This document provides an analysis of the working capital management of Silver Forge Pvt. Ltd. over a four year period from 2009-10 to 2012-13. Key ratios such as the working capital turnover ratio, inventory turnover ratio, receivables turnover ratio, and current assets turnover ratio are calculated and interpreted. Liquidity ratios including the current ratio, quick ratio, and absolute liquid ratio are also analyzed. The analysis finds that the company's working capital and liquidity positions are generally strong, though inventory conversion periods and cash balances could be improved further. Recommendations include enhancing collection periods to reduce the net operating cycle and improving cash management.

1. A
SUMMER TRAINING PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT AT
Silver Forge Pvt. Ltd.
SUBMITTED TO:
Gujarat Technological University
-:Prepared by
UNDER THE GUIDAN

2. COMPANY PROFILE
Name of the unit : - silver forge pvt. Ltd.
Name of director : - Mr. Ankit khoyani
Year of the
Establishment : - 1995
Form of
Organization : - Large Scale
Phone Numbers :- 97234 44449
E-mail Address : - silverforge@yahoo.com
Bankers : - Bank of Baroda,rajkot

3. Working capital management
 Working capital management is concerned with the
problems arise in attempting to manage the current assets,
the current liabilities and the inter relationship that exist
between them.
 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.
 Current assets are include cash short term securities, bills
receivables, debtors, and stock. Current liabilities are
include creditors, bills payable, and outstanding expenses.
 Working capital= current asset – current liability

4. RESEARCH METHODOLOGY
 Source Of Data: Secondary Source
 Secondary data is original data. This kind of data is
gathered by others and that can be used in reference or
in study. The sources to gather this kind of data is
published survey of market, journal by govt., media report
etc.
 I have used secondary data for the purpose of research,
like
 Annual Report Prepaid by Charted Accountant of
company.
 Cost sheet Prepaid by Cost Auditor Of the Company.

5. Net operating cycle
1) Payable Deferral Period
2) Gross Operating cycle
A) Debtor Cosumption Period
B) Inventory Cosumption Period
a) Raw materiol Cosumption Period
b) Work in Progress Cosumption Period
c) Finish Good Cosumption Period
CALCULATION
 Inventory consumption period = Raw material consumption period +
Work in Progress Consumption Period + Finish goods consumption
period
 Gross operating cycle = Inventory consumption period + Debtors
consumption period
 Net Operating cycle= Gross Operating Cycle - Payable Deferral Period

6. Calculation of Net Operating Cycle
Years Inventory
consumption
Period
Debtors
consumption
Period
Payable
deferral
Period
days
2012-13 264 + 80 _ 223 121
2011-12 226 + 71 _ 155 142
2010-11 239 + 85 _ 154 170
2009-10 196 + 99 _ 182 113

7. WORKING CAPITAL RATIO ANALYSIS
 Ratio analysis is the powerful tool of financial statements
analysis. A ratio is define as “the indicated quotient of two
mathematical expressions” and as “the relationship between
two or more things”.
A) Working capital turnover ratio
W.C.R.A. = Net working capital
Sales

8. Particular 2012-13 2011-12 2010-11 2009-10
Sales 669249673 816685475 729950074 648628921
N.W.C. 348405728 327647003 335792950 275044278
W.C,TOR 0.52 0.40 0.46 0.42
Interpretation
High working capital ratio indicates the capability of the
organization to achieve maximum sales with the minimum
investment in working capital. Company’s working capital ratio
shows mostly more than two, except for the year 2012-13 because
of excess of cash balance in current assets which occurred due to
encashment of deposits. In the year 2011-12 the ratio was around
3, it indicates that the capability of the company to achieve
maximum sales with the minimum investment in working capital.

9. B)Inventory turnover ratio
Inventory TOR = Average inventory
 Cost of goods sold
Particular 2012-13 2011-12 2010-11 2009-10
COGS 433156377 520433711 463296547 400008998
Average
Inventory
269919109 285090636 243794185 192118715
Inventory TOR 0.62 0.55 0.53 0.48

10. Interpretation
Inventory turnover ratio indicates the efficiency of the firm in
producing and selling its products. It was observed that Inventory
turnover ratio indicates maximum sales achieved with the minimum
investment in the inventory. As such, the general rule high inventory
turnover is desirable but high inventory turnover ratio may not
necessary indicates the profitable situation. An organization, in order
to achieve a large sales volume may sometime sacrifice on profit,
inventory ratio may not result into high amount of profit.

11. C)Receivable turnover ratio
Receivable turnover ratio = Average account receivables
 Gross sales
Particular 2012-13 2011-12 2010-11 2009-10
Gross Sales 688623368 843295105 772355659 691409903
Sundry
Debtors
151569700 164825535 179198533 187721269
Receivable
TOR
0.22 0.20 0.23 0.27

12. Inerpretation
Receivable turnover ratios that receivables turned around the
sales were greater than 4 times. The actual collection period are more
than normal collection period allowed to customer. It shows that as
compare to previous year the debtors are decrease but it lead to
decrease in gross sales also. The company allows less credit sales but
it may be affect adversely on the total sales of the company.

