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A STUDY ON WORKING CAPITAL MANAGEMENT

IN JADHAO GEARS PVT. LTD.



Project Report Submitted To University Of Pune, Pune
In Partial Fulfillment of Requirement For the Award Of Degree Of

MASTER OF BUSINESS OF ADMISTRATION

By
ROHIT K. WADNERE
Under The Guidance Of
Dr. Sonwane Sir
ASMS INSTITUTE OF PROFESSIONAL STUDIES,
PIMPRI , PUNE- (MAHARASTRA)
2012-13

DECLERATION




I, the undersigned, hereby declare that the Project Report entitled Working Capital On
JADHAV GEARS PVT. LTD. written and submitted by me to University of Pune,
Punne in partial fulfillment of requirements for award of degree of Master Of Business
Administration under the guidance of Dr. S. N. Sonawane is my original work and
conclusions drawn therein are based on the material collected by myself.



Place:Pune ROHIT K. WADNERE
Date: Research Student





CERTI FICATE

This is to certify that the Project Report entitled Working Capital On JADHAV GEARS
PVT. LTD which is being submitted herewith for the award of the degree of Master Of
Business Administration of University of Pune, Pune is the result of original research
work completed by Mr. Rohit Wadnere under my supervision and guidance and to best
of my knowledge and belief the work embodied in this Project Report has not form
earlier the basis for the award of any degree or similar title of this or any other
University or examining body.




Place : Pune Dr. Sonwane Sir

Date : Research Guide



ACKNOWLEDGMENTS
I take this opportunity as privilege to express my deep sense of gratitude to
Dr. G.B. Patil, Director, the I.P.S, Pune for their continues encouragement,
invaluable guidance and for completing present research work. They have been a
source of inspiration to me and I am indebted to them for initiating me in the
field of research.

I am deeply indebted to Dr (Prof) S. N.Sonwane, my research guide, the
ASMs Institute Of Professional Studies, Pune without whose help completion of
project was highly impossible.

I take this opportunity as privilege to articulate my deep sence of gratefulness
to the Managing Director, Mr. Shekhar Pande ( A.M. Corp.) and the staff of
JADHAO GROUP of Company for their timely help and positive encouragement.
I wish to express a special thanks to all teaching to all teaching and non-teaching
staff members, the, ASMs Institute Of Professional Studies, Pune for their for
ever support. Their encouragement and valuable guidance are gratefully
acknowledged. I would like to acknowledge all my family members, relatives and
friends for their help and encouragement.


Place : Pune Rohit k. Wadnere
INDUSTRY PROFILE
Cotton is supposed to be a backbone of agriculture and industrial revolution and the
number one cash crop of India. Out of 500 lack hectors cotton-growing land from the
world India is on the top in production of cotton from 120 lack hector. The first hybrid
variety of cotton is given by Shri C. T. Patel in the world. Likewise this so called white
gold is the number one cash crop of Maharashtra and about 30 lack hectors of land in
Maharashtra is under cotton cultivation.

Since last 15 years our country is exporting cotton in the International Market.
Although large quantity of cotton is exported but the returns are very less as compared to
other exporting countries. And this is only due to contamination proportion in Indian
Cotton. Such type of contamination can be avoided by modern methods of technology of
ginning cotton, there are lot of precautionary measures, which should be adopted before
sending bales in the International Markets
In Maharashtra there was a cotton monopoly purchase scheme managed by the
State Government. The cotton Federation owned by Govt. of Maharashtra purchases
cotton from the cultivators and after ginning and pressing, the lint bales are sold by
them. The functioning of ginning and pressing is done by the factories either owned by
co-op societies or private sectors spread all over the State. Still there is wide scope for
opening new ginning & pressing factories. Since last 3 years Govt. of Maharashtra have
discontinued the cotton monopoly scheme and now there is open market for purchase
of seed cotton & sale of lint bales. Hence most of the Cotton from the south best of
Maharashtra is being exported to Andhra Pradesh, nearest State.
Ginning & Pressing factory is one of the major Industries not only in Maharashtra but
also in the other cotton growing states viz. M.P., Gujarat, A.P., Karnataka etc. In Andhra
it is a manufacturing industry. Factories purchase seed cotton from brokers &
agriculturists and after ginning & pressing in their factories lint bales are being exported
& cotton seed is being sold to Oil Mills etc.
Manufacturing Process
The percentages are: Cotton Lint 34%, Cotton seed 64%, Wastage 2%
Cotton seed and cotton lint are sold separately in the market.
Heeping: - In the factory there should be sufficient space for arranging heeps. The place
of heeps should be decided as per the purchase plan of
verities of cotton. One heep should be of approx. 1000 to 1500 qtles. The heep should
be at a distance 30 to 40 meters from the Gin House and its
height should not be more than 10 meters. The back portion of the heep should be long
than the front portion. Instant availability of bulk water must be near the heeps.
Manufacturing Process :- The traveling of raw cotton to lint bales is
as under



{Fig. No.1.1} Manufacturing Process

Pre-cleaning: - It is very essential to clean the raw cotton before sending it for ginning.
The Pre-cleaner separates small pieces of stones, particles of
dust and sand from raw cotton and thus prevents breakage of fix knife, moving knife and
roller. It is also essential to keep the area of the factory clean to prevent cotton from dust.
To prevent wastage of cotton it is advisable to use Pneumatic Conveyor. The Pneumatic
conveyor helps in transportation of raw cotton from pre cleaner to Gin machine and
with the use of it the raw cotton is automatically poured into the Auto feeder fixed over
the Gin Machine. With the use of Pneumatic Conveyor raw cotton travels from pre-
cleaner to gin machine without moisture and dust.
Ginning: - The process of separation of cotton seed from raw cotton is called Ginning.
Machineries required for on line ginning & pressing factory: -
Heeping of
cotton

