WORKING CAPITAL MANAGEMENT IN DELL’ORTO INDIA PVT LTD.

A training report submitted in partial fulfillment of the requirement for the degree of

MASTERS OF BUSINESS ADMINISTRATION

(2018-2020)

SUBMITTED BY:

BARKHA GARG

MBA-II

ROLL NO: 1891099

BABA FARID COLLEGE OF MANAGEMENT

AND TECHNOLOGY

BATHINDA
CERTIFICATE
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This is to certify that the report titled a study on “WORKING CAPITAL MANAGEMENT
IN DELL’ORTO INDIA PVT LTD” has been prepared under my guidance and supervision.
The report is submitted in partial fulfillment of the reward of MBA degree to the P.G of the
BABA FARID COLLEGE OF MANAGEMENT & TECHNOLOGY. Is a record of
bonafied work carried out by him under my guidance and supervision?

ACKOWLEDGEMENT

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I hereby declare that the report study titled ‘‘WORKING CAPITAL MANAGEMENT’’ prepared under the
guidance of DR SONIA BAGHLA. This project work, which is my first step in the field of
professionalization, has been successfully accomplished only because of my timely support of well-wishers.
I would like to pay my sincere regards and thanks to those, who directed me at every step in my project
work.

I would also like to thank the faculty members and the staff members of DELL’ORTO INDIA PVT.LTD.
for their kind support and help during the project.

TABLE OF CONTENTS
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 1. Title page
2. Certificate of completion
3. Acknowledgement
4. List of tables and charts
5. Executive summary

Chapter No: Page No.

1. Introduction
1.1 Introduction to the organization 7
2. Conceptual framework
2.1 Introduction to working capital management 8-9
2.2 Significance of working capital management 10
2.3 Classification of working capital 11-13
2.4 Financing of working capital 14
2.5 Factors deter mining’s of working capital requirements 15
2.6 Working capital cycle 16-18
2.7 Sources of working capital 19-22
2.8 Working capital position 23
2.9 Inventory management 24
2.10 Cash management 25
2.11 Receivables management 26
2.12 Financing current assets 27
2.13 Working capital and short term financing 28-31

3. Need for study 32

4. Objective of study 33
5. Scope of study 34
6. Limitations of study 35
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7. Research methodology 36-37
8. Analysis 38-51
9. History of the company 52
10.Findings 53
11.Suggestion 54
12.Conclusion 55
13.Appendices
A) Balance sheet of the company 56-59
14. References 60

EXECUTIVE SUMMARY

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This project is based on the study of working capital management in Dell’orto India Pvt ltd., An insight view
of the project will encompass – what it is all about, what it aims to achieve, what is its purpose and scope,
the various methods used for collecting data and their sources, including literature survey done, further
specifying the limitations of our study and in the last, drawing inferences from the learning so far. “Dell’orto
india pvt ltd” is a well-established engineering company. Dell’orto is an Italian company, headquartered in
Cabiate, specialized in the construction of carburetors and electronic injection systems. The company was
founded in 1933 as "Societalanonima Gaetano Dell’orto e figli" (Gaetano Dell’orto and Sons) but actually
only founded by Gaetano's sons, Luigi Piera and Giuseppe. The first production was carburetors for
motorbikes. Right before World War II the company started producing carburetors with aluminum body, for
competitive racing. Under the second Dell'orto generation, towards the end of the 60s, the company began
producing OEM carburetors for the Fiat group, as well as other Italian and foreign manufacturers (i.e.
Flandria, Belgium).

Working capital is the life-blood of all types of enterprises, manufacturing and trading both. It is constantly
required to buy raw materials for payment of wages and other day-to-day expenses. Without adequate
working capital, manufacturing operations will be crippled. It is a base on which all the activities of business
enterprise depend. The working capital management refers to the management of working capital, or
precisely to the management of current assets. A firm’s working capital consists of its investments in current
assets, which includes short-term assets— cash and bank balance, inventories, receivable and marketable
securities. This project tries to evaluate how the management of working capital is done in Dell’orto India
pvt ltd., through inventory ratios, working capital ratios, trends, computation of cash, inventory and working
capital, and short-term financing. Working capital is primarily concerned with inventories management,
Receivable management, cash management & Payable management. The objective of the company now is to
increase the scale of its business by increasing its profits and the turnover and by venturing into new line of
business. It is now targeting to be the World Class Industrial Enterprise from the present status. It is striving
to have a huge global base.

INTRODUCTION
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Company Profile

In a strategic development project, in line with the new global market demands, Dell’orto decided to invest
its knowledge into a new important project. In September 2009 the joint venture company Dell’orto India
Private Limited, founded in 2006 with the cooperation of a local partner, becomes 100% Italian-owned and
Dell’orto’s family kept the whole ownership, over 80-years well-established tradition of Dell’orto S.p.A.

The Board is in fact managed by Ingo. Andrea Dell’orto who actually is the Chairman.Dell’Orto India
Private Limited, after a beginning based on the production and export of carburetors for the European
market, has consolidated its position on the Indian market with the production, started in 2008, of Throttle
Bodies for recreational vehicles (ATV for Bombarbier-Rotax Mexico) and for the Indian automotive market,
manufacturing the Throttle Body for the TATA NANO "small car". Furthermore, in the first months of
2009, began an important business for another Throttle Body for the Renault Logan "low cost car".

In 2012 the plant moved from Delhi to Pune province, where the main Automotive Companies are based.
The new high-tech plant is established in accordance with the Italian experience and know-how, respecting
the European quality standards.

During 2013, some important partnerships -with top Indian manufacturers- are undertaken, one with Bajaj in
particular, both for the local production of the mechanical throttle body for the 2-wheel application destined
for the local market and KTM brand, and the local production of the electronic oil pump for 3-wheel
application. There started a new project with Piaggio Group for the production of the mechanical throttle
body for 2-wheel application, both for Vietnam and European markets. The potential local production of the
Electronic Throttle Body for OEM application is currently under evaluation and development.
On February 2018 a strategic joint venture with VARROC has been signed to develop Fuel injection
systems in the Indian market. This is a very important milestone for Dell’orto in the development of the new
EFI system: Monnalisa. The goal is to enlarge company vision towards worldwide prospective being a
global system integrator for 2 wheeler and 3 wheeler vehicles.

