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A

PROJECT REPORT
On
WORKING CAPITAL MANAGEMENT
AT
PRIVI ORGANICS LTD. , MAHAD
MIDC (RAIGAD).

SUBMITTED TO
UNIVERSITY OF PUNE
IN PARTIAL FULFILLMETNT OF
MASTER OF BUSINESS ADMINISTRATION

BY

MR. ARBAZ MOHAMMED SHAFI CHILWAN


M.B.A. (FINANCE)

POONA INSTITUTE OF MANAGEMENT SCIENCE AND


ENTERPRENEURSHIP, (PIMSE).
2013-14

DECLARATION

I, the undersigned, hereby declare that the Project Report entitled WORKING
CAPITAL MANAGEMENT OF PRIVI ORGANICS LTD., MAHAD,(MIDC)
RAIGAD written and submitted by me to University Of Pune, in partial fulfillment
of the requirements for the award of degree of Master Of Business Administration
under the guidance of Prof. RIYASAT PEERZADE SIR is my original work and the
conclusions drawn therein are based on the material collected by myself.

Place: Pune

Date:

Signature of Student

Mr. Arbaz Chulwan

ACKNOWLEDGEMENT
It is a matter of great satisfaction and pleasure to present this report on Working
Capital Management of Privi Organics ltd. I take this opportunity to owe my thanks
to all those involved in my training.
This project report could not have been completed without the guidance of Prof.
Riyasat Peerzade sir. Their timely help & encouragement helped me to complete this
project successfully.
I thank Mr.Bharath Sheth Gogawle for giving me opportunity to work at PRIVI
ORGANICS LTD. COMMPNY, as a accountant and finance trainee.
I also thank to PAWAR SIR (HR MANAGER) for giving me the opportunity to work
at privy organics ltd. Company.
I express my gratitude towards staff of PRIVI ORGANICS LTD. those who have
helped me directly or indirectly in completing the training.

Mr. ARBAZ MOHAMMED SHAFI CHILWAN

INDEX

Chapter

Particulars

No.
I

Introduction To Study

II

Company Profile

III

Theoretical Background

IV

Research Methodology

Data Analysis and Interpretation

VI

Findings, Suggestions, Conclusion

Bibliography

Page. No.

EXECUTIVE SUMMARY.
My Project is the study of working capital management. The study
was conducted In PRIVI ORGANICS LTD. MAHAD, RAIGAD.The project was of 2
months duration. During the project for collecting the data as a primary source I
interviewed the executives & staff to collect the data, & as a secondary data I made
use of company records & annual reports. The data collected were then compiled,
tabulated and analyzed.
About the subject, my aim is to collect information about how company arranges its
financial resources from the other financial institution, what kind of documentation is
involved in it, what is the procedure followed, and also the study of short-term
financial position of the firm, total current assets, current liabilities, study the
change in working capital & net operating cycle of the company.
Company is manufacturing all types of organics parts.
In the company I was working in Account Department. During the summer training I
came to know about the day-to-day financial transactions and also it has helped me to
explode my knowledge about the subject Working Capital Management.
Working Capital Management is a very important facet of financial management
due to:

Investments in current assets represent a substantial portion of total

investment.

Investment in current assets & the level of current liabilities have to be geared

quickly to change sales.


By studying about the companies different areas I came to know certain things
like the company has negative working capital which is good for the company,
inventory holding period is decreasing.

CHAPTER- I
INTRODUCTION
TO
STUDY

INTRODUTION TO RESEARCH
Working capital requirement is the short-term requirement. Working capital is the
investment needed for carrying out day-to-day operations of the business smoothly.
In this project I have taken a year of Balance sheet & P& L a/c of the company to
know the working capital finance to the industries and to know the current assets &
current liabilities of the company. It covers almost all the important aspect relating to
assessment & follow up of working capital management.
For assessing working capital requirement cost sheet, operating cycle of the company,
statement showing changes in working capital, different ratios are calculated. All data
in the prepared in the form of tables & graphs.

The main objective of the project was to study of working capital management.
Business enterprises need funds to meet their different types of requirements,
i. Long-term requirement
ii. Medium-term requirement
iii. Short-term requirement

OBJECTIVES OF THE STUDY


1) To evaluate companys performance relating to financial statement analysis.
2) To know the liquidity position of the company with the help of current ratio.
3) To find out the utility of financial ratio in credit analysis & determining the
financial capacity of the firm.
4) To find out the operating cycle of the company.
5) To study the working capital components such as receivables accounts,
cash management, Inventory position.

SCOPE OF THE STUDY


Both primary and Secondary data has been be used for the study. Primary data was
collected through direct interaction with the companys accounts department for the
study such as receivable management, inventory management, management of cash
etc.
And I collected the data from the secondary sources comprising Annual Reports of the
firm, and office manuals of the department
Apart from conducting this research work on the basis of these information, various
techniques of financial management e.g., statement of changes in working capital,
cost sheet, operating cycle of firm and ratio analysis etc. were used in the present
study. To present a broad view so far the purpose of the analysis and to make it easy to
understand the problem/concept of a few graphs and tables shall also be presented. In
each chapter, the analysis has been compared with actual management practices of the
company under study.

LIMITATIONS OF THE STUDY


Every project has its own limitations, so has ours. But we have to work irrespective of
these limitations and find our way, so that we can achieve the required aim.
Some of the limitations of our project are:

As our project is based on the data recorded by the company, we face the
limitation of extracting that particular data because our access is limited for
the sake of confidential information of the company.

The grouping of different items in the balance sheet also created hindrances
for us, as it is very difficult to identify which item is clubbed with which head.
But thanks to accounts personal who made it easy to understand these
clubbing

This project is based on three year annual reports. Findings and suggestions
are based on such limited data. The trend of last three year may or may not
reflect the real working capital position of the company.

The Study is limited only to working capital management aspect of the privi

organics pvt. ltd. company midc mahad.

CHAPTER II
COMPANY
PROFILE

OVERVIEW

Privi Organics is one of India's leading manufacturer, supplier and exporter of aroma
chemicals.
Privi started manufacturing aroma chemicals in the year 1992 with only two products,
which it gradually expanded to a range of over 50 products today, having a capacity of
over 15500 tons per annum. Privi also develops and produces custom-made aroma
chemicals as per specific requirement of the customer. The research specialists at inhouse R&D centre continuously thrive to develop new products and processes.
Privi has two state-of-the-art integrated manufacturing facilities with capability to
perform various critical reactions like; hydrogenation, condensation, gregnard
reactions, pyrolysis, reactive distillation, high vacuum distillation, continuous
distillation etc. and deliver consistency in odor and other key parameters in an
industry driven by stringent olfaction standards.
With an installed capacity of ~15,500 TPA of aroma chemicals, the Company enjoys a
dominant position and economies of scale in its product categories.
Privi's world-class products is the result of its very strong R&D team that has proven
expertise in developing new products, customizing odor as per customer
requirements, scaling up products from basic research to commercial scale, and
designing process improvements to drive quality and cost optimization.
The research efforts are facilitated with an advanced research infrastructure
comprising of two well-equipped R&D labs, each of which are recognized by the
Department of Scientific and Industrial Research, Ministry of Science and
Technology, and a hi-tech pilot plant. Supported by a strong R&D team, Privi has
been able to develop some high-margin key aroma chemicals that have good growth
prospects in the fragrance industry and have established their market viability through
extensive market studies.
Importantly, one of the R&D labs is completely focused on developing Green
Products and Green Technologies in technical collaboration with UICT (University
Institute of Chemical Technology, Mumbai) through biotechnology. This only goes on
to highlight Privi's concern and involvement in preserving environment without
compromising on quality of its products.
The Quality Management System (QMS) of Privi Organics have earned the ISO
9001:2008 certification followed with ISO 14001:2004 certification for its
Environmental Management System (EMS).
Privi Organics has recently been also conferred with BS OHSAS 18001:2007
standard Certification Accredited by NABCB (Occupational Health & Safety
Assessment Series) for all Manufacturing Units in Mahad from Bureau Veritas.

