Rohit Jaiswal (Nirlep)

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT
CONTENTS
Sr.No.
1.
Name Of The Topic

Introduction
Page No.
3
A] Company Profile
13
B] Details of Promoters
22
2.
Objective Of The Study
27
3.
Research Methodology
28
A] Primary Data
41
B] Secondary Data
41
4.
Data Analysis And Interpretation
44
5.
Limitation of Study
61
6.
Findings
62
7.
Recommendations / Suggestions
64
8.
Bibliography
65
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Executive summary
Nirlep Appliances Ltd. was incorporated in 1968 by Mr.Nilkanth

Bhogale. In the beginning it is the company which used to deal in hospital &
laboratory equipment (1960).Nirlep Appliances Ltd. is the pioneer in India in
manufacturing of Non-stick Cookware. It has about 40% of market share in
Non-stick Cookware.
The
topic
of
the
project
undertaken
was
Working
Capital
Management. The idea behind selection of this project was mainly due to its
nature and importance in the overall financial management of organization.
The important of working capital management is reflected in the fact that
financial managers spend a great deal of time in managing current assets
and current liabilities. Arranging short term financial, negotiating favourable
credit term, controlling cash movement managing accounts receivable and
monitoring Investment in inventories consumes a great deal of time of
finance manager.
Working Capital means excess of current assets over current

liabilities.
It refers to all aspects of the administration of both current
liabilities. The basic objective of working Capital Management is to manage

the firm's current assets and current liabilities in such a way that the
satisfactory level of working capital is maintained. Organizations are
spending corers of rupees on working capital requirement each year
disproportionately for buying large amount of current assets.
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The need of working capital Arise from the cash/operating cycle of the
firm. Efficiency of operations accelerates the pace of cash cycle and
improves the working capital turnover resulting in reduced requirement of
working capital. A firm should have adequate working capital to support its
budgeted level of activity in terms of production/sales. It should have
neither more nor less working capital than required.
The Finance Manager also has to calculate the firms risk taking and
debt serving capacity for compounding the funds. The ratio analysis is done
to know the performance of the organization. The rationale of ratio analysis
lies in the fact that it makes related information comparable. Comparison
with related facts is, therefore, on the basis of ratio analysis. Analysis of
financial statements is of interest to lenders (short-term as well as longterm), investors, security analysts, managers and others. If properly
analyzed and interpreted, financial statements can provide valuable insights
into a firms performance.
This project is based on analysis and interpretation. The researcher

has alternative solution and suggestions to give to the organization. Lastly at
the end of report, contains bibliography.
BBA VI SEM [2014 2015]
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INTRODUCTION
Working Capital (Meaning and Definition):
Working capital is defined as Excess of current asset over current liabilities

and provisions It is the capital which is required for the daily working of the
business. Working capital is also called as circulation capital.
Definition:
Working capital is the amount of funds necessary to cover the cost of

operating the enterprise
Concept of working capital:
The word working capital is made of two words

1. Working and
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2. Capital
The word working means day to day operation of the business, whereas the
word capital means monetary value of all assets of the business. Working
capital may be regarded as the life blood of business. Working capital is of
major importance to internal and external analysis because of its close
relationship with the current day to-day operations of a business. Every
business needs funds for two purposes.
Long term funds are required to create production facilities through

purchase of fixed assets such as plants, machineries, lands, buildings & etc
Short term funds are required for the purchase of raw materials, payment of
wages, and other day-to-day expenses. It is otherwise known as revolving or
circulating capital.
It is nothing but the difference between current assets and current
liabilities.
Working Capital = Current Asset Current Liability
Businesses
use
capital
for
construction,
renovation,
furniture,
software, equipment, or machinery. It is also commonly used to purchase

inventory, or to make payroll. Capital is also used often by businesses to put
a down payment down on a piece of commercial real estate. Working capital
is essential for any business to succeed. It is becoming increasingly
important to have access to more working capital when we need it.
Components of working capital
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Current Asset- Current assets are the assets which can be converted
into cash within an accounting year.
Current Liabilities- Current liabilities are those claims of outsiders

which are expected to mature for payment within an accounting year.
Current Liabilities
Current Assets
Cash in hand / at bank
Bills Payable
Bills Receivable
Sundry Creditors
Sundry Debtors
Outstanding expenses
Short term loans
Accrued expenses
Investors/ stock
Bank Over draft
Temporary investment
Prepaid expenses
Accrued incomes
Classification of working capital
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Working capital may be classified in to ways:

o
o
On the basis of concept.

On the basis of time/ Periodicity of Requirements
On the basis of concept

On the basis of concept working capital can be classified as gross working
capital and net working capital.
1. Gross working capital
2. Net working capital
Gross Working Capital = Total of Current Asset

Net Working Capital = Excess of Current Asset over Current Liability
On the basis of time

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On the basis of time, working capital may be classified as:

1.
Permanent or fixed working capital.
2.
Temporary or variable working capital
OPERATING CYCLE:
The working capital requirement of a firm depends, to a great extent upon

the operating cycle of the firm. The operating cycle is defined as the time
duration starting from the procurement of goods or raw materials and
ending with the sales realization. The length and nature of the operating
cycle differs from one firm to another depending upon the size and nature of
the firm.
A companys operating cycle typically consists of three primary

activities:
1. Purchasing resources,
2. Producing the product and
3. Selling the product.
These activities create funds flow that is both unsynchronized and

uncertain. This is unsynchronized because cash disbursements usually take
place before cash receipts. This is uncertain because future sales and costs,
which generate the respective receipts and disbursements, cannot be
forecasted with complete accuracy.
The concept of operating cycle is useful in controlling as well as

forecasting working capital needs. Longer the operating cycle the more
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working capital funds the firm needs, while shorter operating cycle period
indicates that there is no locking up of funds in current assets.
Cash
Debtors/BR
Raw Material
Sales
Work-in Progress
Finished Goods
Thus the operating cycle of a firm consists of the time required for the
completion of the chronological sequence of the following:
i.
Procurement of raw materials and services.
ii.
Conversion of raw materials into work-in-progress.
iii.
Conversion of work-in-progress into finished goods.
iv.
Sale of finished goods (cash or credit).
v.
Conversion of receivables into cash.
The segments of the operating cycle include raw material storage period,
conversion period, finished goods storage period and average collection
period before getting back cash along with profit. The total duration of all
the segments mentioned above is known as gross operating cycle period.
When the average payment period of the company to its suppliers is
deducted from the gross operating cycle period the resultant period is called
the net operating cycle period or the operating cycle period.
NEED
FOR ADEQUATE WORKING CAPITAL:
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The need and importance of adequate working capital for day to day
operation can hardly be underestimated. Every firm must maintain a sound
working capital position otherwise; its business activities may be adversely
affected. Thus every firm must have adequate working capital.
The excess working capital, when the investment in working capital is more
than the required level, may result in-
a). Unnecessary accumulation of inventories resulting in wastage, theft,

damage etc.
b). Delay in collection of receivables resulting in more liberal credit terms to
customers than warranted by the market conditions.
c). Adverse influence on the performance of the management.
On the other hand, inadequate working capital situation is not good for the
firm. Such a situation may have following consequences:
i.
The fixed asset may not be optimally used.
ii.
Firms growth may stagnate.
iii.
Interruptions
in
production
schedule
may
occur
ultimately
resulting in lowering of the profit of the firm.

