A.P.SOLVEX

8/17/2019 A.P.SOLVEX

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'ERTI(I'ATE

This is to certify that the project work done on “ WORKING CAPITAL

ANAG!!NT O" RIC!LA # $%&'itted to P(N)A*I (NI+!R$IT, -

PATIALA &y 'e in partia. f%.fi..'ent of the re/%ire'ent for the award of de0ree

of asters of *%siness Ad'inistration is a &onafide work carried o%t &y 'e The

ori0ina. work was carried d%rin0 1th )%ne to 12th )%.y in A3P3 $o.4e5 Ltd3

SHIVANI UPPAL

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ACKNOWLEDGEMENT

I consider it p.easant pri4i.e0e to e5press 'y heartiest 0ratit%de and inde&tedness to those

who ha4e assisted 'e towards the co'p.etion of 'y project report3 The project wo%.dn7t

ha4e seen the .i0ht of day witho%t the he.p and 0%idance of 'any peop.e I take an

opport%nity to con4ey 'y deepest 0ratit%de to a.. those indi4id%a.s3 y first words of

thanks to

M.V!6a G'a+ (D!et')

M.V!7e8 G'a+ (F!"a"e Ma"a9e )

M.A.R.S:a&a (C:a!&a"; &a"a9!"9 %!et' )

y sincere thanks and appreciation are d%e to M. Va!"%e S!"9+a8Inchar0e of the p.ant9 for their a&.e 0%idance and sincere he.p3

I wi.. fai. 'y d%ty if I wo%.d not acknow.ed0e AP$ for not on.y pro4idin0 a.. the 'ora.

and or0ani:ationa. s%pport &%t a.so for inspirin0 enco%ra0e'ent d%rin0 the co%rse of this

work and for a..owin0 'e to 0et %sef%. infor'ation3 Witho%t their he.p it wo%.dn7t ha4e

&een possi&.e for 'e to acco'p.ish this task3

I owe 'y specia. re0ards to 'y e.ders for their &.essin0s and 0ood wishes3

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TA#LE OF CONTENT

Chapter=>1 INTRO?(CTION @

Chapter=>6 COPAN, PRO"IL!

Chapter=>; O*)!CTI+!$ ;>

Chapter=>< R!$!ARCB !TBO?OLOG, ;6

Chapter=>2 WORKING CAPITAL ANAG!!NT ;;

Chapter=> ANAL,$I$ AN? INT!RPR!TATION 2

Chapter=>@ LIITATION$ D>

Chapter=>D CONCL($ION$ D1

Chapter=> R!CO!N?ATION$ D6

Chapter=1> *I*LIOGRAPB, D;

Chapter=11 ANN!E(R! D<

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CHAPTER, /-

INTRODUCTION A#OUT THE COMPAN4

Rice &ran oi. 8R*O9 is pop%.ar in se4era. co%ntries s%ch as )apan- India- Korea- China

and Indonesia as a cookin0 oi.3 It has &een shown that R*O is an e5ce..ent cookin0 and

sa.ad oi. d%e to its hi0h s'oke point and de.icate f.a4or3 The n%tritiona. /%a.ities and

hea.th effects of rice &ran oi. are a.so esta&.ished3 R*O is rich in %nsaponifia&.e fraction-

which contains the 'icron%trients .ike 4ita'in ! co'p.e5es- 0a''a ory:ano.-

phytostero.s- po.ypheno.s and s/%a.ene3 Bowe4er- the hi0h ""A and acetone=inso.%&.e

content of R*O 'ade it diffic%.t for processin03 Therefore- in recent years- research

interest has &een 0rowin0 in R*O processin0 to o&tain 0ood /%a.ity oi. with .ow refinin0.oss3 This re4iew artic.e dea.s with detai.ed reports on Rice *ran Oi. processin0 inc.%din0

physica..y refinin0 techni/%es for the prod%ction and /%a.ity point of 4iew3

The con4entiona. refinin0 techno.o0y which was %sed to refine co''on 4e0eta&.e oi.s

was not s%ita&.e for refinin0 Rice *ran Oi.3 Bence- there was a need for de4e.op'ent of

appropriate processin0 techno.o0y for refinin0 Rice *ran Oi.3 After a .ot of hard work for

few 'onths- r3 $har'a was a&.e to de4e.op a %ni/%e process of Physica. Refinin0 for

prod%cin0 0ood /%a.ity Refined Rice *ran Oi.3 (n.ike .i0ht co.ored refined oi.s prod%ced

thro%0h the con4entiona. process of che'ica. refinin0- 0o.den co.ored refined oi. is

prod%ced in this process witho%t the %se of harsh che'ica.s s%ch as Ca%stic and Acids3

This no4e. process ens%res retention of hi0h .e4e.s of hea.th &eneficia. n%trients in the

refined oi.- which are .ost in che'ica. refinin0 process3


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-.

CHAPTER, /0

LITERATURE REVIEW

A.P.SOLVEX LIMITED

AN INTRODUCTION

THE COMPAN4

LOCATION

THE MANAGEMANT

#OARD OF DIRECTORS

#USINESS PHILOSOPH4

OUR MISSION

CODE OF CONDUCT

THE ACTIVITIES

FUTURE PLANS

PRINCIPLES SPECIAL ACHIVEMENTS

D


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A.P.SOLVEX LIMITED,AN INTRODUCTION

A.P. S'+7e< Lt%. was for'ed with a p.ed0e to introd%ce T:e W'+%=s Hea+t:!est O!+ ,

RICELA REFINED RICE #RAN OIL = as a ho%seho.d co''odity and to participate

in the ission Ca..ed Hea+t:3 The oi. has &een scientifica..y pro4en to the &est

cho.estero. &a.ancer3 Not on.y the cardiac hea.th &%t the prod%ct a.so pro'otes the

0enera. hea.th of an indi4id%a. d%e to presence of 'a5i'%' n%'&er of antio5idants3

Rice.a can tr%.y &e ca..ed the Bea.th ana0er3

THE COMPAN4

A3P3$o.4e5 .i'ited was ori0ina..y incorporated as a Pri4ate Li'ited Co'pany on

1;311316 %nder the na'e and sty.e of A3P3$o.4e5 8P9 Ltd3 and was con4erted into a

.i'ited co'pany w3e3f331136>>13 It is an I$O >>1F6>>> accredited co'pany3 In the year

16- A3 R3 $har'a a.on0 with so'e of his friends na'ed r3 P3?3 Gar0- r3 +ijay

Goya. and r3 P3K3 $in0.a- for'ed a co'pany %nder the na'e and sty.e of A3P3 $o.4e5

Pri4ate Li'ited3 A s'a.. D> T3P3? so.4ent e5traction p.ant for e5tractin0 cr%de Rice *ran

Oi. was set %p at ?h%ri in the year 1;3 In the year 1


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THE MANAGEMANT

The co'pany is 'ana0ed &y a tea' of yo%n0- ener0etic- /%a.ified H e5perienceddirectors %nder the o4era.. contro. H s%per4ision of its Chair'an and ana0in0 ?irector

A.R. S:a&a who is professiona..y /%a.ified ho.din0 &ache.or7s de0ree in co''erce-

'aster7s de0ree in .aw H associate 'e'&ership of the instit%te of co'pany secretaries of

India and has a&o%t fifteen years in the re.e4ant fie.d3 A3R3$har'a is a for'er president

of The $o.4ent !5tractors7 Association of India 8$!A93

#OARD OF DIRECTORS

13 R3 ACBR(( RA $BARA 8chair'an H 'ana0in0 director9

63 R3 PAR$BOTA ?A$$ GARG

;3 R3 +I)A, GO,AL


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distin0%ished- capa&.e and di4erse 'en ser4in0 on its *oard of ?irectors- workin0 hard

with %t'ost sincerity- honesty and fairness3

(nder the a&.e .eadership of it7s directors- what started as a s'a.. pri4ate .i'ited

co'pany in 16- has today e'er0ed as AP$ Gro%p with a n%'&er of co'panies in it7s

fo.d at '%.tip.e .ocations ha4in0 a &i0 tea' of directors- senior 'ana0ers and

e'p.oyees3

Bence there is a need to ha4e a %nifor' code of cond%ct which sets forth o%r princip.es

for workin0 with each other- o%tside &%sinesses- cons%'ers- 0o4ern'ents and .oca.

co''%nities3 The Code ser4es as an e4er=present re'inder of o%r responsi&i.ity to &%i.d

these re.ationships on inte0rity- fairness and h%'anity3

AP$ Gro%p7s rep%tation is entr%sted to each of %s3 With the Code of Cond%ct as o%r

0%ide- to0ether we can ens%re o%r contin%ed pride in o%r peop.e- o%r prod%cts- o%r

inno4ation and o%r co''%nities3 $o I ask that yo% p.ease read this doc%'ent caref%..y

and that yo% 'ake a co''it'ent to .i4e &y it J e4ery day3

THE ACTIVITIES

The co'pany is en0a0ed in the e5traction H processin0 of rice &ran3 The D> TP? so.4ent

e5traction p.ant of the co'pany ca'e in prod%ction in 1; which was .ater e5panded to

6>> TP? capacities3 As a forward inte0ration to its acti4ities the co'pany decided to set

%p a 62 TP? refinin0 p.ant for processin0 R*O which was co''issioned in 123

!nco%ra0ed &y the 'arket response of the prod%ct- the co'pany decided to f%rther

e5pand its capacities of refinin0 H accordin0.y the capacity was e5panded to 6>> TP?3

The t%rno4er of the co'pany has 0one %p fro' Rs3236 crores in 1;=< to o4er Rs31;

crores in the year 6>>6=6>>;3 The co'pany posted a t%rno4er of Rs ;D2 crore in 6>>@=>D-

that the sa'e is e5pected to reach Rs 2>> crore in the c%rrent fisca.3

To add 4a.%e to its &y prod%cts 0enerated d%rin0 the refinery of rice &ran oi.- another

co'pany was pro'oted on 6;3


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prod%ce stearic acid fro' the fatty acid prod%ced as a &y prod%ct d%rin0 the refinin0 of

rice &ran oi.3

FUTURE PLANS

It is proposed to set %p a > T3P3? $o.4ent !5traction P.ant for prod%cin0 cr%de rice &ran

oi. fro' rice &ran which wi.. yie.d a&o%t 2> tonnes of cr%de rice &ran oi.3 It is a.so

proposed to set %p a @2 T3P3? Physica. Refinin0 P.ant to prod%ce Refined Rice *ran Oi.

fro' cr%de rice &ran oi.3 The proposed %nit is in the pipe.ine and is .ike.y to &e

co''issioned &y the end of financia. year3 In 4iew of the 0rowin0 de'and of the prod%ct

of the co'pany we ha4e p.anned for f%rther e5pansion to 'eet the f%t%re de'ands3

The co'pany has no3 of e5port en/%iries in hand and has p.ans to e5port its prod%ct in

the internationa. 'arket3 The co'pany has p.ans to prod%ce hi0h 4a.%e added prod%cts in

the for' of n%trace%tica.s fro' the resid%es 0enerated d%rin0 refinin0 of rice &ran oi. as

are &ein0 prod%ced in the de4e.opin0 co%ntries3

PRINCIPLES

-.Res>et ?' O$ Pe'>+eF We fir'.y &e.ie4e that o%r 'ost i'portant stren0th is o%r

peop.e3 We seek to pro4ide a work en4iron'ent where a.. e'p.oyees ha4e f%.. jo&

satisfaction so that they wi..in0.y work to the &est of their capa&i.ities with %t'ost

sincerity H de4otion and contri&%te to the co'pany7s s%ccess3

We are- in partic%.ar- co''itted to fosterin0 a work en4iron'ent where peop.e at a..

