A

PROJECT REPORT
ON
WORKING CAPITAL MANAGEMANT
For
KISHOR INDUSTRY PVT LTD
SUBMITTED TO

UNIVERSITY OF PUNE
IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF
MASTER OF BUSINESS ADMINISTRATION (M.B.A.)
UNDER THE GUIDANCE OF
PRF M. YAWALKAR

-SUBMITTED BYJADHAV PRAVIN KISAN

Submitted to

MATOSHRI COLLEGE MANAGEMENT

Department of MBA
2013-2015

(Yeola)

MATOSHRI COLLEGE MANAGEMENT, Yeola

DEPT. OF MBA

Certificate

This is to certify that Mr. _JADHAV PRAVIN KISAN_

has submitted a summer project on WORKING CAPITAL MANAGEMEN_( to University of Pune
for the partial fulfillment of Master of Business Administration (M.B.A.).
We further certify that to the best of our knowledge and belief, the matter presented in this project
has not been submitted to any other Degree or Diploma course.

M.YAWALKAR
HOD

ACKNOWLEDGEMENT

I wish to express my sincere appreciation & gratitude to all those with whom I interacted & whose
thoughts & insights me add value to my knowledge.
My grateful acknowledgement to Mr. Kamal Kishor Kabra. Managing Director,
KISHOR INDUSTRY PVT LTD for giving me an opportunity & guides me during my training.
My deepest sense of gratitude to Prof. Yawalkar sir my internal project guide, for extending
his valuable guidance & support, without his project would not have assumed its shape. I would also
like to thank all the staff from .Kishor Industry Pvt Ltd who helped me in my work.
I would also like to extend my acknowledgement to my family & friends whose
encouragement & co-operation helped me complete this project successfully.

PRAVIN JADHAV
MBA2013-15

Declaration

I undersigned hereby declares that, the project titled A Study on

Working Capital

Management is executed as per the course requirement of Two year full time MBA program

of University of Pune. This report has not submitted by me or any other person to any other
University or Institution for a degree or diploma course. This is my own and original work.

Place:
Date: -

p
INDEX

Sd. JADHAV PRAVIN KISAN

MBA-2013-15

Sr. No.

Chapter Name

Page No.

INTRODUCTION

INDUSTRY PROFILE

COMPANY PROFILE

PRODUCT PROFILE

OBJECTIVE OF THE STUDY

RESEARCH METHODOLOGY

6.1

PRIMARY DATA

6.2

SECONDARY DATA

6.3

LIMITATIONS OF THE STUDY

THEORETICAL BACKGROUND

DATA

INTERPRETATION
FINDINGS

10

SUGGESTION

11

CONCLUSION

12

ANNEXURE

ANALYSIS

1) BIBLIOGRAPHY

INTRODUCTION
1.1

OBJECT OF THE PROJECT

AND

In master of Business Administration theoretical knowledge is not sufficient. Practical

knowledge got by the project is very useful in our future. MBA has to play quite responsible role as a
manager, so that practical knowledge is must for management student.
During the project we come across different real life problems. This practical knowledge helps us in
future to overcome such problems in the corporate world.
The objective of the project work is as follows:

1. To enable the MBA student to test their theoretical knowledge in practical.

2. To provide training to student by the company, this is very useful in their future.
3. Preparation of project report is mandatory for every MBA student, that is why the primary
objective of any project is fulfill the requirement of the syllabus with the grasping the
knowledge.

1.2

SELECTION OF THE TOPIC

Topic selection is one of the important aspects of my project. As it decides the course of action is to
be followed. The topic given by my project guide was study of working capital Management by The
Kishor industry.
Any Nationalize Company, private sector Kishor industry etc. provides working capital
management goods and serves to the organizations or companies. The working capital is required for
each and every industry and unit for their day to day operation. Company helps to meet their
financial need by financing them, so that they can run their business unit smoothly wit out any
scarcity of working capital.
In our economy companies are the golden source which can help us to fulfilling our demand by
providing us financial service i.e. loan for a certain period of time then we have to repay the sum in
installments with interest or as per the rule held by the company.
Analyzing, how Kishor industry working capital to business unit is important topic for the
management students who may have an opportunity to work in companies.
Under this study, I analysis the financial position of the companies or orgniasations to whom Kishor
industry was going to finance. This analysis was very essential for the sanctioning of the required
fund to the business unit.

INTRODUCTION OF PROJECT

The current study contributes to the literature by examining impact of working capital
management on the operating performance and growth of new public companies. The study also
sheds light on the relationship of working capital with debt level, firm risk, and industry. Using a
sample of a manufacturing, the study finds a significant positive association between higher levels of
accounts receivable and operating performance. The study further finds that maintaining control (i.e.
lower amounts) over levels of cash and securities, inventory, fixed assets, and accounts payables
appears to be associated with higher operating performance, as well. We find that the firms which are
experiencing unusually high growth tend not to perform as well as those with low to moderate
growth. Further firms which are experiencing high growth tend to hold higher levels of cash and
securities, inventory, fixed assets, and accounts payables. These findings tend to suggest that firms
are willing to sacrifice performance (accept low or negative operating returns) to increase their
growth levels. The higher level of growth is also associated with higher operating and financial risk.
The findings of this study suggest that perhaps the firms should stay more focused on their operating
performance than on maintaining high growth levels.
Working capital policy refers to the firm's policies regarding 1) target levels for each category
of current operating assets and liabilities, and 2) how current assets will be financed. Generally good
working capital policy (i.e. under conditions of certainty) is considered to be one in which holdings
of cash, securities, inventories, fixed assets, and accounts payables are minimized.
The level of accounts receivables should be used as a means of stimulating sales and other
income. Previous literature on working capital management has found a negative association,
overall, between level of working capital and operating performance as measured by operating
returns and operating margins (Peterson and Rajan,). Under conditions of certainty (i.e. sales, costs,
lead times, payment periods, and so on, are known), firms have little reason to hold more working
capital than a minimum level.
The management of working capital plays an important role in the maintaining the financial health of
the firm during the normal course of business.
A study of working capital is of major importance of internal and external analysis because of
its relationship with the current day to day operations of business.
The study of management of working capital covers areas like cash management, Accounts
receivables, inventory and other concerned areas. Thus, working capital is of paramount importance
to a firm's financial performance.

