Project working capital management

A
Project Report
On
A STUDY ON WORKING CAPITAL MANAGEMENT IN FM CG
SECTOR - BAJAJ CORP LIMITED WITH RATIO ANALYSIS
TOOL

Submitted in partial fulfillment for the award of the degree of Master of Business
Administration (MBA) under University of science and technology, Meghalaya

By
Thoudam Suraj Singh
(17/MBA/06)
MBA

Department of Business Administration
School of Business Science
University of Science & Technology, Meghalaya
Techno-city, 9
th
Mile, Kling Road, Baridua, Meghalaya-793101
-

DECLARATION

I, THOUDAM SURAJ SINGH , hereby declare that the “A Study on Working
Capital Management in Bajaj Corp. Limited with Ratio Analysis Tool” submitted to
the University of Science & Technology, Meghalaya in partial fulfillment for the
award of Degree of Master of Business Administrations an original work done by
me under the supervision of D r. Shankar Thapa Professor, Department of Business
Administration, University of Science &Technology, Meghalaya. The dissertation has
not formed the basis for the award of any Degree/ Diploma/ Associateship/
Fellowship or another similar title to any candidate in any university.

Countersigned by:-
Thoudam Suraj Singh

ACKNOWLEDGEMENT

I declare that this project is my own work and that I have correctly acknowledged
the work of others. This project is in accordance with University and School guidance on
good academic conduct. I understand that plagiarism, collusion, copying is grave and
serious offenses in the University and accept the penalties that would be imposed should
I involve in plagiarism, collusion, copying. I have identified and included the source of all
facts, ideas, opinions, and viewpoints of the others in the assignment references. This
assignment or any part of it has not been previously submitted by me or any other person
for assessment on this or any course of study.

( Thoudam Suraj Singh)
Date: 17/MBA/06
MBA (2017-2019)

CERTIFICATE

This is to certify that …Thoudam Suraj Singh... is a student of MBA (2-year Full
Time) Final semester holding University Roll No…17/MBA/06… has completed
his/her project entitled as “A Study on Working Capital Management in Bajaj Corp.
Limited with Ratio Analysis Tool.” under my supervision. This project report is the
original work of the student.

Neither in full nor in any part of the report has been submitted anywhere for the
award of any degree/certificate from any University or Institute.

I wish him all the Best.

Dr. Shankar Thapa
Associate Professor
(Business Administration)

PREFACE

In today’s competitive world the practical study forms an important part in each and
every professional course. The MBA is a course in which the theoretical knowledge is
backed by the practical study. That study is in the form of a project. The Grand Project
is one of the important parts of the curriculum. And each and every student has to work
for the project.

The Grand project enables the students to know more about the application of
theoretical knowledge. The current situation of the market is made known to the
students when they undertake the project. The project gives better insides into the
application part of the theory. The companies in an industry and their operations can
be better known by the students when they analyze the data.

This project has been done on “A Study on Working Capital Management in Bajaj Corp.
Limited with Ratio Analysis Tool” from 2
nd
July – 31
st
August 2018.

I hope the finding and recommendation would be useful in one way or other to the
Organisation in taking decision.

CONTENTS
LESSONS TOPICS PAGE NO.
CHAPTER-1 INTRODUCTION 1 – 7
1.1
1.2
1.3
1.4
1.5
1.5.1
1.5.2
1.5.3
1.5.4
1.6
1.7
About the Topic………………………………………………………...
Literature Review……………………………………………………….
Objective of the Study………………………………………………….
Scope & Limitation of the Study……………………………………….
Research Methodology…………………………………………………
Data Collection method………………………………………………
Period of the study……………………………………………… ….
Framework of analysis………………………………………………
Tools and techniques of data analysis………………………………
Limitations of the study………………………………………………...
Chapterisation…………………………………………………………...
1
2 -3
3
4
4
4-5
5
5
5-6
6
7
CHAPTER-2 WORKING CAPITAL & RATIO ANALYSIS 8-22
2.1
2.2
2.3
2.3.1
2.3.2
2.4
2.5
2.6
2.7
2.8
2.9
2.10
Introduction……………………………………………………………...
Components of Working Capital…………………………………… ….
Working Capital Management………………………………………….
Nature of working capital………………………………………… .…
Scope of Working Capital…………………………………………….
Operating Cycle…………………………………………………………
Types of working capital……………………………………………….
Importance working capital………………………………………… ….
Sources of working capital……………………………………………...
Working capital analysis………………………………………………...
Methods of analysis…………………………………………… ………
8-9
10
11
12
12
13
14-17
18-19
20
20-22
22
CHAPTER-3 RATIO ANALYSIS 23-32
3.1
3.2
3.3
3.3.1
3..4
3.5
3.5.1
3.5.2
Introduction………………………………………………………… ….
Nature of Ratio analysis…………………………………………………
Standard of comparison………………………………………………...
Types of comparison…………………………………………… ….
Importance of ratio analysis…………………………………………….
Types of Ratios…………………………………………………………
Liquidity Ratio……………………………………………………….
Activity Ratio………………………………………………………….
23
24
24
25
25-27
27-32
28-30
30-32

CONTENTS

CHAPTER-4 COMPANY PROFILE 33-36
4.1
4.2
4.3
4.4
4.5
4.6
Introduction …………………………………………………………….
History…………………………………………………………………...
Mission………………………………………………………………….
Vision……………………………………………………………………
Values……………………………………………………………………
Brands …………………………………………………………………..
34
34
35
35
36
36
CHAPTER-5 DATA ANALYSIS AND INTERPRETATIONS 37 – 68
CHAPTER-6 FINDINGS AND SUGGESTIONS 69-70
6.1
6.2
Findings………………………………………………………………….
Suggestions………………………………………………………………
69
70
CHAPTER-7 CONCLUSION 71
BIBLIOGRAPHY 72
ANNEXURE: Balance Sheet of 5 years(2014-2018) 73

LIST OF TABLES

TABLE NO. DESCRIPTION PAGE NO.
Table 1 Current Ratio 37
Table 2 Quick Ratio 39
Table 3 Cash Ratio 41
Table 4 Overall Liquidity ratio 43
Table 5
Inventory Turnover Ratio:
44
Table 6 Fixed asset turnover ratio 46
Table 7 working capital turnover ratio 48
Table 8 Debtors Turnover Ratio 50
Table 9 Creditors Turnover Ratio 52
Table 10 Overall Activity ratio 54
Table 11 Inventory to Current Assets 55
Table 12 Debtors to Current Assets 57
Table 13 Cash & Bank to Current Assets 59
Table 14 Loan & advances to current assets 61
Table 15 Overall liquidity position 63
Table 16 Statement of Ranking in order of liquidity 65
Table 17 Statement of Changes in working capital 66
Table 18 correlation between sales & working capital 68
Table 19 correlation between profit & working capital 68

LIST OF GRAPHS

CHART NO. DESCRIPTION PAGE NO.
CHART 1 Current Ratio 38
CHART 2 Quick Ratio 40
CHART 3 Cash Ratio 42
CHART 4 Overall Liquidity ratio 43
CHART 5
Inventory Turnover Ratio:
45
CHART 6 Fixed asset turnover ratio 47
CHART 7 working capital turnover ratio 49
CHART 8 Debtors Turnover Ratio 51
CHART 9 Creditors Turnover Ratio 53
CHART 10 Overall Activity ratio 54
CHART 11 Inventory to Current Assets 56
CHART 12 Debtors to Current Assets 58
CHART 13 Cash & Bank to Current Assets 60
CHART 14 Loan & advances to current assets 62
CHART 15 Overall liquidity position 64
CHART 16 Statement of Changes in working capital 67

EXECUTIVE SUMMARY

Name of the Organisation: : Bajaj Corp Ltd.
Branch Office: : Udaipur, Rajasthan
Title of the project: : “A Study on Working Capital Management in
Bajaj Corp. Limited with Ratio Analysis Tool”
Duration: : 60 days (2
nd
July- 31
st
August) 2018
Manager: : Mr. Jayanta Dutta (Plant Head,DGM)
Institutional Guide: : Dr. Shankar Thapa, (Associate professor
Department of Business Administration
Organizational Guide: : Mr. Vijay Agarwal (C.A. Accountant Head)
Location of the Study: : Brahmaputra Industrial Park, Karaibari, Assam-
781030
Data Source: : Secondary data
Research Instrument: : Company Financial statement
Research Methodology: : The design in this survey is descriptive
Sample size: : 5 years
Methods of data analysis: : Ratio Analysis
Tools of data analysis: : Graph and Bar diagram

1

CHAPTER – I
INTRODUCTION

1.1 ABOUT THE TOPIC
The overall success of the company depends upon its working capital position. So, it should
be handled properly because it shows the efficiency & financial strength of a company. Working
Capital Management is highly important in firms as it is used to generate further returns for the
stakeholders.

Working Capital Management is a very important fact of financial management due to:
 Investments in current assets represent a substantial portion of the total investment.
 Investment in current assets & the level of current liabilities have to be geared
quickly to change sales.

The working capital is the lifeblood & nerve center of a business firm. The importance of working
capital in any industry needs no special emphasis. No business can run effectively without a
sufficient quantity of working capital.

It is crucial to retain the right level of working capital. Working Capital Management is one of the
most important functions of corporate management. A business enterprise with ample working
capital is always in a position to avail advantages of any favorable opportunity either to buy raw
material or to implement a special order or to wait for enhanced market status.

Working capital can be utilized for operating costs that are involved in the everyday life of the
business. Even very successful business owners may need working capital funds when unexpected
circumstances arise.

Working Capital Management is highly important in firms as it is used to generate a further return
for the stakeholders. When working capital is managed improperly, allocating more than enough of
it will render management non-efficient & reduce the benefits of short-term investments. On the
other hand, if working capital is too low, the company may miss a lot of profitable investment
opportunities or suffer short term liquidity crises, leading to degradation of company credit, as it
cannot respond effectively to temporary capital requirements.

2

1.2 LITERATURE REVIEW
Working capital is very important for every company to meet day to day operation expenses
and urgent payments. Effective working capital increase the company profit and vice versa. For
effective working capital, collection days should be less, and payment days should be more overall
cash conversion cycle days should very low or in negative.
Many researchers have studied working capital from different views and in different environments.
The following ones were very interesting and useful for our research:

Siddharth and Das (1994):
Siddharth and Das have been done a study on “Working Capital Turnover in Pharmaceutical
companies” tried to determine efficient use of working capital in selected pharmaceutical firms in
India. 10 years data has been 338 concluded that overall turnover ratio was 90.3 time. The fine
analysis of the data shows that the selected companies have done well in terms of employment of
working capital. Furthermore, the study discovered the working capital turnover ratio cried off
staidly over the stage from 1981-1990.

