A PROJECT ON WORKING

CAPITAL MANAGEMENT

BARGARH
Submitted To The MBA Dept. For the partial fulfillment
of the degree of Master of Business Administration
For the session 2010-12
UNDER THE GUIDANCE OF:

Mr. G. K. Kara

Mrs. Sarita Mishra

DY.Finance Manager

Lecturer, MBA Dept.

G.M.College, Sambalpur

Submitted by:
Sarita Pattnayak
MBA-1st Year (2010-12)
Roll No.
G.M.College (Autonomous)

ACKNOWLEDGEMENT
No work is solely the effort of its authors. This project is
certainly no exception to this adage. This endeavor is an offspring
of the collective ideas of mine and experiences of the consultants in
corporate finance practice.

First and foremost, I would like to thank my respectable and learned

guide, Mr.G.K. Kara, Dy.Finance Manager but for whos untiring,
persevering and unflinching help; this project would not have seen
the light of day. It is he who initiated the development of the project
and was thus instrumental in showing the right direction in the field
of finance in practice. He provided encouragement and boost in the
transformation of my inherent internal knowledge into a real work
for external audience. I couldnt have devoted the time and energy
to this project without the support and encouragement of my family
members. My special thanks goes to my friends who supported me
to complete this project successfully.
Lastly, I would like to bestow my special regards and gratitude to
the G.M.College, Autonomous, Sambalpur, which provided me this
opportunity to undertake the summer internship programme in ACC
Cement. I would also like to thank the authorities of ACC
Cement,Bargarh, for allowing me to go through this worthy
internship programme.

Sarita Pattnayak

DECLARATION
I, Sarita Pattnayak, Roll No.- PC10MBA025 do hereby declare
that project report titled Working Capital management being
submitted to G.M. College (Autonomous) Sambalpur, affiliated to
Sambalpur University, is prepared by me and solely of my own effort
based upon the summer training programmed in ACC, Bargarh
during May - June 2010.
I also declare that this report has not been submitted to any
other University or Academic Institution, Magazine or journals at any
time before.

Sarita Pattnayak

PREFACE
The project is an attempt to understand and analyze the Working
Capital Management at Bargarh Cement Works, ACC Ltd. This
project includes all the financial aspect of Working Capital
management in ACC.
Working capital is the life blood and nerve centre of a business. Just
as circulation of blood is essential in the human body for maintaining
life, Working capital is very essential to maintain the smooth running
of a business. No business can run successfully without an adequate
amount of working capital. Working capital is the interaction
between current assets & current liabilities. The term current assets
refer to those assets which in ordinary course of business can be, or
will be turned into cash within one year.

CONTENTS
ACKNOWLEDGEMENT
CERTIFICATE
DECLARATION
PREFACE
EXECUTIVE SUMMARY
CHAPTER-1
RESEARCH OBJECTIVES AND SCOPE OF RESEARCH PROJECTS
A. Introduction

B. Problem definition
C. Objectives of research
D. Research Methodology
CHAPTER-2
ORGANISATION PROFILE
A. Introduction
B. Background
C. Milestone
D. Board of Directors

CHAPTER-3
INTRODUCTION

A.

Explanation of the topic

B. Factor determining working capital

C.Reasons for selecting the topic

CHAPTER-4
DATA ANALYSIS, INTERPRETATION AND PRESENTATION

Trend of Working Capital

Working Capital Ratios
CHAPTER-5
FINDING OF THE STUDY
CHAPTER-6

Summary
BIBLIOGRAPHY

EXECUTIVE SUMMARY:
The project on working capital management has been a very good experience .Every manufacturing
company faces the problem of working capital management in their day to day processes. An
organizations cost reduced and the profits increased only if it is able to manage its working capital
efficiently .At the same time the company can provide customer satisfaction and hence can improve
their overall productivity and profitability.
This project is a sincere effort to study and analyze the working capital management of ACC
CEMENT. The project focused on making financial overview of the company by conducting a
working capital analysis of ACC GROUP for the year 2009-2010 and ratios and various components
of working capital and format emphasizing on working capital.
The internship is a bridge between the institute and the organization. This made me to the involved
in a project that helped me to employ my theoretical knowledge about the myriad and fascinating
facts of finance.Moreover,in the process I contribute substantially to the organizations growth .The
experience that I gathered over the past two months has certainly provided me orientation, which I
believe will help me in shouldering any responsibility in future.

CHAPTER-1

INTRODUCTION, OBJECTIVE AND

RESEARCH METHODOLOGY

Introduction
The working capital is the life-blood and nerve centre of a business
firm. The sufficiency of working capital assists in raising credit
standing of a business because of better terms on goods bought,
lesser cost of manufacturing due to the acceptance of cash
discounts, favorable rates of interest etc. No business can run
effectively without a sufficient quantity of working capital. It is
crucial to retain right level of working capital. Finance manager is
required to decide the amount of accurate working capital.
A business enterprise with ample working capital is always in a
position to avail advantages of any favorable opportunity either to
buy raw materials or to implement a special order or to wait for
enhanced market status.
Knowing the amount of working capital a company has is vital to
many aspects. The working capital calculation will tell the company,
as well as the investors, exactly how well the company is doing. In
addition, the company's working capital constitutes the monies used
for purchasing new equipment, new stock lines and much more.
Working capital is the single most important aspect of a company,
whether you are judging performance or speculating on expanding
the company. Without the required working capital and knowledge of
how to perform a working capital calculation, it may be impossible
for a business to grow and prosper. Having the right amount of
working capital is the only way in which a company can advance.

