INTRODUCTION

INTRODUCTION

The success and progress of any firm is depends upon the Financial performance. Finance is one
of the most requisites of a business and a modern management, obviously depends largely on the
efficient management of finance. Finance places a vital role in determining the strength, weakness
and control funds of the organization, without Finance no organization can perform its activities
in modern enterprises.

Every business in this world is directing its production activities towards the end goal of economic
development. A developing company requires an increasing volume of investments not only in the
fixed assets but also in working capital. Because of lack of proper investment, the rate of growth
of such entities depends to a great extent on the effective utilization of its capital.

Working capital is an important for efficiently carrying out the day to day operations of every
organization. In all concerns the problem of effective working capital management is of paramount
significance as considerable amount of funds are invested in the forms of various current assets.
In the absence of proper and efficient management of working capital, it would be difficult to
achieve the basic objectives of organizational efficiency.

The present study is undertaken with a view of analyzing the working capital position of the
company and to understand how the inventories, receivables management and cash management
works. The present study is expected to throw light into the way in which the working capital is
utilized in the TRACO CABLE LTD.

SIGNIFICANCE OF THE STUDY

Capital is the key input of the production, distribution and development. Therefor it can be
described as the life blood of industry and is pre- requisite for accelerating the process of industrial
development. Working capital is the nerve center of every business concern and undertaking can
work efficiently without adequate amount of working capital. Working capital has to be regarded
as one of the conditioning factors in the long run operation of the firm. Because, the adequate
amount of working capital or current assets, long term investments or fixed assets cannot function.

The need of the study is to analyze the working capital position of the company and to understand
how the inventory, receivables management and cash management works. The study in TRACO
CABLE COMPANY is very important because of the scale of the company. The study is very
helpful to know the working capital management. It also helps in ascertaining how the company
performs in future. This study will help the firm to male projections of working capital
requirements for the next two years. This study also helps to understand the liquidity and
profitability of the company.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying now research is done systematically. In that various steps,those
are generally adopted by a researcher in studying his problem along with the logic behind them.

“The procedures by which researchers go about their work of describing, explaining and predicting
phenomenon are called methodology”

TYPE OF RESEARCH

This project “A Study on Working Capital Management in TRACO CABLE COMPANY” is

considered as an analytical research.

Analytical Research is defined as the research in which, researcher has to use facts or
information already available, and analyze these to make a critical evaluation of the facts, figures,
data or material.

RESEARCH DSIGN

The type of research used in this study is analytical. This is an attempt to evaluate the performance
of the company through the financial statement analysis by the financial data which are disclosed
in accounting policies.
SOURCE OF DATA

The data is collected for this study is only secondary sources.

Secondary data:

The secondary data are those which already collected and stored. Secondary data easily get those
secondary data from records, annual reports of the company etc. It will save the money, time and
efforts collect data.

The major source of data for this project was collected through annual reports of 5 year period
from 2012-2016 and some more information collected from internet and text sources.

SAMPLING DESIGN

Sampling unit : Financial statement

Sampling size : Last five years financial statement (period from 2012-2016)

TOOLS USED FOR ANALYSIS OF DATA

The data were analyzed using the following tools. They are:

 Ratio analysis

 Balance sheet

SCOPE OF THE STUDY

The scope of the study is limited to the working capital management of TRACO CABLE
COMPANY LTD, which is one of the Government undertakings functioning in Kerala. The study
has been done for a period of 5 years from 2012-2013 to 2015-2016
The study is designed to cover the analysis of working capital, liquidity and solvency position of
the company on the basis of figures taken from financial statement published by it. The study of
working capital is based on tools like ratio analysis, operating cycle, etc. using the study the firm
can get the necessary information to analyze and formulate strategies to improve the working
capital position of the company

OBJECTIVE OF THE STUDY

PRIMARY OBJECTIVES

 To forecast the working capital requirement of TRACO CABLE COMPANY for next two
years

