Description
Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity.
Analysis of Working Capital Of
Minda Corporation Ltd.
AGENDA
? COMPANY PROFILE ? OBJECTIVE OF PROJECT ? RESEARCH METHODOLOGY ? WCM RATIO ANALYSIS ? OBSERVATIONS ? RECOMMENDATION
HISTORY AND PRESENT STATUS
? Founded by Mr. S.L.Minda in 1958 ? Now a multi-product, multi-location Group ? 36 plants in India, 3 in Germany, 1 in Czech Republic, 1 in Poland, 1 in Indonesia, 1 in Vietnam, 1 in Uzbekistan, Office in Europe & Japan ? No. of employees over 12000 ? Cater to all OEMs and vehicles manufacturers in India ? Also supplying to OEMs in Europe & Asia
MINDA CORPORATION LIMITED
Product Range 2/3 Wheeler, Tractor & Off-Road Vehicles Electronic & Mechanical Security Systems, Immobilizers, Electronic Controllers, Window Regulators, Interiors 1325 ISO/TS-16949: 2002 & ISO-14001, Noida, Pune, Aurangabad, Pantnagar Castellon SA,Spain for Window Regulators NEC, Japan for Electric Vehicle Controllers Orbital Australia Pty. Ltd. for Immobilizers Vehicle
No. Of Employees Quality Certification Plant Location Collaborator
MINDA CORPORATION LTD.(Die Casting Division)
Product Range No. Of Employees Quality Certification Plant Location Die Casting Shop
High pressure Die Cast Components (Zn & Al) & Assemblies, Gravity Die Casting 353 ISO-9001: 2002, ISO-14001, Noida, Pune Major Products
OBJECTIVE
? To know about the Current assets and Current liabilities position of Minda Corporation Ltd. ? To determine the Ratios relating to the Working Capital. ? To know about the Net Working Capital position of Minda Corporation Ltd. ? To look at possible remedial measures if any on the basis of which tied – up funds in Working Capital could be used effectively and efficiently. ? To suggest, if possible on the basis of conclusion some modification to meet the situation.
METHODOLOGY OF THE PROJECT
? Collection of Data. ? Type of the project
? Analysis of Data.
? Conclusion & Recommendation
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Current Ratio
1.69
Current Asset Ratio
= CA / CL
2011
1.39 1.08 1.14 1.16
2010
2009
2008
2007
? It is most common measure for measuring liquidity. It expresses relationship between Current Assets & Current Liabilities. ?It indicates the money amount of Current Assets available for each money unit of liabilities.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Quick Ratio
Quick Asset Ratio
= QA/ CL
1.39 1.06
0.87
0.92
0.77
2011
2010
2009
2008
2007
?The term Quick Assets refers to Current Assets which can be converted into cash immediately or at a short notice without diminution of value. ?These include Cash and Bank balances, Short –Term Marketable Securities and Debtors/ Receivables.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Inventory Turnover Ratio
Inventory Turnover Ratio
= Net Sales / Average Inventory
17.31
21.02
26.47
7.51
2011
2010
2009
2008
?A high Inventory Turnover Ratio indicates the efficient management of inventory because more frequently the stocks are sold. ? The High Inventory Turnover Ratio is desirable , but high Inventory Turnover Ratio may not indicates the profitable situation always.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Debtors Turnover Ratio
Debtors Turnover Ratio
= Net Sales / Sundry Debtors
7.15 5.54 9.03 8.69 9.84
2011
2010
2009
2008
2007
?The Debtors Turnover Ratio, which shows that the number of times the Debtors are turned over cash during a year. ? Low Debtor Turnover Ratio in 2010-11 indicates slowing down process of collection system or an extend line of credit that is being allowed by the customer to the company.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Creditor Turnover Ratio
Creditors Turnover Ratio
= Net Purchase / Sundry Creditors
3.79
3.72
4.17
4.71 4.16
2011
2010
2009
2008
2007
?The creditor Turnover Ratio indicates how rapidly payables are paid to the supplier.
