Project Report (Submitted for the Degree of B.Com. Honours under the University of Calcutta) Title of the Project WORKING CAPITAL MANAGEMENT OF WIPRO LTD. Submitted by Name of the Candidate: SUBJECT: Financial reporting and statement analysis Subject code : dse6.1ah STREAM: B.COM(HONOURS) VI SEMESTER C.U. Registration No: um =r C.U. Roll No: ‘sg2. -2aER Name of the College: ae MS. so SB mero ee Supervised by Name of the Supervisor: TEACHER’S OF COMMERCE DEPARTMENT Name of the College gq ome _____ MES sk Date of Submission : 25/07/2021Table Of Contents CHAPTER Particulars Page No. >» INTRODUCTION INTRODUCTION DEFINATION « NEED OF WORKING CAPITAL “ REVIEW OF LITERATURE “ OBJECTIVE OF THE STUDY * CHAPTER PLANING. 9-10 > CONCEPTUAL FARM WORK “ WORKING CAPITAL MANAGEMENT « FACTORS DETERMINING WORKING CAPITAL REQUIREMENT * COMPIUTATION OF WORKING CAPITAL * NATIONAL AND INTERNATIONAL SCENARIO 12-18 19-21 21-28 28-29 > PRESENTATION OF DATA ANALYSIS AND FINDINGS 30-41 > CONCLUSIONS AND RECOMENDATION s 42CHAPTER 1INTRODUCTION Working Capital is the amount of Capital that a Business has available to meet the day-to- day cash requirements of its operations Working Capital is the difference between resources in cash or readily convertible into cash (Current Assets) and organizational commitments for which cash will soon be required (Current Liabilities) .It refers to the amount of Current Assets that exceeds Current Liabilities (i.e. CA - CL) Working Capital refers to that part of the firm’s Capital, which is required for Financing Short-Term or Current Assets such as Cash, Marketable Securities, Debtors and Inventories. Working capital management is the decision relating to working capital and short- term financing, and this includes managing the relationship between the company’s short-term assets and its short-term liabilities. This enables the company to continue operations and to have enough cash flow at its disposal to satisfy both maturing short-term debt and upcoming operational expenses, which is the major objective of working capital management. The basic objective of working capital management is to put current assets to optimum use for overall profitability of a business enterprise. If the firm can't maintain a satisfactory level of working capital it is likely to become insolvent and may even be forced to bankruptcy. The effective management of working capital requires both medium term planning and intermediate reactions to changes in forecast and conditions. The current assets should be managed in such a way that it should cover its current liabilities in order to ensure a reasonable margin of safety. Therefore, the interaction, between the current assets and current liabilities is the main theme of the theory of working capital management. It improves the operating performance of the business concern and it helps to meet the short-term liquidity.Definitions Working capital is the money needed to fund the normal, day to day operations of your business. It ensures you have enough cash to pay your debts and expenses as they fall due, particularly during your start-up period. Working capital may be defined by various authors as follows “The sum of the current assets is the working capital of the business” — J.S.Mill. According to Weston & Brigham - “Working capital refers to a firm’s investment in short term assets, such as cash amounts receivables, inventories etc.NEED OF WORKING CAPITAL Working Capital is an essential part of the business concern. Every business concern must maintain certain amount of Working Capital for their day-to-day requirements and meet the short-term obligations. Working Capital is needed for the following purposes. 1 Purchase of raw materials and spares: The basic part of manufacturing process is, raw materials. It should purchase frequently according to the needs of the business concern. Hence, every business concern maintains certain amount as Working Capital to purchase raw materials, components, spares, etc. 2. Payment of wages and salary: The next part of Working Capital is payment of wages and salaries to labour and employees. Periodical payment facilities make employees perfect in their work. So, a business concern maintains adequate the amount of working capital to make the payment of wages and salaries. 3.Day-to-day expenses: A business concern has to meet various expenditures regarding the operations at daily basis like fuel, power, office expenses, etc. 4. Provide credit obligations: A business concern responsible to provide credit facilities to the customer and meet the short-term obligation. So, the concern must provide adequate Working Capital.REVIEW OF LITERATURE B.Uma Maheswari and Professor.B.Ramachandra Reddy (2012) stated that Every firm needs working capital irrespective of their nature. Manufacturing organizations require much working capital than the trading organization. Efficient management of working capital is important for the success of enterprise, whereas inefficient management of working capital may cause various problems such as reduction of liquidity position, loosing of profits and utility that leads to winding of the company. Therefore, adequate working capital is required for uninterruption of organization activities. G.L.Meena and I. Lokanandha Reddy (2016) undertook the study to achieve 3 main objectives. These objectives were met by using a mixed research method by collecting both quantitative and qualitative data. The research revealed that when profitability deteriorates, low cash is generated from the operations and firms are able to survive by postponing the payment to suppliers. The regression analysis results indicate the negative relation with the cash conversion cycle to ROTA, which means that management of the firm can increase profitability by decreasing cash conversion cycle period. Mr.V.Venkatachalam (2016), the researcher conducted a study on “Working Capital Management on Mahindra and Mahindra Private Limited”. The main objective of the study is to analyze whether the companies are viable in the long run through ratio analysis and statement of changes in working capital. He