Working Capital Management

WORKING CAPITAL MANAGEMENT
INTRODUCTION
WORKING CAPITAL
1.1 INTRODUCTION:-
Working capital management involves the relationship between a firm’s short-term

assets and its short-term liabilities. The goal of working capital management is to ensure that
a firm is able to continue its operations and that it has sufficient ability to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable, and cash.
Working capital typically means the firm’s holdings of current, or short-term, assets
such as cash, receivables, inventory and marketable securities. These items are referred to as
circulating assets because of their cyclical nature. In a retail establishment, cash is initially
employed to purchase inventory, which is in turn sold on credit and results in accounts
receivables. Once the receivables are collected, they become cash-part of which is reinvested
in additional inventory and part going to profit or cash throw-off.
The need for working capital to run the day to day business activities cannot be
overemphasized. We will hardly find a business firm which does not require any amount of
working capital. Indeed, firms differ in their requirements of the working capital.
There are two concepts of working capital—gross and net.
Gross working capital refers to the firm’s investment in current assets. Current assets are the
assets which can be converted into cash within an accounting year an include cash, Shortterm
securities, debtors, bills receivable and stock.
Net working capital refers to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year and include creditors’ bills payable and outstanding expenses.
Working Capital is the capital that allows businesses to operate on a day-to-day basis.
RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 1

Depending on the nature and the time period for which the working capital is held in
business, it can be classified as:
Though working capital of vital significance to an undertaking in several ways, the
management of which did not receive adequate attention until recently the literature of
finance concentrated more on the infrequent episodic events mergers and liquidation
neglecting completely the management of working capital. Even now, the management of
fixed assets is getting precedence over the working capital.
It has been observed by shall and Haley that “managing current assets requires more
attention than managing plant and equipment expenditure. Mismanagement of current assets
can be costly. Too large an investment in current assets means tying up capital that can be
used productively elsewhere. On the other hand, too little investment can also be expensive.”
For example, insufficient inventory may result in loss of sales as the goods that a customer
wants to buy may not be available. The finance manager will be forced to spend a large
percentage of his time in managing current assets. It is because these assets vary quickly and
a lack of attention paid to them may result in appreciably lower profits for the firm.
Working capital Definitions:

The following are the some of the definitions given for working capital by experts in the area
of finance.
• “The sum of the current assets is the working capital of a business.”- J.S.Mil.
• “Any acquisition of funds which increases the current assets, increased working
capital, for they are one and the same.-Bonneville and Dewey
• “Working capital has ordinarily been defined as the excess of current assets over current
liabilities.”-C.W.Gerstenberg.
NEEDS OF WORKING CAPITAL

Working Capital is an essential part of the business concern. Every business concern must
maintain certain amount of Working Capital for their day-to-day requirements and meet the
short-term obligations. Working Capital is needed for the following purposes.
RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 2

1. Purchase of raw materials and spares:

The basic part of manufacturing process is, raw materials. It should purchase frequently
according to the needs of the business concern. Hence, every business concern maintains
certain amount as Working Capital to purchase raw materials, components, spares, etc.
2. Payment of wages and salary:
The next part of Working Capital is payment of wages and salaries to labour and employees.
Periodical payment facilities make employees perfect in their work. So a business concern
maintains adequate the amount of working capital to make the payment of wages and
salaries.
3. Day-to-day expenses:
A business concern has to meet various expenditures regarding the operations at daily basis
like fuel, power, office expenses, etc.
4. Provide credit obligations:

A business concern responsible to provide credit facilities to the customer and meet the short-
term obligation. So the concern must provide adequate Working Capital.
Working Capital Position/ Balanced Working Capital Position. A business concern must
maintain a sound Working Capital position to improve the efficiency of business operation
and efficient management of finance. Both excessive and inadequate Working Capital lead to
some problems in the business concern. A. Causes and effects of excessive working capital.
(i) Excessive Working Capital leads to unnecessary accumulation of raw materials,
components and spares. (ii) Excessive Working Capital results in locking up of excess
Working Capital. (iii) It creates bad debts, reduces collection periods, etc. (iv) It leads to
reduce the profits. B. Causes and effects of inadequate working capital (i) Inadequate
working capital cannot buy its requirements in bulk order. (ii) It becomes difficult to
implement operating plans and activate the firm’s profit target. (iii) It becomes impossible to

utilize efficiently the fixed assets. (iv) The rate of return on investments also falls with the
shortage of Working Capital. (v) It reduces the overall operation of the business
TYPES OF WORKING CAPITAL

Working Capital may be classified into three important types on the basis of time.
Permanent Working Capital
Temporary Working Capital
Semi Variable Working Capital
Permanent Working Capital

It is also known as Fixed Working Capital. It is the capital; the business concern must
maintain certain amount of capital at minimum level at all times. The level of Permanent
Capital depends upon the nature of the business. Permanent or Fixed Working Capital will
not change irrespective of time or volume of sales.
Temporary Working Capital
It is also known as variable working capital. It is the amount of capital which is required to
meet the Seasonal demands and some special purposes. It can be further classified into
Seasonal Working Capital and Special Working Capital. The capital required to meet the
seasonal needs of the business concern is called as Seasonal Working Capital. The capital
required to meet the special exigencies such as launching of extensive marketing campaigns
for conducting research, etc.
Semi Variable Working Capital

Certain amount of Working Capital is in the field level up to a certain stage and after that it
will increase depending upon the change of sales or time.

