A

SUMMER TRAINING REPORT

ON
WORKING CAPITAL MANAGEMENT AT GLIMPSE INDIA

Submitted in partial fulfillment of the requirement for the

Award of the Degree of Master in Business Administration
(Session 2016-2018)
M.B.A. 3rd Semester
Submitted by:
Palak
Roll No: 23
MBA SEC ‘A’ Final
Submitted to:

UNIVERSITY SCHOOL OF MANAGEMENT

KURUKSHETRA UNIVERSITY, KURUKSHETRA
1
 DECLARATION

I, Palak hereby declare that I have completed the report entitled assigned to me by the Institute,
to be submitted in the partial fulfillment of the MBA 2 Year Degree from Kurukshetra
University. Further, I declared that this is original work done by me and the information
provided in the study is authentic to the best of my knowledge and belief.

Palak

2
 ACKNOWLEDGEMENT

In this project, I have made an honest and dedicated attempt to make the Project Report so easy
to understand for a person who is willing to get knowledge about the WORKING CAPITAL.

I would like to thank GLIMPSE INDIA PVT LTD. that gave me the honour to complete my
summer training in the field of Finance I would like to thank all the employees and associates of
Glimpse India who really helped me in understand all the functions and activities of the
organization from time to time.

I am deeply indebted to my Chairperson Prof. Sudesh, Chairperson, USM, KUK because she
gave me opportunity of making project report. I am also thankful to my lecturer as well as my
supervisor (Guide) Dr. Saloni for their kind support & suggestion for making project report.

Palak

MBA (Final)’A’

Roll no:23

3
Sr No. Title of the chapter Page No.

1. Textile Industry
5-6
1.1 Industry profile

2. Glimpse India 7-12

Company Profile

3. Research Methodology

3.1 Meaning of Research

13-17
3.2 Scope of study

3.3 Research Design

3.4 Sources of data collection

4. Introduction to working capital management

18-34
4.1 Concept of working capital management

4.2 Types of working capital management

4.3 Sources of data collection management

5. Analysis And Interpretation 35-49

6. Finding 50-51

7. Conclusion 52

8. Bibliography 53-54

4
 CHAPTER 1

INTRODUCTION TO INDUSTRY

The textile industry is a group of related industries which uses a variety of natural and/or
synthetic fibers to produce fabric. It is a significant contributor to many national economies,
encompassing both small and large- scale operations worldwide.

Subdivision of the textile industry into its various components can be approached from several
angles. The classical method of categorizing the industry involves grouping the manufacturing
plants according to the fiber being processed, that is, cotton, wool, or synthetics. The modern
approach to textile industry categorization, however, involves grouping the manufacturing plants
according to their particular operation:-

 Designing and sampling

 Yarn scouring( cotton, jute, wool, polyester etc)
 Yarn finishing
 Dye processing
 Woven fabric finishing
 Knit fabric
 Bathmat tufting
 Bathmat dying
 Bathmat tumbling and softening
 Passing and packaging
 Stock and yarn dyeing and finishing

India has been well known for her textile goods since very ancient times. The traditional textile
industry of India was virtually decayed during the colonial regime. However, the modern textile
industry took birth in India in the early nineteenth century when the first textile mill in the
country was established at fort gloater near Calcutta in 1818. The cotton textile industry,
however, made its real beginning in Bombay, in 1850s. The first cotton textile mill of Bombay
was established in 1854 by a Parsi cotton merchant then engaged in overseas and internal trade.

5
Indeed, the vast majority of the early mills were the handiwork of Parsi merchants engaged in

yarn and cloth trade at home and Chinese and African markets.

The first cotton mill in Ahmedabad, which was eventually to emerge as a rival centre to
Bombay, was established in 1861. The spread of the textile industry to Ahmedabad was largely
due to the Gujarati trading class.

The cotton textile industry made rapid progress in the second half of the nineteenth century and
by the end of the century there were 178 cotton textile mills; but during the year 1900 the cotton
textile industry was in bad state due to the great famine and a number of mills of Bombay and
Ahmedabad were to be closed down for long periods.

PRIMARY CONTRIBUTION OF TEXTILE INDUSTRY TO INDIAN

ECONOMY:-

The Indian textile industry has a significant presence in the economy as well as in the
international textile economy. Its contribution to the Indian economy is manifested in terms of its
contribution to the industrial production, employment generation and foreign exchange earnings.
It contributes 20% of industrial production, 9% of excise collections, 18% of employment in the
industrial sector, nearly 20% to the country’s total export earnings and 4% to the Gross Domestic
Product.

In human history, past and present can never ignore the importance of textile in a civilization
decisively affecting its destinies, effectively changing its social scenario.

6
 CHAPTER 2
INTRODUCTION TO GLIMPSE INDIA

Name of the company Glimpse India

Name of the owner Mr. Manoj Kumar

Mr. Parveen Kumar

Departments in Glimpse Purchasing Department

India
Production Department

Marketing Department

Shipping Department

Accounting Department

Address E-42 Industrial area, Model town

Panipat-132103(Haryana)

Website www.glimpseindia.com

E-mail glimpse@ndf.vsnl.net.in

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 Founded in 1996, Glimpse India is a leading textile company internationally, and one of
the largest manufacturers of textiles for the home sectors.
 ‘Glimpse India’ has established itself as one of the most reputed “Manufacturer &
Exporters” of Home Furnishing Products in panipat (India) which is the hub of
Handloom products in Northern India.
 With an experience of more than 18 years of serving the most prestigious clients all our
the globe up to their satisfaction.

