Bajag Working Capital

7/31/2019 Bajag Working Capital

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CHAPTER-I

INTRODUCTION

Finance is one of the major elements, which activates the overall growth economy. Finance is

the life blood of economic activity. In the present day economy, finance is defined as the

provision of money at the time when it is required. Every enterprise, whether big, medium or

small needs finance to carry on its operations and to achieve its targets. The subject finance has

been traditionally classified in to two classes like below:

PUBLIC FINANCE

PRIVATE FINANCE

Public finance deals with the requirements, receipts and disbursements of funds in the

government institutions like states, local self governments and central government.

Private finance is concerned with requirements, receipts and disbursements of fund in case of

an individual, a profit seeking business organizations and non-profit organizations.

INTRODUCTION TO WORKING CAPITAL

Companies that manage their Working Capital will have relatively strong profit and their share

holders have been rewarded with capital appreciation despite an over all trend of declining

share prices. Others especially, Commodity procedures and Companies whose products take

cyclic demand have floundered.


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Many a times, the main causes of the failure of business enterprise have been found to be

shortages of current assets and their mishandling. Inside amount Working Capital is a serious

handicap in business where as fixed capital investment generates products. Companies

competent and administration of current assets sales the problems of underutilization of

capacitance.

A firm contains input to make a finished product, which is sold to make a profit. These sales

proceed are re-invested to make such products and generate further profits. The problem is,

there is a lag between the time a finished product is ready and the time its sale proceeds are

realized. If a Company waited till their products come in, its plant and machinery would lie

idle until this amount accrues to it. So to conjure smooth operations through this time lag,

every business activity make funds. This is its Working Capital, the rational for the Superior

valuation. Since there is a cost associated with Working Capital, a Company that can generate

more revenues from a special amount, Working Capital than others, will eventually be more

profitable, better cash flows.

DEFINITION OF WORKING CAPITAL:

Working capital is descriptive of that capital which is not fixed. But the more common use

of working capital is to consider it as the difference between the book value of the current

asserts and the current liabilities.

HOAGLAND

Working capital is the amount of funds necessary to cover the cost of operating the

enterprise

SHUBIN


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Working Capital refers in a firms investment in short-term assets, Cash. short-term

securities, accounts receivable and inventories

Working Capital is amount of funds necessary to cover the cost of operating their enterprise

WORKING CAPITAL MANAGEMENT THEORETICAL CONCEPTS

Meaning of Working Capital:

Capital required for the business is divided into two aspects

Fixed capital

Working Capital

Fixed capital:

It is the amount of money required to maintain the fixed assets of the concern

Working Capital:

The amount of money required to meet the day-to-day transactions of the business is

termed as Working Capital.

Concepts of Working Capital:

The concepts of Working Capital are

Gross Working Capital

Net Working Capital

Gross Working Capital:


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It refers to the firms investment in the current assets. Current assets are the assets, which

can be easily converted into cash within one accounting year. The gross Working Capital

focuses attention on two aspects of current assets management-

1. The way to optimize the investment in current assets.

2. The opportunity to finance the current assets.

Net Working Capital:

It is the excess of current assets over the current liabilities. Current liabilities are those claims

of outsiders, which are expressed to mature for payment within one accounting year. Net

Working Capital can be positive or negative. A positive Net Working Capital indicates the

excess of current assets over the current liabilities. A negative Net Working Capital is a

qualitative concept and indicates the liquidity position of the firm. It suggests the extent to

which the Working Capital may be financed by permanent sources of funds.

Approaches of Working Capital:

Depending on the mix of short and long-term financing, the approach followed by any

company fall under these three categories-

Matching Approach

Conservation Approach

Aggressive Approach

Matching Approach:

It refers to the adoption of a financial plan, which matches the expected life of the assets with

the expected life of the source of funds raised to finance assets. In this approach the long-term

financing is used to finance the fixed assets and permanent current assets. The short-term

financing will be used if the firm has the need of only fixed current assets.


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Conservative Approach:

In this approach the financing of permanent assets and a part of temporary current assets the

idle amount of long-term financing can be invested in the tradable securities and conserve

liquidity.

Aggressive Approach:

In this approach the short-term financing is used more to finance a part of its permanent current

asserts. Sometimes in a more aggressive way the short-term financing is used for financing the

fixed assets.

Sources of Working Capital

The sources of finance for Working Capital are of two types. They are permanent and

temporary sources of Working Capital. The Working Capital investments in minimum level of

current assets are permanent Working Capital. The Working Capital required to meet the

seasonal contingencies is called temporary (or) variable Working Capital requirements of a

concern from the short term sources of finance.

Permanent Sources of Working Capital:

The permanent Working Capital sources of finance are done for having a uninterrupted finance

for a long period. There are five important sources of permanent Working Capital.

They are:

Shares

Debentures

Public Deposits.

Ploughing back of profits.

Loans from financial institution.


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Shares:

Generally, a company should raise the maximum amount of Working Capital by the issue of

shares. The preferences carry a preferential right in respect of the divided at a fixed rate. Equity

shares do not have such obligation. A company should not issue different shares according to

the companies act.

Debentures :

Debenture is an instrument issued by the company acknowledging its debt to the holder. A

fixed rate of interests is paid on the debentures secured or paid in prior to the unsecured

debenture holders. The company enjoys tax benefits.

Public Deposits:

They are the fixed deposits accepted by the business directly from the public. It has both

advantages and dangers. The R.B.I has also down certain limits on the non-banking concerns.

Ploughing Back of Profits:

It is an internal source of finance and reinvestment of the surplus earnings of the business. It is

the cheapest and cost-free sources of finance. Excessive resort to ploughing back of profits

leads to over capitalization and speculation.

Loans and Financial Institutions:

Financial Institutions like Commercial Banks, IFCI, LIC provide short-term, medium-term,

long term source of finance suitable to meet the demand of Working Capital. A fixed rate of

interest is charged against such loans and is paid by way of installments.

Temporary Sources of Working Capital:

The temporary sources of Working Capitals are:


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Indigenous Bankers.

Trade Credits

Installment Credits

Advances

Accounts Receivable Credits.

Accrued Expenses

Deferred Expenses

Commercial Paper

Indigenous Bankers:

These are the private moneylenders who charge high rate of interest for the loan given by them.

These Bankers are more prior to the establishment of the commercial banks. Now we can fine a

few.

Trade Credit:

It is the credit extended by the suppliers of goods in the normal course of business. The credit

worthiness of a firm and the confidence of its suppliers are the main basis of securing trade

credit. There are some advantages such as convenient method of finance, flexibility as the

credit increases.

Installment Credit:

In this method, the assets are purchased and the possession of goods is taken immediately but

the payments are made in installments over a predetermined period of time.

Advances:


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Firms having ling production cycle take advances from their customers and agents against their

orders. This acts as a cheap source of finance and minimizes their investment in Working

Capital.

Accounts Receivable Credit:

It is the services offered to manage the financing of debts arising out of the credit sales. This

service is now available in India only on recourse basis. It has certain limitations such as the

cost of factoring is high perception of financial weakness about the firm availing these services.