In working capital analysis the direction of change over a period of time is of crucial
importance. Working capital is one of the important fields of management. It is therefore very
essential for an analyst to make a study about the trend and direction of the working capital. The
working capital trend analysis represents a picture of variation in current assets, current liabilities
and working capital over a period of time. Such an analysis enables us to study the upward and
downward trend in current assets and current liabilities and its effect on the working capital position.

OBJECTIVES OF THE STUDY

To study the methods of working capital Management by Kishor industry pvt.ltd to required business
unit.
1. To have a comprehensive understanding of the organization.
2. To know its product profile as well as organizational structure.
3. To study the working capital management of Kishor industry Pvt Ltd. To Determining
the relationship between the current assets and current liabilities and hence liquidity is
determined.
4. To study the optimum level of current assets and current liabilities of the company.

SCOPE
The scope of study project repot on topic working capital management to manage
to all Important point of view
1) The management of working capital helps us to maintain the working
capital at a satisfactory level by managing the current assets and
current liabilities. It also helps to maintain proper balance between
profitability, risk and liquidity of the business significantly.

2) By managing the working capital, current liabilities are paid in time. If

the firm makes payment to it creditors for raw material in time, it can
have the availability of raw material regularly, which doesnt t cause
any

obstacles

in

production

process.

Adequate

working

capital

increases paying capacity of the business but the excess working

capital causes more inventories, increases the possibility of delay in
realization of debts.

3) On the other hand, absence of adequate working capital leads to

decrease in return on investment. The goodwill of the firm is also
adversely affected due to the inability to pay current liabilities in time.

4) Hence, the management of working capital helps to manage all the

factors affecting the working capital in the most profitable manner.

INDUSTRY PROFILE
The Indian plastic industry has taken great strides. In the last few decades, the industry has
grown to the status of a leading sector in the country with a sizable base. The material is gaining
notable importance in different spheres of activity and the per capita consumption is increasing at a
fast pace. Continuous advancements and developments in polymer technology, processing
machineries, expertise, and cost effective manufacturing is fast replacing the typical materials in
different segments with plastics.
On the basis of value added, share of India's plastic products industry is about 0.5% of India's
GDP. The export of plastic products also yields about 1% of the country's exports. The sector has a
large presence of small scale companies in the industry, which account for more than 50% turnover
of the industry and provides employment to an estimate of about 0.4 million people in the country.
Approximately Rs 100 billion are invested in the form of fixed assets in the plastic processing
industry.
History
Indian plastic industry has made significant achievements in the country ever since it made a
promising beginning with the start of production of polystyrene in 1957. The industry is growing at a
rapid pace and the per capita consumption of plastics in the country has increased several times as
compared to the earlier decade. The chronology of production of polymers is summarized as under

1957 - Polystyrene

1959 - LDPE

1961 - PVC

1968 - HDPE

1978 - Polypropylene

Currently, the Indian plastic industry is highly fragmented with an estimate of around 25,000 firms
and over 400,000 employees. The top 100 players of Indian plastic industry account for just 20% of
the industry turnover. Barring 10 to 15% of the firms that can be categorized as medium scale
enterprises, most of the units operate on a small scale basis.

The immense potential of Indian plastic industry has motivated Indian manufacturers to acquire
technical expertise, achieve superior quality standards and build capacities in different facets of the
booming plastic industry. Substantial developments in the plastic machinery sector coupled with
matching developments in the petrochemical sector, both of which support the plastic processing
industry, have facilitated the plastic processors to develop capacities to cater both the domestic as
well as overseas exports.
Exports
In the calendar year 2006, the value of world plastic export was US$ 375 billion. However the share
of India was less than 1 % with exports of worth US$ 3.187 billion. The percentage of growth in
export was 21 %. During this trend of growth in exports, the export of plastics raw material increased
from 55 % to 60 % of the total export of plastic goods, while the export of processed plastic goods
has registered a negative growth from 45 % to 9 %. According to recent reports, the industry is said
to be losing an opportunity of USD 300 million through value addition on the raw materials that are
exported.
Indian plastic exports were valued at about US$ 532 million during FY 2004 (1st half FY2005
exports US $ 295 million). With significant capacity additions leading to over-capacity in domestic
markets during FY2001 and beyond, polymer exports have increased considerably. However, due to
the lower competitiveness of the plastic products industry, polymers have been exported directly.

