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SUMMER TRAINING PROJECT REPORT ON
WORKING CAPITAL MANAGEMENT FOR
“GKB Rx LENS PVT. LTD.”
FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF
POST GRADUATE DIPLOMA IN MANAGEMENT
UNDER THE GUIDANCE OF: UNDER THE SUPERVISION OF:Prof. Sweta Saurabh Mr. Arni Tiwari (Faculty, PGDM, G.B.S.) (Branch Manager, Accounts , GKB)
SUBMITTED BY - MUKESH SHARMA PGDM 2011-13
Galgotias Business School
APPROVED BY AICTE, MINISTRY OF HRD,
GOVT. OF INDIA)
1, KNOWLEDGE PARK, PHASE II,
GREATER NOIDA. (U.P.)
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CERTIFICATE
This i s to cer t i fy tha t t he project work done on ‘Working
Capital Management’ i s a bonaf ide work car r ied out by
Mr.Mukesh Sharma under my supervis ion and guidance . The
projec t repor t i s submi t ted towards the pa r t ia l ful f i l lment of 2
– year , ful l t ime Pos t Graduate Diploma in Management .
This work has not been submi t ted anywhere e lse for any o ther
degree /diploma . The or iginal work was car r ied dur ing Ma y 1 ,
2012 to June 20, 2012 in ‘GKB Rx Lens Pvt . Ltd’ .
Name & Sign of Facul ty:
Date:
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ACKNOWLEDGEMENT
This was a big pro ject and i t has been a very herculeous task to
make i t a success s tory. Over thi s ent i re project work has been
a very me morable journey for me.
Fi rs t of a l l , I would l ike to t ake the opportuni t y to express my
s incere thanks and grat i tude to Mr. R.K. Maheshwary (C.F.O. ,
GKB) & Mr. Arni Tiwari (Branch Manager Accounts , GKB)
for a l lowing me to do the projec t a t GKB and al so providing
me valuable guidance and unfl inching support wi thout which
thi s project would not have been poss ible .
I am highly ob l iged to Mr. V.N. Tiwari (Manager, Credi t
Control Department) & Mr. Amresh Tiwari (Accounts-
Executive, Credi t Control Department) for h is enormous
support and guidance f rom t ime to t ime dur ing the process .
My s incere regards t o Prof . Dr. Renu Luthra, Director,
G.B.S. , Dr.V.K. Luthra, Director, CRC, G.B.S. my project
facul ty guide Prof . Sweta Saurabh , for provid ing me r ight
d i rec t ion and opportuni t y whenever I faced problems dur ing the
whole project .
Las t but not the least , I would l i ke to express my gra t i tude to
the ent i re manage ment of GKB who have al so co-operated wi th
me for the successful complet ion of my project .
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Declaration
I , Mukesh Sharma , Rol l no 11PGDM 053, s tudent of PGDM
of Galgot ias Bus iness School , Grea ter Noida , hereby dec lare
tha t the project repor t on “WORKING CAPITAL
MANAGEMENT at GKB Rx LENS PVT. LTD.” i s an
or igina l and authent icat ed work done by me.
I fur ther declare that i t has not been submi t ted el se where by
any o ther person in any of the inst i tut es for t he award of any
degree or diploma.
Name of t he s tudent :
Date:
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PREFACE
The need for working capital to run the day-to-day business activities
is to be emphasized. We wil l hard l y f ind a business f i rm which
does require any amount of working capital. The goal of working
capital management is to manage firm’s current assets and liabilities in
such a way that a satisfactory level of working capital is maintained. This is
important because if it cannot maintain a satisfactory level of working
capital, it is likely to become insolvent and may even be forced into
bankruptcy. The current assets should be large enough to cover its
current liabilities in order to ensure a reasonable margin of safety.
The interaction and balance of current assets and current liabilities is
therefore the main theme of theory of working capital.
Thus for the fulfillment of the above requirement a project was
undertaken by me on the topic “WORKING CAPITAL MANAGEMENT FOR
GKB Rx LENS PVT. LTD”. For the convineance of study the whole
current assets and current liabilities are further divided into cash
management, receivables management, inventory management however the
emphasis in the study is on the financing of working capital
requirement which is mainly through banks, starting right from
assessment of projection of working capital requirements, preparation of
CMA form up till sanctioning of limits by bank.
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TABLE OF CONTENTS: Page No.
Execut ive Summary 6-12
i ) Int roduct ion 7i i ) Aims and Object ives 8i i i ) Methodology 9iv) Analys is 10v) Conclusions 11vi ) Recommendat ions 12
Part –I An Overview of the Organizat ion 13-49
i ) Int roduct ion 14i i ) His tory of the Organizat ion 15-18
i i i ) Journey f rom GKB to VISION Rx 19-31iv) Depar tmental Study 32-37v) Detai led s tudy 38-49
Part-II Project Overview 50-85
i ) Int roduct ion 52-63i i ) Aims and object ives 64
i i i ) Research Methodology 65-66 iv) Analys i s 67-78v) Conclusions & Recommendat ions 79
vi) Limi tat ions 80vi i ) Overa l l Exper ience 81-85
Part –III 86-99
i ) Bibl iography 87i i ) Annexures 88-99
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The projec t t i t led “Working Capi ta l Management” bas ical l y
engul fs t he ef f ic iency wi th which working capi ta l i s managed at
GKB Rx Lens Pvt Ltd.The Projec t a t a glance is furnished as
under -
Name of the uni t : GKB Rx Lens Pvt Ltd.
Reg is te red & Head Of f ice : P -4 Kasba I ndust r i a l E s tate P hase- I
Ko lkata -700107 Phone:033-24424354 , 4937
E-Mai l : gkbca l@vsn l . com W ebs i t e : www.vis ionrxlab.com
Cons t i t u t i on: P r iva te L im i t ed company
L ine Of Act iv i t y : Manuf actu r ing of Ophtha lmic Lenses , Trad ing in Dom est ic & In t erna t iona l marke ts .
Em ploym ent Genera t ion: E igh t hundred and th i r t y f i ve
Banker ’s t o t he Company: State Bank of India Commercia l Branch Bal lygunge 50 A Gariahat Road Kolkata-700019
Cred i t L im i ts en joyed : Fund Based
A) Cash Credit - 13 Crore
B) Term Loan - 20 Crore
Non fund Based
A ) B ank Guaran tee -25Lakhs
B) L /C- 10.00 Crores
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The aims and object ives of the s tudy i s to make an in depth
anal ys i s of the nature of working capi ta l management and i t ’s
ac tual requi rement for the company. The s tudy wi l l a l so focus
on assess ing the working capi ta l needs of a company f rom the
banker ’s point of view and this wi l l be compared to see
whether i t -
1) Matches the es t imates of the company.
2) The exis tence of mis-match between the
compan y’s requi re ment vis -a’vis the bankers .
This whole project is based on assessing the Working capi ta l
requi rement of a manufactur ing uni t wi th major focus on
domest ic expansion as wel l to compete in inte rnat ional market
of qual i t y prescr ipt ion lenses . The s tudy compr ises to know in
detai l s t he role of bankers and that of t he shareholders in
funding capi ta l projec ts , working capi ta l forecas t and
favorable/unfavorable impact of Capi ta l Gear ing.
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A Research Design is the framework or plan for a study which is used as a
guide in collecting and analyzing the data collected.
The basic objective of research cannot be attained without a proper
research design. It specifies the methods and procedures for acquiring the
information needed to conduct the research effectively. It is the overall
operational pattern of the project that stipulates what information needs
to be collected from which sources and by what method.
RESEARCH DESIGN : DESCRIPTIVE
This s tudy i s l imi ted to one organiza t ion onl y, hence i t i s
Exploratory in nature . The me thodology adopted i s col l ect ion
of da ta f rom Primar y and Secondary sources .
SAMPLING TECHNIQUE : CONVENIENCE SAMPLING METHOD
This i ncludes ana lys i s of Balance Sheet , Operat ing Cycle
anal ys i s , pas t ana lys i s , review of compan y’s interna l document
e tc . as par t of the Primary data col lect ion .
Impor tant ins t i tu t ions associated wi th the funct ion of the
compan y inc lus ive of bankers and other organizat ions formed
a source of Secondary data col lect ion .
