GROUP NO. 8

1

CHAPTER 1

INTRODUCTION

2

HISTORY & MILESTONE OF JHAKAR INDUSTRY

In 1995, Mr VIJAYPAL JAKHAR established the JAKHAR GRANITE INDUSTRIES in

Jalore, Rajasthan.Industry started as a small enterprise established to manufacture granite

tiles.In the last 20 years industry has grown constantly so that currently regarded as one of the

known Granite Industry. At the present, AKHAR GRANITES is successfully headed and

managed by Mr VijayPal Jakhar and Mr Dushyant Jakhar. This Industry do a business in

which granite in the form of slabs and tiles has several attractive features which includes

extra fine mirror polish, scratch free glossy surface and durability.

Operations which are involved in the processing of Jakhar Granites are:

Dressing

Cutting/Sawing

Surface Grinding and Polishing

Edge-Cutting-Trimming

HISTORY & MILESTONE OF SWEET MEMORIES (RESTURANT)

In 2012, Mr Gaurav established the Sweet memories cafe and restaurant in Haldwani, near

Kusumkhera.

Main Course :

Pizza

Coffee

Cakes

Muffins

Dosa

North Indian meal

South Indian meal

Burger

HISTORY & MILESTONE OF STUDIO ELEVEN (PARLOUR)

Based in rural Fort Loramie, Ohio, Studio Eleven was established in 1992 as a family owned

and operated business dedicated to providing high quality and affordable promotional

products and corporate apparel that are on time, on budget, and on target. Our vast selection

of over 900,000 products allows you to find the perfect promotional items for your marketing

or human resource needs.

3

OBJECTIVES OF THE STUDY

Working capital is the most widely used and powerful technique of financial analysis. The

main objective of the present study is to know the financial condition of the small business.

• To know the overall operational efficiently and performance of the business.

• To interpret the financial position ; ie. appropriate (or) not.

• To assess the long term financial viability of business.

• To know whether the owner is constantly concerned about the overall profitability of

the business (or) not.

• To provide reliable financial information about economic resources and obligation of

a business.

• To provide reliable financial information those add ,it’s in estimating the potential of

the business.

SCOPE OF THE STUDY

The main scope of the study was to put into practical the theoretical aspect of the study into

real life work experience.

The study of working capital is based on tools like Ratio Analysis and Statement of changes

in working capital.

Further the study is based on last 3 years financial data.

LIMITATIONS OF THE STUDY

Limited interaction with the concerned heads due to their busy schedule.

The findings of the study are based on the information retrieved by the selected unit.

There may be some fractional differences in the calculated ratios.

4

CHAPTER 2

RESEARCH METHODOLOGY

5

RESEARCH METHODOLOGY

INTRODUCTION:

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying the research systematically. In that various steps, those

are generally adopted by a researcher in studying his problem along with the logic behind

them.

“The procedures by which researchers go about their work of describing, explaining and

predicting phenomenon are called methodology”.

TYPE OF RESEARCH:

This project “A Study on Working Capital Management of restutant /coaching/ parlour

” is considered as an 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.

TOOLS USED FOR ANALYSIS OF DATA

The data were analyzed using the following financial tools. They are:

Ratio analysis.

Statement of changes in working capital.

6

SOURCE OF RESEARCH DATA

For the purpose of the study necessary information has been collected through primary and

secondary sources.

PRIMARY DATA:

The primary data are those which are collected a fresh and for the first time, and thus

happened to be original in character. Primary data include the information collected from the

restutant /coaching/ parlour through discussions. The Primary data has been collected

from Personal Interaction with owner of business.

SECONDARY DATA :

The secondary data on the other hand are those which have already been collected by

someone else and which have already been passed though the statically process.

The secondary data include the information from the business annual reports (2013, 2014 &

2015) which include financial statement like balance sheet and income statements and

magazine.

SAMPLING DESIGN

1. Sampling unit : Financial Statements.

2. Sampling Size : Last three years financial statements.

3. Tools Used : MS-Excel has been used for calculations.

4. Visiting proof : photos with business owners

7

INTRODUCTION OF WORKING CAPITAL MANAGEMENT

Working capital management is significant in financial management. It plays a vital role in

keeping the wheel of the business running. Every business requires capital ,without it

can’t be promoted. Investment decisions is concerned with investment in current assets and

fixed assets .

Working capital in simple terms is the amount of funds, which a company, must have to

finance its day-to-day operation, it can be regarded as part/portion of capital, which is,

employed in short operation.

Every organization invests their funds in two terms of capital namely,

1. Fixed Capital.

2. Working Capital

The amount invested in the assets like Plant and Machinery, Building, Furniture etc, blocked

on permanent basis and is called Fixed Capital Organization not only requires Fixed Capital,

but also need of fund to meet day to day operations for short term purpose, such funds is

called Working Capital.

A Study of Working Capital is of major part of the external and internal analysis because of

its close relationship with the current day to day operation of business. Working Capital

consists broadly for that position/the assets of a business that are used at related current

operations and is represented by raw materials, stores, work in process and finished goods

merchandise, note/bill receivable

8

MEANING OF WORKING CAPITAL

Working capital means the funds (i.e.; capital) available and used for day to day operations

(i.e.; working) of an enterprise. It consists broadly of that portion of assets of a business

which are used in or related to its current operations. It refers to funds which are used during

an accounting period to generate a current income of a type which is consistent with major

purpose of a firm existence.

In Accounting:

METHODS OF ESTIMATING WORKING CAPITAL: -

Conventional Method: -

According to the conventional method, cash inflows and outflows are matched with each

other. Greater emphasis is laid on liquidity and greater importance is attached to current ratio,

liquidity ratio, etc., which pertain to the liquidity of a business.

Operating cycle method:

In order to understand what gives rise to differences in the amount of timing of cash flows,

we should first know the length of time which is required to convert cash into resources,

resources into final product, the final product into receivables and receivables back into cash.

9

OBJECTIVES OF WORKING CAPITAL MANAGEMENT

Effective management of working capital is means of accomplishing the firm’s goal of

adequate liquidity. It is concerned with the administration of current assets and current

liabilities. It has the main following objectives-

1. To maximize profit of the firm.

2. To help in timely payment of bills.

3. To maintain sufficient current assets.

4. To ensure adequate liquidity of the firms.

5. It protects the solvency of the firm.

6. To discharge current liabilities.

7. To increase the value of the firm.

8. To minimize the risk of business.

10

THE NEED FOR THE WORKING CAPITAL

The need for working capital arises due to the time gap between production and realization of

cash from sales. Working capital is must for every business for purchasing raw-materials,

semi finished goods, stores & spares etc and the following purposes.

