0

A
SUMMER TRAI NI NG REPORT

ON
Working Capital Management
AT
J.B.M.COMPONENT PRIVATE LIMITED
(FINANCE DEPARTMENT)


IN
PARTIAL FULFILLMENT OF
MASTER OF BUSINESS ADMINISTRATION
(Session: - 2013 14)


SUBMITTED TO SUBMITTED BY
CONTROLLER OF KAVITA
EXAMINATION
Mr. ROLL NO.MB13016


ADVANCED INSTITUTE OF TECHNOLOGY & MANAGEMENT


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PREFACE
The Project entitled Working Capital Management at J.B.M. and BEST WAY
STEEL pvt. Ltd. deals in this segment. The term of study was kept limited to make the
title true. The purpose of the report is to get the in depth understanding of the process of
working capital management. With the growing Indian economy and the liberal
government policies for infrastructure, the demand for METAL services is increasing and
seeing this as an opportunity is under taking many new projects for expansion of the
production which are under implementation for increasing the capacity of the plants.
Jbm.component and best way pvt. Ltd. world recognised METAL company so the
management of working capital consist of different of new technique which is not common
in Indian METAL industry.
The main objective of my research that how J.B.M and BEST WAY pvt.ltd. maintain the
proper balance between the amount of current assets and the current liabilities in such a
way that the firm is always able to meet its financial obligations, whenever due. This will
ensure the smooth working of the unit without any production held ups due to paucity of
funds and also how J.B.M. and BEST WAY pvt. Ltd. manage the current assets in such a
way that the marginal return on investment in these assets is not less than the cost of
capital acquired to finance them. This will ensure the maximization of the value of the
business unit.
Working capital management in J.B.M. and BEST WAY pvt. Ltd. is seem to be different
and also effective as comparison other metal firms in India. Reason for being different is
their nature of business and implementation of new technique which help them to smooth
flow of the fund.
Performance of J.B.M. and BEST WAY pvt. Ltd. Korea and India both are affluent. Their
mixed corporate culture and the area of expertise in metal processing construction
contract help them to get succeed in every project



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TABLE OF CONTENTS

1 INTRODUCTION 3
2 COMPANY PROFILE 43
3 OBJECTIVES 44
4 RESEARCH METHODOLOGY 54
5 LIMITATION 56
6 DATA INTERPRETATION AND ANALYSIS 57
7 FINDINGS AND SUGGESTIONS 65
8 BIBLIOGRAPHY 70
9 QUESTIONNAIRE 71










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INTRODUCTION
Corporate finance is an area of finance dealing with the financial decisions corporations
make and the tools and analysis used to make these decisions. The primary goal of
corporate finance is to maximize corporate value while managing the firm's financial risks
Although it is in principle different from managerial finance which studies the financial
decisions of all firms, rather than corporations alone, the main concepts in the study of
corporate finance are applicable to the financial problems of all kinds of firms. The
discipline can be divided into long-term and short-term decisions and techniques. Capital
investment decisions are long-term choices about which projects receive investment,
whether to finance that investment with equity or debt, and when or whether to pay
dividends to shareholders. On the other hand, the short term decisions can be grouped
under the heading "Working capital management". This subject deals with the short-term
balance of current assets and current liabilities the focus here is on managing cash,
inventories, and short-term borrowing and lending.
Definition of working capital
The word working capital is made of two words 1.Working and 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 other wise known as revolving or circulating capital
It is nothing but the difference between current assets and current liabilities. i.e.

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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 steeless to more working capital when we need it.
Working capital typically means the firms holding of current or short-term asset s such as
cash, receivables, inventory and marketable securities. Much academic literature is
directed toward gross working capital ,I .e . total current or circulating assets. Each item s
are referred to as circulating assets. these items are referred to as circulating assets
because of their cyclical nature. in a retail establishment cash is initially employed to
purchase inventory which is turn sold on credit and result in steelount receivable . once
receivables are collected , they come cash part of which reinvested in additional
inventory and part. Working capital management is the process of planning and controlling
the level and mix of the current assets, of the firm as well as financing these asset ,
specifically working capital management require financial managers to decide what
quantities of cash , other liquid asset , steelount receivable , and inventories the firm will
hold at any point in time . In addition, financial manager would decide how there current
assets are financed.financing choices include the mix of current as well as long- term
liabilities.
This high degree of divisibility has two important implications for the management of
working capital , first if the management so chooses, working capital can be acquired
piecemeal to meet immediate needs as they arise. Such hand-to-mouth policy has
advantage of reducing the average investment in working capital,thereby minimizing the
interest charges , insurance expenses, and storage fees necessary to carry the investment .
however a land-to- mouth policy has these disadvantages :there will be increased ordering
costs associated with greater likelihood that firm may experience a shortage working
capital , because there is no buffer stock to absorb unexpected fluctuation in requirement.
By balancing the saving in carrying cost against the cost of shortage and of more frequent
procurement , the management of a firm will generally find it profitable to maintain its
working capital at a level higher than needed to meet its immediate needs. However ,the

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relationships among carrying costs , shortage costs , and procurement costs are such the
most firms will find that the economic level of working capital is no more than a few
months supply .This relatively short planning horizon in working capital decisions
contrast sharply with the much longer horizon in working capital decisions contrast sharply
with the much longer planning horizon in fixed capital decisions.
The second implication of divisibility ,which follows logically from first concern the
appropriate methods for financing working capital only amount to a few months supply
means that the working capital cycle , a cycle running from cash to inventories ,
inventories to receivables and receivable to cash , is measured in months rather than in
years. This Liquidity of working capital allows the management a corresponding flexibility
inits financing decisions. Whereas fixed capital should generally be financed with either
long- term funds or short-term funds or some combination of the two.
In the management of working capital , therefore the firm is faced with two key questions.
First given the level of sales and the relevant cost considerations, what are the optimal
amounts of cash assets, steelount receivable, and inventories that a firm should choose to
maintain? Second , given these optimal amount s what is the most economical way to
finance these working capital investments? To produce the best possible returns firm
should keep no unproductive asset and should finance with the cheapest available sources
of funds. why? in general ,it is often advantageous for the firm to invest in short term
assets and to finance with short term liability.


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Working capital, also known as net working capital, is a financial metric which represents
operating liquidity available to a business. Along with fixed assets such as plant and
equipment, working capital is considered a part of operating capital. It is calculated as
current assets minus current liabilities. If current assets are less than current liabilities, an
entity has a working capital deficiency, also called a working capital deficit. A company
can be endowed with assets and profitability but short of liquidity if its assets cannot
readily be converted into cash. Positive working capital is required to ensure that a firm is
able to continue its operations and that it has sufficient funds to satisfy both maturing
short-term debt and upcoming operational expenses. The management of working capital
involves managing inventories, steelounts receivable and payable and cash.
Concept of working capital
Gross Working Capital = Total of Current Asset
Net Working Capital = Excess of Current Asset over Current Liability
Gross working capital- refers to the firms investment in current assets. Current assets are
the assets which can be converted into cash within an steelounting year and include cash
short term securities , debtors.
Current Assets Current Liabilities
Cash in hand / at bank
Bills Receivable
Sundry Debtors
Short term loans
Investors/ stock
Temporary investment
Prepaid expenses
Steelrued incomes
Bills Payable
Sundry Creditors
Outstanding expenses
Steelrued expenses
Bank Over draft

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Net Working Capital -is defined as Current Assets minus Current Liabilities. Current
assets include stocks, debtors, cash & equivalents and other current assets. Current
liabilities include all the short-term borrowings. The formula are as follows
= (stocks + debtors + cash & equivalents + current assets, other) - creditors, short
Focusing on management of current asset
The gross working capital concept focuses attention on two aspects of current assets
management : (1)how to optimise investment in current assets?(2)how should current asset
be financed?.The consideration of the level of investment in current assets should avoid
two danger points- excessive or inadequate investment in current assets. Investment in
current assets should be just adequate to the needs of the business firm .Excessive
investment in current assets should be avoided because it impairs the firms profitability , as
idle investment earn nothing. On the other hand , inadequate amount of working capital
can threaten solvency of the firm because of its inability to meet current obligations. It
should be realized that the working capital of the firm may be fluctuating with changing
business activity . this may cause excess or shortage of working capital frequently. The
management should prompt t o initiate an action and correct imbalances. Another aspect of
the gross working capital point to the need of arranging funds to current assets whenever a
need for working capital fund arises due to increasing level of business activity or for any
reason , financing arrangement should be quickly . similarly, if suddenly, some surplus
fund arise they should not be allowed to remain idle , but should be invested in short-term
securities. thus the financial manager should have knowledge of the sources of working
capital fund as well as investment avenues where idle funds may be temporarily invested
Focusing on liquidity management
Net working capital is a qualitative concept. it indicates the liquidity position of the firm
and suggests the extent to which working capital needs may be financed by permanents
sources of funds. Current assets should be sufficiently in excess of current liabilities to
constitute a margin or buffer for maturing obligations within the ordinary operating cycle
of a business . in order to protect their interests, short-term creditors always like a company
to maintain current asset at a higher liability. it is a conventional rule to maintain the level
of current asset should be considered in determining the level of current asset vis- a- vis

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current liabilities. A weak liquidity position poses a threat to the solvency of the
company and make it unsafe and unsound. A negative working capital means a negative
liquidity and prove to be harmful for the company s reputation. excessive liquidity is
also bad . it may be due to mismanagement of current assets Therefore ,prompt and timely
action should be taken by management to prove and correct imbalances in liquidity
position of the firm. Net working capital concept also cover the question of judicious mix
long term demand short term fund for financing currents assets.
For every firm there is a minimum amount of net working capital is permanent. Therefore
, a portion of the working capital should be financed through permanent sources of fund
such as equity share capital , debenture , long term, debt, preference share capital , or
retained earnings. Management must therefore , decide the extent to which current asset
should be financed with the equity and /or borrowed capital.
In summary , it may emphasised that both gross and net concepts of working capital are
equally important efficient management of working capital . there is no precise way to
determine the exact amount of gross ,or net working capital for any firm . the data and
problems of each company should be analysed to determine the amount of working capital
. there is no specific rule as to how current asset should be financed . it is not feasible in
practise to finance current asset by short tern sources only. keeping view the constraints of
the individuals company, a judicious mix long and short term financed should be invested
in current asset . since current involve cost funds , they should be invested incurrent assets.
Since current assets involve costs of funds, they should be put to productive.
Working capital in terms of five components
Cash and equivalents: - This most liquid form of working capital requires constant
supervision. A good cash budgeting and forecasting system provides answers to key
questions such as: Is the cash level adequate to meet current expenses as they come due?
What is the timing relationship between cash inflow and outflow? When will peak cash
needs occur? When and how much bank borrowing will be needed to meet any cash
shortfalls? When will repayment be expected and will the cash flow cover it?

Steelounts receivable: - Many businesses extend credit to their customers. If you do, is the

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amount of steelounts receivable reasonable relative to sales? How rapidly are receivables
being collected? Which customers are slow to pay and what should be done about them?
Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so
naturally it requires continual scrutiny. Is the inventory level reasonable compared with
sales and the nature of your business? What's the rate of inventory turnover compared with
other companies in your type of business?
Steelounts payable:- Financing by suppliers is common in small business; it is one of the
major sources of funds for entrepreneurs. Is the amount of money owed suppliers
reasonable relative to what you purchase? What is your firm's payment policy doing to
enhance or detract from your credit rating?

