Mafatlal Working Capital

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Chapter No. 5
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Bibliography
Appendix
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INDEX
Chapter No.
1
2
3
4A
4B
5
6
Title
Introduction
Research Methodology
Literature Review
Company Profile
Data Analysis
Conclusion
References
Page No.
CHAPTER 1
INTRODUCTION
WORKING CAPITAL
MEANING AND DEFINITION OF WORKING CAPITAL
Working capital is the amount of funds which a company has to finance its day to
day operations it can be regards as the part of capitals which the capitals is basically
classified into fixed and working.
Fixed capital is normally invested in fixed assets and working capital in current
assets. It is used in day to day operations. These are the funds that are invested in
current assets. The form of these current assets keeps on changing. Ex: Raw material
to work in progress to finished product. , so it is also called circulating capital.
A study of working capital is of major part of the external and internal analysis
because of its close relationship with the current day to day operation of the business.
Working capital consists of broadly for that the assets of a business that are used at
related current operation and is represented by raw material, stores, work in progress,
and finished goods merchandise, bills receivable.
Definition of working capital
Gerstenberg
working capital means current assets of company that are changed in the
ordinary course of business from one form to another, ex: from cash to inventories,
inventories to receivables, receivables into cash
Shubin
Working capital is the amount of funds necessary to the cost of operating the
enterprise. Operating expenses involve investment in current assets, payment towards
overhead and expenses. Investment made in these heads is classified as working
capital.
J. smith
The sum of the current assets is the working capital of the business
WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITY
CONCEPT OF WORKING CAPITAL

There are two concepts of working capital that are:
1)
Balance sheet concept
2)
Operating cycle concept.
1)
Balance sheet concept:

Working capital as per this defined in terms of current assets and current
liabilities. Balance sheet concept further classifies working capital into a) gross and b)
net working capital.
a) Gross working capital: it refers to total investment made in current assets. It is also
called circulating rotating from one head to another. Ex. Cash to raw material, raw
material to finished products, finished products to debtors, and debtors to cash. This
concept stresses on quantity aspect; i.e. to refer to total investment made in different
current assets. Bonneville and beway have defined gross working capital as any
fund received which increases the current assets.
b) Net Working capital: as per this concept working capital is the difference between
current assets and current liabilities. This concept stresses on quality aspect of
working capital. The difference between current assets highlights on liquidity aspect
and quality of current assets. A firm that has excess of current assets over liabilities is
said to possess adequate liquidity. On the contrary firm that has excess of current
liability over current assets means it does not have adequate liquidity. It means that
part of current assets of such firm are financed through fixed assets.
2) Operating cycle concept:

Operating Cycle or Working Capital Cycle indicates the length of time between
affirms paying for raw materials entering into finished stock and receiving cash on the
sales of such Finished Stock.
This operating cycle differs from firm to firm. Longer the operating cycle greater
will be the amount of Working Capital required and vice versa. Thus it plays an
important role in determining the Working Capital needs of a firm.
OPERATING CYCLE CHART

Cash
Raw Materials
Debtors
Sales
Finished good
Work In Process
Operating Cycle is the time duration required to convert sales, after the
conversion of resources into inventories, into cash. The operating cycle of a G.C.T.M
involves three phases.
1. Acquisition of resources such as raw material, labour, power and
fuel etc.
2. Manufacture of the product which includes conversion of raw
material into work-In- progress into finished goods.

3.Sales of the product either for cash or on credit. Credit sales creates
book Debts for collection.
In the MAFATLAL MILL LTD (manufacturing concern), the working capital

operating cycle starts with the purchase of raw materials and ends with the realization
of cash from the sale of finished products. It is also called as cash conversion cycle,
production cycle etc. It involves the purchase of raw materials and stores, its into
stocks of finished goods through the work-in-Progress with the progressive increment
of labor and service costs, conversion of finished goods (Yarn Products) into sales,
Debtors and receivables and ultimately realization of cash and this cycle continuous
again from cash to purchases of raw material and so on.
CLASSIFICATION OF WORKING CAPITAL

Working capital can be classified on the basis of concept and on the basis of time.
Various types of working capital are as follows
KINDS OF
WORKING
CAPITAL
1. ON THE
BASIS OF
CONCEPT
GROSS
WORKING
CAPITAL
2. ON THE
BASIS OF
TIME
NET
WORKING
CAPITAL
PERMANENT
OR FIXED
REGULAR
1)
RESERVE
TEMPORARY
OR VARIABLE
SEASONAL
SPECIAL
On the basis of concept :

Working capital on this basis of concept is classified into
A)
Gross working capital: It refers to total investment made in current asset.
Current assets are the asset which can be converted into cash within a short period of
an accounting year. Current assets include cash, debtors, bills receivables and short
term securities etc.
B)
Net working capital: It is the difference between current assets and current
liabilities. Current liabilities are those claims of outsiders which 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. Positive net
working capital will arise when current asset exceeds current liabilities. A negative net
working capital occurs when current liabilities are in excess of current assets.
2)
On the basis of time :

Classification of working capital in this case is made on the basis
of time for which investment is required. Kinds of working capital in
this category are:
1) Permanent : Some portion of working capital always remain permanent or fixed.

This refers to minimum investment a firm has to make and keep in certain current
assets. Firm has to always maintain minimum cash balance, inventory, debtors etc. as
there current assets are required permanently. They are normally financed through
long term capital.
Such permanent working capital is further classified into
a)
regular and b) reserve
a) Regular: regular permanent working capital is used in

routine business operations.
b) Reserve: reserve working capital refers to some portion of working capital that is
kept as reserve to meet any contingency.
2) Temporary working capital: required of such capital varies or fluctuates

depending on season. Its requirement is not continous it is normally finance through
short term sources, like overdraft, cash credit and other short term liabilities.
Temporary working capital is further classified into:
A)
Seasonal working capital: requirement of working capital is based on
particular seasons
ex; winter, summer or festival seasons etc during these seasons there will be
additional demand for the products. To meet out such demand firm has to make
additional arrangement of working capital.
B) Special working capital: requirement of such working capital is necessitated to
meet demands of special occasions ex. Occasion of world cup cricket, Olympics,
kumba mela, elections. During these special occasions demand for goods and service
will increase. To meet such special demand firm has to make temporary arrangement
of working capital
DETERMINANTS OF WORKING CAPITAL

Requirement of working capital differs from one firm to other. This is because
of business conditions and policies of conducting business differ. Working capital
required by each from is determined by following factors.
1)
Nature of business: important factor that determines requirement of working
capital is nature of business a firm is undertaking. Firm that are engaged in production
and marketing need more working capital compared to the firm that are in trading or
service oriented business. This is because manufacturing units need more current
assets compared to service oriented units.
2)
Size of business: Size of the business obviously determines the
requirement of the working capital bigger the size more is the requirement of the
working capital. Larger the scale of operations, larger the investment required in
current assets.
3)
Operating cycle: Operating cycle means period from which investment is
locked up in different operations. Longer the period of inventory holding, work in

progress, finished goods etc more is the investment needed in the operations. This
necessities more investment in current assets.
4)
Stock turn over: stock turnover refers to number of times stock is turned over
that is it refers to sales. Quicker the stock turn over (quick sales) less is the working
capital. Slow pace of stock turnover demands more investment is locked up in
operation.
5)
Credit policy: Credit policy of the firm will influence requirements of working
capital. Firms that offer liberal credit to the debtor have make more investment in
production operations. Such firms need more working capital to keep their production
operation continuous. Requirement of working capital will be much more if the firm
buys on cash and sells on credit. On the contrary firms that buy on credit and sell on
cash basis need less working capital.
6)
Production policy: Firms that undertakes all production operations within the
organization need more working capital. Such firms have to make investment to
manufacture every component or part. On the contrary, firms which undertake
outsourcing that is buying some of the components or parts from out side agencies
need less working capital.
7)
Growth of business: Firms that are experiencing growth need more working
capital. Such firms have to constantly increase their production levels. To meet rising
needs of sales targets. They need to continuously increase investment in current
assets.
8)
Earning capacity and its appropriation: firms that earn sufficient profits and
invest a portion of profit in business needs less working capital. Ploughing back of
profits and accumulated reserves will minimize dependency on external capital for
working capital needs. On the contrary firms that follow liberal divided policy are
firms that do not have adequate surplus need to borrow more to meet regular working
capital needs.
Needs of Working Capital:
The need for working capital to run the day-to-day business activities cannot
be overemphasized. We will hardly find a business firm which does not required any
amount of working capital. Indeed, firms differ in their requirements of the working
capital.
The firms aim is that maximizing the wealth of shareholders. Earning a steady
amount of profit requires successful sales activity. The firm has to invest enough
funds in current assets for generating of sales activity. Current assets are needed
because sales do not convert into cash instantaneously. There is always an operating
cycle involved in the conversion of sales into cash. Therefore Working Capital
required for:
1)
To meet the cost of inventories including total of raw materials purchased
parts, operating Supplies, work in progress, finished goods.

2)
To pay wages, salaries, for indirect labor, clerical staff, managerial and
supervision staff.
3)
To meet overhead costs, including those of maintenance services activities,
fuel, power charges, taxes and general expense administration.