1.2 INDUSTRY PROFILE
The Automotive industry comprises a wide range of companies and organizations involved in

the design, development, manufacturing, marketing, and selling of motor vehicles. It is one of
the world's largest economic sectors by revenue. The automotive industry does not include
industries dedicated to the maintenance of automobiles following delivery to the end-user,
[
such as automobile repair shops and motor fuel filling stations..
History

The automotive industry began in the 1860s with hundreds of manufacturers that
pioneered the horseless carriage. For many decades, the United States led the world in total
automobile production. In 1929, before the great depression, the world had 32,028,500
automobiles in use, and the U.S. automobile industry produced over 90% of them. At that
time the U.S. had one car per 4.87 persons. After World War II, the U.S. produced about 75
percent of world's auto production. In 1980, the U.S. was overtaken by Japan and then
became world's leader again in 1994. In 2006, Japan narrowly passed the U.S. in production
and held this rank until 2009, when China took the top spot with 13.8 million units. With
19.3 million units manufactured in 2012, China almost doubled the U.S. production, with
10.3 million units, while Japan was in third place with 9.9 million units From 1970 (140
models) over 1998 (260 models) to 2012 (684 models), the number of automobile models in
the U.S. has grown exponentially.
Automobile Industry in India

 The Indian automobile industry seems to come a long way since the first car that was
manufactured in Mumbai in 1898.
 The automobile sector today is one of the key sectors of the country contributing majorly to
the economy of India. It directly and indirectly provides employment to over 10 million
people in the country.
 The Indian automobile industry has a well established name globally being the second largest
two wheeler market in the world, fourth largest commercial vehicle market in the world, and
eleventh largest passenger car market in the world and expected to become the third largest
automobile market in the world only behind USA and China.
Key automobile manufactures in India
 Maruti Udyog
 General Motors
 Ford India Limited
 Eicher Motors

 Bajaj Auto
 Daewoo Motors India
 Hero Motors
 Hindustan Motors
 Hyundai Motors India Limited
 Royal Enfield Motors
 Telco
 TVS Motors
 DC Designs
 Swaraj Mazda Limite
1.3 COMPANY PROFILE
About TVS Motor Company

TVS Motor Company (T.V.S) is a multinational motorcycle company headquartered
at Chennai, India. It is the third largest motorcycle company in India with a revenue of over 20,000
crore (US$2.8 billion) in 2018–19. The company has annual sales of 3 million units and an annual
capacity of over 4 million vehicles. TVS Motor Company is also the 2nd largest exporter in India with
exports to over 60 Countries.
TVS Motor Company Ltd (TVS Motor), a member of the TVS Group, is the largest
company of the group in terms of size and turnover.
History:
T.V. Sundaram Iyengar began with Madurai's first bus service in 1911 and founded
T.V.S, a company in the transportation business with a large fleet of trucks and buses under the name
of Southern Roadways.
Early history
Sundaram Clayton was founded in 1972 in collaboration with Clayton Dewandre

Holdings, United Kingdom. It manufactured brakes, exhausts, compressors and various other

automotive parts. The company set up a plant at Hosur n 1976, to manufacture mopeds as part of their
new division. In 1980, TVS 50, India's first two-seater moped rolled out of the factory at Hosur in
Tamil Nadu, Southern India. A technical collaboration with the Japanese auto giant Suzuki Ltd.
resulted in the joint-venture between Sundaram Clayton Ltd and Suzuki Motor Corporation, in 2017.
Commercial production of motorcycles began in 2018.
Suzuki relationship
TVS and SUZUKI shared a 1-year-long relationship that was aimed at technology
transfer for design and manufacture of two-wheelers specifically for the Indian market. Re-christened
TVS-Suzuki, the company brought out several models such as the Suzuki Supra, Suzuki Samurai,
Suzuki Shogun and Suzuki Shaolin. In 2001, after separating ways with Suzuki, the company was
renamed TVS Motor, relinquishing its rights to use the Suzuki name. There was also a 30-
month Moratorium period during which Suzuki promised not to enter the Indian market with
competing two-wheelers.
Recent
Recent Launches include the flagship model TVS Apache RR 310, the TVS Apache
RTR 200, TVS Victor and TVS XL 100. TVS has recently won 4 top awards at J.D. Power Asia
Pacific Awards 2016, 3 top awards at J.D. Power Asia Pacific Awards 2015 & Two-Wheeler
Manufacturer of the Year at NDTV Car & Bike Awards (2014–15)
In 2016 TVS started manufacturing the BMW G310R, a model co-developed

with BMW Motorrad after their strategic partnership in April 2013. In December 2018, the Hosur
plant where the motorcycle is manufactured rolled out its 50,000th G310R series unit.
On 6 December 2017, TVS launched their most-awaited motorcycle, the Apache RR