Steelrued expenses and taxes payable: - These are obligations of your company at any
given time and represent a future outflow of cash.
Concept of working capital
Balance sheet concept
Operating cycle concept
It goes without saying that the pattern of management will be very largely influenced
by the approach taken in defining it. Therefore the two concept are discussed
separately in a nutshell.
Balance sheet concept- there are two interpretation of working capital under the balance
sheet concept. It is represented by the excess of current assets over current liabilities and is
the amount normally available to finance current operations. But some time working
capital is also synonym for gross or total current assets. In that case , the excess of current
asset over current liabilities is called the net working capital or net current assets. The
conventional definition of working capital in terms of the difference between the current
assets and the current liabilities somewhat confusing. Working capital is really what a part
of long term finance is locked in and used for supporting activities. It is difficult to say
whether this is right or wrong. Apparently are warned about tight working capital situation
, the logic of the above definition would perhaps indicate diversion of long term finances

10
for short term finances. For if short- term bank loans were procured to bring in cash , under
the conventional method working capital evidently remain unchanged. Liquidation of
debtor or inventory into cash would also keep the level unchanged.
Operating cycle concept- a company operating cycle typically consists of three primary
activities :purchasing resources , producing the product ,and distributing (selling) the
product. These activities create fund flows that are both unsynchronised and uncertain.
They are synchronised because cash disbursement (for example ,payments for resources
purchases) usually take place before cash receipts (for example, payments for resources).
They are uncertain because future sales and costs, which generate the respective receipts
and disbursement ,cannot be forecasted with complete steeluracy. If the firm is to maintain
liquidity and function properly, it has to invest funds in various short-term assets (working
capital) during this cycle. It has to maintain a cash balance to pay the bills they come due.
In addition the company must invest in inventories to fill customer orders promptly. And
finally ,the company invests in steelounts receivable to extend credit to its customer. The
firms gross operating cycle (GOC) can be determined as in inventory conversion period
(ICP) plus debtor conversion period (DCP). Thus ,GOC is given follows:
Gross operating cycle= inventory conversion period+ debtors conversion period.
Inventory conversion period is the sum of raw material conversion period (RMCP),
work in- progress conversion period (WIPCP),and finished goods conversion
period(FGCP)
ICP=RMCP +WIPCP+FGCP
Raw material conversion period(RMCP) is the average time period taken to convert raw
material conversion period is the average time period taken to convert material in to
work-in process RMCP depends on: raw material consumption per day ,and (b) raw
material inventory. Raw material consumption per day is given by the total raw material
consumption divided by the number of days in the year (say 360.the raw ,material
conversion period is obtained when raw material inventory is divided by raw material
inventory is divided by raw material consumption per day. Similar calculation can be made
for other inventories debtors and creditors. The following formula can be used :

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Raw material conversion period =RMI X 360/RMC
Work in-process conversion period (WIPCP) is the average time taken to
complete the semi finished or work in-process. It is given by the formula
Working in- process conversion period=WIPI X 360/COP
Finished good conversion period (FGCP) is the average time taken to sell the
finished goods. FGCP can be calculated as follows:
Finished goods conversion period=FGI X 360/CGS
Debtors conversion period is the average time taken to convert debtors into cash .
DCP represent the average collection period. It is calculated as follows:
Debtors conversion period(DCP)= DEBTORS X 360/CREDIT SALES
Creditors deferral period is the average time taken by the firm in paying
suppliers. It can be calculated are as follows
Creditor deferral period= creditors x 360 /credit purchases
Cash conversion cycle or net operating cycle
Net operating cycle (NOC) is the difference between gross operating cycle and payables
deferral period.
Net operating cycle= (gross operating cycle- creditors deferral period).
Net operating cycle is also referred to as cash conversion cycle. Some people argued that
depreciation and profit should be excluded in the computation of cash conversion cycle
since the firms concern is with cash flows associated with conversion at costs:
depreciation is an non-cash item and profits are not costs. A contrary view is that a firm
has to ultimetaly recover total costs and make profits; therefore the calculation of operating
cycle should include depreciation and even the profits. Also, in using the above- mentioned
formulae, average figures for the period may be used.

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RAW MATERIAL
WORK IN
PROGRESS
FINISH GOODS SALES
DEBTORS & BILLS
RECEIVABLES
CASH
OPERATING CYCLE

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Types of Working Capital









TYPES OF
WORKING
CAPITAL
ON THE BASIS
OF B/S
CONCEPT
GROSS
WORKING
CAPITAL
NET WORKING
CAPITAL
ON THE BASIS
OF TIME
REGULAR
WORKING
CAPITAL
TEMPORARY
WORKING
CAPITAL
SEASONAL
WORKING
CAPITAL
SPECIFIC
WORKING
CAPITAL

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SIGNIFICANCE OF WORKING CAPITAL


Factors requiring consideration while estimating working capital.
The average credit period expected to be allowed by suppliers.
Total costs incurred on material, wages.
The length of time for which raw material are to remain in stores before they are
issued for production.
The length of the production cycle (or) work in process.
The length of sales cycle during which finished goods are to be kept waiting for
sales.
The average period of credit allowed to customers
The amount of cash required to make advance payment

SIGNIFICAN--
CE OF
WORKING
CAPITAL
PAYMENT
TO
SUPPLIERS
DIVIDEND
DISTRIBUTI-
ON
INCREASE
DEBT
CAPACITY
INCREASE
IN FIX
ASSETS
INCREASE
EFFECIENC-
Y
EASY LOAN
FROM
BANKS

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Importance of Working Capital Ratios
Ratio Formulae Result Interpretation
Stock
Turnover
(in days)
Average Stock *
365/
Cost of Goods
Sold
= x days On average, you turn over the value of your entire
stock every x days. You may need to break this down
into product groups for effective stock management.
Obsolete stock, slow moving lines will extend overall
stock turnover days. Faster production, fewer product
lines, just in time ordering will reduce average days.
Receivables
Ratio
(in days)
Debtors * 365/
Sales
= x days It takes you on average x days to collect monies due to
you. If your official credit terms are 45 day and it
takes you 65 days.
One or more large or slow debts can drag out the
average days. Effective debtor management will
minimize the days.
Payables
Ratio
(in days)
Creditors * 365/
Cost of Sales (or
Purchases)
= x days On average, you pay your suppliers every x days. If
you negotiate better credit terms this will increase. If
you pay earlier, say, to get a discount this will decline.
If you simply defer paying your suppliers (without
agreement) this will also increase - but your
reputation, the quality of service and any flexibility
provided by your suppliers may suffer.
Current
Ratio
Total Current
Assets/
Total Current
Liabilities
= x times Current Assets are assets that you can readily turn in
to cash or will do so within 12 months in the course of
business. Current Liabilities are amount you are due to
pay within the coming 12 months. For example, 1.5
times means that you should be able to lay your hands
on $1.50 for every $1.00 you owe. Less than 1 times
e.g. 0.75 means that you could have liquidity problems
and be under pressure to generate sufficient cash to

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Ratio analysis can be used by financial executives to check upon the efficiency with which
working capital is being used in the enterprise. The following are the important ratios to
measure the efficiency of working capital. The following, easily calculated, ratios are
important measures of working capital utilization.

Balanced working capital position
The firm should maintain a sound working capital position. It should have adequate
working capital working capital to run its business operations. Both excessive as well as
inadequate working capital positions are dangerous for the firms point of view. Excessive
working capital means holding costs and idle funds which earn no profit for the firm .
paucity of working capital not only impairs the firms profitability but also result in
production interruptions and inefficiencies and sales disruption.
The danger of excessive working capital are as follows
It results in unnecessary steel emulation of inventories. Thus chances of inventory
mis handling , wast ,theft and losses increase.
meet oncoming demands.
Quick Ratio (Total Current
Assets -
Inventory)/
Total Current
Liabilities
= x times Similar to the Current Ratio but takes steelount of the
fact that it may take time to convert inventory into
cash.
Working
Capital Ratio
(Inventory +
Receivables -
Payables)/
Sales
As %
Sales
A high percentage means that working capital needs
are high relative to your sales.

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It is an indication of defective credit policy and slack collection period.
Consequently ,higher incidence of bad debt result. Which adversely affects profits.
Excessive working capital makes management complacent which degenerates into
managerial efficiency.
Tendencies of steelumulation inventories tend to make speculative profits grow.
This may tend to make dividend policy liberal and difficult to cope with in future
when firm is unable to make speculative profits.
Inadequate working capital is also bad and has the following dangers
It stagnates growth . it becomes difficult for the firm to undertake profitable
projects for non availability of working capital working capital funds.
It becomes difficult to implement operating plans and achieve the firms profit
target.
Operating inefficiencies creep in when it becomes difficult even to meet day-day
commitments.
Fixed assets are not efficiently utilised for the lack of working capital funds. Thus
firs profitability would deteriorate.
Paucity of working capital funds render the firm unable to avail attractive credit
opportunities etc.
The firm loses reputation when it is not in position to honour its short term
obligations. As a result ,the firm faces tight credit terms.
An enlightened management should, therefore maintain the right amount of working
capital on a continuous basis. Only then a proper functioning of business operations will be
ensured. Sound financial and statistical techniques, supported by judgement, should be
used to predict the quantum of working capital needed at different time periods.
A firms net working capital position is not only important as an index of liquidity but it
also used as a measure of the firms risk. Risks in this regard means chances of the firm
being unable to meet its obligation on due date. The lender considers a positive net
working capital firm has, the less likely that it will default in meeting its current financial
obligations. Lenders such a commercial bank insists that the firm should maintain a
minimum net working capital positive.

