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This document indicates about the cash management at Axis bank. How the company manages its short term liquidity.
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This is my pleasure that I acknowledge Dr. Ranjana Sharma for his great valuable assistance and excellent co-operation by allowing me to have experienced the things practically and working on the topic “A study on cash management at Axis Bank.” I am thankful to all of them who directly or indirectly helped me in preparing this project report. It is a great to have this opportunity to express my heartily gratitude for their valuable guidance, suggestion and ideas on my report. A world-beating thanks to my family and my friends for their support during this project. THANK YOU.
Cash, like the blood stream in the human body, gives vitality and strength to a business enterprise. Though cash hold the smallest portion of total current assets. However, Cash is both the beginning and end of working capital cycle - cash, inventories, receivables and cash. It is the cash, which keeps the business going. Hence, every enterprise has to hold necessary cash for its existence. Moreover, Steady and healthy circulation of cash throughout the entire business operations is the basis of business solvency. A Now-a-days non-availability and high cost of money have created a serious problem for industry. Nevertheless, cash like any other asset of a company is treated as a tool of profit." Further, "today the emphasis is on the right amount of cash, at the right time, at the right place and at the right cost. In the words of R.R. Bari, "Maintenance of surplus cash by a company unless there are special reasons for doing so, is regarded as a bad sigh of cash management. As, "holding of cash balance has an implicit cost in the form of its opportunity cost. Cash may be interpreted under two concepts. In narrow sense, "Cash is very important business asset, but although coin and paper currency can be inspected and handled, the major part of the cash of most enterprises is in the form of bank checking accounts, which represent claims to money rather than tangible property. "While in broader sense, "Cash consists of legal tender, cheques, bank drafts, money orders and demand deposits in banks. In general, nothing should be considered unrestricted cash unless it is available to the management for disbursement of any nature. "Thus, from the above quotations we may conclude that in narrow sense cash means cash in hand and at bank but in wider sense, it is the deposit in banks, currency, cheques, bank draft etc. in addition to cash in hand and at bank. "Cash management includes management of marketable securities also, because in modern terminology money comprises marketable securities and actual cash in hand or in bank." "The concept of cash management is not new and it has acquired a greater significance in the modern world of business due to change that took place in the conduct of business and ever-increasing difficulties and the cost of borrowing. "Apart from the fact that it is the most liquid current assets, cash is the common denominator to which all current assets can be reduced because the other current assets i.e. receivables and inventory get eventually converted into cash. This underlines the significance of cash management.
of cash resource in such a way that generally accepted business objectives could be achieved. In this context, the objectives of a firm can be unified as bringing about consistency between maximum possible profitability and liquidity of a firm. Cash management may be defined as the ability of a management in recognizing the problems related with cash which may come across in future course of action, finding appropriate solution to curb such problems if they arise, and finally delegating these solutions to the competent authority for carrying them out The choice between liquidity and ij profitability creates a state of confusion. It is cash management that can provide solution to this dilemma. Cash management may be regarded as an art that assists in establishing equilibrium between liquidity and profitability to ensure undisturbed functioning of a firm towards attaining its li business objectives. Cash itself is not capable of generating any sort of income on its own. It rather is the prime requirement of income generating sources and functions. Thus, a firm should go for minimum possible balance of cash, yet maintaining its adequacy for the obvious reason of firm's solvency. Cash
management deals with maintaining sufficient quantity of cash in such a way that the quantity denotes the lowest adequate cash figure to meet business obligations. Cash management involves managing cash flows (into and out of the firm), within the firm and the cash balances held by a concern at a point of time. The words, 'managing cash and the cash balances' as specified above does not mean optimization of cash and near cash items but also point towards providing a protective shield to the business obligations. "Cash management is concerned with minimizing unproductive cash balances, investing temporarily excess cash advantageously and to make the best possible arrangement for meeting planned and unexpected demands on the firms' cash."
