Working Capital Management at Tamilnadu Newspaper and Print

ACKNOWLEDGEMENT
It is universally known truth that there is someone behind the success of one’s career. That
is the reason that I am neither claiming credit of preparation of this in training report. It is
the guidance from audition luminaries of the field, which prove to be rewarded.
First of all I wish to express my sincere and heart full thanks to my teachers who helped me
for guidance for doing training, and I am highly obliged to my all teachers who helped me
a lot for the arrangement of my training.
I would like to thanks all the staff members of Tamil Nadu Newsprint and Papers
Limited (TNPL) for their support and guidance they have provided to me, which has
proved vital for my training.
I would like to thanks Mr. H.C. Popli (Unit Head), Mr. Ruchir Gupta (Manager), Mr.
Pawan Gupta (Assistant Manager), Mr. Jagdish Mor (Assistant Manager), Mr. Ravinder Pal
Singh (Executive) for reading this report, providing guidance based on their practical
experience in the industry for the betterment of this project.
I would also like to thank Mrs. _______________________________, my project guide for

her kind cooperation and support.
Last but not least, I would like to thank my parents and friends who has given me
unconditional love and support and showed faith in me.
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PREFACE
Practical training is an important part of the theoretical studies. It is of an immense
importance in the field of management. It offers the student to explore the valuable treasure
of experience and an exposure to real work culture followed by the industries and thereby
helping the students to bridge gap between the theories explained in the books and their
practical implementations.
Training plays an important role in future building of an individual so that he/she can better
understand the real world in which he has to work in future. The theory greatly enhances
our knowledge and provides opportunities to blend theoretical with the practical knowledge
where trainees get familiar with certain aspects of industries. I feel proud to get myself
trained at Tamil Nadu Newsprint and Papers Limited (TNPL).
I have taken up training in finance department and have studied and explained the need for
working capital as well as its management and financing. I am sure I could encash this
opportunity to the best of my competence, zeal , perfection and academic knowledge & I
am keen to make it on going journey throughout my life as I strongly believe that learning
is a journey not a destination.
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TABLE OF CONTENT
Chapter No. Content Page No.
Executive Summary
1 Company Profile
Introduction
Objectives of the company
Vision
Mission
Products
Technology
Projects
Research and Development
2 Design of the study
Introduction of the study
Objective of the study
Research Methodology
Limitations of the study
3 Conceptual framework of working capital management
Introduction of working capital
Working capital cycle
Concept of working capital
Types of working capital
Composition of working capital
Objectives of working capital
Factors determining working capital
Sources of working capital
Working capital management at Tamil Nadu Newsprint and
4
Papers Limited (TNPL)
Statement showing changes in working capital
Ratios
5 Findings
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6 Suggestions and conclusion
7 Bibliography
EXECUTIVE SUMMARY
One of the most important areas in the day-to-day management of the firm is the
management of working capital. Working capital management is the functional area of the
finance that covers all the current accounts of the firm. It is concerned with management of
the level of individual current assets as well as the management of total working capital.
Financial management means procurement of funds and effective utilization of these
procured funds. Procurement of funds is firstly concerned for financing working capital
requirement of the firm and secondary for financing fixed assets.
Working capital is the lifeline of every concern. Whether it is manufacturing or non-
manufacturing one without adequate working capital, there can be no progress in the
industry. A business enterprise should maintain adequate working capital according to the
needs of its business of its business operations. The amount of working capital should
neither be excessive nor adequate. If the working capital is excess of its requirements it
means idle funds adding to the cost of capital is short of its requirements, it will result in
production interruptions and reduction of sales and, in turn, will affect the profitability of
the business adversely.
The working capital needs of a firm are determined & influenced by various factors. A
wide variety of considerations may affect the quantum of working capital required & these
considerations may vary from time to time. The working capital needed at one point of time
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may not be good enough for some other situation. The determination of working capital
requirements is a continuous process & must be undertaken on a regular basis in the light
of the changing situations.
A number of industries for the past few years have been finding it difficult to solve the
increasing problems of adopting seriously the management of working capital. Business
concerns intent on developing their business have to use to the utmost, their available
resources for the improvement and development of the business, thereby enabling them
profits.
Due to inflationary situation and restrictions imposed on borrowing facility, the commercial
institutions and manufacturing industrial units have been confronting innumerable
difficulties in meeting day-to-day financial needs. Hence effective management of working
capital has become a problem for such organizations and industries.
I have undertaken project on working capital management of Tamil Nadu Newsprint and
Papers Limited (TNPL). Project starts with company introduction, Second chapter is about
the objective and research methodology, Third chapter deals with theoretical frame work of
working capital management and last part is about the data analysis and its interpretation.
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CHAPTER -1
COMPANY PROFILE
INTRODUCTION
Tamil Nadu Newsprint and Papers Limited (TNPL) were established by the Government
of Tamil Nadu during early eighties to produce Newsprint and Printing & Writing Paper
using bagasse, a sugarcane residue, as primary raw material. The Company commenced
production in the year 1984 with an initial capacity of 90,000 tonnes per annum. Over the
years, the production capacity has been increased to 2,45,000 tonnes per annum and the
Company has emerged as the largest bagasse based Paper Mill in the world consuming
about one million tonnes of bagasse every year.
TNPL is the largest producer of bagasse based paper in the world. Annual consumption of
bagasse slated to touch 1 million tonnes per annum. TNPL exports about 1/5th of its
production to more than 30 countries. Manufacturing of quality paper for the past two and
half decades from bagasse is an index of the company’s technological competence.
Presently having an installed capacity of 230000 tpa of Newsprint and Printing & Writing
Paper in various combinations.
Recognizing the pioneering effort, World Bank has twice extended a loan of US $ 100
million through IDBI in 1981 and US $ 75 million for its expansion project in 1993 for
enhancing capacity from 90000 tpa to present level.
TNPL has better economic of scale and higher capacity when compared to other
leading players as BILT and Hindustan Paper Corporation Limited.
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TNPL derives its strength from its dedicated in-house R&D team, one of the best in
the country. TNPL’s customer focused R&D has been instrumental in improving quality,
ensuring consistency and introducing new products based on market feedback and needs.
TNPL believes and invests in state of art technology. In association with CMC TNPL has
developed a comprehensive online integrated information system, which provides real time
information for quick decision making. Notwithstanding the highly fluctuating market
conditions of paper in India, TNPL has been achieving consistently high capacity utilization
of over 100% and a unique record of ZERO STOCK at the end of each financial year since
1989 – 90.
OBJECTIVES OF THE COMPANY
TNPL was promoted with the objective of manufacturing newsprint and printing
and writing paper using primary an unconditional raw material. i.e. pages, a releasable
agricultural waste. By providing indigenous newsprint out of pages, the company helps the
country in conserving the foreign exchange and dividing forest resources.
The main objectives of the company as set out in its memorandum of association and
articles of association are as follows.
 To carry on business as newsprint and paper manufacture in all its branches

including magazine paper.
 To carry on the manufacture of newsprint pulp, bagasse pulp, wood pulp, straw
pulp, wood pulp, bamboo pulp and fibrous pulps of all description cellulose and
other materials required by the company.
 To carry on business as manufactures, makers, dealers, importers, exporters and

traders all kinds of paper including newsprint, magazine, writing, printing, bond and
craft, all varieties of pulp and similar products and goods.
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 To carry on the business of manufacture assemblers and dealers in hirers and repairs
of plant and machinery required for the manufacture of newsprint, magazines paper
pulp and packing materials and of components spare parts accessories of any such
machinery and plant.
 To manufacture, buy, sell, exchanging, after improve prepare for market or

