A STUDY ON CASH MANAGEMENT IN CASTWEL AUTO PARTS

PRIVATE LIMITED CHENNAI.

CHAPTER -I

1.1 INTRODUCTION

Cash is one of the current assets of a business. It is needed at all times to keep

the business going. A business concern should always keep sufficient cash for

meeting its obligations. Any shortage of cash will hamper the operations of a concern

and any excess of it will be unproductive. Cash is the most unproductive of all the

assets. While fixed asset like machinery, plant etc. and current assets such as

inventory will help the business in increasing its earning capacity, cash in hand will

not add anything to the concern. It is in this context that cash management has

assumed much important.

Cash itself does not produce goods or services. It is used as a medium to

acquire other assets. It is the other assets which are asset in manufacturing foods or

providing services. The idle cash can be desalted in bank to earn interest.

A business has to keep required cash for meeting various needs. The assets

acquired by cash again help the business in producing cash. The goods manufactured

or services produce dare sold to acquire cash. A. firm will have to maintain a critical l

level of cash it at a time does not have sufficient cash with it, it true borrow from the

marked for reaching the required level.

The firm has to maintain a minimum amount of cash for setting the dues in

time Cash is needed to purchase raw materials pay creditors pay creditors day to day

expenses. Dividend etc. and to meet various obligation it is done on the basis of past

experiences and future expectation if higher cash balance maintain an opportunity to it

earn is lost.

1

1.2 INDUSTRY PROFILE

Indian Die casting industry pays a major role in the country's economy. Indian

is the third producer of tools. The Indian Die casting tools industry has been focusing

on International markets and International products. Indian Die casting tools industry

brats the competition and makes world market.

Indian Die casting tools industry is considered as the mother industry. And

tools are the largest marketing sector in India. India is the II'1' largest producer of

quality tools availability in India.

According to the survey the cost of power for the Indian Die casting tools

industry has been focused to be highest among competitors.

The Indian Die casting tools industry the largest single industry in India holds

second place among the countries of the world in tools production with in investment

Rs. 184,300 corers in 6615 Die casting tools companies in India.

India provides direct employment to nearly 12 lakhs workers. It also provides

indirect employment many millions like the who are estimated to be over three

million and innumerable. Tools and dies.

The industry contributes in increasing measures to the central and state

government by way of taxes and duties. This birth of this industry dates back to 1932

when the first Die casting tools were established at sort gloster near Calcutta with

English capital. The real growth of the industry however started with the setting up

the Bombay Indian Die casting tools industry in 1945 with Paris capital. These

industry mainly manufacture the pressure die casting, Auto parts, tools, Die casting

moulds, electrical goods.

2

1.3 COMPANY PROFILE

Castwel Autoparts Pvt. Ltd company (CAPL)is one of the leading company

around the world in producing the autoparts. And it has been a trail blazer in the auto

component sector. This organization has a great reputation for producing the good

quality of the auto products among the other companies, casket autoparts pvt ltd was

established in the year 1985 , as a partnership concern and then moved on to become a

private limited company in the year 2006.

The company is currently having two manufacturing locations near chennai,

with the development capability for precision parts , which are supplied to leading

global automobile and auto parts manufacturers in India. CAPL is engaged in

manufacturing of high precision automotive machine components of FDC & GDS

including assemblies.

CAPL is a 100% subsidiary company of M.K auto\ components ltd ., labuan ,

malaysia. In which 51 of shares are owned by UMV & 49 of shares are owned by

MKI.

CAPL is also a member of UMW and MK joint venture company .Lets see

the business structure of UMW in an automotive. It has UMW Toyota & perodua ih

equipment manufacturing It helps in producing heavy equipments , industrial, main &

power.

In oil & gas it helps in manufacturing of pipes, helps in oil & gas exploration ,

fabrican, oil field services , oil filed products.

Machine shop:

1. Critical measuring machine (CMM)

2. Pressure dei-casting machine shop (PDC)

3. Computer numerical concept (CNC) lathe

4. Vertical machining concept (VMC) machine

5. Spectro max

3

CAPL has a great reputation of dealing with the customers who are famous

throughout the world.

The major customers of CAPL are:

BOSCH

TAFE

SONA

AVTEC

RANE

MAHINDRA

SUNDARAM-CLAYTON LTD

PANASONIC

SAME

TVS&

FAIVELESY TRANSPORT

MISSION & VISION OF CAPL

‘create value to shareholders and all other stake holders by cost efficiency

& timely delivery of products adopucts adopting best manufacturing practices’

Shareholding structure of castwel auto parts pvt ltd shareholding structure is as

follows,

100% subsidiary of MK auto components ltd, Malaysia

Jointly owned by UMW and MK

CAPL capabilities span wide range of products in automotive sector and the

company stands as a perfect amalgam of people, technology and resources

reinforced with through knowledge of nuances of automotive industry.

