A STUDY ON LIQUIDITY POSITION IN

ASSOCIATED HYDRO PRESSINGS PVT. LTD.

Submitted in Partial Fulfill of the Requirements for the Award of the Degree of
Bachelor of Business Administration of Bangalore University.

BY
C. DEEPAK
REG. NO: - 17YUC26026

UNDER THE GUIDANCE OF

Asst. Prof. LAXMINARAYANA MAROLI
Dept. of commerce and management

ACHARYA BANGALORE B SCHOOL

BANGALORE – 560091
2019 - 2020
 STUDENT DECLARATION

I, C. DEEPAK, hereby declare that this project title “A STUDY ON LIQUIDITY

POSITION AT ASSOCIATED HYDRO PRESSING PVT. LTD.” Submitted to
Bangalore University in partial fulfilment of the requirement for award of Bachelor of
Business Administration is a result of original work done by me under the guidance and
supervision of ASST. PROF. LAXMINARAYANA MAROLI, DEPATMENT OF
COMMERCE AND MANAGEMENT.

I further declare that, it has not been previously submitted for the award of any
degree/diploma or fellowship or similar title of any university/institution.

C. DEEPAK

Place: Bangalore 6th Semester BBA

Date: (17YUC26026)
 CERTIFICATE BY THE GUIDE

This is to certify that the Project Report titled “A STUDY ON LIQUIDITY POSITION AT
ASSOCIATED HYDRO PRESSINGS PVT. LTD” is a bona fide work done by
C.DEEPAK bearing Reg. no. 17YUC26026, under my guidance during the year 2019-2020.
He has attended the required guidance sessions held.

To the best of my knowledge, this project report has not formed a basis for the award of any
other Degree/Diploma of any university or institution.

Place: Bangalore Signature of the Guide

Date: Mr. L.N. MAROLI

 ACKNOWLEDGEMENT

Words are indeed inadequate to convey my profound gratitude and heartiest thanks to all
those who have helped me in making this project report.

I will take this opportunity to thanks Dr. D.M. MAHISHI, dean, principal, Acharya
Bangalore B School, Bengaluru.

I will take this opportunity to thank Prof. K. RAGHAVENDRA, Program coordinator

Department of management DR. MS. VIJAYA BHASKAR for this constant support,
encouragement and guidance. I would also like to thank the internal guide ASST. PROF.
LAXMINARAYANA MAROLI, DEPARTMENT OF COMMERCE AND
MANAGEMENT, for the valuable inputs provided to this project, which was immensely
helpful in applying various framework to a practical situation.

I express my deep sense of gratitude and sincere thanks to place on record the almighty the
parental care and concern of me and my friends who were also a source of strength and
support behind the project.

This project has been a great learning experience for me and would have not been possible
without their support of the guidance of above mentioned people.

C. DEEPAK

17YUC26026
 CONTENTS

SLNO. NAME PAGE NO.

1 INTRODUCTION 1-18

2 RESEARCH METHODOLOGY 18-25

3 COMPANY PROFILE 25-44

DATA ANALYSIS AND

4 44-73
INTERPRETATION

FINDINGS, SUGGESTIONS,
5 73-78
CONCLUSIONS

BIBILOGRAPHY AND
6 78-82
ANNEXURES
 TABLES

TABLE NO. NAME PAGE NO.

1 CURRENT RATIO 47

2 WORKING CAPITAL RATIO 49

3 DEBTORS TURNOVER RATIO 51

CURRENT ASSETS TURNOVER

4 53
RATIO

5 ABSOLUTE LIQUID RATIO 56

DEBTOR AVERAGE
6 58
COLLECTION PERIOD
 CREDITORS TURNOVER
7 60
RATIO

CREDITORS PAYEMENT
8 62
PERIOD

9 STOCK TURNOVER RATIO 65

10 QUICK RATIO 67
 GRAPHS

GRAPH PAGE
NAME
NO. NO

1 CURRENT RATIO 48

2 WORKING CAPITAL RATIO 50

3 DEBTORS TURNOVER RATIO 52

CURRENT ASSETS TURNOVER

4 55
RATIO

5 ABSOLUTE LIQUID RATIO 57

6 AVERAGE COLLECTION PERIOD 59

7 CREDITORS TURNOVER RATIO 61

CREDITORS PAYEMENT
8 63
PERIOD

9 STOCK TURNOVER RATIO 66

10 QUICK RATIO 68
 CHAPTER 1

INTRODUCTION
A STUDY ON LIQUIDITY POSITION

Introduction to Finance

Finance is the lifeblood and nerve Centre of a business. Just as circulation of blood is
essential in the human body for maintaining life, blood is very essential for smooth running
of business. It has been rightly termed as universal lubricant, which keeps the enterprise
dynamic. Finance may be defined as the provision of money at the time when it is required.
Finance refers to managing the flow of money through an organization. It concerns with the
application of skills in the manipulation, use and control of money.

According to PAUL.G.HASINGS, “Finance” is the management of the monitory affairs of

the company. It includes determining what has to be paid for and when, raising the money on
the best available, and devoting the available funds to the best uses.

What is Finance?

Finance is a broad term that describes two related activities: the study of how money is
managed and the actual process of acquiring needed funds. It encompasses the oversight,
creation and study of money, banking, credit, investments, assets and liabilities that make up
financial systems.

Many of the basic concepts in finance come from micro and macroeconomic theories. One of
the most fundamental theories is the time value of money, which essentially states that a
dollar today is worth more than a dollar in the future.

Since individuals, businesses and government entities all need funding to operate, the field is
often separated into three main sub-categories: personal finance, corporate finance and public
(government) finance.

Types of Finance

Personal Finance
Financial planning generally involves analysing an individual's or a family's current
financial position, and formulating strategies for future needs within financial constraints.
Personal finance is a very personal activity that depends largely on one's earnings, living
requirements, goals and individual desires.

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A STUDY ON LIQUIDITY POSITION

For example, individuals need to save for retirement expenses, which means investing
enough money along the way to properly fund their long-term plans. This type of financial
management decision falls under personal finance.

Personal finance includes the purchasing of financial products, like credit

cards, insurance, mortgages and various types of investments. Banking is also considered a
part of personal finance, including checking and savings accounts as well as online or mobile
payment services like PayPal and Venmo.orry.

Corporate Finance
Corporate finance consists of the financial activities related to running a corporation,
usually with a division or department set up to oversee the financial activities.

For example, a large company may have to decide whether to raise additional funds through
a bond issue or stock offering. Investment banks may advise the firm on such considerations
and help them market the securities.

Start-up may receive capital from angel investors or venture capitalists in exchange for a
percentage of ownership. If a company thrives and decides to go public, it will issue shares
on a stock exchange in an initial public offering (IPO) to raise cash.

Another instance could be a company that is trying to budget their capital and make decisions
on what projects to finance and what projects to put on hold in order to grow the company.
These types of decisions fall under corporate finance.

For more, read the Complete Guide to Corporate Finance.

Public Finance
Public finance includes tax, spending, budgeting and debt issuance policies that all
affect how a government pays for the services it provides to the public.

The federal government helps prevent market failure by overseeing the allocation of
resources, distribution of income and stabilization of the economy. Regular funding is
secured mostly through taxation. Borrowing from banks, insurance companies and other
governments also help finance the government.

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A STUDY ON LIQUIDITY POSITION

In addition to managing money for its day-to-day operations, a government body also has
larger social responsibilities. Its goals include attaining an equitable distribution of income
for its citizens and enacting policies that lead to a stable economy.

FEATURES OF FINANCE

 Investment opportunities in finance, investment can be explained as a utilization of

money for profit or return. Investment can be done by:
a) Creating physical assets with the money such as development of land, acquiring
commercial assets.
b) Carrying on business activities like manufacturing, trading.

 Profitable opportunities in finance, profitable opportunities are considered as an

important aspiration. a) Profitable opportunities signify that the firm must utilize its
available resources most efficiently under the condition of cut throat competitive
markets. b) Profitable opportunities shall be a vision. It shall not result in short term
profits at the expenses of long term gains.

 Optimal mix of funds Finance is concerned with the best optimal mix of fund in order
to obtain the desired and determined result respectively. Funds are of two types: a)
Owned fund (equity shares) b) Borrowed fund (debentures)

 System of internal control Finance is concerned with internal control maintained in

the organization or workplace. Internal control is set of rules and regulation framed at
the inception stage of the organization and they are altered as per the requirement of
its business.

 Future decision making a good finance is an indicator of growth and good return.
This is possible only with the good analytical decision of the organization. However,
the decision shall be framed by giving more emphasis on the present and future
perspective.

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A STUDY ON LIQUIDITY POSITION

MEANING OF LIQUIDITY :
Liquidity is the ability of the firm to pay off the current liabilities with the current
assets it possesses.
DEFINITION OF LIQUIDITY :
A measure of the extent to which a person or organization has cash to meet
immediate and short term-obligations, or …
DEFINITION OF LIQUIDITY POSITION :
The liquidity position is the difference between the sum of liquid assets and
incoming cash flows on one side and outgoing cash flows resulting from commitments on the
other side, measured over a defined period, being the measure of the liquidity ratio

MEANING OF LQUIDITY MANAGEMENT :

Liquidity Management is a “dual” term in that each word deserves explanation to
understand the issues involved. In forex trading , Liquidity is the ability to sell a currency pair
without causing an impact on the price or prevailing spreads in the market and with minimum
loss in the process.
IMPORTANCE OF LIQUIDITY MANAGEMENT :
The Importance of Managing Liquidity for a Company Liquidity is a measure of a
firm’s ability to meet immediate and short-term obligations, or assets that can be quickly
converted to do it. There are two ratios to measure liquidity. ... Managing liquidity is
important in terms of operating activities. Firms which usually purchase in credit should have
big current assets so the suppliers do not need to worry when allowing the credit transaction.
FACTORS AFFECTING LIQUIDITY MANAGEMENT IN COMPANY :
Factors affecting a firm’s liquidity position. A firm’s liquidity position is affected by
how the cash inflow or cash outflow is affected. Drags on Liquidity. When the cash inflow is
reduced or delayed, it’s referred to as drag on liquidity. Examples: Bad debt; Obsolete
inventory; Tight credit: Less or expensive trade credit; Pulls on Liquidity.
IMPORTANCE OF LIQUIDITY POSITION :
It has already been stated above that liquidity means one's ability to meet current
claims and obligations as and when they become due. In order to maintain the liquidity
position firms convert their assets into cash. The importance of liquidity cannot be ignored.

FACTORS AFFECTING LIQUIDITY POSITION OF THE COMPANY :

The liquidity of a firm refers to its ability to meet short-term obligations
using firm's assets can be quickly converted to cash. Cash is the most liquid form of asset
a firm has.

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 A STUDY ON LIQUIDITY POSITION

...
Factors affecting a firm's liquidity position
 Bad debt.
 Obsolete inventory.
 Tight credit: Less or expensive trade credit.

