PREFACE

The M.B.A programme is well structured and integrated course of business studies.
The main objective of summer training at M.B.A level is to develop skill in student by
supplement to the theoretical study of business management in general. Project training helps
to gain real life knowledge about the industrial environment and business practices. The
MBA programme provides student with a fundamental knowledge of business and
organizational functions and activities, as well as an exposure to strategic thinking of
management.

It is only the project through which I come to know that what an industry is and how it works.
I learn about various departmental operations being performed in the industry, which would,
in return, help me in the future when I will enter the practical field.

During this whole training I got a lot of experience and came to know about the
management practices in real that how it differs from those of theoretical knowledge and the
practically in the real life.

In today's globalization world, where cut throat competition is prevailing in the

market, theoretical knowledge is not sufficient. Beside this one need to have practical
knowledge, which would help to individual in his/her carrier activities and it is true that
"Experience is best teacher".
 ACKNOWLEDGEMENT

“Accomplishment of a task with desired success calls for dedication towards work
and prompt guidance, co-operation and deliberation from seniors.”

This report is the outcome of my project that I did at UNIGLASS PVT. LTD.

First of all, I wish to express my profound gratitude and sincere thanks to MR.ROMESH
PRAJAPATI, Manager – Finance for his constant and tireless guidance and encouragement
given during the project and MR.SUDHIR JOGANI- Manager , HR who allowed me to do
project at Uniglass Pvt. Ltd.

It gives me immense pleasure to acknowledge my deep sense of gratitude and sincere

thanks to all staff members of finance department for extending the courtesy and for
guidance, support and affection throughout the course of this work.

I am extremely grateful to MR ________________________, my project guide for his

valuable guidance and glorious teaching.

In last, I express my profound gratefulness and indebtedness to the esteemed organization for
granting me the grand privilege of working on a project under team of experts and
professionals in the field of finance.
 TABLE OF CONTENT

Chapter No. Content Page No.

Executive Summary
1 Design of the study
Introduction of the study
Objective of the study
Research Methodology
Limitations
2 Company Profile
Introduction
Genesys Strength
Product Profile
3 Conceptual Framework of working capital management
Introduction
Meaning of working capital
Constituents of working capital
Types of working capital
Determinants of working capital
Excess or inadequate working capital
Meaning of working capital management
Objectives of working capital management
Steps involved in working capital management
Sources of working capital
4 Working capital management at Genesys Systems Ltd.
5 Findings
6 Suggestions
7 Bibliography
 EXECUTIVE SUMMARY

“Working capital means the part of the total assets of the business that change from one

form to another form in the ordinary course of business operations.”

In a perfect world, there would be no necessity for current assets and liabilities

because there would be no uncertainty, no transaction costs, information search costs,

scheduling costs, or production and technology constraints. The unit cost of production would

not vary with the quantity produced. Borrowing and lending rates shall be same. Capital,

labour, and product market shall be perfectly competitive and would reflect all available

information, thus in such an environment, there would be no advantage for investing in short

term assets. However the world we live is not perfect. It is characterized by considerable

amount of uncertainty regarding the demand, market price, quality and availability of own

products and those of suppliers. There are transaction costs for purchasing or selling goods or

securities. Information is costly to obtain and is not equally distributed.

There are spreads between the borrowings and lending rates for investments

and financings of equal risks. Similarly each organization is faced with its own limits on the

production capacity and technologies it can employ there are fixed as well as variable costs

associated with production goods. In other words, the markets in which real firm operated are

not perfectly competitive. These real world circumstances introduce problem’s which require

the necessity of maintaining working capital. For example,, an organization may be faced

with an uncertainty regarding availability of sufficient quantity of crucial imputes in future at

reasonable price. This may necessitate the holding of inventory, current assets. Similarly an

organization may be faced with an uncertainty regarding the level of its future cash flows and

insufficient amount of cash may incur substantial costs. This may necessitate the holding of

reserve of short term marketable securities, again a short term capital asset. In corporate
 financial management, the term Working capital management” (net) represents the excess of

current assets over current liabilities.

Working capital may be regarded as the life blood of business. Working capital

is of major importance to internal and external analysis because of its close relationship with

the current day-to-day operations of a business. Every business needs funds for two purposes

 Long term funds are required to create production facilities through purchase of fixed

assets such as plants, machineries, lands, buildings & etc

 Short term funds are required for the purchase of raw materials, payment of wages,

and other day-to-day expenses. It is otherwise known as revolving or circulating capital

The project is “WORKING CAPITAL MANAGEMENT OF UNIGLASS PVT. LTD.” The

main objective of the study is to find out the soundness, liquidity and profitability of the
company.

The study is formulated by the research design for analyzing the profitability,
soundness and liquidity of the company.

The research design used for this study is analytical research design. Secondary data
is collected from journals, magazines, reports and books.

The statistical tool for the study is ratio analysis. Graphs are also used for the
diagrammatic representation of the interpretation. The study was mainly based on the annual
reports of Uniglass Pvt. Ltd.

CHAPTER -1
DESIGN OF THE STUDY

INTRODUCTION OF THE STUDY

Working capital may be regarded as the life blood of business. Working capital is of major

importance to internal and external analysis because of its close relationship with the current

day-to-day operations of a business. Every business needs funds for two purpose. There are

spreads between the borrowings and lending rates for investments and financings of equal

risks. Similarly each organization is faced with its own limits on the production capacity and

technologies it can employ there are fixed as well as variable costs associated with production

goods. In other words, the markets in which real firm operated are not perfectly competitive.

