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A SUMMER INTERNSHIP PROJECT REPORT ON WORKING CAPITAL

MANAGEMENT ON TAXTILES AT ARVIND TEXTILE LIMITED Institute code -807
SAL INSTITUTE OF MANAGEMENT Under the guidance of ASST.PR...

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 A
SUMMER INTERNSHIP PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT ON
TAXTILES
AT
ARVIND TEXTILE LIMITED
Institute code –807
SAL INSTITUTE OF MANAGEMENT
Under the guidance of
ASST.PROF. MARGI CHOKSI
In partial fulfilment of the requirement of the award of the degree of
MASTER OF BUSINESS ADMINISTRATION (MBA)
Offered by: -
GUJARAT TECHNOLOGICAL UNIVERSITY
Ahmedabad
Prepared by:
Nihal Joshi
(Enrollment No-208070592103)

1
 Student’s Declaration

I’m Nihal Joshi hereby declare the Summer Internship Project Report titled “WORKIING
CAPITAL MANAGEMENT ON TAXTILES AT ARVIND TEXTILE LIMITED” in Wealth
first Portfolio managers Ltd. Is a result of my indebtedness to other work publications,
references, if any, have been duly acknowledged. If I am found guilty of copying from any
other report or published information and showing as my original work, or extending
plagiarism limit, I understand that I shall be liable and publishable by the university, which
may include ‘Fail’ in examination or any other punishment that university may decide.

Enrollment No. Name Signature

208070592103 Joshi Nihal SanjayBhai

Date:27/10/2021
Ahmedabad

2
This is to Certify that this Summer Internship Project Report Titled WORKIING
CAPITAL MANAGEMENT ON TAXTILES AT ARVIND TEXTILE LIMITED is the
bonafide work of Nihal Joshi (208070592103), who has carried out his/ her project under
my supervision. I also certify further that, to the best of my knowledge, the work reported
herein does not form part of any other project report or dissertation on the basis of which a
degree or award was conferred on an earlier occasion on this or any other candidate. I have
also checked the plagiarism extent of this report which is 15 % and it is below the
prescribed limit of 30%. The separate plagiarism report in the form of html /pdf file is
enclosed with this.

Rating of Project Report [A/B/C/D/E]: ______

(A=Excellent; B=Good; C=Average; D=Poor; E=Worst)
(By Faculty Guide)

Signature of the Faculty Guide/s

(Name and Designation of Guide/s)

Signature of Principal/Director with Stamp of Institute

(Name of Principal / Director)

3
Plagiarism Report

4
 Preface

This project report is attempt to bring under hard work and dedication put in by me
in the completion of the project work on perception of investors to invest in mutual
fund at time of internship. Practical training is an important part of the field of
management. It gives the students to explore the valuable treasure of experience and
an exposure to real work culture followed by the sector and helping to bridge gap
between the theories and practical implementations. Research Project is plays an
important role in future building of an individual so that she can understand the real
world in which I have to work in future. I have completed the Research project on
“WORKIING CAPITAL MANAGEMENT ON TAXTILES AT ARVIND TEXTILE
LIMITED”. I have tried to cover each aspect related to the topic with best of my
capability.

Nihal Joshi

5
 Acknowledgement

The project report concept in M.B.A. curriculum is of immense utility to the students,
project helps to assess the student’s ability to individually conceive, conceptualize, execute
and present a life-like project by making use of the skills acquired during the course of
study. My Project could not have been fruitful without the able guidance of
ASST.PROF. MARGI CHOKSI. I extend my deepest gratitude to all the persons who
gave me full support during the project. Despite serious constraints of time and recourse,
the study was executed with sincerity and commitment. The report is characterized by its
straight forward, to the point approach, with bare minimal reproduction of the theory of
finance research. A deliberate effort has been made to introduce novelty in the report.

With Thanks
Nihal Joshi

6
 Table of content
Ch, No PARTICULAR

1. 1.1) Introduction of textile Industry

1.2) Introduction of Arvind Textile Limited

2. Literature Review

3 Introduction of study

4 Research Methodology

5 Data Analysis and Interpretation

6 Finding and Suggestion

7 Conclusion

8 Bibliography

7
 CHAPTER-1

1.1) INTRODUCTION OF
TEXTILE INDUSTRY

8
 • INTRODUCTION OF TEXTILE INDUSTRY

India`s textiles industry is one of the oldest industry in Indian economy since
from several centuries. Present data also refers that, textiles sectors is one of the largest
contributors to India’s exports with approximately 13 percent of total exports. The
textiles industry is also labor intensive and is one of the largest employers. The textile
industry has two broad segments. First, the unorganized sectors consist of handicrafts
handlooms, and sericulture, which are operated on a small scale through traditional
tools and methods. The second is the organized sectors consisting of spinning, garment
and apparel segment which apply the upgraded and modern machinery and techniques
such as economies of scale.

The Indian textile industry is extremely varied, with the hand-woven and hand spun
textile industry at one end of the spectrum, while the capital-intensive sophisticated
mills sectors at the other end of the spectrum. The decentralized power looms/hosiery
and kitting sectors from the largest component of the textile sectors. The close linkage
of the textiles industry to agriculture (for raw material such as cotton, etc.) and the
ancient culture and traditions of the country in terms of textile makes the Indian textiles
sectors unique in comparison to the industries of other countries. The Indian textile
industry has the capacity to produce a wide variety of products suitable to different
market segment, both within India and across the world.

The Indian textile industry employs about 105 million people directly and indirectly.
India`s overall textile exports during FY 2017-18 stood at US$ 37.74 billion. The
Indian textile industry, estimated at around US$ 150 billion, is expected to reach US$
230 billion by 2020. The Indian textiles industry contributes approximately 2 percent
to India’s Gross Domestic Product (GDP). 14 percent to overall index of industrial
productions (IIP) and 10 percent of manufacturing productions.

https://www.ibef.org/industry/textiles.aspx

9
 • HISTORY OF TEXTILE INDUSTRY
India has been well known for its textile products since very ancient times.
The traditional textiles industry of the India was virtually decayed during the colonial
regime. However, the modern textiles industry took birth in India in the early nineteenth
century when the first textile mill in the country was established at fort gloster near Calcutta
in 1818. The cotton textile industry, however, made its real beginning in Bombay
(Mumbai), in 1850s. The India`s first cotton textile mill of Bombay was established in 1854
by a Parsi cotton merchant then engaged in overseas and internal trade. Indeed, the vast
majority of the early mills were the handiwork of Parsi merchants engaged in yarn and
cloth trade at home and Chinese and African markets.

