Professional Documents
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DECLARATION
I (Anitha Kumari.Pabbathi, Regd no : 110200202012), hereby solemnly declare that the
project report entitled WORKING CAPITAL MANAGEMENT with reference to
LANCO INFRASTRUCTURE LIMITED, HYDERABAD submitted by me is a
genuine bonafide work done by me and is not submitted to any other university or
published any time before. The project work is in partial fulfillment of the requirement
for the award of MASTER OF BUSINESS ADMINISTRATION.
Place: VISAKHAPATNAM
Date:
(ANITHA KUMARI PABBATHI)
CERTIFICATE
This is to certify that the project report entitled A STUDY ON WORKING CAPITAL
MANAGEMENT with reference to LANCO INFRASTRUCTURE LIMITED,
HYDERABAD being submitted by Miss. ANITHA KUMARI PABBATHI
(Regd.no.110200202012) in partial fulfillment of requirement for the award of the degree
of MASTER OF BUSINESS ADMINISTRATION to the Department of Commerce
and Management Studies ANDHRA UNIVESITY is a bonafide work done by her under
my guidance and supervision.
Date:
Station:
Prof.M.Madhusudana Rao
Department of Commerce & Management Studies
Andhra university,
Visakhapatnam.
ACKNOWLEDGEMENT
The satisfaction that accompanies the successful completion of the task would be
incomplete without mentioning the people who made it possible and whose constant
guidance & encouragement crown all the efforts of success.
I wish to take great pleasure in recording my profound gratitude and sincere thanks to
Prof. M.MADHUSUDANA RAO, Department of Commerce and Management studies,
ANDHRA UNIVERSITY for giving me an opportunity to work on this project and for
his supervision with valuable advices, his inspiring guidance, keen interest and critical
evaluation of the work for the successful completion of the project work.
I would like to express my sincere gratitude to Mr. Kiran Kumar, Finance Manager,
LANCO INFRASTRUCTURE LIMITED, HYDERABAD for providing me a chance to
work on the WORKING CAPITAL MANAGEMENT system with his guidance, in the
organization.
CONTENTS
Chapter
Title
Page No
CHAPTER-I
INTRODUCTION
1-5
CHAPTER-II
INDUSTRY PROFILE
6-9
CHAPTER-III
COMPANY PROFILE
10-17
CHAPTER-IV
THEORITICAL FRAMEWORK
18-40
CHAPTER-V
41-81
INTERPRETATION
CHAPTER-VI
82-86
CHAPTER I
INTRODUCTION
Need for the study
Objectives of the study
Methodology of the
study
Limitations of the study
INTRODUCTION
CHAPTER II
INDUSTRY PROFILE
INDUSTRY PROFILE
Lanco believes that people management is a matter of creating,
nurturing and sustaining an environment conducive to optimal use of
employee potential. Lanco is home to more than 5500 committed, talented
and ambitious professionals. As one of the preferred employers in the
industry, LANCO attracts and retains the best talents. Lanco has adopted
some of the best people practices and policies from around the world to
delight its people.
Lanco
Infrastructure
Limited,
an
integrated
infrastructure
The company will continue to take any steps the Board believes will
further improve our standards, controls, and accountabilities and, as
additional regulations and recommendations on corporate governance are
announced, will continue to make required changes to our policies.
housing
projects
and
townships,
industrial
structures,
Business Description:
The Group's principal activities are construction and development of
infrastructure facilities, property development, generation of power and
trading in power. It operates in four business segments: Construction, Power,
Property Development and Infrastructure. The Construction segment
involves in construction of Industrial, residential & commercial buildings,
roads, engineering, procurement and commissioning. Infrastructure segment
involves in development of roads on build, operate and transfer basis and
other infrastructure. The Property development segment involves in
development of IT park, residential buildings, retail and commercial
complex. Power segment involves in generation of power and trading in
power.
CHAPTER III
COMPANY PROFILE
COMPANY PROFILE
About Lanco
The Lanco odyssey began more than two decades ago in civil
engineering and the core sector. The challenges and opportunities in a
resurgent India following economic liberalization saw Lanco reengineer and
consolidate itself under a single apex entity, Lanco Infratech Ltd.
Lanco's operations have always been marked by creation of synergies,
backward and forward integrations and strategic innovations for competitive
edge. Today, Lanco Infratech, through twenty-two subsidiaries has
operations across a synergistic span of verticals.
In power generation, Lanco has a presence in thermal, hydro, wind
and renewables. Projects in operation and those underway represent over
8000 MW. The operations in power generation draw deep strengths from its
own EPC, entry into O&M and the capabilities of its Construction wing.
Lanco's presence in power extends to being a leader in power trading.
Multiple synergies are being leveraged for a strategic presence in
transmission and distribution. In wind energy, Lanco's first line of turbines
will roll out in 2009. Wind project developments are underway in India,
Europe and the Americas.
Lanco's admired expertise in civil engineering has been displayed
across the years in the execution of dams, railways, roads, industrial
structures, residential and commercial construction, canals and other areas
across the length and breadth of India. These competencies and depth of
resources are unfolding a new roadmap in the Indian infrastructure sector.
COMPANY VALUES
Integrity
Lanco chosen to be honest in all their Business Interactions and
Transactions and remain steadfast even when challenged. They strive for
consistency between - what they Think, what they Say and what they Do.
