MBA Project milma

A STUDY ON WORKING CAPITAL MANAGEMENT OF NHC

A Project Report Submitted byLINSON LUKOSE(Reg. No: 125900020)

SUBMITTED TO MANGALORE UNIVERSITYIN PARTIAL FULFILMENTOF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OFMASTER OF BUSINESS ADMINISTRATIONWith Specialization inFINANCE

Under the Valuable Guidance of Internal Guide External Guide MR. G.S.SUBRHMONYA MR K.S. UNNIKRISHNAN ASSOCIATE PROFESSORBRANCH MANAGER

SRINIVAS SCHOOL OF MANAGEMENTMUKKA, MANGALORE-574 1462013- 2014

DECLARATION

I LINSON LUKOSE, bearing Reg. No: 125900020 hereby declare that this project report entitled A STUDY ON WORKING CAPITAL MANAGEMENT OF NAGARJUNA HERBAL CONCENTRATES LTD. has been prepared by me, under the guidance of Mr. G.S.Subrhmonya, Associate Professor, Department of Management studies, Srinivas School of management, for the partial fulfillment of the requirements for the award of the Degree of Master of Business Administration during the academic year 2013-1014.I also declare that this project report is my original and independent work and has not been submitted to any other Universities or institutes for the award of any other Degree, Diploma, Fellowship or any similar titles. The project work does not involve any plagiarism in any form and wherever the contents have been drawn from the literature/ resources, due credit has been given to the authors.

Place: Mangalore LINSON LUKOSE Date : 125900020

ACKNOWLEDGEMENTI am elated to present my report on A STUDY ON WORKING CAPITAL MANAGEMENT OF NAGARJUNA HERBAL CONCENTRATES LTD I deem it a privilege to acknowledge to all those who have directly helped me in the preparation of this field study.I would like to thank our principal Dr. Shreeprakash B, Srinivas School of Management, Mukka for giving me an opportunity to carry out this study.I would like to express my sincere gratitude to Mr. K. S. Unnikrishnan, HR manager Nagarjuna Herbal Concentrates Ltd, Thodupuzha for his valuable suggestions, guidance and encouragement during the preparation of this project.My special thanks to Dr. Vishnu Prasanna K. N, Professor and H.O.D of MBA department for his encouragement and support to complete the project.I express my utmost gratitude to the project guide, Mr. G. S. Subrhmonya, Associate Professor, faculty of MBA department who has guided me in carrying out this project.I thank all the employees of Ngarjuna Herbal Concentrates Ltd, Thodupuzha for their support and co-operation.Last but not least I thank my parents, my relatives and friends, without whose support and encouragement this project study would not have been possible.

Place: LINSON LUKOSE Date: Reg No:12590002CONTENTSSL.NO.TOPICPAGE NO.

CHAPTER-1 INTRODUCTION INTRODUCTION TO THE TOPIC COMPANY PROFILE STATEMENT OF THE PROBLEM SCOPE OF THE STUDY OBJECTIVES OF THE STUDY REVIEW OF LITERATURE

1-1617-2323232324-26

CHAPTER-2 RESEARCH METHODOLOGY LIMITATION OF THE STUDY27-31

CHAPTER-3 RESULTS , ANALYSIS & INTERPRETATION 32-70

CHAPTER-4 FINDINGS , SUGGESTIONS & CONCLUSION71-75

BIBLIOGRAPHY & REFERENCES76-77

ANNEXURE

LIST OF TABLESTable No.TitlePage No.

3.1.1Schedule Of Changes In Working Capital On 2009 & 2010




3.2.1Changes In Gross Working Capital

3.2.2Inventories To Gross Working Capital Ratio

3.2.3Sundry Debtors To Gross Working Capital Ratio

3.2.4 Cash And Bank Balance To Gross Working Capital Ratio

3.2.5Other Current Assets To Gross Working Capital Ratio

3.2.6Loan And Advances To Gross Working Capital Ratio

3.2.7Changes In Current Liabilities

3.2.8Sundry Creditors To Current Liabilities

3.2.9Other Current Liabilities To Current Liabilities

3.2.10Net Working Capital

3.2.11Current Ratio

3.2.12Quick Ratio

3.2.13Absolute Liquid Ratio

3.2.14Inventory Turnover Ratio

3.2.15Inventory Holding Period

3.2.16Inventory To Working Capital Ratio

3.2.17Debtors Turnover Ratio

3.2.18Debt Collection Period

3.2.19Credit Turnover Ratio

3.2.20Average Payment Period

3.2.21Working Capital Turnover Ratio

3.2.22Fixed Assets Turnover Ratio

3.2.23Current Asset Turnover Ratio

3.2.24Working Capital To Total Asset Ratio

3.2.25Current Assets To Total Assets Ratio

3.2.26Cash To Sales Ratio

3.2.27Cash To Current Liability Ratio

3.2.28Cash Turnover Ratio

3.2.29Proprietary Ratio

3.3.1Calculation Of Days Inventory Outstanding (DIO)

3.3.2Calculation Of Days Sales Outstanding (DSO)

3.3.3Calculation Of Days Payable Outstanding (DPO)

3.3.4Calculation Of Cash Conversion Cycle (CCC)

3.4.1Trend Of Current Assets

3.4.2Trend Of Inventories

3.4.3Trend Of Sundry Debtors

3.4.4Trend Of Cash & Bank Balance

3.4.5Trend Of Other Current Assets

3.4.6Trend Of Loans & Advances

3.4.7Trend Of Current Liabilities

3.4.8Trend Of Sundry Creditors

3.4.9Trend Of Other Current Liabilities

3.4.10Trend Of Net Working Capital

LIST OF CHARTTable No.TitlePage No.

3.2.1Changes In Gross Working Capital

3.2.2Inventories To Gross Working Capital Ratio

3.2.3Sundry Debtors To Gross Working Capital Ratio

3.2.4 Cash And Bank Balance To Gross Working Capital Ratio

3.2.5Other Current Assets To Gross Working Capital Ratio

3.2.6Loan And Advances To Gross Working Capital Ratio

3.2.7Changes In Current Liabilities

3.2.8Sundry Creditors To Current Liabilities

3.2.9Other Current Liabilities To Current Liabilities

3.2.10Net Working Capital

3.2.11Current Ratio

3.2.12Quick Ratio

3.2.13Absolute Liquid Ratio

3.2.14Inventory Turnover Ratio

3.2.15Inventory Holding Period

3.2.16Inventory To Working Capital Ratio

3.2.17Debtors Turnover Ratio

3.2.18Debt Collection Period

3.2.19Credit Turnover Ratio

3.2.20Average Payment Period

3.2.21Working Capital Turnover Ratio

3.2.22Fixed Assets Turnover Ratio

3.2.23Current Asset Turnover Ratio

3.2.24Working Capital To Total Asset Ratio

3.2.25Current Assets To Total Assets Ratio

3.2.26Cash To Sales Ratio

3.2.27Cash To Current Liability Ratio

3.2.28Cash Turnover Ratio

3.2.29Proprietary Ratio

3.3.1Representation Of Days Inventory Outstanding (DIO)

3.3.2Representation Of Days Sales Outstanding (DSO)

3.3.3Representation Of Days Payable Outstanding (DPO)

3.3.4Representation Of Cash Conversion Cycle (CCC)

3.4.1Trend Of Current Assets

3.4.2Trend Of Inventories

3.4.3Trend Of Sundry Debtors

3.4.4Trend Of Cash & Bank Balance

3.4.5Trend Of Other Current Assets

3.4.6Trend Of Loans & Advances

3.4.7Trend Of Current Liabilities

3.4.8Trend Of Sundry Creditors

3.4.9Trend Of Other Current Liabilities

3.4.10Trend Of Net Working Capital

CHAPTER-1INTRODUCTION

1.1 INTRODUCTION The developing economies are generally facing with the problem inefficient utilization of resources available to them. Capital is the scarcest productive resources in such economies and proper utilization of these resources promotes the rate of growth, cut down the cost of production, and above all beef up the efficiency of the productive system. Hence, purposeful harnessing of capital is of paramount importance in any development policy of such economies. The total capital of a country comprises fixed capital and working capital. Working capital is regarded as one of the conditioning factors in long run operations of a firm which is often inclined to treat it as an issue of short run analysis and decision making. It is not only influence earning capacity of the business under taking but also determined largely their scope and content of operations. The management of working capital is concerned with the management of the firms current accounts, which include current asset and current liabilities. The study was conducted at Nagarjuna Herbals Concentrates Ltd. Thodupuzha. The study focuses on working capital management of the company.