concluded that the overall working stability-soundness of the company has improved over the years very well. Akash B. Selkari and Omdeo Ghyar (2016) conducted a “Study on Working capital of Mahindra and Mahindra Ltd” for a period of 3 years from 2015-18. To study the working capital of the company ratio analysis technique was used. They came to an end that the working capital of the company was satisfactory because of maintaining proper inventory levels, cash, and other current assets and a decrease in the current liabilities and provisions. Dr.V. Bhuvaneswari (2020) highlighted the working capital which will determine whether the position of the company from the working capital point of view is sound and satisfactory. She concluded that the overall working stability, soundness and overall financial performance have improved over the years.OBJECTIVES OF THE STUDY e To study working capital management of Wipro Ltd. To analysis the receivable management, inventory management of Wipro limited. © To check liquidity of the company SCOPE OF THE STUDY Generally working capital management refers to the management of current assets and current liabilities and also the relationship between them. The study enhances the idea about the performance of working capital of the company. The higher profitability and proper liquidity of a firm is certified by a sound working capital. The study of working capital helps to identify the areas that are to be improved. It magnifies the liquidity, solvency, credit worthiness and reputation of the enterprise. RESEARCH METHODOLOGY A research methodology is the framework for the study. This methodology includes collection of secondary data. Data related to profit and loss account, balance sheet and other information is collected from various websites, journals and books. TOOLS © Ratio analysis is used in the various aspects in the project. © Statistical tools (Pie Chart, Tables) is used. LIMITATIONS OF THE STUDY Since the study is based on secondary data, the direct examination of figures is inappropriate. The study is also limited to a period of 5 years. The data is collected for the period 2016-2020.CHAPTER PLANING The following project has been presented in form of the following chapters:- Chapter 1: Introduction The purpose of Introduction is to provide a basic description of the topic of the project Working Capital and its importance. The background of the subjects builds a platform for the next coming topics to be discussed. The Literature review indicates some related theories to the topic already highlighted which gives importance to the project. Objectives of the study is also defined in here. The methodology shows the steps which has been taken for the completion and development of the project. Chapter 2: Conceptual Framework Conceptual frameworks are abstract representations, connected to the research project's goal that direct the collection and analysis of data (on the plane of observation — the ground). Here, the national and international scenario of corporate social responsibility is shown and through this, analysis can be done about how aware the global world is regarding the subject. The impact and effect, of the topic is also shown. Chapter 3: Presentation of data, analysis and findings ‘The process of evaluating data using analytical and logical reasoning to examine each component of the data provided. This form of analysis is just one of the many steps that must be completed when conducting a research experiment. Data of Nestle India from various sources has been gathered, reviewed, and then analysed to form some sort of finding or conclusion. There are a variety of specific data analysis method, some of which include data mining, text analytics, business, and data visualizations.Chapter 4: Conclusions and Recommendations The interpretations are given of the significance of the findings of a research project along with recommendations for action. These recommendations will be based on the research and on any other relevant information available, including own past experience in a market or in business. Conclusions and recommendations usually form an important part of a project brief and of any report or documentation, and are a key part of the value offered to clients by professional market research.CHAPTER 2CONCEPTUAL FARMWORK WORKING CAPITAL MANAGEMENT This chapter mainly discuss about the different concepts involved in the working capital management. The emphasis has been given to theoretical back ground of related items of working capital management. Capital of the concern may be divided into two major headings. CAPITAL FIXED CAPITAL WORKING CAPITAL Fixed capital means that capital, which is used for long-term investment of the business concern. For example, purchase of permanent assets. Normally it consists of non-recurring in nature. Working Capital is another part of the capital which is needed for meeting day to day requirement of the business concern. For example, payment to creditors, salary paid to workers, purchase of raw materials etc., normally it consists of recurring in nature. It can be easily converted into cash. Hence, it is also known as short-term capital. Working capital includes the current assets and current liabilities areas of the balance sheet. Working capital can be called by its alternative name "Net Current Assets". SIGNIFICANCE OF WORKING CAPITAL Working capital is the life blood and the centre of business. Just as circulation of blood is essential in the human body for maintain the smooth running of a business. No business can run without an adequate amount of working capital as follows.