INTRODUCTION

One needs money to make money. Finance is the life blood of business and there must be a continuous flow of funds in and out of business enterprise. Money makes the wheels of business run smoothly. Some plans, efficient production system, and excellence marketing network are all hampered in the absence of an adequate and timely supply of funds. In the modern money economy, the role of finance has increased due to large scale operations, capital intensive technology, intense competition and the growth of the investment markets. Sound financed management is as important in business as production and marketing. A business firm requires finance to commence of its operations, to continue operations and for expansion or growth. Finance is, therefore, an important operative function of business firms.It is necessary to estimate accurately the capital requirements of the company. Correct determination of capital requirements is essential to arrive at the fair capitalization and to avoid the problems of over capitalization and under capitalization.Capital includes fixed capital and working capital. The capital invested in fixed or permanent assets like land and buildings plant and machinery, furniture and fixtures etc., is known as fixed capital or block capital.The capital invested in current assets such as stock of materials, finished goods, account receivables and bills receivables, short term securities and cash/bank balance for meeting day-to-day expenses is known as working capital or current capital.

Literature review

Adequate working capital is essential for smooth and efficient working of every business organization. Lack of sufficient working capital may endanger survival of the firm at the same time excess working capital or ineffective utilization of working capital needs to the additional expenditure because of the cost of capital.

Working Capital Management is essential for the following:

A firm wit adequate working capital can meet its liabilities promptly. Prompt payment helps to raise the credit standing or reputation of the enterprise.Adequate of working capital enables the firm to take the advantage of any favorable business opportunity. Example to purchase raw materials at a discount or to execute a special order. Financial soundness of business boosts the morale of employees. Lack of adequate working capital may result in interruption in operations and under utilization of plant capacity. A firm with adequate funds can tide over depression and can maintain financial solvency of business. -Adequate working capital permits timely and regular payment of cash dividends. This helps to maintain cordial relations with shareholder.In view of the above it is appropriate to study about the working capita management. For the study the organization selected is Jocil Limited which is a leader in fatty acid industry; an ISO 9002 company; the renowned organization which attained over all excellence; an organization with future and social outlook; a subsidiary of sugar industry against The Andhra Sugars Limited; a highly quality conscious and professionally managed organization; Over and above to all of this, as per Sikkim Manipal University, MBA course curriculum every student has to undergo practical training for a period of two months and come out with the project work report in order to observe the particularity of theory taught. To fulfill this requirement also this study has been undertaken.

Data interpretation

BALANCE SHEET OF JOCIL LIMITED AS AT 31ST MARCH, 2005

Liabilities

Amount (Rs.)

Assets

Amount (Rs.)

Shareholders Funds

Fixed Assets

36,78,66,4 47

Capital

4,44,10,50 0

Investments

21,23,600

Reserves and Surplus

57,75,59,4 43

Current assets, loans and advances Inventories 15,61,79,2 05

Loan Funds

Secured Loans

8,04,83,85 4

Sundry Debtors

10,99,21,5 93

Unsecured Loans

1,34,34,34 6

Cash and bank balances Other Current Assets

1,51,09,76 5

Current Liabilities

5,05,89,75 3

1,10,282

Provisions

13,42,33,7 42

Loans and Advances

31, 07,60,746

Changes in Working Capital during the period 2000-2001 to 2001-2002 (In Rs.)

Particular s

20002001

20012002

Increase in Working Capital

Decrease in working Capital

Current Assets, Loans and Advances:

Inventorie s Sundry Debtors

13703717 9

92267935

44769244

11773924 7

61127426

56611821

Cash and Bank Balances 66822 454152 387330 -

4161671 49

3957434 06

Current Liabilities and Provisions:

Current Liabilities Shot term Loans Provisions

40034131

52292172

12258041

44533245 98735383

7182841 10593437 0

37350404 -

7198987

1833027 59

1654093 83

Decrease in Working Capital

2334121 57

3078134

1208380 93

1208380 93

Changes in Working Capital during the period 2001-2002 to 2002-2003 (In Rs.)