1.2 INTRODUCTION TO THE TOPIC Working capital refers to the investment by the company in short terms assets such as cash, marketable securities. Net current assets or net working capital refers to the current assets less current liabilities. Working capital is that part of companys capital which is used for purchasing raw material and involve in sundry debtors. We all know that current assets are very important for proper working of fixed assets. Suppose, if you have invested your money to purchase machines of company and if you have not any more money to buy raw material, then your machinery will no use for any production without raw material. From this example, you can understand that working capital is very useful for operating any business organization. We can also take one more liquid item of current assets that is cash. If you have not cash in hand, then you cannot pay for different expenses of company, and at that time, your many business works may delay for not paying certain expenses. If we define working capital in very simple form, then we can say that working capital is the excess of current assets over current liabilities. Definition of Working Capital:" Working capital is an excess of current assets over current liabilities. In other words, the amount of current assets which is more than current liabilities is known as Working Capital. If current liabilities are nil then, working capital will equal to current assets. Working capital shows strength of business in short period of time. If a company have some amount in the form of working capital, it means Company have liquid assets, with this money company can face every crises position in market. "Definition of 'Working Capital Management':A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.FACTORS DETERMINING THE WORKING CAPITAL Operating cycles: - in the case of trading concern operating cycle is the time required to turn cash into inventories, inventories into amount receivable and into cash. In the case of financing firm the operating cycle include the length of time taken for the conversation of cash into debtors and conversion of debtors into cash Sales volume: - this is another important factor that affects or influences the amount of working capital requirements. Adequate stocks are required to meet the operational activities of the business. The more the sales volume, the more would be the size of working capital. Seasonal factors: - these are seasonal factors like fluctuation in demand for their products. Certain industries manufacture and sell goods only during certain seasons. Such concern require large amount of working capital during the season. For almost all firms the fluctuation affects the level of working capital to be maintained Policies of the firm: - the policies of the firm affect working capital requirements. In case of firm decides to grant two months credit to their client instead of existing one month credit, it leads to higher level of investments and working capital. Working capital requirements also influenced by the policies relating to depreciation, dividends etc. Technological changes: - technological changes are also cause for changes in the level of working capital. If a new process emerges as a result of technological developments, which shortens the operating cycle. It need for working capital and vice versa. Operating efficiency: - the operating efficiency of the management is also an important determinant of the level of working capital. The management can also contribute to a sound working capital position through its operating efficiency; though the management cannot control the rise in prices it can ensure the efficient utilization of resources. Price level changes: - changes in the price level also affect the requirement of working capital. Rising price necessities the use of more funds for maintaining an existing level of activity. The effect of rising prices is that a higher level of working capital is needed Credit policy: - the credit policy retains to sales and purchases also affect the working capital. The credit policy influences the requirement of working capital in two ways: Through credit terms granted by the firm to its consumer/buyer of the goods Credit terms available to the firm from its creditors. The credit terms grants to customers have bearing on the magnitude of working capital by determining the level of book debts. The credit sale results in higher book debts. A higher book debt means working capital.

CLASSIFICATION OF WORKING CAPITALworking capital

on the basis of concept

on the basis of time

Net working capital

permanent working capital

variable working capital

Gross working capital

Special working

Seasonal working

Regular working

Initial working

Classification of working capitalWorking capital may be classified in two ways, on the basis of concept and on the basis of time. A. On the basis of concept Gross working capital Net working capital.

1. Net working capital This is the difference between current assets and current liabilities; current liabilities are expected to mature with in an accounting year and include creditors, bills payable and outstanding expenses.Net working capital =current assets-current liabilities2. Gross working capital This refers to the firms investment in current assets. Current assets are the assets which can be converted into cash within a short period say an accounting year. Current assets include cash, debtors, bills receivables, short term securitiesB. on the basis of time Permanent working capital Variable working capital

1. Permanent working capital Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprise to carry out its normal business operations. Such working capital grows as the size of the business grows. This can be again classified into two as initial working capital and regular working capitalA. Initial working capital At its inception and during the formative period of its operations a company must have enough cash fund to meet its obligations. The need for initial working capital for every company to consolidate its positionB. Regular working capital Regular working capital is the minimum amount of liquid cash to be maintained in the business to keep up the circulation of the flow of cash to inventories, to receivable and the receivables back into cash. Reserve margin is the excess of working capital maintained in addition to the regular working capital for meeting unforeseen contingencies.

2. Variable working capitalTemporary or variable working capital fund represents additional assets required at different times during the operation year. Such working capital varies with seasonal and cyclical variation in business. It can be further classified as seasonal and special working capital. A. Seasonal working capital The amount of working capital which is required to meet the seasonal demand of busy product is called seasonal working capital. B. Special working capitalSpecial working capital is required to meet the extra ordinary needs and consequences like strike, lock outs etc. Temporary working capital differs from permanent working capital in the sense that it is required for short period and cannot be permanently employed in the business.SOURCES OF WORKING CAPITAL1. Internal sources2. External sources Internal sources a. Retained earnings b. Sale of fixed assets c. Depreciation fund d. Using the recourse meant for taxation External sources a. Bank credit b. Customer advances c. Short term public deposits d. Share Capital e. Trade credit f. Outstanding expenses1.3 COMPANY PROFILE INTRODUCTION

Nagarjuna Herbal Concentrates Ltd is a private limited company engaged in the production and marketing of all kind of Ayurvedic medicines and popularizing the indigenous system of medicines in our country, is located at thodupuzha. The construction of the company started in the year 1985, and commissioned in October 1989.In the beginning company has only 87 agencies but now the authorized agencies are more than 930 and it is spreading throughout the state. At present there are 1000 direct employees and 2000 indirect employees. The company has a product range of 650 medicines. The Kerala State Industrial Development Corporation Ltd and Kerala State Financial interest in the company.1.3.1 NAGARJUNA AYURVEDIC GROUP

Nagarjuna is a paradigm shift among Ayurvedic companies in that Nagarjuna was the first corporate House in the Ayurvedic sector in Kerala as against the family owned Ayurvedic organizations. Beginning commercial production in 1986, Nagarjuna has today notched up a pre-eminent position among frontline Ayurvedic companies, marketing a broad spectrum of Ayurvedic medicines and has achieved commendable sales with national & international presence.The Enterpreneur Nagarjuna was established in the year 1989 by Sri V.G. Devadas Namboodiripad, an entrepreneur, with a few experts in the Ayurveda field in the board of the management. The VisionThe vision of Nagarjuna is to the best solution provider in healthcare through Ayurveda. In translating this vision into reality, its approach is to bring about synthesis of tradition and modernity. All that Nagarjuna does is rooted in traditional values and principles of Ayurveda and at the same time fulfils the requirement of modern ethos, particularly in convenience and form. This is how Nagarjuna position itself in the mind of the consume.

The FIRST1. Nagarjuna has several first to its credit. Some there are: The first to create synergy between Ayurvedic & Ashtavaidya school of thought in ayurveda.2. The first to take the franchise model of service health needs, on a wide scale, across the state of Kerala, particularly to the rural areas.3. The first to provide consistent focus on R & D activities in ayurveda sector in Kerala and to establish a full-fledged facility for the same.4. The first to create widespread awareness of medical plants among people and to make its cultivation a popular as well as income generating programme.5. The first to use modern promotional methods such as TV advertising on a large scale to propagate Ayurveda. 1.3.2The Group

Nagarjuna Ayurvedic Group presently consists the following organization

Nagarjuna Herbal Concentrates Ltd (NHCL) NHCL the flagship company and the GMP (Goods Manufacturing Process) certified manufacturing facility, which began commercial production in 1989 is situated at Alakode Panchayat, Thodupzha in Kerala

Nagarjuna Ayurvedic Center Ltd (NACL) NACL is the hospital providing authentic Ayurvedic treatments situated on the banks of periyar at kalady in Kerala, in an atmosphere of tranquility and scenic charm.

NagarjunaAurvedic Retreat Ltd (NARL) A holistic healthcare center which provides alternative therapies besides Ayurveda including classes in Indian philosophy and culture, well supported by a well stocked reference library. Began operation in 2006 at Moolamkuzhi, east of Malayatoor in Kerala.

