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COMPANY PROFILE

ORIGIN INFOSYS is a leader in providing complete infrastructure


business solutions for IT / ITES . Our aim has been to provide clients
with smart IT solutions that allow their business to meet short term
deadlines, while achieving long term success.

ORIGIN INFOSYS was founded by two young enterprising


engineers – P Thangavel, and S Loganathan in 1993 under the name
Origin Information Technology. It was started with the goal of providing
high-quality computer hardware and service on a contractual basis. In
course of time, the operations were expanded to include sales of
computers and other equipment too.

In 1998, Origin Information Technology was incorporated as a


Private Limited Company under the name Origin Infosys Private Limited
(ORIGIN). Over the years, ORIGIN gradually spread its wings to cater to
other areas of IT. With the single focus of providing high-quality
equipment and service, and encouraged b

ORIGIN's range of services includes:

• Business Infrastructure
• IT Facility Management
• Hardware Sales
• Computer and Peripherals Rental
• Annual Maintenance Contracts
• Software Development
• Web Design & Development
ORIGIN's success has been as much a result of our dedicated team,
as our focus on quality and customer satisfaction. As part of our continual
effort to improve quality and put efficient internal processes in place, we
have also secured the ISO 9001 : 2000 certification.
LEASING THERE COMPUTER
TIE UP WITH COMPUTER COMPANY

IT INFRASTRUCTURE, TECHNOLOGY AND OUTSOURCING


CAREERS AT ORIGIN COLLECTION. CULTURE, SUPPORT,
DEVELOPMENT

Joining Origin translates into continual opportunities to expand on


what you can do. Challenge yourself with interesting work focused on
delivering innovation and proven solutions. Our employees come
together with a wide variety of skills and backgrounds to create talented
teams of problem-solvers. We help clients become high-performance
business.
At ORIGIN, you will find an informal atmosphere and an
approachable management. It's a place where everyone is passionate
about their work and wants to be part of the growth and success of the
organization.

We are committed to total customer satisfaction and recognize that


our employees are critical to our pursuit of excellence. Hence we are
committed to providing an excellent working environment and
competitive benefits benefits.

We believe that any job can be fun if you have the opportunity to
use your insight and intelligence to improve a task or process.

OUR VISION STATEMENT

Here's the vision that guides us in our growth and success.

• We are committed to customer satisfaction through timely


and accurate fulfillment of customer needs. We will
continuously improve our processes and adhere to the
principle of Quality Management System in all aspects of
our business.

• We will be a world-class provider of IT-enabled solutions by


making technology work for customers, while benchmarking
with the best.

• We will strive for long-term relationships with our


customers by sharing their vision and developing a win-win
association.

• We will deliver value by going beyond the contract and


becoming the client's preferred outsourcing partners.
• We will strive to create a workplace that fosters superior
customer service through teamwork and creating an
organization-wide learning environment.

• Plan and effectively utilize technology and human resources

• Improve customer satisfaction

• Provide high-quality, value-added, customer-focused


solutions
THE ORIGIN ADVANTAGE

ORIGIN is in the business of fulfilling clients' IT requirements.


Our state-of-the-art infrastructure, vast experience in various service
sectors, technical competence, and dynamic team ensures that clients get
the best value for money and maximum returns on their investments.

Each of ORIGIN's staff has a single point objective - 100%


customer satisfaction. We take pride in our high standards of customer
service and the ability to keep up commitments at all times. This
approach has brought clients back to us again and again.

Our reputation for providing the highest quality in services and


equipment has won the trust of many clients. An index of our excellent
customer service levels can be judged by the fact that most of our
business is through repeat orders from existing clients and from their
references.

ORIGIN conducts regular technical training sessions and


personality development programs for all employees, with the objective
of increasing customer delight. However, the underlying qualities of
sincerity and dedication of our management and staff forms the
foundation on which these values are built.
NEED FOR THE STUDY
Being a manufacturing company it is essential for the management
to have a check on the working capital of the organization. An ideal
working capital is always necessary, and this will give a very good
operating leverage to the company which has to be monitored time and
again for running the organization without any financial descriptions.
With the rapid growth in the industry and higher Competition level.
Working capital have a pivotal role to play to sustain and growth thick
and fast in this area of manufactures.

PRIMARY OBJECTIVE :

• To study the WORKING CAPITAL management of


ORIGIN INFOSYS PVT LTD.

SECONDARY OBJECTIVE :

• To estimate the working capital requirement of the company


by analyzing the past record of the company.

• To analyze the sources of and appilication of short term


financial resources of the company.

• To find out the status of net working capital ang gross


working capital of the company

SCOPE OF THE STUDY:


• The study is mainly conducted to know the working capital
management of the firm. The working capital management is
concerned With the firms current assets and current liabilities. It is
an important and Integral part of financial management as short-
term survival to the long-term success.
REVIEW OF LITRACTURE

INTRODUCTION

The perfect world does not requires or concentrates about current


assets or current liabilities because there would not be uncertainty, no
transaction costs, information search costs, scheduling costs or
production and technology constraints. The unit cost of production would
not vary with the quantity produced. Capital, Labour and products
markets shall be perfectly competitive and would reflect all available
information. Thus in such an environment, there would be no advantage
for investing in short term assets. Whereas, the world in which we live is
not perfect. It is characterized by considerable amount of uncertainty
regarding the demand, market price, quality and availability of own
products and those of suppliers. There are transaction costs for
purchasing or selling goods or securities. Information is costly to obtain
and is not equally distributed. There are spreads between the borrowing
and lending rates for investments and financing of equal risk. Similarly
each organization is faced with its own limits on the production capacity
and technology it can employ. There are fixed as well as variable costs
associated with producing goods. In other words, the markets in which
real firms operate are not perfectly competitive.