iv.
The firm may not be able to take benefit of an opportunity.
v.
Firms goodwill in the market is affected if it is not in a position to

meet its liabilities on time.
Thus taking in to consideration these consequences, financial manager

must establish:
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1. Well defined working capital policy,

2. Self decision of working capital management system.
Below are some types of policies in working capital management:
1. Moderate policy, in which value of current asset increases in proportion

with sales level.
2. Conservative policy, in which value of current asset increases more
rapidly than sales level. Such a policy tends to reduce the risk of shortage of
working capital by increasing the safety component of current asset. The
conservative policy also reduces the risk of non-payment to liability.
3. Aggressive type of policy, sales level increases more in percentage than
increase in current assets.
This type of aggressive policy has many implications. These implications are
as under:
i.
The risk of insolvency of the firm increases as it maintains low

liquidity.
ii.
The firm is exposed to greater risk as it may not be able to face

unexpected changes in market.
iii.
Reduced investment in current asset will result in increase in

profitability of the firm.
SIGNIFICANCE OF WORKING CAPITAL:
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INDUSTRY PROFILE
Non-stick cookware products are popular in the urban households

because it helps to cook food easily and save our time. The non-stickiness
property helps to clean and maintain the cooking utensils easily. There are
many brands of non-stick cookware products available in India. Here, we
have listed out the most popular non-stick cookware brands in India.
Nirlep:
Nirlep is the most preferred name in the Indian market which was
established in the year 1968 and it has lot of experience in cookware
manufacturing sector. It is the first company to produce non-stick cookware
items in India. Apart from supplying quality cookware products in India, it
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also exports professional non-stick pans to European markets. With many

domestic and international certifications, Nirlep plays an important role to
provide innovative cookware in Indian homes. In the year 2011, Nirlep
launched a new product called Aspa.
The features of Aspa includes,

1. Four layered non-stick coating
2. Requires less fuel and oil
3. Easy to clean and maintain
TTK Prestige:
TTK prestige offers various kitchen appliances for Indian homes. It is
the first kitchenware company in India to receive the ISO 9001 Certification
and the PED/CE Certification by TUV, Germany. The design and durability
are always the first class type in the Prestige cookware models. It deals with
almost all types of cooking products.
Hawkins:
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Hawkins has the experience of more than 40 years in kitchenware

products. Futura non-stick cookware from Hawkins is the most famous one.
The products are thermal efficient and long-lasting. The sales and services
provided by this company are usually excellent.
Pigeon:
Pigeon is a well known kitchen appliance brand that provides top quality
non-stick cookware to Indian customers.
Alda:
Alda produce wide range of kitchen products in India. Alda uses latest
innovation and technological advancement to manufacture the products.
The Alda non-stick cookware uses unique Daikin non-stick coating from
Japan which gives the most resistant non-stick surface for long-lasting
usage.
Usha:
Usha Shriram enterprises was established in the year 1983. At
present, it provides wide range of home appliances and consumer durable
products. The non-stick cooking equipments from this company includes
Tawa, Dosa tawa, Grill pan, Kadai and Frying pan.
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Crystal:
Crystal fulfills each and every household needs in India since 1971. In
the year 2007, it launched High end 3 coat platinum Teflon coated nonstick cookware. Crystal is also a certified licensee of DuPont USA. Concave
griddle,
Flat griddle,
Fry pan, Kadai, Appachatti are the non-stick
products of this company.

Premier:
Premier provides quality kitchen products in India since 1974. It has

diverse branches at all parts of India and customer service centres at many
parts of the globe. Therefore the cookware products are also available
outside India. As it has vast network, it was awarded the National best
exporter award for the year 2009 2010. The Premier non-stick cookware
products are modern, user-friendly and consume less amount of oil for
cooking. Apart from ordinary non-stick products, it also provides some
unique products such as Non-stick Appam panand Paniyara pan for south
Indian cooking.
COMPANY PROFILE
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Company Nirlep was established in 1968 by a visionary businessman

Mr.Nilkanth Bhogale who used to have interest in trading laboratory and Xray related equipments. This was the period when stainless steel was not
freely available in India; it was only available on quota basis. As such there
was a great deal of undersupply of laboratory related equipments in India.
Mr.Bhogale who realised then, the necessity for an alternative to stainless

steel equipments & manufactured the Utensils coated with poly tetra fluoro
ethylene (PTEE). He thus pioneered the concept of non-stick cookware in
India.
The first Nirlep product was launched in Mumbai. It was a fry pan with code
name F.P. 24. It was received suspicious. It was not surprising because
Indian housewife had never seen anything similar to it before.
In the initial stage Nirlep had just one distributer in Mumbai. But today the
company is having a wide distribution network of about 85 distributers
across the country coupled with a strong and dedicated field force to ensure
sales and services at around 9000 retail outlets.
Today, company is pioneer and leader with the market share of 35% in the
non-stick cookware segment in the country. The company exports its
products to countries like Saudi Araobia, Dubai, Maldives & Sri Lanka. The
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company is accredited with the quality certification ISO 9001:2000 of

AS/NZS. The company is having dedicated employees strength of about
225.
The company is having six manufacturing plants out of which three are
devoted to the cookware business; namely Nirlep Appliances Ltd., Amulet
Industries Pvt. Ltd., & Bhogale Coatings Pvt. Ltd. The company has also
undertaken several turnkey projects for setting up manufacturing plants for
the non-stick cookware in Middle East & Africa. The other three plants are
located in Waluj Industrial area, Aurangabad namely Marathwada Auto
compo. Pvt. Ltd., Umasons Steelfeb Pvt. Ltd.
One & half year back the company entered into a strategic technology tie up
with Smaltriva, an Italian company which is world leader in industrial bake
ware coatings. The industrial bake ware coating system (called the SBS
coating) denotes the most advanced non-stick coating systems used by the
most important food and bakery industries in the world. The SBS coating
system can be applied only by the most experienced licensed applicators and
Nirlep is proud to be one among them.
The
companys
fully
integrated
manufacturing
setup
for
non-stick
manufactures high quality kitchenware such as non-stick fry pans, Tawas,