Nagarjuna Research Foundation (NRF)NRF is the charitable trust whose trustees are eminent personalities in society. Besides research activities, NRF has done Yeman service in popularizing the cultivation of MEDICINAL PLANTS, through various activities such as planting and distribution of saplings imparting technical advice, conducting class and giving awards yearly (Oushadhamitram Award). So far it has distributed over 25 lakhs sapling across Kerala. Nagarjuna Social Service Society (NSSS)NSSS is an NGO established specially to carry out the promotional activities related medical plants begun by NRF. NgarjunaAurvedic Institute (NAI)NAI a charitable trust, established to conduct educational program to a variety of target groups, including international students.

1.3.3 ISO Certificate Nagarjuna Herbal Concentrates Ltd. has received the ISO 9001:2000 certification. The certificate has been issued by INTERTEK Quality Register International. It had received the GMP certification earlier.

1.3.4 Products There are Generic/Traditional medicines such as Kashayam, Arishtams, Lehyams, etc. numbering over 500. There are also Proprietary / Branded products developed by Nagargunas R&D. There are as many 31 branded ethical products. Over The Counter (OTC) Products, numbering over 20 are essential household medicines, such as Headache Balm, Hair oil, Brain Nourisher remedies for throat pain and irritation for over all nourishment and validity and so on. To suit modern requirements, liquid kashayams (27 product) have been converted to kashayam capsules. Nagarjuna has more that 500 products,

1.3.5 MarketingThese products are marked through a wide network of over 800 franchise agencies in Kerala over 150 outside the state. In facts Nagarjuna was the first to establish such a wide distribution network in the Aurvedic sector particularly in the rural areas outside Kerala, Nagarjuna has presence in as many as 17 states such as Karnataka, Andhra Pradesh, Tamil Nadu, Goa, Orissa, Maharashtra, Gujarath and Delhi as well as joint ventures in many North Indian States.1.3.6Exports Nagarjuna overseas presence is in countries such as UK, USA, Switzerland, Holland, Australia, Italy, UAE, Singapore, West Indies, Hungry and Bahrain, Russian and Saudi Arabia.1.3.7Nagarjuna R & DRight from inception, Nagarjuna has focused on R&D as essential for Ayurveda in the modern world situated in Alakode, Thodupuzha some of its activities are standardization of Aurvedic medicines and new product development. Recently Nagarjuna R&D acquired atomic absorption Spectrophrometer for the analysis of heavy metals like Arsenic, Mercury, Nickel, Cadmium and Lead. Drugs controller Kerala has approved the quality control lab for testing of crude drugs (raw herbs) for their authenticity and purity. In 2004 this approval has been extended to finished products as well.1.3.8Medical Plants Under the agencies of Nagarjuna Research Foundation, Nagarjuna had initiated ongoing programs for promoting the cultivation of medical plants and trees widespread distribution of plants saplings, providing technical advice to farmers conducting classes at schools and colleges institution of an yearly award (Oushadhamithram Award) to the best farmer of medical plants etc., are some of activities under the program. Within the last 11 year, over 25 lakhs saplings to the tribals at Nachar Watershed area in Idukki district in Kerala. The medical plants programs have been taken over by NSSS.

1.3.9TreatmentThe demonstrative example of its treatment approach and practices is at its best in the Ayurvedic Treatment Center at Kalady, situated on the Bank of river Periyar in an atmosphere that exudes the natural charm of a trees-filled environment. The center and all the infrastructural facilities for stay during treatment, a cafeteria serving Vegetarian cuisine and all the infrastructural facilities and personnel for providing serious Ayurvedic treatments strictly as per traditional protocol Nagarjuna is treatment centers are also preferred destination for westerners and persons from other states seeking serious Ayurvedic treatment. Their number is increasing day by day. The centre has won the coveted GREENLEAF certification from the Government of Kerala, awarded to those possible manner.1.3.10Education Nagarjuna conducts a 4 month intensive Panchakarma Therapist Training course imparting theoretical and practical Ayurvedic education at Kalady begun 2 year ago it has become a successful course. A reorientation programme on Kerala Ayurveda is also given to physicians of other disciplines from other states, who desire to know more about Ayurveda as practiced in Kerala. Plans are a foot to extend the educational programmes of different categories to a variety of target groups including international students. These programmes will be conducted by Nagarjuna Ayurvedic Institute.PROMOTER OF THE COMPANY PROMOTER Sri. V.G. Devdas Namboodiripad

OWNERSHIP PATTERN

Authorised share capital - Rs. 50000000 Issued, subscribed & paid up Capital - Rs. 26480000 Earnings per share - Rs. 1.68 Reserves and surplus - Rs. 30218000 (Of the above shares 180772 shares has been issued as fully paid up bonus shares)

COMPETITORS INFORMATION The main competitors against Nagarjuna Herbal concentrates are the following; Kottackal Arya Vaidhya sala. Vydyaratnam Ayurveda pharmacy Kerala Ayurveda pharmacy Sitaram ayurveda pharmacy SD Pharmacy1.3.11 MCKINSEY 7S MODELThe 7s model is a tool used for managerial analysis and actions that provide a structure with which a company is considered as a whole, so that the organizations problems may be diagnosed and strategy may be developed and implemented. The 7s frame work was developed by a consultant company called McKinsey's in the late 1970s to help the managers address the difficulties of organizational change

1. STRATEGY Nagarjuna aims at cost reduction and higher profitability through customer satisfaction. For reducing cost, company follows material control system. Better and proper control of material and appropriate allocation leads reduction in cost and satisfy the customer with quality products to meet their expectations is the policy followed by the company. Quality control starts from its inputs. So, Nagarjuna adopt quality assurance method to maintain quality of the product. Personnel department of Nagarjuna tries to maintain the strategy of training and development of employees. Company training such as coaching in plant, training at other units, customer training, induction training, external training etc. There are mainly three types of strategy; Business strategy Continuously assimilate, analyze and apply knowledge to power superior financial Decisions. Focus on core competence in medical services. De risk through multiple products and diverse revenue streams.Customer strategy Enhance customer retention through quality research and service. Efficiently deploy cutting-edge technology. Create a wide, multi-modal network to serve customers at one stop.People strategy Attract exceptionally talented and driven people. Ensure a conducive environment.

2. SRUCTURE Strategy represents the structure of the organization. A business need to be organized in a specified form of shape that is generally refers to as organization structure. Organizations are structured in a variety of ways, dependent on their objectives and culture. The structure of the company often indicates the way it operates and performs. The design of an organization structure is a critical task of top management of an organization. It refers to organizational arrangements & relationship. It prescribes formal relationship among various position and activities. Arrangements about reporting relationship, how an organization member is to communicate with other members. Nagarjuna organization structure is flexible enough to counter balance of external & internal environment. This will help in the smooth working of the company.

Manager (QC)Manager (R&D)ChemistProduction Manager Production Officer Production ControllerSupervisor Marketing Manager KeralaRegional ManagerExecutiveGM MarketingManager Marketing(outside)ExecutiveC.E.OManaging DirectorExecutive OfficerAsst. MGR Personnel Officer HR ExecutiveManager HRAGMHRLegal AdvisorManager (QC)Manager FinanceAGM FinanceAsst. Manager Senior Commercial OfficerCommercial OfficerORGANISATIONAL STRUCTURE;

3. SYSTEM System is a flow of activities involved in the daily operation of business. They refer to the procedures, process and routines that are used to manage the organization and characterize how important work is to be done. System in 7s framework refers to the rules, regulations and procedures both formal & informal that complement the organization structure. It includes production planning, control systems capital budgeting system. The system of Nagarjuna includes: 100% management information system. The company has 100% management information system. It helps the company very much in their day-today business administration. It also helps the company to achive their target more effectively. The office of Nagarjuna is fully automated i. e; they are looking forward for a paper less office. Reviews and meetings: Nagarjuna conducts periodical meetings every month regarding the performance of company and also conducts meeting when ever necessary. In the branch level the branch manager conducts meetings.Internet and Technology: Nagarjuna provides its employees the internet facility and technological support to access and to share the information among as and when they require it. It facilitates better communication among the employees. And also Providing prompt and proactive customer services Ensuring high quality services and products. Motivating every new in the organization for active participation toward continuous improvement in activities.

