Working capital changes in R.K.

FURNITURES for the year

PARTICULARS

2009-2010

2010-2011

INCREASE

DECREASE

CURRENT ASSETS
closing stock

2,84,450

1,18,924

1,65,526

cash in hand

28,500

10,600

17,900

cash at bank

2,314

249

2,065

Sundry debtors

10,68,802

5,50,000

5,18,802

TOTAL CURRENT
ASSESTS

13,84,066

6,79,773

4,26,030

CURRENT LIABILITIES
sundry creditors

9,15,298

4,89,268

TOTAL CURRENT
LIABILITIES

9,15,298

4,89,268

WORKING CAPITAL
(CURRENT ASSEST-

4,68,768

1,90,505

CURRENT LIABILITIES)

DECREASE IN
WORKING CAPITAL
4,68,768

2,78,263

2,78,263

4,68,768

7,04,293

7,04,293

2009-2010
INTERPRETATION:
In the above table, it is seen that during the year 2009-2010 and 2010-2011 there was a
net decrease in working capital of Rs.2,78,263.It indicates an inadequate working capital in
R.K.FURNITURES.
This is because of :1) Decrease in current assets such as Sundry Debtors by Rs.5,18,802 and decrease in
inventory by Rs. 1,65,526, decrease in cash balance of 17,900 and decreas in cash at bank
of Rs. 2065.
2) Decrease in current liabilities such as in Sundry Creditors of Rs.4,26,030.
PARTICULARS

2010-2011

2011-2012

INCREASE

DECREASE

CURRENT ASSETS
closing stock

1,18,924

1,68,442

49,518

cash in hand

10,600

64,671

54,071

cash at bank

249

997

748

Sundry debtors

5,50,000

1,58,514

3,91,486

advances and deposits

2,15,000

2,15,000

TOTAL CURRENT
ASSESTS

6,79,773

6,07,624

CURRENT LIABILITIES
sundry creditors

4,89,268

1,83,687

3,05,581

vat

16,313

16,313

TOTAL CURRENT
LIABILITIES

4,89,268

2,00,000

WORKING CAPITAL
(CURRENT ASSEST-

1,90,505

4,07,624

2,17,119

2,17,119

4,07,624

4,07,624

6,24,918

6,24,918

CURRENT LIABILITIES)

INCREASE IN
WORKING CAPITAL

Working capital changes in R.K. FURNITURES for the year 2010-2011

INTERPRETATION:
In the above table, is seen that during the year 2010-2011 and 2011-2012 there was huge
net increase in working capital by Rs.2,17,119. As compare to 2009-2010.
This is because:1)there is increase in current assets such as inventories by Rs.49,518, cash in hand of Rs.54,071,
cash at bank of Rs.748,advance of deposit of Rs.2,15,000. And decrease in Sundry Debtors of
Rs.9,91,486.
2)there is an increase in current liability such as provision of tax (VAT) of Rs.16,313 and
decrease in Sundry creditor of Rs.3,05,581.

Working capital changes in R.K. FURNITURES for the year

2011-2012
PARTICULARS

2011-2012

2012-2013

INCREASE

DECREASE

CURRENT ASSESTS
closing stock

1,68,442

3,42,162

1,73,720

cash in hand

64,671

92,063

27,392

cash at bank

997

11,964

10,967

Sundry debtors

1,58,514

3,46,873

1,88,359

advances and deposits

2,15,000

8,85,000

6,70,000

TOTAL CURRENT
ASSESTS

6,07,624

16,78,062

CURRENT LIABILITIES
sundry creditors

1,83,687

9,71,526

7,87,839

vat

16,313

14,572

1,741

TOTAL CURRENT
LIABILITIES
WORKING CAPITAL
(CURRENT ASSEST-

2,00,000

9,86,098

4,07,624

6,91,964

2,84,340

2,84,340

6,91,964

6,91,964

10,72,179

10,72,179

CURRENT LIABILITIES)

INCREASE IN
WORKING CAPITAL

INTPRETATION:
In the above table, it is seen that during the year 2011-12 and 2012-2013 there was also
net increase in working capital by Rs.2,84,340. As compare to 2010-1 and 2011-12.
This is because:1)there is an current assets such as inventories by 1,73,720, cash in hand of Rs.27,392, cash at
bank of Rs.10,967, Sundry Debtors of Rs.1,88,359 and advances and deposits is Rs.6,70,000.
2)there is increase in current liabilities such as Sundry Creditors of Rs.7,87,839. And decrease in
provision of tax (VAT) of Rs.1741.