Accrued Expenses:

These are the expenses, which have incurred but not yet pain. It varies with the change in the

level of the activity of the firm. The frequency and magnitude of accruals is beyond the control

of the management.

Deferred Incomes:

These are the funds of incomes received by the firm for which it has to supply goods in future.

These funds increase the liquidity of a firm and constitute an important source of short-term

finance.

Commercial paper:

It is unsecured promissory notes issued by the firm to raise short-term funds. The maturity

period of a commercial paper ranges from 91 to 180 days. The draw back is that can be

redeemed only after the maturity date. The Working Capital management or short-term

financial management is concerned with decisions relating to current assets and current

liabilities. The key difference between long-term financial management and short-term

financial management is in terms of timing of cash. Long term financial decisions (like buying

capital equipment or issuing debentures) involve cash flow an extended period of time(5 to 15

years or more) short-term financial decisions typically involve cash flows within a year or


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within the operation cycle of the firm. The Working Capital Management is a significant facet

of the financial management. It is important stems from two reasons. Investment in current

assets and the level of current liabilities have to gear quickly to changes in sales. Arranging

short-term financing, negotiating favorable credit terms, controlling movement of cash,

administrating accounts receivable, and monitoring the investment in inventories consume a

great deal of time financial managers. The management of Working Capital depends upon

certain basic principles.

Principles of Working Capital Management:

In examining the management of current assets (i.e. Working Capital management), certain

principles have to be borne in the mind. These principles are the answers that are to be sought

to the following questions.

The need of invests funds in the current assets.

Amount of funds to be invested in each type of current assets.

The required proportions of the long-term and short-term funds to finance current

assets.

The appropriate sources of funds needed to finance the current assets.

Constituent of Current Assets and Current Liabilities

CURRENT ASSETS CURRENT LIABILITIES

Inventories Sundry Creditors

Raw material and components Trade advances

Work in progress Borrowings


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Finished Goods Commercial Banks

Others Others

Trade debtors Provisions

Loans and advances

Investments

Cash and Bank Balances

Table No: 4.1

Short life Span and Swift Transformation:

In management of Working Capital, two characteristics of current assets must be borne in

mind.

Short life span

Shift Transformation into other assets form

Current assets have a short life span. Cash balances are held idle for a week or two, accounts

receivable may have a life span of 30 to 60 days, and inventories may be held for 30 to 100

days. The life span of current assets depends upon the time required in the activities of

procurement, production, sales and collection and the degree of synchronization among them.

The nature of current assets is that they are swiftly transformed into other assets form. Cash is

used for acquiring raw material. Raw materials are transformed into finished goods, finished

are generally sold on credit are converted into accounts receivable finally accounts receivable,

on realization, generate cash.


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The swift transaction of current assets and the short life span of the components of Working

Capital can be seen in the current assets cycle. However, this short life span and swift

transformation has certain implications.

Decisions relating to Working Capital management are repetitive and frequent.

The difference between profits and present value is insignificant.

The close interaction among Working Capital components implies that efficient

management of one component cannot be undertaken without simultaneous

consideration of other components.

CURRENT ASSETS CYCLE:

Chart no: 4.2

OPERATION CYCLE AND CASH CYCLE:

Investment in Working Capital is influenced by four key events in the production and sales

cycle of the company.

Finished

Working progress

Suppliers

Wages, Salaries

Factory

Cash

Account

Receivable


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Purchase of material

Payment of raw materials

Collection of cash for sales.

These keys events affect the cash flows. The firm begins with the purchase of raw material,

which is pain for after a delay, which is paid for after delay and which represents the accounts

payable period. Customers pay their bills sometime after the sales the period that elapses

between the date of sales and the date of collection of receivables is the accounts payable

period (debit period)

OPERATION CYCLE:

The time that elapses between the purchase of raw material and the collection of cash for sales

is referred as operating cycle. The operating cycle is the sum of the inventory period and the

accounts receivable period.

The behavior of the overall operating cycle and its individual components of a firm are

monitored through time series analysis and cross section analysis. In time series analysis

the duration of the operating cycle and its individual components is compared over a period

of time for the same firm. In the cross section analysis the duration of the operation cycle

and its individual components is compared with that of firms of a comparable nature.

The operating cycle of the firm begins with acquisition of raw materials and ends with the

collection of receivable. It may be divided into four stages.

Raw material and stores stage.

Work in progress stage.


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Debtors collection stage.

Use of Operating Cycle:

The operating cycle is helpful to the company in two ways:

It helps in forecasting Working Capital requirements.

Control of Working Capital can be done efficiently by the use of operating cycle.

Determination of the Length of Operating Cycle:

The length of the operating cycle of a manufacturing firm is the sum of:

Inventory conversion period.

Book debts conversion period.

Inventory Conversion Period:

It is the total time needed for producing and selling the product. It includes the raw material

conversion period. Work-in-progress, conversion period and the finished goods conversion

period.

Book Debts Conversion Period:

The book debts conversion period is the time required to collect outstanding amount from the

customers. The total of inventory conversion period and book debts conversion period is the

gross operating cycle. The difference between the gross operating cycle and the payable

deferral period is net operating cycle.


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Cash Cycle:

Cash cycle is the length between the payment for raw material purchases and collection of cash

for sales. Cash cycle is equal to the operating cycle less the accounts payable period. It also

represents time interval over which additional funds, called Working Capital should be

obtained in order to carry out the company operations. If depreciation is excluded from

expenses in computation of operating cycle, the net operating cycle also represents cast

conversion cycle.

OPERATING CYCLE OF THE LTD.:

The operating cycle of the company has four stages:

Work in progress stage

Finished goods stage

Debtors stage

Creditors stage.

Working in progress stage:

The work in progress stage of the company is calculated as follows.

Work in progress stage = Average stock of Work in progress

Cost of Production per day

Cost of production per day = Manufacturing expenses + consumption of raw Material +

Opening balance of work in Progress Closing balance of work in progress / 360

Finished goods stage:


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The finished goods stage of the company is calculated as follows:

Average stock of finished goods

Finished goods stage =

Cost of goods sold

Cost of sales per day = selling and distribution expenses + excise duty + cost of Production +

opening stock of finished goods closing Stock of finished goods/360.

Debtors stage:

The debtors stage of the company is calculated as follows:

Average debtors

Debtors stage =

Sales per day

Sale per day = Net sales / 360.

Creditors stage:

The creditors stage of the company is calculated as follows:

Average creditors

Creditors stage =

Purchases per day

Purchases per day = Net purchases / 360.


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Cash management:

Cash, the most liquid asset, is of vital importance to the daily operations of the company. Cash

management is concerned with the managing of

1. Cash flows into and out of the firm.

2. Cash flows within the firm.

3. Cash balance held by the firm at a point of time by financing deficit of inventing

surplus cash.

