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“WORKING CAPITAL MANAGEMENT OF RELIANCE INFOCOMM”
Supervisor Mrs. Shashi Bala Lecturer ODM Hissar
Submitted By:Mr. Kamal Krishan Enrollment No 08061114150 MBA IVth SEM (Finance)
Session 2008-10 DIRECTORATE OF DISTANCE EDUCATION GURU JAMBHESHWAR UNIVERSITY OF SCIENCE & TECHNOLOGY HISAR - 125001
Behind every study there stands a myriad of people whose help and contribution make it successful. Since such a list will be prohibitively long, I may be excused for important omissions. I would like to express my heart-felt gratitude to Ms Shashi Bala my project guide, for his invaluable guidance and encouragement.
I would like to pay my heartily gratitude to my friends for their moral support during my project work. It was a pleasant feel and unique experience working on this project.
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Introduction Objectives of the Study Research Methodology Conceptual Framework Working Capital -- Overall View Financial of Working Capital Cash Management Inventory Management Debtors Management Creditors Management
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Findings & Analysis Recommendations Bibliography
Few men in history have made as dramatic a contribution to their country’s economic fortunes as did the founder of Reliance, Sh. Dhirubhai H Ambani. Fewer still have left behind a legacy that is more enduring and timeless. As with all great pioneers, there is more than one unique way of describing the true genius of Dhirubhai: the corporate visionary, the unmatched strategist, the proud patriot, the leader of men, the architect of India’s capital markets, the champion of shareholder interest. But the role Dhirubhai cherished most was perhaps that of India’s greatest wealth creator. In one lifetime, he built, starting from the proverbial scratch, India’s largest private sector enterprise. Reliance Infocomm is the outcome of late Dhirubhai Ambani’s dream of bringing about a digital revolution in India that will bring to every Indian’s doorstep an affordable means of information and communication. When Dhirubhai embarked on his first business venture, he had a seed capital of barely US$ 300 (around Rs 14,000). Over the next three and a half decades, he converted this fledgling enterprise into a Rs 60,000 crore colossus—an achievement which earned Reliance a place on the global Fortune 500 list, the first ever Indian private company to do so.
Dhirubhai is widely regarded as the father of India’s capital markets. In 1977, when Reliance Textile Industries Limited first went public, the Indian stock market was a place patronized by a small club of elite investors which dabbled in a handful of stocks.
Undaunted, Dhirubhai managed to convince a large number of first-time retail investors to participate in the unfolding Reliance story and put their hard-earned money in the Reliance Textile IPO, promising them, in exchange for their trust, substantial return on their investments. It was to be the start of one of great stories of mutual respect and reciprocal gain in the Indian markets. Under Dhirubhai’s extraordinary vision and leadership, Reliance scripted one of the greatest growth stories in corporate history anywhere in the world, and went on to become India’s largest private sector enterprise. Through out this amazing journey, Dhirubhai always kept the interests of the ordinary shareholder uppermost in mind, in the process making millionaires out of many of the initial investors in the Reliance stock, and creating one of the world’s largest shareholder families. "Make the tools of infocomm available to people at an affordable cost. They will overcome the handicaps of illiteracy and lack of mobility", was how Dhirubhai, as he was fondly called, spelt out Reliance Infocomm’s mission in late 1999. He firmly believed the country could use information and communication technology to overcome its backwardness and underdevelopment. It was with this belief that Reliance Infocomm began laying its 60,000 route kilometers of pan-India fiber optic backbone in 1999. The backbone was commissioned on December 28, 2002, Dhirubhai’s 70th birth anniversary, first since his sad demise on July 6, 2002. Late Dhirubhai Ambani built Reliance from scratch and in 25 years got it a place among the world’s top Fortune 500 corporations. The fact that he took barely a quarter of a century to do that is what makes this achievement special. His corporate philosophy was short: "Think big. Think differently. Think fast. Think ahead. Aim for the best". At Reliance, he inspired all to better the best in the world. Dhirubhai would often say that if a telephone call could be made cheaper than the post card in India, it will transform every home, empower every Indian, remove every roadblock to opportunity and growth, and demolish every barrier that divides our society. He was of the view that Infocomm (information and communication) would energize enterprises, galvanize governance, make learning an experience and life, exciting.
high-capacity. is India's largest private sector information and communications company. with over 100 million subscribers.Reliance – Anil Dhirubhai Ambani Group. ranks among India’s top three private sector business houses in terms of net worth. . It has established a pan-India. The group has business interests that range from telecommunications (Reliance Communications Limited) to financial services (Reliance Capital Ltd) and the generation and distribution of power (Reliance Infrastructure Limited). integrated (wireless and wire line). to offer services spanning the entire infocomm value chain. an offshoot of the Reliance Group founded by Shri Dhirubhai H Ambani (1932-2002). Reliance – ADA Group’s flagship company. Reliance Communications. data and video) digital network. Other major group companies — Reliance Capital and Reliance Infrastructure — are widely acknowledged as the market leaders in their respective areas of operation. convergent (voice.
We will also generate value for our capabilities beyond Indian borders while enabling millions of India's knowledge workers to deliver their services globally". and being the industry benchmark in Customer Experience. be amongst the top 3 most valued Indian companies. Communication & Entertainment services. . providing Information. We will offer unparalleled value to create customer delight and enhance business productivity. By 2015.VISION "We will leverage our strengths in executing complex global-scale projects to make leading edge information and communication services affordable by all individual consumers and businesses in India. Employee Centricity and Innovation.
Incessant offering of Products and Services that are value for money and excite customers Providing a Network experience that is best in the industry Building Reliance into an iconic Brand which is benchmarked by others and leads industry in Developing a professional Leadership team that inspires.MISSION We will create world-class benchmarks by: Meeting and exceeding Customer expectations with a segmented approach Establishing. re-engineering and automating Processes to make them customer centric. nurtures talent and propagates efficient and effective Intention to Purchase and Loyalty RCOM Values by personal example .
