You are on page 1of 68

WORKING CAPITAL MANAGEMENT

INTRODUCTION
Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationship between the items of the

balance sheet and the profit &loss account. The financial analysis help in extracting information from financial statements that will be useful in making financial decisions of judgments about a company. A great number of persons and agencies both private and government owned are

Interested in the analysis and interpretation of the financial statement. Users of financial Statements generally desire information about the profitability, efficiency and financial soundness of the business For example trade creditors and bankers are interested in knowing whether the firm can Pay back their debt in time. The analysis will, therefore confine to the evaluation of the firms liquidity position. On the other hand the firms are interested in knowing profitability over a time period. Management is the art of getting things done through others and with the people informally organized groups; it is the process of planning, coordinating, motivating and controlling, decision making the efforts of others towards specific objectives. Management is a universal phenomenon. It is present in virtually all walk at life. The management being concerned with directions, coordination and control of both human and nonhuman resources in terms of proper canalization and application it would be necessary on the part of every one to learn the fundamental principles and practices of management with a special emphasis to business enterprise.

1 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE

WORKING CAPITAL MANAGEMENT

NEED FOR THE STUDY
The working capital requirements depend on the operations and the length of operating cycle. Monitoring the durations of the operating cycle is an important aspect of working capital management and control for and effective management. KTPS is now on its turns around and need to cut on coasts and increase its revenue. Therefore it must have to keep a close check on the day expenses and to get a maximum utilization out of it. Some points should always be taken into consideration like;

1. The duration of raw material stage on the regularity of supply Transportation time, degree of perish ability ice fluctuation and Economic of bulk purchases.

2. The duration at the work in progress stage depends on the length of manufacturing cycle. Consistency in capacities at different stages and efficient co-ordination of various inputs

3. The duration at the finished goods stage depends on the pattern of Production and sales

4. The duration at debtors stage depends on the credit period granted,discount offered for prompt payments and efficient and rigor of collection efforts.

Thus detailed study regarding the working capital management in KTPS has been done to consider is effectiveness the short coming identified and suggestions are made.

2 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE

WORKING CAPITAL MANAGEMENT

OBJECTIVES OF THE STUDY
The study focuses on the following objectives; 1. To study in general working capital management procedure in the organization.

2. To analyze and apply operating cycle of working capital in the organization.

3. To verify the liquidity and analyze its impact on working capital.

4. To know how the working capital is being financed.

5. To know the various norms followed by KTPS Kothugudem for Inventories, Accounts receivable, Investments, and debtors.

6. To give suggestions if any for better working capital management in The organization.

3 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE

Primarydata 2. The analysis of the data has been made with the help of certain mathematical techniques like percentages etc. it mainly interviews with concerned offers and staff either individually or collectively. returns and internal records. 1.Secondary data  PRIMARY DATA: It is information collected directly without any reference. the data collected from primary and Secondary sources has sanitized edited and presented in the from of tables and statements. the data collected through conducting the personal interview with the officers of the KTPS  SECONDARY DATA: When and investigator uses the data which is already been collected by other. The Report also includes and appropriate graphs and diagrams are used. The collection of data is done through two principle source viz. Sonic of the information had been verified or supplemented with personal observation. Such as pamphlets annual reports. In the study.WORKING CAPITAL MANAGEMENT RESEARCH METHODOLOGY For the purpose of the study. 4 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . such data is called secondary data.

3. 2006-2007 to 20010-2011. 4.WORKING CAPITAL MANAGEMENT LIMITATIONS: 1. All the data presented for financial analysis was limited up to 5-years Period only. has been mainly collected from the balance sheet However with these limitations to study is not handicapped in any available data. care is taken to cover all aspects of the Required objectives Way with 5 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . It is not always possible to make future estimations on the basis of past . There was no scope of gathering sufficient financial Intonation as it is confidential.e. 2. The breakup of the various components of raw material not available as the data. data as it always does not come true. i.

Energy comes in various forms but electrical energy is the most convenient form of energy since it can be transported with ease. cooking and industrial processes. Energy is required for everything that we do. 6 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Electric power is generated by central power stations or by distributed generation. it is viewed as a public utility as infrastructure. Lack of power could cause economies to cripple. The flourishing power generation industry is considered to be a sign of prosperity for any nation. Demand for electricity is derived from the requirement for electricity in order to operate domestic appliances. industrial machinery and provide sufficient energy for both domestic and commercial lighting. or electricity. the demand being scarcer in developing nations. office equipment. generated in a number of different ways. and can be converted into mechanical work or heat energy as and when required. In this article we will learn about a few of the most commonly used methods of generating electrical energy. especially in developed nations. in sufficient quantities to areas that need electricity through a grid connection. Because of this aspect of the industry. and it is the next important thing apart from the food upon which the lives of nations depend.WORKING CAPITAL MANAGEMENT INDUSTRY PROFILE The electric power industry provides the production and delivery of electric energy. heating. often known as power. Many households and businesses need access to electricity. The grid distributes electrical energy to customers.

TYPES OF ENERGY SOURCES: Oil is the world’s favorite energy source which comprises 38% to the total energy production closely followed by coal (26%) and gas (23%). and geothermal sources. More correctly. wind. Electricity diagram Oil was used once before as a political weapon by Arab countries when the cartel of OPEC (Organization of Petroleum Exporting Countries) was still strong then. invasion of Iraq and the toppling of a legitimate or some say illegitimate. presidency of Saddam Hussein. a power plant can be said to be a place where electrical energy is obtained by converting some other form of energy. tidal. wood. the term power plant also refers to any arrangement where power is generated. The type of energy converted depends on what type of power plant is being considered.S. In the industrial use of the word.WORKING CAPITAL MANAGEMENT THE POWER PLANT: Power or energy is generated in a power plant which is the place where power is generated from a given source. The supply of oil has both geopolitical and strategic implications for the entire world. Iraq has the 2nd largest known oil reserves in the world after Saudi Arabia. It is geopolitical because the large known oil reserves are in the Middle East which is a region considered to be anti-American. For example the main engine of a ship or an airplane for that matter. It was the hidden agenda in the U. wave. The discovery of new and large oil fields in countries which are not members reduced OPEC’s political and 7 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Actually the term “generated” in the previous sentence is a misnomer since energy cannot be created or destroyed but merely changed from one form to the other. Both nuclear and hydroelectric energy sources contribute equally at 6% each with the remaining 1% coming from solar.

imports a lot of oil not for its consumption but for stockpiling in underground salt mines in Utah and Nevada.S. mainland and therefore it is less vulnerable to supply disruptions than oil which is mainly imported from other countries. These reserves form its strategic planning to ensure supplies of critical materials in wartime. is a strategic raw material and the U. Coal is relatively cheaper compared to all other energy sources and new carbon-emission technologies allowed cleaner burning. Another reason for its comeback is its availability in the U. Water energy 8 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . There has been a frantic search for oil by drilling in such pristine areas as Alaska.S.WORKING CAPITAL MANAGEMENT economic clout on the world stage. Energy consumption graph Coal consumption has been increasing for the past years because of the fantastic price increases of oil in world markets. like copper and aluminum.S. It is also strategic militarily because it is one of the war materials a country needs to wage and win wars. Oil. around the Great Lakes area and continental shelf but it carries the risk of degrading the ecosystem and the environment. The “Strategic Petroleum Reserve” is filled up to 700 million barrels which is equal to about a month’s energy consumption by the U.

This is a viable alternative when a country has sufficient water supplies. Nuclear energy Nuclear power is a significant energy source in some countries like Germany and France.500 megawatts.WORKING CAPITAL MANAGEMENT Gas is a cleaner fuel compared to either oil or coal but has its own drawbacks. 9 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . When it becomes operational in 2011. Ceramics can prevent meltdowns because it has a very high tolerance for extreme heat. The largest dam for years is the Hoover Dam in the U. The correct term for it is liquefied natural gas (LNG) or liquefied petroleum gas (LPG). This energy source is cooled and pressurized to make it into liquid form for easier and safer transport. The meltdown and resulting explosion spewed clouds of radioactive material into much of Europe and is the leading cause of birth defects due to genetic mutations. Its critics always cite safety concerns because of what happened at the Chernobyl reactor.S. Today. There is a new nuclear reactor technology that uses ceramics for its core. it will be the largest hydroelectric power station in the world producing some 22. One is the safe transport of gas since it is very flammable or combustible. Hydroelectric power energy Hydroelectric power is the alternative energy chosen by some countries who do not want nuclear plants due to safety concerns. between the borders of Arizona and Nevada. that distinction now belongs to the Three Gorges Dam in mainland China.

