A SUMMER INTERNSHIP REPORT ON [WORKING CAPITAL MANAGEMENT]

SUBMITTED TO:

Smt. V.B.Nandola MBA College

In partial fulfillment of the requirement for the degree of

MASTER IN BUSINESS ADMINISTRATION

YEAR: 2009 2010. PREPARED BY: Talaviya Bhavesh C. MBA : Sem 2nd ROLL NO:33 UNDER GUIDANCE OF: Mr. Sarvaiya Sir (Professor)

PREFACE

Management is an essential ingredient in every organized endeavor successful management of complex organization sophisticated technology and skilled personnel cant be possible through intuition of trial and error. One cant swim only by reading a book on swimming. It must require a practice. Practice makes man perfect. Theory makes him thoughtful. So, theoretical knowledge is only a half way in study network. If theoretical knowledge aspects are planned in a better way give faithful results, so theoretical knowledge should be supplemented by practical experience. For holding student after his college study the knowledge that he has gained that should be imparted practically. So training is the only way to achieve such expectations. Training process acts as a bridge between college students and carrier performance. So, the article action is on a way through bridge itself since during that period one can expose his real talent in his field. I have been fortunate to have training of six weeks at ACL kodinar. I am very glad to present this report. I honestly thank to all of those who have helped me in my efforts.

ACKNOWLEDGEMENT
The main purpose of industrial summer training is to the develop among the students a fell about industrial environment. As a student of M.B.A. industrial summer training is must. So I have visited to AMBUJA CEMENT LIMITED in Kodinar. Industrial visiting report is outcome of the efforts of many who help through out in preparation. I am really very much thankful to all of them. First of all I would like to thanks our respected principal Mr.R.R.Shama and our Project report guided Mr.Brejendrasing Sarvaiya who give opportunity to go for industrial visiting. My heartily thanks to Mr. N.S.Sekhsariya Chairman of AMBUJA CEMENT LIMITED who gives me permission to take visit in his industry and obliged to all official who give me all kind of information.

PALCE- BHACHA DATE -

Yours Faithfully (Talaviya Bhavesh C.)

DECLARATION

I here by declare that the project report on Summer Training and project work submitted to Smt.V. B. Nandola Management Institute, Bhacha in partial fulfillment of and the requirement of degree of MBA under the guidance of Mr. Ramzan Shama(faculty of MBA programme, Smt.V. B. Nandola Management Institute, Bhacha) and Mr. Harshad Patel (Personnel Manager) of Ambuja Cement ltd at Kodinar.

DATE:

Mr. Talaviya Bhavesh C. MBA (Sem.-II) Roll No.-33

PLACE: Bhacha

SHREE B.M.NANDOLA CHARITABLE TRUST-MUMBAI SMT. VANITABEN BACHUBHAI NANDOLA MBA COLLEGE BHACHA (UNA). TA: UNA DIST: JUNAGADH (GUJARAT) AT: BHACHA-362 560 PRINCIPALS RECOMMENDATION To The Registrar Gujarat Technological University Ahmedabad. Subject: MBA Summer Training Project Report

Respected Sir, I am recommending the Summer Training Project Report entitled Working Capital Management Analysis prepared by Talaviya Bhavesh C. at Kodinar as the partial fulfillment of the University requirement for the award of MBA degree of Gujarat Technological University, Ahmedabad. Thanking You.

Date:Place: - Bhacha

Yours Faithfully, (Principal/Director)

CONTENTS

Sr.no
1. 2. 3. 4. (A) (B) (C) (D) (E) (F) (G) (H) (J) 5. 6. 7.

CONTENT INDUSTRY OVERVIEW COMPANY OVERVIEW STUDY OF FOUR FUNCTION AREA RESERCH METHODOLOGY NTRODUCTION STATEMENT OF PROBLEMS SCOPE OF THE STUDY OBJECTIVE OF STUDY RESEARCH DISIGN SOURCE OF DATA LIMITATION OF STUDY DATA ANALYSIS SUGESTIONS SWOT ANALYSYS CONCLUSION BIBLIOGRAPHY 8

PAGE NO

12 29 67 68 69 70 71 72 73 74 75 106 108 110 111

EXECUTIVE SUMMARY

The study was conducted at Ambuja Cements limited, Ambujanagar. Ambuja Cements limited is a public limited company owned by Holcim, the second largest cements manufacturer in the world. The study was aimed at assessing the effectiveness of Working Capital Management in ACL, Ambujanagar Unit. This is done through exploratory research method using analysis of companys internal as well as external data.

Through this study, the researcher was able to asses the existing Working Capital Management in ACL, Ambujanagar Unit and can able to suggest remedial measures to be taken by management to improve the Working Capital Management at ACL, Ambujanagar Unit.

History of Industry

In India, manufacturing of cement was first started in Madras in 1904.First three companies were started in 1912-1913 and real beginning was started. When the plans started there were 21 factories with an annual capacity of 328 million tons. After 1949 the cement industry had a complete interference of govt. the production, distribution and price of cement and this hampered the growth of industry. It was only in 1977 that govt. announces 12% post tax return on net worth, which was fair enough, and retention price would be fixed to ensure it.

BASE
Production and despatches data for the last five years Year 200405 200506 200607 200708 200809* Production (mntonnes) 127.57 141.81 155.66 168.32 181.35 Growth % (y-o-y) 8.57 11.16 977% 8.13 7.75 Despatches (mn tonnes) 127.14 141.57 155.26 167.69 180.95

EFFECT
Growth % (y-o-y) 8.45 11.35 9.67 8.01 7.91

* Provisional figures, Source : Cement Manufacturers' Association

The real impetus was provided when partial decontrol was announced in 1982. Through this policy all existing cement industry units were required to give up 66.67% of their installed capacity as levy at controlled price. The most important objective of decontrol was to eliminate black-marketing and bring down the price in the free market. It was in follow through that the industry was fully controlled in 1989. In the last decade of 90s cement capacity increased by more than twice. The industry was de-licensed in 1991, which augmented its production in the very first year.

Cement Industry Growth Through Five-Year Plans

The growth rate of the domestic cement industry has hit a five-year low, in terms of both production and despatches, in FY09. The industry registered a growth of 7.75 per cent and 7.91 per cent in production and despatches respectively. The overall production during 2008-09, as per the provisional data available from the Cement Manufacturers' Association, was 181.35 million tonnes against 168.31 million tonnes last year. Despatches grew to 180.95 million tonnes compared with 167.68 million tonnes in the previous year.

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HISTORY AND DEVELOPMENT OF ACL

The rapid growth of the Indian economy has developed the basic industries like cement, iron and steel and fertilizers have prospered. This is also a result of the govt.s incentives of developing such industries. At the time of the installation of this plant, there was not any cutthroat competition in the cement industry. Thus, the above mentioned are the main reason, which encouraged this organization to enter into the cement industry. The AMBUJA CEMENT LTD. is a company, which has been promoted by the GUJARAT INDUSTRIAL AND INVESTMENT CORPORATION LTD. In coordination with the SEKHSARIA GROUP. Originally, the project was planned to be located near MAHUVA, District BHAVNAGAR. All the primary procedure was completed land acquisition procedures were also completed in early May 1984. But the management due to non-corporation could not take the possession of the land and legal proceeding by the villagers compelled the management to change the planned project. Due to this management decided to locate the project at village VADNAGAR, Taluka -KODINAR in JUNAGADH District. Immediately after taking this decision the management purchased the land for both factory building and housing colony at the new site. Gujarat Electricity Board had agreed to provide 19 M.V.A power for the plant and the construction of the double circuit 132kw feeder. Railway agreed to provide the railway siding facilities from Kodinar to Vadnagar, the plant site. In November 1984 the civil work commenced. The construction of the plants started in March 1985 and was competed in August 1986. KRUPP POLYSIUS A.G, West Germany, one of the front runners in the cement world, had supplied the entire design and technology. Finally, the company started its commercial production in October in 1986. Later the company in order to expand its production setup and another plant in Kodinar itself called Gaj. Ambuja Line-1 in 1992 followed by the third one Gaj. Ambuja Line-2 in 1998 making the total production to reach approximately three million tons per annum marks.

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12

INTRODUCTION
As a part of industrial visiting, I have gone to AMBUJA CEMENT LIMITED at date 1-6-2010. I have taken visit in various aspect of the industry like its history, location, administration, production, etc. I have gathered various information during my visit regarding the units product and its progress. The unit is engaged in production of cement is very famous company in India. It plays an important role in development in economy in our nation. It established with the multi-industrial activities and specializing in field of cement industry and to offer hiTech cement for a super construction and establishment of India. The plant was established in 1986 with heavy production cement in similar of other cement production company. This industry is very famous industry in all over the world. This unit has a big market to sale their product in our country and in international market.

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BASIC INFORMATION OF THE COMPANY

NAME & ADDRESS OF THE UNIT:

Gujarat Ambuja Cement Ltd Ambujanagar, Taluka: Kodinar Dist: Junagadh Gujarat 362 720

MISSION OF THE COMPANY: To strive for an environment beyond Compliance. To adopt environmentally sound technologies and management practices for optimum utilization and conservation of natural resources.

VISION OF THE COMPANY: Give a man orders and hell do the task reasonably well. But let him set his own targets gives him freedom and authority, and his task becomes a personal mission: I CAN. (It is constant source of motivation for their people)

BELIEF OF THE COMPANY: Transparency, system and controls are essential factors in the success and growth of the company

DIVISONS:

Ambuja Cements Ltd. Gajambuja Cement Ltd. Line-1 Gajambuja Cement Ltd. Line-2

YEAR OF ESTABLISHMENT:

September 1986.

INVESTMENT:

In Sep- 1986- Rs. 86 crores. 14

PROMOTERS OF THE CO.:

Mr. Narottam Sekhsaria Mr. Suresh Neotia

AUDITORS:

M/S S.R. Batliboi P.M.Nanabhoy&Co. (Cost Auditors)

BANKERS:

Bank of India Bank of Baroda Dena Bank ANZ Grindlays Bank Punjab National Bank The Hong Kong & Shanghai Banking Corporation Ltd. Credit Lyonnais

REGISTERD OFFICE:

P.O. Ambujanagar, Taluka: Kodinar Dist: Junagadh Gujarat: 362715

CORPORATE OFFICE:

106, Maker Chamber- III, Nariman Point, Mumbai- 400 021.

FORM OF THE ORGANIZATION:

Private Limited Company

The form of the organization followed by ACL is of Line and staff type. This can be said by viewing the organization chart, as described within coming pages.

