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WORKING CAPITAL MANAGEMENT

ATDABUR INDIA LIMITED SAHIBABAD

A Summer Training Project Report

Submitted to the Mahamaya Technical University, Noida in partial fulfillment of

The requirements for the award of the degree

Of

Master of Business Administration

In

(Finance)

Gopal verma

1222570018

MBA Batch (2012-14)

Accurate Institute of Management & Technology, Gr. Noida

22 / Oct/ 2013

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SUPERVISORS CERTIFICATE

This is to certify that the Summer Training Project Report titled WOEKING CAPITAL

MANAGEMENT is an original work carried out by GOPAL VERMAunder my supervision, in the partial fulfillment of the requirement for the award of MBA

degree by the Mahamaya Technical University, Noida.

This is to further certify, to the best of my knowledge, that this work was neither

published nor submitted to any other institution for award of any other degree or diploma.

Signature

Date:

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DIRECTORS CERTIFICATE

This is to certify that the Summer Training project titled . is carried out by...(Name of the student), a student of MBA II year at Accurate Institute of Management& Technology, Gr. Noida, under the supervision of .. (Name &designation of company supervisor).

This is an original work carried out by the said student to the best of my knowledge and Irecommend for the submission of this Summer Training Project report to Mahamaya

Technical University, Noida in the partial fulfillment of the requirement for the award ofMBA degree.

Prof (Dr) ( DIRECTOR)(HOD-MBA Deptt.) AIMT, Gr NoidaAIMT,Gr. Noida

Date:

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STUDENTS DECLARATION

I hereby declare that the survey, data collection and analysis work related to Summer

Training Project report titled WORKING CAPITAL MANAGMENT has been carried

out exclusively on my efforts under the guidance of Mr. R.S DANI ADDITIONAL

GENRAL MANAGER FINANCE.

I, further declare that this work was neither published nor submitted to any other

institution for award of any other degree or diploma.

GOPAL VERMA

1222570018

Accurate Institute of Management & Technology, Gr. Noida

Day/month/year

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PREFACE

As a part the academic curriculum, all the students have to undertake a project based on

their in the end of second semester of this program in any industry to get first handexperience on what they have studied throughout the course.

I got an opportunity to do a project on WORKING CAPITAL MANAGEMENT at

DABUR INDIA Ltd., Kaushambi Sahibabad.

Working capital constitutes part of the Crown's investment in a department. Associated

with this is an opportunity cost to the Crown. (Money invested in one area may "cost"

opportunities for investment in other areas.) If a department is operating with more

working capital than is necessary, this over-investment represents an unnecessary cost to

the Crown.

Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to

identify areas requiring closer management

The individual components of working capital can be effectively managed by

using various techniques and strategic

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ACKNOWLEDGEMENT

Gratitude is a hearts memory and putting the feelings of heart into words, is an art.Those who excel in this art are ultimately successful.

Determination, hard work, and patience are the key to success.

Completing a project of this magnitude would not have been possible without the

encouragement & support of many people. At this point of time I would like to

acknowledge all those who have made a major contribution in its development.

I feel great pleasure in expressing my gratitude to my company Guide Mr. R.S Dani

Additional General Manager Finance and Anil Mehrotra Senior Executive Excise

Department on whose guidance, comments and suggestions, I have relied. They

entertained all the queries amidst their hectic schedule.

I also express my sincere regards to all the executives & staff members of finance &

other departments of the company who immensely cooperated in completion of my

project report.

Lastly, I would like to thank the god almighty, my family members, my friends, my

faculty members and all those left unknowingly without whom the completion of this

project would not have been possible.

GOPAL VERMA

MBA-III Sem

TABLE OF CONTENT

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1. Introduction 10i. Brief history of the organization..............................................11

ii. Organizational structure...........................................................13

iii. Performance..............................................................................31

iv. Products....................................................................................38

2. Industry overview41

i. SWOT analysis.......................................................................42

3. Survey, analysis and interpretation.....................................................47

4 Findings49

5. Recommendations96

7. Bibliography.98

8. Annexure.100

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EXECUTIVE

SUMMARY

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EXECUTIVE SUMMURY

OF

DABUR INDIA LIMITED

The highlights of Dabur India Limiteds (DILs) stand - alone result for 2012 2013

are :

Revenue from operations increased by 8% from Rs. 1,269 crore in 2011 2012 to

Rs.1,370 crore in 2009 2010.

Operating profit [EBIDTA] increased by 29.5% from Rs. 188 crore in 2008

2009 to Rs.243 crore in 2009 2010.

Profit after Tax (PAT) increased by 27.7% from Rs. 148 crore in 2008 2009 to

Rs. 189 crore in 2009 2010.

Return on Capital Employed (ROCE) increased from 38.7 % in 2008 2009 to

43.1% in 2009 2010.

Return on Net worth (RONW) increased from 44.5 % in 2008 2009 to 45.5 % in

2009 2010.

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INTRODUCTION

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History

Dabur India Ltd. - Corporate Profile

Dabur India Ltd is one of Indias leading FMCG Companies with Revenues of about

US$750 Million (over Rs 3416 Crore) & Market Capitalisation of over US$3.5 Billion

(over Rs 16,000 Crore). Building on a legacy of quality and experience of over 125 years,

Dabur is today Indias most trusted name and the worlds largest Ayurvedic and

Natural Health Care Company.

Dabur India is also a world leader in Ayurveda with a portfolio of over 250

Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes five flagship

brands with distinct brand identities -- Dabur as the master brand for natural healthcare

products, Vatika for premium personal care, Hajmola for digestives, Ral for fruit juices

and beverages and Fem for fairness bleaches and skin care products.

Dabur today operates in key consumer products categories like Hair Care, Oral Care,

Health Care, Skin Care, Home Care and Foods. The company has a wide distribution

network, covering over2.8 million retail outlets with a high penetration in both urban

and rural markets.

Dabur's products also have a huge presence in the overseas markets and are today

available in over 60 countries across the globe. Its brands are highly popular in the

Middle East, SAARC countries, Africa, US, Europe and Russia. Dabur's overseas

revenues stands at over Rs 500 Crore in the 2008-09 fiscal, accounting for about

20% of the total turnover.

The 125-year-old company, promoted by the Burman family, had started operations in1884 as an Ayurvedic medicines company. From its humble beginnings in the bylanes of

Calcutta, Dabur India Ltd has come a long way today to become one of the biggest

Indian-owned consumer goods companies with the largest herbal and natural product

portfolio in the world. Overall, Dabur has successfully transformed itself from being a

family-run business to become a professionally managed enterprise . What sets Dabur

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apart from the crowd is its ability to change ahead of others and to always set new

standards in corporate governance & innovation.

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DABURMILESTONE

Dabur India Ltd. made its beginnings with a small pharmacy, but has continued to

learn and grow to a commanding status in the industry. The Company has come a long

way in popularising and making easily available a whole range of products based on the

traditional science of Ayurveda. And Dabur has set very high standards in

developing products and processes that meet stringent quality norms . As it grows

even further, Dabur will continue to mark up on major milestones along the way,

setting the road for others to follow...

Milestones To Success

1884 - Established by Dr. S K Burman at Kolkata1896 - First production unit established at Garhia

1919 - First R&D unit established

Early 1900s - Production of Ayurvedic medicines

Dabur identifies nature-based Ayurvedic medicines as its area of specialisation. It is

the first Company to provide health care through scientifically tested and

automated production of formulations based on our traditional science.

1930 - Automation and upgradation of Ayurvedic products manufacturing

initiated

1936 - Dabur (Dr. S K Burman) Pvt. Ltd. Incorporated

1940 - Personal care through Ayurveda

Dabur introduces Indian consumers to personal care through Ayurveda, with the

launch of Dabur Amla Hair Oil. So popular is the product that it becomes the largest

selling hair oil brand in India.