A pound of highly enriched uranium can power a nuclear submarine or nuclear aircraft carrier is equal to something on the order of a million gallons of gasoline. and highly polluting. Burning fossil fuels is increasingly expensive. coal. Once used the water is returned to the ground. Nuclear power plants nuclear generators use nuclear fission to turn water into steam. Fossil fuel power plants burn oil to drive a steam engine. This Chinese dam spans the Yangtze River in the Hubei province and is the largest civil works project since the construction of the Great Wall. which spins a generator to produce power. This drives the steam turbine. archaeological sites and cultural villages now underwater and gone forever. Oil supplies will run very thin in the coming decades. Coal plants burn coal to drive a steam engine. The dam made many historical monuments.WORKING CAPITAL MANAGEMENT The argument against building dams to produce electricity is dislocation of the people living nearby and the resulting changes to the environment. Hydroelectric dams use falling (or flowing) water to spin the turbine blades. Gas power plants use fuels that are burned to create hot gases to spin the turbine. China has a 14facility hydropower long-term development plan in place until 2020. Estimated total cost of this project is US$25 billion when completed and it needs to generate about 1. 10 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . A reason for building this giant dam is flood control along the entire Yangtze River. or biomass are burned to heat water to create steam. DIFFERENT TYPES OF POWER PLANTS: Steam power plants use fuels such as petroleum. spinning the copper wires inside the generator to create an electric current.000 terawatts in 10 years for its construction costs to be fully recovered. Coal is plentiful. but the collateral damage is extreme. Geothermal power plants are steam power plants that tap into steam released from the earth. the pressure of the steam spins a turbine turning the copper wire inside the generator. Wind power plants use the wind to push against the turbine blades.

as analysts believe figures for Q3 2009 have shown signs of positive growth. to streamline their operating and procurement procedures. The total installed capacity of India is ~150.000 MW. Power Grid Corporation of India and Tata Power.WORKING CAPITAL MANAGEMENT PERFORMANCE: The capital-intensive power industry suffered tremendous losses due to the economic recession. Going forward. Due to unbalanced growth and rural-urban disparity. GROWTH POTENTIAL: The Indian power sector is experiencing a large demand-supply gap. In order to best capitalize on these new opportunities. India has the fifth largest electricity generation capacity in the world. it is believed the hotspots of activity will primarily be in India. A corresponding investment is required in Transmission and Distribution networks. over 80. Industry analysts have revealed that there was a staggering 50% decline in the number. China and the UK. Only ~15% capacity is from the private sector. Nuclear Power Corporation of India Limited. Key players include National Thermal Power Corporation Limited. of which majority of generation. there are also significant opportunities for synergies across the global energy supply chain with industry and governments keen to invest in and adopt new technologies. North Eastern Electric Power Corporation Limited. At present.000 MW of new generation capacity is planned in the next five years. transmission and distribution capabilities with either public sector companies or with State Electricity Boards (SEBs). There is a silver lining though. only ~40% of rural household have access to electricity versus ~80% of urban households. As well as new builds. the energy shortage in the India is ~10% but there are States where the energy shortage is as high as 25%. though this is now beginning to increase. major contractors and companies across the energy supply chain have begun to work together more closely. To combat this. 11 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . value and capacity of new projects between the beginning of the credit crunch in Q3 2008 and Q3 2009. Market research suggests ~65% of India’s total installed capacity is contributed by thermal power with the Western and Southern regions each accounting for ~30%.

All of the large power-generation companies are looking for graduates and apprentices in a range of disciplines. work experience is a big advantage.000 MW by 2031-32. Degrees in engineering (mechanical. in addition to providing 100% access to power. electrical or civil). Given the breadth of the power industry. The main objectives. are to provide sufficient power to achieve targeted GDP growth rate of 8%.WORKING CAPITAL MANAGEMENT The Indian Ministry of Power has set a goal. it is possible to work with a range of different technologies and disciplines depending upon your preferences. provide reliable and good quality power and to enhance commercial viability. POWER INDUSTRY IN INDIA: The critical role played by the power industry in the economic progress of a country has to be emphasized. “Mission 2012: Power for all” and released a comprehensive sector development blueprint. This has welcomed numerous global companies to establish their operations in India under the famous PPP (public-private partnership) programs. the industry is experiencing a hiring spike. 12 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . FUTURE PROSPECTS: Due to the influx of foreign companies. A huge capital investment of about US$ 200 billion is required to meet Mission 2012 targets. New graduates would be advised to seek an initial position in one of the larger companies as there will be specific training courses and more opportunities for someone starting out. Additional massive capital investment is further required over the subsequent years with the country’s power requisite expected to touch 800. A self sufficient power industry is vital for a nation to achieve economic stability. In addition. science (physics. chemistry or mathematics) and even IT or business studies are required. and the ramping up of operations by domestic companies.

the country was faced with capacity restraint. By 1970's India had nationalized most of its energy assets.   The existing law is conserved or saved from such a repeal or A law passed by the state legislature receives acknowledgment from the President of India. falls in the Concurrent List (List III of the Seventh Schedule to the Constitution of India). POST INDEPENDENCE: Immediately after Independence. due to its commitment to social goals.WORKING CAPITAL MANAGEMENT INDIAN POWER INDUSTRY: Before Independence The British controlled the Indian power industry firmly before Independence. POWER Constitutional Position Power as a matter of legislative and executive competence. By the late 1980's the Indian economy felt the strain of the socialist agenda followed since independence. 13 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . India adopted a socialist structure for economic growth and all the major industries were controlled by public sector enterprises. with not much regulation with regard to operational safety. The then legal and policy framework was conducive to private ownership.Both the Parliament and state legislatures have the rights to pass laws on the matter and any law passed by the Parliament overrides the existing state laws unless. Faced with a serious deterioration in public finance and balance of payment crisis. the Union government as part of its policy of economic liberalization allowed greater investment by private sector in the power industry.

Electricity Bill 2001 Learning from the experience gained through various reform initiatives. the Indian government passed the Electricity Bill 2001. Whereas Anthracite 14 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . power trading. bituminous and anthracite. gas and coal. especially after the Industrial Revolution. non discriminatory open access. They are nothing but fossilized organic remains that after millions of years has been converted into oil.WORKING CAPITAL MANAGEMENT POST LIBERALIZATION: Understanding the critical part played by the power industry. They are not environmentally friendly. NON RENEWABLE ENERGY: FOSSIL FUELS: The Industrial Revolution in Europe in the 19th century forced human's to seek alternative sources of fuel to cater to the increasing demand. Because this process takes a long time. It is mostly carbon and is used as a combustion fuel. the Union government passed several laws and restructured the Power Industry to gear it up to meet the challenges posed to the Indian economy post Liberalization. COAL: It is the most easily available fossil fuel in the world. Focus was shifted to fossil fuels as an alternate source of energy. they are known as non renewable. A Bureau of Energy Efficiency was set up to monitor and regulate the Power Industry according to the provisions of the act. To address the issues of developing industry including regulation. Lignite and Bituminous have lesser percentage of carbon and therefore burn faster. choice of dispensing with vertically integrated state enterprises and encouraging private enterprise. Fossil fuels were formed millions of years ago.The Bill seeks to   Consolidate and rationalize existing laws. Energy Conservation Act 2001 The Act was enacted by the Indian government to facilitate stringent steps to ensure the efficient use of energy and its conservation. Coal can further be divided into lignite.

coal still continues to be the most used raw material for power generation. drying. an alternate source of energy which would not pollute the environment and which can also be renewed was tapped. cooling. It is believed in the next few years millions of consumers across the world would switch to solar energy. After the oil shock in 1970's many countries conducted research work to tap solar energy. It is therefore mixed with a chemical that gives it a strong our and thereby easy to detect in case of a leak. electricity. Though Petroleum gained prominence through the 20th century. They then turned into chemicals called hydrocarbons . Natural gas is usually found near a source of oil. The various types of renewable energy are SOLAR ENERGY: It is the most easily available renewable resource. the energy in those plants and animals changed into hydrocarbon liquids and gases. 15 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . It is lighter than air and is odorless. Oil and Gas: Oil and Gas is mostly found in underground rocks. The earth's crust changed its shape and put immense pressure and heat on the dead plants and animals. cold storage etc. they got buried in layers of mud and sand. Coal can be found in both underground mines and open mines. Solar energy can be used for cooking. refrigeration. Over a period of time. They are known as renewable energy. In India the Indian Renewable Energy Development Agency and the Ministry of Non Conventional Energy Sources are devising strategies to encourage the usage of solar energy. Oil has a disastrous effect on the environment and many scientists believe the main reason for global warming. heating. It is the cleanest burning fossil fuel. RENEWABLE ENERGY: Because of the environmentally disastrous effect of non renewable energy. It is a mixture of light hydrocarbons. distillation. Millions of years ago when plants and animals died.WORKING CAPITAL MANAGEMENT has about 98% carbon and therefore burns slowly and is more environmentally friendly.Most of the hydrocarbons is found under the sea bed.