Indian plastic industry Products

The major plastic products that India export are Raw Materials - PVC, polypropylene, polyethylene, polystyrene, ABS, polyester chips, urea / phenol
formaldehyde, master batches, additives, etc

Packaging - PP / HDPE woven sacks / bags / fabrics,

poly-lined jute goods, box strapping, BOPP tapes, a
range of plastic sheeting / films (of PVC, PP, HDPE,
nylon, FRP, PTFE, acrylic, etc.), pouches, crates,
bottles, containers, barrels, cans, carboys, shopping /
carrier / garbage bags.
Films - Polyester film, BOPP film, mesh, metalized /
multilayer films and photo films
Consumer Goods - Toothbrushes, cleaning brushes, hair brushes, nail / cosmetic brushes, combs,
molded furniture (chairs, tables, etc.) house ware, kitchenware, insulated molded house ware,
microwave re-heatable containers, mats and mattresses, water bottles, gifts and novelties, a range of
stationery items like files, folders, mathematical instruments, etc. Writing Instruments - Pens, ball
pens, markers, sign pens, refills, etc. Travel ware - Molded luggage, soft luggage, a range of bags
like school bags / ladies handbags, wallets, etc. Leather Cloth / Artificial Leather Floor Coverings Vinyl floor coverings and linoleums
Foam Boards Drip Irrigation Systems / Components Pipes & Pipe Fittings - Made of PVC, HDPE,
PP, FRP, nylon Water Storage Tanks Toys and Games Engineering Plastics - Auto components, parts
for various machinery / equipment in telecommunications, railways, electronics, etc.
Electrical Accessories FRP / GRP Products - Safety helmets / equipment, pipes, storage tanks, etc.
Sanitary Fittings - Cisterns, toilet seats, bathroom fittings, etc. Construction - PVC profiles, doors,
windows, etc. Tarpaulins Laminates Fishnets / Fishing Lines Cordage / Ropes / Twins Eyewear Lenses, spectacle frames, goggles, etc. Laboratory Ware Surgical / Medical - Disposable syringes,
blood / urine bags, I.V. sets, etc.
Trends in Indian Export of Plastic Products -

Future Forecast
The Indian plastic industry clearly has th e potential to continue its fast growth. However, over the

next few years, competition in the industry is expected to increase considerably, as a result of global
trends, which will become applicable to the liberalizing economy of country. To survive the
competition, both polymer manufacturers and processors will need to adopt radically new methods
and approaches to reduce costs, improve market and customer service and management of
performance.
The per capita consumption of plastics in India is well below the world average. However it also
reflects the many years of growth ahead, as the country's economy continues to grow and upgrade
the usage of products. Translating the expected growth rate into incremental demand, it is obvious
that the country will remain one of the largest sources of additional demand for almost all kinds of
plastics.
Hence, it is clear that plastics will continue to be a growth industry, with boosting prospects for fresh
investments in polymerization and downstream processing capacity. This is in contrast to the
situation in various other countries, where growth prospects are limited, either because of stagnant
demand or due to the historical over building. In such countries, the overall outlook would be far less
promising, with the key imperatives being
Brief introduction
The Indian Plastic industry is facing severe demand crunch in
the domestic industry for quite some time. Demand for major polymers was
10% lower in Q2 this financial year as compared to the same period last
year. The slowdown demand is adversely affecting the industry comprising
of 15 raw material producers and there are about 26,000 processing units in
the country with adverse impact on the employment of 3.3 million people
associated with this industry. The contribution of the plastic industry in the
economic growth of countries the world has been great.
With a population over one billion where 40% are under age 15, opportunities for
plastics producers in India include near-term rapid growth in the nation's internal consumption of
plastic products and the Indian middle class is 300 million and rising, and the annual GDP growth
rate is 8%.

COMPANY PROFILE

ORGANISATION STRUCTURE
CHAIRMAN
BOARD OF DIRECTOR
MANAGING DIRECTORS
REQISTAR OF-OPERATIVE
SOCIETY

GENERAL
MANAGER

GENERAL
MANAGER

GENERAL
MANAGER

FINANCE
MANAGER

MARKETING
MANAGEMENT

SALES
MANAGER

PARCHASE
MANAGER

FINANCE
MANAGER
ADVERTISING
MANAGER

HUMAN
RESOURCE
MANAGER
HUMAN
RESOURCE
EXICUTIVE

History:- THE COMPANY ;- KISHOR INDUSTRY established in 1986 kishor industry

earned a good name for making highly productive and reliable moulds we

design &

manufacture plastic injection moulds for clamping tonnages up to 500 our tram of experienced
technicians machinists &die make contributes more than 100 man years experience to ensure
technically sound moulds for you
We have made quality moulds for components in polycarbonates polyamides abs
polyacental pc abc blends glass & mine filled nylons PB t\ etc

Experience:Modal design
Die costing tool man manufacture
Modal flow analysis
Modal manufacture
Our Strengths :

Fast deliveries- we can make an averagely complex mould within 25 days.

On-time deliveries

Complete service from mould design to in-house validation.

Our experience with a wide variety of polymers and applications

Core Capabilities :

Creation of 3D models from proto samples

Mould Design

Design validation: Mould flow analysis

Manufacturing and assembly of moulds

Mould Validation

Other Services :

Mould bases/ die sets

Die casting dies

Press tools

Plastic parts

Engineering assemblies

Machines

DMC 63V Deckel Maho Vertical Machining Center. X=630; Y=500; Z=500, Table Size 800
X 600

VF - 3 HAAS Vertical Machine Center X = 1016; Y = 508; Z = 635 - 2 nos.

VF - 6 HAAS Vertical Machine Center X = 1618; Y = 850; Z = 635 - 1 nos.

+GF+ AgieCharmilles Roboform 23UP Die Sinking CNC EDM. Work size 630 x 400.

