Chapter no: 1

Introduction

1.1 INTRODUCTION

WORKING CAPITAL - Meaning of Working Capital

Capital required for a business can be classified under two main categories via,
1)
2)

Fixed Capital
Working Capital

Every business needs funds for two purposes for its establishment and to carry
out its day- to-day operations. Long terms funds are required to create production
facilities through purchase of fixed assets such as p&m, land, building, furniture, etc.
Investments in these assets represent that part of firms capital which is blocked on
permanent or fixed basis and is called fixed capital. Funds are also needed for shortterm purposes for the purchase of raw material, payment of wages and other day today expenses etc.
These funds are known as working capital. In simple words, working capital refers
to that part of the firms capital which is required for financing short- term or current
assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested
in current assts keep revolving fast and are being constantly converted in to cash and
this cash flows out again in exchange for other current assets. Hence, it is also known
as revolving or circulating capital or short term capital.

Company having two type of capital first is to start or establish the business
and second is to run or operate the business.
Working capital refers to the circulating capital required to meet the day to
day operations of a business firm.
Working capital is made up of combination of several current assets, such as
cash, inventory, and accounts receivable, and is used to identify a businesss
liquidity condition"
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 Working Capital Management involves managing the balance between firms

short-term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and
that it has sufficient cash flow to satisfy both maturing short-term debt and
upcoming operational expenses. The interaction between current assets and
current liabilities is, therefore, the main theme of the theory of working capital
management.
There are many aspects of working capital management which makes it
important function of financial management.
Time: Working capital management requires much of the finance
managers time.
Investment: Working capital represents a large portion of the total
investment in assets.
Credibility: Working capital management has great significance for
all firms but it is very critical for small firms.
Growth: The need for working capital is directly related to the firms
growth

Working Capital refers to that part of the firms capital, which is required for
financing short-term or current assets such a cash marketable securities, debtors and
inventories.

Funds thus, invested in current assets keep revolving fast and are

constantly converted into cash and this cash flow out again in exchange for other
current assets. Working Capital is also known as revolving or circulating capital or
short-term capital.
Working capital refers to the measure of liquidity of finances of a firm. It is normally
expressed as the difference between currents assets and current liabilities. All
companies aim to maintain a positive working capital so as meet the short term
expenses.

1.2 Definition of working capital:

Working capital has been described as the life blood of any business because
it constitutes a cyclically flowing stream through the business.
Working capital may be defined by various authors as follows:
Working capital refers to a firms investment in short term assets, such as
cash amounts receivables, inventories etc.
According to Weston & Brigham
Working capital means current assets.

Mead, Baker and Malott

The sum of the current assets is the working capital of the business- J.S.Mill
Working capital is defined as the excess of current assets over current
liabilities and provisions.
But as per accounting terminology, it is difference between the inflow and outflow of
funds. In the Annual Survey of Industries (1961), working capital is defined to
include Stocks of materials, fuels, semi-finished goods including work-in-progress
and finished goods and by-products; cash in hand and bank and the algebraic sum of
sundry creditors as represented by (a) outstanding factory payments e.g. rent, wages,
interest and dividend; b) purchase of goods and services; c) short-term loans and
advances and sundry debtors comprising amounts due to the factory on account of
sale of goods and services and advances towards tax payments.
The term working capital is often referred to circulating capital which is
frequently used to denote those assets which are changed with relative speed from one
form to another i.e., starting from cash, changing to raw materials, converting into

work-in-progress and finished products, sale of finished products and ending with
realization of cash from debtors.

1.3 CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:
1.

Gross working capital

2.

Net working capital

The gross working capital is the capital invested in the total current assets of the
enterprises current assets are those
Assets which can convert in to cash within a short period normally one accounting
year.
CONSTITUENTS OF CURRENT ASSETS
1)

Cash in hand and cash at bank

2)

Bills receivables

3)

Sundry debtors

4)

Short term loans and advances.

5)

Inventories of stock as:

a.

Raw material

b.

Work in process

c.

Stores and spares

d.

Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses
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8. Accrued incomes.
9. Marketable securities.

In a narrow sense, the term working capital refers to the net working. Net working
capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the
current liabilities are more than the current assets. Current liabilities are those
liabilities, which are intended to be paid in the ordinary course of business within a
short period of normally one accounting year out of the current assts or the income
business.
CONSTITUENTS OF CURRENT LIABILITIES
1.

Accrued or outstanding expenses.

2.

Short term loans, advances and deposits.

3.

Dividends payable.

4.

Bank overdraft.

5.

Provision for taxation , if it does not amt. to app. Of profit.

6.

Bills payable.

7.

Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net
working capital is an accounting concept of working capital. Both the concepts have
their own merits.
The gross concept is sometimes preferred to the concept of working capital for the
following reasons:

1.

It enables the enterprise to provide correct amount of working capital at correct

time.
2.

Every management is more interested in total current assets with which it has to

operate then the source from where it is made available.

3.

It take into consideration of the fact every increase in the funds of the enterprise

would increase its working capital.

4.

This concept is also useful in determining the rate of return on investments in

working capital. The net working capital concept, however, is also important for
following reasons:

It is qualitative concept, which indicates the firms ability to meet to its

operating expenses and short-term liabilities.

IT indicates the margin of protection available to the short term creditors.

It is an indicator of the financial soundness of enterprises.

It suggests the need of financing a part of working capital requirement out of the

permanent sources of funds.

1.4 CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:
o

On the basis of concept.

On the basis of time.

On the basis of concept working capital can be classified as gross working capital and
net working capital. On the basis of time, working capital may be classified as:

Permanent or fixed working capital.

Temporary or variable working capital

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PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-process,
finished goods and cash balance. This minimum level of current assts is called
permanent or fixed working capital as this part of working is permanently blocked in
current assets. As the business grow the requirements of working capital also
increases due to increase in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable working
capital can further be classified as seasonal working capital and special working
capital. The capital required to meet the seasonal need of the enterprise is called
seasonal working capital. Special working capital is that part of working capital which
is required to meet special exigencies such as launching of extensive marketing for
conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the
business.

1.5 Calculating working capital:

Working capital is current assets minus current liabilities.

Working capital = Current assets -- current liabilities

Companies want positive working capital.

 Working capital is a signal of whether or not the company has enough assets to
turn into cash to pay upcoming expenses or debts.
Working capital is a measurement of liquidity and is not a guarantee that a
company can pay for its liabilities.

Current assets:

Current liabilities:

Cash
Accounts receivable
Inventory

Bank overdraft
Outstanding expenses
Accounts payable

Marketable securities

Bills payable

Working capital is a financial metric which represents operating liquidity available to

a business, organization, or other entity, including governmental entity. Along
with fixed assets, such as plant and equipment, working capital is considered a part of
operating capital.

1.6 Working capital management:

Meaning:
Working capital management is the administration of the companys current
assets and the financing needed to support current assets.
Working capital management is an act of planning, organizing and
controlling the components of working capital like cash, bank balance,
inventory, receivables, payables, overdraft and short-term loans

Definition:
According to Smith K. V, Working capital management is concerned with
the problems that arise in attempting to manage the current assets, current
liabilities and the interrelationship that exist between them.
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 According to Weston and Brigham, Working capital generally stands for

excess of current assets over current liabilities. Working capital management
therefore refers to all aspects of the administration of both current assets and
current liabilities

2 Nature of working capital:

Working capital management is centered on problems arising in attempting to manage

the current assets, the current liabilities and the interrelationship that exists between
them. As explained earlier, the term current assets refer to those assets which business
will be converting into cash within one year without experiencing a dwindling in
value and upsetting the operations of the company. Most major current assets are
cash, marketable securities, accounts receivable and inventory.
Current liabilities are referred to those liabilities that are intended at the beginning,
payable in the ordinary course of business, within a year, out of the current assets or
earnings of the concern. Among the essential current liabilities are accounts payable,
bills payable, bank overdraft, and outstanding expenses.
The Principal objective of working capital management is to manage the companys
current assets and liabilities in such a way that a satisfactory level of working capital
is maintained. It is so due to the fact that if the company cannot sustain an acceptable
level of working capital, it is certainly may lead into what is termed insolvency and
may end up into bankruptcy.
Current assets must be large as much as necessary to be able to cover its current
liabilities to guarantee a reasonable margin of safety. All of the current assets are to be
managed efficiently so as to maintain the liquidity of the company; while not keeping
too high a level of any one of them. Every of the short-term bases of financing must
be managed continuously to guarantee the possible best way usage. Hence, the
interaction between current assets and current liabilities is the main premise of the
theory of working management.
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The central elements of the nature of working capital management includes its
definition, need, optimum level of current assets, the trade-off between profitability
and risk which is associated with the level of current assets and liabilities. In addition
to financing mix strategies and so on.

Controlling working capital:

Increasing current assets or decreasing current liabilities increases working
capital, and vice versa.
Four common mechanisms for controlling working capital are cash
management, inventory management, debtors management, and financing
management.
Having too little working capital impairs a company's ability to meet its
financial obligations, while having too much working capital can also be bad
because it means that there are assets that are not being invested in the longterm.

