Nfl Cash Mgmt

Topics: Fertilizer, Urea, Nitrogen Pages: 42 (8228 words) Published: March 30, 2013





The methodology used for carrying out this project is as follows:

➢ Studying the annual accounts of the company for obtaining related financial data. ➢ Studying the accounting records and arrangements with the consortium of banks, Commercial paper, working capital demand loan (WCDL), FDRs and short term loans. ➢ Analyzing the guidelines and norms laid down by the department of public enterprises(DPE) for the investment of funds by PSUs. ➢ Reviewing RBI bulletins and RBI policies and guidelines. ➢ Studying the cash flow statement. Cash budgets and cash reports. ➢ Analyzing the various ratios in order to find out the liquidity position of NFL. Rationale of the study:

The rationale of this project is to understand the real life management practices going on in the firms and to link it with theoretical concepts. This project study is aimed to understand the intricacies involved in analyzing, granting and managing current assets. It’s a kind of industrial exposure that is being given to us through this project.

Scope of the study:

This project aims at studying and analyzing the management of working capital in National Fertilizers Limited. My study has focused more on the operating cycles of working capital components and comparing it with bank norms, a ratio analysis of NFL with other industry players and the sources of working capital financing.


1. NFL requires no long term loan. All NFL bonds will be redeemed by 30th June`04. Since its interest cost is very high. They cab do without bonds since they have sufficient funds with the banks. It has repaid all its debts & has become a Zero-Debt Company. 2. At the time of receiving payments NFL is using drafts while at the time of making NFL uses cheques. 3. There is no fixed system of interest reduction adopted by NFL. It varies according to changing situations and on the intellectual judgment of the financial officials. Here the Consortium of Banks & Multi banking System is used for interest reduction. 4. Inter-banking system poses disadvantage i.e. the funds when transferred from one bank to another may be wrongly transferred to a personal account rather than the company account. 5. The interest rate of cash credit is quite high i.e. 9-10%. Very rarely NFL is using it. 6. The interest rate of commercial paper is also high i.e. 6-7% therefore its use has been stopped. It involves too much manpower, too much bookwork and its effective rate of interest is also high. 7. NFL is now using the most efficient and effective system known as CASH MANAGEMENT SYSTEM (CMS).


1. NFL should exercise tight control over inter-bank transfers of cash and transfers between various units of NFL such as divisions or subsidiaries. Excessive funds may be tied up in various division of the firm, which company should give due attention to. 2. NFL should give special attention to the handling of large remittances so that they may be deposited in a bank as quickly as possible e.g. personal pick-ups, air mart, special delivery etc. 3. when a small no. of remittances account for a large proportion of total deposits, it may be worthwhile to initiate controls to accelerate the deposits and collection of their cheques. 4. Investments in treasury bills and government securities of three yrs maturity, call money deposits. NFL can also deposit its surplus funds in UTI & ILFS. 5. Monthly report for the total payments released during the month along with details of the major recipients should be prepared for reporting to the management. 6. Surprise checks of the physical cash should be made periodically. When cash is lying at more than...
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