PREFACE

This project is all about “A study on customer satisfaction towards

E- banking service.” The project contain various chapters like:-
1) Introduction of the study
2) Review of Literature
3) Research Methodology
4) Data Analysis and Interpretation
5) Finding and Conclusion
6) Bibliography
I am sure the project report will give us enough information for
the study about “A study on
customer satisfaction towards E- banking service.”
I have collected all the information for my project report at my
level best. It is my duty first experience to prepare such type
of project so if any mistake is found, it is requested to be
Forgiven and ignored.
 CONTENTS

SL.NO TITLE PAGE NO

01 EXICUTIVE SUMMARY 05-10

02 INDUSTRY PROFILE 11-12
03 COMPANY PROFILE 13-15
04 PRODUCT PROFILE 16-20
05 WORK FLOW MODEL 21-22
06 MCKINSEY’S 7S FRAMEWORK 23-48
07 SWOT ANALYSIS 49-52
08 ANALYSIS AND INTERPRETATION 53-69
09 RATIO ANALYSIS 70-79
10 FINDINGS 80
11 SUGGESTIONANDRECOMMENDATION 81
12 CONCLUSION 82
13 BIBLOGRAPH 83
 Executive Summary
Introduction:
One of the important areas in the day-to-day management of the affairs of a
firm is the management of Working Capital. Working Capital is used for
financing day-to-day business operations. An organization whether it is
manufacturing or trading, requires adequate funds for acquiring the stock of
materials, marketable securities, stores materials etc., apart from land, building,
machinery furniture etc. The funds invested in current assets such as, stock of
materials work in process, investments, bills receivables, debtors, bank balance
etc., is known as Working Capital. Success or otherwise of any enterprise
depends upon efficient management of working capital and hence, working
capital is often described as “life-blood of business”
In simple terms, all current assets used in daily operations represent
working capital. Current assets are cash or near cash resources. Working
Capital is also known as Circulating or revolving capital, because the current
assets are of nature of circulation. They keep on moving from one form to
another. For example, cash is used for purchasing merchandise which then
takes the form of stock-in-trade or inventories, when the inventories are sold out
cash or debtors are created, when debtors are collected cash is accumulated
and this process continues. Thus, its flow is circular in nature. In,
accounting Working Capital is taken to mean the difference between current
assets and current liabilities.
 Objectives of the Study:
1. To know the financial position of the company access.

2. To assess the financial strengths and weakness of the company to give

valuable suggestions to attain operational excellence.

3. To study the importance of Working Capital Management in a

manufacturing concern.

4. To study and evaluate the present Cash Management system of the

company.
 Methodology of Data Collection
Research methodology is a systematic way for solving any research problem.
It’s a science of analyzing how research is done scientifically. It studies the
various steps that are generally adopted by a researcher in studying the
research problem.

Sources of Data:
There are 2 types of data:
1. Primary Data
2. Secondary Data

Primary Data
The primary data are those which are collected fresh for the first time and thus
happen to be original in character. The primary data collection involves the
collecting of information for the first time by observation, experimentation,
questionnaire and through interview schedule in the original form by the
researcher himself or his nominees.
Plan of action:
The primary data was collected through discussion with the finance manager
using the interview schedule. This data was obtained to study the latest
procedures relating to working capital management and cash management
system followed by the company.

Secondary Data
The secondary data are those which have been collected by some other and
which have been processed. Generally speaking secondary data are
information, which have been previously collected by some organization to
satisfy its own need. But the department under reference for an entirely different
reason is using it.

There are two main sources for Secondary Data:

✓ Published Data: Data that is already available in books, magazines, trade
journals, newspapers, reports, prepared by research scholar etc.
✓ Unpublished Data: This is not published; it can be found in unpublished
biographies, autobiographies, some governmental aspects and private
individual organizations etc.

The Secondary data used in the study are:

o Annual Report of the company. o Published financial reports of the
company.
o Financial records and stores manual of the company.
o Directors reports, auditors report and other schedules.

Limitations of the Study:

➢ The span of study is confined to only 5 years. The comparison of various
ratios may not have the same conditions, which may result in unrelated
comparisons.
➢ DIPL depends completely on Divgi Warner Pvt. Ltd (Pune) for procurement
of raw materials & supply of finished goods. Hence the Working Capital
Inventory management techniques have to be adjusted on a timely basis,
based on DWPL’s needs.
 ➢ In this project report the Working Capital Management & Cash
Management system followed during the time of doing the project is
recorded and analyzed.

Need and Importance of Working Capital:

To fulfill its endeavor to maximize the shareholder’s wealth, firm has to earn
sufficient return from its operations, which needs a successful sales activity. The
firm has to invest sufficient funds in current asset to succeed in sales, as the
sales do not convert into cash instantaneously because of time gap between
the sale of goods and actual receipt in cash.
Hence there is a need for Working Capital in the form of current assets to
sustain sales activity during that period.

Findings:
1. View of financial position: The Company was incorporated in the year
2000, its actual commercial work started in the year 2003 April 1 st.The
Company had not started any business, so there is no question of profit
from the year 2000 to 2003. But however as a first step towards the
commencement of commercial activity the company has taken over the
business of timing gear blanker on April 2003.
2. In 2003-04 the Company started commercial activity by acquiring the
building, plant & machinery from Divgi Metal Ware Pvt. Ltd., on an annual
lease of Rs.9,00,000/- plus taxes of Rs.51,750/-. Using these leased
assets the company carried out job work for Divgi Warner Pvt. Ltd. After
expenses the company made a modest profit of Rs.3,745/- before
depreciation.
3. The debtors component in the composition of current assets is the highest.
It was 87.77% in the year 2003-04, 79.38% in 2004-05, 73.63% in 2005-
 06, 70.87% in 2006-07 and 69.43% for the year 2007-08. It may be noted
that debtors components in current assets is decreasing over the years.
4. The cash and bank component for the year 2003-04 was 2.19%.it was
1.71% in 2004-05, 7.11% in 2005-06, 1.16% in 2006-07, 0.27% in 200708.
The loans and advances component was 10.04% in the year 200304,
18.91% in 2004-05, 19.26% 2005-06, 27.97% in 2006-07, 30.30% in
2007-08. The debtors component in the composition of current assets
decrease the loans and advance component is on an increase.
5. In the years 2003-04 and 2004-05, the company had a negative working
capital of Rs.1,35,169.09 and Rs.1,95,076.75 respectively which is not a
favorable position to the company. Then in the year 2005-06, 2006-07 and
2007-08 the Net Working Capital has improved drastically to
Rs.9,78,370.64 ,.Rs9,86,858.40, and Rs 35,02,104.84 respectively.

Suggestions and Recommendations:

1. The Debtors component is the highest among the five years and it
amounted to nearly 76% of the total current assets. But the percentage
has decreased over the year which is a good sign of improvement. The
second highest element is the loans and advances component which has
increased over the years because of the expansion programmes
undertaken by the company. In the initial years the company had not
maintained a considerable amount of cash and bank balances, but over
the years the company is maintaining adequate cash so as to meet its
immediate cash requirements.

2. The working capital of the company should be always positive. It should

not be negative. In the years 2003-04 and 2004-05, the company had a
negative working capital which is not a favorable position to the company.
 Then again in the year 2005-06, 2006-07, and 2007-08 DIPL’s net working
capital has increased to Rs.9, 78,370.64, RS9,86,858.40, and Rs
35,02,104.84 which is a very positive sign of prosperity and it will help the
company to sustain its expansion programmes. It also shows that the
liquidity position of the company has improved. Hence there is much
capital available with the company to pay off the current liabilities.

3. In order to ensure liquidity and quick cash collection the company can go
for factoring technique, through which the company can get immediate
cash for its accounts receivables and employ it in business and there by
improve its profitability.

INDUSTRY PROFILE
Indian Auto Components Industry:
The Indian auto ancillary industry has come a long way since it had its small
beginnings in the 1940s. If the evolution of the industry is traced in India, it can
be classified into three distinct phases namely: Period prior to the entry of
Maruti Udhyog Ltd, period after the entry of Maruti Udhyog Ltd and Period post
Liberalization. The period prior to the entry of Maruti Udhyog Ltd was
characterized by small number of auto majors like Hindustan Motors, Premier
Automobiles, Telco, Bajaj, Mahindra & Mahindra, low technology and assured
business for most of the auto component manufacturers.
The entry of Maruti in the 1980’s marked the beginning of the second
phase of the industry. The auto ancillary industry in the country really showed a
spurt in growth during this period. This period witnessed the emergence of a
new generation of auto ancillary manufacturers who were required to meet the
stringent quality standard of Maruti’s Korean collaborator Suzuki of Japan. The
good performance of Maruti resulted in an upswing for the domestic auto
ancillary industry. It was during this period that auto components from India
began to be exported.
The entry of foreign automobile manufactures ranging from Mercedes
Benz, Ford and General Motors to Daewoo following the government liberalizing
the foreign investment limits saw the beginning of the third phase of the
evolution of the industry. The auto ancillary industry witnessed huge capacity
expansions and modernization initiatives in the post liberalization period.
Technological collaborations and equity partnerships with world leaders in auto
components became a common affair. However, the global automobile majors
soon realized the folly of their estimations in India. The market did not seem to
be as big as it appeared to be. Hence, sales targets went away. The tough
competitive scenario saw a lot of consolidation in the industry and it still
continues unabated.
Global Scenario;
Prior to 2000, it had been almost ten years since TTS (torq transfer
systems) had been awarded any new transfer case business for the European
market (Land Rover). Then concerted efforts were made to re-enter that market
& attain new business with improved technologies such as high output transfer
cases & Torsen Torque Differential technology which broadens the industries
offering in the transfer case market place.
In the global Scenario of transfer case industry there are significant
differences between the American & European Markets. While the American
car-buyer is primarily interested in traction & larger, more powerful vehicles, the
European driver is more interested in vehicle handling, stability & safety.
Therefore for their home markets, European auto makers are producing smaller,
front wheel drive vehicles. But as the American car buyers are more interested
in powerful engines the automakers are offering a wide range of SUV’s for which
the Torq transfer System ( TTS) is particularly well suited making the 2 wheel
drive into 4 wheel drive ( 4 x 4 ). The vehicles tend to be technically more
sophisticated creating new market potential for TTS.
Borg Warner & TTS (Torq Transfer Systems)
The Company engineers work closely with the Drivetrain group in engineering
strategy & provide many opportunities for collaboration & learning of TTS. TTS
engineers frequently make customer presentations along with colleagues from
TS. This collaboration allows the Company to talk about the company’s all-
wheel drive products while TS engineers present other Drive train technologies
that Borg Warner has to offer, including the very successful Dual Clutch
Technology, which is generating much attention in Global markets.Other Borg
Warner business groups have helped to establish a great reputation for Borg
Warner at the Global level. The company’s commitment to new technologies &
new products for the automakers will help TTS become a future Product Leader
in Auto industry.