ACC is a large organization. That why a lot of day to day operations

goes on. Like purchase of raw material, stores and spares, etc ACC
require a lot of working capital to finance its current assets.

PROBLEM DEFINATION
Problem definition involves stating the general problem and
identifying the specific components of the problem. Here the
problem is to calculate working capital of ACC and what has been
the liquidity position of ACC over the last four years.

OBJECTIVE
The objectives of the study are as follows:
To know the day to day finance of ACC
To know the efficiency of financial operations of ACC
To make an Item wise analysis of the elements / components of
Working Capital to identify the items responsible for changes in
Working capital.
To assess the significance of Working Capital by selecting a few
Important parameters such as Working capital ratio, Quick ratio,
and
Cash operating cycle.
To know the various financial statistics such as sales, profit.
Income,

Expenditure and also the trend of numbers of employees

working in
the company.

RESEARCH METHODOLOGY
The data or information has been collected from two sources:
Primary data
Secondary data
PRIMARY DATA
Primary data are those data collected from individuals, officials,
guide, and views from heads of Finance department. These data are
collected through observation of records and files.
SECONDRY DATA
Secondary data are those which are already gathered and available
There may be internal sources within plant. Externally these sources
include books, periodicals, published reports etc. For collection of
data, I have consulted the following secondary data:
Books on the subject
Annual Reports.
Published reports relevant to the subject.
Commercial data.
Files and records of the plant.
Brochures provided by the Finance Department.

LIMITATIONS OF THE STUDY

This study is limited to two months.
The study is restricted to the application of Working Capital Management.
This study is limited to only one company.

Here data is collected mainly from annual reports.

CHAPTER-2
ORGANISATIONAL PROFILE
-INTRODUCTION

-BACKGROUND,
-MILESTONE,
-BOARD OF DIRECTORS

ORGANISATIONAL
COMPANY

PROFILE

OF

THE

INTRODUCTION:
ACC-Indias first name in cement
ACC cement is Indias foremost manufacturer of cement and
concrete. ACCs operations are spread throughout the country with
16 modern cement factories, more than 40 Ready mix concrete
plants, 20 sales offices, and several zonal offices. It has a workforce
of about 10,000 persons and a countrywide distribution network of
over 9,000 dealers. Since inception in 1936, the company has been
a trendsetter and important benchmark for the cement industry in
many areas of cement and concrete technology. ACC has a unique
track record of innovative research, product development and
specialized
consultancy
services.
The
companys
various
manufacturing units are backed by a central technology support
services centre the only one of its kind in the Indian cement
industry. ACC has rich experience in mining, being the largest user
of limestone. As the largest cement producer in India, it is one of the
biggest customers of the domestic coal industry, of Indian Railways,
and a considerable user of the countrys road transport network
services for inward and outward movement of materials and
products. Among the first companies in India to include commitment
to environmental protection as one of its corporate objectives, the
company installed sophisticated pollution control laws came into
existence. Today each of its cement plants has state-of-the art
pollution control equipment and devices. ACC has made significant
contributions to the nation building process by way of quality
products, services and sharing expertise. Its commitment to
sustainable development, its high ethical standards in business
dealings and its on-going efforts in community welfare programmers
have won it acclaim as a responsible corporate citizen.It is the only

cement company that figures in the list of Consumer Super Brands

of India.

THE BACKGROUND:
ACC Limited is Indias foremost manufacturer of cement and ready
mix concrete with a countrywide network of factories and marketing
offices established in 1936. ACC has been a pioneer and trend-setter
in cement and concrete technology. ACCs brand name is
synonymous with cement and enjoys a high level of equity in the
Indian market. Among the first companies in India to include
commitment to environment protection as a corporate objective,
ACC has won several prizes and accolades for environment friendly
measures taken at its plants and mines. The company has also been
felicitated for its acts of good corporate citizenship.

SERVICE PROFILE IN ACC

less than 10 year

10 to 20 year
20 to 30 year
over 30 year

SKILL PROFILE

Technical
Non-technical
Supervisory

QUALIFICATION PROFILE AT MANAGEMENT STAFF

Diploma holders
Graduates
Post graduates
Other

ACC SHARED
VALUE CREATION
ACC delivers long term value to investor and
other stakeholders

MILESTONE (2006 onwards)

2006

ACC announces new Workplace policy for HIV/AIDS

2006
Change of name to ACC limited with effect from September 1, 2006
from the
Associated Cement Companies Limited.

2006
ACC receives Good Corporate Citizen Award 2005-06 from Bombay
Chamber of
Commerce and Industry
2006
2006

New corporate brand identity and logo adopted from October 15,

2007
Sumant Moolgaokar Technical Institute completes 50 years and
reopens with new
curriculum.

2007

ACC commissions Wind Energy Farm in Tamilnadu

Ready mixed concrete business hived off to new subsidiary called
ACC Concrete Limited.

