A COMPREHENSIVE PROJECT REPORT ON

WORKING CAPITAL
Submitted to
Dr. J. K. Patel Institute of Management IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION Under

Gujarat Technological University

UNDER THE GUIDANCE OF Faculty Guide
PROF. DEVAL NIRMAL

Submitted by

JIMIT M PATEL
Enrollment No.:107110592130 M.B.A - I, SEMESTER-II
Dr. J. K. Patel Institute of Management

M.B.A PROGRAMME Affiliated to Gujarat Technological University Ahmadabad.

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Dr. J. K. Patel Institute of Management

CERTIFICATE

This is to certify that Mr. JIMIT M PATEL, students of Master of Business Administration (Batch 2010-2012) at Dr. J. K. Patel Institute of Management, Vadodara have undertaken a Project Titled WORKING CAPITAL in partial fulfillment of 2 years full time MBA programme of Gujarat Technological University, Ahmedabad. The Summer Internship Project has been undertaken under the guidance of Prof. DEVAL NIRMAL, faculty of Dr. J. K. Patel Institute of Management. This is also to ascertain that this project has been prepared only for the award of Master of Business Administration degree and has not been submitted for any other purpose.

Prof. Deval Nirmal

Dr.Abhijeet Chatterjee Director

Date: Place:

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PREFACE

Summer Placements are a crucial aspect of a Management students life. At the MBA Programme conducted under the aegis of Gujarat Technological University, Ahmadabad, summer placements aim to give the students a chance to apply in actual practice, the fundamentals that they learnt in the first two semester of the programme. Graduate students with no or minimal work-experience step into an organisation and get their first taste of working life. The students get an exposure to all the four functions of management human resources, finance, marketing and production. This enables students to choose or rather, reject a specialization, e.g., the student may have scored well in Marketing Management in the exams, but when confronted by the realities of the marketing professionals, the student will understand exactly where he stands and what he lacks, in terms of his marketing skills. In this report on my summer placement at ALEMBIC LTD., I have presented my

understanding of the working of Alembic Ltd., from a management-students perspective.

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ACKNOWLEDGEMENT

I am thankful to Dr. ABHIJEET CHARTIJEE, Director, Of J.K.PATEL INSTITUTE OF MANAGEMENT for giving me an opportunity to work with ALEMBIC LIMITED for my Summer Internship Project. This report would not have been possible but for the kind support and expert guidance of Mr. Himanshu Jani (Senior HR. Manager) & Mr. Rajkumar Baheti (President Finance).The task of understanding the intricacies of management in practice was made easy by the generous help extended by all the employees of Alembic Ltd. I am also thankful to Prof. Deval Nirmal for him valuable advice and ideas which made my work successful. Without her encourangement I would not have been able to complete my project. No Task is a single mans effort cooperation and coordination of various people at various places goes into successful implementation. It is great pleasure to have the opportunity to extend my heart-felt thanks to everybody who helped me through the successful completion of this project.

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TABLE OF CONTENTS

Sr.NO

CONTENTS

PAGE NO

1 2 3 4 5 6 7 8 9 10 11 12 13 14

PREFACE ACKNOWLEDGEMENTS LITERATURE REVIEW OBJECTIVE OF STUDY INTRODUCTION OF ALEMBIC LTD. FINANCE DEPARTMENT RESEARCH METHODOLOGY DATA ANALYSIS FINDINGS & OBSERVATION SUGGESIONS LIMITATION OF STUDY CONCLUSION BIBLIOGRAPHY ANNEXTURE

3 4 7 19 22 37 41 43 60 62 61 63 64 65

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TABLE OF CHART

Sr.NO 1 2 3 4 5 6 7 8

CONTENTS CURRENT ASSETS DEBTORS INVENTORY LOANS & ADVANCES CASH & BANK BALANCES CURRENT LIABILITIES PROVISIONS NET WORKING CAPITAL RATIOS

PAGE NO 46 47 48 49 50 51 52 53 54 54 55 58

1 2 3

CURRENT RATIO QUICK RATIO WORKING CAPITAL TURNOVER RATIO

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LITERATURE REVIEW
Review
A literature review can be a precursor in the introduction of research paper, or it can be an entire paper in itself, often the first stage of large research projects, allowing the supervisor to ascertain that the student is on the correct path. A literature Review is a critical and in depth evaluation of previous research. It is a summary and synopsis of a particular area of research, allowing anybody reading the paper to establish why you are pursuing this particular research program. A good literature review expands upon the reasons behind selecting a particular research question.

WORKING CAPITAL MANAGEMENT:-

Working capital management involves the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing shortterm debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash. Working capital management is concerned with the problems that arise in attempting to manage the current assets and current liabilities & the inter-relationship that exist between them.

The term current assets refers to those assets which in the ordinary course of business can be, or will be turned into cash within one year without undergoing a diminution in value & without disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivables and inventory. The term current liabilities are those liabilities, which are intended at their inception to be paid in the ordinary course of business, within a year, out of the current assets or earning of

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the concern. The basis current liabilities are accounts payable, bill payables, bank overdraft & outstanding expenses. The goal of working capital management is to manage the firms current assets & current liabilities in such a way that satisfactory level of working capital is maintained. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. The interaction between current assets & current liabilities is therefore, the main theme of the theory of working capital management.

