Financial Project on Working Capital Management And Cost Reduction Tactics

Description
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Sub Code: 830004

Enrollment No.107320592043

Title of the Project: “Working Capital Management And Cost Reduction Tactics”
[As a partial fulfillment of the Master of Business Administration for Summer Internship Program]

Submitted to
MBA Department LDRP-Institute of Technology and Research, Gandhinagar.
(Affiliated to Gujarat Technological University, Ahmedabad)

Under the Guidance of Prof. S. K. Mantrala Submitted by Mittal K. Chaudhari
MBA-II/ SEMESTER-III (BATCH YEAR: 2010-12) Sign of External Examiner _______________________ Sign of Internal Examiner _______________________

LDRP-Institute of Technology and Research, Gandhinagar. MBA Department (732)

PREFACE
Business face ever increasing pressure on costs and growing financing requirement as a result of intensive competition in globalize markets. Many of them are therefore considering ways of making themselves more efficient. In identifying possible options it is important not to focus exclusively on income and expense items, but also to take the balance sheet into account. Improvements to the existing capital structure can free up valuable resources and bring increased efficiency. Active working capital management is an extremely effective way to increases enterprise value. Optimizing working capital results in a rapid release of liquid resources and contributes to an improvement in free cash flow and to a permanent reduction in inventory and capital costs. My project is on working capital management and cost reduction tactics. The attempt is aimed to analyze the various aspects of working capital management of La-Gajjar Machineries (P) Limited. By adopting various calculation and analysis and then making interpretation with the solution of specific problem, best efforts on giving appropriate suggestion to the company have been made. To this context various methods and techniques like ratio analysis , statistical tool, Correlation

analysis and working towards the optimal level of working capital , estimation of working capital and various ratios have been used to draw an exact picture of company.

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ACKNOWLEDGEMENT
I am heartily thankful to the GUJARAT TECHNOLOGICAL UNIVERSITY to provide me the opportunity to make a study for primary and secondary survey for practical knowledge in the company. I would like to express my gratitude to all those who gave me the possibilities to complete this project. I would like to thank Prof. Surya Krishna Mantrala, Director, LDRP Institute of Technology & Research, My Faculty Guide Prof. Hemali Broker who helped me throughout the project and also in the successful completion of my project. She has given a lot of extra input in my project. Besides practical experience, I have gained a lot out of this project. I would also like to thanks all the faculty members for provide necessary guidance and techniques, which are helpful for the project. The successful completion of this report would not have been possible without co-operation and support of Mr. Chandresh Lodaya and all other members of the La-Gajjar Machineries (P) Limited. I would also like to thanks Ms. Veena, who is provide me the opportunity to do the project in the company. I express my sincere thanks to the employees who have given me all the information about their working condition and also about cost reduction in the company. I am thankful to the employees and all those who have directly or indirectly helped me in the preparation of this report.

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EXECUTIVE SUMMARY

For the Summer Internship Programme I choose La-Gajjar Machineries (P) Limited. LGM is, submersible pumps and motors producing company. It is one of the leading manufacturing company for submersible pumps and motors in the market. In this company I have done my Summer Internship Project on topic “Working Capital Management And Cost Reduction Tactics at La -Gajjar Machineries (P) Limited”. This report is gives the basic idea of the Working Capital Management. On the basis of it company can understand the Operating Cycle of the last three years and also can take necessary steps for reducing the Net Operating Cycle. This report also contains Ratio Analysis. So, on the base of analysis of the different ratios of last three years, company can easily understand the position of the company and also identify where company’s more concentration is required. Financial Analysis of the company is also considered for study of working capital management. In the financial analysis, there are comparison of the Profit And Loss Account and Balance Sheet of the last two years. On the basis of comparison of it, company can identify that where company’s expenses and revenue are increase or decrease. And can take necessary action for the same. Cost Reduction Tactics is also considered in this report. On the basis of employees’ views and ideas by filling the questionnaire this analysis is possible. In this report shows that where the cost reduction is possible in the company and for that which types of steps are required. This type of analysis is helpful for the company for reducing cost and increase the profitability of the company.

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TABLE OF CONTENT
NO. 1 2 3 4 5 6 PARTICULARS Preface Acknowledgement Executive Summary Topic Introduction Literature Review Research Methodology 6.1 Sampling Methodology 6.2 Data Collection 6.3 Research Methodology 6.4 Objective of the study Industry Profile Company Profile Conceptual framework 9.1 Working Capital Management 9.1.1 Introduction 9.1.2 Components and Definitions of working capital 9.1.3 Characteristics and sources of working capital 9.1.4 Importance of Working Capital 9.1.5 Types Working Capital 9.2 Operating Cycle of Working Capital 9.3 Ratio Analysis 9.4 Financial Analysis Data Analysis 10.1 Net Working Capital 10.2 Operating Cycle of Working Capital 10.2.1 Raw material conversion period 10.2.2 Work in process conversion period 10.2.3 Finished goods conversion period 10.2.4 Debtors conversion period 10.2.5 Gross operating cycle 10.2.6 Creditors deferral period 10.2.7 Net operating cycle 10.3 Ratio analysis 10.3.1 Current ratio 10.3.2 Quick ratio 10.3.3 Fixed assets turnover ratio 10.3.4 Stock turnover ratio 10.3.5 Debtors turnover ratio 10.3.6 Gross profit ratio 10.3.7 Net profit ratio 10.4 Financial analysis Pg. No. I II III 1 2 3-4 3 3 3 4 5 13 27-40 28 28 29 30 31 32 34 39 40 41-63 42 43-49 43 44 45 46 47 48 49 50-58 50 51 52 53 54 55 57 59-61

7 8 9

10

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11 12 13 14 15 16 17 18 19

10.4.1 Comparative profit and loss account 10.4.2 Comparative balance sheet 10.5 SWOT analysis Cost Reduction Analysis Findings of the study Suggestion of the study Contribution of the study Learning from the study Limitation of the study Conclusions Bibliography Appendix: 19.1 Questionnaire for the cost reduction tactics in the company 19.2 Cash Flow Statement of the last three years 19.3 Profit & Loss A/C Statement of the last three years 19.4 Balance Sheet of last three years

59 60 62 64 78 80 81 82 83 84 85 86

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TOPIC INTRODUCTION:

For Summer Internship Project I choose “Working Capital Management And Cost Reduction Tactics” as a topic. Working capital management is necessary for all the companies to run their business successfully in competitive environment of the market. Without working capital management none of the company can run their business effectively and profitably. Operating cycle and ratio analysis, both are the important tool to find out the working capital management is rather effective or not. Ratio analysis is helpful for the company to know the financial position of the company. Operating Cycle is one of the useful standards for the company to find out the period for completing the different processes. So from that company can find out how to minimize that period and how to minimize the total period required for completing the operating cycle. So by the use of this report the company can find its position in the market and should take necessary action to run their business effectively for getting maximum profit.

Now a day in competitive environment the cost reduction is must for every company or firm to run business successfully. Cost reduction tactics shows that where the maximum cost reducible in the company and how it is favorable for the company. For knowing where the cost reduction is possible in company, the most reliable source is employees working in that company. From the view of them company can reduce the cost in different area and can get maximum output using minimum of resources. If it is possible to reduce cost of the company then profitability of the company will increase.

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LITERATURE REVIEW:
? The research done by Pass C.L., Pike R.H., “An overview of working capita l management and corporate financing”,(1984) describes that over the past 40 years major theoretical developments have occurred in the areas of longer-term investment and financial decision making. Many of these new concepts and the related techniques are now being employed successfully in industrial practice. By contrast, far less attention has been paid to the area of short-term finance, in particular that of working capital management. Such neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience shows that inadequate planning and control of working capital is one of the more common causes of business failure. ? The research done by Herrfeldt B., “How to Understand Working Capital Management” describes that “Cash is king”--so say the money managers who share the responsibility of running this country's businesses. And with banks demanding more from their prospective borrowers, greater emphasis has been placed on those accountable for so-called working capital management. Working capital management refers to the management of current or short-term assets and short-term liabilities. In essence, the purpose of that function is to make certain that the company has enough assets to operate its business. Here are things you should know about working capital management. ? The research done by, Samiloglu F. and Demirgunes K., “The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey” (2008) describes that the effect of working capital management on firm profitability. In accordance with this aim, to consider statistically significant relationships between firm profitability and the components of cash conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-2007 has been analyzed under a multiple regression model. Empirical findings of the study show that accounts receivables period, inventory period and leverage affect firm profitability negatively; while growth (in sales) affects firm profitability positively.

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RESEARCH METHODOLOGY:

SAMPLING METHODOLOGY:
Sample Size: 40 Employees Formula for sample size = z2 p q/ e2 Sample Unit: Employees of the different department. Sample area: La-Gajjar Machineries (P) Limited, Ahmadabad, Sampling Technique: Random Sampling Technique. Thus, Z = 90%, p = o.1 e = 0.06 q = 0.9

DATA COLLECTION:
Primary data has been used by us in the form of questionnaire. Secondary data sources like P & L Account, Balance sheet, Cash flow statement of the company from the company’s annual reports (2007-08, 2008-09, 2009-10)

RESEARCH METHODOLOGY:
Visited the Employees of La-Gajjar machineries (P) Limited. & gathered information required as per the questionnaire. The research design is Quota and descriptive research.

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OBJECTIVE OF THE STUDY:
Primary Objective:
? To find out the working capital management of the company. ? To find out the operating cycle of the company. ? To know how the cost reduction is possible in each department.

Secondary Objective:
? To find out the ratio analysis of the company. ? To know the comparative analysis of the profit & loss account and balance sheet of last two years. ? To know the overall financial position of the La-Gajjar Machineries (P) Ltd. ? To know the employees awareness about the cost reduction in the company.

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INDUSTRY PROFILE:
Indian Pump Industry - A Review
In India the manufacture of pumps has by now a history of nearly eighty years. Pumps being the basic equipment for every sphere of the national economy, the Indian pump industry have in its own growth, contributed immensely to the economic growth of the country. The enterprise in the Indian pump industry merits appreciation for the achievements of prompt and competent indigenization of almost every type of pump, of pumps in gigantic sizes, of pumps of a variety of constructional features and operational sophistications and of pumps in a variety of materials of construction. The industry has over the years built up great potentials to meet challenges. It has also worked with good foresight and resilience to adapt to emerging trends, be it the compliance with the requirements of the Quality systems as per the ISO 9000 series of standards or the exposure to the global competition, prompted by the liberalization of the economy. It is estimated that the production of pumps in the country is presently of the order of Rs. 1200 crores, contributed by some one million pumps per year, produced by some 500 odd manufacturers of large, medium and small scales. The following review surveys some notable achievements and developments of pumps and of the capabilities of the Indian pump industry to fulfill the country's domestic demand from various sectors.