 To examine the solvency and liquidity position of TRACO CABLE COMPANY

SECONDARY OBJECTIVES

 To study the activities in each department

 To understand the production procedure

 To study the financial position of TRACO CABLE COMPANY

LIMITATION OF THE STUDY

Time is the most important constraint. The study is mainly based on secondary data.
Findings and conclusions of its study are based on the information given in the annual
reports of the company and are valued only with respect, to figures given there. Through
adequate measures have been taken to verify the reliability of the secondary data,
possibility of normal errors inherent to research, cannot be completely avoided.
INDUSTRY PROFILE

World Scenario

The economic liberalization and industrial globalization lead to spectacular development

of the infrastructure such as buildings, roads and cables are the crucial element that wire up the
length and breadth of the countries as power and telecom networks. Now the world is all set to
see a "war of the accesses" with ever increasing demand for cables and conductors. World have
learnt with time the “ philosophy of co-operation and co-existence” obviously leading to pooling
of both technical and financial resources for a better economically viable environment for
industrial growth and development.

Indian Scenario

INDIA has made remarkable progress in recent years in the manufacture of cables and
conductors. The country has not only achieved self sufficiency in this field but has also made a big
head way into the international market. Rural electrification and telecommunication networks
undertaken by various state governments as part of national policy lay the crucial infrastructure
backbone for the recently liberalized industry with increased Private Public Participation (PPP)
and privatization. The investment strategy of the government primarily relies on promoting
investment through a combination of public investment with private investment participation. PPP
will promote and streamline strategies for future development and management of the economic
and social infrastructures ensuring effective use of resources, access to modern technology, timely
implementation and operation for rapid economic growth. The Indian economy grew at an average
annual rate of 9% in 2008 before global economic meltdown. Despite the adverse circumstances
Indian economy grew by 6.7% in 2009, 7.9% in 2010, and 8.5% in 2011 and is expected to achieve
a growth rate of 9% in the year 2012. The telecom sector and the power sector needs infrastructure
development which is crustal for fueling for the growth for the economy however power shortage
remain a problem in many part of the country and the distribution segment (transition and
distribution) shows steady growth in the requirement for cables and conductors. In the telecom
sector private investment increased from Rs.6crores in 2003 to Rs.51crores in 2010 and
competition and access to consumers seems to be the driving force. Therefore the pace of economic
and social development of the nation depend to a very large extend of the development of
infrastructure in the power sector as well as in the telecommunication sector.

The market segmentation and structure of the cable industry in India are there both
in Power sector as well in Telecom sector. Power cables are segregated into high and low voltage
varieties. Telecom cables are classified as high capacity cables (Optic Fiber Cables) and low
capacity cables (Jelly Filled Telecom Cables). Organized players have higher presence in Indian
Telecom sector since it involves higher capital and technology inputs when the higher presence of
unorganized players in Indian power cables segment is evident for reasons of low investment. The
current scenario prevailing in the Indian cables industry has ample focus on government policy
along with demand- supply position. In this context, special focus has been given to the impact of
government decisions on the industry for direct foreign investment putting an end to Public sector
monopoly in the Industry

State Scenario

Emphasis is given for 100% electrification giving importance to rural electrification as a

government policy in Kerala State. Moreover telecommunication network is wide spread all over
the state including remote rural areas. Power connection and telephone connection have become a
basic need for everyone in the state. Due to the onslaught of the mobile phones, in the country, the
requirement for telecom cables are diminishing in the state also. TRACO in public sector and
around ten manufacturers in the private sector compete in the market for power cables and
conductors in the state. TRACO has got a manufacturing capacity of 6000 metric ton
conductors/per annum, where as the manufacturing capacity of all the private manufacturers taken
together constitute only 5500 metric ton/per annum. All the private companies are located in the
southern part of the state in Trivandrum and Kollam district. TRACO is logistically located at
central Kerala. When Kerala State Electricity Board floats tenders for conductors the private
manufacturers does not quote for consignees at northern part of Kerala due to high transportation
cost. Hence TRACO has got a monopoly in bare conductors, distribution cables and control cable
market when transmission cables are mostly dominated by private players of outside state.

