A STUDY ON WORKING CAPITAL MANAGEMENT AT

Submitted in partial fulfillment of the requirement for the award of degree

BACHELOR IN BUSINESS ADMINISTRATION

(Session 2011-2014)

Under Guidance of: Submitted By:

MANOJ CHAUDHARY ANCHAL GUPTA

Asst. Professor Roll No.-11105

PANIPAT INSTITUTE OF ENGINEERING & TECHNOLOGY

CERTIFICATE FROM COMPANY

DECLARATION

I, hereby declare that the Summer Training project entitled “A STUDY ON WORKING

CAPITAL MANAGEMENT AT GAURAV EXPORTS, PANIPAT” is an original work and

the same has not been submitted to any other institute for the award of any other degree & the

information provided in the study is authentic to the best of my knowledge.

(ANCHAL GUPTA)

ACKNOWLEDGEMENT

It gives me a Great pleasure to present this Project Report. It indeed goes without saying that the

success of my study on working capital management at GAURAV EXPORTS, PANIPAT

(HARYANA) was because of direct or indirect guidance of everybody at the company and

institute. I take this opportunity to acknowledgement by their help and valuable assistance in

providing technical input or reviewing the report.

I hereby express my sincere thanks and gratitude towards the management of GAURAV

EXPORTS FINANCE DEPARTMENT for giving me an opportunity for training in their

organization.

My respectful thank to all management and employees of GAURAV EXPORTS for their

valuable assistance, suggestions and their timely guidance in completing my project report.

I am delirious about the tremendous support and guidance provided to me by Mr. MANOJ

CHAUDARY. His expert opinion and effort to direct my views in the right direction helped in

the successful completion of this project

ANCHAL GUPTA

TABLE OF CONTENTS

PARTICULARS PAGE NO.

EXECUTIVE SUMMARY 1-6

CHAPTER1:- INTRODUCTION 7-40

INDUSTRY PROFILE 7-8

COMPANY PROFILE 9-23

INTRODUCTION TO TOPIC 24-40

CHAPTER 2:- LITERATURE REVIEW 41-47

CHAPTER 3:- RESEARCH METHODOLOGY 48-54

CHAPTER 4:- DATA ANALYSIS AND INTERPRETATION 55-80

CHAPTER 5:-FINDINGS, SUGGESTIONS AND

CONCLUSIONS

81-82

CHAPTER 6:- BIBLIOGRAPHY 83

OBJETIVES OF WORKING CAPITAL MANAGEMENT

The goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that working capital is maintained at a satisfactory level.

To determine the adequate or optimum quantum of investment in working capital.

To determine the composition or structure of current assets.

To maintain a proper balance between liquidity and profitability.

To determine the policy or means of finance for current assets.

“Working Capital Management is concerned with problems that arise in attempting to manage the current assets, current liabilities and the inter relationship that exists between them .’’

CHAPTER 1

1.1 INTRODUCTION TO INDUSTRY:-

The textile industry is a group of related industries which uses a variety of natural and/or

synthetic fibers to produce fabric. It is a significant contributor to many national economies,

encompassing both small and large- scale operations worldwide

Subdivision of the textile industry into its various components can be approached from several

angles. The classical method of categorizing the industry involves grouping the manufacturing

plants according to the fiber being processed, that is, cotton, wool, or synthetics. The modern

approach to textile industry categorization, however, involves grouping the manufacturing plants

according to their particular operation:-

Wool scouring

Wool finishing

Dry processing

Woven fabric finishing

Knit fabric

Carpet manufacturing

Stock and yarn dyeing and finishing

India has been well known for her textile goods since very ancient times. The traditional textile

industry of India was virtually decayed during the colonial regime. However, the modern textile

industry took birth in India in the early nineteenth century when the first textile mill in the

country was established at fort glister near Calcutta in 1818. The cotton textile industry,

however, made its real beginning in Bombay, in 1850s. The first cotton textile mill of Bombay

was established in 1854 by a Parse cotton merchant then engaged in overseas and internal trade.

Indeed, the vast majority of the early mills were the handiwork of Parse merchants engaged in

yarn and cloth trade at home and Chinese and African markets.

The first cotton mill in Ahmadabad, which was eventually to emerge as a rival centre to

Bombay, was established in 1861. The spread of the textile industry to Ahmadabad was largely

due to the Gujarati trading class.

The cotton textile industry made rapid progress in the second half of the nineteenth century and

by the end of the century there were 178 cotton textile mills; but during the year 1900 the cotton

textile industry was in bad state due to the great famine and a number of mills of Bombay and

Ahmadabad were to be closed down for long periods.

PRIMARY CONTRIBUTION OF TEXTILE INDUSTRY TO INDIAN ECONOMY:-

The Indian textile industry has a significant presence in the economy as well as in the

international textile economy. Its contribution to the Indian economy is manifested in terms of its

contribution to the industrial production, employment generation and foreign exchange earnings.

