PRESENTATION

ON
WORKING CAPITAL MANAGEMENT

Guide :
Dr. Pooja Bhatia
H.O.D.

Submitted By:
Ankanksha Singh
MBA-IInd Year
Roll No. : 1205470085

INTRODUCTION
Cash

is the lifeline of a company. If this lifeline deteriorates, so does

the company's ability to fund operations, reinvest and meet capital
requirements and payments. Understanding a company's cash flow
health is essential to making investment decisions. A good way to
judge a company's cash flow prospects is to look at its working capital
management (WCM).
Working capital, also known as net working capital, is a financial
metric which represents operating liquidity available to a business.
Along with fixed assets such as plant and equipment, working capital
is considered a part of operating capital. It is calculated as
current assets minus current liabilities. If current assets are less than
current liabilities, an entity has a working capital deficiency, also
called a working capital deficit.
A managerial accounting strategy focusing on
maintainingefficientlevels 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.

Net working capital

The

term net working capital may be defined as the excess of

current assets over total current liabilities. It may be noted
that to those liabilities which are payable within a period of
one year. The extent, to which the payments to these current
liabilities are delayed, the firm gets the availability of funds
for that period. So a part of the funds required to maintain
current assets is provided by the current liabilities & the firm
will be required to invest the funds in only those current
assets which are not financed by the current liabilities. In the
broad sense, the term working capital refers to the gross
working capital and represents the amount of funds invested
in current assets. In narrow sense the term working capital
refers to the net working capital. Net working capital is the
excess of current assets over current liabilities i.e.;
NET WORKING CAPITAL = CURRENT ASSETS
CURRENT LIABILITIES

COMPANY PROFILE
Hindustan

Aeronautics Limited (HAL) based in

Bangalore, India, is one of Asia's largest aerospace
companies. Under the management of the Indian
Ministry of Defence, this public sector company is
mainly involved in aerospace industry, which includes
manufacturing and assembling aircraft, navigation and
related communication equipment, as well as operating
airports. HAL built the first military aircraft in
South Asia and is currently involved in the design,
fabrication and assembly of aircraft, jet engines,
helicopters and their components and spares. It has
several facilities throughout India including Nasik,
Korwa, Kanpur, Koraput, Lucknow, and Hyderabad. The
German engineer Kurt Tank designed the HF-24 Marut
fighter-bomber, the first fighter aircraft made in India.

Apart

from these seven, other major

diversification projects are Industrial Marine Gas
Turbine and Airport Services. Several Coproduction and Joint Ventures with international
participation are under consideration.
HAL's supplies / services are mainly to Indian
Defence Services, Coast Guards and Border
Security Forces. Transport Aircraft and
Helicopters have also been supplied to Airlines
as well as State Governments of India. The
Company has also achieved a foothold in export
in more than 30 countries, having demonstrated
its quality and price competitiveness.

VISION
Make

HAL a dynamic, vibrant &

value-based learning organization
with exceptionally skilled, highly
motivated & committed human
resource to meet the current &
future challenges, driven by core
values embedded in the culture
of the Organisation"

MISSION
"Enable

all those working for HAL

to give their best to ensure their
all-round growth as well as that of
the Organization"

PRODUCTS

OBJECTIVE OF THE STUDY

To

get aware with the procedure of

financial department.
To know how the functions passes
through other departments in relation to
financial departments.
To become familiar with the formats of
different documents and their meaning.
To know each departments decision effect
on finance department and vice-versa.
To know organizational structure and
specifically financial department.

SCOPE& IMPORTANCE
To

study the components, determinants of

working capital.
To study how to keep the capital that is
tied up in the working capital cycle at a
minimum and maximizing profit.
To study how HAL finances working capital
requirements of the firms.
Interpreting, analyzing based on the
various ratios, the liquidity position of HAL.
To ascertain the amount of working capital.

RESEARCH
METHODOLOGY

RESEARCH

DESIGN:Research Design is a conceptual structure with research

conducted.
There is no unique method, which can entirely eliminate
the elements of undertaking. But Research methodology
more than any other procedure can minimizethe degree of
uncertainty, Thus it reduces the profit ability of making a
wrongchoice amongst alternative causes of actions.
This is particularly significant in the light of increasing
competitions &growing size, which makes the task of
choosing the best course of action difficult for any
business enterprise. It is imperative that any type of
organization in the present information coupled with tools
of analysis for making sound decisions which involved
minimum risk.

TECHNIQUES

OF DATA COLLECTION
Working capital management policy has a great effect
on firms profitability, liquidity and its structural
health.
For analyzing the performance of working capital
management, simple mathematical tools like
Percentages, Averages, and Ratios have been used in
this project work. To know the financial performances
of this division, calculation of Operation Cycle, Earning
before Interest & Taxes have been calculated.
Primary data:Was collected through the discussion
with the concerned executives.
Secondary data:Was collected through the official
records, various publications of the organization,
annual report and audited financial statements.
PLACE OF THE RESERCH:The research was conducted in Finance departments
in HAL Accessories Division Lucknow.