ADVANTAGES OF LIQUIDITY POSITION ANALYSIS :

Liquidity analysis is necessary to establish the relationship between two accounting
figures to highlight the significant information to the management or users who can analyze
the business situation and to monitor their performance in the meaning full way. The
following are the advantages of liquidity analysis :
(1) It facilitates the accounting information to be summarized and simplified in a required
form
(2) It highlights the interrelationship between the facts and figures of various segments of
business.
(3) Liquidity analysis helps to remove all type of wastages and inefficiencies.
(4) It provides necessary information to the management to take prompt decisions
relating to business.
(5) It helps to the management for effectively discharge its functions such as planning,
organizing, controlling, directing and forecasting.

WORKING CAPITAL:
The capital of a business which is used in its day-to-day trading operations, calculated
as the current assets minus the current liabilities.
Working capital, also known as net working capital (NWC), is the difference between a
company’s current assets, such as cash, accounts receivable (customers’ unpaid bills) and
inventories of raw materials and finished goods, and its current liabilities, such as accounts
payable.

Current assets: Cash and equivalents, inventory, accounts receivable and marketable
securities, are resources a company owns that can be used up or converted into cash within a
year.

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A STUDY ON LIQUIDITY POSITION

Current liabilities: The amount of money a company owes such as accounts payable, short-
term loans and accrued expenses, which are due for payment within a year.

Working capital = Current Assets – Current Liabilities

The working capital formula tells us the short-term, liquid assets remaining after short-term
liabilities have been paid off. It is a measure of a company’s short-term liquidity and
important for performing financial analysis, financial modeling, and managing cash flow.

Working capital is a measure of a company's liquidity, operational efficiency and its short-
term financial health. If a company has substantial working capital, then it should have the
potential to invest and grow. If a company's current assets do not exceed its current liabilities,
then it may have trouble growing or paying back creditors, or even go bankrupt.

Positive vs. negative working capital

Having positive working capital can be a good sign of the short-term financial health
for a company because it has enough liquid assets remaining to pay off short-term bills and to
internally finance the growth of their business. Without additional working capital, a
company may have to borrow additional funds from a bank or turn to investment bankers to
raise more money.

Negative working capital means assets aren’t being used effectively, and a company may a
liquidity crisis. Even if a company has lots invested in fixed assets, it will face financial
challenges if liabilities come due too soon. This will lead to more borrowing, late payments
to creditors and suppliers and, as a result, a lower corporate credit rating for the company.

WORKING CAPITAL MANAGEMENT:

Working capital management refers to a company's managerial accounting strategy
designed to monitor and utilize the two components of working capital, current assets and
current liabilities, to ensure the most financially efficient operation of the company. The
primary purpose of working capital management is to make sure the company always
maintains sufficient cash flow to meet its short-term operating costs and short-term debt
obligations.

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A STUDY ON LIQUIDITY POSITION

It is the administration of all aspects of working capital, which manage the firm’s current
assets and current liabilities in such a way that a satisfactory level of working capital is
maintained.
According to Smith “Working Capital Management is concerned with problems that arise in
attempting to manage the current assets and current liabilities: and their relationship that
exists between them.
“It is the short term capital with which the business is worked over”.
In short, “Working capital refers to the capital invested and locked up in various current
assets”.

OBJECTIVE:
The basic and primary objective of Working Capital Management is to manage the
firm’s working capital in such a way that a satisfactory level of working capital is maintained.
This is necessary because, if the working capital is excessive or large, the liquidity position of
the firm would, no doubt, improve, but its profitability would be adversely affected, as funds
would remain idle.
Conversely, if the working capital is too small, the profitability of the firm may
improve, but the liquidity position of the firm would be adversely affected.

SOURCES OF WORKING CAPITAL:

Among the various sources available for financing working capital needs, finance
manager has to select the best suitable source depending on working need of the company.

LONG TERM FINANCING:

 Loans from financial institutions: The option is normally rules out, because financial
institutions do not provide finance for working capital requirements. Further this
facility is not available to all companies. For small companies, this option is not
practical.
 Floating of debentures: the probability of a successful flotation of debentures seems to
be rather meager. Debenture issues of companies in private sector not associated with
certain reputed groups generally fail to attract investors to invest their funds in
companies.
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A STUDY ON LIQUIDITY POSITION

 Issue of shares: with view to financing additional working capital needs, issue of
additional equity shares could be considered. Many Indian companies have still go
ahead to command respect of investors. Low profit margin as well as lack of
knowledge about company makes the success of a capital issue very dim.
 Raising funds by internal financing: raising funds from operational profits poses
problems for many companies, because prices of their end products are controlled and
do not permit companies to earn profits sufficient to pay reasonable dividend and
additional working assets.

SHORT TERM SOURCES:

They are classified in to:

INTERNAL EXTERNAL

 Withdrawing the depreciation fund.  Bank

 Using the renouncement for  Trade credit

taxation.
 Bills of exchange
 Postponement of payment accrued
expenses  Government assistance
 Public deposits.

TYPES OF FUNDS:
Every company needs two types of funds they are:
1. Long term funds:
Required to create production facilities through purchase of fixed assets
such as plant and machinery, land and building, furniture etc., investments in these assets are
called fixed capital.

2. Short term funds:

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A STUDY ON LIQUIDITY POSITION

These are required for short term purpose for the purchase of raw materials, payments
of wages and other day to day expenses etc., these funds are known as working capital.
Working capital refers to that part of the company’s capital, which is required for
investment, made in short term or current assets for example cash, debtors, marketable
securities and inventories. Funds then invested in these types of current assets keep revolving
fast and being constantly connected in to cash and again this cash flow out in exchange for
other current assets. Therefore it is called as circulating or short term capital.

CLASSIFICATION OF WORKING CAPITAL:

Working Capital is divided into various types based on balance sheet view and
operating cycle view. Balance sheet view divides working capital into gross working capital
and net working capital and the operating cycle view divides the working capital into
permanent and temporary working capital. Permanent working capital is further divided into
seasonal and special working capital whereas temporary working capital into regular and
reserve working capital.

1 .Gross working capital:

It refers to the total investment in current assets. Gross working capital is a financial concept
and it is also known as circulating or operating or current capital.

2. Net working capital:

It refers to the net current assets i.e. the excess of current assets over current liabilities. Net
working capital is an accounting concept and it is also known as net current assets.

 Negative working capital:

It refers to the excess of current liabilities over the current assets. It is also known as
working capital deficit, which is an indication of some crisis to the firm.

 Permanent working capital:

It refers to the amount of investments made permanently in current assets required
throughout the year to carry out the business operations successively. Permanent
working capital is to be financed out of long term funds but no return can be expected
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A STUDY ON LIQUIDITY POSITION

from it. Permanent working capital is also known as regular or fixed or hand core
working capital.

 Temporary working capital:

It is the additional working capital, which is required for financing the increase in the
volume of business operations at different times during the operating year. Thus it
refers to the amount of working capital, which goes on fluctuating or changing from
time to time with the change in the volume of business activities. It is also known as
variable or fluctuating working capital, it is to be financed out of short term funds and
some return can be expected.

NEED FOR WORKING CAPITAL:

The need for working capital to run day to day business activities cannot be
overemphasized. We will hardly find a business firm, which doesn’t require any amount of
working capital. Indeed, firms differ in their requirements of the working capital. We know
that a firm should aim at maximizing the wealth of its shareholders.
A firm should earn sufficient return from its operations. Earning a steady amount of
profit requires successful sales activity. The firm has to invest enough funds in current assets
for cash instantaneously. There is always an operation cycle involved in the conversion of
sales in to cash.

The various need of working capital is as follows:

 To pay wages and salary.
 It helps to the purchase of raw materials, components and spares.
 It helps to incur day-to-day expenses and overhead cost such as fuel, power and office
expenses etc.
 It also helps to meet the selling cost such as packing, advertising.
 It provides credit facilities to the customer.
 It helps to maintain the inventories of raw material, working progress, stores and
spares and finished stock.

TECHNIQUES FOR THE MANAGEMENT OF WORKING CAPITAL:

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A STUDY ON LIQUIDITY POSITION

In this section a few important techniques of working capital are presented. All
techniques of working capital management can be divided into two parts. Techniques
relevant for the management of working capital as a whole and the techniques relevant for the
management of each component of working capital cash account receivable and inventory.

1. Techniques Relevant for the Management of Working Capital:

One of the very important issues in the management of working capital is
to decide how much to invest in current assets. The investment in current assets is generally
influenced by sales volume. Therefore before firm is able to decide about the quantum of
working capital. It should be forecast its feature sales volume accurately or near accurately.
This is equal true about the components of working capital as well.

2. Time Series Models:

The time series models are based on the assumptions that the past trend will
continue repeating in the future. In the construction of tikes series, models, historical
recordings of the factors to be forecasted is taken into the account and their pattern and the
relationship over the time is established on the basis of the pattern so established future
forecast is made.

3. Econometric Models:
The models here are the equations consisting of dependent and independent
variable. These equations attempt to establish the nature of relationship between variables
enabling the analysis to study the value of the dependent variable on the basis of the value of
the independent variable. These models are sophisticated, very useful techniques.

FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS:

The working capital requirements of a firm depend upon a large number of factors
such as nature and size of the business. The character of their operations, the length of
production cycles, the rate of stock turn over and the state of economic situation. It is not

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possible to rank them because all such factors are of different importance and the influence of
individual factors changes for a firm over time. However the following are important factors
generally influencing the working capital requirements.

1. Nature or character of business

The working capital requirements of a firm basically depends upon the nature of its
business public utility undertaking like electricity, water supply and railways need very
limited working capital because they offer cash sales only and supply services. Large
amount in current assets like inventories receivables and cash as such they need large amount
of working capital. The manufacturing undertaking also requires sizable working capital
along with fixed investments.

2. Size of business of sale of operations

The working capital requirements of a concern are directly influenced by the size of
its business which may be measured in terms of scale of operations create the size of the
business unit generally large will be the requirements of the working capital.

3. Production policy

In certain industries the demand is subject to wide fluctuations, due to seasonal variations.
The requirement of working capital, in such cases depends upon the production policy. The
production could be kept either steady by accumulating inventories during slack periods with
a view to meet high demand.

4. Manufacturing process Length of production cycle

In manufacturing, business requirements of working capital increase in direct proportion

to length of manufacturing process. Longer the process period of manufactures, larger is the
amount of working capital required. The process with the shortest production period should
be chosen.

5. Seasonal variation

In certain industries raw material is not available throughout the year. They have to
buy raw material in bulk during the season to ensure an uninterrupted flow and process
them during the entire year.

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A STUDY ON LIQUIDITY POSITION

6. Working capital cycle

In a manufacturing concern the working capital cycle starts with the purchase of raw
material and ends with the realization of cash from the sale of finished products. This cycle
involves purchase of raw material and stores, its conversion in to stocks of finished goods
through work in progress with progressive increment of labor and service costs, conversion of
finished stock in to sales debtors and receivables and ultimately realization of cash and this
cycle continue again from cash to purchase of raw material and so on.

