Abstract

The automobile industry in India is one of the speedily growing industry. Working capital
management is important in this industry due to increasing demand and huge investment in
this sector requires proper management. Working capital management perform a vital role in
the success and failure of a business due to its effect on the performance and liquidity.
Thereby this study has been undertaken to analyse working capital management of Maruti
Suzuki India Limited for the period of five years from 2017 – 18, 2018 -19, 2019 – 20, 2020
– 21, 2021-22. This study found that the operating cycle of the company was slightly
disrupted and as a result, the working capital position of the company was declining.
Explaining the results by answering a specific problem, using different arithmetic operations
and analyses. By using techniques such as estimating working capital, operating cycle
analysis and different financial measures to determine the exact size of an enterprise.
 CHAPTER – 1
INTRODUCTION AND COMPANY PROFILE
INTRODUCTION TO FINANCE:

According to Guttmann and Dougall, “Business finance can be broadly defined as

the activity concerned with planning, raising, controlling and administering of funds used in
the business”.

Finance refers to the capital involved in a project, specifically the capital that has to
be raised to start a new business. Finance is regarded as the life-blood of a business
enterprise. This is because in the modern oriented economy, finance is one of the basic
foundations of all the kinds of economic activities. The need for finance starts from the
inspection of the idea of starting a business. It has rightly been said that, “business means
money to make more money”. However it is also true that money begets more money, only
when it is properly managed. Hence efficient management of every business enterprise is
closely linked with efficient management of its finance.

FEATURES AND CHARACTERISTICS OF FINANCE:

 Business finance or financing is an essential business activity.

 All business concerns whether small or large need finance small business enterprises
require less funds in large business undertaking need more funds.
 Business finance may be short term finance medium term finance or long term
finance depending upon nature of the activities to finance. Business finance is not just
acquisition of finance it is a wider term it includes estimation of the financial
requirement the under taking acquisition of the required funds.

IMPORTANCE OF FINANCE:

 Business activities permanently carried out as corporate form of business organization

has increased the importance of finance.
 The increase in the size of the business resultant increase in the scale of business
operation has contributed to the important of finance
 Wide distribution of corporate ownership is one of the factors reasonable for the
importance of the finance.
 Separation of ownership and management present in corporate form of business
organization is one of the factors responsible for the important of finance.
  Capital-intensive method of product is one of the factors responsible for the
importance of finance in modern industries.
The importance of benefit of finance may be considering in three different heads
they are,
 Importance or benefits to business units
 Importance or benefits of finance to invest
 Importance or benefits of to society

TYPES OF FINANCE:

 SHORT TERM FINANCE

 LONG TERM FINANCE

SHORT TERM FINANCE: Short term finance usually refers to finance required by a firm
finance required for the purchase of raw materials payment of wages salaries and for meeting
the other day to day manufacturing and other expenses in a firm.

LONG TERM FINANCE: Refers to finance required for a period exceeding five years
usually for a period of five to twenty it is required for financing the fixed capital.

SOURCES OF FINANCE: Any type of finance of corporate enterprises is obtained through

different sources. The sources are:-

 Equity shares
 Preference shares
 Debentures and loan bonds
 Public deposits
 Internal resources
 Leasing
 Grants and Subsidies

CLASSIFICATION OF SOURCES OF FINANCE :

1. According to period:
 Long term sources like shares, debentures, and long term loan etc.
 Short term source like advances from commercial banks, public
deposits, advances from customers and Trade creditors.
2. According to ownership:
  Own capital, via share capital, retained earning surplus etc.
 Borrowed capital via debentures, public deposits and loan etc.
3. According to source of generation:
 Internal sources:Retained earnings ,depreciation, funds etc.
 External sources:Securities such as shares, debentures loans.
 Security financing:This includes financing through depreciation funds
and retained earnings.
 Loan financing:This financing includes both short term and long-terms
loans.

FINANCE FUNCTION:

Although it is difficult to separate finance functions from productions, marketing and other
functions, yet the functions themselves can be readily identified. The functions of raising
funds, investing them in assets and distributing returns earned from assets to shareholders are
respectively known as financing, investment and dividend decisions. A firm performs finance
functions simultaneously and continuously in the normal course of the business.

Finance functions include:

 Investment decisions.
 Finance decisions.
 Dividend or Project allocation decisions.
 Current assets and management.

DEFINITION OF FINANCIAL STATEMENT:

According to American Institute of Certified Public Accountants, financial statement

reflects, “A comparison of recorded facts, accounting conventions and personnel judgments
applied affects materially”.

FINANCIAL MANAGEMENT:

Financial management is a measuring success for a failure of an organizational

financial management. It is an exclusive exercise in economy, which includes

 Funds management
 Control and reporting system
 Financial cost and management accounting
  Tax planning
 Budgets related disciplines.

Financial management is managerial activity concerned with planning and

controlling the firm‟s financial resource.As well practicing managers to understand the
theory of financial management is not mere accounting management. Besides accounting also
involves financial decisions, that is how to raise fund loans ,retain profit, investment decision,
utilization of funds etc.

OBJECTIVE OF FINANCIAL MANAGEMENT:

The objectives of financial management can be classified into

1. Specific objective

2. Other objective or general objective.

SPECIFIC OBJECTIVE

 Profit maximization: Earning profit by a cooperative or a company or a social

obligation, profit is the only means through which the efficiency of an organization
can be measured
 Wealth maximization: The concept of wealth maximization refers gradual growth of
the values of the assets of the firm in terms of benefits it produces less cost of action
this is the process of creating wealth of organization.