These real world circumstances introduce problem’s which require the necessity of

maintaining working capital. For example, an organization may be faced with an uncertainty

regarding availability of sufficient quantity of crucial imputes in future at reasonable price.

This may necessitate the holding of inventory, current assets. Similarly an organization may

be faced with an uncertainty regarding the level of its future cash flows and insufficient

amount of cash may incur substantial costs. This may necessitate the holding of reserve of

short term marketable securities, again a short term capital asset. In corporate financial

management, the term Working capital management” (net) represents the excess of current

assets over current liabilities.

OBJECTIVES OF THE SUTDY

 To understand the working capital management of Uniglass Pvt. Ltd.

 To calculate various ratios relating to working capital.
 To study the liquidity position of the organization by analyzing the important
components of working capital
 To understand the various problems faced by the company and the industry as a
whole in proper implementation of working capital management. The necessary
precaution if possible to undertaken to prevent and control them
 To suggest the steps to be taken to increase the efficiency in management of
working capital.
RESEARCH METHEDOLOGY

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic
behind them. It is important for research to know not only the research method but also know
methodology. ”The procedures by which researcher go about their work of describing,
explaining and predicting phenomenon are called 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 will be Exploratory type.

TYPE OF DATA COLLECTED

There are two types of data collection methods available.

1) Primary data

The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature. Primary data was collected through personal interview of head of
account department, head of SQC department and other concerned staff member of finance
department and observation of working of finance department.

2) Secondary data collection method

The secondary data are those which have already collected and stored. Secondary data
also made available through trade magazines, balance sheets, books, newspapers and journals
and websites etc.

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.
 Only last 5 years data was taken into account.
 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 -2

COMPANY PROFILE
INTRODUCTION

UNIGLASS INDUSTRY is the leading manufacturer of fiber reinforced plastic (FRP)

components. It is serving electrical industry since 1976. Uniglass was founded and is
managed by a team of technocrats ,with more than 35 years of experience in Fiber Reinforced
Plastic (FRP) industries it as a strong track record of quality , innovation and reliability and
major strengths in product development .

Uniglass industry is also serving society using CATIA V5 software in association with
dassault systems, Anga Karunaya Kendra (AKK) and RK foundation designed, fabricate and
disperse free cost of fiber glasses composite artificial limbs, artificial lower limbs are
provided to amputees.

They provide wide variety of cylinders and laminated sheets, rods, tubes and customized
molding.

A BRIEF HISTORY OF UNIGLASS

VISION

We at Uniglass Industries Private Limited strive for continual improvement in business

volumes, methods and processes to make timely supplies of cost-effective fibre reinforced
plastic products to meet specified requirements to ensure customer satisfaction.

PRODUCT RANGE
 A. UNIROD

Epoxy & Polyester bonded glass pultruded rods and profiles:

Spacers for Line Traps

Drive Rods
Rods for composite insulators

Products for switchgears:

 Drive Rods
 Switching bars

 Tension plates

 Operating Rods

 Selector bars for tap changers.

 Studs for lightning arresters

Products for Transformers:

 Duct strips
 Dovetail strips & spacers
 Dog bone profiles
 Hat profiles

B. UNICYL

Epoxy bonded glass filament wound tubes:

Applications:

 Tubes for lightning arrestors

  Fuse bodies (low & medium voltages)

Products for tap changer:

 Selector column
 Switch pillars
 Centering tubes
 OLTC tubes & hollow shafts

C. UNILAM

Epoxy & polyester bonded glass sheets & laminates

 Rectifier boards for motors

 Barriers for circuit breakers

 Shutters for switchgears

 Links for switchgears

Products for transformers

 Terminal boards
 Stepped blocks

 Core support blocks

 Yoke insulation
  Barriers

1. Sheets of 1m x 1.5m area with thickness from 0.3mm up to

75mm.

 Blocks of thickness 150 mm can also be provided

 Ready-to-use components of the desired shapes and profiles as

specified can be provided.

ORGANIZATION CHART

Board of Directors

Management CEO
Representative

Manager
Dy. Manger Finance
Production
Dy. Manager tech Dy. Manager
Admn

Asst Mgr Asst. Asst

Mktg Manager manager
Engg QA

Sr. executive Stores

sales officer
Foremen
Engg
 Inspectors &
Engr. Tech Engrs
Clerks Clerks Clerks
Services

Groups Leaders Stores Asst

Workers

CUSTOMERS
CHAPTER -3

CONCEPTUAL FRAMEWORK OF WORKING CAPITAL MANAGEMENT

Introduction

“More business fails for lack of cash than for want of profit…

Efficient management of working capital is one of the pre-conditions for the success
of an enterprise. Efficient management of working capital means management of various
components of working capital in such a way that an adequate amount of working capital is
maintained for smooth running of a firm and for fulfillment of twin objectives of liquidity
and profitability.

While inadequate amount of working capital impairs the firm’s liquidity, holding of excess
working capital results in the reduction of the profitability. But the proper estimation of
working capital actually required, is a difficult task for the management because the amount
of working capital varies across firms over the periods depending upon the nature of
business, production cycle, credit policy, availability of raw material, etc.

Thus efficient management of working capital is an important indicator of sound health of an

organization which requires reduction of unnecessary blocking of capital in order to bring
down the cost of financing.

 Meaning of Working Capital:

Working capital is the amount of capital that a business has available to meet the day to- day
cash requirements of its operations, or more specially, for financing the conversion of raw
material into finished goods, which the company sells for payment. Funds are also needed for
short-term purposes for the purpose of raw materials, payment of wages and other day-to-day
expenses, etc. These funds are known as working capital.