CONCEPT OF WORKING CAPITAL:-

There are two concepts of working capital. 1. Gross Working Capital 2. Net Working Capital

GROSS WORKING CAPITAL

The term gross working capital also referred to as working capital, means the total current assets. Gross working capital refers to the firms investment in current assets. Current assets are the assets which can be converted into cash within an accounting year and include cash, short term securities, debtors (accounts receivables or book debts), and bill receivables and stock (inventory).

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Working Capital Financing in Alembic Ltd.

In Alembic Ltd, working capital planning is done by the finance Manager. The working capital planning is done on four occasions i.e. Yearly, Monthly, Weekly and Daily basis. First the total working capital requirement is assessed on yearly basis. On the basis of yearly planning, the company approaches its bankers for increase or modifications in the working capital facilities. Then the company makes the monthly working capital planning. This is done to meet the working capital requirement of the coming month. Then the company makes a working capital planning for the immediate week. Up to this level the working capital planning is done by the finance manager. Then, on every evening he makes the financial requirement of the next day and assign the execution of those works to the Accountant and officers. The data required for planning in Alembic Ltd Are as follows.

Yearly projected sales:The data is given by Managing Director and Marketing Manager to the Finance Manager.

Expansion plan of management.:These data is given by the Managing Director and Directors.

Monthly projected sales.:This data is given by marketing manager to the Finance Manager

Monthly estimated purchase:.This data is given by Production Manager to the Finance Manager. Monthly estimated salary, power bill , repair and maintenance and other directand indirect expenses. This data is given by Production Manager to the Finance Manager.

Monthly estimated money receivable from debtors.:This data is given by Accountants to the Finance Manager.

Monthly estimated money payables to creditors.:This data is given by Accountants to the Finance Manager. If there are much deviation in the financial requirements during the year due to unexpected receipt of goods purchase orders and increase in sales or change in credit terms, the yearly working capital requirement is reviewed and modified. Accordingly monthly working capital planning is also changed.

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Operating Cycle Of Alembic Ltd.

cash

Debtors

Raw materials

Finished goods

Operating cycle of Working Capital

In any organization current assets are financed by current liabilities but all current assets cannot be financed by current liabilities therefore there is need to maintain net working capital. Why net working capital is needed can be understood by following cycle: Operating cycle consists of four phases: Utilization of cash by procurement of raw material Conversation of raw material into finished goods. Sale of finished goods to customers. Collection of many from customers.

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 There is time lad between two successive phases. Procurement of raw material need some time called as lead time. It can be short or long depends on availability of material. Each product has processing time while converted from raw material to finished goods. Finished goods can reach to customers by sales efforts lacks of proper sales efforts can lead to accumulation of inventory of finished goods. Realization of cash against the finished goods depends on time taken by the cycle to operate more time to operate this cycle; more working capital is needed.

Average inventory 1) Inventory period = -----------------------------------------------Annual COGS / 365

Average accounts receivable 2) Accounts receivable periods = ---------------------------------------------------Annuals sales / 365

Averages accounts payable 3) Average payable periods = ----------------------------------------------------Annual COGS / 365

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Operating Cycle of the Alembic Ltd.

NO.

Particular

Mar08 material Period 29

Mar09 14

Mar010 10

Raw storage (Days)

2 3

Conversion period (Days) Finished goods storage (Days) Advance collection period (in Days) Advance payment period (in Days) Length of Operating Cycle (Days) = (1+2+3+4+5)

8 17

21 10

22 9 31 100 7 26 72 23 21 85

4 5

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NET WORKING CAPITAL

Net working capital refers to the difference between current assets & current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors (account payables), bills payables and outstanding expenses.

Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business Working Capital = Current Assets Current Liabilities Net working capital can be positive or negative. A positive working capital will arise when current assets exceed current liabilities. A negative working capital occurs when current liabilities are in excess of current assets. The liabilities of a business firm are measured by its ability to satisfy short term. The three measures of a firms over all liability are: 1. Current Ratio 2. Acid Test Ratio / Quick Ratio 3. Net Working Ratio

Ratio analysis is a powerful tool of financial analysis. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.
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Sources of Additional Working Capital

Sources of additional working capital include the following: Existing cash reserves Profits (when you secure it as cash!) Payables (credit from suppliers) New equity or loans from shareholders Bank overdrafts or lines of credit Long-term loans

If you have insufficient working capital and try to increase sales, you can easily over-stretch the financial resources of the business. This is called overtrading. Early warning signs include: Pressure on existing cash Exceptional cash generating activities e.g. offering high discounts for early cash payment Bank overdraft exceeds authorized limit Seeking greater overdrafts or lines of credit Part-paying suppliers or other creditors Paying bills in cash to secure additional supplies Management pre-occupation with surviving rather than managing Frequent short-term emergency requests to the bank (to help pay wages, pending receipt

of a cheque).

