A STUDY ON WORKING CAPITAL MANAGEMENT IN

OIL PALM INDIA LTD, KOTTYAM

By

REVATHY.R

Register No: 612911631035

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT STUDIES

In partial fulfilment of the requirementsfor the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

ANNA UNIVERSITYCHENNAI – 600 025

JUNE -2013

BONAFIDE CERTIFICATE

Certified that this project report titled “A STUDY ON WORKING

CAPITAL MANAGEMENT IN OIL PALM INDIA LTD, KOTTYAM” is the bonafide work of

Ms. REVATHY.R (Reg.No:612911631035) who carried out the research under my supervision.

Certified further, that to the best of my knowledge the work reported here is does not form part

of any other project report or dissertation on the basis of which a degree or award was conferred

on an earlier occasion on this or any other candidate.

-------------------------------- ------------------------------

Project Guide Head of the Department

Submitted for the project Viva-Voice examination held on __________________________

------------------------------------ --------------------------------

Internal Examiner External Examiner

DECLARATION

I REVATHY.R (Reg.No:612911631035), hereby declare that this project report, entitled

“A Study on working capital management in oil palm India ltd,kottyam” submitted to the

Anna University, Chennai in Partial fulfillment of the requirements for the award of the Degree

of MASTER OF BUSINESS ADMINISTRATION is a record of original project work done

by me during June-2013 under the supervision and guidance of Mr.P.Kamaraj,

M.B.A,MPhill,PhD Professor, Vivekananda College of Engineering for Women and it has not

formed the basis for the award of any Degree / Diploma / Associate ship / Fellowship or other

similar title to any candidate of any University.

Date : Signature of the Student

Place : (REVATHY.R)

I certify that the declaration made above by the candidate is true.

Signature of the Guide

Mr.P.Kamaraj, M.B.A,MPhill,PhD Professor

ACKNOWLEDGEMENT

I express my sincere thanks and gratitude to Vidhya Rathna Rashitra Rathna Chairman

& Secretary, Dr. M. Karunanidhi, B.Pharm., M.S., Ph.D., D.Lit., Vivekananda Educational

Institutions, for his support in all our endeavors.

I render my heartiest thanks to the Director, Dr.A.P.Kabilan, M.E., Ph.D., for giving me

a wonderful opportunity to carry out this project successfully.

I extent my heartfelt thanks to the principal, Dr.P.Murthi, M.E., Ph.D., for the constant

support given in all our activities.

I wish to express my sincere thanks to Dr. M.Latha Natarajan, MBA., Ph.D., and Head

of the Department of Management studies for the help and kind support rendered by her.

I express my profound thanks to Mr.P.Kamaraj, M.B.A,MPhill,PhD Professor

Department of Management studies, Faculty guide, for her encouragement, supervision and

guidance throughout the project.

I would like to express my sincere thanks for my parents and friends for their unbounded

support to make this project a reality.

I also express my heartfelt thanks to all the respondents who have provided information

required for the study.

CONTENT

CHAPTER NO TITLE PAGE NO

ABSTRACT

LIST OF TABLES

LIST OF CHART

1INTRODUCTION

1.1 Introduction to the study

1.2 Industry profile

1.3 Company profile

1.4 Product profile

1 8

14

21

2 MAIN THEME OF THE PROJECT 2.1 Objectives

2.2 Limitations

2.3 Research methodology

2.4 Literature review

2.5 Data analysis and interpretation

23

24

25

27

31

3 FINDINGS, SUGGESTIONS, CONCLUSION

3.1 Findings

3.2 Suggestion

3.3 Conclusion

58

59

60

4SCOPE RESEARCH FOR THE FUTURE

4.1 Scope work for the future

4.2 Bibliography

61 62

LIST OF TABLES

Table No Title Page No

01 Schedule of changes in working capital 33

02 Current ratio of the company 36

03 Liquidity ratio 38

04 Absolute liquid ratio 40

05 Proprietary ratio 42

06 Trend analysis of current liabilities and provision 44

07 Trend analysis of assets 47

08 Trend analysis of net profit 50

09 Comparative balance sheet 53

LIST OF CHART

ABSTRACT

The main objective of the study is to analyze the various Working capital management

involved in the company for the period 2008 to 2012.

The study is based on the secondary data. The data which are collected from the

company‘s annual report and balance sheet.

The first chapter deals with the introduction about study, introduction about study

industry, introduction about the company

The second chapter deals with the research methodology which includes statement of the

problem, objectives, limitation, data collection and analysis and interpretation process methods,

table, and chart, statement changes in working capital and ratio analysis, Trend Analysis tools for

used.

The third chapter deals with findings, recommendations and conclusion of the study. The

last chapter is Appendices and bibliography.

