17-08-2013, 04:45 PM
ANALYSIS OF WORKING CAPITAL FOR DHARAMPAL SATYAPAL LTD
ANALYSIS OF WORKING.pdf (Size: 378.79 KB / Downloads: 17)
EXECUTIVE SUMMARY
The management of current assets deals with determination, maintenance, control and
monitoring the level of all the individual current assets. Current assets are referred to as
assets, which can normally be converted into cash within one year therefore investment
in current assets should be just adequate no more no less͟ to the needs of the business.
Excessive investments in current assets should be avoided, because it impairs firm͛s
profitability, as idle investment in current assets and are non-productive and so they can
earn nothing, on the other hand inadequate amount of working capital can threaten
solvency of the firm, if it fails to meet its current obligations.
PROJECT OBJECTIVE
The project is aimed at evaluating the financial status of Dharampal Satyapal Ltd
and then doing the comparative analysis with its competitors
Studying the working capital management at Dharampal Satyapal Ltd. and
estimating the working capital requirements for 2007-2008 and then forecasting
for 2008-2009
To find out if there is any relationship between the working capital, sales and
current assets of Birla Power
COMPANY PROFILE
Dharampal Satyapal Group (DS Group) is more than Rs. 1400 crores diversified
conglomerate, which is committed towards high quality products & credited with
several innovations over last seven decades. The sagacity to weave its business around
consumer needs has conferred DS Group with a distinct value. Efficient capital structure,
cutting edge technology, operational discipline and a widespread distribution network,
have together attributed to enhance ͚Brand DS͛, and enabled the organization to deliver
continued growth in all areas of operation.
Its undeterred pursuit for ͚Quality & Innovation͛ has led the Company to progress on a
path of growth. The Group has consolidated its position into diversified sectors like
FMCG, Packaging, Hospitality, Rubber thread, Cement and other businesses.
The Stirring Saga of an Enterprise
In the early 20th century, when trade and commerce had not witnessed the advent of
brands and marketing warfare in India, Shri Dharampalji ʹ the founder of DS Group, set
up a small perfumery shop in Chandni Chowk, Delhi in the year 1929. The urge to create
a business around consumer tastes and preferences led Dharampalji to innovate quality
products. His sagacity revolutionized the market of chewing tobacco and the shop in
Chandni Chowk became renowned not only in Delhi but even amongst the connoisseurs
of tobacco in other parts of India and the world. Blending modernity, technology and
tradition, Dharampalji͛s son Satyapalji brought the dawn of a new era - an era that saw a
revolution. Satyapalji inherited qualities of high virtues, innovation and aspiration for
being the best in the business. His in-depth knowledge of perfumes honoured him the
title of ͞Sugandhi͟ (perfumer). He is credited with blending tobacco with various
exquisite fragrances. He is also known for bringing the element of quality and research
hitherto unknown in this category. Under the able stewardship of Satyapalji, the
nation͛s first ever-branded chewing tobacco BABA was launched in 1964 which became
an instant success and widely popular in its category. And what followed later was an
array of premium brands like Tulsi and a host of others which have established their
leadership in their own category and created new markets in its wake. Continuing the
fervour of innovation and quality, the Group set new benchmarks in Foods & Beverages.
Innovative tabletop sprinklers changed the way Indian households had been enjoying
salt and spices. Be it Catch spices or Catch Beverages, today Catch stands for
international quality and convenience.
Inference
Highest ratio is for Kothari products indicating shareholders have provided majority of funds
to purchase the assets instead of relying on others sources of funds.
DS Group and HUL are majorly dependent on outsiders for funding the assets / working capital.
For ITC it is on a better side with major funding done by proprietors.
DS Group should increase the shareholders fund and try to bring the ratio above 0.50.
Focusing on management of current assets
The gross working capital concept focuses attention on two aspects of current assets
management:
a) How to optimize investment in current assets?
b) How should current assets be financed?
The considerations of the level of investment in current assets should avoid two danger
points- excessive or inadequate investment in current assets. Investment in current
assets should be just adequate to the needs of the business firm. Excessive investment
in current assets should be avoided because it impairs the firm͛s profitability, as idle
investment earns nothing. On the other hand, inadequate amount of working capital
can threaten solvency of the firm because of its inability to meet its current obligations.
It should e realized that the working capital needs of the firm may be fluctuating with
changing business activity. The management should be prompt to initiate an action and
correct imbalances.
OPERATING AND CASH CONVERSION CYCLE
A firm should aim at maximizing the wealth of its shareholders, so the firm should earn
sufficient returns from its operations. Earning a steady amount of profit requires
successful sales activity. The firm has to invest enough funds in current assets for
generating sales. Current assets are needed because sales do not convert into cash
instantaneously. There is always an Operating cycle involved in the conversion of sales
into cash.
There is difference between current and fixed assets in terms of their liquidity. A firm
requires many years to recover the initial investment in fixed assets such as plant and
machinery or land and building. On the contrary, investment in current assets is turned
over many times in a year.