It contributes 20 percent of industrial production, 9 percent of excise collections, 18 percent of

employment in the industrial sector, nearly 20 percent to the country’s total export earning and 4

percent to the Gross Domestic Product.

In human history, past and present can never ignore the importance of textile in a civilization

decisively affecting its destinies, effectively changing its social scenario. A brief but thoroughly

researched feature on Indian textile culture.

MARKET SHARE OF COUNTRIES IN TEXTILE INDUSTRY

share

chinaindiapakistankoreataiwanturkeymexicoothers

1.2 COMPANY PROFILE:-

GAURAV EXPORTS is a flagship company. The group is an industrial conglomerate based at

PANIPAT in HARYANA with the turnover in excess of Rs. 3 crore. The fibre work is one of the

oldest and well recognized businesses in India. The company was incorporated in 1998 by Mr.

SUKESH JAIN. He is the company’s present chairman and managing director. The company is

one of the pioneers of the organized Indian woolen hosiery industry.

The company made a beginning as a manufacturer of hosiery items which was followed by

setting up a worsted woolen spinning plant to serve as a backward integration of the existing

manufacturing activities. The company believes that this worsted the woolen spinning in the

northern India.

Matching ahead in the journey pace with overall industrial development in India. The company

is now a vertically integrated woolen textile company, having presence in diverse market, with

wide range of products including woolen hosiery segment, it company starts its operations with

import of raw greasy wool mostly from U.S.A. and the company’s products include various

types of specialty yarns, such as worsted woolen yarn, acrylic yarn, various types of wool based

blended yarn, fancy yarn, hand knitting and hosiery garments etc.

The company subsequently added cotton garments to company’s existing product portfolio

during fiscal year 2002 , which it outsource as per its requirements and sell under company’s

own brand name. Since March 2006, the company has started manufacturing dyed specialty

fabric, which has added to its existing range of product portfolio.

The company’s manufacturing facilities are spread across various locations in and around

PANIPAT in HARYANA, fully backed by the facilities to provide quality products to its

customers. Currently the company has employed over 1000 persons and company’s present

manufacturing facilities include 2648 spindles to manufacture worsted woolen yarn besides

machines, knitting, dyeing and finishing.

LOGO OF THE COMPANY:-

1.2.1 VISION

To be one of the most preferred & trusted exporter of quality products in floor covering, through

continuous improvement driven by the integrity, teamwork and innovation.

1.2.2 MISSION

The handloom and handicraft sector represent an important source of livelihood in India,

especially in rural areas. After agriculture, handicrafts is the second largest employer in rural

India, with many agricultural communities depending on it as secondary form of income

generation during times of drought, lean harvests and famines. Despite a significant contribution

to the national GDP and export earning, little effort has been made to enhance the incomes of

craft workers at a macro level.

The All India Artisans and Craft workers Welfare Association (AIACA) is a membership-based

apex body for the handloom and handicraft sectors. AIACA seeks to represent a range of

organizations in these sectors and to engage in policy advocacy activities aimed at increasing the

domestic and international market for handloom and handicraft products along with improving

the standard of living of craft workers and to explore new and commercially sustainable models

of livelihood promotion.

1.2.3 VALUES

Client Focus – To exceed customer expectations for values and services.

Commitment to Excellence – To deliver world-class results in all we do.

Competitive Advantage – To enable our customers to stay ahead of their competitors by

providing best-in-class products.

Strong Leadership & Teamwork – To foster an environment and culture of collaboration and

mutual accountability.

Performance – To develop plans that delivers better results, and continually strive for personal

and professional development.

Adaptiveness – To enhance the standards continuously, with passion & pride.

1.2.4 ORGANISATIONAL CHART:

BOARD OF DIRECTORS

marketing

export document

s

maintainence

productionpurchases and stores

marketing

research

account record

1.2.5 PRODUCTS:-

Cushion covers

Tufted rugs

Handloom rugs

Bath rugs

Bed covers

Throws

Benchmarking global standards in speed, innovation, technology, quality, consistency and

punctuality, Gaurav Export House offers world class integrated textile solutions.

Keeping abreast with the international trends GAURAV Export House possesses vertically

integrated, state-of-the-art production facilities for Home Textiles, Woven Products, Tufted

Products, Bath mats, Rugs, Terry Towels, Organic towels and Beach towels.

Trusted for over two decades by India's leading exporters and world's leading brands, Abhitex

has today emerged as one of India's leading textile groups.

1.2.6 QUALITY POLICY:-

Gaurav Export House is a house of home furnishing products and Handicrafts for home. With a

huge range of products, the company provides one stop solution for the need of home furnishing

products and Handicrafts. The company believes in quality, innovation and creativity.

Gaurav Export House provides the world-class high-end Home furnishing products. It provides

a range of Rugs and Handicrafts to choose from. It also provides custom-made handicrafts. The

export house works on quality wool and other fine materials. It provides quality with style and

comfort with elegance. It takes proud of its traditional heritage and richly skilled workers. The

products are wonderfully handcrafted by skilled workers giving it the beauty that speaks of its

own unique style and elegance.