310 in an event at Chennai. The 310cc motorcycle with an engine which was co-developed with
BMW features first ever full fairing on a TVS bike, dual-channel ABS, EFI, KYB suspension kits,
etc.. The Apache RR 310 is designed and realized entirely in India.
Characteristics of TVS Motor

o It was the first Indian company to deploy a catalytic converter in a 100 cc motorcycle.
o It was the first to indigenously produce a four stroke motorcycle.
o India's first 2-seater moped – TVS 50.
o First Indian company to launch ABS in a motorcycle – Apache RTR Series.
o And a recent launch - India's first connected scooter TVS NTORQ which claims to be India's
first Bluetooth Connected Scooter with features like Call Assistance, Navigation etc..,
Current Models:
 TVS NTORQ
 TVS Jupiter
 TVS Wego
 Apache RTR Series.
Awards and Recognitions
 TVS Motor won the prestigious Deming application prize in 2002.

 In the same year, the work done for the TVS Victor motorcycle made TVS Motor win the
National Award for successful commercialization of indigenous technology from Technology
Development Board, Ministry of science and technology, Government of India In 2004, TVS
Scooty Pep won the 'Outstanding Design Excellence Award' from Business world magazine
and the National institute of design, Ahmadabad.
 The effective implementation of Total productivity maintenance practices gave TVS Motor
the TPM Excellence Award given by the Japan Institute of Plant Maintenance in 2008.
 Innovative implementation of Information Technology has won TVS Motor the Ace Award
for Most Innovative Net weaver Implementation in 2007, awarded by technology major SAP

AG and the Team Tech 2007 Award of Excellence for Integrated use of Computer Aided
Engineering Technologies.
 Himalayan Hills, an initiative launched by TVS Motor Company has been included in the
India Book of Records when Anam Hashim became the first woman on a 110 cc scooter to
complete the trip to Khardung La, the world's highest motorable stretch.
TVS Industry Vehicles

3. RESEARCH METHODOLOGY
3.1 NEED FOR THE STUDY
Working capital is one of the key areas of financial management must see that an
excessive investment in current assets should protect the company from the problems of
stock-out. Current assets will also determine the liquidity position of the company.
The goal of working capital is to manage the firm current assets and current liabilities in such a
way that a satisfactory level of working capital is maintained .This study is undertaken to
understanding working capital management at RTPP Ltd.

2.2 SCOPE OF THE STUDY
The study on working capital management confined to RTPP and the study period covers 5
years of data that is from 2013-14 to 2017-18.The study focus on analysis of working capital
management.

3.3 OBJECTIVES OF THE STUDY
• To analysis and evaluate the Net working capital of the company that is being maintained
by the firm for a period of 5 years (2014-2018).
• To analysis and evaluate the funds flow statement.
• To analysis and evaluate the performance of the organization through ratios.

• To analysis and evaluate the firm’s liquidity position by using liquidity ratio.
• To analysis and evaluate the firm’s turn over by using turnover ratio.

3.4 Research Methodology

Research is defined as a careful consideration of study regarding a particular concern or a
problem using scientific methods. According to the American sociologist Earl Robert
Babbie, “Research is a systematic inquiry to describe, explain, predict and control the
observed phenomenon. Research involves inductive and deductive methods.” Types of
Research :
Descriptive Research: research focuses on throwing more light on current issues through
a process of data collection. Descriptive studies are used to describe the behavior of a sample
population. In descriptive research, only one variable (anything that has quantity or quality
that varies) is required to conduct a study. The three main purposes of descriptive research
are describing, explaining and validating the findings. For example, a research conducted to
know if top-level management leaders in the 21st century posses the moral right to receive a
huge sum of money from the company profit. Secondary data:
The secondary data are those which have already collected and stored. Secondary data easily
get those secondary data from records, journals, annuals reports of the company etc., it will
save the time, money and efforts to collect the data. Secondary data also made available
through trade magazine, balance sheets, books etc.
Type of Research: Descriptive Research Research

Data:
For my study, the information is gathered from secondary sources The secondary data is
collected from the company website, company books and other websites for completing my
project work
Financial statements

Working capital statement Tools

used for analysis
1. Bar Graphs used to analyze the collected information
2. Net working capital = current assets - current liabilities
3.5 LIMITATIONS OF THE STUDY
• The study is conducted for 5 years of data i.e. from 2013-2014 to 2017- 2018,for the analysis
of the study.
• Since financial matters are sensitive in nature the same could not be acquired easily.
• Project duration was also time constraint.

