Leena

A
SUMMER TRAINING REPORT

ON
“A STUDY OF WORKING CAPITAL MANAGEMENT”
Submitted in the partial fulfillment of the requirement

for the award of degree of
MASTER OF BUSINESS ADMINISTRATION

(Session 2019-2021)
Under the Supervision of: Submitted By:

Mrs. Rashmi Sabo LEENA
Manager MBA- 3rd Semester
Univ. Roll no.201161123
Geeta Engineering College Naultha, Panipat,
Affiliated To Kurukshetra University, Kurukshetra

DECLARATION
I, LEENA, student in GEETA ENGINEERING COLLEGE, NAULTHA, PANIPAT hereby

declare that the project report entitled “A STUDY OF WORKING CAPITAL MANAGEMENT
AT MADHAV OVERSEAS ” is my original work and the same has not been submitted by me to any
other institution for the award of any other degree.
LEENA
ACKNOWLEDGEMENT
I wish to express my appreciation to all those, with whom I have worked, interacted
and whose thoughts and insights have helped me in furthering my knowledge of
subject.
I wish to express my gratitude and sincere thanks to Dr. Prerna Dawar, Dean
Academics, for her valuable guidance at every time.
I am thankful to my Project Guide Ms. Simran verma, Assistant Professor,
Department of management Studies, Geeta Engineering College for her keen and
guidance offered in an amicable and pleasant manner through this project report work.
I owe much too all faculty members of Geeta Engineering College for their blessing
and encouragement. At last, but not least, I would also like to thank all those people
who spared time out of their busy schedules to provide me with relevant information
and feedback.
EXECUTIVE SUMMARY
MBA is a stepping-stone to the management carrier and to develop good manager it is necessary
that the theoretical must be supplemented with exposure to the real environment. Theoretical
knowledge just provides the base and it's not sufficient to produce a good manager that's why
practical knowledge is needed.
In accordance with the requirement of MBA course I had summer training project in finance
department of MADHAV OVERSEAS on the topic "A STUDY OF Working Capital
management ’’at MADHAV OVERSEAS.
The retail banking environment has undergone major change. Retail banking customers are
much more active than they were a decade ago. Customers are demanding more customized
products and services. This has imposed significant new demands on retail banks. With a view
to attaining an increasingly significant position in the growing retail financial services sector in
the country, banks have continued to provide a sustained thrust to retail banking through a
continuously expanding network and a growing sales force with customer relationship skills,
that has enabled the distribution of a wide range of products to a fast expanding customer base.
INDEX
CHAPTER NO. TOPIC PAGE NO.
CERTIFICATE
DECLARATION
ACKNOWLEDGEM
ENT
EXECUTIVESUMM
ARY
CHAPTER-1 INTRODUCTION 1-34
1.1) Introduction to the Industry 1-8
1.2) Introduction to the Company 9-19
1.3) Introduction to the Topic 20-34
CHAPTER-2 LITERATURE REVIEW 35-38
CHAPTER-3 RESEARCH METHODOLOGY 39-43
3.1) Objectives of the Study 40
3.2) Statement of the Problem 40
3.3) Justification of the study 40
3.4) Scope of the Study 41
3.5) Research Design 41
3.6) Collection of Data 41-42
CHAPTER-4 DATA ANALYSIS & 44-61
INTERPRETATION
CHAPTER-5 FINDINGS,SUGGESTIONS & 62-64
CONCLUSION
5.1) Findings 62
5.2) Recommendations & Suggestions 63
5.3) Conclusion 64
BIBLIOGRAPHY
ANNEXTURE
CHAPTER-1
INTRODUCTION
CHAPTER-1
INTRODUCTION
7
1. INTRODUCTION TO THE INDUSTRY
1.1 INDUSTRY PROFILE
History, craft and cottage industries come together at this important junction between the
Punjab and the Gangetic Plains. About 80 km from Delhi, in the state of Haryana, is the
sprawling industrial city of Panipat, a luminary of the handloom industry in India. Long
before one enters the main city, billboards proclaim the presence of the weaving units.
Further, the main road is flanked by a string of showrooms with local handloom products
on display.
Panipat is famous for ‘panja’ durrie a kind of a floor covering, which is in great demand in
India and abroad. Originally, it was a traditional item made by village women meant to be a
part of daughter’s dowry. But slowly the product came to be recognized beyond Panipat
and the growing demand for durries resulted in a burgeoning number of private and state
owned weaving units within the city.
The most ancient of Indian texts and scriptures, like Rigveda, the Ramayana and
Mahabharata talk of the finesse of Indian textiles. The ancient sculptures too bear testimony
to India’s rich textile traditions. Paintings depict figures in fine, delicate and decorated
fabric. Cotton, Muslin, silk and other Indian textiles were some of the most traded products
from India. Each Indian region has its own textile – characterizing it in terms of designs,
weaving patterns and techniques, colors and texture. Read below the details of various
Indian textile traditions.
Indian textile traditions are reputed all over the world and admired for their beauty, texture
and durability. India has a diverse and rich textile tradition. The origin of Indian textiles can
be traced to the Indus valley civilization. The people of this civilization used homespun
cotton for weaving their garments. India had numerous trade links with the outside world
and Indian textiles were popular in the ancient world. Indian silk was popular in Rome in
the early centuries of the Christian era. Hoards of fragments of cotton material originating
from Gujarat have been found in the Egyptian tombs at Fostat, belonging to 5th century.
● Carpet weaving is an ancient art invented by the wandering nomads. Very little is
known of early and indigenous carpet weaving in India, where it was apparently a
late development. The growth of the industry remained sluggish till mid-sixty when
8
policy makers realized its importance as a major source of foreign exchange
earnings and potential for generating employment to the weaker sections in rural
areas. The export of the Indian carpets particularly to Europe and America had a
tremendous impact on the entire carpet production. This leads to the phenomenal
growth of the industry and also completely revolutionized the designs and colors.
The production of carpet is spread all over India with its main centers in U.P.,
Panipat, Amritsar, Gwalior, Srinagar, Elluru, Warrangal and Hilly areas in
Himachal Pradesh and West Bengal.
Today, the Panipat carpet belt is famous all over the country and is contributing a large
share of total carpet production. The reason for mushrooming of many carpet
manufacturing units in Panipat is its being one of the largest market of raw wool and cotton
in North India. Secondly , the settlement of the skilled weavers and industrialists from the
disturbed and terrorized state of Punjab at Panipat. Panipat specializes in the production of
hand tufted plant plain as well as designed carpets. The present study was carried out to
have an insight of hand tufted carpet industry of Panipat.
1.1.1 INDIAN TEXTILE INDUSTRY
The Indian textile industry is one of the largest in the world with a massive raw material
and textiles manufacturing base. Indian economy is largely dependent on the textile
manufacturing and trade in addition to other major industries. A textile is the largest single
industry in India. While yarn is mostly produced in the mills, fabrics are produced in the
power loom and handloom sectors as well. The Indian textile industry continues to be
predominantly based on cotton, with about 65% of raw materials consumed being cotton.
Textile is one of India’s oldest industries and has a formidable presence in the national
economy as it contributes to about 14 per cent of manufacturing value-addition, accounts
for around one-third of our gross export earnings and provides gainful employment to
millions of people. They include cotton and jute growers, artisans and weavers who are
engaged in the organized as well as decentralized and household sectors spread across the
entire country.
9
1.1.2 HISTORY OF TEXTILE INDUSTRY
India has been well known for her textile goods since very ancient times. The traditional
textile industry of India was virtually decayed during the colonial regime. However, the
modern textile industry took birth in India in the early nineteenth century when the first
textile mill in the country was established at fort glister near Calcutta in 1818. The cotton
textile industry, however, made its real beginning in Bombay, in 1850s. The first cotton
textile mill of Bombay was established in 1854 by a Parsi cotton merchant then engaged in
overseas and internal trade. Indeed, the vast majority of the early mills were the handiwork
of Parsi merchants engaged in yarn and cloth trade at home and Chinese and African
markets.
The first cotton mill in Ahmadabad, which was eventually to emerge as a rival centre to
Bombay, was established in 1861. The spread of the textile industry to Ahmadabad was
largely
due to the Gujarati trading class.
The cotton textile industry made rapid progress in the second half of the nineteenth century
and by the end of the century there were 178 cotton textile mills; but during the year 1900
the cotton textile industry was in bad state due to the great famine and a number of mills of
Bombay and Ahmadabad were to be closed down for long periods.
The two world War and the Swadeshi movement provided great stimulus to the Indian
cotton textile industry. However, during the period 1922 to 1937 the industry was in
doldrums and during this period a number of the Bombay mills changed hands. The second
World War, during which textile import from Japan completely stopped, however, brought
about an unprecedented growth of this industry. The number of mills increased from 178
with 4.05 lakh looms in 1901 to 249 mills with 13.35 lakh looms in 1921 and further to 396
mills with over 20 lakh looms in 1941. By 1945 there were 417 mills employing 5.10 lakh
workers.
The cotton textile industry is rightly described as a Swadeshi industry because it was
developed with indigenous entrepreneurship and capital and in the pre-independence era
10
the Swadeshi movement stimulated demand for Indian textile in the country.
The partition of the country at the time of independence affected the cotton textile industry
also. The Indian union got 409 out of the 423 textiles mills of the undivided India. 14 mills
and 22 per cent of the land under cotton cultivation went to Pakistan. Some mills were
closed down for some time. For a number of years since independence, Indian mills had to
import cotton from Pakistan and other countries.
After independence, the cotton textile industry made rapid strides under the Plans. Between
1951 and 1982 the total number of spindles doubled from 11 million to 22 million. It
increased further to well over 26 million by 1989-90.
Unorganized Textile Industry is the dominant part in this industry which mainly utilizes
the traditional practices (woven or spun) in cloth production and hence is labor intensive in
nature. This industry is characterized by the production of clothes either through weaving
or spinning with the help of hands. The decentralized nature is considered as another
important feature of the unorganized textile industry in India. The other half of the Indian
Textile industry is a highly organized one with immense importance on capital intensive
production process. This sector is characterized by sophisticated mills where
technologically advanced machineries are utilized for mass production of textile products.
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1.1.3 INVESTMENT IN INDIAN TEXTILE INDUSTRY
The scenario of investment in the Indian textile industry started to change after the
inception of the special “Textile Package” during the 2003-2004 budgets. The
recommendations made in the budget included the reforms that are required to be made in
the fiscal policy of the Indian textile Industry for attracting investment in this industry. The
policy matters associated with restructuring of debt for financial viability of this industrial
sector are also being addressed in this budget. A fund was set up in accordance with the
recommendations of the aforesaid budget with an initial principal amount of Rs. 3000
crores. This fund was meant for restructuring of the textile sector.
1.1.4 Factors responsible for wooing the investors in Indian textile