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Anal ys i s has been based on CMA data method vi s-à-vis cur rent
assets in es t imat ion of working capi ta l requi rement f rom the
compan y’s point of view and the Flexi Finance me thod from
the Banker ’s poin t of view.
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Based on es t imates we f ind tha t there is no var iance between
the company’s requirement and the Banker ’s assessment , which
has been expla ined in de tai l wa y in par t I I of the projec t .
However , the Compan y i s in need for higher l imi t s t o the
extent of Rs .17 crores .
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The ac tual requirement of working capi ta l f rom the compan y’s
po int of view and assessment there of made b y thei r Banker’s
i s subject to the annual per formance of the company and close
post c redi t sanct ion and moni tor ing by i ts Banker’s . In view of
the above we recommend prudence on the par t of the compan y
in ut i l iz ing the funds obtained f rom the Bank vis -a vis proper
d isbursement by thei r Bankers .
The Company i s pr i ma fac ie e l igible for higher l imi t s to the
extent of Rs .17 crores . However , due to the joint venture wi th
Essi lor Int ernat ional , France the compan y proposed to ra i se
and fund i ts working capi ta l requi rements f rom i ts own
sources . Hence, no addi t iona l l imi ts are asked for by the
compan y f rom i t s bankers .
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GKB ini t i a l l y was a pa r tnership f i rm in the name and s tyl e of
Gopal Kri shna Brothers which ma inly s tar ted operat ing s ince
1959 in manufactur ing of ophthalmic lenses and had i ts
manufac tur ing act ivi t ies car r ied a t Agra . The compan y under
s tudy i s an exclus ive ent erpr ise of Mr. B.K. Gupta. This
compan y i s exclusively engaged in the manufac tur ing,
processing, t rading and development of ophthalmic prescr ipt ion
lenses and i ts act ivi t i es ma y be regarded as that of vis ion-care ,
heal thcare and of l i fes tyl e product manufac tur ing .
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“GKB”, the connotat ion denotes a par tnership f i rm previousl y
known to be “Gopal Kri shna & Brothers” had an as tute
entrepreneur and leader in the form of Mr. B.K. Gupta. This
par tnership f i rm was into ophthalmic lens business s ince 1959
with i t s smal l manufactur ing faci l i t ies in Agra wi th the he lp of
domest ic technology. Mr. B.K. Gupta, a person of own
d ynamism and class of pe rsonal i ty broke away f rom par tnership
and s tar ted his f i rs t re ta i l opt ical shop in Gariaha t in Kolkata i n
t he yea r 1968 in the name and s t yle of GKB Opticals . Within
just couple of years , GKB Opticals was a fascina t ing name
a mong those who needed a visual correct ion and s tar ted taking
shape of high value brand image.
Number of re ta i l out le t s s tar ted increas ing in and across Kolkata
and had a very h igh presence in the mind of Kolkat tans . Mr. B.
K. Gupta , who focused ini t ia l l y on the hor izontal expans ion of
t he re tai l out le t s , joined by h is two sons namel y Mr. S .K. Gupta
and Mr. Lal i t Gupta taking a lead in the ver t ical expans ion of
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the ophthalmic bus iness . I t was in the year 1985 when aseparate
company was formed by the t r io in t he name of GKB Rx Lens
Pvt . Ltd. t o focus exclusive ly on manufactur ing of high qual i t y
prescr ipt ion lenses by br inging high-end t echnologies avai lable
t o the consumers of wes tern countr ies . I t was a real revolut ion
in t he Indian Ophtha lmic Indust ry where GKB Rx Lens Pvt . Ltd.
of fered Indian consumers CNC (computer numer ical l y
cont rol led) l enses wi th 100% accuracy of visual cor rect ion. The
two companies GKB Opt ica ls Pvt . Ltd. and GKB Rx Lens Pvt .
L td. togethe r had a cut t ing edge advantage over the compet i t iors
and had given a f i l l ip to t he group. Both the companies under
t he dynamic leadership of Mr. B. K. Gupta and hi s sons ’ der ived
reputat ion and bus iness by br inging utmos t sat is fact ion to the
Indian consumers taking advantage of cut t i ng edge technologies
and the s ta te of the a r t products of fered to every n iche segment .
Whi le GKB Opticals , showcased products of Se iko - from
Japan, Rodens tock - from Germany, Car t ier , Swarovski , Versace,
Mont Blanc , Hugo Boss , Porsche, Tommy Hi l f iger , Vogue,
Gucci , Armani , Oakley and Levis , GKB Rx Lens had t ie -ups
wi th interna t ional manufacturers for high-end products and
manufactur ing processes .
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In the year 2011-12 GKB Opticals i s a group of re ta i l
ophthalmic out le ts compr is ing 96 exclusive high-end counters
spread al l ac ross the count ry garner ing a turn-over of around
Rs . 9702.72 Lakhs employing 835 employees . GKB Rx Lens is a
company of 101 Crores sales posted in 2011-12 with i t s pan
India presence through 14 branches and 11 service cent re wi th
s ta te of the ar t manufactur ing fac i l i t ies a t a l l branches . I t has
i t ’s Expor t Oriented Uni ts a t New Delhi , Kolkata and Cochin
which together export ophtha lmic lenses to European countr ies
worth 5-6 Crore a month. The total manpower s t rength wi th
GKB Rx Lens is a round 835 employees .
Keeping pace wi th t ime and ever changing tas te of consumers
GKB Rx Lens embarked on a join t venture wi th world’s largest
l ens manufacture r Essi lor Interna t ional in t he year 2006. This
s tep is again a l andmark dec is ion taken by the Board of
Direc tors of GKB Rx Lens to keep the ever- increas ing inf lux of
i nternat ional compet i t i on in the Indian Market .
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PEOPLE BEHIND GKB Rx LENS PVT. LTD.
The founder of th is premier organizat ion i s Mr. Bri jendra Kumar
Gupta, an outs tanding ent repreneur . Apart f rom the Mr.Gupta
t he other people who are cont inuous ly cont r ibut ing for the
development of GKB are as fol lows-
Mr.Sanjiv Gupta ---------- Director Operation
Mr.Lalit Gupta --------- Director Marketing
Mr.R.K.Maheshawry ----- C. F. O.
Mr.Arni Tiwari ------------ Branch Manager Accounts
Mr.R.P.Tripathi ---------- Manager National Operation
Mr.M.P.Gupta ----------- Manager Accounts
Mr.A.N.Saha ------------- Manager Finance
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I t ’s founder , Director Mr. B.K. Gupta incorporated GKB RX
LENS PRIVATE LIMITED in November 1985 a t Calcut ta ,
ventur ing into set t ing up India ’s mos t modern Prescr ipt ion Lens
Laboratory in Calcut ta equipped with the la tes t CNC machines
impor ted f rom LOH German y.
This lab produces world-class
prescr ipt ion lenses in both glass
& plas t ic to meet the needs of
t he count ry’s opt ic ians .
As par t of i t s long-term st rategy to reach out i t s customers
(opt ic ians & wholesa lers ) in regional a rea , t he compan y opened
satel l i te prescr ip t ion labs and se rvice centers equipped with
gr inding and edging uni t s . I t opened i t s own uni t i n 1991 at
Chennai , in 1993 at Bangalore , in
1994 another service uni t a t
Calcut ta , i n 1995 at Cochin and in
1996 a t Delhi .
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In 1995, GKB Rx Lens car r ied out a major expansion plan in the
f i e ld of export . I t se t up a capi ta l - intens ive export uni t a t
Kolkata that included the la tes t LOH CNC E2 to mass -produce
mineral ophthalmic l enses . Toda y the compan y i s being
recognized as one of the major suppl ie rs of progressive, bi focal
and s ingle vis ion lenses i n
t he world market . The
h ighl y capi ta l extensive
p lant has been
commissioned in ear ly 1998
a t the compan y’s new
premises in Kasba
Indus tr ia l Estate , Kolkat a .
GKB has earned the dis t inct ion of managing the most successful
d i spens ing showrooms in the count ry. On 15 t h August 1997 on
the eve of India’s 50 t h Independence i t inaugura ted i t s f i rs t
showroom located ins ide Sankara Nethralaya a t Chennai . Toda y
GKB Opticals i s India ’s leading cha in of world-c lass opt ical
products boast ing a t otal of 96 reta i l out le t s present in ever y
ma jor c i t y in the country. I t ’s re ta i l act ivi t ies were separated to
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form an independent ent i t y in November 2005, j us t before the
joint Venture wi th Essi lor .
