Shabeeb Rahman Kiliyenni

 CHAPTER I INTRODUCTION INTRODUCTION Every business whether big, medium or small, needs finance to carry on its operations and to achieve its target. In fact, finance is so indispensable today that it’s rightly said to be the lifeblood of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. So this chapter deals with studying various aspects of working capital management that is necessary to carry out the day-today operations. The term working capital refers to that part of firm’s capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories funds invested in current assets keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence it is known as revolving or circulating capital. On the whole, Working Capital Management performs a key function and is of top priority for every finance manager. All managers must, however, keep in mind that n their pursuit to liquidity, they should not lose sight of there basic goal of profitability. They should be able to attain a judicious mix of liquidity and profitability while managing their working capital. The topic for the study is working capital management with special reference to “HINDUSTAN NEWSPRINT LTD”KOTTAYAM. The chief objective of the study is acquire practical knowledge regarding the working capital refers to the investment in all the current asset namely cash inventories ,receivables and repaid expenses..Working capital means the capital required for day to day working in a business concern such as purchasing raw materials ,for meeting day to day expenditure as salaries, wages, rent, rates & advertising etc. In simple words capital which is required for financing short term or current assets such as cash, marketable securities, debtor & inventories. The basic goal of working capital management is to manage the current assets & current liabilities of a firm in such a way that a satisfactory level of working capital is maintained. OBJECTIVES OF THE STUDY PRIMARY OBJECTIVES: To analyze the firm’s Working Capital position. To study the working capital performance of the company. SECONDARY OBJECTIVES: To determine the composition of current assets and current liabilities. To study the operational performance of the company. To study the financial performance of the company for the last 5years. To ascertain the liquidity, solvency and profitability positions of the firm. To study the stock level. SCOPE OF THE STUDY The study is on working capital management of Hindustan Newsprint Ltd, Kottayam. The study furnishes the management of idea about the performance of working capital of the company. Management of working capital refers to management of current assets, current liabilities and relationship between them. The basic goal of working capital is to maintain the satisfactory level of working capital. A sound working capital policy ensures higher profitability and proper liquidity of a firm. Every business needs funds for two purposes: for its establishment and to carry out its day to day operations. Similarly HNL also need funds to carry out its operation and establishments. For this purpose it is important for the company to manage its short term assets and liability. Working capital is quite essential for the working of any business. For a good manufacturing company, some basic capital for producing the goods is required before it starts selling them. It has to take care of production expenses, administration expenses as well as selling expenses. Moreover, since business is usually done on credit, there is a time lag between the date of sale and date of receipt of revenues, which can be as high as 90 days at times. Considering all these, it is essential that a company has sufficient capital to keep it going before it coverts its purchases into goods and then finally into cash. Each and every study has its own scope. This project intends to study the working capital position of the HNl. This study helps to identify the areas that could be improved. Further suggestions were quoted which the company could use it in the future program enhancing better utilization of all resources. CHAPTER II INDUSTRY PROFILE INDUSTRY PROFILE Paper is one of the important industrial products used for the production of books, magazines and newspaper. Educational, government and industrial sectors cannot operate without paper. Other important paper products include cardboard, which is used in packing and adsorbent paper such as tissue and towels. The different type of the paper being produced is paper, paperboards and newsprint. Newsprint is a major material input into production of newspapers. During the course of analysis of the paper industry there is an imperative need to study the prospects of newsprint industry. Paper making is one of the inventions by Chinese. 105 A.D. is often cited as the year in which papermaking was invented. In that year, historical records show that the invention of paper was reported to the Eastern Han Emperor Ho-di by Ts'ai Lun, an official of the Imperial Court. Recent archaeological investigations, however, place the actual invention of papermaking some 200 years earlier. Ts'ai Lun broke the bark of a mulberry tree into fibres and pounded them into a sheet. Later it was discovered that the quality of paper could be much improved with the addition of rags hemp and old fish nets to the pulp. The paper was soon widely used in China and spread to the rest of world through the Silk Road. An official history written some centuries later explained: In ancient times writing was generally on bamboo or on pieces of silk, which were then called ji. But silk being expensive and bamboo heavy, these twice materials were not convenient. Then Tsai Lun thought of using tree bark hemp, rags, and fish nets. In 105 he made a report to the emperor on the process of paper making, and received high praise for his ability. From this time paper has been in use everywhere and is called the "paper of Marquis Tsai."In few years, the Chinese began to use paper for writing. Around 600 A.D. woodblock printing was invented and by 740 A.D., The first printed newspaper was seen in China. To the east, papermaking moved to Korea, where production of paper began as early as the 6th century AD. Pulp was prepared from the fibers of hemp, rattan, mulberry, bamboo, rice straw, and seaweed. According to tradition, a Korean monk named Don-Cho brought papermaking to Japan by sharing his knowledge at the Imperial Palace in approximately AD 610, sixty years after Buddhism was introduced in Japan. Along the Silk Road, we learned that paper was introduced to Xinjiang area very early according to the archaeological records. The paper found at Kaochang, Loulan, Kusha, Kotan, and Dunhuang sites dated as early as the 2nd Century. The technique eventually reached Tibet around 650 A.D. and then to India after 645 A.D. By the time Husain Tsang from China arrived to India in 671 A.D., paper was already widely used there. For a long time the Chinese closely guarded the secret of paper manufacture and tried to eliminate other Oriental centers of production to ensure a monopoly. However in 751 A.D. the Tang army was defeated by the Ottoman Turks at a mighty battle at the Tales River. Some Chinese soldiers and paper makers were captured and brought to Samarkand. The Arabs learned the paper making from the Chinese prisoners and built the first paper industry in Baghdad in 793 A.D. They, too, kept it a secret, and Europeans did not learn how to make paper until several centuries later. The Egyptians learned the paper making from the Arabs during the early 10th century. Around 1100 A.D. paper arrived in Northern Africa and by 1150 A.D. it arrived to Spain as a result of the crusades and established the first paper industry in Europe. In 1453 A.D. Johann Gutenberg invents the printing press. The first paper industry in the North America was built in Philadelphia in 1690. Prior to 1956, India did not have any newsprint mill. Hence, imports alone met the demand for newsprint in India. It was only in early 1956 that the first mill, owned by government, came to produce newsprint in India. Since then additional government-owned and many private mills had sprung up. At present, the newsprint manufacturing industry consists of 73 mills. Five of the mills are “large”, and these account for about one-third of the total installed newsprint capacity in India. However, by current international trends it is debatable whether all five mills can be regarded as “large.” The industry, consisting of many small mills that use obsolete technology and machines, is further characterized by relatively high costs of papermaking fibre, energy and transport. In addition, the quality of newsprint produced tends to be poor. India’s newsprint manufacturers, particularly its medium to small mills, have difficulty competing against imports. The problem is however not confined to newsprint industry; it extends to India’s several manufacturing industries ― a lingering result of government policies in the past (Kochhar, et al. 2006). As a result of the introduction of economic liberalization policies and other developments since early 1990s, the industry situation is improving but not fast enough to keep pace with the rising demand for newsprint by the rapidly expanding newspaper industry. Notwithstanding the problem of competing against newsprint imports, India has been exporting newsprint on a regular basis since early 1990s. But the quantities have been relatively tiny. In contrast, imports have been huge. Not surprisingly, the gap between imports and exports has widened over time. India turned into a significant net importer of newsprint in 2005, when it was the world’s fifth largest importer of newsprint. The top four world importers in descending order were the United States of America, the United Kingdom, Germany and China. Leading suppliers of newsprint to India were Canada and Russia, together accounting for 60-70 per cent of India’s total imports. In 2005, India’s net imports satisfied 53 per cent of its total consumption of 1.3 million tons of newsprint. To put India’s newsprint consumption in perspective, Australia’s newsprint consumption for the same year was 0.8 million ton and Korea’s 1.0 million ton. Continuing with international comparison: India was the third largest consumer of newsprint in Asia, with Japan the second largest at 3.9 million tons and China the largest at 4.1 million tons. Based on the estimated model and specific assumptions about future prices of newsprint and economic growth rates, we forecast that consumption of newsprint in India could be 3.1 to 3.7 million tons by 2010. The demand of the newsprint is dependable on literacy rate of the population, number of magazines and newspaper etc. The increase in rate of literacy now will hike newsprint demand. It’s estimated that newsprint segment will grow by 6-7% in the next coming years. WORLD SCENARIO International trade in the paper industry has not been significant. In the world, United States consumption of paper and cardboard averages about 300 kilogram per person each year. Nearly 64 million metric tons of paper and cardboard are produced in the United States annually. Paper industry tends to be concentrated in those countries that are industrially advanced and have abundant supplies of fibrous raw material wood. There is large-scale international trade for wood pulp; pulpwood is flowing from those countries with large forest resources to those countries that are under-developed. The Chinese are credited with the invention of paper in AD 105. From China the knowledge of papermaking traveled gradually westward and the Arabs are known to have made paper in the eighth century. As the art progressed westward through Morocco and through Spain in Europe, the process was constantly improved. The major restructuring programmers embarked upon world’s leading paper companies in 2005 will not begin to be reflected in full year results until the end of the 2006 financial year. Hence International Paper, Stora Enso and Sensual Cellular (SCA) retained their one-two-three spot in Paper and Pulp International top 100 for 2005 and each with an increase in net sales. For the top 100 as a whole, net sales from pulp paper and converting operations were up 3.7% and $ 281, 175.6 million. Earning however remained depressed