The first cotton mill in Ahmedabad, which was eventually to emerge as a rival
center to Bombay, was established in 1861. The spread of the textile industry to
Ahmedabad apart from Bombay was largely due to the Gujarati trading class.

The cotton textile industry made rapid progress in the second half of the nineteenth
century and by the end of the century there were 178 cotton textile mills; but during the
year 1900 the Indian cotton textile industry was in bad state due to be closed down for a
long period.

https://www.fibre2fashion.com/industry-article/543/indian-textile-industry

10
 • GUJRAT TEXTILE INDUSTRY
Gujarat is one the main modern states in India and material industry in
India specifically had contributed in huge way to the industrialization of the state. Truth be
told, improvement of the numerous ventures like dyestuff, synthetic compounds
Engineering/foundry and cotton cultivating is exclusively subject to these areas. The state
is notable for advancement of mixture cotton, ginning, power looms, composites plants,
turning units and autonomous handling houses.

In Gujarat, material producers use cotton-based textures in plant area,

significant explanation being the accessibility of the essential unrefined components in the
state, i.e., cotton. Essentially, many turning units creating more moderate yarns were set
up in the state. The state turned out to be more moderate with cotton material items mostly
in the coordinated area, weaving and manufactured material in decentralized area. Surat
workmanship silk makers are just exemption also, autonomous handling units process
manufactured mixed and cotton textures. Bunches of handling units are situated in Surat,
Ahmedabad and Jaipur, however these creation units have great limit of handling wide
scope of texture.

Readymade piece of clothing assembling and hosiery knitwear unit

likewise exists in SSI classes. In mid 1990's Gujarat saw emotional change in its material
industry situation where many material factories began fabricating denim. The Arvind
factories, Ashima Textiles, Soma Textiles, Modern Denim, and Arvee denim began
fabricating denim. Such countless factories all at once got another name for Ahmedabad
"Denim city of India" while city of Surat became "Silk city of India".

11
 • MAJOR PLAYERS OF TEXTILE INDUSTRY

Here is the list of top 10 textile companies in India.

• Arvind Ltd

Arvind Ltd was started in the year 1931. The company is headquartered in Ahmedabad,
India. It is offering a range of products including Denim, Knits, and Woven etc. It is one
of the top denim manufacturers in India. The company is also running its retail and clothing
chain.

• Bombay Dyeing and Manufacturing Company Ltd

Bombay Dyeing and Manufacturing Company is one of the top textile companies in India.
It was founded in the year 1879. It is Flagship Company of Wadia Group. It is offering
wide range of products including Bed Linen, Furnishings, and Towels.

• Bombay Rayon Fashions Ltd

Bombay Rayon Fashions Ltd is one of the leading textile companies in India. It is offering
wide-range of products including Lycra, Wool, Tencel, and Polyester. It has very good
fabric manufacturing capacity. It is rapidly growing textile companies in India.

• FabIndia Overseas Pvt. Ltd

FabIndia was founded in the year 1960 by John Bissell. Headquarter is located in New
Delhi, India. Today, it has opened stores all across the country. The company is also
promoting rural employment by sourcing products from Indian Villages. It has also started
the successful retail business in India.

• Grasim Industries Ltd

12
Grasim Industries Ltd was founded in the year 1948 in Mumbai. Headquarter is located in
Mumbai, Maharashtra. It is the subsidiary of Aditya Birla Group. Grasim Industries is one
of the world’s largest producer of Viscose Staple Fiber. Aditya Birla Group is the parent
company of Grasim Industries Ltd. It is exporting its products to various countries.

• JCT Ltd

JCT Ltd is one of the leading textile companies in India.

• Karnataka Silk Industries Corporation Ltd

Mysore is known for its rich cultural heritage. It produces a very good quality silk. KSIC
especially formed to promote the cultural heritage that is silk. Since last many years it is
producing good quality silk that is distributed all across India. It is manufacturing quality
silk admired all over India. Its product range includes Silk Dhoti, Men’s Tie, Salwar
Kameez, Silk Sarees, and Kurta etc.

• Raymond Ltd

Raymond Ltd was founded in the year 1925. It is headquartered in Mumbai, India. It is
producing wide range of products including fabrics, garment, designer wear, denim etc. It
is among the most trusted fabric brands in India. Raymond opened retail shops all across
India and overseas as well.

• The Lakshmi Mills Company Ltd

Lakshmi Mills Company was founded in the year 1910 by G. Kuppuswami Naidu.
Headquarter is located in Coimbatore, Tamil Nadu. It is offering a huge range of products
including textile yarn, textile garments, weaving, and spinning. Its parent company is
Lakshmi Machine Works.

• Vardhman Textiles Ltd

13
Vardhman Group is a textile group based in Ludhiana, Punjab, India. Vardhman Group
was established in 1965 by Lala Rattan Chand Oswal. The group is engaged in
manufacturing and trading in Yarn, Greige and Processed Fabric, Sewing Thread, Acrylic
fiber and Alloy steel. Vardhman group was incorporated in 1962 as Vardhman Spinning &
General Mills (VSGML).

14
 • PORTER`S FIVE FORCES

Porter`s five force models is a framework or industry analysis and business strategy
development created by Michael E porter of Harvard business school in 1979. Indian textile
industries five forces are explain as below

Threat of new entrant (moderated)

• Indian textile industry is extremely dependent on personal associates and experiences.

• The new performer would have to get some kind of customer’s base along with the new
establishment.
• Without any established customer portfolio, it is difficult to attract. So, threat of new
entrant is moderated.
• As a new entrant has less experience in textile manufacturing and they don’t have
relationship with customers so they might experience disadvantages comparative to the
recognized competitors.

Bargaining Power of Customers (strong)

• India is likely to gain the increasing demand in the home textiles in which it has
competitive border against its neighbors. Therefore, the bargaining power of
customers is strong.
• As a result, it is importance for a producer of apparel to make different their
products, thus it will not compete with price as primary mean.

Bargaining Power of Suppliers (weak)

• In India, the excess of availability suppliers gives an initial sign of weak

bargaining powers for the suppliers.
• The supplies lack switching costs and have a low level of product differentiation.
This directs to huge chances for textiles manufacturers to scout the suppliers for
finest terms and prices for productions.

15
 • Therefore, manufacturers can make contact with a huge number of supplies and
play suppliers against each other. Such activity weakens the bargaining power for
suppliers and as a result pushes prices down and makes prices similar among
suppliers.

Threat of Substitute Product (low)

• When using such a wide term as textiles, there are apparent reasons for identifying
substitute products prove hard.
• Obviously, there are difference in types of materials and clothing. Difference in
textile sectors can also be known as trend in styles and fashion.
• Thus, products in the apparel sectors can act as substitutes but the common
conclusion still places; there`s no substitutes to apparel. So, that there is a low
threat of substitute.