1.7 Controlling Components of Working Capital:

Each company has different demands for how much Working Capital they need, but
all companies prefer to have positive working capital (recall that working capital =
current assets - current liabilities). Having too little working capital impairs a
company's ability to meet its financial obligations. It is hard to pay expenses or debts
that come due in the short-term. Having too much working capital can also be bad
because it means that there are assets that are not being invested. Holding too many
short term assets slows future growth of the company. Thus, managing working
capital to an acceptable level is one of the most important jobs of management.

Working capital can be adjusted by increasing or decreasing its two components:

current assets and current liabilities.
Increasing current assets or decreasing current liabilities increases working capital,
and vies versa.
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Management can enact a number of policies, some of which are highlighted below:

A) Cash management:
Identify the cash balance that allows the business to meet day to day expenses, but
reduces cash holding costs. Cash is current assets.

B) Inventory management:
Identify the level of inventory which allows for uninterrupted production but reduces
the investment in raw materials--and minimizes reordering costs--and hence
increases cash flow. Inventory is current assets.

C) Debtors management:
Identify the appropriate credit policy, such as credit terms, that will attract customers,
such that any impact on cash flows and the cash conversion cycle will be offset by
increased revenue and hence Return on Capital (or vice versa). Credit extended to
customers (accounts receivable) is current assets.

D) Financing management:
Identify the appropriate source of financing. Short-term financing (as well as longterm financing that comes due in the next year or operating cycle) is a current liability.
By adjusting these four primary influencers on current assets and current liabilities,
management can change working capital to a desirable level.

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1.8 Characteristics of working capital:

The features of working capital distinguishing it from the fixed capital are
as follows:

(1) Short term Needs:

Working capital is used to acquire current assets which get converted into cash in
a short period. In this respect it differs from fixed capital which represents funds
locked in long term assets. The duration of the working capital depends on the
length of production process, the time that elapses in the sale and the waiting
period of the cash receipt.

(2) Circular Movement:

Working capital is constantly converted into cash which again turns into working
capital. This process of conversion goes on continuously. The cash is used to
purchase current assets and when the goods are produced and sold out; those
current assets are transformed into cash. Thus it moves in a circular away. That is
why working capital is also described as circulating capital.

(3) An Element of Permanency:

Though working capital is a short term capital, it is required always and forever.
As stated before, working capital is necessary to continue the productive activity
of the enterprise. Hence so long as production continues, the enterprise will

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constantly remain in need of working capital. The working capital that is required
permanently is called permanent or regular working capital.

(4) An Element of Fluctuation:

Though the requirement of working capital is felt permanently, its requirement
fluctuates more widely than that of fixed capital. The requirement of working
capital varies directly with the level of production. It varies with the variation of
the purchase and sale policy; price level and the level of demand also. The portion
of working capital that changes with production, sale, price etc. is called variable
working capital.

(5) Liquidity:
Working capital is more liquid than fixed capital. If need arises, working capital
can be converted into cash within a short period and without much loss. A
company in need of cash can get it through the conversion of its working capital
by insisting on quick recovery of its bills receivable and by expediting sales of its
product. It is due to this trait of working capital that the companies with a larger
amount of working capital feel more secure.

(6) Less Risky:

Funds invested in fixed assets get locked up for a long period of time and cannot
be recovered easily. There is also a danger of fixed assets like machinery getting
obsolete due to technological innovations. Hence investment in fixed capital is
comparatively more risky. As against this, investment in current assets is less risky
as it is a short term investment. Working capital involves more of physical risk
only, and that too is limited. Working capital involves financial or economic risk
to a much less extent because the variations of product prices are less severe
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generally. Moreover, working capital gets converted into cash again and again;
therefore, it is free from the risk arising out of technological changes.

(7) Special Accounting System not needed:

Since fixed capital is invested in long term assets, it becomes necessary to adopt
various systems of estimating depreciation. On the other hand working capital is
invested in short term assets which last for one year only. Hence it is not necessary
to adopt special accounting system for them.

1.9 Importance of Working Capital:

Working capital is the life blood 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. The main advantages of maintaining adequate
amount of working capital are as follows:

1.

Solvency of the business:

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Adequate working capital helps in maintaining solvency of the business by

providing uninterrupted flow of production.
2.

Goodwill:
Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining goodwill.

3.

Easy loans:
A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and other on easy and favorable terms.

4.

Cash Discounts:
Adequate working capital also enables a concern to avail cash discounts on the
purchases and hence it reduces costs.

5.

Regular supply of raw materials:

Sufficient working capital ensures regular supply of raw materials and continuous
production.

6.

Regular payment of salaries, wages and other day-to-day commitments:

A company which has ample working capital can make regular payment of
salaries, wages and other day-to-day commitments which raises the morale of its
employees, increases their efficiency, reduces wastages and costs and enhances
production and profits.
7. Exploitation of favorable market conditions:
Only concerns with adequate working capital can exploit favorable market
conditions such as purchasing its requirements in bulk when the prices are lower
and by holding its inventories for higher prices.
8. Ability to face Crisis:
Adequate working capital enables a concern to face business crisis in emergencies
such as depression because during such periods, generally, there is much pressure
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on working capital.
9. Quick and Regular return on Investments:

Every Investor wants a quick and regular return on his investments. Sufficiency of
working capital enables a concern to pay quick and regular dividends to its
investors as there may not be much pressure to plough back profits. This gains the
confidence of its investors and creates a favorable market to raise additional funds
i.e., the future.
10. High morale:

Adequacy of working capital creates an environment of security, confidence, and

high morale and creates overall efficiency in a business.

1.10 Disadvantages of Working Capital:

Excessive Working Capital means ideal funds which earn no profits for the
business and hence the busines0s cannot earn a proper rate of return on its
investments.
When there is a redundant working capital, it may lead to unnecessary
purchasing and accumulation of inventories causing more chances of theft,
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waste and losses.

Excessive working capital implies excessive debtors and defective credit
policy which may cause higher incidence of bad debts.
It may result into overall inefficiency in the organization.
When there is excessive working capital, relations with banks and other
financial institutions may not be maintained.
Due to low rate of return on investments, the value of shares may also fall.
The redundant working capital gives rise to speculative transactions.

1.11 Disadvantages or Dangers of Inadequate Working Capital:

A concern which has inadequate working capital cannot pay its short-term
liabilities in time. Thus, it will lose its reputation and shall not be able to get
good credit facilities.
It cannot buy its requirements in bulk and cannot avail of discounts, etc.

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 It becomes difficult for the firm to exploit favorable market conditions and
undertake profitable projects due to lack of working capital.

1.12 Sources of working capital:

1) Long-term source

2) Short-term source

(Fixed working capital)

(Temporary working capital)

a) Loan from financial institution

a) Factoring

b) Floating of Debentures

b) Line of credit
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c) Accepting public deposits

c) Bank overdraft

d) Issue of shares

d) Trade credit

e) Cash credit
f)

Commercial papers

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 shareholders
Bank overdrafts or lines of credit
Term loans

Long term sources:

1) Issue of shares:
Ordinary shares are also known as equity shares and they are the most common
form of share in the UK. An ordinary share gives the right to its owner to share in
the profits of the company (dividends) and to vote at general meetings of the
company.
Since the profits of companies can vary wildly from year to year, so can the
dividends paid to ordinary shareholders. In bad years, dividends may be nothing
whereas in good years they may be substantial.
The nominal value of a share is the issue value of the share - it is the value written
on the share certificate that all shareholders will be given by the company in which
they own shares.
The market value of a share is the amount at which a share is being sold on the stock

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exchange and may be radically different from the nominal value. When they are
issued, shares are usually sold for cash, at par and/or at a premium. Shares sold at par
are sold for their nominal value only - so if Rs.10 share is sold at par, the company
selling the share will receive Rs. 10 for every share it issues.
If a share is sold at a premium, as many shares are these days, then the issue price
will be the par value plus an additional premium.
2) Loans from other financial institutions:

The term debenture is a strictly legal term but there are other forms of loan or loan
stock. A loan is for a fixed amount with a fixed repayment schedule and may appear
on a balance sheet with a specific name telling the reader exactly what the loan is
and its main details.

3) Public deposits:
Public deposit is in important source of working capital for the business. Under this
system, people deposit, their savings with the business units for a duration of
minimum six months to maximum of three years. The rate of interest to be paid on
this deposit varies from 10 to 15 per years. This system was popular in the
Foodindustry of Mumbai and Ahmadabad as also in the tea plantations of Assam and
Bengal in the 19th century.
The companies can asset public deposit subject to these restrictions. For the
companies this is a convenient and easy method of obtaining funds. Rate of interest
on these deposits is lower than on bank loans.
The depositors behavior is natural, because when the company is in financial
difficulties there is a danger that it may fail to return deposited with interest to all of
its depositors.

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4) Commercial papers:
Commercial papers have become an important tool for financing working capital
requirement of a company. Commercial paper is an unsecured promissory note
issued by the company to raise short-term funds. The buyer of the commercial
papers includes banks, insurance companies, unit trusts and companies with surplus
funds to invest for a short period with minimum risk.