Table No Title Page No

01 Current ratio of the company 37

02 Liquidity ratio 39

03 Absolute liquid ratio 41

04 Proprietary ratio 43

05 Trend analysis of current liabilities and provision

46

06 Trend analysis of assets 49

07 Trend analysis of net profit 52

The overall performance is good. It is hope that the company will take adequate steps for

stated in suggestions to earn maximum profits, and will become one of the best company.

CHAPTER -I

INTRODUCTION

CHAPTER -1

1.1 INTRODUCTION ABOUT THE STUDY

INTRODUCTION

The study of working capital management occupies an important place in financial management.

The earlier emphasis of financial management was more on a long-term financial decision.

Working capital management, which is concerned with short – term financial decision, appears

to have been relatively neglected in the literature of finance. Managers, Tax Authorities and

other interested groups seek answers to the following important questions about a firm:

what is the financial position of the firm at a given point of time?

How did the firm perform financially over a given period of time?

To answer the above questions, one has to prepare two major financial statements - the balance

sheet and the income statement. The balance sheet shows the financial position or condition of

the firm at a given point of time. In income statement or profit and loss account reflects the

performance of the firm over a period of time.

A firm communicates financial information to the users through financial statements and reports.

Balance sheet and profit and loss accounts, as these statements are used by investors and

financial analysis to examine the firms performance in order to make investment decisions.

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises in attempting to

manage the current assets, current liabilities. The basic goal of working capital management is to

manage the current assets and current liabilities of a firm in such a way that a satisfactory level

of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations

are bad for any firm.

There should be no shortage of funds and also no working capital should be ideal. Working

capital management policy of a firm has a great on its probability, liquidity and structural health

of the organization. So working capital management is three dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability, liquidity and risk.

2. It is concerned with the decision about the composition and level of current Asset

3. It is concerned with the decision about the composition and level of current Liabilities.

FINANCIAL MANAGEMENT

Financial management is very important to every type of organization. It refers to that part of

managerial activity concerned with the procurement and utilization of funds the for business

purposes. In the words of Howard and Upton:

Financial management involves the application of general management principles to financial

operations. Thus financial management is concerned with:

Estimation of the fixed and working capital requirements,

Formulation of capital structure,

Procurement of fixed and working capital, and

Management of earnings

OBJECTIVES OF FINANCIAL MANAGEMENT:

Financial management is concerned with the efficient use of capital funds. It evaluates

how funds are used and procured. In all cases, financial management involves sound judgments,

combined with a logical approach to decision- making. Different implication haves to are

available to a business enterprise in the process of decision making. These alternatives have to

be evaluated on the basis of some analytical framework and commercial strategies of an

enterprise.

IMPORTANCE OF FINANCIAL MANAGEMENT

Financial management is application to every type of organisation irrespective of its size,

kind or nature. Thus its is important and useful for all type of ownership organization where

there is a use of financials financial management is helpful every management aims to utilize lit

fund in a best possible and profitable way. It is indispensable in any organization as it help in:

Financial planning and successful promotion of an enterprise.

Proper use and allocation of fund.

Taking sound financial decision.

Improving the profitability through financial controls.

FINANCIAL STATEMENT

Financial statements generally refer to four basic statements-the income statements, the

balance sheet, the statement of retained earnings and the sources and uses of funds statements.

The financial statements, taken together, give the accounting picture of the firms operation and

financial position. The package of financial statements include such schedules as those relating

to fixed assets, long term investments long term debts, accrued liabilities, cost of goods

manufactured, selling expensed and administrative and general expenses. These schedule mainly

supplements the information contained in the financial statements and considered essential for

the purpose of analysis.

MAJOR TOOLS OF FINANCIAL ANALYSIS:

Various tools or techniques are used in the financial analysis. The main objective of any

analytical method is simplification and presentation of data in a more comprehensive manner.

However, no one type of analysis is sufficient to support overall findings, or to serve all type of

users. The most important tools of financial analysis are as follows:

1. Comparative financial statements

2. Trend ratios or percentages.

3. Ratio analysis.

4. Funds flow analysis.

5. cash flow analysis.

COMPARATIVE FINANCIAL STATEMENT:-

Comparative statement mainly shows the following information for analytical pure poses.

1. Actual data in absolute money values, as given in the financial statement for the period under

consideration.

2. Increases or decreases in various items in money values, and

3. Increases or decreases in various items in terms of percentages.

FUND FLOW STATEMENT:-

“A statement of source and application of fund is a technical device is designed to

analysis the changes in the financial condition of a business enterprises between two date”.

In the words of Anthony” the fund flow statement describes the sources from which additional

funds flow statements describe the source from which additional funds were derived and the use

which these changes of sources were put”.

CASH FLOW ANALYSIS:-

Cash deposit cash on hand and demand deposits with banks.

