Working capital management

Presented by: kirti

(In plant trainee)
Dept: Accounts
 Acknowledgement
 I thank Mr. Mahesh Taneja in particular for assigning me
this topic and encouraging me to write in the first place. I
owe much to him for his helpful comments.
I thank Mr. Dgupta for being my guide throughout my
project.
I am deeply indebted to:
Mr. R.K.ARORA (G.M. P & A)
Mr. PANKAJ GUPTA (G.M. F & A and C.S)
Mr. A.K.TRIPATHI (A.G.M. P & A)
For their co-operation and help without which it would
not have been possible for me to complete project in
time.
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 Munjal Showa Ltd.
Established 16th may, 1985

Managing director Mr. Yogesh chander munjal

Formed through a technical and financial collaboration

with Showa co. Japan.

Equity participation Hero gp. - 39%

Showa - 26%
Public - 35%

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 Key objectives of organization
To serve the national interest in the product and
related sectors in accordance and consistence with
government policies.

To maximize utilization of existing facilities in order

to improve efficiency & productivity.

To work towards the achievement of self-sufficiency in

the field of auto-component market.

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 Departments in the company
Material dept.
Production planning & control dept.
Purchase dept.
Accounting & finance dept.
Marketing dept.
I.T. dept.

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 Major activities
RECEIPT
SUPPLIER GATE MRR/GR
STORE

QC
INSPECTION

USER
INVOICE REJECTED
DECISION

OK

WITH GR IN
LOCATION

SAP

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 Theme of project

o To study the working capital management, and

calculate various ratios relating to working capital.

o To avoid the shortage, make a proper estimation of

working capital requirement in the company.

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 Criteria for theme selection

o Inadequate working capital estimation may lead to

business failure.

o The aspect of liquidity & profitability should be analyzed

adequately.

o The advantage of offering a credit line to customers are

foregone with mis-management in working capital.

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 WORKING CAPITAL MANAGEMENT

o It acts as the lifeblood of the business.

o W.C.M is managing the current asset and current

liabilities in such a way that an acceptable level of
working capital is maintained.

o It can be considered as the management of cash,

market securities receivable, inventories and current
liabilities.

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 Questionnaire
o Define the objective of working capital of a firm.
Ans. Every business needs funds for two purposes:-

 Long term funds to create production facilities

through purchase of fixed asset e.g. plant, land,
building etc.

 Short term funds to carry out day to day operations.

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Explain two different concept of working capital.

Ans. Two concept of working capital:

 Gross working capital:
optimum investment in current asset,
financing the current asset.

 Net working capital:

Difference between current asset and current liability.
It can be positive as well as negative.

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Explain the concept of operating cycle.
Ans.
cash
Debtors
& B/R

Raw
material

sales

Work in
progress
Finish
goods
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 Significant ratio in 2010
Capital turn over ratio – msl – 3.28
gabriel – 2.33

Fixed asset turn over ratio – msl – 3.78

gabriel – 3.54

Working capital turn over ratio – msl – 19.69

gabriel – 6.81

Stock turnover ratio – msl – 29.14

gabriel – 8.13
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 Various ratios in 2010
Current ratio – msl – 1.338
gabriel – 1.777

Quick ratio – msl – 1.133

gabriel – 1.17

Net profit ratio – msl – 2.49

gabriel – 3.44

Gross profit ratio – msl – 12.71

gabriel – 14.16
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Earning per share – msl – 6.15
gabriel – 3.35

Return on investment – msl – 12.87

gabriel – 11.81

Debtors turnover ratio – msl – 7.7

Gabriel – 9.02

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 SWOT analysis
Strength
- outstanding growth of company through advanced
tech. & experienced personnel.

 The two wheeler & four wheeler industry are world’s 2nd and
9th largest respectively.

 Both two wheeler & four wheeler likely to attain a good

growth momentum in future.

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Weakness
- cost of material is high and it can’t be shifted towards
consumer.
- R & D for the improvement of product is very less.

Opportunities
- 100% FDI available for automobile sector.
- mass production by Hero Honda.

Threat
- increase in price of diesel/petrol
- increase in labour cost 17
 Conclusion
For increasing the ROI company should add new
customer.
Working capital is present in sufficient amount.

Msl is efficiently reducing its cost & it should be

continued.
Debtors increased in comparison to 2009, good for
company but carries a risk of bad debts.
Sales increases with great speed profit also increases.
Company is likely to maintain a good growth rate in
future.
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