Ginning
cotton
Precleaning

Ginning
Cotton seed

Pressing
cotton
Lint bales
1. DR Gin Machine 5. Auto Feeder
2. Suction Machine 6.Automatic lint conveyor
3. Automatic seed Conveyor 7.Raw cotton pre cleaner
4.Weigh Bridge 8.Cotton Bailing Press
















GINNING
SAW GIN ROLLER GIN
DOUBLE ROLLER GIN
(two rollers & two fix knife &
Two moving knife)
SINGLE ROLLER GIN
(one roller & one fix
knife)
POWER
TRANSMISSION
ASSEMBLY

BEATER
ASSEMBLY
FRAME
ROLLER
ASSEMBLY










Functioning Of Modern Ginning Factory

In the recent past mechanization took an edge over every manual functioning. Ginning
Factories are also on the frontline although most of the factories are established in rural
areas. The benefit and the purpose of establishing the ginning factories in rural areas
is for easy access of raw cotton from the Centers/Sub-Centers of Cotton Federation as
Ele. motor belt
& pully
Hub assembly
Eccentric shaft
Connecting rod
Head pin
Gears of
different teeth
Moving knife
Fix knife
Beater shaft
Beater arm
Beater traff
Grid jally
Roll shaft &
Pulley
Side frame
Leather washers
Gear side frame
Bearings
Seed channel
Swing leaver
Lower panel
Upper panel
Teeth
Seed guard
Hopper
Cross bar
Federation is also having Sub-Centers adjacent to rural areas for the convenience of
farmers.

In a modern ginning factory raw cotton is stores in a shed covered by the sheets.
From the Sheds raw cotton is being carried to pre-cleaner and with the use of
Pneumatic Conveyor it is carried to Auto Feeder. After ginning the lint is collected at one
point and again cleaned by lint cleaner and thereafter by Pneumatic Conveyor it is
brought to Pala House of the Press and then lint is pressed and converted into Lint
Bales. With the use of ultra modern machines lint is directly brought to Pressing
Machine and with the use of Automatic Baling Press converted into lint bales instead of
taking it to Pala House.














CONTENTS


ACKNOLADGEMENT
CHAPTER I: Introduction
CHAPTER II: Profile of organization
CHAPTER III: Research Design and Methodology
CHAPTER IV: Data Presentation, Analysis
and Interpretation

CHAPTER V: Findings and Suggestion
BIBILOGRAPHY
ANNEXURE
CHAPTER I
Introduction

JADHAO Group is well known in India & Abroad for high quality Cotton Ginning &
Pressing Machinery and Plant.

The group comprises of
JADHAO GEARS PRIVATE LIMITED
JADHAO STEEL ALLOYS
JADHAO ICONS
GUKSS INDUSTRIES
JADHAO INERNATIONAL

The group is located at Amaravati in the state of Maharashtra, India. The
operations occupy industrial buildings measuring 25,700 sq.mtrs built over an
area of 84,000 sq.mtrs. Since the commencement in 1985 (with Gear Boxes) the
operations have grown, modernized & diversified amazingly.

Mission
To chive excellence in project execution, quality reliability, safety and
operational efficiency.
To consistently enhance our competitiveness and deliver profitable growth.
To practice highest standards of corporate governance and be finally sound
company.
To improve the lives of local community in all our projects.
To encourage ideas, talent and values system and become the employer of
choice.

Vision for the future

We want to export our systems on large scale to the international market and
our ultimate aim is to win our rightful place in the developed countries.

We want to establish ourselves as vendors for precision machined & pressed
components to OEMS in India & abroad.



We want to build a modern new plant to manufacture Electrical Systems
.
We want to develop plant and machinery for the production of Animal
Fodder.

In monetary terms, we want to increase our turn over from the present US
Dollar 18 millions to US Dollars 35 millions, ie from Rs 70 Crores to 140 Crores,
by the year 2011.












Board Of Director


Mr. Sanjay S. Jadhao Managing Director


Mrs. Smita S. Jadhao Director, (Gen.Adm.& Finance)


Mr. Sanjay S. Supe Director , (Gukss Industries)

Mr. Ajay V. Tijare C.E.O
.
Mr. Arun Ingole Exe. V. P. - Export & Corp.
Affairs

Mr. Sudhir Petkar C.E.O.(Operations)


Mr. Ashok Ingole C.E.O. ( C.A.D.)

Ms.Swanpnili S.Jadhao C.E.O. ( Jadhao Icons)

CHAPTER II
Profile of organization
JADHAO Group of Companies.
JADHAO Group is well known in India & Abroad for high quality Cotton
Ginning & Pressing Machinery and Plant.
The group comprises of

JADHAO GEARS PRIVATE LIMITED.

JADHAO GEARS.

JADHAO STEEL ALLOYS.

JADHAO ICONS.

GUKSS INDUSTRIES.

JADHAO INERNATIONAL.

JADHAO ENGINEERS.

JADHAO ASSOCIATES.