The company values its customers and provides for the best quality affordable home furnishing

products, handicrafts and decorative products.

The group is ISO 9000-2008 & 14001:2004 certified by International Organization for

Standardization. The quality has been important to the end product user, whether an individual or

an organization.

Quality can be defined as a combination of the characteristics or properties of a product which

make a product usable. The extent to which a product successfully serves the purpose of the user

during usage is called its “fitness for use”. Therefore the quality of all products may be described

in terms of whether the products are fit for use or not. Fitness for use in the most widely used

concept of quality and is determined by those features of a product that a user can recognize as

beneficial. Fitness for use should be judged from the consumer’s point of view and not from

either the manufacturer or sellers perspective. We are having various in house Departments to

ensure the Quality of Products manufactured at Gaurav Exports.

1.2.7 TESTING:-

The Group's in-house laboratory is well equipped with testing machines on SGS standards .

Testing is dedicated to becoming the market leader.

The company’s technicians are experts in testing to published application standards with great

precision, delivering accurate, dependable results.

Our environmentally controlled laboratory, impeccable service, quick lead-times, and

competitive pricing all combine to provide you with exceptional value for your textile testing

needs.

1.2.8 TRAINING:-

"Progress comes to those who train and train; reliance on secret techniques will get you

nowhere." Working on this principal, the company regularly conducts in-house training to ensure

peak efficiency, manufacturing excellence and to keep its employees abreast of the latest trends

in manufacturing and management practices.

1.2.9 MATERIAL SOURCING:-

Gaurav Exports strong business partnership allows them to procure raw materials directly from

the mills, giving them the benefits of top quality materials as well as cost advantages.

1.2.10 DYEING:-

Well equipped with different types of looms like 35 Shuttle less looms, Sky looms, 2500 Pit

looms , 50 Power looms , 300 Frame looms , 250 Carpet looms and 400 Tufted carpet frame

looms .

Dyeing facility with latest technologies with dyeing capacity of 70 tons per day.

1.2.11 WEAVING AND TUFTING:-

It started tabletop tufting in 1986 and became the first manufacturer of tufted bath rugs in the

country. Today, Tufting Division is a vertically integrated plant with complete in-house yarn

spinning, tufting, dyeing, packing, and container stuffing facilities.

The division has over 250 multi needle table top tufting machines to produce over 200,000 units

of bath rugs per month and a supporting bath rug dyeing capacity of 15 tons a month. Apart from

this, the group also has, USA made, wide width tufting machines. These machines produce

Chenille bedspreads and bath rugs.

1.2.12 FINISHING & PACKAGING

All finished products are being supervised under strict precaution & safety measures are being

followed to ensure a safe product delivery to end-user.

1.2.13 PLANT MACHINERY AND EQUIPMENT:-

UNIT A

Bath mat machines 189

Stitching machines 56

Pit looms 42

UNIT B

Jacquard machines 23

Pitlooms 90

powerlooms 45

Frame looms 60

UNIT C

powerlooms 23

UNIT D

Bath rugs machine 34

UTILITY SECTION

600 KVA generator 1

250 KVA generator 2

1) Weaving machine

2) Pit looms

3) Jacquard machines

4) Tufted machines

5) Power looms

N1

6) Bath mat machines

1.2.14 SAMPLING:-

GAURAV EXPORTS always concentrates n spends manpower/money in sampling, the

company has dedicated sampling units and sampling units are equipped with the latest

technology machines and well-experienced weavers to handle all kinds of samples with a short

lead-time. It has a huge library which can support the latest trends in the market and the buyers

can select the weaves and make the samples with a quick turn around time.

1.2.15 PRODUCTS PROFILE:-

The range of home furnishing products include:-

1) Bed covers : - the decorative bed covers are made in a multitude of fabrics ranging from

cotton, polyester, silk, with different thread counts.

2) Tufted rugs : - Rugs made by hand will always have certain variations in their surface

coloration, the density of hand-knotting of the pile, irregularities in shape along the edges

or borders and differences along the fringes or fringe ends. Tufted rugs are best of them.

3) Handloom rugs : - We are engaged in offering an alluring range of Cotton rugs that are

processed using high grade cotton rugs, which are in turn procured from reliable vendors.

The fine quality of raw material used in the manufacturing process, gives these rags

sturdy and durable texture.

4) Bath rugs :- Bath rugs made exclusively for waterworks have deep pile for comfort and

absorbency and have been made of the finest cotton to ensure a long life.

FEATURES:-

Waterworks most plush bath rugs

Made exclusively for waterworks

Made with the deep pile for comfort and absorbency

Made from finest quality cotton for durability and to ensure long life.

5) Throws: - Accent your furnishings with fabric pieces made from tapestry, upholstery or a

variety of decorating fabrics. These fabric throws create colorful accents for any room

and can be strategically placed to cover worn or stained spots on furniture.

6) Cushion covers: - Beautiful and potent, the range of aesthetically designed cushion

covers is skillfully set in uncommon designs and hues.