1949 - Launched Dabur Chyawanprash in tin pack

Widening the popularity and usage of traditional Ayurvedic products continues. Theancient restorative Chyawanprash is launched in packaged form, and becomes the

first branded Chyawanprash in India.

1957 - Computerisation of operations initiated

1970 - Entered Oral Care & Digestives segment

Addressing rural markets where homemade oral care is more popular than

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multinational brands, Dabur introduces Lal Dant Manjan. With this a conveniently

packaged herbal toothpowder is made available at affordable costs to the masses.

1972 - Shifts base to Delhi from Calcutta

1978 - Launches Hajmola tablet

Dabur continues to make innovative products based on traditional formulations that

can provide holistic care in our daily life. An Ayurvedic medicine used as a digestive

aid is branded and launched as the popularHajmola tablet.

1979 - Dabur Research Foundation set up

1979 - Commercial production starts at Sahibabad, the most modern herbal

medicines plant at that time

1984 - Dabur completes 100 years

1988 - Launches pharmaceutical medicines

1989 - Care with fun

The Ayurvedic digestive formulation is converted into a children's fun product with

the launch of Hajmola Candy. In an innovative move, a curative product is

converted to a confectionary item for wider usage.

1994 - Comes out with first public issue

1994 - Enters oncology segment

1994 - Leadership in health care

Dabur establishes its leadership in health care as one of only two companies

worldwide to launch the anti-cancer drug Intaxel (Paclitaxel). Dabur Research

Foundation develops an eco-friendly process to extract the drug from its plant source

1996 - Enters foods business with the launch of Real Fruit Juice

1996 - Real blitzkrieg

Dabur captures the imagination of young Indian consumers with the launch ofReal

Fruit Juices - a new concept in the Indian foods market. The first local brand of 100%

pure natural fruit juices made to international standards, Real becomes the fastest

growing and largest selling brand in the country.

1998 - Burman family hands over management of the company to professionals

2000 - The 1,000 crore mark

Dabur establishes its market leadership status by staging a turnover of Rs.1,000

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crores. Across a span of over a 100 years, Dabur has grown from a small beginning

based on traditional health care. To a commanding position amongst an august league

of large corporate businesses.

2001 - Super specialty drugs

With the setting up of Dabur Oncology's sterile cytotoxic facility, the Company gains

entry into the highly specialised area of cancer therapy. The state-of-the-art plant

and laboratory in the UK have approval from the MCA of UK. They follow FDA

guidelines for production of drugs specifically for European and American markets.

2002 - Dabur record sales of Rs 1163.19 crore on a net profit of Rs 64.4

crore

2003 - Dabur demerges Pharmaceuticals business

Dabur India approved the demerger of its pharmaceuticals business from the FMCG

business into a separate company as part of plans to provider greater focus to both the

businesses. With this, Dabur India now largely comprises of the FMCG business that

include personal care products, healthcare products and Ayurvedic Specialities, while

the Pharmaceuticals business would include Allopathic, Oncology formulations and

Bulk Drugs. Dabur Oncology Plc, a subsidiary of Dabur India, would also be part of

the Pharmaceutical business.

Maintaining global standards

As a reflection of its constant efforts at achieving superior quality standards, Dabur

became the first Ayurvedic products company to get ISO 9002 certification.

Science for nature

Reinforcing its commitment to nature and its conservation, Dabur Nepal, a subsidiary

of Dabur India, has set up fully automated greenhouses in Nepal. This scientific

landmark helps to produce saplings of rare medicinal plants that are under threat of

extinction due to ecological degradation.

2005 - Dabur aquires Balsara

As part of its inorganic growth strategy, Dabur India acquires Balsara's Hygiene and

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Home products businesses, a leading provider of Oral Care and Household Care

products in the Indian market, in a Rs 143-crore all-cash deal.

2005 - Dabur announces bonus after 12 years

Dabur India announced issue of 1:1 Bonus share to the shareholders of the company,

i.e. one share for every one share held. The Board also proposed an increase in the

authorized share capital of the company from existing Rs 50 crore to Rs 125 crore.

2006 - Dabur crosses $2 bln market cap, adopts US GAAP.

Dabur India crosses the $2-billion mark in market capitalisation. The company also

adopted US GAAP in line with its commitment to follow global best practices and

adopt highest standards of transparency and governance.2006 - Approves FCCB/GDR/ADR up to $200 million

Moving forward on the inorganic growth path, Dabur India decides to raise up to $200

million from the international market through Bonds, FCCBs, GDR, ADR, QIPs or

any other securities.The capital raised will be used to fund Dabur's aggressive growth

ambitions and acquisition plans in India and abroad.

2007 - Celebrating 10 years of Real

Dabur Foods unveiled the new packaging and design for Real at the completion of 10

years of the brand. The new refined modern look depicts the natural goodness of the

juice from freshly plucked fruits.

2007 - Foray into organised retail

Dabur India announced its foray into the organised retail business through a wholly-

owned subsidiary, H&B Stores Ltd. Dabur will invest Rs 140 crores by 2010 to

establish its presence in the retail market in India with a chain of stores on the Health

& Beauty format.

2007 - Dabur Foods merged with Dabur India

Dabur India decides to merge its wholly-owned subsidiary Dabur Foods Limited with

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itself to extract synergies and unlock operational efficiencies. The integration will also

help Dabur sharpen focus on the high growth business of foods and beverages, and

enter newer product categories in this space.

2008 - Acquires Fem Care Pharma

Dabur India acquires Fem Care Pharma, a leading player in the women's skin care

market. Besides an entry into the high-growth skin care market with an established

brand name FEM, this transaction also offers Dabur a strong platform to enter newer

product categories and markets.

2009 - Dabur Red Toothpaste joins 'Billion Rupee Brands' club

Dabur Red Toothpaste becomes the Dabur's ninth Billion Rupee brand. Dabur RedToothpaste crosses the billion rupee turnover mark within five years of its launch.

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"Dedicated to the health and well being of every household"

This is our company. We accept personal responsibility, and accountability to meet

business needs.

We all are leaders in our area of responsibility, with a deep commitment to deliver

results. We are determined to be the best at doing what matters most.

People are our most important asset. We add value through result driven training, and we

encourage & reward excellence.

We have superior understanding of consumer needs and develop products to fulfill them

better.

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We work together on the principle of mutual trust & transparency in a boundary-less

organisation. We are intellectually honest in advocating proposals, including recognizing

risks.

Continuous innovation in products & processes is the basis of our success.

We are committed to the achievement of business success with integrity. We are honest

with consumers, with business partners and with each other.

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Accolades 2012-13

Dabur stockranked

14th in Value 100

list, a ranking of

attractively-priced

stocks of firms with

'real' earnings

Dabur Amla Hair

Oil & Ral voted as

Most Loved FMCG

Brands with highest

top-of-the-mind

recall

Dabur Chairman

Dr Anand Burman

amongst India's

Most Powerful

CEOs, placed at No.

41 on the list

Dabur India Ltd

ranked as India'sMost Customer

Responsive

FMCG Company

Dabur Uveda

ranked amongst

most successful

brands launched in

2009 Brand Derby

2011-2012 2010-11 2009-10 2008-09

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ORGNIZATION

STURUCTURE

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Organization Structure

Dabur has an illustrious Board of Directors who are committed to take the company to

newer levels of corporate governance.