Company Profile
 Divgi Industries Private Limited (DIPL) is situated at Banavasi Road, Sirsi
in North Kanara District of Karnataka State. It is a medium scale engineering
industry of prestigious city SIRSI. DIPL was incorporated in the year 2000.Its
actual commercial activities started in April 2003. Its registered office is in Sirsi
(Karnataka). It is certified with ISO/TS 16949 quality system in 2005.
There is another industry in the campus of DIPL known as Divgi Warner Pvt.
Ltd. (DWPL) which is a sister concern. Divgi Warner Private Limited was
established in the year 1995 as a joint venture company between Borg Warner
Torq Transfer Systems USA, a global leader in automotive power technology
with history going back over a hundred years & Divgi Metal Wares Limited,
India.
DIPL does the job work for DWPL. Actually buildings and machineries are taken
on Lease basis from Divgi Metal Wares Pvt. Ltd. Raw materials come from
DWPL (Pune) to DWPL (Sirsi). Again these raw materials supplied to DIPL from
DWPL (Sirsi). After the job work is completed & the raw materials are converted
into semi-finished products, it is again supplied to DWPL (Sirsi) & after some
value addition works these products are sent to DWPL (Pune) for exporting it to
Borg Warner (U.S.A.). It has following alliances for the product range.
Alliance for - 4 WD technology & products.
• Manual transmission technology & products.
• Synchronizer technology & products
They design & manufacture the auxiliary transfer cases (required for 4x4
vehicles) & components required for automotive torque transfer applications.
The transfer case & the parts fit on the 4x4 vehicles & their products, end
customer base covers-
▪ Tata Motors
▪ Mahindra & Mahindra
The product range of DIPL includes turned Flange families, turned, hobbed,
rolled, ground shafts and gear families used in auto transmission systems. The
usage of their products on vehicle:
▪ Transfer Case
 ▪ ALH (automatic locking hub)
▪ Companion Flange Families
There are 120 employees working in DIPL. The workers have shift basis work
with specified target. The company provides them with good salary, better
facilities and motivational programs.

Vision:
To be catalytic and innovative organization in the society that supplies goods
and services that are of superior value to those who use them, create jobs that
provide meaning for those who do them and offer our talents & wealth to help &
reward all who invest in us their time money & trust.

Goals:
To become India’s prominent & perfect technology & in crate based solution
provide in automotive transmission & power train application for on & off
highway usage to achieve world class standard in spheres of our business
activities.

Mission:
Our Mission is to assist our customer seek new frontiers of value for the
continuously evolving needs of a globalizing market place in so doing, we seek
to bring unique distinctive & superior value to those who use our products and
services. We seek to provide our customers a continuous source of innovation
by anticipating change & shaping it to our purpose.
Annual turnover of the company –
For the year
2004-2005 90,88,000
2005-2006 1, 22, 60, 000
2006-2007 1, 33, 80,000
2007-2008 1, 70, 54,584
2008-2009 3, 00, 00,000

Board of Directors

➢ SHRI JITENDRA DIVGI.

➢ SHRI HIRENDRA. DIVGI
➢ SHRI BHARATH DIVGI.

Product Profile
Divgi Industry Private Limited manufactures the spare components
required transfer case. The raw materials are procured from Bhosari (Pune) and
component parts are manufactured at DWPL (Sirsi) and they are assembled at
DWPL (Pune).

Transfer Case: transfer case are used in 4*4 vehicles. It includes several
items made up of steel. They include:
Front Adapter: It is an item made up of aluminum.

Shafts:
1. Upper output Shafts.
2. Lower output Shafts.

Upper output shaft lower output shaft

Yokes:
The yokes are classified as single chorden and double chorden that are
supplied to Mahindra & Mahindra and Tata motors. These are also exported to
Borg Warner Torq Transfer Systems.
 Gear: These items include:
➢ Ring Gear

➢ Sprocket drive
➢ Sprocket driven
➢ Hub Sleeve
➢ Hub lock up
➢ Collar lockup
➢ Hub reduction
➢ Clutch Gear
➢ Planet penion Gear Companion Flange:
 Quality Objectives:
➢ To continually enhance customer satisfaction by monitoring the customer
satisfaction index.
➢ To improve productivity, achieve higher process capabilities with a focus
to achieve ZERO detect in all out business activities.
➢ To achieve OPTIMUM INVENTORY LEVELS through ON TIME
PROCUREMENT (JIT) of quality material at competitive prices.
➢ To improve the overall inventory effectiveness
➢ To develop a motivated, committed and effective team by providing the
necessary resources, good training programs and a congenial atmosphere
for overall growth of the employees.
.
. Types of Transfer Case:
➢ Mechanical Shift Transfer Case ➢ Electrical Shift TC

Features and Benefits of Mechanical Shift Transfer Case and Electric

Shift Transfer Case:

Part-time System: - Allows driver to select two or four wheel operation.

Light Weight Construction: - Reduces total vehicle weight to enhance
fuel use efficiency.
 Upper Disconnect to Chain: - Stops unnecessary parasitic losses in two
wheel drive.
Positive Displacement to Oil Pump and Filter: - Assures full liberation
when driving or towing. Reduces maintenance needs. Helical Gearing: -
Delivers quiet, low range operation.
Four-wheel Drive Indicator Light Switch: - Indicates four wheel drive
mode for driver convenience.

Single lever Shift Control: - Simplifies selection of transfer case

operating modes.
Electromagnetic shift on the fly (optional): - Provides smooth
engagement of four wheel drive at highway speeds.

Functions of Transfer Case:

➢ To convert 2 x 2 drive into 4 x 4 drive

➢ To amplify Torque

AREA OF OPERATION
The area of operation of DIPL is done in DIVGI WARNER PRIVATE LTD, which
caters to domestic, and global customer base includes:
Auto Alliance (thailand)
Ford (usa)
Hyudai (japan)
Great wall (china)
General motors
(usa).
Domestic
customers
Mahindra &
Mahindra
Tata motors

Telco.

OWNERSHIP PATTERN
DIVGI Industries is a VENDOR company which is owned by share
holders of the same company with a number of shares rupees 49, 53,000
(equity shares rupee 100 each)

COMPETITORS INFORMATION
There are no competitors to DIPL as it does only job work for DWPL as
it does not undertake a trading or marketing activity.

ACHIEVEMENT/AWARD
DIPL is awarded with ISO/TS-16949-Quality certificate in the year
2002.For every 3 year it should be recertified. Recently it is recertified in the
year 2009.
 Work Flow Model
CAD

Order specification DESIGN

Order PRODN WASTE

DWPL DIPL
DW DEPT TO
MDT SCARP
Material Material
Design

FINAL
FEEDBACK

INSPECTI

ON

Business Process Approach:

The various business processes, their interaction & sequences are identified
on the basis of nature of our business. Following business processes are
performed in the organization, classified into various functions:-

Top Management: The MD of the company is CEO for the quality Management
System. He is overall overseeing the overall growth of the company whereas
day – to – day operations are looked upon by Plant Head.
Sales & Customer Support: This business process communicates with
customer to identify customer requirements & assures customers in increasing
customer satisfaction by interacting with other business processes in the
company. They give inputs to Engineering about customer needs of new /
modified product / system requirements. This business process also supports
customer for line & warranty related issues. This activity is carried by Marketing
Department.

Product Design & Development: Engineering department is responsible for

designing the product / part as per the customer requirement. The customer
requirements are translated into the product realization plan through APQP
(Advanced Product Quality Planning) steps. Product leader convinces multi
disciplinary actions consisting of various business processes who act as a board
of decisions for design activity planning. This business process ensures that
company confirms to all the agreed customer requirements.

McKinsey’s 7S Framework

The 7S model is better known as McKinsey’s 7-S. This is because two

persons who developed this model, Tom Peters & Robert Waterman, have been
consultants to McKinsey & Co, at that time they published their 7-S model in
their article “Structure in not organization “( 1980 ) & in their book
“The Art of Japanese Management “(1981) “In search of Excellence “ ( 1982).

The model starts on the precise that an organization is not just structure, but
consist of 7 elements: Strategy, Structure, System, Style, Staff, Skill and
Shared values.
Strategy : Actions company plans in response to or anticipation of
changes in its external environment.

Structure : Basis for specialization & coordination influenced primarily by

strategy & by organization size and diversity.

Systems : Formal and informal procedures that support the strategy and
Structure.

Style : The culture of the organization consists of 2 components:- o

Organization Culture: The dominant values and norms which develop over
time & become relatively enduring features of organization life.Management
 Style More a matter of what manager do than what they say; how do a
companies managers spend time? What are they focusing attention on?

o Symbolism: The creation and maintenance (or sometimes deconstruction)

of meaning is a fundamental responsibility of mangers.

Staff : The people / human resource management processes use to develop

mangers socialization processes, ways of shaping basic values of management
cadre, ways of introducing young recruits to the Co., ways of helping to manage
the career of employees.

Skills : The distinctive competencies – what the company does best, ways
of expanding or shifting competencies.

Shared values : Guiding concepts, fundamental ideas around which a

business is built – must be simple , usually stated at abstract level, have great
meaning inside the organization even though outsiders may not see to
understand them.

