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The Indian Life Insurance Company has seen a remarkable shift since the time of establishment of the first company, Oriental Life Insurance Company in 1823. At the time of Independence and thereafter, there were more than 200 companies operating in India and not all of them on sound ethical principles. Many factors combined together to prompt the then Government to nationalize the life insurance industry in 1956 to form the Life Insurance Corporation of India.

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.doc   PROJECT_REPORT ON working capital management.doc (Size: 932.5 KB / Downloads: 467)
.doc   PROJECT_REPORT ON working capital management.doc (Size: 932.5 KB / Downloads: 467)
The Indian Life Insurance Company has seen a remarkable shift since the time of establishment of the first company, Oriental Life Insurance Company in 1823. At the time of Independence and thereafter, there were more than 200 companies operating in India and not all of them on sound ethical principles. Many factors combined together to prompt the then Government to nationalize the life insurance industry in 1956 to form the Life Insurance Corporation of India.
Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are thirteen private life insurance companies who has entered the industry.
The study in the first part gives detail information on the on-job training provided the competitive analysis of product of Kotak Mahindra Old Mutual Life Insurance Ltd. with ICICI Prudential Life Insurance. Also, analysis of financial statements.
In the second part, is a project and implimentation on “How does the Indian mutual fund industry compare vis - a - vis global standards and what should be our future expectations from it?”
The paper begins by analyzing the current scenario in the industry characterized by problems with distribution, low investor awareness and concentration of corporate investors. In the next section, a comparison of the Mutual Fund Industry with global standards reveals that the industry still compares unfavorably with developed countries in terms of penetration, investor awareness and diversity of products and the extent of use of risk management techniques. Further comparison reveals that the attitude of regulator towards investor protection and the governance of mutual funds are at par with global standards. The paper then analysis the future expectations from the mutual fund industry in terms of increased investor awareness, product diversity and improvement in penetration and distribution. In the end I recommend certain steps that SEBI and AMCs should take in order to build investor confidence and trust.
Primary Objective(s)

The Basic objective of cash management is two fold:
• To meet the cash disbursement needs (payment schedule);
• To minimize funds committed to cash balances.
These are conflicting and mutually contradictory and the task of cash management is to reconcile them.
1. Customers have basis of preference in selection of the final Kotak Mahindra Old Mutual Life Insurance
2. The choice of the Kotak Mahindra Old Mutual Life Insurance might have an effect either of the personal preference or the country of origin
3. The final decision is based on prior experience
Sample Size:
The size of the sample was around 70 people considering the time constraint.
Research Design:
Data Collection: Data has been collected through both primary and secondary approach.
Data Sources
The research involved gathering Secondary data as well as Primary data. For the purpose two types of survey was conducted by me to collect the data -
• Customer survey and
• Consumer survey
Primary Data
Consumer survey was done to know their purchasing behaviour because they are the one who constitute the market and are the target of the business . In Insurance Industry untill and unless we have the knowledge of the consumer behaviour and factor which influence them to buy a paticular brand ,companies cannot focus upon the target market. Hence a consumer survey was done to know their wants, purchasing power, and buying habits in order to segment the market , and based on this consumer profile was identified.
Secondary Data
Secondary data regarding sales figures, promotional expenses and other related expenses was collected from the company’s own record to analyse the impact on sales due to the running schemes and make cost benefit analysis.
Scope of the Study
Both primary and Secondary data has been be used for the study. Primary data was collected through direct interaction with the company’s finance and accounts department. If needed schedule/questionnaires would be devised to get the information on all the relevant areas of the study such as receivable management, inventory management, management of cash etc.
And I collected the data from the secondary sources comprising Annual Reports of the firm, other journals and peridocials.
Apart from the conducting this research work on the basis of these informations, various techniques of financial management e.g., comparative statement, trend analysis and ratio analysis etc. were used in the present study. To present a broad view so far the purpose of the analysis and to make it easy to understand the problem/concept of a few graphs and tables shall also be presented. In each chapter, the analysis has been compared with actual management practices of the company under study.
Limitation of the Study
 The present study is limited to one Co., i.e. Kotak Mahindra Life Insurance Ltd., and covers a period from 2005 and 2006 due to limitation of time and accessibility to data base.
 The authenticity of the suggestions and recommendations depend upon the rationality of the data provided to me.
 Have to rely upon the data supplied.
 Executives are not ready to part with the information beyond a limit.