Power generation - Thermal:
The first ever, concrete volute pumps to pump sea water through a once-pass cooling water system of a 500 MW thermal power station were recently made and successfully commissioned. The capacity range for these types of pumps is 10,000 m3/hr to120, 000 m 3/hr.

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This was preceded by the design, development, manufacture, and commissioning of 2.2 m delivery size (30,000 m 3/hr) vertical mixed flow pumps, with full-scale works-testing of the pumps with huge captive test-facilities for drive-ratings of the order of 3MWe. Boiler feed pumps, whether in ring-section or barre1-casing designs for pressure-ratings to the order of 420 bars are available from Indian manufacturers. Likewise, condensate extraction pumps of the encase pattern for low NPSH have also been made since long. Amongst the pumps of auxiliary systems, the Indian pump industry has been catering to the needs of ash-handling, abrasion-resistant pumps, pumps for raw water and other miscellaneous duties and screw and gear pumps for fuel-firing and lubrication systems, etc.

Captive power-generation or co-generation:
Complete pumping systems for captive power generation or co-generation are available indigenously.

Power generation - Nuclear:
The programmed of nuclear power generation seems to be far less active now. Yet the successful manufacture and development of Moderator pumps, Primary System Feed Pumps, shut down Cooling pumps, Auxiliary Feed Pumps and pumps for emergency core-cooling system, etc., has progressed further with the development of a range of canned motor pumps up to 200 kW and most interestingly of the sodium-coolant pumps for the prototype fast breeder reactor of 500MWe capacity. Canned Motor Pumps for Heavy Water Plants for ratings of the order of 15 kW have been already supplied by the Indian pump industry.

Hydropower and pumped storage power generation:
The capabilities of the Indian pump industry to supply pumps and systems for hydro power and pumped storage power-generation are well established since long.

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Oil and natural gas sector:
This being the unique core sector, most of the specialized needs of pumps from this sector have been developed in the Public sector enterprise-segment of the Indian pump industry. The developments have covered the sucker rod pumps, the multiplex mud pumps, Cementing Units, etc. These are supplemented by developments contributed also by the private sector, especially towards the injection pumps, fire-fighting pumps, sea-water handling pumps in duplex stainless steel for off-shore oil-exploration, 1 km long screw pumps, etc. For transmission of crude and refined petroleum products across long distances through pipelines, the high energy pumps up to 2000 kW rating have been produced in the country.

Refineries, fertilizers, lubricants and petro-chemicals sector:
The segment of the Indian pump industry, catering to the industries in this sector keeps itself well abreast of the periodic revisions being made in the Internationally well-recognized standards like 1502858, 150-5199, API-610, etc. and is quite prompt in adapting to the latest editions and practices. For the fertilizer industry, reciprocating carbonate and liquid Ammonia pumps are developed by the public sector pump manufacturer.

Mining and metal ore refining sector:
The coal mining is the most prominent amongst the mining activities, although there are activities of metal-ore mining, mining of diamond, mica, etc. Accordingly, pumps of large capacities, of submersible and other types and for slurry transport of the mined outputs are coming into vogue. For aluminum production, single and double casing pumps in high hardness abrasion-resistant materials have been developed indigenously.

Steel sector:
The steel sector, while being a core sector, operates at two prominent levels. If the primary level be considered to be the steel plants, then the secondary level can be the re-rolling mills and sponge iron plants and the like, producing the secondary products.

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The pumping needs of the steel sector comprise pumping water as the one most important utility and also the pumping of other utilities like lubricating oils, furnace-oil, etc. Fluidizing and removal of the scale is another auxiliary activity, where pumps render a useful service. The pickling and cleaning processes involve caustic and acidic solutions, for which pumps in non-metallic constructions and in lined constructions are employed. There are a good number of manufacturers specializing in making pumps in such constructions.

Paper sector:
The significant aspect of paper-making is again the extent of fluidizing the paper-stock. Higher the percentage consistency, as much more economical is the process of paper-making, because all the fluidizing liquid has to be subsequently squeezed out during the calendaring. The solidshandling capacity of paper-stock pumps has over the years improved from 4 to 5 percent consistency to some 8 to 9 percent consistency. Macerator pumps have also been made in India since long.

Alongside, with pumps to handle liquors and bleaching solutions, which are akin to chemicalhandling pumps, the Indian pump industry has had the capabilities to service the complete requirements of pumps for paper-making.

Utility sector:
Water supply and sanitation, the two prominent aspects of public health need good and efficient pumping systems. I Water supply involve pumping right from the source of water, to its transport, treatment and distribution, finally to the point of consumption. While surface waters from rivers, lakes and dams are mostly the major sources for the urban water supply, ground water is becoming an important source not only for rural water supply, but also as an auxiliary source in urban housing societies. Further growing urbanization with high rise, multi-storied complexes is necessitating domestic pumping to be another important complement of the urban water supply. In the rural context, the pumping of water often service jointly, the dual role of irrigation and water supply. Often the treatment of water to ensure the water supply to be portable, does not receive as much attention, as it should.
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The other important aspect of public health viz. sewage-handling, transport, treatment and disposal has received much less attention. Only some sporadic epidemics like the Surat plague generate some temporary interest, which often dies down in due course, without prompting appropriate sewerage schemes. Given proper emphasis, water-treatment and sewerage are sectors of very vast scope all across the country.

Agriculture and irrigation:
For all the urbanization and globalization of the economy, the Indian economy will continue to be agrarian. In fact agriculture has registered a growth so significant as to become a promising foreign-exchange earner. Fruits, vegetables, grains and other processed food items are making prominent strides in the global market, often surpassing the traditional exports of tea, coffee, cotton, etc. Irrigation, fertilizers, insecticides and pesticides, preservatives and packaging, etc., have all made contributions towards these achievements of Indian agriculture. Pumps have been important in all these aspects. The Indian pump industry has been conscious, that twenty percent and more of the power generated and fuel explored in the country are consumed in the agricultural activity. To ensure that there would be continuous improvement in the agricultural pumping, in respect of it being energy-efficient, lPMA extends a comprehensive participation in the national level standardization effort, especially in evolving and upgrading the norms for minimum efficiency of agricultural pumps and pumping systems. IPMA feels proud and happy that the Indian Standards on agricultural pumps are so unique in this respect, that norms for minimum efficiency are incorporated therein, while no such norms are specified in any International standards. The pump-industry is substantially market-driven. This has motivated manufacturers of pumps to adapt energy-efficient designs for production.

Sugar is a prominent corollary of the agricultural produce. Pumping in the production of sugar has interesting facets, including therein the handling and disposal of molasses. There is growing interest in deriving alcohols and organic chemicals as bye products, in the extensional activities of the sugar mills.

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Fisheries and aquaculture:
The liberalization of the Indian economy has increased the travels of international business and has given a boost to the tourist-facilities and associated demands. Fish-farming whether in fresh water resources or seawaters, employing aqua-cultural techniques has become an attractive proposition; India anyway has a long sea shore. The aqua-culture activity is hence attracting interest, abiding enough to prompt the activities to assume the nature and scale of an industrial production. The fish-ponds, especially those near the sea-shore need pumps for continuous replenishment of fresh sea water typically pumps for low head, high discharges and constructed to ensure smooth flow for the sea-life into the ponds and to ensure long life against sea-water corrosion. The industry is ably serving this growing demand.

Trends in manufacturing technology:
The submersible pumps for small-bore tube wells, like 100 mm familiarized the Indian pump industry with the mass-production technologies, adopting also molded impel1ers in engineering plastics like the modified PPO. Efforts had also been made to make the impellers and diffusers for submersible pumps employing pressed sheet metal fabrication.

Development of winding wires with polyester based poly-propylene insulation can be credited to be a wholly indigenous endeavor. This has improved the reliability of the submersible motor, also economizing the design of the motor, by virtue of the reduced insulation thickness. Electronics and computerization have crept across the Indian pump industry, substantially. Many major manufacturers are well adept with CNC machines, have been working with Computer-aided designs, gradually adopting also the Computer-aided manufacturing. There are examples of noteworthy developments of computerized pump-selection software’s, marketing activities and also fully computerized pump test beds.

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Exports:
A bird's eye view of the global market reveals that most developed countries are large-scale importers of pumps, while being also major exporters. Indian pump industry has as such been a very small partner in this game of the global market. With the liberalization of the Indian economy, similar pattern seems to be emerging also in the Indian pump industry. There have been many buy-back contracts operating with Indian manufacturers, in some cases, for periods so long as more than 20 years uninterrupted. This underscores the technological and qualitative competence and cost-competitiveness well-ingrained in the corporate philosophy of some of the leading manufacturers, Importers in the developed countries have often found it a competitive proposition to get pumps made by Indian manufacturers for their projects in other countries, especially in the Asian and African continents. Foreign buyers seem to be evincing good interest also in procuring CKDs and components from Indian manufacturers. India has some of the world's best technically well qualified entrepreneurial and management cadre and traditionally intelligent and highly skilled cadre of technical personnel. The capabilities are becoming more and more sophisticated with computer-aided design, manufacturing and management practices increasingly becoming the order of the day. Indian manufacturers have also to their credit a very good performance in respect of the deemed exports, by virtue of the execution of contracts for domestic requirements, but against global tenders, hence won in situations of global competition. Direct exports of pumps have been steadily rising. The pattern of exports for the past five years has been as follows:

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Year Exports: Year 1990-91 1991-92 1992-93 1993-94 1994-95 ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Exports Rs. 38 Crores Rs. 55 Crores Rs. 75 Crores Rs. 90 Crores Rs. 75 Crores

The Indian pump industry is nearly a century old. Major usage of pumps has always been for agricultural pumping or for other water-handling applications. Before the spread of electrification, pumps were either hand pumps or diesel engine driven pumps. But things have changed and India has now become a formidable manufacturing base. India have 80 % requirement of the submersible pump because India is an agricultural country in the world. Submersible pump are very useful for the fertilizers.

The Industrial Pumps Valves and Systems (IPVS) fair in Hyderabad, India in October was one of a number of shows reflecting the growing confidence of the Indian pump market and the industries that it serves. World Pumps was at the show, not only to launch World Pumps India – a magazine targeted at the Indian domestic market – but to discuss this industry success with those that are making it happen. India is the place to be for pumps. A new show, held in Hyderabad in October, will showcase established companies as well as up and coming businesses riding the tide of this rapidly growing industry. The Indian pump industry is expected to grow at 6–7% over the next three years, according to a recent paper released by the Indian Pump Manufacturers Association (IPMA) and the Confederation of Indian Industry (CII).

