been able improve the

payment collection cycle of debtors. Creditor payment period has been increased from

1141.2 to 2479. It states that company has increased the time payment to the creditors.

Current ratio has been reduced 1.19 to 1.18, it states that current assets have been reduced

or current liability has enhanced. Liquid ratio has been reduced from 0.59 to 0.55, it

means that liquid assets have been reduced or current liability has increased.

31
 3000
2500
2000
1500
1000
500
0

Figure no. 3.6WCR of JK Cement

3.2 Data Analysis

In this part, the ratios like inventory conversion period, debtor collection period, creditor

payment period, current ratio and liquid ratio has been calculated on 6 different

companies of cement industry in India. The five ratios have been discussed below.

32
3.21 Birla corporation Ltd

H0=There will be no correlation between liquidity and profitability of the company.

H1=There will be correlation between liquidity and profitability of the company.

Correlations
ICP DCP CCP CR LR
ICP Pearson Correlation 1 0.9657 0.8695 0.5789 -0.5647
Sig. (2-tailed) .0562 .0465 .2546 .0001
N 2 2 2 2 2
DCP Pearson Correlation 1 0.6896 0.4869 0.7638
Sig. (2-tailed) . .0854 .0758 .5779
N 2 2 2 2
CCP Pearson Correlation
1 0.5794
-0.7685
Sig. (2-tailed) .0458 .0321
N 2 2 2
CR Pearson Correlation 1 0.6954
Sig. (2-tailed) .0741
N 2 2
LR Pearson Correlation 1
Sig. (2-tailed)
N 2
**. Correlation is significant at the 0.05 level (2-tailed).
Table no. 3.7 Co-relation of Birla Corporation Ltd.

Interpretation

33
Table no. 3.7 declares that the result of correlation of different ratios such as ICP, DCP,

CCP (profitability ratio) with CR and LR (liquidity ratio) in Birla corporation ltd where

ICP and DCP has positive degree of high correlation as the correlation coefficient is

0.9657 (significant level at 0.05%). It means increase in ICP will cause an increase in

DCP and has a same relationship with CCP where as with CR (significant at 0.0321%)

the relationship is positive but moderate. But the relationship of ICP and LR is negatively

correlated i.e. 0.5647 (significant at 0.0001%). DCP and LR has a positive degree of

correlation which is more than moderate but the degree of correlation but not significant

(0.5779%) between DCP and CR is less than the moderate level (not significant at

0.0758%). CCP and CR has high degree of negative correlation i.e. -0.7685 (significant at

.0458%) where as CCP and LR are correlated at moderate level i.e. 0.5794. CR and LR

are positively correlated (significant at .0321%).

3.22 PRISM

H0=There will be no correlation between liquidity and profitability of the company.

H1=There will be correlation between liquidity and profitability of the company.

Correlations
ICP DCP CCP CR LR
ICP Pearson 1 -0.5794 0.7538 0.9548

Correlation 0.6496

34
 Sig. (2-tailed) .0234 0.0987 .0000 .5674
N 2 2 2 2 2
DCP Pearson 1 0.6392 0.8895 0.8439

Correlation
Sig. (2-tailed) .0123 .0122 .9564
N 2 2 2 2
CCP Pearson 1 -0.6496

Correlation -0.584

9
Sig. (2-tailed) .0055 .002
N 2 2 2
CR Pearson 1 .5948

Correlation
Sig. (2-tailed) .0098
N 2 2
LR Pearson 1

Correlation
Sig. (2-tailed)
N 2
**. Correlation is significant at the 0.05 level (2-

tailed).

Table no 3.8Co-relation of Prism

Interpretation

Table no. 3.8 declares that the result of correlation of different ratios such as ICP, DCP,

CCP (profitability ratio) with CR and LR (liquidity ratio) in Prism where ICP and DCP

are negatively correlated and we can see a high degree of positive correlation between LR

and ICP (not significant at .5674%) although CCP and CR are also showing good positive

correlation (significant at .0055%). DCP, CR and LR have high degree of positive

correlation i.e. 0.8895 (significant at .0122%) and 0.8439 (not significant at .9564%).