Working Capital management is the management of assets that are current in nature. Current assets, by accounting definition are the assets normally converted in to cash in a period of one year. Hence working capital management can be considered as the management of cash, market securities receivable, inventories and current liabilities. In fact, the management of current assets is similar to that of fixed assets the sense that is both in cases the firm analyses their effect on its profitability and risk factors, hence they differ on three major aspects:
1. In managing fixed assets, time is an important factor discounting and compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets.
2. The large holdings of current assets, especially cash, may strengthen the firm’s liquidity position, but is bound to reduce profitability of the firm as ideal car yield nothing.
3. The level of fixed assets as well as current assets depends upon the expected sales, but it is only current assets that add fluctuation in the short run to a business.
To understand working capital better we should have basic knowledge about the various aspects of working capital. To start with, there are two concepts of working capital:
 Gross Working Capital
 Net working Capital
Gross Working Capital: 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 points out the need of arranging funds to finance the current assets. The gross working capital concept focuses attention on two aspects of current assets management, firstly optimum investment in current assets and secondly in financing the current assets. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in 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 be made quickly, and similarly if some surpluses are available, they should not be allowed to lie ideal but should be put to some effective use.
Net Working Capital: 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 current assets exceed current liabilities and negative working capital refers to the situation where current liabilities exceed current assets. The net working capital helps in comparing the liquidity of the same firm over time. For purposes 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 is to manage the current assets and liabilities in such a way that a acceptable level of net working capital is maintained.
Importance of working capital management:
Management of working capital is very much important for the success of the business. It has been emphasized that a business should maintain sound working capital position and also that there should not be an excessive level of investment in the working capital components. As pointed out by Ralph Kennedy and Stewart MC Muller, “the inadequacy or mis-management of working capital is one of a few leading causes of business failure.
Current assets, in fact, account for a very large portion of the total investment of the firm.
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Company Profile:

Sujala pipes (p) ltd., is commissioned with the objective of catering the agricultural needs of the region. A dynamic entrepreneur Sri S.P.Y.Reddy who is basically a mechanical engineer started a unit at Nandyal those manufacturers black pipes. This resulted information of private ltd., company called “Sujala Pipes Pvt. Ltd.,”
In the year 1995 it diversified into other products like milk products mineral water, super market etc., its greatest achievements are taking over sagar pipes in 1997 and monarch pipes in 1999 who are major competitors at that time. At present the major competitors are sudhakar & finolex pipes. It has its market presence in four states in south India (A.P, T.N, Karnataka, and Kerala).
Working capital signifies funds required for day to day business operation of the organization. Working capital management refers to the administration of all aspects of current assests and current liabilities.
It refers to the firm’s investment in current assests. It is defined as excess of current assests over current liabilities. In other words, ‘it is the net current assests or net working capital’
Working capital management plays a vital role in any organization and one should have a through knowledge about the working capital position.
In view of this context, I have undertaken this study and it would be a great advantage to the company also to know its working capital.
Primary objective:
To find out the working capital position of the company for the last five financial years.
Secondary objective:
To know the liquidity position of the firm.
To study the profitability of the company
The data collected from both primary and secondary data.
Primary data
Primary data has been collected through personal interviews with the financial department and the executives.
Secondary data
Secondary data collected from the records like B/S, income statement and necessary records and website (
Confidential matters like financial position, soundness etc, are naturally not disclosed fully. This is certainly set back while drawing the conclusions.
The study is based on five annual reports only. The information
from annual reports is insufficient to calculate few ratios.
Limited time does not allowed to do more analysis.
• The current ratio is mostly constant for first 4 years and highly increased in last year 2006-2007
• The companies net working capiotal turnover ratio is increasing corresponding maximum increase is 16.8
• The working capital ratio is gradually increasing from year after year
The maximum ratio is 0.46
• The cash ratio is gradually reaching the standered norm
 The company should keep more current assets such as cash & bank balances short-term investment to meet its increasing liabilities. By that the company can able to have a better liquidity position.
 The company has to take necessary steps to establish effective working capital management ( which maintains adequate working capital required for the business). In the view of increasing current liabilities and less allocations of resources towards working capital..
 As of now, the company has maintained good financial position by controlling the current liabilities and other expenses, it has suggested that the company should maintain the same performance in the future.
Plastics have becomes synonymous with modern living. It is undoubtedly a product, which has penetrated extensively into the common mans life. No wonder the industry has achieved in terms of supply of raw materials, expansion and diversification of processing capacities and manufacturing of processing machinery and ancillary equipment.
The versatile material with its superior qualities such as light weight, easy process ability, corrosion resistance, energy conservation, non toxicity etc., may substitute to a large extent, many conventional and costly industrial materials like wood, metal, glass, jute, leather etc., on the automobiles, electronics, packaging and agriculture give enough evidence of the immense utility of plastics.
At present 80% of total requirement of raw material and almost all types of plastic machines required for the industry and indigenously available. The present investment in all three segment of the industry, namely production of raw materials, expansion and diversification of processing equipment in Rs.1,250 crores and it provides employment to more than eight lakh people.
Plastics have been subject to level not only at the central, but at state, and local government levels. These levels have affected the price of plastic of production adversely, because of their inherent advantage in properties and versatile in adaptation and use, plastics have come to play a vital role in a variety of applications over the world. In our country, plastics are used in essential consumer goods of daily use for common man such as baskets, shopping bags tiffany boxes, hair combs, tooth brushes, spectacle frames and fountain pens etc., they also find applications in field like packaging and automobiles and transportation, engineering, electronics, telecommunications, defense, medicine, building and other construction plastics and its importance is also growing infield like agriculture and water management.
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A firm is required to maintain a balance between liquidity and profitability while conducting its day to day operations. Liquidity is a precondition to ensure that firms are able to meet its short-term obligations and its continued flow can be guaranteed from a profitable venture. The importance of cash as an indicator of continuing financial health should not be surprising in view of its crucial role within the business. This requires that business must be run both efficiently and profitably. In the process, an asset-liability mismatch may occur which may increase firm’s profitability in the short run but at a risk of its insolvency. On the other hand, too much focus on liquidity will be at the expense of profitability and it is common to find finance textbooks begin their working capital sections with a discussion of the risk and return tradeoffs inherent in alternative working capital policies. Thus, the manager of a business entity is in a dilemma of achieving desired tradeoff between liquidity and profitability in order to maximize the value of a firm.