Organization Before Self
Lanco recognize that organization interest is supreme, above
individual preferences and goals. In all their decisions, actions and dealings
they put the Organization before self.
Positive Attitude
Lanco always demonstrate a 'can-do' mind-set and engage to deliver
organizational goals. They look upon challenging circumstances as
opportunities to enhance their capabilities and find ways of achieving.
Teamwork
Lanco work harmoniously with a shared vision, energized by their
collective talent. They Trust, Listen to, Share with and Empower team
members and take collective responsibility for the results.
Humility & Respect
Lanco has consistently humble in their approach to and interactions
with people. They treat every person with respect at all times,
unconditionally.
Achievement Drive
Lanco has an urge that drives us to intensely focus on performance
and act decisively with high energy to achieve the desired results. They
strive to continuously learn and consistently set higher Standards of
Excellence.
Accountability
Lanco own up to their words, actions and outcome. When they
commit to do something, they own it and they do it - decisively and
responsibly.
Innovation
Lanco value and encourage application of creative ideas that enhance
the effectiveness of their business. They freely express ideas and take
actions to generate successful Solutions.
About Chairman & Founder
L Rajagopal, a technocrat-turned industrialist, is the Founder
Chairman of LANCO Group. In addition to his entrepreneurial spirit,
Rajagopal has a strong sense of social responsibility. He established LANCO
Foundation (formerely LIGHT), a Charitable Trust, in the year 2000 to reach
out to the needy and has been involved in various philanthropic activities.
After one-and-half decades of outstanding contribution to the industry,
Rajagopal chose to enter public life in 2003. He is a Member of Parliament,
India. His vowed mission is to make a difference in the life of the common
man.
Efforts
towards
Environmental
Management
and
CHAPTER IV
THEORITICAL FRAMEWORK
THEORITICAL FRAMEWORK
Working capital management is the process of planning and
controlling the level and the mix of the current assets of the firm as well as
financing these assets. Specifically working capital management requires
financial manager to decide what quantities of cash, other liquid assets,
account receivables and inventories the firm will hold at any point in time.
In addition, financial manager must decide how the current assets are to be
financed. Finally choices include the mix of current as well as long-term
liabilities.
NATURE OF WORKING CAPITAL
Working capital refers to current assets
Those, which are convertible into cash within 1 year.
Those, which are required to meet day-to-day expenses.
The fixed assets as well as current assets require funds. The
management of working capital involves different concepts than the
techniques used in fixed assets management. The fixed assets involve long
period perspective and therefore, the concept of time value of money is
applied in order to discount the future position.
Cash inflows, where as working capital time horizon is limited one
year and time value of money concept is considered. The fixed assets affect
long term profitability of firm while current assets affect short-term liquidity.
So, working capital management, the financial manager is faced with
decisions involving some of the considerations as follows:
What should be total investment in working capital of the firm?
What should be the level of individual current assets?
working capital positions are bad for any business however, out of the two, it
is the inadequacy of working capital, which is more dangerous from the
point of view of the firm.
DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING
CAPITAL
Excessive working capital means idle funds which earn no profits for
the business and hence the business cannot earn a proper rate for its
investment.
When there is a redundant working capital, it may lead to unnecessary
purchasing and accumulation of inventories causing chances of waste
and losses.
Excessive working capital implies excessive debtors and defective
credit policy, which may cause higher incidence of bad debts.
When there is excessive working capital, relations with banks and
other financial institutions may not be maintained.
Due to low rate of return on investment, the value of shares may also
fall.
NEED FOR WORKING CAPITAL
However the
tied up inventories and receivables. On the other hand trading and financial
firms require less investment in fixed assets but have to invest large amount
of working capital.
SIZE OF BUSINESS OR SCALE OF OPERATIONS:
The working capital requirements of concern are directly influenced
by the size of its business, which may be measured in terms of scale of
operations. Greater the size of a business unit, generally larger will be the
requirements of working capital. However, in some cases even a smaller
concern may need more working capital due to high overhead charges,
influence use of available resources and other economic disadvantages of
small size.
MANUFACTURING PROCESS OR LENGTH OF PRODUCTION
CYCLE:
In manufacturing business, the requirement of working capital
increases in direct proportion to length of manufacturing process. Longer
the process period of manufacture, larger is the amount of working capital
required. The longer the manufacturing time, the raw materials and other
supplies have to be carried for a longer period in the process for finished
product.
SEASONAL VARIATIONS:
In certain industries raw material is not available throughout the year.
They have to make raw materials in bulk during the season to ensure an
uninterrupted flow and process them during the entire year. A huge amount
is, thus block in the form of material inventories during such seasons, which
gives rise to more working Capital requirements. Generally during the busy
season, a firm requires large working capital than in the slake season.
of stocks is very low. Thus, the working capital requirements of such dealer
should be higher than that of a previous stock.
BUSINESS CYCLE
Business cycle refers to alternative expansion and contraction in
general business activity. In a period of boom i.e. when the business is
prosperous, there is a need for larger amount if working capital due to
increase in sales, rise in prices, optimistic expansion of business, etc., on the
contrary in the times of depression i.e., when there is a down swing of the
cycle, the business contracts sales decline, difficulties are faced in collection
of debtors and firms may have a large amount of working capital lying idle.
