SUMMER TRAINING

PROJECT REPORT
AT

BIRLA CORPORATION LIMITED, MAIHAR (M.P.)

WORKING CAPITAL MANAGEMENT

SHRI RAMA KRISHNA COLLEGE POLYTECHNIC

& MANAGEMENT SATNA

Year:-2019-2020
GUIDED BY:-
Mr. GIRISH BAJAJ
OFFICER (FINANCE MANAGER)

SUBMITTED TO:- SUBMITTED BY:-

MRS.SHUBHI KHARE PRADEEP SINGH
HOD & Asst. Prof. M.B.A- III Sem. (HR) SRKCPM, Satna
SRKCPM, Satna
 2019-2020

SHRI RAMA KRISHNA COLLEGE POLYTECHNIC & MANAGEMENT SATNA

(M.P.)

GUIDE’S CERTIFICATE
This is to certify that Mr. pradeep singh has
satisfactorily completed the Summer Training Project
Report on “WORKING CAPITAL MANAGENENT AT
BIRLA CEMENT MAIHAR ‘’ under my guidance for
the partial fulfillment of MBA(semester-III) submitted
to Awadesh pratap singh university, Rewa during the
academi
 DECLERATION

I hereby declare that this Project Report titled “Role of finance in management
with the help of “WORKING CAPITAL MANAGEMENT” submitted by me in
partial fulfillment for the award of Master of Business Administration by
“A.P.S.U.” Rewa is result of authentic work undertaken by me.

Signature of Authority PRADEEP SINGH

M.B.A –III Sem.
(FINANCE+MARKETING)

SRKCPM Satna,(M.P.)
 PERFACE

The following report is the outcome of my research project during the month of
June and July.
Provides an opportunity to demonstrate application of knowledge skill and
competence required during the technical sessions. Research also helps to analyze
the problem and suggest alternative solutions, to evaluate them and to provide
feasibility recommendation on the provided data.
Quality plays an important role in every production unit. To improve it at every
step is very important. In my project report training & development is taken as
main topic for research. The use of WORKING CAPITAL MANAGEMENT in
many highly innovative companies in Scandinavian countries has been proven. The
practice is recommended by many economist / business scholars and quality circles
support in the collection, storage and use of both explicit and tacit knowledge. The
benefits include effective team dynamics through communication, trust, shared
vision, commitment, involvement, empowerment and a learning culture among the
staff. WORKING CAPITAL MANAGEMENT promote Individual self-
development, teamwork, fellowship (each of which can in turn support knowledge
sharing and distribution) and improve overall company performance and corporate
image. They also have the advantage of continuity as the circle remains intact from
project to project.
This tool is suitable for all levels of employee within an organization. However, it
will only succeed if it has genuine management involvement and full
understanding throughout all levels of management and the organization
concerning the multifaceted purposes served by the training development.
 ACKNOWLEDGEMENT

Intellectual alertness creativity and innovation go side by side making of a

manager in this context, the role of successful execution of the project work cannot
be denied.

On this note, I feel inexpedient to express my profound indebtedness and sincere

thanks to our venerable Mr. Agnivesh Agnihotri (Director of SRKCPM), Mrs.
Shubhi Khare (HR Head of SRKCPM) and Mrs. Sadaf Khan (HOD MBA
Depertment) For their Indefatigable Cooperation analytical guidance and
boundless endeavors which gave me great help and revitalization at every step in
completing my project?

I would also like to take this opportunity to convey my respect and special
gratitude towards Mr. sarad shukla (Officer finance ) who consider me worthy of
doing project in their esteemed establishment and never failed to satisfy my over-
zealous thirst to obtain information.

I also want to say thanks to my whole faculty, whole SCW, friends and family.

Working on this project has been a great experience. I am thankful to all concerned
people who have played active role in the successful completion of this project.

