Professional Documents
Culture Documents
PROJECT REPORT
ON
BY
SURESH KUMAR
I owe a great many thanks to a great many people who helped and supported me during the
completion of project.
My deep sense of gratitude to Mr.Santosh Singh Chief Branch Manager for support and
guidance. Thanks and appreciation to the helpful people at BAJAJ ALLIANZ LIFE
INSURANCE, for their support.
I would like to take this opportunity as privilege to express my deep senseof gratitude to
Professor M. N. Navale, Honorable Founder President, and Dr. (Mrs.) Sunanda. M. Navale,
Secretary, Sinhgad Technical Education Society, Pune &Dr.RajashreeShinde, Director S.K.N.
Sinhgad School of Business Management,Ambegaon (BK), Pune for their continuous
encouragement, invaluable guidance and help for completing the present research work. They
have been a source of inspiration to means I am indebted to them for initiating me in the field of
research.
My deepest thanks to Mrs. YogitaKadam, Mrs. SadhanaOgale and Mrs. ShalakaSakhrekar the
guide of the project for guiding and correcting various documents of mine with attention and
care.She has taken pain to go through the project and make necessary correction as and when
needed.
I would also thanks my institution and my faculty members without whom this project would
have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.
I here by declare that the project work entitled EVALUATION OF WORKING CAPITAL
MANAGEMENT IN BAJAJ ALLIANZ LIFE INSURANCE submitted to the Pune university,
is a record of an original work done by me under the guidance of SHALAKA SAKHREKAR,
faculty member, from SKN SINHGAD SCHOOL OF BUSINESS MANAGEMENT, PUNE
Date:
INDEX
Executive Summary
1. Introduction 1-3
3. Research Methodology 9
Limitations 43
7.
Bibliography
Appendix
EXECUTIVE SUMMARY
Executive Summary:
Working Capital is the required for maintenance of day to day business
operations. The present day competitive market environment calls for an
efficient management of working capital. The reason for this is attributed to
the fact that an ineffective working capital management mat force the form to
stop its business operations, may even lead to bankruptcy. Hence the goal of
working capital management is not just concerned with the management of
current assets and current liabilities but also in maintaining a satisfactory level
of working capital.
This study gives in detail the working capital management practices in BALIC.
Management of each current asset, namely cash management, accounts
receivable management is studied permanent to BALIC. Similarly
management of accounts payable, deposit are studied to understand the
managing of current liabilities. A part from this concept of operating cycle is
studied.
The research methodology adopted for this study is mainly from secondary
source of data which include annual reports of BALIC, and website of the
company. The use of primary sources is limited to interviews with few of the
employees in credit department.
The study of working capital management has shown that BALIC has a strong
working capital position. The Company is also enjoying reasonable profits.
INTRODUCTION
The overall success of the company depends upon its working capital position. So it should
be handled properly because it shows the efficiency & financial strength of a company.
WCM is highly important in firms as it is used to generate further returns for the
stakeholders.
Working Capital Management is a very important fact of financialmanagement due to:
Investments in current assets represent a substantial portion of
total investment.
Investment in current assets & the level of current liabilities have tobe geared
quickly to change sales.
The working capital is the life blood & nerve center of a business firm. The importance of
working capital in any industry needs no special emphasis. No business can run effectively
without a sufficient quantity of working capital.
It is crucial to retain right level of working capital. WCM is one of the most important
functions of corporate management. A business enterprises with ample working capital is
always in a position to avail advantages of any favorable opportunity either to buy raw
material or to implement a special order or to wait for enhanced market status.
Working capital can be utilized for operating costs that are involved in the everyday life of
business. Even very successful business owners may need working capital funds when the
unexpected circumstances arise.
WCM is highly important in firms as it is used to generate further return for the
stakeholders. When working capital is managed improperly, allocating more than enough of
it will render management non-efficient & reduce the benefits of short term investments. On
the other hand, if working capital is too low, the company may miss a lot of profitable
investment opportunities or suffer short term liquidity crises, leading to degradation of
company credit, as it cannot respond effectively to temporary capital requirements.
