Zuvari cements working capital management

1. INTRODUCTION
WORKING CAPITAL MANAGEMENT
Any firm, from time to time, employs its short-term assets as well as short-term
financing sources to carry out its day to day business. It is this management of such assets as
well as liabilities which is described as working capital management. Working capital
management is a quintessential part of financial management as a subject. It can also be
compared with long-term decision-making the process as both of the domains deal with the
analysis of risk and profitability.
1) Definition of Working Capital
Working capital is formally arrived at by subtracting the current liabilities from current assets
of a firm on the day the balance sheet is drawn up. Working capital is also represented by a
firm’s net investment in current assets necessary to support its everyday business. Working
capital frequently changes its form and is sometimes also referred to as circulating capital.
According to Gretsenberg:
“circulating capital means current assets of a company that are changed in the ordinary course
of business from one form to another.”
2) Types of working capital
Working capital, as mentioned above, can take different forms. For example, it can take the
form of cash and then change to inventories and/or receivables and back to cash.
• Gross and Net Working Capital: The total of current assets is known as gross working
capital whereas the difference between the current assets and current liabilities is known as
the net working capital.
• Permanent Working Capital: This type of working capital is the minimum amount of
working capital that must always remain invested. In all cases, some amount of cash, stock
and/or account receivables are always locked in. These assets are necessary for the firm to
carry out its day to day business. Such funds are drawn from long term sources and are
necessary for running and existence of the business.
•Variable Working Capital: Working capital requirements of a business firm might
increase or decrease from time to time due to various factors. Such variable funds are drawn
from short-term sources and are referred to as variable working capital.

3) Objectives of working capital management
The main objectives of working capital management are:
• Maintaining the working capital operating cycle and to ensure its smooth operation.
Maintaining the smooth operation of the operating cycle is essential for the business to
function. The operating cycle here refers to the entire life cycle of a business. From the
acquisition of the raw material to the smooth production and delivery of the end products –
working capital management strives to ensure smoothness, and it is one of the main
objectives of the concept.
• Mitigating the cost of capital. Minimizing the cost of capital is another very important
objective that working capital management strives to achieve. The cost of capital is the
capital that is spent on maintaining the working capital. It needs to be ensured that the costs
involved for maintenance of healthy working capital are carefully monitored, negotiated and
managed.
• Maximising the return on current asset investments. Maximising the return on current
investments is another objective of working capital management. The ROIon currently
invested assets should be greater than the weighted average cost of the capital so that wealth
maximization is ensured.
THE WORKING CAPITAL CYCLE
The working capital cycle refers to the minimum amount of time which is required to convert
net current assets and net current liabilities into cash. From a more simplistic viewpoint,
working capital cycle is the amount of time between the payment for goods supplied and the
final receipt of cash accumulated from the sale of the same goods. There are mainly the
following elements of which the working capital cycle is comprised of:
Cash
The cash refers to the funds available for the purchase of goods. Maintaining a healthy level
of liquidity with some buffer is always a best practice. It is extremely important to maintain a
reserve fund which can be utilized when:
•There is a shortage of cash inflow for some reason. In the absence of reserve cash, the day to
day business will get hampered.
•Some new opportunity springs up. In such a case, the absence of reserve cash will pose a
hindrance.

•In case of any contingency, absence of a reserve fund can cripple the company and poses a
threat to the solvency of the firm.
Creditors and Debtors
• The creditors refer to the accounts payable. It refers to the amount that has to be paid to
suppliers for the purchase of goods and /or services.
• Debtors refer to the accounts receivables. It refers to the amount that is collected for
providing goods and/or services.
Inventory
Inventory refers to the stock in hand. Inventories are an integral component of working
capital and careful planning, and proper investment is necessary to maintain the inventory in
a healthy state of affairs. Management of inventory has two aspects and involves a trade-off
between cost and risk factors. Maintaining a sizable inventory has its accompanying costs
that include locking of funds, increased maintenance and documentation cost and increased
cost of storage. Apart from these things, there is also a chance of damage to the stored goods.
On the other hand, maintaining a small inventory can disrupt the business lifecycle and can
have serious impacts on the delivery schedule. As a result, it is extremely important to
maintain the inventory at optimum levels which can be arrived at after careful analysis and a
bit of experimentation.
Properties of a healthy working capital cycle
It is essential for the business to maintain a healthy working capital cycle. The following
points are necessary for the smooth functioning of the working capital cycle:
•Sourcing of raw material: Sourcing of raw material is the beginning point for most
businesses. It should be ensured that the raw materials that are necessary for producing the
desired goods are available at all times. In a healthy working capital cycle, production ideally
should never stop because of the shortage of raw materials.
•Production planning: Production planning is another important aspect that needs to be
addressed. It should be ensured that all the conditions that are necessary for the production to
start are met. A carefully constructed plan needs to be present in order to mitigate the risks
and avert unforeseen issues. Proper planning of production is essential for the production of
goods or services and is one of the basic principles that must be followed to achieve smooth
functioning of the entire production lifecycle.

•Selling: Selling the produced goods as soon as possible is another objective that should be
pursued with utmost urgency. Once the goods are produced and are moved into the inventory,
the focus should be on selling the goods as soon as possible.
• Payouts and collections: The accounts receivables need to be collected on time in order to
maintain the flow of cash. It is also extremely important to ensure timely payouts to the
creditors to ensure smooth functioning of the business.
• Liquidity: Maintaining the liquidity along with some room for adjustments is another
important aspect that needs to be kept in mind for the smooth functioning of the working
capital cycle.
APPROACHES TO WORKING CAPITAL MANAGEMENT
The short-term interest rates are, in most cases, cheaper compared to their long-term
counterparts. This is due to the amount of premium which is higher for short term loans. As a
result, financing the working capital from long-term sources means more cost. However, the
risk factor is higher in case of short term finances. In case of short-term sources, fluctuations
in refinancing rates are a major cause for concern, and they pose a major threat to business.
There are mainly three strategies that can be employed in order to manage the working
capital. Each of these strategies takes into consideration the risk and profitability factors and
has its share of pros and cons. The three strategies are:
•The Conservative Approach: As the name suggests, the conservative strategy involves low
risk and low profitability. In this strategy, apart from the permanent working capital, the
variable working capital is also financed from the long-term sources. This means an increased
cost capital. However, it also means that the risks of interest rate fluctuations are significantly
lower.
•The Aggressive Approach: The main goal of this strategy is to maximize profits while
taking higher risks. In this approach, the entire variable working capital, some parts or the
entire permanent working capital and sometimes the fixed assets are funded from short-term
sources. This results in significantly higher risks. The cost capital is significantly decreased in
this approach that maximizes the profit.
•The Moderate or the Hedging Approach: This approach involves moderate risks along
with moderate profitability. In this approach, the fixed assets and the permanent working
capital are financed from long-term sources whereas the variable working capital is sourced
from the short-terms sources.

