1. Chapter 1
Introduction to Topic
1.1. INTRODUCTION

2. Working capital, also known as "WC", is a financial metric which represents operating
liquidity available to a business. Along with fixed assets such as plant and equipment,
working capital is considered a part of operating capital. It is calculated as current
assets minus current liabilities. If current assets are less than current liabilities, an entity
has a working capital deficiency, also called a working capital deficit. Net working
capital is working capital minus cash (which is a current asset) and minus interest
bearing liabilities (i.e. short term debt). It is a derivation of working capital, that is
commonly used in valuation techniques such as DCFs (Discounted cash flows).
Working Capital = Current Assets − Current Liabilities
A company can be endowed with assets and profitability but short of liquidity if its assets
cannot readily be converted into cash. Positive working capital is required to ensure that
a firm is able to continue its operations and that it has sufficient funds to satisfy both
maturing short-term debt and upcoming operational expenses. The management of
working capital involves managing inventories, accounts receivable and payable and
cash.
Decisions relating to working capital and short term financing are referred to as working
capital management. These involve managing the relationship between a firm's short-
term assets and its short-term liabilities. The goal of working capital management is to
ensure that the firm is able to continue its operations and that it has sufficient cash flow
to satisfy both maturing short-term debt and upcoming operational expenses.
Decision criteria
By definition, working capital management entails short term decisions - generally,
relating to the next one year period - which are "reversible". These decisions are

3. therefore not taken on the same basis as Capital Investment Decisions (NPV or related,
as above) rather they will be based on cash flows and / or profitability.
• One measure of cash flow is provided by the cash conversion cycle - the net
number of days from the outlay of cash for raw material to receiving payment
from the customer. As a management tool, this metric makes explicit the inter-
relatedness of decisions relating to inventories, accounts receivable and payable,
and cash. Because this number effectively corresponds to the time that the firm's
cash is tied up in operations and unavailable for other activities, management
generally aims at a low net count.
• In this context, the most useful measure of profitability is Return on capital
(ROC). The result is shown as a percentage, determined by dividing relevant
income for the 12 months by capital employed; Return on equity (ROE) shows
this result for the firm's shareholders. Firm value is enhanced when, and if, the
return on capital, which results from working capital management, exceeds the
cost of capital, which results from capital investment decisions as above. ROC
measures are therefore useful as a management tool, in that they link short-term
policy with long-term decision making. See Economic value added (EVA).
Management of working capital
Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. These policies aim at managing the
current assets (generally cash and cash equivalents, inventories and debtors) and the
short term financing, such that cash flows and returns are acceptable.

4. • Cash management. Identify the cash balance which allows for the business to
meet day to day expenses, but reduces cash holding costs.
• Inventory management. Identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials - and
minimizes reordering costs - and hence increases cash flow; see Supply chain
management; Just In Time (JIT); Economic order quantity (EOQ); Economic
production quantity
• Debtors management. Identify the appropriate credit policy, i.e. credit terms
which will attract customers, such that any impact on cash flows and the cash
conversion cycle will be offset by increased revenue and hence Return on
Capital (or vice versa); see Discounts and allowances.
• Short term financing. Identify the appropriate source of financing, given the
cash conversion cycle: the inventory is ideally financed by credit granted by the
supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to
"convert debtors to cash" through "factoring".
KINDS OF WORKING CAPITAL

5. Source: www.ushamartin.com
Composition of Working Capital:
Current Assets: Current Liabilities:
1. Stock of Inventory: 1. Accounts Payable:
Raw Material, Work in Progress, Sundry Creditors, Bills Payable.
Finished Goods.
2. Accounts Receivable: 2. Short-term borrowings.
Sundry Debtors, Bills Receivable.

6. 3. Short-term loans & advances. 3. Outstanding Expenses
4. Short-term investments. 4. Provision for Taxation or Tax
Payable.
5. Prepaid expenses. 5. Dividends Payable.
6. Accrued or Outstanding Income. 6. Short-term dues to employees.
7. Cash in Hand. 7. Bank Overdraft.
8. Cash at Bank. 8. Minority Interest.
1.2. OBJECTIVE OF THE STUDY
The objective of the Thesis is to study the different components of current assets and
liabilities and the extent of funds tied up in each the trend of changes of each
component to find out the relationship between working capital and profitability To find
out the impact of Working Capital on Economic Value Addition to the stake holder
1. To set up the required fund for running the operating activities of the
firm.
2. To forecast the required amount of gross & net working capital with

7. individual breakup of the components.
3. To fix up the optimum level of working capital & to change the same
according to the need of the situation.
4. To take care for maintaining the liquidity position of the firm up to the desired level.
5. To increase the profitability of the firm by striking a balance between
liquidity&profitability.
1.3. IMPORTANCE OF THE STUDY
The importance working capital in any business can hardly be over-emphasized. To run
a business smoothly & efficiently, it is essential to have an adequate amount of working
capital. Followings are the advantages that a business firm gets for having adequate
amount of working capital or the working capital facilitates a business in the following
way:
1. Constant supply of raw material.
2. Constant supply of saleable product.
3. Regular payment of operating expenses.
4. Provide adequate solvency to the business.
5. Opportunity of getting loans.

8. 6. Increase in Goodwill.
7. Possibility of getting cash discount.
8. Helps the business to solving the crisis situations.
9. Exploitation of favorable market conditions.
10. Increase in efficiency & productivity.
11. Increase in profitability.
12. Regular payment of Dividend.
13. Research & development.
14. High morale of employees.
It is also to be noted that excess of working capital is a vice for a firm like inadequacy of
working capital. Excess working capital blocks huge amount capital in a firm which
remains idle for longer period & gives no return to the business.

9. 1.5 METHODOLOGY OF THE STUDY
1.5.1. TYPE OF RESEARCH
This thesis “A Study on Working Capital Management & Profitability Analysis of
Usha Martin Ltd” is an analytical research.
Analytical Research is defined as the research in which, researcher has to use facts or
information already available, and analyze these to make a critical evaluation of the
facts, figures, data or material.
The thesis includes finding of primary data and secondary data. It includes surveys and
fact-finding enquiries. So, the project basically covers description of state of affairs, as it
exists at present. Here in this case, the researcher does not have control over the
variables. Here, the job done as a researcher is to use the facts and information already
available. The research is done with the aid of the annual reports, the company
database textbooks and the observation and interaction being the only source of
primary data whatever is used. The same set of information is analyzed to make the
critical evaluation of the material.
With the given nature of research this is an analytical type of research wherein the
analysis of the existing set of affairs are used to arrive the effect of working capital
management on the return and profitability of the company.

10. 1.5.2. INSTRUMENTATION TECHNIQUES
The techniques used for the collections of the financial statements, data and other
information as follows. The primary data were collected by interaction and observation.
The secondary data were collected from the published annual reports, budgeted
manuals and the audited balance sheet and profit and loss account, database of the
company.
1.5.3. ACTUAL COLLECTION OF DATA
The thesis makes use of both the primary as well as secondary data.
Primary data were collected by observation and interaction. In the course of time, the
finance manager and his executives, the purchase manager and his executives and the
store manager and his executives provided very appreciable co-operation during the
interaction.
As for the secondary data, the various published materials were used along with the
database. The annual reports, fact-sheets, budgeted manuals and the audited balance
sheet and profit and loss account, accounting and financial database of the company.
1.5.4. TOOLS USED FOR ANALYSIS OF DATA
The data were analyzed using the following financial tools and techniques
· Ratio analysis
· ABC analysis

11. · Statement of changes in working capital
1.5.5. OTHER SOFTWARE USED FOR DATA ANALYSIS
The application software used for the typing of data, analysis of data, and presentations
of different charts, tables, graphs etc is Microsoft Word and Excel. MS Excel made a
very handy tool for the analysis of the data. It was rigorously made use of during the
calculation and comparisons among the data, graphical and tabular presentation,
calculation of various ratios, their analysis
1.6. LIMITATION OF THE STUDY
• The analysis is limited to just 4 years. The study conducted deals only with
impact of working capital on profitability without taking into consideration the risk
I involved.

12. • The study conducted throws light only on the impact of working capital on a
minuscule part of strategic management namely EVA.
• The figures and facts claimed in the annual reports and in other forms are taken
a
.