1.2.16 ACHIEVEMENTS OF THE COMPANY:-

Gold medal award in 2002-03 for Best Performance over previous year from Handloom Export

Council of India.

1.2.17 SWOT ANALYSIS:-

The SWOT analysis is a valuable step in your situational analysis. Assessing your firm’s

strengths, weaknesses, market opportunities, and threats through a SWOT analysis is a very

simple process that can offer powerful insight into the potential and critical issues affecting a

venture.

The SWOT analysis begins by conducting an inventory of internal strengths and weaknesses in

your organization. You will then note the external opportunities and threats that may affect the

organization, based on your market and the overall environment. Don’t be concerned about

elaborating on these topics at this stage; bullet points may be the best way to begin. Capture the

factors you believe are relevant in each of the four areas. You will want to review what you have

noted here as you work through your marketing plan. The primary purpose of the SWOT

analysis is to identify and assign each significant factor, positive and negative, to one of the four

categories, allowing you to take an objective look at your business. The SWOT analysis will be a

useful tool in developing and confirming your goals and your marketing strategy.

1.2.17.1 SWOT ANALYSIS FRAMEWORK:-

1.2.17.2 ADVANTAGES OF SWOT ANALYSIS:-

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool,

but it involves a great subjective element. It is best when used as a guide, and not as a

prescription. Successful businesses build on their strengths, correct their weakness and

protect against internal weaknesses and external threats. They also keep a watch on their

overall business environment and recognize and exploit new opportunities faster than its

competitors.

SWOT Analysis helps in strategic planning in following manner-

It is a source of information for strategic planning.

Builds organization’s strengths.

Reverse its weaknesses.

Maximize its response to opportunities.

Overcome organization’s threats.

It helps in identifying core competencies of the firm.

It helps in setting of objectives for strategic planning.

It helps in knowing past, present and future so that by using past and current data,

future plans can be chalked out

STRENGTHS: A firm's strengths are its resources and capabilities that can be used as a basis for

developing a competitive advantage . Examples of such strengths include:

1. Indian Textile Industry is an Independent & Self-Reliant industry.

2. Abundant Raw Material availability that helps industry to control costs and

reduces the lead-time across the operation.

3. Availability of Low Cost and Skilled Manpower provides competitive advantage

to industry.

4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber

industry.

5. India has great advantage in Spinning Sector and has a presence in all process of

operation and value chain.

6. India is one of the largest exporters of Yarn in international market and

contributes around 25% share of the global trade in Cotton Yarn.

7. The Apparel Industry is one of largest foreign revenue contributor and holds 12%

of the country's total export.

8. Industry has large and diversified segments that provide wide variety of products.

9. Growing Economy and Potential Domestic and International Market.

10. Industry has Manufacturing Flexibility that helps to increase the productivity.

WEAKNESSES: A firm's strengths are its resources and capabilities that can be used as a basis

for developing a competitive advantage . Examples of such strengths include:-

1. Indian Textile Industry is highly Fragmented Industry.

2. Industry is highly dependent on Cotton.

3. Lower Productivity in various segments.

4. There is Declining in Mill Segment.

5. Lack of Technological Development that affect the productivity and other activities

in whole value chain.

6. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and

transportation Time.

7. Unfavorable labor Laws.

8. Lack of Trade Membership, which restrict to tap other potential market.

9. Lacking to generate Economies of Scale.

10. Higher Indirect Taxes, Power and Interest Rates.

OPPORTUNITIES:

The external environmental analysis may reveal certain new opportunities for profit and growth.

Some examples of such opportunities include

1. Growth rate of Domestic Textile Industry is 6-8% per annum.

2. Large, Potential Domestic and International Market.

3. Product development and Diversification to cater global needs.

4. Elimination of Quota Restriction leads to greater Market Development.

5. Market is gradually shifting towards Branded Readymade Garment.

6. Increased Disposable Income and Purchasing Power of Indian Customer opens New

Market Development.

7. Emerging Retail Industry and Malls provide huge opportunities for the Apparel,

Handicraft and other segments of the industry.

8. Greater Investment and FDI opportunities are available.

THREATS: Changes in the external environmental also may present threats to the

firm. Some examples of such threats include:

1. Competition from other developing countries, especially China.

2. Continuous Quality Improvement is need of the hour as there are different demand

patterns all over the world.

3. Elimination of Quota system will lead to fluctuations in Export Demand.

4. Threat for Traditional Market for Power loom and Handloom Products and forcing

them for product diversification.

5. Geographical Disadvantages.

6. International labor and Environmental Laws.

7. To balance the demand and supply.

8. To make balance between price and quality.

1.2.18 THE WELFARE MEASURES FOR WORKFORCE:-

A. Welfare measures inside the work place and

B. Welfare measures outside the work place

A. Welfare measures inside the work place

1. Conditions of the work environment:

Neighborhood safety and cleanliness

Housekeeping; up keeping of premises

Workshop (Room) sanitation and Cleanliness; temperature, humidity, ventilation,

lighting, elimination of dust, smoke, fumes, gases etc.