Source: company magazine Chart no: 4.4

CASH MANAGEMENT CYCLE:

Sales generate cash, which has to be disturbed out. The surplus cash has to be invested while

deficit has to be borrowed. Cash management seems to accomplish this cycle at a minimum

cost. At the time, it also seeks to achieve liquidity and control. The management of cash is

important because it is difficult to predict cash flows accurately, particularly the inflows and

that there is no perfect coincidence between the inflows and outflows of the cash. In order to

resolve the uncertainness about the cash flows, the firm should develop appropriate for cash

COLLECTIONS

BORROW (or) INVESTINFORMATION

AND CONTROL

PAYMENTS


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management. The firm should evolve strategies regarding the following four facts of cash

management.

Cash planning: cash inflows and outflows should be planned to project cash surplus or

deficit for each period of the planned period.

Managing the cash flows: the flows of the cash should be properly managed.

Optimum cash level: the firm should decide about the appropriate level of cash balance.

Investing surplus cash: The surplus cash balance should be properly invested to earn

profits.

MOTIVES FOR HOLDING CASH:

There are three possible motives for holding cash:

Transitive.

Precautionary.

Speculative.

Transitive Motive:

Firm needs cash to meet their transaction needs. The collection of cash is not perfectly

synchronized with the disbursement of cash. Hence, some cash balance is required as buffer.

Precautionary Motive:


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There may be some uncertainty about the magnitude and timing of cash inflows from sales of

goods and services, sales of assets, and issuance of securities. To project it against such

uncertainties, a firm may require some cash balance.

Speculation Motive:

Firms would like to tap profit-making opportunities arising from fluctuations in commodity

prices, security prices, interest rates, and foreign exchange rates. A cash rich firm is better

prepared to exploit such bargains. Hence, the financial manager should establish reliable

forecasting and reporting system improve cash collections and disbursements and achieve

optimal conservations and utilization of funds.

CASH BUDGETING :

Cash budgeting or short-term cash forecasting is the principle tool of cash management. Cash

budgets, routinely prepared by business firms are helpful in:

Estimating cash requirements.

Planning short-term financing.

Scheduling payments in connection with capital expenditure projects.

Planning purchases of materials.

Developing credit policies.

The principle method of short-term cash forecasting is the receipts and payments method.

Sometimes the adjusted net income method is used through this method is employed mainly for

long-term cash forecasting.


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Long term cash forecasting:

Long-term cash forecasting are generally prepared for a period ranging from two to five years

and serve to provide a broad brush picture of a firms financing needs and availability of invest

bile surplus in the future. The receipt and disbursements method is used for preparing the long-

term cash forecast.

Monitoring collections and receivables:

The efficiency of cash management can be enhanced by properly monitoring the collection and

disbursements.

The followings are useful:

Prompt billing:

By preparing and sending the bills promptly, a firm can ensure remittance. It should be realized

that it is in the area of billing that the companys controls is high and there is a sizeable

opportunity and others in accelerating invoice date, mailing bills promptly, and identifying

payment locations.

Control of payable:

When a firm issues a cheque it reduces the balance in its books. The balance in the banks books

is not reduced till the bank makes the payment. The amount of cheques issued by the company

but not paid for by the referred to as the payment float. The amount of cheques deposited by


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the firm in the bank but not cleared is referred to as the collection float. The difference

between payment float and collection float is referred to as net float.

Optimal cash balance:

If a firm maintains a small cash balance it has to sell its marketable securities (and perhaps buy

them later) more frequently than if it holds a large cash balance. Hence, the trading costs will

tend to diminish if the cash balance becomes increases. However, the opportunities costs of

maintaining cash rise as the cash balance increases. The optimal cash balance is one were the

total costs of holding cash (which consists of trading costs and opportunity costs) are at

minimum for a particular size of cash balances.

Credit management:

Business firms would like to sell on cash. The pressure of competition and the force of

customers persuade them to sell on credit. Firms grant credit to increase or facilitate their sales.

The credit period extended by the business usually ranges from 15 days to 60 days. When

goods are sold on credit, finished goods get converted into accounts receivable in view of

seller. In the view of buyer, the obligation arising from credit purchase is represented as

accounts payable (trade creditors).

CHAPTER II

OBJECTIVES & METHODOLOGY

OBJECTIVES OF THE STUDY:


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The presence study is intended to analyze the practice of Working Capital management in Bajaj

capital Life Insurance Co. Ltd The efficiency of the Working Capital Management is

determined by the efficient administration on its various components.

The main objectives of this study are depicted below:

1. To know the process of Working Capital Management at Bajaj capital Life Insurance

Co. Ltd

2. To study the cash management, receivables management and inventory management.

3. To study the financial ability of Bajaj capital Life Insurance Co. Ltd. to meet its

financial obligations

4. To know the extent to which Bajaj capital Life Insurance Co. Ltd. is efficiently using its

assets in its operations.

5. This study attempts to understand the efficiency and effectiveness of the management

in each segment of Working Capital.

NEED FOR STUDY:

In a perfect world there would be no necessity for current assets and current liabilities because

there would be no uncertainty, no transaction costs, information search costs, scheduling costs,

or production and technology constraints. However, the world in which we live is not perfect.


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So, organization may be faced with an uncertainty regarding availability of sufficient quantity

of critical inputs in future at reasonable price. This may necessitate the holding of inventory i.e.

current assets.

To ensure that each of the current assets is efficiently managed to ensure the overall liquidity of

the unity and at the same time not keeping too high level of any one of them Working Capital

management is a must. Working Capital attains a proper balance between the amount of current

assets and the current liabilities in such away that the firm is always able to meet its financial

obligations whenever due. Working Capital management ensures smooth working of the unit

without any production held ups due to the paucity of funds. Thus as Working Capital is the

life, blood and nerve center of a business. It is managed in order to attain a smooth running of

the business

METHODOLOGY:

In methodology data collections are in two types.

Those are

Primary source and

Secondary source.

PRIMARY DATA:

As for the study, primary data is gathered through a series of detailed discussions with

managers, workers and executives of the company. Continuous interaction with the employees

during the study helped me to arrive at certain conclusions about the study.

SECONDARY DATA:


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As for the study, the secondary data was collected from company financial reports, reference

books, websites, and various books and records from the Finance Department. Data have been

collected from published books like Journals, from the reports of the Auditors and from sources

such as annual reports published by Bajaj capital Life Insurance Co. Ltd., which is the main

source to this study.

LIMITATIONS:

The limitations that came across during the course of this work are listed below

Limited financial information is provided. i. e only 7 yrs data is given.

Limited time is given to study these aspects.

Literally through the study is not comprehensive; it is illustrative enough to arrive at

reasonable conclusions. In spite of many efforts made for perfection, some

inconsiderable mistakes may occur.

CHAPTER-III

INDUSTRY AND COMPANY PROFILE

Bajaj Capital Ltd is one of India's premier Investment Advisory and Financial Planning

companies. The Company is also SEBI-approved Category I Merchant Bankers.

The Company offers personalised Investment Advisory and Financial Planning services to

individual investors, corporate houses, institutional investors, Non-Resident Indians (NRIs) and

High Networth Clients, among


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Bajaj capital Life Insurance Co. Ltd. is a joint venture between Allianz SE, one of the world's

largest insurance companies, and Bajaj Finserv. Allianz SE is a leading insurance corporation

globally and one of the largest asset managers in the world, that manage assets worth over a

Trillion. With over 115 years of financial experience, Allianz SE is present in over 70 countries

around the world. Bajaj Allianz is into both life insurance and general insurance. Today, Bajaj

Allianz is one of India's leading and fastest growing insurance companies. Currently, it has

presence in more than 550 locations with over 60,000 Insurance Consultants.

