Cash Management On Parle Products PVT LTD
Cash Management On Parle Products PVT LTD
Cash Management On Parle Products PVT LTD
ON
CASH MANAGEMENT WITH REFERENCE TO PARLE PRODUCTS
PVT LIMITED
(University Logo)
SUBMITTED BY
(VIDYA SHREE.P)
(2021-22)
SUBMITTED TO
(UNIVERSITY NAME AND ADDRESS IN CAPITAL LETERS)
1
CERTIFICATE
Place: ____________
2
ACKNOWLEDGEMENT
My debts are many and I acknowledge them with much pride and delight. This project Report
was undertaken for the fulfilment of MBA Programme pursuing at (BANGALORE
UNIVERSITY) I would like to thank my institute and PARLE PRODUCTS PVT
LIMITED which has provided me the opportunity for doing this project work.
I am extremely great full to (________________Guide Name)
(__________________________Designation and College/institute name), for his invaluable
help and guidance throughout my work. He kindly evinced keen interest in my work and
furnished some useful comments, which could enrich the work substantially.
In fact it is very difficult to acknowledge all the names and nature of help and encouragement
provided by them. I would never forget the help and support extended directly or indirectly
to me by all.
(_________FULL NAME)
3
STUDENT DECLARATION
PLACE: (NAME)
DATE:
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TABLE OF CONTENTS
S. No. CHAPTER TITLE PAGE NO.
4. REVIEW OF LITERATURE 25
5. RESEARCH METHODOLOGY 50
8. CONCLUSION 64
9. RECOMMENDATION 65
BIBLIOGRAPHY 66
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CHAPTER NO. 1
INTRODUCTION OF THE PROJECT
This project is based on the study of cash management analysis. “The corporate process of
collecting, managing and (short-term) investing cash. A key component of ensuring a
company’s financial stability and solvency. Frequently, corporate treasurers or a business
manager is responsible for overall cash management.” Without a cash management system or
at least closely monitoring cash, a business can become non-solvent very quickly because
they do not have available cash for regular or unforeseen expenses.
Cash management is very important because it allows businesses to be solvent enough to
keep the company in business even during slow activity or economic downturns. The largest
goal of good cash management systems is to reduce or eliminate any surprises when meeting
cash requirements. Good cash management influences the efficiency of operations and
reduces overall cost of doing business.
The project titled is “A study of cash management analysis with reference to Parle P”. Is
being conducted to identify and analysis cash management analysis of Parle Products Pvt Ltd.
This project report begins with a brief overview of the product category being dealt with
mainly all categories. It also dwells briefly on the history of the company and its current
position and activities.
INTRODUCTION OF THE PROJECT
Cash is the important current asset for the operations of the business. 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 or product manufactured by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firm’s profitability. Thus, a major function of the financial manager is
to maintain a sound cash position. Cash is the money which a firm can disburse immediately
without any restriction. The term cash includes coins, currency and cheques held by the firm,
and balances in its bank accounts. Sometimes near-cash items, such as marketable securities
or bank time’s deposits, are also included in cash. The basic characteristic of near-cash assets
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is that they can readily be converted into cash. Generally, when a firm has excess cash, it
invests it in marketable securities.
According to J. M. Keyens:
“It is the cash which keeps a business going. Hence every enterprise has hold necessary cash
for its existence”. In a business firm, ultimately, a transaction results in either an inflow or an
outflow of cash. In an efficiently managed business, static cash balance situation generally
does not less. Cash shortage will disrupt the firm’s manufacturing operation, while excessive
cash will simply remain idle, without contributing anything towards the firm’s profitability.
Therefore, for its smooth running and maximum profitability proper and effective cash
management in a business is of paramount importance.
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disbursements, establishing effective billing and collection measures, and adhering to
budgetary restrictions.
KEY TAKEAWAYS
Cash management is the process of managing cash inflows and outflows.
There are many cash management considerations and solutions available in the
financial marketplace for both individuals and businesses.
For businesses, the cash flow statement is a central component of cash flow
management.
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The cash flow statement is broken down into three parts: operating, investing, and financing.
The operating portion of cash activities will vary based heavily on net working capital which
is reported on the cash flow statement as a company’s current assets minus current liabilities.
The other two sections of the cash flow statement are somewhat straighter forward with cash
inflows and outflows pertaining to investing and financing.
INTERNAL CONTROLS
There are many internal controls used to manage and ensure efficient business cash flows.
Some of a company’s top cash flow considerations include the average length of account
receivables, collection processes, write-offs for uncollected receivables, liquidity and rates of
return on cash equivalent investments, credit line management, and available operating cash
levels. In general, cash flows pertaining to operating activities will be heavily focused on
working capital which is impacted by accounts receivable and accounts payable changes.
Investing and financing cash flows are usually extraordinary cash events that involve special
procedures for funds.
WORKING CAPITAL
A company’s working capital is the result of its current assets minus current liabilities.
Working capital balances are an important part of cash flow management because they show
the amount of current assets a company has to cover its current liabilities. Companies strive
to have current asset balances that exceed current liability balances. If current liabilities
exceed current assets a company would likely need to access its reserve lines for payables. In
general working capital includes the following:
Current assets: cash, accounts receivable within one year, inventory.
Current liabilities: all accounts payable due within one year, short-term debt payments
due within one year.
Current assets minus current liabilities results in working capital. On the cash flow statement,
companies usually report the change in working capital from one reporting period to the next
within the operating section of the cash flow statement. If net change in working capital is
positive a company has increased its current assets available to cover current liabilities which
increases total cash on the bottom line. If a net change in working capital is negative, a
company has increased its current liabilities which reduces its ability to pay them as
efficiently. A negative net change in working capital reduces the total cash on the bottom
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line. There are several things a company can do to improve both receivables and payables
efficiency, ultimately leading to higher working capital and better operating cash flow.
