WORKING CAPITAL MANAGEMENT

AT ING VYSYA BANK

By:
Kanhaiya lal kedia
WORKING CAPITAL MANAGEMENT

Working capital management involves the

relationship between a firm's short-term assets
and its short-term liabilities. The goal of
working capital management is to ensure that a
firm is able to continue its operations and that it
has sufficient ability to satisfy both maturing
short-term debt and upcoming operational
expenses.
 WORKING CAPITAL FINANCING

Working capital financing refers to debt raised

for a period less than one year from term
lending institutions, commercial banks and Non-
Banking Financial Institutions (NBFC) catering
to short term needs of business enterprises.
 
PROCESS OF WORKING CAPITAL
FINANCING

Application for
seeking advance

Post sanction Processing of

follow up application

Sanctioning,
financing and terms
and conditions
 OBJECTIVE OF THE STUDY

To gain an insight into the process of assessment

of the working capital requirements of the
applicant firm and companies

To learn the credit rating techniques adopted by

banks
 SCOPE
Itbrings forth the method to assess the credit
worthiness of the borrowers

Italso helps us understand the risk involved

in sanctioning of advances

It also helps us understand the whole process of

financial analysis is involved in appraising a
loan.
 METHODOLOGY
The methodology adopted for the project
involves the following:
 
 Appraisal of cash credit proposal including the
application papers.
 
 Processing the proposal and analysis of the financial
statement including fixation of the credit limit.
 
 Documentation and disbursement of loans and
advances.
 
 Follow-up process.
CASE ANALYSIS-STARGOLD TEA
COMPANY
Comment on financial performance

SALES(IN CRORES)
700
600
500
SALES(IN
400
CRORES)
300
200
100
0
2006 2007 2008 2009
 CURRENT RATIO
2
1.8
1.6
1.4
1.2
CURRENT RATIO
1
0.8
0.6
0.4
0.2
0
2006 2007 2008 2009
 TOTAL OUTSIDE LIABILITIES/TOTAL
NET WORTH
TOL/TNW
6

4
TOL/TNW
3

0
2006 2006.5 2007 2007.5 2008 2008.5 2009
 NP MARGIN
0.45
0.4
0.35
0.3
0.25 NP MARGIN
0.2
0.15
0.1
0.05
0
2006 2007 2008 2009
 DEBT EQUITY RATIO
3.5

2.5

2 DEBT EQUITY
RATIO
1.5

0.5

0
2006 2007 2008 2009
COMPUTATION OF Z-SCORE
The Altman Z-Score is a tool used to measure the firm's insolvency.
 
Z-Score = A x 3. 3 + B x 0.99 + C x 0.6 + D x 1. 2 + E x 1.4
 
INTERPR ETITION:
 
 Z-SCORE AB OVE 3.0 -The Company is safe based on these financial
figures only.
 
 Z- SCORE BETWEEN 2.7 and 2.99 - On Alert. This zone is an area
where one should exercise caution.

 Z-SCORE BETWEEN 1.8 and 2.7 - Good chances of the company going
bankrupt within 2 years of operations from the date of financial figures
given.
 
 Z-SCORE BELOW 1.80- Probability of financial insolvency is very high.
 
STARGOLD TEA COMPANY

RATIOS 2006 2007 2008 2009 WEIGHTAGE 2006 2007 2008 2009
EBIT/ASSE 0.03 0.03 0.04 0.06 ×3.3 0.1 0.1 0.13 0.2
TS(A)
NET 4.51 4.96 5.82 6.77 ×0.99 4.46 4.91 5.76 6.7
SALES/ASS
ETS(B)
MV OF 0.36 0.34 0.33 0.17 ×9.6 0.22 0.2 0.2 0.1
EQUITY/LI
ABILITIES(
C)
WC/TOTAL 0.26 0.45 0.41 0.27 ×1.2 0.31 0.54 0.49 0.32
ASSETS(D)
RETAINED 0.3 0.29 0.28 0.14 ×1.4 0.42 0.41 0.2 0.2
EARNINGS
/TOTAL
ASSETS(E)
Z-SCORE 5.51 6.16 6.78 7.52
 Z-SCORE
8
7
6
5
Series 1
4
3
2
1
0
2005-06 2006-07 2007-08 2008-09
 FINDINGS

There is a substantial gap between the

sanctioned limit of cash credit and the extent of
their utilization.

There is so much risk involved in sanctioning

loans to borrowers
 LIMITATIONS
The project has the following limitations:

 Limited access to bank data.

 The scope of study is limited to the Ing Vysya Bank,
Allahabad branch.
 Financial information about the banks could not be
revealed because of the privacy policy of the bank.
 The project report has been prepared on information
based on secondary data only.
 Difficult to compare loan policy of different banks
as it is a complete internal affair of the company.
 RECOMMENDATIONS

The bank should strictly ensure that a review of

all borrowers accounts, enjoying working
capital credit limits of Rs10 lac and over from
the banking system is made at least once a year.
 CONCLUSION
After studying the components of working
capital management system of Ing Vysya Bank
Ltd we can say that the company has a sound
and effective policy and its performance is very
good even in this bad recession situation
company has managed to post good profit.
The company is a matured one and it has
contributed well in the countries growth and
development and will also continue to perform
and contribute to the whole nation.