at a combined total of $ 17, 905.1 million, compared to $ 19,764.4 million for same for same top 100 companies year earlier. The future of this industry is very bright. Word paper and board demand has grown rapidly over three consecutive years reaching to a record of 359 million tons in 2004. The growth has been in the east and south, namely Asia-Pacific, Eastern Europe and South America. The new forecast for long term paper demand and supply looks at what seems contradictory-a slowing demand but an explosive growth. The shift in growth from west to east and from north to south was particular dramatic in 2001 to 2204. In this period Asia accounted for 64% of the global demand growth, while North America and Western Europe contributed only 11% and 10% respectively. Eastern Europe only has 4% of global market, but earned 9% of the global demand growth in that period. If prospects are modest in the industrial west, they are dramatic in the BRIC countries with Asia’s share of global production raising from 35% to 42% Asia will be responsible for 60% of the growth of which china and India will be the leaders. INDIAN SCENARIO Newsprint is a special type of paper used in newspaper and magazines. At present there are 22 newsprint-manufacturing units in our country with a total capacity of 600000 TPA, of which 5 public sectors unit alone constitutes 63% of the total capacity. Demand for newsprint, which is dependent on the literacy rate and growth of newspaper and magazines publishing industry has increased every year. Imports have a significant impact on the industry. Newsprint pricing is expected to grow by around 6.5% per annum while supply may grow at a much slower pace The total manufacturing capacity of 6 Lakhs tons constitutes by 22 mills manufacturing newsprint in the country, of which 5 are public sector units. Wood based units constitute about 58% of the total capacity while agro and waste paper based unit’s accounts for 23% and 19% of the newsprint capacity respectively. All public sector units with the exception of TNP are wood based. The paper industry in India is more than a century old. At present there are over 600 paper mills manufacturing a wide variety of items required by the consumers.  These paper mills are manufacturing industrial grades, cultural grades and other specialty papers. The paper industry in India could be classified into 3 categories according to the raw material consumed. 1. Wood based 2. Agro based & 3. Waste paper based While the numbers of wood based mills are around 20 and balance 580 mills are based on non-conventional raw materials. The Govt. of India has relaxed the rules and regulations and also relicensed the paper industry to encourage investment into this sector and joint ventures are allowed and some of the joint ventures have also started in India. The paper industry in India is looking for state-of-art technologies to reduce its production cost and to upgrade the technology to meet the international standards. Estimated Demand of Paper in the Country  CRISIL Research estimated demand for newsprint to grow by 9-10 per cent CAGR from 2.1 million tones in 2011-12 to 3.4 million tones in 2016-17.The Indian paper industry has been exposed to direct competition from international players in the recent times after import duties where lowered to favor the entry of such competitors. The newsprint mills have been adversely affected by this decision of the government. Due to overall all rise in costs, the paper mill began activities to generate the economies of scale .Several of the mills went on a cost cutting measure by generating their own power and electricity via co-generation. The medium sized paper mills too followed the suit observing the success of the large scaled mills. In spite of these measures being taken ,the Indian paper industry still confronts various other challenges, such as uncertain market condition. Due to these reasons some small companies are compelled to shut down as they could not meet the rising cost of operation and could not confirm to the norms and standards set by Pollution Control Board. The share of newsprint in the total cost of production of newspapers is likely to vary across newspapers and over time. However, the fact that this share for the Hindustan Times group of newspapers in India is currently around 40 to 50 per cent shows that newsprint is a major material input into production of newspapers (HT Media Ltd, 2006). Over the 25 years, production, imports, exports and consumption of newsprint in India have all had rising trends . Some computed trend growth rates indicated that the average annual growth rate of production was 7.6 per cent, imports 5.4 per cent and consumption 6 per cent. In the first half of the period, the consumption growth rate was 3.8 per cent a year; the rate more than doubled to 8.8 per cent in the second half, indicating acceleration in newsprint consumption by India's newspapers. STATE SCENARIO Hindustan newsprint ltd is a government company in the central public sectors. Hindustan Newsprint Ltd was incorporated as a wholly owned subsidiary of the Hindustan Paper Corporation limited (HPC) on June 07, 1983. HNL produces exceptional quality newsprint for the Indian and International market. In 1998, HNL became the first newsprint manufacturers in the country to achieve the coveted ISO-9002 certification CHAPTER III COMPANY PROFILE COMPANYPROFILE Hindustan Newsprint Limited (HNL) is a Government of India Enterprise under the administrative jurisdiction of the Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises. HNL was incorporated as a wholly owned subsidiary of the Hindustan Paper Corporation limited (HPC) on June 07, 1983. The Government of India had established HPC on May 29, 1970 for developing indigenous capacity in production of paper and newsprint with a view to reduce dependence on imports. HPC launched the Kerala Newsprint Project (KNP) in 1976. The Kerala Newsprint mill rolled out the first newsprint reel on February 26, 1982 and went into commercial production with effect from November 01, 1982. HNL took over the business of KNP with effect from October 01, 1983. The core competence of HNL lies in its highly skilled technical manpower, which is rated as the best in the domestic Newsprint industry and the quality of its product , which is comparable with international standards. The fact that HNL maintains its profitable track record in a very challenging post-liberalized business environment characterized by abysmally low import duties (3%) which is quite lower than even the WTO bound rates (25%) without any protection, support or preferential treatment stands testimony to the international competitiveness of the company. LOCATION HNL is located at Me velloor, in a picturesque village by the side of the river Muvattupuzha on 725 acres of land. It is very close to the Piravom Road Railway Station. The Mill is almost equidistant from Kottayam (32 km) and Ernakulam (34.5 Km). The nearest airport is Kochi International Airport situated at Nedumbassery in Angamally. Business mission “The objective of HNL is to be a dominant player in Indian pulp and paper industry by adopting world class environment friendly technologies and best practices”. Today, HNL produces exceptional quality newsprint for the Indian and International market. The strength properties of HNL newsprint are comparable to the best in world market. It is a matter of great pride for the company that its product is always compared with imported newsprint. HNL, with its state-of-the-art technology, has emerged in its short span of operations as a company that is truly contemporary in a global context. The Quality Management System has been recertified to ISO 9001: 2000 in November 2002. HNL is also certified to ISO 14001: 1996 in October 2000 for its Environment Management System. The QMS was recertified in 2003. Fully integrated enterprise resource planning (ERP) system in vogue since the year 2001 has enabled the company to streamline the processes and procedures and made it an agile user of IT. Presently, the company is in the process of implementing a strategic business plan for up scaling its production capacity with up gradation of the product portfolio. Cabinet committee on economic affairs (CCEA), Government of India has accorded approval for the project on May 9, 2006. The expansion cum diversification project(EDP),includes a 1,70,000 tons per annum paper machine ,100 tons per day De-inking plant and a power block consisting of a 150 tons per hour boiling and a 25 MW Turbo generator with all the associated facilities. EDP is a brown field project. It would closely integrate the present manufacturing facility with the proposed one. The EDP configuration is tightly optimized by maximizing the utilization of present space, land, infrastructure, and auxillaries etc.Environment-friendly and state -of -the -art technology solutions are formulated as part of the process configuration. The product grades from the EDP are slated to compete with the best in class . Maphlitho/non-surface sized paper, copier paper and film coated varieties are included in the product portfolio of EDP. With the launch of EDP, HNL expects to seize the emerging opportunities in the writing and printing segments of the industry. In addition, EDP will upscale the capacity to reasonable levels while significantly mitigating the risks inherent with a single product. The Company has established an OH&S Management system in accordance with the requirement of OHSAS standard, 18001:2007. The Occupational Health and Safety Assessment Series (OHSAS) specification gives requirement for an Occupational Health and Safety Management System to enable the organization to control its OH&S risk and improve its performance. A system of this kind enables an organization to develop an OH&S policy, establishes objectives and processes to achieve the policy commitments, take action needed to improve its performance and demonstrate the conformity of the system to the requirements OHSAS standards to support good OH&S practices, in tune with Socio-Economic needs. HNL AS A RESPONSIBLE CORPORATE CITIZEN It is said that in today’s fast changing technological situation, one has to keep running to stay at the same place. Keeping in view this dictum, HNL has been making continuous effort to upgrade its technology, to modernize its machines and equipments and fully utilize their inbuilt capacity, to reduce cost, to eliminate waste, to conserve scarce resources like energy, raw materials, etc and to implement effective measures for environmental protection. At the same time, HNL has also implemented several welfare schemes not only for its employees and their families but also to the general public at large in the neighboring areas.HNL has also substantially contributed all these years to the revenues of both state and central governments. On the whole , HNL has emerged as a very responsible corporate citizen. HNL’S credentials in pollution control and in piloting environment friendly methodologies for newsprint production have been widely acknowledged. Kerala state pollution control Board has awarded the company with first place among large scale industries in the year 2005 and second place in 2006 in making substantial and sustained efforts in pollution control. HNL has been ranked with ‘two leaves ‘rating in the green rating exercises conducted in the years 1999 and 2004 by centre for science and environment (CSE) New Delhi. At HNL, pollution control is an integral part of production. In tune with National priorities and social obligations, HNL has adopted a policy of reciprocating the gifts of nature. The effluent treatment system initially installed at a cost of Rs.46 million has been upgraded in 1994 with an additional investment of Rs.52 million. Annually the company spends Rs.25 million for effluent treatment. In-plant control measures have substantially lowered fresh water consumption. Generation of waste water is minimal and in keeping with the national standards. HNL is the only mill in the country, which, in addition to meeting all parameters for effluent treatment, decolorizes the effluent before discharge. HNL is also the first to substitute 90% of chlorine in bleaching with environment friendly Hydrogen peroxide thereby reducing toxic discharges. HNL has been successful in bringing down solid waste to near zero level. Entire fly ash has been utilized by an auxiliary unit for producing Portland Pozzolona cement.        