DISSERTATION

On
“STUDY OF WORKING CAPITAL MANAGEMENT AT
VANTEX PAINTS PVT. LTD.”

Submitted in partial fulfillment for the requirement of the award of Post-graduate Degree of

HONOURS BACHELOR OF COMMERCE

(Batch 2015-18)

Supervisor:
Submitted by:
Shivangi
ROLL NO. 14580 MRS
Id- WBBCM17268
ASSISTANT PROF.

Submitted to
Banasthali vidyapit

1
 PREFACE

In today’s era of cut throat competition MBA’s are sure to have an edge over their counter parts.

During post graduation in master of business administration program, Students comes direct
contact with the real corporate world through the industrial training. An MBA program provides
its students with an in-depth study of various managerial activities that are performed in any
organization.

A detailed research/analysis of managerial activities conducted in various departments like

finance, marketing, human resources, production, credit management department etc. gives the
student the conceptual idea of what they are expected to manage and how to manage and how to
obtain the maximum output through minimum inputs of resources available and how to minimize
the wastage of resources.

As MBA students, I have taken our industrial training in Vantex Paints Pvt Ltd New Delhi.

(xxxxxxxxxxxxxxxxx)

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 ACKNOWLEDGEMENT
Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped
me in completing this summer project to the best of my ability. Being a part of this project has
certainly been a unique and a very productive experience on my part.

I am really thankful to Mr. Amitabh Gupta (Director commercial) & Mr. Arun Sharma
(Account Manager) for making all kinds of arrangements to carry the project successfully and
for guiding and helping me to solve all kinds of quarries regarding the project work. His
systematic way of working and incomparable guidance has inspired the pace of the project to a
great extent.

I would also like to thank my mentor and project – coordinatorxxxxxxxxxxxxxxxx for assigning
me a project of such a great learning experience and acquainting me with real life project
financing and appraisal.

I am very grateful to xxxxxxxxxxxxxxxxxxxxx and very thankful for their useful guidance and
advise.

Last but not least I would like to thank all the employees of Vantex Paints pvt ltd. who have
directly or indirectly helped me with their moral support for the completion of my project.

()
 INDEX

S.N PARTICULARS PAGE NO.

1 PREFACE 2
2 ACKNOWLEDGMENT 3
3 INTRODUCTION OF WORKING CAPITAL 6
4 DETERMINANT OF WORKING CAPITAL 9
5 WORKING CAPITAL COMPONENT 10
6 TYPES OF WORKING CAPITAL 14
7 SOURCES OF WORKING CAPITAL 15
8 SIGNIFICANCE OF WORKING CAPITAL 18
9 IMPORTANCE OF WORKING CAPITAL RATIO 19
10 BLUE PRINT OF GOOD WORKING CAPITAL POLICY 24
11 LITERATURE REVIEW 28
12 INDUSTRY OVERVIEW 33
13 COMPANY PROFILE 36
14 MANAGEMENT 38
15 RECENT ACHIVEMENT &MILESTONE 39
16 MISSION & VISION 40
17 PRODUCT RANGE 41
18 IMAGES OF VANTEX PAINTS 45
19 QUALITY OUTLOOK 49
20 OBJECTIVE & OBLIGATION 50
21 SWOT ANALYSIS 51
22 SATEMENT SHOWING CAHANGE IN W.C. 54
23 CALCULATION OF WORKING CAPITAL 55
24 VARIOUS COMPONENETS OF WORKING CAPITAL 56
25 WORKING CAPITAL RATIOS & ANALYSIS 66
26 OPERATING CYCLE 77
27 RESARCH METHODOLOGY 87
28 CONCLUSION,MAJORFINDING,SUGGESTION 91
29 APPENDIX 94
30 BIBLIOGRAPHY
 An Introduction To Working Capital Management
“Working capital means the part of the total assets of the business that change from one form
to another form in the ordinary course of business operations.”

In a excellent world, there would be no necessity for current assets and liabilities as a result of there would be no
uncertainty, no dealings prices, info search prices, programming prices, or production and technology constraints. The
cost of production wouldn't vary with the amount created. Borrowing and disposal rates shall be same. Capital, labour,
and products market shall be absolutely competitive and would replicate all offered info, therefore in such associate
degree setting, there would be no advantage for investment in brief term assets.
However the globe we have a tendency to live isn't excellent. it's characterised by considerable quantity of uncertainty
concerning the demand, market value, quality and convenience of own merchandise and people of suppliers. There are
dealings prices for buying or marketing merchandise or securities. info is dear to get and isn't equally distributed. There
are spreads between the borrowings and disposal rates for investments and finanancings of equal risks. equally every
organization is Janus-faced with its own limits on the assembly capability and technologies it will use there are fastened
further as variable prices related to production merchandise. In different words, the markets within which real firm
operated aren't absolutely competitive.
These planet circumstances introduce problem’s that need the requirement of maintaining capital. for instance,, a
corporation could also be Janus-faced with associate degree uncertainty concerning convenience of comfortable amount
of crucial imputes in future at cheap worth. this could necessitate the holding of inventory, current assets. equally a
corporation could also be Janus-faced with associate degree uncertainty concerning {the level|the extent|the quantity} of
its future cash flows and insufficient amount of money could incur substantial prices. this could necessitate the holding
of reserve of short term marketable securities, once more a brief term capital plus. In company monetary management,
the term capital management” (net) represents the surplus of current assets over current liabilities.
Concept of operating capital:-

The word capital is created of 2 words one.Working and a pair of. Capital

The word operating suggests that day to day operation of the business, whereas the word capital suggests that price of all
assets of the business.
Working capital: -

Working capital could also be considered the life blood of business. capital is of major importance to internal and
external analysis owing to its shut relationship with the present day-after-day operations of a business. each business
wants funds for 2 functions.

* long run funds are needed to make production facilities through purchase of fastened assets like plants, machineries,
lands, buildings & etc

* Short term funds are needed for the acquisition of raw materials, payment of wages, and different day-after-day
expenses.
. it's otherwise referred to as revolving or current capital

It is nothing however the distinction between current assets and current liabilities. i.e. capital = Current plus – Current

5
Liability.
Businesses use capital for construction, renovation, furniture, software, equipment, or machinery. it's conjointly
unremarkably accustomed purchase inventory, or to form payroll. Capital is additionally used usually by businesses to
place a payment down on a chunk of business property. capital is crucial for any business to succeed. it's changing into
additional} necessary to possess access to more capital after we would like it.
In straightforward words capital is that the far more than current Assets over current liabilities. capital has commonly
been outlined because the far more than current assets over current liabilities. capital is that the heart of the business. If
it's weak business cannot correct and survives. Sit is so aforesaid the fate of enormous scale investment in fastened assets
is commonly determined by a comparatively touch of current assets. because the capital is vital to the corporate is
important to stay adequate working capital with the company. money is that the lifeline of company. If this lifeline
deteriorates therefore will the company’s ability to fund operation, reinvest do meet capital requitrents and payment.
Understanding Company’s income health is crucial to creating investment call. an honest thanks to decide a company’s
income prospects is to appear at its capital management. the corporate should have adequate capital the maximum
amount PRN by the company. It ought to neither be excessive or nor inadequate. Excessive capital cuisses for idle funds
birthing with the firm while not earning any profit, wherever as inadequate capital shows the corporate doesn’t have
comfortable funds for finance its daily wants working capital management involves study of the connection between
firm’s current assets and current liabilities. The goal of capital management is to make sure that a firm is in a position to
continue its operation. which is has comfortable ability to satisfy each maturing short term debt
and forthcoming operational expenses. the higher an organization managers its capital, the less the corporate has to
borrow. Even corporations with money surpluses got to manage capital to make sure those surpluses are endowed in
ways in which can generate appropriate returns for investors.

The primary objective of capital management is to make sure that comfortable money is obtainable to”

Meet day to day income wants.

Pay wages and salaries once they fall due
Pay creditors to make sure continued provides of products and services. Pay government taxation and supplier of capital
– dividends and make sure the long run survival of the business entity.

Concept of capital

• Gross capital = Total of Current plus

• web capital = far more than Current plus over Current Liability

Current Assets Current Liabilities

• take advantage hand / at bank
• Bills due
6
• Sundry Debtors
• Short term loans
• Investors/ stock
• Temporary investment
• postpaid expenses
• increased incomes • Bills collectible
• Sundry Creditors
• Outstanding expenses
• increased expenses
• Bank Over draft

Determinants of capital

Working capital necessities of a priority depends on variety of things, every of that ought to be thought of rigorously for
determinative the right quantity of capital. it should be but be adscititious that these factors have an effect on otherwise
to the various units and these keeps variable from time to time. In general, the determinants of capital that re common to
all or any organization’s may be summarized as under:

Nature of business

Need for capital is very depends on what variety of business, the firm in. there are commercialism companies, that has to
invest a great deal in stocks, ills assets, liquid money etc. public utilities like railways, electricity, etc., would like a lot of
less inventories and money. producing issues stands in between these 2 extends. capital demand for producing issues
depends on varied factors just like the merchandise, technologies, selling policies.