Short term sources:

1) Line of credit:
Lines of credit are not often given by banks to new businesses. However, if your new
business is well-capitalized by equity and you have good collateral, your business
might qualify for one. A line of credit allows you to borrow funds for short-term needs
when they arise. The funds are repaid once you collect the accounts receivable that
resulted from the short-term sales peak. Lines of credit typically are made for one
year at a time and are expected to be paid off for 30 to 60 consecutive days sometime
during the year to ensure that the funds are used for short-term needs only.

2) Factoring:
Factoring allows you to raise finance based on the value of your outstanding
invoices. Factoring also gives you the opportunity to outsource your sales ledger
operations and to use more sophisticated credit rating systems. Once you have set up
a factoring arrangement with a Factor, it works this way:
Once you make a sale, you invoice your customer and send a copy of the invoice to
the factor and most factoring arrangements require you to factor all your sales. The
factor pays you a set proportion of the invoice value within a pre-arranged time
typically, most factors offer you 80-85% of an invoice's value within 24 hours.
The major advantage of factoring is that you receive the majority of the cash from
debtors within 24 hours rather than a week, three weeks or even longer.
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3) Invoice discounting:

Invoice discounting enables you to retain the control and confidentiality of your
own sales ledger operations.
The client company collects its own debts. 'Confidential invoice discounting ensures
that customers do not know you are using invoice discounting as the client company
sends out invoices and statements as usual. The invoice discounter makes a proportion
of the invoice available to you once it receives a copy of an invoice sent.
Once the client receives payment, it must deposit the funds in a bank account
controlled by the invoice discounter. The invoice discounter will then pay the
remainder of the invoice, less any charges.
The requirements are more stringent than for factoring. Different invoice
discounters will impose different requirements.
4) Overdraft facilities:
Many companies have the need for external finance but not necessarily on a longterm basis. A company might have small cash flow problems from time to time but
such problems don't call for the need for a formal long-term loan. Under these
circumstances, a company will often go to its bank and arrange an overdraft. Bank
overdrafts are given on current accounts and the good point is that the interest
payable on them is calculated on a daily basis. So if the company borrows only a
small amount, it only pays a little bit of interest. Contrast the effects of an overdraft
with the effects of a loan.
5) Trade credit:

This source of finance really belongs under the heading of working capital
management since it refers to short-term credit. By a 'line of credit' they mean that a
creditor, such as a supplier of raw materials, will allow us to buy goods now and pay
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for them later. Why do they include lines of credit as a source of finance? They ll, if
they manage their creditors carefully they can use the line of credit they provide for
us to finance other parts of their business.
Take a look at any company's balance sheet and see how much they have under the
heading of Creditors falling due within one year'- let's imagine it is Rs. 25,000 for a
company. If that company is allowed an average of 30 days to pay its creditors then
they can see that effectively it has a short term loan of Rs. 25,000 for 30 days and it
can do whatever it likes with that money as long as it pays the creditor on time.

1.13 Management of cash:

Cash is the important current asset for operation of the business. Cash is the basic input
needed to keep the business running in the continues basis, it is also the ultimate output
expected to be realized by selling or product manufactured by the firm. The term cash include
coins, currency and cheque help by the firm and balance in its bank account.
Sometimes near cash items such as marketing securities or bank term deposit are also include
in cash. Generally when firm execs cash, it invests it is marketable securities.
Cash is maintained for motives:
Transaction motive:
Cash is held to pay for goods or services. It is useful for conducting our everyday
transactions or purchases.
The firm needs cash primarily to make payments for purchases, wages salaries, other
operating expenses, Taxes, dividends, etc.

Precautionary motive:

Cash is a relatively safe investment. Cash investments rarely lose value (as can stocks or
bonds) and are there for held for safety reasons in a balanced portfolio. For example
Debtor who pays after 7 days may inform of his inability to pay, on the other hand a
supplier who used to give credit for 15 days may not have the stock to supply.
Speculative motive:
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Cash investments provide a return to their holders.

The speculative motive helps to take advantages of:
An opportunity to purchase raw material at reduced prize on payment of
immediate cash.
Make purchase at favorable price.

1.14 Objectives of cash management:

1. To make payment according to payment schedule:
Firm needs cash to meet its routine expenses including wages, salary, taxes etc. To present
firm from being insolvent. The relation of firm with bank done not deteriorate. Contingencies
can be met easily.
2. To minimize cash balance:
The second objective of cash managements to minimize cash balance. Excessive amount of
cash balance helps in quicker payments, but excessive cash may remain unused &reduced
profitability of business.

Factors determining cash needs:

1. Matching of cash flows:
The first and very important factor determining the level of cash requirement is
matching cash inflows with cash outflows.
2. Short costs:
Shorts costs are defined as the expenses incurred as a result of shortfall of cash such
as unexpected or expected shortage of cash balances to meet requirements.

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3. Cost of cash on excess balances:

One of the important factors determining the cash needs is the cost of maintaining
cash balances. i.e. excess or idle cash balance. The cost of maintaining excess cash
balance is called excess cash balance cost.
4. Uncertainty in business.
Uncertainty plays a key role in cash management, because cash flows cannot be
predicted with complete accuracy. The first requirement in cash management is
precautionary cushion to cope with irregularities in cash flows.

1.15 Planning of working capital:

When the economic recovery eventually asserts itself, will you have a solid working
capital plan in place to ensure your company can take full advantage? Below are six
steps to follow in preparing such a plan:

1) Assess future funding requirements for running the business:

Begin by evaluating the company's short-term funding needs (e.g., meeting payroll
and paying suppliers, utilities, rent and taxes). The timing of when these payments are
due may not correspond to cash inflows from customers, so you must have a strong
understanding of cash requirements in order to meet company obligations.

Companies also need to address long-term funding needs. For example, purchasing
buildings or plants and upgrading manufacturing facilities requires capital, which is
typically financed. Treasury professionals must secure the requisite funding well
before the company finalizes plans to execute a large capital project.

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2) Calculate the working capital you will need given various growth scenarios:

Conduct a "scenario analysis" to determine if current working capital strategies will

support various rates of growth.

First, a business should consider the economy, its industry and marketplace
competition to establish a realistic expectation of available growth opportunities.

Next, perform a shock analysis by running the numbers at growth rates well above or
below the expected rates in the scenario analysis. This will help with contingency
planning.

In addition to revenue growth, assess margins and overhead expenses at various

growth levels.

3) Evaluate your current access to working capital and consider

diversification:

Companies should review their current access to various funding sources, such as
working capital lines of credit, cash and investment accounts, accounts receivable and
inventory. Make sure those sources are adequate to meet your strategic objectives.

As a best practice, middle-market and larger organizations (those with $100 million
or more in annual revenue) may want to consider holding cash and investments in at
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least two separate institutions. This diversified approach is suggested because in a

depressed economy lending tightens up and businesses may lose their access to credit.

4) Review payables and receivables processes and strive to maximize working

capital:

There are several strategies and processes companies can employ to maximize
working capital.

On the accounts receivable side, they can offer direct debit through the
automated network to customers so payments arrive automatically on a predetermined
schedule. This approach is useful for companies selling services that call for regularly
scheduled payments, such as utilities and real estate firms. Electronic bill
payment can help expedite cash flow by providing consumers electronic options to
make bill payment through the Internet, an agent, or interactive voice response while
retaining control of when payments are made.

Additionally, lockbox services apply check payments at least one day faster than
businesses could if they processed payments on their own. Accepting also adds to
cash flow predictability while providing a possible revenue benefit to the payer,
and remote deposit capture extends cut-off times for receiving same-day credit on
check deposits.

On the accounts payable side, companies can use controlled disbursement accounts
to learn early each morning which checks they've issued will hit their account that
day. They can also use integrated payables solutions or the ACH network to pay

28

suppliers in their preferred method and in a timely manner without worrying about
how fast the postal service will deliver a check.

5) Test and update the working capital plan:

Formal working capital plans should be updated annually, supplemented by a

quarterly or monthly examination of financial results to see if adjustments are
necessary. Consider, for example, whether the company's cash forecast or financial
drivers have changed dramatically (i.e., the company has downsized or either merged
with or acquired another business). As part of this process, companies should
periodically assess the current state of the economy and test their access to lines of
credit

1.16 Definition of Operating Cycle:

The operating cycle is simply defined as the average time that passes between
the business initial purchase of inventory and the collection of cash proceeds

from the sale of inventory.

The operating cycle is the amount of time it takes for a company to turn cash

used to purchase inventory into cash once again.

A company with a short operating cycle is able to quickly recover its

investment.
A company with a long operating cycle will have less cash available to meet
any short-term needs, which can result in increased borrowing and interest
expense.

Importance of operating cycle:

Operating cycle is important because it focuses on business that makes or sells
products and also services businesses.
29

 It also helps in determining the business expenses while delivering the service
and payment terms.
Operating cycle only concentrates on money leaving and returning to your
company.

Operating Cycle Concept of Working Capital:

In this concept of working capital, we make the operating cycle. In this cycle, we
calculate inventory conversion period. To know this, we can estimate when we need
cash

for

buying

our

inventory.