Cash equivalents are short term, highly liquid investment that are readily convertible into

know amount of cash and which are subjective to an insignificant risk of values.

Cash flow are inflows and out flows of cash and cash equivalents.

The cash flowing are the examples of cash flow arising from investing activities.

Cash payment to acquire fixed assets.

Receipt from disposal of fixed assets.

Cash advances and loan made to third parties.

Cash receipt on account of interest and divided on investments.

Cash receipt from future contracts forward contracts etc.,

Cash flow from financing activities:

Cash receipt from the issue of shares.

Cash repayment of amounts borrowed

Cash payment to redeem preference shares

Cash payment of dividend

Cash payment of interest on debentures and loans.

TREND ANALYSIS

Trend analysis calculates the percentage change for one account over a period of time of

two years or more.

Percentage change

To calculate the percentage change between two periods:

1. Calculate the amount of the increase/(decrease) for the period by subtracting the earlier

year from the later year. If the difference is negative, the change is a decrease and if the

difference is positive, it is an increase.

2. Divide the change by the earlier year's balance. The result is the percentage change.

INDUSRTY PROFILE

1.1 COMPANY PROFILE

CHAPTER -II

MAIN THEME OF THE PROJECT

CHAPTER -2

2.1OBJECTIVES OF THE STUDY

To study the working capital management practices in Oil palm India Ltd.

To carryout ratio analysis to study the effectiveness of working capital management

practices

To examine the impact of cash flows on the working capital of Oil palm India Ltd.

To forecast the working capital requirements of the company for the next five years.

To suggest suitable measures to bring improvement in the working capital management

practices of Oil palm India Ltd

2.2 LIMITATIONS OF THE STUDY

The project work has been completed successfully a few limitations has observed.

However adequate measures have been taken to overcome the impact of limitations on

the study.

The study is conducted with available data gathered from the annual report and the

analysis was made accordingly.

The Predictions were made by available data of five years (2008 -2012)

This research is mainly based on ratio analysis and working capital other tools to certain

extent.

It deals with Working Capital Management and finding and generalization are confined

to Oil palm India Ltd.

2.3 RESEARCH METHODOLOGY

MEANING OF RESEARCH

Research is a systematic critical careful search for all answer to a question or solution to a

problem is called search.

RE – search

SEARCH – for the knowledge or fact.

DEFINITION OF RESEARCH

Research is the process of systematic planning analysis of any particular topic or subject

of area of investigation involving colleting comparison presentation interpretation of element

detail or data which should be useful for solving problem of improving existing solving to

problem.

RESEARCH METHODOLOGY

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

understood as a science of studying how research is done scientifically it include overall design

the sampling procedure, data collection, methods and analysis.

RESEARCH DESIGN:-

Research design used in the study is analytical research. The research was carried out by to

analysis the balance sheet, which is a historical data and derive conclusion from it.

NATURE OF DATA:-

The nature of data used for the study is secondary data.

PERIOD OF THE STUDY:-

The study was made between January 2013 and May 2013 .The financial performance of Oil

palm India Ltd between 2008 and 2012 was analyses during this period

SECONDARY DATA:-

Secondary data that are already available i.e., they refers to the data which have already

been collected by someone else. Here, secondary data were collected from the company

brochures, manuals and other records.

TOOLS USED FOR THE ANALYSIS

Working capital analysis

Ratio analysis

Trend analysis

Comparative balance sheet Assessment

2.4 LITERATURE REVIEW

Working capital management can be considered as an important source of profitability of a firm.

Many researchers investigated the impact of working capital management on profitability. This

past research demonstrated that efficient working capital management leads to greater

profitability. Smith (1980) conducted a study on Profitability and Liquidity and suggested that

working capital management directly influence risk and profitability of a firm. Hence it can be

inferred that effective working capital management can increase the financial strength of a

business. Soenen (1993) also performed an analysis of working capital management and its

relationship with financial performance. His study was based on US firms and after the study he

suggested that if the length of net trade cycle increases then it affects the return on investment

negatively.

The Working Capital management is regarded as an essential part of financial management of a

firm (Joshi, 1995). Lamberson (1995) observed the impact of economic activity on the Working

Capital Management Policy. For this he took a sample of 50 small firms of US for a time period

of 12 years i.e. 1980-1991. He found that economic expansion do not cause an increase in the

investment of working capital during a specific period. Finally he suggested that there exists a

slight impact of any change in economic activity on working capital management of these

firms.Some other researchers namely, Jose, Lancaster, and Stevens (1996) carried out a

detailed analysis on the association of cash conversion cycle and financial returns. They located

an inverse association of profitability with cash conversion cycle.