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COMPANY PROFILE:

La-Gajjar Machineries Pvt. Ltd. An ISO 9001:2000 Regd. Company Acidwala Estate, Nagarwel Hanuman Road, Amraiwad, Ahmedabad 380 028, INDIA.

Tel: +91 - 79 - 22744268/9086, 22777485/487 Fax: +91-79-22730869 E-mail: [email protected] Website: www.lagajjarmachineries.com

Live Chat

[email protected]

[email protected]

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COMPANY HISTORY:
The La-Gajjar group was founded in 1935, by the Late Laljibhai Jivram Gajjar (1917-1972), a visionary and industrialist par excellence. The foundation was made through a plant at Naroda Road in Ahmedabad in the name of Forge &Blower, manufacturing a unique product known as Hand Blower-one of the first of its kind in the country. In 1981, a few years after the untimely demise of Laljibhai Gajjar, the Company La-Gajjar machineries (P) Limited was founded by his son, the Late Gautam Laljibhai Gajjar at the Acidwala Estate in Ahmedabad’s industrial area. The new enterprise brought in bore-well and open-well submersibles into the manufacturing line, but maintains the same principles of quality and precision that had been the hallmark of the La-Gajjar Group. As it happens with all manufacturers of quality products, the company did exceedingly well in the market. Shri Udayan Gajjar succeeded the legacy and took over as a director for the company in 1987, at the age of 26, as a young industrialist, his natural understanding of processes and his exceptional curiosity of machines were his only and most essential credentials. These credentials stood him good, and La-Gajjar Machineries (LGM) saw a spurt of development in bringing in new products, setting new standards and creating greater capacities under his leadership. The 100 & 150 mm submersible pumps from LGM soon became the most preferred product in the domestic and agricultural segments throughout the country, in addition to the existing product line of larger pumps that had already gained profound acceptance. In 1992 Shri Udayan Gajjar, now Managing Director, conceptualized the use of Oil-filled Submersible Motors for the 100 mm sector. Along with his core research and development team lead by Shri H Z Talsania, he introduces the first Oil-filled Submersible motor in the country within that year. The motor was an indigenously built marvel, and by 1997 VARUNA oil-filled motors became the undisputed forerunner in the 100 mm submersibles’ market. Its VARUNA brand of pump sets has been a household name across India’s rural, urban and industrial sectors for long. It has also been drawing significant demand in the world markets, thanks to its enduring performance record and engineering superiority.

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Today, the humble but dedicated beginnings of the company have metamorphosed into a giant in the pump industry in India bringing forth products that are unparalleled in the Indian Pumps Industry. Its client base has crossed the Indian shores and moved on to numerous countries spanning 4 continents. Laljibhai Gajjar and his products of the VARUNA fame have truly created history.

About The Company

La-Gajjar Machineries Pvt. Ltd. - Seven Decades of Excellence

La-Gajjar Group is one of India’s pioneer manufacturers and exporter of submersible pump sets and submersible motors, with more than seven decades of market leadership behind it. Its VARUNA brand of pump sets has been a household name across India’s rural, urban and industrial sectors for long. It has also been drawing significant demand in the world markets, thanks to its enduring performance record and engineering superiority. VARUNA brand umbrella encompasses a vast range of products Submersible Pump sets, Centrifugal Monoblock & Jet Pumps, Centrifugal & Coupled Pumps, Peripheral Self Priming Pumps, Electrical Motors, Power Blowers, etc.

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Quality

La-Gajjar is committed to delivering best quality products to its customers. We believe customer satisfaction is of great significance. They follow stringent quality measures in manufacturing their products and delivering the products on-time. The company has quality mark ISI from Bureau of Indian Standards for Submersible Pumps.

Global Presence

Recently, La-Gajjar collaborated with Oasis Pumps Industry LLC, Dubai, UAE, the dewatering industry leader with a global reputation, to manufacture and supply these pump sets and motors from a plant based in UAE.

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BORD OF DIRECTORS

SHRI UDAYAN L.GAJJAR

CHAIRMAN &MANAGING DIRECTOR

SHRI BANSIBHAI P. GAJJAR

EXECUTIVE DIRECTOR

BANKERS OF THE COMPANY
State bank of India Bhadra Branch, Ahmadabad

STATUTORY AUDITORS
M/S Manubhai &Co., Chartered Accountants 2nd Floor, “B” Wing, Premium House, Nr. Gandhi gram Railway Station, Navrangpura, Ahmedabad:-380009

INTERNAL AUDITOR
M/S Jain Kedia and Sharma, Chartered Accountants, 13, Mill Officers Colony, Ashram Road, Ahmedabad-380009

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PRODUCTS:

Submersible Pump sets

75-80 mm Submersible Pump sets 100 mm Submersible Pump sets 150 mm Submersible Pump sets 150 mm Slim body 200 mm Submersible Pump sets HMSP (Horizontal Mono block Submersible Pump sets) VOSP (Vertical Open well Submersible Pump sets)

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75-80 mm Submersible Pump sets
High technology Low electrical expense Durable and strong body Newly developed 75-80 mm oil filled and water filled pump sets are cost effective, durable, versatile and energy efficient. They are also designed to operate for long duration and trouble free operations. These pump sets are for domestic and commercial purposes. It is a perfect replacement of jet pumps.

Salient Features:
Designed to operate in sandy bores and low voltage conditions Motors are easy re-woundable. Cost effective and economically affordable Motors are energy efficient Specially designed CSR motors.

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100 mm Submersible Pump sets:
High technology Low electrical expense Durable and strong body Newly developed 100 mm oil filled and water filled pump sets are cost effective, durable, versatile and energy efficient. Rotor Thrust Bearings

Made of electrical sheet steel and electro grade copper. Dynamically balanced to grade G 6.3 (coated with anti-rust paint for long life

Mitchell type bearings with carbon thrust plate to reduce losses.

SS Pump Jacket

Impeller & Diffuser

Bearing bush

Perfectly straight SS Jacket Impellers made of 20% Made of leaded tin bronze for leak proof pump glass filled Noryl and it is grade LTB-4, with 2% assembly non-polluting & rust-proof. additional nickel.
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150 mm Slim Body Submersible Pump sets:

. Thrust Bearings Impeller

SS-304 SM impeller 15 Mitchell type bearings meters per stage (with with carbon thrust plate projected welding) for to reduce losses. better pump efficiency.

Pump rubber bearing Sleeve Bush

Combination of rubber SS-410 pump sleeve bush and SS sleeve with with hard chrome to hard chrome to make reduce the friction and the pump more sand can withstand wear resistance. resistance against sand.

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HMSP (Horizontal Mono block Submersible Pump sets)
High technology Low electrical expense Durable and strong body Bearing Bush Rotor

Leaded bronze dynamically balanced impellers for better pump efficiency.

Journal bearing made of lead tin bronze grade LTB-4 with 2% additional nickel.

Impeller

High Efficiency Pump Casing

Leaded bronze dynamically balanced impellers for better pump efficiency.

Journal bearing made of lead tin bronze grade LTB-4 with 2% additional nickel.

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VOSP (Vertical Open well Submersible Pump sets)

High technology Low electrical expense Durable and strong body VOSP is cost effective, durable, versatile and energy efficient.

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Market-Coverage
La Gajjar has wide network of more than 2000 dealers and distributors in India. VARUNA pumps are available to customers around the world through a far-flung network of Dealers, Distributors, Service Centers, Export and Representative Offices, strategically located at major centers. We have numerous service center and corporate branch offices all over India, to serve you better. Our service centre are available in Agra, Ahmadabad, Bangalure, Bhubaneswar, Coimbatore, Gwalior, Indore, Jabalpur, Jaipur, Jodhpur, Kanpur, Kolkata, Ludhiana, Nagpur, Patna, Pune, Raipur, Rajkot, Ranchi, Secunderabad, and Udaipur, Uttaranchal Varanasi. It has been establishing a highly noticeable industrial presence in the world’s marketplaces, spurred by a vision of making more significant contributions to humankind fight to release water stress.

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INFRASTRUCTURE
La-Gajjar plants adopt ideal techno-concepts in pumps as they emerge around the world and blend them with the demands of topographical and geo-climatic conditions in its target markets to create ideal product solutions. La-Gajjar plants are founded on an R&D-driven technology platform. This R&D focus, backed by highly trained & skilled technology personnel, enable them to design & develop highly efficient products that have the inherent strength to brave tough working conditions such as sandy regions. It also gives the company a clear edge in comprehensive customization you can order and get a VARUNA Pump that meets your requirements and expectations to the minutest specification in real terms. The optimal technology features the computer-aided quality & performance testing & the no-compromise culture at the La-Gajjar plant, all combine to offer its clientele an ideal solutions package.

The Big “Q” :
At La-Gajjar plants, a QA & QT Cycle comprising state-of-the-tech measuring instruments, computer-aided testing equipment and highly trained engineers who monitor & ensure quality at every process level. The in-house test labs continually ensure that the performance conforms to the standards and declared values preventing the possibility of deviations

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Research & Development:
Company’s research and development division is technologically self-reliant and innovative. They have strong team of R&D department backed by fully equipped hi-tech production unit and efficient team of technocrats and engineers. They believe in developing their products by continuous research and manufacturing quality products.

Company’s R & D team has developed number of products by thorough market research and developing product with integrity. Their aim is to keep upgrading and produce products of high quality at reduced cost and serve their customers to their satisfaction. They provide confidential design services according to the requirement of their customers.

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WORKING CAPITAL MANAGEMENT:
Management is an art of anticipating and preparing for risks, uncertainties and overcoming obstacles. An essential precondition for sound and consistent assets management is establishing the sound and consistent assets management policies covering fixed as well as current assets. In modern financial management, efficient allocation of funds has a great scope, in finance and profit planning, for the most effective utilization of enterprise resources, the fixed and current assets have to be combined in optimum proportions.

Working capital in simple terms means the amount of funds that accompany requires for financing its day-to-day operations. Finance manager should develop sound techniques of managing current assets.

WHAT IS WORKING CAPITAL?
Working capital refers the cash a business requires for day to day operations, or most specifically, for financing the conversation of raw materials into finished goods, which is company sells for payment. Among the most items of working capital are levels of inventory, debtors, and creditors. These items are looked at for signs of a company’s efficiency and financial strengths. The better a company manages its working capital, the less the company needs to borrow. Even companies with cash surpluses needs to manage working capital to ensure that those surpluses are invested in ways that will generate suitable returns for investors.