? A high Creditors Turnover Ratio or a lower Credit Period ratio signifies that the Creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the Creditors. ?Higher Creditor Turnover Ratio is very important for the company.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
WORKING CAPITAL TURNOVER RATIO
Working capital Turnover Ratio
= Net Sale / Working Capital
6.29 11.92 61.79 39.24
2011
2010
2009
2008
?Working Capital Turnover Ratio indicates whether the investments in Current Assets or Net Current Assets ( i.e., Working Capital ) have been properly utilized. ? The Working Capital Turnover Ratio graph shows the capability of Minda Corporation and the organization achieve maximum sales with the minimum investment in Working Capital the Financial year 2008-09.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Avg. Collection Period
Avg. collection period
= 365 / Debtors Turnover Ratio
65.88
51.05
40.4 41.98 37.11 2011
2010
2009
2008
2007
?The ratio indicates the time at which the debts are collected on an average during the year. So we can say that a high Debtors Turnover Ratio implies a shorter collection period which indicates prompt payment made by the customer. ? If the Average Collection Period is high then the Bad Debts can increase and the company may face losses. As a general rule the Average Collection Period is not more then 3 to 4 months.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Avg. Payment Period
Avg. Payment period
= 365 / Creditors Turnover Ratio
96.31 98.11 87.57 77.56 87.72
2011
2010
2009
2008
2007
? Average Payment Period reveals the ability of the firm to avail the credit facility from the suppliers throughout the year. Generally a low Creditor’s Turnover Ratio implies favorable and it is good for the company. ? If the Ratio was very high which means that its position of creditors that year was not good. So we can say that they not enjoys a very good credit facility from the suppliers.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Gross Working Capital
Gross Working Capital
= Total Current Assets
2,000,000,000 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2011 2010 2009 2008 2007
? The various components of Current Assets are also called Gross Working Capital. It denotes the Total Working Capital or Total Investment in Current Assets. ? Sufficient Working Capital helps the company to avoid stoppage of work and effects on profitability. The company can also get an idea about the required funds for maintaining Current Assets.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Net Working Capital
758,871, 173
Net Working Capital
= CA-CL
278,050, 256 34,951,4 30
50,637,1 33 2008
2011
2010
2009
? The Net Working Capital measures the liquidity of the firm. The greater the margin, the better will be the liquidity of the firm. So we can say the position of the company is satisfactory but company have to do work for increase the Net Working Capital. ? Net Working Capital is Current Assets over Current Liabilities. Company has favorable or positive Net Working Capital over the four year which shows the good liquid position of the company.
MINDA CORPORATION LTD.
Working Capital Limits & Utilization as of 31.12.2011.
Sl. No Name Of The Banks Fund Based : 1 Indian Overseas Bank. CC WCFC 660 480 1,140 2 3 AXIS Bank. Standard Chartered Bank. Cash Credit CC PC/ PCFC 4 Karnataka Bank. Fund Based WCDL (Tooling) 5 State Bank of India. Plastic Project Total 3,900 2,598 500 394 500 457 560 1,200 149 480 629 442 677 Facility Limit
Rs/ lacs
Outstanding
Non Fund Based Limits :
1
Indian Overseas Bank.
BG LC
100
450 100 450 125 1,225
27 -
2
Standard Chartered Bank.
BG
LC
3 Karnataka Bank. LC/ LG
8 35
OBSERVATION
? Minda Corporation Ltd. took Working Capital loan to fulfill the requirement of Working Capital, from consortium of banks. The company avail the limits of Working Capital in order to avail the benefits of shipment credit, packing credit, Working Capital loans in foreign currency as company has too many exports involved in the business. Minda Corporation also uses Cash Credit Account, (interest @ 12%). Minda also uses WCFC (Working Capital Loan In Foreign Currency). According to existing norms set by RBI, banks can only charge the London Inter-bank Offered Rate plus one percentage points as interest for their dollar loans. This is called packing credit in foreign currency (PCFC). They use these funds to procure raw material, which means the credit limit provided by the bank to the exporters till the packing of the finished material because these loans are cheap, exporters save on cost and thus remain competitive. Different banks have different limits for Working Capital Loans.
?
?
?
SUGGESTIONS
? Creditors increasing year by year so the company should maintain the low level of creditors because the company can pay them easily whenever required. ? Company has to induct long term funds by ways of share capital, equity, term loans/ unsecured loans from promoters to improve it’s Current Ratio as per the norms. ? Company should raise funds through short term sources for short term requirement of funds. ? The company should maintain a proper level of inventory so that’s why the unnecessary blockage of funds can be avoided. ? Company should take control of Average Payment period it is very high in the Financial Year 2010-11. Which shows the liquidity position of the company. ? The Gross Working Capital is fluctuating and it increase in the Financial Year 2010-11 but the major proportion of Current Assets comprise of inventories in each year. The company should try to reduce investment in inventory. ? The company has highest seller market of security system. So the company should try to increase productivity and produce products at lower rate.
doc_662011791.pptx
Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity.