4)
To bear the expansion (with regard to promotion of sales) e.g. expenses on
packing, advertisement, salesmanship, Sales Servicing, After requires, Credit

Facilities, Delivery Services, etc.
IMPORTANCE OF WORKING CAPITAL
Even though the skills for maintaining the working capital are somewhat
unique, the goals are the same-viz. to make an efficient use of funds for minimizing
the risk of loss to attain profit objectives.
Firstly, the adequate of working capital contributes a lot in raising the credit-standing
of a corporation in terms of favorable rates of interest on bank loan, better terms on
goods purchased, reduced cost of production on account of the receipt of cash
discounts, etc.
Secondly, a company with sufficient working capital is always in a position to take the
advantage of any favorable opportunity either to purchase raw materials or to execute
a special order or to wait for better market position.
In the third place, the ability to meet all reasonable demands for cash without
inordinate delay is a great psychological factor to improve the all rounds efficiency of
the business.
Lastly, during slump the demand for working capital, instead of coming down, shoots
up. A good amount of working capital is locked up in the inventories and book debts.
Concerns having ample resources can tide over that period of depression.
Thus, working capital is regarded as one of the conditioning factors in the long run
operations of the firm, which is often inclined to treat it as an issue of short run
analysis and decision making.
Components of Working Capital:
There are two components of Working Capital

A.
Current Assets
B.
Current Liabilities
A) Current Assets:
Components of Current Assets are as follows:
1. Cash & Bank Balance
2. Stock of Raw Material at cost- work in process and Finished
Goods.
3. Advanced Recoverable in Cash or kind or kind or for value to
be received.
4. Deposits under the company scheme.
5. Advanced payment of income takes credit certificates..
6. Outstanding debts for a period exceeding six months.
7. Balance with central excise authorities.
B) Current Liabilities:
Components of Current Liabilities are as follows:

1. Sundry Creditors for the goods and expenses.
2. Income tax deducted at sources from contractors.
3. Expenses Payable.
4. Unclaimed Dividend.
5. Security Deposits.
6. Liabilities for bills discounted.
7. Bank Overdraft Acceptance.
Working Capital Management concerned with the following aspects:
1. Cash Management:
Cash is the important current asset for the operation of the business. cash is
the basic input needed to keep the business running on a continuous basis; it is also
the ultimate output expected to be realized by selling the service or product
manufactured by the firm. The firm should keep sufficient cash, neither more nor less.
Cash is the liquid form of an asset. It is the ready money available in the
firm or with the business, essential for its operations. A firm needs the cash for the
following three purposes:
(a) The Transaction Motive:

(b) The Precautionary Motive:
(c) The Speculative Motive:
2. Receivables Management:
Receivable represents amounts owed to the firm as a result of sale of
goods or services on the ordinary course of business. These are claims of the firm
against its customers and form part of its current assets. These receivables are carried
for the customers. The period of credit and extent of receivables depends upon the
credit policy followed by the firm. The main purpose of maintaining or investing in
receivables is to meet competitors, to increase sales, and to maintain a cordial
relationship with the clients.
3. Inventory management:
Every enterprise needs inventory for smooth running of its activities. It
serves as a link between production and distribution process. There is, generally a
time lag between the recognition of a need and its fulfillment. The greater the time
lag, the higher the requirements for inventory. The unforeseen fluctuations in demand
and supply of goods necessitate the need for inventory. Moreover, it provides a
cushion for future price fluctuations.
TEXTILE INDUSTRY IN INDIA

The Textile Sector in India ranks next to Agriculture. Textile is one of Indias oldest
industries and has a formidable presence in the national economy in as much as it
contributes to about 14 per cent of manufacturing value-addition, accounts for around
one-third of our gross export earnings and provides gainful employment to millions of
people. The textile industry occupies a unique place in our country. One of the earliest
to come into existence in India, it accounts for 14% of the total Industrial production,
contributes to nearly 30% of the total exports and is the second largest employment
generator after agriculture.
Textile Industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a
unique position as a self-reliant industry, from the production of raw materials to the
delivery of finished products, with substantial value-addition at each stage of
processing; it is a major contribution to the country's economy. This paper deals with
structure, growth and size of the Indian textile industry, role of textile industry in
economy, key advantages of the industry, textile industry export and global scenario
and strength, weakness, opportunities and treats of the Indian textile industry.
INTRODUCTION
The Indian textile industry is one of the largest in the world with a massive raw
material and textiles manufacturing base. Our economy is largely dependent on the
textile manufacturing and trade in addition to other major industries. About 27% of
the foreign exchange earnings are on account of export of textiles and clothing alone.
The textiles and clothing sector contributes about 14% to the industrial production and
3% to the gross domestic product of the country. Around 8% of the total excise
revenue collection is contributed by the textile industry. So much so, the textile
industry accounts for as large as 21% of the total employment generated in the
economy. Around 35 million people are directly employed in the textile
manufacturing activities. Indirect employment including the manpower engaged in

agricultural based raw-material production like cotton and related trade and handling
could be stated to be around another 60 million.
A textile is the largest single industry in India (and amongst the biggest in the world),
accounting for about 20% of the total industrial production. It provides direct
employment to around 20 million people. Textile and clothing exports account for
one-third of the total value of exports from the country. There are 1,227 textile mills
with a spinning capacity of about 29 million spindles. While yarn is mostly produced
in the mills, fabrics are produced in the powerloom and handloom sectors as well. The
Indian textile industry continues to be predominantly based on cotton, with about 65%
of raw materials consumed being cotton. The yearly output of cotton cloth was about
12.8 billion m (about 42 billion ft). The manufacture of jute products (1.1 million
metric tons) ranks next in importance to cotton weaving. Textile is one of Indias
oldest industries and has a formidable presence in the national economy inasmuch as
it contributes to about 14 per cent of manufacturing value-addition, accounts for
around one-third of our gross export earnings and provides gainful employment to
millions of people. They include cotton and jute growers, artisans and weavers who
are engaged in the organised as well as decentralised and household sectors spread
across the entire country.
INDIAN TEXTILE INDUSTRY STRUCTURE AND GROWTH
Indias textile industry is one of the economys largest. In 2000/01, the textile and
garment industries accounted for about 4 percent of GDP, 14 percent of industrial
output, 18 percent of industrial employment, and 27 percent of export earnings
(Hashim). Indias textile industry is also significant in a global context, ranking
second to China in the production of both cotton yarn and fabric and fifth in the
production of synthetic fibers and yarns.
In contrast to other major textile-producing countries, mostly mostly small-scale,

nonintegrated spinning, weaving, cloth finishing, and apparel enterprises, many of
which use outdated technology, characterize Indias textile sector. Some, mostly
larger, firms operate in the organized sector where firms must comply with
numerous government labor and tax regulations. Most firms, however, operate in the
small-scale unorganized sector where regulations are less stringent and more easily
evaded.
The unique structure of the Indian textile industry is due to the legacy of tax, labor,
and other regulatory policies that have favored small-scale, labor-intensive
enterprises, while discriminating against larger scale, more capital-intensive
operations. The structure is also due to the historical orientation towards meeting the
needs of Indias predominately low-income domestic consumers, rather than the
world market. Policy reforms, which began in the 1980s and continued into the 1990s,
have led to significant gains in technical efficiency and international competitiveness,
particularly in the spinning sector. However, broad scope remains for additional
reforms that could enhance the efficiency and competitiveness of Indias weaving,
fabric finishing, and apparel sectors.
Structure Of Indias Textile Industry
Unlike other major textile-producing countries, Indias textile industry is comprised

mostly of small-scale, nonintegrated spinning, weaving, finishing, and apparelmaking enterprises. This unique industry structure is primarily a legacy of
government policies that have promoted labor-intensive, small-scale operations and
discriminated against larger scale firms:
Composite Mills. Relatively large-scale mills that integrate spinning, weaving and,
sometimes, fabric finishing are common in other major textile-producing countries. In
India, however, these types of mills now account for about only 3 percent of output in
the textile sector. About 276 composite mills are now operating in India, most owned
by the public sector and many deemed financially sick.
Spinning. Spinning is the process of converting cotton or manmade fiber into yarn to
be used for weaving and knitting. Largely due to deregulation beginning in the mid1980s, spinning is the most consolidated and technically efficient sector in Indias
textile industry. Average plant size remains small, however, and technology outdated,
relative to other major producers. In 2002/03, Indias spinning sector consisted of
about 1,146 small-scale independent firms and 1,599 larger scale independent units.
Weaving and Knitting. Weaving and knitting converts cotton, manmade, or blended
yarns into woven or knitted fabrics. Indias weaving and knitting sector remains
highly fragmented, small-scale, and labor-intensive. This sector consists of about 3.9
million handlooms, 380,000 powerloom enterprises that operate about 1.7 million
looms, and just 137,000 looms in the various composite mills. Powerlooms are
small firms, with an average loom capacity of four to five owned by independent
entrepreneurs or weavers. Modern shuttleless looms account for less than 1 percent of
loom capacity.
Fabric Finishing. Fabric finishing (also referred to as processing), which includes

dyeing, printing, and other cloth preparation prior to the manufacture of clothing, is
also dominated by a large number of independent, small scale enterprises. Overall,
about 2,300 processors are operating in India, including about 2,100 independent units
and 200 units that are integrated with spinning, weaving, or knitting units.
Clothing. Apparel is produced by about 77,000 small-scale units classified as

domestic manufacturers, manufacturer exporters, and fabricators (subcontractors).
Growth of Textile Industry
India has already completed more than 50 years of its independence. The analysis of
the growth pattern of different segment of the industry during the last five decades of
post independence era reveals that the growth of the industry during the first two
decades after the independence had been gradual, though lower and growth had been
considerably slower during the third decade. The growth thereafter picked up
significantly during the fourth decade in each and every segment of the industry. The
peak level of its growth has however been reached during the fifth decade i.e., the last
ten years and more particularly in the 90s. The Textile Policy of 1985 and Economic
Policy of 1991 focussing in the direction of liberalisation of economy and trade had in
fact accelerated the growth in 1990s. The spinning spearheaded the growth during this
period and man-made fibre industry in the organised sector and decentralised weaving
sector.
Size of Textile Industry in India
The textile industry in India covers a wide gamut of activities ranging from
production of raw material like cotton, jute, silk and wool to providing high valueadded products such as fabrics and garments to consumers.
The industry uses a wide variety of fibres ranging from natural fibres like
cotton, jute, silk and wool to man made fibres like polyester, viscose, acrylic and
multiple blends of such fibres and filament yarn.
The textile industry plays a significant role in Indian economy by providing
direct employment to an estimated 35 million people, by contributing 4 per cent of

GDP and accounting for 35 per cent of gross export earnings. The textile sector
contributes 14 per cent of the value-addition in the manufacturing sector.
Textile exports during the period of April-February 2003-2004 amounted to
$11,698.5 million as against $11,142.2 million during the same period in the previous
year, showing an increase of around 5 per cent.
Estimates say that the textile sector might achieve about 15 to 18 per cent
growth this year following dismantling of MFA.
ROLE OF INDIAN TEXTILE INDUSTRY IN THE ECONOMY
Textile industry plays a significant role in the economy. The Indian textile industry is
one of the largest and most important sectors in the economy in terms of output,
foreign exchange earnings and employment in India. It contributes 20 per cent of
industrial production, 9 per cent of excise collections, 18 per cent of employment in
industrial sector, nearly 20 per cent to the countrys total export earnings and 4 per
cent ton the GDP. The sector employs nearly 35 million people and is the second
highest employer in the country. The textile sector also has a direct link with the rural
economy and performance of major fibre crops and crafts such as cotton, wool, silk,
handicrafts and handlooms, which employ millions of farmers and crafts persons in
rural and semi-urban areas. It has been estimated that one out of every six households
in the country depends directly or indirectly on this sector.
India has several advantages in the textile sector, including abundant availability of
raw material and labour. It is the second largest player in the world cotton trade. It has
the largest cotton acreage, of about nine million hectares and is the third largest
producer of cotton fibre in the world. It ranks fourth in terms of staple fibre
production and fourth in polyester yarn production. The textile industry is also labour
intensive, thus India has an advantage.
The key advantages of the Indian industry are:
India is the third largest producer of cotton with the largest area under cotton
cultivation in the world. It has an edge in low cost cotton sourcing compared to other
countries.
Average wage rates in India are 50-60 per cent lower than that in developed
countries, thus enabling India to benefit from global outsourcing trends in labour
intensive businesses such as garments and home textiles.
Design and fashion capabilities are key strengths that will enable Indian
players to strengthen their relationships with global retailers and score over their
Chinese competitors.
Production facilities are available across the textile value chain, from spinning
to garments manufacturing. The industry is investing in technology and increasing its

capacities which should prove a major asset in the years to come.
Large Indian players such as Arvind Mills, Welspun India, Alok Industries and
Raymonds have established themselves as 'quality producers' in the global market.