Competitive Rivalry within the Industry (high)

• The textiles manufacturing sectors is an enormous sector with lot of companies

producing apparel.
• The high growth rate of total textiles exports shows that the rivalry between textiles
manufacturers is varied since they enjoy different growth rates.
• But the competition is high, so threat from competitors is also high.

As Indian textile manufacturer are forced to lower prices in order to stay competitive
with companies in a foreign country, the overall rivalry within the industry gets companies
to spread out their consumers base so as to keep profits up, therefore reasonable to consider
that such developments may happen on the behalf of competitors if possible, and thereby
raise the rivalry in the industry sectors.

16
 • CHALLENGES FACED BY TEXTILE INDUSTRY

The Indian textiles and apparel industry plays a crucial role in contributing to
employment generation, industrial output and export earnings. However, in its race towards
becoming the second largest producers of textiles and apparel in the world, it has faced
several challenges and continues to battle them to not only retain its position in the global
map but also to improve it.

LABOUR
ILLICIT
REALTED
MARKETS
CONCERNS EXCISE DUTY
POWER ON MAN
SHORTAGE MANDE
FIBRES

THREATS TO RAW
HANDLOOM MATERIAL
SECTORS SHORTAGE

challenges
OBSOLATE faced by
MACHINERY IMAPCT ON
AND indian ENVIRONMENT
TECHNOLOGY textile
industry

• The Indian textile industry faces acute shortage of raw materials in the form of cotton
and raw silk. Fluctuating prices and uncertainties in the availability of raw materials
leads to low productions and sickness of mills.
• Labor related issues such as threat to safety and health of worker, poor working
environment, and exploitation of children, strict labor laws and skill gap pose a major
challenge to the industry.
• The manufacturing activities of the textiles and apparel industry greatly impact the
environment in the form of air and water emission. Alternative process solution that
are eco-growing and cost effective are therefore necessary, to meet increasing demands
of the ever-growing and competitive market, in a sustainable manner.

17
1.2) INTRODUCTION OF
COMPANY

18
 • ARVIND MILLS COMPANY

OVERVIEW

Arvind mills is a textile manufacturer and it’s headquarter is in Ahmedabad,

Gujarat. It is a Flagship company of the Lalbhai Group. It manufactures cotton shirting,
knits, denim and bottom weight or khaki fabrics. It is well-known as India’s largest denim
producer and world`s fourth-largest producer and exporter of denim. Arvind mills has
recently ventured into technical textiles when it started advanced material division in 2011.

• Name of company: Arvind mills limited

• Founded: 1931

• Founded by: kasturbhai Lalbhai

• Chairman: Sanjay Lalbhai

• Products: denim
Woven
Knits
Retail
Agribusinesses
Arvind stores

• Revenue: ₹ 6,423.34 crore

• Number of employees: 25620

• Website: www.arvind.com

• Parent: Lalbhai group

19
 • COMPANY MISSION & VISION
Mission
Arvind limited has laid down certain aims and objectives to be achieved while
pursuing its corporate activities. These are:

• To provide a favorable work environment to the employees to direct their working

towards achievement of corporate goals.
• To provide opportunities creating a mechanism for updating the system.
• To manage the institution as a trust, as empowered leaders and do all that needs to
be done ethically for the purpose of the institution.
• To create a vibrant institution for the future of this nation and the world at large.
• To be a world leader in an environment fostering innovation and leadership.
• To reinforce connection, and catalyze the chemistry that allow connections to be
translated into action which is beneficial for both the organization and the
individual.

Vision

"To achieve global dominance over various businesses built around our core
competencies, through continuous product and technical innovation,
customer orientation and a focus on cost effectiveness".

All along Lalbhai Group has maintained a responsive yet levelheaded attitude
towards the society and its training individuals to create a corporate culture that fosters
excellence. Working in this direction the company has created a learning environment that
nurtures individual talent and intellect. It provides a platform that challenges the individual
capabilities urging them to constantly strive forward towards greater heights using
development as the fundamental tool.

It infuses in individuals a spirit of entrepreneurship which gives courage and

conviction to pursue set goals towards logical achievement and a global mindset that

20
transcends geographical and cultural boundaries evolving as a world leader. All thus is
manifest in an environment fostering innovation and leadership.

Drawing form, the team-based structure to encourage individuals to mesh up into

cross-cultural teams in all operational processes. This process provides opportunities for
individuals to match their capabilities with organizational expectations creating a
mechanism for updating the system. A strong sense of ownership and commitment towards
the organization and the business as a whole is the basic premise of all the company actions.

21
 • ORGANIZATION STRUCTURE
Arvind defines its operations in terms of Strategic Business Units (SBUs). Each
product line such as denim, shirting, knits, voiles, etc. – is designated as an SBU. Each unit
is headed by a president who is able to make independent decisions on finance and
marketing. The president is assisted by vice-presidents who look after functional divisions.

The concept of SBUs, which was implemented in spring 1995, was adopted on the
advice of McKinsey; mainly to facilitate the company’s expansion plans but also to provide
an accurate picture of the performance of individual product lines.

Each SBU, which is similar to a product division within a corporation, operates as

a profit center. While long-term planning is carried out by the corporate group in
consultation with the management of each SBU, medium and short-term planning is in the
hand of the units.

Arvind has been successful in attracting high caliber professionals from the best
multinationals and blue-chip companies.

Board Of Directors
The top management of the company consists of following members:
Name Designation

Mr. Sanjay Lalbhai Executive Chairman & Non-Executive Director

Mr. Suresh Jayaraman Managing Director & CEO

Mr. Kulin Lalbhai Non- Executive Director

Mr. Punit Lalbhai Non- Executive Director

Mr. Jayesh Shah Non- Executive Director

Ms. Nithya Easwaran Non- Executive Director

Mr. Nilesh Dhirajlal Shah Non- Executive Independent Director

22
Ms. Abanti Sankaranarayanan Non- Executive Independent Director

Mr. Nagesh Dinkar Pinge Non- Executive Independent Director

Mr. Achal Anil Bakeri Non- Executive Independent Director

Mr. Vallabh Roopchand Bhanshali Non- Executive Independent Director

Ms. Vani Kola Non- Executive Independent Director

23
 • SWOT ANALYSIS

Internal External
factor factor

Strength Opportunities

Weaknesses Threats

Strength
Below are the Strengths in the SWOT Analysis of Arvind Mills:

1. One of the largest manufacturers of Denims in India and the world

2. Strong portfolio of domestic and international brands
3. Economies of scale through complete integration

4. Arvind runs India's largest Value Retail Chain - Megamart with over 200 stores
5. Latest Manufacturing tools in production of denims and clothing
6. Over 26000 employees form the workforce for Arvind Mills
7. CSR activities like education (Sharda Trust), upgrading slums etc have enhance brand
image

24
Weaknesses

Here are the weaknesses in the Arvind Mills SWOT Analysis:

1. Global penetration is limited as compared to a few other international brands

2. Presence of Indian and international brands offers more offering to customers
therefore high brand switching

Opportunities

Following are the Opportunities in Arvind Mills SWOT Analysis:

1.Growth in the garment industry

2.Rapid growth in target group as well as higher incomes

3. Global expansion and reach of brands to increase sales

Threats

The threats in the SWOT Analysis of Arvind Mills are as mentioned:

1.Increasing competition from Indian as well as international brands

2. Cheaper imports from other countries, and pirated/fake products

25
 CHAPTER-2
LITERATURE REVIEW

26
(Sacratee S. J., Sankar M. and Ayyanar A., 2011) Stated the structure of Indian
textile industry. This industry can be broadly divided into the cotton and the non-cotton
industry. The cotton textile industry can be divided into organized and unorganized
sector. Organized sector consists of spinning mills and composite mills. The
unorganized sector consists of handloom, power loom, khadi and knitting sector.
Textile industry contributes about 14 percent to industrial production, 4 percent to the
GDP and 17 percent to the country`s export earnings. Such industry has largest
employment provider. It is one the mainstays of national economy.

(Phukan Raju, 2012) Stated that handloom sector provides direct employment to over
65 lac people in India in the year 2009-10 among them 60.40 percent are women. Poor
marketing and insufficient market linkage outside the state distress the industry from
growing and earning more revenue.

(Kavin, S., 1989) Conducted a study on textile industry in Kerala with a comparative
reference to Tamil Nadu. According to him Kerla textile industry has revealed a
plethora to weaknesses. Low profitability, inter-mill variation in profitability low
ownership contribution, high debt financing, excessive reliance in short-term finance,
scare internal resources generation, poor debt-service capacity, negative working
capital, insufficient liquidity, over investment of raw material and store and spares. The
study presents the picture of an industry which is hardly profitable and almost
insolvent.

(Kumar, 2006) Did study of various sectors of Indian and Chinese textiles. This paper
concludes and highlights the various areas where Indian has efficiency over China and
how India should more capitalize on it. Also, it gives equally weight age to Chinese
advantages and how India can win over its weaker areas to be more competitive in long
run.

(Chugan, 2006) Discussed opportunities available for various sector of Indian textiles
industry in the post quota era. Study also examined the weaker link, competitions from
China and the schemes run by government to support India textile industry.

27
(Joshi, R.N., Singh, S.P., 2008) examined the trends in the India’s textile and
clothing export in the post-MFA regime. The study found that the growth of India’s
clothing and textile export turns out to be greater than that of the China’s.
(Chaudhary, 2007) Technical textiles an evolving stage in India articled define the
consumption and import situation for TTI concern. He also referred to government
initiatives to discontinue the deficiency of the technical textiles industry in India.
Further, he referred that India can create solid economic environment for TTI because
of the abundance of raw material and cheap labor but here is a need for attentiveness
of both private and government sectors for the systematic circulatory economy
development.
(Neetesh Bhargava, 2015) Impart the information about Indian textile industry. This
industry as the second largest industry provided not only one of the basic need of
people clothing also severed industrial need in technical aspects in field of agro,
biotech, aerospace and automobile, etc. Precise research and reports form 2001 to
current date focus on the growth of technical textiles. The research shows nation
growth of TTI segment-wise, specific segment growth of TTI at a localized level is a
gap know the actual situation of growth to minimize the challenges of the industry.
(Keenan, 2004) Researchers who have explored the textiles and apparel sectors of
European nations have opined that frequent shutdown of plants and loss of
employment in the last decade were resulted to upset their market expansion. It
was stated that quota elimination in 2005, value-chain, building competitiveness on
new technology, innovation and design possess challenging task to the Europe textile
and apparel industry.
(Londhe, 2017) Determinants of competitiveness in Indian textile and apparel
industry and world studies signify the sustainable competitiveness of Indian silk and
handloom sector is Charaj model of silk and handloom competitiveness index

28
 CHAPTER-3

INTRODUCTION TO STUDY

29
 • WORKING CAPITAL MANAGEMENT
• INTRODUCTION

Working capital is required to ensure that a firm is able to continue its

routine operations and that it has sufficient funds to satisfy both maturing short-term
debt and upcoming expenses. The administration of working capital includes
overseeing inventories, cash and records receivable and payable.

• DEFINITION

The working capital is an accounting concept which represents the

excess of current assets over current liabilities. In which current assets includes items
such as cash and bank balance, debtors, stock etc. and current liabilities includes items
such as creditors, bills payables, etc.

If current assets are less than current liabilities, an entity has a working
capital deficiency, also called a working capital deficit.

Working capital = total current assets – total current liabilities

Current assets and current liability include three main account which are as follows:

Account Receivables

• Current Assets

Inventory

• Current liability Account Payables

30
 • TYPES OF WORKING CAPITAL

Working capital is divided into various types/categories based on

balance sheet view and operating cycle view. Balance sheet view divides into two
type gross working capital and net working capital. The operating cycle view
divides into permanent and temporary working capital. Permanent working capital
is further divided into seasonal and special working capital whereas temporary
working capital into regular and reserve working capital.

Working Capital

Balance Sheet Operating Cycle

View View

Gross Working Variable/Temporar

Fixed/Permanent
Capital y

Net Working Seasonal

Capital Working Capital

Special Working
Capital

https://efinancemanagement.com/working-capital-financing/types-of-working-capital

31
 • Balance Sheet View
According to this concept, working capital is calculated on the basis of the
balance sheet prepared at a specific date. It is further classified it two forms- gross and net
working capital.

1. Gross Working Capital

The gross working capital refers to the firm’s investment in current assets. The
sum of current assets is a quantitative aspect of working capital which emphasizes more
on quantity than its qualities.

2. Net Working Capital

Net working capital is the difference between the current assets and the current
liabilities or the excess of total current assets over total current liabilities. Net working
capital may also be defined as, that part of a firm’s current assets which is financed with
long term funds. The net working capital may either bepositive or negative. When current
assets exceed current liabilities, working capital is positive and negative when current
liabilities exceed current assets.