The group is located at Amaravati & Butibori (Nagpur) in the state of
Maharashtra, India. The operations occupy industrial buildings measuring
35,666 sq.mtrs built over an area of 86,351 sq.mtrs. Since the commencement
in 1985 (with Gear Boxes) the operations have grown, modernized & diversified
amazingly.
Products Manufactured
The present product range includes the following.









98).

-cleaners & Lint Cleaners (since 2000).



-line Steam Humidification System for lint (since 2005).

(since 2007).









Manufacturing Machinery & Plant
The manufacturing facilities for all the products are available in house which
ensures high quality consistently.

Foundry - The modern foundry is equipped with Cupola furnace, Core Baking,
Die casting, Laddle pouring in CO2 moulds and Shot Blasting.

High Precision machining - Machining centers, Turning centers, Gear Hobbing
& Teeth Profile Grinding, Knife Grinding, Broaching, Thread Rolling and Special
Purpose Machines accomplish the high precision machining.

High Precision Sheet Metal -The state of the art sheet metal fabrication is
carried out with CNC Turret Punch, NC Bending, MIG, TIG and Spot Welding
machines.

Powder Coating-The surface Treatment is provided by 7-tank Phosphating,
Powder Coating & Oven baking plants.

Fabrication - The heavy fabrication is accomplished by CNC Plasma & Gas
Profile cutting, CO2 welding machines and Plano-miller of 5 tons capacity.

Heat Tratment Gas Carburising,Stress Relieving,Tempering.

Assembly-The final assembly is carried out in the modern mechanized Assembly
Line to meet the market demand.





Product Design Philosophy
The special cell of philosophy innovative designers is headed by the M.D himself.
They convert simple ideas into commercial application & release outstanding
products.

As a Rule, we implement at least one meaningful improvement in each
product every year.




In-house Quality Check & Controls
The quality of each component is monitored at every stage, i.e. Incoming
inspection, In-process inspection & Final inspection. Our custom-built and
well-equipped Testing Laboratory & the Standards Room enable our trained
and customer-focused QC personnel to ensure high quality as expected by
customers.
As a result our products & systems have been working efficiently giving
immense benefit to the customers





After Sale Services

Installation & commissioning services through trained Field Service
personnel. Furthermore, the Customer Complaint Cell resolves Customers
problems ON THE SPOT.

Genuine spare parts at competitive prices & short delivery periods.

en from July 2010, Service Stations at three Centres
in India Viz.Rajkot (Gujrat),Adilabad(AP),Bhatinda(Punjab),Amravati(MS).










Volumes Manufactured & Commissioned (Upto Year 2010)















on system,














Employee Training & Welfare
Jadhao Group firmly believes that trained and happy employees can ensure
CUSTOMER SATISFACTION. The employees are regularly trained on job and
otherwise. We continuously strive to improve their well-being and welfare.

Few Prominent Customers
Jadhao Group is proud to have Satisfied Customers, in all ten cotton
producing states of India, such as; Nuziveedu Seeds, AP; Manjeet Cotex, MP; G.
M. Rao Cotton, AP; Jagannath Textiles, Tamilnadu; Lincoln Industries, Punjab; N. K.
Cotton, Maharashtra; Shyam Textiles & Gurukripa Cotton, Gujrat, etc.
Dunavant, USA & Copcot, Switzerland, having their plants in Uganda, are some of
our valued overseas customers.
Our customer base in overseas countries Uganda,Tanzania,Kenya,Syria.


Future Plans

expand rapidly through international technical collaborations.

export our products & systems on large scale to the international
market.

establish ourselves as vendors for precision machined & pressed
components to OEMS in India & abroad.

commission a new plants for manufacturing electrical systems at
Butibori, Maharashtra.


achieve the Sales Turnover of Rs. 150 crores by year 2011.

Jadhao Group has already become BENCHMARK for the cotton Ginning
Machinery industry in India.














CHAPTER III
Research Design and Methodology
Organization Structure


CHAIRMAN
JADHAV GROUP
HEAD
MATERIAL
CEO
JADHAV GEAR
HEAD
SALE
HEAD
R & D
HEAD
FINANCE
HEAD
MACHINE
DESIGN
HEAD
MARKETING
BILLS
PAYBLE
DEPT
COSTING
DEPT
GENERAL
ACCOUNT
DEPT
TAXATION
DEPT
BILLS
RECIVEBLE
DEPT
Products Manufactured

DR Ginning Machine Jumbo

DR Ginning Machine Extra Long

Hydraulic Cotton Lint Bale Press

Automated Material Handling Systems

Cotton Pre-cleaners and Lint Cleaners

On-line Steam Humidification System for lint

Made to order high precision machined & sheet metal components for
OEMs







Volumes Manufactured

47000 nos. of DR Ginning Machines.
272 nos. of Automatic Hydraulic Cotton Baling Presses.
252 sets of Automated Material Handling Plants,
comprising of Cotton
suction system, Cotton cleaner, Cotton belt conveyer, PLC operated
automated cotton feeding system Lint suction system, Lint cleaner, Lint
belt conveyor, Seed screw conveyor, Seed elevator, Pneumatic seed
blower.
Company export products and systems on large scale to the international
market; especially all the cotton producing countries in Africa including
Egypt. It can also provide machine Setters and Supervisors/ Operators as
per Customers requirements. So far, the Group has supplied about 200
nos of DR Ginning machines to Africa; 145 to six Ginneries in Uganda and
55 to two Ginneries in Tanzania. All Customers are fully satisfied and two
of them have ordered a Baling Press and more DR machines.