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DETERMENTS OF WORKING CAPITAL

A firm should plan its operation in such a way that it should have neither too much nor too little working capital. The total working capital requirement is determined by a wide variety of factors. These factors however affect from enterprise differently. They also vary from time to time. In general the following factors are in valued in a proper assessment of quantum of working capital management.

General nature of business

The working capital requirements of an enterprise are basically related to the conduct of business. The nature of their business is such that they have to maintain a sufficient amount of cash, inventories and bad debts. They have necessarily to invest proportionately large amounts in working capital. The manufacturing enterprise in a sense between these two extremes. The industrial concerns fairly large amount of working capital through it varies from industry depending on their assets structure.

Production cycle
Another factor which has a bearing on the quantum of working capital is the production cycle. The term production or manufacturing cycle refers to the involved in the manufacturing of goods. It covers the time span between the procurement of raw material and the completion of the manufacturing process of manufacturing. In other words, there is some time gap before raw materials becomes goods.

Business cycle
The working capital requirements are also determanined by the nature by the business cycle. Business fluctuation lead to cyclical and seasonal changes which in cause a shift in the

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working capital position, particularly for temporary working capital requirements. The variations in business condition may be in larea direction: Upward. Phase when boom condition prevail and downsizing phase when the economic activity the need for working capital is likely to. Grow to cover the between increase sales and receipt of cash as well as to finance purchase of addition material to the expansion of the level of activity. In brief, business fluctuations the size of working capital mainly through the effect on inventories. The responses of inventory to business to nature of the business cycle.

Production policy
The quantum of working capital is also determined by production policy. In case of business the demand for produces is seasonal that is they are purchased during certain month of the year. What kind of production policy should be follow in such assets? There are two options open to such enterprise: either they confine their production only to periods when goods are purchased or they follow a steady production policy throughout the year and produce goods at a level to meet the peak demand. In the former case, there are serious production problem.

Credit policy
The credit policy relating to sales and purchase also affects the working capital. The credit policy influences the requirement of working capital in two ways. -through credit terms granted by the firm to its customers buyers of goods. -Credit terms available to the firm from its creditors. The credit terms granted to customers have a bearing on the magnitude of working capital by determining the level of book debts. The credit sales result in higher book debts. Higher book debts mean more working capital on the other, if liberal credit terms are available from the suppliers of goods the need for working capital is less. The working capital requirements of a business are thus affected by the terms of and sales and the role to the credit by a company in its dealing with creditors and debtors.

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IMPORTANCE OF WORKING CAPITAL

Working capital is the life-blood and controlling nerve centre of a business.

It helps in forming important business strategies. Working capital helps to properly manage and be flexible in taking important business decisions.

The adequacy of working capital contributes a lot in raising the credit standing

and always helps to take the advantage of any favorable opportunity e.g. purchasing raw materials at a discount with minimum credit period.

Working capital is significant parameter in determining the performance of an

operating division or assessing the health of the project.

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PRAFOMA STATEMENT OF WORKING CAPITAL

Sr. No

Particulars

Amounts (Rs)

Current Assets, Loan & Advances (a) Investment (b) Sundry Debtors (c) Cash & Bank Balances (d) Other current assets ( e) Loans & Advances Total of A Less Current liabilities & Provisions ------------------------------------------------------------------

B (a) current liabilities (b) Provisions Total of B ------------------------

Net Working Capital (Total of A-B )

----------

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OBJECTIVE OF STUDY

My Project Report mainly focuses on Working Capital To determine the amount of working capital requirement and to calculate various ratios relating to working capital. To make an item wise study of the components of the working capital.

To suggest the steps to be taken to increase the efficiency in management of working capital. To develop the different sources of finance. To know the financial position of the company.

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CURRENT ASSETS

Current assets are those assets which can convert in to cash within a short period normally one accounting year.

Constituents of current assets 1) Cash in hand and cash at bank 2) Bills receivables 3) Sundry debtors 4) Short term loans and advances 5) a. b. c. d. Inventories of stock as Raw material Work in process Stores and spares Finished goods

6) Temporary investment of surplus funds 7) Prepaid expenses 8) Accrued incomes 9) Marketable securities

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CURRENT LIABILITIES

Constituents of current liabilities

1) Accrued or outstanding expenses. 2) Short term loans advances and deposits. 3) Dividends payables. 4) Bank overdraft. 5) Provision for taxation, if does not amount to of profit. 6) Bills payable. 7) Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits.

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GENERAL LIMITED

INFORMATION

OF

ALEMBIC

LOGO
The BLUE color represents stability, knowledge, dependability and strength of character. The GREEN color symbolizes prosperity and freshness of thoughts (innovation). The two uni-directional arrows in the logo indicate momentum to achieve the real potential to reach higher goals and aspirations. It gives a feeling of directed and purposeful movement in the company. Alembic made a humble beginning more than 10 decades ago in 1907, it has been driving itself on ethos of Self Reliance, Indigenization, Innovation and Import Substitution. This
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very commitment and focus resulted in Alembic becoming the Public Sector Company. Alembic is in the business of improving the quality of life and healthcare in over 75 countries around the world.

