1.1 OBJECT OF THE PROJECT It is customary that under two year full time course of M.B.A.

degree, a student has to undergo different training programs so as to establish himself capable o f managing at the place of his work after the completion of this degree. Thus pr oject work is an unique way of studying an organization. The main purpose of assigning this task of project report is to keep new practic al knowledge, establishing relations with different persons outside the organiza tion and to obtain first hand and factual information. The project helps to draw out the differences and similarities between the theor etical knowledge with the actual job conditions, this helps the students to pers uade and activate strategy decision-making when they start their carriers. It pr ovides an opportunity to develop communication skill and analytical skills. The project provides the opportunity to understand the working capital requireme nt for a winery. 1.2 SELECTION OF THE TOPIC FOR STUDY One of the most important areas in the day to day management of the firm is the management of the working capital. The analysis of working capital is necessary for all the organization because if an organization maintains a large holding of current assets especially cash, th e risk is reduced but it also reduces the profitability. The importance of working capital management is reflected in the fact that finan cial managers spend a great deal of time in managing current assets and current liabilities. Arranging short term financing, negotiating favorable credit terms, controlling cash movement, managing accounts receivables and monitoring investm ents in inventories consume a great deal of time of financial managers. As the study of working capital can find out the drawbacks of working capital ma nagement of the company by analyzing the previous years working capital. 1.3 OBJECTIVE OF THE STUDY Every study emerges to achieve certain objectives. The main objective of carryin g out this project is to know and gain practical knowledge and to know the organ ization working culture. Following are the important objective of the project: 1 To have comprehensive understanding of Vinsura Wines. 2 To know the present financial position of Vinsura Wines. 3 To know the working capital performance of Vinsura Wines. 4 To examine the financial performance of Vinsura Wines through ratios and statements of changes in working capital. 5 To draw observations based on the study and suggest suitable measures to overcome problems or to improve its performance. 1.4 RESEARCH METHODOLOGY Methodology is the process of collecting the information and helps to fi nd out the solution to the topic selected by the researcher. Where as research h elps to study and find out the techniques with the proper process. It is a syste matic way of presenting information. In order to collect the required information for the project the followi ng methods were adopted: PRIMARY DATA: The concern staff of Vinsura Wines was interviewed personally. The data was coll ected with the purpose of evaluation. Discussion with the finance manager regarding the figure of balance sheet. Collection of information related to working capital from other members of the a ccounts department of the organization.

SECONDARY DATA: Secondary data is provided by the organization. The needed information is collec ted from: Balance sheet of Vinsura Wines 2004-07 Books of accounts of Vinsura Wines 2004-07 Annual reports of Vinsura Wines 2004-07 The present study is aimed at to analyze the working capital analysis of Vinsura Wines, by coving yearly financial data supplied in the companys financial accoun ts. 1.5 SCOPE OF THE STUDY In this project I tried to analysis the working capital of Vinsura Winer y for the last four years from 2004 to 2007. As the part of the study of working capital and its circulation, stateme nt of changes in working capital and ration analysis with its conclusion and int erpretation of working capital with the help of graph has been done. This project is based on last four-year record and these records are use d for comparison for ratio analysis. 1.6 LIMITATIONS OF STUDY This project focuses only on certain factors, which are important to dis cuss. But tool of ratio analysis has certain fundamental and conceptual limitati ons, this project as well. The study is only made on one organization so it does not provide any sc ope of comparison with other organization. The study is based only on last 4-year records. The study is restricted to financial position of the company with on attention g iven to loans and advances and deposit mobilization. While computing ratios, average, percentage, the figures are appropriated to two decimal places. Therefore sometimes the total may not exactly tally. 1.7 RATIONAL OF THE STUDY Education is only a mean to an end and not an end in itself. The ultimate objective of making this project is to develop self reliance, learn ing habit, creating awareness of the special and culture environment developing appropriate communication skills, application of knowledge of project and survey s of these programs. The project also helps to build the skills of analysis. The contribution of the project is to accept as a great opportunity as one can apply the knowledge throu gh project surveys etc. and to study the problem faced by the industry. 2.1 GENERAL INFORMATION Name of an Organization: Address of Corporate Office d, Opp. Telephone Exchange, Nashik 422 001 Maharashtra, India Phone: +91-253-2598555, 3299361 Fax: +91-253-2597555 VINSURA WINES PVT. LTD. CU 3, Vinchur Wine Park, Tal: Niphad, Dist: Nashik Phone: +91 2550 261751/52 Fax: +91 2550 261752 : info@vinsura.com VINSURA WINERY PVT. LTD. VINSURA WINERY PVT. LTD. (Sankalp Winery Pvt. Ltd.) 1, Govind Appt., N. D. Patel Roa