Kadhais, Appam Chatty, Appe Patra, sandwich maker, pots and more.
The company strongly believes in three basic tents Integrity In Business,

Quality and Fair Price.
The company is having the current capacity of manufacturing 1.2 Million

kitchenware pans every year and now poised to have ambitious growth plan
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of achieving the target of 1.8 Million kitchenware pans. The management is

taking conscious efforts to invest heavily not only in technological
advancement but in its human capital as well. A Dedicated & focused efforts
of all the employees will make this successful.
HISTORY OF THE COMPANY:
In 1960, Mr.Nilkanth Bhogale (Father of our MD, Mr.Mukund Bhogale)

had a company which used to deal in hospital & laboratory equipment.
At that time Mr.Yashwant Bhogale (Brother of Mr.Nilkanth Bhogale) had
a cookware shop in Dadar, now known as Nirleponline.com.
Mr. Mr.Nilkanth Bhogale had ordered a shipment of PTFE (Polytetra
Flora Ethelyn), which was to be used in manufacturing on hospital &
laboratory equipment. By the time the shipment reach Mumbai, there
was no use of it. Since PTFE
was
very
overheads
Since
expensive
were
PTFE
very
has
the
high.
non-stick
properties, the idea was struck

to
manufacture
Non-Stick
cookware.
In 1964, Mr.Nilkanth Bhogale
moved
from
Aurangabad
Mumbai
and
to
Started
production. The 1st Pan was
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manufactured for Rs. 80, whereas the normal pans available then used
to cost Rs. 8. To sell these cook wares, promotions were done by live
demonstrations at social clubs, Women gatherings etc. Soon other big
cities also started souring Non-stick tawa. The key challenges faced by
the
company
were
Logistics,
Raw
Materials,
Labour
Intensive,
production, quality etc.

Slowly the production started increasing & the network got bigger. In
1972, 1st Consignment was sent to Poland, and for this we got
recognition
from
the
Indian
Government.
In
1974,
1stpress
advertisement was released and now the company would increase its
market network & product capacity. In 1980, new plant was set up at
Jalna.
In 1978, 1st TV commercial was aired, due to which all non-stick tawa
of Nirlep were bought away in no time.
There were a few business enquires that came from Dubai, Ghana & Sri
Lanka. Nirlep had set up non-stick cookware plants for them. Now the
company not only exported products but also exported technology and
this made them the market leaders.
Since 1980, field staffs were employed who acted as Liaison officers
between the customers retailer distributors company. From time
to time the senior team at Aurangabad visited the markets to get 1st
hand information. This year, markets opened and new competitors
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came into picture. Pressure cooker companies and thermo ware

companies also entered Non-stick cookware business.
In 1997, Nirlep offered sales promotion scheme to its retailers. Sell X
number of pans and get a foreign trip free. The company then started
doing sales via door to door, sales via exhibitions, institution sales,
product tie-ups and exports. During Dot Com boom, Nirlep also sold its
products on online portals. Its own website www.nirlep.com has been
developed..
In 1985, Nirlep had shifted its marketing HQ from Mumbai to
Aurangabad. The idea was increase the interface between the marketing
team and manufacturing team.
Earlier there were 3 separate companies
1. Silver Light
2. Dura ware Ltd Jalna &
3. Nirlep Distributors, which is now one entity Nirlep Appliances Ltd.
NIRLEP continues to be a strong market leader in the Indian non-stick
cookware with a market share of around 40%. NIRLEP products are
manufactured at Aurangabad. The factory is semi-automatic and are
equipped with state of the art machinery like automatic spray guns,
automatic digressing plant, spiral grooving machines, hydraulic press,
base grooving machines and stud welding machines etc.
Quality is taken very seriously at NIRLEP and each and every piece
goes through a Quality Control Check at every stage of manufacturing.
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The Company is owned by Technocrat Engineers who are deeply

involved in day to day operations of the organization and have a wide
knowledge in manufacturing non-stick.
Nirlep group is pioneer to launch non-stick cooking pots and pans in
Indian market. The company makes the finest quality of Non-stick
cook-wares for domestic and European market. Nirlep Group of
companies comprises six major and three minor companies and firms
with total annual sales of $ 40 million.
Other group companies:
1. Marathwada Auto Compo Pvt. Ltd.
2. Umasons Auto Compo Pvt. Ltd.
3. Bhogale Coatings and Paints.
4. Amulet Coatings Pvt. Ltd.
5. Amulet Industries Pvt. Ltd.
NATURE OF THE BUSINESS CARRIED
Nirlep Group of companies is a family owned business with well diversified

areas of working. The business activities are mainly categorized in three
work areas.
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The business group has done backward and forward integration of

processes to achieve ease in material requirement. The group has
aluminium processing facility to cater its captive requirement of aluminium.
1.Auto Component Manufacturing Division
Original Equipment supply for Indian, American, European and Japanese
Automobile manufacturers.
2.Surface Finishing Division
Manufacturing of Industrial paints and coatings and application of surface
treatment for Automobile components and engineering purpose.
3.Consumer Durable Goods Division
This business is involved in manufacturing of a well known brand NIRLEP
non-stick cookware. Nirlep group is pioneer to launch non-stick cooking
pots n pans in Indian market. The company makes the finest quality of non
stick cook-wares for domestic and European market.
Joint venture
It recently formed a joint venture with Italy-based Pardini SRL to

market the latter's products in India.
The joint venture Nova Italia Food Services Pvt Ltd is essentially a
marketing company that will bring to India Pardini's products, which
are available in the European market, said Mr Bhogale.
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VISION:
1.To move beyond boundries
2.To continually challenge and overcome limitations encounter in self

and company growth
3.Providing customer satisfaction,offering reliable products and services

at compitative prices
4.Providing an environment,conductive to the development,growth and

satisfaction of employees while fulfilling their reasonable aspirations.
MISSION:
NIRLEP aims to manufacture and market a wide range of high

quality products,services and systems of world class technology to the
total satisfaction of customer in domestic and overseas markets....
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PRODUCT/SERVICES PROFILE
The fort line product of Nirlep is the non stick cookware. Besides this Nirlep
also markets other products like Nirlep Enamelware. A whole new range of
stock and serve enamel coated utensils.
The products in these ranges are made from pure aluminium and have
spiral groves carved on their bottom. The spiral groves help in quick and
uniform transfer of heat and thus help in saving fuel.
Besides, these products require little oil for cooking.
Cooking in Nirlep products thus has 3 main advantages:-
1.Health- In Nirlep products the food doesnt stick of the utensil and this
helps in lowering the consumption of oil and thus the consumption of fats
and cholesterol.
2.Taste- Nirlep products help inpreserving all the essentials ingrediants of

