“Working Capital Management of

Bharti AXA”
“Bharti AXA Life Insurance Company Limited”

Submitted In Partial Fulfillment of the
Requirements for the Award of the Two Years
Full Time Course in
PGDM 2013-15
NSHM Business School

124, B.L.SAHA ROAD, KOLKATA – 700 053

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“Working Capital Management of Bharti AXA”
“Bharti AXA Life Insurance Company Limited”

J uly TO 31
August 2014


Mr. Piyush Mohan Shukla
(Business Manager – Bharti Axa)

Mr. Chaman Gupta
(Agency Development Manager- Bharti Axa)

Dr. Udayan Kumar Basu
(Faculty Mentor of the I nstitute)

Submitted By

Nitil Sharma
PGDM 2013-15
NSHM Business School, Kolkata

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I, hereby declare that the research project report titled “Working Capital Management of
Bharti AXA “ is my own original research work and this report has not been submitted to
any University/Institute for the award of any professional degree or diploma.

PGDM (13-15)
NSHM Business School
Roll No. PGDM13010
Reg. No. 131364002

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I wish to express my appreciation to all those with whom I have worked or interacted
and whose thoughts and insights helped me in increasing my knowledge and
understanding my project. It is said, the most important single word is we and the zero
important single word is I, This is true even in today‟s modern era. It is absolutely
impossible for a single individual to complete the assigned job without help and
assistance from others.

I hereby would like to thank all the members of the office and it is my great pleasure
to acknowledge sincere gratitude towards Mr. Piyush Mohan Shukla (Business
Manager of the Organization) at Bharti AXA Life Insurance Company Limited,
Kolkata who have been extremely helpful and cooperative throughout the process for
the Completion of the project work.

I would also like to owe my sincere gratitude to my project guide Prof. Udayan
Kumar Basu for helping me in this Project work.

Finally, I am thankful to my entire family members for their great support and
encouragement to complete my project in due time and correctly.

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Executive Summary

The analysis of “Bharti AXA Life Insurance” is taken from different sectors.
For creating strong relationship and for a success full business every insurance
company required financial planner.

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Sl. No. Particulars Page No.

Chapter 1 I ntroduction 17 - 29

Chapter 2 I ndustry Overview 17 - 29

Chapter 3 Company Profile 17- 29

Chapter 4 Scope of Study 17- 29

Chapter 5 Research Methodology 30- 32

Chapter 8 Conclusions 33

Chapter 9 Suggestions & Recommendation 33

Chapter 6 Data Analysis, Results & I nterpretation 34

Chapter 7 Observations & Findings 34-41

Chapter 10 Bibliography 42

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Insurance Industry in India

With 36 crore policies, India's life insurance sector is the biggest in the world. The sector
consists of 52 insurance companies, of which 24 are in life insurance business and 28 in non-
life. The life insurance industry in the country is projected to increase at a compound annual
growth rate (CAGR) of 12-15 per cent in the next five years. The industry plans to hike
penetration levels to five per cent by 2020, and has the potential to top the US$ 1 trillion
mark over the next seven years.
The optimistic outlook is helped to a large degree by the Government of India's efforts to
strengthen the sector. The Union Cabinet in July approved a proposal to relax foreign direct
investment (FDI) limit in the domestic insurance sector to 49 per cent from 26 per cent,
signaling the government's intent to draw capital and investment into the sector.

The total market size of the insurance sector in India was US$ 66.4 billion in FY 13. It is
projected to touch US$ 350-400 billion by 2020.
India was ranked 10
among 147 countries in the life insurance business in FY 13, with a
share of 2.03 per cent. The life insurance premium market expanded at a CAGR of 16.6 per
cent from US$ 11.5 billion to US$ 53.3 billion during FY 03-13. The non-life insurance
premium market also grew at a CAGR of 15.4 per cent in the same period, from US$ 3.1
billion to US$ 13.1 billion.
Digital@Insurance-20X By 2020, by Boston Consulting Group (BCG) and Google India
forecasts that insurance sales from online channels will grow 20 times from present day sales
by 2020, and overall internet influenced sales will touch Rs 300,000-400,000 crore (US$
49.63-66.18 billion).
Investment corpus in India's pension sector is projected to cross US$ 1 trillion by 2025,
following the passage of the Pension Fund Regulatory and Development Authority (PFRDA)
Act 2013, as per a joint report by CII-EY on Pensions Business in India.

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Bharti AXA Life
Bharti AXA Life is a life Insurance player that was started in 2006. It brings together strong
financial expertise of the Paris-headquartered AXA Group and Bharti Enterprises - one of
India's leading business groups with interests in telecom, agricultural business, financial
services, and retail. The joint venture has a 74% stake from Bharti and 26% stake from AXA
.The company launched national operations in December 2006. Today, Bharti AXA Life has
a national footprint of distributors trained to provide quality financial advice and insurance
solutions to the large Indian customer base.
Bharti AXA Life offers a range of innovative products and services that cater to specific
insurance and wealth management needs of customers

