Working Capital Management

DECL ARAT I ON
I hereby declare that the project entitled "Working Capital Management Practices
Of VRL" is submitted in partial fulfillment of degree of BBA as prescribed by Karnataka
University har!ad" for the academic year #$%%&%#'
I further declare that the project is a result of my original !ork and has not been
submitted to any other University or Institute for the a!ard of any degree or iploma'
(urendra )ai"
BBA *
th
(emester
+oll ',o&$-B%%-./
Page %
Working Capital Management
ACKNOWLEDEMENT
0he successful completion of any task could be incomplete !ithout complementing those
!ho made it possible and under !hose guidance and encouragement made our effort
successful'
I am very much beholden to my organi1ation guide (hri' Anirudh )adnavis 2M&3inance 4
C(" 5+6 6ogistics 6imited' 5A+U+" under !hose sincere guidance" valuable suggestion
and benevolent directions from time to time right from the beginning up to the end of project
!ere chiefly responsible for the completion of my project'
(urendra )ai"
BBA *
th
(emester
+oll ',o&$-B%%-./
Page #
Working Capital Management
CONTENTS
Chapter 1
78ecutive summery
Introduction
9bjective of study
Chapter 2 :- An overview of the orani!ation
:istory of the organi1ation
(pecial features
9rgani1ational structure
epartment study
Chapter " :- pro#e$t overview
0heoretical information
Chapter %
ata analysis
Chapter &
3indings
(uggestion
Conclusion
Bibliography
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Working Capital Management
C'A(TER 1
E)EC*TI+E S*MMER,
INTOD*CTION
O-.ECTI+ES O/ T'E ST*D,

E)EC*TI+E S*MMER,
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Working Capital Management
5+6 logistics limited a company registered under the provision of the
company<s act %-/*" !ith its symbol of services as 5+6' :as built and
maintained good !ill in the minds of public at large in the country in
general and in Karnataka in particular !ith more than =$$ branches all
over the country' 0he company has #=$$ vehicles consisting cargo and
passenger buses and calming as largest single fleet o!ner in the !orld
entitled for an entry un the major issues affecting the performance of
the company is ensuring that the cash held by the company is neither
e8cessive or in ade>uate but is sufficient for meeting its current
re>uirement' Cash storage !ill affect the company<s li>uidity position
!hile e8cessive cash !ill remain idle !ithout contributing anything
to!ards profitability'
0he study on capital management takes into amount the
cash position' 0he li>uidity position of the company is good to repay the
liabilities as and !hen they become due' 0he company is using its cash
efficiently' 0he major portion of its cash flo! is used for ac>uiring fi8ed
asset !orking capital management is concerned !ith the management
of current assets' it is an important and integral part of financial
management as short ? term survival is per>uisites for long & term
success' Working capital that is it does not invest sufficient funds in
current assets' it my become illi>uid and conse>uently may not have
the ability to meet current obligation'
0he study reveals that barro!ing constitutes the major
portion of its cash inflo!' 0he financial charges are becoming drain on
the company earnings the company has to takes steps to bring the si1e
of barro!ings' 5+6 can manage its cash better if it adopts budgetary'

INTROD*CTION O/ T'E COM(AN,
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Working Capital Management
0he chairman and managing director Mr' 5ijay (ankesh!ar
started as an individual transporter in @anuary %-A* !ithout any
background and e8perience" initially for the first # years he suffered
heavy losses' 0hen by the end of %-AA and started as local transport
bet!een :ubli and 2adag' 2radually business picked up similarly and
sometimes hiring out to 5ijayanand +oad lines !hich !as property
concern'
6ater the above proprietorship firms !ere converted into a
private limited company and sold there 6orries to the company came
into e8istence and effective from .%
st
march %-=.'