> Solvency of Business Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. Cash Discounts Adequate working capital also enables a concern to obtain cash discounts on the purchases and hence is reducing costs. > Quick and regular return on investments Easy investor wants a quick and regular return on his investment. Sufficient working capital enables a concern to its investor as there may not be much pressure to plough back profits. > Easy Loans A concern having adequate working capital high solvency and good credit standing can arrange loans from banks and other on easy and favorable terms. > Regular supply of Raw materials Sufficient working capital ensures regular supply of raw material and continuous production. > Goodwill Sufficient working capital enables a business concern to make prompt Payments and hence helps in creating and maintaining good will. CONCEPT OF WORKING CAPITAL Working capital can be classified or understood with the help of the following two important concepts Gross Working Capital Gross Working Capital is the general concept which determines the working capital concept. Thus, the gross working capital is the capital invested in total current assets of the business concern.Gross Working Capital is simply called as the total current assets of the concern. GWC= CA Net Working Capital Net Working Capital is the specific concept, which considers both current assets and current liability of the concern.Net Working Capital is the excess of current assets over the current liability of the concern during a particular period. If the current assets exceed the current liabilities it is said to be positive working Capital; it is reverse, it is said to be Negative working capital. Component of Working Capital Every business needs adequate liquid resources in order to maintain day- to- day Cash flow. It needs enough cash to pay wages and salaries as they fall due and to pay creditors if it is to keep its workforce and ensure its supplies. Maintaining adequate working capital is not just important in the short-term. Sufficient liquidity must be maintained in order to ensure the survival of the business in the long- term as well. Even a profitable business may fail it does not have adequate cash flow to meet its liabilities as they fall due Therefore, when businesses make investment decisions they must not only consider the financial outlay involved with acquiring the new machine or the new building, etc, but must also take account of the additional current assets that are usually involved with any expansion of activity. Working capital constitutes various current assets and current liabilities. This can be illustrated by the following chart -Working Capital Current Assets Current Liabilities Cash in Hand Cash at bank Bills Receivable Sundry debtors Accrued Income Inventories Prepaid Expenses Current Assets Cash Inventories Bills payable Sundry Creditors Outstanding Expenses Short term loans and advances Dividend payable Bank overdraft Provision for taxation Current assets are defined as either cash or those assets that can be converted into cash within the current year. The major components of these current assets are inventories, account receivables and advances. It is most liquid current assets and includes cash in hand and cash at bank it provides in start liquidity and can be used to meet obligations / acquire assets without delay These are materials: commodities or goods used in day- to-day operations of production of in the form of finished goods. These include raw materials,work- in - progress and finished goods. Inventory is divided into three types :- Finished goods: Held for sale in the ordinary course of business Work in Progress: In the process of production for such sales Raw Material: Currently consumed in the production of goods and services to be available for saleAccount Receivables These are short- term debts owed by company arising from credit and sales made to customers of the firms. Advances ‘These represent amount paid for which the goods and services have not yet been rendered, including advances given to suppliers and employees Current Liabilities This is second major content of the balance sheet is liabilities defined as the claims of outside against the form alternatively they represent the amount that the form owes to outside that is other than owners. The assets have to be financed by different sources. One source of funds is borrowing long term as well as short term. The firms can borrow on a long-term basis from financial institution / banks or through bonds / mortgage / debentures TYPES OF WORKING CAPITAL Working Capital may be classified into three important types on the basis of time 1. Permanent working capital. 2. Temporary working capital. + Seasonal working capital. * Special working capital. 3. Semi variable working capital. Permanent Working Capital It is also known as Fixed Working Capital. It is the capital; the business concern must maintain certain amount of capital at minimum level at all times. The level of Permanent Capital depends upon the nature of the business.Temporary Working Capital It is also known as variable working capital. It is the amount of capital which is required to meet the Seasonal demands and some special purposes. It can be further classified into Seasonal Working Capital and Special Working Capital. The capital required to meet the seasonal needs of the business concern is called as Seasonal Working Capital. The capital required to meet the special exigencies such as launching of extensive marketing campaigns for conducting research, etc Semi Variable Working Capital Certain amount of Working Capital is in the field level up to a certain stage and after that it will increase depending upon the change of sales or time. Working Capital Position/ Balanced Working Capital Position. A business concern must maintain a sound Working Capital position to improve the efficiency of business operation and efficient management of finance. Both excessive and inadequate. Working Capital leads to some problems in the business concern. A. Causes and effects of excessive working capital + Excessive Working Capital leads to unnecessary accumulation of raw materials, components and spares. + Excessive Working Capital results in locking up of excess Working Capital. * It creates bad debts, reduces collection periods, etc. + It leads to reduce the profits. B. Causes and effects of inadequate working capital + Inadequate working capital cannot buy its requirements in bulk order. + It becomes difficult to implement operating plans and activate the firm’s profit target.