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Determinants of working capital
There are no set rules or formulae to determine the working capital requirements of firms.
A large number of factors, each having different importance ,influence working capital
needs of firms. The importance of factors also changes for a firm over time. Therefore , an
analysis of relevant factors should made in order to determine total investment in working
capital. The following is the description of factors which generally influence the working
capital requirements of firms.
Nature of business:- working capital requirements of a firms are basically influenced by
the nature of its business. Trading and financial firms have a very small investment infixed
assets, but require a large sum of money to be invested in working capital. Retail stores, for
example, must carry large stock like WAL-MART may carry, say 20,000 items. Some
manufacturing businesses, such a tobsteelo manufacturer and construction firms, also
have to invest substantially in working capital and a nominal amount in fixed asset. In
contrast ,public utilities may have limited need for working capital and have to
abundantly in fixed assets. Their working capital requirement are nominal because they
may have only cash sales and supply services, not products. Thus ,no funds will be tied up
in debtors and stock(inventories). For the working capital requirements most of the
manufacturing companies will fall between two extreme requirement s of trading firms and
public utilities. Such concerns have to make adequate investment in current assets
depending upon the total assets structure and other variables.
Market and demand condition:- the working capital needs of a firm are related to its
sales. However ,it is difficult to precisely determine the relationship between volume of
sales and working capital needs. In practice current asset will have to employed before
takes place. It is, therefore, necessary to make advance planning of working capital for a
growing firm on a continuous basis.
Growing firm may need to invest in fixed assets in order to sustain growing production and
sales. This will , in turn ,increase investment in current assets to support enlarged scale of
operations. Growing firms need fund continuously. They use external sources as well as
internal sources to meet increasing needs of funds. These firms faces further problems
when they retain substantial portion of profit, as they will not be able to pay dividends to

19
shareholders. It is therefore imperative that such firms do proper planning to finance their
increasing needs for working capital.
Sales depend on demand conditions. Large number of firms experience seasonal and
cyclical fluctuations in demand for their products and services. These business variation
affect the working capital requirement, specially the temporary working capital
requirement of the firm. When there is a upward swing in the economy , sales will
increase ; correspondingly ,the firms investment in inventories and debtors will also
increase. Under boom, additional investment in fixed assets may be made by some firms
productive capacity. This act of firms will require further additions of working capital. To
meet their requirements of fund for fixed assets and current assets under boom period ,
firms generally resort to substantial borrowing. On the other hand , when there is a decline
in the economy ,sales will fall and consequently , levels of inventories and debtors will
also fall. Under recession, firms try to reduce their short-term borrowing.
Seasonal fluctuations not only affect working capital requirement but also create
production problems for the firm. During periods of peak demand ,increasing production
may be expensive for the firm. Similarly ,it will be more expensive during slack periods
when the firm has to sustain its working force and physical facilities without adequate
production and sales. A firm may thus , follow a policy of level of production, irrespective
of seasonal changes in order to utilise its resources to the fullest extent. Such a policy will
mean steelumulation of inventories during off season and their quick disposal during peak
season.
The increasing level of inventories during the slack season will require increasing funds to
be tied up in the working capital for some months. Unlike cyclical fluctuations seasonal
fluctuation generally conform to a steady pattern. Therefore financial arrangement for
seasonal working capital requirement can be made in advance. However , the financial
plan or arrangement should be flexible enough to take care of some abrupt seasonal
fluctuations.
Technology and manufacturing policy:- the manufacturing cycle (or the inventory
conversion cycle) comprises of the purchase and use of raw materials and the production of
finished goods. Longer the manufacturing cycle ,larger will be the firms working capital.

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Credit policy:- the credit policy of the firm affects the working capital by influencing the
level of debtors. The credit terms to be granted to customers may depend upon the norms
of the industry to which the firm belongs. But a firm has the flexibility of shaping its credit
policy within the constraint of industry norms and practices. The firm should use direction
in granting credit terms to its customers. Depending upon individual case, different terms
may be given to different customers. A liberal credit policy without rating credit
worthiness of customers , will be detrimental to the firm and will create a problem of
collection later on. The firm should be prompt in making collections. A high collection
period will mean tie-up of large funds in debtors. Slack collection procedure can increase
the chances of bad debt. In order to ensure that unnecessary funds are not tied up in
debtors, the firm should follow a rationalised credit policy based on credit standing of
customers and other relevant factors. The should evaluate the credit standing of new
customers and periodically review the credit worthiness of the existing customers. The
case of delayed payments should be thoroughly investigated.
Availability of credit from suppliers:-the working capital requirements of a firm are also
affected by credit terms granted by its suppliers. A firm will needless working capital if
liberal credit terms are available to it from suppliers. Suppliers credit finance the firm will
have ti borrow funds for bank. The availability of credit at reasonable costs from banks is
crucial. It influences the working capital policy of a firm. A firm without the supplier
credit but which can get bank easily on favourable conditions will be able to finance its
inventories and debtors without much difficulty.
Operating efficiency :- the operating efficiency of the firm relates to the optimum
utilisation of all resources at minimum costs. The efficiency in controlling operating costs
and utilising fixed and current assets leads to operating efficiency. The use working capital
is improved pace of cash conversion cycle is steelelerated with the operating efficiency.
Better utilisation of resources improves profitability and thus ,helps in releasing the
pressure on working capital. Although it may not possible for a firm to control prices of
material or wages of labour, it can certainly ensure efficient and effective use of its
material ,labour and other resources.
Price level changes :- the increasing shifts in price level make function financial
manager difficult. She should anticipate the effect of price level changes on working

21
capital requirements of the firm. Generally rising price levels will require a firm to
maintain higher amount of working capital. Same levels of current assets will need
increased investment when prices are increasing. However companies that can
immediately revise their product prices with rising price levels will not face a severe
working capital problem. Further , firms will feel effects of increasing general price
level differently as prices of individual products move differently. Thus it is possible
that some companies may not be affected by rising prices while others may be badly
hit
Policies for financing the current assets
A firm can adopt different financing policies vis-a vis current assets . three types of
financing may be distinguished :
Long term financing the sources of long term financing include ordinary share
capital, preference share capital , debenture , long term borrowings from financial
institution and reserved surplus (retained earning).
Short term- the short term financing is obtained for a period less than one year. It is
arranged in advanced from banks and other supplier of short term finance in the
money market . short term finances include working capital funds from banks ,
public deposits commercial paper factoring of receivable etc.
Spontaneous financing- spontaneous financing refers to the automatic sources of
short term fund arising in the normal course of a business. Trade (supplier) credit
and outstanding expenses are example of spontaneous financing. There is no
explicit cost of spontaneous financing. A firm is expected to utilise these sources
of finance to the fullest extent. The real choice of financing current asset ,once the
spontaneous sources of financing have been fully utilised , is between the long-
term and short sources of finance.
Depending on the mix of short- and long-term financing the approach followed by a
company may be referred to as:
Matching approach-the firm can adopt a financial plan which matches the expected life of
assets with the expected life of the source of funds raised to finance assets with the

22
expected life of the sources of fund raised to finance a plant expected life of ten years ;
stock of goods to be sold thirty days may be financed with a thirty day commercial paper
or a bank loan. The justification for the exact matching is that since the purpose of
financing is to pay for assets, the sources of financing and the asset should relinquished is
expensive as funds will not be utilised for the full period. Similarly , financing will have to
be made on a continuing basis.
When the firm follow matching approach (also known as hedging approach),long term
financing will be used to finance fixed assets and permanent current asset increases, the
long-term funds and as level of these assets are financed with long term financing level
also increases. The temporary or variable current asset are financed with short term funds
as their level increases , the level of short term financing also increases. Under matching
plan ,no short term financing will be used if the firm has a fixed current assets need only.
Conservative approach- a firm in practice may adopt a conservative approach when it
depends more on long term fund for financing needs. Under conservative plan the firm
finances its permanent assets and also a part of temporary current assets with long term
financing. In periods when the firm has no need for temporary current assets, the idle long
term funds can be invested in the tradeable securities to conserve liquidity. The
conservative plan relies heavily on long term financing and therefore , the firm has less risk
of facing the problem of shortage of funds.
Aggressive approach- a firm may be aggressive in financing the current asset. An
aggressive policy is said to be followed by the firm when it uses more short term financing
than warranted by the matching plan. Under an aggressive policy , the firm finance a part
of current asset with the short term financing. Some extremely aggressive firm may
even finance the a part of their fixed asset s with short term financing.
Issues in working capital management
Working capital management refers to administration of all components of working
capital cash , marketable securities, debtor (receivable) and stock (inventories) and
creditors (payables ). The financial manager must determine level and composition of
current assets. It must see the right source tapped to finance current assets, and that current
liabilities are paid in time.

23
There are many aspect of working capital management which make it an important
function of the financial manager.
Time working capital management requires much of the financial manager s
time.
Investment working capital represents a large portion of the total investment in
asset.
Critically working capital management has great significance for all firms but it is
very critical for small firms.
Growth- the need for working capital is directly related to firms growth
Level of current assets : some example of Indian companies.
Current assets form a significant portion of total assets of many Indian companies .
consider the following example
(in crores)
MAHINDRA
TECH.

S.L.PVT.LTD. JMB
COMPONENT
OTHER
Sales 7651.1 1476.7, 8782.5, 1232.3
Total asset 9600.4 1991.9, 17095.9, 862.9
Current
asset
8601.0 882.9 11398.4, 658.4
CA/TA 89.6 44.3 66.7, 76.3
CA/SALES 112.4 59.8 129.8, 53.4

MTH COMPONENT- is a large , well diversified ,private sector marketing cum-
manufacturing organisation. In 2003 the companys current asset are three- fourth of total
assets and more than half of sales.

24
BEST WAY TECHNOLOGY is also a diversified company in the private sector.
In 2003 ,its current assets are two thirds of total assets and about a third times of
sales.
OTHER- is a joint sector(joint venture between state of Gujarat and private
sector) company manufacturing fertilizers, industrial products(methanol, formic
acid, nitric acid, ammonium nitrate, liquid nitrogen etc.) and equipment products.
Its current assets in the year 2003 are less than half of total assets and 60 percent of
sales.
S.L.ENGINEERING- S.L. was started as a large public sector company. its share
have been partly divested now. It has a dominant position in the power sector. Its
manufacturing operations are spread into industrial and transportation sectors also.
A large number of its products are long productions cycle products. The company
s main customer are state electricity boards who fail to pay their due on time.
current asset s in 2005 are 90 percent of total asset and 112 percent of sales.
Empirical observation show that the financial managers have to spend much of their
time to the daily internal operations, relating to current assets and current liabilities of
the firms. As the largest portion of the financial managers valuable time is devoted to
working capital problems, it is necessary to manage working capital in the best
possible way to get the maximum benefit.
Investment in current asset represent a very significant portion of the total investment
in assets. For example , in the case of the large and medium public limited companies
in India current asset constitute about 60 per cent of total assets or total capital
employed. In large company such as S.L. current asset as a percentage of total assets
may be as high as say ,90 percent . above example clearly indicates that the financial
manager should pay attention to the management of current asset continuing basis.
Actions should be taken to curtail unnecessary investment in current assets.
Working capital management is critical for all firms , but particularly for small
firms. A small firm may not have much investment in fixed assets , but it has to invest
in current assets. Small firms in India face a severe problem of collecting their
debtors(book debts or receivables). Further the role of current liabilities in financing

25
current assets is far more significant in case of small firms as unlike large firms, they
face difficulties in raising long term finances.
There is a direct relationship between a firms growth and its working capital needs. As
sales grow the firm needs to invest more in inventories and debtors. These need
become very frequent and fast when sales grow continuously . the financial manger
should be aware of such needs and finance quickly. Continuos growth in sales may
also require additional investment in fixed assets.
It may , thus , concluded that all precautions should be taken for the effective and
efficient management of working capital. The finance manger should pay particular
attention to the levels current assets and the financing of current assets. To decide the
levels and financing of current assets, the risk return implications must be evaluated.

