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INDEX
Chapter 1 2 3 4 5 6 7 8 9 10 TITAL Page No.
Introduction to Organization Objectives & Scope of Study Methodology of the Study Working Capital Management
Working Capital Trends & Liquidity Analysis
Receivable Management Cash Management Data Interpretation Conclusion & suggestion Bibliography
WORKING CAPITAL MANAGEMENT
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Report Writing:The complete research for project report is properly designed into chapters as under
Chapter-1 Introduction to organization:a. Company profile b. Executive summary c. Product profile
Chapter- 2 Objectives & Scope of the study:Chapter- 3 Methodology of the study:Chapter- 4 Working Capital Management:THEROTICAL FRAMEWORK Introduction of Working Capital 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Meaning and Definition Concept of Working Capital Importance of Working Capital Types of Working Capital Operating Cycle of Working Capital Problems of Inadequate Working Capital Problems of Excessive Working Capital Determinant of Working Capital Working capital Financing Computation of Working capital Components Working Capital Management
Chapter-5 Working capital trend and liquidity analysis:-
B.D, C.O.E. SEVAGRAM, MBA
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Working Capital Trends and Liquidity Analysis 1. 2. 3. 4. 5. 6. 7. 8. 9. Working Capital Trends an Introduction Calculate of working capital Size of working capital Current assets Trends Current liabilities Trends Working capital Turnover Ratio Liquidity Analysis Current Ratio Quick Ratio
Chapter - 6 Receivables management:Chapter- 7 Cash Management:Chapter- 8 Data Analysis and Interpretation of Ratio:Chapter- 9 Conclusion and suggestions:Chapter- 10 Bibliography:-
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Introduction to organization:MAHALAXMI TMT.PVT,LTD CORPORATE HISTORY
LOCATION
INFRASTRUCTURE
CORPORATE GOAL OBJECTIVES
ACHIVEMENT
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Company Information
Date of incorporation Date of commencement of production Factory office and registered
Contact person
Company Profile
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PRODUCTION AND CAPACITY
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Performance for Last Five Years

Rs. in lakes. Year Production Sales Product Turnover Rs. Lakes of
PRODUCT PROFILE
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Features of Project .
Objectives & Scope of the study:Objectives of the Study

1. To identify the financial strengths & weakness of the company. 2. Understand the Profitability of the company through the profit ratio. 3. To evaluate efficiency and liquidity of working capital management in
Mahalaxmi tmt.pvt.ltd
4. To examine the pattern of management of working capital and to analyze the

working capital trends.
5. To analyze receivable management in company. 6. To examine cash management practice in company.
Scope of the Study

For the sake of convenience of the study, the scope of the project is restricted as followed-
Temporal Scope
The scope of the study broadly covers the period from 2005-10. However, while studying the history of the organization. The date of formation of the organization is also covered.
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Functional scope
There are various managerial aspects of Mahalxmi Ltd, such as marketing, sales,
human resource management is available for study. Considering the requirement of the course and significance of subject only aspect of Working Capital Management of the organization is selected for the study.
Sources of Information
There are mainly two sources of data and information i.e. a) Primary Sources and b) Secondary Sources.
a) Primary Sources
There are various methods of collecting the primary data i.e. Observation Method, etc. In this case it is the study of a single organization; financial record is used for collecting the necessary information and data. For this purpose, at the time of every , Managing Director, Secretary, Accounts Officer are taken, through which points like requirement of working capital, sources of working capital, history of organization etc. And other relevant issues are discussed and the required information is collected and inserted at appropriate places in this project report.
b) Secondary Sources
This study is based on facts and figures for which secondary sources are also used for collecting the data and information for this project. The secondary sources of data consists ofi) ii) Published Annual Reports of Mahalaxmi Limited. Theoretical base regarding working capital managements in various books available in library.
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Methodology of the Study:RESEARCH & METHODOLOGY TOOLS OF ANALYS

It is essential to use a systematic research methodology for the assessment of project because without the use of a research methodology analysis of any company or organization will not be possible it is worth a while to mention that I have the following type of published data :
Balance sheet Profit &loss a/c Prospectus of the company General body report Schedules
Preloads of Study
The financial data for the financial year have been taken to analysis and interpret the data for the year 2009-2010.
Area of the study

The study covers the analysis of working capital of Mahalxmi limited.
Analysis and Interpretation of Data for the Study

B.D, C.O.E. SEVAGRAM, MBA 10 Page
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Data and information collected for the study through primary and secondary source are arranged and tabulated properly, while tabulating the data bare amounts, figures and information of percentages, index number, proportions and ratios are used. For effective presentation of data, the technique of graphs is also used in the project repot. In this way various statistical tools are used in this study. On the basis of presentation of information and data as above, necessary comments are made on the basis of trends shown by the figures in sorted in the tables. Accordingly appropriate remarks are drawn.
Hypothesis:The study is based on the following hypothesis:-
The organization is raising finance for meeting the working capital requirements. The well experienced and qualified staff is working in organization. There is major impact; of provisions and rules in the companies Act 1956. Maintain the up-to-date records of Working capital.
Organization maintain the reco
Utility of the Study

