Summer Training Project

on
Working Capital Management
at
GNA Enterprises ltd.

Submitted To:
Lovely Professional University

Submitted By:
Reema Bharti
Reg No. 10901821
Contents
Overview of GNAE ltd.
Objectives of project
Scope of study
Introduction to working capital
Working capital management
Analysis
Findings
Suggestions
Overview of GNA Enterprises Ltd.
Vision:
To become a highly growth oriented company based
on strong business fundamentals.

Mission:
To become the number one in machined forgings in
the world.
GNA Enterprises Ltd.
Established in 1946 as a small scale industry by Sardar
Amar Singh.
Started with capital of Rs.15,000.
Initially manufacturing rear Axle Shafts.
GNA Enterprises Ltd. spread over 80,000 square
meters.
 The company has a large customer base covering
different sectors of the automotive industry and a
diversified product range.
Customers of GNAE Ltd.
Product Range of GNAE LTD.
Rear Axle shafts
Torison Bars
Brake S Cam Shafts
Hollow Spindle
Drive Shafts
Yoke Shafts
Planet Carrier
WB Spindles
Clutch shafts
King Pins
Tracks Bars
Management
Objectives of Project
To study the various components of working capital.

To analyze the liquidity trend.

To know the utilization of current assets and current

liabilities and find out short-comings if any.

To suggest best measure for effective management of

working capital.
Scope of Study
Scope of study is to evaluate, analyze and understand
the current assets management and to know the
influence of the working capital on sales in the year
2011-2012 and 2012-2013.
Introduction (Working Capital)
Working capital refers to the investment by the
company in short terms assets such as cash, marketable
securities.
working capital refers to the current assets less current
liabilities.
 
Importance of Working Capital

Lifeblood of the business.

Help to run business smoothly and successfully.
Required for day to day operations of business.
Working Capital Management
Difference between the long term financial
management and short term financial management in
terms of the timing of cash, is called Working Capital
Management.
Working Capital Management manages the current
assets, current liabilities and inter-relationship that
exists between them.
Current Assets Current Liabilities

Cash Bank overdraft

Account receivable Outstanding expenses

inventory Accounts payable

Marketable securities Bills payable

Working Capital Management
If you… Then…

o Collect receivables (debtors) faster. o You release cash from the cycle.

o Collect receivables (debtors) slower. o Your receivables soak up cash.

o Get better credit (in terms of duration or o You increase your cash resources.
amount) from suppliers.

o Shift inventory (stocks) faster. o You free up cash.

o Move inventory (stocks) slower. o You consume more cash.

Determinants of working capital
management
Nature of Business
Sales and Demand Conditions
Technology and Manufacturing Policy
Credit Policy
Availability of Credit
Operating Efficiency
Price Level Changes
Operating cycle
It is length of time between the firms paying the cash
for materials etc., entering into production process and
the inflow of cash from debtors.
Cash Management
In concept of working capital management cash is a
key area. Cash is the most liquid asset.
There are two main motives for holding cash:
It is used broadly to cover currency and generally
accepted equivalents of cash, such as cheques, drafts
and demand deposits in banks.
It includes near-cash assets, such as marketable
securities & time deposits in banks.
Objectives of Cash Management
To meet the cash disbursement needs.
To minimize the funds committed to cash balances.
Debtors Management
Bank References
Financial Account
Personal Contacts
Credit Agencies
Past Experience
General Source of Information
Creditors Management
Parties involved:
Suppliers
The Bank
The Statutory Bodies
Inventory Management
Inventory
Creating
Management
a purchasing plan that will ensure that items are availa
 Ratio Analysis
Acid Test Ratio=

Particulars FY 2011-2012 FY 2012-2013

Quick Assets 14136.80 14051.57

Quick liabilties 10385.47 9917.32

Acid test ratio(value in months) 1.36 1.42

Interpretation: A quick ratio of 1:1 or more is

considered as satisfactory or of sound liquidity
position.
Findings
Acid Test Ratio is more than 1 from last two years (2011-2013). It represents that company is having sufficient liquid assets.


Inventory Holding Period of Organization increased to 2.17 (2012-13) to 1.85 (2011-12). As explained above high inventory

turnover shows that there is increase in sales. It means company has to incur fewer expenses to hold inventory.

Debtors Turnover Ratio as it is lower in 2013 in comparison to 2012, it is good for firm. Lesser the Debtors collection period
lesser the time for payment by debtors.

Creditors Payment Period: as calculated above CPP of GNA is reduced from 9.91 to 7.89. It is good for firm. Firm is paying as

earlier it can pay.
Findings
Working Capital Ratio: Working Capital Ratio
increases from 2.17 to 2.24

 Gross Profit Ratio: There is increase in gross profit

ratio.

Net Profit Ratio: Net Profit Ratio is approximately

doubles from previous year.
Suggestions
Overall position of company is normal but it ii required to
plan more strategically to improve its profits.

Company can extend its credit payment period so that liquid

assets i.e. cash can be used by firm for other productive
operations

 Debtors are paying in short time and it is good for company

as it reduces the risk of bad debts. Company can form strategy
on this basis regarding improvement in financial and
relationship growth. It will help to have a competitive place in
market.