food in their entirely. It also consumes less oil and helps in cooking healthy
yet tasty food.
3.Economy-
As cooking in Nirlep consumes less oil due to its non-stick
property and less fuel due to the spiral grooving on the bootom economy is
achieved by saving on fuel and oil.
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NIRLEP PRODUCTS
Nonstick Cookware
Enamel Cookware
Pressure Cooker
Hard Anodised Cookware
Induction Cooktop
Gas Lighter
Kitchen Gas Top
Nonstick Snackmaker
Cookware Gift Set
Induction Compatible
Cookware
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DETAILS OF PROMOTERS
BOARD OF DIRECTORS
Ramchandra N. Bhogale, Director
Mukund N. Bhogale, Managing Director
Nityanand J. Bhogale, Director
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Vinayak M. Jogalekar, Director
Mukesh Sehgal, Director
Sanjay P. Sathe, Director
Team of Nirlep consists of following members:
Production managers
Skilled & semi-skilled laborer
Quality analyzers
Warehousing and packaging experts
Sales & marketing executives
Administrative staff
COMPETITORS OF NIRLEP
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NIRALI
TTK PRESTIGE
HAWKINS
USHA
TVS
PREMIER
CRYSTAL
ALDA
PIGEON
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INFRASTRUCTURE FACILITIES
Office and Building Premise
FACILITIES
They have Canteen with hygienic food.
There is smoke detector.
They have maintained their campus very clean with good environment.
They provide computers.
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They provide special cloths who work in manufacturing department.
FINANCIAL CONDITION
Turnover:
YEAR
VALUE
2013-2014
(Rs. In Lacs)
6544.26
2012-2013
5727.22
2011-2012
5333.32
2010-2011
4983.00
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Interpretaion:
From the above chart companys turnover is goes on increasing in

each year. So it shows the company is in profitable condition
ACHIVEMENT AWARDS
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OBJECTIVE OF THE STUDY

1. To
understand
the
Working
Capital
structure
of
NIRLEP
APPLIANCES. Ltd.
2. To study the ratio analysis related to Working Capital so as to know

the financial position of the company.
3. To study the operating cycle .
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RESEARCH METHODOLOGY
Review of Literature:
Working Capital
Working capital is defined as Excess of current asset over current

liabilities and provisions It is the capital which is required for the daily
working of the business. Working capital is also called as circulation capital.
Working capital may be regarded as the life blood of business. Working
capital is of major importance to internal and external analysis because of
its close relationship with the current day to-day operations of a business.
It is nothing but the difference between current assets and current
liabilities.
Working Capital = Current Asset Current Liability
Concept of working capital
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Current Asset- Current assets are the assets which can be converted
into cash within an accounting year.
Current Liabilities- Current liabilities are those claims of outsiders

which are expected to mature for payment within an accounting year.
Current Liabilities
Current Assets
Cash in hand / at bank
Bills Payable
Bills Receivable
Sundry Creditors
Sundry Debtors
Outstanding expenses
Short term loans
Accrued expenses
Investors/ stock
Bank Over draft
Temporary investment
Prepaid expenses
Accrued incomes
Classification of working capital
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Working capital may be classified in two ways:

o
o
On the basis of concept.

On the basis of time/ Periodicity of Requirements
On the basis of concept

On the basis of concept working capital can be classified as gross working
capital and net working capital.
1. Gross working capital
2. Net working capital
Gross Working Capital = Total of Current Asset

Net Working Capital = Excess of Current Asset over Current Liability
1.Gross working capital: It refers to the firms investment in current

assets. The sum of the current assets is the working capital of the
business. The sum of the current assets is a quantitative aspect of
BBA VI SEM [2014 2015]
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working capital. Which emphasizes more on quantity than its quality,

but it fails to reveal the true financial position of the firm because
every increase in current liabilities will decrease the gross working
capital.
Gross Working Capital focuses on two main Aspect

1. Optimum Investment in Current Asset
2. Financing of Current Asset
Optimum investment in current assets:
Excessive investments impairs firm s profitability, as idle investment earns

nothing. Inadequate working capital can threaten solvency of the firm
because of its inability to meet its current obligations. Therefore there
should be adequate investment in current assets.
Financing of current assets:
Whenever the need for working capital funds arises, agreement should be
made quickly. If surplus funds are available they should be invested in short
term securities.
2.Net working capital: It is the difference between current assets and

current liabilities or the excess of total current assets over total current
liabilities.
Net working capital = current assets - current liabilities.
It also can be defined as that part of a firms current assets which is

financed with long term funds. It may be either positive or negative. When
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the current assets exceed the current liability, the working capital is positive
and vice versa.
On the basis of time
On the basis of time, working capital may be classified as:
1.
Permanent or fixed working capital.
2.
Temporary or variable working capital

1. PERMANENT OR FIXED WORKING CAPITAL
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 assets 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
2. TEMPORARY OR VARIABLE WORKING CAPITAL

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
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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.
OPERATING CYCLE:
The working capital requirement of a firm depends, to a great extent upon

the operating cycle of the firm. The operating cycle is defined as the time
duration starting from the procurement of goods or raw materials and
ending with the sales realization. The length and nature of the operating
cycle differs from one firm to another depending upon the size and nature of
the firm.
A companys operating cycle typically consists of three primary

activities:
1. Purchasing resources,
2. Producing the product and
3. Selling the product.
These activities create funds flow that is both unsynchronized and

uncertain. This is unsynchronized because cash disbursements usually take
place before cash receipts. This is uncertain because future sales and costs,
which generate the respective receipts and disbursements, cannot be
forecasted with complete accuracy.
BBA VI SEM [2014 2015]
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The concept of operating cycle is useful in controlling as well as

forecasting working capital needs. Longer the operating cycle the more
working capital funds the firm needs, while shorter operating cycle period
indicates that there is no locking up of funds in current assets.
Cash
Debtors/BR
Raw Material
Sales
Work-in Progress
Finished Goods
Thus the operating cycle of a firm consists of the time required for the
completion of the chronological sequence of the following:
1. Procurement of raw materials and services.

