4.

1 MEASUREMENT OF ADEQUACY OF GROSS WORKING CAPITAL a) Analysis of current assets to current liabilities Current assets Current ratio = Current liabilities

Year

Current Assets(Rs in lakh)

Current Liabilities(Rs in lakh) 2346109 2566580 4835244

Ratio 2.47 2.25 1.13

2007-08 5805843 2008-09 5774861 2009-10 5497179

The current ratio is a measure of the firms short term solvency. It indicates the availability of current assets in rupee for every one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims against them. The above table shows that the highest ratio is 2.47 in 2007-08 and lowest ratio is 1.13 in 2009-10 and the ratio is fluctuating from the year to year and thereby a continous decrease in 2007 to 2010. it is clear that current assets are decreasing from 2007.

C U R R E N T AS S E TS TO C U R R E N T LIAB IL ITIE S (R s in lakh )

7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2007-08 2008-09 ye a rs 2009-10

values

Current A s s ets Current Liabilities

Interpretation:
From the above graph it has been observed that current assets are 5497179(min) in 2009-10 and 5805843(max) in 2007-08 and current liabilities are 4835244(max) In 2009-10 and 2346109(min) in 2007-08. here current assets are reducing but current liabilities are increasing but current assets should increase and current liabilities should decrease then net working capital will increase and earn more profit.

b) Analysis of current liabilities to total assets

= current liabilities/ total assets Current Liabilities(Rs

in lakh)

Total assets(Rs
in lakh)

Year

Ratio 11542643

2007-08 2346109 11704457 2008-09 2566580 13489631 2009-10 4835244

0.20

0.21

0.35

The ratio of current liabilities to total assets can be used to demonstrate the effect of changing current liabilities. An increase in trend shows increase in profitability and at the same time increase in risk. Decrease in trend exactly to the results. The above table shows that the highest ratio is 0.35 in 2009-10 and lowest ratio is 0.20 in 2007-08 and the ratio is increasing during the year 2007 to 2010 profits are obtained.

CURRENT LIABILITIES TO TOTAL ASSETS(RS in lakh)

Interpretation:

From the above graph it has been observed that current liabilities are 2346109 (min) in 2007-08 and 4835244 (max) in 2009-10 and total assets are 13489631(max) In 200708 and 1154263(min) in 2009-10. here current liabilities and total assets values are increasing . it shows that increase in profitability as well as increase in risk.

c) Analysis of current Assets to total Assets

= current assets / total assets

Year 2007-08 2008-09 2009-10

Current Assets(RS in lakh) lakh) 11542643 5805843 11704457 5774861 13489631 5497179

Total assets(Rs in

Ratio 0.50 0.49 0.40

When the ratio of current assets to total assets will change then it will reflect a change in the the amount of current assets. Increase in the ratio will lead to decline the profitability and decrease to technical solvency. Decrease in ratio result in an increase in profitability and risk.

The above table shows that the highest ratio is 0.50 in 2007-08 and lowest ratio is 0.40in 2009-10 and the ratio is fluctuating from the year to year and thereby a continuous decrease in 2007 to 2010. it is clear that the company is in profits.

Interpretation: From the above graph it has been observed that current assets are 5497179 (min) in 2009-10 and 5805843 (max) in 2007-08 and total assets are 13489631(max) In 2009-10 and 11542643(min) in 2007-08. Here current assets and total assets values are increasing. It shows that increase in profitability as well as increase in risk.

d) ANALYSIS OF CURRENT ASSETS TO FIXED ASSETS

= CURRENT ASSETS / FIXED ASSETS

Year

Current Assets(Rs in
lakh)

Fixed assets(Rs in
lakh)

Ratio 1.01

5736800 2007-08 5805843 5929596 2008-09 5774861 7992452 2009-10 5497179 0.68 0.97

The higher ratio will differ from industry to industry, therefore no standard can be laid down. In decrease in the ratio mean trading is slack or more mechanization has been put through .an increase in the ratio may reveal that

investors and debtors have unduly increased or fixed assets have been intensively used. An increase in the ratio accompanied by increase in profit indicates the business is expanding. The above table shows that the highest ratio is 1.01 in 2007-08 and lowest ratio is 0.68in 2009-10 and the ratio is fluctuating from the year to year and thereby a continuous decrease in 2007 to 2010. it is clear that the company is in profits.