The credit for setting up this pharma company is shared by three people promoter Raj Mitra, B.D. Amin, Dr. T.K. Gajjar and Prof. Kotibhaskar under the guidance of H.H Maharaja Sayajirao III. Alembic is Asia's most respected integrated pharmaceutical company with manufacturing practices and facilities in Baroda, Panelav, Karakhadi and Baddi that conform to WHO-GMP guidelines with a total turnover in excess of Rs. 1200 crores. Alembic Research Center (ARC) spread over 120,000 sq ft at Vadodara has state-of-the-art research facilities, designed conforming to international standards. From 1950s onwards, it ventured into pharmaceutical business and after 1960 in the production of bulk drugs. Alembic Ltd. is the 17th largest pharmaceutical company in India and is engaged is manufacturing of basic drugs, pharmaceuticals and antibiotic formulations. The major basic / bulk drugs manufactured are Penicillin, Erythromycin and Roxithromycin. Basic production of antibiotic like erythromycin and penicillin is a major activity of the company. The company can be considered as a pioneer in manufacturing Penicillin through fermentation process by developing indigenous know-how and, over the years, has improved on the process technology, the culture and the yields with the help of its own R & D efforts. The company was conferred Sir P.C. Ray award for indigenous manufacturing of Penicillin. Alembic Ltd. is also the first and the only basic manufacturer of Erythromycin in the country. Alembic has also got the distinction of being the first company in India and second in the world to manufacture the basic drug ROXITHROMYCIN (anti-infective) under the brand name ROXID. The company has also introduced a revolutionary antibiotic viz. Azithromycin has unique features of targeted drugs delivery at diseases affected areas in short courses of treatment popularly termed tissue directed antibiotic therapy. Both Roxid and Azithral were fruits of latest scientific developments in Pharmaceuticals and in consonance with the past performance in the marcolide group have emerged as brand leaders despite stiff competition. The company has recently increased the production capacity of bulk drugs manufacturing process. It has vast infrastructure facilities in terms of land in prime locality and is equipped to take up any further expansion programs. The company has also developed various other companies engaged in the area as diverse as manufacture of glass ware, pesticides and weedicides , fabrications of heavy machinery for various industrial, printing activities, manufacture of aluminum vial seals and plastic caps, finance and leasing, investment activities, etc.

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 Alembic Group is one of the oldest and most respected business houses with strong and diverse presence in healthcare, engineering, pharmaceutical and glass sectors. Alembic has speeded its wings in other than pharmaceutical industry; which are proudly known as Alembics Group Companies.

ALEMBIC GROUP COMPANIES

ALEMBIC LIMITED, the pharmaceutical company.

PAUSHAK LTD. Leader in Phosgene based derivatives.

Paushak has mastered the Production of phosgene gas and phosgene based specialty Chemicals / intermediates through indigenously developed Technology. These chemicals are used in diverse fields such as Pesticides, pharmaceuticals, dyes, plastics etc.

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 SHRENO LTD. GLASS DIVISION (known as YERA Glass)

The Pioneering effort of Shreno from which emerged YERA, first name recalled at the mention of Glassware. The support of a wide dealership network all over the country has enabled Yera to achieve a major share in the glassware market. Yera Glassware especially tableware and dinnerware also reach to many places around the globe through exports

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 ALEMBIC LIGHT PUBLICATION

Light Publication is professionally managed unit serving the present day printing and packaging requirement of respective clients

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 SHRENO LTD. ENGINEERING DIVISION

Shreno Ltd is the engineering company of Alembic group. Shreno designs, develops and manufactures process plants and special purpose machines for Biotechnology, Pharmaceuticals, Chemicals and Glassware. The company has been active since 1962, and has one of the best equipped manufacturing facilities in the region. Its customers are major chemical and pharmaceutical companies, glassware manufacturers and nuclear fuel processing facilities. The company is set for major expansion activity and market its presence felt in international markets.

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 BHAILAL AMIN GENERAL HOSPITAL (BAGH)

The group includes BHAILAL AMIN GENERAL HOSPITAL (BAGH), an ISO 9001:2000 certified 160 bed-premier hospital, providing all health-care amenities under one roof. This world-class facility is equipped to provide multi-specialty and tertiary healthcare, 24-hours emergency, intensive care units, a heart command center, besides a plethora of pathological testing facilities and a blood bank. BAGH has been in the forefront of ushering in a revolution in health care in India. From a highly qualified team of doctors to following internationally acclaimed practices, everything at BAGH is aimed at offering the best in health care.

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 VISION STATEMENT
To become a knowledge driven global pharmaceutical company with the highest levels of operational excellence in all spheres.

MISSION STATEMENT
To give access to the best health care products at affordable prices to everyone, anywhere in the world.

ALEMBICS BUSINESSES API BUSINESS FORMULATIONS BUSINESS RESEARCH & DEVELOPMENT ( API , F&D and Bio-Equivalence)

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 API (ACTIVE PHARMACEUTICAL INGRIDIENT)

API is significant operations for Alembic Limited. The fermentation based APIs are manufactured at its main manufacturing facility exceeding 3 million sq.mt. Alembic has an exclusive facility for manufacturing synthetic APIs, consisting of independent manufacturing blocks for Macrolides, NSAIDs and other drugs. API manufacturing facility at Panelav has successfully under gone inspection of USFDA and EDQM.