4. STYLE Style refers to the way the management behaves and collectively spends time to achieve organizational goal. Workers participation in management style is following in Nagarjuna. Various council seen as works committee, safety committee, canteen committee and welfare committee are established and are fully represented by the employees. In this committee worker are given a chance to voice their opinion. Style of leadership in the Nagarjuna is democratic leadership style. It is associated with team building interpersonal leadership and human skill. Regarding the style of production Nagarjuna adopted the policy of quality assurance method. It helps the company for ensuring quality of its product and they are bringing the reputation to the company. Nagarjuna got Government certificate ISO 9001;2000 for its quality. Management style: More a matter of what managers do than what they say, what are they focusing on. In India Info line the leadership style followed is democratic group effort. Here all employees play an active part in giving suggestions for decision making. All major decision is taken in the branch concerned. The managing director or the managers of the concerned departments and branches will take the major decision. In Nagarjuna providing the incentives to the employees, those who are reaching targets and promote them to the higher levels.

5. STAFF The staff of Mckinsys 7S framework includes the human resource management, rewards and recognition. It refers the employees and their general capabilities. Organization are made up of human and its the people who makes the real difference to the success of the organization in the increasingly knowledge based society. The main strength of Nagarjuna is its research teams efficiency and team work of the employees. Staff of Nagarjuna include all functional level Managers, Departmental Heads, Branch Managers, Regional Managers & Operating Employees. Emphasis on hiring the best staff, providing them with rigorous training and monitoring support, and this forms the basis of this organization strategy and competitive advantage over their competitors.

6. SKILLS Skills are considered as one of the most attributes (or) capacities of an organization. The term skills include those characters which most people uses to describe a company. They are recruiting the skilled candidates through direct interview and other sources, and the company also providing training to these candidates for the better results, which is done by the supervisors. The company has the skills needed to carry out the company strategy like. A good specialized knowledge about the products and to serve the clients better. High levels of specialization in communication. Ability to convert the prospect into customers. Apart from this the company follows on job training. At the executors level where are improved skills by employees in areas like communication, leadership, administration, time management, computer knowledge, presentation, team building and also they are trained under various other aspects like self development.The HR department identifies several areas for continuously updating technical/professional skills for employees and brings out attitudinal- change in developing good work culture in all areas. 7. SHARED VALUES Shared values are the core values of the company. And also guiding concepts, values and beliefs of the company. It also includes the long term vision of the company. It refer to a set of values & aspirations that goes beyond the conventional formal statement of corporate objectives. All members of the organization share some common fundamental ideas or guiding concepts around which the company is built. These values and common goal keep the employees work towards a common destination as a coherent team and are important to keep the team spirit alive. Consider the employees as the key resources of the key resources of the organization and provide assistance Quality of the product. Customer satisfaction rather than profit maximization.

SWOT ANALYSIS Strength: Since Nagarjuna products are manufactured as per strict guidelines, they are able to make high quality products. Company has a policy of continuous development and innovation in products that enables it to maintain high marketing share. Frequent meeting between the owners and employers helps to build a good employer-employee relationship. Efficient R&D departments to develop new and efficient products. Excellent brand image and good costumer relationship Wide variety of products Good relationship between management and trade union Good customer satisfaction indexWeakness: Lack of enough advertisement Low number of production and manufacturing units Lack of enough medicinal gardensOpportunities: Growing market demand. Expanding its distribution area Link with tourism area Development of its own medicinal plants garden Scope for innovation of Research & DevelopmentThreats: Transportation problems. Entry of duplicates Scarcity of raw materials Cut throat Competition (e.g.: Kottakkal, Oushadhi, Dhanwandhari) Customers may substitute other products

1.4 STATEMENT OF THE PROBLEM Working Capital shortage or insufficiency or last minute arrangement for working capital needs is a common phenomenon in Nagarjuna Herbal Concentrates Ltd. How to streamline this issue is the main statement of problem of this project. The present technique they use for management of working capital and its true efficiency has been analyzed in this project.1.5 SCOPE OF THE STUDY This study has been carried out in Nagarjuna Herbal Concentrates Ltd in their Kerala plant. Also the study is made on the basis of the financial statements given by the company and as such, the conclusions shall be purely on the basis of the correctness of the statements. Though some personal discussions with the managers and some employees of the Accounts department have given some inputs to this study, the quality and quantity of the information revealed by them affects the study. Also the period considered is of five years (2008-2013) and the conclusions drawn may not be applicable for future due to changes in market conditions.

1.6 OBJECTIVES OF THE STUDY 1. To study the management of working capital in NHCL. 2. To find out solutions to reduce shortage of working capital in the short term. 3. To find a suitable method or methods that can help manage working capital needs in a better way. 4. How cost of working capital be reduced by managing the various sources of working capital