Control of effluents.

Convenience and comfort during work that is operative’s posture, seating arrangements.

Distribution of working hours and provision for rest hours, meal times and breaks.

Supply of necessary beverages, pills and tablets like salt tablets, milk, soda etc.

2. Conveniences:

Urinals and Lavatories, wash basins, bathrooms, provision for spittoons; waste disposal.

Provision of drinking water, water coolers

Mobile phones and e – mail facilities.

3. Employment Follow up:

Progress of the operative in his/her work; his/her adjustment problems with regard to

machines and workload, supervisors and colleagues; industrial counseling.

4. Economic Services:

Workmen’s compensation for injury; family assistance in times of need .

B. Welfare measures outside the work place

Housing and water facilities

1.3 INTRODUCTION TO THE TOPIC:-

“A STUDY OF WORKING CAPITAL MANAGEMENT AT GAURAV EXPORTS PANIPAT”

1.3.1 WHAT IS WORKING CAPITAL?

Working capital is how much in liquid assets that a company has on hand. Working capital is

needed to pay for planned and unexpected expenses, meet the short-term obligations of the

business, and to build the business.

In business, two types of assets are used:-

Fixed assets

Current assets

Working capital is an important component of overall financial system. Working capital is also

known ‘WC’, is a financial metric which represents operating liquidity available to business.

fixed asset

s

current

assets

total asset

s

Along with fixed assets such as plant and equipment, working capital is considered as a part of

operating capital. It is calculated as current assets minus current liabilities. If current assets are

less than current liabilities then the entity has a working capital deficiency, also known as

working capital deficit.

1.3.2 CONCEPT OF WORKING CAPITAL:-

Gross concept

Net concept

GROSS CONCEPT:-

According to the gross concept, working capital means total of all the current assets of a

business. It is also called as gross working capital.

NET CONCEPT:-

GROSS CONCEPT

NET CONCEPT

GROSS WORKING CAPITAL = TOTAL CURRENT ASSETS

According to the net concept of working capital , net working capital means the excess of

current assets over current liabilities. According to this concept, if current assets are equal to

current liabilities , working capital will be zero and in case current liabilities are more than

current assets, the working capital will be called negative working capital.

Current assets are those assets which are converted into cash within one accounting period. For

example, stock, debtors, bills receivables, prepaid expenses, cash and bank balance. Similarly,

current liabilities are those liabilities which have to be paid within an accounting year, for

example, creditors, bills payable, short-term loans etc.

Net working capital can also be defined in another manner. Net working capital is

that part of current assets which has been financed from long-term funds. It is, therefore, called

circulating capital.

Gross concept and net concept of working capital have their own significance.

When individual current assets are to be managed, gross concept of working capital is used. Net

concept of working capital emphasizes on how much current assets have to be financed out of

long-term funds under this concept, the relationship between current assets and current liabilities

is established or their liquidity is determined.

1.3.3 NEED FOR WORKING CAPITAL:-

For the different operations of the business, working capital is required along with the fixed

capital. Working capital is needed for the purchase of raw material and payment of various day

to day expenses. There will be hardly any business which does not require working capital. The

need for working capital is different in different businesses. Financial management aims at

maximizing the wealth of shareholders. To achieve this objective, it is necessary to earn adequate

profits. The profits depend largely on sales but sales do not result in cash immediately. To

increase sales, goods are to be sold on credit, the collection of which takes place after sometime.

Thus there exists a gap between sale of goods and realization of cash. During this period

NET WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES

expenses are to be incurred to continue business operations for this purpose working capital is

required.

It can be explained with the help of operating cycle:-

The greater the period of operating cycle, more will be the requirement of working capital.

Business enterprise engaged in trading activities have smaller duration of operating cycle as

compared to those engaged in manufacturing business because in such enterprise cash is directly

converted into finished goods.

1.3.4 TYPES OF WORKING CAPITAL:-

debtors and b/r

cash

raw material

work -in-progress

finished goods

PERMANENT WORKING CAPITAL:-

The requirements for current assets do not remain stable throughout the year and fluctuate from

time to time. A certain minimum amount of raw material , work-in-progress and finished goods

and cash must be maintained regularly in the business so that day to day operations of the

business could continue without any obstacles. The minimum requirement of current assets is

called permanent working capital or regular working capital. The arrangement of permanent

working capital should be made from long-term sources only.

VARIABLE WORKING CAPITAL:-

In certain months of the year , the level of business activities is higher than normal and,

therefore, additional working capital may be required along with the permanent working

capital .It is known as variable or temporary working capital. This part of working capital is

required due to changes in demand and supply of goods on account of change in seasons .

Therefore, it must be financed from short-term sources only so that later it can be refunded when

it is not required.

