CERTIFICATE

This is certify that Mr/ Mrs. Ajit Sharma of Dronacharya P.G College of
Education Rait has successfully completed the project work titled “Working
Capital Management of Muthoot Finance LTD” in partial fulfilment of
requirement for the award of the bachelors of business administration degree of
finance in HPU.

This project is the record of authentic work carried out during the academic year
2016-2019.

SINGNATURE:
SUPERVISOR’S

DESIGNATION: NAME:

DATE:

PLACE:
 DECLERATION

I Ajit Sharma student of BBA 5th SEM, Dhronacharya PG college of education

Rait hereby declare that I have completed this project on “Working Capital
management of Muthoot Finance LTD” is academic year 2019.

This information provides by me is true and original to the best of my

knowledge.

Ajit Sharma

BBA 5th sem

 PREFACE

The administration as a teach has pulled in consideration of the academician and

professional to an exceptionally awesome degree. Its significance has been
developing step by step on the grounds the business concerns, which have
created, are vast and complex, with many individuals cooperating.

An extremely basic piece of the administration instruction is work preparing.

The point of job training is presentation of the administration understudy in the
field that is done in test the classroom learning.

Functional preparing is thought to be a fundamental piece of all the professional

institutions and the individuals who are trying for business management
program. This venture is done in the field of promoting.

As part of administration instruction, which is accepting consideration in the

assessment of the viable preparing, is to get genuine condition touch of business
management. It is unbendingly acknowledge that the hypothesis augments one’s
speculation skylines viz. concepts of showcasing methods of insight, yet
rehearse demonstrates the cutting edge advertising and utilized as a part of wide
assortment of settings of items.

The venture works has been done under the kind consent of AMS TECHUB. It
is attempted in Mohali under the direction Of Miss Gagandeep kaur,Marketing
trainer of AMS TECHUB.

The report gives a genuine photo of the down to earth exercises done by entire
gathering within the purview. The examination territory was constrained to
Mohali as it were.
 ACKNOWLEDGEMENT

Industrial training is an integral part of any management based program and for
that purpose I had joined AMS TECHUB, India’s premier information ambling
company.

I take the opportunity to express my gratitude to all of them who in some or

other way helped me to accomplish this challenging project on Hewlett Packard
enterprises. No amount of written expression is sufficient to show my deepest
sense of gratitude to them.

I am very thankful to external Guide, Mr. Mohit Shukla (regional sale

manager), office frontline Division, ASM TECHUB, and very grateful to prof.
Gagandeep kaur. ASM TECHHUB Institute of management greater Mohali for
their everlasting support and guidance on the ground of which I have acquired a
new field of knowledge. The course structure created for this curriculum has
benefited with the inclusion of recent development in the organisation and
managerial aspects.

I express my sincere thanks to Miss. Gagandeep kaur and all the employees of
AMS TECHUB for their kind co- corporation during my summer project. I am
thankful to all the member of AMS TECHUB, which has given me valuable
information in the part of my project.

Thanking you

Ajit Sharma
INTRODUCTION

Muthoot Finance Ltd. is an Indian financial corporation. It is known as the

largest gold financing company in the world.[2][3] In addition to financing gold
transactions, the company offers foreign exchange services, money transfers,
wealth management services, travel and tourism services, and sells gold coins at
Muthoot Finance Branches. The company's headquarters are located in Kerala,
India, and it operates over 4,400 branches throughout the country. Outside
India, Muthoot Finance is established in the UK, the US, and the United Arab
Emirates. While the company falls under the brand umbrella of
the Muthoot Group, its stocks are listed on the Bombay Stock Exchange (BSE)
and NSE. As of March 2012, revenue (after expenditure) stood at more than Rs.
23,000 crore ($4.2 billion).[4] The target market of Muthoot Finance includes
small businesses, vendors, farmers, traders, SME business owners, and salaried
individuals.