Interpretation: From the above graph it has been observed that current assets are 5497179 (min) in 2009-10 and 5805843 (max) in 2007-08 and total assets are 7992452(max) in 2009-10 and 5736800(min) in 2007-08. Here current assets are decreasing from year to year but fixed assets values are increasing. It shows

that current assets should have to increase for profitability position of the company.

4.2 MEASUREMENT OF ADEQUACY OF NET WORKING CAPITAL a) ANALYSIS OF NET WORKING CAPITAL

= CURRENT ASSETS CURRENT LIABILITIES

Year 200708 200809 200910 Current Assets(Rs in Current Liabilities(Rs in Net working lakh) lakh) capital 5805843 5774861 5497179 2346109 2566580 4835244 3459734 3208281 661935

The difference between current assets and current liabilities excluding short bank borrowing is called net working capital or net current assets. From the above it is evident from BSNL has sufficient working capital to meet the claims of creditors and to meet day to day needs of business. The above table shows that the highest working capital is 3459734 in 2007-08 and lowest is 661935 in 2009-10.

b) ANALYSIS OF TOTAL ASSETS TO NET WORKING CAPITAL

= Total assets / Net working capital Year Total assets(Rs in lakh) Net working capital(Rs in lakh) Ratio 3459734 3208281 661935 3.33 3.64 5.37

2007-08 11542643 2008-09 11704457 2009-10 13489631

Net working capital is some times used as a measure of firms liquidity. It is considered that, between two firms, the one having larger NWC has the greater ability to meet its current obligations. This is not necessarily so; the measure of liquidity is a relationship, rather than the difference between current assets and current liabilities. NWC however, measures the firms potential reservoir of funds. It can be related to net assets. NWC ratio measures potential reservoir of funds . The above table shows that the highest ratio is 5.37 in 2009-10 and lowest ratio is 3.33 in 2007-0 and the ratio is increasing from the year to year and thereby a continuous increasing liquidity of the firm

T O T A L A S S E T S T O N E T W O R K IN G C A P IT A L (R s in la k h )
14000000 12000000 10000000 8000000 v a lu e s 6000000 4000000 2000000 0

To ta l a s s e ts N e t w o rk in g c a p ita l Y e a r 2 0 0 7 -0 2 0 0 8 -0 2 0 0 9 -1 0 8 9 y e a rs

Interpretation: From the above graph it has been observed that total assets are 11542643 (min) in 2007-08 and 13489631 (max) in 2009-10 and Net working capital are 3459734 (max) in 200708 and 661935 (min) in 2009-10. Here total assets are increasing from year to year but net working capital values are decreasing. It shows that should have to maintain sufficient reservoir of funds.

c) ANALYSIS OF CURRENT LIABILITIES TO NET WORKING CAPITAL = CURRENT LIABILITIES / NET WORKING Year Current Liabilities(Rs in
lakh)

Net working capital(Rs in

lakh)

Ratio 0.67 0.8 7.30

2007-08 2346109 2008-09 2566580 2009-10 4835244

3459734 3208281 661935

The above table shows that the highest ratio is 7.30 in 2009-10 and lowest ratio is 0.67 in 2007-08 and it indicates the amount of working capital available to meet its short term creditors.

CURRENT LIABILITIES TO NET WORKING CAPITAL(Rs in lakh)

6000000 5000000 4000000 values 3000000 2000000 1000000 0 2007-08 2008-09 years 2009-10 Net working capital Current Liabilities

Interpretation: From the above graph it has been observed that current liabilities are 2346109 (min) in 2007-08 and 4835244 (max) in 2009-10 and Net working capital are 3459734 (max) in 2007-08 and 661935 (min) in 2009-10. Here current liabilities are increasing from year to year but net working capital values are decreasing. It shows that the firm is maintaining NWC well but it should has to reduce the current liabilities.