• Operating Cycle View

Working capital is the amount required in different forms at successive stages

of operation during the net operating cycle period of an enterprise. The duration or time
required to complete the sequence of events right from purchase of raw
materials/goods for cash to the realization of sales in cash is called the operating cycle
or working capital cycle. On the basis of time working capital may be classified as (i)
Fixed/Permanent capital; and (ii) Variable or temporary capital.

1. Fixed/Permanent capital

It represents the irreducible minimum amount that is permanently blocked

in the business and cannot be converted into cash in the normal course of business. It has
followingcharacteristics:

32
 A) It keeps on changing its form from one current asset to another
B) The size of working capital grows with the growth of the business
C) As long as the firm is a going concern, this part of working capital cannot
substantially be reduced.
2. Variable or temporary capital

Any amount over and above the permanent working capital is variable or
temporary working capital. It fluctuates as per the change in the production and sale
activities. It can further be classified in following two forms:

A) Seasonal working capital – The capital required to meet the seasonal demands of
the enterprise is called seasonal working capital. It is of short-term nature and thus
has to be financed from short-term sources like bank loan etc.
B) Special Working Capital – Special working capital is that part of the working
capital which is required to meet unforeseen contingencies like slump, strike, flood,
war etc.

33
 • IMPORTANCE OF WORKING CAPITAL
The importance of adequate working capital in any business concern
can never be over emphasized. A concern requires sufficient working capital to carry
on its routine operations smoothly and efficiently. Lack of adequate working capital
not only impairs firm`s profitability but also results in stoppage in production and
deficit payment of its current obligations.

Increase in Advantages
Smooth
Liquidity
run/Flow of
and Solvency of Cash
Production Discount
Position

Regular meet smooth

Payment of unforseen Completion
current Contingencie operating
obligation s cycle

https://efinancemanagement.com/working-capital-financing/importance-of-working-capital-
managementhttps://efinancemanagement.com/working-capital-financing/importance-of-working-capital-
management

34
 CHAPTER-4
RESEARCH
METHODOLOGY

35
 REASEARCH METHODOLOGY

Working capital management is a very crucial component of corporate

finance because it directly affects the liquidity and the profitability of any company. A firm
always required to maintain the balance between liquidity and profitability while
conducting company`s day to day operations. Liquidity is a precondition to ensure that a
company is able to meet its short-term obligations and its continued flow can be guaranteed
from a profitable venture.

5.1) NEED OF THE STUDY:

Scarcity of working capital is a deadlock for any organization. So, to ensure

proper functioning of any company minimum level of working capital needs must be
satisfied. Basically Arvind Mills Working capital Aspects are covered in this research part,
which may be a potential borrower company and then once after studying financial data
and analyzing probable amount of working capital gap if any, We will match the
requirement of Arvin mill with the prospective investors. So, it becomes very significant
to undertake a comprehensive study of Arvind Mills as a part of our research project.

5.2) PROBLEM IDENTIFICATION:

The basic research problem is to determine financial constraint and financial

deficiency. The working capital inefficiency is the main problem as the cost is increasing
and profit is decreasing which may cause the working capital shortage in the Arvind mills.

5.3) SCOPE OF THE STUDY

The scope of the study is mainly working capital assessment, financial

analysis, impact of cost and revenue on the profit, profit & loss account analysis. This all
analysis are done for identifying the working capital need and gap.

36
5.4) RESEARCH OBJECTIVE:

The main research objective is “a comprehensive study on working capital

management of Arvind mills ltd.” The aim of this study is to identify the working capital
Gap and allocation of capital in the business to increase in efficiency in operation. Various
tools and techniques are used to identify the appropriate requirement and gap of working
capital.

5.5) RESEARCH DESIGN:

Two types of research is being used in this research study to identify and
explore some problems and get some solutions for that problems:

1. Descriptive Research
The descriptive research is also being used in this research study to describe
explored problem in detail. It help us to describe the various features of the
problem and also help for deep understanding to resolve the problem
statement of any company.

5.6) DATA SOURCES

Secondary data is used in this research

• Internet
• Annual report of Arvind mills year 2020-21
• Annual report of Arvind mills year 2019-20
• Annual report of Arvind mills year 2018-19
• Annual report of Arvind mills year 2017-18
• Annual report of Arvind mills year 2016-17

37
5.7) TOOLS & TECHNIQUES

The tools & technique used are as follows:

▪ Ratio Analysis
▪ Cash Flow Analysis
▪ Trend Analysis
▪ MS Excel

38
 CHAPTER-5
ANALYSIS AND
INTERPRETATION

39
 • PROFIT AND LOSS ACCOUNT

------------------- in Rs. Cr. -------------------

INCOME March `21 March`20 March`19 March`18 March` 17
Revenue From Operations
[Gross] 4348.79 6434.91 6242.92 6040.98 5669.54
Less: Excise/Service Tax/Other
Levies 0 0 0 2.92 0
Revenue From Operations [Net] 4348.79 6434.91 6242.92 6038.06 5669.54
Other Operating Revenues 179.75 270.4 193.04 382.36 311.42
Total Operating Revenues 4528.54 6705.31 6435.96 6420.42 5980.96
Other Income 64.62 80.16 103.85 74.96 103.10
Total Revenue 4593.16 6785.47 6539.81 6495.38 6084.06

EXPENSES
Cost Of Materials Consumed 1952.93 3158.37 2822.50 2600.60 2394.65
Purchase Of Stock-In Trade 107.44 214.71 154.70 325.61 248.11
Operating And Direct Expenses 23.97 27.69 4.44 9.22 12.87
Changes In Inventories Of
FG,WIP And Stock-In Trade 131.16 64.27 3.27 73.61 -98.63
Employee Benefit Expenses 586.88 776.12 779.19 784.54 777.25
Finance Costs 209.65 224.10 213.38 177.68 221.87
Depreciation And Amortization
Expenses 236.43 240.54 209.75 208.85 184.91
Other Expenses 1261.73 1770.74 2038.73 2000.86 1928.22
Total Expenses 4510.19 6476.54 6225.96 6181.97 5669.25

Profit/Loss Before Exceptional,

Extraordinary Items And Tax 82.97 308.93 313.85 314.33 414.81
Exceptional Items -26.93 -58.82 -70.85 -22.72 -280.17
Profit/Loss Before Tax 56.04 250.11 243 291.61 134.64
Tax Expenses-Continued
Operations
Current Tax 3.40 48.71 53.56 60.93 49.54
Less: MAT Credit Entitlement 0 0 0 0 0
Deferred Tax -35.20 18.07 -56 -20.62 65.92
Tax For Earlier Years -4.83 11.95 31.97 1.26 0.62
Total Tax Expenses -36.63 78.73 29.53 41.57 116.08