INDUSTRY PROFILE

Early telegraph system were the first form of electrical cabling, but transmitted only small
amounts of power. Gutta-percha insulation used for the first time transatlantic cables was
unsuitable for building writing use since Gutta-percha deteriorated rapidly when expose to
air. The first power distribution system developed by Thomas Edison used copper rods,
wrapped in jute and placed in rigid pipes filled with a bituminous compound. Although
vulcanized rubber had been patented by Charles Goodyear in 1844, it was not applied to
cable insulation until the 1880s, when it was used for lighting circuits. Rubber-insulated
cable was used for 11000 volt circuits in 1897 installed for the Niagra Falls Power Project.
Oil-impregnated paper insulated high voltage cables were commercially practical by 1895.
During Second World War several varieties of synthetic rubber and polyethylene insulation
were applied to cables. Modern power came in variety of size, material and type, each
particularly adapted to its uses. Large single insulated conductors are also sometimes called
power called power cables in the trade.

Cable consists of three major components, namely conductors, insulation protection. The
constructional detail individual cables will vary according to their application. The
construction and material are determined by three main factors:- working voltage, which
determines the thickness and composition of insulation ;- current carrying capacity, which
determines the cross-section of the size of conductors;- environmental conductors such as
temperature, chemical or sunlight size of exposure, and mechanical impact, which
determines the form and composition of the cable jacket enclosing conductors. Since power
cable must be flexible, the copper or aluminum conductors are made of stranded wire,
 although very small cable may use solid conductors. The cable may include an insulated
conductor used for the circuit neutral or for ground [earth] connection.
The overall assembly may be round or flat. Filter strands may be added assembly to
maintain its shape. Special purpose power cable for overload vertical use may have
additional elements such as steel or Kevlar structural support. For circuits opening at 2400
volts between conductors or more, shield may surround each conductor. The equalizes
electrical stress on the cable insulation. The technique was patented by Martin Hochstetler
in 1916, and the shield is sometimes called Hochstetler shield. The individual conductor
shields of a cable are connected to earth ground at one or both ends of a length of cable.

COMPANY PROFILE

TRACO CABLE COMPANY, is incorporated in the year 1960; the foundation stone of
Irimpanam unit was laid down by Shri Manubhai M Shai. The company started its operation
in the year 1964. Shri M.D Jose was the first chairman and the managing director on whose
initiation Irimpanam unit of TRACO CABLE COMPANY commenced its operation.

TRACO CAABLE COMPANY, a Premier Kerala Government Company, commenced

operations in the year 1964, manufacturing high quality Electric Cables and Wires in Technical
Collaboration with M/s. Kelsey Engineering Ltd., Canada. Since then TRACO has been in the
forefront in meeting the needs of Public Sector Undertakings in India like Railways, Electricity
Boards of various states in the country and others for AAC/ACSR, Power and Signaling cables.

One of the India’s most sought after Paper Insulated Lead Sheathed Telecommunication Cables
were produced by TRACO in collaboration with Hindustan Cables, West Bengal under an
agreement signed in 1974 until the liberalization of Licensing policy in the country, TRACO was
one of the two manufactures of Telephone Cables in India and only one in the whole of South
India. Always playing its humble role in the process of nation building, TRACO’s cables carry
energy, actuate signals and help to connect people in far flying areas in this vast subcontinent,
that’s India with its quality products.

The superiority of TRACO cables is the result of better know-how combined with well equipped
machinery and efficient work force. Rigorous quality control is maintained during every stage of
production, which ensures, that the products going into the market are according to the IS
specifications. With the progress in Cable Technology, Paper Insulated Cables gave way to the
much more sophisticated Jelly Filled Telephone cables which are superbly suited for
communications. TRACO was one among those who first perceived the opportunities inherent in
this new development. It soon went into Technical collaboration with M/s. General Cables Inc.,
USA, world leaders in the Communication cable field and manufactured them in India to exacting
standards