Quality Policy :-



We at Jadhao Gears, Amravati are committed to
Design , Manufacture , Installation and Service of
Cotton Processing Systems and to meet customers
requirement and satisfaction.

It is a quality policy of the Jadhao Gears. To supply high quality machine product
toits customer and to achieve total quality performance in meting their
requirement by

Understanding who the customer is

Knowing the customer requirement

Meeting those requirement without error on time, every time

Continually improving effectiveness of related process and quality system.



Certification

It is ISO 9000 company certified in 2000 for its quality management first in
district.

VIJAYSHREE award in 1997 at Delhi.

UDYOGSHREE award in 2000.

SARTHI award in 2005.

Functional objective



To increase Export Territory.

To prepare effective method and its implementation for Budget of the next
year.

To prepare and monitor system for timely delivery of the machineries.


Product Portfolio:



Auto Feeder











Auto Feeders are designed to loosen lump of row cotton and for even
distribution of loosen cotton along the beater of Gin. Auto Feeder substitute for
man power without any additional drives. Auto Feeder substantially increase
productivity of Gin Machine. Grids provide removes trash automatically.



Deluxe D.R Gin Machine



Silent feature
I) Oil Immersed Gear Box - Wear & tear Minimum, High Durability
of Moving Parts and Bearing.
II) Helical Gears - High Contact Ratio, More Length of
Contact, Noiseless Running, Extra
Smooth Working, More Working
Life & Considerable Low
Consumption of Elec. Power.


III) 100% Quality Control - Interchangeability, Performance of Parts
Above average, High Life.



IV) Standardization of Parts - Easy Availability.


V) Robust C.I. Frame with - Vibration is Minimum.
Widen Base
VI) An ISO 9001-2000 Co. - Assured Quality, Performance &
Service.
VII) Alloy Still Material For Major - High Working Life.
Moving Parts Dually Treated
VIII) Certified By American Quality Assessors.
IX) Certified By Quality Circles Forum of India.

Machine Specification :

Power Required is 5 H.P./ 3.6 Kw. -450/440 V
Three Phase A.C.Supply.
Frequency 50 Hz.
Frame Size 132s.
Operating Speed 1000 rpm.




Product Design Philosophy

The special cell of highly innovative designers is headed by the M. D. himself.
They convert simple ideas into commercial applications & release outstanding
products. The priority is given to the ecology (for the society) and power saving
(for Customers benefit). To enter into technical collaborations with reputed
international companies in order to acquire latest technologies & expand rapidly.
As a Rule, they implement at least one meaningful improvement in each product
every year.

In-house Quality Check & Controls
The quality of each component is monitored at every stage, i.e. Incoming
inspection, In-process inspection & Final inspection. Our custom-built and well-
equipped Testing Laboratory & the Standards Room enable our trained and
customer-focused QC personnel to ensure high quality as expected by customers
As a result our products & systems have been working efficiently giving immense
benefit to the customers.

After Sale Services
Installation & commissioning services through trained Field Service personnel.
Furthermore, the Customer Complaint Cell resolves Customers problems ON THE
SPOT.
Genuine spare parts at competitive prices & short delivery periods.












Employee Profile


Human resources policies of Jadhao Gears and its
associate concerns have the interest on its work force at heart. The Company
believes in aligning business priorities with the aspiration of the employees
leading to the development of an empowered and responsive human capital. The
human capital of the Company and its associate concerns consists 3 Directors;
C.E.O./Sr.Manager; 15 persons in Managerial Capacity; 15 supervisors & 120
Skilled / Semi Skilled and Unskilled workers comprising 10 departments/divisions
viz. Administration, Production, Marketing & Customer Care, Design &
Development, Quality Control, H.R.D., Maintenance, Purchase, Security and
Accounts.

One of the constant efforts of the Company is to attain
organizational excellence by developing & inspiring the true potential of the
Companys human capital and providing opportunities for growth and
enrichment. The Company tries to inculcate an environment of creativity and
innovation and is constantly working towards providing job content to its
employees through empowerment, accountability and responsibility. The
Company cares for each and every employee and has an in built system of



performance appraisal to recognize and reward him periodically and has
incorporated schemes like performance incentive pay. The company fosters
mutual faith, trust and respect by providing ample growth opportunities and
challenges to all its employees. The Company strives to acquire, engage and
retain a work force that is diverse, innovative, insightful and knowledgeable and
this be achieved only by investing in and upgrading organizational talent by
providing training and education to reinforce its existing strengths.

Under the Employees Welfare the Company provides a
canteen facility, medical facility, insurance on @par basis. Under the Cultural
Activities the Company arranges a get to gather of the family of the employees
on the Kamgar Day, felicitate their meritorious children and also celebrates
Ganesh Festival, Independence Day, Republic Day. And hence the industrial
relations are harmonious and cordial with the cooperation of all the employees.

Employee Training & Welfare
Jadhao Group firmly believes that trained and happy employees can ensure
CUSTOMER SATISFACTION. The employees are regularly trained on job and
otherwise. We continuously strive to improve their well-being and welfare

Objective

The summer training at JADHAO GEARS was undertaken with the view to study
certain fundamental as well as commercial and operational aspect of the
company.
The training was undertaking with view of following objective :-

To measure financial health and stability by measuring the liquidity
position of Jadhao Gears.
To study and analyze various financial ratios of company of past two year .
To judge the efficiency and financial strength of company .
To study the operating efficiency in assets utilization of company .
To forecast likely events in future for company.
To do Time-series analysis of Jadhao Gears.