otherwise deal in all kinds of bagasse bamboo, grass wood and other raw material.
 To give technical consultancy and advisory series for the above activities.
 To extend lease finance to contractors, promoters of various servicing industries.
VISION:
“To be the market leader in the manufacture of world class eco-friendly papers by
adopting innovative technologies for sustainable development”
MISSION:
 Attain Leadership in Paper Technology.
 Promote the usage of bagasse in the manufacture of Newsprint and Printing &
Writing Paper.
 Minimize environmental impact and become an environmental friendly

organization.
PRODUCTS
TNPL offers high-quality surface sized and non-surface sized paper to suit the needs of modern
high speed printing machines. TNPL's cutting edge technology backed by experienced
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professionals ensures quality products to customers. TNPL’ s manufacturing processes are
equipped with state-of-the-art control systems to maintain critical quality parameters on line.
The paper produced by TNPL is eco- friendly as the pulp is manufactured out of renewable raw
material and is subjected to Elemental Chlorine Free (ECF) bleaching. As the paper is acid free,
it has a longer colour stability and enhanced permanency in terms of strength characteristics.
TNPL caters to the requirements of multifunctional printing processes like sheet-fed, web offset,
and digital printers. The paper reels have uniform profile with strength properties to cope even
with high speed machines. TNPL manufactures Printing and Writing Papers in substances ranging
from 50 GSM to 110 GSM.
Major products are:
a. TNPL Ultra while Mapilitho/ Print Vista
A premium product with superior brightness and opacity for high resolution, multi-colour
printing. It is an ideal product for high-end printing segments like diaries, calendars, annual
reports, brochures and catalogues.
b. TNPL Elegant Mapilitho
A high bright paper with excellent visual appeal and good surface properties. It is best suited for
printing of diaries, calendars, posters, annual reports and quality text books etc.
c. Hi-tech Mapiitho
With a pleasant shade and improved optical properties, Hi-tech maplitho is an economical
product for quality multi colour printing on high speed web offset printing machines. The product
has been an ideal choice amongst the computer stationery, notebook and calendar
manufacturers.
d. TNPL Offset Printing
Bright and endowed with superior internal bonding strength, it renders good functional
properties. This product is best suited for student notebooks and continuous stationery.
e. Creamwove
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This is a product for "low end-high quality" printing. It is ideal for examination papers, text
books, students exercise notebooks and a wide range of stationery.
f. Copy Crown
A super bright mutli-purpose office paper known for high opacity. It is offered in ready to use
cut size packets converted and packed on state of the art on line sheeters. Copy crown comes in
attractive, compact and convenient packages. This product is available in A4 size 80 / 75 GSM
packs of 500 sheets. This multi-functional paper is designed to meet all the printing needs of a
modern office. It is ideally suited for laser, inkjet, plain paper fax and digital copiers.
g. TNPL Pigment Paper
Super Surface Sized product with light weight coated properties. An ideal grade suitable for
multi color high speed sheet and web offset printing machines.
h. TNPL Copier
A widely known copier paper conforming to international standards. This copier paper is offered
in 70, 75 and 80 GSM. It is available in A4, A3 and legal sizes. Operationally well accepted for
high-speed copying by virtue of its excellent dimensional stability. The product is offered in
moisture proof attractive convenient packs.
i. Radiant Print
A surface sized paper with good strength and visual appearance. This product is the customers�
choice for printing of textbooks, student notebooks, brochures and commercial grade printing.
j. Ace Marvel
An innovative product for different end-applications such as "Thermal and carbonless coating",
Notebooks and Computer Stationery.
Ace Marvel + is specially treated for lint free high quality and high speed 4 colour offset printing.
k. Students’ favourite
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Ready-to-use cut sized writing paper offered in convenient and shrink wrapped packing. It is
converted to perfect dimensions in an online sheeting machine of international repute. This
bright writing paper with a smooth finish is an ideal choice for writing. The product is offered in
two sizes viz. 33.5 X 42.0 cm and 34.5 X 43.0 cm in reams of 500 sheets.
l. Super print Malipitho
A Product for high speed printing. The smooth surface with an excellent finish gives unique print
evenness. This printer friendly product exhibits high degree of runnability and low degree of ink
consumption. This new product from TNPL is becoming an ideal choice among printers and
publishers.
m. Handbound Notebook
TNPL Hardbound notebooks are made from top class surface sized ultra white paper with a very
pleasing shade with extra smoothness for trouble free writing. The notebooks are made with
strong and rigid covers with laminated multi color designs. The binding, made with latest
technology, is the unique feature which is very easy to handle, durable and at the same time
has long life.
n. Perfect Copier
A new economic copier developed with functional properties for trouble free "High-volume",
"High-speed" commercial mass copying. The product is offered in moisture proof attractive
convenient
TECHNOLOGY
TNPL is an acknowledged leader in the technology of manufacture of paper from bagasse – the
sugar cane residue. Started with an initial capacity of 90,000 tonnes per annum (tpa) on a single
Paper Machine, the Mill doubled the capacity to 180,000 tonnes per annum in the year 1995 by
addition of one more Paper Machine. Under the Mill Development Plan (MDP) completed during
May 2008, the pulp production capacity has been increased from 520 tpd to 720 tpd. The pulp
being produced by TNPL, in post-MDP is Elemental Chlorine Free (ECF). Along with this, the
upgrade of the Paper Machines has resulted in reaching the paper production capacity to
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2,45,000tpa. TNPL completed the Mill Expansion Plan (MEP) in December 2010 to raise the mill
capacity to 400,000 tpa from January 2011, by installing a third Paper machine (PM #3) and
simultaneously increased the pulp production capacity to 880tpd.
Having successfully completed the MEP, the mill has now embarked upon a
green field project to install a double coated multilayer paper board machine.
The pre-project activities have commenced for this project from May 2013. The
target set for commissioning of the project is May 2016.
PROJECTS
1. Revamping of Steam and Power system (RSPS):
The Company is implementing a project to replace the 3 low pressure (44 ata)
Boilers of 60 tph each installed during 1984 with a new energy efficient and
environmental friendly Circulating Fluidised Bed Combustion (CFBC) Boiler of
125 tph steam generation capacity at 105 ata pressure rating. In addition, the
Company has proposed to replace the two old Turbo Generator (TG) sets with a
new TG set of 41 MW capacity to augment the in-house power generation for
meeting the additional power requirement. The project features installation of
an Air Cooled condenser for the TG in place of conventional water cooled
condenser, in order to conserve water. The total capital outlay for the project
is Rs 150 crore. The commissioning of the TG is planned during end September
2013 and that of the CFBC Boiler in October 2013. The RSPS will enable the
mill to fully meet the internal demands including the new facilities created like
LSFM, DIP, PCC and GCC plants besides exporting surplus power to the Grid.
2. De-Inking Plant
To meet the additional pulp requirement in the post- MEP, the Company has
initiated steps to install a state- of-the-art Deinking plant of capacity 300 tpd,
at an estimated capital outlay of Rs.174 Crore. Commissioning trials for the
plant commenced from 3rd week of June 2013. The plant was commissioned
on 1st July 2013 and is in continuous operation since then. The commissioning
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of DIP line is an important mile stone in the history of the company. The DIP
line gives tremendous flexibility in managing the raw material supply chain to
meet the annual production targets set for the mill. Further the DIP line
represents the green technology as it is the least polluting when compared
with the virgin fiber pulp lines like the chemical bagasse and the hard wood
pulp mills. The state of the art 3 loop, 2 disperser DIP line is also a trend setter
in India, for producing high quality printing and writing paper from recycled
paper. The DIP line will be an enabler for future growth of the company.
3. On-site Precipitated Calcium Carbonate (PCC) plant
Following the switching over to alkaline sizing in the Stock preparation, the paper
machines started using Precipitated Calcium Carbonate (PCC) as the wet end
filler. In view of the huge requirement of PCC, the Company has proposed to
install an on-site PCC plant of 60,000 tpa capacity on Built, Own and Operate
(BOO) basis in the Mill premises. The plant will be established by OMYA
International AG, Switzerland at a capital outlay of Rs.30 crore. The
Environmental clearance for the project is received .
4. Lime Sludge & Fly Ash Management (600 tpd Cement Plant)
The lime sludge generation from the Recovery Cycle and the Fly Ash generated
from the power boilers are issues of concern in solid waste management of the
mill. An innovative solution of combining these two wastes and converting
them into high grade cement has been drawn through installation of a 600 tpd
cement manufacturing plant abutting the Mill premises. Environmental
Clearance and the Consent to Establish were received from Department of
MOEF / GoTN and theTamil Nadu Pollution Control Board. This project is
undertaken at a capital outlay of Rs.100 crore. The project has commenced the
commercial operations from January 2013.
RESEARCH AND DEVELOPMENT
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 TNPL Centre for Biotechnology and Bioenergy
Pulp and paper industry basically has strong relationship with biology and biotechnology, as the
main source of paper making raw material comes from the plant source. TNPL has realized the
importance of biotechnology and its application to paper industry and has created advanced
research facility to work on the Biotechnology and Bioenergy.
TNPL has around 6000 square feet of built-up area to accommodate two major research facilities
to work on Plant Biotechnology (Plant Tissue Culture and Microbial Biotechnology and
bioenergy). Besides, facilities like Polyhouse, Shade Net and an experimental field station of
around five acres are attached to the new facility and plan to introduce new plant breeding
facility to cater to the needs of above research programs.
Tissue culture, “the process of growing cells artificially in the laboratory� produces clones, in
which all product cells have the same genotype. The three key areas in which plant cell & tissue
culture have direct application in paper industry are:
 Large scale propagation of elite and improved clones from hybrid or specific parent lines
through micro propagation.
 Production of disease-free and uniform growth character plantlets.
 Development of plant varieties through cellular and molecular techniques in conjunction

