CHAPTER - I

CONCEPTUAL FRAMEWORK OF WORKING CAPITAL

MANAGNEMT

Introduction to Working Capital Management

"Cash is the lifeblood of business" is an often-repeated maxim

amongst financial managers. Working capital management refers to the
management of current or short-term assets and short-term liabilities.
Components of short-term assets include inventories, loans and advances,
debtors, investments and cash and bank balances. Short-term liabilities include
creditors, trade advances, borrowings, and provisions. The major emphasis is,
however, on short-term assets since short-term liabilities arise in the context of
short-term assets.

A business firm must maintain an adequate level of working capital to run

its business smoothly. It is worthy to note that both excessive and inadequacy of
working capital is more dangerous for a firm. Excessive working capital results
in interruptions of production.

This will lead to inefficiencies, increase in costs and reduction in profits.

Working capital is just like the lifeblood of business. If it becomes weak, the
business can tiredly prosper and survive.

Working capital is the nerve centre of a business. Just as circulation of

blood is essential in the human body for maintaining life, working capital is very
essential to maintain the smooth running of a business. No business can run
successfully without an adequate amount of working capital.

There are operative aspects of working capital i.e., current assets which is
known as funds also employed to the business process from the gross working
capital Current asset comprises cash receivables, inventories, marketable

1
securities held as short-term investment and other items nearer to cash or
equivalent to cash. Working capital is determined by the level of production
which depends upon the management attitude towards risk and the factors which
influence the amount of cash, inventories, receivables, and other current assets
required to support given volume of production.

Working capital management as usually concerned with administration of

the current assets as well as current liabilities. The area includes the requirement
of funds from various resources and to utilize them in all result-oriented manner.

Meaning of Working Capital

Working capital means the funds (i.e., capital) available and used for day-
to-day operations (i.e., working) of an enterprise. It consists broadly of that
portion of assets of a business which are used in or related to its current
operations
In Accounting:
Working Capital = Current Assets – Current
Liabilities Definitions:
Many scholars’ gives many definitions regarding term working capital
some of these are given below.
According to Weston & Brigham
“Working capital refers to a firm’s investment in short-term assets
cash, short term securities, accounts receivables and inventories.
Mead Mallott & Field
“Working capital means current assets”.
Bonnerille
“Any acquisition of funds which increases the current assets
increases working capital for they are one and the same”.

2
 Positive working capital means that the company is able to pay off its short-
term liabilities companies that have a lot of working capital will be more
successful since they can expand and improve their operations.
Negative working capital means that a company currently is unable to meet
its short-term liabilities with its current assets.

Objectives of Working Capital Management

Effective management of working capital is means of accomplishing the
firm’s goal of adequate liquidity. It is concerned with the administration of
current assets and current liabilities. It has the main following objectives-
1. To maximize profit of the firm.
2. To help in timely payment of bills.
3. To maintain sufficient current assets.
4. To ensure adequate liquidity of the firms.
5. It protects the solvency of the firm.
6. To discharge current liabilities.
7. To minimize the risk of business.
The need for the Working Capital
The need for working capital arises due to the time gap between production
and realization of cash from sales. Working capital is must for every business for
purchasing raw-materials, semi-finished goods, stores & spares etc and the
following purposes.
1. To purchase raw materials, spare parts and other components
A manufacturing firm needs raw-materials and other components parts
for the purpose of converting them into final products, for this purpose it
requires working capital. Trading concern requires less working capital.
2. To meet overhead expenses.
Working capital is required to meet recurring overhead expenses such
as cost of fuel, power, office expenses and other manufacturing expenses.

3
 3. To hold finished and spare parts etc.
Stock represents current asset. A firm that can afford to maintain stock
of required finished goods, work in progress & spares in required quantities
can operate successfully. So, for that adequate quantity of working capital is
required.
4. To pay selling & distribution expenses.
Working capital is required to pay selling & distribution expenses. It
includes cost of packing, commission etc.
5. Working capital is required for repairs & maintenance both machinery as
well as factory buildings.
6. Working capital is required to pay wages, salaries, and other charges.
7. It is helpful in maintain uncertainties involved in business field.

Types of Working Capital:

Working Capital Management refers to management of current assets and
current Liabilities. The major thrust of course is on the management of current
assets. This is understandable because current liabilities arise in the context of
current assets.
Working Capital Management is a significant fact of financial
management. Its
Importance stems from two reasons:
▪ Investment in current assets represents a substantial portion of total
investment.
▪ Investment in current assets and the level of current liabilities must be
geared quickly to change in sales. To be sure, fixed asset investment and
long-term financing.

4
 Types of working capital

Basis of concept Basis of time

Permanent Temporary
Gross
Net concept working working
concept
capital capital

On the Basis of Concepts

1) Gross Working Capital

Gross working capital is the amount of funds invested in various

components of current assets. Current assets are those assets which are easily /
immediately converted into cash within a short period of time say, an accounting
year. Current assets include Cash in hand and cash at bank, Inventories, Bills
receivables, Sundry debtors, short term loans and advances. This concept has the
following advantages:
a. Financial managers are profoundly concerned with the current assets.
b. Gross working capital provides the correct amount of working capital at
the right time.
c. It enables a firm to realize the greatest return on its investment.
d. It helps in the fixation of various areas of financial responsibility.

5
2) Net Working Capital
Net working capital is a very frequently used term. There are two ways to
understand networking capital. First, one says it is simply the difference between
current assets and the current liabilities on the balance sheet of a business. The
other understanding discloses little deeper or hidden meaning of the term. As per
that, NWC is that part of current assets which are indirectly financed by long-
term assets.

On the Basis of Time

1) Permanent / Fixed Working Capital
Permanent or fixed working capital is minimum amount which is required
to ensure effective utilization of fixed facilities and for maintaining the
circulation of current assets. Every firm has to maintain a minimum level of raw
material, work- in- process, finished goods and cash balance.
a) Initial working capital
At its inception and during the formative period of its operations a
company must have enough cash fund to meet its obligations.
b) Regular working capital
Regular working capital refers to the minimum amount of liquid capital
required to keep up the circulation of the capital from the cash inventories to
accounts receivable and from account receivables to back again cash.
2) Temporary / Fluctuating Working Capital
Temporary / Fluctuating working capital is the working capital needed to
meet seasonal as well as unforeseen requirements. It may be divided into two
types.
a) Seasonal Working Capital
The capital required to meet the seasonal needs of the enterprise is known
as seasonal Working capital.

6
b) Special Working Capital
The Capital required meeting any special operations such as experiments with
new products or new techniques of production and making interior advertising
campaign etc, are also known as special Working Capital.

Adequacy of Working Capital:

Working capital should be adequate to protect a business from the
adverse effects of shrinkage in the values of current assets. It ensures to a greater
extent the maintenance of a company’s credit standing and provides for such
emergencies as strikes, floods, fire etc.

Inadequate of Working Capital:

When working capital is inadequate, a company faces many
problems. It stagnates the growth and it becomes difficult for the firm to
undertake profitable projects for non-availability of working capital funds.
Dangers of Excessive Working Capital:
Too much working capital is as dangerous as too little of it. Excessive
working capital raises problems.
1. It results in unnecessary accumulation of inventories. Thus, chances of
inventory mishandling, waste, theft, and losses increase.
2. Indication of defective credit policy and slack collection period.
Consequently, it results in higher incidence of bad debts, adversely
affecting profits.
3. The tendencies of accumulating inventories to make a speculative
profit, which tends to liberalize the dividend policy, make it difficult
for the concern to cope in the future when it is not able to make
speculative profits.

7
Importance of Working Capital
1. Solvency of the business: Adequate working capital helps in maintaining
the solvency of the business by providing uninterrupted of production.
2. Goodwill: Sufficient amount of working capital enables a firm to make
prompt payments and makes and maintain the goodwill.
3. Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favourable
terms.
4. Cash discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
5. Regular Supply of Raw Material: Sufficient working capital ensures
regular supply of raw material and continuous production.
6. Regular payment of salaries, wages, and other day to day
commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage, and
costs and enhances production and profits.
Ability to Face Crises: A concern can face the situation during the depression.

Estimation of Working Capital Requirements:

Managing the working capital is a matter of balance. The firms must
have sufficient funds on hand to meet its immediate needs. The following aspects
taken to consideration for the Estimation of working capital
a. Total costs incurred on material, wages, and overheads.
b. The length of time for which raw material are to remain in
stores before they are issued for production.
c. The length of the production cycle or work-in-process, i.e., the
time taken for conversion of raw material into finished goods.
d. The average amount of cash required to make advance
payments.