Working capital changes in R.K. FURNITURES for the year 2012-2013

PARTICULARS

2012-2013

2013-2014

INCREASE

DECREASE

CURRENT ASSESTS
closing stock

3,42,162

8,25,829

4,83,667

cash in hand

92,063

68,657

23,406

cash at bank

11,964

46,277

34,313

Sundry debtors

3,46,873

2,52,584

94,289

advances and deposits

8,85,000

1,00,000

7,85,000

TOTAL CURRENT
ASSESTS

16,78,062

12,93,347

CURRENT LIABILITIES
sundry creditors

9,71,526

5,64,745

4,06,781

vat

14,572

4,440

10,132

TOTAL CURRENT
LIABILITIES
WORKING CAPITAL
(CURRENT ASSEST-

9,86,098

5,69,185

6,91,964

7,24,162

9,34,893

9,34,893

CURRENT LIABILITIES)

INCREASE IN
WORKING CAPITAL

32,198
7,24,162

7,24,162

INTERPRETATION:
In the above table, it is seen that during the year 2012-13 and 2013-2014 there was also
net increase in working capital by Rs.32,198.as compare to2011-2012 and 2012-2013.
This is because :1)there is a decrease in current asset such as increase in Inventories by Rs.4,83.667, cash at bank
of Rs34,319. Decreased in Sundry debtors by Rs.94,218, cash in hand of Rs.23,406, advance and
loans by Rs.7,85,000.
2)there is a decrease in current liabilities such as Sundry creditors by Rs.4,06,781 and provision
for tax (VAT) Rs.10,132

NET WORKING CAPITAL OF R.K.FURNITURES FOR

5 YEARS
YEARS

CURRENT
ASSESTS

CURRENT
LIABILITIES

NET WORKING
CAPITAL

2009-10

13,84,066

9,15,298

4,68,768

2010-11

6,79,773

4,89,268

1,90,505

2011-12

6,07,624

2,00,000

4,07,624

2012-13

16,78,062

9,86,098

6,91,964

2013-14

12,93,347

5,69,185

7,24,162

net working capital

800000
700000
600000
500000
400000
300000
200000
100000
0

net working capital

2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:The above chart shows that during the year 2009-10 the company has 4,68,768.00 N.W.C. In the year
2010-2011 the N.W.C is 1,90,505.00 and in the year 2011-12 the company has 4,07,624.00 N.W.C in the
year 2012-13 the company has 6,91,964.00 N.W.C, in the year 2013-14 the company has 7,24,162.00
N.W.C this means the company in a positive position & N.W.C has improved vary fast as compared to
the previous years which show liquidity Position of the R.K.FURNITURES has always more &
sufficient working capital available to pay off its current liabilities.

RATIO ANALYSIS

1) LIQUIDITY RATIOS
a)Current ratio=current assets / current liabilities
YEARS

Current assets

2009-10
2010-11
2011-12
2012-13
2013-14

13,84,066
6,79,773
6,07,624
16,78,062
12,93,347

Current
liabilities
9,15,298
4,89,268
2,00,000
9,86,098
5,69,185

Current ratio
1.51:1
1.38:1
3.03:1
1.70:1
2.27:1

current ratio
3.5
3
2.5
current ratio

2
1.5
1
0.5
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:It is seen from the above chart that during the year 2009-10 the current ratio was
1.51, during the year 2010-11 it was 1.38 and in the year 2011-12 it was 3.03. During the
year 2012-13 the current ratio was dropped to 1.70 due to increase in current liabilities. In
the year 2013-14 the current ratio has increases 2.27. The current ratio is above the
standard ratio i.e., 2:1. Hence it can be said that there is enough current assets in R.K
FURNITURES to meet its current liabilities.