Importance of Working Capital

The working capital meets the short-term financial requirements of a business enterprise. It is a trading capital, not retained in the business in a particular form for longer than a year. The money invested in it changes form and substance during the normal course of business operations. The need for maintaining an adequate working capital can hardly be questioned. Just as circulation of blood is very necessary in the human body to maintain life, the flow of funds is very necessary to maintain business. If it becomes weak, the business can hardly prosper and survive. Working capital starvation is generally credited as a major cause if not the major cause of small business failure in many developed and developing countries.

Objectives of Working Capital
It is becoming more and more difficult to use debt to finance mechanical engineering firms. Companies in this industry are therefore forced to optimize their capital employed in order to become less dependent on borrowed money.

Management of Working Capital

While the performance levels of small businesses have traditionally been attributed to general managerial factors such as manufacturing, marketing and operations, working capital management may have a consequent impact on small business survival and growth. The management of working capital is important to the financial health of businesses of all sizes. The amounts invested in working capital are often high in proportion to the total assets employed and so it is vital that these amounts are used in an efficient and effective way. However, there is evidence that small businesses are not very good at managing their working capital. Given that many small businesses suffer from under capitalisation, the importance of exerting tight control over working capital investment is difficult to overstate.

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Meaning of Working Capital:

- Working Capital is the amount of Capital that a Business has available to meet the day-to-day cash requirements of its operations
- Working Capital is the difference between resources in cash or readily convertible into cash (Current Assets) and organizational commitments for which cash will soon be required (Current Liabilities)
- It refers to the amount of Current Assets that exceeds Current Liabilities (i.e. CA - CL)
- Working Capital refers to that part of the firm’s Capital, which is required for Financing Short-Term or Current Assets such as Cash, Marketable Securities, Debtors and Inventories. Working Capital is also known as Revolving or Circulating Capital or Short-Term Capital

Working Capital Concepts:

- Gross Concept: It means Current Assets. This is knows as Quantitative aspect of Working Capital
(Focus is on (i) Optimum Investment in Current Assets and (ii) Financing of Current Assets)
- Net Concept: It means difference between Currents Assets & Current Liabilities. This is knows as Qualitative aspect of Working Capital
(Focus is on (i) Liquidity Position of the Firm and (ii) WC Amount that can be financed by Permanent sources of Funds)
Meaning of Operating Cycle/Working Capital Cycle:
- Cash
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Empirical observations show that the financial managers have to spend much of their time to the daily internal operations relating to current assets and current liabilities of the firms. As the largest portion of the manager’s time is devoted to working problems, it is necessary to manage working in the best possible way to get maximum benefit. The effective management of the business, among other things primarily depends upon the manner in which the short-term assets and short run sources of financing are managed. The management or current assets management consists of inventories, accounts receivable and cash & bank balances as the major components. There is a difference between current assets and fixed assets in terms of their liquidity. A firm requires many years to recover the initial investments in fixed assets such as plant and machinery and land and buildings. On the contrary, investments in current assets are turned over many times a year. Investments in current assets such as inventories and book debts are realized during the firm’s working capital cycle, which is usually less than a year. Working capital is that proportion of a company’s total capital, which is employed in short-term operations.