8
 e. The average credit period expected to be allowed by suppliers.
Time lag in the payment of wages and other expenses

Operating Cycle of Working Capital:

The working capital cycle reserves to the length of time between the firm
paying cash for materials etc., this working capital also known as operating cycle.
Working capital cycle or operating cycle indicates the length of time between
companies paying for materials entering into stock and receiving the cash from
sales of finished goods. The operating cycle (Working Capital) consists of the
following events. Which continues throughout the life of business?

THE OPERATING CYCLE (WORKING CAPITAL)

Cash

Raw
Debtors
materials

Operating
cycle

Work-in-
Sales
progress

Finished
goods

Fig. Operating cycle of Cash

9
 ▪ Conversion of cash into raw materials.
▪ Conversion of raw materials into work in progress.
▪ Conversion of work in progress into finished stock.
▪ Conversion of finished stock into accounts receivables
(Debtors)through sale and
▪ Conversion of account receivables into cash.

Financing of Working Capital

After determining the level of working capital, a firm has to decide how it
is to be financed.
1. Shares:
The Equity shares do not have any fixed commitment charges and the
dividend on these shares is to be paid subject to the availability of sufficient
funds.
2. Trade Credit:
The trade credit refers to the credit extended by the suppliers of goods in
the normal course of business. The firm has a good relationship with the trade
creditors.
3. Bank Credit:
Commercial banks play an important role in financing the trade & industry
Bank provides short-term, medium term & long-term finance to an industrialist
or a businessman.
Loans: the company has taken loan from the commercial bank for working
capital requirement for a certain period at certain interest rate.
4. Cash Credit / Overdrafts:
Under cash credit/overdraft from/arrangement of bank finance, the bank
specifies a determined borrowings/credit limit. The borrower can draw/borrow
up to the stipulated credit/overdraft limit.

10
Customer Advances:
The company follow the practice of collecting advance money from the
customers as soon as orders are placed and before the actual delivery of the goods.
Such an advance received from the customers constitutes one of the short-term
sources of finance.

Determinants of Working Capital Requirements

In order to determine the amount of working capital needed by the firm several
factors have to be considered by finance manager. These factors are explained
below.
1.Nature of Business:
The Nature of the business effects the working capital requirements to a
great extent. For instance, public utilities like railways, electric
companies, etc. need very little working capital because they need not hold
large inventories and their operations are mostly on cash basis.

2.Production Policies:
The production policies also determine the Working capital requirement.
Through the production schedule i.e., the plan for production, production
process etc.
3.Credit Policy:
The credit policy relating to sales and affects the working capital.
The credit policy influences the requirement of working capital in two ways:
1. Through credit terms granted by the firm to its customers/buyers.
2. Credit terms available to the firm from its creditors.

11
4. Changes in Technology:
Technology used in manufacturing process is mainly determined need
of working capital. Modernize technology needs low working capital, whereas
old and traditional technology needs greater working capital.
5. Size of the Business Unit:
The size of the business unit is also important factor in influencing
the working capital needs of a firm. Large Scale Industries requires huge
amount of working capital compared to Small scale Industries.

6. Growth and Expansion:

The growth in volume and growth in working capital go hand in
hand, however, the change may not be proportionate and the increased need
for working capital is felt right from the initial stages of growth.
7. Dividend Policy:
Another appropriation of profits which has a bearing on working
capital is dividend payment. Payment of dividend utilizes cash while retaining
profits acts as a source as working capital Thus working capital gets affected
by dividend policies.
8. Supply Conditions:
If supply of raw material and spares is timely and adequate, the firm
can get by with a comparatively low inventory level. If supply is scarce and
unpredictable or available during seasons, the firm will have to obtain raw
material when it is available.
9. Market Conditions:
The level of competition existing in the market also influences
working capital requirement. When competition is high, the company should
have enough inventories of finished goods to meet a certain level of demand.
But demand for the product is high; the firm can afford to have a smaller
inventory and would consequently require lesser working capital

12
Estimation of Current Assets

1. Raw Material Inventory:

The Investment in Raw Material can be computed with the help of
the following formula:
Budgeted Cost of Raw Average
Inventory
Production x Material(s) x Holding Period
(In units) per unit (months/days)

12 months / 52 weeks / 365days

2. Work-in-progress (W/P) Inventory:

Until of raw material is required in the beginning the unit cost of work is
process would be higher, i.e., cost of full unit + 50% of conversion cost
compared to the raw material requirement.

Budgeted Estimated Work-Production x Average Time Span

x in-progress cost (In units) per unit of work-in-progress

inventory(months/days)

12 months / 52 weeks / 365days

13
3. Finished Goods Inventory:
Working capital required to finance the finished goods inventory
is given by factors summed up as follows:
Budgeted Cost of Goods Produced Finished Goods

Production x per unit (excluding x Holding Period

(in units) depreciation)
(months/days)

12 months / 52 weeks / 365days

4. Debtors: The working capital tied up in debtor should be estimated

in relation to total cost price (excluding depreciation) symbolically,
Budgeted Cost of Sales per Average Debt

Production x unit excluding x Collection

Period
(In units) depreciation (months/days)

12 months / 52 weeks / 365days

5. Cash and Bank Balances:

Apart from Working Capital needs for Financing Inventories and
Debtors, Firms also find it useful to have such minimum cash Balances
with them. It is difficult to lay down the exact procedure of determining
such an amount.

14
Estimation of Current Liabilities
The Working Capital needs of business firms are lower to the extent that
such needs are met through the Current Liabilities (other than Bank Credit)
arising in the ordinary course of business

1. Trade Creditors:
The Funding of Working Capital from Trade Creditors can be
computed with the help of the following formula:

Budgeted Yearly Raw Material Credit Period

Production x Cost x Allowed by creditors
(In units) per unit (months/days)

12 months / 52 weeks / 365days

Note: Proportional adjustment should be made to cash purchases of Raw
Materials.

2. Direct Wages:
The Funding of Working Capital from Direct Wages can be computed
with the help of the following formula:
Budgeted Yearly Direct Labour Average Time-lag in
Production x Cost x Payment of wages
( In units ) per unit (months/days)

12 months / 52 weeks / 365dayss

Note: The first days monthly wages are paid on the 30 th of the month,
extending credit for 29 days, the second day’s wages are again paid on the 30th
day,

15
3. Overheads (other than Depreciation and Amortization):

The Funding of Working Capital from Overheads can be computed with

the help of the following formula:

Budgeted Yearly Overhead Average Time-lag in

Production x Cost x Payment of wages
( In units ) per unit (months/days)

12 months / 52 weeks / 365days

Note: In the case of Selling Overheads, the relevant item would be sales
volume instead of Production Volume.

16
 FORMAT FOR DETERMINATION OF WORKING CAPITAL

S.NO PARTICULARS AMOUNT

ESTIMATION OF CURRENT ASSETS

1 1) Minimum desired cash and Bank balances. xxx
2) Inventories
Raw material xxx
Work-in-progress xxx
Finished stock xxx
3) Debtors xxx
Total Current Assets
2 XXX
ESTIMATION OF CURRENT LIABILITIES
1) Creditors xxx
2) Wages xxx
3) Overheads xxx
XXX
Total current liabilities
XXX
NET WORKING CAPITAL
(Total Current assets – Total Current liabilities)
Add : Margin for contingency net XX
Working capital requirement

XXXX

Components of Working Capital

The components of working capital are:
▪
Cash Management
▪
Receivables Management
▪
Inventory Management

17
 1. Cash Management:
Cash is the important current asset for the operation of the business. Cash
is the Basic input needed to keep the business running in the continuous basis
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 ideal without contributing anything towards the
firm’s profitability.
Need for Holding Cash
The need for holding Cash arises from a variety of reasons which are,
1. Transaction Motive:
A company is always entering into transactions with other entities.
Transactions cause immediate inflows and outflows. So firms keep a certain
amount of cash so as to deal with routine transactions where immediate cash
payment is required.
2. Precautionary Motive:
Contingencies have a habit of cropping up when least expected. A sudden
fire may break out, accidents may happen, employees may go on a strike,
creditors may present bills earlier than expected or the debtors may make
payments earlier than warranted.
3. Speculative Motive:
Firms also maintain cash balances in order to take advantage of
opportunities that do not take place in the course of routine business activities.
These transactions are purely of speculative nature for which the firms need
cash.
a) Objectives of Cash Management
Primary object of the cash management is to maintain a proper balance
between liquidity and profitability. In order to protect the solvency of the

18
 firm and also to maximize the profitability. Following are some of the
objectives of cash management.
1. To meet day to day cash requirements.

