EXECUTIVE SUMMARY

Working capital management is an important part in financial management part.

Improper management of working capital, i.e., too much or too low working
capital may suffer firms, so an optimal level of working capital is a key to
smooth inflow of profit.

Working capital refers to a company’s current assets. Current assets are cash
and equivalents, accounts receivable, and inventory. Working capital
management is applying investment and financing decisions to current assets.
Working capital management is a very important component of corporate
finance because it directly affects the liquidity and profitability of the firm
referring to the theory of risk and return, investment with or risk will result to
more return.

Working capital management is an accounting process to efficiently maintain

the components of the working capital with respect to each other. It should also
ensure that the company has sufficient cash flows so as to meet the company’s
expenses and short term liability. A good working capital management, the
management will use a combination of policies and techniques for a
management of working capital. The policies aim at managing the current assets
and the short term financing, such that cash flows and return are acceptable.

Liquidity is a precondition to ensure that firms are able to meet its short-term
obligations and its continued flow can be guaranteed from a profitable venture.
The importance of cash as an indicator of continuing financial health should not
be surprising in view of its crucial role within the business. This requires that
the business must be run both efficiently and profitably. In the process, an asset-
liability mismatch may occur which may increase firm’s profitability in the
short run but at a risk of its insolvency. On the other hand, too much focus on
liquidity will be at the expense of profitability.
 CHAPTER 1:

INTRODUCTUON
1.1) THEORITICAL BACKGROUND

INTRODUCTION TO WORKING CAPITAL

Empirical observations show that the financial managers have to spend

much of their time to the daily internal operations relating to current
assets and current liabilities of the firms. As the largest portion of the
manager’s time is devoted to working problems, it is necessary to manage
working in the best possible way to get maximum benefit. The effective
management of the business, among other things primarily depends upon
the manner in which the short-term assets and short-term sources of
financing are managed. The management of current assets consists of
inventories, accounts receivable and cash & bank balances as the major
components. There is a difference between current assets and fixed assets
in terms of liquidity. A firm requires many years to recover the initial
investments in fixed assets such as inventories and book debts are realizes
during the firm’s working capital cycle, which is usually less than a year.
Working capital is that a proportion of a company’s total capital, which is
employed in short-term operations.

Even though. It is one segment of the capital structure of a business; it

constitutes an inter-woven part of the total integrated business system.
Therefore, neither it can be regarded as an independent entity. Nor, can
the working capital decisions be taken in isolation. Thus, a study in this
field is of major importance to both internal and external analysis, for it
close relationship with the day-to-day operations of a business.

There are many aspects of working capital management, which form an

important function of a financial manager:-
1. In most of the organisation working capital represents a large portion
of the firm’s investment in assets.
2. Working capital has greater significance not only for small firms but
also for large firms.
3. The need for working capital is directly related to sales growth.
4. Most of the work dealing with working capital management is
confined to the balance sheet, which is directed towards optimizing
the levels of cash and marketable securities, receivable and
inventories. For the most part, optimization of these current assets is
isolated from the optimization of the other current assets and the
overall valuation of the firm.

The decision is concerning cash and resources, receivables,

investments and current liabilities is with an objective of maximising
the overall value of the firm. Once decisions are reached these areas.
The levels of working capital are also reduced.

An appropriate level of working capital is to be maintained as the

excessive working capital interrupts the smooth flow of the business
activity and curbs profitability. Also, there are a lot of circumstances
where shortage of working capital has proved to be the factor for
business failure. Operating plans are out of control and the corporate
objective get blurred. The suppliers and the creditors give the firm an
adverse credit rating and tighten up credit terms.

The problem of managing working capital has got a separate entity as

against different decision making issues concerning current assets
individually. Working capital has to be regarded as one of the
conditioning factors in the long run operations of a firm. Which is
often inclined to treat it as an issue of short-run analysis and decision-
making.

The management of working capital hence involves constant vigilance

to ensure that the right quantum is available on a continuing basis to
support and promote the activities. Sound financial and statistical
techniques, supported by judgement, should be used to predict the
quantum of the working capital needed at different time periods.

Working capital management is significant in financial management.

It plays a vital role in keeping the wheel of the business running.
Every business requires capital, without it cannot be promoted.
Investment decisions is concerned with investments in current assets
and fixed assets. Working capital plays a key role in a business
enterprise just as the role of heart in human body. It acts as a grease to
run the wheels of the fixed assets. Its effective provision can ensure
the success of the business while its inefficient management can lead
not only to loss but also to the ultimate downfall of what otherwise
might be considered as a promising concern. Efficiently of a business
enterprise depends largely on its ability to its working capital.
Working capital management is one of the important facts of affirms
overall financial management.

For increasing shareholders wealth a firm has to analyse the affect of

fixed assets and current assets on its return and risk working capital
management of current assets. The management of current assets on
the basis of the following points:
 Current assets are for short period while fixed assets are for
more than 1year.
  The large holdings of current assets, especially cash, strengthens
liquidity positions but also reduce overall profitability and to
maintain an optimal level of liquidity and profitability, risk
return trade off is involved holding current assets.
 Only current assets can be adjusted with sales fluctuating with
the short run, thus the firm has greater degree of flexibility in
managing current assets. The management of current assets help
affirm in building a good market reputation regarding its
business and economic conditions.

Decisions relating to working capital and short term financing are referred tp as
working capital management. These involve managing the relationship between
a firms short term assets and its long term liabilities. The goal of working
capital management is to ensure that the firm is able to continue its operations
and that it has sufficient cash flow to satisfy both maturing short term debt and
upcoming operational expenses.

A managerial accounting strategy focusing on maintaining efficient levels of

both components of working capital, current assets, and current liabilities, in
respect to each other. Working capital management ensures a company has
sufficient cash flow in order to meet its short term debt obligations and
operating expenses.

CIRCULATION SYSTEM OF WORKING CAPITAL

In the beginning the funds are obtained from the issue of shares, often
supplemented by long term borrowings. Much of these collected funds are used
in purchasing fixed assets and remaining funds are used for day to day
operations as pay for raw materials, wages overhead expenses. After this
finished goods are ready for sale and by selling the finished goods either
account receivable are created and cash is received. In this process profit is
earned. This account of profit is used for paying taxes, dividend and the balance
is ploughed in the business.

Working capital is considered to efficiently circulate when it runs over quickly.

As circulation increases, the investments in current assets will decrease. Total
assets is the sum of all assets, current and fixed. The asset turnover ratio
measures the ability of a company to use its assets to efficiently generate sales.
The higher the ratio indicates that the company is utilizing all its assets
efficiently to generate sales. Companies with low profit margins tend to have
high asset turnover.

A firm is required to maintain a balance between liquidity and profitability

while conducting its day to day operations. Liquidity is a precondition to ensure
that the firms are able to meet its short term obligations and its continued flow
can be guaranteed from a profitable venture. The importance of cash as an
indicator of continuing financial health should not be surprising in view of its
crucial role within the business. This requires that business must be run both
efficiently and profitably in the short run but at a risk of its insolvency. On the
other hand, too much focus on liquidity will be at the expense of profitability.
Thus, the manager of the business entity is in a dilemma of achieving desired
tradeoff between liquidity and profitability in order to maximize that the value
of the firm.

Working capital management deals with the most dynamic fields in finance,
which needs constant interaction between finance and other functional
managers. The finance manager acting alone cannot improve the working
capital situation.

In recent times a few case studies regarding management of working capital in

selected companies have been in order to make in depth analysis of the several
experts of working capital management. The finding of such studies not only
throws new lights on the technical loopholes of management activities of the
concerned companies, but also helps the scholars and researchers to develop
new ideas, techniques and methods for effective management of working
capital.

NATURE OF WORKING CAPITAL

Working capital management is concerned with the problems that arise in

attempting to manage the current assets, the current liabilities and the
interrelationship that exists between them. The term current refers to those
assets which in ordinary course of the business can be or will be converted into
cash within one year without undergrowing a diminution in value and without
disrupting the operation of the firm. The major current assets are cash,
marketable securities, accounts receivables and inventory. Current liabilities are
those liabilities, which are intended at their inception to be paid in the ordinary
course of the business within a year out of the current or the earning of the
concern. The basic current liabilities are accounts payable, bills payable, bank
overdrafts and outstanding expenses. The goal of working management is to
manage the firms assets and liabilities in such a way that a satisfactory level of
working capital is maintain. This is because if the firm cannot maintain a
satisfactory level of working capital is maintain. This is because if the firms
cannot maintain a satisfactory level of working capital, it is likely to become
insolvent and may even be forced into bankruptcy. The current assets should be
large enough to cover its current liabilities in order to ensure a reasonable
margin of safety. Each of the short term source of financing must be
continuously managed to ensure that they are obtained and used in the way.
Interaction between current liabilities is therefore the main theme of the
management of working capital.
DEFINITIONS OF WORKING CAPITAL

Working capital has been defined in several ways as given below.

Operating capital:

As the working capital is the capital required to operate the business

and is the capital invested in the current assets. It is called as operating
capital.

Circulating capital:

Interchanging used word for working capital is circulating capital.

Gerestenberg has suggested this term ‘circulating capital’ as all the
assets of business change form one form to another.

CONCEPTS OF WORKING CAPITAL

Conceptually, Working capital is either explained as:- Net Working

Capital or Gross Working Capital. These Concepts are not exclusive;
rather they have equal significance form management viewpoint.
Gross working capital refers to the firm’s investment in current assets.
Net working capital refers to the difference between current assets and
current liabilities.

GROSS WORKING CAPITAL

It is the capital invested in the total current assets of the enterprises.

Constituents of current Assets

1. Cash-in-Hand

2. Bill Receivable

3. Sundry Debtors

4. Short-term investments

5. Prepaid expenses

6. Outstanding income

Inventories or Stock as

1. Raw materials

2. Work-in-progress

3. Stores & Spares

4. Finished Goods
Constituent of Current Liabilities

1. Bills Payable

2. Sundry Creditors

3. Outstanding Expenses

4. Short-term Loans, Advances and Deposits

5. Dividend payable

6. Bank Overdraft

7. Provision for Taxation

NET WORKING CAPITAL

It is the excess of current assets over capital liabilities.

Net Working Capital = Current Assets – Current Liabilities

 Types of Working Capital

On the basis of time, working capital may be defined as:

1. Permanent or Fixed working capital

Regular working capital Reserve working capital

2. Temporary or Variable Working Capital

Seasonal Working capital Special Working Capital

Permanent Working Capital

There is always a minimum level of current assets, which is continuously
required by the enterprise to carry out its normal business operations.

