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CONTENTS
1. INTRODUCTION 4-20
2. REVIEW OF LITERATURE 21-34
3. RESEARCH METHODOLOGY 35-39
4. DATA ANALYSIS AND INTERPRETATION 40-73
5. FINDINGS, RECOMMENDATIONS AND CONCLUSION 74-77
BIBLIOGRAPHY 78
APPENDIX 79-88
1
LIST OF TABLES
Table No. Title Page No.
4.1 Trend Analysis of Current Assets for Five Years
4.2 Trend Analysis of Current Liabilities for Five Years
4.3 Trend Analysis of Working Capital
4.4 Trend Analysis of net sales
4.5 Trend Analysis of inventory
4.6 Current Ratio of Five Years
4.7 Quick Ratio of Five Years
4.8 Absolute Liquid Ratio of Five Years
4.9 Working Capital Turnover Ratio of Five Years
4.10 Inventory Turnover Ratio of Five Years
4.11 Debtors Turnover Ratio of Five Years
4.12 Creditors Turnover Ratio of Five years
4.13 Cost of Goods Sold Ratio of Five Years
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LIST OF CHARTS
Table No. Title Page No.
4.1 Trend Analysis of Current Assets for Five Years
4.2 Trend Analysis of Current Liabilities for Five Years
4.3 Trend Analysis of Working Capital
4.4 Trend Analysis of net sales
4.5 Trend Analysis of inventory
4.6 Current Ratio of Five Years
4.7 Current assets and current liabilities
4.8 Quick Ratio of Five Years
4.9 Quick assets and current liabilities
4.10 Absolute Liquid Ratio of Five Years
4.11 Absolute liquid assets and current liabilities
4.12 Working Capital Turnover Ratio of Five Years
4.13 Net sales and net working capital
4.14 Inventory Turnover Ratio of Five Years
4.15 Cost of goods sold and average stock
4.16 Debtors Turnover Ratio of Five Years
4.17 Net credit sales and sundry debtors
4.18 Creditors Turnover Ratio of Five years
4.19 Net credit purchase and sundry creditors
4.20 Cost of Goods Sold Ratio of Five Years
4.21 Cost of goods sold and net sales
3
CHAPTER- 1
INTRODUCTION
4
INTRODUCTION
ABOUT THE STUDY
In our present day economy, finance is defined as the provision of money at the time
when it is required. Every enterprise, whether big, medium or small, need finance to carry on its
operations and to achieve its target. In fact, finance is so indispensable today and it is right said
that it is lifeblood of an enterprise. Without adequate finance no enterprise can possibly
accomplish its objectives.
Finance may be defined as the provision of money at the time when it is required.
Finance reface to the management of flows of money through an organization. It concerns with
the applications of skills in the manipulation, use and control money.
Finance is the most important of all business functions. It remains a focus of all activities.
It is not possible to substitute or eliminate this, because the business will close down in the
absence of finance. The need of money is continuous. It starts with the setting up of an enterprise
and remains at all times. The development and expansion of business rather need more
commitment for funds.
FINANCE PLAN
A financial plan is a statement estimating the amount of capital and determining its
composition. The quantum of funds needed will depend upon the assets requirements of the
business. The time at which funds will be needed should be carefully decided so that finances are
raised at a time when these are needed. The next aspect of a financial plan is to determine the
pattern of financing. There are a number of ways for raising funds.
The selection of various securities should be done carefully. Issuing of capital and
debentures, raising of loans, etc may raise the funds. Which source of finance should be raised
and up to what amount these should be raised is very important. Once a Patten of financing is
selected then it become very difficult to modify it. A financial plan also spells out the policies to
be pursed for the flotation of various corporate securities, particularly regarding the time of their
flotation.
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SOURCES OF FINANCE
In our present day economy, finance is defined as the provision of money at the time
when it is required. Every enterprise, whether big, medium or small, need finance to carry on its
operations and to achieve its targets. Without adequate finance, no enterprise can possible
accomplish its objectives. Capital required for a business can be classified under two main
categories;
1. Fixed Capital
2. Working Capital.
Every business needs funds for two purposes for establishment and to carry out its day-
to-day operations. Long-term funds are required to create production facilities though purchase
of fixed asset such as plant, machinery, land, building, furniture, etc. Investment is these assets
represent that part of firm’s capital that is blocked on a permanent or fixed basis and is called
fixed capital.
Funds are also needed for short-term purpose for the purchase of raw materials, payment
of wages and other day-to-day expenses, etc. These funds are known as working capital. The
various source of raising long-term funds include issue of shares, debentures, plaguing back of
profits and loans from financial institutions, etc. The short-term requirements of funds can be
met from commercial bank, trade credit, installment credit, advances, factoring or receivable
credit, accrual, deferred incomes, and commercial paper, etc.
FINANCIAL MANAGEMENT
Financial management entails planning for the future of a person or a business enterprise to
ensure a positive cash flow. It includes the administration and maintenance of financial assets.
Besides, financial management covers the process of identifying and managing risks. The
primary concern of financial management is the assessment rather than the techniques of
financial quantification. A financial manager looks at the available data to judge the performance
of enterprises. Managerial finance is an interdisciplinary approach that borrows from both
managerial accounting and corporate finance. Some experts refer to financial management as the
science of money management. The primary usage of this term is in the world of financing
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business activities. However, financial management is important at all levels of human existence
because every entity needs to look after its finances
Levels of Financial Management
Broadly speaking, the process of financial management takes place at two levels. At the
individual level, financial management involves tailoring expenses according to the financial
resources of an individual. Individuals with surplus cash or access to funding invest their money
to make up for the impact of taxation and inflation. Else, they spend it on discretionary items.
They need to be able to take the financial decisions that are intended to benefit them in the long
run and help them achieve their financial goals.
From an organizational point of view, the process of financial management is associated with
financial planning and financial control. Financial planning seeks to quantify various financial
resources available and plan the size and timing of expenditures. Financial control refers to
monitoring cash flow. Inflow is the amount of money coming into a particular company, while
outflow is a record of the expenditure being made by the company. Managing this movement of
funds in relation to the budget is essential for a business. At the corporate level, the main aim of
the process of managing finances is to achieve the various goals a company sets at a given point
of time. Businesses also seek to generate substantial amounts of profits, following a particular set
of financial processes.
Financial managers aim to boost the levels of resources at their disposal. Besides, they control
the functioning on money put in by external investors. Providing investors with sufficient
amount of returns on their investments is one of the goals that every company tries to achieve.
Efficient financial management ensures that this becomes possible. Strong financial management
in the business arena requires managers to be able to:
1. Interpret financial reports including income statements, Profits and Loss or P&L, cash
flow statements and balance sheet statements
2. Improve the allocation of working capital within business operations
3. Review and fine tune financial budgeting, and revenue and cost forecasting
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4. Look at the funding options for business expansion, including both long and short term
financing
5. Review the financial health of the company or business unit using ratio analyses, such as
the gearing ratio, profit per employee and weighted cost of capital
6. Understand the various techniques using in project and asset valuations
7. Apply critical financial decision making techniques to assess whether to proceed with an
investment
8. Understand valuations frameworks for businesses, portfolios and intangible assets
In general financial management is the effective & efficient utilization of financial resources. It
means creating balance among financial planning, procurement of funds, profit administration &
sources of funds.
8
INDUSTRY PROFILE
AYURVEDA
Ayurveda aims physical, psychological, spiritual and social welfare of living being.
Envisages the means of preservation of health, prevention and treatment of various ailments.
Eight fold structure of Ayurveda covers the faculties of General Medicine, Pediatrics, Psychiatry,
ENT & Ophthalmology, Surgery, Toxicology, Geriatrics, Science of Aphrodisiacs. According to
Ayurveda, the living body is composed of five basic elemental substances i.e. Panchabhouthika
Principles Viz. Prithvi, Thejas, Vayu, Akasam. These five physical elements constitute the three
essential components of the controller of body which are termed as ‘Thridosha’ viz. Vatha, Pitha
and Kapha. Vatha the controller of body is responsible for the physical activity or the motion in
the living being. The entire physico chemical phenomenon including the biochemical metabolic
and endocrine functions are attributed to Pitha. The gross structure of body (sold and liquid) is
constituted by Kapha.
Ayurveda defines disease as the state in which body and mind are subjected to pain and
misery. The equilibrium of the three humours i.e. “Thridoshas” results in health and their excited
and imbalanced condition causes disease. Approach of Ayurveda is field oriented holistic and
functional. Ayurveda utilizes wealth of nature for increasing the natural resistance of the body.
Treats man as whole and uses drug as a whole. Ayurveda views that successful medical
treatment depends upon four factors, the physician, drugs or diet, nurse, and patient. In principle
the Ayurvedic approach to the treatment of a disease consists of two major procedures.
SAMSODHANACHIKITSA- The radical treatment supposed to eradicate or eliminate the
vitiated humours, thus completely preventing or curing the disease.
SAMSAMANACHIKITSA- The conservative treatment by administration of appropriate or
temporarily subsiding a disease.
Upholds the law of similarity and diversity in therapeutics. Ayurveda favours administration of
natural raw drugs (Plant origin, Animal origin and Mineral origin) and their preparations.
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Generally Ayurvedic medicines cause no toxic or side effects, no question of tolerance,
resistance, and addiction.
Ayurvedic medicines are produced by several thousand companies in India, but quite of
them are small, including numerous neibourhood pharmacies that compound ingredients to make
their own remedies. It is estimated that the total value of the products from the entire Ayurvedic
production in India is on the order of one billion dollars (U.S.).The industry has been dominated
by less than a dozen major companies for decades, joined recently by a few others that have
followed their lead, so there are today 30 companies doing a million dollars or more per year in
business to meet the growing demand for Ayurvedic Medicine. The products of these companies
are included within the broad category of fast moving consumer goods (FMCG; which mainly
involves foods, beverages, toiletries, cigarettes etc.).Most of the larger Ayurvedic medicine
suppliers provide materials other than Ayurvedic internal medicines, particularly in the areas of
foods and toiletries (soap, toothpaste, shampoo, etc.), where there may be some overlap with
Ayurveda, such as having traditional herbal ingredients in the composition of toiletries.
