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Working capital analysis of top 20
consumer goods companies

Financial Management 2



SUBMITTED BY:-
AMRITA DAS
AYESHA JAHAN
KHUSHBOO JAIN
NEHA SHOURIE
OINDRILA ROY
VEDSHREE UPADHYAY
2

INTRODUCTION:-
Working Capital refers to that part of the firms capital, which is required for financing short-
term or current assets such a cash marketable securities, debtors and inventories. Funds thus,
invested in current assets keep revolving fast and are constantly converted into cash and this
cash flow out again in exchange for other current assets.
Every running business needs working capital. Even a business which is fully equipped with
all types of fixed assets required is bound to collapse without (i) adequate supply of raw
materials for processing; (ii) cash to pay for wages, power and other costs; (iii) creating a
stock of finished goods to feed the market demand regularly; and, (iv) the ability to grant
credit to its customers. All these require working capital. Working capital is thus like the
lifeblood of a business. The business will not be able to carry on day-to-day activities without
the availability of adequate working capital.

Disadvantages of Redundant or Excess Working Capital
Idle funds, non-profitable for business, poor ROI.
Unnecessary purchasing & accumulation of inventories over required level.
Excessive debtors and defective credit policy, higher incidence of B/D.
Overall inefficiency in the organization.
When there is excessive working capital, Credit worthiness suffers.
Due to low rate of return on investments, the market value of shares may fall.
Disadvantages or Dangers of Inadequate or Short Working Capital
3

Cant pay off its short-term liabilities in time.
Economies of scale are not possible.
Difficult for the firm to exploit favorable market situations.
Day-to-day liquidity worsens.
Improper utilization the fixed assets and ROA/ROI falls sharply.

COMPANIES UNDER STUDY:-
COMPANY INDUSTRY
Asian Star Company Limited

Diamond Cutting/Jewellery

Bata India Limited

Leather/Leather Products

Bajaj Electricals Limited

Domestic Appliances

C Mahindra Exports Limited

Diamond Cutting/Jewellery

Procter & Gamble Home Products Limited Personal Care-Multinational

Philips Electronics Limited

Electronics-Consumer

Colgate-Palmolive India Limited Personal Care-Multinational

Dabur India Limited

Personal Care - Indian

Gitanjali Exports Corporation Limited

Manufacturing and Exports of Diamond

Gitanjali Gems Limited

Diamond Cutting / Jewellery

Godrej Consumer Products Limited

Personal Care-Multinational

Hindustan Unilever Limited

Personal Care - Multinational

PC Jewelers Limited

Diamond Cutting / Jewellery

Rajesh Exports Limited

Diamond Cutting / Jewellery

SRS Limited

Diamond Cutting / Jewellery

Shree Ganesh Jewellery House (India)
Limited

Diamond Cutting / Jewellery

4

Shrenuj & Company Limited

Diamond Cutting / Jewellery

Titan Company Limited

Diamond Cutting / Jewellery

Videocon Industries Limited

Electronics - Consumer

Whirlpool of India Limited

Domestic Appliances



OPERATING CYCLES ANALYSIS:-
Operating cycle is the number of days a company takes in realizing its inventories in cash. It
equals the time taken in selling inventories plus the time taken in recovering cash from trade
receivables. It is called operating cycle because this process of producing/purchasing
inventories, selling them, recovering cash from customers, using that cash to
purchase/produce inventories and so on is repeated as long as the company is in operations.
\Operating cycle= Raw material holding period+WIP holding period+Finished good holding
period- Creditors collection period.
Asian Star Co. Ltd. Bajaj Electricals Ltd.










0
100
200
300
400
500
600
700
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTR
Y AVG
OC
0
100
200
300
400
500
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
5

Bata India Ltd. C Mahendra Exports Ltd.


Colgate-Palmolive (India) Ltd. Dabur India Ltd.


Gitanjali Exports Corporation Ltd. Gitanjali Gems Ltd.



-50
0
50
100
150
200
250
300
350
400
2
0
0
0
2
0
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2
2
0
0
4
2
0
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6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
0
200
400
600
800
1000
1200
2
0
0
7
2
0
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8
2
0
0
9
2
0
1
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2
0
1
1
2
0
1
2
2
0
1
3
INDUSTRY
AVG
OC
-200
-100
0
100
200
300
400
2
0
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0
2
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2
2
0
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2
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2
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1
2
INDUSTRY
AVG
OC
-100
0
100
200
300
400
500
600
2
0
0
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2
0
0
2
2
0
0
4
2
0
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6
2
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0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
0
200
400
600
800
1000
1200
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
2
0
1
3
INDUSTRY
AVG
OC
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
6

Godrej Consumer Products Ltd. Hindustan Unilever Ltd.



P C Jeweller Ltd. Philips Electronics India Ltd.

Procter & Gamble Home Products Ltd. S R S Ltd.