+ It becomes impossible to utilize efficiently the fixed assets. + The rate of return on investments also falls with the shortage of Working Capital. + It reduces the overall operation of the business.FACTORS DETERMINING WORKING CAPITAL REQUIREM 's They are two type of factors are there + Internal factors + External factors > INTERNAL FACTORS a) Nature of business Working Capital of the business concerns largely depend upon the nature of the business. If the business concerns follow rigid credit policy and sells goods only for cash, they can maintain lesser amount of Working Capital. A transport company maintains lesser amount of Working Capital while a construction company maintains larger amount of Working Capital b) Size of Business The working capital requirements of a concern are directly influenced by the size of its business, which may be measured in terms of scale of operations Greater the size of a business unit, generally large will be the requirements of working capital. ©) Production cycle Amount of Working Capital depends upon the length of the production cycle. If the production cycle length is small they need to maintain lesser amount of Working Capital. If it is not, they have to maintain large amount of working capital d) Business cycle Business fluctuations lead to cyclical and seasonal changes in business condition and it will affect the requirements of the Working Capital. In the booming conditions, the Working Capital requirement is larger and in the depression condition, requirement of Working Capital will reduce. Better business results lead to increase the Working Capital requirements.e) Firms Production Policy It is also one of the factors which affect the Working Capital requirement of the business concern. If the company maintains the continues production policy, there is a need of regular Working Capital. If the production policy of the company depends upon the situation or conditions, Working Capital requirement will depend upon the conditions laid down by the company. f) Credit Policy The credit policy of firm also influences magnitude of working capital. If the company maintains liberal credit policy to collect the payments from its customers, they have to maintain more Working Capital. If the company pays the dues on the last date it will create the cash maintenance in hand and bank. g) Growth and Expansion of Business Working capital requirements of an enterprise tend to increase in correspondence with growth in volume of sales. h) Depreciation Policy The depreciation policy influences the level of working capital by affecting tax liability and retained earnings of the enterprise. Since depreciation is tax deductible expenses items, higher amount of depreciation results in lower tax liability and greater profitability. i) Operating efficiency of firm Operating efficiency of firm results in optimum utilization of resources at minimum cost if a firm successfully controls operating cost, it will be able to improve net profit margin which will, in term, release greater funds for working capital purposes j) Availability of raw materials Major parts of the Working Capital requirements are largely depend on the availability of raw materials. Raw materials are the basic components of the production process. If the raw material is not readily available, it leads to production stoppage. So, the concern must maintain adequate raw material; for that purpose, they have to spend some amount of Working Capital.> EXTERNAL FACTORS a) Business Fluctuations Business fluctuations refer to alternate expansion and contraction in general business activity. In a period of boom that is when business is prosperous, there is a need for longer amount of working capital due to increase in sales, rise in prices, optimize expansion of business on the country in the items of depression that is when there is a down swing of the cycle, the business contracts, sales decline, difficulties are faced in collections from debtors and firms may have a large amount of working capital lying idle. b) Technology Development Technology development in the area of production can have shape effects on the need for working capital. If a firm switches over to new manufacturing process and installs new equipments with which it is able to cut period involved in converting raw materials into finished goods, permanent working capital requirements of the firm will decrease If the new machine COMPUTATION (OR ESTIMATION) OF WORKING CAPITAL A. Estimation of components of working capital method Working capital consists of various current assets and current liabilities. Hence, we have to estimate how much current assets as inventories required and how much cash required to meet the short term obligations. Finance Manager first estimates the assets and required Working Capital for a particular period. B. Percent of sales method Based on the past experience between Sales and Working Capital requirements, a ratio can be determined for estimating the Working Capital requirement in future. It is the simple and tradition method to estimate the Working Capital requirements. Under this method, first we have to find out the sales to Working Capital ratio and based on that we have to estimate Working Capital requirements. This method also expresses the relationship between the Sales and Working Capital.C. Operating cycle Working Capital requirements depend upon the operating cycle of the business, The operating cycle begins with the acquisition of raw material and ends with the collection of receivables. The operating cycle can be shortened by the following means Raw materials procurement One should have a good supply network. This means that he should have a supplier who can provide him with his raw material requirement at the right time, place and in the required quantity at minimum amount of time. Production process In the production process there should not be any time lag from the time of actually receiving the raw materials and the starting of production process. This means as soon as the materials arrive they should be introduced in the production process. * Finished goods The goods once produced should be