35
CCP and DCP have a positive moderate correlation, where as CCP, and LR has high

degree of negative correlation i.e. 0.6 (significant at .002%) . CR and LR have a positive

correlation (0.5948).

3.23 J.K Lakshmi

H0=There will be no correlation between liquidity and profitability of the company.

H1=There will be correlation between liquidity and profitability of the company

36
Correlations
ICP DCP CCP CR LR
ICP Pearson
1 0.4738 0.9854 0.9374 0.9382
Correlation
Sig. (2-tailed) .0147 .0123 .0456 .0789
N 2 2 2 2 2
DCP Pearson
1 0.5097 0.8796 0.8869
Correlation
Sig. (2-tailed) .0357 .0862 .0423
N 2 2 2 2
CCP Pearson
1 0.7685 0.6473
Correlation
Sig. (2-tailed) .0128 .0001
N 2 2 2
CR Pearson
0.4738
Correlation 1
Sig. (2-tailed) .0621
N 2 2
LR Pearson
1
Correlation
Sig. (2-tailed)
N 2
**. Correlation is significant at the 0.05 level (2-tailed).
Table no. 3.9 Co-relation of JK Lakshmi

Interpretation

Table no. 3.9 declares that the result of correlation of different ratios such as ICP, DCP,

CCP (profitability ratio) with CR and LR (liquidity ratio) in J.K. Lakshmi where ICP,

CCP, CR and LR has a high degree of positive correlation that is more than 0.9 where

ICP is significant at .04% with CR but not significant at .07% with LR . ICP and DCP

37
have a moderate degree of correlation. DCP, CR and LR have high degree of positive

correlation i.e. more than 0.8 where as DCP and CCP has a moderate positive correlation

i.e. more than 0.5. CCP, CR and LR have a good positive correlation (significant at .01

and .0001%) where as the relationship of CR and LR has a moderate impact.

3.24ACC cement

H0=There will be no correlation between liquidity and profitability of the company.

H1=There will be correlation between liquidity and profitability of the company.

38
Correlations
ICP DCP CCP CR LR
ICP Pearson
1 -0.8697 0.7685 0.5869 0.8473
Correlation
Sig. (2-tailed) .0945 .2345 .0875 .0543
N 2 2 2 2 2
DCP Pearson
1 -0.8932 -0.8392 -0.8748
Correlation
Sig. (2-tailed) .0545 .1432 .7653
N 2 2 2 2
CCP Pearson
1 0.8951 0.8679
Correlation
Sig. (2-tailed) .5067 .5065
N 2 2 2
CR Pearson
1 0.6754
Correlation
Sig. (2-tailed) .4532
N 2 2
LR Pearson
1
Correlation
Sig. (2-tailed)
N 2
**. Correlation is significant at the 0.05 level (2-tailed).
Table no. 3.10 Co-relation of ACC Cement

Interpretations:

Table no. 3.10 declares that the result of correlation of different ratios such as ICP, DCP,

CCP (profitability ratio) with CR and LR (liquidity ratio) in ACC cement where ICP and

DCP has negative degree of high correlation i.e., -0.8697. It means decrease in ICP will

cause decrease in DCP and has a positive relationship with CCP i.e., 0.7685, whereas

39
with CR the relationship is positive but moderate i.e., 0.5869 (not significant at .08%),

but the relationship of ICP and LR shows a high degree of positive correlation i.e.,

0.8473 (significant at .05%) DCP, CCP, CR and LR has a high degree of negative

correlation i.e. 0.8 in all cases. CCP, LR has a high degree of positive correlation i.e.

more than 0.85 (not significant at .5065%) .

3.25 Ultra Tech cement

H0=There will be no correlation between liquidity and profitability of the company.

H1=There will be correlation between liquidity and profitability of the company.

