You are on page 1of 100

A

Project Report On

“THE STUDY OF WORKING CAPITAL MANAGEMENT”


Prepared at:

ATUL LIMITED

Project Report
On
A member of Lalbhai Group

(Aromatics Division)
The Study of Working Capital
Management
Of
Atul Ltd
A member of Lalbhai Group

Our Mission

“We are a chemical company committed to creating wealth for all


our stakeholders.

We will strive for leadership in our chosen products and markets by


providing high quality products and services to our customers. We
will seek profitable growth by innovative application of science and
technology.

We will pursue excellence in all that we undertake and take steps to


continuously improve.

We will take responsible care of the environment around us and


improve the quality of life in the communities we operate in.”
Board of Directors
The Board of Directors of Atul Ltd consists of eminent
industrialists and professionals who’s Chairman is Arvind Lalbhai.
Sunil S Lalbhai is the MD & CEO, Samveg Lalbhai is the MD and
Jagdish L Shah is the Executive Director.

Board of Directors
Name Status Occupation
Mr A N Lalbhai Non- Chairman,
executive Arvind Mills
Chairman Ltd
Mr S S Lalbhai Managing
Director &
CEO
Mr J L Shah Executive
Director
Mr N N Wadia Independent Chairman
Non- Bombay Dyeing
executive &
Director Manufacturing
Co Ltd
Mr G S Patel Independent Former
Non- Chairman Unit
executive Trust of India
Director
Dr S S Baijal Independent Former
Non- Chairman &
executive CEO ICI
Director Companies in
India
Mr B S Mehta Independent Partner Bansi S
Non- Mehta & Co
executive
Director
Mr H S Shah Independent Former
Non- Chairman &
executive Managing
Director Director Indian
Petrochemicals
Corporation Ltd

Mr S A Lalbhai Managing
Director

Mr S M Datta Independent Former


Non- Chairman
executive Hindustan Lever
Director Ltd
Mr K Aparajithan Independent
Non-
executive
Director
Mr R A Shah (Alternate Director) Independent Sr Partner of
Non- M/s Crawford
executive Bayley & Co.,
Director Mumbai
INDEX

Sr. No Description
1 Chemical industry Outlook
2 Over view of Atul Ltd
3 Over vie w of Aromatic
Division
4 Human Resource
Department
5 Production Department
6 Marketing Department
7 Finance Department
8 Quality Department
9 Objective Of The Study
10 Working capital
Management
11 Inventory Management
12 Cash Management
13 Receivable Management
14 Working Capital Finance
15 Findings
16 Recommendation
17 Bibliography
18 Balance Sheet
Chemical Industry Outlook

• The Indian Chemical Industry has grown at a CAGR of 8% during the period from
2001 to 2005. The industry in India is fragmented with few large companies.
There are over 6,600 chemical manufacturers & capacity utilization of Indian
plants is lower at 70%, when compared to that of China and Japan where it is
higher at 85-90%.

• The sector is a cyclical, capital-intensive where pricing power of the players is


under constant threat. Several bilateral Free Trade Agreements (FTAs) with
various ASEAN countries have been concluded or are under negotiations. These
are aimed at phasing out trade barriers to create a regime of free trade and this
may increase the pricing pressure on the Indian Chemical Industry.

• The bulk chemicals business segment continues to be cyclic in nature. However,


the automobile and electronic sectors are witnessing growth and this affords an
opportunity for the newer intermediaries' business segment and Indian epoxy
market is also growing rapidly.

• The key success factors pertaining to the industry are economies of scale, product
quality and reliability and development of new products and application
processes.

Industry analysis
The Chemical industry constitutes an important segment of the chemical industry
in India. The Indian Chemical industry is today totally self-sufficient with a majority
of its inputs manufactured locally. India is currently producing all varieties of
synthetic Chemicals and intermediates and has a small presence in the natural
Chemical. The subcontinent has emerged as a global supplier of Chemicals and dye
intermediates, particularly for reactive, acid, vat and direct dyes. The market for
Chemical is dependent on textiles, in particular demand for polyester and cotton
determines the demand for certain types of Chemicals. The textile industry is
currently buoyant and the market is growing steadily. There is a shift in the usage of
polyester and polyester blended fabrics and as a result demand for disperse dyes are at
a peak.
Market Size and Major Players

The market size of the Indian Chemical industry is INR141 billion including the
exports of INR52 billion in 2004-05. The exports doubled from INR26 billion 2000-
0'l to INR52 billion in 2004-05. By 2010, the exports are expected to reach INR121
billion. India currently produces 1,30,000 tonnes and 75% of the production is
exported to 15 countries like: the USA, Germany, Netherlands, Italy, UK, Spain,
Turkey, Switzerland, Indonesia, Korea, Hong Kong, Thailand, Singapore, Japan and
Taiwan. The per capita consumption in India is very low 50gm compared to the world
average of 400 gm. Textile, cotton and polyester consume more dye compared to the
other fabrics and in turn, the growth of disperse, direct and reactive dyes is expected
to increase due to the usage of these intermediates in cotton and polyester. By 2010,
the contribution of India in the Global Chemical market is expected to reach 8-
10% with an increase of 20% per annum.

The major players in the organized sector are Atul Products, Jaysynth Dyechem,
Meghmani Organics, Colortex, Sudarshan Chemicals, Colour Chem, Ciba Speciality,
BASF, Clariant India, IDI and Metrochem. The Indian companies account for 6% of
the world dye production.

Opportunities:-

• Constant technology up gradation to provide value added products:


Technology is the key to manufacturing and the Indian industry is
fragmented with very few players handling the organized sector that is
expected to grow.

• Enhanced quality of products at reduced prices: The Indian


manufacturers have to concentrate on the quality of products at
competitive prices in order to compete with leading countries like China,
Japan, Indonesia and HongKong. The developed countries production
share in the market has reduced from 65% to 50% and is expected to
further reduce in the future. The adoption of technology will increase the
quality of products and production.

• Improve economies of scale: Due to five decades of expertise in the


Chemicals industry, players operating in the field must adopt economies
of scale to compete with other countries.

• Product and service differentiation


• Develop world class Infrastructure
• International trade procedures to be implemented
• Build Indian brand image overseas
• Developed countries are looking at outsourcing dyes from developing
countries due to more and more production facilities are being shifted to
Asian countries like India and China.

The key success factors pertaining to the industry are:–

• Economies of Scale
• Products quality and reliability
• Development of new products and application processes
Background of the company

Atul Limited, incorporated in the year 1947


by Mr. Kasturbhai Lalbhai in technical
collaboration with American Cyanamid of
USA, is engaged in manufacturing of
Chemicals, agro chemicals, intermediates,
polymers, 'Aromatics, Pharmaceuticals, bulk
drugs and specialty chemicals. It is one of the
oldest chemical company in the country. The
plant of AL is located at Atul in an area of
1243 acres. At present, the company is
manufacturing more than 300 products which
are mainly used in various industries viz.
agriculture, fragrance & flavours, tyre,
textiles, paper, Pharmaceuticals, aerospace,
construction, paints etc. The Company has
mainly six activities viz. Agrochemicals,
Aromatics, Bulk Chemicals & Intermediates,
Colours, Pharmaceuticals & Intermediates,
and Polymers, functioning independently as
profit center.
Executive Summary
Management

• Atul Ltd. belongs to the Lalbhai Group. The company is managed by a team of
professionals headed by Mr. Sunil S Lalbhai, who is the Managing Director &
CEO of the company. Mr. Sunil Lalbhai has been associated with the chemical
industry for over two decades and has guided the company through the structural
changes that the chemical industry has undergone during this period.

• The senior management includes four Presidents holding professional degrees in


chemical engineering. The management has been able to proactively change the
product mix of the company over years and have been able to sustain the growth
of the company during the lean periods that the chemical industry has passed
through during the last decade.

• The promoters are professional and are forward looking and are likely to lead the
company to achieve the budgeted results.

• The company has successfully absorbed technical know-how through its various
joint ventures and has been able to carry on the respective businesses profitably

Business Model and Competitive Analysis


• Atul Ltd. is a pioneer in the Chemicals industry and has over five decades of
experience in the chemicals industry, which has helped the company to sustain
itself through several business cycles. The Company has focused on R&D in
order to develop new products and applications and has diversified its product
portfolio away from Chemicals over the years. Chemicals now contribute only
33% to the turnover of the company.
• The company is now in the process of moving up the value chain in each of its
business lines. The company has acquired technology for manufacturing
phosgene-based agrochemicals where the margins are high. It plans to focus on
formulations in agrochemicals where the margins are even better. It has
commenced manufacturing Chemicals with higher margins including vat,
reactive and disperse dyes. The Company has integrated facilities with in-house
generation of power, which enables it to reduce its cost of production.
• It has built its brand name through consistent quality of products, reliable
delivery schedules, good technical service support and post sales service. It has
set up a wide marketing network and has set up subsidiaries in foreign countries
in order to export to those countries.
• The company is well placed in terms of technology as it has absorbed the
technology from the world leaders through its joint ventures.

Financial Analysis
• The net sales of the company have grown at a CAGR of around 11 % over the
last three years, with exports growing at a CAGR of around 13% over the same
period. After a downturn in performance in 2003-04, the company has shown
consistency in its performance and is likely to maintain the improvement trend in
the coming years. The Company has shown significant improvement in operating
profit during FY06 mainly
driven by improved performance of Aromatics and Bulk Chemicals and
intermediates division mainly due to growth in volume and better efficiencies.
The performance of Polymers improved due to introduction of value added
products. However, the profitability of Agrochemicals and Colours division
showed decline mainly due to high costs and pressure on selling prices
respectively.
• As per first 9 months financial for FY07, the operating margins of the company
are in line with the estimates as well as the industry average and are likely to
follow the same trend.

Risks and Mitigates

• The Company is in the business of Chemicals. Prices of some of these chemicals


are cyclical and remain low for long periods. The Company constantly keeps
taking up improvement projects to mitigate the impact of such movements in prices.
• Exports, which constitute more than 50% of the company's turnover has the
inherent risk of fluctuations in the exchange rates. Company is renegotiating with
its overseas buyers based in Europe for future sales to be billed in Euro instead of
USD. The company is also hedging its USD by cross currency swaps to reduce
further losses on account of Rupee appreciation.

• Product Obsolescence The company has established a state-of-the-art R&D center


and is progressively increasing its R&D budget. The company through product
diversifications and increased dependence on R&D proposes to mitigate the
product obsolescence risk. The company had already introduced various new
products in the market and is in the process of expanding the capacities of those
products and introducing some more specialized products.