4

DEPARTMENT PROFILE

MRS Section

Material Receipt Section. This section receives the raw materials and issues to

Processing and Production.

E.g.: Raw materials like Casting, Aluminum etc.

INSPECTION

All the materials received from MRS section are inspected here using various

instruments.

STORE

All the approved materials are stored here and sent for further processing.

Store consists of three divisions

(a) Process store

Certain processing is done for raw materials.

(b)Hardware store

Materials are purchased from outside and stored here.

(c) Component store

The approved and rejected materials are segregated and approved

materials are sent for production.

PURCHASE DEPARTMENT:

Identifying the supplier based upon the advertisement, internet and contacts.

They also determine the materials to be purchased and fix the rate.

EDP (IT) DEPARTMENT

It stores whatever data related to the company. In this department data are

stored and processed electronically. The software used in this company is FOXPRO.

FOXPRO is a text-based procedural programming language and DBMS, originally

published by Microsoft, for MS-DOS, Microsoft Windows, Macintosh, and UNIX.

5

They store the details of goods and raw materials, details of supplier and employee

etc.

ASSEMBLY DEPARTMENT

For assembly of the components are received from store and the components

are assembled as per the flow chart / work instructions.

TESTING

Testing is done after assemble of the product. Testing is carried out to check

whether the products are assembled properly.

PACKING

In this department the assembled material are Packed, and a pre-despatch

inspection is carried out. After the inspection the materials are dispatched for sale.

6

PHASES OF DEVELOPMENT

MRS

Material Receipt Section. This section receives the raw materials and issues to

the processing and production. The materials are received based upon the Purchase

Order (PO).The SECURITY STAFF checks for Quantity, Item code, Invoice number

etc., and enters the

Supplier name

Date

Voucher number

Item name and

Quantity in the GATE INWARD REGISTER.

After receiving the materials, the MRS assistant checks the

DC(Delivery Challan) copy with Security seal

Purchase order number

Supplied quantity

Item description

Validation of PO.

The validation of Purchase Order must be 30 days for local purchase and 45

days for outstation.The Unit Head prepares the CCIP/CCIL ( Challan Cum

Invoice Purchase/ Challan Cum Invoice Labour) and enters the necessary details

and the goods are handed over to Inspection department.

INSPECTION

All the materials are received from MRS section through the CCIP/CCIL and

they are kept in YELLOW bags /bins with suitable tag. All the materials are

subject to inspection as per RAW MATERIAL INSPECTION PLAN. The

inspection is carried out using Gauge /Calibrated instruments.

They also check for visual defects such as cracks, holes, thread damage, air

holes etc.,They enter the necessary details in CCIP / CCIL.The rejected materials are

separated in RED colored bags / bins and handed over to store through CCIP/CCIL

7

for corrective action.The approved materials are kept in GREEN colored bags / bins

and handed over to store through CCIP / CCIL.

STORESReceive materials from Inspection. The materials are preserved in this section.

The materials are protected from heat and sunlight. Sufficient fire extinguishers are

provided at some required places. There are three types of store. They are

Process store

Component store

Hardware store.

(a)PROCESS STORE

The raw materials are received and necessary processing is done in process

store.

(b)COMPONENT STORE

In this store the approved and rejected materials are separated and the

approved materials are sent for rework and the rejected goods were sent for

rework / disposed.

(c)HARDWARE STORE

Materials required are purchased from outside and stored. The quotations are

received from the different departments as the material requirement.

8

PURCHASE

In purchase department, they identify the supplier based upon the

advertisement, web, internet, contacts, experience etc. Register form is sent to

suppliers for required materials. The new suppliers are monitored for three months

based on performance during trial period. Based upon the performance during trial

period they are approved or rejected. The purchase requisition is received from store

for procurement of materials. The HOD scrutinizes the purchase requisition. In case

of capital purchase like the purchase of machinery, equipments are ordered after the

approval of GM.

EDP

Electronic Data Processing. It stores whatever data related to the company. It

is also known as IT department. It stores the production details, details of raw

materials purchased, total production and sale. It helps to store data such as the

Date of purchase

Supplier name

Sales / purchase order

Date of delivery date

Supplier address

Service period

Accounting data so on.

This department also stores all the employee details such as

Employee name

Employee salary

Employee detail

Date of joining

Employee address

Employee contact number and so on

9

The software used in the company is FOXPRO. It is a DBMS (Data Base

Management System).LINUX OS is used. Now the department is shifting the data to

use with Oracle as back end and Java as front end. The head of department is EDP

manager. The EDP manager is the senior software engineer. The EDP manager directs

the Maintenance engineer (Software engineer) in the development of software. The

senior software engineer helps in the development of software.

