Final Report

CHAPTER-I
INTRODUCTION
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1.1 INTRODUCTION
The uses of funds of a concern can be divided into two parts namely long-term funds and short-
term funds. The long – term investment may be termed as ‘fixed investment.’ A major part of the
long-term funds is invested in the fixed assets. These fixed assets are retained in the business to
earn profits during the life of the fixed assets. To run the business operations short–term assets
are also required.
The term working capital is commonly used for the capital required for day-to-day
working in a business concern, such as for purchasing raw material, for meeting day-to-day
expenditure on salaries, wages, rents rates, advertising etc. But there are much disagreement
among various financial authorities (Financiers, accountants, businessmen and economists) as to
the exact meaning of the term working capital.
DEFINITION AND CLASSIFICATION OF WORKING CAPITAL

Working capital refers to the circulating capital required to meet the day to day
operations of a business firm. Working capital may be defined by various authors as follows:
1. According to Weston & Brigham - “Working capital refers to a firm’s investment in short-
term assets, such as cash amounts receivables, inventories etc.
2. Working capital means current assets. —Mead, Baker and Malott
3. “The sum of the current assets is the working capital of the business” —J.S.Mill
Working capital is defined as “the excess of current assets over current liabilities
and provisions”. But as per accounting terminology, it is difference between the inflow and
outflow of funds. In the Annual Survey of Industries (1961), working capital is defined to
include “Stocks of materials, fuels, and semi-finished goods including work-in-progress and
finished goods and by- products; cash in hand and bank and the algebraic sum of sundry
creditors as represented by
(a) Outstanding factory payments e.g. rent, wages, interest and dividend;
(b) Purchase of goods and services;
(c) Short-term loans and advances and sundry debtors comprising amounts due to the factory on
account of sale of goods and services and advances towards tax payments”.
The term “working capital” is often referred to “circulating capital” which is

frequently used to denote those assets which are changed with relative speed from one form to
another i.e. starting from cash, changing to raw materials, converting into work-in-progress and
finished products, sale of finished products and ending with realization of cash from debtors.
Working capital has been described as the “life blood of any business which is apt
because it constitutes a cyclically flowing stream through the business”.
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CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital viz. quantitative and qualitative. Some people also
define the two concepts as gross concept and net concept. According to quantitative concept, the
amount of working capital refers to ‘total of current assets’. Current assets are considered to be
gross working capital in this concept.
The qualitative concept gives an idea regarding source of financing capital. According to
qualitative concept the amount of working capital refers to “excess of current assets over current
liabilities.”
L.J. Guttmann defined working capital as “the portion of a firm’s current assets which are
financed from long–term funds.”
The excess of current assets over current liabilities is termed as ‘Net working
capital’. In this concept “Net working capital” represents the amount of current assets which
would remain if all current liabilities were paid. Both the concepts of working capital have their
own points of importance. “If the objectives is to measure the size and extent to which current
assets are being used, ‘Gross concept’ is useful; whereas in evaluating the liquidity position of an
undertaking ‘Net concept’ becomes pertinent and preferable.
It is necessary to understand the meaning of current assets and current liabilities for learning the
meaning of working capital, which is explained below.
Current assets – It is rightly observed that “Current assets have a short life span. These types of
assets are engaged in current operation of a business and normally used for short– term
operations of the firm during an accounting period i.e. within twelve months. The two important
Characteristics of such assets are,
(I) Short life span, and
(ii) Swift transformation into other form of assets.
Cash balance may be held idle for a week or two, account receivable may
have a life span of 30 to 60 days, and inventories may be held for 30 to 100 days.” Fitzgerald
defined current assets as, “cash and other assets which are expected to be converted in to cash in
the ordinary course of business within one year or within such longer period as constitutes the
normal operating cycle of a business.”
Current liabilities – The firm creates a Current Liability towards creditors (sellers) from whom it
has purchased raw materials on credit. This liability is also known as accounts payable and
shown in the balance sheet till the payment has been made to the creditors.
The claims or obligations which are normally expected to mature for payment within an
accounting cycle are known as current liabilities. These can be defined as “those liabilities where
liquidation is reasonably expected to require the use of existing resources properly classifiable as
current assets, or the creation of other current assets, or the creation of other current liabilities.”
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Circulating capital – working capital is also known as ‘circulating capital or current capital.’
“The use of the term circulating capital instead of working capital indicates that its flow is
circular in nature.”
STRUCTURE OF WORKING CAPITAL

The different elements or components of current assets and current liabilities constitute the
structure of working capital which can be illustrated in the shape of a chart as follows:
STRUCTURE OF CURRENT ASSETS AND CURRENT LIABILITIES

Current Liabilities Current Assets
Bank Overdraft Cash and Bank Balance
Creditors Inventories: Raw-Materials

Work-in-progress
Finished Goods
Outstanding Expenses Spare Parts
Bills Payable Accounts Receivables
Short-term Loans Bills Receivables
Proposed Dividends Accrued Income
Provision for Taxation, etc. Prepaid Expenses

Short-term Investments
CIRCULATION OF WORKING CAPITAL

At one given time both the current assets and current liabilities exist in the business. The current
assets and current liabilities are flowing round in a business like an electric current.
However, “The working capital plays the same role in the business as the role of heart in human
body. Working capital funds are generated and these funds are circulated in the business. As and
when this circulation stops, the business becomes lifeless. It is because of this reason that he
working capital is known as the circulating capital as it circulates in the business just like blood
in the human body.”
1. Gross Working Capital: It refers to the firm’s investment in total current or circulating assets.
2. Net Working Capital: The term “Net Working Capital” has been defined in two different
ways:
I. It is the excess of current assets over current liabilities. This is, as a matter of fact, the most
commonly accepted definition. Some people define it as only the difference between current
assets and current liabilities. The former seems to be a better definition as compared to the latter.
ii. It is that portion of a firm’s current assets which is financed by long-term funds.
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3. Permanent Working Capital: This refers to that minimum amount of investment in all current
assets which is required at all times to carry out minimum level of business activities. In other
words, it represents the current assets required on a continuing basis over the entire year. Tandon
Committee has referred to this type of working capital as “Core current assets”.
Working Capital may be classified in two ways (Kinds of Working Capital)
a) Concept based working capital
b) Time based working capital
c) Classification on the basis of financial reports.
CONCEPT BASED WORKING CAPITAL

1. Gross Working Capital
2. Net Working Capital
3. Negative Working Capital
CONCEPTS OF WORKING CAPITAL

1. Gross Working Capital: It refers to the firm’s investment in total current or circulating assets.
2. Net Working Capital:
The term “Net Working Capital” has been defined in two different ways:
i. It is the excess of current assets over current liabilities. This is, as a matter of fact, the most
commonly accepted definition. Some people define it as only the difference between current
assets and current liabilities. The former seems to be a better definition as compared to the latter.
ii. It is that portion of a firm’s current assets which is financed by long-term funds.
3. Negative Working Capital: This situation occurs when the current liabilities exceed the current
assets. It is an indication of crisis to the firm.
TIME BASED WORKING CAPITAL

1. Permanent or Fixed Working Capital
(a) Regular Working Capital
(b) Reserve Working Capital
2. Temporary or Variable Working Capital
(a) Seasonal Working Capital
(b) Special Working Capital
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1. Permanent Working Capital: This refers to that minimum amount of investment in all current
assets which is required at all times to carry out minimum level of business activities. In other
words, it represents the current assets required on a continuing basis over the entire year. Tandon
Committee has referred to this type of working capital as “Core current assets”.
The following are the characteristics of this type of working capital:
1. Amount of permanent working capital remains in the business in one form or another. This is
particularly important from the point of view of financing. The suppliers of such working capital
should not expect its return during the life-time of the firm.
2. It also grows with the size of the business. In other words, greater the size of the business,
greater is the amount of such working capital and vice versa Permanent working capital is
permanently needed for the business and therefore it should be financed out of long-term funds.
2. Temporary Working Capital: The amount of such working capital keeps on fluctuating from
time to time on the basis of business activities. In other words, it represents additional current
assets required at different times during the operating year. For example, extra inventory has to
be maintained to support sales during peak sales period. Similarly, receivable also increase and
must be financed during period of high sales. On the other hand investment in inventories,
receivables, etc., will decrease in periods of depression.
Suppliers of temporary working capital can expect its return during off season when it is not
required by the firm. Hence, temporary working capital is generally financed from short- term
sources of finance such as bank credit.
Classification on the basis of financial reports – The information of working capital can be
collected from Balance Sheet or Profit and Loss Account; as such the working capital may be
classified as follows:
(I) Cash Working Capital – This is calculated from the information contained in profit and loss
account. This concept of working capital has assumed a great significance in recent years as it
shows the adequacy of cash flow in business. It is based on ‘Operating Cycle Concept’.
(ii) Balance Sheet Working Capital – The data for Balance Sheet Working Capital is collected
from the balance sheet. On this basis the Working Capital can also be divided in three more
types, viz., gross Working Capital, net Working Capital and Working Capital deficit.
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NEED FOR AND COMPONENTS OF WORKING CAPITAL
For smooth running an enterprise, adequate amount of working capital is very essential.
Efficiency in this area can help, to utilize fixed assets gainfully, to assure the firm’s long- term
success and to achieve the overall goal of maximization of the shareholders, fund. Shortage or
bad management of cash may result in loss of cash discount and loss of reputation due to non-
payment of obligation on due dates. Insufficient inventories may be the main cause of production
held up and it may compel the enterprises to purchase raw materials at unfavorable rates.
Like-wise facility of credit sale is also very essential for sales promotions. It is rightly
observed that “many a times business failure takes place due to lack of working capital.”
Adequate working capital provides a cushion for bad days, as a concern can pass its period of
depression without much difficulty.
O’ Donnel correctly explained the significance of adequate working capital and