suggested certain general principles of cash management that, essentially add efficiency to cash management. These principles reflecting cause and effect relationship having universal applications give a scientific outlook to the subject of cash management. While, the application of these principles in accordance with the changing conditions and business environment requiring high degree of skill and tact which places cash management in the category of art. Thus, we can say that cash management like any other subject of management is both science and art for it has well-established principles capable of being skilfully modified as per the requirements. The principles of management are follows as –
1. Determinable Variations of Cash Needs A reasonable portion of funds, in the form of cash is required to be kept aside to overcome the period anticipated as the period of cash deficit. This period may either be short and temporary or last for a longer duration of time. Normal and regular payment cf cash leads to small reductions in the cash balance at periodic intervals. Making this payment to different employees on different days of a week can equalize these reductions. Another technique for balancing the level of cash is to schedule i cash disbursements to creditors during that period when accounts receivables collected amounts to a large sum but without putting the goodwill at stake. 2. Contingency Cash Requirement There may arise certain instances, which fall beyond the forecast of the management. These constitute unforeseen calamities, which are too difficult to be provided for in the normal course of the business. Such contingencies always demand for special cash requirements that was not estimated and provided for in the cash budget. Rejections of wholesale product, large amount of bad debts, strikes, lockouts etc. are a few among these contingencies. Only a prior experience and investigation of other similar companies prove helpful as a customary practice. A practical procedure is to protect the business from such calamities like bad-debt losses, fire etc. by way of insurance coverage. 3. Availability of External Cash Another factor that is of great importance to the cash management is the availability of funds from outside sources. There resources aid in providing credit facility to the firm, which materialized the firm's objectives of holding minimum cash balance. As such if a firm succeeds in acquiring sufficient funds from external sources like banks or private financers, shareholders, government agencies etc., the need for maintaining cash reserves diminishes.
certain basic strategies suggested by Gitman, which prove evidently helpful in managing cash if employed by the cash management. They are: "Pay accounts payables as late as possible without damaging the firm's credit rating, but take advantage of the favourable cash discount, if any. Turnover, the inventories as quickly as possible, avoiding stock outs that might result in shutting down the productions line or loss of sales. Collect accounts receivables as early as possible without losing future loss sales because of high-pressure collections techniques. Cash discounts, if they are economically justifiable, may be used to accomplish this objective."
"Cash management is concerned with minimizing unproductive cash balances, investing temporarily excess cash advantageously and to make the best possible arrangements for meeting planned and unexpected demands on the firm's cash. "Cash Management must aim to reduce the required level of cash but minimize the risk of being unable to discharge claims against the company as they arise. All these aims and motives of cash management largely depend upon the efficient and effective functioning of cash management. Cash management functions can be studied under five heads, namely, cash planning, managing cash flow, controlling cash flow, optimizing the cash level and investing idle cash. All these functions are discussed below in details:
Good planning is the very foundation of attaining success. For any management decision, planning is the foremost requirement. "Planning is basically an intellectual process, a mental pre-disposition to do things in an orderly way, to think before acting and to act in the light of facts rather than of a guess. "Cash planning is a technique, which comprises of planning for and controlling of cash. It is a management process of forecasting the future need of cash, its available resources and various uses for a specified period. Cash planning, thus, deals at length with formulation of necessary cash policies and procedures in order to carry on business continuously and on sound lines. A good cash planning aims at providing cash, not only for regular but also for irregular and abnormal requirements.
The heading simply suggests an idea of managing properly the flow of cash coming inside the business i.e. cash inflow and cash moving out of the business i.e. cash outflow. These two are said to be properly managed only, if a firm succeeds in accelerating the rate of cash inflow together with minimizing the cash outflow. As observed expediting collections, avoiding unnecessary inventories, improving control over payments etc. contribute to better management of cash. Whereby, a business can conserve cash and thereof would require lesser cash balance for its operations.
As forecasting is not an exact science because it is based on certain assumptions. Therefore, cash planning will inevitably be at variance with the results actually obtained. For this reason, control becomes an unavoidable function of cash management. Moreover, cash controlling becomes essential as it increases the availability of usable cash from within | the enterprise. As it is obvious that greater the speed of cash flow cycle, I greater would be the number of times
a firm can convert its goods and ' services into cash and so lesser will be the cash requirement to finance the desired volume of business during that period. Furthermore, every enterprise is in possession of some hidden cash, which if traced out substantially decreases the cash requirement of the enterprise.