SIGNIFICANCE OF ADEQUATE WORKING CAPITAL
Maintenance of adequate working capital is extremely important because of the following
factors:
• Adequate working capital ensures sufficient liquidity that ensures the solvency of the
organisation.
• Working capital ensured prompt and on-time payments to the creditors of the organisation
that helps to build trust and reputation.
• Lenders base their decisions for approving loans based on the credit history of the
organisation. A good credit history can not only help an organisation to get fast approvals but
also can result in reduced interest rates.
• Earning of profits is not a sufficient guarantee that the company can pay dividends in cash.
Adequate working capital ensures that dividends are regularly paid.
• A firm maintaining adequate working capital can afford to buy raw materials and other
accessories as and when needed. This ensures an uninterrupted flow of production. Adequate
working capital, therefore, contributes to the fuller utilisation of resources of the enterprise.
FACTORS FOR DETERMINING THE AMOUNT OF WORKING CAPITAL
NEEDED
Factoring out the amount of working capital needed for running a business is an extremely
important as well as difficult task. However, it is extremely critical for any firm to estimate
this figure so that it can operate smoothly and be fully functional. There are several factors
that need to be considered before arriving at a more or less accurate figure. The following are
some of those factors that determine the amount of liquid cash and assets required for any
firm to operate smoothly:
• Nature of business: A trading company requires large working capital. Industrial
companies may require lower working capital. A banking company, for example, requires the
maximum amount of working capital. Basic and key industries, public utilities, etc. require
low working capital because they have a steady demand and continuous cash-inflow to meet
current liabilities.
• Size of the business unit: The amount of working capital depends directly upon the
volume of business. The greater the size of a business unit, the larger will be the requirements
of working capital.

•Terms of purchase and terms of sale: Use of trade credit may lead to lower working
capital while cash purchases will demand larger working capital. Similarly, credit sales will
require larger working capital while cash sales will require lower working capital.
•Turnover of inventories: If inventories are large and their turnover is slow, we shall require
larger capital but if inventories are small and their turnover is quick, we shall require lower
working capital.
•Process of manufacture: Long-running and more complex process of production requires
larger working capital while simple, short period process of production requires lower
working capital.
•Importance of labour: Capital intensive industries e.g. mechanized and automated
industries generally require less working capital while labour intensive industries such as
small scale and cottage industries require larger working capital.

2. COMPANY PROFILE
ZUVARI CEMENTS LIMITED
Strong foundations for a company of strength.
Zuari entered the Cement business in 1994 to operate the Texmaco Cement Plant. In
1995, Texmaco's Plant at Yerraguntla was taken over by Zuari and a Cement Division was
formed. The fledging unit came into its own in the year 2001 when Zuari Industries entered
into a Joint Venture with the Italcementi Group, the 5th largest producer of Cement in the
world, Zuari Cement Limited was born. Zuari Cement took over Sri Vishnu Cement Limited
in 2002. Today, the Company is amongst the topmost cement produces in South India.
Cement Plant
Area: Telangana
Annual Production: 3.5 million tonnes of cement
Owner: Zuari Cement Limited
Shareholders: Italcementi Group
Activity Since: 1986
Contact
Coordinates: 16.831664,80.036619
Address: PO Dondapadu, Nalgonda District, 508 246 Telangana
Email: svclspm@zcltd.com
Phone: +91 (8683) 235 107
Web: http://www.zuaricements.com
Wikipedia: http://en.wikipedia.org/wiki/Italcementi

Zuari and Italcementi. The strength of two
Zuari Cement is one of the leading cement producers in South India.A fully owned
subsidiary of the Italcementi Group, Commitment to customer satisfaction has seen Zuari
Cement grow from a modest 0.5 million tonne capacity in 1995 to almost 6 million tones in
2010,and earned a place among the most reliable cement producers in the country.
Italcementi Group History
Founded in 1864, Italcementi was quoted for the first time on the stock markets, at the
Milan Stock Exchange, in 1925, under the name of "Societa Bergamasca per la Fabbricazione
del Cemento e della Calce Idraulica" and has been operating since 1927 under the name of
Italcementi Spa.
Thanks to a careful plan of investments and take-overs of other cement producers, the
company expanded, quickly reaching a strong position on the market and becoming the
leading cement manufacturer in Italy.
After several acquisitions abroad, in 1992 Italcementi achieved important
international status with its take-over of Ciments Français, one of the main global cement
producer.
In 1997 Italcementi consolidated its verticalisation strategy with the acquisition of
Calcestruzzi, thus becoming Italian leader in the ready-mixed concrete sector.
In March 1997, all the international companies of the Group gathered under one
single corporate identity.
Since 1998 Italcementi Group has been pursuing its internationalisation strategy by
acquiring new cement works in Bulgaria, Kazakhstan, Thailand, Morocco, India, Egypt and
the United States.

CEMENT INDUSTRIES IN INDIA
Introduction
India, being the second largest cement producer in the world after China with a total
capacity of 151.2 Million Tones (MT), has got a huge Cement Company. With the
government of India giving boost to various infrastructure projects, housing facilities and
road networks, the cement industry in India is currently growing at an enviable pace. More
growth in the Indian cement industry is expected in the coming years. The cement industry in
India is dominated by around 20 companies, which account for almost 70% of the total
cement production in India.
India's cement industry is a vital part of its economy, providing employment to more
than a million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian
cement industry has attracted huge investments, both from Indian as well as foreign investors.
India has a lot of potential for development in the infrastructure and construction
sector and the cement sector is expected to largely benefit from it. Some of the recent major
initiatives such as development of 98 smart cities are expected to provide a major boost to the
sector.
Expecting such developments in the country and aided by suitable government
foreign policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and
Vicat have invested in the country in the recent past. A significant factor which aids the
growth of this sector is the ready availability of the raw materials for making cement, such as
limestone and coal.

Market Size
The housing sector is the biggest demand driver of cement, accounting for about 67
per cent of the total consumption in India. The other major consumers of cement include
infrastructure at 13 per cent, commercial construction at 11 per cent and industrial
construction at 9 per cent.
India’s total cement production capacity is nearly 425 million tonnes, as of September
2017. The growth of cement industry is expected to be 6-7 per cent in 2017 because of the
government’s focus on infrastructural development. The industry is currently producing 280
MT for meetings its domestic demand and 5 MT for exports requirement. The country's per
capita consumption stands at around 225 kg.
The Indian cement industry is dominated by a few companies. The top 20 cement
companies account for almost 70 per cent of the total cement production of the country. A
total of 210 large cement plants account for a cumulative installed capacity of over 350
million tonnes, with 350 small plants accounting for the rest. Of these 210 large cement
plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.

Investments
On the back of growing demand, due to increased construction and infrastructural
activities, the cement sector in India has seen many investments and developments in recent
times.
According to data released by the Department of Industrial Policy and Promotion
(DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$
5.25 billion between April 2000 and December 2017.
Some of the major investments in Indian cement industry are as follows:
Ultratech Cement has purchased a 98.47 per cent stake in Binani Cements for Rs 7,266 crore
(US$ 1.12 billion). The deal will help Ultratech achieve greater capacity and markets its
product in north-India.
JK Cement is planning to invest Rs 1,500 crore (US$ 231.7 million) over the next 3 to 4 years
to increase its production capacity at its Mangrol plant from 10.5 MTPA to 14 MTPA.
Government Initiatives
In order to help the private sector companies thrive in the industry, the government
has been approving their investment schemes. Some such initiatives by the government in the
recent past are as follows:
The State Government of Chattisgarh has auctioned one block of Limestone (Kesla II)
in Raipur District having estimated reserves of 215 million tonnes valued at Rs 10,367 crore
(US$ 1.61 billion), and would earn a cumulative revenue of Rs 11,894 crore (US$ 1.85
billion) to State Government over the lease period.
In Budget 2018-19, Government of India announced setting up of an Affordable
Housing Fund of Rs 25,000 crore (US$ 3.86 billion) under the National Housing Bank
(NHB) which will be utilised for easing credit to homebuyers. The move is expected to boost
the demand of cement from the housing segment.

