Tilak Maharashtra University, Pune

TILAK MAHARASHTRA UNIVERSITY, PUNE
A Project Report
On
WORKING CAPITAL MANAGEMENT OF AAI

MASTER OF BUSINESS ADMINISTRATION (FINANCE)
Submitted in partial fulfillment of the requirements for

the award of Master of Business Administration of Tilak Maharashtra
University, Pune
2007-2008
SUBMITTED BY
Name: MANOJ S HULE.

MBA(FINANCE)
PRN NO
Of
___________________________
___________________________
Guided by Prof.Mr R.Subramanian.
TILAK MAHARASTHRA UNIVERSITY
GULTEKDI, PUNE -411037.
WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 1

Tilak Maharashtra University, Pune

(Deemed Under Section 3 of UGC ACT 1956 vide Notification
No:F.9-19/85- U3 dated 24th April, 1987 By the Government of India.)
Vidyapeeth Bhavan, Gultekdi, Pune-411037.
CERTIFICATE
This fis to Certify that the Project titled Working Capital

Management of Airports Authority of India", is a bonafide work
carried out by Mr. Manoj Shantaram Hule a student of Master of
Business Administration Semester 3rd/5th, Specialization in Finance
PRN________________ Under Tilak Maharashtra University, in the
year 2008.
Head of the Department Examiner Examiner

Internal External
Date: University Seal

Place:

CERTIFICATE
TO WHOMSOVER IT MAY CONERN
This is to certify that Mr.Manoj Shantaram Hule , MBA Student of Tilak

Maharashtra University, Pune has successfully collected thé data for thé Project
report for award of Master Degreee of Business Administration.
He has done the Project on " Working Capital Management of Airports

Authority of India".
Company Name Company Seal
Désignation
Signature

CERTIFICATE OF INTERNAL GUIDE
This is to certify that the project titled "Working Capital Management of

Airports Authority of India" is a bonafide work carried out by Mr. Manoj
Shantaram Hule a candidate for the award of Master of Business Administration
of Tilak Maharashtra University, Pune under my guidance and direction.
Signature of guide
Name:
Designation:
Institute:
Date:
Place:

Acknowledgement
I am thankful to Prof. Mr.R.Subramanian my project guide, who has been

instrumental in giving me the required inputs and providing an outline through out
the duration of the abovementioned project.
I would also like to express my thank to Mr. Ajay Pinge, Our Centre Co-ordinator for
giving me the opportunity to undertake a project entitled "Working Captial
Management".
I specially thanks to Shri K.S. Sivakumar, Dy.General Manager(Finance& Accounts),

Airports Authority of India, Western Region, Mumbai, who gave me time for interview
out of their busty schedule for responding to questions on the concerned study and
Mrs. S.Anandavalli, Lecturer in Commerce who has given me her valuable guidance
and suggestions for completing my project work.
Finally, I would like to thank all the personalities behind the successful completion
of the Project. I thank my friends and colleagues for the suggestions they provided
to me from time to time.

TABLE OF CONTENTS
PAGE NO
CHAPTER 0 : EXCUTIVE SUMMARY 07
CHAPTER 1 : RATIONALE FOR STUDY. 08-14

CHAPTER 2 : OBJECTIVE OF STUDY. 15-17
* TITLE OF THE PROJECT. 15
* OBJECTIVE OF THE STUDY. 15-16
* SCOPE OF THE STUDY. 17
CHAPTER 3 : PROFILE OF AIRPORTS AUTHORITY OF INDIA. 18-19
CHAPTER 4 : THEORETICAL PERSPECTIVE. 20-35
CHAPTER 5 : RESEARCH METHODOLOGY. 36
CHAPTER 6 : DATA ANALYSIS AND INTERPRETATIONS USING VARIOUS 37

CHARTS AND GRAPHS.
CHAPTER 7 : FINDINGS. 38
CHAPTER 8 : LIMITATIONS. 39
CHAPTER 9 : EXPECTED CONTRIBUTION FROM THE STUDY. 40
CASE STUDY- THE ITC. 41-43
APPENDIX : COPIES OF QUESTIONNAIRE. 44-45

: BIBLIOGRAPHY. 46

Executive Summary:
Traditional analysis of working capital is defensive; it asks " Can the company meet
its short-term cash obligations?" But working capital accounts also tell you about
the operational efficiency of the company. The length of the cash conversion cycle
tells you how much working capital is tied up in ongoing operations. And trends in
each of the days- outstanding numbers may foretell improvements or declines in the
health of the business.
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. Thus the importance of adequate of working capital in commercial
undertakings can never be over emphasized. The various studies conducted by the
Bureau of Public Enterprises have shown that one of the reasons for the poor
performance of public sector undertakings in our country has been the large amount
of funds locked up in working capital. This results in over capitalization. Over
capitalization implies that a company has too large funds for its requirements,
resulting in a low rate of situation which implies a less than optimal use of
resources. Insolvency risk is there in the case of under capitalization of working
capital. Hence working capital management plays a pivotal role in growth or to
sustain in market for any organization.

CHAPTER-1
RATIONALE FOR STUDY

CHAPTER-1
RATIONALE FOR STUDY
Working capital is the money used to make goods and attract sales. The less
working capital is used to attract sale, the higher is it likely to be the return of
investment. Working capital management is about the commercial and financial
aspect of inventory, credit, marketing, royalty and investment policy. The higher the
profit margin, lower is it likely to be the level of working capital tied up in creating
and selling titles. The faster that we create and sell the books the higher is it likely to
be the return on investment.
The perfect world does not requires or concentrates about current assets and
current liabilities because there would not be uncertainty, no transaction costs,
information search costs, scheduling costs or production and technology
constraints. The unit cost of production would not vary with the quantity produced .
Capital, Labour and products markets shall be perfectly competitive and would
reflect all available information. Thus in such an environment , there would be no
advantage for investing in short term assets. Whereas, the world in which we live is
not perfect. It is characterized by considerable amount of uncertainty regarding the
demand, market price, quality and availability of own products and those of
suppliers. There are transaction costs for purchasing or selling goods or securities.
Information is costly to obtain and is not equally distributed. There are spreads
between the borrowing and lending rates for investments and financing of equal risk.
Similarly each organization is faced with its own limits on the production capacity
and technology it can employ. There are fixed as well as variable costs associated
with producing goods. In other words, the markets in which real firms operate are
not perfectly competitive.
These real world facts introduce problems and require the necessity of
working capital. The most important areas in the day to day management of the firm,
is the management of working capital. Working capital Management is the functional
area of finance that covers all the current accounts of the firm. It is concerned with
management of the level of individual current assets as well as the management of
total working capital. Working Capital Management involves the relationship
between a firm's short-term assets and its short-term liabilities. The goal of working

capital management is to ensure that a firm is able to continue its operations and
that it has sufficient ability to satisfy both maturing short-term debt and upcoming
operational expenses. The management of working capital involves managing
inventories, accounts receivable and payable, and cash.
For example, an organization may be faced with an uncertainty regarding

availability of sufficient quantity of crucial inputs in future at reasonable price. This
may necessitate the holding of inventory i.e. current assets. Similarly an
organization may be faced with an uncertainty regarding the level of its future cash
inflows and insufficient amount of cash may incur substantial costs. This may
necessitate the holding of a reserve of short- term marketable securities, again a
short term capital asset. The unpredictable and uncertain global market plays a vital
role in working capital. Though the globalization of economy and free trading of
products envisages the continuous availability of products but now much its cost
effective and quality based varies concern to concerns.
Working Capital refers to the funds invested in current assets, ie. Investment
in stocks, sundry debtors, cash and other current assets. Current assets are
essential to use fixed assets profitably. The term current assets refers to those
assets which in the ordinary course of business can be converted into cash within
one year without undergoing diminish in value and without disrupting the operations
of the firm. The current assets are cash. Marketable securities, accounts receivable
and inventory. Current liabilities are those which are to be paid within a year out out
of the current assets or earnings of the concern. The current liabilities are accounts
payable, bills payable, bank overdraft and outstanding expenses.