Companies operating with invoice billing can reduce the day’s payable or offer discounts for
quick payments. They may also choose to use technologies that facilitate faster and easier
payments such as automated billing and electronic payments. Advanced technology for
payables management can also be helpful. Companies may choose to make automated bill
payments or use direct payroll deposits to help improve payables cost efficiency.
Cash management attempts, among other things, to decrease the length and impact of these
"float" periods. A collection receipt point closer to the customer-;perhaps with an outside
third-party vendor to receive, process, and deposit the payment (check)-;is one way to speed
up the collection. The effectiveness of this method depends on the location of the customer;
the size and schedule of its payments; the firm's method of collecting payments; the costs of
processing payments; the time delays involved for mail, processing, and banking; and the
prevailing interest rate that can be earned on excess funds. The most important element in
ensuring good cash flow from customers, however, is establishing strong billing and
collection practices. Once the money has been collected, most firms then proceed to
concentrate the cash into one center. The rationale for such a move is to have complete
control of the cash and to provide greater investment opportunities with larger sums of money
available as surplus. There are numerous mechanisms that can be employed to concentrate
the cash, such as wire transfers, automated clearinghouse (ACH) transfers, and checks. The
tradeoff is between cost and time. Another aspect of cash management is knowing a
company's optimal cash balance. There are a number of methods that try to determine this
magical cash balance, which is the precise amount needed to minimize costs yet provide
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adequate liquidity to ensure bills are paid on time. One of the first steps in managing the cash
balance is measuring liquidity, or the amount of money on hand to meet current obligations.
There are numerous ways to measure this, including: the Cash to Total Assets ratio, the
Current ratio, the Quick ratio and the Net Liquid Balance.
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CHAPTER NO. 2
OBJECTIVES OF THE STUDY
To evaluate how cash is being managed.
To gain knowledge about the system prevailing in Parle Products Pvt Ltd.
To suggest methods for improving cash management in Parle Products Pvt Ltd.
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CHAPTER NO. 3
INDUSTRY AND COMPANY PROFILE
FMCG INDUSTRY IN INDIA
Introduction
Fast-moving consumer goods (FMCG) sector is India’s fourth largest sector with household
and personal care accounting for 50% of FMCG sales in India. Growing awareness, easier
access and changing lifestyles have been the key growth drivers for the sector. The urban
segment (accounts for a revenue share of around 55%) is the largest contributor to the overall
revenue generated by the FMCG sector in India. However, in the last few years, the FMCG
market has grown at a faster pace in rural India compared to urban India. Semi-urban and
rural segments are growing at a rapid pace and FMCG products account for 50% of the total
rural spending.
Market Size
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The retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion
in 2017, with modern trade expected to grow at 20-25% per annum, which is likely to boost
revenue of FMCG companies. Revenue of FMCG sector reached Rs 3.4 lakh crore (US$
52.75 billion) in FY18 and is estimated to reach US$ 103.7 billion in 2020. FMCG market is
expected to grow at 9–10% in 2020.
Rise in rural consumption will drive the FMCG market. It contributes around 36% to the
overall FMCG spending. FMCG urban segment witnessed growth rate of 8%, whereas, rural
segment grew at 5% in the quarter ended September 2019.
Investments/ Developments
The Government has allowed 100% Foreign Direct Investment (FDI) in food processing and
single-brand retail and 51% in multi-brand retail. This would bolster employment, supply
chain and high visibility for FMCG brands across organised retail markets thereby bolstering
consumer spending and encouraging more product launches. The sector witnessed healthy
FDI inflow of US$ 16.28 billion during April 2000–March 2020.
Some of the recent developments in the FMCG sector are as follows:
In September 2020, Orkla, a Norway based consumer goods company acquired 68%
stake in eastern Condiment
In May 2020, Tata Consumer Products Limited (TCPL) acquired PepsiCo’s stake in
NourishCo Beverages Limited.
In March 2020, Hindustan Unilever Limited (HUL) signed an agreement with
Glenmark Pharmaceuticals Ltd to acquire its intimate hygiene brand VWash.
In March 2020, Venture Catalysts made an investment in OM Bhakti, an organised
brand in the puja cotton-wicks market during its seed-funding round.
In November 2019, ITC Ltd acquired 33.42% stake in Delectable Technologies,
which is a vending machine start-up.
Nestle plans to invest Rs 700 crore (US$ 100.16 million) to open a new plant in
Sanand for Maggi.
ITC to invest Rs 700 crore (US$ 100 million) in food park in Madhya Pradesh.
Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya
Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.
Government Initiatives
Some of the major initiatives taken by the Government to promote the FMCG sector in India
are as follows:
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The Government of India has approved 100% FDI in the cash and carry segment and
in single-brand retail along with 51% FDI in multi-brand retail.
The Government has drafted a new Consumer Protection Bill with special emphasis
on setting up an extensive mechanism to ensure simple, speedy, accessible, affordable
and timely delivery of justice to consumers.
The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of
the FMCG products such as soap, toothpaste and hair oil now come under the 18% tax
bracket against the previous rate of 23–24%. Also, GST on food products and hygiene
products have been reduced to 0–5% and 12–18% respectively.
GST is expected to transform logistics in the FMCG sector into a modern and
efficient model as all major corporations are remodelling their operations into larger
logistics and warehousing.
COMPANY PROFILE
Since 1929, we have grown to become India's leading manufacturer of biscuits and
confectionery.
As the makers of the world's largest selling biscuit, Parle-G, and a host of other very popular
brands, the Parle name symbolizes quality, nutrition and superior taste.
An in-depth understanding of the Indian consumer psyche has helped us develop a marketing
philosophy that reflects the needs of the Indian masses. We have made it a tradition to deliver
both health and taste, with a value-for-money positioning that allows people from all classes
and age groups to enjoy Parle products to the fullest.
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With a reach spanning the remotest villages of India and major cities across the world, the
House of Parle has become synonymous with trust, globally.
1928-30
Mr. Mohanlal Dayal founded the House of Parle in 1928
Our first factory was set up in 1929 with just 12 people making confectionery.