industry:-
➢The size of the textile along with apparel market in India is quite big.
➢Performance of this industry has been consistent right from the start of the new
millennium.
➢Availability of the skilled labor in India is comparatively cheap in relation to the same in
other parts of the world.
➢The policies related to the Foreign Direct Investment in India are comparatively lenient
and are transparent in nature among all the developing countries.
➢There is no limit on foreign direct investment in the textile industry and hence 100%
direct investment can be done by the foreign capitalists in the Indian textile industry
12
1.1.5 HISTORICAL PERSPECTIVE OF TEXTILE INDUSTRY AT
PANIPAT:-
The textile history of Panipat started after the partition of India and Pakistan, when the
weaver's community that was displaced from Hyderabad, a state in Pakistan was facilitated
to settle in Panipat by the Government of Punjab, on the directions of Mahatma Gandhi.
The following chronology presents the milestones of growth of the textile industry since
then:
1947: Initially, these workers used to work with a frame loom of two treadles and
manufacture 'Khes' and 'Durries' of course hand spun cotton yarn. The main markets for
their fabric were in Assam, Bihar and Bengal.
1948: The National Textiles and the General Company of Panipat purchased Jacquard from
Joan Harlekar and for the first time introduced it in the Panipat industry.
1960-70: New designs were developed for exports by the master weavers like Mr. Amrit Lal
Batra and Mr. D.C. Bhatia. But it was only in 1970 that products entered the export markets
through the initiatives of Shri Jaipuriya from Jaipur. During the same period, the hand
knotted carpet business was started initially for the domestic market and later for exports.
The carpet business was evolved as a result of yarn dyeing of woolens in 1970.
1975-80: Curtains were being made at Panipat by the copying the designs from the Delhi
cloth mills. Then table-mats were introduced here in 1980 by Mr. D.C. Bhatia with the
inspiration from a Hungarian lady Mrs. B.K Nehru. This lady was an adviser of M/s Central
Cottage Industries Corporation of India.
1985-86: The old second hand power looms were introduced by the machine manufacturers
of handloom for making bed covers, curtains and other upholstery clothes. In 1985, M/s
Mahajan Overseas introduced Chindi Durries under the guidance of Mr. D.C Bhatia.
1984-90: The Shoddy Industry introduced blankets manufacturing in Panipat. From the
period of 1984- 1990, when terrorist activities were at their peak in Punjab, many of the
manufacturers in Panipat started manufacturing blankets. The business of blankets
expanded very fast and in due course Panipat became famous for blanket market. A good
13
quantity of blanket was even exported to Japan but later the market of Japan was closed due
to a devastating earthquake in 1997.
1990-91: The throws of different designs were manufactured in power-loom. And the
hand tufted carpets and handloom carpets were introduced. The shuttle-less looms were
introduced by Paliwal .export then Mr. Kaluram of Liberty Velvets and Mr. Om Bhatia
of Loom Drape used them for manufacturing upholstery clothes.
1998: Paper printing began at Panipat and now there are around 20 units in this sector.
1999: New kinds of Made ups i.e. with embroidery and embellishments were
introduced. This has led to evolution of new products, which is going strong even today.
14
1.1.6 LEADING TEXTILE COMPANIES OF PANIPAT
❖ Sheena Exports
❖ Handfab
❖ Paliwal Exports
❖ Om Overseas
❖ Seer India, Delhi
❖ Shiv shakti textile, Delhi
❖ Sheena Export, Panipat
15
1.2 INTRODUCTION TO COMPANY
Madhav Overseas, Panipat was established in 2014. Madhav Overseas, Panipat includes
woolens which is pioneer in spinning woolen yarn in Panipat. Madhav Overseas, Panipat is
one of the largest manufacturers & exporters of Home Furnishings, Carpets and Floor
Coverings in India.
The Company counts among its clientele some of the most reputed stores and catalog
companies of the world. The in-house Design Studio is reputed for its superior quality of
designs and innovative products.
The Company is renowned for our exclusive theme-based collections that reflect the moods
of various seasons. It is also renowned for creating custom-made products to suit the taste
of aesthetics from across countries.
Madhav Overseas, Panipat is run by highly experienced professionals who have in-depth
knowledge in carpet designing, manufacturing and raw materials. Madhav Overseas,
Panipat has built up an international reputation in Carpets and Home Furnishings on the
basis of our superior quality products and timely delivery.
Madhav Overseas, Panipat is a trusted manufacturer, exporter and supplier of Home

Furnishing. The company has reached the position of trust and respect in the market owing
to its wide experience in the field and successfully facing every challenge. The company is
in the field since 2014, and has expanded its network across the world in just few years.
Situated in Panipat, Haryana, the company is meeting the expectations of the clients
16
especially in Surat and many States of India. Mrs. Rashmi Sabu, the Proprietor of the
company is a big motivating factor for the employees to work with dedication.
1.2.1 INFRASTRUCTURE
The company has Two factories where the latest machines are installed to ensure smooth
and streamlined production. The Company’s manufacturing unit is spread in the wide area
of 900 Sq. ft and has modern machines and facilities. With the use of these machines and
facilities, the company has reached the high production target of 700 Sq. ft. per day.
1.2.2 VISION OF THE COMPANY
Madhav Overseas, Panipat vision is to become India’s leading sustainable textile

company by producing quality products and observing highest social, economic and
environmental standards. Our aim is to deliver the highest quality products and
prompt services to our customers. Our objective is to provide good value through a
competitive atmosphere of defined systems and processes.
Lead the textile industry in India

Observe highest social, economic and environmental standards
Maintain a committed and satisfied clientele.
1.2.3 MISSION OF THE COMPANY
Madhav Overseas, Panipat mission is to create conditions and infrastructure for

sustainable procurement and production of textile products.

Manufacture high quality yarn to withstand high levels of competitiveness.
Design, manufacture and sell high quality and affordable apparels and
accessories.
To use latest technologies in manufacturing process.
To provide a safe working environment for the employees.
To operate the business with high motivation and deep commitment.
17
Serving and supporting the society in which we work.
18
1.2.4 ORGANIZATION STRUCTURE OF THE COMPANY
Fig no. 1.1 Organization Chart
BOD
Account Purchase & Human
Maintenance Export Marketing
Record Store Research
Documents (Merchandising)

Source: Annual Company Report File
19
1.2.5 QUALITY POLICY:
Madhav Overseas, Panipat steadfast commitment to quality is reflected in ISO 9001-2000

certification and the Rugmark, Kaleen, Care & Fair label on Carpets. The dedicated team of
craftsmen in Madhav Overseas, Panipat brings together years of experience and knowledge
in carpet manufacturing. Designs are created using the latest computer aided technology
and manufactured to a quality only the finest weavers can produce.
To maintain consistency in quality and supply throughout the year, they procure high
quality raw wool from the leading wool grading centers in India and around world. The
wool is then blended and spun by the company.
To create different texture in manufacture of product they mix different kind of yarns,
purchased from suppliers. Committed to total quality culture, Madhav Overseas, Panipat
strive to meet and exceed its customer expectations. Continuously endeavor towards
achieving higher standards of product and service excellence. Result - maximization of
customer trust and satisfaction. Quality control is the hallmark of their products.
It helps them at every stage to achieve a very consistent product, which is in tune with
customers' expectations.
Carpets are manufactured from the finest wool, which ensure that the carpets have:
o Long life.
o Beautiful look.
o Easy to handle.
o Are not harmful to the health
of children.
o Soothing to the eyes.
20
The Company provides exclusivity of patterns and qualities on a country-to-country basis -
worldwide. It offers an exclusive service of original ideas in carpet design. From ultimate
choice in color and texture to the finest of quality, they offer the unmistakable taste of luxury.
With endless combinations of colors and designs customer can enhance the style of the
interior design - whether he wants to affect a simplistic elegance with a taste of yesteryear -
or a striking post modern look for the future.
21
1.2.6 PRODUCT LINES
Carpets Home Floor Kids