WORKING CAPITAL

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Every business whether big, medium or small needs finance to carry on its operations and to achieve its
target. In fact, finance is so indispensable today that its rightly said to be the lifeblood of an enterprise.
Without adequate finance, no enterprise can possibly accomplish its objectives. So this chapter deals with
studying various aspects of working capital management that is necessary to carry out the day to day
operations. The term working capital refers to that part of firm’s capital. Working capital management deals
with the most dynamic field in finance, which needs constant interaction between finance and other
functional managers. The finance manager acting alone cannot improve the working capital situation. In
recent time a few case studies regarding management of working capital in selected companies have been in
order to make in depth analysis of the several experts of working capital management. The finding of such
studies not only throws new light on the technical loopholes of management activities of concerned
companies, but also helps the scholars and research to develop new ideas techniques and methods for
effective management of working capital. Decisions relating to working capital and short-term financing are
referred to as working capital management. These involve managing the relationship between a firm’s short
terms assets and its short-term liabilities.

In simple terms working capital means is that the amount of funds that a company require finance for its day
to day operations. Working capital states that the period of debtor’s receivables etc for a company to raise a
finance from them at the earliest. Finance manager should develop sound techniques of managing current
assets. Working capital management involves managing the relationship between a firm’s short-term assets
and its short-term liabilities. The goal of working capital management to ensure that the firms is able to
continue its operations and that it has sufficient cash flow to satisfy both maturing short term debt and
upcoming operational expenses.

A company’s working capital essentially consists of current assets and current liabilities. Current assets refer
to those assets that can be converted into cash within one year, like debtors, and stock and prepaid expenses-
expenses that have already been paid for. Current liabilities are the day-to-day debts incurred by a business
in its operation. These could be credit purchases made from vendors (creditors) and outstanding expenses
(expenses that are yet to be paid).

Thus, working capital management refers to monitoring these two components or the short-term liquidity of
your firm.

The following should be effective in working capital management:

Cash management: Identifies the cash balance, which allows for the business to meet day to day expenses
but reduces cash holding costs.

Inventory management: Identifies the inventory balance, which allows for the uninterrupted production but

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reduces the investment in raw materials-and minimizes reordering costs and hence increases cash flow.
Besides this, the lead times in production should be lowered to reduce work in progress and similarly the
finished goods should be kept on as low level as possible to avoid over production.

Debtors management: Identifies the appropriate credit policy i.e. credit terms, discounts etc. which will
attract customers such that any impact on cash flows and the cash conversion cycle will be offset by
increased revenue and hence return on capital. Debtors credit period should be less than 90days to achieve
good working capital ratio and the position of the company.

SIGNIFICANCE OF WORKING CAPITAL MANAGEMENT

The management of working capital is important for several reasons:

 For one thing, the current assets of a typical manufacturing firm account for half of its total assets.
For a distribution company, they account for even more.
 Working capital requires continuous day-to-day supervision. Working capital has the effect
on company's risk, return and share prices.
 There is an inevitable relationship between sales growth and the level of current assets. The target
sales level can be achieved only if supported by adequate working capital Inefficient working capital
management may lead to insolvency of the firm if it is not in a position to meet its liabilities and
commitments.

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 CLASSIFICATION OF WORKING CAPITAL

WORKING CAPITAL CAN BE CLASSIFIED AS FOLLOWS:

 On the basis of time
 On the basis of concept

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 TYPES OF WORKING CAPITAL NEEDS

Another important aspect of working capital management is to analyze the total working capital needs of
the firm in order to find out the permanent and temporary working capital. Working capital is required
because of existence of operating cycle. The lengthier the operating cycle, greater would be the need
for working capital. The operating cycle is continuous process and therefore, the working capital is
needed constantly and regularly. However, the magnitude and quantum of working capital required will not
be same all the times rather it will fluctuate.

The need for current assets tends to shift over time. Some of these changes reflect permanent changes in
the firm as is the case when the inventory and receivables increases as the firm grows and the sales become
higher and higher. Other changes are seasonal, as is the case with increased inventory required for a
particular festival season. Still others are random reflecting the uncertainty associated with growth in sales
due to firm’s specific or general economic factors.

The working capital needs can be:

 Permanent working capital

 Temporary working capital

 PERMANENT WORKING CAPITAL

There is always a minimum level of working capital, which Is continuously required by a

firm in order to maintain its activities. Every firm must have a minimum of cash, stock and other
current assets, this minimum level of current assets, which must be maintained by any firm all the

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 times, is known as permanent working capital for that firm. This amount of working capital is
constantly and regularly required in the same way as fixed assets are required. So, it may also be
called fixed working capital.

 TEMPORARY WORKING CAPITAL

Any amount over and above the permanent level of working capital is temporary, fluctuating or
variable working capital. The position of the required working capital is needed to meet
fluctuations in demand consequent upon changes in production and sales as a result of seasonal
changes.
The permanent level is constant while the temporary working capital isfluctuating increasing and
decreasing in accordance with seasonal demands as shown in the figure:In the case of an
expanding firm, the permanent working capital line may not be horizontol. This Isbecause the
demand for permanent current assets might be increasing (or decreasing) to support a rising level of
activity. In this case line would be rising.

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 FINANCING OF WORKING CAPITAL

There are two types of working capital requirements as discussed above.

They are:

 Permanent or fixed working capital requirements

 Temporary or variable working capital requirements

Therefore, to finance either of these two working capital requirements, we have long term as well as
short-term sources.

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 FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

Many factors determine working capital needs of anenterprise. Some of these factors are explained
below:

 Nature or Character of Business:

The working capital requirement of a firm is closely related to the nature of its business. A
service firm, like an electricity undertaking or a transport corporation, which has a short corpora
ting cycle and which sells predominantly on cash basis, has a modest working capital
requirement. Oh the other hand, a manufacturing concern like a machine tools unit, which has a
long operating cycle and which sells largely on credit, has a very substantial working capital
requirement.
Snitch is a manufacturing concern so this requires them to keep avery sizeable amount in working
capital.

 Size of business/ scale of operations:

It has a good position in its segment and they are also spending their operations in the domestic
market as well as in foreign market. The scale of operations and the size it holds in the market makes
it a must for them to hold their inventory and the current assets at a huge level.