This study is useful to the various factors as under-
a) To Directors
The members of Board of Directors will be able to study the details regarding management of working capital in the organization. They will study the trends of working capital during the last five years. It is helpful for them while financial planning and polity making for the future period.
B.D, C.O.E. SEVAGRAM, MBA 11
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b) To the staff
The officers and employees working in the organization use the study for implementing the financial policies and making optimum use of financial sources.
c) To Students and Researchers

The persons who are interested in study the management of working capital in same company. Can refer the data and information included in this projects report and the conclusions made in the study.
d) To Government Departments
The personnel for government departments may also get valuable information from this report while framing the schemes and plans related with such organizations.
Limitations of the Study

. The limitations are under -
1)
The project report is prepared for the postgraduate level course of The university; Study is carried out according to that level only.
2) The study is to be completed within a period of 50days, so the scope of Study is determined in such a way that it will be completed successfully In such time limit. B.D, C.O.E. SEVAGRAM, MBA 12 Page
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3) The study is limited only to working capital management aspect of Mahalaxmi tmt.ltd
4) The information and data, which is made available by personnel working in the organization is; only used for this study.
Working Capital Management:THEROTICAL FRAMEWORK
12. 13. 14.
Introduction of Working Capital Meaning and Definition Concept of Working Capital

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15. 16. 17. 18. 19. 20. 21. 22. 23.
Importance of Working Capital Types of Working Capital Operating Cycle of Working Capital Problems of Inadequate Working Capital Problems of Excessive Working Capital Determinant of Working Capital Working capital Financing Computation of Working capital Components Working Capital Management
THEROTICAL FRAMEWORK
Introduction
The financial management of business firms involves: the management of long term assets, fixed assets, management of capital and management of short term assets and liabilities. The first of three functions is the capital budgeting, the second is the
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management of capital structure and the last but not the least is the management of working capital.
Working capital is one of the most fundamental measures of a firms financial strength. If a firm possesses a significant value of liquid assets, it can easily fund its day to day business obligations.
Meaning & Definition

Working capital management is the process of planning and controlling the level and mix of the current assets of the firm as well as financing these assets. The portion of firms current assets which are financed with long term funds
-L.G.Gitamann
Working capital is defined as the excess of current assets over The Current liabilities and provision that is, the amounts of surplus of current assets, which remain after deducting current liabilities from, total current assets. amount is equal to the amount invested in working capital. Working capital is the amount of funds necessary for the cost of operating the enterprise. This
-Shubi
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Concepts of Working Capital

The concept of working capital has been a matter of great controversy among the financial experts. There are two concepts of working capital i.e.
a) Gross Concepts b) Net concepts
a) Gross Concepts
The Gross concept of working capital deals with firms current assets. The sum total of current assets of firm is termed as working capital. From the perspective of working capital needs, Gross concept of working capital is the investment in circulating assets or in inventory and accounts receivables, comprising the operating cycle of a manufacturing firm. Investment in assets which be converted in cash within an accounting year, which includes cash, short term securities, debtor, bills receivable and inventories. In short, according to gross concept working capital refers to the sum total of all current assets of the firm employed in the business process.
b) Net Concept
Net concept of working capital refers to current assets less current liabilities. That means, working capital is the difference between resources in cash or readily convertible into cash i.e. current assets land organization commitments for which cash will soon be required i.e. current liabilities. Thus:
Working Capital = Current Assets Current Liabilities
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Current liabilities are those claims of outsiders which are expected to nature for payment within an accounting year and include creditors, bills payable, bank overdraft and outstanding expenses Thus, according to net concepts of working capital that is accepted widely. Some have made it quite simple stating it is the difference between current assets and current liabilities. Others consider it as being equal to the total of current assets.
Importance of Working Capital

The management of working capital plays an important role in to maintain the financial health of the firm during the normal course of business.
A study of working capital is of major importance of internal and external analysis because of its relationship with the current day to day operations of business. The study of management of working capital covers areas like cash management, Accounts receivables, inventory and other concerned areas. Thus, working capital is of paramount importance to a firms financial performance.
Working capital is significance because of

1. Adequate working capital is required to continue uninterrupted business operations. 2. It is essential to run the day-to day business operations. 3. Greater volume of working capital required investing in current assets for the success of sales activities. 4. To ensure the maximizing the wealth of a firm. 5. To increase the rate of return on investment. 6. To meet the short-term obligation of a business enterprise. 7. To make the optimum utilization of resource.
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Types of Working Capital

The term working capital is broadly classified under two heads as under:
a) On the basis of concepts. b) On the basis of time.
a) On the basis of concepts

On the basis of concepts the working capital is divided in two types. They are:-
I. Gross Working capital

The gross working capital refers to investment in all the current assets taken together. The total of investment in all current assets is known as gross working capital.
II. Net working capital

The term net working capital refers to excess of total current assets Over total current liabilities
b) On the basis of time

From the point of view of time, the working capital can be divided into two categories:-
i. Permanent working capital

It also refers to Hard core working capital. It is that minimum levels of investment in the current assets that is carried by the business at all the times to carry over minimum level of its activities.
ii. Temporary working capital