7. Credit policy

The credit policy of a concern in its dealings with debtors and creditors influence
considerably the requirements of working capital A concern that purchases its equipment on
credits and sells its product, services on cash requires, lesser amount of working capital
velocity or speed on the other hand a concern buying its requirements for cash and allowing
credit to its customers, shall need larger amount of working capital as very huge amount of
funds are bound to be tied up in debtors or bills receivables.

8. Rate of growth of business

The working capital requirement of a concern increases with the growth and expansion of
its business activities. Although it is difficult to determine the relationship between the
growth in the volume of business and the growth in the working capital of a business yet it
may be concluded that for normal rate of expansion in the volume of business, we may have
retained profits to provide for more working capital but in fast growing concerns we shall
require larger amount of working capital.

The advantages of having adequate working capital:

 Smooth Flow of Production:
To maintain a smooth flow of production, it is necessary that adequate working
capital is available for paying trade suppliers, hiring labour and incurring other
operating expenses.
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A STUDY ON LIQUIDITY POSITION

 Increase in Liquidity and Solvency Position:

It enhances the liquidity and solvency position of the business concern.
 Goodwill:
A firm with sound working capital position can make timely payment of its
outstanding bills. This enhances the reputation of the firm.
 Advantages of Cash Discount:
It enables the firm to avail itself of the facilities like cash discount by making prompt
payments.
 Easy Loan:
Adequate amount of working capital builds a sound credit-worthiness of the firm. As
a result it becomes easier for the firm to obtain additional loans in favourable terms
and conditions in order to meet seasonal increase in demand or to finance the
increased working capital resulting from expansion.
 Regular Payment of Wages and Salaries:
The firm can make regular and timely payment of wages and salaries to its
employees. This increases the morale and efficiency of employees.
 Security and Confidence:
It creates a sense of security and confidence in the mind of management or officials of
the firm.
 Efficient Use of Fixed Assets:
Adequate amount of working capital enables the firm to use its fixed assets more
efficiently and extensively. If the fixed assets remain idle due to paucity of working
capital, depreciation of fixed assets and interest on borrowed capital invested in fixed
assets will have to be incurred unnecessarily.
 Meeting of Contingencies:
It can meet unforeseen contingencies of the firm. Unforeseen contingencies like
business depression, financial crisis due to huge losses etc. can easily be overcome, if
adequate working capital is maintained by a firm.
 Completing operating cycle:
A sound management of working capital helps in completing the operating cycle
quickly. This enables a firm to increase its profitability.
 Timely Payment of Dividend:
Adequate working capital ensures regular payment of dividends to the shareholders.

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A STUDY ON LIQUIDITY POSITION

Importance of Working Capital Management:

Efficiently maintaining a balanced ratio between current assets and current liabilities is called
working capital management. Significance of Working capital management ensures that that
the company has enough monetary liquidity to meet short-term debts. Structuring an effective
working capital management is a great way to enhance the income. Ratio analysis and
management of individual components of working capital are two primary importance of
working capital management.
1. Ratio Analysis: Process of determining and analyzing numerical relationships in
accordance to financial statements like balance sheets, income statements and cash
inflow statements is known as ratio analysis. The primary purpose of ratio analysis is
to appraise the operating and financial performance of an economic activity and
determine its efficiency, profitability, liquidity and solvency. It also helps in getting a
brief idea about comparative valuation by comparing ratios of different companies in
the same sector.
2. Inventory Management: Inventory management has huge importance of working
capital management, it involves overseeing the purchase of new items and managing
the existing ones. It aims to create such a purchase plan that will ensure effective
delivery of materials. Two most used inventory management strategies are ‘Just-in-
Time Method’ and ‘Material Required Planning.’ In former one the firm plans to
receive items at the time of need rather than maintaining high inventory levels, and
the latter one is based sales forecasts.
3. Cash Management: Cash management is process of collecting, managing and
utilizing the cash inflow to optimize the short-term financial stability. The key
component in accomplishing this task is solvency as an importance of working capital
management. Successful cash management is useful when any unexpected demand
for cash occurs unexpectedly.

THE EFFICIENCY OF WORKING CAPITAL MANAGEMENT CAN BE

JUDGEDTHROUGH ACCOUNTING RATIOS:
The important accounting ratio’s that could be used for judging the efficiency of working
capital management are:-
• Current Ratio

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• Quick Ratio
• Cash to Current assets Ratio
• Debtors turnover ratio
• Inventory turnover ratio

 Current Ratio:
Current ratio in a business concern indicates the availability of current
assets to meet its current liabilities. Higher the ratios better the coverage. Traditionally, it is
also called 2:1 ratio, i.e., 2 is the standard for current assets for each unit of current liabilities.
The current ratio, calculated as current assets divided by current liabilities, is considered a
key indicator of a company's fundamental financial health since it indicates the company's
ability to successfully meet all of its short-term financial obligations. Although numbers vary
by industry, a working capital ratio below 1.0 is generally indicative of a company having
trouble meeting its short-term obligations. Working capital ratios of 1.2 to 2.0 are considered
desirable, but a ratio higher than 2.0 may indicate a company is not effectively using its assets
to increase revenues.

 Quick ratio:
Quick ratio is also known as acid test or liquid ratio, is a more rigorous
test of liquidity than the current ratio. The liquidity refers to the ability of a firm to pay its
short term obligations as and when they become due.

The quick ratio is an indicator of a company’s short-term liquidity position and measures a
company’s ability to meet its short-term obligations with its most liquid assets.

Since it indicates the company’s ability to instantly use its near-cash assets (that is, assets that
can be converted quickly to cash) to pay down its current liabilities, it is also called as the
acid test ratio. An acid test is a quick test designed to produce instant results—hence, the
name.

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 Cash forecasting and budgeting :

Cash budget is the most significant device to plan for and control cash receipts and
payments. A cash budget is a summary of the firm’s expected cash inflows over a projected
period. It gives information on the timing and magnitude of expected cash flows and cash
balances over the projected period. This information helps the financial manager to determine
the future cash needs of the firm, plan for the financing of these needs and exercise control
over the cash and liquidity of the firm.
The time horizon of a cash budget may differ from firm to firm. A firm whose business is
affected by seasonal variations may prepare monthly cash budgets. Cash forecasts are needed
to prepare cash budgets. Cash forecasting may be done on short or long-term basis.
Generally, forecasts covering periods of one year or less are considered short-term those
extending beyond the one year are considered long-term.

 Debtors’ turnover ratio:

It indicates the number of times debtors turnover each year. It indicates the efficiency of staff
entrusted with collection of debts. The higher the ratio is better since it would indicate the
debtors are being collected more promptly. Debtors should be always being taken at gross
value. No provision for bad & doubtful debts should be deducted from them.

 Inventory turnover ratio:

Inventory Turnover Ratio measures the velocity of conversion of stock into sales.
Inventory Turnover Ratio indicates whether inventory has been efficiently used or not. It is a
ratio showing how many times a company has sold and replaced inventory during a given
period. A company can then divide the days in the period by the inventory turnover formula
to calculate the days it takes to sell the inventory on hand. Calculating inventory turnover can

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help businesses make better decisions on pricing, manufacturing, marketing and purchasing
new inventory.

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A STUDY ON LIQUIDITY POSITION

CHAPTER 2

RESEARCH
METHODOLOGY

TITLE OF THE PROJECT

“A study onLIQUIDITY POSITION in Associated Hydro Pressings Private

Limited”

2.1. STATEMENT OF THE PROBLEM:

This research is intended to identify the liquidity position of Abbott healthcare PVT L
TD. Theinability to pay its shortterm obligation can lead a company to face serious fin
ancial problemswhich may affect the settlement of the transactions even if the compan

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A STUDY ON LIQUIDITY POSITION

y is in good financial standing because of the lack of liquidity.

2.2. OBJECTIVES OF THE STUDY:
 The main objective of the study is to analyze how liquidity position is carried out in the
organization.
 The study various liquidity ratios and their usage is analyzing the liquidity position of the
company.
 The study various components of working capital and their management.
 To know the efficiency of the company in utilizing its current assets.
 Liquidity refers to the capacity of an institution to generate or obtain sufficient cash or its
equivalent in a timely manner at a reasonable prize to meet its commitment as they fall due
and to fund new business opportunities as part of going–concern operations.

2.3. SCOPE OF THE STUDY:

Decision regarding liquidity position is operating in nature and is not our time decision, so
the scope of the study is to identify the areas of the control to have better over various
components of liquidity position. An attempt is made to identify the optimum working capital
requirements for Associated Hydro Pressings Private Limited and how can they utilize the
inventories, cash and receivables in better way.
The study is on liquidity position of Associated Hydro Pressings Private Limited. The study
furnishes the management of idea about the performance of liquidity position of the company.
Management of liquidity position refers to management of current assets, current liabilities and
relationship between them. The basic goal of liquidity position is to maintain the satisfactory level of
liquidity position. A sound liquidity position policy ensures higher profitability and proper
liquidity of a firm. Every business needs funds for two purposes: for its establishment and to carry out
its day to day operations. For this purpose it is important for the company to manage its short term
assets and liability. liquidity position is quite essential for the working of any business. For a good
manufacturing company, some basic capital for producing the goods is required before it starts selling
them. It has to take care of production expenses, administration expenses as well as selling expenses.
Moreover, since business is usually done on credit, there is a time lag between the date of sale and
date of receipt of revenues, which can be as high as 90 days at times. Considering all these, it is
essential that a company has sufficient capital to keep it going before it coverts its purchases into
goods and then finally into cash. Each and every study has its own scope. This project intends to study
the liquidity position position of the Public enterprises. This study helps to identify the areas that

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could be improved. Further suggestions were quoted which the company could use it in the future
program enhancing better utilization of all resources.
 The study is exclusively conducted for Associated Hydro Pressings Private Limited
 The study is conducted on the basis of records of last 5 years.
 The study focuses on the measurement of liquidity of liquidity position.
 The study is limited only to important heads of balance sheet and P & L a/c, even though a
brief insight was given to other aspects.
 The study is conducted based on true financial data provided by Associated Hydro
Pressings Private Limitedfor the sole purpose of conducting the study.

a. METHODOLOGY OF DATA COLLECTION:

The study required both primary and secondary data. Secondary data is obtained from past
records and reports of the organization and from other financial statements.
The data relating to liquidity position of Associated Hydro Pressings Private Limitedhas been
collected through secondary source via, published annual reports of the company during the
years 2014-2018.