In India road!ays plays a very important role in connecting
the different parts of the country' 0he globali1ation" privati1ation makes
the customer to demand a speciali1ed and >uality service" to fulfill the
demands one should maintain a very good in his' And kindly upgrade
his service !ith ne! technologies' 0his !ill help in fulfilling this demand'
In olden days the price pay<s an important variable of
competition' But in todays market the >uality and additional service as a
variable for competition' 0he customer in todays is market is ready to
pay high charges but they are not ready to consume the services !itch
are lo! >uality' 0hey !ant a certain standers in the service !itch they
!ant to consume' ,o doubt the majority share in the passenger
transport is o!ned by government 0ransport Company' Because of this
reason the private companies can land their private companies by
putting some restriction to them for lending the service

O-.ECTI+ES O/ T'E ST*D,
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Working Capital Management
(tudy of the !orking capital management is important
because unless the !orking capital is managed effectively" monitored
efficiently planed properly and revie!ed periodically at regular intervals
to remove bottlenecks if the any company cannot earns profit and
increase its turnover' With this primary objective of the study" the
follo!ing further objectives are farmed for depth analysis'
%B 0o calculate the gross !orking capital and net !orking capital for
the last si8 years'
#B 0o kno! about the 5+6 6ogistics'
.B 0o kno! the !orking capital financing pattern'
;B 0o kno! the contribution of every current assets and current
liabilities of the company'
/B 0o study the optimum level of current assets and current liabilities
of the company'
*B 0o give some remedial measures and suggestions'
AB 0o study the !orking li>uidity position through various !orking
capital accounts capital related ration'
=B 0o study the !orking capital components such as receivables
accounts" cash management" inventory position'
-B 0o study the !ay and means of !orking capital fineness of the
!orking capital finance of the 5+6 logistics 6td'
%$B 0o estimate the !orking capital re>uirements of 5+6
logistics 6td'
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Working Capital Management
C'A(TER 2
0 INTROD*CTION
0 'ISTOR, O/ T'E OR1ANI2ATION
0 S(ECIAL /EAT*RES
0 (R1ANI2ATIONAL STR*CT*RE
0 DE(ARTMENTAL ST*D,
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Working Capital Management
IND*STR, (RO/ILE
0ransportation is a large and varied sector of the company' Modes of the conveyance
for goods range from peoples head Con !hich loads are balancedB and bicycles
ricksha!s to trucks and railroad cars' 0he road transport gre! rapidly after %-;A' Both
rail and road transport remains important'
0he share of transportation investment in total public investment declared during the
period from the early %-/$Ds to the early %-=$Ds real public transportation investment
also declined during much of that period because of the need for funds in the rest of the
economy' As a conse>uence" by the early %-=$Ds the transportation system !as barely
meeting the needs of the nation or preparing for future economy gro!th' Many roads
!ere easy braking up because of overuse and lock up maintenance railroads re>uired
ne! track and rolling stock' )orts ended e>uipments and facility" particularly for bulk and
container cargo' And at many airports the national civil airlines needed supporting
e>uipments" including provision for instrument landings the government planned to
devote %-E of the = / year plan C%--#&%--*B budget to transportation and
communication up from the %*E devote to the sector during A
th
pain'
Although there is a large private sector involvement in transportation" government
places a large regulatory and development rule' 0he central government has ministries
to handle civil aviation" railroad and surface transportation counterpart agencies are
found at the state and union territory level critical to improving the entry transportation
sector in the late %--$Ds is the ability of the sector to adjust to the central governmentDs
national reform initiatives including privati1ation deregulation and reduced subsidies the
sector must also adjust to foreign trade e8planation" demographic'
)ressures and incasing urbani1ation" technological and obsolescence" energy
availability environment and public safety concerns
COM(AN, (RO/ILE
5+6 6ogistics 6imited C5+6B !as funded in %-A* by 5ijay (ankesh!arF
chairman in :ubli a small to!n in north Karnataka" the southern state in India" !ith a
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Working Capital Management
single truck and a vision that !ay ahead of its time' (tarting its operations in the general
cargo transportation 5+6 has gro!n into a reno!ned" pan& India 6ogistics and
passenger transport company" !hich is currently the largest private sector fleet o!ner in
India" !ith a fleet strength of over #=$$ vehicles" !hich in the 6imca book of records'
.)6 and !arehousing solutions offered by 5+6 is tailor made cater to
uni>ue needs of various customer of the industry' With the largest net!ork in India" the
5+6 parcel service is indispensable for large number of corporate houses' 0his net!ork
spans the length and breadth of the country and is supported by large number of
transshipment hubs" braches" and franchises and over valuable customers' 5+6 is no!
e8pending its services to rich even the remote locations of the country'
Mr' 5ijay (ankesh!ar" the promoter commenced of the business of
transportation in the state of Karnataka" as a proprietary concern in year %-A*' 0he
proprietary concern subse>uently converted into a partnership firm by the name
measures 5ijayanand road lines in year %-A=' 0his partnership firm !as then converted
into a private limited company under part i8 of Companies act" %-/* under the name of
5ijayanand road lines private limited and a sati fact of incorporation" Bangalore dated
march .%
st
%-=. !as issued by the register of the company Bangalore and Karnataka'
0he company become a deemed public limited company in the year %--; and an
endorsement to this effect !as made by the register of company" Bangalore" Karnataka
on @uly %
st
%---" on the original certificate of incorporation dated march .%
st
%-=.
