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Chapter -1

INTRODUCTION

CHAPTER 1 INDUSTRY & COMPANY PROFILE


India is an emerging country with huge potential. The domestic economy is now growing at around 9-10% per annum and Indias importance in global terms is being reinforced by rapidly rising exports and domestic consumption. At a time when numbers of a slowdown and overheating in the Indian economy have started gaining momentum, the Indian rupee sprang a surprise by pushing the GDP figure past the trillion-dollar (42,00,000 crore) mark. The automotive industry is at the center of Indias new global dynamic. The domestic market expanding rapidly as incomes rise and consumer credit becomes more widely available. Manufacturers product lines are being continually expanded, as is the local automotive manufacturing base. Expectation are high that India can develop as a global hub for vehicle manufacturers and as an outsourcing center that offers the global automotive industry solution high up the automotive value chain. India eyes 25 million automotive jobs. India's GDP is set to double over the next decade In percentage terms, the automotive industry's contribution should also double. In dollar terms, the sector's contribution is set to quadruple to some $145bn With the worlds second largest and fastest-growing population, there is no denying Indias potential in both economic and population terms and the effect it will have on the auto industry in the years to come. The country is already off to a good start, with a welldeveloped components industry and a production level of 1 million four-wheeled vehicles a year, plus a further 5 million two- and three-wheelers. HISTORICAL BACKGROUND In India there are 100 people per vehicle, while this figure is 82 in China. It is expected that Indian automobile industry will achieve mass motorization status by 2014

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India has come a long way. During its early stages the auto industry was overlooked by the then Government and the policies were also not favorable. The liberalization policy and various tax reliefs by the Govt. of India in recent years has made remarkable impacts on Indian Automobile Industry. Indian auto industry, which is currently growing at the pace of around 18 % per annum, has become a hot destination for global auto players like Volvo, General Motors and Tata. A well developed transportation system plays a key role in the development of an economy, and India is no exception to it. With the growth of transportation system the Automotive Industry of India is also growing at rapid speed, occupying an important place on the 'canvas' of Indian economy. Today Indian automotive industry is fully capable of producing various kinds of vehicles and can be divided into 03 broad categories: Cars, two-wheelers and heavy vehicles. The first automobile in India rolled in 1897 in Bombay. India is being recognized as potential emerging auto market. Foreign players are adding to their investments in Indian auto industry. Within two-wheelers, vehicles contribute 80% of the segment size Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%). Tata Motors dominates over 60% of the Indian commercial vehicle market. 2/3rd of auto component production is consumed directly by OEMs. India is the largest three-wheeler market in the world. India is the largest two-wheeler manufacturer in the world. India is the second largest tractor manufacturer in the world. India is the fifth largest commercial vehicle manufacturer in the world. The number one global vehicle manufacturer is in India. India is the fourth largest car market in Asia - recently crossed the 1 million mark.

COMPANY PROFILE MARUTI SUZUKI

Maruti Suzuki India Limited is a publicly listed automaker in India. It is a leading fourwheeler automobile manufacturer in South Asia. Suzuki Motor Corporation of Japan holds a majority stake in the company. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India and on 17 September 2007, Maruti Udyog was renamed Maruti Suzuki India Limited.

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an initial public offering of 25% of the company in June 2003. As of May 10, 2007, Govt. of India sold its complete share to Indian financial institutions. With this, Govt. of India no longer has stake in Maruti Udyog. Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983 with the Maruti 800, based on the Suzuki Alto kei car which at the time was the only modern car available in India, its' only competitors- the Hindustan Ambassador and Premier Padmini were both around 25 years out of date at that point. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold

in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki and manufactured in Pakistan and other South Asian countries. The company annually exports more than 50,000 cars and has an extremely large domestic market in India selling over 730,000 cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts and Maruti Swift is the largest selling in A2 segment. Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is commonly used to refer to this compact car model. Till recently the term "Maruti", in popular Indian culture, was associated to the Maruti 800 model. Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been the leader of the Indian car market for over two decades. Its manufacturing facilities are located at two facilities Gurgaon and Manesar south of New Delhi. Marutis Gurgaon facility has an installed capacity of 350,000 units per annum. The Manesar facilities, launched in February 2007 comprise a vehicle assembly plant with a capacity of 100,000 units per year and a Diesel Engine plant with an annual capacity of 100,000 engines and transmissions. Manesar and Gurgaon facilities have a combined capability to produce over 700,000 units annually. More than half the cars sold in India are Maruti cars. The company is a subsidiary of Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The rest is owned by the public and financial institutions. It is listed on the Bombay Stock Exchange and National Stock Exchange in India. During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In all, over six million Maruti cars are on Indian roads since the first car was rolled out on December 14, 1983.

Maruti Suzuki offers 13 models, Maruti 800, Omni, Alto, Versa, Ritz, Gypsy, A Star, Wagon R, Zen Estilo, Ritz, Swift, Swift Dzire, SX4, Grand Vitara. Swift, Swift dzire, A star and SX4 are maufactured in Manesar, Grand Vitara imported from Japan as a completely built unit (CBU), remaining all models are manufactured in Maruti Suzuki's Gurgaon Plant. Suzuki Motor Corporation, the parent company, is a global leader in mini and compact cars for three decades. Suzukis technical superiority lies in its ability to pack power and performance into a compact, lightweight engine that is clean and fuel efficient. Maruti is clearly an employer of choice for automotive engineers and young managers from across the country. Nearly 75,000 people are employed directly by Maruti and its partners.

SWOT Analysis
STRENGTHS 1. Bigger name in the market. 2. Established distribution & after sales network. 3. Understanding of the Indian market. 4. Ability to design product with differentiating features. 5. Brand Image. 6. Experience & Knowledge how in technology. 7. Trust of People. 8. Maruti Udyog Ltd. is the market leader for more than decade. 9. Has a great dealership chain in the market. 10. Better after sales service. 11. Low maintenance cost of vehicle. WEAKNESSES 1. Lack of experience in foreign market. 2. Comparatively new to diesel cars.