It refers to that part of working capital, which is required by a business over & above permanent working capital. It is also called variable working capital. Since the volume of temporary working capital keeps on fluctuating from time to time according to business activities it may be financed from short-term sources. B.D, C.O.E. SEVAGRAM, MBA 18 Page
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iii. Operating Cycle
The term operating cycle is also known as Cash Cycle. The term capital cycle or operating cycle refers to the length of time between the
of cash from debtors. The operating cycle is the average time between purchasing or acquiring inventory and receiving cash proceeds from the sale of finished products. Firm paying cash for raw materials, applying those materials into production process, stock and inflow
The operating cycle consists of the following events which continues throughout the life of business-
Conversion of cash into raw materials; Conversion of raw materials into work in progress; Conversion of work in progress into finished products; Conversion of Finished products account receivables through sales: Conversion of Account receivables into cash Account Receivables Sales
Cash
Finished Products
Raw Material
Work In process
Cash finished products Raw materials Work in process.

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Operating cycle of Working Capital

Thus there is complete cycle form cash to cash to cash wherein cash gets converted into raw materials, work-in-progress, finished products, debtors and finally into cash again. The operating cycle of working capitals will repeat again and again over the period depending upon the nature of business. The determination of operating cycle helps in forecast control and management if working capital.
Problems of inadequate Working Capital

When working capital is inadequate the company faces the following problems1. The growth of company is stagnant. Because the firm to undertake profitable projects for non availability of working capital funds. 2. Inadequate working capital is difficult to implement operating plans and achieve the firms profit target. 3. Inadequate working capital is difficult to meet day to day commitments. 4. Fixed assets are not efficiently utilized for the lack of working capital funds. 5. Inadequate working capital funds the firm has unable to avail attractive credit opportunities. 6. The firm loses its reputation when it is not in a position to honor its short term obligations.
Problems of Excessive Working Capital

The firm maintains a sound working capital position it should have adequate working capital to run its business operations but excessive working capital position is dangerous to a business enterprises as follows. B.D, C.O.E. SEVAGRAM, MBA 20 Page
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It results in unnecessary accumulation of inventories. Thus chances of inventory mishandling, waste, theft and losses increase. It is an indication of defective credit policy and slack collection period. Consequently higher incidence of bad debts results which adversely affects profits. Excessive working capital makes management complacent which degenerates into managerial inefficiency. Tendencies of accumulating inventories tend to make speculative profits grow. This may tend to make dividend policy liberal and difficult to cope with in future when the firm is unable to make speculative profits.
Determinants of Working Capital

The total working capital requirement is determined by a wide variety of factors. It should be noted that these factors affect different enterprises differently. The following is the description of the factors, which generally influence the working capital requirements of the firms.
A. Internal Factors :1) Nature of Enterprise

The working capital requirements of enterprise are basically related to the conduct of business. Public utilities have certain features which have a bearing on their working capital needs. The two relevant features arei. ii. The cash nature of business (cash sales). Sale of services rather than commodities.
In view of these features they do not maintain big inventories and have therefore probably the least requirement of working capital. The nature of business is such that
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they have to maintain a sufficient amount of cash inventories and book debts. They have necessarily to invest proportionately large amount in working capital. The working capital requirements of a firm basically influence by the nature of its firm. For example, trading and financial firm require a lower investment in working capital but in the case of manufacturing concern have to invest substantially in working capital.
2) Production Cycle
The working capital requirement is also depends upon the production or manufacturing cycle. These cycle are covers the time span between the procurement of raw materials and the completion of the manufacturing process leading to the production of finished goods. Funds have to be necessarily tied up during the process of manufacture necessitating unbalanced working capital. In other words, there is some time gap before raw materials become finished goods.
3) Business Cycle
The working capital requirements are also determined by the nature of the business cycle. Business fluctuations lead to cyclical and seasonal changes which, is turn cause a shift in the working capital position. The variations in business conditions may be in two directions a) upward phase when boom conditions prevail and b) Downswing phase when the economic activity is marked by a decline. During the upswing of business activity, the need for working capital is likely to grow to cover the lag between increased sales and receipt of cash as well as to finance purchases of additional material to cater to the expansion of the level of activity.
4) Sales and Demand Conditions
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Sales depend on demand conditions mostly firms are experience seasonal and cyclical fluctuations in the demand for their products and services. These business variations affect the working capital requirement. Seasonal fluctuations not only affect working capital requirement but also create production problems for the firm, during periods of peak demand increasing production may be expensive for the firm. Similarly, it will be expensive during slack periods when the firm has to sustain its working force and physical facilities without adequate production and sales.
5) Credit Policy
The level of working capital is also determined by credit policy, which relates to sales and purchases. The credit policy influences the requirement of working capital in two ways: i) ii) Credit allowed by firm to its customers. Credit given to firm by its suppliers.
The credit terms granted to customers have a bearing on the magnitude of working capital by determining the level of books debts. On the other hand, if liberal credit terms are available to firm by its suppliers, the requirements of working capital will be less.
6) Availability of Credit
The working capital requirements of a firm are also affected by credit terms granted by its creditors. A firm will need less working capital if liberal credit terms are available to it. Similarly, the availability of credit from banks also influences the working capital needs of the firm. A firm, which can get bank credit easily on favorable conditions, will operate with less working capital than a firm without such a facility.
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7) Availability of Raw Material