mentioned that “to avoid interruption in the production schedule and maintain sales, a concern
requires funds to finance inventories and receivables.”
The adequacy of cash and current assets together with their efficient handling virtually
determines the survival or demise of a concern. An enterprise should maintain adequate working
capital for its smooth functioning. Both, excessive working capital and inadequate working
capital will impair the profitability and general health of a concern.
Therefore working capital is needed till a firm gets cash on sale of finished products. It depends
on two factors:
I. Manufacturing cycle i.e. time required for converting the raw material into finished product;
and
ii. Credit policy i.e. credit period given to Customers and credit period allowed by creditors.
Thus, the sum total of these times is called an “Operating cycle” and it consists of the following
six steps:
I. Conversion of cash into raw materials.
ii. Conversion of raw materials into work-in-process.
iii. Conversion of work-in-process into finished products.
Iv. Time for sale of finished goods—cash sales and credit sales.
v. Time for realization from debtors and Bills receivables into cash.
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DETERMINANTS OF WORKING CAPITAL:
The factors influencing the working capital decisions of a firm may be classified as two groups,
such as internal factors and external factors. The internal factors includes, nature of business size
of business, firm’s product policy, credit policy, dividend policy, and access to money and
capital markets, growth and expansion of business etc. The external factors include business
fluctuations, changes in the technology, infrastructural facilities, import policy and the taxation
policy etc. These factors are discussed in brief in the following lines.
I. Internal Factors
1. Nature and size of the business
The working capital requirements of a firm are basically influenced by the nature and size of the
business. Size may be measured in terms of the scale of operations. A firm with larger scale of
operations will need more working capital than a small firm. Similarly, the nature of the business
- influence the working capital decisions. Trading and financial firms have less investment in
fixed assets. But require a large sum of money to be invested in working capital. Retail stores,
business units require larger amount of working capital, whereas, public utilities need less
working capital and more funds to invest in fixed assets.
2. Firm’s production policy
The firm’s production policy (manufacturing cycle) is an important factor to decide the working
capital requirement of a firm. The production cycle starts with the purchase and use of raw
material and completes with the production of finished goods. On the other hand production
policy is uniform production policy or seasonal production policy etc., also influences the
working capital decisions. Larger the manufacturing cycle and uniform production policy –
larger will be the requirement of working capital. The working capital requirement will be higher
with varying production schedules in accordance with the changing demand.
3. Firm’s credit policy
The credit policy of a firm influences credit policy of working capital. A firm following liberal
credit policy to all customers requires funds. On the other hand, the firm adopting strict credit
policy and grant credit facilities to few potential customers will require less amount of working
capital.
4. Availability of credit
The working capital requirements of a firm are also affected by credit terms granted by its
suppliers – i.e. creditors. A firm will need less working capital if liberal credit terms are available
to it. Similarly, the availability of credit from banks also influences the working capital needs of
the firm. A firm, which can get bank credit easily on favorable conditions, will be operated with
less working capital than a firm without such a facility.
5. Growth and expansion of business
Working capital requirement of a business firm tend to increase in correspondence with growth
in sales volume and fixed assets. A growing firm may need funds to invest in fixed assets in
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order to sustain its growing production and sales. This will, in turn, increase investment in
current assets to support increased scale of operations. Thus, a growing firm needs additional
funds continuously.
6. Profit margin and dividend policy
The magnitude of working capital in a firm is dependent upon its profit margin and dividend
policy. A high net profit margin contributes towards the working capital pool. To the extent the
net profit has been earned in cash, it becomes a source of working capital. This depends upon the
dividend policy of the firm. Distribution of high proportion of profits in the form of cash
dividends results in a drain on cash resources and thus reduces company’s working capital to that
extent. The working capital position of the firm is strengthened if the management follows
conservative dividend policy and vice versa.
7. Operating efficiency of the firm
Operating efficiency means the optimum utilization of a firm’s resources at minimum cost. If a
firm successfully controls operating cost, it will be able to improve net profit margin which, will,
in turn, release greater funds for working capital purposes.
8. Coordinating activities in firm
The working capital requirements of a firm are depend upon the co-ordination between
production and distribution activities. The greater and effective the co-ordinations, the pressure
on the working capital will be minimized. In the absence of co-ordination, demand for working
capital is reduced.
II. External Factors

1. Business fluctuations
Most firms experience fluctuations in demand for their products and services. These business
variations affect the working capital requirements. When there is an upward swing in the
economy, sales will increase, correspondingly, the firm’s investment in inventories and book
debts will also increase. Under boom, additional investment in fixed assets may be made by
some firms to increase their productive capacity. This act of the firm will require additional
funds. On the other hand when, there is a decline in economy, sales will come down and
consequently the conditions, the firm try to reduce their short-term borrowings. Similarly the
seasonal fluctuations may also affect the requirement of working capital of a firm.
2. Changes in the technology
The technological changes and developments in the area of production can have immediate
effects on the need for working capital. If the firm wish to install a new machine in the place of
old system, the new system can utilize less expensive raw materials, the inventory needs may be
reduced there by working capital needs.
3. Import policy
Import policy of the Government may also effect the levels of working capital of a firm since
they have to arrange funds for importing goods at specified times.
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4. Infrastructural facilities
The firms may require additional funds to maintain the levels of inventory and other current
assets, when there is a good infrastructural facility in the company like transportation and
communications.
5. Taxation policy
The tax policies of the Government will influence the working capital decisions. If the
Government follows regressive taxation policy, i.e. imposing heavy tax burdens on business
firms, they are left with very little profits for distribution and retention purpose. Consequently
the firm has to borrow additional funds to meet their increased working capital needs. When
there is a liberalized tax policy, the pressure on working capital requirement is minimized. Thus
the working capital requirements of a firm are influenced by the internal and external factors.
MEASUREMENT OF WORKING CAPITAL:

There are 3 methods for assessing the working capital requirement as explained below:
a) Percent of Sales Method

Based on the past experience, some percentage of sale may be taken for determining the quantum
of working capital
b) Regression Analysis Method

The relationship between sales and working capital and its various components may be plotted
on Scatter diagram and the average percentage of past 5 years may be ascertained. This average
percentage of sales may be taken as working capital. Similar exercise may be carried out at the
beginning of the year for assessing the working capital requirement. This method is suitable for
simple as well as complex situations.
c) Operating Cycle Method

As a first step, we have to compute the operating cycle as follows:
i) Inventory period: Number of days consumption in stock = I ÷ M/36
Where I – Average inventory during the year
M = Materials consumed during the year
ii) Work-in-process: Number of days of work-in-process = W ÷ K/365

Where W = Average work-in-process during the year
K = Cost of work-in-process i.e., Material + Labour + Factory overheads.
iii) Finished products inventory period = G ÷F/365
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Where G = Average finished products inventory during the year
F= Cost of finished goods sold during the year
IV) Average collection period of Debtors = D ÷S/365

Where D = Average Debtors balances during the year
S = Credit sales during the year
v) Credit period allowed by Suppliers = C ÷P/365
Where C = Average creditors’ balances during the year
P = credit purchases during the year
vi) Minimum cash balance to be kept daily.
Formula: O.C. = M + W + F + D – C
Note: It is also known as working capital cycle. Operating cycle is the total time gap between the
Purchase of raw material and the receipt from Debtors.
The calculation of net working capital may also be shown as follows;
Working Capital = Current Assets – Current Liabilities
= (Raw Materials Stock + Work-in-progress Stock + Finished Goods Stock
+ Debtors + Cash Balance) – (Creditors +Outstanding Wages +
Outstanding Overheads).
Where,
Raw Materials = Cost (Average) of Materials in Stock
Work-in-progress Stock = Cost of Materials + Wages +Overhead of Work-in-progress.
Finished Goods Stock = Cost of Materials + Wages +Overhead of Finished Goods.
Creditors for Material = Cost of Average Outstanding Creditors.
Creditors for Wages = Averages Wages Outstanding.
Creditors for Overhead = Average Overheads Outstanding.
Thus,
Working Capital = Cost of Materials in Stores, in Work-in-progress, in Finished
Goods and in Debtors.
Less: Creditors for Materials
Plus: Wages in Work-in-progress, in Finished Goods and in Debtors.
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Less: Creditors for Wages
Plus: Overheads in Work-in-progress, in Finished Goods and in Debtors.
Less: Creditors for Overheads.
The work sheet for estimation of working capital requirements under the operating cycle
Method may be presented as follows:
The following points are also worth noting while estimating the working capital requirement:
1. Depreciation: An important point worth noting while estimating the working capital
requirement is the depreciation on fixed assets. The depreciation on the fixed assets, which are
used in the production process or other activities, is not considered in working capital estimation.
The depreciation is a non-cash expense and there is no funds locked up in depreciation as such
and therefore, it is ignored. Depreciation is neither included in valuation of work-in-progress nor
in finished goods. The working capital calculated by ignoring depreciation is known as cash
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basis working capital. In case, depreciation is included in working capital calculations, such
estimate is known as total basis working capital.
2. Safety Margin: Sometimes, a firm may also like to have a safety margin of working capital in
order to meet any contingency. The safety margin may be expressed as a % of total current assets
or total current liabilities or net working capital. The safety margin, if required, is incorporated in
the working capital estimates to find out the net working capital required for the firm. There is no
hard and fast rule about the quantum of safety margin and depends upon the nature and
characteristics of the firm as well as of its current assets and current liabilities.
IMPORTANCE OR ADVANTAGES OF ADEQUATE WORKING CAPITAL