13. Chapter -2
Literature Review
REVIEW OF LITERATURE
Sam D'Costa wrote an article “Working Capital – a Tool to Judge your Company’s
Efficiency” on the subject of
The most repeated maxim amongst financial managers is "Cash is the lifeblood of
business". A business owner always look that his cash flow to business is smooth and

14. use it for generating profit. When a business is running smoothly and taking in profit,
then it will undoubtedly have cash surpluses. If your business does not have cash
surplus, expect to go out of the business.
1. Cash Flow forecasting is what working capital management is all about. Your forecast
should include factors like fluctuating market cycles, unforeseen events, loss of
customers and your competitor's strategy. Also, unforeseen demands and its effect on
your business all need to be factored in.
2. There is nothing wrong with putting together a contingency plans just in case of
unexpected events. It's true that market leaders manage uncertainty much better than in
years past, but you really should have risk management procedures for your company
as insurance.
Steve Bush wrote an article “Commercial Loans and Working Capital Financing
Special Reports” on the subject of
A prudent approach to working capital management is becoming more difficult for most
commercial borrowers. Commercial loans have always been more complicated than
realized by most business owners. Recent financing difficulties involving commercial
mortgages, SBA loans and business cash advances have added significantly to the
complexity of the entire commercial lending process.
This article will provide a brief overview describing some of the business financing
resources which should be thoroughly evaluated by commercial borrowers as part of
their prudent approach to successful working capital funding. All of the recommended
sources are free and available online. Business owners should contact the author
directly or use one of the leading internet search engines to locate the most appropriate

15. sites.
Jamie Liddell wrote a article “Making the Link Between P2P and Working Capital
to Create a Robust Governance Framework” on the subjectof
How changes made to cope with adversity can prove advantageous in other areas of
the organization. One of the lesser-trumpeted consequences of the credit crunch has
been a renewed (and some might say long overdue) attention paid to working capital
management: with liquidity the watchword organizations have been scrambling to
release potentially significant sums tied up in their P2P and O2C processes, with every
saving going some distance to staving off a potentially business-critical shortage of
cash. But while the short-term benefits of such new-found C-level interest in such
processes can be summed up by the bottom line, longer-term the ramifications could be
a lot more profound – and positive – thanks to the enhanced governance frameworks
resulting from companies' increased attention to detail.
Stephen Bush wrote a article “Commercial Loan Help for Avoiding Problem
Working Capital Lenders” on the subject of
Avoiding critical problems is vital for a small business owner seeking help with
commercial loans. Successful working capital management especially requires that
problem lenders be avoided for business loans and commercial mortgage financing.
One of the most serious commercial loan situations is a small business commercial
lender that causes problems for their commercial borrowers on a repeating basis.
Commercial borrowers should be prepared to avoid certain problematic commercial

16. lenders unless alternative working capital loan options are impossible.
This article will not name specific lenders to avoid. However, we will describe the
importance of avoiding "problem commercial lenders". Key examples will be provided to
illustrate why prudent commercial borrowers should be prepared to avoid a wide variety
of existing commercial lenders when seeking viable commercial mortgage and small
business financing strategies.
Suzanne wrote a article “Working Capital: the Life Blood of Business” on the subject of
Successful business thrives on smooth cash flow. This is no jargon but a simple truth oft
repeated and realized by the financial managers around. The top priority of any small
business is to stay solvent and ensure the availability of adequate working capital. This
capital is utilized for the payment of rent, payroll, and other operating costs as is
involved in the various stages of production and services. Irrespective of the success of
any business, there is always a possibility of scarcity of funds on account of some
unexpected circumstances. Herein arises the need for securing adequate fund to
manage all your business obligations and provide enough financial security for the
future as well.
Lack of adequate expendable cash makes it difficult for an organization to meet day-to-
day expenses. Since businesses always run the risk of unexpected expenses, it
becomes even more important to secure some fund in order to avoid unpleasant
circumstances

17. Stephen Bush wrote an article “Working Capital Financing Success with Realistic Choices”
on the subject of Being realistic when seeking new working capital financing and
commercial loans should be a key goal for all commercial borrowers. Business owners
should be prepared to encounter stark changes impacting most business financing and
working capital loans. Although it is very likely that either the terms or kind of financing
will be different from previous commercial financing arrangements, with proper
preparation most business owners will still be able to obtain new financing despite these
new and difficult challenges.
In view of volatile conditions which have recently impacted credit markets, this will not
be a simple task. The extensive misinformation and confusion that there has been about
business financing and working capital availability illustrates a common example of the
problem. One of the most difficult challenges for commercial borrowers is obtaining
more accurate information about what is realistically possible.
Terry H. Hill wrote an article “Making Your Working Capital Work” on the subject of
The more rapidly that your business expands, the greater the need for working capital
becomes. If you have insufficient working capital – the money necessary to keep your
business
Functioning – your enterprise is doomed to fail. Many businesses, that are profitable
on-paper, are forced to "close their doors" due to their inability to meet short-term debts
when they come due. However, by implementing sound working capital management
strategies, your enterprise can flourish; in other words, your assets are working for you!

18. At one time or another, most businesses have the need to borrow money in order to
finance their growth. The ability to obtain a loan is based on the credit worthiness of a
business. The two major factors that determine credit worthiness are the existence and
extent of collateral and the liquidity of the business. Your company's balance sheet is
used to assess both of these factors. On your balance sheet, working capital
represents the difference between current assets and current liabilities — the capital
that you currently have to finance operations.
Stephen Bush wrote a article “Avoid Key Credit Card Processing and Working
Capital Mistakes” the subject of
Although it will not be easy, avoiding key credit card processing and business cash
advance mistakes is likely to eliminate business finance problems that often have
disastrous consequences. The use of proper precautions is likely to produce improved
working capital management results.
In our experience, the potential difficulties involving factors discussed below are more
serious and common than most business owners expect. While we will not be
addressing all possible merchant cash advance and working capital loan mistakes in
this article, we will include several of the most severe issues to anticipate.
The immediate impact is a sudden influx of inexperienced residential mortgage brokers
and lenders attempting to provide working capital management advice for credit card
processing and business cash advance services. As we have written about extensively,
business financing is infinitely more complex than residential financing.

19. GAUTAM KOPPALA wrote a article “Working Capital from Pome by Gautam Koppala”
on the subject of
The management of short-term assets, also known as working capital assets, is a very,
very important management function. As we will see, mismanagement of these assets,
particularly inventories and accounts receivable, can consume resources that would
otherwise be used to support and strengthen the business. It is important to recognize
that management of these assets is a comprehensive function. One cannot focus on
only one of these asset categories at a time.
We will also see that there is a direct relationship between the management of short-
term assets and the management of short-term liabilities. As we noted earlier, financial
transactions that affect one part of the Balance Sheet ultimately affect another part,
because the Balance Sheet always balances. Understanding the other side of the
Balance Sheet effect helps us understand the impact of management actions
Steve Bush wrote a article “Working Capital Loans and How to Avoid Fake
Articles” on the subject of
In a recent commercial loan report, we described the increasing use of fake articles
about working capital loans on a variety of internet sites. In our prior AEX Commercial
Financing article, we provided two practical strategies to avoid the publishers of fictitious
information concerning commercial mortgages and other business financing. To avoid
repetition, please contact us directly regarding recommendations which were previously
discussed. In the current report we will provide more detailed suggestions for avoiding

20. this growing problem.
The use of reputable publication sites is an effective and important way to avoid fake
articles about business cash advances and commercial real estate loans. Such sites will
employ their best efforts to eliminate articles for which the author does not have
ownership rights. These responsible and high-quality sites will require review of articles
by a human editor prior to publication
Steve Selengut wrote an article “Investment Performance Analysis Using the
Working Capital Asset Allocation Model”2008 on the subject of
The use of Issue Breadth and 52-week High/Low statistics for navigating the sea of
uncertainty, and Peak-to-Peak interest rate and market cycle analysis are much more
useful as performance expectation barometers than the DJIA was ever meant to be.
When did it become vogue to think of Investment Portfolios as sprinters in a twelve-
month race with a nebulous array of indices and averages? Why are the Masters of the
Universe rolling on the floor in laughter? They can visualize your annual performance
agitation ritual producing fee generating transactions in all conceivable directions. An
unhappy investor is Wall Street's best friend, and by emphasizing short-term results in a
super bowlesque environment, they guarantee that the vast majority of investors will be
unhappy about something, all of the time.
Your portfolio should be as unique as you are, and I contend that a portfolio of individual
securities rather than a shopping cart full of one-size-fits-all consumer products is much
easier to understand and to manage. You just need to focus on two longer-range

21. objectives: (1) Growing productive Working Capital, and (2) Increasing Base Income.
Neither objective is directly related to the market averages, interest rate movements, or
the calendar year.
Alfred Anderson wrote an article “Manage Working Capital With Cash Advance” 2006 on
the subject of
The success of an organization depends on how effectively its working capital is
managed. Day to day operational expenses pertaining to advertising, salaries, rent etc.
needs to be met on a regular basis and thus proper management of working capital is
essential. Managing working capital typically refers to strategies being implemented to
maintain the requisite amount of operating liquidity on a day to day basis. This involves
management of a company’s short term assets and liabilities to ensure sufficient cash
flow to satisfy short term debt and other operational expenses.
Working capital decisions are short term which is based on cash flows and profitability
of a business. Hence measurement and estimation of the profitability is vital. Cash flows
can be measured with the help of cash conversion cycle i.e. the time required to convert
raw materials into finished products which is then converted into sales.
Michael Koslow wrote a book “Your Success: It’s All About Working Capital Strategy” on
the subject of

22. This area of finance allows companies to obtain working capital for their business by
releasing liquidity tied up in assets. Asset-based lending is growing faster than general
lending because it is generally less risky, according to Paul Hancock, a managing
director in asset-based lending at JPMorgan, as told to The Financial Times.
"Both the securitization and traditional leveraged loan markets have been significantly
less active, and businesses are increasingly considering alternatives for their funding
needs," Hancock says. "In times of economic uncertainty and earnings volatility,
companies can sometimes find it easier to manage their finances with their balance
sheet rather than earnings or cash flow covenants."
James Leong wrote a book “Managing Working Capital” on the subject of
Accounting defines working capital as Current Assets less Current Liabilities. It is also
known as Net Current Assets. Current assets are those which are considered liquid and
are convertible or expected to be realizable in cash within a period of 12 months from
the date of the financial report. Common examples include cash, inventories, accounts
receivables, prepayments and marketable securities. Current liabilities are those which
are expected to be repaid within a period of 12 months. Examples include bank
overdraft, short term borrowings, accounts payables and accrued expenses.
Operationally, working capital indicates the ability of the company to finance its current
operations and to meet obligations when they mature. It measures the companys ability
to pay daily bills from a liquidity
standpoint.