Furnishings coverings Collection
Profile Hand Tufted Cushions/ kilims Bath Mats Kids Carpets
Handloom Throws Jute Durries Cushions
Shaggy Table Mats/Braid Hemp Throws
Hand Knotted Chair Braid Leather Bath Mats
Latest Creations
Custom Cotton Durries
Printed Carpet/ Woolen Durries

Rugs
Highend
Dhurries
22
✔ Carpets:
SOURCE: Company Catalogue
The Company makes perfect quality, smell-and-azo-free carpets in plain, modern and oriental
designs in hand tufted and handloom carpets. It has an exclusive collection of Shaggy /
Berber high pile carpets and also specializes in making customized Designer Carpets, Prayer
Rugs, Theme Carpets and Contract Carpets with company logo. Additionally, it also makes
plain Boardroom Carpet.
✔ Home Furnishings:
The Company produces a complete range product – right from Bath Mats, Bed Covers,
Curtains, Cushions, Durries and Rugs to Placemats, Napkins, Table Covers, apart from a
variety of other home furnishings.
✔ Floor Coverings:
The Company offers an exclusive range of floor coverings such as Mats and Durries in a
variety of materials.
23
✔ Kids Collection:
24
The Company produces a complete range of specially designed kid’s products including Bed
Linen, Cushions and Braided rugs. To add that exclusive childlike ambience to children’s
room, choose from the Company’s selection of exquisite Kids Carpets, Curtains, Throws and
Bath Mats, all designed in colors, patterns and concepts ideal for children.
25
1.2.7 COMPETITIVE EDGE
Due to the Company consistency in high quality products and timely delivery, it has built up
a formidable reputation in the market. Leading position among their competitors is proven by
the fact that many importers are choosing it over the earlier suppliers from India and giving
them all their future orders.
Another reason for the boom in demand for Indian Hand Tufted Woolen Carpets is due to the
long time recession in Hand Knotted Carpets and cut throat competition in the Machine-
Made Carpet industry. Hence, a lot of traders, importers and machine-made carpet
manufacturers are focusing on Indian Hand Tufted Woolen Carpets. Madhav Overseas,
Panipat comes in here as a much sought after supplier being the only organized company in
India who can take care of all types of customer requirements.
1.2.8 MARKET REACH
Madhav Overseas, Panipat caters to both national and international markets. Some of them
includes:
Domestic:
⮚ Delhi
⮚ Surat
⮚ Rajasthan
1.2.9 MAJOR CUSTOMERS
Some of the major customers of the company include:
Domestic Customers:
⮚ Seer India, Delhi
⮚ Shiv shakti textile, Delhi
⮚ M/S D’ Décor Export pvt ltd, Panipat
⮚ M/S Home Smarts, Panipat
26
PROCESS FOR MANUFACTURING OF TEXTILE PRODUCTS
Fig no. 1.2
Wool Purchase
Raw
Spinning Yarn material
Dyeing
Cloth
Mapping/tracing on
standard
Tuffting
Streching/
Latexing
Thirding
Binding
Finishing
Packing
Dispatching
27
1.3 INTRODUCTION TO THE TOPIC
1.3.1Working Capital
Working capital refers to the cash a business requires for day-to-day operations, or, more
specifically, for financing the conversion of raw materials into finished goods, which the
company sells for payment. Among the most important items of working capital are levels of
inventory, accounts receivable, and accounts payable. Analysts look at these items for signs
of a company's efficiency and financial strength.
Positive working capital means that the company is able to pay off its short-term liabilities.
Negative working capital means that a company currently is unable to meet its short-term
liabilities with its current assets (cash, accounts receivable and inventory).
Also known as "net working capital", or the "working capital ratio".
⮚ Accounts receivable (current asset)

⮚ Inventory (current assets), and
⮚ Accounts payable (current liability)
1.3.2 Concept of Working Capital:
There are two concepts of working capital -
1. Gross working capital

2. Net working capital
⮚ Gross Working Capital:-
Gross working capital refers to the firm’s investment in current assets

Current assets are assets, which can be converted into cash within an accounting year. The
main components of current assets are cash, debtors, marketable securities and stock. The
gross working capital concept focuses attention on two aspects of current asset management.
28
⮚ Net Working Capital:-
Net working capital refers to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders, which are expected to mature for payment
within an accounting year. Current liabilities include creditors, bills payable and outstanding
expense. Net working capital can be positive or negative.
Net working capital is a qualitative concept. It indicate the liquidity position of the firm and
suggests the extent to which working capital needs may be financed by permanent source of
funds such as shares, debentures, long term debts etc. It covers the question of judicial mix of
long and short-term funds for financing current assets.
In order to protect their interest, short-term creditors like a company to maintain a positive
NWC. Conventionally the ratio of CA and CL is 2:1. A negative NWC means a negative
liquidity, which may prove to be harmful to company, reputation. It poses a threat on the
company’s solvency and makes it unsafe and unsound.
A. Optimum investment in current assets.

B. Financing of current assets.
1.3.3 NEED FOR WORKING CAPITAL

The basic objective of financial management is to maximize shareholder’s wealth. For this it
is necessary to generate sufficient profits. The extent to it, which the profit can be, earn,
largely depend on the magnitude of sales. However sales do not convert into cash instantly.
There is invariable the time gap between the sale of goods and receipt of cash. There is,
therefore, a need for working capital in the form of CA to deal with the problem arising. Out
of the lack of immediate realization of cash again goods sold. Therefore, sufficient WC is
necessary to sustain sales activity.
The operating cycle can be said to be at the heart of the need for WC. The continuing flow
from cash to suppliers, to inventory, to account receivables and back into cash is known as
operating cycle.
29
The operating cycle of a manufacturing company involves three phases:
⮚ Acquisition of resources – such as raw materials, labor, power and fuel etc.
⮚ Manufacturing of product – Which includes conversion of raw material into WIP

into finished goods?
⮚ Sale of the product – either on cash or on credit. Credit sales create account
receivable for collection.
1.3.4 WORKING CAPITAL CYCLE
Cash flows in a cycle into, around and out of a business. It is the business's life blood and
every manager's primary task is to help keep it flowing and to use the cash flow to generate
profits. If a business is operating profitably, then it should, in theory, generate cash surpluses.
If it doesn't generate surpluses, the business will eventually run out of cash and expire.
The faster a business expands, the more cash it will need for working capital and investment.
The cheapest and best sources of cash exist as working capital right within business. Good
management of working capital will generate cash will help improve profits and reduce risks.
Bear in mind that the cost of providing credit to customers and holding stocks can represent a
substantial proportion of a firm's total profits.
There are two elements in the business cycle that absorb cash - Inventory (stocks and work-
in-progress) and Receivables (debtors owing you money).
The main sources of cash are Payables (creditors) and Equity and Loans.
Fig 2.1 Working Capital Cycle
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⮚ OPERATING CYCLE= R+W+F+D–C
● R = Raw material shortage period.

● W = Work in progress holding period.
● F = Finished goods shortage period.
● D = Debtors collection period.
● C = Credit period availed.
1 Raw material shortage period = Avg. Stock of raw material

Avg. Cost of raw material consumption per day
2 WIP holding Period = Avg. WIP Inventory

Avg. Cost of production per day
3 Finished goods storage period = Avg. Stock of finished Goods

Avg. Cost of goods sold per day
4 Debtors collection period = Avg. book debts

Avg. credit sales per day
5 Credit period availed = Avg. trade creditors

Avg. credit purchases per day
1.3.5 SOURCES OF ADDITIONAL WORKING CAPITAL
Sources of additional working capital include the following:
31
⮚ Existing cash reserves
⮚ Profits (when you secure it as cash)
⮚ Payables (credit from suppliers)
⮚ New equity or loans from shareholders
⮚ Bank overdrafts or lines of credit
⮚ Long-term loans
If a company has insufficient working capital and it tries to increase sales, then it can easily
over-stretch the financial resources of the business. This is called overtrading. Early warning
signs include:
⮚ Pressure on existing cash