Working Capital = Current Assets – Current Liabilities

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COMPONENTS OF WORKING CAPITAL

CURRENT ASSETS
Inventories Trade Debtors Prepaid Expenses Loans and Advances Investments Cash and Bank balance

CURRENT LIABILITIES
Sundry Creditors Bank Overdraft Short Term Loans Provisions -------------

DEFINITIONS OF WORKING CAPITAL:
The following are the most important definitions of Working capital:

1) Working capital is the difference between the inflow and outflow of funds. In other words it is the net cash inflow.

2) Working capital represents the total of all current assets. In other words it is the Gross working capital, it is also known as Circulating capital or Current capital for current assets are rotating in their nature.

3) Working capital is defined as the excess of current assets over current liabilities and provisions. In other words it is the Net Current Assets or Net Working Capital.

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CHARECTERISTICS OF WORKING CAPITAL:

Working capital is for short term requirements. Working capital refers circular movement of cash liquidity. The flow of working capital in an industry is on permanent basis. The working capital is fluctuative in nature. Working capital enrolls to easily convert in cash. Working capital management has short term investment so it is less risky compared to fixed capital investments.

SOURCES OF WORKING CAPITAL

Long term sources (Fixed working capital)
a) Loan from financial institution b) Floating of Debentures c) Accepting public deposits d) Issue of shares e) Cash credit f) Commercial paper

Short term sources (Temporary working capital)
a) Factoring b) Bill discounting c) Bank overdraft d) Trade credit

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IMPORTANCE OF WORKING CAPITAL:

? Working capital may be regarded as the lifeblood of the business. Without insufficient working capital, any business organization cannot run smoothly or successfully. ? In the business, the Working capital is comparable to the blood of the human body. Therefore the study of working capital is of major importance to the internal and external analysis because of its close relationship with the current day to day operations of a business. The inadequacy or mismanagement of working capital is the leading cause of business failures. ? To meet the current requirements of a business enterprise such as the purchases of services, raw materials etc. working capital is essential. It is also pointed out that working capital is nothing but one segment of the capital structure of a business. ? In short, the cash and credit in the business, is comparable to the blood in the human body like finance s life and strength i.e. profit of solvency to the business enterprise. Financial management is called upon to maintain always the right cash balance so that flow of fund is maintained at a desirable speed not allowing slow down. Thus enterprise can have a balance between liquidity and profitability. Therefore the management of working capital is essential in each and every activity.

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TYPES OF WORKING CAPITAL

Working Capital

Basis of Concept

Basis of Time

Gross Working Capital

Net Working Capital

Fixed Working Capital

Variable Working Capital

Regular Working Capital

Reserve Working Capital

Seasonal Working Capital

Special Working Capital

(Chart -1)

(Source: FINANCIAL MANAGEMENT- 10TH Edition, I M PANDEY, chap-27, pg no: 648)

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Gross Working Capital:
GWC refers to the firm’s total investment in current assets. Current assets are the assets which can be converted into cash within an accounting year (or operating cycle) and include cash, short term securities, debtors, (accounts receivable or book debts) bills receivable and stock (inventories).

Net Working Capital:
NWC refers to the difference between current assets and current liabilities. ? Current Liabilities (CL) are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors (accounts payable), bills payable, and outstanding expenses. ? Current assets are the assets which can be converted into cash within an accounting year (or operating cycle) and include cash, short term securities, debtors, (accounts receivable or book debts) bills receivable and stock (inventories). ? NWC can be positive or negative. Positive NWC = Current Assets > Current Liabilities Negative NWC = Current Assets < Current Liabilities

Fixed Working Capital:
A minimum level of current assets, which is continuously required by a firm to carry on its business operations, is referred to as permanent or fixed working capital.

Variable Working Capital:
The extra working capital needed to support the changing production and sales activities of the firm is referred to as fluctuating or variable working capital.

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OPERATING CYCLE OF WORKING CAPITAL

Raw Material

Cash Operating Cycle

Work in progress

Account Receivable

Finished Goods

Sales

(Chart-2)

(Source: FINANCIAL MANAGEMENT- 10TH Edition, I M PANDEY, chap-27, pg no: 650)
The need of working capital to run the day to day business activities can not be overemphasized. We will hardly find a business firm which does not require any amount of working capital. Indeed, firms differ in their requirements of the working capital. Earning a steady amount of profit requires succesful sales activity. The firm has to invest enough funds in current assets for generating sales. Current assets are needed because sales do not convert into cash instantaneously. There is always an operating cycle involved in the conversion of sales into cash. Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash.

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The operating cycle of a manufacturing company involves three phase. ? Acquisition of resources such as raw material, labour, power, and fuel etc. ? Manufacture of the product which includes conversion of raw material into work-inprogress into finished goods. ? Sale of the product either for cash or on credit. Credit sales create accounts receivable for collection.
Net Operating Cycle

Gross Operating Cycle

-

Creditors Deferral Period

Inventory Conversion Period (ICP)

+

Debtors Conversion Period (DCP)

Raw Material Conversion Period (RMCP)

+

+

Work in Process Conversion Period (WIPCP)

+

Finished Goods Conversion Period (FGCP)

(Chart-3)
(Source: FINANCIAL MANAGEMENT- 10TH Edition, I M PANDEY, chap-27, pg no: 649)

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Net Operating Cycle: Net operating cycle is the difference between Gross Operating
Cycle and Creditors Deferral Period. The net operating cycle involves determining how long it takes to create inventory, sell inventory and collect on invoices to customers.

NOC = GOC – CDP

? Gross operating cycle:
The firms gross operating cycle (GOC) can be determined as inventory conversion period (ICP) plus debtors conversion period (DCP).

Gross oper ating cycle = Inventory conversion Period + Debtors conversion Period
?

Inventory Conversion Period:
finished goods conversion period (FGCP).

The inventory conversion period is the sum of

raw material conversion period (RMCP), work-in-process conversion period (WIPCP) and

Raw Material Conversion Period : The raw material conversion period is the average
time period taken to convert material in work-in-progress. RMCP depends on: a) Raw material consumption per day and, b) Raw material inventory.

RMCP = Raw material inventory/(Raw material consumption/360) RMCP= RMC

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Work-In-Process Conversion Period: Work-in-process conversion period is the
average time taken to complete the semi finished work or work-in-process.

WIPCP = Work in process inventory/(Cost of production/360) WIPCP = (WIPI×360)/COP Finished Goods Conversion Period : Finished goods conversion period is the average
time taken to sell the finished goods.

FGCP = Finished goods inventory/(cost of goods sold/360) FGCP = (FGI×360)/CGS
?

Debtors conversion period:

Debtors conversion period is the average time taken

to convert debtors into cash. DCP represents the average conversion period.The debtors conversion period is the time required to collect the outstanding amount from the customers.

DCP = (debtors×360)/credit sales

Gross Operating Cycle = Inventory conversion period + Debtors conversion
period Net Operating Cycle = GOC – CDP

? Creditors Deferral Period:
firm in paying its suppliers.

Creditors Deferral Period is the average time taken by the

Creditors deferral period = (creditors×360)/credit purchase

Net operating cycle = GOC –CDP
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If you ...
Collect receivables (Debtors) faster. Collect receivables (Debtors) slower. Get better credit (in terms of duration or amount) from suppliers Shift inventory (stocks) faster. Move inventory (stocks) slower. the cycle

Then ...
You release cash from

Your receivables soak up cash. You increase your Cash resources.

You free up cash.

You consume more cash.

(Table-1)
(Source: FINANCIAL MANAGEMENT- 10TH Edition, I M PANDEY, chap-27, pg no: 649)

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RATIO ANALYSIS:
INTRODUCTION:
One of the most important financial tools which have come to be used very frequently for analyzing the financial strength and weakness of the enterprise is ratio analysis. Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. Ratio analysis is to present the figure of financial statement in simple and intangible form. Ratio analysis is in this way the process of establishing meaningful relationship between two figures and set of financial statement. Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure to figure. According to Myers, “ Ratio analysis of financial statements of a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements.”

Types of ratio:
? Current ratio ? Quick ratio ? Fixed assets turnover ratio ? Debtors turnover ratio ? Stock turnover ratio ? Gross profit ratio ? Net profit ratio

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FINANCIAL ANALYSIS:
INTRODUCTION:
The financial statement is present comparative information for the current year and previous year. A simple approach to financial analysis known as a horizontal analysis or comparative financial statement analysis is to calculate amount changes and percentage changes from the previous year to the current year. While an amount change in itself may mean something, converting amount changes is more useful in appreciating the order of a magnitude of a change .

Objective of the comparative statement:

? Changes taken place in the financial performance are taken into consideration for further analysis. ? To reveal qualitative information about the firm in terms of solvency, liquidity, profitability and so on. The data are extracted from the analysis of financial statements. ? With reference to yester financial data of the enterprise, the firm is facilitated to undergo for the preparation of forecasting and planning.

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WORKING CAPITAL
Net working capital = current assets – current liabilities
Particulars 2007-08 2008-09 2009-10 Current assets 42,16,97,773 46,21,67,953 70,84,41,068 (Table-2) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
400000000 300000000 200000000 100000000 0 2007-08 2008-09 2009-10

Current liabilities 22,28,51,122 18,05,98,534 35,72,47,373

Net working capital 19,88,46,651 28,15,69,419 35,11,93,695

(Chart-4)

Net working capital of the company is increasing rapidly year by year from 2007-08 to 2009-10. In this case it is define that the current assets of the company increases and current liabilities of the company decreases, so it is good for the company and also necessary to continue this level of the Net Working Capital.

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OPERATING CYCLE OF THE WORKING CAPITAL
Inventory conversion period = Raw Material Conversion Period + Work in Process Conversion Period + Finished Goods Conversion Period

Raw Material Conversion Period:
RMCP = Raw material inventory/(Raw material consumption/360)

Particulars

Raw material inventory

Raw material consumption
80,49,58,106 66,80,71,813 1,12,72,74,866

Days

2007-08 2008-09 2009-10

6,55,59,216 5,27,27,937 15,17,09,210 (Table-3)

30 28 48

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

50 45 40 35 30 25 20 15 10 5 0

48

30

28

2007-08

2008-09

2009-10

(Chart-5) RMCP decreased from 30 to 28 days from year 2007-08 to 2008-09 which is good for the company in which conversion period of raw material to work in progress is decreased but after that it increased to 48 in year 2009-10 which is not good for the company but in this time the
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production also increases so time period is increased for the conversion. So company should also look after that the conversion period should be minimised or maintained at the lower side with increased production which is good for the company.