 Rate of Growth of Business:

The rate of growth of sales indicates a need for increase in the working capital requirements of the
firm. As the firm is projected to increase their sales by 69% from what it was in 2009, it is required
to guard them against the increasing requirements of the net current asset by way of efficient
working capital management. The sales and projected sales level determine the investment in
inventories and receivables.

 Price level changes:

Changes in the price level also affect the working capital requirements. It was the reduced margins
in the price of the raw materials that had prompted them to go for bulk purchases thus making on
additions to their net current assets. They might have gone for this large-scale procurement for
availing discounts and anticipating a rise in prices, which would have meant that more funds are
required to maintain the same current assets

OPERATING CYCLE
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The operating cycle is the average period required for a business to make an initial outlay of a cash to
produce goods, sell the goods and receive cash from customers in exchange for the goods. If the company is
a reseller, then the operating cycle does not include any time for production-it is simply the date from the
initial cash outlay to the date of cash receipt from the customer.

The operating cycle is use for estimating the amount of working capital that a company will need in order to
maintain or grow its business. A company with extremely short operating cycles requires less cash to
maintain its operations, and so can still grow while selling at relatively small margins. Conversely a business
may have fat margins and yet still require additional financing to grow at even a modest pace, if its operating
cycle is unusually long.

In case of a manufacturing company, the operating cycle is length of the time necessary to complete the
following cycle of events: -

 Conversion of cash into raw materials

 Conversion of raw materials into work in progress
 Conversion of work in progress into finished goods
 Conversion of finished goods into accounts receivables
 Conversion of accounts receivables into cash.

The above operating cycle is repeated again and over the period depending upon the nature of the business
and type of product etc. the duration of the operating cycle the purpose of estimating the working capital is
equal to the sum of duration allowed by the suppliers.

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16
 CONCEPT OF WORKING CAPITAL

The concepts of working capital include current assets and current liabilities both. There are to of working
capital they are gross and net working capital.

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

2. Networking capital: - Net working capital refers to that the difference between current assets and
liabilities are those claim of outsiders which are expected to mature for payment with an accounting
year. It includes creditors and bill’s payables and outstanding expenses. Net working capital can be
positive or negative. When positive working capital can arise when current assets exceeds current
liabilities and vice versa.

SOURCES OF WORKING CAPITAL

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Dell’Orto India Pvt ltd has the following sources available for the fulfillment of its working capital
requirements in order to carry on its operations smoothly:

 BANKS

This will include the following banks:

 State bank of India
 HDFC bank ltd.
 ICICI bank ltd.

 COMMERCIAL PAPERS

Commercial papers have become an important tool for financing working capital requirements for a
company. Commercial paper is an unsecured promissory note issued by the company to raise short term
funds. The buyers of the commercial papers include bank, insurance companies, unit trusts, and companies
with surplus funds to invest for a short period with minimum risk.

INVENTORY MANAGEMENT

INVENTORIES
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Inventories constitute the most important part of the current assets of large majority of companies. On
an average the inventories are approximately 60% of the current assets in public limited companies in
India. Because of the large size of inventories maintained by the firms, a considerable amount of funds
is committed to them. It is therefore, imperative to manage the inventories efficiently and effectively
in order to avoid unnecessary investment.

NATURE OF INVENTORIES

Inventories are stock of the product of the company is manufacturing for sale and components make-up of
the product. The various forms of the inventories in the manufacturing companies are:

 Raw Material: It is the basic input that is converted into the finished product through
the manufacturing process. Raw materials are those units which have been purchased and stored for
future production.
 Work-in-progress: Inventories are semi-manufactured products. They represent product that
need more work they become finished products for sale.
 Finished Goods: Inventories are those completely manufactured products, which are ready for
sale. Stocks of raw materials and work-in-progress facilitate production, while stock of
finished goods is required for smooth marketing operations. Thus, inventories serve as a
link between the production and consumption of goods.

INVENTORY MANAGEMENT TECHNIQUES

In managing inventories, the firm’s objective should be to be inconsonance with the

shareholder wealth maximization principle. To achieve this, the firm should determine the
optimum level of inventory. Efficiently controlled inventories make the firm flexible.
Inefficient inventory control results in unbalanced inventory and inflexibility-thefirm may
sometimes run out of stock and sometimes pile up unnecessary stocks.

Economic order quantity: The major problem to be resolved is how much the inventory should
be added one inventory is replenished. If the firm is buying raw materials, it has to decide lots in
which it has to purchase on replenishment. If the firm is planning a production run, the issue
is how much production to schedule. These problems are called order quantity problems and the
task of the firm to determine the optimum or economic lot size. Determine an optimum level
involves two types of costs: -
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  Ordering costs: The term is used in case of raw materials and includes all the cost of acquiring
raw material. They include the costs incurred in the following activities:

 REQUISITION
 PURCHASE ORDERING
 TRANSPORTING
 RECEIVING
 INSPECTING
 STORING

Ordering cost increase with the number of orders placed; Thus the more frequently inventory is acquired the
higher the firm’s ordering costs. On the other hand, if the firm maintains large inventory’s level, there will
be few orders placed and ordering costs will be relatively small. Thus, ordering cost decrease with the
increasing size of inventory.

 Carrying costs: Costs are incurred for maintaining a given level of inventory are called carrying
costs. These include the following activities:

 WAREHOUSING COST
 HANDLING
 ADMINISTRATIVE COST
 INSUARANCE
 DETERIORATION AND OBSOLCENCE

Carrying costs are varying with inventory size. This behavior is contrary to that of ordering costs
which decline with increase in inventory size. The economic size of inventory would thus depend on trade-
off between carrying costs and ordering costs.

The increasing component of raw materials in inventory is due to the fact that the company has gone for
bulk purchases and has increased consumption due to a fall in prices and reduced margins for the year.
Another reason might be the increasing sales, which might have induced them to purchase more in
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anticipation of further increase in demand of the product. And the low composition of work-in-
progress is understandable as because of the nature of the business firm is involved in.

ABC SYSTEM: ABC system of inventory keeping is followed in the factories. Various items are
categorized into three different levels in the order of their importance. For e.g. items such as memory,
high capacity processors and royalty are placed in the ‘A’ category. Large number of firms has to maintain
several types of inventories. It is not desirable the same degree of control all the items. The firm should
pay maximum attention to those items whose value is highest. The firm should therefore, classify
inventories to identify which items should receive the most effort in controlling. The firm should be
selective in approach to control investment in various types of inventories. This analytical approach
is called “ABC Analysis”. The high-value items are classified as “A items” and would be under
tightest control. “Citems” represent relatively least value and would require simple control. “B items” fall in
between the two categories and require reasonable attention of management.

