SYNOPSIS

ON
WORKING CAPITAL MANAGEMENT
ON
SHRI RAM LIFE INSURANCE COMPANY LTD
Submitted by:

PGD HRM
ENROLMENT NO.
SESSION -2008-2010

IMT

INSTITUTE OF MANAGEMENT TECHNOLOGY

POST BOX NO. 137, RAJ NAGAR,
GHAZIABAD-201001
 PROFORMA FOR SYNOPSIS OF PROJECT WORK
Name :

Address :

Enrolment No. :

Course : PGDBM

Submitted To : Institute of Management Technology,

Ghaziabad (UP)
Mobile No. :

Major Area of :
Specialization
Questionnaire Attached : NO

Phone No. of the project : +

Guide
Date Of Submission :
 CHAPTERISATION SCHEME

 Introduction
 Company Profile
 Statement About the Problem
Objectives and Scope of the Study
Methodology
Questionnaire
Guide’s CV & Consent Letter
Bibliography
 INTRODUCTION
WORKING CAPITAL - OVERALL VIEW
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, H 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 are ad the
fluctuation in the short run u 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 exceeds
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.
 COMPANY PROFILE
Shriram Life Insurance Company Ltd.
Shriram Life Insurance Company Ltd. is a joint venture of the Shriram
Group and Sanlam with South African firm holding 26 per cent strake,
maximum permissible ceiling for a foreign partner in a private insurance
company. (As of June 2009).
The Shriram Group is one of the largest and well-respected financial
services conglomerates in India. The Group’s main line of activities in
financial services include chit fund, truck financing, consumer durable
financing, stock broking, insurance broking and life insurance.
The Group has a customer base of 30 lacs chit subscribers and investors
and operates through a network of 630 offices all over the country. The
Group has the largest agency force in the private sector consisting of more
than 75,000 loyal and dedicated agents.
Shriram Life Insurance Co. Ltd. was launched in January 2006. India
currently accounts for 16% of the world’s population.70% of this population
is below 35 years of age. Between 2001 and 2006, Indian demography has
changed with the higher income classes (more than INR 70,000 per annum)
constituting about 79%. This represents huge market for insurance
products.
This is amply reflected in the growth of insurance industry in the last couple
of years. However, this growth has not really reach the Rural and Semi
Urban areas. Shriram Group with its network of branches particularly in
these areas enjoys a unique opportunity for reaching out to wider audience
and sustain the growth story of the insurance industry. Most of the products
of Shriram Life were designed by advisors working in the field and based on
need analysis done through Intense Market Research.
 STATEMENT ABOUT THE PROBLEM
AS we were seen as a liability towards the organization since there was no
contribution from our side towards, nobody actually paid any attention towards
Working Capital.
It was very difficult to actually take out relevant information from the Comparative
Study with Axis Bank were very hesitant to let us meet the company.
If cash flows are predictable it is simply a problem of minimising the total
costs - the transaction cost and the opportunity cost.
transaction cost) against the cost of too much cash( opportunity cash)
Cash flows, in practice, are not completely predictable. At times they may
be completely random . Under such a situation, a different model based on
the technique of control theory is needed to solve the problem of
appropriate level of working cash balance.
A fire in a factory may burn everything and owner’s only source of earning
with investment of huge capital is finished but insurance will come to one’s
rescue if insurance is taken, all the operations can be started again.
 OBJECTIVES AND SCOPE OF THE STUDY
UNDERSTANDING THE CONCEPT AND IMPORTANCE OF WORKING
CAPITAL MANAGEMENT
One of the major objectives of our project is to understand the concept of
Working capital management. Understanding the meaning of two terms i.e.
gross working capital and net working capital. To know the two types of
working capital i.e. permanent working capital and temporary working
capital. Working Capital Management policies have a great effect on a
firm’s profitability, liquidity and its structural health. A finance manager
should therefore, chalk out appropriate working capital management
policies in respect of each of the components of working capital so as to
ensure higher profitability, proper liquidity and sound structural health of the
organization.
NDERSTANDING VARIOUS STEPS OF OPERATING CYCLE SO WHICH
ARE INVOLVED IN WORKING CAPITAL MANAGEMENT
Steps of operating cycle which are necessary for proper working capital
management. These steps include
Management of cash :- It is the duty of the Finance Manager to provide
adequate cash to all segments of the organization. He has to ensure that no
funds blocked in idle cash since this will involve cost in terms of interest to
the business. A sound cash management scheme, therefore, maintains the
balance between the twin objectives of liquidity and cost.
• Management of Accounts Receivable and Payable:- Accounts