Overview of working capital management in J.B.M. and BEST WAY pvt. Ltd.
The aim of working capital management is to strike off a balance between financial
stability and profitability.Jbm.component and best way pvt. Ltd. working capital
management maintaining both the factors they have financial stability as well as they
generate profit for the business. There working capital management quite different from
the industry because of their business profile and for the strong financial assistance from
their parent company. An examination of the components of working capital is helpful at
this point because of the preoccupation of management with the proper combination of
assets and acquired funds. First , short-term ,or current ,liabilities constitute the portion of
funds which have planned and raised. Since there management must be concerned with
the proper financial structure, these and other funds must be raised judiciously , if we see
their past performance their deficiency of their fund is very low.
Recently in their pani pat project they faced some hindrances because of the cyclone their
infrastructure has been destroyed but the losses has been adjusted in cost , although they
reinstall everything actually it is not a loss but cost has been double. Because of this
incident they had impact on their entire working capital management therefore
reinstallation make their initial cash outflow increased and also their profit margin from
this milestone has been decreased. In the same project they make a huge tower and

26
presume that this tower cannot be install in one process so they adjusted their cost in a such
manner, if the fail to do so they wont face any loss but beyond every one expectation they
install it in one take and that adjusted cost add in the profit.business needs to invest in
current assets to sustain its business operations

MANAGING WORKING CAPITAL
Trade receivable management
Receivable management refers to the decision a business makes regarding its overall credit
and collection politics and the evaluation of individual credit applicants. In formulating
an operational credit policy , finance manger must analyse the marginal benefits and costs
associated with change in credit terms ,collection efforts etc. receivable management
proves for a firm , both, an asset and a problem :an asset because of the promise of a future
cash flow and a problem because of the need to obtain while waiting for the cash flow and
a problem because of need to obtain financing while waiting for the future cash flow. First
a company must decide to sell good on credit. An affirmative answer will necessitate an
evaluation of the credit . terms which will be consistent with the goal of maximizing the
value of the company to its shareholder. Once an optimum credit policy is determine , the
financial manager must ascertain the effect it will have on sthe company s current asset
requirement s.
Steelount receivable are asset steelounts representing amounts owed to the firm as a result
of the sale of goods and services in the ordinary course of business . The value of these
claims is carried on the balance sheet under titles such as steelounts receivable , trade
receivables or customer receivables. The financial manager can add value to the company
s share by properly influencing three areas :the company s aggregate invest receivables
its credit term and credit standard . over investment in receivable can costly because the
investment is typically financed by short term borrowing and because it may signal
steeleptance of late paying customers. If the credit term (cash discount and period allowed
for payment)are not competitive when compared to other seller in the same industry or are
misaligned with the product line profitability , they can also diminish shareholder value.
Setting credit standard for customer incorrectly can erode shareholder because of lost

27
sales(when too stringent)or uncollectible sales( when too lenient ). When a firm makes an
ordinary sale of goods or services and does not receive payment the firms grants trade
credit and creates steelounts receivable which is collected in the future . this steelount
receivable represent and extension of credit to customers, allowing them a reasonable
period of time in which to pay for the goods which they have received . receivable are
significant current assets that must be financed on a continuing basis.
The receivable management process

Credit policy variables
While analysing the receivable management optimum credit policy is one of the important
aspect. In establishing the an optimum credit policy ,we should consider the important
decision variable which influence the level of receivables. As stated in the preceding
section ,the major controllable decision variables include the following:
Credit standard analysis
Credit terms
Collection policy and procedure
Credit standard are the criteria which a firm follows in selecting customers for the
purpose of credit extension. The firm may have tight credit standards: that is it may sales
mostly on cash basis and may extend credit only to the most reliable financial strong

28
customer .such standards will result in no bab debt losses, and less cost of credit
administration. But the firm may not able to expand sales. The profit sacrificed on lost
sales may be more than the costs saved by the firm. On the contrary if credit standard are
loose , the firm may have larger sales but the firm will have to carry larger receivable. The
costs of administering credit and bad debt losses will also increase, thus the choice of
optimum credit standard involves a trade off between incremental return and incremental
costs.
Credit terms the stipulation under which the firm sells on credit to customers are called
credit to customers are called credit terms. These stipulation include (a) credit period and
(b) the cash discount.
Collection policy is needed because all customer do not pay the firms bills in time. Some
customer are slow payers while some are non payer. The collection efforts should,
therefore ,aim at steelelerating collection from slow-payers and reducing bad debt loses. A
collection policy should ensure prompt and regular collection. Prompt collection is needed
for fast turnover of working capital keeping collection costs and bad debt within limits and
maintaining collection efficiency .Regularity n collection keeps debtors alert, and they
tend to pay their dues promptly. The collection policy should lay down clear cut collection
procedures. The collection procedures for past dues steelounts should be established in
unambiguous terms . the slow paying customers should be handled tactfully . some of them
may be permanent customer. The collection process imitated quickly without giving any
chance to them , may antagonise them and the firm may lose them to competitor. The
responsibility for collection and follow up should be explicitly fixed.

Receivable management by J.B.M. and BEST WAY pvt. Ltd.
Trade credit creates steelount receivable while in case of J.B.M. and BEST WAY pvt. Ltd.
they belief in smooth running transaction without create any ambiguity to their customer.
Basically they worked on big infrastructure project where regular recipient of payment is
very important otherwise it put effect on work and increase the completion date therefore it
create loss for both the party. Likewise there ongoing project in pani pat is about 1200cr.
This 1200cr is divided in several parts means several milestone like making the shade,
installation of machinery, Construction of building etc ,and in this payment also divided

29
steelording to the steelomplishment of the milestone. As soon as they as achieve the
milestone they get payment, so that the over dues would not be their and smooth pattern
would be maintain .
While discussing about the credit standard they provide a general credit standard to their
client that is 15-30days in ground of major problem although the firm have tight credit
standard, such credit standard will no result bad debt losses and less cost of credit
administration, and also they dont have fear of reduce sale because they dont have major
competitor in India ,there is no chance of sacrificing on profit because of lost sales and
also costs saved by the firm.
J.B.M. and BEST WAY pvt. Ltd. main agenda is to be cost effective thats why they used
to steelomplish their milestone before time ,so they would make a good reputation in
market and there client would never create any question while making payment .
Default risk is the like hood that a customer will fail to repay the credit obligation .on the
basis of past practice and experience, the financial or credit manger should be able to form
a reasonable judgement regarding the chances of default . To default the financial risk
j.b.m. and best way pvt. Ltd. manager consider(a) character(b)capacity(c) condition.
Character refer to the customer s willingness to pay. The financial
or credit manager should judge whether the customer will make
honest effort to honour their credit obligations. The moral factor is
of considerable importance in credit evaluation in practice.

Capacity refers to the customers ability to pay can be judged by
assessing the customers capital and assets which mat be offer as
security .capacity is evaluated by the financial position of the firm as
indicated by analysis of ratios and trends in firms cash and working
capital.

Condition refers to the prevailing economic and other condition
which may affect the customers ability to pay . Adverse economic
condition can effect the ability or willingness of a customer.

30
J.b.m. and best way pvt. Ltd. faced default risk in the situation of any steelident happened
in the place of work. It may be happen de to the natural calamities or technical fault. While
they treated as business loss in the financial statement.
Steelording to the j.b.m. and best way pvt. Ltd. regulation if the completion of project get
delayed ,means the failed to steelomplished their project with in the due date the liquidity
damage has been deducted by their client.
If they steelomplish their project before time they would be awarded by the bonus from
their client. likewise they done in the petrochemical project of Saudi Arabia ,they got
RS15million bonus and most of them had been distributed among their employees and rest
they treated as retain earning (fixed deposit in bank).while in case of their ongoing pani
pat project they covered 90% of their milestone means all the installation of machinery
have been completed only testing are going on and they are doing their working three
month advance , in this project they will get bonus .
Bonus adjustment
If j.b.m. component and best way ltd. got delayed for completion of project then , per week
.05% liquidity damage has been deducted by their client .2% per week has been given as a
bonus if they done their project in advance means before completion time, a minimum gap
would be their like in case of three year contract they have to complete minimum three
month advance. Bonus is calculated over and above the contract value and also it is treated
as a income from other sources in the balance sheet.
Most of their transaction is E transaction but in some special case like they required a
immediate payment which is not scheduled earlier in such case they prefer to receive in
cash so that transaction would made more faster, while same thing happen when they are
making payment to their suppliers.
Aging schedule
The aging schedule removes one of the limitation of the average collection period. It
breaks down receivable steelording to the length of time for which they have been out
standing. While in case of j.b.m.component and best way ltd. they have tight credit
standard so their average collection period would strictly maintain ,means payment must
be receive within the 25 to 30 days. Jbm.component and best way ltd. gets payment

31
80%on the same month and 20% in the next month. This process of receiving payment is
possible because they do heavy and long run project. Five reason ,why do the jbm
component and best way ltd. have tight credit standard
Competition - generally the higher degree of competition ,the more credit granted by
the firm. however the firm like jbm component and best way ltd. who very less
competitor not only in India but also in world they wouldnt prefer to granting credit.

Company bargaining power if company have a higher bargaining power vis -a vis
its buyers, it may grant no or less credit . jbm component and best way ltd. have strong
bargaining power because they provide industrial facilities such as fertilizer ,petroleum
refining and petrochemical plants all this project are heavy project it can be
steelomplish without government intervening so they dont have competitor although
Larsen &turbo is their who actually provide kind of this industrial facilities but they are
not the perfect competitor of jbm component and best way ltd. ,it will help jbm
component and best way ltd. to create a monopoly another factor is the brand name
Samsung it is the part of Samsung group and one of the Koreas leading company.

Buyers requirements jbm component and best way ltd. provide industrial facilities in
this type of case completion of work is very important otherwise client would have
heavy loss. If the client would extend the credit period thus Samsung also failed to
make payment to their supplier& employees thus project get delayed although those
project are related to huge amount so regular payments must be made.

Buyers status-likewise their ongoing project in pani pat is a petrochemical project by
IOCL so it is a big giant and every work are interrelated with each other so they prefer
to make payment in scheduled dates. IOCL would provide bonus if jbm component and
best way ltd. do their in advance likewise Samsung is expecting to steelomplish this
project in three month advance and would receive bonus for that.

Marketing tool-credit is used as a marketing tool ,but in case of jbm component and
best way ltd. it belong from renowned group so that why they dont require any
support of credit to increase their popularity.

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Inventory Management
Inventories constitute the most significant part of current assets of a large majority of
companies in India .on an average inventories 60 percent of current assets in public limited
companies in India. Because of the large size of inventories maintained by firms, a
considerable amount of funds is required to be committed to them . it is ,therefore
,absolutely imperative to manage inventories efficiently and effectively in order
unnecessary investment. A firm neglecting the management of inventories will be
jeopardising its long-run profitability and may fail ultimetaly . it is possible for a
company to reduce its level of inventories to a considerable degree ,e.g 10to 20 percent
,without any adverse effect on production and sales by using simple inventory planning
and control techniques. The reduction in excessive inventories carries a favourable impact
on a companys profitability.
Inventory Management and Inventory Control must be designed to meet the dictates of the
marketplace and support the company's strategic plan. The many changes in market
demand, new opportunities due to worldwide marketing, global sourcing of materials, and
new manufacturing technology, means many companies need to change their Inventory
Management approach and change the process for Inventory Control.
Objective of inventories management
To maintain a large size of inventories of raw material and work-in-progress for
efficient and smooth production and of finished goods for uninterrupted sales
operations.
To maintain a minimum investment in inventories to maximise profitability.
Inventory control systems
A firm needs an inventory control system to effectively manage its inventory. There are
several inventory control systems in vogue in practice. They range from simple systems to
very complicated systems .the nature of the business and size dictate the choice of an
inventory control system. For example , a small firm may operate a two-bin system .under
this system , the company maintains two bins. Once inventory in one bin used, order is
placed, and mean while the firm uses inventory in the second bin. For a large departmental
store that sell hundreds of items, this system is quite unsatisfactory. The departmental

33
store will have to maintain a self operating, automatic computer system for tracking the
inventory position of various items and placing order .