A financial manager should concentrate on maintaining sound liquidity position i.e. cash level. All his efforts relating to planning, managing and controlling cash should be diverted towards maintaining an optimum level of cash. The foremost need of maintaining optimum level of cash is to meet the necessary requirements and to settle the obligations well in time. Optimization of cash level may be related to establishing equilibrium between risk and the related profit expected to be earned by the company.
Idle cash or surplus cash refers to the excess of cash inflows over cash outflows, which do not have any specific operations or any other purpose to solve currently. Generally, a firm is required to hold cash for meeting working needs facing contingencies and to maintain as well as develop goodwill of bankers. The problem of investing this excess amount of cash arise simply because it contributes nothing towards profitability of the firm as idle cash precisely earns no returns. Further permanent disposal of such cash is not possible, as the concern may again need this cash after a short while. But, if such cash is deposited with the bank, it definitely would earn a nominal rate of interest paid by the bank. A much better returns than the bank interest can be expected if a company deploys idle cash in marketable securities. There are yet another group of enterprise that neither invest in marketable securities nor willing to get interest instead they prefer to deposit excess cash for improving relations with banks by helping them in meeting bank requirements for compensating balances for services and loans.
Every business transaction whether carried on credit or on cash basis ultimately results in either cash inflow or cash outflows. The pivotal point in present day financial management is to maximize cash generation and to minimize cash outflows in relation to the cash inflows. Keynes postulated three motives for holding cash –
It refers to holding of cash for meeting routine cash requirements and financing transactions carried on by the business in the normal course of action. This motive requires cash for payment of various obligations like purchase of raw materials, the payment of usage and salaries, dividend, income tax, various other operating expenses etc. However, there exists regular and counter inflow of cash in the business by way of return on investments, sales etc. However, cash receipts and cash payments do not perfectly synchronies with each other. Therefore, a firm requires an additional cash balance during the periods when payments are in excess of cash receipts. Thus, transaction motive stresses on holding cash to meet anticipated obligations that are not counter balanced by cash receipts due to disparity of timings.
(ii) Raising loans from institutions and creditors other than banks. (Hi) Liquidity marketable securities, (IV) Resorting to bills discounting schemes, (v) Disposing off surplus fixed assets, (vi) Shedding the quantity of raw materials, (vii) Unloading finished goods even at loss, (viii) By delaying payments. As a piece of advice, it is recommended by the financial experts that a cash management should not start searching for external finance at the very instance when the cash shortage is anticipated. At the initial stage, a management should take appropriate steps to avoid or minimize the undesirable situation of emerging cash shortage by exercising effective control over internal resources. In this respect, the matters of special consideration that can be gainfully employed by the concern for overpowering the situation of cash shortage are - (i) Increasing efforts to speedup collection, (ii) Reduction in purchase of inventories, (ii) Increasing cash sales, (iv) Selling-off redundant assets, (v) Selling short-term investments. (vi) Deferment of capital expenditure, (vii) Postponing and delaying payments. These considerations are nothing but mere use of tact and skill to overcome a shortage of cash. They are much economical than any other resources (internal or external) for they cost neither interest nor any expenses. "Even if an external resources has to be found, this might be seen as a bridging operation pending the ability to bring on stream an alternative internal source. No sooner than a firm becomes aware of approaching shortage of cash than it should concentrate its efforts towards the eradication of such situation. The sooner the shortage is provided for, the better it is. Every Concern escapes itself form lending into such a situation as it makes way for numerous costs because of running out cash. A firm bears not only the burden of unnecessary costs but is subjected to various types of pressures pertaining to its dealings. All these factors adversely affect the morale of management, causes damages to the hard- earned reputation and financial credit-worthiness etc. A firm is forced to borrow funds at high rates of interest has to accept higher price demand of suppliers, loses cash discount on payments, enter into further negotiations with banks and other financial institutions on account of slow payment.
