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    A Summer Training Report

    ON

    Working Capital Management

    CONDUCTED AT

    PARLE BISCUITS PRIVATE LIMITEDBahadurgarh

    Submitted in partial fulfillment for the award of degree of

    MASTER OF BUSINESS ADMINISTRATION(SESSION 2005-2007)

    SUBMITTED BY:

    BHUPENDER SINGH

    MBA 2ND YEAR

    P.D.M.COLLEGE OF ENGINEERING,

    SARAI AURANGABAD, BAHADURGARH

    APPROVED BY

    MAHARISHI DAYANAND UNIVERSITY, ROHTAK

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    DECLARATION

    I, Roll No Class of the PDM College of

    Engineering here by declared at the project entitled

    is an original work and the same has not been submitted to any other

    institute for the award of any other degree. The interim was presented to the supervisor on

    and the pre submission presentation was made on ____________. The feasible suggestions have

    been only incorporated in consultation with the supervisor.

    Countersigned

    Signature of the Supervisor

    Forwarded By Signature of the candidate

    Director/Principal of the Institute

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    TABLE OF CONTENTS

    ACKNOWLEDGMENT 4

    PREFACE 5

    INTRODUCTION

    * HISTORY OF COMPANY 6

    * PRODUCT PROFILE 18

    MANAGERIAL USEFULNESS OF STUDY 49

    CONCEPTS USED IN STUDY 50

    FOCUS OF THE PROBLEMS 51

    OBJECTIVES OF THE PROJECT 52

    SCOPE OF THE WORK 54 RESEARCH METHODOLOGY 55

    * RESEARCH DESIGN

    * UNIVERSE AND SURVEY POPULATION

    * SAMPLE

    * SAMPLING METHOD

    * COLLECTION OF DATA

    DATA ANALYSIS 60

    FINDINGS 74

    RECOMMENDATION 76

    LIMITATIONS 77

    CONCLUSIONS 78

    BIBLIOGRAPHY

    79

    ANNEXURE

    80

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    ACKLNOWLEDGEMENT

    The satisfaction and euphoria that accompany the successful completion of any task would

    be, but incomplete without mentioning the people who made it possible, whose constant guidance

    encouraging crowned my effort with success.

    I would like to begin with a special note of gratitude and heartfelt thanks to Mr. S. S.

    SHIVRAIN,General Manager, who gave me the opportunity to complete my summer project at PARLE

    BISCUITS PRIVATE LIMITED Bhadurgarh, Haryana.

    I am extremely grateful to the Deputy Managerof FinanceDepartmentMr. JAIDEEP

    BHALA for his constant encouragement and valuable suggestions throughout my summer training and

    project for his cooperation extended to me.

    I am extremely indebted to Mr. PAWAN TYAGI, Mrs. SANTOSH NARWAL, Mr. S.N.

    VERMA, Mr. AKHIL RASTOGI, Mr. VINOD, Mr. AJAY SINGAL, Mr. PARMINDER SINGH,

    Mr. VIJENDER SINGH, and Mr. MANOJ for sharing their valuable time, comments and encouraging

    suggestions which guided and inspired me throughout the preparation of the project.

    I express my special thanks to Mr. K.G. CHACKO (OFFICE MANAGER), Mr. RAJIV

    SINGH (I.T. MANAGER), Mr. VIJAY KUMAR THAKUR (I.T. ASSTT. MANAGER), Mr. JANAK

    SHEKHAWAT (HR &P), Mr. SANJAY GOEL, Mr. VIDYA DHAR KASWAN (PURCHASE

    OFFICERS) for giving me their valuable opinions time to time.

    At last but not the least, I am very thankful to all the staff members of I.T. department also.

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    PREFACE

    Practical work experience is the integral part of individual learning. An individual who is

    learning managerial concepts has to undergo this practical experience for being a future executive.

    Master of Business Administration is a two-year programme that inserts management

    knowledge in an individual to make that individual completely professional for which practical experience

    is must.

    Parle Biscuits Pvt. Ltd. is the market leader in biscuit industry. Bahadurgarh plant

    of PBPL offered me a project on Working Capital Management to understand the current position through

    dates provided by them.