.e4e.s fee. co'forta&.e and respected- re0ard.ess of indi4id%a. differences- ta.ents or

persona. characteristics and treat each other with respect and di0nity3

We are a.so co''itted to e/%a. opport%nity in a.. aspects of e'p.oy'ent inc.%din0

pro'otions for a.. o%r e'p.oyees and app.icants strict.y on 'erits witho%t any fa4oritis'

or &ias and to pro4idin0 a workp.ace free fro' a.. for's of discri'ination &ased %pon

race- caste- re.i0ion- co.or- ancestry- 'arita. stat%s- se5- a0e- nationa.ity- disa&i.ity and

4eteran stat%s3

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We are co''itted to pro4ide a stron0 'echanis' for speedy redressa. of 0rie4ances- if

any- of the e'p.oyees to their f%.. satisfaction3

Apart fro' honorin0 a.. stat%tory o&.i0ations towards o%r e'p.oyees we are a.so

co''itted to foster an at'osphere of carin0- open co''%nications- candor and stand &y

the' in thick and thin3

We are co''itted to a po.icy of :ero to.erance for 4io.ence3 It is o%r po.icy to pro4ide

e'p.oyees with a dr%0=free workp.ace and create an en4iron'ent free fro' threats-

4io.ence and inti'idation3

We respect the ri0hts of indi4id%a.s to achie4e professiona. and persona. &a.ance in their

.i4es3

A&o4e a..- we are co''itted to r%n o%r &%siness affairs in a 'ost pr%dent 'anner and

there&y ass%re jo& safety to o%r e'p.oyees3

0. Res>et ?' #$s!"ess Ass'!ates a"% C'&>et!t's

We owe o%r pheno'ena. s%ccess in short span to the faith reposed in %s &y a.. o%r

s%pp.iers- c%sto'ers- and ser4ice pro4iders s%ch as &ankers- &rokers etc3 We 4a.%e thecontri&%tion 'ade &y each one of the' in 'akin0 %s the .eaders in o%r .ine of &%siness3

We are co''itted to keep a.. of the' in hi0h re0ards and ens%re &est possi&.e ser4ices at

a.. ti'es3

We are- in partic%.ar- co''itted to treat a.. o%r c%sto'ers and s%pp.iers honest.y- fair.y

and o&jecti4e.y3

We are co''itted to a4oid any %nfair or decepti4e practice and a.ways present o%r

prod%cts in an honest and forthri0ht 'anner3

We &e.ie4e in hea.thy H friend.y &%siness co'petition3 We sha.. 'arket o%r prod%cts on

its own 'erits and sha.. ne4er co''ent on a co'petitor7s sty.e of f%nctionin0 or prod%ct

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witho%t a 0ood &asis or need for s%ch state'ents in cons%'er interest3 We sha.. join

hands with o%r co'petitors for pro'otin0 the o4era.. 0rowth and interests of the ind%stry

and its prod%cts3 Bowe4er we sha.. ne4er join hands with o%r co'petitors to fi5 prices

di4ide or assi0n sa.es or p%rchase territories- c%sto'ers or prod%ct .ines c%rtai.

prod%ctions or coordinate &ids and si'i.ar %nfair- %nethica. or 'onopo.istic trade

practices3

1. Res>et ?' Sste&s

We fir'.y &e.ie4e that adherence to $tandard Operatin0 Proced%res 8$OPs9 and $yste's

is a '%st to ens%re s'ooth f%nctionin0 &etter prod%cti4ity &etter ser4ice and 0%aranteed

safety as we.. as /%a.ity3

We at a.. .e4e.s are co''itted to respect a.. kind of proced%res H syste's introd%ced or

to &e introd%ced in f%t%re and fo..ow the' re.i0io%s.y witho%t any shortc%ts3

. Res>et ?' T!&e

P%nct%a.ity is a 4ery i'portant aspect of o%r &%siness3 We see p%nct%a.ity as a 'ark of

professiona.is' and se.f=discip.ine 4a.%ed &y peers and e'p.oyers3 Nothin0 inspires

confidence in a person &etter than p%nct%a.ity- nor is there any ha&it which sooner spoi.s

hisher rep%tation than that of &ein0 a.ways &ehind ti'e3

This is not a&o%t yo%r e5perience it is a&o%t the e5perience others ha4e- when dea.in0

with yo%3 odern &%siness is dri4en &y ti'e = 'eetin0s and c.ients wi.. not a.ways wait3

$o if yo% are not on ti'e- yo%r co'petitors wi.. &e ready to j%'p in yo%r a&sence3

P%nct%a.ity 0i4es yo% 0reater f.e5i&i.ity- and 'ore i'portant.y peace of 'ind- a..owin0

yo% to re.a5 and foc%s on the task ahead3

@. Res>et ?' E"7!'"&e"t

We a.. are inde&ted to other Nat%re and are d%ty &o%nd to protect the en4iron'ent3

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Keepin0 in 4iew the present state of affairs in this re0ard and risin0 en4iron'enta.

concerns- this area deser4es to &e accorded the hi0hest priority3

Accordin0.y- we are co''itted to 'ini'i:in0 the i'pact of o%r &%sinesses on the

en4iron'ent &y e'&racin0 c.eaner techno.o0ies- enco%ra0in0 conser4ation- recyc.in0 and

ener0y %se pro0ra's that pro'ote c.ean air and water3

We are co''itted to pro4ide 0ood physica. workin0 conditions and enco%ra0e hi0h

standards of hy0iene and ho%sekeepin03

We e5pect each of o%r e'p.oyees to f%..y de'onstrate their co''it'ent to keep the

work p.ace H its s%rro%ndin0s neat and c.ean3

2. O$>at!'"a+ Hea+t: a"% Sa?et

We attach 0reat i'portance to the hea.th and safety concerns of o%r e'p.oyees and

pro4ide the' a safe workp.ace3 We are co''itted to adopt safe workin0 'ethods-

partic%.ar.y desi0ned to pre4ent serio%s or fata. accidents3 We are dedicated to desi0nin0-

constr%ctin0- 'aintainin0 and operatin0 faci.ities that protect o%r peop.e3 It is o%r po.icy

to co'p.y with a.. app.ica&.e hea.th and safety .aws and re0%.ations- pro4ide and re/%ire

the %se of ade/%ate protecti4e e/%ip'ent and 'eas%res- and insist that a.. work &e done

in a safe and responsi&.e 'anner3 It is the responsi&i.ity of each e'p.oyee to fo..ow a..

co'pany po.icies and proced%res re.ated to workp.ace hea.th and safety3

. N' C'&>'&!se B!t: F''% Sa?et a"% $a+!t

We f%..y reco0ni:e and respect the f%nda'enta. ri0ht of e4ery citi:en 0%aranteed &y

Artic.e 61 of the Indian Constit%tion i3e3 “Ri0ht to Life#3 We a.so appreciate that “Ri0ht

to Life# is not 'ere.y confined to physica. e5istence &%t it inc.%des in its a'&it the ri0ht

to .ead a hea.thy .ife3

The food we eat e4eryday has a direct i'pact on o%r hea.th3 Considerin0 that the hea.th

of a nation depends %pon the /%a.ity of food that citi:ens 0et- food safety sho%.d 0et the

hi0hest priority3

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We sha.. ne4er co'pro'ise with food safety and /%a.ity of the food prod%cts we

prod%ce3

We are- in partic%.ar- co''itted to e'&race techno.o0ies and processes- which ens%re

food safety and &etter n%tritiona. /%a.ities3 We sha.. ne4er prod%ce prod%cts or %se

processes or che'ica.s- which are known for their de.eterio%s effect on h%'an hea.th3

We sha.. &e co''itted to s%pp.y 0oods of the hi0hest /%a.ity standards &acked &y

efficient after sa.es ser4ices consistent with the re/%ire'ents of the c%sto'ers to ens%re

their tota. satisfaction3 The /%a.ity standards of o%r 0oods sha.. not on.y 'eet the re/%ired

nationa. standards &%t we sha.. endea4or to achie4e internationa. standards3

. Res>et ?' t:e LaBs '? t:e La"%

It is o%r po.icy to respect the .aws of the .and and co'p.y f%..y with a.. app.ica&.e r%.es

and re0%.ations where4er we operate3 A.. o%r e'p.oyees sha.. in their &%siness cond%ct

co'p.y with a.. app.ica&.e .aws and re0%.ations- &oth in .etter and in spirit3

. Nat!'"a+ I"teest

We sha.. &e co''itted in a.. o%r actions to &enefit the econo'ic de4e.op'ent of theco%ntry and sha.. not en0a0e in any acti4ity that wo%.d ad4erse.y affect s%ch o&jecti4es3

We sha.. not %ndertake any project or acti4ity to the detri'ent of the nations interests or

those that wi.. ha4e any ad4erse i'pact on the socia. and c%.t%ra. .ife patterns of its

citi:ens3

We sha.. cond%ct o%r &%siness affairs in accordance with the econo'ic- de4e.op'ent and

forei0n po.icies- o&jecti4es and priorities of the nations 0o4ern'ent and sha.. stri4e to

'ake a positi4e contri&%tion to the achie4e'ent of s%ch 0oa.s at the internationa.-

nationa. and re0iona. .e4e. as appropriate3

-/3 #$s!"ess B!t: S'!a+ Res>'"s!!+!t

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We are co''itted to r%n o%r &%siness in a socia..y responsi4e 'anner3 We &e.ie4e we are

a citi:en of the .oca.ity where we operate and- .ike indi4id%a. citi:ens- we ha4e a ci4ic

responsi&i.ity to s%pport the hea.th- ed%cation- en4iron'ent and we.fare of the

co''%nity3 The Co'pany a.so enco%ra0es its peop.e to participate on their own ti'e in

.oca. charita&.e acti4ities of their choice.

--3P'+!t!a+ N'",a+!9"&e"t

We sha.. ha4e f%.. respect and re0ard for the ad'inistration- e.ected representati4es of

.oca. &odies- $tate Go4ern'ent- Centra. Go4ern'ent and a.. po.itica. parties and

persona.ities &%t sha.. not s%pport direct.y or indirect.y any specific po.itica. party or

candidate for po.itica. office3 Bowe4er- a.. o%r e'p.oyees are free to participate in po.itica. process &%t they '%st at a.. ti'es 'ake it c.ear that they are participatin0 in s%ch

acti4ities on persona. &eha.f and they are not representin0 the co'pany in any 'anner3

-0. Et:!a+ C'"%$t

A.. o%r e'p.oyees- which sha.. inc.%de a.. directors and senior 'ana0ers- sha.. dea. on

&eha.f of the co'pany with professiona.is'- honesty- inte0rity as we.. as hi0h 'ora. andethica. standards3 $%ch cond%ct sha.. &e fair and transparent and &e percei4ed to &e as

s%ch &y third parties3

-13 Lea%!"9 E+e

The or0anisation7s directors and senior 'ana0e'ent sha.. set the professiona. tone for the

Co'pany3 Thro%0h &oth their words and their actions- the or0anisation7s .eadership

con4eys what is accepta&.e and %naccepta&.e &eha4io%r3 O%r directors- senior

'ana0e'ent and e'p.oyees '%st constant.y reinforce thro%0h their actions and

&eha4io%r that o%r stated &e.iefs of responsi&.e corporate citi:enship are rooted in

indi4id%a. con4iction and persona. inte0rity3

-. Fa! ; P$%e"t $se '? C'&>a" Fa!+!t!es a"% Assets

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No director- senior 'ana0e'ent or e'p.oyee sha.. 'is%se co'pany faci.ities and assets3

These sha.. &e %sed for the p%rpose of cond%ctin0 the &%siness for which they are d%.y

a%thori:ed3 No one sha.. 'ake persona. %se of any of co'pany7s faci.ities or assets %n.ess

a%thori:ed for the sa'e3 Any s%ch persona. %se sha.. &e strict.y in the prescri&ed 'anner3

In the case of officia. and persona. %se of co'pany7s faci.ities and assets- care sha.. &e

e5ercised to ens%re that costs are reasona&.e and there is no wasta0e3

"or this p%rpose co'pany faci.ities and assets inc.%de tan0i&.e assets s%ch as e/%ip'ent

and 'achinery- co'p%ters- 4oice'ai.- e='ai.- internet access- syste's- faci.ities-

4ehic.es- te.ephones- 'o&i.e phones- 'ateria.s- reso%rces as we.. as intan0i&.e assets s%ch

as proprietary infor'ation- re.ationships with c%sto'ers and s%pp.iers etc3

-@3 Pass!'" ?' O$ P'%$ts

We are co''itted to pro4idin0 the hi0hest /%a.ity prod%cts and ser4ices to o%r

c%sto'ers3 O%r rep%tation is &%i.t %pon safe- hi0h /%a.ity prod%cts that are 'arketed

responsi&.y3 !'p.oyees who work to prod%ce o%r prod%cts or ha4e contact with

in0redients- packa0in0 or processin0 e/%ip'ents %sed to prod%ce o%r prod%cts- fo..ow a..app.ica&.e /%a.ity contro. proced%res3 And the &est way to ens%re that we do this is to %se

o%r own prod%cts on a dai.y &asis3

*y %sin0 o%r own prod%cts on a dai.y &asis- we contin%e to inno4ate and &%i.d new

so.%tions to so.4e rea. &%siness pro&.e's- whi.e increasin0 o%r or0ani:ation7s

effecti4eness and efficiencies3 The res%.t is a co'pany that thinks as a %ser which

&enefits o%r c%sto'ers3 $o- we sha.. not on.y %se o%r prod%cts &%t de4e.op a passion for

the sa'e3

-2. C'"t!"$'$s I&>'7e&e"t a"% I""'7at!'"