Management Analysis

The company is managed by a team of professionals headed by Mr. Sunil S


Lalbhai, who is the Managing Director & CEO of the company. Mr. Sunil Lalbhai
has been associated with the chemical industry for over two decades and has guided
the company through the structural changes that the chemical industry has
undergone during this period. The senior management includes four Presidents
holding professional degrees in chemical engineering. They have been able to
proactively change the product mix of the company over years and have been able
to sustain the growth of the company during the lean periods that the chemical
industry has passed through during the last decade. The company has successfully
absorbed technical know-how through its various joint ventures and has been able
to carry on the respective businesses profitably even after the overseas partners sold
their stake to AL and have exited these JVs.
The senior management has initiated a number of steps to improve
profitability. The company has started manufacturing Vat dyes, where the margins
are higher than the other types of dyes like azo and sulphur dyes. The company
introduced various new products viz. Resorcinol, DDS, Dapsone, etc to reduce its
dependence on the colours division which was earlier major contributor to the
turnover of the company. The management is focused on the chemical business and
it appears to have a good understanding of the business and has successfully carried
out the demerger and consolidation of various businesses during the last few years.
The promoters are professional and are forward looking and are likely to lead the
company to achieve the budgeted results.
Infrastructure at Atul
Atul Ltd has made significant contributions to the development of
infrastructure in Atul and nearby villages. The Company has already built over
1000 houses, 2 schools, a medical centre, a sports complex, an open air theatre
and a community centre.

Atul Ltd is self-sufficient in its requirement of electricity achieved through


three state-of-the-art captive power plants. The Company is also in the process of
renewing its fifty year water agreement with the government of Gujarat.

Captive Power Generation:-


Atul Complex is self sufficient in meeting continuous and uninterrupted
steam demand for all its chemical manufacturing processes and it also meets more
than 95% of electricity demand for its housing colonies.

At Atul Complex, there are three captive power plants consisting of coal/oil
fired boilers and turbo generator sets having capacity ranging from 2 MW to 18
MW. Over and above this, diesel generator sets have been installed so as to
facilitate the start up from total black out

All boilers and power generation sets have been designed to meet the
stringent pollution norms as fixed by Gujarat Pollution Control Board.

Effluent Treatment:-
The industrial effluent is fully treated in a well-designed state of art effluent
treatment plant. The industrial effluent is discharged through a 4 km underground
pipeline for ultimate disposal into the estuarine zone of river Par. The domestic
effluent is treated and disposed off in a Septic Tank / Soak Pit system.

Development efforts to minimize the generation or to recycle / reuse the


effluent are a continuous process at Atul Limited. Only after exhausting all these
options, the wastewater is taken to Central Effluent Treatment Plant (CETP). This
CETP designed by Degremont (India) Ltd., has a capacity to treat 20,000 m3/day.

Treatment Storage Disposal Facility (TSDF):-

Atul has developed a site for disposal of solid wastes by land filling. The
site was selected on the basis of a technical Environment Impact Assessment
(EIA) study done by National Productivity Council (NPC). NPC also has given
the detailed design of the site. On the basis of this technical EIA and the design,
site for TSDF was approved by the state level committee and Gujarat Pollution
Control Board.

Snapshot of Facilities
The dimensions of the infrastructure facilities at Atul Ltd's manufacturing
sites at Atul and Ankleshwar are given below.

Units of Atul Ankleswar


Description
Measurement Site Site
Land Area Acres 1250 33
Effluent Drainage System Kilometres 65 GIDC
drainage
system
Effluent Treatment Plants Cubic 30000 2500
Metres/Day
Incinerators Numbers 4 NIL
Captive Power Plant (installed Megawatts 29 2.4
capacity)
Electricity Consumption Million 13 1
Units/Month
Steam Generation (installed Metric 217 32
capacity) Ton/hour
Water Storage Cubic Metres 2 1450
million
Housing Houses 1100 36

Research & Development


The primary thrust of Atul’s Research & Development efforts is to develop
products and processes that are efficient, safe and environmentally friendly; and
which cater to demands of global and domestic customers.

Process and product improvement are also key activities of the R&D group.
In order to respond quickly to market demands, every business unit
(Agrochemicals, Aromatics, Bulk Chemicals and Intermediates, Colors,
Pharmaceutical Intermediates, and Polymers) has its own Research &
Development team. The central Research & Development group provides
common facilities like pilot plant, certain analytical instruments, technical library
etc.

Our entire Research & Development team consists of Doctorates and


Graduates. We subscribe to several Indian and international journals and
magazines. We are well equipped with analytical instruments such as HPTLC,
GCMS, DSC, atomic absorption spectrophotometer, HPLC and GC. We have
established links with certain CSIR laboratories like IICT, Hyderabad; NCL,
Pune; and CSMCRI, Bhavnagar with the primary purpose of technology transfer
and sponsored research programmes.

During 2004-05, the Research & Development team developed


approximately 70 processes and the Company commercialized ~ 40 processes.
Close to 30 processes were improved with respect to raw material and utility
usage, batch cycle time and waste reduction. Several new methods of analysis
(Wet Chemistry, HPLC, GC) were developed.

Atul spends close to 1% of its sales value on Research & Development.


During 2004-05 goods worth Rs 100 crores of sales values were manufactured
based on processes developed in our Research & Development laboratories.

Aromatic Division:-
Aromatics the erstwhile Gujarat Aromatics Ltd., a company under financial
stress, was taken over by AL in 1985 and was formed as aromatics division of
AL. It is one of the largest manufacturers of Cresols and their derivatives in India.
These products are used in the manufacture of flavors, fragrances, cosmetics
(sunscreen lotions), bulk drugs and antioxidants. The Para-cresol capacity at AL
is 10,000 tpa and the company is planning to increase it to 15,000 tpa. The world
requirement for Para-cresols and its derivatives is 50,000 tpa and AL already has
20% share of it. Aromatics Division is one of the world’s largest manufacturers of
Para anisic aldehyde, Para cresol and Para anisic alcohol, supplying its products
to diverse industries, including cosmetics, flavours and fragrances, bulk drugs,
dye intermediates; and plant and animal micro-nutrients.

The Division's manufacturing site is located at Ankleshwar in Gujarat, about


350 km north of Mumbai.

The Division has always laid great emphasis on innovation. The state-of-
the-art cost-effective processes, scientific research, ingenious technology and
detailed market knowledge form the basis for the Division’s success.

Aromatic has strengthened its global competitiveness through process


innovation and has developed new tools to gauge customers’ needs. Through
collaborations with universities and research institutes, the Division gets access to
new knowledge and technology constantly.
A brief summary of various products and their respective applications is as follows:
Product. Group Application
p-Cresol, o-Cresol Antioxidants, Agrochemicals, Bulk drugs,
Resins
p-Cresidine Dye intermediates
p-Anisic aldehyde, p-Anisyl Bulk drugs, Cosmetics
alcohol
p-Anisyl acetate, p-Cresyl Electroplating
acetate
p-Cresyl methyl ether Flavour & Fragrances
p-Methoxyacetophenone
Manganese sulfate Agrochemicalsm, Animal feed
Manganese carbonate Ceramics
Sodium Sulfite Paper

Departments in Atul Company’s Aromatic Division


are as follows:-
HRD
Dept

Marketin Productio
Quality
g n
Dept
Dept Dept

Finance
Dept
Human Resource Department

In the modern world, it is not possible for an existence of any business


organization without personnel department. Personnel department works like a
“Heart in the body of organization.” It is the most important area of any business
organization. Personnel management is an art of getting thing work done through
other people. In any firm, we can find the priority of personnel department. Personnel
department is an internal part of an organization. Personnel management generally
deals with planning, organization, directing and controlling the function of producing,
maintaining development and utilizing work force of the business enterprise to help
for achievement of the objectives.

The management of man is very important in any organization. Management


means to get work done through the people personnel management totally covers this
definition because enterprise runs by the people as it is righting says that manage your
men, men will manage your work. Men are a heart of unit and make organization
living. The success of unit mainly depends on the personnel functioning in the
organization.

It is very important branch of knowledge most of the progressive organization


having separate department appointing the expert as a personnel manager. The
success of any organization depends upon workers and therefore it is considered as
mind your men and men will the other entire thing.

Obtaining involves such activities as recruitment selection, manpower, planning


while maintaining involves performance appraisal, employee’s grievance, employees
status factor with respect to wages, hours, working conditions and relation among
labor and manager.

Objectives

• To manage the personnel effectively


• To ensure motivated and committed workforce for the
organization
• To maintain harmonious relation between the employee and the
organization
• To provide effective services to other departments, etc.
• To provide training & development to enhance promotional,
behavioral and human skills.
ORGANOGRAM OF PERSONAL
DEPARTMENT

M.P.KULKARNI
(V.P HR)

MONISHA
S.S. KOKLE ASHITOSH JANI SINGH
JAYESH PATEL (RECRUITMENT & (Performance
(G.M)
(LAOUR WELFARE) SELECTION)
TRN & DEVLOP appraisal )

SANJAY SONI
(HR MANAGER AEROMATIC DIVISION)

JAYESH PATEL
(ASST MNG HR)
TIME KEEPING OFFICE (TKO):-
ATUL LTD. Has a very effective time keeping system. The TKO is situated
at the main gate of the company and is responsible for maintaining the Muster Roll
ovary department and for every shift. The TKO consists of three staff members, two
for attendance recording and one for special purpose.

The attendance recording system (ARS) is fully computerized, where each


permanent employee is given Punch Card, which needs to be punched while. “In
Coming and Out going” by each and every staff workers, staff members and
management members except the managing director. The card is detailed with
employee name, date of joining, employee number, blood group and a code for
punching. For the attendance of temporary and trainee workers the company has
attendance taking card which is operated manually.

The special purpose activity includes record of PF, distribution of uniform,


shoes, etc. Superannuation, Gratuity and clearance form.

The TKO maintains various records like:

• Level Record
• Promotion Record
• Registration & Recruitment Record
• Overtime Record
• Employee history Record
• Absenteeism Record
• Early Going and Late Coming Report
• Positive/negative Report
• All types of forms like advance Salary leave Travel Allowance,
Medical Loans etc.

Advantages of attendance Recording System:

• As the system is fully computerized, the chances of mistakes are less


or nil as compared to manual work.
• Serves as a basis of fixing wages and salaries.
• High rate of absenteeism on the part of workers can be known at the
correct time and reported to concerned department.
HUMAN RESOURCE PLANNING: (HRP)
“Manpower planning is process of determining and ensuring that the
organization will have an adequate number of qualified personnel.”

THE COMPANY FOLLOWS TWO APPROCHES


OF HRP
(1) Top down approach

In case of Top down Approach the Top Management makes the study of
Human Resource Planning mostly for the expansion of business. Over here
uncertainty for the business like retirement, old age, ill heath etc of the employees are
predicted before hand and planning regarding manpower is done.
Such plans can be
-Short Term: for next 2 years
-Medium Term: between 2 to 5 year
-Long Term: more than 5 year’s

(2) Bottom up Approach

Over here the lower level people gives feedback to the top level. The lower
level discusses with the top level regarding the manpower plans and the top level tries
to fill up the vacancies.
Both this method re used in ATUL LTD, but the Bottom up Approach is given more
importance than the Top Down.

PERFORMANCE APPRAISAL:-
Performance appraisal is the process of evaluating the employee’s
performance on the jobs in the terms of the requirements of the job.

ATUL LTD goes for an effective performance Appraisal system, as this is the
time to remind that only hard work without achieving corresponding results cannot
improve the balance sheet of the company, nor can it contribute towards the
company’s

GUIDELINES suggested for the success of review meeting (meeting


conducted before performance appraisal Programme)
• Fix the meeting in advance
• Create a relaxed friendly atmosphere
• Be prepared to listen, appraise also has a point of view
• Avoid interruption and arguments; have patience
• Keep contents of meeting Confidential
• Do not promise any promotion, financial incentives or any rewards

The right framework to the whole process of appraisal is the corrective


implementation of Performance Management System (PMS) and the Individual
Development Meetings (IDM’s) the company uses both traditional as well as the
modern methods of Appraising.

