1

INTRODUCTION:
A study of working capital is of major importance to internal and external analysis because of its close relationship to current operations of the business. The term working capital originated at the time when most industries were closely related to agriculture. The amount of fund required for operating need varies from time to time in every business. But certain amount of assets in the form of working capital is always required if the business has to carry out its function efficiently and without a break. The requirement of finance in business arises mainly due to two factors acquisition of fixed assets and provision of working capital. !ixed assets such as land funds broadly known as working capital buildings plant and machinery equipments etc. are essential for carrying on sales and production. The working capital is necessary to meet day to day

revenue expenses like purchase of materials wage payment meeting overhead expenses
etc. "orking capital keeps the business going. #n short

"orking $apital % $urrent Assets & $urrent 'iability CURRENT ASSETS

$ash #n (and $ash At Bank )undry *ebtors Bills +eceivable )tock, #nventories )hort Term #nvestment -repaid .xpenses Increase in Current Assets results in increase in W.C. Decrease in Current Assets results in decrease in W.C. Increase in Current Liability results in decrease in W.C. Decrease in Current Liability increase in W.C. 2

CURRENT LIABILITY
)undry $reditors Bills -ayable Bank /verdraft )hort Term Advances 0loan1 /utstanding .xpenses *ividend -ayable -rovision !or Taxation

DE INITION:
Acc!rdin" t! West!n and Bri"#a$ 3"orking $apital refers to a firm4s investment in short term assets cash short term securities account receivable and inventories5. Acc!rdin" t! C!rine T. N!r"ard 3#t is the difference between company4s current assets and current liabilities. The accounts which belong to this group are usually the most active in the company. 6nlike fixed assets they reflect the company4s daily activities. Acc!rdin" t! %.&. 'ul(arni 3#t is the excess of current assets over current liabilities and provisions. #t is net current assets or net working capital5.

T#e!ry !) W!r(in" Ca*ital:

!rom the financial management point of view the nature of fixed assets and current assets differ from each other in following respects.

The fixed assets are required to be retained in the business over a period of time and they yield the returns over their life whereas the current assets loose their identity over a short period of time7 say one year.

#n case of current assets it is always necessary to strike a proper balance between the liquidity and profitability principles which is not the case of the fixed assets. .g. #f the si8e of the current assets is large it is always beneficial from the liquidity point of view as it ensures smooth and fluent business operations. )ufficient raw material is always to cater to the production needs sufficient finished goods are available to cater to any kind of demand of customers liberal credit period can be offered to the customers to improve the sales sufficient cash is available to pay off the creditors and so on. (owever investments in current assets more than ideally required it affects the profitability as it may not be able to yield sufficient rate of return on investment. /n the other hand if the si8e of current assets is to small it always involves the risk of frequent stock out inability of the company to pay its dues in time. "orking capital management is concerned with the problem arising out of the

attempts to manage current assets current liabilities and inter9relationship between them. The intention is not to maximi8e the investment of working capital nor is it to minimi8e the same. The intention is to have optimum investment in working capital. :

E))ect !) In)lati!n !n W!r(in" Ca*ital Re+uire$ent:

The phase of inflation can be identified with the situation of increasing price levels increasing demand and increasing supply. As such the working capital requirements multiply during the phase of inflation due to increasing cost of production and increasing level of sales turnover. 1. -ossibility of using cheaper substitute raw material without affecting the quality should be explored. !or this purpose research activities may be conducted. 2. Attempts should be made to reduce the production cost to the maximum possible extent. !or this purpose the techniques like time and motion study intensive schemes cost reduction programmes etc. may be implemented. :. Attempts should be made to reduce the operating cycle to the maximum possible extent. Aiming at greater turnover at short intervals will go a long way to reduce the stress on working capital requirements. ;. Attempt should be made to reduce the amount looked up in receivables. <uicker reali8ation of debts will go a long way to reduce the stress on working capital requirements. =. Attempts should be made to make the payments of the creditors in time. This helps the business to build up good reputation and increases its bargaining power with respect to period of credit for payment and other conditions. >. Attempts should be made to match the projected cash inflows and projected cash outflows. #f they do not match some of the payments should be postponed our purchases of certain avoidable items should be deferred.