held in the company’s possession as the company’s capital would be locked up in these goods. Thus, it is essential that the company sell all these finished goods as soon as possible so as to allow the company reacquires its capital employed in the operating cycle. * Receipt of sales The receipts of the money from the debtors as soon as possible so as to regain the money along with the profits. This is how the operating cycle operates along with how it can be improved so as to enable the company to regain the money invested in the production of the goods being produced.Calculation of Operating Cycle Operating cycle period Formula: OC = R+W+F+D-C Working Capital Cycle Working capital cycle refers to the time taken by an organization to convert its net current assets and current liabilities inti cash . It reflects the ability and efficiency of the organization to manage its short-term liquidity position. The diagram below illustrates the working capital cycle for a construction firm: Wages & Overheads Finished Goods Stock Rawmaterils Stock Trade Creditors Trade Debtors ‘Share Holders: Loan Creditors Fixed Assets Lease Payments The upper portion of the diagram above shows in a simplified form the chain of events in a manufacturing firm. Each of the boxes in the upper part of the diagram can be seen as a tank through which funds flow. These tanks, which are concerned with day_ to_ day activities, have funds constantly flowing into and out of them. + The chain starts with the firm buying all input materials on credit.+ In due course this stock will be used in production, work will be carried out on the stock, and it will become part of the firm's work in progress (WIP) * Work will continue on the WIP until it eventually emerges as the finished product + As production progresses, labour costs and overheads will need to be met * Of course at some stage trade creditors will need to be paid + When the finished goods are sold on credit, debtors are increased + They will eventually pay, so that cash will be injected into the firm Each of the areas_ stocks (raw materials, work in progress and finished goods), trade debtors, cash (positive Or negative) and trade creditors_ can be viewed as tanks into and from which funds flow. SOURCES OF WORKING CAPITAL Sources of working capital can divide into two parts 1) Short-term working capital 2) Long-term working capital Short — term sources can be dividing into two parts. a) Internal Working Capital b) External Working Capital a) Internal Working Capital 1) Depreciation Reserve The adding back of depreciation to determine the funds from operations is misunderstood by some people they think that depreciation is a source of working capital. It must be of funds. Funds (working capital) are provided by reserves, not by depreciation. Unlike other operating expenses, depreciation does not use cash or working capital. However, it can indirectly influence the flow of funds by affecting the firms tax liability of the firm will be reduced there will be less outflow of cash to the income tax authority. Except through its impact on tax liability depreciation expense has no effect on working capital.2) Reserve for Taxation This is also calculated the same of above model. In this to pay future on sales than to reserve some amount for the purpose. b) External Working Capital (1) Advance from Creditors (2) Public Deposits (3) Govt. Assistance The types of methods are the source of working capital. These are out of the firm. These are depending a performance of company. These relative importance’s of these vary from country to country and from time to time depending upon the prevailing environment. In India, the primary sources for Financing Working Capital trade credit. And short-term bank credit. To obtain short-term bank credit Working Capital requirements have to be estimated by the borrowers and the banks are approached with the necessary supporting data. The banks determine the maximum credit based on the margin requirements of the security. The margin represents a percentage of the value to the assets offered as security by the borrowed. Forms of Credit After getting the overall credit limit sanctioned by the bankers, the borrower draws funds periodically. The following form of credit is available to the borrower. a) Loan Arrangement Under the arrangement the entire amount of loan is credit by the bank to the borrower’s account. In case the loan is repaid in investments, interests in payable of actual outstanding. b) Over draft arrangement Under these arrangements, certain facilities are available to the borrowers, which are not available under the loan arrangement with the overdraft arrangement the borrower is allowed to over draw on his current account with the bank up to a stipulated limit. Within this limit any number of drawing are permitted. Repayments can bemade whenever desired during the period. The interest liability of the borrowed is determined on the basis of the actual amount utilized. c) Cash Credit arrangement This form of Credit is operated in the same way as the over draft arrangement. The borrower can draw up to stipulated limit based on the security margin. He has to pay 1% as commitment charges on the underutilized balanced during the period. LONG TERM WORK! a) Issue of Share CAPITAL It is most important source of long-term regular working capital as for as possible efforts should made to procure the maximum amount of regular working capital out of the proceeds of shares. b) Issue of Debentures Itis another regular working capital can also be procured by the issue of debentures and bonds. If anybody wants mobilize working capital in the form of debentures they can get easily permission from SEBI and Ministry of Industry. c) Sale of fixed assets If there any ideal fixed asset in the firm it can be sold out and the proceeds may be utilization finance of working capital requirements. d) Term loans Midterm and long term loans for a period above five years provide important source of working capital. e) Securities from Employees and from Customers Certain Companies requiring a Security Deposits from their employees