CHAPTER- 1

INTRODUCTION TO THE
TOPIC
 INTRODUCTION OF WORKING CAPITAL MANAGEMENT

INTRODUCTION:
Working Capital Management refers to manage the Current Assets and Current Liabilities of a
firm in such a way that working capital is maintained at a satisfactory level. The current assets
should be large enough to pay the current liabilities in time while not keeping too high a level of
any one of them.
According to Smith, K.V. “Working Capital Management is concerned with the problems that
arise in attempting to manage the current assets, current liabilities and the inter relationship that
exist between them”.

MEANING OF WORKING CAPITAL:

Working Capital refers to the cash business requires for day-to-day, or, more specifically, for
financing the conversion of raw material into finished goods, which the company sells for
payment. In other words “Working Capital” is the money the business process consumes. The
longer the process takes, the more money is consumed. Working Capital is calculated by
deducting current assets from current liabilities.

Working Capita = Current Assets - Current Liabilities

Working Capital can also be defined with an approach that encompasses all the processes
surrounding accounts payable, accounts receivable and inventory and one begins to understand
the potential knock-on impacts of a change in working capital practice or policy. When looking
in detail at any of these three core areas, it soon becomes clear that WCM(Working Capital
Management) can touch all the firm buys makes and sells. Current assets are resources, which
are in cash or will soon be converted into cash (normally within one year). To understand
working capital better than we should basic knowledge about the various aspects working
capital. To start with there are two concepts of working capital. Whereas Current liabilities are
commitments, which will soon require cash settlement in the ordinary course of business.

2
Concepts of Working Capital
A. Gross Working Capital Concepts
B. Net Working Capital Concepts

1) Gross working capital concept:

According to this concept, working capital means working capital means Gross Working Capital
which is the total of all the current assets of a business. Gross Working Capital, which is also
simply known as working capital, refers to the firm’s investment in current assets. Another
aspect of gross working capital point out of the need of arranging funds to finance the current
assets. The gross working capital focuses attention on two aspects of current assets management,
firstly optimum investment in current assets and secondly in financing the current assets.
Whenever a need of working capital funds arises due to increase in level of business activity or
for any other reason the arrangement should may be quickly and similarly if some surplus are
available, they should not be allowed to ideal but should be put to some effective use.

Gross Working Capital = Total current assets

2) Net Working Capital Concept:

According to this concept, working capital means net working capital which is the excess of
Current Assets over the current liabilities. The term Net Working Capital refers to the difference
between the current assets and current liabilities. Net working capital can be positive as well as
negative. Positive working capital refers to the situation where a current asset exceeds current
liabilities and negative working capital refers to the situation where a current liability exceeds
current assets. The net working capital helps in comparing the liquidity of the same firm over
time. For purpose of the working capital management, therefore working capital can be said to
measure the liquidity of the firm. In other words, the goal of working capital management it to
manage the current assets and current liabilities in such way that a acceptable level of net
working capital is maintained.

Net Working capital =Current Assets- Current Liabilities

3
 WORKING CAPITAL MANAGEMENT :
Working capital management involves the relationship between a firm's short-term assets
and its short-term liabilities. The goal of working capital management is to ensure that a firm is
able to continue its operations and that it has sufficient ability to satisfy both maturing short-term
debt and upcoming operational expenses. The management of working capital involves
managing inventories, accounts receivable and payable, and cash.

Importance of Working Capital:

Working capital is a vital part of a business and can provide the following advantages to a
business:

 Higher Return on Capital:

Firms with lower working capital will post a higher return on capital so shareholders will benefit
from a higher return for every dollar invested in the business.

 Improved Credit Profile & Solvency:

The ability to meet short-term obligations is a pre-requisite to long-term solvency and often a
good indication of counterparty’s credit risk. Adequate working capital management will allow a
business to pay on time its short-term obligations which could include raw materials, salaries,
and other operating expenses.

 Higher Profitability:
According to a research conducted by Tauringana and Adjapong African, the management of
account payables and receivables is an important driver of small businesses’ profitability.

 Higher Liquidity:
A large amount of cash can be tied up in working capital, so a company managing it efficiently
could benefit from additional liquidity and be less dependent on external financing. This is
especially important for smaller businesses as they typically have a limited access to external
funding sources.

 Increase Business Value:

Firms with more efficient working capital management will generate more free cash flows which
will result in a higher business valuation.

4
 Favorable Financing Condition:
A firm with a good relationship with its trade partners and paying its suppliers on time will
benefit from favorable financing terms such as discount payments from its suppliers and banking
partners.

 Uninterrupted Production:
A firm paying its suppliers on time will also benefit from a regular flow of raw materials,
ensuring that the production remains uninterrupted and clients receive their goods on time.

 Ability to Face Sock & Peak Demand:

An efficient working capital management will help a firm to survive through a crisis or ramp up
production in case of an unexpectedly large order.

 Competitive Advantages:
Firms with an efficient supply chain will often be able to sell their products at a discount versus
similar firms with inefficient sourcing.

Determinants of Working Capital:

There is no specific method to determine working capital requirement for a business.
There are a number of factors affecting the working capital requirement. These factors
have different importance in different businesses and at different times. So a thorough
analysis of all these factors should be made before trying to estimate the amount of
working capital needed. Some of the different factors are mentioned here below :-
 Nature of business
 Size of business
 Business Fluctuations
 Production Policy
 Firm’s Credit Policy
 Growth and Expansion activities
 Price Level Changes
 Efficiency of Management
 Availability Credit from Banks
 Credit Policy Relating to Purchase

5
Objectives & Aspects of Working Capital Management:
 To Determine the Adequate or Optimum Quantum of Investment in
Working Capital: As discussed, a firm should maintain adequate or reasonable or
investment in working capital. Investment in working capital should neither be excessive nor
inadequate.

 To Determine the Composition or Structure of Current Assets: The financial

management is required to determine the composition of current assets. It should decide how
much amount should be invested in each individual current assets. For this purpose, it should
fix the average amount invested in stock, debtors, marketable securities and the level of cash
balance.

 To Maintain a Proper Balance between Liquidity and Profitability: While

managing working capital, management will have to reconcile two conflicting aspects. The
conflicting aspects are liquidity and profitability. If the quantum of working capital is
relatively large it, will increase the liquidity but decrease the profitability. The reason is that a
considerable amount of firm’s funds will be tied up in current assets, and to the extent this
investment is idle, the firm will have to forego profits. On the other hand, if the quantum of
working capital is relatively small, it will decrease liquidity but will result in increase in the
profitability. This is because the less funds are tied up in idle current assets.

 To Determine the Policy or Means of Finance for Current Assets: Another

important aspects of working capital management is determining the financing mix i. e .what
be the sources of financing the current assets. There are mainly two sources from which funds
can be raised for current assets financing:
 Short term sources: Such as short term bank loans and other current liabilities such as
creditors, bills payable etc.
 Long term sources: Such as share capital, long-term borrowings, retained earnings etc.

It has to be decided as to what proportion of current assets should be financed by short- term
sources how much long term sources.

6
 CHAPTER- 2
INDUSTRY & COMPANY
PROFILE

7
 INDUSTRY PROFILE

CNC Machine Tools Industry:

The First CNC Machine Tools Industry was established in year 1978. Manufacturing
CNC Machine Tools is a process used in the manufacturing sector that involves the use of
computers to control machine tools. Tools that can be controlled in this manner include lathes,
mills, routers and grinders.

On the surface, it may look like a normal PC controls the machines, but the computer's unique
software and control console are what really sets the system apart for use in CNC machine Tools.
Under CNC Machining, machine tools function through numerical control. A computer program
is customized for an object and the machines are programmed with CNC machining language
(called G-code) that essentially controls all features like feed rate, coordination, location and
speeds. With CNC machining, the computer can control exact positioning and velocity.CNC
machining are used the both metal and plastic parts. It manufacturer the all CNC machine tools.

There are many advantages to using CNC Machine Tools:

 The process is more precise than manual machining, and can be repeated in exactly the same
manner over and over again. Because of the precision possible with CNC Machining, this
process can produce complex shapes that would be almost impossible to achieve with manual
machining.
 CNC Machining is used in the production of many complex three-dimensional shapes. It is
because of these qualities that CNC Machining is used in jobs that need a high level of
precision or very repetitive tasks.

Many CNC Machine Tools Manufacturing Industry are as follows;

 Hitachi : www.hitachi.com
 Toyoda : www.toyodausa.com
 Hyundai Wia : www.hyundaiwia-machine.com
 Makino : www.makinoindia.co.in
 Yasda : www.yasda.com
MAJOR PLAYERS OF THIS INDUSTRY:

8
1. Hitachi

Hitachi was established in the year 1910 and is one of the top CNC machine manufacturers in
India. The company’s headquarters is located in Tokyo, Japan while its corporate office in India
is based in New Delhi. This is a Japanese business conglomerate with business interests in eleven
sectors. The company started its operation in India in the 1930s. The company recently started
manufacturing CNC machines and became very successful due to the high quality of its
machines. It occupies the second position in this list.