Contin%o%s i'pro4e'ent- in re0ard to or0ani:ationa. /%a.ity and perfor'ance- foc%ses

on i'pro4in0 c%sto'er satisfaction thro%0h contin%o%s and incre'enta. i'pro4e'ents to

1D


19/84

processes- inc.%din0 &y re'o4in0 %nnecessary acti4ities and 4ariations3 Peop.e at a..

.e4e.s of an or0ani:ation can participate in it- fro' the C? down- as we.. as e5terna.

stakeho.ders when app.ica&.e3 It can take the shape of indi4id%a.- s%00estion syste'-

s'a.. 0ro%p- or .ar0e 0ro%p3

Th%s- we sha.. work contin%o%s.y towards re4isin0 the c%rrent standards- once they ha4e

&een 'astered- and esta&.ishin0 hi0her ones3

-3 Ta"s>ae" a"% A$%!t a!+!t

A.. directors- senior 'ana0e'ent and e'p.oyees sha.. ens%re that their actions in the

cond%ct of &%siness are tota..y transparent e5cept where the needs of &%siness sec%rity

dictate otherwise3 $%ch transparency sha.. &e &ro%0ht a&o%t thro%0h appropriate po.icies-

syste's and processes- inc.%din0 as appropriate- se0re0ation of d%ties- tiered appro4a.

'echanis' and in4o.4e'ent of 'ore than one 'ana0er in key decisions and 'aintainin0

s%pportin0 records3 It sha.. &e necessary to 4o.%ntari.y ens%re that areas of operation are

open to a%dit and the cond%ct of acti4ities is tota..y a%dita&.e3

-. G!?ts a"% D'"at!'"s

AP$ Gro%p co'pany e'p.oyees sha.. neither recei4e nor offer or 'ake- direct.y or

indirect.y- any i..e0a. pay'ents- re'%neration- 0ifts- donations or co'para&.e &enefits

which are intended to or percei4ed to o&tain &%siness or %nco'petiti4e fa4o%rs for the

cond%ct of its &%siness3 Bowe4er- no'ina. 0ifts- which are c%sto'ari.y 0i4en and are of

co''e'orati4e nat%re for specia. e4ents 'ay &e accepted or 0i4en3

-3 P'tet!'" '? C'"?!%e"t!a+ I"?'&at!'"

No director- senior 'ana0e'ent and e'p.oyee sha.. disc.ose or %se any confidentia.

infor'ation 0ained in the co%rse of e'p.oy'ent association with the Co'pany for

persona. 0ain or for the ad4anta0e of any other person3 No infor'ation either for'a..y or

infor'a..y sha.. &e pro4ided to the press- other p%&.icity 'edia or any other e5terna.

a0ency e5cept within appro4ed po.icies3

1


20/84

0/. A7'!%a"e '? C'"?+!t '? I"teest

A.. directors- senior 'ana0e'ent and e'p.oyees '%st a4oid sit%ations in which their

persona. interest co%.d conf.ict with the interest of the Co'pany3 This is an area in which

it is i'possi&.e to pro4ide co'prehensi4e 0%idance &%t the 0%idin0 princip.e is that

conf.ict- if any- or potentia. conf.ict '%st &e disc.osed to hi0her 'ana0e'ent for

0%idance and action as appropriate3

0-. C'"$e"t E&>+'&e"t

An e'p.oyee of AP$ Gro%p sha.. not- witho%t the prior appro4a. of the 'ana0e'ent-

accept e'p.oy'ent or a position of responsi&i.ity 8s%ch as a cons%.tant or a director9 with

any other co'pany- nor pro4ide free.ance ser4ices to anyone3 In the case of a who.e=

ti'e director or the 'ana0in0 director s%ch prior appro4a. '%st &e o&tained fro' the

&oard of directors of the co'pany3

00. I"te9!t '? Data F$"!s:e%

!4ery e'p.oyee of AP$ Gro%p sha.. ens%reat a.. ti'es- the so%ndness and correctness of

data or infor'ation f%rnished &y hi'her to the co'pany3 No&ody wi.. knowin0.y f%rnish

any wron0 or 'is.eadin0 datainfor'ation to any&ody in the co'pany3

01. Res>'"s!!+!t ?' C'&>+!a"e

A.. o%r e'p.oyees '%st ens%re that the princip.es .aid down in the code are fo..owed3

We '%st %nderstand and co'p.y with the code3 If any e'p.oyee co'es across any

sit%ation which is not c.ear- heshe is enco%ra0ed to seek 0%idance of their respecti4e

'ana0er or any of the ?irectors3 At the sa'e ti'e- if any 4io.ation of the code is faced- it'%st &e reported to the respecti4e 'ana0er or any of the ?irectors3

A.so- it is the responsi&i.ity of each of %s to he.p other e'p.oyees %nderstand the Code

and ens%re the i'p.e'entation of the sa'e3

6>


21/84

Wai4ers of this Code wi.. &e re4iewed &y the BR ?epart'ent and in certain

circ%'stances &y the *oard of ?irectors- and if re/%ired- wi.. &e appropriate.y disc.osed3

SPECIAL ACHIVEMENTS

Rice &arn processor A P $o.4e5 has &een conferred with the first Nationa. Award=6>>@

for Research and ?e4e.op'ent in 'edi%' enterprise cate0ory3

The award- constit%ted &y icro- $'a.. and edi%' !nterprises inistry- was 0i4en &y

Pri'e inister an'onan $in0h to A P $o.4e5 Chair'an and ana0in0 ?irector A R

$har'a3

The co'pany has de4e.oped an eco=friend.y- hea.th friend.y and econo'ica. process for

prod%ction of refined rice &arn oi. fro' the n%tritio%s &rown .ayer of rice known as rice

&ran3 A3P3$o.4e5 with the so.e o&jecti4e of prod%cin0 and pro'otin0 “Rice *ran Oi.# as

Wor.d7s Bea.thiest Cookin0 Oi.#- we are today India7s Bi0hest Prod%ction Award

Winnin0 Gro%p3

The de'and for Refined Rice *ran Oi. is increasin0 day &y day d%e to 0rowin0

awareness a&o%t the hea.th &enefits of this oi.3 A few years &ack the fa'o%s &rands .ike

$affo.a H $%ndrop ca'e o%t with new &rand 4ariants s%ch as $affo.a=Go.d and $%ndrop=

Beart which contains D> Rice *ran Oi.3 "ro' Apri.- 6>>@ the .eadin0 NC- Pepsico

started %sin0 Rice *ran Oi. in p.ace of Pa.' Oi. as fryin0 oi. for their fa'o%s snacks

know as “K%rk%re# - “Lays# H “(nc.e Chips#3 PepsiCo3 is p.annin0 to %se this oi. in their

%nits .ocated in other co%ntries3 any other p.ayers in the snacks se0'ent s%ch as

61


22/84

Ba.dira' and ITC A0rotech are a.so p.annin0 to switch o4er to Rice *ran Oi.3 There are

&o%nd to &e 0ood e5ports of this oi. fro' the co%ntry3

A3P $o.4e5s p.ant at ?h%ri in $an0r%r district of P%nja& has a capacity to refine 6>>

tonnes per day 8TP?9 of cr%de R*O3 The co'pany a.so has a so.4ent e5traction %nit to

process D>> TP? of rice &ran- yie.din0 aro%nd 1>> TP? of cr%de R*O- 'eetin0 ha.f of

the refinerys re/%ire'ent3

The re'ainin0 1>> TP? of cr%de R*O is so%rced fro' nei0h&orin0 e5traction %nits3

MMO%r prod%ction of refined R*O is 12> TP? or >> tones per year- correspondin0 to

an a..=India share of 12 per cent# JA3P3$o.4e5

Whi.e financin0 the a&o4e project .ot of do%&t were e5pressed &y the financia.

instit%tions as to the /%a.ity of the end prod%ct of this %nit3 *%t it is a 'atter of 0reat

pro%d for the co'pany that it has achie4ed e5ce..ent standards of /%a.ity as re0ards its

finished prod%ct and and had &een a re0%.ar s%pp.ier of refined rice &ran oi. to .eadin0

'an%fact%rers of 4anaspati .ike $I!L- ?e.hi- the 'akers of RATB7 &rand 4anaspati and

Bind%stan .e4er .td3 'akers of ?AL?A7 &rand3 After achie4in0 e5ce..ence in /%a.ity and

0ettin0 detai.ed n%triti4e st%dies cond%cted- the co'pany has .a%nched the &randed

Refined Rice *ran Oi. for direct cookin0 p%rposes %nder the &rand na'e RICELA3 In

)apan it is 'ore pop%.ar.y know as a “Beart Oi.#3

"UR'$ASE *( RA+ MATERIA%

P%rchase of raw 'ateria. 8Rice *ran9 &y A3P3$o.4e5 in recent years has increased rapid.y3

The p%rchase depends on 'any factors .ike to 'eet the de'and of the s%pp.iers3 Increase

in the sa.es of rice &ran oi. res%.ted in increased p%rchase of raw 'ateria.3 Raw 'ateria.

is &o%0ht fro' the near &y $he..er7s to 'eet the de'and3 P%rchase of raw 'ateria. has

increased fro' 2;72>7@@7> crores in 6>>2 to 1DD7@@7>>D3

66


23/84

0/-- 0/-0 0/-1 0/-

2;2>@@> 2@@>@1@@ 11;612; 1DD@@>>@ the .eadin0 NC-

Pepsico started %sin0 Rice *ran Oi. in p.ace of Pa.' Oi. as fryin0 oi. for their fa'o%s

snacks know as “K%rk%re# - “Lays# H “(nc.e Chips#3 Ba.dira' and ITC A0rotech are

a.so p.annin0 to switch o4er to Rice *ran Oi.3 The sa.es has increased fro' ;7>;7117>@6

crores in 6>>2 to 1D7>D3

0//@ 0//2 0// 0//

SALES ;>;11>@6 D>;@61 @6D@@6 1D


24/84

$O(RC!F Acco%nts ?epart'ent A3P3$o.4e5

PROFIT

Profit of the co'pany has increased d%e to increased in sa.es of rice &ran oi.3 ajor rise

in profit was e5perienced fro' year 6>>@ to 6>>D3 The profit increased &y 11> d%rin0

the year 6>>@=6>>D3 Tie=%p with the .eadin0 &rands res%.ted in increased profit for the

co'pany3 In 6>>2 the profit esti'ation was @27D171;< .akhs which raised to 676>7;@7>2

.akhs in 6>>D3 The percenta0e rise in profit is 1>3 d%rin0 the .ast fi4e years3

0/-- 0/-0 0/-1 0/-

PROFIT @2D11;< @D;62< 1>;@>2

6


25/84

A#OUT RICE #RAN OIL

3

USES OF RICE #RAN OIL

13 Rice &ran Oi. o&tained is s%ita&.e for direct h%'an cons%'ption as refined

oi.3

62


26/84

63 It is sent to +anaspati factories a.so where it is hydro0enated to prod%ce

hydro0enated rice &ran oi.3

;3 Cr%de oi. can a.so &e %sed in 'an%fact%rin0 $oaps and deter0ents-

cos'etics- etc3

>1 F 6>>>3

It has not on.y &een refined proper.y to 'ake it f%..y odo%r.ess &%t has a.so &een

dewa5ed and winteri:ed with the techno.o0y s%pp.ied &y a .eadin0 )apanese

Co'pany- to 'ake it non=ha:y in winters3

It passes thro%0h strin0ent /%a.ity checks &efore reachin0 the cons%'ers3

It is &ein0 prod%ced fro' rice &ran which in t%rn is &ein0 prod%ced fro' non=GO

4arieties of paddy3 Bence “Rice.a# Refined Rice *ran Oi. is a non=GO Prod%ct3

It has &een dec.ared as the “*est *rand# of Rice *ran Oi. &y the G.o&oi. India =an

internationa. conference on 4e0eta&.e oi. ind%stry he.d at %'&ai on 6;rd

$epte'&er- 6>>3

A&o4e a..- “Rice.a# Refined Rice *ran Oi. is the prod%ct of India7s Bi0hest

Prod%ction Award Winnin0 Gro%p Co'pany which ha4e the a&i.ity H reso%rces to

'eet a.. the re/%ire'ents of its c%sto'ers in ter's of /%antity H /%a.ity3

6


27/84

EXPERT VIEWS A#OUT RICE #RAN OIL

The %se of rice &ran oi. not 'ore than ha.f a .iter in a 'onth and j%st12 0' of desi

