WORKING CAPITAL MANAGEMENT

at Foundry & Forge Division,

HINDUSTAN AERONAUTICS LIMITED, BANGALORE

SUBMITTED BY

GULWINDER SINGH
(Reg. No – 212618308)

[Link] (PROFESSIONAL) 3RD YEAR

Under the guidance of

Mrs. DEEKSHITHA
ASSISTANT PROFESSOR (SENIOR SCALE)

DEPARTMENT OF COMMERCE
MANIPAL ACADEMY OF HIGHER EDUCATION
MANIPAL
 DECLARATION

I Gulwinder Singh, hereby declare that this project report titled “Working Capital
Management at Hindustan Aronautics Ltd ” submitted by me to Manipal Academy of
Higher Education in partial fulfilments of the requirements of the Degree of Bachelor of
Commerce (professional) is a record of genuine work carried out by me under the guidance
Of Mrs. Deekshitha (Assistant Professor) Manipal Academy of Higher Education, Manipal.
This report is the outcome of my internship with Hindustan Aronautics Ltd, Bangalore and
contents of this report have not previously formed the basis for the award of any Degree,
Diploma, or such other Similar title.

Gulwinder Singh
212618308
Date:
 ACKNOWLEDGEMENT

I have completed my internship project with deep satisfaction and accomplishment. I would
like to take this opportunity to thank everyone who has helped me in my time of need. I
would like to thank department of commerce, Manipal academy of Higher education, Head of
the department, Department of commerce, MAHE.
I highly appreciate our guide’s assistance. Many thanks to , Mrs. Deekshitha Assistant
Professor Department of Commerce, Manipal academy of higher education, Manipal. For his
assistance in carrying out this research project, as well as making this report.
Finally, I would like to express our gratitude to Hindustan Aronautics Ltd and all others who
have assisted in the completion of this Internship Project.

Gulwinder Singh – 212618308

Department Of Commerce
Manipal Academy Of Higher Education
CERTIFICATE
 CONTENTS

CHAPTER PARTICULARS PAGE

NO. NO.
I 1. Introduction
Introduction to Study 2
II 2. About the Organisation
About the Organisation 4-5
Organisation Structure, Functioning & Process 6-9
III 3. Background of the Project
Literature Review 11
Objective of the Study 12
Scope Of the Study
Research Methodology 13
IV 4. Data Analysis
Tools & Techniques 15
Analysis of Data 16-30
V 5. Findings, Suggestion & Conclusion
Findings of the study
Suggestion of the study 32
Conclusion
VI 6. Bibliography 34-36
CHAPTER I

Page | 1
 INTRODUCTION

This study titled “WORKING CAPITAL MANAGEMENT AT HINDUSTAN

AERONAUTICS LIMITED” is done as a part of my [Link] curriculum.

It explains the several processes necessary in working capital management as well as how the
business handles its working [Link] the company's ability to pay for operations,
reinvest, and meet capital obligations and payments declines, it is the lifeline. A company's
cash flow health must be understood before making any investments. A company's working
capital can be a useful indicator of its cash flow prospects.

Working capital is the total amount of money available to carry out regular or ordinary
commercial [Link] differently, it refers to the total sum of money utilized to
finance the ongoing operations. To put it succinctly, it's the money that the firm operates on.
Thus, working capital is defined as the capital that is invested in and locked up in a variety of
current assets, including cash and bank balances, raw material and finished goods stocks,
work-in-progress stocks, and finished goods stocks.

A finance manager's primary focus is working capital management, which plays a big role in
company decisions. This is because reaching the goal of value maximization rests heavily on
making wise working capital decisions.

A company has to have enough working capital on hand to ensure that production and
distribution go effectively. It is necessary to keep working capital at a level that is neither
excessive nor insufficient for it to operate its company operations. "Optimum Working
Capital" is the term used to describe this amount of working capital.

Working capital is divided into two concepts: net concept and gross concept. Current
liabilities less Current Assets is the formula for calculating net working capital. It is a
working capital derivation that is frequently utilized in valuation methods like discounted
cash flows, or DCFs.

Page | 2
CHAPTER II

Page | 3
 ABOUT THE ORGANISATION

Hindustan Aeronautics Limited (HAL), a defence Public Sector Unit, is a global aerospace
company. Established in 1940, HAL which is an abbreviated form of Hindustan Aeronautics
Limited has been an essential component of India's aviation sector that caters to both military
and civilian components alike. HAL has proven its competence in the areas of Design,
Development, Construction, and Aftercare of Combat Aircraft, Helicopters, Commercial
Aircraft, Engines, and other Equipment and Structures.