GKB Rx Lens Pvt . Ltd is the hi - tech
ophthalmic lens process ing compan y
announced i t ’s 50/50 Joint Venture wi th
Ess i lor India , the 100% owned Indian
subsidiary of Essi lor Internat ional France,
the worlds ’ leade r i n ophtha lmic l enses in
January, 2006.
“Vis ion Rx Lab”, the new branding i s equipped with the la tes t
t echnology and i t i s recognized int ernat ional l y for i t s qua l i t y
and the commitment to de l iver l enses across the globe in the
shor tes t poss ible t ime .
Today i t has become a major brand in man y countr ies and
cont inues t o increase i t s presence every da y. The y have near l y
850 emplo yees and 14 prescr ipt ion
laborator ies equipped with the
la tes t technology to produce world-
c lass l enses l ocated in major c i t i es
i n the count ry.
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OBJECTIVES & VALUES :
GKB Rx Lens promotes h igh
technology lenses i n both glass and
p las t ic . Even though, the indust ry
t rend in ophthalmic l enses is t owards
market ing the bes t qual i t y l enses , the company through i ts
automated p lants , associat ions wi th
the global l eaders in t he opt ical
indus t ry l ike Corning France and
Sa t is - loh German y and wel l
organized di s t r ibut ion s ys t ems is
a t tempt ing to develop a spec i f ic
n iche in the opt ical indus try.
In 1991, GKB Rx Lens held the di s t inct ion to become the
me mber of OLA (Opt ica l Laboratory Associat ion) , USA.
GKB Rx as a compan y has a lways s tood for qual i t y. I t has role-
modeled i t se l f as a top qual i t y opt i cal compan y that
e mphasi zes on high qual i t y new generat ion lenses .
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MARKETING & MANUFACTURING NETWORK
To be ready for tomorrow’s demands ,
GKB Rx Lab br ings innovat ive lens
products and world-class optomet r ic
solut ions that cate r to the needs of i t ’s
spectacle wearers . I t has par tnerships wi th leading
internat ional names l i ke Se iko (Japan) , Rodenstock
(German y) , Opt ima Resolut ion (USA), Shami r
( Is rael ) , Transi t ions (USA) and Younger Opt ics
(USA).
Backed with world-c lass serv ice by an exper ienced and
commit t ed team who are working round the clock to serve our
customers (opt ic ians and wholesale rs) across India and world,
makes GKB Rx Lab the f i rs t choice for qual i t y l enses .
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Domestic Market :
Current ly serving more than 8000 opt ic ians in t he domest ic
market , GKB has been successful in pioneer ing a leadership in
t he Indian opt ical scenar io through i t ’s l a tes t , advanced
automated plants from German y, France and Switzer land and in
col laborat ion wi th global leaders l ike Corning France , SEIKO
Japan, Rodens tock and Sat is loh Germany. At present , being the
count ry’s l arges t Rx lens manufacture r , GKB Rx Lens has a total
capaci ty of producing 9000 Rx lenses everyda y in a l l i t s high
technology labs in Kolkata , Chennai , Cochin , Bangalore ,
H yderabad, Pune , Vizag, Ahmedabad, New Delhi and Mumbai .
Addi t i ona l ly, 6500 lenses a re da i ly produced by i ts mass
product ion plant .
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Export Activ ities:
Apart f rom be ing the leader in th is developing and special ized
sec tor , GKB has managed to create a niche for i t s el f i n the
internat ional market , being the la rges t exporter of prescr ipt ion
lenses in India . GKB ente red into exports in t he 1970s and today
the company i s recognized as one of the major exporters ,
reaching out t o the advanced nat ions l ike U.S.A. , Canada,
F rance , Middle Eas t As ia , Far Eas t , Aust ral i a , Afr ica , Russ ia
and the Uni ted Kingdom wi th an annual growth of 23% in this
sec tor .
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Import:
The Company has a lso impor ted la tes t Automat ic Hard Coat ing
Plants f rom SCL Inte rnat ional , France and Freeform Lab f rom
Optotech, Germany. F inished and semi f inished lens are
impor ted form Seiko, Al t ra , Younger
e tc .
Technology & Quality Management systems
Vis ion Rx Labs a re equipped with the la tes t European
technology f rom Essi lor , Sa t is loh, Optotech and SCL among
o thers t o produce world-class lenses tha t conf i rm the CE
s tandards . I t fol lows internat ional qual i t y management s ys t ems
and has an extens ive exper ience, know-how and s t r ingent
cont rols to ensure opt imized ef f ic iency and qual i t y a t a l l
product ion s tages .
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Over the years, GKB’s commitment and dedication towards it’s
customers is witnessed by the highest quality of products and
services offered. With every new development, GKB is attempting to
develop a specific niche in the optical industry and at the
same time, remains loyal to its customers, providing
unique value additions at affordable prices, making
every product very much within the reach of the masses.
It has modeled a role for itself as a top quality Optical
Company in the world.
Vision :
To become a major, diversified, multinational, integrated company
with national leadership and strong environment consciousness,
playing a strong role in the industry of spectacle lenses.
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MISSION :
To achieve international standard of excellence in
all aspects of business (Domestic and International)
with focus on customers’ delight through product-
standard, quality-services and cost- reduction.
To maximize creation of wealth, value and
satisfaction for the stakeholders.
To attain leadership in developing, adapting and
assimilating state-of-the art technology for
competitive advantages.
To provide technology and services through
sustained Research & Development.
“Helping
the world
see better”
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THE RESOURCES
Human Resources
More than Eight Hundred mot ivated and wel l
exper ienced profess ional a re support ing var ious
ac t ivi t ies of the company as Lis ted Below:-
Accounts
Sales & Marketing
Production
Customer Support Service
Operation & Maintenance
Purchase & Supply
EDP
A substant ia l number of highly qual i f i ed and
exper ienced manpower is avai l able i n the
organizat ion.
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Equipment Resources & Off ice Automation
Ful ly compute r ized s ys tem with Microsof t Axapta connected wi th LAN & WAN al l over India .
The General study of some of the departments is explained below: -
1) Customer Support Service :
This is the one window ever on the look out for customers placing
orders with the company. Key customers like GKB Optical retail
outlets have the direct access to the online software of the company to
place their order which immediately goes for processing. Other
customers place their orders either through telephone, fax, e-mail or
through sales representatives who often visits this department where
orders are verified for their technical accuracies, stock availability and
an adequate lessoning with the customer are done before order goes for
processing. It’s a crucial department with enormous responsibility to
serve customer with exact requirement and timely deliveries. Truly, they
are the people who brings a smile on face of the customers.
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2) Inventory Department:
This department is centrally located at Kolkata with it is counterparts at each
of the branches. This department takes care of entire stocks right from raw-
materials and consumables to the finished products. They are responsible for
uninterrupted supply of raw-materials and consumables to the Central
Laboratory as well as to Branches Across the country.
This department keeps variety of lenses like Finished, Semi finished in
Glass, Plastic, Polycarbonate. Department Maintains the inventory through
integrated ERP named Axapta. After receiving the order form, the C.S.
Department issue the lens to lab (if semi-finished) and if it is finished lens
then the department issue the finished lens and sends it to the dispatch
department.
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3) Production:
The production department is having International quality of
machines like LOH V-PRO, LOH-50, etc.
Lens Process ing s teps in lab are given be low: -
Calculation Machine (computer)
Axis Marking
Blocking GeneratingLOH CNC
SmoothingLOH TORX
PolishingLOH TOREX
D Blocking(Cleaning Machine)
Quality CheckingNIDEK
Packing
T C&TMC
TINTFitting in Frame
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The whole product ion process s ta r t ing f rom the scra tch is
depicted in thi s p ictor ia l diagram.