JIT: The relevance of JIT in HCL Info system can be questioned. This is because they procure materials on
the basis of projections made at least two or three months before. Even at the time of procurement they
ensure that they procure much more than what actually is required by the firm that is they hold significant
amount of inventory as safety stock. This is done to counter the threat involved in default and
accidental breakdowns. The levels of safety stock usually vary according to the usage.

The raw material conversion period or the raw material holding cost has increased from 40 to 100 days,
because in an increase its consumption. The indicates that the firm is able to convert the raw material at its
to disposal the work in progress at a lesser time as compared to the last year. It would be to the benefit of the
firm to reduce the production process and increase the conversion rate still as the firm is required to meet the
increasing demand.

OBJECTIVES

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

The overall financial management objectives of an organization could be summarized in terms of the
following five objectives:

 To ensure that the organization always has enough cash to meet its legal obligations and avoid
liquidity that is to maintain adequate short term financial flexibility.
 To arrange to obtain whatever funds are required from external sources at the right time in the
right form, and or the best possible terms.
 To ensure that the organizations assets and liabilities- current and long term, financial and
operating are utilized as effectively as possible.
 To forecast and plan for the financial requirements of future operations.
 To make all decisions and recommendations on the basis of one primary criterion maximizing the
long term value of the organization. This objective is attained in a publicity owned corporation
through maximization of wealth of the owners by maximizing stock price.

IMPORTANCE

Proper management of working capital is very important for the success of an enterprise. “it aims at
protecting the purchasing power of assets and maximizing the return on investment. The manager of

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administration of current assets to a very large extent determines the success of the operations of a firm.
Constant management is required to maintain appropriate levels in the various working capital accounts. A
study of working capital is major importance to internal and external analysis because of its close
relationship to current day to day operations of business. Inadequacy or mismanagement of working capital
is the leading cause of business failures. Shortage of working capital, so often advanced as the main cause of
failure of industrial concerns, is nothing but the clearance evidence of mismanagement which is so common.
The current assets and current liabilities flow round in a business like an electric current. The working
capital plays the same role in the business as the role of the heart in the human body.

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

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

WORKING CAPITAL ANALYSIS

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

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

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

CASH AND BANK: Every organization or firms maintains cash reserve in their accounts. This is the
major key on which working of the entire organization is dependent upon. This is required in every aspect of
production, marketing, finance etc. in other words it can be said that its play a vital role in the financing of
any organization.

LOANSAND ADVANCES: Advances to staff are those advance which are given to the employees as
festival advance. These advances are treated as current assets as they as given advance to the employees and
are collected within the accounting year. It does not result any default payment as the amount is deducted
from their salaries directly during their payment.

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

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

LINEOFCREDIT: Banks to new business do not often give lines of credit. However, is your new
business is well capitalized by equity and you have good collateral, your business might qualify for one. A
line of credit allows you to borrow funds for short terms need when they arise.The funds are repaid once you
collect the accounts receivables that resulted from the short term sales peak. Lines of credit typically are
made for one year at a time and are expected to paid off for 30 to 60 consecutive days sometime during the
year to ensure that the funds are used for short term needs only.
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SHORTTERMLOAN: While your business, may not qualify for a line of credit from a bank. You
might have success in obtaining a onetime short term loan to finance your temporary working capital needs.
If you established a good banking relationship with a banker, he or she might be willing to provide a short
term notes for a one order or a seasonal inventory and or account receivable build up. In addition to
analyzing the average number of days its takes to make a product and collect on an account vs the number of
days financed by accounts payable. The operating cycle analysis provide one other important analysis.

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

The analysis of working capital can be conducted through a number of devices, such as:

1. Ratio analysis.

2. Fund flow analysis.

3. Budgeting.

1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis can be
employed for measuring short-term liquidity or working capital position of a firm. The following ratios can
be calculated for these purposes:

1. Current ratio.

2. Quick ratio

3. Absolute liquid ratio

4. Inventory turnover.

5. Receivables turnover.

6. Payable turnover ratio.

7. Working capital turnover ratio.

8. Working capital leverage

9. Ratio of current liabilities to tangible net worth.

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2.FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which additional funds were
derived and the use to which these sources were put. The fund flow analysis consists of:

a. Preparing schedule of changes of working capital

b. Statement of sources and application of funds.

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

3. WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and polices to be pursued in the
future period time. Working capital budget as a part of the total budge ting process of a business is prepared
estimating future long term and short term working capital needs and sources to finance them, and then
comparing the budgeted figures with actual performance for calculating the variances, if any, so that
corrective actions may be taken in future. He objective working capital budget is to ensure availability of
funds as and needed, and to ensure effective utilization of these resources. The successful implementation of
working capital budget involves the preparing of separate budget for each element of working capital, such
as, cash, inventories and receivables etc.

ANALYSIS OF SHORT – TERM FINANCIAL POSITION OR TEST OF LIQUIDITY

The short –term creditors of a company such as suppliers of goods of credit and commercial banks short-
term loans are primarily interested to know the ability of a firm to meet its obligations in time. The short
term obligations of a firm can be met in time only when it is having sufficient liquid assets. So to with the
confidence of investors, creditors, the smooth functioning of the firm and the efficient use of fixed assets the
liquid position of the firm must be strong. But a very high degree of liquidity of the firm being tied – up in
current assets. Therefore, it is important proper balance in regard to the liquidity of the firm. Two types of
ratios can be calculated for measuring short-term financial position or short-term solvency position of the
firm.