2009

ACC

received the Jamanlal Bajaj Uchit Vyavahar Puraskar of

Council for Fair Business practices.

2009

2009
at

ACC is allotted coal blocks in Madhya Pradesh and West Bengal

ACCs new Grinding plant of capacity 1.60 million tons inaugurated

Thondebhavi in Karnataka.

2010

9th Greentech Safety Gold Awards in Cement secto r to Jamul

BOARD OF DIRECTORS
1. Chaiman- Mr. N S Sekhsaria
2. Deputy chairman- Mr. Paul Hugentobler
3. Chief Executive Officer & Managing Director- Mr. Kuldip K Kaura
4. Mr. S M Paila
5. Mr. Naresh Chandra
6. Mr. Markus Akermann
7. Mr. M L Narula
8. Mr. D K Mehrota
9. Mr. R A Shah
10.Mr. Shailesh Haribhakti
11.Mr. Aidan Lynam
12.Mr. Sushil Kumar Roongta

CHAPTER-3
WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT

Working capital Management involves deciding upon the
amount and composition of current assets and the manner in which
to finance them. Determining the appropriate levels of working

capital involves fundamental decisions with regard to the firms

liquidity and trade off between risk and profitability. The greater the
amount of working capital level maintained, the lesser the risk of
running out of cash, although profitability will be less. In case of
lower level of working capital the profitability will be greater but the
risk of running out of capital to meet day to day requirement will be
more.
Hence every firm needs to maintain optimum level of Working
Capital by bringing trade-off between risk and profitability.
CONCEPT OF WORKING CAPITAL:Working capital can be defined as the difference between current
asset (cash in hand, cash at bank, debtors, bills receivables,
inventories etc..) & current liabilities (creditors, bills payable,
bank overdraft etc..).
There are two concept of working capital. They are as follows:
1. Gross working capital.
2. Net working capital.

Gross Working Capital:According to this concept the working capital may be classified as
capital invested in the various types of current assets such as cash,
inventories receivables.

Net Working capital:It refers to the difference between current assets and current
liabilities.Net working capital can be positive or can be negative. A
positive net working capital will arise when current assets exceeds
current liabilities. A negative working capital occurs when current
liabilities are in excess of excess of current assets. It can be said
that net working capital measures the liquidity position of the firm.
Factors determining Working Capital:Nature of Business:Requirement of working capital depend upon the nature of
business. Its requirement is more in a public utility business like
railways.
Importance of labor:In case of labor intensive industries more working capital is
required as the wage bill is more and in case of capital intensive
industries less working capital is required.
Cost of Raw Material:If raw material requirement is more than more working capital is
needed.

Credit Policy:-

When suppliers of raw materials give credit facility for a longer

term, the requirement of working capital is less, and if the

company gives credit to its customers and buy raw materials for
cash. The working capital required is high.

Sources of Funds for Working Capital:ACC uses both long term and short term sources of funds to meet
the day to day operations. Generally ACC uses long term sources of
funds like long term debt from financial institution. Only for capital
expansion and short term sources of funds like short term bank loan
for Working capital requirement.
During the last two / three years company has earned a lot of profit
after giving taxes also. So it has cash surplus. And thats why it
gathers funds for working capital through self financing. And also
this source is economical as there is no burden of interest.
A. REASONS FOR SELECTING THE TOPIC:-

I have chosen this topic i.e. Working Capital Management,

because working capital is essential for the existence of the
business. All day to day operation s have to be properly financed
otherwise the firm cannot run smoothly. Since a large firm has
many departments and every department have various functions.
So to properly manage those functions every company requires
funds.

Here

these

funds

requirement

is

Working

capital

requirement.
Since I want to know the total functioning of day to day operations
this topic is suitable for me. This will bring an opportunity for me
to know the total financial activity of a company. Again I want to

know how an organization manages to finance its day to day

activities. , from where it get the funds. To know all these things
Working capital Management is the appropriate subject.
Another reason for choosing this topic to know more insight about
the financial activates of a company. Since working capital
includes current asset, current liabilities, and working capital
ratios. Companys operating cycle; I can know all these things
together.
One more reason is that I want to know the liquidity position of a
company. Whether the company can give its short term obligation
or not. Because this can lead or spoil its popularity.
Since Working capital management is a job of middle level
management it is going to beneficial for me in the future. Since I
have taken Specialization in Finance my topic should be under this
specialization.
So due to the above factors I choose Working Capital
Management.