I,%ORTANCE O WOR'IN- CA%ITAL:

1. Ade+uacy !) .!r(in" ca*ital creates a )eelin" !) security and c!n)idence:/ The proprietor of a concern or the officials of the company who can go home at night and can sleep in peace and comfort without worrying about how wages and salaries are going to be met the next day enjoy the position in business that can come only as a result of efficient management that has provided adequate working capital. 2. Ade+uacy !) .!r(in" ca*ital is $ust )!r $aintainin" s!l0ency and t!

c!ntinue *r!ducti!n:/ #t is essential that sufficient amount of funds be available to

purchase raw materials payment of wage and salary bills stock finished goods and meet other administrative expenses. A manufacturing concern is bound to collapse in the absence of ready cash available to pay the bills for materials direct labour advertising and distribution expenses and other costs of doing business.

3. Creati!n !) s!und "!!d/.ill:/ #t is a common experience of all prudent businessmen that sound goodwill can be maintained only by promptness in payment. The prompt payment of bills to suppliers of materials will not only ensure a continued but will establish credit for seasonal operation

4. Easy a0ailability !) cas# disc!unt:/ Advantage may be taken of cash discounts in the purchase of raw materials or merchandise resulting in a saving in interest charges on the amount of working capital employed.

5. Steady .!r( )!r t#e e$*l!yees and e))iciency in *r!ducti!n:/ A continuous supply of raw materials and production means steady work for employees which raise their morale increases their efficiency lower costs and creates goodwill in the community. =

6. Easy l!ans )r!$ t#e ban(:/ Banks are also favorably inclined in granting seasonal loans if the business is adequately financed in the first place and has good credit standing and trade reputation. #n order to borrow from banks a business must keep itself in fairly liquid condition. Thus the adequacy of working capital contributes a lot in raising the credit standing of company.

7.

acility !) !))/ seas!n *urc#asin":/ /nly concerns with adequate working capital
can take advantages of purchasing the raw materials coal and other factor supplies in a sharply advancing market or in off,seasons periods resulting in substantial savings where storage costs are not prohibitive.

8. 1uic( and steady return t! t#e in0est!r:/ .verybody excepts quick return in his investments in the form of a withdrawal 0in the case of an owner1 or dividend 0in the case of a share holder1. #n the case of insufficiency of working capital the profit to be retained in the business but the case of their adequacy ample dividend can be paid to the shareholder.

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WOR'IN- CA%ITAL CYCLE:

#n any business there is bound to be a time lapse from the time funds are invested in business for buying raw materials and the cash is finally recycled back in the business through sales. This time span can be split into the following parts comprising the chronological sequence of events? Time required for conversion of cash into raw materials.

Time required for conversion of raw materials into work9in9progress.

Time spend in conversion of finished goods into debtors and bills receivables through sales.

Time spend in conversion of finished goods into debtors into bills receivables through sales.

!inally the time taken to convert debtors and bills receivables into cash.

$redit *ebtors *ebtors !inished Boods

"ork 9in9 progress

$rs. !or purchase $ash

+aw Caterial "ages and /verheads

$rs. !or expenses

W!r(in" ca*ital cycle can als! be re*resented in t#e )!ll!.in" $anner:

+eceivable s

"ork #n -rogress

!inished Boods

+aw Caterial

$ash,Bank

The cycle shows that the current assets are acquired either for resale or for conversion into finished goods which are converted into cash. Thus once the cycle is complete the current assets become cash. #n other words the current assets are self9liquidating in nature.

CLASSI ICATION O WOR'IN- CA%ITAL:

"orking $apital !ixed "orking $apital Gariable "orking $apital

+egular

+eserve Cargin

)easonal

)pecial

1.

i2ed W!r(in" Ca*ital:/ As is apparent from the objective permanent

is that part of the capital which is permanently locked up in the circulation of the current asset and in keeping it in moving. !or example every manufacturing concern has to maintain stock of materials work9in9 progress finished products loose tools and equipments it also requires money for the payment of wages and salaries thought the years. Eet
working capital minus fixed working capital will be the variable working capital7 it is also called as fluctuating working capital.

i1

Re"ular W!r(in" Ca*ital is minimum amount of liquid capital needed to keep up the circulation of the capital from cash to inventories to receivable and back again to cash. This would include a sufficient cash balance in the bank to discount bills maintain an adequate supply of raw material for processing carry a sufficient stock of finished goods to give prompt delivery and effect the lowest manufacturing costs and enough cash to carry necessary accounts receivable for the type of business engaged in.