Since the late 1980's the viability of wind energy has gained in prominence across the globe. In India the states of Tamil Nadu and Gujarat lead in the field of wind energy. It can be used to generate power with the same power plant that are burning fossil fuels and is very much environmentally friendly.WORKING CAPITAL MANAGEMENT HYDEL ENERGY: Energy available in fast flowing water can be used to generate electricity. 16 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Wind turbines help to convert the energy in the wind into mechanical energy which can be used for generating power. In India 90% of the rural households and 15% of the urban households use bio mass fuel. This energy can be tapped for commercial purpose. WIND ENERGY: It is the kinetic energy used for many centuries in water sports like sailing and for irrigation. In view of these problems associated with larger dams. cheapest and cleanest source of power. household waste and wood. experts have advocated the construction of smaller dams. New environmental laws to safeguard the planet from the effects of global warming have made smaller hydropower projects more viable. BIOMASS: It is sourced from the carbonaceous waste of animals and is also the by products from timber industry. It converts kinetic energy into more usable forms of power. raw material from forest. agricultural crops. though large dams could have environmental and social repercussions. It is being used in the western countries for applications such as combined heat and power generation. Waves occur due to the interface of the wind with surface of sea and represent a transfer of energy. HYDRO POWER: It is the one of the best.

coal and nonconventional sources of energy. the Ministry of Power started working independently with work areas covering planning and strategizing the Indian power projects and policies. the Indian government entered into an agreement with the government of USA called the 123 agreement. MINISTRY OF POWER: Indian power sector comes under the Ministry of Power India.  The government of India’s Hydrocarbon vision 2025 gives in details the guidelines for the policies in India for the next 25 years to attract investment in exploration. plutonium or thorium or the fusion of hydrogen into helium. This agreement aims to assuage greater cooperation between the two countries in the field of nuclear technology. INDIA POWER SECTOR: India power sector or the power industry in India comprises of the various governmental bodies looking after the power systems in India.WORKING CAPITAL MANAGEMENT NUCLEAR ENERGY: Nuclear energy can be created in nuclear reactors under strict human control. Nowadays mostly Uranium is used for generating nuclear power. The nuclear power can be generated by the fission of uranium. FUTURE TRENDS:  According to experts the private sector would play a greater role in power generation and foreign investments would increase considerable in his sector. power supplies. power industry report showing the analysis of the power scenario in India. production. power generation industry and technologies in India. formulation and amendments of the power laws in India. it comprised of separate departments for power. refining and distribution of petroleum products. the India power requirements and shortage. The power management and implementation of the various power projects undertaken. Earlier known as Ministry of Energy. In 1992. the various India power supply unit and the power infrastructure in India. management of the 17 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . With a view to increase India's dependence on nuclear energy to offset the energy crisis in the country.

other subsidiary organizations of the Mop are:         National Thermal Power Corporation (NTPC) National Hydro Electric Corporation (NHEC) Power Finance Corporation of India (PFCI) Nuclear Power Corporation of India Limited North Eastern Electric Power Corporation (NEEPC) Rural Electrification Corporation (REC) Damodar Valley Corporation (DVC) Bhakra Beas Management Board (BBMB) POWER INFRASTRUCTURE IN INDIA: The power industry in India derives its funds and financing from the government. World Bank. Power Finance Corporation (PFC) Ltd India also looks after the installation of any new power projects as well as renovation of an existing power project India. some private players that have entered the market recently. 18 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The Power Ministry India has set up Power Finance Corporation of India that looks after the financing of the power sector in India. The PFC in association with central electricity authority and the ministry of power facilitates the development in infrastructure of the power sector India.WORKING CAPITAL MANAGEMENT power supply in India. monitoring of the power plants in india. The Power Finance Corporation Limited provides finance to major power projects in India for power generation and conversion. They have taken up construction of mega power projects that will answer to the power shortage in various states through power transmission through regional and national power grids. distribution and supply of power in India. public issues and other global funds. power generation in India and other power shortage problems etc. Along with the CEA. power companies in India. The Ministry of Power (MoP) is coordinated by Central Electricity Authority (CEA) in all technical and economic aspects.

 Thermal Power in India is mainly generated through coal. The power ministry organization responsible for the thermal power management in India is the NTPC. 19 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The power generated at these thermal power plants is then distributed all over India through a network of powergrid at regional and national levels. Various dams and reservoirs are constructed on major rivers and the kinetic energy of the flowing water is utilized to generate hydroelectricity. the distribution of the power generated is undertaken by Rural Electrification Corporation for electricity power supply to the rural areas. India coal power forms a majority share of the source of power supply in India. North Eastern Electric Power Corporation for electricity supply to the North East India regions and the Power Grid Corporation of India Limited for an all India supply of electrical power in India.e. The wind power advantages start with the very fact that a wind energy power plant does not require much infrastructure input and the raw material i. Huge wind energy farms have been set up by the government for tapping the wind energy by using gigantic windmills and them converting the kinetic energy of the wind into electricity by the use of power converters. gas and oil. wind power etc.  Hydropower is India is one of the mega power generators in India. biogas energy.WORKING CAPITAL MANAGEMENT POWER SUPPLY UNITS INDIA: Power is derived from various sources in India. Efforts have been made to utilize this natural source of energy available free of cost for wind power generation.  Wind Power in India is available in plenty as India witnesses high intensity winds in various regions due to the topographical diversity in India. The hydroelectric power plants and the hydro power generation companies are managed by the National Hydro Electric Power Corporation (NHPC). These include thermal power. solar power. wind itself is available free of cost. hydropower or hydroelectricity. Various hydropower projects and hydro power plants have been set up by the ministry of power for generation of hydro power in India. The electric power in India is generated at various thermal power stations in India. The power generator here is the running water.

WORKING CAPITAL MANAGEMENT  Solar Power in India is being utilized to generate electricity on smaller scale by setting up massive solar panels and capturing the solar power. The electricity from all India nuclear plants is distributed by the NPCL as per the nuclear power project scheme. Shri Shakti Durgapur Projects Limited 20 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . POWER COMPANIES IN INDIA: Many government as well as private organizations have taken up the task of power generation in India. Also the number of biogas plants in India is still very low.  Nuclear Power in India is generated at huge nuclear power plants and nuclear power stations in India. India being the largest domestic cattle producer has plenty of biogas fuel and thus utilization of the fuel for mass biogas production by setting up more biogas plants in India would solve the power shortage problem to some extent. All the nuclear power plants in India are managed by the Nuclear Power Corp of India Ltd (NPCL).  Biogas Production in India is still in its infancy stage. A nuclear power plant generates the electricity using nuclear energy. Solar power India is also being utilized by the power companies in India to generate solar energy for domestic and small industrial uses. The major Indian power companies playing prime are:               Bhakra Beas Management Board Enercon Systems India Essar Group GMR Group Gujarat State Petroleum Corporation Ltd Jindal Steel & Power Limited Karnataka Power Transmission Corporation Limited (KPTCL) Karnataka Renewable Energy Development Limited Konarka Magnum Power Generation Limited Nippo Batteries Reliance Energy Ltd.

WORKING CAPITAL MANAGEMENT       Satluj Jal Vidyut Nigam Ltd. United Power Ventral Systems Pvt. Enron India Power Plant Celetronix Power India Caterpillar Power India 21 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Ltd.

6 miles of track laid in side the powerhouse area with marshalling yard.WORKING CAPITAL MANAGEMENT COMPANY PROFILE INTRODUCTION: Kothagudem Thermal Power Station (KTPS) consists of 8 units in four stages in A. Details are given in table. It is located in PALVONCHA village 15km away from Badrachalam Road Railway Station. In A station the R&L (refurbishment and life extension) works have been carried out during 1998 – 2000 for all its four units to extends its life period and at both B& C stations R&M (Renovation and Modernization) works were carried out during 2001 – 2004 to raise the each unit capacity of each unit from 110 MW to 120MW and also to increase its life period. stations. It consists of about 8 miles long BG Railway siding for BCM read station to the powerhouse site. B. At instant 1&2 stages. 1 below. Two main reservoirs of 6 million-gallery have constructed and water was let into the reservoir form the Kinnerasani project through the supply channel The scheme was sanctioned in 1961 for erection of two sets of 60MW each under 1st state and two sets 60MW under 2nd stage of development. Due to abundant supply of cheap coal from nearby singareni collieries and abundant water supply from Krishnaveni River a tributary of Godavari KTPS in a natural selection for the construction of thermal power station. 22 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Kothagudem. C. o two sets of 60MW each has commenced (A station) 3rd stage of two sets of each 110MW each has commenced (C station) later.

The produced steam is the expanded in the steam turbine (Prime Mover) and is condensed in condenser to be fed to the boiler again. yet it embraces many arrangements of proper working and efficiency.0 PRODUCTIONS PROCESS AT K. which converts mechanical energy of the turbine in to electrical energy. The steam turbine drives the alternator. is known as thermal power station.11.1974 19.T. Steam is produced in the boiler by utilizing the heat of coal combustion.1978 OF TABLE 1.1966 27.03.1974 10.07.WORKING CAPITAL MANAGEMENT UNIT NO 1 2 3 4 5 6 7 8 STAGE I I II II III III IV IV STATION A A A A B B C C CAPACITY 60MW 60MW 60MW 60MW 120MW 120MW 120MW 120MW DATE COMMISSINING 04.1967 27.1977 10.S: A generating station.1967 08. A thermal power station is basically works on Rankin cycle.12.1967 13.11.P.08.07. These are located where coal and water are available in abundance. Although thermal power station simply involves the conversion of heat of coal combustion in the electrical energy. 23 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . which converts heat energy of coal combustion into electrical energy.01.