In simple words, working capital refers to that part of the firm’s capital, which is
required for financing short-term or current assets such as cash, marketable securities, debtors
and inventories.

Working capital is a valuation metric that is calculated as current assets minus current
liabilities. Working capital is also known as operating capital.

 Constituents of working capital

Current Assets
This is any cash or assets that can be quickly turned into cash. Current assets
are assets, which can be converted into cash within an accounting year.

Constituents of Current Assets:

• Cash in hand and bank balance

• bills receivables
• Sundry debtors (provision for bad debts)
• Short term loans and advances
• Inventories of stocks.
• Raw material.
• Work in progress.
• Stores and spares.
• Finished goods.
• Prepaid expenses.
• Accrual incomes.etc
Current Liabilities

Current liabilities are those claims of outsiders, which are expected to mature for payment
within an accounting year.

Constituents of current Liabilities:

• Bills payable
• Sundry creditors or account payable
• Short term borrowings
• Dividend payable
• Bank overdraft
• Provisions
• Outstanding expenses
• Unaccrued income

 TYPE OF WORKING CAPITAL

 a. On the basis of concept

1. Gross working capital: The gross working capital refers to the firm’s investment in all the
assets taken together. The total of investment in all the individual current assets is the gross
working capital.
For example: if a firm has a cash balance of Rs. 50,000 ,debtors of Rs.70,000 and inventory
of raw material and finished goods has been assessed at Rs.1,00,000,then the gross working
capital of the firm is Rs.2,20,000 (i.e. ,Rs 50,000+Rs.70,000+Rs.1,00,000).

2. Net working capital: The term net working capital may be defined as the excess of total
current assets over total current liabilities. Current liabilities refer to those liabilities which
are payable within a period of 1 year. The net working capital may either be positive or
negative. If the total current assets are more than total current liabilities, then the difference is
known as positive net working capital, otherwise the difference is known as negative net
working capital. The net working capital measures the firm’s liquidity. The greater the
margin, the better will be the liquidity of the firm.

Net working capital= total current assets – total current liabilities

WORKING CAPITAL
 A financial manager must consider both (gross and net working capital) because
they
provide different interpretation. The gross working capital denotes the total working capital
or the total investment in current assets. This will help avoiding 1.the unnecessarily stoppage
of work or chance of liquidation due to insufficient working capital, and 2.effects on
profitability (over flowing working capital implies cost).The gross working capital also gives
an idea of total funds required for maintaining current assets.
On the other hand, net working capital refers to the amount of funds that must be
invested by firm, more or less, regularly in current assets. The net working capital also
denotes the net liquidity being maintained by the firm.

b. On the basis of time

1. Permanent /fixed working capital: Permanent working capital may be defined as the
minimum level of current assets, which is required by a firm to carry on its business
operations. Every firm has to maintain a minimum level of raw materials, work-in-progress,
finished goods and cash balances.
For example-extra inventory of finished goods will have to be maintained to support the peak
periods of sale. Permanent working capital is permanently needed for the business and
therefore, it should be financed out of long term funds.
2. Fluctuating /variable working capital: It is the extra working capital needed to support
the changing production and sales activities of the firm. The amount of temporary working
capital keeps on fluctuating on time to time on the basis of business activity. Both kind of
working capital – permanent and fluctuating (temporary) are necessary to facilitate
production and sales through the operating cycle. The amount over and above permanent
working capital is temporarily variable or fluctuating.

 Determinants of working capital:

Working capital requirements of a concern depends on a number of factors, each of

which should be considered carefully for determining the proper amount of working capital.
It may be however be added that these factors affect differently to the different units and
these keeps varying from time to time. In general, the determinants of working capital which
are common to all organization’s can be summarized as under:
 Nature of business

The working capital requirement depends upon the nature of business carried on by the

organization. In a manufacturing firm the requirement is generally high, but it also

depends on the type and nature of the product. The proportion of current asset to total

assets measures the relative requirements of working capital of various industries.

 Manufacturing cycle

Time span required for the conversion of raw materials into finished goods is a block

period. The period in reality extends a little before and after the work-in-progress. The

manufacturing cycle and the fund requirements vary in direct proportion. The funds

blocked in manufacturing cycle vary from industry to industry. Further, even within the

same group of industries, the operating cycle may be different due to technological

considerations.

 Business cycle

Business fluctuations lead to cyclic and seasonal changes which, in turn, cause a shift in

working capital position particularly for working capital requirement. The variations in

business conditions may be in two directions:

(i) Upward phase when boom conditions prevail, and, (ii) downswing phase when

economic activity is marked by a decline. During the upswing of business activity, the

need for working capital is likely to grow and during the downswing phase the working

capital requirement is likely to be less. The decline in economy is associated with a fall in

the volume of sales which, in turn, leads to a fall in the level of inventories and book

debts.

 Seasonal variation
Variation apart, seasonality factor creates production or even shortage problem. This is

the reason as to why manufacturing concerns producing seasonal products purchase their

raw material throughout the year and carry on the manufacturing activity. For example;

Woolen garments have a demand during winter. But the manufacturing operation for the

same has to be conducted during the whole year resulting in working capital blockage

during off-season.

 Production policy

While working capital requirements vary because of seasonal factors, the impact can be

minimized by suitably gearing the production schedule. There are two choices- either the

production is periodically adjusted to meet the seasonal requirements or a steady level of

production is maintained throughout, consequently allowing the inventories to build up in

the off-season.