For eg: Every firm has to maintain a minimum level of raw materials, work-in-
progress. Finished goods and cash balance. The minimum level of current assets
called permanent or fixed working capital, as this part of capital is permanently
blocked in current assets.

Regular Working Capital

It is required to ensure circulation of current assets from cash to inventories to

receivables to cash and so on.

Reserve Working Capital

Reserve Working Capital is otherwise called as Cushion Working Capital. It

refers to the short term financial arrangement made by the business units to
meet uncertain changes or to meet uncertainties. A firm is always working with
the expectation of some risks which may be controllable or uncontrollable.

It is the excess amount over the requirement for regular working capital, it may
be provided for contingencies that may arise at unstated periods such as strikes,
rise in prices, depression etc.

Temporary Working Capital

It is the amount of working capital. Which is required to meet changes in

production and sales activities needed for short-term period or temporary
period. Temporary working capital is also known as fluctuating working capital.

Seasonal working capital

Seasonal working capital is the working capital, which is required to seasonal

needs of the enterprise only.
Special working capital

Special working capital is that part of working capital, which is required to meet
special contingencies such as extensive marketing campaigns for conducting
research, etc.

Additional working capital is to be arranged to meet special exigencies such as

launching of extensive marketing campaign, purchase of goods for stock in
view of future increase in price etc.

Variable Working capital

Amount Fixed Working Capital

Period

GROWTH FIRM PERMANENT AND TEMPORARY WORKING CAPITAL

OPERATING CYCLE

Working Capital is required because of the time gap between sales and their
actual realization in cash. The time gap is technically termed as Operating Cycle
business.
During this time, certain expenses are to be met with such as payment for few
materials. Cost of storing and protecting raw materials, semi-finished and
finished goods held in inventory and various production expenses.

Hence the firm needs Working capital until such time as goods are produced,
sold and cash is realized. As this type of operating cycle repeats itself the firm
should continuously maintain certain level of working capital and this involves
the management of working capital.

The amount of working capital differs from time to time and from business to
business depending upon the operating cycle in each case. The shorter the
operating cycle the quicker the realisation of sales and hence lesser the amount
of working capital needs.

The typical operating cycle of a manufacturing firm, a non-manufacture or

trading firms and a service or financial firm is shown below:

OPERATING CYCLE OF A MANUFACTURING FIRM

Raw Materials Work-in-progress

Cash Finished Goods

Debtors Sale

i.e., Conversion of cash into raw materials

Conversion of Raw Materials into Work-in-progress

Conversion of Work-in-Progress into Finished Goods

Conversion of Finished Goods into Sales

Conversion of Debtors into Cash

1. OPERATING CYCLE OF A TRADING FIRM

Stock of Finished Goods

Cash Debtors

2. OPERATING CYCLE OF A SERVICE OR FINANCIAL FIRM

Cash Debtors

i.e., Operating Cycle includes the length of the time taken

Conversion of cash into Debtors

Conversion if Debtors into Cash

SOURCES AND USES OF WORKING CAPITAL

The major sources and uses of working capital are

1. Funds from business operations

 2. Other incomes

3. Sales of non-current assets

4. Long-term borrowings

5. Issue of additional equity capital or preference share capital

USES OF WORKING CAPITAL

1. Losses from business operations

2. Purchase of non-current assets

3. Redemption of debentures and preference shares

4. Dividends to shareholders

ADEQUATE WORKING CAPITAL

1. Adequate working helps in maintaining solvency of the business by

providing uninterrupted flow of production.

2. Sufficient working capital ensures regular supply of raw materials and

continuous production.
3. A concern having adequate working capital, high solvency and good
credit standing can arrange loans from banks and others on easy and
favourable terms.

4. Sufficient capital enables a business concern to make up prompt

payments and hence helps in creating and maintaining goodwill.

5. Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence it reduces cost.

6. Only concerns with adequate working capital exploit favourable market

conditions such as purchasing its requirements in bulk when the prices
are lower and by holding its inventories for higher price.

7. A company which has ample working capital can make regular payment
of salaries, wages and day-to-day commitments which raises the morale
of the employees, increases their efficiency, reduces wastage cost and
enhances production and profits.

8. Adequate working capital enables a concern to face business cries in

emergencies such as depression because during such periods, generally,
there is much pressure on working capital.

9. Sufficiency of working capital enables a concern to pay quick and regular

dividends to its investors, as there may not be much pressure to plough
back profits. This gains the confidence or its investors and creates a
favourable market to raise additional funds in the future.
10.Adequacy of working capital creates an environment of security,
confidence, high morale, and creates overall efficiency in a business.

INADEQUATE WORKING CAPITAL

A concern which has inadequate working capital pays its short-term

liabilities in time. Thus it will lose its reputation and shall not be able to get
good credit facilities.

It cannot buy its requirements in bulk and cannot avail discounts, etc., It
becomes difficult for the firm to exploit favourable market conditions and
undertake profitable projects due to lack of working capital the firm cannot
pay day to day expenses of operations, creates inefficiencies, increases cost,
and reduces the profit of the business.

The rate of return on investment also falls with the shortage of working
capital.

FACTORS DETEMINING WORKING CAPITAL

Nature or character of business

Size of the business or scale of operations

Production policy

Manufacturing process
 Seasonal variables

Working capital cycle

Rate of stock turnover

Credit policy

Business cycle

Earning capacity and dividend policy

Price level changes

Other factors

OBJECTIVES OF THE STUDY

The objectives of project are as follows:

1. To study concept of working capital & components of working capital.

 2. To study change of working capital.
3. To analyse profitability, liquidity & working capital position of the
company.

SCOPE OF THE STUDY

The management of working capital helps us to maintain the working capital at

a satisfactory level by managing the current assets and current liabilities. It also
helps to maintain proper balance between profitability, risk and liquidity of the
business significantly.

By managing the working capital, current liabilities are paid in time. If the firm
makes payment to the creditors for raw materials in time, it can have the
availability of raw materials regularly, which does not cause any obstacles in
production process.

Adequate working capital increases paying capacity of the business but the
excess working capital causes more inventory, increases the possibility of delay
in realization of debts. On the other hand, absence of adequate working capital
leads to decrease in return on investment. The goodwill of the firm is also
adversely affected due to the inability to pay current liabilities in time.

Hence, the management of working capital helps to manage all factors affecting
the working capital in the most profitable manner.

1.2) METHODOLOGY

The source of information that was used to prepare the report are
secondary data as all the financial information of the company is present in the
form of secondary data.
The techniques and tools used to analyse the financial data of the company are
the financial ratios which were very useful to interpret the balance sheet and the
profitless account of the company.

Theoretical concepts

1) Liquidity ratios

 Networking capital ratio

Networking capital = current assets – current liabilities

Networking capital ratio = networking capital/net assets

 Current ratio

Current ratio = current assets/current liabilities

 Quick ratio

quick ratio = current assets – investments/current liabilities

 Cash ratio

Cash ratio = cash/current liability

 Liquidity ratio
 Liquidity ratio = current assets – stock – prepaid expenses/ current
liability

2) Solvency Ratios

 Interest coverage ratio

Interest coverage ratio = earnings before interest tax/interest

 Debt equity ratio

Debt equity ratio = total liabilities/total capital or equity(net worth)

 Debt to Assets ratio

Debt to assets ratio = (total debt/total assets)*100

3) Profitability Ratios

 Profit margin ratio

Profit margin ratio = net income/sales

 Asset turnover ratio

Asset turnover ratio = net sales/average total assets

  Return on assets ratio

Return on assets = net income/average total assets

 Return on equity

Return on equity = net income/average shareholders equity

 Earnings per share

EPS = net income/average shares outstanding

4) Activity ratios

 Average collection period

Average collection period = debtors/average daily sales

 Inventory turnover ratio

Inventory turnover ratio = cost of goods sold/inventory

 Fixed asset turnover

Fixed asset turnover = sales/fixed assets

  Total asset turnover

Total asset turnover = sales/total assets

Limitations of the study:

The scope of the present study has been limited interns of period of study as
well as sources and nature of data. The period covered by the study extends
over 5years from F.Y 2014/15 to 2018/19. At the time of study, the data could
be available up to 2018/19. The limitations of the study are as follows,

1. The study is mainly on secondary data. It is done mostly on the basis of

and published financial documents, like balance sheet, profit and loss
account and other related journals, magazines and books etc.
2. The study follows with specific tools financial ratio analysis.
3. The lack of sufficient time and resources is another limitation of the
study. The study is fully on the student’s resources and is to be completed
within limited time. The report has taken only 5 years data for the study
from year 2014/15 to 2018/19.
4. The study is limited from the point of view of submission on partial
fulfilment of the requirement for the Master degree in Business
Administration (MBA).
 CHAPTER 2

REVIEW OF LITERATURE
The purpose of this chapter is to present a review of literature relating to the
working capital management. The following are the literature review by
different authors and different research scholars.

Pass C.L., Pike R.H: “An overview of working capital management and
corporate financing”(1984).Studied that over the past 40 years major
theoretical developments have occurred in the areas of longer-term investment
and financial decision making. Many of these new concepts and the related
techniques are now being employed successfully in industrial practice. By
contrast, far less attention has been paid to the area of short-term finance, in
particular that of working capital management. Such neglect might be
acceptable were working capital considerations of relatively little importance to
the firm, but effective working capital management has a crucial role to play in
enhancing the profitability and growth of the firm. Indeed, experience shows
that inadequate planning and control of working capital is one of the more
common causes of business failure.

Herzfeld B; ”How to Understand Working Capital Management”(1990).

Studied that “cash is king” –so say the money managers who share the
responsibility of running this country’s business. And with banks demanding
more from their prospective borrowers, greater emphasis has been placed on
these accountable for so-called working capital management. Working capital
management refers to the management of current or short-term assets and short-
term liabilities. In essence, the purpose of that function is to make certain that
the company has enough assets to operate its business. Here are things you
should know about working capital management.