Production policies
Production policies of the organization effects capital necessities terribly extremely. seasonal industries, that produces
solely in specific season needs a lot of capital . some industries that produces around the year however sale principally
wiped out some special seasons are got to keep a lot of capital.

Size of business

Size of business is another issue to determines the requirement for capital

Length of in operation cycle.

Operating cycle of the firm conjointly influence the capital . longer the orating cycle, the upper are the capital demand of
the organization.

Credit policy
Companies; follows liberal credit policy has to keep a lot of capital with them. potency of debt collection machinery is
additionally relevant during this matter. Credit convenience type suppliers conjointly effects the company’s capital
necessities. an organization doesn’t relish a liberal credit from its suppliers can need to keep a lot of capital
Business fluctuation
Cyclical changes within the economy conjointly influence the extent of capital. throughout boom amount, the tendency
7
of management is to collect inventories of raw materials and finished merchandise to avail the advantage of rising prove.
This creates demand for a lot of capital. Similarly, throughout depression once the costs and demand for factory-made
merchandise. perpetually cut back the economic and commercialism activities show a downward termed. therefore the
demand for capital is low.

Current plus policies.

The quantum of capital of an organization is considerably determined by its current assets. Policies. an organization with
conservative assets policy could operate with comparatively high level of capital than its sales volume. an organization
following associate degree aggressive quantity assets policy operates with a comparatively lower level of capital.

Fluctuations of provide and seasonal differences

Some corporations got to keep great deal of capital thanks to their irregular sales and intermittent provide. equally
corporations victimisation large materials conjointly maintain massive reserves’ of stuff inventories. This increase the
requirement of capital . some corporations manufacture and sell merchandise solely throughout bound seasons. capital
necessities of such industries are higher throughout bound season of such industries amount.

Other factors
Effective co ordination between production and distribution will cut back the requirement for capital . transportation and
communication suggests that. If developed helps to cut back the capital requirement/.
 
Working capital in terms of 5 components:

1. money and equivalents: - This most liquid type of capital needs constant oversight. an honest money budgeting and
statement system provides answers to key queries such as: is that the cash level adequate meet current expenses as they
are available due? what's the temporal arrangement relationship between cash influx and outflow? once will peak cash
wants occur? once and the way a lot of bank borrowing are required to satisfy any cash shortfalls? once will
compensation be expected and can the income cowl it?
2. Accounts receivable: - several businesses extend credit to their customers. If you do, is that the quantity of assets
cheap relative to sales? however apace are assets being
collected? that customers are slow to pay and what ought to be done concerning them?
3. Inventory: - Inventory is commonly the maximum amount as fifty p.c of a firm's current assets, therefore naturally it
needs continual scrutiny. is that the inventory level cheap compared with sales and also the nature of your business?
What's the speed of inventory turnover compared with different corporations in your variety of business?

4. Accounts payable:- finance by suppliers is common in tiny business; it's one among the key sources of funds for
entrepreneurs. is that the quantity of cash owed suppliers cheap relative to what you purchase? what's your firm's
payment policy doing to reinforce or cut back from your credit rating?

5. increased expenses and taxes payable: - These are obligations of your company at any given time and represent a
future outflow of money.
Two completely different ideas of capital are:-

• record or ancient thought

• in operation cycle thought.
8
Balance sheet or ancient concept:- It shows the position of the firm at bound purpose of your time. it's calculated within
the basis of record ready at a selected date. during this technique there are 2 variety of operating capital:-

• Gross capital
• web capital

Gross operating capital:- It refers to the firm’s investment in current assets. The add of the present assets is that the
capital of the business. The add of the present assets could be a quantitative side of capital. that emphasizes a lot of on
amount than its quality, however it fails to reveal truth monetary position of the firm as a result of each increase in
current liabilities can decrease the gross capital

Net operating capital:- it's the distinction between current assets and current liabilities or the surplus of total current
assets over total current liabilities.

Working capital= current assets - current liabilities.

Net operating capital: - it's can also outlined as that a part of a firm’s current assets that is supported with long run funds.
it should be either positive or negative. once the present assets exceed the current liability, the capital is positive and
contrariwise.

Operating cycle concept:- The period or time needed to finish the sequence of events right from purchase of stuff for
money to the belief of sales in cash is termed the in operation cycle or capital cycle.

RAW
CASH
MATERIAL

9
10
 DEBTORS & BILLS RECEIVABLES

SALES FINISH GOODS

Each component of working capital (namely inventory, receivables and payables) has two
dimensions TIME and MONEY. When the comes to managing working capital TIME IS
MONEY. If you can get money to move fester around the cycle (collect monies due from debtors
more quickly) or reduce the amount of money tied up (i.e.., reduce inventory level relative to
sales). The business will generate more cash or it will need to borrow less money to fund
working capital. As a consequence, you could reduce the cost of bank interest or you will have
additional freee4 money available to support addition sales growth or investment. Similarly, if
you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit
limit, you festively create freed finance to help fund future sales a perusal of operational cycle
reveals that the cash invested in operations are recycled back in to cash. However it takes time to
reconvert the cash. Cash flows in cycle into around and out of a business it the business’s
lifeblood and every manager’s primary task to help keep it flowing and to use the cash flow to
generate profits. The shorter the period of operating cycle the larger will be the turnover of the
funds invested in various purposes.

11
 Types of Working Capital:-

TYPES OF WORKING CAPITAL

ON THE BASIS OF B/S CONCEPT ON THE BASIS OF TIME

GROSS WORKING CAPITAL

NET WORKING CAPITAL
REGULAR WORKINGTEMPORARY
CAPITAL WORKING CAPITAL

SEASONAL WORKING CAPITAL

SPECIFIC WORKING CAPITAL

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Kinds of working capital
Working capital can be put in two categories:
1) fixed or permanent working capital and
2) fluctuating or temporary working capital

Fixed or permanent working capital

The volume of investment in current assets an change over a period of time. But always there is
minimum level of current assets that must be kept in order to carry on the business. This is the
irreducible minimum amount needed for maintaining the operating cycle. It is the investment in
current assets. This is permanently locked up in the business and therefore known as permanent
working capital.

Variable/temporary working capital

It is the volume of working capital. This is needed over and above the fixed working capital in
order to meet the unforced market changes and contingencies. In other words any amount over
and about the permanent level of working capital is variable or fluctuating working capital . this
type of working capital is generally financed from short ter souse of finance such as bank credit
because this amount is not permanently required and is usually paid back during off season or
after the contingency.

Sources of working capital

The company can choose to finance its current assets by

Long term sources

Short term sources

A combination of them. Long term sources of permanent working capital include equity and
preference shares, retained earnings, debentures and other long term debts from public deposits
and financial institution. The long term working capital needs should meet through long term
means of financing. Financing through long term means provides stability, reduces risk or
payment. And increases liquidity of the business concern. Various types of long term sources of
working capital are summarized as follow

Issue of shares
It is the primary and most important sources of regular or permanent working capital. Issuing
equity shares as it does not create and burden on the income of the concern. Nor the concern is
obliged to refund capital should preferably raise permanent working capital.

Retained earnings
Retained earnings accumulated profits are a permanent sources of regular working capital. It is
regular and cheapest. It creates not charge on future profits of the enterprises.

13
Issue of debentures
It creates a fixed charge on future earnings of the company. Company is obliged to pay interest.
Management should make wise choice in procuring funds by issue of debentures.

Long term debt

Company can raise fund from accepting public deposits, debts from financial institutions like
banks, corporations etc. the cost is higher than the other financial tools.
Other sources sale of idle fixed assets, securities received from employees and customers are
examples of other sources of finance.

Short term sources of temporary working capital

Temporary working capital is required to meet the day to day business expenditures. The
variable working capital would finance from short term sources of funds. And only the period
needed. it has the benefits of ,low cost and establishes closer relationships with banker.
Some sources of temporary working capital are given below;

Commercial bank
A commercial bank constitutes a significant sources for short term or temporary working capital
this will be in the form of short term loans, cash credit, and overdraft and though discounting the
bills of exchanges.

Public deposits
Most of the companies in recent years depends on this sources to meet their short term working
capital requirements ranging fro six month to three years.

Various credits
Trade credit, business credit papers and customer credit are other sources of short term working
capital. Credit from suppliers, advances from customers, bills of exchanges, promissnotes, etc
helps to raise temporary working capital

Reserves and other funds

Various funds of the company like depreciation fund. Provision for tax and other provisions kept
with the company can be used as temporary working capital.