COMPANY VISION

To emerge as a leading Global


manufacturer of Aroma
Chemicals
Privi Organics intends to become
the leading aroma chemicals
brand across the globe with its
wide range of innovative
products, reliable quality along
with exemplary services, to fulfil
the ever growing demands of our
rising customers.
Apart from our conventional
product range, we have an
inherent capability and capacity
to custom-design, develop and
manufacture aroma chemical
molecules, as per the needs of
our customers. With this
customer-need-based capability,
Privi Organics will be able to
further strengthen bonds with
customers for a long time to
come...

Our Mission
To be the best by giving only the
best!
At any given moment, we are
self-assured and prepared to
provide quality products by
adopting safe and healthy
practices in procuring, preparing
and presenting our products.
We shall continue to be a leader
in the local aroma chemicals
industry and keep on thriving and

innovating for the international


market, thereby portraying
Indias potential as a market
leader in Aroma Chemicals.
Our mission shall always be to
fulfill customer's needs first!

BOARD OF DIRECTOR

.
Mr Satan Santumal Bharwani Chairman

Mr Satan Bharwani has more than 4 decades of experience in Banking & Finance and
has been the Chairman of Privi since 2005.
Mr Bharwani has been the guiding force with vast experience in banking and financial
services which comes from his association with the RBI and NABARD where he
retired as General Manager in 1994
During his tenure with RBI and NABARD he has worked on several national level
Committees / Tas Forces set up on varied aspects of finance. He was a faculty
member of the RBI college of Rural Banking, Pune and has delivered lectures on
management and banking institutes including the IIM Ahmedabad and has coauthored books on management of co-operatives.
He has a post graduation degree in Economics, and a Diploma Holder in Industrial
Finance and Co-Operatives, Cranfield University (U.K). He has studied varied aspects
of Micro finance, non forum activities in Thailand, South Korea, U.K and
Switzerland.
He is Director in Satco Securities and Financial Services Ltd, Satguru Enterprises Pvt.
Ltd, Blossoms Industries Ltd

Mr Mahesh Babani Managing Director

Mr Mahesh Babani took reins of the Company in 1989 and is the Managing Director
since 2001. It has been his passion that has driven the Company from a startup to its
current scale. He is the Managing Director of the Company and is involved in
formulation of long term strategy, business development and financial management of
the Company. Over the past 2 decades he has travelled extensively across the globe
and has deep knowledge of the entire value chain of Aroma Chemical Business. His
knowledge extends from sourcing of raw materials to its processing and to the final
consumer
of
Aroma
Chemicals.

His vision, perseverance, motivation and extensive knowledge of global aroma


chemical markets has helped PRIVI to reach the current position.
At present he has strong relationships across the management level of PRIVI's
customers,
suppliers
and
other
stake
holders.
Mr Mahesh Babani is a Commerce Graduate and a self made entrepreneur and has
operational
managerial
experience
of
over
30
years.
He is serving as Director on boards of Babani Investment & Trading Pvt. Ltd, Satguru
Enterprises Pvt. Ltd, Privi Biotechnology Pvt. Ltd, Moneymart Securities Pvt. Ltd,
Minar Ogranics Pvt. Ltd, Satellite Technologies Pvt. Ltd

Mr D B Rao Executive Director

Mr. D B Rao is one of the founder of Privi and has been associated with the company
since 1982. Mr Rao has been on the Board of Directors since 1982 and is a Wholetime Director designated as Executive Director since 2004. Mr D B Rao overseas
operation,
personnel
and
raw
material
sourcing.
Mr Rao has worked diligently in converting the vision of the company to realty and
has handled projects right from conception to completion. He has been instrumental in
putting up the manufacturing facilities in a swift and cost effective manner and
chartering the growth of the Company. His vast experience, in depth knowledge in
chemicals and engineering has helped PRIVI to attain the current position.
He is involved in the operations of the company and institutionalizing various process
in the management of the company. He has travelled extensively across the globe and
has
been
involved
in
sourcing
of
raw
materials.
He has contributed significantly in PRIVI's growth and in creation of formidable
organization
structure
of
PRIVI.
Mr D B Rao is a post graduate in Engineering with over 33 years experience. He is
Director on boards of Minar Organics Pvt. Ltd, Vivira Chemicals Pvt. Ltd., and
Satellite Technologies Pvt. Limited.

Mr Arjan J Advani Director

Mr Arjan J Advani has been associated with PRIVI from 2005 and has been a
visionary with vast experience steming out of his association from being Chairman,
Nominee Director and Member of Governing Councils of many leading
companies/Institutions.
Mr. Advani is a Chemical Engineer and holds degrees in Business Management and
Development Bank Management (West Germany). He has been associated with a
large number of companies for Project Appraisal, Implementation, Technology
Finance, Venture Capital and Turnaround Strategies. He has developed and
implemented programs for technology co-operation, High tech Hi Value Horticulture,
environment, energy etc. His has done advisory Assignments which include: World
Bank, Asian Development Bank-Royal Government of Bhutan, International
Development Research Institute (Canada), Singapore- India Software Consortium
He is also a Member Governing Council National Institute of Naturopathy and has
been conducting programs for Health, Harmony and Happiness for the Body Mind
and Soul.

Mr Anoop P Babani Director

Mr Anoop Babani has been associated with PRIVI since 1999 and has been actively
involved in giving key inputs in various areas of company's operations.
Mr Anoop Babani has been associated with Satco Capital Markets Limited (Formerly
Satco Securities & Financial Services Limited) from its inception and is currently
working as Managing Director of the Company. He has more than 20 years
experience and good knowledge of stock Market operations. He is also associated
with other group companies of Satguru Group involved in construction,
pharmaceuticals
and
chemical
industry.
Mr Anoop Babani is B Com graduate and is on board of Satco Securities & Financial
Services Ltd, Privi Pharma Pvt. Ltd, Satguru Enterprises Pvt. Ltd, Satguru KNS
Construction Pvt. Ltd, Buildwell Land Developers Pvt. Ltd, Babani Investments &
Trading Pvt. Ltd, Multisatco Investments Pvt. Ltd, Vivira Chemicals Pvt. Ltd.

Mr Rajesh Budhrani Director

Mr Rajesh Budhrani has been associated with PRIVI from 2005 as investor and
Director. Mr Budhrani has guided the company to new heights with his experience as

investor

and

Director

in

various

companies.

Mr Budhrani with his vast knowledge of global financial markets has played a major
role in formulating financial plan and financial strategies and has personal
relationships with the financial world has often benefited the company.
Over the years Mr Budhrani has been associated with various companies where he has
portfolio
investments
or
direct
equity
investment.
He has invested across the globe particularly in emerging markets and formidable
knowledge of global financial markets and global commodity markets
Mr Rajesh Budhrani holds a degree in Bachelor of Science Major in Finance &
Accounting from Boston School of Management. He graduated from his class,
Summa
Cum
Laude.
Mr Budhrani is a Director on the board of Budhrani Finance Ltd, Reit Asset
Management India Ltd and many other Companies.

NEWS AND VIEWS

Environment Clearance Grant for Manufacture of Alpha Pinene, Beta Pinene,


Limonene and byproducts by Secretary, Environment Department,
Mantralaya, Mumbai-32

Half yearly EC compliance Report submitted to CCF, Regional Office,


MoEF, Western Region, Bhopal

REACH Registration : Amber Fleur (ISO-E-SUPER) registered under


REACH in the tonnage band of > 1000 tons/year - OR SSS

Halal Certificate All our flavor ingredients are Halal certified from the
globally recognized Halal Committee, Jamiat Ulama-E-Maharashtra

PRIVI ORGANICS LIMITED is now Kosher certified manufacturer of


flavors ingredients / chemicals utilizing one of the Internationally recognized
Kosher organization i,e STAR- K Certification. All flavor ingredients /
products are available Kosher Pareve or Dairy for year-round use, excluding
Passover.