Current assets of enterprises may be financed either by short-term sources or long term sources or by combination of both. The main sources constituting long-term financing are shares, debentures, and debts form banks and financial institutions. "The long term source of finance provides support for a small part of current assets requirements which is called the working capital margin. Working capital margin is used here to express the difference between current assets and current liabilities. Short-term financing of current assets includes sources of short- term credit, which a firm is mostly required to arrange in advance. Short term bank loans, commercial papers etc. are a few of its components. Current liabilities like accruals and provisions, trade credit, short-term bank finance, short-term deposits and the like warranting the current assets are also referred to a short-term term sources of finance. Spontaneous financing can also finance current assets, which includes creditors, bills payable, and outstanding receipts. A product firm would always opt for utilizing spontaneous sources fully since it is free of cost. Every concern that can no more be financed by spontaneous sources of financing has to decide between short-term and long-term source of finance along with relevant proportion of the two. There are three approaches of financing current assets that are popularly used
As the name itself suggests, a financing instrument would offset the current asset under consideration, bearing financing instrument bearing approximately same maturity. In simple words, under this approach a match is established between the expected lives of current asset to be financed with the source of fund raised to finance the current assets. For this, reason a firm would select long-term financing to finance or permanent current assets to finance temporary or variable current assets. Thus, a ten-year loan may be raised for financing machinery bearing expected life of ten years. Similarly, one-month stock can be financed by means of one-month bank loan. This is also termed as hedging approach.
Conservative approach takes an edge over and above matching approach, as it is practically not possible to plan an exact match in all cases. A firm is said to be following conservative approach when it depends more on long-term financial sources for meeting its financial needs. Under this financing policy, the fixed assets, permanent current assets and even a part of temporary current assets is provided with long-term sources of finance and this make it less risky nature. Another advantage of following this approach is that in the absence of temporary current assets, a firm can invest surplus funds into marketable securities and store liquidity.
As against conservative approach, a firm is said to be following aggressive financing policy when depends relatively more on short-term sources than warranted by the matching plan. Under this approach the firm finance not only its temporary current assets but also a part of permanent current assets with short-term sources of finance. In nutshell, it may be concluded that for financing of current assets, a firm should decide upon two important constraints; firstly, the type of financing policy to be selected (whether short-term or long term and secondly, the relative proportion of modes of financing. This decision is totally based on trade-off between risk and return. As short-term financing is less costly but risky, long-term financing is less risky but costly.
the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and state government all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name, which worked for the Liberalization of Banking Practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swifter. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure. Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as “The Bank of Calcutta” in Calcutta in June 1806. Couple of Decades later, foreign Banks like HSBC and Credit Lyonnais Started their Calcutta operations in 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of British Empire and due to which banking actively took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank set up in 1865. By 1900, the market expanded with the establishment of banks like Punjab National Bank in1895 in Lahore; Bank of India in 1906 in Mumbai-both of which were founded under private
ownership. Indian Banking Sector was formally regulated by Reserve Bank of India from 1935.After India’s independence in 1947, the Reserve Bank was nationalized and given broader powers.
