A

ON

FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT

OF

BRINDABAN BEVERAGES PVT.LTD. BAREILLY

SUBMITTED
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION (MBA)

UNDER

GUIDANCE

OF

SUBMITTED BY Mr.PRAKASH KUNDNANI DHOOPAR (FACULTY) 2012)

VIVEK MBA (2010-

UNITED INSITITUTE OF MANAGEMENT NAINI, ALLAHABAD.

Acknowledgment
I wish to express my gratitude to BRINDABAN Beverages Private Limited, management for giving me an opportunity to be a part of their esteem organization and enhance my knowledge by granting permission to do my summer training project under their guidance. This would not have been possible if my project guide Mr. Vikas Johari (Account officer) had given his advice at regular intervals. He made this report possible by providing me needed information and guidance at various stages of preparation of this report. I would like to express my gratitude and warm regard to him for taking off his busy schedule to take insightful suggestion and constant encouragement throughout the period of study. His confidence on me, for allowing me to study the market for him, inspiring guidance with valuable suggestion has made it possible for the project to achieve the prospect form without that it would not have been a success. I express a deep sense of inmates towards my institute, United Institute Of Management, Naini Allahabad, hereby declare, for providing an opportunity to enter into the corporate world as On-Job-Trainee for the period of 45 Days I am also thankful to all those respondent who at the outset answered all the question patiently & honestly and helped me to complete the project. Last but not the least, I would like to thank my Principal of UIM Prof. T.B. Singh and my HOD Mr. Vikas Mehrotra Sir and my Lecturer of UIM Mr. Prakash Kundnani & my parents whose constant love, support and blessed me throughout this project. The success of this project work incorporates the contribution of numerous people. At the outset, I take the opportunity to convey my sincere gratitude to Coco-Cola for giving me a chance to undergo such an interesting project.

Place: Date:

VIVEK DHOOPAR (M.BA 2010-12)

PREFACE

The summer training programs are designed to give the practical knowledge of corporate world. Training is usually meant for such vocations where advance theoretical knowledge is to be backed up by practical experience on the job and it is because of this reason that summer training programs are designed. So, that the future manger must be ready to take the future responsibilities. It was exactly in this context that I was privileged enough to join coca-cola one of the biggest brand in beverages in the world. I achieved lots of experience and confidence over the past eight weeks which will help me to take the future responsibility on my shoulder. During this period, I was given to find out the FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT . In the training program I had tried my level best to arrange the work in systematic and chronological way. This endeavor work shall provide the coca-cola marketing department, an idea about market condition. Therefore, I hope with all sincerity that this work shall be of definite use to the organization.

DECLARATION

I, Vivek Dhoopar, a bonafide student of from United Institute Of Management, Naini Allahabad, hereby declare that the Institutional Training Report submitted in partial United Institute Of Management fulfillment of the requirement of the degree of Masters Of Business Administration University is my original work. This work is not being submitted under any other institution.

DATE: PLACE: NAINI ALLAHABAD

VIVEK DHOOPAR MBA (2010-12)

Table of Contents
CHAPTER 1 OBJECTIVES OF THE STUDY6-7-

CHAPTER 1
2

OBJECTIVE
The main objective of this project is-

Primary Objectives:
The main objective of this project is to know practically about the working capital of BBPL because it is one of the most important financial aspects of any business concern. To fulfill this objective we have to deeply study the financial position of the company and make analysis of items of the balance sheet and profit and loss A/c related to the working capital.

Secondary Objectives:

The other objective of the study is to gain deep insight knowledge of working capital of BBPL knowing different aspects of working capital like

How company manage its working capital ? What are the sources through which BBPL finance its working capital ? Basic factors which affects working capital requirement of BBPL ? Check out the policies of BBPL regarding managing its cash, receivables and inventory .

CHAPTER 2

HISTORY OF COCA-COLA COMPANY

Dr. John Smith Pemberton invented coca-cola in 1886. It was the Doctors second drink with cola leaves and cola nut as basis. The doctor first cola leaves drink, Pembertons French wine coca was actually an imitation of vin mariani, a coca wine drink invented by Angelo Mariani, in 1883. Although there were several limitations of French coca wine, Pembertons formula was superior. He was actually quoted saying I believe hat Im now producing a better preparation than that of Mariani. Pemberton was not in a very good health. Not to mention he was morphine addict, so in 1887, he began to sell parts of the company off. On July 8 th he sold 3rd to George Lowndes. Neither man had the time to market, make or sell coke so they sold their portion of the company to Wool folk and his younger sister Margeret Dozier. Dozier owned to ninth and Walker own four ninth of the formula rights venable somehow disposed its portion of coke to Joseph Jaobs, owner of Jaobs pharmacy. In early October Pemberton ran a blind add looking for additional investors and was able to 3 investors with the help of this add. He took $2000 from each of them. In December 3 new partners move to Atlanta, ready to produce all Pembertons medicine. At this point of time formula of coke was officially owned by Pemberton, Walker and Dozier, but several others started showing interest in it inter as a Candler and ambitious Atlanta druggist. Candler somehow acquired controlled of the company in 1888. Things got sticky for a while with Pemberton claiming his right to the drink. This kicked off by having two cokes by the name of Yum and Coke. Pemberton grew even more ill and eventually he died in on August 16 th 1888. Exactly two weeks after the death of Pemberton Candler brought the remaining interest of Walker and Dozier for $1000. Therefore Candler became the sole proprietor by 01st May 1889. By the turn of the century Candler became one of the wealthier men in Atlanta and coke became one of the most famous soft drink in America. 1

The world has changed since pharmacist John Smith Pemberton first introduced the refreshing taste of coca-cola in Atlanta. The name and the product means so many god things to millions of consume around the globe. Coca-cola products are served more than 705 million per day, quenching the thirst of consumer of around 200 countries in every climate.

BRANDS OF COCA-COLA(CSD)
Coke, Sprite, Thums Up (the most trusted brand in India), Fanta orange, Fanta apple & Limca.

INTRODUCTION OF SOFT DRINKS

Soft drink containing drinks are tea, milk, drinks. is a non-alcoholic beverage a sweetening agent, edible so designed to distinguish cocoa and undiluted fruits either carbonated or non-carbonated usually acids or natural or artificial flavors. Soft them from hard liquors or spirits, coffee, and vegetables are not considered as soft

Types of Soft Drink:

Soft drinks can be divided into two parts Viz, Carbonated Soft Drinks Non-Carbonated Soft Drinks The soft drinks which are not under pressure are termed as carbonated soft drinks. These are packaged for sale in a variety of containers, including glass bottles.

These soft drinks that are in pressure s known as Non-carbonated Soft drinks. This may be packaged in not only in bottles and cans but also in treated carbonated cartoons.

Water is the key element in a soft drink. Water taken from municipal sources, undergoes further processing both to ensure uniformity and to remove solid matter color, chlorine and any other tastes or odors that may be present. The introduction of carbon dioxide protects the carbonated beverages against spoilage, at the same time endowing it with the characteristics effervescence and tangy taste. Sugar or other sweeteners are dissolved or diluted with processed water and then combined with flavoring substances, edible acids colorings and sometimes preservation.

HISTORY OF SOFT DRINK IN INDIA

The first brand of soft drink, gold spot was established 53 years ago. Before coca-cola entered the country to dominate the soft drink market, the history of soft drink in India is quite drinking old. Down the age, people consume soft drink to give them a refreshing feeling. Gold spot is considered as the first brand of soft drink in India. It was established in 1965. Coca-cola at the same time entered the Indian market and dominated the soft drink market. It didnt face any competition from the local market.dur to certain circumstances Coca-cola company discontinued its operation from India. In 1993, Coca-cola was once again launched in Agra with the slogan of OLD WAVES HAVE COME AGAIN. Joining hand with Parle export pvt. Ltd. The company was trying its best to regain prestige which it had before. St present only Coca-cola and Pepsi food are giving tough competition to each other. Coca-cola was the first foreign drink in India in the year 1965. Coca-cola had a very good beginning in the Indian market and it hardly faced any competition in India. The marketing people did not even require advertising for Coca-cola. Later in 1970, it introduced a lemony soft drink called Limca. Before Limca they had introduced Cola-Pepsi, which they had to withdraw soon in the face battering confrontation with Coca-cola. The Indian drink had a significant opportunity in 1977 but Coca-cola decided to wind up its operation.

HISTORY OF SOFT DRINK IN U.P.

When coca-cola re-entered the Indian market, The BRINDABAN beverages pvt. Ltd. Of Bareilly U.P. took on lease for 20 years in 1997-98 and started its operation. The first product launched by BRINDABAN Beverages Pvt. Ltd. was coca-cola and after that all the remaining products came in the U.P. market. At present the BRINDABAN beverages pvt. Ltd. is 126 including all the departments. The soft drink market in India is quite wide. The production of soft drink in U.P. was started on 27th March 1967 with the installation of a coca-cola bottling plant in Jamshedpur under the guidance of late Industrialist Mr. Dharma Chad Kumar which was named as steel city beverages pvt. Ltd. The company controlled the lion share in the soft drink market for nearly 10 years. Parle also entered in this field in U.P. with the installation of bottling unit in collaboration with Mr. Rajendra Poddar in the name of Orient Beverage Pvt. Ltd. in 1997 with the advent of Janta party govt. it created trouble for coca-cola which led to withdraw its operation from India After the withdrawal of coca-cola from India, the Parle monopolized the soft drink market in U.P. took alliance share of the beverage product from the industry even after McDowell pure drink and local drinks entered the market. They could not compete with Parle. Once again with the liberation of economy in 1991, Pepsi food ltd. enter into the Indian market, it share its bottling of products in U.P. by steel city beverage company on 24th March 1991 owned by Kamahis collaboration with the Birla group, which was once the bottling plant 2

for coca-cola. After the re-entry of coca-cola in 1993, the market scenario of U.P. also changed dramatically. Coca-cola established its bottling plant in Jamshedpur and Bareilly to counter its arch-rival Pepsi. A soft drink is non-alcoholic beverage. It is flavored and contained no fruit juice or pulp. The invent of soft drink is really a classic example of todays marketing theory which says The real marketing spirit of marketing man lies behind the fact of indenting a need, a real need of consumer and providing the product to fulfill the need.

COCA-COLA COMPANY IN BAREILLY

Coke began its operation in Bareilly unit on 4 th September 1998 by taking over the plant from franchisee Bottler-Orient Beverages Limited. it is located at E-1, Industrial Area, Patliputra, Bareilly just 3kms away from the banks of river Ganga. The plant is spread over an area of 1.7 acres and houses the most sophisticated machinery to produce Coca-Cola and many other brands marketed by the company. The Plant can produce around 20,000 cases of soft drink per day and employees over 120 employees.

BRIEF OF THE ORGANIZATION

Brindavan Beverages Pvt. Ltd, a bottling company was started during the year 1986 in Bangalore due to the humble services by Mr. S. N. Ladhani, the Managing Director of the company, with and initial capital of Rs. 25 Lac. Brindavan Beverages Pvt. Ltd has a franchisee agreement with Parle exports for hundred years to manufacture and sell its products. During November 1993, Parle export sold all its 60 franchises to Coca-Cola in India in order to compete with Pepsi. Each franchisee can cover up 16 districts. The company is in business of manufacturing and selling Coca Cola and other soft drinks owned by Coca Cola like Thumsup, Limca, Fanta, Maaza, Kinley 2

Soda in area allocated to Bareilly franchisee which covers districts such as Badaun, Moradabad, Rampur, Pilibhit, Shahjahanpur, Lakhimpur Khiri. M/s Brindavan Beverages Pvt. Ltd has its production unit having capacity of 600 bottles per minute, located at Parsakhera Industrial Estate, 12 Kilometer away from Bareilly town on Delhi highway. In state of Uttranchal the company establish a sales depot at Kichha. As the product of company is sold in returnable containers (Glass bottles in plastic Shells) large area is required for storage of empty glass bottles as well as filled glass bottles. Company has maintained huge storage capacity in respect of bottles, which is located adjacent to the production unit. Brindavan Beverages Pvt. Ltd is owned by Ladhani Group which owns three more bottling plants located at Baranbanki, Faizabad, and Hathras having head office located at Bangalore. The Managing Director, the head of the organization is in charge of all administration matters. The G.M. Sales and franchise Manager-sales is responsible for activities such as sales, promotions, advertisements and distribution etc. and Production & Plant Manager takes care of the production department.