SIZE OF THE ORGANIZATION:

Large Scale Unit

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BOARD OF DIRECTORS:

o Mr. N. S. sekhsaria, Chairman o Mr. Paul Hugentobler, Vice Chairman o Mr. Onne van der Weijde,M.D. o Mr. Markus Akermann o Mr. M.L. Bhakta o Mr. Nasser Munjee o Mr. Rajendra P. Chitale o Mr. Shailesh Haribhakti o Dr. Omkar Goswami o Mr. Naresh Chandra, o Mr. B.L. Taparia, Head-Corporate service and company secretary

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COMPANY PROFILE

ACL is a relatively young company in the industry. It begins operations in 1986. But in the short span of 24 years, it has set a new benchmark in every aspects of the cement business, from cement quality to power consumption and from marketing to environment management. Some of the main achievements of the company are listed below.

1. Fastest Project commissioning: The first cement plant in Gujarat was set up in 22 months as against the normal 3 years. Their second plant in Gujarat was set up in just 13 months, a world record.!!!

2. Fastest stabilization: All their cement plants have reached 100% production within 6 months whereas the industry norm is 12 months.

3. Highest Productivity: Ambuja cement holds distinction of operating its plants at a very high productivity level. The Gujarat plant operates above the rated capacity levels. For example the kiln of their first cement plant produces 4000 tones a day as against the rated capacity of 2500 tones.

4. Lowest power and coal consumption: Their power and coal consumption levels are one of the lowest in the world.

5. Best environment Management: At all their plants, the pollution levels are comparable with the most stringent Swiss standards. Ambuja cement is the pioneer in using blast free mining methods.

They have won several safety and environment awards for its mining operations. To monitor the pollution levels, they have cultivated a rose garden right next to the kiln at their Gujarat plant. For these efforts, it has been given the highest national awards for outstanding pollution control in 1992. No other cement plant in India has received this

17

recognition. Their plants are certified with ISO 14001 as per the norms for environment control.

6. Bulk Cement Transpiration: In 1993, they have set up a whole new way of transporting cement- bulk cement transportation by sea. It includes a dedicated port at the Gujarat plants and unloading terminal in Mumbai and Surat. All of them fitted with mechanized conveying system. It also includes 5 special cement ships.

7. Highest Product Quality: In cement, the quality is measured by the comprehensive strength. Ambuja cement is the strongest cement available in the market. The quality of the cement has been appreciated in the international market as well. This quality has made them the highest exporters of cement for last 6 years. Ambuja is the one and only cement company to win National quality award and the first to receive ISO: 9002 quality certificate.

8. A Strong Brand: Ambuja cement, a premium brand in the market. They market cement as a consumer product and not a commodity. Excellence quality backed up by strong service and effective advertising tag discovered this formula way back in 1986 when cement was sold as a commodity.

Their people practice a simple philosophy. Give a man orders and hell Do the task reasonably well. But let him set his own targets, Give him freedom and authority, And his task becomes A personal mission: I CAN.

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PRODUCTION CAPACITY:
The capacity of Ambuja plant is 4500 TPD The capacity of Gajambuja-1 is 4500 TPA The capacity of Gajambuja-2 is 3750 TPA

DEPARTMENTS AT AMBUJANAGAR
1. Personnel Department 2. H.R.D Department 3. Accounts Department 4. Sales & Distribution Department 5. Administration Department 6. Land Department 7. Stores Department 8. Costing Department 9. Security Department 10. Electronic data processing Department 11. Purchasing Department 12. Packing Department 13. Bulk Cement Terminal Department 14. Mines Department 15. Project planning & Developing Department 16. Civil Department 17. Instrumentation Department 18. Electrical Department 19. Mechanical Department 20. Diesel Generator Department 21. Research & Development Department 22. Laboratory Department 19

Different plants & Subsidiary Companies, their location

1. Ambujanagar: 40 Km away from Veraval in Saurashtra, Gujarat. This location consists of three units namely:

a. Ambuja b. Gajambuja-1 c. Gajambuja-2

2. Darlaghat

Near Simla in Himachal Pradesh with one unit.

3. Gadchandur: Near Chandrapur in Maharastra with one unit.

4. Bhatinda: Punjab Grinding unit.

5. Roopnagarss: Punjab Grinding unit.

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HISTORY OF ACL
The ACL is a company which had been promoted by Gujarat Industrial and Investment Corporation Ltd. in Co-ordinatation with Sekhsaria Group. Originally the project was planned to be located at Mahuva, District Bhavanagar. Land acquisition proceeding had also been completed in early May, 1984. Further the land procession could not be taken by the management due to non corporative attitude of villagers, and last the management decides to locate the project at village Vadnagar Taluka Kodinar in Junagadh district. All the infrastructure facilities required were competed in August 1986. Production in physical term was started in September 1986. The ACL procedure cement by process technology brought from KRUPY pulsates, A.B. Germany and Kuchtinghas entered into with Onida engineering and consulting Co. Ltd. at Japan. The production and supply of cement has been increased day by day from its establishment year. In todays context, the entire plant has become fully computerized. The whole production process as governed by just two persons and rest of the work is automatic because of the latest and improved technology adopted by the management

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SIZE OF THE UNIT AND FORM OF ORGANISATION

AMBUJA CEMENT LIMITED is neither a public nor a government company. It is a private limited company. The size of the organization is large scale industry. The company is registered under the Indian private company act-1956. The form of the organization followed by ACL is of line and staff type. This can be said by viewing the organization chart, as described at coming pages in organization structure department. The major functions are grouped under 5 departments and guided by a separate Vice President. The departments are as, 1. Technical Department 2. Finance Department 3. Commercial Department 4. Marketing Department 5. Personnel Department

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ORGANIZATION STRUCTURE

M. D.

Direc tor G.M.(A /c) G.M. (I.T.)

Direc tor

Sr. V.P. Syste m& Audit

Joint President Works Chief Secur ity Offic er G. M. Geolo gy G. M. Min es

Joint President Mines & Geology D.G. M. Perso nnel Liasoni ng G. M. Com mu.

Land Dept

G. M . R & D

D.G. M. Com mun.

G.M. B.C.T

G. M. Powe r& Plant

D.G. M. Civil

G. M. Mech .

Ass t. Mgr . Pur.

Ass t. Mgr . Ad min .

Sr. Mgr . Sale s

Sr. Mgr . Pac kg.

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TIME KEEPING SYSTEM

AMBUJA CEMENT LIMITED is large scale industry. So there is many personal staff there for it is necessary to maintain time keeping system. TIME SYSTEM: Shift 1 2 3 Duty hours 4.00 am to 12.00pm 12.00 pm to 8.00pm 8.00 pm to 4.00am

OFFICE TIME: 11.00 am to 6.00 pm

(SUNDAY IS HOLIDAYS)

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CONTRIBUTION OF THE UNIT

Every industrial unit is come into existence with the primary objective of profit making. But they have some responsibility towards the society. It means the industrial unit should contribute in the social and economic development of the country. AMBUJA CEMENT LIMITED is established with normal objective of profit making. The ownership of the unit is in single hand. Thereafter this unit is always ready to help to the society. It has made such school, hospital, and donates free clothes and medicine on the establishing day of this unit. This unit has taken student in their personal department for giving job. For this type of contribution in the society, they have got many awards and achievements.

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AWARDS, RECOGNITION & ACHIEVEMENTS

YEAR 1989-90 The

AWARDED BY Economic Times, Harvard Best

PURPOSE Corporate

Business School Association Of India 1989-90 National Productivity Council

performance award.

Certificate of Merit for productivity industry. in cement

1990-91

National Productivity Council

Second productivity industry.

prize in

for cement

1990-91

Trade Headers Club, Madria, Spain

International

award

for

best trade name, 1991 1990-91 Gujarat Pollution Control Board. 1st prize for environmental management. 1991-92 National Council Of Cement & Building Material 1991-92 Bureau Of Indian Awards. National award for best energy performance. Rajeev Gandhi National Quality Award. 1992-93 Bureau Of Indian Standards Quality system certificate ISO 9002. 1992-93 National Productivity Council 2nd best productivity

performance award 1993-94 Chemical and Allied Product, Certificate of merit for cements export. 1993-94 International Green And Social Council, Hyderabad 2000-01 National Award Best production and and clinker

Export Promotion Council, Calcutta

product goal award. 2nd best environmental award. 26

2000-01 2002-03 2002-03

Special Export Award National Award Export CAPEXIL Promotion Council,

Outstandingexport award. Prevention of pollution. Outstanding performance Asian CSR Award export

2006-07

Asian Institute of Management, Philippines,

2007 in the Concern for Health category for its robust programme on

health and HIV/AIDS for the welfare of the

communities. 2006-07 Greentech Environment Excellence Gold Award by Greentech company for outstanding achievement in Environmental Management Himachal Unit by 2006-07 Corporate 2007 Excellence Award, Companys overall for

Foundation, New Delhi.

by Indian Institute of

performance particularly in the fields of company

Materials management

visibility, brand image, and contribution to social

corporate responsibility. 2006-07 Top Export Award by CAPEXIL, an export promotion council,

For outstanding export performance

sponsored by the Ministry of Commerce 2006-07 "Dun and Bradstreet - American Express Corporate Awards 2007". 2007-08 Indian Bureau of Mines Top Indian company in cement sector. First Prize Afforestation Second Prize 27

 Top Soil Management Air Quality Management Third Prize Management of Minerals and Sub-Grade Minerals Water Quality Management Overall Performance. 2007-08 "Maratha Cement Works" (Ambuja cements overall management performance. 2007-08 Director General mines safety Awarded the first prize to our Rabriyawas Mine (Ras Lime Stone Mine) in the 22nd Mine Safety Week, Ajmer Region for its over all Ltd.s Best subsidiary)for Environment practices & "Greentech Environment Excellence Gold Award 2008"

(Ministry of Labour & Mines, Govt. of India)

performances. 2008-09 Gujarat Safety Council Ambujanagar unit won Certificate Appreciation for "Accident Free Million Man Hour Worked". 2008-09 IMC Ramkrishna Bajaj National Quality "Performance Excellence Trophy" in the Manufacturing Category. 2008-09 National Award from NCBM. Ambujanagar unit won "Best Environmental of

Excellence in Plant Operation" 28

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PRODUCTION PROCESS
The process in Ambuja cement is characterized in the following manner. Characteristics

Equipment is expensive and used for a solitary purpose. A very small variety of goods are produced. Goods are transported from one fixed work station to another.