VISION

To be one of the most preferred & trusted source for home furnishing textile products,
which on one hand would directly enhance the growth of our business associates, and on
the other enhance the quality of living, home & family life of the final consumers of our
products. Our whole team at Glimpse India strongly believe in this vision of ours, and we
are fully committed towards it.

MISSION

To bring comfort, beauty and style to homes across the world by means of well designed,
well produced, and well-coordinated articles.
Our main focus is to deliver Quality products at the most Competitive Prices. We also
help the customers in developing new products for their range and ensure on Time
Deliveries.
Building strong, positive & lasting relationships.
Creating & developing new designs as per trends, and always offering something new to
the market.

8
Ensuring growth & delivering value to the company, it's employees & associates.
Delighting customers across multiple segments.
To enhance environmental conscience in employees, partners, & consumers and regularly
come with new environmental friendly techniques of production as well as reuse of
materials etc.
Demonstrating continual performance in all spheres while conducting business.

ENVIRONMENT

We are sensitized and fully aware of our obligations towards environmental protection.
None of our facilities cause water or air pollution. We have effluent treatment plants
(ETP) that ensure that wastes are well treated. We also take care that noise pollution is
kept under control and decibel of sound remains well below the unsafe levels. ..

PRODUCTS

Bath Mats, Shower Curtains, Tub Mats, Bed spreads, Throw, Pillowcases, Quilts,
Cushions, Chair pads, Floor Rugs, Cotton Rugs, Wool Rugs, Table Covers, Napkins,

Runner, Towel, Kids collection, Knitted.

PRODUCTION PROCESS

Glimpse’s production process is semi-vertical, which means the company has practically
all production sectors at its disposal, except for spinning and some finishing services such
as carding.

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SWOT ANALYSIS

STRENGTHS: A firm's strengths are its resources and capabilities that can be used as a basis
for developing a competitive advantage. Examples of such strengths include:

1. Indian Textile Industry is an Independent & Self-Reliant industry.

2. Abundant Raw Material availability that helps industry to control costs and reduces the lead-
time across the operation.
3. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry.
4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry.
5. India has great advantage in Spinning Sector and has a presence in all process of operation and
value chain.
6. India is one of the largest exporters of Yarn in international market and contributes around
25% share of the global trade in Cotton Yarn.
7. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the
country's total export.
8. Industry has large and diversified segments that provide wide variety of products.
9. Growing Economy and Potential Domestic and International Market.
10. Industry has Manufacturing Flexibility that helps to increase the productivity.

WEAKNESSES: A firm's weaknesses are:-

1. Indian Textile Industry is highly Fragmented Industry.

2. Industry is highly dependent on Cotton.
3. Lower Productivity in various segments.
4. There is Declining in Mill Segment.
5. Lack of Technological Development that affect the productivity and other activities in whole
value chain.

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6. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and
transportation Time.
7. Unfavorable labor Laws.
8. Lack of Trade Membership, which restrict to tap other potential market.
9. Lacking to generate Economies of Scale.
10.Higher Indirect Taxes, Power and Interest Rates.

OPPORTUNITIES: The external environmental analysis may reveal certain new

opportunities for profit and growth. Some examples of such opportunities include

1. Growth rate of Domestic Textile Industry is 6-8% per annum.

2. Large, Potential Domestic and International Market.
3. Product development and Diversification to cater global needs.
4. Elimination of Quota Restriction leads to greater Market Development.
5. Market is gradually shifting towards Branded Readymade Garment.
6. Increased Disposable Income and Purchasing Power of Indian Customer opens New Market
Development.
7. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft
and other segments of the industry.
8. Greater Investment and FDI opportunities are available.

THREATS: Changes in the external environmental also may present threats to

the firm. Some examples of such threats include:

1. Competition from other developing countries, especially China.

2. Continuous Quality Improvement is need of the hour as there are different demand patterns all
over the world.

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3. Elimination of Quota system will lead to fluctuations in Export Demand.

4. Threat for Traditional Market for Power loom and Handloom Products and forcing them for
product diversification.
5. Geographical Disadvantages.
6. International labor and Environmental Laws.
7. To balance the demand and supply.
8. To make balance between price and quality.

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 CHAPTER 3
RESEARCH METHODOLOGY

MEANING OF RESEARCH:

Research in general refers to the search of knowledge. One can also define research as a
scientific & systematic collection of information. In simple words research is the careful
investigation or enquiry of markets especially through search for new facts in any branch of
knowledge. Research refers to the systematic method consisting of :

ENUNCIATING THE PROBLEM

FORMULATING A HYPOTHESIS

COLLECTING THE FACT OR DATA

ANALYZING THE FACTS

REACHING CERTAIN CONCLUSIONS

 Enunciating the problem,

 Formulating a hypothesis,
 Collecting the fact or data,
 Analyzing the facts and
 Reaching certain conclusions either in the form of solutions towards the concerned problem or
in certain generals for some theoretical formulation.

13
Research methodology is a way to systematically solve the research problem. It may be
understood as the science of studying how research is done. Research in the common parlance
refers to a search for knowledge.

JUSTIFICATION OF STUDY

This study helps in knowing the working capital requirement of the company. This study also
describes certain factors that explain measures that how we can make use of working capital
more effective. Proper management of working capital reduces the cost and increases the value
of a firm while a wrong decision can adversely affect the value of the firm. These all practical
points are very difficult to be understood through books therefore this study provides a practical
knowledge on the management of working capital concept.

SCOPE OF THE STUDY

This study has widened the scope for studying the company on various other parameters:-

 The present study is extended to access the present working condition of the company.
 The study is used to know the financial condition of the company.
 From the present study we can know the areas of short-term capital utilization.