3. People resistant to upper segment models. 4. Heavy import tariff on fully built imported models. 5. Exports are not that good 6. Lesser diesel models in the market compare to others. 7. Global image is not that big. OPPURTUNITIES 1. Increased purchasing power of Indian middle class family. 2. Government subsidies. 3. Tax Benefits. 4. Prospective buyers from two wheeler segment. 5. Great opportunities to go global with success of Swift and SX4 allover. 6. Introduction of more diesel models. The diesel car segment is growing. 7. Opportunity to grow bigger by entering into bigger car markets. 8. Already a market leader so great opportunity to be the king of market in every stage of industry. THREATS 1. Foreign companies entering market; so a bigger threat from MNCs. 2. Competition from second hand cars & TATA Nano. 3. Threats from Chinese manufactures. 4. To the market share, as many big names are coming in the industry 5. There is hardly any diesel models 6. Rs. 1 lakh Rs. 1.5 lakh car

DEALER PROFILE LIBRA AUTO CAR CO. LTD.


When Auto Trade in Northern region is mentioned, first word that strikes the memory lane is Libra Auto Car. The word Libra is entrusting Faith and Lasting relationship among the customers for past 8 years under the vision and leadership of Mr. Pavitpal Singh. These 8 years of sweat and toil has made the Libra Auto Car Co. Ltd. scale the heights and set new standards of customer care and majestic setup across Punjab. Libra Auto Car Co. Ltd. well equipped workshop, sophisticated denting and painting shop and dealer of genuine Maruti Parts, the company has maintain a satisfactory Clientele. ITS PEOPLE & CUSTOMER PHILOSOPHY The Anthem Relationship Through Service itself depicts that team of 20 employees is devoted to the common goal of delivering unmatched service to its customers & hence binds the customer in lifelong relationship. Libra Auto Car keeps on undergoing far reaching changes in many less visible areas. It has adopted total professional approach right from recruiting, training to promotions. The focus on employees satisfaction has made Libra Auto Car to be better equipped to respond to faster changing customer demands. At this point of time Libra Auto Car is well positioned for further growth. VISION & GUIDING PRINCIPLE OF LIBRA AUTO CAR Empowering people to be our partner We are in service industry. We want to empower our front line sales / service people, so that they have all the powers to ensure customer satisfaction. Profit and Profit Centre Concept In order to ensure top line and bottom line focus we have profit and profit centre concept for each division, branch and department. Value & Ethical practice We believe in paying our taxes while improving profitability by excellent performance. Treat People with Dignity

Its our guiding principle to treat people both within the organization and outside with dignity.

Challenging status quo and remain aggressive As we are in auto retail trade, our constant endeavors to challenge the status quo and explore way to increase our sales. We are open to fresh ideas and innovative business practices. QUALITY

We want to Aim for perfection Settle for excellence This is the Core of business practices EARN ASPECTS AND ADMIRATION Earn Aspects and Admiration from our customers, principal, partners , society and Govt. EFFICIENCY AND DISCIPLINE In day to day working of the organization.

Chapter 2

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT


WORKING CAPITAL
Capital required for a business can be classified under two main categories via, 1) 2) Fixed Capital Working Capital

Every business needs funds for two purposes for its establishment and to carry out its day- to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that part of firms capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purposes for the purchase of raw material, payment of wages and other day to- day expenses etc. These funds are known as working capital. In simple words, working capital refers to that part of the firms capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.

CONCEPT OF WORKING CAPITAL


There are two concepts of working capital: 1. 2. Gross working capital Net working capital The gross working capital is the capital invested in the total current assets of the enterprises current assets are those assets which can convert in to cash within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS 1) Cash in hand and cash at bank

2) 3) 4) 5) a. b. c. d. 6. 7. 8. 9.

Bills receivables Sundry debtors Short term loans and advances. Inventories of stock as: Raw material Work in process Stores and spares Finished goods Temporary investment of surplus funds. Prepaid expenses Accrued incomes. Marketable securities. In a narrow sense, the term working capital refers to the net working. Net working capital is the excess of current assets over current liability, or, say: NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES. Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business. CONSTITUENTS OF CURRENT LIABILITIES

1. 2. 3. 4. 5. 6. 7.

Accrued or outstanding expenses. Short term loans, advances and deposits. Dividends payable. Bank overdraft. Bills payable. Sundry creditors. Provisions for taxation, if it does not amount to appropriation of profits.

The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits. The gross concept is sometimes preferred to the concept of working capital for the following reasons: 1. 2. 3. 4. It enables the enterprise to provide correct amount of working capital at correct time. Every management is more interested in total current assets with which it has to operate then the source from where it is made available. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital. This concept is also useful in determining the rate of return on investments in working capital. The net working capital concept, however, is also important for following reasons: It is qualitative concept, which indicates the firms ability to meet to its operating expenses and short-term liabilities. IT indicates the margin of protection available to the short term creditors. It is an indicator of the financial soundness of enterprises. It suggests the need of financing a part of working capital requirement out of the permanent sources of funds.

OBJECTIVES OF WORKING CAPITAL


The need for working capital cannot be over emphasized. Every business needs some amount of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in the sales realization of cash. There is a time gap in purchase of raw materials and production ; production and sales ; sales and realization of cash. Thus, working capital is needed for the following purposes : To meet the current obligations of Working Capital.

To manage current assets in such a way that managerial return on investment in those assets is not less than cost of capital employed to finance current assets. To improve the return on capital employed in the business. For the purchase of raw materials, components and spares. To pay wages and salaries. To incur day to day expenses and overhead costs such as fuel , power , and office expenses.

KINDS OF WORKING CAPITAL

Kinds Kindsof ofWorking WorkingCapital Capital On Onthe thebasis basis of concept of concept On Onthe thebasis basis of Time of Time

Gross Gross Working Working Capital Capital

Net Net Working Working Capital Capital

Permanent or Permanent or Fixed Working Fixed Working Capital Capital

Temporary or Temporary or Variable Working Variable Working Capital Capital

Regular Regular Working Working Capital Capital

Reserve Reserve Working Working Capital Capital

Seasonal Seasonal Working Working Capital Capital

Special Special Working Working Capital Capital

(I) (a)

On the basis of concept:- On the basis of concept , Working Capital has two types which are given as below :Gross Working Capital:- In the broad sense, the term working capital refers to the gross working capital and represents the amount of funds invested in current accounts. Thus , the gross working capital is invested in the total current assets of the enterprise.