Advantages

Greater specialisation. Optimum utilisation of workers and machinery. Low production costs per unit. Low stock-piling costs. Restricted handling of materials. Production control is simplified. High sales turnover. Division of labour. Equipment standardized. Products uniform.

Disadvantages

Expensive capital for equipments/machineries.

Jobbing:
Characteristics

General, all-purpose machinery. Products are generally capital goods. One task must be completed before the next may commence. Customers give specifications. Production processes are seldom repeated. Workers must be highly skilled. Control of production is simple.

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Batch production:
Characteristics

Falls between mass production and jobbing. One batch of products must be completed before work on the next one may begin. Customers give their specifications. Similar products produced on a batch basis, in large quantities.

Advantages

Greater flexibility in terms of quantity produced, factory layout and manufacturing process. Can adjust to changes in demand. Less time wasted during machinery-breakdowns. Less expensive machinery.

Disadvantages

Products take longer to produce. Larger quantities of semi-finished goods must be kept, hence increasing stockpiling costs. Cost per unit is generally higher.

PROCESS:This is a system for determining at which points in the production process deviations and deficiencies emerge. setting quality control

Workers and inspectors must be made well aware of the prerequisite standards, and tolerances must be set. A suitable number of inspection points must be decided upon. Reliable testing and inspecting measures must be used. A suitable number of inspections per inspection point must be decided upon.

Advantages of quality control

Dealers and customers are assured of the quality of the goods that they are purchasing. It can serve as a reliable basis for wage incentive schemes. Workers are encourage to continue to produce goods of a certain standard. Production costs can be lowered. It can lead to improved product design and quality.

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Work study is a scientific measure of working methods, with the aim of finding more effective methods, machinery and materials, standardising them and determining a standard time for every method. Method study analyses all working methods and the organisation of machinery with a mind to finding more effective production methods. Work measurement is an evaluation of exactly how long it takes suitably skilled workers, labouring at maximum tempo (without adversely affecting health) with standard and according to stipulated requirements, to complete a given task.

Hygiene requirements for workers Firewalls dividing rooms and other parts of the factory General safety and security Environmental conservation Flammable materials stored underground Availability of fire-fighting equipment Two exits in every room Fire escapes Structural safety of walls, floors and roofs Protection against machinery

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PLANT PHOTOS

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34

INTRODUCTION
The man power is the main source of personal department. The personal department is concern with man at work and relationship with a view to achieve the desired goal of organization. This department covers all level of personal, including the blue collar employees and white collar employees. These employees are helpful in achieving the organizations goal. According to B.P.Terry Personal Management is concern with the obtaining and maintaining of satisfaction and satisfied work force. GUJARAT AMBUJA CEMENT LIMITED has time office department which is doing function of personal management. The business of the unit is regularly so there is a one type of employees in the unit and there is permanent. The day I had taken visit in this unit the total employees of the firm is 4412. Who all are permanent. The relationship between employees and executive is good. There is no any case of conflict created. They always help to achieving organization desired goal.

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RECRUITMENT AND SELECTION

Necessity for recording new employees arises for much reason. New employees are requires due to many reason like retirement, die or become incapacitate of some employee. Seasonal fluctuation in business also causes a constant change in the work force of much company. Expansion of business requires new man. Scientific recruitment leads to the development to maintenance of satisfied employees, increased production, reduced cost of production per unit finished goods. Error in recruitment lead to high labor, turnover, excessive wastage, reduces production, affect quality adversely, bring down total scale and ultimately leads to over all reduction in profitability. Various method recruitment may be classified into two groups as under. 1. Direct method 2. Indirect method

Now we discuss in details about this two method.

1. Direct method Under this method the management itself undertakes recruitment of employees. The main direct method of recruitment is as under. 1. 2. 3. 4. 5. Recommendation of present employees Promotion to existing employee Notice attributed of the factory Advertisement in news paper Waiting list

2. Indirect method When for requirement of man power, a company makes use of individual or institution as an intermediary. It is known as an indirect method of recruitment. These are as follows. 1. 2. 3. 4. Contractor Labor union Jobber Employment exchange

AMBUJA CEMENT LIMITED has its own selection procedure. First they give advertisement in newspaper for particular post, then qualificandidate are called for interview than candidates are selected or recruited.

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TRAINING & DEVELOPMENT

INTRODUCTION Every organization need to have well trained experienced people to perform the activity that needed to be done with the help of training a person can improve his ability and training to be done good job. Training can be defined as Training is an act of increasing the knowledge and skill of a worker for doing a certain job. The training is very important to help in personnel development, prevention from accident, higher productivity with the use of efficiency etc. According to the type of employee training program can be divided into following type. (A) Method of training for worker1. 2. 3. 4. on the job training Apprentice training Vestibule training Internship training

(B) Method of training to supervisor 1. 2. 3. 4. Conference method Case method Roll playing method Business game

ACL sends its employee for training to various training institutes like: Indian Institute of Engineering Management Baroda Productivity Council National Productivity Council Institute of Cement Building Material (ICBM) The seminar and training programs one also held within the campus premises. The training needs one determined by the departmental needs and the concerned officers.Development is a related process but can be rather be more important for managerial level employees, who require much of theoretical knowledge and for a long duration of period.

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JOB DESCRIPTION
Job description means to give the information and guidance to candidate about his particular job. It is a process of information to employee about his status responsibility and duties. Any person who selected as a supervisor if he is not familiar with duty than what he does so in any company job description is required.

In AMBUJA CEMENT LIMITED when a person is recruited or is transferred to other section, the supervisor manager of that section gives full instruction about the job. The superior and manager observe the work of their subordinate continuously when they feel it necessary. The information included in job description is as under.

1. 2. 3. 4. 5. 6.

Working condition. Nature of the job. About candidates duties and responsibility. Relation with the job. Tools and equipments involves in doing job. About superior from whom he/she will have to Control and guide.

Thus, This is the job description in ACL.

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PROMOTION AND TRANSFER POLICY

If a person doing good job in solving organization problems than a company give promotion from one job to other high job. It means upward advancement of an employee in that type of upward advancement command better wages, better status and higher responsibility and authority etc. The transfer policy is necessary for the employees for suitability from one job shift or plant to another at the same or another place. Where his salary, status and responsibility remain same is called transfer. At present ACL has only one plant in India and so there is no possibilities for transfer of employees or dated to production. But after completation of their Shimala project, the employees will transfer according to their requirement.

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WAGES AND SALARY ADMINISTRATION

Service rendered by individual to business organization has adequately paid. This compensation generally comprises cash payment. This called wages. The wages and salary administration refers to the establishment and implementation of sound policies and practices of employee compensation. Government has enacted legislative measure to protect the wages earns right. There are many wages given by wage legislation. In ACL wages and salaries are paid on 7th day of every month. This unit is not making cash payment but each worker and staff member has his account in STATE BANK OF SAURASHTRA at Kodinar branch when company informs to the salary the amount is credited each employees and members account. In ACL the following grades are given to the employees. A Grade M1 to M5 B Grade wage board C Grade Trainees : : : Management Category Workers Category Trainees & Blue Collar

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GRIEVANCE HANDLING PROCEDURES

There is hardly a company which fluctuation absolutely smoothing at times. In some company employees have complaints against their employer or management due to any kind of dissatisfaction arises. This is called grievances. Grievances can be a various type concerning to wages, supervision, individual, advancement, general work condition etc. The workman in the first instance may obtain grievance form from personnel department and submit his grievance in person, in prescribed form to his immediate supervisor who would. They register the time and date of receipt of form in the column meant for the purpose in grievance form. Then after examination if he finds grievance justified, they takes action within 5 days. Thus in this way they solved the grievance if they feel right. However, till today there is no any complain noticed from employees. It means that relations between employees and executive or management are satisfactory.

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PROVIDENT FUND SCHEME

Provident fund scheme is very useful for the employees. Provident fund is such type of fund, which is given to the employees on the time of his recruitment at prescribed age. According to pension act 1957 it is compulsory to give the facilities of provident fund scheme for those companies which have more than 20 workers and using electricity power. In AMBUJA CEMENT LIMITED have more than 4400 employees. So they have compulsory to accept provident fund scheme. This unit is deducting 11% Provident Fund from the salary of every employee. The bank provides more interest on Provident Fund of all workers.

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WORKING UNDER E.S.I. SCHEME

The abbreviation E.S.I. means Employee Stale Insurance scheme. For this scheme the employees stale insurance commission has been established from both central and state government under employees get him injured during the time of company at company factory, he is rightful to get every expenses from company made on his case. In AMBUJA CEMENT LIMITED this E.S.I. scheme is adopted by management for employees. During my industrial visiting in factory, I was not under E.S.I. scheme because I was not employee. Under this scheme this firm has to give such medical treatment free of charges if he is injured during at working in factory.

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44

INTRODUCTION
Marketing management is the process of planning and executing the conception pricing promotion and distribution of ideas goods and service to create exchange that satisfy individuals and organization goal. Marketing management can be practices in any market. In modern age goods and services are produced in anticipation of demand and so the producers must try to create demand, otherwise they will have to close down the business sooner or later. And the demand can be created by marketing their products. In this way a firm which produced multiple products, but its product demand is less than what will be happen? These types of firms wind up earlier. So in modern age it is necessary to marketing their products. AMBUJA CEMENT LIMITED has a separate department of marketing their product in market its all the products are sale in open market so they have needle Very much. Their marketing department is well established. Because in open market, there are many company to sell each their product. They have international trade so they have also some many expert of this type of trade. The function of marketing department is done by Chairman, Vice-chairman, managing director and marketing expert in this firm.

45

MARKETING SEGMENTATION
A company, which decides to operate from some part of market normally, can not serve all the customers in market. To maximum utilization of available market and resources to the sales the company adopts the market segmentation policy. ACL adopts market segmentation on following basis.

1. Trade segment: It is the biggest segment, which covers 60% of ACL market. It is the segment of the retailers where brand identification, quality of product and market penetration play very important role. 2. Builder: It is the second largest segment and very effective segment in cement marketing of builders. Builders generally purchase in large quality so price and credit policy plays vital for this segment. 3. Government & institution: Government & institution agencies are the largest consumer contribution about 25-30% of all India cement consumption.

46

PRICING POLICY
It is not wrong to say that pricing policy is the most important and crucial decision in the area of marketing organization. The revenues from sales depend mainly on the level of price. Price is the factor which gives life to economic system. The entire firm has its own pricing policy in accordance with its objective.