2. To provide for unexpected payments.

3. To maximize profits on available investment opportunities.

4. To protect the solvency of the firm and build up image.

5. To minimize operational cost of cash management.

6. To ensure effective utilization of available cash resources.

b) Cash Budgeting
Cash budgeting is an important tool for controlling the cash. It is prepared
for future period to know the estimated amount of cash that may be required.
Cash budget is a statement of estimated cash inflows and outflows relating to
a future period. It gives information about the amount of cash expected to be
received and the amount of cash expected to be paid out by a firm for a given
period.
1. Receivables Management:
Receivables or debtors are the one of the most important parts of the
current Assets which is created if the company sells the finished goods to the
customer but not receive the cash for the same immediately.
1) It involves element of risk which should be carefully analysis.
2) It is based on economic value. To the buyer, the economic value in goods
or services passes immediately at the time of sale, while seller expects an
equivalent value to be received later on.
3) It implies futurity. The cash payment for goods or serves received by the
buyer will be made by him in a future period.
Granting credit and crediting debtors, amounts to the blocking of the
company’s funds. The interval between the date of sale and the date of

19
payment has to be financed out of working capital as substantial amounts are
tied up in trade debtors. It needs careful analysis and proper management.
2. Inventory Management:
Inventories are goods held for eventual sale by a firm. Inventories
are thus one of the major elements, which help the firm in obtaining the
desired level of sales.
The following are the objectives of inventory management:

❖
To ensure continuous supply of materials, spares and finished goods.
❖
To avoid both over and under stocking of inventory.
❖
To maintain investments in inventories at the optimum level as required by
the operational and sale activities.
❖
To minimize losses through deterioration, pilferage, wastages and damages.

a) Benefits of Holding Inventories:

Holding of large and adequate inventories is very beneficial to every
firm. The benefits or advantages of holding inventories area as
follows.
1. Reducing orders cost.
2. Continuous production.
3. To avoid loss.
4. Availing quantity discount.
b) Cost of Holding Inventories:
Holding of inventory exposes the firm to a number of risks and
costs. Risks of holding inventories can be put as follows.

1. Material cost
2. Order cost

20
 3. Storage cost
4. Insurance
5. Obsolescence
6. Spoilage
In the BCM, each of the above mentioned costs have to be controlled
through efficient inventory management technique. That is:
c) Economic Order Quantity (EOQ):
This refers to the optimal ordering quantity that will incur the minimum
total cost (order cost and carrying cost) for an item of inventory.

E.O.Q = √ 2AO
C

Here, A = Annual consumption.

O = Ordering cost per order.
C = Carrying cost per unit

21
 CHAPTER - II

RESEARCH METHODOLOGY

Introduction about the Project

There are numerous aspects of working capital management that makes it an

important topic for the study.

The management of assets in any organization is an essential part of

overall management. The enterprise, at the time of formation attaches great
importance to fixed assets management, as a part of investment decision-
making.

However, in the overall day-to-day financial management, after the initial

investment, the management gives more importance to managing working
capital. If we look at any financial statement it will be evident that the investment
in fixed assets remains more or less static but the working capital is constantly
changing.

A healthy working capital position is the sine-qua-non of a successful business.

This is reflected in adequate inventories, lowest level of debtors, minimum
utilization of bank facilities for working capital, etc. thus the study of working
capital management occupies an important place in financial management.

Significance of the study

The study was conducted to know the awareness regarding Rolex Paper Mills
Financial position in the present situation.

The study totally revolves around the opinions and feedback from last five years
balance sheet and opinion and feedback from general manager of Rolex Paper
Mills Limited.

22
With the help of last five years balance sheets to know the financial position of
the firm. The study was also done to estimate the performance of Rolex Paper Mills
Limited with,

➢ Statement of Changes in Working Capital

➢ Ratio Analysis (selected Ratios are used)

Basing on the above two the study was completed.

Objectives of the Study

• To study the sources and uses of the working capital.

• To study the liquidity position through various working capital related

ratios.

• To study the working capital components such as receivables accounts,

Cash Management, Inventory Management.

• To make suggestions based on the finding of the study.

Research Methodology

The study carried with the cooperation of management who permitted to carry
on the study and provided the requisite data. The data is collected from the following
sources.

23
Sources of Data

Secondary Data

Data Analysis:
1. Annual reports of the Company
2. Executive and staff of financial accounting department
This information is collected from different sources is tabulation and
analysed with help of all financial statements.

Scope of the Study

The scope of the study is identified after and during the study is conducted.
The main scope of the study was to put into practical the theoretical aspect of the
study into real life work experience. The study of working capital is based on tools
like Ratio Analysis, Statement of changes in working capital. Further the study is
based on last 5 years Annual Reports of Rolex Paper Mills Limited

Period of the Study

The study covers a period of five year from 2016-17 to 2020-21 to study the
funds flow statement and ratios viz., Profitability Ratios, Liquidity Ratios,
Turnover Ratios, Leverage Ratios, Coverage Ratios, Valuation Ratios are
prepared, calculated and interpreted for these five years for the sake of
convenience.

Limitations of the Study:

• The reliability of the study depends upon the available information

furnished by the officials.
24
• Financial accounting doesn't take into account the price level charges.

• The study is conducted with the available data from the annual reports,
internal reports etc. Figures wherever appearing are rounded to the nearest
numerical.

• Due to unavailability of data, information pertaining to four financial years

was only considered.

Plan of the Study

The present study is six chapters.

• Chapter-I Deals with Conceptual Framework of Working Capital

Management.

• Chapter-II Deals with Research Methodology

• Chapter-III Deals with Industry Profile

• Chapter-IV Deals with Genesis and Progress of the Company

• Chapter-V Deals with Analysis and Interpretation of data

• Chapter-VI Deals with Summary of Broad Findings and Suggestions

25
 CHAPTER – III

INDUSTRY PROFILE

ORIGIN OF THE PAPER:

Paper has a long history, beginning with the ancient Egyptians and continuing
to the present day. For thousands of years, hand-made methods dominated and then,
during the 19th century paper production became industrialized.

The word paper is adopted from the “WATER PLANT” called “PAPYRUS”.
Which is used to grow around “Nile River”, Egypt. The Egyptians used
“PAPYRUS” Plant after cutting and drying it. Since 3000 B.C. It was said that
“T.JAMLUM CHAINE” had prepared paper at the bank of the “MULBERRY
TREE” in 105 A.D.

In 751 A.D. the “ARBAS” imported the knowledge of paper making with the
help of “CHINESE”. Later the art of paper making was spread to Europe and Central
Countries of the world. It was highly popularized by the “BOWDDARK” especially
by the “DOSKO MONK” throughout the world.

The “PAPYRUS” is a quote plant which grow in abundance in a plant were

woven and pressed into a sheet be used as writing material by the ancient Egyptians
the evidence of PAPYRUS having been used as writing material can be found. Even
now in same of the European libraries are preserving old manuscripts. In ancient
days for writing purpose “BOJA PATRA” (Bark of Trees), TALA PATRA (Leaves
of Palm), TAMARA PATRA (Copper Plates) and LOHA PATRA etc., were used
time paned as and the need for writing surface increased this was eventually given
rise to through of having an alternative source for writing surface which is
convenient of a easily available.
26
 The first paper mill in the world was started in 1336 A.D. in Germany. Later
paper mills were started in 1586 in “Switzerland” and “Holland”. Later it spread all
over the world. Firstly in 1789 chlorine was used for bleaching of the pulp, in 1799
“Robert Nicholas” the French scientist, who designed the first paper machine to the
world.

In 1809 “John Dickinson” patented a cylinder Machine which resulted in

better with speed of learning and research work. Later on papermaking has becomes
a seed industry at every inch and fairish of the world.

MILESTONES:

INDIAN PAPER INDUSTRY:

Paper industry in India is the 15th largest paper industry in the world. It
provides employment to nearly 1.5 million people and contributes rupees 25billion
to the governments kitty. The government regards the paper industry as one of the
35 high priority industries of the country.

Unlike Iron and Steel, Textile and Sugar Industries the paper making industry
did not exist in ancient India. For writing purposes “Bojapatra (bank of trees) and
Talpatra (leaves of Palm) were used some of our oldest manuscripts preserved up to
the present time were written on these materials. The modern art papermaking came
to India quite late and perhaps the foundations of the modern paper Industry were
laid about 1870. But the first successful factory.