RESEARCH DESIGN
The research design constitutes the blueprint for the collection, measurement and analysis of
data. It aids the scientists in the allocation of his limited resources by posing actual choices.

“Research Design is the plan and structure of investigation so conceived as to obtain answer to
research questions.”

14
 So in brief research design must contain at least following points:

 Clear statement of research problem.

 Procedure and techniques to be used for gathering information.
 Methods used in processing and analyzing the data.

 TYPES OF RESEARCH DESIGN:

 Exploratory research.
 Descriptive research.

 RESEARCH DESIGN USED:

The research design used in this project report is descriptive research design. A Descriptive
research design is a scientific method which involves observing and describing the behavior of a
subject without influencing it in any way.

The methods used in context of this research design are:

 The study of concerning literature,

The important features of this research design are listed as follows:

 The sampling design used is Non-Probability Sampling design and it is flexible in nature.
 There is a no pre-planned design for the analysis.
 No fixed decisions about the logistics operational procedures.

SOURCES OF DATA COLLECTION

Data collection is in fact, the most important aspect of a survey. While collecting data utmost
care must be exercised because data constitute the foundation on which the superstructure of
statistical analysis is built. If the data are inaccurate and inadequate the entire analysis may be
faulty and the decision taken would be misleading.

15
 Both Primary and Secondary mode of data collection has been used in the project. The different
sources for collecting data are as follows-

PRIMARY SECONDARY
DATA DATA

 Primary Data
 Interview of Export House Owner
 Interaction with Export House Accountant

 Secondary Data
Secondary data are those which have already been collected by someone else and which have already
been passed through the statistical process. The Secondary data consist of reality available companies
already complied. statistical statements. Secondary data consists of not only published records and
reports but also unpublished records.

Here we done the analysis on basis of secondary data, which included-

 Balance sheet of company

 Profit and loss A/C of GLIMPSE INDIA
 Cost sheets, & Trial balance of five years for the period

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 LIMITATIONS OF STUDY

Efforts had been made to collect the relevant information through the sources available; still
some relevant information could not be gathered.

 The time duration could not provide ample opportunity to study every detail of management in
the company.
 There are restrictions not to visit some specific areas such as cash room, storeroom etc.
 Some figures have not been disclosed by the company on account of confidential report,
leading to restriction in analysis.
 Since most of the data used is secondary in nature, this poses the constraints on the validity and
reliability of the data.
 There was a problem in taking appointments from the managers.
 Sources were confounded some time to give proper information.
 More Dependence on the secondary data limits the information gathered.

17
 CHAPTER 4
INTRODUCTION TO STUDY

 WORKING CAPITAL MANAGEMENT

Working capital is how much in liquid assets that a company has on hand. Working capital is
needed to pay for planned and unexpected expenses, meet the short-term obligations of the
business, and to build the business.

In business, two types of assets are used:-

 Fixed assets
 Current assets

fixed current total

assets assets assets

Working capital is an important component of overall financial system. Working capital is

also known ‘WC’, is a financial metric which represents operating liquidity available to
business. Along with fixed assets such as plant and equipment, working capital is considered
as a part of operating capital. It is calculated as current assets minus current liabilities. If
current assets are less than current liabilities then the entity has a working capital deficiency,
also known as working capital deficit.

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 CONCEPT OF WORKING CAPITAL:-

 Gross concept
 Net concept

GROSS
CONCEPT

NET
CONCEPT

GROSS CONCEPT:-

According to the gross concept, working capital means total of all the current assets of a
business. It is also called as gross working capital.

GROSS WORKING CAPITAL = TOTAL CURRENT ASSETS

NET CONCEPT:-

According to the net concept of working capital, net working capital means the excess of
current assets over current liabilities. According to this concept, if current assets are equal to
current liabilities, working capital will be zero and in case current liabilities are more than
current assets, the working capital will be called negative working capital.

NET WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES

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Current assets are those assets which are converted into cash within one accounting period. For
example, stock, debtors, bills receivables, prepaid expenses, cash and bank balance. Similarly,
current liabilities are those liabilities which have to be paid within an accounting year, for
example, creditors, bills payable, short-term loans etc.

Net working capital can also be defined in another manner. Net working capital is that part of
current assets which has been financed from long-term funds. It is, therefore, called circulating
capital.

Gross concept and net concept of working capital have their own significance. When individual
current assets are to be managed, gross concept of working capital is used. Net concept of
working capital emphasizes on how much current assets have to be financed out of long-term
funds. Under this concept, the relationship between current assets and current liabilities is
established or their liquidity is determined.

 NEED FOR WORKING CAPITAL:-

For the different operations of the business, working capital is required along with the fixed
capital. Working capital is needed for the purchase of raw material and payment of various day
to day expenses. There will be hardly any business which does not require working capital. The
need for working capital is different in different businesses. Financial management aims at
maximizing the wealth of shareholders. To achieve this objective, it is necessary to earn adequate
profits. The profits depend largely on sales but sales do not result in cash immediately. To
increase sales, goods are to be sold on credit, the collection of which takes place after sometime.
Thus there exists a gap between sale of goods and realization of cash. During this period
expenses are to be incurred to continue business operations for this purpose working capital is
required.

20
It can be explained with the help of operating cycle:-

debtors
and b/r

finished
cash
goods

work -in- raw

progress material

The greater the period of operating cycle, more will be the requirement of working capital.
Business enterprise engaged in trading activities have smaller duration of operating cycle as
compared to those engaged in manufacturing business because in such enterprise cash is directly
converted into finished goods.

