INTRODUCTION

Working capital management involves the relationship between a firm's short-term assets
and its short-term liabilities. The goal of working capital management is to ensure that a
firm is able to continue its operations and that it has sufficient ability to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.

Capital required for a business can be classified as following

 Fixed capital

 Working capital

Long term funds are required to create production facilities through purchase of
fixed assets such as plants and machinery, land, building, furniture etc. investing in these
assets represent that part of firm's capital, which is blocked on a permanent or fixed basis
and is called fixed capital.

Fund needed for short-term purpose for the purchase of raw material, payment of
wages and other day-to-day expenses etc. these funds are known as working capital, in
simple words working capital refers to that part of the firm's capital which is required for
financing short-term or current asset such as cash, marketable securities, debtors and
inventories. Working capital is also known as 'revaluing or circulating capital or short-term
capital'.

According to Shubin, "working capital is the amount of fund's necessary to cover

the cost of operating the enterprise".

One of the important aspects of company's financial management is the

management of working capital. Working capital management refers to the management of
current assets, namely cash, marketable securities, stock, i.e., inventories and debtors and
current liabilities like bills payable, sundry creditors, bank overdraft, outstanding expenses,
etc.
OBJECTIVES OF THE STUDY

1. To study the various changes in working capital of Sujala Pipes Private Limited.

2. To study the working capital management with regards to cash, Receivables and
inventory of Sujala Pipes Private Limited.

3. To study the liquidity position of Sujala Pipes Private Limited.

SCOPE OF THE STUDY

Financial management is that the managerial activity which is concerned with the
planning and controlling of the firm's financial resources. Though it was a branch of
economics till 1890 as a separate activity or discipline, it is of recent origin. Still it has no
unique body of knowledge of its own and heavily on economics for its theoretical concepts
even today.

The subject of finance is of immense interest to both academician and practicing

managers. It is of great interest of academicians because the subject is still developing and
there are still certain areas where controlling exists for which no unanimous solutions have
been reaches as yet.

The present study aims at the following:

 Highlighting the necessity of current and current liabilities.

 Explain the principles of current asset, investment and financing.

 Focus on the proper mix of short term and long term financing for current assets.

 Emphasis the need and goal of establishing a sound credit policy.

 Suggest the need of monitoring the receivables.

 Highlight the need for and a nature of inventory.

 Explain the needs for holding cash.

 Focus on the management of cash collection and disbursement.

RESEARCH METHODOLOGY

The data were collected from primary and secondary sources.

The secondary data were obtained from the published annual reports of Sujala Pipes
Private Limited, from 2013-2014 to 2017-2018.

The collecting the data were analyzed by

 Changes in working capital,

 Cash,

 Receivables,

 Inventory,

 Liquidity ratio,

 Cost of goods sold statement and

 Creditors conversion period.

The cash analysis is done by cash to Net working capital ratio.

The receivable analysis is done by debtors turnover ratio, average collection period
and incremental investment in receivables.

The inventory analysis is done by percentage of inventory to total current assets,

inventory turnover ratio, holding period of inventory and changes in sales and inventory.

The liquidity analysis is done by current ratio, quick ratio and absolute liquid ratio.

Data collection
 The data required for the project work is collected from the following sources for
the period between 2013-2018.

Primary data

The primary data for this collected from personal interviews and discussions with
executives and the officials of the company.

Secondary data

The secondary data is collected from the following sources.

 Annual financial reports of the company

SCOPE OF THE STUDY

Working capital management is very significant aspect in the management of

finance of any organization. By checking the level of working capital one can easily
identify the liquidity and profitability position of the firm and the decisions regarding.

1. The level of working, which can be determined, by the level of current assets and
current liabilities.

2. The composition of current assets and current liabilities

3. Financing of current assets and current liabilities are of utmost importance and
significant in the financial management of the business because it not only shows
the financial efficiency of business but also its credit worthiness which has gained
importance in these days of credit squeeze. This fact has been justified by many
industries which have failed frequently due to faulty management of working
capital, especially with regard to effect of various suggestions and regulations laid
by tendon, core committee is very necessary.

It is this view that a case study has been made on working capital management in
Sujala Pipes Private Limited.
Limitations

 The major problem in completing the project is the time of 8 weeks which ever less
in order to know about the overall objectives of the study.

 Study has been restricted only to working capital analysis

 The major problem in completing the project is having not sufficient in order to
know about the overall objectives of the study.

 Study has been restricted only to working capital analysis.

 The study is confined to the figures available on the paper and files only.

 Suggestions made are only on personal opinions.

 INDUSTRY PROFILE
PVC pipes poly vinyl chloride pipes have become synonymous, with modern living
it is undoubtedly a product which has deeply penetrated in to common man’s life. No
wonder the industry has achieved remarkable progress in the terms of supply of raw
materials, and diversification of processing capabilities and manufacturing of machinery
and ancillary equipment sophistication.

This versatile material with superior qualities such as light weight, easy processing
corrosion resistance, energy conservative, non taxis etc. may substitute to a large estimate
of many conventional and costly industrial materials like wood, glass, metal and leather
etc. in the future the manifold applications of plastics in the field of automobiles,
electronics, electrical, packaging and agriculture give its immense utility in PVC plastics.

At present as percent of total requirement of raw material and almost all type of
plastic machines required for the industry are not adequate available. The present
investment in all the three segments of industry namely production of raw materials,
expansion and diversification of raw materials. Expansion and diversification of processing
capacities, manufacturing of processing machinery. Equipment is 1250 crores and it
provided employment at more than 8 lakh people.

Plastics have been subjected to leaves not only at the central level but also the state
and local government. These levels have effected the price of the plastic products
adversely. The per-capita consumption of plastics is very low at 0.5kg as against the world
average of 11kgs. The per-capita consumption is 68kgs in FRANCE, 33kgs in UK. And
even in Asian countries like SOUTH KOREA it is 8.5kgs.

On account of their inherent advantage in properties and versatile in adoption and

use, plastics have come to play a vital role in a variety of applications the world over. In
our country plastics are used in making essential consumer goods which are of daily use
for common man. Such as baskets, carry bags, bottles, pipes, pens, etc. they also have
applications in agriculture, building constructions. Water management resources,
engineering and electronics.
 The government of India recognized the importance of plastics in agriculture
appointed on march 7, 1981 a national committee on the use of plastics in agriculture under
chairmanship of Dr G.V.K. Rao. The committee has forecast a treatment as fright of drop
irrigation through a network of plastics tubes and pipes. In its origin large scale adoption of
irrigation would lead to support in demand for PVC pipes. LDAP tubes and play proper by
lane emitters. The committee made a number of recommendations would so a long way is
increase the consumption of plastics, which at present is very low. The committee has
highlighted the importance of use of PVC resin is the manufacture of rigid pipes, flexible
pipes and sheets are being used for agriculture operations to carry water from place and
living of panels and reservoirs to reduce sweepers and most important in drop irrigation
sequence

A break through had already taken place in the field of channel lining with poly
urethane in the state of Gujarat. Madhya Pradesh, Punjab and Haryana. The irrigation
departments in these states have taken concrete steps to incorporate canal living with
LDPE (Low density) pipes on priority basis.

Another variety of plastics that requires artificial manufacturing relates to true

engineering plastics which is used as an alternative to (or) replacement of metals in load
needing applications.

Modified P.P.O. Nylon, polycetal, poly carbonates. Polyster (PBT/PET) phendic

are same of the plastic materials following under the category of en engineering plastics.

Engineering plastics are being increasingly used for various applications in

automatic, electronic, telecommunications and other industries. The plastics are classified
into two major classes.

1. Thermo Plastics

2. Thermostats

The thermo plastics become sufficiently soft as the applications of heart. The
thermostats are the initial application of heat and pressure of heat and pressure subjected to
fire, but up on further application of heat pressure they are cured to heat and pressure.
They are cured to hard moulded price which cannot be resofted by reheating.
LDPE: low density poly ethylene:

Production of LDPE was stated in the year in 1955. at present there are 3units
manufacturing LDPE with a total capacity of 1.15 lakh tonnes. Products targeted for
LDPE by the end of 1999 is placed at 1.86 lakh tones.

HDPE: High density poly ethylene:

Production of HDPE in India commenced in 1968, at present there is a unit (play

defines industries Ltd.) in India producing HDPE by the end of 1989-1990 was producing
1.25 lakhs tones..

PVC (Poly Vinyl Chloride):

Production of PVC started in 1961, against first production of PVC in the world,
1927. At present there are 6 units manufacture of PVC resins. The total installed capacity
comes to 1.7 lakhs tones. The production target of PVC by the end of 1989-90 is placed of
2.33 lakhs tones.

Polystyrene:

Polystyrene was first manufactured in India in may 1987. The production target of
polystyrene by the end of 1989-90 is set out to 29000 tones.

Poly propylene

The first production of poly propylene in India commenced in 1978. A production

target of 36000 tonnes is achieved by the end of 1993-94.

ABS (Acrylonitril Butadiene Styrene)

The production of ABS in India started in 1978. The present total installed capacity
is 5000 tonnes.

Problems :
 Raw material is always been a problem to be recorded with the plastic industry.
The situation was slightly improved recently and is expected to charge considerably by
commissioning the major petrol chemical project in the pipe line by the year 1990.

The Maharastra Gas cracker complex. Haldia petrol chemical and reliance
petrochemicals together with the expansion of existing giants will go a long way to
mitigate this long, study problems. By the terminal year the plan the installed capacity
targeted is almost 8 lakh tones.

The steep rise in the raw material as a result of imposition of duties and taxed poses
another problem to the plastic industry. On account of this domestic price of finished
goods are higher than the rest of world. Apart from this the administrated pieces for basic
raw materials have not been implemented with a balanced view to accommodating the
interest of both consumers and manufacturers. And chloride 85% of the polymers are
made form naptha feedstock. Hence the pricing naptha by the government has a cascading
effects.

Export of the plastic goods:

Plastic have been excellent potentialities. Our country equipped with all kinds of
processing machines and skilled labour and undoubtedly. An extra effort to boost export
finished plastics goods will yield rich dividend.

Today, India exports plastic product to as many as 80 countries all over the world.
The exports which were stagnant at around Rs 60-70 crores per annum doubled to 129
crores in early

1990 in 1991-92 plastic industry has taken up a challenge of achieves export target
of 250 crores. Major export markets for plastic products and usage are Australia,
Bangladesh, Canada, Egypt, France, Holland, Italy, Hong Kong, Srilanka, Sweden,
Taiwan, UK, USA and Russia.

With a view to boosting the experts, the plastics and linoleums, export promotion
council has requested the government to reduce import duty on plastic raw materials
supply of raw materials at international prices, fix duty free backs on weighted average
basis and charge freight rate on plastic products on weight has interested of volume basis.
Prospects:

The production of various plastics raw materials the country is expected to double
by the end of the seventh five-year plan. When the PCS capacity expansion programs is
completed as well the new plants by other manufacturers like PIL, century Enka, reliance
are set up during the period the consumption of touch the one million tones mark by 1989-
90. There is immense scope for the use of plastics in agriculture an irrigation and thus the
plastic industry is on the threshold of an explosive growth.

ROLE OF PLASTICS IN THE NATIONAL ECONOMY

Plastic are get perceived as just simple colorful house hold products in the minds of
common man. A dominant part of plastics of present and future improved their utilization
in the following areas.

 Agriculture, forestry and water management.

 Automobiles and transportation.

 Electronics and telecommunications and buildings.

 Constructions and furniture especially wood substitutes.

 Food processing and packaging.

 Power and gas distribution.

 COMPANY PROFILE

Sujala Pipes Pvt Ltd. Nandyal was incorporated in the year 1988 it is located in the
industrial estate, Nandyal. The company has “Rani Plastic Pipes Industry” as its sister
concern in the manufacture of PVC pipes. This company is promoted by the Managing
Director Sri S.P.Y.Reddy, B.E(Mech) who has decades of experience in the manufacturing
industry.

The company has three main PVC pipes brands. They are “Nandi”, “SUJALA”,
and “Rani”. But the flagship brand is “NANDI PIPES”. The name “NANDI” derives
form the historical aspects of this town, Nandyal. The brand name “NANDI PIPES” as
taken from the pilgrimage place called “MAHANANDI” which is 15 km from Nandyal.
The company has diversified in to various fields in the recent past. Apart from
manufacture of mineral water under the brand name “Name mineral water” dairy products
“Nandi dairy” which supplies regular milk to the people of Nandyal and villages in and
around Nandyal.

The company rightly thinks there is an inseparable relation between education and
business. The Chairman, Mr. S.P.Y. Reddy encouraging women to educate by establishing
women colleges in Nandyal. Sujala pipes also gone for expansion program. They have
taken over “monarch pipes” Anantapur which was a main competitor. The company is
providing good source of employment to the people who are at both workmen level as well
as administrative level. Sujala Pipes which was once upon a time a sole manufacturer of
plastic goods in to many companies. Their turnover touched a remarkable figure nearly
Rs. 30 crores in the year 1999-2000.

The main objective in starting this industry was to cater to the needs of farmers to
facilitate water flow in this area which lakhs rainfall and to use the water resources
productively. This helps the farmers in lifting the ground water to the surface as well as
free flow of the water as an and when necessary.

Initially the industry was producing polythene pipes and PVC(poly vinyl chloride)
pipes were introduced under the same brand name later in 1984-85 the growth of PVC
industry in Rayalaseema area of A.P. has seen rapid growth in the early 90’s. The company
also produce PVC fittings. In short it can be concluded that the company enjoys 95% of
south Indian company does is free offer of transportation to the door steps of the customers
when he purchases 100 or more pipes.

The company also provides free medical facilities to the employees. Sujala pipes
also involved in social activities by providing free water supply to the needy people.
Company organize free medical camps to the poor people. It also gives loans to
unemployed youth in fulfilling their career objective.

As the company caters to the needs of farmer and its main products is agricultural
related product they enjoy maximum benefits given by the government. They are no
unions in the organization as there an there is good relation and working climate exists in
the organization between management and employees. It basically work on 2 shifts.
Residences are also provided by the company to its workforce and employees at
concessional rent. Very recently the company had approached the Karur Vysya bank,
Nandyal for working capital loan 150 lakhs in order to meet the changing requirements of
industrial scenario.

Financially the company markets sounds very good. It gives a credit of 21 days to
its customers. It has a wide distribution network both in A.P. as well as neighbour states in
the south India. Industrial accidents are also nil in the company. The company markets
products through telephone orders. It has a wide network of distributors all over south
India. As and when the order is received, it immediately sent to the production department
as well as stores. Basing on orders requirements and availability at the stores the products
are manufactured and sent.

Production process of PVC pipes:

The material used in PVC pipes manufacture are:

 PVC (poly vinyl chloride)

 Tri basic lead sulphate(TBCS)

 Die basic lead sulphate (DBLS)

 Calcium steric
  Lead steric

 Calcium carbonate(Ca Ca3)

 Titanic dioxide

 Steric acid

 Wax

The above material are mixed in fixed proportion in a big container and they get
processed in to a solidified product. Immediately pipes of various diameters are
manufactured by using various moulds. Once the pipes are manufactured they will be
shifted to warehouse. As and when the requirement comes, they will be dispatched to the
designated place.
 THEORETICAL PERSPECTIVE

A significant portion of financial research is concerned with the management of

working capital. This issue has been extensively investigated at both conceptual and
empirical levels.

Prasad (2001) conducted a research study on the working capital management in

paper industry. His sample consisted of 21 paper mills from large, medium and small scale
for a period of 10 years. He reported that the chief executives properly recognised the role
of efficient use of working capital in liquidity and profitability, but in practice they could
not achieve it. The study also revealed that fifty percent of the executives followed
budgetary method in planning working capital and working capital management was
inefficient due to sub-optimum utilisation of working capital.

Sarvanan (2001) made a study on working capital management in ten selected non-
banking financial companies. For this he employed several statistical tools on different
ratios to examine the effective management of working capital. He concluded that the
sample firms had placed more importance upon the liquidity aspect compared to that of the
profitability.

Dulta (2001) observed that the various components of working capital of HPMC had not
been used efficiently and net working capital position had worsened continuously during
the period of study (1991 to 1998).

Chundawat & Bhanawat (2000) analysed the working capital management practices in
IDBI assisted tube and tyre companies for the period 1994- 1998 by using some relevant
ratios and concluded that the working capital management of IDBI assisted companies
was more effective than the industry as a whole.

Srivastav & Yadav (1986) developed a multiple discriminant model in determining the
effectiveness of working capital management using four ratios and a sample test of 40
textile companies, of which 20 'not effective' (sick) and 20 'effective' (healthy), they
empirically found that their model correctly classified 95 percent of the companies in the
sample. Though accounting ratios played a very important role in most of the above
studies, but a choice of ratios or group of ratios is often a difficult task due to the absence
of a proper theory of ratio analysis (Bhattacharya, 1997). To overcome this problem
Bhattacharya (1997) developed an alternative ratio model for the measurement and
monitoring the efficiency of working Capital Management.

Dr. Santanu Kr. Ghosh & Santi Gopal Maji:

This makes an attempt to examine the efficiency of working capital management of

the Indian cement companies during 1992-93 to 2001 -2012. For measuring the efficiency
of working capital management three index values -performance index, utilisation index
and overall efficiency index are calculated, instead of using some common working capital
management ratios. Using industry norm as target -efficiency level of the individual firms,
this paper also tests the speed of achieving that target level of efficiency by an individual
firm during the period of study. Finding of the study indicates that the Indian Cement
Industry as a whole did not perform remarkably well during this period.

Working capital management involves the relationship between a firm's short-term assets
and its short-term liabilities. The goal of working capital management is to ensure that a
firm is able to continue its operations and that it has sufficient ability to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.

Capital required for a business can be classified as following

 Fixed capital

 Working capital

Long term funds are required to create production facilities through purchase of
fixed assets such as plants and machinery, land, building, furniture etc. investing in these
assets represent that part of firm's capital, which is blocked on a permanent or fixed basis
and is called fixed capital.

Fund needed for short-term purpose for the purchase of raw material, payment of
wages and other day-to-day expenses etc. these funds are known as working capital, in
simple words working capital refers to that part of the firm's capital which is required for
financing short-term or current asset such as cash, marketable securities, debtors and
inventories. Working capital is also known as 'revaluing or circulating capital or short-term
capital'.

According to Shubin, "working capital is the amount of fund's necessary to cover

the cost of operating the enterprise".

One of the important aspects of company's financial management is the

management of working capital. Working capital management refers to the management of
current assets, Namely cash, marketable securities, stock, i.e., inventories and debtors and
current liabilities like bills payable, sundry creditors, bank overdraft, outstanding expenses,
etc., Although the management of current assets is similar to that of fixed assets. Yet it
differs to some extent from the management of fixed assets in three important ways.

First, in managing fixed assets, time is very important, consequently, discounting

and compounding aspects of time element play a significant role in capital budgeting and a
minor one in the management of current assets. The level of fixed assets can not be
adjusted in the shorter run although the level of both current and fixed assets depending
upon the production and sale and it is possible to adjust the level of current assets
depending upon the current level of activity of the firm.

Second, larger holding of current assets especially cash, strengthen firm's liquidity
position and reduces briskness, but it also reduces the overall profitability in the form of
idle investment in current assets no doubt increase the profitability but at the same time
reduces the liquidity which may results in financial embarrassment. Stock out cost and out
of pocket expenses defending the suit.

Third, the level of fixed as well as current assets depends upon expected sales, but
it is only current assets, which can be adjusted with sales fluctuation in the short run. There
is an unavoidable need to manage working capital efficiently. Hence it forms an impotent
function of finance manager, working capital management. Requirements much of the
finance manager's time. Represents a sizable proportion of company's, total investment in
assets. Determine at a glance, the liquidity and solvency position of the company to
outsides creditors.
CLASSIFICATION OR KINDS OF WORKING CAPITAL

Working capital may be classified in two ways.

 On the basis of concept

 On the basis of time

On the basis of concept working capital may be classified as permanent or fixed

working capital and temporary or variable working capital.

KINDS OF WORKING
CAPITAL

On the basis of concept On the basis' of time

Gross Net Permanent or Fixed Temporary or Variable

Working Capital Working Capital Working Capital Working Capital

CAPITAL

1) On the basis of concept

a) Gross working capital

 In broader sense the term working capital refers to t the gross working capital and
represents the amount of funds invested in current assets. Thus 'gross working capital is the
capital invested in total current assets of the enterprise.

Thus GWC = Total of Current assets

b) Net working capital

In narrow sense, the term working capital refers to the net working capital. Net
working capital is the excess of current assets over current liabilities.

Thus NWC = Current assets- Current liabilities

To conclude it may be said that both gross and net concepts of working capital may
be suitable only for proprietary from of organizations such as sole-trader or partnership
firms. But gross concept is suitable to the company form of organization where there is a
divorce between ownership, management and control.

2) On the basis of time

a) Permanent or fixed working capital

Permanent or fixed working capital is the minimum amount which is required to

ensure effective utilization of fixed facilities and for maintaining the circulation of current
assets for example a firm has to maintain a minimum level of raw materials, work-in-
process, finished goods and cash balances. This can further classified into

 Regular working capital

 Reserve working capital

Regular fixed working capital required to ensure circulation of current assets from
cash to inventories to receivables and from receivables to cash and so on.

Reserve fixed working capital is the excess amount over the requirement for regular
working capital, which may be provided for contingencies that may arise at unstated
periods such as strikes, rise in prices, depression etc.
b) Temporary or variable working capital

Temporary or variable working capital is the amount of working capital, which is

required to meet the seasonal demand and some special exigencies, this can be classified as

 Seasonal working capital

 Special working capital

The capital required to meet the seasonal needs of the enterprise is called seasonal
working capital. Seasonal working capital is that part of working capital which is required
to meet special exigencies such as launching of extensive marketing campaigns for
conducting research etc.

Fig 1. Permanent / Fixed Working capital Fig.2 Temporary / Variable Working

capital

Fig 1. Permanent working capital is stable or fixed over time. While temporary or variable
working capital fluctuates.

Fig 2. Permanent working capital is also increasing with passage of time due to expansion
of business but even then it does not fluctuate as variable working capital with
sometime increases and sometimes increases and decreases.

Objectives of working capital

The need of working capital cannot be over emphasized. Every business needs
some amount of working capital. The need for working capital arises due to the time gap
between production and realization of cash from sales. Following are some of the objects.
  For the purpose of raw materials, components, spares, etc.

 To pay wages and salaries.

 To incur day-to-day expenses and overhead costs such as fuel, power and office
expenses etc.

 To meet the selling costs as packing, advertising etc.

 To maintain the inventories of raw materials, work-in-progress, store and spares

and finished stocks.

The amount needed as we in a new concern depends primarily upon its size and the
ambitions of its promoters, greater the size of the business unit, generally, larger will be the
requirements of working capital. The amount of working capital goes on increasing with
the growth and expansion of business till it attains maturity.

Issues in working capital management

Working capital management refers to the administration of all aspects of current

assets, namely cash, marketable securities, debtors and stock (inventories) and current
liabilities. The financial manager must determine levels and composition of Current assets.
He must see the right sources aspects of working capital are

Time working capital management requires much of the financial manager's time.
Investment working capital represents a large portion of the total investment in assets.
Criticality working capital management has great significance for all firms. but it is very
critical for small firms.

Growth the need for working capital is directly related to the firm's growth.
Financial managers have to spend much of their time to the daily internal operations,
relating to current assets and current liabilities of the firm. As the larger portion of the
financial manager's time is devoted to working capital problems, it is necessary to manage
working capital in the best possible way to get the maximum benefit.

Investment in current assets represents a very significant portion of the total

investment in assets. So financial manager should pay special attention to the management
of current assets on a continuing basis. Actions should be taken to curtail unnecessary
investment in current assets.

Working capital management is critical for all firms, but particularity for small
firms. Further, the role of current liabilities in financing current assets is far more
significant in case of small firms, as unlike large firms, they face difficulties in rising long-
term finances. There is direct relationship between a firm's growth and its working capital
needs.

The financial manager should be aware of such needs and finance them quickly.
Continuous growth in sales may require additional investment in fixed assets. It may, thus
be concluded that all precautions should be taken for effective and efficient management of
working capital.

WORKING CAPITAL MANAGEMENT IN SUJALA PIPES PVT., LTD

The working capital in Sujala Pipes comprises nearly 60% of total capital
employed. Hence working capital becomes an importance portion in the Sujala Pipes.

Factors influencing working capital requirements in Sujala Pipes Private Limited.

1. Production program

Its production programmer and those of suppliers, and customer affect the working
capital requirement of Sujala Pipes. Thus the size of the working capital requirement is
determined on the basis of the production programmed and size of the order by the
customer in a year.

2. Sales budget

As Sujala Pipes manufactures against customer order and most of the working
capital requirements are met out of the realization of sales, the estimated sales have
considerable influence on the working requirement of Sujala Pipes.

3. Finance

Availability of finance that is, the cash and bank credit affects the working capital
requirements of Sujala Pipes to considerable extent.
4. Manufacturing process

In Sujala Pipes the length of manufacturing process varies from one production
division to another, depending in the products springs and capacitors and the technological
know how used. As the manufacturing process it has its influence on Sujala Pipe's working
capital requirements.

5. Period of Credit

The period of credit allowed by the suppliers on purchases and the period of credit
allowed to customers on sale also have their own influence on working capital requirement
of Sujala Pipes.

Sources of finance for working capital

The working capital requirement is estimated through the preparation of capital and
revenue budgets. The main source from which Sujala Pipes finances is working capital
needs are

 Realization cash

 Cash credit from banks

 Cash credit from financial institutions and

 Trade credit

Objectives of working capital in Sujala Pipes Private Limited.

The objectives of working capital in Sujala Pipes are mentioned below:

 To see that the level of inventory, loans and advances are satisfactory

 To see the debtors are within the norms

 To have least possible working capital so that the borrowings are reduced and
not high interest cost is incurred

 To meet contingencies that is unexpected expenses

  To meet daily operating expenses

RECEIVABLES MANAGEMENT

Account receivable or trade credit is the most prominent force of the modern
business. It is considered as an essential marketable tool, acting as a bridge for the
movement of goods through production and distribution stages to customers finally. A firm
grants credit to production and distribution stages to customers finally .A firm grants credit
to protect its sales from the competitor and to attract potential customers. Trade credit, thus
credit receivable or book debts, which the firm is expected to collect in future. It also
involves an element of risk as the cash payment has get to be received, hence they has to
be carefully analyzed.

Receivables constitute a substantial portion of current assets of several firms. They

form about 1/3 part of current assets in India. As substantial amounts are tied up in trade
debtors, it needs careful analysis and proper management, for proper management of
receivable a concern must adopt an optimum credit policy.

Optimum Policy

The optimum investment in receivable will be at a level is a trade-off between cost

and profitability. When the firm resorts to liberal credit policy the profitability of the firm
increases on account of higher sales. However such a policy results in increased investment
in receivables, increased changes of bad debts and more collection costs. The total
investment in receivables increases and thus the problem of liquidity is credited. On the
other hand a stringent credit policy reduces profitability but increases the liquidity of firm.
Optimum credit policy therefore involves a trade off between the profit or sales that bring
in receivable. On the one hand the cost of carrying bills receivables plus bad debts losses
on the other. The optimum credit policy occurs at a point where there is " Trade-off
between liquidity and profitability as shown in the chart below:
Profitability

Costs and benefits

Liquidity

Tight  Credit Policy  Loose

Optimum Credit Policy

Variables of Credit Policy

A firm should establish receivables policies after carefully considering both benefit
and cost different policies. These policies relate to:

Credit standard
 Credit term Collection procedures

Credit Standard

The term credit standards represent the basic criteria for extension of credit to
customers. The level of sales and receivables are likely to be high. If the credit standard is
relatively loose, as compared to a situation when there are relatively tight.

The firm's credit standards are generally determined by the five "C"s, character,
capacity, capital, collateral and condition.

Character denotes his ability to manage the business

Capital denotes his financial soundness

Collateral refers to assets which the customer can offer by way of security

Condition refers to the impact of general economic trends on the firm, or to special
development in certain areas of economy that may affect in customer's ability to meet his
obligations.

Credit Terms

It refers to the terms under which a firm sells goods on credit to its customers. The
two components of credit terms are

a) Credit period

b) Cash Discount

a) Credit Period

Extending the credit period stimulates sales but increases the cost on account of
more typing up of funds in receivable. Similarly, shortening the credit period reduces the
profit on account of reduced sales, but also reduces the cost of tying up of funds in
receivable. Determining the optimum credit period therefore involves locating the period
where the marginal profits on increased sales are exactly offset by the cost of carrying the
higher amount of account receivable.
b) Cash Discount

The effect of allowing cash discount can also be analyzed in the same pattern as
that of the credit period. Attractive cash discount terms reduce the average collection
period resulting in reduced investment in account receivable. Thus there is a saving in
capital cost. On the other hand cash discount itself is a loss to the firm optimum cash
discount is allowed at the point where the cost and benefit are exactly offsetting.

Collection Procedure

A stringent collection procedure is expansive for the firm because of high out of
pocket costs and loss of goodwill of the firm among its customers. However it minimizes
the loss on account of bad debts as well as increase saving in terms of lower capital costs
on account of reduction in the size of different collection procedures or policies.

Cost of Maintaining Receivables

The costs in respect to maintenance of receivables can be identified as followed:

Capital Cost

Maintenance of accounts receivable results in blocking of the firm's financial

resources in them. 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, such as payments from its customers. Additional funds may either
be raised from outside or out of profit retained in the business. In both the cases, the firm
incurs a cost. In the former cases, the firm has to pay interest to the outsider while in the
latter case, there is opportunity cast to the firm that is the money which the firm could have
earned otherwise by investing the funds elsewhere.

Administrative costs

The firm has to incur additional administrative cost for maintaining account
receivable in the form of salaries to the staff kept for maintaining accounting records
relating to Customers to determine their credit worthiness etc.
 Collection costs

The firm has to incur costs for collecting the payments from its credit customers.
Sometimes additional step may have to be taken to recover money from defaulting
customers.

Defaulting costs

Sometimes after making all serious efforts to collect money from defaulting
customer, the firm may not be able to recover the over dues because of the inability of the
customers. Such debts are treated as bad debts and have to be written off since they cannot
be realized.

Study of the credit policy

Credit policy adopted by a firm should be optimum neither too liberal nor too
stringent. In order to determine the nature of credit policy followed by a firm the following
techniques may be adopted.

Computation of average age of receivable

Computation of average age of receivables involves the computation of average

collection period. The period so computed with the period fir the industry as a whole or
with that of prevailing in the similar firms. Some of the methods for calculation of average
age of receivable are as under.

A)

Months or days in the period

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

Accounts receivables turnover

Where accounts receivables turnover is

A)

Credit sales in the period

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

Avg account receivable

B)

Avg account receivable

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

Average monthly credit sales

C)

Average accounts receivables * months in a year

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

Credit sales for the year

An increase in the average age of receivables or debt collection period is an index

of a lenient credit policy or inefficiency in collection and vice versa.

Accounts receivable management in Sujala Pipes

Various reports, which serve as a control device for accounts receivable are
prepared by all the units Sujala Pipes of and are submitted to central office they include

Monthly sundry debtors report

Report on age of account and

Weekly debtors report

 Different units in Sujala Pipes Private Limited prepares monthly reports indicating
the credit sales to customers and provides the opening balance at the beginning of the year,
total dispatches done during the month, realization figures and balances of bills not
submitted and out standing.

Following up steps like finding reasons for not submitting the bills and there
reasons are analyzed

I. One more report is also prepared to analyze the age of each account receivable.
The accounts due for more than one year and less than one year are analyzed,
customer wise, to know why the amounts are outstanding.

II. There is one more weekly debtors report, which is prepared by finance
department of each unit for the purpose of internal control.

III. The Sujala Pipes also makes provision for bad and doubtful debts on the basis of
the period for which debts have been outstanding.

The receivables of Sujala Pipes Private Limited, is analyzed by calculating

debtor turnover ratio, average collection period, incremental investment in sales.

I. Debtors turnover ratio :

It indicates the number of times debtors turnover each year. It indicates the
efficiency of staff entrusted with collection of debts. The higher the ratio it is better since it
would indicates the debtors are being collected more promptly. Debtors should be always
being taken at gross value. No provision for bad and doubtful debts should be deducted
from them.

Sales

Debtors Turnover Ratio = -----------------------

Debtors
 DATA ANALYSIS

Analysis of Changes in working capital of Sujala Pipes Private Limited. Components

of Working Capital in Sujala Pipes Private Limited.

The working capital in Sujala Pipes consists of different components like inventory,
sundry debtors, cash and bank balance, current liabilities etc., which are shown in the
following table along with amount invested in each for the period of 5 years. The structure
of working capitals is presented in the table for the purpose of effective analysis of current
assets; current liabilities and net working capital have been calculated. Each component of
current assets and current liabilities and expressed as a proposition to total assets total
liabilities.
 Showing the components of working capital and % for 5 years of Sujala Pipes Private
Limited.

(Amount in Rs.)

%10 %10 %10 %10

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 %100
0 0 0 0
TOTAL CURRENT ASSETS

Inventories 31232858 32 10282787 13 31141292 34 11337421 17 1274835 11

Sunday
30998991 31 31137405 37 15543967 17 46298.356 0.04 44874.768 0.04
Debtors
Cash and
455855 0.5 670771 8 48019623 0.5 638870.3 0.98 313100.8 0.29
Bank
Loans and
36165321 36.5 41568783 49.2 44068783 48 51545318 80.5 57985698 54.05
Advances
Total Current
98853025 83659947 912342382 109819965.62 107266307
Assets
TOTAL CURRENT LIABILITIES
Sunday
89122322 95 72133509 97 52129639.38 96 64385729.94 95.8 59989566 94.2
Creditors
Secured
445000 0.6 445000 0.6
deposits
Provision for
4022674 4.3 1529621 2.4 2256726 4 2503600 4.2 3674600 5.78
tax
Total current
93589996 74108130 54386365.38 66889329.94 63664166
Liabilities
Net working
5263029 9551817 3687873 42930636 43602141
Capital
Trend of Net
100% 181.48% 700.12% 815.7% 828.5%
work capital

Source : Published Annual reports of Sujala Pipes Private Limited from 2014-2018

Note: The trend of networking capital are calculated by taking the year 2014 as abase as 100

Analysis

The inventories are 32% of total current assets during 2013-2014 and 13% in 2014-
2015 and 34% in 2015-2016 and 17% in 2016-2017. It shows the levels of inventory
gradually increased in 2015-2016 and decreased from 2016 to 2017 and 11 % in 2017-
2018
 The sundry debtors are 31% of total current assets during 2013-2014, 37% in 2014-
2015 and 17% in 2015-2016 and 0.04% in 2016-2017 and 0.04% in 2017 - 2018 . It shows
that the amount of sundry debtors has been decreased during the period 2015-2018.

The cash and bank balances are 0.5% of total current assets in 2013-2014 and 8%
in 2014-2015 and 0.5% in 2015-2016 and 0.98% in 2016-2017 and 0.29% in 2017 - 2018.
It shows increase from 2014-2015 and it was decreased in 2016 and it increased in 2017
but decreased in 2018.

In loans and advances there is 36.5% of total current assets in 2013-2014 and
49.2% in 2014-2015 and 48% in 2015-2016, 80.5% in 2016-2017 and 54.05% in 2017-
2018. Here we can say that company was taking more loans and advances in the year
2016-2017 but less in 2017-2018.

The sundry creditors are 95% of the total liabilities in 2013-2014 and 97% in 2014-
2015 and 96% in 2015-2016, 95.8% in 20162017 and 94.2% in 2017-2018. It shows a
gradual decrease in creditors up to 2016-2018 except in 2014-2015. [Ref: 6.8 company
annual reports]

Graph Showing the components of working capital of Sujala Pipes Private Limited.

Graph Showing the Components of Working Capital

100 181.48
828.5 2013-04
2014-05
700.12
2015-06
2016-07
2017-08
815.7

Graph Showing the components of working capital of Sujala Pipes

Private Limited.
 The above graph showing changes Trend % of working capital of Sujala Pipes
Private Limited.

Showing Statement of change in working capital 2013-14

2013 2014
Working Capital Increase Decrease
Amount in Rs. Amount in Rs.
Current Assets

Inventories 61935962 31232858 30703104

Sundry Debtors 43477991 30998991 12479000

Cash and Bank 827769 455855 371914

Loans and Advances 9524520 36165321 26640801

Total 115766245 98853028 16913217

Current Liabilities 102396700 93589996

Total 102396700 93589996

Net decrease in 5263032

13369545
Working capital 8106513

Total 13369545 13369545 43554018 43554018

Source : Published Annual reports of Sujala Pipes Private Limited from 2014 to 2018.

Analysis : Above table show statement of changing working capital during 2013-14
which has a net decrease in working capital Rs. 8106513.

Showing Statement of change in working capital 2014-15

 2014 2015
Working Capital Increase Decrease
Amount in Rs. Amount in Rs.
Current Assets

Inventories 31232858 10282787 20950071

Sundry Debtors 30998991 31137406 138415

Cash and Bank 455855 670971 215116

Loans and Advances 36165321 41568783 5403462

Total 98853028 83659947

Current Liabilities 93589996 74108130

15193078
Total 93589996 74108130
Net decrease in 5263029
9551817
Working capital 4288788

Total 9551817 9551817 20950071 20950071

Source : Published Annual reports of Sujala Pipes Private Limited from 2014 to 2018.

Analysis : Above table show statement of changing working capital during

2014-15 which has a net increase in working capital Rs 4288788

Showing Statement of change in working capital 2015-16

 2015 2016
Working Capital Increase Decrease
Amount in Rs. Amount in Rs.
Current Assets

Inventories 10282787 31141292 20858505

Sundry Debtors 311337406 15543967 15593439

Cash and Bank 670791 480196 190595

Loans and Advances 41568783 44068783 2500000

Total 83659947 91234239

Current Liabilities 74108130 5438365

19721765
Total 74108130 5486365
Net decrease in 9551817
36847874
Working capital 27296057

Total 36847874 36847874 35505799 35505799

Source : Published Annual reports of Sujala Pipes Private Limited from

2014 to 2018.

Analysis : Above table show statement of changing working capital during 2015-16
which has a net increase in working capital Rs27296057

Showing Statement of change in working capital 2016-17

 2016 2017
Working Capital Increase Decrease
Amount in Rs. Amount in Rs.

Current Assets

Inventories 311141292 11337421 19803871

Sundry Debtors 15543967 46298356 3754389

Cash and Bank 480196 158673

44068783
Loans and Advances
51545318

Total 91234239 109819965

Current Liabilities 54386365 66889329

12502965
Total 54386365 66889329

Net decrease in 36847874

42930636
Working capital 6082762

Total 42930636 42930636 19803871 19803871

Source : Published Annual reports of Sujala Pipes Private Limited from

2014 to 2018.

Analysis : Above table show statement of changing working capital during 2016-17
which has a net increase in working capital Rs. 6082762.

Showing Statement of change in working capital 2017-18

Working 2017 2018 Increase Decrease

 Capital Amount in Rs. Amount in Rs.

Current Assets

Inventories 11337421 1274835 10062586

Sundry Debtors 46298356 44874766 1423590

Cash and Bank 480196 3131008 2650812

Loans and Advances 44068783 57985698 13916871

Total 109819965 107266307 16567683 11486176

Current Liabilities 3225163

66889329 63664166
Total

Net decrease in
66889329 63664166 3225163
Working capital

Total 42930636 43602141 671505

43602141 43602141 17936502 17936502

Source : Published Annual reports of Sujala Pipes Private Limited from 2014 to 2018

Analysis : Above table show statement of changing working capital during 2017-18
which has a increase in working capital Rs.671505.

CASH MANAGEMENT

Introduction
 Cash is the important current asset for the operations 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 of product manufactures by
the Firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will
disrupt the firm's manufacturing operations while excessive cash will simply remain idle,
with out contributing anything towards the firm's profitability. Thus, major functions of the
financial manager to maintain a sound cash position.

Cash is the money, which a firm can disburse immediately with out any restriction.
The term cash includes coins, currency and cheques held by the firm, and balances in its
bank accounts. Some times near cash items, such as marketable securities or bank times
deposits, are also includes in cash. The basic characteristic of near cash assets is that they
can readily be converted to cash. Generally when a firm has excess of near cash, it invests
it in marketable securities. This kind of investment contributes some profit to the firm.

Facets of Cash Management :

Cash management is concerned with the managing of

1. Cash flows into and out of the firm.

2. Cash flows with in the firm and

3. Cash balances held by the firm a points of time by financing deficit or investing
surplus cash. It can be represented by a cash management cycle as shown in
fig1.

Sales generate cash, which has to be disbursed out. The surplus cash has to be
invested while deficit has to be borrowed. Cash management seeks to accomplish this
cycle at a minimum cost. At the same time, it also seeks to achieve liquidity and control.

Cash management assumes more importance than other current assets because is
the most significant and the least productive asset that a firm holds. It is significant because
it is used to pay the firm's obligations. However, cash is unproductive. Unlike fixed assets
or inventories, it does not produce goods for sale. Therefore, the aim of cash management
is to maintain adequate control over cash position to keep the firm sufficiently liquid and to
use excess cash in some profitable way.

Business Cash
Operation
Collection

Deficit Bonus
Surplus Interest

Cash Cash
Collection Collection

CASH MANAGEMENT IN SUJALA PIPES PVT LTD

Sources of Cash :

The main sources through which Sujala pipes gets cash are the collection from
debtors, advances on sales and other sources. Payment of cash.

The company's main item of expenditure is wages, salaries, bonus, expenditure

salaries, bonus, and expenditure on development, sales tax, income tax, excise duty,
payment to creditors, interest on borrowings.

All the payment to creditors is made through cheque and cash even expenses are
paid. Wages, salaries excise duty is paid monthly.

CASH TO NET WORKING CAPITAL RATIO

Table 1.1 : Showing Cash to Net Working Capital of Sujala Pipes Private Limited

(Amount in Rs.)

Particulars 20003-04 2014-15 2015-16 2016-17 2017-18

Cash and Bank

455855 671031 480193 638870 3131008
Balances

Net working
5263029 9551817 36847873 42930636 43602141
Capital

Cash to NWC
8.7 (times) 7.02 (times) 1.3 (times) 1.4 (times) 7.2 (times)
Ratio

Source : Published annual reports of Sujala Pipes Private Limited from 2001 to 2015.

Analysis :

Table 2.1 portrays the size of cash and bank balances in Sujala pipes from 2013-
2014 to 2014-2015 as a percentage of networking capital. The cash and bank balances were
8.7% of net working Capital during 2013-2014,7.02% during 2014-2015, 1.3% during
2015-2016, 1.4% during 2016-2017 and 7.2% during the year 2017-2018.
Interpretation :

This ratio indicates the proportion of cash and bank balances maintained by Sujala
pipes. It is assumes per amount importance as the level of cash balances decides the
liquidity profitability aspects of the company. The lower the cash to net working capital the
greater may be the profitability of the concern and vice-versa.

It any company holds too low cash and bank balances in relation to net working
capital, it implies in ability of firm to meet day-to-day requirements of cash. In the present
study cash to current ratio of Sujala pipes reveals it was 8.7% in 2013-2014, and it was
decreased to 7.2% in 2014-2015, and decreased to 1.3% in 2015-2016 and increased to
1.4% in 2016-2017 and 7.2% in 2017-2018. This shows the organization cash and bank
balances vary between 8.7% to 1.4%. However practice of holding cash balance in relation
to networking capital indicates poor cash management in sales.

Graph Showing Cash to Net Working Capital Ratio

Graph showing Cash to NWC

Figure 1.1 : Graph Showing Cash to Net Working Capital Ratio

The above graph showing changes cash to networking capital ratio of Sujala pipes
Private Limited.

Table 1.2: Showing Debtors turnover ratio of Sujala pipes Private Limited.

(Amount in Rs.)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18

Sales 635788959 551477486 369891220 722171487 452109721

Sunday Debtors 30998991 31137406 15543967 46298356 44874766

Debtor
20.5 17.7 23.79 15.59 10.07
Turnover Ratio

Source : Published annual reports of Sujala Pipes Private Limited from 2014 to 2018.

Analysis : The calculated Debtors Turnover Ratio has 20.5 in 20003-2014 decreased to
17.7 in 2014-2015 and increased to 23.79 in 2015-2016 and decreased by
15.59 in 2016-2017 and decreased to 10.07 during the year 2017-2018.

Interpretation :

There is no rule of thumb, which may be used, as a norm to interpret the ratio as it
may be different from firm to firm. Depending upon the nature of the business. This ratio
should be compared with the ratio of other firms doing similar business and a trend may
also be found to make better interpretation of the ratio.

Graph Showing Debtors Turnover Ratio :

Figure 1.2:Graph Showing Debtors Turnover Ratio

The above graph showing changes Debtor Turnover ratio of Sujala pipes Private Limited.
II. Average collection Period :

Average collection period represents the average number of days for which a firm
has to wait before it receivables are converted into cash. The ratio can be calculated as
follows.

Number of Working Days

Average Collection Period = ---------------------------------------------

Debtors Turnover Ratio

Table 1.3:Showing Average Collection Period of Sujala pipes Private Limited.,

(Amount in Rs.)

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18

Debtor Turnover
20.5 17.7 23.79 15.59 10.07
Ratio

Number of
360 360 360 360 360
Working Days

Average
18 21 15 24 36
Collection Period

Source : Published annual reports of Sujala Pipes Private Limited from 2014 to 2018.

Analysis : In the above table 2015-2016 to 2016-2018, we can see increase in the number
of average of collection period. Generally the shorter Average collection
period is better the quality of debtor turnover ratio shorter collection period
implies quick payments by debtors .
Interpretation :

The Average collection period represent the average number of days for a which
firm to wait before it receivables are converted into cash. We can the increase in the
number of days from 2014-2015 to 2017-2018. It is satisfactory, moreover longer average
collection period, larger are the chances of bad debts, shorter the average collection period
the better is the quality of debtors as a collection period implies quick payment by debtors.
As ratio may be different from firm to firm. Depending upon its credit policy nature of
business and business conditions.

Graph Showing Average collection Period :

Figure 1.3: Graph Showing Average collection Period

The above graph showing changes in average collection period of Sujala pipes
Private Limited.

Incremental investment in receivables:

Table 1.4: Showing Incremental Investments in Receivables of Sujala Pipes

Private Limited.
 SALES Average collection period
Year
New Old New Old

2013-14 (Amount in Rs.) 635788959 325662111 18 49

2014-15 (Amount in Rs.) 551477486 635788959 21 18

2015-16 (Amount in Rs.) 395212606 551477486 15 21

2016-17 (Amount in Rs.) 722171487 369891220 24 15

2017-18 (Amount in Rs.) 455109721 722171487 10.07 24

Source: Published annual reports of Sujala Pipes Private Limited from 2014 to 2018.
Incremental Investment Receivables
Change in investment = (SALESn/360)* ACP – (SALESo/360)* ACPo
Where n=new
o=old

2014 = 635788959/360*18 – 325662111/360*49

= 44326231 – 31789448

= 12536783

2015 = 551477486/360*21 – 635788956/360*18

= 32169520 – 31789448

= 380072

2016 = 369891220/360*15 – 551477486/360*21

= 15412134 – 32169520

= -1675738

2017 = 722171487/360*23 – 369891220/360*15

= 46138733 – 15412134

= 30726599

2018 = 452109721/360*10.07 – 7221171487/360*24

 = 126451 – 481411432

= -48814678

Analysis

The average collection period is a significant measure of collection activity and the
quality of accounts receivables. The average collection period indicates the time lag
between the date of sales and date of receipt of payment. The shorter the average collection
period the better would be the quality of debtors as the time lag involves in converting
sums will be less and prompt payments is made by debtors. The incremental investment in
receivables is prepared in table 3.3 was in 2013-2014 Rs 12536783/-, in 2014-2015 -
380072/-, in 2015-2016 -16757385, in 2016-2017-30726599/-, in 2015-2016 - 48814678/-,
2016-2017 average collection period was noticed and it was varied 15 days to 23 days
during the period study.

Interpretation :

If can be observed from the table considerable sums are invested in debtors in
Sujala Pipes, at the same time a low turnover ratio and higher collection period implies
inefficiency in management during 2013-2014. The management struggled in controlling
inventory in receivables and by decreasing the incremental investment in 2015-2016 and
2017-2018.

Investment in receivable has been considerable increased from 2013-2014 to 2014-

2015 and declined in 2015-2016 and 2017-2018. The low investment in receivables in the
year 2016 is due low sales in that period high average collection period occurred in 2014-
2015. It shows the management efficiency in controlling the investment in receivables in
the year 2016-2017.
FINDINGS

The following are the findings of Sujala pipes Private Limited with regards to
working capital Management from 2014 to 2018.

 The investment in inventory gradually decreases from 31.6% to 1.2% during 2014-
2018.

 The amount of sundry debtors has been increased from 31 % of total current assets
to 37% during 2013-2015, there was a decrease in 2016 ie.; 17%, again decline in
2016-2018 i.e. 0.4% of total current assets.

 Cash and bank balance shows the gradual decrease and increase during 2013-2014
to 2014-2015 i.e. from 0.5% to 0.8% of total current assets. The cash and bank
balance during 2016-2017 was 0.99% and 0.05% of total current assets in the year
2017-2018.

 Sundry creditors have been decreased during the period under study from 97% to
90% of the total current liabilities.

 The net increase in working capital during the year 2013-2017 i.e., Rs. 5263029 to
43602141.

 Cost of sales also decreased for through out the period except in the year 2017.

 The calculated current ratio is 1.06 in 2013-14 1.13 in 2014-15, in 2016 and 1.64
in 2016-17 and 1.68 in 2017-2018.

 1.05 in 2015-16. Since the ratio is less than its standard in all the years, the short-
term financial position is not satisfactory.

 The liquid ratio is 0.72 in 2013-2014, 0.99 in 2014-15, 1.10 in 2015-16, 1.47 in
2016-17 and 1.65% in 2017-2018.
 Except 2013-2015 the liquid ratio was more than standard ratio. Therefore liquidity
position of the organization is satisfactory.

 The calculated cash ratios are 0.5 in 2013-2014, 0.6 in 2014-15, 0.5 in 2015-16,
0.99 in 2016-17 and 0.29 in 2017-2018. It is indication that the firm has not
maintaining sufficient level of cash to meet its day-to-day obligations.

 The calculated debtors turnover ratio has decreased over year under study i.e. from
20.5 times in 2013-2014 to 17.7 times in 2014-2015 and there was an increase in
2015-2016 i.e. from 17.7 times to 23.7 times and 15.5 times in 2016-2018. The firm
efficiency has increased in controlling of the amount of debtors.

 The investment in receivables has been considerable increased from 2013- 2015
i.e., 18-21 and then declined in the year 2015-2016 ie., 15 and increase 24 in 2016-
2018. This shows management efficient in controlling the investment in receivables
in the year 2015-2016 when compares to previous years.

 Cash and bank balances vary between 8.6% and 14.8% in Sujala Pipes. However
the practice of holding cash balance in relation to net working capital indicate poor
cash management in Sujala Pipes.

 The total investment in inventory has been decreased from 2013-2014 to 2017-
2018. It indicates poor performance in inventory management. This is due to low
investment in raw materials and low production of finished goods during 2017-
2018.
SUGGESTIONS

 Cost of sales in Sujala Pipes Private Limited decreased by 5.4% in 2014- 2015 and
35.3% in 2015-2016 and increased by 20% and decreased by 25% in 2017-2018
when compared with the cost of sales in 2017 to 2018. The increase is mainly
because of increase in purchase of raw materials, direct labour and other
manufacturing expenses and selling and administration expenses. Hence it is
suggested to have a better control on the amount of above expenses.

 The cash ratio of the company is not satisfactory throughout the period under study,
because in all the years cash ratio is too below than the standard. Hence it is
suggested to improve cash and bank balance to meet day-to-day obligations.

 It is suggested to make investments in inventories and to improve the performance

in inventory m
CONCLUSION

I feel that M/s Sujala Pipes has very good reputation in the market. It is financially
very strong. Further professionalization of management in handing the financial statements
may be encouraged. The company's overall position is very much satisfactory. I have
realized that I have undergone good experience in the project period.
 BIBLIOGRAPHY

BOOKS AUTHORS

MANAGEMENT ACCOUNTANCY K.SHARMA & S.K.GUPTHA

4th Edition

WORKING CAPITAL MANAGEMENT V.K.BHALLA

7th Edition

FINANCIAL MANAGEMENT I.M.PANDEY

9th Edition

FINANCIAL MANAGEMENT PRASANNA CHANDRA

3rd Edition

WORKING CAPITAL MANAGEMENT MOHAN RAO

2nd Edition

Web sites:

www.nandipipes.com