A REPORT ON

“WORKING CAPITAL MANAGEMENT”

AT ODISHA STATE CO-OPERATIVE BANK

Submitted for B.Com Programme in D.A.V. School of Business Management

Affiliated to Utkal University
SUBMITTED BY:
(SUBHASMITA SAHU)
2020-23
University Roll No.- 2003010190550052

EXTERNAL GUIDE: INTERNAL GUIDE:

Mr.A.R.MOHANTY Mr. Muna Sahoo
FACULTY,OSCB FACULTY, DSBM

Committed to Excellence
D.A.V. SCHOOL OF BUSINESS MANAGEMENT
(Recognized by the Govt. of Odisha and Affiliated to Utkal University)
D.A.V. CAMPUS, UNIT-8, NAYAPALLI, BHUBANESWAR-751012, ODISHA

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 ACKNOWLEDGEMENT
It is really a great pleasure to have this opportunity to express the feeling of gratitude
imprisoned in the deepest core of my heart.

At the onset, I convey my sincere gratitude to the Mr. A.R Mohanty, Faculty, OSCB for giving me
the opportunity to prepare my project work.

I do express my sincere thanks to Mr. Muna Sahoo, Faculty, of DAV School of Business
Management for his/her diligent guidance and continuous monitoring of the project.

I must also express my deepest gratitude to our Principal, Dr. D.N. Mishra and the Faculty
Council of DSBM, for their timely help as and when required.

I cannot conclude this acknowledgement without thanking my family, relatives, acquaintances,

and friends who have offered their valuable cooperation to me at every stage.

Date: 16.09.2022 Name: SUBHASMITA SAHU

Place: Bhubaneswar Roll No: (2003010190550052)
 

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 DECLARATION
I do hereby declare that the project work entitled “(WORKING CAPITAL MANAGEMENT)”
submitted to D.A.V. School of Business Management, Affiliated to Utkal University, is a record
of original work done by me under the guidance of (Mr. A.R MOHANTY), FACULTY, OSCB and
(Mr. Muna Sahoo), (Faculty, DSBM).

Date:16.09.2022 Name: SUBHASMITA SAHU

Place: Bhubaneswar Roll No: (2003010190550052)
 

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 CERTIFICATE
Certified that the project report titled “Working Capital Management” is the bona fide work of
Ms. Subhasmita Sahu bearing roll no. 2003010190550052, who carried out the work under my
supervision. Certified that to the best of my knowledge the work reported herein does not form
part of any other project report or dissertation on the basis of which a degree or award
conferred on an earlier occasion on this or any other candidate.

DATE: 16.09.2022 MUNA SAHOO

Place: Bhubaneswar FACULTY, DSBM

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 EXECUTIVE SUMMARY
Working capital is the day to day need of any business and it can be also referred
as the lifeline of any business. There is no specific tool to know the exact amount
of working capital required by any business concern. Working capital
management is widely viewed as the one of the important jobs of the finance
department of any company.
In Odisha State Co-operative Bank, the working capital is managed on the
estimate basis. It is taken as the estimate of the working capital for the current
period as per the expenditure of the previous year and the estimated future
expenses.
The objective of the project is to analyze the working capital requirement of the
State Cooperative Bank. To know the various components of the working capital,
trend analysis and ratio analysis are used in the project report.
This project is intended to make the State Co-operative Bank free from hassle in
the future regarding its working capital management.

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 CONTENTS PAGE NO.
TITLE PAGE 1
ACKNOWLEDGEMENT 2
DECLARATION 3
CERTIFICATE 4
EXECUTIVE SUMMARY 5
INTRODUCTION
a. OBJECTIVE OF THE STUDY 7-9
b. LIMITATION OF THE STUDY
c. SCOPE OF THE STUDY
REVIEW OF LITERATURE 10-11
COMPANY PROFILE 12-15
WORKING CAPITAL 16-17
WORKING CAPITAL MANAGEMENT 18-22
REGULATION OF BANK FIINANCE 22-24
ANALYSIS OF SHORT – TERM FINANCIAL POSITION OR TEST OF 25-31
LIQUIDITY
WORKING CAPITAL ANALYSIS OF OSCB 32-33
RESEARCH METHODOLOGY 34
CONCLUSION 35

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 INTRODUCTION
Working Capital Management involves managing the balance between
firm’s short-term assets and its short-term liabilities. 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.
The interaction between current assets and current liabilities is,
therefore, the main theme of the theory of working capital
management.
There are many aspects of working capital management which makes it
important function of financial management.
Time: Working capital management requires much of the finance
manager’s time.
Investment: Working capital represents a large portion of the
total investment in assets.
Credibility: Working capital management has great significance for
all firms but it is very critical for small firms.
Growth: The need for working capital is directly related to the
firm’s growth.
Working Capital Management
In simple terms working capital means is that the amount of funds that
a company require finance for its day-to-day operations. Working
capital states that the period of debtors, receivables etc for a company
to raise finance from them at the earliest. Finance manager should
develop sound techniques of managing current assets. Working capital
management involves managing the relationship between a firm's
short-term assets and its short-term liabilities. 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.
The following should be effective in working capital management:
Cash management: Identify the cash balance which allows for the
business to meet day to day expenses, but reduces cash holding costs.
Inventory management: Identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials-
and minimizes reordering costs-and hence increases cash flow. Besides
this, the lead times in production should be lowered to reduce Work in

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Progress (WIP) and similarly, the Finished Goods should be kept on as
low level as possible to avoid over production.
Debtor’s management: Identify the appropriate credit policy, i.e. credit
terms, discounts etc. which will attract customers, such that any impact
on cash flows and the cash conversion cycle will be offset by increased
revenue and hence Return on Capital. Debtors credit period should be
less than 90 days to achieve good working capital ratio and position of
the company.
Importance of Adequate Working Capital
Management of working capital is an essential task of the finance
manager. He has to ensure that the amount of working capital available
with his concern is neither too large nor too small for its requirements.
A large amount of working capital would mean that the company has
idle funds. Since funds have a cost, the company has to pay huge
amount as interest on such funds. If the firm has inadequate working
capital, such firm runs the risk of insolvency. Paucity of working capital
may lead to a situation where the firm may not be able to meet its
liabilities. The various studies conducted by the Bureau of Public
Enterprises have shown that one of the reasons for the poor
performance of public sector undertakings in our country has been the
large amount of funds locked up in working capital. This results in over
capitalization. Over capitalization implies that a company has too large
funds for its requirements, resulting in a low rate of return a situation
which implies a less than optimal use of resources. A firm has therefore,
to be very careful in estimating its working capital requirements.
Maintaining adequate working capital is not just important in the short-
term. Sufficient liquidity must be maintained in order to ensure the
survival of the business in the long-term as well.
When business make investment decisions, they must not only consider
the financial outlay involved with acquiring the new machine or the
new building, etc., but must also take account of the additional current
assets that are usually required with any expansion of activity. For e.g.:
 Increased production leads to hold additional stocks of raw materials
and work in progress.
 An increased sale usually means that the level of debtors will
increase.