SamilogluF. And Demirgunes K., “The Effect of working Capital

Management on Firm Profitability: Evidence from Turkey”(2008),Studied
that the effect of working capital management on firm profitability. In
accordance with this aim, to consider statistically significant relationships
between firm profitability and the components of cash conversion cycle at
length, a sample consisting of Istanbul Stock Exchange (ISE) listed.
Appuhami, Ranjith B A; “The impact of Firms’ Capital Expenditure on
Working Capital Management: Studied impact of firms’ capital expenditure
on their working capital management. The author used the data collected from
listed companies in the Thailand Stock Exchange. The study used Schulman and
Cox’s (1985) Net Liquidity Balance and Working Capital Requirement as a
proxy for working capital measurement and developed multiple regression
models. The empirical research found that firms’ capital expenditure has a
significant impact on working capital management. The study also found that
the firms’ operating cash flow, which was recognised as a control variable, has
a significant relationship with working capital management.
Hardcastle; “Working Capital Management”,(2009).

Studied that working capital, sometimes called gross working capital, simply
refers to the firm’s total current assets (the short-term ones), cash, marketable
securities, accounts receivable, and inventory. While long-term financial
analysis primarily concerns strategic planning, working capital management
deals with day-to-day operations. By making sure that production lines do not
stop due to lack of raw materials, that inventories do not build up because
production continues unchanged when sales dip, that customers pay on time and
that enough cash is on hand to make payments when they are due. Obviously
without good working capital management, no firm can be efficient and
profitable.

ThachappillyG. Working Capital Management Managers Flow of

Funds”,(2009)

“Describes that Working capital is the cash needed to carry on operations during
the cash conversion cycle, i.e. the days from paying of raw materials to
collecting cash from customers. Raw materials and operating supplies must be
bought and stored to ensure uninterrupted production. Wages, Salaries, utility
charges and other incidentals must be paid for converting the materials into
finished products. Customers must be allowed a credit period that is standard in
the business. Only at the end of this cycle does cash flow in again.

Beneda, Nancy; Zhang, yilei, ”Working Capital Management, Growth and

Performance of New public

Companies”, Credit & Financial Management Review, (2008)

Studied impact of working capital management on the operating performance

and growth of new public companies. The study also sheds light on the
relationship of working capital with debt level, firm risk, and industry. Using a
sample of initial public offerings (IPO’s), the study finds a significant positive
association between higher levels of accounts receivable and operating
performance. The study further finds that remaining control (i.e. lower amounts)
over levels of cash and securities, inventory, fixed assets, and accounts.

Dubey R, “Working Capital Management-an Effective Tool for

Organisational Success” (2008)

Studied The working capital in a firm generally arises out of four basic factors
like sales volume, technological changes, seasonal, cyclical changes and
policies of the firm. The strength of the firm is dependent on the working capital
as discussed earlier but this working capital is itself dependent on the level of
sales volume of the firm. The firm requires current assets to support and
maintain operational or functional activities.

By current assets we mean the assets which can be converted readily into cash
say within a year such as receivables, inventories and liquid cash. If the level of
sales is stable and towards growth the level of cash, receivables and stock will
also be on the high.
McClure B, Working Capital Works” (2007)

“Working Capital Works” describes that Cash is the lifeline of a company. If

this lifeline deteriorates, so does the company’s ability to fund operations,
reinvest and meet capital requirements and payments. Understanding a
company’s cash flow health is essential to making investment decisions. A good
way to judge a company’s cash flow prospects is to look at its working capital
management (WCM). Cash is king, especially at a time when fund raising is
harder than ever. Letting it slip away is an oversight that investors should not
forgive. Analysing a company’s working capital can provide excellent insight
into how well a company handles its cash, and whether it is likely to have any
on hand to fund growth and contribute to shareholder value.

Best Practices For Treasury And Working Capital Management:

The PricewaterhouseCoopers” Global Best Practices team researches and

writers about leading business practices in today’s global marketplace. Best
practices are the means by which leading companies have achieved top
performance, and they serve as goals for other companies striving for
excellence. Best practices are not the definitive answer to a business problem
but should serve as a source of creative insight for business process
improvement.

The New Liquidity Paradigm: Focus On Working Capital:

The article focuses on the efforts of corporate treasures to improve capital

management in line with the emergence with the new liquidity paradigm
brought about by the recent economic crisis. It routines some of the common
misperceptions about working capital optimization initiatives. It presents the
findings of an in-depth analysis of working capital-intensive industries
conducted by Citi’s Financial Strategy Group. It discusses the components of
working capital such as procure to pay and order to cash.

KPMG Report:

Working capital management This report tells us how companies in Europe

manage their Working Capital. It also tells us the relevance of Working Capital
management for a firm. 2.2 RESEARCH METHODOLOGY The previous
chapter discussed the objectives of this study and in this chapter 1 will discuss
about the research methodology which is followed to carry out this project i.e.
the universe.

Chalam G.V and Manohar Babu B.V: “ Observes on production

process”(1999)

They observed that liquidity performance is very low as compared to the ideal
norms. It is suggested that the managing working capital effectively the
operating and other required budgets should be prepared by the respective levels
of the management on short-term basis. It is further suggested that these are the
people concerned who can really influence the process of production activity to
such an extent that there should be optimum utilization of the investment in
working capital.

Rao K.V and Rao Chinta(1991) observe the strong and weak points of
conventional techniques of working capital analysis. The result has been
obviously mixed while some of the conventional techniques which could
comprehend the working capital behaviour well; others failed in doing job
properly. The authors have attempted to evaluate the efficiency of working
capital management with the help of conventional techniques i.e., ratio analysis.
The article concludes prodding future scholars to search for a comprehensive
and decisive yardstick in evaluating the working capital efficiency.

Garg Pawan Kumar: “Study on Working Capital and Liquidity analysis in

public sector enterprise” (1999)

The study suggests forecasting of working capital requirement confined mainly

to various components of working capital requirement confined mainly to
various components of working capital. After considering the facts the author
realized the need for proper assessment and forecasting of working capital in the
public sector undertaking. For this purpose, he has suggested the analysis of
production schedule, sales trend, labour cost etc., should be taken into
consideration. He further suggested the need for better management of
components of working capital.

Batra Gurdeep Singh: “Gives an overview of working capital and its

Determinants”

According to the author working capital management involves deciding upon

the amount and composition of current assets and how to finance them. He
emphasizes on the hedging approach to finance current assets. He also adds that
a management can use ratio analysis of working capital as a means of checking
upon the efficiency with which working capital is being used in the enterprise.

Deloof Marc.: “ How working capital management affects the profitability

of Belgium firms”.
The writer has made use of empirical analysis for the sample firms. It was
observed that most of the firms have a large amount of cash invested in working
capital. It can therefore, be deducted that the way in which working capital is
managed will have a significant impact on the profitability of the firm.

Dinesh M. : “Challenges faced by the business from managing working

capital and strategies adopted” (2008)

The author concludes with the view that most of the businesses failed not for
want of profit but for the lack of cash. The fast growth in production and sales
may cause the business to utilize all of the financial resources seeking growth
and making assets such as inventories, accounts receivable and other assets as
more illiquid.

Arunkumar O.N and Jayakumar S. : “How working capital considered to

be the lifeblood and controlling nerve centre of the business” (2010)

Profitability and Solvency are two vital aspects of working capital management.
The survival and growth of the company depends upon the ability to meet
profitability and solvency. Here the authors have concentrated on the analysis
of liquidity and solvency position of the major Public Sector Electrical
Industries in Kerala such as Kerala Electrical and Allied Engineering Company
Ltd(KEL) and Transformers and Electrical Kerala Ltd (TELK) for the financial
year.

Gill Amarjit, Biger Nahum and Mathur Neil: “ Examines the relationship
between working capital management and Profitability” (2010)
They found statistically significant relationship between the cash conversion
cycle and profitability, measured through gross operating profits. It also showed
that managers could create profits for their companies by handling correctly the
cash conversion cycle and by keeping accounts receivables at an optimal level.
The study concludes with the observation that profitability can be enhanced if
firms manage their working capital in a more efficient way.

Sunday Kehinde James: “focuses on effective working capital management

within small and medium scale enterprise” (2011)

Most of the SME’s have little regard for their working capital position and they
don’t even have standard credit policy. They have very weak financial position,
and rely on credit facility to finance their operations. This credit facility is
available from accounts payable most of the time. In conclusion the authors
recommended that for SME’s to survive within the Nigeria economy they must
design a standard credit policy and ensure good financial report and control
system. Besides, they must give adequate cognizance to the management of
working capital to ensure continuity, growth and solvency.

Hossain, Syed Zabid (1999) throws a light on the various aspects of working
capital position. He has evaluated working capital and its components through
the use of ratio analysis. For each aspect of analysis certain ratios are computed
and then results are compared with the standard ratio or industry average.

Smith Keith V. : “Working capital decision making would appear to have

been less productive” (1973)
The inability of financial managers to plan and control properly the current
assets and current liabilities of their respective firms has been the probable
cause of the business failure in recent years. Current assets collectively
represent the single largest investment for many firms, while current liabilities
account for a major part of total financing in many instances. This paper covers
eight distinct approaches to working capital management.

Singaravel. P. : “ Focuses on interdependency among working capital,

liquidity and profitability” (1999)

The article is an in-depth analysis of liquidity and its interrelationship with

working capital and profitability. As the working capital, liquidity and
profitability are in triangular position, none is dispensable at the satisfaction of
the other. Excess of stock-in-trade over bank over-draft and excess of liquid
assets over current liabilities other than bank over-draft generate working
capital for the business.

Rao Govinda D and Rao P.M: “Believes working capital is a continuous

process” (1999)

Working capital is a continuous process requiring proper monitoring and

studying of the relationship of all variables with constant, and drawings
inferences. This provides proper direction to the managers.
CHAPTER - 3

INDUSTRY PROFILE AND COMPANY PROFILE

3.1) INTRODUCTION TO RETAIL INDUSTRY

Retail is India’s largest industry, accounting for over 10 percent of the country’s
GDP and around 8 percent of the employment. Retail industry in India is the
crossroads. It has emerged as one of the most dynamic and fast paced industries
with several players entering the market. But because of the heavy investments
required, break even is difficult to achieve and many of these players have not
tasted success so far. However the future is promising; the market is growing,
government policies are becoming more favourable and emerging technologies
are facilitating operations.

Retailing in India is gradually inching its way toward becoming the next boom
industry. The whole concept of shopping has altered in terms of format and
consumer buying behaviour, using in a revolution in shopping in India. Modern
retail has entered India as seen in sprawling shopping centres, multi-storeyed
malls and huge complexes offer shopping, entertainment and food all under one
roof. The Indian retailing sector is at an inflexion point where the growth of
organized retailing and growth is the consumption by the Indian population is
population with average age of 22years, nuclear families in urban areas, along
with increasing working-women population and emerging opportunities in the
services sector are going to be the key growth drivers of the organized retail
sector in India.