B. IMPORANCE OF WORKING CAPITAL FOR COMPANY:-

The working capital is the life-blood and nerve centre of a business

firm. The sufficiency of working capital assists in raising credit
standing of a business because of

better terms on goods bought,

lesser cost of manufacturing due to the acceptance of cash

discounts, favorable rates of interest etc. No business can run
effectively without a sufficient quantity of working capital. It is

crucial to retain right level of working capital. Finance manager is

required to decide the amount of accurate working capital.
Knowing the amount of working capital a company has is vital to
many aspects. The working capital calculation will tell the company,
as well as the investors, exactly how well the company is doing. In
addition, the company's working capital constitutes the monies used
for purchasing new equipment, new stock lines and much more.
Working capital is the single most important aspect of a company,
whether you are judging performance or speculating on expanding
the company. Without the required working capital and knowledge of
how to perform a working capital calculation, it may be impossible
for a business to grow and prosper. Having the right amount of
working capital is the only way in which a company can advance.
ACC is a large organization. That why a lot of day to day operations
goes on. Like purchase of raw material, stores and spares, etc ACC
require a lot of working capital to finance its current assets.

CHAPTER- 4
DATA ANALYSIS

DATA
INTERPRETATION
PRESENTATION

AND

The important question here is to know the trend of

working capital requirement over the last four years of RSP. We know
that to calculate it we have to know the current assets and current
liabilities.. Because
Working capital = current asset - current liabilities.
Now following is the calculation of working capital.

BALANCE SHEET AT A GLANCE

PARTICULARS

2006
(Rs. Cr)

2007
(Rs. Cr)

2008
(Rs. Cr)

2009
(Rs. Cr)

2010
(Rs. Cr)

185.54

185.54

185.54

187.76

187.83

970.28

1222.37

1951.21

2955.16

3964.88

_______

_______

_________

_______

______

2136.75

3142.92

4152.71

I. Sources Of Funds
1. Share Holders
Funds
Share Capital
2. Reserves &
Surplus

1155.82

1407.91

882.32
30.27
__________
912.59

907.06
24.36
________
931.42

950.12
121.30
__________
1,071.42

720.96
50.20
__________
771.16

266.03
40.38
________
__
306.41

4. Deferred Payment
Liability

136.41

291.31

300.38

144.82

162.69

5. Stockiest Deposits
(unsecured)

176.69
__________
2381.51
__________

101.66
__________
2732.30
__________

104.75
__________
3613.30
__________

320.72
__________
4379.62
__________

331.45
________
__
4953.26
________
__

3. Loan Funds
a) Secured Loans
b) Unsecured
Loans

TOTAL FUNDS

II. APPLICATION
OF FUNDS :
1. FIXED ASSETS
a) Gross Block
b)
Less
Depreciation
c) Net Block
d) Capital work-inprogress
TOTAL
ASSET

FIXED

PARTICULARS

2. CURRENT
ASSESTS (A)
a) Inventories
b) Sundry Debtors
c) Cash & Bank
Balance
d) Other Current
Assets
e) Loans &
Advances
TOTAL CURRENT
ASSETS

3. CURRENT
LIABILITIES &
PROVISIONS (B)
a)
Sundry
Liabilities
b) Provisions
TOTAL CURRENT
LIABILITIES &
PROVISIONS

4. Net Current Asset

(A B)
5.MISCELLANEOUS
EXPENDITURE

3924.96
(1102.37)
__________
2822.59
__
__________

4127.38
(1078.38)
__________
3049.00
493.54
__________

4,628.64
(1,722.29)
2906.35
215.68

4816.25
(1893.76)
2922.49
473.42

2822.59
__________

3542.54

2006
(Rs. Cr)

5464.07
(2149.3
5)
3314.72
649.19

3,122.03

3395.91

2007
(Rs. Cr)

2008
(Rs. Cr)

2009
(Rs. Cr)

2010
(Rs. Cr)

497.13
166.25
445.21

418.70
333.01
276.07

600.95
199.17
102.79

624.13
213.96
620.17

730.86
289.29
743.48

7.37
438.26
__________
1554.22
__________

1.15
575.42
__________
1604.35
__________

31.49
486.76
__________
1421.16
__________

16.13
531.85
__________
2006.24
__________

18.87
420.54
_________
_
2203.04
_________
_

572.05
84.12

745.58
40.63

913.28
316.77

1024.73
502.73

1392.23
666.27

__________
656.17
__________

__________
786.21
__________

__________
1230.05
__________

__________
1527.01
__________

_________
_
2058.50
_________
_

898.05
__________

818.14
__________

191.11
__________

479.23
__________

144.54
_________
_

0.51

1.75

6.41

0.94

__

3963.91

6. PROFIT & LOSS

ACCOUNT
TOTAL ASSETS (NET)

478.96
__________
1377.52
__________

577.52
__________
2102.03
__________

462.72
__________
3613.30
__________

1248.94
__________
4379.62
__________

2064.89
_________
_
4953.26
_________
_

PROFIT & LOSS ACCOUNT AT A GLANCE

PARTICULARS

2006
(Rs. Cr)

2007
(Rs. Cr)

2008
(Rs. Cr)

2009
(Rs. Cr)

2010
(Rs. Cr)