4. DATA ANALYSIS AND INTERPRETATION

Trend of Current Assets & Current Liabilities Current
Assets:
Current assets represent all the assets of a company that are expected to be conveniently sold,
consumed, utilized or exhausted through the standard business operations, which can lead to
their conversion to a cash value over the next one year period
Current Assets= Inventories+ Sundry debtors+ Cash & Bank balance+

other current assets
Table No- 4.1:
Years Current Assets

2015 4563099
2016 9599646
2017 9077617
2018 11003428
2019 11946666
Graph No- 4.1:
Current Asset
14000000
12000000
10000000
8000000
6000000 Current Asset
4000000
2000000
0
2015 2016 2017 2018 2019

INTERPRETATION:-
From the above graph and table it is clear that the current assets of the company is having
highest value in the year 2018. The trend of Current assets is decreasing from 2015 to 2016.
The value of the firm in terms of current assets is very high.
Current Liabilities:
Current liabilities are a company's short-term financial obligations that are due within one
year
Current Liabilities=Sundry Creditors+ Bills Payable+ Other Current

Liabilities
Table No-4.2:
Year Amount
2015 2041543
2016 3887765
2017 2829079
2018 3889899
2019 4165659
Graph No-4.2:
Current Liabilities
4500000
4000000
3500000
3000000
2500000
2000000 Current Liabilities
1500000
1000000
500000
0
2015 2016 2017 2018 2019

INTERPRETATION:-
Fromthe above analysis it is observed that the current liabilities are growing year from 2014
to 2015 which is not good for the company and it is decreased in the year 2016. later it was
increased year by year and it reaches to 4165659 in the year 2018.
Net Working Capital:

An analysis of the net working capital will be very help full for knowing the operational
efficiency of the company. The following table provides the data relating to the net working
capital of BCM.
NET WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITISES
Table No-4.3:
Years Current Asset Current Liabilities NWC
2015 4563099.00 2041543.00 2521556.00
2016 9599646.00 3887765.00 5711881.00
2017 9077617.00 2829079.00 6248538.00
2018 11003428.00 3889899.00 7113529.00
2019 11946666.00 4165659.00 7781007.00
Graph No-4.3:
Net Working Capital

9000000
8000000
7000000
6000000
5000000
4000000 Net Working Capital
3000000
2000000
1000000
0
2015 2016 2017 2018 2019

INTERPRETATION:-
The above chart shows that during the year 2014 the company has 2521556.00 N.W.C. In
the year 2015 huge increase in the N.W.C is 5711881.00 and in the year 2016 the company
has 6248538.00 N.W.C in the year 2017 the company has 7113529.00 N.W.C the N.W.C of
the company is increasing compared to the previous years, in the year 2018 the company.
FUND FLOW STATEMENTS

Principles of working capital for calculation purpose
CURRENT ASSETS
If the current assets increase as a result of this, working capital also increases.
If the current assets decreases as a result of this working capital decreases.
CURRENT LIABILITIES
If the current liabilities increases as a result of this working capital decreases.
If the current liabilities decreases as a result of this working capital Increase.
Statement of Changes in Working Capital:

The purpose of preparing this statement is for finding out the increase or decrease in working
capital and to make a comparison between two financial years.
Table 4.4: Statement of Changes in Working Capital for the Year 2014-2015
As on 31-3- As on 31-3- Effect on working capital
2014 2015 w
Particulars Increas Decrease
e
CURRENT ASSETS
Inventories 2001305.00 1532455.00 __ 468850.00

Sundry debtors 1438810.00 2201381.00 762571.00 __

Cash & Bank balance 503667.00 493742.00 __ 9925.00

Other current assets 134364.00 148822.00 14458.0 __
0
Loans and Advances 193081.00 186699.00 __ 6382.00
(A)Total Current Assets 4271227.00 4563099.00
CURRENT
LIABILITIES
Sundry creditors 1606195.00 1673515.00 __ 67320.00
Provisions 511561.00 368028.00 143533.00 __
(B)Total Current Liabilities 2117756.00 2041543.00
(A)-(B) Net Working 2153471.00 2521556.00
Capital
Increase in Working 368085.00* __ __ 368085.00*
Capital
TOTAL 2521556.00 2521556.00 920562.0 930487.00
0
INTERPRETATION:
In the above table, it is seen that during the year 2013 and 2014 there was a net increase in
working capital of Rs 368085.00. It indicates an adequate working capital
This is because of
1.Increase current assets such as Sundry debtors by Rs 762571.00, other current assets by Rs
14458.00. And decrease in Inventories by Rs 468850.00, Cash & Bank balance by Rs
9925.00, Loans and Advances by Rs 6382.00.
2.Increase in current liabilities such as in Sundry creditors by Rs 67320.00 and decrease in
Provisions by Rs 143533.00.

WORKING CAPITAL MANAGEMENET
Table 4.5 Statement of Changes in Working Capital for the Year 2015-2016
As on 31-3- As on 31-3- Effect onworking capital
Particulars 2015 2016 Increase Decrease

CURRENT ASSETS
Inventories 1532455.00 2161071.00 628616.00 __

Sundry debtors 2201381.00 4958527.00 2757146.00 __
Cash & Bank balance 493742.00 1205660.00 711918.00 __
Other current assets 148822.00 78260.00 __ 70562.00
Loans and Advances 186699.00 1196128.00 1009429.00 __
CURRENT LIABILITIES

Provisions 368028.00 395638.00 __ 27610.00
(A)-(B) Net Working Capital 2521556.00 5711881.00
Increase in Working Capital 3190325.00* __ __ 3190325.00*
TOTAL 5711881.00 5711881.00 5107109.00 5107109.00
INTERPRETATION:
In the above table, it is seen that during the year 2014 and 2015 there was huge net increase
in working capital by Rs 3190325.00.
This is because
1.There is Increase in current assets such as Inventories by Rs 628616.00, Sundry debtors by

Rs 2757146.00, Cash & Bank balance by Rs 711918.00, Loans and Advances by Rs
1009429.00. And decrease in other current assets by Rs 70562.00.
2. There is Increase in current liabilities such as Sundry creditors by Rs 1818612.00,
Provisions by Rs 27610.00.

