A STUDY ON WORKING CAPITAL MANAGEMENT AT BERGER

PAINTS LTD

Anna Ramesh M.COM

First year at SRM Institute of Science and Technology, Ramapuram, Chennai-600089

Dr.A.Jayabal

Head department of Commerce, SRM Institute of Science and Technology, Ramapuram,

Chennai-600089

ABSTRACT

Working Capital refers to that part of the firm’s capital, which is required for financing short-
term or current assets such a cash marketable security, debtors and inventories. Funds thus,
invested in current assets keep revolving fast and are constantly converted into cash and this
cash flow out again in exchange for other current assets. Working Capital is also known as
revolving or circulating capital or short-term capital.

KEYWORDS: Working capital, assets, liabilities, cash etc.

INTRODUCTION

Working Capital management is concerned with the problems that arise while attempting to
manage the current assets, the current liabilities and the inter relationship that exist between
them. The term current assets refer to those assets which in ordinary course of business can
be, or, will be, turned in to cash within one year without undergoing a diminution in value
and without disrupting the operation of the firm. The major current assets are cash,
marketable securities, account receivable and inventory.

PROBLEM OF STATEMENT

There are many aspects of working capital management that makes it an important topic for
the study. The management of assets in any organization is an essential part of overall
management. The enterprise, at the time of formation attaches great importance to fixed
assets management, as a part of investment decision-making.
SCOPE OF THE STUDY

The scope of the study is identified after and during the study. The study of Working Capital
management is based on tools like Trend Analysis, Ratio Analysis, working capital leverage,
operating cycle etc. Further the study is based on last 5 years Annual Reports of Harmony
Residences Pvt. Ltd. And even factors like competitor’s analysis, industry analysis were not
considered while preparing this project.

OBJECTIVES OF THE STUDY

Study of the Working Capital management is important because unless the Working Capital
is managed effectively, monitored efficiently planed properly and reviewed periodically at
regular intervals to remove bottlenecks if any, the company cannot earn profits and increase
its turnover. With this primary objective of the study, the following further objectives are
framed for a depth analysis.

PRIMARY OBJECTIVE

To study about awareness of Working Capital management among the people.

SECONDARY OBJECTIVE:

1. To study the optimum level of current assets and current liabilities of the company.

2. To study the liquidity position through various Working Capital related ratios.

LIMITATIONS OF THE STUDY

Following limitations were encountered while preparing this project:

1) Limited data: - This project has completed with annual reports; it just constitutes one part
of data collection i.e., secondary. There were limitations for primary data collection because
of confidentiality.

2) Limited period: This project is based on three-year annual reports. Conclusions and
recommendations are based on such limited data. The report of last three year may or may
not reflect the real Working Capital position of the company.
REVIEW OF LITERATURE

NCEAR -The first and foremost formals study conducted and compiled on working capital
management in India was by the National council of applied Economic Research (NCEAR)
in 1966. The council published a report on ―Structure of Working Capital‖ which confined
to the analysis of the composition of working capital with special reference to fertilizers,
Cement and Sugar industries.

Vijaya – The study conducted on working capital management in six cooperative and seven
private sector companies in the sugar industry of Tamil Nadu found that the growth in current
assets had registered more than that of sale indicating poor working capital management. The
application of correlation analysis revealed that there was a negative correlation between
return on investment and working capital.

Mine Aysen Doyran and Juan Delacruz -Suggested that Latin America, should take the
presence from the Asian textile industry experience. This paper examines recent statistics in
US textile and clothing trade with selected Latin American and Asian economies, comparing
data on textile exports from the top 10 suppliers between 1995 and 2003.

RESEARCH METHODOLOGY

RESEARCH DESIGN

Research design is a plan structure and strategy of investigation conceived so as to obtain

answer to research question and to control variance. A study on Ratio analysis for company
has been made to analyze the present condition of the company and forecasts its future. The
research design used is descriptive design.

PERIOD OF STUDY

The study was conducted for one month from Jan 1st 2022 - Jan31st 2022.

STATISTICAL TOOLS USED:

The study employs the following analytical tools isRatio Analysis

ANALYSIS AND INTERPRETATION
DESCRIPTIVE ANALYSIS
Descriptive statistics is the discipline of quantitatively describing the main features of a
collection of information or the quantitative description itself. Descriptive statistics are
distinguished from inferential statistics (or inductive statistics), in that descriptive statistics
aim to summarize a sample, rather than use the data to learn about the population that the
sample of data is thought to represent.

STATISTICAL ANALYSIS OF DEMOGRAPHIC FACTORS AND VARIABLES

TAKEN UP FOR THE STUDY
This chapter intends to statistically analyze the data collected using statistical tools and draw
inferences thereof. The analysis highlights the awareness of the respondents about

Base View About WC among employees

Table showing percentage analysis about the respondent’s’ base view about WC.

Variable Yes No
Aware about your No. of respondents 3 17
company’s turnover
Knowledge on No. of respondents 20 0
current assets
Knowledge on No. of respondents 20 0
current liabilities
WC is CA-CL OR No. of percentage 18 2
CA-CL

Inference: Maximum portion of respondents have knowledge on current assets and current
liabilities also how a working capital is calculated. Even though they have knowledge about
working capital maximum employees i.e., of 85% people are not aware about their own
organization turnover.
 The respondents’ base view about WC

INTERPRETATION:
From the above table it can inferred that the company’s liquidity position is reducing down
to 0.81 in the year 2018-19 from 0.90 in the year 2017-18 and further down to 0.7 in 2019-20.
This shows that the company’s liquidity position is decreasing.

RATIO ANALYSIS
Table showing net profit ratio

Years Net profit Net Sales Net Profit Ratio

(RS. In crores) (RS. In crores) (In %)
2020-2021 699.05 5691.69 12.28
2019-2020 439.03 5515.55 7.96
2018-2019 431.84 4723.79 9.14

FORMULA:
GROSS PROFIT RATIO = NET PROFIT
--------------------------------- X 100
NET SALES
FINDINGS
OBJECTIVES
 Awareness about working capital is at a good situation.
 Many have the knowledge on assets and liabilities.
 However, the knowledge on the company’s turnover should be taken care of.

RECOMMENDATIONS:
 More measures to be taken to maintain the fixed assets in order to utilize the assets to the
business for longer than a year.
 It is suggested to take measures for increase the sales, when sales are rapid, little cash is
tied up to keep the business going; which may make it easier to expand.
 The cash flow should be maximized as long as possible to pay its bills. However, there are
risks associated with taking more time than is permitted by the terms of trade with the
supplier. One is the loss of supplier goodwill; another is the potential threat of legal action
or late-pay.

CONCLUSION
Working capital knowledge is good among people and the employees. But the benefit of it is
not aware by the them hence that is insufficient for a change to step in. working capital is
used in order to create knowledge among people which will be helpful for a better planning.
Working Capital is used in Berger Paints, for the following purpose- work in progress,
finished goods, inventories, sundry debtors, and day today cash requirements. The various
information regarding.

WEBSITES

The list of websites visited are:

www.slideshare.net

www.moneycontrol.com

www.capitalmarket.com