TITLE

A PROJECT SYNOPSIS ON
A STUDY ON WORKING CAPITAL MANAGEMENT
NAME: G.RAHUL
H.TNO: 18WJ1E0081
COURSE: M.B.A
GURU NANAK INSTITUTIONS TECHNICAL CVAMPUS

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 INRODUCTION
WORKING CAPITAL MANAGEMENT

The prime objective of any management is to make maximum profit. For attaining
maximum profit which enables the organization to accomplish to other objectives of the
business firms. Working capital management involves the administration of current assets
of a firm namely cash, receivables, and inventory.

Administration of fixed assets comes with in the preview of capital budgeting while
the management of working capital is a continuing function which involves controlling of
every day ebb and flow of financial resources circulating in the bunnies. There fore a
business can not survive in the absence of satisfactory ratio between current assets and
current liabilities

Before going to deal with various aspects of working capital management it is better
to under take definition and concepts of working capital.

Definitions and concepts of working capital:-

“Working capital is the excess of current assets over current liabilities”
_____ J. S. Mill

“Working capital refers to the firm’s investment in the short term assets like cash,
account receivable and inventories”
_____Western and Brigham.

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 Working capital management is also known as current assets management.
“Working capital management usually is considered to involve the administration of
current assets namely cash and marketable serenities, receivables and inventories and the
administration of current liabilities”
___ James C. Van Horne

Working capital concept can be categorized into two categories. Viz.

1. Net concept
According to the gross concept “working capital refers to sum total of all current
assets”
____ R. M. Srivastava

Gross working capital rupees to the firm’s investments in current assets.Net working
capital rupees to the difference between current assets and current liabilities the net working
capital indicates (a) liquidity position of the firm (b) suggests the extents to which working
capital need may be financed by permanent sours of funds.

Types of working capital

Working capital is different types. The following are the important types of working
capital.

1. Permanent or regular working capital

Permanent or regular working capital is the minimum amount which should always
be there in minimum current asset like inventory or cash balance in order to carry out the
business smoothly.

2. Variable working capital

The amount of working capital over and above the permanent working capital is
known as variable working capital. The extra working capital need to support the changing
production and sales activities is called the fluctuating or variable or temporary working
capital.

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 NEED FOR WORKING CAPITAL

The bunnies firm has to invest maximum funds on current assets for the success of sale
activity. Current assets are need because when the sale is not converting into cash
immediately. There is always an operating cycle involving in the conversion of sales into
cash.

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OBJECTIVES OF WORKING CAPITAL

1. To study the various changes in working capital of “Alpha Indus.”.

2. To study the working capital management with regards to cash, and

inventory of Alpha Indus.

3. To study the liquidity position of Alpha Indus.

4. To study the creditors conversion period of Alpha Indus.

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Scope of the Study

Financial management is that the managerial activity which is concerned with the
planning and controlling of the firm’s financial resources. Though it was a branch of
economics till 1890 as a separate activity or discipline, it is of recent origin. Still it has no
unique body of knowledge of its own and heavily on economics for its theoretical concepts
even today.

The present study aims at the following

 Highlighting the necessity of current and current liabilities.
 Explain the principle s of current assets, investment and financing.
 Focus on the proper mix of short term and long term financing for current assets.
 Emphasis the need and goal of establishing a sound credit policy.
 Explain the need for holding cash.
 Highlight the need for and a nature of inventory.

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 Limitations

The study will be only a provisional or based on the data collected from the published
annual reports during 2008-2011.
As our project is based on the data recorded by the company, we face the
limitation of extracting that particular data because our access is limited for the sake of
confidential information of the company.

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Research Methodology

The data were collected from secondary sources.

The secondary data were obtained from the published annual reports of Alpha Indus., from
2008-2009 to 2010-2011.
The collecting the data were analyzed by changes in working capital, cash,
inventory, liquidity ratio.
The cash analysis is done by cash to networking capital ratio.
The receivable analysis is done by debtor’s turnover ratio, average collection period
and incremental investment in receivables.
The inventory analysis is done by percentage of inventory to total current assets,
inventory turnover ratio, holding period of inventory and changes in sales and inventory.
The liquidity analysis is done by current ratio, quick ratio and absolute liquid ratio

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SUGGESTIONS

 The cash ratio is of the company is not satisfactory through the period of under
study, because in all the year cash ratio is below the standard. Hence it is suggested
to improve cash and bank balance to meet day to day obligations.

 It is suggested to make investment in inventories and to improve the performance in

inventory management.

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