RATE OF GROWTH OF BUSINESS
The working capital requirements of a concern increase with the
growth and expansion of its business activities. Although, it is difficult to
determine the relationship between the growth in the volume of business and
growth in the working capital of a business. We may have retained profits to
provide for more working capital but in fast growing concerns, we shall
require larger amount of working capital.
MANAGEMENT OF WORKING CAPITAL
There are two types of assets in every business concerns:
Current assets
Fixed assets
Both are necessary for a profit running of a business. Working capital
is the difference of current assets and current liabilities. Management of
working capital is concerned with problems that arise in attempt to manage
current assets, current liabilities and interrelationship between them.
against its customers and from part of its current assets. Receivables are
also known as accounts receivables, trade receivables or book debts. The
receivables are carried for the customers. The period of credit and extent of
receivables depends upon the credit policy followed by the firm.
The
point because it will bring more profits. The increase in profits will be
followed by an increase in the size of receivables or vice-versa.
CREDIT COLLECTION EFFORTS
The collection of credit should be streamlined. The customer should
periodical reminders if they fail to pay in time. On the other hand, if
adequate attention is not paid towards credit collection then the concern then
the concern can land itself a serious problem. Efficient credit collection
machinery will reduce the size of receivables. If these efforts are slower
than the outstanding amounts will be more.
HABITS OF CUSTOMERS
The paying habits of customers also have a bearing on the size of
receivables. The customers may be in habit of delaying payments even
though they are financially sound. The concern should remain in touch with
such customers and should make them realized the urgency of their needs.
COST OF FINANCING RECEIVABLES
The business concern incurs the following costs on maintaining
receivables.
When goods and services are provided on credit then concerns capital
is allowed to be used by the customers. The receivables are financed from
the funds supplied by shareholders for long term financing and through
retained earnings. The concern incurs some cost for collecting funds, which
finance receivables.
COST OF COLLECTION
A proper collection of receivable is essential for receivable
management. The customers who do not pay the money during a stipulated
credit period are reminders for early payments. Some persons may have to
be sent for collection these amounts. In some case legal resources may have
to be taken for collecting receivables. All these costs are known as collection
costs which a concern is generally required to incur.
DEFAULT COSTS
Some customers may fail to pay amounts due towards them. The
amount, which the customers fail to pay are known as bad debts. Though a
concern may be able to reduce bad debts through efficient collection
machinery but one cannot altogether rule this cost.
POLICIES FOR MANAGING RECEIVABLES
The credit policy of any firm should be estimated in such a way that
the benefits like to accrue from it, the credit policy should incorporate the
following:
CREDIT STANDARDS
The term credit standards represent the basic criteria for the extension
of credit to any customer. This is done with the help of factors such as credit
ratings, credit references and various financial ratios. The level of sales and
the amount of account are fairly liberal as compared to sales under the
restructure to tight credit standards.
The credit standards of any firm are usually determined by 5 Cs
namely
CAPACITY: It refers to ability of the specific customer to manage the
required scales of business.
CHARACTER: It refers to integrity of customer i.e. his willingness to pay
dues.
COLLATERAL:
customers, which can be offered by the customer i.e. his capacity to raise
required funds.
CONDITION:
The
greater the time lag, the higher the requirements for inventory. It also
provides a cushion for future price fluctuations.
The amount of
nature of inventories
The dictionary meaning of inventory is stock of goods or list of goods.
In accounting language it may mean stock of finished goods only.
RAW MATERIAL:
determined by the rate of consumption and the time required for the
replenishing the supplies.
materials and government regulations, etc., too affect the stock of raw
materials.
WORK-IN-PROGRESS: The work in progress is that stage of stocks
which are in between raw materials and finished goods. The raw
materials enter the process of manufacture but they are yet to attain a
final shape of finished goods.
FINISHED GOODS:
If it is
A.B.C Analysis
Vital Essential Desirable (VED) analysis
Inventory turnover ratios
CASH MANAGEMENT
INTRODUCTION
Cash is the important current asset for the operations of the business.
Cash is the basic input needed to keep the business running on continuous
basis; it is also the ultimate output expected to be realized by selling the
service or product manufactured by the firm.
sufficient cash neither more nor less. Cash shortage will disrupt the firms
manufacturing operations while excessive cash will simply remain idle,
without contributing anything towards the firms profitability. Thus, a major
function of the financial manager is to maintain a sound cash position.
Cash is the money, which a firm can disburse immediately without
any restriction. The term includes coins, currency and cheques held by the
firm, in its accounts.
securities or bank times deposits, are also included in cash. The basic
characteristics of near-cash assets are that they can readily be converted into
cash. Generally, when firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm.
MOTIVES FOR HOLDING CASH
The firms needs for cash may be attributed to the following needs:
Transaction Motive, Precautionary Motive and Speculative Motive. Some
people are of the view that a business requires cash only for the first two
motives while others feel that speculative motive also remain.
These
Such
contingencies often arise in a business. A firm should keep some cash for
such contingencies.
SPECULATIVE MOTIVE
CASH MONITORING
The aim of cash monitoring is to see that there is no misutilization of
cash or unauthorization of cash.