The availability of a continuous basis without interruption would sometimes affect the requirement of working capital. There may be some materials which cannot be procured easily either because of their sources are few or they are irregular. The procurement of some essential raw materials is difficult because of their sporadic supply. This happens very often with raw materials which are in short supply and are controlled to ensure equitable distribution. The buyer has in such cases very limited options as to the quantum and timing of procurement. It may so happen that a bulk consignment may be available but the firm may be short of funds, while when surplus funds are available the commodities may be in short supply. This element of uncertainty would lead to a relatively high level of working capital. Finally, some raw materials may be available only during certain seasons.
8) Price Level Changes

Changes in the price level also affect the requirements of working capital. Rising prices necessitate the use of more funds for maintaining an existing level of activity for the same level of current assets. Higher cash outlays are required. The effect of rising process is that a higher amount of working capital is needed. The implications of changing price levels on working capital position vary from company to company depending on the nature of its operations, its standing in the market and other relevant considerations.
9) Operating Efficiency
The operating efficiency of the management is also an important determinant of the level of working capital. The management can contribute to a sound working capital position through operating efficiency. Although the management cannot control the rise in prices, it can ensure the efficient utilization of resources by eliminating waste, B.D, C.O.E. SEVAGRAM, MBA 24 Page
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improving co-ordination and a fuller utilization of existing resources, and so on. Efficiency of operations accelerates the pace of cash cycle and improves the working capital turnover. It releases the pressure on working capital by improving profitability and improving the internal generation of funds.
10) Growth and Expansion Activities

It is obvious that, as business expands, it requires more working capital in terms of sale or fixed assets. In the case of growth, there will be an all round increase in investment. That is to say, with the increase in fixed assets for increasing sales the requirement of working capital will be expanded not only for financing increased volume of raw materials but also to finance maintenance of inventory stock and grant credit to customers.
11) Depreciation Policy

Depreciation policy also exerts an influence on the quantum of working capital. Depreciation charges do not involve any cash outflows. The effect of depreciation policy on working capital is, therefore, indirect in the first place depreciation affects the tax liability and retention of profits. In the second place, the selection of the method of depreciation has important financial implications. Depreciation policy is relevant to the planning of working capital.
B. External Factors :1) Business Cycle Fluctuations

Business fluctuations lead to cyclical and seasonal change in production and sales and affect the working capital requirement. Most firms experience seasonal and cyclical fluctuation in the demand for their products and services. These business variations affect specially the temporary working capital requirements of the firm. B.D, C.O.E. SEVAGRAM, MBA 25 Page
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2) Supply Conditions
The inventory of raw materials, spares and stores depends on the condition of supply. If the supply is prompt and adequate the firm can manage with small inventory hence the firm can manage with small inventory hence the lower requirements of working capital. If supply is unpredictable and carry the inventory for longer period. This policy is followed when the raw material is available only seasonally.
3) Technological Development
Changes in technologies may lead to improvements in processing raw materials, minimizing wastages, greater productivity, more speed of production. All these
improvements may enable the firm to reduce investments in inventory .Thus changes in technology affect the requirements of working capital.
4) Government Policies
The policy and decision of government also affect working capital. Government controls and regulates the prices and supply of some essential products, which are very important from the point of view of general public.
5) Level of Taxes
The amount of taxes to be paid is determined by the prevailing tax regulations the management has no discretion in this respect, very often taxes have to be paid in advance on the basis of the profit of the preceding year. Tax liability is, in a sense, short term liability payable in cash an adequate provision for tax payments is, therefore, an important aspect of working capital planning. It tax liability increases, it leads to an increase in the requirement of working capital and vice-versa.
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6) Dividend Policy
The payment of dividend consumes cash resources and there by, affects working capital to that extent. Conversely, if the firm does not pay dividend but retains the profits, working capital increases. In planning working capital requirements, therefore, a basic question to be decided is whether profit will be retained or paid out of shareholders. In the firm should retain profits to preserve cash resources and at the same time, it must pay dividends to satisfy the expectations of investors. When profits are relatively small, the choice is between retention and payment. The choice must be made after taking into account all the relevant factors.
Working Capital Financing:1) Trade Credit

Trade credit represents the credit extended by the supplier of goods and services. It is a spontaneous source of finance in the sense that it arises in the normal transactions of the firm without specific negotiations. Provided the firm is considered credit worthy by its suppliers. It is an important source of finance representing 25 percent to 50 percent of short term financing.
2) Accrued Expenses and Deferred Income
Accrued Expenses:Accrued expenses represent a liability that a firm has to pay for the services which it has already received. Thus they represent a spontaneous, interest free sources of financing the most important component of accruals are wages and salaries, taxes and interest.
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Deferred Income:Deferred income represents funds received by the firm for goods and services which it has agreed to supply in future these receipts increase the firms liquidity in the form of cash. Advance payments made by customers constitute the main item of deferred income.
3) Regulation of Bank Finance