1.
Sale
of
Products
Less: Excise Duty

2250.87
(296.47)
__________
1954.40
__________

2995.31
(312.92)
__________
2682.39
__________

3699.89
(496.48)
__________
3203.41
__________

6435.07
(649.59)
_________
_
5803.48
_________
_

7848.32
841.15
_________
_
7007.17
_________
_

2. Other Income

303.61

334.10

115.21

132.88

128.80

TOTAL INCOME
(GROSS)

__________
2258.01
__________

__________
3016.49
__________

__________
3318.62
__________

_________
_
5936.36
_________
_

_________
_
7135.97
_________
_

INCOME(I)

EXPENDITURE(II)
3. Manufacturing
&
Other
expenses

1686.72

2670.52

2685.03

4180.26

5089.78

4. Depreciation

101.03

124.51

164.37

254.25

305.07

5. Interest

21.26
__________
1809.01
__________

57.30
__________
2852.33
__________

63.76
__________
2913.16
__________

52.03
_________
_
4486.54
_________
_

23.94
_________
_
5418.79
_________
_

449.00

164.16

684.12

1619.50

1717.18

70.96

519.96

134.90

462.72

1248.94

__________
519.96
__________

__________
684.12
__________

__________
462.72
__________

_________
_
1248.94
_________
_

_________
_
2064.89
_________
_

TOTAL
EXPENDITURE

PROFIT/LOSS
BEFORE TAX
(I II)
BALANCE
BROUGHT FROM
PREVIOUS YEAR
BALANCE
CARRIED TO B/S

COMPONENTS OF WORKING CAPITAL OF

ACC LTD., BARGARH CEMENT WORKS
(Rs. Cr)
PARTICULARS

2006
(Rs. Cr)

2007
(Rs. Cr)

2008
(Rs. Cr)

2009
(Rs. Cr)

2010
(Rs. Cr)

Inventory

2,171.6
4

2,518.70

60,095.00

62,413.0
0

74,172.0
0

Sundry Debtors

1,778.9
9

1,319.61

19,917.00

21,396.0
0

30,583.0
0

Cash in Hand & Bank

1,463.4
7

276.07

10,279.00

62,017.0
0

74,641.0
0

14.44

18.64

2,070.00

2,049.00

2,568.00

1,023.8
4

1,403.60

18,253.00

25,145.0
0

33,551.0
0

51.31

65.45

27,292.00

7,086.00

4,284.00

42.28

81.74

861.00

602.00

1,705.00

_________
_
6,545.9

__________
5,683.81

__________
138,767.0
0

__________
180,708.
00

__________
221,504.
00

CURRENT ASSETS

Advance
Employees

to

Advance to Suppliers
Advance to others
Prepaid Expenses
Total Current Asset
Or Gross Working
Capital (A)

CURRENT
LIABILITIES
4,507.3
7

2,006.30

77,115.00

92,072.0
0

131,128.
00

Advance & Security

deposit
from
Suppliers

1,022.6
4

697.56

11,179.00

7,999.00

8,164.00

Provision
payable

86.96

82.35

31,677.00

51,336.0
0

68,444.0
0

_________
_
5,616.9
7
________
929.00
________

__________
2,786.21

__________
119,971.0
0

__________
151,407.
00

__________
207,736.
00

__________
2,897.60
__________

__________
18,796.00
__________

__________
29,301.0
0
__________

__________
3,768.00
__________

Sundry Creditors

Total
Liabilities
(B)

&

others

Current

Net Working Capital

(A-B)

RATIO ANALYSIS
INTRODUCTION:

Ratio implies arithmetical relationship between two related

figures. Ratio analysis as a technique for interpretation of financial
statements. This deals with computation of various ratios by
grouping various figures and / or information appearing in the
financial statements.

Ratio Analysis is the process of determining and interpreting

numerical relationship between figures of the financial statements.
The technique of ratio analysis is used for measuring the short-term
liquidity or working capital position of a firm. Ratio analysis is one of
the important tool for management decision-making.
INTERPRETATION:

The objective of ratio analysis may not be fulfilled unless the

calculated ratios can be compared with some yardsticks. The
interpretation of ratios can be made in the following ways:

The ratio of one organization may be compared with the

ratios of the same organization for various years.

ROLE:

Ratio analysis helps in appraising the firms in terms of their

profitability and performance individually. It can be also worked out
in relation to other firms. It helps the planning and controlling part of
the organization.