Bharti Enterprises
Bharti Enterprises is one of India‟s leading business groups with interests in telecom, agri
business, financial services, retail and manufacturing. Bharti has been a pioneering force in
the Indian telecom sector with many firsts and innovations to its credit. Bharti Airtel Limited,
the group's flagship company, is a leading global telecommunications company with
operations in 20 countries across Asia and Africa. The Company ranks amongst the top four
mobile service providers globally in terms of subscribers.
Other business ventures of the group include Bharti Softbank - a JV between Bharti
Enterprises and Softbank Corp - for mobile internet. Beetel Teletech, a group company, is
India‟s leading manufacturer and distributor of telecom and allied products. The group has a
JV –FieldFresh Foods – with Del Monte Pacific Ltd, to offer fresh and processed fruits and
vegetables in the domestic as well as international markets. Bharti has JVs with AXA, world
leader in financial protection and wealth management, for Life Insurance and General
Insurance. The group has presence in the retail sector through Bharti Retail while operates
multi brand retail stores in various formats under the 'easyday' brand.

AXA Group
AXA Group is a worldwide leader in Financial Protection. AXA‟s operations are diverse
geographically, with major operations in Europe, North America and the Asia/Pacific area. In
2010, total revenues amounted to Euro 91 billion and total revenues underlying earnings to
Euro 3.9 billion.

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Core Attitudes
These are the three attitudes that clients most expect from an insurance and financial services
company in exchange for their vote of confidence. These three attitudes stood out from the
others in the consumer research we conducted across markets, regardless of their level of

They are at the heart of our actions and our commitments to clients.

Vision and Values

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 To achieve a market position among the top 5 in India through a multi-distribution,
multi-product platform
 To adapt AXA's best practice blueprints as a sound platform for efficient and profitable
 To leverage Bharti's local knowledge, infrastructure and customer base
 To deliver high levels of shareholder return
 To build long term value with our business partners by enhancing the proposition to their
 To be the employer of choice to attract and retain the best talent in India
 To be recognised as being close and qualified by our customers.

Strategic Differentiators
 A strong parentage of AXA and Bharti, both having long term commitment to the Indian
Insurance market supporting a strong capital solvency
o AXA, a global leader is world's No.1 insurer brand with strong presence in 57
o Bharti is one of India‟s leading and trusted business group with strong distribution
 Global scale of AXA provides cost effective and speedy re-use of systems, products and
business capability resulting in local competitive advantage
o Product: Wealth management, protection and retirement solutions that meets the
needs of customers across segments
o Service: Best-in-class service guarantee at various points of customer life cycle
o Training: Robust learning and development architecture for employees and
distributors focused on superior service delivery and transparent dealing with
o Footprint: Comprehensive pan-India presence through multi-city, multi-channel
o Digital paradigm: Seamless 'Anywhere' product and service experience for
customers and distributors through various e-initiatives (viz. online products,
servicing portals, tablet-based digital advisor, dematerialized policies)
 Values and culture of both parents AXA and Bharti along with their strong brand ethos
helps in building trust amongst partners and employees

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Sandeep Ghosh is the Chief Executive Officer at Bharti AXA Life Insurance.
He has over 20 years of experience in India and overseas, primarily in
the financial services sector. Prior to joining Bharti AXA Life, he was
with ANZ as the Managing Director, Commercial Banking Head for Asia
Pacific based in Hong Kong. During this time, he played a major role in
building a commercial banking franchise for ANZ in Asia through
organic builds and the integration of businesses acquired from RBS.

Before joining ANZ, Sandeep spearheaded the Commercial Banking for Royal Bank of
Scotland in Asia. He was responsible for Business Banking, SME & Middle Market client
franchises, managing a team of over 1,000 bankers and 40,000 client relationships across 9

Prior to this, he was with Citibank for 9 years during which he held various roles, lastly as
Managing Director for the Global Commercial Bank in India. During his tenure, he led the
India business to become the largest organically built commercial banking franchise within

 Term Insurance
 Bharti AXA Life eProtect
 Bharti AXA Life Elite Secure
 Endowment Plan
 Bharti AXA Life Secure Savings Plan
 Bharti AXA Life Monthly Income + Plan
 Bharti AXA Life Flexi Save Plan
 Health Plan
 Bharti AXA Triple Health Insurance Plan
 Money Back Plans
 Bharti AXA Secure Income Plan
 Bharti AXA Flexi Save Guaranteed Income Plan

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Objectives of the study:
1. To study the efficiency of working capital management of the company
2. To know the progress of working capital in a company
3. To study the efficiency of cash, and receivables management of the company
4. To know the solvency of the company & how the company is managing working
5. The objective of study to analyzed the liquidity position of the company.
6. To study the efficiency of working capital management of the company.
7. To study the efficiency of cash, and receivables management of the company


The data in this project is enabling in secondary in nature. Financial reports, company
records were referred for data analysis. The study has been undertaken by collecting
relevant data from the balance sheet, profit and loss a/c, Annual Report & Audit
Report of the Bharti Axa Life Insurance Company Limited is used financial as tools
for the analyzing and interpretation data.
However primary data is also collected by observation discussing with company
officials. This primary data is used to fill in the gaps while preparing this report and to
know the latest procedures adopted by the company. This has helped to draw
inferences and conclusions.