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    HISTORY OF COMPANY

    INTRODUCTION

    A long time ago, when the British ruled India, a small factory was set up in

    the suburbs of MUMBAI city, to manufacture sweets and toffees. The year was 1929 and the market was

    dominated by famous international brands that were imported freely. Despite the odds and unequal

    competition, this company called

    Parle Products, survived and succeeded, by adhering to high quality and improvising from time to time.

    A decade later, in 1939, Parle Products began manufacturing biscuits, in addition to sweets

    and toffees. Having already established a reputation for quality, the Parle brand name grew in strength with

    this diversification. Parle Glucose and Parle Monaco were the first brands of biscuits to be introduced,

    which later went on to become leading names for great taste and quality.

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    HOW PARLE FOUGHT TO MAKE BISCUITS AFFORDABLE TO ALL

    Biscuits were very much a luxury food in INDIA, when Parle began production in 1939.

    Apart from Glucose and Monaco biscuits, Parle did offer a wide variety of brands.

    However, during the Second World War, all domestic production was diverted to assist the

    Indian Soldiers in India and Far East. Apart from this, the shortage of wheat in those days, made Parle

    decide to concentrate on the more popular brands, so that people could enjoy the price benefits.

    Thankfully today, theres no dearth of ingredients and the demand for more premium

    brands is on the rise. Thats why; we now have a wide range of biscuits mouthwatering confectioneries to

    offer.

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    THE QUALITY COMMITMENT

    Parle Product Private Limited has 3 manufacturing plants

    1) VILE PARLE in Mumbai (Maharashtra)

    2) BHUJ (Gujarat)

    3) BANGLORE (Karnataka)

    Apart these plants Parle Product Pvt. Ltd. maintain 20 contract base manufacturing units in

    all over INDIA. These plants and CMUs produce sweets and confectionary products.

    Parle Product Pvt. Ltd. has also a subsidiary company, which is Parle Biscuit Pvt. Ltd. This

    subsidiary company produces only biscuits. It also has 2 manufacturing plants

    1) BAHADURGARH in Gurgaon (Haryana)

    2) NEEMRANA in Alwar (Rajasthan)

    Apart these two plants Parle Biscuit Pvt. Ltd. maintain 11 contract base manufacturing units

    on different locations, which produce only biscuits.

    All these factories are located at strategic locations, so as to ensure a constant output & easy

    distribution. Each factory has state-of-the-art machinery with automatic printing & packaging facilities.

    All Parle products are manufactured under the most hygienic conditions. Great care is

    exercised in the selection & quality control of raw materials; packaging materials & rigid quality standard

    are ensured at every stage of the manufacturing process. Every batch of biscuits & confectioneries are

    thoroughly checked by expert staff, using the most modern equipment.

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    EMERGING TRENDS OF THE BRAND

    Since its inception in the 30s Pale biscuits have prided itself in offering quality products

    that are affordable to the common man. The marketing mix has evolved with the times

    THE PRODUCT

    Parle biscuits have a range of variants in its product portfolio. The popular brands Parle-G,

    Krackjack, Monaco and its variants (zeera, onion and methi) are available in packets of various

    convenient sizes. New products like Hide & Seekare a foray into the premium segment.

    THE PRICING STRATEGY

    This biscuit major has not bothered to raise the price of its flagship brand Parle-G for the

    past 6-8 years and has always tried to provide its offerings at nearly 33% discount as compared to other

    competitive brands.

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    PARE BISCUTS PRIVATE LIMITED (BAHADURGARH)

    Parle Biscuit Pvt. Ltd. is a subsidiary of Parle Product Pvt. Ltd.

    The manufacturing at Bahadurgarh unit started in 1982 forParle-G with a single plant. It is planted in near

    about 16 acres of land.

    Including General Manager 78 employees of Managerial and Officer

    class are working in this plant. Production is going on in this plant 24 hours in three shifts. Number of

    permanent workers of thrice shifts is 680 and around 400 workers are there on contract basis.

    In 1990s Krackjack production began followed by Monaco and Nimkin. Average

    Production capacity of Bahadurgarh unit per month is-

    1) Parle-G 3500 Metric Tonnes

    2) Krackjack 1600 Metric Tonnes

    3) Monaco 800 Metric Tonnes

    The plant works in coordination with the Mumbai office, Neemrana (Rajasthan) Plant of

    PBPL, 11-contract base manufacturing units and 40 depots. But the accounts are finalized of Neemrana

    plant and 11 CMUS at Bahadurgarh Plant.

