International Journal of Innovations & Research Analysis (IJIRA) 42

ISSN : 2583-0295, Impact Factor: 5.449, Volume 02, No. 01, January - March, 2022, pp 42-48

STUDY ON CASH MANAGEMENT PRACTICES IN INDIAN CORPORATE SECTOR

WITH SPECIAL REFERENCE TO PAPER AND FOREST INDUSTRY:
AN ANALYTICAL STUDY ON SELECTED COMPANIES

Nakum Dilipkumar Hansraj

**
Dr. K. P. Damor

ABSTRACT

Cash is the most important lubricant for any business. Without cash, liquidity of the company is
endangered. In today’s environment, there are many methods and models to handle cash effectively in
the business. Generally certain amount of cash invested at the starting of the business is converted into
fixed assets in the form of land, building, plant and machineries, furniture etc. Other portion of cash
invested in the business is for purchasing raw materials, payment of wages to the worker and payment of
other expenses. Therefore, investment of cash in the production process continued until the revenue
comes in the form of sales. Then the business gets its momentum. No further cash is needed if the
business changes its level of activities or adopted a new project or profit distributed among the
shareholder in the form of dividend or suffered a huge loss. After that cash should be generated in its
regular basis to mitigate the expenses. Periodical surplus in the process distributed as dividend. In the
current paper, cash management practices have been discussed with the special reference to the paper
sector.
___________________________________________________________________________________

Keywords: Liquidity, Cash Conversion Cycle, Current Ratio, Dividend, Cash Management.
___________________________________________________________________________________
Introduction
Forest goods include paper, wood pulp, timber, sawmill products, forest-derived millwork
products, and animal feed, among other cellulosic (wood-based) items obtained from forests. Forest
products and paper, in general, are made from wood or woody plant matter. Wood is used for a variety of
purposes, including as a raw material in the creation of paper and as a completed structural element in
the construction of structures. Non timber forest products are goods that are not made of wood but are
nonetheless obtained from forest resources. The remaining waste mass from saw mills and other forest
product sector facilities may be used to generate electricity and produce bio fuels or renewable fuels.
In India, the paper and paper products market is divided into four regions: north, south, east,
and west. Due to rising paper consumption, particularly in FMCG items, the Western area is the country's
leading consumer of paper and paper products. Tamil Nadu, Andhra Pradesh, Maharashtra, Punjab,
Madhya Pradesh, and Gujarat are the states with the most paper mills. Wood, bamboo, bagasse,
recycled fiber, wheat straw, rice, and husk are among the raw materials used by paper mills. The sort of
raw material utilized is frequently determined by the mill's location. The majority of mills in India's northern
and western regions rely largely on agricultural wastes and wastepaper as a source of raw material.
Wood and bamboo are used as raw materials in pulp and paper manufacture in the southern and eastern
areas.
Review of Literature
The following literature review has been used to conduct the study of the selected paint industry.
Lydiah Wambui Ndirangu (2017), in this study, researcher analyze the effect of cash
management on the financial performance of the companies listed at The Nairobi Securities Exchange,


Research Scholar, Department of commerce, Saurashtra University, Rajkot, Gujarat, India.
**
Professor, Department of Commerce, Saurashtra University, Rajkot, Gujarat, India.
Nakum Dilipkumar Hansraj & Dr. K. P. Damor: Study on Cash Management Practices in Indian..... 43
for which 15 Companies were selected and descriptive research design was used. The study based on
secondary data collected for 7 years (2010-2016) from NSE, published financial statements from
respective websites of company and capital market authority. Researcher analyzed the data with the help
of multiple regression and correlation. Study found positive but insignificant effect of cash conversion
cycle on financial performance, negative and insignificant effect of size of company on financial
performance and positive and significant effect of leverage on financial performance of selected
companies. Therefore, it was recommended by researcher to increase the debt proportion in its capital
structure which improve the financial performance of selected samples.
Ivan Klyuchankin(2017), researcher conducted this study on RE Trading company with the
objective to analyze the cash flow management. For this, researcher use empirical research design. Data
for the study was collected through interview of manager, employees and reports & documents of
selected company. Study found that there were no any problem with cash flow and its management and
company can manage better cash flow by create a subdivision for internal control for financial activity of
company.
Carlos Arangoet. al. (2013) surveyed in Canada, France, Germany and Netherlands for testing
the hypothesis that cash was still the most efficient payment appliance and people hold cash for
protective reasons when facing uncertainty about their future purchases.
End shown that two reason namely minimum cash holdings and cash first were significant
causes of the high shares of low-value cash payments in Canada, France and Germany but in
Netherlands significant share of low value card deal were found.
GamzeVuralet. al. (2012) initiate in their research that upsurge in the level of leverage will lead
to decline in the profitability of the firm and the assessment of the firm.
75 manufacturing firms listed on Istanbul stock exchange market were used to gather the
secondary data for the period of 2002 to 2009 with the objective to check the relationship between
working capital management components and performance of the firm by using dynamic panel data
analysis. The outcomes for the same had shown that by shortening gathering period of books receivable
and cash conversion cycle firms can growth profitability measured by gross operating profit.
Abdirizak Mohamed Jama and others (2017), showed a study on effect of cash management
practices on the profitability of bottled refined companies. Sample of 46 was used to gather the data
through questionnaire, document analysis and interviews. Correlation and regression analysis were used
to evaluate the data. Solvene’s formula was also used in this study. Researcher establish that cash
budgeting has significantly guidance the profitability of the water purified companies.
Parmar (2019) showed a investigation study on a comparative study of cash management
practice of Indian corporate sector analysis of selected companies. In his research work, seven different
industries out of which five companies from each industry were selected with a suitability sampling
system with a study period of ten years from 2008-2009 to 2017-2018. To analyse the cash management
practices, seven ratios are considered by the scholar on the basis of data together and then on that ratios
Pearson correlation and Regression is applied to analyze the data. This study displayed that the selected
samples’ cash management practices show more alteration industry wise because as per the different
industries, many things are changing automatically. Out of all selected companies, some firms have
efficient cash management practices, whereas some firms want to progress their cash management
practices by taking corrective stages and expressing suitable cash management policies for the
company.
Research Methodology
Objectives of the Study
For the study there must be objectives which lead to right way of the study. In the study
following objectives have been analyzed. For the study each objective has its own importance and
specific accounting tool as well statistical tool for analysis so, following objectives have been identify for
analysis.
 To analyze liquidity position in selected paper companies.
 To check cash conversion cycle of selected paper companies.
 To examine cash management practices in selected paper companies during the study period.
 To compare cash conversion cycle of selected paper companies.
44 International Journal of Innovations & Research Analysis (IJIRA) - January - March, 2022