Our constant endeavour is to provide an enhanced customer experience and achieve customer satisfaction by upscaling the productivity of the enterprises and individuals we serve. national and international long distance services and data services along with an exhaustive range of value-added services and applications. Reliance Mobile services now cover over 24. It includes broadband. Our business encompasses a complete range of telecom services covering mobile and fixed line telephony. was among the initial initiatives of Reliance Communications. Reliance Mobile (formerly Reliance India Mobile). Wireless Reliance Mobile With over 100 million subscribers across India. and still counting. It marked the auspicious beginning of Dhirubhai’s dream of ushering in a digital revolution in India. We endeavour to further extend our efforts beyond the traditional value chain by developing and deploying complete telecom solutions for the entire spectrum of society.Business Reliance India Mobile India ’s leading integrated telecom company Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies. Today. it is India’s leading integrated telecommunication company with over 100 million customers. launched on 28 December 2002. we can proudly claim that we were instrumental in harnessing the true power of information and communication. coinciding with the joyous occasion of the late Dhirubhai Ambani’s 70th birthday. 6 lack villages. by bestowing it in the hands of the common man at affordable rates. . Listed on the National Stock Exchange and the Bombay Stock Exchange. Reliance Mobile is India’s largest mobile service brand.000 towns.
Our pan-India wireless network runs on CDMA2000 1x technology. it created a world record by adding one million subscribers in a matter of just 10 days through its ‘Monsoon Hungama’ offer. which has superior voice and data capabilities compared to other cellular mobile technologies. In 2003. R World receives over 1. This innovative low pricing has increased the number of mobile phone users and its result is clearly reflected in the meteoric rise in India’s tale-density over the past four years. Reliance Mobile has ushered in a mobile revolution by offering advanced multimedia handsets to the common man at very affordable rates.5 billion page views per month from Reliance Mobile users. AC Nielsen voted Reliance Mobile (formerly Reliance India Mobile) as India’s Most Trusted Telecom Brand. R World offers a wide array of applications that include hourly news updates. information. superior data speed of up to 144 kbps and seamless migration to newer generations of mobile technologies are some of its key differentiators. and can access hundreds of Java applications on Reliance Mobile World. What sets Reliance Mobile apart is the fact that nearly 90 per cent of our handsets are data-enabled. In July 2003. .We have achieved many milestones in this short journey. seasonal updates including festival specials. astrology. bill payment. downloadable multi-lingual ring tones. With over 150 data applications offering varied services . entertainment and commerce. exam results. mobile banking. Its uniqueness lies in the fact that it enables complex Internet application to be introduced in mobile phones effectively and quickly. high quality headline video clips. Enhanced voice clarity.R World is truly a treasure house of knowledge. R World The R World suite of Reliance Mobile is a unique Java-based application. city and TV specials.unique to any wireless service in India . CDMA2000 1x is more costeffective as it utilizes the scarce radio spectrum more efficiently than other technologies do.
Reliance Group.creation of state-of the-art telecommunications infrastructure allowing convergence of voice. the CDMA solution eliminates the need of rooftop rights and the resultant delays. data and video. Commensurate with this dream. 25. R Connect is also India's fastest growing Internet connectivity service with over 300. Reliance has envisaged an investment of Rs. to leapfrog India to the centre stage of global communication and information technology space. Key Features: • • One of the largest CDMA 1x Network outside of North America CDMA 1x Wireless Technology . over the next 5 years. Subscribers can connect to Internet on the move at data speeds of up to 144 Kbps from their laptops or other mobile computing devices with an R Connect Cable connected to their Reliance India Mobile phones or by using an R-Connect Card inserted into the PCMIA slot in their laptop. which banks traditionally rely on. Reliance Infocomm's CDMAbased Wireless connectivity scores over other ATM connectivity options on counts like speed of deployment.000 subscribers in less than seven months.Wireless ATMs The CDMA-based Wireless connectivity solution enables quick deployment of ATMs by banks. It was the dream of Late Mr Dhirubhai Ambani.000 crore towards the realization of this dream . R-Connect Reliance offers India's only nationwide wireless Internet connectivity through R Connect service by leveraging its pan-India high speed CDMA2000 1x wireless network. apart from the advantage of rolling out a nationwide network of Wireless ATMs that are secure and cost efficient. ICICI and HDFC banks are rolling out hundreds of wireless ATMs using Reliance's wireless network. Unlike VSAT-based connectivity. Reliance will be the key contributor towards enabling India achieves the targeted tale-density of 15 lines per hundred persons as against the current figure of 3. Many banks including SBI. mobility and cost. Chairman.
generate new job opportunities for millions of unemployed Indians. . routing. transform healthcare. The uniqueness of Reliance Communications’ broadband initiative lies in the fact that our entire nationwide network is being conceptualized and built from ground zero. The mass roll out of broadband being carried out by Reliance Communications across the length and breadth of the country. microwave radios. offering speeds of up to 100 Mbps to millions of users. enhance efficiency in business and finally. digital compression and encoding. switching.• • • 673 cities & over 2500 BTS Better spectral efficiency vis-à-vis GSM Networks Data rates of up to 144 Kbps (shared bandwidth) Technology choices make costs lower Lower costs – lower prices • • Internet Broadband Wired to win The successful rolling out of real broadband services across the nation marks the second chapter of Reliance Communications’ commitment to usher in a digital revolution in India. drive governance. It is designed to deliver affordable quality education. in itself is a technological marvel. Reliance Communications is setting new standards for the world to follow through inventive use of cuttingedge technologies in the field of fiber optics. Ethernet.
E-education The mission of Reliance Communications’ e-learning initiatives is to bring world-class education to the doorstep of every Indian home. Utilizing our pan-India optical fiber and retail network. Utilizing our real broadband connectivity. and help tide over the challenges of distribution in a vast country like India. Jamshedpur — are imparting fully interactive real-time courses across 105 cities. Digital workplaces Physical distance or proximity is now a thing of the past. Reliance Communications’ real broadband connectivity has changed the dynamics of work.Reliance Communications’ broadband service is set to revolutionize Indian society by removing the traditional bottlenecks of development including lack of capital and weak infrastructure. Libraries and laboratories around the world can be cross-linked making way for seamless exchange of information and expertise. Leveraging our robust broadband infrastructure two top Indian management schools — the Xavier Institute of Management. The Indian market possesses tremendous potential yet to be tapped. educational institutions can reach out to large sections of students which otherwise would be very difficult to contact. Bhubaneshwar and XLRI. E-healthcare . educational institutions can source the best educational material from anywhere in the world. Our video conferencing service acts as a virtual bridge between professionals working at different office locations across the world.