Winery Address

Email

visitvinsura@vinsura.com Website : www.vinsura.com

THE PROMOTERS / MANAGEMENT TEAM OF VINSURA WINES: The promoters and management team of Vinsura Wines consist of the most eminent I ndustrialist, Agriculturist in the State of Maharashtra. The Vinsura team comprises of: 1. Mr. Pralhad S. Khadangale - Chairman 2. Mr. Kishor C. Holkar - Managing Director 3. Mr. Sadashiv K. Nathe - Chief Executive Officer 4. Mr. Sanjay C. Holkar - Director Finance. 5. Dr. Pradeep N. Pawar - Director Public Relations They main participants in the progress of Vinsura Wines. These people are popula r in their circle of business associations. Some details about the premiers of this group: 1. Mr. Pralhad S. Khadangale Chairman: Specializes in Chemistry, one of the foremost agriculturists in initiating expor t of farm produce from the Nashik Valley. Successfully runs a Biotech Company ca lled M/s. Sankalp Biotech Pvt. Ltd. which is reaping rich dividends under his cr itical supervision. A visionary as a whole and willing to take all the necessary steps to make the company the best wine making company in the country. 2. Mr. Kishor C. Holkar - Managing Director: Specializes in Horticulture, one of the most well-known agriculturists in the Na shik Valley. He has gained recognition all over Maharashtra as one of the best u nder standers of the latest irrigation facilities, methods and culture. He striv es to achieve the best quality grapes for the production of wine. Successfully r uns Drip Irrigation business that helps the farmers in the nearby vicinity. 3. Mr. Sadashiv K. Nathe Chief Executive Officer: The management expert in the team of "VINSURA". He brings in the most innovative ideas for the promotion, sale and brand establishment. He is also an agricultur ist who owns Vineyards which produce one of the best quality table & wine grapes . He has interest in Drip Irrigation and has developed his skills in this sector over the last 15 years. His efficiently managed Company called Jaldhara Drip Ir rigation Pvt. Ltd., which has been doing successful business and is well known i n the Nashik Valley as well as all over Maharashtra. He is also the secretary of the Nashik Valley Wine Producers Association. 4. Mr. Sanjay C. Holkar Director Finance: A dynamic personality, well known industrialist and a popular individual who is a participating member in a lot of industrialist groups. Due to his high thinkin g, path breaking views, popular personality he has been successfully doing business in t he fields of export of fruits & vegetables, production of petrochemicals. He has a vision of making a big corporate house that will be self sufficient in all as pects. At present he is the General Manager of a large Co-operative Society "Veg etable & Fruits Co-operative Marketing Society Ltd.", also he is the Chairman an d Managing Director of "Yashoda Agro Mercantile & Processing Company Private Lim ited". These two organizations are striving ahead under his sincere perseverance , and have set high standards for the future. Recently VEFCO has received the "V asantrao Naik Agricultural Export Award 2006-07 presented by the Honorable Agric ultural Minister Shri Sharad Pawar." 5. Dr Mr. Pradeep N. Pawar - Director Public Relations: One of the most promising medical practitioners in the Nashik City. He has contr ibuted to this company with his personal relations skills in both India as well as abroad. His presence in the Board of Directors gives it a different dimension

. He lends the brand name of "VINSURA" the sophistication that is required to su rvive in the international market. With his astounding presence he has been one of the major factors of "VINSURA" reaching the heights it has come to today and is hoped to achieve in the future. EVOLUTION OF BUSINESS SINCE INCORPORATION: It is known to all that India is primarily an agriculturally inclined co untry. The growth of this country has always been measured by the growth that ta kes place in the agricultural sector. Keeping this in mind the promoters with th eir foresight decided to start to produce wine grapes along with table grapes. Their plan was initiated in the year 1997 when the promoters viz. Mr. P S Khadangale, Mr. Kishor C. Holkar, Mr. S K Nathe had gone to France the birth pl ace of wine. There they took keen interest in the wine making process. Once they started to get a grip on the process of wine making it came to their observatio n that this is predominantly a farmer friendly business. For this purpose they imported wine saplings from France, Australia and Californ ia (USA). 1998 Plantation began at the promoters farms in 1998. This was a very tough perio d of two (2) years where the promoters had to wait with bated breath to find out if the crops would turn out to be the types that are found in the Mediterranean regions. 2000 In the month of October 2000, the promoters went to France. This time they h ad a dream of getting their wine accepted by the French. They knew once it was a pproved in France they could get a green signal to start producing more wine gra pes. With a resolve to accept and acknowledge whatever was the outcome of the te sts they got the samples tested in the World famous testing & tasting laboratori es. The laboratories were Station Analogy and the Institute of Analogy, situated in Eperney the capital of Champaign in France. The wine was appreciated by the French and the reports given were favorable. 2001 October 2001 brought with it the good news of the State Government allottin g license to SANKALP WINERY PVT. LTD (VINSURA Wines) The Government set up a Wine Park at Vinchur, Tal: Niphad, Dist: Nashik. This is the first of a kind in the State of Maharashtra and India as well. November 2001 SANKALP WINERY PVT. LTD (VINSURA Wines) started construction of it s plant. 2002 In March 2002 the crushing process was started. The first products made we re Chenin Blanc White Wine & Zinfandel Red Wine. 2003 The advent of sale took place in the year of 2003. Slowly but steadily Vins ura started forming a market for their product. Over the years they have launche d different varieties of Wine that have been readily accepted by the wine lovers in India.

2004 2006 A number of wine were introduced and in December 2006 Champagne was la unched. The products of Vinsura Wines have been appreciated all over the world. Vinsura was the first company to participate in the VINITALY Verona Fair in Apri l 2006. Vinsura Wines have won a number of awards in the wine tasting competitio ns like in "Wine Style Asia 2006" Singapore in November 2006 3 Awards, 1-Silver medal for Chenin Blanc White Wine, and two commendations for Zinfandel & Rose va riety wines. Vinsura has won 4 Awards in "International Symposiums on Grape Prod uction and Processing, Pune, In February 2006. 2.2 ABOUT VINSURA We are a respected Indian wine making company in business from last three years. With a humble beginning with a farming background, the promoters of VINSURA wer e able to come up with the world class wine made from some exotic wine grape var