Parle Products Pvt. Ltd. engages in the manufacture and marketing of biscuits and
confectionaries. It offers glucose, milk, sweet and salted cream, wafer crème, cumin seed,
and cheese biscuits; chocolate, mint, cola, and tropical fruit flavored toffees and candies; and
snacks. The company offers its products in India, the Middle East, Africa, South East Asia,
the United States, the United Kingdom, Canada, Australia, and New Zealand. Parle Products
Pvt. Ltd. was founded in 1929 and is based in Mumbai, India.
Parle Products Ltd. entered the snack market with the launch of Musst Chips and Musst Stix
in Maharashtra. It is selling these two new products at price points of INR 10 and INR 5 but
giving more quantity as compared to competition. The company has set up a unit in Nashik
for manufacturing the new brands. It intends to promote these two products by extending its
distribution network.
Parle Products Private Limited announced that it has launched new product-Parle 20-20.
Parle's new 20-20 cookies promised to be a combination of crunch and scrumptious delicacy.
This summer experience the richness in taste with Parle's brand new 20-20 cookies. Each
biscuit is baked to perfection and comes in two variants-Butter & Cashew Butter. Consumers
especially the young adults are looking for a tastier and crunchier variety of cookies than ever
before. Parle 20-20 cookies are aimed towards young adults-the 'now' generation. This is the
generation that wants to live right now, and is in a hurry to cram a medley of experiences into
life. The now mantra of the day is 'instant gratification' which 20-20 delivers without
compensating on quality or taste.
Parle Ltd. has decided to unveil butter and cashew cookies under the 20:20 brand. The new
20:20 brand would have the baseline Choice of Champions.
PARLE PRODUCTS
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FUN CENTRE MANGO BITE
JEFFS MAGIX
MONACO ROL-A-COLA
Parle-G TOFFES
Parle Products
Biscuit Goodies:
Parle-G Hide & Seek
Kackjack Hide & Seek Milano
Magix Digestive Marie
Monaco Parle Marie
Kreams Milk Shakti
Parle 20-20 cookies Goldenarcs
Nimkin Kreams Gold
Chox Monaco Jeera
Sweats :
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Melody Kismi Gold
Mango Bite Orange Candy
Kaccha Mango Xhale
Poppins 2 in 1 Éclair
Kismi Toffee Golgappa
Kisme Toffee Bar Melody Softee
Mazelo Pale Lites
Snacks :
Musst Bites Jeffs
Cheeslings Musst stix & Musst Chips
Sixer Sixer Zeera
QUALITY OF PARLE
Parle Quality:- Hygiene is the precursor to every process at Parle. o husking the wheat and
melting the sugar to delivering the final products to the supermarkets and store shelves
nationwide, care is taken at every step to ensure the best product of long-lasting freshness.
Every batch of biscuits and confectioneries are thoroughly checked by expert staff, using the
most modern equipment hence ensuring the same perfect quality across the nation and
abroad.
Concentrating on consumer tastes and preferences, the Parle brand has grown from strength
to strength ever since its inception. The factories at Bahadurgarh in Haryana and Neemrana in
Rajasthan are the largest biscuit and confectionery plants in the country. The factory in
Mumbai was the first to be set up, followed soon by the one in Bangalore, Karnataka. Parle
Products also has 14 manufacturing units for biscuits and 5 manufacturing units for
confectioneries, on contract.
Quality Commitment:- Parle Products has one factory at Mumbai that manufactures biscuits
& confectioneries while another factory at Bahadurgarh, in Haryana manufactures biscuits.
Apart from this, Parle has manufacturing facilities at Neemrana, in Rajasthan and at
Bangalore in Karnataka. The factories at Bahadurgarh and Neemrana are the largest such
manufacturing facilities in India. Parle Products also has 14 manufacturing units for biscuits
& 5 manufacturing units for confectioneries, on contract.
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All these factories are located at strategic locations, so as to ensure a constant output & easy
distribution. Each factory has state-of-the-art machinery with automatic printing & packaging
facilities.
All Parle products are manufactured under the most hygienic conditions. Great care is
exercised in the selection & quality control of raw materials; packaging materials & rigid
quality standards are ensured at every stage of the manufacturing process. Every batch of
biscuits & confectioneries are thoroughly checked by expert staff, using the most modern
equipment.
MARKETING DEPARTMENT
The extensive distribution network, built over the years, is a major strength for Parle
Products. Parle biscuits & sweets are available to consumers, even in the most remote places
and in the smallest of villages with a population of just 500. Parle has nearly 1,500
wholesalers, catering to 4,25,000 retail outlets directly or indirectly. A two hundred strong
dedicated field force services these wholesalers & retailers. Additionally, there are 31 depots
and C&F agents supplying goods to the wide distribution network. The Parle marketing
philosophy emphasizes catering to the masses. They constantly endeavor at designing
products that provide nutrition & fun to the common man. Most Parle offerings are in the
low & mid-range price segments. This is based on their understanding of the Indian
consumer psyche. The value-for-money positioning helps generate large sales volumes for
the products.
However, Parle Products also manufactures a variety of premium products for the up-market,
urban consumers. And in this way, caters a range of products to a variety of consumers.
Parle’s Core Value:- An in-depth understanding of the Indian consumer psyche has helped
Parle evolve a marketing philosophy that reflects the needs of the Indian masses. With
products designed keeping both health and taste in mind, Parle appeals to both health
conscious mothers and fun loving kids. The great tradition of taste and nutrition is consistent
in every pack on the store shelves, even today. The value-for-money positioning allows
people from all classes and age groups to enjoy Parle products to the fullest.
The Customer Confidence:- The Parle name conjures up fond memories across the length
and breadth of the country. After all, since 1929, the people of India have been growing up on
Parle biscuits & sweets.
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Today, the Parle brands have found their way into the hearts and homes of people all over
India & abroad. Parle Biscuits and confectioneries, continue to spread happiness & joy
among people of all ages.
The consumer is the focus of all activities at Parle. Maximizing value to consumers and
forging enduring customer relationships are the core endeavors at Parle.