The company should meet its working capital needs through both long term and short term
funds. It will be appropriate to meet at least 2/3 of the permanent working capital equipments
form long term sources, whereas the variables working capital should be financed from short
term sources. The working capital financing mix should be designed in such a way that the
overall cost of working capital is the lowest, and the funds are available on time and for the
period they are really required.

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SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following

Existing cash reserves

Profits (when you secure it as cash)
Payables (credit from suppliers)
New equity or loans from shareholder
Bank overdrafts line of credit
Long term loans

If you have insufficient working capital and try to increase sales, you can easily over stretch the
financial resources of the business. This is called overtrading. Early warning signs include
Pressure on existing cash Exceptional cash generating activities. Offering high discounts for
clear cash payment Bank overdraft exceeds authorized limit Seeking greater overdrafts or lines
of credit Part paying suppliers or there creditor. Management pre occupation with surviving
rather than managing.

15
 SIGNIFICANCE OF WORKING CAPITAL:-

PAYMENT
TO SUPPLIERS

EASY LOAN DIVIDEND

FROM BANKS DISTRIBUTI- ON

SIGNIFICAN-
-CE OF WORKING CAPITAL

INCREASE
INCREASE
DEBT CAPACITY
EFFECIENC-Y

INCREASE IN
FIX ASSETS

The prime objective of the company is to obtain maximum profit thought the business. The
amount of profit largely depends upon the magnitude of sales. However the sale does not convert
into cash instantaneously. There is always a time gap between sale of goods and receipt of cash.
The time gap between the sales and their actual realization in cash is technically termed as
operating cycle. Additional capital required to have uninterrupted business operations, and the
amount will be locked up in the current assets. Regular availability of adequate working capital
is inevitable for sustained business operation. If the proper fund is not provided for the purpose,
the business operations will be effected. And hence this part of finance to be managed well.

16
Factors requiring consideration while estimating working capital.

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

 Total costs incurred on material, wages.
 The length of time for which raw material are to remain in stores before they are
issued for production.
 The length of the production cycle (or) work in process.
 The length of sales cycle during which finished goods are to be kept waiting for
sales.
 The average period of credit allowed to customers
 The amount of cash required to make advance payment

mportance of Working Capital Ratios

Ratio analysis can be used by financial executives to check upon the efficiency with which
working capital is being used in the enterprise. The following are the important ratios to measure
the efficiency of working capital. The following, easily calculated, ratios are important measures
of working capital utilization.

17
 Formulae Result Interpretation

Stock Average Stock * = x days On average, you turn over the value of your entire stock
Turnover 365/ every x days. You may need to break this down into
(in days) Cost of Goods Sold product groups for effective stock management. Obsolete
stock, slow moving lines will extend overall stock
turnover days. Faster production, fewer product lines,
just in time ordering will reduce average days.
Receivables Debtors * 365/ = x days It takes you on average x days to collect monies due to
Ratio Sales you. If your official credit terms are 45 day and it takes
(in days) you 65 days. One or more large or slow debts can drag
out the average days. Effective debtor management will
minimize the days.

Payables Creditors * 365/= x days On average, you pay your suppliers every x days. If you
Ratio Cost of Sales (or negotiate better credit terms this will increase. If you pay
(in days) Purchases) earlier, say, to get a discount this will decline. If you
simply defer paying your suppliers (without agreement)
this will also increase - but your reputation, the quality of
service and any flexibility provided by your suppliers may
suffer.
Current Ratio Total Current = x times Current Assets are assets that you can readily turn in to
Assets/ cash or will do so within 12 months in the course of
Total Current business. Current Liabilities are amount you are due to
Liabilities pay within the coming 12 months. For example, 1.5 times
means that you should be able to lay your hands on
$1.50 for every $1.00 you owe. Less than 1 times e.g.
0.75 means that you could have liquidity problems and
be under pressure to generate sufficient cash to meet
oncoming demands.
Quick Ratio (Total Current = x times Similar to the Current Ratio but takes account of the fact
Assets - Inventory)/ that it may take time to convert inventory into cash.
Total Current
Liabilities
Working (Inventory + As % A high percentage means that working capital needs are
Capital Ratio Receivables - Sales high relative to your sales.
Payables)/
Sales

18
Advantages of adequate working capital

Adequate working capital provides certain benefits to the company they are:

1 increase in debt capacity and goodwill

Adequate working capital represents the financial soundness of the company. If one company
is financially sound it would be able to pay its creditors timely and properly. It will increase
companies’ goodwill. It crests confidence among investors and creditors. Thus a firm with
adequate working capital can raise requisite funds from market, borrow short term credit
form banks, and purchases inventories of raw material etc., for the smooth operations of its
business.

Increase in production inefficiency

With adequate working capital the firm can smoothly carryout research and development
actives and thus adds to it production efficiency.

Exploitation of favorable opportunities

In the presence of adequate working capital, a company can avail the benefits of favorable
opportunities. Adequate working capital will help the company to have bulk purchases,
seasonal storage of raw material etc., which would reduce the cost of production, thus adds to
its profit.

Meeting contingencies adverse changes:

A company can easily face certain business and economic crises a company having adequate
working capital can successfully meet contingencies such as business oscillations, financial
crisis arising from heavy losses etc.,

Available cash discount

Maintenance of adequate working capital enables a company to avail the advantage of cash
discount by making cash payment for to the suppliers of raw materials and merchandise.
Obviously it will reduce the cost of production and increase the profit of the company.

Solvency and efficiency fixed assets.

It helps to maintain the solvency of the company. So that payments could be made in time as
and when they fall due. Likewise, adequate working capital also increases the efficiency for
fixed assets insofar as their proper maintenance depends upon the availability of funds.

19
Attractive dividend to shareholders

It enables the company to offer attractive dividend to the shareholders so that sense of
security and confidence will increase among them. It also increases the market values of its
shares.

Dangers of inadequate working capital

Having inadequate working capital les to so many of dangers as it doesn’t fulfill its purpose.
Some are given below:

Loss of goodwill and creditworthiness

As the firm fails to on or its current liabilities it loses it goodwill and creditworthiness among
its creditors. Consequently, the firm finds it difficult to procure the requisite funds for its
business operations on easy terms, which ultimately results in reduced profitability as well as
production interruption.

Firm can’t make use of favorable opportunities

The firm fails to undertake the profitable projects, which not only prevent the fir from
availing the benefits of favorable opportunities but also stagnate its growth.

Adverse effects of credit opportunities

The firm also fails to avail the attractive credit opportunities but also stagnate its growth

Operational inefficiencies
In leads the company to operating inefficiencies, as day to day commitments cannot be met.

Effects on financial capacity

Inadequacy of working capital also weakness the shock absorbing capacity of the firm
because it cannot meet the contingencies arising form business oscillations, financial losses,
due to shortage of working capital.

Non achievement of profit target

The firm cannot implement operational plans due to unavailability of fund. This will lead to
non achievement of profit margin.
Dangers of redundant working capital

As the inadequate working capital is dangerous to the firm, redundant working capital also
brings hazardous condition in to the company. Let us discuss the dangers of redundant
working capital to the company.
Low rate of return on capital
Excessive or redundant working capital implies the presence of idle funds that earn no profit
to the firm. So it cannot earn a proper rate of return on its total investments, whereas profits
are distributed on its total investment, whereas profits are distributed on the whole of its
capital.

Decline in capital and efficiency

Since the rate of return on capital is low the company tempts to make some adjustment to
inflate profit to increase the dividend. Sometimes these unearned dividends paid out of the
company’s capital to keep up the show of prosperity by window dressing of accounts.
Certain provision, such as provision for depreciation, repairs and renewals are into made.
This leads to decline in operating efficiency of the firm.

Loss of goodwill and confidence.

Lower rate of return leads to lower dividend available to share holder. This leads to down fall
in market value of the company’s share and markets the shareholder lose their confident in
company.

Evils of over capitalization

Excessive working capital is often responsible for giving berth to the situation of
overcapitalization in the company with all its evils. Over capitalizations is not only disastrous
to the smooth survival of the company but also interests of those associated with the
company.

Destruction of turnover ratio

It destructs the control over turnover ratio. This is commonly used in the conduct of an
efficient business.

It is evident from the foregoing discussion that a company must have adequate working
capital pursuant to its requirements. It should neither be excessive not inadequate. Both
situations are dangerous. While inadequate working capital adversely affects the business
operations and profitability. Excessive working capital remains idle and earns no profits for
the company. So company must assure its working capital is adequate for its operations.
Blueprint for a good working capital management policy

General action

Set planning standards for stock days. Debtor days and creditor’s days.
Having set planning standards (as above) KEEP TO THEM. Impress on staff that these
targets are just important operating budgets and standards cost.
Instill an understanding amongst the staff that working capital management produces profits.