(b)

Net Working Capital:current liabilities. Net working capital =

In the narrow sense , the term working capital refers to

the net working capital. Net working capital is excess of current assets over

Current Assets

Current Liabilities

(II)

On the basis of Time:- On the basis of time it has two types of working capital which are discussed as follow :-

(a)

Permanent or Fixed Working Capital:Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of raw material, work- in-process, finished goods and cash balance. This minimum level of current assets is called permanent or fixed working capital as this part of working is permanently blocked in current assets. As the business grow the requirements of working capital also increases due to increase in current assets.

(b)

Temporary or Variable Working Capital:Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called seasonal working capital.

Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research, etc. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business. It can be shown below:

FINANCING OF WORKING CAPITAL


The working capital requirement of the firm can be classified as: Premanent or Fixed working capital requirement Temporary or Variable Working Capital requirement

The various sources of financing Working capital

are as shown below :-

Sources Of Working Capital

Permanent 1. Shares 2. Debentures 3. Public Deposits 4. Ploughing Back of profits 5. Loans from Financial Institutions

Temporary 1. Commercial Banks 2. Indigeneous Bankers 3. Installment Credit 4. Installment Credit 5. Advances 6. Accounts Receivable 7. Accrued Income 8. Commercial Papers 9. Trade Creditors

PROBLEMS DUE TO INADEQUACY OF WORKING CAPITAL


These are discussed as follow:o A concern which has inadequate working capital cannot pay its Short-term liabilities in time. Thus, it will lose its reputation and shall not be able to get good credit facilities. o o o o o It cannot buy its requirement in bulk and cannot avail of discounts, etc. It becomes difficult for the firm to exploit favourable market conditions and undertake profitable projects due to lack of working capital. The firm cannot pay day-to-day expenses of its operations and its creats inefficiencies , increases costs and reduces the profits of the business. It becomes impossible to utilise efficiently the fixed assets due to non-availability of liquid funds. The rate of return on investments also falls with the shortage of working capital.

Company will not be able to give sufficient or stable dividend to its shareholders.

REASONS FOR INADEQUACY OF WORKING CAPITAL


These are discussed as follow:o Operational losses :- When the cost production and other related cost are more than sales revenue , thus resulting in no cash generation to sustain business on continuous basis. o Expansion of Business :- Expansion of business in another reason for inadequacy of business. During profitability the organization might trading may show their ugly face subsequently. o Extraordinary Losses :- Exceptional losses due to fall in price of finished goods due to Government action are extraordinary losses . It will reduce the current assets or increase in current liabilities. o Credit Policy :- The credit policy of the concern in its dealing with creditors influence considerably the requirement of working capital due to high rate of interest on loans . thus all funds goes to payment of interest on loans. have invested in fixed assets to increase production and sales. As a result, the consequences of over

OPERATING CYCLE
Funds invested in current assets keep revolving fast and are being constantly converted into cash and this cash flows out in exchange for other current assets. Hence, it is also known as revolving or circulating capital. The circular flow concept of working capital is based upon this operating or working cycle of the firm. The cycle starts with the purchase of raw material and other resources and ends with the realization of cash from the sale of finished goods. It involves purchase of raw material and stores, its conversion into stock of finished goods through work-in-progress with progressive increasement of labour and service costs, conversion of finished stock into sales, debtors and receivables ultimately realization of cash and this cycle continuous again from cash to purchase of raw material and so on. It can be shown as below :-

Cash Debtors Sales Operating Cycle Raw Materials Work in Progress

Finished Goods
FACTORS
1.

DETERMINING

THE

WORKING

CAPITAL

REQUIREMENTS
NATURE OF BUSINESS: The requirements of working is very limited in public utility undertakings such as electricity, water supply and railways because they offer cash sale only and supply services not products, and no funds are tied up in inventories and receivables. On the other hand the trading and financial firms requires less investment in fixed assets but have to invest large amt. of working capital along with fixed investment 2. 3. 4. SIZE OF THE BUSINESS: Greater the size of the business, greater is the requirement of working capital. PRODUCTION POLICY: If the policy is to keep production steady by accumulating inventories it will require higher working capital. LENGTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw material and other supplies have to be carried for a longer in the process with progressive increment of labor and service costs before the final product is obtained. So working capital is directly proportional to the length of the manufacturing process.

5. 6.

SEASONALS VARIATIONS: Generally, during the busy season, a firm requires larger working capital than in slack season. WORKING CAPITAL CYCLE: The speed with which the working cycle completes one cycle determines the requirements of working capital. Longer the cycle larger is the requirement of working capital. DEBTORS

CASH

FINISHED

RAW MATERIAL

WORK-IN-

7.

RATE OF STOCK TURNOVER: There is an inverse co-relationship between the question of working capital and the velocity or speed with which the sales are affected. A firm having a high rate of stock turnover wuill needs lower amt. of working capital as compared to a firm having a low rate of turnover.

8. 9.

CREDIT POLICY: A concern that purchases its requirements on credit and sales its product / services on cash requires lesser amt. of working capital and vice-versa. BUSINESS CYCLE: In period of boom, when the business is prosperous, there is need for larger amt. of working capital due to rise in sales, rise in prices, optimistic expansion of business, etc. On the contrary in time of depression, the business contracts, sales decline, difficulties are faced in collection from debtor and the firm may have a large amt. of working capital.

10. 11.

RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall require large amt. of working capital. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning capacity than other due to quality of their products, monopoly conditions, etc. Such firms may generate cash profits from operations and contribute to their working capital. The dividend policy also affects the requirement of working capital. A firm maintaining a

steady high rate of cash dividend irrespective of its profits needs working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend. 12. PRICE LEVEL CHANGES: Changes in the price level also affect the working capital requirements. Generally rise in prices leads to increase in working capital. Others FACTORS: These are: Operating efficiency. Management ability. Irregularities of supply. Import policy. Asset structure. Importance of labor. Banking facilities, etc.