ieties. It is said that 80% of the wine is produced in the vineyards and if we g o by this norm one can notice that the best wines can only be made by the farmer s worldwide and India is no exception. Today VINSURA is already popular with wine connoisseurs and is also present in l arge parts of India. This success belongs to the quality product and dynamic lea dership of Pralhad Khadangle, Chairman, and VINSURA group. 1. Logo In all green plants, including vines, leaves utilize sun light to combine carbon -dioxide and water to synthesize sugars. This process is known as Photosynthesi s . Thus in vines, leaves function as factories where sun light is converted int o grape sugars or grapes. Hence a properly controlled development of leaves or v ines-canopy can optimize light interception to give quality grapes and quality w ines. As vine leaves play a very fascinating and a crucial role in producing qua lity wines, we selected vine leaf for our logo. It is rightly said that great wi nes are made in the vineyard provided the canopy is efficiently managed or the l eaf is provided due attention. 2. Brand Vinsura literally stands for SURA, of Vinchur, to be pronounced as VINSURA. Vi nchur is a small hamlet adjoining the Wine Park, and SURA in Sanskrit means wine . The pharmacological value of wine is well known since antiquity. Considering t hese two prominent factors, i.e. the location of the winery and the ancient nome nclature of this beverage, we decided to brand our product as VINSURA . 3. Location Located in Vinchur Wine Park, a central part of fertile grape-growing area in Na shik Valley, this is the first winery in the proposed Vinchur Wine-Park. The Win e-Park is situated on Mumbai-Aurangabad highway and it is easily accessible by r ail and road. It is about 4 hours drive from Mumbai and Pune. The world - famous caves of Ajanta and Ellora, near Aurangabad, are about 90 km, from the Wine Par k. It is also equidistant from the Pilgrim City of Nashik and the holy shrine of Shirdi - a distance about 50 km. 4. Region Nashik Valley has been known for growing quality grapes, fruits and flowers for the last ten decades. It is during the last decade that some local enterprising farmers took initiative to reorganize and rearrange their vineyards to produce w ine grapes, as this region provided the right environment for growing quality wi ne grapes. The soil type ranges from well-drained gravely loams to moisture reta ining salty clay. The climate is typically Mediterranean with warm, but not exce ssively hot, days and cool nights. The entire grape growing area in this wine di strict is very well irrigated with excellent network of dams and canals. At pres ent there are more than 30,000 hectares of land under grape cultivation in Nashi k and another 30,000 hectares in the surrounding regions. 5. Vineyards Different varieties of vines spread out over 100 hectare, over slopes, sunny hil lsides and valley floor, within a radius of about 15.km from the winery, constit ute our vineyards. Each vineyard, each plot and each plant is looked after by a qualified Horticulturist. Cabernet Sauvignon, Zinfandel and Syrah varieties of wine grapes are used mainly for Red Wines. Sauvignon Blanc, Chenin Blanc and Symphony are used for White Wi nes. Each Variety of grapes has been carefully selected and grown in the most su itable plot, taking into consideration the macro-climate it needs. Annually our vineyards produce about 840 tons of Quality grapes.

2.3 PRODUCTION PROCESS Flow chart of Wine Making Process

2.4

Products in VINSURAs Portfolio: VINSURA BRUT METHOD CHAMPENOISE (SPARKLING WINE) VINSURA CHENIN BLANC (WHITE WINE) VINSURA SAUVIGNON BLANC (WHITE WINE)) VINSURA FLORA (WHITE WINE) VINSURA ZINFANDEL (RED WINE) VINSURA SHIRAZ (RED WINE) VINSURA ROSE (BLUSH WINE) VINSURA DESSERT (SWEET WINE) VINSURA CABERNET SAUVIGNON SHIRAZ (RED WINE) VINSURA VALENTINO (WHITE WINE) VINSURA VALENTINO (RED WINE)

3.1 INTRDUCTION Working capital management is a significant in financial management due the fact that it plays a pivotal in keeping the wheels of a business enterprise running. Working capital management is concerned with short-term financial decis ions. Lack of efficient and effective utilization of working capital leads to ea rn low rate of return on capital employed or even compels to sustain losses. A firm invests a part of its permanent capital in fixed assets and keeps a part of it for working capital i.e. for meeting day to day requirements. We w ill hardly find a firm which does not require any amount of working capital for its normal operations. The requirement of working capital varies from firm to fi rm depending upon the nature of business, production policy, market conditions, seasonality of operations, conditions of supply etc. Working capital to a company is like the blood to human body. It is the most vital ingredient of a business. Working capital management if carried out e ffectively, efficiently and consistently, will assure the health of an organizat ion. MEANING Working capital is defined as the excess of current assets over current liabilities. Current assets are those assets which will be converted into cash within the cur rent accounting period or within the next year as a result of the ordinary opera tions of the business. They cash or near cash resources. These include: Cash and Bank balances. Receivables. Inventory Raw materials, stores and spares. Work in process. Finished goods. Prepaid expenses. Short term advances. Temporary investments. The value represented by these circulates among several times. Cash is used to b uy raw-materials, to pay wages and to meet other manufacturing expenses. Finishe d goods are produced. These are held as inventories. When these are sold, accoun

ts receivables are created. The collection of accounts receivable brings cash in to the firm. Current liabilities are the debts of the firm that have to be paid during the cu rrent accounting period or within a year. These include: Creditors for goods purchased Outstanding expenses. i.e., expenses due but not paid. Short term borrowings. Advances received against sales. Taxes and dividends payable. Other liabilities maturing within a year. Working capital is also known as circulating capital, fluctuating capital and re volving capital. The magnitude and composition keep on changing continuously in the course of business. Current Assets Current Liabilities = Working Capital 3.2 OBJECTIVE OF WORKING CAPITAL MANAGEMENT. The basic objectives of working capital are as follows: By optimizing the investment in current assets and by reducing the level of curr ent liabilities, the company can reduce the locking-up of funds in working capit al thereby; it can improve the return on capital employed in the business. The company should always be in a positing to meet its current obligations which should properly be supported by the current assets available with the firm. But maintaining excess funds in working capital means locking of funds without retu rns. The firm should manage its current assets in such a way that the marginal return on investment in these assets in not less than the cost of capital employed to finance the current assets. The firm should maintain properly balance between current assets and current lia bilities to enable the firm to meet its day to day financial obligations. 3.3 CLASSIFICATION OF WORKING CAPITAL

GROSS AND NET WORKING CAPITAL Generally the working capital has its significance in two perspectives. These are gross working capital and net working capitals are called balance sheet approach of working capital. Gross Working Capital: The term gross working capital refers to the firms investment in current as sets. The amount of current liabilities is not deducted from the total of curren t assets. The concept of gross working capital is advocated for the following re asons: Profits of the firm are earned by making investment of its funds in fixed and cu rrent assets. This suggests the part of the earning relate to investment in curr ent assets. Therefore, aggregate of current assets should be taken to mean the w orking capital. The management is more concerned with the total current assets as they constitut e the total funds available for operating purposes than from the sources from wh ich the funds come. An increase in the overall investment in the enterprise also brings an increase in the working capital. Net Working Capital: The term Net working capital refers to the excess of current assets over c urrent liabilities. It refers to the difference between current assets and curre nt liabilities. The net working capital is a qualitative concept which indicates the liquidity position of the firm and the extent to which working capital need may be financed by permanent source of funds. The concept looks into the angle