ASSEMBLY

For assembly of die components are received from stores and certain materials

are received from varnishing department, as some materials are varnished to prevent

the water leakage. The components are assembled as per the flow chart/ work

instruction. During assembly the assembly details are recorded in the daily production

report. During assembly if any components are found defective it is returned to stores

through replacement indent and recorded in the Non-conformance register. After

assembly of die components they are sent to testing department separately and, testing

is carried out as per testing plan and testing work instructions.

3.8 PACKING

Receives from testing. Name plate is fixed. Final inspection is carried out.

Dispatched. After the final product testing the materials are received for final

assembly. The product is cleaned. necessary assessories, safety measures are taken.

Name plates are received from store and product serial number is punched in the

name plate of the product. The packing materials are drawn from store and the

packing of the material are done in carton/wooden boxes as per work instruction.

Guarantee cards, Manual and packing slip is put into box indicating the serial number.

Identification and safety stickers are fixed. During and after completion of packing

the correctness are verified by carrying out a pre dispatch inspection plan.

PRE DESPATCH INSPECTION

Stickers, Serial numbers are checked. Name plate detail is verified. Bursting

strength is checked.MRP details are checked. Verification of instruction manuals,

guarantee cards etc. Verification of cable length is done. The material are set

10

separately with their corresponding serial number. Packed boxes that are ready for

dispatch are moved to finished goods area and stacked neatly. Package details are

recorded. The non conformities are identified are recorded and disposed.

1.4 REVIEW OF LITERATURE

Kaith V. Smith say’s that financial managers Can consider a series of seven

strategies for handling the excess cash balance with the firm (i) Do noting (ii) Make

adhoc investments (iii) ride the yield curve (iv) develop guidelines (v) Utilize control

limits (vi) manage with a part folio prospective and (vii) follow a mechanical

procedure

The liquid resources of a firm may be kept in various firm Michel Lazare

posted about the public cash management and the supreme loan crisis he say’s that Be

aware of financial investment risks. Effective cash management is one of the basis

pillars of sound public financial management is one of the basis pillars of sound

public financial management is conservation of cash. This includes minimizing idle

cash balances by : (a)Keeping on the governments account only the working cash

balances needed to face day – to –day routine expenditures and the cash needed to

face immediate financial obligations: (b) investing the remaining cash on liquid and

interest – earning financial assets. But, like any other financial investment, investing

cash may present risks.

Denise Ryan Discover new cash management strategies by seeking cash

management education and training. He says that by utilizing effective cash

management techniques. you’ll be able to maximize any available cash by

immediately reinvesting it into your business or allocating it or allocating it for future

expenses. Seeking training to fine tune your business cash flow management enables

you to avoid risky investments and strike a successful balance between saving and

spending. Cash management techniques cover everything from simple budgeting.

There have been a harmful of studies that have examined Senior Officials

from African Countries Discuss cash Management Issues in a workshop Organized by

IMF African East.

11

Africa East, the regional technical assistance center of the IMF in east Africa,

in collaboration with the Africa Capacity Building Foundation, conducted a workshop

on cash management reforms, at the Kenya school o Monetary Studies in Nairobi

from September 22-26 2008. It was arrended by 31 mid- and senior – level officials –

including. Heads of Departments of Treasury , Fiscal policy Units, Macroeconomic

Management Units, Financial Controllers, Senior Economists. Principal Finance and

Accounting Officers, and Budget Officers – from 9 countries (Ethiopia, Kenya,

Lesotho. Malawi Mozambique, Namibia, Rwanda, Uganda, and Zanzibar). The

workshop was facilitated by AFRTAC East advisors and staff from the IMF

Headquarters. It was inaugurated by the permanent Secretary to the Treasury of the

Ministry of Finance of Kenya, and closed by the AFRITAC East Center Coordinator.

A new IMF FAD Technical Guidance Note on Cash Management, Prepared

by lan Lienert of Fiscal Affairs Department, explores how countries can improve the

or cash management practices and eliminate some of the inefficiencies in current

practices he says that do you manage your own cash well? Can you always pay your

bills in time? Do you borrow unnecessarily? Do you have balance in bank accounts

that aree not receiving the interest rate ? just as individuals are concerned about

managing their cash well, so are governments. In practices, however, not all

governments manage cash well. some countries have unremunerated balances in

thousands of bank accounts, yet at the same , they are borrowing from domestic or

external creditors at market interstates. Commercial bank and other purchasers of

government bonds are very happy with such arrangements.

