A Project Repot On

Working Capital Management and profitability analysis of Tamboli Casting

Ltd. Within time frame of 2007 to 2010

At BHAVNAGAR

Under the Guidance of Mr. HARSHADBHAI PATEL

Under the Guidance of Ms.ARPITA VAGHELA Institution

Submitted to Gujarat Technological University - Ahmedabad

Prepared By: DIPALI H. SHAH

M.B.A. Sem. II, Seat No 013916

K. K. Parekh Institute of Management Student Amreli

Dr. Jivraj Mehta Vidhya Vihar Campus Lathi road Amreli Ph: (02792) 223509 fax: (02792) 223509 E-mail: kkpimsa@yahoo.com Web: kkpimsamreli.com

DIRECTORS RECOMMENDATION
TO, The Registrar Gujarat Technological University Ahmedabad

Subject: MBA Summer Training Project Report

Respected Sir,

I am recommending the Summer Training Project entitled- Working capital Management and profitability analysis of Tamboli Casting Ltd. Within time frame of 2007 to 2010 prepared by DIPALI H. SHAH at Tamboli Casting Ltd. BHAVANAGAR as the partial fulfillment of the University requirement for the award of MBA degree of Gujarat Technology University Ahmedabad.

Date: Place: - Amreli

Thanking You, Yours Faithfully

Director

STUDENT DECLARATION

I the undersigned student DIPALI H. SHAH of K. K. Parekh Institute of Management Studies Amreli M.B.A. II Semester, hereby declare that, the project on Working Capital Management and profitability analysis of Tamboli Casting Ltd. Within time frame of 2007 to 2010 is my own work.

In the partial fulfillment of Master Degree of Business Administration, I had undergone project work at ---- Tamboli Casting Ltd. under the guidance of JASMIN MADAM K. K. Parekh Institute of Management Studies Amreli and submitted to Gujarat Technological University, Ahmedabad.

This project work is my original work and has not been submitted to any where earlier.

PREFACE

Whatever I have learn and I will learn in theories and books may or may not be directly useful to me but, to make that knowledge applicable and usable I need to go through practical aspect which I will gain through this project.

Out of the two learning methods practical learning is very effective and efficient and leads to the better understanding of the subject. Whenever the matter is concern about management we must go to words prediction and result that can be possible only practical aspect.

Being a student of management i.e. MBA and doing specialization in finance I find the need to understand the market trend closely. So, that I can judge what is the actual position of the market in this competition era. I have to touch the practical aspect and to understand what is the different between practical knowledge and what I have in theories, so that I divert my knowledge to wards reality and make the theoretical knowledge applicable in practical life.

ACKNOWLEDGEMENT
The work presented here is not a single effort as each and every person associated with this project has contributed in the successful accomplishment of this piece of work and is being thanked for their efforts.

First of all I would like to thanks DR. Vishal patidar , my project guide Ms Arpita vaghela & Chairman of Tamboli casting ltd. Mr.Bipinbhai Tamboli and also my Family, Friends and colleagues and the respondents. And my college K.K.PAREKH INSTITUTE OF MANAGENET STUDIES AMRELI. for giving me such a great opportunity for learning and developing our self during the project and helping me extensively in our problems regarding the project and giving us their guidance on the subject. We sincerely appreciate their cooperation and support.

Finally, we would like to thank all those people who have directly or indirectly helped us and guided us for our project.

EXECUTIVE SUMMARY

While any research is to be done there is an executive summary. Executive summary is very important from this you create the right and a good impression. From the executive summary reader can get enough information to know what is the subject contains from that a person get the idea about what type of research study is done. Executive summary contains what is the problem behind the subject, what is the project about, and what is the conclusion part. Reader can get all the highlight of the report without seeing other content.

As

my

topic

is

Working

capital

and

Profitability

Analysis

of

Tamboli Casting Ltd, The Profitability is one of the main Objective of any of the business. And to measure profitability working capital plays a most important role. The Research is created for to check how the working capital management affects the profitability of the firm is it positive affects or negative for that various stastical tools have been used. The study seems important to the company that research is conducted. Finally the subject is more practical nature rather then brings out fact of the Research.

INDEX
NO.
1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 3 4 4.1 A. B. C. D. E. F. J. 4.2 A. B 4.3 A. B. C. D. E. F. 4.4 A.

NAME OF CONTENT
OVERVIEW OF INVESTMENT CASSTING INDUSTRY

PAGE NO.
1 1 1 2 3 4 6 7 8 10 12 13 14 16 16 22 23 25 27 28 29 29 31 32 32 33 34 35 36 37 38 8

Investment casting History Steps Definition

COMPANY PROFILE

Organization Chart SWOT Analysis Recognition & Achievement

GENERAL INFORMATION STUDY OF FOUR FUNCTIONAL AREAS PRODUCTION DEPARTMENT

What is Investment Casting Process Manufacturing Facilities Machining Facilities Value added Process Quality Control Process: Research & Development
MARKETING DEPARTMENT

Objective Activity
HUMAN RESOURCE DEPARTMENT

Information Manpower Planning Induction Training In house Training Performance Appraisal SHEQ Policy FINANCE DEPARTMENT Introduction

B. C. 5. 5.1 5.2 A. B. 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 6. 7.

Financial Hierarchy of TCL Financial Planning RESEARCH METHODOLOGY Introduction Literature Review Review of Literature Review of Research Define the problem Objective of the study Limitations of the study Research design Rational Of the Study Variable/Tool Hypothesis Testing Data collection Analysis used in the study Data analysis Descriptive Analysis Quantitative Analysis Findings Suggestions Conclusion Appendix Bibliography

39 40 41 41 42 42 44 46 47 48 49 50 51 53 54 57 58 58 63 74 75 76 77 81

1. OVERVIEW OF INVESTMENT CASTING INDUSTRY

1.1 Investment casting:

In industry investment casting and the lost wax process are terms used synonymously. It is for very obvious and logical reasons that this process has been given these titles. It is named the lost wax process because the wax from which the patterns are made is lost or melted during the casting process The title investment casting comes from the process deemed as investing. When a pattern is invested it is encased in a flask or a shell made of slurry and refractory material. During investment casting both the pattern and the mold are destroyed. The pattern is melted out in order to pour the melted metal into the cast. The cast is later destroyed when it is broken away to release the artifact the artifact. While this sounds wasteful it is also very beneficial to those who wish to make one of a kind artifacts or objects with special specifications.

1.2 History
The history of investment casting is very illusive. According to Johnson ( 1955), Authorities are not certain where or when it started, but both ancient Egypt and ancient China have provided museum pieces that could only have been fabricated by this method, thus giving authentic evidence that the process was used successfully several thousand years ago . Another author, Richard L. Little (1977), however would argue that the lost wax process began with the early settlers along the Mediterranean. Although both authors point toward the Mediterranean as being a point of origin for this process, neither one could provide a specific date for its birth.