STATUS OF AYURVEDA IN INDIA
The Indian government and non-government organizations have been collecting statistics on
the Ayurvedic system in India and these data about the manpower and institutional aspects of
Ayurveda have emerged:
Number of registered medical practitioners: 366,812
Number of dispensaries: 22,100
Number of hospitals: 2,189
Number of hospital beds: 33,145
Number of teaching institutions (undergraduate): 187
Number of upgraded postgraduate departments: 51
Number of specialties in postgraduate medical training: 16
Number of pharmacies manufacturing Ayurvedic medicines: 8,400
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In India, 60% of registered physicians are involved in non-allopathic systems of medicine.
In addition to the nearly 400,000 Ayurvedic practitioners, there are over 170,000 homeopathic
physicians; India has about 500,000 medical doctors (similar to the number in the U.S., but
serving nearly 4 times as many people). Reliance on Ayurvedic medicine is heavy in certain
regions of India, such as Kerala in the Southwest. Many ayurvedic practitioners in small villages
are not registered.
ORGANIZATION PROFILE
OUSHADHI
The Pharmaceutical Corporation (I.M) Kerala limited, Thrissur popularly known as
OUSHADHI is an Ayurvedic medicine manufacturing company fully owned by Government of
Kerala. Directly controlled by Health and Family Welfare Department of Kerala State
Government. Governed by a Board of Directors, appointed by the Government of Kerala.
Oushadhi is the largest producer of Ayurveda medicines in public sector in India. This is the one
among the few public sector companies, consistently making profit and paying dividend Govt.of
Kerala since 1999. Oushadhi supplies medicines to Govt. of Kerala for the distribution to
common man through ISM Depts, produces 450 Ayurvedic formulations-both classical and
proprietary. Oushadhi is the sole supplier of medicines to Govt. Ayurveda Hospitals and
Dispensaries in Kerala. And also this firm is the supplier of Ayurvedic Medicines to Govt.
Hospitals and Dispensaries of other states like Madhya Pradesh, Chattisgarh, Pondichery,
Rajasthan, Orissa, New Delhi etc. It caters to the need of public through a vast network of 610
agencies spread all over the nation.
Currently Oushadhi manufactures more than 450 Ayurvedic formulations as per ancient
classical texts, rare combinations of expert, experienced Keralite authorities and special
combinations developed in the Research wing. Oushadhi upholds ancient traditional methods of
manufacturing along with modern Machinery and technology under strict quality control
measures. The whole manufacturing activities are under the direct and expert supervision by
qualified Ayurvedic Physicians. Quality medicines are made available to the public at reasonable
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prices. It meets the entire medicine requirements of Government Ayurvedic Hospitals and
Dispensaries under the Department of Indian Systems of Medicines, Kerala.
Oushadhi Fulfils the demands from Directorate of I.S.M. Bhopal, Jaipur National
Institute of Ayurveda, Government Hospitals and Dispensaries under Central Government
Health Schemes ,Employees State Insurance Medical Services, Government Ayurveda Colleges,
Tribal Welfare Department, Govt. Ayurvedic Mental Hospital, Kottakkal, Government of Kerala
ICDS Cell programmes. It meets public demands through a network of 500 exclusive Oushadhi
Dealers and Agents. It undertakes the Implementation of health care projects from Local bodies.
Propagation of Ayurveda by establishing specific clinical practices all over India. It also
undertake medicinal plants cultivation programme linked with local bodies and entrepreneurs
under buy-back arrangement. Nursery development for the production of quality seedlings
VISION
A leading world class Ayurveda industry in the country by 2020.
OBJECTIVES OF THE ORGANISATION
Manufacturing and Marketing of high quality Ayurvedic medicines.
Research and Developmental studies on Ayurvedic formulations.
Maintenance of Medicinal plants' Herbarium .
Promotional activities on medicinal plants Cultivation.
Health Care through Panchakarma therapy and Clinical Research Programme.
Implementation of Govt. of Kerala Health Care Programmes.
Propagation of Ayurveda and connected systems all over the world.
Implementation of Community Development Programmes with special reference to
women and child development.
MILESTONES
1941: Commenced by His Highness, the Maharaja of Cochin as “Sree Kerala Varma
Ayurveda Pharmacy”.
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1959: Converted into Co-operative Society viz. Sree Kerala Varma Ayurveda Pharmacy
and Stores Ltd.
1975: Registered as a company under Indian Companies Act and renamed as “The
Pharmaceutical Corporation (Indian Medicines) Kerala Limited” Thrissur.
1991: Commissioned modern manufacturing unit at Kuttanellur and shifted the factory to
the new premises.
2004: Started a new Panchakarma Hospital and Research Institute at Thrissur.
2007: The entire office shifted to the Factory premises at Kuttanellur.
2008: Commenced full-fledged R&D Centre at Kuttanellur and regional distribution unit
at Kannur.
FUNCTIONAL DEPARTMENTS
Administration
Human Resources
Finance & Accounts
Purchase
Production
Marketing
Quality Control, Research & Development
Maintenance
ADMINISTRATION DEPARTMENT
The administration Department is responsible for the efficient execution of all
administrative works, general policies, legal matters, personal affairs, security, company campus,
purchase and distribution of stationery, future and initiating proper action on disciplinary
proceeding etc. the responsibilities to provide welfare facilities and other amentias to the workers
are particularly vested on the section. Actually this section is carrying out the company and
formulating company’s personal policies. The section maintaining proceedings for the
recruitment and administration of personal in accordance with the company’s policies. Personal
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records of all employees including confidential files are also maintained in the section. The
department ensures that the company’s personal policies are effectively carried out through out
the organization.
HUMAN RESOURCE DEPARTMENT
Human resource management is the planning, organizing, directing and controlling of the
procurement, development, compensation, integration, maintenance and reproduction of human
resources, to the end that individual, organizational and societal objectives are established.
TOTAL MANPOWER STRENGTH OF OUSHADHI
Category Permanent Others Total
Executives 11 Nil 11
Doctors 7 5 12
Middle Level Executives 10 11 21
Clerks & Other Office Staff 18 16 34
Drivers 9 4 13
Maintenance Staff 6 13 19
Production Supervisors 15 5 20
Security 5 12 17
Field Marketing Officer Nil 5 5
Hospital Workers Nil 8 8
Workers 34 373 407
Total 115 452 567
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FINANCE & ACCOUNTS DEPARTMENT
All day to day matters relating to routine working of the factory is carried out by the
department. The section is ultimately responsible for the financial properties of the various
transactions and for the avoidance of loss etc. The responsibilities of maintaining and supervising
all the accounts of the company including internal audit and costing is vested on the section. It is
responsibility of the finance department the negotiations and dealings with the banks, financial
institutions, government etc. and maintaining banking and accounting for all money received
including foreign currency, bill of exchange and petty cash book etc.
PURCHASE DEPARTMENT
Purchase department is an important department of every organization. There are
different types of purchasing through tender and direct purchase also. Purchase of raw material,
containers & packing materials are done through tender. Other than tender there are many raw
materials and containers & packing materials purchasing through direct purchase from the open
market. Purchases more than 600 varities of raw materials through open tender. In Oushadhi
there is a standardized procedure to verify the variety of raw materials. In those more than 60%
raw materials comes from the forest. Annual purchase of Oushadhi Pharmaceuticals is comes
around 7-9 crores. For all purchases the firm is maintaining a data base of raw materials.
PRODUCTION DEPARTMENT
This section deals with the overall production and management of the livestock. The
requirements of raw materials for the factory is maintain by the section. It is ensured by the
section the safety and health measures of the employees to achieve the daily targeted output and
to efficient utilization of manpower requirements. Up-to-date registers relating to production and
livestock and to co-ordinate the marketing wing is maintained in the section. The stock in
process, products, tools and accessories in production are also maintained.
MARKETING DEPARTMENT
Marketing deals with identifying and meeting human and social needs. Marketing is
defined in as marketing needs profitably. Marketing is formally defined by the American
15
Marketing is formally defined by the American Marketing Association as follows, marketing is
an organizational function and a set of process of creating, communicating and delivering value
to customer and for managing customer relationship in ways that benefit the organization and its
stake holders. Coping with exchange processes calls for a considerable amount of work and skill.
Oushadhi has a marketing department to handle the marketing activities. The marketing section
ensures that proper inventory of finished products, prompt collection of sales proceeds, setting of
due etc.
QUALITY CONTROL AND RESEARCH & DEVELOPMENT
DEPARTMENT
Product Innovation
Process Innovation
Stage wise quality examination
Research on substitute raw drugs
Development of standards for drugs & products.
Training programmes for Ayurveda MD, B.Phams, BAMS, and Biotechnology students.
ACTIVITIES
Product development and related works like experimental and clinical trials.
Innovation practices in processes and products to present ancient pharmaceutical forms in
user friendly mode.
Preparation and implementation of various projects for standardization prototype
development, process trouble shoots etc.
Preparation of database for raw materials, process, and formulations.
Extension activities like awareness classes, seminars etc.
MAINTENANCE DEPARTMENT
Oushadhi maintaining the maximum quality production at lower cost with optimum
safety. The firm is identifying and implementing cost reduction procedure and also providing
accurate equipment maintenance records/ information.
Procurement of plant & machinery
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Upkeep and maintenance of all plant and machinery
Construction of civil work
Power & water supply
Effluent treatment
Maintenance of campus
FUTURE PLANS
Modernization of existing unit to improve quality and to meet the market
requirement.
Establish branches in neighboring states to promote Oushadhi.
Establishment of export oriented production unit for selected high demand items.
Computerization of entire business.
Establishment of new processing and value addition units.
Strengthening of quality control and drug testing laboratory.
Development of new drugs in Neutraceutical, cosmetic and baby products
segments.
Promote medical plant cultivation and conservation.
Purchase of raw materials raised by farmers through Oushadhi agents spread all
over the state through an effective buy back arrangement to encourage medicinal
plant cultivation by farmers.