PHYSICAL CASH VERIFICATION
This is done on surprise basis. Daily the payment and receipts of cash
is tailed with the cash book closing balance.
There is a separate internal audit section to do concurrent audit,
annual audit thoroughly to ensure that the financial statements show the true
picture of the affairs of the concern.
Bank Reconciliation Statement is prepared by the concern to see that
the cash and cheques are timely deposited and collected. This is done on
monthly basis.
To clear the payments, a cheque is written for the net amount payable
as per the payment voucher after making an entry in the register of cheque
drawn and is submitted to the authorized signatories, along with the voucher
to which an original supporting bill is attached, for the signature.
CASH INVESTMENT
According to the guidelines given by the department of public
enterprises regarding investment of surplus funds by public sector
enterprises.
Formula:
Cash
Cash to Net Working Capital Ratio = ------------------------------Net Working Capital
CHAPTER V
DATA ANALYSIS AND
INTERPRETATION
TABLE 5.1.1
SCHEDULE CHANGES IN WORKING CAPITAL FOR THE YEAR 2004-05 (RS. IN LAKHS)
S.
No
Particulars
As On
2003-04
As On
2004-05
Increase
Decrease
(A)
1353.49
Sundry debtors
14780.49
14255.31
36092.14
40266.08
4173.94
5555.58
8367.82
2812.24
7219.76
5999.48
64565.70
70242.18
238.62
1235.14
996.52
0.86
6.67
5.81
495.22
118.99
12.10
21.36
8629.95
6525.36
2104.59
45.22
36.91
8.31
3360.00
2240.00
1120.00
430.50
314.16
116.34
623.38
689.16
40.11
40.11
9.63
0.00
1909.00
1000.00
15794.59
12227.86
48771.11
58014.32
9243.21
Inventories
435.76
525.18
1220.28
I. Sundry creditors
II. unclaimed dividend
V. Other liabilities
VI. Interest occurred but not due to loans
376.23
9.26
b) Provision
I. For proposed dividend
II. For dividend tax
III. For employee benefits
IV. For contractual obligations
65.78
9.63
909.00
Total (B)
58014.32
9243.21
58014.32
12066.04
12066.04
Interpretation:
In the year 2004-2005 there is an increase in working capital position
of the company to Rs.9243.21 lakhs. In the year 2004-2005 the currents
assets of the company had increased and current liabilities of the company
TABLE 5.1.2
SCHEDULE CHANGES OF IN WORKING CAPITAL FOR THE YEAR 2005-2006(RS. IN LAKHS)
S.
No
Particulars
As On
2004-05
As On
2005-06
Increase
Decrease
(A)
1047.57
Sundry debtors
14255.31
19620.68
5365.37
40266.08
47214.28
6948.20
8367.82
8298.37
5999.48
8822.82
70242.18
85003.72
1235.14
1264.79
29.65
6.67
7.14
0.47
118.99
143.64
24.65
21.36
394.82
373.46
6525.36
10618.96
4093.60
36.91
27.75
2240.00
2520.00
280.00
314.16
353.43
39.27
689.16
662.98
40.11
40.11
0.00
0.00
1000.00
1366.71
1222.86
17400.33
58014.32
67603.39
9589.07
Inventories
305.92
69.45
2823.34
I. Sundry creditors
II. Unclaimed dividend
V. Other liabilities
VI. Interest occurred but not due to loans
9.16
b) Provision
I. For proposed dividend
II. For dividend tax
III. For employee benefits
IV. For contractual obligations
26.18
67603.39
366.71
9589.07
67603.39
15172.25
15172.25
Interpretation:
In the year 2005-2006 there is an increase in working capital position
of the company to Rs.9589.07 lakhs. In the year 2005-2006 the currents
assets of the company had increased and current liabilities of the company
had increased when compared to previous year. The above schedule of 20052006 says about the position of the current assets and current liabilities of
the company. As there is an increase in current assets and increase in current
liabilities with this working capital
TABLE 5.1.3
SCHEDULE CHANGES OF IN WORKING CAPITAL FOR THE YEAR 2006-07 (RS. IN LAKHS)
S.
No
Particulars
As On
2005-06
As On
2006-07
Increase
Decrease
(A)
2258.98
1211.41
Sundry debtors
19620.68
22972.14
3351.46
47214.28
39855.44
8298.37
12737.44
4439.07
8822.82
11832.47
3009.65
85003.72
89656.47
1264.79
2780.34
1515.55
143.64
165.49
21.85
394.82
86.75
10618.96
11937.46
27.75
18.60
7.14
10.59
2520.00
2520.00
353.43
428.27
74.84
662.98
809.57
146.59
40.11
40.11
0.00
0.00
1366.71
0.00
17400.33
18797.18
67603.39
70859.29
3255.90
Inventories
7358.84
I. Sundry creditors
308.07
1318.50
9.15
3.45
b) Provision
I. For proposed dividend
II. For dividend tax
III. For employee benefits
IV. For contractual obligations
V. For shortage/losses and unserviceable
assets
VI. For dry dock repairs due
Total (B)
70859.29
Interpretation:
1366.71
3255.90
70859.29
13695.52
13695.52
TABLE 5.1.4
SCHEDULE CHANGES OF IN WORKING CAPITAL FOR THE YEAR 2007-2008 (RS. IN LAKHS)
Particulars
S.