Sources of data
There are two types of data
 Primary Data
 Secondary Data

Primary Data:-
The primary data are those, which are collected fresh for the first
time and thus happen to be original in character. The primary data collection involves
the collecting of information for the first time by observation, experimentation, and
questionnaire and through interview schedules in the original form by the researcher
himself or his nominees.

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The primary data was collected through discussion with the finance manager using the
interview schedule. This data was obtained to study the latest procedures relating to
working capital management and ratio analysis system followed by the company

Secondary data:-
The secondary data are those, which have been collected by some other and
which have been processed. Generally speaking secondary data are information,
which have been previously collected by some organization to satisfy his own need.
But the department under reference for an entirely different reason is using it.
I also used secondary sources for collecting the data. They are:
 Information from the text sources
 Information form the internet sources
 Information from the materials provided by the concern

 Sampling unit : Financial Statements & Audit Reports
 Sampling Size : Last five years financial statements

 This study deals only with the data made available. Hence the result of this study cannot
judge the business of the firm in general
 The study have been influenced by the limitation of the ratio analysis
 The study extensively uses the data provided is the financial reports of the firm which
may also have their own limited perspective
 The analysis made on the working capital management is for a particular period of time
the current assets and current liabilities will change for an analysis made at any other of

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Working Capital Management refers to management of current assets and current liabilities.
The major thrust of course is on the management of current assets .This is understandable
because current liabilities arise in the context of current assets. Working Capital Management
is a significant fact of financial management. Its importance stems from two reasons:-
8. Investment in current assets represents a substantial portion of total investment.
9. Investment in current assets and the level of current liabilities have to be geared
quickly to change in sales. To be sure, fixed asset investment and long term financing
are responsive to variation in sales. However, this relationship is not as close and
direct as it is in the case of working capital components.
The importance of working capital management is affected in the fact that financial manages
spend a great deal of time in managing current assets and current liabilities. Arranging short
term financing, negotiating favourable credit terms, controlling the movement of cash,
administering the accounts receivable, and monitoring the inventories consume a great deal of
time of financial managers.
The problem of working capital management is one of the “best” utilization of a scarce
Thus the job of efficient working capital management is a formidable one, since it depends
upon several variables such as character of the business, the lengths of the merchandising
cycle, rapidity of turnover, scale of operations, volume and terms of purchase & sales and
seasonal and other variations.


 Growth may be stunted. It may become difficult for the enterprise to undertake
profitable projects due to non-availability of working capital.
 Implementation of operating plans may become difficult and consequently the profit
goals may not be achieved.
 Cash crisis may emerge due to paucity of working funds.
 Optimum capacity utilization of fixed assets may not be achieved due to non
availability of the working capital.
 The business may fail to honour its commitment in time, thereby adversely affecting
its credibility. This situation may lead to business closure.

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 The business may be compelled to buy raw materials on credit and sell finished goods
on cash. In the process it may end up with increasing cost of purchases and reducing
selling prices by offering discounts. Both these situations would affect profitability
 Non-availability of stocks due to non-availability of funds may result in production
 While underassessment of working capital has disastrous implications on business,
over assessment of working capital also has its own dangers

 Excess of working capital may result in unnecessary accumulation of inventories.
 It may lead to offer too liberal credit terms to buyers and very poor recovery system
and cash management.
 It may make management complacent leading to its inefficiency.
 Over-investment in working capital makes capital less productive and may reduce
return on investment. Working capital is very essential for success of a business and,
therefore, needs efficient management and control. Each of the components of the
working capital needs proper management to optimize profit.

The working capital in certain enterprise may be classified into the following kinds.
1. Initial working capital. The capital, which is required at the time of the commencement of
business, is called initial working capital. These are the promotion expenses incurred at the
earliest stage of formation of the enterprise which include the incorporation fees. Attorney's
fees, office expenses and other expenses.
2. Regular working capital. This type of working capital remains always in the enterprise
for the successful operation. It supplies the funds necessary to meet the current working
expenses i.e. for purchasing raw material and supplies, payment of wages, salaries and other
sundry expenses.
3. Fluctuating working capital. This capital is needed to meet the seasonal requirements of
the business. It is used to raise the volume of production by improvement or extension of
machinery. It may be secured from any financial institution which can, of course, be met with
short term capital. It is also called variable working capital.

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4. Reserve margin working capital. It represents the amount utilized at the time of
contingencies. These unpleasant events may occur at any time in the running life of the
business such as inflation, depression, slump, flood, fire, earthquakes, strike, lay off and
unavoidable competition etc. In this case greater amount of capital is required for
maintenance of the business.
Financing Working Capital

Now let us understand the means to finance the working capital. Working capital or current
assets are those assets, which unlike fixed assets change their forms rapidly. Due to this
nature, they need to be financed through short-term funds. Short-term funds are also called
current liabilities. The following are the major sources of raising short-term funds:
I. Supplier’s Credit
At times, business gets raw material on credit from the suppliers. The cost of raw material is
paid after some time, i.e. upon completion of the credit period. Thus, without having an
outflow of cash the business is in a position to use raw material and continue the activities.
The credit given by the suppliers of raw materials is for a short period and is considered
current liabilities. These funds should be used for creating current assets like stock of raw
material, work in process, finished goods, etc.
ii. Bank Loan for Working Capital
This is a major source for raising short-term funds. Banks extend loans to businesses to help
them create necessary current assets so as to achieve the Required business level. The loans
are available for creating the following current Assets:
 Stock of Raw Materials
 Stock of Work in Process
 Stock of Finished Goods
 Debtors

Banks give short-term loans against these assets, keeping some security margin. The
advances given by banks against current assets are short-term in nature and banks have the
right to ask for immediate repayment if they consider doing so. Thus bank loans for creation
of current assets are also current liabilities.