Working capital is the life blood and nerve center of a business. Just as circulation of blood is
essential in the human body for maintaining life, working capital is very essential to maintain the
smooth running of a business. No business can run successfully without an adequate amount of
working capital. The main advantages of maintaining adequate amount of working capital are as
follows:
1. Solvency of the business: Adequate working capital helps in maintaining solvency of the
business by providing uninterrupted flow of production.
2. Goodwill: Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining goodwill.
3. Easy loans: A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and other on easy and favorable terms.
4. Cash discounts: Adequate working capital also enables a concern to avail cash discounts on
the purchases and hence it reduces costs.
5. Regular supply of raw materials: Sufficient working capital ensures regular supply of raw
materials and continuous production.
6. Regular payment of salaries, wages and other day-to-day commitments: A company which
has ample working capital can make regular payment of salaries, wages and other day-today
commitments which raises the morale of its employees, increases their efficiency, reduces
wastages and costs and enhances production and profits.
7. Exploitation of favorable market conditions: Only concerns with adequate working capital can
exploit favorable market conditions such as purchasing its requirements in bulk when the prices
are lower and by holding its inventories for higher prices.
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1.2 INDUSTRY PROFILE
Indian Software industry has tremendous growth and economic policy has a substantial
revision in 20th century. The IT industry offer opportunities for foreign direct investment. Due to
liberalization, industries were grown by which foreign reserves as well as employment
opportunities have increased. In the initial days, IT firms export software to other countries
because here man power is widely available with low cost. As the potential of the software
industry was identified government of India developed high speed infrastructure to meet the
demands of foreign clients. Indian software companies developed high quality as well as unique
software to meet the needs of multinational companies as a result they obtain a wider range of
software development tasks. IT/ITES sector has listed incredible growth over the decade,
achieving iconic position all over the world and a reputation for cost-effective delivery of
services.
IT companies in India have set up over 600 delivery centres all over the world. The
revenues have grown from 1.2 percent (1997-98) to 8.1 percent (2013-14). India maintains top
position in the global sourcing arena, for about 55 percent in the year 2013 (of the global
sourcing market size) compared to 52 percent in 2012.
Today the world‟s largest outsourcing destination for IT industry is India, which is
around 52 percent of the US dollar 124-130 billion market. The IT industry employs roughly 10
million Indians which ultimately contribute to the economic growth of the country. The Unique
Selling Proposition (USP) of Indian IT services is its cost competitiveness which is 3-4 times
cheaper than the USA.
Many firms like TCS, Infosys, and Wipro have met top certification for the quality
standards. According to the report of National Association of Software and Service Companies
(Nasscom), GDP share has grown widely when compared to other industries [142]. India exports
information and software services rather than products to 95 countries all over the world. The top
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5 firms in terms of revenue are TCS, Wipro, Infosys, HP India, and IBM [143]. Top companies
contribute 80% of revenues from Indian Software industry.
During 1950s people are not aware of the term “software”, the term was bundled with
hardware by some multinational companies like IBM and ICL with some basic languages like
PASCAL etc. These two are the largest hardware companies which provide basic services. In
mid 1970‟s India exported its first software service. The problem here to export software is
companies had to design its own hard ware system which needs to fulfill worldwide standards. In
order to import the hardware system government of India impose heavy duty tax which the
Indian companies cannot afford on their own. After few years Indian government has reduced
the tax duty with condition that exporters would recover twice the value of foreign exchange
spent on importing the computers. Then the era of software begins in India.
India has largest technical skilled employees working with low salaries and they shift
from one industry to industry to other because of fewer companies. The Indian programmers
were available with less than 12 dollars and the Indian firms are ready to complete the software
projects for the half of the cost when they compared with abroad. This creates a numerous jobs
for Indian employees and free profit opportunity for foreign companies. There is a shortage of
employees in US for the projects in their companies and in India oversupply of employees lead
to match the demand and supply in both countries because of this software industry. The
Government of Andhra Pradesh particularly setup several IT parks and hubs to reduce
unemployment. Companies that come under these parks are tax free and have extraordinary
facilities with high speed data communication and internet. The central government gave the
power to state government regarding licenses, import or export procedures. Tata Consultancy
Services (TCS) was the first software company in India and got export assignment in 1973. TCS
has begun to outsource application work for Central Bank of India. The company sent some
engineers to abroad in order to excel in their platforms. The main competitive advantage for
Indian software companies are cost reduction and the ability to communicate in English. The
main reason to export software is to increase foreign exchange in India.
In 1970s the main challenges for software industry are
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1. Rigid government rules:- Government of India restricted that all multinational
companies must invest their share less than 50 percent whereas Indian companies share must be
more than 50 percent.
2. Lack of trained personnel: - As already exited employees‟ skill does not match to the
organizations need, companies need to train the employees.
3. Heavy import tax: - As the companies need hardware to match the need of software
industry, they used to import from other countries in as India impose heavy taxes.
4. Education in India: - The courses in India do not match to the need of the companies, so
companies need to train in soft skills.
5. Updated Technology:- As the companies need to update technology, it seems to be a
huge cost.
Software Industry- Impact on Indian Economy
Before 1990s the policies of Indian Government is very rigid if any oversees company want to
start in India. By that time the government does not have any foreign reserves, then the
government of P.V.Narasimha Rao, decided for liberalization, so that industries had started
tremendously [146]. Multinational Companies started to invest in India because they identified
huge manpower with low cost. This created a huge foreign reserves as well as employment
opportunities to young and fresh software engineers with high remuneration. The IT industry has
identified as a knowledge industry due to its Information Technology Enabled Services (ITES)
and IT services. The Business Process Outsourcing industry has quickly developed with a sign of
new initiatives. With significant growth of BPO and IT industry, India has become one of the
most chosen offshore destinations (source: The NASSCOM - McKinsey Study 2002). Due to the
tremendous growth of ITES industry results a enormous inflow of foreign direct investments that
have set up huge facilities all over the India which results the entry of IT industry into the BPO-
ITES sector.
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. Future of Software Industry
Indian software industry seems to be dazzling because all private and government
organizations are computerized to reduce manual work as well as manpower, huge talented
scientists, liberalized government policy, employees available with low salary. The weaknesses
are lack of updated infrastructure, lack of new product innovation, lack of financial support.
The companies need to locate head office in India and implement corporate strategies to
meet international standards. Colleges need to train students in order to reduce the gap between
demand and supply in IT industry. The growth of E-commerce made customers easy to purchase
goods instead of going to marketplace.
. Challenges of Indian Software Industry
1. Education System in India:- The education system in India is not updated and students
does not have any practical exposure. So, organizations must educate the students as per the
global needs.
2. Lack of Monitoring in Education sector:- Generally AICTE (All India Council for
Technical Education) only look after the facilities in the organization, but other than other still
there must some more committees to guide the colleges in order to improve infrastructure as well
as soft skills needed for the students.
3. Lack of Project management skills: - As students do not have management skills
according to the corporate companies creates huge cost to the organization.
4. Poor Communication skills: - Students from rural background have good subject
knowledge but unable to express in English which a major drawback for students. Organizations
must motivate the students to inculcate communication skills before they complete their
education.
5. Lack of Industrial Experience: - Students must have industrial exposure and update
themselves according to the needs of Industry. Along with bookish knowledge students should
have practical so that they can implement in corporate field.
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6. Poor Infrastructure facilities:- As the Colleges have poor infrastructure facilities is a
major problem for students.
7. Impact of US economy:- As most of companies depend on US for projects faced a
severe problem during recession. So, companies must concentrate not only on US but also other
countries.
8. Other resources:- During recession Indian companies retrenched the employees because
they do not have projects, so companies need to look after not only Multinational projects but
also Local projects.
9. Huge cost:- Companies specialized in particular technology can become obsolete after
few years, so companies (or) employees cannot work permanently, they want to substitute with
new technology.
10. Different legal laws and norms:- As different countries have different legal laws and
norms, companies need to know every country laws before they invest.
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1.3COMPANY PROFILE
Indian Infotech And Software Limited was incorporated as 'Indian Leasers Limited' on May 22,
1982. Subsequently the name of the Company was changed to 'Indian Infotech And Software
Limited on July 20, 1998. The Company is Non Banking Financial Company (Registration No.
B-13.00221) registered with Reserve Bank of India and any is engaged in the business of
financing & investment And training on computer technology and its related activities. The
Equity Shares of the Company is listed in Bombay Stock Exchange Limited (BSE) and
Ahemadabad Stock Exchange Limited (ASE).
Cognizant Technology Solutions Corporation (Cognizant), Started in the year 1988 with
a mission that “To dedicate our business process and technology innovation know-how, our deep
industry expertise and worldwide resources to working together with clients to make their
businesses stronger.” The Vision of Cognizant is “To lead sustainable growths with
environmental friendly practices and responsible use of natural resources.” Cognizant is the first
IT company leveraging India on NASDAQ. In the initial days, Parent Corporation split into three
major divisions: Dun & Bradstreet, AC Nielsen Consumer Products, and Cognizant Corporation.
Dun & Bradstreet changed its name to Cognizant Technology solutions and began to function as
Cognizant Corporation. In the year October 2013, Cognizant acquired Equinox Consulting SAS.
Cognizant has 50 delivery centers worldwide with 1,78,600 employees as of march 31, 2014, it
is also a member of NASDAQ—100.
The company provides basically Custom Information Technology, consulting and BPO services.
Cognizant functions in four sectors: Logistics, Health care, Financial Services, most chosen
offshore destinations (source: The NASSCOM - McKinsey Study 2002). Due to the tremendous
growth of ITES industry results a enormous inflow of foreign direct investments that have set up
huge facilities all over the India which results the entry of IT industry into the BPO-ITES sector.
Healthcare, Retail, Manufacturing, also includes Information, communications, entertainment,
media. The company also provides a range of services in Information Technology Consulting,
Operations, Process, Business, Enterprise Information Management, Application Development
and systems Integration, Testing, Infrastructure services, Maintenance, Business Process
Outsourcing and Knowledge Process Outsourcing
The Company not only provides financial services but also post-acquisition integration,
project delivery services, business transformation, business and information technology,
Organization relocation services, project delivery services, service launch. The Re-engineering
19
services include Data Warehousing, Business Intelligence, Application Design, Development
and Integration, ERP, customer relationship management.
The company‟s financial services offer services to banking and insurance industries. The
company focuses on commercial banks, retail banking, wholesale banking, credit cards,
payments, investment banking, wealth management, and security services. Cognizant serve both
traditional and commercial banks. The company assists casualty insurers, life insurers, insurance
brokers to improve the efficiency and effectiveness of insurance operations. Cognizant mainly
concentrates on policy issuing, administration, renewal, reporting, payment, maturity
information, and reinsurance.
Cognizant also serves Communication industry like cable, wireless and wire line
providers, equipment vendors and software vendors. The company helps in designing,
developing, testing and introducing new products and channels by improving customer service
and satisfaction. It concentrates on Business Support Systems, Operations Support Systems, ERP
has a huge demand.
Cognizant has a huge demand in Information, media and Entertainment which includes
information service providers, broadcasters, movies, music and video game companies,
advertisement management, Online Media, and e-business, Digital Content Supply chain and
media management. A new initiative of company has helped the media industry to sustain by
Anti-piracy software‟s and advertising sales, studio management, billing and payments.
Company started its operations not only in India but also in Sweden, In 2011, the
company started on their own as Infosys Shanghai Company Ltd. Infosys established first
Software Development Block at their Technopark in Kerala, another Technopark with 1800 seats
capacity of Software Development Block is also under construction. In the year 2011, Infosys
Technologies Ltd was changed to Infosys Ltd.
In November 2011, Infosys entered in to an agreement with the company Atlas Copco AB to
render the financial services such as accounting, reporting and processing of supplier invoices.
By this project Infosys covered around 230 places in Atlas Copco, and by these they provides
20
huge employment in around Czech Republic. In 2011 there was a drastic change in services of
Infosys and they rendered the services to Indian companies.
In 2003 the company was awarded the IBM Lotus award for a knowledge management solution.
India infotech got 15 million dollars worth outsourcing contract to the World Bank. In the year
2005 india infotech acquired a London based company i:e; Citisoft Plc, another Singapore based
company. was awarded the CNBC best performing stock of the year by the Institute of cost and
works accountants of India.infotech render its services to Brisbane to different sectors such as
local government, finance, insurance, mining. India infotech acquired Nitor Global Solutions
with a worth of 5.5 million dollars. India infotech Limited has won the Asian Corporate Social
Responsibility Award under the poverty alleviation. IMC RamKrishna Bajaj National Award
Trophy was awarded to the company in service sector in 2001. In the year 2008, Satyam BPO
has won two prestigious shared service awards from the International Quality and Productivity
Council.
21
1.4 REVIEW OF LITERATURE
Agarwal (1983)27 also studied working capital management on the basis of sample of 34 large
manufacturing and trading public limited companies in ten industries in private sector for the
period 1966-67 to 1976-77. Applying the same techniques of ratio analysis, responses to
questionnaire and interview, the study concluded the although the working capital per rupee of
sales showed a declining trend over the years but still there appeared a sufficient scope for
reduction in investment in almost all the segments of working capital. An upward trend in cash
to current assets ratio and a downward trend in cash turnover showed the accumulation of idle
cash in these industries. Almost all the industries had overstocking of raw materials shown by
increase in the share of raw material to total inventory while share of semi-finished and finished
goods came down. It also revealed that long-term funds as a percentage of total working capital
registered an upward trend, which was mainly due to restricted flow of bank credit to the
industries.
Verma (1989)29 evaluated working capital management in iron and steel industry by taking a
sample of selected units in both private and public sectors over the period 1978-79 to 1985-86.
Sample included Tata Iron and Steel Company Ltd. (TISCO) in private sector and Steel
Authority of India Ltd. (SAIL) and Indian Iron and Steel Company, a wholly owned subsidiary
of SAIL, in public sector. By using the techniques of ratio analysis, growth rates and simple
linear regression analysis, the study revealed that private sector had certainly an edge over public
sector in respect of working capital management. Simple regression results revealed that working
64 capital and sales were functionally related concepts. The study further showed that all the
firms in the industry had made excessive use of bank borrowings to meet their working capital
requirement vis-à-vis the norms suggested by Tandon Committee.
Sastry’s study (1966)32 was a cross section analysis of total inventories of companies across
several heterogeneous industries for the period 1955-60 using balance sheet data of public
limited companies in the private sector. The study brought out the importance of accelerator
represented by 66 change in sales. It also showed negative influence of fixed inventory
investment.
22
The study by George (1972)35 was cross section analysis of balance sheet data of 52 public
limited companies for the period 1967-70. Accelerator, internal and external finance variables
were considered in the equations for raw materials including goods-in-process and total
inventories. However, equations for finished goods inventories considered only output variable.
Accelerator and external finance variables were found to be important.
The analysis by Seamy and Rao (1975)36 of the flow of funds of public limited companies had
an equation for aggregate inventory investment. RBI data for the period 1954- 68 70 had been
used. The explanatory variables considered were accelerator, flow of bank borrowings, an index
of man-days lost, capacity by the call rate. Accelerator, bank finance and fixed investment were
found to be significant.
The study by R.N. Agarwal (1982)37 estimated total inventory investment equation for
individual firms in automobile manufacturing industry, which was divided into two sectors─ car-
sector and non-car-sector. His study was based on the data for 1959-60 through 1978-79. Official
Directory of Mumbai Stock Exchange had been the basic source of data. Analysis of two sector
revealed that sales and stock sales ratio were important explanatory variables. Cost of capital and
trend were important in only car sector while fixed investment and flows of external funds were
significant in nonbar sector. Existing stock of inventories was statistically significant in both the
sector but contrary to expectations, it possessed negative coefficient. Several other variables as
dividends, capacity utilization and liquidity ratio were found to be of no importance in
explaining inventory investment behavior.
N.C. Gupta study (1987)38 examined the determinants of total inventory investment in
aluminum and non-ferrous semi firms in private sector. The data had been taken from Stock
Exchange, Official Directory, and Mumbai for 9 years 1966-67 to 1974-75. variables considered
were current sales change, one lagged sales change, inventory stock at the beginning, gross fixed
investment during the year, flow of net debt (external 69 finance) and profits net of dividends
and taxes but gross of depreciation provision (retained earnings or internal finance). The
equation also provided for firm dummies and year dummies. Analysis was based on pooling of
time series of cross section data. Demand factor and external finance turned out to be significant
23
determinants in aluminum. Both retained earnings and external finance were important
determinants in case of non-ferrous semis. Competition for investment funds between fixed and
inventory investment was suggested both in aluminum and non-ferrous semis.
Misra (1975)26 studied the problems of working capital with special reference to six selected
public sector undertakings in India over the period 1960-61 to 1967-68. Analysis of financial
ratios and responses to a questionnaire revealed somewhat the same results as those of NCAER
study with respect to composition and utilization of working capital. In all the selected
enterprises, inventory constituted the more important element of working capital. The study
further revealed the overstocking of inventory in regard to its each component, very low
receivables turnover and more cash than warranted by operational requirements and thus total
mismanagement of working capital in public sector undertakings.
Shin and Soenen (1998) studied the relationship between working capital management and
profitability of firms. Shin and Soenen used Net Trade Cycle (NTC) instead of Cash Conversion
Cycle to measure working capital management. The difference is components of CCC are
expressed as a percentage of sales in NTC. They founded a strong negative relationship between
NTC and corporate profitability for a large sample of listed American firms for the periods
between 1975 and 1994.
24
1.5 OBJECTIVES OF THE STUDY
Working capital is the most widely used and powerful technique of financial analysis .The main
objective of the present study is to know the financial condition of the company.
PRIMARY OBJECTIVE
• To analysis the working capital of INDIA INFOTECH LTD.
SECOUNDARY OBJECTIVES:
• To analysis the ratios of the company.
• To find the schedule of change in working capital.
• To analysis the comparative balance sheet of the company.
• To analysis the common size of the balance sheet.
• To know the cash flow statement.
25
1.6 SCOPE OF THE STUDY
This project acts as a reference guide or as a source of information. It gives the idea about
the financial analysis of the firm. The main scope of the study was to put into practical the
theoretical aspect of the study into real life work experience. The study deals with analysis and
interpretation of the data collected through the sources of primary and secondary data for a
period of five financial years. I.e. 2013-2013, 2013-2014, 2014-2015, 2015-2016 and 2016-2017
Graphs, diagrams and tabulation methods are used to analyze and interpret the data collected. It
will help to understand the company’s liquidity position. Since the decision regarding working
capital are of an operating nature not one time decision, the scope of the study is geared towards
identifying important areas of control and to establish model for better control of the various
components of working capital
The study would also attempt to identify the various sources available for financing of
working capital.
The study gives a fair idea of improvement in efficiency of working capital management
and also to have proper control over the components of working capital and managing of
efficiency.
26
1.7 LIMITATION OF THE STUDY
• 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
time.
27
CHAPTER-II
RESEARCH METHODOLOGY
28
2. RESEARCH METHODOLOGY
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 VIJAYANAND ROAD
LINES ltd. the company is used financial 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.
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 was used secondary sources also for collecting the data. They are:
• Information from the text sources
• Information from the internet sources
• Information from the annual report of the company.
SAMPLING DESIGN
2 Sampling unit: Financial Statements & Audit Reports
3 Sampling Size: Last five years financial statements
TOOLS USED FOR STUDY