CHAPTER-2
OBJECTIVE OF STUDY
* TITLE OF THE PROJECT.
* OBJECTIVE OF THE STUDY.
* SCOPE OF THE STUDY.

CHAPTER-2
OBJECTIVE OF STUDY
* TITLE OF THE PROJECT
WORKING CAPITAL MANAGEMENT OF AIRPORTS AUTHORITY OF INDIA.
* OBJECTIVE OF WORKING CAPITAL MANAGEMENT
The main objective is to ensure the maintenance of satisfactory level of working

capital in such a way that it is neither inadequate nor excessive. It should not only
be sufficient to cover the current liabilities but ensure a reasonable margin of safety
also.
1. To minimize the amount of capital employed in financing the current assets. This
also leads to an improvement in the "Return of Capital Employed".
2. To manage the current assets in such a way that the marginal return on
investment in these assets is not less than the cost of capital acquired to finance
them. This will ensure the maximization of the value of the business unit.
3. To maintain the proper balance between the amount of current assets and the
current liabilities in such a way that the firm is always able to meet the financial
obligations, whenever due. This will ensure the smooth working of the unit without
any paucity of funds.
4. To decide upon the optimum level of investment in various current asset I.e.
determining the size of working capital.
5. By optimizing the investment in current asset and by reducing the level of

current liability, the company can reduce the locking up of funds in working capital
and thereby it can improve the return on capital employed in the business.
6. To decide upon the optimum mix of short-term funds in relation to long-term

capital.

7. The company should always be in a position to meet its current obligation, which
should be properly supported by current assets available with the firm. Maintaining
excess fund in working capital means locking of funds without any returns.
8. To locate appropriate source of short term financing.
9. Maintaining working capital at appropriate levels.
10. Availability of sufficient funds at time of need.
11. The Firm should manage its current asset in such a way that marginal returns on
investment in current asset is not less than the cost of capital employed to
finance the current assets.

* Scope Of Study:(Airports Authority of India-Working Capital Management).
The Scope of the Study is as follows:
1. Debt Collection:
By proper Working Capital Management the Debts collection period of Sundry

Debtors could be reduced as against the prevailing Debt collection period by
vigour's follow up which in turn will increased the Cash/Bank Balances available at
the disposal of the company to run the day to day efforts and for Short Term
Deposits and so also for liquidation the current liabilities which will be an ideal
situation of a good Working Capital Management. The study aims in achieving this
goal of better Working Capital Management.
2. Inventory Management:
The Excess storage of Inventories more than the normal required level to carry out
the day to day functions of the Company speaks of poor Working Capital
Management, which results in locking on up precious working capital.
Keeping optimum inventory level, the study aims at avoiding over stocking and over
stocking so also avoid blocking of funds.

CHAPTER-3
PROFILE OF THE
COMPANY

CHAPTER-3
PROFILE OF THE COMPANY
HISTORY OF AVIATION INDUSTRY
The aviation industry in India has been growing exponentially over the past
few years with the new reforms being introduced by the government. This industry
has seen a major boom in terms of sales turnover of air service operators.
The Indian Civil aviation Industry took its first steps in the early 1930s, when
the TATA's established TATA AIRLINES. The next two decades saw the entry of
several private carriers. In 1953, the government chose to nationalize private
carriers and set up Indian Airlines to serve the domestic market and Air India to
serve the international market. The national carriers enjoyed a monopoly till 1990-
91, when the Open Sky policy was implemented. With the repeal of the Air
Corporation Act, several private players such as Jet Air, Sahara Airlines, Modi luft,
and East Weste Airlines were allowed to operate commercial airlines and a new
chapter in the history of Indian Aviation began.
In 2003, more reforms were introduced in the aviation sector like an increase
in the FDI limit to 49% from 40%, and a reduction of excise duty on aviation turbine
fuel to 8% from 16%. The policy reforms and a favorable business environment
attracted several more private players like Air Deccan, Spice Jet, Go Airways, Indigo
Airlines, etc, who were set-up to operate under a low cost model.
The Indian aviation sector is currently pegged at US $ 7.7 billion and is

expected to grow four-fold to US $ 33.4 billion in the next three years. Currently,
there are 0.1 million travelers using the air transport services. It is estimated that 50
million people belonging to the middle income group will use the low cost airlines in
the coming years. The aviation industry is all set to conquer greater heights with

many new air service operators entering this market. The government is planning to
establish an independent regulatory authority, to be called Airport Economic
Regulatory Authority (AERA), to regulate tariffs in heavy- traffic sectors. However,
there are a few major challenges that may hinder the growth of the aviation industry.
These include high fuel costs, high airport charges, and the high rate of failure in the
airline business.
It is very essential to understand the history of aviation sector because growth

of Airports Authority of India is related to the Aviation sector. It cannot exist
independently as both are mutually dependent and share the ups and downs in the
industry. But there is difference in the route of development which has taken place
in the formation of Airports Authority of India. The organization has evolved to its
present state many developments and changes in the ownership.
Before Airports Authority was formed it was only Civil Aviation Department
(CAD) which was trusted with development, management and expansion of airports
in the country. The department was purely a Central Government entity and
management was under direct purview of the then Minister. The first branching from
the Civil Aviation Department took place when two divisions were formed namely
International Airports Authority of India (IAAI) and National Airports Authority
(NAA). The IAAI was formed to manage and expand the four international airports of
the country and the other airports were under the management of NAA. This was the
first time a professional management was introduced in the civil aviation sector by
forming a public sector undertaking.
Under the Honorable late Prime Minister Rajiv Gandhi a new initiative was
taken by merging the two divisions which were although a monopoly sector were
competing for the same market. A new entity was formed and was named as
Airports Authority of India(AAI). The entire journey leading up to the formation of

AAI has been depicted in a diagrammatic format for ease of undertaking and putting
the above words in one picture.

AIRPORTS AUTHORITY OF INDIA AT PRESENT
Corporate Office
Airports Authority of India
Rajiv Gandhi Bhavan, Safdarjung Airport,
New Delhi-110 003
Phone:91-11-24632950
Airports Authority of India(AAI) was constituted by an Act of Parliament and came

into being on 1st April, 1995 by merging erstwhile National Airports Authority and
International Airports Authority of India. The merger brought into existence a single
organization entrusted with the responsibility of creating, upgrading , maintaining
and managing Civil Aviation infrastructure both on the ground and air space in the
country. Despite many tragic occurrences like 9/11, Afghan War, Iraq war and SARS
that struck the Civil Aviation sector the world over during the last few years and left
it bleeding, Airports Authority of India (AAI) has persistently come up with good
results, showing all around growth including increased revenue and higher level of
profitability while building up the infrastructure.