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iii. Promoter’s Fund

It is advisable to finance a portion of current assets from the promoter‟s funds .They are long-
term funds and, therefore do not require immediate repayment. These funds increase the
liquidity of the business.

Management of Inventory
Inventories constitute the most significant part of current assets of a large majority of
companies in India. On an average, inventories are approximately 60 % of current assets in
public limited companies in India. Because of the large size of inventories maintained by
firms maintained by firms, a considerable amount of funds is required to be committed to
them. It is, therefore very necessary to manage inventories efficiently and effectively in order
to avoid unnecessary investments. A firm neglecting a firm the management of inventories
will be jeopardizing its long run profitability and may fail ultimately.
The purpose of inventory management is to ensure availability of materials in
sufficient quantity as and when required and also to minimize investment in inventories at
considerable degrees, without any adverse effect on production and sales, by using simple
inventory planning and control techniques

Needs to hold inventories:-
There are three general motives for holding inventories:-
 Transaction motive emphasizes the need to maintain inventories to facilitate smooth
production and sales operation.
 Precautionary motive necessities holding of inventories to guard against the risk of
unpredictable changes in demand and supply forces and other factors.
 Speculative motive influences the decision to increases or reduce inventory levels to
take advantage of price fluctuations and also for saving in reordering costs and
quantity discounts etc

Objective of Inventory Management:-
The main objectives of inventory management are operational and financial. The operational
mean that means that the materials and spares should be available in sufficient quantity so

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that work is not disrupted for want of inventory. The financial objective means that
investments in inventories should not remain ideal and minimum working capital should be
locked in it.

The following are the objectives of inventory management:-
To ensure continuous supply of materials, spares and finished goods.
 To avoid both over-stocking of inventory.
 To maintain investments in inventories at the optimum level as required by the
operational and sale activities.
 To keep material cost under control so that they contribute in reducing cost of
production and overall purchases.
 To eliminate duplication in ordering or replenishing stocks. This is possible with the
help of centralizing purchases.
 To minimize losses through deterioration, pilferage, wastages and damages.
 To design proper organization for inventory control so that management.
 Clear cut account ability should be fixed at various levels of the organization.
 To ensure perpetual inventory control so that materials shown in stock ledgers should
be actually lying in the stores.
 To ensure right quality of goods at reasonable prices.
 To facilitate furnishing of data for short-term and long term planning and control of

Management of cash
Cash is the important current asset for the operation of the business. Cash is the basic input
needed to keep the business running in the continuous basis, it is also the ultimate output
expected to be realized by selling or product manufactured by the firm.

The firm should keep sufficient cash neither more nor less. Cash shortage will disrupt the
firm‟s manufacturing operations while excessive cash will simply remain ideal without
contributing anything towards the firm‟s profitability. Thus a major function of the financial
manager is to maintain a sound cash position.

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Cash is the money, which a firm can disburse immediately without any restriction. The term
cash includes coins, currency and cheques held by the firm and balances in its bank account.
Sometimes near cash items such as marketing securities or bank term deposits are also
included in cash. Generally when a firm has excess cash, it invests it is marketable securities.
This kind of investment contributes some profit to the firm.

Need to hold cash
The firm‟s need to hold cash may be attributed to the following three motives:-
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 payments for
purchases, wages and salaries, other operating expenses, taxes, dividends, etc.
The Precautionary Motive: A firm is required to keep cash for meeting various
contingencies. Though cash inflows and outflows are anticipated but there may be variations
in these estimates. For example a debtor who pays after 7 days may inform of his inability to
pay, on the other hand a supplier who used to give credit for 15 days may not have the stock
to supply or he may not be in opposition to give credit at present.
Speculative Motive: - The speculative motive relates to the holding of cash for investing in
profit making opportunities as and when they arise. The opportunities to make profit changes.
The firm will hold cash, when it is expected that interest rates will rise and security price will

1) Raw Materials Storage Period=
Average stock of raw materials/Average cost of raw material consumption per day.

2.) W-I-P holding period=
Average w-i-p in inventory/Average cost of production per day

3.) Stores and spares conversion period=
Average stock of Stores and spares/Average consumption per day.

4.) Finished goods conversion period=
Average stock of finished goods/Average cost of goods sold per day.

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5.) Debtors collection period=
Average book debts/Average credit sales per day.

6.) Credit period availed=
Average trade creditors/Average credit purchase per day.

Management of Receivables
A sound managerial control requires proper management of liquid assets and inventory.
These assets are a part of working capital of the business. An efficient use of financial
resources is necessary to avoid financial distress. Receivables result from credit sales.

