A

PROJECT REPORT

ON

“WORKING CAPITAL MANAGEMENT AND LIQUIDITY RATIOS AT

FULLERTON”

To be submitted for the partial fulfillment of the requirements for the award of the
degree of BACHELOR OF BUSINESS ADMINISTRATION (FINANCE)

(2017-2019)

Under the Guidance

Ms. Navita Singla

(Asst.prof.in Management)

Submitted To: Submitted By:

Punjabi University, Parneet kaur

Uni. Roll no. 7191

S.S.D WOMEN’S INSTITUTE OF TECHNOLOGY, BATHINDA

(AFFILIATED TO PUNJABI UNIVERSITY, PATIALA
 DECLARATION

This is to certify that the project report entitled completed during the session 2017-2019 for the
degree Bachelor of Business Administration “WORKING CAPITAL MANAGEMENT AND

LIQUIDITY RATIOS AT FULLERTON” (BBA) is a bonfire piece of work and all the
sources used to complete this project are duly acknowledged. In case the project, or any part of
it, is found to be copied or quoted without reference, I shall be solely held accountable for the
repercussions arising therefore.

Parneet kaur
 ACKNOWLEDGEMENT

A project is a combination of views, ideas and suggestions and contribution of many people. The
report is the opportunity to thank those who contributed towards its fulfillment.

“success is not a description, but a journey.” while I reach towards the end of the journey, I
realized I am not have come this far without the guidance, help and support of the people who
acted as guides, friends and torch bearer along the way.

Firstly I would like to thank the Dr. Neeru Garg (principal) and Ms. Neetu goyal (HOD) and for
making me able to prepare this project. I would also like to thank my project guide Ms. Navita
single I would like to thank my parents who give me encouragement and support.

I conclude by delivering my thanks to the almighty for giving me strength and for enabling me to
understand this project and for everything else.

I place our thanks to all those who spared their time and made it convenient for us to complete
the project. We deeply acknowledge their concern for our project.

Parneet kaur
CONTENTS

1. CHAPTER I
INTRODUCTION TO COMAPANY
PRACTICES AND GUIDELINES
PRODUCTS AND FEATURES

2. CHAPTER II
INTRODUCTION TO TOPIC
WORKING CAPITAL MANAGEMENT

3. CHAPTER III
RESEARCH METHODOLOGY
FINANCIAL STATEMENT OF COMPANY

4. ANALYSIS OF WORKING CAPITAL RATIOS

LIQUIDITY RATIOS

5. CHAPTER V
CONCLUSIONS OF THE STUDY
BIBLIOGRAPHY
 CHAPTER 1

INTRODUCTION
TO
COMPANY
 COMPANY PROFILE

Fullerton India Credit Company Limited (FICCL) is a Non-Banking Finance Company (NBFC)
with an ―A category license, issued by the Reserve Bank of India. It is a fully owned subsidiary
of ―Fullerton Financial Holdings Pvt. ltd. Singapore. The Company was established in 1994. In
December 2005 the Management of this Company changed, with an investor making an
investment in the equity capital of this Company under the Foreign Direct Investment Policy.
99.99% of the share capital of FICCL is held by Angelica Investment Pte. Ltd., Singapore. Then
they began their operations with new management in India in January 2006. The new
management team is headed by a professional CEO and Managing Director, supported by a team
of professionals, with expertise in area of Consumer Finance, Middle market lending and SME
businesses. These professionals have worked in various Banks and Financial institutions, and
have good commercial experience. The company operates on a wide range of financial products
and services for customers related to the retail markets and commercial mass markets. The
company provides financial support to its clients through basically two policies namely

Fullerton India Parivaar and

Fullerton India Vyapar.

Fullerton India Parivaar provides financial security to salaried individuals whereas Fullerton
India Vyapar offers financial support to people involved in small scale businesses or firms of
their own. The company follows a customer centric, community based business model, and is
committed to provide quality financial services to the growing Indian masses. The Company
believes in a branch centric community led relationship based approach in meeting customer
needs rather than using the services of a third party or a vendor such as Direct Selling Agents.
Under the organizational structure, the Company has in each of its branches, a team of
Relationship Managers and Officers who meet customers to understand their business or
profession and credit requirements.
The Company being in the financial sector provides Loans and financial services to customers
such as Individuals, Professionals, Partnership firms, Sole proprietorship and Small and Medium
companies.

To service its customers, the Company has two major divisions

Vyapar and Parivaar.

Products Offered By the Company

Fullerton India Parivaar has introduced a new concept in the Indian market. The company have
branches, which cater only to the specific needs of Salaried Individuals.

Its Parivaar branches provide customized products and solutions, especially designed keeping in
mind the unique circumstances and requirements of this segment. The Parivaar Loans cover a
wide range of products, which include:

1. Unsecured Personal Loans

2. Secured Loans

3. Home Finance

4. Home Equity Loans

1. Unsecured Personal Loans

An unsecured loan is a loan that is not backed by collateral, it is also known as a signature loan
or personal loan. Unsecured loans are based solely upon the borrower's credit rating. An
unsecured loan is considered much cheaper and carries less risk to the borrower. Types of
Unsecured Personal loans

There are three types of unsecured loans.

a) First is a personal unsecured loan, which means a loan that, a person individually responsible
for the repayment.

b) Second is an unsecured business loan which leaves the business responsible for the
repayment. c) Third is an unsecured business loan with a personal guarantee. In this type of
unsecured loan the borrower is the business, but guarantor will be the payer if the business
defaults to pay the loan.

2. Secured Loans

collateral for the loan, which then becomes a secured debt owed to the creditor who gives the
loan. The debt is thus secured against the collateral. In any event if the borrower defaults to
repay, then the creditor takes possession of the asset used as collateral and may sell it to satisfy
the debt by regaining the amount originally lent to the borrower. There are two purposes for a
loan secured by debt. In the first purpose, by extending the loan through securing the debt, the
creditor is relieved of most of the financial risks involved because it allows the creditor to take
the property in the event that the debt is not properly repaid. In exchange, this permits the second
purpose where the debtors may receive loans on more favorable terms than that available for
unsecured debt, or to be extended credit under circumstances when credit under terms of
unsecured debt would not be extended at all. The creditor may offer a loan with attractive
interest rates and repayment periods for the secured debt.