The 7-S model is a valuable tool to initiate change processes & to give
them direction. A helpful application is to determine the current state of each
element and to compare this with the ideal state. Based on this it’s possible to
develop action plan to achieve the intended state.

Application of McKinsey’s 7S:

STRUCTURE
Organizations are economic & social entities in which a number of persons
perform multifarious tasks in order to attain common goals.

L. A. Allen defines an organization as “the process of identifying & grouping the

work to be performed, defining & delegating responsibility & authority &
establishing relationship for the purpose of enabling to people to work most
effectively together in accomplishing objectives”.
Organization structure can be designed on the basis of departmentalization and
relationships.

Departmentalization is the process of dividing work of an organization into

various units or departments.
Relationship is the process of organization brings relationship among
employees at different levels, materials, money & machines.

FUNCTIONAL AREAS AT DIPL

The various business processes, their interaction and sequences are identified
on the nature of business. Following business processes are performed in the
organization, classified into various function:-
1.Production, Planning and Control
2. Stores and Materials
3. Human Resource (HRD)
4. Quality System
5. Maintenance
6. Manufacturing
7. Quality Assurance
8. Finance and Accounts
1. Production, Planning and Control Department
This business process receives customer schedule details from
marketing considering inventories at raw material, work-in-progress and
finished goods, they prepare production plan is a base for manufacturing
process. This business process also controls outsourcing of products/
processes. This process strives for 100% on time delivery performance of
company.
Responsibilities and Authorities of Production, Planning and control:
❖ Prepare dispatch plans / schedules based on scheduled requirements.
❖ To-coporate with Bhosari ( Pune ) for the following:
o Raw materials o Tooling / insert s o
Mobilizing empty trays for material handling o
Preparing dispatch schedule

❖ Other requirements like consumables To organize inputs to Sirsi plant

such as:
o Trays or guards on machines o Displaying
information at info center o Providing racks
for storing various materials

❖ Organizing dispatch co-ordination with individual engineer for component

for final inspection and further dispatch.
❖ To take the work-in progress statement for production material within the
plant.
❖ To negotiate and finalize rates for scrap (steel/aluminum) and take
approval from VP (operations).
❖ Development of new tools/ inserts and conduct trails for productivity
improvement with reducing the cost per component.
 Key Performance Indicators (KPI’s) Analysis: Manufacturing
effectiveness:
❖ Work out standard man- hours
❖ Work out available man-hours

On Time delivery
Work out dispatches against planned quantity split into three halves ( 1 st
to 10th , 11th to 20th , 21st to 31st .

2. Stores and Materials Department

This business process procures raw material / products / consumables as
per procurement plan based on production requirement schedule. They
also procure indirect parts / products / consumables or services needed
for all other processes. This business process receives and preserves the
raw material till it is consumed during manufacturing.
The two types of items under the stores department are:
a. Billable items
b. Non- billable items
a. Billable items
Billable items are those, which are procured from outside sources.
They include machine spares, gear parts, tool – holders, cutting
tools, grinding mills and consumables.
b. Non- billable items
Non- billable items are the items, which are procured Bhosari
(Pune). They include forging (shaft, flange), gear blanks, sun gear,
 ring gear, hub reduction, sprocket drive, sprocket driven, hub
sleeve etc.
The Key performance indicator of stores departments is Material Yield of
month.

Receipt of material and preparation of GRR (Goods received cum

inspection report) Receive the material:
The material from vendors/ suppliers / sub-contractors are received
Check for correctness of received material
Identification of received material
Preparation of goods received cum inspection report.

Storage and handling:

❖ Arranging to store the semi-finished components in the respected
allocated areas.
❖ Arrange to stores the consumables in allocated respective bins in the
racks
❖ Forgings issued to sub contractor for roughing operations are to be
unloaded.
❖ Ion forgings areas allocated in respective containers

Preservation:
❖ Check periodically once in three months i.e., quarterly for deterioration of
materials.
❖ Check for expiry date items etc, and prepare list of expiry date items

Dispatch of finish components:

❖ Collect details of components to be dispatched from daily standing
meeting with production, planning and control (PPC) department.
❖ Arrange for transit insurance; collect material return to stores (MRS) from
manufacturing department.
❖ Prepare non returnable delivery challan, while preparing the above challan
check for serial number, P.O. number, quantity, rate, amount and tempo
details in which components are being loaded.
❖ Dispatch of components are made in dedicated trays and transported to
Pune in LCV (Light commercial vehicle).
❖ Arrange for loading in the vehicle such that no space is left between trays
to avoid transit damages.

The material yield of month is calculated as follows:

Total dispatches – Line rejection note + closing stock x 100

Opening balance + receipts
= Percentage of material yield for month

Responsibilities and Authorities of Stores Department:

• To ensure packing / packing of finished products, being dispatched to
customers
• To maintain stocks of material while working towards minimizing the
inventory levels and maintaining “First in – First out” movements of
materials.
• Ensure strict compliance of rules of government authorities, in excise,
octroi procedures.
• Maintain accounts of material
• Ensure return of rejected material time to time and preparation of RGN
(rejected goods note).
• Preparation of GRR (Goods received cum inspection report) of receipt
material.
 Procedure for Budget:
In order to control the annual budget, the management has budget the
expenses for each department.
The Managing Director approves annual budget and it is responsibility to
manage within the budget by the concerned head of the department. All
head of the departments are empowered to manage their department
budget.

Implementation of annual budget procedure is as under:

Every year in 1st week of January, each department is given headcount
wise annual budget to Accounts Department. HR department budgets, the
expenses under the following heads:
1. Training
2. Housekeeping
3. Vehicle maintenance
4. Vehicle fuel
5. Staff welfare 6. Telecommunication
7. Other expenses.
Finance department puts up all department’s annual budget to managing
director for review and final approval. After approval of Managing Director,
Finance department informs the allocation of budget to each department
head. The Finance department organizes a monthly review meeting,
named as Budget Review Meeting.

3.Human Resource (HRD)

This business process maintains the details of Human Resource.
They help other business to acquire new personnel and improve
 competence of employees. This is done by way of effective training
activity as per the needs specified by other business processes.
Induction Training Programme
At Divgi Warner Private Limited four days induction training programme is
conducted for all new employees. All new employees must undergo an
induction training programme. The purpose of induction training
programme is to ensure that the new employee gets familiar with the
company’s day -to-day operations.
Cleanliness of Premises: HOD (HR) ensures that premises are neat &
clean. Any material available is neatly placed & duly identified. Any repairs
to building & infrastructure required to fulfill product & manufacturing
process needs are timely carried out. Any material is promptly removed.
Every month, any deterioration in material is brought to notice of CEO for
further actions

Employee Training: I.
Basic Job Training
II. General Training
III. Further Training
Basic Job Training:
All employees will be trained in the operation of machinery &
equipment specific to their function. Before using such machines or
equipments, employees are to be informed of the hazards that are
likely to occur.
General Training:
All employees will be briefed & receive training in the following:
Accident prevention in the operation of machinery & equipment.
Accident reporting
Good Housekeeping
Company safety, health & environment policy.
 Responsibilities under the current safety, health & environment
legislation.
Further Training:
• On – site emergency plan
• Emergency Skills
• Safety, health & environment audit

Performance Appraisal
Once the employee is confirmed he shall be considered for an annual
appraisal every year effective 1st of January.
Appraisal will be based on his overall performance including
attendance; sincerity to meet his pre agreed key performance areas
& objectives.
At the time of appraisal employee is required to give certain KPA’s
(Key performance areas) for next year with specific targets. It is
expected the employee shall monitor his KPA’s. Depending on
performance of KPA’s employee will be considered for annual
increments.
Leave Policy:
In order to control the absenteeism in day – to – day working and avoid
unplanned leave, management has made certain rules and regulations as
under

Entitlement of Leave:
Every employee other than managers and above will be granted, in each
calendar year, the following leave. o Earned Leave( E.L.) – 15 days o
Casual leaves ( C.L.) – 10 days o Sick leave ( S.L.) – 5 days
Leave for managers and, above will be as per the terms of appointment
letters issued to individual employees.
 Functions of HR Department:
➢ To organize necessary training programs
➢ Assist HOD for human resource acquisition
➢ Maintain all statutory requirements on time, as given out in Gazette
notification and government orders from time to time. This also involves
compliance and renewal of various licenses under Factories Act,
Minimum wages Act, Payment of wages Act, Workmen’s Compensation
Act, Gratuity Act etc.
➢ Maintain records of employees including attendance, leave record and
training record.
➢ To collect training needs through skill matrix from various functions and
prepare training plan.
➢ Upkeep of factory premises.
➢ Arranging and up keeping of company vehicles
➢ Providing and maintaining a conducive atmosphere for work and
enhances performance of employees.
➢ Plan and arrange sports as a part of employee motivation.

Health and Safety Policy :

It is the policy of Divgi Warner Limited to ensure as is reasonably practicable,
the health, safety and welfare of all its employees, contractors and other
persons who may be affected by its operations. The policy is applied equally,
fairly and without exception.
The company’s policy aims to achieve this by providing
and maintaining places of work and equipment which are safe, by the operation
of system of work, which are free from risks to health and also provide suitable
arrangements for the safety and protection of employees.

SkillS
I - Informed – Training.
L – Learned – Training Evaluation.
U – Understand – Minor supports from others.
O – Operating – Independent.
M – Master – Train to others.
ISO 9001 certified and in May 2002, DIPL got TS (Technical Specification) –
16949 certification. Under Writers Laboratories Inc. has issued TS – 16949
certification to DIPL after assessing the firm’s quality system & finding it in
compliance with ISO / TS 16949 : 2002.