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Manufacturing Facility:
I t has a complete setup of capi ta l intensive export & domest ic
uni t a t Kolkata which includes the la tes t LOH CNC E2
Generator to mass produce minera l ophthalmic lenses ,
specia l iz ing in Hi - index in 1.6,1.7 ,1.8,1.9. Today the compan y
is being recognized as one of t he ma jor suppl ier of such lenses
in t he world market . The compan y has e mbarked on world’s
bes t mul t i -coat ing sys tems from SATIS VACUAM of
Switzer land to under t ake hard coat ing on both glass and
p las t ic l enses . The highl y capi ta l extensive new plant has been
commiss ioned in ear l y 1998 at company’s new premises in
Kasba Indus tr ia l Es ta te Kolkata . The Company ha d added LOH
V-50, the s mal l vendor i n lens making indus try to i t s bat tery of
automat ic machine , to provide thinner CR-39 and
Pol ycarbonate Lenses . The company has added in 2000 lates t
automat ic hard coat ing plant f rom France wi th lates t LOH
VPRO. For value added process ing of CR-39 and Pol ycarbonate
specia l ly Hi - index and Progress ive lenses .
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Finance & Accounts Department :
The mos t vi t a l depa r tment of any bus iness organizat ion is
f inance, which is a lways cons idered as l i fe l ine of the business .
GKB has a lso developed an eff ic ient accounts depa r tment wi th
Axapata sys tem, which is e ffect ively spi l t i n to two divi s ions :
1) Finance &
2) Accounts
1) Finance Department :
The Finance depar tment of the compan y i s pr imar i l y
engaged in moni tor ing and control of var ious l imi ts
sanct ioned by i ts bankers . The f inance depar tment process
d iagram i s as under : -
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Finance depar tment looks up specia l ly into the fol lowing
funct ion as under :
Cash Credit: - I t i s actua l ly a fund based benef i t which is
requi red for inf low/out f low of cash through payment to:
1 . Raw mater ia l suppl ier
2 . Freight forwarder
3.Other includes - -
FINANCE DEPARTMENT
BANKING
FUND BASED(CASH CREDIT)
NON-FUND BASED(LETTER OF CREDIT & BANK GUARANTEE)
TERM LOAN OTHERS (PAYMENT
MONITORING)
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a) Factory /Off ice Overhead
b ) Import & Export Mat te rs
c) Statu tory Pa yment
Keeping the fund based limit by deposi ting receivables
and other col lect ions.
Letter Of Credit- This i s non fund based l imi t , which is
u t i l ized for the purchase of raw mater ia l f rom suppl ie r , and
uses per iod var ies f rom 60 da ys to 180 days depending upon
the term of wi th suppl ier .
Bank Guarantee - This is required aga ins t secured c redi t
benef i t or for providing Performance Guarantee.
Fund based or non fund based l imi t s are genera l ly secured by
Hypothecat ion of s tock & book debts of the compan y and
mor tgaging of f ixed assets .
Records of s tock and book debt repor t a re sent to t he bank
every month. Bank s t ipula tes for Margin mone y agains t i s sue
of L/C and Bank Guarantee.
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Normal ly for L/C guaranteed margin mone y by bank i s 10% and
for f inancial guarantee i t i s 25%. This pe rcentage va r ies f rom
compan y to company a lso f rom bank to bank. This i s f ixed
wi th the rela t ion of the company wi th bankers a lso wi th the
amount involved.
While sanct ioning the l imi t s for fund based and non-fund based
l imi t s , bank imposed some condi t ions as to drawing power
keeping margin mone y condi t ion.
Against s tock bank wil l a l low 75% value of the s tock and
against book debt the al lowable drawing ma y be 60% to 75%
depending upon compan y’s pe rformance t rack records . Bank
wi l l never al low drawing l imi t s on the ent i re value of s tock
and book debts as per company’s record .
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TOTAL LOAN FUNDED &
NON-FUNDED TERM LOAN:
A. FUND BASED LIMIT:
a) Term Loan
b) Export Packing Credi t
B. NON FUND BASED LIMIT
a) Let te r of Credi t
b) Bank Gurantee
2) Accounts Department :
The accounts depar tment of the compan y maintains the
fol lowing records in onl ine ERP Mic rosof t Axapta .
The Axapta have fol lowing modules-
a) General Ledger
b) Accounts Receivable
c) Accounts Payable
d) Inventory
e) Basic
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a) General Ledger:
Genera l ledger carr ies fol lowing i tems:
Chart of Accounts
Journal
Inqui res
Report s
Periodic
Setup
Journal :- General Journa l
Inquires :-
Ledger Transact ion
Audi t Trai l
Consol idat ion
TDS Depos i t / cer t i f icate detai l
Excise payment detai l s
Reports :-
i) GKB In-House Reports
Service credit note register
Material credit note register
Sales Tax register
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Other Misc. reports includes
Trai l Balance
Prof i t & loss s ta tement
Balance shee t
Consol ida ted debtor ’s l edger
Input tax credi t regis te r
Receipt l edger
Branch wise col lect ion report
Export sa les report
Export credi t note regis te r
Product ion loss report
i i) Base data reports
i i i) Transact ion :
Ledger Transact ion
Accounts Statement
iv) External reports
Deprecia t ion Schedule
v) Reconci l iat ion
Bank
Customer
Vendor
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vi) Per iodic :
Exchange adjus tment
Ledger set t lement
Set up :-Exchange rates
TDS
Struc ture
Excise
Sales Tax
Journal
Post ing
2) Accounts Receivable :
I t i s the main module of t he whole business cyc le and is
genera ted under these fol lowing s teps :
Order Cum Invoice (OCI) : At f i rs t a l l the orders placed
b y cus tomers are punched in the sys t em b y customer service
depar tment . They punch the order and check the ful l de tai ls
of pl aced order as per customer’s given presc r ip t ion and
then they calcula te the pr ice and val ida te i t .
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Af ter val idat ion OCI wil l ref lect i n the sys tem of inventor y
depar tment . Inventory depar tment then checks the
prescr ipt ion to f ind whether i t i s S tock or RX lens. I f i t i s
found to be a s tock lens then the y i ssue the same and post
t he journal entry through inventory se tup named as “Issue
f rom Inventory” feed into thei r ERP package s ys t em as
fol lows-
Stock Lens Issued A/c………. Dr .
To Work in Progress A/c
This issued quant i t y of l ens wi l l automat i cal l y show reduced
f rom the tota l s tock of that par t icu lar i nventory .
After tha t t he same lens is sent to the d ispatch depar tment .
Dispa tch depar tment packs the mater ia l and they change the
s ta tus as ‘Ready for Dispatch’ and pass the Journal ent ry
into the i r sys tem as fol lows-
Work in Progress A/c…..……Dr .
To Stock Lens Receipt A/c.
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Then the mater i a l i s handover to the courie r depa r tment
and s ta tus is changed as ‘Ready for Dispatch to Del iver to
the Customer’ .
When the lens is del ivered then the same OCI Number wi l l
ref lect in the sa les order s ta tus as del ivered and f rom
thereon s tar ts the real job of accounts depar tment .
Accounts depar tment makes the par t y-bi l l twice a month.
Afte r complet ion of bi l l i ng the col lec t ion f rom cus tomers
(Sundry Debtors ) s tar ts on.
The Compan y has f ramed cer ta in pol ic ies regarding thei r
debtors as per the des ic ion of top level management . This
c redi t pol icy is shown in the fol lowing table .
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For Credit Period:
For Credit Limit:
Cash Period Credit Limits
Nil – Cash On Delivery Cash on delivery
15 Days ( 3months Avg. Sales *15/30) * 110/100 )
30 Days ( 3months Avg. Sales * 30/30) * 110/ 100 )
45 Days ( 3months Avg. Sales * 45/30) *110 / 100 )
60 Days ( 3months Avg. Sales * 60/30) * 110/ 100 )
90 Days ( 3months Avg. Sales * 90/30) * 110/ 100 )
Micro-Soft Axapta helps to exerc ise cont rol in thi s regards .
Moreover accounts depar tment dec ides t he credi t pe r iod and
credi t l imi t on the bai s of cus tomer’s turnover .
Accounts depar tment maintains these Sales A/c and Debtor ’s
l edger into thei r s ys tem only. Accounts a re not maintained
manual ly be yond the sys tem.
Credit Period Credit Days Parameter
Nil – Cash On Delivery If the monthly business is upto Rs.5000
15 Days If the monthly business is upto Rs. 5001 – 10000
30 Days If the monthly business is upto Rs. 10001 – 20000
45 Days If the monthly business is upto Rs. 20001 – 40000
60 Days If the monthly business is upto Rs. 40001 – 100000
90 Days If the monthly business is more than Rs.100001
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c) Accounts Payable :
The accounts payable ac t ivi t ies s tar t f rom plac ing of raw-
mater ia l orders to the suppl ie rs . Purchase depar tment
makes purchase order through the sys tem and i t re f lec ts
pending t i l l the mater ia l i s not received in the compan y’s
warehouse. When the mater ia l i s rece ived then purchase
depar tment matches actua l purchase order wi th cha l lan
rece ived f rom vendor . After ma tching the chal lan, the
purchase depar tment sends the cha l lan a long with way bi l l
i s sued by sales tax depar t ment to the accounts depar tment .
