A Study on Working Capital Management

INDUSTRY PROFILE Overview 1. Indian cement industry dates back to 1914 - first unit was set-up at Porbandar with a capacity of 1000 tones 2. Currently India is ranked second in the world with an installed capacity of 114.2 million tones. Industry estimated at around Rs. 18,000crores (US $ 4185mn) 3. Current per capita consumption - 85kgs. as against world standard of 256kgs 4. Cement grade limestone in the country reported to be 89bt. A large proportion however is un exploitable. 5. 55 - 60% of the cost of production are government controlled 6. Cement sales primarily through a distribution channel. Bulk sales account for < 1% of the total cement produced. 7. An estimated capacity of 11.10 million tons per annum. 8. Ready mix concrete a relatively nascent market in India COMPANY PROFILE Establishment: The Organization My Home Cement Industries Limited is a fast growing and leading Indian industrial group having its head office at Hyderabad and works at Meelacheruvu in Nalgonda district in Andhra Pradesh. It belongs to the groups of my home constructions limited, a leading construction company in South India. The company is new entrant in the field of cement manufacturing where already leading brands like Priyadarshini, Ram co, Raasi and Kakatiya have got deep penetration into the market. The brand name of the cement produced by the company is Maha Cement which is expected to have an image of Maha Shakti and Maha value.

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A Study on Working Capital Management M/s My Home Cement Industries Limited is a public limited company, which is incorporated in 1955. The company commenced its commercial products from 1st July 2000. The cement conforms to the ISI standards and is being marketed under the name of Maha Cement. Maha Cement Industries, a leading cement manufacturing company in Andhra Pradesh having an installed capacity of 6 Million tonnes per annum for immediate placement at their 3 plants located in Andhra Pradesh. Location of plant The factory is situated at Mellacheruvu, Nalgonda District. The principal raw material for the plant is limestone and is available in abundant quantities near the plan INTRODUCTION: Working capital may be regarded as the lifeblood of a business. Its effective provisions can do much to ensure the success of business, which its inefficient management can lead not only to loss of projects but also the ultimate downfall of what otherwise, might be considered as promising concern. Thus, its management is considered as one of the most important aspects of firm's Financial Management. The term working capital stands for that part of the capital which is required for the financial working of the company in simple words; we can say that working capital is the investment needed for carrying out day to day operations of the business smoothly. According to Genestenberg, "circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another, as for example from cash to inventories, inventories to receivable, and receivables into cash". METHODOLOGY OF RESEARCH RESEARCH DESIGN: In view of the objectives of the study an expletory research is one. Which cargely interprets the already available information, and it lies particularly explains on analysis and interpretation of the existing and available information. It makes use of secondary dated.

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A Study on Working Capital Management SOURCES OF DATA: The study is based on secondary data and discussing with the officials of the company the secondary data consists of the annual reports of 'My Home Cement Industries Ltd' ranging for the last 4 years. Yarning other reports is collected from the company's magazines, published book and from web sites.

TOOLS OF ANALYSIS: Ratio Analysis Percentage Method Regression Analysis Operating cycle Method.

OBJECTIVE OF THE STUDY The present study in my home industries ltd is under taken to palmate the working capital strategy in the organization by establishing the following objections.

To study and know the liquidity of the company its profitability. To calculate and compare the operating cycle duration of the company of the study period. To evaluate the recovery efficiency of the company. To judge the cash management ability of the company. To give flexible solution to improve the Liquidity performance of the company.

SCOPE OF THE STUDY: There is more number of methodologies used in financial analysis present study stage extended to ratio analysis of the companies' audited financial reports. The scope of the study is defined below in terms of concepts adopted and period under focus. First a study on management of working capital is unfired only to the My Home Cement Industries Ltd.

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A Study on Working Capital Management Secondly the laniary concepts of working capital gross and Net is used in marketing profitability and Liquidity respectively and also to arrive at varying objectives of the study. Thirdly the study is based on the annual reports of the company for the period of 4 years 2007 08 to 2010 - 11. Thus on the whole the purpose of the work/study is to analyze the past and present Liquidity performance of the company on varying financial areas life Cash management Inventory management Receivable management

STATEMENT OF THE PROBLEM: In order to maintain forms of revenue from operating every firm needs to maintain certain amount of current assets. For example cash required to pay expenses or to met current obligations for services received or goods purchased etc., by a firm on the identical plan inventories area required to provide the link between production and sale, similarly accounts receivable generates when goods are sold on credit. Economics like mead, backer and field are of the optimum that the whole of these current assets the working capital of a firm. But optimum working capital management must be the objective of any manufacturing concern. Optimum many there shall not be of employment and under employment of the working capital. Therefore, the present studies focus or in the My Home Cement Industries Ltd. is working capital to improve Liquidity and Profitability.

LIMITATIONS OF THE STUDY: The information used is primary from historical annual reports available to the public and the same does not indicate the current situation of the firm. Detailed analysis could not be carried for the project work because of the limited time gone. Since financial matters are sensitive in nature the same would not be acquired easily.

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A Study on Working Capital Management

FINDINGS & SUGGESTIONS

In the present chapter some of the important conclusions drawn from the study of short-term financial management of My Home Cement Industries Ltd., are summed up. Further some variable and appropriate measures, which can be adopted by the company, are also suggested for bettering its performance.

There is low current ratio when compared to the standard ratios; this is due to higher stock turnover of the company. A study on the absolute quick ratio reveals a poor cash base of the company but, the further study witness a low recovery from debtors and early payments creditors is causing for poor cash balance in the company. There is a poor raw material stock turnover and a high finished goods stock turnover of the company. Therefore, companys inventory management position may be viewed as dissatisfactory. Most of the current assets are in the form of debtors, followed by inventory. That is the amount of investment in debtors is highs in the whole investment of the working capital. This is because of the new system of loaning to former. The recent performance of the debtor's turnover indicates a speedy recovery of debtors and it may be viewed as a positive working capital performance of the company.

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A Study on Working Capital Management

CONCLUSION:

The working capital position of the company (My home cement industries ltd) is satisfactory .It should focus on sales and marketing. The company is maintaining the normal levels of current assets and current liabilities. So it is not finding any difficulties to discharge its obligations. The company can utilize the reserves and surplus by either capitalizing or invest the money some were as investment get benefit. They should see that the debtors should be collected within a specified time by the company. So that they can discharge some of its creditors or current liabilities and avoid payment of interest.

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