The Titaghar Paper Mills was established in 881 in Bengal and since the
Industry has been growing and spreading in different parts of the Country.
‘Industries which use coarse, heavy and weight-losing materials like wood and

27
timber where in a considerable loss of weight takes place in the first stage may
usually seek different locations in different stages. The first stages of these
industries are generally located near the sources of supply of heavy materials were
these material are changed into half finished goods almost into ubiquitous materials.

The subsequent stages are located near the consumer markets where half
finished goods are given final shape by additional application of labour. In the care
of paper industry it is possible to prepare the wood pulp near the forests and then
turn into paper in industrial and popular centers. Canada and the Baltick countries
of Europe wish their extensive soft wood forests of the Northern Hemisphere and
cheap hydro electric power are the homes of the most important wood pulp and paper
industries of the world. Wood pulp is manufactured just on the out skirts of the
forests and is supplied to the paper making centers inside their own country and is
exported to distant lands like Japan and India.

Perhaps in the beginning the Titaghar mills used cotton rage a first class
material for making the best varieties of paper. But subsequently the Indian paper
mills relied mainly on sabai grass available in Uttar Pradesh and Nepal. For interiors
yellow varieties of paper even the Munj grass was used.

Imported wood pulp, rages, and waste paper were some the other material
used besides coat for power and chemicals for bleaching and other
processes. Between 1925 and 1937, the processes of preparing the paper pulp from
bamboo were developed fully and the paper industry began to rely mostly on
Bamboo as the main and basic fibrous material for papermaking. Nearly 2.38 tonnes
of Bamboo in a v\average is required for making a ton of paper and it accounts for
nearly 60% of the Indian raw materials used in the paper Industry.

28
 The consumption of Bamboo, sabai grass and softwood was estimated in 1954
at 300000, 65000 and 250000 tonnes respectively. In Eastern India (including East
Pakistan) goods supplies of bamboo were available in the Chittagung tracts of
Bengal and in Catcher and sylhet divisions of Assam. Most of the set forests are
now parts of Eastern Pakistan and Bangladesh, Sambalpur, Barpahar, Angul, Puri
and Ganajam divisions of Orissa and Bihar are the main sources of obtaining now
materials for the paper mills of Northern and Eastern India. The advantage of
bamboo as a raw material in comparison with soft wood is that it’s cutting rotation
on an average of four years as against sixty years for most species of wood. F the
Bamboo forests are managed on scientific lines adequate supplies should be
available for meeting a substantial part of the raw material requirements of the
Industry. In parts of South India like Kerala and Mysore a Bamboo is found in
adequate quantities in the forests. Good varieties of needs suitable for the
manufactures of paper are found in Travancore and in the Tinnevellery district of
Madras. The possibilities of using begasses obtainable from sugar mills and quite
bright.

The paperboard Industry uses straw, grass and Bagasses as its raw materials
for the news print Industry the supplies of suitable timber may have to be augmented
by the use of other materials. The availability of sufficient supplies of bagasse and
the economics of its substitution by other fuels in sugar factories, thee extent to
which confers in the Himalaya region or eucalyptus and wattle trees in Nilagiri areas
could be utilized for the manufacture of news print are some of the factors likely to
influence the development of the news print industry in the near future the Nepal
mills are using the chemical pulp from bamboo and the mechanical pulp from salai
wood at present.

29
 With regards to fuel and power the demand for coal is generally placed at
about 3.5 tonnes per ton of finished paper but according to the manufactures on an
average nearly 4.1 tonnes of coal per ton of paper is being consumed. Coal
consumption is some of the mills using Hydel power are comparatively lower. But
the power requirements of the Industry on the whole fare mostly met from power
plants attached to the mills themselves. It is, however envisaged that a substantial
amount of electric power will be drawn from the public undertaking in the coming
years. Besides cellulose’s materials like bamboo and grass, the Industry is an
important consumer of chemicals also, the principal chemical required are time,
caustic soda, soda ash, chlorine, sulphate, rosin and clay.

Most of the paper mills obtain their requirements of chemicals from the
manufacturers. But there are some factories which produce their own requirements
of a few chemicals especially caustic soda and chlorine sulphar is mostly imported
and substantial quantities of soda ash and caustic soda are also obtained from out
side countries on the whole the position with regard to the suppliers of fibrous
materials, power and chemicals it satisfactory although the strain on the
sup0pliers of fibrous materials like Bamboo appears to be increasing requiring
careful and planned expansion of these resources.

A brief discussion of the natural resources shows that the beginning when sabi
and other greases were the principal raw materials and coal the main source of
power. Neither Bengal not Uttar Pradesh enjoyed and distinct advantage, if the mills
Bengal could enjoy the advantage of cheaper of cheaper supplies of local coal, the
Industry in Uttar Pradesh possessed the advantage of grass.

30
 But as only a little over 2 tonnes of raw material and nearly 4 tonnes coal were
required for every ton of finished paper, the Industry in Bengal was better placed
even after paying freight on the supplies of grass obtained form long
distance. Besides this the advantage of the paper market at Calcutta was there. But
with the introduction of Bamboos a superior’s raw material the Industry in Bengal
was placed as constantly advantageous position.

In 1951 ,there were 17 paper mills ,and today there are about 515units engaged
in the manufacture of paper and paper boards and newsprint in India.The pulp and
paper industries in India have been categorized into large scale and small
scale.Those industries which have capacity above 24,000 tonnes per annum are
designated as large scale industries.

GROWTH OF PAPER INDUSTRY:

The long-term outlook for the paper industry in India looks distinctly
bright for a variety of reasons .Literacy rates are expected to go up as a result of a
dedicated fun arising out of the education cess for primary and secondary education.

INDIA’S SUPPLY:

India’s effective installed capacity for paper and paperboard and

newsprint(excluding closed mills) was 6.15 million tonnes and 1.05 million tonnes
respectively. Most mills are based in west India, though they are small and medium-
sized .The majority of large-sized mills are located in south India , primarily due to
a high demand derived out of a high literacy rate, closer access to raw material ,
while 32% use Agro-waste and the rest , waste paper.

31
INDUSTRY PLAYERS

S.NO. NAME CAPACITY

(T.P.A)
01 THE ANDHRA PRADESH MILLS LTD 1,53500
02 ITC BHADRACHALAM PAPER LTD 83,923
03 SIRPUR PAPER MILLS LTD 71,100
04 THE RAYALASEME PAPER LTD 42,000
05 COASTAL PAPER LTD 18,000
06 COASTAL CHEMICALS LTD 16,500
07 SRI LAKSHMI SARASWATHI LTD 15,500
08 A.P.BAGASSE PRODUCTS PVT.LTD 10,000
09 CIRCAR PAPER MILLS LTD 10,000
10 NAGARJUNA PAPER MILLS LTD 10,000
11 TELANGANA PAPER MILLS LTD 10,000
12 GARDIAN PAPER LTD 10,000
13 DELTA PAPER MILLS LTD 9,000
14 ADIVASI PAPER MILLS LTD 7,500
15 VAMSADHARA PAPER MILLS LTD 7,500
16 SURYA CHANDRA PAPER MILLS LTD 6,000
17 PENNER PAPER MILLS LTD 4,950
18 SANDEEP PAPER MILLS LTD 4,200
19 SHREE PAPER MILLS LTD 4,000
20 CHARMINAR PAPER MILLS LTD 3,000
21 JYOTHI CELLOSE LTD 2700

32
SWOT ANALYSIS:

STRENGTHS

• Easy availability of raw material

• Vast domestic market
• Able to tailor to specifications
• Printable Graphics

WEAKNESSES

• Viewed as old material

• Wet strength concerns
• Moisture barrier
• Regulatory hurdles

OPPORTUNITIES

• Booming electronic retail sector

• Changing consumer behaviour
• Huge growth potential
• Budding exports

THREATS

• Competition localized
• Competitive pricing policy
• Advances in alternate design
• Extended producer responsibility

33
STRUCTURE OF THE INDIAN PAPER INDUSTRY:

Paper industry in India can be broadly categorized into 3 major segments

• Segment based on forest-based rawmaterial – large integrated paper mills

fall with in this segments that use hard wood /bamboo as the major fibrous
raw material and are equipped with full-fledged chemical recovery and
effluent treatment system.This segment contributes about 36% of the total
production in India .
• Segment based on Agro based raw materials – this segment includes
medium and small paper mills that used straws, bagasse, and other annual
grasses as the cellulosic fibrous raw material. Very few mills are equipped
with chemical recovery system. This segment contributes about 29% of the
total production in India .
• Segment based on recycled waste paper – this segment covers the medium
and small paper mills using waste paper as a major raw material and
contributes nearly 35% of the Indian total production

There are only 33 large pulp and paper mills based on forest based raw materials
with an installed capacity of 2.8 million tonnes. Since 8 of these mills are closed,
operating capacity of these mills around 2.4 million tonnes of paper board and
newsprint. This sector performed well in the last financial year, snatching a capacity
utilization of over 80% on the total operating capacity.