 TYPES OF WORKING CAPITAL:-

PERMANENT
VARIABLE

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PERMANENT WORKING CAPITAL:-

The requirements for current assets do not remain stable throughout the year and
fluctuate from time to time. A certain minimum amount of raw material, work-in-
progress and finished goods and cash must be maintained regularly in the business
so that day to day operations of the business could continue without any obstacles.
The minimum requirement of current assets is called permanent working capital or
regular working capital.

VARIABLE WORKING CAPITAL:-

In certain months of the year , the level of business activities is higher than normal and,
therefore, additional working capital may be required along with the permanent working capital
.It is known as variable or temporary working capital. This part of working capital is required
due to changes in demand and supply of goods on account of change in seasons. Therefore, it
must be financed from short-term sources only.

Difference between permanent & temporary working

capital

Amount Variable Working Capital

of
Working
Capital

Permanent Working Capital

Time

22
It is clear that the need for working capital remains same for whole year whereas variable
working capital needs are sometimes high and sometimes low. In a growing concern, the need
for working capital goes on rising because of increase in the level of business activities. It is
presented in the figure below:

Variable Working Capital

Amount
of
Working
Capital
Permanent Working Capital

Time

 FACTORS AFFECTING WORKING CAPITAL:-

Business should prepare its financial plan in such a way that it has neither surplus nor inadequate
working capital. The amount of working capital for any business depends upon various factors.
They are:-

(1) Nature of the business: - The working capital requirements of an enterprise basically
depend upon the nature of its business and operating cycle of the business. A trading concern, for
instance, requires large amount of working capital for investment in stocks, receivables and cash
etc. It requires less investment in fixed assets. A business where the proportion of cost of raw

23
material to be consumed to total cost of production is high, the amount of working capital
required is large, shipbuilding for instance.

(2) Size of the business: - The amount of working capital needed depends upon the scale of
operation of the business. The larger the size of the business unit, generally the larger is the
requirement of working capital and vice versa.

(3) Length of period of manufacture:- If the goods are tied up for a longer period of
time in. the production process such as ship building, heavy armaments, aero planes etc., it
requires a large amount of working capital to meet the manufacturing expenses until the payment
is received for the finished products. In case of short manufacturing process of a commodity such
as cloth, shoes etc. the capital is not tied for a longer period and as such the amount of circulating
capital will be small compared to the ship building industry.

(4) Methods of purchase and sale of commodities: - If a business is able to purchase

the raw material and other allied products on credit and is able to sell the manufactured goods on
cash it will need less amount of working capital In case the raw material is purchased on cash
and goods are sold on credit the amount of required working capital would be large.

(5) Converting working assets into cash: - If the assets of a business have liquidity i.e.
they are readily saleable for cash then less amount will be set aside for working capital. In case
the assets are not quickly saleable for cash then a greater amount of working capital will be
required by it.

(6) Seasonal variation in business: - There are certain industries which purchase raw
material in the production season such as cotton, rubber and consume the material in the off
season for the manufacturing of products. These industries require large amount of working
capital to purchase the raw material in a production season and pay the wage costs in the off
season.

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(7) Risk in business: - A business like the oil exploration involves great risk. The business
may or may not be able to find out the oil by digging of wells: The business needs huge amount
of working capital in such risky enterprises.

(8) Size of labour force: - If the size of labour force employed in the manufacture of a

product is fairly, large, (labour intensive), the business will need a greater amount of working
capital. In capital intensive industries lesser amount of working capital is required.

(9) Price level changes:- If the prices are rising very rapidly in the country the business

will require greater amount of working capital to maintain the same current assets and vice versa.

(10) Rate of turnover:- If in a business, the sale is faster i.e., a business has rapid turnover
then the amount of working capital required may be small as cash is realized from sales. A
business where the rate of turnover is slow there is more requirement of working capital in that
business.

(11) State of business activity: - When the business is prosperous it needs more working
capital for increasing the volume of business. On the contrary when the business is slack and
sales decline then less amount of working capital is required.

(12) Business policy: - If a business sets aside funds at the end of each year for the

depreciation, payment of loans and ploughing back of profits in the business, it requires less
amount of working capital. On the other hand, .a business which does not build its own internal
resources needs larger amount of working capital to meet the day today expenses of the business
and other unexpected expenses.

ADVANTAGES OF ADEQUATE WORKING CAPITAL:-

Investment in fixed assets only is not sufficient to run the business. Working capital or
investment in current assets, howsoever small it is, is a must for purchase of raw materials, and
for meeting the day-to-day expenditure on salaries, wages, rents, advertising etc., and for

25
 maintaining the fixed assets. “The fate of large scale investment in fixed capital is often
determined by a relatively small amount of current assets.” Working capital is just like a heart of
industry if it is weak; the business cannot prosper and survive, although there is a large body
(investment) of fixed assets. Moreover, not only the existence of working capital is a must for the
industry, but it must be adequate also. Adequacy of the working capital is the lifeblood and
controlling nerve center of a business. Inadequate as well as redundant working capital is
dangerous for the health of industry. It is said, ‘Inadequate working capital is disastrous; whereas
redundant working capital is a criminal waste’. Both situations are not warranted in a sound
organization.

The advantages of working capital or adequate working capital may be enumerated as

below: -

 Cash Discount:
If a proper cash balance is maintained, the business can avail the advantage of cash discount by
paying cash for the purchase of raw materials and merchandise. It will result in reducing the cost
of production. It creates a Feeling of Security and Confidence:

The proprietor or officials or management of a concern are quite carefree, if they have proper
working capital arrangements because they need not worry for the payment of business
expenditure or creditors. Adequate working capital creates a sense of security, confidence and
loyalty, not only throughout the business itself, but also among its customers, creditors and
business associates.