FORMULATIONS BUSINESS
Plant was commissioned in March 2003. Plant is designed exclusively for Non -lactum Oral Solid Dosage forms.

RESEARCH AND DEVELOPMENT

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Alembic's Multidisciplinary R&D Portfolio Includes: API RESEARCH FORMULATIONS RESEARCH ANALYTICAL RESEARCH INTELLECTUAL PROPERTY

AWARDS & CERTIFICATIONS

R&D facilities approved by DSIR, GOI in 1975 ISO 9002, ISO 14001, ISO 27001 Certification for its Manufacturing Facilities First Chemexcil Award in 1991-92 Received award for "Excellence in Environment Preservation and Pollution Control" by the Federation of Gujarat Industries (FGI) in 1997 Dr.P.C.Ray Award for Quality Inspected in 1969 and approved by MCC (South Africa), MHRA (UK), USFDA (US) and EDQM

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LOCATIONS

REGISTERED OFFICE
BARODA

MANUFACTURING FACILITIES
API & Research Center, BARODA API PLANT, PANELAV API PLANT, KARAKHADI FORMULATION PLANT, PANELAV (EOU) & BADDI (DOMESTIC)

FORMULATION MARKETING, MUMBAI

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ALEMBIC CAMPUS

Houses 438 Employees & their families. Alembic , Tejas ,Utkarsh,Ujjaval Vidyalaya . Bhailal Amin General Hospital.

Two Libraries - with 12,000 books, 25,000 back volumes and 60 periodical titles, Only line database like STN ,SCIFINDER & related with Patents. CD Rom Data base Patent & Synthesis & Pharmacopeia. Alembic Cricket Academy. Badminton / Table Tennis Courts. Fully computerized Bank / Post Office. Employees Departmental Store & Yera Arcade. AXIS Bank ATM.

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BOARD OF DIRECTORS

Sr. No. 1. 2.

Name
Mr. Chirayu Ramanbhai Amin Mrs. Malika Chirayu Amin Dr. Babubhai Rambhai Patel Mr. Raj Baheti Kumar

Designation
Chairman & Managing Director Whole-time Director

3.

Director

4.

President - Finance & Company Secretary Director Director

5. 6.

Mr. Pranav Natverlal Parikh Mr. K. Ramanathan Mr. Paresh Saraiya Mr. Pranav Amin G.

7. 8.

M.

Director Director & Chief Business Development Officer

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ALEMBIC -- MILESTONE

1907 :- A joint stock company with a limited liability registered first in Bombay and then in Baroda. The company was named ALEMBIC CHEMICAL WORKS CO. LTD.

1909 :- French Distillery Plant Worth Rs. 1 lakh along with machinery for Pharmaceutical purposes installed in Baroda.

1933 :- Company celebrated Silver Jubilee.

1934 :- Branch Office in Madras was established.

1935 :- Establish a sales office in Calcutta.

1940 :- Started manufacturing cough syrup, vitamins, tonics and sulphur Drugs.

1952 :- Started R & D activity. 1960 :- Installed Asias Largest Fermentor with capacity of 130 KL

1961 :- Inauguration of penicillin Plant by Late Shri Lal Bahadur Shastry.

1967 :- Bulk Manufacturing of Vitamins B12 by fermentation with know How of pierell company of Italy. 1968 :- Established Paushak Ltd.

1969 :- Received prestigious Dr. P.C.Ray award for Quality for consecutive Three years ( 1969 1971 )

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1975 :- Pharma Building was set up.

1979 :- Started Rural Development Centre, at Panelav.

1991 :- Received First Chemexcil Award. 1992 :- Launched Azithral A brand of Azithromycin. 1997 :- Launched Roxid Liquid First of its kind in the world. 1998 :- Launched Azithral Liquid First of its kind in the world. 1999 :- Changed Companys name as ALEMBIC LIMITED

2000 :- Achieved ISO 14001 certificate.

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FINANCE DEPARTMENT

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ORGANIZATION CHART OF FINANCE DEPARTMENT

PRESIDENT GENERAL MANAGER SR. MANAGER MANAGER DEPUTY MANAGER

ASSISTANT MANAGER SR. EXECUTIVES EXECUTIVES

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BASIC FINANCIAL FUNCTIONS FOLLOWED AT ALEMBIC

1. Accounts 2. Indirect taxation Taxes which are indirectly levied from the end user that is individual or a company by the government. Excise Service Tax Export Benefits / EXIM policy Sales tax / Value Added Tax (VAT) Business Finance

3. Business finance

Business Finance

Domestic

International

4. DIRECT TAXES 5. INSURANCE 6. SECRETARIAL AND LEGAL PRACTICES

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FINANCIAL OBJECTIVE

1) To ensure adequate return on the capital employed and maintain dividend on equity capital. 2) To ensure maximum economy in expenditure.

a reasonable annual

3) To develop long-term corporate plans to provide for adequate growth of the Corporations business. 4) To manage and operate all facilities in an efficient manner so as to generate adequate internal resources to meet revenue cost and requirements for project investment, without budgetary support. 5) To complete all planned projects within the scheduled time and approved cost. 6) To reduce the cost of production of products by means of systematic cost control measures and thereby sustain market leadership through cost competitiveness. 7) To continue to make an effort in bringing reduction in the cost of production of products by means of systematic cost control measures. 8) To generate sufficient internal resources for financing partly/wholly expenditure on new capital projects. 9) To ensure adequate return on capital employed and maintain a reasonable annual dividend on its equity capital 10) To ensure maximum economy in expenditure. 11) The endeavor to complete all plan projects within stipulated time and within stipulated cost estimated.