When it comes to setting up the price, it is the most crucial decision. Price decides the market share and profitability. So any mistake in deciding price will affect too much to unit. ACL follows two types of pricing policy.

A. Cost oriented pricing B. Competition oriented pricing

In this day the price of product is Rs. 151 per bag. They give 30 days of credit facility to reputed agency and 2% of cash discount if the payment is made with in one week.

47

CHANNEL OF DISTRIBUTION
After production, the next problem is faced by a producer is that of selling distribution because production is made to satisfy the needs of the costumers, so it must reach to the costumers for whom it is made. This, a way through which goods flow the producer to the consumer is called channel of the distribution. The channel of distribution of ACL is as under. Manufacture

Direct consumer

Regional Sales officer Sub Officer Dealer

Consumer

Sub dealer Consumer

ACL directly to the consumer sales cement only when the order is in huge quantity. These consumers include Government public sector organization, private organization, etc.

48

SALES PROMOTION
Sale promotion is an activity which aims at sales expansion. Its basic object is to increase sales through special efforts, proper selection of them provision of their training attempts to improve relation with distributors and consumer advertising etc. are the activities which essential aim at increasing sales promotion refer to all activities for enhancing the total sale and demand. So in the area of modernization sales promotion of product is required. ACL adopts various types of sales promotion tools like discounts, gifts, and some other incentives and sometimes company send their dealers and distributors on tour. ACL has adopted 3 levels of sales promotion as under. A. At a Dealer level B. At a Salesman level C. At a Consumer level Thus we can say that sales promotion is not expenditure; it is an investment which provides a lot of rich dividend. Thus it is integral part of manufacture in efforts.

49

ADVERTISING
Advertising is the most important of all tools of promotion of sales. There will be hardly a field in which advertisement not used for sales expansion. It is not wrong to say that Modern age of advertising. In the absence of advertising sales on large scale would have been impossible and production on large scale would have materialized. Markets for good and services would have remained local in absence of advertising. ACL has its own full fledge advertising staff. ACL has given advertising contract to private agency named TRIKAYA GREY . This agency looks after all the function regarding advertising. The executive select proper media to give the advertisement than this agency give advertisement. ACL has use under mentioned media for advertising. PRINTED MEDIA News paper, magazine and periodicals. OUTDOOR MEDIA Wall printing, poster and hoardings, bus, panels, railway bogies. AUDIO VISUAL Television, radio and theatre.

50

MARKETING RESEARCH
Marketing is the systematic gathering of information, recording and analysis of data, to problem concern with market. Marketing Research is basis thing needed for the company. Without marketing research the company not able to known which pattern, size, colors of products is demanded by the consumers about its product. By developing a good research plan company knows that how its product sold in market, so that is essential function. GUJARAT AMBUJA CEMENT LIMITED has an open market to sale their products in market. So they have needed to research the market. They have a special marketing department for all this tools to sales promotion. So this firms sale is more in the market.

51

52

INTRODUCTION:
It is said, Finance is the arms and legs of business . A potential and capable management can run the department very effectively. In finance department each and every decision should be taken in such way that every pie of money should be utilized in adequate manner.

In ACL the finance department is headed by the vice president, under him there are two groups of executives, one group of executives working at corporate office, Bombay. The second group of the executives working at side and is headed by the senior manager. Under him there are two sectional managers namely costing manager and account manager. Under those managers there is Deputy Manager, Assistant manager, Account Officer, Account assistants who are responsible to their respective levels.

53

ORGANIZATION OF FINANCE & ACCOUNT DEPARTMENT:

V. Performance Appraisal (Finance) (Mumbai)

Manager (Plant Office)

Sr. Manager Head (Mumbai Office)

Financial

Controller

Dy, manager

Dy. Manager (Cost) Manager (a/c)

Sr. A/c Officer

Costing Officer

Dy. Manager (a/c)

Ass. A/c Officer

Ass. Officer

Ass. Manager

Sr. A/c Assistant

Sr. A/c Officer

A/c Assistant

54

FINANCIAL PLANNING:
Financial Planning means planning of finance. In the planning of finance not only planning is done for spending the money but also planning is done for finding and evaluating source of finance.

As per Government rules and regulations ACL has the financial year from July to June and on that basis at the year, Balance sheet is prepared and net profit is found out.

Finance Department of ACL explains financial planning as systematic arrangement of financial resources of the company in order to reach the current & future finance requirement. It consists of budgetary control, profitability planning, sales & cash budgeting.

Sources of funds in ACL are: 1. INTERNAL SOURCE: Equity shares Reserves & surplus.

2. EXTERNAL SOURCE: Secured Loans Unsecured Loans Deposits Debentures.

It is tried to collect the fund at very cheap rates & utilized in the best possible manner. For best utilization of funds, ACL prepares two types of plan. Two are as below:

55

A. SHORT TERM PLANNING Financial planning is done for less than once in a year, so it is known as short-term planning.

ACL does it in weekly, fortnightly, monthly and quarterly basis. Account Department decides the need for fund and its application as per weekly, fortnightly, monthly and quarterly basis.

B. LONG TERM PLANNING Planning done for more than one year then it is called long term planning. ACLs financial year is July-June. So, ACL generally does its long term planning in the month of June. ACL does its financial planning on yearly, two yearly, and five yearly.

56

CAPITAL STRUCTURE:
The capital structure is made of debt and equity securities, which compromises a firms finance of its assets. It is permanent financing of firm, represented by long terms debt plus preferred stock plus net worth. Capital Structure of ACL is as: Particulars Rs (In crores) 31-12-2009 (A) Share capital Authorized Capital: 250, 00, 00,000 Equity shares of Rs. 2 each 15, 00, 00,000 Preference shares of Rs. 10 each Issued Capital: 152,40,40,900 Equity shares of Rs. 2 each Subscribed Capital: 152,37,11,380 Equity shares of Rs.2 each 304.74 304.74 TOTAL 304.74 304.81 304.81 150.00 650.00 500.00

(B) Reserve & Surplus: General reserves Share premium Capital reserve Capital Redemption Reserve Subsidies Debenture Redemption Reserve Income & Exp. A/c TOTAL (C) Loans & Funds Secured loan Unsecured Loan TOTAL 100.00 65.70 165.70 1.95 25.00 664.96 61162.92 4136.70 1192.03 132.45 9.93

57

About Equity Shares:

Share Transfer Agents: Sharepro Services, Satam estate, 3rd floor, Above Bank of Baroda, Cardinal Gracious road, Chakala, Andheri (E), Mumbai 400 099. OR Their Investors Relation center at: 912, Raheja Center, free press journal road, Nariman Point, Mumbai 400 021.

Dividend Payment date: Within, The seven working days from the date of Annual General Meeting.

Listing Shares: NAME OF THE STOCK EXCHANGE 1. The stock exchange, Ahmedabad 2. The stock exchange, Mumbai 3. National stock exchange of India Ltd. 4. The Calcutta stock exchange 58 20210 500425 AMBUJACEM STOCK CODE

Association Ltd. 5. The Delhi stock exchange 07021

Association Ltd.

58

Distribution of Share Holding: The shareholding distribution of equity shares as on 31st December, 2009 is as below:

Share Transfer System: Share send for transfer in physical form are registered by ACLs registered and share transfer agents in about 15 to 20 days from the day of receipt of the documents, provided the documents are found in order. Share under objection are returned within two weeks. The transfer committee meets generally on a weekly basis to consider the transfer proposal.

DISTRIBUTION OF SHARE HOLDING:

CATEGORY Body Corporate (1.40%) Foreign Promoters (45.64%) Foreign investors (including FIIs )(22.91%) OCB, NRIs (1.34%) Mutual (16.89%) GDR Holders (1.90%) Indian Promoters (0.79%) Funds, Banks & Institutions

NO.

OF

SHARES 21332630 69539377 34905409 20416097 25740059

28952518 12081909

Other (9.13%)
TOTAL (100%)

13907991 15237111380

59

The shareholding distribution of equity shares as on 31st December, 2009 is as below: Share holding Pattern:

NO. OF EQUITY SHARES

Less than 50 51 to 100 101 to 500 501 to 1000 1,001 to 5,000 5,001 to 10,000 10,001 to 50,000 50,001 to 1,00,000 1,00,001 to 5,00,000 5,00,001 & above Total

NO.

OF

NO. OF SHARS

PERCENTAGE OF SHAREHOLDIG

SHARE HOLDES
120245 43095 44915 11564 20195 3946 2292 141 165 128 246686

3066287 3876307 11697348 9110676 53451013 28498276 42316750 10024450 36755350 13249143 15237110

0.20 0.25 0.77 0.60 3.51 1.87 2.78 0.66 2.41 86.95 100.00

60

FIVE YEARS PERFORMANCE:

( Rs. in Crore )
Particulars
2005 2006 (18 months) salse Operating Profit Cash Profit Profit before Tax 2606 799 714 519 6268 2247 2168 1842** 5705 2239 2163 2712 ** Profit after Tax Gross block New worth Debt Cash EPS (Rs.) EPS (Rs.) Dividend (%) Capacity Million Tons Production Tons Million 468 3827 2172 1127 5.28 3.46 90* 13.30 12.80 1503 5177 3484 865 14.29 10.09* 165 16.30 22.63 1769 5928 4655 3300 14.26 11.61 175 18.50 16.86 6235 1954 1922 1970 ** 1402 7654 5669 289 12.62 9.21 110 22 17.75 1218 8939 6468 166 13.78 7.99 120 22 18.83 7077 2122 2100 1803 2007 2008 2009

Note: * Includes 30% on enlarged capital after issue of Bonus Shares in the ratio of 1:2 **Includes exceptional Items of: Rs.308.33 Crores for the year 2008 Rs.785.89 Crores for the year 2007 Rs47.52 Crores for the period 2005-06(18 months)

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MANAGEMENT OF FIXED ASSETS:

Fixed assets are the tangible assets, which cannot be turned into cash on short period of time. Management of fixed assets is the most important decision in the field of finance for any organization and especially in cement industry, which has its most of investment in fixed assets.

In ACL budget committee prepares a separate budget for every department and does continuous comparison.

Company having the investment of 6154.47 crores in fixed assets.

Capitalization:
Capitalization refers to the decision regarding the total requirements of the long term funds. Any imbalance between realization value of assets and total capitalization i.e. long term funds results is over or under capitalization.