Accounts depar tment wi l l then pos t the purchase order in
the s ys t em and make the invoice as per raw-mater ia ls
suppl ied the by vendor .
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CONTENTS PAGE NO.
1. INTRODUCTION 52-63
2. AIMS & OBJECTIVES 64
3. RESEARCH METHODOLOGY 65-66
4 . ANALYSIS 67-78
5. CONCLUSION & RECOMMENDATIONS 79
6 . LIMITATIONS 80
7 . OVERALL EXPERIENCE 81-85
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1. INTRODUCTION :
My project s tudy i s pr imari ly a imed a t unders tanding the
working capi ta l management of ‘GKB RX LENS PVT.
LTD’ . Working Capi ta l Management is t he s ignif icant
funct ion of f inancia l management for every f i rm. I t i s
impor tant for two basic reasons-
Inves tment in cur rent asset s , which represent a
subs tant ia l por t ion of tota l inves tment .
Investment in current assets and leve l of cur rent
l i abi l i t i es , which have t o be c lose ly watched to
keep i t in the rat io of 2:1.
The impor tance of working capi ta l management is re f lected
on the fact that f i nancia l managers of a compan y whateve r i t s
s ize ma y be spent a great dea l of t ime in managing current
asset s and current l iabi l i t ies .
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I t he lps them during…….
Arranging shor t te rms f inance for genera l operat ion and
peak level require ment .
Negot ia t ing favorable c redi t t erms .
Cont rol l ing the movement of cash.
Adminis t ra t ing the accounts receivables (Sundry Debts ) .
Moni tor ing the investment in inventor ies .
.
All these a re the major areas of concern for a Financial
Manager . In the management of Working Capi ta l which is
pr imar i ly re f lected in the character is t i c of cur rent assets , i t
has t o be kept in mind that current assets have the fol lowing
spec i f icat ions-
Short l i fe spam
Gets t ransform swif t l y i n to other asset s forms and
the l i fe spam of cur rent assets depend upon the
t ime requi red in the act ivi t ies of
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Procurement
Product ion
Sales
Col lect ion & degree of synchronizat ion
a mong them.
Current asset s , which are swif t l y t rans formed in to o ther asse ts
forms , a re re f lected in-
Cash, which i s used for acquir ing raw mater ia ls .
Raw mater ia l are t ransformed into f ini shed goods
( this t ransformat ion ma y involve severa l s tage of
work in progress )
Finished goods general ly sold on credi t are
conver ted into account rece ivable (Book Debt) .
Account rece ivable on real izat ion generates cash.
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A diagrammat ic anal ys i s of the above i s given which shows the
cyc l e of current assets t rans format ion:
WAGES, SALARIES FACTORY OVERHEAD
RAW MATERALS
SUPPLIERS
FINISHED GOODS
ACCOUNTS RECEIVABLES
WORK IN PROGRESS
CASH
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The working capi ta l needs of a f i rm whether operat ing in the
domest ic market or i n foreign market a re i nf luenced by var ious
fac tors . Some of the impor tant ones are: -
Nature of t he bus iness
Seasonal i t y of ope rat ions
Product ion pol icy
Market condi t i ons
Condi t ion of demand and supply
Service provider f i rms , which have a shor t opera t ing c yc le and
which sales predominant ly on cash basi s have a modest
working capi t a l requi rement . On the other hand, manufactur ing
compan y which have a long operat ing cyc le and which sel ls
la rge ly on credi t have substant i a l working capi t a l management .
Simil ar ly, companies , which have market seasonal i t y i n
operat ion have highly f luctua ted working capi ta l requi rements .
In such case there i s a peak level demand of working capi ta l ,
which ma y be requi red for a few months as compared to thei r
overal l requi rement for an ent i re f inancial
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year . This i s most ly not iced in the case of t ea , sugar-cane
woolen indus try etc .
Product ion pol ic ies depending upon the company-fol lowed
pol ic y is one of the const i tuents of working capi ta l
requi rement . In some cases they ma y have a di rect and posi t ive
cor relat i on wi th f i rms under going seasonal f luc tuat ions in
sales .
Domest ic compet i t ions and global requi rement a lso have
impor tant bear ing on working capi ta l needs. When compet i t i on
is severe compan y ma y requi re a la rger inventory of f inished
products . Simi lar ly on the export f ront a cont inuous suppl y
posi t ion as per impor te rs requi rement ma y also require holding
of l a rger inventory of f ini shed product t o be sh ipped as per
schedule given by the impor t er .
The condi t i ons of demand and supply are a l so important as a
par t of working capi ta l management . The inventory of raw
mater ia l , spares and s tores depends on the condi t ion of
suppl y. I f the supply i s prompt and adequate , compan y can
manage wi th smal l inventory. But i f the supply i s unpredic table
or has to be import ed, the company would have to acqui re and
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carry l ager inventory on an average to ensure t he cont inui ty of
product ion.
Every compan y fo l lows a working capi ta l pol i cy adopted as per
the needs of the compan y. This pol icy ma y be -
Conservat ive
Moderate
Aggress ive
Fol lowing table shows below cer ta in working capi t a l pol ic y
tha t can be adopted by any f i rm.
Modera te overal l Working capi ta l pol icy
Aggressive overal l working capi t a l pol ic y
Conserva t ive overal l working capi ta l pol icy
Moderate overal l working capi ta l pol icy
Conserva t ive Aggressive
WORKING CAPITAL POLICY
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Working Capital Policy :
An overal l Conservative Working Capital Pol icy reduces
r i sk and offers low return.
An overal l Moderate Working Capital Pol icy offers
moderate re turn accompanied by moderate r isk .
An overa l l Aggressive Working Capi tal Pol icy provides a
percentage of high r isk and high return as wel l .
Since requi rement of working capi ta l i s pr imari ly re la ted to
the current asse ts of the company, we now take a quick
overview of these essent ia l components of current asset –
a) Raw Materials- Raw Mater ia l s cons t i tute one of the major
i tems of expendi ture . Savings can be a ffected both in
purchasing as wel l as in s torage of excess of inventory.
Care ful purchas ing in te rms of qual i t y, pr i ce , and t iming can
resul t in conside rable saving of the f i rm. Car rying excess
i nventory b y any f i rm means blocking up capi ta l i n idle
resources . Further when mone y is conver ted into inventor ies
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addi t i ona l cos ts a re incur red for s torage, secur i ty,
supervis ion, i nsurance and obsolescence etc .
As a f i rm has to guard i t sel f agains t over s tock & under s tock,
i t ma y a l so face the danger of running out of s tock.
Therefore , in man y f i rms a pol icy of mainta ining a l evel of
safety s tock i s general ly car r ied out . This deci s ion is based on
f luctua t ions in
demand for the manufactured product
the cyc le t ime involved in the suppl y and
p rocurement of raw mate r ia l s and
o ther uncer taint ies involved in the procurement of
products .
b) Work-In-Process - Work-In-Process or semi- f inished
goods are an inte rmediary s tage when raw mater ia ls are
be ing conver ted into f i nished goods . Wi thin a
manufactur ing uni t a cer ta in quant i t y of inventory a lways
ge ts t ied up in the form of semi- f ini shed goods or work-
in-process . Work-in-process var ies f rom indust ry to
indust ry and can be control led eff ic ient ly b y
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improving mater ia l handl ing s ys tem
improving cyc le t ime of t he product ion process
involvement in t he manufactur ing of a product and
implement ing ef fect ive product ion planning s ystem.