Dr. Shankar Thappa (2007) working capital management in sun pharmaceutical industries
ltd. – a case study, TECNIA Journal of Management Studies 2 (1), 45-52 to determine efficient use
of working capital in sun pharmaceutical industries ltd. India. The research article highlighted
mainly the concept of working capital, working capital policy, components of working capital and
factors affecting the working capital of sun pharmaceutical industries during last five years and
identified which factors are mainly responsible for the improvement of working capital of the
company

Arindam Ghosh (2007):- a study carried on Cement Industry of India specific area of study
was “Working Capital Management and its practices and impact on profitability. The main aim of
the study is to evaluate the efficiency of working capital management of selected cement companies
in India during the period 1992 to 2001. For the study targeted 20 large cement companies avail in
India having a very large portion in cement industry of India

Saswata Chatterjee (2010) Focused on the importance of the fixed and current assets in the
successful running of any organization. It poses direct impacts on profitability liquidity.
There has been a phenomenon observed in the business that most of the companies increase the
margin for the profits and losses because this act shrinks the size of working capital relative to sales.
But if the companies want to increase or improve their liquidity, then it has to increase its working

3

capital. In the response of this policy, the organization has to lower down its sales and hence the
profitability will be affected due to this action. For this purpose, 30 United Kingdom-based
companies were selected which were listed in the London Stock exchange. The data were taken of
three years 2006-2008. It analyzed the impact of the working capital on profitability.
The dimensions of working capital management included in this research, which is quick ratios,
current ratios C.C.C, average days of payment, Inventory turnover, and A.C.P (average collection
period. On the net operating profit of UK companies.

Mohamad and Saad (2010) Used Bloomberg’s database of 172 listed companies randomly
selected from Bursa Malaysia main board for a five-year period from 2003 to 2007. Applying
correlations and multiple regression analysis, they found that current assets to total asset ratio show
a positive significant relationship with Tobin Q, ROA, and ROI. Cash conversion cycle, a current
asset to current liabilities ratio and current liabilities to total assets ratio illustrate negative significant
relations with Tobin Q, ROA, and ROIC.
Rahman Mohammad M. (2011):-Research is based on the correlation among working capital
and profitability. To analyze the effectiveness of working capital management of the selected textile
companies. Conclusion of the study found that overall good management in working capital
management of selected textile companies and thus most of the companies are the profitable way
going on.
All the above studies provide us a solid base and give us an idea regarding working capital
management and its components. They also give us the results and conclusions of those researches
already conducted in the same area for different countries and the environment from different aspects.
On the basis of these researches done in different countries, we have developed our own methodology
for research.
1.3 OBJECTIVES OF THE STUDY
 To study the concept of working capital & various components of working capital & Ratio
Analysis.
 To assess the significance of working capital by selecting a few parameters such as; current
ratio, quick ratio, cash ratio.
 To make item wise analysis of the components of the working capital.
 To identify the items responsible for changes in working capital.
 To study the liquidity position of the company through four measures – inventory to current
assets, debtors to current assets, cash & bank to current assets and loan & advances to current
assets.

4

1.4 SCOPE OF STUDY
The study is exclusively conducted for the Bajaj Corp.ltd. for five financial years i.e (2013-14
to 2017-18). The trends indicated may differ from year to year as the pattern of investments,
borrowings etc. The study becomes more meaningful only if it covers a longer period of ten or more
years which is beyond the scope of this dissertation work.

1.5 RESEARCH METHODOLOGY
The primary aim of this paper is to investigate the impact of Working capital Management
of Bajaj Corp.ltd. This is achieved by developing a similar empirical framework first used by
Shinand Soenan (1998). And the subsequent work of Deloof (2003). The study focus exclusively on
the Bajaj Corp.ltd. The data reported in this paper were collected for a period of 2013-2018. As a part
of a study designed to analyze working capital management from financial reports. The secondary
data audited financial statements, broachers, bulletin, statistical returns and company profiles.
The methodology is the primary part of the research work. This area could concentrate
on the sources, which are available to collect data and how the collected data are arranged, and what
kind of statistical tools and techniques have been used to analyze and interpret the collected data and
compared the results with the actually developed hypothesis.

1.5.1 DATA COLLECTION
The data pertaining to the present study were mainly collected from the secondary sources
only. The secondary data are those which have already been collected by someone else and which
have already been passed through the statistical process. The required secondary data were collected
from the annual report of Bajaj Corp.ltd., various publications, periodicals, journals, and books.
Usually, published data are available in….
 Books, Magazines, and newspapers;
 Various publications of the central, states and local governments;
 Technical and trade journals;
 Reports prepared by research scholars, universities, economists, etc. in different fields; and
 Public records and statistics, historical documents and other sources of information.
 Reports and publications of various associations connected with business and industry,
banks, stock exchanges, etc.

5

The sources of unpublished data are many; they may be found in diaries, letters, unpublished
biographies, and autobiographies and also may be available with scholars and research workers,
trade associations, labour bureaus and other public/private individuals and organizations.

1.5.2 PERIOD OF THE STUDY
The study period covered for this dissertation work is five consecutive years i.e. from
2013-14 to 2017-18

1.5.3 FRAMEWORK OF ANALYSIS
The collected data were tabulated and classified into different categories. For the purpose
of analysis, the statistical tool like Ratio analysis, statement of changes in working capital, liquidity
ratio, activity ratio, and correlation have been adequately employed. Besides to give a diagrammatic
representations Bar diagram, charts, graphs have been adequately provided.

1.5.4 TOOLS USED FOR THE ANALYSIS
Accounting techniques and statistical techniques have been used in the present study. For the
analysis of data, one of the techniques of financial statement analysis is that Ratio analysis has been
used. By using appropriate and relevant statistical techniques, the collected data is edited and
tabulated.
Some of the statistical tool used in this project work for analysis and discussion are;
 Ratio Analysis
i. Liquidity Ratios
ii. Activity Ratios
 Liquidity Position of Bajaj Corp.ltd.
 Statement of changes in working capital
The statement of changes in working capital shows the net change in working capital over a
time period of operation.
• Working Capital = Current Asset – Current Liabilities
Positive working capital is when a company has more current assets than current liabilities,
meaning the company can fully cover its short-term liabilities as they come due in the next 12
months. Positive working capital is a sign of financial strength. However, having an excessive
amount of working capital for a long time might indicate the company is not managing its
assets effectively.

6

Negative working capital is when the current liabilities exceed the current assets, and the
working capital is negative. Working capital could be temporarily negative if the company
had a large cash outlay as a result of a large purchase of products and services from its
vendors.
 Correlation Analysis
It is defined as “the process by which two or more groups or set items may vary together
directly or inversely”. Two variables are said to be correlated if the change in one variable
results in a corresponding change to the other variable. That is when two variables move
together, they are said to be correlated.
• Co-efficient of Correlation
It is an algebraic method of measuring correlation. This method of correlation is measured by finding
a value known as the co-efficient of correlation using an appropriate formula.

a. Correlation between sales and working capital
b. Correlation between profit and working capital

1.6 LIMITATIONS OF THE STUDY
The dissertation consists of the following major limitations…

 The period of the study is only five years.
 The present study is confined only to the financial aspects of the study
unit.
 Analysis and discussion are based on the available data and the
knowledge of the student.
 This dissertation report prepared based on the secondary data like an
annual report, a financial statement so it has some limitation

7

1.7 CHAPTERTISATION

Arrangement of the chapter is one of the important tasks of any project
report work. this project report has been arranged and divided into following
chapters.:
 The first chapter deals with introduction and design of the study.
 The second chapter consist of working capital management and study
 Third chapter attempt to Ratio Analysis
 The fourth chapter covers the profile of Bajaj Corp.ltd.
 The fifth chapter reveals the analysis and discussion of the study
 The sixth chapter consists of the summary, Findings, suggestion,
conclusion, and Bibliography of the research study.

8

CHAPTER - II

WORKING CAPITAL

2.1 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-to-day 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 in their pursuit of liquidity, they
should not lose sight of their basic goal of profitability. They should be able to attain a judicious mix of
liquidity and profitability while managing their working capital.

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. Different industry types require different levels of working capital.
Service industries need little to no inventory whereas retailers need more. Depending on the retailer’s
business their inventory will also vary. Manufacturers will probably require more because they need raw
material stocks, work‐in‐progress and finished goods. Retailers may sell for cash, therefore, having
few receivables and producers may have trade customers and have greater receivables.

Decisions relating to working capital and short-term financing are referred to as working capital
management. These involve managing the relationship between a firm's short-term assets and its short-
term liabilities. The goal of working capital management is to ensure that the firm is able to continue its

9

operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming
operational expenses. It refers to all aspects of current assets and current liabilities. In simple words, we
can say that working capital is the investment needed for carrying out day-to-day operations of the
business efficiently. The management of working capital is as important as that of long-term financial
investment. The aim of working capital management is to achieve a balance between having sufficient
working capital to ensure that the business is liquid but not too much that the level of working capital
reduced profitability.

Definitions:
 According to the definition of Mead, Baker, and Malott, “Working Capital means Current
Assets”.

 According to the definition of J.S. Mill, “The sum of the current asset is the working capital of
a business”.

 According to the definition of Weston and Brigham, “Working Capital refers to a firm’s
investment in short-term assets, cash, short-term securities, accounts receivables, and
inventories”.

 According to the definition of Bonneville, “Any acquisition of funds which increases the current
assets, increase working capital also for they are one and the same”.

 According to the definition of Shubin, “Working Capital is the number of funds necessary to
cover the cost of operating the enterprises”.

 According to the definition of Gene Steinberg, “Circulating capital means current assets of a
company that are changed in the ordinary course of business from one form to another,
o for example, from cash to inventories, inventories to receivables, receivables to cash”.

10

2.2 COMPONENT OF WORKING CAPITAL

Working capital constitutes various current assets and current liabilities. This can be illustrated by
the following chart.

Fig.1 Component of Working Capital

11

2.3 WORKING CAPITAL MANAGEMENT

In simple terms working capital means is that the amount of funds that a company requires
finance for its day-to-day operations. Working capital states that the period of debtors, receivables, etc.
for a company to raise finance from them at the earliest. The finance manager should develop sound
techniques of managing current assets.

Working capital management involves managing the relationship between a firm's short-term
assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is
able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term
debt and upcoming operational expenses.

The following should be effective in working capital management:

 Cash management: Identify the cash balance which allows for the business to meet day to day
expenses, but reduces cash holding costs.

 Inventory management: Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials—and minimizes reordering costs—and
hence increases cash flow. Besides this, the lead times in production should be lowered to reduce
Work in Process (WIP) and similarly, the Finished Goods should be kept on an as low level as
possible to avoid overproduction.

 Debtor’s management: Identify the appropriate credit policy, i.e. credit terms, discounts, etc.
which will attract customers, such that any impact on cash flows and the cash conversion cycle
will be offset by increased revenue and hence return on Capital. Debtor’s credit period should
be less than 90 days to achieve good working capital ratio and position of the company.

 Short term Financing: Short term financing identify the source of financing, given the cash
conversion cycle; the inventory is ideally financed by credit granted by the supplier; however,
it may be necessary to utilize a bank loan (overdraft), or to “convert debtor to cash” through
factoring.