Action on stocks

Keep stock levels as low as possible, consistent with not running out of stock and not
ordering stock in uneconomically small quantities. “just in time” stock management is fine,
as long as it is “just in time” and never fails to deliver on time.

Consider keeping stock in suppliers warehouses drawing on its as needed and saving
warehousing cost.

Action on debtors /customers

Assess ALL significant new customers for their ability to pay. Take references, examine
account , and ask around. Try not to take on new customers who would be poor payers.

Re assess ALL significant customers periodically. Stop supplying existing customers who are
poor payers, you may lose sales, but you are after QUALITY of business rather than
QUANTITY of business. Sometimes poor paying customers suddenly (and magically!!) find
cash to settle invoices if their supplies are being cut off. If customers can’t pay / won’t pay
let your competitor have them. Give your competitor a few more problems.

Consider factoring sales invoices the extra cost may be worth it in terms of quick payment of
sales revenue, less debtor administration and more time to carry out your business (rather
than spend time chasing debts)

Consider offering discounts for prompt settlement of invoices, but only if the discounts are
lower than the costs of borrowing the money owed from other sources.

Action on creditors

Do NOT pay invoices too early take advantage of credit offered by suppliers it’s free!!
Only pay early if the supplier is offering a discount. Even then, consider this to be an
investment. Will you get a better return by using working capital to settle the invoice and
take the discount than by investing the working capital in some other way?

Establish a register of creditors to ensure that creditors are paid on the correct date not earlier
an not later.
 THE CONCEPT OF ZERO WORKING CAPITAL

In today’s world of intense global competition, working capital management is receiving

increasing attention from managers striving for peak efficiency the goal of many leading
companies today, is zero working capital. Proponent of the zero working capital concept
claims that a movement toward this goal not only generates cash but also speeds up
production and helps business make more timely deliveries and operate more efficiently. The
concept has its own definition of working capital: inventories+ receivables- payables. The
rational here is (I) that inventories and receivables are the keys to making sales, but (II) that
inventories can be financed by suppliers through account payables.

Companies use about 20% of working capital for each sale. So, on average, working capital
is turned over five times per year. Reducing working capital and thus increasing turnover has
two major financial benefits. First every money freed up by reducing inventories or
receivables, by increasing payables, results in a onetime contribution to cash flow. Second, a
movement toward zero working capital permanently raises a company’s earnings.

The most important factor in moving toward zero working capital is increased speed. If the
production process is fast enough, companies can produce items as they are ordered rather
than having to forecast demand and build up large inventories that are managed by
bureaucracies. The best companies delivery requirements. This system is known as demand
flow or demand based management. And it builds on the just in time method of inventory
control.

Clearly it is not possible for most firms to achieve zero working capital and infinitely
efficient production. Still, a focus on minimizing receivables and inventories while
maximizing payables will help a firm lower its investment in working capital and achieve
financial and production economies.

ESTIMATION OF WORKING CAPITAL MANGEMENT

As discussed above a number of factors are responsible for determining the amount of
working capital required by affirm. Let us know discuss the various methods/ technique used
in assessment of firm’s working capital requirements. These methods are.

1) Estimation of components of working capital method.

This method is based on the basic definition of working capitalizes, excess of current assets over
the current liabilities. In other word the amount of different constituent of the working capital
such as debtors, cash inventories, creditors etc are estimated separately and the total amount of
working capital requirement is worked out accordingly.
(ii) Percent sales method
This is the most simple and widely used method in combination with other scientific methods.
According to this method a ratio is determined for estimating the future working capital
requirement. This is the generally based on the past experience of management as the ratio varies
from industry to industry. For example if the past experience shows that the amount of working
capital has been 20% of sales and projected amount of sales for the next year is Rs 10 lakes, the
required amount of working capital shall be Rs Two lakh.

As seen from above the above method is merely an estimation based on past experience. Their
fore a lot depends on the efficiency of decision maker, which may not be correct in all
circumstances. Moreover the basic assumptions regarding linear relationship between sales and
the working capital may not hold well in all the cases. Therefore this method is not dependable
and not universally acceptable. At best, this method gives a rough idea about the working capital.

(iii) Operating cycle approach

The need of working capital arises mainly because of them gap between the production of goods
and their actual realization after sales. This gap is technically referred as the “operating cycle” or
the “cash cycle” of the business. If it were possible to complete the entire job instantaneously,
there would be no need for current asset (working capital) but since it is not possible, every
business organization is forced to have current asset and hence operating cycle. It may be divided
into four stages.

1. Raw materials and stores storage space.

2. Work in process stage.
3. Finished goods inventory stage.
4. Debtor’s collection stage,

Duration of operating cycle

The duration of the operating cycle is equal to sum of the duration of these stages less the credit
period allowed by the suppliers of the firm. In symbol

OC= R+W+F+D—C

WHERE
OC= Duration of the Operating Cycle
R= Raw materials and storage space periods
W= work in process periods.
F= finished goods storage periods
D= debtor collection period
C= Creditors collection period.

The component of the operating cycles has already been calculated in “ratio
Analysis” which is as follow.
R= average stock of raw material
---------------------------------
Average raw material consumption per day

F= Average stock of stores

---------------------------------------------
Average stores consumption per day

W= average work in process inventory

---------------------------------------------------
Average cost of production per day

D= average book debts

---------------------------------------------------
Average credit sales per day

C= ` average trade credit

----------------------------------------------------
Average trade credit purchase per day
26
Impact of Working Capital Management Policies on Corporate Performance—An
Empirical Study

Sushma Vishnani, Bhupesh Kr. Shah (2007)

It is felt that there is the need to study the role of working capital management policies on
profitability of a company. Conventionally, it has been seen that if a company desires to take a
greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its
sales. If it is interested in improving its liquidity, it increases the level of its working capital.
However, this policy is likely to result in a reduction of the sales volume, therefore of
profitability. Hence, a company should strike a balance between liquidity and profitability. In
this paper an effort has been made to make an empirical study of Indian Consumer Electronics
Industry for assessing the impact of working capital policies & practices on profitability during
the period 1994–95 to 2004–05. The impact of working capital policies on profitability has been
examined by computing coefficient of correlation and regression analysis between profitability
ratio and some key working capital policy indicator ratios.

Working Capital Management: A Study on British American

Tobacco Bangladesh Company Ltd.

Md. Sayaduzzaman (2007)

The efficiency of working capital management of British American Tobacco Bangladesh
Company Ltd. is highly satisfactory due to the positive cash inflows, planned approach in
managing the major elements of working capital. Applications of multi-dimensional models of
current assets mix may have positive impact on the continuous growth & development of this
multinational enterprise. This depends on co-operation of the stakeholders and business
environment in the context of globalization.
The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey

F. Samiloglu and K. Demirgunes (2008)

The aim of this study is to analyze the effect of working capital management on firm
profitability. In accordance with this aim, to consider statistically significant relationships
between firm profitability and the components of cash conversion cycle at length, a sample
consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-
2007 has been analyzed under a multiple regression model. Empirical findings of the study show
that accounts receivables period, inventory period and leverage affect firm profitability
negatively; while growth (in sales) affects firm profitability positively.

27
Working Capital Management, Growth and Performance of New Public Companies

By Beneda, Nancy, Zhang, Yilei (2008)

The current study contributes to the literature by examining impact of working capital
management on the operating performance and growth of new public companies. The study also
sheds light on the relationship of working capital with debt level, firm risk, and industry. Using a
sample of initial public offerings (IPO's), the study finds a significant positive association
between higher levels of accounts receivable and operating performance. The study further finds
that maintaining control (i.e. lower amounts) over levels of cash and securities, inventory, fixed
assets, and accounts payables appears to be associated with higher operating performance, as
well. We find that IPO firms which are experiencing unusually high growth tend not to perform
as well as those with low to moderate growth. Further firms which are experiencing high growth
tend to hold higher levels of cash and securities, inventory, fixed assets, and accounts payables.
These findings tend to suggest that firms are willing to sacrifice performance (accept low or
negative operating returns) to increase their growth levels. The higher level of growth is also
associated with higher operating and financial risk. The findings of this study suggest that
perhaps IPO firms should stay more focused on their operating performance than on maintaining
high growth levels.

Working Capital and Financial Management Practices in the Small Firm Sector

Michael J. Peel ,Nicholas Wilson (2008)

MICHAELJ. PEEL IS A LECTURER IN accountancy and finance at Cardiff Business School,

University of Wales, and Nicholas Wilson is Professor of Credit Management at the University
of Bradford, England. Very little research has been conducted on the capital budgeting and
working capital practices of small firms. The purpose of this paper is to present the results of a
preliminary study on the working capital and financial management practices of a sample of
small firms located in the north of England. In general, the results of the survey indicated that a
relatively high proportion of small firms in the sample claimed to use quantitative capital
budgeting and working capital techniques and to review various aspects of their companies'
working capital. In addition, the firms which claimed to use the more sophisticated discounted
cash flow capital budgeting techniques, or which had been active in terms of reducing stock
levels or the debtors' credit period, on average tended to be more active in respect of working
capital management practices. It is hoped that the issues raised will stimulate further theoretical
and empirical contributions on this neglected and important area of small business research.