 HAL is mostly responsible for the participation in the Indian defence sector, it also
avails the services for civil applications. For instance, HAL helicopters are involved
in many tasks like - rescue operations, medical evacuation, transport and any other
civilian missions.
 HAL has a dedicated R&D division which is always directing the innovation and the
development of technology in aerospace. Collaboration with the wide range of R&D
institutions and other organizations both domestically and abroad, the HAL aims at
increasing its capability and developing most advanced aerospace solutions.
 HAL has built collaborations with various international aeronautical entities,
facilitating tech transfer, co-development initiatives, and mutual supply contracts to
the company's capability to grow and lead in the aerospace domain. Being placed
among the leading aerospace companies in India, HAL envisages a leading role in the
national defence production sector. It strengthens the local production base of defence
technologies for the indigenous defence sector and thus mitigates the risk of imports.
 HAL is spread in many production locations and research centers in India with
cutting-edge manufacturing capabilities and test facilities for maintaining high-quality
and reliable aerospace production.

To sum up, the indispensable role of Hindustan Aeronautics Limited (HAL) can be sensed in
the Indian aviation sector through its legacy in both defence and civil aviation spheres.

Foundry and Forge Division, a unit of HAL, is a manufacturer of Castings, Forgings,

Rolled Rings, Shape Memory Alloy Ferrules, Brake pads and Rubber products for critical
applications in Aerospace, Defence, Locomotive, Earthmover and other Heavy Engineering
industries.

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 Products of HAL

Aircraft Satellite Launch Vehicles

 SU-30 MKI  PSLV
 Hawk  GSLV
 LCA  IRS
 HTT-40  INSAT

Civil Aircraft Helicopters

 Dhruv ALH  Dhruv
 Hindustan-228  Chetak
 Cheetah
 LCH
 LUH
Aircraft MRO
 Jaguar
 Mirage
 Kiran-II
 MiG – 21 Bison

Page | 5
ORGANISATION STRUCTURE, FUNCTIONING & PROCESS

Organisation Structure –

GM (F&F division)

DGM (Quality
DGM (HR)
control)

DGM DGM (Finance)

(Marketing)

Manager (Finance)

Chartered
Accountant

DGM
DGM (Foundry)
(Manufacturing)

DGM (Engineering
DGM (CMPL Lab)
Services)

DGM (IMM) DGM (TRG)

Page | 6
Organisational Functional Areas –

Every company's lifeblood is its Finance. The basic component of all economic activity is
finance. As a result, effective financial management and effective organizational management
are closely linked.

It illustrates the strength and weakness as well as opportunities and threats, through
company's financial performance. However, in HAL, the government makes all financial
decisions with the welfare of the country in mind.

Decisions made by the corporate office under government supervision include those
regarding the capital budget, dividend policy, working capital management, investment in
fixed assets, and other financial matters. The office also strives to fulfill customer needs by
providing its products, which are primarily supplied to the defence organisaton of our nation.

HAL is a financially successful government sector enterprise. The entire share capital of HAL
is owned by the government, and all major financial operations are managed by its corporate
office, which also has control over all of HAL's divisions.

Finance department of HAL has different sections:

MATERIAL ACCOUNTING SECTION

This section's primary duties include:

• Maintaining the material ledger for items kept in stores.

• Checking the balance against the ledger.
• Material ledger balances and bin-card balances quality reconciliation.
• Keeping track of materials loaned out and following up on their return in the loan
register.
• Examining redundant, sluggish, and stationary inventory.
This section checks a variety of documents before forwarding them to the computer/data
processing section for processing, which then generates the required accounting output
statements.

BOOKKEEPING SECTION

The following are the roles played by the bookkeeping section:

• Journal and ledger maintenance.

• Trial balance preparation. Profit & Loss statements, balance sheet.
• Maintenance of the allocation register and capital asset ledger.
• Fixed asset and depreciation schedule preparation.
• Providing information needed to calculate income tax liability.
• Disposing extra/condemned equipment and other assets.

Page | 7
 • The corporate offices and the divisions' control account reconciliation.
• Coordinating with auditing authorities.

CASH SECTION

All cash and check payments as well as accounting are done by this section.
This section's primary duties include:

• Receipts of cash, cheques, postal orders, bank drafts, and other payments and issuing
official receipts for the same.
• Depositing all received funds.
• Withdrawing money for Carter's daily needs from the bank.
• Making cash or check payments for vouchers.
• Entry into bank and cash books.
• Drafting the statement of bank reconciliation.
• Safekeeping of money, cheque-books, bank guarantees, receipts for fixed deposits,
and other investments, etc.