MISSION, VISION & VALUES

Our mission, vision an values outline who we are, what we seek to achieve, and how we want to achieve it. They provide a clear direction for our company and help ensure that we are all working toward the same goals.

MISSION:
To refresh the worldin body, mind, and spirit To inspire moments of optimismthrough our brands and actions. To create value and make a differenceeverywhere we engage.

VISION WITH CLEAR GOALS:

People: Being a great place to work where people are inspired to be the best they can be. Planet: Being a responsible global citizen that makes a difference. Portfolio: bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples desires and needs. Partners: Nurturing a winning network of partners and building mutual loyalty. Profit: Maximizing return to shareholders while being mindful of overall responsibilities.

VALUES:
Leadership: The courage to shape future Passion: Committed in heart and mind Integrity: Be real 3

Accountability: If it is to be, its up for me Collaboration: Leverage collective genius Innovation: Seek, imagine, create, delight Quality: What we do, we do well

Location of BBPL
The Brindavan Beverages, in Bareilly, is located in the area that affects the Working Capital because of the following factors. BBPL produces the beverages that are a seasonal product. Weather of Bareilly is typical of the cities of Western Uttar Pradesh. The city falls in the Rohilkhand area and thus can be considered as a semi-arid region. The summers are scorching with daytime temperature hovering around 37C to 45C. Nights are relatively cooler with minimum temperature falling to 27-28C. The summers set in the month of April and persist till June end. Venturing out during day without proper protection might lead to heatstroke. Monsoon sets in June end but brings very little respite to the simmering city. The average annual rainfall is in the range of 400-500 Millimeters that is precisely contributed by the Southwest jet of monsoon. Winters set in the month of November and persist till February. Winters are quite chilly with minimum temperature hovering around 4-5C. The selling of coke product varies according to the weather and temperature. The production policy is also been divided into three seasons: Peak Season Lean Season Off Season As according to the seasonal production policy the level of purchase of Raw Material and others also varies. And most importantly the requirement of Working Capital also changes

DISTRIBUTION NETWORK OF BRINDAVAN BEVERAGES PVT. LTD.

As stated earlier that this particular plant has been taken over by Brindavan Beverages P Limited from the Coca-Cola India. With the passage of time, company has extended its distribution network from 60 to 230 distributors along with 05 depots and covers over 16 districts under its belt and they are still growing. The names of the district are as follows. 1. Bareilly 3. Shahjahanpur 5. Rampur 7. Chamoli 9. Pitoragarh 11. Rudraprayag 13. LakhimpurKhiri 15. Bageshwar 2. Badaun 4. Pilibhit 6. Moradabad 8. Chandausi 10. Karayanprayag 12. Kichha 14. Haldwani 16. Ranikhet

Right from the first year of the incorporation the company is running in top profit. This is because of many reasons. One of them is being excellent marketing strategy adopted by the company. Also the company gives goods margins to the retailers along with various lucrative from time to time. 2

BRINDAVAN BEVERAGES PRIVATE LIMITED CORPORATE STRUCTURE

PRODUCTS OF THE COMPANY Aerated Water:

Company is engaged in production of aerated water sweetened as well as non sweetened. Products are manufactured exclusively on behalf of Coca Cola India P Limited for distribution in allocated area to this franchise. Aerated water covered under chapter heading 22 of Central Excise and Tariff Act and valuation of product is governed by section 4A of Central Excise Act as the product is covered under Standard Weight and Measurement Act. This product is liable to highest applicable rate of tax under VAT @ 12.5% + SAT @ 1%.

Fruit Juices:
Along-with aerated water company is drinks (Mango Pulp based in the name of in the name of Minute Maid Pulpy Orange from Excise duty and is chargeable to 4% tax under SAT. also manufacturing fruit juice based Maaza and orange juice based drinks or MMPO). This product is exempted rate of tax under VAT + 1% rate of

Beside other applicable statutes company itself maintain stringent quality norms. It has recently successfully undergone ISO 18001:2007 and E3/S3 norms. Products of company are packed and sold in returnable glass bottles and in PET bottles in various pack sizes as per market demand. Under backward integration company has established production capacity of producing PREFORMS an injection blown to form PET bottle. All the products are in the form of Beverages have limited shelf life varying from 3 months to 6 months. Company has various internal controls to assure timely withdrawal of expired / products approaching expiry to maintain the quality of product. Production cycle of product is very short that vary from few hours to a day so company has very nominal inventory in the form of WIP. Products are usually consumed in moderate hot to very hot climate so the sale of 3

products vary with in year due geographical location of plant and franchise area. It peaks in the month of May and June as summers are extremely hot and humid. Depending upon the demand and seasonality of product the inventory requirement also vary with in year with maximum inventory in the month of March and April and almost nil inventories in the month of November and December.

INTRODUCTION TO TOPIC

Coca-Cola serves in India as most the recalled brands across the world including names such as Diet Coke, Sprite, Fanta, Thumbs Up, Limca, Mazza, and Kinley. We are partners with leading customers. The business system in India is directly related to BRINDABAN Beverages Pvt. Ltd.(BBPL). The vast Indian operation comprises 25 companies owned bottling operation and 24 franchisee owned bottling operation. The company owned bottling arm of Indian operation, BBPL is responsible for the manufacture, sale and distribution of beverages across the country.

PROJECT ASSIGNED TO ME AT BBPL:

Title of the project is FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT . This project is related to the Finance area. This project was assigned to me and I have to visit various retailers outlet and was supposed to do a survey regarding the no. of times a retailer orders products and also was to see whether there is any outlet which is not ordering product during the periods time, if yes then, the remedial process to convert them into the regular outlet i.e. converting them into operating outlet. And which product they demanded more. In this project I have to visit various retailers outlet and to classify them as operating and non-operating outlets and then encouraging the non-operating outlets to convert them into the operating outlets and also I was supposed to take their views on the demand of product from the consumers and which product of CocaCola is in more demand from the consumers point of view.

SUMMARY OF THE TOPIC

FINANCIAL ANALYSIS MANAGEMENT : AND WORKING CAPITAL

Every business needs funds for two purposes for its establishment and to carry out its dayto day operations. Long-term funds are required to create production facilities through purchase of fixed assets such as plant &machinery, land, building, furniture, etc. Investment in these assets represents that part of firms capital, which is blocked on a permanent or fixed basis and is called fixed capital. Funds are also needed for short term purposes for the purchase of raw material, payment of wages and other day-to-day expanses, etc. These funds are known as working capital. Working capital may be regarded as life-blood of a business. Its effective provision can do much to ensure the success of the business, while its inefficient management can lead not only to loss of profits but also lead to the ultimate downfall of a concern. Hence, FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT if carried out effectively, efficiently and consistently, will assure the health of an organization.

MEANING OF WORKING CAPITAL

Working capital is commonly defined as the difference between current assets and current liabilities. Efficient FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT requires that firms should operate with some amount of working capital, the exact amount varying from firm to firm and depending upon other things. For ex:- nature of industry. Capital required for a business can be classified in two main categories viz. Fixed capital, & Working capital.

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified on two bases:A) On the basis of concept:On the basis of concept, working capital can be classified as, Gross working capital Net working capital B) On the basis of time:On the basis of time, working capital can be classified as, Permanent or fixed working capital Temporary or variable working capital Gross working capital:The gross working capital is the capital invested in the total current assts of the enterprises. Current assets are those assets, which can be converted into cash within a short period, normally an accounting year. Gross working capital = Total current assets Net working capital:The term net working capital refers to the excess of current assets over current liabilities, or say, Net working capital = current assets current liabilities Net working capital can be positive or negative. When the current assets exceed the current liabilities the working capital is positive and the negative working capital results when the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assets of the income of the business. The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits.

The gross concept is sometime preferred to the concept of working capital for the following reasons:It enables the enterprise to provide correct amount of working capital at correct time. Every management is more interested in total current assets with which it has to operate then the sources from where it is made available. It takes into consideration of the fact every increase in the funds of the enterprise would increase its working capital. The concept is also useful in determining the rate of return on investment in working capital. The net working capital concept, however, is also important for the following reasons:It is a qualitative concept, which indicates the firms ability to meet its operating expenses the short-term liabilities. It indicates the margin of protection available to short term creditor It is an indicator of financial soundness of enterprise. It is suggesting the need of financing a part of working capital requirement out of the permanent sources of funds.

Permanent or fixed working capital Permanent or fixed capital is the minimum amount, which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of current assets is called permanent or fixed working capital as this part of working capital is permanently blocked in current assets. As the business, grow the requirement of working capital also increase due to increase in current assets. Temporary or variable working capital Temporary or variable working capital is the amount of working capital, which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called the seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing campaign for conducting research etc.

Temporary working capital differs from permanent working capital in the sense that it is required for short periods and cannot be permanently employed gainfully in business. Needs and objectives for working capital Every business needs some amount of working capital. The needs for working capital, arises due to time gap between production and realization of cash from sales. There is an operating cycle involved in sales and realization of cash. There are time gaps in purchases of raw material and production, and sales, and realization of cash. Thus, working capital is needed for the following purposes:For the purchase of raw material, component and spares. To pay wages and salaries. To incur day to day expenses and overhead costs such as fuel, power and office expenses etc. To meet the selling costs such as packing, advertising etc. To provide credit facilities to the customers. To maintain the inventories of raw material, work in progress, store, spares, and finished stock For studying the need of working capital in a business, one has to study the business under varying circumstances such as new concern, as a growing and one, which has attained maturity. A new concern requires a lot of funds to meets its initial requirement such as promotion and formation etc. These expenses are called preliminary expenses and are capitalized. The amount needed for working capital depends upon the size of the company and the ambition of its promoters, greater the size of the business unit, generally will be the requirement of the working capital. The requirement of the working capital goes on increasing with the growth and expansion of the business until its gains maturity. At maturity, the amount of working capital required is called normal working capital.

FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENT

3

1. Nature of business:The management of working capital is very critical in FMCG utility undertaking such as electricity, water supply and railways because they offer cash sales only and supply services not products and no funds are tied up in inventories and receivables. On the other hand, the trading and financial firm requires less investment in fixed assets but have to invest large amounts in current assets. The manufacturing undertaking requires sizable amount of working capital along with fixed investments. 2. Production policy:The determination of working capital needs depends upon the production policy of the business. The demand for certain products is seasonal i.e.; such products are purchased in certain months of a year. For such industries, two types of production policy can be followed. Firstly they can produce the goods in the months of demand or secondly, they produce for the whole year. If the second alternative were followed, it would mean that until the time of demand finishes, product would have to be kept in stock. It would require additional working capital. 3. Length of production cycle:The longer the manufacturing time, the raw material and other supplies have to be carried for a longer time in the process with progressive increment of labor and service costs before the final product is obtained. Therefore, working capital is directly proportional to the length of the manufacturing process. 4. Rate of stock turnover: There is an inverse co-relationship between the quantum of working capital and the velocity or speed with which the sales are effected. A firm having a higher rate of stock turnover will need lower amount of working capital as compared to a firm having a low rate of turnover.

5. Credit policy: Credit policy affects the working capital requirements in two ways: Terms of credit allowed by customer to the firm, 2

Terms of credit available to the firm. A concern that purchases its requirements on credit and sells its product/services on cash requires lesser amount of working capital and vice-versa. 6. Working capital cycle:The speed with which the working cycle completes one cycle determines the requirements of working capital. Longer the cycle larger is the requirement of working capit 7. Rate of growth and expansion of business:The larger size businesses require more permanent and variable working capital in comparison to small business. If a company is growing, its working capital requirements will also go on increasing. Thus, the growing concerns require more working capital as compared to the stable industries. 8. Seasonal variation:Generally, during the busy season, a firm requires larger working capital than in the slack season. 9. Business fluctuation:In period of boom, when the business is prosperous, there is a need for larger amount of working capital due to rise in sales, rise in prices, optimistic expansion of business etc. On the contrary in time of depression, the business contracts, sales decline, difficulties are faced in collection from debtors and the firm may have a large amount of working capital idle.