OTHER GENERAL OBJECTIVE

 Balance assets structure

 Liquidity
 Judicious planning of funds
 Efficiency
 Financing discipline

FUNCTIONS OF FINANCIAL MANAGEMENT:

 Anticipating the financial needs.

 Acquiring financial resources.
 Allocating the funds in the business.
 Administrating the allocation of funds.
  Analyzing the performance of firms.
 Anticipating the financial needs.
 Acquiring the funds in the business .
 Administrating the allocation of funds.
 Analyzing the performance of firms.

FINANCIAL PLAN:

Financial plan is primarily a statement estimating the amount of capital and determining its
composition financial planning results in the formation of the financial plan.

The financial plan states:

 The quantum of finance i.e. the amount needed for implementing the business plan.
 The pattern of financing i.e. the form & proportion of various corporate securities to
be issued to raise the required amount.
 The policies to be pursued for floating for various corporate securities particularly
regarding the time for their floating.

WORKING CAPITAL MANAGEMENT

INTRODUCTION:

Working capital is the firm‟s investment in current assets. It refers to the amount of
funds required by an industry to finance its day-to-day operations. It can be regarded as that
part of capital, which is employed for short-term operations, so working capital relates to the
management of current assets and current liabilities.

CURRENT ASSETS:

Current assets are those assets, which are converted into cash within the usual
course of business and within one year. They are
 Cash and bank balance
 Inventory
 Receivables
 Marketable securities
 Prepaid expenses

CURRENT LIABILITY:
 Current liability are those, which are intended at their inception to be paid in the
ordinary course of business, within a year out of the current assets or earnings of the
concern they are,
 Trade creditors
 Bank Overdraft
 Unsecured/short term loans
 Outstanding expenses
 Payables

DEFINITION OF WORKING CAPITAL:

“Circulating capital means current assets of a company that are changed in the ordinary
course of business from one to another as for example from cash to inventories, inventories to
receivables into cash”. - GENESTEN BERG

“The sum of current is the working capital of a business.” - J.S.MILL

“Any acquisition of funds which increase the current assets increases working capital also for
the one and the same.” – BONNEVELE

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:

 Gross Working Capital

 Net Working capital

GROSS WORKING CAPITAL

The term Gross working capital refers to organization’s investment in current assets. The
current assets of the firm include: cash, bank, balance (cr.), short term securities, bills
receivables, stock etc.

NET WORKING CAPITAL

Net working capital refers to the organization’s investment in current assets. The current
assets of an organization (e.g.: cash, bank, short term securities, bills receivable, stock,)and
its current liabilities (e.g.: short term debt, bills payable, outstanding expenses etc..)

NET WORKING CAPITAL HAS BEEN DEFINED AS:

“Working capital, sometimes called net working capital, is represented by the excess of
current assets over current liabilities and it enables a firm to determine the exact amount
available at its disposal for operational requirements.”

Net Working capital = Current Assets – Current Liabilities

NEED FOR WORKING CAPITAL:

The need for working capital to run the day-to-day business activities cannot be over
emphasized. 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.

We know that firms aim at maximizing the wealth of shareholders. In its endeavor to
maximize shareholders wealth, a firm should earn sufficient return from its operations.
Earning a steady amount of profit requires successful sales activity .the firm has to invest
enough funds in current assets for the success of sales activity. Current assets are needed
because sales do not convert into cash instantaneously. There is always an operating cycle
involved in the conversion of sales into cash.

OPERATING CYCLE:

Operating cycle is the time duration required to convert sales, after the conversion of
resources into inventories, into cash. The operating cycle of a manufacturing company
involves three phases:

 Acquisition of resources such as raw material, labor, power and fuel etc.
 Manufacture of the product which includes conversion of raw materials into work-in
progress into finished goods.
 Sales of the product either for cash or on credit. Credit sales create book debts for
collection.

These phases affect cash flows, which most of the time, are neither synchronized nor certain.
They are not synchronized because cash out flows usually occur before cash inflows. They
are not certain because sales and collections, which gives rise to cash inflows, are difficult to
forecast accurately. The firm is therefore required to invest in current assets for a smooth,
uninterrupted functioning. It needs to maintain liquidity to purchase raw materials and pay
expenses such as wages and salaries, other manufacturing, administrative and selling
expenses and taxes as there is hardly a matching between each cash inflows and outflows.
Cash is also held to meet any future exigencies. Stock of raw materials and work-in-process
are kept to ensure smooth production and to guard against non availability or raw materials
and other components. The firm holds stock of finished goods to meet the demands of
customers on continuous basis and sudden demand from some customers. Book debts
(accounts receivables) are created because goods are sold on credit for marketing and
competitive reasons. Thus a firm makes adequate investment in inventories and book debts
for a smooth and uninterrupted production and sale.

DETERMINANTS OF WORKING CAPITAL:

There are no set rules or formulae to determine working capital requirements of the firms.
But there are some factors which generally influence the working capital requirements of
firms.

Nature and size of Business

Working capital requirements of a firm are basically influenced by the nature of its
business. Trading and financial firms have a very small investment in fixed assets, but require
a large sum of money to be invested in working capital. Retail stores, for example, must carry
large stocks of a variety of goods to satisfy varied and continuous demand of their customers.
In contrast, public utilities have a very limited need for working capital and have to invest
abundantly in fixed assets.

