MBA Project on Working Capital Management

INTRODUCTION

Many finance managers, who are quite at home and competent in dealing with long
term decisions, such as capital investments experience difficulties when they have to
scout for funds to meet the day to day working needs. With bank finance getting
increasingly scare, regulated and expensive the emphasis has shifted to closer attention
to internal generation of funds and the development of the enterprises ability to raise
funds in the market.

WORKING CAPITAL MANAGEMENT AND POLICY

Working capital can be defined as the amount at funds, which a Company must have to
finance tits day-to-day operations. It can also be regarded as that proportion of the
companies’ total capital, which is employed in “current liabilities” which are short term
assets that are normally expected to get converted into cash within a year. Current
liabilities are short term liabilities maturing for the payment within a short period say one
year, and they partly support the investment in current assets. In other words they serve
as a source of working capital.

Net working capital is defined as the difference between current assets And current
liabilities, and represents the extent to which current assets are financed by long-term
funds.

Working capital management is the process of administration of current assets and

current liabilities within the policy guidelines of the company.

Working capital policy is concerned with basic policy decisions regarding. The target
levels each category of current assets.

The methods of financing the current assets

Current assets in many cases constitute more than half of the total Assets employed In
business and therefore, it is essential to evolve an appropriate working capital policy to
suit the specific needs of the firm an manage its working capital accordingly. Current
liabilities that are specifically financing current assets come under the preview of
working capital policy.

These are distinct from current liabilities which are consequences of past long term
financing decisions, such as current maturates of long term debt or those in nature of
temporary financing of capital projects which will be subsequently funded by long term
sources off finance.
The aim in working capital management and policy is to maintain a proper balance
between the magnitude of working capital and the general scale of operations of the
company and to determine, with reference therefore, the appropriate levels of
components of current assets to be maintained and the pattern of financing them.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT

The importance of working capital management can be. Traced to the following main
considerations.

a) Current assets constitute the dominant segment of the total assets employed in most
business and, therefore, require more intense and careful managerial attention.

b) The investment in current assets and level of current liabilities are very sensitive to
changes in sale and the funds requirements shifts rapidly, demanding quick short-term
decisions to sustain smooth operations.

C) Through profitability and proper selection of investments are essential for the long
fun prosperity of the business, its short-term survival depends on its liquidity or ability to
meet short-term obligations fully and promptly. The precondition for liquidity is efficient
management of the elements of working capital and the ability to raise sufficient short
and long-term finance. The finance managers of companies will have to devote
considerable time and energy in arranging short term financing obtaining favorable
credit terms from the suppliers of goods and services, deciding on credit policies for
credit sales, keeping n chech on the funds blocked in inventories and monitoring and
directing the movement of cash in the business.

OBJECTIVES OF THE STUDY:

• The objective of the study is to know the short term financial position of the Cement
Company with Working Capital Management.
• To, identify the limitations in management of the Cement Company and suggestions to
overcome those limitations.
• To provide a conceptual frame work and theoretical perception about the performance
of Cement Company.
• To provide credit facilities to the customers
• To pay wages and salaries to the employees working in the organization.
• To know the day-to-day expenses.

METHODOLOGY:

For, the purpose of the study, the data collected from primary and Secondary has
sanitized edited and presented in the form of tables and statements. The analysis of the
data has been made with the help of certain mathematical techniques lie percentages
etc. Where ever feasible and appropriate graphs and diagrams are used.

The collection of data is done through two principles sources viz

1. Primary Data
2. Secondary Data

PRIMARY DATA

It is the information collected directly without any reference. In the study, it mainly
interviews with concerned officers and staff either individually or collectively. Some of
the information had been verified or supplemented with personal observation, the data
collected through conducting personal interview with the officer of the Cement
Company.

SECONDARY DATA

When an investigator uses the data which is already been collected by other, that data
is called secondary data. Such as pamphlets annual reports, return and internal
records.

The data includes:

1. Collection of required data from annual report of Cement Company.

2. Reference from text book and journals relating to financial management.
3. Articles published in business dailies like economic times, Business world, and etc.

LIMITATIONS OF THE STUDY:

The limitations of present study are as follows:

1. Due to the time constraint the study is confined to the assessment of working capital
management only.
2. Data collected for 5 years which is limited.
3. The study is confined to the secondary source of data and figures are taken from the
annual reports and suggestions of various accountants.
4. The data which is used in this project are taken from the annual reports, published at
the end of the year.
5. The study is limited to the period of 5 Years.