AAI manages 126 airports, which include 11 international airports, 89 domestic

airports and 26 civil enclaves at Defence airfields. AAI provides air navigation
services over 2.8 million square nautical miles of airspace. During the year 2002-03,
AAI at various airports handled about 5 lakhs aircraft movements(4 lakhs domestic
and 1 lakh international); 40 million passengers (26 millions domestic and 14 million
international) and 9 lakh tones of cargo(3 lakh domestic and 6 lakh international).
AAI also provides Air Traffic Management Services over entire Indian Air Space and
adjoining oceanic areas with ground installations at all airports and 25other
locations to ensure safety of aircraft operations.
FUNCTIONS OF AAI
. Control and management of the Indian airspace extending beyond the

territorial limits of the country, as accepted by ICAO.
. Design, Development, Operation and Maintenance of International and

Domestic Airports and Civil Enclaves.
. Construction, Modification and Management of Passenger Terminals.
. Development and Management of Cargo Terminals of International and

Domestic airports.
. Provisions of Passenger Facilities and Information System at the Passenger

Terminals at airports.
. Expansion and strengthening of operation area viz. Runways, Aprons,

Taxiway, etc.
. Provision of visual aids.

. Provision of Communication and Navigational aids viz. ILS, DVOR, DME,

Radar etc.
AAI has set for itself ambitious targets for upgrading the infrastructure during
the 10th Five- Year Plan and is working steadily to achieve these targets. The airports
at Ahmedabad, Amirtsar, Bangalore, Goa, Guwahati, Hyderabad and CIAL(Pvt.), in
addition to those at Mumbai, Delhi, Calcutta, Chennai and Thiruvananthapuram, are
today International Airports open to operations even by Foreign International
Airlines. Besides the International flights by National Flag Carriers operate from
Calicut, Coimbatore, Tiruchirappalli, Vananasi, Jaipur and Gaya Airports too. Tourist
Charter now touch Agra, Coimbatore, Jaipur, Lucknow , Patna airports etc.
AAI's proposal to lease out, on global tender basis, the four most profitable
jewels in its crown viz. Delhi, Mumbai, Kolkatta and Chennai airports primarily aims
to upgrade these to emulate the world standars.
All major air-routes over Indian landmass are Radar covered (24 Radar
installations at 11 locations) along with VOR/DVOR coverage (72 installations) co-
located with Distance Measuring Equipment (71 installations), 39 runways provided
with ILS installations with Night Landing Facilities at 36 Airports and Automatic
Message Switching System at 15 airports.
AAI's successful implementation of Automatic Dependence Surveillance

system, using indigenous technology, at Calcutta and Chennai Air Traffic Control
Centers, gave India the distinction of being the first country to use this advanced
technology in the South East Asian region enabling effective Air Traffic Control over
oceanic areas using satellite mode of communication. Use of remote controlled VHF
coverage, along with satellite communication links, has given added strength of our

Air Traffic Management System. Linking to 80 locations by V-Sat installations during

2005 shall vastly enhanced Air Traffic Management and in turn safety of aircraft
operations besides enabling administrative and operational control over our
extensive airport network.
AAI's endeavour in enhanced focus on "customer's expectations' has evinced

enthusiastic response to independent agency organized customer satisfaction
surveys at 3 busy airports. These surveys have enabled us to undertake
improvements on aspects recommended by the airport users. The receptacles for
our 'Business reply letters' at airports have gained popularity; these responses
enable us to understand the changing aspirations of airport users. During the first
year of the millennium, AAI endeavours to make its operations more transparent
and the availability of instantaneous information to customers by deploying state-
of-art information Technology.
The specific training focus on improving employee response and professional

skill up gradation has been manifested. AAI's four training establishments viz. Civil
Aviation Training College- Allahabad, National Institute of Aviation Management and
Research- Delhi and Fire Training Centres at Delhi and Kolkata are expected to be
busier than ever before during 2001.

BOARD MEMBERS OF AAI.
Dr. K.Ramalingam
Chairman
WHOLE-TIME MEMBERS
Shri P.Seth
Member(Operations)
Shri H.S.Bains
Member(Pers & Admin)
Shri S.C.Chhatwal.
Member(Finance)
Shri V.P.Agrawal.
Member(Planning)
PART-TIME MEMBERS
Shri K.Gohain, Director General,
Director General For Civil Aviation
Shri Raghu Menon, IAS, Joint Secretary,

MINISTRY OF CIVIL AVIATION
Shri K.N.Shrivastava, IAS, Joint Secretary,
Shri S.R.Mehra, IPS Commissioner of Civil Security(Civil Aviation), Bureau of Civil

Aviation Security.

CHAPTER-4
THEORETICAL
PERSPECTIVE

CHAPTER 4
THEORETICAL PERSPECTIVE
The financial management of any business organization involves the three following
vital functions.
1. Management of Long Term Assets.
2. Management of Long Term Capital.
3. Management of Short Term Assets and Liabilities.
In most of the organizations of the first & second one which refers to Capital
Budgeting and Capital Structure respectively will be maintained and cope up with
organization growth. The third one which refers to Working Capital Management
requires more skills for sustaining and steady growth rate for any organization.
The working capital management includes decisions
1. How much stock/inventory to be hold.
2. How much cash/bank balances should be maintained.
3. How much the firm should provide credit to its customers.
4. How much the firm should enjoy credit from its suppliers.
5. What should be the composition of current assets.
6. What should be the composition of current liabilities.
Some of the definitions of working capital management:
PROF K V SMITH: “Working capital management is concerned with problems that

arise in attempting to manage the current asset, the current liability and the
interrelation that exist between them”.
WESTON AND BRIGHAM: “Working capital management refer to all aspect of

administration of both current asset and current liability”.

JAMES C VAN HORNE: “Current asset, by definition are asset normally converted
into cash within one year. Working capital management is concerned with the
administration of these asset-namely cash and marketable securities”.
IMPORTANCE OF WORKING CAPITAL MANAGEMENT
According to Husband and Hockery,”the prime object of management is to

make a profit, either or not this is accomplished, depend on the manner in which
working capital is accomplished”. The primary object of working capital is
management is to manage the firm’s current asset and current liability in such a
manner that a satisfactory level of working capital is maintained. The firm may
become insolvent if it cannot maintain a satisfactory level of working capital.
Working capital assists in increasing the profitability of the concern. The working
capital position decide the various policies in the business with receipt to general
operation viz importance of working capital.
Positive correlation between sale and current assets: There is a positive

correlation between the sale of the product of the firm and its current assets.
Increase in the sale of the product requires a corresponding increase in current
assets. Therefore, the current asset must be managed properly.
Investment in current asset: Generally more than half of the total capacity of
the firm is invested in current assets. Thus less than half of the capital is blocked in
fixed asset. Therefore management of working capital attracts the attention of the
management.
No alternative for current asset: While fixed capital can be acquired on lease in
emergency, there is no alternative for current asset. Investment in current asset
cannot be avoided without substantial losses.
Important for small unit: The management of working capital is more

important for small unit because they do not relay on long term capital market and
have easy access to short term finance source such as trade credit, short term bank
loans etc.
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS
The various factors determining the working capital requirement in a business

firm:

(A) Nature of businesses:

(B) Size of business unit:
(C) Seasonal variation:
(D) Time consumed in manufacture:
(E) Turnover of circulating capital:
(F) Labour intensive versus capital intensive industries:
(G) Need to stockpile raw material and finished goods:
(H) Terms of purchase and sale:
(I) Conversion of current asset into cash.
(J) Growth and extension of business:
(K) Business cycle fluctuation:
(L) Profit margin and profit appropriation:
(M) Price level changes:
(N) Dividend policies:
(O) Close coordination between production and distribution policy:
(P) An absence of specialization in the distribution of products:
(Q) If the means of transporting and communication are less developed:
(R) Hazards in a particular business also decide the magnitude of working capital
required.
The main source of working capital financing, namely trade credit, bank credit,
RBI framework/regulation of bank credit/finance/advances, factoring and commercial
papers.
METHODS OF ESTIMATING WORKING CAPITAL REQUIREMENT
Operating cycle method
CASH
ACCOUNTS RECEIVABLE
PURCHASE OF RAW MATERIAL
INVENTORY FINISHED GOODS

W.I.P
OPERATING CYCLE OF WORKING CAPITAL
Percent of sales method:
Some of the types of working capital report are:

Inventory report
Cash report
Receivables report
WORKING CAPITAL RATIO
Working capital ratios indicate the ability of a business concern in meeting its
current obligation as well as its efficiency in managing the current asset in the
generation of sales. These ratios are applied to evaluate the efficiency with which the
firm manages and make use of its current assets. The fallowing three categories of
ratio are used for efficient management of working capital (a) efficiency ratios (b)
Liquidity ratios (c) Structural health ratios.
Efficiency ratio: This ratio is computed by dividing the working capital by sale.
This ratio helps to measure the efficiency of utilization of networking capital. It
signifies for an amount of sale a relative amount of working capital is needed. If any
increase in sale is contemplated, working capital should be adequate and thus this
ratio is useful for maintaining adequate level of working capital.
Inventory turnover ratio: This ratio indicate the effectiveness and efficiency of
the inventory management .The formulae is as fallows
INVENTORY TURNOVER RATIO = SALES / CURRENT ASSET
This ratio shows how speedily the inventory is turned into accounts receivable
through sales. The lower the inventory of sales ratio, the more efficiently the
inventory is said to manage and vice versa.
Current assets turnover ratio: This ratio formula is:

CURRENT ASSET TURNOVER RATIO = SALES / CURRENT ASSETS
This ratio indicates the efficiency with which the current asset turn into sales.
The lower the current asset to sales ratio, it implies a more efficient use of funds.
Thus, a high turnover rate indicates reduced lock up of funds in current assets. An
analysis of this ratio over a period of time reflects working capital management of a
firm.

Liquidity ratio: This ratio indicate the extend of soundness of the current
financial position of an undertaking and the degree of safety provided to the
creditors. The higher the current ratio, the larger amount of rupee available, per
rupee for current liability, the more the firms ability to meet current obligation and
the greater safety of funds of short term creditors. The liquidity ratio formulae is
LIQUIDITY RATIO = CURRENT ASSET, LOANS, ADVANCES/ CURRENT LIABILITY
Current assets are those assets, which can be converted into cash within an
accounting year. Current liability and provisions are those liability that are payable
within a year. A current ratio of 2: 1 indicates a highly solvent position. Banks
consider a current ratio of 1: 3: 1 as minimum acceptable level for providing working
capital finance. The constituents of the current asset are as important as current
asset themselves for evaluation of companies solvency position.
Quick ratio: This ratio is a more refined tool to measure the liquidity of an
organization. It is a better test of financial strength than the current ratio, because it
excludes very slow moving inventories and the item of current asset, which cannot
be converted into cash easily. This ratio shows the extend of cushion of protection
provided from the quick assets to the current creditors. A quick ratio of 1: 1 is
usually considered satisfactorily through it is again a rule of the thumb only.
Structural health ratio: This ratio explains the relationship between current
asset and total investment in current asset. A business enterprise should use its
current asset effectively and economically because it is out of the management of
these assets that profits accrue. A business will end up in losses if there is any
lacuna in managing assets to the advantage of business. Investment in fixed assets
being inelastic in nature there is no elbowroom to make an amendment in this
sphere and its impact on profitability remains minimal. This structural ratio can be
indicated as
S.H.R = NET ASSETS / CURRENT ASSET
An analysis of current assets composition enable one to examine in which
components the working capital funds are locked up. Large tie up of funds in
inventories effect profitability of the business adversely owing to carry over cost .in
addition losses are likely to occur by the way of depreciation, decay, obsolesce,
evaporation and so on. Receivable constitute another component of current assets If
the major portion of current assets are made of cash alone the profitability will be
decreased because cash is a non earning asset. If the portion of cash balance is
excessive then it can be said that management is not efficient to employ surplus
cash.
Debtor turnover ratio: This ratio shows the extend of trade credit granted and
the efficiency in the collection of debts and thus it is an indicative of trade credit
management. The lower the debtor to sale ratio the better the trade credit
management and better the quality of debtors. The lower debtor means prompt

payment by customers. An excessive long collection period on the other hand

indicates a very liberal ineffective inefficient credit and collection policy.
DEBTOR TURNOVER RATIO = SALES / DEBTORS
Average collection period measures how long it takes to collect amounts from
debtors. The actual collection period can be compared with the stated credit terms of
the company. If it is longer than those terms, this indicate some insufficiency in the
procedure of collecting debts
Bad debts to sale ratio: This ratio indicates the efficiency of the controlled
procedure of the company. The actual ratio is compared with the target of norms to
decide whether or not it is acceptable.
Creditor turnover period: The measurement of creditor turnover period shows

the average time taken to pay for goods and service by the company. In general the
longer the credit period achieved the better, because delay in payments means that
the operation of the company is financed interest free by suppliers funds. But there
will be point beyond which if they are operating in a sellers market, may harm the
company. If too long a period is taken to pay creditors, the credit rating of the
company may suffer, thereby making it more difficult to obtain supplier in future.
CREDIT TURNOVER PERIOD = CREDITORS * 365 / PURCHASES
WORKING CAPITAL LEVERAGE

One of the important objectives of working capital management is by maintaining
the optimum level of investment in current asset and by reducing the current
liability .The company can minimize the investment in working capital and
thereby improve the return of capital employed. The term working capital
leverages refer to the impact of level of working capital on company’s
profitability. The working capital management should improve the productivity of
investment and current asset and ultimately it will increase the return on capital
employed. Higher level of investment in current asset than is required means
increase in the cost of interest charged on short term loans and working capital
finance raised from banks and will resulting the lover return on capital employed
and vice versa. Working capital leverages measures the responsiveness of ROCE
for changes in current asset. It is measured by applying the fallowing formulae
Working capital leverages = C.A / T.A - ‫טּ‬C.A
Where:
C.A = CURRENT ASSET
T.A = TOTAL ASSETS (net fixed asset = current asset )
‫טּ‬C.A = CHANGE IN CURRENT ASSET