1.7 REVIEW OF LITERATURE SEYED MOHAMMAD ALAVINASA (2013) in his paper titled "Studying the relationship between working capital management and profitability of listed companies in Tehran stock exchange" stated that working Capital is one of the most important trade factor and largest instrument for attracting the profit. Each firm should have capital in order to access profit from its trade. Capital refers to all financial resources that trade unit consumes it and in this connection, financial management determines the framework of the relationship between capital and firm. Pratibha Jain and Kshitija Chaugule (2014) in their paper titled "WORKING CAPITAL STRUCTURE AND LIQUIDITY ANALYSIS OF INDIAN TEXTILES INDUSTRY" stated that an optimal working capital management is expected to contribute positively to the creation of firm value. Improper management of Working capital, that is, too much or too low working capital may suffer firms, so an optimum level of working capital is the key to a smooth inflow of profit. In this paper we investigate the Working capital structure, working capital turnover position and liquidity analysis with the help of different ratios. From our study we found that Bombay Dyeing reflected good working capital structure and liquidity positionHASAN AGAN KARADUMAN (2010) in his paper titled "EFFECTS OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY: THE CASE FOR SELECTED COMPANIES IN THE ISTANBUL STOCK EXCHANGE" states that Working capital management is one of the essential determinants of firms market value because it directly affects profitability. Hence, firms should establish a fine balance between profitability and risk when it comes to managing working capital. This paper mainly aims to provide some empirical evidence on the effects of working capital management on the profitability of selected companies in the Istanbul Stock Exchange for the period of 2005-2008. Srinivas K.T (2010) in his paper titled "A STUDY ON WORKING CAPITAL MANAGEMENT THROUGH RATIO ANALYSIS WITH REFERENCE TO KARNATAKA POWER CORPORATION LIMITED" determines that Working capital is nerve system of any business. Without proper working capital management company cannot achieve its objectives and not possible to maintain financial soundness. So in this perspective present study is undertaken to study working capital management through ratio analysis at Karnataka Power Corporation limited. From the present study it is found that company financial position was seeing to be sound because the company tries to increase its production and also net profit. TENDAI ZAWAIRA ( 2014) in his paper titled " THE ASSOCIATION BETWEEN WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF NON-FINANCIAL COMPANIES LISTED ON THE ZIMBABWE STOCK EXCHANGE" determines main purpose of this study was to determine the impact of different components of working capital management on profitability of firms listed on the Zimbabwe Stock Exchange during the dollarization era. it used to find out quick ratio, current asset to total asset ratio, current liabilities to total asset ratio, debt ratio and age of company. Therefore Zimbabwean firms should pay more attention to the management of liquidity and payables.VENKATA.N.RAMAN (2013) in his paper titled "IMPACT OF RECEIVABLES MANAGEMENT ON WORKING CAPITAL AND PROFITABILITY: A STUDY ON SELECT CEMENT COMPANIES IN INDIA" In this paper an attempt is made to study the impact on Management of Working Capital and Profitability. The ratios which highlight the efficiency of working capital management viz., Current Assets Ratio, Total Assets Ratio, Sales Ratio, working capital Turnover Ratio and Profitability Ratio, have been computed to know the impact on working capital and profitability. Working capital and profitability were considered as dependent variables. The investigation reveals that the receivable management across cement industry is efficient and showing significant impact. Singh Jasmer (2013) in his paper titled " SINGH JASMER A STUDY ON WORKING CAPITAL MANAGEMENT OF TATA STEEL LTD" according to his point of view Efficient management of Working Capital is very important for the success of an enterprise. So, here an attempt is made by me to study the working capital management of the selected unit i.e. TATA STEEL LTD. From the financial management point of view, capital in broader sense can be divided into two main categories- fixed capital and working capital. After this study the research finds that the working capital position of the Tata Steel Ltd. is not satisfactory.MADHAVI.K (2014) in his paper titled "WORKING CAPITAL MANAGEMENT OF PAPER MILLS" determines that A well designed and implemented working capital management has a significant contribution for firms profitability as well as to maintain liquidity powers. The purpose of this study is to assess working capital adequacy and its impact on profitability; to investigate the relationship between profitability and liquidity of firms. The management of working capital is important to the financial health of business of all sizes. AGHA HINA (2014) in his paper titled " IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY" stated that the main purpose of this study is to empirically test the impact of working capital management on profitability .the author collected secondary data to find out variable of return on assets ratio to measure the profitability of company and variables of account receivable turnover, creditors turnover, inventory turnover and current ratio as working capital management criteria. The results of the research show that there is a significant impact of the working capital management on profitability of company JENNY KOK (2012) in his paper titled " FINANCIAL SUPPLY CHAIN MANAGEMENT CHALLENGES AND OBSTACLES" according to his paper the focus of the research is on finding a way a Small and Medium sized Enterprise can improve its WCM. A Case Study research method is used, because a rich understanding of the context of the research is gained. The primary data of this research is obtained via questionnaires whereas the secondary data is collected and gathered via databases. Research has shown that there are big differences in the way working capital is optimized between SMEs.Sabri Bahjat Tamer ( 2012) in "The impact of working capital on the value of the company in light of differing size, growth, and debt" this study investigates the potential effect of the working capital management on the value of the industrial companies in Jordan, by studying determinants (company size, company growth, leverage) that affect company value measured. To achieve the objectives of the study different profitability ratios are used a sample constituted by forty-one (41) industrial companies was selected. M. NAKAMURA ALOMBINI (2011) in "KEY FACTORS IN WORKING CAPITAL MANAGEMENT IN THE BRAZILIAN MARKET" he determines that many studies have been conducted in corporate fianc regarding long-term investment and financing decisions. However, short-term asset investments play a significant role in the balance sheet of companies. This study used data from 2,976 Brazilian public companies from 2001 to 2008, and found that debt level, size and growth rate can affect the working capital management of companies.Al. M Mamoun (2010) in "Working Capital Management and Profitability: The Case of Industrial Firms in Jordan" he states the study aims at examining the relationship between profitability and working capital management measures for industrial companies listed on Amman Stock Exchange. Therefore, efficient working capital management is expected to enhance the profitability of these companies by trend analysis. The results show that regardless of the level of profitability industrial companies in Jordan pay their suppliers before collecting credit sales. Sumaira Tufail (2011) in "Impact of Working Capital Management on Profitability of Textile" he states that Working capital management (WCM) is the management of short-term financing requirements of a firm which includes maintaining optimum balance of working capital components by using the cash efficiently for day-to-day operations. The main objectives of this study are to examine and evaluate the working capital management in ACC Limited, This also finds the relationship between Working Capital Efficiency and Profitability, Profitability and Market ratios. PRABHATH YADHAV KUMAR (2010) in "A Study on Working Capital management in Public Enterprises" he defined that A well designed and implemented working capital management is expected to contribute positively to the creation of a firms value. Those current assets are essential for smooth business operations and proper utilization of fixed assets. The study concentrates on the main components of working capital like inventory management, accounts receivable management and cash management of Public Enterprises. The tools used in this study includes ratio analysis and trend analysis.Preeti Singh (2012) in "ASSESSMENT OF WORKING CAPITAL AND LIQUIDITY POSITION OF PUBLIC SECTOR STEEL ENTERPRISE IN INDIA" he states the paper makes an assessment of management of working capital, examines the adequacy observes the liquidity position and areas of weakness and gives suggestions for the public sector Steel enterprise in India. A weak liquidity position poses a threat to the solvency as well as profitability of a firm and makes it unsafe and unsound. This research paper analyses the liquidity management of SAIL and observes the liquidity position and weakens.Dr. S. Saravanan (2014) in "Research Paper Commerce A Study on Working Capital Management of Cement Companies" he determines that this level of working capital management serves as a check and balances system to ensure that the amount of cash flowing into the business is enough to sustain the companys operations. This study shows that it is an ongoing process that must be evaluated using the current level of assets and liabilities.Valcemiro Nossa (2010) in "Working capital, profitability, liquidity and solvency of healthcare insurance companies" he determines that the purpose of this study is to analyze the adequacy of a working capital management in terms of profitability, liquidity and solvency through an empirical and analytical research and trend method. The results indicate where financial current assets exceed onerous current liabilities, and cyclical current assets exceed cyclical current liabilities is associated with higher levels of profitability, liquidity and solvency.DR. SHUKLA AVANISH KUMAR (2012) in " IMPACT OF WORKING CAPITAL MANAGEMENT ON FIRMS PERFORMANCE: EVIDENCES FROM LISTED COMPANIES OF INDIA" he states that Working capital management is very significant course of action for any organization which decides the flow and availability of cash and thus results in the effective firms performance. For the study, trend analysis is done. All the selected samples are listed in Security Exchange Board of India, Mumbai. Vishal Shah G. (2012) in " AN EMPIRICAL STUDY OF RECEIVABLES MANAGEMENT IN REAL ESTATE SECTOR OF INDIA" Working capital is considered to be lifeblood and controlling nerve centre of the business which focuses on maintaining an optimum balance of working capital elements. For the purpose of analysis researcher has used ratio techniques. The study analyses the liquidity management of companies and observes the liquidity position is very weak.Paul Kenya (2013) in " Management of working capital and its effect on profitability of manufacturing companies listed on Nairobi securities exchange" he stated that the efficient management of working capital is very vital for a business survival and thus a factor for overall boost in profitability. Thus the study analyzed the effects of working capital management on the profitability of manufacturing firms listed on the Nairobi Securities Exchange by using the trend method. The study result shows that there is effective management of working capital.Dr. Rao Janardhan venkata (2011) in " A Study on Working Capital Management in Cement Company" Working capital is considered to be life-giving force to an economic entity and managing working capital one of the most important functions of corporate management. he also finds the relationship between Working Capital Efficiency and Profitability by analysis of different probability ratios.Rajdev Ankita (2013) in "WORKING CAPITAL MANAGEMENT OF MAKSON" This paper makes an attempt to provide a study on the impact of working capital management on liquidity, of Makson. he used the trend method n comparative method. The findings suggest that the liquidity is managed mostly by owners past experience and data. The originality of the paper is that it conceptualises liquidity management in Makson group as a learning process.Khan Madiha (2013) in " Working Capital Management and Performance of SME Sector" he states that the study investigates the influence of working capital management (WCM) on performance of small medium enterprises (SMEs) in Pakistan. he used the techniques of trend analysis n ratios. The result of the study is that variable size and growth in sales has positive influence on profitability. KARADAGLI.C (2012) in "The Effect of Working Capital Management on the Profitability of Turkish SMEs " he determines that this paper focuses on the effects of working capital management as measured by different profitability ratios The findings suggest that effective management of working capital improves firm performance. This study shows that there is valuable improvement in external n internal forces of working capital.Kaveh Azinfar, Mohammad Reza Khalili (2013) in " The Study of Factors Affecting Working Capital of Pharmaceutical Companies Accepted in Tehran Stock Exchange" He stated that Policies and procedures for financial management policy are based on the assumption that the company will be taking and apply some major decisions. These decisions include choosing the type of goods, offering services and financing for fixed assets of the company. These decisions are playing the main and determinant role on long-term firms profitability and have two important applications on the management of working capital. Also, managers are seeking to reach the desired liquidity and providing profitability targets by them. The method of this study used that financial leverage variables, quick ratio, percentage of asset growth ratio and growth of total assets have a significant effect on the company working capital and the return on assets variables and earnings before and interest tax to turnover had no effect on working capital.

CHAPTER 2RESEARCH METHODOLOGY

This report is prepared on the basis of primary data and secondary data. Primary data are generated when the researcher employs personal interviews, observations and experiments, investigates a particular problem at hand. Secondary data on the other hand, those data are collected from some earlier research study which is conducted in a similar manner and area as well as data obtained from secondary sources like company records, internals etcPrimary data was not collected but the following informal methods were resorted to: Informal interviews with the top executives. Oral and personal discussions with the finance manager . Personal observation.The secondary data was collected from the following sources: Annual accounts and Annual reports. Company records and journals . Audit Reports. Website.Data Analysis and Interpretation Data analysis was done using simple charts like pie-chart and bar diagrams. Also some tools like the following were used for analysis and interpretation. Changes in Working Capital Ratio Analysis Trend Analysis Cash conversion cycle

A. Changes in Working CapitalThe excess of current assets over current liabilities is referred to as the companies working capital. The difference between the working capital for two given reporting periods is called the changes in working capital. the schedule of changes are focused as follows:increase in current assets - increase in working capitaldecrease in current assets - decrease in working capitalincrease in current liabilities - decrease in working capitaldecrease in current liabilities - increase in working capital The statement or schedules of changes in net working capital can be prepared by using one of the following forms1. Using only current account the statement or schedules of changes in net working capital can be prepared by using only current account. while preparing this statement, the current assets and current liabilities of the previous year are compared with those of current year and changes therein determined.2. Using both current and non- current accounts the statement or schedules of changes in net working capital can also be prepared by using both current assets as well as non-current accounts. current account is the account of current assets and current liabilities and non-current account of non-current assets and non-current liabilities and owners equity.B. Ratio analysis Ratio is simple arithmetical expression of the relationship of one number to another. Ratio analysis is the process of determining, interpreting numerical relationship based on financial statement with the help of accounting ratios derived from the profit and loss account and balance sheet, it is a powerful tool of financial analysis. But ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and weakness of a firm.