23. Peter Kennedy wrote a article “Government bond Markets: Shaw Capital
Management February Newsletter” on the subject of
Shaw Capital Management Korea February Newsletter: There was always the risk that
the funding requirements resulting from recent policies, and particularly from the
measures to counter the latest recession, would prove to be a massive burden for the
global bond markets, and this has now proved to be the case. The Dubai government
appears to have been rescued by help from Abu Dhabi; but it is still not clear whether
there will be help for Greece and other periphery countries of the euro-zone that are in
difficulties, and doubts have also been expressed about countries outside the euro-
zone, including the UK, if central banks do not implement "exit strategies" carefully, and
credible plans to reduce the massive fiscal deficits are not introduced fairly quickly.
Capital Management Korea February Newsletter: Debt issuance rose to over $2 trillion
in 2009 to finance this deficit, and to replace maturing bonds; and the latest decision to
take advantage of the unexpected windfall from the repayment of bank bail-out funds
that are no longer needed to provide new resources for job creation is a clear indication
that there are no plans to take early action to reduce the deficit.
Marciano Guerrero wrote a article “Working Capital And Current Ratio - 2 Useful
Measures Of Liquidity And Solvency” on the subject of
The Balance Sheet is one of the four required financial statements that accountants
prepare for business owners and managers. This statement shows the assets, liabilities,
and the owner's equity (capital).

24. The balance sheet is a reflection of the Accounting Equation (Assets = Liabilities +
Owner's Equity). The accounting equation is a simple-minded equality. It informs the
reader of the balance sheet to whom the assets (left side of the equation) belong: the
creditors (liabilities) and the owner (owner's equity).
So, in all businesses, the two parties that can claim ownership of the assets are
creditors and the owner. And in the case of a corporation 'the owner' will be many and
are called shareholders.
Stan Prokop wrote a article “How Does My DSO Affect Cash Flow and Working
Capital” on the subject of
Most business owners and financial managers know the importance of their investment
in accounts receivable. The method by which the largest corporations in the world, and
a small company measure collection activity, is called DSO, or ‘Collection Period ‘. DSO
stands for DAILY SALES OUTSTANDING
Business owners can calculate this number very quickly, and we recommend it be done
regularly, typically monthly, quarterly, and certainly annually. It’s a great business
measurement of your success, and lenders also focus in on this number also.
We point out that the DSO calculation is a reflection of one point in time – that’s why it is
important to monitor the overall trend of DSO on a longer term basis. Naturally all good
businesses age their receivables, so they know how old they are and focus on past due
accounts.
Jeff Bross wrote an article “Accounts Receivable Factoring Can Be A Powerful
Working Capital Tool” on the subject of

25. The way factoring receivables works is the factoring company (factor), provides cash for
your invoices after you invoice your customers. Many factoring companies use the term
purchase your receivables, but in reality they are really just advancing funds against
your receivables as the primary collateral for the transaction. True no recourse factoring
is not very common these days as most companies that need factoring do not want a
factor calling customers for collections and payments. So if the factor sets your
discount fee at 2.5%, the factor keeps 2.5% of the invoice total as their fee for providing
the funds immediately. Most factoring companies will advance 80% to 90% of the total
up front, and then provide your business the remaining amount 20% to 10%, less your
discount fee, once the invoice is paid by your customer.
You are normally given up to 90 days for payment to arrive and if the payment does not
arrive the factor will come back you for collection. It's important to keep in mind that
today's factoring is mostly full recourse so you will need to manage the relationship with
your customers and make sure payments still arrive within a reasonable time period.
DR.R.SRINIVASAN wrote a article “WORKING CAPITAL FINANCING –BOON TO
BUSINESS” on the subject of
It is widely accepted that every successful business must have a strong working capital
position. It is in this context; an attempt was made to explain the concept and various
determinative factors influencing net current assets below:
Gross working capital refers to working capital as the total of current assets. That is to
say, Gross working capital = Total current assets.

26. Net working capital refers to working capital as excess of current assets over current
liabilities. In other words net working capital refers to current assets financed by long
term funds or capital employed of the business.
Accordingly, Net working capital = Current assets – Current liabilities
The net working capital position of the firm is an imperative contemplation, as this will
determine the firm’s profitability and risk. Here the profitability refers to profits after
expenses and risk refers to the probability that a firm will become technically insolvent
where it will be unable to meet obligations when they become due for payment.
Steve Jones wrote an article “Finance for Working Capital - Bank Overdrafts”2004on the
subject of
This is the most common form of finance used to fund working capital and the one with
which most business owners are familiar. This is where the bank account is allowed to
go overdrawn up to a pre-agreed limit.
Overdrafts are straightforward to arrange and are provided by most banks. The limit will
be set at a figure appropriate for the business and at a level where the bank considers
the risk to be acceptable. The actual amount available will therefore vary significantly
from business to business. Security may or may not be required A rapidly expanding
business could easily out grow its overdraft facility and find itself constantly close to the
agreed borrowing limit. As there will always be a finite amount of money

27. that a lender can provide, this in itself may be a restricting factor in the growth of the
business. In this situation it will be necessary to consider and explore other types of
finance.
Stan Prokop wrote a article “How Do Banks Exert Control And Influence On
Business Loan And Working Capital Facilities “2010-06-17 on the subject of
This is because when a customer has to service the additional non- bank debt they
might be unable to service the banks loans. Banks have very well known and published
cash flow ration and they want to ensure their customers can meet these rations on the
bank debt. Naturally if a bank feels comfortable with a customer growth and cash flow
profits they are much more likely to approve a third party financing . If they aren’t
comfortable they may ask the company to at lease temporarily defer bonuses,
dividends, or, in the case of a public company, a stock repurchase.
Bankers of course usually know the company very well, as a relationship and financial
history has developed over the years. They will often want to have input into the
company’s growth direction in an effort to ensure the customer is not going down a path
that in their opinion, might lead to liquidity loss or profitability loss
Jackie Johnson wrote a article “How Accounts Receivable Factoring Can Solve
Your Working Capital Issues”2008 on the subject of

28. The beauty of using this cash flow tool comes in the simplicity of it all. They purchase an
invoice from you at a rate that is discounted from the true invoice value. This discount
allows them to make a profit when the original customer settles the invoice, which is
their motivation for engaging in the transaction. The benefit for selling the invoice comes
in receiving the money immediately, which can negate any potential difficulty that may
be arising from a lack of cash flow. Again, using the skills and knowledge of companies
who perform accounts receivable factoring services can ensure the liquidity of many
firms, even in the most troublesome of times.
The firm who sells the invoice may be the one who benefits the most but it is clear that
the factor is doing a great level of business too. If they have enough cash to cater for
their own short term needs as well as having money left over, it makes sense to have
this excess money working for them. The guaranteed profit that arises from the discount
applied to the invoice rate ensures the firm will receive more money in the future, which
can help a business plan ahead.
Jason Hulott wrote a article “Short term Business Loans: Feasible way to raise
working capital”2005on the subject of
With assist of short term business loans people can avail easy case for any of their
business and other purposes. It may include anything like pay off salary & wages of
employees, business promotional expenses, purchasing a land for office premises,
paying due taxes, buying new machinery, and advertisement expenses, office interior
expenses etc. There is no restriction over the usage of loan amount.

29. These loans are unsecured in nature that avails you money in the ranges of £1000 to
£25000 for the term period of 1 to 10 years. You may have complete freedom to select
the amount range as per your convenience and repaying capability. You can avail this
loan facility at any stage of your business. But, keep in mind that never make delays in
payment as it cause high penalty charges. Plus, timely repayment of money can also
assist you in strengthen your financial position.
Terry Cartwright wrote a article “Cash Flow Management of Debtors And
Creditors In A Credit Crunch” on the subject of
The objective is to obtain payment from customers as fast as possible improving cash
flow and minimizing the risk of bad debts and not being paid at all.
Payment terms offered to customers should be clearly stated and fixed as standard
accounting figures according to the amount of funding the business is prepared to offer
its clients. Because that is exactly what credit terms to customers is, free cash funding
in exchange for eventual sales income.
Consideration should be given to using a cash discount system to encourage sales
invoices to be paid faster. In some businesses it would be appropriate to obtain up front
deposits and scheduled payments. Review this practise to obtain a greater proportion of
payments faster to improve liquidity.
American Journal of Business on An Analysis of Working Capital Management
Results across Industries
Firms are able to reduce financing costs and/or increase the funds available for
expansion by minimizing the amount of funds tied up in current assets. We provide

30. insights into the performance of surveyed firms across key components of working
capital management by using the CFO magazines annual Working Capital Management
Survey. We discover that significant differences exist between industries in working
capital measures across time. In addition, we discover that these measures for working
capital change significantly within industries across time.
The IUP Journal of Accounting Research and Audit Practices on Inventory and
working capital Management: An Empirical Analysis
The working capital management refers to the management of working capital, or
precisely to the management of current assets. A firm’s working capital consists of its
investments in current assets, which includes short-term assets—cash and bank
balance, inventories, receivable and marketable securities. Therefore, the working
capital management refers to the management of the levels of all these individual
current assets. On the other hand, inventory, which is one of the important elements of
current assets, reflects the investment of a firm’s fund. Hence, it is necessary to
efficiently manage inventories in order to avoid unnecessary investments. A firm, which
neglects the management of inventories, will have to face serious problems relating to
long-term profitability and may fail to survive. With the help of better inventory
management, a firm can reduce the levels of inventories to a considerable degree e.g.,
10 to 20% without any adverse effect on production and sales.
European Financial Management, on International working capital practices in the
UK