Investment casting may be called the lost wax process because of its unique way of creating artifacts, but it was also for a long time a lost process. For some unknown reason this process was unused and forgotten in the western civilization until its rediscovery during the 10

Italian Renaissance (Little,1977)It existed in china for centuries, and Cellini employed a form of it in Italy in the sixteenth century (Black, DeGarmo, and Kohser ,1984,). From that point on investment casting was more commonly used for art and small special tasks. Dentists have also used the process since the turn of the century. It did not, however, come into common industrial use until World War II when high quality jet turbine blades and supercharger buckets for aircraft engines were in great demand (Wright,1999,). Since then investment casting has become an important part of industry due to its ability to create unique parts with complex shapes and extremely fine surface details.

1.3 Steps
Investment casting involves the following steps:
1. Produce a master pattern. 2. From the master pattern, produce a master die. 3. Produce the wax patterns. 4. Assemble the wax patterns to a common wax sprue. 5. Coat the cluster with a thin layer of investment material. 6. Produce the final investment around the coated cluster. 7. Vibrate the flask to remove the entrapped air and settle the investment material around the cluster.

8. Allow the investment to harden. 9. Melt or dissolve the wax pattern to permit it to run out of the mold. 10. Preheat the mold preparatory to pouring. 11

11. Pouring the molten metal. 12. Remove the castings from the mold.

1.4 DEFINITIONS: Sprueing system- a network of hollow channels through which the molten metal can flow into the mold that will be formed around the sculpture (Hitchcock,1985). Casting An object that is produced by pouring liquid metal into a mold (Graham,1981). Sprue The passage way or hole in the gating system that allows the molten metal to flow down the parting line (Graham,1981). Mold A hollow form in which molten metal is cast (Repp,1994,).

2.

COMPANY PROFILE

PROFILE - TAMBOLI CASTINGS LIMITED

12

1.

Year of Establishment :

2004 Mr. M. B. Tamboli, EXECUTIVE DIRECTOR Mr. V. B. Tamboli, EXECUTIVE DIRECTOR

Marketing & Contact Person Operation 2. : Finance Shareholders Funds (Equity + Reserves) as at March 2008, Rs. Million

3.

75.05 ( US $ 1.87 Million )

Sales & Other Income in Financial 4. Year April 2008 to March 2009, Rs. 300.00 (Approx. US $ 6.60 Million) Million Annual output, Tons Number of employees (approx.) 380 Last year Installed Capacity 600 117 Workmen 50 Plant Staff Commercial & 28 Administrative Staff State Bank of India, Darbargadh, Bhavnagar, Gujarat, India 364 001 Connected by Rail and road with Ahmedabad (170 Km) and by air with Mumbai (Bombay). Sea connection through Mumbai and Kandla ports. Investment Castings manufactured by LostWax process in Ferrous and Non-Ferrous alloys, of piece weight up to 100 Kg. Fully machined, treated and ready-for-use components supplied. Automobile, Valves & Pumps, Electrical & Electronics, Dairy & Food Processing, Earthmoving Machinery, Air-conditioning & Refrigeration, Printing, 13

5.

6.

7.

Bankers

8.

Transport

9.

Products

10. Industries catered to

Textile Machinery, Compressors, Cutting Tools, Machine Tools, Locomotives, Hand Tools, Sewing Machines etc.

11.

Area of Works, in sq. meters a) Ground b) Covered 2004, October Brief History 2006, April 2007, March

47,246 14,501 Company was incorporated. Commercial Production commenced. Received ISO 9001: 2008 certification from TUV NORD, Germany. Received ISO 14001:2004 certification from TUV NORD, Germany. Received OHSAS 18001:2007 certification from TUV NORD, Germany. Received TS 16949 : 2002 certification from TUV NORD, Germany.

12.

2008, February

2008, February

2008, October

2.1 ORGANIZATION CHART

Board of directors

14

Chairman

Vice chairman

Executive directors

President

General Manager

Deputy General Manager

Senior manager

Manager

Deputy Manager

Assistant Manager

Senior Office

Officer Commercial Assistant

2.3 SWOT ANALYSIS

Strengths:
15

1. Participative environment, motivated teem and well developed systems. 2. Accepting the challenges of rapid development of complex new items including fully machined, treated and ready for use components.

Weakness: 1. The company having investment opportunity but maximum utilization is not there.

Opportunity: 1. Opportunity for the company is to expand business in domestic market.

Threats:
1. In future the China market they can face the competition.

2.3 RECOGNITION & ACHIEVEMENT

>> They have the following Quality Systems Certification from TUVNORD, Germany: 16

ISO9001 : 2008 TS 16949 : 2002 ISO 14001 : 2004 OHSAS 18001 : 2007

>> They are recognized as 100% Export Oriented Unit by Ministry of Commerce & Industry, Government of India; on 29th December 2004.

ISO 9001 : 2008 Certificate

TS 16949 : 2002 Certificate

ISO 14001 : 2004 Certificate

OHSAS 18001 : 2007 Certificate

17

3. GENERAL INFORMATION:

18

The manufacturing and quality control facilities at TCL has a higher degree of automation (robotic shelling system, manipulator in melting etc.), comparable to the best investment casting foundries in Germany & Europe.

TCL is an ISO 9001:2000, ISO14001:2004, BS OHSAS 18001:2007 & TS 16949:2002 certified company by TUV-NORD, Germany.

TCL has its own CNC machining facility with state of the art CNC machine from Mazak, Japan with this and other facilities like electro polishing, electroplating, etc. we are in a position to supply fully machined components and sub assemblies in small, medium and large batches.

They supply the following ready to use steel parts made of investment castings used in auto industry, which are:

Transmission and engine components o Gear shifters; o Fork shifts; o Rail ends; o Pre-combustion chambers; o Nozzle injectors; o Diesel engine parts; o EGR cooler parts; o Power train components and others

Other industry segments that are covered by them are: o Pump (ready to use impellers and diffusers up to 100 kg per piece) 19

o Valve industry o Earth moving equipment industry o Parts for rock drill equipments for mining application o Electrical switch gears o Railway and locomotives o Turbo-chargers o Machine tools o Generals engineering components and many others

The specifications currently handled by them are carbon steel, low alloy steel, stainless steel (Austenitic and inertensitic), cast iron and ductile.

20

STUDY OF FOUR FUNCTIONAL AREAS

21

4.1 PRODUCTION DEPARTMENT

A. WHAT IS AN INVESTMENT CASTING

22

There is some confusion about the word Investment Casting. Some think that this has something to do with finance or investing. This is not so. The Investment Casting process is explained below: An expendable (i.e. consumable) pattern, usually made of wax, is produced through an Injection Press by forcing hot pasty wax at high pressure into a metallic mould called a Die. Several such patterns are assembled by sticking them on to wax bars called Runners or Sprues, to form a cluster, called the Wax Assembly:. The Wax Assembly is dipped into refractory slurry. The Assembly after a such wet dip is coated with refractory grains, called Stucco. This process of dipping and coating is repeated several times, depending on the size and configuration of the component, to create several layers giving the required thickness of coating. The process of surrounding the Wax Assembly with refractory materials is called Investing in old English, which gives the process the name of Inves tment Casting process. A casting made through this process is called an Investment Casting. The Assembly, after it is thus invested or covered with refractory layers, is dried and thereafter the wax inside the Assembly is removed by melting it inside a steam autoclave. As the wax thus gets removed, and in the past was lost by burning off, this process of casting is also called the Lost Wax Process. After removal of the wax, the resulting hollow Mould Shells are pre -heated in a Shell Pre-heating Furnace to make them strong enough to withstand the metal pressure, when hot liquid metal is poured into the shell. After thus Pre-heating the Mould Shells, molten metal produced in an Induction Melting Furnace is poured into them. Individual castings are cut-off from the cluster, using an electric arc or a gas flame or an abrasive disc. Castings are then 23

heat treated as required to get the specified mechanical properties. The process of Fettling of castings involves cutting or grinding off of unwanted portions, followed by thorough cleaning and finishing through various processes, to give the required surface finish and dimensional accuracy. In many cases, the castings are subjected to additional operations like machining, surface hardening, electroplating, electro polishing etc, as per customer requirements. After careful inspection and testing, the Investment Castings thus produced are ready for dispatch