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RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

METHODOLOGY:The unit selection for the study was ALEMBIC LTD.. The study was undertaken at ALEMBIC LTD., Baroda. The Primary data was collected by way of interviewing the staff at Baroda unit. Secondary source like Books, Circulars, Alembic Ltd. Publication and Internet were used.

SOURCES OF INFORMATION:In order to collect the reliable information, the necessary data has been collected with the help of different sources that are-

1) Primary sources 2) Secondary sources 1) A Primary source of information is the source of information thought which information obtained is first hand i.e., from interviewing the officials at ALEMBIC LTD. BARODA.

2) Secondary source of information provides the information which is used by some other researcher but still it is useful as a reference for the study in some other research work. Under this source, text books, past project reports, published journals, websites, etc. were used.

OBJECTIVE:
Understand the working capital position and liquid position for the ALEMBIC LTD

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DATA ANALYSIS

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DATA ANALYSIS:
In this study the techniques of ratio analysis have been used. The collected data have been analyzed in following way. 1. Analysis of liquidity ratio. 2. Analysis of liquidity position. 3. Analysis of component of gross working capital. 4. Analysis of component of Net working capital.

SCOPE OF THE STUDY:

1) The study of working capital is limited to company and their year balance sheet performance. 2) The data used in this study have been taken from published annual report only. 3) For making a clear cut opinion, ratio techniques of financial management has been used. 4) The study of liquidity position of the ALEMBIC LTD. data has been used only for three years.

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STATEMENT SHOWING NET WORKING CAPITAL FROM YEAR 2008 TO 2010

(Rs. in Lacs) Particular Year 2008 (Rs) Year 2009 (Rs) Year 2010 (Rs)

Current assets, Loan & Advances: Sundry Debtors Inventory Loans & Advances. Cash & Balances Bank 23,053.94 20,281.20 8,637.80 1,865.64 21,300.35 23,838.89 12,716.73 1,640.58 19,286.72 24,494.93 12,956.86 2,385.11

Total (Gross Working Capital) Less Current liabilities & Provisions Current Liabilities. Provisions. Total. Net Capital. Working

53,838.58

59,496.55

59,123.62

15,218.57 2,882.88 18,101.45 35,737.13

18,815.94 1,423.53 20,239.47 39,257.08

21,821.53 1897.80 23,719.33 35,404.29

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 CURRENT ASSETS:A balance sheet account that represents the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business.

Graphical Presentation of Current Assets

(Rs. in Lacs) Year Current Assets March 2008 53,838.58 March 2009 59,496.55 March 2010 59,123.62

Current Assets
60,000.00 59,000.00 58,000.00 57,000.00 56,000.00 55,000.00 54,000.00 53,000.00 52,000.00 51,000.00 Mar-08 Mar-09 Mar-10 53,838.58 Current Assets 59,496.55 59,123.62

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INTERPRETATION:From the graphically representation, We can say that from year 2008 to 2009 current assets of the company increases. But in March 2010 it was decrease up to 59,123.62 Rs. Because of decrease in sundry debtors of the company.

SUNDRY DEBTORS:Sundry Debtors is an entity from who amounts are due for goods sold or services rendered or in respect of contractual obligations. Also termed: debtor, trade debtor, and account receivable.

Graphical Presentation of sundry debtors

(Rs. in Lacs) Year Debtors March 2008 23,053.94 March 2009 21,300.35 March 2010 19,286.72

Debtors
24,000.00 23,000.00 22,000.00 21,300.35 21,000.00 20,000.00 19,286.72 19,000.00 18,000.00 17,000.00 Mar-08 Mar-09 Mar-10 Debtors 23,053.94

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INTERPRETATION:From the graphically representation, we can say that from year 2008 to 2010 Sundry Debtors of the Alembic Ltd. is continue decrease.

INVENTORY:The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners.

Graphical Presentation of Inventory

(Rs. in Lacs) Year Inventory March 2008 20,281.20 March 2009 23,838.89 March 2010 24,494.93

Inventory
30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 Mar-08 Mar-09 Mar-10 20,281.20 23,838.89 24,494.93

Inventory

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INTERPRETATION:From the graphically representation, we can say that inventory level is continues increases. In March 2008 it was 20,281.20 which increase up to 23,838.89 and in March 2011 it is 24,494.93. Because of increase in closing stock it indicates that there is decrease in sales of the compan

LOANS & ADVANCES:-

Graphical Presentation of Loans & Advances

Year
Loans Advances &

March 2008 8,637.80

March 2009 12,716.73

March 2010 12,956.86

Loans & Advances

14,000.00 12,000.00 10,000.00 8,000.00 6,000.00 4,000.00 2,000.00 0.00 Mar-08 Mar-09 Mar-10 Loans & Advances 8,637.80 12,716.73 12,956.86

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INTERPRETATION:From the graphically representation, we can say that loans & advances of Alembic Ltd. is continues increases in March 2009 it was 12,716.73 Rs. And in March 2010 it was 12,956.86.