 Scale of operations:

Operational level determines the working capital demand during a particular period.

Higher the scale, higher will be the need for working capital. However, pace of sales

turnover is another factor. Quick turnover calls for lesser investment for inventory while

low turnover rate necessitates larger investments.

 Credit policy

The credit policy influences the requirement of working capital in two ways:

(i) Through credit terms granted by the firm to its customers/buyers of goods.
 (ii) Credit terms available to the firm from its creditors.

 Growth and expansion

It is, of course difficult to determine precisely the relationship between the growth and

volume of business and the increase in working capital. The composition of working

capital also shifts with economic circumstances and corporate practices. However, it is to

be noted that the need for increased working capital funds does not follow the growth in

business activity but precedes it.

 Dividend policy

The payment of dividend consumes cash resources and, thereby, effects working capital

to that extent. However, if the firm does not pay dividend but retains the profit, working

capital increases. There are wide variations in industry practices as regards the inter

relationship between working capital requirement and dividend payment. In some cases,

shortage of working capital is sometimes a powerful reason for reducing or even skipping

dividends in cash(resolved by payment of bonus shares).

 Depreciation policy

There is an indirect effect of depreciation policy on working capital. Enhanced rates of

depreciation lower the profits and tax liability and, thus, more cash profits. Higher

depreciation means lower disposable profits and a smaller dividend payment. Thus cash is

preserved. If the current capital expenditure falls short of the depreciation provision, the

working capital position is strengthened and there may be no need for short-term

borrowing. If the current capital expenditure exceeds the depreciation provision, either
 outside borrowing will have to be resorted to or a restriction on dividend payment

coupled with retention of profits will have to be adopted to prevent working capital

position from being adversely affected.

 Price level changes

Rising prices necessitate the use of more funds for maintaining an existing level of

activity. However, the implications of rising price levels on working capital position may

vary from company to company depending on the nature of its operation, its standing in

the market and other relevant considerations.

 Operating efficiency

The efficient utilization of resources by eliminating waste, improved coordination and full

utilization of existing resources would increase the operating efficiency. Efficiency of

operations accelerates the pace of cash cycle and improve the working capital turnover. It

releases the pressure on working capital by improving profitability and improving the

internal generation of funds.

EXCESS OR INADEQUATE WRKING CAPITAL

Every business concern should have adequate amount of working capital to run its

business operations. It should have neither redundant or excess working capital nor

inadequate nor shortages of working capital. Both excess as well as short working capital

positions are bad for any business. However, it is the inadequate working capital which is

more dangerous from the point of view of the firm.

Disadvantages of redundant or excessive Working Capital:

 Excessive working capital means ideal funds which earn no profit for the firm and

business cannot earn the required rate of return on its investments.

 Redundant working capital leads to unnecessary purchasing and accumulation of

inventories.

 Excessive working capital implies excessive debtors and defective credit policy which

causes higher incidence of bad debts.

 It may reduce the overall efficiency of the business.

 If a firm is having excessive working capital then the relations with banks and other

financial institution may not be maintained.

 Due to lower rate of return on investments, the values of shares may also fall.

 The redundant working capital gives rise to speculative transactions.

For studying the need of working capital in a business, one has to study the business under

varying circumstances such as a new concern requires a lot of funds to meet its initial

requirements such as promotion and formation etc. These expenses are called preliminary

expenses and are capitalized. The amount needed for working capital depends upon the size

of the company and ambitions of its promoters. Greater the size of the business unit,

generally larger will be the requirements of the working capital. The requirement of the

working capital goes on increasing with the growth and expensing of the business till it gains

maturity. At maturity the amount of working capital required is called normal working

capital.
  Meaning of working capital management

Working Capital Management is concerned with the problems that arise in attempting to
manage the Current Assets, Current Liabilities and the inter-relationship that exists between
them. Working Capital Management means the deployment of current assets and current
liabilities efficiently so as to maximize short-term liquidity. Working capital management
entails short term decisions - generally, relating to the next one year periods - which are
"reversible"

 Objectives of Working Capital Management

I. Deciding Optimum Level of Investment in various WC Assets

II. Decide Optimal Mix of Short Term and Long Term Capital

III. Decide Appropriate means of Short Term Financing

 Steps involved in working capital management

I. Forecasting the Amount of Working Capital

II. Determining the Sources of Working

I Forecasting /Estimation of Working Capital Management Requirement Factors

to be considered:

• Total costs incurred on materials, wages and overheads. The length of time for which raw
materials remain in stores before they are issued to production.
• The length of the production cycle or WIP, i.e., the time taken for conversion of raw
material into finished goods.
• The length of the sales cycle during which finished goods are to be kept waiting for sales.
• The average period of credit allowed to customers.
• The amount of cash required to pay day to day expenses of the business.
• The amount of cash required for advance payments if any.
• The average period of credit to be allowed by suppliers.
• Time – lag in the payment of wages and other overheads

OPERTING CYCLE
The working capital requirement of a firm depends, to a great extent upon the
operating cycle of the firm. The operating cycle may be defined as the time duration starting
from the procurement of goods or raw material and ending with the sales of realization. The
length and nature of the operating cycle may differ from one firm to another depending upon
the size and nature of the firm. In a trading concern, there is a series of activities starting from
procurement of goods (saleable goods) and ending with the realization of sales revenue (at
the time of sale itself in the case of cash sales and at the time of debtors realization in case of
credit sales).similarly in case of manufacturing concern, this series starts from the
procurement of raw materials and ending with the sales realization of finished goods. In both
the cases, however, there is a time gap between the happening of the first event and the
happening of the last event. This time gap is called the operating cycle.
Thus, the operating cycle of a firm consists of the time required for the
completion of the chronological sequences of some or all of the following:

1. Procurement of raw material and services.

2. Conversion of raw material into work-in-progress.
3. Conversion of work-in-progress into finished goods.
4. Sale of finished goods (cash or credit)
5. Conversion of receivable into cash.
Operating cycle period

The length or time duration of the operating cycle of any firm can be defined as the sum
of its inventory conversion period and the receivable conversion period.
1. Inventory conversion period:
It is the time required for the conversion of raw material into finished goods sales. In a
manufacturing firm the inventory conversion period is consisting of raw material conversion
period (RMCP), work-in-progress conversion period (WPCP) and finished goods conversion
period (FGCP).

Raw material conversion period refers to the period for which the raw material is generally
kept in stores before it is issued to the production department.
The work-in-progress conversion period (WPCP) refers to the period for which the raw
material remains in the production process before it is taken out as finished units.

The finished goods conversion period refers to the period for which finished units remains
in stores before being sold a customer.

2. Receivable conversion period (RCP):

It is the time required to convert the credit sales into cash realization. It refers to the
period between the occurrence of credit sales and collection from debtors. The total of
Inventory conversion period (ICP) and Receivable conversion period (RCP) is also known as
total operating cycle period (TOCP).The firm might be getting some credit facilities from
supplier of raw material, wages earners etc. This period for which the payment to these
parties are deferred or delayed is known as deferred period (DP).the net operating cycle
(NOC) of the firm is arrived at by deducting the DP from TOCP.
NOC =TOCP-DP
=ICP+RCP-DP
For calculating total operating cycle period (TOCP) and net operating cycle (NOC),
the following formula is being used:

RMCP = Average Raw material stock × 365

Total Raw material consumption

WPCP= Average Work-in-progress × 365

Total cost of production

FGCP= Average Finished Goods × 365

Total Cost of goods sold

RCP= Average Receivable × 365

Total Credit sales

DP= Average Creditors × 365

Total Credit purchase

II SOURCES OF WORKING CAPITAL

The company can choose to finance its current assets by

1. Long term sources
2. Short term sources
3. A combination of them.
 a. Long term sources of permanent working capital include equity and preference
shares, retained earnings, debentures and other long term debts from public deposits
and financial institution. The long term working capital needs should meet through
long term means of financing. Financing through long term means provides stability,
reduces risk or payment. And increases liquidity of the business concern. Various
types of long term sources of working capital are summarized as follow:

1. Issue of shares:
It is the primary and most important sources of regular or permanent working capital.
Issuing equity shares as it does not create and burden on the income of the concern. Nor the
concern is obliged to refund capital should preferably raise permanent working capital.

2. Retained earnings:
Retain earning accumulated profits are a permanent sources of regular working
capital. It is regular and cheapest. It creates not charge on future profits of the enterprises.
3. Issue of debentures:
It creates a fixed charge on future earnings of the company. Company is obliged to
pay interest. Management should make wise choice in procuring funds by issue of
debentures.
4. Long term debt:
Company can raise fund from accepting public deposits, debts from financial
institutution like banks, corporations etc. the cost is higher than the other financial tools.

5. Other sources:
Sale of idle fixed assets, securities received from employees and customers are
examples of other sources of finance.

b. Short term sources of temporary working capital

Temporary working capital is required to meet the day to day business
expenditures. The variable working capital would finance from short term sources of funds.
And only the period needed. It has the benefits of, low cost and establishes closer
relationships with banker. Some sources of temporary working capital are given below:
1. Commercial bank:
A commercial bank constitutes significant sources for short term or temporary working
capital. This will be in the form of short term loans, cash credit, and overdraft and though
discounting the bills of exchanges.
2. Public deposits:
Most of the companies in recent years depend on this source to meet their short term
working capital requirements ranging from six month to three years.

3. Various credits:
Trade credit, business credit papers and customer credit are other sources of short
term working capital. Credit from suppliers, advances from customers, bills of exchanges, etc
helps to raise temporary working capital.

4. Reserves and other funds:

Various funds of the company like depreciation fund. Provision for tax and other
provisions kept with the company can be used as temporary working capital.The company
should meet its working capital needs through both long term and short term funds. It will be
appropriate to meet at least 2/3 of the permanent working capital equipments form long term
sources, whereas the variables working capital should be financed from short term sources.
The working capital financing mix should be designed in such a way that the overall cost of
working capital is the lowest, and the funds are available on time and for the period they are
really required.

SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following-
1. Existing cash reserves
2. Profits (when you secure it as cash)
3. Payables (credit from suppliers)
4. New equity or loans from shareholder
5. Bank overdrafts line of credit
6. Long term loans
If we have insufficient working capital and try to increase sales, we can easily
over stretch the financial resources of the business. This is called overtrading. Early warning
signs include

1. Pressure on existing cash

2. Exceptional cash generating activities. offering high discounts for clear cash payment
3. Bank overdraft exceeds authorized limit
4. Seeking greater overdrafts or lines of credit
5. Part paying suppliers or there creditor.
6. Management pre occupation with surviving rather than managing.
CHAPTER -4
WORKING CAPITAL MANAGEMENT OF UNIGLASS PVT. LTD.