34
INDUSTRY CHALLENGES:

❖ Paper manufacturers have had to manage margins by cost control, and this
has limited fresh investments and growth within the industry.
❖ The industry needs large quantity of wood and water which often face
supply limitations and are subject to environmental regulations.

Performance of the industry has also been constrained due to high cost of production
characterised by inadequate availability and high cost of raw materials and power.

35
 CHAPTER – IV
GENESIS AND PROGRESS OF THE COMPANY

BRIEF HISTORY OF ROLEX PAPER MILLS

ROLEX PAPER MILLES LIMITED is located at Poolapalli village near
Palakollu of West Godavari District in Andhra Pradesh. The company is spread in
an area of 15 acres of land. First it was under the owner ship of APIDC (Andhra
Pradesh Industrial Development of Corporation). Then it was taken by Shri
P.V.Narasimha Raju, of Delta paper Mills.

Once Mr.K.V.S.S Sambhu Prasad of Palakollu earlier established “Andhra

Pradesh Bagasse Products”, a paper unit in joint-venture with Andhra Pradesh agro
Industries Corporation by obtaining term loans from APIDC & APSFC. The unit
was envisages to manufacture writing and printing paper by using Bagasses from the
near by co-operative sugar factory and also waste paper. Though unit commenced
production during 1991 it operated sluggishly. For reasons unknown the unit was
remaining shut due to which APIDU has invoked the provision of Sec.29 of S.F.I
Act seized the unit in February,1996.
Later in 1999 Mr. P.V.Narasimha Raju who is the chief promoter of Delta
Paper Mills Ltd acquired this firm. Similarly the two executive directors have been
associated with paper industry indifferent capacities and have wide contacts for
overseeing the operations of this small unit for the advantage of obtaining good
results.
First, under control of APIDU, the company’s production was 12 tonnes
per renamed as ROLEX PAPER MILLS, its capacity was increase from 12 tonnes
per day to 25 tonnes per day that is about 7,500 tonnes per annum.

36
CAPITAL STRUCTURE:
The initial capital for this project is about 3 crores. The company has
acquired its capital from SBI and other financial institutions namely SFC (state
financial corporation).

VISION:
To excel in serving the demands of paper and paper products worldwide.

MISSION:

➢ To attain customer loyalty by providing the highest standards of quality

products suitable for various business segments and for all age groups across
India and the world.
➢ To focus on innovative production processes through constant research and
development as well as to use a raw material and technology that is
environment friendly and that further caters to the interests of the future
generations.

OBJECTIVES:

❖ To be the largest tissue manufacturer in the GCC by 2021

❖ Achieve customer satisfaction levels on par with world class organizations
❖ Make RPM the employer of choice by caring for employees
❖ Ensure zero effluent discharge and contribute to improving quality of life
❖ Achieve high production efficiency.
❖ Strive towards efficient environment friendly procedures, sustainability,
usage of fresh water and electricity

37
PHILOSOPHY:
Eminent industrialists are at the helm of RPM, steering its destiny towards a future
envisioned by its founders. We believe in nurturing an atmosphere of creativity and
innovation besides maintaining a disciplined approach while striving relentlessly
towards our goals. We at RPM, have focused on the growth of the Company,along
with the growth and development of our nation. In order to realize our dreams and
dreams of thousands of our stakeholders, we have made intensive forays into
technological research that empowers us to augment our growth.

RAW MATERIALS:
In ROLEX PAPER MILLS waste paper is mainly used for paper
manufacturing earlier under the control of A.P.I.D.C. also waste paper is main raw
material. Procurement of raw materials from Vijayawada, Hyderabad, Chennai etc.,
and some amount of raw materials are imported from the foreign countries also. In
the waste paper there are so many varieties. Each variety is used to produce varieties
of paper in different sizes.

VARIOUS VARIETIES OF WASTE PAPER:

There are many varieties of waste paper the main varieties that are used as
main materials in Rolx Paper Mills are as follows:
1. No. I cutting
2. Exercise note books
3. White Records (Office waste)
4. Text books
5. News Paper

38
The company Mills also import raw materials from abroad. They are:
➢ Light colour cuttings
➢ Printer Off cut
➢ Mixed colour Cuttings

FUNCTIONAL AREAS:
TRANSPORTATION FACILITES:
The finished paper goods have been transported through trucks from the plant to the
specified dealers. The transportation office trucks from the plant to the specified
dealers. The transportation office trucks are used for this purpose. As the paper
products of Rolex are marked throughout the five states namely: Maharashtra,
Orissa, TamilNadu, Karnataka and the home Andhra Pradesh, the company is not
using the services of railway department.
In the production of paper first the waste paper pulp is obtained and then,
some chemicals have to be added to the paper pulp for bleaching, drying and
acquiring different colours and sizes. The chemicals which are used in the plant are:
✓ Caustic soda
✓ Sodium Silicate
✓ De- inking
✓ Calcium hypo chloride
✓ ALUM (Aluminium Sulphate)
✓ Rosine

39
WATER AND POWER FACILITIES:
The plant required 70 M.Q. of water per 1tonne of paper. the plant was
located on the bank of Godavari canal. So, the water facility is more for the plant
A.P.S.E.B. Has agreed to supply continuous power from grail. The maximum of
power would be in the order of 700 units per one tone of paper.

LABOUR:
The availability of man power is plenty skilled, semi-skilled and unskilled
workers are there in the plant. The daily wage labours are also working here for the
purpose of waste paper unloading and loading.

COMPANY PRODUCTS:
The company produces five varieties of paper mix. The type of paper as follows:
1. Cream wove
2. Azure wove
3. Duplicating wove
4. White woke
5. White printing
6. News print

Depending upon the order, the above varieties of paper were manufactures after
specifying the sizes and GSM’s of the paper by the dealers.

40
MARKET SHARE OF ROLEX:
Rolex Paper Mill is covering five states including the Andhra Pradesh.
The market shares occupied by Rolex Paper Mill in different states are as under
follows

STATE PERCENTAGE
Andhra Pradesh 75
TamilNadu 10
Karnataka 05
Orissa 05
Maharashtra 05

Andhra Pradesh
Tamilnadu
Karnataka
Orissa
Maharastra

41
MANUFACTURING PROCESS OF ROLEX PAPER MILLS:
The production in Rolex Paper Mill is plant done in 3 stages. The required
amount of raw material (waste paper) is passed through different types of machines
to make require size of the following are the three stages.
I-Stage:
HYDRO PULPER:
In this the waste paper is treated with the high –density water to make it into pulp,
Then the process of dumping. In this, the pulp is dumped water of high density.
Then, after the process of dumping it is passed to high density cleaner. This high
density cleaner the pulp having no other wastes. Then the pulp is passed to
sepraplast. Here the pulp is cleaned. If any plastic materials are there in the pulp, the
sepraplast will clean all the plastic material so that any waste material will not be
there in the pulp. Here the pulp clean.
II-stage
After the reveal of plastics of sepraplast, the pulp will move of the twine drum
thickener. It contains two large alarums. The paper will goes into this twin drum
thickener and it thickness the paper, after the pulp thickness it passes to the kneader.
This pulp thickness in the B2 thickener will pass to chest it is a high consistency
tower. In this tower, the Hypo (2%) is added to the pulp, and the pulp is passed to
the III-Stage centric cleaners for removing sand and other waste material. After the
process of centric cleaners the pulp will move to vertical screen. Then if moves to
pulp washes (HYPO wasting),hypo is added to the pulp and washed for the
impurities to throw out After removing the impurities from the pulp same chemicals
alike Alum, Rosen and Dyes are added to maintain water absorbency of paper.
III-Stage:
In this stage some chemicals like M-violate, Rhodamine, M-green (malachite green)
are added to the pulp to achieve the market required shades at the process of shading,
42
the pulp is supplied to the paper making machine the water in the paper is remove
the water from the paper three tons of steam is required to remove water from one
tone of paper .After the manufacturing of paper, the paper is bundled into pope reels.
A reel contains 500 sheets. The paper is manufacture according to the orders given
by the dealers. They specify the sizes and GSM’s (Grams per square meter). So, that
production department will follows and produce the papers of those sizes and
GSM’S according to the order given by the dealers the width of the real depend upon
the orders given by the dealers. The width of the real depends upon the orders. For
example, the required size is 58x73 cm’s, then it is calculated like this
732+58
146+58=204 cm +5 cm’s, (trim size)
=209 cm’s (approx)
Therefore, the width of the sheet on pope reel =210 Cms.
The other activities namely, cutting of paper, finishing of paper, bailing of paper is
given contracts. The contracts were profiled by the percentage given by the
management for cutting, finishing and bailing of sheets/reels the contractors are
account able to the production manager for their work.