The Board comprises of:

Chairman

Vice-Chairman

Dr. Anand Burman Mr. Amit

Burman

Whole Time Directors

Mr. P.D. Narang Mr. Sunil Duggal Mr. Pradip Burman

Non Whole Time Promoters, Directors

Mr. Mohit Burman

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http://www.dabur.com/About%20Dabur-Dr.%20Anand%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20Amit%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20Amit%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20P.%20D.%20Naranghttp://www.dabur.com/About%20Dabur-Mr.%20Sunil%20Duggalhttp://www.dabur.com/About%20Dabur-Mr.%20Pradip%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20Mohit%20Burmanhttp://www.dabur.com/About%20Dabur-Dr.%20Anand%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20Amit%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20Amit%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20P.%20D.%20Naranghttp://www.dabur.com/About%20Dabur-Mr.%20Sunil%20Duggalhttp://www.dabur.com/About%20Dabur-Mr.%20Pradip%20Burmanhttp://www.dabur.com/About%20Dabur-Mr.%20Mohit%20Burman

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Independent Directors

Mr. Bert Paterson

Mr. P. N. Vijay Mr. R C Bhargava

Dr. S. Narayan

Mr. Analjit Singh

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OFFICES

Corporate Office Kaushambi, Ghaziabad

Registered Office Asaf Ali Road, New Delhi

Corporate Affairs Rouse Avenue, New Delhi

Zonal Headquarters

North Zone : New Delhi

South Zone : Hyderabad

East : CalcuttaWest : Mumbai

Branch Offices AHMEDABAD

Bangalore

Chandigarh

Chennai

Cuttack

Guwahati

Indore

Jaipur

Kanpur

Kochi

Patna

Kathmandu

Russia

United Kingdom

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COMPANY

PROFILE

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COMPANY PROFILE

OVER HUNDRED YEARS OF CARING

Dabur commenced operation in 1884 and is today a multi locational, multi product

enterprise. The company has major interest in health and beauty care.

Dabur is leader in Ayurveda - the traditional Indian health care system.

The company manufactures and markets a range of oncologicals. Dabur is one of the

companies in the world to product PACLITAXEL AN ANTI CANCER DRUG. The

company has developed its own Eco friendly process to manufacture this drug from raw

material stage.

The company has 12 manufacturing plants in India, Nepal and Egypt. Dabur products are

also manufactured in Dubai.Dabur has transactional network of 19 offices serving both rural and urban markets in

India.

The company has sales and marketing offices in Dubai and London. Dabur products are

available in over 50 countries.

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Founding Thoughts

"What is that life worth which cannot bring comfort to others"

The doorstep Daktar

The story of Dabur began with a small, but visionary endeavour

by Dr. S. K. Burman, a physician tucked away in Bengal. His mission was to provide

effective and affordable cure for ordinary people in far-flung villages. With missionary

zeal and fervour, Dr. Burman undertook the task of preparing natural cures for the killer

diseases of those days, like cholera, malaria and plague.

Soon the news of his medicines traveled, and he came to be known as the trusted 'Daktar'

or Doctor who came up with effective cures. And that is how his venture Dabur got its

name - derived from the Devanagri rendition of Daktar Burman. Dr. Burman set up

Dabur in 1884 to produce and dispense Ayurvedic medicines. Reaching out to a wide

mass of people who had no access to proper treatment. Dr. S. K. Burman's commitment

and ceaseless efforts resulted in the company growing from a fledgling medicine

manufacturer in a small Calcutta house, to a household name that at once evokes trust andreliability.

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PERFORMANCE INDICATORS

Good growth momentum was witnessed across categories and geographies with the

domestic FMCG business reporting strong volume-driven growth.

NET PROFIT763.4 CRORS

US$ 5billion crossed

MARKET CAPITALISATION

Up 18.3 robust profitable growth translated into superior shareholder returns with dabursmarket cap touching an all time high.

Total employee count6,154 employeeField resource

2 fold over increase

Sales up 16.3% project double retail footprint ` 6,146.4 crore 30,000 + villages 5.8million outlets India limited performance indicators robust profitable growth translatedinto superior shareholder returns with Daburs market cap touching an all time high. Up18.3% net profit field resources total employee count ` 763.4 crores market capitalisationus$ 5 billion crossed mark over 2-fold increase 6,154 employees

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PROFIT AFTER TAX (Rs. CRORE)

0

20

40

60

80

100

120

140

160

180

200

2008 2009 2010 2011 2012

Pharma

FMCG

FMCG+Pharma

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RETURN ON CAPITAL EMPLOYED (%)

0

10

20

30

40

50

2008 2009 2010 2011 2012

Pharma

FMCG

FMCG+Pharm

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NET WORKING CAPITAL (Rs.crore)

-100

0

100

200

300

2008 2009 2010 2011 2012

FMCG+Pharma FMCG Pharma

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PRODUCTS

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PRODUCTS

Dabur India Limited has marked its presence with some very significant achievements

and today commands a market leadership status. Our story of success is based on

dedication to nature, corporate and process hygiene, dynamic leadership and commitment

to our partners and stakeholders. The results of our policies and initiatives speak for

themselves.

Leading consumer goods company in India amongest turnover of Rs.1899.57

Crore (FY02)

2 major strategic business units (SBU) - Consumer Care Division (CCD) and

Consumer Health Division (CHD)

3 Subsidiary Group companies - Dabur Foods, Dabur Nepal and Dabur

International and 3 step down subsidiaries of Dabur International - Asian

Consumer Care in Bangladesh, African Consumer Care in Nigeria and Dabur

Egypt.

13 ultra-modern manufacturing units spread around the globe

Products marketed in over50 countries

Wide and deep market penetration with 47 C&F agents, more than 5000

distributors and over1.5 million retail outlets all over India

CCD, dealing with FMCG Products relating to Personal Care and Health Care

Leading brands -

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- Medicated Oils

Proprietary Ayurvedic medicines developed by Daburinclude:

-NatureCare

Isabgol

-Madhuvaani

- Trifgol

INDUSTRY

OVERVIEW

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SWOT Analysis of dabur India SWOT stands for Strengths, Weaknesses, Opportunitiesand Threats, and is an important tool often used to highlight where a business ororganisation is, and where it could be in the future. It looks at internal factors, the

strengths and weaknesses of a business, and external factors, the opportunities and threatsfacing the business. The process can give you on overview of where the business, and theenvironment it operates in, is strategically. This is an important, yet to simpletonunderstand, tool used by many students, businesses and organisations for analysis. Thefollowing SWOT analysis looks at dabur India which is operating in FMCG industry. Theanalysis shows dabur Indias Strengths, Weaknesses, Opportunities and Threats. TheSWOT analysis will give you a clear picture of the business environment dabur India isoperating in at the present time. Strengths: The strengths of a business or organisation arepositive elements, something they do well and are under their control. The strengths of acompany or group and value to it, and can be what gives it the edge in some areas over thecompetitors. The following section will outline main strengths of dabur India.

Having alliances with other strong and popular businesses is a major plus point fordabur India as it helps bring in new customers and make business more effective.Being a market leader, as dabur India is, is key to their success as it boostsreputation, profit and market share.Competitive pricing is a vital element of dabur Indias overall success, as this keeps themin line with their rivals, if not above them.Riding high in the niche market in FMCG industry has helped boost dabur India andraised reputation and turnover.Keeping costs lower than their competitors and keeping the cost advantages helpsdabur India pass on some of the benefits to consumers.The services/products offered by dabur India are original, meaning many people willreturn to dabur India to obtain them.Dabur Indias marketing strategy has proved to be effective, helping to raise profilesand profits and standing out as a major strength.Dabur Indias innovation keeps it a front-runner in FMCG as it is regularly turning outnew patents/proprietary technology.Experienced employees are key to the success of dabur India helping to drive themforward with expertise and knowledge.