OVERTRADING
Overtrading arises when a business expands beyond the level of funds available.
Overtrading an attempt to finance a certain volume of production and sales with
inadequate working capital .If the company does not have enough funds of its
own to finance stock and debtors it is forced, if it wish to expand, to borrow from
creditors and from banks on overdraft sooner or later and such expansion
financed completely by funds of others, will lead to a chronic imbalance in the
working capital ratio.
Expansion is advantageous so long as the business has funds available to
finance stock and debtors involved. Overtrading begins at a point where the
business relies on extra trade credit and increased turnover are financed by
taking longer period of credit from suppliers and/or negotiating an extension of
overdraft limits with the banks.
Over dependence on outside finance is a sign of weakness, unless the expansion
is curtailed, suppliers may refuse credit beyond certain limit, and the banks may
call for the reduction in overdrafts. If this happens the business may be insolvent
in that it does not have sufficient liquid resource to pay for current operation or to
repay current liability until customers pay for sale made on credit terms, or
unless the stock is sold for a loss for immediate cash payments.
Using the fallowing ratios it will be possible to analyze the situation properly
1. Working capital = current asset: current liability
2. Acid test = quick asset: current liability
3. Stock turnover = stock: cost of sale
4. Debtor’s turnover = debtors: credit purchases
5. The object of using these ratios is to detect a disorientation of liquidity
position of a firm and increase reliance upon trade creditors and
overdraft facilities.
OVERCAPITALIZATION AND UNDER CAPITALIZATION OF WORKING CAPITAL
If there are excessive stock, debtors and cash and very few creditors, there will
be an over investment in current asset. The inefficiency of managing working
capital will cause this excessive working capital resulting in lower returns in
working capital employed. and long-term funds will be unnecessarily tied up

when they could be invested to earn profit. This situation is known as

overcapitalization of working capital.
Under capitalization is a situation where a company does not have funds

sufficient to run the normal operation smoothly. This may happen, due to
inefficient working capital or diversion of working capital funds to finance capital
items. If the company faces the situation of undrecapitalization, then it will face
difficulty in meeting current obligation, procurement of raw material, meeting day-
to-day running expense etc. The result will ultimately be reduced profitability, and
reduced turnover. The finance manager must take immediate and proper step to
overcome the situation by making arrangements for sufficient working capital.
For this purpose he should prepare the realistic cash flow and fund flow
statement of the company.
STRATEGIES IN WORKING CAPITAL MANAGEMENT

At present more finance option are available to the finance manager to see the
operation of his firm go smoothly. Depending on the risks of business strategies
is evolved to manage the working capital.
Conservative working capital strategy: A conservative strategy suggests carrying
high levels of current asset in relation to sales. Surplus current asset enable the
firm to absorb sudden variation in sales, production plans, and procurement time
without destructing production plans. Additionally the higher liquidity level
reduces the risk of insolvency. But lower risk translates into lower returns. Large
investment in current asset lead to higher interest and carrying cost and
encouragement for efficiency. But conservative policy will enable the firm to
absorb day o day risk. It assures continuous flow of operation and illuminates
worry about recurring obligation. Under this strategy, long term financing covers
more than the total requirement of capital. The excess cash is invested in short-
term marketable securities and in need these securities are sold off in the market
to meet the urgent requirement of working capital.
Aggressive working capital strategy: Under this approach current asset are
maintained just to meet the current liability without keeping cushions for the
variation in working capital needs. The companies working capital is financed by
long-term source of capital and seasonal variation are met through short-term
borrowing. Adoption of this strategy will minimize the investment in net working
capital and ultimately it lowers the cost financing working capital needs. The
main drawback of this strategy is that it necessitates frequent financing and also
increase, as the firm is variable to sudden shocks.

A conservative current asset financing strategy would go for more long-term

finance, which reduces the risk of uncertainty associated with frequent
refinancing. The price of this strategy is higher financing cost since long-term
rates will normally exceed short-term rates. But when aggressive strategy is
adopted, some time the firm runs into mismatches and defaults. It is a cardinal
principle of corporate finance that long term source and short-term assets should
finance long term asset by a mix of long and short-term source.
Efficient working capital management techniques are those that compressed
operating cycle. The length of operating cycle is equal to the sum of the length of
the inventory period and the receivable period. Just in time inventory
management techniques reduce carrying cost by slashing the time that goods are
parked as inventories. To shorten the receivables period without necessary
reducing the credit period, corporate can offer trade discount for prompt
payment.
Rs
SECULAR GROWTH
LONG TERM
FINANCING
SEASONAL INVESTMENT IN
VARIATION MARKETABLE SECURITY
Tim
e
CONSERVATION WORKING CAPITAL STRATEGY

Rs Seasonal variation
Short term financing
Secular growth Long term financing
Time
AGGRESSIVE WORKING CAPITAL STRATEGY
ROLE OF CASH AND BANK IN WORKING CAPITAL MANAGEMENT
Good cash management can have a major impact on overall working capital
management. The key elements of cash management are:
1. Cash forecasting;
2. Balance management;
3. Administration;
4. Internal control.

CHAPTER-5
RESEARCH
METHODOLOGY

CHAPTER 5
Research Methodology:
Research Design: Two years of Annual Reports 2005-06 and 2006-07.
Data Collection Methods:
For this project I have collected the Primary Data from Personal Interview,
questionnaire.
The Secondary Data has been collected from Annual Reports, Case study of ITC
from ITC.Com
Sampling Plan
Sampling Unit: 1. Sr.Level Management(Finance)., Western Region, AAI, Mumbai.
Sampling Size: 1(as Policies are decided at CHQ Level, New Delhi).
Sampling Methods: Questionnaire, Personal Interview(Sr.Level Management)

CHAPTER-6
DATA ANALYSIS AND

INTERPRETATIONS USING
VARIOUS CHARTS AND GRAPHS

CHAPTER-6
DATA ANALYSIS AND INTERPRETATIONS USING VARIOUS CHARTS AND GRAPHS
FINANCIAL PERFORMANCE
The financial highlights of AAI for the year 2006-07 are as under:
(Rupees in crores)
Particulars 2006-07 2005-06
a) Revenue 3,726.23 3,490.46
b) Expenditure 2,196.90 2,236.3
c) Profit before Tax 1529.33 1,254.43
d) Provision for Tax 775.99 595.82
e) Deferred Tax Liability(Asset) (106.51) (59.01)
f) Profit after Tax 859.85 717.62
g) Proposed Dividend 172.00 143.52
h) Tax on Dividend* 27.45 20.13
i) Appropriations to Reserves:
i) Specific Reserves 309.16 221.31
ii) General Reserves 351.24 331.97
j) Internal Resources 1,126.34 984.98

*including interim dividend


CAPITAL STRUCTURE
(Rupees in crores)
Particulars As on 31st March,2007 As on 31st March,2006
a) Government Capital 463.63 449.63
b) Reserves & Surplus 4,381.76 3,720.23
c) Long Term Loans 65.28 82.33
d) Net worth 4,542.99 3,868.59
e) Capital Employed 3,652.32 3,260.70
f) Working Capital 1,491.81 1,285.81
Payment to Government
During the year following payments excluding taxes were made to Government of
India.
Dividend
(incl.interim dividend of Rs:60 crores for 2006-07) 163.52
Guarantee Fee 0.59
Interest on Government budgetary support loan 0.54
Prepayment/Repayment of Government Loans 18.00