CASH & BANK BALANCE: Graphical Presentation of Cash & Bank Balances
(Rs. in Lacs) Year
Cash & Bank Balances

March 2008 1,865.64

March 2009 1,640.58

March 2010 2,385.11

Cash & Bank Balances

3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 Mar-08 Mar-09 Mar-10 1,865.64 2,385.11

1,640.58 Cash & Bank Balances

INTERPRETATION:From the graphically representation, we can say that cash & bank balance of Alembic Ltd. is increase from March 2008 to March 2010. It is Good for Alembic Ltd. Because of increase in cash & bank balance company should eligible for satisfying its debt obligations.
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 CURRENT LIABILITIES:A company's debts or obligations that are due within one year. Current liabilities appear on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.

Graphical Presentation of current Liabilities

(Rs. in Lacs) Year Current Liabilities. March 2008 15,218.57 March 2009 18,815.94 March 2010 21,821.53

Current Liabilities.
25,000.00 21,821.53 20,000.00 15,000.00 10,000.00 5,000.00 0.00 Mar-08 Mar-09 Mar-10 15,218.57 Current Liabilities. 18,815.94

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INTERPRETATION:From the graphically representation, we can say that Current Liabilities of Alembic Ltd. is continuously increase from March 2008 to March 2010. This is not good for company.

PROVISIONS:A provision takes into account an expected expense, showing it as a liability on the balance sheet.

Graphical Presentation of Provisions

(Rs. in Lacs) Year Provisions. March 2008 2,882.88 March 2009 1,423.53 March 2010 1,897.80

Provisions.
3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 Mar-08 Mar-09 Mar-10 1,423.53 1,897.80 Provisions. 2,882.88

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INTERPRETATION:From the graphically representation, Expenses on thae provision is decrease in March 2009 as compared to March 2008. And it was increase in March 2010 as compared to March 2009.

NET WORKING CAPITAL:Net working capital refers to the different between Current assets and current liabilities are those claims which are expected to nature of payment within an account.

Graphical Presentation of Net Working Capital

(Rs. in Lacs) Year Net Working Capital. March 2008 35,737.13 March 2009 39,257.08 March 2010 35,404.29

Net Working Capital.

40,000.00 39,257.08 39,000.00 38,000.00 37,000.00 36,000.00 35,000.00 34,000.00 33,000.00 Mar-08 Mar-09 Mar-10 35,737.13 35,404.29 Net Working Capital.

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INTERPRETATION:From the graphically representation, Net Working Capital is increase in Mrach 2009 as compared to March 2008 & it was decrease in March 2010 as compared to March 2008 & 2009. It was decrease in 2010 because of increase in Inventory level, loans & advances and also increase in cash & bank balance of the company.

RATIO ANALYSIS:a). Current Ratio Current ratio is calculated by dividing current assets by current liabilities. The current ratio of 2:1 is considered satisfactory.

Objective: The objective of computing this Ratio is to measure the ability of the firm to meet its short-term obligations and reflect financial strength of the firm.

Current ratio = Current assets / Current liabilities

Current Ratios of ALEMBIC LTD.

(Rs. in Lacs) YEAR CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO 2008 45,200.78 15,218.57 2.97 : 1 2009 46,779.82 18,815.94 2.48 : 1 2010 46,166.76 21,821.53 2.11 : 1

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CURRENT RATIO
3.5 3 2.5 2 1.5 1 0.5 0 2008 2009 2010 CURRENT RATIO 2.97 2.48 2.11

INTERPRETATION:Standard current ratio 2: 1 and our organization current ratio is 2.11 : 1. It is Lower in

comparison of 2008 & 2009. It is not good for organization to meet their current obligations.

b).Quick Ratio Objective: The objective of computing this ratio is to measure the ability of the firm to meet its short-term obligation as and when due without relying upon the realization of stock. Generally, a quick ratio of 1:1 is considered to represent satisfactory current financial position. Quick ratio= Current assets Inventories / Current liabilities

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Quick Ratios of ALEMBIC LTD.

(Rs. in Lacs) YEAR LIQUID ASSET CURRENT LAIBILITIES QUICK RATIO 2008 43,335.14 15,218.57 2.84 2009 45,139.24 18,815.94 2.40 2010 43,781.65 21,821.53 2.00

QUICK RATIO
3 2.5 2 1.5 1 0.5 0 2008 2009 2010 2.84 2.4 2

QUICK RATIO

INTERPRETATION:The liquid assets are equal to or more than liquid liabilities the condition may be consider as satisfactory. The quick ratio of 1 : 1 is considered to be a satisfactory ratio.Our origination quick ratio more than 1 : 1. So it is good for our origination because it may be meeting its short term obligation in time.