Particular s

20012002

20022003

Increase in Working Capital

Decrease in working Capital

Current Assets, Loans and Advances:

Changes in Working Capital during the period 20022003 to 20032004

Inventorie s Sundry Debtors Cash and Bank Balances Other Current Assets & Loans

92267935

81474257

10793698

61127426

70345332

9217906

46183956

13514915

32669041

19570993 7

25788888 1

62117894 4

3957434 06

4232657 81

Current Liabilities and Provisions:

Current Liabilities

52292172

40638786

11653386

(In Rs.)

Particular s

20022003

20032004

Increase in Working Capital

Decrease in working Capital

Current Assets, Loans and Advances:

Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans & Advances

81474237

100762693

19288456

70345332

85441343

15096011

13514915

20447689

69322774

42416

195122

152706

257888881

267899248

10010367

42326578 1

47474609 5

Current Liabilities and Provisions:

Current Liabilities Shot term Loans

40638786

33601687

7037099

5341331

7307468

1966137

Changes in Working Capital during the period 2003-2004to 2004-2005 (In Rs.)

Particular s

20032004

20042005

Increase in Working Capital

Decrease in working Capital

Current Assets, Loans and Advances:

Inventorie s Sundry Debtors

10076269 3

15617920 5

55416512

85441343

10992159 3

24480250

Cash and Bank Balances Other Current Assets Loans & Advances

20447689

15109765

5337924

195122

10282

84840

26789924 8

31076074 6

42861498

4747460 95

5920815 91

Current Liabilities and Provisions:

A. Statement showing changes in working Capital of Jocil Limited Statement showing changer in working capital of Jocil Ltd., (In Rs.)

Year

Current Assets

Current Liabilitie s

Working Capital

Change in Working Capital

200001

41671491 6

1833027 59

23341215 7

200102

39574340 6

1654093 83

23033402 3

(-3078134)

200203

42326578 1

1416586 71

28160711 0

51273087

200304

47474609 5

1205536 77

35419241 8

72585308

200405

59028159 1

2086063 49

38347524 2

29282824

Interpretation:

The above table shows Jocil Ltd., is gradually increasing working capital in the last year decrease in their working capital.

E.

Cash & Bank Balance to Working Capital Ratio: (Rs.)

Year

Cash & Bank Rs.

Working Capital

Ratio

200001

11062598

233412157

0.04739

200102

46183956

230334023

0.2005

200203

13514915

281607110

0.04799

200304

20447689

354192418

0.05773

200405

15109765

383475242

0.03940

Interpretation:

The Company has a very raise during the years. The Companys cash management trend is not up to the mark. However,

During the year 2000-2001 is 0.04379 During the year 2001-2002 is 0.2005 During the year 2002-2003 is 0.04799 During the year 2003-2004 is 0.05773 During the year 2004-2005 is 0.0394

It is gradually decreased. The Management has to be quick alert about that. In the last year it is increased highly. So it is good.

F.

Loans & Advances:

Year

Loans & Advances Rs.

Working Capital

Ratio

200001

150809070

233412157

0.6461

200102

195709937

230334023

0.8496

200203

257888881

281607110

0.9157

200304

267899248

354192418

0.7563

200405

310760746

383475242

0.8103

Interpretation:

The loans and advances to working capital are 0.6461 in 2000-01 and showed an increase in 2001-02 it is 0.8496. In 2002-03, the ratio is 0.9157. In the year 200304, the ratio decreased, it is 0.7563. In the last year 2004-05 Inter Corporate loan highly increased. Loans and advances are less. It is favorable to the company.

FINDINGS & SUGGESTIONS

FINDINGS:

The following are the findings after a detailed study about working capital management in Jocil Ltd.

1.

The current ratio is less than the ideal ratio in the 2000-01. Later it is gradually increased. In the year 2003-04, it is more than the ideal ratio. So it indicates the firm has the ability to pay its current obligations in time as and when they become due.