-100
0
100
200
300
400
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
-200
-100
0
100
200
300
400
500
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
0
50
100
150
200
250
INDUSTR
Y AVG
OC
-100
0
100
200
300
400
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
2
0
1
3
INDUSTRY
AVG
OC
-200
-100
0
100
200
300
400
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
2
0
1
3
INDUSTR
Y AVG
OC
0
50
100
150
200
2009 2010 2011 2012 2013
INDUSTRY
AVG
OC
7

Shree Ganesh Jewellery House (India) Ltd. Shrenuj & Co. Ltd.



Titan Company Ltd. Videocon Industries Ltd.



Whirlpool Of India Ltd.


0
20
40
60
80
100
120
140
160
180
2006200820102012
INDUSTRY
AVG
OC
0
100
200
300
400
500
600
700
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
0
100
200
300
400
500
600
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
0
100
200
300
400
500
600
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
OC
-100
0
100
200
300
400
500
INDUSTRY AVG
OC
8


Operating cycles of the above companies differ significantly. This is because the companies
belong to diverse industries. Some are jewellery, some are FMCG, etc. If we see overall
almost all the companies have operating cycle below the company average. This implies all
the companies are operating efficiently in managing their current asst and current liabilities.
If we look at the FMCG companies it can be noticed that all of them have negative operating
cycle continuously. This is because they collect their debts as early as possible, and pay of
their debt as late as possible. Also they are keeping their raw material, WIP, and Finished
good holding period as low as possible.
If we look at the jewellery companies, all the companies other than Gitanjali Gems Ltd and
Gitanjali export corporation Ltd are managing their current liabilities and current assets
efficiently.
All the consumer durables are doing good in managing their operating cycles.
Disclaimer: - Rajesh exports Ltd is not taken under analysis due to unavailable data.
RATIO ANALYSIS:-
Current ratio:-
It is an indication of a company's ability to meet short-term debt obligations; the higher
the ratio, the more liquid the company is. Current ratio is equal to current assets divided
by current liabilities. If the current assets of a company are more than twice the current
liabilities, then that company is generally considered to have good short-
term financial strength. If current liabilities exceed current assets, then the company may
have problems meeting its short-term obligations.
This ratio should always be >1.





9


ASIAN STAR CO. LTD BAJAJ ELECTRICALS LTD



BATA INDIA LTD. C MAHENDRA EXPORTS LTD.

COLGATE-PALMOLIVE (INDIA) LTD. DABUR INDIA LTD.

0.0000
10.0000
20.0000
30.0000
40.0000
50.0000
INDU
STRY
AVG
CURR
ENT
RATI
O
0.0000
1.0000
2.0000
3.0000
4.0000
5.0000
6.0000
7.0000
8.0000
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
CURRENT
RATIO
0
1
2
3
4
5
6
7
8
9
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
CURRENT
RATIO
0
2
4
6
8
10
12
14
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
INDUSTRY
AVG
CURRENT
RATIO
0
2
4
6
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTR
Y AVG
CURREN
T RATIO
0
2
4
6
8
10
INDUSTR
Y AVG
CURREN
T RATIO
10


GITANJALI EXPORTS CORPORATION LTD. GITANJALI GEMS LTD.


GODREJ CONSUMER PRODUCTS LTD. HINDUSTAN UNILEVER LTD.


P C JEWELLER LTD. PHILIPS ELECTRONICS INDIA LTD.


0
2
4
6
8
10
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
2
0
1
3
INDUSTR
Y AVG
CURRENT
RATIO
0
2
4
6
8
10
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
CURRENT
RATIO
0
1
2
3
4
5
6
7
8
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUST
RY AVG
CURRE
NT
RATIO
0
1
2
3
4
5
6
7
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTR
Y AVG
CURRENT
RATIO
0
1
2
3
4
5
6
INDUST
RY AVG
CURREN
T RATIO
0
1
2
3
4
5
6
7
8
INDUSTRY
AVG
CURRENT
RATIO
11


PROCTER & GAMBLE HOME PRODUCTS LTD. RAJESH EXPORTS LTD.


S R S LTD. SHREE GANESH JEWELLERY HOUSE


SHRENUJ & CO. LTD. TITAN COMPANY LTD



0
1
2
3
4
5
6
2
0
0
0
2
0
0
2
2
0
0
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2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTR
Y AVG
CURRENT
RATIO
0
5
10
15
20
25
30
35
INDUSTR
Y AVG
CURRENT
RATIO
0
5
10
15
20
25
30
35
40
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
INDUST
RY AVG
CURREN
T RATIO
0
2
4
6
8
10
12
2006 2008 2010 2012
INDUSTRY
AVG
CURRENT
RATIO
0
2
4
6
8
10
12
14
16
18
20
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
CURRENT
RATIO
0
2
4
6
8
10
12
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
INDUSTRY
AVG
CURRENT
RATIO
12

VIDEOCON INDUSTRIES LTD. WHIRLPOOL OF INDIA LTD.