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 A general increase in the firm’s scale of operations tends to imply a
need for greater levels of working capital.

Objectives of the study

 To study the various components of working capital.
 To analyze the liquidity trend of Odisha State Co-operative Bank.
 To appraise the utilization of current asset and current liabilities and find
out shortcomings if any.
 To suggest measure for effective management of working capital.
 To measure and evaluate the liquidity and profitability position of State Co-
operative Bank.
Limitation of the study
 Time factor is the most crucial one. The study was conducted within a short
period of two months.
 Odisha State Co-operative Bank executives were hesitating to provide
information.
 I had to wait for a long time to make contact with the executives, because
they were busy with their work.
 Due to busy work schedule, detailed discussions were not possible.
 It is also found that some of the executives lack interest, enthusiasm,
initiative and involvement, which was de-motivated me.
 Lot of time consumed during survey.
Scope of the study
This project is vital to me in a significant way. It does have some importance for
the company too. These are as follows –
 This project will be a learning device for the finance students.
 Through this project I would study the various methods of the working
capital management.
 The project will be a learning of planning and financing working capital.
 The project would also be an effective tool for credit policies of the
companies.
 This will show different methods of holding inventory and dealing with cash
and receivables.
 This will show the liquidity position of the company.

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 Review of literature
Working capital is very important for every company to meet day to day
operation expenses and urgent payments. Effective working capital increase the
company profit and vice versa. For effective working capital, collection days
should be less and payment days should be more overall cash conversion cycle
days should very low or in negative. Many researchers have studied working
capital from different views and in different environments. The following ones
were very interesting and useful for our research: Eljelly (2004) Identified the
relation between profitability and liquidity who was examined, as measured by
current ratio and cash gap (cash conversion cycle) on a sample of joint stock firms
in Saudi Arabia. The study found that the cash conversion cycle was of more
importance as a measure of liquidity than the current ratio that affects
profitability. The size variable was found to have significant effect on profitability
at the industry level. The results were stable and had important implications for
liquidity management in various Saudi firms. First, it was clear that there was
negative relationship between profitability and liquidity indicators such as current
ratio and cash gap in the Saudi sample examined. Second, the study also revealed
that there was great variation among industries with respect to the significant
measure of liquidity. Lazaridis and Tryfonidis (2006) have explored the
relationship between corporate profitability and WCM in the Athens Stock
Exchange. The finding of results shows a negative relationship between
profitability and working capital indicators like days of accounts receivable,
account payable and cash conversion cycle. They concluded that firms can create
profits by effectively handling each component of the cash conversion cycle.
Saswata Chatterjee (2010) Focused on the importance of the fixed and current
assets in the successful running of any organization. It poses direct impacts on the
profitability liquidity. There has been a phenomenon observed in the business
that most of the companies increase the margin for the profits and losses because
this act shrinks the size of working capital relative to sales. But if the companies
want to increase or improve its liquidity, then it has to increase its working
capital. In the response of this. policy the organization has to lower down its sales
and hence the profitability will be affected due to this action. For this purpose, 30
United Kingdom based companies were selected which were listed in the London
Stock exchange. The data were taken of three years 2006-2008. It analysed the
impact of the working capital on the profitability. The dimensions of working
capital management included in this research which is quick ratios, current ratios
C.C.C, average days of payment, Inventory turnover, and A.C.P (average collection
period. On the net operating profitability of the UK companies. Mohamad and
Saad (2010) Used Bloomberg's database of 172 listed companies randomly
selected from Bursa Malaysia main board for five years period from 2003 to 2007.
Applying correlations and multiple regression analysis, they found that current
assets to total asset ratio shows positive significant relationship with Tobin Q,
ROA and ROI. Cash conversion cycle, current asset to current liabilities ratio and
current liabilities to total assets ratio illustrate negative significant relations with
Tobin Q, ROA and ROIC.
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All the above studies provide us a solid base and give us idea regarding working
capital management and its components. They also give us the results and
conclusions of those researches already conducted on the same area for different
countries and environment from different aspects. On basis of these researches
done in different countries, we have developed our own methodology for
research.

