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Chapter I -Introduction to Research 1.1 Introduction Working capital management is significant in financial management.

It plays a vital role in keeping the wheel of the business running. Every business requires capital, without it cant be promoted. Investment decisions is concerned with investment in current assets and fixed assets .Working capital plays a key role in a business enterprise just as the role of heart in human body. It acts as grease to run the wheels of fixed assets .its effective provision can ensure the success of business while its inefficient management can lead not only to loss but also to the ultimate downfall of what otherwise might be considered as a promising concern . Efficiency of a business enterprise depends largely on its ability to its working capital .Working capital management is one of the important facts of affirms overall financial management For increasing shareholders wealth a firm has to analyze the effect of fixed assets and current assets on its return and risk. Working capital management of current assets. The management of current assets on the basis of the following points: 1. Current assets are for short period while fixed assets are for more than one year 2. The large holding of current assets ,especially cash, strengthens liquidity position but also reduce overall profitability ,and to maintain an optimal level of liquidity and profitability , risk return trade off is involved holding current assets 3. Only current assets can be adjusted with sales fluctuating in the short run. Thus the firm has greater degree of flexibility in managing current assets. The management of current assets helps affirm in building a good market reputation regarding its business and economic conditions. Now first let us discuss the paradigms of working capital management. CONCEPT OF WORKING CAPITAL: The concept of working capital includes current assets and current liabilities both. There are two types of working capital of working capital they are gross and net working capital. 1. Gross working capital: Gross working capital refers to the firms investment in current assets .current assets are the assets, which can be converted into cash within an accounting year or operating cycle. It includes cash, short term securities, debtors (account receivables or book debts), bills receivables and stock (inventory). 2. Net working capital: Net working capital refers to the difference between current assets and liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year. It includes creditors or accounts payables bills payable and outstanding expenses. Net working copulate can be positive or negative. A positive working capital will arise when current assets exceed current liabilities and vice versa.

NATURE OF WORKING CAPITAL Working capital management is concerned with the problems that arise In attempting to manage the current assets, the current liabilities and the Inter relationship that exist between them. The term current refers to those Assets which in the ordinary course of business can be, or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are Cash, marketable securities, accounts receivables and inventory. Current Liabilities are those liabilities, which are intended at their inception, to be paid in the ordinary course of business, within a year out of the current or the Earning of the concern .The basic current liabilities are accounts payable, bills payable, bank overdrafts and outstanding expense. The goal of working management is to manage the firms assets and liabilities in such a way that a satisfactory level of working capital is maintained. This is because if the firms cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable Margin of safety. Each of the short term sources of financing must be continuously managed to ensure that they are obtained and used in the way. Interaction between current liabilities is, therefore the main theme of the Management of working capital.

TYPES OF WORKING CAPITAL 1. NET WORKING CAPITAL: The net working capital is the different between current assets and current liabilities. The concept of net working capital enables a firm to determine how much amount is left for operational requirements. 2. GROSS WORKING CAPITAL: Gross working capital is the amount of funds invested in the various components of current assets.

3. PERMANENT WORKING CAPITAL: Permanent working capital is the minimum amount of current assets which is needed to conduct a business even during the dullest season of the year. The amount varies from year to year depending up on the growth of the company and stage of business cycle in

which it operates. It is the amount of funds required to produce goods and services which are necessary to satisfy demand at a particular point. 4. TEMPORARY OR VARIABLE WORKING CAPITAL: It is represents the additional assets which are required at different times during the operating year additional inventory, extra cash etc., seasonal working capital is the additional amount of current assets particularly cash, receivables and inventory which is required during the more active business seasons of the year. 5. BALANCE SHEET WORKING Capital: The balance sheet working capital is one which calculated from the items appearing in the balance sheet. Gross working capital which is represented by the excess of current assets, and net working capital which is represented by the excess of current assets over current liabilities are examples of balance sheet working capital.

6. CASH WORKING Capital: Cash working capital is one which is calculated from the appearing in the profit and loss account. It shows the real flow of money or value at a particular time and is considered to be the most realistic approach in working capital management. It is the basis of the operating cycle concept which has assumed a great importance in financial management in recent years. The reason is the working capital indicates the adequacy of the cash flow. Which is an essential pre-requisite of a business 7.NEGATIVE WORKING capital: Numbers working capital emerges when current liabilities exceed current assets. Such a situation is not absolutely theoretical, and occurs when a firm is nearing a crisis of some magnitude.

1.2 Statement of the Problem Since manufacturing process of Cement industry takes place throughout the year, working capital requirement is more. In order to study the working capital requirements the present study is undertaken to analyse the importance of working capital components among the selected companies (on the basis of sales turnover) for 5 years.

1.3 Objectives of the Study 1. To examine the suitable ratios for Working Capital Management. 2 To Test whether the sample companies Working Capital requirements have consistency 3. To examine the means of selected ratios among the companies are uniform.

1.4 Hypothesis H 0: There is no significant difference in the means of Return on Capital employed among the selected companies H 1: There is significant difference in the means of Return on Capital employed among the selected companies H 0: There is no significant difference in the means of Current ratio among the selected companies H 1: There is significant difference in the means of Current ratio among the selected companies H 0: There is no significant difference in the means of Cash ratio among the selected companies H 1: There is significant difference in the means of Cash ratio among the selected companies H 0: There is no significant difference in the means of Quick ratio among the selected companies H 1: There is significant difference in the means of Quick ratio among the selected companies

H 0: There is no significant difference in the means of Inventory turnover ratio among the selected companies H 1: There is significant difference in the means of Inventory turnover ratio among the selected companies H 0: There is no significant difference in the means of Debtors turnover ratio among the selected companies H 1: There is significant difference in the means of Debtors turnover ratio among the selected companies H 0: There is no significant difference in the means of Creditor turnover ratio among the selected companies H 1: There is significant difference in the means of Creditor turnover ratio among the selected companies H 0: There is no significant difference in the means of Gross operating cycle among the selected companies

H 1: There is significant difference in the means of Gross operating cycle among the selected companies H 0: There is no significant difference in the means of Net operating cycle among the selected companies H 1: There is significant difference in the means of Net operating cycle among the selected companies 1.5 Scope of the Study In Working capital management the study covers 1. 2. 3. 4. 5. 6. 7. 8. 9. Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle 1.6 Need of the Study The basic objective of financial management is to maximize theshareholders wealth. This is possible only when the company earns sufficient profits. The amount of such profits largely depends upon the magnitude of sales. However do not convert into cash instantaneously. These are always time gap between the sale of goods and their actual realization in cash.

Working capital is required in order to sustain the sales activities in this period. In case adequate working capital is not available for this period. The company will not be in a position to purchase raw material, pay wages and other expenses required for manufacturing the goods. Therefore sufficient amount of working capital is to be maintained at any point of time

1.7 Research Methodology The primary objective of this paper is to investigate the impact of Working Capital Management (WCM) on profitability of Indian Cement Industry The study uses secondary data to analyze and interpret the results. The paper also tries to understand the trends in the working capital needs of the cement sector over the period of time considered in the study.

RESEARCH DESIGN: DATA COLLECTION: The study is based on the secondary data obtained from Money Control.com Which contains: 1. Balance Sheet 2. Profit & Loss A/c 3. Yearly Statement 4. Financial ratios This study covers a period of five years from 2007 to 2011.The Research design adopted for working capital analytical study

TOOLS USED: 1. DESCRIPTIVE STATISTICS 2. ANOVA

SAMPLE SIZE:

12 companies 1.8 Limitations

1. The study is limited up to twelve Cement companies. 2. The period of study is only for 5 years. 3. Only selected ratios have been taken.

1.9 Concepts related to the topic

EXPLANATION OF VARIABLES: RETURN ON CAPITAL EMPLOYED: Return on capital employed establishes the relationship between the profit and the capital employed. It indicates the percentage of return on capital employed in the business and it can be used to show the overall profitability and efficiency of the business.

Gross capital employed = Fixed assets + Investments + Current assets Net capital employed = Fixed assets + Investments + Working capital*. *Working capital = current assets current liabilities.

CURRENT RATIO: Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities. Current Ratio= Current Assets / Current Liabilities Or Current Assets : Current Liabilities

QUICK RATIO: Liquid ratio is also termed as "Liquidity Ratio" Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due.

[Liquid Ratio = Liquid Assets/ Current Liabilities]

CASH RATIO:

Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It is an extreme liquidity ratio since only cash and cash equivalents are compared with the current liabilities. It measures the ability of a business to repay its current liabilities by only using its cash and cash equivalents and nothing else. Cash ratio is calculated using the following formula: Cash Ratio = Cash + Cash Equivalents Current Liabilities

INVENTORY TURNOVER RATIO: Inventory turnover is the ratio of cost of goods sold to average inventory. It is an activity / efficiency ratio and it measures how many times per period, a business sells and replaces its inventory again. Inventory turnover ratio is calculated using the following formula: Inventory Turnover Ratio=Cost of goods sold/Average Inventory.