Traditionally industrial borrows enjoyed a relatively easy access to bank finance for meeting their working capital needs. Further, the cash credit arrangement the principal device through which such finance has been provided is quite advantageous from the point of view of borrowers. Ready availability of finance in a fairly convenient form led to in the opinion of many informed observers of the Indian banking scene, over borrowing by industry and deprivation of other sectors.
4) Public Deposits
Many firms large and small, have solicited unsecured deposits accept from the public, to meet the finance of working capital requirements. Advantages of the firmThe procedure for obtaining public deposits is fairly simple No restrictive covenants are involved No security is offered against public deposits. Hence the margin able assets of the firm are conserved. The post tax cost is fairly reasonable.
5) Inter- Corporate Deposits

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A deposit made by one company with another, normally for a period up to six months, is referred to as an inter corporate deposit. Mainly three types of deposits-
I. Call DepositsA call deposit is withdrawal by the lender on giving a days notice the lender has to wait for
at least three days the percentage of interest rate is 12.
II. Three-Months DepositsThese deposits are taken by borrowers to tide over a short-term cash inadequacy that may because by one or more of the following factors- disruption in production, excessive imports of raw material, tax payment delay in collection, dividend payment, and unplanned capital expenditure.
III. Six- Months DepositsNormally, lending companies do not extend deposits beyond this time frame such deposits. Usually madden with first-class borrowers.
6) Short-Term loans from Financial Institutions

The life Insurance Corporation of India, General Insurance Corporation of India, and Unit Trust of India, provide short term loans to manufacturing companies with an excellent track record.
7) Rights Debentures for Working Capital

Public limited companies can issue rights debentures to their share holders with the object of augmenting the long term resources of the company for working capital requirements.
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Computation of Working Capital Components:1) Computation of Current Assets Components 2) Computation of Current Liabilities Components
1) Computation of Current Assets Components
Raw Materials Inventory:Budgeted Production X Cost of Raw Material X Average Inventory \ Holding Period
(In units)
(Per unit)
(Months/days)
12 Months / 365 days
Work in process Inventory:Budgeted Production X Estimated WIP Cost X Average time span of WIP Inventory
(In units)
(Per unit)
(Months/days)
Finished Goods Inventory :Budgeted Production X Cost of goods produced X Finished Goods holding period B.D, C.O.E. SEVAGRAM, MBA 30 Page
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(In units)
(Per unit)
(Months/days)
Debtors:Budgeted credits Sales X Avg. debt collection period Cost of sales per unit X
(In units)
excluding Depreciation 12 Months / 365 days
(Month /days)
Cash and Bank Balance:Now firm has maintained minimum desired cash and bank balance to computation of working capital.
2) Computation of Current Liabilities Components
Trade Creditor:Budgeted Yearly Production X Raw Material Cost X Credit Period allowed by Creditors
(In units)
(Per unit)
(Months/days)
Direct Wages:Budgeted Yearly Production X Direct Labour Cost X Avg. Time lag in Payment of wages
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(In units)
(Per unit)
(Months/days)
12 Months / 365 day
Overheads:Budgeted Yearly Production X Overhead Cost X Avg.
Time lag in Payment of Overhead
(In units)
(Per unit)
(Months/days)

Working Capital Management plays a vital role in area of financial management of an enterprises it is concerned with the problems that arise in attempting to manage the current assets, and current liabilities. The current assets refer to those assets which in the ordinary course of business can be, will be converted into cash within one year. The current liabilities are those liabilities which are intended, at their inception to be paid in the ordinary course of business, within a year. The key of Working Capital Management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety each of the current assets must be managed efficiently in order to maintain the liquidity of the firm.
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Working Capital Trends and Liquidity Analysis:1. Working Capital Trends An Introduction 2. Calculate of working capital 3. Size of working capital 4. Current assets Trends 5. Current liabilities Trends 6. Working capital Turnover Ratio 7. Liquidity Analysis 8. Current Ratio 9. Quick Ratio
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Working Capital Trends and Liquidity Analysis
1. Working Capital Trends: An Introduction

In working capital analysis the direction of change over a period of time is of crucial importance. Working capital is one of the important fields of management. It is therefore very essential for the analyst to make a study about the trend and direction of the working capital. The working capital trend analysis represents a picture of variation in current assets, current liabilities and its effect on the working capital position.
In the words of S.P.Gupta: The term trends is very commonly used in day-to-day conversation. Trends, also called secular or long term trend, is the basic tendency of population, sales, income, current assets and current liabilities etc., to grow or decline over a period of time
According to R.C.Gulezian, The trend is defined as a smooth irreversible movement in the series. It can be increasing or decreasing. Pointing out the factors responsible for secular trend, D.N.Elhance observes: Secular trend is the effect of such factors, which are more or less constant for a long time or which changes very gradually or slowly. Such factors are changes in population or tastes and habits of people etc. However, it depends on the nature of data, whether it can be regarded as long-term or short-term. It is also not necessary that the rise and fall continue in the same direction throughout a very long period of time.
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Emphasizing the importance of analysis of working capital trends, Man Mohan and GoyalS have pointed out that, Analysis of working capitals trends provides a base to judge whether the practice and prevailing policy of the management with regard to working capital is good enough or an improvement is to be made in managing the working capital funds. Further, any one trend by itself is not very information and, therefore comparison with illustrated their idea in these words: An upward trend for inventories, bills
Receivables and sundry debtors coupled with downward trends of sales, accompanied by a marked increase in plant investment especially if the increase in plant investment by incurring fixed interest obligation
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2. Calculate of working capital :Statement of Working Capital