Then coal is diverted to coal handling plant where it is crushed. The removal of ash from boiler furnace is necessary for proper operation of boiler. Coal is pulverized in the mills then fed to the boiler through belt conveyers. Coal is pulverized in the mills then fed to the boiler through vapor fans.WORKING CAPITAL MANAGEMENT The whole arrangement of production process can be divided into the following stages. The coal is burnt in the boiler and the ash handling plant for further disposal.  Coal and ash handling arrangement  Steam generating plant. 24 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The flue gases make their journey through super heaters.  Steam turbine  Alternator  Feed water  Cooling arrangement COAL AND ASH HANDLING ARANGEMENT:: The coal is transported to the KTPS byroad or rail from near by Singareni Collieries and is stored in coal storage plant. BOILER: The heat of coal combustion in the water tube boiler is utilized to convert water into steam at high temperature and pressure. Coal is pulverized in the mills then fed to the mills through belt conveyers. STEAM GENERATING PLANT: The steam generating plant consists of a boiler for the production of steam and other auxiliary equipment for utilization of flue gases. thus the crushed coal is fed to the mills through belt conveyers. economize and air pre heaters and are finally exhausted to atmosphere through the chimney.

STEAM TURBINE: The super heated steam is fed to the turbine.e HP. The economizer extracts a part of heat of flue gasses to increase the feed water temperature. which in the condenser from LP turbine is condensed by means of cold-water recirculation. 25 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Super heating provides two principle benefits. IP and LP. The air pre heater extracts heat from flue gases and increases the temperature of air used for coal combustion. AIR PRE HEATER: An air pre heater increases the temperature of the air supplied for coal burning by deriving heat from flue gases air is drawn from the atmosphere by forced draught fan and is passed through air pre heater before supplying to the boiler furnace. In turbine the super heated steam is converted into mechanical energy. is passed through three stages i. and secondly too much condensation in last stages of turbine is avoided. The super heated steam from super is fed to the steam turbine through M. ECONOMIZER: An economizer is essentially a feed water heater and derives heat from the flue gases for this purpose. The feed water is fed to the economizer before supplying to be boiler.S. The main benefits of air pre heaters are increased thermal efficiency and increased steam capacity per Sq meter of boiler surface. ALTERNATOR: The steam turbine is coupled to an alternator. Then the electrical power is delivered to the grid.WORKING CAPITAL MANAGEMENT SUPER HEATER: The steam produced in the boiler is wet and is passed through super heater coils where it is dried and super heated by the flue gases on their way to chimney. pipeline. The alternator converts mechanical energy of the turbine into electrical energy. firstly the overall efficiency is increased.

some water may be loosed in the cycle. Circulating water take up the heat of the exhaust steam and itself becomes hot. The cold water in the cooling tower is reused in the condenser. COOLING ARRANGEMENT: In order to improve the efficiency of the plant the steam exhausted from the turbine is condensed by means Condenser. The feed water on its way to the boiler is heated by water heaters (LPH’s and HPH’s) and economizer. Water is drawn from a natural source of supply such as river.WORKING CAPITAL MANAGEMENT FEED WATER: The condensate from the condenser is used as feed water to the boiler. which is suitable made up from DM plant. 26 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . This helps in raising overall efficiency of the plant. canal or CW pump house. This hot water coming out from condenser is discharged on cooling tower at CW pump house. and is re circulated through the condenser.

Furniture etc. The current liabilities and the Inter relationship that exist between the term current assets refers to those Assets which in the ordinary course of business can be business or will be Turned into cash within one year without undergoing a denomination in Value and without disrupting the operations of the firm. Working capital management is concerned with the problem that arise In attempting to manage the current assets. Building.. These funds are known as working capital “working capital is the amount of funds necessary to cover the cost of operating the enterprise”. To carry out its day to day operations. Land. Long-term funds. 1. Short-term funds purposed for the purchase of raw material Payment of wages and other day to day expensed etc. Machinery. Long. for its establishments 2. Short-term funds.term funds are required to create production facilities Through purchase of fixed assets such as Plant.WORKING CAPITAL MANAGEMENT WORKING CAPITAL MANAGEMENT Working Capital is the amount of Capital required for the smooth Uninterrupted function of the normal business operations of a Company Depending on the nature and time period for which t he working capital Held in organization. Every business needs funds for two purposes 1. 2. Funds are of two types. 27 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . it can be classified as permanent working capital And in adequate working capital.

Working capital deals with current assets and the inner relationship that exists and current liabilities between them. The importance that financial of working spend a capital great management is deal of reflected in the fact capital managers time on working Management.WORKING CAPITAL MANAGEMENT Working capital is the life blood and nerve center of a business. It is characterized by the firms considerable uncertainly regarding the demand market price. These real world circumstanced circumstances. either out of current assets are cash marketable securities accounts receivable and inventory. Working capital refers to that parts of the firm’s capital which is required and for financing It is Short-term essential to or current mention assets proper such level as of cash these receivable inventories. The basic objective of working capital management without becoming insolvent or bankrupt. quality and availability of its ow-11 products and those of suppliers. Just As circulation No of blood is can essential run to maintain the smooth an running of Business. SIGNIFICANCE OF WORKING CAPITAL: The world in which real firms function is not perfect. The basic current liabilities are accounts payable bank over draft. assets Finance manager is required to determine the quantum of such assets cash The is required to meet day to day needs and problems inventories etc. receivable management is related to tile volume of production &sales for increasing sales there may go up but the rest of bad debts and costs involved in it may have to weigh against the benefits. business successfully without adequate amount of working capital. 28 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . introduce strategies problems that utilize available investment of to address with these working financing capital accounts often offer a substantial advantage over the other technique. outstanding expenses etc…. Current liabilities are those which are those which are to be paid within a year.

however differs in three important ways 1. Thus a risk term trade of is involved in holding current assets. which can be adjusted with sales fluctuations in the short run.WORKING CAPITAL MANAGEMENT The management of fixed assets and current assets. 2. In managing fixed assets there is a important factor consequently discounting and compounding techniques play a significant role in capital budgeting and a minor one in the management of current assets. 3 . 29 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .Levels of fixed as well as current assets depend upon expected sales. The large holding of current assets especially cash strengthens also reduce the the filmy liquidity position (reduce risk) but overall profitability. Thus the firm has a greater degree of flexibility in managing current assets. but It is only current assets .

But it is quite useful for internal control. As a measure of liquidity the net working capital is not very useful for comparing the performance of different firms. NET WORKING CAPTIAL (NWC) It is the excess of current assets over current liabilities. b. Conversion of cash into inventory.” “Working capital is just like a heart of industry” “The continuing flow-from cash to suppliers to inventory.WORKING CAPITAL MANAGEMENT CONCEPTS OF WORKING CAPITAL There are two types of working capital a) Gross working capital b) Net working capital GROSS WORKING CAPITAL Gross working capital is the total of current assets. Conversion of inventory into receivables Conversion of receivables into cash 30 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . to a account receivable and bank into cash is what is called the operating cycle” In other words the term cash cycle refers to the length to time necessary to complete the following cycle of events a. The use of NWC to measure a firms liquidity is based on the promise that greater the margin by which the current assets over the short term obligations the more able it will be to pay its obligations when they become due for payment NWC is necessary because of the non S1’11c 11Conflation of clash flows.“The fate of large scale investment in fixed capital often determined by a relatively small amount of current assets.

1) PERMANENT OR FIXED WORKING CAPITAL It is the minimum amount which is required to ensure Capitalization of fixed facilities and for maintaining the circulation of Current assets these are always a minimum level of current assets NA-i 1ch is continuously required by the enterprise to carry out its normal business operations. 1) Permanent or fixed working capital 2) Temporary & Variable working capital.e.WORKING CAPITAL MANAGEMENT THE OPERATING CYCLE Receivables cash phase 2 inventory Types of Working Capital: Working capital can be broadly classified into two categories i... 31 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . For example every firm has to maintain minimum level of raw materials work in progress finished goods &cash balance. Variable working capital further classified as reasonable working Capital and special working capital most of the enterprises have to provide additional working capital to meet the seasonal working capital special working capital which is required to meet special exigencies such as marketing research etc. 2) TEMPORARY OR VARIABLE WORKING CAPITAL It is the amount of working capital which is required to meet the seasonal demands and some special emergencies. This level of current assets is called permanent or fixed working capital this part of capital is permanently blocked in current assets..

The for working capital to run the day business activities cannot be over emphasized the needed for working capital arises due to the time gap between production realization.WORKING CAPITAL MANAGEMENT  NEED OF WORKING CAPITAL Every business needs some amount of working capital. 3.progress Stores & spares finished stock. To pay wages and salaries. Greater the size of business unit. 6. generally large will be the requirement of working capital. To maintain the inventories of raw materials work-in. Working capital is needed for the following purpose: 1. and Office expenses etc… 4. It has to ensure that the until will have regular supply of raw material to facilitate uninterrupted production. To meet the setting costs as packing advertising etc 5. The amount needed as working capital depends primarily upon its size an ambitions of its promoters. 32 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . To produce credit facilities to the customers. For the purchase of raw material components and spares. The unit should also be able to maintain finished goods for smooth sale operations customers should be assessed on the basis of the practice be assessed after assessing the above requirement it should be ensure that the caving cost for inventories and duration of credit customers are minimized. power. 2. The amount of working capital needed goes on increasing with growth expansions of business till it attains maturity ASSESSMENT OF WORKING CAPITAL The finance manager has to make proper assessment of the working capital which depends on the nature of activities of an enterprise and the duration of its operating cycle. To incur day to day expenses and overhead costs such as fuel.