Work-in-Process Conversion Period: WIPCP = Work in process inventory/(Cost of production/360) Particulars
2007-08 2008-09 2009-10

Work-in-process inventory
7,18,38,308 5,88,66,530 16,32,85,879

Cost of production
1,07,09,88,061 1,12,37,62,334 1,42,97,74,521

Days
24 19 41

(Table-4) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

50 40 30 20 10 0 2007-08 2008-09 24 19

41

2009-10

(Chart-6) Same as RMCP, in WIPCP it decrased in 2007-08 to 2008-09 but increased in year 2009-10. It was decreased to 19 days in 2008-09 and then increased to 41 days in year 2009-10. So it is

require to decreased in conversion period for the benfit of the company. So if the conversion period is decreased then the production process will become faster.

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Finished Goods Conversion Period: FGCP = Finished goods inventory/(cost of goods sold/360) Particulars
2007-08 2008-09 2009-10

Finished goods inventory
7,62,80,814 3,68,75,181 6,79,76,261 (Table-5)

Cost of goods sold
89,64,20,000 99,48,39,688 1,11,49,88,541

Days
31 13 22

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

35 30

31 22 13

25
20 15 10 5 0 2007-08 2008-09

2009-10

(Chart-7) FGCP is decreased from 31 days to 13 days from year 2007-08 to year 2008-09. So conversion rate is faster in that time period. But in year 2009-10 it is increased to 22 days from 13 days. So time taken for conversion of finished good to sell is increased in that time which all over affect to company’s profit . So the company should manage that the FGCP should be at minimum which is benificial to the company.

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Debtors Conversion Period: DCP = (debtors×360)/credit sales Particulars
2007-08 2008-09 2009-10

Debtors
13,77,26,305 22,14,38,705 19,53,25,240 (Table-6)

Credit sales
1,23,77,16,051 1,39,59,95,436 1,68,48,30,404

Days
40 57 42

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

60

57 40 42

50
40

30
20

10
0 2007-08 2008-09 2009-10

\ (Chart-8) DCP is one of the important factor for the company for cash. In year 2007-08 it is 40 days which increased to 57 days in year 2009-10. So cash recievable is delayed in that time period. But in year 2009-10 it is decreased to 42 days which is in benefit of the company that cash received in short period of time. So company should maintain this for every time. And make effort in direction to decreased the DCP for receiving cash faster.

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Gross Operating Cycle = Inventory conversion period + Debtors conversion
period Particulars
2007-08 2008-09 2009-10

Inventory conversion period
85 60 111

Debtors conversion period
40 57 42 (Table-7)

Gross operating cycle
125 117 153

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

160 140 120 100 80 60 40 20 0

153 125 117

2007-08

2008-09

2009-10

(Chart-9) Gross operating cycle is a measure of the time taken to complete the purchase, sell the inventory and collect the cash. Above graph shows that Gross operating cycle in year 2007-08 completed in 125 days which decreased to 117 days in year 2008-09. But it increased in year 2009-10 to 153 days. For Year 2007-08 to Year 2008-09 There is decreased in Inventory conversion period but the Debtors conversion period is increased which is not good for the company but over all there is decreased in days for Gross operating cycle. So as compare to year 2007-08, in year 2008-09 the cash collection is faster due to there is decreased in Inventory conversion period.
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For Year 2008-09 to Year 2009-10 In year 2009-10 the Gross Operating Cycle completed in 153 days which is more than year 200809. In year 2009-10 there is increased in Inventory conversion period but the Debtors conversion period is decreased. So period required for completion of Gross operating cycle in year 2009-10 is more than 2008-09.

Creditors Deferral Period: Creditors deferral period = (creditors×360)/credit purchase Particulars
2007-08 2008-09 2009-10

Creditors
16,97,81,376 13,75,29,376 29,75,69,234

Credit purchase
80,49,58,106 79,53,91,193 1,12,72,74,866

Days
76 62 95

(Table-8) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

100
80 60 40 20

95
76 62

0
2007-08 2008-09 2009-10

(Chart-10) The more Creditors Deferral Period should be more benefit for the company. In compare to 2007-08 the creditors period reduce by 14 days, which means the company should maintain more working capital, while in compare to 2008-09 the period increase by 33 days which means the company gets almost three months credit to repay the amount.

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Net operating cycle = GOC –CDP
Particulars
2007-08 2008-09 2009-10

GOC
125 117 153

CDP
76 62 95 (Table-9)

Net Operating Cycle
49 55 58

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
58 58 56 54 52 50 48 46 49 55

44
207-08 2008-09 2009-10

(Chart-11) The Net Operating Cycle for the past 3 years i.e. for 2007-08, 2008-09, and 2009-10 is 49, 55, and 58 days respectively. The standard net operating cycle should be 45 days. But here, the net operating cycle of the company is increasing year by year which can affect the image of the company in the market.

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RATIO ANALYSIS
Current Ratio:
This ratio establishes a relationship between current assets and current liabilities. The objective of computing this ratio is to measure the ability of the firm to meet its short term obligation and to reflect the short term financial strength of a firm.

Current Ratio = Current assets/ Current liabilities Particulars
2007-08 2008-09 2009-10

Current assets
42,16,97,773 46,21,67,953 70,84,41,068

Current liabilities
22,28,51,122 18,05,98,534 35,72,47,373

Ratio
1.89 2.56 1.98

(Table-10) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
3 2.5 2 1.5 ratio 1 0.5 0 2007-08 2008-09 2009-10

2.56

1.89

1.98

(Chart-12) Normally the standard current ratio should be 2:1. During the year 2007-08 and 2009-10 current ratio of the company is 1.89:1 and 1.98:1 respectively. This two years ratio is nearby standard ratio, which is good for the company but, during the year 2008-09 current ratio is 2.56:1 which indicates that some cash remain idle, which is harmful for the company.

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Quick Ratio:
This ratio establishes a relationship between quick assets and current liabilities. The quick ratio is better indication of liquid position of the company and shows whether the company will be able to meet its current obligation due for immediate payment in a short period without relying upon the realization of stock.

Quick ratio = Quick assets/ Current liabilities Here, Quick assets = cash+ bank + easily marketable securities Particulars
2007-08 2008-09 2009-10

Quick assets
22,53,72,506 30,78,73,518 33,15,48,897 (Table-11)

Current liabilities
22,28,51,122 18,05,98,534 35,72,47,373

Ratio
1.01 1.70 0.92

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
1.8 1.6 1.4 1.2 1 0.8 0.6 1.01 0.92

1.7

0.4
0.2 0 2007-08 2008-09 2009-10

(Chart-13)

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It is believed that quick ratio should be at least 1:1. During the year 2007-08 and 2008-09 the quick ratio is 1.01:1 and 1.70:1 respectively. This is satisfactory for the company. During the year 2009-10 the ratio is 0.92:1, which is quite less than the standard ratio.

Fixed Assets Turnover Ratio:
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. This ratio establishes a relationship between net sales and fixed assets. The objective of computing this ratio is to determine the efficiency with which the fixed assets are utilized. The more the sales in relation to the amount invested in fixed assets, the more efficient is the use of fixed assets.

Fixed assets turnover ratio = Sales/ Total fixed assets Particulars
2007-08 2008-09 2009-10

Net sales
1,23,77,16,051 1,39,59,95,436 1,68,48,30,404

Net total fixed assets
9,79,94,226 10,86,45,929 13,05,34,083

Ratio (times)
12.63 12.85 12.91

(Table-12) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
13 12.9 12.8 12.7 12.6 12.5 12.85

12.91

12.63

12.4 2007-08 2008-09 2009-10

(Chart-14)
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With reference to the above chart fixed assets turnover ratio gradually increase. A higher fixedasset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. In the year 2009-10 the fixed assets turnover ratio is more so it is considered that in these year company more using the investment in fixed assets to generate revenues.

Stock Turnover Ratio:
This ratio establishes a relationship between costs of goods sold and average inventory. The objective of computing this ratio is to determine the ability of management with which it can move the stock. Higher the turnover ratio the more profitable business would be.

Stock turnover ratio = Cost of goods sold / Average stock Particulars
2007-08 2008-09 2009-10

Cost of goods sold
89,64,20,000 99,48,39,688 1,11,49,88,541 (Table-13)

Average stock
17,08,68,768.5 17,53,09,851 26,55,93,303

Ratio (times)
5.25 5.67 4.20

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
6 5 4 3 2 1 0 2007-08 2008-09 2009-10 5.25

5.67
4.2

(Chart-15)

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It indicates whether the stock has been efficiently used or not, the purpose being to check up whether only the required minimum has been locked up in stocks. During the year 2007-08 the stock turnover ratio is 5.25 which slightly increase to 5.67 in 200809, which is better for the company but, during the year 2009-10 the ratio is decrease to 4.20, which require quite concentration of management.

Debtors’ Turnover Ratio:
This ratio establishes a relationship between net credit sales and average trade debtors. The objective of computing this ratio is to determine the efficiency with which the trade debtors are managed. An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Debtors turnover ratio = Credit sales / Average trade debtors Particulars
2007-08 2008-09 2009-10

Credit sales
1,23,77,16,051 1,39,59,95,436 1,68,48,30,404

Average trade debtors
13,77,26,305 22,14,38,705 19,53,25,240

Ratio ( times)
8.99 6.30 8.63

(Table-14) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)

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10
8 6 4 2

8.99

8.63

6.3

0
2007-08 2008-09 2009-10

(Chart-16) By maintaining accounts receivable, firms are indirectly extending interest-free loans to their clients. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm. This ratio shows that collection from the debtor is 8.99 & 8.63 during the year 2007-08 & 2009-10 respectively. But in the year affect the liquidity position of the company. 2008-09 it was 6.30 which

Gross Profit Ratio:
This ratio measures the relationship between gross profit and net sales. Gross profit ratio evaluates the effectiveness of business. It indicates the efficiency of firm in terms of its production and how much it has gained profit. Gross profit reflects the profit firm has made on cost of goods sold Gross profit ratio is calculated to know, whether the business is in a position to meet operating expenses or not, and how much the share holders can get after meeting such expenses? The ratio shows whether the mark- up obtained on cost of production is sufficient.