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High quality machinery, staff, offices and equipment ensure the job is done to the utmoststandard, and is strength of dabur India.Dabur India has an extensive customer base, which is a major strength regarding salesand profit.Dabur Indias reputation is strong and popular, meaning people view it with

respect and believe in it.Being financially strong helps dabur India deal with any problems, ride any dip in profitsand out perform their rivals.A strong brand is an essential strength of dabur India as it is recognised and respected.Dabur India has a high percentage of the market share, meaning it is ahead of manycompetitors.Dabur Indias distribution chain can be listed as one of their strengths and links tosuccess.High quality products/services are a vital strength, helping to ensure customers return todabur India.Dabur Indias international operations mean a wider customer base, a stronger brand

and a bigger chunk of the global market.Development and innovation are high at dabur India with regard totheir products/services, which is a sure strength in its overall performance.Dabur Indias position in the market is high and strong a major strength in this industrythey are ahead of many rivals.Having little competition, being one of very few companies providing this service/productis a major factor in dabur Indias performance.The online presence of dabur India is strong, meaning it is ahead of many competitors.The lucrative location of dabur India adds to its strengths due to its accessibility (road,rail, air etc).Supplier relationships are strong at dabur India, which can only be seen as strength intheir overall performance.Weaknesses: Weaknesses of a company or organisationare things that need to be improved or perform better, which are under their control.Weaknesses are also things that place you behind competitors, or stop you being able tomeet objectives. This section will present main weaknesses of dabur India.Reputation is important, and a damaged one like dabur Indias is a major weakness asconsumers will not trust the firm enough to spend money with them.A serious weakness for dabur India is the fact their products/services are of low quality,meaning people will have better-quality substitutes.Not reducing costs in the same way as their competitors\' means dabur India is outlayingmore of their profits. Having higher costs than competitors is a major weakness.Dabur Indias R&D work is low and insignificant, which is a major weakness in FMCGasset is constantly creating new products.The lack of staff experience is a major downfall for dabber India as it could lead tomistakes or negligence.Old and outdated technologies hold dabur India back and limits success, as other firmsare making use of better and more reliable technologies. Not having an effective marketing strategy seriously hampers the success of dabur India. Over pricing, setting too high prices for dabur India products/services makes them

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uncompetitive, which is a major weakness. The lack of business alliances is a major weakness for dabur India, as they will struggleto get deals, favours and partnerships. Dabur India is in a poor financial position which makes it weaker than its competitors. Dabur Indias lack of innovation limits its success, as there is no forward thinking.

Good companies need loyal employees, but dabur India has a poor relationship withstaff which affects performance. Dabur India does not function internationally, which has an effect on success, as they donot reach consumers in overseas markets. Problems with stock are a weakness for dabur India as they need to keep up withdemand. Online presence is vital for success these days, and lack of one is a limitation fordabur India. Dabur India\'s underdeveloped distribution chain has a marked effect on performance asit affects the distribution of their products/services. The lack of original products/services is a major flaw in dabur Indias future success, as

it shows a blinkered outlook. Dabur India\'s location is weakness for the firm, as it means they miss out on manyopportunities. Dabur Indias lack of patents/proprietary technology puts it behind its rivals and isdeemed as one of their weaknesses.The weak brand name compromises success for dabur India as it does\'t inspire people tobuy their products/services. A limited customer base is a major weakness for dabur India as it means theyhave less people to sell or market to. The weak market position of dabur India is a limitation to their overall success, as theyare well behind their rivals.Dabur Indias limited product line is a major weakness. Dabur Indias weak supplier relationships also have an adverse effect on success, as itcuts ability to negotiate. Dabur India is behind its competitors with a low share of the market, which in turn leadsto lower turnover.

Opportunities: Opportunities are external changes, trends or needs that could enhance thebusiness or organisations strategic position, or which could be of a benefit to them. Thissection will outline opportunities that dabur India is currently facing. Dabur India could benefit from Governmental support, in the form of grants, allowances,training etc. Looking at export opportunities is a way for dabur India to raise profits. Changes in technology could give dabur India an opportunity to bolster future success. Dabur India could benefit from expanding their online presence and making more moneyfrom online shoppers/internet users. The changes in the way consumers spend and what they buy provides a big opportunityfor dabur India to explore. Dabur India is in good financial position, which is an opportunity for them to exploreinterims of investment in new projects.

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Decrease in taxation gives an opportunity for dabur India to reduce pricesor increase profits. The growth of the FMCG industry is an opportunity for dabur India to grasp. New market opportunities could be a way to push dabur India forward. As the economic climate improves, so do the opportunities for dabur India.

Dabur India has the opportunity to enter a niche market, gain leading position andtherefore boost financial performance. Reaching out into other markets is a possibility for dabur India, and a big opportunity. Grasping the opportunity to expand the customer base is something dabur India can aimfor, either geographically or through new products. Takeover and merger opportunities could be explored for dabur India and used to acquirenew customers, new resources and enter new markets. Expanding the product/service lines by dabur India could help them raise sales andincrease their product portfolio. Reduction in interest rates could benefit dabur India as business costs would come down. Expanding into other markets could be a possibility for dabur India.

Forming strategic alliances and joint ventures is an opportunity for dabur India tomaximise profit and gain new business. Dabur India has a number of highly skilled staff, which is an opportunity for them toexplore as expertise of their staff can help dabur India to bring the business forward. Structural changes in the industry open other doors and opportunities for daburindia.Threats: Threats are factors which may restrict damage or put areas of the businessor organisation at risk. They are factors which are outside of the company's control. Beingaware of the threats and being able to prepare for them makes this section valuable whenconsidering contingency plans and strategies. This section will outline main threats daburIndia is currently facing. Consumer lifestyle changes could lead to less of a demand for daburIndia products/services. Tax increases placing additional financial burdens on dabur India could be a threat. Change in demographics could threaten dabur India. The financial burden of increasing interest rates could be a threat to dabur India. Regulations requiring money to be spent or measures to be taken could put financialor other pressure on dabur India. New products/services from rival firms could lead to dabur India\'sproducts/services being less in demand. Changes in the way consumers shop and spend and other changing consumer patternscould be a threat to dabur India\'s performance. Being undercut by low-cost imports is a major threat for dabur India. Not keeping up with changes in technology could be detrimental to the future ofdabur India as they could slip behind their rivals. Slow growth and decline of the FMCG market is a threat to dabur India. Increased competition from overseas is another threat to dabur India as it could lead tolack of interest in their products/services. Extra competition and new competitors entering the market could unsteady dabur Indianbe a threat.

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The actions of a competitor could be a major threat against dabur India, for instance,if they bring in new technology or increase their workforce to meet demand. Price wars between competitors, price cuts and so on could damage profits fordabur India. A slow economy or financial slowdown could have a major impact on dabur

India business and profits. A decline in demand for dabur India products, with no likelihood of resurgencecould pose a threat. The rise and/or fall of the foreign exchange rate could threaten dabur India with regard toimporting and exporting. Rising costs could be a major downfall for dabur India as it would eat into profit. Dabur India could be threatened by the growing power customers have to set the priceof their products/services. Structural changes in the industry could be a threat for dabur India Dabur India could be threatened by the growing power their suppliers have to settheir prices.

Substitute products available on the market present a major threat to dabur India

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SURVEY

ANALYSIS AND

INTERPRETATION

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MANUFACTURING FACILITIES

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AWARDS

Archive

Dabur CEO

amongst 25 Best

of the Best

India's truly

world class

managers

Dabur CFO

amongst India's

top three CFOs

Dabur wins ICSI

National Award

for Excellance in

Corporate

Governance

Dabur amongst

top 'HOT

FMCG'

Companies

The second

annual listing of

the smartest

chief financial

officers in India

Inc.

Dabur India inForbes "Best

under a Billion"

Dabur amongsttop 10 Great

Place to Work

Dabur Indiaranks 53rd Most

Valuable Indian

Company

Dabur Indiarated IInd most

dynamic FMCG

company

India's mostvaluable

companies

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WORKING

CAPITAL

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W O R K I N G C A P I T A L

DEFINING WORKING CAPITAL

The term working capital refers to the amount of capital which is readily available to an

organisation. That is, working capital is the difference between resources in cash or

readily convertible into cash (Current Assets) and organisational commitments for which

cash will soon be required (Current Liabilities).

Current Assets are resources which are in cash or will soon be converted into cash in "theordinary course of business".

Current Liabilities are commitments which will soon require cash settlement in "the

ordinary course of business".