PRADEEP SINGH
MBA- IIIrd Sem.
(Finance + Marketing)
 INDEX

S.NO. CONTENTS PAGE

NO.
1 COMPANY PROFILE MAIHAR CEMENT
2 INTRODUCTION WORKING CAPITAL
3 OBJECTIVE OF STUDY
4 CORPORATE OF OVERVIEW
5 SIGNIFICANCE
6 RATIO ANALYSIS
7 CLASSIFICATION OF “WORKING CAPITAL MANAGEMENT ‘’
8 RESEARCH METHODOLOGY
9 CONCLUSION
10 BIBLIOGRAPHY
11 QUESTIONNAIRE
 COMPANY PROFILE MAIHAR CEMENT
WELCOM MAIHAR CEMENT INDUSTRY

Maihar Cement is a division of Century Textiles and Industries Ltd., a

flagship company of B K Birla Group. The company is well
diversified having interest in cement, textiles, rayon, chemicals, pulp
and paper.

Maihar Cement is situated at Sarlanagar (Maihar), Dist.Satna in the

State of Madhya Pradesh with an installed capacity of 4.20 Million
TPA. Maihar is 45 kms South-East of Satna on Howrah-Mumbai
Central Railway Main Line. Maihar is well known for Sharda Devi
Temple and Maihar Gharana Music whose proponent was renowned
 Musician Padma Vibhushan Baba Allaudin Khan A part
from this, company has cement plants namely Century Cement at
Baikunth, Dist.Raipur in the State of Chhattisgarh with an installed
capacity of

2.10 Million TPA, Manikgarh Cement at Gadchandur,

Dist.Chandrapur, Maharashtra with an installed capacity of 2.20
Million TPA and Sonar Bangla (Grinding Unit) at Village Dhalo, Dist
Murshidabad in the State of West Bengal with an installed capacity of
1.50 Million TPA. The combined capacity of all the cement plants
taken altogether is 10 Million TP

ABSTRACT The present study deals with the Study of

Liquidity, Productivity viz a viz. Financial Efficiency of Birla Group of
Companies, which are mainly engaged in production of Cement, Textiles,
Automobile, Aluminum Products, Engineering, Tea, Agro Products and
Paper etc. This study is aimed at exploring the liquidity, productivity viz a
viz-financial efficiency of Birla Group of Companies. The Birla Group of
Companies played an important and Multi-dimensional role of uplifting
and taking our country out of lamentable state of industries we
experienced soon after independence. Our overall progress and around
prosperity owe a great deal to the multi faced role performed by some of
very important Birla Group’s have utilized their resources and to study
liquidity, productivity, financial efficiency, and to make the analysis of
activity and financial structure and their contribution to the upliftment and
betterment of the society. For the purpose of ascertaining liquidity,
productivity viz a viz financial efficiency of Birla Group of Companies,
sixteen (16) leading companies of Birla Group’s having a large plant have
been sel. The period covered under the study extends over six years from
1997-98 to 2002-03. Adopting various techniques such as ratio analysis
trend analysis has made analysis of selected units. In order to the judge the
efficiency and performance of the Birla Group of Companies which the
help of published accounting annual reports, some publications and
autobiography related with Birla family was also studied. Most useful
information has been gathered from the various journals reports,
periodicals and daily newspapers. It is hoped that the thesis will be of
immense help and use to practicing financial Manger, Management,
Government officials, employees, Shareholders, Academicians and
research scholars.

CORPORATE OVER VIEW OF THIS

COMPANY MAIHAR CEMENT
M/s Maihar Cement is a division of Century Textiles and
Industries Ltd, a flagship company of BK Birla Group. The company is well
diversified having interest in Cement, Textiles, Rayon, Chemicals, Pulp and
Paper. Maihar Cement is situated at Sarlanagar, Maihar, Distt. Satna in the
State of Madhya Pradesh with licensed production capacity of 5 Million
TPA (3 MTPA Clinker & 5 MTPA Cement). Maihar is 45 Kms South - East
of Satna on Howrah - Mumbai Central Railway Main Line. Maihar Cement
at Sarlanagar Madhya Pradesh, currently operates 2 Units : Unit 1 consists
of 2 Kiln lines each producing around 2350 tpd clinker and unit 2 has one
kiln producing ~ 4500 tpd clinker whereas present Cement production is 5
Million TPA. Maihar Cement is proposing to upgrade the existing pryro
processing lines in Unit 1 to enhance clinker productivity along with
improved fuel and power efficiency to reduce variable cost of clinker
production and also to capitalize on the projected improved cement
demand. Both existing kiln lines in Unit-1 consist of dry kiln with 4 stage
pre-heater. It is proposed to increase the clinker production capacity of the
Plant from 3.0 Million Tons Per Annum (MTPA) to 4 MTPA in Clinker
production by upgrading Kiln No.1 & Kiln No.2