40
Correlations

ICP DCP CCP CR LR

ICP Pearson
1 -0.7869 -0.5931 -0.4812 -0.8124
Correlation
Sig. (2-tailed) .7563 .0974 .7544 .6546
N 2 2 2 2 2
DCP Pearson
1 0.8696 0.6293 0.5104
Correlation
Sig. (2-tailed) .0951 .9880 .3253
N 2 2 2 2
CCP Pearson
1 0.9013 0.8192
Correlation
Sig. (2-tailed) .0983 .0546
N 2 2 2
CR Pearson
1 0.7986
Correlation
Sig. (2-tailed) .0564
N 2 2
LR Pearson
1
Correlation
Sig. (2-tailed)
N 2
**. Correlation is significant at the 0.05 level (2-

tailed).
Table no. 3.11Co-relation of Ultra Tech Cement

Interpretation

41
Table no. 3.11 declares that the result of correlation of different ratios such as ICP, DCP,

CCP (profitability ratio) with CR and LR (liquidity ratio) in Ultra Tech cement where ICP

and DCP are positively correlated i.e., 0.7869 whereas ICP, CR and LR are negatively

correlated with respective ratios, -0.48 (not significant at .7%), -0.81 (not significant at .

6%) and we can see a good correlation i.e., more than 0.5 between CR and LR, where as

we can see a high degree of negative correlation between DCP and CCP and a high

degree of positive correlation of CCP with CR (not significant at .09%) and LR

( significant at ,05%). And even CR and LR are highly correlated i.e., 0.7986.

J.K cement

H0=There will be no correlation between working capital and profitability of the

company.

H1=There will be a correlation between working capital and profitability of the company.

42
Correlations
ICP DCP CCP CR LR
ICP Pearson
1 0.8129 0.9382 0.4039 0.5931
Correlation
Sig. (2-tailed) .0452 .6453 .6546 .0643
N 2 2 2 2 2
DCP Pearson
1 0.8192 0.7235 0.8392
Correlation
Sig. (2-tailed) .0986 .0854 .9474
N 2 2 2 2
CCP Pearson
1 0.8239 0.8931
Correlation
Sig. (2-tailed) .5434 .8763
N 2 2 2
CR Pearson
1 0.9015
Correlation
Sig. (2-tailed) .0845
N 2 2
LR Pearson
1
Correlation
Sig. (2-tailed)
N 2
**. Correlation is significant at the 0.05 level (2-tailed).
Table no. 3.12Co-relation of JK Cement

Interpretation

Table no. 3.12 that the result of correlation of different ratios such as ICP, DCP, CCP

(profitability ratio) with CR and LR (liquidity ratio) in J.K. cement where ICP, DCP, CCP

are showing high degree of positive correlation i.e., 0.8129 and 0.9382 respectively. ICP,

CR and LR are positively correlated i.e., 0.4039 (not significant at .6%) and 0.5931 (not

43
significant at .06%) respectively. DCP has a high degree of correlation with CCP, CR and

LR i.e., 0.8192, 0.7235 and 0.8392 respectively. CCP has a high degree of positive

correlation with CR and LR i.e., 0.8239 (not significant at .5%) and 0.8931 (not

significant at .8%) respectively. CR and LR has a high degree of positive correlation i.e.,

0.9015.

CHAPTER 4

SUMMARY AND CONCLUSIONS

This chapter incorporates the summary and conclusions drawn from the study done in the

previous chapters. This chapter comprises of 3 parts i.e. part A Findings, part B

limitations of the study and part C suggestions and scope for further study.

1.1. Findings of the Study

1. The major elements of working capital are inventory, debtors, cash balances and

short term investments. Inventories are grouped into raw materials, work in process,

finished goods, stores and spares etc.

2. The Debtor collection period of Birla Corporation ltd has decreased from 68.72 to

58.27 indicating better trade credit management and liquidity of the company.
3. Inventory conversion period of Birla Corporation ltd has decreased, indicating that

company is focusing on good techniques and technology followed by faster

conversion of stock into finished product.

44
4. Current Ratio trend of Birla Corporation ltd is close to the standard 2:1. Based on

this data liquid position of the company shall be considered satisfactory.

5. The quick ratio trend of Birla Corporation ltd is close to the standard of 1:1, which

shows that the company has good liquid position.

6. The Debtor collection period of Prism has decreased from 36 to 33.3 indicating

better trade credit management and liquidity of the company.

7. Inventory conversion period Prism has decreased, indicating that company is not

focusing on good techniques and technology followed by faster conversion of stock

into finished product.