Bottom ash is used for making construction bricks. Lime sludge is reburned to produce the lime required in the production process. Chipper waste, DIP sludge and effluent sludge are utilized as secondary fuel in FBC boilers. HNL has Electro Static Precipitators (ESP) and Dust Collectors to control atmospheric pollution and to preserve the lush green vegetation of over 30,000 trees around the plant, this is no small achievement. The United Nations Environmental Programme (UNEP) has selected HNL as the model paper mill in the Asia Pacific Region under its NIEM programme. Besides this, HNL has bagged the Kerala State Pollution Control awards in 1997-98,- and 2002 for the best pollution control measures and processes adopted in the mill. A survey of the Indian Pulp and Paper Industry, the first-ever "Green Rating" exercise in the country by the Centre for Science and Environment (CSE) and supported by the Union Ministry of Environment and Forest and the United Nations Development Programme (UNDP) has rated HNL among the first five environment friendly paper mills. Newsprint of HNL has following characteristics:- Capacity to see through, as the newspaper is printed on both sides. Suitable to run with the modern high printing process without any break. Brightness level at par with that of the imported newsprint. Less bulky newspaper due to low gram mage. Capacity to absorb instantaneously the mineral oil present in the printing ink to avoid blurring of impression. The Environmental Management System which has been ISO 14001 certified since October 2000 is in place in the company, focusing on continual improvement in pollution abatement measures and adhering to the norms prescribed by the Kerala State Pollution Control Board. The Company has already met the majority of action points as per charter on Corporate Responsibility for Environmental Protection (CREP). The company has given due importance to the development of Human Resources by imparting need based training to the employees to equip them to meet their individual task demands as well as organizational objectives. Management of the company is vested in the hands of Board of Directors, including a chairman. The number of directors of the company should not be not less than two and more than twelve. The chairman and M.D of HPC (Hindustan Paper Corporation) shall be chairman of the company and all other directors are appointed by HPC with the approval of the President of India. Presently,Sri. Raji Philip is the chairman and Sri. N. P. Prabhu is the MD of the company. AWARDS MOU Excellence Award Hindustan Paper Corporation was bestowed with the prestigious MoU Excellence Award for performance during the FY 2005-06. The Memorandum of Understanding (MoU) is a mutually negotiated agreement between the Public Sector Enterprises (PSEs) and the Government of India. Under this agreement, a PSE undertakes to achieve the targets set out at the beginning of each financial year. The MoU covers both financial and non-financial parameters and the performance is measured on a weighted 5-point scale. The MoU award was given only to the top ten PSEs securing excellent rating.    National Energy Conservation Award  Hindustan Newsprint Limited has been selected for the certificate of Merit in the Pulp and Paper sector for the National Energy Conservation Awards-2005. State Pollution Control Board Award   Hindustan Newsprint Limited bagged the second prize for pollution control activities in the category of large-scale industries, instituted by Kerala State Pollution Control Board for the year 2007.The award was a true recognition to the sustained efforts and commitment of HNL in preserving the environment Productivity Award Hindustan Newsprint Limited got productivity award for the year-. Production Process a) Input Requirements Fibrous raw materials like wood, reed, bamboo etc. Old Newspaper (ONP) and Old Magazines (OMG) for De-Inking Plant Chemicals used in pulp and paper making like caustic soda, hydrogen peroxide etc. Packing materials like kraft paper, grey board etc Imported machineries and spares General spares like motors, bearings etc. Fuels like coal, furnace oil etc. Fibrous raw material: HNL meets a major portion of its requirement for fibrous raw materials from forest sources. The credit for the superior quality of HNL newsprint goes to the unique raw material: Reed (Ochlandra travancorica) which is a specialty of Kerala forests. The company has a long-term agreement with the Government of Kerala for the supply of Eucalyptus wood and Reed from state forests. Dwindling forest resources has led to this supply getting diminished in the past few years. HNL has developed appropriate alternatives by: Raising captive plantations using own resources and technical know-how on land allotted for that purpose by Govt. of Kerala, and also on vacant land made available by various institutions like Railways. Encouraging pulp wood cultivation on agricultural land through implementation of farm forestry schemes. Procuring raw materials from neighbouring states where they are available. Buying Eucalyptus, Bamboo and other 'pulpable' raw materials from local suppliers and farmers directly under "Purchase at Gate" scheme. Farm forestry scheme is implemented with the active participation of voluntary / Nongovernmental Organizations (NGOs). Pulp wood seedlings of various species such as Eucalyptus, Acacia, Mangium, Bamboo, Reeds etc. are distributed through NGOs. High yielding clonal pulp wood plantlets developed at HNL clonal complex are also distributed at subsidised rates. Approximately 155 lakh seedlings have been distributed through this scheme among farmers all over Kerala. Purchase at gate scheme was launched in 1998 as a complementary programme to Farm Forestry scheme. As per this scheme, pulp wood materials are purchased directly from farmers at a remunerative price at the company gate doing away with middle men. Brief description about process flow CUSTOMERS Newspapers printed on HNL newsprint greet millions of Indians daily morning. It is the information carrier to millions. HNL Newsprint is preferred by the major publishing houses in the country. Malayala Manorama, Mathrubhumi, Deshabhimani, Kerala Kaumudi, Mangalam, Madhyamam, The Hindu, The New Indian Express, Sanmarg, Ananda Bazaar Patrika, Eenadu, Vartha, Andhra Jyothi, Vijay Anand Printers, Deccan Chronicle, Deccan Herald, Lokprakashan, Dinamalar, Sandesh, Thuglak, Kalki, Rashtra Deepika, Chandrika etc. are the majors among HNL customers across the country. HNL is also establishing its market in Srilanka and Malaysia. Number of Employees HNL has a rich pool of qualified and experienced managerial and technical personnel with total staff strength of 1035 permanent employees, out of which 761 employees (74% of the total manpower) are technical staff, 89 supervisors and seniors, 185 officers. The company has a good strength of contract workers also. The company has a harmonious industrial relation with the management and trade unions. The following four shifts are practicing at HNL i.e. General shift, A Shift, B Shift, C Shift. The timing is as follows: General Shift: 9 AM to 5.15 PM A Shift: 6 AM to 2 PM B Shift: 2 PM to 10 PM C Shift: 10 PM to 6AM PROGRESS MADE BY HNL HNL has made steady progress in all its activities ever since its commissioning in the early 1980’s. Production, productivity and profitability were continuously registering upward trends. During the year, 2003-04, HNL could achieve a peak production of 1, 12,555 tonnes of 49/45 GSM Newsprint. In matters of Human Resource development, HNL has made spectacular progress. The officers and employees have been continuously upgrading and sharpening their knowledge skills and innate capabilities. They form a dedicated and committed team. It is this dedicated team of officers and employees, which is responsible for the continuous progress made by the company in fulfilling its objective. CHAPTER IV PRODUCT PROFILE PRODUCT PROFILE HNL produces a wide range of newsprint grades. Initially, the company was producing 52 GSM (Grams per Square Meter) newsprint. Later, to meet changing market demands, HNL commenced production of 48.8 GSM newsprint. As requirement for newsprint with still lower GSM increased, HNL started production of 45 GSM newsprint also. HNL maintains consistent quality in all grades of newsprint that it manufactures. At the time of commissioning in 1982, HNL was producing newsprint having brightness of just 48-50 % ISO. Later, it switched over to a superior and eco-friendly technology in bleaching using Hydrogen Peroxide (H202). This change enhanced the brightness to 53-55% ISO. The company’s competitors soon followed suit. Always a step ahead, HNL further advanced the brightness levels and is at present producing newsprint with 55 - 58 % ISO. Better brightness, better product! Salient Features Grammage 48.8 / 45 GSM Colour Standard / Pink Brightness 55 - 58 % ISO Size of reel 34 cm to 163 cm Today, brightness level is at par with that of imported newsprint. Further improvements are possible by putting a premium value on the product. In terms of quality, HNL newsprint has an enviable position in the domestic newsprint market being comparable to the world-class product standards. HNL is highly customer focused and cherishes good relationship with them. Regular visits are made by HNL’s production managers to newspaper establishments to understand the customers’ demands. It is found that press room operators favour HNL newsprint for its excellent runability and printing properties. The production technology at HNL is modified to match exacting requirements of sophisticated high-speed printing machines. The quality of the product is given primary importance in the quality policy at HNL. Newsprint is the major input for the newspaper industry. Quality newsprint provides excellent prints to satisfy the discerning and demanding readers - the ultimate customers of the product HNL commands leadership position in the domestic newsprint market. HNL’s current product range is from 48.8 GSM to 45 GSM, standard and pink newsprint. Quality of HNL newsprint is well accepted in the market and services of HNL's marketing department have been appreciated by customers across the country. Today, HNL produces exceptional quality newsprint for the Indian and International market. The strength properties of HNL newsprint are comparable to the best in world market. It is a matter of great pride for the company that its product is always compared with imported newsprint. HNL, with its state-of-the-art technology, has emerged in its short span of operations as a company that is truly contemporary in a global context. OPERATIONAL AND FINANCIAL LEVERAGE During the year under review, your Company achieved a production of 102450 MT, which is 102.5% of the installed capacity. During the year your Company sold 102450 MT with a sales turnover of 315.04 crore as against 104911 MT at a value of 301.66 crore during the previous year. The stock was NIL at the end of-. The highlights of performance of your Company during Financial Year- together with corresponding figures for the Previous Year are given below. PRODUCTION SUMMARY Particulars Installed Capacity (MT) - - Production (MT) Capacity Utilization % Production (MT) Capacity Utilization % Saleable news print 100000 102450 102 104911 105 Chemi mechanical pulp 60000 45695 76 48947 82 Chemical pulp 27400 15240 56 15070 55 De linked pulp 33000 28866 87 28346 86 FINANCIAL RESULTS (Lakh) Particulars 2011-12 2010-11 Sales Turnover- Profit/(loss) before Interest Depreciation and Income Tax- Interest 368 62 Cash Profit / (Loss- Depreciation and Deferred Revenue Expenditure Write-off - Profit/(Loss) before tax 404 541 Provision for taxation (285) 38 Profit/(Loss) after tax 689 504 FUNCTIONS OF FINANCE DEPARTMENT Finance department is maintaining a computerized material accounting system. The GRV’s received from the stores are placed against the purchase order and the supplies bill. They are given to the computer section and in batches. The issue vouchers also received in the stores from various departments is fed to the computer. The computer section