pursuant to a special resolution passed by the share holders in e8traordinary general
meeting held on 3ebruary %;
th
%--A the status of our company !as subse>uently
changed from a deemed public limited company to public limited company' 0he name of
our company !as changed into 5+6 6ogistics 6td and the +9C Karnataka granted a
press certificate of incorporation" conse>uent on change of name to our company on
august #/
th
" #$$*'
0he company !as initially in the business of transportation of goods
and parcels" subse>uent it commenced the business of courier service in the year %--#'
In the year %--* the ac>uired passenger buses and entered into an agreement !ith
5ijayanand travels a proprietary concern on the business of passenger service' Initially
5ijayanand travels a proprietary concern started by Mrs' 6alita (ankesh!ar in
,ovember %--* for giving the said vehicles on hire" to carry on the business of
passenger service' Initially 5ijayanand travels !ere operating !ithin the state of
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Working Capital Management
Karnataka only' 9ver a period of time !ith the gro!th of it business" it began operating
business bet!een destination in Karnataka' Maharashtra and 0amilnadu' 0he company
ac>uired the business of 5ijayanand travels on @une .$
th
" #$$; for a total consideration
+s /$" $$"$$$' 0he company continued !ith the same business as separate divisions'
Mrs' 5ani (ankesh!ar in august #$$%" started Maruti parcel carries !hich operate as
division of the company' 0he (hiva road lines !ere started in the year #$$. as separate
division of the company' 0he (hiva road lines provide service only in the state of
Karnataka covering * cities' A (hiva road lines has A dedicated branches' It provides
door& to& door services !ithout more than t!o tones' 0he company has recently
diversified in the !ind po!er business in #$$* and air charter business in #$$A'
+ecently company has purchased premier la air from :a!ker beech incorporation" U(A
%A is # pilots and * passenger seats aircraft C !ith club configuration seatsB it has
entered into M9U dated ,ovember %
st
" #$$A !ith I, damer company private 6imited for
maintenance of the aircraft'
9ver the 5+6 has evolved itself as providers of safe" reliable and timely
delivery net!ork" in the field of parcel services' It has no! e8panded its operation into
7G)+7(( cargo to meet the gro!ing demand for >uicker and speedier deliveries of
parcels' Currently 5+6 handles over *$$$ M0 of parcels every day adding up to a
staggering #%*"$$$"$$$ M0 of cargo per annum" apart from its core business of cargo
transportation the company has diversified into passenger transportation' 0oday 5+6 is
one of the leading companyDs in the Indian transport industry'
In #$$A" 5+6 6ogistics 6td' provides its !ay into the Indian aviation
industry' It is a gradual progression for the company' 3rom surface transport to air
transport' 0he Indian aviation industry has e8perienced a tremendous gro!th in the last
# years" more so in the private aviation sector' Keeping in mind the market demand
5+6 decide to enter the air&charter industry and serve the 55I)" 5I) 4 corporate India'
In the first phase 5+6 has ac>uired a brand ne!" premier jet one a year
craft Manufactured by :a!ker beech corporation" U(A' 0he company has future
e8pansions plans to add more aircraft and helicopters" based on the market feedback
and demand' Initially !e !ise to offer the jet aircraft on charter basis to the corporate
sector" leisure and tourism sector" medical evacuation" a special mission charter" event
management" advertisement agencies and 5I) flights'
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Working Capital Management
-RIE/ 'ISTOR, O/ T'E COM(AN,
0he chairman and managing director Mr' 5ijay (ankesh!ar
started
as on individual transporter in @anuary %-A* !ithout any background and
e8perienced for # year he suffered heavy losses then he started by end of
%-AA as local transporter from :ubli and 2adag and due to personal
management and 0- effective services business is packed up and one more
old lorry in %-A= during this tenure he observed activities of other !ell kno!n
transports and started first H parcel service from Bangalore to :ubli and :ubli
to Belgaum !ith only # lorries gradually the business picked up'
(imilarly (mt' 6'5'(ankesh!ar purchased on old lorry in %-A-
and
running individually and some times hiring out to 5ijayanand +oad 6ines
proprietary concern both of them forecast good future in this business and if
they run individually their old lorries to the company came in to e8istence
effective from .%
st
march %-=. due efficient management and good co&
operation from d the staff the turnover and business picked up the total
turnover of the company for the year %--#&-. !as %$';; crores !ere as in the
year %--- is /$ crores this sho!s achievement of the company in short times'
0his can be seen from the turnover there is a study increase in
the gro!th of the turnover for !hich they are proud that !ithin a span of #; years
the turnover has increasing /$ folds !hich is great achievement of an
entrepreneur from a remote place at :ubli'
0he company is managed by board of directors consisting of
5'B'(ankesh!ar chairman and managing director he has been !ith the day to day
management (hri'
Anand' 5'(ankesh!ar managing director looks after the general
administration verification of accounts other bills'
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Working Capital Management
+RL LO1ISTICS LIMITED
0:7 MI((I9,
0o provide the highest >uality service to our customer byH continuously increasing cost
efficiency and maintaining delivery dealings' 0o encourage our employeesI !orkforce
to serve for >uality and e8cellence they 5J everything they do' 0he promote team !ork
and create a !ork environment that H K takes care of talent and brings out the best in
our employees'
0:7 5I(I9,
0o become a premier company that cuts across various
segment and emerges as the torchbearer of each segment that the group ventures
into'
T'E +AL*ES
)unctuality" Integrity" :onest" 6oyalty" and Credibility'
3*ALIT, (OLIC,
9ur commitment is to provide the >uality logistic service
consistency at reasonable price and continually improve the same to achieve
customer delight on the sustainable task'
5+6 enjoys the distinction of being the single largest fleet o!ner
in the private section India !ith more than #=$$ vehicles'
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Working Capital Management
):I69(9):L
0hey immensely follo! the philosophy of M0IM7 I( 296M
I(9 -$$%&#$$$ C7+0I3ICA0I9,
5ijayanand 0ravels is committed to >uality and safety reorgani1ation of these
7fforts to confirm its services to the highest standards regarding time management of
passengers
convince management system in @une #$$/'
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Working Capital Management
)+9UC0I(7+5IC7 )+93I67
5+6 offer follo!ing services !hich are summari1ed belo!