1F

ii1

Reser0e $ar"in is the excess over the need for regular working capital that should be provided for contingencies that arise at unstated periods. The contingencies include 0a1 rising price which may make advisable to increase inventories 0b1 business depression which may arise the amount of cash required to ride out usually stagnant periods 0c1 strikes fires and unexpectedly serve competition which use up extra supplies of cash 0d1 special operation such as experiments with products or with methods of distribution war contracts to supply new business and the like which can be undertaken only if sufficient funds are available which in many cases mean the survival of business.

2. &ariable W!r(in" Ca*ital: The variable working capital changes with the
volume of business. #n many lines of business 0e.g. Bur or Hhandsari making an fur industry1 operations are highly seasonal and as a result working capital requirement vary greatly during the year. The capital required to meet the distinction between permanent and variable working capital should be raised in same way as fixed capital is procured through a permanent investment of the owner or through long9term borrowing. As business expands this regular capital will necessarily expand..

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12

OB3ECTI&ES
To study the accounting system followed by Asoka 'eyland To study accounts maintained through )A-0system application I product for data processing +ecording transactions in journal and ledger Then posting it in ledger -reparation of final accounts

To study regarding all the documents required for various transactions and the need of it To understand the flow of funds through working capital in such a way that the firm would always be able to meet its financial obligations when due. To understand the adequate working capital maintained for the operations of the business

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1;

AS4O' LEYLAND

Ashok 'eyland is an #ndian automobile manufacturing company based in $hennai #ndia. !ounded in 1D;A and it is )econd largest commercial vehicle manufacturers of commercial vehicles such as trucks and buses as well as emergency and military vehicles. /perating six plants Ashok 'eyland also makes spare parts and engines for industrial and marine applications. #t sells about >F FFF vehicles and about @ FFF engines annually. #t is the second largest commercial vehicle company in #ndia in the medium and heavy commercial vehicle 0CI($G1 segment with a market share of 2AJ 02FF@&FA1. "ith passenger transportation options ranging from 1D seaters to AF seaters Ashok 'eyland is a market leader in the bus segment. The company claims to carry over >F million passengers a day more people than the entire #ndian rail network. #n the trucks segment Ashok 'eyland primarily concentrates on the 1> ton to 2= ton range of trucks. (owever Ashok 'eyland has presence in the entire truck range starting from @.= tons to ;D tons. The joint venture announced with Eissan Cotors of Kapan would improve its presence in the 'ight $ommercial Gehicle 0'$G1 segment 0L@.= tons1. Ashok 'eylandMs 6H subsidiary /ptare has shut down its bus factory in Blackburn 'ancashire. This subsidiaryMs traditional home in 'eeds has also been vacated in favour of a purpose built plant at )herburn9in9.lmet. As#!( Leyland Ltd B#andara ,anu)acturin" %lant

1=

Ashok Leyland Ltd (Hinduja) Address : -lot no 1 C#*$ #ndu Area Gillage Badegan )akoli Taluk Bhandara City :Bhandara State :Caharashtra %in :;;1DF; Website :www.ashokleyland.com #ndustry ?Automobile Auto Ancillaries C!$*any Ty*e :#ndiaMs Top =FF Est. T!tal Turn!0er :)ubscribers only Sect!r :-rivate )ector

)oon after the independence there was a need for self reliance. -andit Kawaharlal Eehru persuaded Cr. +aghunandan )aran an industrialist to enter into the automobile industry. Thus in 1D;A Ashok Cotors was set up in Cadras for the assembly of Austin $ars. #n 1D== with equity participation by British 'eyland the $ompanyMs name changed to Ashok 'eyland. )ince then it has been a major player in #ndiaMs commercial vehicle industry. #n 1DA@ the overseas holding by 'and +over 'eyland #nternational (oldings 'imited 0'+'#(1 was taken over by a joint venture between the (induja Broup and #G.$/ !iat )pA. !or over five decades now Ashok 'eyland has been the technology leader in #ndiaMs commercial vehicle industry moulding the countryMs commercial vehicle profile by introducing technologies 1>

and product ideas that have gone on to become industry norms. The factories of Ashok 'eyland are at .nnore Bhandara 0Caharashtra1 (osur 02 units1 and Alwar.