    Location of the 11 CMUS is as follows-

    5 at Kanpur

    1 at Gorakhpur

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    1 at Patna

    1 at Faizabad

    1 at Raipur

    1 at Varanasi

    1 at Ajmer

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    DEPARTMENTS IN PLANT

    FINANCE

    HR & PERSONNEL

    QUALITY ASSURANCE

    PRODUCTION & PRINTING

    EXCISE & DESPATCH

    ENGINEERING

    I.T.

    PURCHASE

    STORE

    The organization follows a flat structure with less hierarchal levels. The heads of the

    different departments report to the General Manager through direct communication. The working

    atmosphere is not stressful with enough work-flexibility given to staff and managers.

    The plant also has auditorium and viewing gallery, which is used during the visit of

    school children. A retail shop at the Plant provides Parle Products at M.R.P. rates.

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    CREDIT POLICY OF PARLE BISCUITS PVT. LTD.

    Before coming to the credit policy its necessary to be aware with the goods distribution

    policy of Parle Biscuits Pvt. Ltd.

    For fulfilling the demand of its customers timely Parle Biscuits Pvt. Ltd. maintains 40

    DEPOTS in all over INDIA. Finished goods are transferred from production plants to these depots.

    According to their transportation facilities customers of Parle Biscuits Pvt. Ltd. ask their demand of

    different products to depots.

    Then its the responsibility of these depots to fulfill the demand of customers of Parle Biscuits Pvt. Ltd.

    Parle Biscuits Pvt. Ltd. doesnt has credit policy it deals in cash. For the collection of its

    payment PBPL deals with 5 banks which are as follows:

    1) UTI

    2) STANDARD CHARTERED

    3) HDFC

    4) BANK OF PUNJAB

    5) CORPORATION BANK

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    The Parle toffees brands are:

    1) Funtoosh

    2) Mango Bite

    3) Orange Candy

    4) Poppins

    5) Roll-A-Cola

    6) Tangy Candy

    7) Boo

    8) Pippermint

    9) Rose Mint

    10) M Choco

    11) Melody

    12) Dairy Toffee

    13) Lux Toffee

    14) Mayfair Toffee

    15) Kismi

    16) Mahakismi

    17) Smoothies

    18) Cafechino

    19) Chox Bar

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    Introduction of Topic

    WORKING CAPITAL AT A GLANCE

    INTRODUCTION

    TYPES

    FEATURES

    DETERMINANTS

    COMPONENTS

    WORKING CAPITAL CYCLE

    INTRODUCTION

    A successful sales program is necessary for earning profits by any business enterprise. Sales

    dont convert into cash instantly. There is a time lag between the sale of goods and receipt of cash.

    Therefore, there is a need for working capital in the form of current assets to deal with the

    problem arising out of the lack of immediate realization of cash against goods sold. Therefore sufficient

    working capital is necessary to sustain sales activity.

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    FEATURES

    1) Working capital is regarded as the excess of current assets over current liabilities.

    2) Working capital indicates circular flow of funds in the day-to-day activities of business. Thats why it

    is also called circulating capital.

    3) Working capital represents the minimum amount of investment in raw materials, work-in progress,

    finished goods, stores and spares, accounts receivables and cash balance.

    TYPES

    Working capital can be classified either on the basis of concept or on the basis of

    periodicity of its requirement.

    1) ON THE BASIS OF CONCEPT

    On the basis of concept working capital is of 2 types.

    A) Gross working capital - Gross working capital is represented by the total Current assets.

    Gross working capital = Total current assets

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    B) Net working capital -Net working capital is the excess of current assets over current liabilities.

    Net working capital = Current assets Current liabilities

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    5) Terms of purchase - If suppliers allow continuous credit, payment can be postponed for some

    time and can be made out of the sale proceeds of the goods produced. In such a case, the

    requirements of working capital will be reduced.

    6) Dynamic Attitudes As a company grows, it is logical to expect the large amount of working

    capital will be required.

    7) Business cycles Requirement of working capital also varies with the business. When the price

    level is up due to boom conditions, the inflationary conditions create demand for more working

    capital. During depression also a heavy amount of working capital is needed due to the inventories

    being locked unsold and book debts uncollected.

    8) Requirement of cash - The working capital requirements of a company are also influenced by

    the amount of cash required by it for various purposes. The greater the requirement of cash, the

    higher will be the working capital needs of the company.