B. PROCESS C.Facilities: Manufacturing: 1. Wax Shop:

Centrally air-conditioned well equipped Wax Pattern Shop, with Fully Automatic and SemiAutomatic Wax Injection Presses. 24

TCL has huge facilities for assembling, i.e. making trees/sprues for Investment Castings.ection Pres

Wax Injection Press

Ceramic core

2. SHELLING
Centrally air-conditioned and humidity controlled Shell Room with shell-o-matic robot & equipment for building strong shells using Colloidal Silica and Ethyl Silicate slurry systems, and high technology Boilerclave for de-waxing

Shelling - Robot

25

Dewaxing

3. MELTING
Dual Track Induction Melting Furnaces of 450 Kg crucible capacity. Manipulator for pouring liquid metal into Pre-heated shells, Rotary Hearth shell baking furnace.

Melting - Pouring

26

Melting

27

4.FETTLING
Pencil Hand Grinders to Heavy Swing Frame Grinder, facilities for Abrasive Cutting, TIG Welding, Ceramic Blasting & Shot Blasting. Straightening with Hydraulic Presses etc. Knock-out:

Fettling Final Finishing

Cutting: Arc cutting, Gas cutting, Disc cutting etc.

Cutting

28

Grinding:
Swing Grinding, Belt Grinding etc.

Grinding

5.HEAT TREATMENT
TCL has the following capacity for Heat Treatment: Heat Treatment A battery of Muffle, Gas Carburizing & Forced Air Circulation tempering furnaces, for a variety of heat-treatment operations like normalizing, annealing, stress relieving, case hardening, oil quenching, water quenching, tempering etc, with arrangements for automatic temperature control and recoding. Induction Hardening machine.

Heat Treatment

29

6. SURFACE TREATMENT:
In house facilities for pickling, passivation and electro polishing. Dedicated vendors for electroplating, buffing and polishing.

7. TOOL ROOM:
Well developed ancillaries, for making precision dies and Tooling with multiple cavities using CNC machines.

8. JOB SIZE & WEIGHT LIMITATION:

Linear: Up to 500mm

Diameter: Up to 500mm

Piece Weight: Up to 100k

30

D.MACHINING FACILITIES

1.CNC & Conventional Machining:

In-house CNC Machines (Turning Centers & VMCs) from DECKEL MAHO- Germany and Mazak- Japan, Zoller Tool Presetter, Haimer shrink fit technology for tool holders,

Conventional machine like Lathes, Broaching Machine, Drilling Machine and dedicated vendors for conventional machining like drilling, tapping, milling, grinding, honing, lapping etc.

Machining

31

E.VALUE ADDED PROCESSES

TCL possess the strength to give its customers value added services through these processes like:- Electroplating. - Electro Polishing, - Pickling & Passivation. - Buffing & Polishing.

Induction Hardening

Electro Plating

32

Electro Polishing

Hardcrome Plating

Pickling

Pressure Testing

33

F.QUALITY CONTROL
Chemical Laboratory Well equipped Laboratory with Spectrometer for

1.

analyzing all chemical Elements.

Universal Tensile Testing Machine, Impact Testing Machine and Machines to measure Brinnell, Rockwell 2. Physical Testing and Vickers hardness.

Metallurgical Metallographic 3. Laboratory

microscope

with

arrangements

for

photomicrography, micro-hardness testing and image analyzing. Reference Radiographs for X-ray inspection & checking.

Air-conditioned and fully equipped Standards Room 4. Standards Room with Co-ordinate Measuring Machine for dimensional checking of machined and Unmachined castings and for calibration of instruments and gauges.

In-house Facilities for Magnetic Particle Inspection and 5. Non-Destructive Testing Liquid Penetrate Inspection, together with well for

developed Radiography.

recognized

ancillary

Facilities

34

Quality Control

35

J. PROCESS: RESEARCH AND DEVELOPMENT

In order to bring continuous improvement in Investment Casting processes and technology, major emphasis is made on Research & Development in the Company.

R&D Objectives:
1. Continuous Process Improvement 2. New Product Development 3. New Process Development/Improvement Continuous Process Improvement: Continuous efforts are made to improve and optimize parameters through process study and evaluation, through out the Company to encompass all the processes in the Company. Continuous improvement is an objective to be achieved at all levels in the Company. These improvements are measured periodically and evaluation and analysis are done in the Company. New Product Development: The company attaches great importance to new product development in new industry segments, in new range of weights, complexity and material specifications. New Process Development/improvement: Development efforts are also made for new technologies & processes. New and improved processes results in greater efficiency and newer markets, which we are very proud of.

36

4.2 MARKETING DEPARTMENT

37

A. OBJECTIVE:
Determine the customer requirements related to the product review the requirements before acceptance and determined and implement effective arrangements for communicating with customer. This also includes packaging and delivery of the product to ensure that product quality achieved is maintained till product reaches to the customer and agreed requirements are met.

B. ACTIVITIES:
Sr No. 1 Input coming from Potential/Existing Customer Activity Input Customer letter, phone cell, in person, E-mail, Drawing, Detail from customer/ Product customer Requirements Applicable legal requirements Customer requirements, Engineering Specifications, Product drawing quantity, Customer Details Activity(frequency of implementation) Inquiry control (As & when) Activity Output Generate inquiry file.

Export Department

Refer to Chief Operation + director for initial feasibility of orders (As & when)

Feasibility of manufacturing considering quality and quantity

Previous Process

Previous Process

Inquiry, Customer Offer preparation Requirement, (As & when) Drawing, costing, Standard terms & conditions, Legal requirements, Applicable legal requirements related to product Offer submitted, Follow up

Product specification, Price, delivery and any other condition required to communicate to customer

Means of

38

Previous Process

customer (As & when) requirements Customer order, Contract Review Offer submitted, (As & when) Price list, Customer requirements, Applicable legal requirements related to product

Previous Process

Contract agreed

Communication to production

Previous Process

Previous Process

9 10

Previous Process Packing of Finished Goods

11 12

Dispatch of Finished goods Previous Process

Agreed delivery time Customer readiness to take the delivery Product Status Customer feedbacks on phone , e-mail Customer e-mail, phone Standard of packaging material Packaging, preservation & delivery of materials Approved Transporters list Invoice copy which have been sent to customer

Progress review of each orders for timely delivery

communication, contact person Prepare order acknowledgement with detailed offer and send to customer for knowledge, General order Acceptance (OA) record, Enter the name & order of customer Issue OA copy to production department with order specification Progress review meeting output and intimation