4.3 MEASUREMENT OF ADEQUACY OF QUICK ASSETS a) ANALYSIS OF QUICK ASSETS TO CURRENT LIABILITIES

= QUICK ASSETS / CURRENT LIABILITIES

(Current assets-Inventories-prepaid expenses= quick assets)

Year 200708 200809

Quick asset(Rs in
lakh)

Current Liabilities(Rs in Quick lakh) Ratio 2346109 2566580 2.01 1.70

4717942 4372723

200910

3594318

4835244

0.74

The quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset ,other assets which are considered to be relatively liquid and included in quick assets are debtors and bills receivables and marketable securities . inventories are considered to be less liquid. Inventories normally require some time for releasing into cash ;their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.

The above table shows that the highest ratio is 2.01 in 2007-08 and lowest ratio is 0.74 in 2009-10

ANALYSIS OF QUIC K ASSETS TO CU RREN T LIAB ILITIES(R s in lakh)

6000000 5000000 values 4000000 3000000 2000000 1000000 0 2007-08 2008-09 ye a rs 2009-10 Quick asset Current Liabilities

Interpretation:

From the above graph it has been observed that quick assets are 4717942(max)in 2007-08 and 3594318 (min) in 2009-10 and current liabilities are 2346109 (min) in 2007-08 and 4835244 (max) in 2009-10. Here current liabilities are increasing from year to year but quick asset values are decreasing. So that it shouldhas to reduce the increasing level of current liabilities and maximize the increasing level of quick assets.

b) ANALYSIS OF QUICK ASSETS TO CURRENT ASSETS

= QUICK ASSETS / CURRENT ASSETS

Year

Quick asset(Rs in lakh)

Current Assets(Rs in lakh) 5805843 5774861 5497179

Ratio 0.81 0.75 0.65

2007-08 4717942 2008-09 4372723 2009-10 3594318

Quick assets are those , which can be converted into cash with out any loss of either time or money. The above table shows that the highest ratio is 0.81 in 2007-08 and lowest ratio is 0.65 in 2009-10 and it indicates that the ratio of quick assets to current ldecreasing from year to year. The financial position in 2008-09 is better but not gooa as in 2007-08.

QUICK ASSET TO CURRENT ASSET(Rs in lakh)

12000000 10000000 8000000 values 6000000 4000000 2000000 0 2007-08 2008-09 years 2009-10 Current Assets Quick asset

Interpretation:

From the above graph it has been observed that quick assets are 4717942(max)in 2007-08 and 3594318 (min) in 2009-10 and current assets are 5805843 (max) in 2007-08 and 5497179 (min) in 2009-10. Here current assets are decreasing from year to year but quick asset values are also decreasing. So that it should has to increase the level of current assets and .quick assets.

c) ANALYSIS OF QUICK ASSETS TO TOTAL ASSETS = QUICK ASSETS / TOTAL ASSETS

Year

Quick asset(Rs in
lakh)

Total assets(Rs in
lakh)

Ratio 0.40 0.37 0.26

2007-08 4717942 2008-09 4372723 2009-10 3594318

11542643 11704457 13489631

The above table shows that the highest ratio is 0.40 in 2007-08 and lowest ratio is 0.26 in 2009-10 and it shows that the ratio is decreasing from year to year.

QUICK ASSETS TO TOTAL ASSETS(RS in lakh)

16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 2007-08 2008-09 yea rs 2009-10

values

Quick asset Total assets

Interpretation:

From the above graph it has been observed that quick assets are 4717942(max)in 2007-08 and 3594318 (min) in 2009-10 and total assets are 11542643 (min) in 2007-08 and 13489631 (max) in 2009-10. Here total assets are decreasing from year to year but quick asset values are also decreasing. So that it should has to increase the level of total assets and .quick assets.

4.4 MEASUREMENT OF ADEQUACY OF CASH a) ANALYSIS OF CASH TO CURRENT ASSETS

= CASH /CURRENT ASSETS

Year

Cash(Rs in lakh) Current Assets(Rs in lakh) 5805843 5774861 5497179

Ratio 0.69 0.66 0.55

2007-08 4055158 2008-09 3813430 2009-10 3034340

Since cash is the most liquid asset , a financial analyst may examine cash ratio and its equivalent to current assets .trade investment or marketable securities are equivalent of cash; therefore , they may be included in the computation of cash ratio. The above table shows that the highest ratio is 0.69 in 2007-08 and lowest ratio is 0.55 in 2009-10 and it shows that the ratio is decreasing from year to year and it shows the cash position of the company.