Research type: The data sources can be classified into two categories:-

 Primary data:
The data directly collected by the researcher with respect to the problem under a study is
known as primary data. Primary data is also the first hand data collected by the researcher
for the immediate purpose of the study.
Sources of primary data: - Having discussion with different department managers and
officers of the company to get the general information about the company and its activities.
 Secondary data:
Secondary data’s has been obtained from published reports like the annual reports of the company,
balance sheets, and profit and loss account, booklets, records such as files, reports maintained by the
company. Mainly the annual report consists of two parts

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A STUDY ON LIQUIDITY POSITION

 Profit and Loss Account

 Balance Sheet
Profit and loss account reveals the income and expenditure of the company. Balance Sheet reveals
the financial position of the organization. Those two statements are prepared by the highly
qualified and experts with the help of available information or data.

b. LIMITATION OF THE STUDY:

The data were collected mainly on the basis of secondary data. So the limitations of secondary data
are applicable. Due to busy work schedule, detailed discussions were not possible. The data collected
for the study was historic in nature, so the suggestions will be irrelevant.
 The study is based on the liquidity position analysis only.
 It is based on the data supplied by the company’s HR Department.
 The study is based on the information available in the balance sheet of the company
these balance sheet suffers a few limitations.
 The study evaluation is based on the sum of the related working capital ratios.
 The data collected is from the annual reports, which is already prepared.
 Since only 5 years data is used for the analysis, the outcome may be generalized.
 Due to limitation of time, it was unable to go for a depth study in to the subject
 The analysis is based on historical data.

PERIOD OF STUDY

The present study deals with the data collected from the annual reports and other relevant
documents for the period commencing from 2015 to 2019.

TOOLS USED FOR THE ANALYSIS:

 Ratio analysis
 Schedule of changing in working capital

CHAPTER SCHEME:

CHAPTER 1: INTRODUCTION

Liquidity is the term used to describe how is it is to convert assets to cash. The most liquid
asset and what everything else is compared to is cash. This is because it can always been used
easily and immediately. Certificates of deposits are slightly less liquid because there is

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A STUDY ON LIQUIDITY POSITION

usually a penality for converting them to cash before their maturity date. Saving bonds are
also quite liquid. Since they can be sold at a bank fairly easily. Finally shares of the stock,
bonds options and commodities are considered fairly liquid because they can be easily sold
and you can receive the cash within a few days.

CHAPETER 2: RESEARCH DESIGHN

 Statement of the problem.

 Objective of study.
 Scope of study.
 Methodology of data collection.
 Limitation of the study.
 Period of the study.
 Tools for the data analysis.

CHAPTER 3: COMPANY PROFILE

Associated Hydro Pressings Private limited is one of the leading manufacturers of Precision
Pressed Components, specialized in Deep Drawn parts and case assemblies used in the
Automotive Sector and Electro Mechanical sub-assemblies. This chapter contains the
company’s background of “Associated Hydro Pressing Private limited”.

CHAPTER 4: DATA ANALYSIS AND INTERPRETATION

Analysis of data with required interpretation, the information obtained needs to reduce to
table and charts, charts are to be measured on the survey conducted through questionnaire on
Associated Hydro Pressing Private limited. Inferences are drawn from the following
interpretation of the table and chart.

CHAPTER 5: SUMMARY OF FINDINGS, SUGGESTIONS AND CONCULSONS

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It is to be noted that the recommendations are practical, acceptable and comprehensive. All
inferences drawn from each table becomes findings and conclusion for each objective to be
given.

ANNEXURES AND BIBLIOGRAPHY

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CHAPTER 3

COMPANY

PROFILE

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INDUSTRY PROFILE

Deep Drawn and Pressing Components Industry

The popularity of deep drawn components and press components lies in the incredible
flexibility for design and production. Deep drawn components and press components are one
of the primary and most common uses in the industry. One of the main advantages that
precision case assemblies have is its flexibility.

Deep drawing is a sheet metal forming process in which a sheet metal blank is radically
drawn into a forming die by the mechanical action of a punch. It is thus a shape
transformation process with material retention. The process is considered "deep" drawing
when the depth of the drawn part exceeds its diameter.

Deep drawing manufacturing is a technology that involves the stretching of sheet metal stock.
The edges of the sheet metal are restrained by rings and the plug is deep drawn into a top die
cavity to achieve the desired end shape. There are various shapes that can be made through
deep drawing and stamping including cups, pans, cylinders, domes and hemispheres, as well
as irregular shaped products.

The ability to manufacture parts that have traditionally been manufactured by other processes
such as turning, casting or assembly offers many benefits to the designer and production
engineer:

 Less material is used in the deep drawing process, thereby reducing material waste
and ultimately cost
 Deep drawing can produce complex designs that are often not possible with other
manufacturing techniques without using costly secondary operations.
 Component quality is often better than other processes and shows better
repeatability in production batches.

The items that can be manufactured using deep draw pressing ranges from very small catheter
holders to large enclosures. The process can create components that are rectangular, square
and cylindrical. This gives the items a huge versatility.

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Some common household items that benefit in terms of cost and aesthetics by using deep
draw pressed components include:

 Batteries
 Lipstick Tubes / Cosmetics Containers
 Asthma Inhalers
 Metal Pen Lids
 Metal Ball Point Pen Refills.
 “Widgets” In Beer Cans.
 Plumbing And Heating Fittings

In short, any item that features a seamless metal tube could include a component that has
been deep drawn pressed and they are used in a huge variety of industries.

Many metals are suitable for deep draw pressing. The most common are stainless steel,
aluminium, brass, copper and cold rolled steel. The only real requirement is that the metals
must be malleable, allowing the part to be forced into a shape without suffering from
excessive stress damage; resulting in cracks during the deep drawn process.

The deep drawing press pushes material from a reel, or single blanks, through multiple
positions. At each position the shape is changed by pressing or "drawing" the material further
down into a progressively changing set of geometric dies until the final shape is acquired.

Whether the process requires a single draw operation, or multiple drawn operations to create
the desired resulting form, largely depends on the metal being used and the requirements of
the finished product.

The part configuration is limited by the required force to produce the shape, which is
dependent on the size of the drawing press, the material's malleable characteristics and its
ability to be drawn.

Where large volumes are involved, deep draw pressing is an extremely cost-effective process.
This is because once the dies have been installed on the deep draw press, the process is
entirely mechanical. We have engineered deep drawn components that have offered more
than 85% reductions in unit cost when compared to the original machined parts. This makes
the process ideal for high volume, low retail price items.

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The deep draw pressing process first involves creating a series of geometric dies. These are
installed on the deep draw press. A blank metal component is then passed through the press,
being pressed (or drawn) into each die in turn. At the end of the process, the final shape is
achieved. Typical production speed is 60 parts a minute. The process can be repeated if a
particularly complicated shape is required.

Progressive die pressing, sometimes known as stamping is a similar process, but one that is
only capable of producing relatively shallow components. The progression pressing process
is very similar to that of deep draw pressing, with the exception that instead of blanks being
fed into the machine, thin sheet metal is used. Typical production speed for progression
pressing is 250 parts a minute.

Dayton Rogers, a privately held company, began as a supplier of precision deep drawn
components and press components in 1929. Today there are Full Service suppliers of deep
drawn components and press components formed products.

Generally, there are two categories of factory machinery: Standardized and Customized.
Standardized machinery typically found in the paper, transportation, chemical, mining, or
aircraft industries includes equipment such as packaging lines, plastic molding equipment,
and machines used for punching, stamping, or bending metal. Customized equipment takes
longer to build, is more expensive, and is more profitable than standardized equipment.

Expenditures on machinery and tools, (capital spending) tells a lot about the future direction
of the whole economy. Such production equipment from complicated industrial machinery to
small hand tools is used in almost every business, from food processing to auto
manufacturing. When companies establish, expand, or upgrade their production facilities, it’s
usually good news for both the industry and the economy.

The industry mainly specializes in precision metal forming solutions including metal press
components, metal fabrication, engineering support, mechanical assemblies, progressive,
transfer, compound, and deep drawn press components. The high quality metal press
components are manufactured in modern facilities to customer specification with ISO and
testing certifications.

Leading machinery and equipment makers include Illinois Tool Works (ITW), Eaton Corp,
Sandvik, Kennametal, and Dover Corporation. Well-known toolmakers include Stanley

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Works, Snap-on, and Black & Decker. Their products include machine tools, automated
machine tools, hand tools, precision tools and expendables.

Some of the methods are:

 Metal Spinning: Spinning is a method of forming Deep drawn components or

tubing into seamless hollow cylinders, cones, hemispheres or other circular
shapes by a combination of rotation and force.
 Industrial Magnetics: Pick n Place deep drawn components parts in automated
transfer or robotic applications with this new generation of tooling technology.
Ideal for transferring or de-stacking steel sheets, blanks, press components and
parts in variety of automated applications.
 Hydro Forming: The hydro forming process is often a practical solution in cost
sensitive, low volume production and when deep drawn component parts with
irregular contours are required. These types of industries are supplying the
small components to the Automobile and Electrical industry.

In our country the Automobile and Electrical industry are developing stage by stage so that
these type of industries change according to the changing of specification of the industry.

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COMPANY PROFILE

Company Name Associated Hydro Pressing Private Limited

Year of Establishment 1981

Managing Director Mr. Silvian Noronha

Director Mrs. Sheila Noronha

Benniganahalli, Old Madras Road,

Address
Bengaluru-560016

Phone 080-28510188,

Fax 080-28516283

E-Mail ID [email protected]

Website www.ahppl.com

Deep Drawn Components, flanges and case

Product
Assemblies

Product Line Automotive Sector, Electrical Sector, Export Items

Competitors R V Tech, Thermo Industry, NASH, CMW, LMW

Shakthi & Co.
National: -

 Continental Automotive Components India.

Bangalore, Pune &Manesar
 Cooper Bussman India Private Limited.
Customers
Puducherry
 Karnataka Industries. Bangalore
 Mersen India Private Limited. Bangalore
 Omni tonze. Bangalore
 Press form Industries. Chennai

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A STUDY ON LIQUIDITY POSITION

 Pricol Limited. Coimbatore, Pune, Manesar&

Uttaranchal
 Silver Crown Industries. Coimbatore
 Shakthi& Co. Bangalore
 SVS Industries. Bangalore
 Tafe Access Limited. Chennai
 Tyco Electronics Corporation India Private
Limited. Bangalore
 Walvoil Fluid Power India Pvt. Ltd.
Bangalore

International Customers:-

 Continental Automotive
Systems US. Inc
 Siemens VDO Automotive
Corporation, Mexico& USA
 Hoke Incorporated. USA
 Pt.PricolSurya.Indonesia

Area Occupied 15000 Sq. Ft.

Name of Banks Canara Bank

Number of Working Days 300 per year

7:30am to 4:30 pm
Number of Shifts
General shift: - 9:00am to 5:30 pm

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BACKGROUND OF COMPANY

Way back in 1981, Associated Hydro Pressings Private Limited was formed by a technocrat
to work in the field of automobile & electrical sectors. Over a decade, this firm ensured
modest growth and converted into a private limited company under the ages of small scale
industry and christened as Associated Hydro Pressings Private Limited. Subsequently AHP
achieved many milestones during the span of 30 years owing to dedicated and conscious
efforts towards quality and reliability in manufacturing process.

Associated Hydro Pressing Private Limited (AHP) is an ISO/TS – 16949:2002 company

established and recognized organization in the field of deep drawn components. AHP is one
of the leading manufacturers of Precision Pressed Components, specialized in Deep Drawn
parts and case assemblies used in the Automotive Sector and Electro Mechanical sub-
assemblies.