receivables constitute a significant portion of the total current assets of the
business next after inventories. They are a direct consequence of ‘trade
credit’ which has become an essential marketing tool in modern business.
Accounts payable constitute a significant portion of the total current
assets of the business. The objective in accounts payable is to slow down
the payments process as much as possible. Whereas the underlying
objective in accounts receivables is to maximize acceleration of the
collection process.
Management of inventories:- Inventories often constitute a major element of
the total working capital and hence it has been correctly observed, “good
inventory management is good financial management”.
UNDERSTANDING THE WORKING CAPITAL MANAGEMENTOF ASP
DIVISION OF SHRIRAM LIFE INSURANCE CO. LTD
Analyzing the data available with the help of various diagrams and
graphical tools of presentation like bar graphs, line graphs etc.
This would strengthen the theoretical knowledge that we have about
working capital management.
GETTING TO A CONCLUSION
Getting to a conclusion regarding the appropriate and inappropriateness of
the working capital management strategies of Shriram Life Insurance Co.
Ltd
GIVING SUGGETIONS AND RECOMMENDATIONS
Giving suggestions and recommendations based on your theoretical
knowledge and practical analysis of data to make the working capital
management of Shriram Life Insurance Co. Ltd. better.
This project report focuses on the working capital management of Auto
Suspension Products division of Shriram Life Insurance Co. Ltd and its
comparison with the industry and its competitors.
Chapter wise scope of the project is as follows-
Starting with the Company Profile which contains brief information about the
history, competitors, product range and the diverse fields in which the
company is operating. It creates an image of the company in the reader’s
mind which will further help the reader to understand the project properly.
The next chapter is Research Methodology which indicates the various
sources of data used to make the project report and the type of research
design which is used to make it more meaningful.
The research methodology is followed by an overview of working capital
management which gives the theoretical knowledge of working capital
management which in turn would help building a strong base for the
research ahead. Theory is accompanied by graphs and diagrams which
would help the reader to understand the project and the subject thoroughly.
Next is Presentation and Analysis of data. Analyzing the data available with
the help of various diagrams and graphical tools of presentation like bar
graphs, line graphs etc. This would strengthen the theoretical knowledge
that we have about working capital management.
The last chapter is Conclusion & Recommendations. This chapter contains
the critical evaluation of the presentation and analysis of data.
Recommendations include what should be done to make the situation
better.
The aim of the project is to learn the importance of working capital
management for the efficient utilization of funds and proper financial
management of the company. The non-ideal production technology and
imperfect market and distribution systems are responsible for the
generation of current assets, which block the funds of an enterprise.
Working Capital is needed to release such blockage of funds. However the
consideration of the level of investment in current assets should avoid two
danger points- excessive and inadequate investments in current assets.
The concerned unit is a manufacturing unit so a good management of
working capital is indispensable for the company. The content of the report
has a clear sequence which defines the present background of the
company and Sir Ram Life contribution to the market.
It discusses the method of comparison of financial statement of companies
like ratio analysis, working capital analysis and trend analysis etc. Various
ratios, which are required to be calculated, have been stated in the report.
The project deals with the study of working capital of the company and to
find method and solutions for achieving the most efficient level. It will also
look into the approach of risk return trade off in terms of the cost of
maintaining a particular level of current assets, which are:
1) The cost of liquidity and
2) The cost of profitability.
The project deals with analyzing the operating cycle of the company and
discusses the technique used by the company for its management
 METHODOLOGY
• DATA SOURCES & PRIMARY DATA
Appointments with different people who seem to be prospective Company.
Interview Method This method involves presentation of oral – verbal stimuli
and reply in terms of oral - verbal responses. This method can be used through
personal interviews and, if possible, through telephone interviews.
Once the sampling plan has determined, the question was how the subject
should be contacted, i.e. by telephone, mail or personal interviews. But the
single way to contact the subject was personal interviews
• SECONDARY DATA