‘Must’ for Maintaining Solvency and Continuing Production:

In order to maintain the solvency of the business, it is but essential that the sufficient amount t of
fund is available to make all the payments in time as and when they are due. Without ample
working capital, production will suffer, particularly in the era of cut throat competition, and a
business can never flourish in the absence of adequate working capital.

 Sound Goodwill and Debt Capacity:

It is common experience of all prudent businessmen that promptness of payment in business
creates goodwill and increases the debt of the capacity of the business. A firm can raise funds

26
 from the market, purchase goods on credit and borrow short-term funds from bank, etc. If the
investor and borrowers are confident that they will get their due interest and payment of principal
in time.

 Easy Loans from the Banks:

An adequate working capital i.e. excess of current assets over current liabilities helps the
company to borrow unsecured loans from the bank because the excess provides a good security
to the unsecured loans, Banks favor in granting seasonal loans, if business has a good credit
standing and trade reputation.

 Distribution of Dividend:
If company is short of working capital, it cannot distribute the good dividend to its shareholders
in spite of sufficient profits. Profits are to be retained in the business to make up the deficiency
of working capital. On the other contrary, if working capital is sufficient, ample dividend can be
declared and distributed. It increases the market value of shares.

 Exploitation of Good Opportunity:

In case of adequacy of capital in a concern, good opportunities can be exploited e.g., company may
make off-season purchases resulting in substantial savings or it can fetch big supply orders
resulting in good profits.

 Meeting Unseen Contingency:

Depression shoots the demand of working capital because stock piling of finished goods
becomes necessary. Certain other unseen contingencies e.g., financial crisis due to heavy losses,
business oscillations, etc. can easily be overcome, if company maintains adequate working
capital.

 High Morale:
The provision of adequate working capital improves the morale of the executive because they
have an environment of certainty, security and confidence, which is a great psychological, factor
in improving the overall efficiency of the business and of the person who is at the hell of fairs in
the company.

27
 Increased Production Efficiency:
A continuous supply of raw material, research programme, innovations and technical
development and expansion programs can successfully be carried out if adequate working capital
is maintained in the business. It will increase the production efficiency, which will, in turn
increases the efficiency and morale of the employees and lower costs and create image among
the community.

 MANAGEMENT OF WORKING CAPITAL:-

“A managerial accounting strategy focusing on maintaining efficient levels of both components

of working capital, current assets and current liabilities, in respect to each other. Working capital
management ensures a company has sufficient cash flow in order to meet its short-term debt
obligations and operating expenses”

Implementing an effective working capital management system is an excellent way for many
companies to improve their earnings. The two main aspects of working capital management are
ratio analysis and management of individual components of working capital.

A few key performance ratios of a working capital management system are the working capital
ratio, inventory turnover and the collection ratio. Ratio analysis will lead management to identify
areas of focus such as inventory management, cash management, accounts receivable and
payable management.

APPROACHES TO DETERMINE THE FINANCING OF

WORKING CAPITAL:-

1. Matching or Hedging approach:

When the firm uses long term sources to finance fixed assets and permanent current assets, and
short term financing to finance temporary current assets.

28
2. Conservative approach:
Under this approach a firm finances its permanent assets and also apart of temporary current
assets with long term financing. It relies heavily on long term financing and is less risky so far as
solvency is concerned, however, the funds may be invested in such instruments, which fetch
small returns to build up liquidity. This adversely affects profitability.

3. Aggressive Approach:
The firm uses more short term financing than what is justified, in this approach. The firm
finances a part of its permanent current assets with short term financing. This is more risky but
may add to the return on assets.

PRINCIPLES OF WORKING CAPITAL:-

There are four principle of working capital management. They are being depicted
as below:

PRINCIPLE
PRINCIPLE PRINCIPLE PRINCIPLE OF
OF RISK OF COST OF OF EQUITY MATURITY
VARIATION CAPITAL POSITION OF
PAYMENT

(i) Principle of Risk Variation: - The goal of WC management is to establish a

suitable trade between profitability and risk. Risk here refers to a firm's ability to
honor its obligation as and when they become due for payments. Larger investment

29
 in current assets will lead to dependence. Short term borrowings increases
liquidity, reduces risk and thereby decreases the opportunity for gain or loss on the
other hand the reserve situation will increase risk and profitability and reduce
liquidity thus there is direct relationship between risk and profitability and inverse
relationship between liquidity and risk.

(ii) Principle of Cost of Capital: - The various sources of raising WC finance

have different cost of capital and the degree of risk involved. Generally higher the
cost lower the risk, Lower the risk higher the cost. A sound WC management
should always try to achieve the balance between these two.

(iii) Principle of Equity Position: - This principle is considered with planning the
total investment in current assets. As per this principle the amount of WC
investment in each component should be adequately justified by a firm’s equity
position every rupee contributed current assets should contribute to the net worth
of the firm the level of current assets may be measured with the help of two ratios.
They are:

 Current assets as a percentage of total assets.

 Current assets as a percentage of total sales.

(iv) Principle of Maturity of Payment: - This principle is concerned with

planning the source of finance for WC. As per this principle a firm should make
every effort to relate maturities of its flow of internally generated funds.