Customer feedbacks

Intimation

Customer complaints Product Packaging& marking

Complaint review Contents in packing, Marking on packing cases

Delivery Follow up & collection of payment

Delivery Records Phone calls, e-mail, faxes are sent to the concern officials periodically, monitoring the total amount due the payment Rejected castings are reviewed and identify cause of rejection 39

13

customer

Rejection of parts at Rejected casting customer end, if any return

4.3 HUMAN RESOURCE DEPARTMENT

40

A. INFORMATION

Tamboli casting limited is 100% EOU (export oriented unit). Tamboli casting limited manufacturing investment casings. Tamboli casting limited is working in three shifts: 1. General shift 2. First shift 3. Second shift 4. Third shift : 08:30 to 17:00 : 06:30 to 15:00 : 15:00 to 23:00 : 23:30 to 06:30

B. Manpower planning/recruitment
Recruitment refers to the process of finding right people for the right job or function; it is a Linking Activity bringing together those with jobs and those seeking jobs. Once the required number and kind of human resources are determined, the management has to find the means of attracting them towards the organization before selecting suitable candidates for jobs. In Tamboli Casting Ltd.Every year manpower planning is to be prepared for the different department as given by the different of requirement from different department. On the basis of that an interview procedure has been taken for fill up the requirement of different department.

41

Interview procedure:
Call for Interview Written Test . Oral/Personal Interview

C. INDUCTION TRAINNING:
Induction is a welcoming process. When the newcomer joins a firm, he is a stranger to the employees, workplace and work environment. Newcomer may feel nervous, shy and insecure. He may have anxiety because of lack of information, different technologies and usual practice. This may develop discouragement, disillusionment of defensive behavior. Induction leads to reduction of such activities. And he feels confident and it will generate enthusiasm. The main idea of the process is to welcome a new comer, make him feel like home and generate the feeling that this is his own job. It wills small but meaningful activity. For new recruiter is provided induction training, it contains introduction of the organization, which type of work and procedure is going on in respective department. The candidate is provided with enlarged training program. Enlarged training programme contains advance training and on the job training. In enlarge training programme, the candidate prepared the report of that job in which the candidate has taking the training. On training period, the performance is evaluated after first month of joining on the basis of performance appraisal from.

42

D. IN HOUSE TRAINING:
Training is a corner stone of sound management, for it makes employees more effective and productive. Training is for increase the knowledge and skills of an employee for doing a particular job. Training moulds the employees attitudes and helps them into achieve a better co-operation with the company and a greater loyalty to it. It is not for only once it required it will require from time to time for the well run of organization. The efficiency of a firm directly depends on how much capable its personnel are. And the capabilities is depends on person how many abilities and use of then and how they get training. Every year different department prepared skill matrix for their staff/worker. Skills matrix identify the particular skill is required for that particular area. On the basis of skill matrix, the personnel department has to prepare the annual training programme. Annual training programmed contains different training provided in different months. Area in which particular skill is for staff/workers is given training by their department head and training record is prepared. Every year HR Department has to prepare Manpower Budget. Also look the pay roll management system. Following are the different departments: PLANT: wax, shelling, fetting, Melting, cnc machine shop engineering, it, plant engineering. COMMERCIAL: Administration, personnel, marketing, accounts, logistics.

43

E. PERFORMANCE APPRAISAL SYSTEM

Simply performance appraisal may be understood as the assessment of an individuals performance in a systematic way, the performance can be measured by job knowledge, quality and quantity of output, leadership, supervision, co-operation, judgment, versatility, health etc. Under this the firm not only measures performance of employee but also his potential for development. In short it is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.

It is considered as a most significant and indispensable function for an organization. It will very helpful in making decisions regarding various personal aspects such as promotion and merit in increasing. Thus, it is very useful to know skills, ability of the employees.

In Tamboli Casting Ltd. The same practice is followed.

44

F.SHEQ POLICY
Policy for Safety and Occupational Health, Environmental and Quality

45

4.4 FINANCE DEPARTMENT

46

A.INTRODUCTION

Financial Management is the integral part of the overall management; it is not totally separate & independent part. By financial management we mean efficient use of economic resources namely capital funds. Finance is like the wheel that makes business run smoothly. The importance of finance increasing day by day. Financial management defines as procurement of funds and their effective utilization in business.

Finance is like the heart of business without it no one activity could be performed well. It will need in each & every step of doing activity it is like the blood of business. The need of finance can be different in different organization. If the organization is labor intensive then the need is lower or the organization is production oriented then it required higher. According to J.C.Vanhorne, Financial Management is concerned with the acquisition, financing and management of assets with some overall goal in mind. To make the financial decision it is more critical, challenging and as well as very important now a day. The Finance Manager decides not only the source and source and scope of finance but also the employment of finance & other related items.

B. FINANCIAL HIERARCHY OF TCL

47

The success of any firm mostly depends on its organization structure. Finance is like blood of any business without it no one activity is done. If the structure of any firms organization is complicated and improper then so many problem will arise with the organization structure anyone can know how the company is functioning.

All the business activities are related to finance so in each & every department the responsibility for financial management are spread so this play very important role. It is needed the sound & efficient organization.

As concerned to Tamboli Casting Ltd. they have sound structure. As per the organization we can understand about the functioning the chart is as under:

48

C. FINANCIAL PLANNING

The most of the time of Finance Manager is consumed in financial planning. Financial planning means to plane the finance, which will need in future through which the firm can reduce the risk as concern to future. It is an ongoing process in simple terms, financial planning may be referred to as assessment of financial requirements and clear arrangement of various sources of capital so as to optimize on the cost and increase return to shareholders and accommodate at all times the carrying of assets.

With the proper financial planning any firm can achieve higher degree of profit with great success. So whoever the organization adopts the proper financial planning, will never has the problem related to finance and they can be reach to the top.

They are dealing with three types of activities: Expansion Automation Plant Modernize Technology

They are funding approximately 9crore Rs. For this current year that is 2009-2010 for capital expansion.

49

5. RESEARCH METHODOLOGY 5.1 INTRODUCTION:

RESEARCH:

Research can be defined in simple word as systematized effort to gain new knowledge. And broadly it can be defined as A careful investigation or inquiry especially through search for new facts in any branch of knowledge.

RESERCH METHODOLOGY: Basically research methodology is the method one employs to drive data or information from the available source.

Research Methodology is a way to systematically solve the problem. It can be understood as a science of studying how research is done systematically. It is necessary to know not only the research methods but also its methodology.Resercher also need to know the criteria by which they can decide that certain techniques and procedures will be applicable to certain problems and others will not.

5.2 LITERATURE REVIEW:

50

A. Review Of The Literature:

Working capital management is a very important component of corporate finance because it directly affects the liquidity and profitability of the company. It deals with current assets and current liabilities. Working capital management is important due to many reasons. For one thing, the current assets of a typical manufacturing firm accounts for over half of its total assets. For a distribution company, they account for even more. Excessive levels of current assets can easily result in a firms realizing a substandard return on investment. However firms with too few current assets may incur shortages and difficulties in maintaining smooth operations. Efficient working capital management involves planning and controlling current assets and current liabilities in a manner that eliminates the risk of inability to meet due short term obligations on the one hand and avoid excessive investment in these assets on the other hand.