⮚ Exceptional cash generating activities e.g. offering high discounts for early cash
payment
⮚ Bank overdraft exceeds authorized limit
⮚ Seeking greater overdrafts or lines of credit
⮚ Part-paying suppliers or other creditors
⮚ Paying bills in cash to secure additional supplies
⮚ Management pre-occupation with surviving rather than managing
⮚ Frequent short-term emergency requests to the bank (to help pay wages, pending
receipt of a cheque).
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1.3.6 WORKING CAPITAL REQUIREMENTS
Working capital needs of a firm are influenced by numerous factors.
1. Nature and size of business: Working capital requirements of a firm are basically
influenced by the nature of its business. Manufacturing firms require less working
capital as compare to trading and financial firms. However, certain manufacturing
firms also require a heavy investment in working capital. Public utility concerns
require less capital.
The size of the business also has an important impact on working capital needs size
may be measured in the terms of scale of operation. A firm with larger scale of
operation will need more working capital than a small firm.
2. Manufacturing cycle: The production process consumes time right from the purchase
and use of raw materials to the completion of finished goods. The longer the duration,
the greater the requirement of working capital for the firm. Thus, if there are
alternative ways of manufacturing a product, the process with shortest manufacturing
cycle should be chosen.
3. Production policy : If the production is evenly spread over the entire year, working
capital requirements are greater, because the inventories will be unnecessary
accumulated during off- season period, but if the production schedule favors a varying
production plans per the seasonal requirements, working capital is required to a
greater extent during a specified season only.
4. Business fluctuations: Most firms experience seasonal and cyclical fluctuations in

demand for their products and services. On account of market boom, sales increases
and, as a consequence, the requirement of inventories and debtors increase. Slack
seasons reduce the requirements of investment in working capital.
5. Firm credit policy: The credit policy of a firm affects the working capital by
influencing the level of book debts. Liberal credit policy requires more working
capital, as there will be more investment in debtors because the collections would also
be slower then. In the same way, an organization which has a very efficient debt
33
collection system and offer strict credit terms will require lesser working capital as
compare to organization where debt collection system is not so efficient.
6. Ability of credit: The working capital requirements of a firm are also affected by credit
terms granted by its creditors. If the credit period allowed to the company is more, the
requirements of working capital would be less for the company. If the company does not
enjoy liberal credit facilities from its suppliers, it will have to arrange for greator funds
for investment in current assets.
7. Efficiency of operations: The operating efficiency of a firm relates to optimum

utilization of resources at minimum costs. If the operation of the company is efficiently
managed, the operating costs would be low and the resources would be utilized in the best
possible manner resulting in speeding up of the working capital cycle and thus, reducing
the working capital requirements.
8. Dynamic attitudes: If the management of the firm is dynamic, thinking in terms of

expanding the business or diversifying it, greater funds are required by the business. The
main reason why more funds are required early is that advance planning is essential if the
firm is to expand and grow.
9. Inventory policies: This has an impact on the working capital requirements since large
amount of funds is normally locked up in inventories. An efficient firm may stock raw
material for smaller period and may require lower working capital.
10. Price fluctuations: Price- level changes, particularly inflation, have a great effect on the
requirements of working capital. In periods of rising prices, more funds are required to be
invested in working capital. Same level of operations can be conducted only with greater
funds of money falls.
11. Supply fluctuations: Regular supply of raw materials and labor would cause lesser
working capital requirements. If large quantities of raw material are required to be stored
because of non-availability at a later date or on account of increased prices, more funds
are needed for working capital.
34
12. Abnormal factors: Factors such as strikes and lockouts require additional working
capital. Recessionary conditions require more fund for working capital to maintain same
amount of current assets.
13. Tax liability: Greater tax liability means greater requirements of working capital. Tax
liability can be reduced by proper tax planning and tax management and thus the working
capital requirements can also be reduced.
1.3.7 TYPES OF WORKING CAPITAL:
✔ Permanent Working Capital: Permanent working capital refers to minimum level of

investment in the current assets that is carried by the business to carry out minimum
level of activities.
The following are the characteristics of permanent working capital:-
1. Amount of permanent working capital remains in the business is one form or the other.
The suppliers of such WC should not accept its return during the lifetime of the firm.
2. It grows with the size of the firm. Permanent WC is permanently needed for the business
and therefore, it should be financed out of long term funds.
✔ Temporary Working Capital: Temporary working capital is that part of working

capital, which is required by a business above Permanent working capital. It is also
called variable working capital. Since the volume of temporary working capital keep
on fluctuating time by time according to the business activities it may be financed by
short term sources.
35
Fig 2.2 Permanent and Temporary Working Capital of a Stable Firm
Amount
Of
WC
Temporary WC
Permanent WC
⮚ Permanent and Temporary Working Capital (WC) of a Stable Firm
It is shown in the above diagram that permanent WC is stable while temporary WC is

fluctuating and increasing and decreasing in accordance with seasonal demands.
In the case of an expanding firm the permanent WC line may not be horizontal. This is
because the demand for permanent CA might be increasing (or decreasing) to support a rising
level of activities. In that case line should be raising one as follows:
Both kind of WC are necessary to facilitate the sales process through the operating cycle.
Temporary WC is created to meet liquidity requirement that are of purely transient nature.
36
Fig 2.3 Permanent and Temporary WC of a Raising Firm
Temporary WC
Amount
Of
WC
Permanent WC
Time
1.3.8COMPONENTS OF WORKING CAPITAL:-
Working capital has two components: Current assets and Current liabilities. Current assets
comprise several items. The items are:
i) Cash to meet expenses as and when they occur.
ii) Accounts Receivables or sundry trade debtors
iii) Inventory of:
a) Raw materials, stores, supplies and spares,
b) Work-in-process, and
c) Finished goods
iv) Advance payments towards expenses or purchases, and other short-term advances which
are recoverable.
v) Temporary investment of surplus funds which could be converted into cash whenever
needed.
37
A part of the need for funds to finance the current assets may be met from supply of . goods
on credit, and deferment, on account of custom, usage or arrangement, of payment for
expenses.. The remaining part of the need for working capital may be met from short-term
borrowing from financiers like banks. These items are collectively called current liabilities.
The items of current liabilities are:
i) Goods purchased on credit.
ii) Expenses incurred in the course of the business of the organisation (e.g., wages or
salaries, rent, electricity bills, interest etc.).
iii) Temporary or short term borrowings from banks, financial institutions or other
parties.
iv) Advances received from parties against goods to be sold or delivered, or as short term
deposits.
v) Other current liabilities such as tax and dividends payable.
Cash:
All of us know that the basic input to start any business is cash. Cash is initially required for
acquiring fixed assets like plants and machinery which enables a firm to produce products
and generate cash by selling them. Cash is also required and invested in working capital. An
investment in working capital is required, as firms have to store certain quantity of raw
materials and finished goods and also for providing credit terms to the customers.
A minimum level of cash helps in the conduct of everyday ordinary business such as making
of purchases and sales as well as for meeting the unexpected payments, developments and
other contingencies. As discussed earlier cash invested at the beginning of-the operating
cycle gets released at the end of the cycle to fund fresh investments. However, additional
cash is required by the firm when it needs to buy more fixed assets, increase the level of
operations or for bringing out change in working capital cycle such as extending credit period
to the customers.
The demand for cash is affected by several factors, some of them are within the control of the
managers and some are outside their control. It is not possible to operate the business without
holding cash but at the same time holding it without a purpose also costs a firm either directly
in the form of interest or loss of income that could be earned out of the cash.
38
In the context of working capital management, cash management refers to optimizing the
benefit and cost associated with holding cash. The objective of cash management is best
achieved by speeding up the working capital cycle, particularly the collection process and
investing surplus cash in short term assets in most profitable avenues.
Accounts Receivable:
Firms rather prefer to sell for cash than on credit, but competitive pressures force most firms
to offer credit. Today the use of credit in the purchase of goods and services is so common
that it is taken for granted. Selling goods or providing services on credit basis leads to
accounts receivable. When consumers expect credit, business units in turn expect credit from
their suppliers to match their investment in credit extended to consumers. The granting of
credit from one business firm to another for purchase of goods and services is popularly
known as trade credit.
Though commercial banks provide a significant part of requirements for working capital,
trade credit continues to be a major source of funds for firms and accounts receivable that
result from granting trade credit are major investment for the firm.
Both direct and indirect costs are associated with carrying receivables, but it has an important
benefit for increasing sales. Excessive levels of accounts receivables result in decline of cash
flows and many results in bad debts which in turn may reduce the profit of the firm.
Therefore, it is very important to monitor and manage receivables carefully and regularly.
Inventory:
Three things will come to your mind when you think of a manufacturing unit - machines,
men and materials. Men using machines and tools convert the materials into finished goods.
The success of any business unit depends on the extent to which these are efficiently
managed. Inventory is an asset to the organisation like other components of current assets.
Inventory constitutes a very significant part of working capital or current assets in

manufacturing organisation. It is essential to control inventories (physical/quantity control
and value control) as these are significant elements in the costing process constituting
sometimes more than 60% of the current assets.
39
Inventory holding is desirable because it meets several objectives and needs but an excessive
inventory is undesirable because it costs a lot to firms.
Inventory which consists of raw material components and other consumables, work in
process and finished goods, is an important component of `current assets'. There are several
factors like nature of industry, availability of material, technology, business practices, price
fluctuation, etc. that determines the amount of inventory holding. Holding inventory ensures
smooth production process, price stability and immediate delivery to customers. Since
inventory is like any other form of assets, holding inventory has a cost. The cost includes
opportunity cost of funds blocked in inventory, storage cost, stock out cost, etc. The benefits
that come from holding inventory should exceed the cost to justify a particular level of
inventory.
Marketable Securities:
Cash and marketable securities are normally treated as one item in any analysis of current
assets although these are not the same as cash they can be converted to cash at a very short
notice. Holding cash in excess of immediate requirement means the firm is missing out an
opportunity income. Excess cash is normally invested in marketable securities, which serves
two purposes namely, provide liquidity and also earn a return.
40
1.3.9 INTRODUCTION TO WORKING CAPITAL MANAGEMENT
Working Capital management is a significant face of financial management. Working Capital

is referred to as the “Life–Blood of any business firm”. In a manufacturing concern,
Management of working capital requires a great deal of time of managers over its different
issues:-
⮚ Framing working capital policies.