maintains a master file schedule approximately 40,000 items. This is updated on monthly basis. GRV/IV (issue voucher) transactions are also created on monthly basis. These transactions are matched with the master and priced stores ledger and are prepared on a monthly basis. The following are statements prepared every month:- Price stored ledger. GRV analysis for material receipt accounting. IV analysis for consumption accounting. Stock statements. Cost center wise issues analysis for costing purpose. Financial accounting functions The major functions of the finance department are as follows: Establishment section. Work section. Sales section. Cash section. Purchase bill section. Price stored ledger section. Raw material section. Compilation section. Costing and MIS section. Insurance Establishment section: The establishment section‘s function are the preparation of salary, PF accounting, income tax, ESI accounting, leave accounting, accounting of loans and advances, bonus calculations, incentive calculation etc. The functions of this section are: Concurrence- administration power is delegated to various officers subjected to financial concurrence. The proposal relating to establishment matters are to be examined in this section with reference the rules, procedures, budget provisions, pervious practices etc and concurred in before competent authority approves it. Payment- all payments relating to the establishment matters are to be released from establishment section. The claims and other regular payments are checked with reference to the rules and sanction and payment vouchers are prepared and send to cash section under the sign of delegated officers for releasing payment. Accounting- all the payments are debited to relevant head of accounts as per the nomenclature prescribed the compilation section. Manual compilation sub-ledger is to be maintained for the payment, as per the requirements. Work section. Work section deals with various contracts for issuing the work order and also checks the bills received from contractors duly certified by concerned departments and makes the payments. Work section also prepares the journal entries for general ledger. The entries are done manually. Making payments for civil, mechanical, electrical and other contract bills. Maintaining the EMD and security deposit register. Maintaining records for bank guarantee. Preparation of contractor sub ledger. Preparation of annual accounts closing schedules. Sales section Sales section receives the dispatch advices, RNI allocation etc from the distribution section and forwards to the compilation section for preparing invoice and sales accounting. Based on the output received from compilation section the necessary journal entries are prepared for general ledger. Computer section also maintains sundry debtors sub debtor. Cash section. Cash section prepares all bank vouchers for the receipt. All the cash/bank vouchers for payment are received in the cash section from various sections. These vouchers are sent to the compilation section. This data is maintained in the compilation section for the general ledger. Receipt and payment of cash against voucher and the accounting. Preparation and issue of the cheque and DDs against vouchers received from section, preparation of the bank receipt and fund management and investment of surplus funds. Purchase bill section Purchase bill section receives a copy of the purchase order from the purchase department, they also receives bills cashed by suppliers for payment. A copy of payment voucher is sent to the computer section for purchase analysis and sundry creditors accounting. They prepare journal entries for general ledger. The functions are as follows:- Making payments for purchase of the spare parts, consumable stores, diesel oil, lubricant chemical, craft paper, stationery, items, medicines, coal, capital items, and imported items. Payment of transportation bills of authorization transporter. Marinating EMD and SD register. Marinating records for bank guarantees follow up action for extension. Deduction and remittances of income tax. Valuation of GRV’s and adjusting advances. Compilation of purchase analysis and preparation of journal vouchers for final accounts. Preparation of sundry creditors sub ledger. Preparation of closing schedules. Price stored ledger section. PSL section receives GRV’s and issues vouchers from the stores. GRV’s after pricing and also posting the debtors/creditors accounting member and IV’s after posting the debtors/creditors numbers are sent to the compilation section for processing the price ledger and GRV/IV analysis. PSL section prepares the journal entries for the general ledger and based on the computer output. Raw material section. Raw material procurement section receives token from the log yard through the laboratory and forward to the compilation section for processing the transportation bills and royalty statement. They also prepare journal entries for general ledger. Compilation section. Compilation section receives the cash/bank vouchers and journal vouchers from other sections for processing the transportation bill and forwards to compilation section for preparing cash/bank books, general ledger, profit and loss account and balance sheet. They also receive inputs regarding adds/deletion of fixed assets and forwards to the computer section for preparing fixed assets register, depreciation calculation etc. Compilation of monthly accounts. Compilation and finalization of annual accounts. Furnishing of CMA data and periodical statements to bankers. Corporate taxation matters. Arranging loan funds from financial institutions and its accounting. Fixed assets and its depreciation. Liaison with statutory and government auditors. Furnishing of information to various agencies and other miscellaneous assignments. Calculation of bonus and productivity linked incentives. Costing and MIS section. Costing section is involved in preparing the cost sheet based on the budgeted cost. The inputs to the costing system are received from the financial accounting system and also from technical information cell. It’s organized as a part of finance department. Inputs relating to the production, consumption of raw material and chemical and other utilities are received from plant through the technical information all on a daily basis. Monthly cost sheets are prepared on the actual costs. Comparative statements are prepared to analyze the cost variances between budgeted rate and annual rate. Insurance section The major functions of the insurance section are: To ensure adequate insurance cover for all the fixed assets, stock, plantation, cash, goods-in-transit etc. Reduce cost o insurance premium. To ensure claims for the loss risen at times. To follow up the claims to ensure speedy settlement. CHAPTER V ORGANIZATION STRUCTURE ORGANIZATION STRUCTURE FINANCE DEPARTMENT The Finance Department plays an important part in any company. It deals with the financial matters of the company. The main functions of the Finance Department are procurement of funds for the organization and management of the same. For the proper functioning of a business, adequate finance is a must. Finance has to be raised to invest in the business. A business with a shortage of finance will not move on smoothly. The department prepares the final accounts for the company. FINANCE DEPARTMENT CHART FUNCTIONS OF FINANCE DEPARTMENTS Accounting sections maintains the accounts of the organization are efficiently handled by the accounts department. Following are the activities involved in finance function: Liaison with financial institutions for availing long for creation of infrastructure. Liaison with government for financial assistance. Long term repayment and scheduling of loans. Capital management schemes for primary co-operative societies. Recommend remuneration of employees. ESCOL started as a private company in 1980. It got converted into public company in 1995. Shares are issued through private placement method Mr.N.S John is the Chairman and Managing Director of the Co. His family owns 70% of the shares. The remaining is owned by other private parties. The total capital of the Co. is Rs.7.50 cores. Even though it is a public company, it is not a listed company and hence its shares are not distributed widely. In order to meet any additional fund requirements, personal arrangements are made. The company provides credit facility to its customers. The company allows 40 to 60 days credit period. To obtain correct payments, the company insures its receipts on Export Credit Guarantee Corporation of India Ltd on the basis of shipment details. The different modes of payment are Advance payment Letter of credit Documents on purchase Document on acceptance Cash against documents. The company’s Finance Department tries its maximum to obtain maximum grants from the Central Government, like Vishesh Krishi Upagi Yogana (VKUY). Also they will try to avail maximum incentives from the customs department and excise department on the basis of being an exporting company. CHAPTER VI RESEARCH METHEDOLOGIES RESEARCH METHODOLOGY Research is the systematic process of collecting and analyzing data in order to increase our understanding of the phenomenon about which we are concerned or interested. It is the in-depth search for knowledge. It is a careful investigation or inquiry especially through search for new facts in any branch of knowledge. RESEARCH DESIGN Research Design is the strategy for the study and the plan by which the strategy is to be carried out. It is the set of decisions that make up the master plan specifying the methods and procedures for the collection, measurement and analysis of data. Descriptive Research . Research has used descriptive research. Descriptive studies are fact finding investigation with adequate interpretation. It focuses on particular aspects of in the study. It is designed to gather descriptive information and provides information for formulating more sophisticated studies. Source of data The study is conducted with the help of secondary data available at during the period of study. The secondary data was available from the annual reports, balance sheet and profit and loss account Secondary data Secondary data’s has been obtained from published reports like the annual reports of the company, balance sheets, and profit and loss account, booklets, records such as files, reports maintained by the company. Mainly the annual report consists of two parts; 1) Profit and Loss Account 2) Balance Sheet Profit and loss account reveals the income and expenditure of the company. Balance Sheet reveals the financial position of the organization. Those two statements are prepared by the highly qualified and experts with the help of available information or data. . DATA ANALYSIS Tools used for data analysis are Ratio Analysis Working capital statement analysis Analysis of comparative balance sheet PERIOD OF STUDY The present study deals with the data collected from the annual reports and other relevant documents for the period commencing from-to-. LIMITATIONS The data’s were collected mainly on the basis of secondary data. So all the limitations of secondary data are applicable. Due to busy work schedule, detailed discussions were not possible. The data collected for the study was historic in nature, so the suggestions will be irrelevant. . CHAPTER VII REVIEW OF LITERATURE BACKGROUND OF THE STUDY In our present day economy, finance is defined as the provision of money at time when it is required. Every business whether big, medium or small, needs finance to carry on its operations and to achieve its target. Infact, finance is so indispensable today that its rightly said to be the lifeblood of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. A firm is required to maintain a balance between liquidity and profitability while conducting its day to day operations .liquidity is a precondition to ensure that the firm are able to meet its short term obligations and its continued flow can be guaranteed from a profitable venture. The importance of cash as an indicator of continuing financial health should not be surprising in view of its crucial role within the business. This requires that business must be run both efficiently and profitably. In the process, an asset-liability mismatch may