PRODUCTION
Oushadhi produces 450 different varieties of medicines. Qualified and experienced
doctors are appointed to supervise productions. Productions of medicines are done as per GMP
norms. Quality control measures have been set up to ensure quality of raw materials & finished
goods. Modern dosage forms like, Tablet, Ointment, Granules and Syrup were introduced by
Oushadhi.
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Formulations (433 Classic and 17 Patents)
Sl.No. Category Nos.
1 Asavams & Arishtams 38
2 Medicated Oils (Thylam) 112
3 Lehyams and Ghrithams 59
4 Gulika and Tablets 52
5 Liquid Kashayams 49
6 Kashayachoornam & Sooshmachoornam 112
7 Bhasma Sindooram 13
8 Patent and Proprietary 17
Total 450
PRODUCT RANGE
1) Important Classical Products
Sivagulika
Haridrakhandam
Gandhathylam
Aswagandhadi Lehyam
Amruthaprasam
Saraswatharishtam
Dasamoolarishtam
Kottanchukkathi
Agasthyarasayanam
Bhramikritham
18
Thalispathrathi
Rasneradi
Rasneradi Liquor
2) Important Patent Products
Pramehoushadhi
Burncure Ointment
Rheumajith Ointment
Murivenna Ointment
Bliss Balm
Psorset Oil
Hair Tone
Oushadhi Chavanaprasam
Thenginpookkulamrutham
Oushadhi Toothpowder
Oushadhi Dahasamani
Diabetic Drinks
Ashtachoornam Syrup
Oushadhi Cough Syrup
Sudarsanamm Tab
Shaddharanam
Vigor Plus
SCOPE OF THE STUDY
The study will provide adequate information about the working capital position of the
company. This will help to know the solvency position and liquidity position of Oushadhi
Pharmaceuticals. So that they can make appropriate decisions to improve the working capital
position of the company.
19
SCHEME OF THE STUDY
The study has been arranged in 7 chapters. The first chapter gives introduction, research
methodology and limitations of the study. The second chapter covers industry profile.
Organization profile is given in third chapter. Fourth chapter covers product profile. Fifth chapter
deals with analysis and interpretation of the data. Findings and suggestions are given in chapter
six and the last chapter gives conclusion of the study.
LIMITATIONS OF THE STUDY
1) This study is done mainly with the help of the financial statement which are subjected
to many limitations. So many of ratios are not able to calculate. Ratios are also subjected
to many limitations like financial biases.
2) In this study qualitative factors which may generally influence the conclusions derived
are ignored while computing ratio because for calculating ratios we will take only
quantitative factors.
3) The non availability of certain data in the limited time is also one of the major
limitations of study.
20
CHAPTER- 2
REVIEW OF LITERATURE
21
WORKING CAPITAL MANAGEMENT
In business point of view working capital is money or money value is used in business regardless
of the source of obtaining it. The term working means the circulation of capital in one from or
another during the day-to-day operations of business. Working capital is defined in the annual
survey of the industries to include stock of material, stores, fuel, semi-finished goods including
working progress and finished by products, cash in hand and algebraic sum of sundry creditors.
Every business needs funds for two purposes- for its establishment and to carry out its day- to-
day operations. Long- term funds are required to create production facilities through purchase of
fixed assets such as plant and machinery, land, building, furniture, etc. Funds are also needed for
short- term purposes for the purchase of raw materials, payment of wages and other day- to- day
expenses, etc. These funds are known as working capital. Working capital refers to that part of
the firm’s capital which is required for financing short term or current assets such as cash,
marketable securities, debtors and inventories.
DEFINITION
“Capital invested in the Working or current asset with in the business. It is called circulating
capital or revolving capital”.
Working capital stands for the part of the capital, which is required for the financial or Working
or current need of the company.
Generally the term working capital means funds required for the day today operations of the
enterprise. Working capital is defined as the funds required covering the cost of operating an
enterprise. There are two broad types of working capital, namely, permanent working capital
management and temporary working capital management.
a) Permanent Working Capital: - It represents the minimum amount of working capital
required to ensure effective utilization of fixed assets and support the normal operation of the
business. It is the minimum amount to be kept for maintaining a normal level of stock of raw
materials, work-in progress and finished goods and for regular payment of wages, salaries rent
etc. Permanent working capital classified into two.
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Initial working Capital
Regular Working capital
b) Temporary Working Capital: - It is the working capital which varies with volume of
business. It is the additional working capital to meet seasonal and special needs. It is required for
short periods. It is also called variable working capital. This can be again classified as
Seasonal Working Capital
Special Working Capital
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
Gross working capital
Net working capital
The gross working capital is the capital invested in the total current assets of the enterprise. Net
working capital is the excess of current assets over current liabilities
Net working capital= current assets- current liabilities
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. These two concepts of the working capital
are not exclusive; rather both have their own merits. Both, gross and net, concepts of the working
capital are important aspects of working capital management. The net concept of working capital
may be suitable only for proprietary form of organizations such as sole- trader or partnership
firms. But the gross concept is very suitable to the company form of organization where there is
a divorce between ownership, management and control. As per the general practice, net working
capital is referred to simply as working capital.
NEEDS OF ADEQUATE WORKING CAPITAL
Working capital is the life blood and nerve centre of a business. Just as circulation of blood is
essential in the human body for maintaining life, working capital is very essential to maintain the
smooth running of a business. No business can run successfully without an adequate amount of
working capital. The main advantages of maintaining adequate working capital are
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Solvency of the business : - Adequate working capital helps in maintaining solvency of
the business by providing uninterrupted flow of production.
Goodwill : - Sufficient working capital enables a business concern to make prompt
payments and hence helps in creating and maintaining goodwill.
Easy loans : - A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and others on easy and favorable terms.
Cash discounts :-Adequate working capital also enables a concern to avail cash discounts
on the purchases. And hence it reduces costs.
Regular supply of the raw materials : - Sufficient working capital ensures regular supply
of raw materials and continuous production.
Regular payment of salaries, wages etc :- A company which has ample working capital
can make regular payment of salaries ,wages and other day-to-day commitments which
raises the morale of its employees, increases their efficiency, reduces wastages and costs
and enhances production and profits.
Exploitation of favorable market conditions : - Only concerns with adequate working
capital can exploit favorable market conditions such as purchasing its requirements in
bulk when the prices are lower and by holding its inventories for higher prices.
Ability to face crisis : - Adequate working capital enables concern to face business crisis
in emergencies such as depression because during such periods, generally there is much
pressure on working capital.
Quick and regular return on the investments : - Every investor wants quick and regular
return on his investments. Sufficiently of working capital enables a concern to pay
quickly much and regular dividends to its investors as there may not be much pressure to
plough back profits. This gains the confidence of its investors and creates a favorable
market to raise additional funds in future.
High morale : - Adequacy of working capital creates an environment of security,
confidence, and high morale and creates overall efficiency in a business.
IMPORTANCE OF WORKING CAPITAL MANAGEMENT
It is necessary for any organization to provide adequate working capital in order to run
successfully the major thrust of working capital management of current assets, as it is
24
understandable, that current liabilities arise the context of current asset. If the size of such asset is
relatively large, the liquidity position will improve and profitability will be adversely affected, as
funds will remain idle.
Conversely if holding of such asset are small the overall profitability will no doubt
increase. But it will have an adverse effect on the liquidity position and make the firm more
risky. If the firm cannot maintain a satisfactory level of working capital it is likely to become
insolvent.
The area of working capital management intimately links the functioning of every
department in a business concern. The policy governing the working capital has got a snow-ball
effect on other department like personnel, production, marketing and so on. That it can be
deducted that working capital management has a crucial role to play in the survival of any
business unit and working capital management is an integral part of the overall corporate
management.
The importance of maintaining adequate amount of working capital is as follows:
1. Solvency of the business
2. Goodwill
3. Easy loans
4. Cash discounts
5. Regular supply of Raw-materials
6. Regular payment of salaries, wages and other day-to-day commitments
7. Exploitation of favorable market conditions
8. Ability to face crisis
9. Quick and regular return on investments
10. High morale
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OBJECTIVES OF WORKING CAPITAL
The need for working capital cannot be over emphasized. Every business need some
amount of working capital arises due to the time gap between production and realization of cash
from sales.
For the purchase of raw material, components’ and spares.
To pay wages and salaries.
To incur day-to-day expenses and overheads. Costs such a fuel, power and office
expenses etc.,
To meet the selling costs as packing, advertising, etc.,
To provide credit facilities to the customer.
To maintain the inventories of raw material work –in-progress, stores and finished stock.
TYPES OF WORKING CAPITAL
Working capital can be divided in to two categories on the basis of time. They are as follows;
a) Permanent working capital.
b) Variable working capital.
PERMENENT WORKING CAPITAL
Permanent or regular working capital is the minimum amount which is required to ensure the
effective utilization of current asset. It represents the hard core of working capital. The amount
of permanent working capital increases with the increase in fixed assets over a long period.
The increase in fixed asset leads to increase in sales turn over which in turn leads to increase in
permanent working capital.
26
VARIABLE OR TEMPERORY WORKING CAPITAL
It is the amount of working capital which is required to meet the seasonal demand and some
special exigencies. These seasonal demands are subject to fluctuations.
