International Journal of Innovative Research & Studies
Working Capital Management
B.RAJESH1, RESHMA BHANU2
Assistant Professor1, Student of Master of Business Administration2
Department of MBA
Medak College Of Engineering And Technology, (Approved By Aicte, Affiliated To Jntu, Hyd),
Kondapak (V&M), Siddipet (Dist), Telangana – 502372.India.
ABSTRACT
Working Capital may be regarded as the most
important factor of a business. Its effective
provision and utilization can do much to
ensure the success of a business.
While the efficient management may not only
lead to loss of projects but also to the ultimate
shown fall of what otherwise would be
considered as promising concern. A study on
working capital is of major importance,
because of its close relationship with current
day-today operations of a business.
The team working capital stands for that form
of capital which is required for the financially
of working or current need of the company. It
is usually invested in raw material work in
progress finished goods accounts receivable
and saleable securities.
Management of working capital usually
involves planning and controlling current
assets, namely cash and marketable securities,
assets receivable and inventories and also
administration of current liabilities.
Working Capital or current assets management
is one of the most important aspect of the over
all financial management. It is concerned with
the problem that arises in attempting to
manage the current assets.
The current liabilities and the inter
relationships that exists between them.
Current assets are the assets, which can be
converted into cash with in an Accounting year
and includes cash short-term securities,
debtors, bill receivable and inventories.
Current liabilities are that claim of outside,
which are expected to mature for payment with
in an Accounting year and includes creditor’s
bill payable and outstanding expenses.
The goal of working capital management is to
manage the firms current assets and current
liabilities in such a way enough to cover its
current liabilities in order to ensure that they
are obtained and used in the best possible way.
I.INTRODUCTION
WORKING CAPITAL:
Cash is the lifeline of a company. If this
lifeline deteriorates, the company's ability to
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ISSN NO : 2319-9725
fund operations, reinvest and meet capital
requirements and payments also deteriorate.
Understanding a company's cash flow health is
essential for making investment decisions. A
good way to judge a company's cash flow
prospects is to look at its working capital
management (WCM).Working capital of a
company reveals more about the financial
condition of a business than almost any other
calculation. It tells you what would be left if a
company raised all of its short term resources,
and used them to pay off its short term
liabilities. The more working capital, the less
financial strain a company
experiences.Working capital also gives
investors an idea of the company's underlying
operational efficiency. Money that is tied up in
inventory or money that customers still owe to
the company can't be used to pay off any of its
obligations. So, if a company is not operating
in the most efficient manner (slow collection)
it will show up in the working capital. This can
be seen by comparing the working capital from
one period of time to another; slow collection
may signal an underlying problem in the
company's operations.
DEFINITION
The definition of working capital is that it is
the difference between an organization’s
current assets and its current liabilities. Of
more importance is its function which is
primarily to support the day-to-day financial
operations of an organization, including the
purchase of stock, the payment of salaries,
wages and other business expenses, and the
financing of credit sales. It’s a measure of both
a company's efficiency and its short-term
financial health.
The better a company manages its working
capital, the less the company needs to borrow.
Even companies with cash surpluses need to
manage working capital to ensure that those
surpluses are invested in ways that will
generate suitable returns for investors.
II.NEED OF THE STUDY:
Working capital management is one of the key
areas of financial decision-making. It is
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International Journal of Innovative Research & Studies
significant because, the management must see
that an excessive investment in current assets
should protect the company from the problems
of stock-out. Current assets will also
determine the liquidity position of the firm.
The goal of working capital management is to
manage the firm current assets and current
liabilities in such a way that a satisfactory level
of working capital is maintained. If the firm
cannot maintain a satisfactory level of working
capital, it is likely to become insolvent and
may be even forced into bankruptcy.
III.SCOPE OF THE STUDY
A study of the Workingcapital involves an
examination of long term as well as short term
sources that a company taps in order to meet
its requirements of finance. The scope of the
study is confined to the sources that Hero
MotoCorp Ltd. (Formerly Hero Honda Motors
Ltd.) tapped over the years under study i.e.
2012-17.
IV. REVIEW OF LITERATURE
WORKING CAPITAL MANAGEMENT
Management of working capital plays a very
important role in the financial management of
a company because maintaining a balance of
income to debt can be difficult and owners
must be diligent to assure that it is kept.
Sometimes it takes a little assistance to
maintain levels of fluidity or make major
purchases.
If working capital dips too low, a business
risks running out of cash. Even very profitable
businesses can run into trouble if they lose the
ability to meet their short-term obligations.
Working capital financing can be used as a fast
cash option to cushion the periods when the
flow is not ideal or readily available. Even
when owners are meticulous in managing
working capital, finding the right levels to
remain comfortable and competitive can be
difficult.
The Importance of Good Working Capital
Management
Working capital constitutes part of the
Company’s investment in a department.
Associated with this is an opportunity cost to
the company. (Money invested in one area
may "cost" opportunities for investment in
other areas.) If a department is operating with
more working capital than is necessary, this
over-investment represents an unnecessary
cost to the CompanyFrom a department's point
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ISSN NO : 2319-9725
of view, excess working capital means
operating inefficiencies. In addition,
unnecessary working capital increases the
amount of the capital charge which
departments are required to meet
V.RESEARCH METHODOLOGY:
(Both Primary source of data and
Secondary source of data)
 The study of Working Capital
management is based on primary as well
as secondary data.
Data relating to. Has been collected through
SECONDARY SOURCES:
Published annual reportsof the company for
the year 2012-17.
PRIMARY SOURCES:
Detailed discussions with Vice-President
(finance department).
Discussions with the Finance manager and
other members of the Finance department.
DATA ANALYSIS
The collected data has been processed using
the tools of
 Ratio analysis
 Graphical analysis
 Year-year analysis
VI.FINDINGS
1. The Hero MotoCorp Ltd net working
capital is not satisfactory between the
years 2013-17.Since it shows
decreasing trend; but after that it are
in declining position.
2. The current ratio of Hero MotoCorp
Ltd is satisfactory during the period
of study 2012-13to 2016-17. It is
increased but after that it is declining.
3. The average quick ratio of Hero
MotoCorp Ltd is not good though the
quick ratio is showing maximum
value of 0.73 in the year 2016-17and
then it is declining to be deal.
4. Fixed assets turnover ratio of Hero
MotoCorp Ltd increased. The
company has to maintain this.
5. Inventory turnover ratio of Hero
MotoCorp Ltd is also increased
gradually, without any fit falls up to
2012-13. But in the year 2013-14it is
declined, and again it has decreased in
the year 2016-17. Good inventory
management is good sign for efficient
management
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International Journal of Innovative Research & Studies ISSN NO : 2319-9725