Study on working capital management

Stuttgart/Munich, June 29, 2009

Roland Berger Strategy Consultants study on working capital management: Optimizing current
assets helps tap into cash potential and build buffers against insolvency

28
  Our study entitled "Working capital – Cash for recovery" looks at 216 European
companies with total sales of EUR 3,700 billion and total EBIT of EUR 422 billion
 Presently, the insolvency risk is increasing as higher cash requirements coincide with
reduced cash supply and high financing costs
 Internal sources of finance are becoming more interesting: one of the main lever is
tapping into the cash potential in working capital
 The companies surveyed had a combined potential of EUR 353 billion in Q1 2009,
roughly one third more than in 2008
 Relative to tied-up working capital, utilities and engineered products companies have the
greatest cash reserves hidden in their working capital

In the current economic situation, companies are facing a higher risk of insolvency. On the one
hand, they need more cash; on the other, lenders are more tightfisted than usual and the financing
costs are higher. In its study entitled "Working capital – Cash for recovery", Roland Berger
Strategy Consultants has analyzed 216 European companies by taking a close look at their
internal sources of finance. The result? At the moment, releasing the cash reserves hidden in
working capital offers the greatest potential for improving liquidity. According to the Roland
Berger experts, the companies surveyed had a total cash potential of EUR 353 billion. This
turned out to be especially true for utilities and engineered products companies.

"In the current recession, working capital is emerging as a key source of internal finance," says
Roland Schwientek, Partner at Roland Berger's Operations Strategy Competence Center.
Increased cash requirements and a reduced cash supply with higher financing costs combine to
increase the likelihood of insolvency. In their study called "Working capital – Cash for
recovery", the experts highlight alternative sources of internal finance: "As some traditional
sources of cash have dried up, the most promising solution is to tap into the liquidity potential
hidden in working capital," says Schwientek. According to the experts, internal finance based on
optimized working capital is much more effective than external finance. Even small
improvements in receivables, inventories and payables can generate significant reductions in
external finance requirements.

EXAMPLE

A recent example of business attempting to maximize working capital management is the

recurrent attention being given to the application of Six Sigma® methodology. Six Sigma®
methodologies help companies measure and ensure quality in all areas of the enterprise. When
used to identify and rectify discrepancies, inefficiencies and erroneous transactions in the
financial supply chain, Six Sigma® reduces Days Sales Outstanding (DSO), accelerates the
payment cycle, improves customer satisfaction and reduces the necessary amount and cost of
working capital needs. There appear to be many success stories, including Jennifer Towne’s
(2002) report of a 15 percent decrease in days that sales are outstanding, resulting in an increased
cash flow of approximately $2 million at Thibodaux Regional Medical Center. Furthermore, bad
debts declined from $3.4 million to $600,000. However, Waxer’s (2003) study of multiple firms
employing Six Sigma® finds that it is really a “get rich slow” technique with a rate of return
hovering in the 1.2 – 4.5 percent range
29
30
 Indian Electrical Industry
Prospects of the Indian Electric/Electronic industry

Like every other industrial sector in India, the Indian Electrical/Electronics Industry too is slowly
emerging from out of its "protective cover". For far too long has Indian Industry remained
shackled and consequently inward looking. Over the past fifty years there was no exposure to
global players and competition, with the result that the Industry grew up in a sheltered
environment, dependent on the Government for everything, from licenses to protection to tariffs.
Each one of these interventions was aimed at securing protection for oneself and ensuring
growth of one’s own organization at the cost of industry and the nation at large. Lack of global
competition encouraged a "cost plus" approach, where every conceivable cost increase was
passed on to the customer. There was thus no motivation to reduce costs.

With delicensing, decontrol and deregulation, Indian Industry has suddenly been exposed to
global competition. Since last decade, India has witnessed what global players have achieved and
what they are capable of achieving. We are becoming aware of competition on our turf. In this
scenario, every company complains of increased competition, lower order books and shrinking
margins. The Indian Electrical/Electronics Industry is of course further besieged by the fact that
there is a dearth of business on account of lack of investment in the power infrastructure. Many
organizations in this industry are looking overseas to develop the export markets owing to reduce
demand at home.

At the outset, it must be stated that the reduced domestic demand is at best a temporary
phenomenon. The power sector in India is bound to grow and this will undoubtedly boost
demand from the Utilities, quite apart from the industrial demand which will continue to grow
with increased industrial output. The poor financial health of the SEBs is however a damper that
cannot be wished away in the short term. This will continue to plague corporate in the Electrical
Industry, until the SEB restructuring and unbundling brings a turnaround in the medium term.

Segments of Electrical and Electronics Industry

The global electrical and electronics industry centres around various adjunct sectors. Few of
them are Electronic Components, Computer & Office Equipments, Telecommunications,
Consumer Electronics as well as Industrial Electronics.

Electronic Components Industry

This particular industry is engaged in designing, manufacturing, marketing, supporting, selling and
distributing of broad range of electronic components such as bolts, clamps, fasteners, lighting,
semi conductors, integrated circuits, microprocessors, cables and wires, switches, sensors,
keyboards, sockets, sonar devices, test and inspection equipment etc. Worldwide market leaders
electronic components are United States of America, European, Asian countries like Japan,
China, India, Taiwan, and Hong Kong.
Future Prospects

31
The domestic market in India is itself large, and one must firstly satisfy this market with
products that meet international quality standards. With increasing globalization, every
international player is now operating in India, providing goods and services complying with
international quality. Once we deliver high quality products and services within the domestic
market, accessing the international market for exports should not pose a serious challenge. The
Electrical/Electronics Industry in India is growing to its full potential in the coming years and no
doubt that India will soon come to be recognized for quality products and services which in turn,
will bring this industry to a position of true leadership.

Indian electrical industry has grown because of government's thrust on it and also due to overall
economic growth. It has also reached a stage where the industry has demonstrated its
capabilities. The industry has seen a growth of 20% and should continue at the same level for the
next few years.

Factors Governing the Growth of this Industry

Every industry thrives on some supporting factors. In this connection, there are few factors
governing the growth of electrical and electronics industry: Research & development played an
important role to the increased productivity and higher-value added electrical and electronics
products.

Foreign investments accelerated growth in production and export as well. To expand their
business, foreign companies have done huge investments which lead developing countries in
establishing production units.

Global industries like Medical, Telecommunications, Industrial & Automotive industries have been
cordially supported by electrical & electronics industry.

Increase in income changed living standards of the common mass. As a result, it increased the
demand of electronics especially consumer electronics products globally.

Electric & Electrical industry is highly fragmented which comprises of many small and medium
size enterprises resulting into a huge industry.

Asia Pacific region is emerging as the most spinning place for the consumer electronics industry,
as the markets remain still unreached.

Innovation has played importantly in this industry. It led to a consistent demand for newer and
faster products and applications

32
33
We, Vantex Paints Pvt. Ltd., are a professionally managed firm, working as a reliable manufacturer and supplier of
Industrial Paints, Enamel and other allied products. The ultra-modern machines and technology are utilized in the
production of the range. Besides, the ingredients used for composition are directly sourced from the profound vendors.
Our paints and enamel apply to many products to make them resistant to oil, corrosion, grease, water, dust and acid.
Further, to match up the set standard of the market, our range is offered to customers in international quality grade.
Original Equipment Manufacturer:

Yes

Standard Certifications:

ISO 9001:2008

Bankers:

State Bank Of India

Year of Establishment:

2002

Production Type:
34
Automatic Semi-Automatic

Business Type:

Manufacturer And Supplier

Product Range:

Paints

Automotive Paint

Lead Free Paints

Epoxy Paint

Adhesive Decorative Paints

Synthetic Enamel Paints

Exterior Paints

Industrial Paints

Epoxy Finish Paint

Interior Paints

Heat Resistant Paint

Plastic Paint

Finish Paint

Heat Resistant Aluminum Paint

Fast Drying Automotive Paint & N.C. Paint

Texture Paint

Aluminum Paint

Emulsion

Exterior Emulsion

35
Paint With Silicone Emulsion

Paint Enamel

Interior Emulsion

Low Super Acrylic Emulsion

Coatings

Epoxy Coatings

Texture Coating

High Performance Coating

Polyurethane Coatings

Primers

Synthetic Enamel Primers

Synthetic Primers

Epoxy Primers

Repellent

Rain Guard Silicon Based Repellent

Water Based Repellent

We also develop:
Gloss Enamel
Wood Finishing
Wall Putty
Rainsol Waterborne
Acrylic Plaster
Melamine
S. Sealer

36
37
  
         
VPP 18
S. SEALER FOR WOOD
Send Inquiry

 
         
VPP 25
Wall Sealer Paint
Send Inquiry

 
         

38
 OBJECTIVES & OBLIGATIONS

Objectives:

❖ To maximize utilization of the existing facilities in order to improve efficiency and

increase productivity.