+GF+ AgieCharmilles CNC Wire EDM Machine CUT 20P.

EDM drilling machine: 0.3mm to 10mm holes, up to 300 mm depth.

ZNC Spark Erosion with Orbital Attachment, Tank Size 1000 x750.

Spark Erosion with Orbital Attachment Tank Size 1500 x 1200.

Wire Cut EDM Machine

Spark Erosion Machine.

Bed Milling Machine size - 2000 X 1000

Jig Boring Machine size - 1500 X 1000

Bed Milling Machine, HMT FN3 Heavy duty milling, HMT G17 Cylindrical Grinding, Proth
surface grinder 1200 x 350, Jig boring 800 x 400, Perfect brand Surface Grinding Machine
700 X 1500 , Lathe and other conventional machines.

Mounding machines with clamping tonnages ranging from 15 to 400.

Orbital Riveting machine.

Softwares

Pore Wildfire 5

Think3

Power shape

VISI

Unigraphics

CATIA

Special Facilities

MoldeX 3D: software for mould flow analysis

Rapid-I: Sophisticated 3D profile projector, Magnification 65X, accuracy 5.

:
:
:

:
:

PRODUCT PROFILE

The company product profile produce qualitative product

RESEARCH METHODOLOGY
Definition:

Is defined as highly intellectual human activity used in the investigation of nature & matter
& deals specifically with the manner in which data is collected, analyzed & interpreted.
A careful investigation or inquiry especially through search for new facts in any branch of
knowledge.
Research methodology is a process to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. Why a research study has
been undertaken, how the research problem has been defined. In what way and why the hypothesis
has been formulated, what data have been collected and particular method has been adopted. Why
particular technique of analyzing data has been used and a host of similar other questions are usually
answered when we talk of research methodology concerning a research problem or study.
A research design serves as a bridge between what has been established (the research
objectives) and what is to be done, in the conduct of the study. In this project research done is of
conclusive nature. Conclusive research provides information that help in making a rational decision.
Descriptive design was choose to measure the satisfaction level of customers on the basis of
different parameters such as quality, price, features, technology, after sale services etc.
This design ensured complete clarity and accuracy. It also ensured minimum bias in
collection of data and reduced the errors in data interpretation. Statistical method was followed in
this research because the data was of descriptive nature and it also enabled accurate generalizations.
The present study is outcome of systematic procedures adopted by the researcher,
which include primary data collection as well as secondary data collection. They are explained
below:

What is Research?
Research is any organized enquiry carried out to provide information for solving problems.
Research is a systematic enquiry that provides information to guide decisions. More specifically, it is

a process of determining, acquiring, analyzing and synthesizing, and disseminating relevant data,
information and insights to decision makers in ways that mobilize the organization to take
appropriate actions that, in turn, maximize business performance.
1) Primary data
The primary data those which are collected and for the first time thus happened to be
original in character. There are various methods to collect that data some are as follows.
I.
II.

Observation
Direct communication

III.

Content analysis

IV.

Interviews
In my study, primary data has been gathered through interaction and discussion

with the

executives working in the division. Some important information has been gathered through couple of
unstructured interview of executives.
2) Secondary Data :1) The Auditors Reports & Annual Report for last 2 years used for the study of secondary
data.
2) Cash conversion cycle used for the classification & presentation of the data.
3) The reference book, websites & periodicals used for the study of the cash conversion
cycle.

REASERCH DESIGN:
Definition:

Research design is the master plan of methods, approaches, techniques, variables, data
source, evaluation methodology, timing and costing of all research activities etc. Research design is
the logical and systematic planning and directing of a piece of research.
- American Marketing Association

Research Method Used in the Report:

Descriptive Method
Reason for selecting this method: Descriptive design is used to get an accurate description of a
situation, it helps to minimize the bias and maximize the reliability. Descriptive Research provides
facts or details of a particular event or situation. It gives a description of the state of affairs as it
exists of a particular situation. It includes surveys and fact-finding enquiries to study a particular
situation or event. The researcher has no control over the situation or event. He can only report what
has happened or what is happening. As opposed to exploratory research, descriptive research should
define questions, people surveyed, and the method of analysis prior to beginning data collection. In
other words the who, what, where, when, why, and how aspects of the research should be defined.

LIMITATIONS
1. The study is to be completed within a period of two months, so the scope of study is
determined in such a way that it will be completed successfully in such time limit.
2. The study is limited only to working capital management aspect of the Kishor
Industry Pvt Ltd. Aurangabad
3. The information and data, which is made available by the personnel working in the
organization is only used for this study.
4. During the study the data and information collected by me from company and I have
to rely on it.
5. The confidentiality of data was a concern for the organization. so, the data is based only on
the data provided , i.e. the annual reports

THEORETICAL BACKGROUND
Conceptual Background of Working Capital
Introduction:The financial management of business firms involves: the management of long term assets,
fixed assets, management of capital and management of short term assets and liabilities. The first of
three functions is the capital budgeting, the second is the management of capital structure and the last
but not the least is the management of working capital.
Meaning & Definition: Working capital. Management is the process of planning and controlling the level and mix of the
current assets of the firm as well as financing these assets.
"The portion of firm's current assets which are financed with long term funds
Concepts:The concept of working capital has been a matter of great controversy among the financial experts.
There are two concepts of working capital i.e.
a) Gross Concept
b) Net Concept
a) Gross Concept:The Gross concept of working capital deals with firms current assets. The sum total of current
assets of firm is termed as working capital.