12

2.3.1 Nature of Working Capital

Working capital management is concerned with the problems that arise in attempting to manage
the current assets, the current liabilities and the interrelationship that exists between them. The term
current assets refer to those assets which in the ordinary course of business can be or will be converted
into cash within one year without undergoing a diminution in value and without disrupting the operation
of the firm. The major current assets are cash, marketable securities, accounts receivables, and inventory.
Current liabilities are those liabilities, which are intended at their inception, to be paid in the ordinary
course of business, within a year out of the current or the earning of the concern. The basic current
liabilities are accounts payable, bills payable, bank overdrafts and outstanding expense.

The goal of working management is to manage the firm’s assets and liabilities in such a way that
a satisfactory level of working capital is maintained. This is because if the firms cannot maintain a
satisfactory level of working capital, it is likely to become insolvent and may even be forced into
bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a
reasonable margin of safety. Each of the short-term sources of financing must be continuously managed
to ensure that they are obtained and used in the way. Interaction between current liabilities is, therefore,
the main theme of the management of working capital.

2.3.2 Scope of Working Capital

The management of working capital helps us to maintain the working capital at a satisfactory
level by managing the current assets and current liabilities. It also helps to maintain a proper balance
between profitability, risk, and liquidity of the business significantly. By managing the working capital,
current liabilities are paid in time. If the firm makes payment to its creditors for raw material in time, it
can have the availability of raw material regularly, which does not cause any obstacles in the production
process. Adequate working capital increases the paying capacity of the business, but the excess working
capital causes more inventory, increases the possibility of delay in the realization of debts. On the other
hand, the absence of adequate working capital leads to a decrease in return on investment. The goodwill
of the firm is also adversely affected due to the inability to pay current liabilities in time.
Hence, the management of working capital helps to manage all the factors affecting the working capital
in the most profitable manner.

13

2.4 OPERATING CYCLE
The operating cycle is the average period of time required for a business to make an initial outlay
of cash to produce goods, sell the goods, and receive cash from customers in exchange for the goods. If
a company is a reseller, then the operating cycle does not include any time for production - it is simply
the date from the initial cash outlay to the date of cash receipt from the customer.

The operating cycle is useful for estimating the amount of working capital that a company will
need in order to maintain or grow its business. A company with an extremely short operating cycle
requires less cash to maintain its operations, and so can still grow while selling at relatively small
margins. Conversely, a business may have fat margins and yet still require additional financing to grow
at even a modest pace, if its operating cycle is unusually long.

In case of a manufacturing company, the operating cycle is the length of time necessary to complete the
following cycle of events –
Conversion of cash into raw materials
Conversion of raw materials into work-in-progress
Conversion of work-in-progress into finished goods
Conversion of finished goods into accounts receivables
Conversion of accounts receivable into cash

The above operating cycle is repeated again and again over the period depending upon the nature of the
business and type of product etc. the duration of the operating cycle for the purpose of estimating
working capital is equal to the sum of duration allowed by the suppliers.

Fig:2 Operating cycle of Business

14

2.5 TYPES OF WORKING CAPITAL

Fig. 3 Types of Working Capital
The working capital can be classified on the basis of concept and on the basis of time.
A. Types of working capital on the basis of Concept:
Generally, there are two concepts of working capital. They are gross working capital and net working
capital.

Fig.4 Types of working capital on the basis of Concept
1. Gross working capital: Gross working capital refers to the firm’s investment in current assets.
Current assets are the assets, which can be converted into cash within an accounting year or operating
Working capital
Gross working capital Net working capital

15

cycle. It includes cash, short term securities debtors (account receivables or book debts), bills
receivables and stock (inventory). Thus, the gross working capital is the capital invested in total
current assets of the business concern.
Gross Working Capital is simply called as the total current assets of the concern.

2. Net working capital: Net working capital refers to the difference between current assets and
liabilities, which are expected to mature for payment within an accounting year. It includes creditors
or accounts payables, bills payable and outstanding expenses. Net Working capital can be positive or
negative. A positive working capital will arise when current assets exceed current liabilities and vice
versa.

B. Types of working capital on the basis of Time:

Fig. 5 Types of Working Capital on basis of time
1) Permanent working capital: it is also called fixed working capital. It means to carry on
the day to day expenses the firm is required to maintain the minimum amount of working capital. For
example, the firm is required to maintain the minimum level of raw material, finished goods or cash
balance etc.
GWC = CA

NWC = C A – CL

16

Fig. 6 Permanent Working Capital
a) Regular working capital- it means the minimum amount which the firm has to keep with itself
to carry on the day to day operation.
b) Reserve working capital- it refers to short term financial arrangement made by the business
units to meet uncertain changes or to meet uncertainties. A firm is always working with the expectation
of some risks which may be controllable or uncontrollable. The reserve working capital can be used in
order to meet the uncontrollable risks and sustain in the business world like strike, lock out, depression
etc.
2) Temporary working capital: it is also called fluctuating or variable working capital,
which is required to meet the seasonal demands as well as for special purposes. For e.g. If heavy order
is received for production and there is a large amount of credit sales, there is a need of more amount of
temporary working capital. At the same time, if production is carried on in anticipation of demand in
near future, temporary working capital is required.

Fig. 7 Temporary Working Capital
Amount of
Working Capital
Permanent Working Capital
Time

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a) Seasonal working capital- Some products have seasonal demand. Seasonal demand arises
due to festival. In this way, seasonal working capital means an amount of working capital
maintained to meet the seasonal demand of the product.
b) Special working capital- it is required for some special purposes of the enterprise. For
e.g. advertisement campaign, sales promotion activities, product development
activities, marketing research activities, launching of new products, expansion of markets etc.
Thus, the firm requires special working capital.
3) Semi Variable Working Capital:
Certain amount of Working Capital is in the field level up to a certain stage and after that it
will increase depending upon the change of sales or time.

Fig. 8 Semi Variable Working Capital
Semi Variable Working Capital
Time
Amount of
Working Capital

18

2.6 IMPORTANCE OF WORKING CAPITAL
Working capital is a vital part of a business and can provide the following advantages to a
business:-

I. Higher return on capital:
Firms with lower working capital will post a higher return on capital. Therefore, shareholders will
benefit from a higher return for every rupee invested in the business.

II. Improved Credit Profile and Solvency
The ability to meet short-term obligations is a pre-requisite to long-term solvency. And it is often a good
indication of counterparty’s credit risk. Adequate working capital management will allow a business to
pay on time its short-term obligations. This could include payment for a purchase of raw materials,
payment of salaries, and other operating expenses.

III. Higher Profitability
According to research conducted by Tauringana and Adjapong Afrifa, the management of account
payables and receivables is an important driver of small businesses’ profitability.
IV. Higher Liquidity
A large amount of cash can be tied up in working capital, so a company managing it efficiently could
benefit from additional liquidity and be less dependent on external financing. This is especially
important for smaller businesses as they typically have limited access to external funding sources. Also,
small businesses often pay their bills in cash from earnings so efficient working capital management
will allow a business to better allocate its resources and improve its cash management.

V. Increased Business Value
Firms with more efficient working capital management will generate more free cash flows which will
result in higher business valuation and enterprise value.

VI. Favorable Financing Conditions
A firm with a good relationship with its trade partners and paying its suppliers on time will benefit from
favorable financing terms such as discount payments from its suppliers and banking partners.
VII. Uninterrupted Production
A firm paying its suppliers on time will also benefit from a regular flow of raw materials, ensuring that
the production remains uninterrupted and clients receive their goods on time.

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VIII. Ability to Face Shocks and Peak Demand
Efficient working capital management will help a firm to survive through a crisis or ramp up production
in case of an unexpectedly large order.
IX. Competitive Advantage
Firms with an efficient supply chain will often be able to sell their products at a discount versus similar
firms with inefficient sourcing.

2.7 NEEDS OF WORKING CAPITAL
Working Capital is an essential part of the business concern. Every business concern must
maintain certain amount of Working Capital for their day-to-day requirements and meet the short-term
obligations.
Working Capital is needed for the following purposes:
1. Purchase of raw materials and spares: The basic part of manufacturing process is, raw
materials. It should purchase frequently according to the needs of the business concern. Hence,
every business concern maintains certain amount as Working Capital to purchase raw materials,
components, spares, etc.
2. Payment of wages and salary: The next part of Working Capital is payment of wages and
salaries to labour and employees. Periodical payment facilities make employees perfect in their
work. So, a business concern maintains adequate the amount of working capital to make the
payment of wages and salaries.
3. Day-to-day expenses: A business concern has to meet various expenditures regarding the
operations at daily basis like fuel, power, office expenses, etc.
4. Provide credit obligations: A business concern responsible to provide credit facilities to the
customer and meet the short-term obligation. So, the concern must provide adequate Working
Capital.

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2.8 SOURCES OF WORKING CAPITAL
Working Capital requirement can be normalized from short-term and long-term sources. Each
source will have both merits and limitations up to certain extract. Uses of Working Capital may be
differing from stage to stage.

Fig. 9 Sources of Working Capital
The above sources are also classified into internal sources and external sources of working capital:
Internal sources External sources
• Retained Earnings
• Reserve and Surplus
• Depreciation Funds etc.

• Debentures and Public Deposits
• Loans from Banks and Financial
Institutions
• Advances and Credit Financial
arrangements like Factoring, etc.

2.9 WORKING CAPITAL ANALYSIS
 Current Assets:
Current assets are those which can be converted into cash as and when needed, i.e., those assets
which can turn into cash as per the requirement of the business within the accounting period.
E.g. cash and bank balance, bills receivable, debtors, prepaid expenses, advances to suppliers etc.

 Current Liabilities:
Current liabilities are those which are payable during an accounting year. These are paid out of
current assets like cash. When current assets availability is present there exist the current liabilities,

21

but current assets must always be in excess to current liabilities. This provides the organization to
be in a good position.
E.g. account payable, outstanding expenses, advances from customers, provision for taxes,
creditors, provision for divined, etc.

 Sundry Debtors
Debtors are those too who products are supplied on credit basis. These amounts are collected within
the accounting period. Therefore, they are converted into cash as per requirement, hence they are
considered under current assets. It is also known as Trade receivables.

 Sundry Creditors
Creditors are those from whom products are purchased on a credit basis. These amounts are paid
within the accounting period. If the creditor's number increase the amount payable also increases
which further increases the liquidity. It is also known as Trade Payables.

 Inventories
Closing stocks or inventory includes raw materials, work in progress and finished goods, which are
needed for the smooth running of the organization. Generally, inventory is maintained by every
organization, which is bound to meet its demand in the market. The amount of inventory maintained
by the firm represents its profitability position. The quality must not be in excess or inadequate, it
must be according to the requirement. The quality stores must be able to meet the market demand.

 Cash and Bank
Every organization or firm maintains cash reserves in their accounts. This is the major key on which
working of the entire organization is dependent upon. This is required in every aspect of production,
marketing, financing etc. In other words, it can be said that it plays a vital role in the functioning
of any organization.