A young and ambitious engineer with a vision to contribute to the industrial and economic
map of India started his venture for contract manufacturing/job work for niche industries. The
unit was started in 1981 and is headed by Mr. SILVIAN NORONHA, Managing Director,
who has vast experience in the field of Press Tools and Pressed Components for more than
two and half decades.

We have with us the best team to propel the overall management of the company in the right
direction. Our unit is situated in the main part of the city at Old Madras Road, which is well
connected to National Highway, Railway and Airport. They are just 4 KMs. Away from the
famous International Tech Park.

The redeeming feature at Associated Hydro Pressings Private Limited is the availability of
right human resources. Associated Hydro Pressings Private Limited employs qualified
engineers, technologists, management personnel and skilled workmen. The availability of
such a wealth of talent is surely is an asset to the company.

 Associated Hydro Pressings Private Limited strategies in maximum use of all human
resources to greater advantages of the company, the employees, and the customers.
 As a model employer Associated Hydro Pressings Private Limited keeps their people
motivated every time.
 Company adopted the policy of customer friendly & fulfilment of customer needs.
The staff at Associated Hydro Pressings Private Limited is thus Eveready to meet the
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A STUDY ON LIQUIDITY POSITION

challenges in any adversity at any stage. Even they are fully dedicated and determined
to make the company to glorious heights.

PROMOTERS

Mr Silvian Noronha- Managing Director

Mrs Sheila Noronha- Director

VISION

Associated Hydro Pressings Private Limitedis excited about promising and

challenging future prospects. Therefore Associated Hydro Pressings Private Limited
continues to invest in sharpening skills and processes for partnering with you in the journey
towards business excellence. As we operates in dynamic business environment characterized
by rapid change & response so we look forward to future filled with challenges, hope and
optimism.

“Our vision is to graduate to a dedicated, loyal and world class supplier in the
ensuing periods”.

MISSION

AHP’s mission is to be rated as an enviable company in the country, within the next three to
five years.

“The focus shall be on delivering what customers’ business demands”.

QUALITY POLICY

Associated Hydro Pressings Private Limited will provide quality products as mutually agreed since
“Quality First Is Our Policy” this will be achieved through continuous improvement of
effectiveness of Quality Management System and by reviewing the quality objectives periodically.

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PRODUCTS PROFILE

Automobile: Various parts of Automotive Dashboards and Fuel Tanks.

Electrical : Various Tag & Cap assembly parts for HRC fuses.
Export : Fuel Flange Assembly.

AREAS OF OPERATIONS

Bengaluru:
Associated Hydro Pressings Private Limited
Benniganahalli, Old Madras Road
Bangalore - 56 00 16
Coimbatore:

Associated Hydro Pressings Private Limited

Unit-2, KNG Pudur Road,

SomayamPalya, Coimbatore

Tamil Nadu-641006

Accordingly, Associated Hydro Pressings Private Limited opened full-fledged factory at

Coimbatore in order to cater the needs of Pricol Limited and other local customers at
Coimbatore.

INFRASTRUCTURE FACILITIES

 Built Up Area

They have 15,000 Sq. ft. of built up area in a highly develop export oriented industrial zone
adjacent to international technology park in Bangalore. The built up area comprises of
commercial, administrative, technical and production blocks.

Associated Hydro Pressings Private Limited built commendable infrastructure and an

investment for know-how, equipment and manpower. The state of the art technology helped

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Associated Hydro Pressings Private Limited to respond quickly to customer needs and
accurately process it. We have various power/ pneumatic/ hydraulic presses ranging from 10
tons to 250 tons fitted with various attachments like Auto Feeder, Decoiler etc. Our
Inspection department is equipped with latest upgraded Inspection, Measuring and Testing
Equipment’s which enables us to maintain our stringent quality norms. We are situated in an
industrial belt where there is no dearth of Power supply.

 Equipment & Machines

The major production equipment and machineries consist of following:

 Production

The production team works in co-ordination with the development team to qualify to achieve
Zero numbers for Parts per Million and as per customer specifications. They translate
developed product to production under the supervision of product leaders only when quality
standards in terms of development and standard operating procedures is met and understood
by production team.

 Manufacturing Facilities

Associated Hydro Pressings Private Limited(AHP) boasts of a fully integrated manufacturing

facility for development and production of specialty pressed and deep drawn components.
Associated Hydro Pressings Private Limited built commendable infrastructure and an
investment for know-how, equipment and manpower. The state of the art technology helped
Associated Hydro Pressings Private Limited to respond quickly to customer needs and
accurately process it.

They have various manpower/pneumatic/ hydraulic presses ranging from 10 tons to 250 tons
fitted with various attachments like Auto Feeder, DE coiler, etc. This inspection department
is equipped with latest upgraded inspection, measuring and testing equipment which enable
them to maintain their stringent quality norms. They are situated in an industrial belt where
there is no dearth of power supply.

 Production & Manufacturing: Associated Hydro Pressings Private Limited has

various presses ranging from 10 ton to 250 ton capacity (Hydraulic / Mechanical /

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A STUDY ON LIQUIDITY POSITION

Pneumatic) shearing machine, projection welding machine, spot welding , hand

presses, lathe, reverting machines, tapping machines & Soldering Units.
Power presses ranging from 10 ton to 200 on capacity
(hydraulic/mechanical/pneumatic)

1. Shearing machine

2. Projection welding machine

3. Spot & twig welding machine

4. Hand presses

5. Lathe

6. Riveting machines

7. Tapping machines

8. Water leak testing machine.

 Tool Room: Latest Design and In-house Tool manufacturing facility.

1. Lathe
2. Surface grinder
3. Milling machine
4. Radial drilling
5. Die filing machine
6. Band saw cutting
7. Cylindrical grinding

 Testing & Inspection: Fully equipped with Latest Testing Instruments.

1. Digital veriner calipers

2. Dial gauge/stand

3. Illuminated magnifier

4. Radius gauge

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A STUDY ON LIQUIDITY POSITION

5. Digital bore gauge

6. Digital height gauge

7. Micrometers (Ball)

8. Slip gauge

9. Hardness tester

10. Plug gauges

11. Height Gauges.

COMPETITORS INFORMATION

Some of our competitors are:

 Shakthi & Co.

 R V Tech
 Thermo Industry
 NASH
 CMW
 LMW

Human Resources

The redeeming feature at Associated Hydro Pressings Private Limited is the availability of
right human resources. Associated Hydro Pressings Private Limited employs qualified
engineers, technologists, management personnel and skilled workmen. The availability of
such a wealth of talent is surely is an asset to the company.

 Associated Hydro Pressings Private Limited strategies in maximum use of all human
resources to greater advantages of the company, the employees, and the customers.
 As a model employer Associated Hydro Pressings Private Limited keeps their people
motivated every time.
 Company adopted the policy of customer friendly & fulfillment of customer needs.

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A STUDY ON LIQUIDITY POSITION

 Accordingly Associated Hydro Pressings Private Limited opened full-fledged factory

at Coimbatore in order to cater the needs of Pricol Limited and other local customer at
Coimbatore.

The staff at Associated Hydro Pressings Private Limited are thus Eveready to meet the
challenges in any adversity at any stage. Even they are fully dedicated and determined to
make the company to glorious heights.

SWOT ANALYSIS

 Strengths
 Quality policy is good
 Engaged in export business
 Brand equity commands good amount of respect
 Infrastructure and man power is good
 Less competition among deep drown manufacturing industries
 Fully dedicated and determined staff to meet the challenges in any
adversity at any stage
 Latest and upgraded machinery

 Leading manufacturer of deep drawn components

 Weakness
 Intense competition for reduction in prices
 Existing supply capacity is more than the demand
 Need to improve on exports
 Lack of enough space to extend operations

 Opportunities
 As competitors are less, it can expand its business in various places
 Development of new tools and products
 More export opportunities
 New niche market for products as there are very few manufacturers
for deep drown products

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 Threats
 Non availability of skilled labor
 Few competitors, but more competition
 Clients producing products on their own, which makes the loss of
customers

 Market demand is one of the threat to the organization

 There is a threat from the new entrants

 Competition from the overseas

 Labor turnover may be the threat because of the improvement in

technology from the competitors

FUTURE GROWTH AND PROSPECTS

The trust and confidence reposed by the valued customers has emboldened Associated Hydro
Pressings Private Limited to take further strides in larger interests of them. The customers has
remained the pivotal point in all our business initiatives and it is this vision that enabled
Associated Hydro Pressings Private Limited to launch Techno savvy and customer friendly
products.

 "CUSTOMER DELIGHT" is the keyword at Associated Hydro Pressings Private

Limited as we take care of the needs of the customer and therefore our needs are
automatically taken care of. Associated Hydro Pressings Private Limited consciously
and willingly commit to change in the work culture and word ethos.
 During the Financial year the company has achieved the turnover of Rs.582.20 Lakhs
(Gross) and the company is hoping to achieve a turnover of Rs.1250.00 Lakhs for the
current financial year ending March 2015.
 Even in exports the company has achieved the turnover of Rs.25.66 Lakhs. The
company is hoping to cross the turnover in coming financial year March 2015.
 In line with the increase in sales, the company has made the projections as follows:
 To meet the above target, company has strengthened the fleet of machineries and
required man power.

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 Again, with regard to export turnover we have diversified our product line and
expect such increase from new customers.
 We have already appointed a full-fledged Quality team who can take care of all the
quality aspects as per requirements.
 As the company has good reputation with all the financial institutions, there is no
problem for project financing.
 In a nutshell, Associated Hydro Pressings Private Limited has a vital role to play in
the global market in the days to come.

Achievements
Associated Hydro Pressings Private Limited (AHP) has achieved many milestones during last
few years owing to dedicated and conscious efforts towards quality and reliability in
manufacturing process.

In Quest of technical excellence and customer satisfaction, Associated Hydro Pressings

Private Limited recognized the paramount importance of third party quality certification. We
have been awarded ISO 9001 for our Quality Systems in 1999 by RWTUV, Germany. As a
step ahead in quality systems our company is certified for ISO/TS 16949:2002 in the year
2006 by TUV NORD, Germany.

Ref. Certificate No. 44 111 067023 dated 13th December 2006.

Received the Udyog Patra Award as a Self-made Industrialist which was presented by the
Honourable Union Minister for Human Resources at the 16th National Economic
Development Conference held at New Delhi in November 2001.

This award has been considered a tribute to self-made industrialist for his recognition of hard
work, dedication and self-reliance for successful establishment of the industrial unit. It has
been considered a tribute for a great service to build a prosperous India.

Received the Appreciation award from Bharathiya Ekta Parishad, presented by the
Honourable Union Minister for Labour.

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A STUDY ON LIQUIDITY POSITION

We were also adjudged as the Best Overall Supporting Vendor to VDO Siemens
Automotive Limited, Bangalore (now known as Continental Automotive Components) and
Pricol Limited, Coimbatore.