WORKING CAPITAL MANAGEMEMNT
Particulars As on 31-3- As on 31-3- Effect on working capital
2016 2017 Increase Decrease
CURRENT ASSETS
Inventories 2161071.00 3336430.00 1175359.00 __

Sundry debtors 4958527.00 1805948.00 __ 3152579.00
Cash & Bank balance 1205660.00 1033152.00 __ 172508.00
CURRENT LIABILITIES
Sundry creditors 3492127.00 2649781.00 842346.00 __

Provisions 395638.00 179298.00 216340.00 __
TOTAL 6248538.00 6248538.00 3861744.00 3861744.00
INTERPRETATION:
In the above table, it is seen that during the year 2015 and 2016 there was also net increase
in working capital by Rs 536657.00.
This is because
1. There is Increase in current assets such as Inventories by Rs 1175359.00, other current assets
by Rs 111423.00, Loans and Advances by Rs 1516276.00 and decrease in Sundry debtors by
Rs 3152579.00, Cash & Bank balance by Rs 113618.00.

Table 7 Statement of Changes in Working Capital for the Year 2017-2018

Particulars As on 31-3- As on 31-3- Effect on wo rking capital
CURRENT ASSETS
Inventories 3336430.00 2622901.00 __ 713529.00
Sundry debtors 1805948.00 3787274.00 1981326.00 __
Cash & Bank balance 1033152.00 1720815.00 687663.00 __
Loans and Advances 2712404.00 2666232.00 __ 46172.00
CURRENT LIABILITIES
Provisions 179298.00 1230900.00 __ 1051602.00
(A)-(B) Net Working 6248538.00 7113529.00
Capital
TOTAL 7113529.00 7113529.00 2667512.00 2667512.00
INTERPRETATION:
In the above table, it is seen that during the year 2016 and 2017 there was also net increase
in working capital by Rs 864991.00 This is because
1. There is Increase in current assets such as Sundry debtors by Rs 1981326.00, Cash & Bank
balance by Rs 687663.00, Other current assets by Rs 16523.00 and decrease in Inventories
by Rs 713529.00, Loans and Advances by Rs 46172.00.
2. There is Increase in current liabilities such as Sundry creditors by Rs 9218.00, Provisions by
Rs 1051602.00.

Particulars As on 31-3- As on 31-3- Effect on w orking capital
CURRENT ASSETS
Inventories 2622901.00 2360611.00 __ 262290.00
Sundry debtors 3787274.00 4355365.00 568091.00 __
Cash & Bank balance 1720815.00 1978938.00 258123 .00 __
Other current assets 206206.00 185585.00 __ 20621.00
0 0
CURRENT LIABILITIES
Provisions 1230900.00 1107810.00 123090.00 __
TOTAL 8270981.00 8270981.00 1349239.00 1349239.00
INTERPRETATION:
In the above table, it is seen that during the year 2017 and 2018 there was also net increase in working
capital by Rs 1157452.00.
This is because
1. There is Increase in current assets such as Sundry debtors by Rs 568091.00, Cash & Bank
balance by Rs 258123.00 Loans and Advances by Rs 399935.00 and decrease in Inventories by Rs
262290.00, other current assets by Rs 20621.00.
2. There is Increase in current liabilities such as Sundry creditors by Rs 398850.00 and decrease in
Provisions by Rs123090.00.


B. Ratio Analysis:
CURRENT RATIO:-
It is a ratio, which express the relationship between the total current Assets and current
liabilities. It measures the firm’s ability to meet its current liabilities. It indicates the
availability of current assets in rupees for every one rupee of current liabilities. A ratio of
greater than one means that the firm has more current assets than current liabilities claims
against them. A standard ratio between them is 2:1. `
Current assets
Current ratio = ---------------------
Current liabilities
Table No-4.9:
Year Current Assets Current Liabilities Current Ratio
2015 4563099.00 2041543.00 2.23
2016 9599646.00 3887765.00 2.47
2017 9077617.00 2829079.00 3.21
2018 11003428.00 3889899.00 2.83
2019 11946666.00 4165659.00 2.87
Graph No-4.9:

Current Ratio
3.5
2.5
Current Ratio
1.5
0.5
0
2015 2016 2017 2018 2019
INTERPRETATION:-
It is seen from the above chart that during the year 2014 the current ratio was
2.23, during the year 2015 it was 2.47 and in the year 2016 it was 3.21. This shows the
current ratio increases every year but in the year 2017 the current ratio was dropped to
2.83 due to increase in current liabilities. In the year 2018 the current ratio has increases
2.87. The current ratio is above the standard ratio i.e., 2:1.
ACID TEST RATIO / QUICK RATIO / LIQUIDITY RATIO:-