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 Company profile
The Odisha State Cooperative Bank (OSCB) is one of the Scheduled State
Cooperative Banks incorporated under the Orissa Cooperative Societies Act on
2nd April, 1948. Since its inception, the Bank has been playing a pivotal role in
transforming the agrarian economy of the State by catering to the credit
requirement of the farm families. The Bank leads the Short-Term Cooperative
Credit Structure (STCCS) in Odisha comprising 2709 PACS (including 212 LAMPS
and 6 FSS) at the grassroots level, 17 District Central Cooperative Banks (with 323
Branches) at the middle tier. The Bank has facilitated enrolment of 53.69 lakh
agricultural families from out of about 55 lakh agricultural families in the State
covering 97.6% of the families. As a State partnered Bank, the OSCB has been
implementing various plans and programmes of the State Government meant for
agriculture production and productivity with rural development. The Bank has a
network of 14 Branches spread across the State and it has been supporting the
Central Cooperative Banks with its 323 Branches to consolidate the Short-Term
Cooperative Credit Structure. The PACS are also being transformed as One Stop
Shop to provide all the requirements of the farm families under one roof. The
Bank has also facilitated organization and credit linkage of Self-Help Groups
(SHGS) and Joint Liability Groups (JLGs) to meet the credit requirement of the
share croppers and oral lessees. The Bank has firm commitment to the prosperity
of the State by way of providing credit for capital formation through Medium
Term and Long-Term loans for agriculture. Keeping in view the credit requirement
of the large number of handloom weavers, rural artisans, adequate credit have
been sanctioned in favour of the Primary Weavers Cooperative Societies and
artisan members of the PACS. The Bank has established a State-of-the-Art Core
Banking Data Management Centre in its Head Office premises and linked all the
Branches of DCCBs to the Data Centre along with its functional units as a part of
the Core Banking Solution (CBS) being assisted by the State Government. The
Bank has been earning profit since its inception.
HISTORY OF THE BANK
With the growth of Central Banks, the need for loan and advantages and cash
credit at a reasonable rate of interests grew for central banks to enable them to
make adequate finance available to the society. So, in 1914 the Bihar and Odisha
provincial co-operative bank was formed. The early 40s witnessed the
introduction of provincial autonomy in all British-Indian provinces and what
was of paramount was the birth of Odisha provinces on 1st April, 1936. The
Odisha provincial co-operative bank is one of the manifestation of great historical
identity of Odia people. During this period, the number of central banks in north
Odisha were 13. A few months after the formation of separate Odisha province,
the Odisha Cooperative Bank was registered on 25th August, 1936 and sum of
10,520 was collected towards share capital of the bank.

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OBJECTIVES OF THE BANK
The main objectives of the bank are:
 To finance the co-operative society.
 To carry on banking business.
 To act as a balancing center for the surplus of the societies in Odisha.
The Central Bank and Union of the Odisha applied for the bifurcation of Bihar and
Odisha provincial co-operative banks. The 13 central co-operative banks in north
Odisha served all in Odisha with Bihar provincial Co-operative Bank in 1938, and
net liability ton the bank was taken over by Odisha govt. on 2nd April, 1984, the
Odisha provincial co-operative bank was enrolled and 100 shares were issued and
share capital of 10,020 was collected. So, it was a twice born co-operative bank.

THE INDUSTRIAL RURAL CREDIT DELIVERY SYSTEM OF

AGRICULTURAL COMPRISES OF:
1. Short term co-operative credit structure
2. Long term credit structure 3. Regional Rural Banks
4. NABARD
5. Commercial Banks
6. RBI

MILESTONE IN THE HISTORY OF OSCB BANK Ltd.

1. 1954-55: The Orissa Cooperative Society Act 1951 was enforced and the rules
were formed their under.
2. 1955-56: M.T. Agriculture Loans were advanced to the farmer for the First
time.
3. 1956-57:
a. Line of credit for the handloom introduced
b. Bank's deposit exceeds 1 crore.
4. 1957-58: Loan and advances of the bank exceeded Rs.1 core and stood 1.8cr.
5. 1959-60: Financing of the Industrial Cooperative Society started.
6. 1965-66: The Banking Regulation Act, 1949 was made applicable
7. 1968-69: Crop loan was introduced
8. 1970-71: The 1st branch of the Bank was opened at Bhubaneswar on
15-12-1970.
9. 1974-75: The Bank made loss of Rs 86000/- in the history of 50 years i.e. from
1947 to 2000
10. 1978-79: Cooperative storage projects stated in Orissa.
11. 1981-82: A.C.S.T.I of the Bank was set up on 19-11-1985.
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12. 1990-91: New Cooperative year commenced from 01-04-1990
13. 1994-95: MOU was signed between OSCB, NABARD and Govt. of Orissa.
14. 1996-97: The bank became a member of Indian Bank Association on 23-04-
1996.
15. 1997-98: The bank started total branch automation, the main branch was fully
computerized, NABARD awarded the bank with Two best Performance prize for
excellent performance.
16. 2000-02: ATM were installed in Cuttack and Bhubaneswar. Customer attitude
survey was taken up through the Xavier Institution of Management,
Bhubaneswar.
17. 2002-03:
a. Introduction of cooperation bank mutual Arrangement scheme. (COBMASO)
b. Recovery of cooperative duties in Orissa.
c. The cooperative Bank has earned highest profit in that year.
18. 2003-04:
a. Cooperation of "Mini Bank Schemes" at PACS level to mop up Rural savings.
b. Computerization Programs for improving the quality of customer service
streamlines MIS and Financial Accounting System

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Function of OSCB
The OSCB as the apex institution of the short term co-operative credit delivery
system in the state playing a vital role in making strong PACS for the socio-
economic development of the state.

MISSION OF O.S.C.B LTD.:

The mission of O.S.C.B. Ltd is to become a strong and Vibrant Bank having
competition edge and to lead a rejuvenated short term Cooperative Credit
Structure to serve the people of Orissa.

ACHIEVEMENT:
# Net worth exceeding 140 corers and deposits more than 1026 corers.
# ATM service is available in the Main branches for anytime banking.
# Earning profits since inception and paying dividend to shareholders.
#Awarded for best performance by finance Ministry, Govt. of India.
# Loan for commercial vehicles, small business building. Purchase of customer and
durables.
# Demand draft issued on all types of deposits and on ace major cities of country.

Role towards the credit policy at the state level

 Kissan credit has been introduced to attract and ensure adequacy of crop
down among farmers of the state.
 OSCB is preparing annual credit plan as a leader of STCCS in the state.

Recovery agricultural loan

With a competitive and spiritual mind among staff, OSCB has taken the following
steps
 Introduction of new incentive scheme for recovery of loan, regular review
of performance PACS, publicity through e-media etc.

Role towards customer service

 A committee under the chairmanship of Sri M.N. Golpuria has been setup
in September, 1990 on customer service by RBI.
 Golpuria committee has made suitable and recommendation of customer
service in the bank. OSCB to follow important recommendation and
advised its branches and DCCB to follow important recommendation to
ensure customer satisfaction in the bank.

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 WORKING CAPITAL
Capital or funds required for an industry can be bifurcated as:
(i) Fixed capital, and (ii) Working capital.
Working capital is frequently defined as the excess of current assets over current
liabilities.
Working capital: Funds required to carry the required levels of current assets, to
enable the industry to carry on expected levels of operations without
interruption.
This further implies that:
I. Working Capital Requirement (WCR) is proportional to the volume of
activity (level of production / sales);
II. WCR is important to the type of business viz. Manufacturing process,
market mix, product and production program.

FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS: The requirements of working is very limited in public
utility undertakings such as electricity, water supply and railways because they
offer cash sale only and supply services not products, and no funds are tied up in
inventories and receivables. On the other hand, the trading and financial firms
requires less investment in fixed assets but have to invest large amt. of working
capital along with fixed investments.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the
requirement of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady by
accumulating inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw
material and other supplies have to be carried for a longer in the process with
progressive increment of labour and service costs before the final product is
obtained. So, working capital is directly proportional to the length of the
manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm requires
larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle completes
one cycle determines the requirements of working capital. Longer the cycle larger
is the requirement of working capital.
7. RATE OF STOCK TURNOVER: There is an inverse co-relationship between the
question of working capital and the velocity or speed with which the sales are

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affected. A firm having a high rate of stock turnover will need lower amt. of
working capital as compared to a firm having a low rate of turnover.
8. CREDIT POLICY: A concern that purchases its requirements on credit and sales
its product / services on cash requires lesser amt. of working capital and vice-
versa.
9. BUSINESS CYCLE: In period of boom, when the business is prosperous, there is
need for larger amt. of working capital due to rise in sales, rise in prices,
optimistic expansion of business, etc. On the contrary in time of depression, the
business contracts, sales decline, difficulties are faced in collection from debtor
and the firm may have a large amount of working capital.
10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall require
large amt. of working capital.
11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning
capacity than other due to quality of their products, monopoly conditions, etc.
Such firms may generate cash profits from operations and contribute to their
working capital. The dividend policy also affects the requirement of working
capital. A firm maintaining a steady high rate of cash dividend irrespective of its
profits needs working capital than the firm that retains larger part of its profits
and does not pay so high rate of cash dividend.
12. PRICE LEVEL CHANGES: Changes in the price level also affect the working
capital requirements. Generally, rise in prices leads to increase in working capital.
Others FACTORS: These are:
o Operating efficiency.
o Management ability.
o Irregularities of supply.
o Import policy.
o Asset structure.
o Importance of labour.
o Banking facilities, etc.

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Working capital management i.e. management of the capital needed by
a firm for its day-to-day activity. Here you also study the management of cash,
marketable securities, accounts receivables management, account payable,
accruals and different means of short-term financing.
Two most important points to remember while studying working capital
management are:
(a) The optimal level of investment in current assets, and
(b) The appropriate mix of short-term and long-term financing used to
support this investment in current assets.

Working Capital
Management

OR
Value Time

Gross Working Net Working

Permanent Temporary
Capital Capital

The concept of working capital can also be explained through two angles:-
 Value: From the value point of view, Working Capital can be defined as
Gross Working Capital or Net Working Capital.
Gross working capital refers to the firm’s investment in current assets.
Current assets are those assets which can be converted into cash within an
accounting year. Current Assets include: Stocks of raw materials, Work-in-
progress, Finished goods, Trade debtors, Prepayments, Cash balances etc.
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: Trade creditors, Accruals, Taxation payable, Bills
Payables, Outstanding expenses, Dividends payable, Short term loans.

 Time: From the point of view of time, the term working capital can be
divided into two categories viz., Permanent and temporary.
Permanent working capital refers to the hard core working capital. It is
that minimum level of investment in the current assets that is carried by
the business at all times to carry out minimum level of its activities.
Temporary working capital refers to that part of total working capital,
which is required by a business over and above permanent working capital.
It is also called variable working capital. Since the volume of temporary
working capital keeps on fluctuating from time to time according to the
business activities it may be financed from short-term sources

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Importance of Adequate Working Capital : Management of working capital
is an essential task of the finance manager. He has to ensure that the amount of
working capital available with his concern is neither too large nor too small for its
requirements. A large amount of working capital would mean that the company
has idle funds. Since funds have a cost, the company has to pay huge amount as
interest on such funds.
If the firm has inadequate working capital, such firm runs the risk of insolvency.
Paucity of working capital may lead to a situation where the firm may not be able
to meet its liabilities.
Maintaining adequate working capital is not just important in the short-term.
Sufficient liquidity must be maintained in order to ensure the survival of the
business in the long-term as well. When business make investment decisions,
they must not only consider the financial outlay involved with acquiring the new
machine or the new building, etc., but must also take account of the additional
current assets that are usually required with any expansion of activity. For e.g :-
(a) Increased production leads to hold additional stocks of raw materials
and work in progress.
(b) An increased sale usually means that the level of debtors will
increase.
(c) A general increase in the firm’s scale of operations tends to imply a
need for greater levels of working capital.
Solvency of the business: Adequate working capital helps in maintaining the
solvency of the business by providing uninterrupted of production.
Goodwill: Sufficient amount of working capital enables a firm to make prompt
payments and makes and maintain the goodwill.
Easy loans: Adequate working capital leads to high solvency and credit standing
can arrange loans from banks and other on easy and favorable terms.
Cash Discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence reduces cost.
Regular Supply of Raw Material: Sufficient working capital ensures regular supply
of raw material and continuous production.
Regular Payment of Salaries, Wages and Other Day TO Day Commitments: It
leads to the satisfaction of the employees and raises the morale of its employees,
increases their efficiency, reduces wastage and costs and enhances production
and profits.
Exploitation of favourable market conditions: If a firm is having adequate
working capital then it can exploit the favourable market conditions such as
purchasing its requirements in bulk when the prices are lower and holdings its
inventories for higher prices.
Ability to Face Crises: A concern can face the situation during the depression.

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Quick and Regular Return on Investments: Sufficient working capital enables a
concern to pay quick and regular of dividends to its investors and gains
confidence of the investors and can raise more funds in future.
High Morale: Adequate working capital brings an environment of securities,
confidence, high morale which results in overall efficiency in a business.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING

CAPITAL
1. Excessive working capital means ideal funds which earn no profit for the firm
and business cannot earn the required rate of return on its investments.
2. Redundant working capital leads to unnecessary purchasing and accumulation
of inventories.
3. Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.
4. It may reduce the overall efficiency of the business.
5. If a firm is having excessive working capital then the relations with banks and
other financial institution may not be maintained.
6. Due to lower rate of return of investments, the values of shares may also fall.
7. The redundant working capital gives rise to speculative transactions.