Their efforts are driven towards maximizing customer satisfaction and this is in synergy with
their quality pledge. " Parle Products Limited will strive to provide consistently nutritious &
quality food products to meet consumers' satisfaction by using quality materials and by
adopting appropriate processes. To facilitate the above we will strive to continuously train
our employees and to provide them an open and participative environment."
Parle Products with its wide platter of offering of biscuits and sweets like Parle-G, Krackjack,
Monaco, Melody, Mango bite and many others since 1929 is also actively engaged to change
& uplift the social face of India. As a part of Corporate Social Responsibility Policy Parle is
keenly involved in the overall development of younger generation with focused endeavor to
built New Face of India and spread happiness & joy all over.
Parle Centre of Excellence as an institution is dedicated to enrich the lives of people through
conducting various cultural programs across all region to facilitate the all round development
of the children. Every year, Parle organises Saraswati Vandana in the state of West Bengal
during the festival of Saraswati Puja, inviting schools from all across the state to participate.
The event is one of much fanfare and celebration, keeping alive the culture and traditions of
ages. Our involvement in cultural activities has seen the inception of Golu Galata in Tamil
Nadu, held during Navratri. Its gives a platform to all the members of a household to
showcase their creativity and being judged by immanent personalities. Thousands of families
participate and celebrate the occasion on a grand scale.
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These events give us a chance to interact with children on a one-to-one basis, and promote
our belief of fun and health for the whole family.
Parle Awards:-
Parle products have been shining with the golds and silvers consistently at the Monde
Selection ever since they were first entered in 1971. Monde Selection is an international
institute for assessing the quality of foods and is currently the oldest and most representative
organization in the field of selecting quality foods worldwide.
Parle Products Pvt. Ltd. Is a US $ 450 million conglomerate started in India in 1929. We are
in the business of manufacturing and marketing biscuits and confectionaries.
We have State-of-the-art machinery with automatic printing and packaging facilities. Our
biscuit baking oven is the largest of its type in Asia.
Over the decades the efforts of our Research & Development wing have made the repertoire
of our products grow manifold. In biscuits we have Glucose, Milk, sweet and salted cream,
wafer crème, cumin seed and cheese categories.
In confectionery, we have a range of toffees and hard-boiled candies available in chocolate,
mint, cola, and tropical fruit flavors. Some of these are double layered toffees and center
filled candies packed in rolls or pillow packs, or have single or double twist wrapping.
Almost all of our products are market leaders in their category and as recognition of their
quality, have won Gold, Silver and Bronze Monde Selection medals since 1971.
Parle enjoys a 40% share of the total biscuit market and a 15% share of the total
confectionary market, in India.
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CHAPTER NO. 4
REVIEW OF LITERATURE
The Transaction Motives:
The transaction motive requires a firm hold cash to conduct its business in the ordinary
course. The firms need cash primarily to make payment for purchases, wages, operating
expenses, taxes, dividends etc. A firm needs a pool of cash because its receipts and payments
are not perfectly synchronized. A pool of cash is also known as ‘transaction balance’. A cash
budget is often used to decide what the transaction balance should be.
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The philosophy of management regarding liquidity and risk of insolvency. All these factors,
analyses together, will determine the appropriate level of the transactions and precautionary
balances.
Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business regarding expected
cash problems, which it may encounter, thus assisting it to regulate further cash flow
movements. Lack of cash planning results in spasmodic cash flows.
Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If one does the
autopsies of the businesses that failed, he would find that the major reason for the failure was
their inability to remain liquid. Liquidity has an intimate relationship with efficient utilisation
of cash. It helps in the attainment of optimum level of liquidity.
Economical Borrowings
Another product of non-synchronization of cash inflows and cash outflows is emergence of
deficits at various points of time. A business has to raise funds to the extent and for the period
of deficits. Raising of funds at minimum cost is one of the important facets of cash
management. The ideal cash management system will depend on the firm’s products,
organization structure, competition, culture and options available. The task is complex, and
decisions taken can affect important areas of the firm. For example, to improve collections if
the credit period is reduced, it may affect sales. However, in certain cases, even without
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fundamental changes, it is possible to significantly reduce cost of cash management system
by choosing a right bank and controlling the collections properly.
Cash planning
Cash planning can help anticipate future cash flows and needs of the firm and reduces the
possibility of idle cash balances and cash deficits. Cash planning is a technique for planning
and controlling the use of cash. Cash plans are very crucial in developing the overall
operating plans of the firm. Cash planning may be done on daily, weekly or monthly basis.
The period and frequency of cash planning generally depends upon the size of the firm and
philosophy of management. Cash budget should be prepared for this proposes.
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Developing credit policies
Checking the accuracy of long –term forecasts.
Long-term cash forecasts are generally prepared for a period ranging from 2 to 5 years and
serve to provide a rough picture of firm’s financing needs and availability of investable
surplus in future. Long-term cash forecasts are helpful in:
Planning the outlays on capital expenditure projects
Planning the rising of long-term funds.
Managing the cash flows:
The twin objectives in managing the cash flows are: cash inflows and cash outflows. The
inflows of cash should be accelerated while, as far as possible, the out flow of the cash should
be decelerated. A firm can conserve cash and reduce its requirements for cash balances, if it
can speed up its cash collections. Cash collections can be accelerated by reducing the lay or
gap between the time a customer pays his bills and the time the cheque is collected and funds
become available for the firms use.
Within this time gap, the delay is caused by the mailing time, e.g., the time taken by cheque
in transit and the processing time, e.g., the time taken by the firm processing cheque for
internal accounting purpose. The amount of cheques sent by customers but not yet collected
is called deposit floats. The greater will be the firm’s deposit float, the longer the time taken
in converting cheques into usable funds. In India, these floats can assume sizeable
proportions, as cheques normally take a longer time to go realised, than in most countries. An
efficient financial manager will attempt to reduce the firm’s deposits float by speeding up the
mailing, processing and collections time. There are mainly two techniques which can be used
to save mailing and processing times decentralized collections and lock box system. In
decentralisation collection system affirm sets up collection centers in various marketing
centers of the country instead of a single collection center.