31. A new order depletes that inventory significantly. Although payments from Medicare and
other carriers may lag, expenses including loan repayment, must be paid and inventory
replenished. However, additional credit is not available until the existing line has been
repaid. Consequently, unless you have established a credit line sufficient to meet the
cash flow requirements you might need in the future, loans won’t work because they do
not fluctuate with your revenue cycle or expand with your growth
Journal of International Business Studies on An International Study of
Management Perceptions of the working capital Process
Working capital literature is rather limited and the process of managing short‐term
resources is not understood well by he academicians. In contrast the corporate
managers are continuously involved in the working capital decision-making process, but
their perspective is limited to the practice of their firm. In order to fill this gap in the
working capital literature, a study of management perceptions of the working capital
process was undertaken. A survey was used to collect the information from the sample
of marketing, production, and financial executives in large corporations in Belgium,
France, India and United States. The study intercepts management ranking of working
capital objectives and indicates the need to improve finacial planning models to include
explicitly short–run objectives; further, predictability of cash inflows and outflows is
examined and the potential factors affecting the predictability are evaluated

32. Studies in Agricultural Economics on The interpretation of ccc and its elements,
working capital management
Those literary sources, which are about the interpretation of the working capital in a
context with the financing strategies of the companies, about the related financial
indices, and the counting methodological questions of all these, could not be called
poor, nor unified. The deficiency of defining the concepts that give the theoretical basis
and their vocational tenability, the controversial interpretation and the unclearness of the
related methodological questions creates several problems. The problematic concepts
are working capital net working capital, the circulation of current assets and working
capital management etc. The root of the problems could be found on the other hand in
the unclearness of the theoretical contexts, in the deficiency and vocational tenability of
the defining of the related concepts and categories. We define the concepts of working
capital, net working capital based on the results of our several years of research work.
30Journal of Business Finance & Accounting on Does working capital
Management Affect Profitability of Belgian Firms
The relation between working capital management and corporate profitablity is
investigated for a sample of 1,009 large Belgian non-financial firms for the 1992-1996
period. Trade credit policy and inventory policy are measured by number of days
accounts receivable, accounts payable and inventories, and the cash conversion cycle
is used as a comprehensive measure of working capital management. The results
suggest that managers can increase corporate profitability by reducing the number of
days accounts receivable and inventories. Less profitable firms wait longer to pay their
bills.

33. 31Policy Research working Paper Series on Why liberalization alone has not
improved agricultural productivity in Zambia: the role of asset ownership and
working capital constraints
The authors use a large panel data set from Zambia to examine factors that could
explain the relatively lackluster performance of the country's agricultural sector after
liberalization. Zambia's liberalization significantly opened the economy but failed to alter
the structure of production or helps realize efficiency gains. They reach two main
conclusions. First, not owning productive assets (in Zambia, draft animals and
implements) limits improvements in agricultural productivity and household welfare.
Owning oxen increases income directly, allows farmers to till their fields efficiently when
rain is delayed, increases the area cultivated, and improves access to credit and
fertilizer markets. Second, the authors reject the hypothesis that the application of
fertilizer is unprofitable because of high input prices. Rather, fertilizer use appears to
have declined because of constraints on supplies, which government intervention
exacerbated instead of alleviating.
32PR NEWSWIRE , Published a article on the subject of Equity Indexed
Annuities have a place in many people's retirement accounts. Unfortunately, they
aren't as well known as variable or fixed annuities and customers and sales reps often
overlook them because of lack of awareness. Equity indexed annuities provide a
method of fighting inflation, participating in the market and still remaining risk free.
Equity indexed annuities are a blend of the fixed annuity and the variable annuity. They
offer a base interest rate the company guarantees regardless of market conditions. In

34. this way, they're much like the fixed annuity. They also track a specific equity index,
such as the S&P 500, and give a percentage of the growth to the policyholder if the
market increases. The percentage varies from policy to policy.
There are difference in the percentage you receive and differences in caps. A cap on
the percentage is the highest amount the policyholder gets regardless of the market
conditions. Sometimes caps are as low as 8 to 10 percent
PR Newswire published a article . on the subject of Ten papers present recent
research in the field of financial planning and forecasting. Journal of Economic
Literature.
An Empirical Examination of The Intraday Return Volatility Process (S.
Rahman, K.P. Ang). The Valuation of New Product Introduction Under
Uncertain Competition: A Real Option Approach (S.-S. Chen, et al.). Earnings,
Dividends, and Equity Value of Multinational Firms (A. Riah-Belkaoui).
Benford's Law and Its Application in Financial Fraud Detection (K. Kumar, S.
Bhattacharya). Estimation of the Degree of Integration in the U.S. Maturity
Rates Using Semi parametric Techniques (L. Gil-Alana). On Country-Fund
Price Behavior-An Empirical Analysis of Co integrating Factors (T. Chiang, D.
Kim). Strategic Capital Budgeting: the Abandonment Option with Political Risk
(E. Clark). Time Series Model Complexity and Firm Valuation: the Case of AR1
Firms Versus Non-AR1 Firms (B.-H. Bao, D.-H. Bao). Debt Covenant Violation
and the Value Relevance of Accounting Information (W. Cready, et al.). What's

35. Next: Merger in the Lebanese Banking Sector (A. Charbaji).
PR Newswire published a article on the subject of Usually owning to the fact that
the debtor has a regular and consistent job, you as the judgment recovery specialist
can garnish the wages relatively quickly, in such a way that the debtor is able to
sustain his lifestyle at the same time is able to pay the judgment amount, provided that
there no other garnishments with a higher priority than yours, levied on him. However,
there is a high possibility of the debtor quitting his job, right after he is served with the
wage garnishment notice. If, in case, this happens its back to square one for you, as
judgment recovery professional.
Generally, debtors or defendants who fend for themselves and have a home based
business; it becomes excessively harder for the judgment recovery specialist to
recover the judgment owed. When such a case arises, special tools like an
assignment order of third party levies are used by the judgment recovery specialist.
These will be discussed at length in other articles on judgment recovery, once I am
done with them.
Infiniti Research Limited, published a article on the subject of

36. The reputed Las Vegas financial planners can perform proper analysis and make proper
recommendations on every major asset class. They not only make recommendations
depending on the bonds and stocks but also on several other aspects. These planners
include the natural resources, commodities, currencies and real estates. The
experienced planners know how these investments would be taxed. They can
determine the way in which they are to be used within investment portfolio for achieving
the long term as well as the short term goal of their clients.
A person who wants to get the best wealth management should contact a private wealth
manager than contacting the retail brokerage firms. The private wealth management
firms have a financial team and make sure that all investments have a proper
consistency. They provide the planning through the account of his lawyer or his client.
These firms coordinate all wealth of a person as they consider coordinated approach as
the best approach for financial services.
Decision Resources, , Pages: 23 publised a article on the subject of
The Federal Reserve can control interest rates by expanding or contracting the quantity
of money. It can control the financial markets with its “Open Market Operations.” It can
create new money to increase its member's bank reserves at any time. It can negotiate
with foreign banks on monetary policies without congressional approval or knowledge.
And it can do all of this with virtually no oversight by any elected representative of the
people. Even the Government Accounting Office responsible for auditing all government
agencies, has no auditing authority over the Federal Reserve, a private corporation not
a government agency

37. Without the ability to judge the cost of capital by the true market value of interest rates,
determined by the availability of savings for investing and future consumption, no free
market can correctly judge its financial health. These false signals along with
government regulations are what create booms and busts in our economy, not free
market actions.
Espicom Business Intelligence Ltd, May , published a article on the subject of
The core idea of retirement planning is to save enough money for your old age days
and a smart investment plan made by a financial consultant will also be able to
ensure that your old age is the golden period of your life financially. Property is one
of the biggest assets you can have financially and making good money out of
investments and savings is possible by employing independent broker dealers that
can guide you to converting your property into an investment that delivers high
returns. Investing in the right insurance policies can also save your money efficiently
especially in areas like auto insurance or health insurance where without a good
insurance a lot of your money might get spent for the smallest hiccups in your
personal health.
Wealth is the one language that everyone understands across the world and
maintaining this wealth is essential if you want yourself to have an open
communication with a good life.

38. Report from the India Press Release brought to you by the Hindustan Times
MUMBAI, India, -
The Bombay Stock Exchange of India made the following corporate announcement:
Ranbaxy Laboratories Ltd., has informed BSE that Basics GmbH (Basics) based in
Leverkusen Germany, a wholly owned subsidiary of the Company on February 13,
2007, has announced that the Company's products has been selected by 16 Allgemeine
Ortskrankenkassen (AOK), Germany's largest General Local Health Insurance, for
listing. Basics/Ranbaxy is the only Indian Company in the AOK list. This new
agreement, listing specific products, is the first of its kind.
The Star (South Africa) published a article on the subject of In 1933, by Executive
Order of the President (FDR), all Americans were required to surrender their gold to the
government. This took away our right to trade in the most respected of all possible
commodities used to secure value in our economic exchanges. Not only did government
confiscate our gold, they also prohibited redemption of U.S. Dollars for gold by any
American. Of course, the international bankers were still allowed to exchange dollars for
gold. Now you know where our gold went. FDR pulled the plug on value-backed money
for American enterprise, dooming free market capitalism to a slow and painful death.
In 1971, President Nixon reneged on the “Breton Woods Accord” removing the
international gold redemption for the U.S. dollar. Unfortunately, it was too late. It is
probable that the international bankers already own most of what was our country's
gold. No longer would our dollars be backed by anything other than our central bankers
and government's “Good Faith.” No free market can exist without the right to exchange
productive value for productive value.