 Loans and Advances
Advances to staff are those advances, which are given to the employees as festival advances. These
advances are treated as current assets as they are given advance to the employees and are collected
within the accounting year. It doesn’t result in any default payment as the amount is deducted from
their salaries directly during their payment. Their advances are prepared and are collected in the
accounting year. These are the loans and advances amount that are given by the organization in

22

procuring of raw materials. Amount is given in advance to its supplier in supplying the raw materials
required and this is adjusted after receiving the raw material. The final settlements take place only
after deducting the advances amount from total amount.
 Line of Credit:
Banks to new business do not often give lines of credit. However, if your new business is well
capitalized by equity and you have good collateral, your business might qualify for one. A line of
credit allows you to borrow funds for short terms needs when they arise. The funds are repaid once
you collect the accounts receivables that resulted from the short-term sales peak. Lines of credit
typically are made for one year at a time and are expected to be paid off for 30 to 60 consecutive
days sometime during the year to ensure that the funds are used for short-term needs only.

 Short Term Loan:
While your new business may not qualify for a line of credit from a bank, you might have success
in obtaining a one-time short-term loan (less than a year) to finance your temporary working capital
needs. If you have established a good banking relationship with a banker, he or she might be willing
to provide a short-terms loan for one order or for a seasonal inventory and/or accounts receivable
buildup. In addition to analyzing the average number of days it takes to make a product (inventory
days) and collect on an account (account receivable days) Vs. the number of days financed by
accounts payable, the operating cycle analysis provides one other important analysis. From the
operating cycle, a computation can be made of the amount required to support one day of accounts
receivables and inventory and the amount provided by a day of accounts payable. Working capital
has a different impact on cash flow in a business.

2.10 METHODS OF ANALYSIS:
A financial analyst can adopt the following tools for analysis of the financial statements. These are also
termed as methods of financial analysis.
 Ratio analysis
 Comparative statement analysis
 Common-size statement analysis
 Trend analysis
 Funds flow analysis

In our study, Ratio Analysis tool is used for further evaluation of data.

23

Chapter-III

RATIO ANALYSIS

3.1 INTRODUCTION
The ratio analysis is the most powerful tool of financial analysis. Several ratios calculated from the
accounting data can be grouped into various classes according to financial activity or function to be
evaluated.
 Definition:
“The indicate quotient of two mathematical expressions and as “The relationship between two or
more things’’. It evaluates the financial position and performance of the firm. As started in the beginning
many diverse groups of people are interested in analyzing financial information to indicate the operating
and financial efficiency and growth of firm. These people use ratios to determine those financial
characteristics of firm in which they interested with the help of ratios one can determine.
 The ability of the firm to meet its current obligations.
 The extent to which the firm has used its long-term solvency by borrowing funds.
 The efficiency with which the firm is utilizing its assets in generating the sales revenue.
 The overall operating efficiency and performance of firm.
Alexander wall is the pioneer of ratio analysis. He presented a detailed system of ratio analysis
in the year 1919. Ratio analysis is important one for all management accounting for decision making.
Ratio analysis is a powerful tool of financial analysis. It is a process of identifying the financial
strengths and weakness of the firm by properly establishing the relationship between the different items
of balance sheet and profit and loss account for a meaningful understanding of the financial position and
performance of the firm.

24

3.2 NATURE OF RATIO ANALYSIS
Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated quotient of
mathematical expression" and as "the relationship between two or more things". A ratio is used as
benchmark for evaluating the financial position and performance of the firm. The relationship between
two accounting TABLEs, expressed mathematically, is known as a financial ratio. Ratio helps to
summarizes large quantities of financial data and to make qualitative judgment about the firm's financial
performance.
The persons interested in the analysis of financial statements can be grouped under three head owners
(or) investors who are desired primarily a basis for estimating earning capacity. Creditors are the people
who are concerned primarily with Liquidity and ability to pay interest and redeem loan within a specified
period. Management is interested in evolving analytical tools that will measure costs, efficiency,
liquidity and profitability with a view to make intelligent decisions.

3.3 STANDARDS OF COMPARISON
The ratio analysis involves comparison for a useful interpretation of the financial statements. A
single ratio in itself does not indicate favourable or unfavourable condition. It should be compared with
some standard. Standards of comparison are:
1. Past Ratios
2. Competitor's Ratios
3. Industry Ratios
4. Projected Ratios
Past Ratios: Ratios calculated from the past financial statements of the same firm.
Competitor's Ratios: Ratios of some selected firms, especially the most progressive and
successful competitor at the same point in time.
Industry Ratios: Ratios of the industry to which the firm belongs.
Projected Ratios: Ratios developed using the projected financial statements of the same firm.

25

3.3.1 Types of comparison
a. Time Series Analysis
The easiest way to evaluate the performance of a firm is to compare its present ratios with past
ratios. When financial ratios over a period of time are compared, it is known as the time series analysis
or trend analysis. It gives an indication of the direction of change and reflects whether the firm's financial
performance has improved, deteriorated or remind constant over time.
b. Cross Sectional Analysis
Another way to comparison is to compare ratios of one firm with some selected firms in the
industry at the same point in time. This kind of comparison is known as the cross-sectional analysis. It
is more useful to compare the firm's ratios with ratios of a few carefully selected competitors, who have
similar operations.
c. Industry Analysis
Its ratio may be compared with average ratios of the industry of which the firm is a member. This
type of analysis is known as industry analysis and also it helps to ascertain the financial standing and
capability of the firm & other firms in the industry. Industry ratios are important standards in view of
the fact that each industry has its characteristics which influence the financial and operating
relationships.

3.4 IMPORTANCE OF RATIO ANALYSIS
1. Analysis of Financial Statements
Interpretation of the financial statements and data is essential for all internal and external
stakeholders of the firm. With the help of ratio analysis, we interpret the numbers from the balance sheet
and income statements. Every stakeholder has different interests when it comes to the result from the
financial like the equity investors are more interested in the growth of the dividend payments and the
earnings power of the organization in the long run. Creditors would like to ensure that they get their
repayments on their dues on time.

26

2. Helps in Understanding the Profitability of the Company
Profitability ratios help to determine how profitable a firm is. Return on Assets and Return on
Equity helps to understand the ability of the firm to generate earnings. Return on assets is the total net
income divided by total assets. It means how many does a company earn a profit for every dollar of its
assets. Return on equity is net income by shareholders equity. This ratio basically tells us how well a
company uses its investors’ money. Ratios like the Gross profit and Net profit margin. Margins help to
analyze the firm’s ability to translate sales to profit.
3. Analysis of Operational Efficiency of the Firms
Certain ratios help us to analyze the degree of efficiency of the firms. Ratios like account
receivables turnover, fixed asset turnover, and inventory turnover ratio. These ratios can be compared
with the other peers of the same industry and will help to analyze which firms are better managed as
compared to the others. It measures a company’s capability to generate income by using the assets. It
looks at various aspects of the firm like the time it generally takes to collect cash from debtors or the
time period for the firm to convert the inventory to cash. This is why efficiency ratios are very
important, as an improvement will lead to a growth in profitability.
4. Liquidity of the Firms
Liquidity determines whether the company can pay its short-term obligations or not. By short-
term obligations, we mean the short term debts which can be paid off within 12 months or within
the operating cycle. For example the salaries due, sundry creditors, tax payable, outstanding expenses
etc. Current ratio, quick ratio are used to measure the liquidity of the firms
5. Helps in Identifying the Business Risks of the Firm
One of the most important reasons to use ratio analysis is that it helps in understanding the
business risk of the firm. Calculating the leverages (Financial Leverage and Operating Leverages) helps
the firm understand the business risk i.e. how sensitive the profitability of the company is with respect
to its fixed cost deployment as well as debt outstanding.
6. Helps in Identifying the Financial Risks of the Company
Another importance of ratio analysis is that it helps in identifying the Financial Risks. Ratios
like Leverage ratio, interest coverage ratio, DSCR ratio etc helps the firm understand how it is
dependent on external capital and whether they are capable of repaying the debt using their own capital

27

7. For Planning and Future Forecasting of the Firm
Analysts and managers can find a trend and use the trend for future forecasting and can also be
used for important decision making by external stakeholders like the investors. They can analyze
whether they should invest in a project or not.
8. To Compare the Performance of the Firms
The main use of ratio analysis is that the strengths and weakness of each firm can be compared.
The ratios can be also compared to the firm’s previous ratio and will help to analyze whether progress
has been made by the company.

3.5 TYPES OF RATIOS

Management is interested in evaluating every aspect of firm's performance. In view of the requirement
of the various users of ratios, we may classify them into following four important categories:

Fig.10 Types of Ratio Analysis

Ratio Analysis
Liquidity RatiosActivity RatiosLeverage RatiosProfitability Ratios

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3.5.1 (A) LIQUIDITY RATIOS:
It is essential for a firm to be able to meet its obligations as they become due. Liquidity
Ratios help in establishing a relationship between cash and other current assets to current obligations
to provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of
liquidity and that it does not have excess liquidity. A very high degree of liquidity is also bad, idle
assets earn nothing. The firm's funds will be unnecessarily tied up in current assets. Therefore, it is
necessary to strike a proper balance between high liquidity.
Liquidity ratios can be divided into three types:
1. Current Ratio
2. Quick Ratio
3. Cash Ratio

1. CURRENT RATIO:

Current ratio is an acceptable measure of firm’s short-term solvency Current assets includes
cash within a year, such as marketable securities, debtors and inventors. Prepaid expenses are also
included in current assets as they represent the payments that will not made by the firm in future. All
obligations maturing within a year are included in current liabilities. These include creditors, bills
payable, accrued expenses, short-term bank loan, income-tax liability in the current year. The current
ratio is a measure of the firm's short-term solvency. It indicated the availability of current assets in
rupees for everyone rupee of current liability. A current ratio of 2:1 is considered satisfactory. The
higher current ratio, greater the margin of safety, the larger the amount of current assets in relation to
current liabilities, then it indicates more the firm's ability to meet its obligations. It is a cured –and -
quick measure of the firm's liquidity. Current ratio is calculated by dividing current assets and current
liabilities.
CURRENT ASSETS
CURRENT RATIO = -------------------------------------------------

CURRENT LIABILITIES

29

2. QUICK RATIO:

Quick Ratio establishes a relationship between quick or liquid assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.
Cash is the most liquid asset, other assets that are considered to be relatively liquid asset and included
in quick assets are debtors and bills receivables and marketable securities (temporary quoted
investments). Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial
condition. Quick ratio is a more penetrating test of liquidity than the current ratio, yet it should be used
cautiously. A company with a less value of quick ratio can suffer from the shortage of funds if it has
slowed- paying, doubtful and long duration outstanding debtors. A high quick ratio may really be
prospering and paying its current obligation in time.