%B 2oods transportation
a' 3ull truck load
b' 6ess than full load CparcelB 2eneral parcel
78press cargo
c' Courier
d' )assenger travels
#B Wind po!er generation
.B Air charter business
;B ,e!s paper C7nglish 4 kannadaB
/B )ackaged drinking !ater
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Working Capital Management
C'A(TER "
(RO.ECT O+ER+IEW
T'EORTICAL IN/ORMATION
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Working Capital Management
0:7+90ICA6 3+AM7 W9+K A,
0he most profitable function of an organi1ation is to make the !orking capital"
(anctioning credit to customer and others out of current asset and current liabilities
as its one of the principal services of an organi1ation'
It is the current assets and current liabilities" !hich bring most of the earning for
an organi1ation and valuable ties !hich the community' An effective current assets
and current liabilities policy provides funds to the vital sectors of the economy in
appropriate amounts and appropriate time" by promoter economic development'
N Meaning of !orking capital'
N Concept of !orking capital'
N 0ypes of !orking capital'
N ,eeds" objectives" principal" of !orking capital'
N eterminants of !orking capital'
N 7stimation of !orking capital re>uirements" operating cycle'
N 3ormula
CU++7,0 A((70
N Inventories
N (undry debtors
N Cash and bank balances
CU++7,0 6IABI6I0I7(
N (undry creditors
N 9ther liabilities
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Working Capital Management
W9+KI,2 CA)I0A6 MA,A27M7,0
0he aim of the present study is to e8amine the small scale industry practices in
!orking capital management is determined by the efficient administration of its various
components such as cash" accounts receivables and inventory" the study attempts to
determine the management of each component'
Working capital in a business enterprise may be compared to the blood in a human
body' Blood gives life and strength to the human body' (imilarly !orking capital injects
life and strength & profits and solvency& to the business organi1ation' Working Capital
refers to short term funds re>uired for the purpose of business operations' 0he funds
used for meeting day to day e8penses" stock of goods" granting of credit to customers
and maintenance of the minimum balance' It is not necessary that the funds should be
in the form of cash only' It can be in the form of near cash items like marketable
securities" inventories and account receivable'
Page %=
Working Capital Management
C9,C7)0 93 W9+KI,2 CA)I0A6
6ike most of financial concepts" the concept of O!orking capital is used in different
connotations by different !riters' 9bviously" it is understood either as the total
current assets or as the e8cess of current assets over current liabilities' 0he former is
referred to the gross !orking capital and the latter the net !orking capital'
(o there are t!o concepts in !orking capitalP
%' 2ross !orking capital'
#' ,et !orking capital''
2ross !orking capital is the total of all current assets" vi1' cash" marketable
securities account receivable and inventory net !orking capital refers to e8cess of
current assets over current liabilities' Both of these concepts have their o!n
importance' M the gross concept is a going concern concept in !hich management is
particularly interested because for the productive utili1ation of fi8ed assets all the
currents are necessary' 0he net concept is useful to gauge the financial soundness
of a form and is of special'
Interest to sundry creditors and suppliers of short&term loans and
advances' It creates confidence among the creditors about the securities of their of
their amounts'
MWorking capital is the capital circulating into cash over an operating cycle' Working
capital is e>uated !ith all the current assetsM'
Working capital and current assets are interchangeable'
0he precise meaning of current assets and current liabilities
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Working Capital Management
CU++7,0 A((70(
Current assets are those assets !hich are used in the current operation of a
business such as inventories" receivables" cash and bank balances and easily
convertible securities' 0hese assets generally change their form !ithin an accounting
period" Mcurrent receivable may have a life span of .$ to *$ day" and inventories may be
held for .$ to %$$ dayM'
CU++7,0 6IABI6I0I7(
Current liabilities are those claims of outsiders !hich are e8pected to mature
for payment !ithin an accounting year and include creditors" bill payable" bank&overdraft"
outstanding e8penses" outstanding ta8 and income received in advance" Mcurrent
liabilities are those !here li>uidation is reasonably e8pected to re>uire the use of e8isting
resources properly classifiable as current assets" or the creation of other current assets"
or the creation of other assets" or the creation of other current liabilitiesM'
0L)7( 93 W9+KI,2 CA)I0A6
0he operating cycle creates the need for current asset C!orking capitalB ho!ever
the need does not come to an end after the cycle is completed to e8plain this continuing
need of current assets a destination should be dra!n bet!een and temporary capital'
)ermanent !orking capital
0he need for current assets arises as already observed because of the cash
cycle' 0o carryon business certain minimum level of !orking capital is necessary on
continues and uninterrupted basis'
0emporary !orking capital
Any amount over and above the permanent level of !orking capital is temporary"
fluctuating or variable" !orking capital'
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Working Capital Management