3. Home Equity Loan

A home equity loan (sometimes abbreviated HEL) is a type of loan in which the borrower uses
the equity in their home as collateral. These loans are sometimes useful to help finance major
home repairs, medical bills or college education. A home equity loan creates a lien against the
borrower's house, and reduces actual home equity. Types of Home Equity Loan

a) Closed end home equity loan:

The borrower receives a lump sum at the time of the closing and cannot borrow further. The
maximum amount of money that can be borrowed is determined by variables including credit
history, income, and the appraised value of the collateral, among others. It is common to be able
to borrow up to 100% of the appraised value of the home, less any liens, although

There are lenders that will go above 100% when doing over-equity loans. However, state
law governs in this area; for example, Texas (which was, for many years, the only state to
not allow home equity loans) only allows borrowing up to 80% of equity. Closed-end home
equity loans generally have fixed rates and can be amortized for periods usually up to 15
years. Some home equity loans offer reduced amortization whereby at the end of the term, a
balloon payment is due. These larger lump-sum payments can be avoided by paying above
the minimum payment or refinancing the loan.

b) Open end home equity loan:

This is a revolving credit loan, also referred to as a home equity line of credit, where the
borrower can choose when and how often to borrow against the equity in the property, with
the lender setting an initial limit to the credit line based on criteria similar to those used for
closed end loans. Like the closed-end loan, it may be possible to borrow up to 100% of the
value of a home, less any liens. These lines of credit are available up to 30years, usually at a
variable interest rate. The minimum monthly payment can be as low as only the interest that
is due. Typically, the interest rate is based on the Prime rate plus a margin. Fullerton India
Vyapaar strives to improve the business and lives of the small business community. Their
business is focused only on small establishments with a turnover of less than Rs.25 Mn p.a.
I. Relationship Approach of the Company

The Company believes in a branch centric community led Relationship based approach in
meeting customer needs rather than using the services of a third party or a vendor such as Direct
Selling Agents. Under the organizational structure, the Company has in each of its branches, a
team of Relationship Managers and Officers who meet customers to understand their business or
profession and their credit requirements. Both the Vyapaar and Parivaar divisions of the
Company leverage the relationship approach in establishing a credit relationship between the
Company and the borrower. Loans are granted on the basis of completed applications,
completing the Know Your-Customer (KYC) norms, discussion with the customers about the
terms of their loan, rate of interest, repayment arrangement, etc. The branch only services
customers in a limited area around the physical location of the branch. The Company‘s general
policy is to be reasonable, transparent and fair with its customers. The Company follows
established procedures, understands customer requirements and is reasonable in all its dealings
with customers. The design of the application forms and the relationship based processes, are to
make sure that the Company is transparent in its dealings and transactions. It is with this in mind
that the Company has set up the following guidelines as a Fair Practices Code in dealing with its
customers

II. Fair Practices Code and Guidelines in Company

The following are the guidelines as a fair practices code in dealing with its Customer.
1. The current application forms capture full details of the customer i.e. age, profession, business,
office & residential address, income details and other requirements. The application forms
indicate the criteria for minimum and maximum finance available for personal loans, automobile
loans. The application forms specify the documentation requirements in addition to initial
scrutiny of documents submitted. The Company may call for additional documents for
verification purposes. The application forms are numbered and one section of the form is given
back to the Customer as an acknowledgement. The Company keeps a record of acceptance of
terms and conditions by keeping the original agreements signed by the customer and provide a
copy of the Agreement or terms and conditions to its customers.

2. All applications are verified and processed within a reasonable period of time. All applications
would go through a De-duplication and Fraud Check though internally established procedures of
the Company, before loans are processed or approved. The applications which do not satisfy the
DE duplication or Fraud Check criteria would be automatically rejected. Documents needed
from the customers will be collected before disbursement of loan.

3. The terms and conditions of the loan are clearly mentioned in the Loan Agreement. The Loan
Agreement would specify the tenure, the amount of the loan, applicable rate of interest, the
Equated Monthly Installment (EMI) payments and other fees charged by the Company.
Processing fee, if collected would be clearly mentioned to the customer. A Welcome Letter is
also sent to our customers with Key details & Repayment Schedule which mentions the EMIs,
split by Principal and Interest components.

4. In the event that the loan is rejected, the Company would communicate to the Customer
verbally or in writing about the rejection. The Relationship Managers/ Officers are empowered to
convey the information of the rejection of the loan verbally.

5. Customers at the time of disbursement of loan are advised about facilities available to them
and repayments they need to make from time to time. In any event the Company undertakes to
give full details of the loan, its current status, monthly or quarterly repayments required from
time to time on the basis of request made by the Customers.

6. The Company would release all the securities to the customer once the loan is repaid and no
dues are outstanding to the Company.
7. In case of request of a transfer of a loan account from one borrower or a lender to another
Company or a Bank, the transfer would be completed within 21 days of such a request, provided
the customer pays interest and all Company dues up to date.

8. As far as recoveries of loans are concerned the Company would follow its own Collection
Policy and procedure which is designed to be customer friendly. Under the Company‘s collection
policy detailed guidelines are laid down for following the Code of Conduct, with delinquent
customers. Our collection procedures are constantly checked from a customer‘s point of view.

9. The Company has a detailed policy on customer satisfaction and complaints received. As part
of the Customer satisfaction assessment, detailed analysis of customer preferences and their
grievances or responses are taken into account in improving our operations constantly.
Complaints received are personally attended to by the Branch Manager and resolutions are
tracked by centrally by the Corporate Office in Mumbai. All grievances and complaints and
resolutions made are presented regularly to the Board of Directors for their review

III. Fullerton India's Propositions and Values Propositions

The biggest proposition of Fullerton India is customer focus, both,in product design/
customization and service. As an organization, they are structured not around products but along
customer segments. They have separate verticals for the Salaried Individuals (Parivaar) and for
Small sized shop owners & Entrepreneurs (Vyapaar). This model lends itself to better
understanding of our customers' financial situation and for a better products offering to them.
With this holistic understanding of the customers, the company is also able to combine secured
and unsecured products and structure the loan in a manner which is ideally suited to meet
individual customer requirements. The Company employed Relationship Officers to service the
needs of the customers. There are no agents or other intermediaries, coming in between the
customer and the company. These Relationship Officers are the end-to-end solution providers
and act as a single point of contact" for all Product, Process and Service related needs of the
customer. The branches do business only within a 5 km radius. The customers'office or
residence has to be within the branch coverage area. This closer proximity of the customers to
the branches ensures better understanding of the local environment and immediate situation. The
Company participates actively in serving the community in andaround the vicinity of their
branch. The interest of company in the locality extends beyond just a business relationship. The
company believes in participating in other aspects of development of the community as well. The
business envisages setting up branches with employees dealing directly with the customers. This
offering has elicited an enthusiastic response from customers as it gives higher degree of
transparency and faster value delivery. The relationship model includes a deep assessment of a
customer’s business resulting in an omnibus facility with a flexible combination of usage in
parts, flexibility between a combination of short and long tenures, and from unsecured to
partially secured and fully secured facilities. The facility set up for a customer is based on his
risk profile, repayment capacity, as well as proposed expansion plan. A Relationship Officer is
assigned to address incremental product needs, as well as for service requirements, through a
process of continuous engagement. The business strives to deliver lifelong financing support and
regular facility enhancement, based on business growth. Businesses are built on people, and the
company hires relevant localTalent to serve the market, so that there is a connection between the
employees and customers. The business wishes to bring a full service proposition encompassing
loans and liabilities to the small business owners. Besides the variety of loans, life insurance has
been introduced which will also be delivered through the branch based Relationship Officers.
The business uses advanced technology tools to record customer history, and leverage track
record to enhance credit exposure in line with the customer business cycle. This ensures
continuous support through seasonal peaks.
IV. Our Strategic Themes