Road Ahead
The eastern states of India are likely to be the newer and virgin markets for cement
companies and could contribute to their bottom line in future. In the next 10 years, India
could become the main exporter of clinker and gray cement to the Middle East, Africa, and
other developing nations of the world. Cement plants near the ports, for instance the plants in
Gujarat and Visakhapatnam, will have an added advantage for exports and will logistically be
well armed to face stiff competition from cement plants in the interior of the country.
Due to the increasing demand in various sectors such as housing, commercial
construction and industrial construction, cement industry is expected to reach 550-600
Million Tonnes Per Annum (MTPA) by the year 2025.
A large number of foreign players are also expected to enter the cement sector, owing
to the profit margins and steady demand. In future, domestic cement companies could go for
global listings either through the FCCB route or the GDR route.
With help from the government in terms of friendlier laws, lower taxation, and
increased infrastructure spending, the sector will grow and take India’s economy forward
along with it.
An Overview of Cement Industry
The history of the cement industry in India dates back to the 1889 when a Kolkata-
based company started manufacturing cement from Argillaceous. But the industry started
getting the organized shape in the early 1900s. In 1914, India Cement Company Ltd was
established in Porbandar with a capacity of 10,000 tons and production of 1000 installed. The
World War I gave the first initial thrust to the cement industry in India and the industry
started growing at a fast rate in terms of production, manufacturing units, and installed
capacity. This stage was referred to as the Nascent Stage of Indian Cement Company. In
1927, Concrete Association of India was set up to create public awareness on the utility of
cement as well as to propagate cement consumption.
The cement industry in India saw the price and distribution control system in the year
1956, established to ensure fair price model for consumers as well as manufacturers. Later in
1977, government authorized new manufacturing units (as well as existing units going for
capacity enhancement) to put a higher price tag for their products. A couple of years later,

government introduced a three-tier pricing system with different pricing on cement produced
in high, medium and low cost plants.
Cement Company, in any country, plays a major role in the growth of the nation.
Cement industry in India was under full control and supervision of the government. However,
it got relief at a large extent after the economic reform. But government interference,
especially in the pricing, is still evident in India. In spite of being the second largest cement
producer in the world, India falls in the list of lowest per capita consumption of cement with
125 kg. The reason behind this is the poor rural people who mostly live in mud huts and
cannot afford to have the commodity. Despite the fact, the demand and supply of cement in
India has grown up. In a fast developing economy like India, there is always large possibility
of expansion of cement industry.
Technology Up-gradation
Cement industry in India is currently going through a technological change as a lot of
upgradation and assimilation is taking place. Currently, almost 93% of the total capacity is
based entirely on the modern dry process, which is considered as more environment-friendly.
Only the rest 7% uses old wet and semi-dry process technology. There is also a huge scope of
waste heat recovery in the cement plants, which lead to reduction in the emission level and
hence improves the environment.
Major Players in Indian Cement Industry
There are a number of players prevailing in the cement industry in India. However,
there are around 20 big names that account for more than 70% of the total cement production
in India. The total installed capacity is distributed over around 129 plants, owned by 54 major
companies across the nation.

Following are some of the major names in the Indian cement industry:
Mergers and Acquisitions in Cement Industry in India
UltraTech Cement is going to absorb its sister concern Samruddhi Cement to become
biggest cement company in India.
World's leading foreign funds like HSBC, ABN Amro, Fidelity, Emerging Market
Fund and Asset Management Fund have together bought 7.5% of India Cements (ICL) at a
cost of US$ 124.91 million.
Cimpor, a Cement company of Portugal, has bought 53.63% stake that Grasim
Industries had in Shree Digvijay Cement.
French cement company Vicat SA bought 6.67% share of Sagar Cement at a cost of
US$ 14.35 million.
Holcim now holds 56% stake of Ambuja Cement. Previously it held 22% of stake.
The company utilized various open market transactions to increase its stakes. It invested US$
1.8 billion for that.

Recent Investments in the Indian Cement Industry
In a recent announcement, the second largest cement company in South India, Dalmia
Cement declared that it's going to invest more than US$ 652.6 million in the next 2-3 years to
add 10 MT capacity.
Anil Ambani-led Reliance Infrastructure is going to build up cement plants with a total
capacity of yearly 20 MT in the next 5 years. For this, the company will invest US$ 2.1
billion.
India Cements is going to set up 2 thermal power plants in Andhra Pradesh and Tamil Nadu
at a cost of US$ 104 billion.
Anil Ambani-led Reliance Cementation is also going to set up a 5 MT integrated cement
plant in Maharashtra. It will invest US$ 463.2 million for that.
Jaiprakash Associates Ltd has signed a MoU with Assam Mineral Development Corporation
Limited to set up a 2 MT cement plant. The estimated project cost is US$ 221.36 million.
Rungta Mines (RML) is also planning to invest US$ 123 million for setting up a 1 MT
cement plant in Orissa.

MANUFACTURING PROCESS
The basic raw-materials required for manufacturing cement are lime-stone, iron-ore,
laterite, slag, fly ash and gypsum.
Limestones of the size 1 Sq.m to 2 Sq.m are obtained from mine by drilling and
blasting. These lumps are then loaded into Dumpers through excavators and are transported
to the crusher. Before entering crusher the usable material coming alone with the limestone
are screened out by means of Grizzly Feeders, thus allowing only limestone to pass through
the crusher. The material is crushed to a size of 80 mm by impactor type of crusher and then
transported for Pre blending stock pile.
From this stock pile, the material is reclaimed to a separate hopper . Laterite and iron-
ore, the other two raw-materials are stored in separate hoppers. The three components
according to the required proportions are fed into Raw Mill for grinding. The finished fine
ground material is termed “Raw Meal”. This Raw Meal is stored in a continuous flow Silo for
homogeneous blending. The material from C.F.Silo is extracted and fed to Kiln through Pre
Heaters by means of an Air lift. This material is pre heated and calcinated to nearly 900 C .
The material is again burnt in kiln to a temperature of 1400 C into a modular form which is
called “Clinker”.
The major fuel used for heating is Coal and pet coke. Fuel is stored in Gantry, from
where it is conveyed to a crusher to reduce the size and stored in Intermediate Hopper. From
the hopper the fuel is transported to Coal Mill where it is ground to fine powder. This powder
is stored in the Bins from where it is extracted for firing. Rise husk is also used as fuel.
Clinker from the Silos is extracted and ground in Cement Mill along with the
prescribed quantum of gypsum to make ‘Ordinary Portland Cement (OPC)’. Slag is
pulverised in a vertical roller mill and stored in a separate silo. The ground OPC is mixed
with fly ash and /or pulverised slag in a paddle mixer. The finished product thus obtained is
“Portland Slag Cement/Pozzolana Portland Cement”.
Cement is stored in silo and is extracted at the time of packing of or sold as bulk
cement. The packed cement is loaded in Lorries through Belt conveyors and bulk cement is
loaded by using compressed

Fig.1. Manufacturing Process
Fig.2.Klin System

3. CONCEPTUAL FRAME WORK
Working capital management is the way a company manages the relationship between
assets and liabilities in the short term. Simply put, working capital management is how a
company manages its money for day to day operations as well as any immediate debt
obligations. When managing working capital, the company has to manage accounts
receivable, accounts payable, inventory, and cash. The goal of working capital management
is to have adequate cash flow for continued operations and have the most productive usage of
resources.
The capital required for a business may be classified into
 Fixed capital
 Working capital
Fixed capital required for a acquisition of a long term assets which are called fixed assets is
termed as fixed capital, the amounts invested in these assets get blocked up for a long period.
Examples are land, buildings, plant and machinery, furniture etc. These assets are purchased
to facilitate production and sale, they are not respected to be converted into cash.
Working capital business also requires funds for purchasing raw materials for paying
day to day expenses such as wages, salaries, rent, taxes, electricity bills etc. Goods purchased
must be paid for in cash but the firm cannot immediately sell them and get cash because there
is a time gap between purchased and sale funds required for purchase of raw materials and to
meet the day to day expenses is called the working capital of a firm.
Concepts of working capital:
The term working capital is understood in two different ways
 Gross working capital
 Net working capital
To understand the concepts of working capital it is necessary to understand what are current
assets and current liabilities. Current assets are those assets which can be easily converted
into cash within the period of one year and those which are required to meet the day to day
operations they include cash and bank balances, marketable securities, sundry debtors, bills