occur which may increase firm’s profitability in the short run but at a risk of its insolvency. On the other hand, too much focus on liquidity will be at the expense of profitability. Thus, the manager of a business entity is in a dilemma of achieving desired tradeoff between liquidity and profitability in order to maximize the value of a firm Working capital management deals with the most dynamic fields in finance, which needs constant interaction between finance and other functional managers. The finance manager acting alone cannot improve the working capital situation. In recent times a few case studies regarding management of working capital in selected companies have been in order to make in-depth analysis of the several experts of working capital management, The finding of such studies not only throws new lights on the technical loopholes of management activities of the concerned companies , but also helps the scholars and researchers to develop new ideas ,techniques and methods for effective management of working capital. An effort has been made to make an in-depth study of working capital management with special reference to Hindustan Newsprint Limited, Kottayam. LITERATURE REVIEW WORKING CAPITAL MANAGEMENT The funds required by every business organization can be broadly classified in to fixed capital and working capital. Fixed capital is need for the acquisition of fixed assets. Fixed assets constitute the basic tools or the means of production. Investment in fixed assets by itself is dead investment and the funds so locked up do not circulate. In the same every business organization requires some funds to carry on its operations and to produce goods for sale to earn profit. These funds, which are represented by the current capital used through the various stages of production and distribution, are invested in current assets. “Working Capital” is the capital invested in different items of current assets needed for the business, Viz, inventory, debtors, cash and other current assets such as loans & advances to third parties. Those current assets are essential for smooth business operations and proper utilization of fixed assets. The firm should maintain sufficient level of working capital to produce upto a given capacity and maximize the return on investment in fixed assets. Shortage of working capital leads to lower capacity utilization, lower turnover and hence lower profits. Working capital, in excess of the amount required to produce to full capacity, is idle and consequently leads to decline in profits. Hence the dictum “Adequacy is a virtue, surfeit is not”. IMPORTANCE OF ADEQUATE WORKING CAPITAL The importance of adequate working capital in commercial undertakings can never be over emphasized. A concern needs funds for it’s day-to-day running. Adequacy or inadequacy of these funds would determine the efficiency with which the daily business may be carried on. Management of working capital is an essential task of the finance manager. He has to ensure that the amount of working capital available with his concern is neither too large nor too small for its requirements. A large amount of working capital would mean that the company has idle funds. Since funds have a cost, the company has to pay huge amount as interest on such funds. The various studies conducted by the Bureau of Public Enterprises have shown that one of the reason for the poor performance of public sector undertaking in our country has been the large amount of funds locked up in working capital. This results in over capitalization. Over capitalization implies that a company has too large funds for its requirements, resulting in a low rate of return a situation which implies a less than optimal use of resources. A firm has, therefore, to be very careful in estimating its working capital requirements. If the firm has inadequate working capital, it is said to be under-utilized. Such a firm runs the risk of insolvency. This is because; paucity of working capital may lead to a situation where the firm may not be able to meet its liabilities. It is interesting to note that may firms which are otherwise prosperous (having good demand for their products and enjoying profitable marketing conditions) may fail because of lack of liquid resources. CLASSIFICATION OF WORKING CAPITAL ADVANTAGES OF WORKING CAPITAL a) Cash Discount: Adequate working capital enables a firm to avail cash discount facilities offered to it by the suppliers. The amount of cash discount reduces the cost of purchases. b) Goodwill: Adequate working capital enables a firm to make prompt payment. Making prompt payment is a base to create and maintain goodwill. c) Ability to face crisis: The provision of adequate working capital facilities to meet situations of crisis and emergencies. It enables a business to withstand periods of depreciation smoothly. d) Credit Worthiness: It enables a firm to operate its business more efficiently because there is no delay in getting loan from banks and others on easy and favorable terms. e) Regular Supply of raw materials: It permits the carrying of inventories at a level that would enable a business to serve satisfactorily the need of its customers. That is it ensures regular supply of raw materials and continues production. f) Expansion of Market A firm, which has adequate working capital, can create favorable market condition. That is so because purchasing its requirements in bulk when prices are lower and holding its inventories for higher. Thus profits are increased. g) High Morale Adequacy of working capital creates an environment of security, confidence, high morale etc and creates overall efficiency in business. SOURCES OF WORKING CAPITAL Concept There are two concepts of working capital they are:- Balance Sheet concept and Operating cycle concept Under the Balance Sheet concept, there are two interpretations of working capital: a) Gross working capital. b) Net working capital. Gross Working Capital In the broad sense, the term working capital refers to the gross working capital and represents the amount of funds invested in current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprise. Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year. Net Working Capital In a narrow sense, the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities. Net Working Capital = Current assets – Current liabilities Net working capital may be positive or negative. When the current assets exceed the current liabilities, the working capital is positive and the negative working capital results when the current liabilities are more than the current assets. The task of the financial manager in managing working capital efficiently is to ensure sufficient liquidity in the operations of the enterprise. The liquidity of a business firm is measured by its ability to satisfy short term obligations as they become due. Net working capital as a measure of liquidity is not very useful for comparing the performance of different firms, but it is quite useful for internal control. The net working capital helps in comparing the liquidity of the same firm overtime. For purpose of working capital management, therefore, net working capital can be said to measure the liquidity of the firm. In other words, the goal of working capital management is to manage the current assets and liabilities in such a way that an acceptance level of net working capital is maintained. WORKING CAPITAL CYCLE/ OPERATING CYCLE The length of time involved in the conversion of cash into raw materials, raw materials into work- in-progress, work –in-progress into finished goods, finished goods into debtors ,debtors into cash again the operating cycle or working capital cycle. The length of operating cycle or working capital cycle may differ from one firm to another, depending upon the nature of the business FINANCIAL STATEMENT ANALYSIS The terms ‘Financial analysis’ is also known as Analysis & Interpretation of financial statements, refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet and profit and lost account .The technique of financial analysis is typically denoted to evaluate, the past current & project performance of a business firm. The term financial statement analysis includes both analysis and interpretation. OBJETIVE OF FINANCIAL ANALYSIS To estimate the earning capacity of the firm To determine the financial position & performance of the firm To determine the long term liquidity of the funds To judge the solvency of the firm To measure the efficiency of operation METHODS OF FINANCIAL ANALYSIYS Comparative statements Common – size statements Trend analysis Average analysis Statement of changes in working capital Cash flow analysis Ratio analysis Cost- volume- profit analysis TOOLS OF WORKING CAPITAL ANALYSIS The financial manager tries to maintain an adequate working capital at every time, so as to carry on the operation successfully and maximize the results on investment. There are several tools such are :- a. Ratio analysis b. Working capital statement analysis c. Analysis of comparative balance sheet d. Trend analysis RATIO ANALYSIS Ratio analysis is a techniques of analysis & interpretation of financial statement.It is the process of establishing and interpreting various ratios for helping in making certain decision.It is only a means of better understanding of financial strengths and weakness of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective. The following are the four steps involved in the ratio analysis. I. Selection of relevant data from the financial statements is the objective of the analysis. II. Calculation of appropriate ratios from the above data. III. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios of developed from projected financial statements, to which the firm belongs. IV. Interpretation of the ratios. An accounting ratio shows the relationship in mathematical terms between two interrelated accounting figures , such as gross profit & sales, current liabilities .It is an important & one of the most used technique of financial analysis. It aims at making use of quantitative information for decision making. Robert Antony defines “as simply one number expressed in terms of another”. STUDY OF WORKING CAPITAL RATIOS This analysis helps to find out the effectiveness of the working capital management to gain as slight they also use the variables other than those covered the term working capital. 1. LIQUIDITY RATIO:- Liquidity refers to affirms ability to meet its obligations in the short term, usually one year. These ratios are based on the relationship between current assets and current liabilities. The important ratios are current ratio, acid test ratio and cash ratio. 1a. CURRENT RATIO Current Ratio is the ratio of Current Assets to the Current Liabilities. It shows the ability of a firm to cover its Current Liabilities with the Current Assets. It is also called working capital ratio. Current ratio = Current assets / Current liability Current assets are those, the amount of which can be realized within a period of one year. It includes cash in hand, debtors , bills receivables , stock, prepaid expense etc.. Current liabilities are those, the amounts which are payable within a period of one year. It includes bills payable , outstanding expence, income tax etc.. Current ratio of 2:1 is considered satisfactory. 1.b ACID TEST RATIO / QUICK RATIO Acid test ratio also known as quick ratio. It shows the relationship between liquid assets and liquid liabilities. Liquid ratio is the true test of business solvency. Quick ratio =Quick or liquid asset/current liabilities The term quick assets refers to current assets, which can be converted into cash immediately. It comprises all current assets except stock & prepaid expenses. An acid test ratio 1:1 is considered satisfactory. 1. c CASH POSITION RATIO / ABSOLUTE LIQUIDITY RATIO This ratio is obtained by dividing cash (of course cash in hand and cash at bank ) and marketable securities by current liabilities. Absolute liquidity ratio = Cash + Marketable securities/ Current liability A ratio of 0.75 : 1 is recommended to ensure liquidity. 2. LEVERAGE RATIO:-Many financial analysts are interested in the relative use of debt and equity in the firm. These ratios measure the long term solvency position of the firm .The following are the important leverage ratios. 