WORKING CAPITAL MANAGEMENT Operating cycle referred in the above paragraphs beings with the Acquisition of raw materials of cash and ends with the collection of receivables The longer the cycle the higher. Growth & expansion g. c. General nature of business b. Credit policy f. The amount of working capital is determined by wide variety of factors such as. A high working capital involves less risk and less return. a. the working capital is needed & vice-versa Depending on the length of operating cycle different kinds of budgets have to prepare. h. For example if a firm wants to procure some amount of raw material the raw material budgets has to be prepared. Conditions of supply 33 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . FACTORS AFFECTING WORKING CAPITAL A firm should have neither low nor high working capital involves more risk and more returns. Govt policies i. Production policy e. Depending on the requirements of cash budgets have to be prepared. Vagaries in the availability of raw materials. Production cycle. Price level changes j. Business cycle d.

Loan arrangement. Current provisions 4.WORKING CAPITAL MANAGEMENT SOURCES OF FINANCE FOR WORKING CAPITAL 1. Long-term sources comprising equity & long –term borrowings. 5. 3. Non-banking short-term borrowings 5. Bills purchased & Bills discounter. Trade credit. FORMS OF CREDIT WORKING CAPITAL 1. over draft arrangement. Term loans for working capital 34 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . 2. 3. Cash credit arrangement 4. 2. Bank credit.

A.  FLEXIBILITY: Working capital management is highly flexible in nature. However. Controlling the movement of cash. B. The importance of working capital management is reflected in the fact that financial managers spend a great deal of time in managing current assets and current liabilities. 35 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Working capital management is a significant facet of financial management. Its importance stems from two reasons. Investment in current assets represents a substantial portion of total investment. To be sure. which is required for financing the current needs of the company. fixed asset investment and long-term financing are also responsive to variation in sales. Arranging Short-term financing negotiating favorable credit terms. and monitoring the investment in inventories consume a great of time financial managers WHY WORKING CAPITAL MANAGEMENT Effective management and control of the various components of Working capital has been rated as one of the most important and vital function of financial management in any of the in any of the industrial and business units. administering accounts receivable. so much so that it can very easily be adapted to suit even extreme conditions like rising & falling demands in peak and off seasons. this relationship is not as close and direct as it is in the case of working capital components.WORKING CAPITAL MANAGEMENT WORKING CAPTIAL MANAGEMENT Working capital is one of the most important requirements of any Business concern working capital management of short-term financial management which is concerned with decisions relating to current assets and current liabilities The term working capital stands for that part of the capital. Investment in current assets and the level of current liabilities have to be geared quickly to changes in sales. Buoyant and sluggish economic and market conditions etc.

the management of working capital. Therefore. It will be interesting to understand the relationship between working capital risk and return. It is generally accepted that higher level of working capital decreases the risk and have the potential of increasing the profitability also.  ASSESSMENT OF WORKING CAPITAL REQUIREMNTS Further depends upon the levels of study debtors and inventories a matching level of funds are also required to finance them. in its totality means management of current assets and the entire current liabilities..WORKING CAPITAL MANAGEMENT  LEVELS OF INVESTMENTS IN VARIOUS COMPONENTS OF CURRENT ASSETS : Investment in current assets constitutes a very substantial percentage (usually more than 50%) of the total investment in most of the Indian companies and firms. with view to maximizing their profitability and the prospects and prosperity there with. Thus.. as much as needed by the firm it should be excessive not adequate. 36 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .  ADEQUANCY OF WORKING CAPITAL A firm must have adequate working capital i. which again in turn. means an out go of funds by way of interest paid and/or involves some opportunity cost. Both the situations are harmful to the concern excessive working capital means the firm has idle funds which earn no profits for the firm: inadequate working capital ultimately result in production interruptions and lowering down of the profitability.e. In a manufacturing concern. as also a portion of long term or deferred liabilities which go on meet the financial requirements of working capital.  QUANTUM OF EFFORTS AND TIME Empirical study and observation have revealed that a major portion of the time of the financial managers. in most of the companies is devoted towards the management of the various components of working capital. the management of working capital would also involves the management of funds (both sources and long-term sources of funds) required for financing the working capital.

37 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . while lower the risks lower is the profitability. and increase in the ratio in the current assets to total assets will result in the decline of the profitability of the firm. IN BRIEF THE TWO CONCEPTS OF WORKING CAPITAL ARE:  Gross Working Capital: It is the total of all current assets include inventories. This because investment in current assets as stated above is less ratio of current assets to total assets is would increase the profitability of the firm because investment in current assts. higher the risk higher is the profitability.  Net Working Capital: It is excess of current assets over current liabilities include sundry creditors. Current assets are les than fixed assets. Short term funds are less expensive than long term funds. It represents the current assets required on a accounting basis over entire year the Tandan committee has referred to this type of working capital as “ core current assets”.WORKING CAPITAL MANAGEMENT  THE PRINICIPLE BASED ON THE FOLLOWING ASUMPTION: There is a direct relationship between risk and profitability. advances. Which keeps on fluctuating from time to time on the business activities.  Permanent working capital  Variable or temporary working capital Permanent working capital refers to the minimum amount of investments in all current assets which is required at all time to carry our minimum level of business activities in other words. On accounts of the above principles. sundry debtors.Cash in hand and bank. Short term deposits etc. In other words its represents additional current assets required at different time during the operating year. TYPES OF WORKING CAPITAL: Working capital can be divided into two categories on the basis of time.c.t. Advances from customers. However this increases the risk of the becoming technically insolvent on accounts of its possible inability in meeting its commitments in time due to shortage of funds. provision for taxation e. Temporary working capital refers to that amount of working capital.

The interaction between current assets and current liabilities is therefore. the current liabilities and that arise in the interrelationship that exists between them. the basic current liabilities Are accounts payable. at their inception. Efficient working capital management requires that firms should operate with some amount of NWC. Each of the short term sources of financing must be continuously way. The NWC is necessary because the cash outflows and inflows do not concede. Themajor current assets are cash. The more predictable the cash inflows are. the exact amount varying from firm and depending among other things. Current liabilities are those liabilities which are intended. difficult to predict. converted in to cash within on year operations of the without undergoing a diminution in value and without disrupting the firm. The cash inflows are. The term current assets refer to be those assets which in the ordinary course of business can be Or will be. This is so because if the firm can not maintain a satisfactory level of working capital. The goal of working capital management is to manage the firm’s current assets and liabilities in such a way that a satisfactory level of working capital is maintained. it is likely to become insolvent and may even be forced into bankruptcy. out of the current assets earnings of the concern. Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them. 38 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . accounts receivable andinventory. to be paid in the ordinary course of business. the less NWC will be required. In are relatively predictable. marketable securities. however. the main theme of working management. The current assets should large enough to cover its current liabilities in order to ensure a reasonable margin of safety.WORKING CAPITAL MANAGEMENT NATURE OF WORKING CAPITAL Working capital management is concerned with the problem attempting to manage the current assets. on the nature of industry the theoretical justification for the use of NWC to measure liquidity is based on the premise that the greater the margin by which current assets cover the short term obligation. the more is ability to pay obligation when they become due for payment. within a year. or COMMON DEFINITION OF NWC AND ITS IMPLICATIONS: NWC is commonly defined as the difference between current assets and Current liabilities. bills payable. bank overdraft and outstanding expenses.

In such labor intensive industries.WORKING CAPITAL MANAGEMENT Factors determining the working capital requirements: The working capital requirements of a concern depends on a large number of factors affect different enterprises differently they also vary from time to time. more requirement for working capital. the amount of working capital required will also be less. The amount of working capital required will be more as compared to public utility concerns because of the fact that former concerns. If the production cycle is shorter. the amount of working capital will be less (but such concerns require more long term funds) than those concerns where most of the work is done manually. capital Risk: In the case of a business requirement of working capital will be more as compared to a business which is less risky. the amount of working capital required will be more. in trading and manufacturing concern. c. amount of working capital required will be more. b. PRODUCTION POLICIES: Such policies have and important impact on the amount of working capital. A firm providing service like a gas 39 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . a. Are required to invest substantially in inventories and debtors as compared to public utility concerns. If the manufacturer has to carry the raw materials and supplies of labor and service costs before the finished goods are finally obtained. The amount of working inventories is mostly determined by the production policies. The following are important factor that generally influence the working capital requirements. d. In those concerns where the work is mostly done be automatic machines. The greater the uncertainty of receipts and expenditures. the intensive industries. NATURE OF THE BUSINESS: The nature of business affects the amount of working capital required . In public utility concerns most of the capital is required for long term use and hence these concern require more amount of fixed capital than working capital as their realizations are mostly in cash. Length of the production cycle: The requirement of working capital increase in direct proportion to the length of their production cycle in manufacturing concerns.