39. Ankit Agarwal on January published a article in Finance Friday on the subject
of
Its a new year and a economically promising one at that. However, the stock markets
have been playing a see-saw ride for some time now with no major fluctuations.Sectoral
Investing has lost its flavor for some time now but analyzing a particular sector still helps
one shortlist the stocks to invest in. Recently, we had covered a discussion on the IT
Sector’s position in the Stock Market. One other sector that looks set for some real
action is the HealthCare sector. The Health Care sector picked up some real peace
during the last year after March where the BSE HealthCare dropped to its maximum
low(CY 09) and from then on, it has been only an uphill journey. A look at the charts of
the BSE Healthcare index is a good indicator of the good run the Healthcare based
stocks have had in the Indian Stock Markets.
Cheng F. Lee November Wrote a book “Advances in financial planning and
forecasting, Volume 11” on the subject of
This paper presents a comprehensive analysis of the distributional and time-series
properties of intraday returns. The purpose is to determine whether a GARCH model
that allows for time variance in a process can adequately represent intraday return
volatility.
This paper investigates how a stochastic competition process in a two-factor real option
model could affect the value of future product development opportunities. Our results
also indicate that product development opportunities are more valuable

40. This paper develops and tests a valuation model, whose main prediction is that equity
value is a function of earnings, dividends and book value, where the function depends
on the relative level of multi nationality.
This paper has discussed Bedford’s law, which explains that the leading (first or
leftmost) digit in a series of natural numbers is not evenly distributed among the digits 1
to 9. The main purpose of this study actually seeks to explore a new methodological
approach to data mining that can be of some real practical value; especially to the
auditors and forensic accountants in detecting financial frauds.
Alice C. Lee, John C. Lee, Cheng F. Lee Wrote a book “Financial analysis,
planning & forecasting: theory and application” on the subject of
Based on the authors' extensive teaching, research and business experiences, this
book reviews, discusses and integrates both theoretical and practical aspects of
financial planning and forecasting. The book is divided into six parts: Information and
Methodology for Financial Analysis, Alternative Finance Theories and Their Application,
Capital Budgeting and Leasing Decisions, Corporate Policies and Their
Interrelationships, Short-term Financial Decisions, Financial Planning and Forecasting,
and Overview. The theories used in this book are pre-Modigliani Miller Theorem,
Modigliani Miller Theorem, Capital Asset Pricing Model and Arbitrage Pricing Theory,
and Option Pricing Theory. The interrelationships among these theories are carefully
analyzed. Meaningful real-world examples of using these theories are discussed step-
by-step, with relevant data and methodology.
Sue Nugus Wrote a book “Financial planning using Excel: forecasting
planning and budgeting techniques”on the subject of

41. This book covers all aspects of budget preparation, from designing and creating a
budgetary control system, consolidating data and working with spreadsheets.
Now fully updated to include the latest version of Excel, Excel 2007 and for easy
budgeting now with access to an online resource of worked examples and spreadsheet
templates. The book shows how things are done in Excel 2003 and Excel 2007 to ease
transition from the previous version to the new version. Now in full colour throughout to
aid quick understanding through numerous color screen shots.
For those who use Excel on a daily basis in budget planning, this book is a must. It
contains a wealth of practical examples, tips, new techniques all designed to help
quickly exploit and master Excel to its full advantage and therefore use spreadsheets for
more effective management accounting in your firm.

42. Chapter 3
Company profile
Of usha martin

43. COMPANY PROFILE
3.1. EXECUTIVE SUMMARY
Started in 1961 in Ranchi, Jharkhand as a wire, rope manufacturing company, today the
Usha Martin Group is an Rs.3000 Crore conglomerate with a global presence. The
group has set new standards in the manufacture of wire rope, bright bars, steel wires,
specialty wires, wire ropes, strand, conveyor cord, wire drawing and cable
machinery. With continuous growth in both the domestic and international markets,
Usha Martin, the Group’s flagship company has emerged as India’s largest and the
world’s second largest steel wire rope manufacturer.
For Usha Martin, the path to sustainable growth was long; the management constantly
tried out innovative business practices. With initiative to diversify the customer base by
venturing into the international markets, moving up the value chain and fully integrating
its business process to maximize stakeholder value.

44. In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to
benefit from business integration. This ensured a steady supply of steel for the
manufacture of value added products. Today, the Jamshedpur unit has a truly
integrated specialty steel manufacturing facility of 400,000 MT per annum. Out of
which, about 50% is consumed internally by its plant in Ranchi, Hoshiarpur & Bangkok,
producing steel wire, steel strand, steel cords, bright bar and steel wire ropes. All its
manufacturing facilities are ISO 9000 certified and the steel plant was India’s first to
receive the TPM Excellence Award from JIPM, Japan.
With local success come global aspirations. Currently, the company has overseas
manufacturing operations in Thailand, UK, USA and Dubai. Besides a vast network of
distribution centres and marketing offices spread across the globe to support an ever
growing worldwide customer base. The company exports over 60% of the wire rope
output and about 20% of the total wire rods produced.
Usha Martin’s future plans are focused on its operation in Jharkhand – a state rich in
mineral resources. Future priorities include product mix enrichment, cost reduction and
infrastructural improvements. Already flourishing in its recent foray into mining
operations, the company is planning to invest in its iron ore and coal mines, sinter plant,
pellet plant, power plants, while also enhancing its steel
making and value added products capacity with an investment of Rs.2,100 crore. What
set Usha Martin apart is its unwavering commitment to social responsibility. For over
three decades the company has invested ample man-hours and capital on community
development projects for integrated prosperity in rural Jharkhand, through a CSR arm,
Krishi Gram Vikas Kendra (KGVK).

45. This NGO undertakes various development initiatives, following a model of Total Village
Management (TVM). Focusing on key areas like Watershed development, agricultural
productivity, better health practices and education, empowering women and
encouraging micro enterprise. In recognition to its effort Usha Martin has been awarded
the prestigious TERI Award for Corporate Social Responsibility in 2006.
Today Usha Martin is the only company globally having an integrated model on the
upstream, beginning with iron ore and coal mining, power generationand going down to
deep sea oil and gas exploration, providing anchoring and mooring solutions.
3.2. HISTORICAL BACKGROUND:
Mr. B.K. Jhawar, the Chairman, established Usha Martin Limited in 1960 with the Wire
Ropes Plant, Ranchi. The firm was initially called Usha Martin Black as it started with

46. collaboration between M/S Martin Black, Scotland and Usha Automobile & Engineering
Pvt. Ltd., Calcutta in 1960.
1960 - The Company was incorporated as Usha Martin Black (Wire Ropes) limited
having its wire rope plant at Ranchi. The name was changed to Usha Martin Black Ltd.
in 1979 and further changed to Usha Martin Industries Ltd. (UMIL) in 1983.
1965 - UMIL promoted Usha Ismal Ltd. (UIL) in collaboration with CCL Systems Ltd of
UK for the manufacture of fittings and accessories, equipment for pre-stressed concrete
system, wire ropes and wire ropes splicing equipment at Ranchi. UIL merged with UMIL
in 1990 and became a division of the company.
1969- It backed Usha Breco Ltd. To design, construct and erect Ropeways.
1971 - UMIL promoted Usha Alloy Steels Limited (UASL) for the manufacture of billets
at Jamshedpur. UASL merged with UMIL in 1988.
1975 - UASL acquired an ongoing rolling mill at Agra.
1975 - UMIL set up its Machinery Division at Bangalore for the manufacture of Wire
Drawing and allied machines in technical collaboration with Marshall Richards Barcro
Limited (MRB) of UK.
The collaboration with Martin Black broke up in 1975 and the company was hence
called Usha Martin Industries.
The company set up an electrical furnace steel plant at Jamshedpur in 1973, followed
by a rod mill in 1976.
1979 - In order to obtain steady supply of wire rods for its wire rope plant, UASL set up
a Wire Rod Rolling Mill at Jamshedpur.

47. 1980- It promoted Usha Siam Steel Industries Ltd, Thailand to produce wire, wire ropes
& auto control cables. It set special products division to produce Hi-Tech Wire Cables.
1987- UMIL, along with Bihar State Electronics Development Corporation, promoted
Usha Beltron Ltd. (UBL) in collaboration with AEG KABEL of Germany for the
manufacture of Jelly Filled Telephone Cables.
1994- It set up Software Division to provide IT Solution for communication application
and Usha Martin Ltd, a distribution center at Glasgow, UK.
1997 - UMIL merged with UBL w.e.f 1st October 1997.
1999- Usha Martin Ltd. Merged with Usha Beltron Group and was renamed as Wire and
Wire Rope Division within which following six companies are included: JFTC-Ranchi,
Wire And Wire Rope Division - Ranchi, Usha Ismal Division – Ranchi, Usha Alloys &
Steel –Jamshedpur, Usha Machinery Division – Bangalore and Rod-Mill Division – Agra
2000 - Acquisition of specialty wire rope manufacturing plant in UK “BruntonShaw”.
2000 - Commissioning of 25 MW thermal power plants for captive consumption.
2001 – Commissioning of 2nd SMS to enhance capacity and produce quality specialty
steel.
2003 - Usha Beltron Ltd Changed its name to “Usha Martin Limited (UML). UML created
Fine Cord Plasticized coated Fine wires, household wire, Polymer coated wire, Fine
Ropes & Bright Bars manufacturing facilities in Tatisilwai- Ranchi

48. 3.3. Achievements
• UML is the 2nd largest wire and rope manufacturer in the world and has the
largest variety in South East Asia.
• It is multi product, diversified engineering conglomerate with 10 production
units in India,1 in Thailand,1 in UK and 1 in Dubai.
• It is saving valuable foreign exchange by exporting by exporting its
products to 42 countries like USA, Africa and Middle East, conforming to
the strictest product quality standards.
• It got the ISO 9000 Certification by BVQI in 1994.