PRIVI participates in Xth international Exhibition of Raw Material for


Perfumery.

PRIVI is the first organization in the chemical sector to receive OHSAS


certificate with NABCB logo

Standard Chartered PE invests Rs. 85Cr in Privi Organics.

SPIRIT OF ENTREPRENEURSHIP : Smelling Success.

Privi's in-house R & D center in Mahad has been accorded recognition by the
'Department of Scientific and Industrial Research'.

CNBC-TV18 profiles Privi

Privi has built a state of the art Research Centre (Biotechnology) at Privi
Knowledge Centre

Privi participation at FAFAI workshop

Privi commissions a state of the art instrumentation and control system for
Amber Fleur and Sandal Chemicals Plant

Privi Organics inaugurated its new office and proposed research &
development centre - Privi House

Privi launches Oracle E-Business Suite 11i (5.10)

OUR STRENGTH

Economies of Scale
Privi has a leadership position in the world market for products like- DHMOL, Amber
fleur, Citonellyl Nitrile etc. providing it economies of scale and opportunity to set up
dedicated manufacturing facilities for these products to produce them in a most
economical manner.
Operations Excellence
One of Privi's strength is its successful production facilities, which is the result of its
state-of-the-art manufacturing facilities and a very competent operations team to
deliver quality and consistency. These are followed-up with well designed systems
and processes to ensure stringent quality control at all levels.
R&D Capabilities
Privi's strong R&D team is backed by a well-equipped infrastructure that is engaged
in new product developments and process improvements, so as to keep pace with the
changing needs.
Market Access
Privi firmly believes that all the goodness it produces, must reach the end user and
hence has established strong relationships with leading flavors, fragrances and FMCG
companies. Privi is well-known for its long standing relationships with all its
customers and have excellent track record towards customer satisfaction, which is its
primary goal. At every stage Privi ensures to uphold all market values and principles
in the interest of its suppliers and consumers.

Supply Chain
Continuity of quality products and services is Privi's hallmark. We have developed
strong and long lasting relations with all vendors so as to keep our supply chain
unceasing. One of the aspects pointing towards this is our well-planned backward
integration into key raw materials for Pinene based products.
Market Focus
At the end of the day what matters is to understand the tomorrow. Considering this,
Privi regularly interacts with customers with an 'ear-to-the-ground approach'. This is
made possible through various market researches with established networks, enabling
us for new product development so as to maintain our leadership position in the
market.

PRIVI PRODUCTS

Products
Alpha Damascone Alpha Ionone

Alpha Ionone

Alpha Ionone 950

Amber Fleur

Amber Gamma

Beta Ionone

Citronellal

Citronellyl
Acetate

Citronellyl Nitrile

Delta Damascone Dihydromyrcenol

Florascone

Gamma Methyl
Ionone

Gammanolene
700

Geranyl Acetate

Indian Sandal
Core

Ionone 100%

Methyl Ionone

Mugenol

Nimberol

OTBCHA

PTBCHA

Sandal Fleur

Sandal Fleur
Laevo

Sandal Touch

Tetrahydroflorol Tetrahydrogeraniol

Tetrahydrogeranyl Tetrahydromyrcenol Timber Forte


Acetate
Violetone Coeur

Future Products

Delta & Gamma Lactones


Carvone D & L
Menthone from Byproduct Dipentene & Carene
Castor oil derivatives-Aldehyde C11

Grignard chemistry based products

Timber Touch

INNOVATION

Privi's produ

in the R&D with


The R&D techn

processes, whic

effluent, safety a
Privi's R&D lab

Scientific and In
The research ce

between lab, pil


Privi lays great

quality standard

Acetals
Bayer V
Condens
Cracking
Cyclisat
Darzens
Decarbo

Dehydro
Michael rea
Oxidations
Prins reactio
Rearrangme
Reductions
Story synthe
Vilsmayer H

Wolf-Kishn

INFRASTRUCTURE

Privi Organics is equipped with two state-of-the-art manufacturing plants (Unit-I


Unit-II) that are located in the MIDC area of Mahad, Raigad district in Maharashtra
. Both these units are in close proximity to one another and are situated at about
175 Kms to the south of Mumbai, which is within a drive of three hours approximately.
Built indigenously with in-house designs and technical capabilities by Privi's management
team, both the units conform to International standards with all the equipments adhering
to relevant codes like ASME API. These units together have a total production capacity
of 9,000 TPA, which is the highest among any aroma chemical producer in India.
Significantly, while both the plants have dedicated facilities enabling all the key products
for continuous processing, this ultimately results in cost-efficiency for the entire production
system. Whereas, around 20% of the capacity is designed as multi-product processing
facility
enabling flexibility in manufacturing newer and niche products with smaller volume. When
need be, the Company outsources certain non-critical reactions in other processing plants.
Importantly, the advantage in terms of locations of both the units is their proximity to
Jawaharlal
Nehru Port Trust (JNPT). Due to which, there is a significant cost and logistics advantage
that
results with consistent and on-time deliveries to the customers.
An important aspect for Privi's manufacturing Unit-II, which has the largest manufacturing

facility; it enjoys the status of EOU.


Infrastructure in brief

Total area : 64255 Sq Mts


Optimum Production Capacity of FG : 15500 MT
Plot under acquisition : 32000 Sq Mts
Total Reaction Capacity : 247.2 KL
Total Distillation Capacity : 433.2 KL/Day
Blending Capacity : 280 KL
Steam generation : 47 Tons/Hour
Connected Power : 4060 KVA
DG Back-up : 3255 KVA
Cooling Water Tower : 7155 TR
Chilled Water & Chilled Brine Capacity : 770 TR
Storage capacity of RM : 2000 Thousand MT
Storage capacity of FG : 900 MT

Capacities & Capabilities


UNIT 1 - M.I.D.C., Mahad
Multipurpose plant capable of carrying out various
chemical reactions such as

Condensation Reactions
Reduction Reactions
Diels-Alder Reactions
Cyclisation Reactions
Solvent Recoveries/ Purifications
Short-path Distillation (SPDU)

High Vacuum fractional Distillation

UNIT 2
Multipurpose plant capable of carrying out various chemical reactions such as

Condensation Reactions
Cyclo condensation
Diels-Alder Reactions
Cyclisation Reactions
Pyrolysis
Solvent Recoveries/ Purifications
Schiff base formation

Grignard type condensation


Short-path Distillation (SPDU)
High Vacuum fractional Distillation
Oximation
Hydration Reactions
Reduction Reactions
Hydrogen generation
High Pressure- catalytic hydrogenation
Isomerisation

Racemization

Sustainability overview

Privi Organics, being an environment-conscious and eco-friendly aroma chemicals


producer,
meets the Maharashtra Pollution Control Board (MPCB) BOD and COD norms at its
Mahad
plant. Significantly, its BOD and COD of the discharge effluent are the lowest in the
vicinity.
Importantly, Privi has already received ISO 14001 certification demonstrating its
commitment
to environment safety and quality standards. The aerobic and anaerobic treatment
plants are
fully operational while the company is embarking on setting up a reverse osmosis
plant for
recycling water.
Privi follows stringent safety norms at its manufacturing units. Its Unit-I at Mahad has
been
recognized and awarded by the National Safety Council for being an accident-free
plant for
maximum operating hours in 2006 and 2008.