SCOPE

Ratios help to analyse various situation in our day to day life. For e.g. Whenever
we see a cricket match if one team needs to win, this would mean nothing, but
instade of this if we say that the team needs 8 run per over in order to win
match. This could be enough. This is how ratios help us to analyse situation in our
day to day life.

Ratio Analyse help to appraise the firms in term of their profitability and analyse
of performance which can be individually or in relation to those other companies
in same industries.

This is the best possible technique avalible to management to impart the basic
functions like planning and control. As the future is closely related to immidate
past, ratios are calcculeted on basis of historical financial statements could be of
good used to predict the future.

This help to locate and point out the various areas which need the management
attention in order to improve situation.



METHODOLOGY
Project methodology includes various steps. There should be a systematic way of
collection of data and presentation of project report. Proper design has to be
taken base on data collect.
A blend of both technique of data collection like interview method and secondary
data like balance sheet and other statement were used for analysis of fund
sources and application.

Data collection :-
The data required for present study was collect through primary and secondary
sources. Based on finding of data, the analysis of data was further done.

Primary data :-
Data that collets for specific purpose at hand is called as primary
data. The primary data was collect through interviews conducted with various
executive. It was on basis of above information the major portion of project was
prepared.
The modern technique of collecting information is taking interview
of respondents. This is very important method used by researcher. Interview is
the dialog between two person or two groups. It is a way of



communication, which exchange thoughts, and gives ideas about topic, which is
to be discussed.

For the purpose of carrying on this project a descriptive interview was conducted
to describe the present position of fund management.
Manager - Corporate
Manager - sales
Manager accounts
Manager purchase
Manager production
Other staff member in account department.

To conduct project efficiently and effectively, it was necessary to interview above
stated personnels as they were actively involved with all section under topic
fund management.

Secondary data :-
Secondary data is the data that has been collected earlier for
purpose of present study. Secondary data was collected through company
website, balance sheet, annual report etc.
The books on financial analysis and ratio analysis
were referred. Then data was analyzed and ratios were calculate to draw
conclusion and give suggestion.




THEROTICAL INFORMATION

CONCEPTS TO BE COVERED

Introduction of Working Capital
Definition
Concept of Working Capital
Need of Working Capital
Importance of Working Capital management
Factors affecting Working Capital
Nature of Working Capital Management
Operating Cycle





INTRODUCTION

Working capital refers to the cash a business requires for its day to day operations or more
specifically for financing the conversion of raw material into finished goods, which the company sells for
payment.
It is a measure of both a companys efficiency and its short term financial health.
It is calculated by the following formula:-

Working capital = Current Assets - Current Liabilities

If a companys current assets do not exceed its current liabilities, then it may run into trouble
paying back creditors in the short run. The worst case scenario is bankruptcy. A declining working capital
ratio over a longer time period is also a danger (Red Flag) that warrants further analysis.
Working Capital also gives investors an idea of the companys underlying operational efficiency.
Monitor / Track Transaction
1
Manage cash
collections &
receivables
2
Centralize Funds
3
Manage Payroll &
Vendor Payments
Manage Working Capital
Invest Borrow
Monitor / Track Transaction



The primary objective of Working Capital Management is to ensure that sufficient cash is available
to:
Meet day to day cash flow needs
Pay wages and salaries when they fall due
Pay creditors to ensure continued supplies of goods and services
Ensure long term survival of the business entity.

Thus working capital management is an attempt to manage and control the current assets and
current liabilities in order to maximize profitability and proper liquidity in the business. To keep the
business alive you need to manage working capital, so the cash flows quickly around the business.





DEFINITION

Working capital is the excess of current assets over current liabilities of any business at any
time.

Use to evaluate the liquidity of a company and how well it is positioned to fund operations in the
short term using cash and other assets convertible to cash. Liquid assets available for conducting the
daily affairs of a business can also be called as working capital. It is used to meet fluctuating needs that
will be repaid during the companys next full operating cycle, generally, one year. By definition, working
capital management entails short term decisions- generally, relating to the next one year period- which
is reversible


Current
Assets
Current
Liabilities
Assets of the business held in cash
form (eg. At the bank) or that can be
quickly turned into cash.
Money owed by a business that will
need to be paid in the next 12
months



STOCKS
DEBTORS
CASH
INVESTMENTS
LOANS & ADVANCES
CURRENTASSETS



LESS





TRADE CREDITORS
TAXATION
DIVIDENDS
SHORT TERM LOANS
CURRENT LIABILITIES



=






WORKING CAPITAL
CONCEPT OF WORKING CAPITAL


Working capital differs from fixed capital in terms of time required to recover the investment in a
given asset. In case of fixed capital or long term assets (such as land, building and equipment), a firm
usually needs several years or more to recover the initial investment. In contrast, working capital is
turned over or circulated at a relatively rapid rate.

There are two concepts of working capital: - Gross and Net

Gross Working Capital:-
It refers to the firms investment in current assets. Current assets are the assets that can be
converted into cash within an accounting year and include cash, short term securities, debtors, bills
receivable and stock.