The bank was founded in December 1993, as UTI Bank, opening its registered office in Ahmedabad and corporate office in Mumbai. UTI Bank began its operations in 1993, after the Government of India allowed new private banks to be established. The bank was promoted in 1993 jointly by the Administrator of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation, National Insurance Company, The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance Company. The first branch was inaugurated on 2 April 1994 in Ahmedabad by Dr. Manmohan Singh, the then finance minister of India. In 2001 UTI Bank agreed to merge with Global Trust Bank, but the Reserve Bank of India (RBI) withheld approval and the merger did not happen. In 2004, the RBI put Global Trust into moratorium and supervised its merger with Oriental Bank of Commerce. In 2003, UTI Bank became the first Indian bank to launch a travel currency card. In 2005, it was listed on London Stock Exchange. UTI Bank opened its first overseas branch in 2006 in Singapore. That same year it opened a representative office in Shanghai, China. In 2007, UTI Bank opened a branch in the Dubai International Financial Centre and branches in Hong Kong. In 2008, it opened a representative office in Dubai. With effect from 30 July 2007, UTI Bank changed its name to Axis Bank. In 2009, Shikha Sharma was appointed as the MD and CEO of Axis Bank. Axis Bank opened a branch in Colombo in October 2011, as a Licensed Commercial Bank supervised by the Central Bank of Sri Lanka.[18]^ Also in 2011, Axis Bank opened a representative office in Abu Dhabi. In 2011, Axis bank inaugurated Axis House, its new corporate office in Mumbai. In 2013, Axis Bank's subsidiary, Axis Bank UK commenced banking operations. Axis Bank UK has a branch in London. Bollywood actress Deepika Padukone is the brand ambassador of Axis Bank. In 2014, Axis Bank launched its first ‘All Women Branch’ in Patna. In 2015, Axis Bank opened its representative office in Dhaka. In 2019, Amitabh Chaudhry takes over as the MD & CEO from 1 January. As of 31 March 2016, the bank has over 50,001 employees. It spent ₹26. billion (US$370 million) on employee benefits during the FY 2012–13.
Axis Bank is the third largest private sector bank in India. The Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. The Bank has a large footprint of 4,050 domestic branches (including extension counters) with 11,801 ATMs & 4,917 cash recyclers spread across the country as on 31st March, 2019. The overseas operations of the Bank are spread over eleven international offices with branches at
A survey carried out by Navon (Navon, Company level cash flow management, 1996) among construction companies in Israel revealed that although all companies prepared cash flow at the company level, only 60 % of them compile cash flow at project level although infrequently at various levels of accuracy with a lot of manual efforts. The technique used for cash flow forecasting was to assign estimated costs on aggregated schedule and distribute them as a function of time using rule of thumb. The same method was applied to income flow, but no time lags for expenses or income were taken into account. Another technique used was to use well known software packages. However, it also required a lot of manual work and therefore was not very popular with the practitioners. It was also observed that both the methods were mainly used for expense-flow generation and the income-flow was generally assessed very roughly. Odeyinka et al (Odeyinka, Kaka, & Marledge, 2003) carried out a study about use and application of different approaches and strategies in resolving deficit cash flow being followed by small, medium and large scale contractors in U.K. The study also identified various cash flow forecasting methods in use. It was found that overvaluation, company’s cash reserves and tender unbalancing were the most common approaches to resolve the cash deficit. As regards method used for cash flow forecasting, it was found that the traditional method of breaking down the bill of quantities in line with the project schedule; supplemented by use of computer spreadsheet was the most common method. Considering that the Indian construction and projects industry being under development stage at present, a similar study in India would be very useful at this stage. AbdulRazaq et al (AbdulRazaq, Ibrahim, & Ibrahim, 2012) in a study examined the practices of cash flow forecasting by contractors in Nigeria and concluded that the practice of cash flow forecasting by contractors in Nigeria was not consistent. Those who practiced it did not have an appropriate way of doing it, while others did not seem to think it deserves thorough consideration. Most contractors showed nonchalant attitude towards the practice as no formal policy was embedded in their company policy to forecast cash flow. Those who engaged in the practice as a company policy did not adhere strictly to suggestions by researchers to streamline practices along defined activities. Cui et al (Cui, Hastak, & Halpin, 2010) developed a system dynamics model for project cash flows using Vensim DSS Version 5.5 and simulated project cash flow management scenarios for different cash flow management strategies such as front loading, back loading and optimal cash balance strategies. Also different cash management policies such as overbilling and under- billing, subcontracting, trade credit etc. were studied for a typical case. Impact of different strategies on requirement of trade overdraft was analysed to find the most appropriate strategy for minimizing the overdraft. Mahamid (Mahamid, 2011) in a study carried out in Palestine also has emphasized that cash flow management and dependency on banks and paying high interest as some of the major financial causes of contractor’s failure. There have also been various studies by researchers on causes of delays in Indian engineering and construction projects. Some of the studies referring to different engineering and construction sector projects have been mentioned below.