The company started its function with a capital of Rupees one core divided into 250000
per: shares of Rs.10 each and 750000 equity shares of Rs.10 each. The unit was has been
manufacturing cables required for the Railways, the BSNL and the KSEB. Traco's power cable
manufacturing unit has a workforce of 210 and the telephone cable division around 450. The
estimated turnover of Traco cables is around Rs 44.8crore

MAJOR CUSTOMERS

 Kerala State Electricity Board (KSEB) is the current customer

 All Kerala Electricity Board in India

 Railways

 Private firms
 ORGANIZATION STRUCTURE OF TRACO CABLE LTD

DIVISIONAL MANAGER

FINANCE HR Q& A STORE

DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT

MARKETING MAINTENANCE PRODUCTION

DEPARTMENT DEPARTMENT DEPARTMENT

UNITS OF TRACO CABLE COMPANY LIMITED

1. Corporate office
The registered and corporate office of traco cable Company is located in Cochin,
panampilly nagar the industrial city of Kerala. Board of directors, MD’s office, and all main
heads of traco Cable Company is located at the registered and corporate office.
2. Tiruvalla unit
 In tiruvalla unit of traco cables having two major divisions they are power cable division
and telephone cable divisions
3. Irimpanam unit
In irimpanam unit also having two divisions

 Power cable division.

 Telephone cable division.

4. Kannur unit
Kannur unit mainly focused on house wiring cables.

INFRASTRUCTURE AVAILABLE(IRUMPANAM UNIT)

Land : 15.38 Hectares

Plant area : 7500 sq.mtrs

Total built up area : 9500 sq. mtrs

Electricity : 2 nos. 1000KVA transformers in addition to

K.S.E.B. power connection.

Water : 3 nos. bore wells for process water and

3 nos. well for Drinking water (7000ltrs/day)

Cooling tower : 1 FRP/ Spray cooling tower with an

overhead tank and ground level tank

ORGANISATIONAL POLICY
 WORK
IMPROVEMENT

MISSION
&VISION

PRODUCT METHOD
IMPROVEMENT IMPROVEMENT

BOARD OF DIRECTORS

CHAIRMAN

Shri.K.S.SRINIVAS, IAS,
ADDITIONAL SECRETARY TO GOVERNMENT,
INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM.
MANAGING DIRECTOR
Cdr. (Retd) K.SHAMSUDDIN
MANAGING DIRECTOR
TRACO CABLE COMPANY LIMITED,
COCHIN – 682036.
DIRECTORS
1, Shri.K.S.SRINIVAS , IAS
ADDITIONAL SECRETARY TO GOVERNMENT,
 INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM.
2, Cdr. (Retd) K.SHAMSUDDIN
MANAGING DIRECTOR,
TRACO CABLE COMPANY LIMITED,
COCHIN – 682036.
3, Shri.M.RADHAKRISHNAN
JOINT SECRETARY TO GOVERNMENT,
FINANCE DEPARTMENT,
GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM- 695001
4, Shri.R.MADHUSOODHANAN NAIR
MANAGING DIRECTOR
INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,
5, Shri.K.ASOKAN,
MEMBER (TRANSMISSION & TRANSMISSION),
KSEB,
THIRUVANANTHAPURAM.
6, Shri.S.VENKADEESWARAN
MANAGING DIRECTOR,
TELK,
ANGAMALY SOUTH P.O,
ERNAKULAM DIST.
 ORGANISATIONAL SETUP

The company‘s Registered office is at Panampilly Nagar, Kochi with manufacturing units at
Irimpanam in Ernakulam District and Thiruvalla in Pathanamthitta District and also a new Unit at
Thalassery in Kannur District. TRACO CABLE COMPANY LIMITED maintains the traditional lines
of management having pyramid structure of hierarchy. The Board of Directors consists of members
appointed by the Government of Kerala and the Managing Director is the Chief Executive Officer who
delegates the authority to the Unit Chiefs and other department heads. The Head of Irimpanam unit is
Mr.Boban George, Senior Manager and different departments such as Production, Quality Assurance,
Finance, Maintenance, Personnel & Administration, Stores, Purchase and Marketing are having
department heads reporting to the unit head.