Analysis of Working Capital Of
Minda Corporation Ltd.
AGENDA
? COMPANY PROFILE ? OBJECTIVE OF PROJECT ? RESEARCH METHODOLOGY ? WCM RATIO ANALYSIS ? OBSERVATIONS ? RECOMMENDATION
HISTORY AND PRESENT STATUS
? Founded by Mr. S.L.Minda in 1958 ? Now a multi-product, multi-location Group ? 36 plants in India, 3 in Germany, 1 in Czech Republic, 1 in Poland, 1 in Indonesia, 1 in Vietnam, 1 in Uzbekistan, Office in Europe & Japan ? No. of employees over 12000 ? Cater to all OEMs and vehicles manufacturers in India ? Also supplying to OEMs in Europe & Asia
MINDA CORPORATION LIMITED
Product Range 2/3 Wheeler, Tractor & Off-Road Vehicles Electronic & Mechanical Security Systems, Immobilizers, Electronic Controllers, Window Regulators, Interiors 1325 ISO/TS-16949: 2002 & ISO-14001, Noida, Pune, Aurangabad, Pantnagar Castellon SA,Spain for Window Regulators NEC, Japan for Electric Vehicle Controllers Orbital Australia Pty. Ltd. for Immobilizers Vehicle
No. Of Employees Quality Certification Plant Location Collaborator
MINDA CORPORATION LTD.(Die Casting Division)
Product Range No. Of Employees Quality Certification Plant Location Die Casting Shop
High pressure Die Cast Components (Zn & Al) & Assemblies, Gravity Die Casting 353 ISO-9001: 2002, ISO-14001, Noida, Pune Major Products
OBJECTIVE
? To know about the Current assets and Current liabilities position of Minda Corporation Ltd. ? To determine the Ratios relating to the Working Capital. ? To know about the Net Working Capital position of Minda Corporation Ltd. ? To look at possible remedial measures if any on the basis of which tied – up funds in Working Capital could be used effectively and efficiently. ? To suggest, if possible on the basis of conclusion some modification to meet the situation.
METHODOLOGY OF THE PROJECT
? Collection of Data. ? Type of the project
? Analysis of Data.
? Conclusion & Recommendation
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Current Ratio
1.69
Current Asset Ratio
= CA / CL
2011
1.39 1.08 1.14 1.16
2010
2009
2008
2007
? It is most common measure for measuring liquidity. It expresses relationship between Current Assets & Current Liabilities. ?It indicates the money amount of Current Assets available for each money unit of liabilities.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Quick Ratio
Quick Asset Ratio
= QA/ CL
1.39 1.06
0.87
0.92
0.77
2011
2010
2009
2008
2007
?The term Quick Assets refers to Current Assets which can be converted into cash immediately or at a short notice without diminution of value. ?These include Cash and Bank balances, Short –Term Marketable Securities and Debtors/ Receivables.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Inventory Turnover Ratio
Inventory Turnover Ratio
= Net Sales / Average Inventory
17.31
21.02
26.47
7.51
2011
2010
2009
2008
?A high Inventory Turnover Ratio indicates the efficient management of inventory because more frequently the stocks are sold. ? The High Inventory Turnover Ratio is desirable , but high Inventory Turnover Ratio may not indicates the profitable situation always.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Debtors Turnover Ratio
Debtors Turnover Ratio
= Net Sales / Sundry Debtors
7.15 5.54 9.03 8.69 9.84
2011
2010
2009
2008
2007
?The Debtors Turnover Ratio, which shows that the number of times the Debtors are turned over cash during a year. ? Low Debtor Turnover Ratio in 2010-11 indicates slowing down process of collection system or an extend line of credit that is being allowed by the customer to the company.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Creditor Turnover Ratio
Creditors Turnover Ratio
= Net Purchase / Sundry Creditors
3.79
3.72
4.17
4.71 4.16
2011
2010
2009
2008
2007
?The creditor Turnover Ratio indicates how rapidly payables are paid to the supplier.