These real world facts introduce problems and require the necessity
of working capital. The most important areas in the day to day
management of the firm, is the management of working capital. Working
capital management is the functional area of finance that covers all the
current accounts of the firm. It is concerned with management of the level
of individual current assets as well as the management of total working
capital. Working capital management involves the relationship between a
firm's short-term assets and its short-term liabilities. The goal of working
capital management is to ensure that a firm is able to continue its
operations and that it has sufficient ability to satisfy both maturing short-
term debt and upcoming operational expenses. The management of
working capital involves managing inventories, accounts receivable and
payable, and cash.

For example, an organization may be faced with an uncertainty


regarding availability of sufficient quantity of crucial inputs in future at
reasonable price. This may necessitate the holding of inventory ie.,
current assets. Similarly an organization may be faced with an uncertainty
regarding the level of its future cash inflows and insufficient amount of
cash may incur substantial costs. This may necessitate the holding of a
reserve of short – term marketable securities, again a short term capital
asset. The unpredictable and uncertain global market plays a vital role in
working capital. Though the globalization of economy and free trading of
products envisages the continuous availability of products but how much
its cost effective and quality based varies concern to concerns.

Working capital refers to the funds invested in current assets, ie.,


investment in stocks, sundry debtors, cash and other current assets.
Current assets are essential to use fixed assets profitably. The term
current assets refers to those assets which in the ordinary course of
business can be converted into cash within one year without undergoing
diminish in value and without disrupting the operations of the firm. The
current assets are cash, marketable securities, accounts receivable and
inventory. Current liabilities are those which are to be paid within a year
out of the current assets or earnings of the concern. The current liabilities
are accounts payable, bills payable, bank overdraft and outstanding
expenses.

The financial manager plays a vital role in management of working


capital. The financial management of any business organization involves
the three following vital functions:

1. Management of Long Term Assets

2. Management of Long Term Capital

3. Management of Short Term Assets and Liabilities

In most of the organizations the first & second one which refers to
Capital Budgeting and Capital Structure respectively will be maintained
and cope up with organization growth. The third one which refers to
Working Capital Management requires more skills for sustaining and
steady growth rate for any organization.

The working capital management includes decisions

i. How much stock/inventory to be hold

ii. How much cash/bank balance should be maintained

iii. How much the firm should provide credit to its


customers

iv. How much the firm should enjoy credit from its
suppliers

v. What should be the composition of current assets


vi. What should be the composition of current liabilities

For eg., a machine cannot be used without raw material. The


investment on the purchase of raw material is identified as working
capital. It is obvious that a certain amount of funds is always tied up in a
raw material inventories, work in progress, finished goods, consumable
stores, sundry debtors and day to day cash requirements. However the
businessman also enjoys credit facilities from his suppliers who may
supply raw material on credit. Similarly, a businessman may not pay
immediately for various expenses. For instance, the labourers are pain
only periodically. Therefore, a certain amount of funds is automatically
available to finance the current assets requirements. However, the
requirements for current assets are usually greater than the amount of
funds payable through current liabilities. The satisfactory level of
working capital is the main object of working capital management. Any
organization which fails to maintain satisfactory level of working capital
may be forced to bankruptcy. The current assets should always be large
enough to cover its current liabilities in order to ensure a reasonable
margin of safety. Thus the interaction between current assets and current
liabilities is the main aim of working capital management.

The basic objective of financial management is to maximize


shareholders wealth. This objective can be achieved when the company
earns sufficient profits. The amount of profits largely depends on the
magnitude of sales. But, sales do not convert into cash instantly. There is
time lag between the sale of goods and the receipt of cash. Working
capital is required to purchase the materials, pay wages and other
expenses in order to sustain sales activity the time lag. The time gap
between the sale of goods and realization of cash is called operating
cycle. What operating cycle stands for?

a. Conversion of cash into raw materials

b. Conversion of raw materials to finished goods

c. Conversion of finished goods into receivables

d. Conversion of receivables into cash

WHERE IS WORKING CAPITAL ANALYSIS MOST CRITICAL?

On the one hand, working capital is always significant. This is


especially true from the lender's or creditor's perspective, where the main
concern is defensiveness: can the company meet its short-term
obligations, such as paying vendor bills?

But from the perspective of equity valuation and the company's


growth prospects, working capital is more critical to some businesses
than to others. At the risk of oversimplifying, we could say that the
models of these businesses are asset or capital intensive rather than
service or people intensive. Examples of service intensive
companies include H&R Block, which provides personal tax services,
and Manpower, which provides employment services. In asset intensive
sectors, firms such as telecom and pharmaceutical companies invest
heavily in fixed assets for the long term, whereas others invest capital
primarily to build and/or buy inventory. It is the latter type of business -
the type that is capital intensive with a focus on inventory rather than
fixed assets - that deserves the greatest attention when it comes to
working capital analysis. These businesses tend to involve retail,
consumer goods and technology hardware, especially if they are low-cost
producers or distributors.

2. CONCEPTS & DEFINITIONS OF WORKING CAPITAL

There are two concepts of working capital

1. Gross Working Capital : It represents the total current assets


and is also referred to as
circulating capital because current
capital as current assets, are
circulating in nature.

2. Net Working Capital : It is a measure of liquidity and it


can be defined in two ways.

a. The most usually implied definition of net working


capital is that it represents the difference between
current assets and current liabilities. Some people also
define it as excess of current assets over the current
liabilities.

b. It is that portion of the firm’s current assets, which is


financed by long term funds.

