INTRODUCTION

• Working capital could be defined as the portion of assests used in current

operations.

• The movements of the funds from capital to income and profits and back
to working capital are one of the most important characteristics of the
business.

• If the operations of the company are to run smoothly. A properly relationship

between fixed capital and current capital has it to maintain.

• A businessman should be able to judge the accurate requirements of working capital

and should be quick enough to raise the enquired funds to finance
he working capital needs.

• Working capital is also called as net current assests

• Generally, in a balance sheet, current assets consist of raw materials, work in

progress, finished goods or inventories, account receivables, cash and bank balances
which are short term in nature that are used for production and sales;

• Which are able to be converted to cash within the year. On the other hand, current
liabilities refer to obligations that need to be paid within the year or not beyond the
business operating cycle, whichever is earlier (Ross, Westerfield and Jaffe, 2005).
DEFINITION

“Working Capital” is the capital invested in different items of current assets needed for the business, viz, inventory,
debtors, cash and other current assets such as loans & advances to third parties. Those current assets are essential
for smooth business operations and proper utilization of fixed assets.

The goal of working capital management is to ensure that a firm is able to continue its operations and that it has
sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. The management of
working capital involves managing inventories, accounts receivable and payable, and cash.

OBJECTIVES

Few of the importance objectives of working capital management are listed below:

1. Optimization of Working Capital Operating Cycle:

In simple terms, working capital cycle starts from the day raw materials are acquired and completes
when the finished products are sold. One of the major objectives of working capital management is to
ensure that there is no hindrance during the above mentioned process. It includes collecting and
processing raw materials and other initial Investment in time, placing all the essentials for production
beforehand, selling finished products as
soon as possible, collecting account receivables on time and clearing all the account payable’s in time.

2. Balance Working Capital:

The good net working capital is required to stay in a stable equilibrium. The ratio of current assests
and current liabilities should be optimized. Because the lower value of this ratio implies that company
is not financially stable to clear its current debts, higher value is also not an indication of prosperity, it
suggests that company has too many inventories and they are not investing in excess cash.

3. Minimize Cost of Capital:

Working capital management focuses on minimizing cost of capital, rate of interest in some special
cases. It is only when the cost of capital will be lesser than revenue , one can earn profit. Utilization of
long-term funds (in proper mix) is one way of minimizing capital cost. The fundamental principle of
financial management should be followed sincerely while deciding the finance mix, always.

4. Assists the Business to Avoid Over-borrowing:

Over-borrowing is among the quickest techniques towards business growth as well as business failure.
The objectives of working capital management out of over-borrowing leads to mismanagement of
finance as well as assets.
5. Optimal Return on Current Asset Investment:
The return on the investment infused on short term assets must exceed the average cost of capital to
ensure wealth maximization.

NEED AND SCOPE

The basic goal of working capital is to maintain the satisfactory level of working capital . A sound working capital policy
ensures higher profitability and proper liquidity of a firm. Every business needs funds for two purposes: for its
establishment and to carry out its day to day operations.

RESEARCH METHODOLOGY

Research is an organized, systematic, database, critical, objective, scientific, inquiry or

investigation into a scientific problem
undertaken with the purpose of finding answer or solution.

• Exploratory RESEARCH
The study aims to analyse the working capital issues like cash management, inventory management,
receivable management and liquidity and profitability aspects of the working capital management. It also
analyse the various sources of working capital finance. Research topic is on basis of Indian paper industry.
• DESCRIPTIVE RESEARCH
The developing economies are generally faced with the tribulations of inefficient
deployment of resources available to them. Capital is the scare productive resource in
such economies and proper utilization of resource promotes the rate of growth, cuts
down the cost of production, and above all beefs up the efficiency of the productive
system.
• EXPERIMENTAL RESEARCH
The study employed an explanatory non-experimental research design. Keywords:
Working Capital
Management Efficiency, Operating Performance, Working.

DATA COLLECTION
Method of Data collection, objective of studying working capital management with
different types.

• Primary Data
It is the information collecting directly without any reference. In this study it was
mainly interviews with the concerned
officers and staff either individually or collectively. Some of the information had been
verified and supplemented by
conducting personal observations.

• SECONDARY DATA
 The secondary data was collecting from all ready published sources such as , annual
reports, return, and internal records.
The data includes items of the annual reports of Transport finance . In houses
magazines, Reating to financial management.

LIMITATIONS OF THE STUD

• The main limitations of the study are as follows:

• The study is limited to five year - 2003-04 to 2007-08 only.

• The study is related to corporate fertilizer sector of Gujarat only.

• This study is based on secondary data derived from published annual reports of the
selected units. The reliability and finding are largely depending on the data published
in annual reports.

• This study is restricted to only two units as compared to population the sample size is
too small. Hence it becomes the limitation of the study.

• The ratio analysis has its own limitations. The same also applies to the present study.