From the perspective of working capital needs, Gross concept of working capital is - the
investment in circulating assets or in inventory and accounts receivables, comprising the opening
cycle of a manufacturing firm. which includes cask short term securities, debtor, bills receivable and
inventories.

b) Net Concept:Net concept of working capital refers to current assets less current liabilities. That means,
working, capital is the difference between resources in cash or readily convertible into cash i.e.
current assets and organizational commitments for which cash will soon be required i.e. current
liabilities.

Net Working Capital = Current Assets - Current Liabilities

Current liabilities are those claims of outsiders which are expected to mature for payment within
an accounting year and include creditors, bills payable, bank overdrafts and outstanding expenses.
Thus, according to net concept of working capital represents excess of current assets over
current liabilities.
So, there is no universal concept of working capital that is accepted widely. Some have made
it quite simple stating it is the difference between current assets and current liabilities. Others
consider it as being equal to the total of current assets.

CONSTITUENTS OF CURRENT ASSETS:1) Cash in hand and cash at bank

2) Bills receivables
3) Sundry debtors

4) Short term loans and advances.

5) Inventories of stock as:
6) Temporary investment of surplus funds.
7) Prepaid expenses
8) Accrued incomes.
9) Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working capital is
the excess of current assets over current liability, or, say:
Working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are intended
to be paid in the ordinary course of business within a short period of normally one accounting year
out of the current assts or the income business.
CONSTITUENTS OF CURRENT LIABILITIES
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3.

Dividends payable.

4. Bank overdraft.
5. Bills payable.
6. Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits. The
gross concept is sometimes preferred to the concept of working capital for the following reasons:

It enables the enterprise to provide correct amount of working capital at correct time.
1) Every management is more interested in total current assets with which it has

to operate then the

source from where it is made available.

2) It take into consideration of the fact every increase in the funds of the enterprise would increase its
working capital.
This concept is also useful in determining the rate of return on investments in working
capital. The net working capital concept, however, is also important for following reasons:
1) It is qualitative concept, which indicates the firms ability to meet to its operating expenses and
short-term liabilities.
2) It indicates the margin of protection available to the short term creditors.
3) It is an indicator of the financial soundness of enterprises.
4) It suggests the need of financing a part of working capital requirement out of the permanent sources
of funds.

Types of Working Capital:The term working capital is broadly classified under two heads as under:a) On the basis of concepts
b) On the basis of time
(a) On the basis of Concepts:On the basis of concepts the working capital is divided in two types. They are:
i) Gross Working Capital:The gross working capital refers to investment in all the current assets taken together. The
total of investments in all current assets is known as gross working capital.
ii) Net Working Capital:The term net working capital refers to excess of total current assets over total current
liabilities.
b) On the basis of time:From the point of view of time, the working capital can be divided into two categories:
i) Permanent Working Capital:-

It also refers to Hard core working capital. It is that minimum level of investment in the
current assets that is carried by the business at all the times to carry over minimum level of its
activities.

ii) Temporary Working Capital:It refers to that part of working capital, which is required by a business over & above
permanent working capital. It is also called variable working capital. Since the volume of temporary
working capital keeps on fluctuating from time to time according to business activities it may be
financed from short-term sources.

Factor of working capital:The total working -capital requirement is determined by a wide variety of factors. It should be
noted that these factors affect different enterprises differently.
The following is the description of the factors, which generally influence the working capital
requirements of the firms.

A) Internal Factors:1) Nature of EnterpriseThe working capital requirements of a firm basically influenced by the nature of its firm. For
example, trading and financial firms require a lower investment in working capital but in the case of
manufacturing concern. Have to invest substantially in working capital.
2) Production Cycle
Longer the manufacturing process the higher would be the requirements of working capital.
This is the reason why highly capital-intensive industries require a large amount of working capital
to run their sophisticated and long production process.

B) External Factors:1) Business Cycle FluctuationsBusiness fluctuations lead to cyclical and seasonal changes in production and sales and affect the
working capital requirements. Most firms experience seasonal and cyclical fluctuations in the
demand for their products and services.
These business variations affect specially the temporary working capital requirements of the firm.

2) Supply ConditionsThe inventory of raw materials, spares and stores depends on the condition of supply. If the
supply is prompt and adequate the firm can manage with small inventory hence the lower
requirements of working capital.
If the supply is unpredictable the firm, would have to acquire stocks as and when they are
available and carry the inventory for longer period. This policy is followed when the raw material is
available only seasonally.
3) Technological DevelopmentChanges in technologies may lead to improvements in processing raw materials, minimizing
wastages, greater productivity, more speed of production. All these improvements may enable the
firm to reduce investments in inventory. Thus changes in technology affect the requirements of
working capital.
Importance of working capital:The management of working capital plays an important role in the maintaining the financial
health of the firm during the normal course of business.

A study of working capital is of major importance of internal and external analysis because of
its relationship with the current day to day operations of business.
The study of management of working capital covers areas like cash management, Accounts
receivables, inventory and other concerned areas. Thus, working capital is of paramount importance
to a firm's financial performance.
Operating Cycle: The term operating cycle is also known as 'Cash Cycle'. The term capital cycle or operating
cycle refers to the length of time between the firms paying cash for raw materials, applying those
materials into production process, stock and inflow of cash from debtors.
The operating cycle is the average time between purchasing or acquiring inventory and
receiving cash proceeds from the sale of finished products.
The operating cycle consists of the following events which continues throughout the life of
business
Conversion of cash into raw materials;
Conversion of raw materials into work in progress;
Conversion of work in progress into finished products;
Conversion of finished products into account receivables through sales;
Conversion of account receivables into cash
Account Receivables (S. Debtors)

Cash

Sales

Finished Production

Raw Materials

Work in process

Operating Cycle of Working Capital

Thus there is complete cycle form cash to cash wherein cash gets converted into raw
materials, work-in-progress, finished products, debtors and finally into cash again.