Manufacturing cycle

The manufacturing cycle comprises of the purchase and use of raw materials and
the productions of finished goods .longer the manufacturing cycle, large will be the firm‟s
working capital requirements.This needs proper planning and co-ordination at the levels of
activity. Any delay in manufacturing process will result in accumulation of work in process
and waste of time.

Sales Growth

The working capital needs of a firm increase as its sales grow. It is difficult to
precisely determine the relationship between volume of sales and working capital needs in
practice, current assets will have to be employed before growth takes place. It is therefore,
necessary to make advance planning of working capital for a growing firm on a continuous
basis.
Demand conditions

Most firms experience seasonal and cyclical fluctuations in the demand for their
products and services. These business variations affect the working capital requirement,
specially the temporary working capital requirements of the firm. When there is an upward
swing in the economy, sales will increase; correspondingly, the firms investments in
inventories and book debts will also increase. Under boom, additional investment in fixed
assets may be made by some firms to increase their productive capacity. This act of firms will
require further additions of working capital.

Production policy

A steady production policy will cause inventories to accumulate during the off-
season periods and the firm will be exposed to greater inventory cost and risks. Thus, if costs
and risks of maintaining a constant production schedule are high, the firm may adopt the
policy of varying its productions schedules in accordance with changing demand. Those
firms, whose productive capacities can be utilized for manufacturing varied products, can
have the advantage of diversified activities and solve their working capital problems. They
will manufacture the original product line during its increasing demand and when it has an
off-season; other products may be manufactured to utilize physical resources and working
force.

Price level changes

The increasing shifts in price level make functions of financial manager difficult.
He should anticipate the effects of price level changes on working capital requirements of the
firm. Generally, rising price levels will require a firm to maintain higher amount of working
capital. Same levels of current assets will need increased investment when prices are
increasing.

However, companies which can immediately revise their product prices will rise price levels
will not face a severe working capital problem. Further, effects of increasing general price
level will be felt differently by firms as individual prices may move differently. It is possible
that some companies may not be affected by rising prices while other may be badly hit.

IMPORTANCE OF WORKING CAPITAL:

Working capital management is one of the most important aspects in financial management.
Under the present economic scenario, where the industry is facing stiff competition from
various quarters. The existence of a firm/organization depends entirely on the effective
utilization of the available resources. The management of working capital aims and deals
with employment of current assets to derive maximum profitability and minimize risk.

In India, in case of large and medium size companies, the working capital constitutes 60% of
the total assets or total assets or total capital employed. So finance manager should pay
attention to the management of working capital on continuing basis. The manager of
administration of working capital determines to very large extent the success or failure of
overall operation of industry. Many times in the event of failure of business concerns, the
mismanagement of working capital may be one of the factors.

LIQUIDITY v/s PROFITABILITY: THE RISK-RETURN TANGLE

The two important aims of working capital management are; Profitability and solvency.
Solvency, used in the technical sense, refers to the firms continuous ability to meet maturing
obligations. Lenders and creditors except prompt settlements of their claims as and when due.
To ensure solvency, the firm should be very liquid, which means larger current assets
holdings. If the firm maintains a relatively large investment in current assets, it will have no
difficulty in paving claims of production.

Thus a liquid Firm has risk of insolvency; that is, it will hardly experience a cash shortage or
stock-outs. However, there is a cost associated with maintaining a sound liquidity position. A
considerable amount of the firms funds will be tied up in current assets, and to the extent this
investment is idle, the firms profitability will suffer.

To have higher profitability. The firm may sacrifice solvency and maintain a relatively low
level of current assets. When the firm does so, its profitability will improve as less funds are
tied up in idle current assets, but its solvency would be threatened and would be exposed to
greater risk of cash shortage and stock-out.

MANAGEMENT OF CASH:

IMPORTANCE OF CASH

Cash is the important current assets for the operations of the business. Cash is the basic input
needed to keep the business running on a continuous basis; it is also the ultimate output
expected to realize by selling the service or product manufactured by firm. The firm should
keep sufficient cash, neither more nor less. Cash shortage disrupt the firms manufacturing
operation while excessive cash will simply remain idle, without contribution anything
towards the firms profitability thus, a major function of the financial manager is maintain a
sound cash position.

CONCERNS OF CASH MANAGEMENT:

Cash management is concerned with the managing of:

 Cash flows into and out of the firm.

 Cash flows within the firm &
 Cash balances held by the firm at a point of time by financing deficit or investing
surplus cash.

Sales generate cash which has to be disbursed out. The surplus cash has to be invested while
deficit has to be borrowed. Cash management seeks to accomplish this cycle at a minimum
cost. At the same time, it also seeks to achieve liquidity and control.

The management of cash is also important because it is difficult to predict cash flows
accurately, particularly inflows, and that there is a perfect coincidence between the inflows
and outflows of cash. An obvious aim of firms now-a-days is to manage its cash affairs in
such a way has to keep cash balance at a minimum level and to invest the surplus cash funds
in profitable opportunities.

STRATEGIES OF CASH MANAGEMENT:

In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should develop appropriate strategies for cash
management. The firm should evolve strategies regarding the following four facts of cash
management.