8. Current Ratio trend of Prism is not close to the standard 2:1. Based on this data liquid

position of the company shall not be considered satisfactory

9. The quick ratio trend of Prism is not close to the standard of 1:1, which shows that

the company does not have good liquid position

10. Inventory conversion period JK Lakshmi has decreased, indicating that company

is focusing on good techniques and technology followed by faster conversion of

stock into finished product.

11. The Debtor collection period of Prism has increased from 9.25 to 10.25

indicating that company has not been able improve the payment collection cycle

of debtors.
12. Current Ratio trend of JK Lakshmi is not close to the standard 2:1. Based on this

data liquid position of the company shall not be considered satisfactory

13. The quick ratio trend of JK Lakshmi is not close to the standard of 1:1, which

shows that the company does not have good liquid position
14. Inventory conversion period ACC Cement has decreased substantially, indicating

that company is focusing on good techniques and technology followed by faster

conversion of stock into finished product.

15. The Debtor collection period of ACC Cement has increased from 7 to 9.6

indicating that company has not been able improve the payment collection cycle

of debtors

45
16. Current Ratio trend of ACC Cement is not close to the standard 2:1. Based on

this data liquid position of the company shall not be considered satisfactory
17. The quick ratio trend of ACC was close to the standard of 1:1 in 2012-13 but in

2013-14 again it is not close to standard 1:1, which shows that the companys

liquidity position has declined.

18. Inventory conversion period Ultratech Cement has increased substantially from

290.7 to 747.7, indicating that company is not focusing on good techniques and

technology followed by faster conversion of stock into finished product.

19. The Debtor collection period of Ultratech Cement has increased from 16.12 to

20.22 indicating that company has not been able improve the payment collection

cycle of debtors
20. Current Ratio trend of Ultratech Cement is not close to the standard 2:1. Based

on this data liquid position of the company shall not be considered satisfactory
21. The quick ratio trend of Ultratech Cement is not close to the standard of 1:1,

which shows that the company does not have good liquid position
22. Inventory conversion period J.K. Cement has increased from 395 to 422,

indicating that company is not focusing on good techniques and technology

followed by faster conversion of stock into finished product.

23. The Debtor collection period of J.K Cement has remained almost same indicating

that payment collection cycle of debtors has remained same.

24. Current Ratio trend of J.K Cement is not close to the standard 2:1. Based on this

data liquid position of the company shall not be considered satisfactory

25. The quick ratio trend of J.K Cement is not close to the standard of 1:1, which

shows that the company does not have good liquid position
26.
1.2. Limitations of the Study
1. The study is confined to 2 years from 2013-2014, therefore a detailed analysis

covering a lengthy period which may give slightly different results has not

been made.

46
2. The study is based on secondary data collected from the reports and account

of Cement companies as published, therefore the quality of the study depends

purely upon the accuracy, reliability and quality of the secondary data source.
3. The study is based on few companies of cement industry. Therefore, accuracy

of results is purely based on the data of sample unit.

4. The study is based on consolidated financial statements of the selected

company, which may leave some grounds of error.

4.3. Suggestions and Scope for further study
1. The effective and efficient cash inflow provides an opportunity to coordinate

with cash outflow. Proper coordinated cash inflow and outflow management

will maintain sound and better working capital management, the

improvement in credit collection and selling will boost their sales and will

record them in cash inflow management.

2. The cash balance of the company is required to be improved in order to have

immediate liquid position. But at the same time, precaution should be taken to

see that too many funds are locked up in cash balance, which ultimately may

lead to improper utilization of funds.

3. Since the scope of this study is limited to 5 years so the scope for further

research may be extended to working capital components including cash,

marketable securities and inventory management.

4. Working capital management of ACC Limited is satisfactory. The Company

has no problem in the management of inventory, debtors, cash balances and

current liabilities.
5. Ultratech Cement Ltd. has very poor performance compare to other private

companies so there is an urgent need to look in to the problems and tone up

its efficiency.

47
 6. With the efficient management of working capital, selected companies can

utilized their capacity optimally and accelerate economic growth of India by

increasing the production of cement at reasonable cost.

