17-04-2013, 04:54 PM
ANALYSES OF WORKING CAPITAL FOR JUBILANT ORGANOSYS LIMITED, NEERA PUNE
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EXECUTIVE SUMMERY
It gives me great pleasure to present this project report on The study of working capital at Jubilant Organosys, Nira. The project was carried out from 15th Jan 2012 to 15th Feb 2012.
The main objective of the project was to study various aspects of working capital. To know details the procedure of assessment of working capital followed by the firm.
Wheels of business cannot move without money. Availability of money is being limited and wants being unlimited. So procurement of fund is one of the important functions in commercial & non-commercial enterprises and utilizes it for maximization of business profits.
SCOPE OF THE STUDY
The fact that cash inflows are not matched in both timing and amount by cash outflows, provides us with an operating cycle and rationale for investing in working capital In any analysis of working capital, a distinction is made between temporary and permanent working capital requirements. The efficiency of the planning and management is subject to the correct estimates of the working capital requirement. The fixed assets which usually require a large chunk of total funds, can be used at and optimum level only if supported by sufficient working capital If working capital level is not properly maintained and managed, then it may result in unnecessary blocking of scarce resources of the firm .Therefore working capital management needs attention of all the financial managers.
The study of working capital helps us to know the current assets and current liability of an organization. A too large investment in current assets means tying up funds that can be productively used elsewhere. On the other hand, too little investments can also be expensive. e.g. insufficient inventory may mean that sales are lost as the goods which a customer wants are not available.
In this project, the study of working capital analysis is done through working capital budget and ratio analysis. Ratio Analysis is an effective tool to study the relationship between the current assets, current liabilities & various other factors of the firm.
CORPORATE OVERVIEW
Jubilant Organosys is an integrated pharmaceutical and life sciences company. It is the largest Custom Research and Manufacturing Services (CRAMS) player and a leading Drug Discovery and Development Solution (DDDS) provider out of India.
The Company has successfully positioned itself as a preferred partner for leading global pharma & life sciences companies and has the capability to deliver products and services across the pharma value chain. Jubilant has geographically diversified manufacturing facilities at ten locations worldwide. Together, these help the Company cater to its customers in over 65 countries.
It is constantly engaged in delivering value to its global customers through innovative technologies, products and services. Jubilant through its various subsidiaries in India and overseas is constantly endeavoring to contribute towards meeting the unmet medical needs and bringing down the healthcare costs globally.
Jubilant Organosys Limited, an integrated pharmaceutical industry player, is the largest Custom Research and Manufacturing Services (CRAMS) Company and one of the leading Drug Discovery and Development Solutions (DDDS) Companies from India. It is successfully positioned as "an outsourcing partner of choice" to global life sciences companies.
Determinants of working capital :
The amount of working capital depends upon the following factors
1) Nature of business
Some businesses are such, due to their very nature, that their requirement of fixed capital is more rather than working capital. These businesses sell services and not the commodities and that too on cash basis. As such, no funds are blocked in piling inventories and also no funds are blocked in receivables. E.g. public utility services like railways, infrastructure oriented project etc. Their requirement of working capital is less. On the other hand, there are some businesses like trading activity, where requirement of fixed capital is less but more money is blocked in inventories and debtors.
2) Length of production cycle
In some business like machine tools industry, the time gap between the acquisition of raw material till the end of final production of finished products itself is quite high. As such amount may be blocked either in raw material or work in progress or finished goods or even in debtors. Naturally their need of working capital is high.
3) Size and growth of business
In very small company the working capital requirement is quit high due to high overhead, higher buying and selling cost etc. as such medium size business positively has edge over the small companies. But if the business start growing after certain limit, the working capital requirements may adversely affect by the increasing size.
4) Business/ Trade cycle
If the company is the operating in the time of boom, the working capital requirement may be more as the company may like to buy more raw material, may increase the production and sales to take the benefit of favourable market, due to increase in the sales, there may more and more amount of funds blocked in stock and debtors etc. Similarly in the case of depressions also, working capital may be high as the sales terms of value and quantity may be reducing, there may be unnecessary piling up of stock without getting sold, the receivable may not be recovered in time etc.
5) Terms of purchase and sales
Some times due to competition or custom, it may be necessary for the company to extend more and more credit to customers, as result of which more and more amount is locked up in debtors or bills receivables which increase the working capital requirement. On the other hand, in the case of purchase, if the credit is offered by suppliers of goods and services, a part of working capital requirement may be financed by them, but it is necessary to purchase on cash basis, the working capital requirement will be higher.