1. To purchase raw materials, spare parts and other component.

A manufacturing firm needs raw-materials and other components parts for the purpose of

converting them in to final products, for this purpose it requires working capital. Trading

concern requires less working capital.

2. To meet over head expenses.

Working capital is required to meet recurring over head expenses such as cost

of fuel, power, office expenses and other manufacturing expenses.

3. To hold finished and spare parts etc.

Stock represents current asset. A firm that can afford to maintain stock of required finished

goods, work in progress & spares in required quantities can operate successfully. So for that

adequate quantity of working capital is required.

4. To pay selling & distribution expenses.

Working capital is required to pay selling & distribution expenses. It includes cost of

packing, commission etc.

5. Working capital is required for repairs & maintenance both machinery as well as factory

buildings.

6. Working capital is required to pay wages, salaries and other charges.

7. It is helpful in maintain uncertainties involved in business field.

11

WORKING CAPITAL MANAGEMENT

Working Capital Management refers to management of current assets and current

Liabilities. The major thrust of course is on the management of current assets .This

Is understandable because current liabilities arise in the context of current assets.

Working Capital Management is a significant fact of financial management. Its

Importance stems from two reasons:-

Investment in current assets represents a substantial portion of total investment.

Investment in current assets and the level of current liabilities have to be geared quickly

to change in sales. To be sure, fixed asset investment and long term financing are

responsive to variation in sales. However, this relationship is not as close and direct as it

is in the case of working capital components.

CLASSIFICATION OF WORKING CAPITAL

WORKING CAPITAL

On The Basis of Concept

On The Basis of Time

Gross Working Capital

Net Working Capital

Permanent /

Fixed Working

Capital

Temporary /

Fluctuating

Working Capital

Initial Working

Capital

Regular Working

Capital

Seasonal

Working Capital

Special Working

Capital

12

WORKING CAPITAL ON THE BASIS OF CONCEPTS

The concept of working capital includes current assets and current liabilities both. There are

two of working capital they are gross and net working capital.

1. Gross working capital: It refers to the firm’s investment in current assets. Current assets

are the assets, which can be converted into cash within an accounting year or operating

cycle. It includes cash, short term securities, debtors (account receivables or book debts),

bills receivables and stock (inventory). This concept has the following advantages:-

It provides the correct amount of working capital at the right time.

It helps in the fixation of various areas of financial responsibility.

It enables a firm to plan and control funds and to maximize the return on investment. For

these advantages, gross working capital has become a more acceptable concept in

financial management.

2. Net working capital: It refers to the difference between current assets and liabilities are

those claims of outsiders, which are expected to mature for payment within an accounting

year. 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. A small firm has more investment in current assets than

fixed assets and therefore current assets should be efficiently managed.

The 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.

13

WORKING CAPITAL ON THE BASIS OF TIME

1. Permanent / Fixed Working Capital

Permanent or fixed working capital is minimum amount which is required to ensure effective

utilization of fixed facilities and for maintaining the circulation of current assets. Every firm

has to maintain a minimum level of raw material, work- in-process, finished goods and cash

balance. This minimum level of current assets is called permanent or fixed working capital as

this part of working is permanently blocked in current assets. As the business grow the

requirements of working capital also increases due to increase in current assets.

i. Initial working capital

ii. Regular working capital

2. Temporary / Fluctuating Working Capital

Temporary / Fluctuating working capital is the working capital needed to meet seasonal as

well as unforeseen requirements. It may be divided into two types.

i. Seasonal Working Capital

ii. Special Working Capital

“WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES”.

14

NATURE OF WORKING CAPITAL

Working capital management is concerned with the problems that arise in attempting to

manage the current assets ,the current liabilities and the inter relationship that exists between

them. The term current refers to those assets which in the ordinary course of business can be

,or will be converted into cash within one year without undergoing a diminution in value

and without disrupting the operation of the firm. The major current assets are cash,

marketable securities, accounts receivables and inventory.

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 or the earning of the concern

.The basic current liabilities are accounts payable ,bills payable ,bank overdrafts and

outstanding expense.

The goal of working management is to manage the firm’s assets and liabilities in such a way

that a satisfactory level of working capital is maintained. This is because if the firms cannot

maintain a satisfactory level of working capital ,it is likely to become insolvent and may even

be forced into bankruptcy. The current assets should be large enough to cover its current

liabilities in order to ensure a reasonable margin of safety. Each of the short term source of

financing must be continuously managed to ensure that they are obtained and used in the

way. Interaction between current liabilities is ,therefore the main theme of the of

management of working capital.

15

IMPORTANCE OF WORKING CAPITAL

1. Solvency of the business: Adequate working capital helps in maintaining the solvency of

the business by providing uninterrupted of production.

2. Goodwill : Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

3. Easy loans: Adequate working capital leads to high solvency and credit standing can

arrange loans from banks and other on easy and favorable terms.

4. Cash discounts: Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

5. Regular Supply of Raw Material: Sufficient working capital ensures regular supply of

raw material and continuous production.

6. Regular payment of salaries, wages and other day to day commitments: It leads to

the satisfaction of the employees and raises the morale of its employees, increases their

efficiency, reduces wastage and costs and enhances production and profits.

7. Exploitation of favorable market conditions: If a firm is having adequate working

capital then it can exploit the favorable market conditions such as purchasing its

requirements in bulk when the prices are lower and holdings its inventories for higher

prices.

8. Ability to Face Crises: A concern can face the situation during the depression.

9. Quick and regular return on investments: Sufficient working capital enables a

concern to pay quick and regular of dividends to its investors and gains confidence of the

investors and can raise more funds in future.

10. High morale: Adequate working capital brings an environment of securities, confidence,

high morale which results in overall efficiency in a business.

16

ADEQUACY & INADEQUATE OF WORKING CAPITAL

ADEQUACY OF WORKING CAPITAL:

Working capital should be adequate so as to protect a business from the adverse effects of

shrinkage in the values of current assets. It ensures to a greater extent the maintenance of a

company’s credit standing and provides for such emergencies as strikes, floods, fire etc. It

permits the carrying of inventories at a level that would enable a business to serve

satisfactorily the needs of its customers. It enables a company to operate its business more

efficiently because there is no delay in obtaining materials etc; because of credit difficulties.

INADEQUATE OF WORKING CAPITAL:

When working capital is inadequate, a company faces many problems. It stagnates the growth

and it becomes difficult for the firm to undertake profitable projects for non-availability of

working capital funds. Difficulty in implementing operating plans and achieving the firm’s

profit targets. Operating inefficiencies creep in when it becomes difficult even to meet day-

to-day commitments. Fixed assets are not utilized efficiently thus the firm’s profitability

would deteriorate. Paucity of working capital funds renders the firm unable to avail attractive

credit opportunities. The firm loses its reputation when it is not in a position to honor it short-

term obligations thereby leading to tight credit terms.