The ratios to be calculated are as follows: Current Ratio

Quick Ratio
Absolute liquid Ratio
Inventory turnover Ratio
Inventory conversion period Ratio
Inventory to working capital Ratio
Working capital turnover Ratio

CURRENT RATIO
It measures the short-term financial position of the business
concern. In other words it is companys ability to meet its short-term
obligations. It matches the total current assets of the company
against its current liabilities. Current Ratio can be worked as under: Current Ratio =

Current Assets
Current Liabilities

PARTICULARS

2006
(Rs. Cr)

2007
(Rs. Cr)

2008
(Rs. Cr)

2009
(Rs. Cr)

2010
(Rs. Cr)

Total
Current
Asset or Gross
Working Capital
(A)

6,545.97

5,683.81

138,767.0
0

180,708.0
0

221,504.0
0

Total
Current
Liabilities(B)

5,616.97

2,786.21

119,971.0
0

151,407.0
0

207,736.0
0

CURRENT
(A/B)

1.17

2.04

1.16

1.19

1.07

RATIO

As a conventional rule, current ratio of 2:1 or more is considered

as satisfactory. As ACC Ltd., Bargarh Cement Works is having current
ratio a bit lowered then the ideal ratio, it may be interpreted that its
liquidity is not sufficient. However, in 2007 it was 2.04.

cash Ratio
2.5
2006

2007
2008

1.5

2009
1

2010

0.5
0

Series 1

The current ratio is not the binding parameter, in order to judge

the companys success. It is just a measure in quantity, but not of
quality, in 2007 current ratio increased, there can be two reasons or
either of it:

A)Increase in current assets

B)Decrease in current liabilities

It is observed the current ratio decreases gradually during the

years which indicate that the company should look after the current
assets and current liabilities in order to have a sound current ratio
and a better short-term financial position.

QUICK RATIO (ACID TEST RATIO)

Liquid ratio is worked out to test the short-term liquidity of
the company in its correct form. It establishes the relationship
between the quick assets and the current liabilities. We know that an
asset is liquid when it is readily converted in to cash without any
loss in value.

Quick ratio indicates the ability of the business to meet its

immediate commitments. It is one of the quick test mechanisms to
assess financial strength of an organisation than the current ratio as
it does not consider inventory, which may be very slow moving. It is
a supplementary measure of liquidity which places more emphasis
on immediate conversion of assets into cash terms than the current
ratio.

Quick Ratio:

Quick Ratio =

Quick OR Liquid Assets

Current Liabilities & Provisions

PARTICULARS

2006

2007

2008

2009

2010

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

Inventory

2,171.6
4

2,518.70

60,095.0
0

62,413.
00

74,172.
00

Sundry Debtors

1,778.9
9

1,319.61

19,917.0
0

21,396.
00

30,583.
00

Cash in Hand &

Bank

1,463.4
7

276.07

10,279.0
0

62,017.
00

74,641.
00

Advance
Employees

14.44

18.64

2,070.00

2,049.0
0

2,568.0
0

CURRENT ASSETS

to

Advance
Suppliers

to

Advance
others

to

Prepaid Expenses

Total
Current
Asset (A)

LIQUID ASSET
(A Inventory)

1,023.8
4

1,403.60

18,253.0
0

25,145.
00

33,551.
00

51.31

65.45

27,292.0
0

7,086.0
0

4,284.0
0

42.28

81.74

861.00

602.00

1,705.0
0

6,545.9
7

5,683.81

138,767.
00

180,708
.00

221,504
.00

__________

__________

_________
_

_________
_

3165.11

78672.00

118295.
00

147332.
00

_________
_
4374.33

CURRENT
LIABILITIES
Sundry Creditors

4,507.3
7

2,006.30

77,115.0
0

92,072.
00

131,128
.00

Advance
&
Security deposit
from Suppliers

1,022.6
4

697.56

11,179.0
0

7,999.0
0

8,164.0
0

Provision
&
others payable

86.96

82.35

31,677.0
0

51,336.
00

68,444.
00

_________
_

__________

__________

_________
_

_________
_

151,407
.00

207,736
.00

0.78

0.71

Total
Current
Liabilities

2,786.21

(B)

5,616.9
7

119,971.
00

Liquid ratio (A/B)

0.78

1.14

0.66

GRAPHICAL REPRESENTATION

LIQUID RATIO

1.20
1.00

2006
2007
2008
2009
2010

0.80
0.60
0.40
0.20
Liquid ratio ((A-Inventory)/B)
YEARS

Generally, a ratio of 1:1 is considered to represent a satisfactory

current financial condition. In the year2007, company has higher
quick ratio. The company shows low quick ratio in the subsequent
years which are equivalent to 1. Therefore the company has
satisfactory quick ratios.
In short, for an ideal situation

Inventory= current liabilities = current assets

Or, Current liabilities< inventory

Current liabilities < quick assets
INVENTORY TURN OVER RATIO

Every firm has to maintain a certain level of inventory in order

to meet the requirements of the business. Another important
liquidity ratio is the inventory turnover ratio. Inventory turnover is a

measure of the number of time s the average inventory is sold

during the year. It is computed by dividing the cost of good sold by
average inventory balance
Inventory turnover ratio also known as stock velocity.
Inventory turnover ratio (I.T.R.) indicates the number of times the
stock has been turned over during the period and evaluates the
efficiency with which a firm is able to manage its inventory.