Net working capital:-
It refers to the difference between current assets and current liabilities. It can also be defined as
that portion of a firms current assets which is finance with long term funds. Current liabilities are those
claims of outsiders that are expected to mature for payment within an accounting year and include
creditors, bills payable and outstanding expenses. Net working capital can be positive or negative. A
positive net working capital will arise when current assets exceed current liabilities. A negative net
working capital occurs when current liabilities are in excess of current assets.

The two concepts of working capital gross and net are not exclusive rather they have equal
significance from the management view point.

Working capital is also of permanent and variable nature. There is always a minimum level of
current assets that is continuously required by the firm to carry on its business operations. This
minimum level of current asset is referred to as permanent or fixed working capital. The extra working
capital needed to support the changing production and sales activities is called fluctuating or variable
working capital.




















Following is the diagram showing types of Working Capital:-






WORKING
CAPITAL
On the Basis
of Concept
Gross
Working
Capital
Net
Working
capital
On the basis of
Requirement
Fixed
Working
capital
Variable
Working
Capital

The firm should maintain working capital position. It should have adequate Working
Capital to run its business operation. Both excessive as well as inadequate Working Capital
positions are dangerous from the firms point of view. Excessive working capital means idle
funds which earn no profits for the firm.




NEED OF WORKING CAPITAL

Not all businesses have the same need to invest in working capital. Much depends on:-
The nature of the production process i.e. what and how something is being produce.
The way in which the product is distributed to the customer.

Different industries have different optimum working capital profiles, reflecting their methods of
doing business and what they are selling. The most appropriate a method of calculating the working
capital need of a firm is a concept of Operating cycle.

Businesses with a lot of cash sales and few credit sales should have minimum trade debtor
Example: Supermarkets.
Businesses that exist to trade in completed products will only have finished goods in stock. As
compared to this, manufacturers will have to maintain stock of Raw material and Work in
Progress.
Larger Companies may be able to use their bargaining strength as customers obtain more
favourable, extended credit terms from suppliers. But smaller companies those have recently
started trading (and do not have a track record of credit worthiness) may be required to pay
their suppliers immediately.
Some businesses will receive their money at certain times of year, although they may incur
expenses throughout the year at a consistent level. This is known as Seasonality of cash flow.
Example: Travel Agents


Working Capital need fluctuate during the year:-
Amount of funds tied up in Working Capital would not typically be a constant figure throughout
the year




IMPORTANCE OF WORKING CAPITAL MANAGEMENT

The task of the financial manager in managing working capital efficiency is to ensure sufficient
liquidity in the operations of the enterprise. The liquidity of a business firm is measured by its ability to
satisfy short term obligations as they become due.

1. Time devoted to working capital management:-

Surveys indicate that the largest portion of a financial managers time is devoted to the day to day
internal operations of the firm; this may be appropriately subsumed under the heading Working Capital
Management

2. Investment in current assets:-

Characteristically, current assets represent more than half of the total assets of the business firm.
Because they represent a large investment and it tends to be relatively volatile, current assets are worth
of the financial managers careful attention.





3. Importance for small firms:-

Working capital management is particularly important for small firms. A small firm may minimize
its investment in fixed assets by renting or by leasing plant and equipment, but there is no way it can
avoid investment in cash, receivables and inventory. Therefore, current assets are particularly significant
for the financial manager of a small firm. Further, because a small firm has relatively limited access to
the long term capital markets; it must necessarily rely on trade credit and short term bank loans, both of
which affect net working capital by increased current liabilities.

4. Exploitation of favourable market conditions:-

Only concerns with adequate working capital can exploit favourable market conditions such as
purchasing its requirement in bulk when the prices are lower and by holding inventories for higher
prices.

FACTORS AFFECTING WORKING CAPITAL

Determinants of working capital:-
There are no set of rules or formulas to determine the working capital requirements of firms. A
large number of factors, each having a different importance influence working capital needs of firms.
The importance of the factors also changes for a factor of time. Therefore an analysis of relevant factors
should be made in order to determine total investment in working capital. Following are some factors
affecting the composition of working capital:

1. Nature of business:-

Working capital requirements of a firm are basically influenced by the nature of its business.
Trading and financial firms have a very small investment in fixed assets, but require a large sum of
money to be invested in working capital. Retail stores, for example must carry large stocks of a variety of
goods to stratify varied and continuously demands of their customers.
In contrast, public utilities may have limited need of working capital and have to invest
abundantly in fixed assets. Their working capital requirement is nominal because they may have only
cash sales and supply services, not products. Thus, no funds will be tied up in debtors and stock.

2. Market and demand conditions:-
The working capital needs of a firm are related to its sales. However, it is difficult to precisely
determine the relationship between volume of sales and working capital needs. Sales depend on
demand conditions. Large number of firms experience seasonal cyclical fluctuations in the demand
for their products and services. These business variations affect the working capital requirements,
specially the temporary working capital requirement of a firm.
Seasonal fluctuations not only affect working capital requirement but also create production
problems of the firm.







3. Technology and manufacturing policy:-
The manufacturing cycle (or the inventory conversion cycle) comprises of the purchase and
use of raw material and the production of the finished goods. Longer the manufacturing cycle, larger
will be the firms working capital requirement production policies will differ from firm to firm,
depending on the circumstances of the individual firm.




4. Credit policy:-

The credit policy of the firm affect she working capital by influencing the level of debtors. The
credit term to be granted to customers may depend upon the norms of the industry to which the firm
belongs. The firm should follow a renationalized credit policy based on the credit standing of customers
and other relevant factors.