Over Capitalization:
Over capitalization means real value of shares is higher than book value. It occurs when the realizable assets are less than the long term funds of the company.

Under Capitalization:
Under capitalization occurs when the real value of the shares is less than the book value. It occurs when realizable values of assets are more than the long term fund of the company.

ACL is under capitalization this reflect the progressive and healthy stock of the company.

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LEVERAGE ANALYSIS:
Definition: The employment of an asset or source of funds for which the firm has to pay a fixed cost of fixed return may be termed as leverage. The leverage associated with investment (asset acquisition) activities is referred to as operating leverage, while leverage associated with financing activities is called financial leverage. Operating leverage is determined by the relationship between the firms sales revenues and its earnings before interest and taxes. Financial leverage represents the relationship between the firms earnings before interest and taxes and the earnings available for ordinary shareholders.

Data for Leverage Analysis Particulars Year 2009 (12 months) (Rs. In crores) Net Sales Less: Variable Cost 1. Manufacturing Expense 2. Excise Duty 3. Administrative and selling expense Contribution Less: Fixed Cost 1. Administrative and Selling Expense 2. Depreciation and Amortization EBIT Less: Interest PBT Less: Provision for current tax Provision for deferred tax PAT 584.93 584.93 1218.080 63 1751.22 296.99 2048.21 1825.73 22.72 1803.01 2286.64 36.17 1524.67 3847.48 3873.94 7721.42

A. Degree of Operating Leverage = Contribution / EBIT = 3873.94 / 1825.73 = 2.12

B. Degree of Financial Leverage = EBIT / PBT =1825.73/1803.01 = 1.01

C. Degree of Combined Leverage = Contribution / PBT = 3873.94 /1803.01 = 2.15

64

WORKING CAPITAL MANAGEMENT: Management of Receivables:

In the present period of the competitive market to increase sales to meet competition it has become necessary to provide credit facility but it is also essential to receive the bills as speedily as possible.

Generally ACL allows credit for 30 days but in some special cases it extends the period of credit.

To collect cash quickly ACL do: Give cash discount if the payment is made within 1 week. The sales office in different district i.e. Ahmedabad, Rajkot, Jamnagar, Bhavnagar, etc. this collects cash or cheque directly from dealers.

Management of Inventories: Primarily executives in production, purchasing and marketing department take decisions relating to inventories. Usually purchasing shapes Raw material policies & production department, work in progress is influenced by decision of production department and the production & marketing department executives shape finished goods policies. The finance manager has the responsibility to ensure that inventories are properly monitored and controlled. Management of Cash and Bank Balance: Cash and Bank balance are very important factors for any industrial unit to carry out routine transactions. Cash and bank balance are essential but a large amount of cash and bank balance can be harmful so it is necessary to maintain cash and bank balance up to date.

ACL is particular about this matter. It tries to maintain adequate amount of cash and bank balance.If there is essential cash and bank balance, than ACL invests that into Government securities post office deposit etc. In case of shortage of cash and bank balance ACL sales these securities and gets cash. 65

 Working Capital Management:o Receivable :In the present period of competitive market to increase sales to meet competition it has become necessary to provide credit facility but it is also essential to receive the bills as speedily as possible.

Generally ACL allows credit for 30 days but in some special cases it extends the period of credit.

o Cash:Cash and Bank balance are very important factors for industrial unit to carry out routine transactions. Cash and bank balance are essential but a large amount of cash and bank balance can be harmful so it is necessary to maintain cash and bank balance up to date.

ACL is particular about this matter. It tries to maintain adequate amount of cash at hand and bank balance. o Inventories:Primarily executives in production, purchasing and marketing department take decisions relating to inventories. Usually purchasing shapes raw material policies and production department work in progress is influence by decision of production department and the production and marketing department executives shape finished goods policies. The finance manager has the responsibility to ensure that inventories are properly monitored and controlled.

66

67

INTRODUCTION:

Working capital refers to that part of the firms 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 in to cash and these cash flows out again in exchange other current assets. Hence, it is also known as revolving or circulating capital or short term capital. According to Genesten berg, circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another, as for example, from cash to inventories, inventories to receivables, receivables into cash. Working capital, in general practice, refers to the excess of current assets over current liabilities. Management of working capital therefore, is concerned with the problem that arises in attempting to mange the current assets, the current liabilities and the interrelationship that exist between them. In other words it refers to all aspects of administration of both current assets and current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e., it is neither inadequate nor excessive. This is so because both inadequate as well as excessive working capital positions are bad for any business. Inadequacy of working capital may lead the firm to insolvency and excessive working capital implies idle funds which earn no profits for the business. The goal of working capital management is to ensure that a firm is able to continue its operation. And that is has sufficient ability to satisfy both maturing short term debt and upcoming operational expenses. The better a company manages its working capital, the less the company needs to borrow. Even companies with cash surpluses need to manage working capital to ensure those surpluses are invested in ways that will generate suitable returns for investors

68

STATEMENT OF THE PROBLEM

A study of working capital is of major importance to internal and external analyst because of its close relationship with the current day to day operations of a business. Now-a-days many companies are not performing well. Major reason for this is under utilization of capacity and inefficiency in the technical and financial management.

Efficient management of working capital is the key to the success of every business. In this study, an effort is made to analyze the working capital management and its components in Ambuja Cements Limited. Hence the problem is stated as A study to assess the working capital management of The Ambuja Cements Ltd, Ambujanagar Unit.

69

SCOPE OF THE STUDY

Working capital is referred to as the life and blood of the business firm. In the event of working capital being ill-managed, the flow of money gets choked, raw materials and supplies are interrupted, dues and payments get delayed and clamor for clearance and outstanding obligations and commitment gathers momentum. All these may entail virtual stoppage of operations, jeopardizing the viability of the firm.

While inadequate working capital has the potential to disrupt production sales operations of otherwise well-run and managed firms, excessive working capital is equally unwarranted in the view of its adverse impact on profitability. Hence, effective management of working capital is imperative. Working capital management is concerned with the problems that arise in attempting to manage current assets, current liabilities and the interrelationships that exit between them. Working capital is the single best method of determining the position of the company or how well that company may be doing.

This study is conducted to analyze the working capital of The Ambuja Cements Ltd., Ambujanagar Unit. The study involves the analysis of working capital, liquidity, and profitability position as well as the operational efficiency of the company. For the purpose of this, the study has been conducted for the period of the last two years of the Ambujanagar Units data.

70

OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital is managed effectively, monitered effectively planed properly and reviewed periodically at regular intervals to remove bottlenecks ,if any, the company cant earn profits and increase its turnover. With this primary objective of the study, the following further objectives are framed for a depth analysis. To study the working capital management of Ambuja Cements Ltd. , Ambujanagar. To study the optimum level of current assets & Current liabilities of the company. To study the working capital components such as Receivable accounts, Cash management, Inventory position. To study the way & means of working capital finance of the Ambuja Cements Ltd., Ambujanagar To estimate the working capital requirement of Ambuja Cements Ltd., Ambujanagar. To study the Operating & Cash cycle of the company.

71

RESEARCH DISIGNS

This is the most important aspect of research methodology. There are various methods of designing the research. Though, I have taken Working Capital analysis of Ambuja Cement Ltd. The research is undertaken for the measure the strengths and weaknesses of the company. Thus, the research is exploratory in the nature.

72

SOURCE OF DATA

Secondary data Secondary data were obtained from the internal records of the AMBUJA CEMENT LTD. from the published annual reports of the company, Journal and Magazines and also other basic related to them analysis of financial performance. Method to assess the companys method of observation of the work in finance departments in followed.

Sources of secondary data Most of the calculations are made on the financial statements of the company provides statements. Referring standards texts and referred books collected some of the information regarding theoretical aspects.

Period of study A Five year period from 2005 to 2009 has been taken for study. Time of Study 1St June to 15th July2010 Tools of Analysis Working Capital Analysis Representation Tables, Figures and Charts are used for the representation of the data.

73

LIMITATIONS OF THE STUDY

The limitations of the study are as follows The study is restricted for a period of two years, The financial statements contain only historical data and would not necessarily reflect the future, The reliability and accuracy of calculations and interpretation depends very much on the information supplied by the company, Lack of professional knowledge of the researcher, In this short period of time, the research could not go through all aspects of working capital, Authorities were reluctant to reveal full information about the working of the company.

74

WORKING CAPITAL LEVEL & ANALYSIS

WORKING CAPITAL LEVEL: The consideration of the level of investment in current assets should avoid danger points excessive & inadequate investment in C.A should be avoided as it impairs the firms profitability as idle investment earns nothing. On the other hand inadequate amount of working capital can threatened solvency to meet its current obligations. It should be released that the W.C need of the firms may be fluctuating with changing business activity. This may cause excess or shortage of W.C frequently. The management should be prompt to initiate an action & correct imbalance.

SIZE OF WORKING CAPITAL TABLE 1PARTICULAR INVENTORY SUNDRY DEBTORS CASH & BANK LOAN & ADVANCES TOTAL GROSS W.C CREDITORS OTHER LIABILITY PROVISION TOTAL NET W.C 2009 35136.48 277.35 672.76 7748.86 43835.45 15313554.07 96.50 1189.41 (15271004.53) (Figures in Rs. Lakhs) 2010 17251.56 1480.61 365.02 5308.10 24405.29 129503.52 93.30 1646.30 (106837.83)

OBSERVATION: From the above table we can see that company has more current liabilities than their current assets. So the net working capital is going negative but compare to 2009 the N.W.C has improved in the current year.

75

WORKING CAPITAL TREND ANALYSIS

In W.C. analysis, the direction at changes over a period of time is of crucial importance. W.C is of the important field of management. It is therefore very essential for an analysist to make a study about the trend & direction of W.C over a period of time. Such analysis enables as to study the upward and downward trend in C.A & C.L and its effect on the W.C position.

In the words of S.P Gupta, the term trend is very commonly used day-to-day conversion trend, also called secular or long term need is the basic tendency of population, sales, income, C.A & C.L to grow or decline over a period of time.

Emphasizing the importance of W.C trends have pointed out that analysis of W.C trends provide as basis to judge if the practice & privilege policy of the management with regard to W.C is good enough or an importantis to be made in managing the W.C funds.

WORKING CAPITAL SIZE TABLE 2YEAR NET W.C W.C INDICES 2009 (15271004.53) 100 (Rs. In lakhs) 2010 (106837.83) 69.96

OBSERVATIONS:

From the above table, we can see that the Net Working Capital has decreased by 30.04 that is in the favor of the company as the N.W.C is negative and it has reduced.