Website: www.hitachi.com
CASE SUMMARY:

 Challenge
Seeking to utilize IoT and other advanced technologies to create a next-generation factory that
can handle mass customization

 Solution
Okuma built the Dream Site2 (DS2) factory to drive the evolution of production visualization
and accelerate factory control cycles by integrating its expertise with the efforts of the Hitachi
Omiya Works

 Result
Further evolving automated and unmanned systems, improving productivity and reducing
production lead times even for small runs of more than 4,000 items

 Vision
Aiming to apply DS2 expertise to other Okuma factories. Also considering new services to
customer enterprises for smart manufacturing and next-generation factory construction
2. Toyoda

9
 Toyoda was establishing in the year 1949 and is a big name in the field of CNC Machine Tools
manufacturing industry. This is an international company with its offices located in many
countries of the world. In India, the company’s office is situated in Gurugram Haryana. The
CNC machines manufactured by this company are of the finest quality and are in high demand in
the Indian market. No wonder Toyoda is fourth in this list.
Website: www.toyodausa.com

 Vision:
 To make communications a way of life and be the customers' first choice
 To make competitors dependable on us.

 Mission:
We will meet the CNC Machine Tools needs of our customers through :
 Error-free service delivery
 Innovative products and services
 Cost efficiency

 Values:
 We will always put our customers first. We will always trust and respect each other.
 We will respect our associates as we respect each other.
 We will work together through a process of continuous improvement

3.Matsuura

10
 Website :www.matsuura.co.uk
Matsuura Machinery Limited was established in the year 1935. The India office of the company
is located in Guru Gram, Mumbai. It is a renowned company in the CNC machine and machine
tools manufacturing industry. The company has gained international fame due to its high quality
goods and excellent services. Matsuura is a specialist in manufacturing automatic multi-pallet
and multi-tasking CNC machines. It occupies the second position in this list.

 Objectives:

 To earn more profit and reduce the Cost of Production.

 Help employees in achieving their personal goals. This result, they contribute in achieving
the organizational objective.

 Vision:
 The company believe in taking care of not only customers CNC tools needs but also the
need of future generation
 We also believe in society welfare activities and we have contribute our view and ideas for
the society welfare.

 Mission:

 To recognize the customer’s right to Quality, Services, Timely Delivery and Reduce the
production cost also.
 To ensure maximum satisfaction to the client.

4. Hyundai Wia

11
 Website :www.hyundai-wiamachine.com

The company was established in the year 1977. It became the first Korean company to
manufacture CNC machine tools and automation. The company has witnessed a stellar growth in
the manufacturing sector and has attained worldwide fame. In India, the company has its head
office in Papparambakkam Village, Thiruvallur Taluk, and Tamilnadu. Its growth in the Indian
CNC machinery industry has also been impressive and is one of the top producers of CNC
machine tools in the country.

 Objectives:

 Aim to Profit Maximization.

 To Satisfy the demands of growing organization, employees and the clients.
 To maintain Integrity and Fair Play.

 Vision:

 We have more contribution for the society welfare.

 we believe on the customer satisfaction.

 Mission:

 To maintain open information system & understanding within the company and outside.
 To function as a model unit, follow all the law applicable, report profits and pay all the
levied taxes

My Study is based on J.K. TECHNOLOGY

12
JK. TECHNOLOGY OVERVIEW:

We produce thousands of different components for the J.K. Industry. Many of the parts we
make are chassis components that house the flight control systems of commercial as well as
defensive aircraft. For more than one J.K TECHNOLOGY customer we fully manage the
inventory of all of the parts that we supply to them including delivering hundreds of different
part numbers on a “dock to stock” basis.

As with any small business our primary goal is to grow the business and to generate a reasonable
profit. We believe the best way to do that is to give our customers such outstanding performance
in all areas, including: Pricing, Quality, On-Time Deliveries, and Customer Service, that they
would be hard pressed to find a shop that can perform better.

We fully understand that we have to continually earn every bit of business that we get and we
therefore take no business for granted. Additionally, we understand that the best way to continue
to earn business is by performing consistently in all areas over the long-term.

We also understand the pressure that every company has on them to reduce cost. For years now,
the cost of virtually, everything we purchase has been rising sharply. In order to stay
competitive, or even stay in the game for that matter, shops like CNC Industries have had to
make huge gains in productivity.

13
 J.K.TECHNOLOGY
(O.E. Manufactures & Suppliers)
An ISO 9001:2008 Certified Company

J.K.TECHNOLOGY
G 1/166-167 INDRA ENCLAVE SEC 21-D
FARIDABAD-121001 (HARYANA)
CONTACT PERSON: - HARJINDER SINGH
TELEPHONE NO. : (W) +918285518279
E-MAIL: jktech@mail.com

COMPANY PROFILE

14
It gives me great pleasure to introduce you to J.K. Technology.

About J. K. Industries
Registered in 2017, J. K. Industries has made a name for itself in the list of top suppliers of CNC
Machined Components, Brass Turned Components in India. The supplier company is located in
Faridabad, Haryana and is one of the leading sellers of listed products.
J. K. Industries is listed in Trade India's list of verified sellers offering supreme quality of CNC
Machined Components, Precision Turned Machined Components, etc. Buy CNC Machined
Components in bulk from us for the best quality products and service.

Company History:
J.K. Technology has been established in February 1990 with the mission, “Make available
affordable, application the best CNC Machine Components for business, government and home
users”.

Our Business can be classified into two segments, namely the supply and deliver system
integration and services business two major business segments have synergy.
J.K. Technology main customer includes many small to medium enterprises, government bodies
and educational institutions. We have always pride ourselves as the leading CNC Machine Parts
solution-sourcing centre. Our Belief in providing a through product service has been proven with
our wide pool of loyal customers.

In this regard, J.K. Technology has built up an excellent working relationship with major
business partner. We firmly believe in forging long term professional relationship with our
customer and client alike.

In order to achieve this, with this in mind, human resource upgrading and training is of critical
importance. Management has therefore made it a point to invest training for all J.K. Technology
staff in the latest technology. J.K. Technology strongly believes in building strong and stable
relationship with our client.

15
Our Vision
 To be a reliable supplier of our valuable patrons by offering them a easily usable superior
and commercially viable product this would meet and exceed their expectations.
 Continuous up gradation of our technology / Implement effective Quality management
systems and the overall growth of every employee in consonance with the company’s
growth.
 We Commit to deliver complete, reliable value added other services and solutions for
maximizing sustainable organization performance.
 To have an alliance with the people to achieve ISO 9000 / BSCIC practices in our
company by July 2013. (Certified against ISO 9001:2008 on 23.07.13)
 To increase our Market Share from the existing customers base to new OEM’s and white
goods manufacturers.
 To supply components direct-on-line (DOL) to our customers.
 Your preferred, reliable and dependable Our Partner.

Our Mission
 We commit to deliver complete, reliable values added other services and solution for
maximizing sustainable organization performance.
 Through our uncompromising commitment towards excellence, we have built a solid
relationship with our client.
 Provide good facilities to our customers and our employees.

16
Our Facilities
 J.K. Technology has installed multi-manufacturing technology with high flexibility in
production for stamped components and surface treatments (plating / powder coating /
paint /PVC coating).
 J.K. Technology’s has its own Tool Room to manufacture in-house as well as on Job work
press tools, jigs & Fixtures and for maintenance of die & tools.
 J.K. Technology has good infrastructure inside of company. J.K. Technology are provide
many facilities to their employees like (health, medicine, technical, drinking and canteens)
etc. It also focus on employees initial development.

Our Core Values:

 Integrity: We are honest, open and will always tell it like it is.
 Respect: For those we work with, those we serve and our fellow inhabitants of this great
planet.
 Society: To play an active role in our communities and to create a better life for those
around us.
 Excellence: When we achieve great results, to strive to do it better next time.
 Professionalism: To approach we do with passion, commitment and a dedication.
 Customer Feedback: It also take feedback from their customers for the purpose to that
what the customers are thinking about their products.

OUR BUSINESS:
Supply and Delivery
We Supply and sell a broad range of CNC Machine Products and also manufacturing gadgets
which are sourced from authorized distributors of the different CNC vendors, comprising CNC
Machine components and other products. Apart from CNC Machine components and other
products, we also supply computer peripherals and consumable so as to serve as a single sourcof
CNC Machine Products for our consumer. We have authorized reseller certification from
reputable CNC vendors with whom we have established working relationship.