SUSTAINABILITY ENVIRONMENT

Privi Organics Committed towards Creating a 'Breathe Easy & Live Easy
Environment'

Privi Organics is totally committed towards controlling and minimizing the impact of
its operations
that may have on the environment, especially in the immediate vicinity. It's an
endeavour to create
a healthy environment so that everyone lives and breathes easy!
Upholding environment related issues, Privi meets the Maharashtra Pollution Control
Board (MPCB),
BOD and COD norms for its Mahad units. Significantly, its BOD and COD of the
discharge effluent
s are the lowest in the area. Further to which, the Company has set up completely
integrated effluent
treatment plants.
Fulfilling its commitment successfully towards environment safety and quality, Privi
was been conferred
with ISO 14001: 2004 Standard Certification (Environmental Management System)
for all it's
Manufacturing Units in Mahad from Bureau Veritas.
This achievement also signifies Privi's responsibility in providing assurance on
environmental issues

to its internal workforce (management and employees), external associates


(shareholders, customers,
suppliers, the community and regulatory agencies) and all our stakeholders.
The ISO 14001:2004 enables Privi to:

Identify & control the environmental impact of its activities, products or


services
Improve its environmental performance continually
Implement a systematic approach to setting environmental objectives and
targets, to achieving
these and to demonstrating that they have been achieved

Privi being an environmentally conscious corporate, have taken several measures to


maintain harmony
with nature where environment, health of employees and people in the vicinity and
their safety, get
maximum benefits through various steps such as:

The aerobic and anaerobic treatment plants are already operational while we
are embarking on
setting up a reverse osmosis plant for recycling of water.
Continuous measures are taken to improve energy consumption. Privi has
appointed Ahmedabad
Energy Conservation Council to conduct Energy Audit in all its
Manufacturing units and Offices.
Privi follows stringent safety norms at both its manufacturing units. In
recognition to this, Unit-I was
recognised and awarded by the National Safety Council for being 'accident
free plant' for maximum
operating hours in 2006 and 2008.
The Company has a very strong EHS program. Each employee has to go
through the EHS training,
which educates them on the safe handling of materials and equipments,
hazards related to raw
material and processes, etc.

HUMAN CAITAL

Privi is known for its Culture of management, action and innovation.


Our belief in creating value through innovation has successfully transformed Privi into one
of
India's leading manufacturer & supplier of Aroma Chemicals. At Privi, we continuously
strive to harness the power of intellectual minds and challenge conventional thinking by
pushing
the boundaries of science and art.
Employment at Privi is synonymous with change and growth. We offer exciting and
challenging
careers within a stimulating knowledge-driven work environment where ideas and skills are
valued;
where people can realise their full potential through dedicated training programs; and where
individual contribution is respected and recognised.
View our current openings
You could send us your resume to careers@privi.co.in and we are sure that it could be just
the
beginning of a promising future together. +

CHAPTER- III
RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY
Primary Data:Primary source refer to information collected first hand from such sources as
historical documents, literary texts, artistic works, experiment surveys and interviews.
Thus articles where the where the author is describing their own experiment would be
considered primary sources.
The information is collected through the primary sources like:

Talking with the employees of the department.

Getting information by observations e.g. in manufacturing processes.

Discussion with the head of the department.

Getting information from company article and text.

Artistic work experiment of two months.

Survey of company.

Personal papers of company including diaries.

Journals and correspondence, etc.

Secondary Data:-

Secondary source refer to another persons second hand account of something such as
in literature view. Thus, an experiment that is described by someone other than the
researcher would be considered a secondary source.
The data is collected through the secondary sources like:

Annual Reports of the company.

Office manuals of the department.

Reports, records of the company.

Accounts found newspapers, radio, internet and television about research

findings, etc.

CHAPTER- IV
THEROETICAL
BACKGROUND

WORKING CAPITAL MANAGEMENT:-

INTRODUCTION:Working Capital is the key difference between the long term financial management
and short term financial management in terms of the timing of cash. Long term
finance involves the cash flow over the extended period of time i.e. 5 to 15 years,
while short term financial decisions involve cash flow within a year or within
operating cycle. Working capital management is a short term financial management.
Working capital management is concerned with the problems that arise in attempting
to manage the current assets, the current liabilities & the inter relationship that exists
between them. The current assets refer to those assets which can be easily converted
into cash in ordinary course of business, without disrupting the operations of the firm.
WHAT IS WORKING CAPITAL:Working capital refers to the investment by the company in short terms assets
such as cash, marketable securities. Net current assets or net working capital refers to
the current assets less current liabilities. Symbolically, it means,
Net Current Assets = Current Assets - Current Liabilities.
DEFINITIONS OF WORKING CAPITAL:Working capital is defined as excess of Current assets over Current liabilities. It is
that part of capital which is required for the daily working of the business. It is the
capital with which the business is worked over.
Working capital is the amount of funds necessary to cover the cost of operating the
enterprise.
-Shubhin

Working capital is also called as Circulating Capital


Working Capital i.e. Circulating Capital means the current assets of the company that
are changed in the ordinary course of business from one into another as for example
from cash to inventories, from inventories to receivables & from receivables into
cash.
-Gersenberg
CONCEPT OF WORKING CAPITAL:There are 2 concepts:
1) Gross Working Capital
2)

Net Working Capital

1) Gross Working Capital:It represents the amount of funds invested in current assets. Thus, the gross working
capital is the capital invested in the total current assets of the enterprise. Current
assets are those assets which in the ordinary course of business can be converted into
cash within a short period of normally one accounting year.
Examples of current assets are:1. Cash in hand & bank balance
2. Bills Receivables
3. Short term loans & advances
4. Sundry debtors
5. Temporary Investments of surplus funds
6. Inventories of stocks
7. Accrued Incomes
8. Prepaid Expenses
2) Net Working Capital:It is the excess of current assets over current liabilities. Net working capital may be
positive or negative. When the current assets exceed the current liabilities the working
capital is positive & 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 the short period of normally one
accounting year out of the current assets or the income of the business.

Examples of current liabilities are :1. Sundry Creditors or Accounts Payable


2. Bills Payable
3. Accrued or outstanding expenses
4. Short term loans, advances & deposits
5. Bank overdraft
6. Dividend Payable
7. Provision for taxation, if it does not amount to appropriation of profit.
Net working capital = Current assets Current liabilities
From The point of view of time, the working capital can be divided into two
categories:Permanent working capital:It also refers to the hardcore working capital. It is that minimum level
of investment in the current assets that is carried by the business at all times to starry
out minimum level of its activities.
It is the minimum amount which is required to ensure effective
utilization of fixed facilities & for maintaining the circulation of current assets.
There is always a minimum level of current assets which is continuously required by
the enterprise to carry out its normal business operations. For example, every firm
has to maintain a minimum level of raw-material, work-in-process, finished goods &
cash balance. The minimum level of current assets is called fixed or permanent
working capital as this part of working capital is permanently blocked in current
assets. As the business grows, the requirement of permanent working capital also
increases due to the increase in current assets. The permanent working capital can
further be classified as regular working capital and reserve working capital.

Temporary Working capital:It refers to that part of total working capital which is required by a
business over and above working capital. It is also called variable working capital.
Since the volume of temporary working capital keeps on fluctuating from time to time
according to the business activities it may be financed from short term sources.
It is that amount of working capital which is required to meet the
seasonal demand & some special exigencies. Variable working capital can further be
classified as seasonal working capital & special working capital. Most of the
enterprises have to provide additional working capital to meet seasonal & special
needs. The capital required to meet the seasonal needs of the enterprise is called
seasonal working capital. Special working capital is that part pf working capital which
is required to meet the special exigencies such as launching of extensive marketing
campaigns for conducting research etc.
The following Diagrams Shows Permanent and Temporary or Fluctuating or variable
working capital:-

Working Capital
Te
mporary

Temporary

Permanent

Importance of working capital:The management of working capital plays an important role in to maintain the
financial health of the firm during the normal course of business.
A study of working capital is of major importance of internal and external
analysis because of its relationship with the current day to day operations of business.
The study of management of working capital covers areas like cash
management, Accounts receivables, inventory and other concerned areas.
working capital is of paramount importance to a firms financial performance.