Period of the Study

The study period has most important aspect in the research methodology. It makes the study
more effective for certain time period. For the study 2010-11 to 2020-21 that is 10 years of time period
has been considered.
Scope of the Study
The scope of the study describes the geographic area in which the researcher conducted his
investigation. For appropriate research, the scope of study must be specified, which describes the topic
of inquiry. Diverse research has a broad impact, but it is not feasible to cover all disciplines of study
owing to constraints such as time, information, and so on. In the current study, the researcher selects the
region of investigation by taking into account a number of factors. The study's scope is limited to India's
five core industrial sectors.
Type of the Study
There are many types of the study for the research design. This study has been considered as
Analytical, Empirical and Comparative. Analytical because of in the study data have been analyzed
during the study period. Selected companies have been compared with each other that why this study is
called as comparative study.
Universe and Population of the Study
Universe of the study has been considered as whole companies working in India whereas listed
companies on stock exchange are considered as population of the study. Universe gives the entire
potential element for the population. Population has been given all tentative samples for the study. It is
obvious that whole population analysis is not possible due to samples have been taken from the
population.
Data Collection
For the study mainly secondary data have been used and collected from various websites,
annual reports, newspapers and journals.
Hypothesis
H0: There is no significant difference in the liquidity position of the selected paint companies
H1: There is significant difference in the liquidity position of the selected paint companies
H0: There is no significant difference in the cash conversion cycle of the selected paint companies
H1: There is significant difference in the cash conversion cycle of the selected paint companies
Interpretation and Data Analysis
 Current Ratio: (In Times)
Table 1: Current Ratio of Selected Companies
Years TNP JK Paper West Cost Emami
2011-12 0.67 1.31 0.75 0.84
2012-13 0.59 1.00 0.99 1.02
2013-14 0.60 0.98 0.93 1.40
2014-15 0.74 0.97 0.07 1.08
2015-16 0.70 0.76 0.89 0.88
2016-17 0.69 1.04 1.06 0.85
2017-18 0.63 1.08 1.32 0.87
2018-19 0.68 1.55 1.65 0.74
2019-20 0.71 1.26 1.04 0.69
2020-21 0.67 1.24 0.97 0.68
Average 0.67 1.12 0.97 0.91
Minimum 0.59 0.76 0.07 0.68
Maximum 0.74 1.55 1.65 1.40
Source: Calculated from Annual Report of respective Companies
To calculate current ratio, current assets have been divided by the current liabilities. From the
above table it is clear that minimum cash ration was of 0.07 of West Cost company in the year 2014-15
and the maximum cash ratio was 1.65 of West Cost company in the year 2018-19.
Nakum Dilipkumar Hansraj & Dr. K. P. Damor: Study on Cash Management Practices in Indian..... 45
Figure 1: Current Ratio