I f a f i rm has effec t ive product ion p lanning sys te m i t
can quicken the process of i t ’s manufactur ing and can
thereby reduce the cyc le t ime of product ion. Reduct ion
in cycle t ime of product ion general ly ensures that
work- in-process is kept a t hold for minimum t ime.
c) Finished Goods - Finished goods are t he f i nal s tage in
product ion process where the product f inal ly ge ts ready
for the consumpt ion. Finished goods involve the
combinat ion of raw mater ia ls , l abor , manufac tur ing,
components , deprecia t ion of plants & machiner ies for
br inging about the va lue addi t ion of the convers ion f rom
the s tar t to t he f ini sh. As in the case of raw mater ia l i t i s
a lso necessary to decide on the safe ty s tock of f i nished
goods to meet t he f l uctuat ions in demand as wel l as a l l
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the other uncer taint ies that are present in the na ture of the
compan y business .
In addi t ion to the safe ty s tock, what i s held in should be
based on the cyc le t ime involved in supplying the product
manufactured in the factory to the point of consumption
and the quantum of consumpt ion is normal l y required at
this point .
Effect ive management of f i nished goods inventory
involves
careful planning in te rms of requi rement a t
consuming point s ,
t rans i t t ime involved
safety s tock requi rement towards uncer taint ies and
col lect ion of rece ivables .
Account rece ivable ar i ses due to t he Credi t Sa les made by the
compan y. As in modern bus iness no compan y can sel l onl y
agains t cash because condi t ion in the market i s highl y
compet i t ive . Further extending credi t ma y even lead to
h igher sal es and h igher prof i ts . I t i s for t hi s reason that
sui table credi t pol ic y and credi t te rms had to be involved by
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al l the companies . The r isk involved and the cost incur red
have to be balanced agains t the potent ia l benef i ts . The
compan y b y extending the credi t a lso under takes an edge
s t ructure analys is for the credi t ex tended.
Genera l ly account receivable by the company i s c lass i f ied as
book-debts and i s rece ivable wi thin
15 Days
30 Days .
45 Days
60 Days
90 Days &
Beyond 1 year
I f the c redi t per iod extends beyond one year , company should
class i fy the debts as non-current asset s .
Control l ing the debtors ’ pol icy i s a di f f icul t task for the
compan y and severe effor t has to be made to keep the account
receivables a t minimum. This i s gene ral l y done through a
ser ies of di scounts and pers i s ten t fol low up with the sales
team for i t ’s recovery.
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2. AIMS & OBJECTIVES :
The a ims and object ive of this s tudy i s to make an in depth
anal ys i s of t he nature of working capi ta l management and
i t s actua l requi rement for the company. The s tudy wil l a lso
focus on assess ing the working capi ta l needs of the
compan y f rom the banker ’s point of view and this wi l l be
compared to see whether i t -
Matches the es t imate of the company.
The exis tence of mismatches be tween the
compan y’s requi rement vi s-à-vi s the bankers .
The s tudy wi l l a lso look into the past per formance ana lys i s
(3 yea rs ) of t he company and make a speci f ic connect ion
on the heal th of t he uni ts . This wi l l be supported by a
comparat ive s tudy of cer ta in ra t ios .
The s tudy wi l l a lso look out for concept of the operat ing
cyc le analys i s of the manufactur ing compan y and compare
i t ’s movement and changes ove r a per iod of l as t two years
and in depth ana lys i s of var ia t ion for the ent i re per iod of
the cyc le .
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3 . RESEARCH METHODELOGY :
This project demanded an Exploratory research and so
t o achieve my objec t ive i t was necessary to col lec t data
f rom the compan y. I have compi led these requi red data
f rom the concerned depar tment ’s emplo yee through
survey method . This survey was conducted through a
ques t ionnaire i n which 5-7 ques t ions were asked to
a lmost a l l the depar t ments i .e . nearabout 50 employees .
The methodology of the s tudy involves Primary data
col lect ion and Secondary data col lect ion.
Primary Data Col lect ion - This has been col lec ted f rom
several vi s i ts to t he compan y’s factory( lab) /of f ice i n
Kolkata and unders tanding the nature of work be ing done
over there . Close inte ract ions were held wi th the 36
employees (managers , execut ives , off i cers , & other s faffs )
of the compan y depar tment wise t o secure the necessary
da ta as requi red for this project . Apart f rom the data
col lected f rom the company, informat ion has a lso been
col lected f rom other i ns t i tut ions and agencies who a l l are
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having bus iness wi th thi s company, e i ther a buyer or a
se l le r for ge t t ing the i r sa t is fact ion level .
Secondary Data Col lect ion - I t has been col lected f rom
the factory and the company’s head off ice by s incerel y
moni tor ing the fo l lowing da ta :
Annual f inancial data
Product ion schedule and cont rol shee t
Market ing report s
Financial repor t s presented to the bankers
Operat ional s ta tement made depar tment wise
Sanct ion of working capi ta l and te rm loan l imi ts
Guarantees and L/C l imi ts of the compan y
Short review plans
Project ions for the future made by the company
Internal repor ts of the compan y
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Assessment of working capi ta l requirement f rom the banker ’s
point of view depends upon:
The level of bus iness
Segment of the bor rower
Prevai l ing guidel ines of Reserve Bank of India
Trade & indus try pract i ce prevai l ing
Other objec t ive factors
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The assessment i s genera l ly based on
Tota l s tudy of bor rower’s bus iness opera t ion
Processing & product ion cyc le of t he indus try
Financial & manager ial capabi l i ty of bor rowers
Other parameters re l a t ing to uni t & indus t ry
The assessment of t he working capi ta l of any bor rower can be
done under any o f t he fol lowing four me thods
Turnover method
Flexible Bank Finance Method
Cash Budget Method
Net owned fund for NBFC’s .
Turnover method-
Under t his method bankers wi l l ensure maintenance of a
minimum margin of projected annual sales turnover and
in case where no project ion is received las t t urnover
achieved in considered. In other words , genera l ly 25% of
the es t imated sales t urnover sha l l be computed as working
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capi t a l requirement , of which at l eas t 4/5 t h i . e . , (20%) shal l
be provided by the bank and the ba lance 1/5 t h i . e . , (5%)
wil l be of promoter ’s contr ibut ion towards margin mone y.
However , i f the ava i labl e net working capi ta l i s more , the
same wil l be reckoned for assessing the ext ent of bank
f inance and lower i s to be cons idered.
In case of SSI borrowers , they enjoy fund based working
capi t a l faci l i t ies up to Rs . 500 lakhs, t he l imi t shal l be
assessed on the basi s of turnover method.
The turnover method shal l be appl ied for the sanct ion of
fund based working capi ta l l imi t s to non SSI bor rowers
and in thei r case working capi ta l faci l i t i es enjoyed is up
to the extent of Rs.100 lakhs f rom the banking s ys t em.
This sys tem shal l a lso be made appl icable to t raders ,
merchants , exporte rs who are not having pre-de termined
manufactur ing/ t rading cyc le .
Since , GKB is a manufactur ing uni t , i n assess ing the
working capi ta l requi rement they fol low CMA data
me thod vis -à-vis current asse ts in t he es t imat ion of fund
based requirement for the compan y.
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OPERATING CYCLE ANALYSIS :
The opera t ing cycle of f i rm be ings with the acquis i t ion of raw
mater ia l and ends wi th the col lect ion of receivables . I t ma y be
class i f ied into four s tages-
Raw mater ia l convers ion per iod (RICP)
Work-in-process convers ion per iod (WIPCP)
Finished goods convers ion per iod (FGCP)
Debtors convers ion per iod (DCP)
DURATION OF OPERATING CYCLE :
The durat ion of the net operat ing cyc l e (NOC) is equal to the
sum of the dura t ion of each of these s tages less the c redi t
deferral per iod (CDP) al lowed to the suppl ie rs of the f i rm.