2. Conversion of raw materials into work-in-progress.
3. Conversion of work-in-progress into finished goods.
4. Sale of finished goods (cash or credit).
5. Conversion of receivables into cash.
The segments of the operating cycle include raw material storage period,
conversion period, finished goods storage period and average collection
period before getting back cash along with profit.
The total duration of all the segments mentioned above is known as

gross operating cycle period. When the average payment period of the
BBA VI SEM [2014 2015]
Page 39
company to its suppliers is deducted from the gross operating cycle period
the resultant period is called the net operating cycle period or the operating
cycle period.
NEED
FOR ADEQUATE WORKING CAPITAL:
Every firm must maintain a sound working capital position otherwise;

its business activities may be adversely affected. Thus every firm must have
adequate working capital.
Cash Discount- If raw material purchased in bulk at that time will get
cash discount.
It creates a feeling of security & Confidence- need not worry for

payment of Business Expenditure or creditor Sense of security,Sense
of confidence, Loyalty among its customer, creditor& Business
Associates
Must for Maintaining Solvency & Continuing Production- Adequate

Working Capital helps in Cut throat competition
Sound Goodwill- Increase debt Capacity of Business, firm can raise

funds from the Market purchase goods on credit, Borrow short terms
funds from banks
Easy loans from banks- Borrow Unsecured loans from banks, Banks
favor in granting seasonal loans.
BBA VI SEM [2014 2015]
Page 40
Exploitation of good Opportunities -
Company may make
off
season purchases resulting substantial savings, it can fetch big supply

orders
The excess working capital, when the investment in working capital is

more than the required level, may result in-
a). Unnecessary accumulation of inventories resulting in wastage, theft,

damage etc.
b). Delay in collection of receivables resulting in more liberal credit terms to

customers than warranted by the market conditions.
c). Adverse influence on the performance of the management.
Impact of Inadequate Working Capital
The fixed asset may not be optimally used.
Firms growth may stagnate.
Interruptions
in
production
schedule
may
occur
ultimately
resulting
in lowering of the profit of the firm.
The firm may not be able to take benefit of an opportunity.
BBA VI SEM [2014 2015]
Page 41
Firms goodwill in the market is affected if it is not in a position to

meet its liabilities on time.
Thus taking in to consideration these consequences, financial manager

must establish:
1. Well defined working capital policy,

2. Self decision of working capital management system.
Below are some types of policies in working capital management:
1. Moderate policy, in which value of current asset increases in proportion

with sales level.
2. Conservative policy, in which value of current asset increases more

rapidly than sales level. Such a policy tends to reduce the risk of shortage of
working capital by increasing the safety component of current asset. The
conservative policy also reduces the risk of non-payment to liability.
3. Aggressive type of policy, sales level increases more in percentage than

This type of aggressive policy has many implications. These implications

are as under:
BBA VI SEM [2014 2015]
Page 42
iv.
The risk of insolvency of the firm increases as it maintains low

liquidity.
v.
The firm is exposed to greater risk as it may not be able to face

unexpected changes in market.
vi.
Reduced investment in current asset will result in increase in

profitability of the firm.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS:
1. NATURE OF BUSINESS: The requirements of working is very limited in

public utility undertakings such as electricity, water supply and railways
because they offer cash sale only and supply services not products, and no
funds are tied up in inventories and receivables.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the
requirement of working capital.
BBA VI SEM [2014 2015]
Page 43
3. PRODUCTION POLICY: If the policy is to keep production steady by

accumulating inventories it will require higher working capital.
4. LENGTH OF PRDUCTION CYCLE: The longer the manufacturing time

the raw material and other supplies have to be carried for a longer in the
process with progressive increment of labour and service costs before the
final product is obtained. So working capital is directly proportional to the
length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a firm

requires larger working capital than in slack season.
6. WORKING CAPITAL CYCLE: The speed with which the working cycle
completes one cycle determines the requirements of working capital. Longer
the cycle larger is the requirement of working capital.
7.
RATE OF STOCK TURNOVER: There is an inverse co-relationship
between the question of working capital and the velocity or speed with which
the sales are affected. A firm having a high rate of stock turnover wuill needs
lower amt. of working capital as compared to a firm having a low rate of
turnover.
8.
CREDIT POLICY: A concern that purchases its requirements on credit
and sales its product / services on cash requires lesser amt. of working
capital and vice-versa.
BBA VI SEM [2014 2015]
Page 44
9.
BUSINESS CYCLE: In period of boom, when the business is
prosperous, there is need for larger amt. of working capital due to rise in
sales, rise in prices, optimistic expansion of business, etc. On the contrary
in time of depression, the business contracts, sales decline, difficulties are
faced in collection from debtor and the firm may have a large amt. of
working capital.
10.
RATE OF GROWTH OF BUSINESS: In faster growing concern, we
shall require large amt. of working capital.
11.
EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more
earning capacity than other due to quality of their products, monopoly

conditions, etc. Such firms may generate cash profits from operations and
contribute to their working capital. The dividend policy also affects the
requirement of working capital
12.
PRICE LEVEL CHANGES: Changes in the price level also affect the
working capital requirements. Generally rise in prices leads to increase in

working capital.
BBA VI SEM [2014 2015]
Page 45
MANAGEMENT OF WORKING CAPITAL:-
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. WORKING CAPITAL
MANAGEMENT POLICES of a firm has a great on its probability, liquidity
and structural health of the organization.
So working capital management is three dimensional in nature as

1. It concerned with the formulation of policies with regard to
profitability, liquidity and risk.
2. It is concerned with the decision about the composition and level of

current assets.
3. It is concerned with the decision about the composition and level of

current liabilities.
BBA VI SEM [2014 2015]
Page 46
WORKING CAPITAL ANALYSIS:-
As we know working capital is the life blood and the centre of a

business. Adequate amount of working capital is very much essential for the
smooth running of the business. And the most important part is the
efficient management of working capital in right time. The liquidity position
of the firm is totally effected by the management of working capital. So, a
study of changes in the uses and sources of working capital is necessary to
evaluate the efficiency with which the working capital is employed in a
business. This involves the need of working capital analysis.
The analysis of working capital can be conducted through Ratio analysis.
RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The

technique of ratio analysis can be employed for measuring short-term
liquidity or working capital position of a firm. The following ratios can be
calculated for these purposes:
1. Current ratio.
2. Quick ratio
BBA VI SEM [2014 2015]
Page 47
3. Absolute liquid ratio

4. Inventory turnover ratio.
5. Debtors turnover ratio.
6. Creditors turnover ratio.
7. Working capital turnover ratio.
METHODS OF DATA COLLECTION
Primary data: -
Personal interview was the main tool for the collection of primary data and
information. This study has brought in use very little primary data in
relation with the elements of working capital.
Secondary data: -
Since the study is based on the financial aspects of the company so the
Annual report of the organization, Balance Sheet, Profit and Loss accounts
of the company brought in use. Besides the above data, the company profile
and theoretical aspects are taken from the secondary sources.
ANALYSIS OF FINANCIAL STATEMENTS:

BBA VI SEM [2014 2015]
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Financial statement is a collection of data organized according to logical and

consistent accounting procedure to convey an under-standing of some
financial aspects of a business firm. It may show position at a moment in
time, as in the case of balance sheet or may reveal a series of activities over
a given period of time, as in the case of an income statement. Thus, the term
financial statements generally refers to the two statements:
(1) The position statement or Balance sheet.

