OBJECTIVES OF PROJECT

 To know the export procedure.  To understand practical aspects.  To know requirement of fund and document for Export.  To know Government Policy regarding export of pharma chemical product.  To learning about export benefits.

CHAPTER III RESEARCH METHODOLOGY

Information regarding to the working management is collected by way of interviewing persons and from documents and knows basic things relating to topic by observing the work.

PRIMARY DATA
I got lots of information by interviewing the related authorized persons. Especially regarding the purchase procedure, sales procedure, about the debtors credit policy and import and export procedure etc this method is helpful for getting practical information regarding decision making where only figures are not sufficient. Also important when only observations do not clear the ideas about topic.

SECONDARY DATA
This is method used for collecting information. This is a standard and reliable method of gathering information. Information relating to company, variously norms set by banks while borrowing loans for working capital, policy followed by company towards creditors and debtors etc is collected through studying various documents. Various documents like budget files, monthly report files, audit reports, document required at the time import and export etc.

ON SITE OBSERVSTION
With the help of observation one should know the actual process of working which we cannot understand by reading or listening. This method is very essential especially to see actual working of manufacturing in plant. Observation is also important to know purchasing process, stores process for inventory management, sales etc. With the help of this method we
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know the cash management, monthly closing of accounts, verification of stocks etc. In this way the overall functioning of the organization and its culture can be better understood by actually observing the things.

Data analysis techniques

There are several tools of analyzing of working capital of a concern. The important of them adopted as followed.

1. STATIC TOOLS
Financial Ratio Analysis

2. DYNAMIC TOOLS
a) Balance Sheet b) Profit & Loss Account

DATA ANALYSIS AND INTERPRETATION

RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more thing. The relationship between two accounting figures, expressed mathematically, is known as financial ratio. Ratio helps to summaries large quantities of financial data and to make qualitative judgment about the firms performance.

There are mainly three types of ratio consider for working capital:1. LIQUIDITY RATIO 2. ACTIVITY RATIO 3. LEVERAGE RATIO 4. PROFITABILITY RATIO

INTERPRETATION OF RATIOS OF 1. LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its obligations in the short run, usually one year. Liquidity ratios are generally based on the relationship between current assets (the sources for meeting short-term obligations) and current liabilities. The important liquidity ratios are,

 Current ratio: Indicate liquidity of the company the std is 2:1 Current ratio = Current Assets Current Liabilites Current asset = cash and bank balances, marketable securities, inventory of raw materials, semi-finished goods and Finished Goods,bills receivables ,prepaid expenses and provision for bad debts. Current Liabilites = Trade creditors, bills payable bank credit, provision for Tax, Dividend etc Rationale of Current Ratio : It indicates the ability of short-term solvency. It indicates the rupee available for paying of current liabilities.
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Years

2009-10

2010-11 4.58

Current 3.25 Assets(in cr.) Current 0.97 Liabilities (in cr.) sCurrent Ratio(in points) 3.35

1.97

2.32

Current ratio
4
3.5 3

3.35

2.5 2
1.5 1

2.32

Current ratio

0.5 0
2009-10 2010-11

Interpretation: The Current Ratio has been less in last Year compared to 2009-10 which Indicates that the company has lesser amount of cash available for meeting up the current liabilities , but still the ratio is sat isfactory as last years is 2.32 :1 i.e. 2.32 rupee of asset is available to pay off 1 rupee debt.

 Quick Ratio:
It includes only the cash part of the assets. And hence is also called as Acid-test ratio. Here Quick Ratio= Quick asset Current liabilities Quick asset includes= Cash in Bank / Hand, Debtors receivables and short term marketable securities prepaid expenses and inventory. Use: It is a rigorous measure of a firms ability to service short-term liabilities; it is widely accepted as the best available test of investors in the firm.

Years Quick Assets (Cr.)

2009-10
3

2010-11
4.25

0.97 Current Liabilities(Cr.)

1.97

Quick Ratio (In Points)

3.10

1.16

Quick Ratio
3.5

3.1

3 2.5
2

1.5 1
0.5

1.16

Quick Ratio

0 2009-10 2010-11

Interpretation : The standard ratio is 1:1 and it will decresing from 2009-10 to 20010-11, here it is 1.16:1 which is more than standard it is good to be company.

2. ACTIVITY RATIOS Turnover ratios, also referred as activity ratios or assets management ratios, measure how efficiently the assets are employed by firm. The important turnover ratios are,

 Asset Turnover Ratio:

This ratio is also known as the investment turnover ratio. Is based on the relationship between the COGS and investments of a firm. The ratio however measures the efficiency of a firm in managing and utilizing its assets. The higher the Turnover ratio the more is the efficiency.

Fixed Asset Turnover Ratio =

Net Sales *100 Net Fixed Assets

Years Net Sales(Cr.) Net Fixed Assets(Cr.) Asset Turnover Ratio(%)

2009-10 4.58 1.09

2010-11 6.06 1.01

42

60

70 60
60 50 40 30

42

Asset Turnover ratio(%)

20 10 0
2009-10 2010-11

Interpretation :

The asset/investment has been above increse last year at higher rate

comapre to 2009-10.It show above 60% for last year i.e. above 60% of asset were easily converted in to COGS. Hence DPC is capable to convert the investments 55-60% into COGS.

 ACCOUNTS RECEIVABLE PERIOD : Is the period in which the customers/debtors pay-back the amount hence. Its also called as Bills receivables it is in terms of days.