Difference between permanent and Temporary Working Capital
The difference between the permanent or fixed working capital and temporary or variable
working capital is graphically or diagrammatically as represented below;
And;
27
Significance of Working Capital
These are the significance of working capital in a firm arises on account of the following
reasons;
a) Solvency of business
b) Goodwill of the firm
c) Easy loan
d) Cash discount
e) Regular supply of raw material
f) Regular payment of salaries, wages and other day to day expenses
g) Quick and regular return on investment
h) Ability to face crisis
i) High morale
28
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS
The working capital requirements of a concern depend on the following important factors;
a) Nature of Business: The quantum of working capital requirement in a concern basically
depends on the nature of its business. As the public utility concerns like Railway and
Electricity provide cash sales only, they need a very limited working capital. On the other
hand, trading and financial concerns require very less investments in fixed assets but have to
invest huge amount in current assets.
b) Size of Business: The working capital requirements of a concern are directly influenced by
the size of its business. The greater the size of the business unit, the larger will be the amount
of working capital.
c) Manufacturing Process: The level of working capital depends upon the time required to
manufacture goods. The longer the processing period of manufacture, the larger will be the
amount of working capital.
d) Volume of Sales: Volume of sales is a unique factor depends upon the time required to
manufacture goods. The volume of sales and size of the working capital are directly related
to each other. When the volume of sales increases, the investment of working capital also
increase.
e) Production Policy: In certain industries, the demand is subject to wide fluctuations due to
seasonal variation. In such a case, the requirement of working capital depends on the
production policy.
f) Credit Policy: A concern which buys raw material on credit and sells the product on cash
requires less amount of investment in inventory. Thus the working capital will be low.
g) Turnover of Working Capital: Turnover means the speed with which the working capital
converted in to cash by the sale of goods. The speedier the turnover, the smaller will be the
amount of working capital required.
h) Seasonal Variations: Since in certain industrial concerns, raw material is not available
throughout the year, they have to buy these materials during the season to ensure
uninterrupted flow of production. In such cases a large amount of working capital is required.
i) Production Cycle: it is the time required to convert raw materials in to finished goods. The
longer the operating cycle, the larger will be the amount of working capital requirements.
29
j) Business Cycle: more working capital is required during the periods of prosperity and less
during the period of depression.
k) Earning capacity and Dividend policy: The earning capacity and dividend policy of a concern
also influences the requirements of its working capital. Firms which have high earning
capacity may generate cash profits from operations and contribute to their working capital. A
firm that maintains a steady high rate of cash dividend irrespective of its generation of profit
requires a large sum as working capital.
l) Price Level Changes: The price level changes also influence the working capital
requirements of a concern. Usually, a firm will have to maintain the same current assets.
Adequacy of Working Capital
Working capital is an investment in current assets. Like other investment, its costs money. Thus,
the working capital position of a concern should be neither excess nor inadequate. In other
words, every concern should have adequate working capital to run its operations. The adequacy
of working capital arises on account of the following reasons:
a) It helps to enjoy the advantage of cash discounts.
b) It helps the company to It helps the company to pay all the current obligations in time.
c) It helps the company withstand the period of depression.
d) It helps the company to extend favorable credit terms to customers.
e) It enables the company to operate its business efficiently as there is no delay in obtaining
materials.
f) It protests the company from the unfavorable effects of shrinkage in the values of current
assets.
g) It helps the company to a larger extent to maintain its credit.
Dangers of Redundant Working Capital
A concern which has excess working capital should face the following problems:
a) Overtrading.
b) Improper rate of return on investment.
30
c) Big inventories.
d) Imbalance between liquidity and profitability.
e) Fall in value of shares.
f) Speculative transactions.
g) Overall inefficiency in the organization.
Dangers of Inadequate working capital
A concern which has inadequate working capital cannot:
a) Pay its short-term liabilities in time.
b) Exploit favorable market conditions and undertake profitable projects.
c) Buy its requirements in bulk.
d) Pay day to day expenses of its operations.
e) Utilize the fixed assets efficiently due to non- availability of liquid funds
f) Enjoy the advantage of cash discount facilities
MEASURES TO IMPROVE WORKING CAPITAL MANAGEMENT
i. The essence of effective working capital management is proper cash flow forecasting. This
should take into account the impact of unforeseen events, market cycles, loss of a prime
customers, and actions by competitors. The effect of unforeseen demands on working capital
should be factored in.
ii. It pays to have contingency plans to tide over unexpected events. While market leaders can
manage uncertainty better, other companies must have risk management procedures. These
must be based on an objective and realistic view of the role of working capital.
iii. Addressing the issue of working capital on a corporate wide basis has certain advantages.
Cash generated at one location can well be utilized at another. For this to happen,
information access, efficient banking channels, good linkage between production and billing,
internal system to move cash and treasury practices should be in place.
iv. An innovative approach, combining operational and financial skills and an all encompassing
view of the company’s operations will help in identifying and implementing strategies that
generate short term cash. This can be achieved by having the right set of executives who are
31
responsible for setting targets and performance levels. They are then held accountable for
delivering. They are also encouraged to be enterprising and to act as change agent.
v. Effective dispute management procedures in relation to customers will go along way in
freeing up cash otherwise locked in due to disputes. It will also improve customer service and
free up time for legitimate activities like sales, order entry, and cash collection. Overall,
efficiency will increase due to reduced operating costs.
vi. Collaborating with your customers instead of being focused only on your own operations
will also yield good result. If feasible, them to plan their inventory requirements
efficiently to match your productions with their consumptions will help reduce inventory
levels. This can be done with supplier also.
Working capital management is an important yardstick to measure a company’s operational and
financial efficiency. This aspect must from part of the company’s strategic and operational
thinking. Efforts should constantly be made to improve the working capital positions. This will
be yield greater efficiency and improve customer satisfactions.
INVENTORY MANAGEMENT
Inventories have an important role working capital management. Every enterprise need inventory
for smooth running of its activities. It serves between the link between production and
distribution process. There is generally, a time lag between recognition of need and its
fulfillment. The greater time lag the higher the requirement of the inventory. The unforeseen
fluctuation in demand and supply of goods also necessitate the need for inventory it also
provides cushion for future price fluctuations. The term inventory refers to the assets which will
be sold in the normal course of business operations. The term inventory includes raw materials,
work in progress and finished goods.
Purpose of Holding Inventory
Every business enterprise has to maintain a certain level of inventories to facilitate uninterrupted
production and smooth running of business. In the absence of inventories of a firm will have to
make purchase as soon as it receives orders. It will mean loss of time and delay in execution of
order, which some time may cause loss of customers and business. A firm also needed to
32
maintain inventories to reduce ordering cost and avail quantity discount, etc. generally, there are
main purpose or motives of holding inventories.
The transaction motive:- which facilitates continuous production and timely execution of
sales orders.
The production motive:- which necessitates the holding of inventories for meeting
unpredictable changes in demand and supply materials.
The speculative motive:- which includes keeping inventories for taking advantages of
price fluctuations, saving in recording costs and quantity discount etc.
Objectives of Inventory management
The main objectives of inventory management are operational and financial. The operational
objectives mean that materials should be available in sufficient quantity so that work is not
disrupted for a want of inventory. The following are the objectives of inventory management;
1. To ensure continuous supply of materials spares and finished goods so that the
production should not suffer any time and the customer demand should met.
2. To avoid both the over stocking and the under stocking of inventory.
3. To maintain investment in inventories at the optimum level by and operational and sales
activities.
4. To keep material cost under control so that they contribute in reducing cost.
Factors influencing inventory management
The main factors, which are influencing the inventory management, are as follows;
1. Lead Time
2. Cost of Holding Inventory
a) Material Costs
b) Ordering Costs
c) Carrying Costs
d) Cost of tying-up of Funds
33
e) Cost of Under stocking
f) Cost of Overstocking
3. Stock Levels
a. Reorder Level
b. Maximum Level
c. Minimum Level
d. Safety Level / Danger Level.
4. Variety Reduction
5. Materials Planning
6. Service Levels
7. Obsolete Inventory and Scrap
8. Quantity Discounts
34
CHAPTER- 3
RESEARCH METHODOLOGY
35
TITLE OF THE PROJECT
“An Exploratory Study on Working Capital Management At Oushadhi Pharmaceuticals
Corporation (IM) Kerala Ltd.”
OBJETIVES OF THE STUDY
The main objective of the study is to make an exploratory study in Working Capital
Management at Oushadhi Pharmaceuticals Corporation (IM) Kerala Ltd. The other objectives are
as follows.
To analyze the working capital management of the company.
To ascertain different sources and applications of working capital.
To analyze the solvency position of the company.
To study the liquidity position of the organization.
METHODOLOGY:
1) Data Collection: - The data can be classified as
a) Primary Data- Primary data is the data which are directly collected through
personal contacts or face to face interaction.
b) Secondary Data- Secondary data is the data collected through reports, books,
journals, news paper etc. Secondary data has to be collected for this study. It is
collected through the annual reports, journals and books of accounts of the
company.
2) Tools for Analysis:-The tools/ techniques which are used for the analysis of the data
are
a) Ratio analysis
b) Working capital analysis
c) Trend analysis
d) Charts and tables
36
RESEARCH DESIGN
It is the arrangement of conditions for collection and analysis of data in a manner that
aims to combine relevance to the research purpose with economy in procedure. This study
follows the analytical research. In analytical research the available information or data are
analyzed and critical evaluations are made to solve the problems.
DIFFERENT VIEWS OF RESEARCHERS
Many researchers have studied working capital from different views and in different
environments. The following ones were very interesting for our research.
Debasish Sur, Joy Deep Biswas (2001):-
They attempted to study the association between liquidity and profitability of the Indian private
sector enterprises as a case study of aluminum producing industry, Hindalco and Indal were
selected as major aluminum producing units. They observed that there is very high degree of
positive correlation between profitability and liquidity of these companies. They also observed
that liquidity variables working capital ratio, acid test ratio, working capital to sales ,debtor
turnover ratio, inventory turnover ratio, current assets to total assets jointly influence
profitability.
Prasad (2001):-
Conducted a study on the working capital management in paper industry. His sample consisted
of 21 paper mills from large, medium and small scale for a period of 10 years. He reported that
the chief executives properly recognized the role of efficient use of working capital is liquidity
and profitability, but in practice they would not achieve it. The study also revealed that 50% of
the executives followed budgetary method in planning of working capital and working capital
management was inefficient due to sub optimum utilization of working capital.
Reddy and Patkar :-
They made an attempt to study the size composition of in factory companies, evaluate liquidity
management and the relationship between liquidity and profitability of factoring companies. SBI
factors and Can Bank factors Ltd. Were selected for the purpose of the study was based on
37
secondary data collected from annual reports, percentage method and Spearmen’s Rank
Correlation were used to analyze the data of the study was that sundry debtors amount due to
creditors were the major components of current assets and current liabilities liquidity and
profitability were found to be inversely related in factoring companies and the liquidity of Can
Bank factors was found strongly related to profitability than SBI factors.