Many surveys have indicated that managers spend considerable time on day-to-day problems that involve working capital decisions. One reason for this is that current assets are shortlived investments that are continually being converted into other asset types. With regard to current liabilities, the firm is responsible for paying these obligations on a timely basis. Liquidity for the on going firm is not reliant on the liquidation value of its assets, but rather on the operating cash flows generated by those assets. Taken together, decisions on the level of different working capital components become frequent, repetitive, and time consuming. Working Capital Management is a very sensitive area in the field of financial management. It involves the decision of the amount and composition of current assets and the financing of these assets. Current assets include all those assets that in the normal course of business return to the form of cash within a short period of time, ordinarily within a year and such temporary investment as may be readily converted into cash upon need. The Working Capital Management of a firm in part affects its profitability.

51

The ultimate objective of any firm is to maximize the profit. But, preserving liquidity of the firm is an important objective too. The problem is that increasing profits at the cost of liquidity can bring serious problems to the firm. Therefore, there must be a trade off between these two objectives of the firms. One objective should not be at cost of the other because both have their importance. If we do not care about profit, we can not survive for a longer period. On the other hand, if we do not care about liquidity, we may face the problem of insolvency or bankruptcy. For these reasons working capital management should be given proper consideration and will ultimately affect the profitability of the firm.

Firms may have an optimal level of working capital that maximizes their value. Large inventory and a generous trade credit policy may lead to high sales. Larger inventory reduces the risk of a stock-out. Trade credit may stimulate sales because it allows customers to assess product quality before paying. Another component of working capital is accounts payable. Delaying payments to suppliers allows a firm to assess the quality of bought products, and can be an inexpensive and flexible source of financing for the firm. On the other hand, late payment of invoices can be very costly if the firm is offered a discount for early payment. A popular measure of Working Capital Management (WCM) is the cash conversion cycle, i.e. the time lag between the expenditure for the purchases of raw materials and the collection of sales of finished goods. The longer this time lag, the larger the investment in working capital. A longer cash conversion cycle might increase profitability because it leads to higher sales. However, corporate profitability might also decrease with the cash conversion cycle, if the costs of higher investment in working capital rise faster than the benefits of holding more inventories and/or granting more trade credit to customers. This discussion of the importance of working capital management, its different components and its effects on profitability leads us to the problem statement which we will be analyzing.

52

B. Review Of The Research:

Many researchers have studied working capital from different views and in different environments. The following ones were very interesting and useful for our research:

(Deloof, 2003) discussed that most firms had a large amount of cash invested in working capital. It can therefore be expected that the way in which working capital is managed will have a significant impact on profitability of those firms. Using correlation and regression tests he found a significant negative relationship between gross operating income and the number of days accounts receivable, inventories and accounts payable of Belgian firms. On basis of these results he suggested that managers could create value for their shareholders by reducing the number of days accounts receivable and inventories to a reasonable minimum. The negative relationship between accounts payable and profitability is consistent with the view that less profitable firms wait longer to pay their bills.

(Ghosh and Maji, 2003) in this paper made an attempt to examine the efficiency of working capital management of the Indian cement companies during 1992 1993 to 2001 2002. For measuring the efficiency of working capital management, performance, utilization, and overall efficiency indices were calculated instead of using some common working capital management ratios. Setting industry norms as target-efficiency levels of the individual firms, this paper also tested the speed of achieving that target level of efficiency by an individual firm during the period of study. Findings of the study indicated that the Indian Cement Industry as a whole did not perform remarkably well during this period.

53

(Shin and Soenen, 1998) highlighted that efficient Working Capital Management (WCM) was very important for creating value for the shareholders. The way working capital was managed had a significant impact on both profitability and liquidity. The relationship between the length of Net Trading Cycle, corporate profitability and risk adjusted stock return was examined using correlation and regression analysis, by industry and capital intensity. They found a strong negative relationship between lengths of the firm s nettrading Cycle and its profitability. In addition, shorter net trade cycles were associated with higher risk adjusted stock returns.

All the above studies provide us a solid base and give us idea regarding working capital management and its components. They also give us the results and conclusions of those researches already conducted on the same area for different countries and environment from different aspects. On basis of these researches done in different countries, we have developed our own methodology for research.

54

5.3 DEFINE THE PROBLEM Working Capital Management and profitability analysis of Tamboli Casting Ltd. Within timeframe of 2007 to 2010

55

5.4 OBJECTIVES OF THE STUDY

This research is focusing on working capital management and its effects on profitability for a Tamboli Casting Ltd. To establish a relationship between Working Capital Management and Profitability over a period of four years for Tamboli Casting Ltd. To find out the effects of different components of working capital management on profitability. To draw conclusion about relationship of working capital management and profitability of the Tamboli Casting Ltd.

56

5.5 Limitations Of the Study:

The main limitation of the research report is;

Limited Data:
As the analysis is to be done for four years the more data can be beneficial for all over research. If the data is for long period the analysis can be more realistic.

Technical Limitation :
There could not apply the multiple Regressions because of technical limitation. Otherwise result could be seems clear if had been applied.

Time Period:
Time for the research that has been conducted is also for minimum period of time.

57

5.6 RESEARCH DESIGN

As far as research topic is concerned the research design used in study is Descriptive type of research design.

o Descriptive Design:
Descriptive studies are typically structured with clearly states hypotheses or investigative questions. Most of the social research comes under this category. Many scientific disciplines, especially social science and psychology, use this method to obtain a general overview of the subject.

RESEARCH METHOD

Research Method for the study is analytical method. So it is used for the research that have been conducted and help in giving the appropriate results. I have used for this method in my study.

o Research Sample:
As the research is about TCL I have collected the sample of four years.

5.7 RATIONAL OF THE STUDY

58

Rational is the need of the study. As far as TCL is concerned I have found out that profitability is very essential in any organization. So main area that affects the profitability is working capital. Its essential to study upon that.

The project talks about profitability, which interests almost all the organization.

Profitability is majorly function of working capital function. This project analyses the relationship of working capital elements and profitability with stastical analytical tools.

With the level of significance of the relationship we can comment with an authority about the sensitivity of working capital, elements and their effect of profitability.

5.8 VARIABLES AND HYPOTHESIS FORMULATION

59

The purpose of this research is to contribute towards a very important aspect of financial management known as working capital management with reference to Tamboli Casting Ltd. Here we will see the relationship between working capital management practices and its affects on profitability of Tamboli Casting Ltd. for a period of four years from 2007 2010.

Variables
This study undertakes the issue of identifying key variables that influence working Capital management of Tamboli Casting Ltd. Choice of the variables is influenced by the previous studies on working capital management.

All the variables stated below have been used to test the hypotheses of our study. They include dependent, independent and some control variables:

DEPENDEND VARIABLE:

Net Operating Profitability (NOP) which is a measure of Profitability of the firm is used as dependant variable. It is defined as Operating Income plus depreciation, and divided by total assets minus financial assets.

INDEPENEND VERIABLES:

60

Average Collection Period (ACP) used as proxy for the Collection Policy is an independent variable. It is calculated by dividing account receivable by sales and multiplying the result by 365 (number of days in a year).