Recently. Our target is to expand its service to cover the entire country eventually. based on specific customer requirement other high-end technologies including Digital Subscriber Line (DSL). delivered through fiber-to-the-building (FTTB) architecture introduces true broadband connectivity. leased lines. Access to advance medical expertise can no longer be constrained by geography. Gigabit Internet connectivity. suppliers and customers at data speeds scalable from 64 Kbps to 100 Mbps. Local Multipoint Distribution Services (LMDS) and Integrated Service Digital Network (ISDN) are also being deployed. sales and field executives. Our enterprise broadband is delivered using Metro Ethernet technology. . However.Reliance broadband is set to offer timely quality healthcare facilities at very affordable rates to large sections of the Indian population irrespective of their geographical location. Our broadband connectivity is committed to usher in a new generation of online healthcare delivery system. Reliance Communications’ core broadband products include MPLS based VPN. At the click of the mouse. A patient can seek medical advice sitting in the comforts of home. Doctors can attend to patients anywhere in the world on real-time basis. medical records and documents can be digitally dispatched thousands of miles away. the Apollo Group of Hospitals joined hands with Reliance Communications to offer its top-of-the-line healthcare facilities online to the benefits of millions of Indians. our convergent voice-data-video solution framework. video conferencing and video telephony. For Indian enterprises. As per specific requirements of enterprises we provide customized solutions be it a simple voice solution or complex data solutions that involves nationwide networking of all branches. vendors. data and video solution. It consists of an integrated voice. Integrated Enterprise Solution Reliance Communications’ Integrated Enterprise Solution offering is currently being rolled out in 30 cities across India.
7 m illio n b u ild in g s in 2 0 0 to w n s 1 5 0 0 s e -u rib a n a n d ru ra l to w n s m se rv ic e d C y r D E C T bo N a tio n a l B a c k b o n e • 6 0 . which is the preferred IPTV Platform world over. i H ongkonnd ag M id d le E a s t • • L ic en s es fo r IL D . Reliance IPTV is uniquely placed to cater to the growing & varied needs of consumers and become India’s leading IPTV service provider.0 0 0 sq . Leading IPTV Service Providers like AT&T.0 0 0 k m n a tio n w id e o p tic a l fib e r b a c k b o n e c o v e rin g 2 2 6 d is tr ic ts • E a c h fib e r c a p a b le o f N e tw o r k O p e r a tin g te ra b it c a p a c ity C e n te r s • T w oN o C p la n n e d • 6 d u c ts la id in b a c k b o n e s fo r 2 4 /7 m o n ito rin g a n d fa u lt tra c k in g o f n e tw o rk • D ata C en ters • 8 w o rld c la ss D a ta C e n te r s p la n n e d w ith o v e r 5 0 0 . Features and functionalities on the Reliance IPTV differentiate us from all the other IPTV Players in the country.W ir e lin e • W ir e le ss • 3 G w ire le s s n e tw o rk la rg e s t d e p lo y m e n t in In d ia C o v e ra g e in 6 7 3 to w n s • • P a n In d ia c o v e ra g e (1 8 o u t o f 2 1 te le c o m c irc le s) F ib e r to 1 . ft. . N L D . B as ic teleph o n y P lan c o vers 95% o f th e telec o m m arket (b y reven ue) in th e c o un try Entertainment IPTV Reliance IPTV is powered by Microsoft Mediacom. U K . o f sp a c e I n te r n a tio n a l C a r r ia g e • C o n n e c tiv ity o n F ib e r & S a te llite • P o P sn U S A . BT. DT and SingTel operate on the Mediacom Platform.
Typical channel change times are at least 2-4 seconds. Instant Channel Change (ICC) A unique feature of Reliance IPTV which enables channel changeover in microseconds. Reliance IPTV has been tested and is running successfully in more than 200 Homes in Mumbai.Reliance IPTV comes loaded with unique features and functionalities that are built to provide the user an amazing TV experience. Reliance IPTV has the capability to allow a subscriber to go back a week in time. Following features differentiate Reliance IPTV from competition: Live TV Reliance IPTV Service has the capability to deliver over 500 Live TV channels and will carry around 200 Channels at launch – the highest by any Television Service Provider in India. Bangalore. Within a year of launch. our services will be launched in Mumbai and Delhi and then expanded to Pune. DVR Reliance IPTV has functionality to support recording of 3 streams simultaneously while watching Live TV/VOD.000 hours of Video at current capacity. Video on Demand Reliance IPTV can host over 5. within a year of launch. Time-Shift TV Catch-up TV allows a subscriber to go back in time and watch programs that were screened earlier in the day or in the week. Big TV . We are targeting to carry at least 250 channels. we intend to carry at least 1500 Titles. Initially. including 5-10 HD Channels. Hyderabad and Ahmedabad in the next one year. Around 500 Video Titles will be available at launch and the library will be expanded on an ongoing basis.
the quality of its audio and video.Entertainment avenues in India today are expanding from mass entertainment to ‘lifestyle entertainment’. . parental control. optic fiber cable assets and related assets at designated sites. The launch of Reliance BIG TV brings true digitization and a transformation of the current television viewing experience. personalized and social media environment that maximize the limited time available. and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communications service providers under long-term contracts. superior customer service and lots more. digital sound. the synergies with the BIG Entertainment group. expression and creativity. Picture all of your favorite channels. more channel choice. Homes all over the country will witness a never before digital television viewing experience with unlimited hours of fun and entertainment for the entire family. multiple exclusive movie channels. passions and busy schedules. Imagine a digital television service that suits you and your family’s interests. own and operate telecommunication towers. and the Reliance ADA Group retail distribution network. Consumers are looking at the best life has to offer when it comes to enjoyment. Reliance BIG TV presents the next landmark in entertainment in India. entertainment. easy programming guide. Consumers can now experience fantastic features such as pure digital picture. They are seeking products and services that will create a rich. DVR (Digital Video Recording) and HD (High Definition) readiness and many more features because it uses MPEG-4 compression technology. It has a significant technological advantage over other television platforms in terms of the number of digital channels it can broadcast. and marks a shift in the controls from the broadcaster to the hand of the consumer. and movies at your fingertips – it’s time to step into the BIG world of entertainment. interactive services. shows. Reliance Infratel Limited (RITL) RITL’s business is to build. It is also in a superior position to take advantage of the content boom. consumer and investor base.
more specifically the present study is conducted to find out as follows: The main objectives are:• • • • Whether the firm has adequate liquidity throughout the period which leads to risk return trade off? How far has the firm been successful in managing and collection of the receivables in time? To study management policies regarding inventory management. whether the management have applied various inventory control techniques for proper utilization of resources. How far have the firm been successful in managing and payments of accounts payables. Apart from the above. to what extent.OBJECTIVES OF THE STUDY The main objective of the study is to have an insight into the current practices of the company with regards to management of various elements of working capital. An attempt will also be made to find out whether or not. Ways and means to improve working capital management would also be suggested which lead to better productivity and maximization or shareholder’s wealth. the working capital management is efficient and effective in the RELIANCE INFOCOMM. To study the policies regarding working capital management • • . To study the factor affecting the working capital management.