TRADITIONAL METHOD:-
1) Forced distribution method

The rating provides by the Appraiser to the Appraise is based on the major
contribution and the appraiser. In the company, the baring is on the major
contribution and the quality of the same. The appraiser while rating the same
The appraiser while rating uses the following rating criteria:

RATING INDICATORS:-
In results do not meet the goals at all and are below acceptable standards
(Improvement needed)

S results fall slightly below basic goals, but not are in unacceptable category,
scope for higher (satisfactory) contribution

G results meet required achievements levels and on few occasions even


exceed them.

(Good) VG results fully meet and at several times exceed sets goals and that
appraise had to counter difficulties in (very good) achieving the goals/actions

E In general, results consistently far exceed goals in spite of difficult


environmental factors, the (excellent) appraise always operates at high performance
level.

2) CRITICAL INCIDENTS:-

The Company uses critical incidents Method where the workers performance
is appraised in terms of some events that occur in the performance of the Rate’s job.
But is missed out in the appraisal form. The appraiser keeps a records and
increments.
MANAGEMENT BY OBJECTIVE METHOD:-
For appraising the High Officials, the company uses the MBO technique.
Over here, the management first sets the overall objectives of the company and later
they communicate those goals to the Officials. Then a good amount of Discussion

takes place between the management and the Officials regarding the Objective setup
before and also the ways and methods of measuring employees.

This discussion leads to adoption of either the received or the same or


completely changed objectives, with the will of both the parties. This is Joint Goal
Setting between the Manager and the Subordinate.

Lastly, the employees would try to achieve their objectives within the given
period and also feedback to the manger about their Goal Progress.

This method minimized the External control and maximizes Internal


Motivation.

Performance Appraisal leads to


• Grade change
• Monetary reward and even
• Double increments.

CANTEEN ADMINSTRATION:-
Labor Contractors are Private authorities who bring labor on temporary basis.
They are given a P.F. code and insurance Policy if they bring 9 or below 9 employees.
But license is needed for bringing more than 9 employees. If a contractor brings more
than 9 employees without any license, he would be charged penalty or terminated.
Even though the Contractor Administration 12% is contributed by the employee and
other12% by the Contractor which is reimbursed y the company later. The
Contractors are benefited as they get 25% of the wage from the company as
commission, from which 10% is profit and 15% is the Labor liability.

GENERAL SERVICES:-
It includes:-
- Postal Services
- Ticket Reservation
- Reception etc
- Courier Services.
COLONY MAINTENANCE:-
Housing Facility is given to all the permanent employees of the company on
the basis of their position in the organization. The rates of the Houses are provided at
a subsidized amount and the usually deducted from the Salary of the employees. The
Major Facilities in this Colony are recreational facilities for families and library.
Schools, parks etc for children.

INTERNAL CUSTORMER SATISFACTION:-


According to ATUL LTD employees are the first customer of the company,
and if they are satisfied, everything will go on the right path. If the employees are not
satisfied. It will adversely affect the productively.

Internal customers refer to the employees of the company. ATUL LTD gives
more emphasis on internal Customer Satisfaction. It is the First Company in South
Gujarat, who looks after this concept. The personnel department gives a form to the
employees for their feedback with respect to

1) Job Satisfaction
2) Working Condition
3) Housing Facilities
4) Wages & Salary (timing of payment)
5) Other Facilities like Parking, Canteen, Medical, Safely etc.

Form the above form, if the employees of the company are dissatisfied, then the
Personnel manager personally meets that particular employee and discuss regarding
the matter. If he finds that his point needs to be taken into consideration, then further
action may be taken.

INDUSTRIAL RELATIONS:-

Industrial relation continues to be harmonies with the company sharpening its


focus on productivity and discipline. The name of the single Trade Union Prevailing
in this company is the “Cibatul Kamghar sangh.” This Union always gives
constructive ideas to the management whenever they need for. But sometimes they
resist to ideas suggested by the Company when they are against the worker interest.

In this company it is generally observed that the problems and grievances are
solved through mutual understanding. There are no single day strike observed in the
Company since its first day

WELFARE ACTIVITIES:-

Uniform & shoes

ATIL LTD provided to its employees every year. For the fire and security
department employees fire proof uniforms are given Company provides different
types of Shoes to its workers and office staff, for the protection of workers feet
against hazardous and flammable chemicals.
In ATUL LTD, the transport and traveling section is working under he
personnel Department, The function of this department are as under :-
• Transport facilities like Rail & Air booking
• Hotel Booking
• Transport Facility, Guest House Accommodation, Lunch and Dinner
Arrangement for the visitors and guest.
• Transportation of goods within the Factory Premises.
• Emergency Transport facility in case of disaster or accident either in the
factory premises or in the colonies.
Recruitment Process

MPP

Approved Establishment Form

JD/JS Skill Set


Guidelines/ Standard Drafts/ Moderation

Advertisements /
Not Shortlisted Consultants/ Shortlisted
Web Site/
Standard Drafts / Policies

Not Shortlisted Interviews Shortlisted

Up to Div. Unit HR
Final Interviews Corp.HR
- Salary matching
- Offer letter

Not Accepted Offer Accepted

- Info. on policies
- Medical tests
- Appointment letter
Joining formalities

Joining Check List


Responsibility of;
Div. / Unit HR & Corp. HR
Corp. HR (Sr / Sensitive positions)
Div. / Unit HR with consultation to Corp. Standard Induction policy for all level
Induction • Ensure all benefits are delivered
HR • In constant contact till confirmation
RECRUITMENT:-
“Recruitment is the process of searching for prospective employees and
stimulating them to apply for the job in the organization”.

COMPANY’S SOURCES OF RECRUITMENT:-


• INTERNAL SOURCES
- Transfer
- Promotion
• EXTERNAL SOURCES
-Campus Recruitment
- Placement Consultant
-Employment Exchange
- Labor Contractors
- Advertising Agencies
-Web site
-Consultant

INTERNAL SOURCES:-
The Company gives more emphasis on the Internal Sources rather than
External. It believes in the policy of “First Preference to Existing
Employees”, so as to motivate the employees and reduce the cost. The two
sources of Internal Recruitment used by the company are -Transfer –
“Transfer involves the shifting of an employee from one job to another, one
department to another or one shift to another.

TRANSFER POLICY:-
As the Company has two units ATUL LTD PPSITE and ATUL LTD at East,
so transfer is a good source of filling vacancies with employees from overstaff
units/departments/shifts to another.

Promotions – The Company believes in promotion as the best source, but it is


a bit rigid. It believes in Merit basis promotion rather than seniority. But when the
seniors are really capable as compared to the new employee, the senior Employee is
given the first chance of promotion.
PROMOTION POLICY:-
• The Company encourages automatic promotion at all the levels of the
Organization, but under certain circumstances. Whenever a particular
employee remains in a particular grade for a state period of time, he is
promoted to a job of higher grade.
• Promotion other than the grade promotion takes place only when a higher
level post is vacant.
• To fill up the vacancies form within the Company as far as possible (only
eligible employees), on basis of Performance Appraisal System.
• In certain cases when a particular employee has some outstanding skills which
is required for higher level post is to be promoted.

EXTERNAL SOURCES:-

Campus Recruitment:-
The main External Source of Recruitment for this company is through
Educational Institutions. According to them this source not only brings new blood in
the Organization, but also innovative ideas, technical knowledge and fresh talents.
The students are first taken as Management trainees and later they are grouped into 4,
according to their performance.

- Permanent at job - Extended Promotion


- Probation - Terminated
- Placement Consultants

For Recruiting technical, Professional and Managerial Personnel, the


Company goes for Placement. Placement Consultant are privatized and saves the
Company’s time in receiving and screening of applications. There are many
Placement Consultants for this company. One of them is SEARCH Consultant.

EMPLOYMENT EXCHANGE:-
Employment Exchange’s run by the Government is regarded as a good source
of recruitment for Unskilled and Skilled Operative jobs. The company has
compulsion to give notification of vacancies to this exchange. Thus the Employment
Exchange brings the Employer in contact with the job seeker, but the Company need
not compulsorily provide that job to the employee, who is been sent by the
Employment Exchange.
LABOR CONTRACTOR:-
The company finds a Labor Contractor, who brings worker on temporary
basis. The norms and procedure regarding labor Contractor are to be followed by the
Contractor as mentioned in the Contract Administration. (As above)

ADVERTISING AGENCY:-
When the Company is unable to get suitable Candidates from the above
Sources, it goes for Advertising Agency. The company gives last preference to this
source because it brings in flood of response and many a times from quite unsuitable
candidates.

NOTE: The pattern of Interview remains the same for all the employees,
but a slight change takes place depending upon the type of job.

In case of Higher Level Jobs, before giving the Appointment Letter the
Interviewee is taken to the Managing Director and if the Managing Director finds the
Candidate suitable, he is appointed or else is discarded.

In case of Technical Field, the Candidate is first interviewed by the personnel


Manager and later by the Concerned Department Head to check his technical
knowledge.

INDUCTION
After an employee is selected for this Company, he is induced by giving a
friendly welcome Induction is done according to the ISO 9001 policy. A staff
member form the Personnel Department or the personnel manager himself takes the
new employee to the Concerned department and introduce him to his new
environment (Rule and Regulations. Superiors, Fellow Employees etc)

WAGE & SALARY STRUCTURE:-


Wages and salary system is also managed by this Department. The
Employees satisfaction is the top priority of the company, which is reflected by the
Healthy wage and Salary structure designed over here. The company follows the
Minimum Wage Rate Policy, fixed by the Government. But in practical use they pay
more than the rate fixed in the above policy. It includes the following concepts.
Shifts and Working Hours –

Timing at ATUL LTD (AEROMATIC DIVISION) for General Shift is 8:00


hrs to 17:00 hrs on all working days. Lunch time is from 12:00 to 13:00 hrs. There
are no shifts for Management Cadre. But as the Company goes for Round the Clock
Production,

There are three other shifts for workers;


1. shift
Leave Structure –
Weekly off – In an Employee is at the Office, the Weekly Off is on Sunday. If at
Branch Office, the Weekly Off is on Saturday and Sunday.

Paid Holiday – The Employee are entitled to 8 paid Holidays during the Calendar
Year, which the Management declares in the month of January.
Privilege leave – Privilege Leave is available @ 30 days per Calendar Year which
is credited @ 2.5 per month is credited after completion of one month.

Sick Leave – 9 days sick leaves are available per annum and credited on 1 January
every year. During the first year of Employment, however this leave benefit will
be available on pro-rata basis. Accumulated Sick Leave can be encased at the
time of retirement and death only, which can be up to a maximum 72 days.

Casual Leave-9 days Casual leave is available per annum and credited on 1st Jan
every Year. During the first year of Employment, however this leave benefit will
be available on pro-rate basis. Since casual leave benefit cannot be carried to the
next year, at the end of the Calendar Year the outstanding Leave balance will
automatically be encased and included in the salary of the subsequent month.