40
Profit/Loss After Tax And
Before Extraordinary Items 92.67 171.38 213.47 250.04 18.56
Profit/Loss From Continuing
Operations 92.67 171.38 213.47 250.04 18.56
Profit/Loss From Discontinuing
Operations 0 0 -20.70 0 0
Total Tax Expenses
Discontinuing Operations 0 0 6.67 0 0
Net Profit/(Loss) From
Discontinuing Operations 0 0 -14.03 0 0
Profit/Loss For The Period 92.67 171.38 199.44 250.04 18.56

OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 3.58 6.62 7.71 9.67 0.72
Diluted EPS (Rs.) 3.57 6.62 7.71 9.65 0.72
VALUE OF IMPORTED AND
INDIGENIOUS RAW
MATERIALS
Imported Raw Materials 0 0 0 0 0
Indigenous Raw Materials 0 0 0 0 0
STORES, SPARES AND
LOOSE TOOLS
Imported Stores And Spares 0 0 0 0 0
Indigenous Stores And Spares 0 0 0 0 0
DIVIDEND AND DIVIDEND
PERCENTAGE
Equity Share Dividend 0 51.75 62.07 62.04 61.98
Tax On Dividend 0 10.07 12.34 11.61 12.62
Equity Dividend Rate (%) 0 0 20 24 24

41
 • BALANCE SHEET

------------------- in Rs. Cr. -------------------

March `21 March`20 March`19 March`18 March`17
Sources Of Funds
Total Share Capital 258.92 258.77 258.62 258.62 258.36
Equity Share Capital 258.92 258.77 258.62 258.62 258.36
Share Application Money 0.00 0.00 0.00 0.00 2.17
Reserves 2682.08 2594.92 2557.5 2899.61 2751.25
Net worth (A) 2941.00 2853.69 2816.12 3158.23 3011.78
Secured Loans 1700.93 2065.04 2505.49 2437.41 2323.81
Unsecured Loans 71.65 118.00 0.00 0.00 0.00
Total Debt (B) 1772.58 2183.04 2505.49 2437.41 2323.81
Total Liabilities (A+B) 4713.58 5036.73 5321.61 5595.64 5335.59

Application Of Funds
Gross Block 4239.55 4271.15 3819.99 3624.30 3409.25
Less: Accum. Depreciation 981.79 810.38 647.68 476.40 309.56
Net Block (A) 3257.76 3460.77 3172.31 3147.90 3099.69
Capital Work in Progress (B) 74.48 70.58 189.58 59.65 76.65
Investments (C) 531.97 525.47 516.53 883.25 522.96
Inventories 998.7 1038.46 1364.93 1307.72 1299.24
Sundry Debtors 933.68 898.32 714.38 736.61 470.96
Cash and Bank Balance 19.25 30.12 31.19 14.36 13.41
Total Current Assets 1951.63 1966.9 2110.5 2058.69 1783.61
Loans and Advances 792.89 790.83 1024.96 894.58 975.02
Total CA, Loans & Advances 2744.52 2757.73 3135.46 2953.27 2758.63
Current Liabilities 1861.92 1722.60 1637.55 1403.26 1088.78
Provisions 33.23 55.22 54.72 45.17 33.56
Total CL & Provisions 1895.15 1777.82 1692.27 1448.43 1122.34
Net Current Assets (D) 849.37 979.91 1443.19 1504.84 1636.29
Total Assets (A+B+C+D) 4713.58 5036.73 5321.61 5595.64 5335.59

Contingent Liabilities 264.39 278.72 970.61 148.95 0.00

Book Value (Rs) 113.59 110.28 108.89 122.12 116.49

42
 • CASH FLOW STATEMENT

------------------- in Rs. Cr. -------------------

March March` March` March` March`
21 20 19 18 17
Net Profit/Loss Before Tax 92.67 171.38 199.44 250.04 18.56
Net Cash Flow From Operating
Activities 768.23 982.91 725.16 553.84 535.91
Net Cash Used In Investing Activities -137.60 -336.54 -509.82 -441.03 461.05
Net Cash Used From Financing
Activities -641.34 -650 -199.76 -108.10 -1012.14
Net Inc/Dec In Cash And Cash
Equivalents -10.71 -3.63 15.58 4.71 -15.18
Cash And Cash Equivalents Beginning
of Year 19.21 22.84 7.26 2.55 17.73
Cash And Cash Equivalents End Of
Year 8.50 19.21 22.84 7.26 2.55

43
 • WORKING CAPITAL MANAGEMENT
COMPUTATION OF WORKING CAPITAL

Particulars 2021 2020 2019 2018 2017

------------------- in Rs. Cr. -------------------
CURRENT ASSETS
Inventories 998.7 1038.46 1364.93 1307.72 1299.24
Sundry Debtors 933.68 898.32 714.38 736.61 470.96
Cash and Bank Balance 19.25 30.12 31.19 14.36 13.41
TOTAL CURRENT ASSETS (A) 1951.63 1966.9 2110.5 2058.69 1783.61

CURRENT LIABILITIES
Trade payable 1322.4 1118.31 1194.45 948.94 616.73
Other Current Liabilities 539.52 604.29 443.1 454.32 472.05

TOTAL CURRENT
LIABILITIES (B) 1861.92 1722.6 1637.55 1403.55 1088.78

WORKING CAPITAL (A-B) 89.71 244.3 472.95 655.43 694.83

GRAPHICAL PRESENTATION

1000

900

800

700
WORKING CAPITAL

600

500

400

300

200

100

0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

44
INTERPRETATION: -
From the above graph, it was found that there is a huge fluctuation between working
capital from year by year. There is a sudden decrease in working capital in FY 2020-21.
The main reason behind this sudden increase in working capital is Increase in total current
liability and decrease in the total current assets of the company. And which is not good for
the company.

• RAW MATEIAL HOLDING PERIODS

TABULAR PRESENTATION

year Formula calculation inventory period

2020-21 322.87 * 12 2 Month
1952.93

2019-20 227.95 * 12 0.86 Month

average stock of raw material 3158.37
cost of raw material consumed

2018-19 453.75 * 12 1.9 Month

2822.50

2017-18 375.31 * 12 1.73 Month

2600.60

2016-17 300.25 * 12 1.5 month

2394.65

GRAPHICAL PRESENTATION

45
 2.5

Raw Material Conversation

2
1.9
2 1.73
1.5
1.5
Period
1 0.86

0.5

0
2020-21 2019-20 2018-19 2017-18 2016-17
Year Of Production

INTERPRETATION:

From the above graph, it was found that company has inventory holding period which is
more than ideal period (1 month). The pattern of graph also reveals that in first three
financial years and in FY 2020-21 there is a continuous increase in inventory holding
period which might be because of increase in stock and purchase of raw material.