Thus:

WORKING CAPITAL = CURRENT ASSETS - CURRENTLIABILITIES

In a department's Statement of Financial Position, these components of working capitalare reported under the following headings:

Current Assets

Liquid Assets (cash and bank deposits)

Inventory

Debtors and Receivables

Current Liabilities

Bank Overdraft

Creditors and Payables

Other Short Term Liabilities

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Financial ratio analysis calculates and compares various ratios of amounts and balances

taken from the financial statements.

The main purposes of working capital ratio analysis are:

To indicate working capital management performance; and

To assist in identifying areas requiring closer management

Three key points need to be taken into account when analyzing financial ratios:

The results are based on highly summarised information. Consequently, situations

which require control might not be apparent, or situations which do not warrantsignificant effort might be unnecessarily highlighted;

Different departments face very different situations. Comparisons between them,

or with global "ideal" ratio values, can be misleading;

Ratio analysis is somewhat one-sided; favourable results mean little, whereas

unfavourable results are usually significant.

The following ratios are of interest to those managing working capital:

Working Capital Ratio;

Liquid Interval Measure;

Stock Turnover;

Debtors Ratio;

Creditors Ratio.

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In general, a higher turnover ratio indicates that a lower level of investment is required to

serve the department.

Most departments do not hold significant inventories of finished goods, so this ratio will

have only limited relevance.

Debtor Ratio

There is a close relationship between debtors and credit sales to third parties (that is, sales

other than to the Crown). If sales increase, debtors will increase, and conversely, if sales

decrease debtors will decrease.

The best way to explain this relationship is to express it as the number of days that credit

sales are carried on the books:

Credit Sales per Period x Days per period

Average Debtors

The debtor ratio does not solve the collection problem, but it acts as an indicator that an

adverse trend is developing. Remedial action can then be instigated.

Creditor Ratio

This ratio is much the same as the debtor ratio. It expresses the relationship between

credit purchases and the liability to creditors. It can be stated as the number of days that

credit purchases are carried on the books.

Credit Purchases per Period x Days per period

Average Creditors

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INTRODUCTION OF WORKING CAPITAL

MANAGEMENT

Working capital management is the device of finance. It is related to manage of current

assets and current liabilities. After learning working capital management, commerce

students can use this tool for fund flow analysis. Working capital is very significant for

paying day to day expenses and long term liabilities.

Meaning and Concept of Working Capital and its management

Working capital is that part of companys capital which is used for purchasing raw

material and involve in sundry debtors. We all know that current assets are very

important for proper working of fixed assets. Suppose, if you have invested your money

to purchase machines of company and if you have not any more money to buy raw

material, then your machinery will no use for any production without raw material. From

this example, you can understand that working capital is very useful for operating any

business organization. We can also take one more liquid item of current assets that is

cash. If you have not cash in hand, then you can not pay for different expenses of

company, and at that time, your many business works may delay for not paying certainexpenses. If we define working capital in very simple form, then we can say that working

capital is the excess of current assets over current liabilities.

Types of Working Capital

1. Gross working capital

Total or gross working capital is that working capital which is used for all the current

assets. Total value of current assets will equal to gross working capital.

2. Net Working Capital

Net working capital is the excess of current assets over current liabilities.

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Net Working Capital = Total Current Assets Total Current Liabilities

This amount shows that if we deduct total current liabilities from total current assets, then

balance amount can be used for repayment of long term debts at any time.

3. Permanent Working Capital

Permanent working capital is that amount of capital which must be in cash or current

assets for continuing the activities of business.

4. Temporary Working Capital

Sometime, it may possible that we have to pay fixed liabilities, at that time we need

working capital which is more than permanent working capital, then this excess amountwill be temporary working capital. In normal working of business, we dont need such

capital.

In working capital management, we analyze following three points

Ist Point

What is the need for working capital?

After study the nature of production, we can estimate the need for working capital. If

company produces products at large scale and continues producing goods, then company

needs high amount of working capital.

2nd Point

What is optimum level of Working capital in business?

Have you achieved the optimum level of working capital which has invested in current

assets? Because high amount of working capital will decrease the return on investment

and low amount of working capital will increase the risk of business. So, it is very

important decision to get optimum level of working capital where both profitability and

risk will be balanced. For achieving optimum level of working capital, finance manager

should also study the factors which affects the requirement of working capital and

different elements of current assets. If he will manage cash, debtor and inventory, then

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working capital will automatically optimize.

3rd Point

What are main Working capital policies of businesses?

Policies are the guidelines which are helpful to direct business. Finance manager can also

make working capital policies.

1st Working capital policy

Liquidity policy

Under this policy, finance manager will increase the amount of liquidity for reducing the

risk of business. If business has high volume of cash andbankbalance, then business caneasily pays his dues at maturity. But finance manger should not forget that the excess

cash will not produce and earning and return on investment will decrease. So liquidity

policy should be optimized.

2nd Working Capital Policy

Profitability policy

Under this policy, finance manger will keep low amount of cash in business and try to

invest maximum amount of cash and bank balance. It will sure that profit of business will

increase due to increasing of investment in proper way but risk of business will also

increase because liquidity of business will decrease and it can create bankruptcy position

of business. So, profitability policy should make after seeing liquidity policy and after

this both policies will helpful for proper management of working capital.

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CONCEPT OF WORKING CAPITAL

There are two concepts of Working Capital:

GROSS WORKING CAPITALIt refers to the firms investment in total current or circulating assets.

NET WORKING CAPITAL

The term Net Working Capital has been defined in two different ways:

(i) It is the excess of current assets over current liabilities. This is, as a matter of

fact, the most commonly accepted definition. Some people define it as only

the difference between current assets and current liabilities. The former seems

to be a better definition as compared to the latter.

(ii) It is that portion of a firms current assets which is financed by long-term

funds.

For example, a business requires investment in current assets such as cash, accounts

receivable and short-term investment etc., to the extent of Rs. 15,000. A part of this

requirement can be financed by the firm by purchasing on credit of this requirement can

be financed by the firm by purchasing on credit or postponing certain payments or, in

other words, by creation of current liabilities such as accounts payable, outstanding

expenses, etc. Suppose the amount of current liabilities comes to Rs. 10,000. This means

the business still needs Rs. 5,000 for its working purposes. This amount will have to be

financed from long-term sources of funds as indicated in the definition of Net Working

Capital given above.

NEED FOR WORKING CAPITAL

It has already been stated in the preceding chapter that the basic objective of financial

management is to maximize shareholder wealth. This is possible only when the company

earns sufficient profit. The amount of such profit largely depends upon the magnitude of

sales. However, sales do not convert into cash instantaneously. There is always a time

gap between the sale of goods and receipt of cash. Working Capital is required for this

period in order to sustain the sales activity. In case adequate working capital is not

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available for this period, the company will not be in a position to purchase raw materials,

pay wages and other expenses required for manufacturing the goods to be sold.

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In the case of a trading firm the operating cycle will include the length of time required

to convert (i) cash into inventories, (ii) inventories into account receivable, and

(iii) accounts receivable into cash.

In the case of a financing firm, the operating cycle includes the length of time taken for

(i) conversion of cash into debtors, and (ii) conversion of debtors into cash.

PERMANENT WORKING CAPITAL

This refers to that minimum amount of investment in all current assets which is required

at all times to carry out minimum level of business activities. In other words, it represents

the current assets required on a continuing basis over the entire year. Tandon Committee

has referred to this type of working capital as core current assets.

The following are the characteristic of this type of working capital :

1. Amount of permanent working capital remains in the business in one form or

one form or another. This is particularly important from the point of view of

financing. The suppliers of such working capital should not expect its return

during the life-time of the firm.

2. It also grows with the size of the business. In other words, greater the size of

the business, greater is the amount of such working capital and vice versa.

Permanent working capital is permanently needed for the business and therefore it should

be financed out of long-term funds. This is the reason why the current ratio has to be

substantially more than 1, as explained in the Chapter Ratio Analysis earlier.