1. Current Ratio

TABLE – 1

Rs. in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

CURRENT 1633078 2106400 2770400 3690107 4293481
ASSETS
CURRENT 1032002 1442000 2002230 2833290 3244172
LIABILITIES
CURRENT RATIO 1.58 1.46 1.38 1.30 1.32

INTERPRETATION
 Current ratio during the year 2013-2014 was 1.58 and it came down in 1.46 at 2014-2015
and its again decreased 2015–2016 and 2016-17 and it slightly increased in 1.32 at 2017-18. The
standard norm for this ratio is 2:1 required.

We can say that company’s current ratio is less than 2:1 in all the years. So company doesn’t have
enough current assets to pay current liabilities. Overall we can say that company’s liquidity position is
not good.

2. Quick Ratio

TABLE –2

Rs. in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

LIQUID ASSETS 1258640 1684600 2216978 2906405 3369935

LIQUID LIABILITIES 1032002 1442000 2002230 2833290 3244172

LIQUID RATIO 1.22 1.17 1.10 1.03 1.04

INTERPRETATION

The quick ratio in the year 201-2014 was 1.22 and its decreased 0.04% at 2014- 15 (1.17) and
in 2015-2016 get decreased 0.06% (1.10) and 2016-2017 get decreased 0.063% (1.03) and its get
increase in slightly on 2017-2018 at 0.001%(1.04). The standard norm for this ratio is 1:1, means for
every 1 rupee of current liability, company must have 1 rupee of quick assets.
In all years quick ratio is greater than 1:1. We can say that company has enough quick assets to pay
current liabilities. Firm is liquid and it has ability to pay off its current obligations.

3. CASH RATIO

TABLE – 3

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

CASH 413398 580900 838600 1031467 979008

 CURRENT 1032002 1442000 2002230 2833290 3244172
LIABILITIES

CASH RATIO 0.40 0.40 0.42 0.36 0.30

INTERPRETATION

The Cash ratio of the Co. in the 2013-2018 was fluctuating. In 2017-2018 it was 0.30 times
and in 2013-2014 it was 0.40 times and 2015-2016 it was increased to 0.42.

The standard norms of absolute quick ratio are 0.5:1. From the above table the firm
does not maintain the sufficient level of quick assets because of the day-to-day expenses .It is
fluctuating between the standard norms for this ratio is 1:2 means for every 2 rupees of
current Liabilities, Company must have 1 rupee of cash and bank balance and marketable
securities.

In all the year company’s cash ratio is less than 0.5:1. This means that company is not having enough
cash to pay off current liabilities. Co. might have faced the difficulty of short liquidity in terms of
cash. So it has to maintain its cash resources effectively in order to cover its current liabilities.
4. DEBTORS TURNOVER RATIO: -

Debtors constitute an important constituent of current assets and therefore the quality of
the debtors to a great extent determines a firm’s liquidity. It shows how quickly receivables or
debtors are converted into cash. In other words, the DTR is a test of the liquidity of the debtors of a
firm. The liquidity of firm’s receivables can be examined in two ways they are DTR and Average
Collection Period. The higher the ratio, the better it is, since it would indicate that debts are being
collected promptly.

TABLE –4

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

TOTAL SALES 1337403 1723753 1930464 2621233 3286144

DEBTORS 716806 969582 1197487 1597550 2068875

DEBTOR
TURNOVER 1.78 1.61 1.64 1.59
1.87
RATIO
INTERPRETATION

In the year 2017 - 2018 the debtor’s turnover ratio is 1.59 comparing to the previous year, it
came downwards. In the year 2013-14, DTR is the highest i.e. 1.87 and it shows decreasing trend up
to the year 2015-16 and came down to 1.61. It slightly increased to 1.64 in 2016-17. And again came
down to 1.59 in 2017-18. This ratio shows decreasing trend this shows that firm is taking time to
collect its debtors. Firm’s collection policy is liberal or quality of the debtors might not be good. Firm
has to maintain strict payment collection policy to have higher debtors turnover ratio.

5. DEBT COLLECTION PERIOD

Debtor’s collection period is nothing but the period required to collect the money from the
customers after the credit sales. A speed collection reduces the length of operating cycle and vice
versa.

TABLE – 5
 Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

DAYS 365 365 365 365 365

DEBT
TURNOVER 1.87 1.78 1.61 1.64 1.59
RATIO
DEBT
COLLECTION
195 205 227 223 230
PERIOD

INTERPRETATION

The debt collection period of the Co. in the 2013-2014 was 195 days and in 2017- 2018 it was
increased to (18%) 230 days. Standard Debt Collection Period of a firm is less than 90 days.

Compared to 2013-14, debt collection period has increased in 2017-18. This shows that debtors are
not converted into sales rapidly. Company is not focusing much on collecting payment from debtors.
There should be strict follow up of collection of payment.
6. CREDITORS TURNOVER RATIO

TABLE – 6

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

CREDIT PURCHASE 709940 1018186 1182087 1762005 2067232

SUPPLIERS / CREDITORS 280409 353895 442400 585285 757980

CREDITORS TURNOVER
2.53 2.88 2.67 3.01 2.73
RATIO

INTERPRETATION

The Creditors turnover ratio of the Co. was fluctuating during the year 2013 – 2018. It was
2.53 in the year 2013-14 and then goes up to 2.88 in the year 2014-15. It goes down in 2015-16 to
2.67 and again goes up in 2016-17 to 3.01 and reduced to 2.73 in the year 2017-18. This shows that
firm is making delay in paying to its creditor and enjoying more credit period. This is good sign for the
firm.
 7. CASH TO CURRENT ASSETS RATIO

TABLE –7

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

CASH 413398 580900 838600 1031467 979008

CURRENT 1633078 2106400 2770400 3690107 4293481

ASSETS

CAS TO
CURRENT 0.25 0.27 0.30 0.28 0.23
ASSETS RATIO

INTERPRETATION
 The Cash to current assets ratio is 0.25 for the year 2013-14 and goes up in the year 2015-16
to 0.3. It shows decreasing trend and reduced to 0.23 in the year 2017-18. This shows that portion of
cash to current has reduced in the year 2017-18. Company should maintain enough cash balance.