1. Build balanced & resilient book

Continued focus on stable secured, differentiated products, expanded suite

2. Leverage footprint strength

Leverage deep market knowledge, depth of presence and large customer base

3. Focus on scale and efficiency

Disciplined cost management, consistent productivity gains, focus on scale

4. Deliver through cycle returns

Risk appetite, predictive models measure stress performance, rather than current

5. Stable, diversified funding

Continue to extend funding base, expand retail, QFIs, DFIs and Insurance r base Risk appetite,
predictive models measure stress performance, rather than current
 Management

 Rajashree Nambiar - CEO & Managing Director

 Anil Noronha - Executive Vice President & Head - Human Capital
 Ekhlaque Bari - Chief Technology Officer
 Pankaj Malik – Chief Financial Officer
 Rakesh Makkar – Chief Executive Officer, Grihashakti – Fullerton India Home Finance
Company Limited

Key initiatives

Fullerton India Credit Company Limited (FICCL) was the first non-banking financial company
(NBFC) in India to raise funds through Masala Bonds. In the space of innovation, the Company
was the first NBFC to launch a Chatbot ‘ASHA’ on Face book to help customers avail personal
loans. Besides this, the Company adopted IBM Cloud to ensure uninterrupted business
operations and also launched ‘Finnovatica,’ a platform that aims to nurture digital ideas from the
youth into marketable products that could be implemented within the organization’s businesses.

Awards and recognition

2016-17

 Admired Brands and Leaders 2016-17 by White Page International

 2016

 Award for HR Excellence at the Golden Peacock Awards, 2017 (Jan)

 Best Retail NBFC at the Outlook Money Awards, 2016
 Ranked 6th in The Dream Companies to Work For, 2016
 Fortune India 500
 Fullerton India’s Pashu Vikas Day Featured in the Limca Book of Records
2015

 India CSR Best Case Award for Women Empowerment

2013
World CSR Award for Best Community Development Programme in the year 2013

Corporate Information

Board of Directors Mr. Gan Chee Yen

Chairman Ms. Rajashree Nambiar

Chief Executive Officer & Managing Director Mr. Anindo Mukherjee

Non- Executive Director Mr. Kenneth Ho Tat Meng

Non-Executive Director Ms. Renu Challu

Independent Director Ms. Sudha Pillai

Independent Director Dr. Milan Robert Shuster

Director Independent Mr. Premod Thomas

Independent Director Mr. Shirish Apte

Independent Director Company Secretary Mr. Pankaj Malik

Statutory Auditors B S R & Co.

LLP Bankers Allahabad Bank Andhra Bank Axis Bank Limited Bank of America N.A Bank of Baroda
Bank of India BNP Paribas Canara Bank CITI Bank Credit Suisse AG DCB Bank Limited Dena Bank
Deutsche Bank AG HDFC Bank Limited ICICI Bank Limited IDFC Bank Limited International Finance
Corporation JP Morgan Chase Bank Kotak Mahindra Bank Oriental Bank of Commerce Punjab National
Bank Small Industries Development Bank of India Standard Chartered Bank State Bank of India
Syndicate Bank The Federal Bank Limited The Hongkong and Shanghai Banking Corporation Limited
The Jammu & Kashmir Bank Limited Union Bank Of India United Bank Of India Rating Agencies
CRISIL ICRA CARE India Ratings Registered Office Megh Towers, Third Floor, New No. 165, Old No.
307, Poonamallee High Road, Maduravoyal, Chennai - 600 095 Corporate Office Floor 5 & 6, B Wing,
Supreme Business Park, Supreme City, Powai, Mumbai – 400076 *As on 31

V. OUR BRAND IDENTITY

India has successfully and strongly established itself in the country’s financial landscape, with a
network of over 559 branches that serves over 1.9 million customers.

 Its primary services constitute financing of SME for working capital and growth, loans for
commercial vehicles and two wheelers, home improvement loans, loans against property,
personal loans, working capital loans for urban self-employed and loans for rural livelihood
advancement, rural housing finance and financing of various rural micro enterprises. Fullerton
India Credit Company Limited is a wholly owned subsidiary of Fullerton Financial Holdings Pte.
Ltd., which in turn is a wholly owned subsidiary of Temasek Holdings Pte. Ltd., Singapore.
Fullerton Financial Holdings invests in financial institutions in emerging markets with its prime
focus on Business and Consumer Banking.

Vision
 Be the Company of choice in financial services for our customers, employees, communities and
stakeholders, recognised for innovation and high ethical standards. Mission

 We are a responsible financial services partner.

 We drive financial inclusion.
 We foster innovation in everything we do.
  We deliver products and solutions for customer delight.

 We believe in our people and partner in their success.

 We provide long term and sustainable shareholder value, balancing risk and reward.

 We are committed to enriching the communities we serve.

Values
 Integrity: We are a transparent and fair organisation guided by a strong and clear sense of ethics
at all times.

 Collaboration: We understand the power of alliances and communication in an interdependent

world and seek new opportunities and partnerships to grow with.

 Innovation: We constantly pursue new ideas and approaches to enhance our offering to all
stakeholders.

 Diversity: We appreciate/celebrate the potential and power of difference and welcome multiple
perspectives, views, ideas and cultures.

 Excellence: We follow the highest quality standards and are committed to delivering the best to
all our stakeholders.