2.a DEBT – EQUITY RATIO The relationship between borrowed funds and owners ‘ capital is a popular measure of the long term financial solvency of a firm. Debt – equity ratio = Debt/Equity =Outsiders fund/Shareholders fund An acceptable norm for this ratio is considered to be 2:1 2.b PROPRIETARY RATIO Proprietary ratio relates to the shareholders fund to total assets. This ratio shows the long term solvency of the business. Proprietary ratio = Shareholders fund/total assets Shareholders fund = Equity share capital+Preference share capital+ Reserve &Surplus – Fictitious asset The acceptable norm of the ratio is 1:3 2.c FIXED ASSETS TO NET WORTH This ratio shows the relationship between fixed assets and shareholders fund . The purpose of this ratio is to find out the percentage of the owners fund invested in fixed assets. Fixed Assets to Net worth = Fixed Assets / Net worth or Shareholders fund If the ratio is greater than one. 3. ACTIVITY RATIOS :- The published accounts of a firm also provide a useful data for the measurement of the company ‘s level of activities . These ratios are also called as Turn over ratios”. 3.a INVENTORY TURNOVER RATIO (STOCK TURNOVER RATIO ) This ratio indicates whether investment in inventory is efficiently used or not . It also measure the effectiveness of the firm’s sales efforts. Inventory turnover ratio =Cost of goods sold / average stock Where Cost of goods sold = (Opening stock + Purchases + Direct expense )-Closing stock. Average stock = Opening stock + Closing stock 3.b FIXED ASSETS TURNOVER RATIO This ratio indicates the extent to which the investments in fixed assets contribute towards sales. Fixed assets turnover ratio = Net sales /Fixed asset 3.c WORKING CAPITAL TURNOVER RATIO Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio turned over in the course of year. Working capital turnover ratio = Sales/Net working capital 3.d DEBTORS TURNOVER RATIO This ratio a relationship is established between account receivables and net credit sales of the period. Debtors turnover ratio = Net credit sales/ Average accounts receivable 3.e AVERAGE DEBT COLLECTION PERIOD This figure shows the average number of days that elapsed between the receipt of the invoice by customers and the actual payment of the invoice. Average debt collection period = (Debtors + Bills receivable )*365/Net credit sales 3.f CURRENT ASSETS TURNOVER RATIO This ratio indicates the extent to which the investment in Current asset contribute towards sales Current Assets Turnover Ratio = Sales / Current asset 3.g TOTAL ASSETS TURNOVER RATIO Total asset turnover ratio is used to measure the firms ability to utilize its assets to generate sales. It is an indication to the firms operational efficiency. A lower ratio means inefficient utilization of assets. Total Assets Turnover Ratio = Sales / Total Asset 4. PROFITABILITY RATIO :- Profitability is an indication of the efficiency with which the operations of the business are carried on . Poor operational performance may indicate poor sales and hence poor profits. 4.a NET PROFIT RATIO This ratio is also called as the net profit to sales or net profit margin ratio . It is determined by dividing the net income after tax to the net sales for the period and measures the profit per rupee of sales. Net profit ratio = Net profit *100/ Sales 2.WORKING CAPITAL STATEMENT ANALYSIS Working capital is an important tool in the analytical kit of the financial analysis , credit granting institution & financial manager . This is because the Balance sheet of a business reveals its financial status at a particular point of time. It does not sharply focus those major financial transactions which have been behind the Balance sheet changes. Fund for analysis reveals the changes in working capital position. It tells about the sources from which the working capital was obtained & the purpose for which it was used. It brings out in open the changes , which have taken place behind the Balance sheet . Working capital statement is a method by which the study changes in the financial position of a business , enterprise between beginning & ending financial statements dates, & the changes in the working capital position. 3.ANALYSIS OF COMPARATIVE BALANCE SHEET The Comparative Balance sheet analysis is the study of the trend of the same items , group of items, & computed items in 2 or more Balance sheet of the same business enterprise on different dates. The changes can be obsereved by comparison of the Balance sheet at the beginning and at the end of a period & these changes can help in forming an opinion about the progress of an enterprise. The comparative Balance sheet has 2 coloumns is used to show increase in figures . The fourth column may be added for giving percentage of increase or decreases. While interpreting Comparative Balance sheet the interpreter is expected to study the following :- Current financial position & liquidity position Long term financial position Profitability of the concern. 4. TREND ANALYSIS Trend signifies tendency, therefore review & appraisal of tendency in accounting variable is simply called as Trend analysis. Trend ratio is also an important tool of horizontal financial analysis. Under this technique of financial analysis, the ratios of different items for various periods are calculated and then a comparison is made. An analysis of the ratios over the past few years may well suggest the trend or direction in which the concern is going upward or downward. The method of trend percentages is a useful analytical device for the management since by substituting percentages for large amounts; the brevity and readability are achieved. ADVANTAGES Trend analysis is helpful in forecasting & budgeting It helps in comparing one period with another period It makes data brief & easily understandable Trend Percentage = Current year amount/Base year amount *100 CHAPTER VIII DATA ANALYSIS AND INTERPRETATION Study of working capital 1. LIQUIDITY RATIO 1. a Current Ratio Current ratio = Current Asset/ Current Liability Table showing current ratio Table No .1( Rs in Lakhs ) YEAR CURRENT ASSET CURRENT LIABILITY CURRENT RATIO- - - - - - (Source : Annual Report ) Graph Showing Current Ratio INTERPRETATION Current ratio is optimum at 2:1 i.e. Current Assets should be 2 times that of Current Liability. But this rule need not work well in real life situation as it depends on many other factors. Since the availability of the raw materials are seasonal in nature and the industry uses imported Materials and Stores the Company have to stock them for a longer period to avoid lead time. Both these components make the Inventory level very high in turn resulting in a higher Current Assets level over the Current Liability, this in turn lead to a higher Current Ratio. During the year the- &-, The companies’ current ratio was 2.57&3.09 respectively, which was satisfactory. And during 2008 – 09 the the current ratio had began to decrease and which fall just above the satisfactory level. In the year- the current ratio went below 2:1. During 2010 the Companies Current Ratio was at 1.68:1 which is does not meet the standards as per the above rule. In 2010 – 2011 the current ratio had increased to 2.03 which was satisfactory level. Overall the Company found satisfactory with its Current Ratio in the year-. 1. b Quick Ratio Quick Ratio = Quick Asset/Current Liability = Current asset – Inventors/ Current Liability Table showing quick ratio Table No :2(Rs in Lakhs ) YEAR QUICK ASSET CURRENT LIABILITY QUICK RATIO- - - - - - (Source : Annual Report) Graph showing Quick Ratio INTERPRETATION The Liquid Ratio shows the actual liquidity of a firm. As a convention the Liquid Ratio of 1:1 is considered satisfactory. The company has been efficient in maintaining its Liquid Assets over its Current liability. During- & 2007 -08 Company has maintained its Quick Assets more than its Current Liabilities. But in the year 2008 - 09 and 2009 -2010 the company had stepped into severe liquidity crisis and the quick ratio had gone below the ideal ratio i.e. 0.87 and 0.96.In the year of 2011 the company was retain the efficiency. The Liquid ratio of the company is a satisfactory level.The company in a safe position. 1.c Absolute Liquidity Ratio Absolute Liquidity Ratio = Cash + Marketable securities / Current Liability Table Showing Absolute Liquidity Ratio Table No :3(Rs in Lakhs ) YEAR CASH CURRENT LIABILITY RATIO- - - - - - (Source : Annual Report) Graph Showing Cash Position Ratio INTERPRETATION The acceptable norm for this ratio is 0.75 : 1. Cash ratio is a stringent measure of liquidity. Lack of immediate cash matters may not matter if the firm can stretch its payments or borrowings at short notice. In the year- firms cash position ratio is 1.07 : 1 it is favourable position to the form when compared to other years.The absolute liquid ratio is very low the next three year -) when compared to 2008 so after identifying the absolute liquid ratio of HNL Velloor ,It is clear that the past four years the firm does not have enough liquid asset it will affect the liquidity position of the firm. 2.LEVERAGE RATIO 2a Debt Equity Ratio Debt Equity Ratio = Debt/Equity = Outsiders fund / Shareholders fund Table Showing Debt Equity Ratio Table No : 4 (Rs in Lakhs) YEAR DEBT EQUITY RATIO- - - - - - - (Source : Annual Report ) Graph showing Debt-Equity Ratio INTERPRETATION This ratio shows the relative contribution of the creditors and owners. In general, the lower this ratio the higher the degree of protection enjoyed by the firm. In 2008 – 2009 show high ratio it is unfavourable from the point of view of the firm. In the year 2009-10 the debt equity ratio was nil as the firm enjoyed complete protection.At last the company show high debt,the company is able to borrow fund. 2.b Proprietary Ratio Proprietary Ratio = Shareholders funds / Total assets Table Showing Proprietary Ratio Table No : 5 (Rs in Lakhs) YEAR SHARE HOLDERS FUND TOTAL ASSET RATIO- - - - - - - - - (Source : Annual Report ) Graph Showing Proprietary Ratio INTERPRETATION This ratio shows the financial strength of the company . It helps the creditors to find out the proportion of shareholders fund in the total asset . In the year- shows higher ratio it indicates a secured position to creditors and in- indicates greater risk to creditors.It indicate long term solvency of the firm. 2.c Fixed Asset To Net worth Fixed Asset To Net worth = Fixed Asset / Net worth or Shareholders fund Table showing Fixed Asset to Net worth Table No :6 (Rs in Lakhs) YEAR FIXED ASSETS SHAREHOLDERS FUND RATIO- - - - - - (Source : Annual Report) Graph Showing Fixed Assets to Net worth INTERPRETATION The above chart shows that the Fixed assets to net worth ratio .The fixed assets to net worth ratio is of the last 5 years taken in to consideration.In this ratio means that creditors funds have been used to acquire a part of the fixed asset. The ratio was high in the year-.Then it decreases. 3. ACTIVITY RATIO 3.a Inventory Turnover Ratio Inventory Turnover Ratio = Cost of Goods Sold / Average Stock Table Showing Inventory Turnover Ratio Table No :7 (Rs in Lakhs ) YEAR COST SALES AVERAGE STOCK RATIO- - - - - - (Source : Annual Report) Graph Showing Inventory Turnover Ratio INTERPRETATION Inventory turnover ratio measures the velocity of conversion of stock in to sales. Usually a high inventory turnover indicate efficient management of inventory. In this chart shows the turnover ratio has an increasing tendency. In the year- inventory turnover ratio indicate brisk sales. In the year- &- shows turnover ratio is 2.78 &2.77 respectively..It results in blocking of funds in inventory 3.b Fixed Asset Turnover Ratio Fixed Asset Turnover Ratio = Net sales / Fixed Asset Table Showing Fixed Asset Turnover Ratio Table No: 8 (Rs in Lakhs ) YEAR NET SALES FIXED ASSET RATIO- - - - - - (Source : Annual Report) Graph Showing Fixed Asset Turnover Ratio INTERPRETATION This ratio measures the sales per rupee of investments in fixed assets. It also measures the efficiency with which the fixed assets are employed; a high ratio indicates high degree of efficiency in asset utilization and vice versa. So the company has an effective fixed asset turnover. In the year- it shows high degree of efficiency. . 