receivables, work in progress, finished goods, prepaid expenses, income accrued but not
received etc.
Current liabilities refer to those liabilities, which the amounts due to be paid to
creditors with in twelve months.
Gross working capital is the sum total of all the current assets of the company.
Net working capital is the difference between current assets and current liabilities.
Net working capital = Current assets – Current liabilities
As the current liabilities are expected to be repaid within one year, the currents should be
larger than the current liabilities so that they can be repaid on time. The excess of current
assets over current liabilities i.e. the net working capital indicates the part of current assets
financed by long term sources.
APPROACHES OF WORKING CAPITAL MANAGEMENT
Working capital
Aggressive Moderate conservative
a) Aggressive: Here investment in working capital is kept at minimal investment in
current assets which means the entity doesn’t hold lower level of inventory, follow
strict credit policy, keeps less cash balance etc. The advantage of this approach is that
lower level of fund is tied in the working capital which results in lower working cost.
In the long run firm stays behind the competitors
b) Conservative: Here in this approach of organisation used to invest high capital in
current assets. Organisations used to keep inventory high level, follows liberal credit
policies, and cash balance as high as to meet any current liabilities immediately. The
advantages of this approach are higher sales volume, increased demand due to liberal
credit policy and increase good will among the suppliers due to payment in short time.
The disadvantages are increased cost of capital, higher risk of bad debts, shortage o
liquidity in long run to longer operating cycles.

c) Moderate: This approach is in between the above two approaches. Under this
approach a balance between the risk and return is maintained to gain more by using
the funds in very efficient manner.
CURRENT ASSET TO FIXED ASSET RATIO:
Te finance manager is required to determine the optimum level of current assets so that the
shareholders value is maximised. A firms needs fixed and current assets to support a
particular level of output, as the firm output and sales increase the need for current assets
also increased.
The level of current assets can be measured by creating a relationship between current assets
and fixed assets. Assuming constant level of fixed assets, a higher ratio indicates a
conservative current assets policy and a lower ratio means an aggressive current assets
policy assuming all factors to be constant.
A conservative policy implies greater liquidity and lower risk whereas an aggressive policy
indicates higher risk and poor liquidity. Moderate current policy will fall in the middle of

conservative and aggressive policies. The current assets policy of the most of the firms may
fall between these two extreme policies.
DETERMINANTS OF WORKING CAPITAL
Determinants of working capital are as follows:
1. Nature and Size of Business:
The working capital requirements of a firm are basically influenced by the nature if
business. Trading and financial firms have very less investment in fixed assets, by required
large some of money to be invested in working capital e.g. Retailer stores must carry large
stocks of variety of goods to satisfy the varied and continuous demand of their customers.
2. Business Fluctuations:
Most firms experience seasonal and cyclical fluctuations in the demand for their
products and services. These business variations affect the working capital requirement when
there is an upward swing in the (company) economy sales will increase, correspondingly the
firm’s investment in inventories and book debts will also increase. Under boom additional
investment in fixed assets may be made by some firms.
3. Product policy:
We just notes that a strategy if constant productions may be maintained in order
to resolve the working capital problems arising due to seasonal changes in the demand for the
firm’s product.
A steady production policy will cause inventories to accumulate during the off-season periods
and the firm will be exposed to greater inventory costs.
4. Firm’s Credit Policy:
The credit policy of the firms affects working capital by influencing the level of
book debts. A liberal credit policy without rating the credit worthiness of the customers
will be determine centre to the firm and will create a problem of collecting funds later on.
The firms should be prompt in collecting funds.

5. Availability of credit:
The working capital requirements of a firm are also attested by the availability
of credit. A firm will needs less working capital if liberal credit terms are available to it.
Similarly the availability of credit form banks also influences the working capital needs
of the firm. A firm which can get bank credit easily on favourable conditions will operate
with less working capital.
6. Growth and Expansion Activities:
The working capital needs or requirements of a firm will also influence by the
growth and expansion activities i.e. Grows in terms of sales or fixed assets. It is difficult
to precisely determine the relationship between volume of sales and the working capital
needs. The critical fact however that is the need for increased working capital funds does
not follow growth in business activities but precedes it.
7. Profit Margin and Appropriation:
Profit margin as well as profit appropriation is varying from business to business.
Some firm’s entry dominant position, due to quality product or good marketing
management or monopoly power in the market trend earns a higher profit margin.
8. Price Level Changes:
Price level changes are also influences the working capital requirements of a firm.
The increasing shift in price level makes the function of financial manager difficult.
He should anticipate the offer of the poise level changes on working capital
requirements of the firm. Generally rising price level will require a firm to maintain
higher amount of working capital.
9. Operating Efficiency:
Operating efficiency of the firm relates to the optimum utilization of resources as
minimum costs. The firm will be effective contributing to its working capital if it is
efficient in controlling the operating costs. The use of working capital is improve and
pace of cash cycle is accelerated with operating efficiency. Better utilization of resources
improves profitability.

ADEQUATE WORKING CAPITAL:
The working capital should be adequate. That means it should not be neither excessive
nor in sufficient. It should be optimal or adequate.
Advantages of adequate working capital
Working capital is the lifeblood and nerve centre of business. Just as circulation of
blood is essential in the human body for maintaining life, working .capital is very essential
to maintain the smooth running of a business. No business can run successfully without an
adequate amount of working capital. The main advantages of maintaining adequate amount
of working capital are as follows:
1. Solvency of the business: Adequate working capita! helps in maintaining solvency of
the business by providing uninterrupted flow of production.
2. Goodwill: sufficient working capital enables a business concern to make prompt
payments and hence helps in creating and maintaining goodwill.
3. Easy loans: A concern having adequate working capital, high solvency and good
credit standing can arrange loans from banks and others on easy and favourable terms.
4. Cash Discounts: adequate working capital also enables a concern to avail a cash
discounts on the purchases and hence it reduces cost
5. Regular payment of salaries & wages and other day-to-day commitments company
which has ample working capital can make regular payment of salaries, wages and
other day-to-day commitments which raises the morale of its employees, increases
their efficiency, reduces wastage's and costs and enhances production and profits.
6. Supply of raw materials and continuous production.
7. Quick and regular return on Investments: Every Investor wants a quick and
regular return on investments. Sufficient of working capital enables a concern to pay

quick and regular dividends to its investors, as there may not be much pressure to
plough back profits. This gains the confidence of its investors and creates a favourable
market to raise additional funds in the future.
INADEQUATE WORKING CAPITAL:
The working capital which is less than the requirement is called inadequate
working capital. Due to this inadequate working capital company faces some problems
.So Company has to maintain sufficient working capital
Disadvantages of inadequate working capital:
The following are the disadvantages.
• It stagnates growth. It becomes difficult for the firm to undertake profitable projects
for non availability of working capital funds.
• Difficult to implement operating plans and achieve the firm’s profit target.
• Operating-in-efficiency creep in when it becomes difficult to meet day to day
commitments.
• Fixed assets are not efficiently utilized.
• The firm loses its reputation when it is not in position to honour its short term
obligations.
EXCESSIVE WORKING CAPITAL:
The working capital which is more than the requirement is called as excessive working
capital.
Disadvantages of excessive working capital
Every business concern should have adequate working capital to run its business
operations. It should have neither redundant or excessive working capital nor
inadequate nor shortage of working capital. Both excessive as well as short working
capital positions are bad for any business.