We

also

calculate

debtor

or

receivable conversion period. To know this, we can estimate when we receive cash
from our debtors.
If inventory conversion period is less than debtor conversion period, we have to
manage other sources for buying our inventories. If we buy good on credit, we also
take care creditors' conversion period.

A company's balance sheet provides detailed information about the company's assets
and liabilities. A company has cash assets that can be used immediately to cover any
obligations, assets that can be turned into cash within a year and assets that may never
turn into cash.

Operating cycle (O) = R + W + F + D C where,

R = Raw material storage period.
W = Work-in-process holding period.
F = Finished goods storage period.
D = Debtors collection period.
C = Credit period availed.
(a) Raw material storage period:

30

Average raw material stock

Average consumptionof raw material per day

(b) Work-in-process holding period:

Average WIP
Average cost of goods per day

(c) Finished goods storage period:

Average finished goods

Stock average COGS per day

(d) Debtors collection period:

Average receivables

Average sales per day

(e) Credit period availed:

=

Average creditors
Average purchase of raw materials per day

1.17 Determinants of working capital:

Determination is referring to a decision a person has made and nothing will
stop them from doing what they feel should be done. This could be getting a
job. You've found the job you want and nothing is going to persuade or stop
you from getting the job.
The factors influencing the working capital decisions of a firm may be
classified as two groups, such as internal factors and external factors. The
internal factors includes, nature of business size of business, firms product
policy, credit policy, dividend policy, and access to money and capital markets,
growth and expansion of business etc. The external factors include business
fluctuations, changes in the technology, infrastructural facilities, import policy
31

and the taxation policy etc. These factors are discussed in brief in the
following lines.

1. Internal Factors:
A) Nature and size of the business:
The working capital requirements of a firm are basically influenced by the nature and
size of the business. Size may be measured in terms of the scale of operations. A firm
with larger scale of operations will need more working capital than a small firm.
Similarly, the nature of the business - influence the working capital decisions. Trading
and financial firms have less investment in fixed assets. But require a large sum of
money to be invested in working capital. Retail stores, business units require larger
amount of working capital, whereas, public utilities need less working capital and
more funds to invest in fixed assets.

B) Firms production policy:

The firms production policy (manufacturing cycle) is an important factor to decide
the working capital requirement of a firm. The production cycle starts with the
purchase and use of raw material and completes with the production of finished
goods. On the other hand production policy is uniform production policy or seasonal
production policy etc., also influences the working capital decisions. Larger the
manufacturing cycle and uniform production policy larger will be the requirement
of working capital. The working capital requirement will be higher with varying
production schedules in accordance with the changing demand.
C) Firms credit policy:
The credit policy of a firm influences credit policy of working capital. A firm
following liberal credit policy to all customers requires funds. On the other hand, the
firm adopting strict credit policy and grant credit facilities to few potential customers
will require less amount of working capital.
32

D) Availability of credit:
The working capital requirements of a firm are also affected by credit terms granted
by its suppliers i.e. creditors. A firm will need less working capital if liberal credit
terms are available to it. Similarly, the availability of credit from banks also
influences the working capital needs of the firm. A firm, which can get bank credit
easily on favorable conditions, will be operated with less working capital than a firm
without such a facility.
E) Growth and expansion of business:
Working capital requirement of a business firm tend to increase in correspondence
with growth in sales volume and fixed assets. A growing firm may need funds to
invest in fixed assets in order to sustain its growing production and sales. This will, in
turn, increase investment in current assets to support increased scale of operations.
Thus, a growing firm needs additional funds continuously.

F) Profit margin and dividend policy:

The magnitude of working capital in a firm is dependent upon its profit margin and
dividend policy. A high net profit margin contributes towards the working capital
pool. To the extent the net profit has been earned in cash, it becomes a source of
working capital. This depends upon the dividend policy of the firm. Distribution of
high proportion of profits in the form of cash dividends results in a drain on cash
resources and thus reduces companys working capital to that extent. The working
capital position of the firm is strengthened if the management follows conservative
dividend policy and vice versa.
G) Operating efficiency of the firm:
Operating efficiency means the optimum utilization of a firms resources at minimum
cost. If a firm successfully controls operating cost, it will be able to improve net profit
margin which, will, in turn, release greater funds for working capital purposes.
H) Co-coordinating activities in firm:
33

The working capital requirements of a firm are depend upon the co-ordination
between production and distribution activities. The greater and effective the coordinations, the pressure on the working capital will be minimized. In the absence of
co-ordination, demand for working capital is reduced.

2) External Factors
A) Business fluctuations:
Most firms experience fluctuations in demand for their products and services. These
business variations affect the working capital requirements. When there is an upward
swing in the economy, sales will increase, correspondingly, the firms investment in
inventories and book debts will also increase. Under boom, additional investment in
fixed assets may be made by some firms to increase their productive capacity. This act
of the firm will require additional funds. On the other hand when, there is a decline in
economy, sales will come down and consequently the conditions, the firm try to
reduce their short-term borrowings. Similarly the seasonal fluctuations may also
affect the requirement of working capital of a firm.
B) Changes in the technology:
The technological changes and developments in the area of production can have
immediate effects on the need for working capital. If the firm wish to install a new
machine in the place of old system, the new system can utilize less expensive raw
materials, the inventory needs may be reduced there by working capital needs.
C) Import policy:
Import policy of the Government may also affect the levels of working capital of a
firm since they have to arrange funds for importing goods at specified times.
D) Infrastructural facilities:
The firms may require additional funds to maintain the levels of inventory and other
current assets, when there is good infrastructural facilities in the company like,
34

transportation and communications.

E) Taxation policy:
The tax policies of the Government will influence the working capital decisions. If the
Government follows regressive taxation policy, i.e. imposing heavy tax burdens on
business firms, they are left with very little profits for distribution and retention
purpose. Consequently the firm has to borrow additional funds to meet their increased
working capital needs. When there is a liberalized tax policy, the pressure on working
capital requirement is minimized.
Thus the working capital requirements of a firm are influenced by the internal
and external factors.

Chapter no: 2
Research
methodology
35

2.1 Introduction:

Research is a search for knowledge. It is a scientific and systematic search for

pertinent information on a specific topic.
According to Clifford Woody research comprises defining and redefining
problems, formulating hypothesis or suggested solutions; collecting,
organizing and evaluating data; making deductions and reaching conclusions;
and at last carefully testing the conclusions to determine whether they fit the
hypothesis.
It is an art of scientific investigation. Research is a structured enquiry that
utilizes acceptable scientific methodology to solve problems and create new
knowledge that is generally applicable. Scientific methods consist of
systematic observation, classification and interpretation of data.
Although we engage in such process in our daily life, the difference between
our casual day- to-day generalization and the conclusions usually recognized
36

as scientific method lies in the degree of formality, rigorousness, verifiability

and general validity of latter

2.2 Nature of the research:

The project deals with the working capital management with reference to
selecte industries. The project involves the working capital requirement in selected
FOODINDUSTRAY industries.
Now, the requirement of working capital is high at the same time, it includes
the management of such working capital in the company. The question is about
managing such working capital. There are various tools and techniques for managing
the working capital. Not only that there are various ratios to find out the requirement
of working capital.
In the research methodology there are some objectives related to manage as
well as improve the working capital management in FOODINDUSTRAY companies.

2.3 Objectives of the study:

The main objective of the study is to make a critical study of the working capital
management of selected units in Food INDUSTRAY companies.
The main objectives are:
The main objective of the study was to make a critical study of the working

capital of selected units in Gujarat.

To know the working requirement of the company.
To know liquidity position of the company.
To study the operating and cash cycle of the company.
To study the working capital management

FOODINDUSTRAY sector.
To determine the trends

of

Working

with

Capital

reference

to

Management

in

FOODINDUSTRAY companies.
Comparison between Working Capital Management with regards to
FOODINDUSTRAY companies.
37

 To determine the nature and extent of the relationship between working capital
management and FOODI NDUSTRAY companies

2.4 Scope of the Study:

The scope of this study is to provide an insight into concept of working capital
management and illustrate it by actually working capital management of FOOD
INDUSTRAY. The study of working capital management is purely based on
secondary data and all the information is available within the company itself in the
form of records.
So, Scope of the study is limited up to the availability of company records and
information provided by the balance sheet, profit & loss account, Magazine &
websites.

2.5 Selection of the Problem:

In the selection of the problem the problem which is selected by
me is analysis of working capital of the Indian companies. So That the
main reason is that the problem is basically done on the Accountancy so
that the area of account is very wide.
So that the mainly that reasons arise to selection in the problem.

It is widely available problem which is selected.

The comparison of the different business possible.
Through this the investors is also know the financial position of the
companies.
Being a commerce faculty it is being proud to select the basic
problem of the business unit.