PERMANENTVARIABLE

It is clear that the need for working capital remains same for whole year whereas variable

working capital needs are sometimes high and sometimes low. In a growing concern, the need

for working capital goes on rising because of increase in the level of business activities. It is

presented in the figure below:-

1.3.5 FACTORS AFFECTING WORKING CAPITAL:-

Business should prepare its financial plan in such a way that it has neither surplus nor inadequate

working capital. The amount of working capital for any business depends upon various factors.

They are:-

(1) Nature of the business: - The working capital requirements of an enterprise basically depend

upon the nature of its business and operating cycle of the business. A trading concern, for

instance, requires large amount of working capital for investment in stocks, receivables and cash

etc. It requires less investment in fixed assets. A business where the proportion of cost of raw

material to be consumed to total cost of production is high, the amount of working capital

required is large, shipbuilding for instance.

(2) Size of the business: - The amount of working capital needed depends upon the scale of

operation of the business. The larger the size of the business unit, generally the larger is the

requirement of working capital and vice versa.

(3) Length of period of manufacture:- If the goods are tied up for a longer period of time in.

the production process such as ship building, heavy armaments, aero planes etc., it requires a

large amount of working capital to meet the manufacturing expenses until the payment is

received for the finished products. In case of short manufacturing process of a commodity such

as cloth, shoes etc. the capital is not tied for a longer period and as such the amount of circulating

capital will be small compared to the ship building industry.

(4) Methods of purchase and sale of commodities: - If a business is able to purchase the raw

material and other allied products on credit and is able to sell the manufactured goods on cash it

will need less amount of working capital In case the raw material is purchased on cash and goods

are sold on credit the amount of required working capital would be large.

(5) Converting working assets into cash: - If the assets of a business have liquidity i.e. they are

readily saleable for cash then less amount will be set aside for working capital. In case the assets

are not quickly saleable for cash then a greater amount f working capital will be required by it.

(6) Seasonal variation in business: - There are certain industries which purchase raw material in

the production season such as cotton, rubber and consume the material in the off season for the

manufacturing of products. These industries require large amount of working capital to purchase

the raw material in a production season and pay the wage costs in the off season.

(7) Risk in business: - A business like the oil exploration involves great risk. The business may

or may not be able to find out the oil by digging of wells: The business needs huge amount of

working capital in such risky enterprises.

(8) Size of labour force:- If the size of labour force employed in the manufacture of a product is

fairly, large, (labour intensive), the business will need a greater amount of working capital. In

capital intensive industries lesser amount of working capital is required.

(9) Price level changes:- If the prices are rising very rapidly in the country the business will

require greater amount of working capital to maintain the same current assets and vice versa.

(10) Rate of turnover:- If in a business, the sale is faster i.e., a business has rapid turn over then

the amount of working capital required may be small as cash is realized from sales. A business

where the rate of turnover is slow there is more requirement of working capital in that business.

(11) State of business activity:- When the business is prosperous it needs more working capital

for increasing the volume of business. On the contrary when the business is slack and sales

decline then less amount of working capital is required.

(12) Business policy:- If a business sets aside funds at the end of each year for the depreciation,

payment of loans and ploughing back of profits in the business, it requires less amount of

working capital. On the other hand, .a business which does not build its own internal resources,

needs larger amount of working capital to meet the day today expenses of the business and other

unexpected expenses.

1.3.6 ADVANTAGES OF ADEQUATE WORKING CAPITAL:-

Investment in fixed assets only is not sufficient to run the business. Working capital or

investment in current assets, howsoever small it is, is a must for purchase of raw materials, and

for meeting the day-to-day expenditure on salaries, wages, rents, advertising etc., and for

maintaining the fixed assets. “The fate of large scale investment in fixed capital is often

determined by a relatively small amount of current assets.” Working capital is just like a heart of

industry if it is weak; the business cannot prosper and survive, although there is a large body

(investment) of fixed assets. Moreover, not only the existence of working capital is a must for the

industry, but it must be adequate also. Adequacy of the working capital is the lifeblood and

controlling nerve center of a business. Inadequate as well as redundant working capital is

dangerous for the health of industry. It is said, ‘Inadequate working capital is disastrous; whereas

redundant working capital is a criminal waste’. Both situations are not warranted in a sound

organization.

The advantages of working capital or adequate working capital may be enumerated as below: -

Cash Discount:

If a proper cash balance is maintained, the business can avail the advantage of cash discount by

paying cash for the purchase of raw materials and merchandise. It will result in reducing the cost

of production. It creates a Feeling of Security and Confidence:

The proprietor or officials or management of a concern are quite carefree, if they have proper

working capital arrangements because they need not worry for the payment of business

expenditure or creditors. Adequate working capital creates a sense of security, confidence and

loyalty, not only throughout the business itself, but also among its customers, creditors and

business associates.

‘Must’ for Maintaining Solvency and Continuing Production:

In order to maintain the solvency of the business, it is but essential that the sufficient amount t of

fund is available to make all the payments in time as and when they are due. Without ample

working capital, production will suffer, particularly in the era of cut throat competition, and a

business can never flourish in the absence of adequate working capital.