In June 2008, Bajaj Allianz entered into partnership with Thomas Cook India to provide travel

finance. Bajaj Allianz Life Insurance ensures excellent insurance and investment solutions by

offering customized products, supported by the best technology. A comprehensive list of

policies and products offered by Bajaj Allianz Life Insurance Co. Ltd. is as follows

Whether its planning for your children's future or whether its planning for your requirement. Or

for covering your risks. Or for a tax friendly investment option. Insurance companies in India

have lined up an array of options.

Life Insurance plans are classified into children's plans, pension plans, unit linked insurance

plans (ULIP), term plans, endowment plans, whole-life plans and money-back plans.

The best plan for you depends on the benefit you are seeking. It is best to consult a qualified

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and so its important to choose a pension plan carefully. PolicyBazaar.com aims to provide you

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Sky high costs throw even a well-salaried person off balance. With rates rising everyday, you

can imagine how high they will be when you are about to retire. It is reasonable to start

thinking about a good retire plan that fits your needs. Begin by understanding the pension

amount you would require and the premiums you can afford.


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India has a growing elderly population with most of them having no formal access to retirement

benefits. Most are still dependent on their children for old age care. The government has set up

Pension Fund Regulatory Development Authority to promote old-age income security by

establishing, developing and regulating pension funds.

Pension Plans are individual insurance plans that impact your future by providing financial

stability during old age. Pension plans are suitable not only senior citizens, but anyone planning

for a secure future.

With an increasing number of young Indian professionals moving away from traditional joint

family structure, parents have realized the need to be careful for their retirement years. Pension

plans are their best friend offering a comprehensive long term financial plan for retirement

years.

You can research the various plans available in the market and compare their costs and

benefits. Its an important financial step and with Policy Bazaar you are assured of making an

informed decision which will impact your future. You can view various pension plans available

in India here at Policy Bazaar. and evaluate and purchase the one you choose.

Car Insurance

By comparing car insurance technically provides protection against the losses incurred as a

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With so many car insurance companies vying for customer base in the market, it is quite


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Pension plans provide financial security to policyholders during their retirement days and so

its important to choose a pension plan carefully. Policy Bazaar aims to provide you with all

relevant facts and advice so that you can choose the perfect plan for your retirement needs.

Sky high costs throw even a well-salaried person off balance. With rates rising everyday, you

can imagine how high they will be when you are about to retire. It is reasonable to start

thinking about a good retire plan that fits your needs. Begin by understanding the pension

amount you would require and the premiums you can afford.

India has a growing elderly population with most of them having no formal access to retirement

benefits. Most are still dependent on their children for old age care. The government has set up

Pension Fund Regulatory Development Authority to promote old-age income security by

establishing, developing and regulating pension funds.

Pension Plans are individual insurance plans that impact your future by providing financial

stability during old age. Pension plans are suitable not only senior citizens, but anyone planning

for a secure future.

With an increasing number of young Indian professionals moving away from traditional joint

family structure, parents have realized the need to be careful for their retirement years. Pension


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plans are their best friend offering a comprehensive long term financial plan for retirement

years.

You can research the various plans available in the market and compare their costs and

benefits. Its an important financial step and with Policy Bazaar, you are assured of making an

informed decision which will impact your future. You can view various pension plans available

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Children life insurance

Your Life is precious and we make efforts to reduce risks in the best manner we can. History

of Insurance shows that it was introduced to reduce the risk of traders and merchants. But

slowly the civilians started using the format to insure their personal lives.

An important part of a sound financial plan, Life insurance ensures financial protection and

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The beneficiaries can utilize the money to replace the income one would have earned or help

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And Policy Bazaar is here to assist you find the right life insurance solution for you. The

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Personal loans


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Health Insurance

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the most cost effective plan for a teenager. One should treat utility services seriously, since

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Credit cards

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Policy Bazaar will not only save money, but also ensure you choose the best services. Bajaj

Allianz Life Insurance Co. Ltd. is a joint venture between Allianz SE, one of the world's largest

insurance companies, and Bajaj Finserv. Allianz SE is a leading insurance corporation globally

and one of the largest asset managers in the world, that manage assets worth over a Trillion.

With over 115 years of financial experience, Allianz SE is present in over 70 countries around

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is one of India's leading and fastest growing insurance companies. Currently, it has presence in

more than 550 locations with over 60,000 Insurance Consultants.

In June 2008, Bajaj Allianz entered into partnership with Thomas Cook India to provide travelfinance. Bajaj Allianz Life Insurance ensures excellent insurance and investment solutions by

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Regular Premium

New Unit Gain Super

Unit Gain Plus Gold

New Unit Gain Plus

New Unit Gain

Young Care

Young Care Plus

New Family Gain-R


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Single Premium

New Unit Gain Premier SP

New Unit Gain Plus SP

Pension Plans

Annuity

Pension Guarantee

Retirement

Future Income Generator

Swarna Vishranti

New Unit Gain Easy Pension Plus RP

New Unit Gain Easy Pension Plus SP

Future Secure

Traditional Plans

Endowment

Invest Gain

Save Care Economy SP

Life Time Care

Super Saver

Money Back

Cash Gain

Term Plans

Protector

Term Care


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New Risk Care

Women Insurance Plans

House Wives

Working Women

Health Plans

Care First

Health Care

Family CareFirst

Children Plans

Child Gain

Group Plans

Non Employer Employee

Credit Shield

Group Term Life(Non Employer Employee)

Group Suraksha

Swayam Shakti Suraksha

Group Loan Protector

Group Income Protection

Employer Employee

Group Term Life(Employer Employee)

New Group Gratuity Care

New Group Superannuation Care

Group Save Plus

Group Term Life in lieu of EDLI


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Group Leave Encashment Scheme

Group Annuity

Group Superannuation Gold

Group Gratuity Gold

Micro Insurance

Alp Nivesh Yojana

Jana Vikas Yojana

Saral Suraksha Yojana

Other Plans

Family Assure

Fortune Plus

Capital Shield

CenturyPlus II


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CMD/ED

Finance Accounts Chief

Finance Officer K. Suresh

Human Resources Vice

President Jai Krishna

Supply ChainManagement Vice

President (SCM) G.Vijaya Naidu

IT Chief Information

Officer K. Suresh

QMS & QA Vice

President D. Naran Reddy

Finance Accounts D.G.MD. Ramesh Babu

Finance Manager G.

Ramachandra Raju

Debtor Officer Padmaja

Costing Manager V.Venkatesh

Human ResiyrcesManager (HO) T.

Damodhara Chowdary

ADMIN (HQ) Officer M.

Parthasaradhi

D.G.M. B. DamodaramDP & IM HOD L.

Mahendra

Logistics Sr. Officer R.

Chandra Raju

Manager S. SathishQMS Manager K. Subba

Reddy

QA ARBL Manager P.