1.80

1.60

1.40

1.20

1.00
TNP

0.80 JK Paper
West Cost
0.60 Emami

0.40

0.20

0.00

The above chart shows the graphical representation of the current ratio where X axis shows the
ratio in frequency and the Y axis shows the year. Different company has been presented by the different
colors.
Table 2: One Way Anova Test
Source of Variation SS df MS F P-value F crit
Between Groups 1.057973 3 0.352658 5.361003 0.003719 2.866
Within Groups 2.368153 36 0.065782
Total 3.426125 39
In the given table, calculation of one way anova test is done. Here, the calculated value is
5.361003 which is higher than critical value 2.866 that means the Null Hypothesis is rejected and
therefore it denotes that there is a significance difference in the current ratio of selected paper
companies.
 Cash Ratio: (In Percentage)
Table 3: Cash Ratios of Selected Companies
Years TNP JK Papers West Cost Emami
2011-12 1.42 27.43 1.92 9.52
2012-13 1.73 6.04 0.86 31.46
2013-14 0.80 0.96 1.14 73.91
2014-15 1.22 2.01 0.16 35.41
2015-16 1.00 1.76 2.04 17.29
2016-17 1.09 3.36 5.15 5.81
46 International Journal of Innovations & Research Analysis (IJIRA) - January - March, 2022

2017-18 1.27 15.38 2.54 2.36

2018-19 2.24 1.84 1.05 1.19
2019-20 0.25 3.21 0.90 2.43
2020-21 0.59 0.83 17.62 1.86
Average 1.16 6.28 3.34 18.12
Minimum 0.25 0.83 0.16 1.19
Maximum 2.24 27.43 17.62 73.91
Source: Calculated from Annual Report of respective Companies
In order to calculate cash ratio, cash + marketable securities has been divided by current
liabilities. From the above table it is clear that the highest cash ratio was 73.91 of the Emami company in
the year 2013-14 and the minimum cash ratio was 0.16 of West Cost in the year 2014-15.
Figure 2: Cash Ratio

80.00

70.00

60.00

50.00

TNP
40.00
JK Papers
West Cost
30.00
Emami

20.00

10.00

0.00

The above chart shows the graphical representation of the cash ratio where X axis shows the
ratio in frequency and the Y axis shows the year. Different company has been presented by the different
colors.
Table 4: One Way Anova Test
Source of Variation SS df MS F P-value F crit
Between Groups 1715.4 3 571.824 3.5653 0.0234 2.8662
Within Groups 5773.8 36 160.38
Total 7489.277 39
Nakum Dilipkumar Hansraj & Dr. K. P. Damor: Study on Cash Management Practices in Indian..... 47
In the given table, calculation of one way anova test is done. Here, the calculated value is
3.5653 which is higher than critical value 2.8662 that means the null Hypothesis is rejected and therefore
it denotes that there is significance difference in the cash ratio of selected paper companies.
 Cash Conversion Cycle in Days: (In Days)
Table 5: Cash Conversion Cycle of Selected Companies
Years TNP JK Papers West Cost Emami
2011-12 -92.15 12.42 58.64 83.99
2012-13 -172.92 23.81 49.56 70.30
2013-14 -134.42 25.40 47.09 47.50
2014-15 -140.49 21.36 54.21 30.68
2015-16 -160.33 17.51 34.54 100.21
2016-17 -46.11 2.14 30.79 81.53
2017-18 -82.87 -9.53 17.16 94.83
2018-19 -102.64 -31.31 40.06 61.31
2019-20 -92.63 -38.79 50.84 38.96
2020-21 -125.64 -69.36 60.77 35.51
Average -115.02 -4.63 44.36 64.48
Minimum -172.92 -69.36 17.16 30.68
Maximum -46.11 25.40 60.77 100.21
Source: Calculated from Annual Report of respective Companies
In order to calculate Cash Conversion Cycle, no.of days of outstanding inventory + no. of days
of outstanding sales – no.of days of outstanding payables. From the above table it is clear that the
highest cash conversion cycle was 100.21 of the Emami company in the year 2015-16 and the minimum
cash conversion cycle was -172.92 of TNP in the year 2012-13.
Figure 3: Cash Conversion Cycle

150.00

100.00

50.00

TNP
0.00
JK Papers
West Cost
-50.00
Emami

-100.00

-150.00

-200.00

The above chart shows the graphical representation of the cash conversion cycle where X axis
shows the ratio in frequency and the Y axis shows the year. Different company has been presented by
the different colors.
48 International Journal of Innovations & Research Analysis (IJIRA) - January - March, 2022

Table 6: One Way Anova Test

Source of Variation SS df MS F P-value F crit
Between Groups 193477 3 64492.34 76.575 1.08E-15 2.866266
Within Groups 30329.62 36 842.4893
Total 223806.6 39
In the given table, calculation of one way anova test is done. Here, the calculated value is
76.575 which is higher than critical value 2.866 that means the null Hypothesis is rejected and therefore it
denotes that there is significance difference in the cash ratio of selected paper companies.
Findings and Conclusion
The present study shows the importance of cash and its management in the selected paper
sector companies. Different analytical tools has been used for the calculation of current ratio, cash ratio
and cash conversion cycle. From the analysis it is clear that null hypothesis is rejected and alternate
hypothesis is accepted. This study gives us the clear idea of how the cash can be managed effectively in
the paper sector.
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