Market conditions: The degree of competition prevailing in the market will affect the amount of working capital required. the amount of working capital is bounded to be ties in book debts or bills receivable than when sales are made mostly on cash basis or credit is properly administered. Irregularities of Supplies: If the supplies are available regularly less amount of working capital will be required. liberal credit terms will have to be offered to attract customers who many not like to wait because other firms are willing to meet their needs. This will require more amount of working capital i. In times of rising expectations. ie. customers are allowed credit on easy items or the firms is unable to realize its book debts because of slackness. But if supplies are irregular the business is required to have large quantities of stock in order to ensure uninterrupted flow of production. All these will increase requirement of working capital. Rapidity of Turnover: There is a high of correlation between the quantum of working capital employed and speed with which the sales are affected. on other hand if competition is 40 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT company or a transport company has a short operating cycle and service is provided usually on cash basis has a modest working capital requirement . if the firm can enjoy more liberal credit from the suppliers of goods. Cyclical Fluctuations: In both periods of boom and depression. g.. When competition is severe. h. on the other hand a manufacturing company like a textile unit has a long operating cycle and sells and goods on credit needs substantial amount of working capital e. Period of credit allowed and Granted: If the terms of sales are liberal. For additional quantities of raw materials stock dull and producers are required to carry large quantities of all types of stock which means more amount of working capital. the amount of working capital required will be loss. f. Similarly. a business will naturally produce more of its products for which more stock of raw materials will have to be maintained. A company whose items are fast selling will require amount of working capital than a company whose items are not fast selling. the requirements of working capital will be more than the normal items..

Just as circulation of blood is essential in the human body for maintaining life. working capital is very essential to maintain the smooth running of a business.WORKING CAPITAL MANAGEMENT weak and the market is strong.Other factors: There are also factors as rising cost of material or other supplies or expectations of price of finished goods going high also create a temptation to build up large inventories of these. j. a firm can manage with lesser amount of working capital by following a tight credit policy and keeping a smaller quantity of finished goods. ADVANTAGES OF ADEQUATE WORKING CAPITAL Working capital is lifeblood and nerve center of the business. declaring dividend its effect on working capital is given due weight age. 3. K. If a higher rate of dividend is declared. More will be the requirement of working capital and vice versa if a low rat of dividend is declared. Dividend policy: The relationship between divided policy and working capital is well established before. This will require more amount of working capital. No business can run successfully with out an adequate amount of working capital. 2. Easy loans: A concern hacking adequate working capital. high solvency and good credit standing can arrange loans from banks and others on easy and favorable terms. The main advantages of maintaining adequate amount of working capital are as follows: 1. Good will: Sufficient working capital enables a business concern to make payments and hence helps in creating and maintaining goodwill. Solvency of the business: Adequate working capital helps in maintaining solvency of the business of the business by providing uninterrupted flow of production. 41 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .

generally. 2. wages and other day-to-day commitments which raises the morale of its employees. as there may not be much pressure back profits. Both excessive as well as short working capital positions are bad for any business. This gains the confidence of its investors and creates market to raise additional funds in the future. 1. and high morale and creates overall efficiency in a business DISADVANTAGES OF EXCESSIVE WORKING CAPITAL: Every business concern should have adequate working capital to run its business operations. sufficient of working capital a concern to pay quick and regular dividends to its investors. It should neither redundant or excessive working capital nor inadequate nor shortage of working capital. reduces wastage’s and cost and production and profits. Quick and regular return on investments: Every investor wants a quick and regular return on investments. increases their efficiency.WORKING CAPITAL MANAGEMENT 4. it may lead to unnecessary purchasing and accumulation of inventories causing more chances of thefts. 9. waste and losses.Cash discounts: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence it reduces costs 5. 7. 6. Ability to face crisis: Adequate working capital enables a concern to face business crisis in emergencies such as depression because during such periods. When there is redundant working capital. confidence. 42 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . High morale: Adequacy of working capital creates an environment of security. Regular payment of salaries: wages and other day-to-day commitments company which as ample working capital can make regular payment of salaries. Excessive working capital idle funds which earn no profits for the business and hence the business cannot earn a proper rate of return on its investments. there is much pressure on working capital 8. Regular supply of raw materials: Sufficient working capital ensures regular supply of raw materials and continuous production.

Increases costs and reduces the profit of the business. The term risk is defined as the profitability that a firm will become technically insolvent so that it will not be able to meet its obligations when they become due for payment. Or the greater the NWC. the less likely it is to become technically are associated with increasing levels of risk the relationship between liquidity. which may cause higher incidence of bad debts. In other words. 6. The risk of becoming technically insolvent is measured using NWC it is assumed that the greater the amount of NWC. cannot pay its short-term liabilities in time. It cannot buy its requirements in bulk and cannot avail of discounts etc 3.WORKING CAPITAL MANAGEMENT 3. 4. the less risk-prone the firm is. 6. the firm’s risk decreases. NWC and risk such that if either NWC or liquidity increase. It may result into overall inefficiency in the organization When there is an excessive working capital relation with the banks and other financial institutions may not be maintained. The rate of return on investments also falls with the shortage of working capital. The firm cannot pay day-to-day expenses of its operations and it creates inefficiencies. DISADVANTAGES OF INDEQUATE WORKING CAPITAL 1. 43 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . A concern. TRADE OFF BETWEEN PROFITABILITY AND RISK In evaluating a firm’s NWC position and important consideration is the trade off between profitability and risk. Which has inadequate working capital. the level of NWC has a bearing profitability as well as risk. the more liquid is the firm and. Thus it will loose its reputation and shall not be able to get good credit facilities. 2. The term profitability used in this context is measured by profits after expenses. Excessive working capital implies excessive debtors and defective credit policy. It becomes impossible to utilize efficiently the fixed assets due to non-availability of liquid funds. therefore. 5. It becomes difficult for the firm to exploit favorable market conditions and undertake profitable projects due to lack of working capital 4. 5. Due to low rate of return on investments the value of shares may also fall.

trade debtors and bills receivable are converted into cash and a cycle of working capital is completed. In case of sales finished goods will directly be converted into cash is once again used to buy raw material to start another cycle. On sale of finished goods on credit. There is an operating cycle. in theory. On receipt of payment. If it doesn’t generate surpluses. 44 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . around and out of a business. trade debtors of bills receivable result. This cash again flows out in exchange for other current assets. The business will eventually run out of cash and expire.WORKING CAPITAL MANAGEMENT WORKING CAPITAL CYCLE The funds invested in current assets are constantly converted into cash. Cash is used to buy raw materials. It is the business’s lifeblood and every manager’s primary task is to help keep it flowing and to use the cash flow to generate profit. then it should. if a business is operating profitable. Various manufacturing expenses are incurred to convert raw materials into semi finished goods and then into finished goods. generate cash surpluses. The following figure is the working capital cycle cash Trade debtors Raw materials Finished goods WORKING CAPITAL CYCLE Semi-finished goods Cash flows in a cycle into.

There are two elements in the business cycle that absorb cash inventory (stocks and work-in-progress) and receivables (debtors owing you money). in other words. the continuing flow from cash to supplier. Arising out of the lack of immediate realization of cash against goods sold.g. Given the objective of financial decision making to maximize the share holders wealth. to inventory to accounts receivable and back in to cash is what is called the operating cycle. The cheapest and best sources of cash exist as working capital right within business. get longer credit or and increased credit limit: you effectively create free finance to help fund future sales. upon the magnitude of the sales. NEED FOR WORKING CAPITAL The need for working capital (gross) or current assets can not be overemphasized. Technically this is referred to as the operating or cash cycle. The extent to which profits can be earned will naturally depend among other things. consequently. You could reduce the cost of bank interest or you’ll have additional free money available to support additional sales growth or investment. There is. Good management of working capital will generate cash will help improve profits and reduce risks. improved terms with suppliers e. The operating cycle can be said to be said to be at the heart of the need for working capital. it is necessary to generate sufficient profits. the business will generate more cash or it will need to borrow less money to fund working capital. Therefore. necessary for earning profits by any business enterprise. a need for working capital in the form of current assets to deal problem. reduce inventory level relative to sales). Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm’s total profits. A successful sales program is in other words. the term cash cycle refers to the length of time necessary to complete the following cycle of events.g. therefore. if you can negotiate. 45 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The main sources of cash are payables (your creditors ) and equity and loans. Similarly.WORKING CAPITAL MANAGEMENT The faster a business expands the more cash it will need for working capital and investment. However sales don not convert in to cash instantly there is invariably a time lag between the sale of goods and receipt of cash. Sufficient working capital is necessary to sustain sales activity. (e.