Murali

Commercial Manager A.

Venkatesh


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CHAPTER 4

DATA ANALYSIS & INTERPRETATION

Statement showing changes in Working Capital during the period 2001-2002.

Particulars 2001

(Rs)

2002

(Rs)

Changes in Working Capital

Increase Decrease

Current

Assets:

(a) inventories

1,46,63,08,018 1,36,24,00,236 10,39,07,782

(b)sundry

debtors 7,08,07,258 6,45,65,339 62,41,919

(c)cash and

bank balance

4,12,81,015 2,82,13,254 1,30,67,761

(d)other

current assets 30,38,828 19,72,164 10,66,664

(e) loans and

advances 20,32,37,660 20,71,41,557 39,03,897

Total current

Assets 1,78,46,72,779 1,66,42,92,550 12,03,80,229

Current

liabilities and

provisions

6,65,68,372 54,61,25,626 47,95,57,254

Total current

Liabilities

6,65,68,372 54,61,25,626 47,95,57,254

Changes in

working

Capital

Decreasing inWorking

Capital

1,71,81,04,407 1,11,81,66,924

59,99,37,483 59,99,37,483

1,71,81,04,407 1,71,81,04,407 60,38,40,780 60,38,40,780

Table No: 5.1


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Interpretation:

From the above table shows the working capital requirements for the company in the

year 2001. In the year 2001 there is a significant change in current assets such as

inventories has been decreased by Rs.1, 36, 24, 00,236 over the last year 2000. Sundry

debtors have been decreased by Rs.6, 45, 65,339 compared to last year. Cash and bank

balances have been decreased by Rs.2, 82, 13,254. Other current assets, loans, and

advances have been decreased by Rs.19, 72,164 and Rs.20, 71, 41,557 over the last year

2000. In the financial year 2001 total current assets has been decreased by Rs.12, 03,

80,229. That means in flow of funds to the company and their impact decreasing the

Working Capital requirement.

In the year 2001 there is a significant change in current liabilities increasing their value

by Rs.47, 95, 57,254 compared to the last year 2000. The total current liabilities in the

year 2002 increasing their value by Rs 47,95,57,254 over last year 2000. Increase the

current liabilities means inflow of funds to the company that result in decreasing in

working requirements to the company. The total net Working Capital decreased by

Rs.59, 99, 37,483 compare to the last year 2000.


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Particulars 2002

(Rs)

2003

(Rs)


Increase Decrease

Current Assets:

(a) inventories 1,36,24,00,236 1,43,85,65,711 7,61,65,475

(b)sundry

debtors 6,45,65,339 4,80,26,504 1,65,38,835

(c)cash and

bank balance 2,82,13,254 3,45,07,202 62,93,948

(d)other

current assets

19,72,164 24,67,261 4,95,097

(e) loans and

advances

20,71,41,557 21,15,68,500 44,26,943

Total current

Assets 1,66,42,92,530 1,73,51,35,178 7,08,42,648

Current

liabilities and

provisions

54,61,25,626 62,99,49,407 8,38,23,781

Total current

Liabilities 54,61,25,626 62,99,49,407 8,38,23,781

Changes in

Working

Capital

Net decrease

in Working

Capital

1,11,81,66,904 110,51,85,771

1,29,81,153 1,29,81,153

111,81,66,924 111,81,66,924 8,38,23,781 8,38,23,781

Source: Company annual reports. Table No.5.2

Interpretation:


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From the above table shows the working capital requirements for the company

in the year 2002. In the year 2002 there is a significant change in current assets such as

inventories has been increased by Rs.7, 61, 65,475 over the last year 2001. Sundry


balances have been increased by Rs.62, 93,948. Other current assets and loans and

advances have been increased by Rs.4, 95,097 and Rs.44, 26,943 over the last year

2001. In the financial year 2002 total current assets has been increased by Rs.7, 08,

42,628. That means out flow of funds to the company and their impact increasing the


In the year 2002 there is a significant change in current liabilities increasing

their value by Rs.8, 38, 23,781 compared to the last year 2001. The total current

liabilities in the year 2002 decreasing their value by Rs.8, 38, 23,781 over last year

2001. Decrease the current liabilities means outflow of funds to the company that result

in increasing in working requirements to the company. The total net Working Capital

decreased by Rs.1, 29, 81,153 compare to the last year 2001.

Statement showing changes in Working Capital during the period 2003-2004


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Particulars2003

(Rs)

2004

(Rs)Changes in Working Capital

Increase Decrease

Current

Assets:(a) inventories

1,43,85,65,711 1,53,82,60,271 9,96,94,560

(b)sundry

debtors4,80,26,504 7,31,85,488 2,51,58,984

(c)cash and

bank balance3,45,07,202 530,09,438 1,85,84,236

(d)other

current assets24,67,261 12,98,174 11,69,087

(e) loans and

advances 21,15,68,500 20,40,18,611 75,49,889

Total current

Assets1,73,51,35,178 1,86,98,53,982 13,47,18,804

Current

liabilities and

provisions

62,99,49,407 91,44,32,890 28,44,83,483

Total current

Liabilities 62,99,49,407 91,44,32,890 28,44,83,483

Changes in

working

Capital

Net

Decreasing in

Working

Capital

110,51,85,771 95,54,21,092

14,97,64,679 14,97,64,679

110,51,85,771 110,51,85,771 28,44,83,483 28,44,83,483

Table No.5.3

Interpretation:


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balances have been increased by Rs.1, 85, 84,236 compared to the last year 2002. Other

current assets and loans and advances have been decreased by Rs.11, 69,087 and Rs.75,

49,889 over the last year 2002. In the financial year 2003 total current assets has been

increased by Rs.13, 47, 18,804 over the last year 2002. That means out flow of funds to

the company and their impact increasing the Working Capital requirement.

In the year 2003 there is a significant change in current liabilities decreasing

their value by Rs.28, 44, 83,483 compared to the last year 2002. The total current

liabilities in the year 2003 increasing their value by Rs.28, 44, 83,483 over last year

2002. Increase the current liabilities means outflow of funds to the company that result

in increasing in working requirements to the company. The total net Working Capital

decreased by Rs.14, 97, 64,679 compare to the last year 2002.

Statement showing changes in Working Capital during the period 2004-2005

Particulars 2004(Rs)

2005(Rs)



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Increase Decrease

Current

Assets:

(a) inventories

1,53,82,60,271 1,35,29,84,499 18,52,75,772

(b)sundry

debtors 7,31,85,488 12,48,86,536 5,17,01,048

(c)cash and

bank balance 5,30,91,438 5,52,57,959 21,66,521

(d)other

current assets

12,98,174 6,52,331 6,45,843

(e) loans and

advances 20,40,18,611 6,04,77,777 14,35,40,834

Total current

Assets

186,98,53,982 1,59,42,59,102 27,55,94,840

Currentliabilities and

provisions

91,44,32,890 67,27,82,794 24,16,50,096

Total current

Liabilities 91,44,32,890 67,27,82,794 24,16,50,096

Changes in

working

CapitalDecreasing in

Working

Capital

95,54,21,092 92,14,76,308

3,39,44,784 3,39,44,784

95,54,21,092 95,54,21,092 27,55,94,880 27,55,94,880

Source: annual reports. Table No: 5.4

Interpretation:




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inventories has been decreased by Rs.18, 52, 75,772 over the last year 2003. Sundry

debtors have been increased by Rs.5, 17, 01,048 compared to last year. Cash and bank

balances have been increased by Rs.21, 66,521 compare to last year 2003. Other current

assets and loans and advances have been decreased by Rs.6, 45,843 and Rs.14, 35,

40,834 over the last year 2003. In the financial year 2004 total current assets has been

decreased by Rs.27, 55, 94,880. That means in flow of funds to the company and their

impact decreasing the Working Capital requirement.