(2005-06 to 2008-09) Rs in Particular A. Current Assets -Inventories -Receivable -Cash Bank -Loan Advance Total A B. &
&
Current
liabilities
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Interpretation of current Assets :Interpretation Current Liabilities 3. Size of working capital :Working Capital Indices
Rs. in lakhs. Particular Working Capital A-B Indices
Working Capital Ratio :A. Liquidity Analysis

A sound liquid position is of primary concern to management from the point of view of meeting current liabilities as and when they mature as well as for answering continuity of operations. Thus liquidity is the base of continuous business operations. The important of adequate liquidity in the sense of the ability of a firm to meet current or short-term obligations when they become due for payment can hardly be stressed. over
In fact liquidity and profitability is required for efficient financial
management. The liquidity ratios measure the ability of a firm to meet its short-term obligations and reflect the short-term financial strength of a firm.
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I. Current Ratio
The most widely used measure of liquid position of a firm is the current ratio. This ratio is also known as the ratio of current assets to current liabilities or working capital ratio. The current ratio is computed by dividing current assets by current liabilities. Current assets include cash and these assets, which can be converted into cash within a year, such as marketable securities, debtors and inventories etc. The current ratio gives the analyst a general picture of the adequacy of the working capital of a company and of the companys ability to meet its day-to-day payment obligations. It likewise, measures the margin of safety provided for paying current debts in the event of a reduction in the value of current assets. The current ratio can be computer as follows:
Current Assets Current ratio = -----------------------Current Liabilities
A relatively high value of the current ratio is considered as an indication that the firm is liquid and has the ability to pay its bills. On the other hand, a relatively low value of the current ratio is considered as an indication that the firm will find difficulty in paying its bills. As a conventional rule a current ratio of 2:1 or more is considered to be satisfactory.
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Current Ratio
Rs. in lakhs. Particular Current Assets Current Liabilities Current Ratio
II. Quick Ratio

The quick ratio is another widely used device for judging the short-term debts repaying ability of the business in the near future. The ratio is designed to show the amount of cash available for meeting immediate payment. The quick ratio is the ratio between quick assets and quick liabilities and it is calculated by dividing the quick assets by the quick liabilities.
The formula for calculating this ratio is as follows-
Quick Assets Inventory Quick Ratio = ------------------------------Quick Liabilities
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The term quick assets refer to current assets, which can be converted into, cash immediately or at a short notice without diminution of value. It includes cash and bank balance, marketable securities and debtors. Generally a quick ratio of 1to1 is considered to represent to slowly recover satisfactory current financial position. When it is not it implies that the quick assets do not cover current liabilities, and therefore steps should be taken for additional cash. The fundamental object of calculating this ratio is to enable the finance officer to ascertain as to what would happen if the current creditors pressed for immediate payment.
Quick Ratio
Rs.in lakhs Particular A. Quick Assets -Receivable -Cash Bank -Loan & Advance Total A B.Quick liabilities Total B Quick Ratio (A-B)
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3. Working Capital Turnover Ratio

This ratio establishes a relationship between net sales and working capital this ratio is to determine the efficiency with which the working capital is utilized.
Net Sales WCT Ratio = -------------------------Net Working Capital
Rs. in lakhs. Particular Net Sales Net Working Capital WCT Ratio
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Interpretation:-
Receivable Management
Introduction:The receivables represent an important component of the current assets of the firm. The amount of investment in accounts receivable for most firms. The amount of investment in accounts receivable for most firms also represents a very substantial portion of current assets. According to I.M.Pandey:Trade credit is the most
prominent force of the modern business. It is considered as an essential marketing tool, acting as a bridge for the movement of goods from production and distribution stages to customers finally.
The interval period between the date of sale and the date of receipt of payment has to be financed out of working capital funds. Thus, trade debtors represent investment. As substantial amount are tied-up in trade debtors or receivables, it needs careful analysis and proper management.
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Meaning of Receivables:Emerson as has defined the term receivables: when goods or services are sold under an arrangement permitting the customers to pay for them at a letter date, the amount due from the customer is recorded receivable. This is an asset account, representing claim to future payment of cash from the customer.
Objectives of Receivables Management:The basic objective of receivables management is to maximize the value of the firm by achieving a tradeoff between liquidity and profitability. In fact, the firm should manage its credit in such a way that sales are expanded to an extent to which risk remains within an acceptable limit. Thus, to achieve the objective to maximizing the vale, the firm should manage its credit:
(i) (ii) (iii)
To obtain optimum volume of sales. To control the cost of credit and keep it at minimum. To maintain investment in debtors at optimum level.
The purpose of credit management is not sales maximization.
But efficient and
effective credit management does help to expand sales and can prove to be an effective credit management does help to expand sales and can improve to be an effective tool of marketing, thus, the objective of receivables management is to promote sales and profits until that pint is reached where the return on investment in further funding of receivables is less than the cost of funds raised to finance that additional credit.
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Size of Receivables:The size of receivables is closely linked with a firms trade terms, which includes the period of credit, the rate of discount and collection policies etc. But the most
important factor in determining the volume of receivables is the level of a firms credit sales. With an increase in the size of sales, it may decide to bring about a proportionate increase in the magnitude of receivables.
Size of Receivables
Rs. in lakhs. Particular Receivable Indices
Receivables Turnover Ratio:The accounts receivables turnover ratio shows the relationship between net sales and average accounts receivables of a company. It is calculated as follows-
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Net Sales Receivables Turnover Ratio = -----------------------------Average Receivables
Net sales consist of gross sales minus returns, if any, from customers. Average receivables are the simple average of receivables at the beginning and at the end of the year. The receivables, without corresponding increase the total current assets, may imply decrease in the volume of investment in other components of current assets.
Receivables Turnover Ratio Rs.In lakhs