Singh and Shishir Pandey: -
For the successful working of any business organization, fixed assets and current assets play vital
role. Working capital management is essential as it has a direct impact on profitability and
liquidity. An attempt has been made in this paper to study the working capital components and
the impact of working capital management on profitability of Hindalco Industries Limited. The
paper also makes an attempt to study the correlation between profitability, liquidity and profit
before tax of Hindalco. The study is based on the secondary data collected from annual reports of
Hindalco for the study period 1990 to 2007.A successful organization needs two types’ assets,
viz., fixed assets and current assets. Fixed assets include—land, building, plant, machinery,
furniture, etc. These are not only purchased for the purpose of sale, but also for the purpose of
earning profit for many years. Current assets include, raw materials, work-in-progress, finished
goods, sundry debtors, bills receivables, cash, bank balance, etc. These are purchased for the
purpose of production and sales, like raw material into semi finished products, semi finished
products into finished products, finished products into debtors and debtors transferred into cash
or bills receivables. The fixed assets are used in increasing production of an organization and the
current assets are used in using the fixed assets for day to day working. The management of this
working capital is known as working capital management. The term working capital refers to the
amount of capital which is readily available to an organization. Management of working capital
deals...
Rakesh Kumar Baral: -
To start any business, First of all we need finance and the success of that business entirely
depends on the proper management of day-to-day finance and the management of this short-term
capital or finance of the business is called Working Capital Management. Working Capital is the
money used to pay for the everyday trading activities carried out by the business - stationery
38
needs, staff salaries and wages, rent, energy bills, payments for supplies and so on. I have tried to
put my best effort to complete this task on the basis of skill that I have achieved during the last
one year study in the institute. I have tried to put my maximum effort to get the accurate
statistical data. However I would appreciate if any mistakes are brought to my by the reader.
Thomas M. Krueger: -
Firms are able to reduce financing costs and/or increase the funds available for expansion by
minimizing the amount of funds tied up in current assets. We provide insights into the
performance of surveyed firms across key components of working capital management by using
the CFO magazine’s annual Working Capital Management Survey. We discover that significant
differences exist between industries in working capital measures across time. In addition, we
discover that these measures for working capital change significantly within industries across
time. Sales are the importance of efficient working capital management (WCM) is indisputable.
Working capital is the difference between resources in cash or readily convertible into cash
(Current Assets) and organizational commitments for which cash will soon be required (Current
Liabilities). The objective of working capital management is to maintain the optimum balance of
each of the working capital components. Business viability relies on the ability to effectively
manage receivables, inventory, and payables. Firms are able to reduce financing costs and/or
increase the funds available for expansion by minimizing the amount of funds tied up in current
assets.
All the above studies provide a solid base and give idea regarding working capital management’s
and its components. They also give the results and conclusions of those researchers already
conducted on the same area in different companies and environments from different aspects. On
the basis of these studies the researchers have developed own methodology for the research
development.
39
CHAPTER- 4
DATA ANALYSIS AND INTERPRETATION
40
RATIO ANALYSIS
Ratio analysis is one of the most used techniques of financial analysis. It aims at making
use of quantitative information for decision making. A ratio is an expression of relationship
between two figures or two amounts. It is a yard stick which measures relationship between two
variables. Ratios are simply a means of highlighting in arithmetical terms the relationship
between figures drawn from various financial statements. A great number of ratios can be
computed from the basic financial statements- Balance Sheet and Profit and Loss Account.
Ratio analysis is an important method of financial analysis, because a meaningful analysis
of financial statements depends on the study of relationship among various items of the
statement, and the study of relationship among various items of the statement, and the
relationship of one item to another can easily be expressed as a ratio. These are widely used
because simple to calculate and easy to understand. Even a person, having a little knowledge of
accounting, can make use of ratios.
Main Classification of Ratios
According to Statement According to Function According to
Importance
Balance Sheet Ratios Liquidity Ratios Primary Ratio Income
Statement Ratios Leverage Ratios Secondary Ratios
Combined Ratios Activity Ratios
Profitability Ratios
Since the functional classification of ratios is more useful and purposive. For the analysis
of working capital management of Oushadhi, the best is to analyze the Functional Ratios.
41
Functional Ratios
Liquidity Ratios
Current Ratio
Quick Ratio
Leverage Ratios
Debt-Equity Ratio
Proprietary Ratio
Fixed Asset to Net worth Ratio
Activity Ratios
Inventory Turnover Ratio
Fixed Asset Turn Over Ratio
Working Capital Turnover Ratio
Profitability Ratios
Gross Profit Ratio
Net Profit Ratio
Return on Capital Employed
Earnings per share
42
Uses of ratio analysis
1. Ratios are helpful in judging financial performance of an enterprise over a
period of time.
2. Ratio facilitate inter firm comparison.
3. Ratio analysis simplifies the comprehension of financial statements.
4. Sometimes investment decisions are guided by certain ratios.
5. The ratios measure the efficiency of operation of enterprise.
6. It is possible to test the liquidity, solvency and profitability of the enterprise.
7. Ratio analysis communicates the financial strength or weakness of a firm in a
more easy and understand manner.
The following are the importance of ratio analysis:
Aid to measure the general efficiency.
Aid to measure financial solvency.
Aid in forecasting and planning.
Facilitate decision making.
Aid in corrective action.
Helps in evaluating the efficiency.
Limitation of Ratios
Ratio analysis has many limitations,
Limited use of a single ratio
Lack of adequate standards
Inherent limitations of accounting
Window dressing
Personal bias
Incomparable
Absolute figures may be distorted
Ratios are not substitutes
43
Steps involved in ratio analysis
Selection of relevant data from the financial statement depending upon the objective of
the analysis.
Calculation of appropriate ratios from the above data.
Comparison the calculated ratios with the ratios of the same firm in the past or ratios
developed from projected financial statements, the ratios of some other firm’s or the
comparison with ratios of the industry to which the firm belongs.
Interpretation of the ratios.
TREND ANALYSIS
Trends are usually defined as progressive changes in a particular phenomenon. If the
phenomenon can be characterized by one variable over time (such as the price of some item),
then a trend analysis is fairly simple. Phenomena are often characterized, however, by more than
one variable at particular discrete time intervals. In such cases a trend analysis becomes more
complex and ambiguous. If enough data are available, however, trends between two subsequent
times can be represented by so-called transition matrices.
Method of time series data (information in sequence over time) analysis involving comparison of
the same item (such as monthly sales revenue figures) over a significantly long period to
1. Detect general pattern of a relationship between associated factors or variables.
2. Project the future direction of this pattern.
While calculating trend percentages, the following precautions may be taken:
The base year selected should be truly representative of all years involved in the analysis
The financial statements used for the analysis must have been prepared applying
consistent accounting principles and practices
The figures of various accounting statements considered for the analysis should be
adjusted for any price level changes, as compared to base year, before computing trend
percentages.
44
Trend percentages should be studied along with the absolute figures on which they are
based. This will enable us to know whether the change is significant or not.
Features of Trend Analysis
1. Trend Analysis Proper
Allows to plot aggregated response data over time.
2. Market Basket Analysis
Insight into services and product purchasing trend patterns
3. Market Segmentation
Analyzes common characteristics of a consumer base
4. Customer Churn
Identifying those consumers who are most likely to discontinue that service or product
5. Direct and Interactive (web-based) Marketing
Predicting in advance the products or services a person is most likely to use based on past
and present trends.
Trend Analysis of Current Assets for Five Years
Table no: 4.1
Year Current Assets (In Rs.) % Changes
2006-2006 101703382.00 100
2006-2007 124921150.00 122.82
2007-2008 163833168.00 131.15
2008-2009 181251875.00 110.63
2009-2010 200578287.00 110.66
45
Figure no: 4.1
2005-06 2006-07 2007-08 2008-09 2009-100
20
40
60
80
100
120
140
Trend Value
Trend Value
Interpretation
Current Ratio is changing differently over the years. In the year 2007-2008 the current
ratio Change is 31.5%, it is the highest ratio when compared to the following years and the
liquidity position is acceptable. But during the years 2008-2009 the ratio is decreased. It
indicates that the company’s solvency position is not satisfactory and also indicates inadequate
working capital. In 2009-2010 there is a slight increase in the ratio position.
Trend Analysis of Current Liabilities for Five Years
Table no: 4.2
Year Current Liabilities (In Rs.) % Changes
2005-2006 57621110.00 100
2006-2007 68591183.00 119.04
2007-2008 97456151.00 142.08
2008-2009 114314595.00 117.30
2009-2010 119125363.00 104.20
46
Figure no: 4.2
2005-06 2006-07 2--7-08 2008-09 2009-100
20
40
60
80
100
120
140
160
Trend Value
Trend Value
Interpretation
The current liabilities have shown a decreasing trend from 2007-2008 to 2009-2010.
During the year 2007-2008 the companies trend was is highest position5. It is highly satisfactory
that company could reduce their liability to a lowest one in year 2009-2010.
Trend Analysis of Working Capital
Working Capital = Current Assets –Current Liabilities
47
Table no: 4.3
YearCurrent Assets
(In Rs.)
Current Liability(In Rs.)
Working Capital (In Rs.)
% Changes
2005-2006 101703382.00 57621110.00 44082272.00 0
2006-2007 124921150.00 68591183.00 56329967.00 27.78
2007-2008 163833168.00 97456151.00 66377017.00 17.84
2008-2009 181251875.00 114314595.00 66937280.00 0.84
2009-2010 200578287.00 119125363.00 81452924.00 21.69
Figure no: 4.3
2005-06 2006-07 2007-08 2008-09 2009-100
5
10
15
20
25
30
Trend Value
Trend Value
Interpretation
48
The working capital of the company is showing a increasing and decreasing trend. The
decreasing trend is due to the decrease in current assets. In 2007 the portion of current assets was
at very low level, but in the year 2008 company has net working capital of 8.14 (in crores). It is
due to the initiative ness taken by the company in a good manner.
Trend Analysis of net sales
Table no: 4.4
Year Net Sales
(In Rs.)Trend value
2005-2006 128251486.00 100
2006-2007 139729485.00 108.94
2007-2008 190257950.00 148.33
2008-2009 215729769.00 168.19
2009-2010 254799626.00 198.65
Figure no: 4.4
49
2005-06 2006-07 2007-08 2008-09 2009-100
50
100
150
200
250
Net sales
Interpretation
The trend analysis of net sales shows an upward moving trend in the last five years. During
2005-06 to 2009-10 the net sales of the firm is continuously increasing in a constant rate
approximately which indicates a good sales performance of the company.