Nett working capital as a measure of liquidity is generally not very


useful to compare the performance of different units due to difference in
scales of operation, efficiency, and creditability in the market etc.,
between the different firms. However it is a very useful measure for
internal control purposes. It can also be used to compare the liquidity
position of the same unit over a period of time. This will help in
maintaining the acceptable level of net working capital.
Implementing an effective working capital management system is
an excellent way for many companies to improve their earnings. The two
main aspects of working capital management are ratio analysis and
management of individual components of working capital.

A few key performance ratios of a working capital management


system are the working capital ratio, inventory turnover and the collection
ratio. Ratio analysis will lead management to identify areas of focus such
as inventory management, cash management, accounts receivable and
payable management.

3. OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The main objective is to ensure the maintenance of satisfactory


level of working capital in such a way that it is neither inadequate nor
excessive. It should not only be sufficient to cover the current liabilities
but ensure a reasonable margin of safety also.

i. To minimize the amount of capital employed in financing


the current assets. This also leads to an improvement in the
“Return of Capital Employed”.

ii. To manage the current assets in such a way that the marginal
return on investment in these assets is not less than the cost
of capital acquired to finance them. This will ensure the
maximization of the value of the business unit.

iii. To maintain the proper balance between the amount of


current assets and the current liabilities in such a way that
the firm is always able to meet its financial obligations,
whenever due. This will ensure the smooth working of the
unit without any production held ups due to paucity of funds.

4. TYPES OF WORKING CAPITAL

A. Permanent Working Capital

B. Temporary Working Capital

PERMANENT WORKING CAPITAL:

The operating cycle is a continuous feature in almost all the going


concerns and therefore creates the need for working capital and their
efficient management. However the magnitude of working capital
required will not be constant, but will fluctuate. At any time, there is
always a minimum level of current assets which is constantly and
continuously required by a business unit to carry on its operations. This
minimum amount of current assets, which is required on a continuous and
uninterrupted basis is after referred to as fixed or permanent working
capital. This type of working capital should be financed (along with other
fixed assets) out of long term funds of the unit. However in practice, a
portion of these requirements also is met through short term borrowings
from banks and suppliers credit.

For eg., In a manufacturing unit, basic raw materials required for


production has to be available at all times and this has to be financed
without any disturbance.

TEMPORARY WORKING CAPITAL

Any amount over and above the permanent level of working capital
is variable, temporary or fluctuating working capital. This type of
working capital is generally financed from short term sources of finance
such as bank credit because this amount is not permanently required and
is usually paid back during off season or after the contingency. As the
name implies, the level of fluctuating working capital keeps on
fluctuating depending on the needs of the unit unlike the permanent
working capital which remains constant over a period of time.

5. DETERMINANTS OF WORKING CAPITAL

Working capital management is an indispensable functional area of


management. However the total working capital requirements of the firm
are influenced by the large number of factors. It may however be added
that these factors affect differently to the different units and these keep
varying from time to time. In general, the determinants of working capital
which are common to all organizations can be summarized as under:

a. Nature and Size of Business

b. Production Cycle

c. Business Cycle

d. Production Policy

e. Credit Policy

f. Growth & Expansion

g. Proper availability of raw materials

h. Profit level

i. Inflation

j. Operating Efficiency
6. ESTIMATING OF WORKING CAPITAL REQUIREMENTS

The amount of the different constituents of the working capital


such as debtors, cash, inventories, creditors, etc are estimated separately
and the total amount of working capital requirement is worked out
accordingly.

Percent Sales method is the most simple and widely used method
in combination with other scientific methods. A ratio is determined for
estimating the future working capital requirements. This is generally
based on the past experience of the management as this ratio varies from
industry to industry and unit to unit with in the same industry.

Operating Cycle method points towards the length of time


considered necessary to complete the following cycle of events:

a. Purchase of raw materials by converting cash

b. Storage of raw materials including for buffer stock and


safety margin

c. Conversion of raw materials into work in progress

d. Conversion of work in progress into finished goods

e. Conversion of finished goods into debtors and bills


receivable

f. Conversion of debtors into cash

Cash Conversion Cycle is a measure of working capital efficiency,


often giving valuable clues about the underlying health of a business. The
cycle measures the average number of days that working capital is
invested in the operating cycle. It starts by adding days inventory
outstanding (DIO) to days sales outstanding (DSO). This is because a
company "invests" its cash to acquire/build inventory, but does not
collect cash until the inventory is sold and the accounts receivable are
finally collected.

The finance profession recognizes the three primary reasons


offered by economist John Maynard Keynes to explain why firms hold
cash. The three reasons are for the purpose of speculation, for the purpose
of precaution, and for the purpose of making transactions. All three of
these reasons stem from the need for companies to possess liquidity.

SPECULATION:

Economist Keynes described this reason for holding cash as


creating the ability for a firm to take advantage of special opportunities
that if acted upon quickly will favor the firm. An example of this would
be purchasing extra inventory at a discount that is greater than the
carrying costs of holding the inventory.

PRECAUTION:

Holding cash as a precaution serves as an emergency fund for a


firm. If expected cash inflows are not received as expected cash held on a
precautionary basis could be used to satisfy short-term obligations that
the cash inflow may have been bench marked for.

TRANSACTION:

Firms are in existence to create products or provide services. The


providing of services and creating of products results in the need for cash
inflows and outflows. Firms hold cash in order to satisfy the cash inflow
and cash outflow needs that they have.
Receivable are essentially loans extended to customers that
consume working capital; therefore, greater levels of DIO and DSO
consume more working capital. However, days payable outstanding
(DPO), which essentially represent loans from vendors to the company,
are subtracted to help offset working capital needs. In summary, the cash
conversion cycle is measured in days and equals DIO + DSO – DPO:

7. SOURCES OF WORKING CAPITAL

The working capital necessary and what constitutes working


capital have been analyzed in depth. Now we look out what are the ways
we can generate working capital.

a. Trade Credits

b. Bank Credit

c. Current provisions and non-bank short term borrowings: and

d. Long term sources ie., equity share capital, preference share


capital and other long term borrowings.

