K.L.

E Society’s
College of Business Administrations-BBA
1st Floor, RLS College, Corporation circle, Dharwad -580008

A STUDY ON WORKING
CAPITAL MANAGENMENT
Prashanth A
19N11225
Internal guide : Prof. Divya kotyan
 EXECUTIVE SUMMARY

• Working capital management is a business strategy designed to ensure that a

company operates efficiently by monitoring and using its current assets and
liabilities to their most effective use.
• Elmeca works is one of pioneer in manufacturing high precision machine tool
in Dharwad unit situated in Karnataka.
• Its factory and office at Hattikolla in Dharwad and register office in Mumbai
• Mr.Appasaheb M. Jinagouder is director cum chairman of the company.
• Machinetool accessories ,Boring and face heads ,Power operated Chuck's,
CNC tooling system and Micro boring bars and catridges are some of the
products of Elmeca.
• Primary and secondary data has been collected from the company for the
completion of the project.
• In the year 2019-2020 net working capital ratio is 1:0:1 and in the year 2020-
2021 the net working capital is 4:3:1, the lowest working capital is in the year
of 2019 and the highest working Is in the 2020.
• This summary includes, information regarding. Domestic sales and export
Management sales Management is key function in many kinds of enterprises.
It provides higher management with informed estimates and facts for making
marketing divisions and for setting sales and profit goods. Export
Management is related to International Sales Management. This includes
Export Documents relates to goods.
 INDUSTRY PROFILE
• The start of organized sector of the Indian machine tool industry took place in early
years of the Second World War.
• Due to non-availability of imported machine tools, few British owned general
engineering firms took up their manufacturing in India.
• The sixties marked the third phase of machine tool industry, typified by rapid
growth in production and horizontal expansion in types of machine tools
• The fifth and current phase began in early nineties after the new policies of Open
Market Economy were introduced, which saw advent of Technocrats
• the Indian machine tool industry has undertaken a long way in the last decade since
liberalization and economic reforms were ushered in.
• The product range covers highly sophisticated engineering and Import substituting
products like Micro boring and facing heads, CNC Tooling’s, Pneumatic chucks
Jig grinder, Clare chucks and collets, milling accessories and collets.
 COMPANY PROFILE
• Year of establishment: 1971
• Business Type: Manufacturing
• Ownership pattern: Pvt . Ltd. company
• Import and Export: Machine tool accessories, Boring and face heads,Power
operated Chuck's, CNC tooling system & Micro boring bars and cartridges
• No of staff:97
• Organisation pattern: Functional organisation structure
• Company Objectives :
To remain a leading producer of machinery products in India.
To continuously grow in our business and become a significant player
in the world market.
 PRODUCTS

• Machine tool accessories

• Boring and face heads
• Power operated Chuck's
• CNC tooling system
• Micro boring bars and cartridges
 CONCEPTUAL FRAMEWORK
• Working capital management is a business strategy designed to ensure that a
company operates efficiently by monitoring and using its current assets and
liabilities to their most effective use. The efficiency of working capital
management can be quantified using ratio analysis.
•According to principles Board of America institute of certifies public USA has defined:
• Working capital is sometimes called net working capital is representing by the excess
of over the current liabilities and identifies the relatively portion of total enterprise capital
which constitutes a margin of buffer for operating cycle of business.
• " Any acquisition of funds which increase the current assets and increases working capital
they are one and the same " - Bonneville.

• " Working refers to firm investment in short term asses’ cash, short term security, accounts
receivables and inventory" - Weston and Bingham
 OBJECTIVES OF THE STUDY
•  The primary objective of working capital management is to ensure a smooth
operating cycle of the business. Secondary objectives are to optimize the level of
working capital and minimize the cost of such funds.
• OPTIMAL RETURN ON CURRENT ASSET INVESTMENT The return on the
investment made in current assets should be more than the weighted average cost of
capital so as to ensure wealth maximization of the owners. In other words, the rate of
return earned due to investment in current assets should be more than the rate of
interest or cost of capital used for financing the current assets.
• MINIMIZE RATE OF INTEREST OR COST OF CAPITAL The cost of
capital utilized in working capital should be minimized so as to achieve higher
profitability. If the investment in working capital involves bank finance,
interest rates should be negotiated with the bank. The cost can be minimized
by utilizing long-term funds but in a proper mix.
 RESEARCH METHODOLOGY

• Primary data
• Personal interview: personal interaction with external guide, within the company.
• Questionnaire: list of questions asked about the project topic.
• Secondary data
• As the study is aimed at the working capital management of Elmeca works the
methodology adopted is analytical
• Data has been calculated from secondary source like balance sheet, profit and
loss account.
• Detailed study of last 3 years annual report is done and required information is
used for calculation.
•  
 DATA ANALYSIS AND
INTERPRETATION
Year 2019 2020 2021
 