• WORK-IN-PROGRESS HOLDING PERIOD

TABULAR PRESENTATION

work in progress
year Formula calculation inventory period
2020-21 297.78 * 12 1.8 Month
1992.69
2019-20 378.63 * 12 1.3 Month
3484.84
average stock of WIP
2018-19 446.8 * 12 1.9 Month
cost of goods sold
2765.29
2017-18 443.21 * 12 2.1 Month
2592.12
2016-17 460.77 * 12 2.5 month
2232.61

GARPHICAL PRESENTATION

46
 3
2.5

WIP HOLDING PERIOD

2.5
2.1
1.8 1.9
2

1.5 1.3

0.5

0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION

From the above graph, it was found that work-in-progress holding period is decreasing.
The reason behind this change is might be decrease in stock of work-in-progress. The
COGS of the company is also fluctuating which will also cause Less holding period.

• FINISHED GOOD HOLDING PERIOD

TABULAR PRESENTATION

finished goods
year Formula calculation inventory period
2020-21 249.3 * 12 1.5 Month
1992.69
2019-20 320.12 * 12 1.1 Month
3484.84
2018-19 338 * 12 1.5 Month
average stock of finished goods 2765.29
2017-18 cost of goods sold 307.29 * 12 1.4 Month
2592.12
2016-17 368.76 * 12 2 Month
2232.61

GRAPHICAL PRESENTATION

47
 2.5

FG HOLDING PERIOD
2.0

1.5

1.0

0.5

0.0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION

From the above graph, it was found that as compare to the ideal ratio the actual ratio is too
high which is not good for the company. This is because of the changes in the stock of
finished goods and also fluctuation in cost of goods sold.

• DEBTORS COLLECTION PERIOD

TABULAR PRESENTATION

debtors collection period

Year Formula Calculation Debtors Collection
Period

2020-21 933.68 * 12 2.58 Month

4348.79
2019-20 898.32 * 12 1.68 Month
6434.91
2018-19 average debtors 714.38 * 12 1.37 Month
credit sales 6242.92
2017-18 736.61 * 12 1.46 Month
6040.98
2016-17 470.96 * 12 0.94 Month
5980.96

GRAPHICAL PRESENTATION

48
 DEBTORS COLLECTION 3

2.5
2.58
2
PERIOD

1.5 1.68
1.37 1.46
1
0.94
0.5

0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION:
From the above graph, it was found that in FY 2020-21 it had increased so much compared
to past years. which is not good for the company this is because Company is allowing its
Customers more than required time for Payment and because of which company has less
liquidity.

• ACCOUNT PAYABLE PERIOD

TABULAR PRESENTATION

Year Formula Calculation Payable Period

2020-21 1322.4 * 12 8.13 month
1952.93
2019-20 1118.31 * 12 4.25 month
3158.37
2018-19 1194.45 * 12 5.08 month
creditors
2822.5
credit purchase
2017-18 948.94 * 12 4.38 month
2600.60
2016-17 616.73 * 12 3.1 month
2394.65

49
GRAPHICAL PRESENTATION

9
ACCOUNT PAYABLE PERIOD 8
8.13
7
6
5
5.08
4
4.25 4.38
3
3.1
2
1
0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION:

From the above graph, it was found that the account payable period is fluctuating. But in
FY 2020-21 there is sudden increase in account payable period because company is
delaying payment to its creditors. As compare to ideal ratio, the actual ratio is very high
which is not good for the company. This is because of the increase in the credit sales of the
company.

50
 • WORKING CAPITAL RATIOS
FORMULA

Sr.No. Ratio Formula

1. Inventory holding cash (cost of raw material consumed/12)*RMCP

2. WIP holding cash (cost of production/12)*WIPCP

3. Finished goods holding cash (Cost of goods sold/12)*FGCP

4. Debtors holding cash (credit sale/12)*DCP

5. Account payable cash (credit purchase/12)*CDP

6. Wages (total wages/12)*WCD

51
 • INVENTORY HOLDING CASH

TABULAR PRESENTATION

Raw Material Cost

Year Formula Calculation Investment
2020-21 1952.93 * 2 325.49
12
2019-20 3158.37 * 0.86 226.35
12
Cost of Raw Material Consumed *RMCP
2018-19 12 2822.5 * 1.9 446.90
12
2017-18 2600.6 * 1.73 374.92
12
2016-17 2394.65 * 1.5 12 299.33

GRAPHICAL PRESENTATION

450.00

400.00
INVENTORY HOLDING CASH

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

52
INTERPRETATION

From the above graph, it was found that there is an upward trend in raw material
consumption and investment in raw material from FY 2016-17 to 2018-19, As raw material
is increasing it shows that production and sales is also increasing which is good for the
company. And if consumption is increased the investment of material also increased. But
From FY 2019-20 onwards investment in raw material is decreasing, which shows that
production and sales is also decreasing which is not good for the company

• WORK-IN-PROGRESS HOLDING CASH

TABULAR PRESENTATION

WIP holding cash

year Formula Calculation Investment
2020-21 2270.2 * 1.8 340.53
12
2019-20 3467.90 * 1.3 375.60
12
2018-19 Cost Of Production *WIPCP 3028.66 * 1.9 479.54
12 12
2017-18 2827.01 * 2.1 494.73
12
2016-17 2545.22 * 2.5 530.25
12

GRAPHICAL PRESENTATION

53
 600

500
WIP HOLDING CASH 400

300

200

100

0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION
From the above graph, it was found that there is a continuous decrease in the work-in-
progress consumption and investment. The decrease in WIP holding cash is because of the
cost of production is also decreasing which require less investment.

• FINISHED GOODS HOLDING CASH

TABULAR PRESENTATION

Finished Goods Holding Cash

Year Formula Calculation Investment
2020-21 1992.69 * 1.5 249.09
12
2019-20 3484.84 * 1.1 319.44
12
Cost Of Goods Sold *FGCP
2018-19 12 2765.23 * 1.5 345.66
12
2017-18 2592.12 * 1.4 302.41
12
2016-17 2232.61 * 2 372.10
12

54
GRAPHICAL PRESENTATION

FG HOLDING CASH

400.00

300.00

200.00

100.00

0.00
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION
From the above graph, it was found that the investment in finished stock is decreasing
which might be because of changes in the cost of goods sold. As the stock of finished goods
is decreasing it directly reflect (negatively) in production capacity and sales of the company

• DEBTORS HOLDING CASH

TABULAR PRESENTATION

Debtors Holding Cash

year Formula Calculation Investment
2020-21 4348.79 * 2.58 934.99
12
2019-20 6434.91 * 1.68 900.89
12
Credit sales *DCP
2018-19 12 6242.92 * 1.37 712.73
12
2017-18 6040.98 * 1.46 734.99
12
2016-17 5980.96 * 0.94 470.96
12

55
GRAPHICAL PRESENATAION

1000.00
900.00
DEBTORS FOLDING CASH

800.00
700.00
600.00
500.00 934.99 900.89
400.00 712.73 734.99
300.00 470.96
200.00
100.00
0.00
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION
From the above graph, it was found that the debtors holding cash is increased, because of
the increase in credit sales of the company. The company has increased its credit sales
which will directly affect the receivables of the company and result into more cash holding.