CSR PRACTICES:

Our CSR initiatives for the villages include the following:

• Water supply projects.
• School uniform distributions.
• Subsidized notebook distributions.
• Cattle vaccination program.
• Distributions of medicines.
• Medical facilities such as mobile health care units.

43
 • Drinking water arrangements.
• Drinking water arrangements for cattle.
• Organizing social awareness programmes.

ORGANIZATION STRUCTURE:

44
 CHAPTER – V

ANALYSIS AND INTERPRETATION OF DATA

STATEMENT OF CHANGES IN WORKING CAPITAL 2016-2017

Particulars 31-03-2016 31-03-2017 Change in working

capital
Increase Decrease
CURRENT ASSETS:
Inventories 5623.50 7277.55 11654.05
Sundry debtors 1748.29 3402.01 1653.72
Cash & Bank Balances 404.07 865.78 461.71
Other current Assets 219.48 232.06 12.58
Loans & Advances 3107.87 2309.51 798.36
TOTAL: 11103.21 14086.91 3782.06 798.36
CURRENT
LIABILITIES:
Sundry Creditors 2815.49 4714.44 1898.36
Advances from 70.50 56.80 13.70
Customers
Unclaimed Dividends 6.21 8.57 2.36
Other liabilities 3307.86 3426.23 118.37
Interest accrued but not 230.69 275.39 44.70
due on loans
PROVISIONS:
Interim Dividend 66.12 66.12
Proposed final Dividend 3373.47 295.72 41.75
Tax on dividend 34.42 34.42
TOTAL 6802.64 8843.27 89.87 2130.50
Working capital 4300.57 5243.64 3871.93 2928.86
943.07
Increase in working 3871.93 3871.07
capital
45
Interpretation:

➢ The above table shows the schedule changes in the working capital for the
year 2016-2017. In the year current assents like Inventories, sundry debtors,
cash and bank balances loans and advances had increased by Rs. 1654.05
lakhs, Rs.1653.72 lakhs, Rs.461.71 lakhs, and Rs.12.58 lakhs, respectively.
loans and advances had decreased by Rs. 798.36 lakhs
➢ Current liabilities like Sundry creditors, unclaimed dividends, other liabilities
and interest accrued but not due on loans had increased by Rs.1898.95 lakhs,
Rs.2.36 lakhs, Rs.118.37 lakhs, Rs.44.70 lakhs. Advances from customers
had increased by Rs. 13.70 lakhs.
➢ Provisions like proposed equity dividend Rs.34.42 lakhs. Proposed preference
dividend had decreased by Rs.66.12 lakhs.
➢ Working capital had increased by Rs.943.07 lakhs.

46
 STATEMENT OF CHANGES IN WORKING CAPITAL 2017-2018

Particulars 31-03-2017 31-03-2018 Change in working

capital
Increase Decrease
CURRENT ASSETS:
Inventories 7277.55 7977.23 699.68
Sundry debtors 3402.01 2783.85 618.16
Cash & Bank Balances 865.78 563.71 302.07
Other current Assets 232.06 250.80 18.74
Loans & Advances 2309.51 2290.19 19.32
TOTAL: 14086.91 13865.78 718.42 939.55
CURRENT
LIABILITIES:
Sundry Creditors 47144.44 3751.13 963.31
Advances from 56.80 141.87 85.07
Customers
Unclaimed Dividends 8.57 10.42 1.85
Other liabilities 3426.23 3512.37 86.14
Interest accrued but not 275.39 233.84 41.55
due on loans
PROVISIONS:
Interim Dividend 66.12 66.12
Proposed final Dividend 295.72 295.72
Tax on dividend 37.89 37.89
TOTAL 8843.27 7983.24 1070.98 210.95
Working capital 5243.64 5882.54 1789.40 1150.50
638.90
Increase in working 1789.40 1789.40
capital

47
Interpretation:

➢ The above table shows the schedule changes in the working capital for the
year 2017-2018. In the year current assents like Inventories, sundry debtors,
cash and bank balances loans and advances had increased by Rs. 699.68 lakhs,
Rs.18.74 lakhs,
➢ Sundry debtors, cash and bank balances loans and advances had decreased by
Rs. 618.16 lakhs, Rs.302.07 lakhs, Rs.19.32 lakhs respectively.
➢ Sundry creditors, interest accrued but not due on loans had increased by
Rs.963.31 lakhs, Rs.41.55 lakhs,
➢ Provisions like proposed preference dividend had increased by Rs.66.12
lakhs. Tax on dividend had decreased by Rs.37.89 lakhs,
➢ Working capital had increased by Rs.638.90 lakhs.

48
 STATEMENT OF CHANGES IN WORKING CAPITAL 2018-2019

Particulars 31-03-2018 31-03-2019 Change in working

capital
Increase Decrease
CURRENT ASSETS:
Inventories 7977.23 8703.94 726.71
Sundry debtors 2783.85 2791.08 7.23
Cash & Bank Balances 563.71 794.91 231.20
Other current Assets 250.80 91.50 159.30
Loans & Advances 2290.19 2852.54 562.32
TOTAL: 13865.78 15233.97 1527.49 159.30
CURRENT
LIABILITIES:
Sundry Creditors 3751.13 4056.15 305.02
Advances from 141.87 70.85 71.02
Customers
Unclaimed Dividends 10.42 11.86 1.42
Other liabilities 3512.37 3341.43 170.94
Interest accrued but not 233.84 164.50 69.39
due on loans
PROVISIONS:
Interim Dividend 7649.63 7644.79 311.30 306.40
Proposed final Dividend 295.72 414.01 118.29
Tax on dividend 37.86 53.05 15.10
TOTAL 7983.24 8111.85 311.30 439.93
Working capital 5882.54 7122.12 1838.79 599.27
1239.79
Increase in working 1838.79 1838.79
capital

49
Interpretation:

➢ The above table shows the schedule changes in the working capital for the
year 2018-2019. In the year current assents like Inventories, sundry debtors,
cash and bank balances loans and advances had increased by Rs. 726.71 lakhs,
Rs.7.23 lakhs, Rs.231.20 lakhs, Rs.562.35 lakhs, respectively. Other current
assets had decreased by Rs.159.3 lakhs.
➢ Current liabilities like Sundry creditors, unclaimed dividends had decreased
by Rs.305.02 lakhs, Rs.1.44 lakhs, respectively.
➢ Advances from customers, other liabilities, interest accrued but not due on
loans had increased by Rs.71.02 lakhs, Rs.170.94 lakhs, Rs.69.34 lakhs,
respectively.
➢ Proposed equity dividend, corporate tax on dividend had decreased by
Rs.118.29 lakhs, and Rs.15.16 lakhs respectively.
➢ Working capital had increased by Rs.1239.58 lakhs.