0hee e4eryday is s%fficient for 0ood hea.th3 i.k- c%rd and &%tter are a.so

s%pp.e'ents for desi 0hee3

J D. K. K. Ta+Ba5 director of PGI- Chandi0arh and renowned Cardio.o0ist3

8$o%rceF = Chandi0arh Tri&%ne- dated 6336>>@9

Rice *ran oi. enjoyes the stat%s of a hea.th food fro' cardio4asc%.ar 4iew point3

* D.Pa7ee" C:a"%a- ?-?- "or'er Cons%.tant Cardio.o0ist- !scort Beart

Instit%te H Research Center- New ?e.hi3

8$o%rceF= proceedin0 of nationa. se'inar on edi&.e rice &ran oi. he.d on D th 'ay- 1

at new de.hi9

In cerea.=&ased diets- the %se of any sin0.e oi. 8e5cept rice &ran oi.9 'ay not f%rnish

the opti'a. intake of a.. fatty acids and their ratios3

,D. G:a?''$"!ssa5 De>$t D!et'5 Nationa. Instit%te of N%trition- Bydera&ad3

Bea.th aspect of rice &ran oi. is not hi0h.i0hted as '%ch as it sho%.d ha4e &een done

this is where the 'arket is in ter's of the tota. awareness- &e it as a

hypocho.estero.enic- anti4ira.- antio5idant and anticancer effect- or e4en a sca4en0in0

effect of carcino0ens3 A.. these need to &e hi0h.i0hted3

,D. V. Pa8as:5 D!et'5 Centra. "ood Techno.o0ica. Research Instit%te- ysore3

Rice &ran oi.- o&tained fro' rice &ran a &y prod%ct of rice 'i..in0- is a %ni/%e edi&.e

oi. with n%tritiona..y desira&.e attri&%tes co'pared to other edi&.e oi.s- its fatty acids

co'position is nearer to that reco''ended &y n%tritionists idea. for edi&.e p%rpose3 It

has cho.estero. .owerin0 property attri&%ted to ory:ano.- a 'inor constit%ent- present

in the oi.3 It contains 'in%te /%antities of n%tritiona..y 4a.%a&.e constit%ents- s%ch as

6@


28/84

tocophero.s- stero.s s/%a.ene etc3- which are i'portant for pro'otion and

'aintenance of 0ood hea.th3

,D. A.#.A?Ja+>$8a5 D. D!et'5 Indian Instit%te of Che'ica. Techno.o0y-

Bydera&ad3

Rice &ran oi. enjoy the stat%s of a hea.th food fro' a cardio4asc%.ar 4iew point and

ro%tine %se of rice &ran oi. can &e reco''ended as a so.e cookin0 'edi%'3

,D. Pa7ee" C:a"%a5 MD5 DM5 Cons%.tant Cardio.o0ist- !scort Beart Instit%te H

Research Centre- New ?e.hi3

Rice *ran Oi. wi.. &e the cookin0 'edi%' of first choice and preference to &ypass-

&ypass the dietry way3

,D. S:as:a"8 R. 3's:!5 MD5 DM5 FICP5 FICN5 !ndocrino.o0ist- Li.a4ati Bospita.-

%'&ai3

6D


29/84


30/84

♦ The ana.ysis is .i'ited to j%st fi4e years of data st%dy 8fro' year 6>> to year 6>1


31/84

CHAPTER,

METHDOLOG4

In preparin0 of this project the infor'ation co..ected fro' the fo..owin0 so%rces3

P!&a %ata

The Pri'ary data has &een co..ected fro' Persona. Interaction with "inance 'ana0er i3e3-

r3 +i4ek Goya. and other staff 'e'&ers3

Se'"%a %ata

The 'ajor so%rce of data for this project was co..ected thro%0h ann%a. reports- profit and

.oss acco%nt of 2 year period fro' 6>>=6>1< H so'e 'ore infor'ation co..ected fro'

internet and te5t so%rces3

SAMPLING DESIGN

> $a'p.in0 %nit F "inancia. $tate'ents3

1 $a'p.in0 $i:e F Last fi4e years financia. state'ents3

6

T''+s Use% $=!5ce. has &een %sed for ca.c%.ations3

;1


32/84

CHAPTER,@WORKING CAPITAL MANAGEMENT

CAPITAL

I"t'%$t!'"

Capita. is the keynote of econo'ic de4e.op'ent3 In this 'odern a0e- the .e4e.

of econo'ic de4e.op'ent is deter'ined &y the proportion of capita. a4ai.a&.e3

Mea"!"9 '? Ca>!ta+

In the ordinary sense of the word Capita. 'eans initia. in4est'ent in4ested &y

&%siness'an or owner at the ti'e of co''encin0 the &%siness3

Capita. 8econo'ics9- a factor of prod%ction that is not wanted for itse.f &%t for its

a&i.ity to he.p in prod%cin0 other 0oods3

De?!"!t!'"

'apital is a factor of prod%ction with a specific- chan0ea&.e 4a.%e attached to it that

co%.d- potentia..y- pro4ide its owner with 'ore wea.th3 It is an a&stract econo'ic

concept- and- as s%ch- has 'any different definitions and c.assifications- &%t the %nifyin0

feat%re of capita. is that it has a certain 4a.%e- so it in itse.f is a type of wea.th- and it has

the potentia. of 0eneratin0 'ore wea.th3

Feat$es '? Ca>!ta+

Capita. has the fo..owin0 feat%res3

13 Capita. is a 'an 'ade3

63 Capita. is a perisha&.e3

;6

http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Capital_(economics)


33/84

;3 Capita. is a h%'an contro. possi&.e3


34/84

financin0 costs or increase the f%nds a4ai.a&.e for e5pansion3 any 'ana0eria. efforts are

p%t into &rin0in0 non=opti'a. .e4e. of c%rrent assets and .ia&i.ities &ack towards their

opti'a. .e4e.s3

MEA!I!, *( +*R-I!, 'A"ITA%

Workin0 capita. 'eans the f%nds 8i3e3 capita.9 a4ai.a&.e and %sed for day to day

operations 8i3e3 workin09 of an enterprise3 It consists &road.y of that portion of assets of a

&%siness which are %sed in or re.ated to its c%rrent operations3 It refers to f%nds which are

%sed d%rin0 an acco%ntin0 period to 0enerate a c%rrent inco'e of a type which is

consistent with 'ajor p%rpose of a fir' e5istence3

In Acco%ntin0F

DEFINITIONS

any scho.ars7 0i4es 'any definitions re0ardin0 ter' workin0 capita. so'e of these are

0i4en &e.ow3

Accordin0 to +eston . Brigham

“Workin0 capita. refers to a fir'7s in4est'ent in short=ter' assets cash- short ter'

sec%rities- acco%nts recei4a&.es and in4entories3

Mead Mallott . (ield

“Workin0 capita. 'eans c%rrent assets#3

Positi4e workin0 capita. 'eans that the co'pany is a&.e to pay off its short=ter'

.ia&i.ities co'panies that ha4e a .ot of workin0 capita. wi.. &e 'ore s%ccessf%. since they

can e5pand and i'pro4e their operations3

;


35/84

Ne0ati4e workin0 capita. 'eans that a co'pany c%rrent.y is %na&.e to 'eet its short=ter'

.ia&i.ities with its c%rrent assets3 3 Co'panies with ne0ati4e workin0 capita. 'ay .ack the

f%nds necessary for 0rowth

O#3ECTIVES OF WORKING CAPITAL MANAGEMENT

!ffecti4e 'ana0e'ent of workin0 capita. is 'eans of acco'p.ishin0 the fir'7s 0oa. of

ade/%ate .i/%idity3 It is concerned with the ad'inistration of c%rrent assets and c%rrent

.ia&i.ities3 It has the 'ain fo..owin0 o&jecti4es=

13 To 'a5i'i:e profit of the fir'3

63 To he.p in ti'e.y pay'ent of &i..s3

;3 To 'aintain s%fficient c%rrent assets3


36/84

0. T' &eet '7e :ea% ee"ses.

Workin0 capita. is re/%ired to 'eet rec%rrin0 o4er head e5penses s%ch as cost

of f%e.- power- office e5penses and other 'an%fact%rin0 e5penses3

1. T' :'+% ?!"!s:e% a"% s>ae >ats et.

$tock represents c%rrent asset3 A fir' that can afford to 'aintain stock of

re/%ired finished 0oods- work in pro0ress H spares in re/%ired /%antities can

operate s%ccessf%..y3 $o for that ade/%ate /%antity of workin0 capita. is re/%ired3

. T' >a se++!"9 ; %!st!$t!'" ee"ses.

Workin0 capita. is re/%ired to pay se..in0 H distri&%tion e5penses3 It inc.%des

cost of packin0- co''ission etc3

@. Workin0 capita. is re/%ired for repairs H 'aintenance &oth 'achinery as we.. as

factory &%i.din0s3

2. Workin0 capita. is re/%ired to pay wa0es- sa.aries and other char0es3

. It is he.pf%. in 'aintain %ncertainties in4o.4ed in &%siness fie.d3

WORKING CAPITAL MANAGEMENT

Workin0 Capita. ana0e'ent refers to 'ana0e'ent of c%rrent assets and c%rrent

Lia&i.ities3 The 'ajor thr%st of co%rse is on the 'ana0e'ent of c%rrent assets 3This

Is %nderstanda&.e &eca%se c%rrent .ia&i.ities arise in the conte5t of c%rrent assets3

Workin0 Capita. ana0e'ent is a si0nificant fact of financia. 'ana0e'ent3 Its

I'portance ste's fro' two reasonsF=

• In4est'ent in c%rrent assets represents a s%&stantia. portion of tota. in4est'ent3

• In4est'ent in c%rrent assets and the .e4e. of c%rrent .ia&i.ities ha4e to &e 0eared

/%ick.y to chan0e in sa.es3 To &e s%re- fi5ed asset in4est'ent and .on0 ter' financin0 are

responsi4e to 4ariation in sa.es3 Bowe4er- this re.ationship is not as c.ose and direct as it

is in the case of workin0 capita. co'ponents3

;


37/84

I.

O" T:e #as!s '? C'"e>ts

;@

WORKING

CAPITAL

On The *asis of

Concepts

On The *asis of Ti'e

Gross Workin0Capita.

Net Workin0Capita.

Per'anent

"i5ed Workin0Capita.

Te'porary

".%ct%atin0

Workin0 Capita.

Initia. Workin0Capita.

Re0%.ar Workin0Capita.

$easona.

Workin0 Capita.

$pecia. Workin0

Capita.