ABC inventory control system-large numbers of firms have to maintain several
types of inventories. It is not desirable to keep the same degree of control on all the
items. The firms should pay maximum attention to those items whose value is the
highest. The firm should therefore , classify inventories to identify which items
should receive the most effort in controlling. The firm should be selective in its
approach to control investment in various types of inventories.
Just-in time (jit)systems- Japanese firms popularised the just-in-time (jit)system
in the world. In a JIT system material or the manufactured components and parts
arrive to the manufacturing sites or stores just few hours before they are put to use.
The delivery of material is synchronised with the manufacturing cycle and speed.
JIT system eliminates the necessity of carrying large inventories, and thus saves
carrying and other related costs to the manufacturer. The system requires perfect
understanding and coordination between the manufacturer and supplier in terms of
the timing of delivery and quality of the material. Poor quality material or
components could halt the production. The JIT inventory system complements the
total quality management. The success of the system depends on how well a
company manages its suppliers. The system put tremendous pressure on suppliers.
They will have to develop adequate system and procedure to satis factory meet the
needs of manufacturer.
Outsourcing-is a system of buying parts and components from outside rather than
manufacturing internally. Many companies develop a single source of supply , and
many others help developing small size suppliers of components that they require.
Tata motors has for example developed number of ancillary units around its
manufacturing sites that supply parts and components to its manufacturing plants.
Computerised inventory control systems- a computerised inventory control
system enables a company to easily tracks large items of inventories. It is an
automatic system of counting inventories , recording withdrawals and revising the
balance. There is an in-built system of placing order as a computer notices that the
reorder point has reached.

34
Inventory management by j.b.m. component and best way ltd.
Inventory management is concerned with keeping enough product on hand to avoid
running out while at the same time maintaining a small enough inventory balance to allow
for a reasonable return on investment. Proper inventory management is important to the
financial health of the corporation. Excessive level of inventory, however ,results in large
inventory carrying costs, including the costs of the capital tied up in the inventory
warehouse fees , insurance etc. while after considering all this factor jbm component and
best way ltd. decide to follow just-in-time technique for managing their inventory. Reason
for choosing just-in-time technique are as follows:
While j.b.m. component and best way ltd. usually work on heavy projects and all
the projects are different in nature so their requirements are different from each
other , thats why It is not a continuos process.
No storage
This is not a manufacturing organization all item are one time purchase.
The inventory management process followed by j.b.m. component and best way
ltd.
Jbm.component and best way ltd. provides industrial service to the refinery , gas ,
petrochemical plant though all this project are heavy project involvement of fund
is also very high, thats why for being more cost effective and quote low prices to
their customer Jbm.component and best way ltd. prefer to use just-in time
technique for management of their inventory. Because of this they have to
purchase sizeable imported raw materials and compulsory bulk purchases of items
like steel and construction item.
The question arises about the availability of raw material , for that Samsung have
safety plan like In case of their ongoing pani pat project their client IOCL gave few
option steelording to that Samsung choose supplier, likewise preference would be
given steelording to the best price quoted by the supplier. Samsung find out the
actual time when material would required, means they divide the work in several
milestone and they placed order for all the material in the beginning of the project
but they take delivery steelording to the milestone or actually when they required
. Jbm.component and best way ltd. issue letter of Indian to the supplier.

35
Jbm.component and best way ltd. know actually how much time they require to
complete a specific milestone steelording to that they placed order, in case they
require material in month of December then they put up a notice in month of
November. Two three day variation would happen then supplier would keep the
material in his own place.

Apart from that Jbm.component and best way ltd. derive some new technique under
the heading of JIT, which is E1 Transaction& High Sea Sale. E1 transaction is
applicable for the
domestic procurement of raw material , for an example there are three party jbm.
com and best way ltd.DELHI,IOCL PANI PAT,&SAIL KOLKATA, when sail
despatched the raw material they have to charge sales tax , if Samsung would
receive the raw material and put it in his own warehouse then send to the IOCL
again Samsung would have to charge sales tax means same item tax twice
automatically cost has been increase. For that reason Samsung took delivery to the
sail in the middle Samsung employee endorsed and despatched to the IOCL pani-
pat ,Samsung would not posses any material in his own warehouse like this way
warehouse expense of Jbm.component and best way ltd. have been save and also
they avoid double taxation. In case of imported raw material they follow High Sea
Sale Transaction, for an example a Brazilian supplier in favouring the
representative of Jbm.component and best way ltd. of high sea sale agreement with
the Brazilian company to transfer the ownership to IOCL. once the material landed
in Indian port all the taxes paid by IOCL.
An inventory monitoring cell has been constituted at the corporate offices.
The purchases were controlled by the materials management group reporting to the
director of finance .
Monthly review of total inventory at the level of chief executive of plants and
corporate management is introduced.
Inventory control is dovetailed with the budgeting system
Top 100 inventory items were identified for closer scrutiny and control.



36
Investment in inventories
In managing the inventories, the firms objective should be in consonance with
shareholders wealth maximisation principle. To achieve this , the firm should determine
the optimum level of inventory . Efficiently controlled inventories make the firm flexible.
Inefficient inventory control result in unbalanced inventory and inflexibility the firm may
sometimes run out of stock and sometimes may pile up necessary stock. This increases the
level of investment and make firm unprofitable.
To manage inventories efficiency ,answer should be sought to the following two
questions:
How much should be ordered?
When should it be ordered?
While in case of Jbm.component and best way ltd. when should it to be ordered considered
to be more important ,because of uncertainty and is a problem of determining the re-order
point. One of the major inventory management problems to be resolved is how much
inventory is replenished. If the firm is buying raw materials, it has to decide lots in which it
has to be purchased on replenishment. If the firm is planning a production run , the issue is
how much production to schedule, these problems are called order quantity problem.
Determining an optimum inventory level involves two types of costs:(a)ordering costs(b)
carrying cost.
Ordering cost is includes the entire costs of acquiring raw material. They include cost
incurred in ordering , transporting, receiving, inspecting & storing. In case of jbm.
Component and bes tway ltd. ,their transporting costs would be adjusted in material cost
or they pay separately to their vendor. Ordering costs increase with the number of orders;
thus the more frequently inventory acquired ,the higher the firms ordering costs.
Jbm.component and best way ltd. placed order steelording to their milestone so it is
difficult to identify their ordering costs.
Carrying costs incurred for maintaining a given level of inventory. This include storage
,insurance ,taxes. Jbm component and best way ltd. used to paid tax addition to their
material cost, they usually pay custom duty, FBT, service tax, excise duty, vat.


37
Trade payable management by jbm. component and best way ltd.
Jbm component and best way ltd. payment system is based on FIFO basis. Although they
have certain procedure for making payment ,they divide their vendor like international&
national basis.
Following step would be maintained by the while managing trade payable.
They familiarize with their vendors, then they decide the time when actually
material has been utilize steelording to that the time of delivery. Based on material
required they gave advance to their supplier ,advance would made 10%to15%.
Once the material is despatched to the site ,Samsung installed it and commission
the material after successful installation, they bill to the customer as per the term
money received by Samsung that is generally 30to 40 days.
In case of their imported material they pay through letter of credit procedure is
banker given assurance to the vendor then depend upon viability state bank would
allot letter of credit, it is not necessary that only state bank can issue letter of credit
but there would be mutual agreement while choosing bank , if they have large
amount in some bank that bank would gave more preference. In case of domestic
supplier all the payments would be done on cash.
While negotiating the prices to the vendors at the beginning the payment term
generally finalized .
A recent example of there payment system ,they are making three watch tower in
pani pat project, they complete their work in scheduled time but they get payment
for second watch tower then they would make payment to those vendor only who
supply material to the second watch tower. If they failed to receive the payment for
first &third watch tower then the raw material supplier have to wait till the
payment receive but within 30days Jbm.component and best way ltd. have to make
payment to their supplier and if their client failed to make payment for this specific
task then they have to pay by their own.




38
Cash management
Cash is a important current asset for the operation of the business. Cash is the basic input
needed to keep the business running on a continuos basis ; it is also the ultimate output
expected to be realised by selling the service or product manufactured by the firm. The
firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the
firms manufacturing operations while excessive cash will simply remain idle, without
contributing anything towards the firms profitability. Cash is the money which a firm can
disburse immediately without restriction. The term cash includes coins , currency, and
cheques held by the firm , and balances in its bank steelounts. Sometimes near cash items
,such as marketable securities or bank times deposits ,are also included in cash. The basic
characteristics of near-cash assets is that they can readily be converted into cash.
Generally , when a firm has excess cash ,it invests it in marketable securities. This kind of
investment contributes some marketable securities. This kind of investment contributes
some profit to the firm.
management is concerned with the managing of :(1)cash flows into and out of the
firms,(2)cash balances held by the firm at a point of time by financing deficit or investing
surplus cash. It can be represented in the cash management cycle.

Cash Management Cycle


39

Cash management is also important because it is difficult to predict cash flows steelurately
,particularly the inflows ,and there is no perfect coincidence between the inflows and
outflows of cash. during some periods, cash flow steelurately ,particularly the inflows and
outflows of cash. During some period ,cash outflows will exceed cash inflows ,because
payment for taxes ,dividend or seasonal inventory build up. At other times , cash inflow
will be more than cash payment because there may be realised in large sums promptly.
Further , cash management is significant because there may be large cash sales and
debtors may be realised in large sums promptly. Further , cash management is significant
because cash constitutes smallest portion of the total current assets , yet management s
considerable time is devoted in managing it. In recent past , a number of innovation have
been done in cash management techniques. An obvious aim of the firm these days is to
manage its cash affairs in such a way as to keep cash balance at a minimum level and to
invest the surplus cash in profitable investment opportunities. In order to resolve the
uncertainty about cash flow prediction and lack of synchronisation between cash receipts
and payments, the firm should develop appropriate strategies for cash management. The
firm should evolve strategies regarding the following four facts of cash management.
Cash planning cash inflows and outflows should be planned to project cash
surplus or deficit for each period of the planning period. Cash budget should be
prepared for this purpose.
Managing the cash flows- the flow of cash should properly managed. The cash
inflows should be steelelerated while as far as possible , the cash outflows should
be decelerated .
Optimum cash level the firm should decide about the appropriate level of cash
balances deficiency should be matched to determine the optimum level of cash
balances.
Investment of surplus cash the surplus cash balances should be properly invested
to earn profits. The firm should decide about the division of such cash balance
between alternative short term investment opportunities such as bank deposits,
marketable securities, or inter-corporate leading.