Importance or advantages of ratio analysisThe following are the main advantages of ratio analysis. Useful in financial position analysis.Accounting ratios reveal the financial position of the concern. This helps the bank, insurance companies and other financial institutions in lending and making investment decisions. Useful in simplifying accounting figuresAccounting ratios simply summaries and systematize the accounting figures in order to make them understandable and in easy form. Useful in assessing the operational efficiency.Accounting ratios help to have an idea of the working of the concern. The efficiency of the firm becomes evident when analysis when is based on accounting ratios. Analysis is based on accounting ratios.The diagnosis the financial health by health by evaluating liquidity, solvency, profitability etc, this helps the management to assess financial requirements and capabilities various business units. Useful in localities the weak of the business.Accounting ratios are of great assistance in locating the weak spots in the business even though the overall performances may be efficient weakness in financial structure due to incorrect policies in the past or present are revealed through accounting ratios. Useful in comparison of performanceThrough accounting ratios comparison can made between one departments of a firm with another of the same firm in order to evaluate the performance of various departments in the firm

Types of ratios Several ratios can be calculated from the accounting data contained in the financial statements. The parties which generally undertake financial analysis right be the creditors, owners and management. Each of them make financial analysis for their own purpose. Accounting ratios may be classified into the following categories.1. Activity or Turnover ratio

2. Profitability Ratios 3. Leverage Ratios4. Liquidity ratio

Inventories to Gross Working Capital Ratio:This ratio indicates the amount of funds tied up in inventories. A high ratio indicates slow cash realization. It measures how well the company is able to generate cash using working capital at its current inventory level. Inventories to gross working capital ratio= Inventories/ gross working capital ratio*100 Sundry debtors to gross working capital ratio:The measurement of the company's financial leverage, calculated as the company's debt divided by its total capital. Debt includes all short-term and long-term obligation. Total capital includes the company's debt and shareholders equity, which includes common stock, preferred stock, and minority interest.Sundry debtors to gross working capital ratio= sundry debtors/ gross working capital ratio*100 Cash and bank to gross working capital ratio:Cash is the basic input or component of working capital. Cash is needed to keep the business running on a continuous basis. So the organization should have sufficient cash to meet the various requirements.Cash and bank to gross working capital ratio=cash & bank/gross working capital

Other current assets to gross working capital:Except inventories, sundry debtors, cash and bank balance and loans and advances and all remaining items will be put under other current assets.Other current assets to gross working capital=other current assets/gross working capital Loans and advances to the gross working capital:Short-term business loan financing the purchase of income-generating asset, principally inventory. Working capital loans are generally written with lending terms of the company requiring full payment within a specified period, such as 60 days or 90days from the date the funds are advanced.Loans and advances to the gross working capital=loans and advances/gross working capital

A. Liquidity Ratio:Liquidity refers to the ability of a firm to meet its current obligations as and when these become due. The short-term current assets should either be liquid or near about liquidity. These should be convertible in cash for paying obligations of short-tem nature. To measure the liquidity of a firm, the following ratios can be calculated. Net working capital ratio Current ratio Quick ratio/liquid ratio Absolute liquid ratio

Net working capital ratioNet working capital is nothing but the difference between current assets and current liabilities. When the current liability increases the working capital decreases. A high working capital is not good for a company because it deficits the excessive blocking up of capital in inventories and debtors. This will lead to reduce profitability. It is expressed as:Net working capital= current assets- current liabilities

Current Ratio: The current ratio is the ratio of total current assets to total current liabilities. It calculated by dividing current assets by current liabilities. A current ratio of 2:1 is considered as satisfactory. Current ratio = Current assets/current Liabilities Quick Ratio:This ratio is also known as quick ratio or acid test ratio. It is based on those current assets which are highly liquid. Inventory and prepaid expenses are excluded because they are deemed to be least liquid component of current assets. A high quick ratio is the indication that the firm is liquid and has the ability to meet its current liabilities in time and on the other hand low ratio represents liquidity position is not good.Quick Ratio = Quick or Liquid Assets/Current Liabilities Absolute Liquid Ratio:Although receivables are generally more liquid than inventories yet there may be doubt regarding their realization into cash in time. Absolute liquid ratio shows the relationship between liquid assets which include cash, bank and marketable securities.Absolute liquid ratio = Absolute liquid assets/Current liabilitiesWhere,Absolute liquid assets= Cash and Bank balancesB. TURNOVER RATIOS:Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly affects the volume of sales. The ratios are called turnover ratios because they indicate the speed with which assets are converted or turned over into sales. Depending upon the purpose, a number of turnover ratios can be calculated. These are: Inventory turnover ratio Debtors turnover ratio Average collection period Creditors turnover ratio Average payment period Working capital turnover ratio Current asset turnover ratio Cash turnover ratioANALYSIS OF EFFICIENCY OF INVENTORY MANAGEMENT Inventory Turnover RatioIt indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which the firm is to manage inventory. A high inventory turnover indicates efficient management of inventory because more frequently the stocks are sold; the lesser amount of money is required to finance the inventory.Inventory Turnover Ratio = Cost of Goods sold / Average Inventory Inventory Holding Period:The number of days inventory is also known as average inventory period or inventory holding period. A high number of days inventory indicates that there is a lack of demand for the product being sold. A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands.Inventory Holding Period = 365/ Inventory Turnover Ratio

Inventory to Working Capital Ratio: Percentage measure of a firm's capability to finance its inventories from its available cash. Numbers lower than 100 are preferable as they indicate high liquidity. Numbers higher than 100 suggest that the inventories are too large in relation to the firm's financial strength this ratio is usually calculated to study the liquid financial position of business enterprises.Inventory to working capital ratio = Inventory/ working Capital *100RECEIVABLES MANAGEMENT:Accounts receivables are simply extension of credit to the firms customers, allowing them a reasonable period of time in which to pay for the goods. Most firms treat accounts receivables as a marketing tool to promote sales and profits. They represent extension of credit and investment of funds and must be carefully managed. The creation of accounts receivables is beneficial as well as dangerous. The finance manager has to follow a policy which uses cash funds as economically as possible by extending receivables without adversely affecting the chance of increasing sales and making more profits. Receivables Management generally means what type of credit policy a firm should adopt so that sales and profits can be promoted on the one hand and funds can be economically utilized on the other hand. ANALYSIS OF EFFICIENCY OF RECEIVABLES MANAGEMENT Debtors Turnover Ratio:This ratio indicates the number of times average debtors are turned over during a year.The higher the value of debtor turnover ratio the more liquid is the debtors. Similarly low debtor turnover ratio implies less liquid debtors.Debtors turnover ratio = Sales/ Avg. Debtors Debtor Conversion Period (DCP):The average no. of days for which a firm has to wait before its receivables is converted into cash.Debtor Conversion Period=days in a year/Debtors turnover ratio Creditors Turnover Ratio: In the course of business operations, a firm has to make credit purchases and incur short-term liabilities. A supplier of goods, i.e., creditor is naturally interested in finding out how much time the firm is likely to take in repaying its trade creditors. The ratio indicates velocity with which the creditors are turned over in relation to purchases.Creditors turnover ratio is calculated by using following formula:Credit Turnover Ratio = Total Purchase / Creditors Calculation average payment period of MCF Ltd. 2009-2013:It is a variation of creditors turnover ratio. It is calculated to indicate the speed with which the payments for credit purchases are made to creditors. It can be calculated by using the following formula;Average/creditors payment period = days in a year / creditor turnover ratio Working capital turnover ratio:Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio measures the efficiency with which the working capital is being used by a firm.Working Capital Turnover Ratio = Sales/Net Working Capital