CASH

CONVERSION

CYCLE

IN

MANUFACTURING

INDUSTRY

DATA ANALYSIS
Introduction: The calculation of Working capital is considering the following way. There are several
ratios at the disposal of an analyst but their group of ratio he would prefer depends on the
purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond
the scope of this section, we will focus on a technique, which is easy to use. It can provide
you with a valuable investment analysis tool.

Data analysis: It is a simple arithmetical expression of one number to another. The technique of ratio
analysis can be employed for measuring short term liquidity or position of the firm. The
following analysis may be calculated for this purpose:-

LIQUIDITY RATIOS.

PROFITABILITY RATIOS BASED ON SALES.

COVERAGE RATIOS.

OVERALL RETURN/PROFITABILITY RATIOS

WORKING CAPITAL ANALYSIS OF KISHOR INDUSTRY PVT LTD

LIQUIDITY RATIOS:Current Ratio:Current Assets

Current Ratio =

-----------------------------Current Liabilities

Particulars

2012-13

2011-12

Current Assets

33169.70

26904.30

Current Liabilities

19225.66

23659.45

Current Ratio=

1.72:5

1.14:1

35000
30000
25000
20000
Current Assets
15000

Current Laibilities

10000
5000
0
2012-2013

2011-2012

Figure No. 1

Current Ratio=
2
1.8

1.72

1.6
1.4
1.14

1.2

Current Ratio=

1
0.8
0.6
0.4
0.2
0

2012-13

2011-12

INTERPRETATION
1) The standard of current ratio of industry is 2:1 but here we can see the
current ratio of THE Kishor Industry .ltd Kishor Industry has higher
than the ratio.

2) But as the point of view of the company the current ratio is increasing and its the
good sign that company want to maintain standard .
3) The major point of increasing current ratio is the current assets increased more
proportionate than the current liabilities

2. Quick Ratio:-

Quick Assets
Quick Ratio=

----------------------Quick Liabilities

2012-13

Particulars

201112

Quick Assets

15899.45

12371.
89

Quick

19225.66

Liabilities

15744.
29

Quick Ratio=

0.82:1

0.78:1

TABAL 2

Quick Ratio=
0.83
0.82
0.81
Quick Ratio=

0.8
0.79
0.78
0.77
0.76
0.75

2012-13

2011-12

INTERPRETATION

2012-13

2012-11

1) The Quick Ratio of the Company shows the very good liquidity position of
the company.
2)

Creditors point of view this ratio is very good, because company.

maintain this ratio over the standard.

PROFITABILITY RATIOS BASED ON SALES

1 Gross Profit Ratio:Gross Profit Ratio= (Gross Profit/Sales)*100

(
Particulars

2012-13

2011-12

GrossProfit
Sales

16229.52
121786.5
13.58%

13626.78
100286.88
13.32%

GP Ratio

TABAL 3

GP Ratio
13.60%
13.55%
13.50%
13.45%
13.40%
13.35%
13.30%
13.25%
13.20%
13.15%

GP Ratio

2011-12

2012-13
(Graph)NO 3

2010-11

2011-11

INTERPRETATION
1) Gross Profit of KISHOR INDUSTRY pvt.ltd. has showing increase in 20122013

2. Net Profit Ratio:Net Profit Ratio=(Net Profit/Sales)*100

Particulars

2012-13

2011-12

Net Profit After Tax

8748.5

7241.51

Sales

121786.7

100286.88

NP Ratio=

7.22%

7.18%

NP Ratio=
7.22%
7.21%
7.20%

NP Ratio=

7.19%
7.18%
7.17%
7.16%
7.15%
2010-11

2012-13

2011-12

2011-12

GRAPA 5

INTERPRETATION
Net profit margin of Kishor Industry. Increasing means Kishor Industry .ltd. has very good return
to owners.
In year 2012-2013, Net profit margin of. Kishor Industry Increase.

Inventory Turnover Ratio

Inventory Turnover Ratio=
(Cost of Goods Sold/Average Inventory).

Particulars

2012-13

2011-12

Material Cost

88350.51

72794.12

15901.19

13403.61

5.55

5.43

& Operating
Expenses
Average
Inventory
Turnover
ratio
(Graph )

Inventory Turnover ratio

Inventory Turnover ratio

5.6
5.5
5.4
5.3
2011-12

2012-13

2010-11

2011-12

GRAPE NO

INTERPRETATION
1)

Inventory turnover ratio has shown that, company utilize

inventory very fast year by year.

2) Inventory turnover is increasing in 2012-2013 year

because; the cost of goods

sold has increased.