    9) Dividend policy of concern If the management follows a conservative dividend policy the

    needs of working capital can be met with the retained earnings. The relationship between dividend

    policy and working capital is well established and mostly companies declare dividend after a careful

    study of their cash requirements.

    10) Other Factors - Other factors, which affect the requirement of working capital, are lack of co-

    operation in production and distribution policies, transport and communication facilities, the fiscal

    and tariff policies of the government etc.

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    3) Account Receivable - Though accounts receivable are a vital investment of any business

    organization, little analytical work as been done to determine credit policies. Maintaining account

    receivable has its cost implications in that the firms monetary resources are tied up. This is of greater

    significance in the inflationary economy, because of the depreciation in the value of money.

    Basically, this is a two-step account. When goods are shipped, inventories are reduced and accounts

    receivable is created. When payment is made, this account is reduced and the cash level increases.

    Accounts receivables are, therefore a function of the volume of credit sales and the average length of

    time between sales and collections.

    4) InventoryInventories represent a substantial amount of a firms current assets. Management of

    inventories should be efficiently carried out so that this investment doesnt become too large, as it

    would result in blocked capital which could put to productive use elsewhere. On the other hand,

    having too small an inventory could result in loss of sale or loss of customer goodwill. An optimum

    level of inventory should therefore be maintained.

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    WORKING CAPITAL CYCLE

    Working capital cycle indicates the length of time between a firms paying for materials

    entering into stock and receiving the cash from sale of finished goods. In a manufacturing firm, the duration

    of time required to complete the sequence of events is called operating cycle.

    In case of a manufacturing company, the operating cycle is the length of time necessary to

    complete the following cycle of events: -

    1) Conversion of cash into raw materials

    2) Conversion of raw materials into work-in-progress

    3) Conversion of work-in-progress into finished goods

    4) Conversion of finished goods into accounts receivable

    5) Conversion of accounts receivable into cash

    The above operating cycle is repeated again & again over the period depending upon the nature of the

    business & 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.

    Working capital cycle can be expressed as:

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    OPERATING CYCLE OF MANUFACTURING BUSINESS

    REALIZATION Accounts SALES

    Receivables

    Cash Finished Goods

    PURCHASES PRODUCTION

    PRODUCTION PROCESS

    Raw Materials Work-in-Process

    PROCESS

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    SALES per month 67829.07 = 5652.422 Rs.

    12

    Total EXPENSES 60450.77 = 5037.66 Rs.

    Per month 12

    WORKING CAPITAL REQUIRED = Total Length of X Monthly Expenses

    Operating Cycle

    __________________________________

    30

    = 21.34 X 5037.66

    30

    = 3583.45Rs.

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    1 Months Finished Goods = 40275.31/12 = 3356.27Rs.

    2004-05:

    Cost of Goods Sold = 41529.54Rs.

    1 Months Finished Goods = 41529.54/12 = 3460.85Rs.

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    NAME OF THE COMMODITY YEAR AMOUNT (In Rs/-)

    Stores and spares 2003-04 82, 91,000

    2004-05 57, 29,000

    Raw Materials 2003-04 10, 21,52,000

    2004-05 8,11,54,000

    Packing Material 2003-04 5,82,08,000

    2004-05 7,08,06,000

    Finished Goods 2003-04 11,61,33,000

    2004.5 9,46,87,000

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    CASH MANAGEMENT IN PARLE BISCUITS PVT. LTD.

    Cash management in Parle Biscuits Pvt. Ltd. is as follows-

    Average daily collection of the Parle Biscuits Pvt. Ltd. is 2 crores.

    Salaries and Wages are distributed in Parle Biscuits Pvt. Ltd on monthly basis. 50,00,000-

    75,00,000 salaries and wages are distributed in one month. Like this all other daily transactions are

    completed by daily collection.

    In case of strike or any contingency supply of demand is completed by another plant of Parle Biscuits

    Pvt. Ltd. and by 11 CMUS. Supply doesnt disturb.

    Authority for getting the benefit of any opportunity is given to Mumbai office of Parle Biscuits Pvt.

    Ltd. That decides the policy regarding to any market opportunity.

    Parle Biscuits Pvt. Ltd. doesnt have any credit policy. It deals in cash. Thats why it doesnt has any

    cash problem.