The customers are instructed to remit their payments to the collection center of their region.
The collection center deposits the cheques in the local bank. These cheques are collected
quickly because many of them originate in the very city in which the bank is located. Surplus
money of the local bank can then be transferred to the company’s main bank. Another
technique of speeding up mailing processing and collection times is ‘Lock Box System’. In
this system, the local post office box is rented by the company in a city and customers of the
nearby area are asked to send their remittances to it. Local bank is authorised to pick up
remittances from the box and deposit them in the account of the company, ultimately to be
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transferred to the central bank account of the company. It may be concluded that the major
advantage of accelerating collections is to reduce the firm’s total financing requirements.
Determining the optimum cash balance:
One of the primary responsibilities of the 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 firm’s obligations when they become due. Thus, cash balance
is maintained for day to day transactions and an additional amount may be maintained as a
buffer or safety stock. The financial manager should determine the appropriate amount of
cash balance. Such a decision is influenced by a tradeoff between risk and return. If the firm
maintains a small cash balance, its liquidity position becomes week and suffers from a
paucity of cash to make payments. But at the same time a higher profitability can be attained
by investing runs out of cash it may have sell its marketable securities, released funds in
some profitable opportunities.
When the firm runs out of cash it may have to sell its marketable securities, if available, or
borrow. This involves transaction costs. On the other hand, if the firm maintains cash balance
at a high level, it will have a sound liquidity position but forgo the opportunities to earn
interest. The potential interest lost on holding large cash balance involves an opportunity cost
to the firm. Thus, the firm should maintain an optimum cash balance, neither a small nor a
large cash balance. To find out the optimum cash balance, the transaction costs and risk of
too small a balance should be matched with the opportunity costs of too large a balance. But
the opportunity costs would increase. At point x the sum of the two costs is minimum. This is
the point of optimum cash balance which a firm should seek to achieve.
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It highlights the movements in the working capital items, and thus helps to keep a
control on s firm’s working capital.
It fails to trace cash flows, and therefore, its utility in controlling daily cash operations
is limited.
LONG-TERM CASH FORECASTING
Long-term cash forecasts are prepared to give an idea of the company’s financial
requirements in the distant future. They are not as detailed as the short-term forecasts are.
Once a company has developed long-term cash forecast, it can be used to evaluate the impact
of, say, new product developments or plant acquisitions on the firm’s financial condition
three, five, or more years in the future. The major uses of the long-term cash forecasts are:
It indicates as company’s future financial needs, especially for its working capital
requirements.
It helps to evaluate proposed capital projects. It pinpoints the cash required to finance
these projects as well as the cash to be generated by the company to support them.
It helps to improve corporate planning. Long-term cash forecasts compel each
division to plan for future and to formulate projects carefully.
Long-term cash forecasts may be made for two, three or five years. As with the short-term
forecasts, company’s practices may differ on the duration of long-term forecasts to suit their
particular needs. The short-term forecasting methods, i.e., the receipts and disbursements
method and the adjusted net income method, can also be used in long-term cash forecasting.
Long-term cash forecasting reflects the impact of growth, expansion or acquisitions; it also
indicates financing problems arising from these developments.
DETERMINING THE OPTIMUM CASH BALANCE
One of the primary responsibilities of the financial manager is to maintain a sound liquidity
position of the firm so that the dues are settled in time. The firm needs cash to purchase raw
materials and pay wages and other expenses as well as for paying dividend, interest and
taxes. The test of liquidity is the availability of cash to meet the firm’s obligations when they
become due. A firm maintains the operating cash balance for transaction purposes. It may
also carry additional cash as a buffer or safety stock. The amount of cash balance will depend
on the risk-return trade-off.
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FEATURES OF INSTRUMENTS OF COLLECTION IN INDIA
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The firm is able to forecast its cash needs with certainty.
The firm’s cash payments occur uniformly over a period of time.
Baumol’s model for cash balance
Cash balance
C
C/2
Average
Time
0 T1 T2 T3
The firm incurs a holding cost for keeping the cash balance. It is an opportunity cost; that is,
the return foregone on the marketable securities. If the opportunity cost is k, then the firm’s
holding cost for maintaining an average cash balance is as follows:
Holding cost = k(C/2) (1)
The firm incurs a transaction cost whenever it converts its marketable securities to cash. Total
number of transactions during the year will be total funds requirement, T, divided by the cash
balance, C, i.e. T/C. The per transaction cost is assumed to be constant. If per transaction cost
is c, then the total transaction cost will be:
40
Cost trade-off: Baumol’s model
Cost
Total cost
Holding cost
Transaction cost
Cash balance
41
OPTIMUM CASH BALANCE UNDER UNCERTAINTY:
THE MILLER-ORR MODEL
The limitation of the Baumol model is that it does not allow the cash flows to fluctuate. Firms
in practice do not use their cash balance uniformly nor are they able to predict daily cash
inflows and outflows. The Miller-Orr (MO) model overcomes this shortcoming and allows
for daily cash flow variation. It assumes that net cash flows are normally distributed with a
zero value of mean and standard deviation. The MO model provides for two control limits—
the upper control limit and the lower control limit as well as a return point. If the firm’s cash
flows fluctuate randomly and hit the upper limit, then it buys sufficient marketable securities
to come back to a normal level of cash balance (the return point). Similarly, when the firm’s
cash flows wander and hit the lower limit, it sells sufficient marketable securities to bring the
cash balance back to the normal level (the return point).
Miller- Orr model
Cash balance
Upper limit
Purchase of securities
Return point
Sale of securities
Lower point
Time
The firm sets the lower control limit as per its requirement of maintaining minimum cash
balance. At what distance the upper control limit will be set? The difference between the
upper limit and the lower limit depends on the following factors:
The transaction cost (c)
42
The interest rate, (i)
The standard deviation of net cash flows.