5. Operating efficiency:-

The operating efficiency of the firm relates to the optimum utilization of all its resources at
minimum costs. The efficiency in controlling costs and utilization fixed and current assets leads to
operating efficiency.

6. Price level changes:-

Generally, rising price level will require a firm to maintain higher amount of working capital. Same
levels of current asset will need increased investment when prices are increasing. It is possible that
some companies will not be affected by rising prices while others may be badly affected.

7. Rate of growth of business:-

The working capital requirement of a firm increases with the growth and expansion of its
activities. It is difficult to determine the relationship between growth in the volume of business and the
growth in the working capital of a business. Yet it may be concluded that for normal rate of expansion in
the volume of the business, we may have retained profits to provide for more working capital but in fast
growing concern, we shall require larger amount of working capital.


NATURE OF WORKING CAPITAL MANAGEMENT

Working capital management is concern with the problem that arises in attempting to manage
the current assets, the current liabilities and the inter relationships that exists between them .The term
current assets refer to those assets, which in ordinary course will be or can be turned into cash within
one year without undergoing a decrease in value and inventory. Current liabilities, which are intended at
their inception to be paid in the ordinary course of business within year out of the current assets, are
earning of the concerns.

The basic current liabilities are bills payable, creditors, bank overdrafts and outstanding expenses.
The goal of working capital management is to manage the firms current assets and current liabilities in
such a way that a satisfactory level of working capital is maintained. This is because, if the firms cannot
maintain a satisfactory level of working capital, it is likely to force into bankruptcy. The current assets
should be large enough to cover its liabilities in order to ensure a reasonable margin of safety. Each of
the current assets must be managed efficiently in order to maintain the liquidity if the firm while not
keeping it too high level of any one of them. Each of the short term sources of financing must be
continuously managed to ensure that they are obtained and used in the best possible way.



ELEMENTS OF WORKING CAPITAL
OPERATING CYCLE

Cash flows in a cycle into around and out of a business. It is the businesss life blood and every
managers primary task is to help it keep flowing and to use the cash flow to generate profits.
If a business is operating profitably, then in theory it should generate cash surpluses. If it doesnt
generate surpluses, the business will eventually will run out cash and expire.
More businesses fail for lack of cash than for want of profit

Definition:-
The working capital cycle is the period of time between the points at which cash is first spent on
the production of a product and the final collection of cash from a customer.

The operating cycle involves 3 phases:-
Acquisition of resources such as raw material, labour, power and fuel.
Manufacture of the product which includes conversion of raw material into work in progress
into finished goods
Sale of a product either for cash or on credit. Credit sales create account receivables for
collection.

The faster the business expands the more cash it will need for working capital and investments.
Good management of working capital will generate cash, will help to improve profits and reduce risks.


Operating Cycle:-
CASH
DEBTORS
DEBTORS
LABOUR
OVERHEAD
SALES
STOCK


The investment in current assets is circulating in nature. This changes the shape from raw material
to semi finished goods to finished goods, debtors and finally to cash. Thus, conversion of working capital
into cash may result in the profit or loss.
Working capital cycle consists of following five steps:
Conversion of cash into raw material.
Conversion of raw material into work- in- progress.
Conversion of work in progress into finished goods.
Time for sale of finished goods.(cash and credit sales)
Time for realization from debtors and bills receivables into cash.
How can Working Capital Cycle be improved?
Working capital cycle is improved by increasing the rate of stock turnover and/or cutting back on
debt collection period.

Conclusion:-
The use of other peoples money in business is usually an expensive resource. Before looking for
outside finance, examine own working capital cycle to make sure that every rupee of own internal funds
is being fully utilized.


CHAPTER 6
DATA ANALYSIS.
&
CALCULATION

Total Current Assets
(Rs. In Cr.)
Sr. No. Particulars 2010 2011 2012
1 Inventory 205.98 979.47 645.71
2 Sundry Debtors 135.66 194.31 299.49
3 Cash & Bank 147.80 45.34 462.66
4 Loans & Advances 145.60 55.20 1125.46
5 Other Current Assets 254.74 719.84 ----
Total C.A & loans & Adv 889.78 1994.16 2533.32




%of each item of working capital to total current assets



(Rs. In Cr.)
Sr. No. Particulars 2010 2011 2012
1 Inventory 23.15 49.12 25.49
2 Sundry Debtors 15.25 9.74 11.82
3 Cash & Bank 16.61 2.27 18.26
4 Loans & Advances 16.36 2.77 44.43
5 Other Current Assets 28.63 36.10 ----



Total Current Liabilities
(Rs. In Cr.)