1
Some the points to be studied under this topic are:
How much cash should a firm hold?
What should be the firms credit policy?
How to & when to pay the creditors of the firm?
OBJECTIVES
SCOPE
2
decrease in return oninvestment. The goodwill of the firm is also
adversely affected due to the inability to paycurrent liabilities in time.
Hence, the management of working capital helps to manage all the
factors affecting theworking capital in the most profitable manner.
The scope of the present study has been limited interns of period of
study as well as sources and nature of data. The period covered by the
study extends over 5 years from F.Y 2008/9 to 2011/12. At the time of
study, the data could be available up to 2011/12. The limitations of this
study are as follows:
3
BAJAJ ALLIANZ LIFE INSURANCE
E-mail : websaleslife@bajajallianz.co.in
Introduction:
Bajaj Allianz Life Insurance is a union between Allianz SE, one of the
largest Insurance Company and Bajaj Finserv.
4
Allianz SE is a leading insurance conglomerate globally and one of the
largest asset managers in the world, managing assets worth over a
Trillion (Over INR. 55,00,000Crores). Allianz SE has over 119 years of
financial experience and is present in over 70 countries around the
world.
Vision:
Mission:
Our Achievements:
5
Awards:
6
Niraj Bajaj
Sanjiv Bajaj
S.H Khan
Directors
Ranjit Gupta
Sanjay Asher
Suraj Mehta
Manu Tandon
FACTSHEET
Date of Incorporation 12th March 2001
1
Started Operation on 3rd August 2001
2
7
Head office Pune, India
3
WorldWide Web Address www.bajajallianz.com
4
Toll free number 1800-209-5858
5
Brand Statement JiyoBefikar
6
Chairman Mr. Sanjiv Bajaj
7
MD & CEO Mr.V.Philip
8
Total assets under Management 38,003 crore*
9
Solvency ratio 643.31%**
10
Claim Settlement Ratio NOP 91.56%**
11
Total no. of lives covered 1.56crore**
12
Total no. of office 992*
13
Latest Award Won 1.SKOCH Financial Inclusion
14 2013- Organization of the Year
2.SKOCH Financial Inclusion
for Micro Insurance initiatives
following categories:
Micro Insurance Initiat
Securing the Unsecured
Setting the Claims at
Nominees doorsteps
Insurance Awareness &
Education
Micro Insurance Renew
Persistency Manageme
Sour product cater to all the financial needs like Protection, Savings, Retirements, Inv
15 & Health for Individuals and Groups
8
Growing at a breakneck pace with a strong pan Indian
presence Bajaj Allianz has emerged as a strong player in
India...
Product:
Life Insurance
Motor Insurance
Health Insurance
Travel Insurance
Home Insurance
Channel Partner:
2. Dhanlaxmi Bank
9
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, annul report & Audit report of the BALIC the
company is used financial tools for the analyzing and interpretation
data.
Sources of data
10
SAMPLING DESIGN
WORKING CAPITAL:
Introduction:
Financial management looks after two types of capital need: for fixed
capital to invest it tings such as buildings, plants &equipments and
working capital principally to pay for stock and to cover the amount of
credit extended to customers. Fixed capital, as the name implies, tends
not vary in the short but to move up or down in jumps when major
investment decisions are made (or assets sold). Working capital on the
other hand, is much more fluid and fluctuates with level of business.
11
In most business, funds are deployed in assets which are in the form of
cash or bank deposits or will be turned into cash in a relatively short
period as part of normal business activities. In short the working capital
is the sources of financing current assets and it includes short as well as
long term financing.
The term working capital is often used to refer the firms current assets
like primarily cash, marketable securities, account receivables and
inventories. Working capital refers to the fact that most of its
components have their impact over weeks and month rather than years.