of judicious mix of long-term and short-term funds for financing current assets. A position of net working capital should be financed with permanent sources of funds. PERMANANT & TEMPORARY WORKING CAPITAL Permanent Working Capital: The magnitude of investment in working capital may increase or decrease over a period of time according to the level of production. But, there is a need for minimum level of working capital to carry its business irrespective of chan ge in level of sales or production. Such minimum level of working capital is cal led permanent working capital or fixed working capital. Temporary Working Capital: It is also called as fluctuating working capital. It depends upon the chan ges in production and sales, over and above the permanent working capital. It is the extra working capital needed to support the changing business activities. I t represents additional assets required at different items during the operation of the year. A firm will finance its seasonal and current fluctuations in busine ss operations through short-term debt financing. For example, in peak seasons, more row materials to be purchased, more m anufacturing expenses to be incurred, more funds will be locked in debtors balanc es etc. 3.4 FACTORS AFFECTING WORKING CAPITAL The working capital needs of a firm are affected by numerous factors are as foll ows: a) Nature of Business: In some business organizations, the sales are monthly on cash basis and the operating cycle is also very short. In these concerns, the working capital r equirement is comparatively less. Mostly service giving companies come in the ca tegory. In manufacturing concerns, usually the operating cycle is very long and a firm has to give credit to customers for improving sales. In such cases, the w orking capital requirement is more. b) Production Policy: Working capital requirement also fluctuate according to the production p olicy. Some productions have seasonal demand but in order to eliminate the fluct uations in working capital, the manufacturer plans the production in a steady fl ow throughout the year. This policy will even out the fluctuation in working cap ital. c) Market Conditions: Due to competition in the market, the demands for working capital fluctu ate. In a competitive environment, a business firm has to give liberal credit to customers. Similarly, it has to maintain a large inventory of finished goods to service the customers promptly. In this situation, larger amount of working cap ital will be required. d) Seasonal Fluctuations: A firm which is producing production with seasonal demands requires more working capital during peak seasons while the demand for working capital will go down d uring slack seasons. e) Growth and Expansion Activities: The working capital needs of the firm increase as it grows in terms of s ales or fixed assets. This will in turn increase investment in current assets wh ich will result in increase in working capital needs. f) Operating Efficiency: The operating efficiency of the firm relates to the optimum utilization of resources at minimum cost. The firm will be effectively contributing to its w orking capital if it is efficient in controlling operating costs. The working ca pital is better utilized and cash cycle is reduced which decreases working capit al needs. g) Credit Policy:

The working capital requirements of a firm depend to a great extent on t he credit policy followed by a firm for its debtors. A liberal credit policy fol lowed by firm will result in huge funds blocked in debtors which will enhance th e need for working capital. The need for working capital is also affected by the credit policy followed by the firms creditors. If the creditors are ready to sup ply material and goods on liberal credit, working capital requirements are subst antially reduced. h) Sales Growth: As the sales grow, the working capital needs also go up. Actually it is very difficult to establish an exact proportion of increase in current assets, a s a result of increase in sales. i) Dividend Policy: A company has to pay dividends in cash as per Company Act, 1956. If a li beral policy is followed for payment of dividends, more working capital will be required. The needs for working capital will be substantially reduced if dividen d policy is conservative. 3.5 DISADVANTAGES OF INSUFFICIENT WORKING CAPITAL The disadvantages suffered by a company with negative working capital are as follows: The company is unable to take advantages of new opportunities or adapt to change s. Fixed assets cannot be used effectively in situations of working capital shortag e. The operating plans cannot be achieved and will reduce the profitability of firm . It stagnates the growth of the firm. Employee moral will be lowered due to financial difficulties. The operating inefficiencies will creep into daily activities. Trade discounts are lost. A company with ample working capital is able to financ e large stocks and can, therefore, place large orders. The advantages of being able to offer a credit line to customers are foregone. Financial reputation is lost result in non-cooperation from trade creditors in t imes of difficulty. There may be concerted action by creditors and will apply to court for winding u p. It would be difficult to get adequate working capital finance from banks, financ ial institutions. 3.6 OPERATING CYCLE CONCEPT Working capital is the life blood of any business, without which the fix ed assets are inoperative. Working capital circulates in the business, and the c urrent assets change from one form to the other. Cash is used for procurement of raw materials and stores items and for payment of operating expenses, and then converted into work-in-progress, then to finished goods. When the finished goods are sold on credit terms receivables balances will be formed. When the receivab les are collected, it is again converted into cash. The need for working capital arises because of the time gap between production of goods and their actual rea lization after sales. The time gap is called technically called as operating cycl e or working capital cycle. The operating cycle of a company consists of time perio d between the procurement of inventory and the collection of cash from receivabl es. OPERATIING CYCLE Periods are ascertained as follows: (a) Raw Material Holding Period Average raw material stock Average consumption of raw material/365