 Cash planning: Cash inflows and outflows should be planned to project cash surplus
or deficit for each period of planning period. Cash budget should be prepared for this
purpose.
 Managing the Cash flows: The flow of cash flows should be properly managed. The
cash inflows should be accelerated while, as far as possible, decelerating the cash out
flows.
  Optimum Cash Level: The firm should decide about the appropriate level of cash
balances. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash balances.
 Investing Surplus Cash: The surplus cash balances should be properly invested to
earn profits. The firm should about the division of such cash balance between bank
deposits, marketable securities, and inter-corporate lending.

The ideal cash management system will depend on the firms products, organization structure,
competition, culture and options available.

MOTIVES FOR HOLDING CASH:

The firms need to hold cash may be attributed to the following three motives:

 The transaction motive

 The precautionary motive
 The speculative motive

Transaction motive:

The transactions motive requires a firm to hold cash to conduct its business in the ordinary
course. The firm needs cash primarily to make payments for purchases, wages and salaries,
other operating expenses, taxes, dividends etc. for transactions purpose , a firm may invest its
cash in marketable securities. Usually, the firm will purchase securities whose maturity
corresponds with some anticipated payments, such as dividends, or taxes in future. The
transactions motive mainly refers to holding cash to meet anticipated payments whose timing
is not perfectly matched with cash receipts.

Precautionary motive:

The precautionary motive is the need to hold cash to meet contingencies in future. It
provides a cushion or buffer to with stand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flows can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firms ability to borrow at short notice when the need arises.

Such funds should be invested in high- liquid and low-risk marketable securities.
Precautionary balance should, thus, be held more in marketable securities and relatively less
in cash.
Speculative motive:

The speculative motive relates to the holding of cash for investing in profit- making
opportunities as and when they arise. The opportunity to make profit may arise when the
security prices change. The firm will hold cash, when it is expected that interest rates will rise
and security prices will fall. Securities can be benefit by the subsequent fall in interest rates
and increase in security prices. The firm may also speculate on materials prices. If it is
accepted that materials prices will fall, the firm can postpone materials‟ purchasing and make
purchases in future when price actually falls.

CASH FORECASTING AND BUDGETING:

Cash budget is the most significant device to plan for and control cash receipts and
payments. Cash budged is a summary statement of the firms expected cash inflows and
outflows over a projected time period. It gives information on the timing and magnitude of
expected cash flows and cash balances over the projected period .This information helps the
financial manager to determine the future cash needs of the firm, plan for the financing of
these needs and exercise control over the cash and liquidity of the firm .Cash forecasts are
needed to prepare cash budgets. Cash forecasting may be done on short or long- term; those
extending beyond one year considered long- term.

Short-term forecasting method:

Two most commonly used methods of short-term cash forecasting are:

 The receipt and disbursements methods

 The adjusted net income method

The receipts and disbursements method is generally employed to forecast for limited periods,
such as a week or a month. The adjusted net income method, on the other hand, is preferred
for longer durations ranging between a few months to a year.

The cash flows can be compared with budgeted income and expenses items if the receipts and
disbursements approach is followed. On the other hand, the adjusted income approach is
appropriate in showing a company’s working capital and future financing needs.

Long-Term Cash Forecasting:

 Long-term cash forecasts are prepared to give an idea of the company’s financial
requirements in distant future. They are not as detailed as the short-term forecasts. Once a
company has developed long-term cash forecast, it can be used to evaluate the impact of, say,
new-product developments or plant acquisitions on the firms financial condition three, five or
more years in the future. The major uses of the long-term cash forecasts are:

 It indicates as company’s future financial needs, especially for its working capital
requirements.
 It helps to evaluate proposed capital projects. It pinpoints the cash required to finance
these projects as well as the cash to be generated by the company to support them.
 It helps to improve corporate planning long term cash forecasts compel each division
to plan for future and to formulate projects carefully.

DETERMINING THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the finance manager is to maintain a sound liquidity
position of the firm so that dues may be settled in time. The firm needs cash not only to
purchase raw materials and pay wages, but also for payment of dividend, interest, taxes and
countless other purposes. The test of liquidity is really the availability of cash to meet the
firms obligations when they become due.

The operating cash balance is maintained for transaction purposes and an additional amount
may be maintained as a buffer or safety stock. The finance manager should determine the
appropriate amount of cash balance. Such a decision is influenced by a trade off between risk
return. If the firm maintains small cash balance, neither too small nor too large.

To find out the optimum cash balance, the transaction costs and risks of too small a balance
should be matched with the opportunity costs of too large a balance.

If the firm maintains larger cash balances, its transaction costs would decline, but the
opportunity costs would increase. At point x the sum of two costs is minimum. This is the
point of optimum cash balance which a firm should seek to achieve.
COMPANY PROFILE:

Maruti Suzuki India Limited

Maruti Suzuki India Limited is a publicly listed automaker in INDIA. It is a leading four-
wheeler automaker manufacturer in south a Asia. Suzuki Motor Corporation of Japan holds a
majority stake in the company. It was the first company in India to mass-produce and sell
more than a million cars. It is largely credited for having brought in an automobile revolution
to India. 
It is the market leader in India and on 17 September 2007, Maruti Udyog was renamed
Maruti Suzuki India Limited. The company headquarter is in Gurgoan, Haryana. Maruti
Suzuki is one of India's leading automobile manufacturers and the market leader in the car
segment, both in terms of volume of vehicles sold and revenue earned.
 Maruti Udyog Limited (MUL) was established in February 1981, though the actual
production commenced in 1983 with the Maruti 800, based on the SUZUKI Alto kei car,
which at the time was the only modern car available in India, it’s only competitors- the
Hindustan Ambassador and premier Padmini were both around 25 years out of date at that
point Through 2004, Maruti has produced over 5 Million vehicles. Maruti are sold in India
and various several other countries, depending upon export orders. 
Models similar to Maruti (but not manufactured by Maruti Udyog) are sold by Suzuki and
manufactured in Pakistan and other South Asian countries. The company annually exports
more than 50,000 cars and has an extremely large domestic market in India selling over
730,000 cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever
since it was launched in 1983. More than a million units of this car have been sold worldwide
so far. Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is
commonly used to refer to this compact car model. Till recently the term "Maruti", in popular
Indian culture, was associated to the Maruti 800 model. Maruti Suzuki was born as a
government company, with Suzuki as a minor partner to make a people's car for middle class
India. Over the years, the product range has widened, ownership has changed hands and the
customer has evolved.
                                                                                              
MISSION-To provides maximum value for money to their customers through continuous
improvement of products and services.
VISION - Creating customer delight and shareholders wealth.

Here are some of the company's products:

From the Maruti 800 and Alto to the Ritz hatchback, A Star, Swift, Wagon R, Estilo, Desire
sedan, SX4 and sports utility Grand Vitara, Maruthi offers a wide range of vehicles.

 Maruti Alto 800

 Omni
 Gypsy
 Zen Estilo
 Wagon R
 Versa
 A-Star
 Ritz
 SX4
 Dzire
 Grand Vitara
 Ertiga
 Celerio

MILESTONES:

 Maruti Suzuki announces the worldwide debut of the 'Celerio' and the conversion to
Auto Gear Shift in 2014.
 Maruti Suzuki presents the Stingray in style in 2013.
 2012: Maruti Suzuki Alto, India's most popular car, sells over 20 lakh units.
 2011: Maruti Suzuki India reveals the new "Swift," a long-awaited elegant sports
vehicle.
  Maruti Suzuki India showcased its Rs. 1 crore (10 million) automobile on March 15,
2011. Metallic Blue WagonR VXi (Chassis No. 243899) with a 1 crore price tag was
issued from the Gurgaon plan.
 The Economic Times, India's premier business journal, names Maruti Suzuki as one
of India's most trusted automotive goods in 2010.
 MSIL voluntarily accepts fuel disclosure in 2009. Mundra Port Exit, First Star Center
- January 10.
 2008 - World Premiere of concept A-star at 9th Auto Expo, New Delhi.
 2007 - Swift Diesel Introduced. The new automotive industry and diesel engine
started operations in 2006-07 in Manesar, Haryana.SX4 – Luxury Sedan Launched
with the tag line “Black Men”. Maruti introduced the Grand Vitara.
 2006 – J.D.Power Survey sixth year award. MSIL converted its EMS from ISO
14001: 1996 version to ISO 14001: 2004 version w.e.f.1st July.
 2005 - MSIL was re-certified in 2005 in accordance with ISO 14001: 2004 standards.
 2004 - New honors are introduced - a second successful facelift by Maruti engineers.
 2003 -Maruti is listed on BSE and NSE.IPO (issue 11.2 times registered) New zen -
the first facelift by Maruti engineers.

ACHIEVEMENTS / RECOGNITION:

The company is very proud to share the customer rating of Maruti Suzuki for the first time
and in the Customer Satisfaction Survey conducted by an independent organisation, J.D.
Power Asia Pacific. It is the 9th time in a row.

Maruti Suzuki wins 'Golden Peacock Eco – Innovation Award'.

Maruti Suzuki is higher in car customer satisfaction in India for the nine year in a year.

Maruti Suzuki becomes India's first car company to export half a million cars.

OBJECTIVES OF THE STUDY:

The study's major goal was to examine the company's financial performance throughout the
inventory period pertaining to assets and liabilities during the 2011-15 fiscal years.

The subjective objectives are:

 Determining the operating requirements of the company.

 Study the various components of a company's operating budget.
  To study operational financial management over the past 5 years
 Study the real difficulties the bank faces in meeting the operating financial
requirements.
 To get a clear picture of the operating costs of the company.
 Getting the right conclusions and recommendations.

SCOPE OF THE STUDY:

The research focuses on the financial management of the MARUTI SUZUKI INDIA.
Because financial performance is not a one-time choice, the study's goal is to determine the
company's financial performance from 2011 to 2015, as well as its growth and profitability.

LIMITATIONS OF THE STUDY:

 Use of scale as a method of analysis. Therefore all limit analysis parameters also
apply.
 Analysis is limited to 5 years.
 Limited data provided by the company.
 Due to time constraints, an in-depth study was used.
 Performance accounting research is based on information gathered through interviews
with company executives and executives.
 Confidentiality of certain facts and statistics.
 Research is based on secondary data.

STATEMENT OF THE PROBLEM:

Working capital is either taken as current asset or as the excess of current asset over current
liabilities. Working capital management is concerned with the problem that arises in
attempting to manage the current assets, the current liabilities and the inter relationships that
exists between them.

In any industry the working capital is most important as it plays significant role starting from
procuring row materials until it is converted into finished goods. If the working capital is
under invested it results in delay in output of finished products which in turn reduces sales
and profits or if it is over invested, the interest has to be paid on the amount.