❖ To work towards the achievement of self-sufficiency in the field of shakers market by

setting up adequate capacity and to build up expertise in lying of crude.

❖ To further enhance distribution network for providing assured service to customers

throughout the country through expansion of reseller network as per Marketing Plan/
Government approval.

Obligations:

❖ Towards Customers and Dealers: To provide prompt, courteous and efficient

service and quality products at fair and reasonable prices.

❖ Towards Suppliers: To ensure prompt dealings with integrity, impartiality and

courtesy and promote ancillary industries.

❖ Towards Employees: Develop their capability and advancement through appropriate

training and carrier planning.

❖ Towards Community: To develop techno-economically viable and environment

friendly products for the benefit of the people.

39
SWOT ANALYSIS OF SRASWATI DYNAMICS PVTLTD

Strengths:-
1. Price of different range of product is more compatible than others.

2. Vantex Paints pioneered the manufacturing of electrodynamic vibration shakers in India.

3. Vantex Paint is innovative in nature they make changes in their product on time to time.

4. Vantex Paints is the world first company to manufacture the full range of vibration test
system and environmental test chamber’s under one roof.

Weaknesses

1. Limited market and tough competition

2. Continuous increase in labor cost.

3. The Shortage of skilled laborers.

4. Appreciation of rupees against foreign currencies.

Opportunities

1. Increase in the production and sell of cement at different plants have increased the turnover
of the company.

2. The modernization, productivity improvement and cost control measures will improve the
performance of the division in times to come.

3. Explore the new market in the rest of the world.

40
Threats

1. The numbers of players are increasing which further increases the competition

2. Appreciation of rupees against foreign currencies affects the income of the company.

3. It is hard to find the skillful labor for the company.

41
Statement showing change in working capital for Vantex Paints

Particulars 17-08 16-17 Increase ( + ) Decrease (- )

Current Assets
Inventories 1,4182750 14052466 130284
Sund. Debtors 48975443 30901152 18074291
Cash & Bank 2304500 1895049 409451
Loan & Advances 30660132 23485905 7174227
Total ( A ) 96122825 70334572

Current Liabilities
C.L. 34394235 19139989 15254246
Provisions 2980000 3184500 204500
Total ( B ) 37374235 22324489

( A-B ) 58748590 48010083 25992753 15254246

↑ in working 10738507 10738507
capital
Total 58748590 58748590 25992753 25992753

Statement showing change in working capital for Vantex Paints

Particulars 16-17 15-16 Increase ( + ) Decrease ( - )
Current Assets
Inventories 14052466 13908710 143756
Sund. Debtors 30901152 12821864 18079288
Cash & Bank 1895049 1496214 398835
Loan & Adv. 23485905 13988679 9497226
Total ( A ) 70334572 42215467

Current Liabilities
C.L. 19139989 26021539 6881550
Provisions 3184500 1233000 1951500
Total ( B ) 22324489 27254539

( A-B ) 48010083 14960928 35000655 1951500

↑ in working 33049155 33049155
capital
Total 48010083 48010083 35000655 35000655

42
CALCULATION OF WORKING CAPITAL FOR VANTEX PAINTS

Particular 31.03.16 31.03.17 31.03.18

CURRENT ASSETS

INVENTORIES 13908710 14052466 14182750

SUNDRY DEBTORS 12821864 30901152 48975443
CASH AND BANK 1496214 1895049 2304500
LOANS & ADVANCES 13988679 23485905 30660132

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

TOTAL CURRENT ASSESTS (a) 42215467 70334572 961225
--------------- --------------- -----------
LESS:-

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES 26021539 19139989 34394235

PROVISION 1233000 3184500 2980000

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

TOTAL CURRENT LIABILITIES (b) 27254539 22324489 37374235
--------------- -------------- --------------

NET CURRENT ASSETS (a-b) 14960928 48010083 58748590

NET WORKING CAPITAL

70000000
60000000
AMOUNT

50000000
40000000
30000000
20000000
10000000
0

43
 58748590
2
48010803
0
1
6
2 14960928

0
1
8
Y
E
A
R

44
ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials content in a store of factory at any given time.
Inventory means stock of three:-

1. Raw materials
2. Semi finished goods.
3. Finished goods.

Position of inventory in Vantex Paints

Particular 31.03.16 31.03.17 31.03.18

Raw material 3152145 2928101 2672500

Stock in process 10756565 11124365 11510250
--------------- ---- ------------- ----------------
13908710 14052466 14182750
----------------- --------------- ------------

Analysis through chart:

14182750

14200000 14052466
AMOUNT

14100000
14000000
13900000 13908710
13800000

13700000
2016 2017 201
YEAR
INTERPRETATION:

By analyzing the 3 years data we see that the inventories are increased year by year. We are
looking increasing pattern in inventories. We can see that inventories are grown by 1% and 0.9%
in 15-16 and 17-18 respectively from previous year. By this growth we can say that the company
is growing. A company uses inventory when they have demand in market and Vantex Paints is
having a demand in industry market. That is biggest reason for increase in inventories. From
other point of view we can say that the liquidity of firm is blocked in inventories but to stock is
very good due to uncertainty of availability of raw material in time.

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under
current assets. Debtors will arise only when credit sales are made.

Position of Sundry Debtors inVantex Paints

Particular 31.03.16 31.03.17 31.03.18

Debts outstanding more than 6 months 781270 3888555 5672000

Other Debts 11091194 27012597 45946207

------------------ ------------------- -----------
Total (a) 11872464 30901152 51618207
---------------- --------------- ----------

Less:

Doubtful Debts 949400 -------- 2642764

Total (b) 949400 -------- 2642764

-------------- ----------------- -------
Total (a-b) 12821864 30901152 48975443
-------------- --------------- --------
Analysis through chart:

60000000
48975443
50000000
40000000
Amount

30901152
30000000

20000000 12821864

10000000
0

2016 2017 2018

YEAR

INTERPRETATION

In the table and figure we see that there is continuous rise in the debtors of Vantex Paints in the
successive years. A simple logic is that debtors increase only when sales increase and if sales
increases it is good sign for growth. We can see 141% and 58% growth in 16-17 and 17-18
respectively from previous years.

We can say that it is a good sign as well as negative also. Company policy of debtors is very
good but a risk of bad debts is always present in high debtors. When sales are increasing with a
great speed the profit also increases. If company decreases the Debtors they can use the money in
many investment plans.

CASH AND BANK BALANCE ANALYSIS

Cash is called the most liquid asset and vital current assets, it is an important component of
working capital. In a narrow sense, cash includes notes, bank draft, cheque etc while in a broader
sense it includes near cash assets such as marketable securities and time deposits with bank.
Position of Cash and Bank Balance in Vantex Paints

Particular 31.03.16 31.03.17 31.03.18

Cash in hand 250748 80017 1033235

Fixed deposit 1059523 1367844 787961

Bank balances

With scheduled bank:

In Current Account 185943 447188 483304
-------------- ------------- -----------
Total 1496214 1895049 2304500
------------- ------------------ ---------

Analysis through chart:

2500000
AMOUNT

2000000

1500000

1000000

500000

0 2016 2017 2018

YEAR
INTERPRETATION

If we analyze the above table and chart we find that it follows a increasing trend. In the year
2016 it had maintained a huge amount of cash and bank balance which has increase in the year
2017 and 2018. Although company’s cash is increasing but this is very good sign for company.
The analysis shows that the fix deposits of company are rapidly fallen in the year as 42.3% in 17-
18 respectively from previous year. Company is utilizing the fixed cash for exploding the
projects that is good for growth,

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees
for a specific period of time and in return they will be liable to make timely repayment of that
amount in addition to interest on that loan.

Position of Other Loans & Advances in Vantex Paints

Particular 31.03.16 31.03.17 31.03.18

Advance Tax & Tds 128878 353919 1926354

Loans & Advances (assets) 11684618 22079745 27466165

Prepaid Expenses 244335 43000 216326

Security Deposit & Earnest Money 770928 1009240 1051286

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

Total 12828759 23485904 30660131
------------------ ----------------- --------------

60
Analysis through chart:

35000000

30000000

25000000
AMOUNT In RS
20000000

15000000

10000000

5000000

0 2016 2017 2018

YEAR

INTERPRETATION

If we analyze the table and the chart we can see that it follows an increasing trend which is a
good sign for the company. We can see that the increase of 83% and 30.54% in 16-17 and 07-18
respectively from previous year.