BILLS PAYABLE SECTION

Bills payable (Inland)

• Accounting for and making payments on advances to inland vendors.

• Final bill accounting and payments.
• Bank transactions involving suppliers.
• Recovering or adjusting advances.
• Accounting for and modifying the supplier's security deposit and earnest money.
• Receipts voucher pricing and accounting.

Bills payable (foreign)

• Accounting and payment for freight bills, agency commission bills, and customer duties.
• Accounting for and paying suppliers for advances and services received through joint
ventures and other sources.
• Adjustments and advances recovery.
• Pricing and accounting for receipt vouchers.
Opening a letter of credit and corresponding with banks to secure the release and payment of
foreign exchange.
• Maintaining commitment records and deferred liabilities for financial purposes.

BILLS RECEIVABLE SECTION

This division is in charge of creating and sending bills to clients for goods delivered and
services rendered, as well as tracking down and accounting for the money that is not
recovered.

This section performs the following tasks:

Page | 8
• Examines sales orders, including expert sales.
• Creating invoices for services provided and work completed or to be completed.
• Examining completed work orders for which bills need to be generated.
• Documenting the rendered invoice.
• Recording sales of goods and rendered services.

COST SECTION

Batch costing: All components, small assemblies, sub-assemblies, etc. needed for batches of
engines, aircrafts, or equipments are produced in this system based on batch orders. Even
though work orders and job tickets are issued, labor and material costs are booked on work
orders and costs are recorded separately for the manufacturing of individual components.

Job costing: This method is used for various jobs such as RMS orders, manufacturing spares
for HAL/IAF stores, and overhauling or repairing aircraft, equipment, etc. This system issues
a unique work order for each project's overhaul and for the manufacturing of each spare part.

Standard costing: It is a cost control technique that should be applied to manufacturing

projects, containing the fabrication of major assemblies, final assemblies, sub-assemblies, and
detailed components. When work schedules are available, it can be extended for regular
overhauls of major products such as wheel assemblies, high-value notables, engine avionics,
and airframes. To derive variances under each category for control, labor and material
standards need to be fixed.

Page | 9
CHAPTER III

Page | 10
 BACKGROUND OF THE PROJECT

REVIEW OF THE LITERATURE

Mohammad Neab and Noriza BMS (2010) conducted a consider 2010 centering on the
relationship between working capital administration and productivity among little and
medium-sized undertakings (SMEs) in Malaysia. The ponder pointed to explore whether
effective working capital administration emphatically impacts SMEs' benefit. Utilizing board
information examination, Neab and BMS inspected a test of 214 SMEs recorded on the
Malaysian stock trade from 2003 to 2007. They utilized different money related proportions
related to working capital administration and benefit for their investigation.

Mathuva (2009) conducted a consider on the impact of working capital administration on

firm execution, utilizing a test of about 30 freely recorded companies recorded on the Nairobi
Stock Trade, crossing from 1993 to 2008. Through examination utilizing settled impacts
relapse models, a few key discoveries developed. Firstly, a negative relationship was watched
between the time taken to gather cash from clients and firm efficiency. Longer installment
periods were found to be related with expanded benefit, as they possibly diminish budgetary
strain on the firm.

Jain, P. K. and Surendra S.Y. (2007) examine different angles of working capital
administration, counting the relationship between current resources (CAs) and current
liabilities (CLs), financing strategies for working capital, and methodologies for taking care
of excess or shortfall working capital. The consider analyzes thirteen a long time of
information from 1991 to 2003, enveloping 137 open division endeavors.

Singaravel, P. (1999), investigates the interconnecting of working capital, liquidity, and

benefit, emphasizing the supremacy of liquidity adequacy taken after by working capital
adequacy and benefit. The article digs into the perplexing relationship between liquidity,
working capital, and productivity.

Page | 11
OBJECTIVE OF THE STUDY
• Assessing the working capital needs of the companies.
• Analyzing HAL's liquidity position by decoding and examining various ratios.
• Conducting its business in a financially sound and profitable manner to contribute
effectively to the national goal of building a resilient and self-sustaining economy.
• Identifying and highlighting the strengths and weaknesses of HAL's liquidity and
working capital management from various perspectives.