Particular Net Sales Average Receivable Receivable Turnover ratio
2011
Receivable Turnover ratio
Interpretation:A high ratio is indicative of shorter time lag between cash sales and cash collection. A low ratio shows that debts are being collected rapidly. The objective if the accounts receivables turnover ratio is to judge how old the accounts and to know how fast cash will high from collections.
Average Collection Period:The average collection period ratio measures the quality of debtors since it indicated the rapidity or slowness of their collectibles. According to P.L.Ercites: The average collection period is a significant measure of the collection period the better the quality of receivables (Management since a short collection period means that the firms Customer are prompt payer. On the hand, high collection period indicates a slow collection process and low liquidity of trade credit. It is calculate as under-
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365 Average Collection Period = --------------------------Receivables Turnover
This ratio is calculated by dividing the days in a year by the receivables turnover. Donald E. Miller points out: The collection period ratio thus provides the analyst with two significant measurements of receivables.
Collection period
Particular Average collection period
Cash Management
Introduction:Cash is an important component of current assets and is most essential for business operations. Cash is the basic input needed to keep the business running on a
continuous basis. It is also the ultimate output expected to be realized by selling the service and product manufactured by the firm. Cash is both the beginning and the end of the working capital cycle i.e. cash, inventories, receivables and cash. While the management of all the firms should strive hard to secure larger cash at the management of all the firms should strive hard to secure larger cash at the end of the working capital cycle than what had been invested into; it at its beginning, they must also make it a best possible minimum. B.D, C.O.E. SEVAGRAM, MBA 47 Page
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This is required to optimally utilize the cash and to avoid the situation of idea cash balances. Its effective management is the key determinanant of sufficient working capital. In the key determinant of sufficient working capital. In the words of P.V.Kulkarni Cash in the business enterprise may be compared to the blood of the human body; blood gives life and strength profits and solvency to the business organization. Hence, every enterprise has to hold to hold necessary cash for is existence. In a business firm, ultimately, a transaction results in either an inflow or outflow of cash. In an efficient managed business, static cash balance situation generally does not exist. A firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms manufacturing operation; while excessive cash will simply remain idle. Therefore, for its smooth running and maximum in a business is of paramount importance.
Motive For Holding Cash:

J.M.Keynes a prominent economist pointed out three primary motives for holding cash (i) The transaction motive; (ii) The precautionary motive; and (iii) The speculative motive; these motive are explained as under-
(i) The Transaction Motive:The transaction motive requires a firm to hold cash to conduct its business in the ordinary course. The firm needs cash primarily to make payment for purchases, wages, operating expenses, taxes etc. A firm needs a pool of cash because its receipts and payment are not perfectly synchronized. A pool of cash is also known as transaction balance.
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(ii) The Precautionary Motive:The precaution motive is to hold cash to meet any contingencies in future. It provides a cushion or buffer to withstand some unexpected emergency. The precautionary amount of cash depends upon the predictability of cash flows. If cash flows can be predicted with accuracy, less cash will be maintained against an emergency. On other hand, unpredicted the cash flows, the larger the need for such balances.
(iii) The Speculative Motive:The financial manager would like to take advantage of unexploited opportunities. Some reserve of money is always essential to enable the firm to take advantage of cash when such opportunities arise.
Functions of Cash Management:Efficient cash management receipts and disbursement, and an efficient control and review mechanism. The firm should evolve strategies the following four function of cash management:-
a) Cash Planning :Cash planning can help anticipate future cash flows and needs of firm and reduces the possibility of idle cash balances and cash deficits. Cash planning may be done on daily, weekly or monthly basis.
b) Managing the Cash Flows :The twin objective sin managing the cash flows are: cash flows and cash outflows. The inflow of cash should be accelerated while, as far as possible, the out flows of the cash should be decelerated.
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c) Determining the Optimum Cash Balance :One of the primary responsibilities of the financial manager is to maintain a sound liquidity position of the firm so that dues may be settled in time. The test of liquidity is really the availability of cash to meet the firms obligations when they become due.
d) Investing Idle Cash :