is drawn and passed through a filtration plant for purification and

chlorination. The chlorinated water is then pumped to two overhead tanks
of 4.5 lacs liters capacity each in the colony and the two ground level tanks
with 4.5 lacs liters capacity each in the plant. Wastewater generated from
captive Thermal Power Plant is being treated and reused in the Cement
Plant. Present domestic wastewater generation from the Plant M/s Maihar
Cement is a division of Century Textiles and Industries Ltd, a flagship
company of BK Birla Group. The company is well diversified having
interest in Cement, Textiles, Rayon, Chemicals, Pulp and Paper. Maihar
Cement is situated at Sarlanagar, Maihar, Distt. Satna in the State of
Madhya Pradesh with licensed production capacity of 5 Million TPA (3
MTPA Clinker & 5 MTPA Cement). Maihar is 45 Kms South - East of Satna
on Howrah - Mumbai Central Railway Main Line. Maihar Cement at
Sarlanagar Madhya Pradesh, currently operates 2 Units : Unit 1 consists of
2 Kiln lines each producing around 2350 tpd clinker and unit 2 has one kiln
producing ~ 4500 tpd clinker whereas present Cement production is 5
Million TPA. Maihar Cement is proposing to upgrade the existing pryro
processing lines in Unit 1 to enhance clinker productivity along with
improved fuel and power efficiency to reduce variable cost of clinker
production and also to capitalize on the projected improved cement
demand. Both existing kiln lines in Unit-1 consist of dry kiln with 4 stage
pre-heater. It is proposed to increase the clinker production capacity of the
Plant from 3.0 Million Tons Per Annum (MTPA) to 4 MTPA in Clinker
production by upgrading Kiln No.1 & Kiln No.2 of Unit -1. Slight
modifications will also be carried out in unit- 2 to reach its maximum
potential. The existing cement mills will be optimized and bottlenecks will
be removed to reach maximum potential. The proposed modifications will
be carried out within the existing plant; there will not be any additional
land or site requirement. As well as existing infrastructure will be utilized
for the proposed modifications. The principal raw materials required for
the production of Clinker are Limestone and Laterite. Limestone is being
met from Captive limestone mines of Maihar Cement which are located
adjacent to the plant. Fuels used will be Coal and Pet Coke. Total power
requirement for simultaneous running of the complete plant is about 46 -
47 MW which is met from MPSEB, and captive power plants. Maihar
Cement has two Thermal Power Plant with a capacity of 15.7 MW each i.e.
total own power generation capacity is 31.4 MW and remaining power is
fulfilled by MPSEB. About 3200 KL/ day is required for cement plant
complex inclusive of power plant section, which is met from a perennial
river "Tamus" a point called (River Pump House -at a distance of about 2
Km from the plant) during the rainy season only and during non monsoon
season, water is met from water reservoir developed at Mine lease. The
capacity of water reservoir is 2040000 KL. Further marginal increase 25 KL
per day will be required for proposed expansion