10. Earning capacity and dividend policy:Some firms have more earning capacity then other due to quality of their products, monopoly conditions, etc. Such firms may generate cash profits from operations and contribute to their working capital. The dividend policy also effects the requirement of working capital. A firm maintaining a steady high rate 3

of cash dividend irrespective of its profit needs more working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend. 11. Price level changes:Price level changes also affect working capital needs. If the prices of different goods increase, to maintain same level of production, more working capital is needed. 12. Availability of raw material:Availability of raw material on the continuous basis affects the requirement of working capital. There are certain types of raw materials, which are not available regularly. In such a situation firm requires greater working capital to meet the requirements of production. Some raw materials are available in particular season only for example wool, cotton, oil seeds, etc. They have to keep greater working capital. 13. Magnitude of profit:Magnitude of profit is different for different businesses. Nature of product, control on the market and ability of managers etc. Determine the quantum of profit. If the profit margin is high, it will help to arrange funds internally, which will also increase the working capital. 14. Other factor:a) Management ability c) Import policy b) Irregularities of supply

d) Assets structure

e) Importance of labor

FACTORS AFFECTING WORKING CAPITAL OF BBPL

1) Nature of business: - BBPL is engaged in manufacturing (bottling) of soft drinks hence it needs efficient management of working capital for its day to day operations. 4

2) Production policy: - production policy, in BBPL, is divided seasons according to the sales made/estimated by the management. Makes the different level of production for different seasons: a) Peak season b) Lean season c) Off season

3) Expansion of business:- owners of BBPL always tries to expand their business by manufacturing new products launched by their principals i.e. Coca cola India limited. The company is currently expanding business by manufacturing performs (injections) use in production of plastic bottles. 4) Business fluctuation: - seasonal industries located in geographical area where temperature varies wildly summer being very hot and extremely cold winters. So accordingly demand for product varies as maximize in summer & minimized in winters. 5) Credit policy: - credit allowed by BBPL to its customers is advance payment for sale of aerated water/fruit juices and credit allowed by supplier to the firm varies from 15 days to 1 month. 6) Length of manufacturing cycle: - length of the production cycle is 01 to 02 days so it again increases the working capital requirements. 7) Price level changes: - fluctuation in the price of raw material is quite often which fluctuate working capital requirement. In terms of BBPL, the cost of raw material which is required for manufacturing soft drinks going on high which again increases its working capital requirements.

MANAGEMENT OF WORKING CAPITAL

Management of working capital means management of all aspects of current assets and current liabilities. Basically, FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT is concerned with the problems that arise in attempting to manage the current assets, current liabilities and the interrelationship that exist between them.

Financial management should determine the quantum and structure3 of current assets. It should also see that current assets are financed from the proper sources. Management should also see that current liabilities are paid in time, while managing the working capital. The main objective of FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT is to manage current assets and current liabilities in a manner so that working capital can be kept in a satisfactory level. It is also taken in to account that the working capital should be neither excessive nor inadequate. The amount of current assets should be adequate to pay the current liabilities in time and adequate security margin can be maintained. Accordingly, proper balance among the different constituents of current assets is maintained so that no current has more than require amount invested in it. Management of working capital affects profitability, risk and liquidity of the business significantly. Management should, therefore, maintain proper balance among there factors while managing working capital. If the quantum of working capital is more, it will increase liquidity, but decrease profitability and risk. If working capital relatively declines, it will decrease liquidity but cause an increase in profitability and risk. If business wants to earn more profit, it will have to bear higher risk. Risk means inability of the firm to pay current liabilities in time. FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT is three dimensional in nature:1) It concerned with the formulation of policies with regard to profitability, Liquidity and risk. 2) It is concerned with the decisions about the composition and level of current assets. 3) It is concerned with the decisions about the composition and level of current liabilities.

DEBTOR MANAGEMENT
It is very difficult for the organization to sell always on cash basis in todays competitive market. In almost every business, we have to sell on credit basis. The basic objective of management of sundry debtor is to optimize the return on investment on this asset. It is obvious that if there are large amounts tied up in sundry debtors, working capital requirement would be high and consequently interest charges will be high. On the other hand if the credit policy is very tight, 2

investment in sundry debtors is low but the sale may be restricted, since the competitors may offer more liberal credit term. We have limited resources and therefore every resource has its own opportunity cost. Therefore, the management of sundry debtors is an important issue and requires proper policies and efficient execution of such policies. Debtors and cost of debtors have direct relation; cost will increase due to increase in debtors and vice versa. It depends on the credit sale of concern and credit period (collection period) allowed to customer. It is in interest of customer to pay as late as possible, and company whom made sales, would like to collect their debtor as early as possible. There is a conflict between the two aspects. Debtor management is the process of finding the equilibrium at which company agrees to receive its payment without hampering or having any adverse effect on its sales and customer agree to pay at their economical buying concept. Sundry debtor level depends on two measure issues: One is volume of credit sales and another is credit period allowed to customer. It is the essence of every business that to sale on credit and allow credit period to the customer in such a competitive market, following factors may be considered before allowing credit period to the customer: Nature of the product Credit worthiness of the customer, which varies from customer to customer. Quantum of advance received from customers Credit policy of company, say number of days allowed to customer for payment to the customers. Cost of debtors Manufacturing cycle time of the product etc.

There are mainly three aspects of Management of Debtors: 1. Credit policy: The credit policy is to determine that in how much time money will be realized from the debtors . It involves a tradeoff between the profits on additional sale that arises due to credit being extended on one hand and the cost of carrying those debtors and bad debts losses on the other. In BBPL, there is one year contract with organizations that want to relate as dealer/agent. This agreement requires an amount in form of security which is 2

given by the dealer. While placing an order, the dealer has to make advance payment. There are some big dealers, to whom credit is allowed. 2. Credit analysis: This requires determining as how risky is to advance credit to a particular customer. Before the undertaking of any dealer/agent, selling agents (of BBPL) analyses the information about them. It includes the followings: What is the existing business of the party. How much experience they have. The amount of capital, they have invested Infrastructure position like: - location, electricity (accessibility), storing. Minimum load that they will ask to deliver Goodwill position of the party What is the Storage Capacity of the dealer. Quality maintenance of the dealer. Guarantee that is given to BBPL 3. Control of receivables: This requires to the firm to follow up debtors and decide about a suitable credit collection policy. It involves both lying down of credit policy and execution of such policies. In BBPL, Credit is allowed to the bumper sellers (dealers), but after the time placing one order on credit, the dealer cannot place next order (until the payment is made). There is a cost of maintaining receivables, which comprises cost of: The company requires additional funds as resources are blocked in receivables, which involves a cost in the form of interest (loan fund) or opportunity cost (own fund). Administrative cost, which includes record keeping, investigation of credit worthiness etc. Collection cost, Defaulting cost or bad debts.

DEBTORS MANAGEMENT IN BBPL

PARTICULARS Total debtors Turnover TOTAL TO TURNOVER

2008 2,297,000 242,579,000 3.5 days

2009 426,780 309,750,000 0.5 days

Debtor collection period = Debtors *365 / Turnover Total debtors to turnover are the relationship between total debtors and turnover, in no. of days. Interpretation: The reason behind such a ratio is that they, in BBPL, take advance payment from their dealers in either form Cash or draft. Credit facility is allowed in only few conditions like: Bumper sellers (dealers) Long distance (too much of time spending in delivery) & others As stated earlier, BBPL sell the beverages to their dealers and normally, takes the advance payment. But this transaction also creates a hidden debt on the dealer which is that of Empty Bottles. In fact, for example, when BBPL sell 100Rs Coke (to the dealer), they take 100Rs as the advance, and this does not add the value of bottle which may be 400Rs.

Steps involved in management of debts: The following steps are involved in debtors Management There should a close contact with the customers. There should be proper age wise analysis of the debtors. There should be proper classification between collectible between collectible debtors and bad debts. Bad debts should be written off as early as possible after making all efforts for its collection.

 Product cycle should be minimized so that cost of the product should not become high to the agreed amount because of time factor. There must be a provision of discount for early payment of debts by the customers. Regular checking of the records of the debtors is essential so as to analysis the current position of that organization. While making a policy, regarding the debtors the point should be considered that customer having excellent past record, follow the lenient policy is adopted for doubtful customers. Manage the working capital according to need as recovering the debt from customer as early as possible while, get extension of payment of dues on the company of others as suppliers of raw material as late as possible.

CREDIT TERMS
Factors to be considered when granting credit Past record of the debtors Image of the debtors Credit should not provide for the longer period Whether company can take the load of credit or not

INVENTORY MANAGEMENT
Inventories constitute most significant part of current assets, in most of the companies in India. To maintain a large size of inventory, a considerable amount of fund is required. It is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting the management of inventories will be jeopardizing its long-run profitability and may fail ultimately. It is possible for a company to reduce its levels of inventories to a considerable degree, e.g. 10% to 20%, without any adverse effect on production and sales, by using inventory planning and control techniques. The reduction in excessive inventories carries favorable impact o a companys profitability. There are at least three motives for holding inventories: 2

1- To facilitates smooth production and sales operation (transaction motive). 2- To guards against the risk of unpredictable changes in usage rate and delivery time (precautionary motive). 3- To make advantage of price fluctuations (speculative motive).

Inventories represent investment of a firms funds. The objective of the inventory management should be the maximization of the value of the firm. The firm should therefore consider: Costs, Return, & Risk factors in establishing its inventory policy. Two types of costs are involved in the inventory maintenance: Ordering costs: - requisition, placing of order, transportation, and staff services, ordering costs are fixed per order size increases. Carrying costs: - warehousing, handling, clerical and staff services, insurance and taxes. Carrying cost increases. The firm should minimize the total cost (ordering cost + carrying cost). The economic order quantity (EOQ) of inventory will occur at a point where the total cost is minimum. The following formula can be used to determine EOQ: EOQ= (2AO/C)^1/2 Where, A= annual requirement. O= per order cost C= per unit carrying cost. When should the firm place an order to replenish inventory? The inventory level at which the firm places order to replenish inventory is called reorder point. It depends on (a) The lead time & (b) The usage rate.

Under perfect certainty about the usage rate, the instantaneous delivery (i.e. Zero lead time), the reorder point will be =Lead-time * Usage rate + safety stock. The firm should strike a trade-off between the marginal rate of return and marginal cost of funds to determine the level of safety stock. A firm, which carries a number of items in inventory, which differ in value, can follow a selective control system. A selective control system, such as the a-b-c analysis, classifies inventories in to three categories according to the value of item. A- Category consists of highest value items, B- Category consists of high value items, C- Category consists of lowest value items. More categories of inventories can also be created. Tight control may be applied for high-value items and relatively lose control for low-value items. BBPL holds inventory analyzing with ABC method & VED method both. In ABC analysis, in Group A they keep: Essence Sugar Preform Plastic Closer CO2 Crown cork Pulp (Orange & Mango)

Function of inventory control

Functions to be performed in the field of inventory control are: 1. Setting up norms for carrying inventory. 2. Determining what items to be stocked. 3. Setting rules for inventory replenishments. 4. Receiving, storing and issuing inventory items as needed. 5. Maintaining records of inventory quantities and values. 6. Identifying and deposing of slow moving, non-moving, obsolete or damage inventories. 7. Furnishing summary information on inventory position for control purposes.