Special Leave- the Managing director under exceptional circumstance will have
the discretion to grant any additional leave, termed as Special Leave to Individual.
Such Leave will normally believe without pay, unless it is for the benefit of the
company.

Other leaves – Maternity leave, leave after Resignation, Compensatory leave,


Unauthorized Absence etc.

Employee turnover and absenteeism Rate:–


The Employee Turnover Rate in ATUL LTD (Aeromatic division) is around
3%. The Absenteeism rate is around 2%. Most of the employees remain absent
because of some Social or Physical Reasons.

TRAINNING PROCESS:-
Types of Training:-
The company goes for house training for both external and internal training. The
company mostly prepares to go for off the job (external training). In house training
includes training by supervision, whereas Lectures and Seminars are the part of
External Training.

Training Policy:-

1. 7 man days of training and development programme of all the employee is


compulsory

Training Process:-

1. The Training Need Identification process is carried out in October and


November every year.

2. Training Calendar:-
The Training Calendar is prepared at the end of the year.

3. Nomination:-
The names, training details and time schedules for each and every employee
is nominated by his immediate superior. Each department head is very much
familiar with the strength and weaknesses of the Employee of his office
department. As a result he is the best person to suggest the names of trainee.

4. Training Program:-
Over here the planned training programs are actually being implemented in
the company

5. Feed back:-
Feed back about the program is given by the Trainee to the personal
department by filling up Questionnaire which gives us the idea whether the
training program was excellent, good, average, satisfactory, or poor.

6. Evaluation:-
The concerned department head evaluates the performance of the Trainees in
terms of effective or not effective. The Company Surveys into each and every
department. The departmental heads has to give details regarding increasing
the jobs of each employee and if needed they need to be trained regarding
increasing productivity and skill, reducing accident. Bifurcations are made
according to the management Trainees, staff, Staff Workers etc and also on
the basis of are of Training like Basic Programme, ISO Training etc.
INTRODUCTION

Production is the creation of the goods & services. Major emphasis is on the
creation of goods. Manufacturing production is the systematic step-by-step
conversation of raw materials through creation of form utility in goods.

Producing goods is an interact & complex process Goods on the shelves, ready to
sell do not just happened they are the end results of much careful thought & planning.
The job of production management is to weave together those factors (man, material,
and machinery) for those sole purposes of economical delivery of quality goods to
customer.

Production management deals with decision-making Related to production


processes, so that resulting goods or services is produced according to the
expectations, in the amount end by the cost. Production management is associated
with two broad areas of activity, the design & control of the product system”.

Thus in a broader sense production management concerned with co-ordination of


management men, material, method, machine & money in manufacturing goods. In a
narrow sense it means planning, scheduling & controlling the flow of materials to a
plant.

Where as in Atul Aeromatic division the production process is undertaken very


carefully as they produce chemicals which has to meet the exact configuration which
the customers need as the slightest variation in the combination would bring a greater
change in the final product which would not match the standards of the customer
requirements so the production or the manufacturing process at Atul is undertaken
with extra caution as the chemical they produce cant very even 0.01 % than the
requirement of the customers or the whole batch would be rejected and which would
be a great loss to the company.
PRODUCT PROFILE:-

Key Products Name:-

• Para Cresol 99%


• Para Anisic Aldehyde
• Para Anisyl Alcohol
• Para Cresidine
• Ortho Cresol
• Para Cresyl Methyl Ether

Perfumery Grades Name:-

• Para Anisic Aldehyde


• Para Anisyl Alcohol
• Para Cresyl Methyl Ether
• Para Cresol

Inorganics Name:-

• Manganese Sulphate Powder


• Sodium Sulphite
• Liquid Sulphur Dioxide
PRODUCTION PROCESS:-
The ATUL (Aeromatic division) has to mainly offer in the
market, the major of use of the product are Aroma products, Drugs,
Dyes intermediate, Antioxidents, manufacturing of soaps etc.

1. PARA CRESOL 99

Para cresol plant is the main plant in this division as it not only covers
the major part of their sales percentage compared to the other products The
capacity of the plant is 11000 Mt/tones and 900 Mt/tones also serves as the
major raw material for the other products like Para cresidine and which is also
used as the raw material for the production of Para Anisic Aldehyde and Para
Anisic Acid .

2. PARA ANISIC ALDEHYDE

The plant of PAA also has the latest technology of the plant of the
production process the capacity of the plant is 500 Mt/tones per month

3. PARA ANISIC ACID

During the process of production of para anisic aldehyde during the


washing process the waste is extracted from PAA and when the waste is
treated by the distillatation process than the Para anisic acid is obtained
through the process.

4. PARA CRESIDINE

The plant present at Atul for PC has the capacity of 45 Mt. tones per
month, its geneally used for manufacturing of Dyes.

5. ORTHO CRESOL

OC is generally obtained by the cresol mixture, by the process of


decolorizing of the orthophenol obtained through the floronation process and
the product obtained is ortho cresol.
MANGANESE SULPHATE POWDER
SODIUM SULPHITE
LIQUID SULPHUR DIOXIDE

These are the bi products which are obtained while the production process of
the various chemicals stated above.

The production site of ATUL (Aeromatic division) is at GIDC Ankleshwar,


the plant work 24 hours in shift it has been employed with more than 250 workers
totaling both the employees the permanent employees and also the daily contract
workers.

The major demand or the challenging market for ATUL (aeromatic division)
Is the forign market, from the total sale of aeromatc division atul the 70% is from the
export business. As the company enjoys monopoly production in the India there are
no competitiors in the domestic market

The major competitiors in the forign market are the manufacturers from China,
as they are able to produce the same product at cheaper rate sometime s due to the
various factors like Political influence, cost of raw material, etc.
THE PRODUCTION
PROCESS CHART
PARA CRESOL 99 AND ORTHOCRESOL

RAWMATERIAL
TOLUENE,SO3,SO2,
ACETIC ACID

SULPHONATION BY
CAUSTIC SODA

FUSION PROCESS

SEPRATION PROCESS

BI-PRODUCT BI-PRODUCT
MAGNESIUM SULPHATE SODIUM SULPHATE

ACIDFICATION

DISTILLATION

CRESOL MIXTURE
SEPERATION

ORTHO CRESOL PARA CRESOL-99


PARA ANISIC ALDEHYDE & PARA ANISIC ACID

RAW MATERIAL
PARA CRESYL METHYL ETHER

METHILATION

OXIDATION

WASHING

BI –PRODUCT BY
CAUSTIC WASH

AND BY DISTILATION
PURE PARA ANISIC ACID

DISTILATION PROCESS

PARA ANISIC ALDEHYDE


PARA CRESIDINE

NITRATION

METIALATION

REDUCTION

DISTILATION

PARA CRESIDINE
INTRODUCTION

The marketing has changed greater in the present day world. The marketing
has developed many activities to satisfy the needs wants of a group of customers.
Entering into 21st century. Marketing has become one of the important criteria for a
company product or services to sell in state, national and international level. After
world war 2nd, the development in the field of science and technology, social and
political, economical and other relative regions have changed tremendously and
brought new dimensions in marketing. So as marketing gained momentum in the
development of new markets and new avenues of selling a wide range of goods and
services that has changed and development to meet the consumer need at right time.

Marketing is a set of human activities directed, facilitating and consummating


exchange. It is change of products and the transaction is to satisfy that human needs
and wants. Human effort, Finance, Management constitutes the primary sources in
marketing. The marketing mix covering products, price, promotion and distribution
(place) strategies will be implemented to accomplish the object of customer
satisfaction and profitability.

FUNCTIONS:-

There are two types of function in sales and marketing department.

ROUTINE FUNCTION:-

1. Receiving inquiry from the customer.

2. Sending quotation to the customer.

3. Receiving order from the customer.

4. Concern production department for special requirement.

5. Prepare schedule for the production department.

6. This department has a job of preparing invoices, bank letter, side draft, credit
note, sales certificate etc.

7. They consult the customer and ask about the ‘C’ from. If out side of state.

8. They keep in touch continuously with their sales representative or argent.

9. Dispatching goods to customer.

10. Receiving payments and maintain payment details.

11. They prepare advertisement about the product and give it into the different
business media.

12. They send reminder to the customer.


SPECIFIC FUNCTION:-

1. This department gives suggestion to make improvement in systems to the


management whenever required.

2. They perform personnel follow up to production department for preparing


order in time.
3. They understand the special requirement of the customers and try their level
best to satisfy them.

4. They established personnel contacts with their customers as well as agents.

5. They always try to provide letter service to the customer.

PRICING:-

Price is the only element in the marketing mix that creates sale revenue, the
other elements are cost. Company is using the most commonly used strategy and i.e.
the skimming pricing strategy. The company is also using differential price strategy
that involves ago. Indifferenciating its price arose different market segment. The
company sets its price from the given points.

 Selecting the pricing objective.


 Determining demand.
 Estimating cost.
 Analyzing competitions costs prices and offers.
 Selecting price method.
 Selecting the final price.
 Impact of global market.

MARKETING RESEARCH:-

In the worlds of Phillip Kotler “marketing research is a systematic problem


analysis model building feat finding for the purpose of improve decision marking and
control in the marketing of goods and services.

As the company is engaged in the Chemical business it needs the market


research. They are using the produces, which covers the following
points.

 Problem formulation
 Data collection
 Marketing sample
 Data evaluation
 Interpreting data
 Report preparation

The main object behind this is that it finds out for company. Where are his
customers? What they willing to pay for it? what is the Impact and use of
technology? They are researching leaps it’s use in reducing and minimizing all
marketing costs particularly selling advertising and distribution cost.

DOCUMENTS:-

1. Inquiry letter
2. Quotation
3. Order
4. Schedule
5. Transport receipt
6. Invoice
7. Bank letter
8. ‘C’ form
9. Side draft
10. Payment Details
11. Circular
12. Advertisement

INQUIRY LETTER:-

The purpose of inquiry for buyer is to find out the cheapest and best source of
purchase of goods required. Inquiry contains products, name, price, quality,
quantity, discount rate, delivery period and other terms and conditions. Inquiry
received by this department is kept in inquiry register.

QUOTATION:-

The main purpose of the quotation is to give ideas to customer about the under
mentioned matters.

 Mode and terms of payment.


 Place and time of delivery.
 Method of transport.
 Changes of sales tax, octroi, freight and insurance.
 Packing and forwarding changes.
Quotation signed by the proprietor in charge.

ORDER:-

Customer sends orders either through phone, fax, E-media or through letter.
Order received by this department is records in order register. There are three
types of order:

1. New order
2. Repeated order
3. Regular order

SCHEDULE:-

This department transfers information about the order to the production


department in schedule. They also indicate the time limit for the production
department. The manager of the company signs schedule.

TRANSPORT RECEIPT:-

The transport corporation prepares transport receipt. The two copy of this
receipt are prepared

(1) Consignee copy, which is, sends to the customer with goods.
(2) Consignor copy, which is kept in record of this department.

INVOICE:-

Invoice is prepared at the time of dispatching of goods. This department


prepares three copies of invoice. Original copy is sent to the customer. Second
copy is for transport. Third is for excise records.