DEBTOR TURNOVER RATIO: Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. Debtors Turnover Ratio = Total Sales / Debtors

CREDITOR TURNOVER RATIO: This ratio is similar to the debtors turnover ratio. It compares creditors with the total credit purchases. It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. Same as debtor turnover ratio, creditors turnover ratio can be calculated in two forms, creditors turnover ratio and average payment period. Creditors Turnover Ratio = Credit Purchase / Average Trade Creditors

Gross Operating Cycle A normal operating cycle includes the purchase or manufacture of inventory with credit purchases (accounts payable), the sale of inventory with credit sales (accounts receivable) and the payment of cash to suppliers and customers. It is a measure of the time taken to complete the purchase, sell the inventory and collect the cash. The perpetual inventory system keeps a running account of the available inventory. The periodic system of inventory measures inventory levels at periodic intervals. The gross operating cycle calculation does not take creditor deferral periods into account. Gross Operating Cycle= DIO + DSO (in days) Days inventory outstanding = (average inventory / cost of goods sold) * 365 DIO is a measure of the number of days inventory was turned into sales. Daily sales outstanding = (average accounts receivable / total credit sales) * 365 DSO is a measure of the age of the accounts receivable account.

Net Operating cycle A normal operating cycle includes the purchase or manufacture of inventory with credit purchases (accounts payable), the sale of inventory with credit sales (accounts receivable) and the payment of cash to suppliers and customers. It is a measure of the time taken to complete the purchase, sell the inventory and collect the cash. The perpetual inventory system keeps a running account of the available inventory. The periodic system of inventory measures inventory levels at periodic intervals. The gross operating cycle calculation does not take creditor deferral periods into account. Net Operating cycle = DIO + DSO - DPO (in days) Days payable outstanding = (average accounts payable / cost of goods sold) * 365 DPO is a measure of the days taken by the company to pay off its accounts payable.

ADEQUACY OF WORKING CAPITAL: A firm must adequate working capital i.e., as much needed by the firm.It should neither be excessive or inadequate. Both the situations are harmful to the concern. Excessive working capital means the firm has idle funds,which earn no profits for the firm inadequate working capital ultimatelyresults in production interruptions and lowering down of the profitability.It will be interesting to understanding the relationship betweenworking capital, risk and return, In a manufacturing concern. It is generally accepted that higher levels of working capital decrease the risk and have the potential of increasing the profitability also. The principle is based on the following assumptions:

There is a direct relationship between risk and profitability, higher therisk higher is the profitability, while lower the risk lowers is the profitability. Current assets are less profitable than fixed assets. Short-term funds are less expensive than long term funds. On accounts of the above principle, an increase in the ratio of current assets to total assets will results in the decline of the profitability of the firm. This is because investment in current assets as stated above is less profitable than in the fixed assets. However an increase in the ratio would decrease the risk of the firm of the becoming technically insolvent. On the other hand a decrease in the ratio of current assets to total assets is would increase the profitability of the firm because investment in current assets. However these increase the risk of the becoming technically insolvent on accounts of its possible inability in meeting its commitments in time due to shortage of funds

Chapter II Review of Literature

The purpose of this chapter is to present a review of literature relating to the working capital management. Although working capital is an important ingredient in the smooth working of business entities, it has not attracted much attention of scholars. Whatever studies have conducted, those have exercised profound influence on the understanding of working capital management good number of these studies which pioneered work in this area have been conducted abroad, following which, Indian scholars have also conducted research studies exploring various aspects of working capital. Special studies have been undertaken, mostly economists, to study the dynamics of inventory investment which often represented largest component of total working capital. As such the previous studies may be grouped into three broad classes (1) studies conducted abroad, (2) studies conducted in India, and (3) studies relating to determine of inventory investment. Studies on Working Capital Management Studies adopting a new approach towards working Capital management are reviewed here.

Sagan in his paper (1955), 1 perhaps the first theoretical Paper on the theory of working capital management, emphasized the need for management of working capital accounts and warned that it could vitally affect the health of the company. He realized the need to build up a theory of working capital management. He discussed mainly the role and functions of money manager inefficient working capital management. Sagan pointed out the money managers operations were primarily in the area of cash flows generated in the course of business transactions. However, money manager must be familiar with what is being done with the control of inventories, receivables and payables because all these accounts affect

cash position. Thus, Sagan concentrated mainly on cash component of working capital. Sagan indicated that the task of money manager was to provide funds as and when needed and to invest temporarily surplus funds as profitably as possible in view of his particular requirements of safety and liquidity of funds by examining the risk and return of various investment opportunities. He suggested that money manager should take his decisions on the basis of cash budget and total current assets position rather than on the basis of Traditional working capital ratios. This is important because efficient money manager can avoid borrowing from outside even when his net working capital position is low. The study pointed out that there was a need to improve the collection of funds but it remained silent about the method of doing it. Moreover, this study is descriptive without any empirical support. Realizing the dearth of pertinent literature on working capital management, Walker in his study (1964) 2 made a pioneering effort to develop a theory of working capital management by empirically testing, though partially, three propositions based on riskreturn trade-off of working capital management. Walker studied the effect of the change in the level of working capital on the rate of return in nine industries for the year 1961 and found the relationship between the level of working capital and the rate of return to be negative. On the basis of this observation, Walker formulated three following propositions: Proposition I If the amount of working capital is to fixed capital, the amount of risk the firm assumes is also varied and the opportunities for gain or loss are increased. Walker further stated that if a firm wished to reduce its risk to the minimum, it should employ only equity capital for financing of working capital; however by doing so, the firm reduced its opportunities for higher gains on equity capital as it would not be taking advantage of leverage. In fact, the problem is not whether to use debt capital but how much debt capital to use, which would depend on management attitude towards risk and return. On the basis of this, he developed his second proposition. Proposition II The type of capital (debt or equity) used to finance working capital directly affects the amount of risk that a firm assumes as well as the opportunities for gain or loss. Walker again suggested that not only the debt-equity ratio, but also the maturity period of debt would affect the risk-return trade-off. The longer the period of debt, the lower be the risk. For, management would have enough opportunity to acquire funds from operations to meet the debt obligations. But at the same time, long-term debt is costlier. On the basis of this, he developed his third proposition: Proposition III the greater the disparity between the maturities of a firms debt instruments and its flow of internally generated funds, the greater the risk and vice-versa. Thus, Walker tried to build-up a theory of working capital management by developing three prepositions. However, Walker tested empirically the first proposition only. Walkers Study would have been more useful had he attempted to test all the three propositions. Weston and Brigham (1972)3 further extended the second proposition suggested by Walker by dividing debt into long-term debt and short-term debt. They suggested that short-term debt should be used in place of long-term debt whenever their use would lower the average cost of capital to the firm. They suggested that a business would hold short-term marketable securities only if there were excess funds after meeting short-term debt obligations. They further suggested that current assets holding should be expanded to the point where marginal returns on increase in these assets would just equal the cost of capital required to finance such increases.

Vanhorne in his study (1969)4, recognizing working capital management as an area largely lacking in theoretical perspective, attempted to develop a framework in terms of probabilistic cash budget for evaluating decisions concerning the level of liquid assets and the maturity composition of debt involving risk-return trade-off. He proposed calculation of different forecasted liquid asset requirements along with their subjective probabilities under different possible assumptions of sales, receivables, payables and other related receipts and disbursements. He suggested preparing a schedule showing, under each alternative of debt maturity, probability distributions of liquid asset balances for future periods, opportunity cost, maximum probability of running out of cash and number of future periods in which there was a chance of cash stock-out. Once the risk and opportunity cost for different alternatives were estimated, the form could determine the best alternative by balancing the risk of running out of cash against the cost of providing a solution to avoid such a possibility depending on managements risk tolerance limits. Thus, Vanhorne study presented a risk-return trade-off of working capital management in entirely new perspective by considering some of the variables probabilistically. However, the usefulness of the framework suggested by Vanhorne is limited because of the difficulties in obtaining information about the probability distributions of liquid-asset balances, the opportunity cost and the probability of running out of cash for different alternative of debt maturities.

Welter, in his study (1970)5, stated that working capital originated because of the global delay between the moment expenditure for purchase of raw material was made and the moment when payment were received for the sale of finished product. Delay centers are located throughout the production and marketing functions. The study requires specifying the delay centers and working capital tied up in each delay centre with the help of information regarding average delay and added value. He recognized that by more rapid and precise information through computers and improved professional ability of management, saving through reduction of working capital could be possible by reducing the length of global delay by rescuing and/or favorable redistribution of this global delay among the different delay centers. However, better information and improved staff involve cost. Therefore, savings through reduction of working capital should be tried till these saving are greater or equal to the cost of these savings. Thus, this study is concerned only with return aspect of working capital management ignoring risk. Enterprises, following this approach, can adversely affect its short-term liquidity position in an attempt to achieve saving through reduction of working capital. Thus, firms should be conscious of the effect of law current assets on its ability to pay-off current liabilities. Moreover, this approach concentrated only on total amount of current assets ignoring the interactions between current assets and current liabilities.

Lambrix and Singhvi (1979)6 adopting the working capital cycle approach to the working capital management, also suggested that investment in working capital could be optimized and cash flows could be improved by reducing the time frame of the physical flow from receipt of raw material to shipment of finished goods, i.e. inventory management, and by improving the terms on which firm sells goods as well as receipt of cash. However, the further suggested that working capital investment could be optimized also (1) by improving the terms on which firms bought goods i.e. creditors and payment of cash, and (2) by eliminating the administrative delays i.e. the deficiencies of paper-work flow which tended to extend the time-frame of the movement of goods and cash.