with coventional plant breeding.
TNPL has developed tissue culture protocol for 2 clones. 2,70,000 seedlings were developed
from superior Eucalyptus clone and supplied to farmers through Plantation section during the
past 2 financial years. First time in the country, the mini cutting propagation based on sand bed
mini clonal garden was developed by integrating the micro and macro propogation.
CHAPTER - 2
DESIGN OF THE STUDY
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INTRODUCTION OF THE STUDY
“Working capital” is often referred to as “life blood” of an organization as it is the money

used for carrying day to day activities of an organization. The management of fixed and
current assets is similar to that of fixed assets in the sense that in both cases a firm analyses
their effects on its return and risk.
The management of fixed and current assets, however, differs in three important ways first
in managing fixed assets, time is a very important factor, Consequently, discounting and
compounding techniques play a significant role in capital budgeting and a minor one in the
management of current assets. Second, the large holding of current assets, especially cash,
strengthens the firm’s liquidity position (and reduces riskiness), but also reduces the overall
profitability. Thus, a risk-return trade off is involved in holding current assets. A level of
fixed as well as current assets depends upon expected sales, but it is only current assets
which can be adjusted with sales fluctuations in short run.
Working capital is probably the most often used financial management concept verbally
and misused practically. Independent of the nature of an organization have failed or become
sick mainly due to the mismanagement of this vital “working capital”.
This study on WORKING CAPITAL has done for Tamilnadu Newsprint and Paper Ltd.
OBJECTIVES OF THE STUDY
Following are the objectives of the study:
 To find out the size of working capital and to measure its liquidity and operational
efficiency by using ratio analysis.
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 To make an element-wise analysis of working capital and to identify the elements
responsible for variation in working capital.
 To evaluate the performance of the company through Inventory, Receivables and

Cash management.
 To analyze the relationship existing between liquidity and profitability.
 To provide the important ratios pertaining to working capital management for near
future years.
RESEARCH METHODOLOGY
 Research Design
A research design is the arrangement of the condition for collection and analysis of
data. Actually it is the blueprint of the research project.
Research design used was exploratory type.
 Data Collection
 Primary Data: It was collected through interaction with the finance manager and staff
of the company.
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 Secondary Data: The secondary data comprises of various Books, Annual Reports and
balancesheet, Journals, various MIS, magazines and website of the company.
 Data Analysis
Data analysis was done with the help of different ratios.
LIMITATIONS OF STUDY
 The analysis was made with the help of the secondary data collected from the
company.
 Since it is a private limited company, so only unpublished financial data was
available.
 Because of the company’s policy of maintaining secrecy some amount of data was
not made available to which could have helped me in making my project report
better.
 The study is academic in nature.
 The final conclusion can be also affected by some of the extraneous variables.
CHAPTER – 3
THEORETICAL FRAMEWORK OF WORKING CAPITAL MANAGEMENT
Introduction of Working Capital
Firms need cash to pay for all their day-to-day activities. They have to pay wages, pay for
raw materials, pay bills and so on. The money available to them to do this is known as the
firm’s working capital. The main sources of working capital are the current assets as these
are the short-term assets that the firm can use to generate cash. However, the firm also has
current liabilities and so these have to be taken account of when working out how much
working capital a firm has at its disposal.
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Working capital is therefore: -
WORKING CAPITAL = Current Assets - Current liabilities

||
stock + debtors + cash
Working capital management means management of current assets of the firm. It can be
defined in simple terms as excess of current assets over current liabilities. In short it is the
difference between inflow and outflow of funds. Working capital includes stock of raw
material, semi finished goods including work in progress, cash in hand and bank and
debtors after deducting current liabilities i.e. sundry creditors for expenses ex: salaries and
other administration expenses, interest payable to term lending institutions and other
financial institutions within 12 months and creditors for purchase of Raw Material and any
short term advances towards sale of goods.
The working capital is an important part of the top half of the firm's balance sheet. It is
vital to a business to have sufficient working capital to meet all its requirements. Many
businesses have gone under, not because they were unprofitable, but because they suffered
from shortages of working capital.
WORKING CAPITAL CYCLE
Cash flows in a cycle into, around and out of a business. It is the business's life blood and
every manager's primary task is to help keep it flowing and to use the cash flow to generate
profits. If a business is operating profitably, then it should, in theory, generate cash
surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and
expire.
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The faster a business expands the more cash it will need for working capital and
investment. The cheapest and best sources of cash exist as working capital right within
business. Good management of working capital will generate cash will help improve profits
and reduce risks. Bear in mind that the cost of providing credit to customers and holding
stocks can represent a substantial proportion of a firm's total profits.
There are two elements in the business cycle that absorb cash - Inventory (stocks and
work-in-progress) and Receivables (debtors owing you money). The main sources of cash
are Payables (your creditors) and Equity and Loans.
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Each component of working capital (namely inventory, receivables and payables) has two
dimensions: TIME and MONEY. When it comes to managing working capital - TIME IS
MONEY. If you can get money to move faster around the cycle (e.g. collect monies due
from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory
levels relative to sales), the business will generate more cash or it will need to borrow less
money to fund working capital. As a consequence, you could reduce the cost of bank
interest or you'll have additional free money available to support additional sales growth or
investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer
credit or an increased credit limit; you effectively create free finance to help fund future
sales.
It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant, vehicles
etc. If you do pay cash, remember that this is now longer available for working capital.
Therefore, if cash is tight, consider other ways of financing capital investment - loans,
equity, leasing etc. Similarly, if you pay dividends or increase drawings, these are cash
outflows and, like water flowing down a plughole, they remove liquidity from the business.
CONCEPT OF WORKING CAPITAL:
There are three types of working capital, Gross working capital, Net working capital and
fixed working capital.
1. Gross Working Capital: It refers to the firms investment in current assets i.e.,
mainly stock, debtors, bills receivables and cash. This is also known as ‘Current
capital concept’ or ‘Circulating capital concept’. It is represented by the sum total
of the current assets of the enterprise. It is known as Circulating capital’ because
current assets of a company are changed from one form to another, for e.g. from
cash to inventories, inventories to receivable to cash.
The Gross capital concept focuses attention on two aspects of current assets
management:
a). Optimum investment in current assets and
b). Financing of current assets.
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The gross capital concept takes into consideration that: every increase in the funds
of the enterprise would increase its working capital. This concept is more useful in
determining the rate of return on investments in working capital.
2. Networking capital: It is Excess of Current Assets over Current Liabilities.