I t can de expressed as fol lows-
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Where,
NOC= Net Operat ing Cycle
RMCP= Raw mater ia l convers ion per iod
WIPCP= Work-in-process convers ion per iod
FGCP= Finished goods convers ion per iod
DCP= Debtors convers ion per iod
CDP= Credi tors deferral per iod
NOC = RMCP + WIPCP + FGCP + DCP - CDP
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The components of the opera t ing cyc l e ma y be calculat ed as
fol lows:
Raw mater ia l inventory
RMCP= - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Raw mater ia l consumption/360
Work- in-process inventory
WIPCP= ------------------------------------ Cos t of product ion/360
F ini shed goods inventory
FGCP= -------------------------------------- Cos t of goods sold/360
Sundry Debtors
DCP= ---------------------------------------- Credi t sales /360
Sundry Credi tors
CDP= ---------------------------------------- Credi t purchases /360
I have compi led some old data f rom the compan y and then
t r ied to analyze the opera t ing cycle of this company for the
year 2008- 09 & 2009 -10 as shown in t he table below:
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Opening balance :
2008 -2009 2009 -2010
(Rs. In Lakh) (Rs. In Lakh)
Raw Material 78.03 127.23
Work-in-progress 2731.15 2230.67
Finished Goods 159.01 209.05
Debtors 761.99 512.90
Creditors 1427.02 1579.63
Closing balance :
Raw Material 127.23 89.81
Work-in-progress 2230.67 1653.73
Finished Goods 209.05 349.05
Debtors 512.90 717.15
Creditors 1579.63 1117.64
2008 -2009 2009 -2010
(Rs.In Lakh) (Rs.In Lakh)
Purchase of Raw material (Cr.) 3451.70 3950.21
Raw material consumed 3402.50 3987.63
Cost of production 4078.26 4739..85
Cost of goods sold 4028.22 4599.85
Sales (Cr.) 5332.54 7465.26
OPERATING CYCLE ANLYSIS
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The ca lculat ion shows the fol lowing resul t :
PARTICULARS No.of days 2008 -2009
No.of days 2009 -2010
RMCP 8 .26 11.49
WIPCP 241.01 169.42
FGCP 14.21 16.36
DCP 51.44 24.73
CDP 164.75 101.86
NOC 150.17 120.14
Comments on Operat ing Cycle Analysis :
The operat ing cyc l e analys i s of the compan y for 2009 and
2010 shows an in teres t ing resul t for GKB. The company has
made a remarkable progress in decreasing i t ’s operat ing cyc le
f rom 150.17 days in 2009 to 120.14 days in 2010 thereb y
reducing the opera t ing cyc le by near l y 30 days . More eff ic ient
management of Work-in-process ma inly br ings about the
reduct ion in t he opera t ing cyc l e where the compan y has been
able t o reduce the operat ing c ycle t ime near l y b y 72 da ys .
There i s a subsequent reduct ion in debtor ’s convers ion per iod
which indicates tha t debtors of t he company pa ys thei r dues
a f te r the s t i pulated credi t per iod al lowed to t hem and i t he lps
the compan y to redeem their credi tors on t ime as wel l .
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Analysis Of the past performance :
Based on the audi ted account of the company we f ind the
fol lowing data of GKB RX LENS PVT.LTD.
Financial Indicators : (Rs. in Lakhs)
YEAR ENDED 2009(AUD)
2010(AUD)
Paid-up capi ta l 493.00 493.00
Intangible Asset s _ _
Tangibl e Net worth 493.00 493.00
Long te rm l iabi l i t ies 542.51 343.16
Capi t al Emplo yed 1035.51 836.16
Net Block 3088.00 3369.35
Inves tment _ _
Non Current Asset s 107.79 24.67
Current Asse ts 2415.94 6137.02
Current Liabi l i t ies 1878.34 3299.92
Net working capi ta l 537.60 2837.10
Current ra t i o 1 .29 : 1 1.86 : 1
Debt equi ty ra t i o 1 .10 : 1 0.70 : 1
TOL/TNW 4.91 : 1 7.38 : 1
Net sales 5332.54 7465.26
Other Income 4.91 87.08
Net Prof i t After Tax 174.45 298.87
Deprecia t ion 105.18 328.91
Cash Accruals 571.27 2521.52
% NP to sales 3 .27% 4.03%
%ROCE (PAT/CE) 16.85% 35.74%
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Comments on Financial Indicators :
At the outset i t i s qui te vi s ible f rom the above indicators that
the compan y i s on a huge and heavy expans ion p lan to make
i t s reach widel y present on pan-Indian scenar io way ahead of
i t s compet i tors .
In 2008-09 the compan y was operat ing wi th a capi ta l of
Rs.493.00 lakhs which has remained as intact for t he yea r
2009-10 also. This sugges ts t hat there i s no fur ther addi t ion
in the capi ta l of the compan y. The Fixed Asset base of
Rs.3088.00 lakhs base has s l ight l y increased by Rs .281.35
lakhs i . e . , by 9 .11% by the end of yea r 2010. This expansion
p lan of company i s wel l accepted by the market and i t ’s
consumer giving a boost t o sales b y a lmost 1.40 t imes which
nar rates for 40% growth in sales for t he yea r 2009-10.
St eep r i se in ne t working capi ta l requirement was again
ci rcumvented by the mass ive growth plan and opening of new
cent re of operat ions . Aggress ive sales t argets and revenue
recogni t ions have increased the total book debt of the
compan y i mpact ing the Current Assets growing fas te r than
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ever . The compa ny dur ing the per iod of analys is fol lowed a
ruthless cont rol of opera t ing expenses and negot ia t ion wi th
vendors caus ing Current Liabi l i t ies increas ing wi th longer
c redi t per iod enhanced by the vendors . Yet , the pr ime
indicator of compan y’s f i nancia l heal th i . e . Current ra t io is
as tute ly managed and i t indicates the company’s l iabi l i t ies are
wel l covered and protected. Again the capi ta l gear ing aspect
of t he company too is depic t ing a heal thy p ic ture .
The compan y provides anc i l l ary servi ces to i t s cus tomers and
is accounted for as the other sources of revenue and is on a lso
increasing path wi th widening of consumers ’ populat ion.
The marginal inves tment by the compan y in Fixed Asset s such
as Plant & Machiner i es and other fac tors of product ion has led
the deprec iat ion to shoot a b i t h igh but s t i l l donot have a
major impact on the book prof i t of t he company as i t has
increase by 0 .76% over the las t year . The Cash Prof i t earned
b y the compan y i s pr imari ly p loughed back in the growth plans
i t i s commensura te to the increasing revenues earned.
The return on capi ta l employed i s a lso good. There has been
massive increase in 2009-10 and i t s tands at 35.74% .
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Assessment of Working capital :
From banker’s point Of v iew
(Rs. in Lakhs)
PARTICULARS 2009
2010
1. Current Assets 2415.94 6137.02
2. Current Liabi l i t ies (exc luding bank f inance)
1070.65 1642.72
3. Working Capi ta l gap 1354.30 4494.30
4. Net Working Capi ta l 537.60 2837.10
5. Max. Pe rmissibl e bank Finance under Flexi Finance (3 & 4)
816.70 1657.20
The compan y has an ident i f ied working capi ta l requirement of
approx Rs.17 crores . However , inspi te of t he bank favourbl y
d isposed to increase the l imi t , the compan y has dec ided to f i l l
in the working capi ta l gap f rom i ts own resources . This wi l l
cons is t of foreign funding f rom Essi lor Interna t ional , F rance
wi th which the compan y has been engaged into a jo int venture .
The compan y has a l so decided to l iquidate the te rm loan
present ly avai l ed f rom the bank and this i s being done with
regular intervals wi thout any defaul t . The compan y wi l l
however ut i l ize i t ’s present l imi t s wi th prudence for i t ’s
greater operat iona l e ff ic iency.
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5. CONCLUSION & RECOMMENDATIONS :
The Compan y has shown marked improvement in i t s operat ing
cyc le . The raw mater ia l hold ing per iod has shown a
remarkable increase from 78.03 da ys to 127.23 days . This has
been la rgely due to increase in opera t ions both in t rading and
manufactur ing and a lso due to branch l evel feeding f rom main
off ice . The f ini shed goods’ holding has been increased by 50
days . This has been commensurated with subs tant ia l sales -
increase in 2010 as compared to 2009.
There i s a subsequent reduct ion in debtor ’s convers ion per iod
which indicates t hat debtors of the compan y pa ys the i r dues
a f te r the s t ipulated credi t per iod al lowed to them and i t he lps
the compan y to redeem the ir credi tors on t ime as wel l .
Sundry Credi tors deferral per iod has decreased cons iderabl y
by 63 da ys . The compan y has a s tanding reputa t ion in the
market of a good paymas ter and as pe r indus try t rends pays
wi thin 90 days p lus minus .
The f inancial heal th of t he compan y has shown marked
improvement and is good. On al l f ronts the compan y has
poised for subs tant ia l growth.
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6. LIMITATIONS :
Time Limitation - The time constraint was a big hurdle during
completion of the report. The time was not enough to
understand all the policies adopted by the company and hence it
was a tough task to cover all the points about the title in this
short span of time.