Short term source of funds are generally available at comparatively


lower costs but theoretically these funds can be called back any moment
and therefore it is more appropriate to meet at least two thirds of the
permanent working capital requirements from the long term sources. The
advantages of long term sources is, it reduces risk as there is no need to
repay the loans at frequent intervals and funds can be employed gainfully
and it increases liquidity.
WORKING CAPITAL:

“Funds that ensures the smooth operation of a company”.

DEFINITION:

In the words of SHUBIN “working capital the amount of funds


Necessary to cover the cost of operating the enterprise”.

According to GENESTENBERG “circulating means current


assets of a company that are changed in the ordinary course of business
from one Form to another, as for example from cash to inventories,
inventories to receivables, and receivables into cash.

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital

1. Gross working capital.

2. Net working capital.


CLASSIFICATION OF WORKING CAPITAL:

Working capital

Temporary or
Permanent or Fixed
Variable

Seasona
Regular Reserve Special
l
SOURCES OF WORKING CAPITAL:
Commercial banks,

Sources of working
Shares, capital
Indigenous
bankers,
Temporary or
Debentures, or Fixed
Permanent Variable

Trade
Public Deposits, creditors,

Plaguing back Installment


of profits, Credit,

Loans from Advances,


financial

Institution.
Accounts
receivables

Credit.
 Inventory of raw-material stores and spares.
 Inventory of finished goods.

COMPONENTS OF WORKING CAPITAL:

CURRENT ASSETS:

• Cash and bank balances

• Temporary investments
• Short term advances

• Prepaid expenses

• Receivables

• Inventory of raw-material stores and spares.

• Inventory of finished goods.

CURRENT LIABILITIES:

• Creditors for goods purchased

• Outstanding expenses,

• Short term borrowings,

• Advances received against sales,

• Taxes and dividends payable,

• Others liabilities maturing within a year.

CASH CYCLE:
Cash

Materials, Labor
Receivables Expenses

Work-in-
Sales Progress

Finished
Goods

GROSS WORKING CAPITAL:

Gross working capital is the amount of funds invested in the


various component of current assets. This components has the following.

ADVANTAGES:

• Financial managers are concerned with current assets.


• Gross working capital provides the correct amount of working capital

• At the right time.

• It enable a firm to realize the greatest on its investments.

• It helps in the fixation of various areas of financial responsibility.

• It enable a firm to plan and control funds and to maximize the


return of investment.

PERMANENT WORKING CAPITAL

Permanent or fixed working capital is the minimum amount


required to ensure effective utilization of fixed assets and support the
normal operations of the business. There is always a minimum level of
the current assets which is continuously required by the enterprises the
carry out its normal business operations.

TEMPORARY OR VARIABLES WORKING CAPITAL:-

Temporary working capital is the amount of working capital


required for short period. It is intended to meet seasonal demand and
some special Exchanges. Variable working capital cannot be permanently
employed the gainfully in the business.

BALANCE SHEET WORKING CAPITAL:

The balance sheet working capital is one which is calculated form


the items appearing in the balance sheet. Gross working capital which is
represented by current assets and networking capital, which is represented
by the excess assets over current liabilities are example of the balance
sheet working capital.
CASH WORKING CAPITAL:

Cash working capital is one which is calculated from the items


appearing in he profit and loss account. It shows the real flow of money is
value at particular time and is considered to be the most realistic
approach in working capital management. It is the basis of the operation
cycle, which has assumed a great importance in financial management in
recent years. The reasons is that the cash working capital indicates the
adequacy of the cash flow, which is an essential pre requisite of a
business.

NEGATIVE WORKING CAPITAL:-

Negative working capital emerges when current liabilities exceed


current assets. Such a situation is not absolutely theoretical and occur
when a firm is nearing a crises of some magnitude.
FACTORS DETERMING WORKING CAPITAL:-

1. Nature of the business,

2. Size of the business,

3. Time consumed in manufacturing,

4. Seasonal fluctuations,

5. Fluctuations in supply,

6. Speed of turn over,

7. Terms of sales,

8. Terms of purchase,

9. Labors intensive Vs Capital intensive industries,

10. Growth and Expansion of Business,

11. Volume of sales,

12. Demand of creditors,

13. Receivable turnover,

14. Cash requirements,

15. Business cycle,

16. Time,

17. Value of current assets,


18. Variation of sales,

19. Production cycle,

20. Credit control,

21. Liquidity and profitability,

22. Inflation,

23. Profit planning and control,

24. Repayment ability,

25. Cash reserve,

26. Operational and financial efficiency,

27. Changes in technology,

28. Firms policy,

29. Activities of the firm’s.

30. Attitude risk.


RESEARCH METHODOLOGY
The term research is derived from French word research meaning,
“search back”, research is a careful inquiry or examination in seeking fact
or principle intelligent investigation in order to ascertain something web
masters international dictionary.

Research methodology is way to systematically solve the problem


when we talk of research methodology we not mean the research
methods. Also, consider the logic behind the methods used in the context
of research study and explain why a particular method or technique is
used, so that research results are capable of being evaluated.

RESEARCH DESIGN:

Research design is purely and simply framework or plan for study


that guides the collection and analysis of the data.

RESEARCH TYPE:

The type of research used in this study is desk research.