BANK LETTER:-

This department to the bank drafts bank letters. The mode of payment is
described in it. Transport receipt & invoice is attached with the bank letter.

“C” FORM:-

“C” Form is a government-approved form for registration of customers firm.


If customer has “C” Form he bound to pay 4% as a Sales tax & in other situation
he has to pay sales tax as per the product.
SIDE DRAFT:-

The sales & marketing department & sends prepare side draft to the customer.
After acceptance from customer, it is valid up to the mentioned time. It means
customer is bound to pay to bank after this time limit.

PAYMENT DETAILS:-

In payments details this is a record of incoming payment for particular time


period. In payment details customer’s name, mode of payment received, amount
of payment & customer’s account number are mentioned.

CIRCULAR:-

Circular is mainly send to the customer for marketing purpose. Circular


contains the information about the new changes made by the company or by the
government.

ADVERTISEMENT:-

The main purpose of advertisement is providing information to the customer


& improves the sale. It gives the brief idea about the company & product, which is
very much helpful in competitive market. Advertisement is published into the
different media at the particular time limit.

COMMUNICATON:-

The marketing communication process has five major competent i.e. sender,
message, receiver, response and feedback. The sender is itself the Hi-tech. Which
sends message through advertisement. This advertisement reaches the message to
the receiver or audience about the product by buying the Hi-tech. This is than
feedback to the company.
THE MARKETING COMMUNICATION PROCESS:
FINANCE DEPARTMENT
SUMMERY

 Introduction

 Organization

 Relationship with order departments particularly


Marketing, Personnel, Production

 Costing / Control system

 Treasury operation

 Computerized system of accounts

 MIS reports generation

 Accounting policies

 Study of final account of the organization


INTRODUCTION
Finance plays a major role in determining the position of a company. A person
not trained in finance management of a company may face N number of problems
which may affect the day to day functioning of his company. A person not having
knowledge of finance my not be able to the exact suitable return on his investment,
account and finance walk parallel but as compare to account finance is a waste
subject.

A person trained in Finance is able to take financial decision wisely and


quickly which gives better return on investment and have a better chance to survive
and compete.

A business house must necessary keep a systematic record of what happens


from day to day, so that it can know where it stands & where it will go in future. A
systematic record of the daily invents of a business leading to presentation of a
complete financial picture is known as accounting.

Financial account includes trading account, profit & loss account and balance
sheets.

Trading account is a part of profit & loss account. It indicates the earning
capacity of the enterprise. Balance sheet indicates financial position of the enterprise.

In broad sense financial accounting system refers to:

1. Recording of transaction in journal or its subsidiary books.


2. To post them ledger and data store in to computer.
3. To prepare final account.

The financial picture mostly have two parts, one showing how much profit
has been earn or loss suffered and other sowing assets & liabilities and a proprietor’s
interest in the firm. A firm constantly enters into transaction with out siders. A
transaction may be defined as an action & reaction having monitory implication of
one firm in relation to another firm.

In other words accounting defined as, “The Art of recording, classifying &
summarizing in a manner and it terms of money transaction and events which are, in
part at least, of a financial character & interpreting the result thereof”.
FUNCTION

Functions of accounting department are as under:

 ROUTINE FUNCTIONS

1. This department examines the challan in respect of payment.

2. This department handles the income tax and sales tax cases.

3. This department collects the vouchers from the various departments.

4. They note the entries in the sales return book on the basis of credit note & the
entire of stock register.

5. This department makes casting and posting from sales return register to ledger.

6. They fill up the sales and income tax return per month.

7. They checked whether the income tax department has given a correct order for
payment of tax in advance.

8. This department handles the all transaction with bank.

9. They prepare the daybook, ledger, trial balance, manufacturing and profit &
loss account and the final balance sheet
.
10. They collect the “C Form” from the customer this department also allocates
the total salary to the personnel department per month.

 SPECIFIC FUNCTION

1. This department submits monthly report to G.M.

2. This department makes necessary recommendation for change in system and


in procedure to the management.

3. They ensure that the funds are raised economically and used in the most
efficient manner.

4. Communicating the result. Accounting is to communicate the result obtained


from arranging of data to interested parties like proprietors.

5. Protecting proprietors of the business. Accounting has to design such a system


of accounting as will protect its assets from an unjustified and unwanted use.

Company said nothing write about its finance company. So that I can’t write
about finance department.
Orgaonogram of Finance
Department

President
(Dr Hariharan)

GM Finance

Manager Manager
(Costing) (Accounts)
(S.M Behani) (M.D. Gupta)

(H .M .Shah)
(Ashok Modi)

Raghu Desai Chetan Joshi Antana Matha


INTRODUCTION
The Quality Control department at ATUL (Aeromatic Division) is at
Ankleshwar production site where they have to check and certify the various aspects
in the chemical produced and also verify the chemicals which are brought into the
plant as the raw materials. Mr. V.K.Srivastav (QC dept manager), Mr. Sharad Desai
(asst manager), Mr. K.B.Prajapati (chemist) these are some of the person who are
responsible for the quality check activity in Atul Aeromatic division These process
are done according to the ISO standards which can be explained in steps as the
Quality check process are mainly done between these three process ;

1. Raw material check:

All the raw material entering into the Aeromatic plant are been checked
randomly from their lot sizes before they are allowed to be stored. The raw materials
checked are if according to the specification which are required by the company then
they allow them to enter the plant or let them store it or else they are been send back
to the suppliers.

2. In-process check:

As Aeromatic plants should produce the chemicals in exact specification


required by the customers so before very lot is been produced their contents are been
checked before the next batch is been processed so that their products can meet the
exact requirement.

3. Dispatch process:

The goods before they are been dispatch to the customers are been verified
once again that the dispatch goods are the same goods which are meeting the
requirement of the customers and are if checked ok then a Certificate of Analysis is
attached to the vouchers through which the customers could know the goods are of
exact specification as they ordered.

Some of the experiments which is undertaken for the Quality check are , GAS
COMOTOGRAPY SPECIFICATION its for purity, HYPER PERFORMANCE
LIQUID COMOTOGRAPH, ULTRA VIOLET testing, LOVI BALL testing, weight
balance , melting point etc.
PART - 2
Working capital
Management

Introduction:-

Working capital management involves the relationship between a firm’s short


term asset and its long term liabilities. The goal of working capital management is to
ensure that the firm is able to continue its operations and that it has the ability to both
maturing short term debt and upcoming operations expenses. The management of
working capital involves managing inventories, accounts receivables and payable and
cash. Working capital is consent with making sure we have exactly the right amount
of money and lines of credit available to the business at a time.

Meaning:-

Working capital refers to the cash a business requires for day-to-day operations
or more specifically, for financing the conversion of raw material into finish goods,
which the company sells for payment. The better the company manage its working
capital, the less the company needs to borrow. Even companies with cash surpluses
need to manage working capital to ensure that those surpluses are invested in ways
that will generate suitable return for investors.

Objectives:-

The basic objectives of working capital management are:-


• Optimist the level of investment in C.A. and reduction in C.L.
• It should maintain the marginal ratio in C.A and should note is not more then the
cost of capital employed to finance the C.A.

Definition: -

“The management of short term asset and short run resource is said to be
working capital management or current asset management ’’

There are two concept of working capital


1. Gross working capital
2. Net working capital
1. Gross working capital

It refers to the firm’s investment in current assets. Current assets are the
assets which can be converted into cash within an accounting year or operating cycle
and it includes cash, short-term securities, debtors, bills receivables and inventory.

It focuses on two aspect of current asset management :


How to optimize investment in current assets ?
How should current asset be financed ?

Investment in current asset should be judge adequately, not more not less, to
the need of the business firm. Excessive investment in current assets should be
avoided because it impairs the firm’s profitability, as idle firm investment earn
nothing. Inadequate amount of working capital can threaten the solvency of the firm
because of its inability to meets its current obligations.

NET WORKING CAPITAL:-

It refers to the difference between current asset and current liabilities.


Current liabilities are those claims of outsiders which are expected to mature for
payment within the current year and include creditor s, bills payable and outstanding
expenses.

It is a qualitative concept. It indicates the liquidity policy of the firm and


suggests the extent to which working capital needs to be financed by permanent
source of funds. Current asset should be sufficiently in excess of current liabilities to
constitute a buffer or margin for maturing obligations within the ordinary operating
cycle of a business.

Symbolically working capital is denoted as,

WC=CA-CL

Where,

CA=Current Asset
CL=Current Liability

NEED FOR WORKING CAPITAL:-


Mainly the working capital is needed for day-to-day activities of a firm.
Every firm aims at maximizing the worth of its shareholders. In its strive to do so, a
firm should earn sufficient return from its operation. The firm has to invest enough
fund in current assets for generating sales. Current assets are needed because sales do
not get converted into cash instantaneously.

DETERMINATION OF WORKING CAPITAL:-

Any firm should nither have too much nor too little working capital. The
total working capital required is determined by a wide variety of factors. These factors
are:

1) General Nature of Business:

The working capital requirement of an enterprise is basically related to the


nature of business.
The two factors are:
• The cash nature of business i.e. cash sale.
• Sales of services rather then commodities.

The proportion of current asset measures the relative requirements of


working capital of various industries.

2) Production cycle:

Another factor, which has a bearing on working capital is the production


cycle. The term production cycle involves the time involved in manufacturing of
goods. It covers the time span between the procurement of raw material and
completion of manufacturing process leading to the production of finish goods.

To sustain such activities the need for capital is obvious. The larger the time
span, the larger will be the tied-up fund and therefore the larger is the working capital
needed and vice-versa.

3) Business cycle:

The working capital Requirements are also determined by the nature of


business cycle. Business fluctuation lead to cyclical and seasonal changes, which in
turn cause a shift in working capital position. The variation in business condition may
be in two direction.
• Upward phase i.e. Boom condition
• Downward phase i.e. Recession condition

4) Production policy:

The quantity of working capital is also determined by praduction policy. In


some business the demand for product is seasonal. During the slack season, the firm
have to maintain there working force physical facilities without adequate production
and sales. When peek period arrive the firm has to operate at cull capacity to meet
demand.
There for the production policy has to be made on individual setting of each
enterprise and the magnitude and dimension of the working capital problem will
accordingly vary.

5) Credit policy:

The credit policy relating to sales and purchase also affect the working capital.
Credit policy influence the requirement of the working capital in two ways,

1. Through credit terms granted by the firm to its customers/buyers of goods.


2. Credit terms available to the firms from its creditors.

Thus working capital requirement of the business are affected by the terms of
purchase and sales and the role given to credit by the company in its dealing with
creditor and debtors.

6) Growth with expansion:

As the company grows it is logical to expect that a larger amount of working


capital is required. It is difficult to determine precisely the relationship between the
growth in the volume of business of a company and the increase in working capital.
Other things being equal growing industry require more working capital then those
that are static.

PLANING OF WORKING CAPITAL:-

What do you mean by planning of working capital?

Planning of working capital means fixing a proportional amount of funds for


the entire period to carry business of the firm smoothly and effectively.

INTRADUCTION TO PLANING OF WORKING CAPITAL:-

Basically planning of working capital aims at smooth and efficient flow of the
regular operating cycle i.e. right from the procurement of raw material to sale of finish
goods. Planning of working capital is done according to the need and necessity of the
firm. Basically the planning of working capital is done to achieve the goal of the firm.