Even though, it is one segment of the capital structure of a business, it constitutes an inter-woven part of the total integrated business system. Therefore, neither it can be regarded as an independent entity, nor, can the working capital decisions be taken in isolation. Thus, a study in this field is of major importance to both internal and external analysis, for its close relationship with the day-to-day operations of a business.

There are many aspects of working capital management, which form an important function of a financial manager:-
• Working management represents a large portion of the firm’s investment in assets.
• Working management has greater significance not only for small firms but also for large firms.
• The need for working capital is directly related to sales growth.
Most of the work dealing with working capital management in confined to the balance sheet, which is directed towards optimizing the levels of cash and marketable securities, receivable and inventories. For the most part, optimization of these current assets is isolated from the optimization of the other current assets and the overall valuation of the firm.

The decision concerning cash and resources, receivable, investments and current liabilities is with an objective of maximizing the overall value of the firm. Once decisions are reached these areas, the levels of working capital are also reduced.

An appropriate level of working capital is to be maintained as the excessive working capital interrupts the smooth flow of the business activity and curbs profitability. Also, there are a lot of circumstances where shortage of working capital has proved to be the major factor for business failure. Operating plans are out of control and the corporate objectives get blurred. The suppliers and the creditors give the firm an adverse credit rating and tighten up credit terms.

The problem of managing working capital has got a separate entity as against different decision-making issues concerning current assets individually. Working capital has to be regarded as one of the conditioning factors in the long run operations of a firm, which is often inclined to treat it as an issue of short-run analysis and decision-making.

The management of working capital hence involves constant vigilance to ensure that the right quantum is available on a continuing basis to support and promote the activities. Sound financial and statistical techniques, supported by judgment, should be used to predict the quantum of working capital needed at different time periods.


Working capital has been in several ways as given below.

Operating capital: - As the working capital is the capital required to operate the business and is the capital invested in the current assets, it is called as operating capital.

Circulating capital: - Interchangingly used word for working is circulating capital. Gerestenberg gas suggested this item ‘circulating capital’ as all the assets of business change from one form to another.


Conceptually, working capital is either explained as: - Net Working Capital or Gross Working Capital. These concepts are not exclusive; rather they have equal significance from management viewpoint. Gross working capital refers to the firm’s investment in current assets. Net working capital refers to the difference between current assets and current liabilities.

It is called as ‘qualitative’ aspect of working capital and focuses attention on two aspects of current assets management: -

1. Optimum investment in current asset
It is conventional rule to maintain the level of current assets twice the level of current liabilities to constitute a margin or buffer for maturing obligation of a business.

2. Financing of current asset
Another aspect of gross working capital points to the need of arranging funds to finance current assets.

Net working capital can be positive or negative. A positive net working capital will arise when current assets exceed current liabilities. A negative net working capital mean excess current liabilities over current working capital being the difference between current assets and current liabilities, is ‘qualitative’ concept and hence it: -
1. Indicates the liquidity position of the firm: - A weak liquidity position poses a threat to solvency of the company and makes it unsafe and unsound.

2. Suggests the extent to which working capital needs may be financed by permanent sources of funds:- i.e., it covers the question of judicious mix of long term and short term funds for financing current assets. Thus, it may be emphasized that both gross and net concepts of working capital are equally important for the efficient management of working capital.
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to get information about the topic "working capital management" full report ppt and related topic refer the link bellow




topicideashow-to-project and implimentation-report-on-working-capital-management-in-hal
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Management is an art of anticipating and preparing for risks,
uncertainties and overcoming obstacles. An essential precondition for
sound and consistent assets management is establishing the sound and
consistent assets management policies covering fixed as well as current
assets. In modern financial management, efficient allocation of funds has a
great scope, in finance and profit planning, for the most effective utilization
of enterprise resources, the fixed and current assets have to be combined
in optimum proportions.
Working capital in simple terms means the amount of funds that a
company requires for financing its day-to-day operations. Finance manager
should develop sound techniques of managing current assets.