Determinants of WCM
Some of the items/factors which need to be considered while planning for
working capital requirement are:
Cash – Identify the cash balance which allows for the business to meet day to day
expenses, but reduces cash holding costs.
Inventory – Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials and hence increases cash
flow; the techniques like Just in Time (JIT) and Economic order quantity (EOQ) are
used for this.
Debtors – Identify the appropriate credit policy, i.e., credit terms which will
attract customers, 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). The tools like Discounts and allowances are used for this.
Short term financing options – Inventory is ideally financed by credit granted by
the supplier; dependent on the cash conversion cycle, it may however, be
necessary to utilize a bank loan (or overdraft), or to “convert debtors to cash”
through “factoring” in order to finance working capital requirements.
Nature of Business - For e.g.in a business of restaurant, most of the sales are in
cash. Therefore, need for working capital is very less.

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Market and demand conditions – For e.g.an item demand far exceeds its
production, the working capital requirement would be less as investment in
finished good inventory would be very less.
Technology and manufacturing Policies - For e.g.in some businesses the demand
for goods is seasonal, in that case a business may follow a policy for steady
production through out over the whole year or instead may choose policy of
production only during the demand season.
Operating efficiency – A company can reduce the working capital requirement by
eliminating waste, improving coordination etc.
Price Level Changes – For e.g.rising prices necessitate the use of more funds for
maintaining an existing level of activity. For the same level of current assets,
higher cash outlays are required. Therefore, the effect of rising prices is that a
higher amount of working capital is required.

Estimating Working Capital Needs

Operating cycle is one of the most reliable methods of Computation of Working
Capital.
However, other methods like ratio of sales and ratio of fixed investment may also
be used to determine the Working Capital requirements. These methods are
briefly explained as follows:
(i)Current assets holding period: To estimate working capital needs based on the
average holding period of current assets and relating them to costs based on the
company’s experience in the previous year. This method is essentially based on
the Operating Cycle Concept.
(ii)Ratio of sales: To estimate working capital needs as a ratio of sales on the
assumption that current assets change with changes in sales.
(iii)Ratio of fixed investments: To estimate Working Capital requirements as a
percentage of fixed investments.
A number of factors will, however, be impacting the choice of method of
estimating Working Capital. Factors such as seasonal fluctuations, accurate sales
forecast, investment cost and variability in sales price would generally be
considered. The production cycle and credit and collection policies of the firm will
have an impact on Working Capital requirements. Therefore, they should be given
due weightage in projecting Working Capital requirements.

Operating or Working Capital Cycle

Working Capital cycle indicates the length of time between a company’s paying
for materials, entering into stock and receiving the cash from sales of finished
goods. It can be determined by adding the number of days required for each
stage in the cycle. For example, a company holds raw materials on an average for
60 days, it gets credit from the supplier for 15 days, production process needs 15
days, finished goods are held for 30 days and 30 days credit is extended to

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debtors. The total of all these, 120 days, i.e., 60 – 15 + 15 + 30 + 30 days is the
total working capital cycle.
Most businesses cannot finance the operating cycle (accounts receivable days +
inventory days) with accounts payable financing alone. Consequently, working
capital financing is needed. This shortfall is typically covered by the net profits
generated internally or by externally borrowed funds or by a combination of the
two.
H
A
D
S
R
O
T
B
E
M
W
L
V
K
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,
IP

Regulation of Bank Finance

Concerned about such a distortion in credit allocation, the Reserve Bank of India
(RBI) has been trying, particularly from the mid-1960s onwards, to bring a
measure of discipline among industrial borrowers and to redirect credit to the
priority sectors of the economy. From time to time, the RBI issue guidelines and
directives relating to matters like the norms for inventory and receivables, the
Maximum Permissible Bank Finance, the form of assistance, the information and
reporting system, and the credit monitoring mechanism. The important guidelines
and directives have stemmed from the recommendations of various committees
such as the Dehejia Committee, the Tandon Committee, the Chore Committee,
and the Marathe Committee.
However, in recent years, in the wake of financial liberalization, the RBI has given
freedom to the boards of individual banks in all matters relating to working capital
financing. From the mid-eighties onwards, special committees were set up by the
RBI to prescribe norms for several other industries and revise norms for some
industries covered by the Tandon Committee.
Dehejia Committee
National Credit Council constituted a committee under the chairmanship of Shri
V.T. Dehejia in 1968 to 'determine the extent to which credit needs of industry
and trade are likely to be inflated and how such trends could be checked' and to
go into establishing some norms for lending operations by commercial banks. The
committee was of the opinion that there was also a tendency to divert short-term
credit for long-term assets. Although committee was of the opinion that it was
difficult to evolve norms for lending to industrial concerns, the committee

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recommended that the banks should finance industry on the basis of a study of
borrower's total operations rather than security basis alone.
The Committee further recommended that the total credit requirements of the
borrower should be segregated into 'Hard Core' and 'Short-term' component.
The 'Hard Core' component which should represent the minimum level of
inventories which the industry was required to hold for maintaining a given level
of production should be put on a formal term loan basis and subject to repayment
schedule. The committee was also of the opinion that generally a customer
should be required to confine his dealings to one bank only.
Tandon Committee
Reserve Bank of India set up a committee under the chairmanship of Shri P.L.
Tandon in July 1974. The terms of reference of the Committee were:
 To suggest guidelines for commercial banks to follow up and supervise
credit from the point of view of ensuring proper end use of funds and
keeping a watch on the safety of advances;
 To suggest the type of operational data and other information that may be
obtained by banks periodically from the borrowers and by the Reserve Bank
of India from the leading banks;
 To make suggestions for prescribing inventory norms for the different
industries, both in the private and public sectors and indicate the broad
criteria for deviating from these norms;
 To make recommendations regarding resources for financing the minimum
working capital requirements;
 To suggest criteria regarding satisfactory capital structure and sound
financial basis in relation to borrowings;
 To make recommendations as to whether the existing pattern of financing
working capital requirements by cash credit/overdraft system etc., requires
to be modified, if so, to suggest suitable modifications.
Chore Committee
The Reserve Bank of India in March, 1979 appointed another committee under
the chairmanship of Shri K.B. Chore to review the working of cash credit system in
recent years with particular reference to the gap between sanctioned limits and
the extent of their utilization and also to suggest alternative type of credit
facilities which should ensure greater credit discipline.
The important recommendations of the Committee are as follows:
 The banks should obtain quarterly statements in the prescribed format
from all borrowers having working capital credit limits of Rs 50 lacs and
above. The banks should undertake a periodical review of limits of Rs 10
lacs and above.
 The banks should not bifurcate cash credit accounts into demand loan and
cash credit components. If a borrower does not submit the quarterly
returns in time the banks may charge penal interest of one per cent on the
total amount outstanding for the period of default.