3) The reason of cost of goods sold increased i.e. increasing in sales which is very
good as point view of the Kishor Industry

Inventory Holding Period=

Inventory Holding Period=

(Inventory * 365days/COGS)

(Table )
Particulars

2012-13

2012-13

Inventory*365Day

3151820.6

2652115.5

COGS

44175.25

36397.06

IHP Ratio=

30Days

32Days

(Graph )

IHP Ratio=
32.5
32
31.5
IHP Ratio=

31
30.5
30
29.5
29

2013-12

2012-11

INTERPRETATION
1) Here Inventory ratio has showing the fluctuation trend.
2) we can see inventories has increased more proportionate than
cost of goods sold , thats mean KISHOR INDUSTRY PVT LTD.ltd.
had more inventory hold.
3) In the year 2011-2012 the inventories has increased by where as
the cost of goods sold has increased by

thats in this year the

number of days has decrease

3 . Working Capital Turnover Ratio=

Working Capital Turnover Ratio=
( Net Sales/Net Working Capital)

Particulars

2012-13

2011-12

Sales
Net

121786.7

100286.88

6972.02

6489.16

17.46

15.45

Working

Capital
WC Ratio=

WC Ratio=
18
17.5
17

WC Ratio=

16.5
16
15.5
15
14.5
14

2012-13

2011-12

GRAPE NO

INTERPRETATION
2) The working capital turnover ratio had increased in the year 201213

3) The working capital turnover ratio of the year 2011-12 has

decreased net working capital has increased more proportionate
than sales although working capital turnover ratio has decreased
in the 2011-2012 but as the point of view of the liquidities has
increase

5 Debtors Turnover Ratio

Debtor Turnover Ratio=

(Credit

Sales/Average Accounts Receivable)

Particulars

2012-13

2011-12

Total Sales

121786.7

100286.88

Debtors

7111.37

16176.85

Debtors

17.12

16.23

Turnover ratio

Debtors Turnover ratio

17.2
17
16.8
16.6
16.4
16.2
16
15.8
15.6

Debtors Turnover ratio

17.12
16.23

2013-12

2011-12

INTERPRETATION
Debtors Turnover Ratio has shown the increasing trend.
If we see the debtors turnover ratio of Kishor Industry is good because of sales
increasing year by year.
Kishor Industry Pvt Ltd provides different credit facility to their different type of
customer, as we see it is slowly collect fund from debtors.

 Debtors Turnover ratio increasing is good at the point of view of the company Kishor
Industry Pvt Ltd .ltd. Company is collecting debt from its customers rapidly. So, it
will help save the bad debt.

4)

OVERALL RETURN/PROFITABILITY
1 Total Assets Turnover Ratio=
Total Assets Turnover Ratio=
Assets)
(Table )

Particulars
Sales
Total Assets
TA
Turnover
Ratio

2012-13

2011-12

121786.7

100286.88

54017.28

33854.79

2.25

2.96

( Sales/Total

Turnover Ratio
3
2.5
TATurnover Ratio

2
1.5
1
0.5
0
2011-12

2010-11

(Graph)
2012-13

2011-12

INTERPRETATION
1) Here we can see total assets has increased more proportionate than sales
hence the ratio has decreased.

7000
6000
5000
4000
NET WORKING CAPITAL
3000
2000
1000
0
2011/12

2012-13

2010/11

2011-12

INTERPRETATION
Kishor Industry pvt ltd net working capital has increasing year by year.
1. Kishor Industry Pvt Ltd has expanding thats why working capital increasing continuously.
2. Increasing working capital means Kishor Industry Pvt Ltd liquidity position improving.
3. In year 2012-13 current assets increased by 46.85% whereas, current liabilities increased by
9.37%. It means percentage of net working capital of this year increased than previous year.
4. In the year 2012-2013current assets has increased by 23.28% whereas the current liabilities
has decreased by 18.74% and thats the net working capital of this year has increased than
previous year.

DEBTORS=
Particulars

2012-13

2011-12

DEBTORS

7650.61

6572.12

INCREASE

16.41%

13.66%

/
DECREAS
E BY

8000
7000
6000
5000

2012-13

4000

2011-12

3000
2000
1000
0
DEBTORS

INCREASE/ DECREASE BY

GRAPA

INTERPRETATION
Kishor Industry Pvt Ltd debtors have showing increased trend which is very good as point of
view of the company.
Kishor Industry Pvt Ltd debtors have increased because Kishor Industry Pvt Ltd. kept trust on
their customers.

CREDITORS=

Particulars

2012-13

2011-12

CREDITOR

16518.17

20596.20

S
4078.03
DECREASE

25000
20000
15000

CREDITORS

10000
5000
0
2012-13

2011-12

GRAPE

INTERPRETATION
1. Kishor Industry pvt ltd creditors have decreased in year 2012-2013.
2. Increasing trend of creditors is showing that Kishor Industry pvt ltd good name in
the market.

3. Thats why Kishor Industry Pvt Ltd get more credit in market.
4. Increasing trend also showing that all creditors trust Kishor Industry Pvt Ltd

5)

KISHOR INDUSTRY PVT LMT

WORKING CAPITAL ANALYSIS

(Table)

PARTICULARS
A. CURRENT

2012/13

2011/12

ASSETS
Inventories

17270.25

14532.14

Sundry Debtors

7650.61

6572.12

Cash & Bank Balances

697.66

912.61

Loans & Advances

7551.18

4871.15

Total current assets

33169.70

26904.03

LIABILITIES
Current Liabilities

16518.17

20596

Provisions

2707.48

3063.25

Current

19225.66

23659.45

Liabilities (B)
NET
WORKING

13944.04

3244.58

(A)
B. CURRENT

total

CAPITAL
(A-B)
10699.46
INCREASE

14000
12000
10000
8000
6000
4000
2000
0
2012/13

Grape
INTERPRETATION

2012-13

2011-12

2011/12

1) Kishor Industry Pvt Ltds net working capital has increasing year by year.
2) Kishor Industry Pvt Ltd has expanding thats why working capital increasing
continuously.
3) Increasing working capital means Kishor Industry Pvt Ltd liquidity position
improving.
4) In the year 2012-13 current assets has increased whereas the current liabilities has
decreased and thats the net working capital of this year has increased than previous
year.