Agility: We are quick to respond to new ideas and situations; we understand change and rise to its
challenges by remaining open and positive

VI. BUSINESS & MARKETING

Business and Marketing

Fullerton India is continuing its Endeavour to synergies its processes to the market dynamics with the aim
of delivering sustainable growth. At Fullerton India, the urban and rural businesses have been constantly
delivering positive growth and enabling increased customer experience owing to its deep understanding
of the under-served markets, a strong distribution network and with upgrading of individual business
processes. Our Marketing function enables us in fulfilling our business objective and in fuelling future
growth. The Fullerton Differentiator Fullerton India continues to be one of the leading NBFCs in India,
with an extensive branch network of 559 branches. Our cutting-edge technology implemented in routine
business has been helping us in delivering superior customer experience and staying abreast of the
competition at all times. At Fullerton India, we have been serious about facilitating our processes in
enhancing customers’ livelihoods in the under-banked and under-served markets

Rural Business Overview

The rural business at Fullerton India operates under the brand name ‘Gramshakti’. During the year, the
segment strengthened its network further by foraying into the states of Bihar and Odisha. In total, 36 new
branches were opened during FY2018. Going forward, the Company will continue to penetrate in newer
geographies to enhance its branch foot print. As on 31 March, 2018, the network of Gramshakti is spread
across over 55,000 villages across 13 states of India. Rural India showed signs of recovery from last
year’s demonetisation, advancing optimism with increased spending will help the broader economy
regain its vigour. The business also gained momentum with an increased focus of the Government on
agriculture, infrastructural development and with a higher spend in the rural areas. Gramshakti is working
towards serving as a preferred financial partner to stimulate growth in the rural areas of India. Key
Highlights: » Operates in 13 states through a network of 336 rural branches » Serves over 17 lakh
customers » Provides a wide array of product offerings to serve customers’ varied needs » Enables digital
processes (disbursals and collections) through tabs » Ensures strong customer ties and robust credit
quality

Urban Business Overview

The urban business at Fullerton India reported strong growth as it optimised and inculcated further
efficiency in the business. This was enabled through the expansion of its digital footprint and by creating
robust platforms for its customers. The urban business segment services over 2.05 lakh customers;
through a network of 223 branches across 22 states and three Union Territories in India. A strong
presence has enabled the Company to build a diversified portfolio of secured and unsecured loans,
supporting customer’s consumption and income generation requirements. During the year, the business
continued to deliver enhanced customer experiences by way of seamless on-boarding applications, tab
based sourcing, e-KYC and robotic processes. Some processes that have enabled ease of operations for
customers are: BOT enabled originations, e-loans portal and customer self-service mobile applications.
We have a strong and diversified portfolio of products addressing retail consumers, MSMEs and
commercial borrowers. Our product portfolio includes Personal Loans (salaried and self-employed
customers), Loans against Property, SME Loans and Commercial Vehicle Loans.

Key Highlights: » Witnessed strong growth across all asset classes » Used strong analytical tools to assess
customers’ risk profile » Adopted cutting-edge technology for operational excellence » Provided a broad
suite of products catering to a diverse customer base Marketing During the course of the year, the
Company strengthened its marketing initiatives with the objective to reach its customers and create
further awareness on the brand. The Company enhanced visibility by engaging with local media channels
in the regions of its presence and also increased its thrust in social media platforms that has further
complemented the online business sourcing by influencing the decision making of the customers. Key
Highlights » PR coverage at regional levels along with national conferences » Creation of marketing
collaterals basis product and regional requirements » Social media presence and campaigns to build
product knowledge » Reputational management to address concerns and enhance customer experience »
Customized marketing solutions to build trust and boost sales across geographies

Urban financing
Fullerton India’s Urban Financing takes care of all business finance requirements and other financial needs of
those customers who live in the urban areas. The different urban finance products include personal loans, SME
loans, business loans, loan against property, home loans and commercial vehicle loans.
Rural financing
Fullerton India’s Rural Financing takes care of all the financial requirements of those customers who live in
the rural. The different rural finance products include rural financial services, rural housing finance and two-
wheeler loans

PRODUCT FEATURES
1 Working capital loans,
2 Short term capital requirements and business expansion loans
3 Loans from 1 lacs and above
4 Tenure up-to 48 months
Product Benefits

1 Quick and Easy Processing

2 Doorstep Service
3 Simplified Documentation Attractive Rates
4 Flexible repayments
Suitable for

1 Self Employed Traders

2 Manufacturers and Professionals Proprietorship
3 Partnership, Private Limited and Public Limited Firms
Basic Documents

1 Application form with colored photograph

2 Age Proof, Signature Proof, Identity Proof, Address Proof
3 Income Proof : 2 years’ audited financials, Balance Sheet, P&L Accounts, ITRs
4 Bank Statement of last 6 months
5 Repayment Tracks on other loans : 9 months track record
 CHAPTER 2

INTRODUCTION

TO

TOPIC
 I. WORKING CAPITAL

Every business whether big, medium or small, needs finance to carry on its operations and to
achieve its target. In fact, finance is so indispensable today that its rightly said to be the lifeblood
of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives.
So this chapter deals with studying various aspects of working capital management that is
necessary to carry out the day-to-day operations. The term working capital refers to that part of
firm’s capital which is required for financing short term or current assets such as cash,
marketable securities, debtors and inventories funds invested in current assets keep revolving fast
and are being constantly converted in to cash and this cash flows out again in exchange for other
current assets. Hence it is known as revolving or circulating capital. On the whole, Working
Capital Management performs a key function and is of top priority for every finance manager.
All managers must, however, keep in mind that n their pursuit to liquidity, they should not lose
sight of there basic goal of profitability. They should be able to attain a judicious mix of liquidity
and profitability while managing their working capital. Working capital management deals with
the most dynamic fields in finance, which needs constant interaction between finance and other
functional managers. The finance manager acting alone cannot improve the working capital
situation. In recent times a few case studies regarding management of working capital in selected
companies have been in order to make in-depth analysis of the several experts of working capital
management, The finding of such studies not only throws new lights on the technical loopholes
of management activities of the concerned companies, but also helps the scholars and researchers
to develop new ideas techniques and methods for effective management of working capital.
Decisions relating to working capital and short term financing are referred to as working capital
management. These involve managing the relationship between a firm's short-term assets and its
short-term 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 shortterm debt
and upcoming operational expenses.
II. WORKING CAPITAL MANAGEMENT

In simple terms working capital means is that the amount of funds that a company require
finance for its day-to-day operations. Working capital states that the period of debtors,
receivables etc for a company to raise finance from them at the earliest. Finance manager should
develop sound techniques of managing current assets. Working capital management involves
managing the relationship between a firm's short term assets and its short-term 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 short-term debt and upcoming
operational expenses. The following should be effective in working capital management: Cash
management: Identify the cash balance which allows for the business to meet day to day
expenses, but reduces cash holding costs. Inventory management: Identify the level of inventory
which allows for uninterrupted production but reduces the investment in raw materials—and
minimizes reordering costs—and hence increases cash flow. Besides this, the lead times in
production should be lowered to reduce Work in Process (WIP) and similarly, the Finished
Goods should be kept on as low level as possible to avoid over production. Debtors management:
Identify the appropriate credit policy, i.e. credit terms, discounts etc. which will attract
customers, such that any impact on cash flows and the cash conversion cycle will be offset by
increased revenue and hence Return on Capital. Debtors credit period should be less than 90 days
to achieve good working capital ratio and position of the company.
III. OPERATING CYCLE