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  Banks should discourage sanction of temporary limits by charging
additional one per cent interest over the normal rate on these limits. The
banks should fix separate credit limits for peak level and non-peak level,
wherever possible.
 Banks should take steps to convert cash credit limits into bill limits for
financing sales.
Marathe Committee
The Reserve Bank of India, in 1982, appointed a committee under the
chairmanship of Marathe to review the working of Credit Authorization Scheme
(CAS) and suggest measures for giving meaningful directions to the credit
management function of the Reserve Bank. The recommendations of the
committee have been accepted by the Reserve Bank of India with minor
modifications.
The principal recommendations of the Marathe Committee include:
 The committee has declared the Third Method of Lending as suggested by
the Tandon Committee to be dropped. Hence, in future, the banks would
provide credit for working capital according to the Second Method of
Lending.
 The committee has suggested the introduction of the 'Fast Track Scheme'
to improve the quality of credit appraisal in banks. It recommended that
commercial banks can release without prior approval of the Reserve Bank
50% of the additional credit required by the borrowers (75% in case of
export oriented manufacturing units) where the following requirements are
fulfilled:
o The estimates/projections in regard to production, sales, chargeable
current assets, other current assets, current liabilities other than bank
borrowings, and net working capital are reasonable in terms of the past
trends and assumptions regarding most likely trends during the future
projected period.
o The classification of assets and liabilities as 'current' and 'non-current' is
in conformity with the guidelines issued by the Reserve Bank of India.
The projected current ratio is not below 1.33: 1.
o The borrower has been submitting quarterly information and operating
statements (Form I, II and III) for the past six months within the
prescribed time and undertakes to do the same in future also.
o The borrower undertakes to submit to the bank his annual account
regularly and promptly, further, the bank is required to review the
borrower's facilities at least once in a year even if the borrower does
not need enhancement in credit facilities.

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ANALYSIS OF SHORT – TERM FINANCIAL POSITION
OR TEST OF LIQUIDITY
The short-term creditors of a company such as suppliers of goods of credit and
commercial banks short-term loans are primarily interested to know the ability of
a firm to meet its obligations in time. The short term obligations of a firm can be
met in time only when it is having sufficient liquid assets. So, to with the
confidence of investors, creditors, the smooth functioning of the firm and the
efficient use of fixed assets the liquid position of the firm must be strong. But a
very high degree of liquidity of the firm being tied-up in current assets. Therefore,
it is important proper balance in regard to the liquidity of the firm. Two types of
ratios can be calculated for measuring short-term financial position or short-term
solvency position of the firm.
1. Liquidity ratios.
2. Current assets movements ratios
A) LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its current obligations as and when
these become due. The short-term obligations are met by realizing amounts from
current, floating or circulating assts. The current assets should either be liquid or
near about liquidity. These should be convertible in cash for paying obligations of
short-term nature. The sufficiency or insufficiency of current assets should be
assessed by comparing them with short-term liabilities. If current assets can pay
off the current liabilities then the liquidity position is satisfactory. On the other
hand, if the current liabilities cannot be met out of the current assets then the
liquidity position is bad. To measure the liquidity of a firm, the following ratios can
be calculated:
1. CURRENT RATIO
2. QUICK RATIO
3.ABSOLUTE LIQUID RATIO
1. CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of general liquidity
and its most widely used to make the analysis of short-term financial position or
liquidity of a firm. It is defined as the relation between current assets and current
liabilities. Thus, CURRENT RATIO= CURRENT ASSET BY CURRENT LIABILITY
The two components of this ratio are:
1) CURRENT ASSETS
2) CURRENT LIABILITES
Current assets include cash, marketable securities, bill receivables, sundry
debtors, inventories and work-in-progresses. Current liabilities include
outstanding expenses, bill payable, dividend payable etc. A relatively high current
ratio is an indication that the firm is liquid and has the ability to pay its current
obligations in time. On the hand a low current ratio represents that the liquidity
position of the firm is not good and the firm shall not be able to pay its current

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liabilities in time. A ratio equal or near to the rule of thumb of 2:1 i.e. current
assets double the current liabilities is considered to be satisfactory.
CALCULATION OF CURRENT RATIO
(Rupees in crore)
e.g.
Year 2019 2020 2021
Current Assets 81.29 83.12 136.57
Current Liabilities 27.42 20.58 33.48
Current Ratio 2.96:1 4.03:1 4.08:1

Interpretation:
As we know that ideal current ratio for any firm is 2:1. If we see the current ratio
of the company for last three years it has increased from 2019 to 2021. The
current ratio of company is more than the ideal ratio. This depicts that company's
liquidity position is sound. Its current assets are more than its current liabilities.
2. QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may
be defined as the relationship between quick/liquid assets and current or liquid
liabilities. An asset is said to be liquid if it can be converted into cash with a short
period without loss of value. It measures the firms' capacity to pay off current
obligations immediately. QUICK RATIO= QUICK ASSETS BY CURRENT LIABILITES
Where Quick Assets are:
1)Marketable Securities
2)Cash in hand and Cash at bank.
3)Debtors.
A high ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time and on the other hand a low quick ratio represents that
the firms' liquidity position is not good.
As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought
that if quick assets are equal to the current liabilities then the concern may be
able to meet its short-term obligations. However, a firm having high quick ratio
may not have a satisfactory liquidity position if it has slow paying debtors. On the
other hand, a firm having a low liquidity position if it has fast moving inventories.
CALCULATION OF QUICK RATIO
e.g. (Rupees in crore)
Year 2019 2020 2021
Quick Assets 44.14 47.43 61.55
Current Liabilities 27.42 20.58 33.48
Quick Ratio 1.6:1 2.3:1 1.8:1