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RESEARC4 ,ET4ODOLO-Y

!inancial research is a systematic design collection and analysis of data I findings relevant to specific aspect of the company. The data was collected through financial statement like?

Annual +eport Balance )heet -rofit I 'oss A,$ /ther Articles

Along with the above sources the personal interview with official of the company also revealed some useful information required foot he project report.

The calculation were done for three consecutive year via 2FFA & 2FFD 2FFD & 2F1F 2F1F & 2F11.

1A

"orking capital analysis itself is a techniques to asses the financial surrounding of the company. Cethods like ratio analysis and balance sheet analysis also helps to study the financial condition of the organi8ation.

1D

Balance S#eet !) As!(a Leyland Industries

/////////////////// in Rs. Cr. /////////////////// ,ar 567 67 $t#s ,ar 566 67 $t#s 7.78 7.78 8.88 8.88 ==.67 8.88 =?.;7 7;.>9 77.7; =?.87 97.;= ,ar 568 67 $t#s ?6.=8 79.?: ;6.>7 68.;? 8.7: =<.:8 6<.<? 7.:: ?=.7= 68.:; 78.=9 9<.<? 8.88 =;.?6 6.9: =<.<9 =9.9> 8.88 97.;; 7.?> 768.<= ,ar 685 67 $t#s 7.78 7.78 8.88 8.88 ;=.;9 8.88 ;?.<9 :.:8 76.9; ;8.>; ?>.;7 ,ar 589 67 $t#s <<.96 7<.;? ;8.<< =.?8 6.?< 7>.;9 6?.87 ;.;8 =?.>6 <.<? 67.:8 ?<.8> 8.88 ;6.=7 ;.6; ;=.<< ;8.<7 8.88 ?>.;7 6.?7 6??.;6 ,ar 589 67 $t#s 7.78 7.78 8.88 8.88 69.>9 8.88 76.99 6=.88 78.=; ;=.=; <?.=7 ,ar 58: 67 $t#s =6.<: 7>.66 6=.=> 9.7; 6.?< ;>.=? 6:.8= ;.=6 <:.96 ?.6; 68.9: >?.87 8.88 =7.69 7.>> ==.9? ;6.8? 8.88 <?.=6 ;.>? 99.9= ,ar 58: 67 $t#s 7.78 7.78 8.88 8.88 6;.=; 8.88 6<.?; 6=.>? 6<.86 79.>> =<.=8 ,ar 58> 67 $t#s ;9.>9 7>.9< 66.:= ;.?8 <.87 79.:9 6<.97 8.96 =?.>7 9.7= 7.67 <:.8: 8.88 ;6.78 6.9= ;;.6= 7=.9= 8.88 =<.=8 <.<> >6.8<

S!urces O) unds T!tal S#are Ca*ital E+uity S#are Ca*ital S#are A**licati!n ,!ney %re)erence S#are Ca*ital Reser0es Re0aluati!n Reser0es Net .!rt# Secured L!ans Unsecured L!ans T!tal Debt T!tal Liabilities

7.;< 7.;< 8.99 8.88 =>.:= 8.88 <6.6: 7<.>< 7>.76 <7.9? 68=.6= ,ar 566 67 $t#s

A**licati!n O) unds -r!ss Bl!c( Less: Accu$. De*reciati!n Net Bl!c( Ca*ital W!r( in %r!"ress In0est$ents In0ent!ries Sundry Debt!rs Cas# and Ban( Balance T!tal Current Assets L!ans and Ad0ances i2ed De*!sits T!tal CA@ L!ans A Ad0ances De))ered Credit Current Liabilities %r!0isi!ns T!tal CL A %r!0isi!ns Net Current Assets ,iscellane!us E2*enses T!tal Assets C!ntin"ent Liabilities B!!( &alue BRsC