FINANCIAL TOOLS:
• RATIO ANALYSIS: The following ratios are used to calculate financial performance
analysis.
• Current Ratio = Current Asset / Current Liabilities
29
• Quick Ratio = (Current Assets – Investments) / Current Liabilities
• Absolute Liquid Ratio = Absolute Liquid Assets / Current Liabilities
• SCHEDULE OF CHANGE IN WORKING CAPITAL:
A measure of both a company’s efficiency and its short-term financial health.

The working capital is calculated as:
The ratio indicates whether a company has enough short term assets to cover its short
term debt. Anything below 1 indicates negative W/C (Working Capital).
While anything over 2 means that the company. Is not investing excess assets. Most
believe that a ratio between 1.2 and 2.0 is sufficient. The Net Working Capital or
Working Capital Ratio.
Working Capital = Currents – Current Liabilities.
• COMPARATIVE STATEMENTS ANALYSIS:
A statements which compares financial data form different periods of time. The
comparative statements lines up a section of the income statements, balance sheet
Or cash flow statements with its corresponding section from a previous period.it can
Also be used to compare financial data from different companies over time, thus
revealing the trend in the financials.
• COMMON SIZE STATEMENT ANALYSIS:
A company financial statements that displays all items as percentages of a common base
figure. This type of financial statement allows for easy analysis between time periods of a
company. An income statements in which each account is expressed as a percentage of
the value of sales. This type of financial statements can be used to allow for easy analysis
between companies or between time periods of a company.
30
• CASH FLOW STATEMENT:
In financial accounting, a cash flow statement, also known as statement of cash flows, is
a financial statement that shows how changes in balance sheet accounts and income
affect cash and cash equivalents, and breaks the analysis down to operating, investing and
financing activities. Essentially, the cash flow statement is concerned with the flow of
cash in and out of the business. The statement captures both the current operating results
and the accompanying changes in the balance sheet. As an analytical tool, the statement
of cash flows is useful in determining the short-term viability of a company, particularly
its ability to pay bills.
31
CHAPTER-111
DATA ANALYSIS AND INTERPRETATION
32
ANALYSIS OF WORKING CAPITAL FROM DIFFERENT ASPECTS ON BASIS OF
THE HISTORICAL DATA
There are number of devices to analyze working capital like ratio analysis, common size
Statement etc. We will discuss them one by one as follows:
1. RATIO ANALYSIS
Ratio analysis is a technique of analysis and interpretation of financial statements. It is the
process of establishing and interpreting various ratios for helping in making decisions. It only
means of better understanding of financial strengths and weaknesses of a firm. The main
emphasis has been on calculating the ratios related to a working capital management.
CURRENT RATIO – It may be defined as the relationship between current assets and current
liabilities. This ratio is also known as working capital ratio and measures the ability of the firm to
meet current liabilities. High current ratio indicates firm is liquid and has the ability to pay its
current obligations in time as and when they become due. 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.
Current Ratio = Current Assets
Current Liabilities
CA:-inventories + trade receivable + cash & bank balances+ short terms advances + other
current accounts
CL: - short term borrowings + trade payable +other current liabilities +short term provisions
LIQUID RATIO – This ratio is also known as quick ratio or acid test ratio. It is a more rigorous
test of liquidity than the current ratio. It is based on those current assets which are highly liquid.
Inventory and prepaid expenses are excluded because they are deemed to be least liquid
component of current assets. A high quick ratio is the indication that the firm is liquid and has
the ability to meet its current liabilities in time and on the other hand low ratio represents
liquidity position is not good.
Quick Ratio = Quick or Liquid Assets

Current Liabilities
Quick Assets = Current Assets – Inventory – Prepaid Expenses
CL: - short term borrowings + trade payable +other current liabilities +short term provisions
ABSOLUTE LIQUID RATIO – Although receivables are generally more liquid than
inventories yet there may be doubt regarding their realization into cash in time. Absolute liquid
ratio shows the relationship between liquid assets which include cash, bank and marketable
securities.
Absolute Liquid Ratio = Absolute Liquid Assets
33
Current Liabilities
TABLE NO.1 SHOWING THE CURRENT RATIO
YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIES (CR)
2012-2013 143403.39 30132.72 0.4759

2013-2014 12999.37 32354.12 0.4017
2014-2015 15734.92 30215.26 0.5207
2015-2016 15622.21 20721.87 0.7538
2016-2017 14997.80 18710.83 0.8015
CHART SHOWING THE CURRENT RATIO

143403.39
CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO (CR)

32354.12
30215.26
30132.72
20721.87
18710.83
15734.92
15622.21
12999.37
14997.8
0.4759
0.4017
0.5207
0.7538
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 0.8015
INFERENCE:
The current ratio was 0.4759 in the year 2012 – 2013 and the year 2013-2014 the
current ratio was 0.4017 and in the year 2014 -2015 the current ratio was 0.5207 this show the
current ratio has increase every year& also in the year 2015-2016 the current ratio was increased
to 0.7538 .in the year 2016 – 2017 the current ratio has increases 0.8015.The current ratio is
above the standard of 2: 1 ratio and hence it can be said that there is enough working capital in
VRL LOGISTICS Ltd to meet its current liabilities.
34
TABLE NO.2 SHOWING THE LIQUID RATIO
YEAR LIQUID ASSETS CURRENT LIQUID RATIO

LIABILITIES (LR)
2012-2013 13371.97 30132.72 0.4437

2013-2014 11651.79 32354.12 0.3601
2014-2015 14235.22 30215.26 0.4711
2015-2016 13788.88 20721.87 0.6654
2016-2017 13165.69 18710.83 0.7036
CHART SHOWING THE LIQUID RATIO

35000
30000
25000
20000
15000
10000
5000
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
LIQUID ASSETS 13371.97 11651.79 14235.22 13788.88 13165.69
CURRENT LIABILITIES 30132.72 32354.12 30215.26 20721.87 18710.83
LIQUID RATIO (LR) 0.4437 0.3601 0.4711 0.6654 0.7036
LIQUID ASSETS CURRENT LIABILITIES LIQUID RATIO (LR)
INFERANCE:
The liquidity ratio was 0.4437 in the year 2012-2013 and decreased to 0.3601 in the
year 2013 – 2014 and it little bit increase up to 2014-2015.But in the year 2015-2016 it increased
to 0.6654. And this same increased in the year 2016-2017 to 0.7036 .The liquidity ratio is above
the standard of 0.5: 1 ratio. It shows that the liquidity position of the concern is satisfactory
35
TABLE NO.3 SHOWING THE ABSOLUTE
LIQUID RATIO
YEAR ABSOLUTE CURRENT ABSOLUTE