We have been awarded with National Status Award for Business Development – 2007 by
Indian Organization for Commerce and Industry. (IOCI) New Delhi
With the passage of time, AHP emerged as a well-recognized technologically component
vendor. Today Associated Hydro Pressings Private Limited operates from its own premises
with full-fledged manufacturing facilities at Bangalore, India.

PRODUCT PROFILE

AUTOMOBILE

Assembly Case Odoframe Clamp 900 SSB Flange

GMT 560 Flange Flange Cover Magnet Washer

Cup Drag Bracket Inner Ring 3N Case

ELECTRICAL

Page | 41
A STUDY ON LIQUIDITY POSITION

Outer Cap Outer Cap Outer Cap Inner Cap Inner Cap

Armature Plate Tags Tags Tags Tags

Yoke & Core

Mounting Plates
Assembly

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A STUDY ON LIQUIDITY POSITION

CHAPTER 4

DATA ANALYSIS AND

INTERPRETATION

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A STUDY ON LIQUIDITY POSITION

CURRENT RATIO

4.1Table showing Current Ratio

Years
2015 2016 2017 2018 2019

Current
assets 66201104.72 90690668.82 93854071.01 93585501.95 94521352.14

Current
liabilities 16098863.41 30362000.74 28777295.36 33420648.25 36762713.07

Current
ratio in 4.11 2.98 3.26 2.80 2.57
terms

ANALYSIS

The above current ratio table shows increasing trend from 4.11 in 2015 to 2.98 in 2016 and
there was suddenly high increase in 2015 by 4.11, and in 2016 it decreased to 2.98 it is not a
good indicator for the company, and in 2017 it was 3.26 and in 2018 it again fell to 2.80.and
in 2019 to 2.57

Decreasing is not a good sign for the company and increasing is a healthy sign for the
company to meet its short term creditors.

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A STUDY ON LIQUIDITY POSITION

4.1 Graph showing that current ratio changing from 2015 to 2019

INTERPRETATION

Current ratio is useful to test the short term debt paying ability of the business. The high
current ratio may not always be a green signal. It requires a deep analysis of the nature of
individual current assets and current liabilities can differentiate the liquidity position of the
business. From the above graph the current ratio shows a decreasing and increasing trend.
In the operating cycle of the firm current assets are converted into cash to provide funds for
the payment of current liabilities. So higher the current ratio, higher the short term liquidity.

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WORKING CAPITAL RATIO

4.2 Table showing working capital ratio

Years 2015 2016 2017 2018 2019

Sales 90129847.09 192669784.91 159977201.45 140499609.13 154549570.04

Net
working 50102241.31 60328668.08 65076775.65 60164853.7 66181339.07
capital
Working
capital turn 1.79 3.19 2.45 2.33 2.33
over ration

ANALYSIS
The working capital turnover ratio for the year 2015 was 1.79 it is increased in the year 2016
to 3.19 and again decreased in 2017 to 2.45.There was decrease in 2018 to 2.33 and there is
decrease in 2019 which was 2.33. It indicates that in 2016 it has the greatest ability to meet its
current obligations in working capital management.

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4.2 Graph showing the working capital ratio

INTERPRETATION
Generally, a high working capital turnover ratio is better. A low ratio indicates inefficient
utilization of working capital. The ratio should be interpreted because a very high ratio may
also be a sign of insufficient working capital
As it could be observed in Table 4.6 of Associated Hydro Pressing Private Limited, the ratio
of working capital to total assets ratio varied between the highest of 3.19in 2016 and the
lower of 1.79 in 2015 respectively. It indicates that in 2011 it has the greatest ability to meet
its current obligations. In 2015 the company had less working capital it indicates their weak
liquidity position in that year. In 2017 there was 2.45 and it decreased to 2.33 in 2018 and in
2019 there was 2.33 which indicates there is a bad liquidity position.

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DEBTORS TURNOVER RATIO

4.3 Table showing the debtors turnover ratio

Years 2015 2016 2017 2018 2019

Sales 90129847.09 192669784.91 159977201.45 140499609.13 154549570.04

Debtors 17876001.06 46021242.00 31900733.75 23078151.94 25385967.13

Debtor
turnover 5.04 4.18 5.01 6.08 6.08
ratio

ANALYSIS
6.08From the above table we find that the debtor’s turnover ratio for the year 2015 was 5.04
For the year 2016it was 4.18, for the year 2017 it was 5.01, for the year 2018 it was 6.08 and
for the year 2019 it was 6.08 which was the highest in the last 5 years.

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4.3 Graph showing debtor’s turnover ratio

INTERPRETATION
The liquidity of the company as a whole and debtors turnover ratio measures the liquidity of
account receivables. It generally indicates the high ratio indicates that the receivables are
more liquid and are being collected promptly. Low ratios are a sign of less liquid receivables
and reduce the liquidity of the business. As it could be observed in the above Table 4.7,
among all the years of Associated Hydro Pressing Private Limited, the debtor turnover ratio
varied between the highest of 6.08 % in 2018 and 2019 the little lowest by 4.18% in 2016 and
in 2015 it was 5.04%. In 2016 and 2017 it was 4.18 and 5.01 there was increased in last two
years. It indicates that in 2018 and 2019 it has the greatest profitability. It depicts liquidation
capacity of company.

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CURRENT ASSETS TURNOVER RATIO

4.4 Table showing Current assets turnover ratio

Years
2015 2016 2017 2018 2019

Net sales
90129847.09 192669784.91 159977201.45 140499609.13 154549570.04

Current
66201104.72 90690668.82 93854071.01 93585501.95 102944052.14
assets

Current
asset 1.50
1.36 2.12 1.70 1.50
turnover
ratio

ANALYSIS

From the above table we find that the current assets turnover ratio for the year 2015 was 1.36,
For the year 2016 was 2.12, For the year 2017 was 1.70 and for the year 2018 it was1.50 and
the final year 2019 it was 1.50.

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A STUDY ON LIQUIDITY POSITION

4.4 Graph showing current assets turnover ratio

INTERPRETATION

These ratio measures how efficiently a firm uses its assets to generate sales, so a higher ratio
is always more favorable. Higher turnover ratios mean the company is using its assets more
efficient. Lower ratio mean the company isn’t using its assets efficiently and most likely have
production problem. An indication of a company's ability to meet short-term debt obligations;
the higher the ratio, the more liquid the company is. Current ratio is equal to current assets
divided by current liabilities. We note that on the year 2016 the current asset ratio is higher
compared to another years.

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ABSOLUTE LIQUID RATIO

Absolute liquid assets

ABSOLUTE LIQUID RATIO =
Current liabilities

4.5Table showing absolute liquid ratio

Years
2015 2016 2017 2018 2019

Absolute
liquid 1695675.11 2550576.17 18813047.85 2660140.22 2926154.24
assets

Current
16098863.41 30362000.74 28777295.36 33420648.25 36762713.07
liabilities

Absolute
liquid 0.10 0.08 0.65 0.07 0.07
ratio

ANALYSIS:
The above table shows that absolute liquid ratio in the year 2015 was 0.10 and it was huge
decrease in the value and in 2016 it was 0.08 and in 2017 there was sudden increase to 0.65
and again it has decreased in 2018 and 2019 to 0.07 and 0.07 respectively.

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4.5 Graph showing absolute liquid ratio

INTERPRETATION

As it could be observed in the above Table 4.9, all the years of Associated Hydro Pressing
Private Limited, the absolute liquid ratio varied between the lowest 0.07 in 2018 and 2019
and the little highest by 0.65 in 2017. In 2016 and 2015 it was 0.08 and 0.10 which there
was a sudden increase in 2017. It indicates that in 2017 it has the greatest profitability.
There were decreasing in ratios due to changes in the cash balance of the company due to
maintaining less cash during the years.

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DEBTOR AVERAGE COLLECTION PERIOD

No of working days

AVERAGE COLLECTION PERIOD =

Debtor’s turnover ratio

4.6Table showing debtor average collection period

Years 2015 2016 2017 2018 2019

No. of
working 300 300 300 300 300
days
Debtors
turnover 5.04 4.18 5.01 6.08 6.08
ratio
Average
collection 59 days 71 days 59 days 49 days 49 days
period

ANALYSIS:
The average collection period has been increased from 59 days in the year days in 2015 and
2016 and it increased to 71 days and Then 12 days decreased in the year 2017 and 2018 and
2019 it was 49 days and 49 days it has decreased 10 days

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4.6 Graph showing average collection period

INTERPRETATION

Like receivable turnover ratio or average collection period is significant importance when
used in liquidity ratio. A longer collection period may negatively affect the short term debt
paying ability of the business. Whether the collection is good or bad depends on the credit
terms allowed by the company .Average collection period has been same from 49days in
2018 and 2019 and 71 days in 2016. It was the same in the year 2015 and 2017 by 59 days.

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CREDITORS (ACCOUNTS PAYABLE) TURNOVER RATIO

4.7 Table showing the creditors turnover ratio

Years 2015 2016 2017 2018

2019

Sales 90129847.09 192669784.91 159977201.45 140499609.13 1546549570.04

Creditors 10059426.25 12794387.93 13695446.65 14340631.23 15774694.35

Creditors
turnover 8.95 15.05 11.68 9.79 9.79

ratio

ANALYSIS:
The above table shows that in the year 2015 the
company had the least creditors’ turnover ratio in last 5 years which was 8.95. It increased to
15.05 in the next year and in 2016 it reached to its highest number which was 15.05 and after
that it started decreasing to 11.68 in 2017 and 2018 and 2019 it was 9.79 and 9.79

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4.7 Graph showing the creditors turnover ratio

INTERPRETATION

Accounts payable turnover ratio indicates the creditworthiness of the company. A high ratio
means prompt payment to suppliers for the goods purchased on credit and a low ratio may be
a sign of delayed payment.

Accounts payable turnover ratio also depends on the credit terms allowed by suppliers.
Companies who enjoy longer credit periods allowed by creditors usually have low ratio as
compared to others.

A high ratio (prompt payment) is desirable but company should always avail the credit
facility allowed by the suppliers.

At Hydro Pressings Private Limited, the year 2016 look more desirable for the management
than the other four years. After 2016 again it gradually decreased to 9.79 in the last year.

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CREDITORS PAYMENT PERIOD

4.8Table showing creditor’s payment period

Years 2015 2016 2017 2018 2019

No. of
working 300 300 300 300 300
days
Creditors
turnover 8.95 15.05 11.68 9.79 9.79
ratio

Payment
33 days 20 days 26 days 31 days 31 days
period

ANALYSIS:

The creditor’s payment period has been increased from 33 days in the year days in 2015 to 20
days in the next year it again decreased to 20 days in 2016. Then increased by 6 days in the
year 2017 and it became 26 days and again it has increased in last two years by 5 days during
the year 2018 and 2019

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A STUDY ON LIQUIDITY POSITION

4.8 Graph showing creditor’s payment period

0

Current Ratio
35
33
31 31
30

26
25

20
20

15

10

0
2015 2016 2017 2018 2019

INTERPRETATION
An indicator measures the average time it takes a company to settle its debts with trade
suppliers (accounts payable). Thus, among other things, it gives information about payment
habits and also whether a business is taking full advantage of trade credit available. In other
words if we do not pay too soon.