12

CHAPTER - II

RESEARCH METHODOLOGY

2.1 Title of the Project

The title is “A study on Cash Management in Castwel Auto parts Private Ltd

Chennai.

2.2 Scope of the study

The scope of finance is indeed vast and it is determined by the financial needs

of an enterprise. The study aims to find out the most favorable way to manage cash

which is most unproductive of all the .assets and also used as a medium to acquire

other assets and also find out the must feasible way if maintain a balance between

cash in flow and out flow.

2.3 Objectives :

a) To analyze the cash balances held by the firm in a certain point of time.

b) To analyze the cash in flows and out flows.

c) To make a detail planning of cash requirements.

d) To manage the fund flow by accelerating the cash collection.

e) To analyze the day to day working capital position.

2.4 Types of research

This study is an analytical research based secondary data. The researcher has

to use facts or information already available, and analyze these to make a critical

evaluation the material.

2.5 Tools used for Analysis

The statistical tools used for analysis of the data are1. Correlation analysis.2. Trend analysis3. Regression Analysis

13

Financial Tools

1. Fund flow statement Analysis2. Ratio analysis

2.6 Sources of data collection

Secondary data in Castwel Auto Parts Private Ltd.,

2.7 Limitations of the study

The data collected for the study was historic in nature so all the limitation

of secondary data apply to the same.

Data taken for analysis to last 5 years

14

CHAPTER - III

DATA ANALYSIS & INTERPRETATION

RATIO ANALYSIS

Ratio analysis is the systematic process of determining and interpreting the

numerical relationship of various pairs of items derived from the finance statements of

another number.

Ratio analysis involves the use of various methods for calculating and

interpreting financial analysis to assess the performance and status of the business

unit. It is a tool of financial analysis, which studies the numerical or quantitative

relationship between two variable and item.

The primary use of financial statement is evaluated past performance and

predicting future performance arid bother of these are facilitated by comparison.

There focus on financial analysis is always on the crucial information contained the

financial statement.

CURRENT RATIO

Current ratio may be defined as the relationship between current assets and

current liabilities. This ratio also known as working capital ratio, is a measure of

general liquidity and is most widely used to make the analysis of a short-term

financial position or liquidity of a firm. It is calculated by dividing the total of current

assets by total of the current liabilities.

QUICK OR ACID TEST OR LIQUID RATIO

Quick Ratio, also known as Acid Test or liquid Ratio, is a more rigorous test

of liquidity than the current ratio. The term ‘liquidity’ refers to the ability of a firm to

pay its short-term obligations as and when they become due. The two determinants of

current ratio, as a measure of liquidity , are current assets and current liabilities.

Current assets include inventories and prepaid expenses which are not easily

convertible into cash within a short period.

15

Quick ratio may be defined as the relationship between quick/liquid assets and

current or liquid liabilities. An assets is said to be liquid if it can be converted into

cash within a short period without loss of value. In that sense, cash in hand and cash

at bank are the most liquid assets.

The other assets which can be included in the liquid assets are bills

receivable, sundry debtors, marketable securities and short-term or temporary

investment. Inventories cannot be termed to be liquid asset because they cannot be

converted into cash immediately without a sufficient loss of value.

In the same manner, prepaid expenses are also excluded from the list of

quick/liquid assets because they are not expected to be converted into cash. The quick

ratio can be calculated by dividing the total of the quick assets by total current

liabilities.

ABSOLUTE LOQUID RATIO OR CASH RATIO

Although receivables, debtors and bills receivable are generally more liquid

than inventories, yet there may be doubts regarding their realization into cash

immediately or in the time. Hence, some authorities are of the opinion that the

absolute liquid ratio should also be calculated together with current ratio and acid test

ratio sp as to exclude even receivables from the current and find out the absolute

liquid assets.

DEBT-EQUITY RATIO

Debt- Equity Ratio, also known as External – Internal Equity Ratio is

calculated to measure the relative claims of outsiders and the owners (i.e.,

shareholders) against the firm’s assets. This ratio indicates the relationship between

the external equities or the outsiders funds and the internal equities. or the

shareholders’ funds.

16

OPERARING RATIO

Operating ratio establishes the relationship between cost of goods sold and

other operating expenses on the one hand and the sales on the other. In other words, it

measures the cast of operations per rupee of sales. The ratio is calculated by dividing

operating costs with the net sales and is generally represented as a percentage.

CASH PROFIT RATIO

The net profit of a firm are affected by the amount/method of depreciation

charged. Further, depreciation being a non- cash expense, it is to calculate cash profit

ratio. This ratio measures the relationship between cash generated from operations

and the net sales.

17

(a) RATIO ANALYSIS

3.a.(1) QUICK RATIO

Quick assetsQuick liability

3.a (1)Table showing quick ratio for CAPL (RS in Lakhs).