This ratio establishes a relationship between quick/liquid assets and current liabilities. It
measures the firms’ capacity to pay off current obligations immediately. An asset is liquid if
it can be converted in to cash immediately without a loss of value; Inventories are considered
RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS]

Page 27
to be less liquid. Because inventories normally require some time for realizing into cash.
This ratio is also known as acid-test ratio. The standard quick ratio is 1:1. Is considered
satisfactory.
Quick Ratio = Quick Assets (current assets - Inventory)
Current Liabilities
Table No-4.10:
Year Current Assets Inventories Quick Assets Current Liabilities Quick Ratio
2015 4563099.00 1532455.00 3030644.00 2041543.00 1.48
2016 9599646.00 2161071.00 7438575.00 3887765.00 1.91
2017 9077617.00 3336430.00 5741187.00 2829079.00 2.03
2018 11003428.00 2622901.00 8380527.00 3889899.00 2.15
2019 11946666.00 2360611.00 9586055.00 4165659.00 2.30
Graph No-4.10:

Quick Ratio
2.5
1.5
Quick Ratio
1
0.5
0
2015 2016 2017 2018 2019
INTERPRETATION:-
During the year 2014 the quick ratio was 1.48, in the year 2015 it increases to 1.91
This shows the company maintains satisfactory quick ratio, in the year 2016 the quick ratio
increases to 2.03, in the year 2017 it increases 2.15, in the year 2018 it increases 2.30, due to
increase in quick assets. The quick ratio is above the standard ratio i.e., 1:1. Hence it shows
that the liquidity position of the company is adequate.
ABSOLUTE LIQUID RATIO:-

Absolute liquid ratio may be defined as the relationship between Absolute liquid
assets and current liabilities. Absolute liquid assets include cash in hand and cash at bank.
The standard ratio is 0.5: 1.

Page 29
Absolute Liquidity Ratio = Cash & Bank Balance

Current Liabilities
Table No-4.11:
Year Cash & Bank Balance Current Liabilities Absolute Liquidity Ratio
2015 493742.00 2041543.00 0.24
2016 1205660.00 3887765.00 0.31
2017 1033152.00 2829079.00 0.36
2018 1720815.00 3889899.00 0.44
2019 1978938.00 4165659.00 0.47
Graph No-4.11:

Absolute Liquidity Ratio
0.5
0.45
0.4
0.35
0.3
0.25
Absolute Liquidity Ratio
0.2
0.15
0.1
0.05
0
2015 2016 2017 2018 2019
INTERPRETATION:
During the year 2014 the Absolute liquidity ratio was 0.24, during the year 2015 it
was 0.31 and in the year 2016 it was 0.36, in the year 2016 it was 0.44 This shows the
Absolute liquidity ratio increases every year but it is below the standard ratio. In the year
2018 the Absolute liquidity ratio has increases 0.47.
Hence it shows that the liquidity position of the company is satisfactory.

Page 31
INVENTORY TURNOVER RATIO:-

Inventory turnover ratio is the ratio, which indicates the number of times the stock is turned
over i.e., sold during the year. This measures the efficiency of the sales and stock levels of a
company. A high ratio means high sales, fast stock turnover and a low stock level.
A low stock turnover ratio means the business is slowing down or with a high stock level.
Inventory Turnover Ratio = Net Sales

Closing Inventory
Table No-12:
Year Net Sales Closing inventory Inventory Turnover ratio
2015 19542081.00 1532455.00 12.75 Times
2016 31321229.00 2161071.00 14.49 Times
2017 27894285.00 3336430.00 8.36 Times
2018 38496046.00 2622901.00 14.68 Times
2019 42345651.00 2360611.00 17.94 Times

CHART4.12
Inventory Turnover ratio

20
18
16
14
12
10
Inventory Turnover ratio
8
6
4
2
0
2015 2016 2017 2018 2019
INTERPRETATION:
It is seen from the above chart that During the year 2014 the Inventory t/o ratio is
12.75 times, in the year 2015 it increased to 14.49 times, But in the year 2016 it decreased
to
8.36 times . There was a subsequent increase in the year 2017 and 2018 to 14.68 times and
17.94 times respectively.
This shows the company has more sales.

Page 33
DEBTORS /ACCOUNTS RECEIVABLES TURNOVER RATIO:-
Debtor’s turnover ratio indicates the speed of debt collection of the firm. This ratio
computes the number of times debtors (receivables) has been turned over during the
particular period.
Debtors Turnover Ratio = Net Sales
Average Debtors
Table No-4.13:
Average
Year Net Sales Debtors Turnover Ratio
Debtors
2015 19542081.0 2201381.00 8.88 Times

0
2016 31321229.0 4958527.00 6.32 Times

0
2017 27894285.0 1805948.00 15.44 Times

0
2018 38496046.0 3787274.00 10.16 Times

0
2019 42345651.0 4355365.00 9.72 Times

0

Page 34
CHART-4.13
Debtors Turnover Ratio

18
16
14
12
10
8 Debtors Turnover Ratio
0
2015 2016 2017 2018 2019
INTERPRETATION:
It is clear that debtor turnover ratio fluctuating over the years. It was 8.88 times in
the year 2014. It decreased to 6.32 times in the year 2015, It again increased to 15.44 times
in the year 2016 but it decreased to 10.16 times and 9.72 Times in the year 2017 and 2018
respectively. This shows the company is not collecting debt rapidly.