Trend Analysis of inventory
Table no: 4.5
Year Inventory Trend value
2005-2006 8048334.00 100
2006-2007 10139293.50 125.98
2007-2008 13935625.50 173.15
2008-2009 16809355.00 208.85
2009-2010 28991555.00 360.21
Figure no: 4.5
50
2005-06 2006-07 2007-08 2008-09 2009-100
50
100
150
200
250
300
350
400
Trend value
Trend value
Interpretation
The trend of inventories is an increasing trend during the last five years. There is a steady
increment in inventories. In 2008-09, the trend value was 208.85 and in the very next year it
increased in to its highest of 360.21.
RATIO ANLYSIS
1) Current Ratio
Current ratio is the ratio of current assets to current liabilities. It is calculated by dividing
current assets by current liabilities. Current Assets are those, which can be realized within a
period of one year. It includes Cash in hand, Cash in bank, Bills receivable, Sundry debtors,
Stock, Prepaid expenses, short term investment etc... Current liabilities are those amounts which
are payable within a period of one year. In ideal situation Current ratio is 2:1.
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES
Current Ratio of Five Years
51
Table: 4.6
Year Current Assets (In Rs.) Current Liability (In Rs.) Current Ratio
2005-2006101703382.00 57621110.00 1.76
2006-2007124921150.00 68591183.00 1.82
2007-2008163833168.00 97456151.00 1.68
2008-2009181251875.00 114314595.00 1.58
2009-2010200578287.00 119125363.00 1.68
Figure: 4.6
2005-06 2006-07 2007-08 2008-09 2009-101.45
1.5
1.55
1.6
1.65
1.7
1.75
1.8
1.85
Current Ratio
Current Ratio
Current assets and current liabilities
52
Figure: 4.7
2005-06 2006-07 2007-08 2008-09 2009-100
50000000
100000000
150000000
200000000
250000000
current assetscurrent liabilities
Interpretation
The current ratio of the company for the last five years is presented in Table. Since the
ideal current ratio is 2:1,the ratio were less than 2 in all the five years, so it can be understood
that the organization do not have adequate amount of current assets. The current ratio of the
company increased in the year 2006-07 to 1.82%. But in the subsequent years it was seen
decreasing. Again in 2009-10 the ratio showed an increase.
2) Quick Ratio
It is also called Acid Test Ratio or Liquidity Ratio. It is determined by dividing Quick
Assets by Current liabilities. The term Quick asset refers to Current assets, which can be
converted into cash immediately. It comprises all Current assets except stock and prepaid
expenses. An Acid Test ratio of 1:1 is considered satisfactory as a firm can easily meet all its
current liabilities. If the ratio is less than 1:1, then the financial position of the concern shall be
deemed to be unsound.
QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES
Quick Ratio of Five Years
53
Table: 4.7
Year Quick Assets (In Rs.) Current Liability (In Rs.) Quick Ratio
2005-200684464345.00 57621110.00 1.46
2006-2007104503904.00 68591183.00 1.52
2007-2008135340379.00 97456151.00 1.38
2008-2009152928752.00 114314595.00 1.33
2009-2010165041277.00 119125363.00 1.38
Figure: 4.8
2005-06 2006-07 2007-08 2008-09 2009-101.2
1.25
1.3
1.35
1.4
1.45
1.5
1.55
Quick Ratio
Quick assets and current liabilities
54
Figure: 4.9
2005-06 2006-07 2007-08 2008-09 2009-100
20000000
40000000
60000000
80000000
100000000
120000000
140000000
160000000
180000000
quick assetscurrent liabilities
Interpretation
The quick ratio has shown a decreasing trend from 2006-07 to 2008-09. During the year
20078-09 the liquidity position is satisfactory because it is near to 1. Even though it was
decreasing it was above the standard ratio i.e. 1:1. From the above graph company’s liquidity
position is satisfactory
3) Absolute Liquid Ratio
This ratio shows the relationship between absolute liquid asset and current liabilities.
Absolute liquid assets are obtained by subtracting both the debtors, prepaid expenses and
inventory from the current assets. The ideal absolute liquid ratio is 0.5:1.
ABSOLUTE LIQUDITY RATIO = ABSOLUTE LIQUID ASSETS / CURRENT ASSETS
Absolute Liquid Ratio of Five Years
55
Table: 4.8
YearAbsolute
Liquid Assets(In Rs.)
Current
Liabilities(In Rs.)
Absolute
Liquid Ratio
2005-2006 59599325.00 57621110.00 1.03
2006-2007 72310162.00 68591183.00 1.05
2007-2008 75383774.00 97456151.00 0.77
2008-2009 98326119.00 114314595.00 0.86
2009-2010 131741894.00 119125363.00 1.10
Figure: 4.10
2005-06 2006-07 2007-08 2008-090
0.2
0.4
0.6
0.8
1
1.2
Absolute Liquidity Ratio
Absolute Liquidity Ratio
Absolute liquid assets and current liabilities
56
Figure: 4.11
2005-06 2006-07 2007-08 2008-09 2009-100
20000000
40000000
60000000
80000000
100000000
120000000
140000000
absolute liquid assetscurrent liabilities
Interpretation
In the year 2006-07 the cash position was nearer to ideal ratio of 0.5: 1. During the
subsequent period the ratios were far away from ideal ratio. So the company should keep enough
cash to meet day – to - day expenses. Hence the liquidity or cash position of the company is not
satisfactory.
4) Working Capital Turnover Ratio
This ratio is computed to test the efficiency with which the net working capital is utilized.
In other words the ratio indicates whether working capital is effectively utilized in making sales.
It is calculated as follows.
WORKING CAPITAL TURNOVER RATIO = NET SALES / NET WORKING CAPITAL
Working Capital Turnover Ratio of Five Years
57
Table: 4.9
Year Net Sales
(In Rs.)
Net Working
Capital (In Rs.)
Working Capital Turnover
Ratio(In Times)
2005-2006 128251486.00 44082272.00 2.90
2006-2007 139729485.00 56329967.00 2.48
2007-2008 190257950.00 66377017.00 2.86
2008-2009 215729769.00 66937280.00 3.22
2009-2010 254799626.00 81452924.00 3.12
Figure: 4.12
2005-06 2006-07 2007-08 2008-09 2009-100
0.5
1
1.5
2
2.5
3
3.5
Working Capital Turnover Ratio
Working Capital Turnover Ratio
Net sales and net working capital
58
Figure: 4.13
2005-06 2006-07 2007-08 2008-09 2009-100
50000000
100000000
150000000
200000000
250000000
300000000
net salesnet working capital
Interpretation
The working capital turnover ratio indicates an increasing trend from 2006-07 to 2008-09
except in 2010, the higher the ratio the better because it means the company is generating more
sales from its working capital. But here over the first 4 years the company’s working capital
turnover ratio was low and it indicates that the company has not been efficiently generating sales
from its working capital. In 2010 it is 3.12 which has shown a small downfall.
5) Inventory Turnover Ratio
Inventory turnover ratio also known as stock turnover ratio establishes the relationship
between costs of goods sold and average inventory. Besides helps in determining the liquidity of
a business concern, this ratio indicates how many times during the period the firm has turned its
inventory. In other words, it shoes the rate at which inventories are converted into sales and then
into cash. It is computed as follows.
INVENTORY TURNOVER RATIO = COST OF GOODS SOLD / AVERAGE STOCK
Inventory Turnover Ratio of Five Years
59
Table: 4.10
Year
Cost of Goods Sold
(In Rs.)
Average Stock (In
Rs.)
Inventory Turnover
Ratio( In Times)
2005-2006 68306456.00 8048334.00 8.48
2006-2007 73516313.00 10139293.50 7.25
2007-2008 97165036.00 13935625.50 6.97
2008-2009 106229389.00 16809355.00 6.31
2009-2010 133104937.00 28991555.00 4.59
Figure: 4.14
2005-06 2006-07 2007-08 2008-09 2009-100
1
2
3
4
5
6
7
8
9
Inventory Turnover Ratio
Inventory Turnover Ratio
Cost of goods sold and average stock
Figure: 4.15
60
2005-06 2006-07 2007-08 2008-09 2009-100
20000000
40000000
60000000
80000000
100000000
120000000
140000000
cost of goods soldaverage stok
Interpretation
The inventory turnover ratio was decreasing over the years. In 2005-06 the ratio was at
maximum level. High inventory ratio was an indication of good inventory management.
Inventory holding period was shorter in the year 2005-06 and longer in the year 2010. Shorter
holding period is favorable to the company. But company should take necessary actions to
reduce the holding period in 2011.
6) Debtors Turnover Ratio
Debtors turnover ratio is also called receivables turnover ratio. It relates net credit sales to
sundry debtors. It measures how fast debts are collected. It is calculated as follows. The term
debtors in this ratio are the amount of debtors plus bills receivables at the end of the accounting
period.
DEBTORS TURNOVER RATIO = NET CREDIT SALES / DEBTORS INCLUDING BILLS
RECEIVABLE
Debtors Turnover Ratio of Five Years
Table: 4.11
61
YearNet Credit
Sales (In Rs.)
Sundry Debtors
including Bills
Receivable (In Rs.)
Debtors Turnover
Ratio ( In Times)
2005-2006 128251486.00 24865020.00 5.15
2006-2007 139729485.00 32193742.00 4.34
2007-2008 190257950.00 59956605.00 3.17
2008-2009 215729769.00 54602633.00 3.95
2009-2010 254799616.00 33299383.00 7.65
Figure: 4.16
2005-06 2006-07 2007-08 2008-09 2009-100
1
2
3
4
5
6
7
8
Debtors Turnover Ratio
Debtors Turnover Ratio
Net credit sales and sundry debtors
Figure: 4.17
62
2005-06 2006-07 2007-08 2008-09 2009-100
50000000
100000000
150000000
200000000
250000000
300000000
net credit salessundry debtors
Interpretation
The debtor’s turnover ratio was fluctuating over the study period. The ratio was higher
during the year 2009-2010. This was an indication of efficiency of management of receivables. A
high or increasing Debtors Turnover Ratio is usually a positive sign - showing the company is
successfully executing its credit policies and quickly turning its Accounts Receivables/Debtors
into cash. The ratio was very low during the year 2007-08. It was because sales were decreased
and the credit policy was liberal.