Working capital refers to the investment by the company in short
terms assets such as cash, marketable securities. Net current assets or net
working capital refers to the current assets less current liabilities.


Working capital may be regarded as the lifeblood of the business. Without
insufficient working capital, any business organization cannot run smoothly
or successfully.In the business the Working capital is comparable to the blood of the
human body. Therefore the study of working capital is of major importance
to the internal and external analysis because of its close relationship with
the current day to day operations of a business. The inadequacy or
mismanagement of working capital is the leading cause of business

Implications of Net Working Capital:

Net working capital is necessary because the cash outflows and inflows do
not coincide. In general the cash outflows resulting from payments of
current liability are relatively predictable. The cash inflows are however
difficult to predict. More predictable the cash inflows are, the less NWC will
be required. But where the cash inflows are uncertain, it will be necessary
to maintain current assets at level adequate to cover current liabilities that
are there must be NWC.


Working capital is required to run day to day business operations. Firms
differ in their requirement of working capital (WC). Firm s aim is to maximize
the wealth of share holders and to earn sufficient return from its operations.

Operating cycle:

The working capital cycle refers to the length of time between the firms
paying the cash for materials, etc., entering into production process/stock &
the inflow of cash from debtors (sales), suppose a company has certain
amount of cash it will need raw materials. Some raw materials will be
available on credit but, cash will be paid out for the other part immediately.
Then it has to pay labour costs & incurs factory overheads. These three
combined together will constitute work in progress. After the production
cycle is complete, work in progress will get converted into sundry debtors.
Sundry debtors will be realized in cash after the expiry of the credit period.


Cash management is one of the key areas of WCM. Apart from the fact
that it is the most liquid asset, cash is the common denominator to which all
current assets, that is, receivables & inventory get eventually converted into
Cash is oil of lubricate the ever-turning wheels of business: without it the
process grinds to a shop.


Transaction motive:
Transaction motive refer to the holding of cash to meet routine cash
requirements to finance the transactions which a firm carries on in a variety
of transactions to accomplish its objectives which have to be paid for in the
form of cash. E.g. payment for purchases, wages, operating expenses,
financial charges like interest, taxes, dividends etc. Thus requirement of
cash balances to meet routine need is known as the transaction motive and
such motive refers to the holding of cash to meet anticipated obligations
whose timing is not perfectly synchronized with cash receipts.
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Working Capital Management

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Decisions relating to working capital and short term financing are referred to as working capital management. Short term financial management concerned with decisions regarding to CA and CL.
Management of Working capital refers to management of CA as well as CL.
If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.
These involve managing the relationship between a firm's short-term assets and its short-term liabilities.

Why working Capital is important?

Investment in CA represents a substantial portion of total investment.
Investment in CA and level of CL have to be geared quickly to changes in sales.

Gross Working Capital

Total Current assets
Where Current assets are the assets that can be converted into cash within an accounting year & include cash , debtors etc.
Referred as “Economics Concept” since assets are employed to derive a rate of return.

Net Working Capital

Referred as ‘point of view of an Accountant’.
It indicates liquidity position of a firm & suggests the extent to which working capital needs may be financed by permanent sources of funds.

Bank Rate

Standard rate at which bank is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under Reserve bank of India Act,1934.
The rate of interest charged by central bank on their loans to commercial banks is called bank rate(Discount rate).
An increase in bank rate makes it more expensive for commercial banks to borrow . This exerts pressure to bring about the rise in interest rates (lending rates) charged by commercial banks on their lending to public. This leads to a general tightening in economy.
Whereas decrease in bank rate has the opposite effect and leads to general easing of credit in the economy.

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The balance sheet is a snap shot of the asset and the liabilities of the company of a particular point of time. This is also called as the sources and disposition of the funds statements. If one looks at the balance sheet of a particular year one may not be able to detect many strength and the weakness of the company from the balance sheet of the company which is the drawn for the one year and on a particular day.
It is with the help of the evaluation and analysis of the ratios that one may derive some meaningful conclusions from the financial statements.
Generally, the comparison of ratios for the two periods or more is more meaningful as one will be able to establish the trend.


1. Nature of business:

The need of working capital differs from business. A trading concern requires less working capital where as a manufacturing concern requires more working capital. A concern engaged in services requires very less working capital compare to merchandize concerns requires large amount of working capital.

2. Size of business:

The sixe of working capital directly depends upon size of business, larger the business large is the requirement of the working capital and vie-a-vis. This is evident due to high buying and selling cost, less efficient technical equipment etc.