SCOPE OF THE STUDY

This study is done on the subject 'Working capital administration of Hindustan Flight
Limited''. The think about as it were covers on the viability of working capital administration
and as it were based on the auxiliary information.
Ponders of the working capital administration in HAL Ltd benefits the organization to know
around the reasons for increment or diminish the working capital.

RESEARCH METHODOLOGY & DATA SOURCE

RESEARCH DESIGN
A inquire about plan may be a map developed to direct the inquire about. It could be a portion
of the arranging organize of investigate, a diagram for the collection, estimation, and
examination of information. Great inquire about. plan serves three critical capacities, firstly, it
gives a outline for investigate, and furthermore, it limits the boundaries of investigate action
and makes efficient examination possible. Thirdly, it empowers a analyst to expect potential
issues that he may experience within the future.
A commonsense inquire about plan comprises of taking after stages:

• The factual plan which concerned with the address of how numerous things are to be
watched and how the data and information assembled are to be dissected.
• The operational plan which bargains with the procedures by which the strategies indicated
within the inspecting, measurable and observational plans, can be carried out.

DATA SOURCE

Secondary data refers to information that has been previously gathered for purposes other
than the current investigation. In this study, secondary data was collected from a variety of
sources including company files, records, books, papers on organizational culture, the
company's website, annual reports, and relevant textbooks.

Page | 12
CHAPTER IV

Page | 13
 DATA ANALYSIS

TOOLS & TECHNIQUES

The Analysis of the working capital can be conducted through several methods, the methods
used in the study are as follows:

1. Ratio analysis
2. Net working capital

RATIO ANALYSIS

Ratio analysis entails assessing a corporation's financial performance through the comparison
of diverse financial ratios derived from its financial statements. This method aids in
evaluating a company's profitability, liquidity, efficiency, and solvency, thereby offering
valuable insights into its overall financial well-being and performance. These ratios serve as
tools for evaluating the financial health, performance, and potential risks of the company. The
key categories of ratios include:
1. Current Ratio
2. Quick Ratio
3. Debtors Turnover Ratio
4. Average Debt Collection Period
5. Inventory to current Assets Ratio
6. Inventory Turnover Ratio
7. Inventory Conversion Period
8. Creditors Turnover Ratio
9. Working Capital Turnover
10. Net Profit Ratio

NET WORKING CAPITAL

Net working capital is determined as the disparity between a firm's current assets and its
current liabilities. This metric signifies the available capital for meeting short-term
obligations and financing daily activities. By subtracting current liabilities from current assets
as indicated on the balance sheet, net working capital can be calculated. A positive net
working capital denotes sufficient short-term assets to cover short-term liabilities, whereas a
negative value suggests potential liquidity challenges.

Page | 14
 1. CURRENT RATIO

The current ratio is a financial measure that compares the current assets and current liabilities of an
organization to determine how liquid it is. By dividing current assets by current liabilities, it may be
calculated.

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

Cash, accounts receivable, inventories, and other assets that are anticipated to be turned into cash
within a year are examples of current assets. Conversely, current liabilities consist of all debts and
commitments that are due within a year, such as accumulated expenses, short-term loans, and
accounts payable. More current assets than liabilities indicate a company's greater liquidity, as
indicated by a current ratio greater than 1. On the other hand, a ratio less than 1 can cause you to
worry about liquidity.

CURRENT RATIO
YEAR CURRENT CURRENT CURRENT
ASSETS (In LIABILITY RATIO
[Link].) (In Rs. Cr.)
2019 39,644.23 28,193.22 1.406
2020 41,395.42 31,019.89 1.334
2021 40,179.57 25,511.64 1.574
2022 45,007.12 25,019.85 1.798
2023 51,886.31 30,825.42 1.683

Current Ratio
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2019 2020 2021 2022 2023

Page | 15
INTERPRETATION

The company's current ratio experienced some fluctuations over the years but generally
remained above 1, indicating a healthy liquidity position. There was a slight decrease in
2020 followed by increases in 2021 and 2022, with a slight decrease again in 2023.
Despite the fluctuations, the company maintained a strong ability to cover its short-term
obligations throughout the period.

2. LIQUID RATIO

The quick ratio, Also known as the acid-test ratio, it evaluates how well a company can use its
most liquid assets to meet its short-term financial obligations. Inventory is subtracted from
current assets to find the amount, which is then divided by current liabilities. Stronger liquidity is
indicated by a higher quick ratio.