    Distribution channel of Parle Biscuits Pvt. Ltd. is very short only depots are there as a middleman

    between plant & open market. Thats why there isnt any necessity of more cash.

    Biscuits come in FMCG product. So circulation of cash is smooth & fast.

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    Production cycle is short. Thats why Parle Biscuits Pvt. Ltd has less demand of cash.

    FUND FLOW ANALYSIS

    The statement of change in financial position, prepared to determine only the sources and

    uses of working capital between dates of the two Balance Sheets is known as the Fund Flow Statement.

    Working Capital is defined as the difference between Current Assets and Current Liabilities. Working

    determines the liquidity of the firm.

    The Working Capital flow or fund arises when the net effect of transaction is to increase or

    decrease the amount of Working Capital. Normally, a firm will have some transactions that will change Net

    Working Capital and some that ill cause no change in Net Working Capital. The transaction will cause Net

    Change of Working Capital only when one of the accounts affected is a current account (Current Liability)

    and account is non-current account (Long-term Assets or Long term Liability).

    The concepts of Working Capital may be summarized as follows:

    The Net Working Capital increases or decreases when a transaction involves a current account and

    a non-current asset account.

    The Net Working Capital remains unaffected when a transaction involves only Current accounts.

    The Net Working Capital remains unaffected when a transaction involves only non current

    accounts.

    Now let us examine the Working Capital flow of Parle Biscuits Pvt. Ltd. through the statement of

    change in Working Capital.

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    BANK CREDIT

    Bank Credit is the primary institutional source of Working Capital finance in India.

    In fact, it represents the most important source for financing of Current Assets.

    Working Capital finance is provided by banks in five ways:

    1) Cash Credits/Overdrafts

    2) Loans

    3) Purchase/Discount Bills

    4) Letter of Credit

    5) Working Capital term loans

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    INTERNAL SOURCES

    This is also another major source for financing of Working Capital. Internal Sources include

    profits, reserves etc.

    FINANCING OF WORKING CAPITAL IN PARLE BISCUITS PVT. LTD.

    In Parle Biscuits Pvt. Ltd financing of Working Capital is done through only

    internal sources. Profits and reserves of Parle Biscuits Pvt. Ltd. are enough to fulfill the demand of its

    Working Capital.

    Parle Biscuits Pvt. Ltd. doesnt use any other source apart internal for financing its

    Working Capital

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    MANAGERIAL USEFULNESS OF STUDY

    Today in the business line every man. want to know about his company financial condition. A

    working capital is a part of finance. The working capital are calculated by the current assets and

    current liabilities which are related to annual report of the company. With the help of working

    capital management we can calculated the liquidity position of the company. If the current assets

    are more than the current liabilities thus we can say that the liquidity position of the company is

    satisfactory, the usefulness of study is included the signification of the working capital. Working

    capital management is manage the operating process in the organization & company.

    All the businessmen want to know how much they have gained or lost

    during the year; how much capital is invested in the business at the end (if the year; how much

    amount, they are liable to pay and to whom they owe it; how much is owed to them and by whom

    etc. In order to attain such information, it is essential to keep a complete and systematic record of

    each and every business transaction entered into during the year.

    By keeping a complete and systematic record of every business dealing the businessman can know

    how much the amount of purchases is; how much is the amount of sales; what are his total

    expenses and what is the amount of profit earned or loss incurred during the year. Furthermore, he

    can ascertain the financial position of his business, such as, how much capital it has at the end for

    the year and how that capital stands invested in various assets; how much amount he has to take

    and from whom and how much amount he is liable to pay and to whom. Besides, the properly

    maintained accounts are helpful in the assessment of Income-tax and Sales

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    CONCEPT USED IN STUDY

    In this project I used working the ratio which are used for calculating for the financial

    conditions of Parle Biscuit Pvt. Ltd. I have used the ratio which are networking capital

    ratio, current ratio, average collection ratio and quick ratio. These ratio are very useful to

    understand the topic because we can calculate the working capital by the help of these ratio.

    I have used these ratio by the declaration of financial manager of Parle Biscuit Pvt. Ltd.

    These ratio are shows the liquidity position in the financial competition. Ratio help to

    summaries the large quantities of financial data and to make qualitative judgment about the

    firms financial performance. The project is developed keeping in mind the security of

    working capital of the company. That is possible with the help of ratio analysis.