DATA ANALYSIS

CALCULATION OF PERCENTAGE OF ACCOUNTS

RECEIVABLE TO THE CURRENT ASSETS (IN LAKHS)
PARTICULARS
A. Account receivable
B. Current assets
C.% of accounts receivable
to current assets (A/B*100)

2013-14
5883.47

2015-16
14655.86

152518.97

260862.93

3.85

5.61

6
5
4
3
2

5.61
3.85

1
0

INTERPRETATION

2013-14

2015-16
PERCENTAGES

The above comparison shares that: The investment in Accounts receivables is more during 2015-16. By increasing more credit the
sales have increased proportion. If more & more block of working capital. The increase in ratio indicates that the management wants
to push off the accumulated stocks & go for fresh production. However the resultant credit period extended to the customer is to be
received.
It had a sudden decrease in 2013-14 due to a sudden increase in current assets.
The percentages of accounts receivable to current assets has been 3.85% and 5.61% respectively.

CALCULATION OF AVERAGE
COLLECTION PERIOD (IN LAKHS)
PARTICULAR
A. Debtors
B. Sales
C. Average collection
period (A/B*360 days)

2013-14

2015-16

5883.47

14655.86

140816.78

140991.83

16 days

38 days

40
30
20
10
0

38
16
2013-14

2015-16
days

INTERPRETATION:
From the above table we cananalyze that:
The Average Collection Period (ACP) for the year 2013-14 &2015-16 are 16 days and 38 days.
Normally 50-60 days is the lead-time for realizing the debtors for the enterprise like HAL.
The Average Collection Period for these years is much than required.
The Average Collection Period shows the extent of time period & the efficiency in the Collection of debtors.
Thus to improve the efficiency of HAL unit at Lucknow has to shorten the Average Collection Period. Thus reduce the
liberal term to the debtors.
Average Collection Period below would be better for HAL. As more than 95% of Collections are from Government there

FINDINGS
The

sales of HAL Accessories Division, Lucknow are increasing year by year,

which is a positive indication of growth of the organization.
Working capital is always shows negative, because the duration of the
project of developing any aircraft engine at least for 15 years. In this period
company only take advance from customers (i.e 40% of total amount)
which are debited to share capital, so company cannot make profit as well
as the current assets are always less than the current liabilities during this
time.
HAL should indigenously get the raw material and develop spare parts
without depending on Russian to avoid unnecessary delays.
Company is very strict to their customers.
It is founded that 40% to 50% of the current asset is occupied by industry.
Company got advance from the Government of India, which resulted in an
increase in cash/bank balance.
Company annual sales turnover of Rs.11, 457crores during the Financial
Year 2015-16 and to see it reach enviable heights in the future.
This is a defense related organization, so production is made on contract
basis.

SUGGESTIONS
Organization

must take necessary steps to raise the

interest on loans and advances in order to increase
the revenue sources of HAL.
To maintain a good current ratio, it must try to
increase the amount of current assets.
As the analysis reveals, the division is facing a
problem of liquidity due to the reason that the
payment to be received from the debtors is not
realized in the time.
That is the collection period is more than the required.
So, the HAL Accessories Division, Lucknow has to be
strict to its debtors by reducing the credit period
allowed, so as to improve its efficiency in managing
work

CONCLUSION
Cash

is the life-blood of any business, no matter how large or

small. If a business has no cash and no way of getting any cash, it
will have to close down.
Cash flows in a cycle into, around and out of a business. It is the
business's life blood and every manager's primary task is to help
keep it flowing and to use the cash flow to generate profits. If a
business is operating profitably, then it should, in theory, generate
cash surpluses. If it doesn't generate surpluses, the business will
eventually run out of cash and expire.
Cash is king, especially at a time when fund raising is harder than
ever. Letting it slip away is an oversight that investors should not
forgive. Analyzing a company's working capital can provide
excellent insight into how well a company handles its cash, and
whether it is likely to have any on hand to fund growth and
contribute to shareholder value.
Working capital of a business reflects the short-term use of funds
these are cash short-term securities, amount receivable and
inventories of raw materials, work in progress and finished goods.

LIMITATION
As

usual Most of the information is collected from

the secondary sources.
There is a gap between the theoretical analysis &
its practical and real life application. The data
available is limited to the Accessories Division,
Lucknow. The overall data of HAL is not available.
Even if all the factors are taken in consideration,
factors like motivation are not considered.
As HAL comes under Defense sector of central govt.
there are some limitations upon getting the data.
The analysis is purely mathematical in nature and
ignores management factors like motivation.

BIBILOGRAPHY
REFERENCE

BOOKS

MANAGEMENT

ACCOUNTING S.P.JAIN & K.L.NARANG

FINANCIAL MANAGEMENT- R.P.RUSTAGI
FINANCIAL MANAGEMENT - DR. S N MAHESHWARI

REPORTS

BALANCE SHEET OF HAL

PROFIT AND LOSS ACCOUNT OF HAL
ANNUAL BOOK REPORT OF HAL

WEBSITES

www.google.com
www.hal-india.com

THANKYOU