1. Excessive working capital means idle funds which earn no profits for the business
and hence the business cannot earn a proper rate of return on its investments.
2. When there is redundant working capital, it may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theft, waste and losses.
3. Excessive working capital implies excessive debtors and defective credit policy,
which may cause higher incidence of bad
4. It may result into overall inefficiency in the organization.
5. When there is an excessive working capital relation with the banks and other
financial institutions may not be maintained.
6. Due to low rate of return on investments the value of shares may also fall
WORKING CAPITAL CYCLE/OPERATING CYCLE AND LIQUIDITY
MANAGEMENT
The duration of time required to complete the following sequence of events. In case of a
manufacturing firm, is called an “operating cycle” or “working capital” cycle.
1. Conversion of cash in to raw materials.
2. Conversion of raw materials into work in process.
3. Conversion of work in process in to the finished goods.
4. Conversion of finished goods in it debtors and bills receivables through sale.
5. Conversion of debtors and bills receivables in to cash.

Most business cannot finance the operating cycle (accounts receivable days +inventory days)
with accounts payable financing alone consequently, working capital financing is needed.
This shortfall is typically covered by the net profits generated internally or externally
borrowed funds are by combination of the two.
The faster a business expands the more cash it will need for working capital and investments.
The cheapest and best and best sources of cash exist as working capital right with in business.
Good management of working capital will generate cash which will help improve profits and
reduce risks.
The determination of operating capital cycle helps in the forecast, control and management of
working capital. The length of operating cycle is the indicator of performance of
management. The net operating cycle represents the time interval for which the firm has to
negotiate for working capital from its bankers. It enables to determine accurately the amount
of working capital needed for the continuous operation of business activities.
The duration of working capital cycle may vary depending on the nature of the business.
In equation form of working capital cycle/operating cycle can be expressed as follows:
Operating cycle = R + W + F + D – C
Where
R = Raw material storage period
W = Working-in-progress holding period
F = Finished goods storage period
D = Debtors collection period
C = Credit period allowed by creditors
Operating Cycle of Non-manufacturing Firm:
Cash Stock of finished goods Debtors

Operating cycle of service a financial firm:
Some service and financial concerns may not have any inventory at our, such, firms have
shortest operating cycle such as shown in above fissure. As will as the non-manufacturing
phase. Rather they will have direct conversion of cash into stock of finished goods in to
debtors and them into cash.
Estimation of current assets:
The various constituents of current assets and current liabilities have a direct bearing on the
computation of working capital and the operating cycle. The holding period of various
constituents of current assets and current liabilities cycle may either contract or expand the
net operating cycle period.
Shorter the operating cycle period, lower will be the requirement of working capital and vice-
versa.
Estimation of current liabilities:
Current liabilities are deducted from the current assets to get working capital. Hence the
amount of working capital is lower to the extent of current liabilities arising from the normal
course of period.
A company’s working capital is the capital necessary for it to function on a daily basis, as it
requires a certain amount of cash on hand to cover unexpected costs, make regular payments
and buy raw materials used in production. Working capital is the difference between the
company’s current assets and current liabilities. The working capital ratio, calculated by
dividing current assets by current liabilities, indicates to analysts the company’s liquidity, or
whether it has cash flow adequate enough to meet all of its short-term liabilities and
expenses.
Creditors Cash Debtors

For a company liquidity essentially measures its ability to pay off its liabilities when they are
due, or how easily and effectively the company can access the money it needs to cover its
debts. Working capital reflects the liquid assets a company utilizes to make such debt
payments. The firm's ability to pay short-term debt and expenses (aka current liabilities)
within the one-year operating cycle is its liquidity. Balance Sheet asset accounts are listed in
order of liquidity. The first category of current assets addresses items that can be converted
into cash within the normal one-year operating cycle. Total assets are funded through
liabilities or stockholders' equity. Current liabilities, which must be paid within one year, are
paid out of current assets.
Noteworthy current assets, in addition to cash, include Marketable Securities, Accounts
Receivable, Inventory, finished goods, Prepaid Expenses, Investments and Plant and
Equipment less Accumulated Depreciation. Liabilities revert from current liabilities to long-
term debt, if not satisfied within one year. Short-term liability obligations include Accounts
Payable, Short-Term Debt, and Accrued Expense.
A significant amount of working capital indicates healthy levels of liquidity.
CASH CONVERSION CYCLE (CCC)
The Cash Conversion Cycle, or cash cycle, is a measure of working capital efficiency relative
to the firm's short-term financial plan. The Cash Conversion Cycle measures the average
number of days working capital is tied up in operations.
The Cycle:
1. Starts with ordering materials for inventory (DIO) production on credit (no immediate
cash flow)
2. Wages will accrue (not fully-paid at the time work is performed)
3. The finished product is sold on credit
4. The company pays for materials and wages (accounts payable (DPO) – net cash outflow
must be financed, since it is paid before receiving any cash profit from sales
5. The cycle is completed when receivables have been collected, the company can pay off
its credit used to finance production, and optimistically, a profit is realized.
A firm's liquidity is calculated using current assets and current liabilities.

• Low liquidity indicates poor management or financial problems.
• A relatively high liquidity ratio is good.
• Too high liquidity ratio indicates excess funds, which incur an opportunity cost that
could be invested to gain a higher return.
The firm's liquidity may be calculated using the liquidity ratios and working capital ratios.
LIQUIDITY RATIOS:
The liquidity ratio, then, is a computation that is used to measure a company's ability to
pay its short-term debts. There are three common calculations that fall under the category of
liquidity ratios. The current ratio is the most liberal of the three. It is followed by the acid
ratio, and the cash ratio. These three ratios are often grouped together by financial analysts
when attempting to accurately measure the liquidity of a company.
1. Current Ratio:
Current ratio evaluates the ability of a company to pay short term obligations using current
assets such as cash, marketable securities, current receivables, inventory, and prepayments.
Current ratio can be used to take rough measurement of company’s financial health. The
higher the current ratio the more capable the company is of its obligations, as it has the larger
proportion of asset value relative to the value of its liabilities. While a current ratio below 1
show that a company is not in good financial health, it doesn’t necessarily mean that it will go
bankrupt, they are many ways to access financing. Current ratio is obtained when current
liabilities are divided with current assets.

Current ratio = current assets/ current liabilities
Acceptable ratio of current ratio is 2:1
2. Acid test Ratio / Quick Ratio:
This ratio is also referred to as the quick ratio. The purpose of this ratio is to measure
how well a company can meet its short-term obligations with its most liquid assets.
Remember, liquid assets are those that can be quickly turned into cash. Most of the
current assets are highly liquid with the exception of inventory, which often takes a
longer amount of time to turn into cash. It adjusts the current ratio to eliminate the all
assets which are not already in cash or near from cash. The formula for calculating the
acid ratio is:
Quick Ratio = current assets - Inventory
Current liabilities
Acceptable quick ratio is 1:1, less than acceptable ratio indicates danger signal.
3. Cash Ratio:
Cash ratio also known as Absolute liquidity ratio. Measures the ability of a company to
pay its current liabilities using cash and marketable securities. Marketable securities
are short-term debt instruments that are as good as cash. It eliminates unknown
surrounding receivables. The calculation of cash ratio is as follows:
Cash Ratio = cash + Marketable securities
Current Liabilities
WORKING CAPITAL RATIOS:

Working capital ratios or activity ratios are financial analysis tools used to measure a
business' ability to convert its assets into cash. The faster a business is able to convert its
assets into cash or sales, the more efficient it runs. Activity ratios become more meaningful
when compared to industry-average activity ratios. Different industries have different
industry-average activity ratios. It includes Working capital turnover ratios, fixed asset
turnover ratio and Capital turnover ratio
1. Working Capital turnover Ratio:
Working capital turnover Ratio indicates the efficient utilization of working capital in
generating sales. It is calculated as follows:
Working capital turnover Ratio = Sales / Working Capital
Working capital turnover ratio is segregated into three ratios such as Inventory turnover ratio,
Debtors turnover Ratio, Creditors turnover Ratio.
a) Inventory turnover ratio:
This ratio is also known as stock turnover ratio. It establishes the relationship between
sales during the period and average inventory held
Average inventory= opening stock + closing stock
2
A low ratio indicates that the inventory is not used or sold or lost or stays in warehouse for
long-time.
b) Debtor turnover Ratio:
This ratio throws light on collection and credit policies of the firm. It is a technique used
to measure how quickly a company is able to collect money that is owed by its customers.
The higher the ratio becomes, the more efficient management is in collecting credit sales.
A low ratio implies poor credit and collection performance. It is calculated as follows:
Debtor turnover Ratio=sales/average receivables
Receivables pertain to credit sales. It is recommended to calculate with reference to credit
sales alone
Debtor turnover Ratio = credit sales/ average receivable.

c) Credit turnover Ratio:
This ratio shows the velocity of net payment by the firm. Turnover ratio is most often
calculated on annual basis, though this can be broken down to find quarterly or monthly
accounts receivable turnover as well.
Credit turnover Ratio: credit purchases/average account payables
Low ratio indicates liberal credit terms granted by the suppliers where as high ratio shows
that accounts are settled rapidly.
2. Fixed asset Turnover Ratio:
It is the ratio of sales to the value of fixed assets. It indicates how well the business using its
fixed assets to generate sales
Fixed asset turnover ratio = net sales/ average net fixed assets
The higher the ratio the better because a high ratio indicates the business has less money tied
up in fixed assets for each unit of sales revenue. A low ratio may indicate that the business is
over invested in plant, equipment, or other fixed assets
3. Capital turnover ratio:
This ratio shows how efficiently the sales are generated from the capital by the firm. This
ratio helps the investors or the creditors to determine the ability of the firm to generate
revenue and act as a key decision factor for lending more money to asking firm. Higher the
ratio better the utilisation of capital employ and shows the ability of firm to generate
maximum profits with the minimum amount of capital employed.
Capital turnover ratio = net sales/capital employed
Capital employed = Net worth + long term borrowers.
4. DATA ANALYSIS & INTERPRETATION
1. Total Working Capital:
Net Working Capital= Current Assets – Current Liabilities
Year Current assets
current
liabilities Working capital increase/decrease

2013-14 1251.83 1612.4 -360.57 94.57
2014-15 1249.54 1704.68 -455.14 -211.59
2015-16 1199.67 1443.22 -243.55 -57.68
2016-17 1303.78 1489.65 -185.87 -185.87
INTERPRETATION:
From the above table it is clear that working capital for all the 4yrs shows negative
sign, as it indicates current liabilities exceeds current assets. Zuari cementcurrent assets
substantially decrease as a result of a large one-time cash payment, or current liabilities due
to significant credit extensions resulting in an account payable as the working capital turns
into –ve, it means the company is not able to meet the short-term obligations.
2. Total Current Ratio:
Current Ratio = Current Assets / Current Liabilities

Year
Current
assets
current
liabilities current ratio increase/decrease
2013-14 1251.83 1612.4 0.77637683 0.043371221
2014-15 1249.54 1704.68 0.733005608 -0.098239801
2015-16 1199.67 1443.22 0.83124541 -0.043980315
2016-17 1303.78 1489.65 0.875225724 0.875225724
INTERPRETATION:
From the above table it is clear that current liabilities >current assets so the result may turn
into <1 it indicates the company is not in good financial health and it is not able to pay off its
short –term liabilities with its current assets.
3. Total Quick Ratio:
Quick Ratio = (Current Assets – Inventory) / Current Liabilities

Year
Current
assets
current
liabilities Inventory Quick ratio
Increase/Decrease
2013-14 1251.83 1612.4 594.75 0.407516745 0.076656994
2014-15 1249.54 1704.68 685.53 0.330859751 -0.139678351
2015-16 1199.67 1443.22 520.58 0.470538102 -0.035359256
2016-17 1303.78 1489.65 550.17 0.505897358 0.505897358
INTERPRETATION:
Quick-ratio is an indicator of a company’s short-term liquidity. From the above table it is
clear that Zuari cementcurrent assets are not as equal as current liabilities, so it is difficult on
the part of the company to pay its current liabilities when they come due with only quick
assets.
4. Total Inventory Turnover Ratio:
Inventory Turnover Ratio = Net Sales / Average Inventory
Average inventory = (Opening stock + Closing Stock) / 2
Inventory Turnover Ratio in Days = 365 / Inventory Turnover Ratio

Year Sales
opening
stock
closing
stock
average
inventory
ITR in times ITR in days
2013-14
3830.8 82.95 132.25 107.6 35.60223048 10.25216665
2014-15
3683.51 132.95 113.46 123.205 29.89740676 12.2084167
2015-16
3644.89 113.46 110.47 111.965 32.55383379 11.21219708
2016-17
3595.75 110.47 104.31 107.39 33.48309899 10.90102204
INTERPRETATION:
Inventory turnover ratio shows how many times a company’s inventory is sold and replaced
over a period of time. The days in the period can then be divided by inventory turnover
formula to calculate the days it takes to the inventory on hand. This means, from the above
table we can say that inventory turns 33 times a year, and is on hand approximately 11 days
in the year 2016-17 similarly 35,29 and 32 times a year and is on hand approximately 10,12
and 11 days in the years 2014,2015 and 2016 respectively.
5. Total Working Capital turnover Ratio:
Working Capital Turnover Ratio = Net Sales / Working Capital

Year Sales
Working
capital WC Turnover Ratio
2013-14
3830.8
-360.57 10.62428932
2014-15
3683.51
-455.14 8.093136178
2015-16
3644.89
-243.55 14.9656744
2016-17
3595.75
-185.87 19.3455103
INTERPRETATION:
The working capital turnover ratio is used to analyze the relationship between the sales
generated from the operations and utilizes its working capital for supporting a given level of
sales. From the above table it is clear that there is an increase in Working capital due to
increase in current assets, so the Working Capital Turnover Ratio Increases through year by
year.
6. Total Fixed Asset Turnover Ratio:
Total Fixed Asset Turnover Ratio = Net Sales / Total Fixed Assets

Year Sales Total Fixes
Assets FA Turnover Ratio
2013-14
3830.8
4750.55 0.806390839
2014-15
3683.51
4995.3 0.737395151
2015-16
3644.89
5138.18 0.709373747
2016-17
3595.75
5051.74 0.711784454
v
INTERPRETATION:
The fixed assets turnover ratio is, in general, used by analysts to measure operating
performance. The ratio specifically measures how able a company is to generate net sales
from fixed asset investments, it indicates the company how effectively used its investment in
fixed assets to generate revenue. From the above table it is clear that Sales are decreasing
even though there is an increase in fixed assets from the years 2012-16.
7. Total Capital Turnover Ratio:
Total Capital Turnover Ratio = Cost of Sales / Capital Employed

Capital Employed = Total Assets – Current Liabilities
Year Sales Total
Assets
current
liabilities
Capital
Employed
Capital
Turnover Ratio
2013-14 3830.8 6471.38 1612.4 4858.98 0.788395918
2014-15 3683.51 6868.56 1704.68 5163.88 0.713322153
2015-16 3644.89 7070.28 1443.22 5627.06 0.647743226
2016-17 3595.75 7024.85 1489.65 5535.2 0.64961519
INTERPRETATION:
The Capital turnover ratio helps the investors or creditors to determine the ability of a firm to
generate revenues from the capital employed and act as a key decision factor for lending
more money to the asking firm.
STATEMENT SHOWING COMPARATIVE BALANCE SHEET OF
ZUARI CEMENT (2014-15)
Rs
crores Rs Crores
Particulars 2013 2014 Increase/decrease Change in %