DESCRIPTIVE RESEARCH:

Desk research (sometimes known as secondary data or secondary


research ) involves gathering data that already exists either from internal
some of the client, publications of governmental institutions, free access
data on the internet, in professional newspapers and magazines, in annual
reports of companies and commercial databases to name but a few. In
many projects, carrying out an initial desk research stage is strongly
recommended to background knowledge to a subject as well as providing
useful leads that will help to get the maximum from a research budget.
DATA COLLECTION METHODS:

SECONDARY DATA:

The rest of the data is collected from the annual report brochures
and websites of the organization.

ANALYSIS TOOLS:

Ratio analysis,

Schedule of changes in working capital.

LIMITATION OF THE STUDY:

 The main limitation of the study is base on figures available from


balance sheet and profit/loss account. So the actual position may
be slightly different from the conclusions made with the use of
these figure.

 Data taken for comparison is only for three years. Therefore,


detailed study could not be undertaken.

 The executive being busy with their yearly audit works. Therefore,
they could not able to devote sufficient time..

 Time is the major constraint for this study. The study cannot be
finished with in the stipulated period allowed.

 As the analysis is done using secondary data like publishing


reports, annual reports and statement of the study is limited only to
the extents.
DATA ANALYSIS AND INTERPRETATION
WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working


Capital. It also measures the smooth running of business or otherwise, the
Ratio establishes relationship between cost of sales and working capital.

Working capital turnover ratio = Sales or cost of sales


Net working capital
TABLE NO 5.1.1
Working capital turnover ratio
Cost of sales (or) Working capital
Year Ratio in times
direct sales] Rs Rs
2007 262844360 85715065 3.0664
2006 143158718 17294097 8.2778
2005 84759630 10367036 8.1758
2004 58082829 14201468 4.0899
INFERENCE:

During 2006 working capital turnover ratio is 8.2778 it has been


increased when compare to 4.177 times in 2004

CHART 5.1.1 WORKING CAPITAL TURNOVER RATIO

85715065
90000000
80000000
70000000
60000000
50000000
40000000
30000000 17294097
14201468
20000000 10367036
10000000
0
2006-07 2005-06 2004-05 2003-04
DEBTOR COLLECTION PERIOD

This ratio is inter-related to and depends the debtors turnover ratio.


High turnover ratio and short collection period convey quick payment on
the part of debtors.

Debtors collection period = Day/month in the year


Average debtors turnover ratio
TABLE NO 5.1.2
DEBTOR COLLECTION PERIOD

Year Net CR sales Avg a/c receivables Total


2007 216689843 109940267 1.970
2006 82545874 18689046 4.41
2005 33321303 15060677 2.212
2004 18749948 16217174 1.156
Inference:

During 2004 sales was Rs. 1.156 it has been gradually increased to
Rs. 1.1970 in 2007.

Chart 5.1.2 DEBETOR COLLECTION PERIOD

109940267
120000000

100000000

80000000

60000000

40000000
18689046 15060677 16217174
20000000

0
2006-07 2005-06 2004-05 2003-04
DEBTOR TURNOVER RATIO

Debtor collection is also called as receivable turnover ratio or


debtors velocity, a business concern generally adopt different methods of
sales.

Debtor Turnover Ratio = Net Credit Sales


Average Account Receivables
TABLE NO 5.1.3 DEBTOR TURNOVER RATIO
Year Months in a Dr collection period Ratio in times
year
2007 12 1.970 6.1
2006 12 4.41 2.72
2005 12 2.212 5.4
2004 12 1.156 10.38
Inference:

In this debtor collection period the highest debtor turnover ratio is


6.1 and it is high in the year of 2007.

Chart No 5.1.3: DEBTOR TURNOVER RATIO

1.156
2003-04

2.212
2004-05

4.41

2005-06

1.97
2006-07

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5


CREDITOR TURNOVER RATIO

This ratio is also known as accounts payable or creditor velocity.


A business concern usually purchase raw materials, service and goods on
credit.

Creditor Turnover Ratio = Net Purchase


Avg Account Payable
TABLE 5.1.4
CREDITOR TURNOVER RATIO

Year Net purchase Avg A/C payable Total


2007 207304284 109569181 1.891
2006 79667516 19615613 4.061
2005 44857284 13029571 3.442
2004 31332314 8583433 3.65
Inference:

During 2004 purchases was Rs. 3.65 it has been gradually


increased to Rs. 4.061 in 2006.

CHART 5.1.4: CREDITOR TURNOVER RATIO

8583433
13029571

19615613

109569181
CREDITOR PAYMENT PERIOD:

This ratio is also known as accounts payable or creditors velocity.


A Business concern usually purchases raw materials, services and goods
on credit.

Creditors Turnover ratio = Net credit purchases


Average account payables
TABLE 5.1.5
CREDITOR PAYMENT PERIOD
Inference:
Year Months in a year Cr a/c turn over ratio Total
2007 12 1.891 6.34
2006 12 4.061 2.95
2005 12 3.442 3.48
2004 12 3.65 3.28

During 2004 the amount has been paid to creditors in 3.28 days but
it has been decreased to 2.95 days during 2006
CHART 5.1.5: CREDITOR COLLECTION PERIOD

3.65
2003-04

3.442
2004-05

4.061
2005-06

1.891
2006-07

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5


INVENTORY TURNOVER RATIO

This ratio should be compared against industry averages. A low


turnover implies poor sales and, therefore, excess inventory. A high ratio
implies either strong sales or ineffective buying.

High inventory levels are unhealthy because they represent an


investment with a rate of return of zero. It also opens the company up to
trouble should prices begin to fall.