LIQUID ASSETS LIABILITIES LIQUID RATIO
(ALR)
2012-2013 1543.63 30132.72 0.051
2013-2014 1509.24 32354.12 0.046
2014-2015 1913.51 30215.26 0.063
2015-2016 1958.55 20721.87 0.094
2016-2017 1224.67 18710.83 0.065
ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES ABSOLUTE LIQUID RATIO (ALR)

32354.12
30215.26
30132.72
20721.87
18710.83
1958.55
1913.51
1543.63
1509.24
1224.67
0.063
0.051
0.046
0.094
0.065
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
INFERANCE:
The absolute liquidity ratio was 0.051 in the year 2012-2013 and decreased to0.046 in
the year 2013-2014 and increased to 0.063, 0.094 in the year 2015-2016 it was increased due to
current liabilities but in the year 2016-2017 the L.R is less 0.065 because the C.L has increased .
The liquidity ratio is above the standard of1:1 ratio. It shows the liquidity position of the
company is satisfactory.
36
Preparing the schedule/statement of changes in working capital requires us to present the
information relating to the current area of the balance sheets pertaining to the two periods in the
format given below and deriving and presenting the changes within them.
TABLE NO. (4): SHOWING THE SCHEDULE CHANGES IN WORING CAPITAL AS

ON 2012-2013
SCHEDULE CHANGE IN WORKING CAPITAL AS ON 2012-2013

PARTICULAR 2012 2013 Increase Decrease
Current assets
Inventories 873.11 968.42 95.31
Trade receivables 7785.79 8442.06 656.27
Cash & bank balance 136.03 1543.63 183.6
Short term loans 158.91 1952.03 371.12
advances
Other current account 1871.97 1434.25 437.72
A -TOTAL 13471.81 14340.39
Current liabilities
Short term borrowing 7290.32 9384.20 2093.88
Trade payments 3572.32 3784.92 212.68
Other current liabilities 14591.07 13266.85 1324.22
Short term provisions 761.07 3696.75 2935.68
B -TOTAL 26214.70 30132.72 2630.52 5679.96
Working capital (A-B) 12742.89 15792.33

Net change in working 3049.44 3049.44
capital
Total 15792.33 15792.33 5679.96 5679.96
INFERENCE:
From the above table it is inferred there is a decrease in working capital. Because it
was increasing in liabilities and decrease in assets.
37
ON 2013-2014

2013 2014 Increase Decrease
PARTICULAR
Current assets
Inventories 968.42 1347.58 379.16
Short term loans 1952.03 2206.02 253.99
advances
A -TOTAL 14340.39 12993.81
Current liabilities
Trade payments 3784.92 3866.39 81.47
B -TOTAL 30144.05 32354.12 2111.87 5668.52

capital
Total 19360.31 19360.31 5668.52 5668.52
INFERENCE:
From the above table it is inferred there is a decreasing in working capital. Because it
was increase in liabilities and decrease in assets.
38
ON 2014-2015

PARTICULAR
Current assets
Inventories 1347.58 1499.70 152.12
Short term loans 1980.52 2587.13 606.61
advances
A -TOTAL 12993.37 15255.40
Current liabilities
Trade payments 931.09 447.22 483.87
B -TOTAL 32354.12 30195.68 5097.53 677.07

capital
Total 19360.75 19360.75 5097.53 5097.53
INFERENCE:
From the above table it is inferred there is an increasing in working capital. Because it
was decrease in liabilities and increase in assets.
39
ON 2015-2016

PARTICULAR
Current assets
Inventories 1499.70 1833.33 333.63
Bank balance other than 256.71 120.34 136.37
above
Other financial assets 232.24 511.88 279.64
Other current assets 3071.32 4016.01 944.69
A -TOTAL 15734.92 15622.21
Current liabilities
borrowing 9967.33 4971.47 4995.86
Trade payments 447.22 529.39 82.17
Other financial 18182.66 13514.55 4668.11
liabilities
provisions 760.66 815.16 54.50
Current tax liabilities 92.22 45.69 46.53
B- TOTAL 30215.26 20721.87 11449.87 2069.19

capital
Total 14480.34 14480.34 11449.87 11449.87
INFERENCE:
40
TABLE N O. (8): SHOWING THE SCHEDULE CHANGES IN WORING CAPITAL AS
ON 2016-2017

PARTICULAR
Current assets
Inventories 1833.33 1832.11 1.22
Bank balance other than 120.34 68.99 51.35
above
Other financial assets 511.88 466.50 45.38
A- TOTAL 15622.21 14997.8
Current liabilities
borrowing 4971.47 6314.92 1343.45
Trade payments 529.39 442.75 86.64
Other financial 13514.55 10250.22 3264.33
liabilities
provisions 815.16 451.07 364.09
Current tax liabilities 45.69 209.18 163.49
B- TOTAL 20721.87 18710.83 3954.31 2567.68

capital
Total 5099.66 5099.66 3954.31 3954.31
INFERENCE:
41
TABLE NO. (9): SHOWING THE COMPARATIVE BALANCE SHEET AS ON
31ST MARCH 2012 TO 31ST MARCH 2013
PARTICULAR 2013 2012 PERCENTAGE

Equity and liabilities shareholder’s 18116.88 7070 156.25
funds
Share Capital 10823.97 8203.34 31.94
Reserves & surplus 28940.85 15273.34 89.48
Non-current liabilities
Long-term borrowings 28516.25 40351.15 (-29.32)
Deferred tax liabilities (net) 7759.93 9998.42 (-22.38)
Other long term liabilities 865.99 782.9 10.61
Long term provisions 291.26 215.66 35.05
37433.43 51348.13 (-27.09)
Current liabilities
Short-term borrowings 9384.2 7290.32 28.72
Trade payables 3784.92 3572.24 5.95
Other current liabilities 13266.85 14591.07 (-9.07)
Short-term provisions 3696.75 761.07 385.73
30132.72 26214.7 14.94
96507 92836.17 3.95
Assets, non-current assets, fixed
assets
Tangible assets 71009.37 69419.64 2.29
Intangible assets 20.09 37.54 (-46.48)
Capital work-in-progress 1402.84 1002.05 39.99
Non-current investments 7.75 12.75 (-39.21)
Long-term loans & advances 9654.97 8769.71 10.09
Other non-current assets 71.59 122.67 (-41.64)
82166.61 79364.36 3.53
Current assets
Inventories 968.42 873.11 10.91
Cash & bank balances 1543.63 1360.03 13.4
Short term loans advances 1952.03 1580.91 23.47
Other current accounts 1434.25 1871.97 (-23.38)
14340.39 13471.81 6.44
TOTAL 96507 92836.17 3.95
INFERENCE:
From the above table, we can analyze in the year 2013 the total assets was ₹ 96507 crores but in
2012 it was ₹92836.17 crores which shows an increase in Growth Rate of 3.95% due to the
increase in the funds of the company.
42
TABLE NO. (10): SHOWING THE COMPARATIVE BALANCE SHEET AS ON 31ST
MARCH 2013 TO 31ST MARCH 2014
PARTICULARS 2014 2013 PERCENTAGE

Equity and liabilities shareholder’s funds
Share Capital 8553.62 18116.88 (-52.78)
Reserves & surplus 22085.5 10823.97 104.04
30639.12 28940.85 5.86
Long-term borrowings 25287.97 9384.2 169.47
Deferred tax liabilities (net) 8336.37 7759.93 7.42
Other long term liabilities 886.61 865.99 2.38
Long term provisions 264 291.26 (-9.35)
34774.95 37433.43 -7.1
Current liabilities
Short-term borrowings 10942.49 9384.2 16.6
Trade payables 3866.39 3784.92 2.15
Short-term provisions 2229.36 3708.08 (-39.87)
32354.12 30144.05 7.33
97768.19 96518.33 1.19
Assets, non-current assets, fixed assets
Tangible assets 73936.35 71009.37 4.12
Intangible assets 97.2 20.09 383.82
Capital work-in-progress 1403.72 1402.84 0.06
Non-current investments 10.75 7.75 38.7
Long-term loans & advances 9074.66 9666.3 (-6.12)
Other non-current assets 252.14 71.5 252.64
84774.82 82177.94 3.165
Current assets
Inventories 1347.58 968.42 39.15
Trade receivables 777058 8442.06 (-7.95)
Cash & bank balances 1509.24 1543.63 (-2.22)
Short term loans advances 2206.02 1952.03 13.01
Other current accounts 160.39 1434.25 88.81
12999.37 14340.39 (-9.35)
TOTAL 97768.19 96518.33 1.19
INFERENCE:
From the above table, we can analyze in the year 2014 the total assets was ₹ 97768.19
crores but in 2013 it was ₹96518.33 crores which shows an increase in Growth Rate of 1.91%
due to the increase in the funds of the company.
43
PARTICULARS 2015 2014 PERCENTAGE

Equity and liabilities
Shareholders’ funds
Share capital 8,553.62 8,553.62 0
Reserves and surplus 27,065.27 22,085.50 22.54
Total 35,618.89 30,639.12 16.25
Long-term borrowings 19,179.75 25,287.97 (-24.15)
Deferred tax liabilities (net) 8,875.15 8,336.37 6.46
Other long term liabilities 851.91 886.61 (-3.91)
Long-term provisions 589.91 264.00 123.45
Total 29,496.08 34,774.95 0.02
Current liabilities
Short-term borrowings 9,967.33 10,942.49 (-8.91)
Trade payables 447.22 931.09 (-51.96)
Other current liabilities 18,928.25 18,251.18 3.70
Short-term provisions 852.88 2,229.36 (-61.74)
30,195.68 32,354.12 (-6.66)
Total 95,310.65 97,768.19 (-7.27)
Assets
Non-current assets
Fixed assets
Tangible assets 70,514.56 73,936.35 (-4.62)
Intangible assets 171.03 97.20 75.95
Capital work-in-progress 907.42 1,403.72 (-35.35)
Non-current investments 10.75 10.75 0
Long-term loans and advances 8,198.78 9,074.66 9.61
Other non-current assets 252.71 252.14 (-108.04)
Total 80,055.25 84,774.82 (-5.56)
Current assets
Inventories 1,499.70 1,347.58 11.28
Trade receivable 9,018.15 7,995.64 12.78
Cash and bank balance 1,660.80 1,509.24 10.04
Short-term loans advances 2,587.13 1,980.52 30.62
15,255.40 12,993.37 17.40
Total 95,310.65 97,768.19 (-2.51)
INFERENCE:
crores but in 2014 it was ₹97768.19 crores which shows an increase in Growth Rate of -2.51%
due to the decrease in the funds of the company.
44