INVENTORY MANAGEMENT IN BBPL

Inventories are valued at lower of cost or net realizable value except waste which is valued at estimated realizable value as certified by the management. The basis of determining cost for various categories of inventories in the company are as follows: Treated Method: - FIRST EXPIRY FIRST OUT The selling of BBPL changes in different seasons (as mentioned earlier) and the stock level also. They have to increase the inventory level minimum 2 months before the peak season to achieve the target selling. Some advance money to the suppliers also has to be given to continuously receive the raw material. Similarly 2 months before the lean season the inventory level is brought down as the selling goes down. The Inventory level is reduced also before the off season come. Let us study the selling ledger to identify the real fluctuation in figures: -

Sales BRINDAVAN BEVERAGES PVT. LIMITED 2008-09 Particulars 1-Apr-2008 to 31-Mar-2009 Transactions Cumulative Debit Credit Opening Balance April 33,366,483 33,366,483 2

May June July August September October November December January February March Grand Total

42,746,314 36,766,707 9,727,499 10,719,558 10,051,407 4,789,250 1,991,477 1,434,629 5,813,385 9,582,289 65,935,279 232,924,276

76,112,797 112,879,503 122,607,002 133,326,560 143,377,967 148,167,217 150,158,694 151,593,323 157,406,708 166,988,997 232,924,276 232,924,276

A sudden change in selling from Feb. (95,82,000) to march (6,59,35,000) shows that how requirement of inventory changes because of the change in season. This requires a very tight focus in keeping the inventory.

PARTICULAR Store & spare parts Raw Materials Finished & Traded goods Waste Work in process TOTAL Turnover Avg. Inventory Inventory turnover ratio Days of Inventory holding

2008 9,888,000 3,999,000 23,887,000 242,579,000 40,490,500 5.99 60.92

2009 32,690,000 5,046,000 37,736,000 309,750,000 49,679,500 6.23 58.54

INVENTORY RECORD OF PAST TWO YEARS

Opening Stock in the year2008 is 33,20,7000 Inventory turnover ratio= sales / Avg. inventory Days of inventory holding= 365 / Inventory turnover Ratio Interpretation: From the above table we can see that the days of inventory holding are decreases from 61in 2007 to 59 in 2008 which is good for the company because it decrease the cost of kept inventory for the shorter period and company should take measure to control increase in no. of days of inventory holding.

NEED OF INVENTORY MANAGEMENT

Stiff competition, globalization of trade and liberalization. Achieving, increasing and positive EVA. Cost reduction. Energy conservation Conservation of natural resources. Better, work environment. Improved health and safety. Enhanced public image.

MANAGEMENT OF CASH
It is the duty of the finance manager to provide adequate cash to all segments of the organization. At the same time, he/she has also to ensure that no funds are blocking in idle cash as this will involve cost in terms of interest to the concern. A sound cash management scheme has to maintain the twin objective of liquidity and cost.

Meaning of Cash Management

The term cash management refers to the management of cash and near cash assets while cash includes coins, currency notes, cheques, bank drafts, and the demand deposits, the near cash assets include marketable securities and time deposits with banks. Such securities and deposits are easily convertible into cash.

MOTIVES FOR HOLDING CASH

In spite of the fact that cash does not earn any substantial return for the business, it is held by the concern with the following motives. 1. Transaction motive: A Company enters a variety of business transaction resulting both inflow and outflow of cash; at times the cash outflow exceed the cash inflow. In order to meet the business obligations in such situation, it 2

necessary to maintain adequate cash balance. Thus, a firm with the motive of making routine business payments maintains cash balance. 2. Precautionary motive: A firm holds cash balance to meet sudden cash needs arising out of unexpected contingencies such as floods, strikes, obsolesces, sharp increase in prices of raw materials, presentation of bills for payment earlier than expected date. More amount of cash will be kept by the firm if there is more possibility of such contingencies.

3. Speculative motive: A concern should also keep cash balance to take advantage of unexpected business opportunities. Such motive is there of speculative nature. 4. Compensation motive: Banks provide certain services to their customers free of charge. So they usually require the customers to keep minimum cash balance with them which enables them to earn interest and compensate for the free services rendered.

REASONS OF CASH MANAGEMENT

Cash management involves the following four basic problems. 1. Controlling level of cash: One of the basic objectives of cash management is to minimize the level of cash balances with the firm. This objective is sought to be achieved by means of the following: a) Preparing cash budget: Cash budget is the most important device for planning and controlling the use of cash. It involves the future receipts and payments of the firm. On the basis of this information the finance manager can determine the future cash needs of the firm. b) Providing for unpredictable discrepancies: - Cash budget whose discrepancies between cash receipts and payments on the basis of normal business activities. c) Availability of alternative source of funds:- A firm may need not keep large cash balance. If it has arrangements with banks for borrowing money in times of emergencies. 2. Controlling of cash inflow: In order to prevent fraudulent diversion of cash receipt and speeding up collections of cash, an adequate control on cash inflow is necessary. A properly installed internal check system can, to a great extent, a minimize the possibility of fraudulent diversion of cash. Speedier collection of cash can be made possible by adoption of the following two techniques: 2

a) Concentration banking system: It is a system of decentralizing collection of account receivables. According to this system, BBPL offices are authorized to collect the payment from the customers, and deposit in the local bank accounts. This system facilities fast movement of funds. This system is good in case of the firms having their spread over a large area.

b) Lock box system: This system is more popular in the USA and is further step in speeding up collection of cash. This system has been devised to element delay arising in cash of the concentration banking system on account of a time gap between actual receipt of cheques by the regional collection centers and its deposits in the local bank account. Under this system company hires a post office box and instructs its customers for their remits to the box. It also reduces the chances of frauds in the cash collection process and controls the cash inflows better. In order to avoid the unnecessary pockets of idle funds, the company should maintain minimum number of the bank account 3. Controlling outflows of cash: - An efficient control over cash outflows is equally important for conserving cash and reducing financial requirements. Control over cash outflows signifies slow disbursement in order to control the outflows of cash efficiently, a firm should keep in view the following considerations: a) Centralized system for cash payments: Should be followed as compared to decentralized system in cash of collections. All payments should be made from a single control account, i.e., from the central office of the company. However, the local office of the company may pay local expenses. b) Payment should be made on the due dates: Neither before nor after. The company should neither lose cash discount nor its prestige on account of delayed payments. The company should, therefore, made payments within the terms offered by the suppliers. c) Playing float: - Technique should be used by the company for maximizing the availability of funds. The term float means the account tied up in checks which have been issued by company but not have been yet been presented for payment by the creditors. As a result of a time lag between issue of a cheque and its actual presentation, the actual bank balance of a firm may be more than the balance shown in the books. The difference is called payment of float. The longer the float period the greater would be the benefit of the firm.

TOOLS OF CASH CONTROL

1. Cash Budget: It is most significant tool of controlling the use of cash. It provides a comparison between actual and budgeted cash receipts and disbursements locating the points of deviations, if any. The financial manager, after ascertaining the reasons for deviations between the actual and budgeted figures, can take the necessary action to remove. 2. Inflows and outflows of cash: In order to check the change in cash position of the firm from one period to another, a cash flow statement is prepared. It helps management in controlling inflows and outflows of cash. 3. Ratio analysis: Ratio analysis is also an important tool of cash control. Different financial ratios are used for this purpose. There ratios include current ratio, liquidity ratio, receivables turnover ratio, and inventory turnover ratio and cash position ratios.

Cash Conversion Cycle

The cash conversion cycle is a measure of working capital efficiency, often giving valuable clues about the underlying health of a business. The cycle measures the average number of days that working capital is invested in the operating cycle. It starts by adding days inventory outstanding (DIO) to days sales outstanding (DSO). This is because a company "invests" its cash to acquire/build inventory, but does not collect cash until the inventory is sold and the accounts receivable are finally collected. Receivables are essentially loans extended to customers that consume working capital; therefore, greater levels of DIO and DSO consume more working capital. However, days payable outstanding (DPO), which essentially represent loans from vendors to the company, are subtracted to help offset working capital needs. In summary, the cash conversion cycle is measured in days and equals DIO + DSO DPO: 4

Here we extracted two lines from BBPLs most recent income statement and a few lines from their working capital accounts.

2009 From Income Statement

Net Sales Cost of Goods Sold (COGS) Assets (from Balance sheet) Accounts receivable trade Inventories Liabilities (from Balance sheet) Accounts payable 242579000 114236000 2297000 23887000 38718000

2010
309750000 153540000 426780 37736000 20480000

Here are the accounts needed to calculate the cash conversion cycle. From the income statement, you need net sales and COGS. From the balance sheet, you need receivables, inventories and payables. Below, we show the two-step calculation. First, we calculate the three turnover ratios: receivables turnover (sales/average receivables), inventory turnover (COGS/average inventory) and payables turnover (purchases/average payables). The turnover ratios divide into an average balance because the numerators (such as sales in the receivables turnover) are flow measures over the entire year. Also, for payables turnover, some use COGS/average payables. That's okay, but it's slightly more accurate to divide average payables into purchases, which equals COGS plus the increase in inventory over the year (inventory at end of year minus inventory at beginning of the year). This is better because payables finance all of the operating dollars spent during the period (that is, they are credit extended to the company). And operating dollars, in addition to COGS, may be spent to increase inventory levels. The turnover ratios do not mean much in isolation; they are used to compare one company to another. But if you divide the turnover ratios into 365 (for example, 365/receivables turnover), you get the "days outstanding" numbers. Below, for example, a receivable turnover of 227 becomes 2 days sales outstanding (DSO). This number has more meaning; it means that, on average, BBPL collects its receivables in 2 days.

Cash Management in BBPL

Brindavan Beverages Private limited is engaged in manufacturing and selling of fast moving consumer goods. Cash is required in bulk for procurement and other manufacturing activities while is usually collected in small quantity from consumers in such kind of industries. To manage the collection of sale proceed company has adopted three way distribution network. Following is the structure of distribution in BBPL: -

In Depot:
Company is maintaining depots for sales and collection of funds in various remote areas. These depots serve the distributors and FAT agents in case of urgent requirement by distributed storage of finished goods. They also act as cash collection centers of company where nearby distributors are advised to remit funds to depots instead of plant at Bareilly this cash collected at depots is deposited in CBS bank account maintained by the company and information is forwarded on daily basis. Cash disbursals against expenditure are incurred by plant at Bareilly under centralized system of payment except in case of emergency with prior approval of central office.

Sole Selling Agent:

Company is selling all the products in their allotted franchise area through sole selling agents appointed on yearly basis. By this channel company is able to collect the sale proceeds well on or before due dates as and when required by the company. Company is also able to mitigate the risk of bad debts through this distribution channel.

Direct Selling:
For sale of finished goods to area other than one allotted under franchise agreement, company has adopted direct sales channel and sell directly to bottler of that area. Usually funds are collected in advance through R.T.G.S. mode so as to reduce the float. Beside this for payments company has adopted the policy of making all the payments in excess of Rs.2000/- by way of account payee cheque/ DD except in case of payment of freights where this limit is Rs.19000/-.

Monitoring of cash is done by use of monthly cash budgeting system. For security of cash company has taken insurance policy for cash in hand at various locations and for cash- in- transit.

ANALYSIS OF CASH MANAGEMENT

FORMULA
Current Ratio =

2009

2010

Current assets / current liabilities 110,620,310/ 45,107,000 = 2.45 180,173,690/ 26,901,000 = 6.70 Liquidity Ratio = Liquid assets / current liabilities 7,397,780/ 26,901,000 = 0.275 2,583,000/ 45,107,000 = 0.058

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital: 1. 2. Gross working capital Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises current assets are those Assets which can convert in to cash within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS

1) 2) 3) Cash in hand and cash at bank Bills receivables Sundry debtors 2

4) 5)

Short term loans and advances. Inventories of stock as: a. b. c. d. Raw material Work in process Stores and spares Finished goods

6. Temporary investment of surplus funds. 7. Prepaid expenses 8. Accrued incomes. 9. Marketable securities. In a narrow sense, the term working capital refers to the net working. Net working capital is the excess of current assets over current liability, or, say: NET WORKING LIABILITIES. CAPITAL = CURRENT ASSETS CURRENT

Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1. 2. 3. 4. 5. 6. 7. Accrued or outstanding expenses. Short term loans, advances and deposits. Dividends payable. Bank overdraft. Provision for taxation , if it does not amt. to app. Of profit. Bills payable. Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits. The gross concept is sometimes preferred to the concept of working capital for the following reasons:

1. 2. 3. 4.