Thus,

Working capital is significance because of:


1. Adequate working capital is required to continue uninterrupted
business operations.
2. It is essential to run the day to day business operations.
3. Greater volume of working capital required investing in current assets
for the success of sales activities.
4. To ensure the maximizing the wealth of a firm.
5. To increase the rate of return on investment.
6. To meet the short-term obligation of a business enterprise.
7. To make the optimum utilization of resource.
Scope of working capital:

Maintain the adequate level of working capital, always to meet the


rising turnover, this way peak needs can be taken care of.

Sufficient liquidity to meet short-term obligation & when they arise


also to avail market opportunities like purchase of raw material at low
prices or at attractive discount.

Proper interdepartmental co-ordination to minimize working capital


investment. I.e. co-ordination between the marketing department &
production department.

Selection of appropriate sources of working capital viz trades credit,


bank finance, or other short-term finance as well as long term finance.

It becomes easy to avail finance for the working capital if the firm
banker relationship are good and built on strong good faith.

WORKING CAPITAL CYCLE:The working capital cycle refers to the length of time between the firms
paying the cash for materials, etc., entering into production process/stock & the
inflow of cash from debtors (sales), suppose a company has certain amount of cash it

will need raw materials. Some raw materials will be available on credit but, cash will
be paid out for the other part immediately. Then it has to pay labour costs & incurs
factory overheads. These three combined together will constitute work in progress.
After the production cycle is complete, work in progress will get converted into
sundry debtors.
Sundry debtors will be realized in cash after the expiry of the credit period.
This cash can be again used for financing raw material, work in progress etc. thus
there is complete cycle from cash to cash wherein cash gets converted into raw
material, work in progress, finished goods and finally into cash again. Short term
funds are required to meet the requirements of funds during this time period. This
time period is dependent upon the length of time within which the original cash gets
converted into cash again. The cycle is also known as operating cycle or cash cycle.

CASH

SUNDRY
DEBTORS

RAW
MATERIAL

(RECEIVAVL
ES)
FINISHED
GOODS

WORK-INPROCESS

Working capital cycle can be determined by adding the number of days required for
each stage in the cycle. For example, company holds raw material on average for 60
days, it gets credit from the supplier for 15 days, finished goods are held for 30 days
& 30 days credit is extended to debtors. The total days are 120, i.e., 60 - 15 + 15 + 15
+ 30 + 30 days is the total of working capital.
Thus the working capital cycle helps in the forecast, control & management of
working capital. It indicates the total time lag & the relative significance of its
constituent parts. The duration may vary depending upon the business policies. In

light of the facts discusses above we can broadly classify the operating cycle of a firm
into three phases viz.
1) Acquisition of resources.
2) Manufacture of the product and
3) Sales of the product (cash / credit).
First and second phase of the operating cycle result in cash outflows, and
be predicted with reliability once the production targets and cost of inputs
are known.
However, the third phase results in cash inflows which are not certain because
sales and collection which give rise to cash inflows are difficult to forecast accurately.
Operating cycle consists of the following:Conversion of cash into raw-materials;

Conversion of raw-material into work-in-progress;

Conversion of work-in-progress into finished stock;

Conversion of finished stock into accounts receivable through sales.

Conversion of accounts receivable into cash.

In the form of an equation, the operating cycle process can be expressed as follows:

Operating cycle = R + W + F + D -C
R = Raw material storage period
W = Work in progress holding period
F = Finished goods storage period
D = Debtors collection period
C = Credit period availed

OPERATING CYCLE FOR MANUFACTURING FIRM:-

WORK-IN-PROGRESS

RAW MATERIALS
STOCK

FINISHED GOODS
STOCK
WAGES &
OVERHEADS

SALE

SELLING
EXPENCES

TRADE
CREDITORS

a
CASH

TAXATION

TRADE
DEBTORS

FIXED

SHAREHO
LDER

ASSETS

LEASE
PAYMENT

LOAN
CREDIT
a

The firm is therefore, required to invest in current assets for smooth and uninterrupted
functioning.

RMCP

- Raw Material Conversion Period

WIPCP

- Work in Progress Conversion Period

FGCP

- Finished Goods Conversion Period

ICP

- Inventory Conversion Period

RCP

- Receivables Conversion Period

Payables (PDP) - Payables Deferral Period


NOC

- Net Operating Cycle

GOC

- Gross Operating Cycle

Here, the length of GOC is the sum of ICP and RCP.


ICP is the total time needed for producing and selling the products. Hence it is the
sum total of RMCP, WIPCP and FGCP. On the other hand, RCP is the total time
required to collect the outstanding amount from customers. Usually, firm acquires
resources on credit basis. PDP is the result of such an incidence and it represents the
length of time the firm is able to defer payments on various resources purchased.
The difference between GOC and PDP is know as Net Operating Cycle and if
Depreciation is excluded from the expenses in computation of operating cycle, the
NOC also represents the cash collection from sale and cash payments for resources
acquired by the firm and during such time interval between cash collection from sale
and cash payments for resources acquired by the firm and during such time interval
over which additional funds called working capital should be obtained in order to
carry out the firms operations. In short, the working capital position is directly
proportional to the Net Operating Cycle.

Determinants of working capital:The total working capital requirement is determined by a wide variety of factors. It
should be noted that these factors affect different enterprises differently. The
following is the description of the factors, which generally influence the working
capital requirements of the firms.
1)

Nature of Enterprise:-

The working capital requirements of a firm basically influenced by the nature of


its firm. For example, trading and financial firms require a lower investment in
working capital but in the case of manufacturing concern have to invest
substantially in working capital.
2)

Production Cycle:-

Longer the manufacturing process the higher would be the requirements of


working capital. This is the reason why highly capital-intensive industries a large
amount of working capital to run their sophisticated and long production process.
3)

Credit Policy:-

The level of working capital is also determined by credit policy, which relates to
sales and purchases. The credit policy influences the requirement of working
capital in two ways:
i) Credit allowed by firm to its customers.
ii) Credit given to firm by its suppliers.
The credit terms granted to customers have a bearing on the magnitude of working
capital by determining the level of books debts. On the other hand, if liberal
credit terms are available to firm by its suppliers, the requirements of working
capital will be less.
4)

Growth and Expansion Activities:-

It is obvious that, as business expands, it requires more working capital in terms of


sale or fixed assets. In the case of growth, there will be an all round increase in
investment. That is to say, with the increase in fixed assets for increasing sales the
requirement of working capital will be expanded not only for financing increased

volume of raw materials but also to finance maintenance of inventory stock and
grant credit to customers.
5) Business Cycle FluctuationsBusiness fluctuations lead to cyclical and seasonal change in production and sales
and affect the working capital requirement. Most firms experience seasonal and
cyclical fluctuation in the demand for their products and services. These business
variations affect specially the temporary working capital requirements of the firm.
6) Supply Conditions:The inventory of raw materials, spares and stores depends on the condition of
supply. If the supply is prompt and adequate the firm can manage with small
inventory hence the firm can manage with small inventory hence the lower
requirements of working capital. If the supply is unpredictable and carry the
inventory for longer period. This policy is followed when the raw material is
available only seasonally.
7) Technological Development:Changes in technologies may lead to improvements in processing raw materials,
minimizing wastages, greater productivity, more speed of production. All these
improvements may enable the firm to reduce investments in inventory .Thus
changes in technology affect the requirements of working capital.
8) Government Policies:The polices and decision of government also affect working capital. Government
controls and regulates the prices and supply of some essential products, which are
very important from the point of view of general public.

CASH MANAGEMENT
Introduction:Cash is an important component of current assets and is most essential
for business operations. Cash is the basic input needed to keep the business
running on a continuous basis. It is also the ultimate output expected to be
realized by selling the service and product manufactured by the firm.
Cash is both the beginning and the end of the working capital cycle i.e. cash,
inventories, receivables and cash. While the management of all the firms
should strive hard to secure larger cash at the management of all the firms
should strive hard to secure larger cash at the end of the working capital cycle
than what had been invested into; it at its beginning, they must also make it a
best possible minimum. This is required to optimally utilize the cash and to
avoid the situation of idle cash balances.
Its effective management is the key determinanant of sufficient
working capital. In the key determinant of sufficient working capital. Cash in
the business enterprise may be compared to the blood of the human body;
blood gives life and strength profits and solvency to the business
organization. Hence, every enterprise has to hold to hold necessary cash for is
existence.
In a business firm, ultimately, a transaction results in either an inflow
or outflow of cash. In an efficient managed business, static cash balance
situation generally does not exit. A firm should keep sufficient cash, neither
more nor less. Cash shortage will disrupt the firms manufacturing operation;
while excessive cash will simply remain idle.