3.c Working Capital Turnover Ratio Working Capital Turnover Ratio = Net Sales / Net Working Capital Table Showing Working Capital Turnover Ratio Table No :9 (Rs in Lakhs ) YEAR NET SALES NET WORKING CAPITAL RATIO- - - - - - (Source : Annual Report) Graph Showing Working Capital Turnover Ratio INTERPRETATION The working capital turnover ratio of HNL for a period of 5 years was 3.29,2.73,2.24,4.89 and 3.71 respectively.In the year- ,the ratio was very high ,ie,4.89. This shows that the working capital was effectively utilized .There was an increased in the ratio as sales had shown a sudden increase even through the net working capital had also increased. Net sales are increase from the year- on the same hand working capital also increases.But in- it shows a low net sales because of availability of imported news prints at cheaper rate & low working capital. Both the net sales & working capital is high in the years. 3.d Debtors Turnover Ratio Debtors Turnover Ratio =Total Sales / Debtors Table Showing Debtors Turnover Ratio Table No : 10 (Rs in Lakhs) YEAR SALES DEBTORS RATIO- - - - - - (Source : Annual Report ) Graph showing Debtors turnover Ratio INTERPRETATION It indicates the number of time on an average , the receivables are turn over in each year. The higher the value of ratio, the more is the efficient management of debtors. In the year- shows high ratio, the better it is, since it would indicate that debts are being collected promptly. During the year- turnover ratio is decreases 3. e Debt Collection Period Debt Collection Period = 365 / Debtors Turnover Ratio Table Showing Debtors Turnover Ratio Table No : 11 (Rs in Lakhs) YEAR DTR DEBT COLLECTION PERIOD(In Days) - - - - - - (Source : Annual Report ) Graph Showing Debt Collection Period INTERPRETATION The Debt Collection Period is the time taken for the collection of Debtors .It starts from the sale of finished goods to the customers on credits till the collection of receivables from them,Till- the analysis reveals that the company is able to collect it dues rapidly from it`s customers.This ratio measures the quality of debtors . In the year- shows shorter collection period ,It implies prompt payment by debtos. It reduces the chance of bad debts. A longer collection period implies inefficient credit collection performance. 3.f Current Assets Turnover Ratio Current Assets Turnover Ratio = Sales / Current Asset Table Showing Current Assets Turnover Ratio Table No :12 (Rs in Lakhs ) YEAR SALES CURRENT ASSET RATIO- (Source : Annual Report ) Graph Showing Current Assets Turnover Ratio INTERPRETATION It indicates whether the investments in current assets have been properly utilized. This ratio indicates the number of times the current asset is turned over in the course of a year. The highest ratio indicates efficient utilization of current asset. The ratio was high in the year-. But in the year- &- it has declined .Then it increases so there is a chance of increasing the ratio through improved efficiency of the concern. 3.g Total Assets Turnover Ratio Total Asset Turnover Ratio = Sales / Total Asset Table Showing Total Assets Turnover Ratio Table No: 13 (Rs in Lakhs ) YEAR SALES TOTAL ASSET RATIO- (Source : Annual Report ) Graph Showing Total Assets Turnover Ratio INTERPRETATION The above chart shows that the Total assets turnover ratio. The total assets turnover ratio is of the last 5 years taken in to consideration. The ratio was high in the last 5 years of performance and still it continuing so there is a chance of increasing the ratio through improved efficiency of the concern 4. PROFITABILITY RATIO 4. a Net Profit Ratio Net Profit Ratio = Net Profit / sales *100 Table Showing Net Profit ratio Table No: 14 (Rs in Lakhs ) YEAR NET PROFIT (after tax) SALES NPR(%- - - (Source: Annual Report) Graph Showing Net Profit Ratio . INTERPRETATION This ratio shows the earnings left for the shareholders (both equity and preference) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing, and tax management. This ratio was high in the year- but in the year- it was declined and still continuing so there is a chance of increasing the ratio through improved efficiency of the concern. . 4.b Operating Ratio OPERATING RATIO = EBIT / NET SALE (EBIT : Earning Before Interest & Tax ) Table Showing Operating Ratio Table No: 15 (Rs in Lakhs) YEAR EBIT NET SALES RATIO- - - - - - - (Source: Annual Report ) Graph Showing Operating Ratio INTERPRETATION The above chart shows that the operating ratio. The operating ratio is of the last 5 years are taken in to consideration. During the year- shows lower the ratio, the more profitable are the operations indicating an efficient control over costs and an appropriate selling price. In the year- shows high ratio .It is one of the most important efficiency ratios. WORKING CAPITAL STATEMENT ANALYSIS 1.Table Showing Schedule of Changes In Working Capital - Table No :16 Particulars - Increase (in amount) Decrease (In amount) Current Asset Inventories 6820.06 - - Sundry Debtors 1593.40 1436.21 - 157.19 Cash & Bank 2711.69 - - Other Current Asset 24.59 - - Loans & Advances 2727.46 2324.83 - 402.63 Total (A- - Current Liability Sundry Creditors 1302.74 1387.85 - 85.11 Advances From Customers 30.55 39.26 - 8.71 Security Deposit- - 254.72 Liabilities To Govt. 128.17 209.45 - 81.28 Other Liabilities 712.84 983.46 - 270.62 Provision 2150.67 2574.81 - 424.14 Total (B) 4955.42 6080.00 - 1124.58 Working Capital (A-B) 8921.78 - Net Increase In Working Capital 635.31 - - 635.31 Grand Total- INTERPRETATION In- there is increase in Working Capital of Rs 635.31 Lakhs. This means improvement in current financial position of the business. There is increase in current assets. Cash & Bank balance is increase by 2061.45. So the liquidity position is satisfactory. 2. Table Showing Schedule Of Changes In Working Capital- Table No: 17 Particulars 2007 2008 Increase (in amount) Decrease (In amount) Current Asset Inventories - - 44.9 Sundry Debtors 1436.21 901.31 - 534.9 Cash & Bank - - Other Current Asset- - Loans & Advances- - Total (A) - Current Liability Sundry Creditors - - 748.54 Advances From Customers- - 56.75 Security Deposit - - 87.24 Liabilities To Govt- - Other Liabilities - - Provision - - Total (B) - Working Capital (A-B- Net Increase In Working Capital 1376.58 - - 1376.58 Grand Total- - INTERPRETATION In- there is increase in Working Capital of Rs 1376.58. There is increase in current assets such as cash & bank balances, other current assets & loans and advances. Cash & bank balances are increase by 837.23. But the inventories decrease by 44.9 rupees. So the liquidity position is satisfactory. 3. Table Showing Schedule Of Changes In Working Capital- Table No :18 Particulars - Increase (in amount) Decrease (In amount) Current Asset Inventories - - Sundry Debtors - - Cash & Bank - - 5235.67 Other Current Asset- - 28.13 Loans & Advances- - Total (A) - Current Liability Sundry Creditors - - 3223.94 Advances From Customers- - Security Deposit - - 284.43 Liabilities To Govt- - Other Liabilities - - 387.63 Provision - - Total (B) - Working Capital (A-B- Net Increase In Working Capital 2361.33 - - 2361.33 Grand Total - INTERPRETATION In the year- there is increase in the working capital of Rs .2361.33 lakhs.There is increase in current assets such as inventory & sundry debtors. Debtors are increased by 3396.45 rupees & inventories are increase by 7391.33.In this year the liquidity position is not satisfactory. 4. Table Showing Schedule Of Changes In Working Capital- Table No :19 Particulars - Increase (in amount) Decrease (In amount) Current Asset Inventories - - 8309.11 Sundry Debtors - - 2599.45 Cash & Bank - - Other Current Asset- - Loans & Advances- - Total (A) - Current Liability Sundry Creditors - - Advances From Customers- - 122.51 Security Deposit - - 19.66 Liabilities To Govt- - 49.08 Other Liabilities - - 551.88 Provision - - 506.15 Total (B) - Working Capital (A-B- Net Decrease In Working Capital - - Grand Total - INTERPRETATION In the- there is decrease in the position of working capital of Rs. 7486.07 lakhs. There is decrease in the value of current assets such as inventories & sundry debtors & increase in the value of current liability such as sundry creditors. In case of current asset except inventory & debtors all other show increase in trend .This show increase in liquidity position. 5. Table Showing Schedule Of Changes In Working Capital- Table No:20 Particulars - Current Asset Inventories - - Sundry Debtors - - Cash & Bank - - 64.59 Other Current Asset- - Loans & Advances- - 235.93 Total (A) - Current Liability Sundry Creditors - - Advances From Customers- - 1336.85 Security Deposit - - Liabilities To Govt- - Other Liabilities - - 232.87 Provision - - Total (B) - Working Capital (A-B- Net Decrease In Working Capital 2309.65 - - 2309.65 Grand Total - INTERPRETATION During the year- the working capital is increase by 2309.65 lakhs .This is due to increase in the value of inventory & sundry debtors. In this year the cash & bank balances have decrease in tendency. The decrease in the value of current liability such as sundry creditors, deposits, provisions etc,,, COMPARATIVE BALANCE SHEET ANALYSIS 1. Table Showing Comparative Balance sheet- Table No: 21 Particulars- Increase or decreases Amount % Assets Current asset Inventories 6820.06 - Sundry Debtors 1593.40 1436.21 -157.19 -9.86 Cash & Bank 2711.69 - Other CA 24.59 - Loan& advances 2727.46 2324.83 -402.63 -14.76 (A- Fixed Assets (B- - Total Assets (A + B- Current Liability Sundry Creditors 1302.74 - Advance from customers 30.55 - Security deposits 630.45 - Liabilities to govt. 128.17 - Other liabilities 712.84 - Provision 2150.67 - (C- Fixed liabilities Share capital 8253.99 8253.99 - - Reserve & Surplus 1157 - Secured loan - -55.00 Unsecured loan - -79.39 -100 Deferred tax liability 3711.67 3607.28 -104.39 -2.81 (D- - Total (C + D - INTERPRETATION In the year there is increase in the position of working capital. The current position of the concern is quite good because the excess of current assets over current liability is more or less satisfactory. Considering the liquid assets of the company there is a slight increase in the 2nd year than 1st year. Therefore the liquidity position of the company seemingly satisfactory. The long term financial position is not so good because during 2007 there is decrease in the value of fixed asset of 789.39 ie 4.47 %. 2. Table Showing Comparative Balance sheet- Table No: 22 Particulars- Increase or decreases Amount % Assets Current asset Inventories- -44.9 -0.64 Sundry Debtors- -534.9 -37.24 Cash & Bank- Other CA- Loan& advances- (A- Fixed Assets (B- Total Assets (A + B- Current Liability Sundry Creditors- Advance from customers- Security deposits- Liabilities to govt- -79.21 -37.82 Other liabilities- -835.63 -84.96 Provision- -814.41 -31.63 (C- -836.72 -13.76 Fixed liabilities Share capital- Reserve & Surplus- Secured loan- -43.83 Unsecured loan- Deferred tax liability- -4.02 (D- Total (C + D - INTERPRETATION For the year- the current position of the concern is quite good because the excess of current assets over current liability is more or less satisfactory. Considering the liquid assets of the company there is slight increase in the 2nd year than the 1st year, ie 837.23 (17.54 %). Therefore the liquid position of the company is seemingly satisfactory. The long term financial position is not so good but satisfactory because during 2008 there has been an increase in fixed asset of 178.31 ie,1.05%. While long terms loans are relatively decrease by 614.73 & share capital is increase by 1746 lakh. This fact depicits that the policy of the company is to purchase fixed asset not only from long term loans but also from working capital which is long run would total to the companies current financial position 3. Table Showing Comparative Balance sheet- Table No : 23 Particulars- Increase or decreases Amount % Assets Current asset Inventories- Sundry Debtors- Cash & Bank- -5235.67 -93.32 Other CA- -28.13 -55.56 Loan& advances- (A- Fixed Assets (B- -7.53 0.04 Total Assets (A + B- Current Liability Sundry Creditors- Advance from customers- -69.68 -72.57 Security deposits- Liabilities to govt- -53.18 -40.83 Other liabilities- Provision- -417.87 -23.74 (C- Fixed liabilities Share capital- - - Reserve & Surplus- Secured loan- Unsecured loan 0.00 - 0.00 0.00 Deferred tax liability- -217.63 -6.28 (D- Total (C + D - INTERPRETATION During the year there is increase in current assets & current liability. This means improvement in current financial position of the business.The long term financial position is not good because during 2009 there has been decrease in fixed asset of 7.53 ie, 0.04% . There is no change in share capital. A sundry debtor is increased by 376.83% & inventories are increased by 105.23%. But the cash & bank balance is decreased by 93.32%. So the liquidity position is not satisfactory. 