before given the employment under the term of service contracts. Two important aims of working capital management are a. Profitability and b. Solvency i.e., the firm’s continuous ability to meet maturing obligations.Liquidity Vs Profitability To ensure solvency the firm should be very liquid, means larger current assets holdings. But a considerable amount of the firm’s funds will be died up in current assets, and to the extent this investment is idle, the firm’s profitability will suffer. To have higher profitability, the firm may sacrifice solvency and maintain a relatively low level of current assets but its solvency would be threatened and would be exposed to greater risk of cash shortages and stock outs. Principles of Working Capital Management Benefits of Working Cay Working capital management is the management of current assets. Management of fixed assets and current assets differ in three important ways. First, in managing fixed assets, time is very important, consequently, discounting and compounding aspects of time element play a significant role in capital budgeting and a minor one in the management of current assets. Second, the large holding of current assets, especially cash, strengthens firm’s liquidity position and reduces riskiness, but it also reduces the overall profitability. Third, levels of fixed as well as current assets depend upon expected sales, but it is only current assets which can be adjusted with sales fluctuations in the short-run.can utilize less expenses raw materials, the inventory needs may be reduced. | Management Create an effective, companywide working capital management system 1. Handle cash flows more efficiently 2. Develop successful strategies for short term liquidity 3. Enhance the conversion of accounts receivable to cash 4. Find out how different purchasing approaches affect accounts payable and cash Management 5. Measure and control the costs of your company’s working capital management6. Apply a global approach to working capital management; incorporating major foreign subsidiaries into your system value added conversion work in progress. Even profitable companies fail if they have inadequate cash flow. Liabilities are settled with cash not profits. The primary objective of working capital management is to ensure that sufficient cash is available to A. Meet day - to- day cash flow needs B. Pay wages and salaries when they fall due C. Pay creditors to ensure continued supplies of good and services D. Pay government taxation and providers of capital- dividends and E. Ensure the long- term survival of the business entity NATIONAL & INTERNATIONAL SCENARIO NATIONAL SCENARIO Over the past two decades, India has risen to become the leading destination for global sourcing of IT, BPO and research and development services. Established Indian IT services companies have a proven track record for providing business and technology solutions, offering a large, high quality and English-speaking talent pool, and a friendly regulatory environment. These factors, coupled with strong existing client relationships have facilitated India's emergence as a global outsourcing hub. According to the NASSCOM Strategic Review Report 2013, the hardware market in India accounted for 40% of the domestic IT industry, with anticipated growth of 1.4% in fiscal2013. The key components of the hardware industry are servers, desktops and laptops, storage devices, peripherals and networking equipment. Increased use of computing devices in education and consistent demand from enterprises are key factors driving the continued growth of this market. Additionally, the Government of India is promoting initiatives to provide low-cost affordable computing, which is expected to also fuel growth. Increased adoption of virtualization and cloud computing technologies, large-scale digitization and the increased importance of big data or analytics have alsocontributed to growth in the server and storage markets. Demand for networking equipment is increasing as businesses invest in expanding and upgrading their infrastructure, and as penetration of mobile devices, teleconferencing and voice over internet protocol ("VOIP") increases. INTERNATIONAL SCENARIO Working capital management in international context involves managing cash balances, account receivable, inventory, and current liabilities when faced with political, foreign exchange, tax, and liquidity constraints. It also encompasses the need to borrow short-term funds to finance current assets from both in-house banks and external local and international commercial banks. The overall goal is to reduce funds tied up in working capital. This should enhance return on assets and equity. It also should improve efficiency ratios and other evaluation of performance parameters. The Working capital management is an integral part of the total financial management of an enterprise that has a greater impact on Profitability, Liquidity and Overall performance of the enterprise irrespective of its nature. In fact, working capital is a circulatory money investment that takes place right from the input stage to output. Management of working capital is complicated on account of two important reasons, namely, fluctuating nature of its amount, and a need to maintain a proper balance between current assets and non-current assets in order to maximize profits. The importance of working capital in an industry cannot be over stressed, as it is one of the important causes of success or failure of an industry. Whatever be the size of the business, working capital is its life-blood. Working capital constitutes the funds needed to carry on day to day operations of a business, such as purchase of raw materials, payment of wages and other expenses. For running a business an adequate amount of working capital is essential. A firm with shortage of working capital will be technically insolvent. The liquidity of a business is also one of the key factors determining its propensity to success or failure. This calls for a systematic and integrated approach towards utilizing a company’s assets with maximum efficiency. Working Capital management