(b) Work-In-Process Period Average work-in-process Average cost of goods sold/365 (c) Finished Goods Holding Period Average finished goods stock Average cost of goods sold/365 (d) Receivables Collection Period Average receivables Average sales/365 (e) Creditors Payment Period Average creditors Average purchase of raw material/365 3.7 ESTIMATION PROCESS A firm must estimate in advance as to how much net working capital will be required for the smooth operations f the business. Only then, it can bifurcat e this requirement into permanent working capital and temporary working capital. This bifurcation will help in deciding the financing pattern i.e. how much work ing capital should be financed from long-term sources and how much to be finance d from short-term sources. There are different approaches available to estimate the working capital requirements of a firm as follows: A) Working Capital as a Percentage of Net Sales This approach to estimate the working capital requirement is based on th e fact that the working capital for any firm is directly related to the sales vo lume of that firm. So, the working capital requirement is expressed as a percent age of expected sales for a particular period. B) Working Capital as a Percentage of Total Assets or Fixed Assets This approach of estimation of working capital requirement is base on th e fact that the total assets of a firm are consisting of fixed assets and curren t assets. On the bases of the past experience, a relationship between (i) total current assets i.e. gross working capital ; or net working capital i.e. Current assets Current liabilities, and (ii) total fixed assets or total assets of the f irm is established. C) Working Capital based on Operating Cycle The concept of operating cycle, as discussed in the preceding chapter, h elps determining the time scale over which the current assets are maintained. Th e operating cycle for different components of working capital gives the time for which an asset is maintained, once it is acquired. However, the concept of oper ating cycle does not talk of the fund invested in maintaining these current asse ts. The concept of operating cycle can definitely be used to estimate the workin g capital requirements for any firm. 3.8 CURRENT ASSETS MANAGEMENT CASH MANAGEMENT Cash is the most liquid asset in any business. It is a very crucial asset in the day-to-day operations of a business firm. Cash is the basic input required to r un the business continuously and at the same time it is also the ultimate output expected to be realized by selling the service or product manufactured by the f irm. A firm has to strike a balance between maintaining a very high cash balance and a very small amount of cash balance. If excessive cash balance is maintaine d, the excess cash will remain idle affecting the profitability of the business adversely. On the other hand, if too small amount of cash balance is maintained, it will lead to shortage of cash resulting into disruption of manufacturing ope rations of a business firm. Therefore, the major aspect of cash management is to keep proper cash balance. The term cash with reference to cash management is used in two senses. In a narr ow sense, it is used broadly to cover cash (currency) and generally accepted equ ivalent of cash such as cheques, bank drafts and demand deposits in bank. The br oader view of cash also includes near cash assets such a marketable securities and time deposits in bank. The main characteristic of these assets is that they can

be readily sold and converted into cash. They also provide a short-term investm ent outlet for excess cash and are also useful for meeting planned outflow of fu nds. Cash management thus is concerned with, the managing of, 1) Cash flows into and out of the firm. 2) Cash flows within the firm. 3) Cash balance held by the firm at a point of time by financing deficit or investing surplus cash. ACCOUNTS RECEIVABLES MANAGEMENT Business firms generally sell goods on credit which is granted to facili tate sales. It is valuable to customers as it augments their resources. It is pa rticularly appealing to those customers who can not borrow from other resources or find it very expensive. According to O. M. Joy, The term receivable is defined as debts owned to the firm by customers arising from sales of goods or services in the ordinary co urse of business. According to Bolten, The objective of receivables management is to promot e sales and profits unit that point is reached where the returns on the investme nt in further funding of receivables is less than the cost of the funds raised t o finance that additional credit. Accounts receivables management is divided into five sections: 1) Credit Policy Variables. 2) Credit Evaluation. 3) Credit Granting Decision. 4) Control of Receivables. 5) Management of Trade Credit in India. INVENTROY MANAGEMENT The total current assets of a firm consist of 1) Debtors, 2) Bills Receivables, 3) Inventory, 4) Cash and Bank balances, 5) Expenses paid in advance and 6) Shor t-term Investments. The inventories which include inventories of raw materials, finished goods, and work-in-process constitute quite a significant part of the t otal current assets. It has been observed that in many cases inventories are mor e than 60-65% of the total current assets of a firm. This naturally means that a large amount is blocked in inventories and, therefore, management of inventory has assumed a great importance. If properly managed, the profitability is defini tely affected adversely. Classification of Inventories: 1) Raw Materials: A manufacturing concern converts the raw material into th e finished products. The raw materials are the basic inputs which are required f or the conversion into finished products. 2) Work-in-process: Between the raw materials and the finished goods, there is an intermediate stage which is known as work-in-process or work in progress. These units are, therefore, neither totally raw nor totally finished. 3) Finished Goods: These are completed units awaiting the sales in the mark et. As the production in the modern days is in anticipation of the demand, some amount of finished goods inventory is inevitable. This inventory should be in su fficient quantity so that marketing operations of the firm can be smooth. 4.1 STATEMENT SHOWING CHANGES IN WORKING CAPITAL 2004 - 2005 Particulars 2004 2005 Increase Decrease A) Current Assets a) Cash & Bank Bal. -41100 277750 318850 0 b) Inventories 12847800 19428050 6580250 c) Loans & Advances 702650 1135700 433050 d) Sundry Debtors 2853650 6968400 4114750 16363000 27809900 11446900 0 B) Current Liabilities

a) b) c) d) e) f) g) h) i)

Sundry Creditors 8709300 5672850 3036450 Advances to Staff 0 21550 21550 Profession Tax Payable 8850 20600 11750 Provision for Taxation 0 26700 26700 Sales Tax Payable 741150 626550 114600 Elect. Charges Payable 53550 16500 37050 Audit Fee Payable 63100 95500 32400 Telephone Exp. Payable 20450 18550 1900 TCS & Surcharge Payable 2150 21550 19400 j) TDS Payable 110050 26100 83950 9708600 6546450 3273950 111800 Total Increase/Decrease 14720850 111800 Working Capital (A-B) 6654400 21263450 14609050 There is a Net Increase in Working Capital by Rs. 1,46,09,050/Interpretation & Analysis: We see that there is a net increase in the working capital, because in the year 2004-05 there was increase in the inventories by 51%, the sundry debtors also in creased by 144% of the previous year. Along with it the creditors also decreased by 35%. 2005 2006 Particulars 2005 2006 Increase Decrease A) Current Assets a) Cash & Bank Bal. 277750 101750 176000 b) Inventories 19428050 33541550 14113500 c) Loans & Advances 1135700 1727350 591650 d) Sundry Debtors 6968400 9256600 2288200 27809900 44627250 16993350 176000 B) Current Liabilities a) Sundry Creditors 5672850 11348050 5675200 b) Advances to Staff 21550 0 21550 c) Profession Tax Payable 20600 7400 13200 d) VAT BST 0 300 300 e) VAT CST 0 50 50 f) VAT Payable - Delhi 0 6700 6700 g) VAT - 31.03.2005 (BST) 0 456250 456250 h) VAT - 31.03.2005 (CST) 0 3900 3900 i) Provision for Taxation 26700 28050 1350 j) Provision for FBT 0 215600 215600 k) Sales Tax Payable 626550 0 626550 l) O/s Expenses 0 3000 3000 m) Elect. Charges Payable 16500 18200 1700 n) Audit Fee Payable 95500 19500 76000 o) Tax Audit Fees Payable 0 19500 19500 p) Salaries Payable 0 155850 155850 q) Telephone Exp. Payable 18550 0 18550 r) TCS & Surcharge Payable 21550 0 21550 s) TDS Payable 26100 2100 24000 6546450 12284450 801400 6539400 Total Increase/Decrease 17794750 6715400 Working Capital (A-B) 21263450 32342800 11079350 There is a Net Increase in Working Capital by Rs. 1,10,79,350/Interpretation & Analysis: We see that there is a net increase in the working capital, because in the year 2005-06 there was again an increase in the inventories by 73% and the debtors al so increased by 33%. Even though there was increase in creditors by 100%. 2006 -2007 Particulars 2006 2007 Increase Decrease A) Current Assets

a) b) c) d)