Maihar Cement has also developed a reservoir in the Cement Plant

having designed capacity of 500000 KL and is capable of meeting about 40
days water requirements of the Cement Plant. Water from river and mines
and colony is 375 - 400 KLPD. There is no solid waste generation from the
Cement Plant. Ash generated from the captive Thermal Power Plant is
being consumed in the cement plant. Dust collected from air pollution
control equipment is 100% recycled in process and there are no solid
wastes. There is no wild life sanctuary, national park, eco-sensitive area
within the 10 km radius of the project site. Existing infrastructure includes
railway siding and well developed roads, storm water drains with
adequate storage space for Clinker and flyash and parking area. All
infrastructure facilities such as education, health facilities and other social
facilities are available as well as developed at nearest populated area.
Green belt in an area of 149 acres with more than 1,10,000 number of trees
 has been developed in the Plant and colony area. Maihar Cement has well-
defined CSR policy to Carryout social development and welfare measures
in the surrounding villages. Under CSR activity Maihar Cement has and
continues to carry out community development projects, in the fields of
health, education and environmental preservation

About Us
Company is augmenting its cement manufacturing capacity by setting up a
cement plant of 2.8 million tpa capacity in the premises adjacent to the
company''s existing plant manikgarh cement at
gadchandur,dist.Chandrapur in the state of maharashtra. After expansion
capacity will increase from 10 million tpa to 12.8 million tpa by september,
2014.
All cement plants are equipped with captive thermal power plant for
uninterrupted power supply with synchronized support of grid power.

The company sells its cement under its premium brand name - birla gold.
Century cement is pioneer in producing blended cement i.E. Portland
pozzolana cement. The motivation for the production of blended cement
has been primarily with the aim of preserving limestone reserves and
environment.

Sales Network
Century Cement sell the cement under the Brand name "Birla Gold"
through a wide spread distribution network comprising of more than 4000
stockist/customers. We are the leading player in Eastern India particularly
in

 Chhattisgarh
 Orissa
 Bihar
 Jharkhand
 West Bengal
 North East

Marketing Policy
 Provide consistently high quality cement at most economical price
 Product Quality exceeding customer''s expectations
 Timely Despatches
 Attractive and functional packing
 Quick Business Response
 Prompt After-Sales service
 Adhering to fair and ethical business practices
 Strengthening the bond with existing customers

Aim / Vision / Mission

Century Cement is a division of Century Textiles & Industries Ltd.,
belonging to the BK Birla Group of Companies, a leading Business House
with its presence in Core Industries like Textiles, Rayons, Chemicals, Paper
& Pulp and Cement, which has been at the vanguard in generating wealth
for the Nation. Our heritage of being a part of this group carries with it a
commitment to quality. All our Products meet the most stringent and
exacting standards of our growing list of loyal customers who are engaged
in building Modern India.

Our Core Values

Our Group''s Core Value of Quality has built for us an invincible
reputation and for this, the finest technology was sourced from world
renowned manufacturers and state-of-the art equipment installed for
energy efficient and pollution free large scale cement production. The
presence of superior technology is also evinced in our various quality
initiatives which have fetched for us the coveted ISO-9001, an International
Certification for "Quality Management System". We have also got the ISO-
14001 Certification for "Environmental Management System" which amply
reflects our commitment to the environment.

Our Belief
Our Customer is the focal point for all our endeavors and what we value
most is their trust in us, whether that be in the aspect of reliability of
supply or in the aspect of quality assurance. An extensive distribution
network and a retail chain of thousands of outlets stretching across the
length and breadth of regions, play a vital role in taking our cement units
closer to the customer''s doorsteps. Further, our efficient and responsive
technical staff excel in providing quick and expert care so as to enable
thousands of users to keep smiling and ever wanting our products.