Interim Dividend: AAI paid an Interim Dividend of Rs:60 crores for the year 2006-07 to
Government of India.
Statement showing the Performance at glance for working capital
(RS.IN CRORES)
2006-07
Particulars 2005-06 2004-05 2003-04 2002-03 2001-02
6,366.20
Current 5,286.68 4,285.34 3,509.34 3,322.28 2,881.91
Assets
4,874.39
Current 4,000.87 3,160.81 2,612.64 2,501.76 2,140.29
Liabilities
1,491.81
Working 1,285.81 1,124.53 896.70 820.52 741.62
Capital

Statement showing the Performance at glance-Ratios
Ratios UNIT 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02
Profit After Percentag 19% 19% 10% 11% 11% 12%

Tax to Net e
worth
Profit Percentag 42% 38% 23% 20% 20% 20%

Before Tax e
to capital
Employed
Profit After Percentag 24% 22% 11% 12% 11% 11%

Tax to e
Capital
Employed
Turnover Percentag 102% 107% 99% 97% 94% 94%

to Capital e
Employed
Current Ratio 1.31:1 1.32:1 1.36:1 1.38:1 1.33:1 1.35:1

Ratio
Profit Percentag 41% 36% 23% 21% 21% 21%

Before Tax e
to Total
Revenue

Ratios UNIT 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02
Profit After
Percentag 23% 21% 11% 12% 12% 12%
Tax to
e
Total
Revenue
Average Days 164 131 149 200 188 164

Debt
Collection
Period
No.of Nos. 55 42 36 32 27 25
Aircraft
Movements
per
Employee
Revenue Rs.in '000 1,906 1,786 1,502 1,297 1,135 1,079

per
employee
Revenue Rs in '000 1,124 1,133 1,159 1,029 898 850

Exp. Per

employee
STATEMENT SHOWING WORKING CAPITAL OF AIRPORTS AUTHORITY OF INDIA
(RS: IN LAKHS)
CURRENT YEAR PREVIOUS YEAR

S.NO PARTICULARS
2006-07 (RUPEES) 2005-06(RUPEES)
A CURRENT ASSEST
1 STORES & SPARES 25,44,51,040 13,76,07,279
2 SUNDRY DEBTORS 517,36,82,170 495,32,02,052
3 CASH & BANK BALANCE 1980,86,82,858 1551,39,00,247
4 DEPOSITS,LOANS & ADVANCES 3539,03,37,428 2949,22,13,116
5 INTEREST ACCURED ON 148,00,61,574 87,58,38,079

INVESTMENTS/DEPOSITS
6 ANY OTHER ITEM
i) PREPAID EXPENSES 2,12,01,438 2,37,77,215
ii) INCOME ACCURED BUT NOT 153,35,73,531 187,03,30,441

DUE
B CURRENT LIABILITIES

1 LIABILITIES 1763,97,34,240 1334,80,84,638
2 PROVISION 3110,41,24,759 2666,07,08,931
C CONTINGENT LIABILITIES 94,398 1,36,301
CURRENT ASSETS:
1. SUNDRY DEBTORS: The Sundry debtors includes National Carriers Operators(ie.

Air India, Indian Airlines, Alliance Air), Private Taxi Operators(i.e. Jet Airways,
Kingfisher Airlines, Jetlite Airways, Air Deccan etc), Small Domestic Operators,(for
e.g. Pawan Hans , Reliance, ) Commerical Parties etc.
The following are Particulars of Sundry Debtors for the F.Y. 2006-07 and 2005-06
S.N PARTICULARS 2006-07 2005-06
SUNDRY DEBTORS (RUPEES) (RUPEES)
1 DEBTS OUTSTANDING FOR A PERIOD LESS 338,39,68,964 329,48,93,870

THAN 6 MONTHS
2 DEBTS OUTSTANDING FOR A PERIOD 802,25,97,190 697,30,56,442

MORE THAN 6 MONTHS
TOTAL 1140,65,66,154 1026,79,50,312

LESS:PROVISION FOR BAD AND DOUBTFUL 623,28,83,984 531,47,48,260

DEBTS
DEBTORS AFTER PROVISION 517,36,82,170 495,32,02,052
PARTICULARS OF SR DEBTORS 2006-07 2005-06
a) Debts considered good and in respect of 177,15,99,355 150,83,94,368

which the Authority is fully secured
b) Debts considered good for which the 340,20,82,815 344,48,07,683

Authority holds no security other than the
Debtor's personal security.
c) Debts considered doubtful and provided for 623,28,83,984 531,47,48,261
TOTAL 1140,65,66,154 1026,79,50,312
The Debt more than 2 years old recoverable from parties other than Government
Departments are considered doubtful and provided for. Security Deposit available has
not been considered while making the provision for doubtful debts. In cases where
the matter has been referred to arbitration/litigation/disputed, necessary provision is
made in the accounts irrespective of the period of debt.
The Sundry Debtors(RS:517.37 crores)
This is overstated by Rs:1.00 crore due to non accounting of relief granted to India
Tourism Development Corporation in the arbitration award relating to duty free shops
pronounced in October,2006 and accepted by the Board in February,2007. This has
resulted in overstatement of profit by Rs:1.00 crores.

2. CASH AND BANK BALANCES
S.NO PARTICULARS 2006-07 2005-06
1 CASH AND STAMPS 84,43,953 2,40,92,828
2 CHEQUES IN HAND 5,43,32,048 10,12,78,330
3 REMITTANCE IN TRANSIT 41,47,76,251 5,47,09,864
4 SHORT TERM DEPOSITS WITH 1822,61,35,130 1323,89,47,130

BANKS - INDIA
5 BANK BALANCES IN CURRENT 101,47,06,472 195,23,90,106

ACCOUNT- INDIA
6 EXCHANGE EARNERS FOREIGN 9,02,89,004 14,24,81,989

CURRENCY ACCOUNTS
7 CASH IN TRANSIT -
TOTAL 1980,86,82,858 1551,39,00,247
3. DEPOSITS , LOANS AND ADVANCES
1 ADVANCES TO STAFF 266,51,40,081 279,42,42,826
2 ADVANCES FOR PURCHASES 37,37,91,761 9,52,91,487
3 OTHER ADVANCES 216,41,08,996 92,29,80,975

4 DEPOSITS 38,00,37,967 21,44,41,046
5 LOAN TO VAYUDOOT -
6 ADVANCE INCOME TAX & TDS 2885,78,71,711 2456,40,43,575
7 INTEREST ACCURED /DUE ON -

LOANS
8 PREPAID EXPENSES -
9 AMOUNT DUE FROM GOVERNMENT -

BUDGETARY SUPPORT
10 DEPOSITS WITH STATE 24,01,46,245 23,21,22,811

ELECTRICITY BOARD
11 OTHER DEPOSITS 70,92,40,665 66,90,90,396
TOTAL 3539,03,37,428 2949,22,13,116
Deposits, Loans and Advances(Rs:3539.03 Crore)
a) This includes an amount of Rs:6.55 crore lying with Delhi Development