38/84


39/84

Per'anent or fi5ed workin0 capita. is 'ini'%' a'o%nt which is re/%ired to ens%re

effecti4e %ti.i:ation of fi5ed faci.ities and for 'aintainin0 the circ%.ation of c%rrent

assets3 !4ery fir' has to 'aintain a 'ini'%' .e4e. of raw 'ateria.- work= in=process-

finished 0oods and cash &a.ance3 This 'ini'%' .e4e. of c%rrent assts is ca..ed

per'anent or fi5ed workin0 capita. as this part of workin0 is per'anent.y &.ocked in

c%rrent assets3 As the &%siness 0row the re/%ire'ents of workin0 capita. a.so increases

d%e to increase in c%rrent assets3

a) I"!t!a+ B'8!"9 a>!ta+

At its inception and d%rin0 the for'ati4e period of its operations a co'pany '%st

ha4e eno%0h cash f%nd to 'eet its o&.i0ations3 The need for initia. workin0 capita.

is for e4ery co'pany to conso.idate its position3

) Re9$+a B'8!"9 a>!ta+

Re0%.ar workin0 capita. refers to the 'ini'%' a'o%nt of .i/%id capita. re/%ired to

keep %p the circ%.ation of the capita. fro' the cash in4entories to acco%nts

recei4a&.e and fro' acco%nt recei4a&.es to &ack a0ain cash3 It consists of ade/%ate

cash &a.ance on hand and at &ank- ade/%ate stock of raw 'ateria.s and finished

0oods and a'o%nt of recei4a&.es3

0) Te&>'a F+$t$at!"9 W'8!"9 Ca>!ta+Te'porary ".%ct%atin0 workin0 capita. is the workin0 capita. needed to 'eet seasona.

as we.. as %nforeseen re/%ire'ents3 It 'ay &e di4ided into two types3

a) Seas'"a+ W'8!"9 Ca>!ta+

There are 'any .ines of &%siness where the 4o.%'e of operations are different

and hence the a'o%nt of workin0 capita. 4ary with the seasons3 The capita. re/%ired to

'eet the seasona. needs of the enterprise is known as seasona. Workin0 capita.3

) S>e!a+ W'8!"9 Ca>!ta+

The Capita. re/%ired to 'eet any specia. operations s%ch as e5peri'ents with new

prod%cts or new techni/%es of prod%ction and 'akin0 interior ad4ertisin0 ca'pai0n etc-

are a.so known as specia. Workin0 Capita.3

;


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IMPORTANCE OF WORKING CAPITAL

13 S'+7e" '? t:e $s!"ess Ade/%ate workin0 capita. he.ps in 'aintainin0 the

so.4ency of the &%siness &y pro4idin0 %ninterr%pted of prod%ction3

63 G''%B!++ $%fficient a'o%nt of workin0 capita. ena&.es a fir' to 'ake pro'pt

pay'ents and 'akes and 'aintain the 0oodwi..3

;3 Eas +'a"s Ade/%ate workin0 capita. .eads to hi0h so.4ency and credit standin0

can arran0e .oans fro' &anks and other on easy and fa4ora&.e ter's3

3 H!9: &'a+e Ade/%ate workin0 capita. &rin0s an en4iron'ent of sec%rities-

confidence- hi0h 'ora.e which res%.ts in o4era.. efficiency in a &%siness3

ADEUAC4 OF WORKING CAPITAL Workin0 capita. sho%.d &e ade/%ate so as to protect a &%siness fro' the ad4erse

effects of shrinka0e in the 4a.%es of c%rrent assets3 It ens%res to a 0reater e5tent the

'aintenance of a co'pany7s credit standin0 and pro4ides for s%ch e'er0encies as

strikes- f.oods- fire etc3 It per'its the carryin0 of in4entories at a .e4e. that wo%.d ena&.e


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ana0in0 the workin0 capita. is a 'atter of &a.ance3 The fir's '%st ha4e s%fficient

f%nds on hand to 'eet its i''ediate needs3 The *ahety che'ica.s H 'inera.s 8p4t9

Li'ited is 'an%fact%rin0 oriented or0ani:ation3

The fo..owin0 aspects ha4e to &e taken into consideration whi.e esti'atin0 the workin0

capita. re/%ire'ents3

They areF

13 Tota. costs inc%rred on 'ateria.- wa0es and o4erheads3

63 The .en0th of ti'e for which raw 'ateria. are to re'ain in stores &efore they

are iss%ed for prod%ction3

;3 The .en0th of the prod%ction cyc.e or work=in=process- i3e3- the ti'e taken for

con4ersion of raw 'ateria. into finished 0oods3


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Con4ersion of cash into raw 'ateria.s3

Con4ersion of raw 'ateria.s into work in pro0ress3

Con4ersion of work in pro0ress into finished stock3

Con4ersion of finished stock into acco%nts recei4a&.es8?e&tors9thro%0h sa.e and

Con4ersion of acco%nt recei4a&.es into cash3

FINANCING OF WORKING CAPITAL


44/84

I"t'%$t!'"

After deter'inin0 the .e4e. of workin0 capita.- a fir' has to decide how it is to &e

financed3 It was financin0 the workin0 capita. fro' the fo..owin0 fo%r co''on so%rces3

They are-

-. SHARES

Co'pany has iss%ed the e/%ity shares for raisin0 the f%nds3 The !/%ity shares do not

ha4e any fi5ed co''it'ent char0es and the di4idend on these shares is to &e paid s%&ject

to the a4ai.a&i.ity of s%fficient f%nds3 These f%nds ha4e &een injected fro' the co'pany7s

own persona. reso%rces and fro' the 'e'&ers3

0. TRADE CREDIT

The trade credit refer to the credit e5tended &y the s%pp.iers of 0oods in the nor'a.

co%rse of &%siness3 The fir' has a 0ood re.ationship with the trade creditors3 $o that

s%pp.iers send the 0oods to the fir' for the pay'ent to &e recei4ed in f%t%re as per the

a0ree'ent or sa.es in4oice3 In this way- the fir' 0enerates the short=ter' finances fro'

the trade creditors3 It is an easy and con4enient 'ethod to finance and it is infor'a. and

spontaneo%s so%rce of finance for the fir'3

1. #ANK CREDIT

Co''ercia. &anks p.ay an i'portant ro.e in financin0 the trade H ind%stry *ank

pro4ides short=ter'- 'edi%' ter' H .on0 ter' finance to an ind%stria.ist or a &%siness

'an3

-. L'a"s The A3P3 $o.4e5 8P+T9 LT?3- has taken .oan fro' the co''ercia. &ank

for workin0 capita. re/%ire'ent for a certain period at certain interest rate3

0. Cas: Ce%!t O7e%a?ts (nder cash credito4erdraft fro'arran0e'ent of &ank

finance- the &ank specifies a deter'ined &orrowin0scredit .i'it3 The &orrower can

draw&orrow %p to the stip%.ated credito4erdraft .i'it3 Within the specified .i'it .ine

of credit- any n%'&er of drawa.s drawin0s are possi&.e to the e5tent of his

re/%ire'ent periodica..y3 This for' of financin0 of workin0 capita. is hi0h.y


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attracti4e to the &orrowers &eca%se- first.y- it is f.e5i&.e in that a.tho%0h &orrowed

f%nds are repaya&.e on de'and- &anks %s%a..y do not reca.. cash ad4ancesro.. the'

o4er and- second.y- the &orrower has the freedo' to draw the a'o%nt act%a..y

o%tstandin03 Bowe4er- cash credito4erdraft is incon4enient to the &anks and

ha'pers credit p.annin03

. CUSTOMER ADVANCES

The A3P3 $o.4e5 8p4t9 Li'ited fo..ow the practice of co..ectin0 ad4ance 'oney fro' the

c%sto'ers as soon as orders are p.aced and &efore the act%a. de.i4ery of the 0oods3 $%ch

an ad4ance recei4ed fro' the c%sto'ers constit%tes one of the short=ter' so%rces of

finance3

Certain of the price of the 0oods to &e so.d to the c%sto'ers is co..ected in the of an

ad4ance3 $e..er can %ti.i:e the ad4ance 'oney so co..ected for 'eetin0 these %r0ent

financia. o&.i0ations3

DETERMINANTS OF WORKING CAPITAL REUIREMENTS

In order to deter'ine the a'o%nt of workin0 capita. needed &y the fir' a n%'&er of

factors ha4e to &e considered &y finance 'ana0er3 These factors are e5p.ained &e.ow3

-. Nat$e '? #$s!"ess

The Nat%re of the &%siness effects the workin0 capita. re/%ire'ents to a 0reat

e5tent3 "or instance p%&.ic %ti.ities .ike rai.ways- e.ectric co'panies- etc3 need 4ery

.itt.e workin0 capita. &eca%se they need not ho.d .ar0e in4entories and their

operations are 'ost.y on cash &asis- &%t in case of 'an%fact%rin0 fir's and

tradin0 fir's- the re/%ire'ent of workin0 capita. is s%fficient.y .ar0e as they

ha4e to in4est s%&stantia..y in in4entories and acco%nts recei4a&.es 3

Rice.a is a prod%ction fir'- there for workin0 capita. re/%ired is 'ore in period of

prod%ction as co'pared to other period3


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0. P'%$t!'" P'+!!es

The prod%ction po.icies a.so deter'ine the Workin0 capita. re/%ire'ent3 Thro%0h the

prod%ction sched%.e i3e3 the p.an for prod%ction- prod%ction process etc3

The *C has s'a.. prod%ction process31. Ce%!t P'+!

The credit po.icy re.atin0 to sa.es and affects the workin0 capita.3

The credit po.icy inf.%ence the re/%ire'ent of workin0 capita. in two waysF

13 Thro%0h credit ter's 0ranted &y the fir' to its c%sto'ers&%yers3

63 Credit ter's a4ai.a&.e to the fir' fro' its creditors3

The credit ter's 0ranted to c%sto'ers ha4e a &earin0 on the a0nit%de of Workin0

capita. &y deter'inin0 the .e4e. of &ook de&ts3 The credit sa.es res%.ts is hi0her

&ookde&ts 8re a4ai.a&.e9 hi0her &ook de&t 'eans 'ore Workin0 capita.3

On the other hand- if .i&era. credit ter's are a4ai.a&.e fro' the s%pp.iers of 0oods

Trade creditorsQ- the need for workin0 capita. is .ess3 The workin0 capita. re/%ire'ents

of &%siness are- th%s- affected &y the ter's of p%rchase and sa.e- and the ro.e 0i4en to

credit &y a co'pany in its dea.in0s with Creditors and ?e&tors3

In *C co'pany raw 'ateria.s are p%rchased with a credit or cash and finished 0oods

are so.d on cash &asis and a.so credit &asis3

. C:a"9es !" Te:"'+'9Techno.o0y %sed in 'an%fact%rin0 process is 'ain.y deter'ined need of workin0 capita.3

oderni:e techno.o0y needs .ow workin0 capita.- where as o.d and traditiona.

techno.o0y needs 0reater workin0 capita.3

@. S!Je '? t:e #$s!"ess U"!t

The si:e of the &%siness %nit is a.so i'portant factor in inf.%encin0 the workin0 capita.

needs of a fir'3 Lar0e $ca.e Ind%stries re/%ires h%0e a'o%nt of workin0 capita.

co'pared to $'a.. sca.e Ind%stries3

2. G'Bt: a"% Ea"s!'"

The 0rowth in 4o.%'e and 0rowth in workin0 capita. 0o hand in hand- howe4er- the

chan0e 'ay not &e proportionate and the increased need for workin0 capita. is fe.t ri0ht

fro' the initia. sta0es of 0rowth3


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. D!7!%e"% P'+!