AWARDS
 Two Five Star Rating Awards from the Ministry of Mines, New Delhi
for exemplary performance in implementation of scientific development
framework
 Won Gold for a case study at the 2016 Bhilai Chapter Convention
 Par Excellence award for case study presented at National Convention
held at Chennai in February 2016
 AIOE-Award for outstanding Industrial Relations for the Year 2012-13
 First Prize in Lowest Electrical Energy (KWH) Consumption per M.T.
of Cement Production over the year 2008-09 with
 INTRODUCTION
WORKING CAPITAL

Any firm time to time, employee its short- term assets as well
as short- term financial sources to carry out its today business. It is
this management of such asset as well as liabilities which is decided
as working capital management as a subject. It can also be compared
with long-term decision-making the process as both of the domains
deal with the analysis of risk profitability

MEANING OF WORKING CAPITAL

A positive working capital cycle

balances incoming and outgoing payments to minimize net working capital
and maximize free cash flow. For example, a company that pays its
suppliers in 30 days but takes 60 days to collect its receivables has a
working capital cycle of 30 days. This 30-day cycle usually needs to be
funded through a bank operating line, and the interest on this financing is
a carrying cost that reduces the company's profitability. Growing
businesses require cash, and being able to free up cash by shortening the
working capital cycle is the most inexpensive way to grow. Sophisticated
buyers review closely a target's working capital cycle because it provides
them with an idea of the management's effectiveness at managing their
balance sheet and generating free cash flows.
As an absolute rule of funders, each of them wants to see a positive
working capital. Such situation gives them the possibility to think that your
company has more than enough current assets to cover financial
obligations. Though, the same can’t be said about the negative working
capital.[2] A large number of funders believe that businesses can’t be
sustainable with a negative working capital, which is a wrong way of
thinking. In order to run a sustainable business with a negative working
capital, it’s essential to understand some key components.
1. Approach your suppliers and persuade them to let you purchase the
inventory on 1-2 month credit terms, but keep in mind that you must sell
the purchased goods, to consumers, for money. 2. Effectively monitor your
inventory management, make sure that it’s often refilled and with the help
of your supplier, back up your warehouse.
Plus, big companies like McDonald’s, Amazon, Dell, General Electric and
Wal-Mart are using negative working capital
 OBJECTIVE OF STUDY WORKING
CAPITAL COMPANY MAIHAR CEMENT

The primary objective of working capital management is to ensure a

smooth operating cycle of the business. Secondary objectives are to
optimize the level of working capital and minimize the cost of such funds.

The superior objective of financial management is wealth

maximization and that can be gained by profit maximization accompanied
by sustainable growth and development. For sustainable growth and
development, the objectives of all the stakeholders including customers,
suppliers, employees, etc should be aligned to the growth of the
organization.

 SMOOTH WORKING CAPITAL OPERATING CYCLE

This implies that the operating cycle i.e. the cycle starting from
the acquisition of raw material to its conversion to cash should be smooth.
StartIthe acquissmootis This implies that the operating cycle i.e. the cycle
starting from the acquisition of raw material to its conversion to cash
should be smooth. It is not easy; it is as good as circulating 5 balls with two
hands without dropping a single one. If the following 6 points can be
managed, this operating cycle can be managed well.

1. It means raw material should be present on the requirement and it

should not be a cause to stoppages of production.
2. All other requirements of production should be in place before time.
 3. The finished goods should be sold as early as possible once they are
produced and inventoried.
4. The accounts receivable should be collected on time.

5. Accounts payable should be paid when due without any delay.

6. Cash should be available as and when required along with some
cushion.

 LOWEST WORKING CAPITAL

Working capital here refers to the current assets less current liabilities (net
working capital). It should be optimized because higher working capital
means higher interest cost and lower working capital means a risk of
disturbance of the operating cycle.

 OPTIMAL RETURN ON CURRENT ASSET

INVESTMENT
 MINIMIZE THE RATE OF INTEREST
SIGNIFANCE OF THIS COMPANY
 Birla Corporation Limited is a cement major and its eight brands are
marketed under the umbrella identity of M P Birla Cement.
 Universal Cables Limited is in the cables industry, and its cables and
capacitors are known by the brand name "Unistar".
 Vindhya Telelinks Limited manufactures jelly-filled telephone cables in
technical collaboration with M/s. Ericsson Cables AB of Sweden.
 Birla Cables Limited produces optical fibre cables and polyurethane
jelly-filled insulated cables.
 Birla Furukawa Fibre Optics Private Limited manufactures optical fibre.
 Hindustan Gum & Chemicals Limited: manufactures guar gum and
exports to various countries around the world. The company has three
manufacturing units in India.
ABOUT MAIHAR CEMENT
Maihar Cement is listed in Trade India's list of verified sellers offering supreme