RESEARCH METHODOLOGY Research Methodology Research methodology is the way to systematically solve the research problem.. which are collected first time and thus happens be original in character. where. It may be understood as the science of study how research is done systematically. data directly collected by research is known as primary data. The research design can be exploratory and descriptive designs. Primary method Secondary method Primary data Primary data is the important source of information. Research design The formidable problem that follows the task of defining the research problem is the preparation of the design of the research project. The primary source of data collection is classified as: • • • Observation Focus Surveys . when. 2. Data collection method: The data can be collected by two methods: 1. Primary data are those. Decision regarding what. So. popularly known as “RESEARCH DESIGN”. by what means concerning and enquiry or a research study constitute. how much. In it we study the various steps that are generally adopted by the research methods or techniques and also the methodology.
Other published material. But in my research data will be collected through secondary source. Central and state Govt. Websites. which is not collected for the first time & it used already for any other purpose. 2. The main sources are: 1. 3. Magazines & journals. 4. . Analytical tools Data will be analyses on the basis of percentage with the help of table and figures.• Experiments Secondary method The data.
To understand working capital better we should have basic knowledge about the various aspects of working capital. that is commonly used in . by accounting definition are the assets normally converted in to cash in a period of one year.Gross Working Capital . It is a derivation of working capital. To start with. In managing fixed assets. 3. working capital is considered a part of operating capital.CONCEPTUAL FRAMEWORK WORKING CAPITAL MANAGEMENT – AN INTRODUCTION Working Capital management is the management of assets that are current in nature. especially cash. market securities receivable. 1. organization. but it is only current assets that are adjusted with the fluctuation in the short run in a business. however differ on three major aspects. The large holdings of current assets. including governmental entity. there are two concepts of working capital: . inventories and current liabilities.Net working Capital Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business. In fact. Current assets. Net working capital is calculated as current assets minus current liabilities. time is an important factor discounting and compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets. 2. but is bound to reduce profitability of the firm as ideal cash yield nothing. the management of current assets is similar to that of fixed assets the sense that is both in cases the firm analyses their effect on its profitability and risk factors. may strengthen the firm’s liquidity position. The level of fixed assets as well as current assets depends upon the expected sales. Along with fixed assets such as plant and equipment. or other entity. Hence working capital management can be considered as the management of cash.
Net working capital can be positive as well as negative.valuation techniques such as DCFs (Discounted cash flows). Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. an entity has a working capital deficiency. firstly optimum investment in current assets and secondly in financing the current assets. refers to the firm’s investment in current asset. Working Capital = Current Assets Net Working Capital = Current Assets − Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. If current assets are less than current liabilities. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in current assets. Gross Working Capital: Gross working capital. Another aspect of gross working capital points out the need of arranging funds to finance the current assets. Working Capital = Current Assets Net Working Capital: The term net working capital refers to the difference between the current assets and current liabilities. Positive working capital refers to the situation where current assets exceed current liabilities and negative working capital refers to the situation where current liabilities exceed current . which is also simply known as working capital. The management of working capital involves managing inventories. The gross working capital concept focuses attention on two aspects of current assets management. also called a working capital deficit. accounts receivable and payable and cash.
assets. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities. Net Working Capital = Current Assets − Current Liabilities Working Capital Management Decisions relating to working capital and short term financing are referred to as working capital management. which results from working capital management. as above) rather they will be based on cash flows and / or profitability. exceeds the cost of capital. management generally aims at a low net count. this metric makes explicit the interrelatedness of decisions relating to inventories. • One measure of cash flow is provided by the cash conversion cycle . determined by dividing relevant income for the 12 months by capital employed.the net number of days from the outlay of cash for raw material to receiving payment from the customer. • In this context. relating to the next one year period . which results from capital investment decisions as above. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The net working capital helps in comparing the liquidity of the same firm over time. For purposes of the working capital management. Decision criteria By definition. Return on equity (ROE) shows this result for the firm's shareholders. accounts receivable and payable. 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. therefore. Firm value is enhanced when. and cash. and if. These decisions are therefore not taken on the same basis as Capital Investment Decisions (NPV or related. working capital management entails short term decisions .which are "reversible". the most useful measure of profitability is Return on capital (ROC). the return on capital. ROC . The result is shown as a percentage. As a management tool. Net Working Capital can be said to measure the liquidity of the firm.generally.
the Finished Goods should be kept on as low level as possible to avoid over production . See Economic value added (EVA). • Inventory management. in that they link short-term policy with long-term decision making. but reduces cash holding costs.see Supply chain management. inventories and debtors) and the short term financing. it may be necessary to utilize a bank loan (or overdraft). such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa). Economic quantity • Debtors management. Identify the appropriate source of financing.and minimizes reordering costs . or to "convert debtors to cash" through "factoring". Besides this. Just In Time (JIT). • Short term financing. however. Identify the cash balance which allows for the business to meet day to day expenses. given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier. i.e. the lead times in production should be lowered to reduce Work in Progress (WIP) and similarly. Identify the appropriate credit policy. . such that cash flows and returns are acceptable. credit terms which will attract customers. • Cash management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials . see Discounts and allowances. management will use a combination of policies and techniques for the management of working capital.measures are therefore useful as a management tool. These policies aim at managing the current assets (generally cash and cash equivalents. Management of working capital Guided by the above criteria. Economic order quantity (EOQ).and hence increases cash flow.
It has been emphasized that a business should maintain a sound working capital position and also there should not be an excessive level of investment in the working capital components. the current assets accounts for 72.48 67.27 71.82 73. in fact. “the inadequacy of mis-management of working capital is few leading causes of business failure.48 . accounts for a very large portion of the total investment of the firm.Importance of working capital management: Management of working capital is very much important for the success of the business. Table clearly shows that in RELIANCE INFOCOMM. Current assets.57 74. Table showing Current assets as percentage of Total assets Year 1997-98 1998-99 2000-01 2001-02 2002-03 Average: 72.27 71.45 67. As pointed out by Ralph Kannedy and Stewart MC muller.45 74.52% 78 76 74 72 70 68 66 64 62 1997-98 1998-99 2000-01 2001-02 2002-03 75.52% (average) of total investment in the net assets during the study period.57 Percentage 75.82 73.