No
(A)
As On
2007-08
Increase
Decrease
2956.00
697.02
Sundry debtors
22972.14
29659.33
6687.19
39855.44
27340.94
12737.44
13452.25
714.81
11832.47
15955.01
4122.54
89656.47
89363.53
2780.34
4562.00
1781.66
165.49
511.49
346.00
86.75
4.59
11937.46
14716.20
18.60
10.75
10.59
17.62
2520.00
2100.00
420.00
428.27
356.90
71.37
809.57
668.38
141.19
40.11
40.11
0.00
15.50
0.00
0.00
Total (B)
18797.18
23003.54
70859.29
66359.99
Inventories
As On
2006-07
12514.50
I. Sundry creditors
82.16
2778.74
7.85
7.03
b) Provision
I. For proposed dividend
II. For dividend tax
III. For employee benefits
IV. For contractual obligations
V. For shortage/losses and unserviceable
assets
VI. For dry dock repairs due
4499.33
70859.29
70859.29
15.50
4499.33
17443.43
17443.43
Interpretation:
In the year 2007-2008 there is an decrease in working capital position
of the company to Rs.4499.33 lakhs. In the year 2007-2008 the currents
assets of the company had decreased and current liabilities of the company
had increased when compared to previous year. The above schedule of 20072008 says about the position of the current assets and current liabilities of
the company. As there is an decrease in current assets and increase in current
liabilities with this working capital
TABLE 5.1.5
Particulars
S.
No
(A)
As On
2008-09
Increase
Decrease
8178.77
5222.77
Sundry debtors
29659.33
30895.01
1235.68
27340.94
33184.38
5843.44
13452.25
16373.05
2920.28
15955.01
10045.25
Total (A)
89363.53
98876.46
Inventories
(B)
As On
2007-08
5909.76
I. Sundry creditors
4562.00
7098.47
2536.47
511.49
596.02
84.53
4.59
408.22
403.63
14716.20
19004.37
4288.17
10.75
3.35
7.40
17.62
11.07
6.55
2100.00
1400.00
700.00
356.90
237.93
118.97
668.38
724.66
40.11
40.11
15.50
0.00
0.00
0.00
56.28
15.50
assets
VI. For dry dock repairs due
Total (B)
23003.54
66359.99
2992.27
69352.26
29524.20
69352.26
2992.27
69352.26
16071.11
16071.11
Interpretation:
In the year 2008-2009 there is an increase in working capital position
of the company to Rs.9243.21 lakhs. In the year 2008-2009 the currents
assets of the company had increased and current liabilities of the company
had increased when compared to previous year. The above schedule of 20082009 says about the position of the current assets and current liabilities of
the company. As there is an increase in current assets than increase in current
liabilities with this working capital
Table : 5.1.6
YEAR
CURRENT ASSETS
2004-2005
70242.18
12227.86
2005-2006
85003.72
17400.33
2006-2007
89656.47
18797.18
2007-2008
89363.53
23003.54
2008-2009
98876.46
29524.20
Analysis :
The analysis of current assets and current liabilities in Lanco infratech
limited for the period 2004-2009. The current assets are good in the year
2008-2009. The period is recorded as 98876.46. The current liabilities are
less in the year 2004-2005 and the period is recorded as 12227.86.
Interpretation:
From the above the Gross Working Capital at Lanco infratech limited
indicates that the utilization of working capital is good in the year 2008-09
the period is recorded almost a positive trend for 2004-05 to 2008-09.
Graph : 5.1.6
Table 5.2.1
STATEMENT OF GROSS WORKING CAPITAL FOR THE FIVE YEARS
PERIOD FROM 2004-05 TO 2008-09
(Rs. IN LAKHS)
YEAR
2004-05
70242.18
2005-06
85003.72
2006-07
89656.47
2007-08
89363.53
2008-09
98876.46
Analysis:
The above table indicates the net working capital position for five
years period i.e., from 2004-05 to 2008-09 In this year 2004-05 its amount is
Rs. 70242.18 lakhs. It is increased to Rs. 85003.72 lakhs in the year 200506. It is increased to Rs. 89656.47 lakhs in the year 2006-07. It is reduced
to Rs. 89363.53 in the year 2007-08. It is increased to Rs. 98876.46 lakhs
in the year 2008-09.
Interpretation:
From the above the Gross Working Capital at Lanco infratech
limited indicates that the utilization of working capital is good in the year
2008-09 the period is recorded almost a positive trend for 2004-05 to 200809.
Graph 5.2.1
Table 5.2.2
YEAR
CURRENT
ASSETS
CURRENT
LIABILITIES
NET WORKING
CAPITAL
2004-05
70242.18
12227.86
9243.21
2005-06
85003.72
17400.33
9589.07
2006-07
89656.47
18797.18
3255.90
2007-08
89363.53
23003.54
4499.30
2008-09
98876.46
29524.20
2992.27
Analysis:
The above table indicates the net working capital position for
five years period i.e., from 2004-05 to 2008-09. In this year 2004-05 its
amount is Rs. 9243.21 lakhs. It is increased to Rs. 9589.07 lakhs in the year
2005-06. It is reduced to Rs. 3255.90 lakhs in the year 2006-07. It is
increased to Rs. 4499.30 lakhs in the year 2007-08. It is decreased to Rs.