40

Cash management in Jbm.component and best way ltd.
Cash is the lifeblood of a business firm, it is needed to acquire supplies, resources,
equipment, and other assets used in generating the product and service provided by the
firm. It is also needed to pay wages and salaries to workers and managers. Taxes to
government , interest and Objectives to creditors and dividends to shareholders. More
fundamentally , cash is the medium of exchange which allows management to carry on the
various activities of the business firm from day to day. Cash is a important aspect of
business but more is managing it so every company have it own technique . The Jbm
component and best way ltd. strategies regarding the following four facts of cash
management.
Cash planning - Jbm component and best way ltd. makes cash planning steelording
to their projects, like in case of their pani pat project ,they considered it to be long
term project and cash flow is systematic. Another project which I took as a
example is considered to be a scattered project , because it is not a single long term
project. Basically head office Korea globally participating ,when they are biding
somewhere they gave order to Samsung India for to make drawing & proposal.
Once Jbm component and best way ltd. korea received order then they gave order
to the Jbm component and best way ltd. India for making further industrial facility
as per the terms Jbm component and best way ltd. India received payment from
Jbm component and best way ltd. Korea. While for further clarity I made the cash
budgeting for these one project.
Managing the cash flow- the flow of cash should properly managed. The cash
inflows should be steelelerated while as far as possible , the cash outflows should
be decelerated , Jbm component and best way ltd. cash flows are quite fixed in
nature because they prefer to do heavy &long term project , where payment are
received steelording to the completion of the work ,usually they divide their work
in several milestone and steelording to the completion of milestone they receive
payment from their client. Apart from that they get full financial assistance from
their parent company Jbm component and best way ltd. Korea , its help them to
make their cash flow more viable. In the same they maintain their cash outflow

41
,they prioritise their payment first is statutory payment, second is employees
salaries ,third is administrative expenses and fourth one is vendors and others. In
this way the make balance in their outflow they never face cash deficiency because
of their viable strategies and full support from their parent company.
Investment of surplus cash- its a two way process ,when they are taking help from
their parent company ,in return they also providing them assistance when they
required. Jbm component and best way ltd. different system for proper utilization of
surplus cash like Info pool system in this system Jbm component and best way ltd.
India send all the bank detail mean level of cash, flow of payment system ,surplus
cash for the particular period to the citi bank us then Jbm component and best way
ltd. korea would steeless it easily. If Jbm component and best way ltd. korea
required any fund they check from the citi bank and then they tell to Jbm
component and best way ltd. India for fund and they get as a loan. Apart from that
if any branch of Jbm component and best way ltd. require any cash then another
branch is having surplus they can mutually transacted and after that they return to
each other. For making investment plans they having strategic planning department
in their head office.












42
Working Capital Finance by jbm. component and best way ltd.
External funds available for a period of one year or less are called short term finance. In
India short term sources funds are used to finance the working capital. Two significant
short-term sources of finance working capital are: trade credit and bank borrowing. The
use of trade credit a has been increasing over a years in India. Trade credit as a ratio of
current assets is about 40 percent. Bank borrowing is the next important source of working
capital finance. Before seventies, bank credit was liberally available to firms. It became a
restricted resource in eighties and nineties because of the change in the government
prescribed norms in financing working capital requirement of firms. Now there are no
government norms, and banks are free to take business decisions in granting finance for
working capital.
Jbm component and best way ltd. follows several technique to finance their working
capital:
Although they have viable financial structure ,but when they start new project they
take initial advance from their customer percentage depend upon the contract value.
Samsung faced default risk in the situation of any steelident happened in the place
of work. It may be happen de to the natural calamities or technical fault. For that
particular situation they took loans &advances from their head quarter so the flow
of working capital would be maintain .
Jbm component and best way ltd. take overdraft in rare cases ,when head quater
failed to provide them and they require fund in short notice then only take overdraft
and they never cross their overdraft limit.
Their fund flow has been planned in centralized manner and thats why hardly they
faced financial deficiency in the organization.






43

COMPANY PROFILE
J.B.M. COMPONENT ltd. co ,which is incorporated as METAL company in 1981 . It is
engaged in providing total METAL services like design METAL , planning , procurement
and construction for the petrochemical , refinery ,gas plant, industrial equipment
installation and environmental fields. It has completed more than 1700 projects with staff
of more than 1300 specialised personnel and sales exceeding USD 12.73 billion(2011).
Over 30 years ago, Jbm.component and best way ltd. with sharp awareness ,initiated a step
award to design and construct heavy industrial plant solely using technology. As Indias
METAL company Jbm.component and best way ltd. has been key factor behind the
advanMETAL METAL capability.
Mr.SURESH NEOTIA is the chairman and ONNE VAN DER WEIJDE is the managing
director of j.b.m. component ltd.
In 1936, best way ltd. has been established a major role on the turnkey project overseas
which include large projects in southeast Asia ,India Germany and Mexico.
METAL ltd. is now poised to provide a full spectrum of reliable, quality project within
budget and on schedule.
Mr. Arya is the chairman and Mr.Sushil tiwari is the managing director of STEEL
METAL ltd.
The main vision of Jbm component and best way ltd. India PVT Ltd is to provide high
quality parts ,drawing &technical services. The Indian company shall be used as
knowledge hub and METAL centre for global needs for above activities.
The main object of Jbm component and best way ltd. India is to carry on all or any of the
business to provide develops ,supply and render METAL and technical services. And also
to carry on the business of providing METAL ,procurement, maintenance and operation
service to industrial ,petrochemical ,environmental, gas, energy generation and refinery
projects.


44
Working capital objectives:
Jbm component and best way ltd. aims to maintain its position as a world-class company,
devoting their human resources and technology to create superior products and services,
while contributing to a greater society for everyone. To this end, they share and pursue
core values: People, Excellence, Change, Integrity, and Co-prosperity. As part of an effort
to realize these values, they will also adhere to Samsungs Business Principles. This
represents not only our promise to comply with the law and good ethical practices, but also
a concrete commitment to these values. Samsungs Business Principles will serve as every
employees guiding principles at the company, as they outline the conduct expected of all
workers both individually and collectively.

Objectives 1 | Jbm component and best way ltd. comply with the law and ethical
standards. They respect the dignity and diversity of individuals. they compete fairly,
complying with the law and business ethics.they maintain steelounting transparency by
keeping steelurate records. They do not intervene in politics and instead maintain a neutral
instance on all political issues.

Objectives 2 | Jbm component and best way ltd. maintain an honest organizational culture
in all business activities. They draw a strict line between public and private affairs. they
protect and respect the intellectual property of the company and others. They do their
utmost to create a healthy organizational atmosphere.

Objectives 3 | Jbm component and best way ltd. respect customers, shareholders and
employees. They place customer satisfaction as the top priority in their business activities.
They focus on shareholder value they endeavor to improve employees quality of life.

Objectives 4 | Jbm component and best way ltd. care for the environment, health and
safety. They engage in environmentally friendly management practices. They value
people's health and safety.

Objectives 5 | Jbm component and best way ltd. are a socially responsible corporate
citizen. They actively perform their duties as a corporate citizen. They respect the

45
characteristics of local customs, culture, and society, while striving to prosper alongside
local communities. They build win-win relationships with business partners.


Area of expertise and marketing strategy
The area of expertise is METAL processing construction contract especially for process
METAL, chemical METAL ,piping METAL and instrumental METAL.
With advent of new millennium, global as well as domestic METAL a markets are faced
with uncertainties, creating a whole new environment where only a handful of market
leaders with global competitiveness can expect future.
Jbm component and best way ltd. give priorities to health ,safety and environment.
Moreover ,under the business principle to provide an economical and optimised manner
within the fastest possible time, and also focused on building an effective knowledge
management system, improving corporate efficiencies through continued cost reduction
and overall improvement efforts, and building a global standard management basis to
become a customer oriented ,total solution provider.
Furthermore, with people and technology the critical factors in the METAL business, Jbm
component and best way ltd. is setting out to establish long term training programs aimed
at nurturing professional with extensive experiences in the environment and energy sector
facilitating the arrival of future.
Jbm component and best way ltd. is committed to becoming the most reliable business
partner, catering the needs with best quality and seamless services driven by the attitude of
genuinely caring customer.
Jbm component and best way ltd. India Pvt . ltd will try to provide the best manpower and
technology for best product and service to customer.
Jbm component and best way ltd. s no 1 mission is generating values to the customers and
shaping businesses for continuous fulfilment of the clients needs.

46
Jbm component and best way ltd. has earned a reputation for excellence in METAL
construction and project management. With a highly talented ,dedicated and creative team
experts, Jbm component and best way ltd. has grown into one of the most highly
recognized METAL companies in the world.

INTERNATIONAL PROJECT EXPERIENCE
Jbm component and best way ltd. points clients to success. There numerous successes in
petrochemical, refinery, gas, industry, environmental plant and infrastructure businesses
worldwide have served as the basis for success and the power to overcome any difficulties
and explore new opportunities. Undisputed capabilities, strong potential and unrivalled
enthusiasm are the drivers that Jbm component and best way ltd. relies on to bring a
genuine success to their clients.

Recent international projects
Petrochemical project
For several decades Jbm component and best way ltd. has been active in the petrochemical
industry, initially heading large scale petrochemical plant construction projects in Korea
for major companies such as Samsung Petrochemical. Using these experiences as a strong
foundation, Jbm component and best way ltd. has fine-tuned its expertise and capabilities
to successfully execute lump sum turn-key projects including METAL, procurement,
construction and commissioning. From the early 1990s, the company expanded and
penetrated into overseas markets such as China, Thailand, Egypt, India, Malaysia, and Iran.
In the Saudi Arabian market, Jbm component and best way ltd. was recognized for its
business performance by successfully carrying out the SABIC Butene-1 Plant and SPC
PDH/PP Plant. This resulted in securing new orders such as the APPC PDH/PP Plant,
SHARQ EG Plant and TASNEE Ethylene Plant and IBNZAHR PP Plant in 2005. Two
years later, Jbm component and best way ltd. secured MAADEN Ammonia Plant and
KAYAN PP and Amines Plant, due to our global player status in the petrochemical plant
market. Looking forward, we will focus on expanding deeper into ethylene, EO/EG,
PDH/PP, PE plants and building long term relationships with our clients and penetrating
the GCC, CIS, Australia, and North Africa.

47
Refinery
Jbm component and best way ltd. has steelumulated extensive refinery experience across
the globe such as the IOCL Refinery Plant in India, BST Unleaded Gasoline Additive Plant
in Thailand, and refinery plants in Thailand and Taiwan. In Mexico, Jbm.component and
best way ltd. was awarded both the Tula and Salamanca Refinery from PEMEX, proving
the companys continuing partnership with its clients. Currently, Jbm.component and best
way ltd. is constructing two Central and South American projects. They are the PEMEX
Minatitlan Refinery Plant in Mexico and PETROTRIN NHT & CCR Plat former Refinery
Plant in Trinidad & Tobago.2007 marks the year Jbm.component and best way ltd. was
awarded a DHT Plant from ARAMCO, Saudi Arabiasstate-owned and worlds largest oil
company. This was a milestone that would signal enhanced market competitiveness in a
market with large investment potential. Jbm.component and best way ltd. aims to focus on
the refinery plant industry by securing grass-roots performing capacity, and advanced
refining capacity and looks to a future in the offshore market.

Gas / LNG
Gas plants are Jbm.component and best way ltd.s sustained activities in the hydrocarbon
sector and has demonstrated know-how through the quality of projects in several
continents. In Thailand, EPC services for both PTT ESP and GSP-6 Plants began in 2007,
strengthening its competitiveness in overseas gas plant industry. Other notable gas plant
projects include the IPCL Gas Plant in India, KHALDA Gas Plant in Egypt and
Petrovietnam Gas Plant in Vietnam. Last but not least, a recent successfully constructed
TTM GSP-1Plant for the consortium of Thailands PTT and Malaysias PETRONAS, and
PTT GSP-5 plant in Thailand. Jbm.component and best way ltd. is grooming the liquefied
natural gas(LNG) liquefaction market to be the company's next strategic business.
Jbm.component and best way ltd.s extensive experience in the cryogenic process such as
ethylene and air separation will help the company achieve this goal. Their initial foothold
in the LNG market was secured when our company was awarded the Manzanillo LNG
terminal project from CFE in Mexico. Our company is preparing diligently to penetrate
this market and it is not far from our reach




48
Fertilizers & Chemicals
Jbm.component and best way ltd. has enjoyed success not only in petrochemicals,
refineries, and gas processing plant projects, but also in fertilizer projects, like Vietnams
Phu My Fertilizer plant project as well as general and fine chemical plant projects at home
and abroad.