In the year 2004 there is a significant change in current liabilities decreasing

their value by Rs.67, 27, 82,794 compared to the last year 2003. Decrease the current

liabilities means outflow of funds to the company that result in increasing in working

requirements to the company. The total net Working Capital decreased by Rs.3, 39,

44,784 compare to the last year 2003.


Particulars 2005 2006 Changes in Working Capital

Increase Decrease

Current Assets:

(a) inventories 1,35,29,84,499 143,18,24,825 7,88,40,326

(b)sundry

debtors 12,48,86,536 11,21,33,122 12,75,3,414

(c)cash and


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bank balance 5,52,57,959 5,02,62,789 49,95,170

(d)other

current assets

6,52,331 10,21,849 3,69,518

(e) loans and

advances 6,04,77,777 38,99,83,272 32,95,05,495

Total current

Assets 1,59,42,59,102 198,52,25,857 39,09,66,755

Current

liabilities and

provisions

67,27,82,794 135,19,50,925 67,91,68,131

Total current

Liabilities 67,27,82,794 135,19,50,925 67,91,68,131Changes in

working

Capital

Decreasing in

Working

Capital

92,14,76,308 63,32,74,932

28,82,01,376

28,82,01,376

92,14,76,308 92,14,76,308 67,91,68,131 67,91,68,131

Interpretation:





balances have been decreased by Rs.49, 95,170. Other current assets and loans and

advances have been increased by Rs.3, 69,518 and Rs.32, 95, 05,495 over the last year

2004. In the financial year 2005 total current assets has been increased by Rs.39, 09,

66,755. That means out flow of funds to the company and their impact increasing the



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their value by Rs.67, 91, 68,131 compared to the last year 2004. Increase in current

liabilities means inflow of funds to the company that result in decreasing in working

requirements to the company. The total net Working Capital decreased by Rs.28, 82,

01,376 compare to the last year 2004.



Increase Decrease

Current Assets:

(a) inventories

143,18,24,825 135,93,30,982 7,24,93,843

(b)sundry

debtors

11,21,33,122 10,80,11,642 41,21,480

(c)cash and

bank balance

5,02,62,789 6,81,47,393 1,78,84,604

(d)other

current assets

10,21,849 15,13,709 4,91,860

(e) loans and

advances

38,99,83,272 46,65,45,285 76,56,2,013

Total current

Assets

198,52,25,857 200,35,49,011 1,83,23,154

Current 135,19,50,925 131,17,17,583 4,02,33,342


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liabilities and

provisions

Total current

Liabilities

135,19,50,925 131,17,17,583 4,02,33,342

Changes in

working

Capital

Decreasing in

Working

Capital

63,32,74,932

5,85,56,496

69,18,31,428

5,85,56,496

69,18,31,428 69,18,31,428 5,85,56,496 5,85,56,496

Source: annual reports. Table No: 5.6

Interpretation:




debtors have been decreased by Rs.41, 21,480 compared to last year. Cash and bank

balances have been increased by Rs.1, 78, 84,604. Other current assets and loans and

advances have been increased by Rs.4, 91,860 and Rs.7, 65, 62,013 over the last year

2005. In the financial year 2006 total current assets has been decreased by Rs. 5, 85,

56,496. That means out flow of funds to the company and their impact decreasing the

Working Capital.


their value by Rs.4, 02, 33,342 compared to the last year 2005. Increase in current

liabilities means inflow of funds to the company that result in decreasing in working

requirements to the company. The total net Working Capital increased by Rs. 5,

85,56,496compare to the last year 2005.


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Increase Decrease

Current Assets:

(a) inventories

135,93,30,982 132,75,07,945 3,18,23,037

(b)sundry

debtors

10,80,11,642 11,45,09,441 64,97,799

(c)cash and bank

balance

6,81,47,393 17,67,30,095 10,85,82,702

(d)other

current assets

15,13,709 28,08,246 12,94,537

(e) loans and

advances

46,65,45,285 14,02,58,734 32,62,86,551

Total current

Assets

200,35,49,011 176,18,14,461 24,17,34,550

Current liabilities

and provisions

131,17,17,583 125,07,21,521 6,09,96,062

Total current

Liabilities

131,17,17,583 125,07,21,521 6,09,96,062

Changes in

working

Capital

Decreasing in

Working Capital

69,18,31,428 51,10,92,940

18,07,38,488 18,07,38,488

5,85,56,496

69,18,31,428 69,18,31,428 24,17,34,550 24,17,34,550

Source: annual reports Table No: 5.7

Interpretation:


in the year 2007. In the year, 2007 there is a significant change in current assets such as


debtors have been increased by Rs.64, 97,799 compared to last year. Cash and bank


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balances have been increased by Rs.10,85,82,702. Other current assets, loans, and

advances have been increased by Rs.12,94,537 and decreased by Rs.32,62,86,551 over

the last year 2006. In the financial year 2007 total current assets has been decreased by

Rs. 24,17,34,550. That means out flow of funds to the company and their impact

decreasing the Working Capital.

In the year, 2007 there is a significant change in current liabilities decreasing

their value by Rs.6,09,96,062 compared to the last year 2006. Decrease in current

liabilities means inflow of funds to the company that result in increasing in working

requirements to the company. The total net Working Capital decreased by Rs.

18,07,38,428 compare to the last year 2006.


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LIQUIDITY RATIOS:

Current Ratio:

Current Ratio = Current Assets

Current Liabilities

Year Current Assets Current Liabilities Ratio

2002 1,66,42,92,550 54,64,25,626 3.05

2003 1,73,51,35,178 62,99,49,407 2.75

2004 1,86,98,53,982 91,44,32,890 2.04

2005 1,59,42,59,102 77,35,72,424 2.37

2006 1,98,52,25,857 101,65,48,666 1.47

2007 2,00,35,49,011 85,25,17,150 2.35

2008 1,76,18,14,461 1,16,87,78,350 1.51

Source: company annual reports. Table No. 5.6


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0

1

2

3

4

2002 2003 2004 2005 2006 2007 2008

Ratio

Years

Current Ratio

Ratio

Chart No.5.1

INTERPRETATION:

Current Ratio is used to measure the liability position of the concern and thus it reflects

the short-term solvency of the concern. In other words it shows the ability of the

concern to meet its entire current obligation as and when there are due during the short

term period.

As a convention, the minimum of 2:1 ratio is referred to as Bankers Thumb Rule.