⮚ Assessing the needed level of working capital.
⮚ Arranging short-term financing.
⮚ Controlling the movement of cash.
⮚ Administering accounts receivables and
⮚ Monitoring investment in inventories.
Working capital in simple terms is the amount of funds which a company must have, to
finance its day to day operations. It can also be regarded as the proportion of company’s total
capital which is employed in short term operation. Besides these issues, management of
working capital has been the point of discussion because of ever growing demand for short
term finance, its increasing scarcity of finance. It is discipline that seeks proper policies for
managing current assets and current liabilities for maximizing the benefits. An effective
management of working capital enables a firm to maximize the profitability and also to
maintain adequate liquidity in the business as maintaining optimum level of working capital
is the ultimate objective with which finance manager is seriously concerned.
So, to carry on the production and distribute activities smoothly and to ensure Higher
Profitability and to maintain proper Liquidity, an adequate and optimum level of working
capital is required.
Considering the above issues, a study has been carried out in particular to assess the
requirement of working capital in MADHAV OVERSEAS, PANIPAT. Various option to
finance the short term requirement and ways and means of control of utilization of available
resources because today industries find it difficult to procure adequate credit. Therefore the
basic concern is to optimize the use of available resources through the effective and efficient
management of working capital.
41
In financial literature, there exits two concepts namely Gross Concept & Net Concept of
working capital. Gross working capital concept refers to current assets viz. Cash, Marketable
Securities, Inventories of Raw Material, Work in Progress, Finished Goods and Receivables.
Net working capital concept refers to the difference between Current Assets and Current
Liabilities.
Working Capital can be classified into Fixed or Permanent and Variable or
Fluctuating parts. The minimum level of investment in current assets regularly employed in
extra working capital needed to support the changing nature of the activity is called Variable /
Fluctuating Working Capital.
Working Capital Management is thus concerned with all aspects of managing Current
Assets and Current liabilities
1. Level of investment in each aspect of current assets.

2. Financing or working capital, mix of various sources of financing, managing bills payable,
short term bank loans, deposits.
3. Inter relatedness of various aspects of business. For example inventory level keeps
changing acc. To changing levels of sales. During higher sales, inventory decreases, cash
balances or receivables increases.
Thus all the current assets decisions are inter related and studies of Working Capital
Management constitute all the inter related areas as shown:
42
CHAPTER-2
LITERATURE REVIEW
43
LITERATURE REVIEW
Filbeck & Krueger, (2021) Firms are able to reduce financing costs and increase the funds
available for expansion by minimizing the amount of funds tied up in current assets. It
provides insights into the performance of surveyed firms across key components of working
capital management by using the CFO magazine’s annual Working Capital Management
Survey. There are significant differences that exist between industries in working capital
measures across time. These measures for working capital change significantly within
industries across time.
Williams & Tokar, (2020) Two major themes are found to emerge from logistics research
focused on inventory management. First, they give attention on integrating traditional
logistics decisions, such as transportation and warehousing, with inventory management
decisions, using traditional inventory control models. Second, they give attention on
examining inventory management through collaborative models.
Odeyinka et al., (201) There are 11 significant risk factors out of 26 research risk variables.
These significant risk variables can be grouped under three generic factors of “changes in the
design or specification”, “project complexity” and “natural inhibition”. The significant risk
variables are those ranking high in “extent of occurrence” and with critical impacts on cash
flow forecast. It showed that there is no statistically significant difference in the opinions of
different categories of contractors regarding the extent of risk occurrence and impacts on cash
flow forecast.
Smith & Zagelmeyer, (2018) The positive relationship between company size and operating
times and how SMEs make more limited use of more advanced forms of working-time
organization that may allow them to extend their operating hours. The use of less complex
working time measures such as overtime does not have the same positive association with
operating hours. The influence of the regulatory environment on the use of working practices
or the duration of operating hours is not straight forward, and as such the impact of national
regulatory frameworks cannot be discounted in the country-specific differences identified.
44
Jones & Sharma, (2018) Companies in Australia and compares their levels of earnings
management with “old economy” firms, using data on all Australian listed companies. This
explains the methodology and presents the results. The old economy firms do engage in
significant earnings management which is positively associated with leverage and free cash
flow levels but, surprisingly, that this is far less evident in the new economic sector.
Young, (2018) The TMT extra-business group directorate ties that are valuable strategic
assets by the marketplace, and the benefits of extra-business group directorate ties mainly
come from the relationships’ greater prominence, but not from the relationships’ wider span
or better position.
Nobanee et al.,(2017) A strong negative relation between the length of the firm's cash
conversion cycle and its profitability is found in all of the authors’ study samples except for
consumer goods companies and services companies.
Abuzayed, (2016) Using robust estimation techniques it found that profitability is affected
positively with the cash conversion cycle. This indicates that more profitable firms are less
motivated to manage their working capital. Financial markets failed to penalize managers for
inefficient working capital management in emerging markets.
Jarvis et al., (2016) Financial management strategies adopted by small firms, but very little is
known about these practices. Business performance measures are an important element of
these financial management strategies. It discusses the quantitative and qualitative criteria in
the measurement of performance in small firms. Semi-structured interviews were carried out
with 20 owner-managers from both manufacturing and service sectors. The objective of the
firm is to maximize profits, and it follows that the performance measures advocated are
largely based upon it. However, it has shown that small firms pursue a range of goals. Profit
measures were found to be less important than conventional views suggest.
Hainaut, (2016) It shows how the parameters ruling the switching regime cash flows
associated to a project can be inferred from the stock market quotes of a company, active in
the same sector of activities. To illustrate it the tractability of the model applies to a project in
the healthcare industry.
45
Koumanakos (2015) Higher the level of inventories preserved by a firm, the lower its rate
of returns. It tested by the use of pseudo-likelihood ratio test which constitutes a more reliable
tool, thus verifying the robustness of the linearity of the relationship.
Rajeev, (2015) The several major problems in the context of inventory management(IM) in
machine tool enterprises including the use of rule-of-thumb for IM, a low importance given
to forecasting, random ordering of materials, low levels of training and development, and low
computer use as well as a low importance given to purchasing and variable lead-time. It
confirmed the need for managers in the machine tool sector to alter drastically their approach
to IM
Menyah, (2015) The theoretical models of international cash management and assess their
implications for corporate practice. The implications of theoretical models are captured in
essence by corporate practice. The practice of international cash management is largely
driven by developments in communications and computer technology, relaxation of
regulatory and tax impediments, the internationalization of banking and the development of
new banking products. International treasurers may therefore be able to find appropriate cash
management solutions to meet their business needs with the co-operation of banks and
technology providers. it evaluate the extent to which corporate practice is consistent with
extant multi-currency balance and net work optimization models and also explain why
particular approaches to international cash management persist in companies
Tsamenyi &Skliarova, (2014) Management practices in a Russian Multinational Company

(RMC). This is motivated by the lack of empirical evidence on financial management
practices outside the Western World. Data for the analysis are gathered from documents and
in-depth interviews with finance managers in the company. It suggests that the company
implemented an international cash management system reminiscent of international cash
management. For example, techniques such as netting, leading and lagging, re-invoicing
center and cash flow planning are used in the company. Financial management techniques are
likely to be the same in Russia as in the Western world. For example, the company did not
use any of the sophisticated cash management models. It has implications for understanding
financial management practices outside the Western World, especially in Russia.
46
Gustafson, (2014) The trade credit practices of rural small business firms are examined.
These firms borrow money and then re-lend it to others in the form of trade credit. There is a
strong direct relationship between various forms of debt held by these firms and their level of
accounts receivable. The actual level of re-lending varied among firms depending on their
adoption level of computer usage for cash management and credit services. Accounts
receivable balances were also dependent on sales levels, costs of doing business, and other
income.
Farris II & Hutchison, (2013) The cash-to-cash (C2C) metric has evolved as one of the first
measurements bridging across the firm. Therefore, it is important for managers to understand
how the C2C metric is calculated, as well as how a company should compare in its C2C
performance. A typology is introduced to classify industry performance using a 2 x 2 x 2
matrix based on the three variables of the C2C metric: accounts payable, inventory, and
accounts receivable. We also consider how performance has changed since 1986, identify the
key drivers to this change, and describe which industries have experienced the greatest
change in C2C performance.
47
CHAPTER-3
RESEARCH
METHODOLOGY
48
3.0. Research Methodology:
Definition of research:
“Research in general refers to the search of knowledge. One can also define research as
a scientific & systematic collection of information.”
In simple words research is the careful investigation or enquiry of markets especially through
search for new facts in any branch of knowledge. Research methodology is a way to
systematically solve the research problem. It may be understood as the science of studying
how research is done. Research in the common parlance refers to a search for knowledge.
Research methodology constitutes of research methods, selection criteria of research

methods, used in context of research study and explanation of using of a particular method or
technique and why other techniques are not used so that research results are capable of being
evaluated either by researcher himself or by other. Why a research study has been undertaken
how the research problem has been formulated what data have been collected and what
particular methods have been adopted, why a particular technique of analyzing data has been
adopted, why a particular technique of analyzing data has been used and a host of similar
other questions are usually answered when we talk of research methodology concerning a
research problem or study.
Research refers to the systematic method consisting of:

● Enunciating the problem,
● Formulating a hypothesis,
● Collecting the fact or data,
● Analyzing the facts and reaching certain conclusions either in the form of solutions
towards the concerned problem or in certain generals for some theoretical
formulation
49
3.1 OBJECTIVES OF THE STUDY
Main Objective
“To analyze the Working Capital” in Madhav Overseas, Panipat and to study the day to
day operations of the company. ”
● To understand and analyze the working capital of the company over the year.
● To get an insight of corporate world.
● To understand the practical application of the theoretical concepts.
3.2 STATEMENT OF THE PROBLEM

The first step while conducting research is careful definition of Research Problem as a very
good saying is there, “A well defined problem is half solved” The present project has been a
study to prioritize the problems which are major hurdles for the company and also
prioritizing the products to increase the sales revenue so as to seek growth in profit of the
company.
3.3 JUSTIFICATION OF STUDY
Working capital is very important aspect of finance of every company. It is use in day to day
working activities involved in an organization so this topic is chosen so as to known changes
in working capital of MADHAV OVERSEAS, PANIPAT. This topic also helps in getting
practical knowledge of the finance area.
3.4 SCOPE OF THE STUDY:

The scope of study pertains to the following-
● The study comprises the understanding of Working Capital management system in

textile industry Panipat Haryana state.
50
● The survey consists of 100 employees study to understand their views and
involvement towards organization, among themselves and with others.
● The study covers different aspects of Working Capital management in the textile
industry within the framework of their responding attitude.
3.5 RESEARCH DESIGN
Research design is the conceptual blueprint for collection, measurement and analysis of data.
Research design stands for advance planning of the methods to the adopted for collecting the
relevant data and the techniques to be used in their analysis keeping in view the objectives of
the research and the availability of staff, time and money. Two broad classes of research
design are identified as:
● Research design in case of exploratory research studies.
● Research design in case of descriptive in case of research studies.
The research design used in this project report is Descriptive research design. A Descriptive
research design is a scientific method which involves observing and describing the behavior
of a subject without influencing it in any way.
3.6 COLLECTION OF DATA
Data collection is the process of gathering and measuring information on variable of interest,
in an established systematic fashion that enables one to answer stated research questions, test
hypotheses, and evaluate outcomes. The data collection components of research is common
to all fields of study including physical and social sciences, humanities, business, etc. While
methods vary by discipline, the emphasis on ensuring accurate and honest collection remains
the same. The goal for all data collection is to capture quality evidence that then translates to
rich data analysis and allows the building of a convincing and credible answer to questions
that have been posed.
A formal data collection process is necessary as it ensures that data gathered are both defined
and accurate and that subsequent decisions based on arguments embodied in the findings are
51
valid. The process provides both a baselines from which to measure and in certain cases a
target on what to improve.
3.7 SOURCES OF DATA COLLECTION
Data collection is the basic step and of importance on which authenticity of study depends.
Before going for the study the researcher have to collect the appropriate data required for the
study. Source of allocation of data are two types.
1. Primary Data
2. Secondary Data
This project report is based on secondary data. Following statements are used for analysis and
to derive the results required.
● Annual Report
● Data maintained by the department
● Report made by other agencies
3.8Analytical Tools
Microsoft Excel Bar charts (A bar chart or bar graph is a chart with rectangular bars with
lengths proportional to the values that they represent. Bar charts are used for comparing two
or more values that were taken over time or on different conditions, usually on small data
sets. The bars can be horizontally oriented (also called bar chart) or vertically oriented (also
called column chart). Sometimes a stretched graphic is used instead of a solid bar. It is a
visual display used to compare the amount or frequency of occurrence of different
characteristics of data and it is used to compare groups of data.
3.9 LIMITATIONS OF THE STUDY

However, I tried my best to have desired information from the respondents and to make the
report fruitful but some limitations are bound to incur which may affect the results or
findings.
52
Limitations of the study are:-
● Lack of experience: I was new on the topic which was assigned to me. So lack of
experience in getting information from respondents came in to the way of collecting
the relevant data.
● Time Constraints: Time was a bit short to fathom into the depth of the study. But
still all efforts to the best possible extent have been made to collect the data.
● Data collection Constraints: Since most of the data used is secondary in nature, this
poses the constraints on the validity and reliability of the data.
● Busy Employees: Employees are not available as are busy in their work.
● Appointments: There was a problem in taking appointments from the managers.
● Sources: Sources were confounded some time to give proper information.
53
CHAPTER-4
DATA ANALYSIS AND

INTERPRETATION
54
DATA ANALYSIS AND INTERPRETATION
1. Comparative Analysis of Current Assets (Rs in Lacs):
4000
3183.41 3337.98
3000
2000
1000
Fig 4.1
Year Current Assets (Rs in Lacs)
2020 3183.41
2021 3373.98
Table 4.1
Comparative Analysis of Current Assets
Interpretation: According to the analysis the current assets have increased in 2019 as
compared to 2018.
2. Comparative Analysis of Current Liabilities (Rs in Lacs):

55
400
312.99
263.57
300
200
100
0
Fig 4.2
Comparative Analysis of Current Liabilities (Rs in Lacs)
Year Current Liabilities (Rs in Lacs)
2020 Current Liabilities is 312.99.
2021 Current Liabilities is 263.57
Table 4.2
Comparative Analysis of Current Liabilities
Interpretation: According to the analysis the liabilities of the company have decreased in
2019 as compare to 2018. It’s 263.57 in 2019.
3. Comparative Analysis of Working Capital (Rs in Lacs):
56
2870.42 3110.41
3500
3000
2500
2000
1500
1000
500
0
Fig 4.3
Comparative Analysis of Working Capital (Rs in Lacs)
Year Working Capital (Rs in Lacs)
2020 Working Capital is 2870.42
2021 Working Capital is 3110.41
Table 4.3
Comparative Analysis of Working Capital (Rs in Lacs)
Interpretation: According to the analysis working capital have increased in 2019 as

compare to 2018.
57
(1) COMPARATIVE STATEMENT OF WORKING CAPITAL (in Lacs):
Particulars 2020 2021
Debtors Collection Period:

6,361.32 6,657.50
Sales
529.97 975.80
Debtors
0.99m 1.76m
Debtors Collection Period = Debtors / Sales * 12m
Stock Holding Period
Cost of Production 5179.76 5328.26
Closing Stock 1590.50 1290.15
Stock Holding Period = Closing Stock / COP * 12m 3.68m 2.90m
Creditor’s Payment Period

5179.76 5328.26
COP
299.72 250.37
Creditor’s
0.69 0.56
Creditor’s Payment Period = Creditor’s / COP
Current Ratio
3183.41 3373.98
Current Assets
312.99 263.57
Current Liabilities
Current Ratio = CA / CL 10.17 12.80
58
4. Comparative Analysis of Debtors Collection Period: (in months)
1.76
2
0.99
Fig 4.4
Comparative Analysis of Debtors Collection Period: (in months)
Year Debtors Collection Period (Rs in Lacs)
2020 Debtors Collection Period 0.99 month.
2021 Debtors Collection Period 1.76 month.
Table 4.4
Comparative Analysis of Debtors Collection Period: (in months)
Interpretation: According to the analysis data collection period is 1.76 in the year 2019
as compare to 2018 it was 0.99 month.
59
5. Comparative Analysis of Stock Holding Period: (in months)
5
3.68
4
2.9
0
Fig 4.5
Comparative Analysis of Stock Holding Period: (in months)
Year Stock holding period (Rs in Lacs)
2020 Stock holding period is 3.68.
2021 Stock holding period is 2.90.
Table 4.5
Comparative Analysis of Stock Holding Period: (in months)
Interpretation: According to the analysis stock holding period have decrease to 2.90 as
compared to 2019 it was 3.68.
60
6. Comparative Analysis of Creditor’s Payment Period: (in months)
1
0.9
0.69
0.8
0.7 0.56
0.6
0.5
0.4
0.3
0.2
0.1
0
Fig 4.6
Comparative Analysis of Creditor’s Payment Period: (in months)
Year Total of Creditor’s Payment Period (Rs in Lacs)
2020
Total of Creditor’s Payment Period is 0.69
2021
Total of Creditor’s Payment Period is 0.56
Table 4.6
Comparative Analysis of Creditor’s Payment Period: (in months)
Interpretation: According to the analysis creditor’s payment period in 2019 is 0.56 as

compare to 2018.
61
7. Comparative Analysis of Current Ratio: (in Lacs)
15 12.8
10.17
10
0
Fig 4.7
Comparative Analysis of Current Ratio: (in Lacs)
Year Current ratio (Rs in Lacs)
2020 Current ratio is 10.17
2021 Current ratio is 12.80
Table 4.7
Comparative Analysis of Current Ratio: (in Lacs)
Interpretation: According to the analysis, current ratio have increased in 2019 as

compare to 2018 that was 12.80.
62
(2) Comparative Analysis:
Particula 2014-15 2015-16 2016-17 2017-18 2018-19

rs
(Amount in (Amount in (Amount in (Amount in (Amount in
Rs.) Rs.) Rs.) Rs.) Rs.)
Sales 44,29,95,322.33 50,87,77,565.20 57,37,76,192.98 63,61,32,875.99 66,57,50,900.10
%
Increase/ 14.85% 12.77% 10.88% 4.65%
Decrease
in Sales
Gross 6,00,38,685.87 6,36,48,767.21 7,03,42,072.17 11,81,56,357.15 13,29,24,012.52