This recognition would further enable India to leverage its position among global
retailers.
India has gathered experience in terms of working with global brands and this
should benefit Indian vendors.
GOVERNMENT INITIATIVES
With a view to raise India's share in the global textiles trade to 10 per cent by 2015
(from the current 3 per cent), the Ministry of Textiles proposes 50 new textile parks.
Out of the 50, 30 have been already sanctioned by the government (with a cost of US$
710 million). Set up under the Scheme for Integrated Textile Parks (SITP), this
initiative will not only make the industry cost competitive, but will also enhance
manufacturing capacity in the sector.
Apart from the above, a series of progressive measures have been planned to
strengthen the textile sector in India:
Technology Mission on Cotton (TMC)
Technology Upgradation fund Scheme (TUFS)
Setting up of Apparel Training and Design Centres (ATDCs)
100 per cent Foreign Direct Investment (FDI) in the textile sector under
automatic route.
Setting up two design centres in Gujarat in collaboration with National
Institute of Fashion Technology.
Setting up a Handloom Plaza in Ahmedabad with an estimated investment of
US$ 24.6 million.
Revival plans of the mills run by National Textiles Corporation (NTC).
Already, for the revival of 18 textile mills, US$ 2.21 million worth of machineries has
been ordered for the upgradation and modernisation of these mills.
Setting up a handloom mall with an investment of US$ 24.6 million at
Jehangir Mill in Ahmedabad.
Scrapping of the Textile Committee cess being collected from the textile and
textile machinery industry under the Textile Committee Act.
In a further bid to bolster the envisaged annual growth rate of 11 per cent, the
Government will also increase the TUF (Technology Upgradation Fund) from US$
124 million in 2006-07 to US$ 211 million in 2007-08.
The Government of India has also included new schemes in the Annual Plan for 200708 to provide a boost to the textile sector. These include schemes for Foreign
Investment Promotion to attract foreign direct investment in textiles, clothing and
machinery; Brand Promotion on Public-Private Partnership (PPP)) approach to
develop global acceptability of Indian apparel brands; Trade Facilitation Centres for
Indian image branding; Fashion Hubs for creation of permanent market place for the
benefit of Indian fashion industry; Common Compliance Code to encourage

acceptability among apparel buyers and Training Centres for Human Resource
Development on Public Private Partnership (PPP) mode.
INDIAN TEXTILE INDUSTRY
In textile Scenario
In exports Cotton yarns, fabric, made ups etc made largest chunk with US$ 3.33
Billion or 26.5% in textiles category, and Ready Made garments (RMG)-cotton
including accessories made largest chunk with 4.67 Billion US $ or 37.1 % of total
exports. Whereas, manmade yarn and fabrics in textiles group and RMGMan made
fibers constituted second position in the two categories, respectively. Carpets and
woolen garments are other items exported from India.
In global scenario
Developed countries' exports declined from 52.2% share in 1990 to 37.8 % in 2002.
And that of developing countries increased from 47.8% to 62.2 % in the same period.
In 2003 the exports figures in percentage of the world trade in Textiles Group (for
select countries) were:
INDIAN TEXTILE INDUSTRY SWOT ANALYSIS
Strength
India has rich resources of raw materials of textile industry. It is one of the
largest producers of cotton in the world and is also rich in resources of fibres like
polyester, silk, viscose etc.
India is rich in highly trained manpower. The country has a huge advantage
due to lower wage rates. Because of low labor rates the manufacturing cost in textile
automatically comes down to very reasonable rates.
India is highly competitive in spinning sector and has presence in almost all
processes of the value chain.
Indian garment industry is very diverse in size, manufacturing facility, type of
apparel produced, quantity and quality of output, cost, and requirement for fabric etc.
It comprises suppliers of ready-made garments for both, domestic or exports markets.
Weakness
Knitted garments manufacturing has remained as an extremely fragmented
industry. Global players would prefer to source their entire requirement from two or
three vendors and the Indian garment units find it difficult to meet the capacity
requirements.
Industry still plagued with some historical regulations such as knitted
garments still remaining as a SSI domain.
Labour force giving low productivity as compared to other competing
countries.
Technology obsolescence despite measures such as TUFS.
Low bargaining power in a customer-ruled market.
India seriously lacks in trade pact memberships, which leads to restricted
access to the other major markets.
Indian labour laws are relatively unfavorable to the trades and there is an
urgent need for labour reforms in India.
Opportunity
Low per-capita domestic consumption of textile indicating significant
potential growth.
Domestic market extremely sensitive to fashion fads and this has resulted in
the development of a responsive garment industry.
India's global share is just 3% while China controls about 15%. In post-2005,
China is expected to capture 43% of global textile trade.
Companies need to concentrate on new product developments.
Increased use of CAD to develop designing capabilities and for developing
greater options.
Threats
Competition in post-2005 is not just in exports, but is also likely within the
country due to cheaper imports of goods of higher quality at lower costs.
Standards such as SA-8000 or WARP have resulted in increased pressure on
companies for improvement of their working practices.
Alternative competitive advantages would continue to be a barrier.
CONCLUSION
The Indian textile industry has a significant presence in the Indian economy as well as
in the international textile economy. Its contribution to the Indian economy is
manifested in terms of its contribution to the industrial production, employment
generation and foreign exchange earnings. The industry also contributes significantly
to the world production of textile fibres and yarns including jute. In the world textile
scenario, it is the largest producer of jute, second largest producer of silk, third largest
producer of cotton and cellulosic fibre\yarn and fifth largest producer of synthetic
fibre\yarn. Textile Industry is providing one of the most basic needs of people and the
holds importance; maintaining sustained growth for improving quality of life. The
Government of India has also included new schemes in the Annual Plan for 2007-08
to provide a boost to the textile sector. These include schemes for Foreign Investment
Promotion to attract foreign direct investment in textiles, clothing and machinery etc.
CHAPTER 2
RESEARCH
METHODOLOGY
OUTLINE OF THE STUDY

The Management of working capital is very important. It involves the study of day to
day affairs of the company. The motive behind the study is to develop an understanding
about the working capital management in the running business organization and to help
the company in developing the efficient working capital management. So It helps in
future planning and control decisions.
OBJECTIVES OF THE STUDY:

1) To study the working capital management.
2) To know the sources of working capital.
3) To study the different components of working capital of the company.
4) To calculate the operating cycle of an organization.
5) To calculate the working capital of an organization.
6) To study the liquidity position of the company with the help of ratios.
SCOPE OF THE STUDY

The study is conducted at Mafatlal Ltd. Ahmedabad. The study of Working capital
management is purely based on secondary data and all the information is available
within the company it self in the form of records. To get proper understandings of this
concept, I have done the study of the balance sheets, profit & loss a/cs, cash accounts,
trial balance, cost sheets. I have also conducted the interviews with employees of
accounts and finance department and stores department. So, scope of the study is
limited upto the availability of official records and information provided by the
employees. The study is supposed to the related to the period of last four financial
years.
RESEARCH METHODOLOGY
To Recognize the various type of information which are necessary for the
study of working capital management.
Collection of data from various department to analyze.
For understanding the various reports, personal interviews are conducted.
With the help of various techniques like:
Operating Cycle Analysis
Ratio Analysis
Common size statement
Schedule of changes in working capital

The overall position of MAFATLAL is studied and analyzed.
Suggestions are given on the basis of findings for better understanding of
working capital management.
SOURCES OF INFORMATION
Primary data:- The personal interview with senior officials and

various members of finance and accounts department and also
with other departments and collected the data.
Secondary data:- Audited reports of the company.
CHAPTER 3
Literature
Review
CHAPTER 4
A
COMPANY
PROFILE
Mafatlal Industries Limited has been a leader in Textiles for over 100 years.
Mafatlal Industries Ltd.
Kaledonia, 6th Floor, Sahar Road, Andheri (E), Mumbai 400069
Telephone: +91-22-6771 3800 / 3900
Fax No: +91-22-6771 3924 / 25
Registered Office
Mafatlal Industries Limited,
Asarwa Road, Ahmedabad - 380 016
Telephone: +91-79-2212 3944,
Fax No: +91-79-2212 3045
Textile Division
Post Box No 55, Kapadwaj Road, Nadiad 387 001
Telephone: +91-0268-2550226
Fax No: 91-0268-2565030
MILs product portfolio comprises a complete range of products consisting of yarn