QUICK ASSETS
QUICK RATIO = --------------------------------
- CURRENT LIABILITIES

GLOSSORY:
Quick assets: current assets- (inventories-prepaid expenses)
Quick liabilities: current liabilities-bank overdraft-cash credit

3. Cash Ratio:

Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its equivalent
current liabilities. Cash and Bank balances and short-term marketable securities are the most liquid
assets of a firm, financial analyst stays look at cash ratio. Trade investment is marketable securities
of equivalent of cash. If the company carries a small amount of cash, there is nothing to be worried
about the lack of cash if the company has reserves borrowing power. Cash Ratio is perhaps the most
stringent Measure of liquidity. Indeed, one can argue that it is overly stringent. Lack of immediate
cash may not matter if the firm stretch its payments or borrow money at short notice.

BANK+CASH+MARKETABLE SECURIT IES
CASH RATIO= -------------------------------------------------------------------
-- CURRENT LIABILITIES

30

3.5.2 (B). ACTIVITY RATIOS:

Turnover ratios also referred to as activity ratios or asset management ratios, measure how
efficiently the assets are employed by a firm. These ratios are based on the relationship between the
level of activity, represented by sales or cost of goods sold and levels of various assets. The improvement
turnover ratios are inventory turnover, average collection period, receivable turn over, fixed assets
turnover and total assets turnover.

Activity ratios are employed to evaluate the efficiency with which the firm manages and
utilize its assets. These ratios are also called turnover ratios because they indicate the speed with which
assets are being converted or turned over into sales. Activity ratios thus involve a relationship between
sales and assets. A proper balance between sales and assets generally reflects that asset utilization.

Activity ratios are divided into six types:

1. Inventory turnover ratio
2. Working capital turnover ratio
3. Fixed assets turnover ratio
4. Debtor’s turnover ratio
5. Creditor’s turnover ratio
6. Total Assets turnover ratio

1. INVENTORY TURNOVER RATIO/STOCK TURNOVER RATIO:

Inventory turnover ratio indicates the efficiency of the firms in producing and selling its products.
It’s calculated by dividing the cost of goods sold by average inventory.

Cost of goods sold
STOCK TURNOVER RATIO= ---------------------------------------
Average inventory

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2. WORKING CAPITAL TURNOVER RATIO:

This ratio measures the relationship between working capital and sales. The ratio shows
the number of times the working capital results in sales. Working capital as usual is the excess of
current assets over current liabilities. The following formula is used to measure the ratio:

SALES
WORKING CAPITAL TURNOVER RATIO= ------------------------------
WORKING CAPITAL

3. FIXED ASSET TURNOVER RATIO:

The firm may which to know its efficiency of utilizing fixed assets and current assets
separately. The use of depreciated value of fixed assets in computing the fixed assets turnover may
render comparison of firm's performance over period or with other firms. The ratio is supposed to
measure the efficiency with which fixed assets employed a high ratio indicates a high degree of
efficiency in asset utilization and a low ratio reflects inefficient use of assets. However, in interpreting
this ratio, one caution should be borne in mind, when the fixed assets of firm are old and substantially
depreciated the fixed assets turnover ratio tends to be high because the denominator of ratio is very low.

4. DEBTORS TURNOVER RATIO:
Debtor’s turnover ratio indicates how many times debtors are turnover into cash. It’s calculated
by dividing net sales by average debtors. Higher the turnover ratio indicates better performance and
lower turnover indicates inefficiency.

NET SALES
DEBTORS TURNOVER RATIO= -------------------------------
AVERAGE DEBTORS

Cost of goods sold
FIXED ASSETS TURNOVER RATIOS= -----------------------
FIXED ASSETS

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5. CREDITORS TURNOVER RATIO:
Creditor’s turnover ratio indicates how many times creditors are paid in a year. It’s calculated
by dividing net purchase by average creditors. Higher the turnover ratio indicates better performance
and lower turnover indicates inefficiency.

NET PURCHASE
CREDITORS TURNOVER RATIO= -------------------------------
AVERAGE CREDITORS

6. TOTAL ASSET TURNOVER RATIO:
This ratio expresses relationship between the amount invested in the asset and the result in term
of sales. This is calculated by dividing the net sales by total assets. The higher the ratio means the
better utilization and vice-versa.
COGS(or)NET SALES
TOTAL ASSET TURNOVER RATIO= -----------------------------------
TOTAL ASSETS

33

Chapter – IV

COMPANY PROFILE

Type: Public (BSE:533229)
Industry: Consumer goods, FMCG
Founded: 1930
Headquarters: Mr. Jamnalal Bajaj
Key people: Mr. Kushagra Bajaj (Chairman);
Mr. Apoorv Bajaj (Executive President);
Mr. summit Malhotra (Managing Director)
Products: Hair Care, Skin Care.
No. of employees: 1000(approx.)
Website: www.bajajcorp.com

34

4.1 Introduction
Bajaj Corp Ltd.is an India-based holding company. The Company is engaged in the business
activity of trading and manufacturing of cosmetics, toiletries and other personal care products. It is a
fast-moving consumer goods (FMCG) company. The Company's products include Bajaj Kailash Parbat
Thanda Tel, Bajaj Almond Drops Hair Oil, Bajaj Brahmi Amla Hair Oil, Bajaj Jasmine Hair Oil, Bajaj
Nomark Oily Skin Face Wash, Bajaj Nomarks Herbal Scrub Soap, Bajaj Nomark Oily Skin Cream,
Bajaj Nomarks Neem Soap, Bajaj Nomarks Oil Control Soap and others. The Company's brands are
being sold through approximately 7,500 stockists and are available in over 3.69 million retail outlets
across the country. The Company has approximately eight production facilities, of which four units are
situated in Himachal Pradesh (at Parwanoo and Paonta Sahib), three units are situated in Uttarakhand
for manufacturing of various variants of hair oils and Nomarks and the other unit is located at Udaipur,
Rajasthan.
Bajaj Corp Ltd is an Indian consumer goods company with major brands in hair care. It is part
of the Bajaj Group, founded by Jamnalal Bajaj. Bajaj Group has interests in varied industries including
Sugar, Consumer Goods, Power Generation and Infrastructure Development.
Bajaj Corp is the second largest company in the Shishir Bajaj Group of companies. The history
of Bajaj Corp dates back to 1953 when Mr. Kamalnayan Bajaj established Bajaj Sevashram to market
and sell hair oils and other beauty products. Bajaj Corp Ltd is the 2
nd
largest player in the overall hair
oils segment with its key brand, Bajaj Almond Drops Hair Oil commanding a 52% market share in light
hair oil category. Bajaj Corp Ltd.’s own manufacturing facilities are located at Parwanoo, Paonta
Sahib and Dehradun.

4.2 History
Bajaj Corp Ltd was incorporated on April 25, 2006 as a private limited company with the name
Bhaumik Agro Products Pvt. Ltd. In September 11, 2007, the name of the company was changed
from Bhaumik Agro Products Pvt. Ltd to Bajaj Corp Private Ltd. In October 16, 2007, the company
was converted into a public limited company and the name was changed to Bajaj Corp Ltd.
The company products have been in existence since 1953 and were sold by different Bajaj group
companies. Bajaj Sevashram (BSL) an erstwhile Bajaj group company manufactured and sold the
products until December 2000. In January 2001, pursuant to a scheme of de-merger, BSL transferred
their operating business and assigned the trademarks for all the brands to their subsidiary Deccan
Ayurvedashram Pharmacy Ltd which subsequently changed their name to Bajaj Consumer Care Ltd
(BCCL).

35

In March 12, 2008, the company entered into a brand licensing agreement with the promoter BCCL
for the exclusive use of all the brand names under which the company markets their products. In
April 2008, the company commenced manufacturing and sale of the products.
In May 2008, the company set up their first manufacturing facility at Parwanoo, Himachal
Pradesh and in June 2008 they commenced their operations. In May 2009, they set up another
manufacturing facility at Dehradun, Uttarakhand at a cost of Rs.23.9 million.
In October 14, 2009, the company entered into an MoU with Bajaj Infrastructure Development
Company Ltd, Bajaj Hindustan Ltd and Teracon Construction (India) Pvt Ltd to form a consortium
in the nature of a special purpose vehicle to participate in the tender for redevelopment of property
at Nityanand Nagar Vibhag Four Cooperative Housing Society Ltd to be executed as the agent of the
society for the proposed development retaining all rights, ownership and possession of the properties
with the society.
The company’s newest and most advanced manufacturing facility is at Paonta Sahib,
Himachal Pradesh, and commencing from the year 2010.

4.3 Mission
 To make Bajaj Corp.ltd a complete FMCG company by introducing a culture of
innovation here to create newer pathbreaking products for consumers across the globe
 To help our consumers feel good, look good and get more out of life with our premium mixes
and make them accessible even in the farthest corner of the rural markets
 To strongly Engage with, Develop, Recognize and Retain Talent within the organization
across every department
 To develop the most efficient ways of doing business by using cutting edge IT tools across
all processes and make Bajaj Corp.ltd a future ready organization that can add even more value
for our consumers and customers

4.4 Vision
Harness their heritage of 90 years and combine it with leading edge scientific knowledge to bring
innovative high-quality products for consumers across the world to help them get more out of life.

36

4.5 Values
Consumer First
The first priority is to their CONSUMERS and then to their customers, employees and the
communities they serve in.

Entrepreneurship
They will think and act like owners of their business and develop a strong growth
mentality and a positive outlook to their work.

Integrity
They will do the right things, be transparent with all, trust each other and keep
themselves accountable for the responsibilities given to them

Innovation
They will take measured risks, conquer challenges and continue to differentiate through
their products

4.6 Brands
The organization holds a number of brands in the hair care category including Bajaj Almond Drops Hair
Oil, Bajaj Kailash Parbat Thanda Tel, Bajaj Brahmi Amla Hair Oil, Bajaj Amla Shikakai Hair Oil, Bajaj
Jasmine Hair Oil and holds Dental Care brand Bajaj Red Tooth Powder. In August 2013, Bajaj Corp
Ltd, acquired Skin Care brand – NOMARKS. With acquisition of NOMARKS Brand, Bajaj Corp Ltd
enters into Face Creams, Face Wash, Soaps, Face Packs, Face Scrubs Market.

37

Chapter-V

DATA ANALYSIS & INTERPRETATION

I. LIQUIDITY RATIO’S
A. CURRENT RATIO
The current ratio is a financial ratio that shows the proportion of a company's current assets to its
current liabilities.

Table-1: Current Ratio (₹ in Lacs)

YEAR

CURRENT ASSETS

CURRENT LIABILITIES

CURRENT RATIO

2013-14

34,203.81

5,965.46

5.73

2014-15

38,182.46

7,881.02

4.84

2015-16

41,483.13

8,441.62

4.91

2016-17

42,587.19

9,458.32

4.50

2017-18

43,178.94

11,431.34

3.78

CURRENT ASSETS
CURRENT RATIO= -----------------------------------
CURRENT LIABILITIES

38

Chart-1: Current Ratio

INTERPRETATION:

From the above analysis it can be concluded that the company has current ratio greater than 2:1 norm in
all Financial year during the study period. So, the company has been maintaining sufficient assets to
meet current liabilities.