INTRODUCTION1. WORKING CAPITAL MANAGEMENT

1.1 INTRODUCTION
The present research seeks to study in depth the Working Capital Management
of selected paper companies in India, with special emphasis on an examination
of the management performance in regard to financial management. It hardly
needs mentioning that inventory, accounts receivables and cash and its alert
administration can go a long way in solving the problem of the efficient
working capital management. In fact, the present research of working capital
management needs special attention for the efficient working and the business.
It has been often observed that the shortage of working capital leads to the
failure of a business. The proper management of working capital may bring
about the success of a business firm. The management of working capital
includes the management of current assets and current liabilities. The present
research undertakes to deal with the net concept of working capital: excess of
current assets over current liabilities. A number of companies for the past few
years have been finding it difficult to solve the increasing problems of adopting
seriously the management of working capital. Business concerns intent on
developing their business have to use to the utmost, their available resources for
the improvement and development of the business there by enabling them to
increase their profits. Working Capital and change in working capital, especially
in inventories, which is one of the components of working capital form a very
important part of the total gross-capital formation in the paper companies.
Efficient and the optimal utilization of fixed assets is very closely related to the
proper management of working capital. The present research attempts to
recognize initially the importance of working capital as a part of the total
capital. It further goals to recognize the factors influencing the working capital,
its volume, and in the process try to suggest remedial measures which might
help in optimizing the use of working capital. It also considers as to how
precisely “financing working capital” and further more what should be mix of
different components of working capital.
earned return if it invested anywhere else.
Definitions of Working Capital, as per various management experts are as
under: “Working Capital is the excess of C.A. over current liabilities.” - H.G,
Guthmann
“Working Capital is descriptive of that capital which is not fixed. But the more
common use of the Working Capital is to consider it as the difference between
the book value of the C.A. and current liabilities.” - Hoglend. J. Bierman, and
A. K. Mc Adams,
. “Working Capital represents the excess of C.A. over current liabilities” - J.L.
Brown and L.R. Housard.
“Working Capital to a firm’s investment in short term assets cash short term
securities, accounts, receivables and inventories.” -Weston the Brigham
“Working Capital represents only the current capital assets.” - Meal Baker
Malott and Field.
“Working Capital means a sum of C.A” - J.S. Mill.
“A Working Capital deficit exits if current liabilities exceed C.A.” -Prof. C.W.
Gerstoberg.55
“Working Capital equals the aggregate value of C.A. minus aggregate value of
current liabilities” - Lincoln.
“Gross Working Capital may be used to refer to total C.A. and net working
capital refers to the surplus of C.A. over current liabilities” - Prof. S.C. Kuchha

According to quantitative concept, the amount of working capital refers to

‘total of current assets’. What we call current assets? Smith called, ‘circulating
capital’. Current assets are considered to be gross working capital in this
concept. The qualitative concept gives an idea regarding source of financing
capital. According to qualitative concept the amount of working capital refers to
“excess of current assets over current liabilities.” L.J. Guthmann defined
working capital as “the portion of a firm’s current assets which are financed
from long–term funds.” The excess of current assets over current liabilities is
termed as ‘Net working capital’. In this concept “Net working capital”
represents the amount of current assets which would remain if all current
liabilities were paid. Both the concepts of working capital have their own points
of importance. “If the objectives is to measure the size and extent to which
current assets are being used, ‘Gross concept’ is useful; whereas in evaluating
the liquidity position of an undertaking ‘Net concept’ becomes pertinent and
preferable.It is necessary to understand the meaning of current assets and
current liabilities for learning the meaning of working capital, which is
explained below. Current assets – It is rightly observed that “Current assets
have a short life span. These type of assets are engaged in current operation of a
business and normally used for short– term operations of the firm during an
accounting period i.e. within twelve months. The two important characteristics
of such assets are,
(i) short life span, and (ii) swift transformation into other form of assets.
Cash balance may be held idle for a week or two; account receivable may
have a life span of 30 to 60 days, and inventories may be held for 30 to
100 days.”Fitzgerald defined current assets as, “cash and other assets
which are expected to be converted in to cash in the ordinary course of
business within one year or within such longer period as constitutes the
normal operating cycle of a business.”