Inventory Turnover Ratio = Cost of Goods Sold


Avg Inventory Stock
TABLE 5.1.6
INVENTORY TURNOVER RATIO

Year Cost of goods sold Avg inventory stock Total


2007 262844360 10459536 25.12
2006 143158718 1063751.5 134.5
2005 84759630 550759.5 153.8
2004 58082829 191624 303.10
Inference:
During 2005 cost of goods sold was Rs. 58082829 it has been
gradually decreased to Rs. 262844360 in 2007
Chart 5.1.6 INVENTORY TURNOVER RATIO

191624
2003-04

550759.5
2004-05

1063751.5
2005-06

10459536

2006-07

0 2000000 4000000 6000000 8000000 10000000 12000000


INVENTORY TURNOVER PERIOD

This ratio should be compared against industry averages. A low


turnover implies poor sales and, therefore, excess inventory. A high ratio
implies either strong sales or ineffective buying.

High inventory levels are unhealthy because they represent an


investment with a rate of return of zero. It also opens the company up to
trouble should prices begin to fall

Inventory Turnover Period = Days In A Year


Inventory Turnover Ratio
TABLE 5.1.7 INVENTORY TURNOVER PERIOD
Inference:
Year Days in a year Inventory turnover ratio Ratios in times
2007 365 25.129 14.53
2006 365 134.57 2.71
2005 365 153.89 2.37
2004 365 303.10 1.204
During 2004 the amount has been collected from inventory in
1.204 days but it has been increased to 14.53 days during 2007.

Chart 5.1.7 INVENTORY TURNOVER PERIOD

350
303.1

300

250

200 153.89
134.57
150

100

25.129
50

0
2006-07 2005-06 2004-05 2003-04
FINISHED GOODS TURNOVER RATIO

If average inventory at cost is not known then inventory at selling


price may be taken as the denominator and where the opening inventory
is also not known the closing inventory figure may be taken as the
average inventory.
Finished Goods Turnover Ratio= Goods Sold
Avg Finished Goods Inventory
TABLE 5.1.8 FINISHED GOODS TURNOVER RATIO
Year Cost of goods sold Avg finidhed goods Ratio
2007 262844360 19667396 13.36
2006 143158718 1251675 114.37
2005 84759630 875828 96.77
2004 58082829 225691 257.355
Inference:
During 2004 cost of goods sold was Rs. 58082829it has been
gradually decreased to Rs. 262844360 in 2007.

CHART 5.1.8 : FINISHED GOODS TURNOVER RATIO

19667396

20000000

18000000

16000000

14000000

12000000

10000000

8000000

6000000

4000000
1251675 875828
2000000 225691

0
2006-07 2005-06 2004-05 2003-04
FINISHED GOODS STORAGE PERIOD

Firms produce goods in order to sell them in the market. There may
be a delay in them sales or in meeting seasonal demand for finished
goods.

Cost of goods sold Finished = Turnover ratio


goods inventory Average finished goods inventory
TABLE 5.1.9: FINISHED GOODS STORAGE PERIOD

Year Days in a year Finished good inventory total


2007 365 13.36 27.3
2006 365 114.37 3.19
2005 365 96.77 3.77
2004 365 257.35 1.44
Inference:

During 200 the amount has been collected from inventory in 1.44
days but it has been increased to 27.3 days during 2006

CHART 5.1.9 FINISHED GOODS STORAGE PERIOD


13.36

114.37

257.35

96.77
CURRENT RATIO

The ratio of current assets towards liabilities is called ‘current


ratio’. The current assets includes cash, securities, sundry debtors and
inventory, current liabilities includes bills of payable, deposits , advances,
and then short term loans, including cash creditors and provisions.

Current Ratio = current assets


current liability
TABLE 5.1.10: CURRENT ASSET/ CURRENT LIABILITIES

Year C.asset C.liabilities Total


2007 202635677 116920611 1.73
2006 40522249 23228152 1.74
2005 25267333 14900297 1.69
2004 24230239 10028771 2.42
Inference:
During 2004 current was Rs. 24230239 it has been gradually
increased to Rs. 202635677 in 2007.

CHART 5.1.10: CURRENT ASSET/ CURRENT LIABILITIES

250000000
202635677

200000000

150000000

100000000

40522249
25267333 24230239
50000000

0
2006-07 2005-06 2004-05 2003-04
LIQUID RATIO

Liquid ratio calculated by comparing the quick assets with


current liabilities. Quick or liquid assets refer to assets, which are
quickly convertible into cash.

Liquid ratio= Quick assets


Current liabilities
TABLE 5.1.11 LIQUID RATIO

Year Quick asset C.liabilities Total


2007 182968281 116920611 1.56
2006 39270574 23228152 1.7
2005 24391505 14900297 1.63
2004 24004548 10028771 2.4
Inference:

During 2004 quick asset was Rs. 2.4 it has been gradually
decreased to Rs. 1.56 in 2007.

