A STUDY ON WORKING CAPITAL MANAGEMENT IN SMES

A SYNOPSIS

of the
PROJECT

Submitted to

BANGALORE UNIVERSITY

For the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY

Mr. PUROHIT PIYUSHKUMAR N.

(08CQCM6068)

UNDER THE GUIDANCE OF

MRS. KIRAN HIREMATH.

Dayananda Sagar College of Management and Information Technology

Shavige Malleshwara Hills, K.S. layout, Layout, Bangalore – 560078

Academic Year- 2008-2010
INTRODUCTION

SMES

The definition used by the Indian authorities is based on the level of investment in plant,
machinery or other fixed assets whether held on an ownership, lease or hire purchase basis. It
seeks to keep in view the socio economic environment in India, where capital is scarce and labor
is abundant. However, a definition exist only for tiny and small units, medium sized enterprises
are not defined either technically or legally.

Industrial undertaking in which the investment in fixed assets in plant and machinery, excluding
land and building, whether held on ownership terms or on lease or on hire purchase, does not
exceed Rs. 1 Crore.

WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short term financing are referred to as working capital
management. These involve managing the relationship between a firm's short-term assets and its
short-term liabilities. The goal of working capital management is to ensure that the firm is able to
continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt
and upcoming operational expenses.

Significant role in the development of an economy they face many

problems and one such problem is the timely availability of working capital. Funds
employed in current assets constitute working capital. It is infact referred to as life-blood’
or ‘controlling-nerve’ of the unit. The concept used for working capital may be gross
working capital or net working capital. Gross working capital constitutes current assets,
whereas net working capital means current asset minus current liabilities.
RATIONALE AND SIGNIFICANCE OF THE STUDY

SME’s form the back bone of any nation whether developing or developed. But the irony is
that the real issues and problems that SME’s have been facing are not addressed as they
should be. One such problem is the problem of timely availability of working capital.
Finance forms the life line of any business and if it not available when needed the most all
day to day operations are effected and this in turn leads to various other problems (the worst
result due to non-timely availability of working capital could be the closure of the
enterprise). So it is significant to understand the business environment and how it creates a
problem like scarcity of working capital of an enterprise. The study undertaken is also
important so as to ascertain the impact of non-availability of working capital in time to
SME’s, on SME’s, large enterprises and the economy as a whole.

NATURE OF THE STUDY: STATEMENT OF THE PROBLEM

The problem which is addressed in this study is one of the most talked about issue i.e. the
problem of timely availability of working capital to SME’s. The above mentioned problem
will be addressed in this study by a detailed literature review from various available sources
and through a case study of an SME facing this problem.

Objectives
1. To find out Working capital management problems in sme’s.
2. To find out effects of working capital management on profitability of sme’s.
3. To find out effective solutions for working capital management problem in ske’s.
Hypothesis of the study

1. There is no significance co-relation between working capital management and sme’s

problems faced.
2. There is no significance co-relation between working capital management and profitability
of the sme’s.

Methodology

Information and descriptive researcg will be congregate, For fulfilling the above objectives, both
primary and secondary data has been collected. For collecting primary data, Pilot study and
Questionnaire was adopted.personal Interview technique is adopted to meet the respondents and
to collect information. Personal discussion is also made with the different SME organization.

SAMPLE DESIGN

A sample design is define plan for obtaining a sample from a given population. It refers to the

technique or procedure the researcher would adopt in selecting items for sample. Researcher must

prepare a sample design, which should be reliable and appropriate for his research study.

The study is conducted in the AHMEDABAD, NAVSARI, SURAT cities in

GUJARAT. For this study the samples are the SME organization of the AHMEDABAD,

NAVSARI, SURAT cities.

Data collection methods

Primary data

 Questionnaires
 Interviews
 Discussions
 Visits

Secondary data

 Libraries
 Articles
 Research material
 Internet
 Financial Magazines

Organization of the Study

The research comprises of the following chapters:

Chapter – I : introduction.

Chapter – 2 : statement of problems.

Chapter – 3 : objectives.

Chapter – 4 : methodology.

Chapter – 5 : sampling.

Chapter – 6 : plan of analysis.

Chapter – 7 : conclusion.