1.

1 INTRODUCTION:

Working capital holds the key to open the flood-gates for perennial flow of internal
finance for capital formation, which of course, is imperative, an institutional base.
It is just like a heart of industry. If it is weak the business cannot prosper & survival
but not only the existence of working capital is must for the industry but it must also
be adequate. Inadequate working capital is disastrous, where as redundant working
capital is criminal waste.
No doubt, fixed tangible assets like land & building, plant machinery provide a
strong structural base but working capital is all the more needed as a Sriroz
Consultants Pvt.Ltd to make the fixed tangible more effective & turn out what is
mostly needed.
There might be much business in the world, where besides investment in fixed
assets, funds would be not needed for carrying on day to day operations of the
business. But in most companies, it is essential that a certain proportion of funds be
kept invested in the forms of different current assets like inventories, receivables,
cash & marketable securities.
The mode of administration of working capital determines to a very large extent the
overall success or failure of the operations of a business. Many times in the event of
the failure of business concerns, shortage of working capital is given out as its main
cause.
The management of working capital is of vital importance for the success of a
business. A business should maintain a sound working capital but there should not
be excessive level of investment in working capital. The manner of management of
working capital in to a very large extent determines the success of operations of a
concern because problem of trade off between risks & return in involved.
In the ultimate analysis, however, it may be found that it was management of
resources of the firm that converted a successful business into an unsuccessful one.
Inadequacy of working capital is a symptom, & sometimes excess, but by no means
1

the cause of business failure, proper management of working capital is, therefore, of
crucial importance for the success of an enterprise, which involves the
administration of all current assets.
Thus study of working capital management has been conducted to look in to various
aspects of working capital in Sriroz Consultants Pvt.Ltd.
1.2 Theoretical Background:
1.2.1

Working Capital Meaning:-

Working Capital is defined as the excess of current assets over current liabilities.

Working capital is also called revolving, circulating or short term capital. Every
business require the funds for its establishment which is called fixed capital and
require funds to carry out its day to day operations like purchase of raw material,
payment of wages etc. which is called working capital. Thus, working capital is the
capital required to finance the short term or current assets such as cash, securities,
debtors, stock.
1.2.2 Definition :
Many scholars gives many definitions regarding term working capital some of these
are given below.
L.J. Guthmann defined working capital as the portion of a firms current assets
which are financed from longterm funds.
According to Weston& Brigham
Working capital refers to a firms investment in short-term assets cash, short term
securities, accounts receivables and inventories.

Mead Mallott& Field

Working capital means current assets.
Bonnerille
Any acquisition of funds which increases the current assets increases working
capital for they are one and the same.

1.2.3 CONCEPT OF WORKING CAPITAL:

Generally there are two concepts of working capital. They are gross working capital
and net working capital. But they are defined by different names. They are explained
below:
1) In broad sense: working capital refers to gross working capital. It is also defined
as financial concept or going concern concept. It means the capital invested in the
current assets of the firm. Current assets mean the assets which can be converted
into cash easily or within one accounting period. It helps in determining the return
on investment in working capital and providing correct amount of working capital at
right time.
2) In narrow sense: working capital refers to net working capital. It is also defined
as accounting concept. It means excess of current assets over current liabilities. It
helps in finding out firms capability to meet short term liabilities as well as
indicates the financial soundness of the enterprise.
Net working capital = current assets current liabilities
Net working capital can be +ve or ve. When current assets are more than the
current liabilities than working capital is +ve and when current assets are less than
the current liabilities than working capital is ve.
At the end we can say, that both the working capital are important but according to
the suitability gross working capital is suitable for companies having separate
ownership or management while net working capital is suitable for sole trader
companies or partnership firms.

1.2.4 IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING

CAPITAL
SOLVENCY OF THE BUSINESS: Adequate working capital helps in
maintaining the solvency of the business by providing uninterrupted of
production.
Goodwill: Sufficient amount of working capital enables a firm to make
prompt payments and makes and maintain the goodwill.
Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable
terms.
Cash Discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
Regular Supply of Raw Material: Sufficient working capital ensures
regular supply of raw material and continuous production.
Regular Payment Of Salaries, Wages And Other Day TO Day
Commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage and
costs and enhances production and profits.
Exploitation Of Favorable Market Conditions: If a firm is having
adequate working capital then it can exploit the favorable market conditions
such as purchasing its requirements in bulk when the prices are lower and
holdings its inventories for higher prices.
Ability To Face Crises: A concern can face the situation during the
depression.
Quick And Regular Return On Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and
gains confidence of the investors and can raise more funds in future.

High Morale: Adequate working capital brings an environment of

securities, confidence, high morale which results in overall efficiency in a
business.
1.2.5 EXCESS OR INADEQUATE WORKING CAPITAL
Every business concern should have adequate amount of working capital to run
its business operations. It should have neither redundant or excess working
capital nor inadequate nor shortages of working capital. Both excess as well as
short working capital positions are bad for any business. However, it is the
inadequate working capital which is more dangerous from the point of view of
the firm.
1.2.6 DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING
CAPITAL
1.

