Research Methodology-3

The study is descriptive in nature. The study is based on secondary data and it has been collected
from the published annual reports of the BRAMSCO Company, books, journals, magazines,
newspapers and websites. Research methodology is a systematic approach in management
research to achieve pre-defined objectives. It helps a researcher to guide during the course of
research work.

Proper management of working capital is very important for the success of an enterprise. It aims
at protecting the purchasing power of assets and maximizing the return on investment. The
importance of working capital management lies in the fact that financial managers spend a great
deal of time in managing current assets and current liabilities. Arranging short term financing,
negotiating favorable credit terms, controlling the movement of cash, administering accounts
receivables and monitoring the investment in inventories consume a great deal of time of
financial managers.

Research methodology is used to collect information and data for the purpose of making
business decisions. The methodology may include publication research, interviews, surveys
and other research techniques, and could include both present and historical information. A
research method is a systematic plan for conducting research. Sociologists draw on a variety
of both qualitative and quantitative research methods, including experiments, survey
research, participant observation, and secondary data. Quantitative methods aim to classify
features, count them, and create statistical models to test hypotheses and explain observations.
Qualitative methods aim for a complete, detailed description of observations, including the
context of events and circumstances.

3.1 RESEARCH DESIGN

“A Research design is the arrangement of conditions for collection and analysis of

data in a manner that aims to combine relevance to the research purpose with
economy in procedure” The research design followed to study the working capital
management in BRAMSCO GARMENTS PRIVATE LIMITED is Descriptive and
Analytical Research Design.
In this research, secondary data collected from the annual reports of companies has
been used to test the hypothesis. It is a formal study where relationship with
profitability is explained with the components of working capital management
through the extensive use of logistic regression.

Research design is the conceptual structure within which research

was conducted. The function of research design is to provide for the
collection of relevant information with minimal expenditureof effort,
time and money (Ranjit, 2005). Research design is one of the most
important tasks in carrying out the survey. Explanatory research
design was adopted in this study to investigate the impact of working
capital management on profitability Tanzania Portland Cement
Company Limited (Headquarters). Research design allow researcher
to analyze the relationship between working capital management and
profitability.

3.2 SOURCES OF DATA COLLECTION:

PRIMARY
Primary data has been obtained through personal discussions with
managers and senior officials of the organization.
SECONDARY
Secondary data’s has been obtained from published reports like the
annual reports of the company, balance sheets, and profit and loss
account, booklets, records such as files, reports maintained by the
company. Mainly the annual report consists of two parts;
1) Profit and Loss Account
2) Balance Sheet
Profit and loss account reveals the income and expenditure of the
company. Balance Sheet reveals the financial position of the
organization. Those two statements are prepared by the highly
qualified and experts with the help of available information or data.
The secondary data are those which have already collected and stored. Secondary data easily get
those secondary data from records, journals, annual reports of the company etc. It will save the
time, money and efforts to collect the data. Secondary data also made available through trade
magazines, annual reports, books etc.

This project is based secondary data collected through annual reports of the organization. The
data collection was aimed at study of working capital management of the company.