Profit
%
Increase/ 6.01% 10.51% 67.97% 12.49%
Decrease
in Gross
Profit
Net 5,30,98,744.3 6,34,65,871.0 1,81,83,101.5 5,18,37,876.5 3,16,00,554.6

Profit 2 6 4 5 5
%
Increase/
19.52% (71.34%) 185.08% (39.04%)
Decrease
in Net
Profit
G.P 13.55% 12.51% 12.25% 18.57% 19.97%

Ratio
Net 11.99% 12.47% 3.17% 8.15% 4.75%

Profit
Ratio
63
8. Comparative Analysis of Sales (Rs in Lacs):
6361.32 6657.5
8000 5737.76
7000 4429.95 5087.77
6000
5000
4000
3000
2000
1000
0
2016-17 2017-18 2018-19 2019-20 2020-21
Fig 4.8
Comparative Analysis of Sales

Year Total sales (Rs in Lacs)
2014-15 Total sales are 4429.95
Table 4.8
Comparative Analysis of Sales
Interpretation: According to the analysis sales have increased from 4429.95 to 6657.50,
But sales is increased with decreasing rate due to recession.
64
9. % Increase/(Decrease) in Sales over Immediate preceding year:
12.77
16 14.85
10.88
12
8
4.65
Fig 4.9
% Increase/(Decrease) in Sales over Immediate preceding year
Year Sales in %
2017-18 14.85
2018-19 12.77
2019-20 10.88
2020-21 4.65
Table 4.9
% Increase (decrease) in Sales over Immediate preceding year
Interpretation: According to the analysis % increase (Decrease) of sales over preceding

year.
65
10. Comparative Analysis of Gross Profit (Rs in Lacs):
1500 1329.24
1181.56
1000
636.48 703.42
600.38
500
0
2016-17 2017-18 2018-19 2019-20 2020-21
Fig 4.10
Comparative Analysis of Gross Profit (Rs in Lacs)
Year Total Gross Profit (Rs in Lacs)
2016-17 Total Gross Profit is 600.38
Table 4.10
Total Gross Profit
Interpretation: According to the analysis total gross profits have increased.
66
11. % Increase/(Decrease) in Gross Profit over Immediate preceding
year:
80 67.97
60
40
12.99
20 6.01 10.51
0
2017-18 2018-19 2019-20 2020-21
Fig 4.11
% Increase/(Decrease) in Gross Profit over Immediate preceding year
Year Increase in Gross Profit over Immediate preceding year in %
2017-18 % Increase in Gross Profit over Immediate preceding year is 6.01
2020-21 % Decrease in Gross Profit over Immediate preceding year is 12.99
Table 4.11
% Increase/(Decrease) in Gross Profit
Interpretation: According to the analysis the gross profit of company have increased but
decreased in 2020-21 by 12.99%.
67
12. Comparative Analysis of Net Profit (INR in Lacs):
800
634.65
518.37
530.98
600
316
400
181.83
200
Fig 4.12
Comparative Analysis of Net Profit (Rs in Lacs)
Year Total Net Profit
2016-17 Total Net Profit is 530.98
2020-21 Total Net Profit is 316
Table 4.12
Total Net Profit
Interpretation: According to the analysis the net profit of company have increased in
2017-18 but decreased in 2018-19 & 2019-20 but due to recession N.P have decreased in
2020-21.
68
13. % Increase/(Decrease) in Net Profit over Immediate preceding year:
185.08
200
160
120
80
19.52
40
0
-40
-39.04
-80 -71.34
Fig 4.13
% Increase/(Decrease) in Net Profit over Immediate preceding year
Year Increase in Net Profit over Immediate preceding year in %
2017-18 % Increase in Net Profit over Immediate preceding year is 19.52
2018-19 % Decrease in Net Profit over Immediate preceding year is -71.34
2019-20 % Increase in Net Profit over Immediate preceding year is 185.08
2020-21 % Decrease in Net Profit over Immediate preceding year is -39.04
Table 4.13
% Increase/(Decrease) in Net Profit
Interpretation: According to the analysis there is % increase in net profit in the year
2017-18but decrease in 2018-19, again increased in 2019-20, but decrease in 2020-21 by-
39.04%.
69
14. Comparative Analysis of Gross Profit Ratio:
19.97
18.57
20
18
16 13.55
12.51 12.25
14
12
10
8
6
4
2
0
Fig 4.14
Comparative Analysis of Gross Profit Ratio
Year Total Gross Profit Ratio in %
2016-17 Total Gross Profit Ratio is 13.55
Table 4.14
Total Gross Profit Ratio
Interpretation: According to the analysis comparative gross profit ratio. it’s decreased in
2017-18 & 2018-19 but increased in 2019-20 & 2020-21.
70
15. Comparative Analysis of Net Profit Ratio:
15 12.47
11.99
12
8.15
9
6 4.75
3.17
Fig 4.15
Comparative Analysis of Net Profit Ratio
Year Total Net Profit Ratio
2016-17 Total Net Profit Ratio is 11.99
Table 4.15
Total Net Profit Ratio
Interpretation: According to the analysis comparative Net profit ratio. It’s increased in
2020-21and decreased in 2020-21 as compared to last years.
71
(3) SCHEDULE IN CHANGES IN WORKING CAPITAL (in Lacs)
Working Capital
Particulars 2020 2021 Increase Decrease
Current Assets:
Debtors 529.97 975.80 445.83 -
Loans & Advances 971.40 692.55 - 278.85
Closing Stock (Stock in Trade) 1590.50 1290.15 - 300.35
Cash & Bank Balance 91.54 415.46 323.92 -
Total (A)
3183.41 3373.98 769.75 579.20
Current Liabilities:
Sundry Creditors 299.72 250.37 - 49.35
Expenses Payable 13.27 13.02 - .25
Total (B) 312.99 263.57 - 41.52
(A)-(B) 2870.42 3110.41
Net Increase In Working 149.03

Capital
72
CHAPTER-5
FINDINGS,
SUGGESTIONS AND
CONCLUSIONS
73
FINDINGS, SUGGESTIONS AND CONCLUSIONS
5.1 FINDINGS
⮚ Demand of carpet is so high that capacity enhancement proves to be indispensable.
⮚ Due to recession, the sales of Madhav Overseas, Panipat is decreased compared to last
years.
⮚ The total sales 63.12 crore with an increase 10.88% from previous year,& in 2020 it
increased by 4.65% and total sales 66.12 crore.
⮚ In 2019-20,the Gross Profit 11.81 crore with an increase 67.97% from previous
year,& in 2021 it increased by 12.49% and total sales 13.29 crore.
⮚ In 2019-20,the Net Profit 5.18 crore with an increase 185.08 % from previous year,&
in 2021 it Decresed by 39.04% and total sales 3.29 crore.
⮚ In 2019-20,the Current Liabilites 299.12 crore with an increase 0.69% from previous
year,& in 2021 it decreased by 0.56% and total sales 250.37 crore.
74
5.2 SUGGESTIONS
⮚ Madhav Overseas, Panipat should utilize panipat vicinity resources so as to increase