Shin and Soenen (1998) conducted an expanded study by taking a large sample of 58985 firms

of US. Their study was based on a longer time phase of 1975-1994. They suggested that for

generating greater volume of wealth for the shareholders of a firm, it is very crucial to manage

the working capital of that firm effectively and in an efficient manner. They also recommended

that profitability and net trade cycle both are inversely related to each other.

Lyroudi and Lazaridis (2000) investigated the relationship of liquidity and cash conversion

cycle for the food industry of Greece. They concluded that a considerable positive relationship

exists among Cash Conversion Cycle and current ratio, average age of inventory and average

collection period. Also they located an inverse relationship between CCC and average payment

period. They concluded that there was no statistically significant relationship between variables

used for liquidity measurement and that used for profitability measurement. Also they suggested

that cash conversion cycle had no significant relationship with debt ratio.

Working capital management and profitability relationship has been explored by many other

researchers as well. Deloof (2003) analyzed 1009 non-financial firms of Belgium. He found that

gross operating profit of a firm is negatively related to inventory turnover and average collection

period. Hence, he recommended that financial managers can try to improve profitability by

enhancing average payment period and by curbing inventory turnover and average collection

period. He also recommended that profitability is strongly related to working capital

management of a business.Through a study on Saudi Arabian companies, Eljelly (2004

discovered that the profitability and cash gap have a significant negative relationship with each

other. Mallik, Sur, and Rakshit (2005) evaluated Indian pharmaceutical industry. They

discovered that profitability and liquidity do not have any significant relationship for these

firms.Two researchers namely Meszek and Polewski (2006)analyzed the construction sector.

Their work targeted mainly the strategies which should be used for the working capital

management in construction sector. They have not worked to evaluate the overall working

capital management effectiveness and financial performance of construction sector.

The study of S.M.Amir Shah and Sana (2006) was based on a period of five years i.e.

2001-2005. They used working capital ratios to determine the effect of working capital

management on financial performance. These working capital ratios include inventory turnover,

current ratio, quick ratio, average collection period and average payment period. They used

correlation analysis and OLS method to reach the results. Finally they revealed that Gross profit

is negatively associated with all working capital ratios except number of days payable. In a study

on HDFC STANDARD LIFE INSURANCE (2008) analyzed working capital management and

its relation with profitability by examining a sample of manufacturing firm of Mauritius.

Period of the study was six years i.e. 2000-2005. He used days of receivables, inventory

turnover, cash conversion cycle and days of payables as explanatory variables, and return on

total assets (ROA) as dependent variable. They used regression analysis to find out the results.

They found that paper and printing industry showed greater scores for

different working capital components amongst the overall manufacturing industry. These greater

scores affect the profitability of this industry positively. Finally they concluded that if a firm will

invest heavily in its inventory and accounts receivables then the profitability of that firm would

be lower.Vishnani and Shah (2009) from their study on Indian consumer electronic industry

discovered that profitability for the overall industry had no recognized relationship with

liquidity, but majority of the companies belonging to this industry showed a positive association

for profitability and liquidity. Ganesan (2009) conducted a study on Telecommunication &

equipment industry by taking 349 firms of this sector. The time period of this study was 7 years

i.e. 2003-2009. He declared that in this industry effective working capital management and

financial performance do not have any significant inverse relationship with each other. He also

indicated that there exists a strong and inverse association between financial performance and

liquidity.

Raheman and Nasr (2009) performed an analysis on 94 firms listed at KSE, based on a time

span of 6 years from 2001 to 2006. They have taken different working capital ratios such as Net

Operating Profitability, Debt ratio, current assets to total assets ratio, cash conversion cycle,

average collection period, inventory turnover, average payment period, current ratio.

Afza and Nazir (2009)studied 263 firms of Pakistan for a time phase of six years i.e. 2000-

2005. They stated that adopting inefficient working capital management policies affects the

profitability negatively.Afza and Nazir (2010)reviewed their pervious study to estimate the

impact of different types of working capital management policies on financial performance of

firms in different sectors. For this they used a sample of 263 non-financial firms belonging to 17

different sectors listed at KSE from2000 to 2005.

The secondary data was collected from the financial reports of selected companies and also from

the publications of State Bank of Pakistan. There are two types of working capital management

policies namely aggressive working capital management policy and conservative working capital

management policy. In aggressive working capital management policy a firm places less amount

of capital in current assets to earn more profit from fixed assets, whereas in conservative working

capital management policy firms use more capital as current assets. For the measurement of the

degree of aggressiveness they used current liabilities to total assets ratio (CLTAR) and current

assets to total assets ratios (CATAR). To locate the impact of these policies on the performance

of firms they used Return on Equity (ROE) and Return on Assets (ROA). Results were found by

using regression analysis. They found an inverse relationship between degree of aggressiveness

of these policies and profitability.

