The western india plywoods ltd project report

Plywood is a wood item in which thin sheets of wood are stuck together, grains ofcontiguous sheets being at right points to each other in the main plane. Because of the cross-grain orientation, mechanical properties are less directional than those of natural lumberand more dimensionally stable. Following are the plywood product

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  Aircraft plywood
  
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  Marine plywood
  
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  Shuttering plywood
  
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  Fire retardant plywood
  
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  Warm water residency
  
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  Boiling water proof
  
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  Resin surfaced shuttering plywood
  

1. 
   A proper management of cash helps the management to maintain liquidity and control in the business.
   
2. 
   Cash management aids to bring proper planning in terms of cash disbursements and receipts during a period to keep the firm sufficiently liquid and efficient utilization of excess cash by investing in some profitable ventures.
   
3. 
   Cash management is very inevitable part in management chart as we cannot predict future financial uncertainties.
   
4. 
   Cash management helps to generate strategies and it gives way to innovation for cash receipt and payments.
   

Bhutto. Abbas, and Shah, (2011) conducted an examination on the relationship between cash conversion cycle, and firm's profitability in Pakistan. I Required data were collected from Karachi Stock Exchange that consist of financial statements of 157 non-financial companies. Data analysis was carried out using Pearson correlation and analysis of Variance (ANOVA). And the result of the study stated that cash conversion cycle has an impact on ROE and ROA. Cash conversion cycle and sales growth, Return on Equity are negatively correlated, and financing policies of the company and there exist a positive relationship assets and ROA.

Uwuigbe, Uwalomwa and Egbide (2011) conducted a study focusing a few selected companies situated in Nigeria in which he used CCC as a measure of cash management keeping the debt ratio, current ratio and sales growth ratio as dependent variable. Karl Pearson's correlation method and regression method were used to analyze data. And he Concluded that there cash management and profitability of a firm are positively related. The study suggested that the managers should create a positive value for the shareholders by decreasing the cash conversion cycle ad also accounts receivables should be in control.

Similarly, Falope and Ajilore (2009) conducted a same type of study based on Nigerian firms and they found a substantial adverse relationship between et operating profitability and the debtors collection period, stock turnover in days, average creditors turnover period and cash conversion cycle.

Wongthatsanekorn (2010) conducted a study in order to find out cash-to-cash cycle time inventory conversion period, receivable conversion period, and payable deferral period of private hospital in Thailand. The study showed a result that there was a negative association between payable deferral period and asset turnover.

Ebben and Johnson (201 1) conducted a study in small firms regarding the relationship of cash conversion cycle, invested capital, liquidity and performance. The research work found that the firm with efficient cash conversion cycle is found to be more liquid and those kinds of firms require only less debt and equity financing. The study emphasis that cash management is measured by cash conversion cycle which is an important tool of liquidity.

According to malikwaseem and kifayat (2001:156), conducted a study and concluded that profitability and accounts receivable, inventory, cash are positively related and creditors and profitability are inversely related.

Falope and Ajilore (2009:74) conducted a research work and came to a conclusion that there was a negative association between receivable collection period and profitability.

CHAPTER 3

RESEARCH METHODOLOGY

CHAPTER 3

RESEARCH METHODOLOGY

STATEMENT OF THE PROBLEM

The study is aimed to bring out the effectiveness of implementing a proper cash management practices in the company to improve the liquidity position through, improving the unmet areas that can be improved through cash management thinking. This study has been undertaken to meet the requirement of cash disbursement as per payment schedule of Western India Plywood Ltd, and to have a minimum amount of cash balance through monitoring the level of cash inflow, cash outflow and to make sure the most favourable investment of surplus cash.

The study will be beneficial for the short-term financial decisions. The study covers all the mechanisms of Working capital and cash related activities and it will analyse existing cash management practices prevailing in the company and recommend strategic cash management practices to improve the profitability of business. And suggest ways to invest in profitable venture finding the idle cash in the company.

The research will be done with the help of secondary data. The secondary data is collected from discussion with company guide, referring to various sources like

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  Annual reports
  
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  Manuals of the company
  
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  Journals and other research articles
  

Since the research work is purely dependent on secondary data and it is collected from the company’s website and from the annual reports and other documents which include: -

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  Balance sheet
  
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  Income statement
  
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  Cash flow statement
  

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  Ratio Analysis
  
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  Trend analysis
  
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  Anova.
  