LIQUID RATIO = CURRENT ASSETS - INVENTORY

CURRENT LIABILITIES
Investors and analysts use the quick ratio, among other financial metrics, to evaluate a company's
short-term liquidity status. It offers information about how successfully a business can pay its
short-term debts without having to sell inventory. Investors and stakeholders use the quick ratio
to analyze a company's ability to weather short-term financial issues, such as unanticipated
spending or a fall in sales. It offers important information on the state of a company's finances
and the management team's proficiency in working capital management.

QUICK RATIO
YEAR LIQUID ASSETS CURRENT LIQUID RATIO
(CASH + TRADE LIABILITY
RECEIVABLE)
(In Rs. Cr.) (In Rs. Cr.)
2019 12,554.41 28,193.22 0.445
2020 11,881.3 31,019.89 0.383
2021 12,805.69 25,511.64 0.501
2022 18,985.16 25,019.85 0.758
2023 25,025.22 30,825.42 0.811

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 Quick Ratio
0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2019 2020 2021 2022 2023

INTERPRETATION

The company's quick ratio, a measure of short-term liquidity, has exhibited an upward
trend from 2019 to 2023. Starting at 0.445 in 2019, it rose to 0.811 by 2023. This
progression suggests an improved ability to cover immediate liabilities with liquid assets
over the years, reflecting positively on the company's financial health and management. A
higher quick ratio indicates increased resilience to short-term financial challenges,
potentially enhancing investor confidence and operational stability.

3. DEBTORS TURNOVER RATIO

The debtor turnover ratio, also known as accounts receivable turnover ratio, assesses how
efficiently a company manages its accounts receivable by measuring how many times
during a specific period it collects its average accounts receivable balance. This ratio is
crucial in evaluating the effectiveness of a company's credit policies and collection
procedures.

DEBTORS TURNOVER RATIO = NET CREDIT SALES .

AVERAGE ACCOUNTS RECEIVABLE

Where:
- Net Credit Sales represent the total credit sales made by the company during the period.
- Average Accounts Receivable is calculated as (Opening Accounts Receivable + Closing
Accounts Receivable) / 2

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 DEBTORS TURNOVER RATIO
YEAR NET SALES DEBTORS DEBTORS
(In Rs. Cr.) (In Rs. Cr.) TURNOVER
RATIO
2019 19,820.93 10,100.29 1.962
2020 21,217.87 12,021.21 1.765
2021 22,368.93 8,611.38 2.598
2022 24,361.66 5,140.46 4.739
2023 26,927.85 4,680.31 5.753

Debtors Turnover Ratio

7

0
2019 2020 2021 2022 2023

INTERPRETATION

The debtor turnover ratio, which measures how efficiently a company collects payments
from customers. Starting at 1.962 in 2019, it rose to 5.753 by 2023. This trend signifies
improved efficiency in collecting payments, suggesting effective credit management and
potentially stronger customer relationships. A higher ratio indicates better liquidity and
cash flow, as the company can convert accounts receivable into cash more rapidly.
Overall, the increasing debtors turnover ratio reflects improved effectiveness in managing
accounts receivable and suggests positive financial health for the company.

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 4. AVERAGE DEBT COLLECTION PERIOD

The average debt collection period is a critical financial metric that evaluates the
efficiency of a company's accounts receivable management. It represents the average
number of days it takes for a company to collect payments from its customers.

DEBT COLLECTION PERIOD = DAYS IN A YEAR .

(in days) DEBT TURNOVER RATIO
A shorter debt collection period shows that the business can turn its accounts receivable into cash
faster, which improves cash flow management and liquidity. On the other hand, a prolonged collection
period could indicate ineffective credit management or trouble collecting payments, which could have
an effect on the financial stability and operational effectiveness of the business. Sustaining business
operations and a sustainable cash flow depend on tracking and managing the average debt collection
period.

DEBT COLLECTION PERIOD

YEAR DAYS IN A YEAR DEBT DEBT
TURNOVER COLLECTION
RATIO PERIOD
2019 365 1.590 230 days
2020 365 1.831 200 days
2021 365 3.966 92 days
2022 365 5.248 69 days
2023 365 5.706 63 days

Debt Collection Period

250

200

150

100

50

0
2019 2020 2021 2022 2023

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INTERPRETATION

The debt collection period for the years 2019 to 2023 shows a notable trend of decreasing
values over time. In 2019, the debt collection period was 230 days, indicating that, on
average, it took the company 230 days to collect payments from its customers. However,
by 2023, this period had reduced significantly to just 63 days.

5. INVENTORY TO CURRENT ASSETS RATIO

The inventory to current assets ratio is a financial metric used to assess the proportion of a
company's current assets that are tied up in inventory.