Industrial Plants
Exploring overseas markets and pioneering new products, Jbm.component and best way
ltd. implements a strong growth strategy. Through Industrial projects in the fields of IT,
energy, automobile, aerospace, food, and sports facilities, Jbm.component and best way
ltd. is demonstrating technological leadership and quality products through its turn-key
services. In particular, Jbm.component and best way ltd. is focused on high-tech sectors
such as display and semiconductors for the purpose of securing top technology. Based on
its outstanding project execution acquired from the Korean market, Jbm.component and
best way ltd. has strived to focus on overseas markets in Asia, Europe, CIS, the Middle
East and Latin America. Through such efforts, Jbm.component and best way ltd. has
pioneered new products such as steel mill plants, power plants, renewable energy plants as
well as new DCP(Distinct Cooling Plants) and logistics centers.



Recent industrial plants project

IT
IT is an important component in the industrial plant sector for Jbm.component and best
way ltd.. With a great track record in IT projects and the steelumulation of the worlds
leading technologies in the areas of PDP, LCD,OLED, semiconductor and clean-rooms. It
has a proven specialization in next generation displays after completing construction of the
AMOLED line and the PDP line 4 for Samsung SDI. Currently, Jbm.component and best
way ltd. is involved in a project to increase capacity for the 7th generation LCD substrate
glass manufacturing line of Samsung Corning Precision Glass. Jbm.component and best
way ltd. also remains active in IT projects outside of Korea and is currently undertaking a
semiconductor facility in Vietnam for Intel. Working with many Korean companies that

49
have entered markets such as the Philippines, China, and Slovakia, Jbm.component and
best way ltd. serves as a partner in their overseas operations. The company plans to
strengthen its expertise centring on existing client companies and to further enhance
its\competitiveness by reducing construction time and developing new construction
techniques, as well as being more active in exploring new overseas markets.
Based on its extensive experience in the food & beverage industry as well as other
manufacturing sectors, Jbm.component and best way ltd. has successfully completed a
number of large projects based in Korea, including the KT&G Tobsteelo manufacturing
Plant, Konkuk Dairy Eumsung Facility, the Asan, Gumi and Noksan Facilities of Nongs
him, Namyang Dairy Cheonan Facility, Jinro Cass Beer Facility and Hankook Tire
Plant.At the same time, Jbm.component and best way ltd. has served as a strategic partner
with domestic companies to help them enter overseas markets, taking part in Nongshim
Shanghai Facility and Hankook Tire Plant in Eastern Europe. Jbm.component and best way
ltd. is also working on a number of fronts to expand its business portfolio to include
DCP(District Cooling Plants), and to secure new growth engines for the future.
Jbm.component and best way ltd. is strengthening its internal competencies through
constant research and development aimed at GMP(Good Manufacturing Practices) for
medical and pharmaceutical devices.
.
Steel
In the steel sector, Jbm.component and best way ltd. secured contracts representing a total
of 25 million USD in2007 alone. These projects included sinter and By-product Gas
Supply Facilities for Hyundai Steel,POSCO CGL Utility in Mexico and a blast furnace
facility for the SAIL IISCO Steel Plant. Winning the bid for the Hyundai Steel Plant was
particularly significant in that it showed how far Jbm.component and best way ltd. has
progressed within an industry that is known for having high barriers for new contractors.
This achievement was made possible by Jbm.component and best way ltd.s extensive
experience in project operation, its cooperation with technology providers and partners that
allows efficient project execution, and differentiated marketing strategies. their company
will continue to be engaged in overseas operations through its partnerships with domestic
steel companies. Jbm.component and best way ltd. also plans to expand its portfolio of
steel operations to include integrated steel mill packages, mini-mills, CGL and stainless
steel facilities so that it will be able to operate steel plant projects independently.

50

Power
Since the 1990s, Jbm.component and best way ltd. has successfully completed projects for
medium to large combined heat and power plants as well as integrated energy plants in
turn-key contracts. Examples include Ansan Combined Heat and Power Plant, Sihwa
Combined Heat and Power Plant, Incheon Nonhyun District Integrated Energy Plant, and
the Energy Rationalization Facility in Mongolia. It has set up a plan to transform overseas
IPP projects into strategic products for long-term growth and has madevarious efforts to
specialize in IPP projects in Southeast Asia. In Thailand, Philippines and Indonesia, it is
working hard to acquire power plant projects including those for CPP. By securing needed
technologies and expertise to undertake medium to large sized projects(300 MW IPP or
larger), it has become an important player in IPP overseas markets and is laying a
foundation for exploring new growth engines such as the renewable energy industry.

Environmental & Infrastructure
Aspiring to become a specialist in environmental & infrastructure through aggressive
technology development and business expansion. METAL companys entered the
environmental sector in the 1970s and has since been specializing in the environmental and
infrastructure field. Based on 38 years of experience in the water business, it established a
comprehensive water management system that covers ultra pure water, wastewater reuse
and highly efficient wastewater treatment, and continues building upon its capabilities in
the design, construction and operation of related facilities overseas. Jbm.component and
best way ltd. has secured core technologies in other environment-related areas such as the
reduction of air pollution from IT facilities and municipal waste. Simultaneously, the
company is actively engaged in SOC(Social Overhead Capital) projects in the domestic
railway market and has successfully operated projects such as the railway depot and
deployment projects for integrated operation systems. Leveraging its experience in
environmental & infrastructure, METAL company will continue its growth as a leading
water specialist and infrastructure construction company.





51

Recent Environmental & Infrastructure project

Water Treatment
Jbm.component and best way entered the sewage treatment sector in the 1990s and has
successfully completed a number of domestic sewage treatment projects in Seogwipo,
Gwangyang, Ansung,Guryongpo and Kiheung. It is also currently undertaking and
operating sewage treatment facilities in Dongbu, Busan and Songdo-Mansu in Incheon
through privately invested contracts, as well as another privately invested project to
integrate the 12 sewage treatment facilities in Yongin. The company s extensive
experience in the waste water treatment sector has provided it with a solid foundation from
which was utilized to enter the overseas market in UAE. The contract that was awarded
from HCSEZ to build and operate a wastewater treatment facility for the Abu Dhabi ICAD
Complex was a highlight for in 2007. In the ultra pure and wastewater reuse sectors, it is
steadily increasing its market share as it has successfully built ultra pure water &
wastewater recycling facilities for Samsung Electronics in Hwasung, Kiheung and
Cheonan in Korea, and also Suzhou, China. In 2008, the company plans to become more
actively engaged in the seawater desalination sector by leveraging its membrane, ultra pure
water, and desalination technologies.

Disposal of Waste Materials /Reduction of Air Pollution
Jbm.component and best way pvt. Ltd.s unique technological power and expertise has
been demonstrated in various waste treatment projects owned by the government and local
authorities. The company is steelumulating expertise in sludge treatment through its
involvement in the construction and operation of the Seonam-Nanji and Sungnam Sludge
Incinerators. METAL company construction and operation of the Cheonan Municipal
Solid Waste Incinerator is being used as a case study in Korea as well as in other countries.
As the reduction of air pollution has become an international issue, Jbm.component and
best way ltd. is
becoming a global leader in this field by applying its experience in the petrochemical
industry to various projects aimed at treating harmful gases such as PFC(Per Fluoro
Carbon) produced by IT manufacturing facilities. Railway

52
Since entering the domestic railway market in the 1990s, METAL company has
steelumulated technologies specific to railway systems through its completion of the Seoul
Rolling Stork Depot, the Busan Railway Maintenance Depot, and the Ansan Electric Train
Depot. In 2007, it became the first private company to successfully complete a
comprehensive operation system, the Daejeon Subway Line 1. That project helped the
company secure necessary capabilities related to the deployment and trial operation of
integrated operation systems for urban railways. It plans to be more active in entering
overseas markets such as the Middle East while diversifying its business portfolio to
include system integration of light rail transit E&M and railway E&M, and by nurturing
this business as a future growth engine.

Infrastructure
METAL company entered the SOC sector in the 1990s, beginning with its construction of
the Seogwipo Outport Breakwater. It has since contributed to the expansion of Koreas
SOC infrastructure through a variety of SOC projects including the Ulsan-Gangdong
Highway Construction, the Seoul WorldCup Stadium, Haeundae Marine Theme Aquarium
and Bucheon-Sangdong Housing Complex Development. Based on its track record in
projects related to ports, sports complexes, roads, bridges and tunnels, intends to further
build on its expertise in overseas infrastructure projects in the Middle East, North Africa,
and Southeast Asia.

Jbm.component and best way companys Record-breaking performance
In 2007, despite the dramatic escalation in oil prices and raw material prices, Samsung
Engineering worked diligently to record an all-time high. New orders rose 65 percent to
KRW4.8 trillion while net profit rose 31 percent to KRW 156 billion on the back of sales
rising 12percent to a record KRW 2.2 trillion. The performance of the Hydrocarbon Plant
Division was a stellar one, as METAL companys continuously secured mega projects in
Saudi Arabia, Thailand, and India on the strength of their trusted and respected reputation
developed through their successful business performance. A notable milestone for METAL
company includes securing Saudi Arabias ARAMCO as their client, the world's largest oil
company.
Advancing into the UAE market was another proud achievement this year. In the Industrial
Plant Division, Jbm.component and best way ltd. made great progress in diversifying its

53
business portfolio by entering the steel plant market. Securing the Intel Semi conductor
project in Vietnam meant another expansion into a new market and widening their client
base into the global IT sector. In addition, METAL companys steelumulated experience
and high technology in the Environmental & Infrastructure Division resulted in a new
award for a sewage treatment plant in the UAE. Jbm.component and best way ltd. engaged
in a buyback of a total of 1 million stocks worth KRW54.6 billion to stabilize their share
prices and enhance shareholder values, simultaneously and effectively maintaining
shareholder-oriented management for the best interest of their shareholders.
Jbm.component and best way ltd.s share prices have doubled since the beginning of the
year while its market capitalization reached KRW 3.752 trillion, raising overall corporate
value.


54
RESEARCH METHODOLOGY
Research methodology consist of mode of data collection or generation and type of
analysis of data. Data collection methods consist of primary collection, secondary
collection, qualitative data and quantitative data. while primary data consist of Original
data collected for a specific research goal like Questionnaire surveys; Interviews: formal or
structured. Then secondary data consist of data originally collected for a different study,
used again for a new research question like Published statistics , Published texts ,
documents, forms reports.
Another part is Qualitative data and Quantitative data. While qualitative Data involving
understandings of the complexity, detail and context of the research subject, often
consisting of texts such as interview transcripts and field notes, but also audiovisual
material and quantitative Data that can be described in terms of objects, variables and their
values
In regarding my research work I was strictly relied upon the primary and secondary
method of data collection. Primary research consist of collection the financial information
to the respective individuals of the company, through in depth interview and study of
different financial statement of the company. While my half of the thesis is relied on the
primary data collection as my internal guide is a general manager of finance in jbm.
Component and best way pvt ltd. so through in depth interview of my guide is one of my
important source of data collection and in the same way he used to provide all the
relevant statement of the company which I can follow and make analysis of it.
While my secondary research consist of collection of data about the brief introduction of
the company ,their ranking in the market ,condition of their existing project from the
different website ,company brochure, yearly company magazine. Apart from the
information about company , I collected information about working capital management,
how different companies managing their working capital , different aspects of working
capital management.