All of these decisions are relative to the industry and company’s needs, but it is apparent that
the average payment period is a key measurement in evaluating the company’s cash flow
management. Thus, it should always be other companies’ metrics in the industry.

In the last five years the company had a nice period of 20 days of payment in 2016 which was
the best. Other four years are around 30 days and also 33 days is visible for the year 2015.

When credit purchase exists, creditors payment will also exist and it is kind of impossible to
make it zero but as much as possible we can decrease it, the balance in the cash flow of the
company will be proved.

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STOCK TURNOVER RATIO

4.9 Table showing stock turnover ratio

Years 2015 2016 2017 2018 2019

Cost of
goods 107814799 116635280.61 100594143.65 80316116.53 88347728.18
sold

Average
20333452 19096561 16548348 25686010.5 28254611.55
inventory

Stock
turnover 5.30 6.10 6.07 3.12 3.12

ratio

ANALYSIS

From the above table we find that the stock turnover ratio for the year 2015 it was 5.30 and
From the year 2016 it was 6.10 was the highest in the last five years and for the year 2017 it
was 6.07 and in 2018 and 2019 it was 3.12 and 3.12

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4.9 Graph showing stock turnover ratio

INTERPRETATION

Inventory is the account of all the goods a company has in its stock managing inventory
levels is important for companies to show whether sales efforts are effective or whether costs
are being controlled. The inventory turnover ratio is an important measure of how well a
company generates sales from its inventory.

In this calculation inventories are rotating average 5 times in a year .This graph is showing
increasing in inventory turnover ratio year by year but suddenly in the last year of our
analyzing it fell down.

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QUICK RATIO

4.10 Table showing quick ratio

Years
2015 2016 2017 2018 2019

Quick
34942147.7 71448730.82 79999313.01 58468238.95 64315062.84
asset

Current
16098863.41 30362000.74 28777295.36 33420648.25 36762713.07
liabilities

Quick
2.17 2.35 2.77 1.74 1.74
ratio

ANALYSIS

The above table indicates that the quick ratio of the company in the year 2015 was 2.17, in
the year 2016 increased to 2.35, in the year 2017 again increased to 2.77, it decreased to 1.74
in both the years 2018 and 2019

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A STUDY ON LIQUIDITY POSITION

4.10Graph showing quick ratio

INTERPRETATION

The quick ratio is an indicator of a company’s short-term liquidity position and measures a
company’s ability to meet its short-term obligations with its most liquid assets.

A result of 1 is considered to be the normal quick ratio, as it indicates that the company is
fully equipped with exactly enough assets to be instantly liquidated to pay off its current
liabilities. A company that has a quick ratio of less than 1 may not be able to fully pay off its
current liabilities in the short term, while a company having a quick ratio higher than 1 can
instantly get rid of its current liabilities. For instance, a quick ratio of 1.5 indicates that the
company has Rs.1.50 of liquid assets available to cover each Rs.1 of its current liabilities.

In all the years of study the company had quick ratio of above 1, it shows that company was
good enough liquid. It was near to 3 in the year 2018 but suddenly fall down to the least of
last five years 1.74. As the table 4.15 shows a huge decrease in current assets and increase in
current liability, it will be the main reason for the last year’s quick ratio fall.

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Statement of Changes in Working Capital as per 2014 -2015

4.12 Table showing working capital in the year of 2014 and 2015
PARTICULARS 2014 2015 INCREASE DECREASE
CURRENT ASSETS
Closing stock 28933897.00 31258957.00 2325060.00
Deposits (Asset) 3218650.00 3203150.00 15500.00
Loans and Advances (Asset) 9323787.00 10448420.15 1124633.15
Sundry Debtors 22425389.78 17876001.06 4549388.72
Cash-in-hand 1438663.23 1239014.23 199649.00
Bank Account 87208.25 456660.88 369452.63
Excise Account Groups 450307.90 1507874.50 1057567.5
Advance income Tax 820919.50 211026.90 609892.6
GRAND TOTAL 66698822.66 66201104.72 497717.94
CURRENT LIABILITY

Duties and Taxes 534052.00 240930.16 293121.84

Provision 1340223.00 1340223.00

Sundry Creditors 15652778.59 10059426.25 5593352.34

Directors Current A/c 1101500.00 2523149.00 1421649.00

O/S liabilities for Expenses 2270552.38 1935135.00 335417.38

GRAND TOTAL 20899105.97 16098863.41 4800242.56

WORKING CAPITAL
45799716.69 50102241.31
{CA-CL}
INCREASE IN
4302524.62
WORKING CAPITAL

ANALYSIS:

The above table shows that working capital increased by Rs.4302524.62 in the year 2015 in
compare to year 2014.

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Statement of Changes in Working Capital as per 2015 -2016

4.13Table showing working capital in the year of 2015 and 2016.

PARTICULARS 2015 2016 INCREASE DECREASE

CURRENT ASSETS
Closing stock 31258957 19241938 12017019
Deposits (Asset) 3203150 10776240 7573090
Loans and Advances (Asset) 10448420 2108771.2 8339649
Sundry Debtors 17876001 46021242 28145240.94
Cash-in-hand 1239014.2 822004.94 417009.29
Bank Account 456660.88 1728571.2 1271910.35
Excise Account Groups 1507874.5 746670 761204.5
Advance income Tax 211026.9 9215231.5 9004204.6
GRAND TOTAL 66201105 90690669 24489564.1
CURRENT LIABILITY

Duties and Taxes 240930.16 521502 280571.84

Provision 1340223 11750674 10410451

Sundry Creditors 10059426 12794388 2734961.68

Directors Current A/c 2523149 2523149

O/S liabilities for Expenses 1935135 5263298.4 3328163.36

Credit Card HDFC Bank 32138.45 32138.45

GRAND TOTAL 16098863 30362001 14263137.33

WORKING CAPITAL
50102242 60328668
{CA-CL}
INCREASE IN
10226426
WORKING CAPITAL

ANALYSIS:

The above table shows that working capital increased by Rs.10226426in the year 2016 in
compare to year 2015.

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A STUDY ON LIQUIDITY POSITION

Statement of Changes in Working Capital as per 2016 -2017

4.14 Table showing working capital in the year of 2016 and 2017
PARTICULARS 2016 2017 INCREASE DECREASE
CURRENT ASSETS
Closing stock 19241938 13854758.00 5387180
Deposits (Asset) 10776240 10824300.00 48060
Loans and Advances (Asset) 2108771.2 2316875.15 208103.95
Sundry Debtors 46021242 31900733.75 14120508.25
Cash-in-hand 822004.94 464814.94 357190
Bank Account 1728571.2 18348232.91 16619661.71
Excise Account Groups 746670 1043188.46 296518.46
Advance income Tax 9215231.5 15101167.80 5885936.3
GRAND TOTAL 90690669 93854071.01 3163402.01
CURRENT LIABILITY

Duties and Taxes 521502 486316.00 35186

Provision 11750674 11750674.00 0
Sundry Creditors 12794388 13695446.65 901058.65

Directors Current A/c -425298.00

425298
O/S liabilities for Expenses 5263298.4 3183020.68 2080277.72
Credit Card HDFC Bank 32138.45 87136.03 54997.58
GRAND TOTAL 30362001 28777295.36 1584705.64
WORKING CAPITAL
60328668 65076775.65
{CA-CL}
INCREASE IN
4748107.65
WORKING CAPITAL

ANALYSIS:

The above table shows that working capital increased by Rs.4748107.65 in the year 2017 in
compare to year 2016.

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A STUDY ON LIQUIDITY POSITION

Statement of Changes in Working Capital as per 2017 -2018

4.15 Table showing working capital in the year of 2017 and 2018.

PARTICULARS 2017 2018 INCREASE DECREASE

CURRENT ASSETS
Closing stock 13854758 35117263 21262505
Deposits (Asset) 10824300 12379211 1554911
Loans and Advances (Asset) 2316875.15 2616201.33 299326.18
Sundry Debtors 31900733.75 23078151.94 8822581.81
Cash-in-hand 464814.94 963103.44 498288.5
Bank Account 18348232.91 1697036.78 16651196.13
Excise Account Groups 1043188.46 712078.46 331110
Advance income Tax 15101167.80 15672456 571288.2
GRAND TOTAL 93854071.01 93585501.95 268569.06
CURRENT LIABILITY
Duties and Taxes 486316 154578.77 331737.23
Provision 11750674 14295674 2545000
Sundry Creditors 13695446.65 14340631.23 645184.58
Directors Current A/c -425298 425298
O/S liabilities for Expenses 3183020.68 4014551 831530.32
Credit Card HDFC Bank 87136.03 24247.34 62888.69
GST Payable 590966 590966
GRAND TOTAL 28777295.36 33420648.25 4643352.89
WORKING CAPITAL
65076775.65 60164853.7
{CA-CL}
DECREASE IN
4911921.95
WORKING CAPITAL

ANALYSIS:

The above table shows that working capital decreased by Rs.4911921.95 in the year 2018 in
compare to year 2017.

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Statement of Changes in Working Capital as per 2018-2019

4.16 Table showing working capital in the year of 2018-2019

PARTICULARS 2018 2019 INCREASE DECREASE

CURRENT ASSETS
Closing stock 35117263 38628989. 3511726.3
Deposits (Asset) 12379211 13617132. 1237921.1
Loans and Advances (Asset) 2616201.33 2877821.46 261620.133
25385967.
Sundry Debtors 23078151.94 2307815.194

Cash-in-hand 963103.44 1059413.784 96310.344

Bank Account 1697036.78 1866740.45 169703.678
Excise Account Groups 712078.46 783286. 71207.846
Advance income Tax 15672456 17239701. 1567245.6
101459052.1
GRAND TOTAL 93585501.95 7873550.195
45
CURRENT LIABILITY
Duties and Taxes 154578.77 170036. 15457.877
Provision 14295674 . 1429567.4
.
Sundry Creditors 14340631.23 1434063.123

Directors Current A/c

O/S liabilities for Expenses 4014551 4416006. 401455.1
Credit Card HDFC Bank 24247.34 . 2424.734
GST Payable 590966 59096.6 -531869.4
36171747.17
GRAND TOTAL 33420648.25 2751098.924
4

WORKING CAPITAL 65287304.97

26744205.45
{CA-CL} 1
INCREASE IN 38543099.52
WORKING CAPITAL 1

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A STUDY ON LIQUIDITY POSITION

CHAPTER 5

FINDINGS,
SUGGESTIONS &
CONCLUSION

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FINDINGS:
The suggestions are based on the findings and analysis of the

 The above current ratio table shows increasing trend from 4.11 in 2015 to 2.98 in
2016 and there was suddenly high increase in 2015 by 4.11, and in 2016 it decreased
to 2.98 it is not a good indicator for the company, and in 2017 it was 3.26 and in 2018
it again fell to 2.80.and in 2019 to 2.57

 working capital turnover ratio for the year 2015 was 1.79 it is increased in the year
2016 to 3.19 and again decreased in 2017 to 2.45.There was decrease in 2018 to 2.33
and there is decrease in 2019 which was 2.33. It indicates that in 2016 it has the
greatest ability to meet its current obligations in working capital management.