30
COMPONENTS OF WORKING CAPITAL MANAGEMENT:-

There are three basic components of working capital management. They are:-

inventory
mgt

working
capital
mgt
receivables
cash mgt
mgt

INVENTORY MANAGEMENT:-

Inventory management is the process of efficiently overseeing the constant flow of units into and
out of an existing inventory. This process usually involves controlling the transfer in of units in
order to prevent the inventory from becoming too high, or dwindling to levels that could put the
operation of the company into jeopardy. Competent inventory management also seeks to control
the costs associated with the inventory, both from the perspective of the total value of the goods
included and the tax burden generated by the cumulative value of the inventory.

CASH MANAGEMENT:-

The corporate process of collecting, managing and (short-term) investing cash. A key component
of ensuring a company's financial stability and solvency. Frequently corporate treasurers or a
business manager is responsible for overall cash management.

31
Successful cash management involves not only avoiding insolvency (and therefore bankruptcy),
but also reducing days in account receivables (AR), increasing collection rates, selecting
appropriate short-term investment vehicles, and increasing days cash on hand all in order to
improve a company's overall financial profitability.

RECEIVABLES MANAGEMENT:-

The credit and the collection policies should be properly laid down and effectively implemented
to manage the accounts receivables efficiently. The credit policies should be such which balance
the risk on one hand and profitability on the other hand. The investment in the receivables should
be at the optimum level.

ESTIMATING THE WORKING CAPITAL:-

 TECHNIQUES:- There are certain techniques used for finding the optimum
level of working capital or management of different items of working capital.

carrying cost
and shortage
cost working
capital
just-in-time
financing
policy

capital
e.o.q. techniques
budgeting

32
 Intersection of Carrying Cost and Shortage Cost: One of the important methods of
finding the optimum level of working capital is the point of intersection of carrying cost and
shortage cost in a graphical representation. The total of carrying and shortage cost is minimum
at this point. Here, the levels of current assets are optimum at the point where the shortage and
carrying costs are meeting or intersecting. At this point, the total cost, as we can see, is
minimum and this is why that level of current assets is considered to be optimal.

 Working Capital Financing Policy: Working capital can be divided into two viz.
Permanent and Temporary. Permanent working capital is the level of working capital which is
always required and maintained. Temporary working capital is the part of working capital
which keeps on fluctuating. It is high in good seasons and low in bad seasons. There are two
types of financing available. They are long term financing and short term financing. Three
strategies are possible with respect to financing of working capital. Efficient financing of
working capital reduces carrying cost of capital. Long term financing is used for both
permanent and temporary WC. Long term financing is used for permanent and some part of
temporary WC. Remaining part of temporary WC is financed through short term financing as
and when required. Long term financing is used for permanent and short term financing for
temporary WC. These strategies should be chosen so as to match the maturity of source of
finance with the maturity of the asset.

 Cash Budgeting: Cash budgeting is another important technique for working capital
management which helps keeping optimum level of cash in the business. Cash budgeting
involves estimating the requirements of cash by estimating all the fore coming receipts and
payments. For effective management, a balance is needed between both excess and shortage of
cash. It is because both ends are costly. Speeding up of collection and getting relaxed credit
terms from the creditors can reduce the cash requirements.

Inventory Management: Inventory is an important component of working capital or

current assets. Optimum level of inventory can save on costs heavily.

33
 EOQ: Economic Order Quantity (EOQ) model is a famous model for managing the
inventories. It helps the inventory manager know how to find the right quantity that should be
ordered considering other factors like cost of ordering, carrying costs, purchase price and
annual sales. The formula used for finding EOQ is as follows:

EOQ = √{ (2 * A * O) / (P * C)}

A – Annual Sales

O – Cost per Order

P – Purchase price per unit

C – Carrying Cost

 Just-in-Time: Just-in-time is another very important technique which brought about

paradigm shift in the management of inventories. It did not reduce cost of inventory but it
abolished it completely. Just-in-time means acquiring raw material or manufacturing product
at the time when it is required by the customer. This strategy is very difficult to implement but
if implemented can bring down inventory cost to minimum levels.
These are some important techniques discussed here. They are very effective in managing
working capital. Managing working capital means managing current assets. Current assets like
cash can be managed using cash budgeting; inventory can managed using inventory techniques
like EOQ and JIT. Debtors and financing of working capital can be managed using appropriate
sources of finance.

34
 CHAPTER-5
ANALYSIS AND INTERPRETATION

Data Analysis And Interpretation

DATA ANALYSIS
WHY WORKING CAPITAL IS IMPORTANT FOR THE
COMPANY?

WORKING CAPITAL ANALYSIS:-

As it is known that working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth running
of the business. And the most important part is the efficient management of
working capital in right time. The liquidity position of the firm is totally effected
by the management of working capital. So, a study of changes in the uses and
sources of working capital is necessary to evaluate the efficiency with which the
working capital is employed in a business. This involves the need of working
capital analysis.

The analysis of working capital can be conducted through a number

of devices, such as:

 Fund flow analysis.

 Budgeting.

35
 FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which additional
funds were Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position (working capital)
business enterprise between beginning and ending of the financial dates.