For this reason, working capital management is often referred to as
short-term finance. The term working capital is closely related to the
term funds and has two common meaning. It is used to mean current
assets of current assets means current liabilities.
12
refers to those assets which is ordinary course of business can be or
will be turned into cash within one year without undergoing a
diminution in value and with our disrupting the operations of the firm.
The major current assets are cash, marketable securities, account
receivables and inventory.
Working capital may be defined more particularly as the assets held for
current use within a business less the amount due to those who await
settlement in short term in whatever form. Working capital is an
important aspect manufacturing compares that have so far developed
country. Among all available options proper management of working
capital is the only best possible option to improve their operational
viability. Working capital is the financial management practice in
manufacturing enterprises. Working capital represents portion that
13
circulates from one form to another in the ordinary conduct of business.
This idea embraces recurring transaction from cash to inventories to
receivable to cash that forms the conventional chain of business
operations.
Fund deployed for short term are mainly for working capital or
operational purpose. Towards the day-to-day operation, a firm will
have to provide money towards the purchase of raw materials, payment
of wage and salaries to extend credit to buyers of goods as well as to
meet other day to day operations.
14
2) Working capital represents the total of all current assets. In other
words it is the Gross working capital, it is also known as Circulating
capital or Current capital for current assets are rotating in their nature.
3) Working capital is defined as The excess of current assets over
current liabilities and provisions. In other words it is the Net Current
Assets or Net Working Capital
There are two concepts of working capital:- gross & net. Gross
working capital, simply called working capital, refers to the firms
investment in current assets. Current assets are the assets which can be
converted into cash within an accounting period (or operating
cycle)and cash, short-term securities, receivables, debtors and stock
(inventory) are included in current assets. Net working capital refers to
the difference between current assets and current liabilities. Current
liabilities are those claims of outsiders, which are expected to mature
for payment within an accounting periodand include creditors, bills
payableand outstanding expenses.
15
Another name of gross working capital is circulating capital.
Circulating capital means circular flow of cash. This is also called
operating cycle in case of manufacturing firm. This cycle starts with
which is used to pay for raw materials. Raw materials are converted
into work-in progress which is again converted into finished goods.
When it is ready for sale, it is a circular cash-flow from cash into
inventories to receivables and back to cash, this cycle will be repeat
again for the whole life of the firm.
16
CASH CREDITORS
COLLECTION PAYMENTS
RAW MATERIALS
DEBTORS
SALES
PRODUCTION
If the business is profitable the firms assets at the end of each cycle will be
greater than the original investment. In this manner, each cycle will
produce a gross profit, and the amount of net earnings for the year will
depend. In part, on number of times the cycle occurs or how measured
by the ratio of sales to current assets. The higher the ratio, the more
efficiency the operations, fewer current assets are needed to support
each dollar of sales.
17
There is also a much shorter cycle of activity where in goods and
materials are held for manufacture and sale, and credit is advanced to
customers for rapid conversion into cash to provide the funds with
which to continue in business and to make a profit distribution
possible.
The working capital cycle shown in figure 4.1 is theoperating cycle for
non- manufacturing firm where, cash is required to purchase raw
materials which are needed to convert into work-in- progress, which is
again converted into finished goods. Are sold for cash and credit and
ultimately debtors will be realized.
CASH
Sometimes service and financial concerns may not have any inventory.
In this case the operations cycle will be shortest as follows:
18
CASH DEBTORS
Net working capital comprises short term net assets: stock, debtors
and cash less creditors. Working capital management then is to do
with management of all aspects of both current assets and current
liabilities, so as to minimize the risk of insolvency while
maximizing return on assets.
19
Net working capital represents the excess of total current assets
over total current liabilities. It is a qualitative concept which shows
the financial soundness of current financial position. Net working
capital may be positive or negative according to the size of current
assets and current liabilities. Current assets should be sufficiently in
excess of current liabilities for the positive working capital. This
concept lives idea about the case and cost of raising working capital
to the management.