Alternatively it is that portion of the firm’s current assets, which is financed by
long-term funds.
Net working capital being the difference between current assets and current
liabilities is quantitative concepts.
 It indicates the liquidity position of the firm.
 Suggests the extent to which working capital needs may be financed by
permanent sources of funds.
3. Fixed working capital: Every firm is required to maintain a minimum balance of

cash, inventory etc, in order to meet the business requirement even in the slack
seasons. This part of current assets is called as permanent or fixed working capital.
TYPES OF WORKING CAPITAL:
Depending upon the nature of the funds blocked, working capital can be of two
types
1. PERMANENT OR REGULAR WORKING CAPITAL

2. VARIABLE WORKING CAPITAL
PERMANENT WORKING CAPITAL:
The magnitude of the current assets depends upon the firms operating cycle. The operating
cycle is a continuous process and the need for current assets is also continuously. But the
level of current assets needed is not always same. It increases or decreases overtime.
However there is always minimum level of current assets which is continues required by a
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firm to carry out its business operations. The minimum level of current assets is called
permanent or fixed working capital.
It represents the minimum amount of investment in current assets that is seemed necessary
to carry on operations at time. It is also known as ‘hard core’.
It is of two kinds:
a). INITIAL WORKING CAPITAL:
At its inception and during the formation period of its operations, a company must have
enough cash funds to meet its obligations. In the initial year it as revenues may not be
regular and adequate credit arrangements may not be available from banks, financial
institutions, etc till it has established its credit standing, credit may have to be granted on
sales to attract the customers.
b). REGULAR WORKING CAPITAL:

It is the amount of working capital needed for the continuous operations of the business of
the company. It refers to the excess of current assets over the current liabilities so that the
process of conversion of cash into stock, stock into sales, receivables and collections is
maintained without any breaks.
VARIABLE WORKING CAPITAL:
This working capital required over and above the permanent working capital depends upon
changes in production and sales are called fluctuating or variable working capital or
temporary working capital. There may be changes either increase or decrease in working
capital. Many the variable working capital required in season dependent.
It represents additional assets required at different times during the operating year to cover
any change or variability from the normal operations. It can be of two parts:
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A. Seasonal working capital
B. Special Working Capital
A. Seasonal working capital:
The amount to be blocked due to seasonal nature of industry. Examples are package tours
and summer tours. Obviously it refers to financial requirement that cope up during that
particular season. Beyond their initial and regular circulating capital most business will
require at stated intervals a large amount of current assets to fill the demands of the
seasonal busy periods.
B. Special Working Capital:
Extra funds are needed to meet contingencies, festivals, and special occasions.
All business enterprises have to be prepared to meet unforeseen eventualities that may arise
in the course of their operations. Therefore, they must have extra funds at ‘Unstated
Periods’ to meet contingencies.
 COMPOSITION OF WORKING CAPITAL:
Working capital consists of

Current Assets
Current Liabilities
Current Assets:
Current Assets are those, which can be converted into cash with one year without affecting
the operations of the firm.
In the management of working capital, two characteristics of current assets must be borne
in mind:
1. Short life span
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2. Swift transformation into other asset forms.
The life span of current assets depends upon the time required in the activities of
procurement, production, and sales.
List of Current Assets:

 Cash and Bank Balances
 Investments:
a) Government and Other Trustee Securities
b) Fixed deposits with Banks
 Receivables arising out of Sales
 Instalments of Deferred receivable due within a year
 Raw Material and components used in the process of manufacture including those
in transit
 Stock in Process including semi-finished goods
 Other consumable spares
 Advance payment of tax
 Advance for purchase of raw materials, components and consumable stores
 Prepaid Expenses
 Deposits kept with public bodies for the business operations.
Current Liabilities:
Current Liabilities are those, which are expected to fall due or mature for payment in a
short period not exceeding a year and represent short term sources of funds.
List of Current Liabilities:

 Short term Borrowings (including bills purchased and discounted) from
a) Banks and
b) Others
 Unsecured Loans
 Public deposits maturing in one year
 Sundry creditors for raw materials and consumable stores and spares
Page 24
 Interest and other charges accrued but not due for payment
 Deposits from Dealers, Sellers agents, etc
 Instalments of term Loans, Deferred payments, Credits, Debentures, Redeemable
preference shares and long term deposits, payable within one year
 Statutory Liabilities
a) P F dues
b) Provision for taxation
c) Sales tax and excise tax
d) Obligations towards workers considered statutory
e) Others
 Miscellaneous Current Liabilities
a) Dividends
b) Liabilities for expenses
c) Gratuity payable within one year
d) Other provisions
e) Any other payment due within one year
 OBJECTIVES OF WORKING CAPITAL:

The main aim of Working Capital Management is to attain a Trade-off between Profitability
and Risk. Here Risk refers to profitability that a firm will become technically insolvent.
Risk is commonly measured by using the amount of net working capital or the current
ratio. Thus, more the new working capital, the more liquid the firm and therefore less likely
it is to become technically insolvent. On the other hand, Lower levels of liquidity are
associated with increasing levels of Risk. To increase the amount of profits, a firm, may
sacrifice solvency i.e. taking risk of technical insolvency and maintain relatively low levels
of current assets. When the firm does so, its profitability would improve but would be
exposed to greater risk of technical insolvency. Thus, if a firm wants to increase
profitability it must also increase its risk and if it wants to decrease risk, it must decrease
profitability. Therefore, Working capital management involves a Trade-off between Risk
and Profitability.
Page 25
 FACTORS DETERMING WORKING CAPITAL:
The working capital needs of a firm are determined & influenced by various factors.
A wide variety of considerations may affect the quantum of working capital required &
these considerations may vary from time to time. The working capital needed at one point
of time may not be good enough for some other situation. The determination of working
capital requirements is a continuous process & must be undertaken on a regular basis in the
light of the changing situations. Following are some of the factors which are relevant in
determining the working capital need of the firms.
1. Production policy
2. Nature of the business
3. Credit policy
4. Inventory policy
5. Abnormal factors
6. Market conditions
7. Conditions of supply
8. Business cycle
9. Growth and expansion
10. Level of taxes
11. Dividend policy
12. Price level changes
13. Operating efficiency
1. Production Policy:
The production schedule i.e., the plan for production, has great influence on the level of
the inventories. In some cases raw materials can be produced only in a particular season
and have to be stocked for the production of the whole year. In many others the production
cycle is limited to a part of the year and raw materials have to be accumulated throughout
the year. Thus, need for working capital will very according to the production plans.
Page 26
2. Nature of the Business:
The size of business also has an important impact on its working capital needs. Size
may be measured in terms of the scale of operations. A firm with large scale of operation
will need working capital than small term. The working capital requirements of a firm are
basically influenced by the nature of the business trading and financial firm has a very less
investment in fixed assets, but require a large sum of money to be invested in working
capital.
3. Credit Policy:
A company, which allows liberal credit to its customers, may have higher sales but
consequently will have large amount of funds tied up in sundry debtors. Credit terms, Debt
collection system also influences the level of working capital.
4. Inventory policy:
Large amount of funds is normally locked up in inventory. An efficient firm may stock
raw material for a smaller period and may therefore require lesser amount of working
capital.
5. Abnormal factors:
Abnormal factors like strikes, lockouts also require additional working capital.
Recessionary conditions necessitate a higher amount of stock of finished goods.
6. Market conditions:
Page 27
Market conditions like competition large inventory are essential as delivery has to be
off the self or credit has to be extended on liberal terms when market competition is fierce.
7. Conditions of supply:
Prompt and adequate supply of raw materials requires small investment in inventory. If
supply is scant, seasonal canalized, it is essential to keep longer stocks increasing working
capital requirements.
8. Business cycle:
Business fluctuations lead to cyclical and seasonal changes in production, sales and
effect the working capital requirements.
9. Growth and expansion:
The working capital needs of firm increases in growth in terms sales of fixed assets. If
is difficult to precisely determine the relationship between volume of sales and the working
capital needs. The critical fact however is the need for increased working capital funds does
not fallow growth in business activities but precedes it.
10. Level of taxes:
Taxation is a short term liability payable in cash. Advance payment of cash may have to
be paid on the basis of anticipated profits. Tax is first appropriation out of profits. Higher
the tax, greater is the stain on the working capital of the company. Working capital varies
with tax rate and advanced tax provisions.
11. Dividend policy:
Page 28
Payment of dividend utilizes cash while retaining profits acts as a source of working
capital.
12. Price Level changes:

Inflationary trends in the economy necessitate more working capital maintain the same
level of activity.
13. 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.
 SOURCES OF WORKING CAPITAL:
Out of the total current requirement of funds some portion of current funds is more of
permanent nature and its refers to fixed working capital. Balance portion of funds cyclical
and its refers to variable working capital. Every industrial enterprise as to maintaining a
minimum stock of raw material, work-in-progress, finished goods. Loose tools and spare
parts. It always requires money for the payment of wages and salaries throughout the year.
Funds require for these is known as fixed or permanent working capital. Depending upon
the size and volume of the business, additional working capital is required for buying
materials and for meeting the current operational expenses. This is the variable part of the
working capital. The fixed working capital should be financed from long-term sources and
variables working capital should be financed from short-term sources.
 Sources of regular working capital
Issue of share:
Page 29
Rising of funds by issue of shares has certain distinct edges over others sources, especially
borrowed capital. Once procure it is not refundable except in cash of liquidation and does
not create any changes on the assets of the company .so it is advantages for affirm to
finance its fixed working capital out of proceeds of the issuing of shares.
Issue of debenture or long term borrowing

Debentures are fixed interest-bearing securities, besides being redeemable at the option of
the company. The entire surplus after payment of debentures interest goes to the credit of
equity shareholders either in the form of interest goes to the credit of equity shareholders
either in the form of increased rates of dividend or in the form of increased relation. Similar
advantages are also accrued if working capital is financed by long term borrowing.
Retention
Retention in the form of general reserve and or credit balance of profit and loss account
may also be used to finance fixed working capital
 Sources of seasonal or variable working capital
For firms, which are in seasonal character in their business a large amount of working
capital, is required for holding inventory in peak period. But as soon as peak period is over,
their working capital becomes idle. So such firms may not prefer to finance working capital
from long-term sources. They may find it convenient to meet working capital from short-
term sources may find it convenient to meet their working capital from short-term sources
as follows
Cash Credit
This represent the over draft facilities as the hypothecation of inventories and bad debts.
The cash credit system is unique to the Indian banking system. Such as flexible system of
bank finance is nowhere in the world.
Discount of bills
Page 30
Banks discount the bills raised on the buyers of companies’ goods. This facility helps in
realizing funds without wasting for the credit period to get over.
Bank guarantees
A Banks Issues specific guarantee to facilities business transaction between various parts
is, including government agencies.
CHAPTER – 4
WORKING CAPITAL MANAGEMENT IN TAMIL NADU

NEWSPRINT AND PAPERS LIMITED (TNPL)
 STATEMENT SHOWING CHANGES IN WORKING CAPITAL
TABLE 1
Statement showing the changes in working capital 2016-17 to 2017-18

Rs 000’s
2016-17 2017-18 Effective on Working
Particulars (Amount in (Amount in Capital
Rs) Rs) Increase Decrease
CURRENT ASSETS (A)
Inventories 112322.53 109475.52 - 2847.01
Sundry Debtors 176059.92 137167.46 - 38892.45
Cash and Bank Balances 14181.87 43586.10 29404.23
Loans & Advances 90225.00 116367.63 26142.45
Page 31
TOTAL : 392789.50 406596.71
CURRENT
LIABILITIES (B)
Current Liabilities and
239514.74 228417.36 11097.38
provisions
TOTAL : 239514.74 228417.36
Working Capital (A-B) 153274.75 178179.35

Net increase in Working
24904.60 24904.60
Capital
TOTAL 178179.35 178179.35 66644.06 66644.06
INTERPRETATION:-
 The total current assets increased by Rs.392789.50 to Rs.406596.71 in the year

2016-17 to 2017-18.
 The current liabilities decreased by Rs.239514.74 to Rs.228417.36 in the year 2016-
17 to 2017-18.
 The net increase in working capital RS 24904.6 thousands is an application of
funds.
TABLE - 2

Rs 000’s
CURRENT ASSETS (A)
Inventories 86198.35 112322.53 26124.18 -
Page 32
Sundry Debtors 73763.52 176059.92 102296.40 -
Cash and Bank Balances 31957.50 14181.87 - 17775.63
Loans & Advances 55316.38 90225.18 34908.80
TOTAL : 247235.75 392789.50

CURRENT
LIABILITIES (B)
143615.54 239514.74 95899.20
provisions
TOTAL : 143615.54 239514.74

49654.55 49654.55
Capital
TOTAL 153274.76 153274.76 163329.38 163329.38
INTERPRETATION:-
2015-16 to 2016-17
 The current liabilities increased by Rs.143615.54 to Rs.239514.74 in the year 2015-
16 to 2016-17.
 The net increase in working capital of RS 49654.55 thousands is an application of
funds.
TABLE - 3
Rs 000’s
Effective on Working
Particulars
Capital
Page 33
2014-15 2015-16
(Amount in (Amount in Increase Decrease
Rs) Rs)
CURRENT ASSETS (A)
Inventories 17740.16 86198.35 68458.19 -
Sundry Debtors 90621.00 73763.52 - 16857.48
Cash and Bank Balances 32641.34 31957.50 - 683.84
Loans & Advances 41387.75 55316.38 13928.63 -
TOTAL : 182390.25 247235.75

CURRENT
LIABILITIES (B)
96788.91 143615.54 - 46826.63
provisions
TOTAL : 96788.91 143615.54

18018.87 - 18018.87
Capital
TOTAL 103620.21 103620.21 82386.82 82386.82
INTERPRETATION:-

2014-15 to 2015-16.
 The total current liabilities increased by Rs.96788.91 to 143615.54 in the year
2014-15 to 2015-16.
 The net increase in working capital Rs18018.87 thousands is an applications of
funds.
Page 34
TABLE - 4
Rs 000’s
CURRENT ASSETS (A)
Inventories 16299.38 17740.16 1440.78 -
Sundry Debtors 21249.42 90621.00 69371.58 -
Loans & Advances 77548.33 41387.75 - 36160.58
TOTAL : 139654.60 182390.25

CURRENT
LIABILITIES (B)
29003.36 96788.91 - 67785.55
provisions
TOTAL : 29003.36 96788.91

Net decrease in Working
25049.90 25049.90
Capital
TOTAL 110651.24 110651.24 103946.13 103946.13
INTERPRETATION:-

2013-14 to 2014-15.
Page 35
 The total current liabilities increased by Rs.29003.36 to Rs.96788.91 in the year
2013-14 to 2014-15.
 The net decrease in working capital RS 25049.90 thousand is sources / inflow of

funds.
TABLE - 5
Rs 000’s
CURRENT ASSETS (A)
Inventories 9161.13 16299.38 7138.25 -
Sundry Debtors 17383.94 21249.42 3865.48 -
Loans & Advances 101407.07 77548.33 - 23858.74
TOTAL : 149793.49 139654.60

CURRENT
LIABILITIES (B)
33186.94 29003.36 4183.58
provisions
TOTAL : 33186.94 29003.36