4 1. the investment in current assets will decrease. wages overhead expenses.37 1.6 1. Fast turnover current assets results in a better rate on investment.e. CIRCULATION SYSTEM OF WORKING CAPITAL In the beginning the funds are obtained from the issue of shares.27 1997-98 1998-99 2000-01 2001-02 2002-03 The ratio average is 1.35 1. Reasons being during this .82% which was reduced to 73.77 during the 5 year study.57% shows decreasing trend. Current assets turnover ratio speaks about the efficiency of RELIANCE INFOCOMM in the utilization of current assets.e.2 1 0. 1. In 2000-01 current assets turnover ratio is highest one i.6 0. This account of profit is used for paying taxes.2 0 1.27% in the next year and in 2002-03 it is 67.41 2 1. Much of these collected funds are used in purchasing fixed assets and remaining funds are used for day to day operation as pay for raw material.41 times in the study period of 5 years. Table showing Current assets turnover ratio Average: 1. Working capital is considered to efficiently circulate when it turns over quickly.77 1. often supplemented by long term borrowings.4 0.28 1. As circulation increases. 1997-98 it was 75.8 0. dividend and the balance is ploughed in the business.8 1.It can be visualized from the table that in the first year of our study 1.
the need for current assets increases.74 2.08 It can be visualized from the above table that current assets to fixed assets ratio of five study periods are fluctuating. Current Assets to Fixed Assets Ratio Year 1997-98 1998-99 2000-01 2001-02 2002-03 Average: 2.68 Ratio (in times ) 3. Indicate toward higher risk between the two extreme policies.year company has achieved sales growth 33. The short term creation of the firm are interested in the short term solvency and liquidity of firm and owners and long term creditors are interested in long term solvency as profitability of the firm. conservative policy (i. As the firm’s output increases. The level of current assets can be measured by relating current assets to fixed assets.50 2.e. So we can conclude that investment in fixed assets (due to increase in production capacity) attracts the investment in current assets. A proper balance between the two contradictory required for efficient use of current resources. Other things assuming constant. which an aggressive policy (i.14 2. Analysis of Liquidity position: The importance of adequate liquidity or the ability of the firm to meet its long term obligations when they become due for payment can hardly be over emphasized.92 2. A firm needs fixed assets and current assets to support a particular level of output. higher current assets/fixed assets ratio) implies greater liquidity and low risk.e. lower current assets/fixed assets ratio).48% over the previous year and additional activity needs more funds. The following are the ratios which measure the liquidity of a firm: .
it is frequently employed as a measure of the firm’s liquidity. better in the safety margin and technical solvency of the firm.00 126.98 % increase 0 26.78 81.33 60.78 133. Current Ratio: Current ratio shows that how many times current assets have covered the current liabilities.33 160.78 33. But this is an indication only whereas actual liquidity position will be reviewed by current ratio and quick ratio in the next paragraphs.12 Indices 100. So we can say that as per liquidity point of view there is no problem. Current ratio measures the relative ability of enterprise to pay its short term obligations and it is also used to reveal how well a firm could meets a sudden demand to pay of all its short term creditors. in crores) 2032. Net Working Capital Year 1997-98 1998-99 2000-01 2001-02 2002-03 Amount (Rs.35 3267.33 2709.Net Working Capital: Though net working capital is not a ratio.20 3698. Following table shows the working capital position of the company. Table shows the current ratios of RELIANCE INFOCOMM . The greater the amount of net working capital.11 2576. The working capital increases significantly in the year 2000-01 and 2002-03.78 181.98 Table shows that net working capital has increasing trend in the period of study. The higher the ratio. the greater is the liquidity of a firm.
Quick Ratio: Quick ratio is the relationship between quick assets and current liabilities. Quick assets is defined as current assets minus inventory since inventory is relatively less liquid and hence not considered as a part of quick assets.76 2.87 Average: 2.14 2.5 0 1997-98 1998-99 2000-01 2001-02 2002-03 3.90 A high ratio of current assets to current liabilities may be indicative of slack management practices as it might signal excessive inventories for the current requirements and poor credit management in term of over extended accounts receivable. A higher ratio does not necessarily mean that it is good nor a lower ratio means means that it is bad. This ratio is often used supplement the information furnished by current ratio.5 1 0.17 2.5 2 1. An Acid test ratio of 1:1 is considered satisfactory. Table shows the quick ratio of VSNL .5 3 2. The firm may not be making full use of its current borrowing capacity.Current ratio 3. This norm however should be interpreted with caution.54 3.
Rs.8 0. It is most rigorous test of the liquidity position of the business unit.3158.37 1.25 Cr.2 0 1. Rs.01 Cr. It is calculated as : cash and marketable securities Cash ratio = -------------------------------------*100 Current Liabilities The Table shows the cash ratio of RELIANCE INFOCOMM .69 1. Rs.6 1.04 Cr.19 1997-98 1998-99 2000-01 2001-02 2002-03 Cash Ratio: Cash ratio also called absolute liquidity ratio.Quick Ratio Average :1.16 Cr.8 1.6 0.2 1 0.28 1.64 2.4 1.4 0.45 1.4. 9365.50 Year 2005 2006 2007 2008 2009 Quick assets _ Rs. Rs.29 Cr. 10732.72 2 1. Rs. 25543.96 Cr.87 1.14 Cr. Quick ratio _ 742. 18515. Rs. 11238.82 1.46 Cr. Current liabilities _ Rs. 20107.
current ratio.69 50 45 40 35 30 25 20 15 10 5 0 46.89 1997-98 1998-99 2000-01 2001-02 2002-03 Conclusion: In this chapter.e.52% for the 5 years of study period.42 19.55 22. The main findings are as follows: It is witnessed that current assets form an integral part of the total assets i.Year 1997-98 1998-99 2000-01 2001-02 2002-03 Cash Ratio (in Percentage) 46.91 22. average 72.42 Average: 27. quick ratio and cash ratio shows that company has very good position regarding liquidity. Nature and size of the business is reported to be the most effecting factor of working capital level in the company followed by growth and expansion.66 26.66 19. Conservative approach is followed by the company in financing their working capital requirements. management policy etc. .89 26. Total current assets position. practice regarding working capital management has been examined of the company for the selected period of study and management performance has been evaluated.55 22.91 22.
without contributing anything towards the firm’s profitability. Cash is the money which a firm can disburse immediately without any restriction the term cash includes currency and cheques held by the firm and balances in its bank accounts. Cash is the basic input needed to keep the business running on a continuous basis it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm.38 335.22 -25. neither more nor less.CASH MANAGEMENT Cash is the important current asset for the operations of the business. The trend percentage are also calculated and shown in the table: Size of cash balance (Rs.24 328. The firm should keep sufficient cash. Evaluation of cash management performances To assess the cash management performance this phase is divided as follows: A) Size of cash: The quantum of cash held by RELIANCE INFOCOMM during the study period is presented in the table. Thus a major function of the Financial Manager is to maintain a sound cash position.40 Trend 100 -24. in Crores) Year 1997-98 1998-99 2000-01 Cash 442. Cash shortage will disrupt the firm’s operations while excessive cash will simply remain idle.77 .