Excessive working capital means ideal funds which earn no profit for
the firm and business cannot earn the required rate of return on its
investments.

2.

Redundant working capital leads to unnecessary purchasing and

accumulation of inventories.

3.

Excessive working capital implies excessive debtors and defective

credit policy which causes higher incidence of bad debts.

4.

It may reduce the overall efficiency of the business.

5.

If a firm is having excessive working capital then the relations with

banks and other financial institution may not be maintained.

6.

Due to lower rate of return n investments, the values of shares may also
fall.

7.

The redundant working capital gives rise to speculative transactions.

1.2.7 DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working
capital arises due to the time gap between production and realization of cash from
sales. There is an operating cycle involved in sales and realization of cash. There are
time gaps in purchase of raw material and production; production and sales; and
realization of cash. Thus working capital is needed for the following purposes:
For the purpose of raw material, components and spares.
To pay wages and salaries
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores
and spares and finished stock.

1.2.8 OBJECTIVE OF THE PROJECT:The specific objectives of working capital management are as follow :
1.

To ensure that the marginal return on investmentin working capital assets is

equal to or more than the cost of capital of funds utilized to finance working
capital.

2. To ensure that adequate working capital is maintained for the operations of

the business,which in turn ensures solvencyand profitability.

3. To ensure that the mix of working capital components is maintained in

optimum manner.

4. Minimise over the long run the cost of capital employed in financing the
current assets.

5. To control the flow of funds through working capital in such a way that the
firm would always be able to meet its financial obligations when due.

6. To ensure that working capital management is effective enough to promote

profitability and helps in maximizing the wealth of the shareholders.

1.2.9 COMPONENT:
Current assets
Current assets are those assets which will be converted into cash within the current
account period or within the next near as a result of the ordinary operation of the
business. They are cash or near cash resources. These include:

Cash and Bank balance

Receivables

Inventory

Raw materials stores and

Work-in progress

Finished goods

Prepaid expenses

Short-term advances

Temporary investment

Current liabilities are the debts of the firm that have to be paid during the current
accounting period or within a year. These include:

Creditors for goods purchased

Outstanding expenses i.e., expenses due but not paid

Short-term borrowings

Advances received against sales

Taxes and dividends payable

Other liabilities maturing within a year.

1.2.10

ADVANTAGES

AND

DISADVANTAGES

OF

ADEQUATE

WORKING CAPITAL
i) Helps in maintaining goodwill of the firm.
ii) Helps in maintaining solvency of the firm.
iii) Helps the firm in getting regular supply if raw material.
iv) Helps the firm in getting regular return on investment.
v) Helps the firm in getting payment.
vi) Helps the firm to face the crisis.
Vii) Helps the firm in getting loan easily from the banks.
Viii) Helps the firm in getting cash discount.
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
i) It leads to excessive debtors.
ii) Spare funds are of no use and earn no profit.
iii) Firm fails to maintain the relationship with the banks due to non requirement of
funds.

iv) Leads to unnecessary purchasing

1.2.11 TYPES OF WORKING CAPITAL
On The Basis of Concepts
1) Gross Working Capital
Gross working capital is the amount of funds invested in various components
of current assets. Current assets are those assets which are easily / immediately
converted into cash within a short period of time say, an accounting year. Current
assets includesCash in hand and cash at bank, Inventories, Bills receivables, Sundry
debtors, short term loans and advances.
This concept has the following advantages:i.

Financial managers are profoundly concerned with the current assets.

ii.

Gross working capital provides the correct amount of working capital at the
right time.

iii.

It enables a firm to realize the greatest return on its investment.

iv.

It helps in the fixation of various areas of financial responsibility.

v.

It enables a firm to plan and control funds and to maximize the return on
investment.

For these advantages, gross working capital has become a more acceptable concept
in financial management.
2) Net Working Capital
This is the difference between current assets and current liabilities. Current
liabilities are those that are expected to mature within an accounting year and
include creditors, bills payable and outstanding expenses.

Working Capital Management is no doubt significant for all firms, but its
significance is enhanced in cases of small firms. A small firm has more investment
in current assets than fixed assets and therefore current assets should be efficiently
managed.

The working capital needs increase as the firm grows. As sales grow, the firm
needs to invest more in debtors and inventories. The finance manager should be
aware of such needs and finance them quickly.

I. On The Basis of Concepts

1) Permanent / Fixed Working Capital

Permanent or fixed working capital is minimum amount which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of
current assets. Every firm has to maintain a minimum level of raw material, workin-process, finished goods and cash balance. This minimum level of current assets is
called permanent or fixed working capital as this part of working is permanently
blocked in current assets. As the business grow the requirements of working capital
also increases due to increase in current assets.
a) Initial working capital
At its inception and during the formative period of its operations a company
must have enough cash fund to meet its obligations. The need for initial
working capital is for every company to consolidate its position.
b) Regular working capital
Regular working capital refers to the minimum amount of liquid capital
required to keep up the circulation of the capital from the cash inventories to
accounts receivable and from account receivables to back again cash. It
consists of adequate cash balance on hand and at bank, adequate stock of raw
materials and finished goods and amount of receivables.