Planning of working capital differ firm one organization to another because


the rules and regulations, companies strategies would be different from one another.
Thus before planning working capital one has to be vary well acquainted with the firm
position. It has also to see that the working capital that has planned is sufficient to
meet the liabilities of the firm.

Thus planning of working capital plays a very critical role or it’s the pare that
has to be performed by the accounts department of the firm because they are the
person who are responsible for handling the finance of the firm. Thus planning of
working capital has to be done vary carefully by analyzing each and every small and
big thing of firms.

PLANNING OF WORKING CAPITAL AT


ATUL LTD.

In Atul Ltd, working capital planning is done by the finance Manager. The
working capital planning is done on four occasions ie. Yearly, Monthly, Weekly and
Daily basis. First the total working capital requirement is assessed on yearly basis. On
the basis of yearly planning, the company approaches its bankers for increase or
modifications in the working capital facilities. Then the company makes the monthly
working capital planning. This is done to meet the working capital requirement of the
coming month. Then the company makes a working capital planning for the
immediate week. Up to this level the working capital planning is done by the finance
manager. Then, on every evening he makes the financial requirement of the next day
and assign the execution of those works to the Accountant and officers.

The data required for planning in Atul Ltd Are as follows.

Yearly projected sales


The data is given by Managing Director and Marketing Manager to the Finance
Manager.

Expansion plan of management.


These data is given by the Managing Director and Directors.

Monthly projected sales.


This data is given by marketing manager to the Finance Manager

Monthly estimated purchase.


This data is given by Production Manager to the Finance Manager.

Monthly estimated salary, power bill , repair and maintenance and other direct
and indirect expenses.
This data is given by Production Manager to the Finance Manager

Monthly estimated money receivable from debtors.


This data is given by Accountants to the Finance Manager.

Monthly estimated money payables to creditors.


This data is given by Accountants to the Finance Manager.
If there are much deviation in the financial requirements during the year due to
unexpected receipt of goods purchase orders and increase in sales or change in credit
terms, the yearly working capital requirement is reviewed and modified. Accordingly
monthly working capital planning is also changed.

PROCUREMENT PROCIDIRE OF WORKING CAPITAL:-

The company requires certain amount of capital for day-to-day transaction.

The company fulfills its need for working capital from its internal factors such
as receivables from the debtors, advances etc.

The other sources from which company acquire working capital are:

• Bank loan
• Cash credit
• Borrowing from financial institution
• Trade credit
OPERATING CYCLE

The operating cycle is also known as cast to cash cycle, is duration


required to convert sales after the conversion of resources into inventories,
into cash. The various phases of operating cycle can be depicted as given
bellow.

Cash

Collection Purchases

Accounts
Receivab
Raw material
le
Inventory

Work in progress
Sales Inventory

Finished goods
Inventory

Sound financial management of a company involves matching the sources and


uses of cash so that the obligations come due as assets and mature into cash.
Net Operating Cycle

Gross Operating Cycle Payable Deferral Period


(I ) (II)

Inventory Consumption Debtor Consumption Period


Period (1) (2)

Raw material Work in Progress Finish Good


Consumption Period Consumption Period Consumption Period
(A) (B) (C)

CALCULATION OF OPERATING CYCLE OF


ATUL LIMITED

1) Inventory consumption period :-


A) Raw material consumption period :-

Raw material consumption = Raw material inventory X 360


Period Raw material consumed

2005-2006
Raw material inventory -Rs. 4016.71
Raw material consumed- Rs. 42163.12
Raw material consumption = Raw material inventory X 360
Period Raw material consumed

= 4016.71 X 360
42163.12
= 34.2957

2004-2005
Raw material inventory - Rs. 3790.23
Raw material consumed - Rs. 34826.37
Raw material consumption = Raw material inventory X 360
Period Raw material consumed

= 3790.23 X 360
34826.37
= 39.17

2002-2003
Raw material inventory - Rs. 2738.51
Raw material consumed - Rs. 25144.18
Raw material consumption = Raw material inventory X 360
Period Raw material consumed

= 2738.51 X 360
25144.18
= 39.208

2001-2002
Raw material inventory - Rs. 2690.71
Raw material consumed – Rs. 22752.41
Raw material consumption = Raw material inventory X 360
Period Raw material consumed

= 2690.71 X 360
22752.41
= 42.57

B) Work in Progress Conversion Period :-

Work in Progress Conversion = Work in progress inventory X 360

Period cost of production


2005-2006
Work in progress inventory –Rs. 6221.20
Cost of production - Rs. 72681.835
Work in Progress Conversion = Work in progress inventory X 360

Period cost of production

= 6221.20 X 360
72681.835
= 30.814

2004-2005
Work in progress inventory – Rs. 5107.03
Cost of production - Rs. 61931.826
Work in Progress Conversion = Work in progress inventory X 360

Period cost of production

= 5107.03 X 360
61931.826
= 29.69

2003-2004
Work in progress inventory –Rs. 5782.57
Cost of production -Rs. 52600.755
Work in Progress Conversion = Work in progress inventory X 360

Period cost of production

= 5782.57 X 360
52600.755
= 39.57

2002-2003
Work in progress inventory –Rs. 6965.84
Cost of production - Rs. 51454.172
Work in Progress Conversion = Work in progress inventory X 360

Period cost of production

= 6965.84 X 360

51454.172
= 48.73661

C) Finish goods consumption period :-


Finish goods consumption = Finish goods inventory X 360

Period Cost of goods sold

2005-2006
Finish goods inventory – Rs. 6955.05
Cost of goods sold - Rs. 80768.59
Finish goods consumption = Finish goods inventory X 360

Period Cost of goods sold

= 6955.05 X 360
80768.59
= 30.99

2004-2005
Finish goods inventory – Rs. 5187.04
Cost of goods sold - Rs. 69134.80
Finish goods consumption = Finish goods inventory X 360

Period Cost of goods sold

= 5187.04 X 360
69134.80
= 27.01

2003-2004
Finish goods inventory –Rs. 4928.05
Cost of goods sold - Rs. 59663.69

Finish goods consumption = Finish goods inventory X 360

Period Cost of goods sold

= 4928.05 X 360

59663.69

= 29.73

2002-2003
Finish goods inventory – Rs. 6226.43
Cost of goods sold - RS. 61843.65
Finish goods consumption = Finish goods inventory X 360
Period Cost of goods sold

=6226.43 X 360
61843.65
= 36.24
1) Inventory consumption period = Raw material consumption period + Work in Progress
Conversion Period + Finish goods consumption period

2005-2006
Inventory consumption period = A + B + C
= 34.2957 + 30.814 + 30.99
= 96.0997 Days

2004-2005
Inventory consumption period = A + B + C
= 39.17 + 29.69 + 27.01
= 95.87 Days

2003-2004
Inventory consumption period = A + B + C
= 39.208 + 39.57 + 29.73
= 108.508 Days

2002-2003
Inventory consumption period = A + B + C
= 42.57 + 48.7366 + 36.24
= 127.5466 Days

Inventory Consumption Preiod

140 Raw Material


120 consumption
period
No of Days

100
80 Work in
60 Progress
40
Finish Goods
20
Consumption
0 Period
2005- 2004- 2003- 2002- Inventory
2006 2005 2004 2003 Consumption
Yesr Period
2) Debtors conversion period :-

Debtors conversion period = Debtors X 360

Credit sales

2005-2006
Debtors - Rs. 22236.82
Credit sales - Rs. 83043.20
Debtors conversion period = Debtors X 360
Credit sales
= 22236.82 X 360

83043.20

= 96.398

= 96 Days (Approximate)

2004-2005
Debtors - Rs. 20263.13
Credit sales - Rs. 69938.69

Debtors conversion period = Debtors X 360


Credit sales
= 20263.13 X 360
69938.69
= 104.30
= 104 Days (Approximate)

2003-2004
Debtors - Rs. 18613.66
Credit sales - Rs. 59397.69
Debtors conversion period = Debtors X 360
Credit sales
= 18613.66 X 360
59397.69
= 112.81
= 113 Days (Approximate)
2002-2003
Debtors - Rs. 17497.29
Credit sales - Rs. 64436.62
Debtors conversion period = Debtors X 360
Credit sales
= 17497.29 X 360
64436.62
= 97.755
=98 Days (Approximate)

i) Gross operating cycle = Inventory conversion period + Debtors conversion


period

2005-2006
Gross operating cycle = Inventory conversion period + Debtors conversion period

= 96.0997 + 96.398

= 192.4977

2004-2005
Gross operating cycle = Inventory conversion period + Debtors conversion period

= 95.87 + 104.30

= 200.17

2003-2004
Gross operating cycle = Inventory conversion period + Debtors conversion period

= 108.508 + 112.81

= 221.318

2002-2003
Gross operating cycle = Inventory conversion period + Debtors conversion period

= 127.5466 + 97.755

= 225.3016

ii) Payable Deferral Period = Creditors X 360


Credit purchase

2005-2006
Creditors = 13885.56

Credit purchase= 42391.64

Payable Deferral Period = Creditors X 360

Credit purchase

= 13885.56 X 360

42391.34

= 117.92

2004-2005
Creditors = 13371.34

Credit purchase= 36030.52

Payable Deferral Period = Creditors X 360

Credit purchase

= 13371.34 X 360

36030.52

= 133.60

2003-2004
Creditors =11288.20

Credit purchase= 24974.11

Payable Deferral Period = Creditors X 360

Credit purchase

= 11288.20 X 360

24974.11

= 162.7185

2002-2003
Creditors = 11583.99

Credit purchase= 25205.38


Payable Deferral Period = Creditors X 360

Credit purchase

= 11583.99 X 360

25205.38

= 165.45

Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period

2005-2006
Gross operating cycle= 192.49

Payable Deferral Period= 117.9195

Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period

= 192.49 + 117.9195

= 310.40

2004-2005
Gross operating cycle= 200.17

Payable Deferral Period= 133.60

Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period

= 200.17+ 133.60

= 333.77

2003-2004
Gross operating cycle= 221.318

Payable Deferral Period= 162.718

Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period

= 221.318+ 162.718

= 384.036
2002-2003
Gross operating cycle= 225.3016

Payable Deferral Period= 165.45

Net Operating cycle= Gross Operating Cycle+ Payable Deferral Period

= 225.3016 + 165.45

= 390.7516

N et O perating Cy c le

500
400
No of Days

300 N et O perating
200 C y c le
100
0
20 006

20 005

20 004

3
00
-2

-2
-2

-2
05

04

03

02
20

Ye a r
Calculation of Net Working Capital of ATUL LTD.
(Rs in Lacs)

Sources of Funds 2005-06 2004-05 2003-04 2002-03

Estimates of Current Asset

Inventories 20927.58 17122.15 16318.41 18370.41

Sundry Debtors, Unsecured 22236.82 20819.11 18613.66 17497.29

Cash & Bank Balance 1379.18 1425.04 1069.16 874.88

Others 20.80 75.24 138.31 135.78

Loan &advances 6259.92 6252.76 7671.06 7453.62

(A) Total Current Asset 50824.30 45694.32 43810.66 44331.98

Estimated Current Liability

Liabilities 17440.93 15809.26 13431.35 12268.47

Provisions 3334.76 3130.82 1796.33 2285.19

(B) Total Current Liability 20775.69 18940.08 15227.68 14553.66

Net Working Capital(A-B) 30048.61 26754.24 28582.98 32078.01


Net Working capital

31000

Amt in Lacs
30000
29000 Net Working
28000
27000 capital
26000
25000

20 006

20 005

20 004

3
00
-2

-2

-2

-2
05

04

03

02
20

Year

INVENTRY MANAGEMENT

Inventory constitutes the most important part of current asset. On an average,


inventory are 60% of current asset in Public limited companies in India. Because of
the large size of the inventory maintained by the firms, a considerable amount of fund
is required to be committed to them. It is therefore absolutely imperative to manage
inventory efficiently and effectively in order to avoid unnecessary investment.