49. • ICICI (BCB) did the business process re-engineering in 1996 and line
system was set up to enhance performance.
• With the modern concepts like TPM, value engineering, QC, suggestions
scheme, customer satisfaction and human resource development, UML is
trying to reach unparalleled heights.
• UML is serving through a leading daily “Prabhat Khabar”, Krishi Gram
Vikas Kendra, Usha Martin Technical Institute.
HEAD OFFICE:
Usha Martin Limited
Mangal Kalash, 3rd floor
2-A Shakespeare Sarani
KOLKATA-71
PLANT LOCATION:
Usha Martin Limited
Wire Ropes & Specialty Products Division
Tatisilwai, Ranchi,

50. Jharkhand- 835103
3.4. VISION:
• In our chosen business, we shall retain market leadership in India and shall be
globally competitive through customer orientation and excellence in quality,
innovation and technology.
MISSION
• Enriching lives
We will do our best to provide quality product and services, which will improve the
lifestyle of our users.
• Quality is our first priority
We aim to achieve customer satisfaction by providing quality products. No sale is good
sale unless it fulfills our customer expectations.
• Our word is our bound

51. Our dealers are our partners. We endeavor to practice this golden rule in all our
relations with others.
• Integrity is our commitment
The conduct of our company’s affairs must be pursued in a manner that command
respect for honesty and integrity.
TPM POLICY:
• It is our policy to induce change in all employees by delegation, empowerment
and motivation to achieve total participation towards zero accident, zero defects
and zero failure.
3.5. TRADE PROFILE
Business Excellence
UML is the 2nd largest wire and rope manufacturer in the world and has the largest
variety in South East Asia. It is multi product, diversified engineering conglomerate with

52. 10 production units in India, 1 in Thailand, 1 in UK and 1 in Dubai. It is saving valuable
foreign exchange by exporting its products to 42 countries like USA, Africa and Middle
East, conforming to the strictest product quality standards. It got the ISO 9000
Certification by BVQI in 1994.ICICI (BCB) did the business process re-engineering in
1996 and line system was set up to enhance performance. With the modern concepts
like TPM, value engineering, QC, suggestions scheme, customer satisfaction and
human resource development, UML is trying to reach unparalleled heights. UML is
serving through a leading daily “Prabhat Khabar”, Krishi Gram Vikas Kendra, Usha
Martin Technical Institute.
Areas of business
Group companies:
• Usha Siam Steel Industries Public Company Ltd., Thailand (USSIL)
• European Management & Marine Corporation Ltd., Aberdeen, UK (EMM)
• Brunton Shaw Ltd., Nottinghamshire, UK (BSRL)
• Usha Martin Cables Ltd., Silvasa, Bangalore, India (UCL)
Distribution centers:
UM International Ltd. at Glasgow, Houston, Johannesburg, Copenhagen and Dubai UM
Singapore Ltd.
Services:

53. • Usha Breco Ltd. (Usha Martin Industries & British Ropeway Engineering Ltd.)
• Usha Martin Ventures Ltd.
Steel division
A backward integration initiative, the Usha Alloys & Steels Division (UASD) at
Jamshedpur is one of the largest amongst secondary steel manufacturers of specialty
steel long products in India. With ISO 9002 certified facilities, UASD has pioneered the
unique process of steel making through mini blast furnace-arc furnace route, which
ensures superior quality of steel at a lower cost. UASD serves a range of industries like
automobile, general engineering, fasteners, railways, defense and power.
Machinery division
This ISO 9001 unit was set up in 1974 at Bangalore to manufacture Wire Drawing and
allied machines. Over the years, the division has added a wide range of Wire, Wire
Rope and Cable machinery to its product range and is now the leader in this field in
India. The division started with technical collaboration with M/s Marshall Richards
Barcro of UK and subsequently has collaborated with internationally reputed firms like
De-Angeli Industries SPA, Italy, Stolberger Maschinenfabrik, Germany, Hi-Draw
Machinery Ltd, UK and Redaelli Techna Meccanica, Italy. A facility in Ranchi has also
been created for manufacturing machines required for Wire Drawing and Stranding
Applications.
Usha Ismal Division

54. This unit, having manufacturing unit in Ranchi (Eastern India), is the leader in the field
of pre-stressing equipment & accessories and also executes pre-stressing job on
turnkey basis. Besides, it provides services for jointing of reinforcement bars by
mechanical splicing. All major civil contractors of National Highway Authority of India,
Indian Railways and PWD are regular users of these products and services. It also
offers hydraulic presses & accessories for manufacturing mechanically spliced wire rope
slings, machines for proof load testing of wire rope slings, and die-less hand operated
hydraulic crimping tools. These products find wide application with Steel Plants, Port
Trusts, Oil Sector, Heavy Engineering Industry, Electricity Boards, Electrical Contractors
and Factories etc.
Cables Division under UM Cables
The Cable Division of Usha Martin Limited has emerged as a leading manufacturer of
jelly-filled underground & fiber optic telecommunication cables in India. The
sophisticated manufacturing facilities are located in Silbasa. The company integrates
technology from KABEL RHEYDT (formerly AEG KABLE), GERMANY, a member of
Alcatel Group - is rated as one of the most efficient plants in the country and a
benchmark in the industry. The Plant includes computer - controlled critical equipments,
imported from International Leaders in cable technology.
Wire and Wire Ropes Division

55. The ISO 9001-certified 100,000 MT / annum-manufacturing facilities at Ranchi (Eastern
India) is 2nd largest producer of ropes in the world. Since its inception, the division has
continuously developed and expanded its range of product offerings and is considered a
pioneer in certain classes of products in India. Steel wire ropes manufactured by the
division find wide applications in oil exploration, mining, elevators, Crane, fishing,
construction, load transportation and general engineering sectors. It find varied use in
different parts of the world known for their excellent quality, long life and low
maintenance, and are the preferred choice of customers across nations. Ropes, ranging
from 2 mm to 100 mm diameter find varied applications. The wide ranges of products
are used in underground mining, surface mining, mooring, onshore and offshore drilling,
fishing, elevators, cranes, aerial haulage and track installations besides various general
engineering applications. Pre-stretched ropes, locked coil wire ropes and spiral strands
made in Usha Martin are used in suspension bridges, antenna masts etc.
Backed by a strong international distribution network our ropes have found a place in
different corners of the world.
Sources of Raw Materials
Raw materials sources
Steel Wire Rod (90% - 96%) UMIL, Jamshedpur
Steel Wire Rod (4% - 10%) Imported from Germany, Japan, etc.
Fibre Core M/s. Chotanagpur Wire Rope
Other Raw material (Zinc) M/s. Hindustan Zinc & Other

56. Supplies 25% & balance is Reported
Finished Products
Rope- General engineering rope, Flattened strand, Elevator rope, Non- rotating rope,
finished rope, Mining rope, Hyplex rope, Locked coil winding, Track rope.
Wire- Auto spoke, Cycle spoke, PC Strand, Rolling shutter, ACSR, PC wire Indexed &
plain.
Fine Cord
Usha Martin, extended vast experience in rope making technology towards
manufacturing of Fine Cords. Usha Martin Fine Cords find application as the inner
element for the Automotive Control Cables and also in boring applications and as Pull
Cord cables for laying of Television cables.
Size range
The size range for overall diameter of finished cords is 1.20mm to 6.00mm.
Low relaxation prestressed concrete (LRPC) Strands
In keeping with the demands of the international market, we have introduced Low
Relaxation Prestressed Concrete (LRPC) Strands for the construction industry in 2001.
A steel member that is prestressed and embedded in concrete loses the initially applied
stress exponentially with the passage of time. The single most important factor
attributing to this loss in stress relaxation property of the steel itself. By treating the steel
through a thermo mechanical process known as stabilizing, the propensity of the steel to

57. "relax” under a stressed condition is controlled to a great extent. Some of the main
advantages that our customers derive by using low relaxation strands are listed below
* Up to 10% reduction in steel requirement possible
* Reduction in concrete requirement due to reduced size of structural members
* Hot stretch process used during the manufacture of LRPC strands produces a nearly
straight strand, thereby eliminating necessity for extra post straightening treatment.
* Saving in number of anchorages, ducts, sheathings, wedges and labour resulting in
overall reduction of project cost
Applications
Pre-stressed concrete girders for road, river & railway bridges and flyovers, pre-
stressed concrete domes, slabs, silos, hangars, aqua ducts, viaducts & railway
sleepers.
Patenting & Galvanizing facility
* 50ft electrically fired furnace with inline cleaning, coating, galvanizing
facilities.
* 30ft propane fired LeFour furnace with inline cleaning, coating, and
galvanizing facilities.
* 30ft propane fired rod DSW patenting furnace
* Galvanizing plants of different capacities
* Stress relieving facilities for wires and strands
* Annealing furnaces (bell type)

58. * Vacuuann ealing furnace
* PLC driven automatic pickling plant
* manually operated pickling plant
Quality & Testing
Wires and Strands hold a premier position in the domestic market and are also exported
to different part of the world. Used for different purposes across a gamut of industries,
our wires and strands are continuously put through rigorous and demanding conditions.
To ensure that our offerings match the international standards, we have set high internal
quality standards. Plant located at Ranchi has been awarded ISO 9001 due to our
emphasis on maintaining global quality standards.
Wires confirm to various specifications such as
* IS Specifications
* JIS Specifications
* British Specifications
* ASTM Specifications
* DIN Specifications
Aerial Ropes
UML is the undisputed leaders in the domestic Aerial Rope sector. Their product
offerings include Aerial haulage ropes, material handling ropes, rope for passenger
ropeways and other track ropes. Ropes are renowned for their low maintenance, long
life, excellent quality and strength.