4.4 GLOSSARY

1 Sales turnover Sales turnover is the company's total revenue, both the invoice,

cash payments and other revenues.

2 Extensive dealer A distribution strategy that utilizes multiple delivery channels

network and a high distribution volume to reach as many potential

customers as possible

3 Subsidiaries A company controlled by a holding company.

4 Comprehensive study Study with broad scope or content; including all or much
5 Global conglomerate A Global conglomerate is a corporation that is made up of a

number of different, seemingly unrelated businesses

6 Shareholders A shareholder or stockholder is an individual or institution

(including a corporation) that legally owns a share of stock in a

public or private corporation

48
7 Prominent Sticking out above the rest or very famous
8 Expansion The action of becoming larger or more extensive.
9 Operational expenses An expense incurred in carrying out an organization's day-to-day

activities, but not directly associated with production.

10 Infrastructural Infrastructure is the basic physical systems of a business or

nation. Transportation, communication, sewage, water and

electric systems are all examples of infrastructure.

11 Cash flow The total amount of money being transferred into and out of a

business, especially as affecting liquidity

12 Research papers A substantial piece of academic writing, usually done as a

requirement for a class, in which the author does independent

research into a topic and writes a description of the findings of

that research.
13 Journals A newspaper or magazine that deals with a particular subject or

professional activity
14 Capital expenditure Money spent by a business or organization on acquiring or

maintaining fixed assets, such as land, buildings, and equipment

16 Correlation A relationship or connection between two things based on co-

occurrence or pattern of change

17 Corporate financing Corporate finance is the area of finance dealing with the sources

of funding and the capital structure of corporations and the

actions that managers take to increase the value of the firm to the

shareholders, as well as the tools and analysis used to allocate

financial resources.
18 Financial decision The study of investment in fixed assets or capital budgeting is of

making special significance

19 Inadequate planning Poor planning is project management mistake

number one. Among the five most common project

management mistakes

49
20 Money managers A money manager is a business or bank responsible for

managing the securities portfolio of an individual or institutional

investor.
21 Cash conversion cycle The cash conversion cycle (CCC) is a metric that expresses the

length of time, in days, that it takes for a company to convert

resource inputs into cash flows.

22 Short-term liabilities A debt or current liability arising from normal business

operations and recurring expenses that is expected to be satisfied

within one year.

23 Long-term liabilities Long-term liabilities are liabilities with a future benefit over one

year, such as notes payable that mature longer than one year
24 Borrowers A person that has applied, met specific requirements, and

received a monetary loan from a lender

25 Accounts receivables To money owed by customers (individuals or corporations) to

another entity in exchange for goods or services that have been

delivered or used, but not yet paid for

26 Inventory period Inventory turnover is a ratio showing how many times a

company's inventory is sold and replaced over a period.

27 Leverage The ratio of a company's loan capital (debt) to the value of its

ordinary shares
28 Capital expenditure Money spent by a business or organization on acquiring or

maintaining fixed assets, such as land, buildings, and equipment.

29 Control variable The control variable (or scientific constant) in scientific

experimentation is the experimental element which is constant

and unchanged throughout the course of the investigation.

30 Marketable securities Securities or debts that are to be sold or redeemed within a year.

These are financial instruments that can be easily converted to

50
 cash such as government bonds, common stock or certificates of

deposit.

31 Credit period The credit period is the number of days that a customer is

allowed to wait before paying an invoice

32 Initial public offerings IPO is the first sale of stock by a company to the public
33 Debtor Collection In accounting the term Debtor Collection Period indicates the

Period average time taken to collect trade debts. In other words, a

reducing period of time is an indicator of increasing efficiency.

34 Inventory conversion The inventory conversion period is the time required to obtain

period materials for a product, manufacture it, and sell it. The inventory

conversion period is essentially the time period during which a

company must invest cash while it converts materials into a sale

38 Inventory Turnover In accounting, the Inventory turnover is a measure of the number

Rate of times inventory is sold or used in a time period such as a year.

The equation for inventory turnover equals the cost of goods

sold or net sales divided by the average inventory.