INVENTORY TO CURRENT ASSETS RATIO = INVENTORY .

CURRENT ASSETS

A lower ratio indicates that inventory represents a smaller proportion of current assets,
potentially signaling efficient inventory management and better liquidity. Monitoring this
ratio helps stakeholders evaluate the company's ability to convert inventory into cash and
its overall liquidity position.
By understanding the relationship between inventory and current assets, businesses can
make informed decisions regarding inventory management strategies and financial
planning to optimize operational efficiency and maintain healthy liquidity levels.

INVENTORY TO CURRENT ASSETS RATIO

YEAR INVENTORY CURRET ASSETS INVENTORY TO
(In Rs. Cr.) (In Rs. Cr.) CURRENT ASSETS
RATIO
2019 19,684.77 39,644.23 0.496
2020 19,453.92 41,395.42 0.469
2021 16,560.33 40,179.57 0.412
2022 14,343.61 45,007.12 0.318
2023 12,160.67 51,886.31 0.234

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 INVENTORY TO CURRENT ASSETS RATIO
0.6

0.5

0.4

0.3

0.2

0.1

0
2019 2020 2021 2022 2023

INTERPRETATION

The inventory to current assets ratio has been steadily decreasing from 2019 to 2023,
indicating a decreasing reliance on inventory as a portion of current assets. This suggests
improved liquidity and financial flexibility within the company over the specified period.

6. INVENTORY TURNOVER RATIO

The inventory turnover ratio is a key financial metric used to assess a company's
efficiency in managing its inventory.

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD

. INVENTORY.............

it provides insights into how quickly inventory is being sold and replenished. A higher
turnover ratio generally indicates effective inventory management and faster sales, which
can lead to reduced storage costs and improved cash flow.
Conversely, a lower ratio may suggest inventory overstocking or slow-moving products,
potentially resulting in higher carrying costs and increased risk of obsolescence.
By analyzing this ratio, businesses can make informed decisions regarding inventory
levels, purchasing strategies, and operational efficiency enhancements to optimize
performance and profitability.

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 INVENTORY TURNOVER RATIO
YEAR COST OF GOODS INVENTORY INVENTORY
SOLD (In Rs. Cr.) TURNOVER
(In Rs. Cr.) RATIO
2019 7,356.68 19,529.97 0.376
2020 8,173.34 19,569.34 0.417
2021 7,771.76 18,007.12 0.431
2022 8,755.25 15,461.95 0.566
2023 10,010.26 13,262.12 0.754

INVENTORY TURNOVER RATIO

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2019 2020 2021 2022 2023

INTERPRETATION

The ratio has been steadily increasing over the years, indicating an improving efficiency
in managing inventory.
From 2019 to 2023, the company's inventory turnover ratio has more than doubled,
suggesting that the company is selling its inventory more frequently and/or managing its
inventory levels more effectively.
This trend suggests positive growth and improved operational efficiency within the
company's inventory management system over the specified period.

7. INVENTORY CONVERSION PERIOD

The inventory conversion period is the length of time that a business typically needs to sell and
replace its inventory. It is calculated by dividing the number of days in a given period by the
inventory turnover ratio.

INVENTORY CONVERSION PERIOD = DAYS IN A YEAR .

(in days) INVENTORY TURNOVER

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Over time, fluctuations in this period can indicate changes in efficiency and management
of inventory. Analysing trends in the inventory conversion period allows businesses to
assess the inventory management strategies, optimize stock levels, and improve cash
flow.
By closely monitoring this metric, companies can identify areas for improvement and
make informed decisions to enhance operational efficiency and profitability.

INVENTORY CONVERSION PERIOD

YEAR DAYS IN A INVENTORY INVENTORY
YEAR TURNOVER CONVERSION
PERIOD
2019 365 0.376 970.74
2020 365 0.417 875.29
2021 365 0.431 846.86
2022 365 0.566 644.87
2023 365 0.754 484.08

INVENTORY CONVERSION PERIOD

1200

1000

800

600

400

200

0
2019 2020 2021 2022 2023

INTERPRETATION

The inventory conversion period, representing the average time to sell and replace
inventory, has steadily decreased from 2019 to 2023. Starting at 970.74 days in 2019, it
dropped to 484.08 days by 2023. This trend indicates improved inventory management
efficiency and faster turnover, suggesting enhanced operational effectiveness and
potentially increased profitability for the company.