2.6 Sources of data collection:

38

 The task of data collection begins after a research problem is defined and
research design is chalked out.
Data can be collected from two sources i.e. primary and secondary source. The
primary data is the one which is collected for the first time i.e. directly from
the respondent and thus it happens to be original in character.
The secondary data is the one which is collected by someone else and which
has already been passed through the statistical process. The source of data
collection depends on the research problem.
The data used for achieving each objective was made suitable for analysis as
per the methodology. Thus, the data collected from Prowess database has been
complied and used with due care and caution as per the requirement of the
study. The analysis has been carried out both on panel and pooled data
depending on the requirements of the techniques used for analysis.
The present study was based on secondary data. The major source of
information was the secondary data which was collected from Annual reports
of the selected companies

2.7 Sample Design:

The target sample for this study is FOODINDUSTRAY companies i.e.
Food industray ltd

2.8 Limitations of the study:

The present study has the following limitations:Statistical tools are applied for the analysis of the data. The tools suffer from certain
limitations and thus the findings of the study might have been affected.
The data collected may not be full or perfect as it is not possible to cover
each and everything in this limited report.

39

 The study was completely done on the basis of the ratio calculated from
the B/S.
Only secondary data are considered in the project.
Possibility of error in the data collection as on the websites sometimes
wrong data are provided.
The scope of the study is limited up to FOODINDUSTRAY companies.
Time for the study was limited.

Chapter
no: 3
Literature
review
40

3.1 LITERATURE REVIEW:

Introduction:

Review of literature forms an integral as well as an essential part of modern

research studies. No research study is considered complete unless an extensive
literature review is made by the researcher. The basic purpose of undertaking
this exercise is to find the research gap between, studies conducted so far or
literature available, and also to finalize precisely the topic of research and to
get insight into the research topic selected for study. In this sense this exercise
becomes a sort of exploratory research.

The purpose of this chapter is to present a review of literature relating to the

working capital management. Although working capital is an important
ingredient in the smooth working of business entities, it has not attracted much
attention of scholars.

Whatever studies have conducted, those have exercised profound influence on

the understanding of working capital management good number of these
studies which pioneered work in this area have been conducted abroad,
following which, Indian scholars have also conducted research studies
exploring various aspects of working capital.

Literature review is indispensable part of a thesis because it represents the

whole range of research in the past on the topic selected by the researcher on
the basis of which research design of a study is formulated. Literature review
41

gives better insight and helps bridge gap for the research to be undertaken.

A literature review discusses published information in a particular subject

area, and sometimes information in a particular subject area within a certain
time period. A literature review can be just a simple summary of the sources,
but it usually has an organizational pattern and combines both summary and
synthesis.

A summary is a recap of the important information of the source, but a

synthesis is a re-organization, or a reshuffling, of that information. It might
give a new interpretation of old material or combine new with old
interpretations. Or it might trace the intellectual progression of the field,
including major debates. And depending on the situation, the literature review
may evaluate the sources and advise the reader on the most pertinent or
relevant. The format of a review of literature may vary from discipline to
discipline and from assignment to assignment.

This part briefly reviews the studies conducted in India in respect of working
capital management in Indian industries.
The first, small but fine piece of work is the study conducted by National
Council of Applied Economic Research (NCAER) in 1966 with reference to working
capital management in three industries namely cement, fertilizer and sugar. This was
the first study on nature and norms of working capital management in countries with
scarcity of investible resources. This study was mainly devoted to the ratio analysis
of composition, utilization and financing of working capital for the period 1959 to
1963. This study classified these three industries into private and public sector for
comparing their performance as regards the working capital management.
Agarwal (1983) also studied working capital management on the basis of
sample of 34 large manufacturing and trading public limited companies in ten
industries in private sector for the period 1966-67 to 1976-77. Applying the same
techniques of ratio analysis, responses to questionnaire and interview, the study
42

concluded the although the working capital per rupee of sales showed a declining
trend over the years but still there appeared a sufficient scope for reduction in
investment in almost all the segments of working capital. An upward trend in cash to
current assets ratio and a downward trend in cash turnover showed the accumulation
of idle cash in these industries. Almost all the industries had overstocking of raw
materials shown by increase in the share of raw material to total inventory while share
of semi-finished and finished goods came down. It also revealed that long-term funds
as a percentage of total working capital registered an upward trend, which was mainly
due to restricted flow of bank credit to the industries.
Sagan in his paper (1955) perhaps the first theoretical paper on the theory of
working capital management, emphasized the need for management of working
capital accounts and warned that it could vitally affect the health of the company. He
realized the need to build up a theory of working capital management. He discussed
mainly the role and functions of money manager inefficient working capital
management. Sagan pointed out the money managers operations were primarily in
the area of cash flows generated in the course of business transactions. However,
money manager must be familiar with what is being done with the control of
inventories, receivables and payables because all these accounts affect cash position.
Thus, Sagan concentrated mainly on cash component of working capital. Sagan
indicated that the task of money manager was to provide funds as and when needed
and to invest temporarily surplus funds as profitably as possible in view of his
particular requirements of safety and liquidity of funds by examining the risk and
return of various investment opportunities. He suggested that money manager should
take his decisions on the basis of cash budget and total current assets position rather
than on the basis of traditional working capital ratios. This is important because
efficient money manager can avoid borrowing from outside even when his net
working capital position is low. The study pointed out that there was a need to
improve the collection of funds but it remained silent about the method of doing it.
Moreover, this study is descriptive without any empirical support.

Appavadhanulu (1971) recognizing the lack of attention being given to

investment in working capital, analyzed working capital management by examining
the impact of method of production on investment in working capital. He emphasized
43

that different production techniques require different amount of working capital by

affecting goods-in-process because different techniques have differences in the length
of production period, the rate of output flow per unit of time and time pattern of value
addition. Different techniques would also affect the stock of raw materials and
finished goods, by affecting lead-time, optimum lot size and marketing lag of output
disposals. He, therefore, hypothesized that choice of production technique could
reduce the working capital needs. He estimated the ratio of work-in-progress and
working capital to gross output and net output in Foodweaving done during 1960, on
the basis of detailed discussions with the producers and not on the basis of balance
sheets which might include speculative figures. His study could not show significant
relationship between choice of technique and working capital. However, he pointed
out that the idea could be tested in some other industries like machine tools, ship
building etc. by taking more appropriate ratios representing production technique
correctly.
Weston and Brigham (1972) further extended the second proposition
suggested by Walker by dividing debt into long-term debt and short-term debt. They
suggested that short-term debt should be used in place of long-term debt whenever
their use would lower the average cost of capital to the firm. They suggested that a
business would hold short-term marketable securities only if there were excess funds
after meeting short-term debt obligations. They further suggested that current assets
holding should be expanded to the point where marginal returns on increase in these
assets would just equal the cost of capital required to finance such increases.
Walker in his study (1964) made a pioneering effort to develop a theory of
working capital management by empirically testing, though partially, three
propositions based on risk-return trade-off of working capital management. Walker
studied the effect of the change in the level of working capital on the rate of return in
nine industries for the year 1961 and found the relationship between the level of
working capital and the rate of return to be negative.
Chakraborty (1973) approached working capital as a segment of
capital employed rather than a mere cover for creditors. He emphasized that working
capital is the fund to pay all the operating expenses of running a business. He pointed

44

out that return on capital employed, an aggregate measure of overall efficiency in

running a business, would be adversely affected by excessive working capital.
Similarly, too little working capital might reduce the earning capacity of the fixed
capital employed over the succeeding periods. For knowing the appropriateness of
working capital amount, he applied Operating Cycle (OC) Concept. He calculated
required cash working capital by applying OC concept and compared it with cash
from balance sheet data to find out the adequacy of working capital in Union Carbide
Ltd. and Madura Mills Co. Ltd. for the years 1970 and 1971. He extended the analysis
to four companies over the period 1965-69 in 1974 study. 25 The study revealed that
cash working capital requirement were less than average working capital as per
balance sheet for Hindustan Lever Ltd. and Guest, Keen and Williams Ltd. indicating
the need for effective management of current assets. Cash working capital
requirements of Dunlop and Madura Mills were more than average balance sheet
working capital for all years efficient employment of resources. For Union Carbide
Ltd., cash working capital requirements were more in beginning years and then started
reducing in the later years as compared to conventional working capital indicating the
attempts to better manage the working capital. Chakraborty emphasized the
usefulness of OC concept in the determination of future cash requirements on the
basis of estimated sales and costs by internal staff of the firm. OC concept can also be
successfully employed by banks to assess the working capital needs of the borrowers.

Cohn and Pringle in their study (1973) illustrated the extension of

Capital Asset Pricing Model (CAPM) for working capital management decisions.
They tried to interrelate long-term investment and financing decisions and working
capital management decisions through CAPM. They emphasized that an active
working capital management policy based on CAPM could be employed to keep the
firms shares in a given risk class. By risk, he meant unsystematic risk, the only risk
deemed relevant by CAPM. Owing to the lumpy nature for long-term financial
decisions, the firm is continually subject to shifts in the risk of its equity. The fluid
nature of working capital, on the other hand, can be exploited so as to offset or
moderate such swings. For example they suggested that a policy using CAPM could
be adopted for the management of marketable securities portfolio such that the
45

appropriate risk level at any point in time was that which maintains the risk of the
companys common stock at a constant level.
Vanhorne in his study (1969) recognizing working capital management as
an area largely lacking in theoretical perspective, attempted to develop a framework
in terms of probabilistic cash budget for evaluating decisions concerning the level of
liquid assets and the maturity composition of debt involving risk-return trade-off. He
proposed calculation of different forecasted liquid asset requirements along with their
subjective probabilities under different possible assumptions of sales, receivables,
payables and other related receipts and disbursements. He suggested preparing a
schedule showing, under each alternative of debt maturity, probability distributions of
liquid asset balances for future periods, opportunity cost, maximum probability of
running out of cash and number of future periods in which there was a chance of cash
stock-out. Once the risk and opportunity cost for different alternatives were estimated,
the form could determine the best alternative by balancing the risk of running out of
cash against the cost of providing a solution to avoid such a possibility depending on
managements risk tolerance limits. Thus, Vanhorne study presented a risk-return
trade-off of working capital management in entirely new perspective by considering
some of the variables probabilistically. However, the usefulness of the framework
suggested by Vanhorne is limited because of the difficulties in obtaining information
about the probability distributions of liquid-asset balances, the opportunity cost and
the probability of running out of cash for different alternative of debt maturities.