It enables the enterprise to provide correct amount of working capital at correct time. Every management is more interested in total current assets with which it has to operate then the source from where it is made available. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital. This concept is also useful in determining the rate of return on investments in working capital. The net working capital concept, however, is also important for following reasons: It is qualitative concept, which indicates the firms ability to meet to its operating expenses and short-term liabilities. IT indicates the margin of protection available to the short term creditors.

It is an indicator of the financial soundness of enterprises. It suggests the need of financing a part of working capital requirement out of the permanent sources of funds.

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways: o o On the basis of concept. On the basis of time.

On the basis of concept working capital can be classified as gross working capital and net working capital. On the basis of time, working capital may be classified as: Permanent or fixed working capital. Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of raw material, work- in-process, finished goods and cash balance. This minimum level of current assts is called permanent or fixed working capital as this part of working is permanently blocked in current assets. As the business grow the requirements of working capital also increases due to increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research, etc. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business.

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the solvency of the business by providing uninterrupted of production. 1

Goodwill: Sufficient amount of working capital enables a firm to make prompt payments and makes and maintain the goodwill. Easy loans: Adequate working capital leads to high solvency and credit standing can arrange loans from banks and other on easy and favorable terms. Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence reduces cost. Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw material and continuous production. Regular Payment Of Salaries, Wages And Other Day TO Day Commitments: It leads to the satisfaction of the employees and raises the morale of its employees, increases their efficiency, reduces wastage and costs and enhances production and profits. Exploitation Of Favorable Market Conditions: If a firm is having adequate working capital then it can exploit the favorable market conditions such as purchasing its requirements in bulk when the prices are lower and holdings its inventories for higher prices. Ability To Face Crises: A concern can face the situation during the depression. Quick And Regular Return On Investments: Sufficient working capital enables a concern to pay quick and regular of dividends to its investors and gains confidence of the investors and can raise more funds in future. High Morale: Adequate working capital brings an environment of securities, confidence, high morale which results in overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its business operations. It should have neither redundant or excess working capital nor inadequate nor shortages of working capital. Both excess as well as short working capital positions are bad for any business. However, it is the inadequate working capital which is more dangerous from the point of view of the firm.

DISADVANTAGES OF WORKING CAPITAL

1. 2.

REDUNDANT

OR

EXCESSIVE

Excessive working capital means ideal funds which earn no profit for the firm and business cannot earn the required rate of return on its investments. Redundant working capital leads accumulation of inventories. 3 to unnecessary purchasing and

3. 4. 5. 6. 7.

Excessive working capital implies excessive debtors and defective credit policy which causes higher incidence of bad debts. It may reduce the overall efficiency of the business. If a firm is having excessive working capital then the relations with banks and other financial institution may not be maintained. Due to lower rate of return n investments, the values of shares may also fall. The redundant working capital gives rise to speculative transactions

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in sales and realization of cash. There are time gaps in purchase of raw material and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes: For the purpose of raw material, components and spares. To pay wages and salaries To incur day-to-day expenses and overload costs such as office expenses. To meet the selling costs as packing, advertising, etc. To provide credit facilities to the customer. To maintain the inventories of the raw material, work-in-progress, stores and spares and finished stock.

For studying the need of working capital in a business, one has to study the business under varying circumstances such as a new concern requires a lot of funds to meet its initial requirements such as promotion and formation etc. These expenses are called 1

preliminary expenses and are capitalized. The amount needed for working capital depends upon the size of the company and ambitions of its promoters. Greater the size of the business unit, generally larger will be the requirements of the working capital. The requirement of the working capital goes on increasing with the growth and expensing of the business till it gains maturity. At maturity the amount of working capital required is called normal working capital.

ANALYSIS OF FINANCIAL STATEMENTS

FINANCIAL STATEMENTS:
Financial statement is a collection of data organized according to logical and consistent accounting procedure to convey an under-standing of some financial aspects of a business firm. It may show position at a moment in time, as in the case of balance sheet or may reveal a series of activities over a given period of time, as in the case of an income statement. Thus, the term financial statements generally refers to the two statements (1) The position statement or Balance sheet. (2) The income statement or the profit and loss Account. OBJECTIVES OF FINANCIAL STATEMENTS: According to accounting Principal Board of America (APB) states The following objectives of financial statements: 1. To provide reliable financial information about economic resources and obligation of a business firm. 2. To provide other needed information about charges in such economic resources and obligation. 3. To provide reliable information about change in net resources (recourses less obligations) missing out of business activities. 4. To provide financial information that assets in estimating the learning potential of the business.

LIMITATIONS OF FINANCIAL STATEMENTS:

Though financial statements are relevant and useful for a concern, still they do not present a final picture a final picture of a concern. The utility of these statements is dependent upon a number of factors. The analysis and interpretation of these statements must be done carefully otherwise misleading conclusion may be drawn. Financial statements suffer from the following limitations: 1. Financial statements do not given a final picture of the concern. The data given in these statements is only approximate. The actual value can only be determined when the business is sold or liquidated. 2. Financial statements have been prepared for different accounting periods, generally one year, during the life of a concern. The costs and incomes are apportioned to different periods with a view to determine profits etc. The allocation of expenses and income depends upon the personal judgment of the accountant. The existence of contingent assets and liabilities also make the statements imprecise. So financial statement are at the most interim reports rather than the final picture of the firm. 3. The financial statements are expressed in monetary value, so they appear to give final and accurate position. The value of fixed assets in the balance sheet neither represent the value for which fixed assets can be sold nor the amount which will be required to replace these assets. The balance sheet is prepared on the presumption of a going concern. The concern is expected to continue in future. So fixed assets are shown at cost less accumulated deprecation. Moreover, there are certain assets in the balance sheet which will realize nothing at the time of liquidation but they are shown in the balance sheets. 4. The financial statements are prepared on the basis of historical costs Or original costs. The value of assets decreases with the passage of time current price changes are not taken into account. The statement are not prepared with the keeping in view the economic conditions. the balance sheet loses the significance of being an index of current economics realities. Similarly, the profitability shown by the income statements may be represent the earning capacity of the concern. 5. There are certain factors which have a bearing on the financial position and operating result of the business but they do not become a part of these statements because they cannot be measured in monetary terms. The basic limitation of the traditional financial statements comprising the balance sheet, profit & loss A/c is that they do not give all the information regarding the financial operation of the firm. Nevertheless, they provide some extremely useful information to the extent the balance sheet mirrors the financial position on a particular data in lines of the structure of assets, liabilities etc. and the profit & loss A/c shows the result of operation during a certain period in terms revenue obtained and cost incurred during the year. Thus, the financial position and operation of the firm.

FINANCIAL STATEMENT ANALYSIS It is the process of identifying the financial strength and weakness of a firm from the available accounting data and financial statements. The analysis is done CALCULATIONS OF RATIOS Ratios are relationship expressed in mathematical terms between figures, which are connected with each other in some manner. CLASSIFICATION OF RATIOS Ratios can be classified in to different categories depending upon the basis of classification The traditional classification has been on the basis of the financial statement to which the determination of ratios belongs. These are: Profit & Loss account ratios Balance Sheet ratios Composite ratios

Dimensions of working capital

EXISTING SYSTEM OF WORKING CAPITAL IN BBPL
To maintain the optimum level of working capital in such a organization is really a challenging task. The three basic components that determine the level of working capital in any organization are:Cash Debtors Inventory On the basis of our research in the BBPL, these basic components are managed in the organization, in the under mentioned manner. 1

CHAPTER 3
1

Research Methodology
In common research is refers to as a search for knowledge. Research may also define as a scientific and systematic search for pertinent information on a specific topic. In fact research is an art of scientific investigation. According to Redman & Moray research is a systematized effort to gain new knowledge. Some people consider research as a movement, a movement form the known to the unknown. The basic need of any reason is data and method of collecting it. Data is an information on the basis of which inferences are drawn therefore data becomes a very important factor to research study. The main purpose behind this framing of methodology is to describe the research procedure. The areas where the study was conducted, in the jurisdiction of the company. Secondary data like the company profile, history, products details and other facts were collected from data supplied by the companies data bank, internet, books and papers. Moreover internet was one of the major sources of secondary data. The methodology, I have adopted for my study is the various tools, which basically analyze critically financial position of to the organization: I. II. III. IV. V. VI. COMMON-SIZE P/L A/C COMMON-SIZE BALANCE SHEET COMPARTIVE P/L A/C COMPARTIVE BALANCE SHEET TREND ANALYSIS RATIO ANALYSIS

I sincerely hope, through the evaluation of various percentage, ratios and comparative analysis, the organization would be able to conquer its in efficiencies and makes the desired changes.

TYPES OF RESEARCH

1. APPLIED RESEARCH:- Applied research aims at finding a solution for an immediate problems facing a society or an industrial / business organization. 2. FUNDAMENTAL RESEARCH:- It is mainly concerned with generalization and with the formulation of a theory ''gathering knowledge's sake is termed basic research''. 3. DESCRIPTIVE RESEARCH:- It includes surveys and fact-finding enquires of different kinds. The major purpose of this research is description of the state of affairs as it exists at present. The main characteristic of this method is that the researcher has no control over the variables. 4. ANALYTICAL RESEARCH:- In this research the researcher has to use facts or information already available, and analyze these to make a critical evaluation of the martial. 5. QUANTITATIVE RESEARCH:- It is based on the measurement of quantity or amount. It is applicable to phenomena that can be expressed in terms of quantity. 6. QUALITIVE RESEARCH:- It is concerned with qualitative phenomenon. This research aims at discovering the underlying motives and desire, using in depth interviews for the purpose. It is especially important in the behavioral sciences where the aims are to discover to the underlying motives of human behavior.

7. CONCEPTUAL RESEARCH:- It is related to some ideas or theory. It is generally by philosophers and thinkers to develop new ideas or concepts.

8. EMPIRICAL RESEARCH:- It relies on experience or observation alone, often without due regard for system and theory.

Scope of the project

The study of working capital behaviour occupies an important position in financial management. The earlier emphasis of financial management was more on a long term financial position. Working capital management while short term financial decision appears to have been relatively neglected in the literature of finance

Decision Making Tool. Management Planning. Problem Solving Technique. Suitable Marketing Operations.

Financial management and working capital are the dominant contributors to the capital of a developing country.

Literature Survey

Literature Survey is a process of developing an insight into both conceptual and research based studies available on the area and the topic chosen. The objectives of such review is to understand the importance of the topic and find out research gaps. Concentrating exclusively on borrowing as a source of financing working 3

capital requirement in the corporate sector in India. Manjumdar (1994) has carried out an empirical analysis among 20 corporate companies in India (10 from private sector and 10 from public sector) for the period from 1981 to 1990. The study revealed that the share of public deposits to total borrowing on an average was only 6% in public limited companies and this way only 0.08% in private sector companies. The result indicated that the public deposit was not a significant source of working capital finance among the selected sample companies during the study period. The study revealed that current ratio in the private corporate limited companies was 1.38, which indicated aggressive policy. In government companies the current ratio was 4.32 indicating conservative policies adopted by them which in return resulted in higher debt equity ratio. On overall basis, this comparative study indicated that FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT in public sector companies was better than that of private sector companies.

Rafuse (1996) Working Capital may be regarded as the lifeblood of any business unit. Its effective management can do much more to the success of the business while its ineffective management will undoubtedly led to ensured failure of the business. It is in this context that management of working capital assumes paramount importance. In the present scenario of cutthroat competition, the business doesnot have any other option then cutting the cost of its operation in order to survive and continue to be financially healthy. It is in this connection, effective management of working capital forms an absolute part of cost reduction. As it is quite vivid and evidenced by many research, in any manufacturing unit barring knowledge industry, the proportion of raw material in the total cost of the product will be highest and hence if the organization wants to minimize the cost of production it has to tackle the cost of raw material first. The present article makes an attempt to analyze both concept and research based studies. Suk, Seung and Rowland (1992) survey conducted on 94 Japanese companies in US revealed that the Japanese companies differed in working capital management practices from US companies in terms of lower levels of inventory and higher level of account receivables. The survey revealed that more than 70% of times, Japanese investors use outside financing as a major sources of short term financing.