Some key facts:

 Retail is India’s largest industry accounting for over 10 percent of the

country’s GDP and around 10 percent of the employment.
 The market size of the Indian retail industry is about US $312 billion.

India’s Consumption Cosmos

During the past decade, Private Final Consumption Expenditure has been the
key driver of economic growth in India.

The $350 Billion Consumption spending provides the single biggest business
opportunity in India and is divided into some key categories led by food,
fashion and home product.
Retailing in INDIA is one of the pillars of its economy and accounts for about
22 percent of its GDP. The Indian retail market is estimated to be US$ 600
billion and one of the top five retail markets in the world by economic value.
India is one of the fastest growing retail markets in the world, with 1.2 billion
people.

As of 2008, India’s retailing industry was essentially owner manned small

shops. In 2016, larger format convenience stores and supermarkets accounted
for about 8 percent of the industry, and these were present only in large urban
canters. India’s retail and logistics industry employs about 8% of Indian
population.

Until 2014, Indian central government denied foreign direct investment (FDI) in
multi-brand retailing, forbidding foreign groups from any ownership in
supermarkets, convenience stores or any retail outlets. Even single-brand retail
was limited to 51% ownership and a bureaucratic process.
In November 2014, India’s central government announced retail reforms for
both multi-brand stores and single-brand stores. These market reforms paved
the way for retail innovation and competition with multi-brand retailers such as
Walmart, Carrefour and Tesco, as well as single brand majors such as IKEA,
Nike and Apple. The announcement sparked intense activism, both in
opposition and in support of the reforms. In December 2014, under pressure
from the opposition, Indian government placed the retail reforms on hold till it
reaches a consensus.

In January 2016, India approved reforms for single-brand stores welcoming

anyone in the world to innovate in Indian retail market with 100% ownership,
but imposed the requirement that the single brand retailer source 30% of its
goods from India. India government continues the hold on retail reforms for
multi-brand stores.

In June 2016, IKEA announced it had applied for permission to invest $1.9
billion in India and set up 25 retail stores. An analyst from Fitch Group stated
that the 30% requirement was likely to significantly delay if not prevent most
single brand majors from Europe, USA and Japan from opening stores and
creating associated jobs in India.

On 14th September 2016, the government of India announced the opening of the
FDI in multi-brand retail, subject to approvals by individual states. This
decision was welcomed by an economists and the markets, but caused protests
and an upheaval in India’s central governments political coalition structure. On
20th September 2016, the government of India formally notified the FDI reforms
for single and multi brand retail, thereby making it effective under Indian law.

On 7th December 2016, the Federal government of India allowed 51% FDI in
multi-brand retail in India. The government managed to get the approval of
multi-brand retail in the parliament despite heavy uproar from the opposition
(the NDA and leftist parties). Some states will allow foreign supermarkets like
Walmart, Tesco and Carrefour to open while other states will not.

RETAIL MARKET IN INDIA

The Indian retail industry is generally divided into organized and un-organized
retailing.

Organized retailing: In India, refers to trading activities undertaken by

licenced retailers, that is, those who are registered for sales tax, income tax, etc.
These include the publicity traded supermarkets, corporate-backed
hypermarkets and retail chains, and also the privately owned large retail
businesses.

Organised Retail Sector

Unorganised retailing: On the other hand, refers to the traditional formats of
low-cost retailing, for example, the local corner shops, owner manned general
stores, paan/beedi shops, convenience stores, hand cart and pavement vendors,
etc.

Organised vs Unorganised Retail

MAJOR INDIAN RETAILERS UNDER FUTURE GROUP LIMITED

Brands Stores

Fbb is a value retail offering in the

fashion space offering exclusive
merchandice. FBB sections are
present across all Big Bazaar stores
and 30 separate outlets across metros,
mini metros and some cities.
 Food Bazaar is a large supermarkets
which mix Indian bazaar and global
supermarket. There are over 185FB
outlets

Across the country there are 198

stores operating under this name. Big
Bazaar is ranked among the top 4
services brands in India.

Home Town is a unique one stop shop

for home making solutions. It offers
hassle free and convenient

eZone is a electronics store from

future group. The stores offer best
national and international electronics
brands.

This was started in 2004 at

Bangalore. The stores showcase over
1000 brands. There are 25 centrals
stores in different cities in India.
 This was launched in 2006 at
Marathalli, Bangalore. It provides
discount at 20% to 50%, 365 days of
a year.

Planet Sports is a subsidiary of future

group. Presently there are 45 stores
nationwide long with 28 shop-n-
shops in central.

Aadhaar is a rural retaining and

distribution chain operating under a
joint venture between future group
and Godrej Agrovet.

Pantaloons fashion & retail, now a

part of Aditya Birla group.

3.2) INTRODUCTION TO COMPANY

Future Group, led by its founder and Group CEO, Mr. Kishore Biyani, is one of
India’s leading business houses with multiple businesses spanning across the
consumption space. While retail forms the core business activity of Future
Group, group subsidiaries are present in consumer finance, capital, insurance,
leisure and entertainment, brand development, retail real estate development,
retail media and logistics.

Led by its flagship enterprise, Pantaloon Retail, the group operates over 12
million square feet of retail space in 71 cities and towns and 65 rural locations
across India. Headquartered in Mumbai (Bombay), Pantaloon Retail employs
around 35000 people and is listed on the Indian stock exchanges. The company
follows a multi-format retail strategy that captures almost the entire
consumption basket of Indian customers. In the lifestyle segment, the group
operates Pantaloons, a fashion retail chain and central, a chain of scamless
malls. In the value segment, its marquee brand, Big Bazaars with the choice and
convenience of modern retail.

In 2008, Big Bazaar opened its 100th store, making the fastest ever organic
expansion of a hypermarket. The first set of Big Bazaar stores opened in 2001
in Kolkata, Hyderabad and Bangalore.

The group’s speciality retail formats include, books and music chain, Depot,
sportswear retailer, Planet Sports, electronics retailer, Ezone, home
improvement chain, Home town and rural retail chain, Aadhar, among others. It
also operates popular shopping portal, futurebazaar.com.

Future Capital Holdings, the group’s financial arm provides investment

advisory to assets worth over $1 billion that are being invested in consumer
brands and companies, real estate, hotels and logistics, It also operates a
consumer finance arm with branches in 150 locations.

Other group companies include, Future Generali, the group’s insurance venture
in partnership with Italy’s Generali Group, Future Brands, a brand development
and IPR company, Future Logistics, providing logistics and distribution
solutions to group companies and business partners and Future Media, a retail
media initiative. The group’s presence in Leisure & Entertainment segment is
led through, Mumbai-based listed company Galaxy Entertainment Limited.
Galaxy leading leisure chains, Sports Bar and Bowling Co. and family
entertainment centres, F123. Through its partner company, Blue Foods the
group operates around 100 restaurants and food courts through brands like
Bombay Blues, Spaghetti Kitchen, Noodle Bar, The Spoon, Copper Chimney
and Gelato.

Future Group’s joint venture partners include, US-based stationery products

retailer, Staples and Middle East-based Axiom Communications.

Future Group believes in developing strong insights on Indian consumers and

building businesses based on Indian ideas, as espoused in the group’s core value
of ‘Indianness’. The group’s corporate credo is, ‘Rewrite rules, Retain values’.
On May 2016, Future Group announced a 50.1% stake sale of its fashion chain
Pantaloons to Aditya Birla Group in order to reduce its debt of around Rs.
80billion . To do so, Pantaloons fashion segment was demerged from
Pantaloons Retail India Ltd; later was then emerged into another subsidiary-
Future Retail Ltd.
Future Group is a corporate group and nearly all of its businesses are managed
through its various operating companies based on the target sectors. For eg.
retail supermarket/hypermarket chains Big Bazaar, FBB, Food Bazaar, Food
Hall, Hometown etc. are operated by its retail division, Future Retail Limited,
while its fashion and clothing outlets Brand Factory, Central, and Planet Sports
are operated via another if its subsidiaries, Future Lifestyle Fashions Limited.
with these many fashion outlets and supermarkets, the group also promotes its
fashion and sports brands like Indigo Nation, Spalding, Lombard, Bare etc. and
FMCG’s like Tasty Treat, Fresh & Pure, Clean Mate, Ektaa, Premium Harvest,
Sach etc. It also has operating companies to cater specifically to internal
financial matters and consulting within its group of companies.

On November 21st 2017, Future Consumer Enterprise Limited, acquired the

98% from Actis Capital and other promoters. With that, Nilgiris is a fully
owned subsidiary of Future Consumer Enterprises Limited (FCEL).

Future Group is India’s first and largest independent homegrown pure-play

retail group. With a pan-India presence and multiple store formats, we meet the
everyday needs of millions of customers in India, helping them live a better
quality of life everyday. Growth, Profitability and Scalability have been the key
focus along with customer delight, innovation and value creation.

Future Group has grown and continues to grow on a simple belief to participate
in every consumption opportunity of the Indian consumer. Today, the group has
complementary businesses across three sectors- retail, allied services and
Finance- which are provided with strategic support and scaled synergies from
the corporate team operating in a federated structure of opportunities and
excellence.

Future Group consists of 4 listed entities led by its flagship company future
retail limited(India) and also has privately held businesses. The group believes
in seeding, mentoring and growing various consumption led businesses and
once they reach significant scale, it creates public shareholding to ensure wealth
creation and value unlocking for the general public.

3.3) CORPORATE GOVERNANCE REPORT

Corporate Governance indicates transparency, accountability and reliability on

any organization.

One of the core missions of the organization is to achieve excellence in all

spheres, be it profitability, growth in the market share, superior quality of
products and services to the satisfaction of the stakeholders through an efficient
and effective code of governance.

We aim at providing fairness, clarity and transparency in all our dealings and
increasing the value of all stakeholders of the company.

3.4) Future Group’s Vision

“To Deliver Everything Everywhere. Every time, to Every Indian Customer in

the most profitable manner.”
One of the core values at Future Group is, ‘India ness’ and its corporate credo is
- “Rewrite rules, Retain values.”