dyed Shirtings, Suitings, Voiles, Prints, Linens, Bleached White Fabrics, Rubia, value
added and fashion Denims, Corduroys, School Uniforms, Corporate/ Institutional
Uniforms, Bed & Bath Linen and Readymades in Cotton, Linen, Polyester/ Cotton,
Polyester/Viscose, Cotton/Lycra, PV/Lycra, Terry Rayon and Polyester wool blends.
The total sales of Mafatlal Industries Ltd. for the last financial year 2012 - 2013 was
over 80 million meters.
Nadiad
Established
in
Unit Navsari
Unit
1913. Composite unit established in 1931.
One of the largest composite textile mills in Produces Cotton and Polyester
the
country. blended Fabrics in Yarn Dyed and
Piece
Dyed
varieties.
It produces some of the finest fabrics, in a Has
well-equipped
Quality
count range of 7's to 140's, which are Assurance
Laboratories.
supplied to the most demanding customers Obtained ISO-9001 Certification in
and
oversees. 2005.
Its modern equipments include shuttle less
looms and latest processing equipments such
as Combi Bleaching Range, Continuous
Dyeing Range and 16 colour Stormac Rotary
Printing
machines.
Denim
Division
With the amalgamation of Mafatlal
Denim Limited into Mafatlal
Industries Limited, speciality and
fashion denims (mercerized, stretch,
coated and ring) have now been
Has well-equipped Quality Assurance added to our product range.
laboratories accredited by Marks and
Spencer, Next, DGQA, DGS&D and Production commenced in 1997.
Ordinance
Factories. State-of-the-art
composite
manufacturing
facilities.
Obtained ISO-9001 Certification in 1994.
Produces fashion denim fabrics.
Accreditions:
ISO
9001:2008
ISO
14001:2008
Oeko-Tex
Standard
100
GOTS (Global Organic Textile
Standard)
OE (Organic Exchange / Textile
Exchange)
FOUNDER
SHRI MATATLAL GAGALBHAI
The story of the Mafatlal Group is a stirring saga of a blend of traditional values and
modern technology triumphing over circumstances. Mr. Mafatlal Gagalbhai the
founder, was born in 1873, to a weaver of Ahmedabad. His father, who was neither
educated nor prosperous, made a living by doing odd jobs. It wasn't long before a
young Mafatlal, who was still in his early teens, had to leave school to help his father
peddle textile products. With goods hanging from their shoulders, both father and son
would scour the countryside in search of buyers. Some of the buyers proved to be Mr.
Mafatlal's benefactors in later years, when he metamorphosed into an industrialist.
They not only provided him with capital, but also gave it at low rates of interest.
Driven by curiosity and ambition, he took up a job as a mill-hand. He wanted to

understand the entire gamut of operations; his big break came only at the age of 31.
Alongwith Chandulal Mahadevia, a friend, and Arthur Shorrock, an Englishman who
knew some British textile-machinery manufacturers in Lancashire, he took over the
management of a small mill in Ahmedabad, and named it the Shorrock Mill. Of the
initial equity capital of Rs 3.25 lakhs, Mr. Mafatlal picked up 30 shares of Rs 1,000
each while his father picked up another 30 shares. Along with his partners, he evolved
an innovative scheme to raise the rest of the funds. In those days, business concerns
were run by managing agencies. So, the enterprising partners promised investors a
share in the managing agency.
SHRI ARVIND MAFATLAL

The first mill did extremely well, and Mr. Mafatlal developed an appetite for
expansion. Six years later, in 1912, he bought a mill in neighbouring Nadiad for Rs
6.26 lakhs. The second mill was christened New Shorrock. For Mafatlal and the
others in the textile business, the War years were the years of prosperity and
expansion. Although the partnership was doing well, Mr. Mafatlal wanted to do
something on his own. So, in 1916, he bought Jaffer Ali Mill, which was founded by
the Nawab of Surat and renamed it Surat Cotton Spinning & Weaving Mills. Three
years later, Mr. Mafatlal came to Mumbai, taking over the China Mill, which had been
set up by a Parsi family in 1887.
Shri Hrishikesh Mafatlal

It was in the 1970's and 1980's, under the leadership of Mr. Arvind Mafatlal, that the
existing business was consolidated. The Group also diversified into Information
Technology, Chemicals and the Engineering Industry. The late 1980's saw the Group
further diversifying into the Financial Service Industry, Gas Distribution and later into
Healthcare business. From 1995 onwards, the strategy has been to focus on the Core
Competence viz. Textiles and Chemicals and divest from other businesses. Today,
Chairman Mr. Hrishikesh Mafatlal, provides the strategic vision for Arvind Mafatlal
Group, as it strides ahead with ambitious plans for the future.
The Arvind Mafatlal Group believes in business excellence without compromise.

This is the way we have always done business. Actions matter, mere intentions don't.
What does excellence without compromise mean?
It means honouring business commitments even in competitive times.
It means zero short-cuts.
Our group's living truth is reflected perfectly in our corporate identity.
A blue lotus formed out of the letters AMG and a verbal expression "The Ethics of
Excellence."
The blue lotus or 'Indivar' is Lord Vishnu's favourite flower.
The Indivar plant always has at least one flower in the bloom every day.
The flower has an exquisite fragrance but it doesn't spread by itself. You have to sniff
it. Very similar to the Arvind Mafatlal Group, the organisation that doesn't shout about
its achievements.
Indivar. It rises above circumstances. Every day.
Quality Policy
We shall provide our customers in National and International Markets products and
services of agreed standards. We also commit to extend the Quality concept to all
phases of our business by strengthening partnership with our customers and suppliers.
We shall continue our endeavours to develop new products and markets, especially for
exports.
We shall develop our information system to regular feed back on product quality
performance, and acceptance from our external customers to prepare ourselves to
meet the future requirements.
We shall pay special attention to Health, Safety & Environmental requirement.
We provide skills and training to our employees and promote open communication to
maximise their contribution in achieving quality excellence.
We shall continue ISO 9001:2008 series of quality standards to ensure total customer
satisfaction by supplying our products which conform to contractual requirements.
H.A.MAFATLAL
Chairman
GROUP COMPANIES
Navin Fluorines integrated fluoro chemicals complex has been the largest in India
since 1967. Here, the company manufactures the widest range of fluoro chemicals in
the bulk and speciality segments. So far, it has developed over 40 products on a
commercial scale using indigenously built multi-purpose plants and product
technology.
Visit us at: www.nfil.in
The Arvind Mafatlal Group took over MIINDIA Chemicals in 1976, and, in the years
to follow, turned it around totally. In fact, the company has been the largest
manufacturer of rubber chemicals in India for more than two decades. Today,
NOCILs customer profile spans the global market as well.
Visit us at: www.nocilrubberchemicals.com or www.natocil.com
BOARD OF DIRECTORS
MANAGEMENT TEAM
1905
Sets up first textile mill in Ahmedabad, India
1912
Purchased a second textile mill in neighbouring Nadiad, India
1916
Purchased another mill in Surat
1919
Shifts base to Mumbai with the purchase of a textile mill
1931
Establishes one more textile mill in Navsari
1944
Shri Navichandra Mafatlal takes over the family business, after the sad demise of the
founder, Shri Mafatlal Gagalbhai.
1945-54
Group invests heavily in cotton textile mills and their modernization to become the
third largest mill owner in India. Establishes a strong foothold in mumbai
1954
Shri Arvind Mafatlal takes over the reins of the group companies and starts
diversification of the Group businesses.
1970
Mafatlal promotes ace cricketers and football players thereby gaining tremendous
mileage.
1979
After division of the Mafatlal Group business, the Arvind Mafatlal Group focuses on
textiles, petro chemicals, rubber chemicals and fluoro chemicals.
1980-90
Consolidates its position in textiles, expanding the textile machinery activities.
Mr. Hrishikesh Mafatlal takes over the reins of the company.
1994
1996
Obtains ISO-9001 certification.
Joint Venture (50%:50%) with Burlington Industries, USA called Mafatlal Burlington
Industries Ltd. for manufacturing denim fabrics.
2000
2006
Major expansion in the area of corporate uniform and work wear fabric.
Paved a new path to success by acquiring the entire stake of Burlington Industries,
USA to setup Mafatlal Denim Ltd.
2007
2009
Introduce largest collection of school uniform fabrics in domestic market.
Mafatlal Denim Ltd. establishes itself as the largest supplier of denim material in
India, and as a reliable supply chain partner for value added and fashion denims.
2011
The sad demise of the Chairman Emeritus Shri Arvind Mafatlal
2012
Launches home furnishing range with terry towels and bedsheets
2013
Mafatlal Denim Ltd. amalgamated with Mafatlal Industries Ltd.
Modernisation of Nadiad unit.
Capacity expansion of Navsari unit.
They say, change is the only constant and change invariably brings transformation.
With constant innovation over the years, Mafatlal has introduced a wide range of
textile fabrics. It has been witness to revolutionary changes in the textile market, right
from olden days of managing agencies, to current system of textile dealers and
merchants. Mastering a range of fabrics that spells quality, the brand today has a wide
distribution network.
Mafatlal Industries Ltd. has spread its fame and fragrance far and wide. The finesse
and quality of its products are world renowned. In India, famous brands like Marks &
Spencer, Next, Debenhams, Tommy Hilfiger, Gap, Marco Polo, Jules, Wrangler, Lee,
Jack & Jones, UF and Esprit procure their fabric from here.
Mafatlal Industries Ltd. has gone beyond boundaries and extended its horizons by
exporting its world-class fabrics, including denims, to customers in USA, South
America, UK, Switzerland, Italy, France, Germany, UAE, Qatar, Saudi-Arabia,
Yemen, Oman, Egypt, Bangladesh, Sri Lanka, Sudan, Mauritania, Malaysia,
Indonesia, Thailand, Hong Kong and Japan.
Social Responsibility in itself is a feeling that we belong to the people at large and
more so to the people we serve. The satisfaction of giving is supreme when we expect
nothing in return. This giving comes from unconditional urge to do something
meaningful for the Society. Mafatlal Industries Limited has always held this thought
close to its heart. We have strived for improvement in conditions faced by the needy
and the poor. We fully believe that such acts of giving back to the Society are at the
core of a balanced life.
With inspiration from Param Pujya Ranchhoddasji Maharaj, Shri Sadguru Seva
Sangh Trust was founded in 1968. The Trust was guided and nurtured by the late Shri
Arvind Mafatlal. The Trust is fully supported under the aegis of Arvind Mafatlal
Group. The Trust is aimed at providing food to the hungry, clothing support to the
downtrodden and the gift of sight to the blind.
Whether it is health care, education, agriculture, dairy or women empowerment Shri

Sadguru Seva Sangh Trust (SSSST) has contributed towards an overall development
of entire areas surrounding the districts of Chitrakoot and Anandpur in Madhya
Pradesh. Essential Health services in the field of General Medicine, Gastroenterology,
Obstetrics, Gynaecology and Paediatrics have been made available. The Trust has
performed a record 14 lakh (1.4 million) eye surgeries under innumerable eye camps
through Shri Sadguru Netra Chikitsalaya which is located at Chitrakoot and