Year Quick Asset Quick liability Result

2004-2005 1981 1228 1.613

2005-2006 944 1542 0.612

2006-2007 542 1402 0.386

2007-2008 534 1253 0.426

2008-2009 655 1741 0.376

Interpretation:

From the above table ,shows the quick Ratio for 2004-2005 is 1.613 and

2005-2006 Ratio is 0.612 2006-2007 Ratio is 0.386 where as in 2007-2008 the quick

ratio is 0.426 and 2008-2009 Ratio is 0.376.

18

Quick Ratio =

3.a.(1) The Figure Showing Quick Ratio

19

3 .a (2) OPERATING RATIO

Cost of goods soldNet sales

3.a. (2) Table showing operating ratio for CAPL (RS in Lakhs)..

Year Cost of goods sold Net Sales Result

2004-2005 11717 12634 0.927

2005-2006 12668 13697 0.924

2006-2007 13126 15148 0.866

2007-2008 12969 15760 0.822

2008-2009 13679 14931 0.916

Interpretation:

Operating ratio table shows in the year 2004-2005 it is 0.927 2005-2006

0.924, 2006-2007 0.866, 2007-2008 0.822,the last year ratio 2008-2009 is 0.916.

20

Operating Ratio =

3.a (2)The Figure Showing Operating Ratio

21

Op

erat

ing

Rat

io

3.a(3) . DEBT EQUATY RATIO

DebtEquity

3.a (3) Table showing Debt Equity Ratio (RS in Lakhs).

Year Debt Cash Profit Equity Result

2004-2005 2378 4127 0.576

2005-2006 2141 4127 0.518

2006-2007 1599 4127 0.387

2007-2008 701 4127 0.169

2008-2009 394 5000 0.0788

Interpretation:

The above Debt equity ratio table shows in the year 2004-2005 it is

0.576,2005-2006 0.518, 2006-2007 0.387,2007-2008 0.169, the last year ratio

2008-2009 is 0.0788.

22

Debt equity Ratio =

3.a. (3)The Figure Showing Debt Equity Ratio

23

Deb

t E

qu

ity

Rat

io

3.a(4) . CASH RATIO

Cash + Marketable securities Current liability

3.a.(4)Table showing cash ratio (RS in Lakhs).

Year Cash + Marketable securities

Current liabilities Result

2004-2005 212 1228 0.172

2005-2006 574 1542 0.372

2006-2007 1356 1402 0.961

2007-2008 2165 1253 1.728

2008-2009 2305 1741 1.323

Interpretation:

From the table, cash ratio shows in the year 2004-2005 it is 0.172,2005-2006

0.372,2006-2007 0.961, 2007-2008 1.728, the last year ratio 2008-2009 is 1.323

24

Cash ratio =

3.a.(4)The Figure Showing Cash Ratio

25

Cas

h R

atio

3.a.(5) . CURRENT RATIO

Current Ratio = Current Assets Current Liabilities

3.a.(5) The Table showing Current Ratio (RS in Lakhs).

Year C.A C.L Ratio

2004-2005 5019 1228 4.087

2005-2006 4481 1542 2.905

2006-2007 3952 1402 2.818

2007-2008 3500 1253 2.793

2008-2009 4167 1741 2.39

Interpretation:

Current ratio table shows in the year 2004-2005 it is 4.087,2005-2006

2.905,2006-2007 2.818,2007-2008 2.793 the last year ratio 2008-2009 is 2.39.

26

3.a.(5) The Figure Showing Current Ratio

27

Cu

rren

t R

atio

3.a(6) . CASH PROFIT RATIO

Cash profit Sales

3.a.(6)Table showing Cash profit Ratio (RS in Lakhs).

Year Cash Profit sales Result

2004-2005 1957 25268 0.07744

2005-2006 2120 27393 0.0773

2006-2007 4057 30296 0.1339

2007-2008 5753 31519 0.1825

2008-2009 2990 29861 0.1001

Interpretation:

Above table shows in the year 2004-2005 it is 0.07744, 2005-2006 0.0773,

2006-2007 0.1339, 2007-2008 0.1825 the last year ratio 2008-2009 is 0.1001.

28

Cash profit Ratio =

3.a. (6)The Figure Showing Cash Profit Ratio

29

Cas

h P

rofi

t R

atio

3.(b) FUND FLOW STATEMENT

The Funds flow Statement is a statement which shows the movement of funds

and is a report of the financial operations of the business undertaking. It indicates

various means by which funds were obtained during a particular period and the ways

in which these funds were employed. In simple words, it is a statement of sources and

applications of funds.

