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On
At
HARIDWAR
(Submitted For the Partial Fulfillment of the Requirement for the Degree of
Master in Business Administration)
AKUMS, Hardwar
SESSION 2009-2011
DECLARATION
The matter embodied in this project report has not been submitted anywhere else
for any other degree/diploma. .
I am also thankful to all others who helped me directly or indirectly towards the
completion of my works.
Ankita Negi
MBA
COER-SM
INDEX:-
COMPANY PROFILE
METHODOLOGY
FINDINGS
CONCLUSION
RECOMMENDATION
ANNEXURE
OBJECTIVES:
Akums drugs & pharmaceutical ltd is situated in a excise free zone & well
developed INDUSTRIAL AREA OF HARIDWAR (U.A), in INDIA was
established & formed in the year 2004 by good efforts of MR. D.C. JAIN, MR.
SANDEEP JAIN
Akums drugs has become the icon of INDIAN HEALTHCARE & A QUALITY
PHARMA MANUFACTURER of the country, global vision AKUMS has been
accredited with WHO-GMP,ISO 9001:2000 & ISO 14001:2004 CERTIFICATE.
Quality assurance:
Quality assurance is deals with all methods that individually & collectively
influence the quality of products.
Proving the details of storage conditions & monitoring of R.M & P.M
Inspection of entire batches manufacturing & packing records for giving final
approval for transfer to finished goods store.
Approving SOP’S of all functional department & product master formula card.
DOCUMENTS & DATA CONTROL :
AKUMS quality gyrates around customer satisfaction. It is towards this end that
the company has the following:
(eye / ear/skin)
FINANCE DEPARTMENT OF AKUMS & PHARMACEUTICALS LTD.
PURCHASE SECTION.
The section is responsible to give the information to payroll section for payment
and deduction of below mentioned benefits and incentives.
Travelling Allowance
Travelling allowance
Daily allowance
Displacement allowance
Transit allowance
Salary advance
Insurance charges
Octroi charges
Packing charges
Joining time
Facilities
Canteen services
Medical facilities
Housing facilities
Education facilities
Provident fund
Other benefits
Issue of briefcase
Issue of calculators
Performances linked
Advances to employees
Pay and allowance shall be drawn by the finaces department on the basis of
attendance particular which shall be send by the time office to finance giving
details such as name of the employee.employee number, number of regular days,
over time etc. under the mechanized system of pay roll accounting, the time cards
are after filling in summary particulars through finance department to the data
processing section. The data processing section shall prepare a statement, which is
checked and confirmed by the time office subsequently. Pay and allowances are as
mentioned below:
Scale of pay
Dearness allowance
Shift allowance
Washing allowance
Tea reimbursement
Special allowance
Patrolling allowance
Tanker allowance
ADVANCE TO EMPLOYEE
Rules for various types of advances are prescribed in the personal manual on the
basis of sanction and release order received from competent authority. The section
dealing with advance shall prepare payment voucher debiting appropriate advance
account and the same shall be passed on to cash section for payment. Recovery of
advance shall be made in accordance with the installments given in the sanction
order. Where the period of recovery is prescribed in the rule given in the relevant
manuals. The same shall be done accordingly. All recoveries in respect of
particular advance account shall be credited to the advance account. Loans and
advances are mentioned below:
Conveyance advance
Emergency advance
Funeral expenses
Festival advance
Payments
THEORITICALBACKGROUND
MEANING OF WORKING CAPITAL
Working Capital is commonly defined as the difference between current assets and
current liabilities. Efficient working capital management requires that firms should
operate with some amount of working capital, the exact amount varying from firm
to firm and depending, among other things on the nature of industry.
Capital required for a business can be classified in two main categories viz.
2) Working capital.
Every business needs funds for two purposes-for establishments and to carry out its
day-to-day operations. Long-term funds are required to create production facilities.
Through purchase of fixed assets such as plants and machinery, land, building,
furniture, etc. An investment in these assets represents that part of firm’s capital
which is blocked on permanent or fixed basis and is called fixed capital. Funds are
also needed for short-term purpose for the purchase of raw material, payment of
wages and other day-to-day expenses, etc. These funds are known 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. Funds thus invested in current assets keep
revolving fast and are being constantly converted into cash and these cash flows
out again in exchange for other current assets. Hence, it is also known as revolving
or circulating capital or short-term capital.
CLASSIFICATION OF WORKING CAPITAL
The Gross Working Capital is the Capital invested in the total current assets of
the enterprises. Current assets are those assets, which can be converted into cash
within a short period, normally an accounting year.
The term Net Working Capital refers to the excess of current assets over current
liabilities, or say,
Net Working Capital can be positive or negative. When the current assets exceed
the current liabilities the working capital is positive and the negative working
capital results when the current liabilities are more than the current assets. Current
liabilities are those liabilities, which are intended to be paid in the ordinary course
of business within a short period of normally one accounting year out of the
current assets of the income of the business. The gross working capital concept is
financial or going concern concept whereas net working capital is an accounting
concept of working capital. Both the concepts have their own merits.
The gross concept is sometime preferred to the concept of working capital for the
following reasons: -
It takes into consideration of the fact every increase in the funds of the
enterprise would increase its working capital.
The net working capital concept, however, is also important for the
following reasons:-
Temporary working capital differ from permanent working capital in the sense that
it is required for short periods and cannot be permanently employed gainfully in
business
CALCULATE CURRENT ASSETS TO FIXED ASSET RATIO
A firm needs current and fixed assets to support a particular level of output.