2992.27 lakhs in the year 2008-09.
Interpretation:
From the above the Net Working Capital at Lanco Infratech Limited
indicates that the utilization of working capital is good in the year 2005-06.
The higher the net working capital ratio, the greater ability to meet its
current obligations.
Graph 5.2.2
Table 5.2.3
STATEMENT OF CURRENT RATIO OF LANCO INFRATECH LIMITED
FROM 2004-05 TO 2008-09
(Rs. IN LAKHS)
YEAR
CURRENT
ASSETS
CURRENT
LIABILITIES
CURRENT
RATIO
2004-05
70242.18
12227.86
5.74
2005-06
85003.72
17400.33
4.88
2006-07
89656.47
18797.18
4.76
2007-08
89363.53
23003.54
3.88
2008-09
98876.46
29524.20
3.34
Analysis:
The above table represents current assets, current liabilities of DCI for
last five years from 2004-05 to 2008-09. Ratio between the current assets
and current liabilities is shown in the above table. The current ratio in the
year 2004-05 was 5.74. It was decreased 4.88 in the year 2005-06 and 4.76
in the year 2006-07. It is further decreased to 3.34 in the year 2008-09.
Interpretation:
From the above the Current Ratio at lanco infratech Limited indicates
that the utilization of Current Ratio is good in the year 2004-05.The higher
current ratio is greater the margin of safety, the more the firms ability to
meet its current obligations.
Graph 5.2.3
Table 5.2.4
STATEMENT OF QUICK RATIO OF LANCO INFRATECH LIMITED FROM
2004-05 TO 2008-09
[RS. IN LAKHS]
YEAR
QUICK
ASSETS
CURRENT
LIABILITIES
QUICK RATIO
2004-05
68888.69
12227.86
5.63
2005-06
83956.15
17400.33
4.82
2006-07
87397.49
18797.18
4.64
2007-08
86407.53
23003.54
3.75
2008-09
90697.69
29524.20
3.07
Analysis:
The above table represents Quick ratio of DCI for the last five years
from 2004-05 to 2008-09. The position of Quick ratio for the past five years
in the year 2004-05 was 5.63. It was decreased to 4.82 in the year 2005-06
and 3.75 in the year 2007-08. The current ratio is decreased to 3.07 in the
year 2008-09.
Interpretation:
From the above the analysis of Quick Ratio at Lanco infratech
Limited indicates that the utilization of Quick Ratio is good in the year
2004-05 the period is recorded almost a positive trend for 2004-05 to 200809.
Graph 5.2.4
Table 5.2.5
STATEMENT OF CASH RATIO OF LANCO INFRATECH LIMITED
FROM 2004-05 TO 2008-09
(RS. IN LAKHS)
YEAR
CASH &BANK
BALANCE
CURRENT
LIABILITIES
CASH RATIO
2004-05
40266.08
12227.86
3.29
2005-06
47214.28
17400.33
2.71
2006-07
39855.44
18797.18
2.12
2007-08
27340.94
23003.54
1.18
2008-09
33184.38
29524.20
1.12
Analysis:
The above table represents cash ratio of Lanco infratech limited for
the last five years from 2004-05 to 2008-09. . This means cash worth Rs. 1
are adequate for liabilities worth Rs. 2. In the year 2004-2005 the cash ratio
is 3.29 and it is decreased to 1.12 in the year 2008-2009.
Interpretation:
From the above the Cash Ratio at Lanco infratech limited indicates
that the utilization of Cash Ratio is good in the year 2004-05. Cash ratio is
very exact measure of liquidity. From the point of view absolute liquidity
ratio, a ratio of 1:2 or 0.5 considered as on acceptable standard.
Graph 5.2.5
Table 5.2.6
STATEMENT OF WORKING CAPITAL TURNOVER OF LANCO
INFRATECH LIMITED FROM 2004-05 TO 2008-09
(Rs. In Lakhs)
YEARS
INCOME FROM
OPERATIONS
NET WORKING
CAPITAL
WCT RATIO
2004-05
52478.87
58014.32
0.90
2005-06
50689.89
67603.39
0.74
2006-07
57289.09
70859.29
0.80
2007-08
70531.72
66359.99
1.06
2008-09
68522.19
69352.26
0.98
Analysis:
The analysis of Working Capital Turnover Ratio at Lanco infratech
limited indicates that the utilization of working capital is good in the year
2007-08 the period is recorded almost a positive trend for 2004-05 to 200809.
For the year 2008-09 the working capital turnover ratio at Lanco
Interpretation:
The working capital turnover ratio studies the velocity or utilization
of the working capital of the firm during a year. The higher the working
capital turnover ratio the lower is the investment in the working capital and
the higher would be the profitability.
Graph 5.2.6
Table 5.2.7
STATEMENT OF CURRENT ASSETS TURNOVER RATIO OF LANCO
INFRATECH LIMITED FROM 2004-05 TO 2008-09
(RS. IN LAKHS)
YEARS
INCOME FROM
OPERATIONS
CURRENT
ASSETS
CURRENT ASSETS
TURNOVER RATIO
2004-05
52478.87
70242.18
0.74
2005-06
50689.89
85003.72
0.59
2006-07
57289.09
89656.47
0.63
2007-08
70531.72
89363.53
0.78
2008-09
68522.19
98876.46
0.69
Analysis:
The analysis of current assets turnover ratio of Lanco infratech limited
for past five years reveals a satisfactory ratio. The current assets turnover
ratio is high in 2007-08. The current assets turnover ratio was 0.69 in 200809.