Page 35
CREDITORS/ACCOUNTS PAYABLES TURNOVER RATIO:-

Creditor’s turnover ratio is the ratio, which indicates the number of times the debts are paid
in the year. This ratio is calculated as follows.
Creditors Turnover Ratio = Net Purchases

Average Creditors
Table No-4.14:
Year Net Purchases Average Creditors Creditors Turnover Ratio
2005-06 11691090.00 1673515.00 6.98 Times
2006-07 17778675.00 3492127.00 5.09 Times
2007-08 18896828.00 2649781.00 7.13 Times
2008-09 23605773.00 2658999.00 8.88 Times
2009-10 27146639.00 3057849.00 8.88 Times
CHART-4.14

Page 36
Creditors Turnover Ratio

10
9
8
7
6
5
Creditors Turnover Ratio
4
3
2
1
0
2015 2016 2017 2018 2019
INTERPRETATION:
It is clear that creditor turnover ratio changing over the years. It was 6.98 times in the year
2014. It decreased to 5.09 times in the year 2015, there was a subsequent increase in the
year 2016 and 2017 to 7.13 times and 8.88 times respectively. In the year 2017 it is same
as compared to 2018. It shows that company has making prompt payment to the creditors.
WORKING CAPITAL TURNOVER RATIO:-

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

Page 37
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 = Net Sales

Net Working Capital
Table No-4.15:
Year Net Sales Net Working Capital WCTR
2005-06 19542081.00 2521556.00 7.75 Times
2006-07 31321229.00 5711881.00 5.48 Times
2007-08 27894285.00 6248538.00 4.46 Times
2008-09 38496046.00 7113529.00 5.41 Times
2009-10 42345651.00 7781007.00 5.44 Times
CHART-4.15

Page 38
WCTR
9
4 WCTR
0
2015 2016 2017 2018 2019
INTERPRETATION:
The working capital t/o ratio is fluctuating year to year that was high in the year 2014, 7.75
times; there was a subsequent decrease in the year 2015 and 2016 to 5.48 times and 4.46
times. But it increases in the year 2017 and 2018 to 5.41 and 5.44 times respectively. This
shows the company is utilizing working capital effectively.

Page 39
5. FINDINGS, SUGGESTIONS AND CONCLUSION
5.1 FINDINGS
• Working capital of the company was increasing and showing positive working capital per
year.
• The higher current and quick ratios are i.e., 2.87 and 2.30 respectively.
• Inventory turnover ratio is very low in the year 2016-17. In the year 2017-18 it has increased
by 6.32 times as compared to 2016-17 and in the last year 2017-18 it has again increased by
3.26 times as compared to 2017-18.
• Debtor’s turnover ratio is very high in the year 2016-17. In the year 2017-18 it has decreased
by 5.28 times as compared to 2016-17 and in the last year 2017-18 it has again decreased by
0.44 times as compared to 2017-18.
• Creditor’s turnover ratio has increased in the years of 2015-16 and 2016-17. It is same in the
last year 2016-17 as compared to 2017-18.
• Working capital turnover ratio is very low in the year 2016-17. In the year 2017-18 it has
increased by 0.95 times as compared to 2016-17 and in the last year 2017-2018 it has again
increased by 0.03 times.

Page 40
5.2 SUGGESTIONS
• Working capital of the company has increasing every year. Profit also increasing every year this is
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. The company is satisfactory and it has to maintain it further.
• The company has sufficient working capital and has better liquidity position. By efficient utilizing
this short-term capital, then it should increase the turnover.
• The company should take precautionary measures for investing and collecting funds from receivables
and to reduce the bad debts.
• The company has sufficient working capital and has better liquidity position. By efficient utilizing
this short-term capital, then it should increase the turnover.
• Creditor’s turnover ratio has increasing from 2016-17 to 2017-18 and in the last year
20182019 it is same as compared to 2017-18. Company is making prompt payment to its
creditors. This is good sign for the company. On-time payment to suppliers will increase the
credibility of the firm. It has maintain it further to survive in the market.
• The company is investing more in the fixed assets and it is suggested to invest more in
current assets and it affect the solvency position of the company.
• The company is having more current liabilities than current assets. It is suggested that the
company should invest more in current assets.
• The company is having less money in hand. So the company should maintain cash reserves it
will good for company

Page 41
5.3 CONCLUSION
Working capital is very important for any business organization to meet its short term
obligations or to perform the day to day activities. The present study is to analyze the
performance of working capital in RTPP. Changes in working capital will have the impact on
business activities. The company’s financial position is analyzed by using the tool of annual
reports from 2013-14 to 2018-19.
In the last year the inventory turnover has increased, this is good sign for the company.
The company’s liquidity position is very good With regard to the investments in current
assets there are adequate funds invested in it. Care should be taken by the company not to
make further investments in current assets, as it would block the funds, which could
otherwise be effectively utilized for some productive purpose. On the whole, the company is
moving forward with excellent management.