0
1
2
3
4
5
6
2013-14 2014-15 2015-16 2016-17 2017-18
Series 1 5.73 4.84 4.91 4.5 3.78
5.73
4.84 4.91
4.5
3.78
ratio
CURRENT RATIO

39

B. QUICK RATIO
Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.

QUICK ASSETS
QUICK RATIO= -----------------------------------------
- CURRENT LIABILITIES

 Quick assets = Current Assets - Inventories- Prepaid Expenses

Table.2: Quick Ratio (₹ in Lacs)

YEAR

QUICK ASSETS

CURRENT LIABILITIES

QUICK RATIO

2013-14

30,258.62

5,965.46

5.07

2014-15

34,255.2

7,881.02

4.35

2015-16

36,464.13

8,441.62

4.32

2016-17

38,338.71

9,458.32

4.05

2017-18

38,514.75

11,431.34

3.37

40

Chart-2: Quick Ratio

INTERPRETATION:

From the above analysis it can be concluded that the company has quick ratio greater than 1:1 norm in
all financial year during the study period. So, the company has been maintaining satisfactory liquid cash
that can be converted into cash immediately.
About current financial position:-
As the company has satisfied both the norms of Current ratio 2:1 and Quick ratio 1:1. So the financial
position or liquidity position has been satisfactory during the study period.
0
1
2
3
4
5
6
2013-14 2014-15 2015-16 2016-17 2017-18
Series 1 5.07 4.35 4.32 4.05 3.37
5.07
4.35 4.32
4.05
3.37
RATIO
.
QUICK RATIO

41

C. CASH RATIO
Cash ratio is the ratio between cash plus marketable securities and current
liabilities.

CASH+CASH EQUIVALENTS
CASH RATIO= ---------------------------------------------------
L CURRENT LIABILITIES

Table-3: Cash Ratio (₹ in Lacs)

YEAR

CASH + CASH EQUIVALENTS

CURRENT LIABILITIES

CASH
RATIO

2013-14

12,920.03

5,965.46

2.17

2014-15

13,418.49

7,881.02

1.70

2015-16

5,779.12

8,441.62

0.68

2016-17

1,242.55

9,458.32

0.13

2017-18

669.26

11,431.34

0.06

42

Chart-3: Cash Ratio

INTERPRETATION:

In all the above years the cash ratio is very low except 2013-14 & 2014-15. The standard norm
for absolute quick ratio is 1:00 so the company is failed in keeping sufficient Cash & Bank Balances
and Marketable Securities.

0
0.5
1
1.5
2
2.5
2013-14 2014-15 2015-16 2016-17 2017-18
Series 1 2.17 1.7 0.68 0.13 0.06
2.17
1.7
0.68
0.13
0.06
Ratio
CASH RATIO

43

Table 4. Overall liquidity ratio

CHART 4: OVERALL LIQUIDITY RATIO

Interpretation:
Looking at this summary, the company reduced its liquidity position from 2013-14 to 2017-18, as
indicated by all three metrics. The current ratio has been declining over time in all consecutive year. The
quick ratio & cash ratio shows that the company has to sell inventory to meet its current debt obligations
and not maintaining sufficient cash and bank balance to meet its liabilities.
0
1
2
3
4
5
6
2013-14 2014-15 2015-16 2016-17 2017-18
5.73
4.84
4.91
4.5
3.78
5.07
4.35 4.32
4.05
3.37
2.17
1.7
0.68
0.13 0.06
Current RatioQuick RatioCash Ratio
OVERALL LIQUIDITY RATIO

YEAR

Current Ratio

Quick Ratio

Cash Ratio

2013-14

5.73

5.07

2.17

2014-15

4.84

4.35

1.70

2015-16

4.91

4.32

0.68

2016-17

4.50

4.05

0.13

2017-18

3.78

3.37

0.06

44

II.ACTIVITY RATIO
1. INVENTORY TURNOVER RATIO
It indicates the firm efficiency of the firm in producing and selling its product. It indicates how
many times goods are being converted into sales. It is calculated by dividing the cost of goods sold by
the average inventory. Higher the ratio is more efficient to the management, lower the ratio is less
efficient to the management.

COST OF GOODS SOLD
INVENTORY TURNOVER RATIO = -----------------------------------
AVERAGE INVENT ORY

 Cost of goods sold= (Opening stock + Net purchase + Direct expenses) – (Closing stock)
 Average inventory=
??????&#3627408529;&#3627408518;&#3627408527;??????&#3627408527;?????? &#3627408532;&#3627408533;&#3627408528;&#3627408516;&#3627408524; + &#3627408490;&#3627408525;&#3627408528;&#3627408532;??????&#3627408527;?????? &#3627408532;&#3627408533;&#3627408528;&#3627408516;&#3627408524;
??????

 Inventory conversion period =
&#3627408491;&#3627408514;??????&#3627408532; ??????&#3627408527; &#3627408514; ??????&#3627408518;&#3627408514;&#3627408531;
??????&#3627408527;&#3627408518;&#3627408527;&#3627408533;&#3627408528;&#3627408531;?????? &#3627408533;&#3627408534;&#3627408531;&#3627408527;&#3627408528;&#3627408535;&#3627408518;&#3627408531; &#3627408531;&#3627408514;&#3627408533;??????&#3627408528;

Table-5: Inventory Turnover Ratio: (₹ in Lacs)

Year
Cost Of Goods Sold
(COGS)
Average
Inventory
Inventory
Turnover Ratio
Inventory
Conversion Period

2013-14

30,630.77

3,765.13

8.14

44 days

2014-15

36,040.63

3,936.22

9.16

39 days

2015-16

35,154.59

4,473.13

7.86

46 days

2016-17

33,638.37

4,633.74

4.49

50 days

2017-18

35,656.04

4,456.33

8.00

45 days

45

Chart.5: Inventory Turnover Ratio

INTREPRETATION:
Inventory turnover ratio measures how fast the inventory become cash or accounts receivable. In 2014
it is 8.14 times. It is increased to 9.16 times in the year 2015. But it is gradually decreased to 7.86 and
7.26 times in 2016 and 2017 respectively. Then, it increased to 8 times in the year 2018.
Here we see the turnover is in average range. It shows a positive impact on their management
efficiency, i.e. company production is increased. Subsequently sales are also increased.

0
1
2
3
4
5
6
7
8
9
10
2013-14 2014-15 2015-16 2016-17 2017-18
Series 1 8.14 9.16 7.86 7.26 8
8.14
9.16
7.86
7.26
8

46

2. FIXED ASSET TURNOVER RATIO:
Fixed asset turnover measures how well a company is using its fixed assets to generate revenues.
The higher the fixed asset turnover ratio, the more effective the company’s investments in fixed assets
have become.

Table 6- Fixed asset turnover ratio (₹ in Lacs)

YEAR

NET SALES

NET FIXED ASSETS

FIXED ASSET
TURNOVER RATIO

2013-14

67,172.61

23,222.18

2.89

2014-15

82,562.18

18,055.85

4.57

2015-16

87,641.27

13,527.04

6.47

2016-17

79,689.73

15.626.38

5.09

2017-18

82,848.52

16597.89

4.99

NET SALES
FIXED ASSETS TURNOVER RATIOS= -----------------------
NET FIXED ASSETS

47

Chart:6- Fixed Asset Turnover Ratio

INTREPRETATION:
Fixed asset turnover ratio is used in analyzing growth companies to see if they are growing sales in
proportion to their asset bases. From the above chart we can say that Fixed asset turnover ratio is 2.89
in the year 2014 but it increased to 4.57 and 6.47 in the year 2015 & 2016 but it decreased to 5.09 and
4.99 in the year 2018. Thus, it can be concluded that the fixed asset turnover ratio of 5 consecutive year
are in very fluctuating manner. Hence, the fixed asset turnover ratios are not satisfactory for the year
2010-15

0
1
2
3
4
5
6
7
2013-14 2014-15 2015-16 2016-17 2017-18
FATR 2.89 4.57 6.47 5.09 4.99
2.89
4.57
6.47
5.09 4.99
Fixed assets turnover ratio

48

3. WORKING CAPITAL TURNOVER RATIO:
Working Capital Turnover Ratio is used to determine the relationship between net sales and
working capital of a business. It shows the number of net sales generated for every single unit of
working capital employed in the business. The following formula is used to measure the ratio:
NET SALES
WORKING CAPITAL TURNOVER RATIO = -----------------------------------
AVERAGE WORKING CAPITAL

▪ Working capital= Current Assets - current liabilities
▪ Average working capital=
&#3627408476;&#3627408477;??????&#3627408475;??????&#3627408475;?????? ??????&#3627408476;&#3627408479;&#3627408472;??????&#3627408475;?????? ????????????&#3627408477;??????&#3627408481;??????&#3627408473;+??????&#3627408473;&#3627408476;&#3627408480;??????&#3627408475;?????? ??????&#3627408476;&#3627408479;&#3627408472;??????&#3627408475;?????? ????????????&#3627408477;??????&#3627408481;??????&#3627408473;
2

Table.7: Working capital turnover ratio: (₹ in Lacs)

YEARS

NET SALES

AVERAGE WORKING
CAPITAL

WORKING CAPITAL
TURNOVER RATIO

2013-14

67,172.61

32,152.33

1.93

2014-15

82,562.18

15,150.72

2.82

2015-16

87,641.27

31,671.48

2.77

2016-17

79,689.73

33,085.19

2.41

2017-18

82,848.52

32,438.24

2.55

49

Graph 7: Working Capital Turnover Ratio:

INTREPRETATION:
Working capital turnover ratio measure how well a company is utilizing its working capital to
support a given level of sales. From the above chart we can say that working capital turnover ratio are
in average range except in the year 2014 with 1.93 times. This shows the company is utilizing working
capital effectively. However, the turnover ratios are very low, it need to be increased to utilize its
working capital more effectively.

0
0.5
1
1.5
2
2.5
3
2013-14 2014-15 2015-16 2016-17 2017-18
WCTR 1.93 2.82 2.77 2.41 2.55
1.93
2.82 2.77
2.41
2.55
WCTR

50

4. DEBTORS TURNOVER RATIO :
Debtor’s turnover ratio indicates how many times debtors are turnover into cash in a year. It’s
calculated by dividing net sales by average debtors. Higher the turnover ratio indicates better
performance and lower turnover indicates inefficiency.
NET CREDIT SALES
DEBTORS TURNOVER RATIO = -------------------------------
AVERAGE DEBTORS

o Trade debtors = sundry debtors + bills receivable
o Average trade debtors =
&#3627408528;&#3627408529;&#3627408518;&#3627408527;??????&#3627408527;?????? &#3627408533;&#3627408531;&#3627408514;&#3627408517;&#3627408518; &#3627408517;&#3627408518;&#3627408515;&#3627408533;&#3627408528;&#3627408531;&#3627408532;+&#3627408516;&#3627408525;&#3627408528;&#3627408532;??????&#3627408527;?????? &#3627408533;&#3627408531;&#3627408514;&#3627408517;&#3627408518; &#3627408517;&#3627408518;&#3627408515;&#3627408533;&#3627408528;&#3627408531;
??????