47 6837.90 7350. the later signifies the ability of a firm to settle all its current obligations on a particular date. .24 328. in Lacs) Year 1997-98 1998-99 2000-01 2001-02 2002-03 Source: Annual Reports Sales 4033. The former indicates the extent of the soundness of the current financial position of a firm and the degree of safety provided to the creditors.38 335.96 82.05 1.60 500 400 300 200 100 0 -100 442.4 421.21 71.2001-02 2002-03 Source: Annual report 421. To test a firm’s liquidity and solvency we commonly use current and quick ratios.19 6912.49 (B) Liquidity and Adequacy of Cash: One of the most important jobs of the Finance Manager is to maintain sufficient liquidity to enable the firm to pay off its obligations when they fall due. Traditionally 2:1 current ratio and 1:1 quick ratio are taken as satisfactory standards for the purpose.77 2000-01 -0.6 2002-03 1997-98 1998-99 Size of sales (Rs.22 -25.44 100 -24.98 5524.15 449.44 -0.15 449.00 36.05 2001-02 1.36 69.08 Trend 100.
87 2.32 Conclusion : It can be inferred from the above table that except the year 1997-98. Further.90 7.45 (C) Control of Cash: One of the major objectives of cash management form the stand point of increasing return on investment is to economize on the cash holding without impairing the overall liquidity requirements of the firms.17 Quick Ratio 1. The following ratio has applied to assess the efficiency of cash control: # Cash to Current Assets ratio # Cash turnover ratio Cash to Current assets ratio Year 1997-98 1998-99 2000-01 2001-02 2002-03 Average: 9. all the ratio fluctuates throughout the period.43 Source: Annual Reports Cash to CA ratio 14.82 8. which shows the proper maintenance of liquidity position. This is possible by effecting tighter controls over cash flows.69 1.37 1.19 1.76 2.83 8.Current ratio and quick ratio Year 1993-94 1994-95 1995-96 1996-97 1997-98 Source: Annual Reports Our analysis clearly shows that the company has very sound position regarding liquidity and solvency. Current ratio 3. . cash to current assets ratio is more or less constant.14 2. which ultimately affect the operational efficiency of the firm.54 3.30 7.82 1.
Cash Turnover Ratio Year 1997-98 1998-99 2000-01 2001-02 2002-03 Ratio 9. cash to current assets ratio indicates the position that the firm is controlling the and managing the cash efficiently when the cash to current assets ratio is concerned. . There is a decrease in sales in the year 2001-02 and 2002-03.41 15. it has thereby affected the cash turnover ratio. the ratio is at the minimum level at last year and also at the optimum level of cash apart of all current assets.12 16.38 16.48 22. Overall conclusion: The analysis of financial data reveals that the company has very sound position regarding liquidity and solvency as shown by the current and quick ratios. cash to current liabilities ratio. In 1997-98 it was lowest but in 1998-99 it gets the highest value and in other three years it remains constant which reveals the poor management of cash in the company. The cash to current liabilities ratio is nearly on decreasing trend shows the efficiency of operations. Cash turnover ratio.21 Conclusion: Table shows that cash turnover ratio of the company is very fluctuating.
It is therefore. . If a close link is maintained between the sales and the production department then an organization can do with a small inventory also. The structure of inventory shows us that which part of the inventory is more in the organization. Composition of Inventory: Composition of inventory generally depends upon the nature of business. The aspect of management of inventory is especially important in respect to the fact that in country like India. Table shows the composite of inventory in RELIANCE INFOCOMM. A company should maintain adequate stock of materials for a continuous supply to the factory for an uninterrupted production. It is not possible for a company to procure raw material instantaneously whenever needed. Such knowledge helps us in the efficient management of inventory. the capital block in terms of inventory is about 70% of the current assets. Although to maintain low inventories may prove to be profitable but to maintain very low inventories may prove risky on the contrary. In the process inventory is also necessary because production can not be instantaneous Evaluation of Inventory Management: In this section of this chapter.MANAGEMENT OF INVENTORY Inventories are the stock of the product made for sale by the company or semi finished goods or raw materials. These inventories serve as a link between the production and consumption of goods. Inventory of finished goods which are ready for sale is required to maintain smooth marketing operation. absolutely imperative to manage efficiently and effectively in order to avoid unnecessary investment in them. an attempt has been made to judge the efficiency of inventory management in RELIANCE INFOCOMM by examine the composition movement and level of inventory held by the firm.
85 46. the percentage share of finished goods in the total inventory has increased significantly during last 3 years of the study period.83 13. The percentage share of store/scrap/spares etc.98 13.80 46.00 100.15 16.42 14.00 100.09 Semi Finished Material 21. Inventory Turnover Ratio Year Ratio In days .Composition of Inventory Year 1997-98 1998-99 2000-01 2001-02 2002-03 Average Raw Material 36.00 100.00 70 60 50 40 30 20 10 0 1997-98 1998-99 2000-01 2001-02 2002-03 Average Raw Material Finished Goods Semi Material Stores Spares & scrap Conclusions: Table reveals the proportion of each component of inventory to total of inventory in percentage terms.10 19.96 18.48 Goods 30.45 12.00 100.00 100.42 10.26 9.92 27.85 Stores Spares Total & scrap 10.40 13. is moving between 10-18%.68 100. that shows the blockage of goods at finished stage.87 8.47 57. The increasing share of finished goods is to be checked and controlled. On the opposite.56 25.73 13.41 56.31 14.61 61.
Moreover. It establishes a relationship between the total sales during a period and average inventory hold to meet that quantum of turnover. MANAGEMENT OF RECEIVABLES Trade credit.78 2. therefore. In other words. that signifies the slow moving of inventory.64 100 119 71 131 138 Inventory turnover ratio is generally regarded as indicator of inventory efficiencies. The overall position of inventory is that adequate on following basis: • The factor of finished goods is the composition of inventory is total is at higher The stock is also very slow moving and the stock retention period is on level and also having an increasing trend.64 3. inventory turnover ratio is the lowest one at 2. Overall Conclusion: This can be concluded that overall composition includes the highest factor of finished goods and that is too on increasing trend. the inventory level is maintained for 138 days for the year 2002-03 that is the highest during the study period. • increasing trend. the stock held during 2002-03 is for 138 days as comparison of average at 112 days for the view of five years.1997-98 1998-99 2000-01 2001-02 2002-03 Average: 112 days 3.06 5. is a force in the present day business and .64 times. the tool which as a bridge for movement of goods through production and distribution stages to customer. In the year 2002-03. The above two factors increases the cost of production and decreases the profitability.15 2. these should be taken in to consideration for better productivity and efficiency of operation.
