FM-1

Group 16
A Case Study on Working Capital
Management
Presented by,
Aditya Rai 20215043
Priya Soni 20215062
Shailly Pujara 20215055
Sandesh Talesara 20215063
Guided by – Dr Lalit Khurana Shivani Pachori 20215058
 What is working capital?

Working capital, also known as net working capital (NWC), is the difference between a
company’s current assets—such as cash, accounts receivable/customers’ unpaid bills, and inventories of
raw materials and finished goods—and its current liabilities, such as accounts payable and debts.

NWC is a measure of a company’s liquidity, operational efficiency, and short-term financial health.

If a company has substantial positive NWC, then it should have the potential to invest and grow.
 • Asian Paints Limited was established way back on February
1,1942 and today stands as India’s largest paint company and
Asia’s third largest paint company with an annual turnover of
Rs 5,463 crore. Asian Paints along with its subsidiaries has
operations in 20 countries across the world.
• The rationale of the study spring from the fact that unless the
working capital is managed effectively, monitored efficiently,
Asian Paints planned properly and reviewed periodically at regular intervals
to remove bottlenecks it any, the company cannot earn profits

Case and increase its turnover.

• The study is concerned with the paint industry and it has been
confined to one of the private sectors viz., Asian Paints
Limited. This study is based on the secondary data, which was
obtained from the published sources i.e., annual reports for a
period of five years (2013-2014 to 2017-2018). The collected
data has been analysed with the help of ratio analysis,
statement of changes in working capital and simple
percentage analysis.
Working Capital Management
In order to fulfil the objective of Ratio Mean
Working Capital Management, and to Current Ratio 1.67
comment on the working capital
management of this company, the Liquidity Ratio 0.85
study deals with the following three Current Assets to Total assets 0.49
approaches:
Current Assets to Fixed Assets 1.94
1. Selected Working Capital Ratio
Inventory Turnover Ratio 3.87
2. Distribution of Working Capital
Debtor Turnover Ratio 16.76
3. Statement of Changes in Working
Capital Working Capital Turnover Ratio 34.18
Distribution of Working Capital
• The elements-wise analysis of working capital
enables to examine in which elements the working
capital funds are locked up and to find out the factors
responsible for the significant changes in working
capital of different years. The distribution of working
capital among the elements and its average
calculated in percentages for the study.
• The four elements of the working capital-inventory,
debtors and loans & advances contributed almost
equally i.e., 104.37 percent 34.25 percent and 90.74
percent respectively, towards gross working capital
whereas the last one i.e., cash and bank contributed
the lowest i.e., 27.16 percent towards gross working
capital. During the period of study, remarkable
changes were observed in share of different
elements of working capital.
Statement of Changing Working Capital
• The working capital changes due to various transactions.
• Working capital of the company has increased by 2432.02 lakh in
2013-14, by 2524.85 lakh in 2014-15, by 5685.84 lakh in 2015-16 and
decreased by 2071.56 in 2016-17, by 5260.88 lakh in 2017-18. These
changes may be due to the reasons of increased volume of sales,
increasing price of raw material and so on.
• Thus, it is concluded that there are changes in the amount of working
capital of the company year to year, which depended on sales and
output of that period.
 The study reveals that the liquidity position of
Asian Paints Limited is good as it remained above
the standard norms throughout the period of
study. The turnover ratios reveal that the
company’s ability to manage the current assets
for generation observation from the study is that
the debtors’ collection period has declined from
Conclusion 40 days to 26 days. Thus, it can be said that since
2017-18 importance of debtors management is
realized. On the whole, it can be concluded that
the working capital management efficiency has
been increasing every year. It needs to be
maintained and increased further by effective
utilization and control of current assets.
References
• https://adalyajournal.com/gallery/26-oct-v1026.pdf