Warren and Shelton (1971)7 applied financial simulation 8 to simulate future financial statements of a firm, based on a set of simultaneous equations. Financial simulation approach makes it possible to incorporate both the uncertainty of the future and the many interrelationships between current assets, current liabilities and other balance sheet accounts. The strength of simulation as a tool of analysis is that it permits the financial manager to incorporate in his planning both the most likely value of an activity and the margin of error associated with this estimate. Warren and Shelton presented a model in which twenty simultaneous equations were used to forecast future balance sheet of the firm including forecasted current assets and forecasted current liabilities. Current assets and current liabilities were forecasted in aggregate by directly relating to firm sales. However, individual working capital accounts can also be forecasted in a larger simulation system. Moreover, future financial statements can be simulated over a range of different assumptions to portray inherent uncertainty of the future.

Cohn and Pringle in their study (1973)9 illustrated the extension of Capital Asset Pricing Model (CAPM)10 for working capital management decisions. They tried to interrelate longterm investment and financing decisions and working capital management decisions through CAPM. They emphasized that an active working capital management policy based on CAPM could be employed to keep the firms shares in a given risk class. By risk, he meant unsystematic risk; the only risk deemed relevant by CAPM. Owing to the lumpy nature for long-term financial decisions, the firm is continually subject to shifts in the risk of its equity. The fluid nature of working capital, on the other hand, can be exploited so as to offset or moderate such swings. For example they suggested that a policy using CAPM could be adopted for the management of marketable securities portfolio such that the appropriate risk level at any point in time was that which maintains the risk of the companys common stock at a constant level.

Similarly, Copeland and Khoury (1980)11 applied CAPM to develop a theory of credit expansion. They argued that credit should be extended only if the expected rate of return on credit is greater than or equal to market determined required rate of return. They used CAPM to determine the required rate of return for the firm with its new risk, arising from uncertainty regarding collection due to the extension of credit. Thus, these studies show how CAPM can be used for decisions involved in working capital management. One more approach, used mainly in empirical studies, towards working capital management has been to apply regression analysis to determine the factors influencing investment in working capital. Different studies in the past have considered different explanatory variables to explain the investment in inventory.

A brief review12 of these studies is important as regression equation of investment in working capital, in the present study, would be formulated on the basis of works on investment in inventory. In inventory investment literature, there is basically one school of thought according to which firms aim at an optimum or desired stock of inventories in relation to a given level of output/sales. This is known as acceleration principle.

Pioneering work in this field has been done by Metzler (1941)13.However, his work was mainly on simple acceleration principle which postulated that firms liked to maintain inventories in proportions to output/sales and they succeeded in achieving the desired level of inventories in a unit timeperiod. That is to say, any discrepancy between the actual level and desired level of inventories is adjusted within the same time-period. Needless to say, that such an instantaneous adjustment is not a realistic assumption to make. Modifications, therefore, have been introduced in the literature to provide for partial adjustment.

Goodwin (1948)14 assumed that firms attempted only a partial adjustment of the discrepancy between the desired stocks as determined by the level of output and the existing stock. Similarly, Darling and Lovell (1965)15 modified Metzlers formulation based on simple acceleration principle and obtained, the relationship based on flexible accelerator principle. There are several reasons physical, financial and technical those motivate partial adjustment. Among the physical factors, mention may be made of procurement lags between orders and deliveries. The length of such lags is connected with the source of supply, foreign or domestic availability. Import licensing procedures on account of foreign exchange scarcity could cause further delays in adjustment. Among the financial factors, cost advantages associated with bulk buying and higher procurement costs for speedy delivery are also mentioned. Uncertainties in the market for raw materials and in the demand for final product also play a role in influencing the speed of adjustment. Technically, firms like to make sure that changes in demand are of a permanent character before making full adjustment. The acceleration principle has great relevance in inventory analysis than in the analysis of fixed investment, as there are limits to liquidate fixed capital in the face of declining demand. Other variables influencing inventories have been introduced in the literature in the context of accelerator model. Rate of interest is used as a proxy for the opportunity cost of carrying stocks or as a measure of the cost of funds needed to hold inventories.

It has been found significant in the studies of Hilton (1976)16 and Irwin (1981)17. Timetrend is expected to be important because inventories generally accumulate with the expansion of economic activities of the company. Anticipated price changes, measured by changes in wholesale price index of inventories, are taken as an explanatory variable to capture speculative element in inventory. This suggests a positive relationship between price changes and inventory. An increase in sales is expected to increase the demand for stocks to meet orders regularly. An increase in capacity utilization is also expected to increase the demand for stock by increasing the demand for raw materials and increasing the inventories of finished goods. Thus, the variable, capacity utilization, is postulated to have a positive coefficient in the equation.

Abramovitz (1950)18and Modigliani (1957)19 highlighted the impact of capacity utilization on inventory investment. Existing stock of inventories is expected to take account of adjustment process to the desired levels. Thus the variable, existing stock of inventories, is postulated to be negatively related with the desired stock. The ratio of inventory to sales may affect inventory investment positively because a high ratio of stocks to sales in the past

suggests the maintenance of high levels of inventories in the past and thus also calling for high investment in inventories in the current period. The studies of Metzler (1941)20 and Hilton (1976)21 have found this variable, inventorysales ratio, to be statistically significant. Fixed investment is generally expected to affect inventory investment inversely because of competing demand for the limited funds. However, in case of an expanding firm, the two components may be complementary. Besides, availability of funds from retained earnings and external sources, may affect investment decision by providing funds for financing inventory investment. Therefore, retained earnings and flow of debt are postulated to have positive coefficients. The studies described so far, are the important studies conducted abroad. A number of studies on working capital management have been conducted in India also. The following discussion describes Indian studies. Studies on Working Capital Management in India this part briefly reviews the studies conducted in India in respect of working capital management in Indian industries.

The first, small but fine piece of work is the study22 conducted by National Council of Applied Economic Research (NCAER) in 1966 with reference to working capital management in three industries namely cement, fertilizer and sugar. This was the first study on nature and norms of working capital management in countries with scarcity of investible resources. This study was mainly devoted to the ratio analysis of composition, utilization and financing of working capital for the period 1959 to 1963. This study classified these three industries into private and public sector for comparing their performance as regards the working capital management. The study revealed that inventory constituted a major portion of working capital i.e. 74.06 per cent in the sugar industry followed by cement industry (63.1%) and fertilizer industry (59.58%). The study observed that the control of inventory had not received proper attention. The inventory control was mainly confirmed to materials management leading to the neglect of stores and spares. So far as the utilization of working capital was concerned, cement and fertilizer industry had a more efficient utilization of working capital. The sugar industry had inefficient utilization of working capital largely due to the accumulation of stock with the factories. As regards financing of working capital, the study showed that internal sources had contributed very little towards the financing of working capital. It was 11.87 per cent in the cement industry, 15.03 per cent in sugar and 31.25 per cent in fertilizer industry, 17.78 per cent being the average. However, this study failed to put into sharp focus the various problems involved in the management of specific working capital accounts.

Appavadhanulu (1971)23 recognizing the lack of attention being given to investment in working capital, analyzed working capital management by examining the impact of method of production on investment in working capital. He emphasized that different production techniques require different amount of working capital by affecting goods-in process because different techniques have differences in the length of production period, the rate of output flow per unit of time and time pattern of value addition. Different techniques would also affect the stock of raw materials and finished goods, by affecting lead-time, optimum lot size and marketing lag of output disposals. He, therefore, hypothesized that choice of production technique could reduce the working capital needs. He estimated the ratio of work-in-progress and working capital to gross output and net output in textile weaving done during 1960, on the basis of detailed discussions with the producers and not on the basis of balance sheets

which might include speculative figures. His study could not show significant relationship between choice of technique and working capital. However, he pointed out that the idea could be tested in some other industries like machine tools, ship building etc. by taking more appropriate ratios representing production technique correctly.

Chakraborty (1973)24 approached working capital as a segment of capital employed rather than a mere cover for creditors. He emphasized that working capital is the fund to pay all the operating expenses of running a business. He pointed out that return on capital employed, an aggregate measure of overall efficiency in running a business, would be adversely affected by excessive working capital. Similarly, too little working capital might reduce the earning capacity of the fixed capital employed over the succeeding periods. For knowing the appropriateness of working capital amount, he applied Operating Cycle (OC) Concept. He calculated required cash working capital by applying OC concept and compared it with cash from balance sheet data to find out the adequacy of working capital in Union Carbide Ltd. and Madura Mills Co. Ltd. for the years 1970 and 1971. He extended the analysis to four companies over the period 1965-69 in 1974 study.

25 The study revealed that cash working capital requirement were less than average working capital as per balance sheet for Hindustan Lever Ltd. and Guest, Keen and Williams Ltd. indicating the need for effective management of current assets. Cash working capital requirements of Dunlop and Madura Mills were more than average balance sheet working capital for all years efficient employment of resources. For Union Carbide Ltd., cash working capital requirements were more in beginning years and then started reducing in the later years as compared to conventional working capital indicating the attempts to better manage the working capital. Chakraborty emphasized the usefulness of OC concept in the determination of future cash requirements on the basis of estimated sales and costs by internal staff of the firm. OC concept can also be successfully employed by banks to assess the working capital needs of the borrowers.

Misra (1975)26 studied the problems of working capital with special reference to six selected public sector undertakings in India over the period 1960-61 to 1967-68. Analysis of financial ratios and responses to a questionnaire revealed somewhat the same results as those of NCAER study with respect to composition and utilization of working capital. In all the selected enterprises, inventory constituted the more important element of working capital. The study further revealed the overstocking of inventory in regard to its each component, very low receivables turnover and more cash than warranted by operational requirements and thus total mismanagement of working capital in public sector undertakings.