A concern is required to allow credit sales in order to expand its sales volume. It is not
always possible to sell goods on cash basis only. Sometimes other concern in that line might
have established a practice of selling goods on credit basis. Under these circumstances, it is
not possible to avoid credit sales without adversely affecting sales.
The increase in sales is also essential to increases profitability. After a certain level of sales
the increase in sales will not proportionately increase production costs. The increase in sales
will bring in more profits. Thus, receivables constitute a significant portion of current assets
of a firm. But for investment in receivables, a firm has to insure certain costs. Further, there is
a risk of bad debts also. It is therefore, very necessary to have a proper control and
management of receivables.

Needs to hold cash:
Receivables management is the process of making decisions relating to investment in trade
debtors. Certain investments in receivables are necessary to increase the sales and the profits
of a firm. But at the same time investment in this asset involves cost consideration also.
Further, there is always a risk of bad debts too.
Thus, the objective of receivable management is to take a sound decision as regards
investments in debtors. In the words of Bolton, S.E., the need of receivables management is
“to promote sales and profits until that point is reached where the return of investment in
further funding of receivables is less than the cost of funds raised to finance that additional

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Cash flows in a cycle into, around and out of a business. It is the business's life blood and
every manager's primary task is to help keep it flowing and to use the cash flow to generate
profits. If a business is operating profitably, then it should, in theory, generate cash surpluses.
If it doesn't generate surpluses, the business will eventually run out of cash and expire.

The faster a business expands the more cash it will need for working capital and investment.
The cheapest and best sources of cash exist as working capital right within business. Good
management of working capital will generate cash will help improve profits and reduce risks.
Bear in mind that the cost of providing credit to customers and holding stocks can represent a
substantial proportion of a firm's total profits.

There are two elements in the business cycle that absorb cash - Inventory (stocks and work-
in-progress) and Receivables (debtors owing you money). The main sources of cash are
Payables (your creditors) and Equity and Loans.

Each component of working capital (namely inventory, receivables and payables) has two
dimensions TIME and MONEY. When it comes to managing working capital - TIME IS
MONEY. If you can get money to move faster around the cycle (e.g. collect monies due
from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory
levels relative to sales), the business will generate more cash or it will need to borrow less
money to fund working capital.
As a consequence, you could reduce the cost of bank interest or you'll have additional free
money available to support additional sales growth or investment. Similarly, if you can
negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you
effectively create free finance to help fund future sales.
If you…. Then…….
Collect receivables (debtors) faster You release cash
from the cycle

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Collect receivables (debtors) slower Your receivables
soak up cash
Get better credit (in terms of
duration or amount) from suppliers
You increase your
cash resources
Shift inventory (stocks) faster You free up cash
Move inventory (stocks) slower You consume more

It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant, vehicles etc.
If you do pay cash, remember that this is now longer available for working capital. Therefore,
if cash is tight, consider other ways of financing capital investment - loans, equity, leasing
etc. Similarly, if you pay dividends or increase drawings, these are cash outflows and, like
water flowing downs a plug hole, they remove liquidity from the business.
More businesses fail for lack of cash than for want of profit.

Sources of Additional Working Capital

Sources of additional working capital include the following:
 Existing cash reserves
 Profits (when you secure it as cash!)
 Payables (credit from suppliers)
 New equity or loans from shareholders
 Bank overdrafts or lines of credit
 Long-term loans

If you have insufficient working capital and try to increase sales, you can easily over-stretch
the financial resources of the business.

This is called overtrading. Early warning signs include:

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 Pressure on existing cash
 Exceptional cash generating activities e.g. offering high discounts for early cash
 Bank overdraft exceeds authorized limit
 Seeking greater overdrafts or lines of credit
 Part-paying suppliers or other creditors
 Paying bills in cash to secure additional supplies
 Management pre-occupation with surviving rather than managing

Frequent short-term emergency requests to the bank (to help pay wages, pending receipt of a

Handling Receivables (Debtors)
Cash flow can be significantly enhanced if the amounts owing to a business are collected
faster. Every business needs to know.... who owes them money.... how much is owed.... how
long it is owing.... for what it is owed.
Late payments erode profits and can lead to bad debts.
Slow payment has a crippling effect on business; in particular on small businesses who can
least afford it. If you don't manage debtors, they will begin to manage your business as you
will gradually lose control due to reduced cash flow and, of course, you could experience an
increased incidence of bad debt.
The following measures will help manage your debtors:
1. Have the right mental attitude to the control of credit and make sure that it gets the priority
it deserves.
2. Establish clear credit practices as a matter of company policy.
3. Make sure that these practices are clearly understood by staff, suppliers and customers.
4. Be professional when accepting new accounts, and especially larger ones.
5. Check out each customer thoroughly before you offer credit. Use credit agencies, bank
references, industry sources etc.
6. Establish credit limits for each customer... and stick to them.
7. Continuously review these limits when you suspect tough times are coming or if operating
in a volatile sector.
8. Keep very close to your larger customers.

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9. Invoice promptly and clearly.
10. Consider charging penalties on overdue accounts.
11. Consider accepting credit /debit cards as a payment option.
12. Monitor your debtor balances and ageing schedules, and don't let any debts get too large
or too old.