1.2 Current liabilities – The firm creates a Current Liability toward creditors
(sellers) from whom it has purchased raw materials on credit. This
liability is also known as accounts payable and shown in the balance
sheet till the payment has been made to the creditors. The claims or
obligations which are normally expected to mature for payment within an
accounting cycle are known as current liabilities. These can be defined as
“those liabilities where liquidation is reasonably expected to require

WORKING CAPITAL MANAGEMENT: CONCEPT, IMPORTANCE

AND OBJECTS

the use of existing resources properly classifiable as current assets, or the

creation of other current assets, or the creation of other current
liabilities.”

1.4 CIRCULATION SYSTEM OF WORKING CAPITAL Working

capital is also known as ‘circulating capital or current capital’ Kulkarni
has remarked that, “The use of the term circulating capital instead of
working capital indicates that its flow is circular in nature”. The funds in
a business are obtained from the issue of share, the issue of debentures,
and other long-term arrangement and from operations of business. A huge
part of generated funds is used to acquire fixed assets, viz, plant and
machinery, land building and some other fixed assets, while the
remaining part of the generated funds is used for day to day operations of
the business e.g. to pay wages and overheads expenses for the raw
materials processed.
WORKING CAPITALTERM LOAN (WCTL):
A working capital term loan (WCTL) should process specific
characteristic as laid down below Working capital term loan is a shortage
“long-term surplus” or net working capital(NWC) in a unit that a bank
chooses to fund.

It is a long term need of the unit that is met by the bank though its short
term port-folio.

Working capital term loan may be either clean or secured depending

upon the margin stipulated or the amount of working capital term loan in
relation to the chargeable current assts.
It must be repaid is a prescribed maximum number of installments.

It is not sanctioned as such but segregated out of existing outstanding,

when outstanding exceed the unit’s eligibility.

It is a sort of ‘once-in-a-life-time’ loan. It is a post-facto corrective

measure, it
 It should be repayable form long-term sources. If the repayment is form
short term sources, the permissible bank finance will fall correspondingly
and working capital term loan will rise there by neutralizing the process
of repayment. Moreover, both physical and financial follow up can be
used to complement each other, if the concept of the ‘margin’ is refined
and integrated into the maximum permissible bank finance (MPBF)
MPBF = NWC + OSCL – NCCA/CCA Margin Where NWC is net
working capital, OSCL means other current liabilities less creditors for
purchases. NCCA are non-chargeable current assets on which no drawls
are permitted. CCA means chargeable current assets on which margin are
proposed to be stipulated. The application of margin would be coupled
with the deduction of the value of creditors for purchases from the
advance value to arrive at the drawing power. Once a margin is
stipulated, it can be utilized as the operating thumb rule for monitoring
the borrower’s stake in the stocks charged to the bank as well as a rough
and ready method for keeping the drawings power within the MPBF
limits.

ADEQUACY OF WORKING CAPITAL N.K. Kulshrestha has observed

that, “the need for maintaining an adequate working capital can hardly be
questioned. Just a circulation of blood is very necessary in the human
body to maintain life, smooth flow of funds is very necessary to maintain
the heath of the firm”.
 Adequate working capital becomes necessary because of the following
reasons