4. Quality System
It consists of four Quality Management Systems:
a) ISO-9001
b) ISO-9002
c) ISO-9003
d) ISO-9004

ISO-9001 is given to those companies that will do designing as well as

manufacturing, marketing and service.
ISO-9002 is given to those companies that will do only manufacturing, marketing
and service.
ISO-9003 is given to those companies for servicing, calibration and testing.
ISO-9004 is given only for service. It is vocabulary (guidelines for above
systems).
After 1994 a new system was incorporated QS-9000. It consists of two sections.
Section I includes basic segments of ISO series and
Section II is customer specific requirements
QS- 9000 is basically formed the big 3’s viz., General Motors, Chrysler, Ford
and other manufactures.
Later in 2000 they formed TS-16949 and the latest updation is of version TS-
16949, 2002 the fundamentals for this system is ISO- 9001, 2000 and ISO9004,
2000.

Why go for TS-16949?

TS-16949 is a license for doing business with the customers and
implementation of TS-16949 develops a common understating of quality related
expectations, methods and practices with the customers. The common
understanding and assurance it brings leads to:
✓ Simplifying many different detailed decisions and work methods in
managing and continually improving quality
✓ Motivating and empowering people to take action to improve effectiveness
and efficiency of their work processes in disciplined way.
✓ Co-coordinating the actions of different people in an efficient way to give
customers a defect and hassle free experience.

TS-16949 standard belief:

TS-16949 is a quality management system that helps us continually improve the
effectiveness and efficiency of our processes for products and services to our
customers by emphasizing.
• Defect prevention
• Reduction in variation and waste in our supply chain.
Functions of Quality System:
➢ To co-ordinate the (APQP) advanced production quality planning meeting.
➢ To maintain the distribution control of quality system documents
➢ Execute IQA’s ( Internal quality audits) as per plan
➢ Maintain IQA ( Internal Quality audit ) reports and analyze the findings and
monitor the target dates of action ➢ Arrange for plant level operation
review meeting ➢ Maintain relevant quality system records.

5. Maintenance Department
The Maintenance Department is concerned with the Maintenance
of machines utilities like air compressor, diesel generator set, and IT equipments
like computer fax machines, scanner and printers.

There are three type of Maintenance :

a. Breakdown Maintenance
b. Preventive Maintenance
c. Predictive Maintenance

a). Breakdown Maintenance:

In the case of breakdown maintenance the machines are attended only when
the process has stopped or after the breakdown.

b). Preventive Maintenance

In the case of preventive maintenance machines are maintained in such a way
to prevent occurrence by regular inspection, cleaning, greasing etc, as the case
may be.

c). Predictive Maintenance

Predictive Maintenance is where the life of each spare part is determined
and at the end of the period spare part is replaced with new one whether it is
damaged or not.
Maintenance schedule are prepared on monthly, quarterly, semiquarterly
and yearly basis.
Functions of Maintenance Department:
➢ To identify key process equipments
➢ To rectify day- to –day breakdown of the equipments
➢ To plan and procure the spare parts equipments Maintenance
➢ To maintain and update all records related to breakdown/ calibration/
installation and commissioning / retrofitting/ spare parts etc.
➢ Provide adequate support to organization by keeping the equipments
under proper working condition, to support qualitative and cost effective
manufacturing of products.
➢ Design and implement an effective preventive and predictive maintenance
system so as to keep high uptime for equipment
➢ Recondition old equipments to effectively maintain machine capability and
retrofit the new technology to enable more effective capital deployment for
minimizing unscheduled downtime and maintain machine capability.

6. Manufacturing Department
This business process manufactures product as per production orders
released by planning. They follow the entire standard, i.e. quality and process
to realize the products. They assist manufacturing engineering to establish the
new manufacturing process. They develop various job/ work instructions to
guide operations to perform better and better. They plan and accomplish
manufacturing of products so that customer requirements are fulfilled. This
business process ensures maintenance of manufacturing fixtures and tooling
required for product realization.
Monitoring and Measurement of Manufacturing processes:
1. During initial process approvals, the new processes are studied with the
help of PFMEA (Process Failure Mode Effective Analysis) to establish
process controls to achieve process capability. The results o such process
studies are documented in PFMEA ( Process Failure Mode Effective
Analysis) and developed to further documents like process plans,
maintenance check sheet’s tooling manual. These documents also
contain acceptance criteria of relevant process parameters.
2. We achieve and maintain manufacturing process performance
capabilities, functional heads of manufacturing and quality assurance
ensure that PFD (Process Flow Diagram), CP (control Plan), process plan
when acceptance criteria is not met with.
3. Significant process events such as tool change, machine repair etc. are
recorded in process monitoring charts.
4. 100% inspection of products is done at stages for critical special
characteristics whenever process becomes unstable or process capability
is lower then target. For other characteristics 100% inspection decision is
taken depending upon making on further process in house or customer
end, results are recorded in inspection reports.

Functions of Manufacturing Department:

➢ To identify the tooling resources.
➢ To identify process special characteristics as per (production part approval
process) PPAP and company procedures.
 ➢ To prepare process maintaining and operator instructions
➢ To Identity manpower requirements
➢ To maintain the process control in manufacturing
➢ Provide smooth flow of production as per schedule, under the overall
guidance of plant in charge.
➢ Execution of development activity by participating in APQP (Advanced
Production Quality Planning) System.
➢ Optimize utilization of manpower and machines as per production plan.
➢ Ensure safety and cleanness of plant and machine.
➢ Plan and procure jigs, fixtures and tooling required for production function.
➢ Maintaining and updating all records related to process charge.
➢ Co-ordinate with other works functionaries to ensure effective on going
production
➢ Work towards zero defect production system with the help of predestinated
process.
➢ Adoption of new technology for manufacturing process to improve the
quality and cost effectiveness.

7. Quality Assurance
Quality Assurance is given for finished products. For every machine
Quality audit report is prepared and certain observations are noted down.
Statistical process control is carried out by once in 15 days. It is an important
tool in the machine shop. Different products/ processes are evaluated through
audits and feed back is given to the manufacturing management for further
improvements.

Function of Quality Assurance:

➢ To identify the acceptance criteria of receipt stage ( for attribute
characteristics visual inspection )
➢ To prepare receipt and final product Quality plan.
➢ To maintain all inspection and test records.
➢ To select appropriate IMTE (Instrument Measuring Test Equipment) and
calibrate all IMTE at prescribed interval.
➢ To maintain all calibration records.
➢ To prepare and execute plan.
➢ Ensure non- confirming products are not supplied to customers and also
ensure proper identification at all stages of manufacturing.
➢ Verification and control of PPAP (Production Part Approval Process)
reports and samples.
➢ Analyze monthly rejection data on LRN ( Line Rejection Note ) Basis
➢ Ensure calibrated and capable inspection, measuring and test equipments
are available for accurate evaluation of products.
➢ Evaluate different products/ processes through audits and give feedback
to manufacturing/ management for improvements.
➢ Ensure planning for product quality from “Development stage”. APQP
(Advanced Production Quality Planning), with the use of proper gauging
and process control techniques.

8. Finance and Accounts Department:

Finance is essential component of the business. To maintain this effectively a
specialized department is there i.e. Finance Department. This department is
concerned with the day to day financial activities like consumable purchase,
sale, payments, receipts etc. It properly manages the accounts of concerned
year.
Functions:
➢ Cash handling –petty cash handlings
➢ Bank transactions – cash withdrawals, maintaining record of bank
balance, details of check payments.
➢ Preparation of statements for funds requirements of the month including
statutory and supplier payments.
➢ Recording of all the transactions in the books of accounts ➢ Preparation
of cash flow statement budget.
.

SKILLS
The skills required for every level in the organization are well defined through a
skill matrix exhaustively. For example in the stores department the skills
identified by Manager are – communication skills, negotiation skills,
interpersonal skills, Managerial skills, computational skills and problem solving
skills.
A team of top management assesses these skills through a competency matrix
& training needs are recommended by the respective section heads in order to
improve the weak areas. For top management, wherever necessary the
company employs outside agencies to assess the skills & competency levels.
Training is given to the identified employees in all the levels in house, outside
as well as on – job.

STYLE
The organization style of management can be described as to participative
in nature at various levels.
❖ Every day representatives from the all the departments meet together &
discuss the progress of the jobs & any difficulties faced. Decisions to solve
the bottlenecks are taken & time frames are fixed with specific
responsibilities to the person of related department. However the
management gives all the support to sole the problem.
 ❖ On a weekly basis the progress of the job is reviewed by the section heads,
which is chaired by the head of the plant. Major decisions related to project
status, customer readiness, site condition, status of the component parts
etc. shall be discussed & appropriate decisions are taken.
❖ Employees are treated in a most friendly way rather than boss –
subordinate way & suggestions are taken from all the level for improving
the process however trivial it may be.
❖ Top management always encourages changes for betterment of the
organization. The staff is also given continual training to cope up with the
changing scenario & to keep their skills abreast with the latest technology
& methods.
❖ Apart from regular official work, the employees participate in various
recreational activities during festivals by organizing sports, competitions
etc.
❖ The success of the organization is attributed to each & every person & not
a single key person as DWPL gives importance to the efforts of the entire
staff.

STRATEGY
The company has adopted the strategy of ‘Continual Improvement’.
Continual improvement is a way of life and part of DIPL’s culture. It is
comprehensive & all encompassing system of methods & practices based on
continuous learning to achieve greater effectiveness & efficiency of the business
processes. It is driven by a close understanding of our customers to give them
a defect & hassle free experience, disciplined use of facts, data & analysis and
diligent business processes to reduce variation & waste.
Continual Improvement helps to:
➢ Continually improve the effectiveness and efficiency of the organization’s
processes for its products and services
➢ Enhance Customer Satisfaction by emphasizing the fundamental principle
of :
- Defect Prevention
- Reduction of variation and waste in Supply chain.

SYSTEM
System followed by DIPL to Improve the Work Place - JAPANESE 5S
5S is a system of steps and procedures that can be used by individuals
and teams to arrange work areas in the manner to optimize performance,
comfort, safety and cleanliness.
'5S' driven workplace enhances productivity and competitiveness and
fosters a productivity culture through a continual process of identifying, reducing
and eliminating Waste.'5S' helps:

• Identify, Reduce and Eliminate Waste

• Organized & World Class Workplace Enhancement in Productivity &
Competitiveness
• Better Living and improved work life
• “5S'' is a tool with Japanese roots, focused on fostering and sustaining
high quality house keeping, Safety (preventing accidents).
• Quality (preventing errors) and equipment maintenance (reduction in
breakdowns).
• Safety (preventing accidents),
• Inculcates in the employees a mentality for continuous improvement.