Agarwal (1983)27 also studied working capital management on the basis of sample of 34 large manufacturing and trading public limited companies in ten industries in private sector for the period 1966-67 to 1976-77. Applying the same techniques of ratio analysis, responses to questionnaire and interview, the study concluded the although the working capital per rupee of sales showed a declining trend over the years but still there appeared a sufficient scope for reduction in investment in almost all the segments of working capital. An upward trend in cash to current assets ratio and a downward trend in cash turnover showed the accumulation of idle cash in these industries. Almost all the industries had overstocking of

raw materials shown by increase in the share of raw material to total inventory while share of semi-finished and finished goods came down. It also revealed that long-term funds as a percentage of total working capital registered an upward trend, which was mainly due to restricted flow of bank credit to the industries.

Kamta Prasad Singh, Anil Kumar Sinha and Subas Chandra Singh (1986)28 examined various aspects of working capital management in fertilizer industry in India during the period 1978-79 to 1982-93. Sample included public sector unit, Fertilizer Corporation of India Ltd. (FCI) and its daughter units namely Hindustan Fertilizers Corporation Ltd., the National Fertilizer Ltd., Rashtriya Chemicals and Fertilizers Ltd. and Fertilizer (Projects and Development) India Ltd. and comparing their working capital management results with Gujarat State Fertilizer Company Limited in joint sector. On the basis of ratio-analysis and responses to a questionnaire, study revealed that inefficient management of working capital was to a great extent responsible for the losses incurred by the FCI and its daughter units, as turnover of its current assets had been low. FCI and its daughter units had high overstocking of inventory in respect of each of its components particularly stores and spares. Similarly, quantum of receivables had been excessive and their turnover very low. However, cash and liquid resources held by FCI and its daughter units had been much lower in relation to operation requirements. So far as financing of working capital was concerned, long-term funds had been financing a low proportion of current assets due to rapid increase of current liabilities. The profitability providing an internal base for financing of working capital, had been very low in these undertakings.

Verma (1989)29 evaluated working capital management in iron and steel industry by taking a sample of selected units in both private and public sectors over the period 1978-79 to 1985-86. Sample included Tata Iron and Steel Company Ltd. (TISCO) in private sector and Steel Authority of India Ltd. (SAIL) and Indian Iron and Steel Company, a wholly owned subsidiary of SAIL, in public sector. By using the techniques of ratio analysis, growth rates and simple linear regression analysis, the study revealed that private sector had certainly an edge over public sector in respect of working capital management. Simple regression results revealed that working 64capital and sales were functionally related concepts. The study further showed that all the firms in the industry had made excessive use of bank borrowings to meet their working capital requirement vis--vis the norms suggested by Tandon Committee.

Vijaykumar and Venkatachalam (1995)30 studied the impact of working capital on profitability in sugar industry in Tamil Nadu by selecting a sample of 13 companies; 6 companies in co-operative sector and 7 companies in private sector over the period 1982-83 to 1991-92. They applied simple correlation and multiple regression analysis on working capital and profitability ratios. They concluded through correlation and regression analysis that liquid ratio inventory turnover ratio, receivables turnover ratio and cash turnover ratio influenced the profitability of sugar industry in Tamil Nadu. They also estimated the demand functions of working capital and its components i.e. cash, receivables, inventory, gross working capital and net working capital, by applying regression analysis. They showed the impact of sales and interest rate on working capital and its components. When only sales was taken as independent variable, coefficient of sales was more than unity in all the equations of working capital and its components showing more than unity sales elasticity and diseconomies of scale. When sales and interest rate were taken as independent variable, sales elasticity was

again more than unity in demand functions of working capital and its components except cash. So far as capital costs were concerned, these had negative signs in all the equations but significant only in inventory, gross working capital and net working capital showing negative impact of interest rates on investment in working capital and its components. Thus study showed that demand for working capital and its components was a function of both sales and carrying costs. Studies on Determinants of Inventory Investment Inventory, in most industries, accounts for largest proportion of gross working capital. A number of studies, therefore, have been conducted to find the determinants of investment in inventories. The following discussion provides a brief review of studies, dealing with factors influencing investments in inventory in India. Econometric studies to analyse the factors that influence inventory accumulation in India, are based on time series and pooling of cross section of time series date pertaining to manufacturers inventories. Krishnamurtys study (1964)31 was aggregative and dealt with inventories in the private sector of the Indian Economy as a whole for the period 1948-61. This study used sales to represent demand for the product and suggested the importance of accelerator. Short-term rate of interest had also been found to be significant. Sastrys study (1966)32 was a cross section analysis of total inventories of companies across several heterogeneous industries for the period 1955-60 using balance sheet data of public limited companies in the private sector. The study brought out the importance of accelerator represented by 66change in sales. It also showed negative influence of fixed inventory investment. Krishnamurty and Sastrys study in (1970)33 was perhaps the most comprehensive study on manufacturers inventories. They used CMI data and the consolidated balance sheet data of public limited companies published by RBI, to analyze each of the major components i.e. raw material, goods-in-process and finished goods for 21 industries over the period 1946-62. It was a time series study but some inter-industry cross section analysis had also been done. Accelerator represented by change in sales, bank finance and short-term interest rate were found to be important determinants. Utilization of productive capacity and price anticipations had been found to be of some relevance. Another study conducted by them in 1975 analyzed inventory investment in the context of flexible accelerator with financial variables. Both RBI and Stock Exchange, Official Directory, Mumbai data for seven important industries had been taken for the period of 1956-69. Their study of pooled cross section was in current prices whereas time series analysis based on RBI data was a constant prices. OLS results showed the important influence of accelerator, internal and external funds flow and fixed investment on inventory investment.

The study by Vinod Prakash (1970)34 was a time series analysis with mostly un deflated data taken from CMI and annual Survey of Industries (ASI) for the period 1946-63. It examined the influence of structural changes in manufacturing activity on the relative size and composition of inventory in the 67large scale-manufacturing sector in India. Three different models for industry groups and for six important individual industries had been tried. Output/sales, capacity utilization,

Short-term rate of interest, money supply, foreign exchange availability, price index, size and time trend were taken as explanatory variable. The simple accelerator model with output gave better results for industrial groups, whereas the ratio model seemed to perform better in the analysis of individual industry. The flexible accelerator models were found to be inferior. The impact of price index was found to be generally insignificant, while the impact of foreign exchange and money supply was absent. The rate of interest showed a perverse impact. Time trend appeared to be important than the size of establishment. The role of availability of funds was completely ignored in this study.

The study by George (1972)35 was cross section analysis of balance sheet data of 52 public limited companies for the period 1967-70. Accelerator, internal and external finance variables were considered in the equations for raw materials including goods-in-process and total inventories. However, equations for finished goods inventories considered only output variable. Accelerator and external finance variables were found to be important.

The analysis by Seamy and Rao (1975)36 of the flow of funds of public limited companies had an equation for aggregate inventory investment. RBI data for the period 1954-68 had been used. The explanatory variables considered were accelerator, flow of bank borrowings, an index of man-days lost, capacity by the call rate. Accelerator, bank finance and fixed investment were found to be significant.

The study by R.N. Agarwal (1982)37 estimated total inventory investment equation for individual firms in automobile manufacturing industry, which was divided into two sectors car-sector and non car-sector. His study was based on the data for 1959-60 through 1978-79. Official Directory of Mumbai Stock Exchange had been the basic source of data. Analysis of two sector revealed that sales and stocksales ratio were important explanatory variables. Cost of capital and trend were important in only car sector while fixed investment and flows of external funds were significant in noncar sector. Existing stock of inventories was statistically significant in both the sector but contrary to expectations, it possessed negative coefficient. Several other variables as dividends, capacity utilization and liquidity ratio were found to be of no importance in explaining inventory investment behaviour.

N.C. Gupta study (1987)38 examined the determinants of total inventory investment in aluminum and non-ferrous semi firms in private sector. The data had been taken from Stock Exchange, Official Directory, Mumbai for 9 years 1966-67 to 1974-75. variables considered were current sales change, onelagged sales change, inventory stock at the beginning, gross fixed investment during the year, flow of net debt (external 69finance) and profits net of dividends and taxes but gross of depreciation provision (retained earnings or internal finance). The equation also provided for firm dummies and year dummies. Analysis was based on pooling of time series of cross section data. Demand factor and external finance turned out to be significant determinants in aluminum. Both retained earnings and external finance were important determinants in case of non-ferrous semis. Competition for investment funds between fixed and inventory investment was suggested both in aluminum and non-ferrous semis.

Adesh Sharma (1994)39 applied accelerator model with financial variables to determine the factors influencing investment in inventories in pesticides industry in India. Data had been taken from the Stock Exchange Official Directory, Mumbai for the period 1978-1992 in respect of 18 firms in this industry. The coefficients of the accelerator and financial variables were found to be significant and positive. The coefficient of inventory of inventory stock was significant and negative. The above brief review of studies in Indian context shows that no attempts have been made to analyze working capital management in Hotel industry in India. Secondly, there have been many studies exploring the determinants of inventory investment; no attempt has been made to study the factors influencing investment in total working capital. On the basis of previous studies, the present study aims at filling both these gaps.