Therefore, for its smooth

running and maximum in a business is of paramount importance.


Motive For Holding Cash:(i) The transaction motive;
(ii) The precautionary motive; and
(iii) The speculative motive; these motive are explained as under-

(i) The Transaction Motive:The transaction motive requires a firm to hold cash to conduct its business in
the ordinary course. The firm needs cash primarily to make payment for
purchases, wages, operating expenses, taxes etc. A firm needs a pool of cash
because its receipts and payment are not perfectly synchronized. A pool of
cash is also known as transaction balance.
(ii) The Precautionary Motive:The precaution motive is to hold cash to meet any contingencies in future. It
provides a cushion or buffer to withstand some unexpected emergency. The
precautionary amount of cash depends upon the predictability of cash flows.
If cash flows can be predicted with accuracy, less cash will be maintained
against an emergency. On other hand, unpredicted the cash flows, the larger
the need for such balances.
(iii) The Speculative Motive:
The financial manager would like to take advantage of unexploited
opportunities. Some reserve of money is always essential to enable the firm to
take advantaged of cash when such opportunities arise.
Functions of Cash Management:Efficient cash management receipts and disbursement, and an efficient
control and review mechanism.

The firm should evolve strategies the

following four function of cash management:


a) Cash Planning:Cash planning can help anticipate future cash flows and needs of firm and
reduces the possibility of idle cash balances and cash deficits. Cash planning
may be done on daily, weekly or monthly basis.
b) Managing the Cash Flows:The twin objective sin managing the cash flows are: cash flows and
cash outflows. The inflow of cash should be accelerated while, as far as
possible, the out flows of the cash should be decelerated.

c) Determining the Optimum Cash Balance:One of the primary responsibilities of there financial manager is to maintain a
sound liquidity position of the firm so that dues may be settled in time. The
test of liquidity is really the availability of cash to meet the firms obligations
when they become due.
d) Investing Idle Cash:The idle cash or precautionary cash should be properly and profitably
invested. The firm should decide about the division of cash balances
between marketable securities and securities and bank deposits.

Receivable Management
Introduction:The receivables represent an important component of the current assets of the
firm. The amount of investment in accounts receivable for most firms. The
amount of investment in accounts receivable for most firms also represents a
very substantial portion of current assets. According to I.M.Pandey: Trade
credit is the most prominent force of the modern business. It is considered as
an essential marketing tool, acting as a bridge for the movement of goods from
production and distribution stages to customers finally.
The interval period between the date of sale and the date of receipt of payment
has to be financed out of working capital funds. Thus, trade debtors represent
investment. As substantial amount are tied-up in trade debtors or receivables,
it needs careful analysis and proper management.
Meaning of Receivables:Emerson as has defined the term receivables: when goods or services are
sold under an arrangement permitting the customers to pay for them at a letter
date, the amount due from the customer is recorded receivable. This is an
asset account, representing claim to future payment of cash from the customer.
Objectives of Receivables Management:The basic objective of receivables management is to maximize the value of the
firm by achieving a trade off between liquidity and profitability. In fact, the
firm should manage its credit in such a way that sales are expanded to an
extent to which risk remains within an acceptable limit. Thus, to achieve the
objective to maximizing the vale, the firm should manage its credit:
(i)

To obtain optimum volume of sales.

(ii)

To control the cost of credit and keep it at minimum.

(iii)

To maintain investment in debtors at optimum level.

The purpose of credit management is not sales maximization. But efficient


and effective credit management does help to expand sales and can prove to be
an effective credit management does help to expand sales and can improve to
be an effective tool of marketing, thus, the objective of receivables
management is to promote sales and profits until that pint is reached where the
return on investment in further funding of receivables is less than the cost of
funds raised to finance that additional credit.

Payable Management
Introduction:The current assets of affirm are supported by a combination of long-term and
short-term sources of financing. The long-term sources of finance provide
support for a small part of current assets requirement, which is called the
working capital margin. Working capital margin represents the difference
between current assets and current liabilities.

The short-term sources of

finance, referred to also as current liabilities consist of accrual and provisions,


trade credit, short- term bank finance, public deposits. According to Weston
and Brigham: The main sources of short term finance are
a) Trade credit between firms
b) Loans from Bank and
c) Commercial paper.
Trade Credit between firms:Trade credit is a form of short-term financial common to almost all business.
In fact, it is the largest source of short-term funds for business firms
collectively. In an advanced economy, most buyers are not required to pay for
goods upon delivery but are allowed a short deferment period before payment
is due. During this period, the seller o fetch goods extend credit to the buyer.
Because suppliers generally are more liberal in the extension of credit than
financial institutions, small companies in particular rely on trade credit.
According to Solomon and Pringle: Trade credit arise from the firms normal
operations, specifically form the time lag between receipts of goods purchased
and payment. The sum total of a firms obligations to its trade creditors at any
point in times normally is called accounts payable on the balance sheet.
Most purchases made by the firm do not have to be paid immediately, and this
deferral of payment is a short-term source of funds called trade credit.
Terms of Trade Credit:Broadly speaking, there are two aspects of trade credit i.e.
(i) The Cash Discount and
(ii) The Payment Period

Cash Discount:A cash discount is a reduction in price based on payment within a


specified period. The cost of not taking cash discounts often exceed the rate
of interest at which the buyer can borrow, so it is important that a firm be
cautions in its use of trade credit as a source of financing- it could be quite
expensive. If the firm borrow and takes the book is reduced. The effective
length of credit is thus influenced by the size of discount offered.
(ii) The Payment Period:Credit terms regarding payment period may be categorized several
groups according to the net period within which payment is expected and
according to the terms of cash discount.
a) Cash before Delivery:These terms involve no credit at all since the customer is required to
make payment for the goods before the supplier ships them. These terms are
imposed when the supplier either knows nothing about the customer or he
knows too much about the customers unreliability in managing his business
affairs.
b) Cash on Delivery:Under these terms the supplier ships the goods by mail or express but
the customer must pay for them before taking possession. These terms also
do not involve credit.
c) Net Terms, No Cash Discount:Where net terms are quoted, seller specifies the period within which
full payment must be made. These terms involve extension of credit.
d) Net Terms with Cash Discount:These terms contain the provision of grant of cash discount if the
payment is made within the specified period. Under most circumstances a
cash discount is offered as an incentive to the buyer to pay early.
e) Seasonal Dating:Seasonal dating are used in connection with goods that have seasonal
sales patterns. By offering seasonal terms, the manufacture is able to judge
the size of the market more accurately and to maintain level of production

over the year. The buyer obtains the goods for sale, but it is not obligated to
pay until the arrival of the peak-selling season.
Obtaining Trade Credit:The confidence of suppliers is the key to securing trade credit. What do
suppliers look for in granting trade credit? Among the things that suppliers
consider are:(i) Earning record over a period of time:If the firm has a fairly good earnings record with a portion of it
ploughed back in the business; it is looked upon favorably.
(ii) Liquidity position of the firm:Suppliers naturally look at the ability of the firm to meet its obligation
in the short run. Such ability is usually measured by the current ratio and the
acid test ratio.
(iii)

Record of PaymentIf the firm has been prompt and regular in paying the bulk of the

suppliers in the past, it is deemed to be creditworthy.