17
 ISO CERTIFICATION

ISO 9001:200
ISSUE DATE: 23JLU 2013
EXPIRY DATE: 22JULY2019

OUR INFRASTRUCTURE
We are backed by an ultramodern infrastructural
base that enables us to design a rigid and durable
range of spare parts a per the global set standards.
We have installed latest facilities in this unit that
Helps to meet the varied needs of the clients in an
Predefined time period. This unit divided into sub
Divisions that include admin, RD, manufacturing,
Sales, procurement,

Some of the factors which assist us to gain the belief of our

customers are listed below
 State-of-the-art infrastructural base

 Impeccable quality spare parts

 Dexterous team of professionals

 Client-centric approach

 Excellent transport & logistic facility

 Economical price range

 Prompt delivery

18
 FACTSHEET

BASIC INFORMATION:
Nature of Business Nature of Business
Additional Business Supplier

Company CEO MS. Harjinder Singh

Total Number of Employees 50 to 200 People
Year of Establishment 2012
Legal Status of Firm Sole Proprietorship (Individual)
Annual Turnover Rs. 1 Cr – 5Cr
COMPANY USP:

Primary Competitive Advantage  Experienced R & D Department

 Large Product Line
 Large Production Capacity

STATUTORY PROFILE

Banker INDIAN BANK

GST No. 06JVYPS2340F1Z0
PACKAGING/PAYMENT AND SHIPMENT DETAILS

Payment Mode  Cash

 Cheque
 DD
 Online

Shipment Mode By Road

19
OUR ACHIEVEMENTS
AWARDED GIVEN BY HONDA
MOTORCYCLE AND SCOOTER
INDIA PVT. LTD. TO J.K. TECH.
FOR BEST VENDER STAMPING
CATEGORY.

We are one of the renowned ISO 9001-200certified organizations, engaged in manufacturing

for Suspension sheet metal Parts, tubular parts, welded Assemblies, automobiles. Our focus
lies on providing the clients with nothing. The production process is executed using cutting-edge
technology and is closely monitored by our team of experts

OUR TEAM
Outshining our competitors would have been a tedious task, if our team wouldn’t have been this
zealous. We are fortunate to have a team that is willing to work round the clock to help us reach
the pinnacle of success. Our team does everything that’s crucial to our survival and that too in a
streamlined manner. From comprehending the clients’ requirements to ascertaining the quality of
the end products, our team takes care of all our business operations. As a matter of fact, we
consider our team to be one of our biggest assets, as it is of pivotal importance to us.

WHY US?
Flawless products, OEM capability and consistent quality are some of the factors that have
enabled us to gain an edge over our competitors. As a matter of fact, we have become the
preferred choice of our clients by providing them with what they need and that too within the
stipulated time frame. We follow ethical business practices, so as to ensure that the clients
continue to trust us with their hard earned money. Moreover, we see to it that the clients are
facilitated with flexible payment modes, thereby ensuring that they do not hesitate in dealing
with us.

20
PRODUCT DESCRIPTION:
Our company specializes in manufacturing and supplying an Precision Turned Machined
Components in Faridabad, Haryana, India. The well laid CNC machining center backs us to
manufacture components using various grades of raw materials. These machined components
feature extremely close tolerance, smooth finish and dimensional stability. Customer can get this
from us in reasonable rates.

CNC MACHINE PARTS MADE BY J.K. TECHNOLOGY

SUCTION CLAMP METAL CLAMP METAL WASHER

MOUNTING BRACKETS MILD STEEL BLUSH COPPER WASHER

SLEEVE JOINT COLLAR GASKET

CLIP STEEL METAL PARTS BRACKETS

21
Industrial Containers, Cabins & Racks of “J.K. TECHNOLOFGY”
Backed by rich industry experience, we are engaged in manufacturing and supplying a
qualitative array of Aluminum Lined Container, Office Container, Cabin, Ply Lined Container,
Blast Retardant Container, Workshop Container, Tool Room Container, Bunk House, Multi
Store Container, etc. We also offer Container Repairing Services. Our efficient team of engineers
and technicians manufacture these products in accordance with the international standards
making use of optimum grade raw material sourced from the certified vendors. These products
are widely appreciated in market for dimensional accuracy, sturdiness, less maintenance, rigid
construction and high durability. Further, to meet the diversified demands of client, we offer
these products in various specifications and can also be customized as per the precise
requirements of the clients at industry leading prices.

Shipper’s Own Containers Workshop Containers Portable Containers

Prefabricated Structure School Cabins Modular Kitchen Service

Bunk Houses Portable Cabins Security Hut Containers

22
INFRASTRUCTURE FACILITIES PROVIDED BY J.K.
TECHNOLOGY

WELFARE FACILITIES: The workers in are given some facilities for their. Better
Arrangement and comfort.

WASHING RESTING FACILITIES: Facility for washing, storing, drying materials, resting
first aid facilities have been provided inside the factory for the benefits of workers on duty.

DRINKING WATER: The Company has made provision of clean, drinking water providing
to the workers during the working hours. There are drinking taps and coolers placed
in every department.

SHELTER AND LUNCHROOM: After the working hours to take rest rooms have been made by the
company and to have food in lunchtime.

CANTEEN: Canteen is also provided to the workers. It runs on “no profit and no loss basis”.

PARKING FACILITIES: As the raw materials are brought in Lorries, there is a proper
facility to parking and unload them.

Our Competitive Strengths:

We believe that a happy and motivated set of employers will result in a group of satisfied
customers. We try to create an environment of trust, continuous learning and improvement,
Self-Motivation together with a comfortable working environment.
We treat our customer as a friend and it is through this friendship that we have gained many
loyal and long lasting customers.
We believe that in order to give our customer the best possible services, we have to be in the
forefront of technological developments. We invest in the latest area of training for our
employees and where appropriate, would implement them for our client.

23
We constantly review and address the specific needs of our employees and
client and take appropriate steps to improve the relationship:

A Full Services Provider:

Our business is modeled to provides and fulfill your total CNC Tool needs. From the supply of
CNC products, to system integration and a comprehensive maintenance program, our dedicated
team of engineers will endeavor to provide you with a single source of CNC products to satisfy
your requirements.

A Wide Array of Products:

Through our partnership with major CNC Companies, we have the ability to provide you with a
broad and diverse range of products. These comprise (Metal Clamp, Metal Washer, Mounting
Brackets, Mild Steel Blush, Copper Washer, Sleeve Joint, Collar, Gasket, Clips, Painting /
Powder Coating, Zinc, ELV, CED Coating / Nickel Plating, Phosphate and PVC coating surface
treatments facilities are available with our close associates.

Diverse Customer Base:

As a result of our customer- focused and consultative approach, we have maintained a huge and
diverse base of repeat customers.

Our Experience and Expertise:

Our customer support and maintenance services are fine-tuned to meet the exact demands of our
clients. With our vast experience providing system integration and IT services, we have acquired
and developed expertise in various IT disciplines. We are also able to provide web based services
from our office or remote locations.

Authorized Dealership:
Our excellent working relationship with numerous IT vendors allows us to have access to these
companies’ training, product support and technology. These relationship have also enabled us to
develop expertise pertaining to hardware, software and application more efficiency and act as a
sou8rce of new sales leads and Co Marketing opportunities.
24
 J.K. TECHNOLOGY OVERVIEW

One of the challenges of making parts for the CNC Machine Tools industry is dealing with the
hundreds, or even thousands of pieces of information on every part. If any one of those pieces of
information is overlooked or mistaken it could cause the parts to be non-conforming.

J.K. TECHNOLOGY has more than 51-200 employees.

Board of Directors
J.K. TECHNOLOGY Board of Directors comprises of 12 members are present.
J. K. TECHNOLOGY work culture
J. K. TECHNOLOGY strives to provide the best environment to its employees. The company
has provision for day care for children of the employees.
It follows the management principles Of Kaizen (continuous
improvement), leadership, teamwork, empowerment etc.
In J.K. TECHNOLOGY the CEO is Ms. Harinder Singh.
It believes to fulfill the needs of their employees and its customers.

BOARD OF DIRECTORS OF J.K. TECHNOLOGY:

NAME OF DIRECTORS PERSONNEL

Mr. Tan SerKo Non-Executive Director

Mr. Lim Yeok Hua Non-Executive Independent Director

Mr. Lee Sek Leong Christopher Non- Executive Independent Director

Mr. Yong Boon Chuan Leslie Non- Executive Director

Mr. Ang Yew Jin Eugene Managing Director

25
 SWOT ANALYSIS

Strengths Weakness

Opportunities Threats

Strength:
 First generation entrepreneur.
 Qualified and experts team of professional and management.
 World class technology and equipment.
 Continuous innovation and quality control.
 Strong branding.
 Favorable demand & supply situation will keep the margins intact.
 The company is moving into production of float glass, which is a high growth segment.

Weakness:
 No established reputation in float glass segment.
 Competition from established players with global backing.

Opportunities:
 Strong entry barriers due to the capital-intensive nature of the industry.
 Float glass production is going to put the company into a diverse trajectory.

Threats:
 Competition in processing from established international players.
 Operational teething problem in the new plant.
 Employees are not working with efficiency.