Authority(DDA) f0 deposit work for development of land for resettlement at Delhi.
Out of this an amount of Rs:3.36 crore has been certified by the DDA as expenditure
incurred, which should have been charged off to revenue. Non changing of the
amount has resulted in overstatement of the above head and understatement of
"Other expenses" by RS:3.36crore. Consequently, profit stands overstated by the
same amount.
b) This includes a) RS:1.57 crore being clam against contractor at Hyderabad

pending in arbitration and b) RS:70 lakh being claim disallowed by arbitrator. As the
recovery of the above amounts is uncertain, the same should have been provided

for. Non provision towards these has resuled in overstatement of profit by Rs:2.27
crore.
4. Stores and Spares Rs:25.45 Crore:
This includes Rs:91.89 lakh being value of inventory items whose unit prices were
Rs:5000 and less in contravention of accounting policy No.6. This has resulted in
understatement of expenditure and overstatement of profit by Rs:91.89 Lakhs.
i) Stock/Spares consumed during the year are changed as revenue expenditure.
ii) Stock at year end(except store/spare with unit cost of Rs:5,000 and less) is valued
at cost price on FIFO basis for a period of five years from the date of receipt.
Thereafter the valuation is to be done as under:
6th year : 70% of the cost
7th year : 40% of the cost
8th year onwards : 10% of the cost
iii) Unconsumed stock of store/spare as 01.04.2005 is valued at 10% of the cost.
CURRENT LIABILITIES

1. LIABILITY FOR :
Goods Supplied/Work Done-Capital 154,60,53,611 111,32,81,370
Goods Supplied/Work Done-Revenue 38,73,56,569 32,57,83,335
Pay & Allowances and Exgratia 224,68,21,751 187,65,06,262
Provident Fund 7,42,49,544 3,42,20,223
Municipal Taxes 30,19,44,254 28,14,90,044
Arbitration 18,33,84,962 -
Recoveries Awaiting Remittance 41,57,24,749 14,52,76,267
Benevolent Fund 16,18,81,325 -2,24,54,937
MET Expenses 116,32,00,000 174,90,70,037
Other Expenses 253,44,66,815 221,55,96,310
SUNDRY CREDITORS 9,38,78,765 14,07,79,149
LIQUIDATED DAMAGES 16,00,43,997 11,44,47,204
ANTI-HIJACKING EXPENSES 103,03,85,242 101,35,03,191
WORKS TAX PENDING REMITTANCE 2,47,62,562 2,21,17,004
CISF EXPENDITURE 70,45,02,852 75,56,47,528
SECURITY DEPOSITS, EMD 112,36,38,170 98,36,50,481
INTEREST ACCURED BUT NOT DUE ON

LOANS-
-INDIAN LOANS 22,07,192 8,88,699

-FOREIGN LOANS 3,24,776 25,04,026
-COMMERCIAL CAPITAL 167,60,56,849 167,60,56,849
INCOME RECEIVED IN ADVANCE BUT 14,71,39,877 17,95,08,785

NOT DUE
ADVANCES FROM CLIENTS 37,12,31,012 28,02,46,491
DEPOSIT FOR DEPOSIT WORKS 12,35,71,847 21,22,77,028
DEPOSIT WORK BY CPWD - 12,18,220
BUREAU OF CIVIL AVIATION SECURITY - -

DEPOSIT
INCOME HELD UNDER SUSPENSE - -
MISCELLANEOUS DEPOSITS 26,69,07,520 24,64,71,072
ADVANCES FROM CLIENTS UPFRONT 290,00,00,000 -

FEE FROM JVCs
TOTAL 1763,97,34,240 1334,80,84,638
CURRENT LIABILITIES :
i) This is understated by Rs: 30.22 crore due to non-inclusion of liability towards taxes
payable (Rs: 29.32 crore) and leasing and other charges payable (Rs: 90.48 Lakh).
Consequently, accumulated profit is overstated by Rs: 30.22 crore.

ii) This is overstated by Rs: 3.51 crore due to creation of liabilities in excess of
requirement (Rs: 1.29 crore) and non write back of liabilities outstanding for over three
years for which no claims are pending (Rs: 2.22 crore). Consequently, net profit is
understand by Rs: 3.51 crore.
iii) This is understand by Rs: 2.52 crore due to non inclusion of liabilities towards cost
of work done and bills received upto 31st March, 2007. Consequently Gross Block of
Fixed Assets and Capital Work in Progress stand understand by Rs: 1.25 crore and
Rs: 1.27 crore respectively. Depreciation is also understated and profit overstated by
Rs: 12.40 Lakh.
PROVISIONS
S.N. PARTICULARS 2006-07(RUPEES) 2005-06(RUPEES)
1 INCOME TAX
-INDIA 2197,22,08,366 1820,93,51,856
2 EXCHANGE FLUCTUATION - -
3 PROPOSED DIVIDEND 112,00,00,000 103,52,37,551
4 TAX ON DIVIDEND 19,03,44,000 14,51,92,069
5 OTHERS 782,15,72,393 727,09,27,455
TOTAL 3110,41,24,759 2666,07,08,931
Provision: Rs:3110.41 Crore

This is understated by Rs:6.17 crore due to incorrect calculation of actuarial

valuation for Gratuity liability(Rs:1.48 Crore) and provision for fringe benefit tax
(Rs:4.69 Crore). Consequently profit is overstated by the some amount.
CHAPTER-7
FINDINGS

CHAPTER:7
FINDINGS:
By perusing the primary data of the company, I could get an insight about the
various components of the Working Capital Management ie. Sundry Debtors and
related Debts collection period, Cash Flow of the Company and the richness of the
company enjoys due to its status in the Industry(i.e. Monopoly).
The details of Stock Accounting of the Company and the implications of the
same on the Working Capital Management also could be analysed.
I could also know about how Creditors of the Company are being discharged
so also the various provisions being made by the Company in its Books of Accounts
at the end of the Financial Year and its implications on the Working Capital
Management.

The good management of working capital is part of good financial

management. Effective use of working capital will add to the operational efficiency of
a department; optimal use will help to generate maximum returns so also the
STATUS of 'GOOD PAY MASTER" in the Industry.
Ratio analysis can be used to identify working capital areas, which require
closer management. Various techniques and strategies, discussed above are
available for managing specific working capital items.
Debtors, creditors, cash and in some cases inventories are the areas most
likely to be relevant to a firm.
CHAPTER-8
LIMITATION IF ANY

Chapter-8
Limitations
The Stock Accounting in respect of Airports Authority of India is governed by

the Company Accounting Policy in this regard. Taking into account the policy
guidelines prevailing the suggestion noted for better Inventory Management has a
limitation to this effect towards overall Working Capital Management.