6. Return on investment is not References

satisfactory. This indicates that the
company’s funds are not being BOOKS
utilized in a better way. Financial Management Written By
M.Y. Khan & P.K. Jain
VII.SUGGESTIONS Financial Management Written By
1. Improve position funds should be Prasanna Chandra
utilized properly. Financial Management Written By
2. Better Awareness to increase the sales I. M. Pandey
is suggested. Financial Management Written By
3. Cost cut down mechanics can be S. N. Maheswari
employed.
4. Better production technique can be ANNUAL REPORTS OF HERO
employed. MOTOCORP LTD 2016-2017
www.evanimics.com
VIII.CONCLUSIONS www.damodaram.com
www.hero.com
1. The Hero MotoCorp Ltd Net Profit www.investopedia.com
Ratio is showing negative profit in the www.valuebasedmanagement.net
year 2016-17. These event is an
expected one because since from the
previous two years it is showing the
decline stage in Net Profit Ratio
2. The Hero MotoCorp Ltd Gross Profit
Margin of Hero MotoCorp Ltd
increases in decreases due to the
increase in sales
3. Profit Margin of Hero MotoCorp Ltd
is decreasing and showing negative
profit because there is increase in the
price of copper
4. The Hero MotoCorp Ltd Net Working
Capital Ratio is satisfactory.
5. The Hero MotoCorp Ltd return on
Total Assets ratio shows a negative
sign in the year 2015-16
6. The Operating Ratio of Hero
MotoCorp Ltd increase in the year
2012-13 , in the year 2013-14and
reached in the year 2016-17So the
company has to reduce its operating
costs.
7. The Operating Ratio of Hero
MotoCorp Ltd isn’t satisfactory. Due
to increase in cost of production, this
ratio is decreasing. So the has to
reduce its office administration
expenses

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