MANAGEMENT OF WORKING CAPITAL


Management of working capital is concerned with the problem that arises in attempting to manage the current assets, current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations are bad for any firm. There should be no shortage of funds and also no working capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its probability, liquidity and structural health of the organization. So working capital management is three dimensional in nature as 1. 2. 3. It concerned with the formulation of policies with regard to profitability, liquidity and risk. It is concerned with the decision about the composition and level of current assets. It is concerned with the decision about the composition and level of current liabilities.

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of devices, such as: 1. 2. 3. Ratio analysis. Fund flow analysis. Budgeting. RATIO ANALYSIS A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis can be employed for measuring short-term liquidity or working capital position of a firm. The following ratios can be calculated for these purposes: 1. 2. 3. 4. 5. 6. 7. 8. 9. Current ratio. Quick ratio Absolute liquid ratio Inventory turnover. Receivables turnover. Payable turnover ratio. Working capital turnover ratio. Working capital leverage Ratio of current liabilities to tangible net worth. FUND FLOW ANALYSIS Fund flow analysis is a technical device designated to the study the source from which additional funds were derived and the use to which these sources were put. The fund flow analysis consists of: a. Preparing schedule of changes of working capital

b.

Statement of sources and application of funds. It is an effective management tool to study the changes in financial position (working capital) business enterprise between beginning and ending of the financial dates. WORKING CAPITAL BUDGET A budget is a financial and / or quantitative expression of business plans and polices to be pursued in the future period time. Working capital budget as a part of the total budgeting process of a business is prepared estimating future long term and short term working capital needs and sources to finance them, and then comparing the budgeted figures with actual performance for calculating the variances, if any, so that corrective actions may be taken in future. He objective working capital budget is to ensure availability of funds as and needed, and to ensure effective utilization of these resources. The successful implementation of working capital budget involves the preparing of separate budget for each element of working capital, such as, cash, inventories and receivables etc.

Chapter 3

REVIEW OF LITERATURE

REVIEW OF LITERATURE
Vishnani et. al. (1995) felt that there is the need to study the role of working capital management policies on profitability of a company. Conventionally, it has been seen that if a company desires to take a greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its sales. If it is interested in improving its liquidity, it increases the level of its working capital. However, this policy is likely to result in a reduction of the sales volume, therefore of profitability. Hence, a company should strike a balance between liquidity and profitability. In this paper an effort has been made to make an empirical study of Indian Consumer Electronics Industry for assessing the impact of working capital policies & practices on profitability during the period 199495 to 2004 05. The impact of working capital policies on profitability has been examined by computing coefficient of correlation and regression analysis between profitability ratio and some key working capital policy indicator ratios. Rafuse (1996) argued that attempts to improve working capital by delaying payment to creditors is counter-productive to individuals and to the economy as a whole. Claims that altering debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit. Proposes that stock reduction generates system-wide financial improvements and other important benefits. Urges those organizations seeking concentrated working capital reduction strategies to focus on stock management strategies based on lean supply-chain techniques. Appuhami (2008) investigated the impact of firms' capital expenditure on their working capital management. The author used the data colleted from listed companies in the Thailand Stock Exchange. The study used Shulman and Cox's (1985) Net Liquidity Balance and Working Capital Requirement as a proxy for working capital measurement and developed multiple regression models. The empirical research found that firms' capital expenditure has a significant impact on working capital management. The study also found that the firms' operating cash flow, which was recognized as a control variable, has a significant relationship with working capital management.

Stephen Bush (2008) suggested that commercial borrowers sometimes overlook shortterm options for commercial loans. In the current recessionary conditions, it is wise to explore all working capital management options. This article will shed some light on shorter-term choices such as short-term commercial mortgages and business cash advances. Due to misunderstandings about long-term commercial financing, short-term commercial loans are often not considered properly. Although long-term commercial real estate financing options are often appropriate, there are practical short-term business financing choices that will be more workable and profitable for commercial borrowers. The most critical short-term commercial financing techniques typically include shortterm merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital funding approaches are frequently a source of confusion for business owners. Allensius (2009) reviewed that there will usually be only a few business financing sources that are regularly successful at executing the credit card financing and processing. There are key difficulties to avoid with a working capital advance, and selecting an effective funding source is essential to an appropriate business cash advance program. A long-term commercial mortgage is appropriate for many businesses that own commercial property. Commercial property should be financed with an appropriate combination of short-term and long-term funding. It is wise to consider long-term business financing of up to 30 years when a longer-term commercial real estate loan is feasible. Thachappilly (2009 ) stated that working capital is the cash needed to carry on operations during the cash conversion cycle, i.e. the days from paying for raw materials to collecting cash from customers.Raw materials and operating supplies must be bought and stored to ensure uninterrupted production. Wages, salaries, utility charges and other incidentals must be paid for converting the materials into finished products. Customers must be allowed a credit period that is standard in the business. Only at the end of this cycle does cash flow in again.

Chapter 4

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Research refers to the process of collecting and classifying the information in such a manner that it serves the purpose for which it has been collected.

SCOPE OF THE STUDY


The scope of the study ranges from exploration of working and organizational structure of the organization, understudy of different functions of Personnel Department broader profile of the organization, the financial and non-financial benefits provided the company to its workers, to suggest and recommend improvement in the existing functions of Personnel Deptt. To collect the information a particular path is followed. The path to collect information is called research methodology. Research Methodology is the most investigated approach. Research methodology is the method by which the research has been carried out. It refers to as a process of defining a problem and ending up with a solution to the management. To do the research the data has to be collected and data can be of 2 types-primary and secondary, each of which is having its own importance in a way or other. Types of data are: Primary data Secondary data

Primary data refers to data originally collected in the process of investigation. It is also known as first hand information. As Regards To the Project Report It has always been difficult to gather first hand information. But efforts were made so as to collect the first hand information which was required for the purpose of conducting financial analysis of a company. The primary data is based on discussion with Mr. Beant

Singh (Finance Manager) and other concerned officers working in Libra Auto Car Co. Ltd.. Secondary data is that type of data which is already in existence. Such type of data is available in form of published and unpublished reports. Data collected by some other person is called secondary data.

AS REGARDS TO THE PROJECT


The data used in the analysis of a company is taken from the company's website and other medium also. Some concerned authorities were also contacted for the data. Most of the data was collected by way of personal interaction with officials and some part of the information was also taken from the other related websites The secondary data is collected from various reports and companys records and studying the literature of the company. The data is prepared on monthly basis. These reports edited from time to time.