CHAPTER-9

EXPECTED
CONTRIBUTION FROM THE
STUDY
CHAPTER-9
Expected Contribution from the Study:
1. Better Debts Collection.
2. Timely discharge of Current Liabilities.
3. Increased cash flow which could be used even for Short Term Investments

which in turn increases the liquidity taking into account the interest accrued
on such investments.
4. Better Stock Management.
CASE STUDY
THE ITC
ITC is one of the India's foremost private sector companies with a market
capitalization of nearly US $ 18 billion and a turnover of over US $ 5.1 Billion. ITC is
raed among the World's Best Big Companies. Asia's 'Fab 50' and the World's Most
Reputable Companies by Forbes magazine, among India's Most Respected

Companies by BusinessWorld and among India's Most Valuable Companies by

Business Today. ITC also ranks among India's top 10 'Most Valuable (Company)
Brands', in a study conducted by Brand Finance and published by the Economic
Times.
ITC has a diversified presence in Cigarettes, Hotels, Paperboards and

Speciality Papers, Packaging, Agri-Business, Packaged Foods and Confectionery,
Information Technology, Branded Apparel, Personal Care, Stationery, Safety
Matches and other FMCG products. While ITC is an outstanding market leader in its
traditional businesses of Cigaretters, Hotels, Paperboards, Packaging and Agri-
Exports, it is rapidly gaining market share even in its nascent businesses of
Packaged Foods and Confectionery, Branded Apparel, Personal Care and Stationery.
As one of India's most valuable and respected corporations, ITC is widely

perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this
source of inspiration "a commitment beyond the market". In his own words: "ITC
believes that its aspiration to Crete enduring value for the nation provides the motive
force to sustain growing shareholder value. ITC practices this philosophy by not
only driving each of its businesses towards international competitiveness but by
also consciously contributing to enhancing the competitiveness of the larger value
chain of which it is a part."
ITC's diversified status originates from its corporate strategy aimed at creating
multiple drivers of growth anchored on its time-tested crore competencies:
unmatched distribution reach, superior brand-building capabilities, effective supply
chain management and acknowledged service skills in hoteliering. Over time, the
strategic forays into new businesses are expected to garner a significant share of
these emerging high-growth markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products.

ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billion in the
last decade). The Company's 'e-Choupal" initiative is enabling Indian Agriculture
significantly enhance its competitiveness by empowering Indian farmers through the
power of the Internet. This transformational strategy, which has already become the
subject matter of a case study at Harvard Business School, is expected to
progressively create for ITC a huge rural distribution infrastructure, significantly
enhancing the Company's marketing reach.
ITC's wholly owned Information Technology subsidiary, ITC Infotech India

Limited, is aggressively pursuing emerging opportunities in providing end-to-end IT
solutions, including e-enabled services and business process outsourcing.
ITC's production facilities and hotels have won numerous national and
international awards for quality, productivity, safety and environment management
systems. ITC was the first company in India to voluntarily seek a corporate
governance rating.
ITC employees over 24,000 people at more than 60 locations across India. The
Company continuously endeavors to enhance its wealth generating capabilities in a
globalising environment to consistently reward more than 3,81, 000 shareholders,
fulfill the aspirations of its stakeholders and meet societal expectations. This over-
arching vision of the company is expressively captured in its corporate positioning
statement: "Enduring Value. For the nation. For the Shareholder."
STATEMENT SHOWING WORKING CAPITAL OF ITC
2007 – 2008 2006 – 2007

Particulars
Rs in Crores Rs in Crores

CURRENT ASSETS:
Inventories 4050.52 3354.03
Sundry debtors 736.93 636.69
Cash and Bank balance 570.25 900.16
Other current asset 146.07 183.04
Loans and advances 1515.50 1215.8015278
TOTAL CURRENT ASSET (A) 7019.27 6289.72
CURRENT LIABILITY
Current liability 2786.97 2384.75
Provisions 1645.33 1472.84
TOTAL CURRENT LIABILITY (B) 4432.30 3857.59
NET WORKING CAPITAL (A-B) 2586.97 2432.13
QUESTIONNAIRE
1. NAME :
_______________________________________

2. DESIGNATION :
________________________________________
3. ADDRESS :
________________________________________
4. OCCUPATION :
________________________________________
5. AGE :
________________________________________
1. Whether Working Capital Management is done in your

Organization. Yes/No
2. How the Working Capital is managed in your Organization?
Very Efficiently Average Less Inefficient

Efficiently Efficiently
3. What is your contribution to the Management of Working Capital?
100% 75% 50% 25% Less than 25%
4. Rankings to what aspects you consider for working capital management
S.NO FACTORS RANKING
1 LIQUIDITY
2 PROFITABILITY
3 PRICE CHANGES

4 SERVICE CONSIDERATION
5 SATISFACTION OF CUSTOMERS.
5. What steps should be required to be taken for improving the Working Capital
Management?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

BIBLIOGRAPHY:
1. 12th Annual Report 2006-07-Airports Authority of India.
2. Case Study-ITC- from ITC.COM.





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TILAK MAHARASHTRA UNIVERSITY, PUNE

WORKING CAPITAL MANAGEMENT OF AAI

Submitted in partial fulfillment of the requirements for

Name: MANOJ S HULE.

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 1

Tilak Maharashtra University, Pune

This fis to Certify that the Project titled Working Capital

Head of the Department Examiner Examiner

Date: University Seal

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 2

TO WHOMSOVER IT MAY CONERN

This is to certify that Mr.Manoj Shantaram Hule , MBA Student of Tilak

He has done the Project on " Working Capital Management of Airports

Company Name Company Seal

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 3

CERTIFICATE OF INTERNAL GUIDE

This is to certify that the project titled "Working Capital Management of

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 4

I am thankful to Prof. Mr.R.Subramanian my project guide, who has been

I specially thanks to Shri K.S. Sivakumar, Dy.General Manager(Finance& Accounts),

to me from time to time.

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 5

CHAPTER 0 : EXCUTIVE SUMMARY 07

CHAPTER 1 : RATIONALE FOR STUDY. 08-14

* OBJECTIVE OF THE STUDY. 15-16

* SCOPE OF THE STUDY. 17

CHAPTER 3 : PROFILE OF AIRPORTS AUTHORITY OF INDIA. 18-19

CHAPTER 4 : THEORETICAL PERSPECTIVE. 20-35

CHAPTER 5 : RESEARCH METHODOLOGY. 36

CHAPTER 6 : DATA ANALYSIS AND INTERPRETATIONS USING VARIOUS 37

CHAPTER 9 : EXPECTED CONTRIBUTION FROM THE STUDY. 40

CASE STUDY- THE ITC. 41-43

APPENDIX : COPIES OF QUESTIONNAIRE. 44-45

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 6

Implementing an effective working capital management system is an excellent way

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 7

RATIONALE FOR STUDY

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 8

RATIONALE FOR STUDY

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 9

For example, an organization may be faced with an uncertainty regarding

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 10

* SCOPE OF THE STUDY.

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 11

* TITLE OF THE PROJECT

WORKING CAPITAL MANAGEMENT OF AIRPORTS AUTHORITY OF INDIA.

* OBJECTIVE OF WORKING CAPITAL MANAGEMENT

The main objective is to ensure the maintenance of satisfactory level of working

5. By optimizing the investment in current asset and by reducing the level of

6. To decide upon the optimum mix of short-term funds in relation to long-term

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 12

8. To locate appropriate source of short term financing.

9. Maintaining working capital at appropriate levels.

10. Availability of sufficient funds at time of need.

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 13

* Scope Of Study:(Airports Authority of India-Working Capital Management).

The Scope of the Study is as follows:

By proper Working Capital Management the Debts collection period of Sundry

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 14

WORKING CAPITAL MANAGEMENT- MANOJ S.HULE. 15

PROFILE OF THE COMPANY

HISTORY OF AVIATION INDUSTRY