INVENTORY MANAGEMENT
Managing inventory is a juggling act. Excessive stocks can place a heavy
burden on the cash resources of a business. Insufficient stocks can result in lost
sales, delays for customers etc.
The key is to know how quickly your overall stock is moving or, put another
way, how long each item of stock sit on shelves before being sold. Obviously,
average stock-holding periods will be influenced by the nature of the business.
For example, a fresh vegetable shop might turn over its entire stock every few
days while a motor factor would be much slower as it may carry a wide range
of rarely-used spare parts in case somebody needs them.
Nowadays, many large manufacturers operate on a Just-In-Time (JIT) basis
whereby all the components to be assembled on a particular today, arrive at the
factory early that morning, no earlier - no later. This helps to minimize
manufacturing costs as JIT stocks take up little space, minimize stock holding
and virtually eliminate the risks of obsolete or damaged stock .Because JIT
manufacturers hold stock for a very short time, they are able to conserve
substantial cash. JIT is a good model to strive for as it embraces all the
principles of prudent stock management.
The key issue for a business is to identify the fast and slow stock movers with
the objectives of establishing optimum stock levels for each category and,
thereby, minimize the cash tied up in stocks.
Factors to be considered when determining optimum stock levels include:

What are the projected sales of each product?

How widely available are raw materials, components etc.?

How long does it take for delivery by suppliers?

Can you remove slow movers from your product range without
compromising best sellers?

Remember that stock sitting on shelves for long periods of time ties up money,
which is not working for you. For better stock control, try the following:

Review the effectiveness of existing purchasing and inventory systems.

Know the stock turn for all major items of inventory.

Apply tight controls to the significant few items and simplify controls
for the trivial many.

Sell off outdated or slow moving merchandise - it gets more difficult to


sell the longer you keep it.

Consider having part of your product outsourced to another


manufacturer rather than make it yourself.

Review your security procedures to ensure that no stock "is going out the back
door!"
Higher than necessary stock levels tie up cash and cost more in insurance,
accommodation costs and interest charges.

CHAPTER V
DATA
ANALYSIS
AND
INTERPRETATION.

STATEMENT OF CHANGES IN WORKING CAPITAL


(2009 -10)
PARTICULARS

2007 - 08
AMOUNT

2008 - 09
AMOUNT

(Rs.)

(Rs.)

INCREASE DECREASE

CURRENT
ASSETS,LOANS
& ADVANCES
Stock In Trade
Raw Material
WIP
Finished Goods

123,970.50
55,098.00
96421.5

119,520.00
53,120.00
92,960.00

4450.5
1,978.00
3461.5

Sundry Debtors
1,382,137.25 1,774,891.97
Loans
&

392,754.72

39,390.00
226,740.00

Advances
Adv - Employees
Adv - Marshal

193,848.00
233,238.00
944,545.00 1,171,285.00

Engineers
Tax Deducted At

49,032.00

20,530.00

28,502.00

Source
Advance Tax
Fringe Benefit Tax
Fringe Benefit Tax

150,000.00
50,990.00
11,533.23

150,000.00
86,294.00
7,987.00

35,304.00
-

3,546.23

( A.Y. 2009-10 )
MVAT Receivable
Cash In Hand
Bank
Of

410,198.28
5,861.45
-

96,190.28
4,351.45
11,884.00

11,884.00

314,008.00
1,510.00
-

Maharashtra - CA
Total ( A ) : 3,473,635.21 3,822,251.70
CURRENT
LIABILITIES

&

PROVISIONS
Sundry Creditors
1,145,780.56 1,185,182.66
Advances
From
350,000.00
Debtors

39,402.10
350,000.00

Outstanding
Expenses
Light Bill Payable
Telephone

19,860.00
7,650.00

19,860.00
7,650.00

Expenses Payable
A/C Writing

1,500.00

1,500.00

Charges Payable
Salaries & Wages

104,336.00

139,306.00

34,970.00

Payable
EX

Gratia

113,979.00

113,979.00

Tax

34,459.81

48,051.56

13,591.75

Payable
TDS Payable
VAT Audit Duty

22,154.00
16,854.00

16,854.00

22,154.00
-

Payable
Audit Fees Payable
Professional Fees

14,045.00
18,224.00

36,470.00
18,224.00

22,425.00
-

Payable
CST Payable
VAT Payable
Duties & Taxes

10,803.49

2,260.00
44,476.00
-

10,803.49

2,260.00
44,476.00
-

Payable
Service

Total ( B ) : 1,859,645.86 1,492,324.22

Working Capital 1,613,989.35 2,329,927.48


( A- B ) :
Increase In

715,938.13

715,938.13

Working Capital

2,329,927.48 2,329,927.48 1,230,519.21

1,230,519.21

MANUFACTURING & TRADING ACCOUNT


FOR THE YEAR ENDING ON 31/03/2009

PARTIC

For the Year Ended

For the Year Ended

31/03/2009
Amount
Amount

31/03/2008
Amount
Amount

ULARS

(Rs.)

(Rs.)

INCOME
SALES
Sales 12.5%
7,820,919.64
Interstate Sales
1,980,323.98
Labour Charges 2,145,728.00
Received
Round Off

(Rs.)

(Rs.)

8,471,215.13
1,732,192.90
2,737,070.00

10.06 11,946,981.68

33.94

12,940,511.97

123,970.50
55,098.00
96,421.50

275,490.00

CLOSING
STOCK
Raw Material
WIP
Finished Goods
TOTAL A :

119,520.00
53,120.00
92,960.00

265,600.00
12,212,581.68

13,216,001.97

EXPENDITURE
OPENING
STOCK
Raw Material
WIP
Finished Goods

123,970.50
55,098.00
96,421.50

PURCHASES
Raw Material 1,065,738.60
4%
Raw

275,490.00

120,444.80
69,731.20
126,784.00

1,467,777.20

Material

857,877.71

130,017.00

12.5%
Consumable

147,461.00

44,151.70

Stores
Consumable

20,970.98

235,495.68

Stores 4%
Consumable

44,570.88

393,086.40

Stores 12.5%
Oil & Lubricants

194,254.54

66,080.00

12.5%
Ele & Maint. 4%
Ele & Maint.

50,593.35

34,039.00
13,610.00

12.5%
Labour Charges 1,722,151.02

4,103,618.08 1,989,938.92

Paid
DIRECT
EXPENSES
Salary & Wages 1,868,387.00
Octroi Charges
9,662.00
Electrical
77,094.00
Maint.& Repairs
Electricity

1,395,336.00
8,353.00
217,168.00

135,820.00

193,710.00

Factory

7,114.00

Machine

240,820.00

90,097.00

42,286.00

8,627.00

Charges
Expenses
Maintenance
Packing
Forwarding

&

316,960.00

4,374,195.90

Production

105,475.00

Incentives
Transport

80,736.07

108,713.00

Charges
Oil & Lubricants
TOTAL B :
GROSS

4,417.00

2,459,222.07
6,838,330.15
5,374,251.53

2,134,593.00
6,825,748.90
6,390,253.07

PROFIT ( A B)

PROFIT & LOSS ACCOUNT


FOR THE YEAR ENDING ON 31st MARCH, 2009

PARTICULARS

For the Year Ended


31/03/2009
Amount
Amount
(Rs.)

(Rs.)

For the Year Ended


31/03/2008
Amount
Amount
(Rs.)

(Rs.)

INCOME :
GROSS PROFIT

5,374,251.53

6,390,253.07

INDIRECT INCOME

71,467.00

73,817.35

TOTAL A :

5,445,718.53

6,464,070.42

EXPENDITURE :
ADMINISTRATIVE
EXPENSES
Grampanchayat Tax
Repairs & Maint.-

57,274.00

12,204.00
-

Vehicle
Repairs & Maint.-

30,245.00

182,605.00

Maint.