Inventory Turnover Ratio:

Inventory turnover ratio=

Net Sales
Average inventory

Particulars
2006

2007

2008

2009

2010

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

Net Sales(A)

15,254.
40

16,043.3
9

320341

580348

784832

Average
Inventory(B)

2,171.6
4

2,518.70

60,095.0
0

62,413.0
0

74,172.0
0

7.02

6.37

5.33

9.30

10.58

Inventory
Turnover Ratio
(A/B)

Lower inventory ratio indicates an inefficient management. A

too high inventory turnover may not necessarily always imply a
favourable situation. It is compared in terms of times. The company
shows an optimum inventory turnover ratio.

GRAPH

INVENTORY TURNOVER RATIO

12.00
10.00
2006
2007
20085-06
2009
2010

8.00
6.00
4.00
2.00
Inventory Turnover Ratio (Net Sales/Inventory)
YEARS

ACC Ltd., Bargarh Cement Works shows increase since 2006 and
has an optimum inventory turnover ratio. There is no standard
inventory turnover ratio or rules of thumb for interpreting the
inventory turnover ratio. The norms may be different for different
firms depending upon the nature of the business.

INVENTORY CONVERSION PERIOD:

The amount of time required to sell the average inventory can
be determined by dividing the inventory turnover ratio in to the
number of days in a year for simplicity, 365 days. It helps in knowing
the average time taken for clearing the stocks.

Particulars
2006

2007

2008

2009

2010

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

365

365

365

365

365

Inventory
turnover ratio

7.02

6.37

5.33

9.30

10.58

Inventory
Conversion
Ratio (365/ITR)

51.96

57.30

68.47

39.25

34.50

No. of days in
a year

Inventory Conversion Ratio =

No. of days in a year

Inventory Turnover Ratio

INVENTORY CONVERSION RATIO

70.00
60.00
50.00

2006
2007
2008
2009
2010

40.00
30.00
20.00
10.00
Inventory Turnover Ratio in days(365/ITR)
YEARS

The greater the number of times per year the inventory turns
over, the more efficiently it is being used. This shows the average
time taken for clearing the stocks.

INVENTORY TO WORKING CAPITAL RATIO:

This ratio is derived at by dividing the book value of
closing stock of raw materials, finished and semi-finished products,

stores and spares and other inventories by working capital and

expressed as percentage. This ratio appraises managements
judgment in proportioning its working capital to the least liquid
segment of that capital. If investment is too much in the inventory, it
not only limits the liquidity of working capital, it may be indicative of
poor judgment in balancing and stocking also.

Inventory to Working Capital =

Total Inventory
Net Working Capital

PARTICULARS

Total
Inventory(A)

Net Working

2006

2007

2008

2009

2010

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

2,171.64

2,518.70

60,095.0
0

62,413.0
0

74,172.0
0

2,897.60

18,796.0
0

29,301.0
0

3,768.00

0.87

3.20

2.13

5.39

929.00

Capital (B)

Inventory to
Working
Capital (A/B)

2.34

GRAPH

INVENTORY TO NWC RATIO

3.50
3.00
2.50

2006
2007
2008
2009
2010

2.00
1.50
1.00
0.50
Inventory to Working Capital Ratio (Inventory/NWC)
YEARS

WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio indicates the velocity of the
utilization of net working capital. This ratio indicates the number of
times the working capital is turned over in the course of a year.

This ratio measures the efficiency with which the working capital is
turned is being used by the firm. It also indicates the sales volume
of the concern.

Working Capital Turnover Ratio =

Net Sales

Net Working Capital

PARTICULARS

2006

2007

2008

2009

2010

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

(Rs. Cr)

Net Sales (A)

15,254.4
0

16,043.3
9

320341

580348

784832

Net Working

929.00

2,897.60

18,796.0
0

29,301.0
0

3,768.00

5.54

17.04

19.81

57.00

Capital (B)

Working
Capital
Turnover Ratio
(A/B) (in times)

1
6.42

GRAPH
WORKING CAPITAL TURNOVER RATIO

60.00
50.00
2006
2007
2008
2009
2010

40.00
30.00
20.00
10.00
Working capital turnover ratio (Net Sales/NWC)
YEARS

A higher ratio indicates efficient utilization of working capital

and a low ratio indicates otherwise. But a very high working capital

turnover ratio is not a good situation for any firm and hence care
must be taken while interpreting the ratio.

CASH MANAGEMENT
Cash is the lifeblood of a business firm. It is needed to acquire
supplies, resources, and other assets used in generating the product
and services provided by the firm. It is also needed to pay salaries
and wages to managers and workers, taxes to government, interest
and principal to the creditors, and dividend to shareholders and
discharge other short-term as well as long term liabilities. More
fundamentally, cash is the medium of exchange, which allows
management to carry on the various activities of the business firm
from on day to day basis.

As long as the firm has the cash to meet these obligations,

financial failure is improbable. Without cash, or at least access to it,
bankruptcy becomes a grim possibility. Such is the emerging view of
the modern corporate cash management. On the other hand,
marketable

securities

come

in

many

forms,

but

their

main

characteristic is that they represent near cash in that they may be

readily sold. Hence, marketable securities serve as a back up pool of
liquidity that provides cash quickly when needed. Marketable
securities also provide a short-term investment outlet for excess
cash and are useful for meeting planned outflows of funds.