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Gross profit ratio = (Gross profit / Net sales) × 100 Particulars
2007-08 2008-09 2009-10

Gross profit
34,12,96,051 40,11,55,748 56,98,41,863

Net sales
1,23,77,16,051 1,39,59,95,436 1,68,48,30,404

Ratio (%)
27.57 28.74 33.82

(Table-15) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
40 35 30 27.57 28.74

33.82

25
20 15 10

5
0 2007-08 2008-09 2009-10

(Chart-17) If firm has higher gross profit margin then it is a sign of success because all operating expenses, interest charges and dividends would have to be taken off from GP. If company increase selling price of goods sold and decrease cost of goods sold then this ratio increases. However If company decrease selling price of goods sold and increase cost of goods sold then this ratio decreases. From the above graph, the gross profit ratio is in increasing manner, it indicates that the cost of sale is low and selling price of the goods sold are higher i.e., the purchasing is efficient. In the last three year it was increasing, so it is good for the company and also concentrate on to maintain this level.

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Net Profit Ratio:
This ratio measures the relationship between net profit and net sales. The main objective of computing this ratio is to determine the overall profitability due to various factors such as operational efficiency, trading on equity, etc. Net profit ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment.

Net profit ratio = (Net profit / Net sales) × 100 Particulars
2007-08 2008-09 2009-10

Net profit
5,31,96,959 7,61,93,935 13,94,37,728 (Table-16)

Net sales
1,23,77,16,051 1,39,59,95,436 1,68,48,30,404

Ratio
4.3 5.5 8.28

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
9 8 7 6 5 4.3 5.5 8.28

4
3 2 1 0 2007-08 2008-09 2009-10

(Chart-18)

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Obviously, higher the ratio the better is the profitability. From the above graph it is found that, the Net profit ratio increased year on year from year 2007-08 to year 2009-10. So it is define that the company’s profitability is better which is good for the company and also required to maintain this level of the ratio.

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FINANCIAL ANALYSIS La-Gajjar Machineries (P) Limited
Comparative Profit and Loss Account
(In lacks)
Particulars Sales & Other income Expenditure Profit before tax Provision for tax Profit after tax 2009-10 2008-09 Increase/ (Decrease) 51,13.58,446 44,31.09,960 6,82.48,486 2,31.91,938 4,50.56,548 Percentage

1,79,36.54,182 1,68,20.75,353 11,15.78,829 4,09.60,650 7,06.18,179

1,28,22.95,736 1,23,89.65,393 4,33.30,343 1,77.68,712 2,55.61,631 (Table-17)

39.88 35.76 157.51 130.52 176.27

(Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited)
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 sales and other expenditure income profit before tax provision for profit after tax tax

2009-10 2008-09

(Chart-19) From above calculation we can see that sales and other income increased at 39.88%, while expenditure increased 35.76%, so the overall profit after tax is increased at 176.27%.

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La-Gajjar Machineries (P) Limited
Comparative Balance Sheet
Particulars Share holders’ funds and liabilities: Share capital Reserve and surplus Secured loan Unsecured loan Deferred tax liabilities (net) Current liabilities and provision Total funds 84,48,55,762 57,09,49,562 27,39,06,200 47.97 35,72,47,373 18,05,98,534 17,66,48,839 97.81 1,23,40,000 20,02,18,566 23,96,67,806 3,25,86,882 27,95,135 1,05,00,000 10,47,14,773 20,90,77,437 6,42,24,333 18,34,485 18,40,000 9,55,03,793 3,05,90,369 (3,16,37,451) 9,60,650 17.52 91.20 14.63 (49.26) 52.36 2009-10 2008-09 Increase/ (decrease) Percentage

Assets: Fixed assets investments Current assets, loans and advances Total assets 84,48,55,762 57,09,49,562 (Table-18) (Source: last three years Annual Reports of La-Gajjar Machineries (P) Limited) 27,39,06,200 47.97 13,16,14,694 48,00,000 70,84,41,068 10,87,81,609 46,21,67,953 2,28,33,085 48,00,000 24,62,73,115 20.99 0 53.28

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400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0
share capital reserve and secured surplus loan unsecured diferred tax current loan liabilities liabilities and provision

2009-10 2008-09

(Chart-20) The above graph is show only liabilities part of the above balance sheet. In the liabilities part there is changes from 2008-09 to 2009-10. Some liabilities were increase and some were decrease in the company. In the above graph share capital, reserve and surplus, secured loan, differed tax liabilities and current liabilities and provision are increases 17.52%, 91.20%, 14.63%,52.36%,and 97.81% respectively. But only unsecured loan is decreases 49.26% from 2008-09 to 2009-10.
800000000 700000000 600000000 500000000 400000000 300000000 200000000 100000000 0 fixed assets investments current assets, loan and advances

2009-10 2008-09

(Chart-21) The assets part of the balance sheet shown in the above graph. All the fixed assets are increase from 2008-09 to 2009-10. There is no investment in the 2008-09 but Rs. 48,00,000 investments are in 2009-10. The fixed assets, current assets, loan and advances are increase 20.99%, and

53.28% respectively.

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SWOT ANALYSIS OF COMPANY
SWOT analysis shows the strength, weakness, opportunities and threats to company. SWOT analysis is done for and by every company. La- Gajjar Machineries Pvt. Ltd. to have its SWOT analysis which is as follows:

STRENGTH:
? Company produce high quality pumps then also management always tries to increase the quality of pumps in order to fulfill their potential customer’s satisfaction level. ? Total produced items plus wastage are being fully sold by company which shows their efficiency of sales activity. ? Better packaging, carriage and transportation system with all modern equipments and good after sales services. ? Regular seminars and meeting are conducted in entire department in order to find their loopholes and solution for the same. ? Division has domestic as well as export market and for this they are doing online marketing in order to find new market. ? Division also has World Class Manufacturing (WCM) cell, which looks out for better ways of manufacturing. ? La-Gajjar Machineries Pvt. Ltd. ISO 9001 which shows the sign of better quality production and environment concern for its surroundings. ? The most important thing is that they have good and healthy working atmosphere in company and they provide ample no. of opportunities for everyone to satisfy their job desire.

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WEAKNESS:
? Locations of depots (Consuming Centers) are far away from factory. Hence transportation cost and time duration is increases in inventories. ? ? Here company follows the Zero Budget inventory Method Follow. Here some time not fulfill the Order in Production Department because of Purchase department or not manage the minimum inventory. ? Many process steps and process are more sensitive to normal process variations and small error causes the big amount of wastage of material. ? Being highly labor intensive unit, HR department is always under pressure and many times fails to meet expectations of various departments and employees.

OPPORTUNITIES:
? ? ? Division should find new market area for its products More research activity should be done as there are chances of getting new market. Quality has more weight age in international market .Hence there are opportunities for grabbing market share. ? Biggest opportunity for La-Gajjar Machineries Pvt. Ltd. was of opening up of global market.

THREATS:
? ? ? ? ? Government policies are the main hurdles of division’s performance. Emergence of Pump threads made the market share of La-Gjjar yarn low. Change in Demand of the pump is also a biggest threat for division. The main raw material is costly and also shortage many time. Commodity price are also affected on production or raw-Material.

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1. Gender ratio of the respondents :

Particulars Male Female

Number 28 12

2. Employee belonging from different age group:
Age group 21 to 30 31 to 40 41 to 50 Above 50 Number 30 7 2 1

3. Education qualification:
Qualification Graduate Post Graduate Doctrine Number 27 13 0

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Q: 1 Have you ever heard about cost reduction?
Particulars Yes No Numbers 39 1

Number of employees
1

Yes
No

39

(Chart-22) In the company only 2.5% employees are not known about the cost reduction. But remaining 97.5% employees are aware about the cost reduction.

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Q: 2 Where can you reduce the cost from your department?
Particulars Electricity Stationary Telephone Tea & Refreshment Overtime All Others Numbers 36 30 13 20 16 5 8

No. of employees
5 8 36 Electricity

Stationary
Telephone Tea & Refreshment

16

20 13 30

Overtime
All Others

(Chart-23) In the company cost reduction is possible in different area and in different ways. Out of 40
employees most of the employees believe that they can save cost by reducing the use of electricity. 36 employees have shown their opinion for that. 30 employees believe that cost reduction also done by the

minimizing the use of stationary. They think about reduce the cost by stationary, use of mail facility, by use of wastage papers, company can reduce the cost. In the other area also cost reduction is possible. All the randomly selected employees gave their view where the company reduces the cost. Most of the employees gave the preference for cost reduction in following order 1. Electricity 2. Stationary 3. Tea & refreshment 4. Overtime 5. Telephone
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Q: 3 Where the employees feel it will help to reduce cost effectively? (Give your priority in number 1 to 5 in ascending order from below mentioned particular for cost reduction)

Particulars Electricity Stationary Telephone Tea & Refreshment Overtime

1 29 3 3 2 3

2 9 16 8 2 5

3 2 12 13 6 7

4 0 9 6 20 5

5 0 0 10 10 20

30
25 20 15 10 5 0 1 2 3 4 5

Electricity Stationary Telephone Tea & Refreshment Overtime

(Chart-24)

In the above graph employees gave the preference from where they reduce the cost more effectively. On the basis of graph or table we consider that most of the employees given the first priority to the electricity, second priority given to the stationary, at the third number telephone and in the last tea & refreshment and overtime given the same priority at the number of four & five respectively.

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Hypothesis for ELECTRICITY:
Test: Z-test 1. Hypothesis Ho: µ?2 Null Hypothesis is less than and equal to 2. Ha: µ>2 Alternate Hypothesis is greater than 2. 2. Z-statistics:

3. ? value ?= 0.05 Since our test is one tailed test we will take ?= 0.05 4. Z ? value =0.5-0.05=0.45= (1.645). An observed test statistic must be less than (1.645) to reject the null hypothesis. z tabulated = (1.645)

5. Z Value & data collection

X= 1.325, µ =2, ?=0.108, n= 40 6. Z critical = -39.70 7. As z calculated (-39.70) is less than Z ? (1.645). It lies in acceptance area. Hence, we fail to reject the null hypothesis.

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Hypothesis for STATIONARY:
Test: Z-test 1. Hypothesis Ho: µ?2 Null Hypothesis is less than and equal to 2. Ha: µ>2 Alternate Hypothesis is greater than 2. 2. Z-statistics:

3. ? value ?= 0.05 Since our test is one tailed test we will take ?= 0.05 4. Z ? value =0.5-0.05=0.45= (1.645). An observed test statistic must be less than (1.645) to reject the null hypothesis. z tabulated = (1.645)

5. Z Value & data collection

X= 2.675, µ =2, ?=0.108, n= 40 6. Z critical = 39.70 7. As z calculated (39.70) is not less than Z ? (1.645). It lies in rejected area. Hence, we fail to accept the null hypothesis.

