Working Capital Management- Heritage Foods

INTRODUCTION
The concept of working capital is much confusing in the business circles. It is very unfortunate, there
is much disagreement among financiers, accountants, businessmen and economists as to the exact
meaning of the term working capital. According to a few, working capital means current assists. For
some others it is an excess of current assets over current liabilities. Some authorities prefer to call it
circulating capital in place of working capital.

MEANING OF WORKING CAPITAL:The term working capital is commonly used for the capital required for day-to-day working
in business concern. Such as for purchasing raw material for meeting day-to-day expenditure on
salaries, wages, rent rates advertising etc. but there is much disagreement among various financial
authorities as to the exact meaning of the term working capital

DEFINITION OF WORKING CAPITAL

Working Capital refers to that part of the firms capital, which is required for financing short-term
or current assets such a cash marketable securities, debtors and inventories. Funds thus, invested
in current assets keep revolving fast and are constantly converted into cash and this cash flow out
again in exchange for other current assets. Working Capital is also known as revolving or
circulating capital or short-term capital.

DETERMINANTS OF WORKING CAPITAL

Nature of Industry

Seasonality of Operations

Production Policy

Market Conditions

Conditions of supply

Size of Business

Volume of Sales

Terms of Purchase and Sales

Business Cycle

Growth and Expansion of the firm

Price Level Changes

Operating Efficiency of the firm

Profit Appropriation

Capital Structure of the firm

NEED OF THE STUDY

Current assets must be managed efficiently in order to maintain the liquidity of the firm to know
about the financial mixed strategies .
Hence forth so far researchers not touched with said topic to
knowing the information in organization exactly the working capital wants to know the balances of
current assets & current liabilities increases or decreases to know the corrected netprofit of
balance and we can know the difference of the year of balance how much it is profit or loss will be
there in company.

SCOPE OF THE STUDY:

The study is confined to HERITAGE ltd and analysis of its financial statements .
The study period is 2006-2012
The main aim of the study is to assess the proper mgt of current assets & current liabilities .
The study concentrates more on the working capital mgt of HERITAGE .
Working capital gives only a good basis for quantitative analysis of financial problem.

OBJECTIVES OF STUDY :
To study overall position of HERITAGE.
To examine the changes in working capital of HERITAGE.
To study existing system of working capital management in HERITAGE.
To analyze financial performance of company with reference to its working capital
components.
To know the financial position of a company.

LIMITATIONS OF THE STUDY:

In present study the analysis is mainly based on secondary data given in annual audited balance
sheets , profit and loss a/c and reports of HERITAGE.
The study does not touch all the units of HERITAGE.
Limited span of time is a major limitation of this project.
The present study cannot be used for inter firm comparision.
The result does not reflect the day to day transactions.
The study does not cover the all working capital.
Balancing liquidity , profitability and risk in managing working capital .

RESEARCH METHODOLOGY
PERIOD OF THE STUDY : the period of the study of these project of working capital
management on HERITAGE is two months.

COLLECTION OF DATA:
To achieve a fore said objective the following methodology has been adopted. The information
for this report has been collected through the Primary and Secondary sources.
1. Primary Data Sources
2. Secondary Data Sources
PRIMARY DATA SOURCES:
It is also called as first handed information the data is collected through the observation in the
organization and interviews with the accounts and the persons in the financial department. A part from
these, some information is collected through the seminars which were held by ECIL.
SECONDARY DATA SOURCES:
These secondary data is existing data which is collected by other sources, i.e. financial journals
annual reports of ECIL, website of ECIL and other publication of ECIL.

TOOLS AND TECHNIQUES :

Current ratio

Current Assets
Current Liabilities

Quick ratio

Liquid Assets
Current Liabilities

Cash ratio

Working capital turnover ratio =

Cash & Bank balances

Current Liabilities
sales(turnover)
Working capital

* 100

debtors turnover ratio

Stock turnover ratio

sales (turnover)
accounts recieveble
Sales (turnover )
inventory