Inventory turnover in days (ITID) used as proxy for the Inventory Policy is also an independent variable. It is calculated by dividing inventory by cost of goods sold and multiplying with 365 days.

Average Payment Period (APP) used as proxy for the Payment Policy is also an independent variable. It is calculated by dividing accounts payable by purchases and multiplying the result by 365.

The Cash Conversion Cycle (CCC) used as a comprehensive measure of working capital management is another independent variable, and is measured by adding Average Collection Period with Inventory Turnover in Days and deducting Average Payment Period.

All the above variables have relationships that ultimately affect working capital management. It is expected that there is a negative relationship between Net operating profitability on the one hand and the measures of Working Capital Management (number of days accounts receivable, inventories and accounts payable and cash conversion cycle) on the other hand. This is consistent with the view that the time lag between expenditure for the purchases of raw materials and the collection of sales of finished goods can be too long, and that decreasing this time lag increases profitability.

5.9 HYPOTHESES TESTING

61

Since the objective of this study is to examine the relationship between profitability and working capital management, the study makes a set of testable hypothesis {the Null Hypotheses H0 versus the Alternative ones H1}. Its about the four elements that working capital having:

1. H0: There is no relationship between Average collection period and Net Operating profitability analysis Ha: There is a possible positive relationship between Average collection period and Net Operating profitability analysis.

2. H0: There is no relationship between Average payment period and Net Operating profitability analysis Ha: There is a possible positive relationship between Average payment period and Net Operating profitability analysis.

3. H0: There is no relationship between Inventory Turnover in days period and Net Operating profitability analysis Ha: There is a possible positive relationship between Inventory Turnover in days and Net Operating profitability analysis.

4. H0: There is no relationship between Cash Conversion Cycle and Net Operating profitability analysis Ha: There is a possible positive relationship between Cash Conversion Cycle and Net Operating profitability analysis.

5.10 DATA COLLECTION

62

Collection of data is an important part in the process of research work. The quality and credibility of the results derived from the application of the research methodology depends upon the relevant, accurate and adequate data.

In this research we have collected basically two types of data:

Primary Data Secondary Data

1. Primary Data:
Data observed or collected directly from first-hand experience is Called Primary data. There are many methods of collecting primary data and the main methods include: Questionnaires Interviews Focus group interviews Observation Case-Studies Critical Incidents Portfolios.

As far as research is concerned interview and observation methods are to be used.

63

Interview: Interviewing is a technique that is primarily used to gain an understanding of the underlying reasons and motivations for peoples attitudes, preferences or behaviour. Interviews can be undertaken on a personal one-to-one basis or in a group. They can be conducted at work, at home, in the street or in a shopping centre, or some other agreed location.

observation Observation involves recording the behavioral patterns of people, objects and events in a systematic manner. Observational methods may be: structured or unstructured disguised natural personal mechanical In the TCL the both method were used for data collection interview had been organized for auditor and manager.

2. Secondary Data: Secondary sources are interceptions of primary data. Published data and the data collected in the past or other parties are called secondary data.

Encyclopedias, textbooks, handbooks, magazine and newspaper articles, and most newscasts (nearly all reference materials) are considered secondary information sources. There are mainly Two type of sources: a. External source b. Internal source

64

Types of external information sourced used by business researchers: Indexes & bibliographies Dictionaries Encyclopedias Handbooks Directories

In external secondary source: Published source Unpublished source Electronic source

As far as our research concerned I have to use in internally source as balance sheet and external secondary source as used electronic source.

65

5.11 ANALYSIS USED IN THE STUDY

In this research we have provided two types of data analysis; descriptive and Quantitative.

Descriptive Analysis
Descriptive analysis is the first step in our analysis; it will help me to describe relevant aspects of phenomena of cash conversion cycle and provide detailed information about each relevant variable.

Quantitative Analysis
In quantitative analysis I have applied two methods: First: we used correlation models, specifically Pearson correlation to measure the degree of association between different variables under consideration. And then for co-relation (r) it is valid or not significant t test have been applied. And then used Regression analysis to estimate the causal relationships between profitability and variable, liquidity and other chosen variables.

5.12 DATA ANALYSIS AND DISCUSSION

66

I have performed two types of analysis, descriptive and quantitative. The results of these two types of analysis are discussed in this section.

5.13 DESCRIPTIVE ANALYSIS

Descriptive analysis shows the average, and standard deviation of the different variables of interest in the study. It also presents the minimum and maximum values of the variables which help in getting a picture about the maximum and minimum values a variable can achieve.

Calculation for components:

1. Net Operating Profitability:

Operating Income + Depreciation
Net Operating Profitability = ----------------------------------------

Total asset Financial asset

YEAR 2006-07

CALCULATION 19587061 + 6942347

----------------------------------------

ANSWER 0.22

2007-08

153435574 35287642 46317841 + 9388405

----------------------------------------

0.33

2008-09

230846790 60833873 12707023 + 11941154

----------------------------------------

0.11

2009-10

273558939 56780241 26574881 + 19274596

----------------------------------------

0.17

321342047 49533483

67

2. Average Collection Period:

Account receivable Sales

Average Collection Period

---------------------------------------- * 365

YEAR 2006-07

---------------------------------------- * 365

CALCULATION 51605248 11350551 58161057

ANSWER 166 Days

2007-08

98 Days

---------------------------------------- * 365

216712689 2008-09
---------------------------------------- * 365

48940192

58 Days

2009-10

---------------------------------------- * 365

310579010 51692831 176349123

107 Days

3. Account Payable in Days:

68

Account Payable in days

---------------------------------------- * 365

Account Payable Purchase

YEAR 2006-07 2007-08 2008-09 2009-10

---------------------------------------- * 365

CALCULATION 18647853 68485704 15593105

ANSWER 99 Days 57 Days 20 Days 63 Days

---------------------------------------- * 365

---------------------------------------- * 365

99167735 5718502

106371065 8838220
---------------------------------------- * 365

50933196

4. Inventory Turnover in Days:

Inventories

Inventory Turnover in days

---------------------------------------- * 365

Cost of Sales

YEAR 2006-07 2007-08 2008-09 2009-10

---------------------------------------- * 365

CALCULATION 33434175 40601413 58885801

ANSWER 300 Days 291 Days 152 Days 422Days

---------------------------------------- * 365

---------------------------------------- * 365

99167735 33053897

---------------------------------------- * 365

132202969 45051374 38935719

69

5. Cash Conversion Cycle:

Cash Conversion Cycle =

ACP + ITID - APP

YEAR 2006-07 2007-08 2008-09 2009-10

CALCULATION 166 + 300 99 98 + 291 57 58 + 152 20 107 + 422 63

ANSWER 367 Days 332 Days 190 Days 466 Days

Descriptive Analysis for the All Components that have counted:

Descriptive Statistics Tamboli Casting Ltd. 2007-2010 Year Observations

Minimum ACP APP ITID CCC NOP 58 20 152 190 0.11

Maximum 166 99 422 466 0.33

Mean 107.25 59.75 291.25 338.75 0.21

Std. Deviation 38.61 28.08 97.12 98.95 0.081

70

The cash conversion cycle used as a proxy to check the efficiency in managing working capital is on average 339 days and standard deviation is 99 days. Firms receive payment against sales after an average of 107 days and standard deviation is 39 days.