2) Temporary / Fluctuating Working Capital

Temporary / Fluctuating working capital is the working capital needed to meet
seasonal as well as unforeseen requirements. It may be divided into two types.

10

a) Seasonal Working Capital

There are many lines of business where the volume of operations are
different

and hence the amount of working capital vary with the seasons. The

capital required to meet the seasonal needs of the enterprise is known as seasonal
Working capital.
b) Special Working Capital
The Capital required to meet any special operations such as experiments
with new products or new techniques of production and making interior advertising
campaign etc, are also known as special Working Capital.
1.2.12 WORKING CAPITAL CYCLE/OPERATING CYCLE
A continuous process starting from payment of cash for purchasing raw material ,
production , stocking , selling until obtaining money from debtors.
It is a cycle involving- conversion of cash into raw material > conversion of raw
material into WIP > conversion of WIP into Finished goods> conversion of Finished
goods into cash /debtors and > conversion of debtors into cash.
OC = R+W+F+D-C
Ie.
Duration of Operating Cycle = Raw mat. period+WIP period +Finished goods
period +Debtors collection period Creditors payment period

Cash

Inventories

Receivables

11

1.2.13 WORKING CAPITAL ANALYSIS:

As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth
running of the business. And the most important part is the efficient
management of working capital in right time. The liquidity position of the
firm is totally effected by the management of working capital. So, a study of
changes in the uses and sources of working capital is necessary to evaluate
the efficiency with which the working capital is employed in a business. This
involves the need of working capital analysis.
The analysis of working capital can be conducted through a number of
devices, such as:
1. Fund flow analysis.
2.

Ratio analysis.

3.

Budgeting.

1. FUNDS FLOW STATEMENT:

The funds flows statement explains the working capital change through the changes
in the long term sources and non-current assets. In other words, it shows the sources
and application of working capital.
According to R.A.Foulke fund flow statement is defined as A statement of source
and application of funds is a technical device designed to analyse the changes in the
financial condition of a business enterprise between two dates.
According to Anthony R.N.: The fund flow analyse describe the sources from
which additional fund are derived and the use to which these funds were puts.

12

Fund flow analysis is a technical device designated to the study the source from
which additional funds were derived and the use to which these sources were put.
The fund flow analysis consists of:
a.

Preparing schedule of changes of working capital

b.

Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position

(working capital) business enterprise between beginning and ending of the
financial dates.
2. WORKING CAPITAL BUDGET:
A budget is a financial and / or quantitative expression of business plans and polices
to be pursued in the future period time. Working capital budget as a part of the total
budge ting process of a business is prepared estimating future long term and short
term working capital needs and sources to finance them, and then comparing the
budgeted figures with actual performance for calculating the variances, if any, so
that corrective actions may be taken in future. He objective working capital budget
is to ensure availability of funds as and needed, and to ensure effective utilization of
these resources. The successful implementation of working capital budget involves
the preparing of separate budget for each element of working capital, such as, cash,
inventories and receivables etc.
3. RATIO ANALYSIS:
3.1 INTRODUCTION:
When we observed the financial statement comprising the balance sheet and profit
or loss account is that they do not give all the information relation to financial
operations of firm, they can provide some extremely useful information to the extent
that the balance sheet shows the financial position on a particular date in terms of
structure of assets, liabilities and owners equity and profit or loss account shows the
result of operation during the year. Thus the financial statements will provide a

13

summarized view of the firm. Ratio analysis is the powerful tool applied measuring
financial soundness and performance of a firm.
Ratio analysis is the one of the powerful techniques which is widely used for
interpreting financial statement. This technique serves as a tool for assessing the
financial soundness of the business. It can be used to compare the risk and return
relationship of firms of different sizes. The terms ration refers to the numerical or
quantitative relationship between two items/variables.
3.1.1 MEANING:
The term ratio refers to One number expressed in terms of another. Ratio is a
mathematical expression of the relationship between two or more related numbers.
The rations used to describe significant relationship between two or more related
items of financial statements are called as accounting ratios.
The ratio may be expressed either in / form of:
1. Co-efficient
2. Percentage
3. Proportion
Thus ratio analysis is defined and interpretation of financial statements through
ration.
3.1.2 BASIS OF COMPARISON:
Ratios are relative figures reflecting the relationship between variables. They
enable analysis to draw conclusion regarding financial operations. The use of the
ratios, as a tool of financial analysis involves their comparison, for a single ration
like absolute figures, fails to reveal the true position. For example, if in the case of a
firm, the return on capital employed is 15 percent in a particular year the relevant
return was 12 percent or 18 percent, it can be inferred whether the profitability of the
firm has declined or improved. Four types o comparison are involved.