MANAGEMENT IN IRIMPANAM UNIT

 SENIOR MANAGER (UNIT HEAD) - BOBAN GEORGE

 SENIOR MANAGER(MAINTENENCE) - K.S. KRISHNAKUMAR
 MANAGER( P&A) - JOSHY ABRAHAM
 MANAGER (P&A) - JOHN VARKEY
 MANAGER (MARKETING) - BOBY GEORGE
 MANAGER (FINANCE) - MANOJ BINDHU
 MANAGER (PRODUCTION) - MANOJ A.T
 MANAGER (QA&STORES) - DEEPA MERIN JACOB
REVIEW OF LITERATURE

Sagan in his paper (1955), 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’s
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.

Realizing the death of pertinent literature on working capital management, Walker in his study
(1964) made a pioneering effort to develop a theory of working capital management by empirically
testing, though partially, three propositions based on risk-return 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.

Welter in his study (1970) stated that the 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 and working capital
tied up in each delay center 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 among the different delay centers. However, better
information and improved staff involve cost.

Agarwal (1983) 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 all though the working capital per rupee of sales showed a
declining trend over the years but still there appeared a sufficient scope for reduction investment
in almost all the segments of working capital.

Chakraborty (1973) approached working capital as a segment of capital employed rather than a
mere cover of creditors. He emphasized that working capital is the fund to pay all the operating
expenses of running a business. He pointed out that return of capital employed, an aggregate
measure of overall efficiency in running a business, would be adversely by excessive working
capital. Similarly, too little working capital might reduce the earning capacity of the fixed capital
employed over the succeeding period. For knowing the appropriateness of working capital amount,
he applied Operating Cycle(OC) Concept.

Warren and Shelton (1971) applied financial simulation 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.

Verma (1989) 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 capital 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-à-vis the norms
suggested by Tandon Committee.

Wilson N describes working capital is a financial metric which represent the amount of day by day
operating liquidity available to a business. Along with fixed assets such as plant and equipment,
working capital is considered a part of operating capital. It is calculated as current assets minus
current liabilities. A company can be endowed with assets and profitability, but short of liquidity,
if these assets cannot readily be converted into cash.

According to P Chandra, under a flexible policy the investment in current assets is high. This means
a huge balance of cash and marketable securities, carries large amount of inventories, and grants
generous terms of credits to customers. Under a restrictive policy, the investment in current assets
is low this means that the firms keeps a small balance of low. Cash and marketable securities,
manage with small amount of inventories and offer stiff terms of credit.

According to the article of Joshua Kennon “The number one reason most people look at balance
sheet is to find out a company’s working capital position. It reveals more about the financial condition
of a business than almost any other calculation. It tells you what would be left if a company raised all
of its short term resources, and used them to pay off its short term liabilities. The more working capital,
the less financial stain a company experiences. By studying company’s position, you can clearly see if
it has the resources necessary to expand internally or if it will have to turn to a bank and take on debt”.

Bhatt V. V. (1972) widely touches upon a method of appraising working capital finance applications
of large manufacturing concerns. It states that similar methods need to be devised for other sectors
such as agriculture, trade etc. The author is of the view that banks while providing short-term finance,
concentrate their attention on adequacy of security and repayment capacity. On being satisfied with
these two criteria they do not generally carry out any detail appraisal of the working of the concerns.