?9.?: ;<.=6 ;=.7> 6;.8= 8.7: ?6.=7 7;.?; 6.87 :?.8> 66.=? 6>.<= 66<.8> 8.88 <<.?7 7.:9 <:.<6 <?.<? 8.88 68=.6< =.:= 76;.<:

W!r(in" Ca*ital State$ent !) As!(a Leyland C!$*any Industries

2F

BRs. In Cr!reC

%articular A. CURRENT ASSETS #nventories )undry *ebtors $ash and Bank Balance 'oans and Advances T!tal Current Assets

7868 B,arC >1.;2 2:.>: 1.F2 11.;> 9>.<;

7866 B,arC ;=.AF 1=.=> 2.AA 1F.A: ><.8>

7867 B,arC 2@.:D 1>.F2 :.:F =.=> <7.7>

B. CURRENT LIABILITIES $urrent 'iability -rovisions Total $urrent 'iability ==.>2 2.AD =A.=1 ;:.>1 1.DA ;;.=D :1.;2 :.1: :;.==

C. Net W!r(in" Ca*ital 0A & B1 ;9.87 ;8.=: 6>.>7

6C Rati! Analysis !) W!r(in" Ca*ital !) As!(a Leyland C!$*any Industries )r!$ 7868 D 7866 and 7867. 21

The +atio of Bross "orking $apital to Asset *etermined the relationship between gross working capital to total asset. Bross working capital +epresent total amount of investment in current asset. Total asset include current asset and !ixed Asset. Bross "orking $apital Bross ". $. to total Assets % Total Assets Year 7867 : =A.:D x 1FF 1F;.1= E Year 7866 : :;.A: x 1FF D2.:: % Year 7868 : 2>.@: x 1FF >@.:2 E ;9.>6F ;>.>7F <?.8?F x 1FF

Gross Working Capital to Total Asset

22

60 50 40 30 20 10 0 1 7867 27866 3 7868 Series1

An E2a$inati!n !) t#e table re0eals t#e )!ll!.in" :/ a1 Bross "orking $apital to total asset ratio varied between :D.@1 to =>.F> during three years period of review.

7C CURRENT RATIO :. 2:

$urrent Assets $urrent +atio % $urrent 'iability Year 7867 : D2.=: % =A.=1 E Year 7866 : @=.F@ % ;;.=D % Year 7868 : =2.2@ :;.== E 6.<6F 6.?:F 6.?>F

Current Ratio :
2;

1.7 1.65 1.6 S eries1 1.55 1.5 1.45 1 7867 27866 37868

INTER%RETATION :/ #deal $urrent +atio is 2?1 Thus from the above we can say that company was almost in its ideal position in the year 2F11 & 2F12 but current ratio in 2F1F & 2F11 has decrease.

;C -r!ss W!r(in" Ca*ital t! )i2ed Asset Rati! : 2=

The +atio described the relationship between gross working capital and fixed assets. Bross "orking $apital Bross ". $. and !ixed Asset +atio % !ixed Asset Year 7867 : =A.:D x 1FF 1;.@A E Year 7866 : :;.A: x 1FF 11.1@ % Year 7868 : 2>.@: x 1FF FA.@A E ;8=.==F ;66.:7F ;9<.8?F x 1FF

Gross Working Capital to fixed assets ratio :

2>

400 300 200 100 0 S eries1 S eries1

7867

7866

7868

a1 Bross "orking capital to !ixed Asset +atio is decrease row :F;.;; in 2F1F to :D=.F> in 2F11. b1 The fixed asset were continually decrees from F.@A crore in 2FFD +s. :D=.F> crore in 2F12.