76

CURRENT ASSETS ANALYSIS

Total assets are basically classified in two parts as fixed assets & current assets. Fixed assets are in the nature of long term or life time for the organization. C.A covers in the cash in the period of 1 year. It means that C.A are liquid assets or assets which can convert into cash within a year.

TABLE 3 YEAR INVENTORY Rs. DEBTORS Rs CASH & BANK Rs. LOAN & ADVANCES Rs. TOTAL C.A TREND 43835.45 100 2009 35136.48 277.35 672.76 7748.86

(Rs. IN LAKHS) 2010 17251.56 1480.61 365.02 5308.10

24405.29 55.67

OBSERVATION:

From the above table, we can see that the trend of the companies investment in current assets differs from the previous. In 2009, company has invested more in inventory & advances but the trend has changed in 2010 & company has invested in sundry debtors. But reduced his cash balance by 307.74 which will affect the absolute liquidity condition

77

COMPOSITION OF CURRENT ASSETS:

Analysis of current assets components enable one to examine in which components the working capital fund has locked. A large tie up of funds in inventories affects the profitability of the business or the major portion of C.A is made up of cash alone the profitability will be decreased as cash is non earning assets. TABLE 4 PARTICULAR INVENTORY SUNDRY DEBTORS CASH & BANK LOAN & ADVANCES TOTAL 2009 80.16 0.63 1.53 17.68 100 (NO. IN %) 2010 70.69 6.07 1.50 21.74 100

OBSERVATION:

From the above table, we can see that company has reduced 10% of its investment in Inventory & increased its investments in sundry debtors & advances by 5.44% & 4.06% respectively.

78

CURRENT LIABILITY ANALYSIS

Current liability means the liability which have to pay in current year. It includes sundry creditors, short term loan & provision. C.L also includes band O.D & short term loan. Company has to pay interest thus the management of C.L has importance.

TABLE 5YEAR CREDITORS Rs. OTHER LIABILITIES Rs. 2009 % to total liability Indices of C.L 2010 % to total liability Indices of C.L over previous year. 8.456 96.683 129503.52 98.67 93.30 0.08 100 100 1531354.07 99.92 96.50 0.01

(Rs IN LAKHS) PROVISION Rs. TOTAL Rs.

1189.41 0.07

1532639.98 100

100

1646.30 1.25

131243.12 100

138.413

OBSERVATIONS::

From the above table, we can se that in 2009 company has invested hughly in the creditor that means company has borrowed hugely for the investment in current assets & other operating works. In 2010 company has reduce its creditors by Rs. 1401850.55 lakh which will help to acvhieve its liquidity position to a good extent. Also create provision for the future in theis year more than previous year. 79

Changes in working capital

There are so many reasons to changes in working capital as follow

1. Changes in sales and operating expanses: The changes in sales and operating expanses may be due to three reasons There may be long run trend of change e.g. The price of raw material say oil may constantly raise necessity the holding of large inventory. Cyclical changes in economy dealing to ups and downs in business activity will inflence the level of working capital both permanent and temporary.
Changes in seasonality in sales activities

2.

Policy changes:-

The second major case of changes in the level of working capital is because of policy changes initiated by management. The term current assets policy may be defined as the relationship between current assets and sales volume.

3.

Technology changes:The third major point if changes in working capital are changes in technology

because change sin technology to install that technology in our business more working capital is required.

A change in operating expanses rise or full will have similar effects on the levels of working following working capital statement is prepared on the base of balance sheet of last two year.

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TABLE 6 PARTICULAR 2009 2010

( FIGURES IN LAKH Rs.) CHANGES IN W.C

CURRENT ASSETS INVENTORY SUNDRY DEBTORS. 35136.48 277.35 17251.56 1480.61 17884.92 (1203.26)

CASH & BANK LOAN ADVANCES GROSS W.C CURRENT LIABILITY SUNDRY CREDITORS OTHER LIABILITIES PROVISIONS NET W.C &

672.76 7748.86

365.02 5308.10

277.74 2440.76

43835.45

24405.29

19430.16

1531354.07

129503.52

1401850.55

96.50

93.30

3.2

1189.41 (15271004.53)

1646.30 (106837.83)

(456.89) (15164166.7)

OBSERVATIONS: From the above table we can see that company has reduced his sundry creditors by paying their amount & increased the provision for short term & government regulations. Also company has reduced investment in inventories & increased its amount of debtors & advances

81

OPERATING CYCLE
The need of working capital arrived because of time gap between production of goods and their actual realization after sale. This time gap is called Operating Cycle or Working Capital Cycle . The operating cycle of a company consist of time period between procurement of inventory and the collection of cash from receivables. The operating cycle is the length of time between the company s outlay on raw materials, wages and other expanses and inflow of cash from sales of goods. Operating cycle is an important concept in management of cash and management of cash working capital. The operating cycle reveals the time that elapses between outlays of cash and inflow of cash. Quicker the operating cycle less amount of investment in working capital is needed and it improves profitability. The duration of the operating cycle depends on nature of industries and efficiency in working capital management.

Calculation of operating cycle

To calculate the operating cycle of ACL. used last two year data. Operating cycle of the ACL. Vary year to year as changes in policy of management about operating control.

According to the information provided by the company, we calculate operating cycle as below:

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TABLE 7PARTICULAR INVENTORY PERIOD 2009 35136.48 / 2 114598.76 / 365 55.96 277.35 / 2 85923.95 / 365 0.59 56.55 = 57 DAYS 2010 17251.56 / 2 114230.16 / 365 27.56 1480.61 / 2 82341.29 / 365 3.28 30.84 = 31 DAYS

ACCOUNTS RECEIVABLE PERIOD TOTAL OPERATING CYCLE

Assumption: Here in Accounts Receivable Period, we have taken Sundry Debtors as Accounts Receivable.

OBSERVATION:

Operating cycle of ACL shows the numbers of day have decreased in this year. It reflects the efficiency of management. Days of operating cycle shows period of lock of funds in current assets, if no of day are more than it increases the cost of funds as taken from outside of the business. In 2009 the operating cycle was of 57 days which is reduces up to 31 days which shows efficient management of operations.

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WORKING CAPITAL RATIO ANALYSIS

INTRODUCTION

Ratio analysis is an important and age-old technique. It is a powerful tool of financial analysis. It is defined as the indicated quotient of two mathematical expression and as the relationship between two or more things. Systematic use of ratio is to interpret the financial statement so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined.

A ratio is only comparison of the numerator with the denominator. The term ratio refers to the numerical or quantitative relationship between two figures. Thus, ratio is the relationship between two figures, and obtained by dividing the former by the latter. Ratios are designed show how one number is related to another. The data given in the financial statements are in absolute form, are dump, and are unable to communicate anything. Ratios are relative form of financial data and very useful technique to check upon the efficiency of a firm. Some ratios indicate the trend, progress, or downfall of the firm.

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ROLE OF RATIO ANALYSIS

Ratio analysis helps to appraise the firms in the term of there profitability and efficiency of performance, either individually or in relation to other firms in same industry. Ratio analysis is one of the best possible techniques available to management to impart the basic functions like planning and control. As future is closely related to the immediately past, ratio calculated on the basis historical financial data may be of good assistance to predict the future. E.g. On the basis of inventory turnover ratio or debtor s turnover ratio in the past, the level of inventory and debtors can be easily ascertained for any given amount of sales Similarly, the ratio analysis may be able to locate the point out the various arias which need the management attention in order to improve the situation. E.g. Current ratio which shows a constant decline trend may be indicate the need for further introduction of long term finance in order to increase the liquidity position. As the ratio analysis is concerned with all the aspect of the firm s financial analysis liquidity, solvency, activity, profitability and overall performance, it enables the interested persons to know the financial and operational characteristics of an organization and take suitable decisions.

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LIMITATIONS OF RATIO ANALYSIS The basic limitation of ratio analysis is that it may be difficult to find a basis for making the comparison Normally, the ratios are calculated on the basis of historical financial statements. An organization for the purpose of decision making may need the hint regarding the future happiness rather than those in the past. The external analyst has to depend upon the past which may not necessary to reflect financial position and performance in future. The technique of ratio analysis may prove inadequate in some situations if there is differs in opinion regarding the interpretation of certain ratio. As the ratio calculates on the basis of financial statements, the basic limitation which is applicable to the financial statement is equally applicable In case of technique of ratio analysis also i.e. only facts which can be expressed in financial terms are considered by the ratio analysis.

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CLASSIFICATION OF WORKING CAPITAL RATIO

Working capital ratio means ratios which are related with the working capital management e.g. Current assets, current liabilities, liquidity, profitability and risk turnoff etc. these ratio are classified as follows:

1. Efficiency ratio

The ratios compounded under this group indicate the efficiency of the organization to use the various kinds of assets by converting them the form of sale. This ratio also called as activity ratio or assets management ratio. As the assets basically cate gorized as fixed assets and current assets and the current assets further classified according to individual components of current assets viz. investment and receivables or debtors or as net current assets, the important of efficiency ratio as follow:

1. Working capital turnover ratio 2. Inventory turnover ratio 3. Receivable turnover ratio 4. Debtors turnover ratio. 5. Current assets turnover ratio

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Efficiency ratio

1.

Working capital turnover ratio It signifies that for an amount of sales, a relative amount of working capital is

needed. If any increase in sales contemplated working capital should be adequate and thus this ratio helps management to maintain the adequate level of working capital. The ratio measures the efficiency with which the working capital is being used by a firm. It may thus compute net working capital turnover by dividing sales by working capital.

TABLE 8PARTICULAR SALES (Rs.) NET WORKING CAPITAL (Rs.) W.C. TURNOVER RATIO 2008 85923.95 (15271004.53) 5.63

( Rs. IN LAKHS) 2009 82341.29 (106837.83) 0.77

Observation: High working capital ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in working capital. achieve maximum sales with the minimum investment in working capital. In 2009, the W.C.R was 5.63 but the same is reduced to 0.77 due to reduce in sales & N.W.C. So from the above table we can say that the situation is in not the favor of the company.

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2) 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 good sold by average inventory:

Table 9 PARTICULAR C.O.G.S (Rs.) AVR.INVENTORY(Rs.) INV. TURN. RATIO 2008 114598.76 17568.24 6.52

(Rs. In lakhs) 2009 114230.16 8625.78 1.32

For calculating the average inventory total stock of the inventory is taken. We have assumed that there is no opening & closing stock of good in a particular year.