Smith Keith V. (1973) believes that Research which concerns shorter range or working capital
decision making would appear to have been less productive. The inability of financial managers to
plan and control properly the current assets and current liabilities of their respective firms has been the
probable cause of business failure in recent years. Current assets collectively represent the single
largest investment for many firms, while current liabilities account for a major part of total financing
in many instances. This paper covers eight distinct approaches to working capital management. The
first three - aggregate guidelines, constraints set and cost balancing are partial models; two other
approaches - probability models and portfolio theory, emphasize future uncertainty and interdepencies
while the remaining three approaches - mathematical programming, multiple goals and financial
simulation have a wider systematic focus.
Natarajan Sundar (1980) is of the opinion that working capital is important at both, the national and
the corporate level. Control on working capital at the national level is exercised primarily through
credit controls. The Tandon Study Group has provided a comprehensive operational framework for the
same. In operational terms, efficient working capital consists of determining the optimum level of
working capital, financing it imaginatively and exercising control over it. He concludes that at the
corporate level investment in working capital is as important as investment in fixed assets. And
especially for a company which is not growing, survival will be possible only so long as it can match
increase in operational cost with improved operational efficiency, one of the most important aspects
of which is management of working capital.
Kaveri V. S. (1985) has based his writing on the RBI‟s studies on finances of large public limited
companies. This review of working capital finance refers to two points of time i.e., the accounting
years ending in 1979 and 1983 and is based on the data as given in the Reserve Bank of India on studies
of these companies for the respective dates. He observes that the Indian industry has by and large failed
to change its pattern of working capital financing in keeping with the norms suggested by the Chore
Committee. While the position of working capital management showed some investment between
1975-79 and 1979-83, industries have not succeeded in widening the base of long-term funds to the
desired extent. The author concludes with the observation that despite giving sufficient time to the
industries to readjust the capital structure so as to shift from the first method to the second method,
progress achieved towards this end fell short of what was desired under the second method of working
capital finance.
N. C. Gupta study (1987) examined that the determinants of total inventory investments 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 sale change,
one -lagged sales change, inventory stock at the beginning, gross fixed investment during the year,
flow of net debt (external finance) and profits net of dividend and taxes but the gross of depreciation
provision ( retained earnings or internal finance) . Demand factor and external finance turned out to be
significant determinants of 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.
Cohn and Pringle in their study (1973) illustrated the extension of Capital Asset Pricing Model
(CAPM) for working capital management decisions. They tried to interrelate long – term 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
firm’s 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 decision, the firm is continually subjects
to shifts in the risk of its equity. The fluid nature of working capital, can be exploited so as to offset or
moderate such swings.
Wilson N describes working capital is the financial metric which represent the amount of day by day
operating liquidity available to a business. Along with fixed asset such as plant and equipment, working
capital is considered a part of operating capital. It is calculated as current assets minus current
liabilities. A company can endowed with assets and profitability, but short of liquidity if these assets
cannot readily be converted into cash.
Bhattacharyya Hrishikes (1987) tries to develop a comprehensive theory and tool of working capital
management from the system’s point of view. According to this study, capital is often used to refer to
capital goods consisting of a great variety of things, namely, machines of various kinds, plants, houses,
tools, raw materials and goods-in-process. A finance manager of a firm looks for these things on the
assets side of the balance sheet. For capital he turns his attention to the other side of the balance sheet
and never commits a mistake. His purpose is to balance the two sides in such a way that net worth of
the firm increases without increasing the riskiness of the business. This balancing is financing, i.e.,
financing the assets of the firm by generating streams of liabilities continuously to match with the
dynamism of the former. The study is an improvement of the concept of Park and Gladson who were
not able to capture the entire techno-financial operating structure of a firm.

Rao K.V. and Rao Chinta (1991) observe the strong and weak points of conventional techniques of
working capital analysis. The result has been obviously mixed while some of the conventional
techniques which could comprehend the working capital behavior well; others failed in doing the job
properly. The authors have attempted to evaluate the efficiency of working capital management with
the help of conventional techniques i.e., ratio analysis. The article concludes prodding future scholars
to search for a comprehensive and decisive yardstick in evaluating the working capital efficiency.

Hamlin Alan P. and Heath field David F. (1991) opine that working capital is necessary input to the
production process and yet is ignored in most economic models of production. The implications of
modeling the time dimension of production, and hence, the working capital requirements of firms are
explored, with the particular stress placed on the competitive advantage gained by firms that retained
flexibility in the time structure of their production. In this article they have attempted to explore only
this most basic role of time in the production process and so focus is on the implications of explicitly
recognizing the need for working capital