quality of Birla Gold Royal Cement ,Birla Gold Regal Cement ,Birla Gold Classic
Cement etc. Buy Cement & Sand in bulk from us for the best quality products and
service.
Registered in 2012 , Maihar Cement has made a name for itself in the list of
top suppliers of in India. The supplier company is located in Satna,
Madhya Pradesh and is one of the leading sellers of listed ng supreme
quality of etc. Buy in bulk from us for the best quality products and service.

Established in 2014 , Maihar Cement has made a name for itself in the list
of top suppliers of Cement & Sand in India. The supplier company is
located in Maihar, Madhya Pradesh and is one of the leading sellers of
listed products.
RATIO ANALYSIS
Birla Corporation NSE -0.49 % Ltd, the flagship company of the MP Birla
Group, is looking to scale up cement manufacturing capacity by over 60%
to 25 million tonnes per annum (mtpa) in the next four to five years.

Birla Corporation and its subsidiary, RCCPL Private Ltd, have 10 cement
plants spread across the country, with an annual installed capacity of 15.5
mtpa.

The expansion, which would be partly green-field and partly brownfield,

will entail a total investment of around Rs ..
The company has already commenced construction of the 3.9-mtpa green-
field project at Mukutban in Maharashtra. It is expected to be complete by
April 2021. The estimated investment on the project is close to Rs 2,450
crore. The company has tied up with a consortium of lenders for a 12-year
term loan of close to Rs 1,625 crore.

According to Pracheta Majumdar, CEO, Birla Corporation, the company

would want to become a 25-30 mtpa player in the cement industry in the
near

Birla Corporation is also setting up the second production line at

Kundanganj in Uttar Pradesh of 1.2 mtpa to augment unit capacity to 3.6
mtpa. This apart, expansion of the NCCW plant at Chanderia in Rajasthan
has also begun.

It will add clinkerisation capacity of 4,80,000 tonnes that, in turn, can feed
the additional clinker needs of the Kundanganj grinding unit. The
company will also look to add another production line at its existing unit at
Maihar in Madhya Pradesh.
RESEARCH DESIGN
 Research Design is the strategy for the study and the plan by which
the strategy is to be carried out.
It is the set of decisions that make up the master plan specifying the
methods and procedures for the collection, measurement and
analysis of data.
Research has used descriptive research.
Descriptive studies are fact finding investigation with adequate
interpretation. It focuses on particular aspects of in the study.
It is designed to gather descriptive information and provides
information for formulating more sophisticated studies.
PRIMARY DATA
Primary data has been obtained through personal discussions
with managers and senior officials of the organization

SECONDARY DATA
Secondary data’s has been obtained from published reports like
the annual reports of the company, balance sheets, and profit and loss
account, booklets, records such as files, reports maintained by the
company. Mainly the annual report consists of two parts;
1) Profit and Loss Account
2) Balance Sheet Profit and loss account reveals the income and
expenditure of the company.Balance Sheet reveals the financial position of
the organization.
Those two statements are prepared by the highly qualified and experts
with the help of available information or data.

TOOLS USED FOR THE WORKING CAPITAL

ANALYSIS
1. Trend Analysis
2. Ratio Analysis
3. Operating Cycle Analysis
4. Working Capital Leverage Analysis
5. Schedule of changing in working capital

PERIOD OF STUDY The present study deals with the data

collected from the annual reports and other relevant documents for the
period commencing from 2016-2017 to 2018-2019.
 SCOPE OF THE STUDY

The study is on working capital management of selected Public enterprises.