2.

Jocil Ltd., working capital is gradually increasing from year to this way the working capital is increasing.

year. In

3.

Jocil Ltd., quick ratio in the year 2000-2001 is 1.5257. It is gradually increasing from year to year. The ideal ratio is 1:1 so the Jocil Ltd., as good liquidity. In the last year 2003-2004 quick ratio is 3.1022.

4.

The ratio between cash & bank balance to working capital in the Jocil Ltd., is as follows. In the year 2000-01 to 2004-05. In the last year the ratio decreased highly. The ratio is 0.02559.

5.

The debtors ratio in the current assets is decreased year after year. In the year 2000-01, the ratio is 0.28254, 2001-02 ratios are 0.1544, 2002-03 ratios are 0.1667, 2003-04 ratios are 0.1799, 2004-05 ratios are 0.1862.

6.

Working capital turnover ratio is changing from year to year. In 2000-01 the ratio is 4.7043, 2001-02 the ratio is 4.8760, 2002-03 the ratio is 2.0469, from 2000-01 the ratio decreased 5 years. Later it is increasing slightly. In the year 2003-04 the ratio is 2.2663, 2004-05 the ratio is 2.1256.

7.

Inventory turnover ratio in the Jocil Ltd., is changing year after year. The ratio increased in the first two years. In 2000-01, the ratio is decreased. Later it is increased. In the year 2003-04, the ratio is 8.8095, In the year 2004-05 the ratio is 6.3448. It is good to the organization.

8.

Stock conversion period is decreasing year after year. These less days are good to the organization. In 2000-01, Jocil ratio 40.69, 2001-02 is 37.2612 days, 2002-03 is 55.0063, 2003-04 is 41.43, 2004-05 is 57.5274.

9.

Collection period is changing highly. In the year 2000-01, it is 39 days, 200102 is 20 days, 2002-03 is 43 days, 2003-04 is 38 days, 2004-05 is 50 days. These less days are good to the organization.

10.

Debtors turnover ratio is increasing gradually. In the year 2000-01, the ratio is 9.32. In the year 2004-05, the ratio is 7.14. High ratio is not good to the organization.

SUGGESTIONS:

The suggestions for more efficient management of working capital in Jocil Ltd., are as follows:

1.

The current ratio in Jocil Ltd., is increased than the ideal ratio. It is good to the organization. Jocil Ltd., has to try to maintain the ideal ratio.

2.

Jocil Ltd., working capital is increasing gradually. The sales are not increasing according to working capital. It is not good at the organization to increase the working capital.

3.

Jocil Ltd., quick ratio is increasing gradually from year to year. IT is not good to the organization to maintain the high quick ratio.

4.

Jocil Ltd., is maintaining less cash & bank balances. It is problem to the organization in some times. So it is good to the organization to maintain minimum cash and bank balances.

5.

Jocil Ltd., debtors turnover ratio is increasing year to year. It will causes for bad debts. So it is not good to the organization. The company has to try to reduce the debtors. Try to increase the cash sales.

6.

Working capital turnover ratio is gradually decreasing. High ratio is good to the organization try to maintain high ratio.

7.

Inventory Turnover ratio in Jocil Ltd., is increasing one year and after decreasing next year. IT is good t the organization. Try to maintain some level of increasing in future.

8.

Jocil Ltd., is presently following a concentration banking methods of collection from debtors. As lock box system is an advanced procedure of cash collection from debtor. The company is advised to follow this procedure which is more advantageous for the firm.

9.

Jocil Ltd., is producing goods for HLL on the basis of contract. It is not good thing. IT arise no. of problems in feature.

10.

The firm may use marketable securities in the place of fixed deposits, because they are the most liquid assets after cash.

BIBLIOGRAPHY
1. Fundamentals of Financial Management - James C.Van Horne

2. Financial Management

- I.M.Pandey

3. Financial Management

- Pasanna Chandra

4. Financial Management

- Khan and Jain

5. Annual Report

- Jocil Ltd.,