17

ESTIMATION OF WORKING CAPITAL REQIUREMENTS

Managing the working capital is a matter of balance.The following aspects have to be taken

into consideration while estimating the working capital requirements. They are:

1. Total costs incurred on material, wages and overheads.

2. The length of time for which raw material are to remain in stores before they are

issued for production.

3. The length of the production cycle or work-in-process, i.e., the time taken for

conversion of raw material into finished goods.

4. The length of sales cycle during which finished goods to be kept waiting for sales.

5. The average period of credit allowed to customers.

6. The amount of cash required paying day-today expenses of the business.

7. The average amount of cash required to make advance payments.

8. The average credit period expected to be allowed by suppliers.

9. Time lag in the payment of wages and other expenses.

18

OPERATING CYCLE OF WORKING CAPITAL

The working capital cycle reserves to the length of time between the firm paying cash for

materials etc., this working capital also known as operating cycle. Working capital cycle or

operating cycle indicates the length or time between companies paying for materials entering

into stock and receiving the cash from sales of finished goods. The operating cycle (Working

Capital) consists of the following events. Which continues throughout the life of business?

Conversion of cash into raw materials.

Conversion of raw materials into work in progress.

Conversion of work in progress into finished stock.

Conversion of finished stock into accounts receivables(Debtors)through sales

Conversion of account receivables into cash.

RAW

MATERIALS

WORK-IN-

PROGRESS

FINISHED

STOCK

DEBTORS

CASH

19

ESTIMATION OF CURRENT ASSETS

1. Raw Material Inventory:

The Investment in Raw Material can be computed with the help of the following formula:-

Budgeted Cost of Raw Average Inventory

Production x Material(s) x Holding Period

( In units ) per unit (months/days)

12 months / 52 weeks / 365days

2. Work-in-progress (W/P) Inventory:

The relevant cost of determine work in process inventory are the proportionate share of cost

of raw material and conversion costs ( labors and Manufacturing over Head cost excluding

depreciation) In case, full until of raw material is required in the beginning the unit cost of

work is process would be higher, i.e., cost of full unit + 50% of conversion cost compared to

the raw material requirement. Throughout the production Cycle, working process is normally

equivalent to 50% of total cost of production. Symbolically,

Budgeted Estimated work- Average Time Span

Production x in-progress cost x of work-in-progress

( In units ) per unit inventory (months/days)


3. Finished Goods Inventory:

Working capital required to finance the finished goods inventory is given by factors summed

up as follows:-

Budgeted Cost of Goods Produced Finished Goods

Production x x per unit (excluding x Holding Period

( in units ) depreciation) (months/days)


20

4. Debtors:

The working capital tied up in debtor should be estimated in relation to total cost price (

excluding depreciation ) symbolically,

Budgeted Cost of Sales per Average Debt

Production x unit excluding x Collection Period

( In units ) depreciation (months/days)


5. Cash and Bank Balances:

Apart from Working Capital needs for Financing Inventories and Debtors, Firms also find it

useful to have such minimum cash Balances with them. It is difficult to lay down the exact

procedure of determining such an amount. This would primarily be based on the motives of

holding cash balances of the business firm, attitude of management towards risk, the access to

the borrowing sources in times of need and past experience.

21

COMPONENTS OF WORKING CAPITAL

The components of working capital are:

CASH MANAGEMENT

RECEIVABLES MANAGEMENT

INVENTORY MANAGEMENT

CASH MANAGEMENT:

Cash is the important current asset for the operation of the business. Cash is the basic input

needed to keep the business running in the continuous basis, it is also the ultimate output

expected to be realized by selling or product manufactured by the firm.

The firm should keep sufficient cash neither more nor less. Cash is the money, which a firm

can disburse immediately without any restriction. The term cash includes coins, currency and

cheques held by the firm and balances in its bank account.

OBJECTIVES OF CASH MANAGEMENT

Primary object of the cash management is to maintain a proper balance between liquidity and

profitability. In order to protect the solvency of the firm and also to maximize the

profitability. Following are some of the objectives of cash management.

1. To meet day to day cash requirements.

2. To provide for unexpected payments.

3. To maximize profits on available investment opportunities.

4. To protect the solvency of the firm and build up image.

5. To minimize operational cost of cash management.

6. To ensure effective utilization of available cash resources

RECEIVABLES MANAGEMENT:

Receivables or debtors are the one of the most important parts of the current Assets which is

created if the company sells the finished goods to the customer but not receive the cash for

the same immediately. Trade credit arises when a company sales its products or services on

credit and does not receive cash immediately. It is an essential marketing tool, acting as a

bridge for the moment of goods through production and distribution stages to customers.

22

The receivables include three characteristics

1. It involve element of risk which should be carefully analysis.

2. It is based on economic value. To the buyer, the economic value in goods or services

passes immediately at the time of sale, while seller expects an equivalent value to be

received later on.

3. It implies futurity. The cash payment for goods or serves received by the buyer will

be made by him in a future period.

A company gives trade credit to protect its sales from the competitors and to attract the

potential customers to buy its products at favorable terms. Trade credit creates receivables or

book debts that the company is accepted to collect in the near future. The customers from

who receivables have to be collected are called as “Trade Debtors” receivables constitute a

substantial position of current assets.

Granting credit and crediting debtors, amounts to the blocking of the company’s funds. The

interval between the date of sale and the date of payment has to be financed out of working

capital as substantial amounts are tied up in trade debtors. It needs careful analysis and proper

management.

In HCIL ltd., they are selling the goods on cash basis and also on credit basis.

INVENTORY MANAGEMENT:

Inventories are goods held for eventual sale by a firm. Inventories are thus one of the

major elements, which help the firm in obtaining the desired level of sales. Inventories

include raw materials, semi-finished goods, finished products.

In company there should be an optimum level of investment for any asset, whether it is plant,

cash or inventories. Again inadequate disrupts production and causes losses in sales. Efficient

management of inventory should ultimately result in wealth maximization of owner’s wealth.

It implies that while the management should try to pursue financial objective of turning

inventory as quickly as possible, it should at the same time ensure sufficient inventories to

satisfy production and sales demand.

The main objectives of inventory management are operational and financial.

The operational mean that means that the materials and spares should be available in

sufficient quantity so that work is not disrupted for want of inventory. The financial objective

means that investments in inventories should not remain ideal and minimum working capital

should be locked in it.

23

The following are the objectives of inventory management:-

To ensure continuous supply of materials, spares and finished goods.

To avoid both over and under stocking of inventory.