Statement showing change in working capital for GLIMPSE INDIA. :-

(Rs. in LACS)

Particulars 15-16 16-17 Increase ( + Decrease (- )

)

Current Assets

Inventories 582.00 705.00 123.00 --

Sundry Debtors 250.00 320.00 70.00 --

Cash & Bank 6.52 25.00 18.48 --

Loan & Advances 19.00 0.00 -- 19.00

Total ( A ) 857.52 1050.00

Current Liabilities

C.L.and provisions 250.00 350.00 100.00

36
Total ( B ) 250.00 350.00

( A-B ) 607.52 700.00 111.48 19.00

↑ in working capital

Total 607.52 700.00 111.48 19.00

CALCULATION OF WORKING CAPITAL FOR GLIMPSE INDIA

(Rs. in LACS)

YEAR 31.03.16 31.03.17

CURRENT ASSETS

Inventories 582.00 705.00

Sundry debtors 250.00 320.00

Cash and bank 6.52 25.00

Loans & advances 19.00 0.00

Total current assests 857.52 1050.00

LESS:-

CURRENT LIABILITIES AND PROVISIONS

C.l. & provisions 250.00 350.00

37
Total c.l. 250.00 350.00

Net current assets 851.00 1025.00

Bank borrowings for w.c. 6.52 25.00

NET WORKING CAPITAL 607.52 700.00

ANALYSIS OF VARIOUS COMPONENTS OF WORKING

CAPITAL

INVENTORY ANALYSIS

POSITION OF INVENTORY IN GLIMPSE INDIA (Rs in LACS)

PARTICULAR 2016 2017

STORES 185.00 225.00

RAW
195.00 250.00
MATERIAL

FINISHED
125.00 175.00
GOODS

W.I.P 77.00 100.00

TOTAL 582.00 750.00

38
Analysis through chart:

250

200
STORES
150 RAW MATERIAL
FINISHED GOODS
100 W.I.P

50

0
2016 2017

INTERPRETATION:

The analysis of the financial statements of the company shows that the sale of the company
increases so as it is known that the sales increases due increase in the demand of the product. So
in order to meet the demand of the customers company has to increases its production. And in
order to increase the production company needs more raw materials. So it can be said that Raw
material for the financial year 2016 was 582 and it is increase to 750 IN 2017.We it can be said
that raw material is increased by 168 IN 2016 to 2017 financial year. This is necessary for
smooth production so that there is no shortage of raw material, and also to avoid the unnecessary
delays in production.

39
SUNDRY DEBTORS ANALYSIS

Position of Sundry Debtors in GLIMPSE INDIA (Rs. in LACS)

PARTICULAR 2016 2017

Receivable other than 2500.00 2800.00

export and deferred

Export receivable 230.00 350.00

TOTAL 2730.00 3150.00

Analysis through chart:

RECEIVABLE ANALYSIS
3000

2500

2000
AMOUNTS

Recevinable other than export and

1500
deferred
1000 Export receivable
500
0

2016 2017
YEARS

40
INTERPRETATION

Through the analysis of the above table it can be said that debtors in 2016 it increases by 420 in
2017.So it can be said that credit sales of company also increases because debtors and bill
receivables only arises when credit sales are made.

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees
for a specific period of time and in return they will be liable to make timely repayment of that
amount in addition to interest on that loan.

Position of Other Loans & Advances in GLIMPSE INDIA.

(Rs. in lacs)

PARTICULAR 2016 2017

Advance to suppliers 2.04 0.50

Advance payment of taxes 15.00 18.00

Prepaid expenses & advances 1.50 1.00

Duty drawback & cash 350.00 375.00

incentives

Investment other than long ----- -----

term

41
TOTAL 368.54 394.50

Analysis through chart:

LOANS & ADVANCES

400 394.5
368.54 375
350
350
ADVANCE TO SUPPILERS
300
AMOUNT

250 ADVANCE PAYMENT OF TAXES

200
PREPAID EXPENSES & ADVANCES
150
100 DUTY DRAWBACK & CASH
INCENTIVES
50
2.04151.5 18 INVESTMENT OTHER THAN LONG
0 0.5 1 TERM

2016 2017

YEARS

INTERPRETATION

Through the analysis of the above table it can be said that the advance payment and loans is
increased by 7.00% for the financial year 2017 from 25.96 of the previous 2016 so it can be said
that advance payment to the supplier is increased in 2017. company want to take advantage of
cash discount which is provided by the supplier for the advance cash payment made by the
Company and it also have positive impact on goodwill of company and it’s the sign of
satisfactory financial Position of the company.

42
CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or
current liabilities that has to be paid by the firm within one year.

Position of Other Current Liabilities in GLIMPSE INDIA.

(Rs. in thousands)

PARTICULARS 2016 2017

i. Creditors for purchases 250.00 350.00

ii. Bills payable under L/C for .50 .75

raw material

iii. Advance received from .40 .50

customers

iv. Accrued expenses 1.25 1.50

v. Statutory liability 88.00 125.00

vi. Installment of fixed asset 0.00 0.00

loans due to within a year

TOTAL 340.15 477.75

43
Analysis through chart:

CURRENT LIABILITIES & PROVISIONS

350
350
Creditors for purchases
300
250
AMOUNT

250 Bills payable under L/C for raw

material
200 Advance received from
customers
150
125 Accrued expenses
100 88
Statutory liability
50
0.50.4
1.25 0
0 0.75
0.51.5 Installment of fixed asset loans
0
due to within a year

2016 2017
YEARS

INTERPRETATION

The analysis of the whole current liability shows that current liability is increased by 137.60
for the financial year 2016-17 respectively. It is increasing by 40.00 % respectively. If only
creditors are seen for purchase then it can be said that in 2016 So it can be said that the
purchase of the company is increasing in all financial year annually increased by 12% and it
is also seen that advances received from customers are also increasing that is in 2017 it is
increased by .10% . So it can be said that more cash is coming so the liquidity position of the
company becoming strong.

WORKING CAPITAL RATIO’S OF COMPANY in lacs

Gross Profit=

44
 2016 2017
2350.00 2400.00

ANALYSIS THROUGH CHART

GROSS PROFIT RATIO

2400 2400

2350

2300

2016 2017

YEARS

INTERPRETATION

Through the analysis of the above table it can be said that Gross profit ratio of the company
is 2400 for the year 2017 . It is because the cost of the company has minor decrease because
of decrease in raw material cost. Then company’s gross profit ratio increased in 2017 which
is best for company so it can be said that company’s position is strong for the financial year
2017.