OBSERVATION: It was observed that Inventory turnover ratio indicates maximum sales achieved with the minimum investment in the inventory. As such, the general rule high inventory turnover is desirable but high inventory turnover ratio may not necessary indicates the profitable situation. An organization, in order to achieve a large sales volume may sometime sacrifice on profit, inventory ratio may not result into high amount of profit From the above table we can say that the C.O.G.S of the company has come down but due to reduction in the average inventory the ratio has come down.

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3) RECEIVABLE TURNOVER RATIO:

The derivation of this ratio is made in following way

Gross sales are inclusive of excise duty and scrap sales because both may enter in to receivables by credit sales. Average receivable calculate by opening plus closing balance divide by 2. Increasing volume of receivables without a matching increase

in sales is reflected by a low receivable turnover ratio. It is indication of slowing down of the collection system or an extend line of credit being allowed by the customer organization. The latter may be due to the fact that the firm is loosing out to competition. A credit manager engage in the task of granting credit or monitoring receivable should take the hint from a falling receivable turnover ratio use his market intelligence to find out the reason behind such failing trend. Table 10 PARTICULAR Gross sales Average a/c receivables Receivable ratio turnover 2009 95482.61 277.35 / 2 688.54 (Rs. In lakhs) 2010 89978.97 1480.61 / 2 121.54

Here we have assumed there is no opening and closing balance left every year. Whatever was arising during the year was recovered at the end of the year. Also we have taken debtors & receivable combined.

OBESRVATION: From the above table we can say that, the gross sale has reduced and at the same time the average receivable has increased so the same situation is not in the favor of the company. Company should either increase the gross sales or reduced the investments in receivable. So that it can increase the profitability & locking up of the funds

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4) DEBTORS TURNOVER RATIO: Debtor turnover indicates the number of times debtors turnover each year Generally the higher the value of debtor s turnover, the more is the management of credit.

TABLE 10 PARTICULAR DAYS RECEIV.TURN RATIO DEB.TURN.RATIO 2008 365 688.54 0.53 2009 365 121.54 3.01

Here we have assumed there is no opening and closing balance left every year. Whatever was arising during the year was recovered at the end of the year. Also we have taken debtors & receivable combined. OBSERVATION: From the above table, we can say that the ratio has increased from 0.53 to 3.01 which favor the management of credit by the company

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5) CURRENT ASSETS TURNOVER RATIO

Current assets turnover ratio is calculate to know the firms efficiency of utilizing the current assets .current assets includes the assets like inventories, sundry debtors, bills receivable, cash in hand or bank, marketable securities, prepaid expenses and short term loans and advances. This ratio includes the efficiency with which current assets turn into sales. A higher ratio implies a more efficient use of funds thus high turnover ratio indicate to reduced the lock up of funds in current assets. An analysis of this ratio over a period of time reflects working capital management of a firm.

TABLE 11PARTICULAR SALES CURRENT ASSETS C.ATURN. RATIO OBSERVATIONS: 2008 85923.95 43835.45 1.96

(RS. IN LAKHS) 2009 82341.29 24405.29 3.37

From the above calculation we come to know that the C.A ratio is increased and which reflects the situation in favors the company and the company is utilizing its C.A very efficiently compared to previous year

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LIQUIDITY RATIO
The ratios compounded under this group indicate the short term position of the organization and also indicate the efficiency with which the working capital is being used. The most important ratio under this group is follows 1. Current ratio 2. Quick ratio 3. Absolute liquid ratio

1) CURRENT RATIO: Current assets include cash and those assets which can be converted in to cash within a year, such marketable securities, debtors and inventories. All obligations within a year are include in current liabilities. Current liabilities include creditors, bills payable accrued expenses, short term bank loan income tax liabilities and long term debt maturing in the current year. Current ratio indicates the availability of current assets in rupees for every rupee of current liability. TABLE 12YEAR CURRENT ASSETS Rs. CURRENT LIABILITIES Rs. 2008 2009 OBSERVATIONS: The current ratio indicates the availability of funds to payment of current liabilities in the form of current assets. A higher ratio indicates that there were sufficient assets available with the organization which can be converted in cash, without any reduction in the value. As from the table we can see that the ratio in 2010 has increased compared to 2009. So it indicates that company now has more current assets to repay its current liabilities. 43835.45 24405.29 15314839.98 131243.12 0.002 0.19 (Rs IN LAKHS) CURRENT RATIO

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2) QUICK RATIO :

Quick ratios establish the relationship between quick or liquid assets and liabilities. An asset is liquid if it can be converting in to cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset .other assets which are consider to be relatively liquid and include in quick assets are debtors and bills receivable and marketable securities. Inventories are considered as less liquid. Inventory normally required some time for realizing into cash. Their value also be tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.

TABLE 13YEAR QUICK ASSETS Rs. CURRENT LIABILITIES Rs. 2008 2009 8698.97 8153.73 15314839.98 131243.12

(Rs IN LAKHS) QUICK RATIO

0.0006 0.06

OBESRVATIONS: Quick ratio indicates that the company has sufficient liquid balance for the payment of current liabilities. The liquid ratio of 1:1 is suppose to be standard or ideal but here ratio is more than 1:1 over the period of time, it indicates that the firm maintains the over liquid assets than actual requirement of such assets. In the year 2009, company has Rs. 0.0006 for every rupee of liability but in 2010 it was increased and was Rs. 0.06 for every rupee of liability. But compare to ideal standard it is too low.

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3) ABSOLUTE LIQUIDE RATIO: Even though debtors and bills receivables are considered as more liquid then inventories, it can not be converted in to cash immediately or in time. Therefore while calculation of absolute liquid ratio only the absolute liquid assets as like cash in hand cash at bank, short term marketable securities are taken in to consideration to measure the ability of the company in meeting short term financial obligation. It calculates by absolute assets dividing by current liabilities.

ABSOLUTE LIQUIDE RATIO TABLE 14YEAR CASH & BANK BALANCE Rs. 2008 2009 672.76 365.02 15314839.98 131243.12 0.00004 0.003 CURRENT LIABILITY Rs. (Rs IN LAKHS) RATIO

OBSERVATIONS: Absolute liquid ratio indicates the availability of cash with company is sufficient because company also has other current assets to support current liabilities of the company. In 2009, the absolute liquid ratio is 0.00004 which was increased to 0.003. o from the above table we can say that company is also focused on the cost of the funds and doesnt carry more cash balance but investing in its operating cycle.

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WORKING CAPITAL MANAGEMENT COMPONENTS

1) RECEIVABLE MANAGEMENT

Receivables or debtors are the one of the most important parts of the current assets which is created if the company sells the finished goods to the customer but not receive the cash for the same immediately. Trade credit arises when firm sells its products and services on credit and dose not receive cash immediately. It is essential marketing tool, acting as bridge for the movement of goods through production and distribution stages to customers. Trade credit creates receivables or book debts which the firm is expected to collect in the near future.

The receivables include three characteristics: It involve element of risk which should be carefully analysis It is based on economic value. To the buyer, the economic value in goods or services passes immediately at the time of sale, while seller expects an equivalent value to be received later on It implies futurity. The cash payment for goods or serves received by the buyer will be made by him in a future period.

Objective of receivable management

The sales of goods on credit basis are an essential part of the modern competitive economic system. The credit sales are generally made up on account in the sense that there are formal acknowledgements of debt obligation through a financial instrument. As a marketing tool, they are intended to promote sales and there by profit. However extension of credit involves risk and cost, management should weigh the benefit as well as cost to determine the goal of receivable management. Thus the objective of receivable management investment in further funding of receivables is less .than the cost of funds raised to finance that additional credit.

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SIZE OF RECEIVABLES OF ACL

TABLE 15PARTICULAR SUNDRY DEBTORS(RS.) INDICES 2008 277.35 100

(Rs. IN LAKHS) 2009 1480.61 533.84

OBSERVATIONS:

From the above table we can see that company has invested more in sundry debtors in 2010 compared to 2009.

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AVERAGE COLLECTION PERIOD

The average collection period measures the quality of debtors since it indicate the speed of there collection. The shorter the average collection period, the better the quality of the debtors since a short collection period implies the prompt payment by debtors. The average collection period should be compared against the firm s credit terms and policy judges its credit and collection efficiency.

The collection period ratio thus helps an analyst in two respects.

1) In determining the collection ability of debtors and thus, the efficiency of collection efforts.

2)

In ascertaining the firm s comparative strength and advantages related to its credit

policy and performance.

The debtors turnover ratio can be transformed in to the number of days of holding of debtors.

TABLE 15PARTICULAR DAYS RECEIVABLES T.O.R AVER.COLL.PERIOD (DAYS) (ROUND OF FIGURES) 2008 365 688.54 1

(Rs. In lakhs) 2009 365 121.54 3

OBSERVATIONS: Average collection period arent reducing and also the sales of the company is also reducing which isnt in favor of the company. 98

2) CASH MANAGEMENT

Cash is common purchasing power or medium of exchange. As such, it forms the most important component of working capital. The term cash with reference to cash management is used in two senses, in narrow sense it is used broadly to cover cash and generally accepted equivalent of cash such as cheques, draft and demand deposits in banks. The broader view of cash also induce hear- cash assets, such as marketable sense as marketable securities and time deposits in banks. The main characteristics of this deposits that they can be really sold and convert in to cash in short term. They also provide short term investment outlet for excess and are also useful for meeting planned outflow of funds. We employ the term cash management in the broader sense. Irrespective of the form in which it is held, a distinguishing feature of cash as assets is that it was no earning power. Company have to always maintain the cash balance to fulfill the dally requirement of expenses. There are four primary motive for maintain the cash as follow:

Motive of holding cash

There are four motives for holding cash as follow:

1. Transaction motive 2. Precautionary motive 3. Speculative motive 4. Compensating motive

1).

Transaction motive

Cash balance is necessary to meet day-to-day transaction for carrying on with the operation of firms. Ordinarily, these transactions include payment for material, wa ges, expenses, dividends, taxation etc. there is a regular inflow of cash from operating sources, thus in case of JISL there will be two-way flow of cash- receipts and payments. But since they do not perfectly synchronize, a minimum cash balance is 99

necessary to uphold the operations for the firm if cash payments exceed receipts. Always a major part of transaction balances is held in cash, a part may be held in the form of marketable securities whose maturity conforms to the timing of anticipated payments of certain items, such as taxation, dividend etc

2).