55
Research Design:
The research design used in this study is descriptive.


Sampling Procedure- The sampling procedure consists of:
Probability or random sampling- Employees are selected for study using
probability sampling. It is one in which each and every unit of the population has
an equal chance of being selected into the sample.
Non-probability or non-random sampling- Managers are selected for study using
Non-probability sampling. In this the chance of including an elementary unit of
population in the sample cannot be determined and hence they do not lend
themselves to a statistical treatment and analysis.


METHODS OF DATA COLLECTION: -
Secondary sources of data collection was used for the study of working capital
management at Jbm.component and best way pvt. Ltd.


THE PRIMARY SOURCES OF DATA COLLECTION
Data observed or collected directly from first-hand experience is called primary data.
Sources to collect Primary data are through:

By administering the questionnaire;
By non- participative observation;
By face to face discussions ;



56
THE SECONDARY SOURCE OF DATACOLLECTION

Available records
Annual reports
Company magazines, etc.

THE SCOPE OF THE SURVEY: -
The survey will be conducted at Samsung limited Faridabad. This survey is related to study the
working capital management Samsung limited Faridabad. The study is confined to only one
company so that, it has limited scope for getting more knowledge.
LIMITATIONS OF THE STUDY
Busy Schedule of Concerned Executives: The concerned executives were having very
busy schedule because of which they were reluctant to give appointment.

Time: The time duration could not provide ample opportunity to study every detail
bbbbof working capital management of the company.

Unawareness: Executives were unaware of many terms related to working capital
study while asking to them.

Confidential Information: As the company on steelount of confidential report has
not disclosed some figures. Moreover, in some cases separate steelounts of division
are not separately maintained thereby, leading to restrictions in study.

Secondary data used: This project is completed by using secondary data.




57
DATA ANALYSIS & INTERPRETATION

1.Amount of working capital in different years.
Years 2007-08 2008-09 2009-10 2010-11
J.b.m.component(in crores) 171 246 318 288

Interpretation:
I found that in the year 2007-08 working capital was 171.78 crores while in
year 2010-11 it was 288.33 crores.










02
1 3
2007-08 2008-09 2009-10 2010-11
28.

58
2. Type of working capital used in Jbm.component and best way ltd.











Interpretation:
Out of total working capital of the company, 74% is permanent and 26% is
temporary working capital.



Permanent Temporary
74% 26%
permanent
Tempory

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3. Method use for Material dispatch:












Interpretation:
Result shows that most of the times company adopt LEFO method to issue
inventory. And for other tyers company also use FIFO method . but
sometimes company also apply HIFO & other methods tom supply inventory.


Method FIFO LIFO HIFO Other
Respondents
[%]
15 20 10 5
0
2
4
6
8
10
12
14
16
18
20
15
20
10
5

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4. Time period of collecting raw material from supplier.














Interpreattion:
Company get raw material from its suppliers half yearly 30%, 34% monthly,
22%quartly
&14 % yearly some times.
Time Period Monthly Half
Yearly
Quarterly Yearly
Respondent
[%]
34 30 22 14
Monthly
Half yearly
Quarterly
Yearly

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5. Sources to raise finance for working capital:



Interpretation:Generally company raise funds through owned & borrowed
funds & also through other sources also.
Sources of
Finance
Owned
Fund
Borrowed Fund Other
sources
Both 1 & 2
Respondent
[%]
7 10 7 76
SOURCES OF FUNDS
Both 1& 2
Borrowed fund
Other sources
Owned fund

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6. Cost incurred for maintaining Receivables:






Interpretation
For maintaining receivables company have to incurred all type of cost i.e.
cost of financing , cost of collection, bed debt cost & other type of cost.


7. Technique use for inventory management.

Cost Cost of
financing
Cost of
collection
Bad
debt
Other
Cost
Respondent
[%]
40 10 10 40
Technique ABC
Analysis
VED
Analysis

Fixation of
EOQ
XYZ Analysis
Respondent
[%]
30 28 20 22

63


Interpretation
For spare parts goodyear india are in used .company classified spare parts as
VITAL(V) ESSENTIAL(E) and DESIRABLE(D) APPLY 22% & also use ABC analysis
& also use EOQ & XYZ analysis.






TECHNIQUE USAGE
ABC Analysis
VED analysis
Fixation of EOQ
XYZ analysis

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8. Credit payment period





Interpretation
Company paid to its creditors half yearly(50%)of its credit, 26% yearly,14%
quarterly of its debts&10%monthly



Time Period Monthly Half
Yearly
Quarterly Yearly
Respondent
[%]
10 50 14 26
CREDIT PAYMENT PERIOD
Monthly
Half Yearly
Quartely
Yearly

65
FINDINGS OF THE STUDY
Opportunities are given for advanMETAL.
Organization makes their employees feel that their work is important for the
organization, if working capital management rate is higher..
Employees are given opportunity to look ways to stream line process and them more
efficient which acts as a motivator for them.
Organization recognizes contribution made by individuals by programmes using
working capital management.
I noticed that working capital management plays a very important role in employee
relations.
If we have sufficient working capital in any firm ,it makes good relationship with
suppliers through timely payment to them.

Dividend distributes regularly between shareholders with enough
working capital.

Ideal working capital ratio helps in easy loans from banks.









66
CONCLUSION
The overall performance of Jbm.component and best way ltd. is getting on a good track.
The total turn over of the company also increased in good phase and that they will achieve
their vision of global leader in METAL by obtaining new order worth USD20 billion and
revenue 15 billion by 2015.if we see their expansion plan when they came to they decided
to do only heavy project which have government intervention but now they change their
decision and started doing some small projects also. Only for expansion in India is the
competitive advantage because they dont have perfect competitor in Indian market. For
taking care the vision and objective they have the best man power and technology in their
organization. Jbm.component and best way is committed to becoming the most reliable
business partner catering the needs with the best quality and seamless services driven by
the attitude of genuinely caring customer and it also reflect in their five business principle
Jbm.component and best way ltd. working capital management is smooth because of the
implementation of new technique which is more improvised and avoid the ambiguity.
There overall projection of help them to maintain the flow of fund in their organization. If
go through their trade receivable management , they worked on big infrastructure project
where regular recipient of payment is very important otherwise it put effect on work and
increase the completion date therefore it create loss for both the party. They worked in
milestone basis so hardly they face any over dues and payment would be receive smoothly.
since they have tight credit standard it help them to avoid bad debt and losses. There main
agenda is being cost effective so they try to complete their work before time. For before
completion they receive bonus from their client .Bonus is calculated over and above the
contract value and also it is treated as a income from other sources in the balance sheet.
While their aging sechdule they gets payment 80 percent on the same month and 20% .
This process of receiving payment is possible because the do heavy and long run
project.There payment system is based on FIFO basis. Although they have certain
procedure for making payment ,they divide their vendor like international& national basis.
Based on material required they gave advance to their supplier ,advance would made
10%to15%. They used letter of credit for international supplier& for national supplier they
placed bill as per terms of agreement.

67
They follow just in-time technique for managing their inventory, and it help them to be
more cost effective. Because of this they have to purchase sizeable imported raw materials
and compulsory bulk purchases of items like steel and construction item Apart from that
Jbm.component and best way derive some new technique under the heading of JIT, which
is E1 transaction& High sea sale.
Cash is a important aspect of business but more is managing it so every company have it
own technique . The Jbm.component and best way strategies regarding the following four
facts of cash management Cash is a important aspect of business but more is managing it
so every company have it own technique . Jbm.component and best way makes cash
planning steelording to their projects, like in case of their pani pat project ,they considered
it to be long term project and cash flow is systematic. Jbm.component and best way ltd.
cash flows are quite fixed in nature because they prefer to do heavy &long term project ,
where payment are received steelording to the completion of the work ,usually they
divide their work in several milestone and steelording to the completion of milestone they
receive payment from their client. while their investment of surplus cash ,they gave
financial assistance to their parent company and other one is Info pool system.
Jbm.component and best way pvt. Ltd. finance their working capital by different sources
likewise when they start new project they take initial advance from their customer
percentage depend upon the contract value. In case of default risk they take loans and
advance from their head quarter so the flow of working capital would be maintain. In rare
cases they use overdraft ,sometime they require fund in very short notice.
If we see the trend year wise then their net working capital is increased in year 2011as
comparison to year 2010. Then there is continuous rise in the debtors for two years,where
as it considered to be as a good sign for the business.
Whereas their cash balance is decreasing because they expand their business . Company is
utilizing the fixed cash for exploding the projects that is good for growth.
They would not provide any loan and advances to outsider or any supplier. they only give
loan to their parent company .
There current liability is also decreasing Lower current liabilities indicate that company is
not using credit facilities by creditors. In same way their provision indicating a good trend

68
that their provision is increased mean their income has been increased and also the profit.
While their ratios are also indicating good signs, their receivable ratio is high mean debt
collection period is short. Even their payable ratio is also favourable. The most important
ratio is current ratio is quite close to favourable.








69
RECOMMENDATION & SUGGESTIONS
Working capital means the part of the total assets of the business that change from one
form to another form in the ordinary course of business operations.
Jbm.component and best way pvt. Ltd. should understand the competitive edge of
indian market and steelording to that they would expand their business .
Jbm.component and best way pvt. Ltd. seem to be conservative in regarding their
inventory management although just in time is applicable in some specific case
,but when they are the expanding their business specifically in Indian market they
would liberalise their inventory technique and consider the other technique also.
If Jbm.component and best way pvt. Ltd. maintain a small cash balance its
liquidity positions weakens but its profitable for opportunities. On the other hand
if the firm keeps high cash it will have a strong liquidity position but its
profitability will be low. The potential profit forgone on holding large cash balance,
it is an opportunity cost for firm. A firm should maintain optimum just enough ,
neither too much nor too little cash balance.
Jbm.componentand Steel cememt pvt. Ltd. India never give loan and advance to
different parties, company, employees ,whereas they prefer to give loan to their
parent company through the info pool system , but in return they are not getting
any interest from them. For that reason they should provide loan and advances to
different parties, company, employees ,in return they will be liable to make timely
repayment of that amount in addition to interest on that loan. which will increase
their profitability.







70


71
BIBLIOGRAPHY
www.samsungengineering.com

Financial Management Pandey, I.M.,p.n.106,2
nd
edition

Working capital management by BHALLA, V.K.,p.n.234,3
rd

edition

Financial Management MAHESHWARI, S. N.,p.n.300,1
st
edition















72
QUESTIONNAIRE

1. What are the requirements of working capital?
(a) 8990 lacs [ ] (b)32 9200 lacs [ ]
(c) 9500 lacs [ ] (d) 9800 lacs [ ]

2. What is the type of working capital?
(a) Permanent [ ] (b) Temporary [ ]
Working capital working capital
3. What is your economic order quantity?
(a) 60000 units [ ] (b) 70000 units [ ]

(c) 80000units [ ] (d) 90000 units [ ]

4. Which method use for material dispatched?
(a) FIFO [ ] (b) LIFO [ ]

(c) HIFO [ ] (d) Others [ ]