4. Table Showing Comparative Balance sheet- Table No: 24 Particulars- Increase or decreases Amount % Assets Current asset Inventories- -8309.11 -57.64 Sundry Debtors- -2599.45 -60.48 Cash & Bank- Other CA- Loan& advances- .95 (A- -7684.46 -35.07 Fixed Assets (B- -801.54 -4.66 Total Assets (A + B- -8486 -21.70 Current Liability Sundry Creditors- -1447.67 -27.01 Advance from customers- Security deposits- Liabilities to govt- Other liabilities- Provision- (C- -198.39 -2.30 Fixed liabilities Share capital- - - Reserve & Surplus- -4802.4 -34.36 Secured loan 3265.52 - -3265.52 -100 Unsecured loan - - - Deferred tax liability- -219.69 -6.77 (D- -8287.61 -27.18 Total (C + D - -8486 -21.70 INTERPRETATION In the year there is decrease in current assets & current liability..In- there is decrease in current assets such as inventories & sundry debtors.The debtors shows a decrease of 60.48% & inventories shows a decrease of 57.64%. But the cash balance is increased by 852.46. therefore the liquid position of the company is satisfactory.the financial position is satisfactory because there is no loan in 2010 in compared to previous year.The over all performance of the company is poor. 5.Table Showing Comparative Balance sheet- Table No : 25 Particulars- Increase or decreases Amount % Assets Current asset Inventories- Sundry Debtors- Cash & Bank- -64.59 -1.81 Other CA- Loan& advances- - (A- Fixed Assets (B- -911.49 -5.56 Total Assets (A + B- Current Liability Sundry Creditors- -1566.4 -40.03 Advance from customers- Security deposits- -180.73 -14.16 Liabilities to govt- -23.17 -18.37 Other liabilities- Provision- -378.44 -20.47 (C- -6949.19 -82.54 Fixed liabilities Share capital- - - Reserve & Surplus- Secured loan - - Unsecured loan - - - - Deferred tax liability- -8.09 -0.27 (D- Total (C + D - INTERPRETATION During the year- the current position of the concern is quite good because the excess of current assets over current liability is more satisfactory. Considering liquid assets of the company there is decrease in the 2nd year than the 1st year. So the liquidity position is not so good. Also the financial position of the company is not satisfactory because during 2011 there has been decrease in fixed assets & increase in long term loans .There is no increase in share capital. Fixed assets shows a decrease of 5.56% &current liabilities shows a decrease of 82.54%. The over all performance of the company is satisfactory. TREND ANALYSIS Trend percentage = Current Year Amount / Base Year Amount * 100 Trend percentage of Sales & Working capital YEAR SALES WORKING CAPITAL AMT TREND% AMT TREND% 2007 - - - - - INTERPRETATION The trend of sales of the company reveals that not encouraging with a sales turnover of Rs-, ie 90.22 for the year 31st march 2010 compares to Rs- more during the previous year. The sales have shown an upward & downward relation.The trend of sales may be studied in the light of two factors ;The rate of fixed expansion or secular trend in the growth of the business & the general price level. Increase in sales is quite satisfactory. The working capital shown an upward & downward relation. Through the working capital is more as compared to base year but still rate of increase has not constant&requires a study by comparing these trends to other items like loss of production etc..Increase in working capital is quite satisfactory . CHAPTER IX SWOT ANALYSIS SWOT ANALYSIS Swot analysis is an important aide for the management when it comes from making critical decision. It is an acronym for strengths, weakness, opportunity & threats. Opportunity & threats where as the “Weakness& Threats” represent the positive aspects that the company should try to overcome. After a keen observation over the organization and the various departments of HNL the following strengths, weakness, opportunity & threats are known. The basic objective of SWOT. Analysis is to provide framework to reflect on the firm ability to overcome barriers & avail of the opportunities emerging in the environment. Indeed the dimensions of the internal capabilities have reliance is so far as they relate to the environmental condition. The following are the some of the strengths, weakness, opportunity & threats of HNL. STRENGTH The factory is located in main part of Kottayam and had the entire infrastructure that required quick movement of raw materials and finished goods. Its proximately habitation movement of men and material is easy Long term relationship with the customers indicates the trust in their product. Modern manufacturing facility with maximum capacity. Foreign technology to suit indigenous conditions. Modern manufacturing facility with maximum capacity. Foreign technology to suit indigenous conditions. Excellent sales staff with strong knowledge of existing products Good internal communications Successful marketing strategies Low cost production good reputation among companies WEAKNESS Strained employer-employee relation. Product line underutilized and space of area very short. Advertising expenses is very meager Low turnover result the low profit. Defensive marketing strategy lack efficiency and publicity Holding too much stock Poor record-keeping Shortage of consultants at operating level rather than partner level Lack of raw material A weak brand name High cost production Wastage of raw material Lack of access to key distribution channels OPPORTUNUTIES Good raw materials source to enhance production Customer awareness over the product of HNL has been increasing over the years Customer demand - have asked sales staff for similar product Well established position with a well defined market niche An unfulfilled customer need Arrival of new technologies Globalization New market are opening Loosening of regulations Removal of international trade barriers Growing incomes New delivery systems . THREATS: Competitors pay their agents high commission which cause a threats to HNL. Lack of advertisement by HNL. Renovation of machinery is needed. Lack of new product development. Renovation of machinery is needed. Lack of new product development. Other competitors in the market Quality of the product should be maintained Lack of skillful workers in the industry Competitors have a similar product Competitors have launched a new advertising campaign Competitor opening shop nearby. Downturn in economy may mean people are spending less large consultancies operating at a minor level New regulations Increased trade barriers. Awareness problem . CHAPTER X FINDINGS, SUGGESTIONS AND RECOMMENDATIONS FINDINGS Actual production has been increasing consistently- when compared with the previous year. The company has performed exceptionally well during the year-inspite of economic meltdown which had hit the domestic newsprint market badly. Great fluctuations in the loans and advances The average current ratio of the company never went below 1.68 :1 for the last 5 years ie , from the year-,The company was stable in maintaining it`s current ratio. Hence the current ratio of HNL is satisfactory. The company is fully utilizing its assets. Sufficient rate of quick ratio is witnessed from the findings. The company was successful in maintaining its liquid ratio after the year-, there by increasing the efficiency of the firm. So the quick ratio is also satisfactory because the ratio is nearest to the ideal ratio. The debt equity ratio is not favorable from long term creditor’s point of view. Considerable reduction of variable cost is already achieved by replacing chemical pulp by deinked pulp. The company has exercised control over its fixed expenses through extensive cost cutting measures. Cash position of HNL has declined from 5610.37 to 3504.28 in the current financial year. The company has maintained proper records showing full particulars, including Quantitative details and situation of fixed assets. The schedule changes in working capital shows both increasing & decreasing tendency. Increasing working capital shows an efficient management of current assets & current liabilities.The reason for decrease in working capital was decrease in current assets. SUGGESTIONS & RECOMMENDATIONS . The company should improve the liquidity position & maintain a proper balance between current asset & current liabilities. The company should adopt proper working capital management .Otherwise it will affect the overall performance of the company. The company should maintain a steady mark – up on sales by controlling the operating & manufacturing expences.Thus the net profit of the company can be improved.. In our opinion and to the best of knowledge of information about the company does not have accumulated losses as at the end of the financial year and the company has not incurred cash losses in the current financial year and in the immediately preceding financial year. Cash planning is a suitable technique to plan & control the use of cash. It is possible by preparing a projected cash flow statement on the basis of present business operations & anticipated future activities. The company should try to reduce the utilization of assets CONCLUSION A study conducted in Hindustan Newsprint LTD Kottayam; enable to get practical touch to the topic Working Capital Management of the company. The study was very useful to get knowledge regarding the practical implication of the theoretical aspects. From the study undertaken it is clear that the various components will decrease the amount of other leading to maintain level of working capital. As could be seen from the working capital the financial position of firm is very encouraging. It ensures reasonable return on investment hence it is to be considered a sound and feasible project. Objectives of working capital are to manage such a way that satisfactory level of working capital maintained. To conclude the project work has been a great experience and exposure to the real fixed experience and actual working capital of an organization. Hence we can conclude that, the working capital management of a company is very efficient and is promotes suitable suggestions for better utilization of working capital components. The efficient management levels to the success of the firm. In our opinion where the company the working capital position of a firm is very well CHAPTER X BIBLIOGRAPHY BIBLIOGRAPHY BOOKS [1] Dr. Prasanna Chandra (IIM B), Financial Management Theory and Practice, Second Edition, Tata Mc-Graw Hill Publications, New Delhi, pp- 245-265 [2] Pandey,”Financial Management”, Vikas Publishing House Pvt Ltd, pp108-157,808-939 [3]Sharma, “Working Capital Management”Surabhi Publications, 103-173. WEBSITE [1]http://www.hnlonline.com OTHER SOURCES [1]Annual Report of the company, Year-to- [2]Articles issued by the Company [3]Monthly Statement of Operational Data (MSOD) [4]Journals, Magazines issued by the Company. APPENDIX BALANCE SHEET AS ON- TO- Particulars- Source of fund Share capital- Reserve & Surplus- Total- Secured loan- Un secured loan- Total- - 1367.46 Deferred Tax liability- Total- Application of Fund Fixed Assets Gross Block- Less depreciation- Net Block- Work in progress- Total- Current Assets Inventories- Sundry Debtors- Cash & Bank Balances- Other Current Assets- Loans & Advances- Total- Less Current liability & Provision- Net Current Assets- Total- PROFIT AND LOSS A/C AS ON 31-3 -2007 TO- Particulars- INCOME Sale of Newsprint- Other Income- WIP 11.52 - - TOTAL- EXPENDITURE Raw Material - Chemical- Power & fuel- Repairs- Employee Benefit- Other Expenses- Interest- Depreciation- Miscellaneous expenditure- - - - TOTAL- Profit for the year- - Prior period adjustment (10.77) (13.93) - P.B.T- - Provision for tax - - - - - Excess short (12.54) (0.11) 0.29 (277.43) - Profit after tax- - Profit from previous year- Profit available- Appropriations General Reserve- - - - Interim dividend - - - - - Proposed dividend- - - 400.00 Tax on dividend- - 64.89 Balance carried to B/S-