Recognize that the longer someone owes you, the greater the chance you will never get paid.
If the average age of your debtors is getting longer, or is already very long, you may need to
look for the following possible defects:
 weak credit judgement
 poor collection procedures
 lax enforcement of credit terms
 slow issue of invoices or statements
 errors in invoices or statements
 Customer dissatisfaction.

Debtors due over 90 days (unless within agreed credit terms) should generally demand
immediate attention. Look for the warning signs of a future bad debt. For example.........

 longer credit terms taken with approval, particularly for smaller orders
 use of post-dated checks by debtors who normally settle within agreed terms
 evidence of customers switching to additional suppliers for the same goods
 new customers who are reluctant to give credit references
 Receiving part payments from debtors.

Profits only come from paid sales.

The act of collecting money is one which most people dislike for many reasons and therefore
put on the long finger because they convince themselves there is something more urgent or
important that demands their attention now. There is nothing more important than getting
paid for your product or service. A customer who does not pay is not a customer.
Managing Payables (Creditors)

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Creditors are a vital part of effective cash management and should be managed carefully to
enhance the cash position.
Purchasing initiates cash outflows and an over-zealous purchasing function can create
liquidity problems. Consider the following:
 Who authorizes purchasing in your company - is it tightly managed or spread among a
number of (junior) people?
 Are purchase quantities geared to demand forecasts?
 Do you use order quantities which take account of stock-holding and purchasing
 Do you know the cost to the company of carrying stock?
 Do you have alternative sources of supply? If not, get quotes from major suppliers
and shop around for the best discounts, credit terms, and reduce dependence on a
single supplier.
 How many of your suppliers have a returns policy?
 Are you in a position to pass on cost increases quickly through price increases to your
 If a supplier of goods or services lets you down can you charge back the cost of the
 Can you arrange (with confidence!) to have delivery of supplies staggered or on a
just-in-time basis?

There is an old adage in business that if you can buy well then you can sell well. Management
of your creditors and suppliers is just as important as the management of your debtors. It is
important to look after your creditors - slow payment by you may create ill-feeling and can
signal that your company is inefficient (or in trouble!).

Remember, a good supplier is someone who will work with you to enhance the future
viability and profitability of your company.

The following methods of cash management will help:

Page | 25

A) Methods of accelerating cash inflows:
1) Prompt Payment by customers.
2) Quick conversion of payment into cash.
3) Decentralized collections.
4) Lock box system.
B) Methods of slowing the cash outflows:
1) Paying on last Date.
2) Payment through Draft.
3) Adjust Payroll funds.
4) Centralization of payments.
5) 1nter13ank transfer.
6) Making use of Float.

Page | 26


It was observed that major source of liquidity problem is not the mismatch between current
payments and current receipts from the Comparison of funds flow statements of Bharti Axa
for last four years. This company net working capital is continue fluctuation and to the
present level is not satisfactory. The growth and decline in working capital is a clear
indication that the company is over utilizing its short term resources with inefficiency. In year
2010-11 the company net working capital was ₹ 57102 and after 3 years it increasing and
2013-14 the company net working capital was ₹-343095.
Particular 2010-11 2011-12 2012-13 2013-14
CASH & BANK BALANCE 345110 251531 369838 684420
LOAN & ADVANCES 1020640 1050602 1119324 1123364
TOTAL CURRENT ASSETS 1365750 1302133 1489162 1807784
CURRENT LIABILITIES 1247333 1566047 1385588 2041847
PROVISIONS 61315 62778 84794 109032
TOTAL CURRENT LIABILITIES 1308648 1628825 1470382 2150879
NET WORKING CAPITAL 57102 -326692 18780 -343095
2010-11 2011-12 2012-13 2013-14
Net Working Capital 57102 -326692 18780 -343095
Net Working Capital

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Page | 28

Total assets are basically classified in two parts as fixed assets and current assets.
Fixed assets are in the nature of long term or life time for the organization. Current assets
convert in the cash in the period of one year. It means that current assets are liquid assets or
assets which can convert in to cash within a year.

It was observed that the size of current assets is increasing with increases in the sales. The
excess of current assets is showing positive liquidity position of the firm but it is not always
good because excess current assets then required, it may adversely affects on profitability.
Current assets include some funds investments for which company pay interest.
2010-11 2011-12 2012-13 2013-14
Cash & Bank Balance 345110 251531 369838 684420
Loan & Assets 1020640 1050602 1119324 1123364
Current Assets
2010-11 2011-12 2012-13 2013-14
Net Current Assets

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Current liabilities mean the liabilities which have to pay in current year. It includes sundry
creditor‟s means supplier whose payment is due but not paid yet, thus creditors called as
current liabilities. Current liabilities also include short term loan and provision as tax
provision. Current liabilities also includes bank overdraft. For some current assets like bank
overdrafts and short term loan, company has to pay interest thus the management of current
liabilities has importance

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Current liabilities show continues growth each year because company creates the credit in the
market by good transaction. To get maximum credit from supplier which is profitable to the
company it reduces the need of working capital of firm. As a current liability increase in the
year 2011-12 by ₹320177. It increases the working capital size in the same year. And
company enjoyed over creditors which may include indirect cost of credit terms.