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 Current Assets to Working Capital Ratio

This ratio shows the relationship between current assets and working capital. It indicates the percentage of current assets to working capital.

Current Assets to Working Capital Ratio = Current Assets Working Capital

(Rs. in Lacs) YEAR March 2008 March 2009 March 2010 CURRENT ASSETS WORKING CAPITAL 35,737.13 39,257.08 35,404.29 CA to WC RATIO 1.26 1.19 1.30

45,200.78 46,779.82 46,166.76

CA to WC RATIO
1.32 1.3 1.28 1.26 1.24 1.22 1.2 1.18 1.16 1.14 1.12 1.3 1.26

1.19

CA to WC RATIO

2008

2009

2010

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INTERPRETATION:CA to WC Ration is decrease in March 2009 as compared to March 2008 & March 2010 because there is increase in Net Working Capital of company as compared to March 2008 & March 2010.

Working Capital Turnover Ratio

This Ratio establishes a relationship between net sales and working capital. Working capital = Current Assets Current Liabilities Working capital Turnover Ratio = Cost of goods sold / Net working capital COGS = Sales Gross Profit

Working capital turnover ratio is to indicate the velocity of the utilization of net working capital. This ratio indicates the number of times the working capital is turned over in the course of a year.

(Rs. in Lacs) YEAR COGS WORKING CAPITAL WORKING CAPITAL TURNOVER RATIO March 2008 March 2009 March 2010 86,617.55 35,737.13 2.42

99,444.45

39,257.08

2.53

92,408

35,404.29

2.78

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WORKING CAPITAL TURNOVER RATIO

2.9 2.8 2.7 2.6 2.5 2.42 2.4 2.3 2.2 2008 2009 2010 2.53 WORKING CAPITAL TURNOVER RATIO 2.78

INTERPRETATION:Working Capital turnover ratio is increases in March 2010 as compard to March 2008 & 2009. It is 2.42 in March 2008 & increase by 2.78 in March 2010.

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Findings & Observations

The company finance its working capital through its internal accruals. It is also making use of financial instruments like Overdraft, Cash credit, Bill Purchase, Export packing credit foreign bill Purchase/Discount. It makes use of such instrument in order to be safe due to export dealing of vary high values

There are increase in current liabilities of the Alembic ltd. Therefore company should take proper steps to maintain current liabilities.

In ratio analysis, I observed of comparison with inter firm comparison and standard.

The successful implementation of working capital budget involves the preparing of separate budget for each element of working capital, such as, cash, inventories and receivables etc.

The requirement of working capital is not stable in the company. It was 35,737.13 Rs. In 2008, 39,257.08 Rs. In 2009 and 35,404.29 Rs. In 2010.

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LIMITATIONS OF STUDY

Period of time:

Internship Project time is short and within this time everything of the

study is not covered deeply. Due to time constraints all the aspects of the WORKING CAPITAL couldnt be studied and elaborated. Ratios of company have meaning only when they are compared with some standard. It is difficult to find out proper basis of comparison. In limited time it is not possible to interact with all the employees of the organization who are directly involve in the financial accounting department.

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SUGGESTIONS

The plant must take certain steps to decrease the working capital cycle. One way can be better management of inventories.

Company should use Management Information System (MIS) as it provides very effective information, which ultimately helps in decision-making. This results in the proper future projections effectively.

Company should install modernized equipments and machines in the production plants and new techniques should also be used to produce. The company needs to improve a lot in advertisements. Advertisements are the best way to enhance the sales and ultimately the revenues. But the company is not able to advertise its products properly, due to which the customer is unaware of any brand that comes from it. It is a common saying that out of sight is out of mind. Therefore the company must make attempts to use proper advertising media so as to set their brands in the minds of the consumers. It should be more consumers oriented rather than being customer oriented Proper market survey should be conducted to know consumers/dealers buying behavior Company should take several steps to make stable requirement of working capital.

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CONCLUSION

The study involves practical and conceptual over view of decisions concerning current assets like cash and bank balance ,inventories( like raw materials ,w-i-p, finished goods ),sundry debtors, loans and advances, other current assets and current liabilities like sundry creditors, securities and other deposits, other current liabilities and provisions of Alembic Ltd.. Was with the objective of maximizing the overall net profit of the bank. And complete synchronization and co ordination among the working capital components which shall contribute to optimum level of operations. Mismanagement of each or any of these components shall be detrimental to the objectives of efficient operation, profitability and maximization of overall value of the bank.

The working capital limits would be considered only after the project nearing completion and after ensuring control over the inventory. The inventory is a great concern for Alembic Ltd. and it need proper procurement and management.

Eligible working capital limits would be assessed by cash Budget method And Projected production method depending the market condition, scale of operation, nature of activity/enterprise and duration/length of operating cycle etc.

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BIBLIOGRAPHY

Books Financial Management

By I. M. Pandey (Sixth Edition)

Annual Report of ALEMBIC LTD.

Websites

www.alembic-india.com www.google.com

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