46

Chapter no:

Data
Presentation
47

and Data
Analysis
4.1 PROFILE OF SELECTED INDUSTRY

Utsav Food Products working in India With 400 Employees And We Are The
Manufacturer of ilaichi Biscuits,Cookies Biscuits,Butter Biscuits,Cream
Biscuits,Biscuits,

Registered Address
5/1A, Hungerford Street
,
Kolkata
West Bengal
700017
Tel
Fax
Email
Website
Group

: 033-22870505 033-22872439
: 033-22872501
: [email protected]
: http://www.britannia.co.in
: MNC Associate

Registrars
48

Sharepro Services (India) Pvt.Ltd. 13 AB, Samhita Warehousing Complex,

2nd Floor, Sakinaka Telephone Exchange Lane,
Off Andheri-Kurla Road, Mumbai - 400072
Maharashtra
Tel
Fax
Email
Website

: 022-67720300, 67720400
: 022-28591568, 28508927
: [email protected]
: http://www.shareproservices.com

Management Name
Nusli N Wadia
A K Hirjee
Nimesh N Kampani
Keki Dadiseth
Nasser Munjee
Vijay L Kelkar
S S Kelkar
Name
Varun Berry
Avijit Deb
Jeh N Wadia
Ajai Puri
Ness N Wadia

Designation
Chairman
Director
Director
Director
Director
Director
Director
Designation
Managing Director
Director
Director
Director
Director

Products and Services

Biscuits

Cream Biscuits

49

Butter Biscuits

Biscuits Cookies

Elaichi Biscuits

50

Fact Sheet

Legal Status of Firm

Partnership

Nature of Business
Manufacturer

Number of Employees
101 to 500 People

Company Background - Britannia Industries

Industry Name
House Name
Collaborative Country Name
Joint Sector Name
Year Of Incorporation
Year Of Commercial Production

Food Processing - Dairy/Fruits/Others

MNC Associate
N.A.
N.A.
1918
N.A.
Regd. Office
51

Address
District
State
Pin Code
Tel. No.
Fax No.
Email : [email protected]

5/1A, Hungerford Street, N.A.

Kolkata
West Bengal
700017
033-22870505,033-22872439
033-22872501
Internet : http://www.britannia.co.in

Auditors
B S R & Co. LLP

Company Status
N.A.

Registrars
Name Sharepro Services (India) Pvt.Ltd.
Address 13 AB, Samhita Warehousing Complex, 2nd Floor, Sakinaka Telephone
Exchange Lane, Off Andheri-Kurla Road, Mumbai - 400072, Maharashtra
Tel. No. : 022-67720300, 67720400

Fax No. : 022-28591568, 28508927

Email : [email protected] Internet : http://www.shareproservices.com

4.2 Ratio analysis:

Meaning of Analysis :
Analysis is the process of examining information in detail given in the
financial statement,
Analysis play very important role in developing and understanding the
financial statement of the company. It is also helpful to know the financial position of
the company as well as to mark the investors to know about the working capital of the
company in todays life. It is very important from the view point of understanding and
interpreting the financial aspects of the company.

Concepts of ratio analysis:

52

Ratio analysis is widely used tool of financial analysis. The term ratio
in it refers to the relationship expressed in mathematical terms between two
individual figures and are selected from financial statement of the concern.
The ratio analysis is based on the fact that a single accounting figure by itself
may not communicate any meaningful information but when expressed as a
relative to some other figure, it may definitely provide some significant
information. The relationship between two or more accounting figures is
called a financial ratio.
For good an accurate results financial analysis is must ratio analysis is
the process of determining the inter relationship between the figures appearing
in the financial statements. This study enables comparisons of the performance
of various firms. Their financial soundness and profitability is judged. But it is
very difficult to find one standard ratio against which the comparison of actual
ratio can be made.

Meaning of Ratio analysis:

Ratio analysis is widely used tool of financial analysis. The term ratio in it
refers to the relationship expressed in mathematical terms between two
individual figures and are selected from financial statement of the concern.
The ratio analysis is based on the fact that a single accounting figure by itself
may not communicate any meaningful information but when expressed as a
relative to some other figure, it may definitely provide some significant
information. The relationship between two or more accounting figures is
called a financial ratio.
For good an accurate results financial analysis is must ratio analysis is the
process of determining the inter relationship between the figures appearing in
the financial statements. This study enables comparisons of the performance of
various firms. Their financial soundness and profitability is judged. But it is
very difficult to find one standard ratio against which the comparison of actual
ratio can be made.
53

Ratio analysis is process of determining and interpreting numerical

relationships bases on financial statements. A ratio is simple one number
expressed in terms of another. The financial ratios focus attention on the inter
relationship between the figures appearing in the financial statements.

Importance of ratio analysis:

Ratios help to make qualitative judgments. The ratio analysis involves
comparison for a useful interpretation of the financial statements. A single ratio in
itself does not indicate favorable or unfavorable condition.

Ratio analysis is the most important tool of financial analysis:

Helpful to management
Helpful in trend analysis
Useful in comparative study Helpful in communication
Helpful in determining the standards
Helpful in effective control
Helpful in evaluation of financial soundness

Limitations of ratio analysis:

54

There are certain limitations of the ratio analysis:

Limited Use of a Single Ratio

Ignores Qualitative Factors
Only a part of the information needed in the process of decision taking
Possibility of window-dressing

Classification of Ratio:

Accounting ratio is generally classified as follows:

Classific
ation of
ratio
Functio
nal
Classific
ation

Traditio
nal

classific
ation
Revenue
statemen
t ratio

Balance
sheet
ratio

Composi
te ratio

Turnover
Ratios

Liquidit
y Ratio

Leverag
e Ratio

Profitab
ility
ratio

Traditional classification:
The ratio is grouped into three categories on the basis of the statement
from which the figures are taken for computing the ratio. It is well-known
55

traditional classification and has been grouped since the advent of ratio
analysis. The ratio according to this classification is:
a) Revenue statement ratio
b) Balance sheet ratio
c) Composite ratio
Functional Classification:

Ratio is also groped in accordance with certain tests.

On this basis there are four categories of ratios:

1. Turnover Ratios:
The turnover ratios are excellent guide to measure the efficiency of managers.
The stock turnover ratio will indicate how efficiency sale is being. The debtors
turnover will indicate the efficiency of collection department and assets turnover
shows efficiency with which the assets are used in business. All such ratio related to
sales present to sales present a good picture of success or otherwise of the business.

1.

Debtors Turnover Ratio

2.

Creditors Turnover Ratio

3.

Fixed Assets Turnover Ratio

4.

Total Assets Turnover Ratio

2. Liquidity Ratio:
In fact the use of ratio was made initially to ascertain the liquidity of
business. The current ratio, liquid ratio, and acid test ratio will tell whether the
business will be able to meet its current liabilities and when the nature banks
and lenders will be able to pay regularly the interest and loan installments.

1.

Liquid Ratio
56

2.

Current Ratio

3.

Acid Test Ratio

3. Leverage Ratio:
It indicates the total capital of the company. And its division into own
funds and borrowed funds.
1. Proprietary Ratio
2. Debt Equity Ratio
3. Long Term Loan To Fixed Asset Ratio
4. Capital Gearing Ratio
4. Profitability ratio:
The profitability ratio of the firm can be measured by calculating
various profitability ratios. General two groups of profitability ratios are calculated.
1. Profitability in relation to sales.
2. Profitability in relation to investments.

57

4.3 Gross profit ratio:

It measures the relationship between gross profit and sales. It is
calculated by dividing gross profit by sales.
Gross profit ratio = Gross profit X 100
Net sales
Gross profit is the difference between sales and cost of goods sold.

Year
GROSS PROFIT

2014-15
12.29

2013-14
8.6

2012-13
5.91

58

GROSS PROFIT
100%
80%
60%
40%
20%
0%

2014-15

2013-14

2012-13

GROSS PROFIT

Interpretation:
There is a variation in the gross profit of the Food industray units. In
case gross profit increased from 2012-2013 to 2014-2015 is year by year
increased. This is the good sign of the company.

59

4.4 Net profit ratio:

It measures the relationship between net profit and sales of a firm. It
indicates managements efficiency in manufacturing, administrating, and selling the
products. It is calculated by dividing net profit after tax by sales.