3. Length of operating cycle:

The need of working capital directly depends upon the length of period required for manufacturing. The longer the operating cycle greater will be the need for working capital.

4. Production policy:

Working capital requirement also fluctuates according to the production policy. Some products have seasonal demand but in order to eliminate the fluctuations in working capital, the manufacturer plans the production a steady flow throughout the year. This policy even out the fluctuations in working capital.

5. Terms of purchase and sale:

The requirement of working capital depends upon term of purchase. Cash if credit, cash purchase requires more amount of working capital compare to credit purchase. Similarly policy of credit sale needs more working capital than that of cash sale.

6. Inventory:

Some concerns are forced to hold large inventories in terms of raw material or finished goods due to the reason of seasonal nature of availability, long distances, scarcity etc. in such case the working capital required is more.

7. Cash requirement:

When more of cash is required for payment of taxes, interest, dividend and other expenses more of working of working capital is needed. Discounts policies, cost reduction programs, change in stock levels etc. affected the cash position in the working capital.

8. Expansion:

For the expansion of the business at normal rate, retained profits can be used for the purpose. However for the rapid sudden growth if such profits are not available then the requirement of working capital will be more.

Management ability attitude and efficiency:

The management policies in respect of payment affect the requirement of working capital. An efficient management can speed up the turnover and maintain a smooth flow of cash and receivables. The extent of risk to be assumed and the flexibility of capital structure depend upon management ability and attitude. The flexible capital structure needs a high proportion of working capital.

Meaning of Research:-

“A careful investigation or enquiry especially through search for new facts in any branch of knowledge”
Radman and Mory define research as a “systematized effort to gain knowledge.”
In research 5 basic types. The main of research is to find out the truth which is hidden and which has not been discovered as yet. The purpose of research is to discover answer to questions through the application of scientific procedures. Research has its special significance in solving various operational and planning problems of business and Industry.
Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how is done scientifically. In it we study various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them.

Primary sources:-

There are various methods of collecting the primary data i.e. interview method, questionnaire method, observation method etc. in this case it is the study of a single organization, so personal interview methods is used for collecting the necessary information and data. For this purpose at the time of every visit personal interview of the Managing Director, CEO, Finance Manager. Accounts officer are taken, through which points like requirement of Financial Analysis. Sources of Financial Analysis, history of organization etc. And other relevant issues are discussed and the required information is collected and inserted at appropriate places in this project and implimentation report.

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The Engineering sector is the largest in the overall industrial sectors in India. It is a diverse industry with a number of segments, and can be broadly categorized into two segments, namely, heavy engineering and light engineering. The engineering sector is relatively less fragmented at the top, as the competencies required are high, while it is highly fragmented at the lower end (e.g. unbranded transformers for the retail segment) and is dominated by smaller players.
The engineering industry in India manufactures a wide range of products, with heavy engineering goods accounting for bulk of the production. Most of the leading players are engaged in the production of heavy engineering goods and mainly produces high-value products using high-end technology. Requirement of high level of capital investment poses as a major entry barrier. Consequently, the small and unorganized firms have a small market presence.
The light engineering goods segment, on the other hand, uses medium to low-end technology. Entry barrier is low on account of the comparatively lower requirement of capital and technology. This segment is characterized by the dominance of small and unorganized players which manufacture low-value added products. However, there are few medium and large scale firms which manufacture high-value added products. This segment is also characterized by small capacities and high level of competition among the players.
The engineering industry is the largest segment of the overall Indian industry. The engineering industry can be divided into electrical and non-electrical segments. The electrical segment depends upon the investments in power industry, while the prospects of the non-electrical segment are driven by industrial investment.

Engineering equipment finds demand in sectors like cement, steel, power,
chemicals and petrochemicals, all of which have been adversely affected by the general slowdown in the Indian economy in the past. Indian manufacturers are capable of catering to most of the customer’s needs. There may be a supply constraint in some cases. For example, India has an installed capacity of 7000 MW in turbines. Some Indian manufacturers like BHEL and Larsen & Toubro have made a mark in the international markets, while some of the Indian arms of multinationals are a global base for outsourcing products and services including R&D.