Formula: Accounts receivable period=

Total Debtors Net Sales

x 365

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Years Total Debtors(Cr.) Net Sales(Cr.) Accounts receivable period(days)

2009-10 1.14

2010-11 1.09

4.58

6.06

90.85

65.65

Account's Receivable Period(Days)

100 90

90.85

80 70
60

65.65

50 40
30

Account's Receivable Period(Days)

20 10
0

2009-10

2010-11

Interpretation: The Debtors payable period in days have remain almost of 2 months for Gacl it has been reduced to 50 days to the current year. For the predicted year it may 51 days.

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 Invetory Turnover ratio :

This indicates the number of times inventory is replaced during the year. It measures the relationship between the COGS and the inventory level. Formula := Net Sales ( including excise duty recovered) Average Inventory Average Inventory = (opening balance+ Closing Balance

Years Net Sales(Cr.) Avg Inventory (Cr.) Average inventory Ratio(Times)

2009-10 4.58 0.53

2010-11 6.06 1.89

8.64

3.21

Average I ve t ry rati (Times)

10

9
8

8.64

7
6

5
4

Average Inventory ratio(Times) 3.21

3
2

1
0

2009-10

2010-11

12

Interpretation: Is similar to the Inventory holding period, but it shows the data in terms of times. Here GACL was able to convert its inventory in COGS 13 times, the ratio is less compared to previous year because of slow-down in demand and also because of the overstocking of chlorine . The predicted ratio for year 2008-09 is set-out to be 14 times

3.LEVERAGE RATIOS:
Financial leverage refers to the use of debt finance. While debt capital is a cheaper source of finance, it is also a riskier source of finance. Leverage ratios help in assessing the risk arising from the use of debt capital.

 DEBT/EQUITY RATIO:
Actually indicates the proportion of Debt and Equity . i.e. the shareholders fund and The Debt claims. Its major application is for long-term funding , but while funding for the working capital Financial Institutions also consider this ratio for various purposes importance for creditors, owners and firm itself. The higher the ratio is a bad signal as owners are putting less money.

Debt/Equity= Secured Loans+Unsecured Loans Share Capital+Reserve and Surplus

-(secured+ unsecured Debts)

Years Debt(Cr.) Equity(Cr.)

2009-10 0.03 2.99

2010-11 0.07 2.99 0.023

Debt/Equity 0.01 Ratio(points)

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De t/Eq ity ati (

0.025 0.02 0.015 0.01
0.01 0.005 0

i ts)

0.023

Debt/Equity Ratio(Points)

2009-10

2010-11

Interpretation: Here the last years ratio was 0.3:1 i.e. for every 0.3 rupee of debt the company has 1 rupee of owners capital. Since last 3 years the GACLs Debt funding for long-term projects has been less as it less that 1(0ne).

 INTEREST COVERAGE RATIO :

Also known as time interest earned ratio It measures the debt servicing capacity of a firm in so far as fixed interest on long-term loan concerned. But it is also used for analysis as it indicates the companys capacity to pay-off the long-term loan. The lower the ratio more the company is burden by that expenses. When the interest coverage ratio is less than 1.5 or lower its ability to meet the expenses may be questionable and interest Coverage below 1 indicates that company is not generating sufficient revenue to satisfy interest expense.

Formula:

Profit before Interest and Taxation Interest

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Years PBIT(Cr.)

2009-10 0.43

2010-11 0.52

Interest(Cr.)

0.03

0.04

14.33 Interest Coverage Ratio(Times)

13

Interest Coverage Ratio(Ti es)

14.5

14

13.5

13

12.5

12
2009-10 2010-11

Interpretation : Here its calculated wrt Times, Hence in 2007-08 15.75 times the GACL was able to pay-off the Interest.

I terest

verage ati (Ti es)

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Net Working Capital

Net working capital (NWC) represents the excess of asset over current liabilities. The term current asset refers to asset, which in the normal courses of business get converted into cash over short period, usually not exceeding one year. Current Liabilities are those liabilities, which are required to be paid in short period normally one year. An enterprise should have sufficient NWC in order to be able to meet the claims of the creditors and meeting the day-to-day needs of Business. The greater the amount of the NWC, the greater the liquidity. Inadequate working capital is the first sign of financial problem of the firm.

Net working Capital = Current asset-Current liabilities

Years

2009-10

2010-11 4.58 1.97

Current Assets(Cr.) 3.25 Current Liabilities ( Cr.) NET WC requirement(Cr.) 0.97

2.28

2.61

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Net W rki g capital( r.)

2.7
2.61 2.6 2.5

2.4 2.3
2.2 2.28

Net Working capital(Cr.)

2.1 2009-10 2010-11

Interpretation : The Working capital requirement for the year 2007-08 is 2085.27 which indicates that the net working capital requirement has been reduced because of the last years unused inventory and cash, also most of the cash is been utilized from internal accruals .

4.PROFITABILITY RATIO

 Gross Profit Ratio:

Formula: = Gross Profit * 100 Net Sales

Years Gross Profit(Cr.) Net Sales ( Cr.)

2009-10 0.40 4.58

2010-11 0.31 6.06

Gross Profit Ratio(%)

8.73

5.12

17

Gr ss r fit ati (%)

10
9

8.73

8
7

6 5 4 3
2

5.12

Gr ss r fit ati ( )

1
0

2009-10

2010-11

 Net Profit Ratio

Formula: = Net Profit * 100 Net Sales

Years Net Profit(Cr.) Net Sales ( Cr.)

2009-10 0.40 4.58

2010-11 0.39 6.06

Gross Profit Ratio(Cr.)

8.73

6.44

18

Net r fit ati (%)

10
9

8.73

8
7

6.44

6
5 Net Profit Ratio(%)

4
3

2
1

0
2009-10 2010-11

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