Precautionary Motive

Cash flows are somewhat unpredictable, with the degree of predictability varying among firms and industries. Unexpected cash needs at short notice may also be the result of following:

1. Uncontrollable circumstances such as strike and natural calamities 2. Unexpected delay in collection of trade dues 3. Cancellation of some order for goods due unsatisfactory quality 4. Increase in cost of raw material, rise in wages, etc.

The higher the predictability of firm s cash flows, the lower will be the necessity of holding this balance and vice versa. The need for holding the precautionary cash balance is also influence d by the firm s capacity to have short term borrowed funds and also to convert short term marketable securities into cash.

3).

Speculative motive:

Speculative cash balances may be defined as cash balances that are held to enable the firm to take advantages of any bargain purchases that might arise. While the precautionary motive is defensive in nature, the speculative motive is aggressive in approach. However, as with precautionary balances, firms today are more likely to rely on reserve borrowing power and on marketable securities portfolios than on actual cash holdings for speculative purposes.

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Advantages of cash management

Cash does not enter in to the profit and loss account of an enterprise, hence cash is neither profit nor losses but without cash, profit remains meaningless for an enterprise owner.

1. 2.

A sufficient of cash can keep an unsuccessful firm going despite losses An efficient cash management through a relevant and timely cash budget may enable

a firm to obtain optimum working capital and ease the strains of cash shortage, fascinating temporary investment of cash and providing funds normal growth. 3. Cash management involves balance sheet changes and other cash flow that do

not appear in the profit and loss account such as capital expenditure. SIZE & INDICES OF CASH & BANK IN ACL.

Table 16PARTICULAR CASH & BANK Rs. INDICES 2008 672.76 100

(Rs. IN LAKHS) 2009 365.02 54.25

OBSERVATION: Company has reduced the amount to be hold by 46% which is in favor of the company as it reduced the cost of fund and the same should be invested in the operating cycle but here the same is invested in sundry debtors so company should focus here.

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CASH CYCLE

One of the distinguishing features of the fund employed as working capital is that constantly changes its form to drive business wheel . It is also known as circulating capital which means current assets of the company, which are changed in ordinary course of business from one form to another, as for example, from cash to inventories, inventories to receivables and receivables to cash.

Basically cash management strategies are essentially related to the cash cycle together with the cash turnover. The cash cycle refers to the process by which cash is used to purchase the row material from which are produced goods, which are then send to the customer, who later pay bills. The cash turnover means the number of time firms cash is used during each year. CASH CYCLE = INVENTORY + A/C RECEIVEBLE A/C PAYABLE PERIOD PERIOD PERIOD

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TABLE 17 PARTICULAR INVENTORY PERIOD ACCOUNT RECEIVABLE PERIOD ACCOUNT PAYABLE PERIOD CASH CYCLE 56.24 =57 DAYS 0.31 2008 55.96 0.59

(FIGURES IN DAYS) 2009 27.56 3.28

0.30

30.54 =31 DAYS

FOR ACCOUNT PAYABLE PERIOD, WE HAVE TAKEN OTHER LIABILITIES AS ACCOUNT PAYABLE PERIOD OBERSRVATION: The size of the cash in the current assets of the company indicates the miss cash management of the company.

After the study of cash management it mentioned above it can be conclude that management of cash involve three things: a) Managing cash flow into and out of the firm. b) Managing cash inflow within the firm, c) Financial deficit or investing surpluses cash and thus controlling cash balance at a point of a time. The firm should hold an optimum balance of cash and invest any temporary excess amount in short term marketable securities such as treasury bills, commercial papers, certificates of deposit, bank deposits and inter corporate deposit

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3) INVENTORY MANAGEMENT

The term inventory is used to designate the aggregate of those items of tangible assets which are: Finished goods ( saleable ) Work-in-progress ( convertible ) Material and supplies ( consumable )

In financial view, inventory defined as the sum of the value of raw material and supplies, including spares, semi-processed material or work in progress and finished goods. The nature of inventory is largely depending upon the type of operation carried on. For instance, in the case of a manufacturing concern, the inventory will generally comprise all three groups mentioned above while in the case of a trading concern, it will simply be by stock- in- trade or finished goods.

Objective of inventory management

In company there should be an optimum level of investment for any asset, whether it is plant, cash or inventories. Again inadequate disrupts production and causes losses in sales. Efficient management of inventory should ultimately result in wealth maximization of owner s wealth. It implies that while the management should try to pursue financial objective of turning inventory as quickly as possible, it should at the same time ensure sufficient inventories to satisfy production and sales demand. The objectives of inventory management consist of two counterbalancing parts: To minimize the firms investment in inventory To meet a demand for the product by efficiently organizing the firms production and sales operation.

This two conflicting objective of inventory management can also be expressed in term of cost and benefits associated with inventory. That the firm should minimize the investment in inventory implies that maintaining an inventory cost, such that smaller the inventory, the better the view point .obviously, the financial manager should aim at a level of inventory which will reconcile these conflicting elements.

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Some objective as follow To have stock available as and when they are required To utilize available storage space but prevents stock levels from exceeding space available. To maintain adequate accountability of inventories assets. To provide, on item by- item basis, for re-order point and order such quantity as would ensure that the aggregate result confirm with the constraint and objective of inventory control. To keep low investment in inventories carrying cost an obsolesce losses to the minimum. TABLE 18PARTICULAR DAYS INVENTORY T.O.R DAYS OF INV.HOLDING ASSUMPTION: FOR CALCULATING INVENTORY HOLDING PERIOD WE ASSUMED THAT THERE IS NO OPENING AND CLOSING STOCK OF RAW MATERIAL IN A YEAR. OBSERVATION: From the above table we can say that the company has reduces the time of its inventory T.O.R by 1 day that means company can use its money 1 more day without paying interest for it in the operation. That will help company & the situation is in the favor of the company. 2008 365 6.52 56 2009 365 6.62 55

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SUGGESSIONS

From the table 1 we can see that companys current assets has reduced by Rs. 19430.16 lakh due to reduction in the investment in inventory & increase investment in sundry debtors. Company has also pays its creditors of Rs. 15184050.55 lakh. and reduced it. And also increased its provisions. From table 2 we can see that company has reduces its overall investment of Net Working Capital by 30.04% From table 3 we can see that company has reduced its investment in C.A by 44.33% due to increasing debtors & reduction in inventory compared to previous year. Looking to the total composition of current assets in percentage form in table 4. its clear that there is a sharp increase in sundry debtors by 5.44% & increasing loan & advances by 4.06% which lead company from his operation motive and a sharp decrease in investment in inventory by 9.47%. Looking to the table 5, we can see that company has concentrated on paying off his creditors & increased provision regarding governments rules & other short term provisions. From table 7, we can say that company has concentrated on the operating cycle & has reduced its operating cycle days by 26 days which shows efficient management of the working capital in the company.

From table 9 we can say that there is a sharp fall in the inventory turnover ratio. This is not a favorable situation as this ratio helps company to achieve high sales by investing minimum in W.C but here there is a sharp fall.

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 The gross sales has decreased & also there is sharp increase in the receivables so this situation is not in the favor of the company. Table 10 shows that company is managing the credit very well. But still company has to focus more on the sales part as sales has declined by 5.76%. From the table 11 we can say that the current asset ratio has increased which reflect w good position for the company from external point of view, but of we look to the investment in inventory which has decline by 9% which is harmful to the cahflow from the operations as sales in current year has declined over previous year. Table 12 shows the current asset ratio which is in favor of the company as compared to the previous year the position of the company has improved. Table 13 shows the good position of the company to the previous year as both the ratio has improved which shows the most liquidity position of the company Table 15 shows that there is no improvement in the average collection period and this shows that management is less focused here. The collection period has to be decreased other wise it will affect companys current & liquidity position in future. Table 16 shows that company has reduced his cash holding amount but the same was invested in debtors. Company is not looking to the opportunity which is available in the market for the short term investment and also company is not investing in the operations. Table 17 shows that the cash cycle has reduced and it comes down to 31 days which shows the efficient management of the managers. From table 18, we can see that the inventory holding period has also reduced by 1 day and the operation has started fast. But still these holding period should be focused and try it to reduce,

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SWOT ANALYSIS

STRENGTH

1. Lower energy cost due to imported calorific value coal and use of non conventional fuels. 2. Lower transportation cast due to increased transport through sea router for bulk shipping. 3. Very high brand identity. 4. Excellent innovation engineering and technological skill useful for operating excellence. 5. Very less dependent on government for coal and power. 6. Possessing own jetty and ships useful for timely and cheap transport. 7. Favorable location having raw material site at a distance of 1 km near the production line. 8. High distribution efficiency and sound to cope up with economic situation. 9. Excellent management team to cope with changing environment.

WEAKNESS

2. No national geographic coverage as in case of competition. 3. Very limited fragmentation of plant, which avoid is presence in very sub regional markets.

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OPPORTUNITY

1. Higher production of agricultural sector & service sector may result into higher purchasing power, which will increase demand. 2. Stability of Government may result into higher FDI inflow which will give rise to MNCs entry in India, which would require operations in India. Thus large infrastructure projects and related requirements of housing and accommodation will boost cement sales. 3. New product usage of RMC (Ready Mix Concrete) would the demand.

THREATS:

1. Threats from the economic cycles. i.e. Recession or growth. 2. Change in Government policies in term of coal, diesel, raw material and transport. 3. Exchange rate fluctuation having direct effect on bottom line as well as on export 4. Capacity expansion by the competition which will lead to the surplus of the cement.

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CONCLUSION

In this study an attempt has been made to analyze the working capital position of Ambuja Cements Ltd. , Ambujanagar. The studyshows that the overall performance of the company is not satisfactory. Though the company is a profit making organization, its profit is not up to the mark with respect to the asset employed in the organization. Since the working capital amount shows a negative To positive trend it reveals that the company is not in a position to meet its day to day obligations. The analysis and interpretation of various data relating to working capital management helped to reach into a conclusion that the efficiency of the Working capital management is not adequate in 2009 and it shows a negative balance. But this cannot be blamed, as due to recession period in Infrastructure in India & at globe

The overall success of any company depends upon the working capital position. So it should be handled properly because it shows the efficiency and financial strength of the company. Therefore the company should adhere to strict measures in every sphere of its activities to bring the company back to sufficient working capital position and improve its financial performance

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BIBLOGRAPHY

Companys internal reports Khan M.Y & Jain P.K Financial Management, 4th edition (2004) , Tata Mc Graw Publishing Company Limited www.workingcapitalmanagement.com

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