37 Current Ratio Current ratio is a liquidity and efficiency ratio that measures a

firm's ability to pay off its short-term liabilities with its current

assets
38 Current liabilities Current liabilities are a company's debts or obligations that are

due within one year, appearing on the company's balance sheet

and include short term debt, accounts payable, accrued

liabilities and other debts.

39 Inventory conversion The inventory conversion period is the time required to obtain

period materials for a product, manufacture it, and sell it. The inventory

51
 conversion period is essentially the time period during which a

company must invest cash while it converts materials into a sale.

The calculation is: Inventory

40 Cash balances The ideal amount of cash that a company wishes to hold in

reserve at any given point in time.

41 Trade credit Credit extended to you by suppliers who let you buy now and

pay later.
42 Contingency plans A plan designed to take account of a possible future event or

circumstance.
43 Risk-management Forecasting and evaluation of financial risks together with the

identification of procedures to avoid or minimize their impact

44 Banking channels the business engaged in by a bank
45 Treasury practices The process of administering to the financial assets and holdings

of a business.
46 Multi-product Comprising, manufacturing, or selling several products

corporation
47 Profitability Ability of a business to earn a profit.
48 Competitiveness The ability of people to compete successfully
49 Intervention the act or fact of interposing one thing between or among others
50 The BIS Certification An Act to provide for the establishment of a Bureau for the

Mark harmonious development of the activities of standardization

51 Limestone a hard sedimentary rock.
52 Expansion The action of becoming larger or more extensive

52
 CHAPTER-5

RECCOMMENDATIONS

1 The essence of effective working capital management is proper cash flow

forecasting. This should take into account the impact of unforeseen events, market

cycles, loss of a prime customer and actions by competitors. So the effect of

unforeseen demands of working capital should be factored by company. This was

one of its reasons for the variation of its revised working capital projection from

the earlier projection.

2 It pays to have contingency plans to tide over unexpected events. While market-

leaders can manage uncertainty better, even other companies must have risk-

management procedures. These must be based on objective and realistic view of

the role of working capital.

3 Addressing the issue of working capital on a corporate-wide basis has certain

advantages. Cash generated at one location can well be utilized at another. For this

to happen, information access, efficient banking channels, good linkages between

production and billing, internal systems to move cash and good treasury practices

should be in place.
4 An innovative approach, combining operational and financial skills and an all-

encompassing view of the companys operations will help in identifying and

implementing strategies that generate short-term cash. This can be achieved by

53
 having the right set of executives who are responsible for setting targets and

performance levels. They could be then held accountable for delivering,

encouraged to be enterprising and to act as change agents.

5 Effective dispute management procedures in relation to customers will go a long

way in freeing up cash otherwise locked in due to disputes. It will also improve

customer service and free up time for legitimate activities like sales, order entry

and cash collection. Overall, efficiency will increase due to reduced operating

costs.
6 Working capital management is an important yardstick to measure a company

operational and financial efficiency. This aspect must form part of the strategic

and operational thinking. Efforts should constantly be made to improve the

working capital position. This will yield greater efficiencies and improve

customer satisfaction.
7 Inventories should be managed on a line-by-line basis using the 80/20 rule.
8 Placing the responsibility for collecting the debt upon the centre that made the

sale. i.e., cold rolled, hot rolled, galvanized etc.

54
 BIBLIOGRAPHY

Journals

(i) S Saravanan, B Thangaraj, C Eahambaram (2014),A Study on Working Capital

Management of Cement Companies with Special Reference to the Associated Cement

Companies Limited and Chettinad Cement Corporation, Global Journal for

Research Analysis, Volume : 3, Issue : 2, Feb 2014, ISSN No 2277 - 8160

(ii) Ashraf Mohammad, Salem Alrjoub, Ali Mahmoud, Abdallah Alrabei, Mousa

Mohammad Abdalla Saleh and Omar Ahmad Mustafa Alrawashdesh (2012),

Working Capital Management in Cement Units in Rajasthan, Middle Eastern

Finance and Economics, No.16, pp.111-121.

(iii) Asha E. Thomas (2011), Capital Structure and Financial Performance of Indian

Cement Industry, GITAM Journal of Management, Vol. 9 No. 3, July September,

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