? A high Creditors Turnover Ratio or a lower Credit Period ratio signifies that the Creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the Creditors. ?Higher Creditor Turnover Ratio is very important for the company.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
WORKING CAPITAL TURNOVER RATIO
Working capital Turnover Ratio
= Net Sale / Working Capital
6.29 11.92 61.79 39.24
2011
2010
2009
2008
?Working Capital Turnover Ratio indicates whether the investments in Current Assets or Net Current Assets ( i.e., Working Capital ) have been properly utilized. ? The Working Capital Turnover Ratio graph shows the capability of Minda Corporation and the organization achieve maximum sales with the minimum investment in Working Capital the Financial year 2008-09.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Avg. Collection Period
Avg. collection period
= 365 / Debtors Turnover Ratio
65.88
51.05
40.4 41.98 37.11 2011
2010
2009
2008
2007
?The ratio indicates the time at which the debts are collected on an average during the year. So we can say that a high Debtors Turnover Ratio implies a shorter collection period which indicates prompt payment made by the customer. ? If the Average Collection Period is high then the Bad Debts can increase and the company may face losses. As a general rule the Average Collection Period is not more then 3 to 4 months.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Avg. Payment Period
Avg. Payment period
= 365 / Creditors Turnover Ratio
96.31 98.11 87.57 77.56 87.72
2011
2010
2009
2008
2007
? Average Payment Period reveals the ability of the firm to avail the credit facility from the suppliers throughout the year. Generally a low Creditor’s Turnover Ratio implies favorable and it is good for the company. ? If the Ratio was very high which means that its position of creditors that year was not good. So we can say that they not enjoys a very good credit facility from the suppliers.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Gross Working Capital
Gross Working Capital
= Total Current Assets
2,000,000,000 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2011 2010 2009 2008 2007
? The various components of Current Assets are also called Gross Working Capital. It denotes the Total Working Capital or Total Investment in Current Assets. ? Sufficient Working Capital helps the company to avoid stoppage of work and effects on profitability. The company can also get an idea about the required funds for maintaining Current Assets.
WORKING CAPITAL RATIOS OF MINDA CORPORATION
Net Working Capital
758,871, 173
Net Working Capital
= CA-CL
278,050, 256 34,951,4 30
50,637,1 33 2008
2011
2010
2009
? The Net Working Capital measures the liquidity of the firm. The greater the margin, the better will be the liquidity of the firm. So we can say the position of the company is satisfactory but company have to do work for increase the Net Working Capital. ? Net Working Capital is Current Assets over Current Liabilities. Company has favorable or positive Net Working Capital over the four year which shows the good liquid position of the company.
MINDA CORPORATION LTD.
Working Capital Limits & Utilization as of 31.12.2011.
Sl. No Name Of The Banks Fund Based : 1 Indian Overseas Bank. CC WCFC 660 480 1,140 2 3 AXIS Bank. Standard Chartered Bank. Cash Credit CC PC/ PCFC 4 Karnataka Bank. Fund Based WCDL (Tooling) 5 State Bank of India. Plastic Project Total 3,900 2,598 500 394 500 457 560 1,200 149 480 629 442 677 Facility Limit
Rs/ lacs
Outstanding
Non Fund Based Limits :
1
Indian Overseas Bank.
BG LC
100
450 100 450 125 1,225
27 -
2
Standard Chartered Bank.
BG
LC
3 Karnataka Bank. LC/ LG
8 35
OBSERVATION
? Minda Corporation Ltd. took Working Capital loan to fulfill the requirement of Working Capital, from consortium of banks. The company avail the limits of Working Capital in order to avail the benefits of shipment credit, packing credit, Working Capital loans in foreign currency as company has too many exports involved in the business. Minda Corporation also uses Cash Credit Account, (interest @ 12%). Minda also uses WCFC (Working Capital Loan In Foreign Currency). According to existing norms set by RBI, banks can only charge the London Inter-bank Offered Rate plus one percentage points as interest for their dollar loans. This is called packing credit in foreign currency (PCFC). They use these funds to procure raw material, which means the credit limit provided by the bank to the exporters till the packing of the finished material because these loans are cheap, exporters save on cost and thus remain competitive. Different banks have different limits for Working Capital Loans.
?
?
?
SUGGESTIONS
? Creditors increasing year by year so the company should maintain the low level of creditors because the company can pay them easily whenever required. ? Company has to induct long term funds by ways of share capital, equity, term loans/ unsecured loans from promoters to improve it’s Current Ratio as per the norms. ? Company should raise funds through short term sources for short term requirement of funds. ? The company should maintain a proper level of inventory so that’s why the unnecessary blockage of funds can be avoided. ? Company should take control of Average Payment period it is very high in the Financial Year 2010-11. Which shows the liquidity position of the company. ? The Gross Working Capital is fluctuating and it increase in the Financial Year 2010-11 but the major proportion of Current Assets comprise of inventories in each year. The company should try to reduce investment in inventory. ? The company has highest seller market of security system. So the company should try to increase productivity and produce products at lower rate.
doc_662011791.pptx