The formula for determining the distance between upper and lower control limits (called Z) is
as follows:
(Upper Limit—Lower Limit) =
(3/4 * transaction cost * cash flow variation/ interest per day)⅓ (5)
We can notice from equation (5) that the upper and lower limit will be far off from each other
(i.e. Z will be larger) if transaction cost is higher or cash flows show greater fluctuations. The
limits will come closer as the interest increases. Z is inversely related to the interest rate. It is
noticeable that the upper limit is three times above the lower control limit and the return point
lies between the upper and the lower limit. Thus,
Upper Limit = Lower Limit + 3Z (6)
Return point = Lower Limit + Z (7)
The net effect is that the firms hold the average cash balance equal to:
Average Cash Balance = Lower Limit +4/3 Z
The MO model is more realistic since it allows variation in cash balance within lower and
upper limits. The financial manager can set the lower limit according to the firm’s liquidity
requirement. The past data of the cash flow behavior can be used to determine the standard
deviation of net cash flows. Once the upper and lower limits are set, managerial attention is
needed only if the cash balance deviates from the limits. The action under these situations are
anticipated and planned in the beginning.
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Wire Transfer:
A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple bank
account transfer, or by a transfer of cash at a cash office. Bank wire transfers are often the
most expedient method for transferring funds between bank accounts. A bank wire transfer is
a message to the receiving bank requesting them to effect payment in accordance with the
instructions given. The message also includes settlement instructions. The actual wire transfer
itself is virtually instantaneous, requiring no longer for transmission than a telephone call.
Controlled Disbursement:
This is another product offered by banks under Cash Management Services. The bank
provides a daily report, typically early in the day, that provides the amount of disbursements
that will be charged to the customer's account. This early knowledge of daily funds
requirement allows the customer to invest any surplus in intraday investment opportunities,
typically money market investments. This is different from delayed disbursements, where
payments are issued through a remote branch of a bank and customer is able to delay the
payment due to increased float time. In the past, other services have been offered the
usefulness of which has diminished with the rise of the Internet. For example, companies
could have daily faxes of their most recent transactions or be sent CD-ROMs of images of
their cashed checks.
PURPOSE OF CASH MANAGEMENT
Cash management is the stewardship or proper use of an entity’s cash resources. It serves as
the means to keep an organization functioning by making the best use of cash or liquid
resources of the organization. The function of cash management at the U.S. Treasury is
threefold:
To eliminate idle cash balances. Every dollar held as cash rather than used to augment
revenues or decrease expenditures represents a lost opportunity. Funds that are not
needed to cover expected transactions can be used to buy back outstanding debt or can
be invested to generate a flow of funds into the Treasury’s account.
To deposit collections timely. Having funds in-hand is better than having accounts
receivable. The cash is easier to convert immediately into value or goods. A
receivable, an item to be converted in the future, often is subject to a transaction delay
or a depreciation of value. Once funds are due to the Government, they should be
converted to cash-in-hand immediately and deposited in the Treasury's account as
soon as possible.
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To properly time disbursements. Some payments must be made on a specified or legal
date, such as Social Security payments. For such payments, there is no cash
management decision. For other payments, such as vendor payments, discretion in
timing is possible. Government vendors face the same cash management needs as the
Government. They want to accelerate collections. One way vendors can do this is to
offer discount terms for timely payment for goods sold.
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CHAPTER NO. 5
RESEARCH METHODOLOGY
Research Design
Research is a systematic process of collecting and analyzing information (data) in order to
increase our understanding of the phenomenon about which we are concerned or interested. A
Research Design is the framework or plan for a study which is used as a guide in collecting
and analyzing the data collected. It is the blue print that is followed in completing the study.
The basic objective of research cannot be attained without a proper research design. It
specifies the methods and procedures for acquiring the information needed to conduct the
research effectively. It is the overall operational pattern of the project that stipulates what
information needs to be collected, from which sources and by what methods.
Primary Sources
These include the Balance sheet and Profit and loss Account method.
Secondary Sources
These include books, the internet, company brochures, the company website, competitor’s
websites etc. newspaper articles etc.
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CHAPTER NO. 6
DATA ANALYSIS AND INTERPRETATION
BALANCE SHEET
Particulars Years
2020 2019 2018
Equity and liabilities
Shareholders’ funds
Share capital 1,039,939,765 1,039,939,765 1,039,939,765
Reserve and surplus 1,289,920,931 1,330,242,671 1,410,215,741
2,329,860,696 2,370,182,436 2,450,155,506
Share application money pending
allotment
Non-current liabilities
Long term borrowing 375,971,569 355,690,357 346,441,847
Deferred tax liabilities (net) - -
Other long term liabilities 218,124,972 32,57,88,979 372,623,974
Long term provisions 27,321,161 25,228,322 26,682,000
621,417,702 706,707,658 747,747,821
Current liabilities
Short term borrowing 368,495,542 300,023,735 304,516,203
Trade payables 1,245,675,628 1,986,490,310 1,967,479,731
Other current liabilities 150,822,775 39,530,439 73,078,406
Short term provisions 134,135,450 136,119,389 116,664,877
1,899,129,395 2,462,163,873 246,17,39,216
Total 4,850,407,793 5,539,053,967 565,96,42,543
Assets
Non-current assets
a) Fixed assets
i) Tangible assets 2,477,506,139 2,314,858,681 2,280,511,429
ii) Intangible assets 4,163,925 5,656,703
iii) Capital work in progress 176,337,360 191,824,040
2,481,670,064 2,496,852,743 2,472,335,469
b) Non-current investments 21,476,940 21,476,940 21,476,940
c) Deferred tax assets (net) 1,78,03,360 36,108,849
d) Long term loans and advances 184,974,747 191,934,988 188,055,228
e) Other non-current assets 66,464,805 281,516,301 422,055,338
2,754,586,556 3,009,584,333 3,140,031,824
Current assets
a) Current investments
b) Inventories 1,087,588,405 1,356,407,164 1,664,150,391
c) Trade receivables 400,497,644 659,223,336 411,433,969
d) Cash and cash equivalents 18,566,728 29,996,457 25,768,781
e) Short term loans and advances 304,298,359 184,714,405 157,518,135
f) Other current assets 28,4,870,101 299,128,273 260,739,443
2,095,821,237 2,529,469,634 2,519,610,720
Total 4,850,407,793 5,539,053,967 5,659,642,543
PROFIT AND LOSS ACCOUNT
50
Sr.