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A quick ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time. The ideal quick ratio is 1:1. Company's quick ratio is
more than ideal ratio. This shows company has no liquidity problem.
3. ABSOLUTE LIQUID RATIO
Although receivables, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash
immediately or in time. So absolute liquid ratio should be calculated together
with current ratio and acid test ratio so as to exclude even receivables from the
current assets and find out the absolute liquid assets. Absolute Liquid Assets
includes:
ABSOLUTE LIQUID RATIO= ABSOLUTE LIQUID ASSETS BY CURRENT LIABILITES
ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.
e.g. (Rupees in Crore)
Year 2019 2020 2021
Absolute Liquid Assets 4.69 1.79 5.06
Current Liabilities 27.42 20.58 33.48
Absolute Liquid Ratio 0.17:1 0.09:1 0.15:1

Interpretation:
These ratio shows that company carries a small amount of cash. But there is
nothing to be worried about the lack of cash because company has reserve,
borrowing power & long-term investment. In India, firms have credit limits
sanctioned from banks and can easily draw cash.

B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits.
The better the management of assets, large is the amount of sales and profits.
Current assets movement ratios measure the efficiency with which a firm
manages its resources. These ratios are called turnover ratios because they
indicate the speed. with which assets are converted or turned over into sales.
Depending upon the purpose, a number of turnover ratios can be calculated.
These are:
1. Inventory Turnover Ratio
2.Debtors Turnover Ratio
3.Creditors Turnover Ratio
4.Working Capital Turnover Ratio
The current ratio and quick ratio give misleading results if current assets include
high amount of debtors due to slow credit collections and moreover if the assets
include high amount of slow\moving inventories. As both the ratios ignore the
movement of current assets, it is important to calculate the turnover ratio.

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 1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO:
Every firm has to maintain a certain amount of inventory of finished goods so as
to meet the requirements of the business. But the level of inventory should
neither be too high nor too low. Because it is harmful to hold more inventory as
some amount of capital is blocked in it and some cost is involved in it. It will
therefore be advisable to dispose the inventory as soon as possible.
INVENTORY TURNOVER RATIO= COST OF GOOD SOLD BY AVERAGE INVENTORY
Inventory turnover ratio measures the speed with which the stock is converted
into sales. Usually, a high inventory ratio indicates an efficient management of
inventory because more frequently the stocks are sold; the lesser amount of
money is required to finance the inventory. Whereas, low inventory turnover
ratio indicates the inefficient management of inventory. A low inventory turnover
implies over investment in inventories, dull business, poor quality of goods, stock
accumulations and slow-moving goods and low profits as compared to total
investment. AVERAGE STOCK OPENING STOCK+ CLOSING STOCK BY 2.
e.g. (Rupees in Crore)
Year 2019 2020 2021
Cost of Goods sold 110.6 103.2 96.8
Average Stock 73.59 36.42 55.35
Inventory Turnover Ratio 1.5 times 2.8 times 1.75 times
Interpretation:
These ratio shows how rapidly the inventory is turning into receivable through
sales. In 2019 the company has high inventory turnover ratio but in 2018 it has
reduced to 1.75 times. This shows that the company's inventory management
technique is less efficient as compare to last year.
2. INVENTORY CONVERSION PERIOD:
INVENTORY CONVERSION PERIOD = 365 (net working days) BY INVENTORY
TURNOVER RATIO
e.g.
Year 2019 2020 2021
Days 365 365 365
Inventory Turnover Ratio 1.5 2.8 1.8
Inventory Conversion 243 days 130 days 202 days
Ratio
Interpretation:
Inventory conversion period shows that how many days inventories takes to
convert from raw material to finished goods. In the company inventory
conversion period is decreasing. This shows the efficiency of management to
convert the inventory into cash.

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 3. DEBTORS TURNOVER RATIO:
A concern may sell its goods on cash as well as on credit to increase its sales
and a liberal credit policy may result in tying up substantial funds of a firm
in the form of trade debtors. Trade debtors are expected to be converted
into cash within a short period and are included in current assets. So,
liquidity position of a concern also depends upon the quality of trade
debtors. Two types of ratios can be calculated to evaluate the quality of
debtors.
a) Debtors Turnover Ratio.
b) Average Collection Period
DEBTORS TURNOVER RATIO= TOTAL SALES (CREDIT) BY AVERAGE DEBTORS
Debtor's velocity indicates the number of times the debtors are turned over
during a year. Generally higher the value of debtor's turnover ratio the more
efficient is the management of debtors/sales or more liquid are the debtors.
Whereas a low debtors turnover ratio indicates poor management of
debtors/sales and less liquid debtors. This ratio should be compared with ratios of
other firms doing the same business and a trend may be found to make a better
interpretation of the ratio.
AVERAGE DEBTORS = OPENING DEBTOR+CLOSING DEBTOR BY 2.
e.g.
Year 2019 2020 2021
Sales 166.0 151.5 169.5
Average Debtors 17.33 18.19 22.50
Debtor Turnover Ratio 9.6 times 8.3 times 7.5 times
Interpretation:
This ratio indicates the speed with which debtors are being converted or turnover
into sales. The higher the values or turnover into sales. The higher the values of
debtor’s turnover, the more efficient is the management of credit. But in the
company the debtor turnover ratio is decreasing year to year. This shows that
company is not utilizing its debtor’s efficiency. Now their credit policy become
liberal as compare to previous year.
4. AVERAGE COLLECTION PERIOD:
Average Collection Period = No. of Working Days BY Debtors Turnover Ratio
The average collection period ratio represents the average number of days for
which a firm has to wait before its receivables are converted into cash. It
measures the quality of debtors. Generally, shorter the average collection period
the better is the quality period the better is the quality of debtors as a short
collection period implies quick payment by debtors and vice-versa. Average
Collection Period = 365 (Net Working Days) BY Debtors Turnover Ratio.