=C Sales t! Net.!r(in" Ca*ital Rati! :

2@

The +atio show the number of items working capital is turnover in stated period. This ratio can also be called as working capital turnover ratio. The higher the ratio the lower is the amount of networking capital. )ales )ales to Eet "orking $apital % Eet "orking $apital Year 7867 : 22.FA x 1FF :D.F2 E Year 7866 : 22.;= x 1FF :F.;A % Year 7868: 2;.F> x 1FF 1@.@2 E 6;<.>:F >;.?<F <?.<9F x 1FF

Sale t! Net W!r(in" Rati! :

2A

140 120 100 80 60 40 20 0 1 7867 2 S eries1

7866

3 7868

2D

<C In0ent!ry t! Net W!r(in" Ca*ital Rati! : The +atio is calculate to as certain leave of inventories. #ncreased in the value of sale requires proportionate increase in inventory should not exceed the amount of net working capital an equal ratio disables. #nventory #nventory to Eet "orking $apital +atio % Eet "orking $apital Year 7867 : >1.;2 x 1FF :D.F2 E Year 7866 : ;=.AF x 1FF :F.;A % Year 7868 : 2@.:D x 1FF 1@.@2 E 6<=.<>F 6<8.7?F 6<>.=6F x 1FF

:F

In0ent!ry t! Net W!r(in" Ca*ital Rati! :

158 156 154 152 150 148 146 1 7867 S eries1 2 7866 3 7868 S eries1

The +atio of inventories to Eet "orking $apital varied between 1=;.=@ to 1=@.;1 during the three years review period the inventory to Eet "orking $apital ratio is highest of 1=@.;1.

:1

?C In0ent!ry t! Current Asset Rati! : The +atio explain the relationship of inventory to current asset. #nventory #nventory to $urrent Asset +atio % $urrent Asset Year 7867 : >1.;2 x 1FF D@.=: E Year 7866 : ;=.AF x 1FF @=.F@ % Year 7868 : 2@.:D x 1FF =2.2@ E <7.=8F ?6.88F ?7.9:F x 1FF

:2

In0ent!ry t! Current Asset Rati! :

70 60 50 40 30 20 10 0 1 7867 2 7866 S eries1

7868 3

Inter*retati!n : The +atio is highest at >2.DA in 2F12 an lower at =2.1; in 2F1F. The inventory to current ratio is continuously increasing year by year.

::

>C Net W!r(in" Ca*ital t! T!tal Asset Rati! : Eet "orking $apital Eet "orking $apital +atio % Total Asset Year 7867 : :D.F2 1F;.1= E Year 7866 : :F.;A D2.:: % Year 7868 : 1@.@2 >@.:2 E 8.7?; 8.;;8 8.;><

:;

Net W!r(in" Ca*ital t! T!tal Asset Rati! :

7889

Inter*retati!n : (igher the ratio higher will be the effective utili8ation of working capital. Eet "orking capital ratio in 2F12 less then that of the year 2F11 and 2F1F. Thus we can says that working capital in the year 2F1F 9 2F11 has not been effectively utili8ed.

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DATA ANALYSIS
The data serve as the bases or raw material for analysis. *ata collection is a term used to describe a process of preparing and collecting data 9 for example as part of a process improvement or similar project. The purpose of data collection is to obtain information to keep on record to make decisions about important issues to pass information on to others. -rimarily data is collected to provide information regarding a specific topic. There are mainly 2 types of data?9

1. %RI,ARY DATA D This includes the data collected directly by the researcher. They are those which are collected afresh and for the first time and thus happen to be original in character. 2. SECONDARY DATA DThis includes data that are readily available which is used by the researcher for studies. This are those which are collected by some one else and which have already been passed through the statistical process.

SA% BSyste$ A**licati!n A %r!duct !r Data %r!cessin"C

!inancial excellence is achieved when resources people and technology are leveraged to ensure strong cash flow and liquidity compliant and accurate financial reporting while maximi8ing the profitability. "ith )A- solutions companies can accurately manage liquidity and cash streamline processes and lower costs ensure the financial health of the enterprise as well as reduce the cost of compliance and risk in the face of a challenging economy and regulatory landscape. )A- .+- !inancials an application of )A- Business )uite helps deliver greater insight and visibility across organi8ations operational efficiency and effectiveness and flexibility to help :@

you enable efficient and compliant accounting and reporting. Eo matter the industry or si8e of your business you can implement only the software you need to solve your unique business challenges in your own time and without expensive upgrades.