Uyar (2011) took a sample of 166 Turkish companies to predict the nature of relationship of

profitability and size of the firms with Cash Conversion cycle. The result demonstrated that

profitability and size of the firms both are negatively related with Cash Conversion Cycle.

The study of Binti Mohamad and Mohd Saad (2012) was based on secondary data of 172 firms

of Malaysia. They evaluated the impact of various components of working capital on

profitability and market value of the firms. The study covered a time span of five years from

2005 to 2009. For this purpose they used different working capital components namely cash

conversion cycles (CCC), debt ratio (DR), current assets to total assets ratio (CATAR), current

liabilities to total assets ratio (CLTAR)and current ratio (CR),. To see the effect of these working

capital components on financial performance they used Tobin’s Q (TQ), return on invested

capital (ROIC) and return on assets (ROA) as a measurement of financial performance of the

selected firms. To deduce the results they used correlations and multiple regression analysis.

ANALYSIS AND INTERPRETATION

WORKING CAPITAL ANALYSIS

3.1 SCHEDULE OF CHANGES IN WORKING CAPITAL

TABLE NO: 1

YEAR CURRENT ASSET CURRNT

LIABILITIES

NET WORKING

CAPITAL

2008-2009 49.4 14.1 35.3

2009-2010 71.6 33.0 38.6

CHANGES 22.2 18.9 3.3

(Amount in crore)

SOURCE: Annual Report of Oil palm India LTD

The working capital of Oil palm India ltd has increased to Rs. 3.3 crore in the year 2008-2009.

The current asset and current liabilities increased Rs.22.2 crore and 18.9 crore respectively in

the year 2009-2010

TABLE NO: 2

(Amount in crore)

YEAR CURRENT ASSET CURRNT

LIABILITIES

NET WORKING

CAPITAL

2010-2011 65.0 26.8 38.2

2011-2012 70.8 37.7 33.1

CHANGES 5.8 10.9 -5.7

SOURCE: Annual Report of Oil palm India LTD

The working capital of Oil palm India ltd has decreased to Rs. 5.7 crore in the year 2010-2011.

The current asset and current liabilities increased Rs.5.8 crore and 10.9 crore respectively in

the year 2011-2012

TABLE NO: 3

(Amount in crore)

YEAR CURRENT ASSET CURRNT

LIABILITIES

NET WORKING

CAPITAL

2011-2012 70.8 37.7 38.2

2013 72.1 32.5 33.1

CHANGES 1.3 -5.2 -5.1

SOURCE: Annual Report of Oil palm India LTD

The working capital of Oil palm India ltd has dereased to Rs. 5.1 crore in the year 2011-2012.

The current asset was increased Rs.1.3 crore and current liabilities decreased Rs.5.2 crore in

the year 2012-2013.

3.2 RATIO ANALYSIS

3.2.1CURRENT RATIO

Thus the two basic components of current ratio are current asset and current liabilities. Current

asset: debtors, bills receivable, inventory, cash in hand, cash at bank, prepaid expenses and short

term investment, raw material work in progress finished goods and stores and spares.

Current liabilities: current liabilities include creditors, bill payable, advance received, bank over

draft, outstanding liabilities for expenses and interest accrued but not due.

Current asset Current ratio = -------------------------- x 100 Current liabilities

TABLE NO: 4

THE TABLE SHOWS CURRENT RATIO OF THE COMPANY+BETWEEN 2009-2013

(Amount in crores)

YEAR CURRENT ASSET CURRENT

LIABILITIES

CURRENT RATIO

2009 49.4 14.1 3.49

2010 71.6 33.0 2.17

2011 65.0 26.8 2.42

2012 70.8 37.7 1.87

2013 72.1 32.5 2.21

INTERPRETATION

The above table shows that the current ratio of the firm between 2008 and 2012, and it is

fluctuating considerably. The maximum current ratio of 3.49 is observed during 2008 and the

least 1.87 is reported during 2011. It is concluded that there exist an abnormal variation in

current asset and current liabilities between 2008 and 2012.

CHART: 1 CURRENT RATIO

3.2.2 LIQUID RATIO

Liquid ratio may be defined as the ratio of liquid assets to liquid liabilities or current liabilities.