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    Scope of the Work

    Company has opportunities of tapping new markets by their products. Company is

    trying to expand its network in many countries. Societal effects, company has a good scope

    in the field of home loans and insurance sector. On one side it will be good for the society

    and on the other side it will be beneficial for the company , as the loans have good profits

    margins.

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    RESEARCH METHODOLOGY

    After knowing the job profile of every employee of finance department in Bahadurgarh

    plant of PBPL. I choose the project of Working Capital Management. I discussed the project with my

    instructor and coordinatorMr. JAIDEEP BHALA Deputy Manager of Finance Department.

    He approved the project. After that a simple course of action has been followed for working

    on this project. All the data are gathered from the respective annual report of Parle Biscuits Pvt. Ltd. All the

    figures are taken from their balance sheet, profit & loss account of the respective years and other internal

    documents.

    My instructor Mr. JAIDEEP BHALA in understanding the facts and figures provided a

    great help. Mr. BHALA made it possible for me to ask my queries from that person who can answer these

    best rather than anybody else in the company. Although is has been a difficult task but the availability of

    proper data and timely guidance given by Mr. BHALA made it a little simpler to complete this project.

    In a lucid way I can summarize the steps of Research Methodology as-

    1)Collection

    2)Organization

    3) Presentation

    4)Interpretation

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    1. Primary Data

    Primary data is the data collected specially for the specific purpose, it can be collected through experiment

    or through survey. In a case of survey data can be collected by one or more of the following ways.

    1)COMMUNICATION METHOD

    2)OBSERVATION METHOD

    All the datahas been collected from the primary sources.

    1. Communication

    In Communication data we uses the mode of communication which we uses oftenly. By collecting the data

    from this method is the direct interaction. We can collect this data for further use also. Because this data

    can be used during comparison from last ones.

    2. Observation

    During the Data Collection first of all we have to see all the aspect related to data. From where we can get

    the input according to our project. As the data collection will be taken initially then we can get the best

    output.

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    2. Secondary Data

    Secondary data consists of information that already exists somewhere and was collected for another

    purpose which may not be the same.

    Secondary Data used here

    - Various files

    - Magazine and Books

    - Performas and Websites

    I have used secondary data in the completion of this summer training report.

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    In year 2002-03 Investments were 20,000 lacs Rs/- so % of Working Capital to

    Investments was 12.5 and in year 2003-04 Investments were 15,000 lacs Rs/- so % of Working Capital to

    Investments was 20.

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    % of Working

    Capital to Sales

    9.7

    % of Working

    Capital to

    Investment

    19.67 19.32

    7.56

    0

    5

    10

    15

    20

    25

    1 2

    2003-04

    2004-05

    Amount in Lacs

    RATIO ANALYSIS

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    It is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of

    two mathematical expressions and as the relationship between two or more things. Ratio helps to

    summaries the large quantities of financial data and to make qualitative judgment about the firms financial

    performance. The point to note is that a ratio indicates a quantitative relationship, which can be turn, used

    to make a qualitative judgment.

    Here are some of the calculated ratios of the financial year of Parle Biscuits Pvt. Ltd.

    All the ratios are calculated in Lacs Rs/- figures.

    Net Working Capital Ratio

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    Net Working Capital Ratio

    0.22

    0.15

    0

    0.05

    0.1

    0.15

    0.2

    0.25

    2003-04 2004-05

    2003-04 0.22

    2004-05 0.15

    Net Working Capital Ration

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    Current Ratio

    Current Assets

    Current Liabilities

    2003.4 2004-05

    Current Assets 26686.68 28602.82

    Current Liabilities 20090.52 23308.81

    Ratio 1.33: 1 1.23: 1

    Current Assets include cash and those assets, which can be converted into cash within a

    year. All obligations maturing within a year are included in current liabilities.

    As a conventional rule a current ratio 2: 1 or more is considered satisfactory. The current

    ratio doesnt represent margin of safety i.e. a cushion of protection for creditors.

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    Average Collection Ratio

    Debtors*360

    Sales

    2003-04 2004-05

    Debtors*360 1217.16*360 821.90*360

    Sales 68000 70,000

    Days 6.45 4.22

    The average collection period shows the efficiency of debtors. It tells that Parle Biscuits

    Pvt. Ltd doesnt has credit policy and if is given then in rare cases.