The study furnishes the management of idea about the performance of
working capital of the company. Management of working capital refers to
management of current assets, current liabilities and relationship between
them. The basic goal of working capital is to maintain the satisfactory level
of working capital. A sound working capital policy ensures higher
profitability and proper liquidity of a firm. Every business needs funds for
two purposes: for its establishment and to carry out its day to day
operations. For this purpose it is important for the company to manage its
short term assets and liability. Working capital is quite essential for the
working of any business. For a good manufacturing company, some basic
capital for producing the goods is required before it starts selling them. It
has to take care of production expenses, administration expenses as well as
selling expenses. Moreover, since business is usually done on credit, there
is a time lag between the date of sale and date of receipt of revenues, which
can be as high as 90 days at times. Considering all these, it is essential that
a company has sufficient capital to keep it going before it coverts its
purchases into goods and then finally into cash. Each and every study has
its own scope. This project intends to study the working capital position of
the Public enterprises. This study helps to identify the areas that could be
improved. Further suggestions were quoted which the company could use
it in the future program enhancing better utilization of all resources.
IMPORTANCE OF ADEQUATE
WORKING CAPITAL
The importance of adequate working capital in commercial undertakings
can never be over emphasized.
A concern needs funds for it’s day-to-day running.
Adequacy or inadequacy of these funds would determine the efficiency
with which the daily business may be carried on.
Management of working capital is an essential task of the finance manager.
He has to ensure that the amount of working capital available with his
concern is neither too large nor too small for its requirements.
A large amount of working capital would mean that the company has idle
funds. Since funds have a cost, the company has to pay huge amount as
interest on such funds.
The various studies conducted by the Bureau of Public Enterprises have
shown that one of the reason for the poor performance of public sector
undertaking 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
return a situation which implies a less than optimal use of resources.

Working Capital There are two concepts of

working capital they are:-
CAMS Journal of Business Studies and

Research Balance Sheet concept and

Operating cycle concept
Under the Balance Sheet concept,
 There are two interpretations of working
capital:
a) Gross working capital.
b) Net working capital.

Gross Working Capital In the broad sense, the term working

capital refers to the gross working capital and represents the amount of
funds invested in current assets. Thus, the gross working capital is the
capital invested in total current assets of the enterprise. Current assets are
those assets which in the ordinary course of business can be converted into
cash within a short period of normally one accounting year.

Net Working Capital In a narrow sense, the term working capital

refers to the net working capital. Net working capital is the excess of
current assets over current liabilities. Net Working Capital = Current assets
– Current liabilities

SOURCES OF WORKING CAPITAL ON

THE BASIS OF CONCEPT

GROSS WORKING CAPITAL

NET WORKING CAPITAL
PERMANENT WORKING CAPITAL TEMPARORY WORKING CAPITAL
POSITIVE WORKING CAPITAL NEGATIVE WORKING CAPITAL
REGULAR WORKING CAPITAL RESERVE WORKING CAPITAL
SEASONAL WORKING CAPITAL SPECIAL WORKING CAPITAL CAMS
Journal of Business Studies and Research ISSN

Net working capital may be positive or negative.