Another appropriation of profits which has a &earin0 on workin0 capita. is di4idend

pay'ent3 Pay'ent of di4idend %ti.i:es cash whi.e retainin0 profits acts as a so%rce as

workin0 capita. Th%s workin0 capita. 0ets affected &y di4idend po.icies3

The A3P $o.4e5 fo..ows .i&era. di4idend po.icy wi.. re/%ire 'ore workin0 capita. than

co'pany that fo..ows a strict di4idend po.icy3

. S$>>+ C'"%!t!'"s

If s%pp.y of raw 'ateria. and spares is ti'e.y and ade/%ate- the fir' can 0et &y with a

co'parati4e.y .ow in4entory .e4e.3 If s%pp.y is scarce and %npredicta&.e or a4ai.a&.e

d%rin0 partic%.ar seasons- the fir' wi.. ha4e to o&tain raw 'ateria. when it is a4ai.a&.e3 It

is essentia. to keep .ar0er stocks increasin0 workin0 capita. re/%ire'ents3

. Ma8et C'"%!t!'"s

The .e4e. of co'petition e5istin0 in the 'arket a.so inf.%ences workin0 capita.

re/%ire'ent3 When co'petition is hi0h- the co'pany sho%.d ha4e eno%0h in4entories of

finished 0oods to 'eet a certain .e4e. of de'and3 Otherwise- c%sto'ers are hi0h.y .ike.y

to switch o4er to co'petitor7s prod%cts3 It th%s has 0reater workin0 capita. needs3 When

co'petition is .ow- &%t de'and for the prod%ct is hi0h- the fir' can afford to ha4e a

s'a..er in4entory and wo%.d conse/%ent.y re/%ire .esser workin0 capita.3 *%t this factor

has not app.ied in these techno.o0ica. and co'petiti4e days3

-/. #$s!"ess C+e

The workin0 capita. re/%ire'ents are a.so deter'ined &y the nat%re of the &%siness cyc.e3

*%siness f.%ct%ations .ead to cyc.ica. and seasona. chan0es which- in t%rn- ca%se a shift in

the workin0 capita. position- partic%.ar.y for te'porary workin0 capita. the 4ariations in

the &%siness conditions 'ay &e in two directionsF

-. (pward phase when &oo' condition pre4ai.-

0. ?ownswin0 phase when econo'ic acti4ity is 'arked &y a dec.ine3


48/84

--. P'?!t Le7e+

Profit .e4e. a.so affects the workin0 capita. re/%ire'ents as a concern hi0her profit

'ar0in res%.ts in hi0her 0eneration of interna. f%nds and 'ore contri&%tin0 to workin0

capita.3

ESTIMATION OF CURRENT ASSETS

-. RaB Mate!a+ I"7e"t'F

The In4est'ent in Raw ateria. can &e co'p%ted with the he.p of the fo..owin0

for'%.aF=

*%d0eted Cost of Raw A4era0e In4entory

Prod%ction 5 ateria.8s9 5 Bo.din0 Period

8 In %nits 9 per %nit 8'onthsdays9

16 'onths 26 weeks ;2days

0. W'8,!",>'9ess (WP) I"7e"t'F

The re.e4ant cost of deter'ine work in process in4entory are the proportionate

share of cost of raw 'ateria. and con4ersion costs 8 .a&ors and an%fact%rin0 o4er Bead

cost e5c.%din0 depreciation9 In case- f%.. %nti. of raw 'ateria. is re/%ired in the &e0innin0

the %nit cost of work is process wo%.d &e hi0her- i3e3- cost of f%.. %nit 2> of

con4ersion cost co'pared to the raw 'ateria. re/%ire'ent3 Thro%0ho%t the prod%ction

Cyc.e- workin0 process is nor'a..y e/%i4a.ent to 2> of tota. cost of prod%ction3

$y'&o.ica..y-

*%d0eted !sti'ated work= A4era0e Ti'e $pan

Prod%ction 5 in=pro0ress cost 5 of work=in=pro0ress

8 In %nits 9 per %nit in4entory 8'onthsdays9


1. F!"!s:e% G''%s I"7e"t'


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50/84

The "%ndin0 of Workin0 Capita. fro' Trade Creditors can &e co'p%ted with the

he.p of the fo..owin0 for'%.aF=

*%d0eted ,ear.y Raw ateria. Credit Period

Prod%ction 5 Cost 5 A..owed &y creditors



N'te, Proportiona. adj%st'ent sho%.d &e 'ade to cash p%rchases of Raw ateria.s3

0. D!et Wa9es

The "%ndin0 of Workin0 Capita. fro' ?irect Wa0es can &e co'p%ted with the

he.p of the fo..owin0 for'%.aF=

*%d0eted ,ear.y ?irect La&or A4era0e Ti'e=.a0 in

Prod%ction 5 Cost 5 Pay'ent of wa0es


16 'onths 26 weeks ;2dayss

N'te, The a4era0e Credit Period for the pay'ent of wa0es appro5i'ates to ha.f=a='onth

in the case of 'onth.y wa0e pay'ent3 The first days 'onth.y wa0es are paid on the ;> th of

the 'onth- e5tendin0 credit for 6 days- the second day7s wa0es are- a0ain - paid on the

;>th day- e5tendin0 credit for 6D days- and so on3 A4era0e credit period appro5i'ates to

ha.f=a='onth3

1. O7e:ea%s ('t:e t:a" De>e!at!'" a"% A&'t!Jat!'")

The "%ndin0 of Workin0 Capita. fro' O4erheads can &e co'p%ted with the he.p

of the fo..owin0 for'%.aF=

*%d0eted ,ear.y O4erhead A4era0e Ti'e=.a0 in

Prod%ction 5 Cost 5 Pay'ent of o4erheads


2>


51/84


N'te, The a'o%nt of O4erheads 'ay &e separate.y ca.c%.ated for different types of

O4erheads3 In the case of $e..in0 O4erheads- the re.e4ant ite' wo%.d &e sa.es 4o.%'e

instead of Prod%ction +o.%'e3

FORMAT FOR DETERMINATION OF WORKING CAPITAL

SL.NO PARTICULARS AMOUNT

-

0

!$TIATION O" CURRENT ASSETS

-) ini'%' desired cash and *ank &a.ances3 555

0) In4entories

Raw 'ateria. 555Work=in=pro0ress 555

"inished stock 555

1) ?e&tors 555

Tota. C%rrent Assets

!$TIATION O" CURRENT LIA#ILITIES

-) Creditors 555

0) Wa0es 555

1) O4erheads 555

Tota. c%rrent .ia&i.ities

NET WORKING CAPITAL

8Tota. C%rrent assets J Tota. C%rrent .ia&i.ities9

Add F ar0in for contin0ency net

Workin0 capita. re/%ire'ent

XXX

XXX

XXX

XX

XXXX

COMPONENTS OF WORKING CAPITAL

21


52/84

The co'ponents of workin0 capita. areF

CASH MANAGEMENT

RECEIVA#LES MANAGEMENT

INVENTOR4 MANAGEMENT

CASH MANAGEMENT

Cash is the i'portant c%rrent asset for the operation of the &%siness3 Cash is the

*asic inp%t needed to keep the &%siness r%nnin0 in the contin%o%s &asis- it is a.so the

%.ti'ate o%tp%t e5pected to &e rea.i:ed &y se..in0 or prod%ct 'an%fact%red &y the fir'3

The fir' sho%.d keep s%fficient cash neither 'ore nor .ess3 Cash shorta0e wi.. disr%pt

the fir'7s 'an%fact%rin0 operations whi.e e5cessi4e cash wi.. si'p.y re'ain idea.

witho%t contri&%tin0 anythin0 towards the fir'7s profita&i.ity3 Th%s a 'ajor f%nction of

the financia. 'ana0er is to 'aintain a so%nd cash position3 Cash is the 'oney- which a

fir' can dis&%rse i''ediate.y witho%t any restriction3 The ter' cash inc.%des coins-

c%rrency and che/%es he.d &y the fir' and &a.ances in its &ank acco%nt3

NEED FOR HOLDING CASH

The need for ho.din0 Cash arises fro' a 4ariety of reasons which are-

-. Ta"sat!'" M't!7e

A co'pany is a.ways enterin0 into transactions with other entities3 Whi.e so'e

of these transactions 'ay not res%.t in an i''ediate inf.owo%tf.ow of cash 8!303 Credit

p%rchases and $a.es9- other transactions ca%se i''ediate inf.ows and o%tf.ows3 $o

fir's keep a certain a'o%nt of cash so as to dea. with ro%tine transactions where

i''ediate cash pay'ent is re/%ired3

0. Pea$t!'"a M't!7eF

Contin0encies ha4e a ha&it of croppin0 %p when .east e5pected3 A s%dden fire

'ay &reak o%t- accidents 'ay happen- e'p.oyees 'ay 0o on a strike- creditors 'ay

present &i..s ear.ier than e5pected or the de&tors 'ay 'ake pay'ents ear.ier than

26


53/84

warranted3 The co'pany has to &e prepared to 'eet these contin0encies to 'ini'i:e

the .osses3 "or this p%rpose co'panies 0enera..y 'aintain so'e a'o%nt in the for' of

Cash3

1. S>e$+at!7e M't!7e

"ir's a.so 'aintain cash &a.ances in order to take ad4anta0e of opport%nities

that do not take p.ace in the co%rse of ro%tine &%siness acti4ities3 "or e5a'p.e- there 'ay

&e a s%dden decrease in the price of Raw ateria.s which is not e5pected to .ast .on0 or

the fir' 'ay want to in4est in sec%rities of other co'panies when the price is j%st ri0ht3

These transactions are p%re.y of spec%.ati4e nat%re for which the fir's need cash3

O#3ECTIVES OF CASH MANAGEMENT

Pri'ary o&ject of the cash 'ana0e'ent is to 'aintain a proper &a.ance &etween

.i/%idity and profita&i.ity3 In order to protect the so.4ency of the fir' and a.so to

'a5i'i:e the profita&i.ity3 "o..owin0 are so'e of the o&jecti4es of cash 'ana0e'ent3

13 To 'eet day to day cash re/%ire'ents3

63 To pro4ide for %ne5pected pay'ents3

;3 To 'a5i'i:e profits on a4ai.a&.e in4est'ent opport%nities3


54/84

infor'ation a&o%t the a'o%nt of cash e5pected to &e recei4ed and the a'o%nt of cash

e5pected to &e paid o%t &y a fir' for a 0i4en period3

Cash &%d0etin0 indicates pro&a&.y cash receipts and cash pay'ents for an %nder

consideration3 It is a state'ent of &%d0eted cash receipts and cash pay'ent res%.tin0 in

either positi4e or ne0ati4e cash or for a week or for a year and so on3

RECEIVA#LES MANAGEMENT

Recei4a&.es or de&tors are the one of the 'ost i'portant parts of the c%rrent

Assets which is created if the co'pany se..s the finished 0oods to the c%sto'er &%t not

recei4e the cash for the sa'e i''ediate.y3 Trade credit arises when a co'pany sa.es its

prod%cts or ser4ices on credit and does not recei4e cash i''ediate.y3 It is an essentia.

'arketin0 too.- actin0 as a &rid0e for the 'o'ent of 0oods thro%0h prod%ction and

distri&%tion sta0es to c%sto'ers3

The recei4a&.es inc.%de three characteristics

19 It in4o.4e e.e'ent of risk which sho%.d &e caref%..y ana.ysis3

69 It is &ased on econo'ic 4a.%e3 To the &%yer- the econo'ic 4a.%e in 0oods or ser4ices

passes i''ediate.y at the ti'e of sa.e- whi.e se..er e5pects an e/%i4a.ent 4a.%e to &e

recei4ed .ater on3

;9 It i'p.ies f%t%rity3 The cash pay'ent for 0oods or ser4es recei4ed &y the &%yer wi..

&e 'ade &y hi' in a f%t%re period3

A co'pany 0i4es trade credit to protect its sa.es fro' the co'petitors and to attract the

potentia. c%sto'ers to &%y its prod%cts at fa4ora&.e ter's3 Trade credit creates

2


55/84

recei4a&.es or &ook de&ts that the co'pany is accepted to co..ect in the near f%t%re3 The

c%sto'ers fro' who recei4a&.es ha4e to &e co..ected are ca..ed as “Trade ?e&tors#

recei4a&.es constit%te a s%&stantia. position of c%rrent assets3

Grantin0 credit and creditin0 de&tors- a'o%nts to the &.ockin0 of the co'pany7s f%nds3

The inter4a. &etween the date of sa.e and the date of pay'ent has to &e financed o%t of

workin0 capita. as s%&stantia. a'o%nts are tied %p in trade de&tors3 It needs caref%.

ana.ysis and proper 'ana0e'ent3

In *C .td3- they are se..in0 the 0oods on cash &asis and a.so on credit &asis3

INVENTOR4 MANAGEMENT

In4entories are 0oods he.d for e4ent%a. sa.e &y a fir'3 In4entories are th%s

one of the 'ajor e.e'ents- which he.p the fir' in o&tainin0 the desired .e4e. of

sa.es3 In4entories inc.%des raw 'ateria.s- se'i finished 0oods- finished prod%cts3

In co'pany there sho%.d &e an opti'%' .e4e. of in4est'ent for any asset- whether it is

p.ant- cash or in4entories3 A0ain inade/%ate disr%pts prod%ction and ca%ses .osses in

sa.es3 !fficient 'ana0e'ent of in4entory sho%.d %.ti'ate.y res%.t in wea.th 'a5i'i:ation

of owner7s wea.th3 It i'p.ies that whi.e the 'ana0e'ent sho%.d try to p%rs%e financia.

o&jecti4e of t%rnin0 in4entory as /%ick.y as possi&.e- it sho%.d at the sa'e ti'e ens%re

s%fficient in4entories to satisfy prod%ction and sa.es de'and3

The 'ain o&jecti4es of in4entory 'ana0e'ent are operationa. and financia.3

The operationa. 'ean that 'eans that the 'ateria.s and spares sho%.d &e a4ai.a&.e in

s%fficient /%antity so that work is not disr%pted for want of in4entory3 The financia.