AD&ANTA-ES O SA%/

Bain efficiency in finance to streamline financial processes such as reporting cycles receivables and payments

*rive strategy and growth and improve the quality of business decisions for all employees bridging analysis and planning with strategic execution

Canage risk and compliance through embedded controls and real9time monitoring and exception9based analysis

/ptimi8e working capital to accelerate cash flows manage liquidity and improve control over cash balances

T#e )!ll!.in" are t#e s!urces )r!$ .#ere I #a0e c!llected $y data:

%RI,ARY DATA:/
)A- has been planned to use from 2FF@92FFA but it has started utili8ing in almost full swing in B)#' from 2FFD92F1F )A- is one of the .+-. But #t is the leader of all .+ #n B)#' there are different modules for different department such as sales purchase finance etc. #n B)#' 3Cy )A- ecc =.F5 is used )A- is very useful and has various advantages such as time saving minimum risk no need for repeated entries

:A

 "hen raw materials are purchased the purchase department makes entries in journal through )A- and that entry automatically is also seen in financial books as well. thus there is no need for finance department to make repeated entries #E $A). /! #E-6T?9 1. !irstly purchase 0 quotations1 are made 2. materials management make entries in )A:. Then bills are made by finance department ;. then payment is made =. then entries of payment is made #E $A). /! /6-6T?9 1. <uotations are taken and Advances are received 2. sales are made :. sales department make entries in sap ;. that amount is checked and the amount is collected by finance department and then receipts are issued

SECONDARY DATA:/
1. B)#' Balance sheet 02F1F92F11 1 2. -rofit and loss )tatement

:D

;F

CONCLUSION

"orking $apital Canagement involves deciding upon the amount and composition of current assets and how to finance these assets. The greater the relative proportion of liquid assets the less the risk of running out of all cash all other things being equal. (owever the profitability also will be less. )imilarly the larger the proportion of long9term funds to finance the firm the lesser the risk of cash insolvency all other things being equal. (owever the profit of the firm is likely to be less. Thus while making decisions about composition and the extent of current assets and financing the structure the firm has to resolve the trade off between the risk and profitability. Therefore in the working capital management consider the assets and financial mixes. *ecisions relating to .!r(in" ca*ital and short term financing are referred to as working capital management. These involve managing the relationship between a firmMs short9 term assets and its short9term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short9term debt and upcoming operational expenses. it is very much crucial to

Decisi!n criteria
By definition working capital management entails short term decisions 9 generally relating to the next one year period 9 which are NreversibleN. These decisions are therefore not taken on the same basis as $apital #nvestment *ecisions 0E-G or related as above1 rather they will be based on cash flows and , or profitability. /ne measure of cash flow is provided by the cash conversion cycle 9 the net number of days from the outlay of cash for raw material to receiving payment from the customer. As a management tool this metric makes explicit the inter9relatedness of decisions relating to inventories accounts receivable and payable and cash. Because this number

;1

effectively corresponds to the time that the firmMs cash is tied up in operations and unavailable for other activities management generally aims at a low net count.

#n this context the most useful measure of profitability is +eturn on capital 0+/$1. The result is shown as a percentage determined by dividing relevant income for the 12 months by capital employed7 +eturn on equity 0+/.1 shows this result for the firmMs shareholders. !irm value is enhanced when and if the return on capital which results from working capital management exceeds the cost of capital which results from capital investment decisions as above. +/$ measures are therefore useful as a management tool in that they link short9term policy with long9term decision making

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SU--ESTION

Bajaj )teel #ndustries should trust to update the technology Bajaj )teel #ndustries should constructed of full resources utili8ation. Bajaj )teel #ndustries should constructed on there look product and price consistency. Bajaj )teel #ndustries should relia on cost efficiency and strong financial resources. /perating expenses can be reduced by making effective operating system.

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LI,ITATIONS
11 21 :1 ;1 'imited manual were available. -ositive performance of working capital will reflact on the financial health. )tudy is best of Bhandara +egion only. )tudy period is very low 0two months1

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