Interpretation:
From the above the current assets turnover ratio of DCI for the last
five years from 2004-05 to 2008-09. A high ratio indicates a high degree of
efficiency. The higher the ratio the lower is the investment in current assets
and higher would be the profitability.
Graph 5.2.7
Table 5.2.8
STATEMENT OF CASH TO NETWORKING CAPITAL TO LANCO
INFRATECH LIMITED FROM 2004-05 TO 2008-09
(RS. In Lakhs)
YEAR
CASH
NETWORKING
CAPITAL
2004-05
40266.08
58014.32
2005-06
47214.28
67603.39
2006-07
39855.44
70859.29
2007-08
27340.94
66359.99
2008-09
33184.38
69352.26
Source: Annual Reports of Lanco infratech limited
CASH TO NET
WORKING
CAPITAL RATIO
0.69
0.69
0.56
0.41
0.47
Analysis:
The analysis of Cash to Networking Capital Ratio at Lanco infratech
limited indicates that the utilization of working capital is good in the year
2004-05 and 2005-2006, the period is recorded almost a positive trend for
2004-05 to 2008-09. For the year 2008-09 the Cash to Networking capital
ratio at Lanco infratech limited is 0.47.
Interpretation:
The cash to net working capital ratio of Lanco infratech limited for the
last five years from 2004-05 to 2008-09. Cash is a basic source of working
capital therefore ratio between cash and working capital is so essential.
Graph 5.2.8
Table 5.2.9
OPERATION
PROFIT FROM
OPERATION
ACTIVITIES
CASH
GENERATED
FROM
OPERATIONAL
ACTIVITIES
2004-05
20255.06
17017.43
2005-06
18171.35
17713.07
2006-07
20876.61
10977.51
2007-08
15821.79
1792.51
2008-09
8133.29
14780.98
Source: Annual Reports of Lanco infratech limited
NET CASH
FROM
OPERATIONAL
ACTIVITIES
9087.23
13739.89
8183.12
8353.14
10651.85
Analysis:
The analysis of Net Cash from Operational Activities at Lanco
infratech limited indicates that the utilization of working capital is good in
the year 2005-2006, the period is recorded almost a positive trend for 200405 to 2008-09.
Interpretation:
From the above the cash flow statement of Lanco infratech limited for
the last five years from 2004-05 to 2008-09. It observed that the cash flow
from operating activities is increasing year to year.
Graph 5.2.9
TABLE 5.2.10
STATEMENT OF DEBTORS TURNOVER RATIO OF LANCO INFRATECH
LIMITED FROM 2004-05 TO 2008-09
[Rs. In lakhs]
YEAR
INCOME FROM
OPERATIONS
AVERAGE
DEBTORS
DEBTORS
TURNOVER
RATIO
2004-05
52478.87
14255.31
3.68
2005-06
50689.89
19620.68
2.58
2006-07
57289.09
22972.14
2.49
2007-08
70531.72
29659.33
2.37
2008-09
68522.19
30895.01
2.21
Analysis:
The analysis of Debtors Turnover Ratio at Lanco infratech limited
indicates that the utilization of Debtors Turnover Ratio is good in the year
2004-05 the period is recorded almost a positive trend for 2004-05 to 200809. For the year 2008-09 the Debtors Turnover Ratio at Lanco infratech
limited is 2.21.
Interpretation:
From the above debtors turnover ratio of Lanco infratech
limited for last five years from 2004-05 to 2008-09. The higher Debtors
Turnover Ratio is indicating of a sound credit management policy.
Graph: 5.2.10
TABLE 5.2.11
STATEMENT OF DEBTORS TURNOVER RATIO
INFRATECH LIMITED FROM 2004-05 TO 2008-09
OF
LANCO
[Rs. In Lakhs]
YEAR
DEBTORS
TURNOVER
RATIO
NO. OF DAYS IN A
YEAR
2004-05
3.68
365
2005-06
2.58
365
2006-07
2.49
365
2007-08
2.37
366
2008-09
2.21
365
Source: Annual Reports of Lanco infratech limited.
AVERAGE
COLLECTION
PERIOD DAYS
99
141
147
154
165
Analysis:
The analysis of Average collection Period Days at Lanco infratech
limited indicates that the utilization of Average Collection Period Days is
good in the year 2008-09 the period is recorded almost a positive trend for
2004-05 to 2008-09.
Interpretation:
Table 5.2.12
YEAR
SALES/
OPERATING
INCOME
AVERAGE
STOCK
INVENTORY
TURNOVER
RATIO
2004-05
2005-06
2006-07
2007-08
2008-09
52478.87
50689.89
57289.09
70531.72
68522.19
1135.61
1200.53
1653.27
2608.99
5567.38
46.21
42.22
34.65
27.03
12.30
Analysis:
Lanco infratech limited for last five years from 2004-05 to 2008-09.