It is concerned with the relationship between liquid assets and liquid or current liabilities. The

other terms used for liquid ratio are ‘quick ratio’ and ‘Acid test ratio’ for the purpose of

computation, the current assets and current liabilities could be classified as follows:

Current assets: (a) liquid assets, and (b) Deferred Assets

Current liabilities: (a) Liquid liabilities and (b) Deferred liabilities

Formula:

Liquid assets Liquid assets Liquid ratio = or Liquid liabilities Current liabilities

TABLE NO: 5

THE TABLE SHOWS LIQUIDITY RATIO OF THE COMPANY

BETWEEN 2008-2012

(Amount in crore)

YEAR QUICK ASSET CURRENT

LIABILITY

QUICK RATIO

2008 44.9 14.1 3.16

2009 69.2 33.0 2.09

2010 61.7 26.8 2.30

2011 67.1 37.7 1.78

2012 63.8 29.4 2.17

INTERPRETATION

The above table shows the liquidity ratio of the firm between 2008-2012. The maximum

liquidity ratio of 3.16 is observed during 2008 & the least 1.78 is reported during 2011.It is

observed that there exist an abnormal variation in liquidity asset and current liabilities

between2008 to 2012

CHART: 2 QUICK RATIO

3.2.3 ABSOLUTE LIQUIDITY RATIO

It is relationship between absolute liquate asset and current liabilities .absolute liquid

assets consists of cash in hand and marketable securities or temporary inventory.

Absolute liquidity ratio

Absolute liquidity ratio = ----------------------------------

Current liabilities

TABLE NO: 6

THE TABLE SHOWS ABSOLUTE LIQUID RATIO OF THE COMPANY

BETWEEN 2008-2012

(Amount in crore)

YEAR ABSOLUTE

LIQUID ASSETS

CURRENT

LIABILITIES

ABSOLUTE

LIQUID RATIO

2008 38.3 4.4 8.68

2009 43.0 5.3 8.11

2010 41.6 4.2 9.85

2011 41.9 9.5 4.37

2012 40.5 9.1 4.45

INTERPRETATION

It is observed from the above table that the absolute liquidity ratio of the firm between

2008-2012 is decreasing. The maximum absolute liquidity ratio of 9.85 is observed during 2010

and the least 4.37 is reported during 2011.An increase or decreases in the absolute liquid ratio

represent improvement in the liquidity position. This indicates that the short term solvency

position of the company is satisfactory.

CHART: 3 ABSOLUTE LIQUID RATIO

3.2.4 PROPRIETOR’S FUND

The ratio of current asset to the proprietors fund establishes the relationship between the

current asset and shareholders fund.

Share holder fund

Proprietor’s ratio = ---------------------------- x100

Total assets

TABLE NO: 7

THE TABLE SHOWS PROPRIETARY RATIO OF THE COMPANY

BETWEEN 2008-2012

(Amount in crores)

YEAR SHARE HOLDER

FUND

TOTAL ASSETS RATIO

2008 55.2 49.4 1.11

2009 58.7 71.6 0.81

2010 60.4 65.0 0.93

2011 63.7 70.8 0.89

2012 65.2 68.6 0.95

INTERPRETATION

It could be observed from the above table that the proprietary ratio of the firm between 2008-

2012 is fluctuating considerably. The maximum proprietary ratio of 1.11 is observed during 2008

and the least 0.81 is reported during 2009. It is concluded that there exist a major variation in

total asset and share holders fund between2008 to 2012

CHART: 4 PROPRIETARY RATIO

3.3TREND ANALYSIS

Working capital trend analysis in an important technique of working capital management. Trend percentage constitutes an important tool of interpretative analysis of financial position of a company.

It indicates die changes, which have been taking, place from time to time in individual items of current assets, current liabilities and net working based on some standard year and its effect on working capital position.

1. Current liabilities & provision

TABLE NO:8

YEAR X X^2 Y

Liabilities

In (crore)

XY

In (crore)

2008 -2 4 14.1 -28.3

2009 -1 1 33.0 -33.0

2010 0 0 26.8 0

2011 1 1 37.7 37.7

2012 2 4 32.5 220.0

TOTAL ∑ X=0 ∑ X^2=10 ∑Y=144.1 ∑XY=41.4

∑X=0 ∑ X^2 = 10

a = ∑y/n

b = ∑xy/∑x^2

y = a+bx

a =28.82 crores

b = 4.14 crores

y =28.82+4.14(x)(in crore)

SL YEAR Trend value of current liabilities(In crores)

1 2008 20.54

2 2009 24.68

3 2010 28.82

4 2011 32.42

5 2012 37.08

6 2013 41.24

7 2014 45.38

8 2015 49.52

9 2016 53.66

10 2017 57.80

INTERPRETATION

It is observed from the above table that the current liabilities has been increasing consistently

from 2008 to 2017 .The value of current liabilities during 2008 was 20.54 crores and it has

grown to 37.08 crores at the end of the year 2012.In order to predict the current liability

requirement for the financial year between 2013-2017 a trend analysis was executed and it is

projected that a sum of Rs.( in crore) 41.24, 45.38,49.52,53.66,57.8 are required during the

respective years.