Policy change: The second major cause of changes in the level of working capital is because of policy changes initiated by the management. and 2) iii) changes in technology. For instance the price of raw material. may constantly rise. The third source of change is seasonality in sales activity. The term current asset policy may be defined as the relationship between the current assets and sales volume. The changes in this factor may be due to three reasons first there may be a long run trend of change. both permanent and temporary. There is a wide choice in the matter of current assets policy. Seasonality-peaks and troughs-can be said to be the main source of variations in the level of temporary working capital. A firm following a conservative policy in this respect having a very high level of current assets in relation to sales may deliberately opt for a less conservative policy and vice versa.WORKING CAPITAL MANAGEMENT 1) Conversion of cash in to inventory Conversion of inventory into receivables 3) Conversion of receivables in to cash  Changes in Working capital: The changes in the level of working capital occur for the following three basic reasons. These conscious managerial decisions certainly have an impact on the level of working capital Technology changes: Finally. In the second place. policy changes. necessitating the holding of a large inventory. technological changes can cause significant changes in the level of working capital. Which shortens the operating cycle. if a new process emerges as a result of technological developments. Changes in the sales and Operating Expenses: The first factor causing a change in the working capital requirements is change in the sales and operating expenses. It reduces and need for working capital and vice versa 46 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The secular trends would mainly affect the need for permanent current assets. cyclical changes in the economy leading to ups and downs in business activity influence the level of working capital. i) ii) changes in the level of sales and/or operating expenses. say oil.

47 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The current liabilities are increased the year 2007 148282 the next year2008 54527 .when compared the 2007-2008 the net working capital is decreased 93755 due to low sales poor control on all current liabilities.WORKING CAPITAL MANAGEMENT STATEMNET SHOWING WORKING CAPITAL Particulars As on 31-3-2007 As on 31-3-2008 17380 4699 Increase Decrease Current assets Sundry debtors Cash & bank Balance Loans & Advances Other current Assets Gross working Capital Current liabilties Provision Total current Liabilities Net working Capital Increase in Working capital Total 17712 124349 ___ ___ 332 119650 5447 6091 644 __ 21482 27279 5797 __ 25142 80019 54877 __ 194132 11648 34202 135468 15697 65244 4049 31042 45850 80941 148282 54527 93755 148282 148282 93755 93755 93755 Interpretation: The above table showing the current assets decreased from 194132 To135468.Tha major portion occupied with loans and advance.

WORKING CAPITAL MANAGEMENT STATEMNT SHOWING WORKING CAPITAL Particulars As on 31-3-2008 As on 31-3-2009 Increase Decrease Current assets Sundry debtors Cash & bank Balance Loans & Advances Other current Assets Gross working Capital Current liabili ties &provisions Current liabilities Provision Total current Liabilities Net working Capital Increase in Working capital 17380 4699 1777 13747 397 9048 _ _ 6091 27279 60783 27052 54692 _ __ 227 80019 9714 _ 70305 135468 129073 65244 52306 _ 12938 15697 15161 _ 536 80941 67467 54527 61606 7079 7079 Total 61606 61606 64137 64137 48 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .

49 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT Interpretation: The above table showing the current assets decreased from 135468 To 129073 the major portion occupied with loans and advance.67467 when compared the 2008-2009 the net working capital is increased 7079 due to low sales poor control on all current liabilities god control on management. The current liabilities are decreased the year 2008 80941 the next year2009.

WORKING CAPITAL MANAGEMENT STATEMNET SHOWING WORKING CAPITAL Particulars As on 31-3-2009 As on 31-3-2010 Increase Decrease Current assets Sundry debtors Cash & bank Balance Loans & Advances Other current Assets Gross working Capital Current liabil Ities &provisions Current liabiltes Provision Total current Liabilities Net working Capital Increase in Working capital Total 17777 13747 23404 8678 5627 _ _ 5069 60783 84714 23931 __ 27052 30287 3235 _ 9714 10161 447 __ 129073 157244 52306 15161 49102 12300 3204 _ 2861 67467 61402 __ 61606 95842 __ 34237 95842 __ 95842 34237 35929 35929 50 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .

The current liabilities are increased the year 2009 67467 the next year2010 61402 .when compared the 2009-2010 the net working capital is increased 34237 due to all the current assets and current liabilities good control on management 51 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT Interpretation: The above table showing the current assets increased from 129073 To157244.Tha major portion occupied with loans and advance.

The current liabilities are increased the year 2010 61402 the next year2011 70263 .Tha major portion occupied with loans and advance.when compared the 2010-2011 the net working capital is increased 56722 due to all the current assets and current liabilities good control on management 52 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT STATEMNET SHOWING WORKING CAPITAL Particulars As on 31-3-2010 As on 31-3-2011 26102 12523 Increase Decrease Current assets Sundry debtors Cash & bank Balance Loans & Advances Other current Assets Gross working Capital Current liabil Ities &provisions Current liabiltes Provision Total current Liabilities Net working Capital Increase in Working capital Total 23404 8678 2698 3845 __ __ 84714 133146 48432 __ 30287 40476 10189 __ 10161 10580 419 __ 157244 222827 12300 16042 3742 61402 70263 __ 95842 152564 __ 56722 152564 152564 __ 55087 56722 55087 Interpretation: The above table showing the current assets increased from 157244 To 222827.

53 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT GROSS WORKING CAPITAL & NET WORKING CAPITAL OF KTPS The figures of gross working capital & current liabilities which result in net working capital for 5 years from 2007-12 Year Gross working capital current liabilities 45850 80941 67467 61402 70263 Net working capital 148282 54527 61606 95843 151564 2007-08 2008-09 2009-10 2010-11 2011-12 194132 135468 129073 157244 222827 DATA ANALSIS WITH CHART: 250000 200000 150000 Gross working capital current liabilities 100000 Net working capital 50000 0 2007-08 2008-09 2009-10 2010-11 2011-12 Interpretation: Gross working capital is the summation of current assets. Gross working capital is decreased from 2009-10to 2010-11 and later is increase in the next 2 years. It is decreased from 2008-09 to 2008-09 and then it is rapidly decreased for the next 3 years and working capital of KTPS is a positive sign. This increase is due to either increase in volume of manufacturing activities of KTPS.

WORKING CAPITAL MANAGEMENT CURRENT ASSETS OF KTPS: For purpose of analysis and interpretation took 5 years annual reports of KTPS 2007-08 to 20011-12

CURRENT ASSETS Year inventories sundry Debtors 2007-08 2008-09 2009-10 2010-11 2011-12 17712 17380 17777 23404 26102 124349 4699 13747 8678 12523 cash& bank balances 5447 6091 60783 84714 133146 other current 25142 80019 9714 10161 10580 Loans advances 21482 27279 27052 30287 40476 total current 194132 135468 129073 157245 221827

250000 200000 150000 100000 50000 0 2007-08 2008-09 2009-10 2010-11 2011-12

inventories sundry cash& bank other Loans total

INTERPRETATION: From the above figure it is found in inventories they form a huge portion of current assets and the inventories is decreased in 2005-06 and increased in next 3 years. Coming to stud debtors in 2006-07 is 124349 and from 2006-07 onwards rapidly decreased and cash & bank balance is increased in 2009-10.this is mainly because of decrease in sundry debtors. The total current assets are decreased form 20010-11and From the next year onwards is increased.

54 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE

WORKING CAPITAL MANAGEMENT CURRENT LIABILITIES OF KTPS:

The following are figures of current liabilities of KTPS for 5 years staring from 2007-08 to 2011-12 Year deposits suspense Account 2007-08 2008-09 2009-10 2010-11 2011-12 2384 33254 19128 13235 11600 provisions outstanding 11648 15697 15161 12300 16042 31818 31990 33178 35867 42621 45850 80941 67467 61402 70263 creditors total

DATA ANALYSIS WITH CHART:

90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2007-08 2008-09 2009-10 2010-11 2011-12 deposits suspense provisions creditors total

INTERPRETATION: If we observe the current liabilities of KTPS the deposits borrowed from different banks increased from 2005-06 to 2006-07 and in the next 3 years they are gradually decreased. KTPS is not maintaining suspense account. The provisions of the company are increased in 2007-08 are rapidly increased. The creditors of the company are ups and down this means the company is pay in the amounts to creditors properly.

55 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE

WORKING CAPITAL MANAGEMENT WORKING CAPITAL RATIOS: LIQUIDITY RATIOS: These ratios measure the firm’s ability to meet its currents obligations as and when they become due. Liquidity is a prerequisite for the very survival of a firm. A firm should ensure that it does not suffer from lack of liquidity. The failure of the company to use its obligations put in a dangerous situation on the other named idle assets earns nothing

Therefore a proper balance between the two contradictory requirements i.e. liquidity and profitability is required for efficient financial short term obligations and reflect the shortterm financial strength/solvency of a firm.

CURRENT RATIO: Current ratio is calculated by dividing total current assets to total liabilities. The ratio is also known as “working capital ratio”.