,77 39+ W9+KI,2 CA)I0A6
0o fulfill its endeavor to ma8imi1e the share holderDs !ealth' 3irm has to earn
sufficient return from its operation !hich needs a successful sales activity' 0he firm
has to invest sufficient funds in current assets to succeed in sales of goods and
actual receipt in cash' :ence there is need for !orking capital in the form of current
assets to sustain sales activity during that period (ince cash inflo!s and cash
outflo!s donDt match' 3irms have to necessarily keep cash or investment in short&
term li>uid securities to fulfill its obligations as and !hen they become due' 0he
ade>uate stock of inventory provides a cushion against being out of stock and helps
as guard to meet demand for its products' 0o be competitive" the firm must sell its
products to there customers on credit !hich necessitates the holding of accounts
receivables' 0herefore an ade>uate level of !orking capital is absolutely necessary
for the smooth sales activities" !hich in term enhances the o!nerDs !ealth'
The wor4in $apita5 nee6 ari7e7 for the fo55owin p8rpo7e7:-
%' 3or purchasing ra! material" components and spare parts'
#' 3or paying !ages and salaries'
.' 0o incur day & to & day e8penses and overhead costs like fuel" po!er and offices
e8penses etc'
;' 0o meet selling costs of packing advertising etc'
/' 0o provide credit facilities to customers'
*' 0o maintain inventories of ra! materials" !ork& in & progress" spare parts and
finished goods'
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Working Capital Management
9B@7C0I57( 93 W9+KI,2 CA)I0A6 MA,A27M7,0
N 0o ensure ade>uate of a firm'
N 0o minimi1e the risk'
N It contributes to the ma8imi1ation of firmDs value'
N 0o estimate to !orking capital re>uirement of 5+6 6ogistics 6td'
N 0o study the !orking capital component such as receivables accounts" cash
management" inventory position'
N 0o study the optimum level of current assets and current liabilities of the
company'
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Working Capital Management
707+MI,A,0( 93 W9+KI,2 CA)I0A6
19 Nat8re of :87ine77:-
0he !orking capital re>uirement of a enterprise are basically related to the
conduct of business enterprises fall into some broad categories depending on the
nature of their business' )ublic utilities have t!o future !hich have a bearing on
!orking capital need areP
N 0he cash nature of business that is cash sale and
N (ale of services rather than commodities
29 (ro68$tion $;$5e :-
0his is another factor" !hich has bearing on the >uantum of !orking capital' 0he
term production or manufacturing cycle refers to the time involved in the
manufacturing of goods' It covers the time span bet!een procurement of ra!
materials and the completion of the manufacturing process leading to the finished
goods'
" -87ine77 $;$5e:-
0he !orking capital re>uirement is also determine by the nature of the business
cycle' Business need to cyclical and seasonal changes" !hich in term causes a shift
in the !orking capital position' 0he variation in the business conditions may be in t!o
directionsP
N Up!ard phase !hen boom condition prevail" and
N o!ns!ing phase !hen economic activity is marked by a decline
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Working Capital Management
(ro68$tion policyP&
0he >uantum of !orking capital is also determined by production policy'
0he demand for products is seasonal that is they are purchased during certain months
of the year there are t!o opinions for production policy to enterprises either they confine
there production only to periods !hen goods are purchased or they follo! a steady
production during the slack season the firm have to maintain their !orking force and
physical facilities !ithout production and sale'
Cre6it policyP&
0he credit policy relating to sales and purchases a so affects the !orking capital'
0he credit policy influences the re>uirement of !orking capital in t!o !ays'
0he credit policy terms granted to customer have a bearing on the supplies of goods
Ctrade creditorsB the need for !orking capital is less' 0he !orking capital re>uirement of
the business is affected by the terms of purchase and sale and the role given to credit
by a company in its !ith credit and debtors'
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Working Capital Management
ESTIMATION O/ WORKIN1 CA(ITAL
78penses on ra! materials" labour and overhead" 6ength of time" the
ra! materials to be held in stock' 6ength of time the ra! materials in
manufacturing process in semi finished goods' 6ength of time" finished goods
are held in !are house !aiting sales' Credit period granted by the sundry
creditors' 0ime gap in the payment of !ages" salaries and other operating
e8penses'
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Working Capital Management
C9M)9,7,0( 93 W9+KI,2 CA)I0A6
0he components of !orking capital are
%Cash management +eceivables management Inventory management
CA(: MA,A27M7,0
Cash is the li>uid form of an asset' It is the ready money available in the form or !ith the
business" essential for its operations' A firm needs the cash for the follo!ing three
purposesP
Tran7a$tion <otive: the firm must and should keep the funds for transactions like
purchase" sales etc' these activities !hich are not kno!n in . advances" are not
considered !hile preparing a cash budget'
Spe$85ative <otive: to tap profits from opportunities arising from fluctuations . in
commodity prices" interest rates etc' the company !ith surplus cash is in a . better
position to e8ploit such situations' .