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8. CREDITORS TURNOVER RATIO

The creditors turnover ratio assesses a company's ability to manage its accounts payable
by indicating how often it pays its creditors within a specific timeframe.

CREDITORS TURNOVER RATIO = NET ANNUAL CREDIT PURCHASE

AVERAGE ACCOUNT PAYABLE

A higher ratio suggests that a company pays its creditors more frequently, indicating
better liquidity and potentially stronger supplier relationships. Conversely, a lower ratio
may signal delays in payment or challenges in managing cash flow.

CREDITORS TURNOVER RATIO

YEAR NET ANNUAL AVERAGE CREDITORS
CREDIT ACCOUNT TURNOVER RATIO
(In Rs. Cr.) PAYABLE
(In Rs. Cr.)
2019 16,641.64 2,632.81 6.321
2020 17,922.28 4,089.23 4.383
2021 18,844.38 2,246.15 8.390
2022 20,375.40 2,559.00 7.962
2023 22,106.71 3,137.34 7.046

CREDITORS TURNOVER RATIO

9

0
2019 2020 2021 2022 2023

Page | 24
INTERPRETATION

The creditors turnover ratio, which measures how efficiently a company pays its
suppliers, has fluctuated over the years but remained relatively high. Starting at 6.321 in
2019, it decreased in 2020, sharply increased in 2021, and then stabilized in 2022 and
2023 around 7. This suggests varying payment practices and supplier relationships, but
overall, the company appears to maintain consistent and timely payments to creditors.

9. WORKING CAPITAL TURNOVER

The working capital turnover ratio assesses how efficiently a company utilizes its
working capital to generate sales revenue.

WORKING CAPITAL TURNOVER = NET SALES .

NET WORKING CAPITAL

A higher ratio indicates more efficient utilization of working capital to generate sales,
while a lower ratio suggests inefficiency.
By analyzing this ratio over time, businesses can evaluate their ability to generate revenue
relative to the resources invested in working capital. A declining trend may indicate issues
with inventory management, accounts receivable, or excess liquidity.

WORKING CAPITAL TURNOVER

YEAR NET SALES NET WORKING WORKING
(In Rs. Cr.) CAPITAL CAPITAL
(In Rs. Cr.) TURNOVER
2019 20,008.47 11,451.010 1.747
2020 21,438.38 10,375.530 2.066
2021 22,754.58 14,667.930 1.551
2022 24,620.21 19,987.270 1.232
2023 26,927.85 21,060.890 1.279

WORKING CAPITAL TURNOVER

2.5

1.5

0.5

0
2019 2020 2021 2022 2023

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 INTERPRETATION

The working capital turnover ratio for the given years indicates how efficiently a
company utilizes its working capital to generate sales. In 2019, the ratio was 1.747,
indicating that the company generated $1.747 in sales for every dollar of working
capital. This ratio increased in 2020 to 2.066, suggesting improved efficiency.

10. NET PROFIT RATIO

The net profit ratio, also referred to as the net profit margin, serves as a vital financial
metric for evaluating a company's profitability. It offers insight into the efficiency of a
company in converting revenue into profit.

NET PROFIT RATIO = NET PROFIT . X 100

TOTAL REVENUE

A higher net profit ratio indicates that a larger proportion of revenue is being retained as
profit after all expenses, including operating costs, taxes, and interest payments, have
been deducted. This metric is crucial for investors, creditors, and management as it helps
assess the financial health and performance of a business over time and in comparison to
its industry peers.
A consistent and improving net profit ratio is generally a positive indicator of a
company's profitability and operational efficiency.
NET PROFIT RATIO
YEAR NET PROFIT TOTAL REVENUE NET PROFIT RATIO
(In Rs. Cr.) (In Rs. Cr.)
2019 2,346.06 20,383.98 11.509
2020 2,832.36 21,731.71 13.033
2021 3,232.96 23,113.25 13.987
2022 5,086.50 25,606.55 19.864
2023 5,811.17 28,599.65 20.319

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 NET PROFIT RATIO
25

20

15

10

0
2019 2020 2021 2022 2023

INTERPRETATION

From 2019 to 2023, the net profit ratio of the company has shown a consistent upward
trend, indicating improving profitability over the years. In 2019, the net profit ratio was
11.509%, which increased to 13.033% in 2020 and further to 13.987% in 2021. The trend
continued with significant growth, reaching 19.864% in 2022 and 20.319% in 2023.
This consistent increase in the net profit ratio suggests that the company has been
effectively managing its expenses and generating higher profits relative to its total
revenue.