 . From the above table we find that the debtor’s turnover ratio for the year
was 5.04 For the year 2016it was 4.18, for the year 2017 it was 5.01, for the year 2018
it was 6.08 and for the year 2019 it was 6.08 which was the highest in the last 5 years.

 From the above table we find that the current assets turnover ratio for the year 2015
was 1.36, For the year 2016 was 2.12, For the year 2017 was 1.70 and for the year
2018 it was1.50 and the final year 2019 it was 1.50.

 The above table shows that absolute liquid ratio in the year 2015 was 0.10 and it was
huge decrease in the value and in 2016 it was 0.08 and in 2017 there was sudden
increase to 0.65 and again it has decreased in 2018 and 2019 to 0.07 and 0.07
respectively.
 The average collection period has been increased from 59 days in the year days in
2015 and 2016 and it increased to 71 days and Then 12 days decreased in the year
2017 and 2018 and 2019 it was 49 days and 49 days it has decreased 10 days
 The above table shows that in the year 201 the company had the least creditors’
turnover ratio in last 5 years which was 8.95. It increased to 15.05 in the next year and
in 2016 it reached to its highest number which was 15.05 and after that it started
decreasing to 11.68 in 2017 and 2018 and 2019 it was 9.79 and 9.79
 The creditor’s payment period has been increased from 33 days in the year days in
2015 to 20 days in the next year it again decreased to 20 days in 2016. Then increased

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by 6 days in the year 2017 and it became 26 days and again it has increased in last
two years by 5 days during the year 2018 and 2019
 From the above table we find that the stock turnover ratio for the year 2015 it was
5.30 and From the year 2016 it was 6.10 was the highest in the last five years and for
the year 2017 it was 6.07 and in 2018 and 2019 it was 3.12 and 3.12
 The above table indicates that the quick ratio of the company in the year 2015 was
2.17, in the year 2016 increased to 2.35, in the year 2017 again increased to 2.77, it
decreased to 1.74 in both the years 2018 and 2019

RECOMMENDATIONS

 Theoretically, Current ratio in a business concern indicates the availability of current

assets to meet its current liabilities.
Higher the ratio, better the coverage. Traditionally, it is also called 2:1 ratio, i.e., 2 is
the standard for current assets for each unit of current liabilities.
Hence, the suggestion to the top management is to maintain standards of current ratio
by decreasing current liabilities like Bills payable, sundry creditors or accounts
payable unsecured loans, and increasing the current assets like finished goods, sundry
creditors, deposits and advances.

 Theoretically, cash in hand refers that the firms’ real capability lies in its ability to pay
off its short-term liabilities out of its quickly realizable assets.
AtAssociated Hydro Pressings Private Limited in the years 2014 - 2018, only 0.5-
2%of the current assets are in the form of cash & bank balances.
The company should increase its cash sales so its bank balances and cash in hands can
meet its account payables demand to pay.

 Theoretically, debtor’s turnover ratio refers that the number of times debtors turnover
each year. It indicates the efficiency of staff entrusted with collection of debts. The
higher the ratio is better since it would indicate the debtors are being collected more

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promptly. Debtors should be always being taken at gross value. No provision for bad
& doubtful debts should be deducted from them.
The debtor’s turnover ratio has fluctuated between “ – ” times in the last five years
which in the last year it was the highest one.
Hence, suggestion to the top management is to increase their sales and their debt
values, because higher Debtor’s turnover ratio is better since it would indicates the
debtors are being collected more promptly.

 Theoretically, the average collection period refers to the average number of days for
which a firm has to wait before its receivables are converted into cash.
At Associated Hydro Pressings Private Limited, The average collection period is
decreased comparing to the four years of analyzing before 2019.
Hence, the top management should try to descend the period of collection to improve
efficiency of credit management. It should be maintained around 50 days, which
means collection period is prompt.

 Inventory turnover is the number of times a company sells and replaces its stock of
goods during a period. Inventory turnover provides insight as to how the company
manages costs and how effective their sales efforts have been.
The higher the inventory turnover, the better since a high inventory turnover typically
means a company is selling goods very quickly and that demand for their product
exists.
Low inventory turnover, on the other hand, would likely indicate weaker sales and
declining demand for a company’s products.
Inventory turnover provides insight as to whether a company is managing its stock
properly. The company may have overestimated demand for their products and
purchased too many goods as shown by low turnover. Conversely, if inventory
turnover is very high, they might not be buying enough inventory and may be missing
out on sales opportunities.
At Associated Hydro Pressings Private Limited, inventory turnover ratio was
fluctuating around 5 times in a year but it decreased suddenly to around 3 times in the
year 2019 which is not good sign, hence the increasing of sales which will effect on it
and will increase it, is our suggestion for the top management of the company.

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 At Associated Hydro Pressings Private Limited the working capital efficiency was
good until 2017 but in the last year it fall by very big amount which is not good sign
for the company my suggestion for the company is to decrease in current liability and
increased its current assets so can increase its working capital efficiency.

CONCLUSION
Liquidity position process should not be just a chore of top management and finance
department, but there should be organization wide commitment.
This should be an exercise where senior management sets realistic targets and requires
departmental managers to produce their own plans to achieve their goals.

A study on liquidity position shows how the use of various statements of liquidity position
improves decision making in relation to costing, cost control, transparency in administrative
activities and helps taking corrective measures more quickly. The study also throws light on
how crucial the liquidity position is to co. ordinate the activities of various units to realize the
vision and objectives of the company. The study on liquidity position has helped me to gain
lots of knowledge on the management of financial resources and its allocation to fund various
processes and operations of the company.

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A STUDY ON LIQUIDITY POSITION

BIBLIOGRAPHY

AND ANNEXURES

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A STUDY ON LIQUIDITY POSITION

BIBLIOGRAPHY

Reference Books

Sl. No Books Author Publication

Financial
1 I.M. Pandey Vikas publishing
management

Fundamentals Tata McGraw-

2 of financial Prasanna Chandra Hill Publishing
management Co., Ltd.

Working capital S. Chand

3 V.K. Bhalla
management publishing

OTHERS

Company Broachers

Business Magazines

Annual reports of the company

WEBSITES

www.ahppl.com

www.google.com

www.wikepedia.org

www.investopedia.com

https://efinancemanagement.com

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A STUDY ON LIQUIDITY POSITION

ANNEXURES

BALANCE SHEET

At the end of 31 March

Particulars 31-Mar-17 31-Mar-18 31-Mar-19

Capital Account 1387726.00 2652644.00 2917908.4
Reserves & Surplus -1112274.00 152644.00 167908.4
6666666Share Capital 2500000.00 2500000.00 2500000.00
Loans (Liability) 37878901.17 47114624.98 51826087.47
Bank OD A/c 33159566.17 39389990.76 43328989.83
Secured Loans 43219.00 7177984.62 7895783.08
Unsecured Loans 4676116.00 546649.60 601314.56
Current Liabilities 28777295.36 33420648.25 36762713.07
Duties & Taxes 486316.00 154578.77 170036.64
Provisions 11750674.00 14295674.00 15725241.4
Sundry Creditors 13695446.65 14340631.23 15774694.35
Directors Current A/c -425298.00
Outstanding Liabilities 3183020.68 4014551.00 816006.1
Credit Card Corporation Bank 87136.03 24247.34 26672.07
Credit Card HDFC Bank
GST Payable 590682.43 649750.67
GST Payable Unit 2 283.48 311.82
Profit & Loss A/c 39553283.48 40174223.32 44191645.65
Opening Balance 31780338.74 38729424.48 42602366.92
Current Period 7772944.74 1922160.84 2114376.92
Less: Transferred 477362.00 525098.2
Difference in Opening balances 5390.00 1975.00 2172.5
Total equities and Liabilities 107602596.01 123364115.55 135700527.10
Fixed Assets 13738525.00 29768613.60 32745474.96
Capital work in process 4313525.00
Bore Well Exp 406174.00 406174.00 406174.00
BUILDING Account 7488920.00 8237812.00

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A STUDY ON LIQUIDITY POSITION

Capital Work in Progress 311321.00

Computer A/c 1022001.00 1088401.00 1197241.1
COMPUTER A/C UNIT 2 41990.00 41990.00 41990.00
Computer Software A/c 7800.00 7800.00 7800.00
Cycle A/c 1356.00 1356.00 1356.00
Electrical Fittings 727770.00 1065624.00 1172186.4
Electrical Fittings Unit II 93764.00 93764.00 93764.00
Furniture & Fixtures 1752632.00 1880573.00 2068630.3
Furniture & Fixture Unit 2 344341.00 344341.00 344341.00
LIFT 900000.00 990000
Office Equipment 1386216.00 1517716.00 1669487.6
Office Equipment Unit II 107846.00 107846.00 107846.00
Plant & Machinery 25552918.00 36938473.60 40632320.96
Plant & Machinery [ Unit II ] 423410.00 2630770.00 2893847
Provision for Dep.on Computer -930826.00 -1024909.00 -1127399.9
Provision for Dep.on Cycle -1356.00 -1356.00 -1356.00
Provision for Dep.on Elec.Fittings -760317.00 -797411.00 -877152.1
Provision for Dep.on Fur.& Fixtures -1382132.00 -1573856.00 -1731241.6
Provision for Dep.on Office Eqipment -1060471.00 -1257288.00 -1383016.8
Provision for Dep.on Plant & -23130212.6
-19807634.00 -21027466.00
Machinery
Provision for Dep.on Vhicles -2076108.00 -2327154.00 -2559869.4
Pur (Street Lighting) 91875.00 91875.00 91875.00
Vehicle A/c 2949906.00 2949906.00 2949906.00
Vehicles (Two Wheeler) 222524.00 222524.00 222524.00
Investments 10000.00 10000.00 10000.00
Investments 10000.00 10000.00 10000.00
Current Assets 93854071.01 93585501.95 102944052.14
Closing Stock 13854758.00 35117263.00 38628989.3
Deposits (Asset) 10824300.00 12379211.00 13617132.1
Loans & Advances (Asset) 2316875.15 2616201.33 2877821.46
Sundry Debtors 31900733.75 23078151.94 25385967.13

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A STUDY ON LIQUIDITY POSITION

Cash-in-hand 464814.94 963103.44 1059413.78

Bank Accounts 18348232.91 1697036.78 1866740.45
Advance Income Tax 15101167.80 15672456.00 17239701.6
Excise Account Groups 1043188.46 712078.46 783286.30
Advance Against Purchase of Car
Staff Advance (FUND) Account 1350000.00 1485000.00
Total Assets 107602596.01 123364115.55 135700527.10

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