Chapter 5

OBJECTIVES OF THE STUDY

OBJECTIVES OF THE STUDY


To analyse cash position of the Libra Auto Car Co. Ltd. To determine the amount of working capital requirement and to calculate various ratios related to working capital. To know the margin of protection available to long-term creditors in excess of current assets over current liabilities. To ascertain the method of estimating financing management of working capital in the company. To analyse the means of financing the working capital requirement in the company.

Chapter 6

ANALYSIS & FINDINGS

ANALYSIS & FINDINGS


WORKING CAPITAL MANAGEMENT IN LIBRA AUTO CAR CO. LTD. Working Capital management refers to excess of current assets over current liabilities. Working Capital Management is an integral part of corporate management which is concerned with the problems that arise in all attempting management of current assets, current liabilities, and the inter-relationship that exist between them. In other words, it is planning and controlling of financial resources used by the company to meet its financial requirements. In Libra Auto Car Co. Ltd., the management of working capital is done by Accounts & Finance Department . This department is liable to provide quantitative information to finance department which is provided by production department and store department etc.

REQUIREMENT OF WORKING CAPITAL IN LIBRA AUTO CAR CO. LTD. Working Capital Requirement are estimated with the help of following points :A. OPERATING STATEMENT:- This is a statement of period of profit and loss account. From this operating results of the company are analysed and following information is known : B. Gross Sales Net Sales All direct and indirect expenses Estimated profit and loss during the year COMPARATIVE STATEMENT OF CURRENT ASSETS, LOANS AND ADVANCES :- This is to satisfy the bank that the company has estimated its working capital requirement according to proper rules. On the basis of these records, the projection for future years are made. C. COMPARATIVE STATEMENT OF CURRENT LIABILITIES AND PROVISIONS :- In this statement the current liabilities and provisions for previous year

and current year is given. On the basis of this statement, the finance department gets to know the requirement of working capital. D. BALANCE SHEET :- The main purpose of preparing a balance sheet is to satisfy the banks about the financial position of the company, so that they may sanction credit limit to finance the working capital needs of the company. 5.3 WORKING CAPITAL POSITION OF LIBRA AUTO CAR CO. LTD. LUDHIANA DURING THE PERIOD 2009 TO 2012 I. Analysis of Schedule of Changes in Working Capital:- The following text presents the analysis of schedule of changes in working capital for the year ending 2009 to 2012 :1. CURRENT ASSETS = Sundry Debtors + Cash/Bank +Advances To Suppliers + Inventories + Other current Assets A. SUNDRY DEBTORS YEARS 2009 2010 2011 2012 B. CASH & BANK YEARS 2009 2010 2011 2012 AMOUNT 1,564,000 3,531,000 17,500,000 17,500,000 AMOUNT 74,704,000 68,038,000 83,200,000 88,200,000

C. ADVANCES TO SUPPLIERS YEARS 2009 2010 AMOUNT 17,17,000 11,33,000

2011 2012 D. INVENTORIES YEARS 2009 2010 2011 2012 E. OTHERS YEARS 2009 2010 2011 2012 2. CURRENT LIABILITIES F. SUNDRY CREDITORS YEARS 2009 2010 2011 2012

17,00,000 17,00,000

AMOUNT 42,941,000 34,955,000 35,900,000 36,300,000

AMOUNT 61,492,000 82,471,000 1,12,068,000 1,43,433,000

AMOUNT 2,97,02,000 2,80,43,000 3,25,00,000 3,50,00,000

G. ADVANCES FROM CUSTOMERS YEARS 2009 2010 2011 2012 H. Short Term Borrowings YEARS AMOUNT AMOUNT 40,000 5,09,000 5,000 5,000

2009 2010 2011 2012

1,24,47,000 61,67,000 3,00,00,000 3,00,00,000

I. OTHER CURRENT LIABILITIES YEARS 2009 2010 2011 2012 AMOUNT 2,85,20,000 2,74,79,000 2,96,73,000 3,23,56,000

TOTAL CURRENT ASSETS YEARS AMOUNT 2009 2010 2011 2012 18,24,18,000 19,01,28,000 25,03,68,000 28,71,00,000

TOTAL CURRENT LIABILITIES YEARS 2009 2010 2011 2012 AMOUNT 7,07,09,000 6,21,98,000 9,21,78,000 9,73,61,000

Working Capital = Current Assets Current Liabilities YEARS 2009 2010 2011 2012 INTERPRETATION The above table shows that the working capital position of Libra Auto Car Co. Ltd. is positive in all the years. Further, it is increasing yearly during the period of 2009 to 2012. It shows that the short-term financial position of Libra Auto Car Co. Ltd. is highly solid because all the current liabilities are paid from the current assets. The above information also shows that the major position of current assets consists of inventories as well as sundry debtors. Therefore, it is suggested that Libra Auto Car Co. Ltd. should make an effective policy for the last movement of debtors as well as inventory. It can be shown as below :Working Capital Position
20000000 15000000 10000000 50000000 0 2009 2010
Working Capital Position

AMOUNT 11,17,09,000 12,79,30,000 15,81,90,000 18,97,39,000

l t p a C g n i k r o W

II.

ANALYSIS OR TEST OF LIQUIDITY

OF

POSITION

2011 2012 SHORT TERM FINANCIAL Years

The short term creditors of a company such as suppliers of goods of credit and commercial banks short-term loans are primarily interested to know the ability of a firm

to meet its obligations in time. The short term obligations of a firm can be met in time only when it is having sufficient liquid assets. So to with the confidence of investors, creditors, the smooth functioning of the firm and the efficient use of fixed assets the liquid position of the firm must be strong. But a very high degree of liquidity of the firm being tied up in current assets. Therefore, it is important proper balance in regard to the liquidity of the firm. Two types of ratios can be calculated for measuring short-term financial position or short-term solvency position of the firm. 1. 2. A) Liquidity ratios. Current assets movements ratios. LIQUIDITY RATIOS Liquidity ratio is calculated to know the short term solvency of the concern. These ratios shows whether a firm can pay its current liability in time or not. These ratios includes the following: 1. 2. 3. CURRENT RATIO QUICK RATIO ABSOLUTE LIQUID RATIO

1.