The study has been conducted to know the working capital management of the “MARUTI
SUZUKI” to know various ratios of working capital. As working capital is the life blood and
nerve centre of an organization can run successfully without an adequate amount of working
capital.

CHAPTER – 2
RESEARCH METHODOLOGY
RESEARCH DESIGN

Research design is a statement or specification of procedure for collecting and analyzing the
information required for the solution of a specific problem. It provides a scientific find work
for conducting some research investigation. The conception of research of the research design
plan is a critical step in the research process. The design of the study constitutes blue print for
the collection, measurement, and analysis of the data.

RESEARCH DESIGN OF THE STUDY

The research is by large desk research and involves the following :

 Setting up an objective of the study.

 Scanning through the standard texts to understand the theory behind working capital
management.
 The decision regarding the study period in this case was decided on the basis of
various items in current assets and current liabilities for working capital management.
 Collection of the company’s specific literature i.e.company’s profile and annual
reports over this study period.
 Collection of primary and secondary data, related to the functioning of the company.
 Identification of current assets and current liabilities for working capital.

METHODOLOGY OF THE STUDY

The study requires secondary data. The secondary data was obtained from the past records,
files and annual reports of the concern and also from other financial statement.

SOURCES OF DATA COLLECTION

Data is defined as group of non-random symbols in the firm of text, image, or voice
responding quantities, action as objects. Data is processed into a form that is meaningful to
the recipient and is of real and perceived value in the current or prospective actions or
decisions of the recipient.

 SECONDARY DATA

Secondary data are those, which already have been collected by some other agency or
researcher with the intention of using it for a particular purpose. The source of secondary data
concern’s data is about the various records, reports and research studies published.
Significant tools popular with my studies are bank’s websites, annual reports and books and
magazines.
 CHAPTER-3

DATA ANALYSIS AND INTERPRETATIONS

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDING 31-
03-2017 & 31-03-2018

PARTICULARS 2017 2018 INCREASE IN DECREASE IN

WORKING WORKING
CAPTIAL CAPITAL
CURRENT ASSESTS
Current Investments 2178.80 1217.30 961.50
Inventories 3262.20 3160.80 101.40
Trade Receivables 1199.20 1461.80 262.60
Cash and Cash 13.80 71.10 57.30
Equivalents
Short Terms Loans and 2.50 3.00 0.50
Advances
Other Current Assets 2119.70 20007.40 112.30
TOTAL CURRENT 8776.20 7921.40
ASSETS (A)
CURRENT
LIABILITIES
Short-Term Borrowings 483.60 110.80 372.80
Trade Payables 8367.30 10497.00 2129.70
Other Current Liabilities 3926.50 4274.30 347.80
Short Term Provisions 449.00 560.00 111.00
TOTAL CURRENT 13226.40 15442.10
LIABILITIES (B)
WORKING -4450.20 -7520.70 3070.50
CAPITAL(A-B)

INTERPRETATION:

From the above analysis, it is known that in the year 2017, the working capital is - 4,450.20
and in 2018 the working capital is -7520.70. Hence, there is a decrease in working capital of
3,070.50.
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDING 31-
03-2018 & 31-03-2019

PARTICULARS 2018 2019 INCREASE IN DECREASE IN

WORKING WORKING
CAPTIAL CAPITAL
CURRENT ASSESTS
Current Investments 1217.30 5045.50 3828.2
Inventories 3160.80 3325.70 164.90
Trade Receivables 1461.80 2310.40 848.60
Cash and Cash 71.10 178.90 107.80
Equivalents
Short Terms Loans and 3.00 16.00 13.00
Advances
Other Current Assets 20007.40 1485.10 522.30
TOTAL CURRENT 7921.40 12361.60
ASSETS (A)
CURRENT
LIABILITIES
Short-Term Borrowings 110.80 149.60 38.80
Trade Payables 10497.00 9633.00 864.00
Other Current Liabilities 4274.30 3743.30 531.00
Short Term Provisions 560.00 624.40 64.00
TOTAL CURRENT 15442.10 14150.30
LIABILITIES (B)
WORKING -7520.70 -1788.7 5732.00
CAPITAL(A-B)

INTERPRETATION:

From the above analysis, it is known that in the year 2018, the working capital is – 7520.70
and in 2019 the working capital is -1788.7. Hence, there is an increase in working capital of
5732.00.
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDING 31-
03-2019 & 31-03-2020.

PARTICULARS 2019 2020 INCREASE IN DECREASE IN

WORKING WORKING
CAPTIAL CAPITAL
CURRENT ASSESTS
Current Investments 5045.50 1218.80 3826.70
Inventories 3325.70 3214.90 110.80
Trade Receivables 2310.40 1974.90 335.50
Cash and Cash 178.90 21.10 157.80
Equivalents
Short Terms Loans and 16.00 16.90 0.90
Advances
Other Current Assets 1485.10 1980.80 495.70
TOTAL CURRENT 12361.60 8427.40
ASSETS (A)
CURRENT
LIABILITIES
Short-Term Borrowings 149.60 106.30 43.30
Trade Payables 9633.00 7494.10 2138.90
Other Current Liabilities 3743.30 3014.80 728.50
Short Term Provisions 624.40 679.60 55.20
TOTAL CURRENT 14150.30 11294.80
LIABILITIES (B)
WORKING -1788.7 -2867.40 1078.70
CAPITAL(A-B)

INTERPRETATION:

From the above analysis, it is known that in the year 2019, the working capital is – 1788.7and
in 2020 the working capital is -2867.40. Hence, there is a decrease in working capital of
1078.70.
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDING 31-
03-2020 & 31-03-2021.