“A place for every thing and every thing in its place.”

JAPAN TRANSLATION ENGLISH WORD
Seivi Organization Sorting

Seiton Neatness Simplifying Access

Seiso Cleaning Sweeping

Seiketsu Standardization Standardization

Shitsuke Discipline Self Discipline

• Seiri : Sorting out - "When in doubt, throw it out"

• Seiton : Systematic Arrangement Straighten - Everything has a place,
everything in its place
• Seiso : Spic and Span Scrub - Clean it up
• Seiketsu : Standardizing- Stabilize - Standardized cleaning and
housekeeping
• Shitsuke : Self-discipline -Sustain - Make it a way of life .

''5S'' is the beginning of a productive life for everyone in DWPL and is

fundamental to productivity improvement. A clean, organized and systematic
workplace directly impacts Waste and thus impacts Productivity, Quality,
Costs and other factors.’5S’is a time tested and proven approach (infact a
stepping stone) to achieving World-Class status.

STAFF
The staff of DIPL – Top, middle and lower management have nurtured following
qualification thereby being able to meet the expectations of their valuable
customers.
❖ Quality: DIPL staff maintains professional attitude among all employees.

❖ Line & Staff Relationship:

Line refers to those positions of an organization, which have
responsibility, authority and is accountable for accomplishment of primary
objectives. The relationship existing between two managers due to delegations
of authority and responsibility and giving or receiving instructions or orders is
called line relationship. Line authority represents uninterrupted series of
authority and responsibility delegating down the management hierarchy.
DIPL has adopted Line & Staff organizational structure that offers individual the
opportunity to meaningfully learn & participate across diverse business
processes.
The Managing Director of this company is CEO for the Quality Management
System. He is overall in-charge overseeing the overall growth of the company,
whereas plant heads look after day -to -day activities.
The business process heads, as shown in overall organization chart, are
treated as top management to establish, implement, maintain & continually
improve effectiveness of Quality management to establish, implement, maintain
& continually improve effectiveness of Quality Management System. The
Deputy General Manager follows the Managing Director. The team leaders of
various departments report to the Deputy General Manager.

SHARED VALUES

Organization Purpose:
➢ To pursue excellence in all spheres of our business activity
through a process of continual improvement
 ➢ To produce detect – and hassle free quality products & services
to meet or exceed customer expectations.
➢ To attain leadership in the market.
➢ Commitment to high standards of motivation & competency that
is essential to the persuit of excellence.

The company is achieving its objectives through Key Performance

Indicators (KPI’s). Top management has defined measurable KPI’s for each
business process which are also Quality objectives for the company. Each
business process owner utilizes Multi-disciplinary action approach to measure
and analyze the data & information to arrive at a action plan which is
implemented & reviewed every month. This monthly review also serves as one
activity to improve & maintain internal communication. These KPI’s are for
overall functioning of business processes.
Quality objectives are deployed within the organization through KPI’s. While
defining KPI’s company ensures that all KPI’s are:
S - Specific
M - Measurable
A - Achievable
R - Realistic
T - Time Bound

The status of KPI’s is shared within the team for sustaining or improving
the performance. The status of KPI with the action plan is shared with the
management in various forums, which range from weekly to quarterly forums.

SWOT Analysis
Strengths of DIPL:
The quality management system is in Corporate Culture:
DIPL are committed to customer satisfaction at all levels in the organization.
DIPL has Quality Assurance and QMS departments where in all the queries,
difficulties or any type of assistance required by customer is taken care. The
issues relating to customer complaints, resolutions, corrective actions etc.,
suggestions by customers for improvement in processes / products are
discussed on weekly basis and actions are initiated to resolve the problems.
DIPL provides total transparency in dealing with its customers and are
committed to enhance their capabilities, by providing them with latest
technological advantage and utilizing maximum capacity to meet their
requirements.
They process the knowledge and the technology that is relevant to the
products being designed, manufactured and supplied.
Company has On-line communication system, capable to be linked with
customer’s On-line system.
➢ line with QS-TS-16949 certification, which can achieve a good
market for its product at global level.
➢ The company has adopted Continual Improvement philosophy,
which helps to achieve greater effectiveness & efficiency in all
the business processes.
➢ Customer complaints are systematically handled through team
– oriented problem solving 8 – D methodology for internal as
well as external concerns.
➢ There is well- designed automation & workstation near every
machine, which are operator friendly.
➢ There is teamwork among the employees in the company.
➢ Each process (activity) is measured for effectiveness &
efficiency to meet quality objectives. Competency to adopt new
system, implementation, practice & sustenance.
 ➢ Most of the workforce comprises of well informed, competent
youngsters qualified with diploma or graduation in engineering.
Global Scenario:
➢ Divgi is one among the world – class competitors at global level.
➢ DIPL works with world’s best logistics agencies to bring
unbeatable value & supply chain management capabilities from
India to right at your door step across the globe.
➢ Packaging developed to minimize dunnage at assembly plants
while protecting materials in transit to any part of world.

\
Weakness of DIPL:

1. DIPL is situated in a remote place or area, which is far away from

metropolitan cities, and it is not connected with national or state highways.
2. The lack of connectivity with proper roads & highways leads to the problem
of procuring inputs & delivery of outputs.
3. There is transportation problem because Sirsi is a hilly region above sea
level so there is no facility of railways, which is the faster means of
transportation than roadways.
4. The company hires employees on contract basis, which makes rigorous
training essential.

Opportunities at DIPL:

1. There is a scope for making final products instead of component parts and
make it available for profit & loss.
2. There is an opportunity for making future expansion in business by going
for joint ventures & tie-ups with other company’s also.
 3. The company provides various employment opportunities to new
graduates & local people of Sirsi.
4. By adopting QMS – ISO 14001, the next aim of the company is to
“Deming Award” of certified by Japanese, which is given for quality
management systems.
5. The vast area of land & space of building can be effectively used for future
expansions.

Threats of DIPL:

DIPL, Sirsi mainly depends on the parent company i.e. DWPL,Sirsi and Pune.
The parent may change its base of manufacturing for marketing its products
outside India.

The major raw material used in the production is steel, presently there is a huge
demand for steel & there is rise in the price of steel for last few years in India &
all over the world. The rise in the input cost will reduce the margin of the
company.

There is always a risk of change in Government Policies.

Title of the Study: “A Study on Working Capital Management with

reference to Divgi Industries Private Ltd. SIRSI.”

Working Capital Management

Definition:
Working Capital Management is defined as, “a process of determining quantum
of current of assets to be held at a right time, so as to discharge current liabilities
and thereby utilizing them to their maximum extent, and at the same time
increasing over all value of the firm keeping the liquidity position intact.
Working capital management is the functional area of finance. It involves
the formulation of policies for managing the current assets and current liabilities
so as to maximize the benefits arising there from. Management of working
capital involves deciding upon the amount and composition of current assets
and tapping proper sources of finance for acquiring current assets. Hence
proper management of working capital ensures adequate investments in current
assets avoiding the possible losses arising out of deficit or excess funds.

Objectives of the Study:

1. To know the financial position of the company access.
2. To assess the financial strengths and weakness of the company to give
valuable suggestions to attain operational excellence.
3. To study the importance of Working Capital Management in a manufacturing
concern.
4. To study and evaluate the present Cash Management system of the
company.
5. To suggest strategies to improve the liquidity position of the company.

Methodology of Data Collection

Research methodology is a systematic way for solving any research problem.
It’s a science of analyzing how research is done scientifically. It studies the
various steps that are generally adopted by a researcher in studying the
research problem.
Sources of Data:
There are 2 types of data:
1. Primary Data
2. Secondary Data
 Primary Data
The primary data are those which are collected fresh for the first time and thus
happen to be original in character. The primary data collection involves the
collecting of information for the first time by observation, experimentation,
questionnaire and through interview schedule in the original form by the
researcher himself or his nominees.
Plan of action:
The primary data was collected through discussion with the finance manager
using the interview schedule. This data was obtained to study the latest
procedures relating to working capital management and cash management
system followed by the company.
Secondary Data
The secondary data are those which have been collected by some other and
which have been processed. Generally speaking secondary data are
information, which have been previously collected by some organization to
satisfy its own need. But the department under reference for an entirely different
reason is using it.

There are two main sources for Secondary Data:

✓ Published Data: Data that is already available in books, magazines, trade
journals, newspapers, reports, prepared by research scholar etc.
✓ Unpublished Data: This is not published; it can be found in unpublished
biographies, autobiographies, some governmental aspects and private
individual organizations etc.
The Secondary data used in the study are:
1. Annual Report of the company.
2. Published financial reports of the company.
3. Financial records and stores manual of the company.
4. Directors reports, auditors report and other schedules.
 Statement of the Problem:
Financial statements can provide valuable insights into a firm’s performance.
Analysis of financial statements is useful for the company to evaluate its own
performance and also it is of interest to lenders (short term as well as long term),
investors, security analysts, managers and others. To evaluate the effectiveness
of operations and to determine its success an analyst has to combine
quantitative results with qualitative factors. For instance a company’s current
profitability may be low. However, because of actions initiated by the
management like technology up gradation, joint venture and collaboration with
a foreign partner, etc. The prospects for better performance of the company in
future may be bright.
To fulfill its endeavor to maximize the shareholder’s wealth, firm has to
earn sufficient return from its operations, which needs a successful sales
activity. The firm has to invest sufficient funds in current asset to succeed in
sales, as the sales do not convert into cash instantaneously because of time
gap between the sale of goods and actual receipt in cash. Hence there is a need
for Working Capital in the form of current assets to sustain sales activity during
that period.
 Limitations of the Study:

➢ The span of study is confined to only 5 years. The comparison

➢ of various ratios may not have the same conditions, which may result
in unrelated comparisons.