To maintain investments in inventories at the optimum level as required by the

operational and sale activities.

To keep material cost under control so that they contribute in reducing cost of production

and overall purchases.

To minimize losses through deterioration, pilferage, wastages and damages.

To design proper organization for inventory control so that management. Clear cut

account ability should be fixed at various levels of the organization.

To ensure perpetual inventory control so that materials shown in stock ledgers should be

actually lying in the stores.

To ensure right quality of goods at reasonable prices.

DANGERS OF EXCESSIVE WORKING CAPITAL:

Too much working capital is as dangerous as too little of it. Excessive working capital raises

problems.

1. It results in unnecessary accumulation of inventories. Thus chances of inventory

mishandling, waste, theft and losses increase.

2. Indication of defective credit policy and slack collection period. Consequently, it results

in higher incidence of bad debts, adversely affecting profits,

3. Makes the management complacent which degenerates in to managerial inefficiency.

4. The tendencies of accumulating inventories to make a speculative profit, which tends to

liberalize the dividend policy, make it difficult for the concern to cope in the future when

it is not able to make speculative profits.

24

CHAPTER 3

DATA PRESENTATION & ANALYSIS

25

A] NET WORKING CAPITAL

An analysis of the net working capital will be very help full for knowing the operational

efficiency of the company.

NWC= CURRENT ASSETS-CURRENT LIABILITIES

JAKHAR GRANITE INDUSTRIES, JALORE (Granite industry)

Years Current Asset Current Liabilities NWC

2013 2314214 135621 2178593

2014 2433145 145632 2287513

2015 2521767 166592 2355175

Table No.1

INTERPRETATION:-

The above chart shows that during the year 2013 the industry has 2,178593 N.W.C. and after

that in year 2014 and 2015 it is continue increasing. In 2015 N.W.C. was 2355175. So we can

say that is in position when there is sufficient WC to pay off it current liabilities.

SWEET MEMORIES (restaurant)

Years Current Asset Current Liabilities NWC

2013 300000 210000 90000

2014 270000 220000 50000

2015 315000 270000 45000

Table No.2

2050000

2100000

2150000

2200000

2250000

2300000

2350000

2400000

2013 2014 2015

Net working capital

Net working capital

26

STUDIO ELEVEN (parlor)

Years Current Asset Current

Liabilities NWC

2013 400000 300000 100000

2014 360000 320000 40000

2015 419000 370000 49000

Table No.3

INTERPRETATION:-

The above chart shows that during the year 2013 the company has 100000 N.W.C. But in the

year 2014 the N.W.C decreases to (40000) but after that it comes positive in 2015 49000.In

the year 2013 the company has 100000 N.W.C this means the company in a positive position

& sufficient WC available to pay off its current liabilities.

0

20000

40000

60000

80000

100000

2013 2014 2015

Net working capital

Net working capital

0

20000

40000

60000

80000

100000

120000

2013 2014 2015

Net working capital

Net working capital

27

B] RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. Alexander Hall first presented it in

1991 in Federal Reserve Bulletin. Ratio Analysis is a process of comparison of one figure

against other, which makes a ratio and the appraisal of the ratios of the ratios to make proper

analysis about the strengths and weakness of the firm’s operations. The term ratio refers to

the numerical or quantitative relationship between two accounting figures. Ratio analysis of

financial statements stands for the process of determining and presenting the relationship of

items and group of items in the statements.

Note: I have used the ratio analysis in this project in order to substantiate the managing of

WC. For this, I used some of the ratios to get the required output.

1. LIQUIDITY RATIOS:

Liquidity refers to the ability of a firm to meet its current obligations as and when these

become due. The short-term obligations are met by realizing amounts from current,

floating or circulating assets. Following are the ratios which can help to assess the

ability of a firm to meet its current liabilities.

1. Current ratio

2. Acid Test Ratio /

Quick Ratio /

Liquidity Ratio

3. Absolute liquid ratio

4. Time interest ratio

2. TURNOVER/ACTIVITY RATIOS:

These are the ratios which indicate the speed with which assets are converted or

turned over into sales.

1. Inventory Turnover

Ratio.

2. Debtors/ Accounts

receivables Turnover

Ratio.

3. Total assets turnover

ratio

4. Creditors/Accounts

Payables Turnover

Ratio.

5. Working Capital

Turnover Ratio.

6. Fixed assets turnover

ratio

28

1. CURRENT RATIO:-

It is a ratio, which express the relationship between the total current Assets and

current liabilities. It measures the firm’s ability to meet its current liabilities. It

indicates the availability of current assets in rupees for every one rupee of current

liabilities. A ratio of greater than one means that the firm has more current assets than

current liabilities claims against them. A standard ratio between them is 2:1.

Current Ratio: Current Assets

Current Liabilities


Years Current Asset Current Liabilities Current Ratio

2013 2314214 1356212 1.7

2014 2433145 1456327 1.6

2015 2521767 1665920 1.5

Table No.4

INTERPRETATION:-

From this chart we can see that during the year 2013 C.R. was 1.7, which means

that year the Jakhar Ind. Was able to meet its all C.L. In next two years C.R.

dropped to 1.5 .

1.4

1.45

1.5

1.55

1.6

1.65

1.7

1.75

2013 2014 2015

current ratio

current ratio

29


Years Current Asset Current Liabilities Current Ratio

2013 300000 210000 1.42

2014 270000 220000 1.22

2015 315000 270000 1.16

Table No.5

INTERPRETATION:-

It is seen from the above chart that during the year 2013 the C.R. was 1.42, which

means that during this year the sweet memories is able to meet its all C.L. But in the

year 2014the C.R. dropped to 1.22 due to increase in C.L. and decrease in c.a .In the

year 2015 the C.R.was1.16. The standard current ratio is 2:1. Hence it can be said that

there is not enough C.A. in studio eleven to meet its C.L. in the current year.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2013 2014 2015

current ratio

current ratio

30


Years Current Asset Current

Liabilities

Current

Ratio

2013 400000 300000 1.33

2014 360000 320000 1.12

2015 419000 370000 1.13

Table No.6

INTERPRETATION:-

It is seen from the above chart that during the year 2013 the C.R. was 1.33, which

means that during this year the studio eleven is able to meet its all C.L. But in the year

2014the C.R. dropped to 1.12 due to increase in C.L. and decrease in c.a .In the year

2015 the C.R.was1.13. The standard current ratio is 2:1. Hence it can be said that

there is not enough C.A. in studio eleven to meet its C.L. in the current year

1

1.05

1.1

1.15

1.2

1.25

1.3

1.35

2013 2014 2015

current ratio

current ratio

31

2. ACID TEST RATIO / QUICK RATIO / LIQUIDITY RATIO:-

This ratio establishes a relationship between quick/liquid assets and current liabilities.