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TEMPORARY WORKING CAPITAL

The amount of such working capital keeps on fluctuating from time to time on the basis

of business activities. In other words, it represents additional current assets required at

different times during the operating year. For example, extra inventory has to be

maintained to support sales during peak sales period. Similarly, receivable also increase

and must be financed during period of high sales. On the other hand investment in

inventories, receivables, etc., will decrease in periods of depression.

Suppliers of temporary working capital can expect its return during off season when it is

not required by the firm. Hence, temporary working capital is generally financed from

short-term sources of finance such as bank credit.

The diagrams given below illustrates the difference between permanent and temporary

working capital. In Gif. 1, permanent working capital is fixed over a period of time, while

temporary working Capital is fluctuating. In Fig. 2, the permanent working capital is

increasing over a period of time with increase in the level of business activity. This

happens in case of a growing company. Hence, the permanent working capital line is not

horizontal with the base line as in Fig. 1.

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The Importance of Good Working Capital Management

Working capital constitutes part of the Crown's investment in a department. Associated

with this is an opportunity cost to the Crown. (Money invested in one area may "cost"opportunities for investment in other areas.) If a department is operating with more

working capital than is necessary, this over-investment represents an unnecessary cost to

the Crown.

From a department's point of view, excess working capital means operating

inefficiencies.

Approaches to Working Capital Management

The objective of working capital management is to maintain the optimum balance of each

of the working capital components. This includes making sure that funds are held as cash

in bank deposits for as long as and in the largest amounts possible, thereby maximising

the interest earned. However, such cash may more appropriately be "invested" in other

assets or in reducing other liabilities.

Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to

identify areas requiring closer management

The individual components of working capital can be effectively managed by

using various techniques and strategies

When considering these techniques and strategies, departments need to recognise thateach department has a unique mix of working capital components. The emphasis that

needs to be placed on each component varies according to department. For example,

some departments have significant inventory levels; others have little if any inventory.

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Furthermore, working capital management is not an end in itself. It is an integral part of

the department's overall management. The needs of efficient working capital

management must be considered in relation to other aspects of the department's financial

and non-financial performance.

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COMPONENTS OF WORKING CAPITAL

The key components of working capital are as follows:

Stocks

These consists stocks of raw materials, work-in-progress and finished goods, together

with stocks of consumables and spare parts. Nan-manufacturing concerns will not carry

raw material and work-in-progress stocks.

Debtors

Debtors represent money owed at any point in time to the firm in respect of goods and

services which it has supplied on the credit to its customers. Debtors will also include any

prepayments in respect of goods and services (e.g. pre payments of rents and insurance).

Investment

These will include short-term, easily liquidated, investments such as marketable

securities. Marketable securities are financial assets on which a company can earn a rate

of return by investing temporarily surplus cash and which are readily and quickly

convertible back into cash with minimal risk of loss to their value, for e.g. treasury bill

(Tbs) and certificate of deposits (Cds).

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Cash

This will include cash in hand, cash held in current bank account, and cash held in

demand deposit accounts with bank and other financial institutions. Cash plus marketablesecurities collectively represent a firms liquid assets.

Current Liabilities

These represent the amount actually owed at any point in time by the firm and technically

due to be paid within one year of balance sheet date. They will include amounts due to

trade creditors for goods and services supplied, interest and principal due ton any short-

term borrowings, and payments due in respect of taxes, dividends, and so forth.

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WORKING CAPITAL POLICIES

Matching Approach

When a firm follows matching approach (also known as hedging approach), long-term

financing will be used to finance fixed assets and permanent current assets and short-term

financing to finance temporary or variable current assets.

Conservative Approach

The financing policy of the firm is said to be conservative when it depends more on long-

term funds for financing needs. Under a conservative plan, the firm finances itspermanent assets and also a part of temporary current assets with long-term financing. In

the period when the firm has no need for temporary current assets, the idle long-term

funds can be invested in tradable securities to conserve liquidity.

Aggressive Approach

An aggressive policy is said to be followed by the firm when it uses more short-term

financing than warranted by the matching plan. Under this, the firm finances a part of itspermanent current assets with short-term financing. The relatively more use of short-term

financing makes the firm more risky.

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WORKING CAPITAL FINANCING

TRADE CREDIT:

It refers to the credit extended by the supplier of goods and services in the normal course

of transaction/business/sale of the firm. Although most of the trade credit is on open

account as accounts payable, the suppliers of goods do not extend credit indiscriminately.

BANK CREDIT:

It is primarily institutional source of working capital finance. It is provided by banks in

five ways:

Cash credits/overdrafts,

Loans,

Purchase/discount bills,

Letter of credit, and

Working capital term loans.

COMERCIAL PAPERS (CP):

It is a short term unsecured negotiable instrument, consisting of usance promissory notes

with a fixed maturity. It is issued on a discount on face value basis but it can also be

issued in interest-bearing form. A CP when issued by a company directly to the investor

is called a direct paper. Companies which are able to raise funds through CPs have better

financial standing.

FACTORING:

It provides resources to finance receivables as well as facilitates the collection of

receivables. It can be defined as an agreement in which receivables arising out of sale of

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goods/services are sold by a firm (client) to the factor (a financial intermediary) as a

result of which the title of the goods/services represented by the said receivables passes

on the factor. Realization of credit sales is the main function of factoring services.

CASH MANAGEMENT

The term cash with reference to cash management is used in two senses. In a narrow

sense, it is used broadly to cover currency and generally accepted equivalents of cash,

such as cheques, drafts and demand deposits in bank. The broad view of cash also

includes near-cash assets, such as marketable securities and time deposits in banks.

There are three primary motives for maintaining cash balances:

1. Transaction Motive: This refers to the holding of cash to meet routine cash

requirements to finance the transactions which a firm carries on in the

ordinary course of business . Such motives refers to the holding of cash to

meet anticipated obligations whose timing is not perfectly synchronized

with cash receipts.

2. Precautionary Motive: A firm may have to pay cash for purposes which

cannot be predicted or anticipated. This cash balance held in reserve for

such random and unforeseen fluctuations in cash flows.

3. Speculative Motive: It refers to the desire of the firm to take advantage of

opportunities which presents themselves at unexpected moments and

which are typically outside the normal course of business.

BASIC STRATEGIES

The cash budget, as a cash management tool, would throw light on the net

cash position of a firm. After knowing the cash position, the management

should work out the basic strategies to the employed to manage its cash. These

strategies are essentially related to the cash cycle together with the cash

turnover. The cash cycle refers to the process by which cash is used to

purchase materials from which are produced goods, which are then sold to

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customers, who later pay the bills. The cash turnover means the number of

times cash is used during each year.

Cash management strategies are intended to minimize the operating cash

balance requirement.

The basic strategies that can be employed are:

Stretching Accounts Payable,

Efficient Inventory-Production Management,

Speedy Collection of Accounts Receivable, and

Combined Cash Management Strategies.

RECIEVABLE MANAGEMENT

The term receivables is defined as debt owed to the firm by customers arising from sale

of goods or services in the ordinary course of business. When a firm makes an ordinarysale of goods or services and does not receive payment, the firm grants trade credit and

creates accounts receivable which could be collected in the future. Receivable

management is also called trade credit management.

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CREDIT POLICIES

The credit policy of a firm provides a framework to determine:

a. Whether or not to extend credit to a customer and

b. How much credit to extend?

The credit policy decision of a firm has two broad dimensions:

1. Credit Standards: it represents the basic criteria for the extension of credit to

customers. The trade-off with reference to credit standards covers:

I. The collection cost,

II. The average collection period/cost of investment in accounts

receivable,

III. Level of bad debt losses, and

IV. Level of sales.

2. Credit Analysis: It involves two basic steps:

I. Obtaining credit information internally (filling forms and documents

giving details about financial operations) and externally (through bank

references, financial statement, trade references etc.)

II. Analysis of credit information through qualitative and quantitative

aspects.