Minimum time taken by a company to collect cash from receivables is 58 day while the maximum time for this purpose is 166 days. It takes an average 291 days to sell inventory with standard deviation of 97 days. Here, maximum time taken by a company is 422 days, which has large time period to convert inventory into sales. Firm wait an average 60 days to pay their purchases with standard deviation of 28 days. Here, minimum time taken by a company is 20 days which is occasionally, and maximum time taken for this purpose is 99 days.

5.14 QUANTITATIVE ANALYSIS

71

For quantitative analysis I have used two methods. At first, correlation is used to measure the degree of association between different variables under consideration. I have been able to identify many important variables associated with working capital management. As multiple variables are influencing our problem, I have identified the crucial factors associated with working capital management. Pearson correlation is calculated for all variables used in the study starting with the Pearsons correlation results.

Correlation Coefficient Analysis

Correlation analysis is used for data to see the relationship between variables such as those between working capital management and profitability. If efficient working capital management increases profitability, one should expect a negative relationship between the measures of working capital management and profitability variable. There is a positive relationship between gross profitability on the one hand and the measures of working capital management on the other hand. This is consistent with the view that the time lag between expenditure for purchases of raw material and the collection of sales of finished goods can be too long, and that decreasing this time lag increases profitability. But it is negative in CCC.

Calculation of Karl Pearson Co-relation:

72

Formula for co-relation:

ACP(X) 165 98 58 107 TOTAL 428

NOP(Y) 0.22 0.33 0.11 0.17 0.83

X2 27225 9604 3364 11449 51642

Y2 0.0484 0.1089 0.0121 0.0289 0.1983

XY 36.3 32.34 6.38 18.19 93.21

r1 =

4(93.21)-(428) (0.83) (4(51642)-(428)2 4(0.1983)-(0.83)2

0.35

There is a positive relationship between Average collection period and net operating profitability.

73

APP(X) 99 57 20 63 TOTAL 239

NOP(Y) 0.22 0.33 0.11 0.17 0.83

X2 9801 3249 400 3969 17419

Y2 0.0484 0.1089 0.0121 0.0289 0.1983

XY 21.78 18.81 2.2 10.71 53.5

r2 =

4(53.5)-(239) (0.83) (4(17419)-(239)2 4(0.1983)-(0.83)2

0.43

There is a positive relationship between Average payment period and net operating profitability.
ITID(X) 300 291 152 422 TOTAL 1165 NOP(Y) 0.22 0.33 0.11 0.17 0.83 X2 90000 84681 23104 178084 375869 Y2 0.0484 0.1089 0.0121 0.0289 0.1983 XY 66 96.03 16.72 71.74 250.49

r3 =

4(250.49)-(1165) (0.83) (4(375869)-(1165)2 4(0.1983)-(0.83)

0.28

There is a positive relationship between Inventory turnover in days and net operating profitability.

74

CCC(X) 367 332 190 466 1355 TOTAL

NOP(Y) 0.22 0.33 0.11 0.17 0.83

XY 80.74 109.56 20.9 79.22 290.42

134689 110224 36100 217156 498169

0.0484 0.1089 0.0121 0.0289 0.1983

r4 =

4(290.42)-(1355) (0.83) (4(498169)-(1355)2 4(0.1983)-(0.83)2

=
profitability.

-0.59

There is a negative relationship between Cash conversion cycle and net operating

And then r is significant or not for that t- test has been applied and for t-test the hypothesis is formulated is to be for this element. t=r d.o.f = n-2 For Average Collection Period (ACP) t= 0.35 4 - 2 1-(0.35)2

= tC =

0.53 2.92

There is no relationship between Average collection period and Net Operating profitability analysis so null hypothesis is accepted.

75

For Average Payment Period (APP) t = 0.43 4 - 2 1-(0.43)2

= tC =

0.67 2.92

There is no relationship between Average payment period and Net Operating profitability analysis so null hypothesis is accepted

For Inventory Turnover In Days (ITID) t= 0.28 4 - 2 1-(0.28)2

= tC =

0.41 2.92

There is no relationship between Inventory Turnover in days period and Net profitability analysis so null hypothesis is accepted.

Operating

For Cash Conversion Cycle (CCC) t= -0.59 4 - 2 1-(-0.59)2

-1.03

tC =

2.92

There is no relationship between Cash Conversion Cycle and Net Operating profitability analysis so null hypothesis is accepted. 76

Wing are co-relation (r) calculated results:

Elements Of Working Capital X

Profitability

Co-relation

y NOP NOP NOP NOP

r 0.35 0.43 0.28 -0.59

ACP APP ITID CCC

Co-relation(r)

t calculated 0.53 0.67 0.41 -1.03

t critical (table) 2.92 2.92 2.92 2.92

Accepted/ Rejected Accepted Accepted Accepted Accepted

0.35 0.43 0.28 -0.59

d.o.f = n-2 = 4-2 = 2 = 5%

77

INTERPRETATION:

I have started analysis of correlation results between the average collection period and net operating profitability. The result of correlation analysis shows a positive coefficient 0.35 with t-value calculated 0.53 and table value of 2.92 and hypothesis is accepted. And we can see that there is no relationship between profitability and average collection period. So ACP not independently affects the profitability. Correlation results between inventory turnover in days and the net operating Profitability also indicate the same type of result.

The correlation coefficient is 0.28 with t-value calculated 0.41 and table value of 2.92 and hypothesis is accepted. And the calculation has resulted that there is no relationship between profitability and Inventory turnover in days. So ITID not independently affect the profitability. It also indicates that if the firm takes more time in selling inventory, it will adversely affect its profitability. Correlation results among the payable turnover in days or average payment period also indicate the same trend. The coefficient is 0.43 with t-value calculated 0.67 and table value of 2.92 and hypothesis is accepted.

And the calculation has also resulted that there is no relationship between profitability and average Payment Period. So APP not independently affects the profitability. It means that the more profitable firms wait lesser to pay their bills. The cash conversion cycle which is a comprehensive measure of working capital management has a negative coefficient 0.59 with t-value calculated 1.03 and table value of 2.92 and hypothesis is accepted. And we can see that there is no relationship between profitability and Cash Conversion Cycle. So CCC not independently affects the profitability. It means that if the firm is able to decrease this time period known as cash conversion cycle, it can increase its profitability.

78

Regression Analysis:
For the purpose of identifying the important variables influencing the dependent variable I have used the regression analysis.