22


56/84

o&jecti4e 'eans that in4est'ents in in4entories sho%.d not re'ain idea. and 'ini'%'

workin0 capita. sho%.d &e .ocked in it3

The fo..owin0 are the o&jecti4es of in4entory 'ana0e'entF=

♦ To ens%re contin%o%s s%pp.y of 'ateria.s- spares and finished 0oods3

♦ To a4oid &oth o4er and %nder stockin0 of in4entory3

♦ To 'aintain in4est'ents in in4entories at the opti'%' .e4e. as re/%ired &y the

operationa. and sa.e acti4ities3

♦ To keep 'ateria. cost %nder contro. so that they contri&%te in red%cin0 cost of

prod%ction and o4era.. p%rchases3

♦ To 'ini'i:e .osses thro%0h deterioration- pi.fera0e- wasta0es and da'a0es3

♦ To desi0n proper or0ani:ation for in4entory contro. so that 'ana0e'ent3 C.ear c%t

acco%nt a&i.ity sho%.d &e fi5ed at 4ario%s .e4e.s of the or0ani:ation3

♦ To ens%re perpet%a. in4entory contro. so that 'ateria.s shown in stock .ed0ers sho%.d

&e act%a..y .yin0 in the stores3

♦ To ens%re ri0ht /%a.ity of 0oods at reasona&.e prices3

#ENEFITS OF HOLDING INVENORIES

Bo.din0 of .ar0e and ade/%ate in4entories is 4ery &eneficia. to e4ery fir'3

The &enefits or ad4anta0es of ho.din0 in4entories area as fo..ows3

13 Red%cin0 orders cost3

63 Contin%o%s prod%ction3

;3 To a4oid .oss3


57/84

Bo.din0 of in4entory e5poses the fir' to a n%'&er of risks and costs3 Risks of

ho.din0 in4entories can &e p%t as fo..ows3

13 ateria. cost

63 Order cost

;3 $tora0e cost


58/84

DATA INTERPRETATION AND ANAL4SIS

A NET WORKING CAPITAL An ana.ysis of the net workin0 capita. wi.. &e 4ery

he.p f%.. for knowin0 the operationa. efficiency of the co'pany3 The fo..owin0 ta&.e

pro4ides the data re.atin0 to the net workin0 capita. of A3P3 $o.4e5 Ltd3

NET WORKING CAPITAL CURRENT ASSETS,CURRENT

LIA#ILITIS

,ears C%rrent Asset C%rrent Lia&i.ities NWC

6>>=6>1> 3>> 6> 6261223>>

6>1>=6>11 2> ;DD@@23>> 2@11DD13>>6>11=6>16 >@@1@3>> 6D6>@3>> 6>

6>16=6>1; 11>>;> ;DDD3>> @11;263>>

6>1;=6>1< 11> > @@D1>>@3>>

INTERPRETATION,

2D

C:at s:'B!"9 NWC

/

-//////

0//////

1//////

//////

@//////

2//////

//////

//////

//////

0//,0/-/ 0/-/,0/-- 0/--,0/-0 0/-0,0/-1 0/-1,0/-

4ea

N W C

NWC


59/84

The a&o4e chart shows that d%rin0 the year 6>>=6>1> the co'pany has 6261223>>

N3W3C3 In the year 6>1>=6>11 h%0e increase in the N3W3C is 2@11DD13>> and in the year

6>11=6>16 the co'pany has 6> N3W3C in the year 6>16=6>1; the co'pany has

@11;263>> N3W3C the N3W3C of the co'pany is increasin0 co'pared to the pre4io%s

years- in the year 6>1;=6>1< the co'pany has @@D1>>@3>> N3W3C this 'eans the

co'pany in a positi4e position H N3W3C has i'pro4ed 4ary fast as co'pared to the

pre4io%s years which show .i/%idity Position of A3P3 $o.4e5 .td has a.ways 'ore H

s%fficient workin0 capita. a4ai.a&.e to pay off its c%rrent .ia&i.ities3

# RATIO ANAL4SIS

INTRODUCTIONRatio Ana.ysis is a powerf%. too. of financia. ana.ysis3 A.e5ander Ba.. first

presented it in 11 in "edera. Reser4e *%..etin3 Ratio Ana.ysis is a process of

co'parison of one fi0%re a0ainst other- which 'akes a ratio and the appraisa. of the

ratios of the ratios to 'ake proper ana.ysis a&o%t the stren0ths and weakness of the

fir'7s operations3 The ter' ratio refers to the n%'erica. or /%antitati4e re.ationship

&etween two acco%ntin0 fi0%res3 Ratio ana.ysis of financia. state'ents stands for

the process of deter'inin0 and presentin0 the re.ationship of ite's and 0ro%p of

ite's in the state'ents3

N'teF I ha4e %sed the ratio ana.ysis in this project in order to s%&stantiate the 'ana0in0

of workin0 capita.3 "or this- I %sed so'e of the ratios to 0et the re/%ired o%tp%t3

Va!'$s B'8!"9 a>!ta+ at!'s $se% &e ae as ?'++'Bs

-. LIUIDIT4 RATIOS

Li/%idity refers to the a&i.ity of a fir' to 'eet its c%rrent o&.i0ations as and when

these &eco'e d%e3 The short=ter' o&.i0ations are 'et &y rea.i:in0 a'o%nts fro'

c%rrent- f.oatin0 or circ%.atin0 assets3

2


60/84


61/84

INTERPRETATION,

It is seen fro' the a&o4e chart that d%rin0 the year 6>>= 6>1> the c%rrent

ratio was 636;- d%rin0 the year 6>1>=6>11 it was 6311=6>16 it

In was ;3613 This shows the c%rrent ratio increases e4ery year &%t in the year 6>16=

6>1; the c%rrent ratio was dropped to 63D; d%e to increase in c%rrent .ia&i.ities3 the

year 6>1;=6>1< the c%rrent ratio has increases 63D@3 The c%rrent ratio is a&o4e the

standard ratio i3e3- 6F13 Bence it can &e said that there is eno%0h c%rrent assets in

A3P3 $o.4e5 Ltd to 'eet its c%rrent .ia&i.ities3

0. ACID TEST RATIO UICK RATIO LIUIDIT4 RATIO,

This ratio esta&.ishes a re.ationship &etween /%ick .i/%id assets and c%rrent

.ia&i.ities3 It 'eas%res the fir's7 capacity to pay off c%rrent o&.i0ations i''ediate.y3 An

asset is .i/%id if it can &e con4erted in to cash i''ediate.y witho%t a .oss of 4a.%e

In4entories are considered to &e .ess .i/%id3 *eca%se in4entories nor'a..y re/%ire so'e

ti'e for rea.i:in0 into cash3 This ratio is a.so known as acid=test ratio3 The standard /%ick

ratio is 1F13 Is considered satisfactory3

$!8 Rat!' $!8 Assets ($e"t assets , I"7e"t')

C$e"t L!a!+!t!es

C%rrent Assets In4entories S%ick Assets C%rrent Lia&i.ities S%ick Ratio

6>>=6>1> 3>> 12;6> ;>;> 6> 131>=6>11 2> 611>@13>> @> ;DD@@23>> 131

6>11=6>16 >@@1@3>> ;;;3>> 2@> 6D6>@3>> 63>;

1


62/84

6>16=6>1; 11>>;> 666>13>> D;D>26@3>> ;DDD3>> 6312

6>1;=6>1< 11> 6;>113>> 2D>223>> > 63;>

INTERPRETATION,

?%rin0 the year 6>>=6>1> the /%ick ratio was 131>= 6>11 it

increases to 131 This shows the co'pany 'aintains satisfactory /%ick ratio- in the year

6>11=6>16 the /%ick ratio increases to 63>;- in the year 6>16= 6>1; it increases 6312- in

the year 6>1;=6>1< it increases 63;>- d%e to increase in /%ick assets3 The /%ick ratio is

a&o4e the standard ratio i3e3- 1F13 Bence it shows that the .i/%idity position of the

co'pany is ade/%ate3

1. A#SOLUTE LIUID RATIO,

A&so.%te .i/%id ratio 'ay &e defined as the re.ationship &etween A&so.%te .i/%id

assets and c%rrent .ia&i.ities3 A&so.%te .i/%id assets inc.%de cash in hand and cash at &ank3

The standard ratio is >32F 13

As'+$te L!$!%!t Rat!' Cas: ; #a"8 #a+a"e

C$e"t L!a!+!t!es

,ears Cash H *ank *a.ance C%rrent Lia&i.ities A&so.%te Li/%idity Ratio

6>>=6>1> 6> >36<

6>1>=6>11 16>2>3>> ;DD@@23>> >3;1

6>11=6>16 1>;;1263>> 6D6>@3>> >3;

6>16=6>1; 1@6>D123>> ;DDD3>> >31;=6>1< 1@D;D3>> > >3


63/84

INTERPRETATION

?%rin0 the year 6>>= 6>1> the A&so.%te .i/%idity ratio was >361>=6>11 it was >3;1 and in the year6>11= 6>16 it was >3;- in the year6>16= 6>1; it

was >31;= 6>1< the A&so.%te .i/%idity ratio has increases >3


64/84

INTERPRETATION

It is seen fro' the a&o4e chart that ?%rin0 the year 6>>=6>1> the In4entory to ratio is

163@2 ti'es- in the year 6>1>=6>11 it increased to 116=6>1;

and6>1;= 6>1< to 1>=6>1> ;2 163@2 Ti'es 6D3; ?ays

,ear Net $a.es C.osin0 in4entory In4entory T%rno4er ratio

6>>=6>1> 12D13>> 12;6> 163@2 Ti'es

6>1>=6>11 ;1;61663>> 611>@13>> 116=6>1; ;D> 666>13>> 1


65/84

6>1>=6>11 ;2 11; ;2 13;< ?ays

INTERPRETATION

In4entory ho.din0 period f.%ct%atin0 o4er the years3 It was 6D3; days in the year 6>>=

6>1>3 It decreased to 6231 days in the year 6>1>=6>11- it increased to 11= 6>16- there was a s%&se/%ent decrease in the year 6>16=6>1; and 6>1;=6>1<

to 63;< days respecti4e.y3

This shows the co'pany is 'ini'i:in0 these in4entory=ho.din0 days there&y to increase

the sa.es3

1. DE#TORS ACCOUNTS RECEIVA#LES TURNOVER RATIO,

?e&tor7s t%rno4er ratio indicates the speed of de&t co..ection of the fir'3 This ratio

co'p%tes the n%'&er of ti'es de&tors 8recei4a&.es9 has &een t%rned o4er d%rin0 the

partic%.ar period3

Det's T$"'7e Rat!' Net Sa+es

A7ea9e Det's

,ear Net $a.es A4era0e ?e&tors ?e&tors T%rno4er Ratio

2

C:at s:'B!"9 I"7e"t' H'+%!"9 Pe!'%

/

@-/

-@

0/

0@

1/

1@

/

@

@/

0//,0/-/ 0/-/,0/-- 0/--,0/-0 0/-0,0/-1 0/-1,0/-

4ea

N $ & F e ' ? % a ( s

I"7e"t'H'+%!"9Pe!'%


66/84

6>>=6>1> 12D13>> 66>1;D13>> D3DD Ti'es

6>1>=6>11 ;1;61663>> > 3;6 Ti'es

6>11=6>16 6@D> 1D>2> 1231;=6>1< > 3@6 Ti'es

INTERPRETATION

It is c.ear that de&tor t%rno4er ratio f.%ct%atin0 o4er the years3 It was D3DD ti'es in the

year 6>>= 6>1>3 It decreased to 3;6 ti'es in the year 6>1>=6>11- It a0ain increased to

123


67/84


68/84

,ear Net P%rchases A4era0e Creditors Creditors T%rno4er Ratio

6>>=6>1> 111>>3>> 1@;2123>> 3D Ti'es

6>1>=6>11 1@@@D@23>> ;> 23> Ti'es

6>11=6>16 1DDD6D3>> 6> @31; Ti'es

6>16=6>1; 6;>2@@;3>> 62D3>> D3DD Ti'es

6>1;=6>1< 6@1> ;>2@D> D3DD Ti'es

INTERPRETATION

It is c.ear that creditor t%rno4er ratio chan0in0 o4er the years3 It was 3D ti'es in the

year 6>>=6>1>3 It decreased to 23> ti'es in the year 6>1>=6>11- there was a s%&se/%ent

increase in the year 6>11=6>16 and 6>16=6>1; to @31; ti'es and D3DD ti'es respecti4e.y3

In the year 6>1;=6>1< it is sa'e as co'pared to 6>16= 6>1;3 It shows that co'pany has

'akin0 pro'pt pay'ent to the creditors3

2. CREDITORS PA4MENT PERIOD,

The Creditors Pay'ent Period represents the a4era0e n%'&er of days taken &y the fir'

to pay the creditors and other &i..s paya&.es3

A7ea9e Pa&e"t Pe!'% Das !" a 4ea

Ce%!t's T$"'7e Rat!'