PLANT AND MACHINERY

26
A. MANUFACTURING:

Sr. No. Description Make Quantity

1 Power Presses - Mechanical (5 To 50 T) Anil Engg. 06 Nos.
2 Hand Press (1, 2 & 3 No.) Anil Engg. 01 Each
3 Drilling M/c (1/2” & ¼”) Royal 01 Each
4 Drilling M/c (1/2” & 1¼”) Royal 01 Each
5 Surface Grinder (9x14’) GADMT 01 No.
6 Surface Grinder (10X20”) GADMT 01 No.
7 Tapping M/c (8MM) Royal Make 01 No.
8 Lathe M/c GDMT 01 No.
9 D.G. Set (62.5KVA) Eicher 01 No.
10 M1TR HMT 01 No.
11 Welding Set (20 KVA) Weld Tech 01 No.
12 Projection Welding (75 KVA) Weld Tech 01 No.
13 Spot Welding (40 KVA) Manjit Engg. 01 No
14 Mix Welding (7.5 KVA) Weld Tech 01 No.
15 Generator (7.5 KVA) 01 No.

16 Wire Cut (Maxi Cut) Electronic 01 o.

B. METAL FINISHING EQUIPMENT:

 Painting / Powder Coating, Zinc, ELV, CED Coating / Nickel Plating, Phosphate and PVC
coating surface treatments facilities are available with our close associates.
 Metal Clamp, Metal Washer, Mounting Brackets, Mild Steel Blush, Copper Washer,
Sleeve Joint, Collar, Gasket, Clips

C. INSPECTION & TESTING:

27
  Equipped with basic instruments like Dial indicators, Plain & Dial venires, Slip
gauge, Surface plate, Center bench, Height Gauges, Micrometer, venire etc.
 Entire process is controlled and carried out strictly as per Control Plan, Process
standards & check sheets, Work Instructions etc.
 First set-up approval & Line inspection is done by skilled operators during
production.
 Patrol inspection is done by quality professionals.
 Inspection process is rigorous with dedication and commitment to meet customer
needs and expectations and is carried out from receipt stage to Final stage.

D. QUALITY ACTIVITIES:

 Manufacturing system development & control review meetings are conducted once in
four weeks or as per requirement.
 PDIR & customer complaints review meetings are conducted as and when required.
 J.K. Technology. has been certified under Quality Management Systems, SO
9001:2008 ON 23.07.13.

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SEBROS AUTO PVT LTD - PUNE

BRIGHT TECHNO DEVICES - FARIDABAD

28
CHAPTER - 3

REVIEW OF
LITERATURE

29
Many researchers have studied working capital from different views and in different
environments. The following ones were very interesting and useful for our research;

1) The Research done by Pass C.L., Pike R.H.,“AN OVERVIEW OF WORKING

CAPITAL MANAGEMENT AND CORPORATE FINANCING”,(1984) describe that over
the past 40 years major theoretical development have occurred in the areas of longer-term
investment and Financial Decision Making. Many of these new concept and the related
techniques are now being employed successfully in industrial practice. By Contrast, far less
attention has been paid to the area of short-term finance, in particular that of working capital
management. Such neglect might be acceptable were Working Capital considerations of
relatively little importance to the firm, but effective Working Capital Management has a
crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience
shows that inadequate planning and control of working capital is the one of the more common
causes of the business.

2) The Research done by Herrfeldt B., “HOW TO UNDERSTAND WORKING

CAPITAL MANAGEMENT” describe that “CASH IS KING” so say the money manager
who share the responsibility of running this country’s businesses. Working Capital Management
refers to the management of current or short-term assets and short-term liabilities. In essence, the
purpose of that function is to make certain that the company has enough assets to operate its
business. Here are things you should know about Working Capital Management.

3) The Research done by, Samiloglu F. and Demirgunes K., “THE EFFORTS
WORKING CAPITAL ON FIRM PROFITABILITY: EVIDENCE FROM TURKEY”
(2008) describes that the efforts of working capital management on the firm profitability. In
accordance with his aim, to consider statistically significant relationship between firm
profitability and the components of cash conversion cycle at length, a sample consisting of
Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-2007 has been
analyzed under a multiple regression model. Empirical findings of the study show that accounts
receivables period, inventory period and leverage affect firm profitability negatively; while
growth (in sales) affects firm profitability positively.

30
4) The Research done by, Appuhami, RanjithB A, “THE IMPACT OF FIRMS’
CAPITAL EXPENDITURE ON WORKING CAPITAL MANAGEMENT: AN
EMPIRICAL STUDY ACROSS INDUSTRIES IN THAILAND”, International Management
Review,(2008), The purpose of this research is to investigate the impact of firms’ capital
expenditure on their working capital management. The author used the data collected from listed
companies in the Thailand Stock Exchange. The study used Shulman and Cox’s (1985) Net
Liquidity Balance and Working Capital Requirement as a proxy for working capital
measurement and developed multiple regression models. The empirical research found that
firm’s capital expenditure has a significant impact on working capital management. The study
also found that the firm’s operating cash flow, which was recognized as a control variable, has a
significant relationship with working capital management.

5) The Research done by, Hardastle J.,“WORKING CAPITAL MANAGEMENT”,

(2007) describes that Working capital, sometimes called gross working capital, simply refers to
the firm’s total current assets (the short-term ones), cash, marketable securities, accounts
receivable and inventory. While long-term financial analysis primarily concerns strategic
planning, working capital management deals with day-to-day operations. By making sure that
production lines do not stop due to lack of raw materials, that inventories do not build up
because production continues unchanged when sales dip, that customers pay on time and that
enough cash is on hand to make payments when they are due. Obviously without good working
capital management, no firm can be efficient and profitable.

6) The research done by, Thachappily G., “WORKING CAPITAL MANAGEMENT

MANAGES FLOW OF FUNDS”,(2009) describes that Working capital is the cash needed to
carry on operations during the cash conversion cycle, i.e. the days from paying for raw materials
to collecting cash from customers. Raw material and operating supplies must be bought and
stored to ensure uninterrupted production. Wages, Salaries, Utility charges and Other Incidentals
must be paid for converting the materials into finished product. Customer must be allowed a
credit period that is standard in the business.

31
7) The Research done by, Dubey R.,“WORKING CAPITAL MANAGEMENT – AND
EFFECTIVE TOOLS FOR ORGANISATIONAL SUCCESS” (2008)” describe that the
working capital in a firm generally arises out of four basic factors like sales volume, technology
changes, seasonal, cyclical changes and policies of the firm. The Strength of the firm is
dependent on the working capital as discussed earlier but this working capital is interdependent
on the level of sales volume of the firm. The firm requires current assets to support and maintain
operational or functional activities. By Current Assets we mean the assets which can be
converted readily into cash say within a year such as receivables, inventories and liquid cash. If
the level of sales is stable and towards growth the level of cash, receivables and stock will also
be on the high.

8) The Research done by, MeClure ., “WORKING CAPITAL WORKS” describe that
cash is the lifeline of a company. If this lifeline deteriorates, so does the company’s ability to
funds operation, reinvest and meet capital requirement and payments. Understanding a
company’s cash flow health is essential to making investment decisions. A good way to judge a
company’s cash flow prospects is to look at its working capital management (WCM). Cash is
King especially at a time when fund raising is harder than ever. Letting it slip away is an
oversight that investors should not forgive. Analyzing a company’s working capital can provides
excellent insight into how well a company handles its cash and whether it is likely to have any
on hand growth and contributes to shareholder value.

9) The Research done by, Gass D., “HOW TO IMPROVE WORKING CAPITAL
MANAGEMENT” (2006) “CASH IS LIFEBLOOD OF BUSINESS” is an often repeated
maxim amongst financial managers. Working Capital Management refers to the management of
current or short- term assets and short- term liabilities. Components of short-term assets include
inventories, loans and advances, debtors, investments and cash and bank balances. Short- term
liabilities include creditors, trade advances, borrowings and provisions. The major emphasis is
however, on short-term assets and short-term liabilities arise in the context of short-term assets.
It is important that companies minimize risk by prudent working capital management.

32
WORKING CAPITAL MANAGEMENT:
What is “WORKING CAPITAL MANAGEMENT” ……….?
Working capital management refers to a company’s managerial accounting strategy designed to
monitor and utilize the two components of working capital, current assets and liabilities, to
ensure the most financially efficient operation of the company. The primary purpose of working
capital management is to make sure the company always maintains sufficient cash flow to meet
its short-term operating costs and short-term debt obligations.
Every business needs finance for two purpose----for its establishment and to carry out its day to
day operations. Long term funds are required to create production facilities through purchase of
fixed assets such as plant machinery, land and building, furniture etc. funds are also needed for
short term purpose : for the purchase of raw material, payment of wages and other day to day
expenses etc. These funds are known as working capital. In simple, terms Working Capital refers
to that part of firm’s capital which is required for financial shorts term and current assets such as
cash, marketable securities, debtors and inventories etc. Funds thus invested in current assets
keep revolving fast and are being constantly converted into cash and these cash flows out again
in exchange for other assets. Hence, it is also known as revolving or circulating capital or short
term capital.