is about the financial and commercial aspects of purchasing, marketing, inventory, credit, royalty and investment policy.Chapter 3PRESENTATION ANALYSIS AND FINDINGS COMPANY PROFILE:WIPRO Wipro Enterprises Limited (Formerly Azim Premji Custodial Services Private Limited), was incorporated under the Provisions of Companies Act, 1956, is headquartered in Bangalore, India. The Company primarily carries on the businesses of Consumer care products, Domestic & Commercial lighting and Infrastructure engineering which Ire transferred pursuant to the Scheme of Arrangement of Wipro Limited (“Wipro”) with effect from March 31, 2013, with the appointed date as on April 1, 2012. Wipro Ltd. (NYSE: WIT), a leading global Information Technology, Consulting and Outsourcing company today announced that it has been ranked as a leader in the 'Global R&D Service Provider’ survey by Zinnov Management Consulting for the fourth successive year. Zinnov is a leading Globalization and Market Expansion Advisory firm that helps companies globalize their R&D/Product Engineering activities. “Wipro has consistently kept up pace with changing customer needs in the Product Engineering space. Be it adopting flexible business models, taking a solution led approach or co-investing in developing a product and taking it to market Wipro has demonstrated strong capability. Wipro’s vertical specific solutions and PDLC (Product Development Life Cycle) accelerators give it a definite edge as an engineering partner." said Sundararaman Viswanathan, Engagement Manager, Zinnov Management Consulting Pvt. Ltd. Wipro Enterprises Limited comprises of two main divisions 1. Wipro Consumer Care and Lighting (WCCLG) 2. Wipro Infrastructure Engineering (WIN) Wipro Consumer Care and Lighting (WCCLG) is among the top fastest growing FMCG companies in India. It has a strong brand presence in personal care and skin care products in South-East Asia and Middle-Eastapart from significant market share in identified segments. Today WCCLG has global workforce of 8300 serving over 40 countries, WCCLG business includes multiple product ranges from Personal care (Soaps, Toiletries), Baby care, Illness Electrical wire devices, Lighting and Modular Office furniture Wipro Infrastructure Engineering (WIN) is the largest independent hydraulic cylinder manufacturer in the world, delivering around 2 million cylinders to OEMs in different geographies. WIN has global workforce of over 1,700 committed and skilled people, and 14 state-of-the-art manufacturing facilities across India, Northern Europe, Eastern Europe, US, Brazil and China. WIN specializes in designing and manufacturing custom Hydraulic Cylinders (double acting, single acting and telescopic cylinders), Actuators and Precision engineered components for infrastructure and related industries such as Construction & Earthmoving, Material/Cargo Handling & Forestry, Truck Hydraulic, Farm & Agriculture, Mining, and Aerospace & Defense. Wipro Enterprises Limited also has two associates: 1. Wipro GE Healthcare Private Limited 2. Wipro Kawasaki Precision Machinery Private Limited Business Products Wipro Technologies © IT Services © Product Engineering Solution Technology Infrastructure Services Business Process Outsourcing © Consulting Services Wipro Infotech LTD Notebooks Desktops Servers Data Warehousing IBM Servers eoceeWipro Consumer Care & Lightning Fast Moving Consumer Goods Wipro Infrastructure Engineering Construction, Agriculture, Ports Wipro GE Medical Systems Medical Systems Life science Speciality Products Medical System Managed Services Wipro Biomed STATEMENT OF CHANGES IN GROSS WORKING CAPITAL: Gross working capital refers to the firm’s investment in current assets. Current assets are the assets which can be converted into cash within an accounting year and include cash, short term securities, debtors, and stock. ‘ABLE 1 REFERS TO THE GROSS WORKING CAPITAL (Amount in Crores) PARTICULARS 207 2017 2018 2019 2020 6 Current Assets Investments [20,419.50 29,146.7 29,146.7 27,998.80 21,998.8 0 0 0 Inventories 526.20 355.90 294.30 340.30 174.10 ade Receivables [6398.00 8129.90 9502.00 0648.60 ‘9257.00 cash and [8408.80 3156.60 7322.00 70390.20 1044.00 cash equivalent short term 0.00 191.70 0.00 0.00 947.20 loansand advances other 17508.80 7386.30 6007.80 “4352.50 5927.50 current, assets Total \45260.30 48727.1 a7272.8 47730.40_|~ 457%3.3 current o 0 0 assets In 2017 there was an increase in the working capital of Rs.3466.80 Croresbecause of the increase in investment and in 2018 there was decrease inworking capital by Rs.1454.30 Crores because of decrease in some current assets. In 2019 there was an increase in working capital by Rs.457.6 Crores as there was both increase and decrease in current assets and in 2020 there was a decrease in 2017.10 Crores. STATEMENT OF CHANGES IN NET WORKING CAPITAL: Net Working Capital refers to the difference between current assets and current liabilities. Current liabilities those claims of outsiders which are expected to mature for payment within an accounting year and include creditor, bills payables, and outstanding expenses. Net working capital can be positive or negative. A positive net working capital will arise when current assets exceed current liabilities. Negative net working capital occurs when current liabilities are in excess of current assets. TABLE 2: THE TABLE REFERS TO NET WORKING CAPITAL (Amount in cores) 2016 2017 2018 201 202 PARTICULARS 9 0 Current Assets Investments 20,419.5 29,146.7 29,146.7 | 21,998.80 | 21,998.80 0 0 0 Inventories 526.20 355.90 794.30 340.30 174.10 Trade 8398.00 8129.90 9502.00 10648.60 9257.00 Receivable s ‘cash and 8408.80 3156.60 7322.00 0390.20 1044.00 cash equivalent short term 0.00 191.70 0.00 0.00 947.20 loansand advances other 7508.80 7386.30 6007.80 4352.50 5927.50 current assets Total 45260.3 48727.1 47272.8__| 47730.40 | 45713.30 current 0 0 0 assets Curren tLiabilities short 5549.50 5018.60 4647.70 5052.20 5007.90 term borrowingsTrade payables 4362.30 3818.60 4176.20 4765.50 4542.00 other “4857.50 4375.80 5418.60 5397.90 5769.10 current abilities Short 642.60 626.90 793.40 929.00 7730.20 