Chadda (1964) conducted a study on inventory management practices of Indian companies and found that the management of individuals components of inventory 2

very scattered. The study recommended for the usage of modern tools like operations research in ensuring the efficient management of working capital.

Banerjee (1979) in his study establisahed the relationship between liquidity ratio , debtors turnover ratio ,creditors turnover ratio & movement of overdraft. The study found out that when liquid ratio was below the norm, debtor turnover ratio & cerditors turnover ratio were high while the movement of overdraft showed declining trend. Banerjee demonstrated how turnover ratio would affect the financial performance of a given company. The study concluded that the management of working capital was not satisfactory .

Novneon (2002) survey on a chemical based company in US, found that the prudent in working capital mananagement resulted in increase in cash inflows. The increase in cash inflows due to improved working capital management was almost double which indicates the tangible benefits of effective working capital management

RESEARCH DESIGN
A Research Design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research design is the conceptual structure within which research should be conducted. In this summer training report I have used descriptive research design. I have been trying to find out the PepsiCo cooling equipment in comparison to coca-cola cooling equipment. 3

I visited to different departments of the company to collect information, which helped me to understand the process and the nature of the organization. The preparation of the research design, appropriate for a particular research problem, usually involves the consideration of the following: The means of obtaining the information. The availability and skills of the researcher. The time available for research. The cost factors relating to research, i.e. the finance available for research.

SOURCES OF DATA COLLECTION

Types of data collection Primary data The primary data is that data which is collected fresh or first hand, and for the first time which is original in nature. Primary data can collect though personal interview, questionnaires etc to support the secondary data.

Secondary data collection method The secondary data are those which have already collected and stored. Secondary data easily get those secondary data from records, journals, annual reports and balance sheets of the company etc. It will save the time, money and efforts to collect the data. Secondary data also made available through trade magazines, balance sheets, books etc.

DATA COLLECTION
The next step is to determine the sources of data to be used. The researcher has to decide whether to collected secondary data. When a study is to be based on secondary data, whether partly or fully, it is necessary to satisfy oneself that the data are quite suitable for the objectives spelt out by the study. The various sources of collecting data in the project are: From Officers & Employees Record Files Company Site 3

Annual Report 2010

Tools & Techniques For Analysis Of Data:

After the data have been collected, the researcher turns to the task of analyzing them. The analysis of data requires a number of closely related operations such as establishment of categories, coding, tabulation and then drawing statistical references. For analysis of data, two types of tools are used: Financial tools. Statistical tools. Graphs Tables Charts

1) Financial tools: Financial tools are very important and help in systematically analyzing the data. Ratio Analysis Comparative Analysis Working Capital Analysis.

With the help of these tools, different items of balance sheet, profit & loss account and capital employed of the company are analyzed.

1) Statistical tools: 1

Statistical tools are also important and significantly help in data analysis and interpretation. Tables Bar graphs Pie charts Are used to show the trend of the company and to compare the financial data.

Secondary data was collected with the help magazines, company site, office record files.

of journals,

Limitations
In the preparation of any report, one faces some sorts of limitations in preparing it. In this study of FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT , I had also faces some limitations which are as follows:

Limitation in respect of time and cost.

Authenticity of the report based on authenticity of data collected. 3

 Report is based on secondary data so lack of primary data in report.

CHAPTER 4

DATA ANALYSIS OF WORKING CAPITAL

Table 1: STATEMENT SHOWING CHANGE IN WORKING CAPITAL (2008-2009):

(Rupees in thousands) YEAR 2008 YEAR 2009 INCREASE IN W.C. DECREASE IN W.C.

PARTICULARS CURRENT ASSETS (A) Total Net Inventory Total Net Debtors Total CURRENT LIABILITIES (B) Total Creditors Total Provisions for Liabilities Total WORKING CAPITAL=A-B

2729115 9877929 12607044

3862111 11889443 15751554

1133000 2011514

9537100 1124601 19784817 - 7177773

15404941 1111345 16516286 - 764732

5867841 13256 9012355 13256

TABLE 2: Indicating change in working capital (20082009)

STATEMENT SHOWING CHANGE IN WORKING

CAPITAL (2009-2010):
(Rupees in thousands) PARTICULARS CURRENT ASSETS (A) Total Net Inventory Total Net Debtors Total CURRENT LIABILITIES (B) Total Creditors Total Provisions for Liabilities Total WORKING CAPITAL=A-B 15404941 1111345 16516286 - 764732 20320820 1098870 21419690 - 1634873 9020793 4915879 12475 84126 3862111 11889443 15751554 3790460 15994357 19784817 4104914 71651 YEAR 2009 YEAR 2010 INCREASE IN W.C. DECREASE IN W.C.

TABLE 3: Indicating change in working capital (20092010)

CALCULATION OF WORKING CAPITAL FOR COCACOLA LTD. BAREILLY
(Rupees in thousands) PARTICULARS CURRENT ASSETS (A) Total Net Inventory Total Net Debtors Total CURRENT LIABILITIES (B) Total Creditors Total Provisions for Liabilities Total WORKING CAPITAL= A-B 9537100 1124601 19784817 - 7177773 15404941 1111345 16516286 - 764732 20320820 1098870 21419690 - 1634873 2729115 9877929 12607044 3862111 11889443 15751554 3790460 15994357 19784817 YEAR 2008 YEAR 2009 YEAR 2010

TABLE 4: Indicating working capital during 2008, 2009

&2010
ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL
INVENTORY ANALYSIS: Inventory is the total amount of goods and material contents in a store of factory in a given time. Inventory is Tangible property held for sale in the ordinary course of business, in the process of production for such sale or, to be consumed in the process of production of goods or services for sale. Inventory of COCA-COLA Ltd Bareilly contains stock of two things: Raw material Work in progress

2008 Stock
Raw material WIP 917243 1811872 2729115

2009
2413018 1449093 3862111

2010
1644357 2146103 3790460

Interpretation:
According to the given data we can clearly see that the inventory is increasing in 2009 with respect to 2008 and then again decreases in 2010 with respect to 2009.

Size of Inventories
3

The first and the foremost objective of the inventory management is to make all types of materials available at all times whenever they are needed by the production department so that the production may not be held up for want of materials. It is therefore advisable to maintain an optimum size of inventory to move on the production on schedule. The dominant position of inventories in working capital of COCA-COLA LTD makes it relevant to throw light on each component of inventory at COCA-COLA LTD. The size of inventory and percentage of inventory to total current assets in COCA-COLA LTD is presented in table below:

TABLE 5:

Indicating size of inventory and percentage

of inventory to total current assets

Inventories Year (Rupees In Thousands) 2008 2009 2010 2729115 3862111 3790460 Total Current Assets (Rupees In Thousands) 13244835 18784924 25584830 Percentage Of Inventories To Current Assets 21 21 15

Size of inventories shows below 50% portion of current assets consists of inventories. Inventory, in general has decreased, which is a good sign of inventory management because they are holding less inventory with them and reducing the warehousing.

Raw Material Inventory Raw materials constitute a very small proportion of inventories. It includes direct material used in the manufacture of a product. The purpose of holding raw material is to ensure uninterrupted production. The amount of raw materials to be kept by a firm depends on various factors such as speed with which raw materials are to be ordered and procured and uncertainty in the supply of these raw materials. 1

TABLE 6:

The size of raw material to the total inventories

has been shown below:

Raw Material Year (Rupees in Thousands) 2008 2009 2010 917243 2413018 1644357

Inventories (Rupees in Thousands) 2729115 3862111 3790460

% Of Raw Materials to Inventories 34 63 43

During the year 2008, raw material is reported to be 917243 whereas in 2009, use of raw material increased by 63% i.e. 2413018 it shows that during this particular year requirement of raw material is more, that may be a reason of increased production. But during the year 2010 production has dropped again and the requirement of raw material has decreased and became 43%. Work In Progress Inventory Work-in-progress includes partly finished goods and materials held between manufacturing stages. It can also be stated that those raw materials which are used in production process but are not finally converted into final product are work-in progress. 3

TABLE 7: shown below:

Size of WIP to the total inventories has been

Work in Progress Year (Rupees in Thousands) 2008 2009 2010 1811872 1449093 2146103

% of Work Inventories (Rupees in Thousands) in Progress to Inventories 2729115 3862111 3790460 67 37 57

Interpretation:During the year 2008, work-in-progress is reported to be 1811872 whereas in 2009, work-in-progress decreased by 37% i.e. 1449093. It shows that during this particular year production process is increased. But during the year 2010 production has dropped again and work-in-progress has increased and became 57%.

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of devices, such as: 1. 2. 3. Ratio analysis. Fund flow analysis. Budgeting.

1.

RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis can be employed for measuring short-term liquidity or working capital position of a firm. The following ratios can be calculated for these purposes: 1. Current ratio. 2. Quick ratio 3. Absolute liquid ratio 4. Inventory turnover. 5. Receivables turnover. 6. Payable turnover ratio. 7. Working capital turnover ratio. 8. Working capital leverage 9. Ratio of current liabilities to tangible net worth.

2.

FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which additional funds were derived and the use to which these sources were put. The fund flow analysis consists of: a. b. Preparing schedule of changes of working capital Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position (working capital) business enterprise between beginning and ending of the financial dates.

3.

WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and polices to be pursued in the future period time. Working capital budget as a part of the total budge ting process of a business is prepared estimating future long term and short term working capital needs and sources to finance them, and then comparing the budgeted figures with actual performance for calculating the variances, if any, so that corrective actions may be taken in future. He objective working capital budget is to ensure availability of funds as and needed, and to ensure effective utilization of these resources. The successful implementation of working capital budget involves the preparing of separate budget for each element of working capital, such as, cash, inventories and receivables etc.

ANALYSIS OF SHORT TERM FINANCIAL POSITION OR TEST OF LIQUIDITY

The short term creditors of a company such as suppliers of goods of credit and commercial banks short-term loans are primarily interested to know the ability of a firm to meet its obligations in time. The short term obligations of a firm can be met in time only when it is having sufficient liquid assets. So to with the confidence of investors, creditors, the smooth functioning of the firm and the efficient use of fixed assets the liquid position of the firm must be strong. But a very high degree of liquidity of the firm being tied up in current assets. Therefore, it is important proper balance in regard to the liquidity of the firm. Two types of ratios can be calculated for measuring short-term financial position or short-term solvency position of the firm. A. B. Liquidity ratios. Current assets movements ratios.

A) LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when these become due. The short-term obligations are met by realizing amounts from current, floating or circulating assts. The current assets should either be liquid or near about liquidity. These should be convertible in cash for paying obligations of short-term nature. The sufficiency or insufficiency of current assets should be assessed by comparing them with short-term liabilities. If current assets can pay off the current liabilities then the liquidity position is satisfactory. On the other hand, if the current liabilities cannot be met out of the current assets then the liquidity position is bad. To measure the liquidity of a firm, the following ratios can be calculated: 1. 2. 3. CURRENT RATIO QUICK RATIO ABSOLUTE LIQUID RATIO

1. CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of general liquidity and its most widely used to make the analysis of short-term financial position or liquidity of a firm. It is defined as the relation between current assets and current liabilities. Thus,

CURRENT RATIO LIABILITES

= CURRENT

ASSETS/

CURRENT

The two components of this ratio are: 1) 2) CURRENT ASSETS CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors, inventories and work-in-progresses. Current liabilities include outstanding expenses, bill payable, dividend payable etc. A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time. On the hand a low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time. A ratio equal or near to the rule 1

of thumb of 2:1 i.e. current assets double the current liabilities is considered to be satisfactory.

CALCULATION OF CURRENT RATIO

(Rupees in crore) e.g. Year Current Assets Current Liabilities Current Ratio 2007 81.29 27.42 2.96:1 2008 83.12 20.58 4.03:1 2009 13,6.57 33.48 4.08:1

Interpretation:As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the company for last three years it has increased from 2006 to 2008. The current ratio of company is more than the ideal ratio. This depicts that companys liquidity position is sound. Its current assets are more than its current liabilities.

2. QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be defined as the relationship between quick/liquid assets and current or liquid liabilities. An asset is said to be liquid if it can be converted into cash with a short period without loss of value. It measures the firms capacity to pay off current obligations immediately.

QUICK RATIO = QUICK ASSETS/ CURRENT LIABILITES

Where Quick Assets are: 1) 2) 3) Marketable Securities Cash in hand and Cash at bank. Debtors.

A high ratio is an indication that the firm is liquid and has the ability to meet its current liabilities in time and on the other hand a low quick ratio represents that the firms liquidity position is not good. 2

As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought that if quick assets are equal to the current liabilities then the concern may be able to meet its short-term obligations. However, a firm having high quick ratio may not have a satisfactory liquidity position if it has slow paying debtors. On the other hand, a firm having a low liquidity position if it has fast moving inventories.

CALCULATION OF QUICK RATIO

e.g. Year Quick Assets Current Liabilities Quick Ratio 2007 44.14 27.42 1.6 : 1 2008 47.43 20.58 2.3 : 1 (Rupees in Crore) 2009 61.55 33.48 1.8 : 1

Interpretation : A quick ratio is an indication that the firm is liquid and has the ability to meet its current liabilities in time. The ideal quick ratio is 1:1. Companys quick ratio is more than ideal ratio. This shows company has no liquidity problem.

3. ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. So absolute liquid ratio should be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets. Absolute Liquid Assets includes :

ABSOLUTE LIQUID RATIO =ABSOLUTE LIQUID ASSETS/ CURRENT LIABILITES

1

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

e.g. Year Absolute Liquid Assets Current Liabilities Absolute Liquid Ratio Interpretation : These ratio shows that company carries a small amount of cash. But there is nothing to be worried about the lack of cash because company has reserve, borrowing power & long term investment. In India, firms have credit limits sanctioned from banks and can easily draw cash. 2007 4.69 27.42 .17 : 1 (Rupees in Crore) 2008 1.79 20.58 .09 : 1 2009 5.06 33.48 .15 : 1

B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly affects the volume of sales. The better the management of assets, large is the amount of sales and profits. Current assets movement ratios measure the efficiency with which a firm manages its resources. These ratios are called turnover ratios because they indicate the speed with which assets are converted or turned over into sales. Depending upon the purpose, a number of turnover ratios can be calculated. These are : 1. 2. 3. 4. Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include high amount of debtors due to slow credit collections and moreover if the assets 1

include high amount of slow moving inventories. As both the ratios ignore the movement of current assets, it is important to calculate the turnover ratio. 1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO : Every firm has to maintain a certain amount of inventory of finished goods so as to meet the requirements of the business. But the level of inventory should neither be too high nor too low. Because it is harmful to hold more inventory as some amount of capital is blocked in it and some cost is involved in it. It will therefore be advisable to dispose the inventory as soon as possible.

INVENTORY TURNOVER RATIO = COST SOLD/ AVERAGE INVENTORY

OF

GOOD

Inventory turnover ratio measures the speed with which the stock is converted into sales. Usually a high inventory ratio indicates an efficient management of inventory because more frequently the stocks are sold ; the lesser amount of money is required to finance the inventory. Where as low inventory turnover ratio indicates the inefficient management of inventory. A low inventory turnover implies over investment in inventories, dull business, poor quality of goods, stock accumulations and slow moving goods and low profits as compared to total investment.

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

(Rupees in Crore) Year Cost of Goods sold Average Stock Inventory Turnover Ratio Interpretation : These ratio shows how rapidly the inventory is turning into receivable through sales. In 2007 the company has high inventory turnover ratio but in 2008 it has reduced to 1.75 times. This shows that the companys inventory management technique is less efficient as compare to last year. 2. INVENTORY CONVERSION PERIOD: INVENTORY TURNOVER RATIO 1 INVENTORY CONVERSION PERIOD = 365 (net working days) 2007 110.6 73.59 1.5 times 2008 103.2 36.42 2.8 times 2009 96.8 55.35 1.75 times

e.g. Year Days Inventory Turnover Ratio Inventory Conversion Period 2007 365 1.5 243 days 2008 365 2.8 130 days 2009 365 1.8 202 days

Interpretation : Inventory conversion period shows that how many days inventories takes to convert from raw material to finished goods. In the company inventory conversion period is decreasing. This shows the efficiency of management to convert the inventory into cash.

3.

DEBTORS TURNOVER RATIO : A concern may sell its goods on cash as well as on credit to increase its sales and a liberal credit policy may result in tying up substantial funds of a firm in the form of trade debtors. Trade debtors are expected to be converted into cash within a short period and are included in current assets. So liquidity position of a concern also depends upon the quality of trade debtors. Two types of ratio can be calculated to evaluate the quality of debtors. a) b) Debtors Turnover Ratio Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)/ AVERAGE DEBTORS

Debtors velocity indicates the number of times the debtors are turned over during a year. Generally higher the value of debtors turnover ratio the more efficient is the management of debtors/sales or more liquid are the debtors. Whereas a low debtors turnover ratio indicates poor management of debtors/sales and less liquid debtors. This ratio should be compared with ratios of other firms doing the same business and a trend may be found to make a better interpretation of the ratio. 1

AVERAGE DEBTOR
e.g. Year Sales Average Debtors

DEBTORS= OPENING

DEBTOR+CLOSING

20067 166.0 17.33 9.6 times

2008 151.5 18.19 8.3 times

2009 169.5 22.50 7.5 times

Debtor Turnover Ratio Interpretation :

This ratio indicates the speed with which debtors are being converted or turnover into sales. The higher the values or turnover into sales. The higher the values of debtors turnover, the more efficient is the management of credit. But in the company the debtor turnover ratio is decreasing year to year. This shows that company is not utilizing its debtors efficiency. Now their credit policy become liberal as compare to previous year.

4.

AVERAGE COLLECTION PERIOD :

Average Collection Period = Debtors Turnover Ratio

1

No. of Working Days/

The average collection period ratio represents the average number of days for which a firm has to wait before its receivables are converted into cash. It measures the quality of debtors. Generally, shorter the average collection period the better is the quality of debtors as a short collection period implies quick payment by debtors and vice-versa.

Average Collection Period = 365 (Net Working Days)/

Year Days Debtor Turnover Ratio Average Collection Period 2007 365 9.6 38 days 2008 365 8.3 44 days 2009 365 7.5 49 days

Debtors Turnover Ratio

Interpretation : The average collection period measures the quality of debtors and it helps in analyzing the efficiency of collection efforts. It also helps to analysis the credit policy adopted by company. In the firm average collection period increasing year to year. It shows that the firm has Liberal Credit policy. These changes in policy are due to competitors credit policy.

5.

WORKING CAPITAL TURNOVER RATIO : Working capital turnover ratio indicates the velocity of utilization of net working capital. This ratio indicates the number of times the working capital is turned over in the course of the year. This ratio measures the efficiency with which the working capital is used by the firm. A higher ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover is not a good situation for any firm.

Working Capital Turnover Ratio = Cost of Sales/ Net Working Capital Working Capital
e.g. Year Sales Networking Capital Working Capital Turnover 2007 166.0 53.87 3.08 2008 151.5 62.52 2.4 2009 169.5 103.09 1.64

Capital

Turnover

= Sales/

Networking

Interpretation : This ratio indicates low much net working capital requires for sales. In 2008, the reciprocal of this ratio (1/1.64 = .609) shows that for sales of Rs. 1 the company requires 60 paisa as working capital. Thus this ratio is helpful to forecast the working capital requirement on the basis of sale.

INVENTORIES (Rs. in Crores) Year Inventories 2006-2007 37.15 2007-2008 35.69 2008-2009 75.01

Interpretation : Inventories is a major part of current assets. If any company wants to manage its working capital efficiency, it has to manage its inventories efficiently. The graph shows that inventory in 2005-2006 is 45%, in 2006-2007 is 43% and in 2007-2008 is 54% of their current assets. The company should try to reduce the inventory upto 10% or 20% of current assets. CASH BANK BALANCE : 1

(Rs. in Crores) Year Cash Bank Balance 2006-2007 4.69 2007-2008 1.79 2008-2009 5.05

Interpretation : Cash is basic input or component of working capital. Cash is needed to keep the business running on a continuous basis. So the organization should have sufficient cash to meet various requirements. The above graph is indicate that in 2006 the cash is 4.69 crores but in 2007 it has decrease to 1.79. The result of that it disturb the firms manufacturing operations. In 2008, it is increased upto approx. 5.1% cash balance. So in 2008, the company has no problem for meeting its requirement as compare to 2007.

DEBTORS : (Rs. in Crores) Year Debtors 2006-2007 17.33 2007-2008 19.05 2008-2009 25.94

Interpretation : Debtors constitute a substantial portion of total current assets. In India it constitute one third of current assets. The above graph is depict that there is increase in debtors. It represents an extension of credit to customers. The reason for increasing credit is competition and company liberal credit policy.

CURRENT ASSETS : (Rs. in Crores) Year 2006-2007 1 2007-2008 2008-2009

Current Assets

81.29

83.15

136.57

Interpretation : This graph shows that there is 64% increase in current assets in 2008. This increase is arise because there is approx. 50% increase in inventories. Increase in current assets shows the liquidity soundness of company. CURRENT LIABILITY : (Rs. in Crores) Year Current Liability 2006-2007 27.42 2007-2008 20.58 2008-2009 33.48

Interpretation : Current liabilities shows company short term debts pay to outsiders. In 2008 the current liabilities of the company increased. But still increase in current assets are more than its current liabilities.

NET WOKRING CAPITAL : (Rs. in Crores) Year Net Working Capital 2006-2007 53.87 2007-2008 62.53 2008-2009 103.09

Interpretation : Working capital is required to finance day to day operations of a firm. There should be an optimum level of working capital. It should not be too less or not too excess. In the company there is increase in working capital. The increase in working capital arises because the company has expanded its business.

DEBTOR ANALYSIS (Accounts Receivable)

Debtor is an important part of working capital and fall under current assets. Debtors are persons and/or other entities that owe to an enterprise an amount for receiving goods and services on credit. Debtors will arise only when credit sales is made. The basic aim is to provide facility to customers to allow them a reasonable time in which they can pay for goods purchased by them.

Debtors of COCA-COLA Ltd Bareilly contains two types of debtors: Trade debtors Sundry debtors

2008 Debtors
Trade debtors Sundry debtors 9512145 365784 9877929

2009
11974763 -85320 11889443

2010
14894633 1099724 15994357

Interpretation:
Increase in debtors in any organization increases the risk of bad debts. From the above data we can see that the debtors amount is continuously increasing in the organization from 2008 to 2010 which is not a good sign for the company. If debtors increase, the money can be invested in many investment plans.

CREDITOR ANALYSIS (Accounts Payable)

Creditor is also an important part of working capital and fall under current liabilities. Creditors are persons and/or other entities that have to be paid by an enterprise for receiving goods and services on credit. Creditor will arise only when purchase is made. Creditors of COCA-COLA Ltd Bareilly contains two types of debtors: Trade creditors Other creditors

2008 Creditors
Trade creditors Other creditors 6635880 2901220 9537100

2009
11358441 4046500 15404941

2010
15520028 4800792 20320820

Interpretation:
To maintain a good reputation of organization in market the amount of creditors should never be very high. On the basis of the data provided we can see that the creditors show an increasing trend which hinders the goodwill of the company.

PROVISIONS ANALYSIS
Components under provisions of COCA-COLA Ltd. Bareilly are: After sales service LD/penalties

Year Provisions
After sales service LD/Penalties

2008
173367 93217 266584

2009
280957 248601 529558

2010
412391 439821 852212

Interpretation:
Our theories say that increase in provisions is beneficial for employees and public. Analyzing the given data we can see that the trend of provisions is increasing which is a good sign for companys growth.