Sr. No. Particulars 2010 2011 2012

1 Sundry Creditors 673.67 386.09 640.33
2 Other Liabilities 48.56 874.52 738.35
3 Short Term Borrowing ---- ---- 750.19
Total C A & loans & Adv 722.23 1260.61 2128.87




% of each element of Working Capital to Total Current Liabilities


Sr. No. Particulars 2010 2011 2012
1 Sundry Creditors 93.28 30.63 30.08
2 Other Liabilities 6.72 69.37 34.68
3 Short Term Borrowed ---- ---- 35.24
























889.78
1994.16
2533.32
0
500
1000
1500
2000
2500
3000
2010 2011 2012
Total Current Assets
Total
Current













722.23
1260.61
2128.87
0
500
1000
1500
2000
2500
2010 2011 2012
Total Current Liability
Total
Current
Liability
Total Current Assets
(Rs. In Cr.)
Sr. No. Particulars 2010 2011 2012
1 Inventory 205.98 979.47 645.71
2 Sundry Debtors 135.66 194.31 299.49
3 Cash & Bank 147.80 45.34 462.66
4 Loans & Advances 145.60 55.20 1125.46
5 Other Current Assets 254.74 719.84 ----
Total C.A & loans & Adv 889.78 1994.16 2533.32




%of each of working capital to total current assets



(Rs. In Cr.)
Sr. No. Particulars 2010 2011 2012
1 Inventory 23.15 49.12 25.49
2 Sundry Debtors 15.25 9.74 11.82
3 Cash & Bank 16.61 2.27 18.26
4 Loans & Advances 16.36 2.77 44.43
5 Other Current Assets 28.63 36.10 ----



Total Current Liabilities
(Rs. In Cr.)

Sr. No. Particulars 2010 2011 2012

1 Sundry Creditors 673.67 386.09 640.33
2 Other Liabilities 48.56 874.52 738.35
3 Short Term Borrowed ---- ---- 750.19
Total C A & loans & Adv 722.23 1260.61 2128.87




% of each element of Working Capital to Total Current Liabilities


Sr. No. Particulars 2010 2011 2012
1 Sundry Creditors 93.28 30.63 30.08
2 Other Liabilities 6.72 69.37 34.68
3 Short Term Borrowed ---- ---- 35.24


















889.78
1994.16
2533.32
0
500
1000
1500
2000
2500
3000
2010 2011 2012
Total Current Assets
Total
Current
TOTAL WORKING CAPITAL
(InCr.)


Sr. No. Particulars 2010 2011 2012
A Current Assets
1 Inventory 205.98 979.47 645.71
2 Sundry Debtors 135.66 194.31 299.49
3 Cash & Bank 147.80 45.34 462.66
4 Loans & Advances 145.60 55.20 1125.46
5 Other Current Assets 254.74 719.84 --------
Total (A) 889.78 1994.16 2533.32
B Current Liabilities

1 Sundry Creditors 673.67 386.09 640.33
2 Other Liabilities 48.56 874.52 738.35
3 Short\Term Borrowed ----- ----- 750.19
Total (B) 722.23 1260.61 2128.87

C Net Working Capital 167.55 733.55 404.45
( A - B )




















722.23
1260.61
2128.87
0
500
1000
1500
2000
2500
2010 2011 2012
Total Current Liability
Total
Current
Liability






167.55
733.55
404.45
0
100
200
300
400
500
600
700
800
2010 2011 2012
NET WORKING CAPITAL
NET
WORKING



CHAPTER 7
FINDINGS







FINDINGS

Findings Related to Various Elements of Working Capital

Inventory.

Receivables:-
Cash:-


Net Working Capital:-
It is the difference between current assets and current liabilities. The net working capital has
increased in year 2011. This is due to the tremendous rise in the current assets and comparatively a slow
rise in current liabilities. A continuous rise in the net working capital is a positive sign.




Current Ratio and Acid Test Ratio:-

Working Capital Turnover Ratio:-


Current Assets Turnover Ratio:-


Inventory Turnover Ratio:-


Debtors Turnover Ratio:-

Creditors Turnover Ratio:-



CHAPTER-8
CONCLUSION






Jadhao gears(JGPL) of Jadhao Group is profitable business of whole group and it
is well furnished from all sides, it is one of the best in ginning business. The
company has scaled great heights and has potential to scale even higher.
With opening up of economy and world market the company just cannot afford to stop
and look back at what mistake they have done but rather look at how they can improve
in future. They have very strong foundation and now what they ought to do is build over
it.


The main objective of the research was to study the working capital management of the
company. The whole conclusion regarding the working capital management is that the
net working capital is increasing from 2006. As the turnover of the company is on the
rise attention should be paid towards proper working capital management.
Managing working Capital means managing each element of working capital. So
following suggestions are given to the company to meet its increasing needs in future.
Each element of working capital is interrelated so if any of the elements is not properly
managed it will lead to inefficient utilisation of the resources of the company.
The working capital ratios help to determine the financial position of the
company. So ratios like profitability ratios and efficiency ratio determined where exactly
the management of working capital fails.
For meeting the increasing demands the company suggested to manage its
working capital.


SUGGESTIONS

In spite of better performance in certain areas as compared to its major
competitors and in past years performance, Jadhao Gear(JGPL) adopt following
suggestion to improve its performance further.

Cost Control :- In recent past years the praise of metal. Power and fuel have gone
up drastically. There exist squeeze of margin because of that. Therefore adopting
different majors should control the cost. Company has scope to control Personal
and Administrative expenses, which is increasing continually. Greater
indigenization could be one of the cost control major along with efficient
Inventory Management System.
Credit Policy :- It has been seen that there is significant amount of receivable in
companies balance sheet, due to this company has low liquidity. Therefore it is
necessary for the company to reframe its credit policy; at time it can strict in
collecting outstanding from its debtors. The credit policy should ensure that all
payments are collect on the maturity date.




CHAPTER 9
BIBLOGRAPHY.






For the preparation of the project report following books and websites were referred





1) www.jadhaogin.com

2) www.jadhoagroup.com

3) Annual report of Jadhao Gear

4) Pandey I.M., Financial Management
Vikas Publishing House, New Delhi.