CURRENT RATIO Current Ratio, also known as working capital ratio is a measure of general liquidity and its most widely used to make the analysis of short-term financial position or liquidity of a firm. It is defined as the relation between current assets and current liabilities. A ratio equal or near to the rule of thumb of 2:1 i.e. current assets double the current liabilities is considered to be satisfactory.Thus, Current Assets Current Ratio = ---------------------------------Current Liabilities CALCULATION OF CURRENT RATIO Particulars Current Assets ( Rs. ) Current Liabilities ( Rs. ) Ratio Interpretation:As we know that ideal current ratio for any firm is 2:1.. The current ratio of company is more than the ideal ratio. This depicts that companys liquidity position is sound. Its current assets are more than its current liabilities. It can be shown as below: 2009 18,24,18000 7,07,09,000 2.58:1 2010 19,01,28,00 0 6,21,98,000 3.05:1 2011 25,03,68,000 9,21,78,000 2.72:1 2012 28,71,00,000 9,73,61,000 2.95:1

Current Ratio
3.1 3 2.9 2.8 2.7 2.6 2.5 2.4 2.3 2009 2010 2011 YEARS 2012

RATIO

o i a R t n e r u C

2.

QUICK RATIO Quick ratio or liquid ratio is ascertained by comparing the liquid assets to current liabilities. Liquid assets are those assets which are immediately convertible into cash without much loss. A comparison of the current ratio may not have satisfactory liquidity position if it has low paying debtors. The ideal quick ratio is 1:1. Current Assets Inventory Prepaid exp. Quick Ratio = ------------------------------------------------------------Current Liabilities Where Quick Assets are: 1) 2) 3) Marketable Securities Cash in hand and Cash at bank. Debtors.

CALCULATION OF QUICK RATIO Particulars Quick or liquid Assets ( Rs. ) Current Liabilities ( Rs. ) Ratio Interpretation : A quick ratio is an indication that the firm is liquid and has the ability to meet its current liabilities in time. The ideal quick ratio is 1:1. Companys quick ratio is more than ideal ratio. This shows company has no liquidity problem. It can be shown as below: 2009 13,94,77,00 0 7,07,09,000 1.97:1 2010 15,51,73,00 0 6,21,98,000 2.49:1 2011 21,44,68,000 9,21,78,000 2.33:1 2012 25,08,00,000 9,73,61,000 2.58:1

Quick Ratio
3 2.5 2 1.5 1 0.5 0

RATIO

o t a r k c i u Q

2009

2010

2011 2012 YEARS

3.

ABSOLUTE LIQUID RATIO Although receivables, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. So absolute liquid ratio should be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets. The good ratio is 0.5:1. Absolute Liquid Assets includes: Cash + Marketable Securities Absolute Liquid Ratio = ----------------------------------------Current Liabilities ABSOLUTE LIQUID ASSETS=CASH & BANK BALANCES. CALCULATION OF ABSOLUTE LIQUID RATIO Particulars Absolute liquid Assets ( Rs. ) Current Liabilities ( Rs. ) Ratio Interpretation : These ratio shows that company carries a small amount of cash. But there is nothing to be worried about the lack of cash because company has reserve, borrowing power & long term investment. In India, firms have credit limits sanctioned from banks and can easily draw cash. It can be shown as below:2009 1,564,000 7,07,09,000 0.02:1 2010 3,531,000 6,21,98,000 0.06:1 2011 17,500,000 9,21,78,000 0.19:1 2012 17,500,000 9,73,61,000 0.18:1

Absolute Liquid Ratio


0.2 0.15 0.1 0.05 0
RATIO

2009

2010

2011 2012 YEARS

a r d q i L e t u l o s b A

B)

CURRENT ASSETS MOVEMENT RATIOS Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly affects the volume of sales. The better the management of assets, large is the amount of sales and profits. Current assets movement ratios measure the efficiency with which a firm manages its resources. These ratios are called turnover ratios because they indicate the speed with which assets are converted or turned over into sales. Depending upon the purpose, a number of turnover ratios can be calculated. These are : 1. Inventory Turnover Ratio 2. Debtors Turnover Ratio 3. Creditors Turnover Ratio 4. Working Capital Turnover Ratio The current ratio and quick ratio give misleading results if current assets include high amount of debtors due to slow credit collections and moreover if the assets include high amount of slow moving inventories. As both the ratios ignore the movement of current assets, it is important to calculate the turnover ratio.

1.

INVENTORY TURNOVER OR STOCK TURNOVER RATIO : This ratio indicates the effectiveness and efficiency of inventory management. Inventory turnover ratio measures the speed with which the stock is converted into sales. Usually a high inventory ratio indicates an efficient management of inventory because more frequently the stocks are sold ; the lesser amount of money is required to finance the inventory. Where as low inventory turnover ratio indicates the inefficient management of inventory. A low inventory turnover implies over investment in inventories, dull business, poor quality of goods, stock accumulations and slow moving goods and low profits as compared to total investment.

Cost of Goods Sold Inventory Turnover Ratio = -------------------------------Average Inventory

Average Stock = Opening Stock + Closing Stock 2 CALCULATION OF INVENTORY TURNOVER RATIO Particulars 2009 Cost of Goods 36,93,35,000 Sold ( Rs. ) Average 4,29,41,000 Inventory ( Rs. ) Ratio 8.60 Interpretation : This ratio shows how rapidly the inventory is turning into receivable through sales. The company has high inventory turnover ratio in all the years .This shows that the companys inventory management technique is efficient. It can be shown as below:2010 38,75,27,000 2011 41,70,05,000 2012 44,68,74,000

3,89,48,000

3,54,27,500

3,61,00,000

9.95

11.77

12.38

2.

INVENTORY CONVERSION PERIOD: INVENTORY CONVERSION PERIOD = 365 (net working days)

365 Days Inventory Conversion Period = --------------------------------Inventory Turnover Ratio Calculation of Inventory Conversion Period: Particulars Days Inventory Turnover ratio Inventory Conversion Period Interpretation: Inventory conversion period shows that how many days inventories takes to convert from raw material to finished goods. In the company inventory conversion period is decreasing. This shows the efficiency of management to convert the inventory into cash. 2009 365 8.60 42 days 2010 365 9.95 37 days 2011 365 11.77 31 days 2012 365 12.38 29 days

3.

DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to increase its sales and a liberal credit policy may result in tying up substantial funds of a firm in the form of trade debtors. Trade debtors are expected to be converted into cash within a short period and are included in current assets. So liquidity position of a concern also depends upon the quality of trade debtors. Two types of ratio can be calculated to evaluate the quality of debtors. a) b) Debtors Turnover Ratio Average Collection Period

Net Sales Debtor Turnover Ratio = -----------------------------------------Avg. Trade Debtors

Debtors velocity indicates the number of times the debtors are turned over during a year. Generally higher the value of debtors turnover ratio the more efficient is the management of debtors/sales or more liquid are the debtors. Whereas a low debtors turnover ratio indicates poor management of debtors/sales and less liquid debtors. This ratio should be compared with ratios of other firms doing the same business and a trend may be found to make a better interpretation of the ratio. Average debtors = Opening debtors + Closing debtors 2 Particulars Sales ( Rs. ) Average Trade Debtors ( Rs. ) Ratio 2009 44,08,53,000 7,47,04,000 5.90 2010 46,09,92,000 7,13,71,000 6.46 2011 50,00,71,000 7,56,19,000 6.61 2012 54,49,19,000 8,57,00,000 6.36

Interpretation: This ratio indicates the speed with which debtors are being converted or turnover into sales. The higher the values of debtors turnover, the more efficient is the management of credit. This ratio is increasing year by year except the estimated ratio for the 2011. Otherwise the company utilizing its debtors efficiency.

4.

AVERAGE COLLECTION PERIOD : The average collection period ratio represents the average number of days for which a firm has to wait before its receivables are converted into cash. It measures the quality of debtors. Generally, shorter the average collection period the better is the quality of debtors as a short collection period implies quick payment by debtors and vice-versa. 365 Days Average Collection Period = --------------------------------Debtor Turnover Ratio

Calculation of Average Collection Period

Particulars Days Debtor Turnover ratio Average Collection Period

2009 365 5.90 62 days

2010 365 6.46 57 days

2011 365 6.61 55 days

2012 365 6.36 57 days

Interpretation: The average collection period measures the quality of debtors and it helps in analyzing the efficiency of collection efforts. It also helps to analysis the credit policy adopted by company. Average Collection period has been decrease from 62 days in 2009 to 57 days in 2010 and then in 2011 to 55 days.

5.

WORKING CAPITAL TURNOVER RATIO : Working capital turnover ratio indicates the velocity of utilization of net working capital. This ratio indicates the number of times the working capital is turned over in the course of the year. This ratio measures the efficiency with which the working capital is used by the firm. A higher ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover is not a good situation for any firm.

Cost of goods sold Working Capital Turnover Ratio = -------------------------------Net Working Capital

Or Sales Working Capital Turnover Ratio = -------------------------------Net Working Capital

Particulars Sales (Rs.) W. Cap. (Rs.) Ratio

2009 44,08,53,00 0 11,17,09,00 0 3.95

2010 46,09,92,00 0 12,79,30,00 0 3.60

2011 50,00,71,000 15,81,90,000 3.16

2012 54,49,19,000 18,97,39,000 2.87

Interpretation:

This ratio indicates how much net working capital requires for sales. In 2012, the reciprocal of this ratio (1/2.87 = .348) shows that for sales of Rs. 1 the company requires 35 paisa as working capital. Thus this ratio is helpful to forecast the working capital requirement on the basis of sale. It can be shown as below:-

III. FUND FLOW ANALYSIS


Fund flow analysis is a technical device designated to the study the source from which additional funds were derived and the use to which these sources were put. The fund flow analysis consists of: a. b. Preparing schedule of changes of working capital Statement of sources and application of funds. It is an effective management tool to study the changes in financial position (working capital) business enterprise between beginning and ending of the financial dates.

SCHEDULE OF CHANGES IN WORKING CAPITAL FUND FLOW STATEMENT Particulars Current Assets Cash Sundry Debtors Stock Advances To Suppliers Others Total Current Assets Current Liabilities Sundry Creditors Advances From Customers Short Term borrowings Others Total Current Liabilities Working Capital (C.A.-C.L.) Increase in Working Capital 1279.30 1279.30 319.26 319.26 162.21 162.21 297.02 0.40 124.47 285.20 707.09 1117.09 280.43 5.09 61.67 274.79 621.98 1279.30 16.59 4.69 62.80 10.41 31/03/2009 (Rs.in lacs) 15.64 747.04 429.41 17.17 614.92 1824.18 31/03/2010 (Rs.in lacs) 35.31 680.38 349.55 11.33 824.71 1901.28 Increase (Rs.in lacs) 19.67 66.66 79.86 5.84 209.79 Decrease (Rs.in lacs)

rupees SOURCES Fund from operation (in lacs) 582.77 APPLICATIONS Repayment of

rupees (in lacs) 61.92

Issue of Debentures

0.00

unsecured loans Decrease in Deffered Tax Liability Purchase of Fixed Assets Purchase of NonCurrent Assets Partners withdrawls Increase in Working Capital

0.72 341.19 4.42 12.31 162.21 582.77

582.77

STATEMENT OF FUND FROM OPERATION

Particulars Balance of P/L A/c at the end of the year Add: Depreciation already deducted from net profit being a non-fund item Funds generated by operations during the year

Rupees (in lacs) 294.30 288.47

582.77

Chapter 7

LIMITATIONS

LIMITATIONS OF THE STUDY


In an attempt to make this project aesthetic and reliable every possible aspect of the topic was kept in mind. Nevertheless, despite this function constraints were at play during the formulation of this project. The main limitations of this study are given as follow: Being a private concern, the officials were hesitant to provide certain information, especially about their financial structure. Despite the best efforts, unintentional exclusion of few cannot be eliminated though all necessary steps were taken to avoid the same. Lack of time on the part of few officials of Libra Auto Car Co. Ltd. also restricted the scope of research. The area of research was limited at Libra Auto Car Co. Ltd. because of lack of time period of the training.