3.5) Future Group’s Mission

 They share the vision and belief that our customers and stakeholders shall
be served only by creating and executing future scenarios in the
consumption space leading to economic development.
 They will be the trendsetters in evolving delivery formats, creating retail
reality, making consumption affordable for all customer segments – for
classes and masses.
 They shall infuse Indian brands with confidence and renewed ambition
 They shall be efficient and, cost-conscious and committed to quality in
whatever they do.
 They shall ensure that our positive attitude, sincerity, humility and united
determination shall be the driving force to make successful.

3.6) Core Values

 Indianness: confidence in ourselves.

 Leadership: to be a leader, both in thought and business.
 Respect & Humility: to respect every individual and be humble in our
conduct.
 Introspection: leading to purposeful thinking.
 Openness: to be open and respective to new ideas, knowledge and
information.
 Valuing and Nurturing Relationships: to build long term relationships.
 Simplicity & Positively: Simplicity and Positivity in our thought,
business and work.
  Adaptability: to be flexible and adaptable, to meet new challenges.
 Flow: to respect and understand the universal laws of nature.

3.7) FUTURE PLANS

The Company would continue to pursue its aggressive growth to strengthen its
position as a leading player in the consumption space in India, with an aim to
capture increasing share of the consumer’s wallet. The Company would
continue with its expansion plans and would continue to increase it presence on
a pan-India basis by opening more retail outlets in tier 3 cities and by further
strengthening its position in key metro cities.

The Company has planned to increase its operating retail space from around 20
million square feet currently to around 25 million square feet by FY19-20. The
various subsidiary companies of the company, which have been created to cater
to various consumption categories, are currently in initial set-up phase. Most of
them will come into their own, pursuing aggressive growth plans to achieve
scale and garner increasing market share. The company will also be able to
unlock value out of these businesses by listing these subsidiary companies, and
partnering with strategic partners in them, at an appropriate time.

The company, operating in the consumption space, has added IT services and
education to its portfolio of businesses, apart from the exciting consumer
finance, insurance, media, logistics, and brand businesses. All these businesses
will help in capitalizing on the synergies with the retail business to further
enhance shareholder’s wealth.
The move will be aimed at growing revenues from smaller format stores by
more than ten times to Rs.60k crore, from existing levels of Rs.5k crore.

India’s largest retailer FUTURE GROUP plans to open about 10,000 small
stores as part of strategy of growing revenues from smaller format stores more
than ten times, to Rs.60,000 crore, from about 5,000 crore at present, its founder
Kishore Biyani said, without specifying a time-frame.

Biyani told ET that his company plans to dot the country with small format
‘Easyday’ branded stores in the range of 2,500 sq ft., and the membership-based
format plans to enrol about 20 million members.

The 10,000 store target is 10times the number of smaller outlets that Future
Group runs. It has 1,700 stores, which include a combination of small and large
outlets. The group has an annual turnover of about Rs.30,000 crore.

The retailer is also piloting in three of its ‘Nilgiris’ outlets, a facility where
consumers can scan the barcode of products using a mobile application and the
goods will be delivered to their homes.

“It is scan-and-go and it is cashless checkout, as payments are done through

wallet and other digital means,” Biyani said in New Delhi where he was
attending the group’s strategy meet.

Last year, Future Group had converted the network of stores it has purchased
from Bharti Retail and through some other acquisitions and folded them under
membership-based Easyday Club, where member pay an annual fee of Rs.999
and get about 10% discount on purchase.

Now, Future Group will expand that membership card to discounts at its other
stores including, Central, Big Bazaar, eZone and other formats.
Future Retail plans to add Big Bazaar stores in FY19. Future Retail is currently
opening 2 stores a day and plans to open almost 100 small format stores in the
current year.

Kishore Biyani led Future Retail plans to increase the penetration of small
format stores as reported by leading media agencies. In an exclusive interaction
with leading media agencies said CP Toshniwal, Executive Director, Future
lifestyle fashions and Chief Financial Officer of the company informed that the
company is planning to open 20 Big Bazaar stores which are their flagship
stores having the highest penetration across the country.

Kishore Biyani said “We plan to have 200 exclusive FBB outlets in the next
2years FY2020-21. We will invest about Rs.350 crore to open these stores. We
aim to double our turnover in the next 2years. FBB, however, does not disclose
its financial numbers.

Out of these planned about 140 new exclusive stores, 40 will be opened in the
current fiscal year.

FBB has also partnered with global fibre brand LYCRA to offer products at its
stores in India.

3.8) GLOBAL SCENARIO

The retail Industry in the far East has evolved into what could be called ‘The
breeding ground’ for emerging models with countries like Singapore being the
home to some of the big players in the industry in these parts of the world.

The presence of all the major players of the retailing industry is found in
Singapore. Singapore has 2 hypermarkets, one run by Carrefour and the other
by Giant Hypermarket, part of dairy farm International. According to the
government, there are slightly more than 11,000 market stalls operating in 150
markets located all across Singapore Island.

The markets further spread to China, Thailand, and Malaysia thanks to the
major support that the local governments provided in creating the necessary
regulatory framework in establishing their presence. Singapore, Malaysia and
Thailand not only fuelled the retail industry within the country, but also
attracted hordes of tourists to experience the shopping” experiences” that they
created in these Islands. The markets are now saturated with no additional space
for a new entrant and are expected to consolidate within the next few years.
Apart from Singapore, which is a more recent development, Japan enjoys an
active spot on the retailers’ map.

The retail industry is as huge as US$ 1088 Billion in the non-segment and US$
493.2 Billion in the retailing sector. Several retailers, however, have made
recent improvement in their warehousing and distribution technologies to make
their presence felt in the Japanese market. Convenience stores, which are small
and suitable in a country where land is expensive, continue to do well, in fact
has been one of the few sectors that have experienced growth over the last
several years.

In mainland China, the retail markets have mushroomed over the years of
intense economic development to a very considerable size. The total volume of
retail sales for consumer goods increased by 10.6% in China over the last
couple of years.

A decade age, the top five retail enterprises in China were all traditional
merchandise, but now the five are mainly supermarkets and China stores. The
world is enamoured with China’s potential and opportunities. But in medium-
sized and small cities and rural areas, traditional retailing methods, such as
department stores and local retailing networks, will be sufficient, as
consumption is lower.

In Indonesia, Wet markets and supermarkets remained the major distribution

channels for products. Although these retail sub-sectors also offered non-
products, such as household goods, products remained dominant in terms of the
items.

Wet markets distribution of products tended to be much greater than non-as

these retail channels mainly provided fresh produce. Supermarkets had an
almost equal distribution, with up the greater proportion.

For example, some retail formats offered non-items, such as supermarkets,

hypermarkets, and convenience stores. These retail outlets provided some
basic non products, such as toothpaste, soap, or detergent. However, non-
retail outlets rarely provided items, except certain department stores or
druggists. The traditional distribution system in Thailand is through so called
‘wet markets’ which sells fruits, vegetable, meat and fish, together with small
‘mom and pop’ stores which distribute dry goods.

However, the rapid growth of the economy, particularly during the decade
before the financial crisis began, has led to dramatic changes in the structure
of the retailing sector. Modern supermarkets, superstores, hypermarkets and
convenience stores developed at breakneck pack to service the growing middle
class with their demand for more sophisticated stores and a greater variety of
products many of which were imported.

Retail is the sale of goods and services from individuals or businesses to the
end-user. Retailers are the part of an integrated system called the supply
chain. A retailer purchases goods or products in large quantities from
manufacturers directly or through a wholesale, and ten sells smaller quantities
to the consumer for a profit.

Shopping generally refers to the act of buying products. Sometimes this is done
to obtain necessities such as clothing; sometimes it is done as a recreational
activity. Recreational shopping often involves window shopping (just looking,
not buying) and browsing and does not always result in a purchase.

Retail goods are traditionally divided into durable goods, such as furniture and
large appliances, which are expected to last 5years, and which include clothing,
and other categories far too numerous to mention but which eventually form
the bulk of the stuff you see on make shift table at garage sales.

Retail industry, being the fifth largest in the world, is one of the sunrise sectors
with huge growth potential and for 14-15% of the country’s GDP. Comprising
of organized and unorganized sectors, India retail industry is one of the fastest
growing industries in India, especially over the last few years. According to the
Global Retail Development Index 2012, India ranks fifth among the top 30
emerging market for retail.

3.9) factors driving growth are:

 Mergers of nuclear families.

 Falling real estate prices.
  Growing trend of double-income households.
 Increase in disposable income and customer aspiration.
 Increase in expenditure for luxury items.
 Large working population.
 Low share of organized retailing.
 Growing liberalization of the FDI policy in the past decade.

4.0) INDIAN SCENARIO

Though with a population of a billion and a middle class population of

over 300 million organized retailing (in the form of retail chains) is still in its
infancy in the Country.

India has been rather slow in joining the Organized Retail Revolution that was
rapidly transforming the economies in the other Asian Tigers. This was largely
due to the excellent retailing system that was established by the Kirana (mom
and pop) stores that continue to meet with all the requirements of retail
requirements without the convenience of the shopping as provided by the
retail chains and also due to the highly fragmented supply chain that is clocked
with several intermediaries (from farm-processor-distributor-retailer) resulting
in huge value loss and high costs.

This supplemented with lack of developed processing industry kept the

organized chains out of the market place. The correction process is underway
and the systems are being established for effective Business-to-Business
solutions thereby leveraging the core competence of each player in the supply
chain. Spread of Organized Retailing in India Organized retailing is spreading
and making its presence felt in different parts of the country.
The trend in grocery retailing, however, has been slightly different with a
growth concentration in the South. Though there was traditional family owned
retail chain in South India such as Nilgiri’s as early as 1904, the retail
revolutions happened with major business houses foraying into the starting of
chains of retail outlets in South India with focus on Chennai, Hyderabad and
Bangalore markets, preliminarily.

In the Indian context, a country wide chain in retailing is yet to be established

as lots of Supply Chain issues need to be answered due to the vast expense of
the country and also diverse cultures that are present.

The unorganized sector is characterized by the lari-galla vendors (also known

as “mobile supermarket”) seen in every Indian by lane is, therefore, difficult to
track, measure and analyse. But they do know their business-these lowest cost
retailers can b found wherever more than 10 Indians collect a rural post office,
a dusty roadside bus stop or a village square.

As far as location in concerned, these retailers have succeeded beyond all

doubt. They have either neither village nor city-wide ambitions or plans. Their
aim is simply a long walk down the end of the next lane. This mode of “mobile
retailers” is neither scalable nor viable over the longer term, but is certainly
replicable all over India.