Project is based on

1. Annual report of BRAMSCO 2015-2016

2. Annual report of BRAMSCO 2016-2017

3. Annual report of BRAMSCO. 2017-2018

4. Annual report of BRAMSCO. 2018-2019

5. Annual report of BRAMSCO. 2019-2020

3.3 SAMPLING DESIGN

According to Kothari (2007) sample is a collection of some parts of the

population to be a true representative of the population. Sample size
refers to a number of items to be selected from the population. While
sampling technique defined as a process of selecting a number of
individual or objects from a population such that the selected group
contains elements representative of characteristics found in entire
group (Kothari, 2007). Sampling can be probability or non-probability.
In probability sampling, there is equal opportunity for all the elements
to be selected, while in non-probability sampling, no equal chance for
the element to be selected. In this case, purposive sampling technique
was used. With this type of sampling, researcher exclude all staff with
less than one year in the organization to get a valid conclusion.
3.6Sampling Technique / Design
In this study to investigate on the effect of WCM components and
WCM policy towards the profitability of firms, non-probability sampling
technique has been adopted in view that the selection of the elements
in the population as sample have unknown probability and no pre-
arranged opportunity of being selected, which one of the non-
probability designs refers to purposive sampling (Sekaran and Bougie,
2010).Purposive sampling refers to a non-probability sample that
corresponds to specific criterion stipulated, whereby one of the types
is known as judgment sampling (Cooper and Schindler, 2006;Sekaran
and Bougie, 2010).
Therefore, in this study, judgments ampling has been applied due to
the sample is selected based on certain criteria that had been
identified as per the section on data collection method ,such as the
sample of companies selected must be continuously listed in the
Bursa Malaysia between the periods of 2006 to 2010and firms with
missing data are omitted from the sample of study. This is further
supported by study conducted by Falope and Ajilore (2009), who had
also selected purposive sampling in their study as they had excluded
firms with missing data and newly listed firms when investigating on
the effect of WCM on profitability for a panel of a sample of 50
Nigerian firms listed on the Nigerian Stock Exchange during 1996 to
2005.
As of 6thOctober 2012, based on data stream terminal and Bursa
Malaysia website, there are182firms listed in the Main Market of Bursa
Malaysia under trading/services sector, meanwhile there are 248 firms
listed under industrial products sector, which represents the
population of firms in the services and manufacturing sectors
respectively. Thus, after taken into consideration removal of firms with
missing or incomplete data from the population, the sample of the
study consists of 75 firms listed under trading/services sector, which
represents services sector, while 143 firms listed under industrial
products sector representing manufacturing sector. Data is later
analyzed by using Eview software version 7.0.

SAMPLING DESIGN

Sampling unit : Financial Statements.

Sampling Size : Last five years financial statements.

Tool Used for calculations: - MS-Excel.

3.4 DATA ANALYSIS TOOLS

Accounting techniques and statistical techniques have been used in

the present study. For the analysis the accounting technique Ratio
Analysis is used. Ratio analysis is considered as the best tool for
performance evaluation an organization. Ratio is quotient of two
numbers and the relation expressed between two figures. The ratio
analysis concentrates on the inter relationship among the figures
appearing in the financial statement profit & loss account and
Balance sheet. The strengths and weakness can be measured
properly by the ratio analysis.

By using appropriate and revenant statistical techniques, the

collected data is edited and tabulated. For that purpose of testing
hypothesis framed during the course of research, the researcher used
parametric and non-parametric tests. With the help of average,
percentage, co variance, the data has been presented. Hypotheses
have been tested by5% level of significance by using An nova test
requirement of the study.

1.Trend Analysis2.Ratio Analysis3.Operating Cycle Analysis4.Working

Capital Leverage Analysis5.Schedule of changing in working capital

A.Correlation Analysis

Itis defined as “the process by which two or more groups or set items may vary
together directly or inversely”.Two variables are said to be correlated, if the change
in one variable results in a corresponding change to theother variable. That is when
two variables move together, they aresaid to becorrelated.

Co-efficient of Correlation

It is an algebraic method of measuring correlation. This method of correlation is

measured by finding a value known as the co-efficient of correlation using an
appropriate formula.

B. Trend Analysis

Trend Analysis, also referred as Time series is the ratio which indicates the direction
of change. This analysis is important in the applicability of the items in profit and loss
accounts. For trend analysis the use of index numbers is generally adopted. The
procedure which is adopted in this analysis is to assign the number 100 for items of
the base year and to calculate percentage changes in each item of other years in
relation to the base year. This procedure is called as the “trend-percentage method”.

The trend analysis within the company’s ratio itself is informative, but it is more
informative when comparison is done with the company’s ratio with that industry
ratio. This comparison indicates how company has been operating well over time
relative to its competitors and may also help to explain the trends in the company
ratios.
C. Ratio Analysis

The ratio analysis is one of the most powerful tools of financial analysis. It is used as
a device to analyze and interpret the financial of enterprise. The important factor
used in Ratio Analysis is:

Ratio analysis helps to appraise the firms in the term of there

profitability and efficiency of performance, either individually or in
relation to other firms in same industry. Ratio analysis is one of the
best possible techniques available to management to impart the basic
functions like planning and control. As future is closely related to the
immediately past, ratio calculated on the basis historical financial data
may be of good assistance to predict the future. E.g. On the basis of
inventory turnover ratio or debtor‟s turnover ratio in the past, the level
of inventory and debtors can be easily ascertained for any given
amount of sales. Similarly, the ratio analysis may be able to locate the
point out the various arias which need the management attention in
order to improve the situation.
LIQUDITY RATIO: Liquidity refers to ability of a concern to meet its
current obligations as and when these become due. The short-term
obligations are met by realising amounts from current, floating or
circulating asset. The current asset either be liquid or near liquidity.
These should be convertible into cash for paying obligation of short-
term nature. To measure the liquidity of a firm, following ratios can be
calculated: A) CURRENT RATIO: Current assets include cash and
those assets which can be converted in to cash within a year, such
marketable securities, debtors and inventories. All obligations within a
year are include in current liabilities. Current liabilities include
creditors, bills payable accrued expenses, short term bank loan
income tax liabilities and long term debt maturing in the current year.
Current ratio indicates the availability of current assets in rupees for
every rupee of current liability.
CURRENT RATIO = CURRENT ASSET/ CURRENT LIABILITIES
B) QUICK RATIO OR ACID TEST: Quick ratios establish the
relationship between quick or liquid assets and liabilities. An asset is
liquid if it can be converting in to cash immediately or reasonably soon
without a loss of value. Cash is the most liquid asset .other assets
which are consider to be relatively liquid and include in quick assets
are debtors and bills receivable and marketable securities. Inventories
are considered as less liquid. Inventory normally required some time
for realizing into cash. Their value also be tendency to fluctuate. The
quick ratio is found out by dividing quick assets by current liabilities.
QUICK RATIO = total liquid asset/ total current liabilities
C) ABSOLUTE LIQUID ASSET: Even though debtors and bills
receivables are considered as more liquid then inventories, it cannot
be converted in to cash immediately or in time. Therefore while
calculation of absolute liquid ratio only the absolute liquid assets as
like cash in hand cash at bank, short term marketable securities are
taken in to consideration to measure the ability of the company in
meeting short term financial obligation. It calculates by absolute
assets dividing by current liabilities.
ABSOLUTE LIQUID RATIO=absolute liquid asset/ total current
liabilities
EFFICIENCY RATIO: Funds are invested in various assets in
business to make sales and earn profits. The efficiency with which
assets are managed directly affects the volume of sale. Activity ratios
measure the efficiency and effectiveness with which a firm manages
its resources or assets. These ratios are also called turnover ratios.
A) DEBTORS TURNOVER RATIO: Receivable turnover ratio provides
relationship between credit sales and receivables of a firm. It indicates
how quickly receivables are converted into sales.
DEBTORS TURNOVER RATIO= SALES/ AVERAGE ACCOUNT
RECEIVABLES.
AVERAGE A/C RECEIVABLES= opening trade debtor+ Closing trade
debtor/2
AVERAGE COLLECTION PERIOD= (365/DTR) days
Or RECEIVABLES * 365/ sale
B) WORKING CAPITAL TURNOVER RATIO: It signifies that for an
amount of sales, a relative amount of working capital is needed. If any
increase in sales contemplated working capital should be adequate
and thus this ratio helps management to maintain the adequate level
of working capital. The ratio measures the efficiency with which the
working capital is being used by a firm. It may thus compute net
working capital turnover by dividing sales by net working capital.
WORKING CAPITALTURNOVER RATIO=cost of sales/ net working
capital

CURRENT ASSET TURNOVER RATIO:

CURRENT ASSET TURNOVER RATIO= sales / current asset
LIMITATIONS OF THE STUDY
The main limitations of the study are as follows: 1. The study is
limited to ten year 2002-03 to 2011-12 only 2. The study is related to
textile industry. 3. This study is based on secondary data derived from
published annual reports of the selected Units. The reliability
and finding are largely deepending on the data published In
annual reports. 4. This study is restricted to only 10 units as compared
to population the sample size is to samll. Hence it becomes
the limitation of the study. 5. The ratio analysis has its own
limitations. The same also applies to the the present study. 6.
There are many approaches to performance measurement. There is
no Uniformity among experts. 7. The calculation of working capital has
many practical difficulties there are different methods to
calculate the working capital of an industry.
 The study duration (summer in plant) is short.

 The analysis is limited to just five years of data study (from year 2006 to year 2010) for

financial analysis.

 Limited interaction with the concerned heads due to their busy schedule.

 The findings of the study are based on the information retrieved by the selected unit.

LIMITATIONS
The data’s were collected mainly on the basis of secondary data. So
the limitations of secondary data are applicable. Due to busy work
schedule, detailed discussions were not possible. The data collected
for the study was historic in nature, so the suggestions will be
irrelevant.