Table 8: Debtors Turnover Ratio (₹ In Lacs)

YEAR

NET CREDIT
SALES

AVERAGE
DEBTORS

DEBTORS
TURNOVER RATIO

AVERAGE
COLLECTION
PERIOD

2013-14

4,117.16

917.125

4.49

80 days

2014-15

3,767.21

1081.64

3.48

103 days

2015-16

3,844.32

1930.69

2.0

180 days

2016-17

4,580.19

2638.99

1.74

206 days

2017-18

4,107.01

2993.35

1.37

262 days

51

Graph.8: Debtors Turnover Ratio:

INTREPRETATION:
Debtor’s turnover ratio indicates how many times debtors are turnover into cash. From the above
calculation we found that Debtor’s turnover ratio is 4.49 times in the year 2014 and it started to
decrease rapidly in the next consecutive year. This shows the company performance inefficient and
collection of debt took more days . It is not a good indicator for the company.

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2013-14 2014-15 2015-16 2016-17 2017-18
DTR 4.49 3.48 2 1.74 1.37
4.49
3.48
2
1.74
1.37
DTR

52

5. CREDITORS TURNOVER RATIO:

Creditor’s turnover ratio indicates how many times creditors are paid in a year. It’s calculated
by dividing net purchase by average creditors. Higher the turnover ratio indicates better performance
and lower turnover indicates inefficiency.

NET CREDIT PURCHASE
CREDITORS TURNOVER RATIO= --------------------------------------
AVERAGE TRADE CREDITORS
o Trade creditors = sundry creditors + bills payable
o Average trade creditors =
(&#3627408528;&#3627408529;&#3627408518;&#3627408527;??????&#3627408527;?????? &#3627408533;&#3627408531;&#3627408514;&#3627408517;&#3627408518; &#3627408516;&#3627408531;&#3627408518;&#3627408517;??????&#3627408533;&#3627408528;&#3627408531;&#3627408532;+&#3627408516;&#3627408525;&#3627408528;&#3627408532;??????&#3627408527;?????? &#3627408533;&#3627408531;&#3627408514;&#3627408517;&#3627408518; &#3627408516;&#3627408531;&#3627408517;??????&#3627408533;&#3627408528;&#3627408531;&#3627408532;)
??????

Table.9: Creditors Turnover Ratio (₹ In Lacs)

YEAR

NET CREDIT
PURCHASED

AVERAGE
TRADE
CREDITORS

CREDITORS
TURNOVER RATIO

AVERAGE
PAYMENT PERIOD

2013-14

21796.01

3486.3

5.99

60 days

2014-15

21950.18

4599.23

3.68

97 days

2015-16

25504.64

4747.37

3.06

117 days

2016-17

21163.16

4351.49

2.36

152 days

2017-18

24057.31

2504.72

2.30

156 days

53

Chart.9: Creditors Turnover Ratio

INTREPRETATION:
Creditor’s turnover ratio indicates how many times creditors are paid in a year. From the above
calculation we found that creditor’s turnover ratio is 5.99 times in the year 2014 and it started to decrease
rapidly in the next consecutive year. It shows that company has making delayed payment to the creditors. It
indicates that the company has taken a long time for making payment to creditors.

0
1
2
3
4
5
6
2013-14 2014-15 2015-16 2016-17 2017-18
CTR 5.99 3.68 3.06 2.36 2.3
5.99
3.68
3.06
2.36 2.3
CTR

54

TABLE.10: OVERALL ACTIVITY RATIO
ACTIVITY RATIO

YEAR

Inventory
Turnover
Ratio

Fixed Asset
Turnover
Ratio

Debtors
Turnover
Ratio

Creditors
Turnover
Ratio

Working
Capital
Turnover
Ratio

2013-14

10.09

1.21

4.49

6.25

2.09

2014-15

6.48

1.80

3.48

4.77
5.41

2015-16

5.49

2.52

2.0

5.37
2.74

2016-17

4.49

1.76

1.74

4.87
2.39

2017-18

5.36

1.83

1.37

9.60

2.50

CHART.10: OVERALL ACTIVITY RATIO

10.09
6.48
5.49
4.49
5.36
1.21
1.8
2.52
1.76 1.83
4.49
3.48
2
1.74
1.37
6.25
4.77
5.37
4.87
9.6
2.09
5.41
2.74
2.39 2.5
0
2
4
6
8
10
12
2013-14 2014-15 2015-16 2016-17 2017-18
Overall Activity Ratio
Inventory Turnover RatioFixed Asset Turnover RatioDebtors Turnover Ratio
Creditors Turnover RatioWorking Capital Turnover Ratio

55

 (III) LIQUIDITY POSITION OF THE COMPANY
In above we have calculated the basic liquidity ratio and Activity ratio of the company like current
ratio, quick ratio and cash ratios and Turnover ratios. Now we are going to identify the liquidity
position of the company by calculating through four measures. They are:
1. Inventory to current assets
2. Debtors to current assets
3. Cash & Bank to current assets
4. Loan & Advances to current assets

1. INVENTORY TO CURRENT ASSETS
Inventory to current assets is the relationship between the total Inventory to the total current
assets of the company. It is calculated by dividing the total Inventory to the total current assets.
Higher the ratio is more efficient to the management, lower the ratio is less efficient to the
management.
INVENTORY
INVENTORY TO CURRENTS ASSETS = -----------------------------------------
- CURRENT ASSET

Table.11: Inventory to Current Assets (₹ In Lacs)

Year

Inventory

Current assets

Inventory to Current assets

2013-14

3,945.19

34,203.81

12%

2014-15

3,927.26

38,182.46

10%

2015-16

5,019.00

41,483.13

12%

2016-17

4,248.48

42,587.19

10%

2017-18

4,664.19

43,178.94

11%

56

Chart.11: Inventory to Current Assets

INTERPRETATION:
From the above analysis it can be conclude that the company has sufficient inventory in all consecutive
year. So, the company has maintaining enough inventories in all years during the study period to meet
its current asset.

9%
10%
10%
11%
11%
12%
12%
2013-14 2014-15 2015-16 2016-17 2017-18
ITCR 12% 10% 12% 10% 11%
12%
10%
12%
10%
11%
ITCR

57

2. DEBTORS TO CURRENT ASSETS
Debtors to current assets is the relationship between the Debtors to the total current assets of the
company. It is calculated by dividing the total Debtors to the total current assets. Higher the ratio is more
efficient to the management, lower the ratio is less efficient to the management.

Table.12: Debtors to Current Assets (₹ In Lacs)

DEBTORS
INVENTORY TO CURRENTS ASSETS = -----------------------------------------
- CURRENT ASSETS

YEAR

DEBTORS

CURRENT ASSETS
DEBTORS TO
CURRENT ASSETS

2013-14

837.11

34,203.81

2.45%

2014-15

1,326.17

38,182.46

3.47%

2015-16

2,535.22

41,483.13

6.11%

2016-17

2,742.76

42,587.19

6.44%

2017-18

3,243.93

43,178.94

7.51%

58

Chart.12: Debtors to current assets

INTERPRETATION:
From the above analysis it can be conclude that the company has gradually increased its debtors in all
consecutive year. So, the company has efficient receivable in all years during the study period to meet
current asset.

0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2013-14 2014-15 2015-16 2016-17 2017-18
DTCA 2.45% 3.47% 6.11% 6.44% 7.51%
2.45%
3.47%
6.11%
6.44%
7.51%
DTCA

59

3. CASH & BANK TO CURRENT ASSETS
Cash & Bank to current assets is the relationship between the Cash & Bank to the total current assets of
the company. It is calculated by dividing the total Cash & Bank by the total current assets.
Higher the ratio is more efficient to the management, lower the ratio is less efficient to the management.

Table.13: Cash & Bank to Current Assets (₹ In Lacs)
INVENTORY
INVENTORY TO CURRENTS ASSETS = -----------------------------------------
- CURRENT ASSETS

YEAR

CASH & BANK

CURRENT ASSETS
CASH & BANK
TO
CURRENT
ASSETS

2013-14

12,920.03

34,203.81

38%

2014-15

13,418.49

38,182.46

35%

2015-16

5,779.12

41,483.13

14%

2016-17

1,242.55

42,587.19

3%

2017-18

1,336.46

43,178.94

3%

60

Chart.13: Cash & Bank to Current Assets

INTERPRETATION:
From the above analysis it can be conclude that the company has gradually decreased its cash & bank
balance in all consecutive year. So, the company has not enough cash balance in the last 2 years in the
study period.

0%
5%
10%
15%
20%
25%
30%
35%
40%
2013-14 2014-15 2015-16 2016-17 2017-18
C&BTCA 38% 35% 14% 3% 3%
38%
35%
14%
3% 3%
C&BTCA

61

4. LOAN & ADVANCES TO CURRENT ASSETS
Loan & advances to current assets is the relationship between the loan & Advances to the total
current assets of the company. It is calculated by dividing the total Loan & advances by the total current
assets. Higher the ratio is more efficient to the management, lower the ratio is less efficient to the
management.

Table.14: Loan & advances to current assets (₹ in Lacs)

INVENTORY
INVENTORY TO CURRENTS ASSETS = -----------------------------------------
- CURRENT ASSETS

YEAR
LOAN &
ADVANCES

CURRENT ASSETS
LOAN &
ADVANCES TO
CURRENT ASSETS

2013-14

377.71

34,203.81

1.10%

2014-15

464.96

38,182.46

1.22%

2015-16

425.55

41,483.13

1.03%

2016-17

26.12

42,587.19

0.062%

2017-18

24.96

43,178.94

0.058%

62

Chart.14-Loan & advances to current assets

INTERPRETATION:
From the above analysis it can be conclude that the company has very less loan and advances in
all consecutive year. So, the company has maintaining not enough cash to pay the loan and advances
during the study period.