Share capital 9,124.35 8,553.62 6.67
Reserves and surplus 42,229.47 27,065.27 (-84.37)
Total 51,353.82 35,618.89 44.17
Long –term borrowings 11,568.88 19,179.75 (-39.68)
Deferred tax liabilities(net) 9,037.29 8,875.15 1.82
Other long term liabilities 821.46 851.27 (-3.50)
Long-term provisions 359.30 257.57 39.49
Total 21,786.93 29,163.74 25.29
Current liabilities
Total-term borrowings 4,971.47 9,967.33 (-50.12)
Trade payables 529.39 447.22 (-18.37)
Other current liabilities 41,856.73 19,260.59 117.31
Short-term provisions 860.85 852.88 0.93
Total 48218.44 30,528.02 57.94
94359.19 95310.65 0.99
Non-current asset
Fixed assets
Tangible assets 71,589.47 70,514.56 1.52
Intangible asset 166.61 171.03 (-2.58)
Capital work-in progress 1,623.38 907.42 78.90
Non-current and investments 5.75 10.75 (-46.51)
Long-term loans and advances 5,618 8,198.78 2.56
Other non-current assets . 252.71 (-100)
Total 79,004.20 80,055.25 (-1.31)
Current assets
Inventories 1,833.33 1,499.70 22.24
Trade receivable 7,302.44 9,018.15 (-19.02)
Cash and bank balances 1,958.55 1,660.80 17.92
Short-term loans and advances 4,055.31 2,587.13 56.74
Other current assets 205,36 489.62 229.76
Total 15,35499 15,255.40 0.65
94,359.19 95,310.65 0.99
INFERENCE:
crores but in 2015 it was ₹95310.65 crores which shows an increase in Growth Rate of 0.99%
45
Assets
Non- current assets

Property, plant and equipment 69,008.48 71,048.25 (-2.87)
Capital work-in-progress 177.28 1,623.38 (-89.07)
Investment properties 259.29 264.47 (-1.95)
Other intangible assets 120.02 166.61 (-27.96)
Financial assets
Investments 5.75 5.75 0
Other financial assets 2,751.67 2,678.00 2.75
Income tax assets 155.50 305.52 (-49.10)
Other non- current assets 2,192.16 2,456.03 (-18.12)
74,670.15 78,548.01 (-4.93)
Current assets
Inventories 1,832.11 1,833.33 (-32.79)
Financial assets
Trade receivables 7,541.69 7,302.44 3.27
Cash and cash equivalents 1,155.68 1,838.21 (-37.13)
Bank balances other than above 68.99 120.34 (-42.67)
Other financial assets 466.50 511.88 (-8.86)
Other current assets 3,932.83 4,016.01 (-2.07)
14,997.80 15,622.21 (-3.99)
Total assets 89,667.95 94,170.22 (-4.78)
Equity
Equity share capital 9,124.35 9,124.35 0
Other equity 44,998.82 42,268.32 6.45
54,123.17 51,392.67 5.31
Liabilities
Non- current liabilities
Financial liabilities
Borrowings 5,954.52 11,540.75 (-48.40)
Other financial liabilities 810.55 804.92 0.69
Provisions 503.48 359.30 40.12
Deferred tax liabilities (net) 8,960.94 8,841.85 1.34
Other non-current liabilities 604.46 508.86 18.78
16,833.95 22,055.68 (-23.67)
Current liabilities
46
Borrowings 6,314.92 4,971.47 2.70

Trade payables 442.75 529.39 (-16.36)
Other financial liabilities 10,250.22 13,514.55 (-24.15)
Provisions 451.07 815.16 (-44.46)
Current tax liabilities (net) 209.18 45.69 357.82
Other current liabilities 1,042.69 845.61 23.30
18,710.83 20,721.87 (-9.70)
Total equity and liabilities 89,667.95 94,170.22 (-4.78)
INFERENCE:
crores but in 2016 it was ₹94170.22 crores which shows an increase in Growth Rate of -4.78%
47
TABLE NO. (14) SHOWING THE COMMON SIZE BALANCE SHEET AS ON 31
MARCH 2013 TO 31 MARCH 2014
PARTICULAR 2013 PERCENTAGE 2014 PERCENTAGE

Current
liabilities
Short-term 9384.2 31.16 10942.49 33.8
borrowings
Trade payables 3784.92 12.56 3866.39 12
Other current 13266.85 44.02 15315.88 47.3
liabilities
Short-term 3696.75 12.26 2229.36 6.9
provisions
TOTAL 30132.72 100 32354.12 100
Current assets
Inventories 968.42 6.75 1347.58 10.4
Trade 8442.06 58.86 777058 59.8

receivables
Cash & bank 1543.63 10.76 1509.24 11.6
balances
Short term loans 1952.03 13.63 2206.02 17
advances
Other current 1434.25 10 160.39 1.2
accounts
TOTAL 14340.39 100 12999.37 100
INFERENCE:
crores but in 2013 it was ₹14340.39 crores which shows an decrease in Growth Rate due to the
48

Current
liabilities
Short-term 10942.49 33.8 9,967.33 33
borrowings
Trade payables 3866.39 12 447.22 1.48
Other current 15315.88 47.3 18,928.25 62.68
liabilities
Short-term 2229.36 6.9 852.88 2.84
provisions
TOTAL 32354.12 100 30,195.68 100
Current assets
Inventories 1347.58 10.4 1,499.70 9.83
Trade 7770.58 59.8 9,018.15 59.14

receivables
Cash & bank 1509.24 11.6 1,660.80 10.88
balances
Short term loans 2206.02 17 2,587.13 16.95
advances
Other current 160.39 1.2 489.62 3.20
accounts
TOTAL 12999.37 100 15,255.40 100
INFERENCE:
From the above table, we can analyze in the year 2015 the total assets was ₹
15,255.40 crores but in 2014 it was ₹12999.37 crores which shows an increase in Growth Rate
49

Current
liabilities
Short-term 9,967.33 33 4,971.47 10.6
borrowings
Trade payables 447.22 1.48 529.39 1.09
Other current 18,928.25 62.68 41,856.73 86.80
liabilities
Short-term 852.88 2.84 860.85 1.78
provisions
Total 30,195.68 100 48218.44 100
Current assets
Inventories 1,499.70 9.83 1,833.33 11.93
Trade receivable 9,018.15 59.14 7,302.44 47.55
Cash and bank 1,660.80 10.88 1,958.55 12.75
balances
Short-term loans 2,587.13 16.95 4,055.31 26.41
advances
Other current 489.62 3.20 205.36 1.36
assets
Total 15,255.40 100 15354.99 100
INFERENCE:
crores but in 2015 it was ₹15,255.40 crores which shows an increase in Growth Rate due to the
50
MARCH 2016TO 31 MARCH 2017
Current
liabilities
Total-term 4,971.47 10.6 6,314.92 33.75
borrowings
Trade payables 529.39 1.09 442.75 2.36
Other current 41,856.73 86.80 1251.87 6.38

liabilities
Short-term 860.85 1.78 10701.29 57.24
provisions
Total 48218.44 100 18,710.83 100
Current assets
Inventories 1,833.33 11.93 1,832.11 12.21
Trade 7,302.44 47.55 7,541.69 50.28

receivables
Cash and bank 1,958.55 12.75 1224.67 8.2
balances
Short-term loans 4,055.31 26.41 466.50 3.11
and advances
Other current 205.36 1.36 3,932.83 26.2
assets
Total 15354.99 100 14,997.80 100
INFERENCE:
From the above table, we can analyze in the year 2017 the total assets was ₹
14,997.80 crores but in 2016 it was ₹15354.99 crores which shows an increase in Growth Rate
51
CHAPTER-1V
FINDING
SUGGESTION
& CONCLUSION
52
FINDINGS
• The current ratio of the company is increasing in 2015 i.e., 0.5207 and it decreases
to 0.8015 in 2017. This is increase in the current asset of the company namely
sundry debtors and the loan and advances made by the company.
• The Quick Ratio has been at a small changes from the year 2013 till 2016, where the
lowest was at 0.3601 in 2014, but then a sudden increase in this year, 2017 has been
the highest ratio of 0.7036.
• The five years Absolute Liquid Ratio has been seen as at an increasingly order
where the lowest range has been from 0.046 in the year 2014, but due to the
decrease in the fund of the company it has been low this year (2017) to 0.065.
• The growth rate of the company is very poor in the performance of the year 2017 as
compared to the other years.
• There are fluctuations in the Working Capital over the year because there is an
increase and decrease in Current Liabilities.
• In common size balance sheet, During the year 2014 the total assets was ₹ 12999.37
crores but in 2013 it was ₹14340.39 crores which shows a decrease in Growth Rate
• During the year 2016 the total assets was ₹ 15354.99 crores but in 2015 it was
₹15,255.40 crores which shows an increase in Growth Rate due to the increase in
the funds of the company.
• In comparative balance sheet ,during the year 2016 the total assets was ₹ 943459.19
crores but in 2015 it was ₹95310.65 crores which shows an increase in Growth Rate
of 0.99% due to the decrease in the funds of the company.
• During the year 2017 the total assets was ₹ 89667.95 crores but in 2016 it was
₹94170.22 crores which shows an increase in Growth Rate of -4.78% due to the
decrease in the funds of the company.
• In schedule change in working capital, during the year 2015-16 it is inferred there is
an increasing in working capital. Because it was decrease in liabilities and increase
in assets.
53
• In the year 2012-13 it is inferred there is a decrease in working capital. Because it
was increasing in liabilities and decrease in assets.
SUGGESTION
• The company has faced decrease in the Working Capital in this year i.e. 2017
which was better in the previous year. The Company should take necessary steps
to maintain the ideal current asset ratio by increasing in current assets.
• The ideal Current Ratio is 2:1 but it is found that among the five years, the best
has been 0.8015 for the year 2017. The lowest has been this year (2014) which is
0.4017 so the organization has to maintain this as close to 2:1.
• Seeing the Quick Ratio, the year 2014 has been the lowest of 0.3601, but seeing
the other previous years it has been at a less changing rate. Thus the company
needs to be seeing to maintain the previous ratios or even bett er.
• Absolute Liquid Ratio has been seen to be at a highly increasing rate to the
maximum at 0.094 in the year 2016 from the lowest rate of 0.046 in the year 2014
but then a slight decrease has been seen in this year of 2017 to 0.065. So the
Company needs to keep up to the rise in had in the previous years.
• The Comparative Balance Sheet in the year 2013, the total assets was ₹ 96507
crores but in 2012 it was ₹92836.17 crores which shows an increase in Growth
Rate of 3.95% due to the increase in the funds of the company. This change needs
to be maintained by the company for the upcoming years.
• The Working Capital is seen using the Schedule Change in Working Capital has
been decreasing in the five years except for the years 2014-2015 and the year
2016-2017 has been seen as an increase in Working Capital which needs to be
maintained as for the following coming years.
54
CONCLUSION
In the present study I have analyzed the working capital management INDIA
INFOTECH LIMITED.
The study involves practical and conceptual over view of decisions
concerning current assets like cash and bank balance ,inventories,sundry debtors, loans
and advances, other current assets and current liabilities like sundry creditors, securities
and other deposits, other current liabilities and provisions of INDIA INFOTECH. Was
with the objective of maximizing the overall net profit of the bank. And complete
synchronization and coordination among the working capital components which shall
contribute to optimum level of operations. Mismanagement of each or any of these
components shall be detrimental to the objectives of efficient operation, profitability
and maximization of overall value of the bank.
The working capital limits would be considered only after the pr oject nearing
completion and after ensuring control over the inventory. The inventory is a great
concern for INDIA INFOTECH and it need proper procurement and management.
The company have sufficient reserve and surplus and
reserve and surplus has increases every year. After going through the different aspects
of the industry departments and the awards it has received in different fields. There is
good relationship between the directors and employee. The managemen t concerned
about employees complete health and wealth
55
BIBILOGRAPHY
BOOKS:-
 I.M. PANDEY –FINANCIAL MANAGEMENT