C SH TOC R EN A A U R T SSETS(R in s lakh)

1000 2000 1000 0000 values 8000 000 6000 000 4000 000 2000 000 0 2 0 -0 07 8 2 0 -0 08 9 y ears 2 0 -1 09 0 C rre t Asse u n ts C AH S

Interpretation:

From the above graph it has been observed that cash is 4055158 (max)in 2007-08 and 3034340 (min) in 200910 and current assets are 5805843 (max) in 2007-08 and 5497179 (min) in 2009-10. Here current assets are decreasing from year to year and cash balance is also decreasing.

b) ANALYSIS OF CASH TO CURRENT LIABILITIES = CASH /CURRENT LIABILITIES

Year 2007-08 2008-09 2009-10

Cash(Rs
in lakh)

Current Ratio Liabilities(Rs

in lakh)

4055158 2346109 3813430 2566580 3034340 4835244

1.72 1.48 0.62

Since cash is the most liquid asset , a financial analyst may examine cash ratio and its equivalent to current assets .trade investment or marketable securities are equivalent of cash; therefore , they may be included in the computation of cash ratio. The above table shows that the highest ratio is 1.72 in 2007-08 and lowest ratio is 0.62 in 2009-10 and it shows that the ratio is decreasing from year to year and it shows the cash position of the company. Whole over the company position is not good to repay its short term credit.

C S TOC R E T LIA IL AH U R N B ITIE (R in S s lakh )

6000 000 5000 000 4000 000 3000 000 2000 000 1000 000 0 2007 0 8 2008 0 9 y ears 2009 1 0

values

ca sh C rre t L b u n ia ilitie s

Interpretation:

From the above graph it has been observed that cash is 4055158 (max)in 2007-08 and 3034340 (min) in 200910 and current liabilities are 2346109 (min) in 2007-08 and 4835244 (max) in 2009-10. Cash balance has been maintained well.

4.5 MEASUREMENT OF CASH FLOWS FROM INVENTORIES a) ANALYSIS OF SALES TO INVENTORY = SALES / INVENTORY

Year 2007-08 2008-09 2009-10

Sales(Rs
in lakh)

inventory(Rs
in lakh)

Ratio 10.04 6.61 6.33

3235953 3026857 3204541

322,006 457258 505833

The inventory turnover ratio indicates the efficiency of the firm in producing and selling its products. It is calculated by dividing the cost of goods sold by the average inventory. The average inventory is the average of opening and closing balances of inventory. In a manufacturing company inventory of finished goods is used to calculate inventory turnover.

The above table shows that the highest ratio is 10.04 in 2007-08 and lowest ratio is 6.33 in 2009-10 and it shows that the ratio is decreasing from year to year.

sales to inventory(Rs in lakh)

4000000 3500000 3000000 2500000 values 2000000 1500000 1000000 500000 0

inventory sales

2007-08

2008-09 year

2009-10

Interpretation:

From the above graph it has been observed that sales are 3235953 (max)in 2007-08 and 3204541 (min) in 200910 and inventory is 322006 (min) in 2007-08 and 505833 (max) in 2009-10. Sales have to be improved.

b) ANALYSIS OF INVENTORY TO CURRENT ASSETS = INVENTORY / CURRENT ASSETS Current inventory(Rs Assets(Rs
in lakh) in lakh)

Year 2007-08 2008-09 2009-10

Ratio 0.05 0.07 0.09

322,006 457258 505833

5805843 5774861 5497179

The above table shows that the highest ratio is 0.09 in 2009-10 and lowest ratio is 0.05in 2007-08 and it shows that the ratio is increasing from year to year .increase in ratio will results in decrease in profitability as well as risk.

in v e n to ry to c u rre n t a s s e ts (R s in la k h )
7 00 00 00 6 00 00 00 5 00 00 00 values 4 00 00 00 3 00 00 00 2 00 00 00 1 00 00 00 0 20 0 7 -08 20 08 -09 ye a r 20 09 -10 in ve nto ry c u rren t a s s ets