The increasing pattern shows that company is giving advances for the expansion of plants and
machinery which is good sign for better production. Although company’s cash is blocked but
this is good that company is doing modernization of plants In time to compete with other
competitors in market.

CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current
liabilities that has to be paid by the firm within one year.
Position of Other Current Liabilities in Vantex Paints

Particular
31.03.16 31.03.17 31.03.18

Advance From customer 523512 10084413 7536341

Bank O/D A/c 431 1482216 84248

Creditor for expenses 9674075 2487913 1503979

Creditor for good 12720801 3518381 11617976

Creditor for other ---------- ----- 11027760

Expenses payable&
Duties & Taxes 3102720 1567066 2623931

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

Total 26021539 19139989 3434235
------------------- --------------- --------

Analysis through
chart:
AMOUNT ( IN RS )

35000000
30000000
25000000
20000000
15000000
10000000
5000000
0

2016 2017 2018

YEAR
INTERPRETATION

If we analyze the above table then we can see that it follow an uneven trend. The important
component of current liabilities is sundry creditors and other liabilities. In 16-17 it decreased by
27% and in 17-18 it increased by 75%. In 17-18 it was increased because of growth in other
liabilities .This is liability for company so this should be less. When company have minimum
liabilities it creates a better goodwill in market. High current liabilities indicate that company is
using credit facilities by creditors.

PROVISIONS ANALYSIS

Position of Other Provisions in Vantex Paints

Particular 31.03.16 31.03.17 31.03.18

Fringe Benefit Tax 562000 425000 300000

Income tax 671000 2759500 2680000

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

Total 1233000 3184500 2980000
------------- ------------ -------------
Analysis through chart:

AMOUNT ( IN RS )

3500000

3000000

2500000

2000000

1500000

1000000

500000
2016 201 2018
0
YEAR

INTERPRETATION

From the above table we can see that provision shows an uneven trend and the huge amount is
being kept in these provisions. Though the profits of the company are increased income tax is
also increased which is good that company is creating goodwill in market by pa ing income tax
in time. The income tax is increased by 158% in 16-17 and fall 6% in 17-18 respectively from
previous year. Although company is paying more income tax but also they are earning more.
This is good sign for Company growth.
Position of RECEIVABLE RATIO in Vantex Paints

FORMULA
DEBTORS
RECEIVABLE RATIO =------------------* 365
SALES

YEAR 31.03.16 31.03.07 31.03.08

RECEIVABLE RATIO (IN DAYS) 62.41 89.79 133.59

Analysis through chart:

160
140
120
DAYS

100
80
60
40
20
0
2016 2017 2018

YEAR
INTERPRETATION

Generally a low debtors turnover ratio implies that it considered congenial for the business as it
implies better cash flow. The ratio indicates the time at which the debts are collected on an
average during the year. Needless to say that a high Debtors Turnover Ratio implies a shorter
collection period which indicates prompt payment made by the customer.

Now if we analyze the three year data we can say that it holds a good position while receiving
its money from its debtors. The ratios are in an increasing trend, which implies that recovery
position is good and company should maintain these positions

Position of PAYABLE RATIO in Vantex Paints

FORMULA
CREDITORS
PAYABLE RATIO=------------------------------* 365
COST OF SALES

YEAR 31.03.16 31.03.17 31.03.18

PAYABLE RATIO (IN DAYS) 116.66 28.83 113.81

Analysis through chart:

140

120

100
DAYS

80

60

40

20

0
2016 2017 2018

YEAR

INTERPRETATION

Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers
throughout the year. Generally a low creditor’s turnover ratio implies favorable since the firm
enjoys lengthy credit period

Now if we analyze the three years data we find that in the year 2016 the ratio was very high
which means that its position of creditors that year was not good, but in the next years it is seen
that it has followed a decreasing trend which is very good sign for the company but in 2018 it
followed a increasing trend So we can say it not enjoys a very good credit facility from the from
the suppliers.
Position of CURRENT RATIO in Vantex Paints

FORMULA

TOTAL CURRENT ASSETS

CURRENT RATIO= --------------------------------------------
TOTAL CURRENT LIABILITIES

YEAR 31.03.16 31.03.17 31.03.18

CURRENT RATIO 1.5 3.15 2.57

Analysis through chart:

3.5

2.5
DAYS

1.5

0.5

0
2016 YEAR 2017 2018
INTERPRETATION

This ratio reflects the financial stability of the enterprise. The standard of the normal ratio is 2:1
but in most of companies standard is taken according to Tandon Committee which is taken as
1.33:1.

Now if we analyze the three years data it can be predicted that it holds a stable position all
throughout period but it is seen that it holds a low position in 2016 compare the standard one but
the company improve its position in 2017 &2018 which show improving position of the
company

Position of QUICK RATIO in Vantex Paints

FORMULA

TOTAL CURRENT ASSETS - INVENTORIES

QUICK RATIO= -----------------------------------------------------------------
TOTAL CURRENT LIABILITIES

YEAR 31.03.16 31.03.17 31.03.18

QUICK RATIO 1.03 2.52 2.19

70
Analysis through chart:

2.5

2
DAYS

1.5

0.5

0
2016 2017 2018

YEAR

INTERPRETATION

It is the ratio between quick liquid assets and quick liabilities. The normal value for such ratio is
taken to be 1:1. It is used as an assessment tool for testing the liquidity position of the firm. It
indicates the relationship between strictly liquid assets whose realizable value is almost certain
on one hand and strictly liquid liabilities on the other hand. Liquid assets comprise all current
assets minus stock.

By analyzing the three years data it can be said that its position was weak in the year 2016 but it
improved significantly in the next two years and was stable during that year and it is meet with
the standard & in the year 2017 & 2018 it was very satisfactory and it can be said that its
liquidity position is stable & good.
Position of WORKING CAPITAL RATIO in Vantex Paints

FORMULA

COST OF GOOD SOLD

WORKING CAPITAL TURNOVER RATIO = -------------------------------------------------------
WORKING CAPITAL

YEAR 31.03.16 31.03.17 31.03.18

WORKING CAPITAL RATIO 4.68 1.57 1.31

Analysis through chart:

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2016 2017 2018

YEAR
INTERPRETATION

This ratio indicates whether the investments in current assets or net current assets ( i.e., working
capital ) have been properly utilized. In order words it shows the relationship between sales and
working capital. Higher the ratio lower is the investment in working capital and higher is the
profitability. But too high ratio indicates over trading.

This ratio is an important indicator about the working capital position. Now if we analyze the
three years data, we find that it follows a decreasing trend which means that its investment in
working capital is higher and the company not utilizing more of its profit. But we find that it is
not a good sign for the company and the company is required to look into these matters closely.

Position of INVENTORY TURNOVER RATIO in Vantex Paints

FORMULA

AVERAGE STOCK
STOCK TURN OVER RATIO (IN DAYS) =----------------------------------------* 365
COST OF GOODS SOLD

YEAR 31.03.16 31.03.17 31.03.18

STOCK TURN OVER RATIO 65.02 67.16 36.14

Analysis through chart:

80

70

60
DAYS

50

40

30

20

10

0
2016 2017 2018

YEAR

INTERPRETATION

This ratio tells the story by which stock is converted into sales. A high stock turnover ratio
reveals the liquidity of the inventory i.e., how many times on an average, inventory is turned
over or sold during the year. If a firm maintains a minimum stock level in order to maximize
sales by quick rotation of inventory and the holding cost of inventory will be minimum. A low
stock turnover ratio reveals undesirable accumulation of obsolete stock.