When the current assets exceed the current liabilities, the working capital is
positive and the negative working capital results when the current
liabilities are more than the current assets. The task of the financial
manager in managing working capital efficiently is to ensure sufficient
liquidity in the operations of the enterprise. The liquidity of a business firm
is measured by its ability to satisfy short term obligations as they become
due. Net working capital as a measure of liquidity is not very useful for
comparing the performance of different firms, but it is quite useful for
internal control. The net working capital helps in comparing the liquidity
of the same firm overtime. For purpose of working capital management,
therefore, net working capital can be said to measure the liquidity of the
firm. In other words, the goal of working capital management is to manage
the current assets and liabilities in such a way that an acceptance level of
net working capital is maintained. Nature of Working Capital Working
capital management is concerned with the problems that arise in
attempting to manage the current assets, the current liabilities and the
interrelationship that exists between them. The term current assets refer to
those assets which in the ordinary course of business can be, or will be,
converted into cash within one year without undergoing a diminution in
value and without disrupting the operations of the firm. The major current
assets are cash, marketable securities, accounts receivable and inventory.
Current liabilities are those liabilities which are intended, at their inception,
to be paid in the ordinary course of business, within a year, out of the
current assets or earnings of the concern. The basic current liabilities are
accounts payable, bills payable, bank overdraft, and outstanding expenses.
The goal of working capital management is to manage the firm’s current
assets and liabilities in such a way that a satisfactory level of working
capital is maintained. The current assets should be large enough to cover
its current liabilities in order to ensure a reasonable margin of safety. Each
of the short term sources of financing must be continuously managed to
ensure that they are obtained and used in the best possible way. The
interaction between current asset and current liabilities is, therefore, the
best main theme of the theory of working capital management. Working
capital is very essential to maintain the smooth running of a business. No
business can run successfully without an adequate amount of working
capital. Working capital management is concerned with the problems that
arise in attempting to manage the current assets, current liabilities and the
inter-relationship that exists between them. In other words, it refers to all
aspects of administration of both current assets and current liabilities.
Source of Working Capital The sources of working capital can be divided
as Long-term source of working capital and Short-term source of working
capital. Long-term funds are required to create production facilities
through purchase of fixed assets such as plant and machinery, land and
building, etc. Investments in these assets represent that part of firm’s
capital is blocked on a permanent or fixed basis and is called fixed capital.
Short-term funds are needed to manage the day-to-day operations of the
organization. It is a temporary working capital. CAMS Journal of Business
Studies and Research

Working capital for the long-term purposes can be obtained by several

ways

There are different sources of long-term

working capital:
1. Issue of shares
2. Issue of debentures
3. Retained earnings
4. Sale of fixed assets
5. Security from employee and from customers.

Sources of Short-term Working Capital are:

1. Trade credit.
2. Credit paper.
3. Bank credit.
4. Public deposits.
5. Government assistance
6. Customer credit

DETERMINANTS OF WORKING CAPITAL

The need of
working capital varies from month to month,
year to year.
For determining the working capital needed by
a business unit there is no set of rules to
formulate.
In order to determine the proper or optimum
amount of working capital of a business unit
various factors should be considered carefully
as each of them having own importance and the
importance of various factors changes for a
business unit overtime.
WORKING CAPITAL CYCLE/
OPERATING CYCLE
WORKING CAPITAL POLICIES

A business firm can adapt any of the following working capital policies:
1. Conservative working capital policy
2. Aggressive working capital policy
3. Moderate working capital policy Under Conservative approach, the firm
carries high investment in current assets such as cash, marketable securities
and carries large amount of inventories and grants generous terms of credit
to customers resulting in a high level of debtors. The consequences of
conservative working capital policy are quick deliveries to customers and
more sales due to generous credit terms. Under Aggressive working capital
policy, investment in current assets is very low. The firm keeps less amount
of cash and marketable securities, manages with less inventories and tight
credit terms resulting in low level of debtors. The consequences of
aggressive working capital policy are frequent production stoppages,
delayed deliveries to customers and loss of sales.
A trade off between two costs namely carrying cost and shortage cost
determines the optimal level of current assets. Costs that rise with current
assets i.e. that
cost of financing a higher level of current assets form carrying costs.
Shortage costs are in the form of disruption in production schedule, loss of
sales and loss of goodwill. The optimum level of current assets is denoted
by the total costs (= carrying costs + shortage costs) minimized at that level
 Conclusion

Working capital Management is important part firm in financial

management decision. The present study point out that the
overall position of the working capital of select cement companies
is satisfactory, but there is a need for improvement in certain
factors. The major portion of the current assets is in the firm of
Inventory. The investment in current assets should consider
liquidity profitability and solvency. The companies should also
try to maintain adequate quantum of liquidity all the times by
keeping considerable proportion of various components of the
working capital in relation to the overall current assets. It is very
important to trade off between liquidity and profitability by
properly arranging the needed funds at right time, period and
source.
 BIBLOIGRAPHY

www.adityabirlachemicals.com

www.wikipedia.org.

www.moneycontrol.com

www.corpfilling.co.in

www.google.com
QUESTIONNAIRE