Chapter III About the Study unit

Introduction about sample companies Acc Company ACC Limited is Indias foremost cement manufacturer with a countrywide network of factories and marketing offices. Established in 1936, ACC has been a pioneer and trend-setter in cement and concrete technology. Among the first companies in India to include commitment to environment protection as a corporate objective, ACC has won accolades for environment friendly measures taken at its plants and mines, and has also been felicitated for its acts of good corporate citizenship. ACC is the most preferred cement brand name in India. ACC is now part of the worldwide Holcim Group.

Ambuja Cements Limited It was set up in the late 80s. The cement industry presented an opportunity of steady growth and ethical competition to the promoters. However, a decade later, it became one of worlds most efficient cement companies producing the finest cement in the world at the lowest cost. While adhering to the most stringent international pollution-control norms. Today, Ambuja is the 3 rd largest cement company in India, with an annual plant capacity of 16 million tonnes including Ambuja Cement Eastern Ltd. and revenue in excess of Rs.3298 crores. More importantly, its plants are some of the most efficient in the world. With environment protection measures that are on par with the finest in the developed world. But the companys most distinctive attribute is its approach to the business.

Ambuja believes its most valuable assets arent cement plants. They are the people who run the plants. This unique vision is encapsulated in the companys home grown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. Its called I can This simple vision has created an environment where there are no limits to excellence, no limits to efficiency. And has proved to be a powerful engine of growth for the company. As a result, Ambuja has consistently raised the bar in all aspects of the cement industry. Be it transportation, plant efficiency, brand building or human resource development.

Andhra Cement It was incorporated on 9th December 1936 under the Indian Companies Act, 1913. The first unit with a capacity of 100 tonnes per day was commissioned at Vijayawada in 1940. The capacity was extended in three stages in 1951, 1958 and 1970. By 1970, the total Capacity of the factory reached 2.4 lakh tonnes of cement per annum. The company manufactures cement. It markets the products under the Trade name 'Durga Brand'. During 1989-90 there was a sharp decline in Clinker and Cement production due to erratic and inadequate supply of Coal, paucity of working capital, continuous power cut etc. During Same year (1989-90), the company came under the provisions of the Sick Industrial Companies Act, 1985. During 1990-91, production Increased significantly by 72% despite shortage of fuel, power cuts And severe paucity of funds.

BHEEMA CEMENTS BHEEMA has been an epitome of unsurpassable righteous strength in the Indian mythology. Bheema Cements continues to carry forward the legacy of this strength in the field of construction. BHEEMA CEMENTS LTD has been in the cement industry for over 2 decades with Cement Plant located in Ramapuram Village, Nalgonda District AP Pin 508246. It has its own captive mines adjacent to the factory with proven reserves of 127 million tons. The Plant is 15 KM from NH-9 on Hyderabad Vijayawada Highway. The nearest railway station is Jaggayapet on the Hyderabad Nadikudi line. The existing railway line from Jaggayapeta is being extended to Miryalaguda via Ramapuram near the plant giving access to rail transport.

Birla cement The Cement Division of Birla Corporation Limited has seven plants, two each at Satna (M.P.) - Satna Cement Works & Birla Vikas Cement, Chanderia (Rajasthan) - Birla Cement Works & Chanderia Cement Works, Durgapur (W.B.) - Durgapur Cement Works & Durga Hitech Cement - and one at Raebareli (U.P.)-Raebareli Cement Works. They manufacture varieties of cement like Ordinary Portland Cement (OPC), 43 & 53 grades, Portland Pozzolana Cement (PPC), Fly Ash - based PPC, Low Alkali Portland Cement, Portland Slag Cement, Low Heat Cement and Sulphate Resistant Cement. The cement is marketed under the brand names of Birla Cement SAMRAT, Birla Cement KHAJURAHO, Birla Cement CHETAK and Birla Premium Cement, bringing the product under the common brand of Birla Cement while retaining the niche identity of SAMRAT for blended cement, i.e. PPC & PSC, for all the units, KHAJURAHO (for the OPC product of Satna) and CHETAK (for the OPC product of Chanderia). The Division exports large quantities of cement to Nepal, under the brand names of Birla Cement Samrat, Birla Cement Khajuraho and Birla Cement. The special variety of Birla Cement SAMRAT, being produced by the company, is ideal for mass concrete, RCC/prestressed/precast structure (for reduced thermal crack), increased water tightness of concrete, increased resistance to sulphate soils and aggressive water and increased resistance to alkali aggregate reaction besides corrosion resistant properties. Chettinad Cement Chettinad cement is operating its cement business spanning three generations. Since its establishment in 1962 with a wet process cement plant at Puliyur near Karur, Chettinad cement has been expanding and making itself versatile in the field of cement products. Major supplier of Southern India cement needs, Chettinad Cement supplies the "glue" upon which many residential, commercial and engineering projects are built. Chettinad Cement has established its position in the southern market by innovatively aligning its products and services to the needs of cement users. Chettinad Cement's modern, flexible manufacturing plant produces a wide range of cements which can be delivered in bulk using reliable road tanker fleet. Under its Builders Choice brand name, Chettinad Cement offers an extensive range of bagged products that includes Ordinary Portland cements and blended cements to suit most building and construction applications. For over four decades, the Chettinad cement companies have built a reputation for serving the construction industry with high-performance products that encourage creativity and ensure longevity. As the creative use of cementitious materials continues to grow in popularity, in both masonry and concrete applications, so too, does our commitment to providing customers with the widest range of cements to achieve the maximum in creativity, versatility and integrity.

Deccan cements Incorporated in Jul.'79, Deccan Cements manufactures cement. The first mini cement plant based on rotary kiln technology started commercial production in Oct.'92. The company was promoted by M B Raju of the Nagarjuna group -- a technocrat enterprenuer. The other companies of the group are DCL Polyesters and Deccan Polypacks. During 1986-87, DCL introduced reinforced suspension preheater technology, from Onoda Engineering & Consulting Company, Japan, to enhance its capacity from 66000 tpa to 99000 tpa. In Aug.'91, it completed the modernisation and expansion programme to double its capacity from 300 tpd to 600 tpd. The company has also commissioned a captive-generation plant to meet nearly 65% of its total power requirement. The company issued PCDs on a rights basis, aggregating Rs. 8.66 cr, in Nov.'92 to meet long-term working capital requirements, capital expenditure and to invest in group companies, DCL Polyesters and Deccan Polypacks. The company commissioned the first wind farm in Andhra Pradesh in Feb.'95 which has generated 10.65 lac units of power. The 3.75 MW captive mini hydel plant at Guntur Branch canal, Narasaraopet, Andhra Pradesh, has been commissioned. The company executed the expansion capacity of the cement division from 1,98,000 tonnes to 2,97,000 tonnes per annum 1999-2000. The company had set up a Slag Cement Plant with a capacity of 3,00,000 TPA at an estimated cost ofRs. 25 crores and the project was completed during 2002 and commercial production has commenced.

India Cements The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar in Tamilnadu in 1949 . Since then it has grown in stature to seven plants spread over Tamilnadu and Andhra Pradesh. The capacities as on March 2010 have reached 14.05 mtpa.

Company Highlights

The Company is the largest producer of cement in South India. The Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh which cater to all major markets in South India and Maharashtra. The Company is the market leader with a market share of 28% in the South. It aims to achieve a 35% market share in the near future. The Company has access to huge limestone resources and plans to expand capacity by de-bottlenecking and optimisation of existing plants as well as by acquisitions. The Company has a strong distribution network with over 10,000 stockists of whom 25% are dedicated. The Company has well established brands- Sankar Super Power, Coromandel Super Power and Raasi Super Power. Regional offices in all southern states and Maharasthra offices/representative in every district. Technical cell to cater to all your queries/doubts tech.cell@indiacements.co.in

JK Cement A quarter century of excellence and aesthetics Born to the 125 year old multi-disciplinary J.K. Organisation, J.K. White Cement Works (a part of J.K. Cement Ltd.) is a company that has been enriching the consumers world with ornamental aesthetics since 1984. Thus began a journey of committed excellence in product quality, customer service and social responsibility. The company in the past 25 years has established itself as a front runner in the White Cement category. Over the years, continuous process improvements & modifications have increased J.K. White Cement Plants production capacity to 400,000 tons per annum. With a nationwide distribution and strong equity in the category, J.K. White Cement brings aesthetics to life with matchless White Cement, Wall Putty and Water Proofing backed by turnkey design consultancy and installation support. Today, J.K. White Cement is the second largest manufacturer of White Cement in India. Not only does J.K. White Cement enjoy demand in the domestic market but is also exported to countries like South Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka, Kenya, Tanzania, UAE and Nepal, hence giving the company a global footprint.

Madras Cements

Madras Cements Ltd., is one of the most prominent Company in the South India engaged in the manufacture of cement. The cement unit in Karnataka is the latest addition to the number of plants run by the Company. Madras Cements Ltd is a Public Limited Company managed by Board of Directors under the dynamic leadership of Shri. P.R. Ramasubrahmaneya Rajha as Chairman and Managing Director, ably supported by a team of experts in Cement Technology, Mining operations, Marketing Techniques, Finance, Administration, HRD etc. Madras Cements Ltd has increased the capacity of the 400 TPD plant to 1000 TPD capacity cement production within the same premises at Mathod, Hosadurga Taluk, Chitradurga District. To meet the increased capacity of the plant, limestone requirement of this mine is proposed to be increased from the existing production level. The location of the mine is shown in the location plan (Plate -1). MOEF clearance is being sought for the proposed expansion of the mine. To meet the requirement of the Cement plant the company intends to increase the production of Limestone to 5.17 lacs tonnes per annum. Out of this it is proposed to produce 182040 tonnes from the Kanchipura mines. The total estimated reserves of the limestone mining lease area is 4.16 Mil tones. The Company proposes to produce 182040 tonnes every year from these mines. Limestone from this mine is required essentially for blending purpose owing to the availability of high calcium, low silica limestone in other mines. The balance requirement will be met from other nearby sources to Cement plant at Method.