Measure the efficiency of working capital

Some of the measures used in estimating the efficiency of working capital management include
current ratio, days of payables outstanding, days of inventory outstanding, days of sales
outstanding, etc. Many small businesses are unable to fund their operating cycles with account
payables and hence, have to rely on the cash that is generated through the internal sources like
the owner, etc. if the working capital is managed efficiently, the business will be able to free up
cash to pay debts or for reinvestments. Working Capital can be divided into two main
categories:

BASED ON TIME PERIOD BASED ON CAPITAL

1) Permanent Working Capital 1) Gross Working Capital
2) Variable Working Capital 2) Net Working Capital

33
“Working Capital is the Life-Blood and Controlling Nerve Centre of
a business”
“Working capital is the life-blood and controlling nerve centre of the business”. The sufficiency
of working capital assists in raising credit standing of a business because of better terms on
goods bought, lesser cost of manufacturing due to the acceptance of cash discount favorable rates
of interest etc.

No Business can run effectively without a sufficient quantity of working capital. It is crucial to
retain right level of working capital. Finance manager is required to decide the amount of
accurate working capital. A business enterprise with ample working capital is always in a
position to avail advantages of any favorable opportunity either to buy raw material or to
implement a special order to wait for enhance market status.

Cash is needed to carry out day-to-day workings and but inventories etc. The shortage of cash
may badly affect the position of a business concern. The receivables management is related to
the volume of production and sales. For escalating sales there may be a need to offer additional
credit facilities. While sales may ascend but the danger of bad debt and cost involved in it may
have to be considered against the benefits.

Inventory control is also a significant constituent in working capital management. The deficiency
of inventory may cause work stoppage. On the other hand, surplus inventory may result in
blocking of money in stocks.

“The overall success of the company depends upon its working capital position. So, it should be
handled properly because it shows the efficiency and financial strength of company”.

So working capital management is three dimensional in nature as:

 It concerned with the formulation of policies with regard to profitability, liquidity and risk.
 It is concerned with the decision about the composition and level of current assets.
 It is concerned with the decision about the composition and level of current liabilities.

34
Concept of working capital:-
The word working capital is made of two words 1.Working and 2. Capital.
The word working means day to day operation of the business, whereas the word capital means
monetary value of all assets of the business.“Working capital may be regarded as the life blood
of business. Working capital is of major importance to internal and external analysis because of
its close relationship with the current day-to-day operations of a business”.

Every business needs funds for two purposes.

 Long term funds are required to create production facilities through purchase of fixed assets
such as plants, machineries, lands, buildings &etc
 Short term funds are required for the purchase of raw materials, payment of wages, and
other day-to-day expenses.

The working capital management precisely refers to management of current assets. A firm’s
working capital consists of its investment in current assets, which include short-term assets such
as:
Cash and bank balance,
 Inventories,

 Receivables (including debtors and bills),

 Marketable securities.

Current Assets Current Liabilities

·Cash in hand / at bank · Bills Payable

·Bills Receivable · Sundry Creditors
· Sundry Debtors · Outstanding expenses
·Short term loans · Accrued expenses
·Investors/ stock · Bank Over draft
· Temporary investment
· Prepaid expenses
·Accrued incomes
35
Estimating the working capital of your business

1. Unless it is specified otherwise, the calculation of stocks of the finished products and debts
should be made at cost.
2. Profits are to be ignored when calculating the working capital as profits may or may not used
as working capital and even in the scenario of it being used the amount will be reduced due to
taxes, dividends, etc.
3. Unless mentioned otherwise, take into consideration the 100 percent value of WIP.

Time and Money Concept in Working Capital:

Every component of Working Capital (namely inventory, receivables and payables) has two
dimensions TIME and MONEY, in managing Working Capital. By making the money the
money move faster around the cycle, one can reduce the amount of money tied up. This helps
the business generates more cash or it will need to borrow less money to fund its Working
Capital. Consequently, it would either reduce the cost of interest or have free funds to support
additional sales growth or investment of the company. Similarly, if one can negotiate on better
terms with suppliers i.e. get and increased credit limit or longer credit: it will effectively create
additional cash to help fund future sales.

Benefits and Uses of Working Capital Management:

 Expansion of investment portfolio

 Increased profitability
 Ensure the availability of sufficient resource
 Solidifies the going concern status of a company
 Improves overall efficiency of a company
 Helps a company avoid overtrading
 Maintain good relation with supplier and other creditors
 Avoid underutilization of resources

36
  Provides better insight into the true financial state of a company.

“Working capital is commonly defined as the difference between

current assets and current liabilities”.

Businesses use capital for construction, renovation, furniture, software, equipment, or

machinery. It is also commonly used to purchase inventory, or to make payroll. Capital is also
used often by businesses to put a down payment down on a piece of commercial real estate.
Working capital is essential for any business to succeed. It is becoming increasingly important to
have access to more working capital when we need it.

Two different concepts of working capital are:-

o Traditional concept
o Operating cycle concept.

Traditional concept:

It shows the position of the firm at certain point of time. It is calculated in the basis of balance
sheet prepared at a specific date. In this method there are two type of working capital:

o Gross working capital

o Net working capital

Gross working capital:

It refers to the firm’s investment in current assets. The sum of the current assets is the working
capital of the business.

Gross Working Capital = Total Current Assets

37
The sum of the current assets is a quantitative aspect of working capital. Which emphasizes more
on quantity than its quality, but it fails to reveal the true financial position of the firm because
every increase in current liabilities will decrease the gross working capital.
Net Working Capital:

It is the difference between current assets and current liabilities or the excess of total current
assets over total current liabilities.

Working capital= Current Assets – Current Liabilities.

It is also can defined as that part of a firm’s current assets which is financed with long term
funds. It may be either positive or negative. When the current assets exceed the current liability,
the working capital is positive and when the current assets less to the current liability, the
working capital is negative.

Operating Cycle Concept:

All business firm aims at maximizing the wealth of the shareholder for which they need to earn
sufficient return on their operations. To earn sufficient profits they need to do enough sales,
which further necessitates investment in current assets like raw material etc. There is always an
operating cycle involved in the conversion of sales into cash.
The duration or time required to complete the sequence of events right from purchase of
raw material for cash to the realization of sales in cash is called the operating cycle or working
capital cycle.
CASH

DEBTORS OR T/P ROW MATERIAL

SALE OF GOODS WORK IN PROGRESS

FINISHED GOODS

38
Thus, the Operating Cycle start from cash finishes at cash and then again restarts from cash.
Need of Working Capital depends upon period of operating cycle. Greater the period, more will
be the need for working capital. Period of operating cycle in a manufacturing concern is greater
than period of O.C. in a trading concern because in trading unit cash directly converted.
Advantages of Adequate 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 & 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 Favorable Market Conditions:

If a firm is having adequate working capital then it can exploit the favorable 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.

39
 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.

Excess or Inadequate Working Capital:

Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.

Disadvantages of Excessive Working Capital:

 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.
 Redundant working capital leads to unnecessary purchasing and accumulation of inventories.
 Excessive working capital implies excessive debtors and defective credit policy which causes
higher incidence of bad debts.
 It may reduce the overall efficiency of the business.
 If a firm is having excessive working capital then the relations with banks and other financial
institution may not be maintained.
 Due to lower rate of return n investments, the values of shares may also fall.
 The redundant working capital gives rise to speculative transactions

Disadvantages of Inadequate Working Capital:

40
Every business needs some amounts of working capital. The need for working capital arises due
to the time gap between production and realization of cash from sales. There is an operating
cycle involved in sales and realization of cash. There are time gaps in purchase of raw material
and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

 For the purpose of raw material, components and spares.

 To pay wages and salaries
 To incur day-to-day expenses and overload costs such as office expenses.
 To meet the selling costs as packing, advertising, etc.
 To provide credit facilities to the customer.
 To maintain the inventories of the raw material, work-in-progress, stores and spares and
finished stock.

For studying the need of working capital in a business, one has to study the business under
varying circumstances such as a new concern requires a lot of funds to meet its initial
requirements such as promotion and formation etc. These expenses are called preliminary
expenses and are capitalized. The amount needed for working capital depends upon the size of
the company and ambitions of its promoters. Greater the size of the business unit, generally
larger will be the requirements of the working capital.

The requirement of the working capital goes on increasing with the growth and expensing of the
business till it gains maturity. At maturity the amount of working capital required is called
normal working capital.

There are others factors also influence the need of working capital in a business.

Circulation System of Working Capital:

In the beginning the funds are obtained from the issue of shares, often supplemented by long
term borrowings. Much of these collected funds are used in purchasing fixed assets and
41
remaining funds are used for day to day operation as pay for raw material, wages overhead
expenses. After this finished goods are ready for sale and by selling the finished goods either
account receivable are created and cash is received. In this process profit is earned. This account
of profit is used for paying taxes, dividend and the balance is ploughed in the business.

Schedule of change in Working Capital (Format)

Particulars 31march 31march Effect on working Effect on working
2017 2018 capital capital

Increase (Rs. Cr) Decrease (Rs. Cr.)

Current Assets:

Interest accrued on
investment

Inventories

Contract work in progress

Sundry Debtor

Cash and Bank Balances

Other Current assets

Loan & Advance(Current)

Total A

Current Liabilities:

Liabilities & Provision

Total B

Net Increase or Decrease

in Working capital (A-B)

42
The Flow of Fund is deeply affecting the working capital. If the inflow of funds is decreasing
and outflow is increasing, then the working capital management are not manage efficiently.