Unavailability of Proper Material - The lack of proper material
also proved to be a limitation while developing the report. There
was inadequate avai labi l i t y of recent mater ia l . All the study
is based on historical data and so it has got no more importance.
Lack of Proper Guidance - There was lack of guidance at some
stages. The guide sometimes was not able to give proper guidance
because of his own job responsibilities and lack of time.
Organizational Restrictions - There were restrictions on the
guide too as no one in the organization is authorized to disclose all the
confidential policies and processes to outsiders whosoever because of
certain principles made by the top management of the organization.
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7. OVERALL EXPERIENCE :
The project was a good experience and helped me a lot in widening
my knowledge and sharpening management skills. Practical knowledge
is an important suffix to theoretical knowledge. One cannot merely
depend upon the theoretical knowledge. Classroom lectures make the
fundamental concepts of management clear. They also facilitate the
learning of practical things. However to develop healthy managerial and
administrative skills for potential managers, it is necessary that they
combine their classroom learning with real life project research which
plays a significant role in the curriculum of Business Management
Courses.
Any science without its practical application or knowledge is considered
to be unsystematic. Since, management is a developing science, the
students of Management courses are required to undergo a project in
the final year of the course. Hence, I also had to undergo 2 months
of summer training project in GKB Rx Lens Pvt. Ltd.
I was provided with the opportunity to work in the Credit Control
Department. There I had to punch the customers’ order - cum
invoice after referring it to it’s particular chalan copy. I also had
to issue debit note to customers against their purchases.
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Sometimes, if goods sold is found to be defective and the same is
returned by the customer, I has to issue credit note to that party on
the basis of information provided by the Quality Control
Department.
I also had to take the decision regarding credit limit of the party
whether to increase it or not after seeing into his ledger account.
I gained some precious knowledge about the concept of excise
duty, sales – tax, CST, VAT, etc. that are very common term in
this business language.
If I could have been provided with more time then it would have
helped me immensely to gain some more pratical knowledge and
corporate exposure that would have laid a strong foundation for my
future development, enhancing the chances of my acceptability in
this corporate world and would have made me stand ahead of my
other collegues in this race of competition.
I attentively observed the whole process of business by visiting to
almost each and every department of the company and observing
the nature of work being carried over there.
I am very eager to exhibit my whole learning and observation
through this process flow chart-
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PROCESS FLOW cHART
Branch
Dealer
Customer(Phone/internet/
references)
Salesman
N O
Yes
ORDER FROM
CustomerService GENERATE
OCI
STOCK?Blank/Rx
Finished Stock
Processing
FITTING/COATING
Quality Control
NextPage
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No
Yes
No
Yes
No
Yes
Yes
No
Logist ics of the companyensures Pan India del iveyof i t ’s f in ished goods within24hours .
Contd.
PASS?
Domestic
?
Local
?
From Finished
Stock?
PROCESS LOSS / ADD TO COST
ExportTransfer to Gurgaon
STOCK TRANSFER
SALES + CST/VAT
Sales + Excise + CST/VAT
Logistics
Quality Control
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Yes
Yes
No
Yes
RejectionAfter
Billing?
PROCESS LOSS/ ADD TO COST
Sales Return ?
Transfer to Warehouse
Quality Control
Fresh?
Added to Finished Stock
Issue Credit NoteReduce Sales/TO
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BIBLIOGRAPHY
(A) BOOKS:
1 . Financial Management (Tenth Edi t ion)
Author : Pandey I .M.
P lace of publicat ion : Noida (U.P.)
Publ i shed by : Vikas Publ ishing House Pvt . Ltd.
Date of publ ica t ion : January, 2010
No. of pages referred : 648 660
2. Financial Accounting (Fourth Edit ion)
Author : Narayanaswamy R.
P lace of publicat ion : Connaught Ci rcus (New Delhi )
Publ i shed by : Asoke K. Ghosh
Date of publ ica t ion : June, 2011
No. of pages referred : 544 558
(B) WEBSITE: 1. www.vrxlab.com
2. www.google.com
(visited on June 1, 2012)
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ANNEXURES
Questionnaire :
1. Location :
a) Is the location of factory ideal ?
Ans: Yes, the factory is ideally located with proper transport facilities and in a
perfect industrial environment and State of the art manufacturing facility.
b) What is the area of land ?
Ans: The are of land is over 15000 sq.feet.
c) Is the land adequate for factory’s immediate and future
requirement?
Ans: Yes, the land is adequate for factory’s immediate and future requirement.
d) Has the location advantage of availability of
i) Water
ii) Power
iii) Easy access to skilled and unskilled labour
Ans: i) The location of factory has proper advantage of availability of water.
ii) Power cut is very rare in this location.
iii) There is an easy access to the skilled and unskilled labour
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2. Plant & Machinery:
a) Is the machinery imported or locally purchased ?
Ans: The Plant & Machineries are all imported from France (Essilor group).
b) Is the plant in working order and maintained in good
condition ?
Ans: Yes, the plant & machinery is in working order and maintained in good
condition.
c) Does the unit possess it’s own tool room and workshop ?
Ans: The unit does have it’s own tool room and workshop.
d) What is the the technology and software being used here ?
Ans: The technology and software used over here are-
i) ‘In house’ know- how from parent Comp. GKB and also through
various collaborations.
ii) The Comp. is using Microsoft Office & ERP package (Microsoft
Dynamics Ax i.e., Axapta)
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3. Raw materials:
a) What are the raw materials used ?
Ans: The raw materials that are mostly used are -
1.498 index - material used is called CR39 glass (Columbia Resine 39)
More than 1.498 - material used is plastic
Better than plastic - material used is Polly Carbonate (hardy material)
Best quality is Trilogy (bullet proof, not easily breakable, toughest and
most costly.
b) Has the factory made satisfactory arrangements for regular
supply of raw materials?
Ans: Yes,there is regular supply of raw materials as per requirement of the
factory and demand of the customer.
c) Are raw materials domestically available or to be imported ?
Ans: All the raw materials are imported from Germany (Roden Stock), Japan
(Seaco), Israel (Shamir), Mexico (Sola), etc.
d) Which accounting method is adopted to control inventory ?
Ans: We generally practice
i) Economic Order Quantity (EOQ)
ii) ABC analysis
iii) Standardization
The lead time stock period is 3 months as the lens starts getting darker,
once the 3 months period comes to an end. So, we follow FIFO method.
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4. PRODUCTION:
a) Elaborate your whole Production process.
Ans: Whole operation cycle rotates somewhat in this way-
i) Order booked (through telephone, fax, online, e-mail etc.)
ii) Punched in the system
iii) Released the OCI (order cum invoice) to store
iv) Issued by inventory
v) Issued to surfacing
vi) Issued to coating
vii) Issued to quality control
viii) Issued to dispatch dept.
ix) Ready for dispatch to customers
x) Delivery to customers
b) Number of working shifts .
Ans: Genarally three (3) shifts of working are done here.
c) Production per day in value for the last six months.
Ans: We generally puch invoice worth Rs. 5- 6 lakhs per day as per the
availability of customers’ order.
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5. CREDIT POLICY:
a) What credit policy does the company exercise on it’s customers. ?
Ans: For Credit Period:
Credit Period Credit Days Parameter
Nil –Cash On Delivery If the monthly business is upto Rs.5000
15 Days If the monthly business is upto Rs. 5001 – 10000
30 Days If the monthly business is upto Rs. 10001 – 20000
45 Days If the monthly business is upto Rs. 20001 – 40000
60 Days If the monthly business is upto Rs. 40001 - 100000
90 Days If the monthly business is more than Rs.100001
For Credit Limit:
Cash Period Credit Limits
Nil – Cash On Delivery Cash on delivery
15 Days ( 3months Avg.Sales *15/30) * 110/100 )
30 Days ( 3months Avg.Sales * 30/30) * 110/ 100 )
45 Days ( 3months Avg.Sales * 45/30) *110 / 100 )
60 Days ( 3months Avg.Sales * 60/30) * 110/ 100 )
90 Days ( 3months Avg.Sales * 90/30) * 110/ 100 )
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NOTE: I have compiled al l these graphs shown below
from the report presented in form of Power-
point presentation in the recent sales meet ing
held at Bangalore in the month of June.
VE represents Reliance Customers &
GOP represents GKB Optical Customers.