1. Liquidity ratios.

2. Current assets movements ‘ratios.

A) LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when these become due. The
short-term obligations are met by realizing amounts from current, floating or circulating assts. The current

26
assets should either be liquid or near about liquidity. These should be convertible in cash for paying
obligations of short-term nature. The sufficiency or insufficiency of current assets should be assessed by
comparing them with short-term liabilities. If current assets can pay off the current liabilities then the
liquidity position is satisfactory. On the other hand, if the current liabilities cannot be met out of the current
assets then the liquidity position is bad. To measure the liquidity of a firm, the following ratios can be
calculated:

1. CURRENT RATIO

2. QUICK RATIO

3. ABSOLUTE LIQUID RATIO

1. CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general liquidity and its most widely used
to make the analysis of short-term financial position or liquidity of a firm. It is defined as the relation
between current assets and current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES

The two components of this ratio are:

1) CURRENT ASSETS

2) CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors, inventories and work-in-
progresses. Current liabilities include outstanding expenses, bill payable, dividend payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current
obligations in time. On the hand a low current ratio represents that the liquidity position of the firm is not
good and the firm shall not be able to pay its current liabilities in time. A ratio equal or near to the rule of
thumb of 2:1 i.e. current assets double the current liabilities is considered to be satisfactory.

2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be defined as the
relationship between quick/liquid assets and current or liquid liabilities. An asset is said to be liquid if it can
be converted into cash with a short period without loss of value. It measures the firms’ capacity to pay off
27
current obligations immediately.

QUICK RATIO = QUICK ASSETS

CURRENT LIABILITES

3.ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally more liquid than inventories, yet there may
be doubts regarding their realization into cash immediately or in time. So absolute liquid ratio should be
calculated together with current ratio and acid test ratio so as to exclude even receivables from the current
assets and find out the absolute liquid assets. Absolute Liquid Assets includes:

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES

B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits. The efficiency with which
assets are managed directly affects the volume of sales. The better the management of assets, large is the
amount of sales and profits. Current assets movement ratios measure the efficiency with which a firm
manages its resources. These ratios are called turnover ratios because they indicate the speed with which
assets are converted or turned over into sales. Depending upon the purpose, a number of turnover ratios can
be calculated. These are:

1. Inventory Turnover Ratio

2. Debtors Turnover Ratio

3. Creditors Turnover Ratio

4. Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include high amount of debtors due
to slow credit collections and moreover if the assets include high amount of slow moving inventories. As
both the ratios ignore the movement of current assets, it is important to calculate the turnover ratio.

1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO:

Every firm has to maintain a certain amount of inventory of finished goods so as to meet the requirements of
the business. But the level of inventory should neither be too high nor too low. Because it is harmful to hold
more inventory as some amount of capital is blocked in it and some cost is involved in it. It will therefore be
28
advisable to dispose the inventory as soon as possible.

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is converted into sales. Usually a high
inventory ratio indicates an efficient management of inventory because more frequently the stocks are sold;
the lesser amount of money is required to finance the inventory. Whereas low inventory turnover ratio
indicates the inefficient management of inventory. A low inventory turnover implies over investment in
inventories, dull business, poor quality of goods, stock accumulations and slow moving goods and low
profits as compared to total investment.

AVERAGE STOCK =OPENING STOCK + CLOSING STOCK

2

2. INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD = 365 (net working days)

INVENTORY TURNOVER RATIO

Inventory conversion period shows that how many days’ inventories takes to convert from raw material to
finished goods. In the company inventory conversion period is decreasing. This shows the efficiency of
management to convert the inventory into cash.

3.DEBTORS TURNOVER RATIO:

A concern may sell its goods on cash as well as on credit to increase its sales and a liberal credit policy may
result in tying up substantial funds of a firm in the form of trade debtors. Trade debtors are expected to be
converted into cash within a short period and are included in current assets. So liquidity position of a
concern also depends upon the quality of trade debtors. Two types of ratio can be calculated to evaluate the
quality of debtors.

a) Debtors Turnover Ratio

b) Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over during a year. Generally, higher
29
the value of debtor’s turnover ratio the more efficient is the management of debtors/sales or more liquid are
the debtors. Whereas a low debtor’s turnover ratio indicates poor management of debtors/sales and less
liquid debtors. This ratio should be compared with ratios of other firms doing the same business and a trend
may be found to make a better interpretation of the ratio.

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

2

4. AVERAGE COLLECTION PERIOD:

Average Collection Period = No. of Working Days

Debtors Turnover Ratio

The average collection period ratio represents the average number of days for which a firm has to wait
before its receivables are converted into cash. It measures the quality of debtors. Generally, shorter the
average collection period the better is the quality of debtors as a short collection period implies quick
payment by debtors and vice-versa.

Average Collection Period = 365 (Net Working Days)

Debtors Turnover Ratio

5. WORKING CAPITAL TURNOVER RATIO:

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

Working Capital Turnover Ratio = Cost of Sales

Net Working Capital

Working Capital Turnover = Sales

Networking Capital

30
 NEED FOR THE STUDY

 To Study the Conceptual framework of Working Capital Management in India

 The study has been conducted for gaining practical knowledge about working capital management
and activities of Dell’Orto India private limited.

31
 OBJECTIVES OF STUDY

The objectives of this project were mainly to study the inventory cash and receivable at Dell’orto India Pvt
ltd. But there are some more and they are:

 The main purpose of study is a better understanding of a concept “WORKING CAPITAL

MANAGEMENT” IN DELL’ORTO INDIA PVT LTD.
 To understand the planning and management of working capital at Dell’Orto India pvt ltd.
 To measure the financial soundness of the company by analyzing various ratios.
 To measure and evaluate the liquidity and profitability position of dell’orto India pvt ltd.

32
 SCOPE OF STUDY

This project is vital to me in a significant way. It does have some importance for the company too. These are
as follows.

 This project will be a learning device for the finance student.

 Through this project I would study the various methods of the working capital management.
 This project will be a learning of planning and financing working capital.
 This will show different methods of holding inventory and dealing with cash and receivables.

33
 LIMITATIONS OF STUDY

 The study duration is short.

 The analysis is limited to just five years of data study (from year 2014 to year 2018) for financial
analysis.
 Future plans of the company will not be disclosed to the trainees.

34
 RESEARCH METHODOLOGY

 This project requires a detailed understanding of a concept- “working capital management” therefore
firstly, need to have a clear idea of what is working capital, how it is managed in Dell’orto India pvt
ltd. What are the different ways in which the financing of working capital is done in the company.
 The management of working capital involves managing inventories accounts receivables and payable
and cash. Therefore, one also needs to have a sound knowledge about cash management, inventory
management and receivable management.
 Then comes the financing of working capital requirement i.e. how the working capital is financed,
35
 what are the various sources through which is it done.
 And, in the end, suggestions and recommendations on ways for better management and control of
working capital are provided.