However, to support the same level of output the firm can have different levels of
current assets. As the firm’s output and sales increases, the need for current asset
increases. Generally the current assets do not increase in direct proportion to
output; current assets may increase at a decreasing rate with input. This
relationship is based upon the notion that it takes a greater proportional investment
in current assets when only a few units of output are produced than it does later on
when the firm can use its current assets more efficiently.
The level of the current assets can be measured by relating current assets to fixed
assets.
Every business needs some amount of working capital. The needs for working
capital, arises due to time gap between production and realization of cash from
sales. There is an operating cycle involved in sales and realization of cash. There
are time gaps in purchase of raw material and production, production and sales,
and realization of cash.
To incur day- to- day expenses and overhead costs such as fuel, power and
office expenses etc.
For studying the need of working capital in a business, one has to study the
business under varying circumstances such as new concern, as a growing and one,
which has attained maturity. A new concern requires a lot of funds to meets its
initial requirement 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 the ambition of its promoters. Greater
the size of the business unit, generally will be the requirement of the
working capital. The requirement of the working capital goes on increasing with
the growth and expansion of the business until its gains
maturity. At maturity, the amount of working capital required is called normal
working capital.
The largest portion of financial manager’s time is devoted to day to day internal
operation the firm. This may be appropriately sum up under the heading
"WORKING CAPITAL MANAGEMENT".
current assets represent more than half of the total assets of a business firm.
Because they represent largest investment and because this investment tends to
relatively volatile, current assets are worthy for the financial manager's careful
attention.
current assets are similarly important for the financial manager's of small firm.
Further small firm are relatively limited access to the long term markets, it must
necessarily rely on the trade credit and short term bank loan , both of net effect on
net working capital by increased current liabilities.
WORKING CAPITAL CYCLE: -
The speed with which the working cycle completes one cycle determines the
requirements of working capital. Longer the cycle larger is the requirement of
working capital.
DEBTORS
CASH FINISHED
GOODS
WORK IN
RAW MATERIAL
PROGRESS
ASSEST
CURRENT 1006.15 1053.91 1396.86 1568.71 2524.77
LIABLITIES
NET 1286.10 1780.77 2347.12 2850.86 2958.65
WORKING
CAPITAL
3000
2500
2000
1500
WORKING CA
1000
500
0
MAR'06 MAR'07 MAR'08 MAR'09 MAR'10
Interpretation: -
If we see from the above table, it can be clearly seen that net working capital has
continuously rise up from MAR’06 TO MAR’10. It is good for the company
because its turnover is also increased
GRAPH
2.5
1.5
WORKING CAPITAL TURNOVER
1 RATION
0.5
0
MAR'06 MAR'07 MAR'08 MAR'09 MAR'10
INTERPRETATION:
By observing the above ratio we find that the organization was using its working
capital in the best possible manner in mar’06, this ratio is 2.318 but in the year
2007-09 this ratio has rapidly come down from 2.002 to 1.836 & in the year 2010
this ratio is increase to 1.895 . This increase was because
the sales do increase in the same ratio so it shows that working capital management
is in a proper manner and in accordance to sales.
CURRENT ASSETS TURNOVER RATIO:-
This ratio indicates the efficiency with which current assets turn into sales. A
higher current assets turn over rate or a lower current assets turnover period is
better. It indicates the efficient use of the funds and the reverse case indicates
reduced lock-up of funds in current assets.
GRAPH
2.5
1.5
CURRENT ASSETS
1 TURNOVER RATIO
0.5
0
MAR'06 MAR'07 MAR'08 MAR'09 MAR'10
Interpretation:- By observing the above ratio we find that current assets turnover
rate increased in MAR’06. Then after there was a decline from MAR’07-09 but
very soon the company improved its current assets position from 1.836 to 1.895 in
MAr’10. This increment shows that the current asset management is improving.
CURRENT LIABLITIES TURN OVER RATIO:-
GRAPH:-
3.5
3
2.5
2
CURRENT LIABLITIES
1.5 TURNOVER RATIO
1
0.5
0
MAR'06 MAR'07 MAR'08 MAR'09 MAR'10
The company is able to reduce its working capital from in a span of FIVE
years without affecting the sales of the company which means that company
is sincerely utilizing its funds and has reduced the locking of funds.
The latest working capital ratio indicates the efficiency of utilization of net
working capital is increased
The current assets turnover ratio has increased which indicates that current
assets is efficiently turning into sales.
The current liabilities shows fluctuation ,in mar’10 the C.L reduces which
means company maintained its working capital in well manner.
CONCLUSION & RECOMMENDATION
CONCLUSION
By observing the ratio come under working capital management we can say
that the company doing good & also improving their sale year by year.
The company also doing well by reducing current liability,& improving their
current assets & working capital . So we can say that the company manage
w.c management in good way.
RECOMMENDATION
There is a increase in current liabilities which is not good for the credit of
company so the organization should try to reduce the current liabilities
through speedy payment to creditors and reduce the un-necessary provisions.
There is a big fluctuation in working capital turnover ratio This was because
the sales did not increase in the same ratio as working capital increased. So
the company should manage the working capital and should properly
estimate for an amount of sales how much working is needed so that the un-
necessary lock up of funds in working capital may not occur.
ANNEXURE
BIBLOGRAPHY