Assaf and Al-Heiji (Assaf & Al-Heiji, 2006) studied delays in large construction projects in Saudi Arabia and found that difficulties in financing project by the contractor and delays in payments by the owner were few of the significant causes for project delays. Enshassi et al (Enshassi, Al-Hallaq, & Mohammed, 2006) find in a study in Palestine that dependence on bank loans with high interest rates and cash flow mismanagement are two most significant financial factors for contractors’ business failures. Abdul-Rahman et al (Abdul-Rahman, Takim, & Min, 2009) carried out a study in Malaysia among clients, contractors, consultants and bankers reveal that poor cash flow management is the most significant factor that leads to a project delay, followed by late payments and insufficient financial resources. Doloi et al35 (Doloi, Sawhney, Iyer, & Rentala, 2012) analysing causes of delays in Indian construction projects have identified various project related, site related, process related, human related, authority related and technical issue related attributes for project delays compiled on the basis of earlier research carried out by other researchers on the topic. The attributes were ranked by Relative Importance Index (RII) calculated on the basis of weights given to each attribute by the respondent. One of the attributes identified under technical Issues as ‘Financial Constraints of Contractors’ was ranked third among 45 attributes. The meaning of ‘financial constraint’ is not very clear from the paper and therefore cannot be related to poor cash flow management. Pai and Bharath37 (Pai & Bharath, 2013) in a study on Indian infrastructure projects identified 74 different causes for project delay in different groups such as project, owners, contractors, consultant etc. The survey responses were analysed by calculating ‘frequency index’ based on frequency of occurrence, ‘severity index’ based on severity of occurrence. An ‘importance index’ was defined as the multiplication of frequency and severity indices. The factors were categorised in extremely critical, very critical and critical on the basis of importance factor within each group. ‘Difficulties in financing project by contractor’ was observed as a very critical factor.
Ratio analysis is the one of the most powerful tool of financial analysis. It aims at making use of quantitative information for decision making. A ratio is an expression of relationship between two figures or two amounts. It is a yard – stick which measures relationship between two variables. Ratios are simply a mean of highlighting in arithmetical terms the relationship between figures drowns from various financial statements. Robert Antony defines a ratio as “simply one number expressed in terms of another” a. CURRENT RATIO Current ratio is the most common ratio for measuring liquidity. It represents the “ratio of current assets to current liabilities”. It is also called working capital ratio. It is calculating by dividing current assets by current liabilities. Current ratio = Current Assets Current Liabilities Current assets are those, the amount of which can be realized with in a period of one year in includes cash in hand, cash at hand etc. Current liabilities are those amounts which are payable with in a period of one year- current liabilities are creditors, bills payable etc. The current ratio of the firm measures its short-term solvency, i.e., its ability to meet short term obligations. In a sound business a current ratio of 2:1 is considered an idle one. It provides a margin of safety to the creditors. Year Current Assets Current Liability Ratio 2019 127192.64 734320.24 0.1 7 2018 9 3831.51 627884.31 0.1 5 2017 95858.05 545705.13 0.1 7 2016 61164.52 472302.71 0. 13 2015 45992.02 417255.88 0. 11
Interpretation From the above table and from the above chart it can be seen that the current ratio during the year 20 15 was 0.11 and in 20 16 it was an increased to 0.13 while during the year 20 17 there was a increase in to 0.17 during the year 20 18 the current ratio was decreased to 0.15 but in the case of 201 9 the final year it was a slight increase to 0.17 But it can be analysed from the above that the organization did not attained a satisfactory as the current liabilities are more than the current assets. The company does not have adequate current assets to meet their current liabilities, so the firm has to increase its assets then the performance will improve.
The ratio is obtained by dividing cash (of course cash in hand and cash at bank) and marketable securities by current liabilities. It is also known as cash position ratio. Absolute Liquid Ratio = Cash+marketable Securities 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 Year Cash+ Marketable Securities Current Liabilities Ratio 2019 101775.33 734320.24 0. 2018 98926.32 627884.31 0. 2017 86620.48 545705.13 0. 2016 75526.06 472302.71 0. 2015 64495.35 417255.88 0.
0
2019 2018 2017 2016 2015