Page 42
6. BIBLIOGRAPHY AND ANNEXTURE

REFERENCES
1. Afrifa, G.A, Tauringana, V., & Tingbani, I. (2014). Working capital management and
performance of listed SMEs. Journal of Small Business and Entrepreneurship, 27(6), 57-578.
2. Altaf, N., & Shah, F. (2017). Working capital management, firm performance and financial
constraints: Empirical evidence from India. Asia-Pacific Journal of Business Administration,
9(3), 206-219
3. Gill, A., Biger, N., & Mathur, N. (2010). The relationship between working capital
management and profitability: Evidence from the United States. Journal of Business
Management and Economics, 10, 1-9.
4. Korankye, T., & Adarquah, R.S. (2013). Empirical analysis of working capital management
and its impact on the profitability of listed manufacturing firms in Ghana. Research Journal
of Finance and Accounting, 4(1), 124-132.
5. Shrivastava, A Kumar, N., & Kumar, K.P. (2017). Bayesian analysis of working capital
management on corporate profitability: Evidence from India. Journal of Economic Studies,
44(4), 568-584.
6. Singhania, M., & Mehta, P. (2017). Working capital management and firm’s profitability:
Evidence from emerging Asian countries, South Asian Journal of Business Studies, 6(1), 80-
97.
7. PANDY.I.M –“ Financial Management” –Eight Edition,– VIKAS Publishing House Pvt. Ltd,
New Delhi, year 1999.
8. KHAN&JAIN .M.Y – “ Financial Management”- Tata McGraw Hill, New Delhi, year 2001
9. V K BHALLA-“Financial management” –S CHAND Publication
10. www.apgenco.com

Page 43
ANNEXURE
FINANCIAL STATEMENT 2018-2019
PROVISIONAL BALANCE SHEET AS AT 31st MARCH, 2018
LIABILITIES AMOUNT ASSETS AMOUNT

SOURCES OF FUNDS FIXED ASSETS
Share capital 1000000.00 Gross block 10913360.00
Reserves and surplus 9827210.00 Less: Depreciation 5135959.00
LOAN FUNDS Net Block 5777401.00
Secured Loans 2574672.00 Capital WIP 3693764.00
Unsecured Loans 3049192.00 CURRENT ASSETS
Deferred tax liability 801098.00 Inventories 2360611.00
CURRENT LIABILITIES Sundry debtors 4355365.00
Sundry creditors 3057849.00 Cash & bank balance 1978938.00
Provisions 1107810.00 Other current assets 185585.00
Loans and Advances 3066167.00
TOTAL 21417831.00 21417831.00

Page 44

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WORKING CAPITAL MANAGEMENT

Working capital management involves the relationship between a firm’s short-term

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 1

Working capital Definitions:

NEEDS OF WORKING CAPITAL

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 2

1. Purchase of raw materials and spares:

4. Provide credit obligations:

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 3

TYPES OF WORKING CAPITAL

Permanent Working Capital

Temporary Working Capital

Semi Variable Working Capital

Permanent Working Capital

Semi Variable Working Capital

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 4

1.2 INDUSTRY PROFILE

The Automotive industry comprises a wide range of companies and organizations involved in

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 5

Automobile Industry in India

Key automobile manufactures in India

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 6

About TVS Motor Company

Sundaram Clayton was founded in 1972 in collaboration with Clayton Dewandre

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 7

In 2016 TVS started manufacturing the BMW G310R, a model co-developed

On 6 December 2017, TVS launched their most-awaited motorcycle, the Apache RR

Characteristics of TVS Motor

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 8

o It was the first to indigenously produce a four stroke motorcycle.

o India's first 2-seater moped – TVS 50.

o First Indian company to launch ABS in a motorcycle – Apache RTR Series.

 Apache RTR Series.

Awards and Recognitions

 TVS Motor won the prestigious Deming application prize in 2002.

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 9

TVS Industry Vehicles

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 10

3.1 NEED FOR THE STUDY

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 11

2.2 SCOPE OF THE STUDY

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 12

3.3 OBJECTIVES OF THE STUDY

• To analysis and evaluate the performance of the organization through ratios.

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 13

3.4 Research Methodology

Type of Research: Descriptive Research Research

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 14

Working capital statement Tools

2. Net working capital = current assets - current liabilities

3.5 LIMITATIONS OF THE STUDY

• Project duration was also time constraint.

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES [RIMS] Page 15

4. DATA ANALYSIS AND INTERPRETATION

Current Assets= Inventories+ Sundry debtors+ Cash & Bank balance+

Years Current Assets

RAGHAVENDRA INSTITUTE OF MANAGEMENT SCIENCES Page 16