Working Capital Management – Analysis and Ratios

Working capital management is the process of managing these short-term assets and liabilities to
ensure the company has adequate liquidity to operate smoothly.

Techniques to analysis working capital

There are several methods to conduct a working capital analysis, these include:

A. Ratio Analysis
Liquidity Ratio

Ratio Formula Description

Current Current Assets/ Current Also known as the Working Capital Ratio and
ratio Liabilities measures the short-term financial health of a
company.

Acid Test Liquid Assets/Current Measures if an asset can be liquidated to cash in a

Ratio/ Liabilities short period of time without the loss of value.
Quick Ratio

43
 Cash [(cash & Bank) + short- Includes cash in hand and that in the bank and the
Position term securities]/Current temporary investments including marketable
Ratio/ Liabilities securities. This ratio must ideally be 50 percent.
Absolute
Liquid
Ratio

This is a simple arithmetic view of the relationship between numbers. It is used to measure the
short-term liquidity of the firm.

Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory at Cost

When the Cost of Goods Sold is not known one may look at the following numbers:

Ratio Formula Description

Inventory Cost of Goods Sold/Average When the cost of goods sold is not
Turnover Ratio Inventory at Cost known one may look at the other
formulas

Net Sales/Average Inventory at

Cost

Cost of Goods Sold / Average

Inventory at Selling Price

Relevance of Working Capital

The working capital ratio is crucial to creditors as it shows the liquidity of the company. The
liabilities of current nature are paid with current assets like marketable securities, cash, and cash
equivalents. The faster an asset can be converted into liquid cash, more likely that the company

44
will be able to pay off its debts. When the current liabilities are exceeded by the current assets,
the business will have ample capital for its daily operations. In other words, it will have enough
capital to work with. This ratio is a measure of a company’s short-term financial health and its
efficiency.

Anything that is below 1 is indicative of a negative W/C (working capital). While anything that
is over 2 indicates that the company is not investing the excess assets. Most ideally this ratio
should be between 1.2 and 2.0. Another name for working capital is net working capital.
Working capital are difference of Current Assets and Current Liabilities.

Components of Working Capital Management:

Receivable Management:-
The term receivable is defined as “debt owed to the firm by customers arising from sales of goods in the
ordinary course of business”. The sale of goods on credit is an essential part of modern day business.
Management should weigh the benefits as well as the cost to determine the goal of receivable
management.“The Cost associated with the extension of credit and accounts receivable are Collection
cost, Capital cost, Delinquency cost and default cost. It is also can defined as that part of a firm’s current
assets which is financed with long term funds. It may be either positive or negative. When the current
assets exceed the current liability, the working capital is positive and vice versa”.
The sum of the current assets is the working capital of the business. The sum of the current assets
is a quantitative aspect of working capital. Which emphasizes more on quantity than its quality,
but it fails to reveal the true financial position of the firm because every increase in current
liabilities will decrease the gross working capital. Net Working capital:

Capital Cost-
The increased level of accounts receivable is an investment in assets. They have to be financed
thereby involving cost. The cost on the use of additional capital to support credit sales, which
alternatively could be profitably employed elsewhere, is therefore a part of the cost of extending
credit or receivables.

Delinquency Cost-

45
Blocking up of funds for an extended period and cost associated with steps that have to be
initiated to collect the over dues are important components of such type of costs. This type of
cost is called Delinquency Cost

Default Cost-
When firms are unable to recover the over dues because of the inability of the customers, the
debts are treated as bad debts and have to be write off as they can’t be realized. Such costs are
known as default cost. These bed debts are loss for the business and decrease the value of
Working Capital.

Why Firms Hold Cash:

The finance profession recognizes the three primary reasons offered by economist John Maynard
Keynes to explain why firms hold cash. The three reasons are for the purpose of speculation, for
the purpose of precaution, and for the purpose of making transactions. All three of these reasons
stem from the need for companies to possess liquidity.

46
 Speculation
Economist Keynes described this reason for holding cash as creating the ability for a firm to
take advantage of special opportunities that if acted upon quickly will favor the firm. An
example of this would be purchasing extra inventory at a discount that is greater than the
carrying costs of holding the inventory.
 Precaution
Holding cash as a precaution serves as an emergency fund for a firm. If expected cash
inflows are not received as expected cash held on a precautionary basis could be used to
satisfy short-term obligations that the cash inflow may have been bench marked for.
 Transaction
Firms are in existence to create products or provide services. The providing of services and
creating of products results in the need for cash inflows and outflows. Firms hold cash in
order to satisfy the cash inflow and cash outflow needs that they have.

Ways to Manage Cash

Firms can manage cash in virtually all areas of operations that involve the use of cash. The goal
is to receive cash as soon as possible while at the same time waiting to pay out cash as long as
possible. Below are several examples of how firms are able to do this.

 Policy For Cash Being Held

Here a firm already is holding the cash so the goal is to maximize the benefits from holding it
and wait to pay out the cash being held until the last possible moment. Previously there was a
discussion on Float which includes an example based on a checking account. That example is
expanded here. “Assume that rather than investing $500 in a checking account that does not pay any
interest, you invest that $500 in liquid investments. Further assume that the bank believes you to be a
low credit risk and allows you to maintain a balance of $0 in your checking account. This allows you
to write a $100 check to the water company and then transfer funds from your investment to the
checking account in a "just in time" (JIT) fashion. By employing this JIT system you are able to draw
interest on the entire $500 up until you need the $100 to pay the water company. Firms often have
policies similar to this one to allow them to maximize idle cash.”

47
 Sales

The goal for cash management here is to shorten the amount of time before the cash is
received. Firms that make sales on credit are able to decrease the amount of time that their
customers wait until they pay the firm by offering discounts.

For example, credit sales are often made with terms such as 3/10 net 60. The first part of the
sales term "3/10" means that if the customer pays for the sale within 10 days they will receive
a 3% discount on the sale. The remainder of the sales term, "net 60," means that the bill is due
within 60 days. By offering an inducement, the 3% discount in this case, firms are able to
cause their customers to pay off their bills early. This results in the firm receiving the cash
earlier.

 Inventory

The goal here is to put off the payment of cash for as long as possible and to manage the cash
being held. By using a JIT inventory system, a firm is able to avoid paying for the inventory
until it is needed while also avoiding carrying costs on the inventory. JIT is a system where
raw materials are purchased and received just in time, as they are needed in the production
lines of a firm.

 Cash

Cash inflow or cash outflow should be planned to project cash surplus or deficit for each
period of the planning period. Cash budget should prepare for this purpose. Cash budget is an
estimate of cash receipts and cash payments for a future period of time. It has two parts.

Float
“Float is defined as the difference between the book balance and the bank balance of an
account”. In other words, “Float is very important way of showing down disbursement. Float is
the amount of money tied up in cheques that have been presented in the banks for payment.
There is always some time-gap between the issue of cheque by the firm’s and it presentation to

48
its bank by the creditor’s bank for payment due to transit and processing delays by the creditors”.
For example, assume that you go to the bank and open a checking account with $500. You
receive no interest on the $500 and pay no fee to have the account.

Now assume that you receive your water bill in the mail and that it is for $100. You write a
check for $100 and mail it to the water company. At the time you write the $100 check you also
record the payment in your bank register. Your bank register reflects the book value of the
checking account. The check will literally be "in the mail" for a few days before it is received by
the water company and may go several more days before the water company cashes it.

The time between the moment you write the check and the time the bank cashes the check there
is a difference in your book balance and the balance the bank lists for your checking account.
That difference is float. This float can be managed. If you know that the bank will not learn
about your check for five days, you could take the $100 and invest it in a savings account at the
bank for the five days and then place it back into your checking account "just in time" to cover
the $100 check.

Time Book Balance Bank Balance

Time 0 (make deposit) $500 $500
Time 1 (write $100 check) $400 $500
Time 2 (bank receives check) $400 $400

Float is calculated by subtracting the book balance from the bank balance.

Float at Time 0: $500 − $500 = $0

Float at Time 1: $500 − $400 = $100

Float at Time 2: $400 − $400 = $0

49
 CHAPTER – 4
RESEARCH
METHODOLOGY

50
 RESEARCH METHODOLOGY

T he research methodology is a way to solve the research problem in a systematic manner. It

depends upon the various steps like objective of the study, how the data is collected, how
much is the sample size required and limitation of the survey. According to Clifford Woody
research “Define and redefining problem, formulating hypothesis or suggested solution,
collecting, organizing and evaluating data; making deduction and reaching conclusion; and at
last carefully testing the conclusion to determine whether they fit the formulating hypothesis” In
the survey, attempt has been made to study the working capital management of J.K.
TECHNOLOGY in Faridabad.

“Research Methodology is a systematic approach in management research to achieve pre-defined

objectives. It helps a researcher to guide during the course of research work. Rules and
Techniques state in research methodology save time and labour of the researcher as researcher
know how to proceed to conduct the study as per the objectives”.