Ramco Cements Madras Cements Ltd is the flagship company of the Ramco Group, a well-known business group of South India. It is headquartered at Chennai. The main product of the company is Portland cement, manufactured in five state-of-the art production facilities spread over South India, with a current total production capacity of 13.0 MTPA. The company is the fifth largest cement producer in the country. is the most popular cement brand in South India. The company also produces Ready Mix Concrete and Dry Mortar products, and operates one of the largest wind farms in the country.

Ultratech Cement UltraTech's success is attributed to its diverse product offerings. Different products are handled by different product groups, which are also known as profiles. Product groups decentralise control and encourage innovation. They also ensure better customer segmentation, which in turn leads to better customization of product offerings and guarantees cent percent customer satisfaction. UltraTech Cement, Birla White, UltraTech Concrete, UltraTech Building Products and UltraTech Solutions are the different profiles of UltraTech, each catering to varied needs. This versatility has been a key competitive advantage for UltraTech over the years UltraTech Cement is the largest selling single brand cement in India and the largest cement clinker exporter. UltraTech's products include Ordinary Portland Cement, Portland Pozzolana Cement and Portland Blast Furnace Slag cement. UltraTech is the most trusted and preferred brand of Engineers, builders, contractors and individual house builders. Today, UltraTech is used in vital structures like dams, bridges, flyovers, airports, metro railways apart from residential and commercial structures. Chapter IV About the topic Introduction about Cement Industries in INDIA The most general sense of the word, cement is a binder, a substance which sets and hardens independently, and can bind other materials together. Cement used in construction is characterized as hydraulic or non-hydraulic. Hydraulic cements (e.g. Portland cement) harden even underwater or when constantly exposed to wet weather while non-hydraulic cements (e.g. lime and gypsum plaster) must be kept dry in order to gain strength. The most important use of cement is the production of mortar and concrete used by the construction and real estate sectors. The world production of hydraulic cement is dominated by China (1.2 billion MT), followed by India and Brazil, with these 3 countries contributing to over half of global production. There are a number of employment opportunities within the

sector such as site engineer, packaging engineer, surveyor, geologist, contractor, and supervisor amongst others. Typically, the industry is characterized by few large players due to the high entry barriers such as economies of scale, high capital requirements, long gestational period of over 3 years and the need for capacity augmentation in large increments. These producers tend to have high bargaining power due to their limited numbers and the lack of any substitutes for their product, which is quintessential for secondary industries. The largest global players are Lafarge (France), Holcim (Switzerland) and Cemex (USA). Performance India is the worlds 2nd largest producer of cement after China with an industry capacity of over 200 MT. The cement industry in India is one amongst the fastest growing sectors due to the rapid development of infrastructure and real estate projects in the country, with 2008s domestic consumption growing ~10% YoY. The Southern and Central regions saw maximum consumption growth (~16% and ~14% respectively) whereas the North and Eastern lagged behind, with lacklustre growth (~4% and ~2% respectively). The industry consists of both the organized sector and the unorganized sector. The largest organized sector companies include Ambuja Cements Ltd, J.K Cement Ltd, Grasim Industries Ltd, Associated Cement Company Ltd (ACC) and Madras Cement Ltd. while the main players of the unorganized sector are the regional and local cement producing units across various states. Some of the states where the cement industry is booming are Gujarat, Madhya Pradesh, and Rajasthan. The significant growth trajectory of the industry has attracted a lot of foreign interest in the recent few years, with Holcim increasing its stake in Ambuja Cement from 22% to 56% and leading foreign funds investing in a 7.5% stake in Indias 3d largest cement company, India Cements (ICL) valued at US$125 million. Growth Potential Prospects for the industry remain bright over the coming years, given Indias dominance of global markets and relatively low cost of production. Also, the overall economic prosperity of the country, with a burgeoning middle class, growing infrastructure demand, significant technological change and increasing government spending all bode well for the future. On the flip side, some caution has to be maintained due to the current demand- supply gap leading to over capacity and falling margins and prices. Also, given the close linkages between them, the effect of a slowdown in global real estate and infrastructure demand or hike in interest rates should also be evaluated. Future Prospects According to the recent surveys, one metric ton of cement generates job opportunities for around 1.4 million people. In most cases, one needs to have some type of expertise in architecture in order to get a good job in this sector. Given that most of the jobs for qualified graduates have a good pay package with other benefits and perks coupled with positive growth prospects, working in the cement industry is considered a lucrative career option for new graduates, especially for those with an interest in architecture. It is believed that in the coming years, more than 2.5 million people will be directly employed by cement companies. To cater to this growing demand, a number of colleges and educational

institutes have introduced various courses and study programs related to the cement industry such as a Post Graduate Diploma in Cement Technology.

Chapter V Analysis and Interpretation

On the basis of Sales turnover companies have been divided into two groups. Group A (less sales) 1. Andhra Cement 2. Bheema Cement 3. Birla Cement 4. Chettinad Cement 5. Deccan Cement 6. Ramco Cement Group B (more sales) 1. ACC Cement 2. Ambuja Cement 3. India Cement 4. JK Cement 5. Madras Cement 6. Ultratech Cement

Descriptive Results Part A Companies Andhra Cement As for as Andhra Cement is concern the selected ratio for working capital requirement is shown as follows: Table 1 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall -7.074 1.166 1.088 0.0492 26.58 16.622 2.34 43.202 40.862 13.87 Standard Deviation 39.85 0.55 0.78 0.04 13.63 8.29 2.06 20.95 22.39 6.28 C.V -563.331 47.16981 71.69118 81.30081 51.27916 49.87366 88.03419 48.49313 54.79419 45.27758

As per the table 1 the company showed less consistency in terms of maintaining Cash Ratio (cv-81.30), Creditors Turnover Ratio (cv-88.03) and Quick Ratio (cv-71.69).In addition to that the company has not maintained satisfactory level in terms of other ratios.

Bheema Cement As for as Bheema Cement is concern the selected ratio for working capital requirement is shown as follows:

Table 2 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 9.648 0.734 0.902 0.082 10.374 5.962 1.932 16.336 14.404 6.7 Standard Deviation 12.69 0.14 0.32 0.05 5.51 2.16 1.13 6.85 6.56 2.07 C.V 131.5299 19.07357 35.47672 60.97561 53.11355 36.22945 58.48861 41.93193 45.5429 30.89552

As per the table 2 the company showed less consistency in terms of maintaining Return on Capital Employed (cv-131.52), Creditors Turnover Ratio (cv-58.48) and Cash Ratio (cv60.97).In addition to that the company has not maintained satisfactory level in terms of other ratios. Birla Cement As for as Birla Cement is concern the selected ratio for working capital requirement is shown as follows: Table 3 Mean Return on Capital Employed Current Ratio 34.648 0.868 Standard Deviation 14.59 0.17 C.V 42.10921 19.58525

Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall

0.92 0.056 20.706 71.87 1.132 92.576 91.444 34.91

0.27 0.01 4.03 17.86 0.09 17.38 17.43 13.31

29.34783 17.85714 19.46296 24.85042 7.95053 18.77376 19.06085 38.12661

As per the table 3 the company showed less consistency in terms of maintaining Return on Capital Employed (cv-42.10).In addition to that the company has maintained satisfactory level in terms of other ratios. Chettinad Cement As for as Chettinad Cement is concern the selected ratio for working capital requirement is shown as follows: Table 4 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 18.312 0.714 0.904 0.226 18.544 37.04 0.698 55.584 54.886 20.76 Standard Deviation 15.73 0.23 0.35 0.01 3.77 16.32 0.14 15.27 15.15 7.7 C.V 85.89996 32.21289 38.71681 4.424779 20.33003 44.06048 20.05731 27.47193 27.60267 37.09056

As per the table 4 the company showed less consistency in terms of maintaining Return on Capital Employed (cv-85.89), Debtors Turnover Ratio (cv-44.06). In addition to that the company has maintained satisfactory level in terms of other ratios.

Deccan Cement As for as Deccan Cement is concern the selected ratio for working capital requirement is shown as follows: Table 5 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 18.486 0.914 1.118 0.386 27.282 85.064 1.264 112.346 111.082 39.77 Standard Deviation 11.69 0.2 0.32 0.26 13.01 58.04 0.65 67.18 67.51 16.26 C.V 63.23704425 21.88183807 28.62254025 67.35751295 47.68711971 68.23097903 51.42405063 59.79741157 60.77492303 40.88508926

As per the table 5 the company showed less consistency in terms of maintaining Return on Capital Employed (cv-63.23), Cash ratio (cv-67.35), Debtors Turnover Ratio (cv-68.23) and Net Operating Cycle (cv-60.77). In addition to that the company has not maintained satisfactory level in terms of other ratios.