Semi-organized retailers like kirana (mom and pop stores), grocers and
provision stores are characterized by the more systematic buying- from the
mandis or the farmers an selling from fixed structures. Economies of scale are
not yet realized in this format, but the front end is already visibly changing
with the times.
These store have presented Indian companies with the challenge of servicing
them, giving rise to distribution and cash flow cycles as never seen elsewhere
in Asia. The model is very antithesis of modern retail in terms of the
buyer(retailer)-seller(FMCG)equations. It is not unknown for MNC leaders to
the link the supply of one line of products to another slower moving line of
products. These retailers are not organized in the manner that they could that
they could challenge the power of the sellers, most protests have been in the
form of boycotts, which really haven’t hit any company permanently.

India is world’s second largest grower of fruits and vegetables after Brazil and
China respectively while the agriculture sector has witnessed technological
advancements, the processing sector is still in its infancy. Even with less than
4% procession of fruits and vegetables, the processing industry sector in India is
one of the largest in terms of production, consumption with India, export and
growth prospects.

The government had accorded it a high priority, with a number of reliefs and
incentives, to encourage commercialization and value addition to agricultural
produce; for minimizing pre/post-harvest wastage, generation employment
and export growth.

As a result of several policy initiatives undertaken since liberalization in early

90’s, the industry has witnessed fast growth in most of the segments. In the
following few paragraphs, it can be noted that the processed market for India
is vast and the amount of scope that retail chains would be exposed to his
phenomenal taking into consideration the demographics and raise in standards
of living.

India has also seen a flurry of chain majors like McDonalds, Pizza hut and
Kentucky Fried Chicken finding their place among the India consumers. The
trend still follows for chains in India to spread to almost all cities and towns.
These advancements have revolutionized the integration of the Indian Industry
and has played a vital role in solving, to a large extent, major supply chain
issues that prevailed. The trend is that these successful institutional
intervention models be replicated and spread in all segments of the industry
far and wide through the country that benefit all the incumbents of the chain
evolve. This is finally helps the retailer as his supply chain becomes much
learner and vertically integrated. He is in a position to offer a wide variety and
highest degree of convenience to his customer.

Retailing one of the largest sectors in the global economy, is going through a
transition phase in India. For a long time, the corner grocery store was the only
choice available to the consumer, especially in the urban areas. This is slowly
giving way to international formats of retailing, The traditional and grocery
segment has seen the emergence of supermarkets/grocery chains,
convenience stores and fast-chains.

The traditional grocers, by introducing self-service formats as well as value-

added services such credit and home delivery, have tried to redefine
themselves. However, the boom in real leaps of innovation and retailing has
been confined primarily to the urban markets in the country. Even there, large
chunks are yet to feel the impact of the organized retailing. There are two
primary reasons for this. First, the modern retailer is yet to feel the saturation
effect in the urban market and has therefore, probably not looked at the other
markets as seriously. Second, the modern retailing trend, despite its cost
effectiveness, has come to be identified with lifestyles.

In order to appeal to all classes of the society, retail stores would have to
identify with different lifestyles, Ina sense, this trend is already visible with the
emergence of stores with an essentially ‘value of money’ image. The
attractiveness of the other stores actually appeals to the existing affluent class
as well revolution is emerging along the lines of the economic evolution of
society.

It was only in the year 2000 that the economists put a figure to it. Rs.4,00,000/-
crore(1crore=10million) which is expected to develop to around Rs.8,00,000/-
crore by the year 2005 – an annual increase of 20%.

Retailing in India is unorganized with poor supply chain management

perspective. According to a recent survey by some of the retail consulting
bodies, an overwhelming proportion of the Rs.4,00,000/-crore retail markets
are unorganized. In fact, only a Rs.20,000 crore segment of the market is
organized.

If a close look is taken at the nature of the Indian retail markets, it can be seen
that there is so much potential to extract from individual regions, which
players are in no tearing hurry to spread out. Based on recent study by a
renowned government institutional in India, in the 6 major meters, Delhi as the
highest per capita consumption of and grocery, among super markets. Chennai
“the Mekka of retailing”, comes at fourth place. This shows the high potential
the sector presents. Chennai as sum five supermarket chains, and each of them
is doing well fore themselves.
4.1) Board of Directors (Future Group Limited)

CEO Kishore Biyani

Mr. Rakesh Biyani

Shailesh Haribhakti

S Doreswamy

Directors Rakesh Biyani

Anil D Biyani

Sunil Biyani

Vijay Biyani
Mr. Ravindra Dhariwal
ANALYSIS AND INTERPRETATION
3.11) LIQUIDITY RATIOS:

Liquidity ratios are the ratios that measures the ability of a company to meet its
short term debt obligations. These ratios measure the ability of a company to
pay off its short-term liabilities when they fall due. The liability ratios are a
result of dividing cash and other liquid assets by the short term borrowings and
current liabilities. They show the number of time the short term debt obligations
are covered by the cash and liquid assets. If the value is greater than 1, it means
the short term obligations are fully covered. Generally, the higher the margin of
safety that the company possesses to meet is current liabilities. Liquidity ratios
greater than 1 indicate that the company is in good financial health and it is less
likely fall into financial difficulties. Most common example of liquidity ratios,
acid test ratio (also known as quick ratio), cash ratio and working capital ratio.

3.11.1) Net Working capital ratios:

The difference between current assets and current liabilities excluding short
term bank borrowing is called net working capital (NWC). Net working capital
is sometimes used as measure of a firm’s liquidity.

Networking capital = current assets – current liabilities.

Networking capital ratio = net working capital/net assets

Significance: A company having a greater net working capital ratio has a better
and greater ability to pay off its short term debts as a organization has enough
funds and also that this would lead the business without any problems of
liability when it is very important of the organization.
5 years data 2018 2017 2016 2015 2014

Total current 4,870.74 4,119.26 3,516.08 226.39 246.59

assets
Current 3,817.24 3,254.32 2,550.46 320.32 331.74
Liabilities
Net Current 3,268.86 3,066.43 2,735.66 -76.14 -49.58
Assets
Working capital 0.32 0.28 0.350 1.23 1.71
ratio

6,000.00

5,000.00

4,000.00
Total current assets
3,000.00 Current Liabilities

2,000.00 Net Current Assets

Working capital ratio
1,000.00

0.00
2018 2017 2016 2015 2014
-1,000.00

Interpretation: During past the company has its current liabilities is more than
the current assets but during recent years it has developed significantly and has
also shown improvement in the net working capital ratio as it has come from
being negative to a lot better hold

3.11.2) Current ratio: Current ratio is calculated by dividing current assets by

current liabilities. Current assets include cash and those assets that can be
converted into cash within a year, such as marketable securities, debtors,
inventories, loan and advance. All the obligations maturing within a year are
included in current liabilities. Current liabilities include creditors, bills payable,
accrued expenses, short term bank loan, income tax liability and long-term debt
maturing in the current year.

Current ratio = current assets/current liabilities.

Significance: It includes the availability of current assets in rupees for every

one rupee of current liability. A ratio of greater than one means that the firm has
more current assets than current claims against them. In India, the conventional
rule is to have a ratio of 1.33.

5 years data: 2018 2017 2016 2015 2014

Total Current 4,840.74 4,119.26 3,516.08 226.39 246.59

Assets
Current Liabilities 3,817.24 3,254.32 2,550.46 320.32 331.74
Current Ratio 1.27 1.26 1.37 0.70 0.74
 6000

5000

4000
5 years data:

3000 Total Current Assets

Current Liabilities
2000 Current Ratio

1000

0
1 2 3 4 5

Interpretation: The current ratio of the firm was below par in the year 2014
which shows that they did not even have current assets equal to that of current
liabilities. In the year 2017 it almost reached to par as the ratio 1.26 and has
again increased to 1.27 in the year 2018.

3.11.3) Quick Ratio: This ratio establishes the relationship between quick or
liquid assets and current liabilities. An assets is liquid it can be converted into
cash immediately without loss of value. E.g. Cash, Debtors, Bills receivable and
marketable securities. Inventories are considered to be less liquids it requires
time for realising into cash, their value also has tendency to fluctuate.

Quick ratio = current assets – inventories/current liabilities.

Significance: Generally a quick ratio of 1:1 is considered to represent a

satisfactory current financial condition. This test is more significant as
compared to current ratio to fulfil the firm’s obligations.

5 years data 2018 2017 2016 2015 2014

Total Current 4,870.74 4,119.26 3,516.08 226.39 246.59
Assets
Current 3,817.24 3,254.32 2,550.46 320.32 331.74
Liabilities
Inventories 4,417.41 3,735.16 3,297.24 216.15 223.52

Quick Ratio 0.11 0.11 0.08 0.03 0.06

6000
5000
Series1
4000
3000 Series2
2000 Series3
1000 Series4
0
Series5

Interpretation: The general quick ratio is 1:1 but the firm never reached the par
ratio but there is a substantial improvement in the ratio when compared to 2015.

3.11.4) Cash Ratio: It shows the relationship between absolute liquid or super
quick current assets and liabilities. Absolute liquid assets include cash, bank
balances and marketable securities. Absolute liquid assets, a financial analyst
may examine cash ratio and its equivalent of cash; therefore, they may be
includes in the computation of cash ratio.

Cash ratio = cash/current liability.

Significance: The ratio of a company’s total cash and cash equivalents to its
current liabilities. The cash ratio is most commonly used as a measure of
company liquidity. It can therefore determine if, and how quickly, the company
can repay its short-term debt. A strong cash ratio is useful to creditors when
deciding how much debt, if any they would be willing to extend to the asking
party.

5 years data 2018 2017 2016 2015 2014

Cash and Bank 183.23 156.04 91.36 9.80 22.49

Balance
Current liabilities 3,817.24 3,254.32 2,550.46 320.32 331.74

Cash ratio 0.05 0.04 0.035 0.030 0.06

4500
4000
3500
3000
5 years data
2500
Cash and Bank Balance
2000
Current liabilities
1500
Cash ratio
1000
500
0
1 2 3 4 5

Interpretation: The cash balance of the company in the year 2014 was 0.06 and
has improved continuously and has also a great reserve of cash right now as we
can see the cash ratio being 0.05 in the year 2018 which is a greatest
improvement.
 3.11.5) Liquidity Ratio: This is the ratio is calculated to know the actual liquid
holding of the firm because the current liability is actually compared with the
current assets after the stock and the prepaid expenses are removed because
stock becomes the holding part of the firm and the prepaid expenses are already
paid off so it is not held liquid with the company to pay off the liabilities.