14

1) Trend ratio :
Trend ratios involve a comparison of a firm over time, that is, present ratios
are compared with the past ratio of the firm. Trend ratio indicates the direction of
change in the performance, improvement, deterioration or constancy over the year.
This kind of ration particularly applicable to the net income may be studied in the
light of two factors: the rate of fixed expansion or secular trend in the growth of the
business and the general price level. It might be found in practice that a number of
firms would show a persistent growth over the period of the year.
2) Intra firm comparison :
Intra firm comparison involving comparison of the firm with those of the others in
the same line of business or for the industry as a whole relation to its competitors.
3) Comparison of items within a single years financial statement of a firm
In This method the ratios of same period are complied with each other.
4) Comparison with standards :
In this ratios of a firm are compared with pre-determined standards.
1) Liquidity Ratio :
The liquidity ratio is the ability of a firm to satisfy its short term obligations
as they become due; Liquidity ratios play a key role in the analysis of short term
solvency of a firm. To judge the liquidity of a firm, Following ratios are examined.
1) Current Ratio :
Current ratio means the ratio of current assets to current liabilities. It indicates
relationship between assets and current liabilities. It is also collect as working
capital ratio it is calculated as follows:
Current Assets
Current Ratios = -----------------------Current Liability
Current Ratios of 2:1 are considered to be ideal.

15

A very high current ratio is not desired as it indicates less efficient use of
funds.
2) Quick / Acid Test Ratio :
This ratio is also called as Liquid Ratio. The Liquid ratio is the ratio
between liquid assets to Liquid Liabilities or some authors explains ratio
is the ratio between Liquid Assets to Current Liabilities. The following
formula is used:

Liquid Assets
Liquid Ratio =

-----------------------Liquid Liability

OR
Liquid Assets
Liquid Ratio =

-----------------------Current Liability

Ideal liquid ratio is 1:1

Liquid Assets: All Current Assets Except Stock and prepaid expensed are treated
as liquid Assets.
Liquid Liabilities: All Current Liabilities expect Bank over draft and Cash credit
facilities are considered as liquid Liabilities.

16

1.4 TYPES OF TURNOVER RATION

1.4.1 Inventory Turnover Ratio:

Inventory turnover ratio is also known as stock turnover ratio.Inventory turnover

ratio shows the relationship between the cost of good sold and the average
inventory. This ratio measures how frequently the company's inventory turned into
sales.

This

ratio

is

calculated

by

using

the

following

formula.

Inventory turnover ratio = Cost of good sold/Average stock = ........... times.

In the absence of the cost of good sold and average stock, the following formula can
be

used

Inventory

to

turnover

calculate
ratio

inventory

Sales/Closing

turnover

Inventory

..........

ratio.
times.

* Cost Of Good Sold = Opening stock+ Purchases+Carriage inward+Direct wages

and
*

expensesCost

Of

Good

Closing
Sold

=Sales

Stock
-

Gross

profit

* Average stock = (Opening stock + closing stock)/2

1.4.2 DEBTORS TURNOVER RATIO :
Debtors turnover ratio is also called receivable turnover ratio. This ratio establishes
the relationship between net credit sales and average debtors for the year. Debtors
turnover ratio shows how quickly the credit sales of the company have been
converted into cash. This ratio can be calculated by using the following formula

Debtors Turnover Ratio = Net credit sales/Average account receivable

* The term account receivable includes 'trade debtors and bills receivable'.

AVERAGE COLLECTION PERIOD :

Average Collection Period = No. of Working Days
Debtors Turnover Ratio

17

The average collection period ratio represents the average number of

days for which a firm has to wait before its receivables are converted into
cash. It measures the quality of debtors. Generally, shorter the average
collection period the better is the quality of debtors as a short collection
period implies quick payment by debtors and vice-versa.

Average Collection Period =

365 (Net Working Days)

Debtors Turnover Ratio

1.4.3 CREDITORS OR PAYABLE TURNOVER RATIO :

When the goods or services are purchased on credit.the parties from whom such
purchases have been made are called as Trade Craditors in accounting
terminology. They are also called as Payables. Trade creditors are naturally
interested in knowing the time by which their dues are settled. Like debtors
turnover. Creditors turnover ratio is calculated to analyse the speed with which
payments are made to creditors.the ratio is shown as :

Annual Credit Purchases

Creditors Turnover Ratio = -- --- -----------------------------------Average Trade Creditors