Trade credit is said to be extended to a customer when a firm sell its services or goods and does not receive the payment for them immediately. . competitors and attaching more of the potential customers. Goals of Management of Receivables As all other aspects of management. So in an effort to maximize the wealth. clearly spot the slow paying accounts and indicate towards the efficiency of the management in collecting the post due accounts. Ageing.an essential device. as factory collection period and receivable task over minimum bad debts losses and effective use of capital invested in receivable. Trade credit is granted with a motive of protecting the sale from ones. A firm which fails to recover up its receivable with in time faces bad debts losses ultimately. the goals of management of receivable are: • • • To obtain optimum value of sales To control the cost of credit and keep it to the minimum level. Yet a successful receivable management must ensure a comparatively slow growth of receivable as against sales. To maintain investment in debtors at optimum level. Performance Evaluation of Receivables Management: Evaluation of the performance of the credit department is a difficult task. The main aim of management is not to maximize sales or minimize bad debt risk but in a way it is to expand sale to the extent that the bad debt risk remained within the limits. RELIANCE INFOCOMM has given information in their annual reports and accounts for those debts which are due for over six months. There is no standard yardstick to compare with the actual performance. Accordingly the following criterion has been employed to evaluate the performance of receivable management in RELIANCE INFOCOMM: Ageing of Debtors: We can have a detailed idea about the quality of accounts receivable through the ageing and schedule. Thus trade credit creates receivable which refer to the amount which a firm is expected to collect in near future. this also aims at the maximization of wealth by a beneficial trade off between liquidity risk and profitability.
10 0.15 Debtors O/S for a period exceeding six months 0.04 0.02 0. In the unit under study receivable mainly consist of study debtors and loan and advances both the segment of receivable have been shown in table: Composition of Receivable Year 1997-98 1998-99 2000-01 2001-02 Sundry Debts considered goods (in times) 0.12 0. Composition of Receivable: .06 0.96 0.04 Table reveals that receivable outstanding for a period of less than six months have more or less constant status whereas outstanding more than six months ranges between 0.85 0.06 in our five year study.86 0.02 0.88 0.05 .94 0.03 0.97 0.11 0.96 Receivable O/S over six months 0.04 0.Table Showing the Ageing of Receivable in RELIANCE INFOCOMM Year 1997-98 1998-99 2000-01 2001-02 2002-03 Receivable O/S under six months 0.02 & 0.80 Loan& Advances Considered goods 0.98 0.02 0.
46 3. A higher collection period indicates towards a liberal and inefficient credit and collection performances shorter the collection period the better the credit management and liquidity of accounts receivable. Debtors Turnover Ratio: This ratio is calculated the effective utilization of funds involved in receivable.83 0. Average Collection Period: Average collection period explains how many days of credit.2002-03 0. The period is more or less constant.30 3. An effective credit management results in a higher turnover of accounts receivable. Average collection period Year 1997-98 1998-99 2000-01 2001-02 2002-03 Average: 110 Days 116 111 105 111 108 Conclusion: The receivable collection period at an average level is for 110 days during five years of study. a company is allowing to the customer.14 3.13 0. Year Debtors Turnover Ratio Average collection period (in days) 1997-98 1998-99 2000-01 2001-02 3.04 Table reveals that sundry debtors considered goods are having constant base whereas loans and advances have fluctuating trend.30 116 111 105 111 .
. pay. Trade Acceptance.e. the buyer tends to look upon it as a loaning of goods or inventory. MANAGEMENT OF PAYABLES A substantial part of purchase of goods and services in business are on credit terms rather than against cash payment. The factor of debtors exceeding the six months in composition of total receivable trend from 0. the .06 during study period. 1. The average collection period is at level of 110 days for the five years of study. The collection period of debtors should be kept at lowest level for the reduction in cost of capital and better productivity. The extent to which this ‘buy-now. Trade Credit. Trade Bill. That shows the constant recovery of debtors and other receivable and also in 1997-98 it is 108 days. Overall Conclusions: The overall conclusions of receivable management can be made on following basis: 1.2002-03 3. The factor of debtors considered goods in composition of total receivable is on decreasing trend.later’ facility is provided will depend upon a variety of factors such as the nature. While the supplier of goods and services tends to perceive credit as a lever for enhancing sales or as a form of non-price instrument of competition. The supplier’s credit is referred to as Accounts payable.. Average 110 days whereas lowest 105 days during 1995-96. quality and volumes of items to be purchased.02 to 0.38 108 Conclusion: The debtor’s turnover ratio is also more or less constant that signifies the constant recovery of debtors from operation activities. Average collection period of receivable and debtors is more or less constant i. commercial drafts of bills payable depending on the nature of the credit.
the degree of competition and the financial status of the parties concerned. after satisfying himself about the credit-worthiness of the buyer. the rate and the total price payable and the payment terms. The buyer records his liability to the supplier in his books of accounts and this is shown as Payables on open account.06 Average payment period 177 . Bills payable or commercial drafts are instrument drawn by the seller and accepted by the buyer for payment on the expiry of the specified duration. And they primarily finance inventories which form a major component of current assets in many cases. dispatches the goods as required by the buyer and sends the invoice with particulars of quantity dispatched. The promissory note is thus an instrument of acknowledgment of debt and a promise to pay. The bill or draft will indicate the banker to whom the amount is to be paid on the due date. Open Account or open credit operates as an informal arrangement wherein the supplier. The buyer is then expected to meet his obligations on the due date. the supplier may require a formal acknowledgment of debt and a commitment of payment by a fixed date. and the goods will be delivered to the buyer against acceptance of the bill. The supplier may even stipulate an interest payment for the delay involved in payment. Promissory notes and Bills Payables. Evaluation of Payables Management Creditor’s turnover ratio & Average Payment Period Year 1997-98 Creditors Turnover Ratio 2.prevalent practices in the trade. Where the client fails to meet his obligations as per open credit on the due date. Trade credits or Payables constitutes a major segment of current liabilities in many business enterprises. The promissory note is a formal document signed by the buyer promising to pay the amount to the seller at a fixed or determinable future time. Types of trade credits: Trade credits or Payables could be of three types: Open Accounts.