20
Both the concepts of working capital, gross and net, are not
mutually exclusive, however. They are equally important from the
management point of view in the gross concept points out two
important aspects of current assets: (i) Optimum investment in each
of the component of current assets and (ii)Financing of these
current assets; while the net concept indicates (i) The liquidity
position and (ii) The extent to which working capital may be
financed by permanent sources of funds. Both the concepts have
their own advantages and disadvantages, which concept to choose
depend upon the purpose of the firm. The concept of gross capital is
a financial concept where as that of net concept is an accounting
concept. Management is interested in current assets to operate the
business with efficiency. To evaluate the efficiency, gross concept is
appropriate. On the other hand interest of investors and lenders is in
concept of net working capital because it helps in the judgment if
liquidity position of the enterprise.
21
4.4) IMPORTANCE OF WORKING CAPITAL
Operating Efficiency
22
Operating efficiency means optimum utilization of resources. The firm
can minimize its need for working capital by efficiently controlling its
operating costs. With in-creased operating efficiency the use of
working capital is improved and pace of cash cycle is accelerated.
Better utilization of resources improves profitability and helps in
relieving the pressure on working capital.
Other Factors
There are some other factors, which affect the determination of the
need for working capital. A high net profit margin contributes towards
the working capital pool. The net profit is a source of working capital
to the extent it has been earned in cash. The cash inflow can be
calculated by adjusting non-cash items such as depreciation, out-
standing expenses, losses written off, etc, from the net profit, (as
discussed in Unit 6).
The firm's appropriation policy, that is, the policy to retain or distribute
profits also has a bearing on working capital. Payment of dividend
consumes cash resources and thus reduces the firm ',s working capital
to that extent. If the profits are retained in the business, the firm's
working capital position will be strengthened.
23
In general, working capital needs also depend upon the means of
transport and communication. If they are not well developed, the
industries will have to keep huge stocks of raw materials, spares,
finished goods, etc. at places of production, as well as at distribution
outlets.
There are no hard and fast rules or certain formulae to determine the
working capital requirement of the firm. The importance of efficient
working capital management is an aspect of overall financial
management. Thus a firm plans its operations with adequate working
capital requirement or it should have neither too excess nor too
inadequate working capital. A number of factors affect the working
capital. Generally, the following factors affect the working capital
requirement of the firm.
24
Working capital requirement is also determined by its production
policy. If a firm produces seasonal foods, the its production and sales
volume fluctuate with different seasons. This type of fluctuating policy
affects the working capital policy of the firm.
v) Availability of Credit:
25
implications of changing price level of working capital position will
vary from firm to firm depending on the nature and another relevant
consideration of the operation of the conserned firm.
The level of profit margin differs from firm to firm. It depends upon
the nature and quality of product has a sound marketing management
and enjoy the monopoly power in the market then it earns quite high
profit and vice-versa. Profit is sources of working capital because it
contributes towards the working capital as a pol by generating more
internal funds.
x) Level of Taxes
26
assets whether they are instable or growing conditions. The most
important function of financial manager is to determine the level of
working capital and to decide how it is to financed. Financial of any
assets is concerned with two major factors- cost and risk. Therefore, the
financial manager must determine an appropriate financing mix, or
decide how current liabilities should be used to finance current assets.
However, a number of financing mixes are available to the financial
manager. He can resort generally there kinds of financing.
i) Long-term financing:
27
Two approaches are generally followed for the management of working
capital: (i) the conventional approach, and (ii) the operating cycle
approach.
28
ADEQUACY OF WORKING CAPITAL
29
It stagnates growth. It becomes difficult for the firm to
undertake
profitable projects for non- availability of working capital funds.
It becomes difficult to implement operating plans and achieve
the firm s
profit target.
Operating inefficiencies creep in when it becomes difficult even
to meet
day commitments.