13. D)Current assets turnover ratio
Current assets TOR= Current assets
Sales
Particular 2012-13 2011-12 2010-11 2009-10
sales 669249673 816685475 729950074 648628921
Current Assets 524548890 543102425 544804318 451413980
Current Assets
TOR
0.78 0.67 0.75 0.70

14. Interpretation
It was observed that current assets turnover ratio does not
indicate any trend over the period of time. Turnover ratio was O.78 in
the year 2012-13 and increase to 0.67 in the year 2011-12 , but it
decreased in the year 2010-11, because of high cash balance. Cash
did not help to increase in sales volume, as cash is non earning asset

15. 2)Liquidity ratio
The ratios compounded under this group indicate
the short term position of the organization and also indicate
the efficiency with which the working capital is being used.
Current assets
A) Current ratio = Current liabilities
Particular 2012-13 2011-12 2010-11 2009-10
Current Assets 524544889 543102425 544804318 451413098
Current
liabilities
176139161 215455422 209011368 176368820
Current Ratio 2.98 2.52 2.61 2.55

16. Current Ratio
2.98
2.52
2.61
2.55
3.2
3
2.8
2.6
2.4
2.2
2012-13 2011-12 2010-11 2009-10
Years
Times
Interpretation
The current ratio indicates the availability of funds to payment
of current liabilities in the form of current assets. A higher ratio
indicates that there were sufficient assets available with the
organization which can be converted in cash, without any reduction
in the value. As ideal current ratio is 2:1, where current ratio of the
firm is more than 2:1, it indicates the unnecessarily investment in
the current assets in the form of debtor and cash balance. Ratio is
higher in the year 2012-13 where cash balance is more than
requirement which came through encashment of deposits of funds.

17. B)Quick ratio
Current assets – Inventory
Quick ratio = Current liabilities
Particular 2012-13 2011-12 2010-11 2009-10
C.A –
Inventories
270222975 257586120 260139350 248489696
Current
liabilities
176139161 215455422 209011368 176368820
Quick Ratio 1.53 1.20 1.24 1.40

18. Quick Ratio
1.53
1.2 1.24
1.4
2
1.5
1
0.5
0
2012-13 2011-12 2010-11 2009-10
Years
Times
Interpretation
Quick ratios establish the relationship between quick or liquid
assets and liabilities. An asset is liquid if it can be converting in to cash
immediately or reasonably soon without a loss of value. Cash is the
most liquid asset .other assets which are consider to be relatively liquid
and include in quick assets are debtors and bills receivable and
marketable securities.
The liquid ratio of 1:1 is suppose to be standard or ideal but here ratio is
more than 1:1 over the period of time, it indicates that the firm maintains
the over liquid assets than actual requirement of such assets.

19. C)Absolute liquid ratio
Absolute liquid assets
Absolute liquid ratio = Current liabilities
Particular 2012-13 2011-12 2010-11 2009-10
Cash & Bank
Balance
64391467 19178538 17833875 7297136
Current
liabilities
176139161 215455422 209011368 176368820
Absolute liquid
ratio
0.36 0.089 0.085 0.041

20. Absolute liquid ratio
0.36
0.089 0.085
0.041
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2012-13 2011-12 2010-11 2009-10
Years
Times
Interpretation
Absolute liquid ratio indicates the availability of cash with
company is sufficient because company also has other current
assets to support current liabilities of the company. In the year 2012-
13 absolute liquid ratio increased because of company carry more
cash balance, as a cash balance is ideal assets company has to
take control on such availability of funds which is affect on cost of
the funds.

21. FINDING
Working capital turnover ratio in year 2009-10 was 0.42. In year 2010-11 the
ratio was 0.46. Then in year 2011-12 the ratio of working capital turnover was
0.40 . In year 2012-13 the ratio was 0.52
Inventory turnover ratio in year 2009-10 was 0.48. In year 2010-11 the ratio was
0.53 year 2011-12 the ratio was 0.55.And in year 2012-13 the ratio was 0.62
RecievableTurnover Ratio in year 2009-10 was 0.27. Then in year 2010-11 the
ratio was 0.23.In year 2011-12 the ratio was 0.20. And in year 2012-13 the ratio
was 0.22.
Current assets turnover ratio in year 2009-10 was 0.70. then in year 2010-11 the
ratio was 0.75. then in year 2011-12 the ratio was 0.67. And in year 2012-13 ratio
was 0.78

22. Liquidity ratio in year 2009-10 was 2.55. in year 2010-11 the ratio was 2.61. In year
2011-12 the ratio was 2.52. And in year 2012-13 the ratio was 2.98.
Quick Ratio in year 2009-10 was 1.40. In year 2010-11 the ratio was 1.24. In year
2011-12 Ratio was 1.20. In year 2012-13 the ratio was 1.53
Absolute Liquid ratio in year 2009-10 was 0.04. In year 2010-11 the ratio was
0.085. In year 2011-12 the ratio was 0.089. And in year 2012-13 the ratio was 0.36.

23.  Working capital of the company was increasing and showing
positive working capital every year. It shows good liquidity
position.
 Positive working capital indicates that company has the ability of
payments of short terms liabilities.
 Working capital increased because of increment in the current
assets is more than increase in the current liabilities.
 The company has more cash and bank balance in current year it
shows that inefficient management.
 The inventory conversion period of the company has increasing
every year so it shows that there is more days to convert the raw
material into finished products.
 Debtors of the company are decreasing every year it shows that
company allows less credit sales.

24. RECOMMENDATIONS
 Net operating cycle days decreasing as compare to previous
years but there is need to improvement.
 If we see the debtors are increasing year by year but the
collection period are decreasing in current year so by
improving the collection period we can improve the net
operating cycle.
 The cash and bank of the company is very high it shows
inefficient cash management so as the company has to
improve cash management

25. CONCLUSION
 Concluding about the working of SFPL. It is truly a well
organized and well-managed unit all the department of the
unit is perfectly co-ordinate and managed.
 Production department of SFPL is full fledged, marketing
needs no reference because company’ product is in full
demand and Personnel is at its best. So, there is nothing
more too critical evaluate the working of the unit.
 However, there are some problems faced by the company
periodically as by other units but its does not over all affect
the successful image of the company.

26. THANK YOU