Ramco Cement As for as Ramco Cement is concern the selected ratio for working capital requirement is shown as follows:

Table 6 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 14.43 0.952 1.224 0.26 5.806 15.556 0.268 21.362 21.094 8.99 Standard Deviation 1.82 0.33 0.32 0.17 1.33 0.87 0.02 0.99 1 3.02 C.V 12.61261261 34.66386555 26.14379085 65.38461538 22.90733724 5.592697352 7.462686567 4.634397528 4.740684555 33.59288098

As per the table 6 the company showed less consistency in terms of maintaining Cash ratio (cv-65.38). In addition to that the company has maintained satisfactory level in terms of other ratios.

Part B Companies ACC Cement As for as ACC Cement is concern the selected ratio for working capital requirement is shown as follows: Table 7 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 33.17 0.786 0.526 0.044 23.786 26.588 0.018 50.374 50.356 20.62 Standard Deviation 8.02 0.08 0.08 0.02 3.59 3 0.004 2.42 2.42 7.08 C.V 24.17847 10.17812 15.20913 45.45455 15.09291 11.28329 22.22222 4.804066 4.805783 34.3356

As per the table 7 the company showed less consistency in terms of maintaining Cash ratio (cv-45.45). In addition to that the company has maintained satisfactory level in terms of other ratios.

Ambuja Cement As for as Ambuja Cement is concern the selected ratio for working capital requirement is shown as follows: Table 8 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 30.65 1.114 0.716 0.106 11.302 35.538 0.0088 46.84 46.8312 19.23 Standard Deviation 7.79 0.18 0.13 0.04 3.63 21.56 0.001 18.88 18.88 6.86 C.V 25.41599 16.15799 18.15642 37.73585 32.11821 60.66745 11.36364 40.30743 40.315 35.67343

As per the table 8 the company showed less consistency in terms of maintaining Debtors turnover ratio (cv-60.66). In addition to that the company has maintained satisfactory level in terms of other ratios.

India Cement As for as India Cement is concern the selected ratio for working capital requirement is shown as follows: Table 9 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 14.646 1.064 1.434 0.011 23.122 9.442 2.646 32.564 29.918 12.76 Standard Deviation 7.68 0.24 0.51 0.01 8.92 0.75 0.59 9.05 8.94 4.31 C.V 52.4375256 22.55639098 35.56485356 90.90909091 38.57797768 7.943232366 22.29780801 27.79142611 29.88167658 33.77742947

As per the table 9 the company showed less consistency in terms of maintaining Cash ratio (cv-90.90). In addition to that the company has maintained satisfactory level in terms of other ratios.

JK Cement As for as India Cement is concern the selected ratio for working capital requirement is shown as follows:

Table 10 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 18.358 1.4 1.194 0.23 25.314 28.646 1.594 53.96 52.366 20.34 Standard Deviation 8.29 0.21 0.21 0.19 10.19 3.73 0.35 11.06 11.13 7.2 C.V 45.15742456 15 17.5879397 82.60869565 40.25440468 13.02101515 21.95734003 20.4966642 21.25424894 35.39823009

As per the table 10 the company showed less consistency in terms of maintaining Cash ratio (cv-82.60). In addition to that the company has maintained satisfactory level in terms of other ratios.

Madras Cement As for as India Cement is concern the selected ratio for working capital requirement is shown as follows: Table 11 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 21.266 0.666 0.67 0.05 22.876 26.144 1.622 49.02 47.398 18.85 Standard Deviation 10.39 0.08 0.07 0.03 9.14 7.2 0.14 13.84 13.87 6.57 C.V 48.85733 12.01201 10.44776 60 39.95454 27.53978 8.631319 28.23337 29.26284 34.85411

As per the table 11 the company showed less consistency in terms of maintaining Cash ratio (cv-60). In addition to that the company has maintained satisfactory level in terms of other ratios.

Ultratech Cement As for as India Cement is concern the selected ratio for working capital requirement is shown as follows: Table 12 Mean Return on Capital Employed Current Ratio Quick Ratio Cash Ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Gross Operating Cycle Net Operating Cycle Overall 27.992 0.794 0.442 0.048 25.076 31.08 1.478 56.156 54.678 21.97 Standard Deviation 9.96 0.23 0.09 0.01 6.8 3.7 0.25 7.87 7.76 7.61 C.V 35.58159 28.96725 20.36199 20.83333 27.11756 11.90476 16.91475 14.01453 14.19218 34.63814

As per the table 12 the company has maintained satisfactory level in terms of all ratios.

ANOVA Results Part A Anova for Return on Capital Employed of Part A companies Table 13 Source of Variation Between Groups Within Groups Total SS 4624.977 9400.409 14025.39 df 5 24 29 MS 924.9953 391.6837 F 2.361587 P-value 0.070579 F crit 2.620654

The Return on Capital employed position of sample companies are compared and tested using the one way Anova. As we find in the table 13, F cal (2.36) < F crit (2.62) @10%significant level, we accept alternate hypothesis and conclude that return on capital employed of part A companies has significant difference. Anova for Current Ratio of Part A companies Table 14 Source of Variation Between Groups Within Groups Total SS 0.681907 2.26984 2.951747 df 5 24 29 MS 0.136381 0.094577 F 1.442019 P-value 0.245474 F crit 2.620654

The Current ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 14, F cal (1.44) < F crit (2.62) @5% significant level, we accept null hypothesis and conclude that Current Ratio of part A companies has no significant difference. Anova for Quick Ratio of Part A companies Table 15 Source of Variation Between Groups SS df MS F P-value F crit

0.46504 5

0.093008 0.492749 0.778398 2.620654

Within Groups Total

4.53008 24 4.99512 29

0.188753

The Quick ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 15, F cal (0.49) < F crit (2.62) @5% significant level, we accept null hypothesis and conclude that Quick Ratio of part A companies has no significant difference.

Anova for Cash Ratio of Part A companies Table 16 Source of Variation Between Groups Within Groups Total SS df MS F P-value F crit

0.464843 5 0.527097 24 0.991939 29

0.092969 4.233084 0.006698 2.620654 0.021962

The Cash ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 16, F cal (4.23) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Cash Ratio of part A companies has significant difference. Anova for Inventory Turnover Ratio of Part A companies Table 17 Source of Variation Between Groups Within Groups Total SS 1869.808 1670.821 3540.629 df 5 24 29 MS F P-value F crit 373.9616 5.371658 0.001878 2.620654 69.61753

The Inventory turnover ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 17, F cal (5.37) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Inventory turnover Ratio of part A companies has significant difference.

Anova for Debtors Turnover Ratio of Part A companies Table 18 Source of Variation Between Groups Within Groups Total SS 26737.42 16116.94 42854.36 df 5 24 29 MS F P-value F crit 5347.483 7.963025 0.000153 2.620654 671.5392

The Debtors turnover ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 18, F cal (7.96) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Debtors turnover Ratio of part A companies has significant difference.

Anova for Creditors Turnover Ratio of Part A companies Table 19 Source of Variation Between Groups Within Groups Total SS 14.6669 23.98444 38.65134 df 5 24 29 MS F P-value F crit 2.933379 2.935282 0.033138 2.620654 0.999352

The Creditors turnover ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 19, F cal (2.93) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Creditors turnover Ratio of part A companies has significant difference.

Anova for Gross Operating Cycle of Part A companies Table 20 Source of Variation Between Groups Within Groups Total SS 37223.95 22145.58 59369.53 df 5 24 29 MS F P-value F crit 7444.79 8.068202 0.00014 2.620654 922.7323

The Gross operating cycle position of sample companies are compared and tested using the one way Anova. As we find in the table 20, F cal (8.06) > F crit (2.62) @5% significant level,

we accept alternate hypothesis and conclude that Gross operating cycle of part A companies has significant difference.

Anova for Net Operating Cycle of Part A companies Table 21 Source of Variation Between Groups Within Groups Total SS df MS F P-value F crit

37342.66 5 22551.91 24 59894.57 29

7468.533 7.948097 0.000155 2.620654 939.663

The Net operating cycle position of sample companies are compared and tested using the one way Anova. As we find in the table 21, F cal (7.94) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Net operating cycle of part A companies has significant difference.

Part B Anova for Return on Capital Employed of Part B companies Table 22 Source of Variation Between Groups Within Groups Total SS 1351.646 1841.097 3192.743 df 5 24 29 MS F P-value F crit 270.3292 3.523933 0.015727 2.620654 76.71238

The Return on Capital Employed position of sample companies are compared and tested using the one way Anova. As we find in the table 22, F cal (3.52) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Return on Capital Employed of part B companies has significant difference.

Anova for Current Ratio of Part B companies Table 23 Source of Variation Between Groups SS df MS F P-value F crit 2.620654

1.858587 5

0.371717 10.66621 1.75E05 0.03485

Within Groups Total

0.8364

24

2.694987 29

The Current ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 23, F cal (10.66) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Current ratio of part B companies has significant difference.

Anova for Quick Ratio of Part B companies Table 24 Source of Variation Between Groups Within Groups Total SS 3.894337 1.40316 5.297497 df 5 24 29 MS 0.778867 0.058465 F 13.32194 P-value 2.84E06 F crit 2.620654

The Quick ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 24, F cal (13.32) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Quick ratio of part B companies has significant difference. Anova for Cash Ratio of Part B companies Table 25 Source of Variation Between Groups Within Groups Total SS 0.155718 0.175398 0.331116 df 5 24 29 MS F P-value F crit 0.031144 4.261417 0.00648 2.620654 0.007308

The Cash ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 25, F cal (4.26) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Cash ratio of part B companies has significant difference.