Liquidity ratio = current assets - stock – prepaid expenses/current liability.

Significance: Liquidity ratio is considered a more reliable test of short-term

solvency than current ratio because it shows the ability of the business to pay
short term debts immediately. Inventories and prepaid expenses are excluded
from current assets for the purpose of computing quick ratio because inventories
may take long period of time to be converted into cash and prepaid expenses
cannot be used to pay current liabilities. Generally, a liquidity ratio of 1:1 is
considered satisfactory.

5 years data 2018 2017 2016 2015 2014

Inventories 4,417.41 3,735.16 3,297.24 216.15 223.52

Loans and Advances 2,271.59 2,252.64 1,808.66 53.96 80.42
Total Current Assets 4,870.74 4,119.26 3,516.08 226.39 246.59
Current Liabilities 3,817.24 3,254.32 2,550.46 320.32 331.74
Liquidity ratio -0.47 -0.57 -0.62 -0.13 -0.17
 6000
5000
4000
3000
Series1
2000
Series2
1000
Series3
0
Series4
-1000 Series5

Interpretation: Liquidity ratio in the year 2014 was -0.17 and has shown
sufficient improvement in the year 2016. In the mid years there are so many
fluctuations in the ratio which has been changing in all the years but the ratios
has been improved and decreased in the year 2018.

3.12) SOLVENCY RATIO

Solvency ratios also called leverage ratios, measures a company’s ability to

sustain operations indefinitely by comparing debt levels with equity, assets, and
earnings. In other words, solvency ratios identify going concern issues and a
firm’s ability to pay its bill in the long term. Many people confuse solvency
ratios with liquidity ratios. Although they both measure the ability of a company
to pay of its obligations, solvency ratios focus more on the long-term
sustainability of a company instead of the current liability payments. Solvency
ratios show a company’s ability to make payments and pay off its long-term
obligations to creditors, bondholders, and banks. Better solvency ratios indicate
a more credit worthy and financially sound company in the long-term.
3.12.1) Interest coverage ratio: Is an indicator of the company’s ability to pay
interest as it comes due. It is calculated by dividing earnings before interest and
taxes (EBIT) by interest expense.

Interest coverage ratio = Earnings before interest and tax/interest

Significance: A time interest earned ratio of 2-3 or more indicates that interest
expense should reasonably be covered. If the times interest earned ratio is less
than two it will be difficult to find a bank to loan money to the business.

5 years data 2018 2017 2016 2015 2014

PBDIT 242.08 602.40 101.06 -314.88 -183.23
Interest 175.38 204.23 49.75 20.23 70.68
Interest 1.3803 2.9496 2.0313 -15.5650 -2.5923
coverage ratio

2500

2000

1500
5 years data
PBDIT
1000
Interest
Interest coverage ratio
500

0
1 2 3 4 5
-500
Interpretation: The company has a very healthy interest coverage ratio, even
though it has been decreasing it is very healthy as a good ratio is only 2 or 3
times but the company is maintaining the ratio in double delights.

3.12.2) Debt Equity Ratio: It is also otherwise known as external to internal

equity ratio. It is calculated to know the relative claims of outsiders and the
owners against the firm’s assets. This ratio establishes the relationship between
the outsider’s fund and the shareholders fund.

Debt equity ratio = total liabilities/total capital or equity (net worth).

Significance: The purpose of debt equity ratio is to derive an idea of the amount
of capital supplied to the concern by the proprietors. This ratio is very useful to
assets the soundness of long term financial position of the firm. It also indicates
the firm. It also indicates the extent to which the firm depends upon outsiders.
For instance, a low debt equity ratio implies the use of more equity than debt.

5 years data: 2018 2017 2016 2015 2014

Total liabilities 4,321.01 3,632.06 2,996.59 101.80 140.61

Net worth 3,096.27 2,553.66 1,874.19 -288.60 -42.39
Debt equity ratio 1.39 1.42 1.59 -0.35 -3.31
 5000

4000

3000
5 years data:
Total liabilities
2000
Net worth
Debt equity ratio
1000

0
1 2 3 4 5
-1000

Interpretation: The debt equity ratio of the company has always been below par
the company has slightly improved after the ratio has regularly kept decreasing
as we see a increase in the year 2016. But there need to be improvement so as to
clear off the debts without any issues and gain the par value.

3.12.3) Debt to Assets Ratio: The debt to total assets ratio calculates the
present of assets provided by creditors. It is calculated by dividing total debt by
total.

Debt assets ratio = (total debt/total assets)*100

creditors to maintain or make change in assets of the company. It means that the
percentage represents the share of creditors in financing the company’s assets.

5 years data 2018 2017 2016 2015 2014

Total Debit 1,286.74 1,078.40 1,122.40 1,008.40 1,020.00

Total Assets 4,321.01 3,632.06 2,996.59 2,700.80 2,840.61
Debt assets 29.77 29.69 37.45 37.33 35.90
ratio

5000
4500
4000
3500
3000 5 years data

2500 Total Debit

2000 Total Assets

1500 Debt assets ratio

1000
500
0
1 2 3 4 5

Interpretation: If we clearly notice the percentage of finance received by the

creditors to maintain there is a sudden increase in the year 2016 as the
percentage as regularly and increased suddenly. The company should reduce the
finance from the creditors and should try to use the shareholders finance to
maintain which would be better.

3.13) PROFITABILITY RATIOS

Profitability ratio measure a company’s ability generates earning relative to

sales, assets and equity. Those ratios assets the ability of a company to generate
earnings, profit is and flows relative to some metric, often, the amount of money
invested. The highlight how effectively the profitability of a company is being
managed. Common examples of profitability ratios include return on sales,
return on capital invested (CROCI), gross profit margin and net profit margin.
All of these ratios indicate how well a company is performing at generating
profits or revenues relative to a certain metric.

3.13.1) Profit Margin Ratio: The profit margin ratio also known as the
operating performance ratio measures the company’s ability to turn its sales into
net income to evaluate the profit margin it must be compared to competitors and
industry statistics.

Profit margin ratio : net income/net sales.

Significance: This shows the amount of sales that the company is able to turn
into income.

5 years data: 2018 2017 2016 2015 2014

Net Profit 201.43 181.32 137.56 156.89 128.96

Net Sales 5,301.07 5,289.18 4,987.81 3,567.90 2,365.78
Profit Margin Ratio 0.037 0.034 0.027 0.043 0.054
 6000

5000

4000
5 years data:

3000 Net Profit

Net Sales
2000 Profit Margin Ratio

1000

0
1 2 3 4 5

Interpretation: The profit margin ratio of the firm has been decreasing
continuously as we can see the reason is that the sales of the firm is increasing
rapidly but the profits of the firm have remained almost the same with not much
comparative increase.

3.13.2) Asset Turnover Ratio: The asset turnover ratio measures how
efficiently a company is using its assets. The turnover value varies by industry.
It is calculated by dividing net sales by average total assets.

Asset turnover ratio : net sales/average total assets.

Significance: It helps to know the efficiency of the company in utilization of its

assets and the average of the previous 2 years of the assets is taken to calculate
the average assets to define the ratio.

5 years data: 2018 2017 2016 2015 2014

Net Sales 5,301.07 5,289.18 4,987.81 3,567.90 2,365.78

Total Asset 4,321.01 3,632.06 2,996.59 2,700.80 2,840.61
 Asset turnover ratio 1.22 1.45 1.66 1.32 0.83

6000

5000

4000
5 years data:

3000 Net Sales

Total Asset
2000 Asset turnover ratio

1000

0
1 2 3 4 5

Interpretation: The average asset turnover ratio has remained almost stagnant
without much fluctuation though there is a fluctuation in the total asset of the
company because the net sale of the company has also increased comparatively.

3.13.3) Return on assets ratio: ROA is a combination of the profit margin ratio
and the asset turnover ratio it can be calculated separately by dividing net
income by average total assets or by multiplying the profit margin ratio times
the asset turnover ratio.

Return on assets : net income/average total assets.

Significance: The return on asset ratio (ROA) is considered an overall measure

of profitability it measures how much income was for each Re.1 of assets the
company has.
 5 years data: 2018 2017 2016 2015 2014

Total Assets 4,321.01 3,632.06 2,996.59 2,700.80 2,840.61

Net income 52.21 49.59 47.83 43.91 36.78
ROA 0.012 0.013 0.015 0.016 0.012

5000
4500
4000
3500
3000 5 years data:

2500 Total Assets

2000 Net income

1500 ROA
1000
500
0
1 2 3 4 5

Interpretation: The ratio has significantly increased in the year 2015 but after
that the ratio has decreased in 2 consecutive years still the company has a
healthy ratio without any serious issues.

3.13.4) Return on equity: The return on stockholder’s equity (ROE) measures

how much net income was earned relative to each dollar of common
stockholder’s equity. It is calculated by dividing net income by average
common stockholders’ equity.

Return on equity : net income/average shareholders’ equity.

Significance; In a simple capital structure only common stock outstandings,
average common shareholders’ equity is the average of the beginning and
ending stockholders equity.

5 years data: 2018 2017 2016 2015 2014

Equity share capital 100.40 94.36 86.70 1,398.66 1,398.66

Net Profit 201.43 181.32 137.56 156.89 128.96
ROE 2.00 1.92 1.58 0.11 0.09

2500

2000

1500 5 years data:

Equity share capital

1000 Net Profit

ROE
500

0
1 2 3 4 5

Interpretation: There is no variation in the return of equity it has consistently

increased because there is increase in the profits of the company and while the
shareholders equity remaining almost constant.

3.13.5) Earnings per share: Earnings per share (EPS) represent the net income
earned for each share of outstanding common stock. In a simple, capital
structure it is calculated by dividing net income by the number of weighted
average common shares outstanding.
Earnings per share : net income/average shares outstanding.

Significance: Earning per share is a very important figure. It reveals a about the
financial health of a company. Increasing EPS is a very good sign for a
particular company. EPS tells you how much profit a company earns from a
single stock available in the market.

5 years data 2018 2017 2016 2015 2014

Earnings per share 4.53 4.47 4.01 3.45 3.0
(Rs)(B/S)
2500

2000

1500 5 years data

1000 Earnings per share

(Rs)(B/S)

500

0
1 2 3 4 5

Interpretation: As we can see the EPS of company has constantly increased

without any major fluctuation, so the company is working well, and also
ensuring good profits to the shareholders.