➢ DIPL depends completely on Divgi Warner Pvt. Ltd (Pune) for

procurement of raw materials & supply of finished goods. Hence the
Working Capital Inventory management techniques have to be
adjusted on a timely basis, based on DWPL’s needs.

➢ In this project report the Working Capital Management & Cash

Management system followed during the time of doing the project is
recorded and analyzed.

Need and Importance of Working Capital:

To fulfill its endeavor to maximize the shareholder’s wealth, firm has to earn
sufficient return from its operations, which needs a successful sales activity. The
firm has to invest sufficient funds in current asset to succeed in sales, as the
sales do not convert into cash instantaneously because of time gap between
the sale of goods and actual receipt in cash.
Hence there is a need for Working Capital in the form of current assets to
sustain sales activity during that period.
 The need for Working Capital arises for following reasons:
➢ To purchase raw-materials, spare parts and other components
➢ To pay wages and salaries and other charges
➢ To meet over-head expenses
➢ To pay selling and distribution expenses
➢ To grant credit facility to customers
➢ To hold adequate stock of raw-materials finished goods, spare parts,
etc.
➢ To provide for Contingencies.

Principles of Working Capital:

➢ Principle of Risk Assumption
➢ Principle of Net Worth Position
➢ Principle of Maturity of Payment
➢ Principle of Cost of Capital

Classification of Working Capital:

1. Gross Working Capital
2. Net Working Capital
3. Permanent Working Capital
4. Temporary or Fluctuating Working Capital
5. Negative Working Capital
1. Gross Working Capital: The gross working capital consists of total current
assets. It provides the correct amount of working capital required at the right
time. In financial management, the major thrust is upon the management of
current assets. It tries to maximize return on investment by avoiding two
extremes. Excessive investment in current assets simply reduces the
profitability of an enterprise, since, the investment becomes idle. Whereas,
inadequate working capital effects the solvency of the company negatively.
2. Net Working Capital: Net working capital is defined as the difference
between current assets and current liabilities. A company has to give more
importance to liquidity, because inability to pay short-term creditors may prove
to be dangerous to the organization. Current assets should be sufficiently
above the current liabilities low liquidity is harmful to the solvency of the
company.
3. Permanent Working Capital: It refers to the current assets that are required
to be maintained continuously throughout the year to carry on the business
operations. In other words, it represents that part of the working capital which
remains permanent in the business, in one form or the other in the same way
as the fixed assets. For e.g. Cash or bank balance, stock-intrade to be
maintained as minimum to carry on business operations at any time.
4. Temporary or Fluctuating Working Capital: It refers to the additional
current assets required to meet the changing demands of an industrial or
business enterprise caused by seasonal change. During peak season, a
company requires additional funds to hold extra stock of goods. Thus,
fluctuating working capital is not permanently locked up unlike the fixed working
capital. It varies according to the changes in the volume of business caused by
seasonal changes or any other factors.
5. Negative Working Capital: It refers to the deficit working capital. When the
current liabilities exceed the current assets it is known as negative working
capital. Under this situation a firm actually suffers from the shortage of funds
and is a sign of unhealthy developments in business. It results in damage to the
reputation of a concern.

Current Assets
Current assets are those assets, which in the normal course of business,
convertible into cash within a short period of time i.e. an accounting year (or
operating cycle)
Components of Current Assets:
➢ Stock of materials in trade and in transit
➢ Stores and spare parts
➢ Bills of exchange
➢ Loans and advances
➢ Deposits
➢ Cash and Bank bal
➢ Investment in Govt. and other securities
➢ Amount due from subsidiary Companies etc.
➢ Prepaid expenses
➢ Outstanding Incomes.
Current Liabilities
Current Liabilities include all the obligations of the concern that are
maturing within an accounting year.
Components of Current Liabilities:
➢ Sundry Creditors.
➢ Loans from bank & others
➢ Provision for taxation, dividend etc.
➢ Liabilities towards gratuity etc
➢ Outstanding expenses
➢ Incomes received in advance.

Operating Cycle of Working Capital

Operating cycle refers to the length of time involved between the sales & their
actual realization in cash.
In other words, it is the cycle time required in conversion of:
a. Cash to raw materials
b. Raw materials to work in process
c. Work in process to finished goods
d. Finished goods to Accounts Receivables(A / R)
e. A / R to Cash

The operating cycle of DIPL is as follows:

➢ Purchase of resources such as Raw Material, labour, power and fuel etc.
with cash.
➢ Conversion of Raw Material into Work-in-Process into finished goods.
➢ Sale of finished product either for cash or on credit. Credit sale create book
debts for collection.
➢ Conversion of book debt (Accounts Receivables) into cash.

The operating cycle of DIPL may be diagrammatically shown as:

 CASH RAW
MATERIAL

Accounts Work in
Receivables Process

FINISHED
GOODS

The above phases affect the cash flows. The cash inflows and cash outflows
are neither synchronized nor certain. The firm needs to maintain liquidity to
purchase raw material and pay expenses such as wages. Salaries other
manufacturing and administration & selling expenses and taxes, as the cash
outflows are certain. It surplus cash is available at any time in an intermediary
state should be invested in short term securities without keeping it idle. Longer
the duration of the operating cycle greater is the extent of working capital
requirements.
Generally, the operating cycle is lengthier in case of manufacturing industries.

Operating Cycle with reference to DIPL may be calculated as follows:

Operating Cycle = Inventory Period + A / R Period – Accounts Payable Period.

= 2 Days + 60 Days – 60 Days
= 2 Days.

Financial Sources for Working Capital

The firm can finance its Working Capital needs from different sources of funds
using different approaches. The sources of funds are categorized as:-
 Long term financial

sources Short term

financial sources
Spontaneous sources.

Long Term Financial Sources: Long term financial sources are sources
through which funds are raised for a longer period of time i.e. more than 1 year.
It is used mainly to finance permanent assets. Following are the long term
financial sources:
➢ Equity Shares
➢ Preference Shares
➢ Debentures
➢ Retained Earnings
➢ Loans and advances from banks and specialized financial institutions.
➢ Public Deposits

Short Term Financial Sources: Short term financial sources provide financial
assistance for a shorter period of less that one year. The firm must arrange
these sources in advance to meet day-to-day operational expenses. Following
are the short term financial sources:
➢ Trade Credit
➢ Customer’s Advance
➢ Installment Credit
➢ Discounting of bills
➢ Bank Finance
➢ Factoring

Spontaneous Sources: Spontaneous sources refer to the automatic or instant

funds which arise in the regular courses of business operation. The major
sources of such financing are trade credit & outstanding expenses.
 Analysis of Gross Working Capital
Concept: Gross working capital refers to the total current assets which include
debtors, cash and bank balances and loans and advances.
2003-04 2004-05 2005-06 2006-07 2007-08

Debtors 20,35,974 15,17,190 23,88,962 24,83,950 33,12,312

Cash and 50,913 32,588 2,30,605 40,694 12,913

Bank
balances

Loans and 2,32,801 3,61,417 6,24,889 9,80,256 14,45,510

Advances

Total 23,19,688 19,11,195 32,44,456 35,04.900 47,70,735

Table 1: Composition of Gross Working Capital

Interpretation: The debtors balance has increased over the years which
shows that lot of funds have been blocked up in the debtors and where the
company needs to improve its credit policy.
The cash and bank balances has increased considerably in the year 2005-06
which shows that the company is trying to maintain a good liquidity position.
The gross working capital is increasing over the years mainly because of
increase in the debtors and loans and advances. But in the year 2005-06 less
than 75% of the gross working capital is made up by debtors which is a sign of
improvement compared to the previous years.

NET WORKING CAPITAL

Concept: Net working capital is the difference between current assets and
current liabilities.
 Year Current Current Networking
Assets Liabilities Capital
2003-04 23,19,688.84 24,54,857.93 (1,35,169.09)

2004-05 19,11,194.6 21,06,271.35 (1,95,076.75)

2005-06 32,44,456.39 22,66,085.75 9,78,370.64

2006-07 35,04,899.10 25,18,040.70 9,86,858.40

2007-08 47,70,735.74 12,68,630.90 35,02,104.84

Table 2: Net Working Capital

Interpretation:
In the years 2003-04 and 2004-05, DIPL had a negative working capital which
is not a favorable position to the company. But in the year 2005-06, 2006-07
and 2007-08 the net working capital has improved drastically compared to
previous years, which shows that the liquidity position of the company has
improved. Hence there is much capital available with the company to pay off the
current liabilities.

Statement of Changes in Working Capital for year 2003-04

Particulars 31.3.04 31.3.03 Increase Decrease

Current Assets 20,35,974.00 20,35,974.00
Debtors
Divgi Warner Pvt. Ltd.
Cash and Bank
Balance 40,022.87 4,686.00 35,336.87
Cash in Hand 8,980.00 85.00 8,895.00
Sirsi Urban Co-op, Bank 1,910.17 - 1,910.17
Sirsi Urban Co-op, Bank
Loans and Advances
Advance Modi Xerox 5,340.00 5,340.00
Centre 26,093.00 26,093.00
Divgi Metal Ware Pvt.,
Ltd. Pune
Advanced Partnership in 76,619.00
which directors are
interested.
66,890.00 48,170.00 18,720.00
Other Advances 42,486.00 42,486.00
Electricity Deposit 91,992.00 91,992.00
Advanced to Staff &
Workers T.D.S.
Total 23,19,688.84 2,41,654.00 20,78,034.80

Current Liabilities
Creditors for suppliers & 21,40,125.93 1,55,912.00 19,84,213.93
services
Creditors for outstanding 3,14,732.00 11,261.00 3,03,471.00
expenses

Total 24,54,857.93 1,67,173.00 22,87,684.93

Net Working Capital

(Current Asset – Current (1,35,169.09) 74,481.00 (2,09,650.09)
Liability)