Particulars Years
No.
2020 2019 2018
Income
1 Revenue from operation (gross) 5,734,806,718 6,336,048,456 10,944,649,232
Less:- Excise duty 6,05,143,905 497,174,792 560,098,922
Revenue from operation (net) 512,96,62,813 583,88,73,663 10,384,550,310
2 Other income 52,146,810 104,709,272 99,003,129
3 Total revenue (1+2) 5,181,809,623 5,943,582,936 10,483,553,439
4 Expenditure
a) Cost of materials consumed 3,805,290,777 3,163,101,843 4,434,090,575
b) Purchase of stock in trade 323,565,623 1,770,185,893 5,073,013,743
c) Changes in investments of
finished goods, work in progress -333,578,325 -335,995,134 -589,541,198
and stock in trade
d) Employee benefits expense 178,732,303 213,615,124 207,677,447
e) Finance costs 110,298,251 98,572,432 94,797,735
f) Depreciation and amortization
153,088,368 179,198,892 183,628,723
expense
g) Other expenses 923,639,402 832,308,251 1,017,816,953
Total expenses 5,161,033,399 5,920,987,301 10,421,483,978
Profit/loss before exceptional
5 and extraordinary items and tax 20,776,224 22,595,635 62,069,461
(3-4)
6 Exceptional items
Profit/loss before extraordinary
7 20,776,224 22,595,635 62,069,461
items and tax (5+6)
8 Extraordinary items
9 Profit/loss before tax (7+8) 20,776,224 22,595,635 62,069,461
10 Tax expenses:-
a) Current tax expenses for
current year
b) Less:- MAT credit ( where
applicable)
c) Current tax expense relating
-324,625
to prior years 430,000
d) Net current tax expense 430,000 -324,625
e) Deferred tax 17,803,360 18,305,489
430,000 17,803,360 17,980,864
11 Profit/loss after tax (9+10) 21,206,224 40,398,995 80,050,325
Earning per equity share of face
value of 1/- each
Basic and diluted (in Rs.) 0.05 0.1 0.2
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1. CURRENT RATIO
Formula:-
Current Assets
Current Ratio =
Current Liabilities
Chart:-
Years Current Assets Current Liabilities Total Ratio
2018-19 2,095,821,237 1,899,129,395 1.1
2019-20 2,529,469,634 2,462,163,873 1.03
2020-21 2,519,610,720 2,461,739,216 1.02
Graph:-
Interpretation:-
This graph is shows to current financial position of Parle Products Pvt Ltd on the basis of
current ratio. In 2019 the current ratio is 32 % and 2020 the current ratio is 33% will be
increase with the value of 1 % on previous year. In 2021 the current ratio is 35% will be
increase with the value of 2 % on previous year.
2. QUICK RATIO
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Formula:-
Quick Assets
Quick ratio =
Quick Liabilities
Chart:-
Graph:-
Interpretation:-
This graph is related to quick ratio of Parle Products Pvt Ltd. In 2019 the quick ratio is 25 %
and 2020 the quick ratio is 36 % will be increase with the value of 11 % on previous year. In
2021 the quick ratio 39 % will be increase with the value of 3 % on previous year.
3. DEBT-EQUITY RATIO
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Formula:-
Long term loan
Debt-equity ratio =
Shareholders fund
Chart:-
Graph:-
Interpretation:-
This graph shows debt-equity ratio of Parle Products Pvt Ltd. In 2019 the debt-equity
ratio is 31 % and 2020 the debt-equity ratio is 32 % will be increase with the value of 1 %
on previous year. In 2021 the debt-equity ratio 37 % will be increase with the value of 5
% on previous year.
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Formula:-
Long term debt
Debt to capital employed ratio =
Capital employed (net assets)
Chart:-
Graph:-
Interpretation:-
This graph shows debt to capital employed ratio of Parle Products Pvt Ltd. In 2019 the
debt to capital employed ratio is 45 % and 2020 the debt to capital employed ratio is 40 %
will be decrease with the value of 5 % on previous year. In 2021 the debt to capital
employed ratio 15 % will be decrease with the value of 25 % on previous year.
5. PROPRIETARY RATIO
55
Formula:-
Shareholders’ funds
Proprietary ratio =
Capital employed (net assets)
Chart:-
Years Shareholders’ Funds Net Assets Total Ratio
2018-19 2,329,860,696 196,691,842 11.85
2019-20 2,370,182,436 67,305,761 35.22
2020-21 2,450,155,506 57,871,504 42.34
Graph:-
Interpretation:-
This graph shows proprietary ratio of Parle Products Pvt Ltd. In 2019 the proprietary ratio is
47 % and 2020 the proprietary ratio is 40% will be decrease with the value of 7 % on
previous year. In 2021 the proprietary ratio 13 % will be decrease with the value of 27% on
previous year.
Formula:-
56
Total assets
Total assets to debt ratio =
Long term debts
Chart:-
Years Total Assets Long Term Debtors Total Ratio
2018-19 4,850,407,793 375,971,569 12.9
2019-20 5,539,053,967 355,690,357 15.57
2020-21 5,659,642,543 346,441,847 16.34
Graph:-
Interpretation:-
This graph shows total asset to debt ratio of Parle Products Pvt Ltd. In 2019 the total asset to
debt ratio is 36 % and 2020 the total asset to debt ratio is 35% will be decrease with the value
of 1 % on previous year. In 2021 the total asset to debt ratio 29 % will be decrease with the
value of 6 % on previous year.