It measures the firms’ capacity to pay off current obligations immediately. An asset is

liquid if it can be converted in to cash immediately without a loss of value;

Inventories are considered to be less liquid. Because inventories normally require

some time for realizing into cash. This ratio is also known as acid-test ratio. The

standard quick ratio is 1:1. Is considered satisfactory.

Quick Ratio = Quick Assets

Current Liabilities

Quick Assets = C.A.- Inventory


Year Quick Assets Current Liabilities Quick Ratio

2013 562145 1356212 0.41

2014 750214 1456327 0.51

2015 873267 1665920 0.52

Table No.7

INTERPRETATION:

It seems from the above chart that quick ratio of the industry during the year 2013 was

0.41 which increased and became 0.52 in 2015.

0

0.1

0.2

0.3

0.4

0.5

0.6

2013 2014 2015

quick ratio

quick ratio

32



2013 100000 210000 0.47

2014 50000 220000 0.22

2015 45000 270000 0.16

Table No.8

INTERPRETATION:-

During the year 2013 the quick ratio was 0.47, but in the year 2014 it decreases to

(0..22)and continues to decrease in the following years. In 2015 it was 0.16 This

shows the Sweet memories does not maintains satisfactory quick ratio. The quick

ratio is above the standard ratio i.e., 1:1. Hence it shows that the liquidity position of

the resturant is not adequate

0

0.1

0.2

0.3

0.4

0.5

2013 2014 2015

quick ratio

quick ratio

33



2013 60000 300000 0.2

2014 5000 320000 (0.15)

2015 70000 370000 0.18

Table No.9

INTERPRETATION:-

During the year 2013 the quick ratio was 0.20, but in the year 2014 it decreases to

(0..15)and continues to decrease in the following years. In 2015 it was 0.18 This

shows the studio eleven does not maintains satisfactory quick ratio. The quick ratio is

above the standard ratio i.e., 1:1. Hence it shows that the liquidity position of the

parlour is not adequate

0

0.05

0.1

0.15

0.2

0.25

2013 2014 2015

quick ratio

quick ratio

34

3. ABSOLUTE LIQUID RATIO:-

Absolute liquid ratio may be defined as the relationship between absolute liquid

assets and current liabilities. Absolute liquid assets include cash in hand and cash at

bank.

The standard absolute liquid ratio is 1:2

Absolute Liquidity Ratio = Cash& Bank Balance

Current Liabilities


Table No.10

INTERPRETATION:

During the year 2013 the absolute liquidity ratio was 0.26 which is fine for the

industry. In the year 2014 nad 2015 ratio increased and remain same, which

represents that liquidity position of the industry is satisfactory.

0.23

0.24

0.25

0.26

0.27

0.28

0.29

0.3

0.31

0.32

2013 2014 2015

Absolute liquid ratio

Series 1

Years Cash & Bank

Balance

Current Liabilities Absolute Liquidity

Ratio

2013 365412 1356212 0.26

2014 457810 1456327 0.31

2015 519714 1665920 0.31

35


Table No.11

INTERPRETATION:

During the year 2013 the Absolute liquidity ratio was 0.95 which is good for the

company. But during the year 2014 it increases to 0.84. In the year 2015 it increases

to 0.85 but still remained below the standard ratio Hence it shows that the liquidity

position of the sweet memories is not satisfactory

0.78

0.8

0.82

0.84

0.86

0.88

0.9

0.92

0.94

0.96

2013 2014 2015


Series 1

Years Cash & Bank

Balance


Ratio

2013 200000 210000 0.95

2014 185000 220000 0.84

2015 231000 270000 0.85

36


Table No.12

INTERPRETATION:

During the year 2013 the Absolute liquidity ratio was 0.71 which is good for the

company. But during the year 2014 it increases to 0.90. In the year 2015 it decreases

to 0.86 but still remained below the standard ratio Hence it shows that the liquidity

position of the studio eleven is not satisfactory

0

0.2

0.4

0.6

0.8

1

2013 2014 2015


Series 1

Years Cash & Bank

Balance


Ratio

2013 215000 300000 0.71

2014 290000 320000 0.90

2015 319000 370000 0.86

37

4. Times Interest Earned Ratio

The times interest earned ratio, sometimes called the interest coverage ratio, is a

coverage ratio that measures the proportionate amount of income that can be used to

cover interest expenses in the future.

Formula

The times interest earned ratio is calculated by dividing income before interest and

income taxes by the interest expense.

Both of these figures can be found on the income statement. Interest expense and

income taxes are often reported separately from the normal operating expenses for

solvency analysis purposes. This also makes it easier to find the earnings before

interest and taxes or EBIT.

Analysis

The times interest ratio is stated in numbers as opposed to a percentage. The ratio

indicates how many times a company could pay the interest with it’s before tax

income, so obviously the larger ratios are considered more favourable than smaller

ratios.

In other words, a ratio of 4 means that a company makes enough income to pay for its

total interest 4 times over. Said another way, this company's income is 4 times higher

than its interest expense for the year.

As you can see, creditors would favour a company with a much higher time’s interest

ratio because it shows the company can afford to pay its interest payments when they

come due. Higher ratios are less risky while lower ratios indicate credit risk.

Required data:-

http://www.myaccountingcourse.com/accounting-dictionary/income-statement

38


Table No.13

INTERPRETATION:

In the year 2013 Time Interest Earned Ratio was 86 but 2014 and 2015 it

reduced. In 2015 it was 76.26. The lowe the ratio credit risk decreased.


Table No.14

70

72

74

76

78

80

82

84

86

88

2013 2014 2015

Times and intrest earned ratio


Year Income before

interest and tax

(EBIT)

Interest Expenses

Times Interest

Earned Ratio

2013 2064782 24000 86.03

2014 2314597 28200 80.07

2015 2474751 32450 76.26

Year Income before

interest and tax

(EBIT)

Interest Expenses

Times Interest

Earned Ratio

2013 1800000 12000 150

2014 2150000 15000 143.33

2015 2320000 16500 140.60

39

INTERPRETATION:

In the year 2013 Times Interest Earned Ratio was 150 but during the year 2014 it

reduces to 143.33. In the year 2015 it was 140.60 As higher the ratio the credit ratio is

very low and as the ratio decreases the credit risk becomes higher and higher

STUDIO (ELEVEN parlor)

Table No.15

INTERPRETATION:-

In the year 2013 Times Interest Earned Ratio was 168 but during the year 2014 it

reduces to 147.4. In the year 2015 it was 147.5 As higher the ratio the credit ratio is

very low and as the ratio decreases the credit risk becomes higher and higher.

