Cash Conversion Cycle

One important tool to help us better understand the dynamics of Working Capital is Cash Conversion Cycle (CCC).

Cash Conversion Cycle (CCC) tells us about the time duration in which -

1. the inventory is consumed & processed into finished products and sold to customers,

2. the sales proceeds from the products is brought in from the customers or Sundry Debtors, and

3. the money is paid to the suppliers or Current Liabilities are paid.

Overall, Cash Conversion Cycle tells us how quickly money generated by the business or Net Profits is brought into the company after paying all its dues and liabilities. The shorter the cycle, the better it is. It also indicates as to how efficiently the working capital is being managed, meaning, whether the company is able to get longer credit periods from its suppliers and is able to quickly draw in money from its customers.

Cash Conversion Cycle has three components - Days Inventory Outstanding, Days Sales Outstanding and Days Payable Outstanding.

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Understanding Working Capital

Net Current Assets and Working Capital are one and the same thing. We know that Working Capital is the difference of Current Assets and Current Liabilities. Current Assets include Inventories, Sundry Debtors, Cash & Bank Balances and Loans & Advances. Current Liabilities include Liabilities and Provisions.

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EQUITY SECTION An Indian Stock Investment Forum - Balance Sheet, Profit & Loss, Cash Flow Statement

EQUITY SECTION An Indian Stock Investment Forum - Balance Sheet, Profit & Loss, Cash Flow Statement

Titan Industries Ltd. - Analysis of December quarter Results

Recommendation : BUY

January 28, 2010.

Titan Industries Ltd. did an Income from Operations worth Rs. 1954.59 crores. The Consumption of Materials as %age of Sales decreased significantly to 63% to 1235.91 crores from 70% at 935.74 crores in the same quarter last year. Purchase of Traded Goods as %age of Sales rose sharply to 12% at 239.37 crores from 8% at 101.21 crores in the same quarter the last year. Tax Expenses climbed to 3% at 59.08 crores as %age of Sales from 1% at 19.93 crores in the same quarter last year.

Selan Exploration Technology Limited - An Analysis

Recommendation : BUY

January 27, 2011.

Remarkable points from Annual Report 2009-10

During this Financial Year, the Selan Exploration Technology Limited has not undertaken any new drilling activities. However, 3D seismic data acquisition, processing and interpretation (API) activity in Bakrol and Indrora oilfields is underway. This shall give us a fair idea of the locations in which drilling campaign can be started in the second half of the current fiscal year.

Titan Industries Ltd - An Analysis

Recommendation : BUY

January 23, 2010.

Remarkable points from Annual Report 2009-10

Both Watches and Jewellery segments benefited from a good wedding season in the first quarter of 2009-10. Retail sales were extremely good for watches post October 2009. Tanishq ran a successful promotion the ‘Queen of Diamonds’ and the new Eyewear business had an extremely impactful activation in the first half of the year and a very successful advertising campaign in the last quarter of the year.

TTK Prestige LIMITED - Analysis of December Quarter Results

Recommendation ; BUY

January 19, 2011.

TTK Prestige Ltd. did an Income from Operations worth Rs. 236.45 crores. The Consumption of Materials as %age of Sales rose significantly to 25% to 60.13 crores from 18% at 26.44 crores in the same quarter last year. Purchase of Traded Goods as %age of Sales dropped to 29% at 68.4 crores from 33% at 68.4 crores in the same quarter the last year. Other Expenditures also dropped to 22% at 51.32 crores as %age of Sales from 27% at 39.5 crores in the same quarter last year.

Zydus Wellness - Analysis of December Quarter Result

Recommendation : HOLD

January 17, 2011.

Zydus Wellness did an Income from Operations worth Rs. 90.88 crore. The Consumption of Materials as %age of Sales rose significantly to 18% to 16.46 crores from 14% at 10.74 crores in the same quarter last year. Advertisement Expenses as %age of Sales dropped to 8% at 7.05 crores from 22% at 16.39 crores in the same quarter the last year. Other Expenditures climbed to 21% at 18.66 crores as %age of Sales from 15% at 11.48 crores in the same quarter last year.

Jubilant FoodWorks Limited - An Analysis

Recommendation : BUY
January 3, 2010.

Debt/Equity of Jubilant FoodWorks Limited as of now has improved at 0.002 vs 0.05 as in March 2010 quarter, indicating an almost debt-free company. Reserves and Surplus have increased by 2% at 94.85 crores in the September quarter from 92.91 crores in the March quarter this year. Capital Employed has decreased by 3% to 121.92 crores in September quarter from 126 crores in March quarter due to decreasing Working Capital.

Equity Section WatchList

Equity Section is analysing companies listed on the stock markets and issues certain recommendations and conclusions on that basis. But, for all the recommendations issued, it doesn't mean that Equity Section holds the stocks of all those companies. Still, during studies, Equity Section does get interested in certain companies and follows it closely. This doesn't mean that we stop analysing other companies or are insincere in our approach. Its just that we pay special attention to such companies. Thats why, Equity Section is deciding to bring forward Equity Section WatchList which will disclose the interests of Equity Section.