50
 STATEMENT OF CHANGES IN WORKING CAPITAL 2019-2020

Particulars 31-03-2019 31-03-2020 Change in working

capital
Increase Decrease
CURRENT ASSETS:
Inventories 8703.94 8624.29 79.62
Sundry debtors 2791.08 2687.77 103.32
Cash & Bank Balances 794.91 612.33 182.52
Other current Assets 91.50 80.73 10.73
Loans & Advances 2852.54 3294.97 442.43
TOTAL: 15233.97 15300.09 442.43 376.35
CURRENT
LIABILITIES:
Sundry Creditors 4056.15 4567.27 511.12
Advances from 70.85 171.13 100.23
Customers
Unclaimed Dividends 11.86 14.70 2.84
Other liabilities 3341.43 3498.24 156.5
Interest accrued but not 164.50 138.94 25.56
due on loans
PROVISIONS:
Interim Dividend 41.42 41.42
Proposed final Dividend 414.01 297.75 116.29
Tax on dividend 53.05 41.79 11.29
TOTAL 8111.85 8771.21 153.11 812.45
Working capital 7122.12 6528.88 595.54 1188.78
593.24
Increase in working 1188.78 1188.78
capital

51
Interpretation:

➢ The above table shows the schedule changes in the working capital for the
year 2019-2020. In the year current assents like loans and advances had
increased by Rs. 442.43 lakhs.
➢ Inventories, sundry debtors, cash and bank balances and other current assets
had decreased by Rs.79.65 lakhs, Rs.103.31 lakhs, Rs.182.58 lakhs, and
Rs.10.77 lakhs respectively.
➢ Current liabilities like interest accrued but not due on loans had increased by
Rs.25.56 lakhs. Sundry creditors had decreased by Rs.511.12 lakhs, Rs.100.28
lakhs, Rs.2.84 lakhs, and Rs.156.81 lakhs respectively.
➢ Provisions like income tax (Net of advance tax) had decreased by Rs. 41.42
lakhs. Proposed equity dividend, corporate tax on dividend had increased by
Rs.116.26 lakhs, and Rs.11.29 lakhs respectively.
➢ Working capital had decreased by Rs.593.24 lakhs.

52
 STATEMENT OF CHANGES IN WORKING CAPITAL 2020-2021
Particulars 31-03-2020 31-03-2021 Change in working
capital
Increase Decrease
CURRENT ASSETS:
Inventories 8624.29 9351 726.71
Sundry debtors 2687.77 2695.77 8.00
Cash & Bank Balances 612.33 843.53 231.20
Other current Assets 80.73 60.50 20.23
Loans & Advances 3294.97 3857.29 562.32
TOTAL: 15300.09 16808.09 1528.23 20.23
CURRENT
LIABILITIES:
Sundry Creditors 4567.27 4872.31 305.02
Advances from 171.13 242.15 71.02
Customers
Unclaimed Dividends 14.70 16.12 1.42
Other liabilities 34978.24 3327.3 170.94
Interest accrued but not 138.94 69.55 69.39
due on loans
PROVISIONS:
Interim Dividend 41.42 41.42
Proposed final Dividend 297.75 181.46 116.29
Tax on dividend 41.79 30.5 11.29
TOTAL 8771.21 8924.32 153.11 411.42
Working capital 5882.54 7122.12 1838.79 599.27
1239.79
Increase in working 1838.79 1838.79
capital

53
Interpretation

➢ The current assets like Inventories, debtors, cash and bank, loans and
advances had increased by 726.71, 8 lakhs, 231.20 lakhs, 562.32 lakhs.
➢ The current liabilities like creditors, Interest accrued but not due on loans
had decreased 305.02,.1.42, 170.94 lakhs respectively.
➢ The advances from customers increased by 71.02 lakhs
➢ The working capital which means increased by 870.25 lakhs that the
company had been able to meet its short-term obligation.

54
Current Ratio:
Current assets
Current ratio =
Current liabilities
CURRENT RATIO 2016- 2021 (Rs in crores)
Years Current Assets (in Rs) Current liabilities (in Rs) Ratio (In times)

2016-2017 140.8691 88.4327 1.59:1

2017-2018 138.6578 79.8324 1.73:1
2018-2019 152.3397 81.1185 1.87:1
2019-2020 153.0009 87.7121 1.74:1
2020-2021 158.38314 88.5135 1.78:1
(Source: Annual Reports of RPM Ltd.)

Current Ratio
Ratio
1.9
1.8
1.7
1.6
1.5
1.4
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The ideal current ratio is 2:1. It indicates that current assets double the current
liabilities is considered to be satisfactory. The higher the current ratio represents that
the more liquid and greater the safety of funds the firm is ability to meet its current
liabilities. But in this case the firm’s liquidity position is 1.59:1 it is lower than the
2:1. So the company liquidity position is not satisfactory.

55
Quick Asset Ratio:

Quick assets
Quick Ratio =
Current Liabilities

Quick Ratio from 2016 to 2021 (Rs in crores)

Years Quick Assets Current liabilities Ratio(In times)
2016-2017 68.0936 88.4327 1.77
2017-2018 58.8855 79.8324 1.73
2018-2019 65.3003 81.1185 1.80
2019-2020 66.7580 2.4310851 2.31
2020-2021 68.8450 3.3220641 2.71
(Source: Annual Reports of RPM Ltd.)
Quick Ratio

Quick Ratio
Ratio
4
3
2
1
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The standard for quick ratio is 1:1. The company liquidity position is
satisfactory during the last five years from 2016 to 2021. Because the quick assets
are equal to current liabilities then the firm can easily meet all the current obligation.
If the ratio is more than 1:1 indicates that the firm has sound liquidity position.

56
Absolute Liquidity Ratio:

Cash
Cash Ratio =
Current Liabilities

Cash Ratio from 2016 to 2021: (Rs in crores)

Years Cash Current liabilities Ratio

2016-2017 8.6578 88.4327 1.09

2017-2018 5.6371 79.8324 1.07
2018-2019 7.9491 81.1185 1.09
2019-2020 6.1233 87.7121 1.06
2020-2021 7.3521 88.8128 1.08
(Source: Annual Reports of RPM Ltd.)

Cash Ratio

1.1
Ratio
1.08
1.06
1.04
1.02
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The standard for absolute liquid ratio is 0.5:1. It indicates that 50% worth of
absolute liquid assets are considered adequate to pay the 100% claims of current
liabilities in time. If the ratio is lower than 1 it indicates that the company’s day to
day cash management is poor. If ratio is more than one, the firm has enough liquidity
position to meet short term obligations.
57
Activity Ratios/Turnover Ratios:
The activity ratios are calculated to measure the efficiency with which the
resources of a firm have been employed. These are also called the turnover ratios as
they indicate the speed with which assets are being turned into sales.

The Turnover Ratios includes:

➢ Inventory Turnover Ratio
➢ Debtors Turnover Ratio
➢ Average Collection Period Ratio
➢ Creditors Turnover Ratio
➢ Fixed Assets Turnover Ratio

58
Inventory/Stock Turnover Ratio:

Sales
Stock Turnover Ratio =
Inventory

Stock turnover Ratio from 2016 to 2021 (Rs in crores):

Years Sales Inventory Ratio

2016-2017 423.755 72.7755 5.82

2017-2018 408.604 79.7723 5.12
2018-2019 393.5169 87.0394 4.52
2019-2020 443.3906 86.2429 5.14
2020-2021 455.3628 87.7152 5.19

Stock turnover Ratio

Ratio
8
6
4
2
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represent the stock turnover ratio is highest in the first year 2016 to
2017 that is 5.82. The lowest turnover ratio is third year 2018 to 2019 is 4.52.

59
INVENTORY HOLDING PERIOD:

Inventory
INVENTORY HOLDING PERIOD = * 360
Sales

Inventory Holding Period from 2016 to 2021: (Rs in crores)

Years Sales Inventory Ratio

2016-2017 423.755 72.7755 61

2017-2018 408.604 79.7723 70
2018-2019 393.5169 87.0394 78
2019-2020 443.3906 86.2429 70
2020-2021 455.3807 86.5436 75

Inventory Holding Period

Ratio
100
80
60
40
20
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represents the inventory holding period up to 5 years. The inventory
holding period is high in third year that is 2018 to 2019 is 78. The lowest inventory
holding period ratio is in first year that is 2016 to 2017 is 61.

60
Debtors Turnover Ratio:

SALES
DEBTORS TURN OVER RATIO =
DEBTORS

Debtors Turnover Ratio from 2016 to 2021: (Rs in crores)

Years Sales Debtors Ratio

2016-2017 423.755 34.0201 12.45

2017-2018 408.604 27.8385 14.68
2018-2019 393.5169 27.9108 14.09
2019-2020 443.3906 26.8777 16.49
2020-2021 482.2305 26.9444 17.89

Debtors Turnover Ratio

Ratio
20
15
10
5
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021

Years

Interpretation:
The above table represent the debtor’s turnover ratio is high in fifth year 17.89
and the lowest ratio is in first year 12.45. The ROLEX paper mills ltd has maintained
a good debtor turnover ratio in fourth and fifth year.