CHART : 5 TREND RATIO OF CURRENT LIABILITY

2. Trend analysis of Current assets

TABLE NO: 9

YEAR X X^2 Y

Current assets

In (crore)

XY

In (crore)

2008 -2 4 49.4 -98.9

2009 -1 1 71.6 -71.6

2010 0 0 65.0 0

2011 1 1 70.8 70.8

2012 2 4 72.1 144.2

TOTAL ∑ X=0 ∑X^2=10 ∑Y=328.9 ∑XY=44.5

∑X=0 ∑X^2 = 10

a = ∑y / n

b = ∑xy / ∑x^2

y = a + bx

a = 65.75crores

b = 4.45crores

y = 328.9+4.45 (x)(in crore)

INTERPRETATION

It is observed from the above table that the current asset has been increasing consistently from

2008 to 2012 .The value of current asset during 2008 was 320.00 crores and it has grown to

337.80 crores at the end of the year 2012.In order to predict the current asset requirements for the

financial years from 2013 to 2017 a trend analysis was executed and it is projected that a sum of

Rs. (in crore) 342.25, 346.7, 351.15, 355.6, 360.05 are required for the respective years

SI.No. YEAR Trend value of current asset(In crores)

1 2008 320.00

2 2009 324.45

3 2010 328.90

4 2011 333.35

5 2012 337.80

6 2013 342.25

7 2014 346.7

8 2015 351.15

9 2016 355.6

10 2017 360.05

CHART: 6 TREND RATIO OF CURRENT ASSET

3. Trend analysis of Net profit

TABLE NO: 10

YEAR X X^2 Y

Net profit

In (lakhs)

XY

In (lakhs)

2008 -2 4 210.8 -421.8

2009 -1 1 67.7 -67.7

2010 0 0 117.1 0

2011 1 1 164.1 164.1

2012 2 4 201.2 402.4

TOTAL ∑ X=0 ∑ X^2=10 ∑Y=760.9 ∑XY=77.01

∑X=0 ∑ X^2 = 10

a = ∑y/n

b = ∑xy/∑x^2

y = a+bx

a = 152.18 lakhs

b = 7.70 lakhs

y =152.18+7.70(x)(in lakhs)

INTERPRETATION

It is evident from the above table that the net profit has been increasing heavily from 2008 to

2012. The value of profit during 2008 was 136.78lakhs and it has grown to 167.58 at the end of

the year 2012.In order to calculate the profit for the financial year 2013-2017 a trend analysis

executed and it is projected that a sum of 175.28 ,182.98,190.68,198.38,206.08 are required for

the respective years

SL YEAR Trend value of profitIn lakhs

1 2008 136.78

2 2009 144.48

3 2010 152.18

4 2011 159.88

5 2012 167.58

6 2013 175.28

7 2014 182.98

8 2015 190.68

9 2016 198.38

10 2017 206.08

CHART :7 TREND RATIO OF PROFIT

4 . Trend analysis of Sales

TABLE NO: 11

YEAR X X^2 Y

Sales

In (crore)

XY

In (crore)

2008 -2 4 27.0 -54.0

2009 -1 1 24.0 -24.0

2010 0 0 31.9 0

2011 1 1 22.2 22.2

2012 2 4 31.0 62.1

TOTAL ∑ X=0 ∑ X^2=10 ∑Y=136.3 ∑XY=6.2

∑X=0 ∑ X^2 = 10

a = ∑y/n

b = ∑xy/∑x^2

y = a+bx

a = 27.2 crores

b = 62 lakhs

y = 27.2 crores + 62 lakhs(x)

INTERPRETATION

It is obvious from the above table that the sales has been small variation from 2008 to 2012 .The

value of sales during 2008 was 26.0 crores and it has grown to 28.5 crores at the end of the year

2012.In order to estimate the requirement for the financial year 2013-2017 a trend analysis

executed and it is projected that a sum of 29.1, 29.7,30.3,30.9,31.5 respectively.

SL YEAR Trend value in sales(In crores)

1 2008 26.0

2 2009 26.6

3 2010 27.2

4 2011 27.8

5 2012 28.5

6 2013 29.1

7 2014 29.7

8 2015 30.3

9 2016 30.9

10 2017 31.5

CHART: 8 TREND RATIO OF SALES

4. COMPARITIVE BALANCESHEET OF OIL PALM INDIA LTD

BETWEEN 2008-2012

TABLE NO :12

Particulars Changes

In 2007-08

(In lakhs)

Changes

In 2008-09

(In lakhs)

Changes

In2009-10

(In lakhs)

Changes

In 2010-11

(In lakhs)

Fixed asset(A)

-14.3 -476.6 +2036.2 -67.3

Working capital

Current asset(1)

+486.7 +222.2 -668.8 +587.1

Current liability(2)

-23.9 +189.0 -623.2 +1084.6

Working capital(B)1-2

+462.8 +331.9 -1292.0 +1671.8

Capital

employed(A+B)