CHART 5.1.11 : LIQUID RATIO

2003-04 24004548

2004-05 24391505

2005-06 39270574

182968281

2006-07

0 50000000 100000000 150000000 200000000


SCHEDULE OF CHANGES IN WORKING
CAPITAL AS ON 31.3.2007
2007 2006
Particulars
(Rs. In crores) (Rs. In crores)

CURRENT ASSETS:
Inventories 19667396 1251675
Sundry debtors 109940267 18689046
Cash & bank 63426 117311
Deposit, loan 72941555 20319655
Total(A) 202612644 208578787

CURRENT LIABILITIES:
Current liabilities 109569181 19615613
Provision 7351430 3612539

TOTAL(B) 116920611 23288152


Working capital(A-B) 85692033 185290635

Increase in working
99598602
capital

185290635 185290635
SCHEDULE OF CHANGES IN WORKING
CAPITAL AS ON 31.3.2004
Particulars 2004 2005
(Rs. In crores) (Rs. In crores)
CURRENT ASSETS:
Inventories 875828 225691
Sundry debtors 15060677 16217174
Cash & bank 58640 23719
Deposit, loan 6817322 6336002
Bank account 26911 16000
TDS at sources 2427955 1411653

Total(A) 25267333 24230239

CURRENT LIABILITIES:
Sundry creditor 13029571 8583433
provision 1870726 1445338

TOTAL(B) 14900297 10028771

Working capital(A-B) 10367036 14201468

Increase in working
capital 3834432

185290635 185290635
FINDINGS

• During 2006 working capital turnover ratio is 8.2778 it has


been increased when compare to 4.177 times in 2004 in
working capital

• During 2004 sales was Rs. 1.156 it has been gradually


increased to Rs. 1.1970 in 2007 in debt collection period

• In this debtor collection period the highest debtor turnover


ratio is 6.1 and it is high in the year of 2007in debt turnover
ratio

• During 2004 purchases was Rs. 3.65 it has been gradually


increased to Rs. 4.061 in 2006 in creditor turnover ratio.

• During 2004 the amount has been paid to creditors in 3.28


days but it has been decreased to 2.95 days during 2006
in creditor payment period.

• During 2005 cost of goods sold was Rs. 58082829 it has


been gradually decreased to Rs. 262844360 in 2007 in
inventory turnover ratio.

• During 2004 the amount has been collected from inventory


in 1.204 days but it has been increased to 14.53 days during
2007 in inventory turnover period.

• During 2004 cost of goods sold was Rs. 58082829it has been
gradually decreased to Rs. 262844360 in 2007 in finished
turnover period.
• During 200 the amount has been collected from inventory in
1.44 days but it has been increased to 27.3 days during
2006 in finished goods storage period.

• During 2004 current was Rs. 24230239 it has been gradually


increased to Rs. 202635677 in 2007 in current ratio.

• During 2004 quick asset was Rs. 2.4 it has been gradually
decreased to Rs. 1.56 in 2007 in liquid ratio.
SUGGESTION & RECOMMENDATIONS
The working capital was decreasing year by year and collection
period is reducing. The company as to maintain some ratio and collection
period in the year in future year. It observed that finished goods working
capital utilization is decreasing year after year. It increasing market share
and profitability of the company in the future year.

The company meet major fluctuation is the working capital that


will affects the current assets and current liabilities and sources of fund
will affects a lot. Therefore the firm has to find way to increase the source
of fund. The creditors of the company is fluctuating year by year the
company has to concentrate on creditors.
CONCLUSION
A study on working capital management at ORIGIN INFOSYS
PRIVATE Limited, Chennai” has been enlightening experience on the
position aspects on previous year Balance sheets has done in whole lot of
good to the issuer, Investor, companies and country.

Excellence in all aspects of ORIGIN INFOSYS PRIVATE


Limited Honesty integrity and ethical business. People as the source of
strength. Respect for the individual & personal growth. Tackling
challenges and solving problems continued self improvement, never
being satisfied.

The origin Infosys limited has increasing to the profits. So the


company has become improve to the high position.
BIBLIOGRAPHY

• Management accounting by (R.P. trivedi &manoj Pankaj


publications Hyd.)

• Financial Management By (I.M. Pandey) vikas publishing


house ltd.

• Management Accounting By (R.k. Sharma, Shashi) k.Gupta,


Kalyani pub.

• Financial management (text & problem) By (M.Y. Khan,


P.K. Jain)

• Tata McGraw Hill

• Management Account by T.S. Reddy Andy Hari Prasad


Reddy

WEBSITE:

 WWW.GOOGLE.COM

 WWW.WIKEPADIA.COM

 WWW.ORIGININFOSYS.COM
“A STUDY ON WORKING CAPITAL MANAGEMENT
OF ORIGIN INFOSYS PRIVATE LIMITED”

Undertaken at
ORIGIN INFOSYS LTD.
CHENNAI

A SUMMER PROJECT REPORT

Submitted by
V.SHYAM SUNDAR
(Reg. No. 10607631051)

of
JAYA ENGINEERING COLLEGE
In partial fulfillment for award of the degree
of

MASTER OF BUSINESS ADMINISTRATION


IN
FINANCE

JULY -2008
DECLARATION

I, V.SHYAM SUNDAR, (Reg. No.10607631051) a bonafide student of

Department of Management Studies, Jaya Engineering

College, Chennai would like to declare that the project

entitled, “A STUDY ON WORKING CAPITAL

MANAGEMENT OF ORIGIN INFOSYS PRIVATE Ltd”

in partial fulfillment of Master of Business Administration

course of the Anna University is my original work.

SHYAM SUNDAR.V
BONAFIDE CERTIFICATE

Certified that this project report “A STUDY ON WORKING

CAPITAL MANAGEMENT OF ORIGIN INFOSYS PRIVATE Ltd”

is the bonafide work of “SHYAM SUNDAR.V” (Reg. No.10607631051)

who carried out the project work under my supervision.

Certified further, that to the best of my knowledge the work

reported herein does not form part of any other project or dissertation on

the basis of which a degree or award was conferred on an earlier occasion

on this or any other candidate.