The study uses the correlation research design, the research methodology for analysing the data includes Return d on Assets, and return on Equity which is dependent variables, cash conversion cycle is the independent variable. Current ratios, debt ratios and growth in sales are treated as controllable variables. Correlation analysis and regression analysis along with financial ratio are applied to find out their impact of cash management practices on profitability of the firm. The data and information so collected will be tabulated accordingly and respective tables and chart will be prepared. Simple excel charts are graphs will be used to analyse the data. Inference will be drawn from the analysis accordingly.

Cash management is the method of managing the cash inflows and outflows of the firm keeping in mind the end goal to keep up satisfactory level of cash to meet the operational and capital requirements. The study is aimed to bring out the effectiveness of implementing a proper cash management practices in the organization in order to improve the liquidity position through improving the unmet areas that can be improved through cash management thinking.

Cash management has a significant influence on the profitability of the firm. Many business managers are confronted with the problem of lack of cash to pay off its daily expenses even though the firm is having profit. Profit is nothing without having liquid cash to sustain business. So firm's current financial position and profitability is to be ascertained in order to implement effective cash management practices. The financial status and profitability level can be easily calculated using different ratio analysis techniques.

RATIO ANALYSIS

A ratio can be generally defined as the association between two numbers which is expressed in arithmetic terms. It attempts to build a significant relationship between the figures expressed in the financial statements of the company such as position statement income statement, and cash flow statement. Ratio analysis is used to assess different aspects of the company's operating and financial status such as profitability, solvency and liquidity. Thus, a company's financial status is studied by checking the trend of ratios over a time in order to determine whether it is improving or deteriorating.

Ratios are classified into following different categories according to its intention

1. 
   Liquidity ratio
   
2. 
   Leverage or solvency ratio
   
3. 
   Efficiency ratio
   
4. 
   Profitability ratio
   

Liquidity denotes to the capability of a concern to meet its current obligations as and when they become due Below mentioned ratios are used to calculate liquidity.

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  Current ratio
  
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  Quick ratio
  
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  Absolute Liquid ration
  

The term solvency refers to the ability of the concern to meet its long-term obligations. Long term solvency ratio indicates a firm's ability to meet fixed interest costs and repayment schedules associated with its long-term borrowings. To measure the solvency of the firm, the following ratios can be calculated

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  Debt Equity Ratio
  
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  Proprietary Ratio
  

Activity ratio measures the efficiency or effectiveness with which a firm manages its resources or assets. They measure how efficiently a firm converts its assets or turned over to sales. To measure the efficiency of the firm, following ratio can be calculated.

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  Inventory turnover ratio
  
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  Creditors turnover ratio
  
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  Debtors turnover ratio
  
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  Total assets turnover ratio
  

The primary objective of any business is to cam profit. Profit earning is essential forthe survival of the business. The profitability of a firm can be easily measured by itsprofitability ratios. These ratios are generally calculated either in relation to sales or inrelation to investments. The various profitability ratios are

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  Gross profit ratio
  
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  Net profit ratio
  
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  Operating ratio
  
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  Operating profit ratio
  
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  Earnings per ratio
  

Current ratio is commonly used to ascertain the short-term solvency, which indicate whether the firm is liquid and has the ability to pay its short-term obligation with its current assets in time as and when it became due. Current ratio 2:1 is a satisfactory index which means the current assets is two times of its current liability which says that companies with more current assets can easily pay off its current liabilities.

The current ratio of Western India Plywood Ltd shows that company is running at a satisfactory level. In year 2014 the current ratio was highest because the current liability was low compared to other years and it showed a fluctuating tendency in the remaining years. However, company maintained its current ratio in a satisfactory level. It is better to maintain current ratio 1 so it tells company's value of total current assets cover at least one time of their short-term liabilities. So, the trend of current ratio of WIP shows that the company would not be facing any challenges to meet its short-term obligation.

A quick ratio is a financial ratio used to calculate a company's financial liquidity. Liquid assets are those assets which are ready to be converted into cash from its material status Quick Ratio show Company's ability to meet its short-term financial contingencies with its most liquid assets.