Current ratio should always be more than 1. From the above charts it can be noticed that
Colgate-Palmolive (india) ltd., Godrej consumer products ltd., Hindustan unilever ltd.,
Procter & Gamble home products ltd are not able to maintain their current ratio more than 1.
This is because they are having excess of current liability over current asset.
Other companies are managing their current assets and current liabilities efficiently.

Quick ratio:-
This ratio is a better measure than current ratio.
A measure of a company's liquidity and ability to meet its obligations. Quick ratio, often
referred to as acid-test ratio, is obtained by subtracting inventories from current assets and
then dividing by current liabilities. Quick ratio is viewed as a sign of
company's financial strength or weakness (higher number means stronger, lower number
means weaker).
Quick ratio should always be >1.




0
2
4
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10
12
2
0
0
0
2
0
0
2
2
0
0
4
2
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2
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2
0
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0
2
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1
2
INDUSTRY
AVG
CURRENT
RATIO
0
1
2
3
4
5
6
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8
2
0
0
0
2
0
0
2
2
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2
0
0
6
2
0
0
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2
0
1
0
2
0
1
2
INDUSTRY
AVG
CURRENT
RATIO
13


ASIAN STAR CO. LTD. BAJAJ ELECTRICALS LTD.


BATA INDIA LTD. C MAHENDRA EXPORTS LTD.



COLGATE-PALMOLIVE (INDIA) LTD. DABUR INDIA LTD.


0
5
10
15
20
25
30
35
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
1
2
3
4
5
6
2
0
0
0
2
0
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2
0
0
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2
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1
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1
2
Industry
Average
Quick Ratio
0
1
2
3
4
5
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
2
4
6
8
10
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
Industry
Average
Quick Ratio
0
1
2
3
4
5
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick Ratio
0
2
4
6
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick Ratio
14


GITANJALI EXPORTS CORPORATION LTD. GITANJALI GEMS LTD.



GODREJ CONSUMER PRODUCTS LTD. HINDUSTAN UNILEVER LTD.

P C JEWELLER LTD. PHILIPS ELECTRONICS INDIA LTD.

0
1
2
3
4
5
6
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
2
0
1
3
Industry
Average
Quick
Ratio
0
1
2
3
4
5
6
7
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
1
2
3
4
5
Industry
Average
Quick
Ratio
0
1
2
3
4
5
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
0.5
1
1.5
2
2.5
3
3.5
2010 2011 2012 2013
Industry
Average
Quick
Ratio
0
1
2
3
4
5
6
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
15


PROCTER & GAMBLE HOME PRODUCTS LTD. RAJESH EXPORTS LTD.


S R S LTD. SHREE GANESH JEWELLERY HOUSE LTD.



SHRENUJ & CO. LTD. TITAN COMPANY LTD.

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
5
10
15
20
25
30
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
5
10
15
20
25
30
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
Industry
Average
Quick
Ratio
0
1
2
3
4
5
6
7
8
9
10
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
Industry
Average
Quick Ratio
0
2
4
6
8
2
0
0
0
2
0
0
3
2
0
0
6
2
0
0
9
2
0
1
2
Industry
Average
Quick
Ratio
0
1
2
3
4
5
6
7
2000200220042006200820102012
Industry
Average
Quick Ratio
16


VIDEOCON INDUSTRIES LTD. WHIRLPOOL OF INDIA LTD.



Videocon Industries Ltd., Shrenuj & Co. Ltd., S R S Ltd., Shree Ganesh Jewellery House
Ltd., Gitanjali Exports Corporation Ltd., Gitanjali Gems Ltd., C Mahendra Exports Ltd.,
Asian Star Co. Ltd., Bajaj Electricals Ltd are the companies who are able to keep their quick
ratio more than 1. But the other companies are inefficient in keeping their quick ratio more
than 1.
Analysis of cash and bank balance:-
Hindustan Unilever Ltd., Rajesh Exports Ltd., Videocon Industries Ltd. Are having excess
cash balance than necessary. This may lead to loss of ROI. Idle excess cash balance is good
for the liquidity of the company, but it may lead to loss of profit from various investment
opportunities.
Procter & Gamble home products Ltd., Asian Star Co. Ltd, Bata India Ltd., Balaji Electricals
Ltd., C. Mahendra Exports Ltd., Phillips Electronics India Ltd., Shrenuj & Co. Ltd., are the
companies who are having very low cash balance hich may hamper their liquidity.
Conclusion:-
Due to difference in the industries various companies are having diverse operating cycles,
ratios etc. Colgate-Palmolive Ltd, Gitanjali Gems Ltd, Gitanjali Exports Corporations Ltd.,
Videocon Industries Ltd are some of the companies which are more efficient in management
of working capital.
0
1
2
3
4
5
6
7
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
0
1
2
3
4
5
6
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
Industry
Average
Quick
Ratio
17

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