SIGNATURE SIGNATURE

(DR. LATHA KRISHNADASS) (MR.S.VIJAYANKANTH)

Head Of The Department FACULITY GUIDE


ACKNOWLEDGEMENT
This project was completed with the support of many persons.
I have great pleasure to express my sincere and profound thanks
to our Chairman Prof. A. KANAGARAJ, M.A, M.Phil,
Mrs K.VIJAYAKUMARI ,M.A, B.Ed, Secretary of Jaya Educational
Trust, MR. K. NAVARAJ, M,Tech, Vice chairman , Jaya Engineering
College.

I owe my sincere thanks to Prof. DR R.RAJA M.E.,PH.D.,


Principal of Jaya Engineering College who provided me an opportunity to
do this project work.

I would like to express my sincere thanks to Dr. LATHA


MAZUMDER, Director and Head of the Department, Department of
Management Studies, Jaya Engineering College.

My Institutional Guide Mr.S.VIJAYANKANTH, MBA., M.Phil.


for his valuable suggestions and support throughout this project. I am also
grateful to other Faculty Members of MBA Department for having shown
interest during the project work.

I would like to thank sincerely MR.KALYAN, HR Manager,


ORIGIN INFOSYS and my company guidance in finance department.

I would like to thank my parents for their valuable support without


which the project would not have been completed successfully.

Last but not least, I would like to thank all the respondents.
Company staffs and friends who have directly and indirectly helped me to
complete this project.
ABSTRACT
This project was undertaken with a view of study the impact of
working capital management origin Infosys private limited.

The study was conducted for a period of one months. The research
design used in this study is case study method. The research design used
in this study of interim reports.

Data was collected through different source to proceed further in


this project and also for its fulfillment primary data was collected from
the company afficials and staff in origin Infosys private ltd. Secondary
data was provided for study through , company records and internet.

The analysis has been carried based on the secondary data and will
be displayed in tables and charts. This tables and charts help the
researcher for findings of the study.

After the analysis of data it was found that working capital


management in origin Infosys private limited. This study is useful to give
the few suggestion for the organization.

Through there were certain limitations faced during the time of


research, this was an excellent learning experience by the researchers.
TABLE OF CONTENTS

CHAPTER TITLE PAGE NO


NO

ABSTRACT

LIST OF TABLES

LIST OF FIGURES

1. GENERAL INTRODUCTION 1

1.1 INDUSTRY PROFILE

2. INTRODUCTION OF THE STUDY

2.1 TITLE OF THE PROJECT 8

2.2 NEED FOR THE STUDY 8

2.3 OBJECTIVES OF THE STUDY 8

2.4 SCOPE OF THE STUDY 8

3. REVIEW OF LITERATURE 9

4. RESEARCH METHODOLOGY

4.1 RESEARCH DESIGN 30

4.2 RESEARCH TYPE 30

4.3 DESCRIPTIVE RESEARCH 30

4.4 DATA COLLECTION METHOD 31

4.5 ANALYSIS TOOLS 31

4.6 LIMITATION OF THE STUDY 31


5. DATA ANALYSIS & INTERPRETATION

5.1 WORKSING CAPITAL TURNOVER RATIO 32

5.2 DEBTORS COLLECTION PERIOD 33

5.3 DEBTORS TURN-OVER RATIO 34

5.4 CREDITOR TURNOVER RATIO 35

5.5 CREDITOR PAYMENT PERIOD 36

5.6 INVENTORY TURNOVER RATIO 37

5.7 INVENTORY TURNOVER PERIOD 38

5.8 FINISHED GOODS INVENTORY 39


TURNOVER RATIO

5.9 FINISHED GOODS STORAGE PERIOD 40

5.10 CURRENT RATIO 41

5.11 LIQUID RATIO 42

SCHEDULE OF CHANGE IN WORKISNG 43-44


CAPITAL

6. FINDINGS 45-46

7. SUGGESTIONS & RECOMMENDATIONS 47

8. CONCLUSION 48

APPENDICIES

BIBLIOGRAPHY
LIST OF TABLES

TABLE TITLE PAGE


NO NO

5.1 ANALYSIS OF WORKSING CAPITAL 32


TURNOVER RATIO

5.2 ANALYSIS OF DEBTORS COLLECTION PERIOD 33

5.3 ANALYSIS OF DEBTORS TURN-OVER RATIO 34

5.4 ANALYSIS OF CREDITOR TURNOVER RATIO 35

5.5 ANALYSIS OF CREDITOR PAYMENT PERIOD 36

5.6 ANALYSIS OF INVENTORY TURNOVER RATIO 37

5.7 ANALYSIS OF INVENTORY TURNOVER 38


PERIOD

5.8 ANALYSIS OF FINISHED GOODS INVENTORY 39


TURNOVER RATIO

5.9 ANALYSIS OF FINISHED GOODS STORAGE 40


PERIOD

5.10 ANALYSIS OF CURRENT RATIO 41

5.11 ANALYSIS OF LIQUID RATIO 42


LIST OF CHARTS

TABLE TITLE PAGE


NO NO

5.1 A CHART OF WORKSING CAPITAL 32


TURNOVER RATIO

5.2 A CHART OF DEBTORS COLLECTION 33


PERIOD

5.3 A CHART OF DEBTORS TURN-OVER RATIO 34

5.4 A CHART OF CREDITOR TURNOVER RATIO 35

5.5 A CHART OF CREDITOR PAYEMNT PERIOD 36

5.6 A CHART OF INVENTORY TURNOVER 37


RATIO

5.7 A CHART OF INVENTORY TURNOVER 38


PERIOD

5.8 A CHART OF FINISHED GOODS 39


INVENTORY TURNOVER RATIO

5.9 A CHART OF FINISHED GOODS STORAGE 40


PERIOD

5.10 A CHART OF CURRENT RATIO 41

5.11 A CHART OF LIQUID RATIO 42

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