Anandpur.
The late Shri Arvind Mafatlal was a great philanthropist and was actively associated
with BAIF Development Research Foundation and also was at the helm of affairs as
its Chairman for many decades. Along with the legendary freedom fighter late Shri
Manibhai Desai, he created a huge body of work in people oriented fields of Rural
Development. He laid great emphasis on cattle development, animal health
laboratories, tribal rehabilitation and most importantly resource development in terms
of water and land. The BAIF programs today are spread across 16 States of India
impacting the lives of around 4.4 million families.
At Mafatlal Industries Limited, we consider our contribution as a humble tribute to

what Society has given us. We have pledged our resources in various sectors and are
striving continuously with the sole objective of creating an environment of well-being
in all spheres of life.
We wish every life to be empowered and every deed to have a meaningful impact on
society.
CHAPTER 4 B
DATA
ANALYSIS
Determinants of Working Capital

The following factors should be considered carefully while determining the amount of
Working capital required:
1.
Nature of business The amount of working capital is basically related to the
nature and the volume of the business. Firms engaged in public utility services require
moderate amount of working capital whereas firms producing luxury goods require
large amount of working capital.
2.
Size of business Size is also a determining factor in estimating working
capital requirements. The size may be measured either in terms of scale of operations
or in terms of assets or sales.
3.
Changes in technology Changes in technology may lead to improvement in
processing of raw material, saving in wastage, higher productivity and more speedy
production. All these improvements enable the firm to reduce the working capital
requirements.
4.
Length of operating cycle The amount of working capital depends upon the
length or duration of operating cycle. The speed with which the operating cycle is
completed, determines the amount of working capital. The larger is the period, the
more is the investment in inventories and wage bills.
5.
Terms of purchase and sale A firm buying raw materials and other services
on credit and selling on cash basis will require less investment in current assets as
compared to a firm which purchases on cash basis and sells on credit. The period of
credit and the efficiency in collection of debts also influence the amount of working
capital required. The terms and conditions of purchase and sale are generally
governed by the prevailing trade practices and by changing economic condition.
6.
Inventory - Some concerns are force to hold large inventories in terms of raw
materials or finished goods due to the reason of seasonal nature of availability, long
distances, scarcity etc, in such case the working capital requires is more.
7.
Business cycles Business cycle refers to the alternate expansion and
contraction in general business activities. In a period of boom when the business is
prosperous, there is need for larger amount of working capital due to increase in sales
and rise in prices of raw materials. The contrary happens in the period of depression.
8.
Profit margin A high rate of profit margin due to quality products or good
marketing management or monopoly power in the market, reduces the working capital
requirements of the firm, as profit earned in cash is a source of working capital. On
the contrary, firms earning low margin of profits due to competition or

mismanagement need larger amount of working capital.
9.
Credit policy A firm following liberal credit policy and thus granting credit
facilities to all customers without evaluating the credit worthiness will require more
working capital to carry book debts. On the contrary, a firm that adopts strict credit
policy and grants facilities to customers with high credit standing will require less
amount of working capital as funds tied-up in receivables will be released promptly
for further uses.
Significance of adequate Working Capital

Adequate working capital is a source of energy to any business organization. It
provides
the following advantages to a business enterprise:
1.
Adequate working capital enables a firm to make prompt payments to the
suppliers and thus it can also avail the advantage of cash discount by paying cash for
the purchase of raw material.
2.
If a firm has adequate working capital, it can declare and distribute enough
dividends when there are sufficient profits. This creates satisfaction among the
shareholders.
3.
In business, promptness to third parties creates goodwill and increases the
debt capacity of the concerned firm. This in turn ensures uninterrupted flow of
production.
4.
A firm having adequate working capital and liquid assets can arrange loans
from the banks on easy and favourable terms, as it provides a good security for the
unsecured loans.
5.
Adequate working capital has psychological effect on the directors and
executives of the firm as it motivates them to work vigorously. It creates an
environment of security, confidence, high morale and increases overall efficiency in
the business.
6.
Adequate working capital increases the productivity or efficiency of fixed
assets in the business.
Effects of excessive Working Capital

Excess or redundant working capital refers to the idle funds which do not earn any
profits for the firm. Inadequate working capital is disastrous; whereas redundant
working capital is a criminal waste. A firm may suffer following disadvantages from
excess working capital:
1.
It may lead to unnecessary purchasing and accumulation of inventories
causing more chances of mishandling of inventories, theft, waste, losses, etc.
2.
.Excessive working capital implies excessive debtors and defective credit
policies causing higher incidence of bad debts that ultimately affects profits of the
firm.
3.
It indicates inefficient management of the firm. It shows that the management
is not interested in effectively utilizing the resources and encouraging economy.
4.
Excessive working capital remains idle and earns no profits for the firm, even
though interest has to be paid on it. This reduces the amount of profits.
5.
It is an indicator of inefficient management. Hence, shareholders believe that
they are not getting proper return on their investments. This results in lowering the
value of shares causing discontentment among shareholders.
6.
It promotes profits of speculative nature by stock-piling. It results in liberal
dividend policy, but the management has to face difficulties in future when there are
no speculative profits.
Mafatlal
Industries
Standalone Profit & Loss
account
------------------- in Rs. Cr. ------------------Mar

'15
Mar '14
Jun '13
May '12
Mar '11
12
mths
9 mths
13 mths
14 mths
12 mths
797.49
143.75
670.61
152.66
138.23
0.00
0.00
0.00
0.00
0.00
797.49
143.75
670.61
152.66
138.23
Other Income
49.87
-13.46
123.06
51.31
401.34
Stock Adjustments
25.72
0.64
10.30
-1.17
0.17
873.08
130.93
803.97
202.80
539.74
569.73
75.59
98.59
59.66
61.03
Power & Fuel Cost
70.71
34.38
56.90
57.40
49.99
Employee Cost
72.74
35.53
70.18
48.46
35.73
Other Manufacturing Expenses
3.12
0.99
4.61
3.19
2.93
Selling and Admin Expenses
0.00
0.00
43.38
10.13
24.98
59.81
45.81
14.27
10.66
10.42
0.00
0.00
0.00
0.00
0.00
776.11
192.30
287.93
189.50
185.08
Mar
'15
Mar '14
Jun '13
May '12
Mar '11
Income
Sales Turnover
Excise Duty
Net Sales
Total Income
Expenditure
Raw Materials
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses
Operating Profit
47.10
-47.91
392.98
-38.01
-46.68
PBDIT
96.97
-61.37
516.04
13.30
354.66
Interest
32.00
2.45
12.73
6.04
10.52
PBDT
64.97
-63.82
503.31
7.26
344.14
Depreciation
14.44
2.03
2.52
3.33
4.02
Other Written Off
0.00
0.00
0.00
0.01
12.79
Profit Before Tax
50.53
-65.85
500.79
3.92
327.33
Extra-ordinary items
-0.87
14.00
4.28
58.84
10.34
PBT (Post Extra-ord Items)
49.66
-51.85
505.07
62.76
337.67
Tax
12.50
0.00
124.50
11.00
0.16
Reported Net Profit
37.16
-51.86
380.56
51.76
337.51
Total Value Addition
206.38
116.71
189.34
129.85
124.05
Preference Dividend
0.00
0.00
0.00
0.00
0.00
Equity Dividend
6.96
0.00
0.00
0.00
0.00
Corporate Dividend Tax
1.18
0.00
0.00
0.00
0.00
Shares in issue (lakhs)
98.13
98.14
98.14
98.14
50.00
Earning Per Share (Rs)
37.87
-52.84
387.78
52.74
675.01
Equity Dividend (%)
50.00
0.00
0.00
0.00
0.00
330.22
311.06
363.91
-23.87
-210.38
Per share data (annualised)
Book Value (Rs)
Mafatlal Industries
Standalone Balance Sheet
------------------- in Rs. Cr. ------------------Mar

'15
Mar '14
Jun '13
May '12
Mar '11
12
mths
9 mths
13 mths
14 mths
12 mths
39.81
39.81
69.81
69.81
95.00
Equity Share Capital
9.81
9.81
9.81
9.81
5.00
Share Application Money
4.10
0.00
0.00
0.00
0.00
Preference Share Capital
30.00
30.00
60.00
60.00
90.00
314.25
295.46
347.32
-33.24
-110.19
0.00
0.00
0.00
0.00
0.00
358.16
335.27
417.13
36.57
-15.19
89.97
5.45
34.21
36.09
51.88
0.00
0.09
36.14
36.87
48.65
89.97
5.54
70.35
72.96
100.53
448.13
340.81
487.48
109.53
85.34
Mar
'15
Mar '14
Jun '13
May '12
Mar '11
12
mths
9 mths
13 mths
14 mths
12 mths
Gross Block
411.28
200.60
200.10
217.31
266.48
Less: Accum. Depreciation
317.28
184.20
183.96
197.56
232.75
94.00
16.40
16.14
19.75
33.73
Sources Of Funds
Total Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application Of Funds
Net Block
Capital Work in Progress
62.49
3.64
0.00
0.00
0.00
Investments
48.72
50.10
54.77
124.78
165.67
Inventories
106.63
28.77
26.80
15.67
16.36
Sundry Debtors
122.17
51.82
60.92
50.23
52.74
Cash and Bank Balance
141.40
189.23
3.08
33.21
3.54
Total Current Assets
370.20
269.82
90.80
99.11
72.64
Loans and Advances
56.71
50.40
35.16
70.18
52.08
0.00
0.00
633.00
2.24
16.92
426.91
320.22
758.96
171.53
141.64
0.00
0.00
0.00
0.00
0.00
163.41
42.40
175.27
139.06
229.20
20.56
7.15
167.11
67.46
26.53
Total CL & Provisions
183.97
49.55
342.38
206.52
255.73
Net Current Assets
242.94
270.67
416.58
-34.99
-114.09
0.00
0.00
0.00
0.00
0.01
448.15
340.81
487.49
109.54
85.32
96.02
87.77
95.57
90.42
61.54
330.22
311.06
363.91
-23.87
-210.38
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)
Mafatlal Industries
Cash Flow
------------------- in Rs. Cr. ------------------Mar '15
Mar '14
Jun '13
May '12
Mar '11
12 mths
9 mths
13 mths
14 mths
12 mths
Net Profit Before Tax
50.53
-65.86
507.74
62.74
337.67
Net Cash From Operating Activities
39.34
-369.37
465.30
-34.40
72.05
8.53
17.55
147.03
83.17
2.35
Net Cash (used in)/from Financing

Activities
-63.25
-93.58
-13.15
-33.47
-90.97
Net (decrease)/increase In Cash and

Cash Equivalents
-15.38
-445.40
599.18
15.30
-16.57
Opening Cash & Cash Equivalents
99.48
634.63
35.45
20.15
36.72
Closing Cash & Cash Equivalents
84.10
189.23
634.63
35.45
20.15
Net Cash (used in)/from

Investing Activities
Mafatlal Industries
Raw Materials
------------------- in Rs. Cr. -------------------
Product Name
Fibres & Cotton
Unit
Not Reported
Quantity
NA
Value
124.30
Yarn
Not Reported
NA
61.82
Others
Not Reported
NA
8.94
Fabrics
Not Reported
NA
7.64
Total
Mar 2013
202.7
Operating Profit & OPM

Operating Profit gives an indication of the current operational profitability of the
business and allows a comparison of profitability between different companies after
removing out expenses that can obscure how the company is really performing.
Interest cost depends on the management's choice of financing, tax can vary widely
depending on acquisitions and losses in prior years, and depreciation and amortization
policies may differ from company to company.
EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation, and

Amortization. PBT stands for Profit Before Tax, and PAT stands for Profit After Tax.
The graph visually shows how the net profit of the company stand reduced due to the
impact of Interest, Depreciation, and Tax.
Total Assets & Asset Turnover Ratio

Total Assets is the sum of all assets, current and fixed. The asset turnover ratio
measures the ability of a company to use its assets to efficiently generate sales. The
higher the ratio indicates that the company is utilizing all its assets efficiently to
generate sales. Companies with low profit margins tend to have high asset turnover.
Net Sales
Sales is the total amount of products or services sold by the company.
Networth
Networth is the difference between a company's total assets and its total liabilities. It
is also known as shareholder`s equity.
Return On Capital Employed %

Capital Employed is defined as total assets less current liabilities. Return On Capital
Employed is a ratio that shows the efficiency and profitability of a company's capital
investments. The ROCE should always be higher than the rate at which the company
borrows money.
Dividend
Dividend is a payment made by a company to its shareholders usually as a distribution
of profits. When a company makes profit it can either re-invest it in the business or it
distribute it to its shareholders by way of dividends. The dividend payout ratio is the
amount of dividends paid to shareholders relative to the amount of total net profit of a
company.
A reduction in dividends paid is not appreciated by investors and usually the stock
price moves down as this could point towards difficult times ahead for the company.
On the other hand a stable dividend payout ratio indicates a solid dividend policy by
the company's management.
Book Value (Rs)

Book value is a company's assets minus its liabilities. In simple terms it would be the
amount of money that a share holder would get if a company were to liquidate.
Ratio Analysis is a powerful tool of financial analysis. Alexander Hall first presented
it in 1991 in Federal Reserve Bulletin. Ratio Analysis is a process of comparison of
one
figure against other, which makes a ratio and the appraisal of the ratios of the ratios to
make proper analysis about the strengths and weakness of the firms operations. The
term
ratio refers to the numerical or quantitative relationship between two accounting
figures.
Ratio analysis of financial statements stands for the process of determining and
presenting the relationship of items and group of items in the statements.
Ratio analysis can be used both in trend analysis and static analysis. A creditor would
like to know the ability of the company, to meet its current obligation and therefore
would think of current and liquidity ratio and trend of receivable.
Major tool of financial are thus ratio analysis and Funds Flow analysis. Financial
analysis is the process of identifying the financial strength and weakness of the firm
by
properly establishing relationship between the items of the balance sheet and the
profit
account.
The financial analyst may use ratio in two ways. First he may compare a present ratio
with the ratio of the past few years and project ratio of the next year or so. This will
indicate the trend in relation that particular financial aspect of the enterprise. Another
method of using ratios for financial analysis is to compare a financial ratio for the
company with for industry as a whole, or for other, the firms ability to meet itscurrent
obligation. It measures the firms liquidity. The greater the ratio, the greater the firms
liquidity and vice-versa.
A ratio can be defined as a numerical relationship between two numbers expressed in
terms of (a) proportion (b) rate (c) percentage. It is also define as a financial tool to
determine an interpret numerical relationship based on financial statement yardstick
that
provides a measure of relationship between two variable or figures.
Meaning and Importance:
Ratio analysis is concerned to be one of the important financial tools for appraisal of
financial condition, efficiency and profitability of business. Here ratio analysis id
useful
from following objects.
1. Short term and long term planning
2. Measurement and evaluation offinancial performance
3. Stud of financial trends
4. Decision making for investment and operations
5. Diagnosis of financial ills
6. Providing valuable insight into firms financial position or picture.
ADVANTAGES & DISADVANTAGES OF RATIO ANALYSIS:
Advantages:
The following are the main advantages derived of ratio analysis, which are obtained
from
the financial statement via Profit & Loss Account and Balance Sheet.
a) The analysis helps to grasp the relationship between various items in the financial
statements.
b) They are useful in pointing out the trends in important items and thus help the
management to forecast
c) With the help of ratios, inter firm comparison made to evolve future market
strategies.
d) Out of ratio analysis standard ratios are computed and comparison of actual with
standards reveals the variances. This helps the management to take corrective action.
e) The communication of that has happened between two accounting the dates are
revealed effective
Action.
f) Simple assessmentsof liquidity, solvency profitability efficiency of the firm are
indicted by ratio analysis. Ratios meet comparisons much more valid.
Disadvantages:
Ratio analysis is to calculate and easy to understand and such statistical calculation
stimulation thinking and develop understanding. But there are certain drawbacks and
dangers they are.
i)There is a trendy to use to ratio analysis profusely.
ii)Accumulation of mass data obscured rather than clarifies relationship.
iii) Wrong relationship and calculation can lead to wrong conclusion.
1. In case of inter firm comparison no two firm are similar in size, age and product
unit.(for example) one firm may purchase the asset at lower price with a higher
returnand another firm witch purchase the asset at asset athigher price will have a
lower
return)
2. Both the inter period and inter firm comparison are affected by price level changes.
A
change in price level can affect the validity of ratios calculated for different time
period.
3. Unless varies terms like groupprofit, operating profit, net profit, current asset,
current
liability etc., are properly define, comparison between two variables become
meaningless.
4. Ratios are simple to understand and easy to calculate. The analyst should not take
decision should not take decision on a single ratio. He has to take several ratios into
consideration.
STANDARDS OF COMPARISION:
1.Ratios calculated from the past financial statements of the same firm.
2.Ratio developed using the projected or perform financial statementof the same firm
3.Ratios of some selected firm especially the most progressive and successful, at the
same point of time.
4.Ratios of the industry to which the firm belongs.
IMPORTANCE OF RATIO ANALYSIS
In the preceding discussion in the form, wehave illustrated the compulsion and
implication of important ratios that can be calculated from the Balance Sheet and
Profit &
Loss account of a firm. As a tool of financial management, they are of crucial
significance. The importance of ratio analysis lies in the fact and enables the drawing
of
inferences regarding the performance of a firm. Ration analysis is a relevant in
assessing
the performance of a firm in respect of the following aspect.
CAUTION IN USING RATIOS
1.It is difficult to decide on the proper bases of comparison.
2.The comparison rendered difficult because of difference in situation of two
companiesorofone-company for different years.

3.The price level change make the interpretation of ratios invalid4.The difference in
thedefinition of items in the balance sheet and Profit & Loss
statement make the interpretation of ratios difficult.
5.The ratios calculated at a point of time are less informative and defective as they
suffer from sort term changes.
6.The ratios are generally calculated from the past financial statement and thus are no
indicatorsof Future.
CURRENT RATIO :
The relationship of current assets to current liabilities is
known as current ratio. It is also known as bankers ratio or working capital ratio.
1.CURRENT RATIO
It is relationship between firms current assets and current liability.
Current assets
Current ratio = _______________________________
Current liability
YEAR
CURRENT
2015
370.20
2014
269.82
2013
90.80
2012
99.11
2011
72.64
ASSESTS
CURRENT
163.41
42.40
175.27
139.06
229.20
2.26
6.36
0.51
0.71
0.31
LIABILITIE
S
RATIO
CASH MANAGEMENT
Introduction
Cash management is one of the key areas of working capital management. Cash is the
liquid current asset. The main duty of the finance manager is to provide adequate cash
to
all segments of theorganization. The important reason for maintaining cash balances
is
the transaction motive. A firm enters into variety of transactions to accomplish its
objectives which have to be paid for in the form of cash.
Meaning of cash
The term cash with reference to cash management used in two senses. In a narrower
sense it includes coins, currency notes, cheques, bank drafts held by a firm. n a
broader
sense it also includes near-cash assets such as marketable securities and time
deposits
with banks.
Objectives of cash management:
There are two basic objectives of cash management. They areTo meet the cash disbursement needs as per the payment schedule.
To minimize the amount locked up as cash balances.
Basic problems in Cash Management:
Cash managementinvolves the following four basic problems.
Controlling level of cash
Controlling inflows of cash
Controlling outflows of cash and
Optimum investment of surplus cash.
Determining safety level for cash:
The finance manager has to take into account the minimum cash balance that the firm
must keep to avoid risk or cost of running out of funds. Such minimum level may be
termed as safety level of cash. The finance manager determines the safety level of
cash
separately both for normal periods and peak periods. Under both cases he decides
about
two basic factors. They are-
Desired days of cash:

It means the number of days for which cash balance should be sufficient to cover
payments.
Average daily cash flows:
This means average amount of disbursements which will have to be made daily.
Criteria for investment of surplus cash:
In most of the companies there are usually no formal written instructions for investing
the
surplus cash. It is left to the discretion and judgment of the finance manager. While
exercising such judgment, he usually takes into consideration the following factorsSecurity:
This can be ensured by investing money in securities whose price remains more or
less
stable.
Liquidity:
This can be ensured by investing money in short term securities including short term
Fixed deposits with banks.
Yield:
Most corporate managers give less emphasis to yield as compared to security and
liquidity of investment. So they prefer short term government securities for investing
surplus cash
Maturity:
It will be advisable to select securities according to their maturities so the finance
manager can maximize the yield as well as maintain the liquidity of investments.
CASHRATIO
It is relationship between cash and current liabilities.
Cash
Cash ratio = _______________________
Current liabilities.
YEAR
CASH
CURRENT
2015
141.40
163.41
2014
189.23
42.40
2013
3.08
175.27
2012
33.21
139.06
2011
3.54
229.20
0.87
4.46
0.02
0.24
0.01
LIABILITIE
S
RATIO
The cash ratio is generally a more conservative look at a company's ability to cover its
liabilities than many other liquidity ratios. This is due to the fact that inventory and
accounts receivable are left out of the equation. Since these two accounts are a large
part of many companies, this ratio should not be used in determining company value,
but simply as one factor in determining liquidity. Very few companies will have
enough cash and cash equivalents to fully cover current liabilities, which isn't
necessarily a bad thing, so don't focus on this ratio being above 1:1.
RECEIVABLES MANAGEMENT
Introduction:
Receivables constitute a significant portion of the total assets of the business.
When a firm seller goods or services on credit, the payments are postponed to future
dates and receivables are created. If they sell for cash no receivables created.
Meaning:
Receivable are asset accounts representing amounts owed to the firm as a result of
sale of
goods or services in the ordinary course of business.
Purpose of receivables:
Accounts receivables are created because of credit sales. The purpose of receivables is
directly connected with the objectives of making credit sales. The objectives of credit
sales are as followsAchieving growth in sales.
Increasing profits.
Meeting competition.
Factorsaffecting the size of Receivables:
The main factors that affect the size of the receivables areLevel of sales.
Credit period.
Cash discount.
Costs of maintaining receivables:
The costs with respect to maintenance of receivables are as followsCapital costs: This is because there is a time lag between the sale of goods to
customers and the payment by them. The firm has, therefore to arrange for additional
funds to meet
its obligations.
Administrative costs:
Firm incur this cost for manufacturing accounts receivables in the form of salaries to
the
staff kept for maintaining accounting records relating to customers.
Collection costs:
The firm has to incur costs for collecting the payments from its credit customers.
Defaulting costs:
The firm may not able to recover the over dues because of the inability of customers.
Such debts treated as bad debts.
Receivables management:
Receivables are direct result of credit sale. The main objective of receivables
management is to promote sales and profits until that point is reached where the ROI
in
further funding of receivables is less than the cost of funds raised to finance that
additional credit (i.e.; cost of capital). Increase in receivables also increases chances
of bad debts. Thus, creation of receivables is beneficial as well as dangerous. Finally
management of accounts receivable means as the process of making decisions relating
to investment of funds in this asset which result in maximizing the overall return on
the investment of the firm.
Receivables management and Ratio Analysis:

Ratio Analysis is one of the important techniques that can be used to check the
efficiency
with which receivables management is being managed by a firm. The most important
ratios for receivables management are as followsDEBTORS TURNOVER RATIO:Debtors constitute an important constituent of current assets and therefore the quality
of
the debtors to a great extent determines a firms liquidity. It shows how quickly
receivables or debtors are converted into cash. In otherwords, the DTR is a test of the
liquidity of the debtors of a firm. The liquidity of firms receivables can be examined
in
two ways they are DTR and Average Collection Period.
It indicates the number time debtors turned over each year. Generally the highervalue
of
debtors turnover shows high efficiency to manage the credit management.
Total sales
Debtors turnover ratio = ______________________________
Debtors
YEAR
TOTAL
2015
797.49
2014
143.75
2013
670.61
2012
152.66
2011
138.23
SALES
DEBTORS
122.17
51.82
60.92
50.23
52.74
RATIO
6.53
2.77
11.09
3.03
2.62
Debtors constitute an important constituent of current assets and therefore the quality
of
the debtors to a great extent determines a firms liquidity. It shows how quickly
receivables or debtors are converted into cash. In other words, the DTR is a test of the
liquidity of the debtors of a firm. The liquidity of firms receivables can be examined
in two ways they are DTR and average collection period. The higher the ratio the
better. The companys ratio is bumping over years, but its improving.
Debt Turnover Ratio

12
11.09
10
8
6.53
6
4
3.03
2.77
2.62
2
0
2015
2014
DEBT COLLECTION PERIOD
2013
2012
2011
Debtors collection period is nothing but the period required to collect the money
from
The customers after the credit sales. A speed collection reduces the length of operating
cycle and vice versa. The more quickly the customers pay, the less risk from bad
debts,
the lower the expenses of collection and more liquid the nature of of this asset.
It indicates the speed with which debts are collected.
Days/months in a year
Debt collection period = _______________________________
Debtors turnover ratio
YEAR
DAYS
RATIO
DAYS
2015
365
6.53
56
2014
365
2.77
132
2013
365
11.09
33
2012
365
3.03
120
2011
365
2.62
139
The debt collection period decreases dramatically rom 139 in 2009 to 56 days in
2013. Its less than standard period of 90 days.
CASH TO CURRENT ASSETS RATIO

YEAR
CASH
CURRENT
2015
141.40
370.20
2014
189.23
269.82
2013
3.08
90.80
2012
33.21
99.11
2011
3.54
72.64
ASSESTS
RATIO
0.38
0.70
0.03
0.33
0.05
Cash to Current Assets

2015
2014
2013
2012
2011
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Compare to previous years, the data of last two years shows that company has very
good cash balance.
INVENTORY MANAGEMENT
Introduction:
Inventories are stock of the product a company is manufacturing for sale and
components. That makeup the products. The various forms inwhich inventories exist
in a
manufacturing company are: Raw-materials, work-in-process, finished goods.
Raw-Materials:-Are those basic inputs that are converted into finished products
through the manufacturing process. Raw-materials inventories arethose units,
which have been purchased and stored for future production.
Work-In-Process inventories are semi-manufactured products. The represent
products that need more work before they become finished products for sale.
Finished Goods inventories are those completely manufactured products, which
are ready for sale. Stocks of raw-materials and work-in-process facilitate
0.8
production which stock of finished goods is required for smooth marketing

operations. These inventories serve as a link between production and
consumption of goods.
Stores and spares are also maintained by some firms. This includes office and
plant cleaning materials like soaps, brooms, oil, fuel, light, bulbs etc. These
materials do not directly enter in production. But are necessary for production
process.
Need to holding inventory
The question of managing inventories arises only when the company holds
inventories.
Maintaining inventories involves tying up of the company's funds and incurrence of
storage and handling cost. It is expensiveto maintain inventories, why does company
hold inventories? There are three general motives for holding inventories.
1.Transaction Motive:-Emphasizes the need to maintain inventories to facilitate
smooth production and sales operations
2.Precautionary motive:-Necessitates holding of inventories to guard against the risk
of unpredictable changes in demand and supply forces and other factors.
3.Speculative motive:-Influences the decision to increase or reduce inventory levels to
take advantages of price influences.
A company should maintain adequate stock of materials for a continuous supply to the
factory for the uninterrupted production. It is not possible for a company to procure
raw
materials whenever it isneeded. A time lag exists between demand for materials and
its
supply. Also there exists uncertainty in procuring raw materials in time on many
occasions. The procurement of materials may be delayed because of such factors as
strike, transport disruption or short supply. Therefore, the firm should maintain
sufficient
stock of raw materials at a given time to stream line production.
Objective of Inventory Management
In the context of inventory management the firm is faced with the problem of meeting
two conflicting needs ;
To maintain a large size of inventory for sufficient and smooth production and
sales operations.
To maintain a minimum investment in inventories to maximize profitability.

Both excessive and inadequate inventories are not desirable. Theseare two dangerous
points within which the firm should operate. The objective of inventory management
should be to determine and maintain optimum level of inventory investment. The
optimum level of inventory will lie between the two danger points of excessive and
inadequate inventories.
The firm should always avoid a situation of over investment or under investment in
inventories. The major dangerous of over investment are,
Unnecessary tie-up of the firms funds losses of profit

Excessive carrying cost
Risk of quality
The aim of inventory management thus should be to avoid excessive and

inadequate
levels of inventories and to maintain sufficient inventory for smooth production
and sales
operations. Efforts should be made to place an order at the right timewith the right
source to acquire the right quantity at the right price and quality. An effective
inventory
management should
Ensure a continuous supply of raw materials to facilitate uninterrupted
production.
Maintain sufficient stock of raw materials inperiods of short supply and
anticipate price changes.
Maintain sufficient finished goods inventory for smooth sales operations and
efficient customer service.
Minimize the carrying cost and time.
Control investment in inventories and keep it at an optimum level.
Inventory management techniques :
In managing inventories the firm objective should be in consonance with the
shareholders' wealth maximization principle. To achieve this firm should
determine the optimum level of inventory. Efficientlycontrolled inventories make
the firm flexible.
Inefficient inventory control results in unbalanced inventory and inflexibility-the
firm may sometimes run out of stock and sometimes may pileup unnecessary
stocks. This increases level of investment and makes the firm unprofitable.
To manage inventories efficiency, answers should be sought to the following two
questions.
1) How much should be ordered?
2) When should it be ordered? The first question how much to order, relates to the
problem of determining economic order quantity (EOQ), and is answered with an
analysis of costs of manufacturing certain level of inventories. The second
question when to order arise because of determining the reorder point.
Inventory turnover Ratio:Inventory turnover ratio indicates the efficiency of the firm in producing and
selling its products. It is calculated by dividing the cost of goods sold by the
average inventory. The average inventory is the average of open and closing
balance of inventory.
It indicates the inventories turning into receivables through sales.
Sales
Inventory turnover ratio =__________________________
Inventory
YEAR
2015
2014
2013
2012
2011
SALES
797.49
143.75
670.61
152.66
138.23
INVENTORY 106.63
28.77
26.80
15.67
16.36
RATIO
7.48
4.99
25.02
9.74
21.10
A ratio showing how many times a company's inventory is sold and replaced over a
period. The days in the period can then be divided by the inventory turnover formula
to calculate the days it takes to sell the inventory on hand or "inventory turnover
days." This ratio should be compared against industry averages. A low turnover
implies poor sales and, therefore, excess inventory. A high ratio implies either strong
sales or ineffective buying.
High inventory levels are unhealthy because they represent an investment with a rate
of return of zero. It also opens the company up to trouble should prices begin to fall.
INVENTORY HOLDING PERIOD
YEAR
2015
Days
365
INVENTORY 7.48
2014
365
4.99
2013
365
25.02
2012
365
9.74
2011
365
21.10
RATIO
INVENTORY 48.80
73.14
14.58
37.47
17.30
HOLDING
PERIOD
Working Capital Turnover Ratio

YEAR
Sales
Net working
2015
797.49
206.79
2014
143.75
227.42
2013
670.61
(84.47)
2012
152.66
(39.95)
2011
138.23
(156.56)
capital
Ratio
3.86
0.63
The working capital turnover ratio measures how well a company is utilizing its
working capital to support a given level of sales. Working capital is current assets
minus current liabilities. A high turnover ratio indicates that management is being
extremely efficient in using a firm's short-term assets and liabilities to support sales.
Conversely, a low ratio indicates that a business is investing in too many accounts
receivable and inventory assets to support its sales, which could eventually lead to an
excessive amount of bad debts and obsolete inventory. Company achieved very good
ration in year 2013, all other years are below average and in RED and company
should take some measures to improvise this.
Operating and cash Conversion Cycle
Operating cycle method is the best technique for estimating future cash working
capital of a firm. Under this method, total operating expenses for a period are divided
by the number of operating cycles in the relevant period to find out the cash cost of
working capital. Thus, the computation of total operating expenses, operating cycle
and number of operating cycles in the year is essential for estimating the amount of
working capital, as discussed below:
Operating expenses include purchase of raw material, direct labour cost, fuel and
power, administrative and selling and distribution expenses for a specific period for
which estimates can be obtained from cost records.
Operating cycle period means the total number of days involved in the different stages
of operation commencing from the purchase of raw materials and ending with
collection of sale proceeds from debtors after adjusting the number of days credit
allowed by suppliers. It is calculated by using the following formula:
I. PERIOD OF OPERATING CYCLE =
Material storage period (M)+ Work-in-progress period (W) + Finished goods period
(F)+ Debtors collection period (D) - Creditors payment period (C)
WORKING CAPITAL POLICY :The basic objective of working capital management is that there should be an
optimum investment in working capital. There should not be either excessive working
capital or shortage of working capital. In order to decide the optimum investment
working capital, there is a need to consider different policies of working capital. The
different policies are discussed.
(A) Ratio of current assets to sales:-
The current assets change as a result of changes in the sales. A firm has to decide
about the proportion of current assets to be maintained in relation to sales. There can
be aggressive, moderate or conservative current assets policies.
AN AGGRESSIVE CURRENT assets policy is followed, a firms will
maintain a very low level of current assets in relation to sales.
A CONSERVATIVE POLICY implies carrying of a very high level of current
assets in relation to sales.
A MODERATE POLICY is a via media between the two extreme policies
mentioned above and results into a moderate proportion of current assets to sales.
A MODERATE CURRENT assets policy tries to balances risk

and profitability by keeping moderate level of current assets in relation to
sales
Conservative
Moderate
Current
Aggressive
Assets
Sales
(B) Financing of current assets:In conservative current asset financing policy, a firm relies more on long term
financing such as shares, debentures, preference shares, long term debt and retained
earnings. In this method, as the emphasis is on long term financing, the firm has less
risk of facing problems of shortage of funds.
An aggressive policy is said to be followed by a firm, when it relies heavily on shortterm bank financing and other short-term sources. Even some part of fixed assets is
financed by short-term funds. The policy exposes the firms to a higher degree of but
reduces the average cost of financing.
Problems with Excessive Working Capital: -
Its Results in unnecessary accumulation of inventories. Thus, chances of
inventory mishandling, waste, theft and losses increase.
Its an indication of defective credit policy and slack collection period.
Consequently, higher incidence of bad debts results, which adversely affects profits.
Excessive working capital makes management complacent which degenerates
into managerial inefficiency.
Tendencies of accumulating inventories tend to make speculative profit grows.
This may tend to dividend policy liberal and difficult to cope with in future when the
firms are unable to make speculative profits.
Inadequate Working Capital is bad and has the following Problems:
Its Stagnates growth. It becomes Difficult for the firms to undertaken
profitable for non-availability of working capital funds.
It becomes difficult to implement operating plans and achieve the firms profit
target. Operating inefficiencies creep in when it becomes difficult even to meet day
to-day commitments.
Fixed assets are not efficiently utilized for the lack of working capital funds.
Thus then firms profitability would deteriorate.
Paucity of working capital funds renders the firms unable to avail attractive
credit opportunities etc.
The firms, loses its reputation when it is not in a position to cover its short-
term obligations. As a result, the firm faces tight credit terms.
FUTURE REQUIRMENT OF WORKING CAPITALMAFATLAL.
Profit of the Mafatlal was increased during last three year, shows that their
requirements of working capital will also increasing in future.
As the sales grow, the working capital needs also grow up. Actually it is very
difficult to find out an exact proportion of increase in current assets, as a result of

increase in sales. Advance planning of working capital becomes essential because
current assets will have to be employed even before growth in sales takes place. Ones
sales start increasing, they must be sustained. For this Mafatlal will have to expand its
production facilities which will require more investments in fixed assets. This will in
turn result in more requirements of turn results of current assets which will increase
working capital needs.
The working capital needs of the Mafatlal increase as it grows in terms of
sales or fixed assets. A growing Mafatlal may need to invest funds in fixed assets in
order to sustain its growth in production and sales. This will lead to increase
investment in current assets which will result in increase in working capital needs.
The operating efficiency of the Mafatlal relates to the Optimum utilization of
resources at minimum cost. Mafatlal will contribute to its working capital, if it is

efficient in operating costs. The working capital is better utilized and cash cycle is
reduced which reduces working capital needs.
The working capital requirement of a firm depends to a great extend on the
credit policy followed by a firm for its debtors. A liberal credit policy followed by a
firm will result in huge funds blocked in debtors which will enhance the need for
working capital.
The need for working capital is also affected by the credit policy allowed by the
Mafatlals creditors. If the creditors are ready to supply material and goods on liberal
credit, working capital requirement are substantially reduced. If purchases are mainly
for cash, working capital needs go up. While planning the working capital due
attention should be given toward the credit policies followed by the firm and its
creditors.
RECOMMENDATION
Having done a detailed study of the financial performance and financial standing of
Mafatlal, under this project work I would like to make the following suggestion for
the improvement in the financial management of the company, with special reference
to its Working Capital Management.
Mafatlal is facing increased competition in the market so it will have to adopt
more aggressive working capital management policy in order to increase its share and
sales turnover.
It is observed that the credit period for Debtors is ranging for 30 days to 120
days. I would like to suggest that the maximum credit period should not exceed 90
days.
Many debtors had not made the payment even after one year period. Due to
this there is reduction in the collection from the debtors year to year.
Company has to maintain sales turnover for that purpose company has to
maintain and increase their working capital.
Gross profit has increasing but net profit has decreasing so that purpose
effectively utilizes and maintain working capital.
CHAPTER 5
CONCLUSION
CONCLUSION
Working capital is simply current assets minus current liabilities. It's the best
way to judge how much a company has in liquid assets to build its business, fund its
growth, and produce shareholder value.
As Mafatlal is a textile manufacturing company the procedure of goods to be

ready for sale takes too much time. Thus, working capital is blocked in high
amount. But with the comparison to other company its Working Capital is
blocked for lesser time then another textile companies.
Mafatlal makes payment to his creditors within a month and collect from
debtors takes appx 1.25 month. So, its overall short-term liquidity position is
very good.
The mean percentage of current assets to total assets for the last four years is
40% which shows decrease in investment of current assets.
Overheads have increased as compare to the last two years thereby reducing
the profit.
If a company has ample positive working capital, it's is in good shape, with plenty of
cash on hand to pay for everything it might need to buy. But negative working capital
means that the company's current liabilities exceed its current assets, removing its
ability to spend as aggressively as a working-capital-positive peer. All other things
being equal, a company with positive working capital will always outperform a
company without it.
REFERENCES
1.
Financial Management
- I. M. PANDEY
2.
-PRASANNA
CHANDRA
3.
- KHAN & JAIN
4.
Annual Report of Mafatlal Industries Ltd.
WEB-LINKS:
www.mafatlals.com
www.moneycontrol.com
www.wikipedia.org
OTHER BOOKS:
Agrawal M.R, Financial Mnagement, Garima Publications
Pandey I.M, Financial Management, Mc-Graw Hill Publications Annual

reports of the company for the year 2011-12, 2010-11.

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The following structure of project work should be followed to

maintain the uniformity in preparation and presentation

In this chapter Selection and relevance problem, historical background of the

Data Presentation and Data Analysis

If required more chapters of data analysis can be added.

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m y supervision. It is her / his own work and facts reported by her/his

Name & Signature of Guide

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Stamp of the Institute with date

is a result of my own research work and

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Instruction for preparation of project work

MEANING AND DEFINITION OF WORKING CAPITAL

Definition of working capital

CONCEPT OF WORKING CAPITAL

Balance sheet concept

Operating cycle concept.

Balance sheet concept:

2) Operating cycle concept:

OPERATING CYCLE CHART

material into work-In- progress into finished goods.

In the MAFATLAL MILL LTD (manufacturing concern), the working capital

CLASSIFICATION OF WORKING CAPITAL

On the basis of concept :

Gross working capital: It refers to total investment made in current asset.

On the basis of time :

1) Permanent : Some portion of working capital always remain permanent or fixed.

regular and b) reserve

a) Regular: regular permanent working capital is used in

2) Temporary working capital: required of such capital varies or fluctuates

Seasonal working capital: requirement of working capital is based on

DETERMINANTS OF WORKING CAPITAL

Nature of business: important factor that determines requirement of working

Size of business: Size of the business obviously determines the

Operating cycle: Operating cycle means period from which investment is

locked up in different operations. Longer the period of inventory holding, work in

Needs of Working Capital:

To meet the cost of inventories including total of raw materials purchased

parts, operating Supplies, work in progress, finished goods.

To meet overhead costs, including those of maintenance services activities,

fuel, power charges, taxes and general expense administration.

To bear the expansion (with regard to promotion of sales) e.g. expenses on

packing, advertisement, salesmanship, Sales Servicing, After requires, Credit

IMPORTANCE OF WORKING CAPITAL

Components of Working Capital:

There are two components of Working Capital

Components of Current Liabilities are as follows:

Working Capital Management concerned with the following aspects:

(a) The Transaction Motive:

TEXTILE INDUSTRY IN INDIA

manufacturing activities. Indirect employment including the manpower engaged in

INDIAN TEXTILE INDUSTRY STRUCTURE AND GROWTH

In contrast to other major textile-producing countries, mostly mostly small-scale,

Structure Of Indias Textile Industry

Unlike other major textile-producing countries, Indias textile industry is comprised

Fabric Finishing. Fabric finishing (also referred to as processing), which includes

Clothing. Apparel is produced by about 77,000 small-scale units classified as

Growth of Textile Industry

The textile industry plays a significant role in Indian economy by providing

direct employment to an estimated 35 million people, by contributing 4 per cent of