18

2.1 INTRODUCTION
Sriroz Consultants is a pioneer company in India who has supplied poly house
material to Indian as well as Overseas market. Today, Sriroz Consultants is a
recognized leader for material supplier of playhouses/ Shade Net Houses and one of
the largest & leading exporters of poly houses in India.
Sriroz Consultants have also supply poly house accessories like G.I. Pipe, Shade
Net, Clamps, Profiles, Poly locks & Polythene to the clients for repairing and
changing of part material. Sriroz Consultants have one of the best qualities of poly
film anti fog, anti dust, 200 micron thick, U.V stabilized, IR resistant, water and also
sulphur resistant. This film is available in various widths.
Sriroz Consultants poly house material are used for strong & sturdy designed poly
house to obtain maximum utility, better growth & optimal production. These poly
houses are designed for heavy rainfall and to withstand heavy wind speed.
Sriroz Consultants therefore conclude that the poly house cultivation will remain the
only key factor in the field of agriculture, because open field agriculture is not a
game of surety. The global demand of Floriculture and Horticulture crop is
increasing tremendously. In order to get the quality of international marketing poly
house is the only solution.
2.2 HISTORY Sriroz Consultants was established in 1990. The company is located in Pune,
Maharashtra state. Mr. Mayur Umap is the Planning and Strategy Head of the
company. The company involves in activities in all types of polyhouse erection
according to different climatic conditions.
The structures vary according to regional requirements. The company boasts that it
has worked on more than 1,800 acres in the past 22 years. The companys main
customers are farmers and its annual revenue is around Rs. 20 crores.

19

2.3 VISION AND MISSION

2.3.1 MISSION :
The mission of Sriroz Consultants Pvt.Ltd is to actively be of service to others as an
inspirational mode of living and working together to create social change and
community amongst themselves and with the people.

2.3.2 VISION :
Sriroz Consultants Pvt.Ltd continuously empowering the skills and techniques that
help to withstand, both national and international business.
2.4 HUMAN RESOURCE
There are 26 to 50 employees. Mr. Chandramohan sane the owner and Mr. Mayur
Umap looks after tax structure .
2.5 CLIENTS

Maharana Pratap College of Agriculture - Udaipur, Rajasthan

College of Agriculture - Pune, Maharashtra

Jawaharlal Nehru Agriculture University - Jabalpur, U.P.

Sun Frost Limited Sri Lanka

Asian Institute of Technology - Bangkok, Thailand

President of Republic of - Djibouti, Africa

Shreewardan Bio-tech - Kolhapur, Maharashtra

Talegaon Floriculture Park Pune, Maharashtra

Soex Flora International - Pune, Maharashtra

Vikram Green Tech India Ltd. - Pune, Maharashtra

Dept. of Horticulture - Gangtok, Sikkim

North Bengal Irrigation - Siligudi, Bengal

Bharti Blooms - Warangal

Nitin Rameshchandra - Chevella

20

J. Madhavi Prasad - Hyderabad

Champali Garden - Mumbai, Maharashtra

Vikrambhai Patel - Bayad, Gujarat

Sunitha Nerella - Janagam

Oleander Farms - Karjat, Maharashtra

2.6 PRODUCTS

2.6.1 PRODUCT RANGE :

Material For Agriculture Polyhouse

Material For Multi Span Polyhouse

Material For Fan And Pad Controlled Polyhouse

Material For Open Vent Polyhouse

Material For Ventilated Polyhouse

Material For Shade Net House

2.6.2 POLYHOUSES ARE IDEAL FOR :

Cut Roses, Gerbera, Carnation & other flowers

Colored Capsicum, Broccoli, Lettuce, Zucchini & exotic vegetables

Tomatoes, Cucumber, Bitter Gourd, Okra and seedling vegetables

Indoor and nursery plant

Hardening, Propagation & Research Lab

21

2.7 FUTURE PLANS OF THE COMPANY:

Sriroz Consultants is planning to extend its branches to reach its customers
easily.
To extend the service period to avail best post purchase service for its
customers.
To setup more Branches of Sriroz Consultants.
To setup new units all over the World.

22

OUTLINE OF THE PROBLEM

In the management of working capital, the firm is faced with two key problems:
1. First, given the level of sales and the relevant cost considerations, what are the
optimal amounts of cash, accounts receivable and inventories that a firm should
choose to maintain?
2. Second, given these optimal amounts, what is the most economical way to finance
these working capital investments? To produce the best possible results, firms
should keep no unproductive assets and should finance with the cheapest available
sources of funds. Why? In general, it is quite advantageous for the firm to invest in
short term assets and to finance short-term liabilities.

23

4.1 INTRODUCTION
Research methodology is a way to systematically solve the research problem. It May
be understood as a science of studying now research is done systematically. In that
various steps, those are generally adopted by a researcher in studying his problem
along with the logic behind it.
Defined in simplest terms, research is searching for and gathering information,
usually to answer a particular question or problem. In the broadest sense of the
word, the definition of research includes any gathering of data, information and facts
for the advancement of knowledge.
4.2 OBJECTIVE OF THE PROJECT:The main objective of carrying out this project is to know and gain practical
knowledge and to know the organizations working culture. The project was
conducted to know the various financial and other aspects of the working capital
analysis.
The present study is aimed to cover the following objectives:
1. To Study the present financial position of Sriroz Consultants Pvt.Ltd.