Cash & Bank Bal. 101750 831400 729650 Inventories 33541550 68505100 34963550 Loans & Advances 1727350 1380900 346450 Sundry Debtors 9256600 19145250 9888650 44627250 89862650 45581850 346450 B) Current Liabilities a) Sundry Creditors 11348050 22844750 11496700 b) Deposit Giltage Enterprises, Delhi 0 1000000 1000000 c) Profession Tax Payable 7400 -550 7950 d) VAT BST 300 0 300 e) VAT CST 50 0 50 f) VAT Payable Delhi 6700 1017700 1011000 g) VAT - 31.03.2005 (BST) 456250 456250 0 0 h) VAT - 31.03.2005 (CST) 3900 3950 50 i) Provision for Taxation 28050 400000 371950 j) Provision for FBT 215600 220900 5300 k) Provident Fund 0 216500 216500 l) O/s Expenses 3000 0 3000 m) Elect. Charges Payable 18200 0 18200 n) Audit Fee Payable 19500 19500 0 0 o) Tax Audit Fees Payable 19500 19500 0 0 p) Salaries Payable 155850 0 155850 q) Wages Payable 0 105800 105800 r) TCS & Surcharge Payable 0 22200 22200 s) TDS Payable 2100 30800 28700 12284450 26357300 185350 14258200 Total Increase/Decrease 45767200 14604650 Working Capital (A-B) 32342800 63505350 31162550 There is a Net Increase in Working Capital by Rs. 3,11,62,550/Interpretation & Analysis: We see that there is a net increase in the working capital, because in the year 2006-07 there was increase in the inventories by 105% and the debtors increased by 107%. 4.2 GRAPH SHOWING CHANGES IN WORKING CAPITAL Year INCREASE IN WORKING CAPITAL DECREASE IN WORKING CAPITAL 2004-2005 14609050 0 2005-2006 11079350 0 2006-2007 31162550 0

4.3 ESTIMATION OF WORKING CAPITAL Working Capital as a Percentage of Net Sales 2004 2005 2006 2007 Net Sales 6827000 10555300 Total Current Assets 16363000 Total Current Liabilities 9708600 Current Assets as a % of Sales 240% Current Liabilities as a % of Sales The average of current assets as a % of i.e. (240%+263%+295%+274%)/4 The average of current liabilities as a i.e. (142%+62%+81%+80%)/4 So, net working capital as a % of Sales i.e. (268% - 91%) 15138200 32799400 27809900 44627250 89862650 6546450 12284400 26357300 263% 295% 274% 142% 62% 81% 80% sales is 268% % of sales is 91% is 177%

Year % Change 2004-2005 55% 2005-2006 43% 2006-2007 117% The percentage changes in Net Sales: The average % change in Net Sales is 72% i.e. (55%+43%+117%)/3 Thus an Estimated Working Capital for next three years with an average change in Net Sales. For 2008: Expected Sales = Rs. 32799400 + 72% thereof = Rs. 56414950/Net Working Capital as a % of Sales = 177% = Rs. 56414950 X 177% = Rs. 66005500/For 2009: Expected Sales = Rs. 56414950 + 72% thereof = Rs. 97033700/Net Working Capital as a % of Sales = 177% = Rs. 97033700 X 177% = Rs. 113529400. For 2010: Expected Sales = Rs. 97033700 + 72% thereof = Rs. 166897950/Net Working Capital as a % of Sales = 177% = Rs. 166897950 X 177% = Rs. 195270600/5.1 RATIO ANALYSIS The ratio analysis has emerged as the principal technique of the analysi s of financial statements. A ratio is a relationship expressed in mathematical t erms between two individual or group of figures connected with each other in som e logical manner. The ratio analysis is based on the premise that a single accou nting figure by itself may not communicate any meaningful information but when e xpressed as a relative to some other figure, it may definitely give some signifi cant information. The relationship between two or more accounting figures/groups is called a financial ratio. A financial ratio helps to summarize a large mass of financial data into a concise form and to make meaningful interpretations and conclusions about the performance and positions of a firm. Working Capital Ratios Working capital ratios indicate the ability of a business concern in mee ting its current obligations as well as its efficiency in managing the current a ssets for generation of sales. These ratios are applied to evaluate the efficien cy with which the firm manages and utilizes its current assets. The following th ree categories of ratios are used for efficient management of working capital (1 ) Efficiency ratios (2) Liquidity ratios (3) Structural health ratios IMPORTANCE OF RATIO ANALYSIS The major benefits arising from ratio analysis are as follows: Ratio analysis is a very powerful tool useful for measuring performance of an or ganization. Ratio analysis concentrates on the inter-relationship among the figure appearing in the financial statements. Ratio analysis helps the management to analyze the past performance of the firm and to make further projections. Ratio analysis allow interested parties to make evaluation of certain aspects of the firms performance as given below: Shareholders and prospective investors will analyze ratios for taking investment