61
COLLECTION PERIOD:
DEBTORS
DEBTORS TURN OVER RATIO = * 365
SALES

Debtors Collection Period from 2016 to 2021: (Rs in crores)

Years Sales Debtors Ratio

2016-2017 423.755 34.0201 29

2017-2018 408.604 27.8385 25
2018-2019 393.5169 27.9108 26
2019-2020 443.3906 26.8777 22
2020-2021 484.9207 25.5415 20

Debtors Collection Period

Ratio
40
30
20
10
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represent the average collection period has decreased from the 29
in 2016 to 2017. It was decreased to 20 in 2020 to 2021. The highest collection
period is 29 days in 2016 to 2017.

62
CERDITOR TURNOVER RATIO:

PURCHASES
CREDITORS TURN OVER RATIO =
CREDITORS

Creditors Turnover Ratio from 2016 to 2021: (Rs in crores)

Years Purchases Creditors Ratios

2016-2017 109.2020 47.1444 2.32

2017-2018 107.8094 37.5113 2.87
2018-2019 129.8677 40.5615 3.20
2019-2020 149.4618 45.6727 3.27
2020-2021 151.5147 48.9823 3.34

Creditors Turnover Ratio Series1

Ratio
4
3
2
1
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represent the creditors turnover ratio is highest in the fifth year
2020 to 2021 is 3.34. The lowest turnover ratio is first year 2.32. It indicates the
ability of firm.

63
TURNOVER TO WORKING CAPITAL RATIO:

SALES
TURNOVER TO WORKING CAPITAL RATIO =
NET WORKING CAPITAL

Turnover to working Capital Ratio from 2016 to 2021: (Rs in crores)

Years Sales Net Working Capital Ratio

2016-2017 423.755 52.4364 8.1

2017-2018 408.604 58.8254 6.9
2018-2019 393.5169 71.2212 5.5
2019-2020 443.3906 65.2888 5.5
2020-2021 493.7916 73.2999 6.7

Working Capital Ratio

10 8.1
6.9 6.7
Ratio 8 5.5 5.5
6
4
2
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represent the turnover to working capital ratio of 5.5
signifies that the working capital has been utilized in making sales of 5.5 times in
year. This also indicates that the favourable turnover of inventories and receivables.

64
INVENTORY TO WORKING CAPITAL RATIO:

STOCK
STOCK TO WORKING CAPITAL RATIO =
WORKING CAPITAL

Stock working Capital Ratio from 2016 to 2021: (Rs in crores)

Years Sales Working Capital Ratios

2016-2017 423.755 52.4364 1.38

2017-2018 408.604 58.8254 1.35
2018-2019 393.5169 71.2212 1.22
2019-2020 443.3906 65.2888 1.32
2020-2021 497.3909 70.0233 1.42

Stock Working Capital Ratio

1.4
Ratio1.35
1.3
1.25
1.2
1.15
1.1
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represents the stock to working capital ratio during the period of
working capital ratio 1:1 is satisfactory. The highest ratio is fifth year 2020 to 2021
is 1.42. The lowest ratio is third year 2018 to 2019 is 1.22.

65
CURRENT ASSESTS TO WORKING CAPITAL RATIO:

CURRENT ASSETS
CURRENT ASSETS TO WORKING =
CAPITAL RATIO WORKING CAPITAL

Current Assets to working Capital Ratio from 2016 to 2021: (Rs in crores)
Years Sales Working Capital Ratios

2016-2017 423.755 52.4364 2.68

2017-2018 408.604 58.8254 2.36
2018-2019 393.5169 71.2212 2.14
2019-2020 443.3906 65.2888 2.34
2020-2021 455.1807 67.2128 2.45

Ratio Current Assests to Working Capital

3
2.5
Ratio
2
1.5
1
0.5
0
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The above table represents the current assets to working capital the highest ratio
was in the 2016 to 2017 is 2.68. But in the case of ROLEX paper mills ltd the
current assets to working capital ratio was above the considered degree. However,
ROLEX paper mills ltd had maintained good current assets to working capital ratio
which a very systematic and good techniques.
66
CURRENT ASSESTS TO LIQUIDITY ASSETS RATIO:

CURRENT ASSETS
CURRENT ASSETS TO LIQUIDITY =
ASSETS RATIO LIQUIDITY ASSETS

Current Assets to Liquidity Assets Ratio from 2016 to 2021: (Rs in crores)
Years Sales Liquidity Assets Ratios

2016-2017 140.8691 68.0936 2.07

2017-2018 138.6578 58.8855 2.35
2018-2019 152.3397 65.3003 2.33
2019-2020 153.0009 66.758 2.29
2020-2021 156.02115 67.879 2.45

Current Assets to Liquidity Ratio

Ratio
2.4
2.2
2
1.8
2016- 2017- 2018- 2019- 2020-
2017 2018 2019 2020 2021
Years

Interpretation:
The standard for current assets to liquidity ratio 2:1 is satisfactory. The highest
ratio was in 2020 to 2021 that is 2.45. The lowest ratio was in 2016 to 2017 that is
2.07. The higher ratio indicates that the company had low liquidity position out of
current assets whereas, lower the ratio indicates high liquidity position out of
current assets.

67
 CHAPTER – VI
SUMMARY OF BROAD FINDINGS & SUGGESTIONS

FINDINGS
▪ There are many reasons accounted for company’s success. During the
discussions with workers and staff it has been observed that they are fully
satisfied with their job. And they are feeling secured when they are on job and
the employees have trust on the management.

▪ It resulted, increase in workers efficiency in production. And it has been

observed that is these years the demand for paper has been increased.

▪ This is because of economic development and central Government economic

reforms. The company is exporting its product to Egypt, Turkey and Australia.
The company has taken certain measure to raw materials. The company is
growing the bamboo plantations in association with farmers to overcome raw
material shortage.

▪ To overcome the over employment problem the company did not any
appointment during the period. Besides it is offering voluntary retirement
schemes.

▪ Not only are these but also there are innumerable factors accounted for its
success.

▪ By taking several actions like maintaining good holding period of inventory,

maintaining of sufficient working capital etc.

These reasons help the company to achieve its targets easily and become one of the
success companies in the country.

68
SUGGESTIONS

The following are the suggestions, which have been offered for the improvement
of the Rolex Paper Mills Ltd.

1. The company had maintained a good working capital with systemic planning
techniques. It is better for future contingencies.
2. The company’s current ratio is below standard so that the company will better
increase this ratio.
3. The quick asset ratio is quite satisfactory. But it is better to increase.
4. The working capital inventory position is in better condition while compared
with sales. It is better to continue in future.
5. The inventory holding period is also good in the year 2004-2017. If the
company will follow like this then the company can get the lion share in the
market.
6. The debtor’s collection period is also good. It is better to continue for reduced
bad debts in future.
7. The stock to working capital ratio is above standard. It is not good in future.
8. Current assets to liquidity asset ratio are higher standard so it is better to
maintain general level i.e., 1:1 level for the future contingencies.
9. Loans and Advances of the firm are almost 28% of the total current assets.
But if the return on loans and advances where not as much as expected, the
firm should try to reduce the investment in loans and advances.

69
CONCLUSION

After analysing the capital trends in the Rolex paper mills Ltd., from year 2016 -
2021. It has found that the working capital is widely fluctuation, corresponding to
the fluctuation in the inventory, through there has been an over increase.
The firm’s liquidity position is not satisfactory when compared to standard norms.
However, the cash position is satisfactory. The firm is maintaining good credit and
collection policy. The company’s management had taken several steps and initiative
necessary control action to keep the net working capital on increasing mode. By
taking various measures and control sections the company is now a royal one in the
paper industry with such high net working capital position. Furthermore, the
company is pursuing a fair and persuasive approach to improve the individual peace
and harmony.

70
 BIBLIOGRAPHY

I. Books:
1. Management Accounting and Financial Management

(Sultan Chand & Sons, New Delhi-1997) :S.N.Maheswari

2. Financial Management

(Tata Mc.Graw Hill, New Delhi-1998) :M.Y.Khan & P.K.Jain

3. Financial Management

(Tata Mc.Graw Hill, New Delhi-1998) : Prasanna Chandra

4. Financial Management

(Vikas Publications, 8th Edition,

New Delhi-1999) :I.M.Pandey

II. Journals:
1. Business world
2. Business India (The Magazine of the corporate world)
3. Facts for you

III. News Papers:

1. The Hindu
2. Business Line
3. Economic Times

IV. Website:
http://www.rolexpapermill.com/
www.google.com

71