Interpretation:

From the above graph it has been observed that current assets are 5805843 (max) in 2007-08 and 5497179(min) in 2009-10 and inventory is 322006 (min) in 2007-08 and

505833 (max) in 2009-10. There is a slight decline in current assets due decreased in sales but where as inventory has been increased.

c) ANALYSIS OF INVENTORY TO NET WORKING CAPITAL = INVENTORY / NET WORKING CAPITAL Net working inventory(Rs capital(Rs
in lakh) in lakh)

Year 2007-08 2008-09 2009-10

Ratio 0.09 0.14 0.76

322,006 457258 505833

3459734 3208281 661935

The above table shows that the highest ratio is 0.09 in 2009-10 and lowest ratio is 0.14in 2008-09 and it shows that the ratio has been fluctuating from year to year. But the ratio has been increased in 2009-10 when compared with 2008-09.

INVENTORY TO NET WORKING CAPITAL (Rs in lakh)

2009-10 year

2008-09

NET WORKING CAPITAL INVENTORY

2007-08 0 1000000 2000000 3000000 4000000 value

Interpretation Net working capital is some times used as a measure of firms liquidity. It is considered that, between two firms, the one having larger NWC has the greater ability to meet its current obligations. This is not necessarily so; the measure of liquidity is a relationship, rather than the difference between current assets

and current liabilities. NWC however, measures the firms potential reservoir of funds. It can be related to net assets. From the above graph it has been observed that NWC is 3459734 (max)in 2007-08 and 661935(min) in 2009-10 and in inventory is 322006 (min) in 2007-08 and 505833 (max) in 2009-10. There is a slight decline NWC. .

d) ANALYSIS OF SALES TO GROSS WORKING CAPITAL = Sales / Gross working capital

Year 2007-08 2008-09 2009-10

Sales(Rs
in lakh)

Current Assets(Rs
in lakh)

Ratio 0.55 0.52 0.58

3235953 3026857 3204541

5805843 5774861 5497179

The ratio is also deemed as working turn over ratio. Generally speaking a high ratio indicates the management is aggressive in its use capital. However an excessive high ratio may indicate poor working capital management. The above table shows that the highest ratio is 0.58 in 2009-10 and lowest ratio is 0.52in 2008-09 and it shows that the ratio has been fluctuating from year to year. But the ratio has been increased in 2007-08 when compared with 2008-09.

S A L E S T O G R O S S W O R K IN G C A P IT A L (R s in la k h )

2009-10 s a le s gros s w ork in g c apital

year

2008-09

2007-08 0 2 000000 0000 00 0 00000 00000 01E + 07 4 6 8 v a lu e s

Interpretation From the above graph it has been observed that sales are 3235953(max)in 2007-08 and 3204551(min) in 2009-10 and gross working capital is 5805843 (max) in 2007-08 and 5497179(max) in 2009-10. There is a slight decline NWC. .

e) ANALYSIS OF DEBTORS TURNOVER RATIO

= SALES/ DEBTORS

Year 2007-08 2008-09 2009-10

Sales(Rs
in lakh)

Debtors(Rs
in lakh)

Ratio 5.92 6.41 6.75

3235953 3026857 3204541

546551 472054 474457

Debtors turn over is found out by dividing credit sales by average debtors. Debtors turn over indicates the number of times debtors turnover each year. Generally the higher the value of debtor turnover, the more efficient is the management of credit. To outside analyst information about credit sales and opening and closing balances of debtors may not be available. Therefore debtors turn over can be calculated by dividing total sales by the year and balance of debtors. The above table shows that the highest ratio is 6.75in 2009-10 and lowest ratio is 5.92in 2008-09.

sa les to d e b to rs (R s in la kh )
4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2007-08 2008-09 ye a r 2009-10

values

debtors s ales

Interpretation: From the above graph it has been observed that sales are 3235953 (max) in2007-08 and 3204551(min) in 200910 and debtors are 546551 (max) in 2007-08 and 474457(max) in 2009-10. Reduction happens mainly with sales.