MEANING AND CONCEPT OF FUNDS

The term ‘funds’ has been defined in a number of ways

(a) In a narrow sense, it means cash only and a funds flow statement prepared on

this basis is called a cash flow statement. Such a statement enumerates net effects of

the various business transactions on cash and takes into account receipts and

disbursements of cash.

(b) In a broader sense, the term ‘funds’ refers to money values in whatever form it

may exist. Here ‘funds’ means all financial resources, used in business whether in the

form of men, material money machinery and others.

(c) In a popular sense, the term ‘finds’ , means working capital, i.e., the excess of

current over current liabilities. The working capital concept of funds has emerged due

to the fact that total resources of a business are invested partly in fixed assets in the

form of fixed capital and partly kept in from of liquid or near liquid form as working

capital.

The narrower concept of ‘funds’, i.e., cash or working capital concept, fails to

reveal the changes in the total financial resources of a business. Some significant

items., such as purchase of building in exchanges of shares or payment of bonus in the

30

form of shares, which do not directly affect cash or working capital are not revealed

from the analysis based on these concepts.

However, the concept of funds as working capital is the most popular one and

in this chapter we shall generally refer to ‘funds’ as working capital and a funds flow

statement as a statement of sources and application of funds.

MEANING AND CONCEPT OF ‘FLOW OF FUNDS’

The term ‘flow’ means movement and includes both ‘inflow’ and ‘outflow’.

The tern ‘flow of funds’ means transfer of economic values from one asset of equity

to another. Flow of funds is said to have taken place when any transaction makes

changes in the amount of funds available before happening of the transaction.

It the effect of transaction results in the increase of funds, it is called a source

of funds and if it results in the decrease of funds, it is known as an application of

funds. Further, in case the transaction does not change funds, it is said to have not

resulted in the flow of funds.

According to the working capital concept of funds, the term ‘flow of funds’

refers to the movement of funds in the working capital. If any transaction results in

the increase in working capital, it is said to be a source or inflow of funds and if it

results in the decrease of working capital, it is said to be an application or out-flow of

funds.

RULE

The flow of funds occurs when a transaction changes on the one hand a non-

current account and an the other a current account and vice-versa.

When a change in a non-current account e.g., fixed assets, long-term liabilities,

reserves and surplus, fictitious assets, etc., is followed by a change in another non-

current account, it does not amount to flow of funds. This is because of the fact that in

such cases neither the working capital increase nor decreases. Similarly, when a

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changes in one current account results in a change in another current account, it does

not affect funds.

Funds move from non- current to current transactions or vice-versa only. In

simple language funds move when a transaction affects (i) a current asset and a fixed

asset, or (ii) a fixed and a current liability, or (iii) a current asset and a fixed liability,

or (iv) a fixed liability and current liability; and funds do not move when the

transaction affects fixed assets and fixed liability or current assets and current

liabilities.

CURRENT AND NON-CURRENT ACCOUNTS

To understand flow of funds, it is essential to classify various accounts and

balance sheet items into current and non-current categories.

Current Accounts can either be current assets or current liabilities. Current

assets are those assets which in the ordinary course of business can be or will be

converted into cash within a short period of normally one accounting year.

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 assets or the income of the business.

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3.b.(1) The Schedule showing changes in working capital

(2005-2006 and 2006-2007)

(RS in Lakhs).

Capital

Particulars

2005-2006 2006-2007 Changes in working capital

Increase Decrease

Current Assets

Inventories

Debtors

Cash

Other current

assets

Current Liabilities

W.C (CA-CL)

Net decrease in

Current Cash

3038

1977

212

1

3537

1234

574

4

499

-

362

3

193

743

5228

1228

4000

5349

1542

3807

193

4000 4107 1057 1057

Fund from operations (RS in Lakhs). .

Particulars Amount Amount

Transfer to general reserve

Provision

Fund from operation

69

169

238

33

3.b.(2) Fund flow statement 2005-2006

(RS in Lakhs).

Sounds Amount Application Amount

Issue of share capital

Fund from operation

Net decrease in W.C

Increase in

miscellaneous

expenses

Increase deferred tax

liabilities

-

238

193

61

189

Decrease in seared loan

Decrease in

Unsecured loans

purchase of Net block

Increase in WIP

Decrease in loans and

advances

23

214

245

93

106

681 681

3.b.(3) Schedule Showing Changes in working capital

(2006-2007 and 2007-2008)

(RS in Lakhs).

Particulars 2006-2007 2007-2008 Changes in working capitalIncrease Decrease

Current AssetsInventoriesDebtorsCashOther Current Assets

35371234 574 4

3410 7961356 12

782 8

127438

34

Total Current assets

Current Liabilities

Total Current Liabilities

Working capital(CA-CL)Increase in work in Capital

140

365

5349

1542

1542

3807 365

5574

1402

1402

4172

Fund From operations (RS in Lakhs).