59. Size range
The size range generally preferred for such ropes is
* 19mm to 38mm5
Steel cord for conveyor belts
Conveyor belts - one of the most popular means for bulk material handling - finds
widespread application in mines, cement and coal industries, ports & terminals, power
stations etc. When reinforced with steel cord these belts last longer, allow higher
operating speeds and offer better shock and rupture resistance than conventional fiber
reinforced belts. In addition, very low elongation and absence of creep, makes steel
cord the ideal reinforcement for long haul, high strength belts (from 500 to 2000 N per
mm of belt width).
In March 2003, the US $ 300 million Usha Martin Group, entered into a Joint Venture
with Gustav Wolf, Germany for production of Steel Cords for Conveyor Belts at a
special facility set-up adjacent to the main Wire & Wire Rope plant at Ranchi and known
as Gustav Wolf Specialty Cords Limited. Gustav Wolf, Germany is one of the global
pioneers in producing Steel Cord for Conveyor belts with decades of experience behind
them and with all major Conveyor Belt manufacturers on their customer list.
Through effective synergy of years of conveyor belt experience of Gustav Wolf with
rope making expertise of Usha Martin, we have become the pioneer and the only
producer of Steel Cords for Conveyor Belts in this country. With state-of-art machinery
and latest technology from Gustav Wolf, our cords provide an optimized high tensile yet
flexible reinforcement to the Conveyor Belts and enables reliable and high capacity
Conveyor Systems to be used. Our flexibility to supply in ready-to-fit spools as well as in

60. giant master spools, gives our customers the option to procure in exact lengths, thus
reducing operational cost and downtime.
Major customers of Usha Martin
Eastern Region—
a. Indian Ropeway & Corporation Ltd.
b. OTIS India Ltd.
c. Philips India Ltd.
d. SAIL
e. HEC, Ranchi
f. TISCO, Jamshedpur
g. MCL, Talchar
i. CCL, Ranchi
Western Region-
• ONGC
• Jindal Strips Ltd.
• Essar Steels, Surat
• Reliance Infrastructure.
• Nuclear Power Corporation of India, Tarapur
• Western Coal Fields

61. Northern Region—
• BHEL Panipat
• Hindustan Copper Ltd.
• Maruti Udyog Ltd.
• Hindustan Electronics Ltd.
Southern Region—
• L&T Ltd.
• KONE Elevator, Chennai
• Johnson Lifts Pvt. Ltd., Chennai
• KEC International Ltd., Amateur
• United Marine Traders.
3.6. COMPETITORS
DOMESTIC –
Fort Williams, Kolkata
TATA SSL, Mumbai

62. Bharat Wire Ropes, Maharashtra
South Indian Wire Ropes, Maharashtra
JCT Ltd., Punjab
Naveen Wire Ropes, Pathankot
Orient Wire Ropes, Indore
Asian Wire Ropes, A.P.
GLOBAL—
KISSWIRE, Korea
Austria draught, Austria
Caser, Germany
John Shaw, England
Redaelli, Ital
Bridan, Ger
3.7. BOARD OF DIRECTORS
Mr. B.K Jhawar – Chairman
Mr. Prashant Jhawar – Vice Chairman
Mr. Brij Kr. Jhawar – Director
Mr. U.V. Rao – Director
Mr. N.J. Jhaveri -- Director
Mr. A.K. Chaudhuri – Director
Mr. Suresh Neotia – Director
Mr. Ashok Basu – Director
Mr. Sudhir Dole – ICICI nominee director

63. Mr. Rajeev Jhawar – Managing Director
Dr. P. Bhattacharya – Jt. Managing Director
3.8. GOVERNMENT POLICIES
RELATED ACTS:
Factories Act (1948)
Objectives:
The Factories Act provides for the health, safety, welfare, service conditions and other
aspects of workers in factories. The Act is enforced by the State Government who frame
rules that ensure that local conditions are reflected in enforcement.
The Act as amended in 1987 also regulates the safeguards to be adopted for the use
and handling of hazardous substances.
Applicability:
The Factories Act extends to whole of India and is applicable to all 'factories'
including government factories.

64. It applies to all factories employing more than 10 people and working with the aid of
power or employing 20 people and working without the aid of power. Factory however
does not include a mine
Covered under the mines Act, 1952, a mobile unit of the armed forces, a railway shed or
a hotel, restaurant or eating place. The act covers all workers employed in the factory
premises or precincts directly or through an agency including a contractor, involved in
any manufacture
Minimum Wages Act (1948)
Object of the Act- to Provide for fixing minimum rates of wages in certain Employment.
The object of the Act is to ensure the welfare of the workers in a competitive market by
fixing the minimum rates of wages in certain employments.
Article 39 states that the State shall, in particular, direct its policy towards securing (a)
that the citizen, men and women equally shall have the right to an adequate livelihood
and (b) that there is equal pay for equal work for both men and women.
Article 43 states that the State shall endeavour, by suitable legislation or economic
organisation or in any other way, to give all workers, agricultural, industrial or otherwise,
work, a living wage, conditions of work ensuring a decent standard of life and full
enjoyment of leisure, and social and cultural opportunities.
Employees’ Provident Fund Act (1952)

65. The Employees’ Provident Fund and Provision Fund and Miscellaneous Provision Act,
1952 provides for institution of compulsory provident funds for employees in Factories
and other establishment. The purpose is to make some provisions for the future of the
industrial worker after he retires or for his dependents in case of his early death. It
applies to all factories and other establishment of any notified industry if the number of
employees is 20 or more than 20.
Under this scheme, a stipulated amount {12%(current)} is deducted from the
employees’ salary & contributed towards the fund. This amount is decided by the
government. The employer also contributes an equal amount to the fund.
Employees’ State Insurance Act (1948)
The Government of India passed ‘Employees’ State Insurance Act, at April 1948. It was
designed to provide cash benefits in the case of Sickness, Maternity and Employment
Injury, payment in the form of pension of dependents of workers who dies, the family
gets employment injury and medical benefits.
Contribution periods and benefit period:
Workers, covered under the ESI Act, are required to pay contribution towards the
scheme on a monthly basis contribution period means a six-month time span from 1
April to 30 October and 1 November to 31 March. Thus, in a financial year there are two
contribution periods of six months duration. Cash benefits under the scheme are

66. generally linked with contribution paid. The benefit period starts their months after the
closure of a contribution period.
Contribution period corresponding benefit period:
1 April to 30 September 1 January to 30 June of the following year
1 October to 31 march 18 July to 31 December
Registration:
Simultaneously with his or her entry into employment in a covered factory or
establishment, an employee is required to fill in a declaration form. The employee is
then allotted a registration number, which distinguishes and identifies the person for the
purposes of the scheme. A person is registered once and only upon his entry in
insurable employment. But recent SC’s judgment in Balakrishna v ESIC has held that a
worker covered under the act would be entitled to benefit from the date of his
employment and not from the date of registration after contribution by the employer.
Bonus Act (1975)
It is a part of profit linked with productivity given annually to the employees. Every
employee receiving wages up to Rs.3500/month
is entitled to bonus every accounting year. Every factory wherein 10 or more persons
are employed with the aid of power or an establishment in which 20 or more persons
are employed without the aid of power on any day during an accounting year.
Minimum Bonus -- 8.33% of wage.
Maximum Bonus -- 20% of wage / Rs.7200

67. 3.9. Social Commitment through Krishi Gram Vikas Kendra
Management commitment and support since 1977
"in every village where hunger persists, human being must be empowered to discover.
Their own vision expresses their own leadership, create their own solutions and work
together to achieve their own success"
KGVK Activities
• augmenting water resources through watershed management
• sustainable income generation through cottage industries & live stock management
• capacity building through "agivika research & training center"
• health & family welfare programmes
• women empowerment thru "swashakti" programme
KGVK projects
In partnership with grass root civic society, corporate and government
• India canada environment facility (icef) project - for water resources conservation
& conjunctive utilization for environmental restoration (project cost rs 10.0 cr)
• ICICI - cini project - for primary health services at the grass root level project cost rs.
2.0 cr)

68. • project with us aid along with cepda - for training barefoot workers in villages for
making them 1st point of contact in village health services
• Projects with govt of India for water shed, women empowerment, education etc.
• Total projects worth Rs.18 cr in hand

69. Chapter 4:
Data analysis
And
Interpretation
4.1GENERAL INDICATORS
COMPONENTS OF CURRENT ASSETS
Current assets means assets that will either be used up or converted into cash within a
year's time or normal operating cycle of the business whichever is longer. They include
cash and bank balances, marketable securities, inventory of raw materials, semi-
finished and finished goods, debtors, bills receivables and pre-paid expenses.
TABLE 4.1.1: COMPONENTS OF CURRENT ASSETS

70. current assets 2004-05 2005-06 2006-07 2007-08
Inventories 2840534 2621667 3390551 5324181
Sundry debtors 2513970 1982492 2269104 2563505
cash and bank balance 389655 517489 370805 463607
other current assets 195738 225640 260942 340486
Loans and advance 2108995 1648665 2119931 4024216
Total current assets 8048892 6995953 8411333 12715995
increase/decrease in CA -1052939 1415380 4304662
(%)increase/decrease in CA -13.08% 20.23% 51.17%

71. Source: www.econpapers.repec.org.com
COMPONENTS OF CURRENT LIABILITIES

72. Current liabilities are those liabilities or obligations, which are expected to mature in the
next twelve months. They include short-term loans and advances, accounts payable /
sundry creditors, provision for taxation, outstanding expenses and dividend payable.
TABLE4.1.2: CURRENT LIABILITIES
Particulars Amount in (Rs)
2004-05 2005-06 2006-07 2007-08
Sundry creditors 1431326 1701248 1940128 5175146
Advances from customers 74406 70772 95418 106193
Unclaimed dividends 2982 2797 2983 3152
Others Liabilities 2894347 1994670 2574014 3325085
Provisions 176380 210109 262565 381723
Total Current Liabilities 4579441 3979596 4875108 8991299
Increase/Decrease in CL - (599845) 895512 4116191
(%)Increase/Decrease in CL _ 22.50% 84%

73. Source:www.econpapers.repec.org.com
NET WORKING CAPITAL
Net working capital (NWC) represents the excess of current assets over current
liabilities. The greater the amount of net working capital, the greater the liquidity of the
firm. However, the problem of net working capital as the measure of liquidity is that the

74. change in net working capital does not necessarily reflect the change in liquidity of the
firm
TABLE 4.1.3: NET OPERATING CYCLE
NET WORKING CAPITAL
Particulars Amount (Rs)
2004-05 2005-06 2006-07 2007-08
Total CA 8048892 6995953 8411333 12715995
Total CL 4598033 3979596 4875108 8991299
Net Working Capital(NWC) 3450859 3016357 3536225 3724696
Increase/Decrease in NWC - (434502) 519868 188471
(%)increase/decrease in NWC - (12.59)% 17.20% 5.32%
Significance:
Working capital during 2006 was negative but as on 2007 it has increased upto 17.20%
but again there was drastically fall during 2008 i.e.5.32% the reason of this fall was
increase in current liability was twice of increase in current assets.