(2) The income statement or the profit and loss Account.
in crore
BALANCE SHEET OF LAST FOUR YEARS
I]Sources of funds
1.Shareholders funds:
a) Share capital
b)Reserve and surplus
2.Loan Funds:
a)Secured loan
b)Unsecured loan
c)Deferred tax liability
Total
II]Application of Funds
1.Fixed Assets:
a)Gross block
b)Less: Depreciation
BBA VI SEM [2014 2015]
Mar-11
Mar-12
Mar-13
Mar-14
12 mths
12 mths
12 mths
12 mths
1.60
3.25
1.87
4.41
2.64
5.56
3.64
8.25
11.15
2.92
12.51
2.68
16.83
2.76
21.48
27.81
30.47
2.37
0.01
44.76
14.29
7.95
18.65
9.27
37.72
11.30
18.93
11.52
6.90
Page 49
c)Net block
2.Investments
3.Current
Assets,Loan
Advances:
a)Inventories
b)Sundry debtors
c)Cash and bank Balance
d)Other current assets
e)Loans and Advances
4.61
0.31
6.33
0.23
9.37
0.29
26.41
0.34
7.40
12.34
0.29
0.04
3.38
7.97
14.35
0.10
0.04
3.92
8.54
12.06
0.33
8.46
11.34
11.51
0.34
6.89
23.48
26.40
29.42
30.09
9.72
11.49
11.27
12.09
13.75
0.24
18.93
14.91
0.01
21.48
18.14
27.81
18.00
44.76
&
&
deposits
Less:Current
liabilities
&
provision
Net current assets
Miscellaneous Expenditure
Total
PROFIT & LOSS ACCOUNT OF LAST FOUR YEARS
in crore
Mar-11
Mar-12
Mar-13
Mar-14
12 mths
12 mths
12 mths
12 mths
A]Income
Sales
Other receipts
Total A
49.83
0.19
50.02
53.29
0.47
53.77
57.27
0.23
57.50
65.44
0.28
65.73
B]Expenditure
Finished goods consumed
Raw material consumed
13.97
19.23
13.53
20.65
15.04
19.80
11.21
28.69
Manufacturing expenses
Manpower expenses
Administration expenses
Advertising & sales promotion
2.61
3.47
2.18
4.96
3.65
4.05
2.37
5.23
3.96
4.60
2.93
6.74
5.47
5.59
3.75
6.55
exp
Interest
1.44
1.57
1.41
2.19
BBA VI SEM [2014 2015]
Page 50
Preliminary expenses written
0.21
0.21
0.01
0.86
48.96
1.05
52.34
1.42
55.95
2.02
65.50
Profit before tax(A-B)

Provision for income tax
Provision for freigne benefit
1.05
0.31
0.05
1.42
0.48
0.06
1.55
0.65
-
0.22
0.03
-
tax
Provision for dividend
Dividend tax paid
Profit after tax
0.08
0.01
0.59
0.09
0.01
0.77
0.02
0.03
0.65
0.02
off
Depreciation
Total B
DATA
ANALYSIS
0.17
AND
INTERPRETATION
1.
CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of general

liquidity and its most widely used to make the analysis of short-term
financial position or liquidity of a firm. It is defined as the relation between
current assets and current liabilities. Thus,
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITES
The two components of this ratio are:
1)
CURRENT ASSETS
2)
CURRENT LIABILITES
BBA VI SEM [2014 2015]
Page 51
Current assets include cash, marketable securities, bill receivables, sundry

debtors, inventories and work-in-progresses. Current liabilities include
outstanding expenses, bill payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is liquid and has
the ability to pay its current obligations in time. On the hand a low current
ratio represents that the liquidity position of the firm is not good and the
firm shall not be able to pay its current liabilities in time. A ratio equal or
near to the rule of thumb of 2:1 i.e. current assets double the current
liabilities is considered to be satisfactory.
CALCULATION OF CURRENT RATIO

(Rupees in crore)
Year
Current
2011
23.48
2012
26.40
2013
29.42
2014
30.09
Assets
Current
9.73
11.49
11.27
12.09
2.41:1
2.29:1
2.61:1
2.48:1
Liabilities
Current Ratio
BBA VI SEM [2014 2015]
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Interpretation:
As we know that ideal current ratio for any firm is 2:1. If we see the
current ratio of the company for last four years it has standard ratio from
2011 to 2014. This shows that companys liquidity position is sound. Its
current assets are more than its current liabilities.
2. QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio.
Quick ratio may be defined as the relationship between quick/liquid assets
and current or liquid liabilities. An asset is said to be liquid if it can be
BBA VI SEM [2014 2015]
Page 53
converted into cash with a short period without loss of value. It measures
the firms capacity to pay off current obligations immediately.
QUICK RATIO = QUICK ASSETS
CURRENT LIABILITES
Where Quick Assets are:
1)
Marketable Securities
2)
Cash in hand and Cash at bank.
3)
Debtors.
A high ratio is an indication that the firm is liquid and has the ability
to meet its current liabilities in time and on the other hand a low quick ratio
represents that the firms liquidity position is not good.
As a rule of thumb ratio of 1:1 is considered satisfactory. It is
generally thought that if quick assets are equal to the current liabilities then
the concern may be able to meet its short-term obligations. However, a firm
having high quick ratio may not have a satisfactory liquidity position if it has
slow paying debtors. On the other hand, a firm having a low liquidity
position if it has fast moving inventories.
CALCULATION OF QUICK RATIO

BBA VI SEM [2014 2015]
Page 54
(Rupees in Crore)
Year
2011
2012
2013
2014
Quick Assets
14.68
12.94
12.7
12.2
9.73
11.49
11.27
12.09
1.5 : 1
1.1 : 1
1.1 : 1
1:1
Current Liabilities
Quick Ratio
Interpretation :
A quick ratio is an indication that the firm is liquid and has the ability
to meet its current liabilities in time. The quick ratio is 1:1 and it is ideal as
compare with standard.
3. ABSOLUTE LIQUID RATIO
BBA VI SEM [2014 2015]
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Although receivables, debtors and bills receivable are generally more

liquid than inventories, yet there may be doubts regarding their realization
into cash immediately or in time. So absolute liquid ratio should be
calculated together with current ratio and acid test ratio so as to exclude
even receivables from the current assets and find out the absolute liquid
assets. Absolute Liquid Assets includes :
ABSOLUTE LIQUID RATIO =
ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES
ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