The operating cycle is the average period of time required for a business to make an initial outlay
of cash to produce goods, sell the goods, and receive cash from customers in exchange for the
goods. If a company is a reseller, then the operating cycle does not include any time for
production - it is simply the date from the initial cash outlay to the date of cash receipt from the
customer. The operating cycle is useful for estimating the amount of working capital that a
company will need in order to maintain or grow its business. A company with an extremely short
operating cycle requires less cash to maintain its operations, and so can still grow while selling at
relatively small margins. Conversely, a business may have fat margins and yet still require
additional financing to grow at even a modest pace, if its operating cycle is unusually long. In
case of a manufacturing company, the operating cycle is the length of time necessary to complete
the following cycle of events – Conversion of cash into raw materials Conversion of raw
materials into work-in-progress Conversion of work-in-progress into finished goods
Conversion of finished goods into accounts receivables Conversion of accounts receivable into
cash The above operating cycle is repeated again and again over the period depending upon the
nature of the business and type of product etc. the duration of the operating cycle for the purpose
of estimating working capital is equal to the sum of duration allowed by the suppliers.
IV. OPERATING CYCLE OF FINANCIAL BUSINESS

Working Capital Management is concerned with the problem arise in attempting to manage the current
assets, the current assets refers to the inter relationship that exist between them. The term Current assets
refers to those assets which in ordinary course of business can be, or will be, turned in to cash within one
year without undergoing a diminution in value and without disrupting the operation of the firm. The
major current assets are cash, marketable securities, account receivable and inventory. Current liabilities
ware those liabilities which intended at there inception to be paid in ordinary course of business, within a
year, out of the current assets or earnings of the concern. The basic current liabilities are account payable,
bank overdraft, and outstanding expenses.

The goal of working capital management is to manage the firm’s current assets and
current liabilities in such way that the satisfactory level of working capital is mentioned. The current
should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.

Definition:-

According to Guttmann & Dougall-

“Excess of Current assets over current liabilities”.

According to park & Gladson-

“The excess of current assets of a business items owned to employees and others (such as
salaries & wages payable, accounts payable, taxes owned to government)”.
The concept of working capital includes current assets and current liabilities both. There are two
of working capital they are gross and net working capital.

1. Gross working capital: Gross working capital refers to the firm’s investment in current assets.
Current assets are the assets, which can be converted into cash within an accounting year or
operating cycle. It includes cash, short term securities debtors (account receivables or book
debts), bills receivables and stock (inventory).

2. Net working capital: Net working capital refers to the difference between current assets and
liabilities are those claims of outsiders, which are expected to mature for payment within an
accounting year. It includes creditor’s or accounts payables bills payable and outstanding
expenses. Net working copulate can be positive or negative. A positive working capital will arise
when current assets exceed current liabilities and vice versa.
V. OBJECTIVES

 Every company has their own objectives of working capital that is they try to keep
company position at upper level through working capital. Company may get good
position by giving less credit period to debtors, receivables, etc. and by taking more
credit period from creditors, payables etc. Its main objective is to get back cash in short
term period and meets companies day to day operations. Effective working capital helps
a company to borrow short term funds and long term funds from public, banks,
investment banking and financial institutions.

 The overall financial management objectives of an organization could be summarized in

terms of the following five objectives:

To ensure that the organization always has enough cash to meet its legal obligations and
avoid illiquidity- that is, to maintain adequate short-term financial flexibility.

To arrange to obtain whatever funds are required from external sources at the right time, in
the right form, and on the best possible terms.

To ensure that the organization’s assets and liabilities – current and long-term, financial and
operating are utilized as effectively as possible.

To forecast and plan for the financial requirements of future operations.

To make all decisions and recommendations on the basis of one primary criterion: maximizing
the long-term value of the organization. This objective is attained in a publicly owned
corporation through maximization of the wealth of the owners (stockholders) by maximizing
stock price.

 The last point is particularly important; without this requirement, financial executives
could find many suboptimal solutions to problems. It would be easy, for example, to
satisfy the first requirement by maintaining enormous cash balances or investing very
large sums in readily salable short –term securities; but such a policy would normally not
be in the best interests of the stockholders of a typical corporation.

VI. IMPORTANCE

 Proper management of working capital is very important for the success of an enterprise.
“It aims at protecting the purchasing power of assets and maximizing the return on
Investment. The manager of administration of current assets to a very large extent
determines the success of the operations of a firm. Constant management is required to
maintain appropriate levels in the various working capital accounts. A study of working
capital is of major importance to internal and external analysis because of its close
relationship to current day-to-day operations of business, Inadequacy or mismanagement
of working capital is the leading cause of business failures. Shortage of working capital,
so often advanced as the main cause of failure of Industrial concerns, is nothing but the
clearest evidence of mismanagement, which is so common. The current assets and
current liabilities flow round in a business like an electric current. The working capital
plays the same role in the business as the role of the heart in the human body. Just as the
heart gets blood and circulated the same in the body, in the same enterprise, adequate
amount of working capital is pre-requisite. The adequacy of cash and current assets
together with their efficient handing virtually determine the survival or demise of a
 concern. Inadequate working capital is a business ailment as compared to the availability
of excess working capital may lead carelessness.

 About costs and therefore, to inefficiency of operations. Many a times business failure
takes place due to lack of working capital. If a concern maintains an adequate amount of
working capital, it enjoys a good credit rating and gets discount on payment. It will
ensure proper functioning of the business operations and help in the maximization of
threat of return. A business house can maximize its rate of return on the capital invested
provide in keeps pace with the scientific and technological developments taking place in
the field to which it pertains. As soon as some technological and scientific development
takes place, a business enterprise in order to accelerate its profitability should
immediately introduce the same to its productive process. In reality, however the
sufficiency of working capital will determine the course of decision in this regard.

 Working capital helps to operate the business smoothly without any financial problem
for making the payment of short-term liabilities. Purchase of raw materials and payment
of salary, wages and overhead can be made without any delay. Adequate working capital
helps in maintaining solvency of the business by providing uninterrupted flow of
production. Quick payment of credit purchase of raw materials ensures the regular
supply of raw materials from suppliers. Suppliers are satisfied by the payment on time. It
ensures regular supply of raw materials and continuous production. A firm having
adequate working capital, high solvency and good credit rating can arrange loans from
banks and financial institutions in easy and favorable terms.
VII. WORKING CAPITAL ANALYSIS

CURRENT ASSETS: Current assets are those which can be converted into cash as and when
needed, i.e., those assets which can turn to cash as per the requirement of the business within the
accounting period.

SUNDRY DEBTORS: Debtors are those to who products are supplied on credit basis. These
amounts are collected within the accounting period. Therefore, they are converted into cash as
per requirement, hence they are considered under current assets.