The ratio is 46.21 in the year 2004-05 and the ratio has decreased to 42.22 in
the year 2005-06 and it is decreased to 34.65 in the year 2006-07 and it is
decreased to 27.03 in the year 2007-08 and it is decreased to 12.30 in the
year 2008-09.
Interpretation:
NOTE:
Table 5.2.13
INVENTORY
NET WORKING
CAPITAL
2004-05
2005-06
2006-07
2007-08
2008-09
1353.49
1047.57
2258.98
2956.00
8178.77
58014.32
67603.39
70859.29
66359.99
39652.26
INVENTORY TO
NET WORKING
CAPITAL RATIO
0.023
0.015
0.031
0.044
0.117
Analysis:
The analysis of Inventory to Networking Capital Ratio at Lanco
infratech limited indicates that the utilization of Ratio is good in the year
2008-09 the period is recorded almost a positive trend for 2004-05 to 200809. For the year 2008-09 the Inventory to Networking Capital Ratio at Lanco
infratech limited is 0.117.
Interpretation:
From the above inventory to networking capital ratio is gradually
increasing every year which indicates satisfactory performance of the
organisation.
Overall
organization
is
maintaining
stock
approximately
Graph 5.2.13
2004-05
5.74
2005-06
2006-07
2007-08
2008-09
4.88
4.76
3.88
3.34
to
2. Quick ratio
5.63
4.82
4.64
3.75
3.07
3. Cash ratio
3.29
2.71
2.12
1.18
1.12
4. Working
Capital ratio
0.90
0.74
0.80
1.06
0.98
5. current
Assets turn
over ratio
6. cash to
net working
capital
7. Debtors
Turn over
ratio
0.74
0.59
0.63
0.78
0.69
0.69
0.69
0.56
0.41
0.47
3.68
2.58
2.49
2.37
2.21
8. Inventory to
Networking
Capital ratios
0.023
0.15
0.31
0.044
0.117
CHAPTER VI
SUMMARY, FINDINGS
AND
SUGGESTIONS
SUMMARY
As Lanco infratech limited, a public sector organization its objective
for financial management is not only wealth maximization but service to the
nation is also to be considered. This fact has its influence on the working
capital management i.e., inventory management, investment policies of
surplus cash, debtors management, which includes credit period, credit
discounts, credit standards etc. under its purview, as amount of customers of
Lanco infratech limited are ports and public sector organization, in taking.
Decision Lanco infratech limited has to consider this factor
Cash, management in Lanco infratech limited, is a conservative one,
which requires maintaining sufficient enough cash, this policy though may
result in decreased profitability, it helps to maintain the liquidity of the
organization.
In Lanco infratech limited the investment of cash in bank balances,
are in the form of bank deposits. Because of its conservative policy that is
taken from the guidelines of Government of India. It invests surplus cash in
bank deposits rather than other investment options, which could yield more
return. Because of these deposits, which are earning significant amount of
funds, a company is maintaining good profitability through the current assets
levels are high.
The investment in fixed assets like dredgers are taken from its internal
sources like reserves and surpluses, equity etc., its dependence of debt is low
by this, organization may not major the benefits of leverage. But because of
its policy it is utilizing internal sources mostly for its capital investment
requirements.
Lanco infratech limited is going to increase its fleet in the 10 th plan at
an out lay of Rs. 1000 crores (approximately) which, it is going to raise from
These
acquisitions will have influence on future financial position i.e., cash levels,
working capital, depreciation funds, etc.
FINDINGS
The working capital ratio is satisfactory which increases year to year.
Current ratio of the firm in satisfactory position from the period 20042009
The current assets turnover ratio is maintained consistently at 0.7%
which is favorable to organization.
The quick assets are more than current liabilities, which may not be a
problem to meet the obligation.
The cash ratio which is only 50% of current liabilities, which needs
improvement.
The inventory is maintained consistently but the inventory turnover
ratio fluctuates due to change in operating income.
The debt collection period is high. This gives problem in quick
recovery of debt.
The company has no debts.
SUGGESTIONS
Lanco infratech limited has been performing well since its inception.
It is in strong financial position and it commands good credit worthiness.
Still there is a scope for better performance through different policies that
are intended in reducing costs and improving the profitability and efficient
utilization of funds. In this regard some observations have been made for
better performance of the organization.
The following features may be suggested to Lanco infratech limited for
further growth
Considering the competition Lanco infratech limited may be
suggested to improve quality of its services and implement best
technology available in the market to have an edge over the
competitors. Lanco infratech limited also suggested implementing
development in technologies not only in dredging field but also allied
like uses of information technology for competition edge.
Presently Lanco infratech limited could not meet its domestic demand
so it is suggested to expand the capacity to meet the domestic demand
as well as to tap international markets effectively.
It is suggested to train its human resources to have the required skilled
human resources for increase efficiency on operations.
Lanco infratech limited also suggested forming effective policies to
cost maximization without comprising with quality of service which
will help in competing with international market players.
BIBLIOGRAPHY
BIBLIOGRAPHY
Reference Books
1. Financial Management
-----------
I.M. Pandey
2. Financial Management
-----------
R.M. Srivatsava
----------
Prasanna Chandra
4. Financial Management
----------
5. Websites
----------
www.dredge.gov.in