D

C:at s:'B!"9 Ce%!t's T$"'7e Rat!'

/

-

0

1

@

2

-/

0//,0/-/ 0/-/,0/-- 0/--,0/-0 0/-0,0/-1 0/-1,0/-

4ea

C T R

Ce%!t's

T$"'7eRat!'


69/84

INTERPRETATION

A4era0e pay'ent period chan0in0 o4er the years3 It was 2636 days in the year 6>>=

6>1>3 It increased to @13@1 days in the year 6>1>=6>11- *%t in the year 6>11=6>16 and

6>16=6>1; it decreased to 2131 days and days respecti4e.y3 In the year 6>1;=6>1<

it is sa'e as co'pared to 6>16=6>1;3 It indicates that the co'pany has taken the steps to pro'pt pay'ent to the creditors3

. WORKING CAPITAL TURNOVER RATIO,

This ratio indicates the n%'&er of ti'es the workin0 capita. is t%rned o4er in the co%rse

of the year3 This ratio 'eas%res the efficiency with which the workin0 capita. is %sed &y

the fir'3 A hi0her ratio indicates efficient %ti.i:ation of workin0 capita. and a .ow ratio

indicates otherwise3 *%t a 4ery hi0h workin0 capita. t%rno4er is not a 0ood sit%ation for

any fir'3

W'8!"9 Ca>!ta+ T$"'7e Rat!' Net Sa+es

Net W'8!"9 Ca>!ta+

,ear ?ays in a ,ear Creditors T%rno4er Ratio A4era0e Pay'ent Period

6>>=6>1> ;2 3D Ti'es 2636 ?ays

6>1>=6>11 ;2 23> Ti'es @13@1 ?ays

6>11=6>16 ;2 @31; Ti'es 2131 ?ays

6>16=6>1; ;2 D3DD Ti'es ?ays6>1;=6>1< ;2 D3DD Ti'es ?ays


70/84

,ear Net $a.es Net Workin0 Capita. WCTR

6>>=6>1> 12D13>> 6261223>> @3@2 Ti'es

6>1>=6>11 ;1;61663>> 2@11DD13>> 2316=6>1; ;D> @11;263>> 23>=

6>1>- @3@2 ti'es there was a s%&se/%ent decrease in the year 6>1>=6>11 and 6>11=6>16

to 2316=6>1; and 6>1;=6>1< to

23


71/84

CURRENT LIA#ILITIES

If the c%rrent .ia&i.ities increases as a res%.t of this workin0 capita. decreases3

If the c%rrent .ia&i.ities decreases as a res%.t of this workin0 capita. Increase3

State&e"t '? C:a"9es !" W'8!"9 Ca>!ta+

The p%rpose of preparin0 this state'ent is for findin0 o%t the increase or decrease in

workin0 capita. and to 'ake a co'parison &etween two financia. years3

Ta+e - State&e"t '? C:a"9es !" W'8!"9 Ca>!ta+ ?' t:e 4ea 0//,0/-/

Pat!$+as As '" 1-,1,

0//

As '" 1-,1,

0/-/ I"ease Deease

CURRENT ASSETSIn4entories 6>>1;>23>> 12;6> UU 3>>$%ndry de&tors 13>> 66>1;D13>> @62@13>> UU

Cash H *ank &a.ance 2>;@3>> UU 623>>

Other c%rrent assets 1; 1> 1 UU

Loans and Ad4ances 1;>D13>> 1D3>> UU ;D63>>

(A)T'ta+ C$e"t Assets 0-00.// @21/.//

@1

E??et '" B'8!"9 a>!ta+


72/84

CURRENT LIA#ILITIES$%ndry creditors 1>123>> 1@;2123>> UU @;6>3>>

Pro4isions 211213>> ;D>6D3>> 1> UU

(#)T'ta+ C$e"t L!a!+!t!es 0--@2.// 0/-@1.//

(A),(#) Net W'8!"9 Ca>!ta+ 0-@1-.// 0@0-@@2.//

I"ease !" W'8!"9 Ca>!ta+ 12/@.//Q UU UU 12/@.//Q

TOTAL 0@0-@@2.// 0@0-@@2.// 0/@20.// 1/.//

INTERPRETATION

In the a&o4e ta&.e- it is seen that d%rin0 the year 6>> and 6>1> there was a net

increase in workin0 capita. of Rs ;D>D23>>3 It indicates an ade/%ate workin0 capita. in

A3P3 $o.4e5 .td3-

This is &eca%se of

13 Increase c%rrent assets s%ch as $%ndry de&tors &y Rs @62@13>>- other c%rrent

assets &y Rs 13 And decrease in In4entories &y Rs 3>>- Cash H *ank

&a.ance &y Rs 623>>- Loans and Ad4ances &y Rs ;D63>>3

63 Increase in c%rrent .ia&i.ities s%ch as in $%ndry creditors &y Rs @;6>3>> and

decrease in Pro4isions &y Rs 1>3

Ta+e 0 State&e"t '? C:a"9es !" W'8!"9 Ca>!ta+ ?' t:e 4ea 0/-/,0/--

Pat!$+as As '" 1-,1,

0/-/

As '" 1-,1,

0/-- I"ease Deease

CURRENT ASSETS

@6

E??et '" B'8!"9 a>!ta+


73/84

In4entories 12;6> 611>@13>> 6D13>> UU

$%ndry de&tors 66>1;D13>> > 6@2@1> UU

Cash H *ank &a.ance 16>2>3>> @111D3>> UU

Other c%rrent assets 1> @D6>3>> UU @>263>>

Loans and Ad4ances 1D3>> 1116D3>> 1>>> UU

(A)T'ta+ C$e"t Assets @21/.// @22.//

CURRENT LIA#ILITIES$%ndry creditors 1@;2123>> ;> UU 1D1D163>>

Pro4isions ;D>6D3>> ;2;D3>> UU 6@1>3>>

(#)T'ta+ C$e"t L!a!+!t!es 0/-@1.// 12@.//

(A),(#) Net W'8!"9 Ca>!ta+ 0@0-@@2.// @---.//

I"ease !" W'8!"9 Ca>!ta+ 1-/10@.//Q UU UU 1-/10@.//Q

TOTAL @---.// @---.// @-/-/.// @-/-/.//

INTERPRETATION

In the a&o4e ta&.e- it is seen that d%rin0 the year 6>1> and 6>11 there was h%0e net

increase in workin0 capita. &y Rs ;1>;623>> As Co'pare to 6>1> and 6>11 3 This is

&eca%se

13 There is Increase in c%rrent assets s%ch as In4entories &y Rs 6D13>>- $%ndry

de&tors &y Rs 6@2@1>- Cash H *ank &a.ance &y Rs @111D3>>- Loans and

Ad4ances &y Rs 1>>>3 And decrease in other c%rrent assets &y Rs @>263>>3

63 There is Increase in c%rrent .ia&i.ities s%ch as $%ndry creditors &y Rs 1D1D163>>-

Pro4isions &y Rs 6@1>3>>3

Ta+e 1 State&e"t '? C:a"9es !" W'8!"9 Ca>!ta+ ?' t:e 4ea 0/--,0/-0

@;


74/84

Pat!$+as As '" 1-,1,

0/--

As '" 1-,1,

0/-0 I"ease Deease

CURRENT ASSETSIn4entories 611>@13>> ;;;3>> 11@2;23>> UU

$%ndry de&tors > 1D>2> UU ;1262@3>>

Cash H *ank &a.ance 16>2>3>> 1>;;1263>> UU 1@62>D3>>

Other c%rrent assets @D6>3>> 1DD;3>> 111> UU

Loans and Ad4ances 1116D3>> 6@16> 1216@3>> UU

(A)T'ta+ C$e"t Assets @22.// /2-.//

CURRENT LIA#ILITIES$%ndry creditors ;> 6> D UU

Pro4isions ;2;D3>> 1@6D3>> 61;3>> UU

(#)T'ta+ C$e"t L!a!+!t!es 12@.// 00/.//

(A),(#) Net W'8!"9 Ca>!ta+ @---.// 20@1.//

I"ease !" W'8!"9 Ca>!ta+ @122@.//Q

UU UU

@122@.//Q

TOTAL 20@1.// 20@1.// 12-.// 12-.//

INTERPRETATION

In the a&o4e ta&.e- it is seen that d%rin0 the year 6>11 and 6>16 there was a.so net

increase in workin0 capita. &y Rs 2;2@3>>3 As co'pare to 6>> and 6>1>3This is &eca%se

13 There is Increase in c%rrent assets s%ch as In4entories &y Rs 11@2;23>>- other

c%rrent assets &y Rs 111>- Loans and Ad4ances &y Rs 1216@3>> and decrease in

$%ndry de&tors &y Rs ;1262@3>>- Cash H *ank &a.ance &y Rs 11;1D3>>3

@<

E??et '" B'8!"9 a>!ta+


75/84

63 There is ?ecrease in c%rrent .ia&i.ities s%ch as $%ndry creditors &y Rs D-

Pro4isions &y Rs 61;3>>3

Ta+e State&e"t '? C:a"9es !" W'8!"9 Ca>!ta+ ?' t:e 4ea 0/-0,0/-1

Pat!$+as As '" 1-,1,

0/-0

As '" 1-,1,

0/-1 I"ease Deease

CURRENT ASSETSIn4entories ;;;3>> 666>13>> UU @1;263>>

$%ndry de&tors 1D>2> ;@D@6@> 1D1;63>> UU

Cash H *ank &a.ance 1>;;1263>> 1@6>D123>> D@;3>> UU

Other c%rrent assets 1DD;3>> 6>6>3>> 126;3>> UU

Loans and Ad4ances 6@16> 66;63>> UU >

(A)T'ta+ C$e"t Assets /2-.// --//10.//

CURRENT LIA#ILITIES$%ndry creditors 6> 62D3>> UU 61D3>>

Pro4isions 1@6D3>> 16;>>>3>> UU 1>21>63>>

(#)T'ta+ C$e"t L!a!+!t!es 00/.// 1.//

(A),(#) Net W'8!"9 Ca>!ta+ 20@1.// --1@0.//

I"ease !" W'8!"9 Ca>!ta+ 2-.//Q

UU UU

2-.//Q

TOTAL --1@0.// --1@0.// 022@-0.// 022@-0.//

INTERPRETATION

In the a&o4e ta&.e- it is seen that d%rin0 the year 6>16 and 6>1; there was a.so net

increase in workin0 capita. &y Rs D> As co'pare to 6>11 and 6>163

This is &eca%se

@2

E??et '" B'8!"9 a>!ta+


76/84

13 There is Increase in c%rrent assets s%ch as $%ndry de&tors &y Rs 1D1;63>>- Cash

H *ank &a.ance &y Rs D@;3>>- Other c%rrent assets &y Rs 126;3>> and decrease in

In4entories &y Rs @1;263>>- Loans and Ad4ances &y Rs >3

63 There is Increase in c%rrent .ia&i.ities s%ch as $%ndry creditors &y Rs 61D3>>-

Pro4isions &y Rs 1>21>63>>3

Ta+e @ State&e"t '? C:a"9es !" W'8!"9 Ca>!ta+ ?' t:e 4ea 0/-1,0/-

Pat!$+as As '" 1-,1,

0/-1

As '" 1-,1,

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