Short Term investment opportunities

The following short-term investment opportunities are available to

companies in India to invest there:

Treasury Bills- Treasury bills (TBs) are short term govt.

securities. The usual practice in India is to sell TBs at a discount
and redeem them at par on maturity. The difference between
the issue price and the redemption price, adjusted for the time
value of money, is return on TBs.

They can be bought and sold any time, thus, they have liquidity
also, and they do not have default risk.
Commercial paper Commercial papers (CPs) are short term,
unsecured

securities

issued

by

highly

creditworthy

large

companies. They are issued with a maturity of 3monts -1 years.

CPs are marketable securities, and therefore, liquidity is not a
problem.

Certificate of Deposits - Certificate of Deposits (CDs) are paper

is issued by banks acknowledging fixed deposits for a specified
period of time. CPs are negotiable instruments that make them
marketable securities.

Bank deposits-A firm can deposit its temporary cash in a bank

for a fixed period of time. The interest rate depends on the
maturity period. The default risk of the bank deposits is quite
low since most banks in India are owned by the govt.

Inter-corporate deposits - Inter-corporate deposits (ICDs) are a

popular short-term investment alternative for companies in
India. Generally a cash surplus company will deposit its funds in
a sister or associate companies or whit outside companies with
high credit standing .In practice, companies can negotiate Inter
corporate borrowing or lending for very short period. The risk of
default is high but return is quite attractive.

Money market mutual funds- Money Market Mutual Funds

(MMMF) focus on short-term marketable securities such as TBs
CPs, CDs or call money.

They have a minimum lock in period of 30 days, after this

period, an investor can withdraw his/her money any time at a
short notice or even across the counter in some cases. They
offer attractive yields are usually 2% above than on bank
deposits of same maturity. MMMFs are recent origin of India
and they have become quite popular with institutional investors
and some companies.

CHAPTER-5
SUMMARY

SUMMARY
In ACC Ltd., the marketing of products and realisation of debtors are
the responsibilities of the respective Sales Units (SU). As such, each
individual cement units have no source of revenues other than the
Cash Credit and receipt from miscellaneous sale (sale of scrap etc).
Therefore, ACC Ltd. has a Cash Credit Account with State Bank of
India, which is operated centrally from Mumbai and the respective
manufacturing Units. The Units get their daily requirement of funds
in their Cash Credit A/c maintained at the respective locations. The
allocation of daily requirement of funds is remitted centrally from

Mumbai on every day basis to the respective locations through a

process called RTGS (Real Time Gross Settlement).

Apart from this, requirement of additional amounts for deposit

of Govt. dues, taxes etc are requisitioned as and when necessary.
The daily limit of Bargarh Cement Works is Rs.1.60 crores available
on everyday-basis from the SBI, Commercial Branch, Bargarh. Incase
of non-utilisation of the allocated amount in the same day, the
amount goes back to the Mumbai CC A/c and the next day again,
fresh limit of Rs.1.60 crores becomes available.

Apart from the cash management, management of different

other components of working capital i.e. Finished Goods, Work-inProcess, Inventory are done most scientifically with modern
management tools.

CHAPTER-6

FINDINGS OF THE STUDY

FINDINGS OF THE STUDY:After studying the working capital Management of ACC, the key
findings of the study are as follows:
As ACC is a large cement manufacturing organization, it
requires more working capital, so it manages huge amount of
working capital.
The working capital result for ACC, during the year 2006-09
has increase in position, but during the year 2009-10 it
decreased.
Here we can find that the working capital has been increasing
over the years but at a decreasing rate. But profit has been
increasing at double that of working capital, though in 2006-07
profit decreased. ACC recovered very fast and made good
profit.
The measure of efficiency of working capital management is
the current ratio which at the standard current ratio i.e. 2:1

only for the year 2007-08, in the year 2006-07 and 2008-10 it
is less than the standard current ratio.
During the year 2006-2007 working capital turnover ratio the
amount has decreased & in 2008-10 has increased.

CONCLUSION
Finally, I conclude that the working capital management is the
important part of the sector of finance and this project will very
much help me in my future period of time. It was a great
opportunity for me to do my summer project in ACC CEMENT
organization which is a very large organization. ACC is a very
much profitable organization and continuously increasing their
profit over the last 3 years i.e. 2008-10.Working capital is
decreasing at a lower rate. But at the same time profit is
increasing at a much faster rate than working capital. It means
that it has achieved efficiency over working capital. This is
commendable performance by ACC.

BIBLIOGRAPHY
PUBLISHED BALANCE SHEET OF ACC LTD.
FINANCIAL MANAGEMENT by I.M. PANDEY

FINANCIAL MANAGEMENT by PRASANNA CHANDRA

MANAGEMENT ACCOUNTING by SHARMA & GUPTA

ACCOUNTING MANUAL TO COMPANY BALANCE SHEET

AND PROFIT & LOSS ACCOUNT (1997) by R.K. AGARWAL