75. OPERATING CYCLE
The operating cycle represents the time taken for cash spent on raw materials to come
back to the business in the form of cash from collection of sale proceeds.
In case of a manufacturing firm, the following are the sequence of events, which is
termed as operating cycle of the manufacturing firm.
.Conversion of cash into raw materials
Conversion of raw materials in WIP
Conversion of WIP into finished goods
Conversion of finished goods into Accounts receivables
Conversion of accounts receivables into cash
.The term cash or operating cycle contains the length of time necessary to complete the
following cycle events:
Conversion of cash into inventory
Conversion of inventory into receivable
Conversion of receivable into cash
TABLE 4.1.4: NET OPERATING CYCLE
PARTCULARS 2005-06 2006-07 2007-08

76. Raw material conversion period 46 52 107
Work in progress conversion period 18 24 24
Finished goods conversion period 84 112 123
Debtors conversion period 52 52 50
Operating Cycle 200 240 304
Payable deferral period / Credit Period* 119 113 207
Net Operating Cycle (in days) 81 127 97
.Credit Period: This includes advances from customers. The company as a conscious
decision on policy solicits for advances for all the special orders to take care of the cost
of the materials to be procured.

77. Source: www.themanagementor.com
4.2.LIQUIDITY ANALYSIS
CURRENT RATIO:

78. The current ratio is an indicator of the firm's commitment to meet its short-term
liabilities. The current ratio is an index of the concern's financial stability since it shows
the extent of working capital, which is the amount by which the current assets exceed
the current liabilities. A very high current ratio would indicate inadequate employment
of funds while a poor current ratio is a danger signal to the management. It shows that
business is trading beyond its resources.
CURRENT RATIO -This ratio tells about the relationship between current assets and
current liabilities of a business .The formula for calculating the ratio is:
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITIES
Current assets include those assets which can be converted into cash within a year’s
time and current liabilities include those liabilities which are repayable in a year’s time.
Current Asset
Item having a life of one year or less, or the normal Operating Cycle of the business,
whichever is greater. For example, if a construction company's operating cycle is three
years because it is engaged in long-term construction activities, it would show as
current assets items having up to a three-year life. However, in almost all cases, the
one-year cutoff is used. Examples of current assets are cash, marketable securities,
inventory, and prepaid expenses.
Current Assets = Cash in hand + cash at bank + B/R + short term
investments(marketable securities) + debtors + (debtors-provision) + stock (stock of
finished goods + stocks of raw material + work in progress) + prepaid expenses.

79. Current Liabilities = Bank overdraft + B/P + creditors + provision for taxation +
proposed dividends + unclaimed dividends + outstanding expenses + loans payable
within a year.
TABLE4.2.1: CURRENT RATIO

80. Particulars YEAR
2004-05 2005-06 2006-07 2007-08
Current Assets
Inventories 2840534 2621667 3390551 5324181
Sundry Debtors 2513970 1982492 2269104 2563505
Cash &Bank
389655 517489 370805 463607
Balance
Other Current
195738 225640 260942 340486
Assets
Loans& Advances 2108995 1648665 2119931 4024216
Total (a) 8048892 6995953 8411333 12715995
Current
Liabilities
Liabilities 4421653 3769487 4612543 8609576
Provisions 176380 210109 262565 381723
Total (b) 4598033 3979596 4875108 8991299

81. Current Ratio (a/b) 1.75 1.76 1.73 1.41
Significance:
This ratio is used to assess the firm’s ability to meet its short term liabilities on time.
According to accounting principle, a current ratio of 2:1 is supposed to be an ideal ratio.
It means that current assets of a business should, at least, be twice of its current
liabilities. The higher the ratio, the better it is, because the firm will be able to pay its
current liabilities more easily. The reason of assuming 2:1 as the ideal ratio is that the
current assets include such assets as stock, debtors etc., from which full amount cannot
be realized in case of need. Hence, even if half the amount is realized from the current
assets on time, the firm can still meet its current liabilities in full.
Status of Current ratio of UML - With the help of graph and the available data of
Usha Martin Ltd we can see that the ratio of 1.75:1 was stagnant for two consecutive
financial year and during 4th financial year i.e. during 2007-08 the current ratio fall to

82. 1.41:1 .The reason of fall in current ratio is because of increase in current liabilities
during this financial period we can see that the current assets has also increase but the
increase in creditors as well as other liability the current ratio decrease .Thus during
slow down of market also the company’s current ratio was positive .During 2008 the
debtors, loans and advances increases but the increase in current liabilities was approx.
double of 2007.
QUICK RATIO
Quick ratio is a refinement over current ratio as it shows the instant ability to meet the
current liabilities. Liquid assets means all the current assets less inventories, sticky
debts, etc., i.e. such assets as can be ‘quickly’ converted into cash. The general norm
for a healthy quick ratio is 1:1. This ratio is also known as acid-test ratio.
Quick ratio indicates whether the firm is in position to pay its current liabilities within a
month or immediately. As such, the quick ratio is calculated by dividing liquid assets
(quick current ratio) by current liabilities:-
Quick Ratio or Acid Test Ratio = liquid assets
Current liabilities
‘Liquid assets’ means those which will yield cash very shortly. All current assets except
stock and prepaid expenses are include in liquid assets. Stock is excluded from liquid
assets because it has to be sold before it can be converted into cash. Prepaid expenses

83. too are excluded from the list of liquid assets because they are not expected to be
converted into cash. Liquid assets thus include cash, debtors, bills receivable and short
term securities.
TABLE 4.2.2: QUICK RATIO

84. Particulars Year
2004-05 2005-06 2006-07 2007-08
Liquid assets
Sundry Debtors 2513970 1982492 2269104 2563505
Cash &Bank Balance 389655 517489 370805 463607
Other Current Assets 195738 225640 260942 340486
Loans& Advances 2108995 1648665 2119931 4024216
Total (a) 5208358 4374286 5020782 7391814
Current Liabilities
Liabilities 4421653 3769487 4612543 8609576
Provisions 176380 210109 262565 381723
Total (b) 4598033 3979596 4875108 8991299
quick ratio (a/b) 1.13 1.10 1.03 0.82

85. Significance:
An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better. The idea
is that for every rupee of current liabilities, there should at least be one rupee of liquid
assets. This ratio is a better test of short term financial position of the company than the
current ratio, as it considers only those assets which can be easily and readily
converted into cash. Stock is not included in liquid assets as it may take a lot of time
before it is converted into cash.
The liquidity of Usha Martin
The liquidity of Usha Martin is favorable but during 2007-08 the ratio is in a dangerous
situation as we can see that the quick ratio is0.82:1 that means the company is unable
to meet its liability at a very short period and the reason is that during this financial year
the demand of the product decreased and therefore the amount of inventorywas quiet
high and so the company was unable to meet its short term liability at a very short
period.
4.3. ACTIVIT RATIOS

86. WORKING CAPITAL TURN OVER RATIO:
This ratio indicates whether or not working capital has been effectively utilized in making
sales. If a firm makes higher volume of sales with relatively small amount of working
capital, it is an indicator of the operating efficiency of the company.
WORKING CAPITAL TURNOVER RATIO-This ratio shows therelationship between
sales and working capital. This ratio shows the number of times the working capital
results in sales.
Working capital turnover ratio= Net Sales
Net Working Capital
TABLE 4.3.1: WORKING CAPITAL TURNOVER
RATIO
PARTICULARS YEAR
2004-05 2005-06 2006-07 2007-08
NET SALES (A) 11898717 12352083 14086047 16558987
CURRENT ASSETS (a) 8048892 6995953 8411333 12715995
CURRENT LIABILITIES (b) 4598033 3979596 4875108 8991299
NET WORKING CAPITAL (a- 3450859 3016357 3536225 3724696

87. b) (B)
W.CTURNOVER RATIO (A/B) 3.44:1 4.09:1 3.98:1 4.44:1
Significance:
This ratio is of particular importance in non-manufacturing concerns where current
assets play a major role in generating sales. In other words it shows the number of
times working capital has been rotated in producing sales. A high working capital
turnover ratio shows efficient use of working capital and quick turnover of current assets
like stocks and debtors. A low turnover indicates under utilization of working capital.
However, a very high turnover ratio of working capital is also dangerous, as it sign of
over- trading, i.e., doing business with too little working capital.
Status of working capital turnover ratio of UML- during 2004-05 the turnover was
3.44:1 but in 2005-06 it increases upto 4.09:1 which was the good significance and