INVENTORIES: Closing stocks or inventory includes raw materials, work in progress and
finished goods, which are needed for the smooth running of the organization. Generally
inventory is maintained by every organization, which is bound to meet its demand in the market.
The amount of inventory maintained by the firm represents its profitability position. The quality
must not be in excess or inadequate, it must be according to the requirement. The quality stores
must be able to meet the market demand.

CASH AND BANK: Every organization or firm maintains cash reserves in their accounts. This
is the major key on which working of the entire organization is dependent upon. This is required
in every aspect of production, marketing, financing etc. In other words, it can be said that it plays
a vital role in the functioning of any organization.
LOANS AND ADVANCES: Advances to staff are those advances, which are given to the
employees as festival advances. These advances are treated as current assets as they are given
advance to the employees and are collected within the accounting year. It doesn’t result in any
default payment as the amount is deducted from their salaries directly during their payment.
Their advances are prepared and are collected in the accounting year. These are the loans and
advances amount that are given by the organization in procuring of raw materials. Amount is
given in advance to its supplier in supplying the raw materials required and this is adjusted after
receiving the raw material. The final settlements take place only after deducting the advances
amount from total amount.

CURRENT LIABILITIES: Current liabilities are those which are payable during an
accounting year. These are paid out of current assets like cash. When current assets availability is
present there exist the current liabilities but current assets must always be in excess to current
liabilities. This provides the organization to be in a good position.

SUNDRY CREDITORS: Creditors are those from whom products are purchased on credit
basis. These amounts are paid within the accounting period. If the creditors number increase the
amount payable also increases which further increases the liquidity.

LINE OF CREDIT: Banks to new business do not often give lines of credit. However, if your
new business is well capitalized by equity and you have good collateral, your business might
qualify for one. A line of credit allows you to borrow funds for short terms needs when they
arise. The funds are repaid once you collect the accounts receivables that resulted from the short-
term sales peak. Lines of credit typically are made for one year at a time and are expected to be
paid off for 30 to 60 consecutive days sometime during the year to ensure that the funds are used
for short-term needs only.
SHORT TERM LOAN: While your new business may not qualify for a line of credit from a
bank, you might have success in obtaining a one-time short-term loan (less than a year) to
finance your temporary working capital needs. If you have established a good banking
relationship with a banker, he or she might be willing to provide a short-terms note for one order
or for a seasonal inventory and/or accounts receivable buildup. In addition to analyzing the
average number of days it takes to make a product (inventory days) and collect on an account
(account receivable days) Vs. the number of days financed by accounts payable, the operating
cycle analysis provides one other important analysis. From the operating cycle, a computation
can be made of the dollars required to support one day of accounts receivables and inventory and
the dollars provided by a day of accounts payable. Working capital has a different impact on
cash flow in a business.

Constituents of current assets

1. Cash in hand and cash at bank

2. Bills receivables
3. Sundry debtors
4. Short term loans and advances.
5. Inventories of stock as:
o Raw material
o Work in process
o Stores and spares
o Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working capital is the
excess of current assets over current liability.

Constituents of current liabilities

1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation, if it does not amt. to app. Of profit.
6. Bills payable.
7. Sundry creditors.

The gross working capital concept is financial or going concern concept whereas
net working capital is an accounting concept of working capital. Both the concepts have their
own merits. The gross concept is sometimes preferred to the concept of working capital for the
following reasons:

1. It enables the enterprise to provide correct amount of working capital at correct time.
2. Every management is more interested in total current assets with which it has to operate
then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.
4. This concept is also useful in determining the rate of return on investments in working
capital. The net working capital concept, however, is also important for following
reasons:
 o It is qualitative concept, which indicates the firm’s ability to meet to its operating
expenses and short-term liabilities.
o IT indicates the margin of protection available to the short term creditors.
o It is an indicator of the financial soundness of enterprises.
o It suggests the need of financing a part of working capital requirement out of the
permanent sources of funds.

VIII. Types of working capital:-

The operating cycle creates the need for current assets (working capital) however
the need does not come to an end after the cycle is completed to explain this continuing need of
current assets a destination should be drawn between permanent ad temporary working capital.

1) Permanent working capital:-

The need for current assets arises, as already observed, because of the cash cycle.
To carry on business certain minimum level of working capital is necessary on continuous and
uninterrupted basis. For all practical purpose, this requirement will have to be met permanent as
with other fixed assets. This requirement refers to as permanent or fixed working capital

2) Temporary working capital:-

Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable, working capital. This portion of the required working capital is needed to
meet fluctuation in demand consequent upon changes in production and sales as result of seasonal
changes.
The amount of working capital is depends upon the following factors:

1) Nature of business:-

Some businesses are such, due to their very nature, that their requirement of fixed
capital is more rather than working capital. These businesses sell services and not the commodities
and that too on cash basis. As such, no founds are blocked in piling inventories and also no funds
are blocked in receivables. E.g. public utility services like railways, infrastructure oriented project
etc. Their requirement of working capital is less. On the other hand, there are some businesses like
trading activity, where requirement of fixed capital is less but more money is blocked in
inventories and debtors.

2) Length of production cycle:-

In some business like machine tools industry, the time gap Between the acquisitions
of raw material till the end of final production of finished products it is quite high. As such amount
may be blocked either in raw material or work in progress or finished goods or even in debtors.
Naturally there need of working capital is high.

3) Size and growth of business:-

In very small company the working capital requirement is quit high due to high
overhead, higher buying and selling cost etc. as such medium size business positively has edge
over the small companies. But if the business start growing after certain limit, the working capital
requirements may adversely affect by the increasing size.
4) Business/ Trade cycle:-

If the company is the operating in the time of boom, the working capital
requirement may be more as the company may like to buy more raw material, may increase the
production and sales to take the benefit of favorable market, due to increase in the sales, there may
more and more amount of funds blocked in stock and debtors etc. similarly in the case of
depressions also, working capital may be high as the sales terms of value and quantity may be
reducing, there may be unnecessary piling up of.

IX. Determinants of working capital:

1. Business size and its nature:

Nature of business greatly influences the working capital requirements of an

enterprise. Thus financial and trading enterprises require less of fixed assets but require huge
working capital investments. For example a retailer has to carry large stockers of a variety of
goods to satisfy the varied and continuous needs and requirements of his customers.

2. Manufacturing cycle:
 Working affected by its manufacturing cycle as well. The cycle starts with the
purchase and use of raw material and ends when finished goods are produced. Thus the longer
the cycle the greater the companies’ working capital needs. To avoid this an alternative
manufacturing cycle should be adopted if it calls for shortest time span.

3. Fluctuations of business:

Fluctuations in business are of several types namely short period, seasonal and
cyclical etc. These fluctuations result in change in the demand of products of the enterprise. This
in turn results in change in working capital requirements of the business. In the event upswing in
the economy there will be increase in demand and correspondingly increase in sales. With the
result there will be more investments in inventories and debtors will also increase.