2. To Study the working capital management of Sriroz Consultants Pvt.Ltd.

3. To draw observations based on the study and suggest suitable measures to

overcome problems or to improve its performance.

4. To analyze the various components of working capital of Sriroz Consultants

Pvt.Ltd with the help of ratio analysis.

24

4.3 RESEARCH METHODOLOGY

4.3.1 Data collection Method:

Methodology of the study refers to the methods used to collect the require data
for research work. The data required has been collected from following sources.

Primary Sources:
1. Discussion with the management.
2. Interview with concerned officer.

Secondary Sources:
The secondary data of the organization helps me a lot. I have collected all the
figures from Annual Reports & Financial Statements of Sriroz Consultants
Pvt.Ltd.

A. Records of the company help me to get details, regarding the history of the
company.

B. A number of books in the library on finance were referred to collect

theoretical background relating to finance.

4.3.2 DATA RANGEThe Data is based on study last three financial year that is from 2010-11,2011-12
and 2012-13.

25

4.3.3 DATA ANALYSIS TOOLSThe study is carried on with the help of ratio analysis and percentage analysis.
TYPE OF RESEARCH:
This project A Study on Working Capital Management of Sriroz consultants
pvt ltd is considered as an analytical research.
Analytical Research is defined as the research in which, researcher has to use facts
or information already available, and analyze these to make a critical evaluation of
the facts, figures, data or material.
4.3.4 SCOPE OF THE STUDY:

This project is carried to analyze the working capital of Sriroz Consultants

Pvt.Ltd for the last years from 2012 to 2013.

As the part of the study of working capital and its circulation, statement of
changes in working capital with its conclusion and interpretation of working
capital with the help of graph has been done.

4.3.5 LIMITATIONS OF THE STUDY:

This project focuses only on certain factors which are important to discuss. But they
cannot be discussed completely.

The study is done on only one organization so it does not provide any scope
of comparison with other organization.

The study is based only on last three years record and do not give clear idea
from the data available.

The Present study is based on secondary data.

due to Time and Financial data constraint the study includes only last 3 year
data.

The Conclusions were drawn are based on the data supplied by the company
it may not be applicable in general

26

TABULATION OF DATA:
Table No.1
Sources Of Funds

2010

2011

2012

2013

Total Share Capital

16.86

16.85

16.85

16.84

Equity Share Capital

16.86

16.85

16.85

16.84

0.00

0.00

0.06

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

Reserves

311.34

357.57

350.28

379.91

Revaluation Reserves

0.00

0.00

0.00

0.00

Networth

328.20

374.42

367.19

396.75

Secured Loans

7.14

34.20

35.13

25.85

Unsecured Loans

476.98

539.63

450.68

126.90

Total Debt

484.12

573.83

485.81

152.75

Total Liabilities

812.32

948.25

853.00

549.50

72.15

107.29

106.16

104.95

13.74

51.56

42.97

34.24

Net Block

58.41

55.73

63.19

70.71

Capital Work in Progress

0.25

0.31

0.37

0.43

Investments

378.68

412.24

412.59

416.59

Inventories

13.02

50.36

55.88

60.59

Sundry Debtors

13.55

23.52

12.31

14.60

Cash and Bank Balance

7.58

12.85

5.10

1.62

Total Current Assets

34.15

86.73

73.29

76.81

Loans and Advances

416.80

448.43

351.21

48.80

Share

Application

Money

Application Of Funds

Gross Block
Less:

Accum.

Depreciation

27

Fixed Deposits

0.00

4.48

4.67

0.27

450.95

539.64

429.17

125.88

Deffered Credit

0.00

0.00

0.00

0.00

Current Liabilities

73.71

57.53

50.31

60.04

Provisions

2.26

2.60

2.54

4.06

Total CL & Provisions

75.97

60.13

52.85

64.10

Net Current Assets

374.98

479.51

376.32

61.78

Miscellaneous Expenses

0.00

0.48

0.53

0.00

Total Assets

812.32

948.27

853.00

549.51

187.08

181.24

136.94

222.16

217.86

235.58

Total

CA,

Loans

&

Advances

Contingent Liabilities
Book Value (Rs)

194.63

28

Table No.2

(Amt. in crores)
PARTICULARS

2010-11

2011-12

2012-13

(A) CURRENT
ASSETS

Inventories

13.02

50.36

55.88

Sundry Debtors

13.55

23.52

12.31

7.58

12.85

5.10

416.80

448.43

351.21

0.00

4.48

4.67

450.95

539.64

429.17

73.71

57.53

50.31

Provisions

2.26

2.60

2.54

Total CL

75.97

60.13

52.85

Cash and Bank Balance

Loans and Advances
Fixed Deposits
Total CA

(B)