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 NET WORKING CAPITAL
Less short-term obligations, cash, and short-term assets that are anticipated to be converted to
cash within a year. Businesses gauge their cash flow and debt servicing capacity using net
working capital. A positive net working capital shows that the business has enough cash on
hand to fund ongoing or future operations. Although it doesn't usually contribute much to the
company's assets, net working capital keeps it operating on a daily basis.
WORKING CAPITAL TURNOVER

CURRENT ASSET 2019 2020 2021 2022 2023

Inventories 19,684.77 19,453.92 16,560.33 14,363.58 12,160.67
Trade Receivable 12,459.03 11,583.39 5,639.36 4,641.55 4,719.07
Cash & Cash Equipment 95.38 297.91 7,166.33 14,343.58 20,306.15
Short Term Loans & Advances 27.21 19.28 14.56 8.06 7.62
Other Current Assets 7,377.84 10,040.92 10,798.99 11,650.32 14,692.80
TOTAL (A)
39,644.23 41,395.42 40,179.57 45,007.09 51,886.31

CURRENT LIABILITIES 2019 2020 2021 2022 2023

Short Term Borrowings 4,016.20 5,775.18 9.07 0.00 0.00
Trade Payable 2,632.81 4,089.23 2,246.15 2,559.77 3,137.34
Other Current Liabilities 17,050.64 16,355.23 19,280.83 17,404.30 20,911.43
Short Term Provisions 4,493.57 4,800.25 3,975.59 5,055.78 6,776.65
TOTAL (B)
28,193.22 31,019.89 25,511.64 25,019.85 30,825.42
NET WORKING CAPITAL
(A-B) 11,451.01 10,375.53 14,667.93 19,987.24 21,060.89

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 NET WORKING CAPITAL
25000

20000

15000

10000

5000

0
2019 2020 2021 2022 2023

INTERPRETATION

The Net Working Capital, From 2019 to 2023, net working capital is generally on the rise. This
demonstrates that the company's liquidity position has improved over time. An increased net
working capital could indicate that the company has more current assets than current obligations,
which would allow it to pay off short-term debt, invest in expansion opportunities, and deal with
unforeseen financial challenges. Nonetheless, an analysis of the constituents of current assets and
liabilities is essential to understanding the root reasons of this trend and its implications for the
organization's financial management.

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CHAPTER V

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 FINDINGS, SUGGESTIONS & CONCLUSION

FINDINGS OF THE STUDY –

 Stable Liquidity Position - Throughout the years, the company consistently

maintained a current ratio above 1, indicating a stable liquidity position, albeit
with minor fluctuations.
 Efficiency Improvements - Notable improvements in efficiency were observed
across various metrics, such as the quick ratio, debtor turnover ratio, and
inventory turnover ratio, showcasing enhanced management of liquidity, debt
collection, and inventory.
 Profitability Growth - Over the specified period, the net profit ratio
demonstrated a consistent upward trajectory & Sustained growth in profitability.

SUGGESTIONS OF THE STUDY –

 Safeguard Liquidity - It is imperative to continue monitoring and preserving the

current ratio to ensure the company's ability to meet short-term financial
obligations.
 Optimize Efficiency - Efforts should be directed towards further enhancing
efficiency in key areas like debtor turnover, inventory management, and creditor
turnover to maximize operational effectiveness.
 Sustain Profitability - Implement strategies aimed at sustaining the upward trend
in profitability by efficiently managing costs and maximizing revenue streams.

CONCLUSION OF THE STUDY –

 Financial Stability - The company exhibits a commendable level of financial

stability, underscored by its consistent liquidity position, efficiency improvements,
and growing profitability.
 Strategic Imperatives - Ongoing focus on maintaining liquidity, optimizing
efficiency, and sustaining profitability will be vital for the company's resilience
and competitiveness in the market.
 Positive Prospects - With robust financial management practices in place, the
company is poised for continued success and poised to seize opportunities for
growth in the future.

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CHAPTER VI

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 BIBLIOGRAPHY

Book reference –
Financial management by PANDEY, I. M. (2005)
Journals –
 Mohammad Neab and Noriza BMS. (2010), "Working Capital Management
 Mathuva D.M. (2009), "The Influence of Working Capital Management
Components on Corporate Profitability
 Jain, P. K. and Surendra S.Y. (2007), Some Empirical Bases of
Financial ratio Analyses
 Singaravel, P. (1999), Toward a Theory of Working Capital Management

Links –
[Link]
[Link]

Financial statements –

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