Particulars Amount Amount

Transfer to general reserve

Provisions

Fund from operation

267593

860

3.b.(4) Fund Flow Statement 2006-2007 (RS in Lakhs)

.Sources Amount Application Amount

Issue of share capital

Fund from operation

Decrease in work in process

Increase in Loans and Advances

Increase differed tax and Liabilities

-

860

242

107

455

Decrease In secured loans

Decrease in unsecured loans

Purchasing of Net block

Net increasing working

capital

Decrease in miscall igneous

Expenses

527

10

686

365

76

1664 1664

35

3.b.(5). The Schedule Showing changes in working capital (2007-2008 and 2008-2009)

(RS in Lakhs).

Particulars 2007-2008 2008-2009

Changes in working

capital

Increase Decrease

Current Assets

Inventories

Debtors

Cash

Other current assets

Total current assets

3410

796

1356

12

3534

718

2165

17

125

809

5

149

78

1010

5574 6434

Current Liabilities

Working capital (C.A –

C.L)

Net increase in working

capital

1402

1402

4172

1010

1253

1253

5182

5182 5182 1088 1088

Fund from Operations

(RS in Lakhs).

Particulars Amt Amt36

Transfer to General Reserve 872

- provision 135

Funds from Operation 1007

3.b.(6)Fund flow statement for the year 2007-2008

(RS in Lakhs).

Sources Amt Applications Amt

Issue of share Capital - Decrease in secured loan 558

Fund from operation 1007 Increase in WIP 8

decrease in Net block 823 Decrease in Loans and Advances 171

Decrease the deferred Tax 83

Net increase in working capital 1010

1830 1830

3.b.(7) . Schedule of changes in working capital

(2008-2009 and 2009-2010)

(RS in Lakhs).

Particulars 2008-2009 2009-2010Changes in working

capitalIncrease Decrease

Current AssetsInventoriesDebtorsCashOther Current Assets

3534718 2165 17

3512 4422305 25

140 8

22276

37

Total Current assets

Current Liabilities

Total Current Liabilities

W.C (CA-CL)Net Decrease in working Capital

638

488

6434

1253

6284

1741

1253

5181

1741

4543 638

5181 5181 786 786

Funds from Operations

(RS in Lakhs).

Particulars Amt Amt

Transfer to General Reserve 284

- provision 161

Funds from Operation 123

3.b.(8)Fund flow statement for the year 2008-2009

(RS in Lakhs).

Sources Amt Applications Amt

Increasing the Capital 873 Decrease in secured loan 607

Fund from operation 123 Purchase of net block 591

Net decrease in W.C 638 Increase in WIP 596

Increase the deferred tax

liabilities

227 Decrease in Loans and Advances 67

1861 1861

38

3.b. (9)Yearly Changes in working capital (2005-2006 to 2008- 2009)

(RS in Lakhs).

Year Changes in working capital

Increase Decrease

2005-2006193 193

2006-2007365 365

2007-2008

1010 1010

2008-2009638 638

Interpretation

The working capital is increase two years that is 2006-2007,2007-2008 and

two years decrease the work capital for 2005-2006,2008-2009

39

3.b. (9)The figure Showing Changes in working capital

(2004-2005 to 2007- 2008)

40

Year

Ch

ange

s of

wor

kin

g ca

pit

al

3.1 TREND ANALYSIS

Trend analysis is apple usual tool for the management. Since it reduces large

amount of absolute data in to a simple and easily from. This method determines the

direction up ward and down ward and involves the computation of the percentage

relationship that statement item bears to the same item in base year.

3.1 (a) The Table showing Five Year Cash Profit and Deficit

Year Cash profit and deficit

(y)

Deviations from the year (y)

xy X2 Trend value

2005 978 -2 -1956 4 1117.4

2006 1060 -1 -1060 1 1402.4

2007 2028 0 0 0 1687.4

2008 2876 1 2876 1 1972.4

2009 1495 2 2990 4 2257.4

∑y 8437 ∑x 0 ∑xy 2850 ∑x2 10

Yc = a+bx

A = ∑y = 8437 a = 1687.4 n 5

41

B == ∑xy =2850 b = 285 ∑x2 10

Yc = a+bx

=1687.4 + 285x

Estimated the profit and deficit for 2011

For 2012 x = 5 so we have

Y2012 = 1687.4 +285x

Y2012 = 1687.4 +285(5) = 3112.4

Estimated the profit and deficit for 2012 = 3112.4

3.1.(a)The Figure Showing Five year Cash Profit and Deficit

0

500

1000

1500

2000

2500

2005 2006 2007 2008

Year

Tre

nd

val

ue

Series1

3.1.(b) Estimates the Cash Profit and deficit for fourth coming year

Year Estimate the cash profit and Deficit

2009-2010 2542.4

2010-2011 2827.4

2011-2012 3112.4

2012-2013 3367.4

42

2013-2014 3682.4

Interpretation

The fourth coming year cash profit increasing the trend.