3.14) Activity Ratios:

Accounting ratios that measure a firm’s ability to convert different accounts

accounts within its balance sheets into cash or sales. Activity ratios are to
measure the relative efficiently of a firm based on its use of its assets leverage
or other such balance sheet items. These ratios are important in determining
whether a company’s management is doing a good enough job of generating
revenues, cash, etc. from its resources.

Activity ratios measures company sales per another assets account-the most
common assets accounts used are accounts receivable or inventory, these
accounts are used in the denominations of the most popular activity ratios.

3.14.1) Average collection period: This ratio measures how long a firm’s
average sales remains in the hands of its customers. A longer collection period
collection automatically creates a larger investment in assets

Average collection period ; debtors/average daily sales*365

Significance: This ratio shows the period of the time the company would take to
recover money from its debtors, the lower the amount of days the better it is for
the company.

5 years data: 2018 2017 2016 2015 2014

Sales turnover 5,301.07 5,289.18 4,987.81 3,567.90 2,365.78
Sundry debtors 270.10 228.06 135.48 109.67 95.80
Avg. collection 18.59 15.73 9.91 11.21 14.78
period
 6000

5000

4000
5 years data:

3000 Sales turnover

Sundry debtors
2000 Avg. collection period

1000

0
1 2 3 4 5

Interpretation: The average collection period of the firm has drastically reduces
which shows a very good improvement because the collection period has
reduced from 14days in 2014 to just 18days in 2018 which makes a difference.

3.14.2) Inventory turnover ratio: This ratio measures the number of times
company’s investments in inventory is turned over during a given year. The
higher the turnover ratio, the better, since a company with a high turnover
requires a smaller investment in inventory than one producing the same level of
sales with a low turnover rate. Company management has to be sure, however,
to keep inventory at a level that is just right in order not to miss sales.

Inventory turnover ratio : cost of goods sold/inventory.

Significance: This ratio indicates the efficiency in turning over inventory and
can be compared with the experience of other companies in the same industry. It
also provides some indication as to the adequacy of a company’s inventory for
the volume of business being handled.

5 years data: 2018 2017 2016 2015 2014

Inventories 4,417.41 3,735.16 3,297.24 216.15 223.52

COGS 5,591.06 5,109.18 4,150.34 3,281.03 2,109.45
Inventory turnover 1.26 1.36 1.25 15.17 9.43
ratio

6000

5000

4000
5 years data:

3000 Inventories
COGS
2000 Inventory turnover ratio

1000

0
1 2 3 4 5

Interpretation: The inventory turnover ratio has fluctuations as we can see it has
increased and also decreased in the past year but there is a comparative increase
from the year 2016 because of increase in COGS without equivalent increase in
the inventories.

3.14.3) Fixed asset turnover: The fixed (or capital) assets turnover ratio
measures how intensively a firm’s fixed assets such as land, building and
equipment are used to generate sales. A low fixed assets turnover implies that a
firm has too much investment in fixed assets relative to sales: it is basically a
measures of productivity.

Fixed assets turnover : sales/fixed assets.

Significance: This ratio shows the firms relationship between the sales and the
fixed assets of the company. If a business shows a weakness in this ratio, its
plant may be operating below capacity and manage should be looking at the
possibility of selling the less productive assets.

5 years data: 2018 2017 2016 2015 2014

Net Block 1,018.56 853.78 796.93 668.54 608.48
Sales turnover 5,301.07 5,289.18 4,987.81 3,567.90 3,365.78
Fixed Asset Turnover 5.20 6.19 6.25 5.33 5.53

6000

5000

4000
5 years data:

3000 Net Block

Sales turnover
2000 Fixed Asset Turnover

1000

0
1 2 3 4 5
Interpretation: The fixed ratio has raised and slightly fluctuations has occurred
in these years which means the fixed assets of the company are doing good
sometimes.

3.14.4) Total assets turnover:

This ratio takes into account both net fixed assets; and current assets. It also
gives an indication of the efficiency with which assets are used; a low ratio
means that excuse in assets are employed to generate sales and/or that some
assets (fixed or current assets) should be liquidated or reduced significance;
sales/total assets.

Significance: This ratio shows the relationship between the sales of the firm and
the total assets the lesser the ratio the better the performance of the company.
this also considers both current assets and fixed assets.

5 years data: 2018-19 2017-18 2016-17 2015-16 2014-15

Sales turnover 5,301.07 5,289.18 4,987.81 3,567.90 2,365.78

Total Assets 4,321.01 3,632.06 2,996.59 2,700.80 2,840.61
Total Assets turnover 1.22 1.45 1.66 1.32 0.83
 6000

5000

4000
Series1
3000 Series2
Series3
2000
Series4
1000

0
5 years 2018-19 2017-18 2016-17 2015-16 2014-15
data:

Interpretation: The company shows slight increase in the ratio which means that
the assets are not performing well and also it is trying to decrease the ratio by
utilizing the assets in a better way as we can see the ratio decreased in the year
2018.
 CHAPTER - 4

SUMMARY AND FINDINGS

4.1) LIQUIDITY RATIOS

 The net working capital ratio has improved as we can see that the company
from being negative has managed to move to the positive side by decreasing its
net liabilities and increasing net current assets at the same time, though it has
reduced in the past year it has a good hold over the liabilities and assets.

The current ratio was less than 1 during the year 2014 but the ratio has
vigorously grown in the next few years and has crossed the mark of one which
shows that the company to pay off the debits in case of any rising problem.

The quick ratio of the company has however never reached the par level of 1,
but there is gradual improvement as it has grown up to 0.1 this is also because
of the increase in the assets when compared with that of the liabilities of the
company.

There is decrease in the cash ratio of the company is decreased from 0.06 in
2014 to 0.05 in the year 2018 which is a healthily sign, it also has increased
when compared to the change is also a tremendous change after being 0.06 in
2014.

The liquidity ratio satisfactory when it is anything above 1 but here we find that
the company has reached the satisfactory level, but there is a decrease of 0.47
from 2018.

4.2) Solvency ratios

 The interest coverage of the company is satisfactory if it is around 2-3 but
as we can see here the company has maintained is double digit ratios
throughout, though there is gradual decrease in the ratio the company has still
been in a sustainable position.

The debt-equity ratio has always remained the same with a very less of
fluctuations basically it has decreased all the years expect for the year 2016
where it has increased.

The debts to assets ratio has always been increasing other than the year 2016
where it has drastically grown due to the great increased in the assets which far
greater when compared to the increase in the debts.

4.3) Profitability ratios

The profit margin of the firm has always kept increasing as it has
increased 0.054 in the year 2014 and decreased to 0.037 in the year 2018.
Though there is a drastic in the sales the profit margin has decreasing showing
the company’s move to increase the sales.

The asset turnover ratio has always been increasing in the company as it has
increased from 1.32 in the year 2015 to being 1.22 in the year 2018 which is
because of increase in the asset of the company which shows a weakening sign.

The return on asset ratio has also shown fluctuations where is increase and
decrease still there is an decrease on over all compression where it has
decreased from 0.016 in 2015 to 0.016 in 2018.
The return on equity of the company has remained almost constant though there
is an increase in the constant though there is an increase in the ratio from being
1.58 in 2016 to 2.00 in 2018.

The earnings per share has increased in a great pace ensuring shareholders
adequate profits for their investments and also shows that the company is
attaching its shareholders by doing this.

4.4) Activity ratios

The average collection period of the debtors has increased from 14days in
2014 to 18days in 2018 which is a great difference; this is because of great
increase in the sales of the company while the debtors are almost constant
comparatively.

The inventory turnover ratio has increased from 1.25 in 2016 to 1.26 in 2018
which shows that there is a comparatively greater increase in sales to that of the
inventory.

The fixed asset ratio has fluctuating ratio from 5.53 in the year 2014 to 5.20 in
2018 which shows slight fluctuations in ratios and in the year 2016 it was
increased to 6.25.
The total asset turnover ratio has grown from 0.83 in 2014 to 1.22 for the year
1.22 because of the comparatively greater growth in the sales than that of the
total assets which shows better utilization of the assets in generating sales.

The liquidity ratios of the company has seen great improvement though it is not
enough for the company it would be reaching the par level in a few years
because of the great improvement in the previous years, so the company should
be going ahead with the same pace so as to increase the liquidity.

The solvency ratios of the company are at the very good stage as we can see
good progress in the company, but it is very important at the same pace, in order
to maintain the ratios at a good pace the company has to improve its operations
as to benefit the solvency ratios or should continue with its great hold.

The profitability ratios shows that the company is mainly not aiming at its
profits but is trying to drastically increase its sales where it has succeeded and
also the earnings per share has increased attaching the customers, so the
company has to focus a little bit more on its profits so as to get the profit of the
firm to a higher level.

The activity ratios also shows that the company has been very good in its
operations where the company has seen to generate more profit with lesser
number of assets which shows the increase in the utilization level of the firm, so
the company should maintain the utilization level or can further try to squeeze
out more sales with the same amount of assets.
CHAPTER – 5

CONCLUSION
5.1) Conclusion:

In this report, we considered key aspect of financial management; the

management of a company’s working capital. This aspect of finance is a critical
one in that ensures, if effectively, the results can be disastrous for the company.
Some of the major applications of this type of analysis include performance
evaluation, monitoring’s credit worthiness, and financial projection. But ratios
are useful only when they can be compared. The comparison should be done in
two ways-comparison over time for same company and over time for the
company compared with its peer group. Here I did the first one and tried to
compare the current situation is better compare to their past. Their turnover is
also increasing year to year which indicate the good working capital
management practice.

In conclusion, I can say that working capital management practice of Future

Group ltd. is also going well. It becomes strong year to year. The current
situation is much better compare to last 4 or 5 years.
 CHAPTER – 6

BIBLIOGRAPHY

BOOKS

NAME OF THE TITLE AND PUBLISHERS TITLE OF

AUTHOR AUTHOR PUBLICATION

I.M PANDEY FINANCIAL VIKAS 2004

MANAGEMENT PUBLISHING
 HOUSE PVT.
LTD

PRASANA FINANCIAL TATA MC 2005

CHANDRA MANAGEMENT GREW-HILL
PUBLISHING
M.Y KHAN & P.K FINANCIAL UNITED 2004
JAIN MANAGEMENT PUBLISHERS

Websites:

 http://www.futuregroup.in

 https://www.bigbazaar.com

 http://m.moneycontrol.com

 http://www.rediff.com/money/