It protects a business form the adverse effects of shrinkage in the values

of current assets.
It is possible to pay all the current obligations promptly and to take
advantages of cash discounts.
It ensures to a greater extent the maintenance of a company’s credit
standing and provides for such emergencies as strikes, floods, fibers, etc.
It permits the carrying of inventories at a level that would enable a
business to serve satisfactory the needs of its customers.
It enables a company to extend favorable credit terms to customer.
It enable a company to operate its business more efficiently because there
is no delay in obtaining materials, etc., because of credit difficulties.
It enables a business to withstand periods of depression smoothly.
There may be operating losses or decreased retained earnings.
There may be excessive non-operating or extraordinary losses.
The management may fail to obtain funds from other sources for the
purposes of expansion.
There may be an unwise divided policy.
Current funds may be invested in non-current assets.
The management may fail to accumulate funds necessary for meeting
debentures on maturity.
There may be increasing price necessitating bigger investments in
inventories and fixed assets.
1.10 EXCESS OF INADEQUACY OF WORKING CAPITAL The firm
should maintain a sound working capital position. It should be repayable
form long-term sources. If the repayment is form short term sources, the
permissible bank finance will fall correspondingly and working capital
term loan will rise there by neutralizing the process of repayment.
Moreover, both physical and financial follow up can be used to
complement each other, if the concept of the ‘margin’ is refined and
integrated into the maximum permissible bank finance (MPBF) MPBF =
NWC + OSCL – NCCA/CCA Margin Where NWC is net working
capital, OSCL means other current liabilities less creditors for purchases.
NCCA are non-chargeable current assets on which no drawls are
permitted. CCA means chargeable current assets on which margin are
proposed to be stipulated. The application of margin would be coupled
with the deduction of the value of creditors for purchases from the
advance value to arrive at the drawing power. Once a margin is
stipulated, it can be utilized as the operating thumb rule for monitoring
the borrower’s stake in the stocks charged to the bank as well as a rough
and ready method for keeping the drawings power within the MPBF
limits.
1.9 ADEQUACY OF WORKING CAPITAL N.K. Kulshrestha has
observed that, “the need for maintaining an adequate working capital can
hardly be questioned. Just a circulation of blood is very necessary in the
human body to maintain life, smooth flow of funds is very necessary to
maintain the heath of the firm”. Adequate working capital becomes
necessary because of the following reasons:
It protects a business form the adverse effects of shrinkage in the values
of current assets.
It is possible to pay all the current obligations promptly and to take
advantages of cash discounts.
It ensures to a greater extent the maintenance of a company’s credit
standing and provides for such emergencies as strikes, floods, fibers, etc.
It permits the carrying of inventories at a level that would enable a
business to serve satisfactory the needs of its customers.

It enables a company to extend favorable credit terms to customer.

It enable a company to operate its business more efficiently because there
is no delay in obtaining materials, etc., because of credit difficulties.
It enables a business to withstand periods of depression smoothly.
There may be operating losses or decreased retained earnings.
There may be excessive non-operating or extraordinary losses.
The management may fail to obtain funds from other sources for the
purposes of expansion.
There may be an unwise divided policy.
Current funds may be invested in non-current assets.
The management may fail to accumulate funds necessary for meeting
debentures on maturity.
There may be increasing price necessitating bigger investments in
inventories and fixed assets.