s and disinvestment decisions. Bankers who provide working capital will analyze ratios for appraising the credi tworthiness of the firm. The financial institutions who provide long-term debt will analyze ratios for pr oject appraisal and debt servicing capacity of the firm. Government agencies will analyze ratio of a firm for review of its performance. The companys management will analyze ratios for determining the financial health and its profitability. The ratio will also be used for inter-firm and intra-firm comparison and will also be used in financial planning and decision making. FACTORS AFFECTING RATIOS Ratios by themselves mean nothing. Caution has to be exercised in using ratios. They must always be compared with. a) A norm or a target, b) Previous ratios in order to assess trends, and c) The ratios achieved in other comparable companies. The following limitations must be taken into account: Ratios are calculated from financial statements which are affected by the financ ial bases and policies adopted on such matters as depreciation and the valuation of stocks. Financial statements do not represent a complete picture of the business, but me rely a collection of facts which can be expressed in monetary terms. These may n ot refer to other factors which affect performance. Over use of ratios as controls on managers could be dangerous, in that managemen t might concentrate more on simply improving then on dealing with the significan t issues. A ratio is a comparison of two figures, a numerator and a denominator. In compar ing ratios it may be difficult to determine whether differences are due to chang es in the numerator or in both. Since ratios are calculated from past records, there are no indicators of future . Proper care should be exercised to study only such figures as have a cause and e ffect relationship, otherwise ratios will only be meaningless or misleading. 5.2 CALCULATIONS OF RATIOS A) Working Capital Working capital is defined as the excess of current assets over current liabilities. Working capital = Current assets Current liabilities Year 2003-04 2004-05 2005-06 2006-07 Current assets Current liabilities 16362950 9708600 6654350/27809900 6546450 21263450/44627250 12284400 32342850/89862650 26357300 63505350/Working capital

Interpretation & Analysis: In the case of Vinsura Wines the working capital is increases year after year. There is a continuous increase in current assets as compare to current l iabilities. Thus there is an application done every year in the funds of the company .

B) Current Ratio The current ratios is a popular financial ratio used to test a company s liquidi ty (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. The concept behind this ratio is to ascertain whether a company s short-term ass ets (cash, cash equivalents, marketable securities, receivables and inventory) a re readily available to pay off its short-term liabilities (notes payable, curre nt portion of term debt, payables, accrued expenses and taxes). In theory, the h igher the current ratio, the better. Current Assets, Loans & Advances Current Liabilities & Provisions Year Current Assets Current Liabilities Current Ratio 2003-04 16363000 9708600 1.69 2004-05 27809900 6546450 4.25 2005-06 44627250 12284450 3.63 2006-07 89862650 26357300 3.41

Interpretation & Analysis: In case of Vinsura Wines the situation was improved from the year 2004 to 2005, from 1.69 to 4.25, which had an increase of 2.56, which was 151%. But again in 2 006 and 2007 it decreased a bit. Thus the company has sufficient assets to be converted into cash in order to the debts as and when required.

C) Liquid/Quick/Acid Test Ratio This ratio is also known as liquid ratio or test ratio. It expresses the relationshi p between quick current assets and current liabilities. While calculation of qui ck ratio, inventories are excluded from current assets, since inventories cannot be converted into cash in short time without loss of value. This ratio is a mor e refined tool to measure the liquidity of an organization. Current Assets, Loans & Advances Inventories Current Liabilities & Provisions Bank Overdraft Year Liquid Current Assets Liquid Liabilities Liquid Ratio 2003-04 3515200 9708600 0.36 2004-05 8381850 6546450 1.28 2005-06 11085700 12284400 0.90 2006-07 21357550 26357300 0.81

Interpretation & Analysis: In case of Vinsura Wines the situation was good in the year 2005, it was above o ne which was satisfactory, which shows high liquidity. While in the rest of the years the position was below satisfaction for meeting the liabilities. Standard ratio is 1:1. Thus it is observed that the major of the current assets is filled with the stoc k. Stock is a not liquid current asset. D) Working Capital Turnover Ratio This ratio is computed by dividing sales by working capital. This ratio helps to measure the efficiency of the utilization of the net working capital. It signif ies that for an amount of sales, a relative amount of working capital is needed. If any increase in sales is contemplated, working capital should be adequate an d thus, this ratio helps management to maintain the adequate level of working ca pital. A high ratio indicates efficient utilization of working capital. Sales Working Capital Year Sales Working Capital Working Capital Turnover Ratio 2003-04 6827000 6654400 1.03 2004-05 10555300 21263450 0.50 2005-06 15138200 32342800 0.47 2006-07 32799400 63505350 0.52

Interpretation & Analysis: In case of Vinsura Wines the working capital turnover was good in 2004 than the other years. Observing the working capital turnover in the year 2005, 2006, and 2007 is very low as per the standards. It means that there was no efficient utilization of the working capital during 2005, 2006, and 2007.

E) Inventory Turnover Ratio The ratio establishes relationship between the sales with average stock. It measures the velocity of converting stock into sales. This ratio indicates t he effectiveness and efficiency of the inventory management. The ratio show how speedily the inventory is turned into accounts receivables through sales. The hi gher the ratio, the more efficiently the inventory is said to be managed and vic e versa. Sales Average Inventory Year Sales Average Inventories Inventory Turnover Ratio

2003-04 6827000 9979950 0.68 2004-05 10555300 16137900 0.65 2005-06 15138200 26484800 0.57 2006-07 32799400 51023350 0.64

Interpretation & Analysis: As Vinsura Wines is a storage industry its inventory moves slowly. We can see th at inventory turnover ratio decreases from 2004 to 2006. But it has decreased in 2006 to 0.57 from 0.65. It is due to the expansion of th e company in 2006-07, due to which the storage capacity increased. But still the company should improve its Inventory turnover ratio. F) Inventory Holding Period (in days) 365 Inventory Turnover Ratio Year 365 Inventory Turnover Ratio 2003-04 365 0.68 537 days 2004-05 365 0.65 562 days 2005-06 365 0.57 640 days 2006-07 365 0.64 570 days Inventory Holding Period

Interpretation & Analysis: As Vinsura Wines is a storage industry its inventory holding period is more. We have seen that the inventory holding period has increased due to the expansion i n the company during 2006. (Increased up to 640 days) But still it should improve at least up to 350 days to 450 days. G) Debtors Turnover Ratio This ratio shows the extent of trade credit granted and the efficiency i n the collection of debts. Thus, it is an indicative of efficiency of trade cred it management. The lower the debtors to sale ratio, the better the trade credit management and better the quality (liquidity) of debtors. The lower debtors mean prompt payment by customers. Credit Sales Average Accounts Receivables Year Average Debtors 2003-04 2853650 2.39 Credit Sales Debtors Turnover Ratio 6827000