Table 3: Statement of changes in Working Capital for the year 2003-04

Statement of Changes in Working Capital for year 2004-05

Particulars 31.3.05 31.3.04 Increase Decrease

Current Assets 15,17,190.00 20,35,974.00 5,13,784.00
Debtors
Divgi Warner Pvt. Ltd.
Cash and Bank Balance
Cash in Hand 21,384.70 40,022.87 18,638.17
Sirsi Urban Co-op, Bank 9,980.00 8,980.00 1,000.00
Sirsi Urban Co-op, Bank 1,223.27 1,910.17 686.9

Loans and Advances

Advance Modi Xerox 5,340.00 5,340.00
Centre 7,829.63 26,093.00 18,263.37
Divgi Metal Ware Pvt., Ltd.
Pune

Other Advances 66,890.00 66,890.00

Electricity Deposit 56,047.00 42,486.00 13,561.00
Advanced to Staff & 84,375.00 - 84,375.00
Workers 2,950.00 - 2,950.00
U.L. India Pvt. Ltd., 1,43,325.00 91,992.00 51,333.00
Bangalore
Gagni International, Hubli
T.D.S.
Total 19,11,194.60 23,19,688.84 4,08,494.92
Current Liabilities
Creditors for suppliers & 18,37,154.35 21,40,125.93 3,02,971.00
services
Creditors for outstanding 2,69,117.00 3,14,732.00 45,615.00
expenses

Total 21,06,271.35 24,54,857.93 3,48,586.60

Networking Capital
(Current Asset – Current (1,95,076.75) (1,35,169.09) 59,907.66
Liability)

Table 4: Statement of changes in Working Capital for the year 2004-05

Statement of Changes in Working Capital for year 2005-06

Particulars 31.3.06 31.3.05 Increase Decrease

Current Assets 23,88,962.60 15,17,190.00 8,71,772.60
Debtors
Divgi Warner Pvt. Ltd.
Cash and Bank Balance
Cash in Hand 8,594.89 21,384.70 12,789.81
Sirsi Urban Co-op, Bank 980.00 9,980.00 9,000.00
Sirsi Urban Co-op, Bank 1,96,272.87 1,223.27 1,95,049.6
Vijaya Bank 24,757.00 - 24,757.00
Loans and Advances
DWPL, Pune 7,829.63 7,829.63
DWPL, Sirsi 2,62,003.4 2,62,003.4

Other Advances
Electricity Deposit - 66,890.00 66,890.00
Advanced to Staff & 23,618.00 56,047.00 32,429.00
Workers - 84,375.00 84,375.00
U.L. India Pvt. Ltd., - 2,950.00 2,950.00
Bangalore 68,775.00 - 68,775.00
Gagni International, Hubli 2,62,663.00 1,43,325.00 1,19,338.00
Prashant Tools Pvt. Ltd.
T.D.S.
Total 32,44,456.39 19,11,194.60 13,33,261.79
Current Liabilities
Creditors for suppliers & 18,90,298.75 18,37,154.35 53,144.40
services
Creditors for outstanding 3,75,787.00 2,69,117.00 1,06,670.00
expenses

Total 22,66,085.75 21,06,271.35 1,59,814.4

Net Working Capital

(Current Asset – Current 9,78,370.64 (1,95,076.75) 11,73,447.39
Liability)

Table 5: Statement of changes in Working Capital for the year 2005-06

Statement of Changes in Working Capital for year 2006-07

Particulars 31.3.07 31.3.06 Increase Decrease

Current Assets 24,83,949.50 23,88,962.60 94,986.90
Debtors
Divgi Warner Pvt. Ltd.
Cash and Bank Balance
Cash in Hand 12,489.59 8,594.89 3894.70
Sirsi Urban Co-op, Bank 1,680.00 980.00 700.00
Sirsi Urban Co-op, Bank 999.98 1,96,272.87 1,95,272.89
Vijaya Bank kansur 24,646.00 24,757.00 111.00
Vijaya Bank sirsi 878.00 --- 878.00
Loans and Advances
DWPL, Pune 7,829.63 7,829.63
DWPL, Sirsi 5,73,656.40 2,62,003.40 3,1,653.00

Other Advances
Advanced to Staff & 17,732.00 23,618.00 5,886.00
Workers
Prashant Tools Pvt. Ltd. 1,25,000.00 68,775.00 56,225.00

T.D.S. 2,56,038.00 2,62,663.00 6,625.00

-

Total 35,04,899.10 32,44,456.39 2,60,442.71

Current Liabilities
Creditors for suppliers & 21,08,000.45 18,90,298.75 2,17,701.70
services
Creditors for outstanding 4,10,040.25 3,75,787.00 34,253.25
expenses

Total 25,18,040.70 22,66,085.75 2,51,954.95

Net Working Capital

(Current Asset – Current 9,86,858.40 9,78,370.64 8,487.76
Liability)

Table 6: Statement of changes in Working Capital for the year 2006-07

Statement of Changes in Working Capital for year 2007-08

Particulars 31.3.08 31.3.07 Increase Decrease

Current Assets
Debtors
Rediant Securities
Service ,Pune 2,872.00 ----- 2,872.00

Divgi Warner Pvt. Ltd.

Sirsi
33,09,440.50 24,83,949.50 8,25,491.00
Cash and Bank Balance
Cash in Hand
Sirsi Urban Co-op, Bank 3,787.23 12,489.59 8,702.36
Sirsi Urban Souharda Co-
op Bank 1,680.00 1680.00
Vijaya Bank Kansur
Vijaya Bank Sirsi 4,178.98 999.98 3,179.00
2,389.00 24.646.00 22,257.00
878.00 878.00
Loans and Advances
DWPL, Pune 61,329.63 7,829.63 53,500.00
DWPL, Sirsi 9,22,031.40 5,73,656.40 3.48,375.00

Other Advances
Advanced to Staff &
Workers 11,500.00 17,732.00 6,232.00
True Consultants Belgaum
. 1,25,000.00 1,25,000.00
T.D.S 3,25,649.00 2,56,038.00 69,611.00

Total 47,70,735.74 35,04,899.10 12,65,836.64

Current Liabilities
Creditors for suppliers &
services 7,25,630.65 21,08,000.45 4,52,690.20
Creditors for outstanding
exps 5,43,000.25 4,10,040.25 1,32,960.00

Total 12,68,630.90 25,18,040.70 5,85,650.20

Net Working Capital
(Current Asset – Current 35,02,104.84 9,86,858.40 25,15,246.44
Liability)

Table 7: Statement of changes in Working Capital for the year 2007-08

Interpretation:
The working capital of the company should be always positive. It should
not be negative. In the years 2003-04 and 2004-05, DIPL had a negative
working capital which is not a favorable position to the company.
It clearly shows that DIPL was a newly established company. So it was
facing shortage of working capital in initial years, so it had to increase its working
capital to stand in the business world.
Then again in the year 2005-06, 2006-07 and 2007-08 DIPL’s net working
capital has increased to Rs.9,78,370.64, Rs9,86,858.40 and Rs35,02,104.84
which is a very positive sign of prosperity and it will help DIPL to sustain its
expansion programmes.

Ratio Analysis
Ratio analysis is a widely accepted tool of financial analysis. It is defined
as a systematic use of ratio to interpret the financial statements so that the
strengths and weakness of the firm as well historical performance and current
financial conditions can be determined. The term ratio refers to the numerical or
quantitative relationship between two items or variables. Current Ratio
Concept: Current ratio is a measure of firm’s short term solvency i.e. its ability
to meet short term obligations. This ratio is also known as Working Capital ratio.
The current ratio is the ratio of total current assets to total current liabilities.

Current Assets
Current Ratio =
Current Liabilities

Year Current Assets Current Ratio

Liabilities
2003-04 23,19,688.84 24,54,857.93 0.95 : 1

2004-05 19,11,194.6 21,06,271.35 0.91 : 1

2005-06 32,44,456.39 22,66,085.75 1.43 : 1

2006-07 35,04,899.10 25,18,040.70 1.39: 1

2007-08 47,70,735.74 12,68,630.90 3.76: 1

Table 8: Current Ratio
Interpretation:
The Current Ratio was 0.95 for 2003-04 and decreased to 0.91 in the
year 2004-05 and for 2005-06 the ratio increased to 1.43.and then decreased
to1.39 in the year 2006-07 and for 2007-08 the ratio increased to 3.76.
The current ratio has met the standard of 2:1 ratio and hence it can be said that
there is enough working capital to meet the current liabilities. Hence it can be
noted that steps have been taken to increase the current ratio in the previous
financial years .so that enough working capital is available to meet the current
obligation. Thus the liquidity position, as calculated by the current ratio, is
improved in the financial year 2007-08.

Absolute Liquidity Ratio

Concept: Absolute liquidity ratio is a ratio of cash in hand and at bank to Current
Liabilities. The standard ratio is 0.5: 1.
 Cash in hand + Cash at bank
Absolute Liquidity Ratio =
Current Liabilities
Year Cash Current Ratio
Liabilities
2003-04 50,913.04 24,54,857.93 0.021 : 1

2004-05 32,587.97 21,06,271.35 0.015 : 1

2005-06 2,30,604.76 22,66,085.75 0.102 : 1

2006-07 40,693.57 25,18,040.70 0.016: 1

2007-08 12,913.21 12,68,630.90 0.010: 1

Table 9: Absolute Liquidity Ratio

Interpretation:
The absolute liquidity ratio was 0.021 for 2003-04 and decreased to
0.015 in the year 2004-05 and for the year 2005-06 the ratio increased to 0.102
and then in 2006-07 and 2007-08 the ratio decreased to 0.016 and
0.010 respectively.
The absolute liquidity ratio is below the standard of 0.5:1. It shows that the
liquidity position of the concern is not good. Hence adequate cash balance need
to be maintained by the company.