Fixed assets are not efficiently utilized for the lack of working
capital
funds. Thus, the firm s profitability would deteriorate.
Paucity of working capital funds render the firm unable to avail
attractive credit opportunities etc.
The firm loses its reputation when it is not in a position to
honor its
short-term obligations.
An enlightened management should, therefore, maintain the right
amount of working capital on a continuous basis. Only then a proper
functioning of business operations will be ensured. Sound financial and
statistical techniques, supported by judgment, should be used to predict
the quantum of working capital needed at different time periods.
30
In this study four years data ( 2008 to 2012 have been presented and
analyzed. It covers to analyze the ratio as well trend and composition
of working capital, which means current assets, current liabilities,
liquidity, turnover, leverage and profitability of BALIC.
Table 1 :
Current Assets
Fiscal Year Sundry Cash and Bank Loan and Other C.A Tota
Debtors balance advance
31
2010/11 1,341,359 4,285,098 147,078 2,344,020 8,21
INTERPRETATION 1 :
32
following table shows the amount of deposit and other accounts, short
term loan, bills payable and other current liabilities of BALIC.
Table 2 :
Current Liabilities
INTERPRETATION 2 :
In the above figure shows that the current liabilities of the company is
increasing In fiscal year 2008/09 the total amount of current liabilities
Rs. 8,052,356 for the increasing impact of deposits and other current
liabilities. In all four year deposits and other current liabilities are
increased.
33
Working capital is required to run business smoothly and efficiently in
the context of set objectives. It is no doubt that no organization can
achieve its goal without proper use of working capital. It means money
invested on working capital should be neither more nor less because
both the position of working capital affects not only liquidity but also
profitability of the organization. The investment decision should be
made on any type of current assets by considering their role in
company and determining which one is more beneficial to the company
and which is not. The following table shows the amount of working
capital of BALIC of the study period.
Table 3 :
INTERPRETATION3:
34
In the above figure we clearly show the current assets, current
liabilities and working capital condition of BALIC from fiscal year
2008/09 to 2011/12. Working capital condition of the company is at
satisfactory level. All the year of the study period the working capital
of the company is negative.
Liquidity Ratio:
Liquidity ratios measures ability of the firms to meet its short-
term obligations. Liquidity of any business organization is
directly related with working capital or current assets and
current liabilities of that organization. In other words, one of the
main objectives of working capital management is keeping
sound liquidity position. Company is a different organization
which is engaged in Mobilization of funds. So, without sound
liquidity position of ability to meet its short-term obligation
various liquidity ratios are calculated and to know the trend of
liquidity are trend analysis of major liquidity ratios have been
considered.
The following table shows the current ratio to compare the following
capital management of BALIC.
Table 4 :
Current ratio
Fiscal Year Total CA Total CL Current ratio
35
2011/12 9,746,988 10,654,854 0.91
Average=0.74
Sources: Annual Report of BALIC from 2008/09 to 2012.
INTERPRETATION4 :
The above table shows the CA, CL and current ratio of the BALIC. The
current ratio of the BALIC is fluctuating over the year. The highest
current ratio is in fiscal year 2011/12 0.91. And in all year it is
increasing. The average ratio is 0.74.
The cash and bank balance is almost liquids from the current assets,
this ratio shows the percentage of readily available fund within the
banks. It can be calculated by dividing cash and bank balance by
current assets, which is given below.
36
Cash and bank balance
Current assets
This ratio shows that the percentage of current assets cover cash and
bank balance. The following table and figure shows the cash and bank
balance to current assets ratio of BALIC over the study period.
Table 5 :
INTERPRETATION5 :
37
5.7) Cash and Bank Balance to Total deposit:
The ratio shows the ability of bank immediate funds to cover their
deposits. It can be calculated by dividing cash and bank balance by
deposits. The ratio can be expressed as:
The following table and figure shows the cash and bank balance to total
deposits ratio of the BALIC over the study period.