CREDIT TERMS

The stipulations under which goods are sold on credit are referred to as credit terms. It

has three components:

1. Credit period,

2. Cash discount, and

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3. Cash discount period.

INVENTORY MANAGEMENT

The term inventory refers to the stockpile of the products a firm is offering for sale and

the components that make up the products. The basic responsibility of the financial

manager is to make sure the firms cash flows are managed efficiently. Efficient

management of inventory should ultimately result in the maximization of the owners

wealth.

The objective of inventory management consist of two counter balancing parts:

(a) To minimize investments in inventory, and

(b) To meet a demand for the product by efficiently organizing the production and

sales operations.

COST OF HOLDING INVENTORY

One operating objective of inventory management is to minimize cost. Excluding the costof merchandise, the costs associated with inventory fall into two basic categories:

Ordering or acquisition or Set-up costs, and

Carrying Costs

BENEFITS OF HOLDING INVENTORY

Inventory is to act as a buffer to decouple or uncouple the various activities of a firm so

that all do not have to be pursued at exactly the same rate.

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The key activities are:

I. Purchasing

II. Production, and

III. Selling.

Since inventory enables uncoupling of the key activities of a firm, each of them can be

operated at the most efficient rate.

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TECHNIQUES

The major problem areas that comprise the heart of inventory control are:

I. The classification problem to determine the type of control required,

II. The order quantity problem,

III. The order point problem, and

IV. Safety stocks.

CLASSIFICATIN PROBLEM: A B C SYSTEM

The A B C system is a widely used classification technique to identify various items ofinventory control. This technique is based on the assumption that a firm should not

exercise the same degree of control on items of inventory.

ORDER QUANTITY PROBLEM: ECONOMIC ORDER QUANTITY (EOQ)

MODEL

While purchasing raw materials or finished goods, the questions to be addressed are:

How much inventory should be bought in order on each replenishment?

Should the quantity should be purchased be large or small?

Or, should the requirements of materials during a given period of time be acquired

in one lot or should be it required in installments or in several small lots?

Such inventory problems are called order quantity problems. All such problems are

answered by the economic order quantity (EOQ). It is the inventory management

technique for determining item optimum order quantity which is one that minimizes the

total of its order and carrying costs; it balances fixed ordering costs against variable

ordering costs.

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ORDER POINT PROBLEM

Another important question pertaining to efficient inventory management is: when shouldthe order to procure inventory be placed? This aspect of inventory management is

covered under the recorder problem. It is stated in terms of the level of inventory at

which an order should be placed replenishing the current stock of inventory.

Recorder point = lead time in days * Average daily usage of inventory

The term lead time refers to the time normally taken in receiving the delivery after

placing orders with the suppliers.

The average usage means the quantity of inventory consumed daily.

SAFETY STOCKS

It implies extra inventories that can be drawn down when actual lead time and/or usage

rates are greater than expected. It involves two types of costs:

a. Stock-out costs, and

b. Carrying costs.

The stock-out and the carrying costs are counter balancing. If the firm minimizes the

carrying costs, the stock-costs are likely to rise and vice-versa. The safety stock with the

minimum carrying and stock-out costs is the economic (appropriate) level which

financial manager should aim at.

The Importance of Good Working Capital Management

Working capital constitutes part of the Crown's investment in a department. Associated

with this is an opportunity cost to the Crown. (Money invested in one area may "cost"

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opportunities for investment in other areas.) If a department is operating with more

working capital than is necessary, this over-investment represents an unnecessary cost to

the Crown.

From a department's point of view, excess working capital means operating

inefficiencies.

Approaches to Working Capital Management

The objective of working capital management is to maintain the optimum balance of each

of the working capital components. This includes making sure that funds are held as cashin bank deposits for as long as and in the largest amounts possible, thereby maximising

the interest earned. However, such cash may more appropriately be "invested" in other

assets or in reducing other liabilities.

Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to

identify areas requiring closer management The individual components of working capital can be effectively managed by

using various techniques and strategies

When considering these techniques and strategies, departments need to recognise that

each department has a unique mix of working capital components. The emphasis that

needs to be placed on each component varies according to department. For example,

some departments have significant inventory levels; others have little if any inventory.

Furthermore, working capital management is not an end in itself. It is an integral part of

the department's overall management. The needs of efficient working capital

management must be considered in relation to other aspects of the department's financial

and non-financial performance.

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BLUE PRINT FOR A GOOD WORKING CAPITAL

MANAGEMENT POLICY

GENERAL ACTIONS

Set planning standards for stock days, debtor days and creditors days;

Having set planning standards (as above) KEEP TO THEM. Impress on staff

that these targets are just as important as operating budgets and standard costs;

Instill an understanding amongst the staff that working capital management

produces profits.

ACTIONS ON STOCKS

Keep stock levels as low as possible, consistent with not running out of stock and

not ordering stock in uneconomically small quantities. Just-in-Time stock

management is fine, as long as it is Just-in-Time and never fails to deliver on

time;

Consider keeping stock in suppliers warehouses, drawings on it as needed andsaving warehousing costs.

ACTION ON DEBTORS / CUSTOMERS

Asses ALL significant new customers for their ability to pay. Take references,

examine accounts, and ask around. Try not to take on new customers who would

be poor payers;

Re-asses ALL significant customers periodically. Stop supplying existingcustomers who are poor payers you may lose sales, but you are QUALITY of

business rather than QUANTITY of business. Sometimes poor paying

customers suddenly (and magically!!) find cash to settle invoices if their supplies

are being cut off. If customers cant pay / wont pay your competitors have them

give your competitors a few more problems;

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Consider factoring sales invoices the extra cost may be worth it in terms of

quick payment of sales revenue, less debtor administration and more time to carry

out your business (rather than spend time chasing debts);

Consider offering discounts for prompt settlement of invoices, but only if the

discounts are lower than the costs of borrowing the money owed from other

sources.

ACTION ON CREDITORS

Do NOT pay invoices too early - take advantage of credit offered by suppliers

its free;

Only pay early if the supplier is offering a discount. Even then, consider this to be

an investment. Will you get a better return by using working capital to settle the

invoice and take the discount than by investing the working capital in some other

way? ;

Establish a register of creditors to ensure that creditors are paid on the correct date

not earlier and not later.

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WORKING

RESULT -1

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0.002,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

2010 2011 2012

CHANGE IN CURRENT ASSETS

Inventory

S. Debtors

Cash&bank

Loans&Adv.

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DETAILS OF CURRENT LIABILITIES(Rs. In Lacs)

Particulars 2011 2012 2013

Creditors 11,511.44 13,359.71 13,169.08

Difference 1,848.27 -190.60

% Increase 16.05 -1.42

Security Deposits 23.81 47.24 12.65

Difference 23.43 -34.59

% Increase 98.40 -73.22

Amount due 764.88 876.01 1,041.54

Difference 111.13 165.53

% Increase 14.52

Advance from

customer

101.08 53.71 51.24

Difference -47.37 -2.47

% Increase -46.86 -4.59

Provisions 7,169.81 8,384.94 11,388.94

Difference 1,215.13 3004

% Increase 16.94 35.82

Other liabilities 4,050.86 9,501.38 5,067.55

Difference 5,450.52 -4,433.83

% Increase 134.55 -46.66

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0

2000

4000

6000

8000

10000

12000

14000

2010 2011 2012

CHANGES IN CURRENT

LIABILITIEScreditors

security

depositsamount due

advance fromcustomers

provisions

other liability

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CHANGES IN WORKING CAPITAL

-80

-70

-60

-50

-40-30

-20

-10

0

2011 2012 2013

workingcapital ratio

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RATIO

ANALYSIS

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INTRODUCTION

Financial ratio analysis calculates and compares various ratios of amounts and balances

taken from the financial statements.