NET PROFIT RATIO OF GLIMPSE INDIA :

Net Profit Ratio: Net Profit * 100

Sales

45
Net Profit ratio: -

2016 2017
5.25 5.53

Analysis through chart:

NET PROFIT RATIO

5.6 5.53
5.4
5.25
5.2

2016 2017
YEARS

INTERPRETATION

Company’s net profit is 5.53% in the year 2017 by covering increase in previous year and by
seeing the overall earning it can be said that company is in good position.

POSITION OF RECEIVABLE RATIO IN GLIMPSE INDIA

FORMULA

DEBTORS

RECEIVABLE RATIO = --------------- * 365

SALES

46
Year 2016 2017
Receivable Ratio 45 60

Analysis through chart:

RECEIVABLE RATIO (IN DAYS)

60 60
45
DAYS

40

20

0
2016 2017
YEARS

INTERPRETATION

From the above table and diagram it can be said that company has good debt collection
period because the company have low debt collection period. But the company’s debt
collection period for the year 2016 is 45 and then it is increased to 60 in 2017 . So it can be
said that the company’s debt collection period is increasing averagely by 4days per year. It
can be said that the company has no impact on slowdown of economy. So it can be said that
overall position of the company is satisfactory.

POSITION OF CURRENT RATIO IN GLIMPSE INDIA :

FORMULA

TOTAL CURRENT ASSETS

CURRENT RATIO= ---------------------------------365

TOTAL CURRENT LIABILITIES

47
Year 2016 2017
Current Ratio 4.49 5.23

Analysis through chart:

5.5
5.23
5
4.49
4.5

2016 2017

YEAR

INTERPRETATION

Through the analysis of the above table it can be said that current ratio in 2016 is 4.49 and
5.23 in 2017. The current ratio should be 2:1.

POSITION OF DEBT-EQUITY RATIO IN GLIMPSE INDIA. :

Formula = Debt / Equity

Calculation of debt-equity ratio:

Particulars 2015-16 2016-17

Long Term Debt 0.00 0.00

Net Worth 1025 1125

D/E Ratio 1.02 1.12

48
INTERPRETATION

GLIMPSE INDIA has a decreasing trend in d/e ratio so we can say that it is using its funds
and not taking loans from banks. Equity is more than debt that shows a very strong position
in whole market. Using lower debts decreases the cost as well as risk. So company is in good
position.

49
 CHAPTER -6
 FINDING

FINDINGS

The major findings are:-

Statement showing change in position from Previous Year OF GLIMPSE INDIA

(amt. in lacs)

PARTICULARS 15-16 16-17

Investments

Inventories 582.00 705.00

Sundry Debtors 250.00 320.00

Cash & Bank 6.52 25.00

Current Liabilities 340.15 477.75

General reserve 0.0 0.00

50
RECOMMENDATIONS:-

 Management should make the proper use of inventory control techniques like fixation of
minimum, maximum and ordering levels for all the items for less blockage of money.
 The unit should also adopt proper inventory control like ABC analysis etc. This inventory
system can make the inventory management more result oriented The EOQ can be
followed in stores
 Due to competition prices are market driven and for earning more margin company
should give the more concentration on cost reduction by improving its efficiency
 The investments of surplus funds are made by the corporate office and the unit is not
generally involved while taking decisions with regard to structure of investment of
surplus funds. The corporate office should involve the units so as to better ascertain the
future requirements of funds and accordingly the investments are made in different
securities.
 The company is losing its overseas customers due to decrease in exports so the sufficient
amount of exports should the maintained.

51
 CHAPTER 7
CONCLUSION

By concluding the study about the working capital it has been found that working capital
management of GLIMPSE INDIA is too good. GLIMPSE INDIA has sufficient funds to
meet its current obligation every time which is due to sufficient profits and efficient
management of GLIMPSE INDIA

Cash management and receivable management are too much good because of centralized
control on these. Raw material for the all units of GLIMPSE INDIA is purchased by
corporate office in bulk which is the best way. Safety measures for inventories are also quiet
sufficient in company. Overall the working capital management of GLIMPSE INDIA is
very much efficient.

52
 CHAPTER 8
BIBLIOGRAPHY

1. Allensius (2009) “MANAGEMENT WORKING CAPITAL” Working Paper No- 02-01.

2. Bebehuk L. and L. stole (2009) “Organize Turn tax dollars into working capital” Rush,
George pg- 02-01.
3. Gamble, Richard H. (2005) “Working capital managers: muscling into a larger role”
Cash flow Magazine0196-6227
4. Stephen Bush (2008) “Seizing new treasures with aggressive cash management” cash
flow magazine Paper No- 02-01.

BOOKS:-

1. Financial management: IM Pandey - 2000, vikas publishing house.

ANNUAL REPORTS OF GLIMPSE INDIA.

1. Balance sheet :- for the financial period 2015-17

2. Profit and loss account :- for the financial period 2015-17

WEBSITES

 http://www.economywatch.com/business-and-economy/textile-industry-overview.html

 http://www.economywatch.com/business-and-economy/textile-mills.html

 http://www.allprojectreports.com/working_capital_analysis/working_capital
_analysis.htm

53
 journal.org/submissions/isfa2015_submission_13.doc+abstract+of+working
+capital&cd=24&hl=en&ct=clnk&gl=in

54