Chapter 8

SUGGESTIONS

SUGGESTIONS
Suggestions can be used by the firm for the betterment of the firm after study and analysis of project report on study and analysis of Working Capital. I would like recommend: In context, it is suggested here that the current assets must be effectively utilized in order to increase the sales level. It is suggested that the company should spend more amount on research and development to improve production which will ultimately improve quality. It is suggested that the need for financing a part of the working capital requirements out of permanent sources of funds. Company should raise funds through short term sources for short term requirements of funds, which comparatively economical as compare to long term funds. Company should take control on debtors collection period which is major part of current assets. Company has to control cash balance because cash is non-earning assets and increasing cost of funds.

Chapter 9

CONCLUSION

CONCLUSION
The working capital position of Libra Auto Car Co. Ltd. is quite satisfactory. It has positive trend in the past four years. This means the firm is paying its current liabilities timely out of its available current assets. It shows good liquidity position. Positive working capital indicates that the company has the ability of payments of short term liabilities. Working Capital increased because of increment in the current assets is more than increase in the current liabilities. For financing the working capital requirement the company is merely dependent on the banks. However, the shares, ploughing back profits are also used for financing the fixed working capital whenever required. The working capital position of the company is sufficient, which enables them to make prompt payments and helps in creating and maintaining goodwill. The adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production.In short, we can say that the working capital management of the concern is satisfactory. Overall thee company has good liquidity position and sufficient funds to repayment of its liabilities. Company has accepted conservative financial policy and thus maintaining more current assets balance. Company is increasing sales volume per year which supported the company to sustain.

REFERENCES

REFERENCES
Appuhami, B., Ranjith, A. (2008), The impact of firms capital expenditure on working capital management. Journal of International Management Review, VOL. 4, NO. 1, PP:821 Chandra P. (2000)Financial Management- Tata McGraw Hill. Gupta S., SHARMA B.D.,(2007) Financial Management- Kalyani Publishers Gupta S.K. & SHARMA, R. K. (2006) Financial Management Kalyani Publishers Pandey I.M. (2006) Financial Management Vikas Publishing House Private Limited. Ninth Edition 2006 Mahashwari S.N. (2004) Financial Management Sultan Chand Publications. Rafuse, M.E. (1996), Working capital management: an urgent need to refocus, Management Decision, Vol. 34, Issue 2. Vishnani S., Shah B.K.,(2007) Impact of Working Capital Management Policies on Corporate PerformanceAn Empirical Study, Global Business Review December, Vol. 8 no. 2 267-281 Wachowitz Vanhorne Education http://stevebush.articlealley.com/how-receivables-financing-can-improve-workingcapital-management-1444585.html Annual report of Libra Auto Car Co. Ltd. (2002) Fundamentals of Financial Management, Pearson

II II

APPENDIX

III

BALANCE SHEET Particulars Current Assets Cash Sundry Debtors Stock Advances To Suppliers Others Total Current Assets Current Liabilities Sundry Creditors Advances From Customers Short Term borrowings Others Total Current Liabilities Working Capital (C.A.-C.L.) Increase in Working Capital 1279.30 1279.30 319.26 319.26 IV 162.21 162.21 297.02 0.40 124.47 285.20 707.09 1117.09 280.43 5.09 61.67 274.79 621.98 1279.30 16.59 4.69 62.80 10.41 31/03/2009 (Rs.in lacs) 15.64 747.04 429.41 17.17 614.92 1824.18 31/03/2010 (Rs.in lacs) 35.31 680.38 349.55 11.33 824.71 1901.28 Increase (Rs.in lacs) 19.67 66.66 79.86 5.84 209.79 Decrease (Rs.in lacs)

SUMMER TRAINING REPORT ON WORKING CAPITAL MANAGEMENT OF LIBRA AUTO CAR CO. LTD.
SUBMITTED TO PUNJAB TECHNICAL UNIVERSITY, JALANDHAR

IN PARTIAL FULFILLMENT FOR THE REQUIREMENT FOR THE AWARD OF DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION

SUBMITTED BY SANDEEP SINGH UNIVERSITY ROLL NO. 1107613

DEPARTMENT OF BUSINESS MANAGEMENT GULZAR GROUP OF INSUTITUTES LIBRA, KHANNA SESSION 2013

ACKNOWLEDGEMENT
When you give yourself, you receive more than you give. The concepts learnt in academics are of no importance until they are practically applied. In todays world it is imperative for the students of any Graduate course to keep pace with the changing technology innovations taking place across the world. In alignment with this, I prepared a Summer Report after my of BBA. I would like to thank Mr. Beant Singh for giving me product knowledge and their valuable support throughout the project. It was very enriching and enlightening experience to work under their valuable guidance. Without their support this project would not have been possible. I would like to thank Mr. Vikram Sharma (Principal of GGI) for giving me an

opportunity. A feeling of elation insists me on expressing my heartiest thanks, deep sense of gratitude and indebtness to Mrs. Aman Chhabra for her judicious, impeccable and sagacious guidance, constant and vital encouragement, perceptive enthusiasm, unstilted interest and determined efforts even in her demanding schedule. I would also like to thank my parents and friends those who have given their support & contribution, whenever required. Finally and most important I would like to thank to faculty of GGI to provide me with such an opportunity that has enhanced my learning horizon Last but not least, I thank the almighty, and may he stand with all of us.

Sandeep Singh

PREFACE
The project has been completed by collecting the primary data by interviewing the various industrialist of Ludhiana. Secondary data was also used as per the availability from different sources. In all the study was to find out at which geographical area the potential customer may exist and also to study the consumer behavior regarding automobile sectors. During the project, I learnt the procedures and various other aspects of Working Capital Management of Libra Auto Car Co. Ltd. by applying theoretical knowledge and concepts to the best. Needless to say, errors and omissions are bound to occur. Last but not the least, I am grateful to all those who happened to be a part of the successful completion of this Project and my mind and heart for going hand in hand!

TABLE OF CONTENTS
CHAPTER NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. CHAPTER NAME Introduction Working Capital Management Review of Literature Research Methodology Objectives Analysis and Findings Limitations Suggestions Conclusion References Annexure PAGE NO. 19 10 23 24 26 27 29 30 31 32 51 52 53 54 55 56 57 I II III IV