14,500.00

Charges
Workers Insurance
Accounts Writing

15,995.00
18,000.00

7,919.00
19,500.00

Charges
Foreign Expenses
VAT Audit Fees
Audit Fees
25,000.00
Exgratia Paid
Labour
Welfare 135,896.00

937,369.00
16,854.00
14,045.00
80,000.00
175,571.73

Others
Society

Expenses
Legal Fees
Designing Charges
Loss On Sale Of TATA

20,000.00
-

33,300.00
60,105.00

INDIGO 8617
Loss On Sale Of TATA

41,855.00

49,586.00

99,172.00

INDIGO 9860
Key Man Insurance

Employee Provided

60,785.00

67,551.00

84,825.00
52,636.00
31,032.00
23,990.00
7,082.00
13,279.00
14,500.00
23,928.00
75,222.14
44,152.00

54,447.00
33,818.00
35,290.00
43,674.00
16,612.00
67,772.00
132,668.71
783,427.14 95,638.00 2,242,470.44

5,005.95
2,238.00

28,472.91
17,000.00

9,189.00

7,371.00

Fund
( E.P.F.)
General Insurance
Petrol & Diesel
Postage & Telegram
Printing & Stationery
Interest On TDS
Inspection Charges
Professional Fees
Office Expenses
Telephone Expenses
Travelling
&
Conveyance
SELLING
EXPENSES
Discount
Sales
Promotion
Expenses
Entertainment
Expenses
Advertisement

8,050.00

24,482.95

6,000.00

58,843.91

FINANCIAL
EXPENSES
Bank Commission &

10,437.89

37,078.90

Charges
Interest To Others
Interest to Bank

870,290.23

159.00
880,728.12 424,684.96

461,922.86

DEPERCIATION ON
Land & Building
Plant & Machinery
Office Equipment
Vehicles

46503.37
1275070.6
44128.43
425421

76503.37
888763
65466
325774.08

1356506.45

TOTAL B :

1791123.4
3,479,761.61

4,119,743.66

BALANCE SHEET
AS AT 31st MARCH, 2009

PARTICU
LARS
SOURCES

As At 31/03/2009
Amount
Amount
(Rs.)

(Rs.)

As At 31/03/2008
Amount
Amount
(Rs.)

(Rs.)

OF

FUND
PARTNER'S

8,176,936.65

7,625,598.49

6,721,726.86
7,355,998.68
800,000.00

7,521,726.86

CAPITAL
LOANS

&

ADVANCES
Secured Loans
6,471,298.68
Unsecured Loans
884,700.00

15,532,935.33

15,147,325.35

Total:

APPLICATION
OF FUNDS
FIXED ASSETS
Land & Building 2,558,675.20
Plant
& 7,225,400.05
Machinery

1,984,399.20
7,891,707.65

Office
Equipment
Vehicles

228,147.60

173,952.15

2,410,717.00 12,422,939.85 2,836,139.00 12,886,198.00

INVESTMENTS
Janseva Bank -

240,640.00

240,640.00

Shares
Vishveshwar

7,500.00

7,500.00

Shares
Janseva Bank -

92,511.00

309,898.00

RD
Rupee Bank

89,100.00

89,100.00

Shares
Janseva Bank -

350,317.00

Sah.

Bank

780,068.00

FD
CURRENT
ASSETS
LOANS

&

ADVANCES
Stock In Trade
Raw Material
WIP
Finished Goods

119,520.00
53,120.00
92,960.00

123,970.50
55,098.00
96421.5

Sundry Debtors 1,774,891.97


Loans
&

1,382,137.25

Advances
Adv

233,238.00

193,848.00

Employees
Adv - Marshal 1,171,285.00

944,545.00

Engineers
Tax Deducted At

20,530.00

49,032.00

Source
Advance Tax
Fringe Benefit

150,000.00
86,294.00

150,000.00
50,990.00

Tax
Fringe Benefit

7,987.00

11,533.23

Tax

647,138.00

(A.Y. 2009-10)
MVAT

96,190.28

410,198.28

Receivable
Cash In Hand
Bank
Of

4,351.45
11,884.00

5,861.45
-

Maharashtra

3,822,251.70

3,473,635.21

CA
LESS:CURRENT
LIABILITIES &
PROVISIONS
Sundry Creditors
Advances From

1,185,182.66
-

1,145,780.56
350,000.00

Debtors
Outstanding
Expenses
Light

Bill

19,860.00

Payable
Telephone

7,650.00

Expenses Payable
A/C Writing

1,500.00

1,500.00

Charges Payable
Salaries &

139,306.00

104,336.00

Wages Payable
EX - Gratia

113,979.00

Payable
Service Tax

48,051.56

34,459.81

Payable
TDS Payable
VAT Audit Duty

16,854.00

22,154.00
16,854.00

Payable
Audit

Fees

36,470.00

14,045.00

Payable
Professional

18,224.00

18,224.00

Fees Payable
CST Payable
VAT Payable
Duties & Taxes

2,260.00
44,476.00
-

10,803.49

307,141.56

363,865.30

NET CURRENT

2,329,927.48

1,613,989.35

15,532,935.33

15,147,325.35

ASSETS

Total:

CHAPTER VI
FINDINGS,

SUGGESTIONS,
AND
CONCLUSION

FINDINGS
.
1) Standard current ratio is 2:1 and for industry it is 2.56.in this year. This shows that
privi organics ltd. companys ratios are satisfactory.
2) Liquid ratio is more than one so, it is satisfactory.
3) As there are more number of debtors the average collection period of debtors also
increased. The decrease in the debtor turnover ratio shows that there are more
receivables from debtors. Because of the recession, it is very difficult for a company
to collect the debtors hence; there is less recovery from debtors.
4) Inventory turnover ratio is improving from 2006-07 to 2008-09,which means
inventory is used in a better way so it is good for the company.& Inventory holding
period is decreasing year after year which is a good indicator of business.
5) Fixed assets turnover ratio is decreasing year after year. In the year 2008-09 ratios
indicate that, the sales has decreased and fixed assets were increased. So it indicates
that the fixed assets are not turned over in the form of sales most of the times. If we
exclude vehicles from the fixed assets then the fixed assets turnover ratio is 1.19.
(11946981.68 / 10012222.85)
6) In the year 2008-09 Creditors turnover ratio was 3.52.It shows that there are more
payables as compared to previous year. Because of recession company paid to their
creditors late which resulted in the extension of the credit period permitted to them.
7) In the calculation of the net operating cycle it has been seen that the company has
negative net operating cycle which shows the company is getting more credit period
and they are making business with others money. It shows that company has good
reputation in the market.

SUGGESTIONS
Suggestions can be used by a firm for the betterment after study and analysis of
project report on working capital management. I would like to suggest:1) It can be said that the overall financial position of the company is sound but it is
required to improve from the point of view of profitability
2) Company should minimize their long-term debts.
3) Company should minimize their expenses.
4) Company should have proper policy for salary increment & labour welfare policy.
5) Company should minimize their inventory holding period.
6) Company should increase their sales.
7) Company should raise funds through short term sources for short term requirement
of funds, which is comparatively economical as compared to the long term funds.
8) Company should work on the negative working capital because it will affect the
companys reputation in the long term, by paying off their creditors dues in the given
period of time i.e. the credit period. Company should plan for the cash purchases &
take a cash discount & bring down the cost & make profit and also plan for the
repayment of loan.

CONCLUSION

The title of the project is Working Capital Management which is carried out
in Privi Organics Pvt. Ltd. The objectives of the project were primary and secondary
i.e. to analyze the financial statement of the company through ratio of the company, to
find out the working Capital of the company, the net operating cycle of the company.
In this study an attempt is made to provide an idea about the way in which a decision
can be taken to decide in the field of finance for better progress.
There is a negative operating cycle in the company which means that they are
doing business with others money. The working capital management of the Company
is being effectively done as they have a proper management and control over the
WCM.

BIBLIOGRAPHY
1) Principles Of Financial Management :Satish M. Inamdar: Everest
Publishing House, Pune.Third Edition 2006.
2) Annual reports of Privi Organics Pvt. Ltd.
3) Financial Management:-I.M.PANDEY:-Vikas Publishing House
Pvt.Ltd.

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