A
Report On
Working Capital Management
In the field
Of
Finance for
Zydus Cadila healthcare Ltd.
Submitted By:
PRIYANKA J. SHETH
Batch: 2006 - 08
V.M. Patel Institute of Management
Ganpat University (Kherava)
PREFACE
“Knowledge is power and ideas rule the world.”
Any human being when enters into the world enters with a raw brain and mind. He or She
gains knowledge from the experience of his or her human ancestors, through the Bibles
of the knowledge and also through his own experience.
“Knowledge if not implemented into actions, gets rusted or in length is
nothing. Study of management will immaterial if it is not coupled with
the practical studies.”
A business runs on money. It must have or be able to raise the money needed to pay
money for its buildings, inventories and other assets. Finance plays an important role in
modern business society. Modern industry is capital intensive, which requires huge
capital investment for its functioning. Money is required in every organization, whether
Big or Small, Public Corporation or Private Bodies, commercial establishment or public
service institutions.
“Money is a lubricant that keeps the machinery of business in a
continuous state of activities.”
Corporation finance deals with financial problem of a corporate firm. These problems
include the financial aspect of the firm, the administration of the finance, accounting of
financial transaction and also the financial adjustment necessary to bolster up or
rehabilitate a corporation, which runs into financial difficulties.
ACKNOWLEDGEMENT
The successful completion of this report would not have been possible without the proper
guidance and support of our professors. I would also like to give my gratitude to my
college, which helps me in every aspect to prepare this valuable report.
There is no better work that comes without better efforts; the efforts cannot be better
without proper guidance. I wish to express my gratitude to all the people who provided
factual information technical notes and moral support.
I am obliged to Cadila healthcare limited for providing an opportunity to undergo training
in their esteem organization. I am also thankful to Mr. P.A. Padmanabhan(vice president
of finance), Mr. Jyotindra Gor (Chief Account Officer), Mr. D. [Link], Mr. Suhas
Mulhekar and Mr. J. P. Patel for providing with first hand information.
I would also like to thank
Mr. Sanjay Thoriya Mrs. Gira Desai
Mr. Manoj Soni Mrs. Bhama Warrier
Mr. Deepak Parikh Mr. Sandip Patel
EXECUTIVE SUMMARY
This project is focused on “The Study of Working Capital Management at ZYDUS
CADILA”.
Working Capital Management involves not only managing the different components of
the current assets, but also managing the current liabilities, or to be more precise, the
financing the current assets.
Working Capital can be viewed as the amount of capital required for the smooth and
uninterrupted functioning of the normal business operations of company ranging from the
procurement of raw materials, converting the same into finished products for the sale of
finished goods.
To have a holistic view of the Working Capital Management my project will involve
areas like:
Distribution Channel Management
Receivables Management
Cash Management
Inventory Management
Financial Analysis
The number one reason most people look at a glace sheet is to find out a company’s
working capital (or “current”) position. It reveals more about the financial condition of
business short-term resources, and used them to pay off its short-term liabilities. The
more working capital, the less financial strain a company experiences. By studying a
company’s position, you can clearly see if it has the resources necessary to expand
internally or if it will have to turn to a bank and take on debt.
Working Capital is the easiest of all the balance sheet calculations. Here’s the formula:
Current Assets – Current Liabilities = Working Capital
One of the main advantages of looking at the working capital position is being able to
foresee any financial difficulties that may arise. Even a business that has billions of
rupees in fixed assets will quickly find itself in bankruptcy court if it can’t pay its
monthly bills. Under the best circumstances, poor working capital leads to financial
pressure on a company, increased borrowing, and late payments to creditor – all of which
result in a lower credit rating. A lower credit rating means banks charge a higher interest
rate, which can cost a corporation a lot of money over time.
Companies that have high inventory turns and do business on a cash basis (such as a
grocery store) need very little working capital. These types of businesses raise money
every time they open their doors, then turn around and plough that money back into
inventory to increase sales. Since cash is generated so quickly, management can simply
stockpile the proceeds from their daily sales for a short period of time if a financial crisis
arises. Since cash can be raised so quickly, there is no need to have a large amount of
working capital available. A company that makes heavy machinery is a completely
different story. Because these types of businesses are selling expensive items on a long-
term payment basis, they can’t raise cash as quickly.
TABLE OF CONTANT
[Link]. CONTENT PAGE NO.
PREFACE
ACNOWLEDGEMENT
EXECUTIVE
SUMMARY
1. The Indian Pharmaceutical Industry: An Overview 1
a) Budget
2006-07 8
2. About the company 13
a) About the
founder 13
b) Milestones 16
c)
Management profile 21
d) Cadila’s structure 23
e) SWOT
Analysis 29
3. Working Capital Management 31
4. Receivable
Management 39
a) Credit control 42
b) Claim
settlement 64
c) Distribution channel management 70
d) Ranking of
C&F agents 93
e) Aging 98
5. Inventory
Management 104
6. Cash Management 110
7. Financial
Analysis 115
a) Liquidity Ratio 116
b) Leverage
Ratio 123
c) Activity Ratio 132
d) Profitability
Ratio 148 8.
Conclusion 156
9. Bibliography 157
Appendix