2010-11 2011-12 2012-13 2013-14
Current Liabilities
61315 62778
2010-11 2011-12 2012-13 2013-14
Current Liabilities
Current Liabilities Provisions

Page | 31

The current ratio is calculated by dividing the total current assets by total current liabilities.

Current Assets
Current ratio =
Current Liabilities

Current ratio may be defined as the relationship between current assets and current
liabilities .This ratio also known as working capital ratio is a measure of general liquidity &
most widely used to make the analysis of a short-term financial position or liquidity position
of the firm.

Current assets include cash and those assets, which can be converted into cash within
a year such as marketable securities, debtors and inventories, bills receivable and prepaid
expenses. All obligations maturing within a year are included in current liabilities. Current
liabilities include creditors, Bills payable accrued expenses, short-term bank loans. Income –
tax liabilities and long-term debt maturing in the current year.

1) Cash in hand 1) Outstanding Expenses
2) Cash at Bank 2) Bills payable
3) Marketable Securities 3) Sundry creditors
4) Short term investments 4) Short term advances
5) Bills receivable 5) Income tax payable
6) Sundry Debtors 6) Dividends payable
7) Inventories 7) Bank overdraft
8) Work in process 8) Accrued expenses and
other obligations maturing in current year
9) Prepaid expenses and others which
Can be converted into Cash within a year

As a conventional rule a current ratio of 2:1 or more is considered to be satisfactory it
represents the margin of safety for creditors. An extremely high ratio of current asset to

Page | 32

current liability is an indication of slack management, poor credit management and excessive
inventories for the current requirement.

The current ratios of Bharti AXA from the year 2011 to 2014 are as follows:

2010-11 2011-12 2012-13 2013-14
Curet Assets 1365750 1302133 1489162 1807784
Current Liabilities 1308648 1628825 1470382 2150879
Current Ratio
Curet Assets Current Liabilities
2010-11 2011-12 2012-13 2013-14
Current Ratio
Current Ratio

Page | 33

The current ratio indicates the availability of funds to payment of current liabilities in the
form of current assets. A higher ratio indicates that there were sufficient assets available with
the organization which can be converted in cash, without any reduction in the value.
It is very low 0.79 in 2011-12, but regularly fluctuates. In 2013-14 it comes at 0.84

Acid Test or Quick Ratios: -
This ratio is calculated by dividing Total liquid assets by Total current liabilities.
Quick Assets
Quick Ratio = -------------------------
Current Liabilities
Acid test or quick ratio is a more rigorous test of liquidity than the current ratio. The term
„‟Liquidity” refers to the ability of a firm to pay its short-term obligations as and when they
become due. Quick ratio may be defined as the relationship between quick liquid assets and
current or liquid liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Cash in hand and cash at bank are the most liquid
assets. The other assets, which can be included in the liquid assets, are bills receivable,
sundry debtors, marketable securities and short-term or temporary investments.

Quick Assets are those assets which are converted into cash immediately for example cash,
debtors, bills receivables, and marketable securities.

Generally a quick ratio of 1:1 is considered satisfactory. Usually a high acid test
ratio is an indication that the company is liquid and has the ability to meet its current
liabilities in time and on the other hand, a low quick ratio represents that the company‟s
liquidity position is not good. A company with a high value of quick ratio can suffer from the
shortage of funds if it has slow paying, doubtful and long duration outstanding book debts
(receivable) and it can really prospering with a low value of quick ratio if it is realizing cash
efficiently from inventories and paying its current obligations in time.

Quick ratio of Bharti AXA from the year 2011 to 2014 are as follows:-

Page | 34

Quick ratio indicates that the company has sufficient liquid balance for the payment of
current liabilities. The liquid ratio of 1:1 is supposed to be standard or ideal but here ratio is
more than 1:1 over the period of time, it indicates that the firm maintains the over liquid
assets than actual requirement of such assets.

The total assets turnover ratio is calculated by dividing Net sales by total assets.
Net Sales
Total assets turnover ratio =
Total Assets

The total assets turnover ratio is a significant ratio since it shows the firm‟s ability of
generating sales from all the financial resources committed to the company. As this ratio
increases there is more revenue generated per rupee of total investment in assets.

The total assets turnover ratios of BHARTI AXA from the year 2011 to 2014 are
as follows:
Rs₹ in „000



Working Capital Turnover Ratio = ---------------------

Page | 35

Net working capital = Current Asset – Current Liability

ANALYSIS:- High working capital ratio indicates the capability of the organization to
achieve maximum sales with the minimum investment in working capital.. The
working capital turnover ratio in 2008-09 has gone up from 1.45 in 2007-08 to 1.96 in 2008-
09 due to very high cash and bank balance as on 31
march, 2009 to 2011-12 it is decrease
compare in last year 2010-11 in 1.80 due to they are no loan in bank .


After studying the components of working capital management system of BHARTI AXA. It
is found that the company has a sound and effective policy and its performance is average
even in this bad recession situation company has managed to post good profit. Company is
competing well at the domestic as well as the international level. The company is a matured
one and it has contributed well in the countries growth and development and will also
continue to perform and contribute to the whole nation. In conclusion, we can say that the
companies management is an effective one and knows well the management of finance.