Net decrease in Working
5955.31 5955.31
Capital
TOTAL 116606.55 116606.55 23858.74 23858.74
Page 36
INTERPRETATION:-
 The total current assets decreased by Rs.149793.49 to Rs.139654.60 in the year

2012-13 to 2013-14.
 The total current liabilities decreased by Rs.33186.94 to Rs.29003.36 in the year

2012-13 to 2013-14.
 The net decrease in working capital of RS 5955.31 thousands is sources / inflow of

funds.
 RATIO ANALYSIS
1. CURRENT RATIO:-
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio is also known as working capital ratio. It is used to measure short
term financial position or liquidity of a firm. It is calculated as
Current Assets
Current Ratio =
Current Liabilities
COMPONENTS:-
The two components of this ratio is Current Assets & Current Liabilities i.e. Current
Assets includes cash (those assets can be easily converted into cash) with in a short period
of time generally, one year. Such as marketable securities, bill receivables, sundry debtors,
inventories, work in progress, prepaid expenses.
Page 37
Current liabilities which are payable within a short period, includes Outstanding
Expenses, bills payable, sundry creditors accrued expenses, short-term advances, income
tax payable, dividend payable, bank over draft may take or may not take as a current
liability depends up on the choice.
Rs 000’s
CURRENT CURRENT
YEAR CURRENT RATIO
ASSETS LIABILITIES
2013-14 139654.60 29003.36 4.81
2014-15 182390.25 96788.91 1.88
2015-16 247235.75 143615.54 1.72
2016-17 392789.50 239514.74 1.63
2017-18 406596.71 228417.36 1.78
INTERPRETATION:-
Page 38
The ratio for the year 2013-14 is 4.81, where as in 2014-15 it is decreased to 1.88,
where as in 2015-16 it is decreased to 1.72, where as in 2016-17 it is decreased to 1.63, in
2017-18 it is increased to 1.78.
Ideal current ratio is 2:1. In all the year except 2013-14, current ratio is less than 2:1. This
indicates that the company’s resources are not invested in productive assets yielding good
returns. This trend also indicates that the company doesn’t have enough current assets to
pay off current liability and company’s liquidity position is not good.
2. LIQUID RATIO:-
Liquid ratio indicates that a relationship between quick or liquid assets and current
liabilities. It is a rigorous measure, and superior to the current ratio. However both the
ratios should be used to analysis the liquidity of a firm.
An asset is liquid if it can be converted in to cash immediately or reasonable soon
without a loss of value.
Liquid Assets
Liquid Ratio = ------------------------------
Current Liabilities
Liquid Assets = Current Assets – Stock.
COMPONENTS:-
Liquid assets include cash, debtors after providing for bad and doubtful debt and
securities. Current liabilities are creditors, bills payables.
Rs 000’s
CURRENT LIQUID
YEAR LIQUID ASSETS
LIABILITIES RATIO
Page 39
2013-14 123355.22 29003.36 4.25
2014-15 164650.09 96788.91 1.70
2015-16 161037.40 143615.54 1.12
2016-17 280466.97 239514.74 1.17
2017-18 297121.19 228417.36 1.30
INTERPRETATION:-
The liquid ratio of the firm for the year 2013-14 is 4.25; where as in 2014-15 it is
decreased to 1.70, where as in 2015-16 it is decreased to 1.12, where as in 2016-17 it is
increased to 1.17, in 2017-18 it is increased to 1.30.
Page 40
The Liquid Ratio from 2013 - 2018 is favourable and in line with the general ratio of 1:1. It
gives the short term liquidity position and the company’s ability to honour the short term
obligations. If the ratio is above the ideal ratio of 1:1 as in the years 2013 -2018, it is a
good sign for a company. As we can see in the graph the ratio is stable throughout last 5
years which shows there is efficient management of liquid assets and the company is in a
position to pay off its liabilities.
3. ABSOLUTE LIQUID RATIO:-

Since cash is most liquid assets, a financial analysis may examine the ratio of cash
and its equivalent to current liabilities. Trade investment on marketable securities are
equivalent to cash therefore, may be including in computation of its ratio.
Absolute Liquid Assets
Absolute Liquid Ratio =
Current Liabilities
Absolute Liquid Assets = Cash and Marketable Securities.
Rs 000’s
ABSOLUTE
ABSOLUTE CURRENT
YEAR LIQUID
LIQUID ASSETS LIABILITIES
RATIO
2013-14 24557.47 29003.36 0.84
2014-15 32641.34 96788.91 0.33
2015-16 31957.50 143615.54 0.22
Page 41
2016-17 14181.87 239514.74 0.05
2017-18 43586.10 228417.36 0.19
INTERPRETATION:-
The standard of absolute liquid ratio is “0.5”. Absolute liquid ratio is 0.84 in the year
2013-14 and decreased to 0.33 in the year 2014-15. It further decreased to 0.22 in the year
2015-16 and 0.05 in 2016-17. It increased to 0.19 in the year 2017 – 18.
In all the year except 2016-17, absolute liquid ratio is less than ideal one. This showed that
company is not maintaining enough cash to pay off current liabilities.
4. INVENTORY TURNOVER RATIO:-
This ratio also known as inventory turnover ratio establishes relationship

between sales of goods sold during a given period and the average an amount of inventory
Page 42
held during that given period. This ratio reveals the number of times finished stock is
turned over during a given accounting period higher the ratio, the better it is because it
shows that finished stock is rapidly tuned over. On the other hand a low stock turnover
ratio is not desirable because it reveals the accumulation obsolete stock or the carrying of
too much stock. This ratio is composed as follows.
Sales
Inventory Turnover ratio = -------------------------------
Average Inventory
Rs 000’s
YEAR SALES AVERAGE INVENTORY
INVENTORY TURNOVER
2013-14 162650.38 17020 9.56
2014-15 402611.55 51969 7.75
2015-16 376050.69 99260 3.79
2016-17 984066.03 110899 8.87
2017-18 1076037.65 109476 9.83
Page 43
INTERPRETATION:-
The inventory turnover ratio is 9.56 in the 2013-14, where as in 2014-15 it is
decreased to 7.75; in 2015-16 it is decreased to 3.79, where as in 2016-17 it is increased to
8.87, in 2017-18 it is increased to 9.83.
Inventory turnover ratio showed increasing trend which showed that company’s inventory
is turned over fast. Company’s inventory management is efficient and less amount of
money is tied up in inventory.
5. AVERAGE CONVERSION PERIOD:-
The average time taken for clearing the stocks. This period is calculated by
dividing the number of days by inventory turnover.
365
AVERAGE CONVERSION PERIOD = ------------------------------------------
Inventory turnover ratio
Rs 000’s
INVENTORY AVERAGE
YEAR No. OF DAYS TURNOVER CONVERSION
RATIO PERIOD (DAYS)
2013-14 365 9.56 38
2014-15 365 7.75 47
2015-16 365 3.79 97
Page 44
2016-17 365 8.87 41
2017-18 365 9.83 37
INTERPRETATION:-
Inventory conversion period throughout under the study in the year 2017-18 the
inventory was sold within 37 days. It is less period compared to other years. In 2013-14, it
is 38 days, where as in 2014-15 it is increased to 47 days, in 2015-16 it is increased to 97
days, where as in 2016-17 it is decreased to 41 days, in 2017-18 it is decreased to 37 days.
This showed that holding period of inventory is decreasing year on year. This showed that
cost of holding inventory goes down and inventory is converted into sales very fast.
6. DEBTORS TURNOVER RATIO:-
It indicates the number of times debtors turnover each year. It

indicates the efficiency of staff entrusted with collection of debts. The higher the ratio it
Page 45
is better since it would indicates the debtors are being collected more promptly. Debtors
should be always being taken at gross value. No provision for bad and doubtful debts
should be deducted from them.
Net Sales
Debtors Turnover Ratio = -------------------------------
Average Debtors
Opening debtors+ closing debtors