The company current ratio position is far better till 2003. In the year 2002 the current

ratio relatively high then the Bankers Rule.

1.Quick Ratio:

Quick Ratio = Quick Assets


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Current Liabilities

Year Quick Assets Current Liabilities Ratio

2002 30,18,92,314 54,61,25,626 0.552003 29,65,69,467 62,99,49,407 0.47

2004 33,15,93,711 91,44,32,890 0.36

2005 24,12,74,603 67,27,42,794 0.36

2006 55,34,01,032 101,35,19,50,925 0.41

2007 64,42,18,029 85,25,17,150 0.76

2008 43,43,06,516 1,16,87,78,350 0.37



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0

0.5

1

2002200320042005200620072008

Ratio

Years

Quick Ratio

Ratio

TABLE-1

Interpretation:

From the above table shows the quick ratio of the company. As conventional

rule 1:1 is satisfactory level. The company maintains high quick ratio in the year 2002

and later years gradually decreasing up to 0.36 in the year 2004 and 2005. It is

advisable that the company maintains high quick ratio.

2.Absolute liquid Ratio or Cash Ratio:

Cash Ratio = Absolute Liquid Assets

Current Liabilities


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Year Absolute Liquid

Assets

Current liabilities Ratio

2002 2,82,13,254 54,61,25,626 0.054

2003 3,45,07,202 62,99,49,407 0.055

2004 5,30,91,438 91,44,32,890 0.0582005 5,52,57,959 67,27,82,794 0.082

2006 5,02,62,789 135,19,50,925 0.037

2007 6,81,47,393 85,25,17,150 0.080

2008 17,67,30,095 1,16,87,78,350 0.151

Source: company annual reports.


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0

0.1

0.2

2002200320042005200620072008

Ratio

Years

Cash Ratio

Ratio

TABLE-2

INTERPRETATION:

From the above table shows the cash ratio of the company. Cash is the most liquid

asset a financial analysis may examine the company maintain high cash ratio in the year

2004-05. In the current year 2005-06 the cash ratio of the company is 0.037. It is

advisable that the company maintains high cash ratio.

3. LEVERAGE RATIO:

Total Debt Ratio = Total Debt


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Net Sales

Year Debit Net sales Ratio

2002 57,71,88,270 2,20,42,39,579 0.262003 45,63,15,310 132,90,33,413 0.34

2004 35,36,06,280 146,09,80,106 0.24

2005 86,55,61,433 2,05,22,67,476 0.42

2006 54,11,87,847 3,10,49,48,667 0.17

2007 50,11,72,102 4,07,14,44,781 0.12

2008 37,35,99,300 3,97,24,59,539 0.09



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0

0.5

2002200320042005200620072008

Ratio

Years

Total Debt Ratio

Ratio

TABLE-4

INTERPRETATION:

From the above table shows the debt ratio of the company. The company maintains

high debt ratio which is 0.42 in the year 2004-05 and later years gradually decreasing

up to 0.18 in the financial year 2005-06 in which is the lowest ratio. It is advisable that

the company maintains high debt-equity ratio,


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4.DEBT-EQUITY RATIO:

Debt Equity Ratio = Total Debt

Equity Capital

Year Total Debt Share Holders Ratio

2002 57,71,88,370 11,33,85,000 5.09

2003 45,63,15,310 11,33,85,000 4.02

2004 35,36,06,280 11,33,85,000 3.12

2005 86,55,61,433 11,33,85,000 7.63

2006 54,11,87,947 11,33,85,000 4.77

2007 50,11,72,102 11,33,85,000 4.42

2008 37,35,99,300 11,33,85,000 3.29

Source: company annual reports


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0

2

4

6

8

2002 2003 2004 2005 2006 2007 2008

Ratio

Years

Debt Equity Ratio

Ratio

TABLE-4

Interpretation:

From the above table shows the debt equity ratio of the company. The debt equity

indicates the relationship describing the lenders contribution for each rupee of the

owner. The company maintains high debt equity in the year 2004-05 and later years

gradually decreasing up to 3.12 in the year 2003-04.

II. ACTIVITY RATIOS


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5.Debt Collection Period:

Debt Collection Period = Total No. of Days

Debtors Turnover Ratio

Year No. of Days Debt Turnover

Ratio

Days

2002 365 34.13 10.69

2003 365 27.67 13.19

2004 365 22.20 16.44

2005 365 18.49 19.74

2006 365 28.78 12.68

2007 365 39.13 9.33

2008 365 34.69 10.52

Source: company annual reports


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0

5

10

15

20

2002 2003 2004 2005 2006 2007 2008

Ratio

Years

Debtors Collection Period

Ratio

TABLE-5

Interpretation:

The debt collection period indicates the efficiency of trade credit management years

1998-99 is in 98 days implies that debtors on an average are collected in 98 days and it

has been raised to 149 days in the year 2003-04. A very high long collection period

would imply either poor credit selection or an inadequate collection effort. So, short

collection period is preferable.

6.Debtors Turnover Ratio:

Debt Turnover Ratio = Sales

Sundry Debtors


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Year Sales Debtors Ratio

2002 2,20,42,39,579 6,45,65,339 34.13

2003 1,32,90,33,413 4,80,26,504 27.67

2004 1,69,48,61,973 7,31,85,488 22.202005 2,31,01,73,398 12,48,86,536 18.49

2006 3,22,66,58,786 11,21,33,122 28.78

2007 4,22,60,31,645 10,80,11,642 39.13

2008 3,97,24,59,539 11,45,09,441 34.69


0

10

20

30

40

2002 2003 2004 2005 2006 2007 2008

Ratio

Years

Debtors Turnover Ratio

Ratio


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TABLE-6

Interpretation:

The debtors turnover ratio indicates the efficiency in the management of credit. The

higher credit the more efficient it is in credit management. In Bajaj capital Life

Insurance Co. Ltd the debtors turnover ratio on an average is 28.146, in the year 2002-

2003 it is high 27.67 after which continuous decline is observed. This represent the

increased from 18.49

Working Capital Turnover Ratio

7.Working Capital Turnover Ratio = Net Sales

Net Working Capital

Year Sales Working Capital Ratio

2002 2,20,42,39,579 111,81,66,924 1.97

2003 1,32,90,33,413 110,51,85,771 1.20

2004 1,69,48,61,973 95,54,21,092 1.53

2005 2,31,01,73,398 77,14,76,308 2.232006 3,22,66,58,786 63,62,74,932 5.67


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2007 42,27,60,31,645 6,91,18,31,428 6.11

2008 3,97,24,59,539 51,10,92,940 7.77


0

5

10

2002200320042005200620072008

Ratio

Years

Working Capital Turnover Ratio

Ratio

TABLE-7

INTERPRETATION:


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The Working Capital turnover ratio relates net current assets to sales. The Working

Capital ratio in Bajaj capital Life Insurance Co. Ltd in very progressive pattern in 2005

and 2006 when compared to all the previous 4 years.