Fixed assets turnover ratio:This ratio establishes the relationship between sales or cost of goods sold and fixed assets. It determines whether the investment made in fixed assets has really helped in generating sales. It is calculated by using the following formula:Fixed asset turnover ratio= sales/fixed assets

Current Asset Turnover Ratio:Current asset turnover ratio between current assets and turnover of sales; this indicates the contribution of current assets to sales. There is no standard current asset turnover ratio. High current asset turnover ratio is an indication of better utilization of current assets. Current asset turnover= Sales / Current assets Working Capital to Total Assets Ratio:It is the ratio working capital to total assets. The working capital to total assets ratio measures a companys ability to cover its short term financial obligations by comparing its total current assets to its total assets. This ratio can provide some insight as to liquidity of the company, since this ratio can cover the percentage of remaining assets compared to the companys total assets. It is expressed as: Working capital to total asset = Net working capital / Total assets Current Asset to Total Asset Ratio: Total Assets of a firm are the combination of current assets and fixed assets. Current assets include cash in hand, cash at bank, debtors, bills receivables, stock, prepaid expenses and marketable securities etc. It shows that out of total assets how much percentage of current assets has. It is calculated as:Current asset to total asset ratio = Current assets / Total assets Cash to Sales Ratio:The cash turnover ratio denotes the circulation as utilization of cash during the period of time. It shows the number of time the average cash balance of the firm turnover during the year.It is expressed as:Cash to sales ratio = Cash / Sales Cash to Current Liability Ratio: It is the ratio of cash to current liability. Cash to Current liability ratios that measures the company's ability to satisfy its short-term financial obligations immediately and to obtain the liquidity measures.It is expressed as:Cash to current liability ratio = Cash / Current liability

Cash Turnover RatioThe cash turnover ratio denotes the circulation of cash balance of firms and turnover during the year. It indicates a firms efficiency in its use of cash for generation of sales revenue. It is the inverse of cash-to-sales ratio.It is expressed as: Cash turnover ratio = Net sales / Average cash

Proprietary Ratio:This ratio is also called equity ratio or owners fund ratio or shareholders equity ratio. This ratio points out relationship between the shareholders funds and total tangible asset.It is expressed as: Proprietary ratio= shareholders fund / total tangible asset

Cash conversion cycleOne of the distinguishing features of the fund employed as working capital is that constantly changes its form to drive business wheel. It is also known as circulating capital which means current assets of the company, which are changed in ordinary course of business from one form to another, as for example, from cash to inventories, inventories to receivables and receivables to cash Elapsed time, usually expressed in days, from the outlay of cash for raw materials to the receipt of cash after the finished goods have been sold. Because a profit is built into the sales, the term earnings cycle is also used. The shorter the cycle, the more Working Capital a business generates and the less it has to borrow. This cycle is directly affected by production efficiency, credit policy, and other controllable factors.It is expressed as:Cash conversion cycle =DSO+DIO-DPO

1. Trend Analysis Trend Analysis is another important tool of financial statement, for analyzing the financial performance of the company.Meaning; Trend Analysis may be defined as a comparative analysis of a companys financial ratios over time. The financial statement may be analyzed by computing trends of series of information. This method determines the directions upward or downward and involves the computation of the percentage relationships that each statement items bears to the same item in the base year. The information for a number of years is taken up, one years generally the first year is taken as 100, and trend ratios for the other years are calculated based on the base year. Then analyst is able to see the trend of the figures in upward or downward.Procedure One year is taken as base year. Generally, the first or last is taken as base year The figures of the base year are taken as 100. Trend percentages are calculated in relation to base year. If a figure in other year is, less the figure in the base year, the percentage will be less than 100 and it will be more than 100 if the figure is more than base year figure. Each years figure is divided by base years figure. Trend analysis interpretation requires a caution study, because mere increase or decrease in trend percentage may give misleading results if studied in isolation. An increase in of 20 % in current is may be treated as favorable. If this increase in current asset is accompanied by an equaling increase in sales may not increase profits if the cost of production has also gone upThe base year should be carefully calculated and selected. The base period should be a normal period. The price level changes in subsequent years may reduce the utility of trend ratios. If the figure of the base year period is small, then the ratios calculated on this ratio may not give true idea about the financial data. The accounting procedures and conventions used for data and presentation of financial statements should be similar; otherwise, the figures will not be comparable.

LIMITATIONS OF THE STUDY Through the project, work has been completed successfully, a few limitations observed. However, proper care has been taken to overcome the impact of limitations of the study. The study is conducted with the available data gathered from the annual reports of NHCL and the analysis was made accordingly. One cannot make an accurate analysis, using the data of 5 years and judge the performance of the whole company. This study mainly used secondary data for the analysis, they were extracted for publishing the statements of the corporation. Confidential matters are not exposed by the company.

CHAPTER -3RESULTS & ANALYSIS AND INTERPRETATION

A. changes in working capital

Schedule of changes in Working capital on the year 2009-2010Particulars20092010IncreaseDecrease

a)CURRENT ASSETS

a. Inventoriesb. Sundry Debtorsc. Cash & Bank balancesd. Other current assete. Loans & advances

Total (a)

b)CURRENT LIABILITY

a. sundry creditorsb. other current liabilities

Total (b)

Net Working Capital (a-b)

Increase in working capital

3466054197978337239354484108861825

386702301189934086292347366013087623

40096892101507138988025250

4225798

709500

1252511

13714135

60607963

1693981613929733

72360087

1623031612677222

30869549

28907538

29738414

13714135

43452549

434525494345254913714135

13714135

ANALYSIS AND INTERPRETATION According to schedule of changes in working capital for the year 2009 & 2010 there is increment in working capital. There is Rs. 137,14,135 increment in working capital for the year 2009 & 2010. The various current assets for the year of 2009 & 2010 ( i.e., inventories (4009689) , sundry debtors (2101507) , cash & bank balance (138980) , other current assets ( 25250) and loan and advance (4225798) ) shows better increment in working capital. By observing the schedule we can understand there is huge increment in current assets amount from the year 2009 to 2010. When a company increase its current assets it means its lead to a cash outflow from the company. The company had to shell out money to buy the extra assets. Same time there is also increment in current liabilities in the year of 2009 & 2010. The various current liabilities ( i.e., sundry creditors (709500) and other current liabilities (1252511) ) shows increment in those years. When a company increases its current liabilities it means it's a cash inflow to the company. When changes in working capital is positive, the company is either selling off current assets or else raising its current liabilities. Working capital can also vary drastically year to year. But its effects depends on how you view a business and investment. When there is huge demand for the product the company is force to raise its current assets


a)CURRENT ASSETS


Total (a)

b)CURRENT LIABILITY


Total (b)



386702301189934086292347366013087623

455702473260281088180507345015986717

690001720703470188816

2899094

210

8393947

5075947

17221293

72360087

1623031612677222103051274

2462426317753169

28907538

42377432

43452549

17221293

60673842

60673842606738423069139730691397

ANALYSIS AND INTERPRETATION In the year 2010 & 2011 also the company shows increment in working capital i.e. is Rs. 172,21,293. In those year the company having same current assets items. So the various current assets items (i.e. inventories (6900017) , sundry debtors (20703470) , cash & bank balance (188816) and loans & advances (2899094). shows increment in working capital from the last year. But in the same year other current assets shows slight decrease in the working capital. That is 210. But as it shows very small amount in decrement in working capital it will not effect that fast. In the same year the company having same items of current liabilities. That is nothing but sundry creditors and other current liabilities. This items shows the decrement in working capital ( i.e. sundry creditors (8393947) , other current liabilities (5075947) ). Other current liabilities may be included account payable , sales and taxes payable and unearned revenue. In those items shows increment in the actual amount from its past year. so off course its shows decrement in working capital in schedule of changes in working capital If the change in net working capital is positive, the change to current assets outweighs the change in the current liabilities.Within the capital-budgeting process, a project typically adds to current assets given additional inventories or potential increases in accounts receivables from new sales. The increases to current assets, however, are offset by current liabilities needed to finance the new project.


a)CURRENT ASSETS


Total (a)

b)CURRENT LIABILITY


Total (b)