Net profit ratio = Earning after tax X 100

Net Sales

Year
Net Profit

2014-15
51.89

2013-14
30.83

2012-13
19.56

60

Net Profit
60
50
40
30
20

19.56

10
0

2014-15

2013-14

2012-13

Interpretation:
There is a variation in the net profit of Food industry units. The net profit
61

increased in the last three year 2012-13 19.56 and after 2013-14 30.83 and 2014-15
51.89 this is the good sign of the company.

4.5 Quick ratio:

Quick assets are those current asses which can be realized
immediately at short notice without much difficulty. Expenses paid in advance
are also exuding from quick assets. This is every existing standard of liquidity
and it is satisfaction if the ratio is 1.50:1

Quick ratio=

C . AInventory
Quick Liabillities

Year
Quick Ratio (X)

2014-15
0.9

2013-14
0.51

2012-13
0.44

62

Quick Ratio (X)

1
0.8
0.6
0.4
0.2
0
2014-15

2013-14

2012-13

Quick Ratio (X)

Interpretation:
A quick ratio of 1:1 or more is considered as satisfactory or of
sound liquidity position. In current year the ratio decreased as compared to last
three year of Foodindustray and . respectively. Over all the quick ratio of last

63

five year is very satisfactory, so we can conclude that the absolute liquidity of
the Foodindustray and . is in favor.

4.6 . Current ratio:

The current ratio measures the short-term solvency of the firm. It

establishes the relationship between current assets and current liabilities.

It is

calculated by dividing current assets by current liabilities.

Current Ratio =

Year
Current Ratio (X)

Current assets
Current liabilities

2014-15
1.19

2013-14
0.9

2012-13
0.82

64

Current Ratio (X)

100%
80%
60%
40%
20%
0%

2014-15

2013-14

2012-13

Current Ratio (X)

Interpretation:
It is generally believed that 2:1 ratio position. i.e. the current assets should
be twice the current liabilities. Here the ratio of Foodindustray is very high as
65

compared to other year

4.7 Debtors turnover ratio:

The debtors turn over suggests the number of times the number of
credit sale is id collected during the year.

Debtors Turnover Ratio=

Year
Debtors turnover ratio

Credit sales
Account Receivalbe

2014-15
0

2013-14
0

2012-13
0.3

66

Debtores turnover ratios

100%
80%
60%
40%
20%
0%

2014-15

2013-14

2012-13

Debtores turnover ratios

67

Interpretation:
The collection in the credit policy. We know that the higher debtors
turnover ratio is not good for the firm. Here the .s ratio is very down as compared to
other year.

68

4.8 Total asset turnover ratio:

This ratio shows the firms ability to generate sales from all
financial resources committed to total assets. It is calculated by dividing sales by total
assets.
Total asset turnover = Total Sales
Total Assets

Year

2014-15

2013-14

2012-13

Asset Turnover Ratio

291.47

341.96

333.65

69

Asset Turnover Ratio

100%
80%
60%
40%
20%
0%

2014-15

2013-14

2012-13

Asset Turnover Ratio

Interpretation:
Here In the current year the ratio of Foodindustray is 291.47
and . is 341.16 in previous . Than after there is a continuous decrease and
decrease.

70

4.9 Capital Structure

Year
capital structure

2014-15
23.99

2013-14
23.99

2012-13
23.91

capital structure
100%
80%
60%
40%
20%
0%
2014-15

2013-14

2012-13

capital structure

71

Conclusion Chapter no: 5

72

5.1 Conclusion:

We have audited the accompanying standalone financial statements of

Britannia Industries Limited (the Company), which comprise the balance sheet
as at 31 March 2015, the statement of profit and loss and the cash flow
statement for the year then ended and a summary of the significant accounting

policies and other explanatory information.

We have taken into account the provisions of the Act, the accountingand
auditing standards and matters which are required to be included in the audit

report under the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act. Those Standards require that we
comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from

material misstatement.
An audit involves performing procedures to obtain audit evidence about the

amounts and the disclosures in the financial statements.

The procedures selected depend on the auditor''s judgment, including the
assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal financial control relevant to the Company''s preparation of
the financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on whether the Company has in place an adequate
internal financial controls system over financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness Order)
issued

by

the

Government

of

India

in

terms

of

sub-section

(11)of Section 143 of the Act, we give in the Annexure a

statement on the matters specified in the paragraph 3 and 4 of
the order to the extentapplicable.

73

5.2 Finding

Net profit ratio

There is a variation in the net profit of Food industry

units. The net profit increased in the last three year 2012-13 19.56 and after
2013-14 30.83 and 2014-15 51.89 this is the good sign of the company.

Gross profit ratio

There is a variation in the gross profit of the Food

industry units. In case gross profit increased from 2012-2013 to 2014-2015 is

year by year increased. This is the good sign of the company.

Total asset turnover ratio Here In the current year the ratio of Food industry
is 291.47 and. is 341.16 in previous. Than after there is a continuous decrease

and decrease.
Debtors turnover ratio The collection in the credit policy. We know that the
higher debtors turnover ratio is not good for the firm. Here the .s ratio is very
down as compared to other year.

Quick ratio A quick ratio of 1:1 or more is considered as satisfactory or of

sound liquidity position. In current year the ratio decreased as compared to last
three year of Foodindustray and . respectively. Over all the quick ratio of last
five year is very satisfactory, so we can conclude that the absolute liquidity of
the Foodindustray and . is in favor.

74

BIBLIOGRAPHY:

Websites:

www.Britannia.com
www.sunfiest.com
www.utsavfood.com]
www.google.com
www.moneycontrol.com
www.economictimes.com

Books:
Financial management Ravi M. Kishore
Financial management I. M. Panday

BALANCESHEET -

Total Share Capital

Sources Of Funds
23.99
23.99

23.91

23.89

23.89
75

Equity Share Capital

Share Application Money
Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

23.99
0
1,211.63
1,235.62
4.3
0
4.3
1,239.92

23.99
0
829.47
853.46
4.62
0
4.62
858.08
Mar
Mar '15
'14
Application Of Funds
Gross Block
986.66
929.1
Less: Accum. Depreciation
460.71 383.44
Net Block
525.95 545.66
Capital Work in Progress
48.22
97.22
Investments
661.04 372.99
Inventories
345.74 366.86
Sundry Debtors
70.98
53.69
Cash and Bank Balance
186.67
65.78
Total Current Assets
603.39 486.33
Loans and Advances
623.39 342.24
Total CA, Loans & Advances
1,226.78 828.57
Current Liabilities
811.16 660.98
Provisions
410.91 325.38
Total CL & Provisions
1,222.07 986.36
Net Current Assets
4.71 157.79
Total Assets
1,239.92 858.08
Contingent Liabilities
324.22 250.36
Book Value (Rs)
103.03
71.17

23.91
2.29
612.5
638.7
5.23
189.24
194.47
833.17
Mar
'13

23.89
0
496.15
520.04
0.58
27.57
28.15
548.19

23.89
0
427.41
451.3
406.89
23.68
430.57
881.87

Mar '12 Mar '11

777.53
325.85
451.68
128.44
279.6
331.49
77.12
64.48
473.09
350.22
823.31
576.9
272.96
849.86

673.06
293.97
379.09
79.73
428.94
382.28
52.14
30.94
465.36
319.22
784.58
882.53
241.62
1,124.15

590.75
287.05
303.7
11.7
545
311.2
57.26
28.75
397.21
224.88
622.09
381.29
219.33
600.62

-26.55
833.17
351.2
53.24

-339.57
548.19
327.87
43.54

21.47
881.87
425.14
37.78

PROFIT & LOSS A/C

76

Revenue From Operations

[Gross]
Less: Excise/Sevice Tax/Other
Levies
Revenue From Operations
[Net]
Other Operating Revenues
Total Operating Revenues
Other Income
Total Revenue

Cost Of Materials Consumed

Purchase Of Stock-In Trade
Changes In Inventories Of
FG,WIP And Stock-In Trade
Employee Benefit Expenses
Finance Costs
Depreciation And
Amortisation Expenses

Mar 15 14-Mar
INCOME
7,269.2 6,347.8
6
5

13-Mar

12-Mar

11-Mar

5,649.6
6

5,005.6
6

4,230.5
9

168.8
115.76
7,100.4 6,232.0
6
9
75.53
75.3
7,175.9 6,307.3
9
9
87.53
34.82
7,263.5 6,342.2
2
1
EXPENSES
3,592.9 3,165.5
9
3
749.33
656.78