PARTICULARS 2020 2021 INCREASE IN DECREASE IN

WORKING WORKING
CAPTIAL CAPITAL
CURRENT ASSESTS
Current Investments 1218.80 8415.70 7196.90
Inventories 3214.90 3050.00 164.90
Trade Receivables 1974.90 1276.60 698.30
Cash and Cash 21.10 3036.40 3015.30
Equivalents
Short Terms Loans and 16.90 23.00 6.10
Advances
Other Current Assets 1980.80 2725.00 744.20
TOTAL CURRENT 8427.40 18526.70
ASSETS (A)
CURRENT
LIABILITIES
Short-Term Borrowings 106.30 488.80 382.50
Trade Payables 7494.10 10161.70 2667.60
Other Current Liabilities 3014.80 4714.60 1699.80
Short Term Provisions 679.60 741.60 62.00
TOTAL CURRENT 11294.80 16106.70
LIABILITIES (B)
WORKING -2867.40 2420 5287.40
CAPITAL(A-B)

INTERPRETATION:

From the above analysis, it is known that in the year 2020, the working capital is – 2867.40
and in 2021 the working capital is 2420. Hence, there is an increase in working capital of
5287.40.
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR ENDING 31-
03-2021 & 31-03-2022.

PARTICULARS 2021 2022 INCREASE IN DECREASE IN

WORKING WORKING
CAPTIAL CAPITAL
CURRENT ASSESTS
Current Investments 8415.70 4100.10 4315.6
Inventories 3050.00 3533.10 483.1
Trade Receivables 1276.60 2030.10 753.5
Cash and Cash 3036.40 3036.20 0.2
Equivalents
Short Terms Loans and 23.00 30.50 7.5
Advances
Other Current Assets 2725.00 4051.20 1326.2
TOTAL CURRENT 18526.70 16781.20
ASSETS (A)
CURRENT
LIABILITIES
Short-Term Borrowings 488.80 381.90 106.9
Trade Payables 10161.70 9761.00 400.7
Other Current Liabilities 4714.60 6009.50 1294.9
Short Term Provisions 741.60 861.30 119.7
TOTAL CURRENT 16106.70 17013.70
LIABILITIES (B)
WORKING 2420 -232.5 2652.5
CAPITAL(A-B)

INTERPRETATION:

From the above analysis, it is known that in the year 2021, the working capital is 2420 and in
2022 the working capital is -232.5. Hence, there is a decrease in working capital of 2652.5.
GRAPHICAL REPRESENTATION OF CHANGES IN WORKING
CAPITAL:

WO RKING CAPITAL
Increase Decrease
7000

6000
5732
5000 5287.4

4000

3000
3070.5
2652.5
2000

1000
1078.7
0
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022

WORKING CAPITAL
4000

2000

0
2018 2019 2020 2021 2022
-2000

-4000

-6000

-8000

-10000

WORKING CAPITAL

MEANING OF CURRENT RATIO:

Current ratio is the ratio which expresses relationship between current assets and current
liabilities. This ratio is most commonly used to perform the short term financial analysis.
Also known as the working capital ratio, this ratio matches the current assets of the firm to its
current liabilities.

The numerator generally includes assets such as cash, short-term marketable

securities, sundry debtors (accounts receivables), stocks (inventories), and prepaid expenses.

The denominator, on the other hand, includes sundry creditors (Accounts

Payables), dividends, taxes due, and short-term bank loans.

A 2:1 current ratio is generally considered satisfactory by creditors. However, they should not
rely too heavily on the current ratio.

CURRENT RATIO = CURRENT ASSETS/ CURRENT LIABILITIES

TABLE SHOWING CURRENT RATIO:

YEAR CURRENT CURRENT CURENT RATIO

ASSETS LIABILITIES

2018 7921.40 15442.10 0.5129

2019 12361.60 14150.30 0.8736

2020 8427.40 11294.80 0.7461

2021 18526.70 16106.70 1.1502

2022 16781.20 17013.70 0.98633

GRAPHICAL REPRESENTATION OF CURRENT RATIO:

 CURRENT RATIO
1.4

1.2

0.8

0.6

0.4

0.2

0
2018 2019 2020 2021 2022

CURRENT RATIO

INFERENCE:

The current ratio in the year 2017-2018 is 0.51, in the year 2018-2019 is 0.8736, in the year
2019-2020 is 0.746, in the year 2020-2021 is 1.1502, in the year 2021-2022 is 0.98.We
observe that the ratio of the first year has been low and it has seen a raise the next year,
followed by which there has been a decreasing trend of current ratio.
MEANING OF QUICKRATIO:

This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of liquidity of
a company than the current ratio. It shows the ability of a business to meet its immediate
financial commitments .it is the ratio between liquid assets and liquid liabilities.

 The quick ratio measures a company's capacity to pay its current liabilities without
needing to sell its inventory or obtain additional financing.

 The quick ratio is considered a more conservative measure than the current ratio,
which includes all current assets as coverage for current liabilities.