Page | 36

Working capital management is important aspect of financial management. The study
of working capital management of BHARTI AXA has revealed that the Net Working Capital
was decreasing regularly from ₹ 57102000 in 20010-11 and ₹ 18780000 in 2012-13 which
is not as per standard industrial practice.

Page | 37

Recommendation can be use by the firm for the betterment increased of the firm after study
and analysis of project report on study and analysis of working capital. I would like to
1. Company has to take control on cash balance because cash is non-earning assets and
increase cost of funds.
2. Company should raise it fund through short term sources for short term requirement of
3. BHARTI AXA must try to maintain a low working capital by lowering the investment in
current assets as the working capital is too high.
5. The Company must try to increase its profitability ratios by increasing investment which will
improve the capacity of the firm to face adverse economic conditions like low demand, price
competition, etc.

Page | 38

Balance Sheet of Bharti Axa Life I nsurance Company Limited
Particulars As at 31st
As at 31st
As at 31st
As at 31st
Sources of Funds
Shareholders' Funds:

Share Capital 152,53,509 171,86,510 180,72,010 197,82,010
Share Application Money Pending Allotment - - - -
Reserves and Surplus 17,92,943 18,59,942 19,24,442
Credit/(Debit) Fair Value Change Account (Net) 19,418 156 -11,476
Sub-Total 170,65,870 190,46,608 199,84,976 217,64,022
- -
Policyholders' Funds:
Credit/(Debit) Fair Value Change Account (Net) 1,252 -2,219 -26,227
Policy Liabilities 6,74,987 12,14,685 21,31,311
Insurance Reserves - - -
Provision for Linked Liabilities 133,91,430 159,02,554 171,57,059 167,27,431
Sub-Total 140,67,669 171,15,020 192,62,143 213,30,629
Funds for Future Appropriations - - - -
Discontinuance Fund on account of non-payment of premium 813 1,28,486 4,43,664
Discontinuance Fund others - - - -
Total 311,34,352 362,90,114 396,90,783 441,85,493
Application of Funds
Shareholders' 13,86,711 17,45,507 12,05,787
Policyholders' 6,26,607 12,49,820 20,96,585
Assets Held to Cover Linked Liabilities* 133,92,243 160,31,040 176,00,723 178,18,273
Loans -



Fixed Assets 87019.00 1,07,448 93,015 1,02,863
Current Assets
Cash and Bank Balances 3,45,110 2,51,531 3,69,838
Advances and Other Assets
10,20,640 10,50,602 11,19,324
Sub-Total (A) 13,65,750 13,02,133 14,89,162 18,07,784
Current Liabilities 12,47,333 15,66,047 13,85,588
Provisions 61,315 62,778 84,794
Sub-Total (B) 13,08,648 16,28,825 14,70,382 21,50,879

Net Current Assets (C) = (A - B) 57,102 -3,26,692 18,780 -3,43,095
Miscellaneous Expenditure
. - -

(to the extent not written off or adjusted)
Debit Balance of Profit and Loss Account
155,84,570 174,82,991 186,75,893 202,72,927
Total 311,34,352 362,90,114 396,90,783 441,85,493

Page | 39

For the
Year Ended
For the
Year Ended
For the
Year Ended
For the
Year Ended
Amounts transferred from
Policyholders' Account (Technical
Account) -28,34,341 -5,26,763 1,12,127 -87,434
Income from Investments
(a) Interest, Dividends and Rent -
Net of amortisation 95,097 1,13,591 1,09,325 1,05,089
(b) Profit on Sale/Redemption of
Investments 17,697 25,904 29,389 37,933
(c) (Loss on Sale/ Redemption of
Investments) -2,200 -3,135 -2,084 -9,587
Other Income -
Total (A) -27,23,747 -3,90,403 2,48,757 46,001
Expense other than those directly
related to the insurance business 14,050 33,459 39,934 22,423
Bad debts written off -
Provisions (Other than Taxation) (a)
For Diminution in the value of
investments (net)
(b) Provision for Doubtful Debts -
(c) Others
Contribution to the Policyholders
Account (Technical Account) 6,66,076 14,74,559 14,01,725 16,20,612
Total (B) 6,80,126 15,08,018 14,41,659 16,43,035
Profit/ (Loss) before Taxation -34,03,873 -18,98,421 -11,92,902 -15,97,034
Provision for Taxation -

Profit / (Loss) after Taxation -34,03,873 -18,98,421 -11,92,902 -15,97,034

(a) Balance at the beginning of the
period -121,80,697 -155,84,570 -174,82,991 -186,75,893
(b) Interim dividends paid during
the period -

(c) Proposed Final Dividend

(d) Dividend Distribution on Tax

(e) Transfer to Reserves/Other

Profit/ (Loss) carried to the
Balance Sheet -155,84,570 -174,82,991 -186,75,893 -202,72,927
Earnings Per Share (in Rs.)
(Face Value Rs.10 Per share)
Basic and Diluted -2.6 -1.17 -0.68 -

Page | 40


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