METHODOLOGY

In preparing of this project the information collected from the following sources:

SECONDARY DATA

The major source of data for this project was collected through annual reports, profit and loss account of 4-
year period from 2015-2018 & some more information collected from through internet and text sources.

SAMPLING DESIGN

1. Sampling unit : Financial Statements

2. Sampling size : Last four year financial statements

TOOLS USED:

MS-Excel has been used for calculations.

DATA SOURCES

The following sources have been sought for the prep of this report:

 Primary sources such as business magazines, current annual reports, book on financial management
 Secondary sources like previous year’s annual reports, reports on working capital for research,
analysis and comparison of the data gathered.
 While doing this project, the data relating to working capital, cash management,
receivables management, inventory management and short-term financing was required.
 The data was gathered through the company’s websites, its corporate intranet, Dell’orto India pvt ltd
annual report last four years.
 A detailed study on the actual working processes of the company is also done through direct
interaction with the employees and by timely studying the happenings at the company.

36
 ANALYSIS

Dell’Orto India Private Limited

Advisory as on August 31, 2018

This rating advisory is provided in relation to the rating of Dell’orto India Private Limited
The key rating sensitivity factors for the rating include:
 Scale of operations
 Profitability
37
 Capex and its funding
CRISIL Ratings has a policy of keeping its accepted ratings under constant and ongoing
monitoring and review. Accordingly, it seeks regular updates from companies on business and
financial performance. CRISIL is yet to receive adequate information from Dell’orto India Private
Limited (DIPL) to enable it to undertake a rating review. CRISIL is taking all possible efforts to get
the rated entity to cooperate with its rating process for enabling it to carry out the rating review.
CRISIL views information availability risk as a key factor in its assessment of credit risk. (Please
refer to CRISIL Ratings publication dated April 30, 2012 - 'Information Availability - a key risk
factor in credit ratings')
If DIPL continues to delay the provisioning of information required by CRISIL to undertake a rating
review then, in accordance with circular SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dt Nov 1,
2016 and SEBI/HO/MIRSD/ MIRSD4/ CIR/ P/ 2017/ 71 dot June 30, 2017 issued by Securities and
Exchange Board of India, CRISIL will carry out the review based on best available information
and issue a press release.
About The Company
Incorporated in January 2006, DIPL is a subsidiary of the Italian company,Dell’ortoSpa. It
manufactures carburetors and fuel injection subassemblies (mainly throttle bodies) for two/three
wheelers and fuel injection systems for four-wheelers/all-terrain vehicles. The manufacturing facilities
are at Chakan (near Pune).

Dell’Orto India Private Limited

'CRISIL BBB/Stable' assigned to bank debt

Rating action

Total bank loan facilities rated Rs. 5.5 crore

Long term rating CRISIL BBB/ STABLE ASSIGNED

1 crore = 10 million

38
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL has assigned its 'CRISIL BBB/Stable' rating to the long-term bank facility of Dell’orto India Private
Limited

(DIPL).

The rating reflects DIPL's above-average financial risk profile driven by healthy net worth and limited
reliance in external debt. The rating also factors in company's moderate business risk profile because of
technological support from promoter group for manufacturing carburetors, throttle bodies and fuel injection
kits, established relations with reputed clientele in domestic and overseas market and growing scale of
operation.

These strengths are partly offset by company's exposure to cyclical auto industry and its working capital
intensity nature of operations.

Key Rating Drivers & Detailed Description

Strengths

* Above-average financial risk profile: Network is healthy at Rs 53.6 crores as on March 31, 2017,
while gearing Is comfortable at 0.10 times. The company is likely to incur capital expenditure (capex) of
Rs14-16 crore over the 18-24 months through fiscal 2019, to set up additional manufacturing lines for new
customers. The capex will be largely funded by internal cash accrual, contribution from customers and
supplier credit and hence the capital structure is not materially impacted. Debt protection metrics have been
comfortable, with interest coverage and net cash accrual to total debt ratios at 9.8 times and 1.15 times,
respectively, in fiscal 2017, because of limited debt.

* Established market position supported by technologically superior promoter group

and reputed clientele:

The promoters, Dell’orto SPA, has been manufacturing auto components since 1933. The promoters'
experience and support have enabled DIPL to establish business, and build a reputed clientele. Currently, the
company's key customers are Bajaj Auto Ltd, KTM, TVS-BMW and Piaggio Vehicles in 2 wheeler
segment; Renault-Nissan, Mahindra and Mahindra Ltd and Volvo in 4 wheeler segment; Rotax and Polaris
etc in all-terrain vehicles segment. The company has been adding new customers regularly and consequently
its revenue is likely to increase to over Rs80 crore in fiscal 2018 from Rs37 crore in fiscal 2014. The
39
expedited implementation of Bharat Stage VI in India is also likely to benefit the company over medium
term.

Weaknesses

* Exposure to cyclicality in industry: DIPL derives majority of its revenue from the automobile
industry, which is inherently cyclical. Hence, the business risk profile is likely to remain constrained over
the medium term.

* Working capital- intensive operations: current assets wereabove250 days over the three years
through fiscal 2017, with debtors of about 90 days and inventory of about 60 days; other large receivables
(central value-added tax) add to the working capital intensity.

PROFITABILITY RATIO
A profitability ratio is a measure of profitability, which is a way to measure a company's performance. Profitability is
simply the capacity to make a profit, and a profit is what is left over from income earned after you have deducted all costs
and expenses related to earning the income.

S.N Name of Formula 2014 2015 2016 2017 2018 Usual Remarks
O ratio norms

1. GP Ratio GP/Sales*100 12.68 18.75 23.88 21.44 27.14 Show the

% % % % % basic
earning

40
 potential of
the
company
from the
main
operation
higher the
better.

2. NP ratio Profit/loss/sales*1 - 2.11% 3.60% 0.44% 10.18 >5.00% Show the

00 6.41% % net earning
of the
company
including
income
from other
sources
higher the
better

3. Operation Operating 99.79 89.99 85.19 84.46 77.81 <75.00 Indication

ratio exp./sales*100 % % % % % % of level of
expense
with sales
lesser the
better.

4. Operating Operating 0.21% 10.01 14.81 11.54 22.19 >20.00 Indicate

profit profit/sales*100 % % % % % the
ratio operational
efficiency
of the firm
& is a
measure of
the firms’
ability to
cover the
total
operating
expenses.

