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STATEMENT OF THE PROBLAM

In order to maintain flows operations every firm needs certain amount of


current assets. For example cash is required to pay for expenses or to meet obligations
for services received or goods purchased etc, by a firm.

On the identical plane

inventories are required to provide the link between production and sale. Similarly
accounts receivable generate when goods are sold on credit.
Needless to mention cash, bank, debtors, bills receivables closing stock
(including raw materials, work in process, finished goods), prepayments and certain other
deposits and investments which are temporary in nature present current assets of a firm.
Economists like Mead, Mallet, Backer and Field are of the opinion that the
whole of these current assets forms the working capital of a firm. And this concept of
working capital of a firm is frequently termed as gross working capital, in the area of
financial management.

CHAPTER -I
INTRODUCTION

INTRODUCTION
The total capital employed in a business organization can be categorized as fixed
capital and working capital. The fixed capital that part of the funds, which is invested in
current assets.
The investment in fixed assets is represented by land and buildings (for factory,
office go down and stores), equipment such as machinery, furniture and fixtures,
intangible assets in the form of patents and goodwill etc. To employ these fixed assets
gainfully current assets are required. Current assets consists of raw materials, working
progress, finished goods, stores and spares accounts, receivables, and cash in hand and at
bank and marketable securities.

Balanced working capital position:


The firm should maintain a sound working capital position. It should have
adequate working capital to run its business operations. Both excessive as well as
inadequate working capital positions are dangerous from the firms point of view.
Excessive working capital means idle funds, which earn no profits for the firm. Paucity
of working capital not only impairs the firms profitability but also results in production
interruptions and inefficiencies.

WORKING CAPITAL MANAGEMENT


Working capital management forms the inching of every business. As
Gilberth Harold puts the problems. Unfortunately, there is so much disagreement among
financiers, accountants, business men and economists as to the exact meaning of the term
Working Capital.

Definition of Working Capital:


Working Capital or Circulating Capital indicates circular flow of funds in the
routine activities of business.
Working Capital can be defined as Any acquisition of funds which increases the
current assets, increases working capital also, for they are one and the same
Bonneville.
The current assets are cash, marketable securities, accounts receivable and
inventory.
The current liabilities are those liabilities which are intended at their inception
to be paid in the ordinary course of business such as bills payable, bank overdraft and
outstanding expenses.
The goal of working capital management to manage the firms current assets
and current liabilities in such a way that a satisfactory level of working capital is
maintained. This is because if the firm cannot maintain a satisfactory level of working
capital, it is likely to become insolvent and may even be forced into bankruptcy.

IMPORTANTCE OF WORKING CAPITAL


The source of any enterprise depends on the proper management of working
capital aims at protecting the purchasing power of assets and maximizing the return on
investments, sales expansion, dividend declaration, plant expansion, increased salaries
and wages, rising price level etc., but added strain on working capital maintenance.

CONCEPTS OF WORKING CAPITAL


There are two concepts of Working Capital
Gross Working Capital
Net Working Capital
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Gross Working Capital:


It refers to the companys investments in Current assets. Current Assets are the
assets which can be converted into cash within an accounting year and include cash,
short-term securities, debtors, bills receivables and stock.

Net Working Capital:


It refers to 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.
Networking Capital can be positive or negative.
A positive net working capital will arise when current liabilities are in excess
of current liabilities. A negative net working capital occurs when current liabilities are in
excess of current assets.
The two concepts of working capital gross and networking capital are not
exclusive, rather they have equal significance from management view point, the gross
working capital concept focuses attention on two aspects of current assets management.
Optimum investment current assets and Financing of current assets.
Net working capital being the difference between current assets and current
liabilities. It is a qualitative concept. It aims at the firms liquidity position and financing
of current assets suggests the extent to which working capital needs may be financed by
permanent sources of funds.
The consideration of the level of investment in current assets should avoid two
danger points.
Current assets have excessive and inadequate investments. Investment in
current assets should be just adequate, not more not less to the needs of the business firm.
Excessive investment in current assets should be avoided because it impairs the firms
profitability an ideal investments nothing. On the other hand inadequate amount of

working capital can threaten solvency of the firm because of its inability to meet its
current obligations.

CHARACTERISTICS OF CURRENT ASSETS


In the management of working capital two characteristics of current assets
must borne in mind.
Short-term span
Swiftly transformation into other assets form Current assets has a short life span.
Accounts receivable may have a life span of 30 to 60 days, inventories may be held for 30
days to 100 days and cash may be held idle for week or two.
Each current asset is swiftly transformed into other assets form. Cash is used
for acquiring raw materials.
Raw materials are untransformed into finished goods (this transformation may
involve several stages of work in progress), finished goods, generally sold on credit, are
converted into accounts receivable and finally, accounts receivables, on realization
generates cash.
The need for current assets arises because of the operating cycle. The
operating cycle is a continuous process and therefore, the need for current assets is felt
constantly. But the magnitude of current assets needed in not always the same, it increases
and decreases over time.
However, there is always a minimum level of current assets which time is
continuously required by the firm to carry on its business operations.
This minimum level of current assets is referred to as permanent or fixed
working capital. Depending upon the changes in production and sales, the need for
working capital, over and above permanent working capital will fluctuate.
The extra working capital needed to support the changing production and sales
an activity is called fluctuating or variable or temporary working capital.

DETERMINANTS OF WORKING CAPITAL


There are no set rules to determine the working capital requirements of firms.
A large number of factors, each having a different importance, influence working capital
needs of firms. Therefore, an analysis of relevant factors should be made in order to
determine total investment in working capital. The following is the description of factors,
which generally influence the working capital requirements of firms.

NATURE AND SIZE OF BUSINESS:


The size of business also has an important impact on its working capital needs.
Size may be measured in terms of the scale of operations. A firm with large scale of
operations will need working capital than small term. The working capital requirements
of a firm are basically influenced by the nature of business trading and financial firm has
a very less investment in fixed assets, but require a large sum of money to be invested in
working capital.

TECHNOLOGY AND MANUFACTURING POLICY


The manufacturing cycle starts with the purchase and use of raw materials and
completes with the production of finished goods. Longer the manufacturing cycle, larger
will be the firms working capital requirements. An extended manufacturing time span
means a larger tie-up of funds in inventories. Thus if there are alternative technologies of
manufacturing a product, the technological process with the shortest manufacturing cycle
may be chooses.

FIRMS CREDIT POLICY

The credit policy of the firm affects the working capital by influencing the
level of debtors. The credit term to be granted to customers may depend upon the forms
of the industry to which the firm belongs.

AVAILABILITY OF CREDIT
Creditors also affect the working capital requirements of a firm. A firm will
need less working capital if liberal credit terms are available to it.

OPERATING EFFICIENCY
The operating efficiency of the firm relates to the optimum utilization of
resources at minimum costs. The firm will be effectively contributing in keeping the
working capital investment at a lower level if it is efficient to controlling operating costs
and utilizing current assets. The use of working capital is improved and pace of a cash
conversion cycle is accelerated with operating efficiency.

BUSINESS FLUCTUATIONS
Most firms experience seasonal and cyclical fluctuations in the demand for
their products and services. This business variation effects the working capital
requirements especially the temporary working capital requirement of the firm. When
these is an upward swing in the economy, sales will increase and vice-versa.

PRODUCTION POLICY
A steady production policy will cause inventories to accumulate during the
off-season periods and the firm will be exposed to greater inventory cost and risk. Thus, if
the cost and risks of maintaining a constant production schedules are high, the firm may
adopt the policy of varying its production schedules in accordance with the change in
demand.

GROWTH AND EXPANSION ACTIVITIES

The working capital needs of firm increases it growth in terms of sales of fixed
assets. If is difficult to precisely determine the relationship between volume of sales and
the working capital needs. The critical fact however is that the need for increased working
capital funds does not follow growth in business activities but precedes it.

PROFIT MARGIN AND PROFIT APPROPRIATION


Firms differ in their capacity to generate profit from business operations.
Some firms enjoy a dominant position, due to quality product or good marketing
management or monopoly power in the market and earn a high profit margin. Some other
firms may have to operate in an environment of intense competition and may earn low
margin of profits. A high net profit margin contributes towards the working capital pool.
In fact the net profit is a source of working capital to the extent it has earned in cash.

DIMIENSIONS OF WORKING CAPITAL MANAGEMENT

Working Capital Management refers to the administration of all aspects of current


assets namely cash, marketable securities, and debtors and are many aspects of working
capital management, which makes it an important function of the financial manager.

Empirical observations show that the financial managers have to spend much
of their time to the daily internal operations, relating to the current assets and current
liabilities of the firms. Investments in current assets represents a very significant portion
of the total investment in assets. It is particularly very important for small firms to
manage their current liabilities in financing current assets is far significant incase of small
firms, as unlike large firms, the difficulties in raising long terms finances.

There is a direct relationship between sale and working capital needs. As sales
grow, the firm needs to invest more in inventories and book debts. These needs become
very frequent and fast when sales grow continuously.

It may thus be concluded that all precautions should be taken for the effective
and efficient management of working capital. To decide the levels and financing of
current assets, the risk return implications must be evaluated.

FINANCING CURRENT ASSETS


The firm must find out the sources of funds to finance its current assets. It can
adopt different financing policies. Three types of financing be distinguished as follows.
Long term financing
Short term financing
Spontaneous financing
The important sources of long-term financing are shares, debentures, preference
shares, retained earnings and debt from financial institutions.
Short term financing refers to those sources of short credit that the firm must
arranged in advance. These sources include short term bank loans, commercial papers and
factoring receivable.
Spontaneous financing refers to the automatic sources of short term funds. The
major sources of such financing are trade credit (creditors and bill payable) and
outstanding expenses. Spontaneous sources of finance are cost free.

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TECHNIQUES FOR THE MANAGEMENT OF WORKING CAPITAL

In this section a few important techniques of working capital are presented. All
techniques of working capital management can be divided into two parts. Techniques
relevant for the management of working capital as a whole and the techniques relevant for
the management of each component of working capital cash account receivable and
inventory.

Techniques relevant for the management of working capital


One of the very important issues in the management of working capital is to
decide how much to invest in current assets. The investment in current assets is generally
influenced by sales volume. Therefore before firm is able to decide about he quantum of
working capital. It should be forecast its feature sales volume accurately or near
accurately. This is equal true about the components of working capital as well.

TIME SERIES MODELS


The time series models are based on the assumptions that the past trend will
continue repeating in the future. In the construction of tikes series, models, historical
recordings of the factors to be forecasted is taken into the account and their pattern and
the relationship over the time is established on the basis of the pattern so established
future forecast is made.

ECONOMETRIC MODELS

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The models here are the equations consisting of dependent and independent
variable. These equations attempt to establish the nature of relationship between variables
enabling the analysts to study the value of the dependent variable on the basis of the value
of the independent variable. These models are sophisticated, very useful techniques.

WORKING CAPITAL FORECASTING TECHNIQUES


Having determined the sales accurately, steps can to taken to forecast working
capital and the various components of it. Working capital requirements can be,
determined into two.
Percentage Sales method.
Operational Cycle method.

OBJECTIVES OF THE STUDY


The following are the objective of the study
1. To present the conceptual framework relating to management of working capital
2. To Examine the size of invest and turnover of working capital in an overall manner
including financing of current assets.
3. To know the inventory management practices of Bevcon Wayors pvt Ltd in terms of
its size, turnover and collection polices
4. To assess the receivables management practices of Bevcon Wayors Pvt Ltd in terms of
its size, turnover and collection polices
5. To offer suitable suggestion for the efficient management of working capital in Bevcon
Wayors Pvt Ltd. Keeping in view the inadequacies highlighted by the study.

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SCOPE OF THE STUDY


Since it will not be possible to conduct a micro level study of all infrastructure
industries in Andhra Pradesh, the study is restricted to Bevcon Wayors Pvt Ltd.
The Project was done in only 45 days
The study is focused on financial performance through comparative analysis of
Bevcon Wayors Pvt Ltd. The purpose the tools comparative and ratio analysis applied.

NEED FOR 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 require any
amount of working capital. We know that a firm should aim at maximizing the wealth of
its shareholders. In its endeavor to do so, a firm should earn sufficient return from its
operations. The firm has to invest enough funds in current assets of generating sales.
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.

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RESEARCH METHODLOGY
The proposed study is carried with the help of both primary and secondary sources
of date. Annual reports of the company and other journals, magazines and manuals
published by Bevcon Wayors Pvt Ltd. Some of the information related to topic was
gathered from website related to Bevcon Wayors Pvt Ltd.

DATA SOURCES
The information was collected through both primary and secondary
sources.
1. PRIMARY SOURCES:Administering a questionnaire, conduction interviews and through
discussion with the employees, collected primary data.

2. SECONDARY DATA:Secondary data was collected by literature booklets, statically reports,


quarterly reports, annual reports, journals and internet etc. on the basis of
above two sources the data was recorded and analyzed for the purpose of
evaluating employee satisfaction.

Analysis and presentation


The data is analyzed by using comparative analysis between the two years
performance and financial data of the company. The former year is considered as a base
year values and later is considered as current year values. The current year values are
dividing with base year values the change between the two years are presented in change
n amount and change in percentage. If the revenue center information is treated as good.
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If the cost centers have negative charging it is considered with help of ration analysis and
a detailed interpretation for tables were presented in the report. In order to understand the
pictorial presentation is made with simple histograms.

LIMITATIONS OF THE STUDY

Availability of the time is a serious constraint in the proposed survey.


Since the project will be completed with in a period of 45 days.

The accuracy and correctness of Financial Analysis on reliability of the data


contained in the next statement.

In the case of inter firm comparison two firms should have uniform accounting
practices.

Inflation makes the comparative study complicated and measuring.

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CHAPTER -II
REVIEW OF LITERATURE

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TOOLS AND TECHNIQUES OF INVENTORY


MANAGEMENT
A proper inventory control not only helps in solving the acute problem of liquidity
but also increases profit and causes substantial reduction in the working capital of the
concern.
The following are the important tools and techniques of inventory management
and control.

1. Determination of stock levels:


Carrying of too much and too little of inventory is detrimental to the firm. If the
inventory level is too little, the firm will face frequent stock outs involving heavy
ordering cost and if the inventory level is too high it will be unnecessary tie up of
capital.
An efficient inventory management requires that a firm should maintain an
optimum level of inventory where inventory costs are the minimum and at the
same time there is no stock out which may result in loss or sale or storage of
production.
a) Minimum stock level:
It represents the quantity below its stock of any item should not be allowed to fall.
Lead time: a purchasing firm requires sometime to process the order and time is also
required by the supplying firm to execute the order. The time in processing the order and
then executing it is know as lead time
Rate of consumption:
it is the average consumption of materials in the factory. The rate of consumption
will be decided on the basis of past experience and production plans.

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Nature of materials: the mature of materials also affects the minimum level. If a
material is required only against the special orders of the customer then minimum stock
will not be required for such material
Minimum stock level can be calculated with the help of following formula.
Minimum stock level-Re-ordering level:
(Normal consumption*Normal re-order period)
b) Re-ordering Level
When the quantity of materials reaches at a certain figure the fresh order is sent to
get materials again: the order is sent before the materials reach minimum stock level.
Re-ordering level is fixed between minimum level maximum levels.
c) Maximum level
It is the quantity of materials beyond which a firm should not exceeds its stocks. If
the quantity exceeds maximum level limit then it will be over-stocking.
Overstocking will mean blocking of more working capital, more space for storing
the materials, more wastage of materials and more chances of losses from obsolescence.
Maximum stock level reordering level + reorder quantity
(Maximum consumption * Minimum reorder period)
d) Danger stock level
It is fixed below minimum stock level. The danger stock level indicates
emergences of stock position and urgency of obtaining fresh supply at any cost.
Danger stock level = average rate of consumption * emergency delivery time

e) Average stock level:


This stock level indicates the average stock held by the concern.

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2) Determination of safety stocks:


Safety stock is a buffer to meet some unanticipated increase in usage. The demand
for materials may fluctuate and delivery of inventory may also be delayed and in such a
situation the firm can be face a problem of stock out.
In order to protect against the stock out arising out of usage fluctuations, firms
usually maintain some margin of safety stocks.
Two costs are involved in the determination of this stock that is opportunity cost
of stock outs and the carrying costs.
.

3) Economics Order Quantity (EOQ):


The quantity of materials to be ordered at one time is known as economic ordering
quantity. This quantity is fixed in such a manner as to minimize the cost of ordering and
carrying costs.
Total cost material = Acquisition cost + cost + carrying costs + ordering cost

Carrying cost:
It is the cost of holding the materials in the store.
Ordering cost:
It is the cost of placing orders for the purchase of materials.
EOQ can be calculated with the help of the following formula.
EOQ = 2 CO/I
Where C= consumption of the material in units during the year
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O=ordering cost
I=carrying cost or interest payment on the capital.

4) A-B-C Analysis: (Always Better Control Analysis):


Under A-B-C analysis the materials are divided into 3 categories viz.., A, B and
C.Almost 10% of the items contribute to 70% of value of consumption and this category
is called A category.
About 20% of the items contribute about 20% of value of category C covers about 70%
of items of materials which contribute only 10% of value of consumption.

5) VED Analysis: (Vitally Essential Desire)


The VED analysis is used generally for spare parts. Spare parts classified as Vital
(V), Essential (E), and Desire (D).
The vital spares are a must for running the concern smoothly and these must be
stored adequately. The E types of spares are also necessary but their stocks may be kept
at low figures. The stocking of D type spares may be avoided at times. If the lead time
of these spares is less, then stocking of these spares can be avoided.

6) Inventory turnover ratio:


Inventory turnover ratios are calculated to indicate whether inventories have been
used efficiently or not.The inventory turnover ration also known as stock velocity is
normally calculated as sales / average inventory of cost of goods sold / average inventory.
Inventory conversion period may also be calculated to find the average time taken for
clearing the stocks. Symbolically.

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Cost of goods sold


-------------------------------Average inventory at cost

Inventory turnover ratio=

Or

Net sales
=

------------------------------Average invent
And,
Days in a year

inventory conversion period = -------------------------------Inventory turnover ratio

7) Classification of inventories:
The inventories should first be classified can then code numbers should be
assigned for their identification. The identification of short names is useful for inventory
management not only for large concerns also for small concerns. Lack of proper
classification may also lead to reduction in production.
Generally, materials are classified accordingly to their nature such as construction
materials, consumable stocks, spears; lubricants etc. after classification the material are
given code numbers. The coding may be done alphabetically or numerically. The later
method is generally used for coding.

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The class of materials is assigned two digits and then two or three digits are
assigned to the categories of items divided into 15 groups. Two numbers will be category
of materials in that class.
The third distinction is needed for the quality of goods and decimals are used to
note this fact

8) Valuation of inventories-method of valuations:


FIFO Method(First -In First- Out Methed )
LIFO Method ( Last -In First -Out Methed )
Base Stock Method
Weighted Average Price Me

CRITERIA FOR JUDGING THE INVENTORY SYSTEM

While the overall objective of the inventory system is to minimize the cost to the
firm at the risk level acceptable to management, the more proximate criteria for judging
the inventory system are:
Comprehensibility
Adaptability
Timelines

AREA OF IMPROVEMENT:
Inventory management in India can be improved in various ways. Improvements
could be affected through.

Effective computerization:
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Computers should not be used merely for accounting purpose but also for improving
decision making.

Review of classifications:
ABC and FSN classification must be periodically reviewed.

Improved coordination:
Better coordination among purchase, production, marketing and finance departments will
help in achieving greater efficiency in inventory management.

Development of long term relationship:


Companies should develop long term relationship with vendors. This would help
in improving quality and delivery.

Disposal of obsolete / surplus inventories:


Procedures for disposing obsolete / surplus inventories must be simplified.
Adoption of challenging norms:
Companies should set benchmarks with global competitors and use ideals like JIT
to improve inventory management.

INVENTORY VALUATION AND COST FLOWS:


What is the cost of inventory?
One can readily visualize the determination of inventory quantities by physical
count or by use of perpetual inventory records. When this quantity is determined, it must
be multiplied by a unity cost in order to determine the inventory value that is used on
financial statement.
Trade and quantity discount are to be exclude from unit cost since these discount
exist for the purpose of defining the true invoice cost of merchandise. Cash discounts, on
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the other hand, have been considered as a reward for early payment and as a penalty for
late payment. The reward has often been interpreted as a loss rather than as a part of
unit cost. Thus in would not be difficult to find difference of opinion as to whether
invoice cost includes or excludes cash discount.
When the current re plain frastracture cost of material on hand at the close of a
year is less than the actual cost, the inventory value is reduced to replainfrastracture cost
(current market price). Thus the acceptable basis inventory valuation is he lower of cost
or marker or more properly the lower of actual cost or replainfra stracture cost.
The determination of inventory values is very important from the point of view of
the balance sheet and the income statement since costs not included in the inventory (the
balance sheet) are considered to be expensive and are thus included in the income
statement.

Valuation of inventories method of determination:


Although the prime consideration in the valuation of inventories is cost, there are
a number of generally accepted methods of determining the cost of inventories at the
close of an accounting period. The most commonly used methods are first in first out
(FIFO) average, and last in first out (LIFO). The selection of the method for determining
cost for inventories valuation is important for its has a direct bearing on the cost of goods
sold and consequently on profit. When a method is selected, it must be used consequently
and cannot be change from year to year in order to secure the most favorable profit for
each year.

THE FIFO METHOD (FIRST-IN FIRST- OUT METHOD):


Under this method it is assumed that the materials or goods first received are the
first to be issued or sold. Thus, according to this method, the inventory on a particular
date is presumed to be composed of the items which were acquired most recently.
The value inventory would remain the same even if the perpetual inventory
system is followed.

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Advantages:
The FIFO method has the following advantages.
1) It values stock nearer to current market prices since stock is presumed to be
consisting of the most recent purchases.
2) It is based on cost and, therefore, no unrealized profit enters in the financial
accounts of the company.
3) The method is realistic since it takes into account the normal procedure of
utilizing or selling those materials or goods which have been longer in stock.

Disadvantages:
The method suffers from the following disadvantages.
1) It involves complicated calculations and hence increases the possibility of clerical
errors.
2) Comparison between different jobs, using the same type of material becomes
sometimes difficult. A job commenced a few minutes after another job may have
to bear an entirely different change for materials because the first jobs completely
exhausted the supply of materials of the particular lot.

The FIFO method of valuation of inventories is particularly suitable in the following


circumstance.
a. The materials of goods are of a perishable nature.
b. The frequency of purchase is not large.
c. There are only moderate fluctuations in the prices of materials or goods
purchased.
d. Materials are easily identifiable as belonging to a particular purchase lot.

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THE LIFO METHED (LAST IN FIRST OUT METHED)


This method is based on the assumption that last item of material or goods
purchased are the first to be issued or sold. Thus, according to this method, inventory
consists of items purchased at the earliest cost.

Advantages:
This method has the following advantages.
1. It takes not account the current market conditions while valuing materials issued
to different jobs or calculating the cost of goods sold.
2. The method is based on cost and, therefore, no unrealized profit or loss is made on
account of use of this method.The method is most suitable for materials which are
of bulky and non-perishable type.

Base stock Method:


This method is based on the contention that each enterprise maintains at all times
a minimum quantity of materials or finished goods in its stock. This quantity is termed as
base stock. The base stock is always valued at this price and is carried forward as a fixed
asset. Any quantity over and above the base stock is valued in accordance with any other
appropriate method. As this method aims at matching current costs to current sales, the
LIFO method will be most suitable for valuing stock of material of finished goods other
than the base stock. The base stock method has advantage of charging out material /
goods at actual cost. Its other merits or demerits will depend on the method which is used
for valuing materials other than the base stock.

WEIGHTED AVERAGE PRICE METHOD:


This method is based on the presumption that once the materials are put into a
common bin, they lose their identify. Hence, the inventory consists of no specific batch of
goods. The inventory is thus priced on the basis of average priced on the quantity
purchased at each price.

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Weighted average price method is very popular on account of its being based on
the total quantity and value of materials purchased besides reducing number of
calculations. As a matter of fact the new average price is to be calculated only when a
fresh purchase of materials is made in place of calculating it every now then as is the case
with FIFO, LIFO method. However, in case of this method different prices of materials
are charged from production particularly when the frequency of purchase and issues/sales
is quite large and the concern is following perpetual inventory system.

VALUATION OF INVENTORIES IMPACT ON THE FLOW OF


COSTS:
As should be quite evident, the different methods of calculating inventory values
will all have their impact on the flow of costs through the balance sheet into the income
statement. The dollars that are paid to acquire inventory are always divided between the
Balance sheet (inventories) and the income statement (costs of goods sold), there is not
other place to put them. Thus if the different methods of calculating inventory produce
differing inventory values, they will also produce differing cost of goods sold figures, and
the differing cost of goods sold will naturally produce differing profit figures.
In order show the impact of inventory valuation on cost flows, the preceding
exhibits are summarized. Each method produces a different figure for the transfer of raw
materials to work in process. The differences appear small, but the only reason for this is
that the dollar amounts have been kept small to make the illustration workable.
With the transfer of materials to work in process, the cost flow or transfer with
have its impact on the work in process inventory and the transfer of completed
merchandise to finished goods. Ultimately when goods are sold the varying methods of
valuing inventories will have their impact on cost of goods sold and these profits. The
effects of the cost flows on cost of goods sold and profits can be accentuated further it the
differing methods of valuing inventories are applies to work in process and finished good

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CHAPTER -III
INDUSTRY PROFILE
&
COMPANY PROFILE

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Company profile:
Bevcon Wayors Limited is a leading infrastructure development company that
operates out of Hyderabad, the Capital of South Indian State of TELENGANA. This
particular unit has established in 1993, MCs registered an exponential growth within the
first five years under the sterling leadership of the companys chairman C.M. Ramesh.

MCs expertise is outstanding in following project areas: masonry / Concrete dams


spill ways, tunneling, formation of earth dams and bunds, canals, bridges, roads and
buildings. Befittingly, the company has the privilege of working for or on behalf of such
infrastructure majors as the Tehri Hydro power Development Corporation, steel Authority
of India Limited, NTPC, NHPC, Reliance, and Engineering projects India Limited.

MCs expertise, virtually in all areas of civil and engineering construction, is best
reflected in the successful execution of following projects.

Rs.350 Cores Koteshwar Dam for the Tehri Hydro Electric power project in
Uttaranchal,

Rs.250 - Crores project for transportation of iron ore form Kalta iron ore mines to
SAIL in orissa state engaging an unprecedented workforce of 4000 people.

Rs.150-crores project for construction of B.G. single Line Tunnel No.5 (Bakkal Tunnel)
form Km 43.040 to 48.940 on the Katra-Laole section of the Udahampur srinagarBaramulla Rail Link.

Mr. Ramesh plans to bank from when the change of


29

Rs.8-crores Owk Reservoir Complex in Andhra Pradesh, and

Rs22-cores project for construction of barrage across ponnai River near


Kalavagunta, Chittoor district in Andhra Pradesh.

Board of directors:

Mr. C. M. Ramesh, Chairman & Managing Director

Operating efficiently out of a network of corporate and project offices across the country,
Ramesh presents the picture of a cutting edge entrepreneur endowed with exemplary vision,
leadership, resource mobilization, and management skills.

Current diversification plans of Mr.Ramesh include tapping the excellent hydropower


generation opportunities that the highly progressive State of Sikkim is unfolding.

Mr. C.M. Rajesh Director


Mr. C.M. Rajesh, Director of Bevcon Wayors Limited A graduate in the Arts from
Andhra Loyola College, Vijayawada, Andhra Pradesh is the current successful Director of
the profit-making Bevcon Power Projects Limited in Khammam district of Andhra Pradesh.
He brings a sharp sense of focus, dynamism, dedication and competitive spirit to the
company to shape into a successful, professionally managed enterprise.

A hands-on leader, Mr. Rajeshs experience is significant in successful management of the


6 MW Bio-Mass-based electricity project in Khammam. This project is recognized as the
most significant in its class for implementation of the power industrys best practices.

focus and business:

30

Power generation, irrigation and highways will dominate the development agendas
of the Indian Government at the center as Well as in States and Union Territories.
Consequently, the Bevcon Groups business strategy too will revolve around these areas. In
the crucial power sector, Bevcons associated company Bevcon power projects Limited has
developed a successful 6 MB bio-mass based electricity project in Khammam district of
Andhra Pradesh. Bevcon Groups combined capabilities in civil engineering; power
generation and highway building provide an excellent platform for power project
development, particularly in Sikkim given the state Governments progressive energy
policy.

The central and provincial realize that hydroelectric power projects established in
the Southern and western parts of India are increasingly becoming unviable primarily
because of poor river flows. Therefore, the Government of India has decided to
encourage hydroelectric power projects in the Himalayan region that is endowed with
perennial rivers, so necessary to make power projects meaningful to all from the
generator to the consumer.

To make power projects meaningful to all from the generator to the consumer. To
acquire an edge in the highly competitive infrastructure industry, Bevcon Wayors
Limited, entered into an MOU with National projects constructions Corporation. The
MOU entitles the company to 10% price/purchase preference in all bids submitted by
NPCC on MCs behalf significantly done to be constructed by NTPC and hydropower
projects in

Northeast India shall constitute BW s thrust areas for the next three years. Participation
in these projects will call for extraordinary expertise and resource mobilization. Bevcon
Wayors has the confidence to generate both. Needless to stress, success in such mega
projects could steer Bevcon Wayors to the companys stated goal of industry leadership.

31

Bevcon Industries Limited


details of works on hand as on 30.11.2010
rs. in crores
si.no
name of the work

Transportation of iron ore from KALTA


IRON MINES to SAIL in Orissa State

Value of

Value of

Value of

work

work

work to be

awarded

executed

executed

250.00

46.76

203.24

Construction of civil works of DAM


2

spillway

and

power

house

at

near

335.00

99.34

235.66

152.29

34.34

117.95

77.04

48.55

228

58.32

13.31

45.01

rishikesh, uttranchal sate


Construction of B.G. single line tunnel
No.5 (Bakkal tunnel) from Km43.040 to
3

48.940 on the katra-laole section of the


udahampur srinagar baramulla Rail Link
project
Investigation preparation of hydraulic

particulars,

design

and

drawings

excavation of HNSS Main Canal from


Km15.00 km
Investigation, preparation of hydraulic
particulars, design and drawings and
excavation of HNSS Main canal from Km

176.000

to

Km

192.000

including

construction of CM&CD works and


distributor system to feed an ayacut of
20,900 acres khariff I.D.(package No33)
32

Awards & Achievements:

BHARTIYA SHIROMANI
PURASKAR

This certificate of Excellence for


Enhancing the image of India presented by
Dr.Bhishma Narain Singh
(Honble Former Governor of Tamil Nadu & Assam)
To
Bevcon Wayors
Awarded by the Institute of Economic Studies (IES),
New Delhi at the time of the Seminar on
Economic Development
held on 13th February 2008 at New Delhi.

IE
S

President

Executive Director

33

Partners:

Progressive Constructions Limited

Ga India Limited

Mytas

NPCC

Konkan Railway Corporation Limited

Tehri Hydro Development Corporation

Steel Authority of India Limited

NTPC

Clients:

Milestones:

Engaging 4000 workers, executing the largest manual labor contract in India at
Kalta Iron Ore mines in Orissa

Construction of the district in AP much ahead of the scheduled time. The


comprises at paleru, Gollaleru and Thimmaraju earth dams.

Executing all subcontracts efficiently to become principal contractor with the


potential of bidding for awards worth Rs.200 Crores independently.

Large plant and machinery base to undertake any super Infrastructure project.

34

Reservoir of trained, motivated and dedicated manpower to undertake projects


of any complexity or magnitude.

CHAPTER -IV
DATA ANALYSIS
&
INTERPREATION

35

RATIO ANALYSIS:
A ratio is a simple mathematical expression. It is number expressed in terms of
another number, expressing the quantitative relationship between the two Ratio analysis is
the technique of interpretation of financial statements with help of various meaningful
rations. Ratios do not add any information that is already available, but they show the
relationship between two items in a more meaningful way. They help us to draw certain
conclusion. Comparison with related facts in the basis of ratio analysis.

Ratio may be used for comparison in any of the following ways. Comparison of a firm
with its own performance in the past Comparison of one firm with another firm in the
industry. Comparison of one firm with the industry as a whole. Comparison of an
achieved performance with pre-determined standards. Comparison of one department of a
concern with other departments.

TYPES OF RATIOS:
Several ratios calculated from the accounting data can be grouped into various
classes according to the financial activity function to be evaluated. The parties which
generally interested in financial analysis are short and long term creditors owners and
management short term creditors are mainly interested in liquidity or short term solvency
of the firm.

36

1. Liquidity Ratio:
It is externally essential for a firm to the table to meet its obligation as they
become due. Liquidity ratios measure the ability of the firm to meet its current
obligations. In fact analysis of liquidity needs its current obligations. In fact analysis of
liquidity need the preparation of cash budgets and cash and funds flow statements but
liquidity ratio by establishing a relationship between cash and other assets to current
obligation provide quick measure of liquidity. A firm should ensure that it does not suffer
from lack of liquidity. And also that is not too much highly liquid. The failure of a
company to meet its obligations, due to lack of sufficient liquidity will result in bad credit
image loss of creditors of the company. A very high degree of liquidity is also bad ideal
assets earn current assets. Therefore it is necessary to strike a proper balance between
liquidity and lack of liquidity.
The most common ratio which indicated the extent of liquidity or lack of it is:
Current Ratio
Quick Ratio

1.1 CURRENT RATIO:


The current ratio is calculated by dividing current assets and current liabilities.
Current Ratio: current assets/ current liabilities.
Current assets include cash and those assets, which can be converted into cash
with in a one year. Such as marketable securities, debtors and inventories prepaid
expenses are also include in current assets as they representing the payments that will
have not to make by the firm in the near future. All obligations maturing within one year
included in current liabilities.
Thus current liabilities include creditors, bills payable, accrued expenses shortterm loans income tax liability and long term debts maturing in the current year. The ratio
is a measure of the firms short-term solvency. It indicates the availability of current

37

assets in rupees for every one rupee of current liability. A ratio greater than one means
that the firm has more current assets than current claims again them

1.2 QUICK RATIO:


Quick Ratio = Quick assets/Current liabilities

The ratio establishes a relationship between quick of liquid and current liabilities. Assets
liquids if it can be converted into cash immediately or reasonably soon with a loss of cash
value. Other assets, which are considered to be relatively liquid and include in fixed
assets, are books debts means debtors and bills receivables and marketable securities
which are temporary quoted once. Inventories normally require some time for realizing
into cash their values also tendency to fluctuate.

The quick ratio is found out by dividing the total of the quick assets by total current
liabilities.

2. LEVERAGE RATIO:

FIXED ASSETS TURNOVER RATIO:


Fixed assets imply net fixed assets = Gross fixed assets-Depreciation
A high fixed assets turnover ratio indicates better utilization of firms fixed assets. A ratio
of around 5 is considered is ideal.
This ratio establishes a relationship between net sales and fixed assets.
The objective of computing this ratio is determining the efficiency with which fixed
assets are utilized
Components of this ratio is

38

Net Sales, which means gross sales minus sales returns.


Net Fixed (operating) assets, which mean gross fixed assets minus depreciation theorem
Computation of this ratio is
This ratio is computed by dividing the net sales by the fixed assets. This is usually
expressed as X number of terms. In the form of formula, ratio may be expressed as
under:
Fixed assets turnover ratio = net sales/net fixed assets
It indicates the firms ability to generate sales per rupee of investment in fixed
assets. In general, the ratio, the more efficient the management and utilization of fixed
assets, and vice versa.

3. PROFITABLITIY RATIO
NET PROFIT RATIO:
It indicates that the result of overall operation of the firm. While the gross profit
ratio indicates the extent of profitability of core operations, net profit ratio tells us about
overall profitability.
The ratio means the relationship between net profit and net sales the main
objective of computing this ratio is to determine the overall profitability due to various
factors such as operational efficiency, trading on equity etc.
The components if these ratios are net profits and sales.
The ratio is computed by dividing the net profit by the net sales.
Net profit ratio = Net profit /sales

39

4. SOLVENCY RATIO

DEBT AND EQUITY RATIO:


The ratio establishes a relationship between long term debts and shareholder funds.
It reflects the relative claim of creditors and share holders against the assets of the
business. Debt usually refers to long-term liabilities. Equity includes equity and
preference share capital and reserves .Long-term debt, which means long-term loans.
Shareholders funds, which mean equity share capital plus preference share capital
plus reserves and surplus minus fictitious assets.
This ratio is compared by dividing the long-term debts by the shareholders funds.
This ratio is usually expressed as proportions, 2:1 it indicates the margin of safety to longterm creditors. A low-debt ratio implies the use of more equity than debt, which means a
larger safety margins for creditors treat owners as a margin of safety.
Debit-equity ratio = Long-term debts/shareholder funds.

40

Particular

2008

2009

Absolute
Change

Change in %

Inventories

800065303

1821777224

1021711921

127.7

Sundry Debtors

991705719

1911277269

919571550

92.72

Cash & Bank Balance

91528024
115506801

251092974

159564950

-13.1

559090805

443584004

174.3

763136566

1903119982

85.87

419193748

2429298057

84.43

1620414304

816152547

101.5

3685960534

1613145510

77.82

433233214

289974472

202.4

4119193748

-115134368

384

Current Assets

Other current assets


Loans and Advances
Total Current Assets (A)
Current Liabilities (B )
Working Capital (A-B)
(+) Provisions

Net Working Capital

878270934
2877076781
804261757
2072815024
143258232

2216073256

COMPARATIVE STATEMENT OF WORKING CAPITAL FOR THE YEAR

41

2007-2008

Interpretation
Interpretation of comparative working capital statement of Bevcon Wayors pvt ltd
between the years 2008 & 2009
In the year 2009 the closing stock 0% raw materials work in progress and finished
goods in Bevcon Wayors was Rs 1,82,17,77,224 and the year 2008 the inventory is Rs
80,00,65,303 there is an increased in the stock balance by 127.7% i.e Rs 1,02,17,11,921.
The Average inventory for two years study period is Rs 1,31,09,21,263.
In the year 2009 sundry debtors in Bevcon Wayors pvt ltd was Rs 1,91,12,77,263
and the year 2008 the sundry debtors Rs 99,17,17,05,719 there is increased by 92.72% i.e.
Rs 95,95,71,550.
Cash and bank balance have increased to Rs 25,10,92,974 from Rs 9,15,28,024
and other current assets also increased.
In the year 2009 the loans and advances of Bevcon Wayors pvt ltd was Rs
76,31,36,556 and in the year 2008 loans and advances of Bevcon Wayors pvt ltd is Rs
87,82,70,934. It is decreased to (-) Rs 11,51,34,368.
The total current assets increased from Rs 2,87,70,76,781 to Rs 5,30,63,74,838 i.e.
Rs 2,42,92,98,057 (84.43%)
In the year of 2008 the current liabilities was Rs 80,42,41,757 and in the year of
2009 current liabilities are Rs 1,62,04,14,14,304. There is increase by Rs 81, 62, 52,547
i.e. 101.47% this is resulted is to increase in current liabilities.
The working capital of Bevcon Wayors pvt ltd is increased from Rs
2,07,28,15,024 to Rs 3,68,59,60,534. But the provisions of Bevcon Wayors pvt ltd have
increased from Rs 14,32,58,232 to Rs 43,32,33,214 i.e. Rs 28,99,74,982 i.e. 202.14%

42

Particular

2009

2010

Absolute
Change

Change in
%

Current Assets
Inventories

1821777224

1528406205

-293371019

-16.10

Sundry Debtors

1911277269

1539980546

-376344854

-19.63

Cash & Bank Balance

251092974

312180623

61087649

24.32

Other current assets

419193748

182114852

-376975953

Loans and Advances

763136566

997119989

239031554

-16.65

5306374838

547413821

114180607

-14.06

Current Liabilities (B )

1620414304

1487645302

-1372769002

-8.19

Working Capital (A-B)

3685960534

3072156913

613803621

26.35

(+) Provisions

433233214

4559802215

-746572623

-67.42

4119193748

3619570734

499623014

-12.12

Total Current Assets (A)

Net Working Capital

31.53

COMPARATIVE STATEMENT OF WORKING CAPITAL FOR THE YEAR 2009-2010

Interpretation:
Interpretation of comparative working capital statement of Bevcon Wayors pvt
ltdbetween the years 2009-2010.
In the year 2008-09 the closing stock 0% raw materials work in progress and
finished goods in Bevcon Wayors was Rs 1,52,84,06,205 and the year 2009-10 the
inventory is Rs 1,82,17,77,224 there is an increased in the stock balance by 16.10% i.e.
Rs 29,33,71,019. The Average inventory for two years study period is Rs 1,67,50,91,715.
43

In the year 2008-09 sundry debtors in Bevcon Wayors pvt ltd was Rs
1,53,99,80,546 and the year 2009-2010 Rs 19,11,27,72,269 So it was decreased in the
sundry debtors by 19.63% i.e. Rs 37,63,44,854.
Cash and bank balance have increased to Rs 6,10,87,549 and it is 2009-10 Rs
31,21,80,623 and it is increased from 2008-09 it is Rs 25,10,92,974.
In the year 2008-09 the loans and advances of Bevcon Wayors pvt ltd was Rs
76,13,65,66 and in the year 2009-10 loans and advances of Bevcon Wayors pvt ltdis Rs
99,71,19,989 It is increased to Rs 23,90,31,554.
The total current assets decreased from Rs 5,30,63,74,838 to Rs 4,55,98,02,215
i.e. Rs 74 65,72,623 (-14.06%)
In the year of 2008-09 the current liabilities was Rs 1,62,04,14,304 and in the year
of 2009-10 current liabilities are Rs 1,48,76,45,302. There is decrease by Rs 13,27,69,002
i.e. 8.19% this resulted too decrease in current liabilities.
The working capital of Bevcon Wayors pvt ltd is increased from Rs
3,68,59,60,534 to Rs 3,07,21,56,913 i.e. Rs 61, 38, 03,621 (16.65%).
In the year 2008-09 the net working capital was Rs 4,11,91,93,748 and in the year
2009-10 Rs 3,61,95,70,734.This means that the net working capital is decreased to Rs
49,96,23,014 i.e. 12.12% Compare to the 2005-06 to 2006-07 the total networking is
decreased Rs 49,96,23,014, it is not satisfactory.

COMPARATIVE STATEMENT OF WORKING CAPITAL FOR THE YEAR 2009-2010

44

Particular

2009

2010

Absolute
Change

Change in
%

Current Assets
Inventories

1528406205

1970349211

441943006

Sundry Debtors

1539980546

1535631209

-4349337

-0.28%

Cash & Bank Balance

312180623

198671674

65343353

6.55%

Other current assets

3619570734

263218444

81103592

44.53%

Loans and Advances

997119989

106263342

275785779

7.61%

4559802215

638879286

470531665

10.31%

1487645302

1773856653

286211351

19.23%

3072156913
547413821

3256477227

184320314

5.99%

3895356513

91465465

16.70%

182114852

5030333880

-113508949

-36.36%

Total Current Assets (A)


Current Liabilities (B )
Working Capital (A-B)
(+) Provisions

Net Working Capital

28.91%

Interpretation
Interpretation of comparative working capital statement of Bevcon Wayors pvt ltd
between the years 2008-2009 to 2009-2010
In the year 2007-08 the closing stock 0% raw materials work in progress and
finished goods in Bevcon Wayors was Rs 1,97,03,49,211 and the year 2006-07 the
inventory is Rs 1,52,84,06,205 there is an increased in the stock balance by 28.91% i.e.
Rs 44,19,43,006. The Average inventory for two years study period is Rs 1,74,43,77,708.
In the year 2006-07 sundry debtors in Bevcon Wayors pvt ltd was Rs
1,53,99,80,546 and the year 2009-2010 Rs 1,53,56,31,209 So it was decreased in the
sundry debtors by 0.28% i.e. Rs 43,49,337.

45

Cash and bank balance have been decreased in the year 2007-08 36.36% i.e Rs 11,
35,08,949
Other Current assets of the year 2007-08 Rs 18,21,14,852 and it are increased in
the year 2007-08.The increased amount is Rs 8,11,03,592 i.e. 44.53%
In the year 2006-07 the loans and advances of Bevcon Wayors pvt ltd was Rs 99,
71, 19,989 and in the year 2007-08 loans and advances of Bevcon Wayors pvt ltd is It is
increased to Rs 6,3,43,353 i.e. 6.55%.
The total current assets increased from Rs 4,55,98,02,215 to Rs 5,03,03,33,880.
In the year of 2006-07 the current liabilities was Rs 1,48,76,45,302 and in the year
of 2007-08 current liabilities are Rs 1,77,38,56,653 There is increase by Rs 28,62,11,351
i.e. 19.23% this resulted too increase in current liabilities.
The Net working capital of Bevcon Wayors pvt ltd is increased from Rs
3,61,95,70,734 to Rs 3,89,53,56,513 i.e. Rs 27,57,85,779 i.e. 7.61%.
Compare to the 2006-07 to 2007-08 the net working capital is very beneficial to
company for the purpose of maintaining (or) managing the day today activities of Bevcon
Wayors Ltd.

COMPARATIVE STATEMENT OF WORKING CAPITAL FOR THE YEAR 2010-2011

46

Particular

2010

2011

Absolute
Change

Change in
%

Current Assets
Inventories

1970349211

2030662246

60313035

3.06%

Sundry Debtors

1535631209

2007943703

472312494

30.75%

Cash & Bank Balance

198671674

243527953

44856279

22.57%

Other current assets

263218444

219176744

-44041700

19.06%

Loans and Advances

106263342

4635718062

740361549

-15.87%

3895356513

5395148045

364814165

7.25%

Current Liabilities (B )

1773856653

1453759824

-320096829

7.25%

Working Capital (A-B)

3256477227

3941388221

684910994

21.03%

(+) Provisions

638879286

694329841

55450555

8.67%

Net Working Capital

5030333880

893837399

-168625943

-16.73%

Total Current Assets (A)

Interpretation
Interpretation of comparative working capital statement of Bevcon Wayors pvt
ltdbetween the years 2009-2010 to 2010-2011
In the year 2008-09 the closing stock 0% raw materials work in progress and
finished goods in Bevcon Wayors was Rs 2,03,06,62,246 and the year 2007-08 the
inventory is Rs 1,97,03,49,211 there is an increased in the stock balance by 3.06% i.e Rs
6,03,130,35. The Average inventory for two years study period is Rs 2,00,05,05,729.
In the year 2008-09 sundry debtors in Bevcon Wayors pvt ltdwas Rs
2,00,79,43,703 and the year 2009-2010 Rs 1,53,56,31,209 So it was increase in the
sundry debtors by 30.75% i.e. Rs 47, 23,12, 494.

47

Cash and bank balance have been decreased to Rs 4,48,56,279 and other current
assets have been decreased to Rs 4,40,41,700 in the year 2007-08 the loans and advance
of Bevcon Wayors Ltd was Rs 1,06,24,63,342 and in the year 2008-09 the loans and
advance of Bevcon Wayors Ltd was Rs 89,38,37,399 it has decreased by 15.87% i.e. Rs
10,86,25,943.
The total current assets were increased Rs 5,03,03,33,880 to Rs 5,39,51,48,045.
In the year of 2007-08 the current liabilities was Rs 1,77,38,56,653 and in the year
of 2008-09 the current liabilities are Rs 1,45,37,59,824, so there was decreased by Rs
32,00,96,829 i.e. 18.04%.
The working capital of the loans and advance of Bevcon Wayors Ltd in the year
2008-09 was Rs 3,94,13,88,221 and in the year 2007-08 Rs 3,25,64,77,227, so there was
an increased Rs 68,49,10,994 this was happened due to the increased total current assets
in the present financial year 2008-09.
Provisions of Bevcon Wayors Ltd., in the year 2008-08 was Rs 6,94,33,29,841
and in the year 2007-08 was Rs 63,88,79,286 by this we can indentify that the provisions
has been increased by Rs 5,54,50,555 i.e. 8.67% in the financial year 2008-09.
In the year 2008-09 the Net working capital of Bevcon Wayors pvt ltdwas Rs
4,63,57,18,062 and in the year 2008-09 the net working capital was Rs 3,89,53,56,513 so
there was an increased the net working capital by 19.06% i.e Rs 74,03,61,549
Increasing net working capital was very beneficial to the company for the purpose
of maintaining (or) managing the day today activities of Bevcon Wayors Ltd.

COMPARATIVE STATEMENT OF WORKING CAPITAL FOR THE YEAR 2011-2012

48

Interpretation
Particular

2011

2012

Absolute
Change

Change in
%

Current Assets
Inventories

2030662246

3768827777

1738165531

46.11%

Sundry Debtors

2007943703

2459452581

451508878

18.36%

Cash & Bank Balance

243527953

272422341

3134188446

10.60%

Other current assets

4635718062

7769906508

100977322

40.33%

Loans and Advances

893837399

2062247261

1168409862

56.65%

Total Current Assets (A)

5395148045

8681149372

3286001327

37.85%

Current Liabilities (B )

1453759824

2268292085

814532261

35.91%

Working Capital (A-B)

3941388221

6412857287

2471469066

38.54%

(+) Provisions

694329841

1357049231

662719380

48.83%

Net Working Capital

219176744

118199412

28894388

-85.42%

Interpretation of comparative working capital statement of Bevcon Wayors pvt


ltdbetween the years 2010-2011 to 2011-2012
In the year 2009-10 the closing stock 0% raw materials work in progress and
finished goods in Bevcon Wayors was Rs 3,76,88,27,777 and the year 2008-09 the
inventory is 2,03,06,62,246 there is an increased in the stock balance by 46.11% i.e. Rs
1,73,81,65,531. The Average inventory for two years study period is Rs 2,89,97,45,012.
In the year 2009-10 sundry debtors in Bevcon Wayors pvt ltdwas Rs
2,45,94,52,581 and the year 2010-2011 Rs 2,00,79,43,703 So it was increase in the
sundry debtors by 18.36% i.e. Rs 45,15,08,878.

49

Cash and bank balance have been decreased to Rs 2, 88, 94,388 and other current
assets have been decreased to Rs 10, 09,77,322. In the year 2009-10 the loans and
advance of Bevcon Wayors Ltd was Rs 2,06,22,47,261 and in the year 2008-09 the loans
and advance of Bevcon Wayors Ltd was Rs 89,38,37,399 it has decreased by 56.65% i.e.
Rs 1,16,84,09,862.
The total current assets were increased Rs 5,39,51,48,045 to Rs 8,68,11,49,372
In the year of 2008-09 the current liabilities was Rs 1,45,37,59,824and in the year
of 2009-10 the current liabilities are Rs 2,26,82,92,085, so there was increase by Rs
81,45,32,261 i.e. 35.91%.
The working capital of Bevcon Wayors Ltd in the year 2009-10 was Rs
6,41,28,57,287 and in the year 2008-09 Rs 3,94,13,88,221, so there was an increased Rs
2,47,14,69.066 this was happened due to the increased total current assets in the present
financial year 2009-10.
Provisions of Bevcon Wayors Ltd., in the year 2009-10 was Rs 1,35,70,49,221
and in the year 2008-09 was Rs 69,43,29,841 by this we can indentify that the provisions
has been increased by Rs 66,27,19,380 i.e. 48.83% in the financial year 2009-10.
In the year 2009-10 the Net working capital of Bevcon Wayors pvt ltdwas Rs
7,76,99,06,508 and in the year 2008-09 the net working capital was 4,63,57,18,062 so
there was an increased the net working capital by 40.33% i.e. 3,13,41,88,446.
Increasing net working capital was very beneficial to the company for the purpose
of maintaining (or) managing the day today activities of Bevcon Wayors Ltd.

50

COMPARATIVE STATOF WORKING CAPITAL FOR THE YEAR 2012-2013

Particular

2012

2013

Absolute
Change

Change in
%

Current Assets
Inventories

3768827777

4421701810

652874033

14.77%

Sundry Debtors

2459452581

2730735205

271282624

9.93%

Cash & Bank Balance

272422341

405421333

4566426280

32.81%

Other current assets

118199412

214691785

96492373

37.02%

Loans and Advances

2062247261

4290179191

2227931930

51.93%

Total Current Assets (A)

7769906508

12336332788

3381579952

Current Liabilities (B )

2268292085

3030323592

762031507

25.15%

Working Capital (A-B)

6412857287

9032405732

2619548445

29.00%

(+) Provisions

1357049231

3303927056

1946877825

58.93%

Net Working Capital

8681149372

12062729324

132998992

44.94%

28.03%

Interpretation
Interpretation of comparative working capital statement of Bevcon Wayors pvt
ltdbetween the years 2011-2012 to 2012-2013
In the year 2010-11 the closing stock 0% raw materials work in progress and
finished goods in Bevcon Wayors was Rs 4,42,17,01,810 and the year 2009-10 the
inventory is Rs 3,76,88,27,777 there is an increased in the stock balance by 14.77% i.e.
Rs 65,28,74,033. The Average inventory for two years study period is Rs 4,09,52,64,794.
In the year 2010-11 sundry debtors in Bevcon Wayors pvt ltdwas Rs
2,73,07,35,205 and the year 2011-2012 Rs 2,45,94,52,581 So it was increase in the
sundry debtors by 9.93% i.e. Rs 27, 12, 82,624.

51

Cash and bank balance have been increased to Rs 13, 29, 98,992 and other current
assets have been increased to Rs 9,64,92,373. In the year 2010-11 the loans and advance
of Bevcon Wayors Ltd was Rs 4,29,01,79,191 and in the year 2009-10 the loans and
advance of Bevcon Wayors Ltd was Rs 2,06,22,47,261 it has increased by 51.93% i.e. Rs
2,22,79,31,930.
The total current assets were increased Rs 3,38,15,79,952 to Rs 12,06,27,29,324.
In the year of 2009-10 the current liabilities was Rs. Rs 2,26,82,92,085 and in the
year of 2010-11 the current liabilities are Rs 3,03,03,23,592 so there was increase by Rs.
76,20,31,507 i.e. 25.15%.
The working capital of Bevcon Wayors Ltd in the year 2010-11 was Rs
9,03,24,05,732 and in the year 2010-11 was Rs 6,41,28,57,287, so there was an increased
Rs. 2,61,95,48,445 this was happened due to the increased total current assets in the
present financial year 2010-11.
Provisions of Bevcon Wayors Ltd., in the year 2010-11 was Rs 3,30,39,27,056 and
in the year 2009-10 was Rs 1,35,70,49,221by this we can indentify that the provisions has
been increased by Rs 1,94,68,77,825 i.e. 58.93% in the financial year 2010-11.
In the year 2010-11 the Net working capital of Bevcon Wayors pvt ltdwas Rs
12,33,63,32,788 and in the year 2009-10 the net working capital was 7,76,99,06,508 so
there was an increased the net working capital by 37.02% i.e 4,56,64,26,280.
Increasing net working capital was very beneficial to the company for the purpose
of maintaining (or) managing the day today activities of Bevcon Wayors Ltd.

1. LIQUIDITY RATIO
Current ratio = Current assets/current liabilities
Year
2007-2008

Current Assets
53063.74.

Current Liabilities
20536.47
52

Ratio
2.58

2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

45598.02
50303.33
53951.48
86811.49
120627.29

20350.59
24127.35
21480.89
36253.41
63342.51

2.24
2.08
2.51
2.39
1.90

Interpretation:
The current ratio shows fluctuating trend during the review period the ideal ratio of
current ratio is 2:1 but, this company had current ratios in each year more than the ideal
ratio. This indicates the company was not utilizing is current assets properly during the
review period.
In 2007-2008 the current ratio was 2.58% this clearly indicates the positive
utilization of funds.During the review period 2007-2008 in all financial years the
company made use of current assets efficiently.

2.QUICK RATIO
Quick ratio = quick assets/current liabilities
Year
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012

Quick Assets
20770.11
38345.97
30313.96
30109.82
33644.85

Current Liabilities
9475.20
20536.47
20350.59
24127.35
21480.89
53

Ratio
2.19
1.69
1.48
1.24
1.56

2012-2013

76410.28

30303.24

2.52

Interpretation:The quick ratio was showing fluctuating trend during review period.
The average quick ratio was found 1:21 times during 2007-08.
Which is more than the ideal ratio of 1:1 which indicates the company invested
more funds are created which may have good liquidity position but there is a cut in the
profit of the company.
The above clearly indicates that the firm is highly liquid.

3.LEVERAGE RATIO
FIXED ASSETS TURNOVER RATIO
Fixed assets turnover ratio = net sales/net fixed assets
Year
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

Sales ( In Lakhs)
Net fixed assets
134479.03
60794.08
134440.3
62647.10
138917.83
59008.51
156572.14
56993.09
251645.89
110519.01
344032.16
171883.45
54

Ratio
2.21
2.14
2.35
2.74
2.27
2.00

Interpretation:
The fixed assets turnover ratio was showing the fluctuating trend during the review
period.
The fixed assets turnover ratio is high in the year 2008-09 compare to all given financial
year all these ratios are less than 3 but the deal ideal fixed assets turnover ratio is 5
A high fixed turnover ratio includes better utilization of the firm fixed assets
The firm fixed asset turnover ratio has to increase, these it is desirable.

4. PROFITABILITY RATIO
NET PROFIT RATIO
Net profit ratio = net profit/net sales
Year
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

Net profit
8027.80
12541.56
7441.66
9298.54
11850.44
38335.04

Net sales
67214.21
134543.30
135375.20
140116.20
157648.40
298792.21

55

Ratio
11.94
9.32
5.49
6.63
7.51
12.83

Interpretation
The above ratio shows fluctuating trend during the review period.
In the year 2012-2013 the profit was 12.83% by this we can find that the highest profit
earning financial year is 2010-11 compare to the given financial year
I n the net profit ratio increases the company performance is good and the profit will be
increased.
The above ratio is satisfactory for all given financial years.

5. SOLVENCY RATIO
DEBT AND EQUITY RATIO
DEBIT-EQUITY RATIO= LONG TERM DEBIT /SHARE HOLDER FUNDS

Year
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

Long-term debts
9917.06
19112.77
15399.8
15356.31
20079.43
24594.52

Share holder funds


34869.39
36491.77
33881.86
33878.40
34848.27
60869.28

56

Ratio
0.28
0.52
0.45
0.45
0.57
0.40

Interpretation
The above ratio was shown little fluctuating trend during review period The ideal
debt-equity ratio is 2:1 the firms seemed to pay a little amount to the creditors because the
firm debit-equity ratios are very less than the ideal debt equity ratio any year.
The low debt equity implies that there us a less risk to the creditors and have
sufficient safety margin. The company is maintaining a good level of long-term loans.

CHAPTER -V
57

FINDINGS,
SUGGESTIONS
CONCLUSION

FINDINGS

On the basis of the analysis and interpretations of various ratios and


financial statements in chapters 4 &5, the following findings and
suggestions are made.

The profitability position of the company is good and it can be


improved by looking into the factors contributing to the companys
profile.

The current and quick ratio of the company is so far so good but further
reduction is advised.

The companys total assets and fixed assets turn over ratios are satisfactory, and
can be improved.
58

It is advised that the idle funds and investments be effectively utilized to have a
good profitable position.

Though the financial position is considered to be strong, the company is


advised to maintain consistency in improving its reserve capacity.

The companys aim should be to strive for the maximization of share holders
wealth.

The credit management policy needs to be emended in order to reach the


idle debtors turnover ratio. The company is advised to further improvise its
policies in this matter.

The company should reduce cost of production and spend more on


marketing their products to maximize their sales in indigenous market
.

The company should maintain loyal relationship with customers i.e.


doctors in order to create awareness regarding their products.

SUGGESTIONS

it is suggested that the company has to maintain sufficient inventory and which should be
on par with the working capital requirement for strengthen it.
It is clear from the study liquidity position was increased which has satisfactory the
company has to maintain the same in future.
It is observed from the study that employ can more debt to take the advantage of leverage.
A high fixed turnover ratio indicates better utilization of the firms fixed assets. A ratio of
around 5 is considered ideal.
It is clears from the study the net profit ratio overall profitability. The higher the ratio the
more profitable is the business.

59

It is observed from the study the company has to decrease its direct expenses to improve
its net profit. The company has to utilize its current assets efficiently only its maintaining
as smooth liquid position.

CONCLUSIONS

It is clear from the study net working capital of Bevcon Wayors 2005-2011.The
net working capital of the company recorded 85.87% in the year 2005-06. Again in the
year of 2006-07 net working capital was decreased 12.12% again it is increased 7.61% in
the year of 2007-08.And in the year 2008-09 it is recorded 19.06% & in the year 2009-10
it is recorded 40.33% Finally in the year 2012-2013 it was recorded 37.02.
It is observed from the study the current of the Bevcon Wayors from 2005-20011.
Current assets of the company recorded in the year of 2004-2005 i.e. 84.43%. In the year
2008-2009 it is decreased to 14.06%.Again it is decreased 10.31% in the tear 20092010.IN the year 2010-2011 it is recorded 7.25%. In the year 2011-2012 it is recorded
37.85%. In the year 2012-2013 it is recorded 28.03%.
It is understood from the study the current liabilities of Bevcon Wayors during the
year 2005-2011. In the year 2007-2008 it is recorded 101.47% in the year of 2008-2009 it
is declined 8.19% in the year 2009-2010 it is reached 19.23% again in the year 2010-2011
it is decreasing 18.04%, in the year 2011-2012 it is increased by 35.91% and in the year
60

2012-2013 it is decreased by 25.15% It is clear the study ratio is satisfactory as it is more


than the thumb rule 2.1
It is concluded the quick ratio is above the standard rule and this concludes it as
satisfactory.
Fixed assets turnover ratio indicates the extent to which assets are utilized to
maximize the sales. The company has managed fixed assets efficiently.
Net profit ratio we can describe that the company net profit is very sound. it is concluded
that the gross profit is satisfactory
The debt-equity ratio proportion as per equality concerned is less the low equity
that there is less risk to the creditors and they have sufficient safety margin.

CHAPTER-6

BIBLIOGRAPHY
61

BIBLIOGRAPHY

Authors Name

Title of the Book

Publisher and Edition

I.M.Pandey

Financial Management,

Vikas Publisher 8th Edition

Prasanna Chandra

Financial Management,

Tata McGraw Hill 5th Edition

Management Accounting,

Kalyani Publishers, 8th


Edition

R.K.Sharma &
Shashi K.Gupta

S.P.Jain &
62

K.L.Narang

Financial Accounting &Analysis,

Kalyani Publishers,
3rdEdition

APPENDICES
63

ORGANISATION STRUCTURE
BEVCON WAYORS

BOARD OF DIRECTORS
CHAIRMAN
MANAGING DIRECTOR
DIRECTORS

MANAGING DIRECTOR

DIRECTORS

GENERAL
MANAGER
(Commercial)
FINANCE
ACCOUNTS
PURCHASE
STORES
DISPATCH
64

ADVISOR

CORPOREATE
OFFICE
CORPOREATE
PLANNING
OPERATIONS
INFORMATION SYSTEMS
CENTRE

GENERAL
MANAGER
(R&D)
R&D
QUALITYASSURANCE
QUALITY CONTROL
EQUIPMENT
DEVELOPMENT
SECABL
ASMBLY
DIVISION
TRAINING

GENERAL
MANAGER
(Sales)
MARKETING
SALES

65