• ACCOUNT PAYABLE CASH

TABULAR PRESENATION

Year Formula Calculation Investment

2020-21 1952.93 * 8.13 1323.11
12
2019-20 3158.37 * 4.25 1118.59
12
2018-19 Credit purchase *CDP 2822.5 * 5.08 1194.86
12 12
2017-18 2600.6 * 4.38 949.22
12
2016-17 2394.65 * 3.1 618.62
12

56
GRAPHICAL PRESENTATION

1400.00

1200.00
ACCOUNT PAYABLE CASH

1000.00

800.00

600.00

400.00

200.00

0.00
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION
Form the above graph, it was found that form FY 2016-17 to FY 2019-20 the company is
trying to balance their account payables. The credit payable holding cash is increased due
to increase in the credit purchase of the company. But in FY 2020-21 though credit
purchase had decreased but as company’s account payable period is more, company is able
to maintain its credit payable holding cash.

57
 • WAGES
TABULAR PRESENTATION

wages
year Formula calculation investment
2020-21 498.32 * 1 41.53
12
2019-20 679.37 * 1 56.61
12
2018-19 677.26 * 1 56.44
Total Wages *WCP 12
2017-18 12 663.38 * 1 55.28
12
2016-17 648.69 * 1 54.06
12

GRAPHICAL PRESENTATION

60.00
WAGES

40.00

20.00

0.00
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION
From the above graph, it was found that there is a continuous increase in cost of wages and
salaries of the company from FY 2016-17 to FY 2019-20. Which clearly defines that the
company is in growth stage as they requiring more and more employees to work. The wages
are increased as the company is paying more attention in payment of wages, increment,
and other benefits. But suddenly in FY 2020-21 wages had decreased by the reason that
company had removed its employees.

58
 • CURRENT RATIO

TABULAR PRESENTATION

CURRENT RATIO
year formula Calculation Ratio
2020-21 1951.63 1.05
1861.92
2019-20 1966.9 1.14
1722.6
2018-19 Current Assets 2110.5 1.29
Current Liability 1637.55
2017-18 2058.69 1.47
1403.26
2016-17 1783.61 1.64
1088.78

GRAPHICAL PRESENTATION

1.8
1.6
1.4
CURRENT RATIO

1.2
1
0.8
0.6
0.4
0.2
0
2020-21 2019-20 2018-19 2017-18 2016-17
YEAR OF PRODUCTION

INTERPRETATION

From the above graph, it was found that in Form F Y 2016-17 to 2020-21, the Current ratio
is decreasing and in FY 2020-21 the current ratio is decreased due to increase in the total
current liability as well as decrease in the total current assets of the company. The company
is not performing good as it is decreasing the current assets.

59
CHAPTER-6

FINDING
AND
SUGGESTION

60
 • FINDINGS
Based on the ratio related to working capital it was found that –

• There is a huge fluctuation in the working capital requirement and management

due to the sudden decrease in the total current liability of the company. As per the
analysis it was found that the total current assets of the company is also increased.

• From the aspect of inventory holding including raw material, work-in-progress,

finished goods, it was found that it contains too much holding periods due to
increase in the stock of the inventories and the increase in the purchase of the
material for production.

• The debtor’s collection period of the Arvind Mills is good as compare to ideal ratio
which is around 1 month. This shows that company follows the moderate credit
collection policy to get as soon as possible the receivable amount from debtors.

The company is working well in its debtor’s collection. The moderated

credit policy will Help Company in two aspects- one is it will help to complete the
cash conversation cycle at time and free up the capital of the company. Second one
is help to maintain relationship with debtors as they are not too strict and also liberal
with the debtors.

• From the analysis of wages, it was found that the cost of wages is increasing due to
more employees hired which clearly intense that company is growing. Company is
paying attention to increment in wages which will also cause increase in wages.

61
 • SUGGESTION
From the analysis and finding following are the suggestion for the Arvind Mills:

• Arvind mills needs to control their cost of material as their cost is increasing it will
reduce the profit. They can reduce their cost by reducing carrying cost, ordering
cost and also by using various methods and techniques for inventory management
respect to contract.

• Arvind mills needs to keep balance of working capital. The working capital
management of Arvind mills is not enough to manage all the routine expense so,
they need to improve the working capital management by analyzing the proper
need, allocation and utilization of the capital.

• As Arvind mills is doing only credit sales, they have balance the ratio between the
credit sales and the cash sales of the company. This will help the company to
maintain some level of liquidity in hand. Company has to decide an ideal ratio for
the credit and cash sales so that they can also manage the cash conversation cycle.

62
CHAPTER-7
CONCLUSION

63
 CONCLUSION
This study helps us to know the company`s liquidity and financial position.
After analyzing the components of working capital management, it is found that the
company has a sound and effective policy to improve its performance and has managed its
profitability. Company is doing well at domestic and in a vision to start overseas
operations. They are working with problem of working capital management especially for
short-term financing.

The company is well performing and it is at a growth stage. It has

contributed well in nation growth and development. In conclusion, we can say that the
management of Arvind mills is good; and know well how to finance the need of capital.
The company has improved its performance effectively since from establishment. It has
maintained its position in the market quite well.

So, the overall performance of the company is good but, still they have to
improve the working capital management of the company.

64
 CHAPTER-8
BIBLIOGRAPHY

65
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Sacratee S. J., Sankar M. and Ayyanar A. (2011). Indian Textile Industry. A Study. Southern
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BOOKS:

 Financial management

Author- Khan and Jain

 Financial management
Author- I.M.Pandey

WEBSITES:

https://www.ibef.org/industry/textiles.aspx

https://www.fibre2fashion.com/industry-article/543/indian-textile-industry
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 https://efinancemanagement.com/working-capital-financing/types-of-working-capital

https://efinancemanagement.com/working-capital-financing/importance-of-working-capital-
managementhttps://efinancemanagement.com/working-capital-financing/importance-of-working-capital-
management

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