The idle cash or precautionary cash should be properly and profitably invested. The firm should decide about the division of cash balances between marketable securities and securities and bank deposits.
Cash Turnover Ratio:A study of cash to sales ratio will provide a deep insight into the cash balance held in undertaking. This is an important ratio of controlling cash. Cash to sales ratio is calculated by dividing the figures of total sales by figures of total cash available at the end of the year. Greater cash to sales ratio indicates the effective and better utilization of cash resources.
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Cash Position Ratio:It may be defined as the ratio of cash to current liabilities or the ratio of liquid funds to the company to control cash balances. In order to analyze the level of liquid funds in relation to current liabilities. In this context, liquid funds include cash and bank balance and marketable securities.
Cash Position Ratio

Rs. in lakhs. Particular Cash Bank Current liabilities Ratio % &
Ratio %
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Interpretation:.
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Data Analysis and Interpretation of the Ratio Analysis

I. Operating Expenses Ratio Analysis Operating Exp. Ratio = Administrative Exp. + Selling Exp.*100 OER = --------------------------------------------------------Net sales
Five Years Operating Expenses Ratio Rs. in lakhs. Year Administrative Exp. Selling Exp. Total Net sales Ratio
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Ratio
Interpretation:-
II. Administrative Expenses Ratio Analysis :Administrative Expenses Ratio = Administrative Expenses * 100 AER = ------------------------------------------Net Sales
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Five Years Administrative Expenses Ratio Rs.in lakhs

Year AD. Exp. Net Sales Ratio Interpretation:-
III. Finance Expenses Ratio Analysis Finance Expenses Ratio = Finance expenses*100 FER = ------------------------------Net Sales
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Five Years Finance Expenses Ratio Rs. in Lakhs. Year Finance Exp. Net Sales Ratio
Interpretation:-
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Conclusion and Suggestion
Management Oriented:As the system has developed keeping unique management needs in his mind an alignment with the corporate aims and objective.
Management Directed:As the manager spend good deal of time in system development far from being a onetime effort. This continuity is maintained in the review and redesign.
Integration:This was observed in all major systems studied, here the mutual input and output needs of the interlocking systems are identified and build as part of the design.
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Flexibility and Easy of Use:-
FUTURE:-
Suggestions
NOTE:-
Bibliography
Management- A Conceptual Approach By Dheeraj Sharma, Himalaya Publications House. Working Capital Management-Theory& Practiceby Dr.P.Periasamy, Himalaya Publishing House. Organization and Finance Of Industries IN India By C.B.Mamoria, kitab Mahal Allahabad. Finical Management PE-II Study Material the ICAI. Management Account-Principles of Practice By M.A. Sahat vikas publishing house
Annual report for 2004-05 to 2008-09.
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INDEX

Chapter 1 2 3 4 5 6 7 8 9 10 TITAL Page No.

WORKING CAPITAL MANAGEMENT

Chapter-1 Introduction to organization:a. Company profile b. Executive summary c. Product profile

Chapter-5 Working capital trend and liquidity analysis:-

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

Introduction to organization:MAHALAXMI TMT.PVT,LTD CORPORATE HISTORY

CORPORATE GOAL OBJECTIVES

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

Date of incorporation Date of commencement of production Factory office and registered

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

PRODUCTION AND CAPACITY

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

Performance for Last Five Years

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

Objectives & Scope of the study:Objectives of the Study

4. To examine the pattern of management of working capital and to analyze the

5. To analyze receivable management in company. 6. To examine cash management practice in company.

Scope of the Study

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

B.D, C.O.E. SEVAGRAM, MBA

WORKING CAPITAL MANAGEMENT

Methodology of the Study:RESEARCH & METHODOLOGY TOOLS OF ANALYS

Area of the study

Analysis and Interpretation of Data for the Study

WORKING CAPITAL MANAGEMENT

Hypothesis:The study is based on the following hypothesis:-

Organization maintain the reco

Utility of the Study

B.D, C.O.E. SEVAGRAM, MBA 11

WORKING CAPITAL MANAGEMENT

c) To Students and Researchers

Limitations of the Study

WORKING CAPITAL MANAGEMENT

Working Capital Management:THEROTICAL FRAMEWORK

12. 13. 14.

Introduction of Working Capital Meaning and Definition Concept of Working Capital

B.D, C.O.E. SEVAGRAM, MBA 13

WORKING CAPITAL MANAGEMENT

15. 16. 17. 18. 19. 20. 21. 22. 23.

B.D, C.O.E. SEVAGRAM, MBA 14

WORKING CAPITAL MANAGEMENT

Meaning & Definition

B.D, C.O.E. SEVAGRAM, MBA 15

WORKING CAPITAL MANAGEMENT

Concepts of Working Capital

a) Gross Concepts b) Net concepts

Working Capital = Current Assets Current Liabilities

B.D, C.O.E. SEVAGRAM, MBA 16

WORKING CAPITAL MANAGEMENT

Importance of Working Capital

Working capital is significance because of

B.D, C.O.E. SEVAGRAM, MBA 17

WORKING CAPITAL MANAGEMENT