Ca7h f5ow7: the flo! of cash into and out of the business over a period refers to
cash flo!' Cash inflo! can be in the form of cash received from customers" lenders
and investors' Cash outflo! can arises because of payments made to employees
CsalariesB supplies and creditors'
Page #*
(re$a8tionar; <otive: the firm also funds for the safeguard against
uncertainties" !hich are an integral part of business operations'
Working Capital Management
(o7itive $a7h f5ow7: !hen cash flo! e8ceeds outflo! it results in positive cash
flo!s' )ositive cash flo! is beneficial to the business" the only thing to be cautious
about is the opportunity cost" incurred as result of idle money'
Neative $a7h f5ow7: negative cash flo!s arises !hen cash outflo!s e8ceeds
inflo!s' 0his can be due to various reasons'
A good cash management has a major impact on the overall !orking capital
management' It is re>uired to meet the business obligations in the firm' 0he benefits
of good cash management areP
H Control of financial risk H 9pportunity for risk
H Increased customer" supplier" and shareholder confidence
The $a7h <anae<ent i7 $o<<on5; 6ea57 with the fo55owin a7pe$t79
Cash planning or identifying of cash flo!s managing the cash flo!s
9ptimum cash level
Page #A
Working Capital Management
(0A07M7,0 93 0:7 )+9B67M
N 0he under the manner of administration of assets and ho! they are financed
determinants the success or failure of the company' ,o!" this is running under profit
but is suffering from accumulated losses'
N 0o find out ho! !orking capital is involved and to make an in & depth study" this
researcher undertook the task of defining the problem in this study'
N 0he researcher problem undertakes involves the financing and efficient
management of current assets that is inventories" receivables" and cash' Working
capital management involves the management of current assets and current
liabilities' 0he manner of administration of current assets and current liabilities
determine to a very large e8tent the success or failure of the business'
39+MU6A 93 W9+KI,2 CA)I0A6
,et !orking capital Q current assets & current liabilities
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Working Capital Management
Current assets and current liabilities include three accounts !hich are of
special importance' 0he account represents the areas of the business !here managers
have the most direct impact'
Account receivables Ccurrent assetB Inventory Ccurrent assetsB Acc 0he current portion
of debt Cpayable !ithin %# monthsB is critical" because often secured by long term
assets' Common types of short& term debt are bank loans of credit'
An increase in !orking capital that the business has either increase current assets
Cthat is received cash or other current assetB or has decreased current liabilities' 3or
e8ample has paid off some short & term creditors'
W9+KI,2 CA)I0A6 MA,A27M7,0
ecisions relating to !orking capital and short& term financing are referred to as
!orking capital management' 0hese involve managing the relationship bet!een a firmDs
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Working Capital Management
short term asset and short& term liabilities' 0he goals of !orking capital management is
to ensure that the firm is able to continue its operations and that it has sufficient cash
flo! to satisfy short & term debt and upcoming operation e8penses'
Manae<ent of wor4in $apita5
Management !ill use a combination of policies and techni>ues for the
management of !orking capital' 0hese policies aim at managing the current assets
Cgenerally cash and inventories and debtorsB and the short & term financing such that
cash flo!s and returns are acceptable'
Ca7h <anae<ent
Identify the cash balances !hich allo!s for the business to meet day to day e8pense"
but reduce cash holding cost'
Inventorie7 <anae<ent
Identify the level of inventory !hich allo!s for uninterrupted production but reduces the
investment in ra! materials and minimi1e recording costs and hence increases the
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Working Capital Management
investment in ra! materials and minimi1e recording costs and hence increases cash
flo!