(Rupees in Crore)
Year
2011
2012
2013
2014
Absolute Liquid Assets
0.60
0.33
0.62
0.68
Current Liabilities
9.73
11.49
11.27
12.09
0.06 : 1
0.02 : 1
0.05 : 1
0.05 : 1
Absolute Liquid Ratio
Interpretation :
The companys absolute ratio is low as compare to standard ratio 0.5:1. If
absolute acid test ratio is 0.05 which is less than rule standard ratio and
current and liquid ratio are much more than rule of thumb, at that time, we
have to improve cash liquidity by changing the policy of credit sales and
BBA VI SEM [2014 2015]
Page 56
advance payments.
B) CURRENT ASSETS MOVEMENT RATIOS
Funds are invested in various assets in business to make sales and
earn profits. The efficiency with which assets are managed directly affects
the volume of sales. The better the management of assets, large is the
amount of sales and profits. Current assets movement ratios measure the
efficiency with which a firm manages its resources. These ratios are called
turnover ratios because they indicate the speed with which assets are
converted or turned over into sales. Depending upon the purpose, a number
of turnover ratios can be calculated. These are :
1.
Inventory Turnover Ratio
2.
Debtors Turnover Ratio
3.
Creditors Turnover Ratio
4.
Working Capital Turnover Ratio
The current ratio and quick ratio give misleading results if current
assets include high amount of debtors due to slow credit collections and
moreover if the assets include high amount of slow moving inventories. As
both the ratios ignore the movement of current assets, it is important to
calculate the turnover ratio.
BBA VI SEM [2014 2015]
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1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO :

Every firm has to maintain a certain amount of inventory of finished
goods so as to meet the requirements of the business. But the level of
inventory should neither be too high nor too low. Because it is harmful to
hold more inventory as some amount of capital is blocked in it and some
cost is involved in it. It will therefore be advisable to dispose the inventory as
soon as possible.
INVENTORY TURNOVER RATIO =
COST OF GOOD SOLD

AVERAGE INVENTORY
Inventory turnover ratio measures the speed with which the stock is
converted into sales. Usually a high inventory ratio indicates an efficient
management of inventory because more frequently the stocks are sold ; the
lesser amount of money is required to finance the inventory. Where as low
inventory turnover ratio indicates the inefficient management of inventory. A
low inventory turnover implies over investment in inventories, dull business,
poor quality of goods, stock accumulations and slow moving goods and low
profits as compared to total investment.
AVERAGE STOCK =
BBA VI SEM [2014 2015]
OPENING STOCK + CLOSING STOCK
Page 58
(Rupees in Crore)
Year
Cost of Goods sold
Average Stock
Inventory Turnover
2011
48.77
7.76
6.28 times
Ratio
BBA VI SEM [2014 2015]
Page 59
2012
51.86
7.69
6.74 times
2013
55.72
8.26
6.74 times
2014
63.19
9.94
6.35 times
Interpretation :
These ratio shows how rapidly the inventory is turning into receivable
through sales. In 2012 and 2013 the company has high inventory turnover
ratio but in 2014 it has reduced to 6.35 times. This shows that the
companys inventory management technique is less efficient as compare to
last year.
2. INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD =
365 (net working days)
INVENTORY TURNOVER RATIO

(Rupees in Crore)
Year
2011
2012
2013
2014
Days
365
365
365
365
6.28
6.74
6.74
6.35
58 days
54 days
54 days
57 days
Inventory Turnover Ratio

Inventory
Conversion
Period
BBA VI SEM [2014 2015]
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Interpretation :
Inventory conversion period shows that how many days inventories
takes to convert from raw material to finished goods. In the company
inventory conversion period is increasing as compare to last 2 years. This
shows the efficiency of management to convert the inventory into cash.
3. DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to increase
its sales and a liberal credit policy may result in tying up substantial funds
of a firm in the form of trade debtors. Trade debtors are expected to be
converted into cash within a short period and are included in current
assets. So liquidity position of a concern also depends upon the quality of
trade debtors. Two types of ratio can be calculated to evaluate the quality of
debtors.
a)
b)
Average Collection Period
DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS
BBA VI SEM [2014 2015]
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Debtors velocity indicates the number of times the debtors are turned
over during a year. Generally higher the value of debtors turnover ratio the
more efficient is the management of debtors/sales or more liquid are the
debtors. Whereas a low debtors turnover ratio indicates poor management of
debtors/sales and less liquid debtors. This ratio should be compared with
ratios of other firms doing the same business and a trend may be found to
make a better interpretation of the ratio.
AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR
2
(Rupees in Crore)
Year
2011
2012
2013
2014
Sales
49.83
53.29
57.27
65.44
Average Debtors
11.32
13.34
13.21
11.79
4.4 times
4 times
4.3 times
5.5 times
Debtor
Turnover
Ratio
BBA VI SEM [2014 2015]
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Interpretation :
This ratio indicates the speed with which debtors are being converted
or turnover into sales. The higher the values of debtors turnover, the more
efficient is the management of credit. But in the company the debtor
turnover ratio is decreasing in 2012 compare to 2011 and in 2013 and 2014
it will increase.
4. AVERAGE COLLECTION PERIOD :
Average Collection Period =
BBA VI SEM [2014 2015]
No. of Working Days
Page 63
The average collection period ratio represents the average number of

days for which a firm has to wait before its receivables are converted into
cash. It measures the quality of debtors. Generally, shorter the average
collection period the better is the quality of debtors as a short collection
period implies quick payment by debtors and vice-versa.
Average Collection Period =
365 (Net Working Days)

(Rupees in Crore)
BBA VI SEM [2014 2015]
Page 64
Year
2011
2012
2013
2014
Days
365
365
365
365
Debtor
4.4
4.3
5.5
83 days
91 days
85 days
66 days
Turnover
Ratio
Average
Collection
Period
Interpretation :
In the firm average collection period increasing in 2012 but it will
decrease in 2013 and 2014. It shows that shorter the average collection
period the better is the quality of debtors.
BBA VI SEM [2014 2015]
Page 65
5. WORKING CAPITAL TURNOVER RATIO :
Working capital turnover ratio indicates the velocity of utilization of

net working capital. This ratio indicates the number of times the working
capital is turned over in the course of the year. This ratio measures the
efficiency with which the working capital is used by the firm. A higher ratio
indicates efficient utilization of working capital and a low ratio indicates
otherwise. But a very high working capital turnover is not a good situation
for any firm.
Working Capital Turnover Ratio = Cost of Sales