Working Capital Turnover Ratio

Concept: This ratio indicates how efficiently the working capital of the firm is
being utilized.
Sales / Income
Working Capital Turnover Ratio =
 Net working Capital
Year Sales Net Working Ratio
Capital
2003-04 58,31,018.2 (1,35,169.09) (43.14)times

2004-05 90,88,657.33 (1,95,076.75) (46.59)times

2005-06 1,22,61,058.8 9,78,370.64 12.5 times

2006-07 1,33,77,943.25 9,86,858.40 13.5 times

2007-08 1,71,49,248.50 35,02,104.84 4.89 times

Table 10: Working Capital Turnover Ratio Interpretation:
The working capital turnover ratio was negative for the years 2003-04 and
2004-05. in the year 2005-06 and 2006-07 it has increased to 12.5 times and
13.5 times respectively. But in the year 2007-08 it has considerably decreased
to 4.89 times.
Working capital turnover is the ability to generate sales per rupee of working
capital. It should always be positive but in the initial years the ratio was negative
which is not a favorable position to the company. For year 200506, 2006-07 the
ratio has improved to12.5 times and 13-5 times But in the year 2007-08 it has
decreased to 4.89 times which shows that the organization is not able to utilize
its working capital full.

Debtors Turnover Ratio

Concept: Debtors are expected to be converted into cash over a short period
of time and therefore are included in current assets. It shows how many times
debtors are converted into cash in a year.

Net Credit Sales

Debtors Turnover Ratio =
 Average Debtors
Where, Average Debtors= opening Debtors + closing Debtors
_____________________________
2
Year Credit Sales Average Debtors Ratio
2003-04 58,31,018.2 20,35,974 2.86 times

2004-05 90,88,657.33 17,76,582 5.12 times

2005-06 1,22,61,058.8 19,53,076.3 6.28 times

2006-07 1,33,77,943.25 24,36,456.05 5.49 times

2007-08 1,71,49,248.50 28,98,131.00 5.91 times

Table 11: Debtors Turnover Ratio

Interpretation:
The debtors turnover ratio was very less for the year 2003-04 at 2.86 times, it
has increased to 5.12 and 6.28 times in the years 2004-05 and 200506.
subsequently in the year 2006-07 it has decreased to 5.49 times. Again the
debtors turn over ratio has increased 5.91 times in the year 2007-08. This
shows that the company is making all the efforts to speed up the collection
process.

Debtors Conversion Period

Concept: Debtors are expected to be converted into cash over a short period
of time and therefore are included in current assets. It shows how many times
debtors are turned over during the year. It is the number of days needed for
debtors to get converted into cash.

No. of days in a year

Debtors Conversion Period =
Debtors turnover Ratio
Year Debtors Turnover Debtors Conversion
Ratio Period
2003-04 2.86 times 128 days
2004-05 5.12 times 71 days

2005-06 6.28 times 58 days

2006-07 5.49 times 66 days

2007-08 5.91 times 62 days

Table 12: Debtors Conversion Period Interpretation:
The debtors conversion period was 128 days in the year 2003-04 and over the
years it is improving by reducing debtors conversion period days it has
significantly reduced from 128 days in the year 2003-04 to just 62 days in the
current year 2007-08.
The standard period of credit allowed is 30 days, if it is less than the standard
it indicates the credit collection is efficient and if it is more, it indicates that its
credit collection is inefficient. But in the case of DIPL, even though the debtors
conversion period is falling short of the standard period. The company has
shown that it is making all the efforts to speed up the collection period.

Creditors Turnover Ratio

Concept: Creditors turnover ratio establishes relationship between net credit
purchases and average trade creditors and accounts payable. The ratio
indicates the velocity with which the creditors are turned over in relation to
purchases.
The objective of computing this ratio is to determine the efficiency with which
the creditors are managed.

Net Credit Purchases

Creditors Turnover Ratio =
Average Creditors
Where, Average Creditors= opening creditors+ closing creditors
________________________________
2

Year Credit Average Ratio

Purchases Creditors
2003-04 50,47,654.21 13,11,015.5 3.85 times

2004-05 64,38,433.5 22,80,564.6 2.82 times

2005-06 1,02,27,956.31 20,49,057.25 4.99 times

2006-07 1,11,01,526.70 23,92,063.23 4.64 times

2007-08 1,37,46,031.96 18,93,335.80 7.26 times

Table 13: Creditors Turnover Ratio

Interpretation:
The creditors turnover ratio was 3.85 times in the year 2003-04 and then
decreased to 2.82 times in the year 2004-05. In the year 2005-06 it increased
to 4.99 times. Subsequently in the current financial year 2007-08 it has
increased to 7.26 times.
Generally lower the ratio better is the liquidity position of the firm and vice versa.
But lower ratio also implies lesser discount facilities availed or higher prices paid
for the goods purchased on credit. The creditors turnover ratio is important tool
of analysis as a firm can reduce its requirement of current assets by relying on
suppliers credit.
From the above table it can be known that that the creditors turnover ratio
in the current financial year 2007-08 is increased considerably over the previous
year and hence the company’s liquidity position is not good in current years.
 Average Collection Period
Concept: Average collection period is the period within which the creditors are
repaid. Higher the credit period enjoyed by the company from its creditors,
higher will be the liquidity of the company.

365Days
Average Collection Period =
Creditors Turnover Ratio

Year Creditors Turnover Conversion Period

Ratio
2003-04 3.85 times 95 Days
2004-05 2.82 times 129 Days

2005-06 4.99 times 73 Days

2006-07 4.64 times 79 Days

2007-08 7.26 times 50 Days

Table 14: Average Collection Period

Interpretation:
Generally higher the credit period enjoyed by the company better is their
liquidity status. But the credit period has decreased in the current financial year
2007-08 to 50 days which shows that there is a prompt repayment to creditors
 Current Asset Ratio
Concept: This ratio measures sales per rupee of investment in current assets.
This ratio measures the efficiency with which current assets are employed – a
high ratio indicates a high degree of efficiency in asset utilization and a low ratio
reflects inefficient use of current assets.

Net Sales
Current Asset Ratio =
Average Current Assets

Where, Average Current Assets = opening + closing

_______________
2

Year Sales Average Current Ratio

Assets
2003-04 58,31,018.2 12,80,671.42 4.55

2004-05 90,88,657.33 21,15,441.72 4.30

2005-06 1,22,61,058.8 25,77,825.5 4.76

2006-07 1,33,77,943.25 33,74,677.74 3.96

2007-08 1,71,49,248.50 41,37,817.42 4.14

Table 15: Current Asset Ratio

Interpretation:
The current asset ratio for the year 2003-04 was 4.55 and in 2004-05 it slightly
decreased to 4.30 and in the year 2005-06 it has increased to 4.76. and then
decreased to 3.96 in the year 2006-07. In the current year 2007-08 the ratio is
slightly increased to 4.14.
The current asset ratio shows the relationship between or elasticity of
current assets to sales and it depicts how efficiently current assets are employed
in an organization to boost the sales.
 Findings:
1. View of financial position: The Company was incorporated in the year
2000, its actual commercial work started in the year 2003 April 1 st.The
Company had not started any business, so there is no question of profit
from the year 2000 to 2003. But however as a first step towards the
commencement of commercial activity the company has taken over the
business of timing gear blanker on April 2003.
2. In 2003-04 the Company started commercial activity by acquiring the
building, plant & machinery from Divgi Metal Ware Pvt. Ltd., on an annual
lease of Rs.9,00,000/- plus taxes of Rs.51,750/-. Using these leased
assets the company carried out job work for Divgi Warner Pvt. Ltd. After
expenses the company made a modest profit of Rs.3,745/- before
depreciation.
3. The debtors component in the composition of current assets is the highest.
It was 87.77% in the year 2003-04, 79.38% in 2004-05, 73.63% in 2005-
06, 70.87% in 2006-07 and 69.43% for the year 2007-08. It may be noted
that debtors components in current assets is decreasing over the years.
4. The cash and bank component for the year 2003-04 was 2.19%.it was
1.71% in 2004-05, 7.11% in 2005-06, 1.16% in 2006-07, 0.27% in 200708.
The loans and advances component was 10.04% in the year 200304,
18.91% in 2004-05, 19.26% 2005-06, 27.97% in 2006-07, 30.30% in
2007-08. The debtors component in the composition of current assets
decrease the loans and advance component is on an increase.
5. In the years 2003-04 and 2004-05, the company had a negative working
capital of Rs.1,35,169.09 and Rs.1,95,076.75 respectively which is not a
favorable position to the company. Then in the year 2005-06, 2006-07 and
2007-08 the Net Working Capital has improved drastically to
Rs.9,78,370.64 ,.Rs9,86,858.40, and Rs 35,02,104.84 respectively.

Suggestions and Recommendations:

1. The Debtors component is the highest among the five years and it
amounted to nearly 76% of the total current assets. But the percentage
has decreased over the year which is a good sign of improvement. The
second highest element is the loans and advances component which has
increased over the years because of the expansion programmes
undertaken by the company. In the initial years the company had not
maintained a considerable amount of cash and bank balances, but over
the years the company is maintaining adequate cash so as to meet its
immediate cash requirements.

2. The working capital of the company should be always positive. It should

not be negative. In the years 2003-04 and 2004-05, the company had a
negative working capital which is not a favorable position to the company.
Then again in the year 2005-06, 2006-07, and 2007-08 DIPL’s net working
capital has increased to Rs.9, 78,370.64, RS9,86,858.40, and Rs
35,02,104.84 which is a very positive sign of prosperity and it will help the
company to sustain its expansion programmes. It also shows that the
liquidity position of the company has improved. Hence there is much
capital available with the company to pay off the current liabilities.
.
3. In order to ensure liquidity and quick cash collection the company can go
for factoring technique, through which the company can get immediate
cash for its accounts receivables and employ it in business and there by
improve its profitability.
 Conclusion:

The Working Capital management contributes much in the overall

management of the organization affairs. Efficiency of organization operations
depends on how it manages its short-term business dealings. Working capital
management contributes for the firm’s efficiency as well as the bottom line by
optimally utilizing the available wealth and maintaining the required liquid

Bibliography

❖ Financial Management by M Y KHAN AND P K JAI

❖ Divgi Industries Administrative Manual.
❖ Divgi Industries Directors Report.
❖ Financial Reports of the company

Web Site Visited:

www.divgi-warner.com www.google.com