4.4 CALCULATIONS & ANALYSIS OF RATIOS

(1) LIQUIDITY RATIO: (a) Current ratio = 2008 = = 2009 = = 2010 = = 3574.03 2570.09 1.39:1 2875.88 2141.97 1.34:1 1878.49 1540.49 1.22:1 Current Asset Current Liability

b) Liquid / Quick Ratio (QR): QR = 2008 =1773.87 1540.49 =1.15:1 2009 =2496.83 2141.97 =1.17:1 2010 =3093.19 2570.09 =1.20:1 Quick Assets Current Liabilities

(2) ACTIVITY TURNOVER RATIO:

a) Capital turnover ratio = 2008 = = 2009 = = 2010 = = 2008 = = 2009 = = 2010 = 4020.00/871.54 Net sales Net Working capital c) Working capital turnover ratio = 3566.90/838.39 4.25 2641.21/677.02 3.90 4020.00/1898.07 2.12 times 3566.90/1634.20 2.18 times 2641.21/1155.50 2.29 times Net Sales Capital Employed

b) Fixed asset turnover ratio = Net sales/ Net Fixed Assets

Net Working Capital = Current assets Current liabilities 2008 = = 2641.21/508.46 5.20 times

2009 3

= = 2010 = =

3566.90/733.91 4.86 times

4020.00/1007.75 3.99 times

d) Total asset turnover ratio = Net Sales/Total assets 2008 = = 2009 = = = = 2010 4020.00/4468.15 0.90 3566.90/3776.17 0.95 2641.21/2845.86 0.93

PROFITABLITY RATIO:
a) Return on total asset = Earnings before interest and tax Total assets 2008 = = 2009 = = 357.66/3776.17 100 9.47% 376.83/2845.86 100 13.24% 100

2010 = 347.12/4468.15 100 1

7.77%

b) Return on capital employed = Earnings before interest and tax/Capital employed100 2008 = = 2009 = = 2010 = = 347.12/1898.07100 18.29% 357.66/1634.20100 21.89% 376.83/1155.50100 32.61%

1. WORKING CAPITAL RATIOS:

Turnover Ratios:
3

Receivables (Sales/Avg. Receivables): 227 =3097500/Avg. of [22,97,000 & 4,26,780] Inventory (COGS/Avg. Inventory): 4.98 =153540000/Avg. of [23887000 & 37736000] Payables (Purchases/Avg. Payables): 6.2 =183232300/avg. of [38718000 & 20480000] Days Outstanding (365/Turnover Ratios) Days Sales Outstanding (DSO) 365/227 + 2days Days Inventory Outstanding (DIO) 365/4.98 +73 days Days Payable Outstanding (DPO) 365/6.2 - 57 days Cash Conversion Cycle = 16 days Here is a graphic summary of BBPLs cash conversion cycle for 2008. On average, working capital spent 16 days in BBPLs operating cycle:

Traditional analysis of working capital is defensive; it asks, "Can the company meet its short-term cash obligations?" But working capital accounts also tell you about the operational efficiency of the company. The length of the cash conversion cycle (DSO+DIO-DPO) tells you how much working capital is tied up in ongoing operations. And trends in each of the days-outstanding numbers may foretell improvements or declines in the health of the business.

a) STOCK / INVENTORY TURNOVER RATIO (ITR):

Inventory Turnover Ratio = Cost Of Goods Sold / Average Inventory

2008 3

= 1714.14/329.56 = 5.20 times 2009 = 3266.07/382.63 = 8.54 times 2010 = 3545.86/429.94 = 8.25 times

b) INVENTORY CONVERSION PERIOD:

Inventory Conversion Period= 365 / ITR

2008 = 365/5.20 = 71 days 2009 = 365/8.54 = 43 days 2010 = 365/8.25 = 45 days

a) RECEIVABLES / DEBTORS TURNOVER RATIO (DTR):

Debtors Turnover Ratio = Total Sales / Debtors

2008 3

= 26412143/11889443 = 2.22 times 2009 = 35658766/15994357 = 2.23 times 2010 = 35658766/15994357 = 2.23 times

b) Average / Debt Collection Period (Debtors Velocity):

DEBTORS VELOCITY = 365/DTR

2008 = 365/2.22 = 164 days 2009 = 365/2.23 = 164 days 2010 = 365/2.23 = 164 days

c) PAYABLES / CREDITORS TURNOVER RATIO (CTR): Creditors Turnover Ratio = Purchases / Creditors 2008 = 17141373/15404941 = 1.11 times 3

2009 = 24925936/20320820 = 1.23 times 2010 = 24925936/20320820 = 1.23 times

d) Average

/ Debt Payment Period (Creditors Velocity):

2008 = 365/1.11 = 329 days 2009 = 365/1.23 = 297 days 2010 = 365/1.23 = 297 days

1. WORKING CAPITAL RATIO (WCR):

WCR = Cost Of Goods Sold / Working Capital

2008 1

=17141373/5084584 =3.37

2009 =24925936/7339118 =3.40

2010 =24925936/7339118 =3.40

Valuation of the Company: Dividend Yield: 2.76% / 2.75% expected Payout Ratio: 34.78% 5-Year Dividend Growth: 9.26% Market Capitalization: 156.08 Billion Cash and Short Term Investments: 12.27 Billion 1

Long-Term Debt: 12.68 Billion Cash flow from Operations: 9.5 Billion CAPEX: 2.2 Billion

All pricing measures decreased over the past ten years. Price to earnings fell by 55%, price to book ratio slipped in total 53%, price to sales ratio decreased 28% and price to cash flow ratio is finally 36% lower than 10 years before.

Long-Term Fundamentals and Dividends:

The company had a strong track record. Sales of Coca-Cola rose 100% over the past decade. Earnings before taxes and interest (EBIT) increased by 151% and net income finally grew in total 196%. Due to share buybacks, earnings per share rose 216%.

Coca-Cola paid dividends since 1893. The company raised dividends for 48 consecutive years. The next Ex-Div. Date is June 13, 2011. Payments will be received on July 01, 2011. The next dividend is the second quarter dividend at the same rate ($0.47).

INTERPRETATION

As we know that the current ratio of any company should revolve around 2:1 and from the above table we can see that the BBPLs current ratio is too much above the standard. This means that the price of companys current asset is 6 times of the price of its current liabilities which means that the company can easily meets its current liabilities from its current assets. Now we compare of the companys position according to the liquidity ratio. As we know the standard of the liquid ratio is 1:1. In case of the company it is quiet lower than standards but in line with the industry that come to 0.3 on annual basis. Cash conversion cycle indicate that company is able to generate the cash back in about 16 days from the day of deployment which is better than that of industry due to efficient collection channel.

CHAPTER 5
1

FINDINGS
The major findings as revealed by the above statement showing the difference of values from the previous year are as follows:

Total net inventory of the company have increased by 55% in the year 2009 and by 22% in the year 2010. This shows that the liquidity of company is getting blocked due to increase in inventory. Total net debtors have increased by 88% in the year 2009 and by 68% in the year 2010. The amount of debtors is continuously increasing in the organization from 2008 to 2010 which is not a good sign for the company. The total current assets of the company have increased by 72% in the year 2009 and by 48% in the year 2010. Trade creditors have increased by 73% in the year 2009 and by 21% in the year 2010. Total other creditors of the company have increased by 41% in the year 2009 and by just 5% in the year 2010. The total current liabilities of the company have increased by 74% in the year 2009 and by 32% in the year 2010. The difference in the working capital of the company between the year 2008 and 2009 is 308745 which reveals that it has increased by 68% in the year 2009.

 The difference in the working capital of the company between the year 2009 and 2010 is 599007 which reveals that it has increased by 79% in the year 2010.

Suggestions
No report is considered to be completed without the recommendation and suggestions which is an integral part of it. It is also been said that the report is prepare to see the lacking of the subject and putting the suggestion so that the company can apply this in order to get rid of it. This report has also some suggestion for Coca-Cola to make its product effective. They are as follows:

Coca-Cola should create products on time.

awareness among its distributor to deliver the

Coca-Cola should focus on all kind of promos activity i.e. electronic media, print media and other type of promo activity. In market they should also focus on making consumers satisfaction by providing the required flavors on time. In case of making the retailers more satisfied they should offer some discounts and schemes to retailers, so that they are encouraged to sell more and more products. It should give healthy benefits to its marketing employees so that they can dedicate more and more towards their work.

Conclusion
Brindavan Beverages Pvt Limited is using best possible tools for
efficient and effective management of its working capital. Company has adopted excellent system for appraisal of selling agents so as to collect receivables in time and avoid bad debt losses. Suppliers of raw material and primary packing material are appraised by company on annual basis from the list of suppliers approved from Coca Cola India P Limited (quality approval), these suppliers are limited in numbers so they enjoy monopolistic terms of payments at the time of season due to which company has to provide huge advances for timely procurement of material thereby blocking huge working capital as advance to suppliers. Company should try to negotiate with suppliers and Coca Cola India Limited to break this cartel so as to deploy their working capital more effectively. After completing my project on FINANCIAL ANALYSIS AND WORKING CAPITAL MANAGEMENT in BBPL, I have learnt how to manage working capital in efficient manner. This project helps me in understanding the daily requirement of such a big manufacturing firm in FMCG business. Every analysis gives some conclusions; here also, I draw some conclusion by the analyzing the collected data, which I had considered in evaluating the survey. They are as follows: It is found that, most of the retailers says that they orders less than expected due to several reasons like that of the delay in delivery and non-availability of products.

The other reasons as per the retailers view is that the time of they says the time of delivery of the product is not suitable many times when the sales comes for delivery during the when they are not at the shop to receive the product and pay to them. 1

delivery as to them as odd hours the amount

 To some extent, respondents says that there are other reasons for them to buy less products, which may be like that of they need a few offers or schemes, delivery process and many others factors which they did not disclosed.

As per the opinions of the respondents, which includes the retailers most of them says that the consumers mainly demands more the brands like Thumbs up, sprite, mazza than the likes of fanta and limca, so they says that they demand more these products more than the likes of fanta and limca.

Most of the respondent shares the same view that the distributor should enhance its distribution channel.

It can also be seen that the retailers mainly orders the 200ml and 2.0L PET bottles more than the likes of 300ml and can.

BIBLOGRAPHY
Books:
Marketing Management: Business Research Method: Financial Management: Philip Kotler William G. Zikmund I. M. Pandey

Journals:
Banerjee, Bhabathosh,(1979) Working Capital & Turnover Ratios & Cash Management. The Management Accountant , January 1979,pp. 21-22. Chadda R.S.(1964) Inventory Management In India , Allied Publishers Bombay , 1964 Bails, Ashley, (2003), New Zealand business, Auckland, December 2003, pp 64

Internet:

www.coca-cola.com
www.financeindia.org www.icfai.org

ANNEXURE
Coca-Cola Company Consolidated Balance Sheet - January 31, 2010 Current Assets Dec. 31, 2010 Dec. 31, 2009 Cash & Equivalents $1,819,000,000 $1,611,000,000 Short Term Investments $73,000,000 $201,000,000 Receivables $1,757,000,000 $1,798,000,000 Inventories $1,066,000,000 $1,076,000,000 Pre-Paid Expenses $1,905,000,000 $1,794,000,000 Total Current Assets $6,620,000,000 $6,480,000,000 Long Term Assets Property, Plant, & Equipment Goodwill Total Assets Current Liabilities Accounts Payable Short Term Debt Total Current Liabilities Long-Term Liabilities Long-Term Debt Other Liabilities Deferred Long Term Liability Charges Total Liabilities Shareholders' Equity Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity Total Stockholder Equity $8,129,000,000 $4,168,000,000 $1,917,000,000 $20,834,000,000 $8,916,000,000 $4,267,000,000 $1,960,000,000 21,623,000,000

$9,300,000,000 $21,000,000 $9,321,000,000

$4,483,000,000 $5,373,000,000 $9,856,000,000

$835,000,000 $1,004,000,000 $358,000,000 $11,518,000,000

$854,000,000 $902,000,000 $498,000,000 $12,110,000,000

$870,000,000 $867,000,000 $21,265,000,000 $20,773,000,000 ($13,293,000,000) ($13,160,000,000) $3,196,000,000 $2,584,000,000 ($2,722,000,000) ($1,551,000,000) $9,316,000,000 $9,513,000,000