CURRENT

LIABILITIES

Current Liabilities

29

Table No.3

Statement showing changes in working capital for year 2010-11

(Amt. in crores)
PARTICULARS

2010

2011

Increase

in Decrease in

working

working

capital

capital

(A)CURRENT
ASSETS

Inventories

13.02

50.36

37.34

Sundry Debtors

13.55

23.52

9.97

7.08

12.85

5.27

416.80

448.43

31.63

0.00

4.48

4.48

450.95

539.64

73.71

57.53

2.26

2.60

75.97

60.13

374.98

479.51

Cash and Bank Balance

Loans and Advances
Fixed Deposits
Total CA

(B)

CURRENT

LIABILITIES

Current Liabilities
Provisions
Total CL
Working capital
Increase

in

working

16.18
0.34

104.53

104.53

capital
Total

479.51

479.51

104.87

104.87

Interpretation The above table shows the current asset for the year 2010-11 was
450.95 on the other hand for 2011-12 was rs. 539.64, whereas Current Liab. For
year 2010-11was 75.97 and for year 2011-12 is 60.13. then net working capital is
increased by 104.53.

30

Table No.4 Statement showing changes in working capital for year 2011-12
(Amt. in crores)
PARTICULARS

2011

2012

Increase

in Decrease

working

working

capital

capital

in

(A)CURRENT
ASSETS
5.52

Inventories

50.36

55.88

Sundry Debtors

23.52

12.31

12.85

5.10

448.43

351.21

4.48

4.67

539.64

429.17

57.53

50.31

7.22

Provisions

2.60

2.54

0.06

Total CL

60.13

52.85

479.51

376.32

Cash

and

Bank

Balance
Loans and Advances
Fixed Deposits
Total CA
(B)

11.21
7.75

97.22
0.19

CURRENT

LIABILITIES

Current Liabilities

Working capital
Decrease in working

103.19

103.19

479.51

116.18

capital
Total

479.51

116.18

Interpretation :
The above table shows the current asset for the year 2011-12 was 539.64 on the
other hand for 2012-13 was rs. 429.17, whereas Current Liab. For year 2011-12 was
60.13 and for year 2012-13 is 52.85. then net working capital is decreased by
103.19.

31

Table No.5

Statement showing changes in working capital for year 2012-13

(Amt. in crores)
PARTICULARS 2012

2013

Increase

in Decrease

working

working

capital

capital

in

(A)CURRENT
ASSETS
Inventories

55.88

Sundry Debtors

12.31

Cash and Bank

Balance
Loans

and

Advances
Fixed Deposits
Total CA

60.59

4.71

14.60

2.29

1.62

3.48

48.80

302.41

4.67

0.27

4.4

429.17

125.88

5.10

351.21

(B) CURRENT
LIABILITIES
Current

50.31

Liabilities

60.04

9.73

1.52

Provisions

2.54

4.06

Total CL

52.85

64.10

376.32

61.78

Working capital
Decrease

in

314.54

314.54

376.32

321.54

working capital
Total

376.32

321.54

Interpretation :The above table shows the current asset for the year 2012-13 was
429.17on the other hand for 2013-14 was rs. 125.88, whereas Current Liab. For year
2012-13 was 52.85and for year 2013-14 is 64.10. then net working capital is
decreased by 314.54.

32

The size of working finance of the SRIROZ CONSULTANTS from the period
WORKING FINANCE = CURRENT ASSTES CURRENT LIABLITIES

TABLE NO. 6
Year

Current Assets

Current

Working Finance

Liabilities
2010 - 11

450.95

75.97

374.98

2011 - 12

539.64

60.13

479.51

2012 - 13

429.17

52.85

376.32

The figures from the above table clearly indicate that W.C requirement is increasing
year by year except 2010 11 where it has shown a short decline. This highlights to
improve the W.C Position in SRIROZ CONSULTANTS.

GRAPHICAL REPRESENTATIO

Working Finance
500
450
400
350
300
250
200
150
100
50
0

Working Finance

2010 - 11

FIG.

NO.

2011 - 12

WORKING

2012 - 13

CAPITAL

CONSULTANTS PVT. LTD.

33

RATIOS

OF

THE

SRIROZ

5.2.1 Current Assets Ratio of the SRIROZ CONSULTANTS PVT. LTD. For
the Period:
TABLE NO. 7
Year

Current Assets

Current

Current Ratio

Liabilities
2010-11

450.95

75.97

5.935

2011-12

539.64

60.13

8.974

2012-13

429.17

52.85

8.120

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of
the company for last three years it has increased from 2011 to 2013. The current
ratio of company is more than the ideal ratio. This depicts that companys liquidity
position is sound. Its current assets are more than its current liabilities.