8. TURNOVER TO FIXED ASSETS:

Fixed Assets Turnover Ratio = Sales

Fixed Assets

Year Total Sales Fixed Assets Ratio

2002 2,20,42,39,579 95,86,36,933 2.29

2003 1.,32,90,33,413 1,01,14,89,111 1.31

2004 1,46,09,80,106 1,01,41,13,437 1.44

2005 2,05,22,67,476 96,49,20,932 2.13

2006 2,95,67,60,674 1,04,48,76,936 2.83

2007 4,22,60,31,645 1,39,70,66,294 3.02

2008 3,97.24,59.539 1,55,41,25,127 2.56



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0

2

4

2002 2003 2004 2005 2006 2007 2008

Ratio

Years

Fixed Assets Turnover Ratio

Ratio

TABLE-8

INTERPRETATION:

It indicates whether there was adequate; investment fixed assets turnover investment or

under investment in fixed assets. The ratio is an index to the efficiency of the

management. In Bajaj capital Life Insurance Co. Ltd the fixed assets. Turnover ratio in

the years 2002,2003,2004,2005 and 2004-05 is 2.29, 1.31, 1.44, 2.13, 2.83


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9.Gross profit ratio:

Gross Profit Ratio = Gross Profit x 100

Sales

Year Gross Profit Sales Ratio

2002 37,20,16,000 2,20,42,39,579 16.87

2003 25,42,94,000 1,32,90,33,413 19.13

2004 15,35,38,000 1,46,09,80,106 10.50

2005 30,22,50,000 2,05,22,67,476 14.72

2006 80,33,82,000 2,95,67,60,474 27.17

2007 1,04,93,99,000 4,22,60,31,645 24.83

2008 66,85,88,000 3,97,24,59,539 16.83



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0

10

20

30

2002200320042005200620072008

Ratio

Years

Gross profit ratio

Ratio

TABLE-9

INTERPRETATION:

From the above table shows gross profit ratio of the company. This ratio

shows the relationship between the prices, sales volume and costs. It indicates the

efficiency of the production and trading operations of the organization. The company

maintains high gross profit in the year 2002-03 and gradually decreasing in the financial

years 2003-04 and 2004-05.


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10.Net Profit Ratio:

Net Profit Ratio = Profit After Tax

Sales

Year Net Profit Sales Ratio

2002 13,68,16,069 2,20,42,39,579 0.06

2003 3.40.18.935 1,32,90,33,413 0.03

2004 (4,22,12,528) 1,46,09,80,106 (0.03)

2005 19,11,78,692 2,05,22,67,476 0.092006 40,65,21,252 2,95,67,60,674 0.13

2007 57,11,04,726 3,59,13,09,940 0.16

2008 2,35,55,05,448 3,97,24,59,539 0.06



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-0.05

0

0.05

0.1

0.15

0.2

2002 2003 2004 2005 2006 2007 2008

Ratio

Years

Net Profit Ratio

Ratio

TABLE-10

Interpretation:

The net profit ratio measures relationship between Net Profit and sales of a firm and

influence the management efficiency in manufacturing, administration and selling of

the product. The net profit ratio in Bajaj capital Life Insurance Co. Ltd reflecting

fluctuations and in the year 2006 it was 0.13. A high net profit margin would ensure

adequate returns to the owners of an organization.


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CHAPTER V

FINDINGS AND SUGGESTIONS

INTRODUCTION:

Working Capital attains a proper balance between the amount of current assets and the

current liabilities in such away that the firm is always able to meet its financial

obligations whenever due. Working Capital management ensures smooth working of

the unit without any production held ups due to the paucity of funds. Thus as Working

Capital is the life, blood and nerve center of a business. It is managed in order to attain

a smooth running of the business.

OBJECTIVES OF THE STUDY:

The presence study is intended to analyze the practice of Working Capital

management in Bajaj capital Life Insurance Co. Ltd. The efficiency of the Working

Capital Management is determined by the efficient administration on its various

components.

The main objectives of this study are depicted below:


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1. To know the process of Working Capital Management at Bajaj capital Life

Insurance Co. Ltd

2. To study the cash management, receivables management and inventory

management.

3. To study the financial ability ofBajaj capital Life Insurance Co. Ltd meet its

financial obligations

4. To know the extent to which Bajaj capital Life Insurance Co. Ltd is

efficiently using its assets in its operations.

5. This study attempts to understand the efficiency and effectiveness of the

management in each segment of Working Capital.

METHODOLOGY:

In methodology data collections are in two types.

Those are

Primary and

Secondary.

PRIMARY DATA:


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As for the study, primary data is gathered through a series of detailed

discussions with managers, workers and executives of the company. Continuous

interaction with the employees during the study helped me to arrive at certain

conclusions about the study.

SECONDARY DATA:

As for the study, the secondary data was collected from company financial

reports, reference books, websites, and various books and records from the

Finance Department. Data have been collected from published books like

Journals, from the reports of the Auditors and from sources such as annual

reports published by Bajaj capital Life Insurance Co. Ltd, which is the main

source to this study.

FINDINGS:

1. Current Ratio of the firm in satisfactory position from the period 2002-2006.

2. The quick assets are half of the current liabilities, which may be a problem

to meet the obligation.

3. The cash ratio, which is only 55% of current liabilities, which needs

improvement.


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4. The inventory is maintained consistently but the inventory turnover ratio

fluctuates due to change in sales.

5. The fixed assets turnover ratio is maintained consistently at 2% above.

Which to favorable to organization.

6. The debts collection period is 12.68 days. This helps in quick recovery of

debts.

7. The debt of the organization is 4 times than equity. This has to be reduced or

else, may create a problem for the organization.

8. The Working Capital ratio is satisfactory year to year

SUGGESTIONS:

1. It is the immediate responsibility of the management to improve the position of

cash and bank balances.

2. The amount of current liabilities should be reduced to a significant level

3. It is advisable to maintain the same and study growth in sales.

4. By applying various inventories maintenance methods try to reduce the level of

inventories by which the company will get sufficient financial resources to re

pay the huge amount of its current liabilities.


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5. As the Government decides about the price for sugar it would be suggestible to

maintain sufficient cash reserves with the Organization to maintain stability in

its operations if low price is fixed.

6. Debt collection performance of the company should be improved.

7. Quick Assets have to be increase cash and bank balances.

8. The debtors turnover ratio was increasing year by year and should be continued

so.

9. The return on equity satisfactory which should be so.

10. The cash ratio is to be improved by increasing cash bank balances and loans and

advances.

BIBLOGRAPHY:

1. JAIN , SP & NARANGE, KV ADVANCEDACCOUNTING


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KALYANIPUBLICATIONS

Newdelhi-1986.

2. Maheswari, Sn. finance managementSultan chand & sons

Newdelhi-1997.

3. Prasanna chandra finance management

Tata McGraw hill

Newdelhi-1998.

4. I. M. Pandey finance management

Vikas publicationsNewdelhi-1999.

5. R.K. Sharma, Shashi,

K. Gupta management accounting

Kalyani publications

Newdelhi-1986.

6. Weston & Brigham Essential of managerial

Finance

The bryden press

Horcourt brce

Jovanovich College

Publishers

Footwoth-1990.

Documents

Bajag Working Capital