0

5

10

15

20

25

2013 2014 2015

Inventory Turnover ratio


135

140

145

150

155

160

165

170

2013 2014 2015



Year Income before

interest and tax

(EBIT)

Interest Expenses

Times Interest Earned

Ratio

2013 3200000 19000 168.4

2014 3310000 22500 147.11

2015 3540000 24000 147.5

40

5. INVENTORY TURNOVER RATIO:-

Inventory turnover ratio is the ratio, which indicates the number of times the stock is

turned over i.e., sold during the year. This measures the efficiency of the sales and

stock levels of a company. A high ratio means high sales, fast stock turnover and a

low stock level. A low stock turnover ratio means the business is slowing down or

with a high stock level.

Inventory Turnover Ratio = Net Sales

Closing Inventory


Table No.

INTERPRETATION:

From the above chart we can see that during the year 2013 Inventory Turnover

Ratio was 12.13 times , and by 2015 ratio decreased and remain 5.57 times only.

0

2

4

6

8

10

12

14

2013 2014 2015



Year Net Sales Closing inventory Inventory Turnover

ratio

2013 2245461 185241 12.13Times

2014 2541567 321450 7.90Times

2015 2757669 494550 5.57Times

41


Table No.

INTERPRETATION:

It is seen from the above chart that During the year 2013 , the Inventory t/o ratio is

19.5 times, in the year 2014 it decreases to 17.84 times, in the year 2015 it again

increases to 21.8 times.


Table No.

0

5

10

15

20

25

2013 2014 2015




ratio

2013 1760000 90000 19.5Times

2014 2052000 115000 17.84Times

2015 2295000 105000 21.8Times


ratio

2013 3920000 150000 26.13Times

2014 4080000 180000 22.67Times

2015 4470000 165000 27.09Times

42

INTERPRETATION:-

It is seen from the above chart that During the year 2013 , the Inventory t/o ratio is

26.13 times, in the year 2014 it decreases to 22.67 times, in the year 2015 it again

increases to 27.09 times.

20

21

22

23

24

25

26

27

28

2013 2014 2015



43

6. INVENTORY HOLDING PERIOD :-

This period measures the average time taken for clearing the stocks. It

indicates that how many days’ inventories take to convert from raw

material to finished goods.

Inventory Holding Period = Days in a year

Inventory turnover ratio


Table No.16

INTERPRETATION:

The Inventory Turnover Ratio of the Jakhar Granite Indusrty during the year

2013 was 30.09 days only. It increased in 2014 and 2015 and become 65.52

days.

0

10

20

30

40

50

60

70

2013 2014 2015

Inventory Holding Period


Year Days in a

Year

Inventory Turnover

Ratio


2013 365 12.13Times 30.09 Days

2014 365 7.90Times 46.20 Days

2015 365 5.57Times 65.52 Days

44


Table No.17

INTERPRETATION:

Inventory holding period fluctuate over the years. It was 18.7 days in the year 2013. It

increases to 20.4 days in the year 2014 and to 16.7 days in the year 2015.

0

5

10

15

20

25

2013 2014 2015

in M

illio

ns

Years



Year Days in a

Year

Inventory Turnover

Ratio

Inventory Holding

Period

2013 365 19.5Times 18.7Days

2014 365 17.84Times 20.4Days

2015 365 21.8Times 16.7Days

45


Table No.18

INTERPRETATION:-

Inventory holding period fluctuate over the years. It was 13.96 days in the year 2013.

It increases to 16.1 days in the year 2014 and to 13.47 days in the year 2015.

This shows the company is minimizing these inventory-holding days thereby to

increase the sales.

12

12.5

13

13.5

14

14.5

15

15.5

16

16.5

2013 2014 2015



Year Days in a

Year

Inventory Turnover

Ratio

Inventory Holding

Period

2013 365 26.13Times 13.96 Days

2014 365 22.67Times 16.1 Days

2015 365 27.09Times 13.47 Days

46

7. DEBTORS /ACCOUNTS RECEIVABLES TURNOVER RATIO:-

Debtor’s turnover ratio indicates the speed of debt collection of the firm. This ratio

computes the number of times debtors (receivables) has been turned over during the

particular period.

Debtors Turnover Ratio = Net Sales

Average Debtors


Year Net Sales Average Debtors Debtors Turnover

Ratio

2013 2245461 194465 11.54Times

2014 2541567 231485 10.97Times

2015 2757669 353553 7.79Times

Table No.19

INTERPRETATION:

In the year 2013, Debtors Turnover Ratio was 11.54 times which is continuously

increasing during the year 2014 and 2015. During the year 2015 the ratio was

decreased and became 7.79 times only.

0

2

4

6

8

10

12

14

2013 2014 2015

Debtors Turnover Ratio


47



Ratio

2013 1760000 42000 42Times

2014 2052000 35000 58.6Times

2015 2295000 21000 109Times

Table No.20

INTERPRETATION:

In the year 2013 ,Debtors Turnover Ratio was 42 times and increases to 58.6 times in

the year 2014. But in the year 2015, it again increases to 109 times

0

20

40

60

80

100

120

2013 2014 2015



48



Ratio

2013 3920000 62000 63.22Times

2014 4080000 49000 83.26Times

2015 4470000 53000 84.33Times

Table No.21

INTERPRETATION:-

In the year 2013 ,Debtors Turnover Ratio was 63.22 times and increases to 83.26

times in the year 2014. But in the year 2015, it again increases to 84.33 times.

0

10

20

30

40

50

60

70

80

90

2013 2014 2015



49

8. DEBTORS COLLECTION PERIOD :-

Debtors collection period measures the quality of debtors since it measures the

rapidity or the slowness with which money is collected from them a shorter collection

period implies prompt payment by debtors. It reduces the chances of bad debts. A

longer collection period implies too liberal and inefficient credit collection

performance.

Average Collection Period = Days in a Year



Table No.22

INTERPRETATION:

In the above chart we can see that in the year 2013 Debtors Collection

Period was 31 days. It was increased during the year 2014 and 2015. In

2015 it reduced by 12 days.

0

2

4

6

8

10

12

14

2013 2014 2015

Debtors Collection Period


Year Days in a

Year

Debtors Turnover Ratio Debtors Collection Period

2013 365 11.54 Times 31 Days

2014 365 10.97 Times 33 Days

2015 365 7.79 Times 45 Days

50


Table No.23

INTERPRETATION:

As from the chart it is known that in the year 2013 Debtors Collection Period was 8.6

days. It decreases to 6.2 days in the year 2014 which shows the efficient credit

collection performance of the company. In the year 2013 it again reduces to 3.3 days.