85.28
5,564.3
8
51.11
5,615.4
9
55.47
5,670.9
6

58.62
4,947.0
4
27.15
4,974.1
9
58.53
5,032.7
2

32.27
4,198.3
2
25.2
4,223.5
2
48.92
4,272.4
4

2,890.4
2
638.18

2,655.0
1
529.53

2,371.9
2
410.31

-25.48
176.79
1.21

-12.58
172.45
5.44

-10.16
143.5
37.74

-4.79
145.87
38.07

-17.89
119.93
37.75

117.27
1,910.8
6
6,522.9
7

63.38
1,728.5
9
5,779.5
9

57.08
1,582.0
2
5,338.7
8

47.32
1,369.3
4
4,780.3
5

44.59
1,107.7
7
4,074.3
8

562.62
-20
542.62

332.18
0
332.18

252.37
0
252.37

198.06
0
198.06

177.25
0
-4.46
0
172.79

92.85
0
5.46
0
98.31

63.71
0
1.92
0
65.63

41.52
13.91
12.82
12.34
52.77

369.83

233.87

186.74

145.29

369.83

233.87

186.74

145.29

Profit/Loss For The Period

622.41
369.83
233.87
186.74
OTHER ADDITIONAL INFORMATION

145.29

Other Expenses

Total Expenses
Profit/Loss Before
Exceptional, ExtraOrdinary
Items And Tax
740.55
Exceptional Items
142.06
Profit/Loss Before Tax
882.61
Tax Expenses-Continued Operations
Current Tax
285.68
Less: MAT Credit Entitlement
0
Deferred Tax
-25.48
Tax For Earlier Years
0
Total Tax Expenses
260.2
Profit/Loss After Tax And
Before ExtraOrdinary Items
622.41
Profit/Loss From Continuing
Operations
622.41

77

EARNINGS PER SHARE

Basic EPS (Rs.)
52
31
20
16
12
Diluted EPS (Rs.)
52
31
20
16
12
VALUE OF IMPORTED AND INDIGENIOUS RAW MATERIALS
Imported Raw Materials
7.28
8.09
6.19
1.05
166.35
3,585.7 3,157.4 2,884.2 2,653.9 2,205.5
Indigenous Raw Materials
1
4
3
6
7
STORES, SPARES AND LOOSE TOOLS
Imported Stores And Spares
0
0
0
0.28
0.09
Indigenous Stores And Spares
19.26
18.33
18.19
14.04
11.89
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend
191.88
143.91
101.66
101.53
77.64
Tax On Dividend
39.06
24.46
17.28
16.47
12.6
Equity Dividend Rate (%)
800
600
425
425
325

78

 CASH FLOW

Mar
15
Net Profit/Loss Before
Extraordinary Items And
Tax
Net CashFlow From
Operating Activities
Net Cash Used In Investing
Activities
Net Cash Used From
Financing Activities
Net Inc/Dec In Cash And
Cash Equivalents
Cash And Cash Equivalents
Begin of Year
Cash And Cash Equivalents
End Of Year

14Mar

13Mar

12Mar

11Mar

882.61 542.62 332.18 252.37 198.06

515.33 614.51 272.01 210.66 246.32
384.29 227.34 53.89 -51.56 156.42
168.11 325.46 359.11 128.55 107.39
-37.07

61.71

-33.21

30.55

-17.49

54.69

-7.02

26.19

-4.36

13.13

17.62

54.69

-7.02

26.19

-4.36

79

RATIOS :

Basic EPS (Rs.)

Diluted EPS (Rs.)
Cash EPS (Rs.)
Book Value
[ExclRevalReserve]/Share
(Rs.)
Book Value
[InclRevalReserve]/Share
(Rs.)
Dividend / Share(Rs.)
Revenue from
Operations/Share (Rs.)
PBDIT/Share (Rs.)
PBIT/Share (Rs.)
PBT/Share (Rs.)
Net Profit/Share (Rs.)
PBDIT Margin (%)
PBIT Margin (%)
PBT Margin (%)
Net Profit Margin (%)
Return on Networth /
Equity (%)
Return on Capital
Employed (%)
Return on Assets (%)
Total Debt/Equity (X)
Asset Turnover Ratio (%)
Current Ratio (X)
Quick Ratio (X)
Inventory Turnover Ratio
(X)
Dividend Payout Ratio
(NP) (%)
Dividend Payout Ratio
(CP) (%)
Earnings Retention Ratio
(%)
Cash Earnings Retention
Ratio (%)

Mar 15
14-Mar
Per Share Ratios
51.9
30.87
51.89
30.87
61.67
36.12

13-Mar

12-Mar

11-Mar

19.57
19.55
24.34

15.63
15.62
19.59

12.16
12.16
15.9

103.01

71.15

53.23

43.54

37.78

103.01
16

71.15
12

53.23
8.5

43.54
8.5

37.78
6.5

598.25
525.83
71.62
52.64
61.84
47.36
73.58
45.24
51.89
30.83
Profitability Ratios
11.97
10.01
10.33
9
12.29
8.6
8.67
5.86

469.72
35.72
30.94
27.79
19.56

416.42
28.28
24.31
21.13
15.63

353.58
23.47
19.74
16.58
12.16

7.6
6.58
5.91
4.16

6.79
5.83
5.07
3.75

6.63
5.58
4.68
3.44

43.33

36.74

35.9

32.19

49.41
41.74
25.28
20.05
0
0
291.47
341.96
Liquidity Ratios
1.19
0.9
0.9
0.51

28.68
13.89
0.3
333.65

26.94
11.16
0.05
297.43

14.15
9.8
0.95
284.89

0.82
0.44

0.88
0.49

1.54
0.86

50.37

20.76

17.19

16.94

13.01

13.57

30.82

38.91

43.46

54.36

53.43

25.94

33.21

34.94

43.37

40.88

69.18

61.09

56.54

45.64

46.57

74.06

66.79

65.06

56.63

59.12
80

Enterprise Value (Cr.)

EV/Net Operating Revenue
(X)
EV/EBITDA (X)
MarketCap/Net Operating
Revenue (X)
Retention Ratios (%)
Price/BV (X)
Price/Net Operating
Revenue
Earnings Yield

Valuation Ratios
25,705.2 10,050.5
7
4

6,393.1
8

7,074.6
2

4,828.0
4

3.58
29.92

1.59
15.92

1.14
14.97

1.42
20.95

1.14
17.22

3.61
69.17
20.95

1.6
61.08
11.85

1.12
56.53
9.85

1.42
45.63
13.61

1.05
46.56
9.81

3.61
0.02

1.6
0.04

1.12
0.04

1.42
0.03

1.05
0.03

81

Auditor's Report

We have audited the accompanying standalone financial statements of Britannia

Industries Limited (the Company), which comprise the balance sheet as at 31 March
2015, the statement of profit and loss and the cash flow statement for the year then
ended and a summary of the significant accounting policies and other explanatory
information.

The Company''s Board of Directors is responsible for the matters stated in Section
134(5) of the Companies Act, 2013 (the Act) with respect to the preparation of these
standalone financial statements that give a true and fairview of the financial position,
financial performance and cash flows of the Company in accordance with the
accounting principles generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the

Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of

adequate accounting records in accordance with the provisions of the Act for
safeguarding of the assets of the Company and for preventing and detecting frauds
and other irregularities; selection and application of appropriate accounting policies;
making judgments and estimates that are reasonable and prudent; and design,
implementation and maintenance of adequate internal financial controls, that were
operating effectively for ensuring the accuracy and completeness of the accounting
records, relevant to the preparation and presentation of the financial statements that
give a true and fair view and are free from material misstatement, whether due to
fraud or error.
Auditor''s responsibility
Our responsibility is to express an opinion on these standalone financial statements
based on our audit.

82

We have taken into account the provisions of the Act, the accountingand auditing
standards and matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified under
Section 143(10) of the Act. Those Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and the disclosures in the financial statements.
The procedures selected depend on the auditor''s judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal financial
control relevant to the Company''s preparation of the financial statements that give a
true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on whether the
Company has in place an adequate internal financial controls system over financial
reporting and the operating effectiveness of such controls. An audit also includes
evaluating the appropriateness of the accounting policies used and the reasonableness
Order) issued by the Government of India in terms of sub-section (11)
of Section 143 of the Act, we give in the Annexure a statement on the
matters specified in the paragraph 3 and 4 of the order to the
extentapplicable.
2. As required by Section 143 (3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit.
(b) In our opinion, proper books of account as required by law have
been kept by the Company so far as it appears from our examination of
those books.

83

(c) The balance sheet, the statement of profit and loss, and thecash
flow statement dealt with by this report are in agreement with the
books of account.
(d)

In

our

opinion,

statementscomply

with

the

the

aforesaid

Accounting

standalone

Standards

financial

specified

under

Section 133 oftheAct, read with Rule 7 of the Companies (Accounts)

Rules, 2014.
e) On the basis of the written representations received from the
directors

as

on

31

March

2015

taken

on

record

by

the

Board

of

Directors, none of the directors is disqualified as on 31 March 2015

from being appointed as a director in terms of Section 164 (2) of the
Act.
(f)

With

respect

to

the

other

matters

to

be

included

in

theAuditor''s Report in accordance with Rule 11 of the Companies

(Audit and Auditors)Rules, 2014, in our opinion and to the best of
our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations
onitsfinancial position in its financial statements - Refer notes 27
(i) (a), 32 and 33 to the standalone financial statements. ii.

The

Company did not have any long-term contracts including derivative

contracts for which there were any material foreseeable losses Refer note 51 to the standalone financial statements. iii. There has
been no delay in transferring amounts, required to be transferred, to
the Investor Education and Protection Fund by the Company.

84