De:tor7 <anae<ent
Identify the appropriate credit policy that is credit terms !hich !ill attract
customers" such that any impact on cash flo!s and the cash conversion cycle !ill be
offset by increased revenue and hence return on capital or vice versa'
Short - ter< finan$in
Identify the appropriate source of financing" given the cash conversion cycle" the
inventory is ideally financed by credit granted by the supplier" ho!ever it may be
necessary to utili1e a bank loan Cor overdraftB or Mconvert debtors to cashM through
MfactoringM
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Working Capital Management
CA(: MA,A27M7,0 BA(IC )+9B67M
Cash management techni>ue & one of the basic objectives of cash management
is to The o:#e$tive7 i7 7o8ht to :e a$hieve6 :; <ean7 of the
fo55owin
N )reparing cash budget
N )roviding for unpredictable description
Contro55in inf5ow of $a7h & care should be taken to ensure that there is no
significant direction bet!een the projected cash inflo!s and projected cash
outflo!s" appropriated techni>ue has to be devised for spread collection of cash
and there techni>ue areF
N Concentration banking
N 6ock bo8 system
Contro5 over $a7h o8tf5ow7 & centrali1e disbursement should be follo!ed as
compared to decentrali1ed system in cash of collection' )ayment should be made
on date' 0he firm should pay !ithin the term offered by suppliers'
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Working Capital Management
MA,A27M7,0 93 I,57,09+I7(
INTROD*CTION -
0he tired major asset in !orking capital is inventory' 0he term inventories refer to
the stock of the product' A firm is offering for sale and the components that make up the
products'
Inventory as a current asset" differed from other current asset because only
financial managers are not involved return all the function areas" finance" marketing and
purchasing are involved'
Management of inventories involves t!o basic problems
Maintaining a sufficient large si1e of inventories for efficient and smooth production and
sale' Maintaining minimum investment inventories to minimi1e the direct and indirect
cost associated !ith holding inventories to minimi1e profitability' Inventories should
neither e8cessive nor inade>uate if inventories !here kept at high level of inventories
may result in fre>uent interruption in the production scheduling therefore company
should maintain optimum inventory to achieve its objectives'
O:#e$tive7 of inventor; <anae<ent:-
7nsuring the supply of inventories for facilitating uninterrupted production
Maintaining sufficient stock of supply" Minimi1ing the carrying cost 4 9ptimum
investment in inventory
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Working Capital Management
Te$hni=8e7 of inventor; <anae<ent:-
A' etermination of the types of control re>uired' /' 0he
basic economic order >uality' C 0he record point' '
(afety stock'
+7C7I5AB67( MA,A27M7,0
INTROD*CTION
0he sale of goods on credit is on essential fact of the model competitive
economics systems" the terms receivables is defined as debtor o!ned to the customer
arising from sale of goods services in the ordinary course of business'
O:#e$tive7 of re$eiva:5e7 <anae<ent
9bjectives of receivables management is to promote sales and projects until
and point is reached !here the return on investment in further funding receivables is less
than the cost of raised to finance that additional credits'
(o5i$ie7 for <anain re=8ire7:-
+eceive should also be benefit cost trade off involved in the various areas of
allocates receivables management bless management'
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Working Capital Management
C:A)07+ ; R A0A A,A6L6(I( A, I,07+)+70A0I9,
Infor<ation re5atin to vario87 $8rrent a77et7 an6 5ia:i5itie7 in$586e in
the ;ear 2>>&->?
Page ./
parti$85ar7 A<o8nt (er$ent
C8rrent A77et7:
Inventories */%';A #A'#.E
(undry debtors %##A'%/ /%'#-E
Cash and Bank balance %/.'-; #%';=E
Tota5 2"@29&? 1>>A
C8rrent Lia:i5itie7:
(undry creditors %.--';* -/';;E
9ther provisions **'=- ;'/*E
Tota5 1%??9"& 1>>A
Working Capital Management
It may be inferred that in the overall composition of sundry creditors are the highest
C-/';;EB" follo!ed by sundry debtors C/%'#-EB" other liabilities C;'/*EB" cash and bank
balance C#%';=EB" inventories C#A'..EB'
Infor<ation re5atin to vario87 $8rrent a77et7 an6 5ia:i5itie7 in$586e in
the ;ear 2>>?->B
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(arti$85ar7 A<o8nt (er$ent
C8rrent a77et7:
Inventories =*-'/ #*'.*E
(undry debtors %A#%'#/ /#'%AE
Cash and Bank balance A$='%/ #%';AE
Tota5 "2@C9@ 1>>9>>A
C8rrent 5ia:i5itie7:
(undry creditors %/-*';. =-'$*E
9ther provisions %-*'%= %$'-;E
Tota5 1B@29?1 1>>9>>A
Working Capital Management
It may be inferred that in the overall composite on of sundry creditors are the highest C=-'$*EB" follo!ed
by sundry debtors C/#'%AEB" inventories C#*'.*EB" cash and bank balances C#%';AEB" other liabilities
C%$'-;EB'
Infor<ation re5atin to vario87 $8rrent a77et7 an6 5ia:i5itie7 in$586e in
the ;ear 2>>B->C
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(arti$85ar7 A<o8nt per$ent
C8rrent a77et7:
Inventories -*$'#- %-'=%E
(undry ebtors #.A%'.# ;='-#E