0

2

4

6

8

10

2013 2014 2015



Year Days in a

Year

Debtors Turnover Ratio Debtors Collection

Period

2013 365 42Times 8.6Days

2014 365 58.6Times 6.2Days

2015 365 109Times 3.3days

51


Table No.24

INTERPRETATION:-

As from the chart it is known that in the year 2013 Debtors Collection Period was

5.77 days. It decreases to 4.38 days in the year 2014 which shows the efficient credit

collection performance of the company. In the year 2013 it again reduces to 4.32

days.

0

10

20

30

40

50

60

70

80

90

2013 2014 2015



Year Days in a

Year

Debtors Turnover Ratio Debtors Collection

Period

2013 365 63.22Times 5.77Days

2014 365 83.26Times 4.38Days

2015 365 84.33Times 4.32Days

52

9. CREDITORS/ACCOUNTS PAYABLES TURNOVER RATIO:-

Creditor’s turnover ratio is the ratio, which indicates the number of times the debts

are paid in the year. This ratio is calculated as follows.

Creditors Turnover Ratio = Net Purchases

Average Creditors


Year Net Purchases Average

Creditors

Creditors TurnoverRatio

2013 1154632 126284 9.1 times

2014 1456782 142565 10.2 times

2015 1583248 166592 9.5 times

Table No.25

INTERPRETATION:

From the above chart we can see that the Creditors Turnover Ratio was changing over

the years. During the year 2013 it was 9.1. Then it decreased in 2014. Then again at

the time of 2015 ratio again increased. It shows that Industry has been making

payments to creditors in right manner.

8.4

8.6

8.8

9

9.2

9.4

9.6

9.8

10

10.2

10.4

2013 2014 2015

Creditors Turnover Ratio


53



Creditors

Creditors

TurnoverRatio

2013 85000 21000 4Times

2014 90000 28000 3.2Times

2015 97000 19000 5.1Times

Table No.26

INTERPRETATION:

It is clear that creditor turnover ratio changing over the years. It was 4 times in

the year 2013. It decreases to 3.22 times in the year 2014. In the year 2015 it

increases to 5.1 times. It shows that company has been making prompt payment

to the creditors

0

1

2

3

4

5

6

2013 2014 2015



54



Creditors

Creditors

TurnoverRatio

2013 85000 33000 2.57Times

2014 91000 41000 2.22Times

2015 103000 31000 3.32Times

Table No.27

INTERPRETATION:-

It is clear that creditor turnover ratio changing over the years. It was 2.57 times in the

year 2013. It decreases to 2.22 times in the year 2014. In the year 2015 it increases to

3.32 times. It shows that company has been making prompt payment to the creditors.

0

0.5

1

1.5

2

2.5

3

3.5

2013 2014 2015



55

10. CREDITORS PAYMENT PERIOD:-

The Creditors Payment Period represents the average number of days taken by the

firm to pay the creditors and other bills payables.

Average Payment Period = Days in a Year



Table No.28

INTERPRETATION:

During the year 2013 the Average Payment Period was 40 days. This time

period was changing over the years. Next year it decreased by 4 days then

during the year 2015 it again rises.

34

35

36

37

38

39

40

41

2013 2014 2015

Creditors Payment Period

Average Payment Period

Year Days in a Year Creditors Turnover

Ratio

Average Payment

Period

2013 365 9.1 times 40 Days

2014 365 10.2 Times 36 Days

2015 365 9.5 times 38 Days

56


Table No.29

INTERPRETATION:

Average payment period changing over the years It was 91.25 days in the year 2013.

It increase 114 days in the year 2014, But in the year 2015 it decreases to 71.5 days.

0

20

40

60

80

100

120

2013 2014 2015




Ratio

Average Payment

Period

2013 365 4Times 91.25Days

2014 365 3.2Times 114Days

2015 365 5.1Times 71.5Days

57


Table No.30

INTERPRETATION:-

Average payment period changing over the years. It was 142.02 days in the year

2013. It increase to 164.41 days in the year 2014, But in the year 2015 it decreases to

109.93 days.

0

50

100

150

200

2013 2014 2015




Ratio

Average Payment

Period

2013 365 2.57Times 142.02Days

2014 365 2.22Times 164.41Days

2015 365 3.32Times 109.93Days

58

11. WORKING CAPITAL TURNOVER RATIO:-

This ratio indicates the number of times the working capital is turned over in the

course of the year. This ratio measures the efficiency with which the working capital

is used by the firm. A higher ratio indicates efficient utilization of working capital

and a low ratio indicates otherwise. But a very high working capital turnover is not a

good situation for any firm.

Working Capital Turnover Ratio = Net Sales

Net Working Capital


Year Net Sales Net Working Capital WCTR

2013 2245461 2145632 1.04 Times

2014 2541567 2244551 1.13 Times

2015 2757669 2355175 1.17 Times

Table No.31

INTERPRETATION:

The Working Capital Ratio was increasing over the years. WCR was highest in

the 2015. From 2013 to 2015 the ratio raised from 1.04 to 1.17.

0.95

1

1.05

1.1

1.15

1.2

2013 2014 2015

WCTR

WCTR

59



2013 1760000 180000 (9.7)Times

2014 2052000 214000 (9.5)Times

2015 2295000 165000 (13.9)Times

Table No.32

INTERPRETATION:

The working capital t/o ratio is fluctuating year to year that was high in the year 2013,

9.7 times; there was a subsequent decrease in the year 2014 to (9.5) times .But it

increases in the year 2015 to (13.9) times. This shows the company is not utilizing

working capital effectively.

0

2

4

6

8

10

12

14

16

2013 2014 2015

WCTR

WCTR

60



2013 3920000 322000 (12.17)Times

2014 4080000 353000 (11.55)Times

2015 4470000 309000 (14.46)Times

Table No.33

INTERPRETATION:-

The working capital t/o ratio is fluctuating year to year that was high in the year 2013,

12.17 times; there was a subsequent decrease in the year 2014 to (11.55) times .But it

increases in the year 2015 to (14.46) times . This shows the company is not utilizing

working capital effectively.

0

2

4

6

8

10

12

14

16

2013 2014 2015

WCTR

WCTR

61

12. FIXED ASSET TURNOVER RATIO:-

The fixed (or capital) assets turnover ratio measures how intensively a firm's fixed

assets such as land, buildings, and equipment are used to generate sales. A low fixed

assets turnover implies that a firm has too much investment in fixed assets relative to

sales; it is basically a measure of productivity. The following shows how Eastman's

fixed assets turnover ratio is calculated.