2004-05 10555300 4911000 2.15 2005-06 15138200 8112500 1.87 2006-07 32799400 14200900 2.31

Interpretation & Analysis: In case of Vinsura Wines the situation is average. But in 2006 it decreased up t o 1.87 which was not good for the company. The ratio should be around 3 and above. Thus it can be said that in the year 200 4, 2005 and 2007 was average, because it was just near 3. H) Debtors Collection Period (in days) This ratio measures how long it takes to collect amounts from debtors. T he ratio represents the average number of days, for which a firm has to wait bef ore their receivables are converted into cash. 365 Debtors Turnover Ratio Year 365 Debtors Turnover Ratio Debtors Collection Period 2003-04 365 2.39 153 days 2004-05 365 2.15 166 days 2005-06 365 1.87 195 days 2006-07 365 2.31 158 days

Interpretation & Analysis: In case of Vinsura Wines the average collection period is quit high. It should b e at least below 150 days. In none of the years the collection period was below 150 days, thus the company should improve the collection activity. This shows that the account receivables are not converted into cash in time. I) Creditors Turnover Ratio This ratio indicates the credit period allowed by the creditors. A high creditors turnover ratio indicates that payment to creditors is quite prompt but it also implies the full advantage of credit allowed by creditors is not taken. A low ratio indicates that payment to creditors is not quite prompt and it needs to be improved. Credit Purchases Average Accounts Payable Year Credit Purchases Average Creditors Creditors Turnover Ration

2003-04 6195800 6454800 0.96 2004-05 6393200 7191100 0.89 2005-06 12208750 8510450 1.43 2006-07 38372650 17096400 2.24

Interpretation & Analysis: In case of Vinsura Wines the situation is improving year by year. From 0.96 to 2 .24. But still it should be around 3. We can see that in 2004 and 2005 the ratio was very low (0.96 & 0.89), which mea ns the creditors were paid very late which was not good. J) Average Payment Period (in days) The measurement of the creditor payment period shows that average time t aken to pay for goods and services purchased by the company. In general, the lon ger the credit period achieved, the better, because delays in payment mean that the operations of the company are being financed interest free by suppliers fund s. 365 Creditors Turnover Ratio Year 365 Creditors Turnover Ratio 2003-04 365 0.96 380 days 2004-05 365 0.89 410 days 2005-06 365 1.43 255 days 2006-07 365 2.24 163 days Average Payment Period

Interpretation & Analysis: In case of Vinsura Wines the situation was improved year after year, from 380 da ys to 163 days. But still it should be below 150 days. It shows that the company used the credit from the creditors for more than one y ear in 2004 and 2005

K) Current Assets Turnover Ratio This ratio indicates the efficiency with which current assets turn into sales. A higher ratio implies by and large a more efficient use of funds. Thus, a high t urnover rate indicates reduced lock-up of funds in current assets. An analysis o f this ratio over a period of time reflects working capital management of a firm .

Sales Current Assets Year Sales Current Assets Current Assets Turnover Ratio 2003-04 6827000 16363000 0.42 2004-05 10555300 27809900 0.38 2005-06 15138200 44627250 0.34 2006-07 32799400 89862650 0.37

Interpretation & Analysis: In case of Vinsura Wines the situation is poor. The current assets turnover shou ld be improved. It is said that the higher the ratio the better utilization of t he assets. But the ratios of the company shows that the current assets are locked up for a longer period. Which means the sales should improve to match the required ratio. L) Return on Working Capital Net Profit Working Capital X100 X100

Year Net Profit Working Capital Return on Working Capital 2003-04 6654400 -34.56 % 2004-05 21263450 0.88 % 2005-06 32342800 1.15 % 2006-07 63505350 3.30 % -2299950 186850 371500 2098000

X100 X100 X100 X100

Interpretation & Analysis: In case of Vinsura Wines the situation was improved from the year 2004 to 2005, there was an increase of 35.44%. But still it is observed that as compare to the working capital implied the net profit has not increased.

CONCLUSIONS: As the project was conducted to analyze the Working Capital of VI NSURA WINERY PVT. LTD. for the last four years. During this project working and p roject report I came to conclusions that are as follows: Working capital shows a constant increase every year. Current ratio is good of the company, which means the company has suffic ient assets, which can be converted into cash to pay the debts when required. The acid test ratio is just below the standard ratio which is 1:1. The working capital turnover ratio is found below standards during the y ear 2005, 2006, and 2007. The inventory turnover ratio is found too low. The company has a long inventory holding period. The debtors turnover ratio is found average. The creditors turnover ratio is improving every year. Lots of current assets are in blocked position. RECOMMENDATIONS AND SUGGESTIONS In Working Capital Management, there are mainly three parts they are Cas h Management, Receivables Management and Inventory Management. For optimum use o f working capital, these three parts should be managed properly, for that I woul d like to give suggestions to Vinsura Winery, they are as follows: Considering the cash management the company should maintain a cash flow budget every year, considering monthly or quarterly. During the preparation of t he cash budget the credit period should be below 150 days allowed to the custome r. Considering the receivables management, certain credit standards and pol icy should be established, like: Establishment of policy in appointing sales recovery force. Cash discounts policy for cash purchases and early payment of debts balance by c ustomer to be established. Credit rating systems to be established. Considering the inventory management, there should be a fast movement of inventory, by taking efforts in increment of the sales. Considering the creditors the management should set a price range for th e creditors. The creditors who are paid early should be given a low price. The creditors who are waiting for a longer period should be paid more. BIBLIOGRAPHY Books: Financial Management: N. M. Vechalekar. Financial Management: Ravi M. Kishore (6th edition). Financial Management: R. P. Rastogi. Financial Statements of Vinsura Winery Pvt. Ltd. From 2003-04 to 2006-07. www.vinsura.com