Formula for the regression is: X = X N Y = Y N

= ssxy

ssyx
a = Y + X (b)

= a + b(X)

Variables are:
Independent: ACP, APP, ITID, CCC Dependent: Net Operating Profitability

79

Regression Results are: Average Collection Period (ACP):

x = 428
4

= 107.25 y = 0.83
4

= 0.2075 ssxy = 4.41 ssyx = 5962.75 b=

4.41 5962.75

= 0.0007 A = 0.2075+107.25 (0.0007) = 0.1324 = 0.1324 + 0.0007X

Average Payment Period (APP):

x = 239
4

= 59.75 y = 0.83
4

= 0.2075 ssxy = 3.91 ssyx = 3138.75 b =

3.91 3138.75

= 0.0012 A = 0.2075+59.75 (0.0012) = 0.135 = 0.1358 + 0.0012X

80

Inventory Turnover In Days (ITID):

x = 1165
4

= 291.25 y = 0.83
4

= 0.2075 ssxy = 8.75 ssyx = 37727.75 b =

8.75 37727.75

= 0.0002 A = 0.2075+291.25 (0.0002) = 0.149 = 0.149 + 0.0002X

Cash Conversion Cycle (CCC):

x = 1355
4

= 338.75 y = 0.83
4

= 0.2075 ssxy = -18.70 ssyx = 39162.75 b =

-18.70 39162.75

= 0.00047 A = 0.2075+338.75 (0.00047) = 0.05 = 0.05+ 0.00047X

81

INTERPRETATION:

Different elements for working capital have been applied for regression. And the above results were found. First of all ACP found and if we consider the slope (b) it is 0.0007 and it will have not more effect. And the regression efficient is too low to affect the dependent variable. After that APP was to be found and the results for slope (b) came 0.0012 and this also having no more effect. And here also same results as ACP were there the regression coefficients are too low to affect the dependent variable. The third one is run using the ITID and results for the slope (b) is 0.0002 that all indicates the same results it is not independently affect the profitability. And after that regression is run using the component that is CCC and for that the slope (b) is 0.00047 and the regression coefficient also indicates that independently any of the elements does not affect the profitability.

82

5.15 FINDINGS:

The results show that there is a positive relationship between average collection period and net operating profitability. As similar relationship shows average payment period and inventory turnover in day. And there is negative relationship between cash conversion cycle and net operating profitability. It means that the cash conversion cycle increases it will lead to decreasing profitability of the firm, and managers can create a positive value for the shareholders by reducing the cash conversion cycle to a possible minimum level.

The results show that any of the elements of working capital independently does not affect the profitability of the firm. In a casting industry working capital cycle was found almost fix for that reason visible effect would be largely missing at one independent variable.

83

5.16 SUGGESTIONS:
Mostly, casting units are capital incentives units and their mainly concern themselves with fixed establishments they need to focus more on efficient working capital management also. Working capital management in this case, may seem to be insignificant as far as profit is concerned, but in long run and with deeper analysis it can give a clear picture about the bond between working capital factors and profits. As the company is 100% export oriented unit after a period of 5 years the competition will be found more in foreign market so the diversification planning and also focusing on domestic market will fruitful for the company.

84

5.17 CONCLUSION
Tamboli casting Ltd. has large amounts of cash invested in working capital. It can therefore be expected that the way in which working capital is managed will have a significant impact on profitability of firm. I have found a significant positive relationship between net operating profitability and the average collection period, inventory turnover in days, average payment period and negative in cash conversion cycle for a sample of Tamboli casting Ltd. These results suggest that company can create value for their shareholders by reducing the number of days accounts receivable and inventories to a reasonable minimum level. The positive relationship between accounts payable and profitability is consistent with the view that they have good management at APP. It can be improve also.

Regarding our hypotheses, I conclude that the all null hypothesis (H0) that all are accepted. No elements of working capital significantly affect (independently) the profitability of TCL.

Regarding the regression that has been applied the regression co-efficient are too low to affect the dependent variable. The result can be more realistic if multiple regressions have been used but because of technical limitations it cant apply.

85

6. APPENDIX

Balance sheet

Particulars

As at 31.03.10

As at 31.03.09

As at 31.03.08

As at 31.03.07

SOURCES OF FUND Share holder fund Share capital Reserves & surplus Total Secured Loans Unsecured Loans Deferred Tax Liability TOTAL 29000000 112574504 141574504 97072366 53600000 6561082 298807952 29000000 95592622 128592622 69166056 53600000 5645312 29000000 46052136 75052136 73930196 53600000 4520000 29000000 12972260 41972260 31842364 52900000 3315000

257003990 207102332 130029624

APPLICATION OF FUND Fixed Assets Gross Block Less- Depreciation Net Block Capital Work in Progress Current assets, Loan & 185329442 (47588163) 137741279 39652169 159087743 107288131 61365156

(28313566) (16372413) (6987480) 130774177 90915718 54377676 -

86

Advance Inventories Sundry Debtors Cash & Bank Balance Loan & Advance Total Less-Current Liability & Provision Liabilities Provisions Net current asset 16720788 5813307 121414504 10392799 6162150 126229813 116186614 75651948 23744458 23405950 45051374 51692831 4482109 42722285 143948599 33053897 49840192 23723574 37067099 58885801 58161057 1948072 20936142 33434175 51605248 1853467 12165008 99057898

142784762 139931072

Miscellaneous Expenditure (to the extent not written off) TOTAL 298807952 257003990 207102332 130029624

87

Profit & loss:

Particular INCOME Sales & Operating Income

2009-10

2008-09

2007-08

2006-07

176349123

3105790 0

21671268 9 188735 2169014

1592.00

Other Income Total EXPENSES Change in inventory Materials and manufacturing exp. Administrative and other exp. Interest Depreciation Total Profit before tax for the year Less- Current tax Less-Deferred Tax Less Fringe benefit tax

1103817 177452940

703045 3112825

11335051 11381408

-4891572 94766223 41278812 6993503 19724596 157871562 19581378 2295000 915770 0.00

2508352 1586143 4293603 6570700 1194114 2451452 6613633 7575000 1125312 165000

-2229773 14979077 33702114 3846189 9388405 17442972 42471672 4865000 1205000 100000

-21241635 95979181 12547084 1415373 6942347 95642350 18171688 170000 3315000 18000

Profit after taxation Add - Prior Period adjustments Amount available for appropriation Appropriation:

16370608 4129 16374737

5727101 1615 5727266

36301672 171059 36472731

14668688 0 14668688

88

Dividend Corporate dividend tax General reserve Balance Carried To Balance sheet Earning per share (basic/Diluted) Nominal value of share

2900000 492855 12981882 0 5.65 10

3190000 542140 5354046 0 19.75 10

2900000 492855 33079876 0 12.58 10

1450000 246428 12972260 0 5.58 10

NOP: Net Operating Profitability

ACP: Average Collection Period ITID: Inventory Turnover in Days

APP: Average Payment Period

CCC: Cash Conversion Cycle

89

7. BIBLIOGRAPHY
Deloof, M and Jegers, M. 1996. Trade credit, product Quality, and Intra Group Trade: Some European Evidence, Financial Management, Vol 25 No 3 pp. 33-43 Deloof, M. 2003. Does Working Capital Management Affects Profitability of Belgian Firms?, Journal of Business Finance & Accounting, Vol 30 No 3 & 4 pp. 573 587

Eljelly, A. 2004. Liquidity-Profitability Tradeoff: An empirical Investigation in an Emerging Market, International Journal of Commerce & Management, Vol 14 No 2 pp.48 61 Ghosh, S. K. and Maji, S. G. 2003. Working Capital Management Efficiency: A study on the Indian Cement Industry, The Institute of Cost and Works Accountants of India
Book : Van Horne, J. C. & Wachowicz, J. M. 2000. Fundamentals of Financial Management, 11th Ed. Prentice Hall Inc.

Black Ken, Business Statistics for contemporary decision making, 4th edition, Wiley India Edition.

Website: www.tcl.in

90