Table 6 :
38
INTERPRETATION6 :
The above figure depicts that the cash and bank balance to total deposit
of BALIC has been slightly decreasing in FY 2009/10, 2010/11,
2011/12.
This ratio is very much crucial for measuring the profitability of funds
invested in the bank assets. It measures the return on assets it
computed by using the following formula.
Total assets
Table 7
39
2010/11 10,387,412 8,217,555 1.26
INTERPRETATION7:
Net Profit to total asset ratio in 2008/09 1.05 and it increasing slightly
in financial year 2009/10, 2010/11 and 2011/12.
Concept: -
Average Debtors
Table 8 :
40
2008/09 102,199,181 19,080,194 5.35
INTERPRETATION8 :
Concept: -
Average creditors
41
Table 9 :
INTERPRETATION9 :
The creditors turnover ratio was 1.17 times in the year 2008/09& it
decreased to 1.13 times in the year 2009-2010 but creditor turnover
will be remain same two year 2009/10 and 2011/12.
Net Working
Capital
42
Table 10 :
INTERPRETATION10 :
In The year 2008/09 working capital t/o ratio was5.05 time ,5.72 time
in the year 2009/10. In the year 2009/10 the working capital has
increases. And in financial year 2010/11 it decreased and again in
financial year 2011/12 it increased.
Table 11 :
43
Current assets
Current Liabilities
INTERPRETATION 11 :
Current assets for the year 2009/10 is increases and it is good condition
for the company and current liabilities of the company is
increased by 2,466,355.and by putting formula (W.C= C.A-
C.L)working capital of the company for year 2009/10 is
4,470,970. Here working capital of company is increasing that
means profitability of company also increasing.
Table 12 :
44
Particulars 31-3-2010 31-3-2011 Increase Decrease
Current assets
Current Liabilities
INTERPRETATION12 :
Current assets for the year 2009/10 is increases and it is good condition
for the company and current liabilities of the company is decreased by
1,017,796 thats shows the working capital of the company is
increased. Here debtors increased means cash balance of company
decreased.
45
Table 13 :
Current assets
Current liabilities
INTERPRETATION13 :
Current assets for the year 2009/10 is increases and it is good condition
for the company and current liabilities of the company is increased by
1,153,939 thats shows working capital of company decreased. Here
debtors decreased thats good for company it shows cash of company
increased.
46
FINDINGS
1. Current assets for the year 2009/10 is decreases and its
application for the company and current liabilities of the
company is increased by 2,466,355.and by putting formula
(W.C= C.A- C.L)working capital of the company for year
2009/10 is 4,470,970.
6. The above figure depicts that the cash and bank balance to total
deposit of BALIC has been slightly decreasing in FY 2009/10,
2010/11, 2011/12.
8. The debtors turnover ratio was very less in the year 2010/11 at
4.72 times, but them it has increased to 5.19, 5.66 times in the
year 2011/12 and 2008-09. This shows that the company is
making all the offers to speed up the collection process.
9. The creditors turnover ratio was 1.17 times in the year
2008/09& decreased to 1.13 times in the year 2009-2010 but
47
creditor turnover will be remain same two year 2009/10 and
2011/12.
10. In The year 2008/09 working capital t/o ratio was5.05 time ,
5.72 time in the year 2009/10. In the year 2009/10 the working
capital has increases. And in financial year 2010/11 decreased
and again in financial year 2011/12 increased.
SUGGESTION
On the basis of the analysis and observation an attempt made to
present some suggestions.
4. Company has able to full fill the standard level of current ratio
i.e. 2:1 .There for the company has able to repay the liability
and loan of company.
48
CONCLUSION
At the end it is stated that the working capital management is a part of
money invested in the business.Working capital may be regarded as
lifeblood of a business. Its effective provision can do much to ensure
the success of a business.
49
LIMITATIONS
1. The analysis is limited to three years of data study (for the year
2008/09 to 2011/12 ) for financial analysis.
50