By analyzing the three year data it seen that it follows an uneven trend. We see that from the year
2016 to 2017 it is more which has been rectified in the year 2018. But it is needless to say that
ratio the company maintains is very high in 2016 &2017 and the company is required to take
measures to lower down this ratio as it affects the working capital cycle of company and the flow
of cash in the company. In 2018 we saw company take measure to lower down its ratio which is
good for company because A low stock turnover ratio reveals undesirable accumulation of
obsolete stock.
Position of Debt-Equity RATIO in Vantex Paints

Formula = Debt / Equity

Calculation of debt-equity ratio at Vantex Paints

Particulars 2005-16 2016-17 2017-18

Debt 4750168 70518408 58513399
Equity 31543972 51077695 72736936
D/E Ratio 0.15:1 1.38:1 0.80:1

Analysis through chart:

1.6
1.4
D/E Ratio

1.2
1
0.8
0.6
0.4
0.2
0
2005-16 2016-17 2007-18

YEAR
Interpretation

This ratio establishes a relationship between external liabilities and shareholder fund. The DER
is worked out to ascertain the relative proportion of debt & equity in financing the assets of the
firm. Generally, a debt equity ratio Of 1:1 is considered satisfactory

When a company has lower d/e ratio, it means that company is utilizing its own funds and
reserves rather than taking loans from outsiders. Vantex Paint have a uneven trend in d/e ratio so
we can say that in 2016 which portray that debt is less than shareholder fund but in 2017 it
increase due to it increase in debt more than its equity but in 2018 its lees than the equity which
show company in satisfactory position & the long term solvency position of the enterprise is
quite comfortable.
Material storage period position of Vantex Paints

FORMULA

Average stock for the year

Material storage period (in days) = ---------------------------------------
Daily average consumption

Average stock = opening stock + closing stock

---------------------------------------
2

Daily average consumption = Annual average consumption

-----------------------------------------
360

YEAR 31.03.16 31.03.17 31.03.18

Material storage period (R) = 30 days 18 days 16days

Analysis through chart:

16

2016
30
2017
2018

18

Production process period position of Vantex Paints

FORMULA

Average work in process (WIP)

Production process period (in days) = ---------------------------------------
Average production cost
 Average WIP = opening WIP + closing WIP
---------------------------------------
2

Average production cost = Average daily cost of production

-----------------------------------------
360

YEAR 31.03.16 31.03.17 31.03.18

Production process period (W) 361days 171days 5days

Analysis through chart:

171 2016
2017
2018

361

80
Finished goods storage period position of Vantex Paints

FORMULA

Average stock of the finished good

Finished goods storage period (in days) = ---------------------------------------
Average cost of sales per day

Average finished good = opening finished goods + closing finished goods

-------------------------------------------------
2

Average cost of sales = Annual cost of goods sold

-----------------------------------------
360

YEAR 31.03.16 31.03.17 31.03.18

Finished goods storage period (F) 00 00 00

Interpretation

Vantex Paints doesn’t hold the finished goods in stock. As the finished goods is manufactured it
made their goods after the demand of product from the customer. That’s why the finished good
storage period of Vantex Paints is nil.

Debtor collection period of Vantex Paints

FORMULA

Debtor collection period = average debtors

------------------------------
Daily average sales

Average debtors = opening debtor + closing debtor

-------------------------------------------
2

Daily average sales = Annual sales

-----------------------------
360
YEAR 31.03.16 31.03.17 31.03.18

Debtor collection period (D) = 51days 62days 1076days

Analysis through chart:

5162

2016
2017
2018

1076
Creditor payment period of Saraswti Dynamics

FORMULA

Creditor payment period = Average trade creditor

-------------------------------------------
Average credit purchase per day

Average payment period = opening creditor + closing creditor

---------------------------------------------------
2

Average credit purchase per day = Annual credit purchase

-------------------------------
360

YEAR 31.03.16 31.03.17 31.03.18

Creditor payment period(C) 228days 85days 37days

Analysis through chart

37

2016
85 2017
2018

228

Operating cycle period of Vantex Paints

Formula

OC = R +W+F+D-C
YEAR 31.03.16 31.03.17 31.03.18

Operating cycle period 214days 166 days 1063days

Analysis through chart

214

166 2016
2017
2018

1063
 OBJECTIVE OF THE RESARCH

The objective of this project work is to focus on the working capital of the Vantex Paints Pvt.
Ltd. and exploring its potential in the company. The project contain the basic postulates of
working capital, procedure of analysis of working capital, ratio being used to define the working
capital and the impact of working capital in the company in case of excess or inadequacy. Also,
the project contains analysis of estimation of working capital requirement and the procedure to
estimate working capital requirement in manufacturing and trading concern and from the data
available it can be concluded that it holds a very strong position in the market.

RESEARCH DESIGN

The research design for the comparative study is of exploratory type and the focus is given to
discover the possible measures, by detailed analysis, for the company which would be helpful up
to some extent to retain a good position in the competitive market. The research design is not
formal and rigid one as the focus depends upon the availability of new ideas and relationship
among variables.
DATA COLLECTION METHOD

Primary Data:

The primary data are which are collected afresh and for the first time, and thus happen to be
original in character.

Secondary sources:

The Secondary data are those which have already been collected and through processed the
statically process.

For the purpose of study both primary as well as secondary data have been used. The secondary
data have been collected from company broachers, newspapers, company annual reports, and
websites. For the collection of primary data personally asked the question.
For the purpose of knowing whereabouts of the company in the present market secondary data
has disclosed many important information as- market share of the company and its potential in
the electro dynamic vibration market leaders on the basis of various attributes .

Tools for analysis:

The following statistical tools have been used for analyzing the data.

➢ Column diagram
➢ Sampling percentage
➢ Pie-Diagram
SIMPLE PERCENTAGE ANALYSIS

Percentage refers to a special kind of ratio. Percentages are used in making comparison between
two or more variables to find the efficacy of each variable. Percentages are used to describe
relationships among them replacing the common base say (100) so that comparisons can be made
easy and meaning full.

Percentage = current year * 100

Previous year

90
 CONCLUSIONS

After completing my project on working capital management in Vantex Paints, I can say that
now I understand working capital much better and in a practical way. This project helps me in
understanding the daily requirement in a manufacturing firm.

During my training period in Vantex Paints I am able to know the importance of working capital
in any company especially if the concern is a big one. It enable the company to have regular
supply of raw material, regular payment of salary and wages, exploit the favorable market
conditions, have ability to face crisis and also make the good image of the company. In Vantex
Paints the working capital requirements are very high as production is continuous in the concern.

Working capital is also a major external source of capital for especially small and medium sized
firms. These firms have relatively limited access to capital markets and tend to overcome this
complication by short-term borrowing. Working capital position of such firms is not only an
internal firm-specific matter, but also an important indicator of risk for creditors. Higher amount
of working capital enables a firm to meet its short-term obligations easier. This results increase
in borrowing capability and decrease in default risk (and consequential decrease in cost of capital
and increase in firm value). So, it is possible to state that efficiency in working capital
management affects not only short-term financial performance (profitability), but also long-term
financial performance (firm value maximization).

From the discussion in this project we can say that Vantex Paints manage its working capital
requirement in an effective and efficient manner. Its current assets are approx. twice of its current
liabilities which is the standard for any company and it means that the company always have the
sufficient amount of cash to meet any type of liability at any time.
 Major Findings

Statement Showing Difference from Previous Year

Particulars 16-17 17-18

Investments 000000000 -100000

↑ by0% ↓.79%

Inventories 143756 130284

↑ by 1% ↑ by 0.92%

Sundry Debtors 108079288 18074291

↑ by 141% ↑ by 58%

Cash & Bank 398835 409451

↑ by 26.6% ↑ by 21.6%

Current Liabilities -6881550 15254246

↓ by 26.44% ↑ by 76.69%

Reserve & Surplus 19533723 21659241

↑ by 86.76% ↑ by 51.51%
1. Vantex Paints profit is increasing day by day from last three years.

2. Vantex Paints has shown that it is very strong competitor in Electrodynamics

shaker market in India.

3. Overall all ratios of the company are good and company need to work with more
efficiency

4. Lack of advertisement can be said as weak point of the Vantex Paints.

5. Firm profitability can be increased by shortening accounts receivables and

inventory periods

6. Position of the stock is increasing per year that is good sign to face the competition
coming ahead.

7. Recession in the economy affect the Vantex Paints.

8. Appreciation in rupees reduces the profit the company.

9. The major sources of raw materials are local sources and USA, UK, etc

10. Working capital management of the Vantex Paints Is satisfactory due to efficient
management of inventory, debtors, cash balances and working funds.

11. The major elements of working capital are inventory, debtors, cash balances and short
term investments.

12. Cash management of the company is done through cash budget, cash flow statement and
other steps.

13. The company has bright prospects due to efficient management of mace, machine
materials & technology.

14. The company has successful uses of working capital due to planned inventory,
receivables, cash, finance and good cash inflow.
 BIBLIOGRAPHY

Reference of book

Dr.A.K.Garg (2007), Basic Business Finance, Swati Prakashan Publisher, UP

C.R.Kothari (2009), Research Methodology, New Age International Publishers, New Delhi

Reference of web page

www.ventaxcom

http://aggregate-inventory-management-47605.htm

http://www.allelectricalproducts.com/indian-electricalindustry.html

http://isb.agepub:com/(g)/content/abstract/1412152

http://findarticles:com/P/articles/mi-qa3857/is200807/ai_n30992061

http://wwwfinanceweek:co.uk/item/6240

http://findarticle.com/P/article/mi-qa5439/is_200801/ai_n27996599

http://wwwemeraldinsight.com/insight/viewcontentservlet?filename=published/emeraldfull
text article/Articles/0010340208html