The main purposes of working capital ratio analysis are:

To indicate working capital management performance; and

To assist in identifying areas requiring closer management

Three key points need to be taken into account when analyzing financial ratios:

The results are based on highly summarised information. Consequently, situations

which require control might not be apparent, or situations which do not warrant

significant effort might be unnecessarily highlighted;

Different departments face very different situations. Comparisons between them,

or with global "ideal" ratio values, can be misleading;

Ratio analysis is somewhat one-sided; favourable results mean little, whereas

unfavourable results are usually significant.

The following ratios are of interest to those managing working capital:

Working Capital Ratio;

Liquid Interval Measure;

Stock Turnover;

Debtors Ratio;

Creditors Ratio.

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Working Capital Ratio:

Current Assets divided by Current Liabilities

The working capital ratio (or current ratio) attempts to measure the level of liquidity, that

is, the level of safety provided by the excess of current assets over current liabilities.

The "quick ratio" a derivative, excludes inventories from the current assets, considering

only those assets most swiftly realisable. There are also other possible refinements.

There is no particular benchmark value or range that can be recommended as suitable for

all government departments. However, if a department tracks its own working capital

ratio over a period of time, the trends-the way in which the liquidity is changing-will

become apparent.

Liquid Interval Measure:

Liquid Assets divided by Average Operating Expenses

This is another measure of liquidity. It looks at the number of days that liquid assets (for

example, inventory) could service daily operating expenses (including salaries).

Stock Turnover

Cost of Sales divided by Average Stock Level

This ratio applies only to finished goods. It indicates the speed with which inventory is

sold-or, to look at it from the other angle, how long inventory items remain on the

shelves. It can be used for the inventory balance as a whole, for classes of inventory, or

for individual inventory items.

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The figure produced by the stock turnover ratio is not important in itself, but the trend

over time is a good indicator of the validity of changes in inventory policies.

In general, a higher turnover ratio indicates that a lower level of investment is required to

serve the department.

Most departments do not hold significant inventories of finished goods, so this ratio will

have only limited relevance.

Debtor Ratio

There is a close relationship between debtors and credit sales to third parties (that is, sales

other than to the Crown). If sales increase, debtors will increase, and conversely, if sales

decrease debtors will decrease.

The best way to explain this relationship is to express it as the number of days that credit

sales are carried on the books:

Credit Sales per Period x Days per period

Average Debtors

The debtor ratio does not solve the collection problem, but it acts as an indicator that an

adverse trend is developing. Remedial action can then be instigated.

Creditor Ratio

This ratio is much the same as the debtor ratio. It expresses the relationship between

credit purchases and the liability to creditors. It can be stated as the number of days that

credit purchases are carried on the books.

Credit Purchases per Period x Days per period

Average Creditors

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WORKINGRESULT -2

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PARTICULARS 2012 2013

1.Working Capital Ratio 0.781 0.925

2. Liquid Ratio 0.186 0.211

3. Stock Turnover Ratio 5.02 6.35

4. Debtors Turnover Ratio 27.77 35.93

5.Creditors Turnover Ratio 4.64 4.49

6. Liquid Interval Measure 0.126 0.063

7. Net Working Capital Ratio -18.05 -59.68

8. Fixed Assets Turnover Ratio 0.274 2.890

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RECOMENDATIONS

Working Capital Ratio is lower than the ideal one and a lower ratio indicates the

lack of liquidity. Dabur must maintain enough cash balance or other liquid assetsso that it never faces problem of payments to liabilities.

Liquid Ratio is lower than the ideal ratio which indicates that the liquidity of the

firm is very unsatisfactory. There is a decline in liquid ratio of Dabur and the

decline in the liquid ratio indicates over trading which, if serious, may land the

company in difficulties.

Stock Turnover Ratio is increased by 1.32 times which means that more sales are

being produced by a rupee of investment in stocks. The company should maintain

the high ratio trend to produce more sales by a unit of investment in stocks. A

proper Inventory Turnover ratio enables the business to earn a reasonable margin

of profits.

Debtors Turnover Ratio has been increased by 8.16 times which means that debts

are being collected more quickly. The company should get the ratio higher so that

the economy and efficiency in collection of amounts is maintained. A standard

ratio should be set up for measuring the efficiency. A ratio lower than the

standard would indicate inefficiency.

Creditors Turnover Ratio has been decreased by 0.15 times which means that the

company is not taking the full advantage of credit facilities. The firm should try to

increase this ratio as the high ratio indicates that the firm is enjoying actually the

credit promised by the suppliers.

Net Working Capital Turnover Ratio has been decreased by 77.73 times which is

not a good sign for the firm. Dabur India Limited Should try to maintain this ratio

high as the high ratio is better for the firm. This ratio indicates the efficiency or

otherwise utilization of short term funds in making the sales.

Fixed Assets Turnover Ratio has been increased by 2.616 times which shows that

firm is utilising the fixed assets. The firm should try to maintain this ratio high

because a low ratio indicates that fixed assets is remained idle

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BIBLIOGRAPHY

Books:

Financial Management, I.M. Pandey

Financial Management, R.P. Rastogi

Financial Management, Khan & Jain

Financial & Management Accounting, S.N. Maheshwari

Websites: www.google.com

www.studyfinance.com

www.dabur.com

Others:

Annual Reports

http://www.google.com/http://www.studyfinance.com/http://www.dabur.com/http://www.google.com/http://www.studyfinance.com/http://www.dabur.com/

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ANNEXURE

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CONSLIDATED BALANCE SHEETAs per at march 31,2013

Amount in Rs lacks exempt share capital

S.N. Particulars As at march31,2013

As at march31,2012

(I) Equity & Libilities1. Share holder fund

a) Share capitalb) Reserve and surplus

2. Minority Interest

3. Non Current Liabilitiesa) Long term Borrowingb) Deffered tax Liabilitiesc) Other Long Term Provision

d) Long Term Provision4. Current Liabilitiesa) Short Term Borrowingb) Trade Payablesc) OtherCurrent Liabilitiesd) Short Term Provision

172291950091206

53993362112

4919

61142744304319618684

17421154297

303

727182740

-

20566

34091476815084019376

TOTAL 473641 420033

(II) ASSETS

1. Non Currents Assets

a) Fixed AssetsI. Tangible assets

II. Intangle assetsIII. Capital working in Progress

b) Non Current Investment

c) Long Term Loans and Advances

d) Other non-current assets

2. Currents Assets

a) Current Investment

b) Inventoryc) Trade Receivablesd) Cash and Cash Equivalentse) Shorts term Loans and advancef) Other current assets

94568636209257

13047

1577

31268

50141

843864841351281201505933

84225798982676

8928

2584

10192

39324

823924616841842185833221

TOTAL 473641 420033

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CONSOLIDATED STATEMENT OF PROFIT AND LOSS

ACCOUNTFOR THE YEAR ENDED MARCH 31, 2013

(All amounts in `Lacs, exceptshare data)

Sl. No. Particulars For theyear ended

Mar31, 2013

For theyear ended

Mar 31,2012I

Revenue from operations 6,17,612 5,30,542

II

Other Income 9,450 5,740

III

Total Revenue (I +II) 6,27,062 5,36,282

IV ExpensesCost of materials consumedPurchase of stock in tradeChanges in inventories of FG, WIP & Stock in Trade

Finished GoodsWork in ProgressStock in tradeEmployee benefits expensesFinance costsDepreciation and Amortisation ExpensesOther Expenses

2,42,21159,922

(3,028)(87)

291647,123

589011,240165575

22788051665

(5454)(2571)(2280)387425384

10324133543

Total Expense 5,31,762 457233

V Profit before exceptional and extraordinary items and tax (III -IV)

95300 79049

VI Exceptional Items 466 -

VII Profit before extraordinary items and tax (V - VI) 94834 79049

VIII ExtraordinaryItems

8 -

IX Profit before tax (VII -VIII)

94,842 79049

X Tax expense

1. Current tax2. Deferred tax3. Earlier year tax

17278881104

13829809-

XI Profit/(Loss) for the year from continuing operations (IX -X)

76579 6