4. Policy of production:

An enterprise as stated above nay adopt a constant policy of production to suit its
ends. But such a policy will expose the company to greater risks and inventory costs. Therefore
the company may prefer to follow the policy of varying its production schedules in accordance
with the changes in its demand. Some concerns may utilize their production capacities.

5. Credit policy of the company:

The working capital of an enterprise is also determined by its credit policy as it

affects the companies level of book debts. An enterprise formulates the terms of credit followed
by it towards its customers which of course is influenced by the norms set in the similar policy
on the merit of each individual case and thus it should have a discretionary practice.

6.Credit Availability:

Credit terms granted to an enterprise by its customers also affect the requirements
of working capital. If liberal credit terms are available to the company it will require less
investment in its working capital. The availability of bank creditors also affects the level of
working capital needs of an enterprise. It will operate on less working capital if bank credits are
avail to it easily and on favorable condition.
7. Activities of growth and expansion:

With the growth of a firm by way of increase in its sales and fixed assets the
working capital needs of it also increase. In fact the increased working capital needs proceed the
growth in business activities .Thus the increased working capital need not follow the growth of
the firm rather the growth follows it. As such for a growing firm there is every need to make
advance planning on continuous basis for working capital needs.

8. Margin of profit and profit appropriation:

Profit earning capacity of business enterprise varies from one another. This of
course depends much upon the quality of the product pricing, marketing strategies and monopoly
power or otherwise enjoyed by the enterprise. Different organizations some earning high and
others low profit margin. The volume of net profit earned is a source of working capital.

9. Changes in price level:

There is direct impact of changes in price level on the working capital

requirements of an enterprise. This makes the job of the financial manager very important as he
is required to anticipate correctly this impact. Generally a company will have to maintain higher
volume of working capital as a result of rise in price line. This is because investments in current
assets will increase because of price rise.

10. Operating Efficiency:

With optimum utilization of its resources a company can improve its operational
efficiency. Thus will result in minimization of cost and maximization of returns. When the
company is able to control its operational costs it can effectively contribute towards its working
capital. The operational efficiency of an enterprise improves the use of its working capital about
the pace of the cash cycle will be accelerated.

Current assets minus current liabilities. Working capital measures how much in
liquid assets a company has available to build its business. The number can be positive or
negative, depending on how much debt the company is carrying. In general, companies that have
a lot of working capital will be more successful since they can expand and improve their
operations. Companies with negative working capital may lack the funds necessary for growth.

Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash, account receivable and inventory) Also known as
"net working capital", or the "working capital ratio".

If a company's current assets do not exceed its current liabilities, then it may run
into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A
declining working capital ratio over a longer time period could also be a red flag that warrants
further analysis. For example, it could be that the company's sales volumes are decreasing and,
as a result, its accounts receivables number continues to get smaller and smaller.

Working capital also gives investors an idea of the company's underlying

operational efficiency. Money that is tied up in inventory or money that customers still owe to
the company cannot be used to pay off any of the company's obligations. So, if a company is not
operating in the most efficient manner (slow collection), it will show up as an increase in the
working capital. This can be seen by comparing the working capital from one period to
another; slow collection may signal an underlying problem in the company's operations.
 CHAPTER 3

RESEARCH METHODOLOGY
What is Research…?

Research means search for facts in order to find answers to certain questions or to find solutions
to certain problems. It is often referred to as ‘scientific inquiry’ or ‘scientific investigation’ into a
specific problem or situation. This is because; the search for facts should be made by scientific
method rather than by arbitrary method. The scientific method uses systematic rational approach
to search for facts, whereas, the arbitrary method attempts to find answers to questions on the
basis of imagination and one’s own beliefs and judgment. In simple words Research is the
systematic process of finding out problems between variables by investigating inside or outside
of the company and giving better solutions to it.

Definition:-

Mythology refers to body of method of technique used in conducting a study. Different type of
method is used in social research. In selecting a method a researcher should take into account not
only the suitability of method but also adequate knowledge of the method.

Sources:-

Secondary Data:-

1. Book
2. Websites
 Hypothesis:-

1. The current ratio the company is optimum.

2. The company has enough liquid assets.

OBJECTIVES OF STUDY-

The objectives of the study are to make a comprehensive analysis of Working capital

management of the company.

1. To study optimum level of current assets and current liabilities of company.

2. To study the liquidity position through various working capital related ratio.

3. To study the working capital component such as receivable accounts cash management inventory
position.

To estimate the working capital requirement of Fullerton India credit Ltd.

Balance sheet as on 31st 2016, 2017, 2018(in lakhs)
 CHAPTER 4

ANALYSIS OF WORKING

CAPITAL ANALYSIS
ANALYSIS OF WORKING CAPITAL RATIO:-

1) WORKING CAPITAL:-

Working capital = current assets – current liabilities

Current Asset:-

Inventories + Sundry Debtors + Cash &Bank Balance+ Other Current Assets + Loan & Advance.

Current Liabilities & Provisions:

Creditors + Advances + Overdrawn Bank Balance + Other Liabilities + Interest

Accrued but not due on loan + Fringe Benefit Tax + Taxation + Employee Benefits + Excise
Duties

Total Working Capital = Current assets - Current liabilities

No. of items
2) CURRENT RATIO:-

Current ratio = Current assets

Current liabilities

Current Asset:

Inventories + Sundry Debtors + Cash &Bank Balance+ Other Current Assets + Loan & Advance.

Current Liabilities & Provisions:

Creditors + Advances + Overdrawn Bank Balance + Other Liabilities + Interest

Accrued but not due on loan + Fringe Benefit Tax + Taxation + Employee Benefits + Excise
Duties.

1) Current Ratio:-

This ratio is the measure of general liquidity and is most widely used to make the
analysis of a short term financial position or liquidity of a firm. The higher ratio indicates the
firm is liquid and has the ability to pay its current obligations in time.

Current ratio = Current Assets

Current Libilities
(No. of items)
Inference:-

Current ratio shows the short-term financial position of the business. This ratio
measures the ability of the business to pay its current liabilities. The ideal current ratio is
supposed to be 2:1 i.e. in case, it is more than 2:1, it indicates idleness of working capital, FC’s
Ratio is also idle.

3) Working Capital Turnover Ratio:

Working capital turnover ratio indicates the velocity of utilization of net working
capital. This ratio indicates the number of times the working capital is turned over in the course
of the year. This ratio measures the efficiency with which the working capital is used by the firm.
A higher ratio indicates efficient utilization of working capital and a low ratio indicates
otherwise. But a very high working capital turnover is not a good situation for any firm.