term provisions Total 1521.9 3839.9 15035.9 | 16144.60 | 16443.80 current 0 0 0 liabilities Net 30048.4 34887.2 27931.4_ | 31585.80 | 29296.50 working 0 0 0 capital In 2017 there was an increase of net working capital of Rs.4383.8 Crores as there is huge increase in investment and in 2018 there was a decrease in Rs.6955.80 Crore due to the decrease in cash and cash equivalent and other current assets. In 2019 there was an increase in 3654.4 Crores as there is an increase in trade receivables and cash and cash equivalents. In 2020 there was an decrease in Rs.2289.30 Crores as there is decrease in current assets. TABLE 3 REFERS TO THE RATIO FOR DEBTORS MANAGEMENT ‘Year Debtors turnover ratio ‘Average collection period (Days) 2016 540 C759 2017 337 65.52 2018 307 T199 2019 aI7 77.00 2020 5.06 TRIS In 2016 the debtors turnover ratio was 5.40 and the average collection period was 67.59 days. In 2017 the debtors turnover ratio was 5.57 and the average collection period was 65.52 days. In 2018 the debtors turnover ratio was 5.07 and the average collection period was 71.99 days. In 2019 the debtors turnover ratio was 4.77 and the average collection period was 77 days and in the year 2020 the debtors turnover ratio was 5.06 and the average collection period was 72.13 days. There was an increase in debtors turnover ratio in 2017 and 2020. And there was a decrease in debtors turnover ratio in 2018 and 2019. The average collection period increased in 2018 and 2019 and it decreased in 2017 and 2020.TABLE 4 REFERS TO THE RATIOS FOR INVENTORY MANAGEMENT Year Inventor Days yturnover ofinventory ratio ratio (days) 2016 70.94 5.14 2017 88.77 4.11 2018 118.60 2.31 2019 130.17 2.80 2020 169.55 2.15 In 2016 the Inventory Turnover Ratio was 70.94 and the DSI was 5.14 days - In 2017 the Inventory Turnover Ratio was 88.77 and the DSI was 4.11 days. In 2018 the Inventory Turnover Ratio was 118.60 and the DSI decreased to2.31 days. Next year in 2019 the Inventory Turnover Ratio raised to 130.17 and the DSI was 2.80. In 2020 the Inventory Turnover Ratio was highest to the ratio of 169.55 and DSI again decreased to 2.15 days. The Inventory Turnover Ratio goes on increasing every year. The DSI is high in the year 2016 and 2017 and is lowest in the year 2020. LIQUIDITY RATIOS: TABLE 5 REFERS TO THE CURRENT RATIO YEAR CURRENT ‘CURRENT CURRENT, RATIO ASSETS LIABILITIES 2016 45260.3 15211.9 2.97 0 0 2017 48727.1 13839.9 3.52 0 0 2018 4272.8 15035.9 344 0 0 2019 47730.4 16144.6 2.95 0 0 2020 45713.3 16443.8 2.78 0 0In 2016 the current ratio was 2.97 which indicates good short term liquidity. Next year in 2017 the current ratio increased to 3.52 because of the overall increase in current asset and decrease in current liabilities. In 2018 the working capital decreased a bit to the ratio of 3.14. In 2019 there is a further decrease in the current ratio. This stood at a ratio of 2.95. Again, In 2020 the current ratio decreased to 2.78. There was an increase in the year 2017. The current ratio went decreasing after 2017, which needs to be improved. TABLE 6 REFERS TO THE QUICK RATIO. YEAR LIQUID CURRENT RATIO. ASSET LIABILITY 2016 44734.10 1521.90 2.94 2017 4371.20 13839.90 3.49 2018 43978.50 15035.90 2.92 2019 47301.10 1614.60 2.92 2020 45539.20 16443.80 2.76In 2016 the quick ratio was 2.94 which indicates that the company owned more current assets than the current liabilities.In 2017 the quick ratio increased to 3.49 due to the increase in inventory turnover ratio. During 2018 the quick ratio dropped to 2.92 and in 2019 the quick ratio raised to 2.93 due to the increase in inventory turnover ratio.In 2020 the ratio falls to 2.76.There was an increase in the year 2017.The quick ratio started to decrease after 2017 which should be improved. TABLE 7 REFERS TO THE CASH RATIO YEAR CASH AND CURRENT CASH RATIO CASH LIABILITIES EQUIVALENT 2016 8408.80 15211.90 0.552 2017 3516.60 13839.90 0.254 2018 2322.00 15035.90 0.154 2019 10390.20 16144.60 0.645In 2016 the cash ratio was 0.552. In 2017 the cash ratio decreased to the ratio of 0.254. Next year in 2018 cash ratio further declined to 0.154. in 2019 there is a huge increase. The ratio was 0.645. In 2020 cash ratio slightly decreased to 0.635. The ideal cash ratio is between 0.5-1. Therefore, In 2016, 2019 and 2020 the company was able to achieve its ideal ratio.SUGGESTIONS On the basis of the above analysis and observation,the following suggestions are given to improve the overall financial position of Wipro Limited. 1. It can be said that the overall financial position of the company is sound and healthy from the profitability point of view. 2. The company should make an effort to increase the amount of sales to engage the great area of the market. 3. The company has to control its expenses and try to earn at a constant rate of return. It has to maximize its net profit. 4. Although the sales of the company are moderately increasing, the proportionate profit is not so much increased. Therefore the management should focus on reducing its expenses. 5. The company should bring more efficiency to drive on productivity and automation. 6. The working capital management could be more efficient to improve the liquidity position of Wipro Ltd. 7. The company may take up few marketing strategies to survive in the global market.CONCLUSION The current study titled “A study on working capital management of Wipro Limited “was initiated with the objective of studying working capital management, changes in working capital, receivables management, inventory management, cash management and liquidity position through Ratio analysis and Statement of changes in working capital. This study gives an idea of working capital management of Wipro Limited. The company is maintaining a good profit over the years. But the company has lost its working capital due to the pandemic situation in the year 2020. So it has to be improved to work efficiently. On the basis of the analysis of the financial statement of Wipro Limited, we conclude that the overall working stability and soundness have improved over the years and will improve the financial performance in the upcoming years.