TYPES OF RESEARCH
The basic types of research are as follows:
(i) Descriptive vs. Analytical: Descriptive research includes surveys
and fact-finding enquiries of different kinds. The major purpose of
descriptive research is description of the state of affairs as it exists
at present. In social science and business research we quite often
use Research Methodology: An Introduction 3 the term Ex post
facto research for descriptive research studies. The main
characteristic of this method is that the researcher has no control
over the variables; he can only report what has happened or what is
happening. Most ex post facto research projects are used for
 descriptive studies in which the researcher seeks to measure such
items as, for example, frequency of shopping, preferences of
people, or similar data. Ex post facto studies also include attempts
by researchers to discover causes even when they cannot control
the variables. The methods of research utilized in descriptive
research are survey methods of all kinds, including comparative
and correlational methods. In analytical research, on the other
hand, the researcher has to use facts or information already
available, and analyze these to make a critical evaluation of the
material.
(ii) (ii) Applied vs. Fundamental: Research can either be applied (or
action) research or fundamental (to basic or pure) research.
Applied research aims at finding a solution for an immediate
problem facing a society or an industrial/business organisation,
whereas fundamental research is mainly concerned with
generalisations and with the formulation of a theory. “Gathering
knowledge for knowledge’s sake is termed ‘pure’ or ‘basic’
research.”4 Research concerning some natural phenomenon or
relating to pure mathematics are examples of fundamental research.
Similarly, research studies, concerning human behaviour carried on
with a view to make generalisations about human behaviour, are
also examples of fundamental research, but research aimed at
certain conclusions (say, a solution) facing a concrete social or
business problem is an example of applied research. Research to
identify social, economic or political trends that may affect a
particular institution or the copy research (research to find out
whether certain communications will be read and understood) or
the marketing research or evaluation research are examples of
applied research. Thus, the central aim of applied research is to
discover a solution for some pressing practical problem, whereas
basic research is directed towards finding information that has a
broad base of applications and thus, adds to the already existing
organized body of scientific knowledge.
(iii) (iii) Quantitative vs. Qualitative: Quantitative research is based on
the measurement of quantity or amount. It is applicable to
phenomena that can be expressed in terms of quantity. Qualitative
research, on the other hand, is concerned with qualitative
phenomenon, i.e., phenomena relating to or involving quality or
kind. For instance, when we are interested in investigating the
reasons for human behaviour (i.e., why people think or do certain
things), we quite often talk of ‘Motivation Research’, an important
type of qualitative research. This type of research aims at
discovering the underlying motives and desires, using in depth
 interviews for the purpose. Other techniques of such research are
word association tests, sentence completion tests, story completion
tests and similar other projective techniques. Attitude or opinion
research i.e., research designed to find out how people feel or what
they think about a particular subject or institution is also qualitative
research. Qualitative research is specially important in the
behavioural sciences where the aim is to discover the underlying
motives of human behaviour. Through such research we can
analyse the various factors which motivate people to behave in a
particular manner or which make people like or dislike a particular
thing. It may be stated, however, that to apply qualitative research
in 4 Pauline V. Young, Scientific Social Surveys and Research, p.
30. 4 Research Methodology practice is relatively a difficult job
and therefore, while doing such research, one should seek guidance
from experimental psychologists.
(iv) (iv) Conceptual vs. Empirical: Conceptual research is that related
to some abstract idea(s) or theory. It is generally used by
philosophers and thinkers to develop new concepts or to reinterpret
existing ones. On the other hand, empirical research relies on
experience or observation alone, often without due regard for
system and theory. It is data-based research, coming up with
conclusions which are capable of being verified by observation or
experiment. We can also call it as experimental type of research. In
such a research it is necessary to get at facts firsthand, at their
source, and actively to go about doing certain things to stimulate
the production of desired information. In such a research, the
researcher must first provide himself with a working hypothesis or
guess as to the probable results. He then works to get enough facts
(data) to prove or disprove his hypothesis. He then sets up
experimental designs which he thinks will manipulate the persons
or the materials concerned so as to bring forth the desired
information. Such research is thus characterised by the
experimenter’s control over the variables under study and his
deliberate manipulation of one of them to study its effects.
Empirical research is appropriate when proof is sought that certain
variables affect other variables in some way. Evidence gathered
through experiments or empirical studies is today considered to be
the most powerful support possible for a given hypothesis.
(v) Some Other Types of Research: All other types of research are
variations of one or more of the above stated approaches, based on
either the purpose of research, or the time required to accomplish
research, on the environment in which research is done, or on the
basis of some other similar factor. Form the point of view of time,
we can think of research either as one-time research or longitudinal
research. In the former case the research is confined to a single
time-period, whereas in the latter case the research is carried on
over several time-periods. Research can be field-setting research or
laboratory research or simulation research, depending upon the
environment in which it is to be carried out. Research can as well
be understood as clinical or diagnostic research. Such research
follow case-study methods or in-depth approaches to reach the
basic causal relations. Such studies usually go deep into the causes
of things or events that interest us, using very small samples and
very deep probing data gathering devices. The research may be
exploratory or it may be formalized.
The objective of exploratory research is the development of
hypotheses rather than their testing, whereas formalized research
studies are those with substantial structure and with specific
hypotheses to be tested. Historical research is that which utilizes
historical sources like documents, remains, etc. to study events or
ideas of the past, including the philosophy of persons and groups at
any remote point of time. Research can also be classified as
conclusion-oriented and decision-oriented. While doing conclusion
oriented research, a researcher is free to pick up a problem,
redesign the enquiry as he proceeds and is prepared to
conceptualize as he wishes. Decision-oriented research is always
for the need of a decision maker.