Sound Goodwill and Debt Capacity : It is common experience of all prudent

businessmen that promptness of payment in business creates goodwill and increases the

debt of the capacity of the business. A firm can raise funds from the market, purchase

goods on credit and borrow short-term funds from bank, etc. If the investor and

borrowers are confident that they will get their due interest and payment of principal in

time.

Easy Loans from the Banks : An adequate working capital i.e. excess of current assets

over current liabilities helps the company to borrow unsecured loans from the bank

because the excess provides a good security to the unsecured loans, Banks favor in

granting seasonal loans, if business has a good credit standing and trade reputation.

Distribution of Dividend: If company is short of working capital, it cannot distribute the

good dividend to its shareholders inspite of sufficient profits. Profits are to be retained in

the business to make up the deficiency of working capital. On the other contrary, if

working capital is sufficient, ample dividend can be declared and distributed. It increases

the market value of shares.

Exploitation of Good Opportunity : In case of adequacy of capital in a concern, good

opportunities can be exploited e.g., company may make off-season purchases resulting in

substantial savings or it can fetch big supply orders resulting in good profits.

Meeting Unseen Contingency : Depression shoots the demand of working capital

because sock piling of finished goods become necessary. Certain other unseen

contingencies e.g., financial crisis due to heavy losses, business oscillations, etc. can

easily be overcome, if company maintains adequate working capital.

High Morale : The provision of adequate working capital improves the morale of the

executive because they have an environment of certainty, security and confidence, which

is a great psychological, factor in improving the overall efficiency of the business and of

the person who is at the hell of fairs in the company.

Increased Production Efficiency: A continuous supply of raw material, research

programme, innovations and technical development and expansion programmes can

successfully be carried out if adequate working capital is maintained in the business. It

will increase the production efficiency, which will, in turn increases the efficiency and

morale of the employees and lower costs and create image among the community.

1.3.7 MANAGEMENT OF WORKING CAPITAL:-

“A managerial accounting strategy focusing on maintaining efficient levels of both components

of working capital, current assets and current liabilities, in respect to each other. Working capital

management ensures a company has sufficient cash flow in order to meet its short-term debt

obligations and operating expenses”

Implementing an effective working capital management system is an excellent way for many

companies to improve their earnings. The two main aspects of working capital management are

ratio analysis and management of individual components of working capital.

A few key performance ratios of a working capital management system are the working capital

ratio, inventory turnover and the collection ratio. Ratio analysis will lead management to identify

areas of focus such as inventory management, cash management, accounts receivable and

payable management.

1.3.8 APPROACHES TO DETERMINE THE FINANCING OF WORKING CAPITAL:-

1. Matching or Hedging approach:

When the firm uses long term sources to finance fixed assets andpermanent current assets, and

short term financing to finance temporary current assets.

2. Conservative approach:

Under this approach a firm finances its permanent assets and also apart of temporary current

assets with long term financing. It relies heavily on long term financing and is less risky so far as

solvency is concerned, however, the funds may be invested in such instruments, which fetch

small returns to build up liquidity. This adversely affects profitability.

3.Aggressive Approach: The firm uses more short term financing than what is justified, in this

approach. The firm finances a part of its permanent current assets with short term financing. This

is more risky but may add to the return on assets.

1.3.9 PRINCIPLES OF WORKING CAPITAL:-

There are four principle of working capital management. They are being depicted as below:

(i) Principle of Risk Variation: - The goal of WC management is to establish a suitable trade

between profitability and risk. Risk here refers to a firm's ability to honor its obligation as and

when they become due for payments. Larger investment in current assets will lead to

dependence. Short term borrowings increases liquidity, reduces risk and thereby decreases the

opportunity for gain or loss On the other hand the reserve situation will increase risk and

profitability And reduce liquidity thus there is direct relationship between risk and profitability

and inverse relationship between liquidity and risk.

(ii) Principle of Cost Capital: - The various sources of raising WC finance have different cost

of capital and the degree of risk involved. Generally higher the cost lower the risk, Lower the

risk higher the cost. A sound WC management should always try to achieve the balance between

these two.

(iii) Principle of Equity Position: - This principle is considered with planning the total

investment in current assets. As per this principle the amount of WC investment in each

component should be adequately justified by a firms equity position Every rupee contributed

PRINCIPLE OF RISK

VARIATION

PRINCIPLE OF COST CAPITAL

PRINCIPLE OF EQUITY

POSITION

PRINCIPLE OF MATURITY OF

PAYMENT

current assets should contribute to the net worth of the firm The level of current assets may be

measured with the help of two ratios. They are:

· Current assets as a percentage of total assets.

· Current assets as a percentage of total sales.

(iv) Principle of Maturity of Payment: - This principle is concerned with planning the source

of finance for WC. As per this principle a firm should make every effort to relate maturities of its

flow of internally generated funds in other words it should plan its cash inflow in such a way that

it could easily cover its cash out flows or else it will fail to meet its obligation in time.