Avg Debtors= -----------------------------------------------------
2
Rs 000’s
DEBTORS
AVERAGE
YEAR SALES TURN OVER
DEBTORS
RATIO
2013-14 162650.38 55935.21 2.90
2014-15 402611.55 82192.26 4.89
2015-16 376050.69 124911.72 3.01
2016-17 984066.03 156613.69 6.28
2017-18 1076037.65 137167.46 7.84
Page 46
INTERPRETATION:-
Debtors turnover ratio is 2.90 times in 2013-14, in 2014-15 it is increased to 4.89
times, where as in 2015-16 it is decreased to 3.01 times, in 2016-17 it is increased to 6.28
times, in 2017-18 it is increased to 7.84.
This is good sign for the company. This shows that debtors are collected fast.
Company is adopting strict collection policy and quality of debtors is good.
7. AVERAGE COLLECTION PERIOD:-
Average collection period represents the average number of days for

which a firm has to wait before it receivables are converted into cash. The ratio can be
calculated as follows
365
Average Collection Period = ———————————————
Debtors Turnover Ratio
Page 47
Rs 000’s
DEBTORS AVERAGE
YEAR No. OF DAYS TURNOVER COLLECTION
RATIO PERIOD (DAYS)
2013-14 365 2.90 126
2014-15 365 4.90 75
2015-16 365 3.01 121
2016-17 365 6.28 58
2017-18 365 7.84 47
INTERPRETATION:-
Page 48
The average collection period for the year 2013-14 is 126 days; in 2014-15 it is
decreased to 75 days, where as in 2015-16 it is increased to 121 days. In 2016-17, it is
decreased to 58 days, where as in 2017-18 it is decreased to 47 days.
This showed that collection from debtors are done very fast. This could be due to the
improvement the billing procedure. The company continuously tries to reduce the
collection period by implementing strict collection policy.
8. CREDITORS TURNOVER RATIO:-
The ratio shows the relationship between net credit purchases and the
average amount of creditors outstanding during the year. The sub ratio of this is the
creditors payment period. The creditors turnover ratio and credit payment period are
inversely related i.e., if creditors turnover increases, credit payment period decreases and
vice-versa. A low creditor’s turnover ratio is advantaging to the firm as it indicates liberal
credit terms extended by suppliers. A high creditor’s turnover ratio is disadvantageous to
the firm because it shows that accounts are to be settled rapidly.
Purchases
Creditors Turnover Ratio = --------------------------------
Average Creditors
Rs 000’s
CREDITORS
AVERAGE
YEAR PURCHASES TURNOVER
CREDITORS
RATIO
2013-14 65365.12 28212.42 2.32
2014-15 237773.84 44002.54 5.40
Page 49
2015-16 286192.31 104188.59 2.75
2016-17 715546.31 118465.87 6.04
2017-18 771863.97 81184.54 9.51
INTERPRETATION:-
Creditors turnover ratio for the year 2013-14 is 2.32, in 2014-15 it is increased to
5.40, where as in 2015-16 it is decreased to 2.75. In 2016-17 it is increased to 6.04, in
2017-18 it is increased to 9.51.
This showed that firm is making payment rapidly and enjoyed less credit period. Credit
term extended by the supplier is strict.
9. AVERAGE PAYMENT PERIOD:-
365
Page 50
Average Payment Period = --------------------------------------
Creditors Turnover Ratio
Rs 000’s
CREDITORS AVERAGE
YEAR No. OF DAYS TURNOVER PAYMENT PERIOD
RATIO (DAYS)
2013-14 365 2.32 158
2014-15 365 5.40 68
2015-16 365 2.75 133
2016-17 365 6.04 60
2017-18 365 9.51 38
Page 51
INTERPRETATION:-
Creditors payment period are 158 days in 2013-14 and 68 days in 2014-15, 133
days in 2015-16, 60 days in 2016-17 and 38 days in 2017-18. There is a continuously
decreasing the average payment period which is a good sign & better liquidity position of
the firm.
This showed that company is paying to its creditor fast. Earlier Co. used to enjoy liberal
credit period. But now credit period given by supplier is less.
10. NETWORKING CAPTIAL TO CURRENT ASSETS RATIO:-
Networking capital to current assets ratio that measures the liquidity of a

firm this ratio should be at least 50 percent to indicate satisfactory liquidity.
Networking Capital
NETWORKING CAPTIAL TO CURRENT ASSETS RATIO = ---------------------------
Current Assets.
Rs 000’s
NET WORKING CURRENT

YEAR RATIO
CAPITAL ASSETS
2013-14 110651.24 139654.60 0.79
2014-15 85601.34 182390.25 0.46
2015-16 103620.21 247235.75 0.41
2016-17 153274.76 392789.50 0.39
Page 52
2017-18 178179.35 406596.71 0.43
INTERPRETATION:-
The networking capital ratio for the year 2013-14 is 0.79. In 2014-15, it is
decreased to 0.46, where as in 2015-16 it is decreased to 0.41. In 2016-17 it is decreased to
0.39 and in 2017-18 it is increased to 0.43.
This ratio showed stable growth throughout all the years.
11.NETWORING CAPITIAL TURNOVER RATIO:-
This ratio indicates to what extent the networking capital funds have been
employed in the business towards sales. This is calculated as
Sales
NETWORING CAPITIAL TURNOVER RATIO = -----------------------------------
Page 53
Networking Capital
Rs 000’s
NET WORKING
YEAR NET SALES RATIO
CAPITAL
2013-14 110651.24 162650 1.46
2014-15 85601.34 402612 4.70
2015-16 103620.21 376051 3.62
2016-17 153274.76 984066 6.42
2017-18 178179.35 1076038 6.03
INTERPRETATION:-
Page 54
The contribution of networking capital in generating sales revenue is continuously
increasing from 1.46 in 2013-14 to 6.03 in 2017-18.
Working capital turnover showed increasing trend which says that company is using
working capital efficiently to generate sales.
12.CASH TO NETWORKING CAPITAL:-
This ratio indicates the proportion of cash and bank balances maintained by the
company in relation to networking capital. It assumes importance, as the level of cash &
bank balances decides the liquidity and profitability aspects of the company.
The lower the cash to networking capital the greater may be profitability of the
concern and vice – versa.
Cash
Cash to Networking Capital Ratio = ---------------------------- X 100
Networking Capital
Rs 000’s
PARTICULARS 2013-14 2014-15 2015-16 2016-17 2017-18
Cash & Bank