+448.4 -144.2 +744.1 +1104.5

Share holders fund

Share capital

0 0 0 0

Reserve and surplus

+523.7 +347.5 +173 +324

Share holders fund

+523.7 +347.5 +173 +324

INTERPRETATION

From the above comparative balance sheet it is observed that the fixed asset has been fluctuating

consistently from 2007to 2011.Heavy change in the fixed asset was observed in the year 2009-10

and also the value of current asset decreased heavily in the year 2009-10(+2036.2)crore. It is also

observed that the change in the value of current liability is fluctuating from 2007 to 2011. The

minimum current liability was reported during 2007-08. Increased value of change in the

working capital was observed during the year 2010-11 which amounts +1671.8 crore. While

studying the changes in the capital employed it is obvious that a maximum of +1104.5 Crore was

injected during 2010-11 .The changes in the value of share holders fund is also fluctuating from

2007-11.

CHAPTER -IIIFINDINGS,

SUGGESTIONS AND CONCLUSION

CHAPTER -4

4. FINDINGS, SUGGESTIONS AND CONCLUSION

4.1 FINDINGS

With the help of trend analysis and financial performance measures the collected data

were analysed and the following are the major findings of the study

The schedule of changes in the working capital of Oil palm India Ltd is increased

Rs.5.5 crore in the year 2008 to 2009 when comparing to 2008-2009.

The Current ratio for the year 2008 is 3.49 which is highest while comparing to

rest of the years.

The Absolute Liquidity ratio for the year 2011 is 4.37 which is lowest than

comparing to rest of the years.

The liquid ratio for the year 2008 is 3.16 which is highest than comparing to rest

of the years.

The proprietor’s ratio for the year 2009 is 0.81 which is lowest than comparing to

rest of the years.

The trend value of current liabilities increased in the year 2012 is 37.08 crore

which is higher than comparing to other years.

The trend ratio of current asset increased in year 2012 the value is 337.80 which

is higher than comparing to rest of the years.

The trend ratio of profit decreased for the year 2008 the value is 136.78 which is

lower than comparing to rest of the years

The trend value of sales increased in the year 2012 the value is 28.5 which is

higher than comparing to rest of the years

The comparative balance sheet shows the changes in the value of share holders

fund is also fluctuating from 2007-11

4.2 SUGGESTIONS

Liquidity position of the company can be improved by sound financial planning.

The current and quick ratios are almost up to the standard requirement so the working

capital management of Oil palm India ltd is satisfactory and it has to be maintained .

Availing more credit from its suppliers will help to ensure efficient of working capital

It is suggested to improve the inventory conversion period ,mainly reduction in working

progress

4.3 CONCLUSION

This study briefly conducted in Oil palm India Ltd under the title of “a study on working

capital management in Oil palm India Ltd, kottayam”. The profit level of the company

known from its accounting record is encouraging .The management of working capital is

also maintain well.

The overall position of the company is in a good position; the company needs to maintain

the inventory level. It is hoped that the company will take adequate steps as stated in

suggestion to earn maximum profit and will become one of the best company.

Annexure-i BALANCESHEET

SCOPE FOR FUTURE WORKS

Particulars Mar

08

Mar

09

Mar

10

Mar

11

Mar

12

Sources of funds

Total share capital 11.78 11.78 11.78 11.78 11.78

Reserves 43.48 46.95 48.69 51.93 58.75

Total 55.27 58.74 60.48 63.72 70.54

Application of funds

FIXED ASSET

Gross block 29.62 30.18 33.40 33.54 33.54

Less: accum.

Depreciation

19.60 20.63 21.82 22.63 21.38

Net block 10.02 9.54 11.58 10.90 10.90

Development of property 6.70 6.91 6.91 7.57 6.87

Capital work in progress 76678 715208.06 2477439.03 78.92 10.26

Investments 1.00 1.00 1.00 1.00 1.00

Deferred tax asset(net) 2.25 2.61 2.59 3.17 3.77

CA,Loans & Advances

Inventories 4.56 2.45 3.21 3.70 3.86

Sundry debtors 623814 627309.00 634515.00 149817 118005

Cash and bank balance 38.39 43.03 41.67 41.95 41.01

Loans and advances 6.45 26.13 20.05 25.20 25.34

TOTAL 49.47 71.69 65.00 70.87 110.19

Less:Cl And Provisions

Current liabilities 4.42 5.30 4.22 9.59 9.11

Provisions 9.76 27.78 22.63 28.10 20.37

Total CL & provisions 14.18 33.09 26.85 37.70 37.70

net current assets 35.28 38.60 38.14 33.17 33.17

TOTAL 55.27 58.74 60.48 63.72 63.72

ANNEXURE-IIBibliography

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