0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
2013-14 2014-15 2015-16 2016-17 2017-18
L&ATCA 1.10% 1.22% 1.03% 0.06% 0.06%
1.10%
1.22%
1.03%
0.06% 0.06%
L&ATCA

63

Table no.15: Overall liquidity position of Bajaj Corp.ltd for the year 2013-2018

Year

Inventory to
Current Asset

Debtors to Current
Asset
Cash & Bank
to Current
Asset
Loan &
Advances to
Current Asset

2013-14

12%

2.45%

38%

1.10%

2014-15

10%

3.47%

35%

1.22%

2015-16

12%

6.11%

14%

1.03%

2016-17

10%

6.44%

3%

0.06%

2017-18

11%

7.51%

3%

0.06%

64

Chart.15: OVERALL LIQUIDITY POSITION OF BAJAJ CORP.LTD FOR THE YEAR 2013 -18

INTERPRETATION:
From the above overall analysis, it can be concluded that inventory to current asset ratio are fluctuating
over time during the study period. Debtors to current assets ratio are in increasing trend but Cash and
bank balances ratio are gradually decreased in all consecutive year. Loan and advances are also slightly
decreased over the study period. Overall, it shows the liquidity position of the company are poor in
upcoming years so there must be point for investigation to increase the liquidity of the company.
0%
5%
10%
15%
20%
25%
30%
35%
40%
2013-14 2014-15 2015-16 2016-17 2017-18
12%
10%
12%
10%
11%
2.45%
3.47%
6.11%
6.44%
7.51%
38%
35%
14%
3% 3%
1.10% 1.22% 1.03%
0.06% 0.06%
LIQUIDITY POSITION
Inventory to CADebtors to CACash & Bank to CALoan&Advances to CA

65

(V). STATEMENT OF RANKING IN ORDER OF LIQUIDITY OF BAJAJ CORP .LTD
(from 2013-14 to 2017-18)
The purpose of preparing this statement is for finding out the more comprehensive measure of
liquidity in which four factors – namely Inventory to Current Assets, Debtors to Current Assets, Cash &
Bank to Current Assets, Loans & Advances to Current Assets ratio, have been combined in a point score. A
high value indicates relatively favourable position & vice versa and ranking has been done in that order
Table.16: Statement of ranking in order of liquidity of Bajaj Corp.ltd (from 2013-14 to 2017-18)

Year

Inventory
to
Current
Assets

(1)

Debtors
To
Current
Assets

(2)

Cash &
Bank to
Current
Assets

(3)

Loans &
Advance
s to
Current
Assets

(4)

Liquidity Rank

Total
Rank

Ultimate
Rank

1

2

3

4

2013-14

12%

2.45%

38%

1.10%

5

1

5

4

15

4

2014-15

10%

3.47%

35%

1.22%

3

2

4

5

14

3

2015-16

12%

6.11%

14%

1.03%

5

3

2

3

13

3

2016-17

10%

6.44%

3%

0.06%

3

4

1

2

10

1

2017-18

11%

7.51%

3%

0.06%

4

5

1

1

11

2

Interpretation:
From the above table we can conclude that in the year 2013-14 & 2014-15 registered the most sound
liquidity position and was followed by 2015-16 and 2015-16 respectively in that order but in the year
2017-18 it slightly increased. The fluctuation in the liquidity position over different years of the period
of the study may be a point for investigation in to the financial efforts of the concerns.

66

(VI). STATEMENT OF CHANGES IN WORKING CAPITAL
The purpose of preparing this statement is for finding out the increase or decrease in working
capital and to make a comparison between two financial years.
Table 17.Statement of changes in working capital of Bajaj corp ltd for the year 2013-18 (₹ in Lacs)

Year

Current
Assets

Current
Liabilities

Working Capital
(CA-CL)

Changes in Working
Capital

2013-14

34,203.81

5,965.46

28,238.35

(-7,881.02)

2014-15

38,182.46

7,881.02

30,301.44

+2,063.09

2015-16

41,483.13

8,441.62

33,041.51

+2,740.07

2016-17

42,587.19

9,458.32

33,128.87

+87.36

2017-18

43,178.94

11,431.34

31,747.60

(-1,381.27)

67

CHART.16: CHANGES IN WORKING CAPITAL
The net working capital of the company is showing a fluctuating trend for the year 2014-2018. In the
year 2014 company has the net working capital 28,238 lakhs shows increase due to increase in the
component of current assets as inventory. Again, there is an increasing trend in working capital during
the years 2014-2017. But it started to decrease in the year 2018 due to increase in the sundry creditors.
So firm was not in a satisfactory position in terms of working capital during this period.

34203.81
38,182.46
41,483.13
42,587.19
43,178.94
5,965.46
7,881.02
8,441.62
9,458.32
11,431.34
28,238.35
30,301.44
33,041.51 33,128.87
31,747.60
7,881.02
2,063.09
2,740.07
87.36
1,381.27
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
9,000.00
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2013-14 2014-15 2015-16 2016-17 2017-18
CHANGES IN WORKING CAPITAL
Current Asset Current LiabilitiesWorking Capital Changes in working Capital

68

 (VI).CO-RRELATION BETWEEN SALES & WORKING CAPITAL
Table.18: correlation between sales & working capital

YEAR

SALES

WORKING CAPITAL

2013-14

67,068.00

32,152.33

2014-15

81,949.00

15,150.72

2015-16

86,657.48

31,671.48

2016-17

79,049.07

33,085.19

2017-18

81,185.12

32,438.24

TOTAL

395,908.67

144,497.96

CORRELATION

-0.222554867

 CO-RRELATION BETWEEN PROFIT & WORKING CAPITAL
Table.19: correlation between profit & working capital

YEAR

PROFIT

WORKING CAPITAL

2013-14

14,892.31

32,152.33

2014-15

17,265.91

15,150.72

2015-16

19,635.41

31,671.48

2016-17

21,824.21

33,085.19

2017-18

21,108.45

32,438.24

TOTAL

94,726.29

144,497.96

CORRELATION

0.357886902

69

Chapter – VI

FINDINGS AND SUGGESTION

4.2 FINDINGS:
 Working Capital of the company showing positive working capital during the study period there
was higher working capital of Rs. 33,128.87 lacs in F.Y. 2016-17.

 The company has higher current and quick ratios i.e., 5.73 times and 5.07 times respectively in
the year 2013-14, although in all years the current and quick ratios are above the standard norms.
So, the company has the ability to make payment of current obligation or current liabilities.

 The company is failed in keeping sufficient cash & bank balances and marketable securities
during the study period. So, the company cash performance is down position.

 Inventory Turnover Ratios are fluctuating in all consecutive years. Overall it is well in satisfied
position and the highest ratios is in the F.Y 2014-15 with the ratio of 9.16 times
• Inventory conversion period are also less as it can convert the inventory in and around 1 to
2 months.

 Debtor’s Turnover Ratio is very low in all consecutive years except in the 2013-14. This shows
the company has poor credit collection policy.
• Debtor Collection Period shows poor credit collection performance which
was gone up to 262 days in the F.Y 2017-18.
 Creditors Turnover Ratio was 5.99 times in the year 2013-14 & start gradually decreased up to
2.30 times in the F.Y 2017-2018. This shows the company is poor in making payment to its
creditors.
• The Creditors Payment Period shows that the company has taken long time
from creditors which was gone up to 156 days in the F.Y 2017-18.

70

 Working Capital Turnover Ratio was 1.93 times in the year 2013-14, then it increased up to 2.82
times in 2014-15 and goes in average range till F.Y 2017-18. This shows the company is utilizing
working capital effectively in all the years.

4.3 SUGGESTIONS
 The study suggested that the company should follow the present working capital as the
company’s showing positive working capital.
 The current ratio is maintained at a satisfied level. So that company peruses this much of
current assets to meet the objective of the firm.
 Company is maintaining high quick assets to overcome current liabilities for better results.
 Company should maintain sufficient liquidity in bank so they can meet urgent needs.
 Inventory:
▪ To gain good profits company has to improve the sales through inventory management.
▪ Company should try to reduce inventory cycle to ensure that on time delivery.
 Debtors & Receivables:
▪ Company should keep reminding customers about outstanding amount on a weekly basis.
▪ Company should call and inform customers about cash discount offered for early payment.
 Creditors & Payables:
▪ Because of long outstanding amount suppliers are not ready to supply on credit so company
should try to clear outstanding amount of suppliers so that they can ask more credit days as
far as possible.
▪ Company should maintain good relationship with suppliers, for that they have to make
payment on due date.
▪ Company should make payment on due date so they can escape from interest.

71

Chapter – VII

CONCLUSION

The study was conducted to analyse the working capital management in Bajaj Corp Ltd. in the state of
Assam. The financial position of the company was analysed and interpreted by using the tool of ratio
analysis through annual reports from 2013-14 to 2017-18.

The Current and Quick Ratio of the company is good but there is some need to increase in that, but the
Cash Ratio of the company is not maintaining sufficient liquidity in cash or bank. The inventory turnover
ratio has fluctuating in all consecutive years although they are in well satisfied position as well as
Inventory conversion period are also less.

Debtor’s turnover ratio has decrease in every year this is not a good sign for the company. This shows
the company has poor credit collection policy as well as debtor collection period shows poor credit
collection performance.

Creditor’s turnover ratio has also decreased in every consecutive year this is not a good sign for the
company. This shows the company is poor in making payment to its creditors as well as creditors
payment period has taken a long time to pay to its creditors.

Working capital turnover ratio was in average range. This shows the company is utilizing working
capital effectively in all the years. Thus, the company is showing positive working capital during the
study period.

On the whole, the company’s financial position is good because the company’s activity ratio and
management of working capital are good, and the company have to increase its liquidity position for
better performance in future.
Overall the company is moving forward with excellent management.

72

BIBLIOGRAPHY

Books:
• Financial Management – Khan, M.Y & Jain, P.K, Tata McGraw Hill
• Fundamental of Financial Management – Bose D.C
• Financial Management – Prasanna Chandra, Tata McGraw Hill

Journals:
• TECNIA Journal of Management Studies Vol.2 No.1

Annual Reports:
 Bajaj Corp ltd. Annual Report from 2013-14 to 2017-18

Websites:
 www.google.com
 www.wikipedia.com
 www.accountingtools.com
 www.investopedia.com
 www.bajajcorp.com

73

ANNEXURE

Balance sheet of BAJAJ Corp ltd. for last 5 years i.e. 2013-14 to 2017-18 (in lacs)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18
I. EQUITIES & LIABILITIES

(1) Shareholder's Funds

(a) Share Capital 1475 1475 1475 1475 1475
(b) Reserves and Surplus 50448.61 47381.07 46604.89 47943.5 47771.15
(2) Non-Current Liabilities

(a) Deferred tax liabilities
(Net) 39.48 54.82 68.22 76.64 73.67
(3) Current Liabilities

(a) Short Term Borrowing

1000 1500 1348.82
(b) Trade Payables 4055.22 5143.24 4351.49 4025.11 5993.8
(c) Other Current Liabilities 1910.24 2737.78 3090.13 3933.21 4088.72

TOTAL EQUITIES & LIABILITIES 57928.55 56791.91 56589.73 58953.46 60751.16

II. ASSETS

(1) Non-Current Assets

(a) Fixed Assets 19355.48 14242.29 9716.43 11858.05 13035.39
(b) Goodwill on consolidation 4300.1 4300.1 4300.1 4300.1 4300.1
(c) Long term loans and
advances 69.16 67.06 1090.07 208.12 236.73
TOTAL Non-Current Asset 23724.74 18609.45 15106.6 16366.27 17572.22
(2) Current Assets
(a) Current Investment 15638.51 18365.88 27069.44 33854.3 30738.9
(b) Inventories 3945.19 3927.26 5019 4248.48 4664.19
(c) Trade Receivable 837.11 1326.17 2535.22 2742.76 3243.93
(d) Cash and Cash Equivalents 12920.03 13418.49 5779.12 1242.55 1336.46
(e) Short term loan & Advances 377.71 464.96 425.55 26.12 24.96
(f) Other Current Assets 440.26 679.7 654.8 472.98 3195.46
TOTAL Current Assets 34203.81 38182.46 41483.13 42587.19 43178.94

TOTAL ASSETS 57928.55 56791.91 56589.73 58953.46 60751.16

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