Net Working Capital
Working Capital Turnover
Sales
Networking Capital
BBA VI SEM [2014 2015]
Page 66
(Rupees in Crore)
Year
2011
2012
2013
2014
Sales
49.83
53.29
57.27
65.44
Networking Capital
13.75
14.91
18.15
18
3.6
3.6
3.1
3.6
Working
Capital
Turnover
Interpretation :
This ratio measures the efficiency with which the working capital is
used by the firm. A higher ratio indicates efficient utilization of working
BBA VI SEM [2014 2015]
Page 67
capital and a low ratio indicates otherwise so in 2011, 2012 and 2013 it
constant but in 2013 it will decrease by 0.5.
CALCULATIONS OF OPERATING CYCLE:

Operating cycle = R + W + F + D C
R = Raw material storage period
W = Work in progress holding period
F = Finished goods storage period
D = Debtors collection period
C = Credit period availed
Formula:
a. RMCP = Average Stock x 360 = days

Annual Consumption
b. WIPCP = Average Stock x 360 = days

Cost of Production
c. FGCP = Average Stock x 360 = days

Cost of Goods Sold
BBA VI SEM [2014 2015]
Page 68
Operating cycle
2011
2012
2013
2014
a)RMCP
B)WIPCP
C)FGCP
(in days)
145
110
57
(in days)
134
98
53
(in days)
150
105
53
(in days)
125
90
57
BBA VI SEM [2014 2015]
Page 69
Interpretation :
From the above chart companys RMCP,WIPCP,FGCP period is less as
compare to last year, so company is in profitable condition because less
operating cycle period i.e converting raw material into sales of the product.
LIMITATIONS OF THE STUDY

The limitation in this study is: -
1) A company generally cannot disclose its internal policies to outsiders.

In such case, it is very difficult to find out and gather complete and
true information in the forms of figures regarding financial matters.
2) Information regarding new plans and policies also can not be known
to me.
BBA VI SEM [2014 2015]
Page 70
Summary of Findings:
1. Current Ratio: As we know that ideal current ratio for any firm
is 2:1. If we see the current ratio of the company for last four
years it has standard ratio from 2011 to 2014. This shows that
companys liquidity position is sound. Its current assets are
more than its current liabilities.
BBA VI SEM [2014 2015]
Page 71
2. Quick Ratio: A quick ratio is an indication that the firm is

liquid and has the ability to meet its current liabilities in time.
The quick ratio is 1:1 and it is ideal as compare with standard.
3. Absolute Liquid Ratio: The companys absolute ratio is low as

compare to standard ratio 0.5:1.
4. Inventory Turnover Ratio: These ratio shows how rapidly the

inventory is turning into receivable through sales. In 2012 and
2013 the company has high inventory turnover ratio but in
2014 it has reduced to 6.35 times. This shows that the
companys inventory management technique is less efficient as
compare to last year.
5. Inventory conversion period: It shows that how many days

inventories takes to convert from raw material to finished goods.
In the company inventory conversion period is increasing as
compare
to
last
years.
This
shows
the
efficiency
of
management to convert the inventory into cash.

6. Debtors Turnover Ratio: This ratio indicates the speed with
which debtors are being converted or turnover into sales. The
higher the values of debtors turnover, the more efficient is the
management of credit. But in the company the debtor turnover
ratio is decreasing in 2012 compare to 2011 and in 2013 and
2014 it will increase.
BBA VI SEM [2014 2015]
Page 72
7. Average collection period: In the firm average collection period

increasing in 2012 but it will decrease in 2013 and 2014. It
shows that shorter the average collection period the better is the
quality of debtors.
8. Working capital turnover: This ratio measures the efficiency
with which the working capital is used by the firm. A higher
ratio indicates efficient utilization of working capital and a low
ratio indicates otherwise so in 2011, 2012 and 2014 it constant
but in 2013 it will decrease by 0.5.
9. The operating cycle period of the firm as compare to last year is

less so it shows that the period of converting raw material into
finished goods.
SUGGESTIONS:a. Nirlep is very small company and its head office is only in
Aurangabad but according to its goodwill and brand name in
the market, it is necessary to expand the business throught in
India.
BBA VI SEM [2014 2015]
Page 73
b. Nirlep producing number of product but it is costly for normal

person thats why they cannot purchase it because of their
financial condition, so reduce prices or to make product
according to their purchasing power.
c. Absolute acid test ratio is 0.05 which is less than standard ratio
and current and liquid ratio are much more than standard, at
that time, to improve cash liquidity by changing the policy of
credit sales and advance payments.
BBA VI SEM [2014 2015]
Page 74
BIBLIOGRAPHY
1) www.nirleponline.com
2) www.google.com
BBA VI SEM [2014 2015]
Page 75

Rohit Jaiswal (Nirlep)

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PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Name Of The Topic

Objective Of The Study

Data Analysis And Interpretation

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Nirlep Appliances Ltd. was incorporated in 1968 by Mr.Nilkanth

Working Capital means excess of current assets over current

It refers to all aspects of the administration of both current

liabilities. The basic objective of working Capital Management is to manage

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

This project is based on analysis and interpretation. The researcher

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Working capital is defined as Excess of current asset over current liabilities

Working capital is the amount of funds necessary to cover the cost of

Concept of working capital:

The word working capital is made of two words

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Long term funds are required to create production facilities through

Working Capital = Current Asset Current Liability

software, equipment, or machinery. It is also commonly used to purchase

Components of working capital

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Current Liabilities- Current liabilities are those claims of outsiders

Short term loans

Bank Over draft

Classification of working capital

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Working capital may be classified in to ways:

On the basis of concept.

On the basis of concept

Gross Working Capital = Total of Current Asset

On the basis of time

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

On the basis of time, working capital may be classified as:

Permanent or fixed working capital.

Temporary or variable working capital

The working capital requirement of a firm depends, to a great extent upon

A companys operating cycle typically consists of three primary

These activities create funds flow that is both unsynchronized and

The concept of operating cycle is useful in controlling as well as

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

Procurement of raw materials and services.

Conversion of raw materials into work-in-progress.

Conversion of work-in-progress into finished goods.

Sale of finished goods (cash or credit).

Conversion of receivables into cash.

FOR ADEQUATE WORKING CAPITAL:

BBA VI SEM [2014 2015]

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT

a). Unnecessary accumulation of inventories resulting in wastage, theft,

The fixed asset may not be optimally used.

Firms growth may stagnate.

resulting in lowering of the profit of the firm.

The firm may not be able to take benefit of an opportunity.

Firms goodwill in the market is affected if it is not in a position to

Thus taking in to consideration these consequences, financial manager

BBA VI SEM [2014 2015]