SELECTION OF TOPIC: The selection topic is a crucial factor in any research study. There
should be newness and it should give maximum scope to explore the ideas from different angles.
In present day due to increase in competition, working capital is becoming necessary for the
organization. It is that part of capital which is necessary to undertake day to day expenditure of
the business organization. Whatever may be the organization, working capital plays an important
role, as the company needs capital for its day to day expenditure. Thousands of companies fail
each year due to poor working capital management practices. Working capital is the fund
invested by a film in current assets. Now in a cut throat competitive era where each firm
competes with each other to increase their production and sales, holding of sufficient current
assets have become mandatory as current assets include inventories and raw materials which are
required for smooth production runs. Holding of sufficient current assets will ensure smooth and
un interrupted production but at the same time, it will consume a lot of working capital. Here
creeps the importance and need of efficient working capital management. to consultation with
the external guide/internal guide, the topic was finalized and titled as-“A STUDY ON
WORKING CAPITAL MANAGEMENT in J.K. TECHNOLOGY,

51
OBJECTIVES OF THE STUDY:

The broad objectives of the study are to analysis the Working Capital Position of machine
manufacturing companies in India. The objectives are as under:

 To assess the changes in working capital position over the years.

 To evaluate current assets and current liabilities for finding out liquidity position of the
company.
 To study the various components of the working capital
 To analyze the working capital trends.

SCOPE OF THE STUDY:

The scope of my study will be confined to:

 Position of the company:

The main focus of the study is to analyze the position of the company on the basis of by
using the various types of Assets, Liabilities and Funds etc.

 Decisions take by managers:

Manufacturing Industry is expanding its business but before taking any decision they would
like to know about the sources of funds and applications of these funds. This report will help
them to take such kinds of decision.

 Identify the weak areas:

This report are identifies the weak areas of the company which is helpful to management to
remove such kinds of pin point.

 Focus:
My study will also focuses on long term funds and also short term. This study will also
focuses on the working capital and also own capital

52
RESEARCH DESIGN

A research design is a set of methods & procedures used in collecting & analyzing measures of
the variable specified in the research problem research. The design of a study defines the study
type & sub-types, research problem, hypotheses, independent & dependent variable,
experimental design & if applicable, data collection methods and a statistical analysis plan. A
research design is a framework that has been created to find answers to research question.

TYPES OF RESEARCH DESIGN

 Exploratory Design
 Descriptive Design
 Experimental Design

 EXPLORATORY DESIGN:-

In this design a researcher uses his own imagination & ideas. It is based on the
researcher personal judgment and obtaining information about something.

 DESCRIPTIVE RESEARCH DESIGN:-

In this design a researcher is interested in describing a particular situation or

phenomena under his study. It is a theoretical type of researcher design based on the
collection designing and presentation of the collected data.

 EXPERIMENTAL DESIGN:-

In this type of research design is often uses in natural science but it is different in social
science. This social researcher use a method of experiment in that type of research
design.

I used descriptive research design in my research study.

53
METHODS OF DATA COLLECTION:

Primary as well as secondary souses of data collection were used for the study of working capital
management at J. K. TECHNOLOGY, Faridabad. Managers are selected for study using Non-
probability sampling. In this the chance of including an elementary unit of population in the
sample cannot be determined and hence they do not lend themselves to a statistical.

THE SECONDARY SOURCE OF DATA COLLECTION

Secondary Data refers to ant data collected by the person or organization other than the user of
the Data.
Where does such data come from? A wide variety of individual and organization actually collect
data, it follows that at least some of the data will come to be made available to other individual
and organization. This data may be of considerable value although the exact value will depend
upon the type of study being carried out.
 Available records
 Annual reports
 Company magazines, etc….

THE PRIMARY SOURCES OF DATA COLLECTION

Data observed or collected directly from first-hand experience is called primary data.
Primary Data is collected by the immediate user of the data expressively for the survey or the
experiment being conducted. It is that data we normally refer to when we talk about the data
collection.
 By administering the questionnaire;
 By non- participative observation;
 By face to face discussions ;

I used secondary data in this study. The secondary data is collected by the detailed study &
critical analysis of the various records of the company.

DATA ANALYSIS METHODS:

54
In this study, by various graphs and tables are used for Data Analysis.

LIMITATIONS OF THE STUDY:

 Busy Schedule of Concerned Executives: The concerned executives were having

very busy schedule because of which they were reluctant to give appointment.

 Time: The time duration could not provide ample opportunity to study every detail of
working capital management of the company. The study cover 45 days.

 Economical Condition: The financial statements generally based on historical or

original cost. The current economical condition is ignored.

 Unawareness: Executives were unaware of many terms related to working capital study
while asking to them.

 Confidential Information: As the company on account of confidential report has not

disclosed some figures. Moreover, in some cases separate accounts of division are not
separately maintained thereby, leading to restrictions in study.

 Financial Matter: Since the financial matter are sensitive in nature the same could not
acquired easily.

 Data Availability: Data availability is very rare & the company is not ready to provide
full facts and figures about their organization that is under study.

55
 CHAPTER-5
DATA ANALYSIS
AND
INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

56
 Data Analysis and Interpretation:

The process by which sense and meaning are made of the data gathered in qualitative research,
and by which the emergent knowledge is applied to clients' problems. This data often takes the
form of records of group discussions and interviews, but is not limited to this. Through processes
of revisiting and immersion in the data, and through complex activities of structuring, re-framing
or otherwise exploring it, the researcher looks for patterns and insights relevant to the key
research issues and uses these to address the client's brief.

Data Analysis and Interpretation of various Assets and Liabilities of

Company:

 Cash and Bank Balance

 Sundry Debtors
 Inventory Position of the Company
 Bills Receivables
 Total Current Assets
 Sundry Creditors
 Bills Payables
 Outstanding Expenses
 Total Current Liabilities
 Working Capital Position of the Company

Management of Working Capital in J.K. TECHNOLOGY is done by managers are effectively and
efficiently. Decisions related to Management of Cash, Management of Inventory, Management of
Bills Receivables, and Management of Debtors, Reduce the Bank Loans and Advances etc. are
taken by with proper planning, organizing, directing and controlling. The managers direct their
workers and reducing the waste activities which is done by managers. The managers are using the
latest technology for the cost reduction which comes on outputs.

1.) CASH AND BANK BALANCE:

57
 Year 2014-15 2015-16 2016-17 2017-18

Cash and Bank 34,50,000 33,35,000 34,60,000 35,75,000

Balance

(In Rs.)

3600000
3575000

3550000

3500000
3460000
3450000
3450000

3400000

3350000 3335000

3300000

3250000

3200000
2014-15 2015-16 2016-17 2017-18

CASH AND BANK BALANCE

INTERPRETATION:
From the above table or graph show that Cash and Bank Balance of J.K. TECHNOLOGY is
increasing in all financial year excluded to 2015-16 in this year Cash and Bank Balance is
decreasing from the previous year 2014-15. In 2016-17 and 2017-18 of the company is
increasing from the previous year.

58
2.) SUNDRY DEBTORS:

Year 2014-15 2015-16 2016-17 2017-18

Sundry 3,60,000 3,75,000 3,95,000 4,00,000

Debtors
(In Rs.)

410000

400000
400000
395000

390000

380000
375000

370000

360000
360000
INTERPRETATION:
350000
From the above table or graph show that, the Sundry Debtors of the J.K. Technology are
increasing in every financial years. In 2015-16 the Sundry Debtors is more increasing from the
340000
2014-15
previous year and in 2017-18 the Sundry Debtors is 2015-16 2016-17
less increasing 2017-18year
from the previous
(2016-17).
SUNDRY DEBTORS

59
3.) INVENTORY POSITION OF THE COMPANY:

Year 2014-15 2015-16 2016-17 2017-18

Inventory 21,05,000 22,20,000 21,10,000 22,45,000

Position (In
Rs.)

2300000

2250000 2245000

2220000

2200000

2150000

2105000 2110000
2100000

INTERPRETATION:
2050000
From the above table or graph it is clear that, the Inventory Position in J. K. Technology in
increasing or decreasing. In 2015-16 inventory are increasing as compare to previous year,
2000000
2014-15
But in 2016-17 the inventory are decreasing 2015-16
from the previous 2016-17
year and in 2017-18 2017-18
the inventory
are again increasing.
INVENTORY POSITION
4.) BILLS RECEIVABLES:
60
 Year 2014-15 2015-16 2016-17 2017-18

Bills 2,35,000 2,40,000 2,45,000 2,50,000

Receivables
(In Rs.)

255000

250,000
250000

245,000
245000

240,000
240000

235,000
235000

230000

225000
2014-15 2015-16 2016-17 2017-18

BILLS RECEIVABLES

INTERPRETSTION:
From the above table or graph it is clear that, Bills Receivable is equally increasing in every
year. In years: 2014-15, 2015-16, 2016-17, 2017-18 bills receivables is increasing from Rs.
5000.