Calculation of Working Capital Turn over Ratio:

Net Sale

= Current assets – Current Liabilities

4) QUICK RATIO:-
Quick assets are defined as current assets excluding inventors. The quick
ratio also called the acid asset ratio is fairly stringent measure of liquidity. It is based on that
current assets when are inventories are excluded from current assets because inventory are
deemed to be the least liquid comparative of current assets. The normal level for such ratio is
supposed to be 1:1.The quick ratio positions of the company are as under:

Quick ratio = quick assets

quick liability

Quick assets:

Current asset – stock – prepaid expenses

Quick liability:

Current liability – bank overdraft

Inferences;
Quick ratio also like current ratio shows improvement. But does consistency
improvement. However since 2007-08 to 2009-10 the company indicates that it margin towards
does not improvement. Quick ratio also like currents ratio show that a negative trend quick ratio
varied from 11.30 to 9.47 over the year. The negative trend in ratio means that liquidity position
of the company is not improving.

INVENTORY MANAGEMENT

Inventory constitutes a substantial portion of the assets employed in any

industry. The range from 50% to 60% of the total production cost. This can be defined as those
items which are sold in ordinary course of business or to consume in the production process.
Inventories can be categories in to following type.

1) Raw material:-

To hold stocks of raw material, an organization deploys its primary production

sections or processes to obtain raw materials from manufactures and stockies
2) Work in process:-

The holding of both raw materials and stocks of finished goods is

generally a planned activity. In process stocks, however, are likely to exist in any
manufacturing organization, whether they are planned for or not.

3) Finished Goods:-

The stock of finished goods provides a buffer between customer demand

and the manufacture's supplies.
4). Flabby inventory:-

It comprises finished goods, raw materials and stores held because of poor
working capital management and inefficient distribution.

5) Profit making inventory:-

It represents stocks of raw materials and finished goods held for realizing stock
profit.

6) Safety Inventory:-

It provides for failures in supplies, unexpected spurt in demand, etc. although

there may be an insurance cover.

7) Normal inventory:-

It is based on a production plan, lead time of supplies and economic ordering

levels. Normal inventories fluctuate primarily with change in production plan. Normal inventory
also includes a reasonable factor of safety.

8) Excessive inventory:-

Even an efficient management may be compelled to build up excessive inventory

for reasons beyond it control, as in the case of a strategic import or as a measure of Government
price support of a commodity.
Objectives:-

i) To have stocks available as and when they are required.

ii) To utilize available storage space, but prevent stock levels from exceeding space
availability.
iii) To maintain adequate accountability of inventory assets.
iv) To keep all the expenditure within the budget authorization

To ensure an adequate supply of materials stores spares etc. minimize stock outs and shortages;
and avoid costly interruption in operations.

INVENTORY TURNOVER RATIO:-

Inventory turnover ratio = Net Sales / Inventory

No of item
FINDINGS
 The company has adopted the strategy to maintain of lower limits. It puts on lower
working capital and also maintains a stock level in efficient manner. The trend and ratio also
show that the marginal performance is move in a subsequent manner.

5) Debtor Turnover Ratio:-

This ratio compares the size of firms sells the size of its uncollected bills from
customers. Debtor turnover indicates the efficiency of the company. The low ratio indicates
difficulty faced by company in collection of bills a large receivables balance. A strict policy well
result in low receivable balance high ratio. It determines the rate of which cash is remitted by the
debtors.

Debtors turnover ratio = Turnover

Debtor
6) AVERAGE COLLECTION PERIOD:-

Average collection period: - Debtors x 365

Turnover
FINDINGS

The debtor turnover ratio shows that during the year 2008-2009 to 2009-
2010 indicate that it mention low debtor. However the ratio better is the performance.

Higher the percentage of debtors to sale larger is the period of collections, which indicates very
liberal & inefficient credit & collection performance. This certainly delays the collection of cash
impair the firms debt rating ability. The chance of bad debts losses are also increase.
SUGGESTIONS:

1) Level of working capital:-

This should be maintained by a careful study of the movements of working

capital in successive periods. If a management can develop a pattern in these movements, this
pattern would serve as a guide to its changing requirements in relation to certain decisions which
are made from time to time.

2) Structural Health:-

The relative health of the various components of the working capital should be
considered from the point of view of liquidity. It is necessary to draw structural relationships in
respect of each component constituting the current assets.

3) Circulation:-

This is an important feature of the liquid position and involves the natural activity
cycle of an enterprise. Ratios may be calculated to show the average period required for the
conversion of raw materials into finished goods, finished goods into sales, and sales into cash.

4) Liquidity:-

A more comprehensive test to measure liquidity may be adopted by using the

following three ratios, each expressed as a percentage of :

a) Working capital to current assets

b) Stocks to current assets

c) Liquid resources to current assets.

5) The company must concentrate more on cost reduction either than cost control.
6) For proper inventory management.

a) To provide a check against losses of materials through carelessness for pilferage.

b) To enable the management to make costs and consumption comparisons between operations
and periods.

c) To provide a perpetual inventory value and consistent and reliable basis for the preparation
of financial statements.

7) For proper cash management

a) Planning of cash requirements

b) Effective control of cash flow

c) Productive utilization of excess funds

d) d) To search for the optimum cash probable overstates the company's capabilities.

8) The company must be able to implement to new better sophisticated methods of production to
old and obsolete methods of production.
CHAPTER 5

CONCLUSIONS
CONCLUSION:

The statement of working capital for 3 years shows that there is an adequate
rate of increase in working capital and it corresponds to rate of increase in turnover. Major
reasons for increase in working capital

 Improvement in profitability
 Infusion of long term fund by way of long term working capital loan
 In comparative analysis, the performance of a firm at a single point of time relative either
to other firm in the industry to some other generally accepted industry standard is studied.
 To utilize available storage space, but prevent stock levels from exceeding space
availability.
 Working capital represents the volume of current assets advances from long term
resource. It is that part of a firm's current assets which will stay with working capital is a
measure of a firm's immunity to financial squeeze.
 Working capital is the difference between the inflow and outflow of funds. In other
words, it is the net cash inflow. It is defined as the excess of current assets over current
liabilities and provisions
BIBLIOGRAPHY

Following books were referred for carrying out the project: -

 Financial Management-Khan M.Y./Jain P.K.

 Financial Management-I.M. Pande
 Financial Management-S.M. Inamdar
 Management Accounting-M.G.Patkar
 Business Research Methods- William Zikmund
Research Book-

Management Accounting & Financial Analysis –Borad Of Studies The

Institute Of Chartered Accountants Of India

Annual Reports from 2015-2016, 2016-2017, 2017-2018 of Fullerton India Credit

Ltd.
Following websites were referred: -

1) www.fullertonindia.com

2) www.linkedin.com/companies/stfc