Formula:-
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Cost of revenue from operations
Inventory turnover ratio =
Average inventory
Chart:-
Cost of Revenue
Years Average Inventory Total Ratio
From Operation
2018-19 5,734,806,718 400,497,644 14.32
2019-20 6,336,048,456 659,223,336 9.61
2020-21 10,944,649,232 411,433,969 26.6
Graph:-
Interpretation:-
This graph shows inventory turnover ratio of Parle Products Pvt Ltd. In 2015 the inventory
turnover ratio is 53 % and2016 the inventory turnover ratio is 19% will be decrease with the
value of 34 % on previous year. In 2017 the inventory turnover ratio 28 % will be increase
with the value of 9% on previous year.
8. TRADE RECEIVABLES TURNOVER RATIO
Formula:-
58
Net credit revenue from operations
Trade receivable turnover ratio =
Average trade receivable
Chart:-
Net Credit Revenue
Years Average Trade Receivable Total Ratio
From Operations
2018-19 10,384,550,310 411,433,969 25.24
2019-20 5,838,873,663 659,223,336 8.86
2020-21 5,129,662,813 400,497,644 12.81
Graph:-
Interpretation:-
This graph shows trade receivable turnover ratio of Parle Products Pvt Ltd. In 2019 the
trade receivable turnover ratio is 27 % and 2020 the trade receivable turnover ratio is 19%
will be decrease with the value of 28 % on previous year. In 2021 the trade receivable
turnover ratio is 54 % will be increase with the value of 31 % on previous year.
Formula:-
Gross profit
Gross Profit Ratio = X 100
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Net revenue of operations
Chart:-
Net Revenue of
Years Gross Profit Total Ratio
Operation
2018-19 5,734,806,718 5,129,662,813 1.12
2019-20 6,336,048,456 5,838,873,663 1.09
2020-21 10,944,649,232 10,384,550,310 1.05
Graph:-
Interpretation:-
This graph shows gross profit ratio of Parle Products Pvt Ltd. In 2019 the gross profit
ratio is 32 % and 2020 the gross profit ratio is 34% will be increase with the value of 1 %
on previous year. In 2021 the gross profit ratio 34 % will be the same value of the
previous year.
10. NET PROFIT RATIO
Formula:-
Net Profit
Net Profit Ratio = X 100
Revenue from operations
60
Chart:-
Graph:-
Interpretation:-
This graph shows net profit ratio of Parle Products Pvt Ltd. In 2019 the net profit ratio is 41
% and 2020 the net profit ratio is 37% will be decrease with the value of 7 % on previous
year. In 2021 the net profit ratio 22 % will be decrease with the value of 15% on previous
year.
CHAPTER NO. 7
FINDINGS OF THE STUDY
Current ratio analysis of Parle Products Pvt Ltd shows recurring surplus in itself.
Since 2019 it increasing continuously.
Quick ratio provides positive signs since 2019 it are going increasing continuously.
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Debt equity proportion of Parle Products Pvt Ltd improving year by year but it is not
satisfactory.
The proportion of debt to capital employed shows distinct losses after 2019.
The proprietary ratio also decreases at huge proportion.
The ratio of total asset to long term debts ratio will be decrease with huge losses on
company financial statements.
Inventory turnover ratio will be not satisfactory for company position that’s why
company faces various losses.
Due to sudden increment in stock turnover ratio there it also affected to debtors
turnover ratio. It also improve up to 54%.
There are not satisfactory signs in gross profit ratio. It reducing by 1% in 2020-21 as
compared to in 2019.
Due to decrement in gross profit it affects net profit of the company but it's no
strongly influence.
CHAPTER NO. 8
CONCLUSION
The cash management Analysis done on the financial position of the company has provided a
clear view on the activities of the futuristic Parle Products Pvt Ltd. The use of the cash flow
Statement, Cash inflow & outflow and ratio calculations of ratio, financial management
62
helped in this study to find out the financial soundness of the company. This project was very
for the judgment of the financial status of the company from the management point of
view .this evaluation proved a great deal to the management to make a decision on the
regulation of the funds to increase the sales and bring profit to the company .
CHAPTER NO. 9
RECOMMENDATION
Current ratio of Parle Products Pvt Ltd its growing good that’s why it is better for
company poisons.
Quick ratio of possessions is better Parle Products Pvt Ltd.
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Debt equity proportion of Parle Products Pvt Ltd is not satisfactory but increases in
revenue of Parle Products Pvt Ltd can keep the ratio stable.
The debt to capital employed ratio of Parle Products Pvt Ltd is faces huge losses in
company position but company can also manage this ratio with the help of proper asset
management techniques
The proprietary ratio was not favorable for company position after company analysis.
The ratio of total asset to long term debts growing slowly but this situation is not superior
for company growth
Inventory turnover ratio is not superior for company growth the company will reduce his
non profitable product that time the inventory ratio create positive signs
Stock turnover ratio affects to debtors turnover ratio that why this ratio is an growing
position and this situation is better for company growth.
The gross profit ratio proportion of Parle Products Pvt Ltd is not satisfactory but company
analyses all profit margins that time company can keep the ratio on incremental situation.
Gross profit ratio affects to net profit ratio that why this ratio is an unfavorable and this
situation is not good for company growth but company can remove its unprofitable
product, reduce inventories and reduce overheads that time the net profit ratio will be
superior for company growth.
BIBLIOGRAPHY
BOOKS:
S.N. Maheshwari, Financial management, Eleventh Edition 2006, Sultan Chaqnd
& Sons, Educational Publishers. New Delhi.
I.M Pandey, Financial management, Ninth Edition, Vikas publishing house pvt
Ltd.
64
M.Y Khan- P.K Jain, Management Accounting, Third edition, Tata Mc Graw-Hill
Publishing co. Ltd
B.L. Gupta, Management of Liquidity and Profitability, Arihant Publishing
House, Jaipur.
WEBSITE:
www.financeindia.org
www.fao.org
https://www.parleproducts.com/about
********************Thank You***********************
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