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Hypothesis for TELEPHONE: Test: Z-test 1. Hypothesis Ho: µ?2 Null Hypothesis is less than and equal to 2. Ha: µ>2 Alternate Hypothesis is greater than 2. 2. Z-statistics:

3. ? value ?= 0.05 Since our test is one tailed test we will take ?= 0.05 4. Z ? value =0.5-0.05=0.45= (1.645). An observed test statistic must be less than (1.645) to reject the null hypothesis. z tabulated = (1.645)

5. Z Value & data collection

X= 3.3, µ =2, ?=0.208, n= 40 6. Z critical = 39.63 7. As z calculated (39.63) is not less than Z ? (1.645). It lies in rejected area. Hence, we fail to accept the null hypothesis.

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Hypothesis for TEA & REFRESHMENT: Test: Z-test 1. Hypothesis Ho: µ?2 Null Hypothesis is less than and equal to 2. Ha: µ>2 Alternate Hypothesis is greater than 2. 2. Z-statistics:

3. ? value ?= 0.05 Since our test is one tailed test we will take ?= 0.05 4. Z ? value =0.5-0.05=0.45= (1.645). An observed test statistic must be less than (1.645) to reject the null hypothesis. z tabulated = (1.645)

5. Z Value & data collection

X= 3.85, µ =2, ?=0.296, n= 40 6. Z critical = 39.53 7. As z calculated (39.53) is not less than Z ? (1.645). It lies in rejected area. Hence, we fail to accept the null hypothesis.

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Hypothesis for OVERTIME: Test: Z-test 1. Hypothesis Ho: µ?2 Null Hypothesis is less than and equal to 2. Ha: µ>2 Alternate Hypothesis is greater than 2. 2. Z-statistics:

3. ? value ?= 0.05 Since our test is one tailed test we will take ?= 0.05 4. Z ? value =0.5-0.05=0.45= (1.645). An observed test statistic must be less than (1.645) to reject the null hypothesis. z tabulated = (1.645)

5. Z Value & data collection

X= 3.85, µ =2, ?=0.296, n= 40 6. Z critical = 39.53 7. As z calculated (39.53) is not less than Z ? (1.645). It lies in rejected area. Hence, we fail to accept the null hypothesis.

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Cross tabulation:
Step 1. H0: Reduction cost is Independent on designation. Ha: Reduction cost is Dependent on designation. Step 2. The appropriate statistical test is

Step 3. Step 4.

? = .05
R = 5, c = 5 (5-1) (5-1) = 16

?² 0.05,16 = 26.2962
Step 5. Observed Data are as follow:
TEA &REFRESHMENT OVERTIME TOTAL 3.33 5 15 4 2.71 14.7 4.25 2.25 15 3.95 4.21 14.89 3.71 3.71 14.99 19.24 17.88 74.58

PARTICULARS ELECTRICITY STATIONARY TELEPHONE Assistant 1 3 2.67 Supervisor 1.42 2.43 4.14 Engineer 1.75 2.75 4 Executive 1.26 2.58 2.89 Manager 1.71 2.29 3.57 Total 7.14 13.05 17.27

Step 6. Step 7.

?²= 2.393096702
The Observed value of Chi-square, 2.393096702, is less than the critical value of Chi-

square, 26.2962. So the null hypothesis is accepted that is reduction cost is independent on designation.

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Q: 4 Have you ever suggested about cost reduction to your superior?

Particulars Yes No

Number 23 16

No. of Employees
16 Yes No

23

(Chart-25)

Out of the randomly selected employees, 39 employees are known about the cost reduction. Out of those 39 employees only 23 employees are suggested about the cost reduction to their superior. Remaining 16 employees are never suggested about the cost reduction to their superior.

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Q: 5 If yes, what was your superior reaction?

Particulars Agreed Disagreed Agreed, took any action

Numbers 21 0 2

No.of employees
0
2 Agreed

Disagreed
21 Agreed,took any action

(Chart-26) Those employees who are suggested about the cost reduction to their superior, out of them 91.30% employees told that that their superior is agreed on them, no one employees told that their superior is disagreed but only 8.70% employees are told that their employees are agreed and took any action on the basis of their suggestion.

Q: 6 If no, what was the reason for the same?
In this descriptive question employees gave the answer as under. ? Some of the employees said that they were came to know about cost reduction from their superiors, so they believe that there is no requirement to suggest them about same because their superiors have better idea for the cost reduction. ? Some employees told that they have no idea about cost reduction so they never think about it.

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Q: 7 what suggestions given by you were implemented?
Employees given some suggestion to their superior and some suggestions are implemented also. Here are those suggestions which were implemented by the company. ? All the employees switch off their computer at the time of lunch, and also switch off when they are doing some other work and there is not required of the computer. ? If there is necessary to print out the copy then only go for a print otherwise don’t waste the pages. ? Switch off the unnecessary fans, lights, and a.c in the company. ? Proper time schedule should be maintain so, there is no need of overtime. ? Use the wastage papers for the ruff work. ? Decrease the use of telephone by increasing the use of mail.

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FINDINGS:
Findings for Working Capital Management:
? From last three Years the Net working capital of company is increasing. ? Raw Material Conversion Period, Work in Process Conversion Period and Finished good Conversion period of the year 2009-10 is increased as compared to year 2008-09. ? Debtors’ conversion period is decreased in year 2009-10 as compared to year 2008-09. ? In year 2009-10, time taken for completing the Gross Operating cycle is more than in year 2008-09. ? Creditors Deferral Period increased in year 2009-10. ? Completion period of the Net operating cycle of company is increasing from last three years. ? Current ratio, which measure the ability of firm to reflect the short term financial strength, is improving from 2007-08 to 2008-09. But it goes beyond the ideal limit in year 2009-10. ? Quick ratio, which is better indication of liquid position of the company and shows whether the company will be able to meet its current obligation, is going downwards from its standard limit in year 2009-10 as compared to year 2007-08 and year 2009-10 in which it was better. ? Fixed assets ratio, which determines the efficiency with which the fixed assets are utilized, is increasing year on year. ? Stock turnover ratio, which determine the ability of management with which it can move the stock, is decreased in year 2009-10, which was increased in year 2008-09 as compared to year 2007-08. ? Debtors’ turnover ratio, which determines the efficiency with which the trade debtors are managed, is decreased in year 2009-10. ? Gross profit ratio shows whether the mark- up obtained on cost of production is sufficient, is increasing year by year. It indicates that the cost of sale is low and selling price of the goods sold are higher i.e., the purchasing is efficient. ? Net profit ratio shows overall profitability, is also increasing year by year.

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? From comparative profit & loss account of year 2008-09 and 2009-10, it is found that the overall profit after tax is increased at 176.27%. ? Some liabilities like share capital, reserve and surplus, secured loan, differed tax liabilities and current liabilities and provision are increases from year 2008-09 to 2009-10 and The fixed assets, current assets, loan and advances are increase in year 2009-10.

Findings for Cost Reduction Tactics:
? Most of the employees are aware about the cost reduction in company which is in benefit of the company. ? Among the randomly selected employees, most of found that maximum cost reduction done by saving Electricity and then by Stationary. After that Tea & refreshment, Overtime and Telephone respectively. ? On priority basis, most of the employees give first priority to save the Electricity for making cost reduction effective, and after that Stationary, Telephone, Tea & Refreshment, and then Overtime respectively. ? 40% of employees were never suggesting their superiors about cost reduction although they know about it. ? Most of the employees found that their superior is agreed for suggestion, but few (8.70%) employees told that their superior took any action on that. ? Some employees believe that the superiors have better idea for cost reduction so they never suggest their superior. ? The most implemented suggestion in the company is to save the Electricity.

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SUGGESTIONS: Suggestion for the Working Capital Management:
? As the customers are becoming quality oriented, TQM concept should be implemented by the company. ? Team work and pre planning is required to get the Maximum output of product from the market. ? The most valuable asset of the company is their Human Resources which should be utilized in a proper way and also should be trained. ? The brand image of the company in the market is only through advertisement but product should also be available at retail counters also. ? To achieve & complete the Maximum target by production department. ? Organization requires professional as well as qualified people who can sharpen the growth of the company by the skills and potential they have.

Suggestions for the Cost Reduction Tactics:
Company should follow the suggestions which are as under: ? Switch off the A.C, Fans, Lights, and Computers at the time of lunch. ? Use the wastage papers for the ruff work. ? Use the internet facility by sending the mail instead of sending a printed letter to the internal employees. ? Only print out those papers which are required, otherwise don’t waste the papers. ? Use the cubic system in the company. ? By using proper fringe facility company can reduce the cost. ? By maintaining the proper schedule of tea & refreshment. ? Work should be done on time so, overtime is not required. ? By increasing the sales of the products cost reduction will be possible.

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CONTRIBUTION OF THE STUDY: To The Researcher:
? Researcher can know about the company. ? Researcher can get the information about the working capital of the company and they can research more effectively. ? This project provides overall idea about industry, company and financial position of the company to the researcher. ? Cost reduction tactics helpful for researcher in that, in which area maximum cost reduction is possible and how.

To The Students: ?
This report clears the concepts about the Working capital management to the students who are willing to do their project on this topic.

? Ratio analysis will provide performance of company to students. ? Student can know that what is operating cycle and how it works its role in working capital management. ? Students can also know about, how cost reduction is possible in the company from the view points of the employees.

To The Company:
? Company can identify the working capital management which allows the company to meet day to day expenses, but reduces cash holding cost. ? Comparative analysis of balance sheet becomes helpful to the company to compare the two years data and performance of the company in last two years. ? This project gives better idea where cost reduction is possible in the company.

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LEARINING FROM THE STUDY:
? I have learned from the company, how the different departments work in the company. ? Operating cycle of the company. ? Inventory control in the company. ? In which area cost reduction is possible at maximum level in the different departments of the company. ? I learnt that how can company get more possible outputs in less time and minimum available resources.

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Limitations of the study:
Limitations of Working Capital Management Study:
1) This study is based on the data of last three years so, based on that the complete analysis is not possible. 2) Various information regarding unit was not shared with trainee by company due to their rules, regulation and policies. 3) Working capital is wider concept and it requires more time for learning each and every aspect of it. Hence there was time constraint too. 4) Busy schedule of the company, guide of the company made delay and provide less portion of their time for trainee students. 5) Unfamiliarity with culture and department of the company was also becoming a hurdle for producing efficient output for trainee.

Limitations for Cost Reduction Tactics Study:
1) This analysis is based on questionnaire filled by randomly selected 40 employees of the company so, it is not considered as an accurate data. 2) At the time of filling of questionnaire some of the employees were busy with their routine work so, whichever answers given by them are not completely reliable. 3) On the basis of questionnaire I can only consider some of the area for cost reduction. But in the company there are many areas where cost reduction will be possible. Because of time limit I cannot consider all those area for the cost reduction.