I. EQUITY & LIABILITIES
Shareholders’ Funds
Share Capital 23.8 23.80 0.00 0
Reserves and Surplus 2,346.96 2458.28 -111.32 -4.743157105
Total 2,370.76 2,482.08 -111.32 -4.695540671
Non Current Liabilities
Long Term Borrowings 1,393.06 1420.35 -27.29 -1.958996741
Deferred Tax Liabilities 716.36 737.37 -21.01 -2.932882908
Other Long Term Liabilities 338.42 383.47 -45.05 -13.311861
Long Term Provisions 40.38 40.61 -0.23 -0.569588905
Total 2,488.22 2681.8 -193.58 -7.779858694
Current Liabilities
Short Term Borrowings 588.08 723.62 -135.54 -23.04788464
Trade Payables 143.08 187.66 -44.58 -31.15739446
Other Current Liabilities 734.35 729.18 5.17 0.704023967
Short Term Provisions 146.89 64.22 82.67 56.28020968
Total 1,612.40 1704.68 -92.28 -5.723145621
Total Liabilities 6,471.38 6868.56 -397.18 -6.137485359
II. ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 4,513.40 4521.91 -8.51 -0.188549652
Intangible Assets 80.15 119.16 -39.01 -48.67124142
Capital Work in Progress 147.96 349.52 -201.56 -136.226007
Intangible Assets Under Development 9.04 4.72 4.32 47.78761062
Non Current Investments 265.77 283.41 -17.64 -6.637317982
Long term Loans and Advances 201.74 338.68 -136.94 -67.8794488
Other Non Current Assets 1.49 1.62 -0.13 -8.724832215
Total 5219.55 5619.02 -399.47 -7.653341763
Current Assets
Inventories 594.75 685.53 -90.78 -15.26355612
Trade Receivables 302.81 303.96 -1.15 -0.379776097
Cash and Bank Balances 53.96 44.61 9.35 17.32765011
Short Term Loans and Advances 298.72 206.59 92.13 30.84159079
Other Current Assets 1.59 8.85 -7.26 -456.6037736
Total 1251.83 1249.54 2.29 0.182932187
Total Assets 6471.38 6868.56 -397.18 -6.137485359
INTERPRETATION:

1. The comparative balance sheet of Zuari cement for the year 2014-15of
March reveals the following facts.
2. The liquidity position of Zuari cement for the year 2014-15shows that there is
a decrease in working capital.
3. Where the total current Liabilities are greater than Current assets, working
capital indicates negative sign. Hence the position is not satisfactory.
4. The comparative balance sheet of Zuari cement for the year ending March
2014 reveals that there is increase in fixed assets and long term liabilities.
5. The final position of Zuari cement is satisfactory. Because the liquidity
position of Zuari cement is better.
ZUARI CEMENT(2015-16)
Rs in crores Rs in Crores

Particulars Rs in crores 2014
RS in Crores
2015 Increase/decrease Change in %
Share Capital 23.80 23.81 -0.01 -0.042016807
Reserves and Surplus 2458.28 2621.38 -163.10 -6.634720211
Total 2,482.08 2645.19 -163.11 -6.571504545
Long Term Borrowings 1420.35 1710.02 -289.67 -20.39426902
Long Term Provisions 40.61 39.9 0.71 1.748337848
Total 2681.8 2981.87 -300.07 -11.18912671
Current Liabilities
Short Term Borrowings 723.62 553.61 170.01 23.4943755
Trade Payables 187.66 219.75 -32.09 -17.1000746
Short Term Provisions 64.22 122.42 -58.20 -90.62597322
Total 1704.68 1443.22 261.46 15.337776
Total Liabilities 6868.56 7070.28 -201.72 -2.936860128
II. ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 4521.91 4763.91 -242.00 -5.351720844
Intangible Assets 119.16 111.61 7.55 6.336018798
Capital Work in Progress 349.52 257.52 92.00 26.32181277
Intangible Assets Under
Development 4.72 5.14 -0.42 -8.898305085
Long term Loans and Advances 338.68 374.54 -35.86 -10.58816582
Total 5619.02 5870.61 -251.59 -4.47747116
Current Assets
Inventories 685.53 520.58 164.95 24.06167491
Cash and Bank Balances 44.61 61.85 -17.24 -38.64604349
Short Term Loans and
Advances 206.59 233.76 -27.17 -13.15165303
Other Current Assets 8.85 3.26 5.59 63.16384181
Total 1249.54 1199.67 49.87 3.991068713
Total Assets 6868.56 7070.28 -201.72 -2.936860128
INTERPRETATION:

1. The comparative balance sheet of Zuari cement for the year 2015-16 of
2. The liquidity position of Zuari cement for the year 2015-16 shows that there is
an increase in working capital.

Particulars Rs in crores 2015
RS in Crores
2016 Increase/decrease Change in %
Share Capital 23.81 23.81 0.00 0
Reserves and Surplus 2621.38 3049.46 -428.08 -16.33032983
Total 2645.19 3073.27 -428.08 -16.18333655
Minority Intrest 0.61 0.7 -0.09 -14.75409836
Long Term Borrowings 1710.02 1070.98 639.04 37.37032315
Total 2981.87 2461.23 520.64 17.46018438
Current Liabilities
Short Term Borrowings 553.61 701.66 -148.05 -26.74265277
Trade Payables 219.75 209.25 10.50 4.778156997
Other Current Liabilities 547.44 552.18 -4.74 -0.865848312
Total 1443.22 1489.65 -46.43 -3.217111736
Total Liabilities 7070.28 7024.85 45.43 0.64254881
II. ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 4763.91 4852.8 -88.89 -1.865904268
Development 5.14 8.53 -3.39 -65.95330739
Long term Loans and Advances 374.54 271 103.54 27.64457735
Total 5870.61 5721.07 149.54 2.547265105
Current Assets
Inventories 520.58 550.17 -29.59 -5.684044719
Cash and Bank Balances 61.85 91.13 -29.28 -47.34033953
Total 1199.67 1303.78 -104.11 -8.678219844
Total Assets 7070.28 7024.85 45.43 0.64254881
INTERPRETATION:

1. The comparative balance sheet of Zuari cement for the year 2016-17 of
2. The liquidity position of Zuari cement for the year 2016-17 shows that there is
an increase in working capital.
STATEMENT SHOWING COMMONSIZE BALANCE SHEET OF

Rs in crores % change Rs in Crores % change
Particulars 2014 2015
Share Capital 23.8 0.36777318 23.80
0.3465064
Reserves and Surplus 2,346.96 36.26676227 2458.28
35.79032577
Total 2,370.76 36.63453545 2,482.08
36.13683217
Long Term Borrowings 1,393.06 21.52647503 1420.35
20.67900695
Deferred Tax Liabilities 716.36 11.06966366 737.37
10.735438
Other Long Term Liabilities 338.42 5.229487374 383.47
5.58297518
Long Term Provisions 40.38 0.623978193 40.61
0.591244744
Total 2,488.22 38.44960426 2681.8
39.04457412
Current Liabilities
Short Term Borrowings 588.08 9.087397124 723.62
10.53525047
Trade Payables 143.08 2.210965822 187.66
2.732159288
Other Current Liabilities 734.35 11.34765691 729.18
10.61619903
Short Term Provisions 146.89 2.269840436 64.22
0.934984917
Total 1,612.40 24.9158603 1704.68
24.81859371
Total Liabilities 6,471.38 100 6868.56
100
II. ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 4,513.40 69.74401132 4521.91
65.83490572
Intangible Assets 80.15 1.238530267 119.16
1.734861456
Capital Work in Progress 147.96 2.286374776 349.52
5.088693991
Development 9.04 0.139691998 4.72
0.068718916
Non Current Investments 265.77 4.106852016 283.41
4.12619239
Long term Loans and Advances 201.74 3.117418541 338.68
4.930873429
Other Non Current Assets 1.49 0.023024455 1.62
0.02358573
Total 5219.55 80.65590338 5619.02
81.80783163
Current Assets
Inventories 594.75 9.19046633 685.53
9.980694643
Trade Receivables 302.81 4.679218343 303.96
4.425381739
Cash and Bank Balances 53.96 0.833825243 44.61
0.649481114
Short Term Loans and Advances 298.72 4.616016986 206.59
3.007762908
Other Current Assets 1.59 0.024569721 8.85
0.128847968
Total 1251.83 19.34409662 1249.54
18.19216837
Total Assets 6471.38 100 6868.56
100
INTERPRETATION:

The above table represents the Common size Balance sheet of Zuari cementin the year
2014-15. It is used to analyse the working capital position based on Current Assets and
Current Liabilities. We can also interpret the sales based on Total fixed Assets and revenue
along with Current Liabilities. By this we can say whether capital structure is safe or not.
Rs in crores % change Rs in Crores % change

Particulars Rs in crores 2015 RS in Crores 2016
Share Capital 23.80 0.3465064 23.81 0.336761769
Reserves and Surplus 2458.28 35.79032577 2621.38 37.07604225
Total 2,482.08 36.13683217 2645.19 37.41280402
Deferred Tax Liabilities 737.37 10.735438 827.06 11.69769797
Other Long Term Liabilities 383.47 5.58297518 404.89 5.726647318
Total 2681.8 39.04457412 2981.87 42.17470878
Current Liabilities
Trade Payables 187.66 2.732159288 219.75 3.108080585
Total 1704.68 24.81859371 1443.22 20.4124872
Total Liabilities 6868.56 100 7070.28 100
II. ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 4521.91 65.83490572 4763.91 67.37936829
Development 4.72 0.068718916 5.14 0.072698677
Non Current Investments 283.41 4.12619239 355.83 5.032756836
Long term Loans and Advances 338.68 4.930873429 374.54 5.297385676
Other Non Current Assets 1.62 0.02358573 2.06 0.029136046
Total 5619.02 81.80783163 5870.61 83.03221372
Current Assets
Inventories 685.53 9.980694643 520.58 7.362933293
Trade Receivables 303.96 4.425381739 380.22 5.377721957
Total 1249.54 18.19216837 1199.67 16.96778628
Total Assets 6868.56 100 7070.28 100
INTERPRETATION:

The above table represents the Common size Balance sheet of Zuari cement in the
year 2015-16. It is used to analyse the working capital position based on Current Assets and

Particulars Rs in crores 2016 % Change RS in Crores 2017 % Change
Share Capital 23.81 0.336761769 23.81 0.338939621
Reserves and Surplus 2621.38 37.07604225 3049.46 43.40961017
Total 2645.19 37.41280402 3073.27 43.74854979
Minority Intrest 0.61 0.008627664 0.7 0.009964626
Deferred Tax Liabilities 827.06 11.69769797 852.77 12.13933394
Other Long Term Liabilities 404.89 5.726647318 520.27 7.406136786
Total 2981.87 42.17470878 2461.23 35.03605059
Current Liabilities
Trade Payables 219.75 3.108080585 209.25 2.978711289
Total 1443.22 20.4124872 1489.65 21.20543499
Total Liabilities 7070.28 100 7024.85 100
II. ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 4763.91 67.37936829 4852.8 69.08047859
Development 5.14 0.072698677 8.53 0.12142608
Non Current Investments 355.83 5.032756836 367.27 5.228154338
Long term Loans and Advances 374.54 5.297385676 271 3.857733617
Other Non Current Assets 2.06 0.029136046 3.64 0.051816053
Total 5870.61 83.03221372 5721.07 81.4404578
Current Assets
Inventories 520.58 7.362933293 550.17 7.83176865
Trade Receivables 380.22 5.377721957 468.48 6.668896845
Total 1199.67 16.96778628 1303.78 18.5595422
Total Assets 7070.28 100 7024.85 100
INTERPRETATION:

The above table represents the Common size Balance sheet of Zuari cement in the
year 2016-17. It is used to analyse the working capital position based on Current Assets and

5.FINDINGS
1. The working capital of Zuari cement represents negative value for 4 years .But for the
year 2015-16 the performance of working capital is comparatively better than the
previous years, due to the increase in current assets (but less than the current
liabilities).
2. The acceptable ratio of current ratio is 2:1, the current ratio of Zuari cement is
gradually increasing from year to year. But in the year 2015-16 somehow the
company is able to meet its short-term obligations with its increased current assets.
3. The acceptable ratio of quick ratio is 1:1, the quick ratio of Zuari cement is gradually
increasing from year to year. But in the year 2015-16 somehow the company is able to
pay off its current liabilities with its increased liquidity assets.
4. The inventory turnover ratio of Zuari cement is highest (35.602) when compared to
the following years because of its efficient increase in sales.
5. The working capital turnover position of Zuari cement has significantly increased
from year to year due to increased in sales as well as increase in current assets.
6. The fixed asset turnover ratio is highest in 2012-13 (0.80) because the money tied up
in fixed assets is low for each unit of currency of sales revenue. The fixed assets
turnover ratio is lowest in 2014-15 (0.70) because it was over invested in plant,
equipment or other fixed assets.
7. The capital turnover ratio of Zuari cement in 2012-13 is higher than the following
years because the utilization of capital employed, shows the ability of the firm to
generate maximum profits with the minimum amount of capital employed.

6. SUGGESTIONS
1. Zuari cement has to overcome from negative working capital to positive working
capital by increasing its current assets with the reduction in current liabilities.
2. The current ratio of Zuari cement has to reach the acceptable range of either 1 or > 1
to meet their short-term obligations.
3. The quick ratio of Zuari cement has to reach the acceptable range of 1 to pay off its
current liabilities with its increasing liquidity assets.
4. Zuari cement has to improve the sales over a period of time with optimum level of
inventory.
5. The increased working capital turnover ratio encourages the company to boost up
their further sales and current assets.
6. I suggest Zuari cements, that, it has to invest less amount in fixed assets so that the
amount will be efficiently used in raising the revenue.

7. The objective of every is to gain maximum profits with minimum amount of capital
employed.
CONCLUSION
By conducting the study about the “Working Capital Management “ it is found out
that working capital management of Zuari cement is improved on a comparative analysis, the
co. has less significant funds to meet its current obligations.
The Working Capital enables the company to meet its short-term obligations, but here
in the Zuari cements, though the working capital is negative it is able to resolve the payments
due to increase in terms of current assets and liquidity assets.

It is observed that there is a raise in inventory due to purchase on regular basis, as it is
impacting the current assets to increase which pays a path to meet its current obligations.
The sales of Zuari cement were decreasing for the past 4 years which is uncontrollable
in nature due to fluctuating prices in market, from the past 4 years Financial Statements the
investment in fixed assets are increasing, which tells us that there is a raise in turnover, over a
period of time.
REFERENCES
http://study.com/academy/lesson/what-is-working-capital-management-definition-
examples.html
https://www.universalclass.com/articles/business/financial-analysis-defining-liquidity-and-
working-capital-management.htm

http://www.investopedia.com/terms/r/receivableturnoverratio.asp
https://efinancemanagement.com/working-capital-financing/aggressive-approach-to-
working-capital-financing
www.icai.org

Zuvari cements working capital management

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