5. Return on PAT/average or - 2.12% 4.66% 0.76% 27.35 >20.00 Show the

investme closing 6.37% % % utilization
nt investment*100 of assets
and return
earned on
total asset
41
 higher the
better.

6. Return PAT/capital - 1.15% 2.58% 0.34% 10.41 Indicates

om employed*100 2.62% % whether
capital the funds
employed are utilized
properly or
not higher
the better.

7. Earnin Earning per equity (4.34) 1.60 3.31 0.49 17.42 Amount
gs per holder no. of earned for
share equity share*100 shareholde
rs higher
the better.

LIQUIDITY RATIO
A liquidity ratio is a financial ratio that indicates whether a company's current assets will be sufficient to meet the
company's obligations when they become due.

S.N Nameofratio Formula 2014 2015 2016 2017 2018 Usual Remark
O norm
s

42
 1. Current ratio current assets/ 1.22 1.30 1.88 1.65 1.85 >1.33 Traditionall
current y 2:1is
liabilities standard but
now
1.33:1is
acceptable

Current ratio- 0.87 0.67 0.98 1.03 1.85

without
consider cenvat

2. Quick/ (current assets- 1.06 1.51 1.37 1.42 >1.00 1:1 is

liquid/acid test inventory- 1.12 treated as
prepaid standard
expenses)/curre talks
nt liabilities repayment
capacity of
the
company in
a short run

Quick/liquid/aci 0.70 0.48 0.61 0.75 1.41 1.41

d test ratio-
without
consider cenvat

Cash ratio Cash/ current 0.02 0.01 0.00 0.00 0.00 0.00 Shown
3. liabilities what% of
current
liabilities
can be paid
immediatel
y 0.5:1 as
treated as
standard

4. Defencive Liquid 428.3 274.1 227.3 244.5 202.2 How many

interval ratio assets/projected 1 7 3 5 2 days’ cash
daily cash requirement
requirement is met by
current
liquid asset
is given by
this ratio?

43
 TURNOVER RATIO

The turnover ratio or turnover rate is the percentage of a mutual fund or other portfolio's holdings that have been replaced
in a given year (calendar year or whatever 12-month period represents the fund's fiscal year)

44
S.NO NAME OF 2016 2017 2018 REMARK
RATIO

1. INVENTORY 6.12 6.24 How fast the

TURNOVER inventory get
RATIO turned over
during the year
on an average
higher the
better

2. DEBTORS 4.77 4.43 4.57 How fast

TURNOVER debtors are
RATIO realised on an
average higher
the better

3. CREDITORS 3.58 3.50 How many

TURNOVER times creditors
RATIO are paid during
the year on an
average lesser
the better

4. ASSETS 0.66 0.79 1.09 Are the asset

TURNOVER utilized
RATIO efficiently?
Relationship
between asset
and revenue
higher the
better

5. CURRENT 1.41 1.50 1.86 How fast the

ASSETS current asset
TURNOVER are moving
RATIO higher the

45
 better

6. CAPITAL 0.92 1.13 1.51 Are the fund

TURNOVER utilize
RATIO efficiently?
Relationship
between capital
and revenue
higher the
better

TURNOVER IN TERMS OF NO.S

S.NO NAM,E OF FORMULA 2014 2015 2016 2017 2018 USUAL

RATIO NORMS
REMARK

1. INVENTOR 365*Average 71 52 44 44 40 Show on

Y HOLDING inventory/turnove an average
PERIOD r how many

46
 days stock
in kept in
store lesser
the better

2. DEBTORS 365/debtors 232 164 76 82 Shon on an

CREDIT turnover ratio average
PERIOD how many
days
debtors are
outstanding
lesser the
better

3. CREDITORS 365/creditors 311 265 102 104 Indicate on

CREDIT turnover ratio an average
PERIOD for how
many days
creditors
payment is
pending
medium is
better

CAPITAL STRUCTURE RATIO

Capital structure refers to the degree of long term financing of a business concern as in the form of debentures, preference
share capital and equity share capital including reserves and surplus. ... Capital structure is otherwise called as leverage

S.NO NAME OF FORMULA 2016 2017 2018 REMARK

RATIO

1. LONG TERM Long term debts/equity 0.00 0.00 0.00 2:1 is

DEBTS EQUITY treated as
RATIO adequate
ratio
47
2. TPTAL DEBTS Long term debts+ short 0.35 0.52 0.48 The
EQUITY RATIO term debts/equity proportion
of loan and
equity

3. PROPERITERY Proprietary fund/ total 0.74 0.66 0.67 Show how

RATIO assets match funds
have been
put by the
owner of
the
company

4. FIANANCIAL EBIT/EBIT-interest 1.31 3.22 1.02 Show the

LEVERAGE financial
risk of the
company
lesser is
better

5. DEBTS EBIT+ depreciation+ 12.31 9.60 94.49 The

SERVICE loan installment capacity of
COVERAGE paid/loan installment+ company to
RATIO interest repay the
loan
instalment

6. INTEREST PFA+ depreciation 12.31 9.60 94.49 Show the

COVERAGE +interest/interest capacity of
RATIO company to
pay of its
interest

7. PREFERENCE PAT+ N/A N/A N/A Indicate

DIV.COVERAGE depreciation/preferenc how match
RATIO e div. profits are
left to pay
the
preference
48
 dividend

DELL’ORTO INDIA PVT LTD

Name of the company DELL’ORTO INDIA PRIVATE LIMITED

Year of incorporation 2006

Chairman Andrea Dell’orto

Type of company Private limited

B-42, Chakan Industrial Area, Phase-II,
Area of operation
M.I.D.C Village- Bhamboli, Taluka Khed,
Pune MH 410501 IN

49
Nature of business Manufacture of parts and accessories for motor
vehicles and their engines

No. of departments

No. of employees

No. of working days 5 days in a week

SHARE CAPITAL & NO. OF EMPLOYEES

AUTHORISED CAPITAL RS. 650,000,000

PAID UP CAPITAL RS. 595,000,000

LISTING AND ANNUAL COMPLIANCE DETAILS

50
 LISTING STATUS UNLISTED

DATE OF LAST ANNUAL GENERAL 03 SEPTEMBER 2018

MEETING

DATE OF LATEST BALANCE SHEET 31 MARCH 2018

HISTORY

1933, Dell’orto manufactured the first carburettor with acronym SC 26 -commercialized as Rex-.
The three founders developed the first carburettors for the main motorcycles manufacturers such as Guzzi,
Benelli and Piaggio, performing all production phases (diecasting, mechanical machining and assembly) by
creating a strategy which was not limited to the component manufacturing, but which controlled the whole
production chain.