8. CASH TURNOVER RATIO

TABLE –8

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

SALES 1337403 1723753 1930464 2621233 3286144

CASH 413398 580891 838602 1031467 979008

CASH
TURNOVER 3.24 2.97 2.31 2.54 3.36
RATIO
INTERPRETATION

The cash turnover ratio in the years 2013-2018 was fluctuating. In the year 2013-14, it is 3.24
and shows decreasing trend up to 2015-16. Again it shows increasing trend up to the year 2017-18
and reached up to 3.36.

As this ratio shows increasing trend it shows firm is efficiently use its cash for generation of sales
revenue.

9. INVENTORY TURNOVER RATIO

Inventory turnover ratio indicates the efficiency of the firm in producing and selling its
products. It is calculated by dividing the cost of goods sold by the average inventory. The average
inventory is the average of open and closing balance of inventory.

TABLE –9

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

SALES 1337403 1723753 1930464 2621233 3286144

INVENTORY 374437 421767 573640 783702 923546

INVENTORYTUR
3.57 4.09 3.37 3.34 3.56
NOVER RATIO
INTERPRETATION

Inventory turnover ratio for the year 2013-14 is 3.57. It increased to 4.09 in the year
2014-15. Again it decreased to 3.37 in the year 2015-16 and again decreased to 3.34 in the year
2016-17. It shows increasing trend and touched to 3.56 in the year 2017-18.

This ratio shows how quick inventory is converted into sales. As this shows increasing trend, we can
say that inventory is converted into sales quickly and less amount of money is tied up in inventory.
Firm’s inventory management is efficient.

10. INVENTORY HOLDING PERIOD

TABLE –10

INVENTORY HOLDING PERIOD

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

DAYS / MONTH
365 365 365 365 365
IN YEAR
 INVENTORY
TURNOVER 3.57 4.09 3.37 3.34 3.56
RATIO

INVENTORYHOL
102 89 108 109 103
DING PERIOD

INTERPRETATION

Inventory holding period for the year 2013-14 is 102 days and reduced to 89 days in the
year 2014-15. Again it goes up to 108 days in the year 2015-16 and 103 days in 2017-18. This shows
that firm need to hold inventory for less days and inventory is converted into sales very fast.

11. WORKING CAPITAL TURNOVER RATIO

 TABLE-11

Rs in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

SALES 1337403 1723753 1930464 2621233 3286144

NET WORKING
601076 664286 788388 856817 1049309
CAPITAL

WORKING
CAPITAL
2.23 2.59 2.45 3.06 3.13
TURNOVER
RATIO

INTERPRETATION

Working capital turnover ratio for the year 2017 - 2018 was 3.13 times. It is higher when comparing
the past four years. Working capital turnover ratio shows increasing trend. This means firm is using
its working capital efficiently to generate sales. We can say that firm’s working capital management
is good.
 TABLE –12

WORKING CAPITAL FOR TREND ANALYSIS

Rs. in Thousands

YEAR 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

CURRENT
1633078 2106297 2770472 3690107 4293481
ASSETS
CURRENT
1032002 1442011 1982084 2833290 3244172
LIABILITIES
WORKING
CAPITAL
601076 664286 788388 856817 1049309
INTERPRETATION

In this current asset is increasing during the period of study. Current liability is also increased
during the period of study. And working capital is also increased.

TABLE –13

ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL

CURRENT ASSETS

Rs in Thousand

Particulars 2013 2014- 2015- 2016-17 2017-

-2014 2015 2016 18

Inventories 22.93 20.03 20.71 21.24 21.52

Sundry debtors
43.90 46.03 43.22 43.29 48.18
C& B balance
25.30 27.58 30.27 27.95 22.80
Other assets
Loans and advances 0.52 0.95 1.52 0.95 0.95

7.35 5.41 4.28 6.57 6.55

Total 100 100 100 100 100

INTERPRETATION

In this period 2013 – 2018 Sundry debtors and other current assets was only maintained in
stable for the period of study. Uniglass Pvt. Ltd. must take extra care about cash and bank balance in
future. In the period of 2015-2018 inventory ratios are in increasing trend. All about Co. should be
very careful and must maintain in adequate current assets in future.
 INVENTORY

SUNDRY DEBTORS
CASH AND BANK BALANCES

OTHER CURRENT ASSETS

LOANS AND ADVANCES

 1. GROSS PROFIT RATIO:
Gross profit margin shows the company can return income at the gross level. This
ratio helps to control inventory usage and production performance and fixing unit price of goods.

TABLE – 14

Rs in Thousands

Particulars 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

Gross Profit /
256435 373607 443039 484885 659065
Profit before tax
Total Sales 1337403 1723753 1930464 2621233 3286144
Gross Profit ratio 19.2 21.7 23.0 18.5 20.1
INTERPRETATION

In the analysis of Gross profit ratio Co. must control production expenses in future.
Comparison of 2015-16 to 2016-17 margin profit ratio will goes down in 2 %. Firm should control
production cost in next coming years, such as raw material, freight and transport expenses.
Otherwise, Co. must increase sales unit price.