Current assets Current ratio = Current liabilities

Current assets include cash and those assets in marketable securities, debtors, stock, prepaid expenses, which can be converted in to cash with in a year the ratios, which indicate liquidity of firm, are

Current liabilities defined as liabilities, which are short term maturing obligation to be met, current liabilities include creditors, bills payable, bank credit, and provision for taxation, dividend payable, outstanding expenses. A ratio greater than one means that the firm has more current claims against them. Its conventional rule that a current ratio of 2to1 or more to Be considered as satisfactory. In other woods, current ratio is 1:1, it means that funds yielded by current assets are just sufficient to pay the amounts due to various creditors and there will be nothing left to meet the expenses which are being currently incurred. However current ratio is a crude and quick measure of firm’s liquidity. Thus the ratio should always be more than 1:1 a very high current ratio is also not desirable because it indicates idleness of funds which is not a sigh of efficient financial management. 56 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE

57 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT Table showing current ratio Years 2007-08 2008-09 2009-10 2010-11 2011-12 Current assets 194132 135468 129073 157245 221827 Current liabilities 45850 80941 67467 61402 70263 Ratio 4.67 in 2006-07 The sight decrease to 1.23 1.67 in 2006-07 so here the relatively high current ratio is an indication that the firm is liquid and has ability to pay its current obligations in time. Here it is representing and increase in the current ratio that there was improvement in liquidity position of the firm.56 3.67 1.15 Data analysis with chart: 250000 200000 150000 Current assets Current liabilities 100000 Ratio 50000 0 2007-08 2008-09 2009-10 2010-11 2011-12 Interpretation. Current ratio is from 4.91 2.23 in the year 2005-06 to 1.

But there is a slight increase in current liabilities compared with current assets in year of 2008-09 In Quick Ratio: Quick ratio or acid test ratio is more refined measure of firm’s liquidity. working capital is positive. current assets should be two times more than the current liabilities. 58 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .. More over here the firms current assets are more than current liabilities. As a normal rule.Inventors Quick Ratio = Current liabilities Generally. Current assets . Working capital is the capital required meeting daily obligations of the firm.e. So we can say that it can reach its any current obligations. It given a better picture of the firm’s ability to meet its short-term liabilities out of its short-term assets. The higher the current ratio the greater the short term solvency. representing a satisfactory current financial condition.WORKING CAPITAL MANAGEMENT Conclusion: The current ratio measure the ability of the firm to meet its current obligations current assets gets converted in to cash in the operating cycle of the firm and provide the funds needed to pay current liabilities. a quick ratio of 1:1 is considered. generally 2:1 is ideal ratio for a concern. This ratio is of great important for banks and financial institutions. This ratio establishes a relationship between quick or liquid assets and current liabilities. In KTPS the current ratio is gradually up to the mark current ratio and increased to year. Stock and prepaid expenses are considered to be less liquid. Through out the period of study current assets are more than the current liabilities i.

81 Data analysis with chart: 4.5 3 2.64 to 3.5 1 0.84 1.17 2.5 2 1. 59 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .84 quick ratio si highest in the year 2009-10and least in the year of 2005-06 because as there is a decrease in current liabilities and increase in quick assets in the year of 2006-07 it is increased in the year 2010-011 as there is a raise in current assets.WORKING CAPITAL MANAGEMENT Table showing quick ratio Years current Assets current liabilities 45850 80941 67467 61402 70263 inventory Ratio 2007-08 2008-09 2009-10 2010-11 2011-12 194132 135468 129073 157245 221827 17712 17380 17777 23405 25102 3.45 1.64 2.5 4 3.5 0 2007-08 2008-09 2009-10 2010-11 2011-12 INTERPRETATION: Quick ratio is ranging from 1.

bank loans and advances.07 0. The ideal ratio is 1:1.79 in the year 2010-11. Inventory is lower than the sundry debtors. Absolute liquid assets include cash in hand and short term investment. years cash in hand & bank current liabilities Ratio 2007-08 2008-09 2009-10 2010-11 2011-12 5447 6091 607783 84714 133146 45850 80941 67467 61402 70263 0.LIQUIDITY RATIO: It is the ratio of the absolute liquid assets to quick liabilities.11 0. Cash. quick ratio of KTPS is 2. C.90 1. The ratio must be improved slightly compared with previous year. The quick ratio is a fairly straight measure of liquidity here for KTPS. Cash in hand and bank Absolute Liquidity Ratio = ………………………………… Current liabilities Table showing Cash Ratio.37 1. However for calculation purposes it is taken as ratio of absolute liquid assets to current liabilities.WORKING CAPITAL MANAGEMENT CONCLUSION: Quick assets are defined as current assets excluding inventories. quick assets are more and current liabilities are low.89 60 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .

WORKING CAPITAL MANAGEMENT Data analysis with chart: 700000 600000 500000 400000 300000 200000 100000 0 2007-08 2008-09 2009-10 2010-11 2011-12 cash in hand current liabilities Ratio Interpretation: The deal absolute liquidity ratio is taken as 1:2 or 0. net worth 61 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .5 from the above table we can say that KTPS is maintaining small amount of cash.  Current liabilities to net worth: It explains the relationship between the current liabilities to net worth Current liabilities Current liabilities to Net worth=………………………………. The company needs to improve its short term financial position.

25 0.14 Data analysis with chart: 0.15 0.1 0.2 0.16 0. 62 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .22 0.05 0 2007-08 2008-09 2009-10 2010-11 2011-12 Interpretation: The current liabilities to net worth ratio is increase 2006-07 to 2007-08 due to increase in liabilities and then in the next 3 years it is increase gradually due to decrease in liabilities.WORKING CAPITAL MANAGEMENT Table showing current liabilities to net worth.14 0. Years 2007-08 2008-09 2009-10 2010-11 2011-12 current liabilities 48850 80941 67467 61402 70263 net worth 315040 35501 417763 449587 485968 Ratio 0.13 0.

5 2 1.61 DATA ANALYSIS WITH CHART: 4 3.-09 2009-10 2010-11 2011-12 net credit sales 190475 188491 225403 267016 325952 working capital 148282 54527 616006 95843 151564 Ratio 1. This ratio indicates the working capital is well and efficiently utilized. the ratio ascertained as Net sales Working capital turnover ratio = ………………. The higher working ratio express the. 63 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .-09 2009-10 2010-11 2011-12 Ratio Interpretation Working capital turnover ratio measure the efficiently of the employment of working capital generally the high the turn over the greater the efficient and larger the ratio rate of profits. Here the ratio is positive it shows the efficiency of working capital is increasing it should be maintained constantly.WORKING CAPITAL MANAGEMENT Working capital turnover ratio: This ratio indicates the efficiency or inefficiency in the utilization of working capital in making sales.28 3.78 2.5 3 2.5 0 2007-08 2008.… Working capital Working capital = (current assets – current liabilities) Year 2007-08 2008.5 1 0.45 3..65 2.

the better he trade credit management and the better the liquidity of debtors as short collection period and high turnover ratio imply prompt payment and the better the liquidity of debtors as short collection period and high turnover ratio imply prompt on the part of the debtors too high turnover is not necessarily good.WORKING CAPITAL MANAGEMENT Debtor’s turnover ratio: Debtors’ turnover ratio indicates the speed with which debtors account receivables are being collected.53 40. While it is true that it awards the risk of receivables. Being bad debit as well as the burden of high interest on outstanding debtors it may have an adverse effect on the volume of sales on the firm.77 26.11 16. Years 2007-08 2008-09 2009-10 2010-11 2011-12 Debtors 12349 4699 13747 8678 12523 Sales 190475 188491 225402 267016 32952 Ratio 1. it should at least reasonable level.40 30. Sales may be confined to only such customers as make prompt payments. The credit and collection policy of the firm may be very re-directive without reasonable a firm should have neither a very low nor a very less debtors turnover ratio. The higher turnover ratio and the shortest the average collection period.03 64 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . Total sales Debtors turnover ratio = debtors Table showing Debtors turnover ratio.

Generally the higher the value of debtors shows the efficiency of management of credit. 65 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .WORKING CAPITAL MANAGEMENT Data Analysis with chart : 45 40 35 30 25 20 15 10 5 0 2007-08 2008-09 2009-10 2010-11 2011-12 Ratio Interpretation Debtors turnover indicates the number of times debtors turnover in each year.

WORKING CAPITAL MANAGEMENT SUGGESTIONS:  Current ratio from 2007 to 2008 is high due to decrease in current assets and current liabilities and the it is increased to the next year onward compared to 2008 to 2009.  Working capital turnover ratio a show decreasing trend during the period of 2009 to 2010 so the company has to increase the current assets  The absolute liquid ratio is decreased from 2007 to 2008 due to increase in current liabilities. So the company has to decrease the current liabilities and it should increase cash in hand &bank. so the company has to increase the current assets. 66 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE .

The study also helped a lot to evaluate the working capital management in the organization. This study will be helpful to the organization to know the value of their assets.WORKING CAPITAL MANAGEMENT CONCLUSION: The study brings out the information about the working capital management with in the organization and brings the value information about the ratio analysis of the organization. 67 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . The study will helpful for the organization to do self analysis and to strengthen end go behind the limitations.

Ajanta Publications. PANDY: Financial Management. Himalaya Publishing House.com 68 BOMMA INSTITUTE OF TECHNOLOGY AND SCIENCE . 2001 Rajeshwar Rao K: Working Capital – Planning and Controller Public Enterprises in India.ktps. 2001. WEBSITES: www.: Financial Management and Policy.M.gov. New Delhi. Mumbai. New Delhi.ratioanalysis.com www. R.WORKING CAPITAL MANAGEMENT BIBILOGRAPHY Company Ltd. I.. Kalyani publishers.2001.workingcapital. 1997.apgenco. Sharma & Shashi K.in www. Vikas Publications.studyfinance.M. New Delhi. Gupta: Financial Management.K. Srivastava R.com www.com www. 1985.