7) Creditors Turnover Ratio
Creditors turnover ratio is the ratio between net credit purchase and the amount of sundry
creditors. It implies the credit period enjoyed by the firm in paying creditors. It is computed by
using the following formula. The creditors turnover ratio may also be expressed in days. Then it
is known as creditors payment period or creditors velocity.
CREDITORS TURNOVER RATIO = NET CREDIT PURCHASE / SUNDRY CREDITORS
Creditors Turnover Ratio of Five years
Table: 4.12
63
Year
Net Credit
Purchases (In
Rs.)
Sundry Creditors including
Bills Payable(In Rs.)
Creditors Turnover
Ratio
( In Times)
2005-2006 69645734.00 22515907.00 3.09
2006-2007 76358954.00 27586162.00 2.76
2007-2008 101915059.00 43498386.00 2.34
2008-2009 107226825.00 40216377.00 2.66
2009-2010 139163828.00 45012676.00 3.09
Figure: 4.18
2005=-6 2006-07 2007-08 2008-09 2009-100
0.5
1
1.5
2
2.5
3
3.5
Creditors Turnover Ratio
Creditors Turnover Ratio
Net credit purchase and sundry creditors
Figure: 4.19
64
2005-06 2006-07 2007-08 2008-09 2009-100
20000000
40000000
60000000
80000000
100000000
120000000
net creditsundry creditors
Interpretation
The creditor’s turnover ratio has indicated that there were more differences over the
years. In 2009-10 the ratio was 3.09 which was highest compared to other years. This indicates
delayed payment to suppliers which is not a very good policy as it may affect the reputation of
the business. The lower ratio indicates that company enjoys a greater credit period to repay the
liability. In 2007-08 creditor’s turnover ratio is the lowest with 2.34. A high ratio implies the
company should re-assess its credit policies in order to ensure the timely collection of imparted
credit that is not earning interest for the firm.
8) Cost of Goods Sold Ratio
Cost of goods sold ratio is the ratio of relationship between the cost of goods sold and the
sales of an organization. For the cost of goods sold ratio the smaller the ratio the better it is. Try
to reduce the cost of goods sold and increase the net profit. Cost of goods sold ratio is calculated
by using the following formula.
COST OF GOODS SOLD = COST OF GOODS SOLD / NET SALES *100
Cost of Goods Sold Ratio of Five Years
65
Table: 4.13
Year
Cost of Goods
Sold (In Rs.) Net Sales (In Rs.)
Cost of Goods
Sold Ratio (In %)
2005-2006 68306456.00 128251486.00 53.25
2006-2007 73516313.00 139729485.00 52.61
2007-2008 97165036.00 190257950.00 51.07
2008-2009 106229389.00 215729769.00 49.24
2009-2010 133104937.00 254799616.00 52.23
Figure: 4.20
2005-06 2006-07 2007-08 2008-09 2009-1047
48
49
50
51
52
53
54
Cost of Goods Sold Ratio
Cost of Goods Sold Ratio
Cost of goods sold and net sales
Figure: 4.21
66
2005-06 2006-07 2007-08 2008-09 2009-100
50000000
100000000
150000000
200000000
250000000
300000000
cost of goods soldnet sales
Interpretation
The cost of goods sold ratio in 2005-06 is 53.25.During the five years if this study that
was the highest ratio. After that it comes reducing in the following years up to 2008.In 2009-10
again cost of selling increased
STATEMENT SHOWING CHANGES IN WORKING CAPITAL
67
Working capital management is concerned with the problem that arise in attempting to
manage the current assets, current liabilities and the inter relationship that existing between
them. The goal of working capital management is to manage the firm’s current assets and
current liabilities in such way that the satisfactory level of working capital is mentioned. The
current assets should be large enough to cover its current liabilities in order to ensure a
reasonable margin of the safety. For this purpose researchers are preparing the statement of
changes in working capital in order to understand how much is difference between the
previous year amount and the current year amount.
Statement showing changes in working capital is an important tool to study the changes in
working capital of the concern and can also throw light on cause for these changes. Working
capital means the excess of current asset over current liabilities. All current assets and current
liabilities are individually listed in this statement, and against each account, the figure pertaining
to that account at the beginning and at the end of the accounting period is shown. The net
change in its position is also added up to equal net change in working capital.
As, Working Capital= Current Assets - Current Liabilities. So,
1. An increase in Current Assets increases Working Capital.
2. A decrease in current assets decreases, working capital.
3. An increase in current liabilities decreases working capital, and
4. A decrease in current liabilities increases working capital.
In case a current asset in the current period is more than in the previous period, the effect
is an increase in working capital and it is recorded in the increase column. But if a current
liability in the current period is more than in the previous period, the effect is decrease in
working capital and it is recorded in the decrease column or vice versa.
Statement of Changes in Working Capital as on 2005-2006
68
Changes (In Rs.)
Particulars31st
March200531st March2006 Increase Decrease
A) Current Assets
Inventories 14439911 17239037 2799126 --------------
Sundry Debtors 31959809 24865020 -------------- 7094789
Cash & Bank Balances 40927691 49684946 8757255 --------------
Other Current Assets 10251534 8799225 -------------- 1452309
Loans & Advances 838757 1115154 276397 ---------------
B) Current Liabilities
Sundry Creditors 21237233 22515907 -------------- 1278674
Other Liabilities 26117826 26990490 -------------- 872664
Provisions 8972005 8114713 857292 ---------------
Total 12690070 10698436
Increase in Working Capital=1991634
Interpretation
There is an increase in working capital in the year 2005 to 2006 by 19.91 lakhs which
was due to the increase in inventory by 27.99 lakhs and increase in cash and bank balance by
87.57 lakhs. Increase in working capital is contributed to the sources of funds.
Statement of Changes in Working Capital as on 2006-2007
69
Changes (In Rs.)
Particulars31st
March2006
31st
March2007Increase Decrease
A) Current Assets
Inventories 17239037 20417246 3178209 ---------------
Sundry Debtors 24865020 32193742 7328722 ---------------
Cash & Bank Balances 49684946 58703536 9018590 ---------------
Other Current Assets 8799225 12471133 3671908 ---------------
Loans & Advances 1115154 1135494 20340 ---------------
B) Current Liabilities
Sundry Creditors 22515907 27586162 --------------- 5070255
Other Liabilities 26990490 31162911 --------------- 4172421
Provisions 8114713 9842110 --------------- 1727397
Total 23217769 10970073
Increase in Working Capital=12247696
Interpretation
There is an increase in working capital in the year 2006 to 2007 by 1.22crores which was
due to the increase in inventory by 31.78 lakhs and increase in cash and bank balance by 90.18
lakhs. Increase in working capital is contributed to the sources of funds.
Statement of Changes in Working Capital as on 2007-2008
70
Changes (In Rs.)
Particulars31st
March2007
31st
March2008Increase Decrease
A) Current Assets
Inventories 20417246 28492789 8075543 ---------------
Sundry Debtors 32193742 59956605 27762863 ---------------
Cash & Bank Balances 58703536 58137332 --------------- 566204
Other Current Assets 12471133 15516908 3045775 ---------------
Loans & Advances 1135494 1729534 594040 ---------------
B) Current Liabilities
Sundry Creditors 27586162 43498386 --------------- 15912224
Other Liabilities 31162911 36582078 --------------- 5419167
Provisions 9842110 17375687 --------------- 7533577
Total 39478221 29431172
Increase in Working Capital=10047049
Interpretation
There is an increase in working capital in the year 2007 to 2008 by 1.004crores which
was due to the increase in inventory by 80.75 lakhs and decrease in cash and bank balance by
56.62 lakhs. Increase in working capital is contributed to the sources of funds.
Statement of Changes in Working Capital as on 2008-09
71
Changes (In Rs.)
Particulars31st
March2008
31st
March2009Increase Decrease
A) Current Assets
Inventories 28492789 28323123 --------------- 169666
Sundry Debtors 59956605 54602633 --------------- 5353972
Cash & Bank Balances 58137332 65993619 7856287 ---------------
Other Current Assets 15516908 30589086 15072178 ---------------
Loans & Advances 1729534 1743414 13880 ---------------
B) Current Liabilities
Sundry Creditors 43498386 40216377 3282009 ---------------
Other Liabilities 36582078 59107935 --------------- 22525857
Provisions 17375687 14990283 2385404 ---------------
Total 28609758 28049495
Increase in Working Capital=560263
Interpretation
There is an increase in working capital in the year 2008 to 2009 by 5.60lakhs which was
due to the decrease in inventory by 1.69 lakhs and increase in cash and bank balance by 78.56
lakhs. Increase in working capital is contributed to the sources of funds.
Statement of Changes in Working Capital as on 2009-2010
72
Changes (In Rs.)
Particulars31st
March2009
31st
March2010Increase Decrease
A) Current Assets
Inventories 28323123 35537010 7213887 ---------------
Sundry Debtors 54602633 33299383 --------------- 21303250
Cash & Bank Balances 65993619 99601775 33608156 ---------------
Other Current Assets 30589086 30606278 17192 ---------------
Loans & Advances 1743414 1533842 --------------- 209572
B) Current Liabilities
Sundry Creditors 40216377 45012676 --------------- 4796299
Other Liabilities 59107935 60290932 --------------- 1182997
Provisions 14990283 13821755 1168528 ---------------
Total 42007763 27492118
Increase in Working Capital=14515645
Interpretation
There is an increase in working capital in the year 2009 to 2010 by 1.45 crores which was
due to the increase in inventory by 72.13 lakhs and increase in cash and bank balance by 33.60
lakhs. Increase in working capital is contributed to the sources of funds.