2. NET PROFIT RATIO:

As every business is to earn profit, this ratio is very important because it measures the
profitability of sales. A business may yield high gross income but low net income because of
increasing operating and non-operating expenses. This situation can easily be detected by calculating
this ratio.

The profits used for this purpose may be profits after/before tax. To obtain this ratio, the
figure of net profits after tax is divided by the figure of net profits after tax is divided by the figure of
sales the ratio is also known as sales margin as we can ascertain with its help the margin which the
sales leave later deducting all the expenses. The unit of expression is percentage, as is the case with
profitability ratios.

TABLE – 15

Rs in Thousands

Particulars 2013 -2014 2014-2015 2015-2016 2016-17 2017-18

Net Profit /
167916 241470 285934 313821 431064
Profit after tax
Net Sales 1337403 1723753 1930464 2621233 3286144
Net Profit ratio 12.6 14.0 14.8 12.0 13.1
INTERPRETATION

In this period of research of study, Net profit of the Co. goes downwards from 2016 – 2018
comparing previous year achievements.

TREND ANALYSIS

2013 -2014 2014-2015 2015-2016 2016-17 2017-18

Particulars

Current Assets :

Inventories / Stock 100 112.64 153.20 209.30 246.65

Debtors
100 135.26 167.06 222.87 288.62

Cash and Bank Balances

100 140.52 202.86 249.51 236.82

Other Current Assets

100 236.33 498.33 414.45 481.48

Loans & Advances

100 95.08 98.87 201.99 234.50

Current Liabilities :

Liabilities
100 135.08 188.20 265.19 318.17

Provisions
100 166.79 214.54 329.01 292.14

INTERPRETATION
 Above Table Inventory and debtors goes to growth level in all the years. Loans and Advances
and Other Current assets show high level of improvement in all the years. Cash and Bank balances
are fluctuating ratio in the year 2016 – 2018. Current Liabilities are increasing in all the years and
Provisions are fluctuating in the year 2018 compared to previous years.
CHAPTER - 6

FINDINGS

1) Company’s current ratio is less than 2:1 in all the years. So company doesn’t have enough
current assets to pay current liabilities. Overall we can say that company’s liquidity position is
not good.

2) In all years quick ratio is greater than 1:1. We can say that company has enough quick assets
to pay current liabilities. Firm is liquid and it has ability to pay off its current obligations.

3) In all the year company’s cash ratio is less than 0.5:1. This means that company is not having
enough cash to pay off current liabilities. Co. might have faced the difficulty of short liquidity
in terms of cash. So it has to maintain its cash resources effectively in order to cover its
current liabilities.

4) Debtors turnover ratio shows decreasing trend this shows that firm is taking time to collect
its debtors. Firm’s collection policy is liberal or quality of the debtors might not be good.

5) Compared to 2013-14, debt collection period has increased in 2017-18. This shows that
debtors are not converted into sales rapidly. Company is not focusing much on collecting
payment from debtors.

6) Creditors turnover ratio reduced to 2.73 in the year 2017-18. This shows that firm is making
delay in paying to its creditor and enjoying more credit period. This is good sign for the firm.

7) Cash to current assets shows that portion of cash to current has reduced in the year 2017-18.
8) Cash turnover ratio shows increasing trend it shows firm is efficiently use its cash for
generation of sales revenue.

9) Inventory turnover ratio shows increasing trend, we can say that inventory is converted into
sales quickly and less amount of money is tied up in inventory. Firm’s inventory management
is efficient.

10) Inventory holding period is 103 days in 2017-18. This shows that firm need to hold inventory
for less days and inventory is converted into sales very fast.

11) Working capital turnover ratio shows increasing trend. This means firm is using its working
capital efficiently to generate sales.
CHATER - 7

SUGGESTIONS AND CONCLUSION

1) The company depends more on bank borrowings and long term sources of funds for working
capital needs. The working capital required by the company is increasing over years. The
company should try to curtail the unnecessary expenditure in order to reduce the cost of
production and promote high return on sales.

2) As the company’s current ratio is less than the standard ratio, it should increase the current
assets which are in the form of cash, sundry debtors and inventory etc. Company should try
to be more liquid.

3) More than 45% of current assets are blocked in the form of receivables. This is due to giving
credit sales to its customers and maximum portion of sales are in credit terms only. If at all
there is any possibility, the company should reduce the credit sales and receivables holding
period and to bridge the gap between the excess and shortage of working capital.
 4) The inventory position of the company is satisfactory. If the company will increase its stock of
inventory, then it will be more satisfactory in future.

5) The company needs to invest in marketable securities in order to increase its cash ratio.

6) As the company maintaining low cash resources it should try to maintain balance between
debtors and cash. That means it should reduce its debtors and increase cash resources.

CHAPTER - 8

BIBLIOGRAPHY

Books:

 Payday I.M., ”Financial Management, ”7th edition; New Delhi: Vikas Publishing House
Pvt. Ltd; 1995.

 Rustagi R. P.,” Fundamentals of Financial Management, ”3rd edition; New Delhi: Galgotia
Publishing Company; 2002.

 Gupta S.P., “Management Accounting, ”12th edition; Agra: Sahitya Bhawan Publication;
2007.

Annual Report:
  Annual Report of Financial Year 2013-14, 2014-15, 2015-16, and 2016-17 and 2017-18
of Uniglass Pvt. Ltd.

Internet Sources:

 http://www.wikipedia.com

 http://www.workingcapital.com

 http://www.uniglass.com