The term inventory refers to the stock pile of products as firm is offering for
sales and the component that make up the products .

Raw Material
Work in progress
Finished goods

The Raw material inventories contain the items that are purchased by the firm
from others and are converted into finished goods through manufacturing process.
The work in progress inventory consist of items that are purchased by the firm
from others and are converted into finished goods through manufacturing process.

Work in progress inventories consist of items currently being used in


production process. They are normally semi-finished goods that are at various stage of
production in multi stage production process.

Finish goods represent final of completed products available for sole. The
inventory of such goods consists items that have been produced but are yet to be sold.

OBJECTIVES OF INVENTRY MANAGEMENT


The basic responsibility of the financial manager is to make sure that the firms
cash flows are managed efficiently. Efficient management of inventory should
ultimately result in the maximization of the owner’s wealth. The objectives of
inventory management consist of two counterbalancing parts:

1. To minimize investments in inventory


2. To meet the demand of the product by efficiently organizing the production
and sales operation.

SIGNIFICANCE OF INVENTRY
Inventory constitutes in every business concern the most significant pert of
working capital current asset. Inventory in Indian industries constitute more than 60%
of current assets. About 40% to 60% of the cost of product contains material cost.

NEED TO HOLDING INVENTORY


The managing inventory arises only when the company hold inventories.
Managing inventories involve tying up of the company’s funds and incurrence of
storage and handling coat.

1. Transaction motives:-

It emphasizes the need to maintain inventories to facilitate smooth production


and sales operation.

2. Precautionary motive:-

It necessitates holding of inventories to guard against the risk of unpredictable


changes in demand and supply forces and others.

3. Speculative Motive:-

It influences the decision to increase or reduce inventory level to take


advantage of price fluctuation.

INVENTRY RELATED COST


An inventory system consist of the following cost

1. ORDERING COST

It include the following costs.


• Ordering cost
• Handling of issued transaction
• Cost of administration

2. HOLDING COST

It include the following cost


• Cost of blocking
• Cost of insurance
• Storage cost
• Cost of obsolence
• Determination cost

3. STOCK OUT COST

It include the following cost


• Lost sales
• Back lagging
• Penalty cost
• Loss of goods

FACTORS DETERMINING LEVEL OF


INVENTRY

1. Type and nature of business:

The nature and quantity required for raw material different from firm to firm.
Because it is depending on type of firm.

2. Anticipated sales volume:

If anticipated sales volume is high then the level of inventory is also high.

3. Price level variation / availability of funds:

If the price of raw material decrease and if company is capable to buy in bulk,
then the level of inventory will be high in company.

4. Demand of finish goods:

If the demand of finish good is high then the level of inventory is also high.
So that the company can meet the demand.

5. Production process:

The level of inventory also depends on production process. If there is


continuous production process, then the requirement of the raw material will be high
and vice-versa.
Inventory management technology

ABC ANALYSIS:
It is also known as selective inventory management
technique. It is the analyses tabulation and classification of
characteristics of item being carried out.
In inventory the comprehensive classification of item
being carried inventory in terms of deciding value stand
financial control of inventory.

“A” class items are very costly. So regularly received by


the up level supervisors and are issued by only authorized
person signature.

“B” class items are less supervised in comparison of “A”


class items and cheap or not very cheap or not very costly.

“C” class items are vary supervised and are known as


regularly consumption items and are very cheap.

Main Raw materials of Atul Ltd

• Toluene
• Phenol
• Sulfur
• Methanol
• Others
• Imported
• Indigenous
• Dyestuffs
• Intermediates
• Manganese Sulphate
• Oleum 25%
• Sulpheuric Acid 98%
• Oleum 65%

Packaging Materials of Atul Ltd.


• M.S. Drums
• Plastic Bags
• Fiber Drums

Finish Goods of Atul Ltd.


Atul Ltd manufactures many products the product manufacture by Atul Ltd
are Cresol , Toluidines , Sodium Sulphite , Sodium Sulphate and many more other
products there are as many as 42 product.

Inventory Management in Atul Ltd.

Inventories (Rs in lakh)


Raw material 42163.12
Work-in-progress 6221.20
Finish goods 41948.36
Store 5107.03
Power, Fuel, Water 9472.53
Packaging Material 52.27

Inventory at Atul Ltd

45000
Amt in Lacs

40000
35000
30000
25000 Series1
20000
15000
10000
5000
0
er

l
ss
l

ia
ds
ia

at
,fu ore

er
re
er

oo

,W

at
og
at

t
G

M
el
M

Pr

ng
aw

is
in

er
in

gi
R

ow

ka
or

ac
W

Component
Classification Of Inventory In Atul Ltd.

Raw materials
Raw materials Units Qty Rate (Rs in
Lacs)
Toluene MT 9498 30002.20 2846.99
Phenol MT 5558 54470.89 3040.71
Sulfur MT 26931 5246.62 1412.87
Methanol MT 6621 15646.73 1035.97
Other MT 33826.58
Imported MT 16834.67
Indigenous MT 25328.45
Dyestuffs MT 326 221782.2 723.01
0
Intermediates MT 1147 137709.6 1579.53
7
Manganese Sulphate MT 336 13616.07 45.75
Total 86674.53

ABC Analysis of Raw Material


Raw Material Units Amount %of Categor
total y
cost
Other MT 33826.5 39.027 A
8
Indigenous MT 25328.4 29.22 A
5
Imported MT 16834.6 19.42 A
7
Phenol MT 3040.71 3.50 B
Toluene MT 2846.99 3.28 B
Intermediates MT 1579.53 1.822 C
Sulfur MT 1412.87 1.63 C
Methanol MT 1035.97 1.19 C
Dyestuff MT 723.01 0.834 C
Manganese Sulphate MT 45.75 0.0528 C
Total 86674.5 100
3

The value of Indigenous, Imported and other Raw Material is higher and has
blocked other raw material. So they have A category. Phenol and Toluene lies in B
category. Finally other product having lower value lies in C category.

Raw materials Analyses


(Rs in Lacs) Toluene
1% 2% 0% 3% 4% Phenol
2% Sulfur
1%
Methanol
29%
Other
Imported
39% Indigenous
Dyestuffs
Intermediates
19%
Manganese Sulphate
FINISH GOODS

Class of Goods MT Rs in Lacs


Cresol 392 334.57
Sodium Sulphite 552 26.12
p-Anisaldehyde 135 280.07
p- Anisyl alchohol 38 88.92
p-Cresidin 9 16.32
Anisole 8 8.34
Dyes & Dye imtermediates (a&b) 727 804.79
Caustic/Chlorine 819 60.05
Chemicals 2280 1270.10
Pharmaceuticals 1 2.70
Sulpha Drug & intermediates 5 14.38
Bulk Drugs & Drug intermediat 13 80.16
PHIM 14 78.91
UF/MF/PF dicyandiamide resines 2 1.55
Epoxy resins 250 327.74
Hardener & auxilialiaries 129 189.78
Farmaldehyde 114 10.16
Polyminoamide resins & their intermediates 15 24.98
Sulphanilic Acid 1 .18
Sulpha bulk drugs for export 85 193.75
other 212.09
Ancamine 3 11.11
% of
Class of Goods MT Rs in Tota
Categor
Lacs l y
Coat
Cresol 392 334.57 8 B
Sodium Sulphite 552 26.12 1 C
p-Anisaldehyde 135 280.07 7 B
p- Anisyl alchohol 38 88.92 2 C
p-Cresidin 9 16.32 0 C
Anisole 8 8.34 0 C
Dyes & Dye imtermediates (a&b) 727 804.79 20 A
Caustic/Chlorine 819 60.05 1 C
Chemicals 228 1270.1 31 A
0 0
Pharmaceuticals 1 2.70 0 C
Sulpha Drug & intermediates 5 14.38 0 C
Bulk Drugs & Drug intermediat 13 80.16 2 C
PHIM 14 78.91 2 C
UF/MF/PF dicyandiamide resines 2 1.55 0 C
Epoxy resins 250 327.74 8 B
Hardener & auxilialiaries 129 189.78 5 C
Farmaldehyde 114 10.16 0 C
Polyminoamide resins & their 15 24.98 1 C
intermediates
Sulphanilic Acid 1 .18 0 C
Sulpha bulk drugs for export 85 193.75 5 C
other 212.09 5 C
Ancamine 3 11.11 0 C
ABC Analysis of Finish Goods
RsinLacs

5%

0% 1%

1% 7%
5% 0% 8%
0% 2%

5% 0%

0%
8%

0%

2% 20%
2%

0%
1%
0% 31%

Finish Goods
Cresol
Sodium Sulphite
p-Anisaldehyde
p- Anisyl alchohol
p-Cresidin
Anisole
Dyes & Dye imtermediates (a&b)
Caustic/Chlorine
Chemicals
Pharmaceuticals
Sulpha Drug & intermediates
Bulk Drugs & Drug intermediat
PHIM
UF/MF/PF dicyandiamide resines
Epoxy resins
Hardener & auxilialiaries
Farmaldehyde
Polyminoamide resins & their intermediates
Sulphanilic Acid
Sulpha bulk drugs for export
other
Ancamine
Method of inventory valuation in Atul Ltd.
At Atul Ltd FIFO method is used, ie FIRST IN FIRST OUT.

Level of inventory at Atul Ltd.


Maximum level= 2month’s

Maximum level represents the beyond which the stock is hand is not allowed
to exceed.

Minimum level=15day’s

Minimum level represents the beyond which the stock is hand is not allowed
to Fall.

Analysis of inventory holding in Atul Ltd.


Inventories (2005-06) (2004-05)
Raw material 42163.12 34826.37
Work in progress 6221.20 5107.03
Finish Goods 41948.36 36244.80
Store 5107.03 5728.16
Power, Fuel And Water 9472.55 7684.69
Packaging Material 52.27 45.39

(2005-06)
Inventory Analysis
(2004-05)
45000
40000
35000
30000
Amount

25000
20000
15000
10000
5000
0
Raw material Work in Finish Store Power, Fuel Packaging
progress Goods Inventory And Water Material
CASH MANAGEMENT
Cash management is one of the key area of working capital management.
Apart from the fact that it is the most liquid currency assets, cash is the common
denominator to which all the current assets be reduced because the other major liquid
assets that is receivables and inventory get converted into cash. This underlines the
significance of cash management.