24557.47 32641.34 31957.5 14181.87 43586.10
Balances
Networking Capital 110651.24 85601.34 103620.21 153274.76 178179.35
Cash to Net
Working Capital 22.19 38.13 30.84 9.25 24.46
in %
Page 55
INTERPRETATION:-
The size of cash and bank balances in TNPL from 2013-14 to 2017-18 as a
percentage of networking capital. The bank balances were 22.19% of working capital
during 2013-14, 38.13% in 2014-15, 30.84% in 2015-16, 9.25 in 2016-17 and 24.46 in
2017-18.
Higher ratio indicates company is cash rich and has impact on profitability.
13. CURRENT ASSETS TO TOTAL ASSETS AND CURRENT
ASSETS TO FIXED ASSETS:
Rs 000’s
YEARS CURRENT TOTAL NET CURRENT CURRENT
ASSETS NET FIXED ASSETS ASSETS
ASSETS ASSETS TO TOTAL TO TOTAL
NET FIXED
Page 56
NET
ASSETS
ASSETS
(IN RATIO
(IN RATIO
%)
%)
2013-14
139654.6 110651.24 76468.17 1.26 1.82
2014-15
182390.25 85601.34 72562.55 2.13 2.51
2015-16
247235.75 103620.20 61779.28 2.38 4.00
2016-17
392789.50 153274.75 56496.82 2.56 6.95
2017-18
406596.71 178179.35 50766.79 2.28 8.00
INTERPRETATION:-
The proportion of current assets to total net assets has increased from 1.26% to
2.28% in 2017-18.
The proportion of current assets to net fixed assets has also showed some
trend. It has increased from 1.82% to 8.00%.
Page 57
14.GROSS WORKING CAPTIAL TURNOVER RATIO:-
This ratio shows the number of times gross working capital (i.e., current
assets) is turned over in a stated period. This ratio is calculated as
Sales
GROSS WORKING CAPTIAL TURNOVER RATIO = -------------------------------
Gross Working Capital
Rs 000’s
GROSS
TURNOVER
YEAR WORKING SALES VALUE
RATIO
CAPITAL
2013-14 139654.6 162650.38 1.16
2014-15 182390.25 402611.5 2.20
2015-16 247235.75 376050.69 1.52
2016-17 392789.50 984066.03 2.50
2017-18 406596.71 1076037.65 2.64
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INTERPRETATION:-
The ratio for the year 2013-14 is 1.16, where as in 2014-15 it is increased to 2.20. In
2015-16 it is decreased to 1.52, where as in 2016-17 it is increased to 2.50. In 2017-18 it is
increased to 2.64
Company is using gross working capital efficiently to generate sales.
CHAPTER – 5
FINDINGS
Following are the findings of the study
Page 59
 In all the year except 2013-14, current ratio is less than 2:1. This indicates that the
company’s resources are not invested in productive assets yielding good returns.
This trend also indicates that the company doesn’t have enough current asset to pay
off current liability and company’s liquidity position is not good.
 The Liquid Ratio from 2013 - 2018 is favourable and in line with the general ratio
of 1:1. It gives the short term liquidity position and the company’s ability to honour
the short term obligations.
 In all the year except 2013-14, absolute liquid ratio is less than ideal one. This
showed that company is not maintaining enough cash to pay off current liabilities.
 Inventory turnover ratio showed increasing trend which showed that company’s
inventory is turned over fast. Company’s inventory management is efficient and less
amount of money is tied up in inventory.
 Inventory conversion period is decreased to 37 days. This showed that holding

period of inventory is decreasing year on year. This showed that cost of holding
inventory goes down and inventory is converted into sales very fast.
 Debtors turnover ratio in 2017-18 is increased to 7.84. This is good sign for the
company. This shows that debtors are collected fast. Company is adopting strict
collection policy and quality of debtors is good.
 Average collection period in 2017-18 is decreased to 47 days. This showed that

collection from debtors are done very fast. This could be due to the improvement
the billing procedure.
 Creditors turnover ratio in 2017-18 is increased to 9.51. This showed that firm is
making payment rapidly and enjoyed less credit period. Credit term extended by the
supplier is strict.
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 There is a continuously decreasing the average payment period which is a good sign
& better liquidity position of the firm.
 The contribution of networking capital in generating sales revenue is continuously

increasing from 1.46 in 2013-14 to 6.03 in 2017-18.
 Working capital turnover showed increasing trend which says that company is using
 Cash to net working capital ratio is 24.46 in 2017-18. Higher ratio indicates
company is cash rich and has impact on profitability.
 The proportion of current assets to total net assets has increased from 1.26% to
2.28% in 2017-18.
 The proportion of current assets to net fixed assets has also showed some trend. It
has increased from 1.82% to 8.00%.
 Gross working capital in 2017-18 is increased to 2.64. Company is using gross

CHAPTER - 6
SUGGESTIONS AND CONCLUSION
Following are suggestions;
 The company should improve the current ratio of solvency by raising additional
funds most economically.
Page 61
 The company should reduce financing its financial needs from short term funds as
the short term funds directly affected the profitability of the concern.
 Efforts are to be made to improve the proportions of cash and bank balances in
current assets of the company.
 The working capital can be further increased by utilizing bank borrowings to meet
working capital requirements.
 It is suggested to the company that it should maintain stable inventory by
employing proper inventory controlling techniques.
 The company should improve the proportion of net working capital in current assets
of the company.
 As the company working capital is not satisfactory so in order to increase it’s
working capital, it is suggested to invest more in fixed assets, such as land &
buildings, furniture etc.
CONCLUSION
Taminadu newprint and paper ltd. (TNPL) is maintaining a fairly good level of
liquidity. This happens to be a major problem for most of the companies. The study shows
on various issues to be addressed. The working capital management should be improved
mainly in terms of receivables management and cash management so as to meet its
requirements and avoid unfavorable conditions. The company should introduce adequate
level of policies so that it gets strength to face intense competition, provide adequate
returns to owners, with stands adverse economic conditions and make better use of
favorable conditions.
CHAPTER - 7
BIBLIOGRAPHY
 BOOKS
Page 62
Financial Management Written By M.Y. Khan & P.K. Jain
Financial Management Written By Prasanna Chandra
Financial Management Written By I. M. Pandey
Financial Management Written By S. N. Maheswari
 WEBSITES
www.investopedia.com
www.tnpl.com
Page 63

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ACKNOWLEDGEMENT

I would also like to thank Mrs. _______________________________, my project guide for

Practical training is an important part of the theoretical studies. It is of an immense

trained at Tamil Nadu Newsprint and Papers Limited (TNPL).

is a journey not a destination.

Chapter No. Content Page No.

Financial management means procurement of funds and effective utilization of these

requirement of the firm and secondary for financing fixed assets.

Working capital is the lifeline of every concern. Whether it is manufacturing or non-

the business adversely.

of the changing situations.

increasing problems of adopting seriously the management of working capital. Business

institutions and manufacturing industrial units have been confronting innumerable

difficulties in meeting day-to-day financial needs. Hence effective management of working

capital has become a problem for such organizations and industries.

OBJECTIVES OF THE COMPANY

 To carry on business as newsprint and paper manufacture in all its branches

 To carry on business as manufactures, makers, dealers, importers, exporters and

 To manufacture, buy, sell, exchanging, after improve prepare for market or

 To extend lease finance to contractors, promoters of various servicing industries.

 Attain Leadership in Paper Technology.

 Minimize environmental impact and become an environmental friendly

Major products are:

a. TNPL Ultra while Mapilitho/ Print Vista

b. TNPL Elegant Mapilitho

d. TNPL Offset Printing

g. TNPL Pigment Paper

l. Super print Malipitho

1. Revamping of Steam and Power system (RSPS):

3. On-site Precipitated Calcium Carbonate (PCC) plant

RESEARCH AND DEVELOPMENT

 Production of disease-free and uniform growth character plantlets.

 Development of plant varieties through cellular and molecular techniques in conjunction

DESIGN OF THE STUDY

“Working capital” is often referred to as “life blood” of an organization as it is the money

OBJECTIVES OF THE STUDY

Following are the objectives of the study:

 To evaluate the performance of the company through Inventory, Receivables and

 To analyze the relationship existing between liquidity and profitability.

Research design used was exploratory type.

Data analysis was done with the help of different ratios.

Introduction of Working Capital

WORKING CAPITAL = Current Assets - Current liabilities

WORKING CAPITAL CYCLE

CONCEPT OF WORKING CAPITAL:

2. Networking capital: It is Excess of Current Assets over Current Liabilities.

3. Fixed working capital: Every firm is required to maintain a minimum balance of

TYPES OF WORKING CAPITAL:

1. PERMANENT OR REGULAR WORKING CAPITAL

PERMANENT WORKING CAPITAL:

a). INITIAL WORKING CAPITAL:

b). REGULAR WORKING CAPITAL:

VARIABLE WORKING CAPITAL:

A. Seasonal working capital:

B. Special Working Capital:

 COMPOSITION OF WORKING CAPITAL:

Working capital consists of

List of Current Assets:

List of Current Liabilities:

 OBJECTIVES OF WORKING CAPITAL:

9. Growth and expansion:

10. Level of taxes:

11. Dividend policy: