CHAPTER 1

INDUSTRY PROFILE
1.1 Introduction
Machine Tools Industry is a strategic industry forms the backbone of many if not most
of the major sectors of industrial activity in a country in the traditional manufacturing context.
Therefore, a country such as India which is on the threshold of becoming a major global
industrial and economic power must have a strong, well-developed, robust and modern
machine tool industry to support and assist its manufacturing sector.
The machine tool industry in India has played and will continue to play a key role in
enhancing competitiveness and enabling development of quality and excellence in the output of
the manufacturing industry and of the Indian economy as a whole. In India, the machine tool
industry supports the strategic development and growth of the automotive, the white and brown
goods, the capital goods industries as well as strategic sectors such as defense, railways,
aerospace, etc. Machine tools also contribute to the vibrancy of small and medium scale
manufacturing industries, in particular, the millions of job shops in the country.
In India, the Rs. 17 billion machine tool industry supports more than Rs.2,000 billion
manufacturing sector in the country. The Indian machine tool industry predominantly
comprises manufacturers from the small and medium-sized enterprises. There are about 150
major manufacturers in the organized sector. About three-quarters of total machine tool
production in the country comes out of ISO certified companies that are involved in
manufacturing of metalworking machine tools, manufacturing solutions, accessories, cutting
tools & tooling systems. India-wide, the sector employs 65,000 skilled unskilled persons.
Based on current trends and emerging demands, the computer numerically controlled
(CNC) segment is emerging as a key driver of growth for the machine tool industry in India.
Indian-made machine tools are currently exported to over 55 countries – major ones being
United States, Italy, Brazil, Germany, and the Middle East. Lathes and automats, presses,
Electro-discharge machines and machining centers form the bulk of export orders for Indian
manufacturers. Thus, the Indian machine tool industry has undertaken a long way in the last
Decade since liberalization and economic reforms were ushered in. Now, the industry, which
had a technology dependent status, boasts of successful products out of its own R&D efforts.

1.2 Historical Background

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 Early 1950s to mid 1970s, the machine tools industry evolved under an umbrella of
protection in which the growth was based on import substitution. The Government of India set
up the Hindustan Machine Tools (HMT), which provided a nucleus for development of
technological capabilities and skills. It also spearheaded sprouting of several ancillary units in
the private sector by providing support and thus became local suppliers of components.
During the 1950s to mid-1960s, this sector bolstered in confidence and began to absorb
imported technology and manufacture machine tools to specifications given by foreign
collaborators. It also initiated developmental work directed to modifying machine tools and
developing variants of machines for which design had been acquired by the purchase of license.
The next phase of liberalization of policies of the government allowed selective imports
that made it imperative for the domestic industry to catch up with quality specifications of
imported machines, at reduced costs and to adopt best practices for reducing technology gaps.
In the 1980s, the industry developed further and was able to acquire know-how in machine tool
technology in order to reproduce and even develop new machine tools, particularly special
purpose machine tools (SPMs). The national expertise developed over the years provided the
needed human resources to initiate creative modified versions of existing machine tools
manufactured under license, thereby further paving the way towards self-reliance through
aggressive R&D in India.
These efforts resulted in the setting up of several entrepreneurial enterprises that began
manufacturing machine tools leading to increased employment opportunities for engineers and
widening the scope of indigenous R&D projects and development of enhanced technological
capabilities over the next decade. As a result of the various initiations, output of the Indian
machine tool industry, witnessed a meteoric rise from Rs. 29 million in 1970-71 to Rs. 1,185
million a decade later. And by the time of the economic liberalization in 1990-91, turnover of
the industry touched a new high of Rs. 4,135 million. Indian machine tool industry was among
the first industry sectors to be thrown open to global competition in the economic reforms of
the early Nineties. That, however, did not deter the industry, to face the onslaught challenges –
and towards this direction improved features of their machines, enhanced productivity,
increased reliability and performances, and embraced TQM practices.
1.3 Domestic Market
The Indian machine tools industry comprises of around 160 players in the organized
sector and around 400 units in the small ancillary sector. Ten major Indian companies
constitute almost 70 per cent of the total production. The Government-owned Hindustan
Machine Tools Limited (HMT) alone accounts for nearly 32 per cent of machine tools
manufactured in India. Approximately, 75 per cent of the Indian machine tool producers are

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ISO certified. While the large organized players cater to India’s heavy and medium industries,
the small-scale sector meets the demand of ancillary and other units. Many machine tool
manufacturers have also obtained CE Marking certification, in keeping with the requirements
of the European markets. The machine tools industry employs a workforce totaling 65,000
skilled and unskilled personnel. The Indian Machine Tool Manufacturers’ Association
(IMTMA) is the sole voice of the Indian machine tools industry, its membership constituting
over 90 per cent in the country.
1.4 International Trends
Given the buoyant trends in calendar year 2004, the previous worldwide slump in the
global machine tools industry appeared to be a thing of a past. The top 31machine tools
manufacturing countries recorded a turnover of US$ 45.3 billion in2004 – representing a
promising 23 percent growth by value over the previous year. Predictably, some rebounds were
more resilient than others, resulting in few surprises. While Japan increased its lead over
Germany, Taiwan edged past the United States to be among the top five machine tools
manufacturing countries. Italy and China remained in the second and third slot in the last
calendar year. Japan expanded its margin yet again to become the undisputed leader in the
global machine tools industry.
Given the swelling backlog orders for its metal-cutting machine tools, the Japanese
machine tools industry is expected to retain its leadership position. Germany likewise gained a
respectable eight per cent output, while Italy grew by a marginal two percent in 2004. At the
same time Taiwan decisively came out of a slump with a one-third gain in output, China
witnessed a robust 34% boost in its output. In growth terms India was also not far behind. The
Asian manufacturers inched their way up to a 42% share in the total turnover, while the
Europeans, led with a 45 percent share. However, this is still three percent lower than 2003.
The surge in global machine tools exports could not have been more pronounced than in 2004,
with only two countries recording a decline among 31 nations.
1.5 Import Trends
A burgeoning Indian market and a capacity-constrained Indian machine tools industry
resulted in a zoom-phase for importers. Machine tool imports rose by 47 percent to register a
total value of $1.4 billion. With this hike, imports captured nearly 75 % of the Indian market
share. The bulk of the imports comprised metal-cutting machine tools. And within this segment
machining centers, turning centers and grinding centers formed the largest chunk of imports.
These three machine tool categories captured 40 per cent of the total machine tool imports in
2009.

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1.6 Research & Development in Machine Tool Industry
The Indian machine tools are a highly innovative industry. Most of the products
manufactured are through transfer of technology from a technology leader. Usually after
absorption of technology transfer, there always exists a gap where the receiver always ends up
with less technology than the supplier has. Further, the technology leader goes on upgrading
their products and hence Indian companies need to be highly innovative, firstly, to bridge the
gap during the technology transfer and then adapting it to local conditions, tackling problems
thrown up by local materials, labor, market and environment. The role of R&D in India is
slightly different from that in a technology driven country. Its role is to solve problems that
arise in manufacturing since they cannot be solved on the shop floor and that requires special
skills embodied in the R&D department.
Today in India R&D work done by the industry is in isolation. Except for the
automotive component industry, R&D is not generally done in consultation with user sector.
This needs to be changed and more interaction is necessary with the users to bring about
innovative changes and add value to the products. The CII survey has revealed that 60 percent
of the companies have R&D departments and earmark a percentage of their sales towards
R&D. The industry spends on an average 1.9 percent of its sales on R&D, ranging from 0.2
percent to 10 percent in some cases, which is quite satisfactory when compared to the other
sectors of the capital goods industry. However, this is still not enough and more needs to be
done, especially when it comes to high speed flexible machines requiring higher capabilities.
The industry has developed very sophisticated machines thereby proving that the domestic
companies do possess the technical ability and manufacturing capability but lacks the financial
power to pursue these. Only 20 percent of the companies have technological tie-ups.
Most of the lower end machine tools manufacturers develop their own products through
in house innovation and product development. The product development capabilities of this
sector are therefore fairly high. It is also evident that more and more manufacturers are
converting their products from conventional machines to CNC. The industry should spend
more on R&D for the CNC systems and develop indigenous PC based or dedicated CNC
systems so that dependence on foreign sources for supply or servicing can be reduced.
CHAPTER 2
COMPANY PROFILE

2. a. Background and inception of the company

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 ACE Designers was set up in 1979 as a machine tool designing Service Company. The
company began its foray into manufacturing of machine tools in 1982 when it was
commissioned to make a range of special purpose import substitution machine tools needed by
the I.C Engine valve industry. Three engineers, Mr.A.V.Sathe, Mr.Shrinivas G.Shirgurkar and
Mr. B. Machado promoted the company as a partnership. Together, they pooled into their new
venture a total of 35 years of machine tool experience, all of it accumulated at the central
manufacturing technology Institute, India’s premier center for manufacturing technology &
machine tool design. The trio began the venture armed with only their experience, design
boards and a few thousands Rupees in a garage.

The first product developed by Ace Designers was Auto Lathe – a multi slide automatic
production turning machine, built on the modular concept around the “component to be
machined” and supplied s a complete machining solution with custom designed work holding
and tooling. This machine became very popular with the auto components and the two- wheeler
industry & the industry leader in its class. Ace started manufacture of CNC machines in 1986
and their first CNC Chucker LC-16 was adjudged the best – designed machine at the IMTEX
86. “Today, Ace Designers are their largest manufacture of CNC Lathes in India with a market
share of 40%.” The product range consist of Slant bed CNC Lathes, CNC Chucker, a twine
spindle CNC Chucker, Auto Lathes and special turning solutions with automatic load unload
systems.

In-line with industry expectations and market trend, the company has set a target of
producing 2,300 machines for the financial year 2010-11 and 3,000 machines for the year
2011-12. In order to achieve targeted sales, the Company has planned for increase in
manpower. Efforts within the industry are now underway to improve the features of CNC
machines, and provide further value additions at lower costs, to meet specific requirements of
users. Since its inception in 1979, Ace Designers has accorded the highest priority on
appropriate, state-of-the-art technology in developing a product portfolio eminently suited for
the needs of the day and anticipating emerging trends. Ace Designers' foray into manufacturing
took off with SPMs for the engine valve industry, followed by semi-automatic multi-slide
lathes for the automobile industry. These modular machines, known as Auto Lathes, turned out
to be the launching pad for the Company's emergence as a leading manufacturer of CNC
turning machines. In 1986, Ace launched its first CNC Chucker LC-16, adjudged as the best
designed machine introduced at the IMTEX exposition. With a range of turning machines
covering a wide spectrum of applications, Ace now plays a pivotal role in the engineering

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industry, especially in the automobile component sector. This role extends far beyond just the
supply of machines to encompass comprehensive tooling solutions and application engineering,
leading to strong and enduring relationships with loyal customers. They have grown with Ace,
just as Ace has grown with them. Underlying the abiding commitment of Ace to customers is
the pursuit of excellence in a fully transparent Endeavour covering all aspects of the
Company’s operations.

2. b. Nature of Business Carried

Ace Designers Ltd is normally manufacture the machine tools and exports the products
overall their markets which are there in India and also across the world. As a result of
continuous expansion, ACE has kept looking for new markets; it began its export of Auto
Lathes with automatic load, unload systems for the bearing industry. A large number of these
machines are in use and regularly exported to Brazil, Egypt, Germany, Spain, UK and USA.
ACE has over 300 CNC Lathes working with international customers in Australia, Brazil,
China, France, Germany, Italy, Middle East, Netherlands, Russia, Thailand, Turkey and UK.
ACE exports machines and have an established distributor network in Australia, Brazil, China,
France, Germany, Italy, Netherlands, Russia, Thailand, Turkey, and UK. Efforts are on way to
set up a distributor networks in USA , South Africa, South East Asia.

2. c. Vision, mission & Quality Policy

These are the main things for the organization so that it can set definite mark for the
organization. In the corporate context, vision refers to an inspirational picture of a future that
can be created, offering clarity amidst confusion, hope against despair, and unity of purpose
amidst diversity of personal causes and mission tells about the activities which are to be good
to reach the goal.
Vision: - A strategic vision is a road map showing the route a company intends to take in
developing and strengthening its business. It paints the picture of company’s destination and
provides a rationale for going there. The vision statement of Ace Designer Ltd is as follows:
“Large Scale Producer of World Class Machine Tools”
Mission: - The mission is an enduring statement of purpose that distinguishes one business
from other similar firms. Defines current business activities, highlighting boundaries of current
business. Present products and services, Types of customers served. Which conveys who are,
what we do, and why we are here? We will recognize our responsibilities as corporate citizens
to foster progress, to promote general welfare of the society. We will provide an environment

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to our staff to grow and advance to prosperity and thus promote a sense of belonging. We will
exceed customer expectations through reliable product, on time delivery, cost effective solution
with an added assurance of prompt service.
Quality policy: - ‘It is our policy to continuously aim at satisfying our customers’ quality
expectations. Our objective is to provide the customers with a reliable product, a cost effective
solution to their needs and to deliver t to them on time with an added assurance of prompt

service. Customer delight, cost effective working, passionately ensuring quality, empowering
people, business ethics & transparency.

2. d. Products Profile
Jobber XL: - Ace Jobber Series are cost effective, fully fledged CNC machines designed
for precision and built to take advantage of CNC features like high rapid rates, cutting
parameters, constant surface speed etc., The machine elements like ball screws, bearings,
CNC systems and drives have been chosen appropriately. The machine is put together by a
dedicated team of skilled craftsmen, under expert technical guidance.

Jobber Junior: - Ace Jobber Series are cost effective, fully fledged CNC machines
designed for precision and built to take advantage of CNC features like high rapid rates, cutting
parameters, constant surface speed etc., The machine elements like ball screws, bearings, CNC
systems and drives have been chosen appropriately. The machine is put together by a dedicated
team of skilled craftsmen, under expert technical guidance.

Super Jobber: - Ace Jobber Series are cost effective, fully fledged CNC machines designed
for precision and built to take advantage of CNC features like high rapid rates, cutting
parameters, constant surface speed etc., The machine elements like ball screws, bearings, CNC
systems and drives have been chosen appropriately. The machine is put together by a dedicated
team of skilled craftsmen, under expert technical guidance.

Dart: - Dart is a faster version in BT – 30 family with rapid traverse of 60 /48 m / min. Dart
comes with 12 tool disc type tool changer. It has got 8000 rpm direct drive as a standard. Dart
has a chip to chip time of 2.7 seconds. Optional features like higher spindle power, CTS, 16
tools ATC and APC are available.

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Spark: - Spark is the smallest machine under BT – 30 series. Table size is of 500 X 330 mm.
It has 6 tools disc type tool changer. This machine is targeted mainly for educational
Institutions small entrepreneurs who are making a shift from conventional machines to CNC
machines. This is the one of the important product in this company.

DTC – 300: - DTC- 300 is the smallest drill tap center available. It has got slightly bigger
table and strokes when compared with Spark. DTC-300 comes with 12 tool disc type tool
changer. This has got higher rapid traverse of 32, 40 m/min as option with higher axes motors.
Options like APC, 16 tool disc type ATC and provision for Index table available.

DDART +: - Dart + is a bigger version of Dart with larger strokes and bigger table when
compared to Dart. (Table size is of 900 X 450 and Stroke of 600 / 450 / 350 mm). It has got a
chip to chip time of 2.9 seconds. Optional features like higher spindle power, CTS, 16 tools
ATC and APC are available. Apart from shuttle type APC rotary type APC are offered.

MCV – 300: - MCV – 300 is the smallest Vertical Machining Center available in BT – 40
ranges. Table size of 600 X 350 mm; Stroke of 350 / 300 / 300 mm. Indirect Drive 6000 rpm is
a standard feature. Rapid traverse of 32 / 32 / 30 m / min. Options such as APC, CTS Index
table interfacing etc are offered.

MCV -300 XL: - MCV – 300 XL is the faster version of MCV – 300. It has got 8000 rpm
direct drive as a standard feature. Rapid traverse is 50 / 50 / 48 m / min. Higher spindle power
of 7.5 / 5.5 Kw is a standard feature. All other options of MCV – 300 such as APC, CTS, Index
table and Rotary table interfacing are offered.

Winner: - As the name itself says it is really a Winner. Close to 600 Winners are
successfully running continuously in different parts of the country since it was launched.
Feature wise similar to MCV – 300. Table size is of 800 X 400 mm and stroke of 500 / 400 /
350 mm. It is very ideal machine for an Entrepreneur who wants to start new business or to
upgrade from conventional machining to CNC machining.

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Winner XL: - Winner XL is a faster version of Winner with higher rapid traverse of 40 m /
min on all the three axes. Spindle speed of 8000 rpm with direct drive and higher power of 7.5 /
5.5 Kw is a standard feature. Options such as CTS can be offered with direct drive.

Challenger+: - Challenger + is a model with 12 tool ATC with servo driven in the BT – 40
group which is quite popular among two wheeler component manufacturing industries. This is
the fastest machine in this range with 50 / 50 / 40 m / min rapid traverse.

2. e. Areas of Operation
Areas of operation is nothing but the company where and which type of business It
has doing. Which type of business it has and where and all the branches were present. The first
product developed by Ace Designers was Auto Lathe – a multi slide automatic production
turning machine, built on the modular concept around the “component to be machined” and
supplied s a complete machining solution with custom designed work holding and tooling. This
machine became very popular with the auto components and the two- wheeler industry & the
industry leader in its class. Ace started manufacture of CNC machines in 1986 and their first
CNC Chucker LC-16 was adjudged the best – designed machine at the IMTEX 86. “Today,
Ace Designers are their largest manufacture of CNC Lathes in India with a market share of
40%.” The product range consist of Slant bed CNC Lathes, CNC Chucker, a twine spindle
CNC Chucker, Auto Lathes and special turning solutions with automatic load unload systems.
As a result of continuous expansion, ACE has kept looking for new markets; it began its
export of Auto Lathes with automatic load, unload systems for the bearing industry. A large
number of these machines are in use and regularly exported to Brazil, Egypt, Germany, Spain,
UK and USA. ACE has over 300 CNC Lathes working with international customers in
Australia, Brazil, China, France, Germany, Italy, Middle East, Netherlands, Russia, Thailand,
Turkey,UK. ACE exports machines have an established distributor network in Australia,
Brazil, China, France, Germany, Italy, Netherlands, Russia, Thailand, Turkey,UK. Efforts are
on way to set up a distributor networks in USA, South Africa South East Asia.

2. f. Ownership Pattern

Ownership pattern means who are all the owners of the company and if it is depend on
shareholders and other parties then it will give clear details about the investment and the
investors who invested in the company. It is help to understand whom the company belongs
and how the pattern of investment. 100% Shares are held and owned by three directors and

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their family members: Mr. A.V.Sathe, Mr.S.G. Shirgurkar Mr. B. Machado Three engineers,
Mr.A.V.Sathe, Mr.Shrinivas G.Shirgurkar and Mr. B.Machado promoted the company as a
partnership. Together, they pooled into their new venture a total of 35 years of machine tool
experience, all of it accumulated at the central manufacturing technology Institute, India’s
premier center for manufacturing technology & machine tool design. The trio began the
venture armed with only their experience, design boards and a few thousands Rupees in a
garage.

2. g. Competitors Information

Competitors are almost everywhere, whether it is a business or anything else.

Competitors will give one kind of motivation to change ourselves and develop innovative
things for the business. Though Ace Designers Ltd machine tool industry is one of the leading
companies not in Karnataka, but also in India. There are many competitors for Ace Designers
Ltd they are: LMW ltd Coimbatore, Tamil Nadu. Lokesh Machines Ltd, Balanagar, Hyderabad.
Askar Micron Private Ltd, Hebbal industrial area Mysore. Bathiboi Ltd, JC Road Bangalore.
Pride Machine tools Pvt Ltd, Peenya indusrial area Bangalore. PMT Ltd, Pune. Macpower
CNC Machines Pvt Ltd, Metoda Rajkot Gujarat. Galaxy Machinery Pvt Ltd, Belgaum ,
Karnataka. Marshall Machines Pvt Ltd, Ludhiana, Punjab. Micron Machine tools Ltd, Mavdi
plot, Rajkot, Gujarat. Miven Machine tools Ltd, Hubli, Karnataka. So the competitors will
have them a lot overall market.

2. h. Infrastructure Facilities
Infrastructure plays an important role in the organization development. Infrastructure for
any company mainly contains land and building, power supply for the repair, transportation
facility. Storage facility like warehouses and stores many other. All this play an important role
in the overall growth of the organization. Ace Designers Ltd has good infrastructure facilities
which contribute a lot in the success of the company. Infrastructure availability in particular
cover area is of 8- Acre Plot.
Technology: - Modern component production shop with CNC Lathes, Machining Centers,
Precision Grinders. Sheet metal plant with CNC bending machines, shearing machine. Design
facility equipped with CAD infrastructure –Microcadem & Pro E software. Precision testing &
quality control equipment- Laser interferometer, a Roundness Tester, Surface Tester,
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Renishaw Ball bar Tester & CMM. Detailed documented manufacture testing & assembly
procedures. State of the art information technology infrastructure consisting of a companywide
LAN, ERP, CRM, Mail servers, SQL server Etc. Al the manufacturing principles & the
marketing offices across the country are networked on a VPN Trained work force with
emphasis on current processing rather than o post-production inspection. Ethical Business
Practices.
Research & Development: - The strong research and development set-up is the backbone
of the Company’s growth. The existing products are continuously improved with user feedback
and new products introduced. The Department of Scientific and Industrial Research, Ministry
of Science and Technology granted in-house R&D unit recognition since 1992. It’s a mate of
pride that ACE does not rely on any technical collaborate and all product development is
internal. The core competence of the company is in converting design concepts into working
products quickly & cost effectively.

2. i. Achievements and Award

The art of accomplishing or finishing, something fruitfully, especially by means of
exertion, skill, practice, or perseverance. Optimism is the faith that leads to achievement.
Nothing can be done without hope and confidence. The starting point of all achievement is
desire. Without continual growth and progress, such words as improvement, achievement, and
success have no meaning. For ACE fulfillment comes only from complete customer
satisfaction and from being a good corporate citizen .OUR strong adherence to the values they
cherish and their relentless pursuit of excellence helped them in receiving various awards. Over
the years, a number of awards have been be reserved on ACE for various achievements. These
include the development of pioneering process technologies such as flow – line assembly CNC
lathes, which has enabled the company to pass on the cost benefits of mass production to
customers. The numerous accolades ACE have received only serve as reminders of the intense
efforts we have to put in to maintain our position of leadership in serving our customers and
safeguarding the interests of all stakeholders.
1979: Ace designer was set up as a machine tool designing Service Company in 1982
they took up manufacture of special machines for the I.C. Engine Valve Industry. In 1984,
“Ace Auto Lathe” - A multi slide Automatic turning machine for large Volume production is
introduced. Again in 1985, Auto Lathe is established as a production machine of choices in the
two wheeler and auto ancillary sectors. In 1986, Developed CNC machines with different
technology. They got the award in 1987, “Best small scale entrepreneur” – 1st prize National

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Award, which was Presented by the President of India. Again in 1988, CNC bags the “most
innovative product” award at INTEC-88 in Coimbatore and in 1989, “Special Recognition
Award” – which was awarded by the KLN Foundation Trust. In 1990, developed an Export
model CNC Lathe. In 1991 they were 2 Plant Inaugurated. In 1992, In house R&D granted
recognition by the department of Scientific & Industrial Research.
In 1994, they established Ace Manufacturing System Ltd. To manufacture Horizontal &
Vertical Machining Centers. In 1995, “Excellence as an Entrepreneur of Karnataka” – which
was awarded by K.S.F.C. In 1996, they established Ace Multi Axes Systems Ltd. And in 1997,
they were again established Plant 3 for sheet metal facilities. In 1998 they introduced Jobber a
Cost effective full-fledged CNC Lathe for job shops at IMTEX 98. In 2000 they acquired an 8
acre plot with 2 manufacturing shops or consolidation of Facilities. In 2003, They Shifted
manufacturing facilities to the new plant. Installed Mazak pallet pool Machining center. In
2004, they Won FIE award for best design for LT-2XL CNC Lathe with sub spindle at IMTEX
04. In 2005, the got the Best supplier Award – which was awarded by Honda Motorcycle &
Scooters India Limited. In 2006, again they got the Productivity Championship Award from
IMTMA – SIEMENS in the model Manufacturing System Redesign. In 2007, “Captain of the
Industry ’’ which was award by Government of Karnataka. And in 2008, Obtained ISO
14001:2004 certifications from TUV, so Ace Designer Ltd achieves with hard efforts.

2. j. Work Flow Model

Work Flow concepts are closely related to other concepts used to describe
organizational structure, such as silos, functions, teams, projects, policies and hierarchies. In
the 1980s, the term workflow was first used in its modern form in the software industry by
FileNet vice president David Siegel. Workflows may be viewed as one of the primitive
building block of the organizations. The company called its business process automation
software “WorkFlo”. Workflow consists of a sequence of connected steps. Which present the
operation of the company in the form of model of sheet metal cladding in machine tools &
machinery is shown in following chart.

Figure No.2.1a: Workflow Model

Type Of Raw Material

Cutting

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 Welding

Finishing

Material handling

Fixtures

Type Of Raw Material

The raw material is the one of the very essential things in manufacturing
process. Without raw material the process cannot moves nicely. The main this sheet metal there
may be find as mainly in 2 types of raw materials. In this type of raw material also found
different categories of raw materials.

CRCA – Cold Rolled Closed Annealed

In this type of material there may keeps in a particular degree called cooling storage,
and then it will goes to the final particular machines. In this process there is different processes
are coming. Namely, HR coils, Picking plant, cold rocing mill, Annealing line, skin pass,
slitting line, shearing line, finally CR sheet will come arise. There may 4 main categories in
CRCA Sheet. Generally available up to 3.15mm thickness. Commercial Quality Grade, D
Grade Quality, D.D Grade Quality, EDD Grade Quality.

HRCA – Hot Rolled Closed Annealed

In this type of material there may keeps in a particular hot degree called hot storage,
and finally it goes to the particular machines. In this process there is different process are
coming. Namely, Slabs, reheating furnace, roughing mill, stecket mill, shearing line, plates,
packing, and finally dispatch to the particular machines.

Cutting
Cutting is one of the important work flow model in sheet metal cladding. In this process
there is also some different cutting types are come arises.

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Shearing: - Length of cutting can be controlled with the help of back gauge and accuracy
will be within + / - 1.0mm/meter.
Notching: - Corner profile cutting can be done with notching machine by using templates or
by marking.
Punching: - Holes and slots can be done with punching machine. Quality and accuracy of
profiles and holes with the above machines are depending on the skill manpower and
repeatability will not be assured.
CNC Laser cutting: - Available to cut up to 16.0mm thickness of ms plate and 8.0mm
thickness of SS depend on capacity. Sheet metal development drawing are made using CAD
software, transfer file to the machine to get the required profile, and an accuracy of cutting of
about +/- 0.01mm/ meter with the above machine. Continuous improvement should be there in
development in the view of decrease cutting operation as well a welding length.

Bending
There are many types in folding or bending of sheet metal components depending upon
the capacity, quality, quantity requirement & infrastructure type of bending will be selected. As
machine tool component doesn’t have the batch quality as compared to automobile component
we have to go for V-Type punch and die technology for bending. 2 types of V-type ending Air
bending, Bottoming.
Welding
It is process of joining 2 metal parts through melting themselves or welding wire
between them, using the heat generated from an Arc of high electricity between the parts and
the tin of welding torch. So welding is the one of the major process in workflow model.
Finishing
It is the one in which removes the unwanted welded area o improve the Aesthetic of the
sheet metal component and to ensure the good finish like there is no joints in between there. If
there is more welding accumulation on the component first grinding operation is done then
final finishing is done using sandering machine. If bead thickness is small directly it can be
finished with sandering. After finishing operation component will be sent for pre-Treatment
And Painting Or Powder Coating.
Material Handling

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 Material handling, housekeeping is not directly related to a technical operation, it is
very important for any sheet metal, fabrication industry control quality quantity, handling to
avoid damage and wastage of time. Storage of raw material and process components on
suitable flat racks. Handling of raw material and finished components with designed pallets.
Movement of process and finished components with Hydraulic or battery operated trolleys.
Fixture
In order to join parts successfully in welding application individual parts must be
aligned precisely and held securely in place while welding the component. Important points to
be taken care. Design of fixtures which holds the individual parts in the proper alignment. The
tool must allow for quick and easy loading. It must hold the parts in place securely until they
are welded together.

2. k. Future Growth and Prospectus

Future growth and prospectus is one of the important aspects in every field of
organization. It is the base for all the company’s activities whatever the functions are doing in
throughout the year. Future growth means what is their expectation in their short term period,
and also long term period what and all goals they want to achieve in a particular time including
some god projects like purchasing the new plant and machineries, new equipments, furniture’s
etc.. Without any future growth they get the difficult to sustain in the market. So all companies
will try their level best to make the maximum output with certain development in their
companies which may effect in positive manner.
Keeping pace with advances in technology, Ace is poised to meet the Challenges of the
future with a product range that offers the best value for the investment Customers make. Up-
to – date, cost effective total turning solutions from Ace help Customers to reach ever higher
levels of productivity and sustain high quality parameters. Ace is committed to an abiding
partnership with customers in exploring wider vistas, whatever the turns. The next move for
ACE is to make cost effective machines with high productivity.
In-line with industry expectations and market trend, the company has set a target of
producing 2,300 machines for the financial year 2010-11 and 3,000 machines for the year
2011-12. In order to achieve targeted sales, the Company has planned for increase in
manpower. The company order book position has touched all time peak 1,100 machines and
the order backlog has exceeded 6 months production. Efforts within the industry are now

15
underway to improve the features of CNC machines, and provide further value additions at
lower costs, to meet specific requirements of users.
Initiatives are taken to de-bottleneck the production activities. Challenges include
supply chain management: wherein vendors are not geared-up to deliver required quantity with
short lead time. To overcome the situation permanently, the company has planned to go for
backward integration by investing in modern foundry: which will produce required inputs
within a short lead time. Plans are also underway to set up most modern Machine Tool Plant
with all required amenities at Thyamagondlu Hobli, Nelamangla Taluk, Bangalore and some
other places they were found out.
There is a lot of project which may has to be come in the upcoming year therefore the
Ace Designer Ltd Company has well planned their future growth as short term as well as long
period of time. In this way they are working with hand in hand to reach their target which may
thought to do the work in a particular period of time.
CHAPTER - 3
MCKINSEY’S 7S FRAMEWORK
According to Mc Kinsey’s model , a company’s strategy is only one of the seven
elements in Japanese Management by Richard Pascal and Anthony Athos in 1981. They
had been looking at how Japanese industry had been successful , at the same time
Tom Peters and Robert Walterman were exploring what made a company excellent.
The 7S model was born at a meeting of the four authors in 1978. .

Figure .3.1A: Mckinsey’s 7S Frame Work Model

The above figure 3.1A show Mckinsey’s 7S work model. The first three elements
Strategies, System and Structure are considered as the hardware of the business. The
next four elements Style, Staff, Skills and Shared Values are called as the Software’s of

16
successes. The McKinsey’s 7S model involves seven interdependent factors which are
categorized as either “hard” or “soft” elements.

The Mc Kinsey’s 7S model involves seven interdependent factors which are categorized
as either “hard” or “soft” elements. The hard elements are Strategy, Structure, and Systems
and the soft elements are shared values, Skill, Style and Staff. Hard elements are easier to
define or identify and management can directly influence them: These are strategy statements;
organization charts and reporting lines; and formal processes and IT systems. “Soft” elements,
on the other hand, can be more difficult to describe, and are less tangible and more influenced
by culture. However, these soft elements are as the hard elements if the organization is going to
be successful. Therefore it is much more difficult to plan or to influence the characteristics of
the soft elements. Although soft factors are below the surface, they can have a great impact of
the heard strategies system of the organization.
3.1 Structure
Structure is the organizational chart and associated information that shows who reports
to whom and how tasks are both divided up and integrated. In other words, structures describe
the hierarchy of authority and accountability in an organization, the way the organization's
units relate to each other: centralized, functional divisions (top-down); decentralized (the trend
in larger organizations); matrix, network, holding, etc. These relationships are frequently
diagrammed in Organizational charts. Most organizations use some mix of structures -
pyramidal, matrix or networked ones - to accomplish their goals.
Business need to be organized in a specific form of shape that is generally referred to as
organizational structure. Organizations are structured in a variety of ways, dependent on their
objectives and culture. The structure of the company often dictates the way it operates and
performs. Traditionally the businesses have been structured in a hierarchical way with several
divisions and departments, each responsible for a specific task such as human resources
management, production or marketing. Many layers of management controlled the operations,
with each answerable to the upper layer of management. Although this is still the most widely
used organizational structure, the recent trend is increasingly towards a flat structure where the
work is done in teams of specialists rather than fixed departments. The idea is to make the
organization more flexible and devolve the power by empowering the employees and eliminate
the middle management layers.
Organizational structure refers to the way that an organization arranges people and jobs
so that its work can be performed and its goals can be met. When a work group is very small
and face-to-face communication is frequent, formal structure may be unnecessary, but in a

17
 larger organization decisions have to be made about the delegation of various tasks. Thus,
procedures are established that assign responsibilities for various functions. It is these decisions
that determine the organizational structure. In an organization of any size or complexity,
employees' responsibilities typically are defined by what they do, who they report to, and for
managers, who reports to them. Over time these definitions are assigned to positions in the
organization rather than to specific individuals. The relationships among these positions are
illustrated graphically in an organizational chart (see Figures 1a and 1b). The best
organizational structure for any organization depends on many factors including the work it
does; its size in terms of employees, revenue, and the geographic dispersion of its facilities; and
the range of its businesses (the degree to which it is diversified across markets).

BOARD OF DIRECTORS

MANAGING DIRECTOR MANAGING DIRECTOR

ief of finance & project Chief of HR Chief of materialsChief of assembly Chief of design Chief of development

Recruitment Design development

Account Heads Bought outs
Chief of Technical servic

Training R&D
Vendor component
Costing
Chief of ACG & MR
Employee payroll Tool room
Production of component
Management Payroll

Performance management Chief of information system

Finance Machine assembly

Chief of customer services

Projects

18
 There are multiple structural variations that organizations can take on, but there are a
few basic principles that apply and a small number of common patterns. The following sections
explain these patterns and provide the historical context from which some of them arose. The
first section addresses organizational structure in the twentieth century. The second section
provides additional details of traditional, vertically-arranged organizational structures. This is
followed by descriptions of several alternate organizational structures including those arranged
by product, function, and geographical or product markets. Next is a discussion of combination
structures, or matrix organizations. The discussion concludes by addressing emerging and
potential future organizational structures.

3. 2 Strategy
Strategy includes purpose, mission, objectives, goals and policies. According to “Peter
Ducker” Strategic management is not a box of an action Plan based on the actual or probable
plans of others tricks or a bundle of techniques. It is analytical thinking and commitment of
resources to action. An action Plan based on the actual or probable plans of others. The set of
decisions and actions that result in the formulation and implementation of plans designed to
achieve a company’s objectives.
Strategic intent is the leveraging of a firm’s internal resources, capabilities and core
competencies to accomplish the firm’s vision, mission and objectives in a competitive
environment. Characteristics of Strategic Decisions require large amounts of the firm’s
resources often affect the firm’s long-term prosperity, usually have multifunctional or multi-
business consequences, Require considering the firm’s external environment. Strategy is the
plan of action an organization prepares in response to, or anticipation of, changes in its external
environment. It deals with essentially three questions. Where the organization is at this moment
in time, where the organization wants to be in a particular length of time, How to get there.
To recognize the responsibilities as corporate senior citizens to faster progress , to
promote general welfare of the society, to provide an environment to the staff to grow and
advance to prosperity and thus provide a sense of belonging . We will exceed customer
expectations through reliable product with timely delivery , cost effective solution with an
added assurance of prompt service.
All company got different strategy. The authors describe strategy as the plan or course
of action in allocating resources to achieve identified goals over time. Ace Designer Ltd
mission is to “We will exceed customer expectations through reliable product, on time delivery,
cost effective solution with an added assurance of prompt service. The quality policy of Ace
Designers Ltd is to have a set of satisfied internal customers, business associates, and society
through excellence in quality products and services and also to achieve safe working conditions
19
and Eco friendly environment through continuous improvement in the technology and man
power skills. Its strategy is to be committed to the state of the technology, environmental
protection, and safely to operations, social commitment and employee relations.

3. 3 Systems
System in the 7-S frame work referred to on the all the rules, regulations and
procedures both formal and internal that compliments the organization structure in other words,
it is the equaling of the term “infrastructure” often changes in strategy implemented with some
changes in ‘system’ rather than in organization’s structure.

System refers to the rules and procedures- both formal and informal. System
complements the organizational structure. They are similar to the term infrastructure used in
the earlier section. The daily activities and procedures that staff members engage in to get the
job done. System includes procedure, planning and control systems, costing and capital
budgeting, recruitment, training and development, planning and budgeting, and performance
evolution. Formal and informal procedures that support the strategy and structure (systems are
more powerful than they are given credit). These processes are normally strictly followed and
are designed to achieve maximum effectiveness. Increasingly, the organizations are simplifying
and modernizing their process by innovation and use of new technology to make the decision-
making process quicker.

According to Wikipedia “ system is a set of detailed methods, procedures, and routines

established or formulated to carry out a specific activity, perform a duty, or solve a problem”.
Manic bag have its own system in the organization by giving online test drive option for the
local customers. Company follows a particular process for recruitment that is by inviting
application form for the job. These processes are normally strictly followed and are designed to
achieve maximum effectiveness. Increasingly, the organizations are simplifying and
modernizing their process by innovation and use of new technology to make the decision-
making process quicker. Systems define the flow of activities involved in the daily operation
of business, including its core processes and its support systems. They refer to the
procedures, processes and routines that are used to manage the organization and characterize
how important work is to be done.

The procedures, processes and routines that characterize how the work should be done:
financial systems; recruiting, promotion and performance appraisal systems; information

20
systems. The flow of activities involved in the daily operation of a business including its core
process and its support systems. In Ace Designers Ltd, there is a formal flow of communication
in two ways i.e., a top level to bottom level and bottom to top.

3.4 Style/ Culture

Style is one of the seven levels for manager can use to bring about organization change.
The style of an organization, according to the McKinsey framework, becomes evident though
the patterns of actions taken by member of the top management team over a period of time. The
McKinsey framework considers ‘Style’ as more than the style of top management.
"Style" refers to the cultural style of the organization, how key managers behave in
achieving the organization's goals, how managers collectively spend their time and attention,
and how they use symbolic behavior. How management acts is more important that what
management says. Culture remains an important consideration in the implementation of any
strategy in the organization. the culture of the organization, consisting of two components they
are organizational culture and management styles. style is a way in which something is said,
done, expressed, or performed. How the managers in organizations use style to bring about
change all organizations have their own distinct culture and management style. It includes the
dominant values, beliefs and norms which develop over time and become relatively enduring
features of the organizational life. It entails the way managers interact with the employees and
the way they spend their time.
The businesses have traditionally been influenced by the military style of management
and culture where strict adherence to the upper management and procedures was expected from
the lower – rank employees. However, there have been extensive efforts in the past couple of
decades to change to culture to a more open, innovative and friendly environment with fewer
hierarchies and smaller chain of command. An instrument used by the ancient I writing on
tablets covered with wax, having one of its ends sharp, and the other blunt, and somewhat
expanded, for the purpose of making erasures by smoothing the wax. Organizational reporting
relationship conveys the style.
In Ace Designers Ltd Managers spend time interacting with various employees in
various departments and the participation of workers in management is considered vital.
Workers are represented by their trade union for the purpose of healthy negotiation with
management and women employees are equal opportunity to be part to management through
women welfare association.

21
3.5 Skill
"Skills" refer to the dominant distinctive capabilities and competencies of the
personnel or of the organization as a whole. Skill are one of the most crucial attributes or
capabilities or strength of an organization. The term skill includes those characteristics or
distinctive competence which most people use to describe a company. Staff includes the
people/human resource management - processes used to develop managers, specialization
processes, way of shaping basic values of management cadre, ways of introducing young
recruits to the company, ways of helping to manage the careers of employees. Organizations
are made up of humans and it’s the people who make the real difference to the success of the
organization in the increasingly knowledge – based society. Skills refer to the fact that,
employees have the skills needed to carry out the company strategies. Skills of the employees
are improved by giving necessary training to them. Different organization has different set of
skilled employees depending on the nature of business carried. The workers in production
department are skilled in all technical aspect of production process. Informal working
environment created in the organization is a means of bring out the hidden talents and initiative
of workers.

Skills refer to crucial attributes or capabilities of an organization. They are used to

describe that which is found most in the organization. Skills are developed over a period of
time and are a result of the interactions of number of factors. These factors could be personal,
top management, structure, system, etc. Hence when a strategic decision is too made. It is
necessary to build new skills. A skill refers to the fact that employees have the skills needed to

carry out the firm‘s strategies. Skill full employees are the asset of any organization. Skills of
employees may be giving necessary training to them.

Ace Designers has combination of skilled as well as the unskilled labors. Managers like
production, quality manager, accounts manager are highly skilled in the area of their discipline.
In manufacturing department there were labors like educated as ITI background for fitters and
welders where as they have unskilled labors for helping them. Accounting and financial
manager is knowledgeable regarding taxes, duties, transportation charges etc. Overall the
employees are skilled and both on the job and off the job is provided as per the requirements.

3.6 Staff

22
 People are main asset of the organization. Organization performance is mainly depends
upon individual’s performances who are working in the organization. So Staffing plays
important role by employ right person in right job. Staffing is the process of acquiring human
resources for the organization and assuring that they have the potential to contribute to the
achievements of the organizations goals.
"Staff" refers to the number and types of personnel within the organization and how
companies develop employees and shape basic values. Brawn and Moberly define staffing as
“This implies that it includes two fundamentally different processes”. Staffs includes the
people/human resource management – processes used to develop managers, socialization
processes, and way of shaping basic values of management cadre, ways of introducing young
recruits to the company, ways of helping to manage the careers of employees. Organizations
are made up of humans and it's the people who make the real difference to the success of the
organization in the increasingly knowledge-based society.
The importance of human resources has thus got the central position in the strategy of
the organization, away from the traditional model of capital and land. It is also important for
the organization to instill confidence among the employees about their future in the
organization and future career growth as an incentive for hard work. All leading organizations
put emphasis on hiring the best staff, providing them with rigorous training and mentoring
support, and pushing their staff to limits in achieving professional excellence, and this forms
the basis of these organizations strategy and competitive advantage over their competitors. It is
also important for the organization to instill confidence among the employees about their future
in the organization and future career growth as an incentive for hard work organizations are
made up of humans and it is the people who make the real difference to the success of the
organization in the increasingly knowledge-based society.
Staff are the human resources working in an organization they are responsible for
carrying out various activities of the organization effectively and efficiently. They are
responsible for carrying out various activities of the firm effectively and efficiently. In Ace
Designer Ltd, 547 staff members are working in the firm. In that 32 managerial, 147 are
executives, 103 are operators, 1 engineering trainee, 6 Diploma trainee, 218 are technical , 39
are apprentice trainees , 1 for temporary staff. They are very flexible, dynamic and energetic
and always willing to adapt to changes and align towards the strategic goal of the company.

3.7 Shared Values

Shared values the centre case of the framework give raise to a certain spirit among
organizational members regarding “who we are and where we are headed” the spirit permeating

23
in the organization in term is reflected in the values, attitudes and philosophy it its members the
corporate values define the ideas and belief which guide the organizational operation they lay
down the foundation of the organization management philosophy and give raise to a particular
culture.
The super-coordinated goal is analogous to the organization’s purpose. It is a set of
values and aspirations going beyond the formal statement of corporate objectives. They can be
considered as fundamental ideas around which a business is built. Hence, they represent the
main values of the organization. They can also provide the broad notions of future direction.
The organizations with low values and common goals often find their employees
following their own personal goals that may be different or even in conflict with those of the
organization or their fellow colleagues. Under these goals of the company, vision and mission
are specified to the employees. This may be to make money or to achieve excellence in a
particular field. These values and common goals keep the employees working towards a
common destination as a coherent team and are important to keep the team spirit alive.
Shared values are commonly held beliefs, mindsets, and assumptions that shape how
an organization behaves – its corporate culture. Shared values are what engender trust. They
are an interconnecting center of the 7Ss model. Values are the identity by which a company is
known throughout its business areas, what the organization stands for and what it believes in,
it central beliefs and attitudes. These values must be explicitly stated as both corporate
objectives and individual values.
At Ace Designer Ltd each individual department have specific goals and objectives
within the broad framework of its Vision and Mission. They act as the framework for
achievement of organization objectives and goals efficiently and effectively. They are also
bound to follow policies and procedures governed by the state government. All members of the
organization share some common fundamental ideas or guiding concepts around which the
business is built. It must be simple, usually stated at abstract level, have great meaning inside
the organization even though outsiders may not see or understand them.

CHAPTER- 4
SWOT ANALYSIS
A SWOT analysis is an instrumental framework in Value Based Management. Similarly
Strategy Formulation is very essential to identify the Strength, Weaknesses, Opportunities and

24
Threats for a particular company. The technique is credited to Albert Humphrey, who led a
convention at Stanford University in the 1960s and 1970s using data from Fortune 500
companies. It involves specifying the objective of the business venture or project and
identifying the internal and external factors that are favorable and unfavorable to achieving that
objective.
Identification of SWOTs is essential because subsequent steps in the process of
planning for achievement of the selected objective may be derived from the SWOTs. Strengths:
attributes of the person or company that is helpful to achieving the objective(s). Weaknesses:
attributes of the person or company that is harmful to achieving the objective(s). Opportunities:
external conditions that is helpful to achieving the objective(s). Threats: external conditions
which could do damage to the objective(s).
Figure 4.1A: SWOT Analysis

Situation Analysis

Internal Analysis External Analysis

Strengths Weaknesses Opportunities Threats

The above figure 4.1A shows that SWOT analysis. Every organization has certain
techniques to enhance its production, marketing, financing etc. It will increase the productivity
of the organization. Strengths and Weaknesses are internal value creating (or destroying)
factors such as assets, skills or resources a company has at its disposal relatively to its
competitors. They can be measured using internal assessments or external benchmarking.
Opportunities and Threats are external value creating (or destroying) factors a company cannot
control, but emerge from either the competitive dynamic of the industry/market or from
demographic, economic, political, technical, social, legal or cultural factors.

4.1 Strength
Any existing or potential resources or capability within the organization that provides a
competitive advantage in the market is called strength. Strength in the SWOT Analysis is
attribute or characteristics within the organization that are considered to be important to the
execution and ultimate success of the project. Strength captures the positive aspects internal to
your business, Cost advantage through proprietary know-how, Quality processes and

25
procedures, Strong brand or reputation. A firm’s strength are its resources and capabilities that
can be used as a basis for developing a competitive advantage examples of such strength
include; patents, strong brand names, good reputation among customers, cost advantages from
proprietary know-how, exclusive access to high grade natural resources, favorable access to
distribution networks.

The Ace Designers Ltd has the ISO certification that is the one of the important
strength. The ISO 9001 and 14001 certified company and ISO 9001 registration means the
certification of company’s quality system by the third party. This is obtained after a successful
onsite audit of the company operation against the requirements of the relevant quality system
by a third party. Another strength is Working on business excellence model instituted by the
EXIM bank for process improvements. Therefore it is help for the company to make trade on
foreign exporters. The labors in this company have good experienced persons which are
necessary engineering knowledge in particular products. Therefore it is increase the company’s
strength ineffective manner. About in product, Ace Designers are manufactures well quality
products. They were measuring the product each and every content while on manufacturing
process. Pollution free environment; continuous improvement of the environmental
performance by minimizing air emissions, fluent generation and better management of solid
and hazardous wastes. About the manpower they were doing continuous training to the workers
therefore their efficiency and knowledge skill will increases in a systematic manner. It will
takes them to better position for employers as well as company will develops. The main
strength o this companies is they fulfills the customers satisfaction with their wants and
demand. The main markets their product based on the customers demand.

4.2 Weaknesses
A weakness is something a firm lacks, does poorly, or a condition placing it at a
disadvantage. The absence of certain strength may be viewed as weakness. For example, each
of the following may be considered weakness: lack of patent protection, a weak brand name,
poor reputation among customers, high cost structure, and lack of access to the best natural
resources, lack of access to key distribution channels. Your weaknesses are determined through
failures, defeats, losses and inability to match up with the dynamic situation and rapid change.
The weaknesses may be rooted in lack of managerial skills, insufficient quality, technological
backwardness, inadequate systems or processes, slow deliveries, or shortage of resources.

26
 A company’s weakness can relate to inferior or unproven skills, expertise, or
intellectual capital in competitively important areas of the business. Deficiencies in
competitively important physical, organizational, or intangible assets: Missing or competitively
inferior capabilities in key areas. Internal weaknesses are thus shortcomings in a company’s
compliment of resources and represent competitive liabilities. Nearly all companies have
competitive liabilities of one kind or another. In some cases, a weakness may be the flip side
of a strength. Take the case in which a firm has a large amount of manufacturing capacity.
While this capacity may be considered a strength that competitors do not share, it also may be a
considered a weakness if the large investment in manufacturing capacity prevents the firm from
reacting quickly to changes in the strategic environment.
The main weakness of Ace Designers Ltd is that delay in delivery. They manufactures
the tools in a time but they have plenty of orders were comes in to the company. So it will
causes to delays in delivery. Another important weakness of Ace Designer Ltd is high cost of
production. Cost of production is very high due to the raw materials they uses well quality of
materials for their production so it causes high cost of production. Another important weakness
of Ace Designer Ltd is high cost of product is high due to the cost of production. When cost of
production is goes to high then the product cost is automatically increases. The company has
many competitors so they have to make more number of quality products for compete with
them. They can’t do the little bit of negligence in their product competitor will survive the
market.

4.3 Opportunities
The external environment analysis may reveal certain new opportunities for profit and
growth. Some examples of such opportunities include: an unfulfilled customer need, arrival of
new technologies, loosing of regulations, removal of regulation trade barriers. Any opportunity
is major favorable situation in the firm’s environment. The opportunities are External attractive
factors that represent the reason for an organization to exist and develop. The external
conditions that is helpful to achieving the objective. An opportunity could be: A developing
market such as the Internet, Mergers, joint ventures or strategic alliances, moving into new
market segments that offer improved profits, A new international market, A market vacated by
an ineffective competitor in that region.

27
 Market opportunity is a big factor in shaping a company’s strategy. Indeed, managers
can’t properly tailor strategy to the company’s situation without first identifying its
opportunities and appraising the growth and profit potential each one holds. Depending on the
prevailing circumstances, a company’s opportunities can be plentiful or scarce and can range
from widely attractive interesting to unsuitable. In evaluating a company’s market
opportunities and ranking their attractiveness, managers have to guard against viewing every
industry opportunity as a company opportunity. It is mostly from the external environment, it
may be from the govt. also like low down the trade barriers, increase in subsidies, decrease in
number of quotas for foreign players, the competitors in the market are or less demandable etc.

Ace Designer Ltd has the opportunity for their export market. It means the company
has the opportunity for export the products which they were not exporting some other
countries. These countries were demanding their products t them. They has the opportunity for
entry into smaller segments. It means there were the chances for making the merger or
acquisition to a particular segment. The important opportunity that is high demand for products.
Therefore it will helps to the company that their product will getting good value in the market.
Ace Designer Ltd has another opportunity that is easy availability of technology. Here the
company wills manufactures well quality of products as easy available technology so, it is not
necessary to use highflier technology for them.

4.4 Threats
Changes in the external environment also may present threat to the firm. Some
examples of such threats include: shifts in consumer tastes away from the firms products,
emergence of substitute products, new regulations, and increased trade barrier. Threats are the
external factors, beyond an organization’s control, which could place the organization mission
or operation at risk. The external conditions which could do damage to the business’s
performance. A threat is a challenge created by an unfavorable trend or development that may
lead to deteriorating revenues or profits.
Globalization and privatization, any sudden change in govt. Policy may have adverse
effect on sales, new interacts from competitors like price and quality, changing market trends,
competition from other models, change in market that is from seller’s market to buyers market.
Emergence of cheaper/better technologies, introduction of better products by rivals, entry of
lower-cost foreign competitors, onerous regulations, rise in interest rates, potential of a hostile
takeover, unfavorable demographic shifts, adverse shifts in foreign exchange rates, political

28
upheaval in a country. Threats are key impediments to the firm’s current or desired position.
Changes in the external environmental also may present threats to the firm. Threat could be: a
new competitor in your home market, price wars with competitors, and a competitor has a new,
innovative product or service, competitors have superior access to channels of distribution, and
taxation is introduced on your product.
Ace Designer Ltd have the lot of competition. Due to this the company may get the
threats from them. Because the competitors were sells their product with low rate. So, it will
affects to the company. The another important threat of Ace Designer Ltd is that entries of
small players in to the market. The threat is that the customers were concentrating to these
small players for their experience or for their reasonable rates. Ace Designers another threat is
that availability of suppliers were decreased. Due to improper training for suppliers, lack of
knowledge for suppliers in a particular areas etc. Due to inflation product price were increased.
Then money supply will increase in the market. Therefore raw materials cost will increases.
Credit availability will decrease.
From the above discussion we can understand various threats, opportunities, challenges
and weakness of the company. It clearly deals with these attributes of an organization. Because
of the globalization the competition is high. If companies have the ability to identify weakness
and convert this weakness into strengths then only they can survive in the market

CHAPTER: 5
ANALYSIS OF FINANCIAL STATEMENT
It is analysis of financial statement of a company to assess its financial health and
soundness of its management. Financial statement analysis involves a study of the financial
statements of a company to ascertain its prevailing state of affairs and the reasons therefore.
Such a study would enable the public and investors to ascertain whether one company is more
profitable than the other, and also to state the causes and factors that are probably responsible
for this.
Financial statement Analysis is an analysis which highlights important relationship in
the financial statements. It focuses on evaluation of past operations as revealed be the analysis
of basic statements. Financial statement analysis embraces the methods used in assessing and
interpreting the results of past performance and current financial position as they relate to
particular factors of interest in investment decisions. It is an important means of assessing past
performance and in forecasting and planning future performance.

29
 The process of critical evaluation of the financial information contained in the financial
statements in order to understand and make decisions regarding the operations of the firm are
called financial statement analysis. It is basically a study of relationship among various
financial statements, and the interpretation thereof to gain an insight into the profitability and
operational efficiency of the firm to assess its financial health and future prospects.
The term financial analysis includes both analysis and interpretation the term analysis
means simplification of financial data by methodical classification given in the financial
statements. Interpretation means explaining the meaning and significance of the data. These
two are complimentary to each other. Analysis is useless without interpretation, and
interpretation without analysis is difficult or even impossible. The term financial analysis
includes both analysis and interpretation the term analysis means simplification of financial
data by methodical classification given in the financial statements. Interpretation means
explaining the meaning and significance of the data. These two are complimentary to each
other. Analysis is useless without interpretation, and interpretation without analysis is difficult
or even impossible. Financial statement analysis involves careful selection of data from
financial statements for the primary purpose of forecasting the financial health of the company.
This is accomplished by examining trends in key financial data across companies, and
analyzing key financial ratios.

5.1 Profit And Loss A/C as on 31st March 2010, 2009, 2008
The profit and loss account is an account which shows the net profit or net loss of a
business for a particular trading period. Having prepared the trading account and ascertained he
gross loss, the trader has to prepare the profit and loss account of his business.
Table 5.2A: Profit And Loss Account as on 31st March 2010

30
 Particulars 31-Mar-10 31-Mar-09 31-Mar-08
Income

Sales 1,927,024,997 1,741,202,903 2,437,242,014

Other income 35,116,412 27,920,734 129,129,885
Total 1,962,141,409 1,769,123,637 2,566,371,899
LESS : Total Expenditure 1,766,656,741 1,615,153,481 1,970,068,558
Profit before tax 195,484,668 153,970,156 596,303,341
Less : Tax 72,555,777 61,537,010 199,062,061
Profit after tax 122,928,891 92,433,146 397,241,280
Less : Prior period expense 15,835,070 - -
Net Profit 107,093,821 92,433,146 397,241,280
Add : Balance brought 945,576,829 904,084,016 671,657,918
forward from previous year
Profit available for
appropriation
Less : Appropriation 1,052,670,650 996,517,162 1,068,899,198
Proposed Final dividend
Tax on dividend 44,550,000 35,640,000 53,460,000

Transfer to General Reserve 7,399,200 6,057,018 9,085,527

Surplus carried to Balance 10,709,382 9,243,315 39,724,128

Sheet
990,012,068 945,576,829 1,068,899,198

Sales of the company were increased around 11% in2010 compare to 2009. Which
shows company is done well in this period. Whereas 21% decrease when compared with the
year of 2008. And profit before tax of the company was increased around 28% in 2010
compare to 2009. Whereas 68% were decrease when compared with the year of 2008.

31
5.2 Balance Sheet as on 31st March 2010
In the organization Balance sheet which gives details about the expenses and the funds
which is borrowed. It contains all the loans and the debtors. But a trader likes to know not only
the net profit or net loss of his business for a certain trading period, but also the financial
position of the business at the end of the period.
Table. 5.2A: Balance Sheet as on 31st march 2010
Particulars 31-Mar-10 31-Mar-09 31-Mar-08
Sources Of Funds
Shareholders Funds
Share capital 178,200,000 178,200,000 178,200,000
Reserves and Surplus 1,172,143,58 1,116,998,96 1,066,262,834
3 2
Loan Funds
Secured and Unsecured 48,535,141 234,745,861 19,655,430
Loans
Deffered Tax Liabilities 19,316,284 29,914,333 23,248,630
Total 1,418,195,00 1,559,859,15 1387366894
8 6
Application Of Funds
Fixed Assets 676,840,578 734,142,047 591,785,511
Capital WIP 9,031,128 29,337,019 40,922,737
Investments 233,720,365 11,894,295 62,901,669
Current Assets
Inventories 417,502,371 533,753,597 511862684
Debtors 353,599,104 255,576,852 459808580
Cash and Bank Balance 153,215,425 102,968,897 44,223,138
Other current assets 154,648,539
Loans &Advances 308,072,423 195,303,577 73,500,935
Total 1,232,389,32 1,087,602,92 1,244,043,876
3 3
LESS : Current liabilities 733,786,386 303,117,128 552,286,899
Net Current Assets 498,602,937 784,485,795 691,756,977
Total 1,418,195,00 1,559,859,15 1,387,366,894
8 6

32
 From the above balance sheet we can identify that reserves and surplus of the company
was increased due to the intention of expansion of business. But in case of fixed assets the
value is decreased when compared with the year of 2010. Whereas in current asset there is
increase in the year of 2010 when compared with 2009,2008 year.
5.3 Ratio Analysis
Ratio is simply one number expressed in terms of another. I is an expression of
relationship spelt out by dividing one figure into another. A Ratio is defined as the indicated
quotient of two mathematical expressions and as the relationship between two or more things.
An Accounting Ratio shows the mathematical relationship between two figures which have
meaningful relations with each other. E.g. Gross Profit and sales, current asset and current
liabilities, etc.,
i. Current Ratio
This ratio is commonly used to perform short-term financial analysis. It indicates the
firm’s ability to promptly meet its current liabilities with its current assets. A relatively high
current ratio indicates that the firm is liquid and has the ability to meet its current liabilities. On
the other hand, relatively low current ratio indicates that the firm will find it difficult to pay its
bill. If the current ratio is 1:1, it means that funds yielded by current asset are just sufficient
to pay the amounts due to various creditors and there will be nothing left to meet the
expenses which are being currently incurred. Thus the ratio should always be more than 1:1.
Normally a current ratio of 2:1 is considered satisfactory.

Current Ratio = Current assets

Current Liabilities
Table 5.3A: Current Ratio
Year Current Asset Current Liabilities Current Ratio
(Rs. In Crores) (Rs. In Crores)
2007-08 1,244,043,876 552,286,899 2.25

2008-09 1,087,602,923 303,117,128 3.59

2009-10 1,232,389,323 733,786,386 1.68

Current assets include cash, current investments, debtors, inventories, loans and
advances, and prepaid expenses. The current liabilities represent liabilities that are expected to
mature in the next twelve months. The above table is showing current ratio: The current ratio

33
was 2.25 in the year 2008 which increased to 3.59 1n 2009, and in the year of 2010 the current
ratio is 1.68 which indicates that the company to discharge its current liabilities has slightly
declined over the years.
ii. Quick Ratio
This is a severe test of liquidity of a company. It shows the ability of a Business to meet
its immediate financial commitments. Liquid assets means all the current assets less
inventories, sticky debts, i.e. such assets as can be ‘quickly’ converted into cash It is used to
supplement the information given by the current ratio. Generally a quick ratio of 1:1 is
considered to represent a satisfactory current financial position
Quick Ratio = Quick Asset / Current Liabilities

Quick Asset= Current Asset – (Stock + Prepaid Expenses)

Table 5.3A: Quick Ratio

Year Quick Asset Current Liabilities Quick Ratio

(Rs In Crores) (Rs In Crores)
2007-08 732181192 552,286,899 1.32
2008-09 553849326 303,117,128 1.83
2009-10 814886952 733,786,386 1.11

The above table is showing quick ratio: At Ace Designers Ltd the quick ratio in 2008 is1.32
though the ratio is increased in 2009 that is 1.83, similarly in the year of 2010 the quick ratio is
1.11 which was decreased when compared to the previous year.

iii. Absolute Liquidity Ratio

This is also known as super quick ratio or cash ratio. It helps us get an
idea about the absolute liquidity of a concern. An absolute liquidity ratio of 1:2 is considered
satisfactory.
Absolute Liquidity Ratio = Cash + Bank BalanceCurrent Liabilities

Table No.5.4A: Absolute Liquidity Ratio

Year Cash & Bank Current Liabilities Absolute Liquidity

(Rs In Crores) (Rs In Crores) Ratio
2007-08 44223138 552,286,899 0.08
2008-09 102968897 303,117,128 0.34
2009-10 153215425 733,786,386 0.21

34
 The above table is showing absolute liquidity ratio: The table tells the ratio in the year
2008 is 0.08 which was increased to 0.34 in 2009. Whereas there was a decrease in absolute
liquidity ratio in the year of 2010 the ratio is 0.21 compared to the previous year.
iv. Debtors Turnover Ratio
This ratio indicates the relationship between net credit sales and trade debtors. It shows
the rate at which case is generated by the turnover of debtors. In other words, this ratio
indicates as to how many days’ average sales are tied up in the amount of debtors. This ratio is
an excellent supplement to the information provided by current ratio.
Debtors Turnover Ratio = Credit Sales
Average Debtors

Table 5.5A:Debtors Turnover Ratio

Year Credit Sales Average Debtors Debtors Turnover

Ratio
2007-08 2437242014 229904290 10.60
2008-09 1741202903 127788426 13.62
2009-10 1927024997 176799552 10.90

The above table is showing debtors turnover ratio: In the year of 2008 the ratio is 10.60, which
is increased to 13.62 in the year of 2009, similarly in 2010 it is again decreased to 10.90 when
compared with the year of 2009.

v. Net Asset Turnover Ratio

Asset is used to generate sales. A firm should manage its assets efficiently to
maximize the sales. A firm’s ability to produce a large volume of sales for a given amount of
assets is the most important aspect of its operating performance.

Net Asset Turnover Ratio= Sales/ Net Assets

Table 5.5A:Net Asset Turnover Ratio

YEAR CREDIT SALES NET ASSET NETASSET

(Rs in crores) (Rs in crores) TURNOVER
RATIO

2007-08 2437242014 1387366894 1.76

2008-09 1741202903 1559859156 1.12
2009-10 1927024997 1418195008 1.36

35
The table 5.5A showing net asset turnover ratio. In the year of 2008 the ratio is 1.76 which
was decreased in the year of 2009 where as there is increase in the net asset turnover ratio 1.36
when compared with the year of previous year.

Vi. Current Asset Turnover Ratio

This ratio shows the relationship between a company’s sales and current assets. A
decrease in this ratio is a good indication of the performance of the company.

Current Asset Turnover Ratio = Sales/ Current Asset

Year Current Asset Sales Current Asset

(Rs in crore) Turnover Ratio

2007-08 691756977 2437242014 3.52

2008-09 784485795 1741202903 2.22
2009-10 498602937 1927024997 3.86

Table .5.6A.Current Asset Turnover Ratio

The above table is showing current asset turnover ratio. The current ratio of 2008 is 3.52 which
was decreased to 2.22 in the year of 2009, where as the current ratio again increased to 3.56 in
the year of 2010 when compared with the year of 2009.

vii. Fixed Asset Turnover Ratio

This ratio indicates the efficiency with which the firm is utilizing its investments in
fixed assets such as plant and machinery, land and building etc. Generally speaking, a high
ratio indicates efficient utilization of fixed assets in generating sales and a low ratio may
signify that the firm has an excessive investment in fixed assets.

Fixed Assets Turnover Ratio = Sales/ Net Fixed Assets

Table 5.7A:Fixed Asset Turnover Ratio

36
 Year Fixed Asset Sales Fixed Asset
(Rs in crores) (Rs in crores) Turover Ratio
2007-08 591785511 2437242014 4.12
2008-09 734142047 1741202903 2.37
2009-10 676840578 1927024997 2.85

The above table showing the fixed asset turnover ratio: The table shows that the
companies ratio in the year of 2008 is 4.12 which is decreased in the year of 2009, it is 2.37.
Where as the ratio in 2010 is 2.37 it means ratio is slightly increased when compared with
previous year.
viii. Gross Profit Ratio
This Ratio expresses the relationship between gross profit and sales and is usually
expressed in percentage. Gross Profit Ratio indicates the average margin on the goods sold. It
shows whether the selling prices are adequate or not.

Gross Profit Ratio = Gross Profit X 100

Net Sales

Table.5.8A: Gross Profit Turnover Ratio

Year EBIT Sales Gross Profit

(Rs in lakhs) (Rs in lakhs) Ratio
2007-08 596303341 2437242014 24.46 %
2008-09 153970156 1741202903 8.84 %
2009-10 195484668 1927024997 10.14 %

The above table showing the Gross profit turnover ratio. In this table the ratio in 2008
is 24.46% which is decreased to 8.84% in the year of 2009. Whereas the gross profit again
increased up to 10.14% when compared to the year of 2009.

ix. Net Profit Ratio

This ratio explains per rupee profit generating capacity of sales. If cost f he sales is
lower , then the net profit will be higher and then we divide it with the net sales, the result is
the sale efficiency. Comparison of net profit ratio with other firms in the industry or with the
previous years will indicate the scope for improvement. This will enable the firm to
maximize its efficiency.

Net Profit Ratio = Net Profit After Tax X 100

Net Sales

37
 Table 5.9A: Net Profit Ratio

Year Profit After Tax Sales Net Profit Ratio

(Rs in crores) (Rs in crores)
2007-08 397241280 2437242014 16.29 %
2008-09 92433146 1741202903 5.3 %
2009-10 107093821 1927024997 5.56 %
The above table showing the Net profit turnover ratio. This table highlights that the net profit
ratio in the year of 2008 is 16.29% which was decreased to 5.3% in the year of 2009 where as it
was increased to 5.56% in the year of 2010 when compared with previous year.
CHAPTER 6
LEARNING EXPERIENCE

The study was an excellent opportunity to understand an organizational environment

to a great extend. Today the corporate world demands for certain qualities without which facing
the corporate world is a difficult task. Therefore the organizational study has played an
important role in understanding what an organization expects from a new entrant in their
organization. During the study, it had given an opportunity to closely watch the activities of
Ace Designer Ltd. The hierarchy in this organization that is the manner of delegation from one
level to another was clearly understandable. Also helpful to understand the decision making
pattern of the organization.
Every organization has various departments so does Ace Designers Ltd also. The
organization study has helped in going through the different department of Ace Designer Ltd
and understanding the functions of each department, its hierarchy and the manpower involved.
During the period of organization study, processing of machines, finance department, HR
department marketing department, also understood the inter connection between various
departments and how they work towards the achievement of a common organizational
objective in a systematic manner..
Ace Designer Ltd was a good place for an organizational study as it is involved in
various activities from the birth of the product to its distribution. Thus every aspect could be
studied in one single organization. The employees in Ace Designers Ltd were supportive in
conducting the study in the organization. The success of the organization depends on
manager’s activity. So the study enabled we to know how manager how manager has to handle
the employees to get maximum output. The human resources of the company is properly
utilized to get the maximum benefits from them.

38
 We had to do in-plant training for 10 weeks to know the organizational review. It was a
new kind of environment as it was the first time we had been in the company. When we
stepped to the company the environment was completely different as compared to the college
campus. There were a lot of restrictions to be followed while walking inside the company and
even a lot of checking used to go on everyday which showed a lot of discipline and safety on
the part of the organization.

From the SWOT analysis, following things understand: The company has a high
capacity for production: The company has a good quality control lab; the company has good
control room which manages the production operation from one room withal controlling
systems. This system helped the company to reduce accidents and helped to increase the
capacity utilization. The company is also providing sufficient training facilities to the
employees. The training is given in the company and also through outside training agencies.
The organizational study of Ace Designers Ltd helped to know the fact that employees
are the most difficult to manage. As human beings have emotions the manager has to guide and
train the people in such a manner that they get emotional balance. If the emotions of the
employees are hurt it is very difficult to get maximum productivity from them.
Obtained information regarding the finance department, functions done finance
manager, functions are preparation of final accounts, preparation of bank advice statements,
budget preparation, payroll systems, calculation of attendance bonus, preparation of monthly
journal, ledger and trail balance, auditing preparation of cost sheet etc. Helps to identify the
role of trade unions and their importance in taking decisions in the organization for the benefit
of both parties. Acquired information regarding the human resource department, functions done
by human resource manager, functions included formulation and development of personal
policies, employment of right person in the , training programs, maintain personal records of
each employee etc.
So the company should adopt adequate measure to control the pollution through
pollution control measures. They have provided a lot of incentives to the employees to boost
the motivation of the employees. It is understood that all the activities in the plant and helped
me to relate what we studied in our college with actual working of the organization.
The employees at Ace Designers Ltd are given very good food and pantry facilities too
inside the departments which is necessary to increase the productivity of the employees. The
organizational study of Ace Designers Ltd helped me to know the fact that the company should
adopt environment friendly measures. If it concentrates only on the profit maximization and

39
 keep on disturbing the natural climate, then the company’s operations may be opposed by the
public.
As the part of curriculum in MBA an ‘organization study’ was conducted for a period of
70 days in the Ace Designers Ltd. The in plant training experience was an excellent
opportunity to engage our self in the organization was helped us in understanding an
organizational environment to a great extend. Today the corporate world demands for certain
qualities without which facing the corporate world is a difficult task. Therefore the
organizational study has played an important role in understanding what an organization
expects from a new entrant in their organization. This gave an opportunity to have close look
on the functioning of an industry otherwise we study theoretically. Studying the profile of the
company, the background has helped to know how an organization is set up considering the
location of plant. This gives students an exposure to the corporate world.

Internal guide gives knowledge about the project format, which are the things to be
properly placed in the project and how it should be placed in a proper manner. Daily it is to go
and meet the internal guide and they use to tell me that before starting any of the matter we
should give a small introduction part of that matter and latter start the main body of the heading
which we mention in the project. They remind that First impression is the best impression so
here tried those things to make the best impression. In the project everything is systematic flow,
it should not lose the link between the different headings in the project and they guide, to make
a systematic project in his guidelines. During this project, many kinds of difficulties were
faced, which help in the future to, net repeat.

In company the external guide gives me relevant information with his busy schedule. He
always co-operate with me for regarding to give the company’s data and several information.
He gets the minimum time for giving the information to me, but still he guides me with lots of
smile. Under his guidelines he guide apart from project how the employees are to be
enthusiastic with their work and how to be behave in company.

This gave an opportunity to have close look on the functioning of an industry otherwise
we study theoretically. Studying the profile of the company, the background has helped to
know how an organization is set up considering the location of plant. This gives students an
exposure to the corporate world.

1) Organization study: - Person enhances his/her knowledge only when exposed to real world
situations and by being exposed to the real conditions is systematic manner. Human beings

40
 understand how to live and face various situations. This is exactly what organization study
helps a student. This organization study has helped me in understanding an organizational
environment to a great extent.
2) Project profit: - Today the corporate world demands for certain qualities without which facing
the corporate world is a hard task. Therefore the organizational study has played an important
role in accepting what a business expects from a new entrant in their trade. During the time of
study, it has learnt about how to make our own sentences and how to uses the information for
improving knowledge. It also implicit that how the tables and diagrams help to understand the
concepts clearly and easily. It also makes students strong enough to say about the company
without any fear.
3) Plant section: - The organization study was helped in going to the different department of Ace
Designers Ltd and understanding the functions of each department, its hierarchy and the
manpower complex and how the departmental heads manage their duties. During the period of
organization study, it has studied the production, finance, human resource, purchase,
marketing, development, quality management. It also understood the inter connection between
various departments how they work towards the success of a common objective.
4) Process of production: - The Ace Designers Ltd is a manufacturing oriented company. So it
has got an opportunity to closely watch the production process of the organization from the
beginning to the final finished products.
5) SWOT Analysis: - The strength, weakness, opportunities and threats of the Ace Designers Ltd
are identified as was associated with the organization for a period of 70 days of during
organization study. The theories which we study during the course is being nearly put in use in
the organization can be seen during an organization study.
6) Practical analysis: - the learning experience in the Ace Designers Ltd would surely help me in
my future to enter the corporate world with confidence and knowledge of corporate world in a
better manner than just in theory. As a management student it is of great help to gain practical
knowledge through the application of theory learnt in real life. The organization study was a
great practical learning experience for life.
The employees at Ace Designers Ltd are given very good food and pantry facilities too
inside the departments which is necessary to increase the productivity of the employees. The
organizational study of Ace Designers Ltd helped me to know the fact that the company should
adopt environment friendly measures.
This gave an opportunity to have close look on the functioning of an industry otherwise
we study theoretically. Studying the profile of the company, the background has helped
to know how an organization is set up considering the location of plant. This gives students an

41
exposure to corporate world. It is understood that all the activities in the plant and helped me to
relate what we studied in our college with actual working of the organization.

Every organization has various departments so does The Ace Designers Ltd also. The
project has encouraged in going to different departments of company and understanding of
function of each department. During the period of project, it gives idea of the production
administrative, finance, quality control department of the company etc and also understood the
inter connection between various departments and how they working towards the achievement
of common organization goal.
It aided to know the structure of the company along with the employee’s
delegation of authority and responsibility. Learned how various department activities
are interrelated in the organization. Obtained information regarding the finance
department, functions done by finance manager.
The functions of finance department are like preparation of final accounts, preparation
of bank statement, budget preparation, calculation of attendance bonus, preparation of monthly
journal, ledger and trail balance, auditing, preparation of cost sheet etc and also acquired
information regarding facilities provided to the employees, customers, shareholders, and public
in large. Bring together information regarding the marketing department, functions done by
marketing manager, functions are providing training programmes to employee, collection of
feed backs, providing information to sales departments about the demands of the product,
monitoring of sales, processing credit proposal for customers, processing and sending replies to
audit queries at the divisional level, liaison with bulk buyers.
Thus 7 S’s i.e. the structure; strategy, system, staff, skills, style and shared value of
company are studied during the project. The Ace Designers Ltd is a good place for an
organizational study as it is involved in various activities from birth to its distribution. Thus
every aspect could be studied in one single organization. The employees in the company were
supportive in conducting the studies in the organization.
The learning experience in Ace Designers Ltd has helped me tremendously and updated
my skill sets and given confidence to enter the corporate world. As a management student it is
of great help to gain practical knowledge through the application of theory learnt in real life.
This in plant training was a great practical learning experience for me which is expected from
industrial study. So the learning experience in the sense the overall view in company’s day to
day activities which were all the aspects to be helped in project to study for me.

42
 CHAPTER: 1
GENERAL INTRODUCTION

Ace Designer Ltd is engaged in the machine tools business. The company needs huge
inventory and the need of working capital is very high. The company had to maintain a huge
cash and bank balance. The company is having high sales, accordingly all the collections from
agents and debtors were remitted to the bank account daily. Hence the company will be
showing negative working capital, it does not mean the company is at loss. The working capital
meets the short – tm financial requirements of a business enterprise. It is a trading capital, not
retained in the business in a particular form for longer than a year.

The money invested in it changes its form and substance during the normal course of
business operations. The need for maintaining an adequate working capital can hardly be
questioned. Just as circulation blood is very necessary in the human body to maintain life, the
flow of funds is very necessary to maintain business. If it becomes weak, the business can
hardly prosper and survive. The success of a firm depends ultimately, on its ability to generate
cash receipts in excess of distribursements

1. a. Statement of the Problem

The project focuses on study of working capital management of Ace Designers Ltd. The
study gives fair idea of improvement in efficiency of working capital at Peenya Bangalore. An
improved working capital system can be suggested. This will help the Company to raise and
manage working capital efficiently.

1. b. Objective of the Study

The primary objective of the study is to know the importance of the working capital
management in Ace Designers Ltd and the secondary objective of the study are following:
• To understand and analyze the working capital position of ACE DESIGNER LTD
• To study the efficiency and effectiveness of working capital management of the
company.
• To know the changes in working capital.

43
1. c. Scope of the Study

The scope of the working capital management lies in testing of short term solvency and
on the effectiveness with which the business is conducted. Tests of receivables and inventory
should be regarded primarily as relating to solvency rather than to efficiency. Standards of
turnover always are held as tentative for the final test of effectiveness of business management.
The study covers in areas in cash, inventory, accounts receivables, financing of working capital
and other related matters. The scope of working capital management deals with testing of short
term solvency and liquidity position of company. It helps n controlling the components of
working capital. It gives an idea of improvement in the efficiency of working capital
management.
The working capital management is critical for all firms, especially for small
undertakings. A small firm may not have investment in fixed assets but it has invested in
current assets. Small firm in India faces a several problem of collecting their debts from
debtors. Thus the study of working capital is important for the successful
conducting of the business.

1. d. Methodology

This project “A Study on Working Capital Management of Ace Designer Ltd” is

considered as analytical research. Analytical Research is defined as the research in which,
researcher has to use facts or information already available, and analyze these to make a critical
evaluation of the facts, figures, data or material.
The project includes finding of primary data and secondary data. It includes surveys and
fact- finding enquiries. The project basically covers description of state of affairs, as it exists at
present. Here, the job done as by using the facts and information already available. The
research is done with an aid of the annual reports the company database textbooks and
observation and interaction being the only source of primary data whatever is used. The same
set of information is analyzed to make the critical evaluation of the material. With the given
nature of research wherein the analysis of the existing set of affairs are used to arrive the effect
of working capital management on the return and profitability of the company. The quality of
the project work depends upon the methodology adopted for the study, which in turn depends
up on the nature of the project work. The main strength of the project report depends on the
process of collecting, synthesizing and analyzing of the information.
Primary Data: The primary data includes the information collected from assistant general
manager, senior manager, DGM, staff and other employees of the company. Primary Data are

44
those, which are collected fresh and for the first time The primary data were collected by
interaction, discussion with the accounts manager as well as the finance staff and observation
of the activities of the organization. In the course of time , the finance manager and his
executives, provided very appreciable co-operation during the interaction. Along with this,
informal discussion with other, members involved in the financial activities.

Secondary Data: The company manuals formed the main source of data collection. Annual
reports, magazines, articles, journals, and various financial management books have been
referred for this study. Five ear Balance sheet & Profit & Loss account stated in annual reports
were used for analysis Working Capital & concerned ratios that were used as tools of analysis
based upon the company’s financial position, performance was evaluated suggestions were
made. Regarding financing of working capital both the methods were evaluated by extracting
information from balance sheet for three years, then the best alternative was chosen based on
which the companies position regarding the financing of working capital.

1. e. Limitations of the Study

This survey has tried to collect the best possible information on working
capital management of Ace Designers Ltd, but there are some limitations are there in this report
and it can be improved further. There are in this research because of the following reasons.

1. Non disclosure of facts: It has not been possible to have in depth study because of non-
disclosure of facts by the company on the pretext that it would affect the interest of the
organization. Some of the information will not be disclosed by the company. If they give
relevant facts, the result may be more accurate and relevant. So it is treated as one of the main
limitations of the report.
2. Inadequate Time Period: This survey work has completed within 10 weeks due to time
constraint which is very less for such kinds of the research, due to lack of sufficient time. If it
can be done with the sufficient time, then result may be more accurate and relevant.
3. Scope of the Study is Restricted to 5 Years: The scope of the study of working capital
management is restricted to only for five years. The working capital position is to be finding
out only for five years. It is also one of the limitations of this report.
4. Limited Scope: The scope is limited to Ace Designers Ltd only and it cannot be globalized.
If it can globalize means we can get a lot of information through various sources. It is also one
of the limitations of this report.

45
5. Lack of expertise and knowledge: The lack of expertise and knowledge of the researcher
may affect the quality of the study. This research is done without much training and also the
researcher may not have the depth knowledge about research. It is also one of the limitations of
this report.
6. Ratio’s are not Future Indicators: The ratios are calculated from the past
financial statements are no indicators of the future. It is calculated from last five
years. It didn’t given accurate results to the research. It is also one of the limitations of the
research.
Chapter Scheme: In this chapter scheme, the survey has given basic introduction to the project
which is prescribed by Visvesvaraya Technological University, Belgaum for the partial
fulfillment of MBA program.
First Chapter: The first chapter highlights the basic information regarding
project such as statement of the problem, objectives of the study, scope, methodology used in
the research for data collection and sampling technique and also the limitation of the research.
Second Chapter: The second chapter gives a profile on theoretical aspects of the research
topic i.e., working capital. It also consists of important definitions, meaning, needs,
determinants, theories, merits and demerits of the working capital. The Third Chapter
includes the data analysis and interpretation of the data with the help of some statistical tools
like graphs on the findings, which gives the brief idea about the research. All the data collected
with the help of the various sources are analyzed and interpreted in this chapter. The Fourth
chapter encompasses findings from the study and some suggestions for the company; it also
includes the questionnaire used to collect the data and the list of the bibliograph of the study.
Thus the above discussion comprises the basic introduction to the problem, statement
of the problem. It also includes the objectives of the project, research methodology, and data
collection methods, source of data and limitation the study. This gives base to whole project.

CHAPTER 2
CONCEPTUAL FRAMEWORK

2.1 Introduction

46
 Business activity is dynamic in nature and subject to wide fluctuations. The movement
from the working capital to income and profits and back to working capital is one of the most
vital characteristics to business administration. This is concerned with the expenditure of fund
with hope that they will return, rendering an additional amount called profit. If the operations
of an enterprise are to run smoothly a proper relationship between fixed capital and current
capital must be maintained. Sufficient liquidity must be achieved and maintained to provide
the fund to pay off obligation as they mature. The adequacy of cash and other current assets,
together with their efficient handling, virtual determine the survival or demise of the
enterprises. Working capital management ids an integral part of over all corporate financial
management. For the finance manager who is ready to pay his roll and has a working
knowledge of tools and techniques that he can employ to open a welcome challenge and
opportunity.

2.2 Definition

According to Genestenberg “Working Capital means Current Assets of a company that are
changed in the ordinary course of business, from one to another, for ex, from cash to
inventories, inventories to receivable, receivable to cash.”
According to Westen & Brigham “Working capital refers to a term investment in short term
assets cash, short term securities accounts receivables and inventories.”

2.3 Meaning of Working capital

The term Working capital is commonly used in used for the capital required for day to
day working in a business concern. In general Working capital means the deference between the
current assets and current liabilities. The major current assets are cash, marketable securities,
accounts receivable and inventories. Current liabilities are those liabilities which are intended to
be paid in the ordinary course of business, within a year, out of the current assets or earnings of
the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft and
outstanding expenses.

The goal of working capital management is to manage the firm’s current assets and
liabilities in such a way that a satisfactory level of working capital is maintained. This is so
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.

47
 Each of the short term sources of financing must be continuously managed to ensure that
they are obtained and used in the best possible way. The interaction between current assets and
current liabilities is, therefore, the main theme of the theory of working management. The
difference between inflow and outflow of cash is also known as the difference between current
assets and current liabilities. Current assets consists of cash/bank balance, short from
investments, receivables, stocks advance payments etc., current liabilities include creditors, bills
payables, bank overdraft, short term loans etc.

Working
Capital

On the basis of concepts On the basis of time

Permanent Variable
Net Working Gross working
Working Working
Capital Capital
Capital Capital

Special Seasonal Initial Working Regular

Working Working Capital Working
Capital Capital Capital

Figure No. No.2.1B: Classification of Working Capital

On the basis of above diagram it is clear that working capital can be classified in to two
types, on the basis of concept and another one is on the basis of time. On the basis of concept it is
divided in to Net Working Capital and gross working capital. On the basis of time divided into
Permanent Working capital and Variable Working Capital. Permanent Working Capital again be
divided into Seasonal and Special Working Capital, and Variable Working Capital is divided into
Initial and Regular Working Capital.

2.4 On The Basis Of Concept

i. Net Working Capital: This is the difference between current assets and current liabilities.
Current Liabilities are those that are expected to mature within an accounting year and include
creditors, bills payable and outstanding expenses. Investment is current assets represent a very
significant portion of the total investment in assets. In case of public limited companies in India,

48
current assets constitute around 60% of the total capital employed. Therefore the finance
manager should attention to working capital management.
Working Capital Management is no doubt significant for all firms, but its significance is
enhanced in cases of small firms. A small firm has more investment in current assets than fixed
assets and therefore current assets should be efficiently managed. He working capital needs
increase as the firm grows. As sales grow, the firm needs to invest more in debtors and
inventories. The finance manager should be aware of such needs and finance them quickly.
Current Assets can be finance through long-term and short-term sources. The ratio of
long-term to short-term source will depend on whether the firm is aggressive of conservative. It
the firm is aggressive then it will finance a part of its permanent current assets with short-term
funds. On the other hand, a conservative firm will finance its permanent assets and also a part of
temporary current assets with long-term financing.
ii. Gross Working Capital: This refers to the firm’s investment in current assets. Current
Assets are the assets which can be converted into cash within a short period say, an accounting
year. Current assets include cash, debtors, and bill receivable, short-term securities. Etc.

2.5 On the basis of Time

i. Permanent Working Capital: Permanent Working Capital is permanently locked up in

the circulation of current assets. It covers the minimum amount requested for maintaining the
circulation of current assets. It is the minimum level of current assets. It is permanent in the same
way as the firm’s fixed assets are depending upon the changes in the production and sales, the
need for working capital, over and above permanent working capital, will fluctuates.
ii. Initial Working Capital: At its inception and during the formative period of its
operations a company must have enough cash fund to meet its obligations. The need for initial
working capital is for every company to consolidate its position.
iii. Regular Working Capital: It refers to the minimum amount of liquid capital required
to keep up the circulation of the capital from the cash inventories to account receivable and from
account receivables to back again cash. It consists of adequate cash balance on hand and at bank,
adequate stock of raw materials and finished goods and amount of receivables.
iv. Variable Working Capital: It is the extra working capital needed to support the
changing production and sales activities of the firm. Both kinds of working capital – permanent
and fluctuating are necessary to facilitate production and sales through the operating cycle. It
refers to the past of the Working Capital that changes with the volume of business; it may be
divided into two classes.

49
v. Seasonal Working Capital: There is many line of business where the volumes of
operations are different and hence the amount of working capital varies with seasons. The capital
required to meet the seasonal needs of the enterprise knows as Seasonal Working Capital.
vi. Special Working Capital: The capital required to meet any special operations such as
experiments with new products or new techniques of production and making interior advertising
campaign etc, is also known as Special Working Capital.

2.6 Determinants of Working Capital

There are no set rules or formulate to determine the working capital requirements of
firms. A large number of factors, each having a different importance, influence working capital
needs of firms. The importance of factors also changes for a firm over time. 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.
i. Nature of Business: Working capital requirements of a firm are basically influenced by
the nature of its business. Trading and financial firms have a very small investment in working
capital. Retail store, for example, must carry large store of a variety of goods to satisfy varied
and continuous demands for their customers. A large departmental tore like wall-mart may
carry, say, over 20000items. Some manufacturing business, such as tobacco manufacturer and
construction firms also have to invest substantially in working capital and a nominal amount in
fixed assets.
ii. Market and demand condition: The working capital needs of a firm are related to its
sales. However, it is difficult to precisely determine the relationship between volume of sales
and working capital needs. In practice, current asset will have to be employee before growth
takes place. It is, therefore , necessary to make advance planning of working capital for a
growing firm on a continuous basis. Growing firms may need to invest funds in fixed assets in
order to sustain growing production and sales. This will, in turn, increase investment in current
assets to support enlarged scale of operations.
iii. Technology and manufacturing policy: The manufacturing cycle comprises of the
purchase and use of raw materials and the production of finished goods. Longer the
manufacturing cycle, larger will be the firm’s working capital requirements. For example, the
manufacturing cycle in the case of a boiler, depending on its size, may range between six to
twenty-four months. On the other hand, the manufacturing cycle of products such as detergent
powder, soaps, chocolate etc. May be a few hours.

50
iv. Credit Policy: The credit policy of the firm affects the working capital by influencing
the level of debtors. The credit terms to be granted to customers may depend upon the norms of
the industry to which the firms belongs. But a firm has the flexibility of shaping its credit
policy within the constraint of industry norms and practices. The firm should use discretion in
granting credit terms to its customers.
v. Availability of Credit from Suppliers: The working capital requirements of a firm
are also affected by credit terms granted terms granted by its suppliers. A firm will needless
working capital if liberal credit terms are available to it from suppliers. Suppliers credit
finances the firm’s inventories and reduces the cash conversion cycle. In the absence of
supplier’s credit the firm will have to borrow funds for bank.
vi. Operating Efficiency: The operating efficiency of the firm relates to the optimum
utilization of all its resources at minimum costs. The efficiency in controlling operating costs
and utilizing fixed and current assets leads to operating efficiency. The use of working capital
is improved and pace of cash conversion cycle is accelerated with operating efficiency. Better
utilization of resources improves profitability and thus, helps in releasing the pressure on
working capital.
vii. Price Level Changes: The increasing shifts in price level make functions of financial
manager difficult. She should anticipate the effect of price level changes on working capital
requirements of the firm. Generally rising price levels will require a firm to maintain higher
amount of working capital. Same levels of current assets will need increased investment when
prices are increasing.

2.7 Issues in Working Capital Management: Working capital management refers to

the administration of all components of working capital-cash, marketable securities, debtors
and stock and creditors. The financial manager must determine levels and composition of
current assets. He must see that right resources are tapped to finance current assets, and that
current liabilities are paid in time. There many aspects of working capital management which
make it an important function of the financial manager.
Time is one of the important aspect of working capital. Working capital management
requires much of the financial manager’s time. Working capital requires large portion of
investment in assets. It has great significance for all firms but it is very critical for small firms.
The need for working capital is directly related to the growth of the firm.

51
2.8 Estimating Working Capital Needs: The most appropriate method of calculating
the working capital needs of a firm is the concept of operating cycle. However, a number of
other methods may be used to determine working capital working capital needs in practice. We
shall illustrate here three approaches which have been successfully applied in practice. To
estimate working capital requirements on the basis of average holding period of current assets
and relating them to costs based on the company’s experience in the previous years. This
method is essentially based on the operating cycle concept. To estimate the working capital
requirements as a ratio of sales on the assumption that current assets change with sales. The
ratio of fixed investment is also one of the tool to estimating working capital.

2.9 Policies for Financing Current Assets: A firm can adopt different financing
policies for the purpose of financial needs of the company. Long term financing, short term
financing and spontaneous financing are the main three types of financial policies are there in
financing current assets. These can be explained as under-
i. Long term financing: The long term financing is one of the important policies for
financing current assets. The sources of long term financing include ordinary share capital,
debentures, long term borrowings from financial institutions and reserves and surplus (retained
earnings).
ii. Short Term Financing: The short term financing is obtained for a period less than one
year. It is arranged in advance from banks and other supplier’s of short term finance in the
money market. Short term finance include working capital funds from banks, public deposits,
commercial paper, factoring of receivable etc.
iii. Spontaneous Financing: Spontaneous financing refers to the automatic sources of
short term funds arising the normal course of business. Trade credit and outstanding expenses
are examples of spontaneous financing. There is no explicit cost of spontaneous financing. A
firm is expected to utilize these sources of finances to the fullest extent. The real choice of
financing current assets, once the spontaneous sources of financing have been fully utilized, is
between the long term and short term sources of financing. The approaches involved in the
estimation of working capital may be studied in three types:

Matching Approach
The firm can adopt a financial plan which matches the expected life of assets with the
expected life of the source of funds raised to finance assets. Thus, a ten year loan may be raised

52
to finance a plant with an expected life of ten years. When the firm followes matching
approach, long term finance will be used to finance fixed assets and permanent current assets
and short term financing to finance temporary or variable current aseets. However it should be
realised that exact matching is not possible because of the uncertainty about the expected lives
of assets.

Conservative Approach
A firm in practice may adopt a conservative approach in financing its current asset and
fixed asset. The financing policy of the firm is said to be conservative when it depends more on
long term funds for financing needs. Under a conservative plan, the firm finances its
permanent asset and also a part of temporary current asset with long term financing. In the
periods when the firm has no need for temporary current assets, the idle long term funds can be
invested in the traceable securities to conserve liquidity.

Aggressive Approach
A firm may be aggressive in financing its asset. An aggressive policy is said to be
followed by the firm when it uses more short term financing than warranted by the matching
plan. Under an aggressive policy the firm finances a part of its permanent current assets with
short term financing. Some extremely aggressive firms may even finance a part of their fixed
assets with short term financing. The relatively more use of short term financing makes the
firm more risky.

2.10 Need For Working Capital

Although, fixed capital plays a vital role in the establishment of a firm, the importance of
working capital need not be over emphasized. Working capital is needed to keep the firm
working. From the time the finished goods are purchased for the purpose of resale till they
actually sold out and sales proceeds are realized, the adequate provision for working capital must
be made.
The need for the working capital arises because of the following points to purchase raw
materials, spare parts and other component parts, to pay wages and salaries and other charges, to
meet over head expenses, to pay selling and distribution expenses, to grant credit facilities to
customers, to hold adequate stock of raw materials finished goods, spare parts, to provide for
contingencies.
2.11 Importance of working capital
53
 Working capital is an investment on current assets. A firm has to maintain adequate
working capital in order to run the business smoothly and efficiently. Working capital should
neither be excess nor deficit. Excess working capital restricts the profitability of a concern by
keeping the funds idle. It results in unnecessary accumulation of stock and thereby causes loss
due to wastage, theft, pilferage etc. Similarly, inadequate working capital prevents a firm from
availing itself of new business opportunities, and also liberal credit terms from suppliers. The
reason most people look of balance sheet is to find out a company’s working capitals position it
tells what would be left if any company raised all of its short term resources and used them to
pay off its short term liabilities. The more working capital the less financial strain a company
experiences on main position is being able to foresee any financial difficulties that may arise,
poor working capital leads to financial pressure on a company.
Thus, adequate working capital plays an important role in the successful operation of
business activities. Importance of working capital can be better understood from the following
points. It protects the solvency of the firm, it enables the firm to get the benefit of cash discounts,
better credit terms to the customers, it helps in achieving stability, easy loans and advances from
banks and other financial institutions, creation of goodwill, improves general morale of
employees, easy execution of rush order sand capacity to hold up inventories.

Ratio Analysis
A ratio is statistical measure to know the relationship between two accounting figures of
a concern relating to different years. The significance of ratio analysis lies in the fact that it
presents on comparative basis and enables the drawing of inference reading the performance of
the firm.

Importance of Ratio Analysis

Liquidity Position: With the help of ratio analysis conclusions can be drawn regarding the
liquidity positions of a firm. A firm can be said to have the ability to meet its short-term
liabilities if it has a sufficient liquid funds to pay the interest on its short-maturing debt. This
ability is reflected in the liquidity ratios of a firm. The liquidity rations are particularly useful in
credit analysis by banks and other suppliers of short-term loans.
Long-term Solvency: Ratio analysis is equally useful for assessing the long-term financial
viability of a firm. This aspect of the financial position of a borrower is of concern to the long-
term creditors, security analysis, and the present and potential owners of the business. The

54
long-term solvency is measured by the leverage/capital structure and profitability ratios, which
focus on earning power and operating efficiency.
Operating Efficiency: Yet another dimension of the usefulness of ratio analysis, relevant from
the viewpoint of management, is that it throws light on degree of efficiency in the management
and utilization of its assets. The various activity ratios measure this kind of operational
efficiency.
Overall Profitability: The outside parties, which are interested in one aspect of the financial
position of a firm, the management is constantly concerned about the overall profitability of the
enterprise. That is, they are concerned about the ability of the firm to meet its short-term as
well as long-term obligations to its creditors, to ensure a reasonable return to its owners and
secure optimum utilization of the assets of the firm.
Inter-Firm Comparisons: One of the popular techniques is to compare the ratios of a firm
with the industry average. It should be reasonably expected that the performance of a firm
should be in broad conformity with that of the industry to which it belongs. An inter-firm
comparison would demonstrate the relative position vis-à-vis its competitors.

CHAPTER 3
DATA ANALYSIS AND INTERPRETATION

The term Data means group of a message and understood that represent the
qualitative or quantitative attribute of a variable or set of variables. The results obtained during
the study on Working Capital Management at Ace Designers Ltd is presented and discussed in
this chapter.

3.1 Objective 1

To Study the changes in Working Capital Position of Ace Designers Ltd

An optimum function of the management and the prime duty of the finance department
as to maintain an optimum level of working capital has got such an important position because
of its nature of revealing the clear cut position of the liquidity of the firm. Though there are
several tools of analyzing working capital, the below mentioned are note worthy. Statement of
changes in working capital. Working capital ratios.

Statement of changes in Working Capital at Ace Designers Ltd

55
 Statement of changes in Working Capital shows the trend to changes in working
Capital. This statement is prepared with the help of current assets and current liabilities of two
Periods. It is comparative statement that is used to calculate increase or decrease in working
Capital. It also indicates the overall effects of the changes, which shows the trend in changes of
working capital and its components.

This is the difference between current assets and current liabilities. Current
Liabilities are those that are expected to mature within an accounting year and include
creditors, bills payable and outstanding expenses. Working Capital Management is no doubt
significant for all firms, but its significance is enhanced in cases of small firms.

Table 3.1B. Statement of Changes in Working Capital For The Year

2005-06 when Compared To 2006-07 (Rs in Crores)

Particular 2005-06 2006-07 Increase Decrease

A. Current Asset
Inventories 242378637 346747382 104368745
Sundry Debtors 256160049 399955392 143795343
Cash & Bank Balance 221088968 159647129 61441839
Other current asset 55405546 156356444 100950898
Loans & Advances 36668401 67104217 30435816
Total Current Asset 811701601 1129810564
B. Current Liabilities
Current Liabilities 354080008 431847847 77767839
Provision 100003701 12916417 87087284
Total Current Liabilities 454083709 444764264
Net Working capital (A-B) 357617892 685046300
Increase in working capital 327428408 32742840
8
Total 685046300 685046300 466638086 46663808
6

56
Source: Company Annual Report
In the above year 2005-06, there is an increase in the working capital by Rs.
327428408 crores. This is because: As we can see that there is a great increase in
Current Assets of the company, because there is high increase in inventories
Debtors, Other Current Assets of the company. But Cash & Bank Balance decreased.

From the above table it is clear that there is a increase of Rs. 77767839 crores in
the liabilities of the company and also an decrease in the provisions of Rs. 87087284
crores which lead to the increase in working capital.So from all the above calculation
we can see that there is good increase in the working capital. So we can say
that company is more likely to increase their inventory because they thinking it for
the long term perspective.

The net working capital for the year 2005 was Rs. 357617892 crores and for the year
2006 was Rs. 685046300 crores. As compared to year 2005 there was an increase of working
capital of Rs. 327428408 crores. The current assets increased from Rs.811701601 Crores to Rs.
1129810564 crores and current liabilities also decreased form Rs. 454083709 crores to Rs.
444764264 crores during the same period.

57
Table 3.2B. Statement of Changes in Working Capital For The Year
2006-07 when Compared To 2007-08 (Rs in Crores)
Source: Company Annual Report
In the above table it is seen that, there is an increase in the working capital by
Rs.6710677 Crores in the year 2006-07, this is because As we can see in the above table, there
has been decrease in other current assets, cash and bank balance. In spite of this, the current

Particular 2006-07 2007-08 Increase Decrease

A. Current Asset
Inventories 346747382 511862684 165115302
Sundry Debtors 399955392 45988580 59853188
Cash & Bank Balance 159647129 44223138 115423991
Other current Asset 156356444 154648539 1707905
Loans & Advances 67104217 73500935 6396718
Total Current Asset 1129810564 1244043876
B. Current Liabilities
Current Liabilities 431847847 475969738 44121891
Provision 12916417 76317161 63400744
Total Current Liabilities 444764264 552286899

Net Working capital (A-B) 685046300 691756977

Increase in working capital 6710677 6710677

Total 552286899 552286899 231365208 231365208

assets have been increased due to the increase in sundry debtors and inventories, loans and
advances. As we can see there is overall increase in current liabilities. This is due to increase in

the current liabilities by Rs. 44121891 crores and increase in the provisions by Rs. 63400744
crores. So as the liabilities have increased this year, there has been an increase in the current
assets, resulting in an increase in working capital.
The net working capital for the year 2007 was Rs. 691756977 crores and for the
year 2006 is Rs. 685046300 crores. As compared to the year 2006 there is an increase of
working capital of Rs 6710677 crores in the year 2007. The current assets increased from Rs.

58
 Particular 2007-08 2008-09 Increase Decrease
A. Current Asset
Inventories 511862684 533753597 21890913
Sundry Debtors 45988580 255576852 20423178
Cash & Bank Balance 44223138 102968897 58745759
Other current Asset 154648539 - 154648539
Loans & Advances 73500935 195303577 121802642
Total Current Asset 1244043876 1087602923

B. Current Liabilities
Current Liabilities 475969738 235145631 240824107
Provision 76317161 67971497 8355664
Total Current Liabilities 552286899 303117128

NetWorking capital (A-B) 691756977 784485795

Increase in working capital 92728818 9272818

Total 784485795 784485795 451609085 451609085

1129810564 crores to Rs. 1244043876 crores and current liabilities increased form Rs.
444764264 crores to Rs. 552286899 crores during the same period.

Table 3.3B. Statement of Changes in Working Capital For The Year

2007-08 when Compared To 2008-09 (Rs in Crores)
Source: Company Annual Report
From the above table it is clear that in the year 2007-08, there has been an increase in the
working capital of Rs. 92728818 crores. This is because: As we can see that there is a great
increase in the Inventories, cash and bank balance, there is great decrease in debtors, other
current asset. As a result there has been an increase in the overall current assets of the

company. As we can see that there is an decrease of Rs. 240824107 croes in the liabilities of
the company, and there is a decrease in the provisions of Rs. 8355664 crores. So from all the
above calculation we can see that there is an increase in the working capital. So we can say
that company is more likely to increase their inventory from the long term perspective.
The net working capital for the year 2007 was Rs.691756977 crores and for the year
2008 is Rs.78448579 crores. As compared to year 2007 there is an increase in the working

59
 capital of Rs. 92728818. The current assets decreased from Rs. 1244043876 crores to Rs.
1087602923 crores and current liabilities also decreased form Rs.552286899 crores to Rs.
303117128 crores during the same period.

Table 3.4B. Statement of Changes in Working Capital For The Year

2008-09 when Compared To 2009-10 (Rs in Crores)

Particular 2008-09 2009-10 Increase Decrease

A. Current Asset
Inventories 533753597 417502371 116251226

Sundry Debtors 255576852 353599104 98022252

Cash & Bank Balance 102968897 153215425 50246528

Loans & Advances 195303577 308072423 11276884

6
Total Current Asset 1087602923 1232389323

B. Current Liabilities
Current Liabilities 235145631 664395332 429249701

Provision 67971497 69391054 1419557

Total Current Liabilities 303117128 733786386

Net Working capital (A-B) 784485795 498602937

Decrease in working capital 285882858 28588285

8
Total 784485795 784485795 54692048 546920484
4
Source: Company Annual Report

In the above table it is clear that, there is an decrease in the working capital of Rs.
285882858 crore in the year 2009-10, this is because We can see that the Current Assets of
2010 have been increased due to the increase in sundry debtor’s cash and bank balance and
loans and advances. But there is a decrease in Inventories. It is clear from the above table that
there is a increase in the overall Current Liabilities due to the increase in the current liabilities

and provisions of Rs. 429249701 crores and Rs. 1419557 crores respectively.

60
 The net working capital for the year 2009 was Rs. 784485795 crores and for the
year 2010 is Rs.498602937crores. As compared to year 2009, there is a decrease in the working

capital by Rs. 285882858 millions. The current assets increase from Rs. 1087602923 crores to
Rs. 1232389323 crores and current liabilities increases from Rs.303117128 millions to Rs.
733786386 crores during the same period.

Table 3.5B. Working capital at Ace Designers Ltd under Gross Concept

(Rs in crores)
Particulars 2005-06 2006-07 2007-08 2008-09 200-10
Current Assets

Inventories 242378637 346747382 511862684 533753597 417502371

Sundry Debtors 256160049 399955392 45988580 255576852 353599104

Cash & Bank Balance 221088968 159647129 44223138 102968897 153215425

Other current asset 55405546 156356444 154648539

Loans & Advances 36668401 67104217 73500935 195303577 308072423

Gross working capital 811,701,601 1,129,810,564 1,244,043,876 1,087,602,923 1,232,389,323

The table shows the gross working capital of the firm for five years. As per the analysis it
is understood that in the year 2005-06 the gross working capital was 811,701,601 where in the
next year it increased to 1,129,810,564. The next year also increased up to 1,244,043,876. But
the trend changes and decreases it to 1,087,602,923in the year 2008-09 because of reduction in
other current asset and so on. This shows that gross concept takes into consideration only the
current assets. It indicates that gross working capital is a quantitative concept. Gross concept
does not the liquidity position of the firm.
Net working capital (NWC) represents the excess of current assets over current
liabilities. The greater the amount of net working capital, the greater the liquidity of the firm.
However, the problem of net working capital as the measure of liquidity is that the changes in
net working capital do not necessarily reflect the changes in liquidity of the firm.
Table 3.6B. Working Capital at Ace Designer Ltd. Under Net Concept
Particulars 2005-06 2006-07 2007-08 2008-09 200-10

61
A. Gross 811,701,601 1,129,810,56 1,244,043,876 1,087,602,92 1,232,389,323
working 4 3
capital
B. Current 454,083,709 444,764,264 552,286,899 303,117,128 733,786,386
Liabilities
Net working 357,617,892 685,046,300 691,756,977 784,485,795 498,602,937
capital (A-B)
The table shows the net working capital includes both current assets and current
liabilities. Unlike gross working capital it indicates qualitative concept by showing the excess
of current asses over current liabilities. It indicates the liquidity position of the firm.
3.2 Objective 2
To Study The Efficiency And Effectiveness Of Working Capital
Management Of The Ace Designers Ltd

Ratio Analysis
A ratio analysis is a statistical yardstick that measures the relationship
between the two concerned terms. The important of the ratio analysis lies in the fact that it
presents facts on a competitive basis and enables the drawing of influences regarding the
performance of the given terms. With the help of ratios the following can be determined. The
overall operating efficiency and performance of the company, The efficiency with which the
firm in utilizing its various assets in generating revenues., The ability to the firm to meet its
current obligations. In other words , Ratio Analysis is the technique of calculation of a number
of accounting ratios from the data found in the financial statements and the comparison of
these ratios of the current year with that of the previous years. A Financial Ratio gives the
analyst a way of making meaningful comparison of a firm’s financial data at different points
in time and with other firms. It allows various aspects of company’s performance from their
own point of view and interest.

Liquidity Ratio
Liquidity ratios are those ratios, which are intended to measure the liquidity or
short term solvency of an enterprise. They indicate whether it will be possible for an enterprise
to meet the short-term obligations out of its short-term resources. Which presumably provide
the source from which these obligations will be met. From these ratios, much insight can be
obtained into the present cash-solvency of the firm and the firm’s ability to remain solvent in
the event of adversity.

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i. Current Ratio
This ratio is commonly used to perform short-term financial analysis. It
indicates the firm’s ability to promptly meet its current liabilities with its current assets. A
relatively high current ratio indicates that the firm is liquid and has the ability to meet its
current liabilities. On the other hand, relatively low current ratio indicates that the firm will
find it difficult to pay its bill. If the current ratio is 1:1, it means that funds yielded by current
asset are just sufficient to pay the amounts due to various creditors and there will be nothing
left to meet the expenses which are being currently incurred. Thus the ratio should always be
more than 1:1.Normally a current ratio of 2:1 is considered satisfactory. An indication of
company’s ability to meet short-term debt obligations the higher the ratio the more liquid the co
Current Ratio = Current Assets
Current Liabilities

Table 3.6B. Current Ratio

(Rs in crores)
Year Current assets Current Liabilities Ratio

2005-06 811,701,601 454,083,709 1.79:1

2006-07 1,129,810,564 444,764,264 2.54:1
2007-08 1,244,043,876 552,286,899 2.25:1
2008-09 1,087,602,923 303,117,128 3.59:1
2009-10 1,232,389,323 733,786,386 1.68:1

Figure 3.6B. Current Ratio

Source: Data Collected From Companies Annual Report

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 The above chart shows that the company’s current ratio. The ratio is good in the 3
years when compared with the conventional standard 2:1. Except 2006, 2010 all the three
years ratio is above the 2:1. In the year 2006 and 2010 the current ratio is 1.79 and 1.68 it is
bad , but the company should reach 2:1 to get good commitment to the short-term liabilities.
This indicates that firm’s commitment to meet its short liabilities was good.

ii. Quick Ratio

This is a severe test of liquidity of a company. It shows the ability of a Business to meet its
immediate financial commitments .It is used to supplement the information given by the
current ratio. Generally a quick ratio of 1:1 is considered to represent a satisfactory current
financial position. This ratio is also known as acid-test ratio. An asset is liquid if it can be
converted into cash immediately without loss of value.

Quick ratio= Quick (or liquid) Assets

Current Liabilities

Quick Asset= Current Asset – (Stock + Prepaid expenses)

Table 3.7B. Quick Ratio
(Rs in crores)

Years Quick assets Current Liabilities Quick Ratio

2005-06 569322964 454,083,709 1.25:1

2006-07 783063182 444,764,264 1.77:1
2007-08 732181192 552,286,899 1.32:1
2008-09 553849326 303,117,128 1.82:1
2009-10 814886952 733,786,386 1.12:1

Figure 3.7B. Quick Ratio

Source: Data Collected From Companies Annual Report

The acid test ratio is a rigorous measure of a firm’s ability to service short-term
liabilities. Generally, an acid-test ratio of 1:1 is considered satisfactory as a firm can meet all
current claims. The ratio is good in the five years when compared with the conventional
standard 1:1. In all the five years the ratio is above the 1:1. So we can say that in the recent
five years the company is having higher liquidity position.

Activity Ratios

64
 Activity ratios are used to indicate the efficiency with which assets and resources
of the firm are being utilized. These ratios are known turnover ratios because they indicate the
speed with which assets are being converted or turned over into sales.

i. Working Capital Turnover Ratio

This ratio indicates whether or not working capital has been effectively utilized in
making sales. If a firm makes higher volume of sales with relatively small amount of working
capital, it is an indicator of the operating efficiency of the company.
Working Capital Turnover Ratio = Sales
Working Capital
Table3.8B. Working Capital Turnover Ratio
(Rs in crores)
Years Sales Net Working Capital Ratio
2005-06 2,066,403,500 357,617,892 5.77
2006-07 2,627,953,345 685,046,300 3.84
2007-08 2,437,242,014 691,756,977 3.52
2008-09 1,741,202,903 784,485,795 2.22
2009-10 1,927,024,997 498,602,937 3.87

Figure 3.8B. Working Capital Turnover Ratio

Source: Data Collected From Companies Annual Report

The table and figure showing the working capital turnover ratio. In the year of 2006
the working capital ratio is 5.2 and the year of 2007,2008,2009,2010 is 3.84, 3.52, 2.22, 3.87
respectively. In this case the company has the good working capital since past five years with
positive manner. The company has to be maintained same kind of standards there is no any
problem in future coming years.

ii. Debtors Turnover Ratio

This ratio indicates the relationship between net credit sales and trade debtors. It shows
the rate at which case is generated by the turnover of debtors. In other words, this ratio
indicates as to how many days’ average sales are tied up in the amount of debtors. This ratio is
an excellent supplement to the information provided by current ratio.
Debtors Turnover Ratio = Credit Sales
Average Debtors

Table 3.9B. Debtors Turnover Ratio

(Rs in crores)

65
 Years Sales Average Debtors Debtors Turnover Ratio
2005-06 2,066,403,500 128,080,025 16.13
2006-07 2,627,953,345 199,977,696 13.14
2007-08 2,437,242,014 229,904,290 10.60
2008-09 1,741,202,903 127,788,426 13.63
2009-10 1,927,024,997 176,799,552 10.90

Figure 3.9B. Debtor Turnover Ratio

Source: Data Collected From Companies Annual Report

The purpose of this ratio is to discuss the credit collection power and policy of the
firm. The table and figure shows that the debtor turnover ratio had increased in the year 2006
when compared to following years. In the year 2007 saw a sharp decreased in the debtors
turnover ratio compared to the previous year. In 2008 it was decrease when compared to 2007,
and again increased in 2009, but in 2010 the debtors turnover ratio decreased. This ratio
indicates the number of times the debtors are collected in a year. As per the table ratio is
because it indicates the debts are being collected properly.
iii. Current Asset Turnover Ratio
This ratio shows the relationship between a company’s sales and current assets. A decrease in
this ratio is a good indication of the performance of the company. It shows the ability of the
company to realize the cash from debtors as well as the less amount of money blocked in
inventories.
Current Asset Turnover Ratio = Sales
Current Asset

Table 3.10B. Current Turnover Ratio

(Rs in Crores)
Years Sales Current Assets Current Turnover
Ratio
2005-06 2,066,403,500 811,701,601 2.55
2006-07 2,627,953,345 1,129,810,564 2.32
2007-08 2,437,242,014 1,244,043,876 1.96
2008-09 1,741,202,903 1,087,602,923 1.60
2009-10 1,927,024,997 1,232,389,323 1.57

Figure 3.01B. Showing Current Asset Turnover Ratio

Source: Data Collected From Companies Annual Report

66
 This ratio indicates the extent to which the investment in current asset towards sales.
Compared to last year there is a less fluctuation in the current asset ratio. The Ratio has
decreased in the year 2009 from 1.96 to 1.75 indicating the good performance of the company.
It shows the ability of the company to realize the cash from debtors as well as less amount of
money blocked n inventories.
iv Fixed Assets Turnover Ratio
This ratio indicates the efficiency with which the firm is utilizing its investments in
fixed assets such as plant and machinery, land and building etc. Generally speaking, a high
ratio indicates efficient utilization of fixed assets in generating sales and a low ratio may
signify that the firm has an excessive investment in fixed assets.
Fixed Assets Turnover Ratio = Sales
Net Fixed Assets

Table 3.10. Fixed Assets Turnover Ratio

Years Sales Fixed Assets Ratio

2005-06 2,066,403,500 274,114,387 7.54
2006-07 2,627,953,345 302,462,400 8.69
2007-08 2,437,242,014 591,785,511 4.11
2008-09 1,741,202,903 734,142,047 2.38
2009-10 1,927,024,997 676,840,578 2.85
(Rs in crores)

Figure 3.11B. Showing Fixed Asset Turnover Ratio

Source: Data Collected From Companies Annual Report

The ratio indicates the extent to which the investment in fixed asset contributes
towards sales. The standard norm is 5 times. The fixed assets turnover ratio is 7.54 times
in the year 2006 and it is increased to 8.69 times in the year 2007. But in case of
following years the standard time has the beyond the times, it means it is decreased as
compared to the standard time.

v. Cash Turnover Ratio

Cash turnover ratio indicates the relationship between sales and cash. This ratio
indicates the extent to which cash resources are efficiently utilized by the enterprise.

67
Cash Turn over Ratio = Sales
Cash

Table 3.12B. Cash Turnover Ratio

Years Sales Cash Cash Turnover Ratio
(Times)
2005-06 2,066,403,500 221,088,968 9.35
2006-07 2,627,953,345 159,647,129 16.46
2007-08 2,437,242,014 44,223,138 55.12
2008-09 1,741,202,903 102,968,897 16.91
2009-10 1,927,024,997 153,215,425 12.58
(Rs in crores)

Figure 3.12B. Cash Turnover Ratio

Source: Data Collected From Companies Annual Report

The table and the figure showing the cash turnover ratio. In 2006 it is 9.35and later
it is increased to 16.46. In 2008 cash turnover ratio is become 55.12.The company as a cash
turnover ratio of 12.58 for the year 2010, as compared in a year 2009 hat is 16.91 which
indicates the cash in the firm is being not used efficiently. The sales are increasing as per the
analysis and at the same time the cash is decreasing.
vi. Net Asset Turnover Ratio
Assets are used to generate sales. A firm should manage its assets efficiently to
maximize the sales. Relationship between sales and net assets is called net assets is called net
assets turnover. A firm’s ability to produce a large volume of sales for a given amount of
assets is the most important aspect of its operating performance.
Net Asset Turnover Ratio = Sales
Net Assets

Table 3.13B. Net Asset Turnover Ratio

(Rs in crores)

Years Sales Net Assets Net Asset

Turnover Ratio
2005-06 2,066,403,500 693,711,046 2.98
2006-07 2,627,953,345 1,156,041,351 2.28
2007-08 2,437,242,014 1,387,366,894 1.76
2008-09 1,741,202,903 1,559,859,156 1.12
2009-10 1,927,024,997 1,418,195,008 1.30

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 Figure 3.13B. Net Asset Turnover Ratio

Source: Data Collected From Company Annual Report

The table and figure showing the net asset turnover ratio. In 2006 it was 2.98and in
coming years it decreased in slope manner. It decreased to 2.28 in the year 2007. In a year
2008, 2009 also decreased up to 1.76, 1.12 respectively. But in case of year 2010 it is
increased to 1.3. Here the net asset includes the depreciation.

vii. Inventory Working Capital Ratio

This ratio indicates the relationship between inventory and working capital. Percentage
measure of a firm's capability to finance its inventories from its available cash. Numbers lower
than 100 are preferable as they indicate high liquidity. Numbers higher than 100 suggest that
the inventories are too large in relation to the firm's financial strength.
Inventory Working Capital Ratio = Inventory
Net working capital
Table 3.14B. Inventory Working Capital Ratio
(Rs in crores)
Years Inventory Net working capital Inventory working
capitalRatio
(Times)
2005-06 242,378,637 357,617,892 0.68
2006-07 346,747,382 685,046,300 0.51
2007-08 511,862,684 691,756,977 0.74
2008-09 533,753,597 784,485,795 0.68
2009-10 417,502,371 498,602,937 0.83

Figure 3.14B. Showing Inventory Turnover Ratio

Source: Data Collected From Company annual Reports

The table and figure showing the inventoy to working capital ratio. The ratio is
decreasd from 0.68 to 0.51 between the years 2006 to 2007. It increased to 0.74 in the year
2008 and again it is decreased to 0.68 in the year 2009. But next year 2010 it is increased 0.83.

CHAPTER 4

FINDINGS

69
 This chapter consists of major findings of the analysis conducted. The Analysis is made
based on the objectives, which were set before the analysis. This throws the light on the
various aspects of the working capital and how it affects the company. The objectives were
prepare the basis of working capital management of Ace Designers Ltd.

1. The study tells us that there is an increase in working capital management of the
firm over the past five years.
2. The study found that the overall financial soundness of the company is increasing year by
year so it is the good improvement of company.
3. Companies’ liquidity position is also increasing day by day over the years.
4. The average debtors collection period is in a decreasing trend, which is a good indication
that the receivables are being well managed.
5. The current asset turnover is showing decreasing trend for the first 4 years and later a
increasing trend. The increasing trend shows the company is not managing its current assets
and more money blocked in inventories.
6. The fixed asset turnover ratio is decreased year by year. But there is growth at the last year
2010. It means the company is not utilizing the asset efficiently. It indicates overtrading
and excessive investment in fixed assets. Here the fixed asset does include depreciation.
7. The company’s net asset turnover ratio is comparatively not good with past three years. But
the current years ratio is good. Here the asset does include depreciation. So it is showing a
decreasing trend because wear and tear is reduced.
8. In Ace Designers Ltd debtors turnover ratio was good because of economic condition and
good policy of the company.
9. Company’s Fixed asset turnover ratio I in progressive when compared with previous year
10. Companies’ liquidity position is also increasing day by day over the years. The company
was able turnaround into a profit making unit within a few years.
11. The Ace designers Ltd was maintaining lower cash and bank balance and it has been
increased during the year but in 2008 they has the more cash balance than year of 2008.
12. The inventory is balance is low when compared with the year of 2009.

SUGGESTIONS
From the above analysis of working capital at Ace Designers Ltd, it is clear that the
management of working capital is satisfactory, but still there is some improvements is

70
required to be made in the company. Following are the some suggestions to improve the
existing system of working capital followed by the company.
1. The company can make an attempt to search new customers using the company’s
products which will add to the total revenue of the company, and also the company
can turnover its amount of working capital invested for more time in a year.
2. A still better working capital management can raise more profits for the company
taking it to the heights of prosperity, which make to reduce the company’s working
capital.
3. The effort should be made by the company to increase the availability of cash with
an effective control of inflows and outflows.
4. Company should adopt frequent decision making is involved in the management of
working capital; a separate department should be established to assess the
environmental economic trends and their impact on working capital requirements.
5. The company has to reduce its overall cost of production to improve its competitive
strength and efficiency level and profit.
6. The company should find other sources for financing its current assets than bank
borrowings and trade credits.
7. The company is having less liquid cash comparatively. The cash balance is not
enough to pay off the provisions, if there is an immediate obligation to be met. The
company’s net current assets are less comparatively to the total assets of the
company. This reveals the less liquid position and company must consider current
asset management.
8. Ace Designers Ltd current assets as compare to current liability is less, it must
manage its current assets properly. It is advisable to maintain a higher current asset
by recovering from creditors.
9. The current ratio of the firm has been increasing; higher the liquidity, lesser will be
the profitability to the firm. Hence company has to maintain a balance between
liquidity and profitability.

71
General Suggestions
Working capital management is an important aspect of financial management and also
the most time consuming job for financial managers. They have to monitor the working capital
as it is continuously absorbing

1. Increasing the price:-Human mentality is very difficult to understand. For

instance if we sell a product at low price no baby will buy because they think
that low price have low quality, the same product if we try to sell at higher
price than people will buy. Because they think higher value means high
quality.

2. Based on the manufactures expectations:-It is widely agreed that the

facilitators were sincere people who were not deliberately faking the results.
Their choice of keys was based on their own expectations. So, like people
tasting foods or purchasing car, their perceptions were misled by their
expectations.

3. Through direct personal experience:-Normally when we are confident

someone is honest and they tell us that they have learned something through
direct personal experience, we feel it must be true. This applies even more so
when we feel us, ourselves have learned something from our own experience.

4. By price reductions:-Many products and services face new competition from

substitutes and from completely new offerings or bundles from industry
outsiders. Since product differences are closed at an increasing speed and
many companies try to win the battle for customers by price reductions,
products and services tend to become commodities.

5. Providing wider choice of prices for products:-Customer behaviour has

become more hybrids now days. On one hand, customers are increasingly
price sensitive – searching for bargains at marketplaces. On the other hand
they enjoy branded and luxury goods. For many offerings the balance of
power shifts towards the customer. Customers are widely aware of their
greater power, which raises their expectations on how companies should care
for them.

72
6. Development of a strong relationship:-The development of a strong relationship
between customers and a company could likely prove to be a significant opportunity
for competitive advantage.

7. Customer satisfaction:-Customer satisfaction is the precondition for repeat

purchases and it prevents the customer from telling others about his
disappointing experiences.

8. Creating emotional bond:-The emotional bond which links the customer so

closely to the company that he develops a clear preference for these products or
brands and is even willing to recommend them to others.

9. Understanding customer loyalty:-The customer establishes an equation

between perceived benefits and perceived costs of one product and compares
this to similar equations of other products. Based on this, customer loyalty can
be understood as to how customers feel about a product, service or brand and
whether their perceived total investments with it live up to their expectations.

10. Brand image:-Consumer perceptions will be positively related to brand

image. Brand image has been a common term in marketing research and practice
for half a century.

11. Know about itself and its offerings:-First of all the company has to find out
how itself and its offerings are perceived by the customers. It is essential to
identify what the customer is actually buying and which features are most
important to him. Only this way it is possible to align the internal focus and resources to
the customer’s expectation.

12. Customer expectations:-customer likes and dislikes information is of greater

value if it can be compared to the customers’ perception of competitive
offerings. Not only will this reveal relative strengths and weaknesses, it is also
a valuable source of ideas for improvement.

13. Through research activities:-Any market research activities, it should be

based on careful customer segmentation. Customer groups that differ by frequency
of use, social status, geographical region or other criteria, are likely to
have different expectations and preferences. Hence, they will probably perceive
an offering in different ways.

14. Added values:-Generic products can be made distinct by adding value through
extra features, such as quality or performance enhancements. In terms of

73
 competition with other products and companies, consumers greatly value these
added benefits when making a purchasing decision, making it important for
manufacturers to understand the notion of a “total package” when marketing to their
customers.

15. The final level of consumer perception involves augmented properties, which
offer less tangible benefits, such as customer assistance, maintenance services,
training, or appealing payment options.

16. Changing Product Strategies:-Products and consumer perceptions are

variable, so changes in strategy may be required to better address customer needs,
technological developments, new laws and regulations, and the overall product
life-cycle.
17. Product development:-By monitoring external conditions and shifting product
development accordingly, a company can better target its consumers and learn to react
to their needs.

18. Measuring Public relation:-customer perception can measure public relations,

public relations messages may not have influence on consumers' knowledge,
and the influence of the messages might not be positive on consumer's
attitude or behavior;

19. Awareness:-Companies should try to make sure that their customers are fully
aware of all the ways their offering can provide value to them. They have to
explain the customer how this particular product can deliver more value than
those from competitors.

20. By solving customer needs or problems:-A common idea of many authors is

that it is not always necessary to deliver the absolutely perfect
customer experience. Instead it is important to solve the customers need or problem in a
matter that is perceived appropriate.

Responsiveness and service quality:-The degree to which the customer feels the actual
marketing campaign addresses the most important issues, Responsiveness and service
quality of any affiliates

21. The more experience the customer accumulates, the more his perceptions will shift from
fact-based judgements to a more general meaning the whole relationship gains
for him. Over time, he puts a stronger focus on the consequence of the
product or service consumption.

74
22. Based on competitor offerings:-In the external environment, the offerings of
competitors, with which a customer compares a product or service will change, thus
altering his perception of the best offer around. Another point is that the public
opinion towards certain issues can change.

23. Measurement system:-Any serious effort to manage customer perceptions starts

with a good measurement system. Companies must be truly willing to look at the
whole process of interaction through the customers eyes. For many companies, this
requires a more or less extensive shift in mindset, since most departments from
development to sales will be involved.

24. Understanding customer important:-Only if a company knows which features of its

products and services or which other points of contact with the customer are considered
most important by the customers, it can develop appropriate strategies.

25. Consumers can evaluate a product along several levels. Customer perception is basic
characteristics are inherent to the generic version of the product and are defined as the
fundamental advantages it can offer to a customer.
26. Power of suggestion:- In the day today life When we form a judgment about
something we have experienced ourselves, like how much we like ice cream, we
naturally assume our judgment is based entirely on our own perception. However if we
have a prior expectation based on what someone has told us or something we have
assumed, that expectation may have a strong influence on our opinion that we don't
recognize. This is sometimes called the "power of suggestion

75
 CONCLUSION
Working capital may be regarded as lifeblood of a business. It’s effective provision can
do much to ensure the success of a business, while it’s inefficient management can lead not
only to loss of profits but also to the ultimate down fall of what otherwise might be considered
as a promising concern. The working capital finance in Ace Designers Ltd is satisfactory it has
been increasing over the past five years.
If the working capital is more, it is understood that the company is in an advantages
position. The suppliers judge whether to give credit facilities to the company on this basis of
the current assets held by the company, so if the company is holding more current assets the
suppliers will be ready to provide the credit facilities to the company. On the other hand if the
current assets do not yield any returns the amount is blocked in current assets so the
profitability is affected. So the company should maintain balance between current assets and
current liability
In the overall study of the company’s performance in the past six years, it can be
concluded that the company is doing its best with innovative ideas and adopting new
technology to introduce new products with high quality. Since 1987, Ace Designer Limited
has been India’s leading manufacturer of CNC lathes and auto lathes and has been exporting
machines to countries all around the world, including Brazil, Germany, the UK and US. Also,
it is the only Indian company to make machine tools on a conveyor line. It is a company with
raising sales and is running under profit. This is studied and analyzed under the various heads
of ratio analysis. Observations have also been drawn ad suggestions also given. A good co-
ordination and co-operation exist between the union and the management, which when
maintained , forces better functioning of the organization to achieve its long-term objectives
effectively.

76
77
 BIBLIOGRAPHY
Books
1. Accounting for manager –Maheshvary & Maheshvari–Vikas Publishing House (P)
Ltd.
2. Advanced Financial management – I.M. pandey, Vikas Publishing House Pvt
limited, 9th edition, 2005.
3. Accounting for Managers - Jawaharalal – Himalaya Publishing House, 4th
edition,2004.
4. Financial Management – M.Y.Khan and P.K Jain, TMH Publications, 4th edition,
2004.
5. Financial Accounting – P.C. Tulsian – Pearson Education India, 1/e. Pp341-345
6. Accountancy – B.S. Raman – United Publishers. Fourth edition, 2007.Pp 698-714
7. Bussiness Research Methods – S.N. Murthy/U.Bhojaanna – Excell
Books/2e/2007.Pp140-159.
8. Marketing Research – Naresh k malhothra – Pearson Education/PHI/5e/2007.Pp
78-99.
9. Crafting and executing strategy by Arthur A. Thompson Jr, A.J.Stickland iii.Ppl
167-179
10. Financial Management- Paresh P Shah- Indian text edition. Pp 153-162
11. Fundamentals of Financial management- James C Van Horne, John m Wachowicz Jr,
Sumithra N Bhaduri. Pp 197-213.
12. Fundamentals of Financial Management- Tenth edition- Bringham & Houston – Thompson,
South western. Pp 562-610

Internet
1. http://www.acedesigners.co.in

2. www.MachineTool Industry.com

3. www.acegroup.com

4.www.ace designers ltd.com

5. http://www.investopedia.com

78
6. http://www.wikipedia.org/wiki/working_capital

7. http://www.sutuition.org/2010/02/working _capital_management.html

8. http://www.studyfinance.com/lessons/workcap/

10. http://www.sutuition.org/2010/02/working _capital_management.html

11. http:// www.osi.hu/cpd/policyresources/fmbp/chapter_06_page1_fmbp.html

12. http:// www.planware.org/workingcapital.html

13. . www.rediff.com

14. www.working capital management.com

APPENDIX-1

79
Particulars 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06
Sources Of Funds
Shareholders Funds
Share capital 178,200,000 178,200,000 178,200,000 178,200,000 178,200,000
Reserves and Surplus 1,172,143,583 1,116,998,962 1,066,262,834 794,112,608 441,941,104
Loan Funds
Secured and 48,535,141 234,745,861 19,655,430 163,157,174 56,060,686
Unsecured Loans
Deffered Tax 19,316,284 29,914,333 23,248,630 20,571,569 17,509,257
Liabilities
Total 1,418,195,008 1,559,859,156 1387366894 1,156,041,351 693,711,047
Application Of Funds
Fixed Assets 676,840,578 734,142,047 591,785,511 302,462,400 274,114,387
Capital WIP 9,031,128 29,337,019 40,922,737 6,638,356 84,472
Investments 233,720,365 11,894,295 62,901,669 161,894,295 102,634,178
Current Assets
Inventories 417,502,371 533,753,597 511862684 346,747,382 242,378,637
Debtors 353,599,104 255,576,852 459808580 399,955,392 256,160,049
Cash and Bank 153,215,425 102,968,897 44,223,138 159,647,129 180,349,085
Balance
Other current assets 154,648,539 155,732,944 44,860,865
Loans &Advances 308,072,423 195,303,577 73,500,935 67,727,717 36,763,417
Total 1,232,389,323 1,087,602,923 1,244,043,876 1,129,810,564 760,512,053
LESS : Current 733,786,386 303,117,128 552,286,899 444,764,264 443,634,043
liabilities
Net Current Assets 498,602,937 784,485,795 691,756,977 685,046,300 316,878,010
Total 1,418,195,008 1,559,859,156 1,387,366,894 1,156,041,351 693,711,047

Balance Sheet Of Ace Designers Ltd For Past Five Years

APPENDIX-2

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH

80
Particulars 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06
Income
Sales 1,927,024,997 1,741,202,903 2,437,242,014 2,627,953,34 2,066,403,50
5 0
Other income 35,116,412 27,920,734 129,129,885 112,384,605 71,900,562
Total 1,962,141,409 1,769,123,637 2,566,371,899 2,740,337,95 2,138,304,06
0 2
LESS : Total 1,766,656,741 1,615,153,481 1,970,068,558 2,026,322,39 1,558,846,38
Expenditure 9 8
Profit before tax 195,484,668 153,970,156 596,303,341 714,015,551 579,457,674
Less : Tax 72,555,777 61,537,010 199,062,061 229,768,889 192,653,260
Profit after tax 122,928,891 92,433,146 397,241,280 484,246,662 386,804,414
Less : Prior period 15,835,070 - - - -
expense
Net Profit 107,093,821 92,433,146 397,241,280 484,246,662 386,804,414
Add : Balance 945,576,829 904,084,016 671,657,918 367,911,080 131,543,010
brought forward
from previous year
Profit available for
appropriation
Less : 1,052,670,650 996,517,162 1,068,899,198 852,157,742 518,347,424
Appropriation
Proposed Final
dividend
Tax on dividend 44,550,000 35,640,000 53,460,000 115,830,000 35,640,000
Transfer to General 7,399,200 6,057,018 9,085,527 16,245,158 4,998,510
Reserve
Surplus carried to 10,709,382 9,243,315 39,724,128 48,424,666 38,680,441
Balance Sheet
990,012,068 945,576,829 1,068,899,198 852,157,742 518,347,424

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