 The quick ratio is calculated by dividing a company's most liquid assets like cash,
cash equivalents, marketable securities, and accounts receivables by total current
liabilities.

QUICK RATIO= LIQUID ASSETS/ CURRENT LIABILITIES

LIQUID ASSETS=CURRENT ASSETS-STOCK-PREPAID EXPENSES

TABLE SHOWING QUICK RATIO:

YEAR LIQUID ASSETS CURRENT QUICK RATIO

LIABILITIES

2018 4760.6 15442.10 0.308

2019 9035.9 14150.30 0.638

2020 5212.5 11294.80 0.461

2021 15476.7 16106.70 0.9608

2022 13248.1 17013.70 0.778

GRAPHICAL REPRESENTATION OF QUICK RATIO:

QUICK RATIO

1.2

0.8

0.6

0.4

0.2

0
2018 2019 2020 2021 2022

QUICK RATIO

INFERENCE:

The quick ratio in the year 2018 is 0.308, in the year 2019 is 0.638, in the year 2020 is
0.461,in the year 2021 is 0.9608,in the year 2022 is 0.778. We observe that the ratio of the
first year has been low and it has seen a raise the next year, followed by which there has been
a decreasing trend of quick ratio.
MEANING OF WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio indicates the velocity of the utilization of net working capital.
This ratio indicates the number of times the working capital is turned over in the course of the
year. This ratio measures the efficiency with which the working capital is being used by a
firm.

WORKING CAPITAL TURNOVER RATIO=NET SALES/NET WORKING

CAPITAL

A higher working capital generally signals that the company generates more revenue with its
working capital. When the current assets are higher than the current liabilities, the working
capital will be positive. It is important to look at all the parts that go into the formula. It’s
important to analyze whether the ratio is higher or lower due to a high level of inventory or
the management of debtors or credits from whom the company buys raw materials or sells
their finished goods. It is important to look at the working capital ratio across ratios and also
in comparison to the industry to make a good.

TABLE SHOWING WORKING CAPITAL TURNOVER RATIO:

YEAR NET SALES NET WORKING WORKING

CAPITAL CAPITAL
TURNOVER
RATIO
2018 79762.70 -7520.70 -10.6057

2019 86020.30 -1788.7 -48.091

2020 75610.60 -2867.40 -26.3690

2021 70332.50 2420 29.0630

2022 88295.60 -232.5 -379.766

GRAPHICAL REPRESENTATION OF WORKING CAPITAL
TURNOVER RATIO:

WORKING CAPITAL TURNOVER RATIO

100

0
2018 2019 2020 2021 2022

-100

-200

-300

-400

-500

WORKING CAPITAL TURNOVER RATIO

INFERENCE:

The working capital turnover ratio in the year 2017 is -15.288, in the year 2018 is -10.60, in
the year 2019 is -48.091, in the year 2020 is -13,456, in the year 2021 is 29.06, in the year
2022 is -379.76. We observe that the working capital turnover ratio for all the five years
except the year 2021 has seen a negative ratio.
MEANING OF INVENTORY TURNOVER RATIO

Inventory turnover ratio is the ratio which expresses the relationship between the net sales
and average inventory. It is also known as stock turnover ratio. It indicates the efficiency of a
firm’s inventory management.

For Finance: INVENTORY TURNOVER RATIO = NET SALES/ AVERAGE

INVENTORY

For Supply chain: COST OF GOODS SOLD/AVERAGE INVENTORY

TABLE SHOWING INVENTORY TURNOVER RATIO:

YEAR NET SALES AVERAGE INVENTORY

INVENTORY TURNOVER
RATIO

2018 79762.70 3161.42 25.23

2019 86020.30 3325.09 25.87

2020 75610.60 3214.74 23.52

2021 70332.50 3049.97 23.06

2022 88295.60 7315.29 12.07

GRAPHICAL REPRESENTATION OF INVENTORY TURNOVER
RATIO:

INVENTORY TURNOVER RATIO

30

25

20

15

10

0
2018 2019 2020 2021 2022

INVENTORY TURNOVER RATIO

INFERENCE:

The inventory turnover ratio in the year 2018 is 25.23, in the year 2019 is 25.87, in the year
2020 is 23.52, in the year 2021 is 23.06, in the year 2022 is 12.07.

A high stock turnover ratio is good as it indicates more sales from each rupee of investment
in stock. But in case we notice that the stock turnover ratio is low which indicates weak sales,
lackluster market demand or an inventory glut.
 CHAPTER – 5
FINDINGS, SUGGESTIONS AND
CONCLUSION
FINDINGS:

IN SCHEDULE OF CHANGES IN WORKING CAPITAL

We observe that the working capital over the five years except the year 2018-2022 has been
positive only in the year 2021 and rest all the years the working capital balance of the
company has been negative.

There has been an increase in working capital only in the years 2018-2019 and 2020-2021,
there after there has been a steady decrease in working capital. Hence we observe that the
company has not maintained sufficient current assets to meets its working capital
requirements.

Therefore, if Working Capital increases, the company's cash flow decreases, and if Working
Capital decreases, the company's cash flow increases. That explains why the Change in
Working Capital has a negative sign when Working Capital increases, while it has a positive
sign when Working Capital decreases.

IN CURRENT RATIO

And 2010-11 in the case of current ratio the standard convention ratio is 2:1,which means the
current assets should be double the current liabilities where as in this case we observe That
the current assets are not sufficient to meet requirements.