Cash in the important current asset for the operations of business. Cash is the
basic input needed to keep the business running on a continuous basis. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the
firm’s manufacturing operations while excessive cash will simply remain idle,
without contributing any thing towards the firms profitability. Thus the major
function of the Finance manager is to maintain sound cash position.

Cash is the money which the firm can utilize immediately without any restriction.

Cash management is concerned with the management of :-


Cash flow into and out of the firm.
Cash flow within the firm.
Cash balance held by the firm at a point of time by financing deficit or investing
surplus cash.

Motives for holding cash

The term cash with reference to cash management is used in two senses. In a
normal sense, it means currency which is accepted as cash. The broad view of cash
also include near cash assets cash balance in bank.

The four primary motives for maintaining cash balances

• Transaction motive
• Precautionary motive
• Speculative motive
• Compensating motive

1. Transaction motive:

Transaction motive refers to the holding of cash to meet cash requirement to


finance the transaction, which the firm carries on in the ordinary business. Example :
cash payment to be made for purchase, wages, operating expenses, financial charges
like taxes.
“The requirement of cash balance to meet routine cash needs is known as the
transaction motive and such motive refers to the holding of cash to meet anticipated
obligation whose timing is not perfectly synchronized with cash receipts.”

2. Precautionary motive:

The cash balances held in reserve for random and unforeseen fluctuations in
cash flow are called as Precautionary motive.
Many time cash is required in order to overcome some unforced requirements.
Usually there is always same minimum balance maintained for this purpose.

3. Speculative motive:

It refers to the desire of the firm to take advantage of opportunity which


present themselves at unexpected moments and which are typically outside the normal
cause of business.

Many times the opportunity may be available due to a fall or rise in raw
material price. The company should explore such circumstances.

4. Compensating motive:
Usually the clients are required to maintain a minimum balance of cash at
bank. Since this balance cannot be utilize by the firm for transactions purposes, the
bank themselves can use the amount to earn a return. Such balances are
“Compensating Balance.”

Objectives for cash management

The basic objectives of cash management are;


1. To meet the cash disbursement needs
2. To minimize funds committed to cash balances.

While cash serves this function it evolves in an opportunity cast. The liquidity
provided by cash holding is at the expenses of profit by forcing alternative investment
opportunities. Hence, an optimum cash balance should be maintained taking into
account the profitability.

Cash management technique

There are some specific technique and processes for speedy collection of
receivables from costumers and slowing disbursements.

• Speed cash collections


• Prompt payment by costumer
• Early conversion of payment into cash

Cash management techniques at ATUL LTD

The firm prepares cash budget to determine the net cash inflow or outflow so that the firm is
enabled to arrange for finances. Cash budget is helping the firm to manage it cash position.
RECEIVABLE
MANAGEMENT
The term receivable is defined as “Debt owned to the firm by customer arising
from sales of goods or service in the ordinary course of business”

When a firm makes an ordinary sale of goods on services and does not receive
payment, the firm grants trade credit and creates account receivable, which could be
collected in the future. Receivable management is also trade credit management.

Firm now days also enjoy the benefit of Negative Working capital. Here they
enjoy the benefit of gating various Products, Raw material and other things on credit
for manufacturing of final product. Here this benefit received by the firm is on the
basis of good will and bargaining strength of the company. Negative Working
capital adds to a larger benefit then expected by the creditor. For these reason now
day’s companies have started to raise the payment period to it creditor.

Major costs:

The major categories of costs associated with the extension of credit and account
receivables are;
1. Collection cost
2. Capital cost
3. Delinquency cont
4. Default cost

1. Collection cost:

Collection cost are administration cost incurred in collecting the receivable


from the customers to whom credit sales have been made.

2. Capital cost:

The increase level in assets. They have to be finance there by involving the
cost there is a time leg between the sales of goods to and payment by the costumer.

3. Delinquency cost:

This cost arises out of the failure of the costumer to meet there obligation
when payment on credit period. Such costs are called delinquency cost.

4. Default cost:

Finally the firm may not be able to recover the over-dues because of the
inability of cost associated with credit sales and account receivables.
Credit policy
The credit policy related to sales and purchase also affect working capital. The credit
policy influences the requirement of working capital in two ways.

1. Through credit terms granted by the firm to its customer buyers of good.

2. Credit terms available to the firm from its creditors.

The, credit policy is a framework to determine weather to extend credit to a


costumer and how much credit to be extended to the costumer. The broad
dimensions of credit policy of a firm are credit standards and credit analysis.

Credit policy at ATUL LTD

The firm is granting credit to its customers for the following reasons:

1. To achieve growth in sales

If the firm sells goods on credit, it will generally be in a position to sell


more goods then if it insisted on cash payment. This is because many
costumers are either not prepared or not in a position to pay in cash when
they purchase the goods.

2. To increase profit

Increase in sales result in high profit for the firm not only because of
increase in volume of sales but also because the firm charges a higher
margin of profit on credit sales as compared to cash sales.

3. To meet competition

A firm has to resort to granting credit its competitors were granting


credit facilities. In order to avoid loss of sales the firm has to resort to
grant credit facilities.

Receivable management at ATUL LTD


At ATUL LED Receivable form approximately 35% of current assets. Hence
the company accords high importance to the management of receivables. The credit
policy varies from 15 days to 90 days depending on costumers.

On every 15 days and last day of the month the company prepares the
receivables list this list show the total receivable, receivable which are due and due
date of each bill. This list is prepared by the accounting department.

The accounts department co-ordinates with the marketing department for


collection of receivables. The total receivable is classified on the basis of:

• Amount involved
• Risk involved
• Future business relations

On the basis of amount involved the receivable are classified into High value,
Medium value and low value.

High value receivables are managed by the Finance manager.


Medium value receivables are managed by the subordinate of the Marketing manager
and Finance manager.
Low value receivables are managed by the clerks in the Accounting department.

On the basis of risk involved, the company categorizes the receivable into high
risk, moderate risk and normal risk.

In case of high risk receivables the company the adequate insurance through
Export Credit Guarantee Corporation of India in case of exports and in the case of
domestic sales the company fixed credit period with the baking of post dates cheques
or assurance from receivable sources. High risk category is directly managed by the
directors of the company.

In case of moderate risk receivables, the Marketing Manager and Finance


manager follow up the debtors filling in the category.

In case of normal business risk receivables, the subordinate of the Marketing


Manager and Finance manager follow up the debtors filling in the category.

On the basis of the future prospects of the costumers the receivables are
classified into fast growing companies, study growing companies and stagnant
companies.

The terms of credit in case of fast growing companies are fixed on the basis of
the latest date available. Director of the company manage this category.

In case of steady growing companies, the Marketing Manager and Finance


Manager follow up the debtors falling in the category.

In case of stagnant companies, the subordinates of the Marketing Manager and


Finance Manager follow up the debtors falling in this category.
Working capital finance
Bank finance for working capital
Banks are the main institutional source of working capital finance in India. After trade
credit, bank credit is the most important source of financing working capital
requirements of the firm in India. A bank considers a firm’s sales and production
plans and the desired level of current assets in determining its working capital
requirement.

Forms of bank finance

1. Overdraft
Under the overdraft facility, the borrower is allowed to withdraw funds in excess of
balance in his current account up to certain specified limit during the specified period.
Though the overdrawn is repayable on demand, they generally continue for a longer
period by annual renewal of the limits.

2. Cash credit
Cash credit facility is similar to the overdraft management. The barrower is allowed
to withdraw funds up to certain sanctioned credit limit. He does not require the entire
amount at once. He can periodically withdraw to the extent of his requirement and
repay by depositing surplus funds in his cash credit account. Interest is payable on the
amount actually utilized by the borrower.

3. Bills Purchasing or Discounting


Under the purchase or discounting of bills, a borrower can obtain credit from bank
against its bills. The bank purchase or discount the borrower bills, bank holds bills as
security for credit. When bill is discounted, the borrower is paid the discount amount
bill i.e The full amount of the bill minus the discount charged by the bank. The bank
collects the full amount on maturity.

4. Working capital loan


A borrower may sometime require temporary working capital in excess of
sanctioned credit limit to meet unforeseen expenses. Banks provide such
accommodation through demand lone account. The borrower is required to pay
higher rate of interest about the normal rate of interest on such additional credit.
FINDINGS
Raw material stock as on 31/3/06 show the raw material holding period is 34 days as
compare to 39 days on 31/3/05 , 31/3/04 , 42 days on 31/3/03 .During the year the
average holding time was 30 days but due the year ending the company had export
order which were to be executed by the first half of April-07 .
Due to the decrease in inventory consumption period, the gross operating cycle period
has also decrease.
• The net working capital requirement of the company has increased in 2005-06
• The Firm CA and CL has increase in 2005-06 and the ratio of CA is higher
then increase CL .the increase in CA is decrease to increase in inventory.
(Compared to 2004- 2005, 2003-2004.)

Inventory Management
The values of imported, indigenous and other raw material are high and these raw
materials has block 19.42%, 29.22%. 39.03%.Hence it has been category as A. The
reason of high value of this raw material is as they are imported and the availability of
raw material is not regular.
The value of finish products of Dye and Dye intermediates (a&b), chemicals are
highest in finish goods inventory and these finish goods have blocked 51% of the total
value of finished goods inventory. Hence it has been categorized in A category.
The reason of high stock value of this finish Goods is that this material is scheduled to
be dispatched in Second week of April. Hence it is seen as a higher value finish goods
inventory as on 30 March 2006.

Cash Management
The company’s maintain a cash balance of Rs.150 Lacs. In order to meet the daily
requirements of miscellaneous cash purchases and for emergences like accident.
The company prepares the cash budget and forecast its requirements. If there is any
deficit then it borrows and if there is any surplus then it repays.

Working capital
The company finance its working capital through its internal accruals. It is also
making use of financial instruments like Overdraft, Cash credit, Bill Purchase, Export
packing credit foreign bill Purchase/Discount.
It makes use of such instrument in order to be safe due to export dealing of vary high
values.
RECOMMENDATION
Working Capital
The Company has high internal accruals. Hence it Should not go for working
capital loan. It should try to reduce it inventory consumption period and Debtors
collection period.
It should try to reduce it Current Asset.

Inventory Management
The Company should implement inventory management technique efficiently
as there working capital amount is mostly blocked in inventory and above 50% of the
amount is blocked in Inventory. If inventory holding is reduce there will be more
Working Capital.

Receivable Management
The Company has to maintain against schedule in order to keep a proper track
of the receivables. This schedule helps in finding out the payment which have gone
beyond the credit limit. It would also help the management in taking proper action to
recover the payments.

The company should also maintain Collective Experience Matrix which will
show how efficient the collection in collecting the receivables. In the diagram it there
in an increase in the debtors then it shows the inefficiency of the collection
department.

Cash Management
The company has got high interest accruals. Hence it should not borrow and
finance its activities from interest accrual. More over the company can also think of
investment in order to earn income on idle cash.

BIBLIOGRAPHY
• Khan and Jain, Financial Management Third Edition.

• Prasanna Chandra, Financial Management Fourth Edition.

• I. M. Pandey, Financial Management , Eighth Edition ,Vikas


Publication Pvt. Ltd.

• www. Atulnet.com

• www.Atul.com

• Company’s Annual Report