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CONCLUSION:
On the basis of the study I conclude that the company is in its growth path. In some area more concentration is required for the company, like Operating Cycle for which time period for completion is increased in year 2009-10, should be decrease, Stock Turnover Ratio which was decreased in 2009-10, should be increase. Gross profit ratio and Net profit ratio is increases year by year so it is profitable for the company. Profit of the company is increasing year by year from last two years. So from operating cycle and ratio analysis I can conclude that La-Gajjar Machineries (p) Ltd have effective working capital management from last two years. But in some area more concentration is required to make working capital management more effective. Most of the employees are aware about the cost reduction. They are also think about how to reduce the cost for the company and also told their superior about it. I found that from employees that their some of the superiors have good knowledge of cost reduction and they also share with them. So it is good for company. I found that the Electricity is one of the most cost reducible particular than any other. So company should concentrate on that and should make efforts in direction to maximum utilization of their resources. Training should be imparted to those employees who are not aware about cost reduction and company should organize training session for all the employees on cost reduction at regular interval for making cost reduction more effective.

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BIBLIOGRAPHY:
FINANCIAL MANAGEMENT- 10TH Edition, I M PANDEY, chap-27, pg no: 649 Prasnna Chandra, FINANCIAL MANAGEMENT, 9th Edition, Pg no:175 BUSINESS STATISTICS – 4TH Edition, KEN BLACK, chap-9.pg no:304 BUSINESS STATISTICS – 4TH Edition, KEN BLACK, chap-12, pg no:468 Annual Reports Of The Company for the year 2007-08, 2008-09, 2009-10 Donald R. Cooper, Pamel S. Schindler, 8th edition, chap-7 Donald R. Cooper, Pamel S. Schindler, 8th edition, chap-17,pg no: 536-538 http://www.allprojectreports.com/mba-projects/finance-project-report/working-capitalmanagement.htm ? http://www.investopedia.com/terms/ratioanalysis.asp ? http://www.lagajjarmachineries.com ? http://www.swpa.org ? ? ? ? ? ? ? ?

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APPENDIX-I
QUESTIONNAIRE FOR THE COST REDUCTION TACTICS
Dear Sir/Madam, I am the student of LDRP Institute of Research and Technology. I am doing the summer internship project on cost reduction tactics in your company. So, I would like to know your views and opinions. I would be grateful if you spend few minutes helping me by completing this questionnaire. 1. Name:___________ 2. Gender: Male Female

3. Age: 21 to 30 31 to 40 41 to 50 Above 50

4. Education Qualification: Graduate Post Graduate Doctrine

5. Department: _____________

6. Designation: _____________

7. Have you ever heard about cost reduction? Yes No

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8. How can the cost reduced from your department? Electricity stationary Tea & refreshment overtime Telephone others_____________ All

9. Where the employees feel it will help to reduce cost effectively? (Give your priority in number 1 to 5 in ascending order from below mentioned particular for cost reduction)

particulars 1 Electricity Stationary Tea & refreshment Telephone overtime

2

3

4

5

10. Have you ever suggested about cost reduction to your superior (H.O.D)? Yes No

10 (a) If yes, what was your superior reaction? Agreed Disagreed Agreed, took any action 10 (b) If no, what was the reason for the same? __________________________________ 11. What suggestion given by you were implemented? ____________________________________

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APPENDIX-II
La-Gajjar Machineries (P) Limited
Cash flow statement of last three years (2007-08, 2008-09, and 2009-10)
Year ended March 31, '10 Amount 111578829 20026521 135812 1068652 -1899692 25285129 44616422 156195251 222597736 -26113465 36686998 -167254690 65916579 90278672 30633270 386060 31019330 59259342 -43374919 -10033831 379500 -53029250 -4000000 5840000 25760000 -1047082 1899692 -25285129 -1529558 1637923 7868015 14921888 22789903 Year ended March 31,'09 Amount 43330343 19528738 228410 -74783 -3708905 -461982 27540211 43051689 86382032 -42030832 83712400 12439020 26226165 80346753 6035279 5075748 1955210 -70436 6960612 -925333 -30714749 -3074511 245000 -33544260 Year ended March 31,'08 Amount 30931991 12716080 90843 -176197 3304791 (306314 16617490 32246693 63178684 50912997 10498396 -22486 15962247 -18196319 59154835 4023849 14277313 802430 -28554 15051189 -11027340 -54097454 -2546958 1013038 -55631374 -2000000

Particulars Cash flow from operating activity Net profit before taxation, extraordinary items Adjustment for: Depreciation Prior period adjustment Loss on sale of assets Profit on sale of assets Notional Provision of central excise duty Interest income Interest expenses Operating profit before working capital change Increase/Decrease in inventory Increase/decrease in sundry debtors Increase/decrease in other current assets Increase/decrease in loan & advances Increase/decrease in sundry creditors Cash generated from operations Income taxes paid Fringe benefit tax paid Income tax refund Net cash from operating activities Cash flow from Investing activities Purchase of fixed assets Advance given for fixed assets Proceeds from sale of assets Net cash from investing activities Cash flow from financing activities Redemption of preference share Issue of equity shares Equity shares premium on issue shares Proceeds from long term borrowings Interest received Interest paid Dividends paid Net cash from financing activities Net increase in cash &cash equipments cash & cash equipments at the beginning of the year cash & cash equipments at the end of the year

68684461 461982 -27540211 -1379710 40226522 5776929 9164958 14921888

92418788 306314 -16617490 -1569944 72537668 5878954 3286004 9164958

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APPENDIX-III
La-Gajjar Machineries (P) Limited
Profit & Loss A/C of last three years (2007-08, 2008-09, 2009-10)
PARTICULAR INCOME : SALES LESS: EXICE DUTY 1,68,48,30,404 5,20,34,816 1,63,27,95,588 91,49,384 15,17,09,210 1,79,36,54,182 97,46,18,503 15,26,56,363 50,94,88,837 2,52,85,129 2,00,26,521 1,68,20,75,353 11,15,78,829 4,00,00,000 _ _ _ 9,60,650 4,09,60,650 7,06,18,179 PROVISION AFTER TAX ADD: BALANCE OF PROFIT OF EARLIER YEAR BROUTHT FORWARD 7,61,93,935 14,68,12,114 1,395,995,436 76,040,306 1,319,955,130 15,068,543 (52,727,937) 1,282,295,736 668,071,813 127,319,380 396,505,251 27,540,211 19,528,738 1,238,965,393 43,330,343 16,000,000 _ 1,400,000 40,000 328,712 17,768,712 25,561,631 53,196,959 78,758,590 1,237,716,051 75,855,141 1,161,860,910 5,346,450, 65,559,216 1,232,766,576 630,587,124 174,370,982 367,542,909 16,617,490 12,716,080 1,201,834,585 30,931,991 11,000,000 113,031 1,730,000 19,000 (363,314) 12,498,717 18,433,274 39,643,395 58,076,669 SCHEDULE MARCH-10 (RS) MARCH-09 (RS) MARCH-08 (RS)

OTHER INCOME GOODS IN STOCK TOTAL LESS: EXPENDITURE RAW MATERIAL CONSUMED TRADING GOODS PURCHASED MANUFACTURING & OTHER EXPENSES INTEREST & FINANCE CHANGES DEPRECIATION TOTAL PROFIT BEFORE TAXATION LESS: PROVISION FOR INCOME TAX TAXATION FOR EARLIER YEAR PROVISION FOR FRINGE BENEFIT TAX PROVISION FOR WEALTH TAX DEFERRED TAX

11 12

13 14

LESS: APPROPRIATION GENERAL RESERVE CAPITAL REDEMTION RESERVE PROPOSED DIVIDEND ON PREFRENCE SHARE TAX ON DIVIDEND BALANCE OF PROFIT CARRIED TO B/L BASIC & DILUTED E.P.S. OF RS 100/EACH

65,00,000 3,97,370 3,50,000 1,27,016 7,374,386 13,94,37,728

1,500,000 0 910,000 154,655 2,564,655 76,193,935

1,500,000 2,000,000 1,179,290 200,420 4,879,710 53,196,959

1316

612

426

LDRP Institute of Technology & research

APPENDIX-VI
La-Gajjar Machineries (P) Limited
Balance sheet of last three years (2007-08, 2008-09, 2009-10)
PARTICULAR SCHEDULE MARCH-10 (RS) MARCH-09 (RS) MARCH-08 (RS)

SOURCES OF FUNDS :
1) SHAREHOLDER : a) SHARE CAPITAL b) RESERVES & SURPLUS 1 2 1,23,40,000 20,02,18,566 21,25,58,566 2) LOANS FUNDS : a) SECURED LOANS b) UNSECURED LOANS 3 4 23,96,67,806 3,25,86,882 27,22,54,688 3) DEFERRED TAX LIABILITY (NET) TOTAL APPLICATION OF FUNDS : 1) FIXED ASSET : GROSS BLOCK LESS: DEPRECIATION FUND NET BLOCK ADD: CAPITAL WORK IN PROCESS 20(12) 27,95,135 48,76,08,389 5 22,33,48,770 9,28,14,687 13,05,34,083 10,80,611 13,16,14,694 2)INVESTMENT : 3)CURRENT ASSETS LOANS & ADV a) INVENTORIES b) SUNDRY DEBTORS c) CASH & BANK BALANCES d) LOANS & ADVANCES 6 7 8 9 10 48,00,000 18,19,11,929 7,32,66,000 10,86,45,929 1,35,680 10,87,81,609 _ 152,143,322 54,149,096 97,994,226 _ 97,994,226 _ 1,05,00,000 10,47,14,773 11,52,14,773 20,90,77,437 6,42,24,333 27,33,01,770 18,34,485 39,03,51,028 1,05,00,000 80,217,795 90,717,795 1,60,130,257 44,487,052 2,04,617,309 1,505,773 2,96,840,877

37,68,92,171 19,53,25,240 2,27,89,903 11,34,33,754

15,42,94,435 22,14,38,705 1,49,21,888 7,15,12,925

196,325,267 137,726,305 9,164,958 78,481,243

70,84,41,068 LESS: CURRENT LIABILUTIES & PROVISION NET CURRENT ASSETS TOTAL 11 35,72,47,373 35,11,93,695 48,76,08,389

46,21,67,953

42,16,97,773

18,05,98,534 28,15,69,419 39,03,51,028

2,22,851,122 1,98,846,651 2,96,840,877

LDRP Institute of Technology & research

APPENDIX-VI

LDRP Institute of Technology & research



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