Decrease in working capital

455702473260281088180507345015986717

5110684530036663897297611106512109319

5536598

15492637615

5525673

88801

2566147

3877398

4900068

103051274

2462426317753169

102336868

2952433112227496

4237743241751827

60673842

60585041

88801

60673842

60673842

1134361311343613

ANALYSIS AND INTERPRETATION As per the schedule of changes in working capital in the year 2011 & 2012 there is decrease in working capital. Rs. 88,801 decrement is happened in the those year. In this year the current assets items are shows increment as well as decrement in the working capital. The items inventories (5536598), cash & bank balance (154926) and other current assets (37615) shows increment in working capital. The items sundry debtors(2566147) and loans & advances (3877398) shows decrement in working capital. In the year 2011 & 2012 the current liabilities items sundry creditors and other current liabilities shows increment as well as decrement shows in working capital. Sundry creditors shows Rs. 4900068 decrement in working capital. Other current liabilities shows Rs. 5525673 increment in working capital. Over all this year its shows the decrement in working capital. When changes in working capital is decreasing, the company is investing heavily in its current assets, or else drastically reducing its current liabilities. Negative working capital means that the business currently is unable to meet its short term liabilities with its current assets. Therefore, an immediate increase in sales or additional capital into the company is necessary in order to continue its operations.


a)CURRENT ASSETS


Total (a)

b)CURRENT LIABILITY


Total (b)



5110684530036663897297611106512109319

566181413429618253541969614514185126

55112964259519

2075807

1993155

361878014920

5903299

4302778

102336868

29524331

12227496

110549790

35427630

10234341

4175182745661971

60585041

430277864887819

64887819

64887819

1383977713839777

ANALYSIS AND INTERPRETATION

According to the last 2 years schedule of changes in working capital it shows increment in the working capital. That is Rs. 43,02,778. In those year also the current a assets shows the increment and decrement in working capital. The current assets items inventories (5511296), sundry debtors (4259519) and loans and advances ( 2075807) shows increase in working capital compare to last year. And the items cash & bank balance (3618780) and other current assets (14920) shows decrease in working capital compare to last year. so the overall result in working capital shows in increment. At the same time the current liabilities items sundry creditors (5903299) shows decrement in working capital. and other current liabilities (1993155) shows increment in working capital compare to last year. So this schedule is giving a clear picture of how the company maintain its working capital in the year 2012 & 2013. Increase in working capital means that the business is able to pay off its short term liabilities. Also, a high working capital can be a signal that the company might be able to expand its operation. So the company can think of expanding their business in those year.

Gross Working CapitalTable: 3.2.1Table showing Changes in gross working capital for last 5 years YearGross working capital

2008-0960607963

2009-1072360087

2010-11103051274

2011-12102336868

2012-13110549790

Graph No 3.1.1Graph showing Changes in gross working capital for last 5 years

ANALYSIS AND INTERPRETATION There is a continues increment trend in gross working capital from the year 2008-09 (60607963) to 2012-13 (110549790). There is slight decrement in the year of 2011-2012. But very next year 2012- 13 there is an increment in gross working capital compare to last 4 years. Investment in current assets should not be more or less. And this is sufficient to meet its day to day operation. It is a quantities concept showing the total amount available for finance the current assets. It results every increase in borrowings will increase the gross working capital. But the net working capital will remain the same. Inventories to gross working capital ratio:Table: 3.1.2Table showing inventories to gross working ratio for last 5 yearsYearInventoriesGross working capitalRatio

2008-09346605416060796357

2009-10386702307236008753

2010-114557024710305127444

2011-125110684510233686850

2012-135661814111054979051

Graph no: 3.1.2Graph showing Inventories to gross working capital ratio for last 5 years

ANALYSIS AND INTERPRETATIONIn terms of absolute figures inventory holding fluctuates over the years. One of the reason being subsidy declared by the government. As a result of which procurement is done at higher rate the gross working capital has also gone up with total inventory holdings. A high ratio indicates slow cash realization. It measures how well the company is able to generate cash using working capital at its current inventory level. Sundry debtors to gross working capital ratioTable 3.1.3Sundry debtors to gross working capital ratio for last 5 yearsYearSundry debtorsGross working capitalRatio

2008-099797833606079630.16

2009-1011899340723600870.16

2010-11326028101030512740.32

2011-12300366631023368680.29

2012-13342961821105497900.31

Graph no 3.1.3Graph showing Sundry debtors to gross working capital ratio for last 5 years

ANALYSIS AND INTERPRETATIONThe graph shows a increases in debtors from the year 2008-09 to 2010-11, which is favorable to the company sales have been increasing over the years. It can be noted that with the increased sales, sundry debtors have been decreasing which is a favorable sign to the concern. Because the company going to receive the cash with least period. But the company showing slight decrement in the last 2 years( 2011- 12 & 2012- 13) which happened due to the increment in sundry debtors which not that good to the company. Cash and bank balance with gross working capital ratioTable no: 3.1.4cash and bank balance with gross working capital ratio for last 5 yearsYearCash & bankGross working capitalRatio

2008-097239354606079630.12

2009-108629234723600870.12

2010-1188180501030512740.09

2011-1289729761023368680.09

2012-1353541961105497900.05

Graph no: 3.1.4Graph showing cash and bank balance with gross working capital ratio for last 5 years

ANALYSIS AND INTERPRETATIONFrom the companys cash and bank position shows the fluctuation between gross working capital and cash and bank balances. Cash is one of the main factor which is required for meet the day to day requirement of the company. But here the company cash strength is in decreased manner. In the year 2008-09 it had very good cash position but the year 2012-13 it shows very poor performance. From 0.12 percentage it go down to 0.05.From this it is clear that the company has no sufficient cash balance to meet the various requirements for their day to day operations. Other current assets to gross working capital ratioTable no: 3.1.5other current assets to gross working capital ratio for last 5 yearsYearOther current assetsGross working capitalRatio

2008-0948410606079630.07

2009-1073660723600870.10

2010-11734501030512740.07

2011-121110651023368680.11

2012-13961451105497900.09

Graph no: 3.1.5Graph showing Ratios of other current assets to gross working capital ratio for last 5 years

ANALYSIS AND INTERPRETATION

From the companys other current assets show the fluctuation between gross working capital and other current assets balances. Other current assets included prepaid expenses, advances paid to suppliers and advances paid to employees. In the year 2008-09 the ratio shows 0.07, but the very next year it's go up to 0.1 which shows good improvement. But very next year again it go down to 0.07. May it due to increment in operating cost. But very next year again their able to handle it in good way. It came up to 0.11. But again in the last year it showing the poor performance in maintain the other current assets (0.09). Loans and advances to gross working capital ratioTable no 3.1.6Loans and advances to gross working capital for last 5 yearsYearLoans and advancesGross working capitalRatio

2008-098861825606079630.15

2009-1013087623723600870.18

2010-11159867171030512740.16

2011-12121093191023368680.12

2012-13141851261105497900.13

Graph no: 3.1.6Graph showing Ratio between loans and advances to gross working capital for last 5 years

ANALYSIS AND INTERPRETATIONLoans and advances are utilized for making the payment of current liabilities, wages and salaries of employees and also the tax liability of business. According to this table and graph the company maintain more loans and advances in the year of 2009-10 (0.18). But remaining all years it shows decrease in loans and advances to gross working capital. In the year 2011-12 (0.12) shows least contribution of loans and advances to gross working capital. Even in the year 2012-13 (0.13) it not showing much increment. This is indicates that the contribution of loans and advances to gross working capital is reduced. Current liabilitiesTable no 3.1.7Table showing Changes in current liabilities for last 5 years YearCurrent liabilities

2008-0930869549

2009-1028907538

2010-1142377432

2011-1241751827

2012-1345661971

Graph no: 3.1.7Graph showing Changes in current liabilities for last 5 years

ANALYSIS AND INTERPRETATIONAs per the table and graph it is clear that the current liabilities of the firm is keep on increasing year to year. In 2008-09 it shows 30869549 current liabilities but after 4 year it shows 4566197. That means it shows a increment in current liabilities. It may be due to increment in sundry creditors and other liabilities items compare to previous year. But as per those year current assets the company is able to maintain the standard 2.1 in their current liabilities. That means even thought they have liabilities to meet they have enough current assets to overcome it. so company is in fine position

Sundry creditors to current liabilitiesTable no 3.1.8Table showing Sundry creditors to current liabilities for last 5 yearsYearSundry creditors

Current liabilitiesRatio

2008-0916939816308695490.55

2009-1016230316289075380.56

2010-1124624263423774320.58

2011-1229524331417518270.71

2012-1335427630456619710.76

Graph no: 3.1.8Graph showing ratio of Sundry creditors to current liabilities for last 5 years

ANALYSIS AND INTERPRETATION As per this table and graph we can observe the sundry creditors contr

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