3.1.(b) The figure Showing Estimates the Cash Profit and deficit for

fourth coming year

43

Est

imat

e th

e ca

sh p

rofi

t an

d D

efic

it

Year

CHAPTER –IV

FINDINGS,

1. Quick Ratio is high in 2004-2005 and the continuous years is fell down bad

position of the company.

2. The operating Ratio of a company is fluctuating . The variation is 0.1. This Ratio

is does not affect the company.

3. The cash profit ratio also goes on fluctuating movement that depicts the company

has good profit earnings for present and future years.

4. The organization debt equity ratio is goes on downward movement this shows that

the company does not maintain the debt and equity proportion as 1:1.

5. The current ratio is shows the bad position of the company, The ratio does not

have the good liquidity position.

6. Schedule of changes in working capital of a company is increasing 2006-2007,

2007-2008 .decrease the working capital 2005 – 2006 , 2008 - 2009.

7. The fund from operation cost is increasing . But the last year is decreasing (2007-

2008) .

8. The cash profit, sales turn over, cash balance, fixed assets year by year increasing

in trend.

44

9. Estimate the forthcoming years Trend is Cash Profit and deficit , Cash balance ,

Sales Turnover is increase.

CHAPTER - V SUGGESTIONS

1. The company must take care of the Quick ratio during the last year in 2008.

2. Castwel auto parts private limited does not have a correlation between sales and

cash. The company must care about the sales and cash.

3. The current Ratio of 2:1 is considered normally satisfactory. Castwel auto parts

private limited should try to improve the current ratio.

4. The company followed an aggressive policy of financing working capital should try

to finance 50% of their working capital using long term source and improve their

status.

5. The company must take care of fund from operation for the last year 2008-2009..

6. The company must take care of the current ratio and cash profit ratio during the

last year.

7. They need to kept more money in reserve and surplus, because the industry has

quick profit as well as quick losses.

8. The enhance the efficiency of cash management collection and disbursement must

be properly monitored.

45

46

CHAPTER - VI

CONCLUSION

The Cash Management Analysis done on the financial position of the

company has provided a clear view on the activities of the company. The use of the

ratio analysis, trend analysis, Fund Flow Statement and other accounting and financial

management helped in this study to find out the financial soundness of the company.

This project was very useful for the judgment of the financial status of the company

from the management point of view.

This evaluation proved a great deal to the management to make a decision on

the regulation of the funds to increase the sales and bring profit to the company. . So

this study will helps the management to eradicate such a negative impact of Quick

ratio , Current ratio, and also helps the organization to take necessary actions in

areas where they are needed. Overall the company cash management is effectively.

The company have a strong solvency position.

47

BIBLIOGRAPHY

Shashi K. Gupta and R.K. Sharma “Financial Management” in Kalyani

Publishers. Sixth Edition.

Company annual report

K.V. Smith “Management of working capital”

Google search

o www.financial management.com

Statistical Methods Gupta S.T. New Delhi, Sultan Chand and Sons, 1998.

s

48

ANNEXTURE

Balance sheet of Castwel Auto parts Pvt.Ltd. (RS in Lakhs).

Particulars March-

05

March-06 March-

07

March-

08

March-

09

Source of funds

Share capital

Reserve and surplus

Total

4127

5450

4127

5519

4127

5786

4127

6658

5000

6942

9577 9646 9913 10785 11942

Loans funds

Secured loans

Unsecured loans

Deferred tax liabilities

Total

2019

269

1243

2086

55

1432

1559

40

1887

1001

-

1504

394

-

1731

13198 13219 13399 13290 14067

Fixer assets

Net block

WIP

Total

7769

183

8014

276

8700

34

7887

42

11837

638

7952 8290 8734 7919 9116

Investments

Inventors

Debtors

Cash

Other current assets

Loans and advances

Total

-

3038

1977

212

1

1332

-

3537

1234

574

4

1226

-

3410

296

1356

12

1333

-

3534

718

2165

17

1162

-

3512

442

2305

25

1095

6560 6575 6907 7596 7379

Current Liabilities

Provisions

Net current assets

Miscellaneous Expenses

Total

1228

314

5019

77

1542

483

4481

138

1402

1076

3952

62

1253

941

3500

-

1741

780

4167

-

13198 13219 13399 13290 14067

49

50