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    0

    1

    2

    3

    4

    5

    6

    7

    2003-04

    2004-05

    2003-04 6.45

    2004-05 4.22

    Average collection ratio

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    Quick Ratio or Acid Test

    Current Assets - Inventories

    Current Liabilities

    2003.4 2004-05

    Current Assets Inventories 26686.68-2869.33= 28602.82 -2524.98=

    23817.35 26077.84

    Current Liabilities 20090.52 23308.81

    Ratio 1.18: 1 1.12: 1

    Generally a quick ratio of 1:1 is considered to represent a satisfactory position. But it cant

    be said tat a company having quick ratio of less than 1:1 isnt financially sound, Because it depends upon

    the nature of debtors. If the debtors are slow paying the quick ratio of more than 1:1 can become harmful.

    But if debtors are liquid like in this organization than even less than 1:1 can work out to be satisfactory.

    As debtors of this organization arent slow paying so that quick ratio is satisfactory.

    The above made calculation of various ratios has told us about the various aspects of

    Working Capital of Parle Biscuits Pvt. Ltd. The system is well under control an effective but still in some

    areas a little more concentration to be needed.

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    SCHEDULE OF CHANGE IN WORKING CAPITAL

    73

    1.09

    1.1

    1.11

    1.12

    1.13

    1.14

    1.15

    1.16

    1.17

    1.18

    1.19

    2003-04

    2004-05

    2003-04 1.18

    2004-05 1.12

    Quick Ratio

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    Particulars 2003-04 2004-05 Effect on Working capitalIncrease Decrease

    Current

    AssetsInventories 270934 289272 18338

    Debtors 172716 188725 16009

    Cash 153228 168070 14842

    Accured Income 816122 868345 52223

    Total 1413000 1514412

    Current LiabilitiesC/L (Cr.) 297238 357239 60001

    Provisions 1111814 1151815 40001

    Total 1409052 1509054

    W.C (A-B) 3948 5358 101412 100002Pos. Inc. in W.C 1410

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    The project is developed keeping in mind the security of Working Capital of the company.

    Means that no one can enter in the confidential data of the company and without permission the senior

    officer one cant enter in the main programme whether he is Manager, Employee or the Guest.

    FINDINGS

    It is very difficult to make the project or the analysis in such a way that can solve all the problems

    according to the requirements. In this project it is being tried to give more and more facilities but in a short

    period of training time, as much as possible has been done.

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    1.In the year 2002-03 working capital of Parle Biscuit Pvt. Ltd. Was 2500 Lacks

    Rs/. While in the same period the sales was noticed 65,000 Lacks Rs/. Then %

    of working capital to sale was 3.84 but in the next year 2003-04 sales was

    50,000 Lacks Rs/. And working capital was 3,000 Lacks Rs/. So in year 2003-

    04 % of working capital to sales was 6.

    2.In the year 2002-03 investment were 20,000 Lacks Rs/. So % of working

    capital to investments was 12.5 and in year 2003-04 investment were 15,000

    Lacks Rs/. So % of working capital to investments was 20.

    3. The Position of Net Working Capital in the year 2003-04 is better as

    compared with the year 2002-03. The important thing to say is that this

    organization has healthy current assets.

    4. As a Conventional rule a current ratio 2:1 or more is considered satisfactory

    the current ratio dont represent margin of safety i.e. a cushion of

    protection for creditors.

    5. The average Collection period shows the efficiency of the debtors, it tells

    that Parle Biscuit Pvt. Ltd doesnt has credit policy and if is given then in

    rare cases.

    6. It can not be said that a Company having a quick ratio of less than 1:1 isnt

    financially sound because it depends upon the nature of debtors. If the

    debtors are slow paying the quick ratio of more than 1:1 can become

    harmful. But if debtors are liquid like in this organization than even less

    than 1:1 can work out to be satisfactory.

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    Recommendation

    Total Current assets need to be increased.

    Total Liabilities of outsiders should be deceased.

    Net Profit need to be improved.

    Overall Management should be improved.

    Expenditure should be decreased.

    Organization has healthy current assets but it is need to more improved

    current assets and liquidity power.

    The organization is well under controlled and effective but still in some

    areas a little more concentration to be needed.

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    Limitations of the Study

    The major limitations of my study are as under.