India is the fourth largest market in the world in terms of installed wind power capacity. In terms of new capacity added in 2006 it was third in the world. A good local production base for wind turbines now exists in the country, with 15 manufacturing companies active in this sector. Suzlon Energy Ltd, based in Mumbai, is the world's fifth largest wind turbine generator company, and the largest in India (it is estimated to have over 50% of market share) and Asia, and the company reported record growth for the financial year ended 31 March 2007. Overseas sales accounted for around 48% of total sales during this year.
Leading wind turbine blade manufacturer LM Glass fiber has two factories for manufacturing blades in India and it opened a new R&D Centre in Bangalore in May, joining its existing R&D Centers in Denmark and the Netherlands. The Indian Centre, which will employ more than 40 engineers by the end of the year, will specialize in finite element method (FEM), computational fluid dynamics (CFD) and computer-aided design (CAD) for product development.
China is undoubtedly the powerhouse of the Asian region, but with a population of 1.1 billion (second only to China) and a booming economy, India is also attracting a lot of attention. India's gross domestic product (GDP) growth rate is around 8.5% (2006), lab our costs are low, the country has a strong base of skilled IT professionals, and English is widely spoken in the business world. Not surprisingly many foreign investors and companies are planning to, or have already, set up production units in India.
In this environment the Indian composites industry has been faring well, registering a 25-30% annual growth rate over the last three consecutive years, more than twice that of general industrial growth and three times that of GDP. This is according to consultant Dr N.G. Nair, of NGN Composites, Chennai. Nair is also founder of the FRP Institute, a society which aims to bring together all those who are concerned with fiber reinforced plastic (FRP) composites in India.
Indian manufacturers of composite products are generally small- to medium-sized companies, Nair told Reinforced Plastics. There are about 300 medium-sized companies and over 1200 small companies (turnover less than 1 million rupees). There are over 60 larger companies. Around 25 companies are exporting their products, led by the manufacturers of chemical process equipment.


Finance is the life blood and nerve centre of a business. Just as circulation of blood is essential in the human body for maintaining life, blood is very essential for smooth running of business. It has been rightly termed as universal lubricant which keeps the enterprise dynamic. Finance is about the bottom line of business activities. It is that branch of economics that deals with management of money and assets involving banking, investment, credits, and so on. As a verb, let’s look at the activities that happen around us. One needs a proper planning, or estimation in a business management, like arranging funds, assessing the profit or loss factor, etc. In the personal front arranging one’s finance may be his or her saving ability or investment in various instruments available.
A nation needs to have a budget to run the economy, have to plan accordingly regarding the general welfare based on the revenue generated from the tax-payers, or foreign exchanges earned over a period whether it’s private, public, or personal front, the common mantra here is proper planning, understanding of income and expenditure, and risk-factors involved. Now, where do we find these entire activities taking place, or in common man’s term where’s the market place? It’s everywhere around us, but happens in a very organized fashion, so we will call them in different names, like stock (equity) markets, Forex market, etc.
The Foreign Exchange or the Forex market is regarded to be the largest financial market place based on the volume of transaction every day. It involves regulatory banking bodies, government, MNC’S, and other financial institutions. Finance market place is basically the exchange or trading place for one currency with other. There isn’t’ any particular institutional body where this trading happens, but usually an over-the –counter practice, where different currency instruments are exchanged. Even the rate varies from place to place, that is why you will find different values for one dollar in other countries.


Finance may be defined as the provision of money at the time when it is required. Finance refers to managing the flows of money through an organization. It concerns with the application of skills in the manipulation, use and control of money. Different authorities have interpreted the term ‘Finance’ differently.

“Finance is that part of business activity which is concerned with organization and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise”. By Wheeler


The main objective of financial management is to arrange sufficient finance for meeting short-term and long-term needs. These funds are procured at minimum costs so that profitability of business is maximized. With these things in mind, a financial manager will have to concentrate on the following areas of finance function.
1. Estimating Financial Requirement
2. Deciding Capital Structure
3. Proper Cash Management
seminar flower
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Posts: 10,120
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13-09-2012, 10:19 AM

Working Capital Management

.ppt   1Working Capital.ppt (Size: 1.83 MB / Downloads: 74)

The Cash Conversion Cycle

In order to manage working capital efficiently, a firm has to be aware of how long it takes, on average, to convert its goods and services into cash. This length of time is formally known as the cash conversion cycle.
The cash conversion cycle is made up of 3 separate cycles:
The production cycle: the time it takes to build and sell the product
The collection cycle: the time it takes to collect from customers (i.e. collecting accounts receivable)
The payment cycle: the time it takes to pay for supplies and labor (i.e., paying accounts payable).