FINANCING OF WORKING CAPITAL Any enterprises whether industrial or trading acquire two types of assets to run its business. plant and machinery. A set financing pattern is evolved to meet the requirement of a unit for acquisition of fixed assets and current assets.56 1. It requires fixed assets which are necessary for carrying on the production/business such as land and building. The other type of assets required for day to day working of a unit are known as current assets which are floating in nature and are converted into sale. furniture and fixture etc. For a going concern these assets are of permanent nature and are not to be sold.1998-99 2000-01 2001-02 2002-03 Source: Annual reports Average: 201 days 2.57 174 190 234 232 Conclusion: Table shows that the minimum average creditor period is 201 days and maximum is 234 days.10 1. Table reveals the increasing trend in average payment period which is beneficial for the company. The total current assets with the firm may be taken as gross working capital whereas the net working capital with the unit may be calculated as under: . It is these assets which are generally referred to as “WORKING CAPITAL”.92 1.
3. Finished Goods: The margin on finished goods generally higher than the margin on raw material and may be lower than the stock in process.NET WORKING CAPITAL = CURRENT ASSETS -. Raw Materials : Credit to the RELIANCE INFOCOMM is available for purchase of raw material and the same is deducted from credit limit fixed for raw material. The margin fixed by bank is 15%.e. The margin for raw material is low in comparison to finished goods. 2.e. Semi-finished Goods: Semi processed goods do not form a good security as its realizable value is not exactly determined. Bills Receivables: Banks generally prefer to grant facilities against bill receivables and a very low margin is required for the supply made to government department. The banks follow the following methods for fixing the limits of RELIANCE INFOCOMM on various components of working capital: 1. The RELIANCE INFOCOMM has enjoy the following financing facilities by its banker i. ICICI Bank. The assessment of working capital may involve two important aspects as under: * The level of current assets required to be held by any unit which is adequate for its day to functioning. 40 %. 4.CURRENT LIABILITIES This net working capital is also sometimes referred to as liquid surplus with the firm and is the margin available for working capital requirement of the unit. * The mode of financing of these current assets. That is due to the fact that the value of finished goods can be realized easily. .e. 25 %. HDFC Bank. So bank has insisted on higher margin i. This margin is very high i.
. Further current assets to fixed assets ratio also shows on decreasing trend during the study period which substantiate above mentioned criterion of effectiveness in management of working capital by the company. 72. This facility is sanctioned to the exporter for procuring/manufacturing/ processing/packaging and shipping the goods Packing Credit may be taken as equivalent to “Cash Credit” in domestic business except that cash credit facility is sanctioned as a continuous running facility whereas packing credit advance is disbursed for a specific purpose to enable the exporters to meet a specific export obligation. The fluctuation in business is the prime factor that can directly effect the organization. FINDINGS The study conducted on working capital management of RELIANCE INFOCOMM shows the evaluation of management performance in this regard. Major findings and suggestions thereon are narrated as under: • Current assets comprise a significant portion i. This scheme is beneficial to the enterprises in many ways. Every Pre-shipment Advance is considered as a separate loan account which differs from a domestic advance. PACKING CREDIT (OR PC) LIMIT: meant for export are termed as Pre-shipment Credit.WORKING CAPITAL DEMAND LOAN (WCDL): Under this scheme bank has to finance the working capital loan as the organization required.52% (average for five years of study) of total investment in assets of the company.e. There is decreasing trend of this ratio during the study period which shows management efficiency in managing working capital in relation to total investment.
Further composition of inventory reveals that portion of individual element of inventory has fluctuating trend which indicates that management has no policy in respect of inventory management. 1. which shows ineffectiveness of the management in managing current/quick assets in relation to current liabilities. Both the ratio shows fluctuating trend within reasonable limit but these ratio are higher than conventionally accepted norms i. It reveals that management has no specific policy in respect of debtors management. cash to current liabilities ratio and cash turnover ratio. It reveals that management is taking maximum credit period benefit from suppliers which . • Debtors Turnover ratio reveals a constant trend during the period of study and average collection period ranges from 105 to 116 days. • Inventory turnover ratio depict the decreasing trend except 1995-96 which All these ratios reveal that management has no indicates the accumulation of inventory in turn which cause loss to the company by way of deterioration of stock. • The ratio used for analysis of liquidity position is current ratio and quick ratio. These ratios reveal that company has sound liquidity position throughout the period of study.77 during the study. • The ratios used for cash management are cash to current assets ratio.• Current assets turnover ratio for the first three years of study shows increasing trend which is due to significant increase in sales.e.e. definite cash policy. Keeping in view of fastener industry trend credit period of 3-4 months is quite very higher. Cash to current liabilities and cash turnover ratio shows fluctuating trend where as cash to current assets ratio shows decreasing trend except 2002-03.04% over the previous year. • Creditors turnover ratio shows an increasing trend in the study period and average credit period increasing from 177 days (1998-99) to 234 days (2001-02). In 1995-96 current assets turnover ratio is highest one i. interest loss on blockage of stock etc. reasons being during this year company has achieved sales growth 33. 2:1 in case of current ratio & 1:1 in case of quick ratio.
in turn helps in maximizing working capital effectively and management has no specific purchase policy as far as credit period is concerned. .
• Company should make a policy in respect of investment of excess cash. FSN technique. VED technique should be adopted to increase the efficiency of inventory management.RECOMMENDATIONS Keeping in view of detailed analysis for the 5 years of study and our findings mentioned in above paragraphs. if any. consumables. • Management should develop a credit policy and proper self realization system from customers so that efficient and effective management of accounts receivable can be ensured. should be introduced which ultimately helps improper planning of inventory. in marketable securities and overall cash policy should be introduced. This will significantly improve the profitability and liquidity of the company. • Purchase policy regarding raw material. Further an inventory monitoring system should be introduced to avoid holding of excess inventory. tools and packing materials etc. BIBLIOGRAPHY . availment of maximum trade/cash discount and availment of maximum credit period from suppliers. the following suggestions shall be helpful in increasing the efficiency in working capital management. • In case of inventory management ABC analysis.
trai.com http://www.org/wiki/Working_capital . and Jain P.moneycontrol.Books & Magazines • Financial Management : Khan M.investopedia.com http://www.wikipedia.in http://en.com http://www.com http://www.ril.co.K Financial Management : Rustagi R.P Dalal Street Journal Reinforce(Reliance in–house monthly journal ) Business World • • • • Newspapers • • • Economic Times Times of India Hindustan Times Websites • • • • • • http://www.gm.Y.rcom.
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