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A STUDY ON CASH CONVERSION CYCLE WITH SPECIAL Click to edit Master subtitle style REFERENCE TO SUNDARAM PACKAGINGS

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ABOUT THE COMPANY


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SUNDARAM PACKAGINGS

It is situated in sidco , coimbatore. It is a company which manufactures carton boxes, export containers and packaging material.

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OBJECTIVE OF THE STUDY

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PRIMARY OBJECTIVE :
v

To study the cash conversion cycle of the company.

SECONDARY OBJECTIVE :

To study the efficiency in cash, inventory, debtors and creditors. To study the working capital management of the company.

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RESEARCH

METHODOLOG Y
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RESEARCH: Systematic and organized effort to investigate a scientific problem. Identify the problem. Gather information. Analyze the data. Take corrective action and solve the problem.

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RESEARCH METHODOLOGY:

It is the way to systematically solve the research problem. This study on cash conversion cycle is an analytical study because the facts and information that is readily available are being used to make critical evaluation of cash conversion cycle at Sundaram Packagings.

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RESEARCH DESIGN :

Research design is a blue print or a planned procedure for conducting research program.

RESEARCH DESIGN USED IN THE STUDY: RESEARCH:

5/4/12 ANALYTICAL

DATA COLLECTION METHOD: Nature of Data

The data collected is both primary and secondary in data in nature.

Source of Data

The source of data is the various years balance sheet, profit and loss account and statements provided by the company. They were used for the analysis and for preparing reports. The records maintained 5/4/12 by the company where referred to get the

TOOLS AND TECHNIQUIES FOR ANALYSIS: Various tools and techniques are used for the analysis are as follows

Ratio Analysis Formula Formula


NOC CCC

Tables and charts are used for the purpose of the analysis and interpretation.
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LIMITATIONS OF THE STUDY


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The study has taken into account only three years for comparative analysis. Time and other resources have proved to be a constraint. It has always not been possible to get the full information.

The three year balance sheet is shown in the study.from this we cannot predict the previous year performance of the 5/4/12 company.

INTRODUCTION OF CASH CONVERSION CYCLE


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The cash conversion cycle (CCC) is a key measure of business efficiency and how quickly actual cash ends up in your bank account from the time the outlay is made in terms of paying for inventory (stock) or raw materials. Simply the CCC is the time between an expenditure of money to make or buy a product and the collection of accounts receivable from the ultimate sale of that product

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The formula is:

CCC = Inventory Conversion Period + Receivable Conversion Period Payables Conversion Period
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Inventory conversion period (ICP)

ICP is the sum of raw material conversion period (RMCP), Work in progress conversion period (WIPCP) and finished goods conversion period (FGCP)

ICP = RMCP + WIPCP + FGCP (2)

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Raw material conversion period (RMCP)

RMCP is the average time period taken to convert material in to work in process

RMCP = Raw material inventory / [raw material 5/4/12

Work in process conversion period (WIPCP) :

WIPCP is the average time taken to complete the semi-finished or work in- process. Work in process conversion period = work-in-process inventory/ [cost of production]/360... (4)

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Finished goods conversion period (FGCP)

Finished goods conversion period is the average time taken to sell the finished goods. Finished goods conversion period = Finished goods inventory / [Cost of goods sold / 360].. (5)

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Debtors (receivable) conversion period (DCP)

DCP is the average time taken to convert debtors into cash. DCP represents the average Collection period. Debtors conversion period (DCP) = Debtors / [Credit sales / 360] (6)

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Creditors (payable) deferral period (CDP)

CDP is the average time taken by the firm in paying its suppliers (creditors). CDP = Creditors / [credit purchases / 360] (7)

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Net operating cycle

Net operating cycle [NOC] is the difference between gross operation cycle and payable deferral period. Net operating cycle = Gross operating cycle Creditor deferral period. (8)

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analysis
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CASH CONVERSION CYCLE FOR 3 YEARS


YEAR 2008 2009 2010 ICP 268.52 246.4 14.61 RCP 18.58 47.13 50.2 PCP 103.61 69.12 4.38 CCC 183 224 60

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CHART SHOWING CASH CONVERSION CYCLE FOR 3 YEARS

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WORKING CAPITAL FOR 3 YEARS


Year 2008 2009 2010 Current Asset 2529320.49 3708185.52 4050431.68 Current Libility Amout 1706067.85 1788672.26 2071671.86 823252.64 1919513.26 1978759.82

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CHART SHOWING WORKING CAPITAL FOR 3 YEARS

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NET OPERATING CYCLE FOR 3 YEARS


Year 2008 2009 2010 GOC 535 491 536 CDP 115 97 97 NOC 650 588 633

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CHART SHOWING NET OPERATING CYCLE FOR 3 YEARS

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FINDINGS
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The working capital of the company is increasing year to year, on 2008 it has only 823252.64 but on 2009 it tremendously increased to 1919513.26, and by 2010 it reaches 1978759.82.That shows the better utilization of working capital of the company.

Cash conversion cycle is around 6 months for the year 2008 and 7 months for the year 2009, both the years the inventories are very high when compared to the year 2010. CCC for year 2010 is only 2 months, which shows the 5/4/12 companies better control over CCC.

2008 debtors conversion period is only 18 days where it is increasing for the years 2009 and 2010,by increasing the debtors conversion period chances for bad debt is high. And cash conversion period also will increase.

Creditors turnover ratio remains almost stable for the 3 years.

Creditors conversion period has not much fluctuated for the 3 years 5/4/12

2009 have a better inventory conversion period when compared with other two years. Gross operating cycle is constant for the years 2008 and 2010 which shows the company have a better control over gross operating cycle. But it is less for the year 2009.The lower gross operating cycle indicates the faster production and faster sales.

Net operating cycle is very high i.e. nearly 5/4/12 years is taking. When compared with two

SUGGESTIONS
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Last two years companys working capital is high so liquidity position of the company is good. But much more increase in working capital is not that good for the company hence they should maintain the further increase of working capital. The company is having a very good cash conversion cycle for the 2010 when compared to previous years. So the company should maintain the same for the coming years. should try to get more debtors

Company 5/4/12

The debtors conversion period of the company is not that much high, hence the company can follow the same.

The company should try to get more credit purchase so that company can reduce the cash conversion cycle. The company should try to get more credit purchase so that company can reduce the cash conversion cycle.

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The firm should concentrate on the production department for reducing the inventory conversion cycle.

Last year companies gross operating cycle is one month more when compared to 2009.so the company should try not to increase their gross operating cycle.

The higher net operating cycle shows blocking of money in business. So the company should concentrate on how to 5/4/12 reduce their net operating cycle.

CONCLUSION
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The study of cash conversion cycle is to analyse how fast the company is getting back the cash which they invested for raw materials, work in progress and from debtors. This company is have a better cash conversion period, last year it only takes two months as the cash conversion period. And the firms have a good liquidity position because the working capital is increasing year to year. So the company can follow this for the coming years for their better functioning.

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THANK YOU
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