Putting it all together: The Cash Conversion Cycle

Production cycle + Accounts receivable cycle – Payment cycle = Cash conversion cycle, that is, the number of days between when a firm incurs an outflow of cash to start production until it receives payment on a credit sale.
So if a firm can shorten its production cycle or its collection cycle, or both, while keeping its payment cycle constant or lengthened, it can shorten the number of days that it would typically have to finance its operations, thereby reducing its financing costs and increasing its profits.
Thus, shortening the cash conversion cycle essentially requires the efficient management of receivables (credit policy), inventory, and payables.

Collecting accounts receivable

The timing of collecting payments from customers is hardly uniform.
A certain percentage of customers always pays on time, while a small percentage is always late. 
Firms have to analyze their historical collection patterns and plan accordingly for the future.

Credit: A two-sided coin

One firm’s accounts receivable is another firm’s accounts payable.  
The cash conversion cycle decreases with a shortening of the collection cycle, but increases with a lengthening of the payment cycle.
If a firm shortens it collection cycle by tightening its credit policy, its suppliers could do the same, a move that would negate the effectiveness of the strategy.
Firms must establish good credit policies regarding screening, payment terms, and collecting of overdue bills.

Qualifying for credit

Determining whether credit should be extended to a sotomer usually depends on the customer’s background and business potential. The common credit practices of competing firms also influence the decision.
There is usually a tradeoff between paying the high screening costs and the lost cash flow due to defaults resulting from poor screening.

Setting Payment Policy[/b]

An important part of credit policy is to determine how many days of free credit to grant customers and whether or not to offer discounts for paying early, and if so, by how much of a discount.
Discounts, if high enough, tend to be mutually beneficial, since the seller frees up cash and the buyer pays less.

Collecting Overdue debt

A firm’s collection policy involves sending collection notices, taking court action, and eventually writing off bad debts.
The cost to the firm escalates at each step
Firms should carefully establish and monitor their credit policy involving:
payment terms
collection procedures
The goal is to maximize benefits while minimizing costs.

seminar flower
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Posts: 10,120
Joined: Apr 2012
17-09-2012, 12:35 PM

Working Capital Management

.ppt   Working-Capital-Management2.ppt (Size: 626 KB / Downloads: 31)


Current assets – Current liabilities
It measures how much in liquid assets a company has available to build its business.
A short term loan which provides money to buy earning assets.
Allows to avail of unexpected opportunities.
Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds 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.

Working Capital Management

Decisions relating to working capital and short term financing are referred to as working capital management. Short term financial management concerned with decisions regarding to CA and CL.
Management of Working capital refers to management of CA as well as CL.
If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.
These involve managing the relationship between a firm's short-term assets and its short-term liabilities.
The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses.
Businesses face ever increasing pressure on costs and financing requirements as a result of intensified competition on globalised markets. When trying to attain greater efficiency, it is important not to focus exclusively on income and expense items, but to also take into account the capital structure, whose improvement can free up valuable financial resources

Net Working Capital

Referred as ‘point of view of an Accountant’.
It indicates liquidity position of a firm & suggests the extent to which working capital needs may be financed by permanent sources of funds.

Characteristics of Current Assets

Short Life Span
I.e. cash balances may be held idle for a week or two , thus a/c may have a life span of 30-60 days etc.
Swift Transformation into other Asset forms
I.e.each CA is swiftly transformed into other asset forms like cash is used for acquiring raw materials , raw materials are transformed into finished goods and these sold on credit are convertible into A/R & finlly into cash.

Matching Principle

If a firm finances a long term asset(like machinery) with a S-T Debt then it will have to be periodically finance the asset which will be risky as well as inconvenient.
i.e. maturity of sources of financing should be properly matched with maturity of assets being financed.
Thus Fixed Assets & permanent CA should be supported with L-T sources of finance & fluctuating CA by S-T sources.

seminar flower
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Joined: Apr 2012
06-10-2012, 05:14 PM


.doc   wcm.doc (Size: 54.5 KB / Downloads: 31)

Every business needs funds for two purposes for its establishment and to carry out its day- to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that part of firm’s capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purposes 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 words, working capital refers to that part of the firm’s capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.


There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the enterprises current assets are those
Assets which can convert in to cash within a short period normally one accounting year.


Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of raw material, work- in-process, finished goods and cash balance. This minimum level of current assts is called permanent or fixed working capital as this part of working is permanently blocked in current assets. As the business grow the requirements of working capital also increases due to increase in current assets.


Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business.


Management of working capital is concerned with the problem that arises in attempting to manage the current assets, current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations are bad for any firm. There should be no shortage of funds and also no working capital should be ideal.

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