2013,

In the year of its 80th anniversary, Dell’orto continues its business with great partnerships. Thanks to a
technical agreement with Bosch Group in 2012, Dell’orto started the production of motorized throttle bodies

51
for customers, high level application and aftermarket demand. The partnership enlarges with the distribution
of Bosch products through Dell’orto sales network in the national market.

2018,On its 85th anniversary, Dell’orto continues its business towards great projects.

Dell’orto has signed a strategic joint venture with VARROC to develop Fuel injection systems in the Indian
market and worldwide. This is a very important milestone for Dell’orto in the development of the new EFI
system: Monnalisa. The goal is to enlarge company vision towards worldwide prospective being a global
system integrator for 2 wheeler and 3 wheeler vehicles.

FINDINGS

 Working capital of the Dell’orto India pvt ltd. was increasing and showing positive working capital
per year.
 The Dell’orto India pvt Ltd has higher current and quick ratios are i.e.1.85 and 1.42 respectively. So
the company’s liquidity position is good. It shows that it is able to meet its current obligations.

52
 SUGGESTIONS

 Working capital of the company has increasing every year. Profit also increasing every year this is a
good sign for the company. It has to maintain it further, to run the business long term.

 The current and quick ratios are almost up to the standard requirement. So the working capital
management Dell’orto India pvt ltd is satisfactory and it has to maintain it further.

53
 CONCLUSION

Liquidity is an attribute that signifies the capacity to meet financial obligations of the company when
required. The importance of liquidity to meet the day to day operations and urgent payment to suppliers. A
firm should maintain adequate level of working capital to meet the day to day operations and maintain
business operations. The effective management of working capital requires both medium term planning and
immediate reactions to the fast changes taking in the present business environment. The effectiveness of
working capital depends on all current assets and current liabilities.

The relative liquidity of the firm’s assets structured is measured by the current assets to fixed assets ratio.
The grater this ratio, the less risky as well as less profitable will be the firm and vice versa. Similarly, the
relative liquidity of the firm’s financial structure can be measured by the short term financing to the total

54
financing ratio. The lower this ratio, the less risky as well as less profitable will be the firm and vice versa.
In shaping its working capital policy, the firm should keep in mind these two dimensions- relative asset
liquidity and relative financing liquidity of the working capital management. A firm will be following a very
conservative working policy if it combines a high level of current assets with a high level of long- term
financing. Such a policy will not be risky at all and would be less profitable. An aggressive firm on the other
hand would combine low level of current assets with a high level of long term financing. This will have high
profitability and risk. In fact, the firm may follow a conservative financing policy to counter its relatively
liquid assets structure in practice. The conclusion of all this it that the considerations of assets and financing
mixes are crucial to the working capital management.

APPENDICES

Balance sheets

Balance sheet as at 31st march, 2016

particulars notes Figures as end of figures as at end of

current period previous reporting
period In Rs.
In Rs
Equity & liabilities
Shareholders funds
2
55
Share capital 3 595,595,000 595,000,000
Reserve & surplus 30,416,510 50,117,749
564,583,490 544,882,251
Non- current liabilities
Long term provisions
4 16,36,924 14,14,435
Deferred tax liabilities

Current liabilities
5 36,823,089 47,742,643
Short term borrowing
6 104,164,211 115,534,489
Trade payables
7 48,967,102 115,756,307
Other current liabilities
8 6,660,605 3290,715
Short term provisions
196,615,007 282,324,154

Total
762,835,421 828,620,840
Assets
Non-current assets 9
Fixed assets 285,779,164
Tangible assets 295,692,654 47017,365
Intangible assets 10 88,560,661 123,333,419
Capital work in progress 5,750,113 4,598,587
Other non- current assets 2,747,747

392,751,174 460,728,536
Current assets
Inventories 11 72,943,472 51530,341
Trade receivables 12 97671,449 120,998,230
Cash & cash equivalents 13 181,282 1478,116
Short term loans advance 14 199,288,044 193,876,120
Other current assets 10 - 9,497
370,084,247 367,892,304

Total 762,835,421 828,620,840

56
Balance sheet as on 31st march,2018

particulars Notes Figures as end of figures as at end of

current period previous reporting
period In Rs.
In Rs
Equity & liabilities
Shareholders funds
Share capital 2 595,000,000 595,000,000
Reserve & surplus 3 7,61,60,117 (2,75,05,832)
67,11,60,117 56,74,94,168
Non- current liabilities
17,55,621 17,41,333
Long term provisions 4
Deferred tax liabilities

Current liabilities
5 3,7078,779 5,24,22,828
Short term borrowing
6 18,88,87,188 16,67,555,97
Trade payables
7 6,41,25,310 6,6048,949
Other current liabilities
8 3,32,37,831 92,65,011
Short term provisions
32,33,29,108 29,44,92,385

Total
99,62,44,847 86,37,27,886
Assets
Non-current assets
Fixed assets 33,78,34,452 31,14,01,238

57
Tangible assets 9 3,94,08,900 6,08,15,281
Intangible assets 38,54,872 47,12,304
Capital work in progress 1,15,71,034 -
Other non- current assets 39,83,052 22,69,489
39,66,52,309 37,91,98,313
Current assets
Inventories 11 14,15,83,974 8,06,52,489
Trade receivables 12 24,94,34,065 19,26,57,987
Cash & cash equivalents 13 7,91,375 5,62,400
Short term loans and 14 20,77,52,540 21,06,41,523
advances
Other current assets 10 30,584 15,176

48,45,29,574
59,95,92,538

99,62,44,847 86,37,27,887

58
 REFERENCES

BOOKS:

• Research methodology- R.C KOTHARI

• Financial management- PRASAANA CHANDRA

JOURNALS

• CAMS journal of business studies and research :0975-7953

• International journal of financial issues vol.2, no.4

ANNUAL REPORTS:

• Dell’orto India pvt ltd annual report from 2015- 2018.

WEBSITES:

• www.google.com

• www.wikipedia.com

• www.accountingtools.com

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