 S.N. MAGESHWARE SULTAN CHAND & SONS – FINANCIAL MANAGEMENT
 T.S.REDDY & Y. HARIPRASAD REDDY – MANAGEMENT ACCOUNTING
WEBSITES:-
 https://www.india infotechgroup.in/
 http://www.india infotech.in/if_investor_desk.aspx?display=finance_a_reports
 http://profit.ndtv.com/stock/india infotech -ltd_ if/financials
56
ANNEXURE
57
INDIA INFOTECH LTD
BALANCE SHEET AS ON 31ST MARCH 2012 TO 31ST MARCH 2013
PARTICULAR 2013 2012
Equity and liabilities shareholder’s funds 18116.88 7070
Share Capital 10823.97 8203.34
Reserves & surplus 28940.85 15273.34
Long-term borrowings 28516.25 40351.15
Deferred tax liabilities (net) 7759.93 9998.42
Other long term liabilities 865.99 782.9
Long term provisions 291.26 215.66
37433.43 51348.13
Current liabilities
Short-term borrowings 9384.2 7290.32
Trade payables 3784.92 3572.24
Other current liabilities 13266.85 14591.07
Short-term provisions 3696.75 761.07
30132.72 26214.7
96507 92836.17
Tangible assets 71009.37 69419.64
Intangible assets 20.09 37.54
Capital work-in-progress 1402.84 1002.05
Non-current investments 7.75 12.75
Long-term loans & advances 9654.97 8769.71
Other non-current assets 71.59 122.67
82166.61 79364.36
Current assets
Inventories 968.42 873.11
Trade receivables 8442.06 7785.79
Cash & bank balances 1543.63 1360.03
Short term loans advances 1952.03 1580.91
Other current accounts 1434.25 1871.97
14340.39 13471.81
TOTAL 96507 92836.17
58
INDIA INFOTECH LTD
PARTICULARS 2014 2013
Equity and liabilities shareholder’s funds
Share Capital 8553.62 18116.88
Reserves & surplus 22085.5 10823.97
30639.12 28940.85
Long-term borrowings 25287.97 9384.2
Deferred tax liabilities (net) 8336.37 7759.93
Long term provisions 264 291.26
34774.95 37433.43
Current liabilities
Short-term borrowings 10942.49 9384.2
Other current liabilities 15315.88 13266.85
32354.12 30144.05
97768.19 96518.33
Tangible assets 73936.35 71009.37
Capital work-in-progress 1403.72 1402.84
Long-term loans & advances 9074.66 9666.3
84774.82 82177.94
Current assets
Inventories 1347.58 968.42
Trade receivables 777058 8442.06
Cash & bank balances 1509.24 1543.63
Short term loans advances 2206.02 1952.03
Other current accounts 160.39 1434.25
12999.37 14340.39
TOTAL 97768.19 96518.33
59
INDIA INFOTECH LTD
PARTICULARS 2015 2014

Share capital 8,553.62 8,553.62
Reserves and surplus 27,065.27 22,085.50
Total 35,618.89 30,639.12
Long-term borrowings 19,179.75 25,287.97
Deferred tax liabilities (net) 8,875.15 8,336.37
Long-term provisions 589.91 264.00
Total 29,496.08 34,774.95
Current liabilities
Short-term borrowings 9,967.33 10,942.49
Other current liabilities 18,928.25 18,251.18
Short-term provisions 852.88 2,229.36
30,195.68 32,354.12
Total 95,310.65 97,768.19
Assets
Non-current assets
Fixed assets
Tangible assets 70,514.56 73,936.35
Capital work-in-progress 907.42 1,403.72
Long-term loans and advances 8,198.78 9,074.66
Total 80,055.25 84,774.82
Current assets
Inventories 1,499.70 1,347.58
Trade receivable 9,018.15 7,995.64
Cash and bank balance 1,660.80 1,509.24
Short-term loans advances 2,587.13 1,980.52
Other current assets 489.62 160.39
15,255.40 12,993.37
Total 95,310.65 97,768.19
60
INDIA INFOTECH LTD
Share capital 9,124.35 8,553.62
Reserves and surplus 42,229.47 27,065.27
TOTAL 51,353.82 35,618.89
Long –term borrowings 11,568.88 19,179.75
Deferred tax liabilities(net) 9,037.29 8,875.15
Long-term provisions 359.30 257.57
TOTAL 21,786.93 29,163.74
Current liabilities
Total-term borrowings 4,971.47 9,967.33
Other current liabilities 41,856.73 19,260.59
TOTAL 48218.44 30,528.02
94,359.19 95,310.65
Asset
Non-current asset
Fixed assets
Tangible assets 71,589.47 70,514.56
Intangible asset 166.61 171.03
Capital work-in progress 1,623.38 907.42
Non-current and investments 5.75 10.75
Long-term loans and advances 5,618 8,198.78
Other non-current assets . 252.71
TOTAL 79,004.20 80,055.25
Current assets
Inventories 1,833.33 1,499.70
Trade receivable 7,302.44 9,018.15
Cash and bank balances 1,958.55 1,660.80
Short-term loans and advances 4,055.31 2,587.13
Other current assets 205,36 489.62
TOTAL 15,35499 15,255.40
94,359.19 95,310.65
61
INDIA INFOTECH LTD
Assets
Non- current assets
Property, plant and equipment 69,008.48 71,048.25
Capital work-in-progress 177.28 1,623.38
Investment properties 259.29 264.47
Other intangible assets 120.02 166.61
Financial assets
Investments 5.75 5.75
Other financial assets 2,751.67 2,678.00
Income tax assets 155.50 305.52
Other non- current assets 2,192.16 2,456.03
TOTAL 74,670.15 78,548.01
Current assets
Inventories 1,832.11 1,833.33
Financial assets
Trade receivables 7,541.69 7,302.44
Cash and cash equivalents 1,155.68 1,838.21
Bank balances other than above 68.99 120.34
Other financial assets 466.50 511.88
Other current assets 3,932.83 4,016.01
TOTAL 14,997.80 15,622.21
Total assets 89,667.95 94,170.22
Equity
Equity share capital 9,124.35 9,124.35
Other equity 44,998.82 42,268.32
TOTAL 54,123.17 51,392.67
Liabilities
Non- current liabilities
Borrowings 5,954.52 11,540.75
Other financial liabilities 810.55 804.92
Provisions 503.48 359.30
Deferred tax liabilities (net) 8,960.94 8,841.85
Other non-current liabilities 604.46 508.86
TOTAL 16,833.95 22,055.68
Current liabilities
62
Borrowings 6,314.92 4,971.47
Other financial liabilities 10,250.22 13,514.55
Provisions 451.07 815.16
Current tax liabilities (net) 209.18 45.69
Other current liabilities 1,042.69 845.61
TOTAL 18,710.83 20,721.87
Total equity and liabilities 89,667.95 94,170.22
63
INDIA INFOTECH LTD
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2013
PARTICULARS Year Ended Year Ended

31.03.2013 31.03.2012
A Cash flows from operating activities
Profit before tax

Adjustments for: 6358.75 6206.49
Depreciation and amortization expense 8233.59 6959.86

Interest expenses 5912.30 6482.14
Interest income (32.18) (21.57)
Dividend income (2.92) (0.96)
Loss on sale of fixed assets (net) 31.36 3.25
Advances and bad debts written off 0.90 75.32
Provision for doubtful advances and debts 43.00 5.00
Credit balance written back (61.06) (9.70)
Operating profit before working capital changes Adjustments 20483.74 19699.83
for:
(Increase) / decrease in trade receivables (699.27) (933.72)

(Increase) / decrease in loans and advances and other current (1873.30) (961.54)
assets
(Increase) / decrease in inventories (95.31) (265.65)
Increase / (decrease) in trade payables, other liabilities and (92.74) 528.40
provisions
Cash generated from operating activities 17723.12 18067.32
Direct taxes paid (net of refunds) (1311.87) (1573.31)
Net cash generated from operations (A) 16411.25 16494.01
B Cash flows from investing activities
Purchase of fixed assets (including capital advance) (9140.68) (24335.26)

Proceeds from sale of fixed assets 74.42 88.97
Encashment / (placement) of fixed deposits with bank 55.67 (203.38)
Sale / (purchase) of non-current investments 5.00 (0.25)
64
Interest received 18.91 24.81
Dividend income 2.92 0.96
Net cash (used in) investing activities (B) (8983.76) (24424.15)
C Cash flows from financing activities
Proceeds from issue of shares (including securities premium) 12500.00 -

Share issue expenses (104.88) (435.41)
Repayment of public deposits (net) (607.33) (308.84)
Repayment of unsecured loans from corporates (55.00) (2460.00)
Proceeds from short term borrowings (net) 2148.88 893.11
Proceeds from long term borrowings 9317.98 30287.11
Repayment of long term borrowings (21079.68) (12340.78)
Dividend paid and tax thereon (3040.26) (1725.56)
Interest and processing fees paid (6319.01) (6268.11)
Net cash from / (used in) financing activities (C) (7239.30) 7641.52
Net increase / (decrease) in cash and cash equivalents 188.19 (288.62)
(A+B+C)
Cash and cash equivalents at the beginning of the year 1279.32 1567.94
Cash and cash equivalents at the end of the year 1467.51 1279.32
Cash and cash equivalents comprise 376.89 359.71
Cash on hand
Cheque / drafts in hand / transit 57.03 87.33
Balances with banks
- in current accounts 820.81 752.60

- in deposit accounts (with maturity up to 3 months) 188.81 64.33
Cash in transit 23.97 15.35
Cash and cash equivalents as per note 17 to the financial 1467.51 1279.32
statements
Restricted Cash
Fixed deposits pledged with banks 91.77 20.00
65
INDIA INFOTECH LTD
PARTICULARS YEAR ENDED YEAR ENDED