Cash and Bank Balance %/%/'=/ .%'#AE
Tota5 %C%B9%? 1>>9>>A
C8rrent Lia:i5itie7:
(undry Creditors #A-;'#= -$'==E
9ther )rovisions #=$';. -'%#E
Tota5 ">B%9B1 1>>9>>A
Working Capital Management
It <a; :e revea5e6 that in the overa55 $o<po7ition of 78n6r; $re6itor7
are the hihe7t D@>9CCAEF fo55owe6 :; 78n6r; 6e:tor7 D%C9@2AEF
inventorie7 D"192BAEF $a7h an6 :an4 :a5an$e7 D1@9C1AEF other 5ia:i5itie7
D@912AE9
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Working Capital Management
Infor<ation re5atin to vario87 $8rrent a77et7 an6 5ia:i5itie7 in$586e in
the ;ear 2>>C->@
it may be revealed that in the overall composition of sundry creditors are the highest
C-*'-*EB" follo!ed by sundry debtors C/#'-AEB" inventories C%%';AEB" cash and bank
balances C./'//EB" other liabilities C;'$$EB'
Page .-
(arti$85ar7 A<o8nt (er$ent
C8rrent a77et7:
Inventories *..'$* %%';AE
(undry ebtors #-## -= /#'-AE
Cash and Bank Balance %-*% =- ./'//E
Tota5 &&1B9@" 1>>A
C8rrent Lia:i5itie7:
(undry Creditors ../. -* -*'-*E
9ther )rovisions %$/'%# ;'$$E
Tota5 "%?1 >C 1>>A
Working Capital Management
Infor<ation re5atin to vario87 $8rrent a77et7 an6 5ia:i5itie7 in$586e in
the ;ear 2>>@-1>
It may be revealed that in the overall composition of sundry creditors are the highest
C-*'-*EB" follo!ed by sundry creditors C/-'%AEB" inventories C-'%%EB" cash and bank
balance C.%'A#EB" other liabilities C.'*$EB'
Page ;$
parti$85ar7 A<o8nt per$ent
C8rrent A77et7:
Inventories *=*'./ -'%%E
(undry ebtors ;;/-'#- /-'%AE
Cash and Bank Balance #.-%'%A .%'A#E
Tota5 B&"?9C1 1>>9>>A
C8rrent Lia:i5itie7:
(undry Creditors #-;;'-$ -*';$E
9ther )rovisions %$-'=. .'*$E
Tota5 ">&%9B" 1>>9>>A
Working Capital Management
E7ti<ation of Net wor4in Capita5 Re=8ire<ent
Net Wor4in Capita5 fro< 2>>2->" To 2>>@-1>:
Net Wor4in Capita5
By using this graph !e can easily identified that the net !orking capital of the
firm is continuously increasing it is favorable for the company'
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Lear Current Assets Current 2ross Working ,et Working
6iabilities Capital Capital
#$$#&$. AA#'.- /%='/* AA#'.- #/.'=.
#$$.&$; *#-'A/ /.-'%/ *#-'A/ -$'*$
#$$;&$/ %;=$'.* A.*'A* %;=$'.* A;#'*$
#$$/&$* #.-#'/* %;**'./ #.-#'/* -#*'#%
#$$*&$A .#-='-$ %A-#'*% .#-='-$ %/$*'#-
#$$A&$= ;=;A';* .$A;'A% ;=;A';* %AA#'A/
#$$=&$- //%A'-. .;*%'$= //%A'-. #%$%'=/
#$$-&%$ A/.*'=% .$/;'A. A/.*'=% ;;=#'$=
,et Working
Capital
#$$# #$$. #$$; #$$/ #$$* #$$A #$$= #$$-
Working Capital Management
C:A)07+ /
0 /INDIN1S
0 S*11ESTION
0 CONCL*SION
-I-LO1RA(',
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Working Capital Management
3I,I,2(
(undry debtors" investment" cash and bank balances have been the main
elements of current assets'
0he financing mi8 for the company has been constituted !ith short term sources'
(undry creditors and other liabilities have been the constituents of current
liabilities'
0he net !orking capital re>uirement for the year end #$$= &$- is comparatively
high CI'e' ;;=#'$=B in comparison !ith last * years'
N from the study !e come to kno! that there is a net income in !orking capital'
It !as observed that sources of application or e>ually managed in 5+6 6td' RN 0he
short term solvency of the firm is good as per the * year'
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Working Capital Management
(U227(0I9,
0he company should not finance in !orking capital re>uirement through long term
borro!ings'
Instead of having financed from banking source it is better to relating the >uantum of capital
clause by increasing the authori1ed share capital and there by issuing the shares and the
company should also mobili1ed some of funds through accepting public deposits on the
interest rates !ill be la! compare to the financial charges paid for bank'
0he 5+6 travels services may e8tend to local area'
It !ould better if 5+6 enters into education institution'
0he company must undergo campus intervie!'
Work environment should be improved and good !orking conditions should be provided
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Working Capital Management
C9,C6U(I9,
0he main intention to study this project !ork has to understand the short term and long&
term li>uidity of the firm' 0he other objectives of this report !ere to kno! the !orking capital
financing pattern and its impact on the profitability' Keeping these objectives in mind
necessary calculation have been made and presented in the charts' 3rom the data analysis
!e can concluded that company has sound financial represent the current re>uirement of
the firm has deals !ith current assets and current liabilities' 0he !orking capital
re>uirement have progress by ;;=#'$=E bet!een the years #$$=&$- this indicates the
company has better financial condition'
By using all these information !e can conclude that the financial position of 5+6 6ogistic
6td >uite satisfactory



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Working Capital Management
BIBI692+A):L
%' 3inancial Management P By I'M' )andey
#' 3inancial Management P By Khan and @ain
.' 3inancial Accounting PBy +' ,arayanas!amy
Annual +eport of 5+6 from #$$*&#$$A 0o #$%$&#$%%
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