B)LIQUID RATIO/QUICK RATIO/ACID TEST RATIO=

QUICK ASSETS=(CURRENT ASSETINVENTORY)/CURRENT LIABILITY
Years
2009-10
2010-11
2011-12
2012-13
2013-14

Current
assets
13,84,066
6,79,773
6,07,624
16,78,062
12,93,347

INVENTORY Quick
assets
2,84,450
10,99,616
1,18,924
5,60,849
1,68,442
4,39,182
3,42,162
13,35,900
8,25,829
4,67,518

Current
liabilities
9,15,298
4,89,268
2,00,000
9,86,098
5,69,185

Liquid
ratio
1.20:1
1.14:1
2.19:1
1.35:1
0.82:1

liquid ratio
2.5
2
1.5

liquid ratio

1
0.5
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:During the year 2009-10 the quick ratio was 1.20, in the year 2010-11 it was 1.14, in the
year 2011-12 the quick ratio increases to 2.19, in the year 2012-13 it decreases to 1.35, in the
year 2013-14 it was 0.82. The quick ratio is above the standard ratio i.e., 1:1. Hence it shows that
the liquidity position of the company is adequate.

C)ABSOLUTE LIQUID RATIO=

CASH &BANK BALANCE / CURRENT LIABILITIES
Year

Cash & bank balance

2009-10
2010-11
2011-12
2012-13
2013-14

28,500+2,314=30,814
10,600+249=10849
64,671+997=65,668
92,063+11,964=1,04,027
68,657+46,277=1,14,93
4

Current
liabilities
9,15,298
4,89,268
2,00,000
9,86,098
5,69,185

Absolute liquid
ratio
0.03:1
0.02:1
0.32:1
0.10:1
0.20:1

absolute liquid ratio

0.35
0.3
0.25
absolute liquid ratio

0.2
0.15
0.1
0.05
0
2009-10

2010-11

2011-12

2012-13

2013

INTERPRETATION:
During the year 2009-10 the Absolute liquidity ratio was 0.03, during the year 2010-11 it
was 0.02 and in the year 2011-12 it was 0.32, in the year 2012-13 it was 0.10. during the year
2013-14 the Absolute liquidity ratio has increases 0.20. This shows the Absolute liquidity ratio
increases every year.
Hence it shows that the liquidity position of the company is satisfactory.

2) TURNOVER RATIOS:a) INVENTORY TURNOVER RATIO =

NET SALES / CLOSING INVENTORY
Year

Net sales

Closing inventory

2009-10
2010-11
2011-12
2012-13
2013-14

1,15,05,626
51,98,217
32,95,961
37,11,158
38,42,562

2,84,450
1,18,924
1,68,442
3,42,162
8,25,8290

Inventory
turnover ratio
40.4 times
43.7 times
19.5 times
10.8 times
4.65 times

inventory turnover ratio

50
45
40
35
30

inventory turnover ratio

25
20
15
10
5
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:
It is seen from the above chart that During the year 2009-10 the Inventory t/o ratio is 40.4
times, in the year 2010-11 it increased to 43.7 times, But in the year 2011-12 it decreased to 19.5
times .in the year 2012-13 it was 10.8timesand in the year it was 4.65times .
This shows the company has more sales.

A)(A) INVENTORY HOLDING PERIOD = DAYS IN A YEAR/

INVENTORY TURNOVER RATIO
Year

Days in a year

2009-10
2010-11
2011-12
2012-13
2013-14

365
365
365
365
365

Inventory
turnover ratio
40.4 times
43.7 times
19.5 times
10.8 times
4.65 times

Inventory holding
period
9.03 days
8.35 days
18.71 days
33.79 days
78.49 days

inventory holding period

90
80
70
60
inventory holding period

50
40
30
20
10
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:
Inventory holding period fluctuating over the years. It was 9.03 days in the year 2009-10.
It decreased to 8.35 days in the year 2010-11, it increased to 18.71 days in the year 2011-12,
there was a subsequent increase in the year 2012-13 it was 33.79 days and it increased to
78.49days in the year 2013-14.
This shows the company is maximizing these inventory-holding days thereby to decrease the
sales.

b) DEBTORS TURNOVER RATIO= NET SALES / AVERAGE

DEBTORS
Year

Net sales

Average debtors

2009-10
2010-11
2011-12
2012-13
2013-14

1,15,05,626
51,98,217
32,95,961
37,11,158
38,42,562

10,68,802
5,50,000
1,58,514
3,46,873
2,52,584

debtors turnover
ratio
10.76 times
9.45 times
20.79 times
10.69 times
15.21 times

Series 1
25
20
15

Series 1

10
5
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:
It is clear that debtor turnover ratio fluctuating over the years. It was 10.76 times in the
year 2009-10. It decreased to 9.45 times in the year 2010-11, It again increased to 20.79 times in
the year 2011-12 but it decreased to 10.69 times in the year 2012-13 and 15.21times in the year
2013-14. This shows the company is not collecting debt rapidly.