31 MARCH 31 MARCH
2014 2013
A. Cash flows from operating activities
Profit before tax 7676.78 6358.75
Adjustments for:
Depreciation and amortization expense 8661.60 8233.59
Interest expenses 5984.00 5912.30
Provision for doubtful advances and debts 25.00 43.00
Credit balance written back (76.27) (61.06)
Adjustment for Exceptional item (663.72) –
Operating profit before working capital changes 21775.77 20483.74
Adjustments for:
(Increase) / decrease in trade receivables 657.92 (699.27)
(Increase) in loans and advances and other current assets (364.69) (1873.30)
(Increase) in inventories (379.16) (95.31)
Increase / (decrease) in trade payables, other liabilities 127.05 (92.74)
and provisions
Cash generated from operating activities 21816.89 17723.12
Direct taxes paid (net of refunds) (1490.70) (1311.87)
Net cash generated from operations ( A ) 20326.19 16411.25
B. Cash flows from investing activities
Purchase of fixed assets (including capital advance) (10935.80) (9140.68)
Proceeds from sale of fixed assets 1906.10 74.42
Encashment / (placement) of fixed deposits with bank (109.53) 55.67
Sale / (purchase) of non-current investments (3.00) 5.00
Dividend income received 0.99 2.92
Net cash (used in) investing activities ( B ) (9106.57) (8983.76)
C. Cash flows from financing activities
Proceeds from issue of shares (including securities – 12500.00
premium)
Share issue expenses – (104.88)
Repayment of public deposits (net) (259.62) (607.33)
Repayment of unsecured loans from corporates – (55.00)
Proceeds from short term borrowings (net) 1558.29 2148.88
66
Proceeds from long term borrowings 11926.31 9317.98
Repayment of long term borrowings (12759.36) (21079.68)
Dividend paid and tax thereon (5635.94) (3040.26)
Interest and processing fees paid (6012.67) (6319.01)
Net cash (used in) financing activities ( C ) (11182.99) (7239.30)
Net increase in cash and cash equivalents (A+B+C) 36.63 188.19
Cash and cash equivalents at the beginning of the year 1467.51 1279.32
Cash and cash equivalents at the end of the year 1504.14 1467.51
Cash and cash equivalents comprise:
Cash on hand 366.25 376.89
Cheques / drafts in hand / transit 41.79 57.03
Balances with banks
– in current accounts 1072.44 820.81
– in deposit accounts (with maturity up to 3 months) 5.00 188.81
Cash and cash equivalents as per note 17 to the financial 1504.14 1467.51
statements
Restricted Cash
67
INDIA INFOTECH LTD
PARTICULARS As at As at
31st March 2015 31st March 2014
Profit before tax 13,790.21 7,676.78
Adjustments for :
Depreciation and amortisation expense 8,766.03 8,661.60
Finance costs 5,859.98 5,984.00
Provision for doubtful advances and debts - 25.00
Credit balances written back (57.94) (76.27)
Prior period items 8.83 -
Adjustment for Exceptional item (371.63) (663.72)
Operating profit before working capital changes 28,198.80 21,775.77
Adjustments for :
(Increase) / decrease in trade receivables (1,022.51) 657.92
(Increase) in loans and advances and other current (1,309.84) (364.69)
assets
(Increase) in inventories (152.12) (379.16)
Increase in trade payables, other liabilities and 328.82 127.05
provisions
Cash generated from operating activities 26,043.15 21,816.89
Direct taxes paid (net of refunds) (2,868.79) (1,490.70)
Net cash generated from operations (A) 23,174.36 20,326.19
Purchase of fixed assets (including capital advance) (8,589.11) (10,935.80)
Proceeds from sale of fixed assets 3,681.47 1,906.10
Encashment/(Placement) of fixed deposits with bank 0.53 (109.53)
(Purchase) of non-current investments - (3.00)
Interest received - 34.67
Net cash (used in) investing activities (B) (4,906.09) (9,106.57)
Repayment of public deposits (net) - (259.62)
Proceeds/(repayment) from/of short term borrowings (975.16) 1,558.29
(net)
Proceeds from long term borrowings 10,100.72 11,926.31
Repayment of long term borrowings (15,337.40) (12,759.36)
68
Dividend paid and tax thereon (6,037.73) (5,635.94)
Interest and processing fees paid (5,866.04) (6,012.67)
Net cash (used in) financing activities (C) (18,115.61) (11,182.99)
Net increase in cash and cash equivalents (A+B+C) 152.66 36.63
Cash and cash equivalents at the beginning of the 1,504.14 1,467.51
year
Cash and cash equivalents at the end of the year 1,656.80 1,504.14
Cash on hand 462.14 366.25
Cheques/drafts in hand/transit - 41.79
Balances with banks
- in current accounts 1,171.04 1,072.44
- in deposit accounts (with maturity up to 3 months) 21.21 5.00
Cash and cash equivalents as per note 17 to the 1,656.80 1,504.14
financial statements
Restricted Cash
69
INDIA INFOTECH LTD
Particulars Year ended Year ended

31 March 2016 31 March 2015
Adjustments for :
Depreciation and amortization expense 8,995.04 8,766.03
Finance costs 3,069.32 5,859.98
Provision for doubtful advances and debts 69.00 -
Prior period items - 8.83
Adjustment for Exceptional item - (371.63)
Operating profit before working capital 27,458.46 28,198.80
changes
Adjustments for :
(Increase) / decrease in trade receivables 1,665.71 (1,022.51)
(Increase) in loans and advances and other (433.48) (955.97)
current assets
(Increase) in loans and advances and other (433.48) (955.97)
current assets
Increase in trade payables, other liabilities 1,500.54 328.82
and provisions
Purchase of fixed assets (including capital (11,090.59) (8,589.11)
advance)
Proceeds from sale of fixed assets 91.51 3,681.47
Encashment of fixed deposits with bank 137.57 0.53
Sale of non-current investments 5.00 -
Interest received 13.25 -
Proceeds from issue of shares (including 11,700.03 -
securities premium)
70
Share issue expenses (351.66) (353.87)
(Repayment) of short term borrowings (net) (4,995.86) (975.16)
Proceeds from long term borrowings 3,970.55 10,100.72
Net increase in cash and cash equivalents 181.41 152.66
(A+B+C)
Cash and cash equivalents at the beginning 1,656.80 1,504.14
of the year
Cash and cash equivalents at the end of the 1,838.21 1,656.80
year
Cash on hand 389.73 462.14
Balances with banks
- in current accounts 1,045.53 1,045.53 1,171.04
- in deposit accounts (with maturity up to 3 402.21 21.21
months)
Cash and cash equivalents as per note 17 to 1,838.21 1,656.80
the financial statements
Restricted Cash
71
INDIA INFOTECH LTD
Cash Flow Statement for the year ended 31 March 2017
PARTICULARS Year ended Year ended
31 March 2017 31 March 2016
Adjustments for :
Depreciation and amortization expense 9,525.65 8,969.54
Impairment of non-financial assets 292.20 -
Finance costs 2,374.50 3,126.99
Interest income from fixed deposit (35.67) (55.02)
Rent income from investment property (126.75) (121.70)
Provision for doubtful debts - 69.00
Unwind of discount on security deposit (201.14) (174.04)
Notional rent expense 191.73 201.28

Rent income arising on fair valuation of security (6.25) (3.07)
deposits received
Fair valuation of financial liabilities 7.81 4.29
Finance cost recognized based on effective interest 17.90 31.51
cost
Actuarial gain / (loss) recognized in other 116.19 (461.20)
comprehensive income
Operating profit before working capital changes 22,746.31 27,368.92
Adjustments for :
(Increase) / decrease in trade receivables (239.25) 1,665.71
(Increase) in financial and other current assets (837.77) (204.78)
(Increase) / Decrease in Inventories 1.22 (333.63)
Increase in trade payables, other liabilities and 87.74 1,297.35
provisions
Purchase of property, plant and equipment and other (6,270.47) (11,090.59)
intangible assets
(including capital work in progress and capital
advances)
72
Proceeds from sale of property, plant and equipment 59.82 91.51
Encashment of fixed deposits with bank 52.59 137.57
Rent received from investment property 126.75 121.70
Sale of non-current investments - 5.00
Proceeds from issue of shares (including securities - 11,700.03
premium)
Share issue expenses - (351.66)
Proceeds from/(repayments) of short term 1,343.45 (4,995.86)
borrowings (net)
Proceeds from long term borrowings 811.00 3,970.55

Net increase in cash and cash equivalents (A+B+C) (682.53) 181.41
Cash and cash equivalents at the beginning of the 1,838.21 1,656.80
year
Cash and cash equivalents at the end of the year 1,155.68 1,838.21

Cash on hand 302.71 389.73
Cheques/drafts on hand 22.39 -
Balances with banks
- in current accounts 830.53 1,045.53
- in deposit accounts (with maturity up to 3 months) - 402.21
Cash and cash equivalents as per note 10 to the 1,155.68 1,838.21
financial statements
73

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CHAPTER-I

DEFINITION AND CLASSIFICATION OF WORKING CAPITAL

The term “working capital” is often referred to “circulating capital” which is

STRUCTURE OF WORKING CAPITAL

STRUCTURE OF CURRENT ASSETS AND CURRENT LIABILITIES

Bank Overdraft Cash and Bank Balance

Creditors Inventories: Raw-Materials

Outstanding Expenses Spare Parts

Bills Payable Accounts Receivables

Short-term Loans Bills Receivables

Proposed Dividends Accrued Income

Provision for Taxation, etc. Prepaid Expenses

CIRCULATION OF WORKING CAPITAL

CONCEPT BASED WORKING CAPITAL

CONCEPTS OF WORKING CAPITAL

TIME BASED WORKING CAPITAL

O’ Donnel correctly explained the significance of adequate working capital and

II. External Factors

MEASUREMENT OF WORKING CAPITAL:

a) Percent of Sales Method

b) Regression Analysis Method

c) Operating Cycle Method

ii) Work-in-process: Number of days of work-in-process = W ÷ K/365

iii) Finished products inventory period = G ÷F/365

IV) Average collection period of Debtors = D ÷S/365

IMPORTANCE OR ADVANTAGES OF ADEQUATE WORKING CAPITAL

In 1970s the main challenges for software industry are

Software Industry- Impact on Indian Economy

. Challenges of Indian Software Industry

• To analysis the working capital of INDIA INFOTECH LTD.

• To analysis the ratios of the company.

• To find the schedule of change in working capital.

• To analysis the comparative balance sheet of the company.

• To analysis the common size of the balance sheet.

• To know the cash flow statement.

There are two types of data

TOOLS USED FOR STUDY

• Current Ratio = Current Asset / Current Liabilities

• Absolute Liquid Ratio = Absolute Liquid Assets / Current Liabilities

• SCHEDULE OF CHANGE IN WORKING CAPITAL:

A measure of both a company’s efficiency and its short-term financial health.

• COMPARATIVE STATEMENTS ANALYSIS:

• COMMON SIZE STATEMENT ANALYSIS:

DATA ANALYSIS AND INTERPRETATION

Quick Ratio = Quick or Liquid Assets

YEAR CURRENT CURRENT CURRENT RATIO

2012-2013 143403.39 30132.72 0.4759

CHART SHOWING THE CURRENT RATIO

CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO (CR)

2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 0.8015

YEAR LIQUID ASSETS CURRENT LIQUID RATIO

2012-2013 13371.97 30132.72 0.4437

CHART SHOWING THE LIQUID RATIO

LIQUID ASSETS CURRENT LIABILITIES LIQUID RATIO (LR)

YEAR ABSOLUTE CURRENT ABSOLUTE

ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES ABSOLUTE LIQUID RATIO (ALR)

2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

TABLE NO. (4): SHOWING THE SCHEDULE CHANGES IN WORING CAPITAL AS

SCHEDULE CHANGE IN WORKING CAPITAL AS ON 2012-2013

Working capital (A-B) 12742.89 15792.33

SCHEDULE CHANGE IN WORKING CAPITAL AS ON 2013-2014

Working capital (A-B) 15804.5 19360.31

SCHEDULE CHANGE IN WORKING CAPITAL AS ON 2014-2015