Anova for Inventory Turnover Ratio of Part B companies Table 26 Source of Variation Between Groups Within Groups Total SS 700.3093 1358.94 2059.249 df 5 24 29 MS F P-value F crit 140.0619 2.473608 0.060769 2.620654 56.62249

The Inventory turnover ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 26, F cal (2.47) < F crit (2.62) @10% significant level, we accept alternate hypothesis and conclude that Inventory turnover ratio of part B companies has significant difference. Anova for Debtors Turnover Ratio of Part B companies Table 27 Source of Variation Between Groups Within Groups Total SS 1989.852 2217.973 4207.825 df 5 24 29 MS F P-value F crit 397.9704 4.306314 0.00615 2.620654 92.41555

The Debtors turnover ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 27, F cal (4.30) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Inventory turnover ratio of part B companies has significant difference. Anova for Creditors Turnover Ratio of Part B companies Table 28 Source of Variation Between Groups Within Groups Total SS 26.56482 2.274693 28.83951 df 5 24 29 MS 5.312964 0.094779 F 56.05642 P-value 1.88E12 F crit 2.620654

The Creditors turnover ratio position of sample companies are compared and tested using the one way Anova. As we find in the table 28, F cal (56.05) > F crit (2.62) @5% significant

level, we accept alternate hypothesis and conclude that Inventory turnover ratio of part B companies has significant difference. Anova for Gross Operating Cycle of Part B companies Table 29 Source of Variation Between Groups Within Groups Total SS df MS F P-value F crit

1740.973 5 3282.549 24 5023.522 29

348.1947 2.545788 0.055209 2.620654 136.7729

The Gross operating cycle position of sample companies are compared and tested using the one way Anova. As we find in the table 29, F cal (2.54) < F crit (2.62) @10% significant level, we accept alternate hypothesis and conclude that Gross operating cycle of part B companies has significant difference. Anova for Net Operating Cycle of Part B companies Table 30 Source of Variation Between Groups Within Groups Total SS 1954.779 3283.471 5238.25 df 5 24 29 MS 390.9558 136.8113 F 2.857629 P-value 0.036649 F crit 2.620654

The Net operating cycle position of sample companies are compared and tested using the one way Anova. As we find in the table 30, F cal (2.85) > F crit (2.62) @5% significant level, we accept alternate hypothesis and conclude that Net operating cycle of part B companies has significant difference.

Chapter VI - Conclusions According to the study of descriptive analysis the following companies performed well in maintaining ratios: Part A companies 1. Birla Cements 2. Ramco cements Part B Companies 1. Acc Cements 2. Ambuja Cements 3. Madras Cements 4. Ultratech Cements Remaining companies having more variance in maintaining the ratios. Anova statistics states except current ratio in Part A all other Ratios have shown significant difference. In Part B all ratios shown significant difference.

Annexure Bibliography Secondary Data source: www.moneycontrol.com References Literature Review 1. John Sagan, Towards a Theory of Working Capital Management, The Journal of Finance, May 1955 2. Ernest W. Walker, Towards A Theory of Working Capital, The Engineering Economist, Winter 1967 3. J. F. Weston and E.F. Brigham, Managerial Finance, Holt, Rinehart and Winston, 4th edition, 1972. 4. James C. Vanhorne, A Risk-Return Analysis of a firms Working Capital Position, The Engineering Economist, Winter 1969

5. Paul Welter, How to Calculate Savings Possible Through Reduction of Working Capital, Financial Economist, October 1970 6. R. J. Lambrix and S.S. Singhvi, Managing the Working Capital Cycle, Financial Executive, June 1979 7. J. M. Warren and J. P. Shelton, A Simultaneous Equation Approach to Financial Planning, Journal of Finance,Volume 26, December 1976 8. Simulation involves developing a model of some real phenomenon and then performing experiments in the model evolved. In stimulation, a given system is copied and the variables and constants associated such it are manipulated in that artificial environment to examine the behaviour of the system. The benefit of simulation is that the results of taking a particular course of action can be estimated prior to its implementation in the real world. 9. R.A. Cohen and J.J. Pringle, Steps Towards as Integration of Corporate Financial Theory, 1973 in K.V. Smith, Readings on The Management of Working Capital, West Publishing Company, U.S.A., 1980. 10. CAPM states that the required rate of return on a security (investment) is equal to the riskless rate plus premium for unsystematic risk of the security. Unsystematic risk, which is specific to the company of the security, can be eliminated by diversification in the portfolio. But systematic risk, which is because of general market fluctuations, cannot be eliminated by diversification. 11. Thomas E. Copeland and Nabil T. Khoury, Analysis of Credit Extension in a World with Uncertainty, in K.V. Smith, op.cit. 12. A detailed survey of literature in respect of inventory investment is not undertaken here as it is available in R. Eisner & R. Strotz, Determinants of Business Investment, in Impacts of Monetary Policy, Commission on Money and Credit, Prentice-Hall, 1963, M.C. Lovell, Determinants of Inventory Investment, in Models of Income Determination, NBER, Princeton University Press, 1964. Here, emphasis is on factors influencing inventory investment, which have been considered in the literature. 13. Lloyd Metzler, The Nature and Stability of Inventory Cycles, Review of Economics and Statistics, Vol.III, August 1941, 14. Richard M. Goodwin, Secular and Cyclical Aspects of the Multiplier and Accelerator, in Income, Employment and Public Polic:, Essays in Honour of Alvin H. Hanson, Norton and Company, New York, 1948. 15. P.G. Darling and M.C. Lovell, Factors Influencing Investments in Inventories, in the Brookings Quarterly Econometric Model of the U.S., J.S. Dusenberry et al., eds.,, Chicago, 1965.

16. Hilton, Inventory Investment in Applied Macro Economics, ed. By David Heathfied, 1976. 7317. F. Owen Irvine, Jr. Retail Inventory Investment and the Cost at Capital, The American Review, September 1981, 18. Moses Abramovitz, Inventories and Business Cycles With Special References to Manufacturers Inventories, NBER, New York, 1950. 19. Franco Modigliani, Business Reasons for Holding Inventories and Their Macro Economic Implications, Problems of Capital Formation, Studies in Income and Wealth,Vol. 19, NBER, 1957 20. Lloyd Metzler, op.cit. 21. Hilton, op.cit. 22. NCAER, Structureof Working Capital, New Delhi, 1966. 23. V. Appavadhanulu, Working Capital and Choice of Techniques, Indian Economic Journal, July-Sept. 1971 24. S.K. Chakraborty, Use of Operating Cycle Concept for Better Management of Working Capital, The Economic and Political Weekly, August, 1973, Vol.8 25. S.K. Chakraborty, Cash Working Capital Vs. Balance Sheet Working Capital, The Economic and Political Weekly,March 1974, 26. Ram Kumar Misra, Problems of Working Capital (With Special Reference to Selected Public Understandings in India), Somaiya Publications Private Limited, Mumbai, 1975. 27. N.K. Agrawal, Management of Working Capital, Sterling Publication Pvt. Ltd., New Delhi, 1983 7428. Kamta Prasad Singh, Anil Kumar Sinha and Subas Chandra Singh, Management of Working Capital in India, Janaki Prakashan, New Delhi, 1986. 29. Harbans Lal Verma, Management of Working Capital, Deep and Deep Publication, New Delhi, 1989. 30. Vijaykumar and A. Venkatachalam, Working Capital Capital and Profitability An Empirical Analysis, The Management Accountant, October 1995 Working Capital Managaement in Sugar Mills of Tamil Nadu A Cash Study, Management and Labour Studies, Vol. 20, No.4, October 1995 31. K. Krishnamurty, Private Investment Behaviour in India: A Macro Time Series Study, Arthaniti, January 1964. 32. V.K. Sastry, Dividends, Investment and External Financing Behaviour of the Corporate Sector in India, Unpublished doctoral dissertation. University of Pennysylvania, 1966.

33. S. Krishnamurthy & D.U. Sastry, Inventories in Indian Manufacturing, Institute of Economic Growth . . ., Books Ltd., Mumbai, 1970; and Investment and Financing in Corporate Sector in India, Tata McHill Publishing Company, New Delhi, 1975. 34. Vinod Prakash, Manufacturers Inventoires in a Developing Economy, Unpublished Ph.D. Tehsis, MIT, Cambridge, 1970; and Industrialisation and Manufacturers Inventories in India, IBRD, May 1973 (mimeo). 35. P.V. George, Inventory Behaviour and Efficacy of Credit Control, Anvesak, No.2, Vol.II, 1972 36. Dalip S. Swamy and V,.G. Rao, The Flow of Funds in ndian Manufacturing Sector, Sankhya Series C, Vol. 37, 1975. 37. R.N. Agarwal, Analysis of Profits, Investment and Financing Behaviour of Indian Automobile Manufacturing Industry, Ph.D. Thesis, Delhi University, 1982.

38. N.C. Gupta, Productivity, Investment and Import Substitution in Indian Industries (A Case Study of NonFerrous Metals), Anmol Publications, New Delhi, 1987. 39. Adesh Sharma, Investment and Financing in Pesticides Industry in India, Indian Journal of Finance and Research, Vol. No.2, July 1994