Secondary data means data which is already available i.e. we

refer to the data which has already been collected and
analyzed by someone else. Secondary data may be either
published data or unpublished data. In this project secondary
data collected from following sources. Usually published data
are available:

 Telephone directory, which contains telephone

number of all residents of the area, companies and
shops.

 Newspapers, books and magazines.

 Reports and publications of various associations
connected with business and industry.
 APPENDICES
QUESTIONNAIRE
Hello. This is ____________________ Shriram Life Insurance Co. Ltd,
working here as a management trainee. I would appreciate it if you could
lend me just 2 minutes of your time for my project on Insurance Industry. I
would like to assess if you are interested in taking a business opportunity
available in the insurance sector which requires no investment of yours.
1. Name:
2. Occupation
3. Do you know about Insurance?
Yes
No
4. Have you ever opted for Insurance from any company?
Yes
No
5. If Yes,
Which company have you taken Insurance from?
LIC
SBI Insurance
HDFC Standard Life Insurance
Icici Pur
Max New York Life Insurance
Kotak Mahindra Old Mutual Life Insurance
 TATA AIG life Insurance
6. How did you come to know about Insurance?
Advertisement
Word of Mouth
Referred by your company / Friend
7. What made you select a particular company for the Insurance?
EMI
Brand name
Procedures
Facilities
Policies
Advertisement
8. How do you like the Marketing strategy by different Insurance
Company?
Good
Average
Bad
9. What motivates you for selecting any Company for Insurance?
EMI
Brand name
Procedures
Facilities
Policies
10. Advantages or Comment about Insurances

11. Which Company would you prefer if you have never applied for
Insurance?
LIC
SBI Insurance
HDFC Standard Life Insurance
HDFC Pur
Max New York Life Insurance
Kotak Mahindra Old Mutual Life Insurance
TATA AIG life Insurance
 BIBLIOGRAPHY
BOOKS
Board of Studies – The Institute of Chartered Accountants of India,
Financial Management, New Delhi, ICAI, December 2006.
Bolton S.E., Managerial Finance, (Boston) Houghton Miffin Co. 1976, Page
no. 388
‘Banking : The Network is the bank’, by Yogesh Sharma, Dataquest,
January 31, 2006
Hampton, John J., Financial Decision Making, 1977 ed., Page no. 154
Hrishikesh Bhattacharya, Working Capital Management – Strategies and
Techniques, New Delhi, Prentice Hall of India Private Limited, 2001.
‘Race will end in survival of the fittest’, The Financial Express, November
29, 2006.
Roy Chowdary, A.B., Working Capital Management: A work Book on
Corporate Liquidity, Calcutta: Management Technologists of 6 Southern
Avenue, 1987, Page no. 10.
The Times of India, 26 July, 2007.
‘The future is in e-banking’ by Mr. K.V. Kamath (Managing Director, ICICI),
April 14, 2002, Business Line.
‘RBI road map for banking’, The Indian Express, July 21,2009
Banking in India, by Dr A. K. Mishra (Professor & Chairman of Finance
Group at IIM Lucknow).
 TABLE OF CONTENTS

Chapter No. Subject Page No.

1.0 Executive Summary
2.0 Introduction

a. Objectives
3.0 Industry Profile

a. Review of literature on the industry

b.Major Companies

c.Growth chart – past and projections for future

d .SWOT etc.
4.0 Company Profile

a. Review of literature on the company

b.Historical analysis

c.Growth Chart – past and projections for future

d.SWOT etc.
5.0 Issues and challenges facing the

organization
6.0 Reflections on what has been learned

during the placement experience

7.0 Recommendations
8.0 Bibliography
9.0 Annexure
10.0 Case Study