Fixed Asset Turnover = Sales

Fixed Assets


Year Sales FIXED ASSETS FAT

2013 2254632 4502147 0.50 Times

2014 2541325 5214678 0.48 Times

2015 2757669 6558875 0.42 Times

Table No.34

INTERPRETATION:

From the above chart we can see that Fixed Asset Turnover Ratio is decreased

over the years. During the year 2013 it was 0.50 times and in the year 2015 it

decreased by 0.8.

0.38

0.4

0.42

0.44

0.46

0.48

0.5

0.52

2013 2014 2015

Fixed Asset Turnover Ratio

fat

62



2013 1800000 1100000 1.63Times

2014 2100000 1155000 1.8Times

2015 2350000 1232000 1.9Times

Table No.35

INTERPRETATION:

It is shown that in the year 2013 the FAT ratio is 1.63 times and it increases to 1.8

times in the year 2014. In 2015 it again increases to 1.9 times

1.451.5

1.551.6

1.651.7

1.751.8

1.851.9

1.95

2013 2014 2015


fat

63



2013 4260000 1500000 2.84Times

2014 4330000 1545000 2.80Times

2015 4820000 1610000 2.99Times

Table No.36

INTERPRETATION:-

It is shown that in the year 2013 the FAT ratio is 2.84 times and it decreases to 2.80

times in the year 2014. But In 2015 it increases to 2.99 times.

2.7

2.75

2.8

2.85

2.9

2.95

3

3.05

2013 2014 2015


fat

64

15. Total Assets Turnover.

This ratio takes into account both net fixed asset; and current assets. It also gives an

indication of the efficiency with which assets are used; a low ratio means that

excessive assets are employed to generate sales and/or that some assets (fixed or

current assets) should be liquidated or reduced. Eastman's total assets turnover is as

follows:

Total Asset Turnover = Sales

Total Assets


Year Sales TOTAL ASSETS TATR

2013 2254632 7280546 0.30Times

2014 2541325 8436217 0.30 Times

2015 2757669 9080642 0.30 Times

Table No.37

INTERPRETATION:

In the year 2013 Total Asset Turnover Ratio was 0.30 and it remains same from

2013 to 2015.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

2013 2014 2015

Total Asset Turnover Ratio

WCTR

65



2013 1800000 1500000 1.2Times

2014 2100000 1555000 1.35Times

2015 2350000 1648000 1.42Times

Table No.38

INTERPRETATION:

In the year 2013 Total Asset Turnover Ratio was 1.2 times and in the 2014 it was

1.35 times. It increases in the year 2015 1.42 times.

1.05

1.1

1.15

1.2

1.25

1.3

1.35

1.4

1.45

2013 2014 2015


WCTR

66



2013 4260000 1900000 2.42Times

2014 4330000 1905000 2.27Times

2015 4820000 2029000 2.37Times

Table No.39

INTERPRETATION:-

In the year 2013 Total Asset Turnover Ratio was 2.42 times and in the 2014 it was

2.27 times. It increases in the year 2015 to 2.37 times.

2.15

2.2

2.25

2.3

2.35

2.4

2.45

2013 2014 2015


WCTR

67

CHAPTER 4

FINDINGS OF THE STUDY

68

FINDINGS OF THE STUDY

1. The Working Capital Ratio of Jhahar granite industry was increasing over

the years. WCR was highest in the 2015. From 2013 to 2015 the ratio raised

from 1.04 to 1.17.

2. The working capital t/o ratio of sweet memories is fluctuating year to year that

was high in the year 2013, 9.7 times; there was a subsequent decrease in the year

2014 to (9.5) times .But it increases in the year 2015 to (13.9) times. This shows

the company is not utilizing working capital effectively.

3. The working capital t/o ratio of studio eleven is fluctuating year to year that

was high in the year 2013, 12.17 times; there was a subsequent decrease in

the year 2014 to (11.55) times .But it increases in the year 2015 to (14.46)

times . This shows the company is not utilizing working capital effectively

SUGGESTIONS

1. Manage working capital actively throughout the organisation.

2. Consider alternative funding.

3. Pay your suppliers on time

4. Negotiate discounts with your suppliers

5. Manage your stock actively

6. Investigate the benefits of e-procurement

CONCLUSIONS

1. Working capital is necessary for all business but here we were targeting small

business and we find the small business is going good as we compare by ratio

analysis.

2. Working capital need for day to day operation and here in small business we need

day to day business.

69

APPENDICES

JAKHAR GRANITE INDUSTRIES

DATA COLLECTED FOR RATIO ANALYSIS

(From ANNUAL REPORT – 2013, 2014 & 2015)

S no. Account head 2013 2014 2015

1 Current assets 2314214 2433145 2521767

2 Current liabilities 1356212 1456327 1665920

3 Quick assets 562145 750214 873267

4 fixed assets 4502147 5214678 6558875

5 Earnings per share(ESP) not applicable not applicable not applicable

6 Cash & bank balance 365412 457810 519714

7 Net purchases 1154632 1456782 1583248

8 Average creditors 126284 142565 166592

9 Average debtors 194465 231485 353553

10 Sales 2254632 2541325 2757669

11 Net sales 2245461 2541567 2757669

12 Net working capital 2145632 2244551 2355175

13 Interest expenses 24000 28200 32450

14 Income before interest and

tax (EBIT)

2064782 2314597 2474751

15 Closing inventory 185241 321450 494550

16 Inventories 1100456 1345702 1648500

17 Total Assets 7280546 8436217 9080642

70

SWEET MEMORIES (Restaurant)


(From ANNUAL REPORT – 2013, 2014& 2015)

Sno. Account head 2013 2014 2015

1 Current assets 300000 2700000 3150000


3 Quick assets 100000 50000 45000

4 fixed assets 1100000 1155000 1232000

5 Earnings per share(ESP)


7 Net purchases 85000 90000 97000


9 Average debtors 42000 35000 21000

10 Sales 1800000 2100000 2350000

11 Net sales 1760000 2052000 2295000



14 Income before interest and tax (EBIT) 1800000 2150000 2320000


16 Inventories 200000 212000 180000

17 Total Assets 1500000 1555000 1648000

71

STUDIO ELEVEN (PARLOUR)


(From ANNUAL REPORT – 2013, 2014& 2015)

Sno. Account head 2013 2014 2015

1 Current assets 400000 360000 419000


3 Quick assets 60000 5000 70000

4 fixed assets 1500000 1545000 1610000

5 Earnings per share(ESP)


7 Net purchases 85000 91000 103000


9 Average debtors 62000 49000 53000

10 Sales 4260000 4330000 4820000

11 Net sales 3920000 4080000 4470000



14 Income before interest and tax (EBIT) 3200000 3310000 3540000


16 Inventories 340000 355000 349000

17 Total Assets 1900000 1905000 2029000

GROUP NO. 8

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