employment opportunities as it has maximum export from panipat.
⮚ Madhav Overseas, Panipat should concentrate on others products like curtains, bed
coverings etc to increase market share.
⮚ As according to its carpet demand it should increase its capacity so as to meet the
required demand in the market.
⮚ Madhav Overseas, Panipat should adopt certain tools to cope up with recession such
as cost cutting.
⮚ It should diversify itself to other than panipat area also and should not mainly
concentrate on export & import.
⮚ Short term liability such as salary, wages should not be immediately paid. Time
duration of 10-15 days should be kept for the payment of these liabilities this will
increase the cast balance within the organization.
75
5.3 CONCLUSION
⮚ The working capital analysis is the one of the important tools of financial statement
analysis because with working capital analysis the day to day operations of company
can be analyzed and Madhav Overseas, Panipat do not have a satisfactory financial
health according to analysis.
⮚ Madhav Overseas, Panipat have a good location area in the vicinity of panipat but it’s
not able to explore panipat resources in an efficient manner. So it is concluded that the
management has the finance available but it is not able to invest in a right direction.
Therefore it should take in concentration the financial analysis of concern statement to
take appropriate decisions.
⮚ Textile industry in India has vast scope to grow as Panipat & Ambala is the hub of
`textile industries and there are many options available to manufacture textile
products such as weaving and designing. Madhav Overseas, Panipat is basically
engaged in weaving business. It is recommended to focus more into designing, which
will improve the financial health of the Company.
⮚ Last but not the least this research work aims to gather the knowledge of financials
loopholes of the company and in this research work, I have contributed best of my
experience in Madhav Overseas, Panipat.
76
BIBLIOGRAPHY
77
BIBLIOGRAPHY
Books:-
❖ Goel, D.K. (2009), “Management Accounting & Financial management”, Avichal
Publishing Company.
❖ Khan, y.“Management Accounting & Financial Management” , Tata mc-Graw hill
publishing co. ltd
❖ Donald R. Cooper & Pamela S. Schindler ,“Business Research Methods Eight
Edition” , Tata Mc. Graw-Hill Edition.
❖ Kothari, C.R., “Business Research Methodology” , new age international publication.
❖ Maheshwari, S.N.,“Accounting for Management” ,Vikas publishing housing pvt. ltd.
❖ Sondhi, Dr. Neena (2012),“Research Methodology Concepts & Cases”, vikas publishing
housing pvt. Ltd.
Journals:-
❖ BanaAbuzayed, (2017) "Working capital management and firms’ performance in
emerging markets: the case of Jordan", International Journal of Managerial Finance,
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impact on firm value in an emerging economy", Journal of Intellectual Capital, Vol. 6
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Finance Review, Vol. 65 Iss: 1, pp.45 – 57
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performance", International Journal of Productivity and Performance Management, Vol.
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❖ Donatien Hainaut, (2013) "Entry and exit decisions with switching regime cash flows",
International Journal of Managerial Finance, Vol. 8 Iss: 1, pp.58 – 72
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impacting construction cash flow forecast", Journal of Financial Management of
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Practice", Managerial Finance, Vol. 31 Iss: 10, pp.3 – 17
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management metric", International Journal of Physical Distribution & Logistics
Management, Vol. 32 Iss: 4, pp.288 - 298
❖ M. Theodore Farris II, Paul D. Hutchison, (2003) "Measuring Cash-to-Cash
Performance", International Journal of Logistics Management, The, Vol. 14 Iss: 2, pp.83
– 92
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performance in Europe", International Journal of Manpower, Vol. 31 Iss: 4, pp.392 – 409
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machine tool enterprises in Bangalore", Management Research News, Vol. 31 Iss: 9,
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and accounting regulation on earnings management in Australia’s “old” and “new”
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Website:-
1. www.emeraldinsight.com (retrieved on 25.6.2014)
2. www.Madhavoverseas.com (retrieved on 27.6.2014)
3. www.advfn.com (retrieved on 27.6.2014)
4. www.investorwords.com (retrieved on 27.6.2014)
80
ANNEXURES
81
ANNEXURES:-1
Balance sheet- 2020-21
Jun '21 Sep ' 20 Jun ' 18 Jun ' 17 Jun ' 16
Sources of funds
Owner's fund
Equity share capital 9.09 9.09 9.09 9.09 9.09
Share application money - - - - -
Preference share capital 17.10 17.10 17.10 17.10 -
Reserves & surplus -1.15 -2.67 -3.66 -5.23 -27.60
Loan funds
Secured loans 17.73 37.43 40.05 36.43 69.47
Unsecured loans 8.96 11.88 9.64 9.81 6.45
Total 51.74 72.82 72.23 67.21 57.41
Uses of funds
Fixed assets
Gross block 82.81 84.12 84.06 83.83 83.20
Less : revaluation reserve - 1.18 1.18 1.18 1.18
Less : accumulated depreciation 65.11 60.19 55.00 51.36 47.28
Net block 17.71 22.75 27.88 31.29 34.74
Capital work-in-progress 3.86 2.84 2.83 2.82 0.32
Investments 0.38 0.38 0.38 0.38 0.38
Net current assets
Current assets, loans & advances 45.09 57.91 52.92 41.52 38.66
Less : current liabilities & provisions 15.29 11.06 11.78 8.80 16.68
82
Total net current assets 29.80 46.86 41.14 32.72 21.98
Miscellaneous expenses not written - - - - -
Total 51.74 72.82 72.23 67.21 57.41
Jun '21 Sep ' 20 Jun ' 18 Jun ' 17 Jun ' 16
Income
Operating income 146.03 117.81 80.25 77.16 66.78
Expenses
Material consumed 125.03 76.77 49.96 48.18 41.62
Manufacturing expenses 13.23 11.82 8.67 8.41 8.38
Personnel expenses 7.19 6.53 4.75 4.71 4.30
Selling expenses - 5.47 4.25 4.94 4.49
Administrative expenses 8.56 2.23 1.33 1.57 1.72
Expenses capitalized - - - - -
Cost of sales 154.01 102.81 68.96 67.82 60.51
Operating profit -7.98 15.00 11.29 9.33 6.26
Other recurring income 24.92 0.62 1.63 3.47 0.28
Adjusted PBDIT 16.94 15.62 12.93 12.81 6.55
Financial expenses 10.63 9.52 7.48 6.95 6.03
Depreciation 5.15 5.19 4.07 4.08 4.04
Other write offs - - - - -
Adjusted PBT 1.17 0.91 1.37 1.78 -3.52
Tax charges - - 0.04 0.05 0.04
Adjusted PAT - - 1.34 1.73 -3.56
Nonrecurring items - 0.08 0.23 3.81 0.31
Other non-cash adjustments - - - 20.99 0.03
Reported net profit 1.17 0.98 1.57 26.54 -3.22
Earnings before appropriation -13.82 -16.63 -17.62 -19.19 -45.72
Equity dividend - - - - -
Preference dividend - - - - -
Dividend tax - - - - -
Retained earnings -13.82 -16.63 -17.62 -19.19 -45.72
83

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A

SUMMER TRAINING REPORT

“A STUDY OF WORKING CAPITAL MANAGEMENT”

Submitted in the partial fulfillment of the requirement

MASTER OF BUSINESS ADMINISTRATION

Under the Supervision of: Submitted By:

Geeta Engineering College Naultha, Panipat,

Affiliated To Kurukshetra University, Kurukshetra

I, LEENA, student in GEETA ENGINEERING COLLEGE, NAULTHA, PANIPAT hereby

1.1.1 INDIAN TEXTILE INDUSTRY

1.1.4 Factors responsible for wooing the investors in Indian textile

❖ Seer India, Delhi

❖ Shiv shakti textile, Delhi

❖ Sheena Export, Panipat

Madhav Overseas, Panipat is a trusted manufacturer, exporter and supplier of Home

1.2.2 VISION OF THE COMPANY

Madhav Overseas, Panipat vision is to become India’s leading sustainable textile

Lead the textile industry in India

1.2.3 MISSION OF THE COMPANY

Madhav Overseas, Panipat mission is to create conditions and infrastructure for

Madhav Overseas, Panipat steadfast commitment to quality is reflected in ISO 9001-2000

Carpets Home Floor Kids

Profile Hand Tufted Cushions/ kilims Bath Mats Kids Carpets

Handloom Throws Jute Durries Cushions

Shaggy Table Mats/Braid Hemp Throws

Hand Knotted Chair Braid Leather Bath Mats

Custom Cotton Durries

Printed Carpet/ Woolen Durries

SOURCE: Company Catalogue

SOURCE: Company Catalogue

SOURCE: Company Catalogue

SOURCE: Company Catalogue

1.2.8 MARKET REACH

1.2.9 MAJOR CUSTOMERS

Some of the major customers of the company include:

Fig no. 1.2

Also known as "net working capital", or the "working capital ratio".

⮚ Accounts receivable (current asset)

1.3.2 Concept of Working Capital:

There are two concepts of working capital -

1. Gross working capital

⮚ Gross Working Capital:-

Gross working capital refers to the firm’s investment in current assets

A. Optimum investment in current assets.

1.3.3 NEED FOR WORKING CAPITAL

⮚ Manufacturing of product – Which includes conversion of raw material into WIP

1.3.4 WORKING CAPITAL CYCLE

Fig 2.1 Working Capital Cycle

● R = Raw material shortage period.

1 Raw material shortage period = Avg. Stock of raw material

2 WIP holding Period = Avg. WIP Inventory

3 Finished goods storage period = Avg. Stock of finished Goods

4 Debtors collection period = Avg. book debts

5 Credit period availed = Avg. trade creditors

1.3.5 SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following:

⮚ Pressure on existing cash

Working capital needs of a firm are influenced by numerous factors.

4. Business fluctuations: Most firms experience seasonal and cyclical fluctuations in

7. Efficiency of operations: The operating efficiency of a firm relates to optimum

8. Dynamic attitudes: If the management of the firm is dynamic, thinking in terms of

1.3.7 TYPES OF WORKING CAPITAL:

✔ Permanent Working Capital: Permanent working capital refers to minimum level of

The following are the characteristics of permanent working capital:-