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e.g.
Year 2019 2020 2021
Days 365 365 365
Debtor Turnover Ratio 9.6 8.3 7.5
Average Collection Period 38 days 44 days 49 days
The average collection period measures the quality of debtors and it helps in
analyzing the efficiency of collection efforts. It also helps to analysis the credit
policy adopted by company. In the firm average collection period increasing year
to year. It shows that the firm has Liberal Credit policy. These changes in policy
are due to competitor's credit policy.
5. WORKING CAPITAL TURNOVER RATIO:
Working capital turnover ratio indicates the velocity of utilization of net working
capital. This ratio indicates the number of times the working capital is turned over
in the course of the year. This ratio measures the efficiency with which the
working capital is used by the firm. A higher ratio indicates efficient utilization of
working capital and a low ratio indicates otherwise. But a very high working
capital turnover is not a good situation for any firm.
Working Capital Turnover Ratio = Cost of Sales BY Net Working Capital.
Working Capital Turnover = Sales BY Net Working Capital.
Year 2019 2020 2021
Sales 166.0 151.5 169.5
Net Working Capital 53.87 62.52 103.09
Working Capital Turnover 3.08 2.4 1.64
Interpretation:
This ratio indicates low much net working capital requires for sales. In 2019, the
reciprocal of this ratio (1/1.64 .609) shows that for sales of Rs. 1 the company
requires 60 paisa as working capital. Thus, this ratio is helpful to forecast the
working capital requirement on the basis of sale.
Inventories (Rs. In crores)
Year 2018-19 2019-20 2020-21
Inventories 37.5 35.69 75.01
Interpretation:
Inventories is a major part of current assets. If any company wants to manage its
working capital efficiency, it has to manage its inventories efficiently.
CASH BANK BALANCE:
for example:
Year 2018-19 2019-20 2020-21
Cash bank balance 4.69 1.79 5.05
Interpretation:
Cash is basic input or component of working capital. Cash is needed to keep the

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business running on a continuous basis. So, the organization should have
sufficient cash to meet various requirements. The above graph indicates that in
2018 the cash is 4.69 crores but in 2019 it has decrease to 1.79. The result of that
is it disturbs the firms manufacturing operations. In 2020, it is increased upto
approx.5.1% cash balance. So, in 2020, the company has no problem for meeting
its requirements as compare to 2019.
DEBTORS:
For example: (Rs in Crores)
Year 2018-19 2019-20 2020-21
Debtors 17.33 19.05 25.94
Interpretation:
Debtors constitute a substantial portion of total current assets. In India it
constitutes one third of current assets. The above graph depicts that there is
increase in debtors. It represents an extension of credit to customers. The reason
for increasing credit is competition and company liberal credit policy.
CURRENT ASSETS:
For example:
Year 2018-19 2019-20 2020-21
Current Assets 81.29 83.15 136.57
Interpretation:
This graph shows that there is 64% increase in current assets in 2019. This
increase is because there is approx. 50% increase in inventories. Increase in
current assets shows the liquidity soundness of company.
CURRENT LIABILITY:
Year 2018-19 2019-20 2020-21
Current Liability 27.42 20.58 33.48
Interpretation:
Current liabilities shows company short term debts pay to outsiders. In 2018 the
current liabilities of the company increased. But still increase in current assets are
more than its current liabilities.
NET WORKING CAPITAL:
For example:
Year 2018-19 2019-20 2020-21
Net Working Capital 53.87 62.53 103.09
Interpretation:
Working capital is required to finance day to day operations of a firm. There
should be an optimum level of working capital. It should not be too less or not too
excess. In the company there is increase in working capital. The increase in
working capital arises because the company has expanded its business.

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 WORKING CAPITAL ANALYSIS OF OSCB
CAPITAL STRUCTURE
The paid-up share capital stood at as on March 31st, 2021 and this is an increase
from position of last year.
Particulars 31.03.2018 31.03.2019 31.03.2020 31.03.2021
Paid-up share 507.31 531.77 608.04 692.68
capital

Govt. share capital 104.23 104.23 124.23 149.23

Percentage of govt. 20.55 19.60 20.43 21.54

share capital from
total share capital

Growth rate of 16.46 4.86 14.34 13.92

share capital over
previous year

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RESERVES
Since inception, the bank has not achieved the breakeven level of
business but also attained viability in its operations. As a result, the
bank continued to build up its reserves as per the Odisha Co-operative
Society Act and Rules framed thereon and by laws of the bank. The
position of the reserves for the last 3 years as follows:
Category 2019-20 2020-21

Statutory Reserve Fund 20,45,32,258.23 17,12,37,975.91

Agri – Stabilization Fund 12,27,19,354.94 10,27,42,785.55

Investment fluctuation reserve ------ 6,04,11,281.00

Dividend equalization fund ------ 13,69,43,329.00

Staff welfare fund 2,00,000.00 2,00,000.00

Cooperative development fund 2,00,000.00 2,00,000.00

Charitable fund 1,00,00,000.00 1,00,00,000.00

Building fund 20,00,00,000.00 10,00,00,000.00

Balance carried to Statutory 28,04,77,419.74 10,32,16,532.19

Reserve Fund

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 RESEARCH METHODOLOGY
The research involved extensive and intensive studies of the Orissa
State Cooperative Bank Ltd. This project has been made to study the
financial analysis of the bank. During this period, I study the final
position and performance of the bank. At last, I have given
interpretation and conclusion of the study.
DATA COLLECTION
The data collection is completely made from primary as well as
secondary sources.
The secondary sources are:
 Annual report
 Official records in the organization
 Files
 Websites
▪

35 | P a g e
 CONCLUSION
Liquidity is an attribute that signifies the capacity to meet financial
obligations of the company when required. The importance of liquidity
to meet the day-to-day operations and urgent payment to suppliers. A
firm should maintain adequate level of working capital to meet the day-
to-day operations and maintain business operations. The effective
management of working capital requires both medium – term planning
and immediate reactions to the fast changes taking in the present
business environment. The effectiveness of working capital depends on
all current assets and current liabilities.

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