B)(A) DEBTORS COLLECTION PERIOD= DAYS IN A YEAR / DEBTORS

TURNOVER RATIO
Year

Days in a year

2009-10
2010-11
2011-12
2012-13
2013-14

365
365
365
365
365

Debtors turnover Debtors collection

ratio
period
10.76 times
33.92 days
9.45 times
38.62 days
20.79 times
17.55 days
10.69 times
34.14 days
15.21 times
23.99 days

debtors collection period

120
100
80
debtors collection period
60
40
20
0
2009-10 2010-11 2011-12 2012-13

2013-14

INTERPRETATION:
Debt collection period changing over the years. It was 33.92 days in the year 2009-10. It
increased to 38.62 days in the year 2010-11, but in the year 2011-12 it decreased to 17.55 days.
There was a subsequent increase in the year 2012-13 it was 34.14 days and 23.99 days in the
year 2013-14

This shows the inefficient credit collection performance of the company.

c) CREDITORS TURNOVER RATIO= NET PURCHASE / AVERAGE

CREDITORS
Year

Net purchase

Average creditors

2009
2010
2011
2012
2013

1,05,19,225
40,35,550
29,59,462
33,57,434
37,14,676

9,15,298
4,89,268
1,83,687
9,71,526
5,64,745

creditors
turnover ratio
11.49 times
8.24 times
16.11 times
3.45 times
6.57 times

creditors turnover ratio

18
16
14
12
creditors turnover ratio

10
8
6
4
2
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:
It is clear that creditor turnover ratio changing over the years. It was 11.49 times in the year
2009-10. It decreased to 8.24 times in the year 2010-11, there was a subsequent increase in the
year 2011-12 to 16.11 times. In the year 2012-13 it was 3.45 times and in the year 2013-14 it
was 6.57times It shows that company has making prompt payment to the creditors.

C)(A) CREDITORS PAYMENT PERIOD= DAYS IN A YEAR / CREDITOR

TURNOVER RATIO
Year

Days in a year

2009-10
2010-11
2011-12
2012-13
2013-14

365
365
365
365
365

creditors
turnover ratio
11.49 times
8.24 times
16.11 times
3.45 times
6.57 times

Average payment
period
31.76 days
44.29 days
22.65 days
105.79 days
55.55 days

average payment period

120
100
80
average payment period
60
40
20
0
2009-10 2010-11 2011-12 2012-13

2013-14

INTERPRETATION:
Average payment period changing over the years. It was 31.76 days in the year 2009-10.
It increased to 44.29 days in the year 2010-11, But in the year 2011-12 is was decreased to 22.65.
In the year 2012-13 it was 105.79. in the year 2013-14 it was 55.55. It indicates that the company
has taken the steps to prompt payment to the creditors.

d) Working capital turnover ratio= net sales / net working capital

Year

Net sales

2009-10
2010-11
2011-12
2012-13
2013-14

1,15,05,626
51,98,217
32,95,961
37,11,158
38,42,562

Net working
capital
4,68,768
1,90,505
4,07,624
6,91,964
7,24,162

Working capital
turnover ratio
24.54 times
27.28 times
8.08 times
5.36 times
5.30 times

working capital turnover ratio

30
25
20

working capital turnover

ratio

15
10
5
0
2009-10

2010-11

2011-12

2012-13

2013-14

INTERPRETATION:
The working capital t/o ratio is fluctuating year to year that was high in the year 2009-10 it
was 24.52 times. In the year 2010-11 it was 27.28times. There was a subsequent decrease in the
year 2011-12 it was 8.08 times .in the year 2012-13 it was 5.36 times and in the year 2013-14 it
was 5.30. This shows the company is utilizing working capital gradually.