Net working 8,69,25,908 -5,030,758 -7,09,22,895
capital

Net Assets 8,20,05,510 1,16,46,408 2,43,04,429

Nec ratio 1.060 4.338 2.918

• NET WORKING CAPIATL RATIO

• NWC Ratio= current Assets - current Liabilities
 WORKING CAPITAL RATIO
Chart Title
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2019 2020 2021

•INTERPRETATION:
This chart shows that, for the year 2020 net working capital ratio is
highest (i.e., 4.3:1) compared to previous year for the year 2019 net
working capital ratio is lowest (i.e., 1:0.1) among all the 3 years.
 CURRENT RATIO

• Current ratio = Current Assets / Current Liabilities

Particulars 2019 2020 2021

Current Assets 8,33,05,843 17,20,24,333 17,25,46,995

Current Liabilities 1,72,31,751 12,14,93,575 10,16,24,100

Current Ratio 0.489 1.416 1.698

 CURRENT RATIO

Chart Title
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2019 2020 2021

•INTERPRETATION:
Table 1 shows that, for the year 2021 current ratio is in highest (i.e., 1.7:1) compared to
previous year. For the year 2019 current ratio is lowest (0.5:1) among all the 3 years.
 QUICK RATIO

Quick ratio= Quick Assets/Quick Liabilities

Quick Assets=Current Assets – (Inventory + Prepaid Expenses)

particulars 2019 2020 2021

Quick Assets 1,95,22,710 7,09,14,941 8,76,42,445

Quick Liabilities 6,48,83,342 7,67,54,809 3,71,40,050

Quick Ratio 0.300 0.923 2.359

 QUICK RATIO
Chart Title
2.5

1.5

0.5

0
2019 2020 2021

INTERPRETATION:
•Table 2 shows that, for the year 2021 quick ratio is highest (I.e., 2.4:1)
compared previous year for the year 2020 quick ratio is lowest (i.e.,
0.3:1) among all the 3 years.
 INVENTORY TURNOVER RATIO

Inventory Turnover ratio = Cost of goods sold(cogs)/ Average stock

Particulars 2019 2020 2021

Cost of goods 2,87,95,158 1,50,33,300 4,60,53,600

sold
Average Stock 9,72,23,975 2,13,43,509 3,95,75,875

Inventory 0.29 0.7 1.16

Turnover Ratio
 INVENTORY TURNOVER RATIO

Chart Title
1.4

1.2

0.8

0.6

0.4

0.2

0
2019 2020 2021

• Interpretation:
Table 4 shows that, for the year 2021 inventory turnover ratio is highest (i.e., 1.1:1) compared to
previous year for the year 2019 inventory turnover ratio is lowest (i.e., 0.2:1) among all the 3
years
 FINDINGS
• The net working capital of the company for the last three years (, 2019-20,2020-21)
shows negative trends due to more increase in liability.
• The fixed assets of the company are not used properly resulting into un-necessary
payment of fixed charges
• The company long term borrowing has gone up over a period of the years at an
increased rate
• The company has not yet adopted the scientific and advanced method of accounting
system.
• The company should practices new tools with intention the overall productivity.

• The credit period allowed to the customer to pay for its purchases is approximately 60
days.
 SUGGESTIONS

• The company has excess of current over Liabilities means that three means that is a sound system
of working capital. But the company has a policy of sloughing back of profits so as to build up
free reserves; hence the company has not declared any dividend for the year 2016 -2018. My
suggestion to this is the company should pay regular dividend to its investors, which creates a
favourable market to raise additional funds in the future.
• The company has to practice advance method of accounting system such as tally 6.5, SAP etc.
• The company has to appoint qualified, skilled, and experienced employees replacing excessive
and in competent.
• Debtors should make payment on due date or within the specified period and thereby the
efficiency of the finance department can be improved
• Fixed assets should be revalued once in a year.
• The company long term borrowing has to be minimized.
• The company should reduce its liability by minimizing its expenses.
 CONCLUSION

• After the study of working capital system at Elmeca, I found

that networking capital of the company is decreasing and
maintaining the case properly. It has to maintain sales to make
maximum profits and it should decrease its expenses. I came to
conclusion that there is a negative or deficit working capital in
last four years. It should work more efficient in managing
capital of the company.
 LIMITATIONS

• The study is based on primary data as well as secondary data such as

published annual accounts of the company.
• The data considered for study confined only for a period of 3 years.
• The data provided by the company is estimated figures.
• The working capital is calculated from past financial statement and these are
not indicators of future.
 BIBLIOGRAPHY

• Company manual
• Company website – www.elmeca.netfirm.com
• Company profile

• REFERANCE
• Financial Management - Prasanna Chandra
• Financial Management - I. M. Pandey