FINDING
1) Working capital of the company was increasing and showing positive working capital
each year.
2) Positive working capital indicates that company has the ability of payments of short
terms liabilities.
3) Working capital increased because of increment in the current assets is more than
increase in the current liabilities.
4) Companys current assets were always more than requirement and it affected on
profitability of the company.

5) Kishor Industry Pvt Ltd good pay very rapidly to its creditors, it is positive point of
Kishor Industry.
6) Looking to the annual reports & analysis Kishor Industry Pvt .Ltd. is good
progressing and bright future of the company.
7) When comparing Working capital is compared with net sales it is in
increasing trend indicating the effective utilization of the net working
capital.

SUGGESTIONS:1) The present study observed that the position of Kishor Industry Pvt Ltd. Industries. Is
satisfactory except in cash management. Considering the significant role of Kishor Industry
Pvt. Ltd.

Industries. In the economic life of Aurangabad area, the study recommends the

following suggestions.

2) The variations were very high in the cash position of Kishor Industry. Ltd. Industries ltd.
and the cash resources are not use properly. So the study suggests that the cash resources
must be used effectively and by better way.
3)

The study suggests that the other factor of working capital management like Inventory

Management, Receivables Management, and Payables. Management are running effectively

in Kishor Industry Pvt Ltd. Industries ltd. So the efforts must be given to maintain the current
trend in future.

Conclusion:-

As I made the project on Working Capital Management within two months, I found it a very
challenging task.
A study of the Working Capital Management is of major importance to internal and external
analysis because of its close relationship with the day to day operations of a business.
Working Capital may be regarded as the life blood of the company or a business. Its effective
provision can do much to ensure the success of a business while its inefficient management

can lead not only to loss or profit, but also to the ultimate downfall of otherwise might be
considered as this promising concern.

ANNEXURE
Kishor industry Pvt Ltd
BALANCE SHEET
Rs. ( 000)

Particulars

For

Year

For

Year

Ended

Ended

31/3/2013

31/3/2012

SOURCES

OF

FUNDS
SHAREHOLDERS
FUNDS
Share Capital

1270.27

1270.27

Reserves & Surplus

23208.24

17639.28

LOAN FUNDS

24478.5

1859.55

Secured Loans

17661.03

19036.4

Unsecured Loans

7900.83

3869.62

DEFERRED

1988.45

3492.19

TAX

LIABILITY (Net)
APPLICATION OF
FUNDS
FIXED ASSETS

54017.28

Gross Block

60099.05

48293.39

Less : Depreciation

23016.59

20163.2

Net Block

37082.24

28132.38

Add : Capital W-I-P

2617.06

1308.36

Add: Assets held for

76781.99

290.06

57858.80

disposal
INVESTMENTS

3364.49

3361.63

CURRENT
ASSETS,
Inventories

1682.24

14532.14

Sundry Debtors

7650.61

6532

Cash

697.66

912.61

75051.17

4887.15

&

Bank

Balances
Loans & Advances

Less : CURRENT
LIABILITIES

33169.70

26904.03

&

PROVISIONS

Creditors

16518.17

20596.19

Provisions

2707.48

3063.25

1394.04

6489.16

19225.66

67709.59

Profit & loss account

Particulars

For

Year

For Year

Ended

Ended

31.3.2013

31.3.2012

121786.7

100286.8

INCOME
Sales

8
Other Income

2147.33

1621.55

EXPENDITURE

12393.03

101097.6
5

Cost of Materials

7960.89

6578.62

Manufacturing,

105579.41

85819.51

Selling

&

Other

Expenses
PROFIT BEFORE

18354.61

15278.14

825.67

635.13

1905.4

1651.35

137.13

107.94

309.10

274.27

5571.18

4572.81

INTEREST,
DEPRECIATION
& TAX
Interim
Paid

Dividend
on

Equity

Shares
Proposed Dividend
on Equity Shares
Corporate Dividend
Tax Paid
Provision

for

Corporate Dividend
Tax
Transferred

to

General Reserve
Kishor Industry
WORKING CAPITAL
PARTICULARS
A. CURRENT

2012-13

2011-12

ASSETS
Inventories

17270.25

14532.14

Sundry Debtors

7650.61

6572.12

Cash & Bank Balances

697.66

912.61

Loans & Advances

7551.18

4887.16

Total

33169.70

26904.03

assets(A)

current

B. CURRENT
LIABILITIES
Current Liabilities

16518.18

20596.19

Provisions

2707.48

3063.26

Current

19225.66

23659.45

Liabilities(B)
NET
WORKING

13944.04

3244.58

Total

CAPITAL
(A-B)
10699.46
INCREASE

BIBLIOGRAPHY
1) Financial Management- Prasanna Chandra.
2) Financial Management- Satish Inamdar.
3) Annual Report of 2011-12
4) Annual Report of 2012-2013
5) Website are
www.google/working capital .com

OF ABBREVIATION
1. C.A. = CURRENT ASSEST.
2. C.L. =

CURRENT LIABILITIES.

3. G.P.= GROSS PROFIT.

4. N.P = NET PROFIT.
5. W.I.P. = WORK IN PROCESS.
6. W.C. = WOKING CAPITAL.
7. T.A. = TOTAL ASSETS.
8. O.P.= OPERATING PROFIT.

9. C.O.G.S. = COST OF GOOD SOLD.