73
CHAPTER- 5
FINDINGS, RECOMMENDATIONS AND
CONCLUSION
FINDINGS
74
Current ratio is fluctuating over the years; in 2006 – 2007 the current ratio is satisfactory,
because the current ratio is near than the standard ratio 2:1. During the year 2007 – 09
the ratio shows a declining tendency this is an indication of firm’s inability to pay off its
current liabilities fully.
The quick ratio of the company is not satisfactory because it shows a declining trend over
the years and is less than the standard ratio (1:1). It is very low of 1.33 in the year 2009.
Absolute liquid ratio is almost same in all years from 2006 to 2010.But in 2008 and 2009
we can see in a low level as 0.77 and 0.86.
Working capital turnover ratios are in a good level. It shows in increasing level.
The inventory turnover ratio shows a decreasing trend over the years. In the last year
(20010) it is in the lowest level 4.59.
Debtor’s turnover ratio started with a good range and continuing with declining form up to
2009. In 20010 it is in the highest level 7.65.
Creditors turnover ratio standing in the same position in 2006 and 20010.But in between
years it is fluctuating.
Cost of goods sold ratio is going in decreasing range up to 2009. Again in 20010 it
increased.
The liquidity position of the company is weak. Because current assets and current liabilities
are increasing in all the years. Hence it shows the inefficiency of the organization.
SUGGESTIONS
Even in 2010 current assets have increased, organization should take necessary steps to
keep and increase the ratio of current assets.
75
Even the liquidity position is satisfactory level company should concentrate on that point.
As per the absolute liquid ratio of this study cash position of the company is not
satisfactory. Hence company should take necessary steps.
Organization should try to take adequate steps for increasing the working capital.
Company should take adequate actions to reduce the inventory holding period.
Organization should take measures to reduce the cost for selling the goods, which in turn
increases the profit.
The company has to give more importance in the utilization of all assets effectively.
The company should adopt suitable policies and measure to self the scrap and by
products obtained during the production process. So that it will generate an additional
source of revenue.
The operating expenses should be reduced as much as possible by adopting cost reducing
policy in relation to office and administrative overheads and selling and distribution
expenses etc.
The firm must ensure that the assets of units it utilized at its maximum either by reducing
idle capacity assets on by avoiding excessive investment in fixed assets.
It would be advisable if the concern could maintain liquid cash in case to meet any
sudden expenses.
The company can plan of investing more amounts on research and development in order
to develop innovative products.
The company is showing a fluctuating trend, it is not advisable to be like this. So the
company should concentrate more in a constant rate of growth.
CONCLUSION
The financial position of the company was analyzed and interpreted. The analysis and
interpretation of data relating to working capital management of Oushadhi Pharmaceuticals
Corporation helped me to reach a conclusion that working capital efficiency of Oushadhi
76
Pharmaceuticals Corporation is not much better. Since the working capital amount shows an
increasing trend reveals that the company is in a good position to meet its day to day obligations.
The management of the company should look in to the reason for loss and put extra
efforts taken for the operations of the company to obtain better financial results.
BIBLIOGRAPHY
Books
Jain S.P and Narang K.L Advanced Accountancy – 14th Revised Edition, 2004.
77
Maheshwari S.N, Financial Management – 5th Revised and Enlarged Edition, 1997.
R. M Srivastava, Financial Management and Policy, Mumbai, Himalaya Publishing
House.
Journals
Annual Reports of Oushadhi Pharmaceuticals Corporation (IM) Kerala Ltd. from
2005-2006 to 2009-2010.
Oushadhi Corporate Profile
Review of Literature- a) Debasish Sur and Joydeep Biswas
b) Prasad
c) V.V.Reddy and S.B.Patkar
d) J.P.Singh and Shishir Pandey
e) Rakesh Kumar Baral
f) Thomas.M.Krueger
Websites
www.oushadhi.org
APPENDIX
OUSHADHI PHARMACEUTICALS CORPORATION (IM) KERALA LTD.
Balance Sheet as on 31 st March 2006
78
As on 31st March 2006(Rs.)
As on 31st March 2005(Rs.)
SOURCES OF FUNDS
Share Holders Fund
Share Capital 41759720 35093720
Advance towards Share capital 1000000 6666000
Reserves & Surplus 27827721 70587441 24707577 66467297
Deferred Tax Liability 814883 814883
Total 71402324 67282180
APPLICATION OF FUNDS
Fixed Assets
Gross Block 59960333 50567498
Less: Depreciation 32670281 29570050
Net Block 27290052 20997448
Capital Work-in Progress 0 4140094
Current Assets, Loans & Advances
Inventories 17239037 14439911
Sundry Debtors 24865020 31959809
Cash & Bank Balances 49684946 40927691
Other Current Assets 8799225 10251534
Loans & Advances 1115154 838757
101703382 98417702
Less: Current Liabilities & Provisions
Sundry Creditors 22515907 21237233
Other liabilities 26990490 26117826
Provisions 8114713 8972005
57621110 56327064
79
Net Current Assets 44082272 42090638
Miscellaneous Expenditure to the Extent Not Written off or Adjusted
30000
54000
Total 71402324 67282180
OUSHADHI PHARMACEUTICALS CORPORATION (IM) KERALA LTD.
Balance Sheet as on 31 st March 2007
As on 31st march 2007(Rs.)
As on 31st march 2006(Rs.)
80
SOURCES OF FUNDS
Share Holders Fund
Share Capital 45159720 41759720
Advance towards Share capital 2500000 1000000
Reserves & Surplus 34812699 82472419 27827721 70587441
Deferred Tax Liability 915734 814883
Total 83388153 71402324
APPLICATION OF FUNDS
Fixed Assets
Gross Block 62923036 59960333
Less: Depreciation 35993060 32670281
Net Block 26929976 27290052
Capital Work-in Progress 113210 0
Current Assets, Loans & Advances
Inventories 20417246 17239037
Sundry Debtors 32193742 24865020
Cash & Bank Balances 58703536 49684946
Other Current Assets 12471133 8799225
Loans & Advances 1135494 1115154
124921151 101703382
Less: Current Liabilities & Provisions
Sundry Creditors 27586162 22515907
Other liabilities 31162911 26990490
Provisions 9842110 8114713
68591183 57621110
Net Current Assets 56329967 44082272
81
Miscellaneous Expenditure to the
Extent Not Written off or Adjusted
15000
30000
Total 83388153 71402324
OUSHADHI PHARMACEUTICALS CORPORATION (IM) KERALA LTD.
Balance Sheet as on 31 st March 2008
As on 31st march 2008(Rs.) As on 31st march 2007(Rs.)
82
SOURCES OF FUNDS
Share Holders Fund
Share Capital 48359720 45159720
Advance towards Share capital 4000000 2500000
Reserves & Surplus 52404631 104764351 34812699 82472419
Deferred Tax Liability 1323715 915734
Total 106088066 83388153
APPLICATION OF FUNDS
Fixed Assets
Gross Block 70398024 62923036
Less: Depreciation 39782885 35993060
Net Block 30615139 26929976
Capital Work-in Progress 9095910 113210
Current Assets, Loans & Advances
Inventories 28492789 20417246
Sundry Debtors 59956605 32193742
Cash & Bank Balances 58137332 58703536
Other Current Assets 15516908 12471133
Loans & Advances 1729534 1135494
163833168 124921151
Less: Current Liabilities & Provisions
Sundry Creditors 43498386 27586162
Other liabilities 36582078 31162911
Provisions 17375687 9842110
97456151 68591183
Net Current Assets 66377017 56329967
83
Miscellaneous Expenditure to the Extent Not Written off or Adjusted
0 15000
Total 106088066 83388153
OUSHADHI PHARMACEUTICALS CORPORATION (IM) KERALA LTD.
Balance Sheet as on 31 st March 2009
As on 31st march As on 31st march 2008(Rs.)
84
2009(Rs.)
SOURCES OF FUNDS
Share Holders Fund
Share Capital 48359720 48359720
Advance towards Share capital 12800000 4000000
Reserves & Surplus 61832037 122991757 52404631 104764351
Deferred Tax Liability 1327037 1323715
Total 124318794 106088066
APPLICATION OF FUNDS
Fixed Assets
Gross Block 84078454 70398024
Less: Depreciation 45245024 39782885
Net Block 38833430 30615139
Capital Work-in Progress 18548086 9095910
Current Assets, Loans & Advances
Inventories 28323123 28492789
Sundry Debtors 54602633 59956605
Cash & Bank Balances 65993619 58137332
Other Current Assets 30589086 15516908
Loans & Advances 1743414 1729534
181251875 163833168
Less: Current Liabilities & Provisions
Sundry Creditors 40216377 43498386
Other liabilities 59107935 36582078
Provisions 14990283 17375687
114314595 97456151
85
Net Current Assets 66937278 66377017
Miscellaneous Expenditure to the Extent Not Written off or Adjusted
0 0
Total 124318794 106088066
OUSHADHI PHARMACEUTICALS CORPORATION (IM) KERALA LTD.
Balance Sheet as on 31 st March 2010
86
As on 31st march 2010(Rs.) As on 31st march 2009(Rs.)
SOURCES OF FUNDS
Share Holders Fund
Share Capital 61159720 48359720
Advance towards Share capital 0 12800000
Reserves & Surplus 80970291 142130011 61832037 122991757
Deferred Tax Liability 1327037 1327037
Total 143457048 124318794
APPLICATION OF FUNDS
Fixed Assets
Gross Block 90108893 84078454
Less: Depreciation 51826358 45245024
Net Block 38282536 38833430
Capital Work-in Progress 23601589 18548086
Current Assets, Loans & Advances
Inventories 35537010 28323123
Sundry Debtors 33299383 54602633
Cash & Bank Balances 99601775 65993619
Other Current Assets 30606278 30589086
Loans & Advances 1533842 1743414
200578287 181251875
Less: Current Liabilities & Provisions
Sundry Creditors 45012676 40216377
Other liabilities 60290932 59107935
Provisions 13821755 14990283
119125363 114314595
87
Net Current Assets 81452924 66937278
Miscellaneous Expenditure to the Extent Not Written off or Adjusted
120000 0
Total 143457048 124318794
88