    Limited Time : Although the staff of Parle Company Pvt. Ltd. was very

    efficient and highly co-operative and devoted enough of their valuable

    time to us. But because of time constant. We were not able to devote as

    much time with their employees.

    Secrecy: Some of the information was kept confidential and was not

    disclosed to any person who so ever.

    Lack of Comparative Data : Due to non availability of other industries

    in the same line we were not able to compare the data of one organization

    with other one. Inspire of these difficulties we still put our best efforts to

    try to do the full justice subject matter and in completion of the report.

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    Conclusions

    Success is achieved by those who try where there is nothing to loose by trying a great deal

    to gain if successful, by all means try.

    W.Clement Stone

    The study has its own importance in its own way. With the help of this study one can know about

    the struggle and success of Parle Biscuits Pvt. Ltd. Efforts, which is due to its efficient management.

    The study will definitely increase the morale of each employee and by studying this managers come

    to know that what effective measures can be taken to maintain the effective use of working capital in the

    organization and thus to achieve goals of the organizations.

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    BIBLIOGRAPHY

    Text Books

    D.C.Sharma & K.G.Gupta Management Accounting

    M.Y.Khan & P.K.Jain Financial Management

    Annual Reports

    1) Parle Biscuits Pvt. Ltd. annual report 2001-02

    2) Parle Biscuits Pvt. Ltd. annual report 2002-03

    3) Parle Biscuits Pvt. Ltd. annual report 2003-04

    ANNEXURE

    Profit and Loss Account

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    Particulars 2003-04 2004-05

    Sales 5282907 5505061

    Less: Cost of Goods Sold

    Opening Stock 137107 136933

    Add: Raw Material Consumed 3067148 3268256Packing Material Consumed 723740 666587

    Payment to an Provisions for employees 171429 126067

    Store and Spare Parts Consumed 43975 40306

    Power and Fuel 120505 142037

    Conversion Charges 257928 305061

    Rates and Taxes 68721 78051

    Less: Closing Stocks 136933 105061

    Gross Profit 829287 846824Less : Operating Expenses

    Selling and Distribution expenses

    Repair and Maintenance 44499 40507

    Advertisement and Sales/ Marketing Expenses 187875 250507

    Communication Expenses 2103 2209

    Cash Discount 20440 25061

    Traveling and Convince Expenses 6312 7051

    General and Administrative Expenses

    Rent 4636 2051

    Printing and Stationary 2276 2051

    Insurance 3531 3033

    Legal and Professional 3642 4050

    Financial ExpensesDepreciation 103900 95061

    Miscellaneous 5488 6057

    Operating Profit 327846 396336

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    Add : Not Operating Income

    Income from Investment 87622 146251

    Other Incomes 10606 21872

    Less : Non Operating Expenses

    Net income before Tax 426074 564459

    Less : [email protected]% 164038 217317

    Net Income 262036 347142

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    Common Size Statement

    Profit and loss Account

    Particulars 2003-04 2004-05

    Sales 100 100

    Less Cost of Good Sold 84.3 84.62

    Gross Profit 15.7 15.38Less : Operating Expenses

    Selling and Distribution Expenses 7.15 6.14

    General and Administration Expenses .27 .20

    Financial Expenses 1.97 1.72

    Misc. Expenses .10 .11

    Total Operating Expenses 9.5 8.18

    Operating Profit 6.21 7.2

    Total Income 1.86 3.05Less : Other Expenses

    Income Before Tax 8.07 10.25

    Less : Provision for Tax 3.11 3.95

    Income after Tax 4.96 6.3

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    Balance Sheet

    Particulars 2003-04 2004-05

    Liabilities

    Share Capital 4950 4950

    Reserves and Surplus 1494788 1759852

    Secured Loans

    Unsecured Loans

    Current Liabilities and

    Provisions

    a) Current Liabilities(Creditors) 297238 357239

    b) Provisions 1111814 1151815

    Contingent Liabilities

    Total 2908790 3273856

    Particulars 2003-04 2004-05

    Assets

    Fixed Assets 556596 583761

    Investment 939194 1175683

    Current Assets, Loans and

    Advances

    a) Current assets

    Stock 270934 289272Debtors 172716 188725

    Cash 153228 1680707

    b) Loans and Advances 816122 868345

    Misc. Expenditure

    Profit and Loss A/c(Dr. Balance)

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    Total 2908790 3273856