61
5.) TOTAL CURRENT ASSETS:

Year 2014-15 2015-16 2016-17 2017-18

Total 61,50,000 61,70,000 62,10,000 64,70,000

Current
Assets (In
Rs.)

6500000 6470000

6400000

6300000

6210000
6200000 6170000
6150000

6100000

6000000

5900000
2014-15 2015-16 2016-17 2017-18

TOTAL CURRENT ASSETS

INTERPRETATION:
In this table or graph it is clear that, Total Current Assets of J. K Technology are increasing
every financial year. In year 2015-16 Total Current Assets are less from other years and year
2017-18 total current assets are very high from the previous year.

62
6.) SUNDRY CREDITORS:

Year 2014-15 2015-16 2016-17 2017-18

Sundry 23,75,000 23,60,000 23,65,000 23,55,000

Creditors
(In Rs.)

2380000

2,375,000
2375000

2370000

2,365,000
2365000

2,360,000
2360000

2,355,000
2355000
INTERPRETATION:
2350000
From the above table or graph it is clear that, the Sundry Creditors of J.K. Technology are very
high in 2014-15 and other year is less as compare to 2014-15. In year 2015-16 it is decreasing, in
2345000
2014-15it should be
2016-17 it is increasing and in 2017-18 2015-16 2016-17
again decreasing. 2017-18

SUNDRY CREDITORS
63
7.) OUTSTANDING EXPENSES:

Year 2014-15 2015-16 2016-17 2017-18

Outstanding 11,35,000 12,40,000 11,45,000 12,30,000

Expenses

(In Rs.)

1260000
1240000
1240000
1230000
1220000

1200000

1180000

1160000
1145000
1140000 1135000

1120000

1100000

1080000
2014-15 2015-16 2016-17 2017-18

OUTSTANDING EXPENSES

INTERPRETATION:

From the above table and graph it is clear that, outstanding expenses of J.K. Technology are very
low in 2017-18 and high in 2016-17. It increases liabilities for J.K. Technology. Previous three
years, outstanding expenses are increasing but in 2017-18 it should be decrease.

64
 Year 2014-15 2015-16 2016-17 2017-18

Bills 4,25,000 3,20,000 4,30,000 4,35,000

Payables
(In Rs.)
8.) BILLS PAYABLES:

500000

450000 430,000 435,000

425,000

400000

350000
320,000
300000

250000

200000

150000
INTERPRETATION:
100000
From the above table or graph it is clear that, Bills Payable of J.K. Technology is high in 2017-
50000
18 and low in 2015-16. It should be increasing or decreasing both. J.K. Technology needs to do
less their0 bills payable.
2014-15 2015-16 2016-17 2017-18
BILLS PAYABLE
65
9.) TOTAL CURRENT LIABILITIES:

Year 2014-15 2015-16 2016-17 2017-18

Total 39,35,000 39,20,000 39,40,000 40,20,000

Current
Liabilities
(In Rs.)

4040000
4020000
4020000

4000000

3980000

3960000
3940000
3935000
3940000
3920000
3920000
INTERPRETATION:
3900000
From the above table or graph it is clear that, Total Current Liabilities of J.K. Technology is very
high in year 2017-18 and low in 2015-16. The liability is controls by J.K. Technology are
3880000
effectively or efficiently.
3860000
2014-15 2015-16 2016-17 2017-18

66
TOTAL CURRENT LIABILITIES
10.) POSITION OF WORKING CAPITAL IN J.K.
TECHNOLOGY:
Year 2014-15 2015-16 2016-17 2017-18

Working 22,15,000 22,50,000 22,70,000 24,50,000

Capital
Position(In
Rs.)

2500000
2450000
2450000

2400000

2350000

2300000
2270000
2250000
2250000
2215000
2200000

INTERPRETATION:
2150000
From the above table or graph is show that, the Working Capital Position is good in every
2100000
financial year. In all financial year the working capital position is normal.
2050000
2014-15 2015-16 2016-17 2017-18

WORKING CAPITAL POSITION

67
CHAPTER -6

CONCLUSIONS
&
SUGGESTIONS

68
 CONCLUSIONS

The conclusions of the study are as follows:

 Cash and Bank Balance of the Company are increasing from the previous year. It shows the
good Cash and Bank Balance condition of the company.

 Sundry Debtors of the company are increasing in all financial year. It is in good position.

 Inventory Position of the company are increasing from the previous year. It show that the
company Inventory Position is adequate.

 Bills Receivables of the company is increasing in all the financial year. It show the Bills
Receivables are in good condition.

 Total Current Assets of the company are increasing in every financial year. It shows that good
position of Total Current Assets of the company.

 Sundry Creditors of the company are decreasing in every financial year. It shows that the
liability of company is decreasing; It is good for the company.

 Outstanding Expenses of the company are increasing from the previous year. It show that the
liability of company is increasing, It is not good for the company

 Bills Payables of the company are increasing from the previous year, It is more in every year.
It shows that the liability is increasing; It is not good for the company.

 Total Current Liabilities of the company are increasing in every financial year. It show the
liability is increasing, It is not good for the company.

 Working Capital Position of the company is increasing in every financial year. It show that
the good Working Capital Position of the company

69
 SUGGESTIONS
The study has amply revealed that there is a large scope for management to improve the
effectiveness of utilization of working capital and thus increase the growth rate of the company
and profit as well. Major Suggestions are:

Loans & Advances: Special efforts should be made to analyze loans& advances, which
are between 35% to 56% of Current Assets. This can be classified between production /
operation relation related and non-production / operation related. No production related cases
might be financed from other sources like debenture etc..and treated separately.

Inventory: Inventory should be reviewed constantly to identify show / dead / obsolete item
and then disposed until 2017-18 level is again achieved.

Debtors: A study may be conducted if required by experts to pinpoint reason behind

J.K.TECHNOLOGY high correction period of 95 days in 2017-18 against 50 days. It is due to
quality of products, quality of customer, and the segment of customers marketing effort,
distribution pattern or other reasons.

Creditors: It has a very heavy long term cost like high interest cost, bad credit ratings and
shyness of good quality / standard suppliers. It has need to improve the long & short term
borrowing decisions.

Ratios: The Company should try to improve its current situation. The ratios, which are taken
in this research to evaluate the company’s position, are Current ratio, Quick ratio and Activity
ratio. These ratios show the actual position of the company. There is a drastic declining in the
working capital turnover ratio. This ratio goes to –ve position in current year compared to
previous. The Debts collection period is 359 days for Exporters. This shows the poor collection
policy. The current ratio is 1.12 in 2017-18, which is not up to the ideal ratio. This shows that the
current assets are equal to the current liabilities. Not satisfactory

70
 CHAPTER- 7
BIBLIOGRAPHY

71
 BIBLIOGRAPHY

 BIBILOGRAPHY

 Annual Reports of the Company.

 Publications by the organizational circulation

 Company Records

 Financial statements of J.K. TECHNOLOGY

 REFERENCE BOOKS

 Grewell T.S Financial Analysis Edition 2016

 Goel D.K Analysis Of Financial Statement Edition 2017

 Grewell T.S. Statement Of Financial Statement Edition 2016-17

 WORLD WIDE WEB

 www.jktechnology.com

 www.economictimes.com

 www.google.com

 www.wikipidia.com

72
CHAPTER-8
ANNEXURE

73
 STATEMENT OF PROFIT AND LOSS OF J.K TECHNOLOGY

Y/e 31 Mar( In .Cr) Mar-2018 Mar-2017

Revenue 7,689 6,898

yoy growth (%) 11.50 (6.60)

Raw materials (4,343) (3,869)

As % of sales 56.50 56.10

Employee costs (854) (770)

As % of sales 11.10 11.20

Other costs (1,360) (1,142)

As % of sales 17.70 16.60

Operating profit 1,132 1,117

OPM 14.70 16.20

Depreciation (291) (216)

Interest expense (440) (252)

Other income 65.40 24.20

Profit before tax 466 672

Taxes (155) (203)

Tax rate (33) (30)

Minorities and other (4.40) 10.50

Adj. profit 306 480

Exceptional items 69.10 (13)

Net profit 375 467

yoy growth (%) (20) 41.80

NPM 4.88 6.77

74
Y/e 31 Mar ( In .Cr) Mar-2018 Mar-2017
Equity capital 45.40 45.40

Preference capital -- --

Reserves 1,916 1,919

Net worth 1,961 1,965

Minority interest

Debt 5,811 5,655

Deferred tax liabilities (net) 965 802

TOTAL LIABILITIES 8,879 8,566

Fixed assets 6,451 6,120

Intangible assets

Investments 128 73.20

Deferred tax asset (net) 584 445

Net working capital 1,585 1,633

Inventories 1,448 1,320

Inventory Days -- 62.70

Sundry debtors 1,545 1,795

Debtor days -- 85.20

Other current assets 831 792

Sundry creditors (1,165) (1,214)

Creditor days -- 57.60

Other current liabilities (1,074) (1,060)

Cash 131 295

TOTAL ASSETS 8,879 8,566

BALANCE SHEET OF J.K. TECHNOLOGY

75