GRAPHICAL REPRESENTATION

Current Ratio
9
8
7
6
5
4
3
2
1
0

Current Ratio

2010-11

2011-12

2012-13

FIG. NO. 2 QUICK RATIO OR LIQUIFIED RATIO OF THE SRIROZ

CONSULTANTS PVT. LTD. FOR THE PERIOD 2010-2011 TO 2012-2013

34

TABLE NO. 8
Year

Quick Assets

Quick/Current

Quick Ratio

Liabilities
2010-11

437.93

75.97

5.76:1

2011-12

489.28

60.13

8.137:1

2012-13

373.29

52.85

7.063:1

A quick ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time. The ideal quick ratio is 1:1. Companys quick ratio is
more than ideal ratio. This shows company has no liquidity problem.
GRAPHICAL REPRESENTATION

Quick Assets Ratio

9
8
7
6
5
Quick Assets Ratio

4
3
2
1
0
2010-11

2011-12

2012-13

FIG. NO. 3 INVENTORY TURNOVER RATIO OF THE SRIROZ

CONSULTANTS PVT. LTD.

35

INVENTORY TURNOVER RATIO:

TABLE NO. 9
Year

Net Sales

Average

Inventory

(A)

Inventory

Turnover Ratio

(B)

A/B=C

2010-11

102.90

13.02

7.90 times

2011-12

137.04

50.36

2.72 times

2012-13

103.51

55.88

1.85 times

Interpretation:

These ratio shows how rapidly the inventory is turning into

receivable through sales. In 2010 the company has high inventory turnover ratio but
in 2012-13 it has reduced to 1.75 times. This shows that the companys inventory
management technique is less efficient as compare to last year.
GRAPHICAL REPRESENTATION

Inventory Turnover Ratio

8
7
6
5

Inventory Turnover Ratio

4
3
2
1
0
2010-11

2011-12

2012-13

FIG. NO. 4 INVENTORY CONVERSION PERIOD:

36

TABLE NO. 10
Year

Days

Inventory

Inventory

Turnover Ratio

Conversion Period

2010-11

365

7.90

46.20 days

2011-12

365

2.72

134.19 days

2012-13

365

1.85

197.29 days

Interpretation :
Inventory conversion period shows that how many days inventories
takes to convert from raw material to finished goods. In the company
inventory conversion period is decreasing. This shows the efficiency of
management to convert the inventory into cash.

5.2.5 DEBTORS TURNOVER RATIO OF THE SRIROZ CONSULTANTS

PVT. LTD.
TABLE NO. 11
Year

Net sales

Average Debtors

Debtors Turnover

2010-11

102.90

18.535

5.55

2011-12

137.04

17.915

7.64

2012-13

103.51

13.455

7.69

Interpretation:
This ratio indicates the speed with which debtors are being converted or turnover
into sales. The higher the values or turnover into sales. The higher the values of
debtors turnover, the more efficient is the management of credit. But in the company
the debtor turnover ratio is increasing year to year. This shows that company is
utilizing its debtors efficiency.

37

GRAPHICAL REPRESENTATION

Debtors Turnover
8
7
6
5
Debtors Turnover

4
3
2
1
0
2010-11

2011-12

2012-13

FIG. NO. 5 AVERAGE COLLECTION PERIOD :

TABLE NO. 12
Year

Days

Debtor Turnover

Average

Ratio

Collection Period

2010-11

365

5.55

65.76

2011-12

365

7.64

47.77

2012-13

365

7.69

47.46

Interpretation :
The average collection period measures the quality of debtors and it helps in
analyzing the efficiency of collection efforts. It also helps to analysis the credit
policy adopted by company. In the firm average collection period increasing year to
year. It shows that the firm has Liberal Credit policy. These changes in policy are
due to competitors credit policy.

38

LEARNING OF THE STUDENT THROUGH THE PROJECT

Project has also helped me in increasing my knowledge about different concepts of
working capital.
The project at Sriroz Consultants Pvt.Ltd provide me with the ideas about the ways
in which decision can be taken in the field for finance of has also helped me to
interpret and made me understand various quantitative relationship between group of
figures.
Through The project I learnt about planning and management of working capital
and To measure the financial soundness of the company by analyzing various ratios.
The management of working capital involves managing inventories accounts
receivable and payable and cash. Therefore I also got a sound knowledge about cash
management, inventory management and receivables management.
Then comes the financing of working capital requirement, i.e. how the working
capital is financed, what are the various sources through which it is done.

39

CONTRIBUTION TO THE HOST ORGANIZATION

I have contributed them by suggesting them that the company should not invest
unnecessary in current asset, and should maintain its liquidity, which will increase
the profitability.
I have suggested them ways for better management and control of working capital.

40

BIBLIOGRAPHY

BOOKS
1. Financial

Management,

by

P.V.

Kulkarni,

B.G.

Satyaprasad ,Himalaya Publishing House.

2. Fundamentals of Financial Management, by APR Everest
Publishing House.
Article
1. Annual

report

of

Consultants Pvt.Ltd.
2010-11
2011-12
2012-13

Website
www.agricultureinformation.com/consultants/sriroz-consultants-pvt-ltd
www.indiamart.com/srirozconsultants/
http://shodhganga.inflibnet.ac.in
www.slideshare.net

41

Sriroz

www.accounting-ebook.com

42