1.3.10 COMPONENTS OF WORKING CAPITAL MANAGEMENT:-

There are three basic components of working capital management. They are:-

INVENTORY MANAGEMENT:-

Inventory management is the process of efficiently overseeing the constant flow of units into and

out of an existing inventory. This process usually involves controlling the transfer in of units in

Working Capital

Management

Inventory Management

Cash Management

Receivables Management

order to prevent the inventory from becoming too high, or dwindling to levels that could put the

operation of the company into jeopardy. Competent inventory management also seeks to control

the costs associated with the inventory, both from the perspective of the total value of the goods

included and the tax burden generated by the cumulative value of the inventory.

CASH MANAGEMENT:-

The corporate process of collecting, managing and (short-term) investing cash. A key component

of ensuring a company's financial stability and solvency. Frequently corporate treasurers or a

business manager is responsible for overall cash management.

Successful cash management involves not only avoiding insolvency (and therefore bankruptcy),

but also reducing days in account receivables (AR), increasing collection rates, selecting

appropriate short-term investment vehicles, and increasing days cash on hand all in order to

improve a company's overall financial profitability.

RECEIVABLES MANAGEMENT:-

The credit and the collection policies should be properly laid down and effectively implemented

to manage the accounts receivables efficiently. The credit policies should be such which balance

the risk on one hand and profitability on the other hand. The investment in the receivables should

be at the optimum level.

ESTIMATING THE WORKING CAPITAL:-

1.3.11 TECHNIQUES:-

There are certain techniques used for finding the optimum level of working capital or

management of different items of working capital.

Intersection of Carrying Cost and Shortage Cost: One of the important methods of

finding the optimum level of working capital is the point of intersection of carrying cost

and shortage cost in a graphical representation. The total of carrying and shortage cost is

minimum at this point.

Here, the levels of current assets are optimum at the point where the shortage and carrying costs

are meeting or intersecting. At this point, the total cost, as we can see, is minimum and this is

why that level of current assets is considered to be optimal.

Working Capital Financing Policy: Working capital can be divided into two viz.

Permanent and Temporary. Permanent working capital is the level of working capital

which is always required and maintained. Temporary working capital is the part of

working capital which keeps on fluctuating. It is high in good seasons and low in bad

seasons. There are two types of financing available. They are long term financing and

short term financing. Three strategies are possible with respect to financing of working

capital. Efficient financing of working capital reduces carrying cost of capital.

Long term financing is used for both permanent and temporary WC.

techniques

e.o.q.

just-in-time

carrying cost and shortage costworking capital

financing policy

capital budgeting

Long term financing is used for permanent and some part of temporary WC. Remaining part of

temporary WC is financed through short term financing as and when required.

Long term financing is used for permanent and short term financing for temporary WC.

These strategies should be chosen so as to match the maturity of source of finance with the

maturity of the asset.

Cash Budgeting: Cash budgeting is another important technique for working capital

management which helps keeping optimum level of cash in the business. Cash budgeting

involves estimating the requirements of cash by estimating all the fore coming receipts

and payments. For effective management, a balance is needed between both excess and

shortage of cash. It is because both ends are costly. Speeding up of collection and getting

relaxed credit terms from the creditors can reduce the cash requirements.

Inventory Management: Inventory is an important component of working capital or current

assets. Optimum level of inventory can save on costs heavily.

EOQ : Economic Order Quantity (EOQ) model is a famous model for managing the

inventories. It helps the inventory manager know how to find the right quantity that

should be ordered considering other factors like cost of ordering, carrying costs, purchase

price and annual sales. The formula used for finding EOQ is as follows:

EOQ = √{ (2 * A * O) / (P * C)}

A – Annual Sales

O – Cost per Order

P – Purchase price per unit

C – Carrying Cost

Just-in-Time: Just-in-time is another very important technique which brought about

paradigm shift in the management of inventories. It did not reduce cost of inventory but it

abolished it completely. Just-in-time means acquiring raw material or manufacturing

product at the time when it is required by the customer. This strategy is very difficult to

implement but if implemented can bring down inventory cost to minimum levels.

These are some important techniques discussed here. They are very effective in managing

working capital. Managing working capital means managing current assets. Current assets like

cash can be managed using cash budgeting; inventory can managed using inventory techniques

like EOQ and JIT. Debtors and financing of working capital can be managed using appropriate

sources of finance.

Chapter 2

LITERATURE REVIEW:-

Introduction:-This chapter discusses the literature about working capital management. This

literature was obtained from textbooks, and publication, periodicals research reports, the

company financial documents and Internet among others.

2.1 Working Capital Management

Samuels said that funds management is the planning, controlling and the effective utilization of

funds. Money can be earned not only through manufacture and distribution but also through the

management of all its assets that it employees. The best funds management policy is through

funds budgets. A company can decide on the funds that it will have available for short-term

investment at a particular time depending on the nature of business and season. If a business is

seasonal or trade is cyclical, funds budgets will show when the surplus funds that will be

available and what length of time will elapse before they are required. Some companies will

borrow money in case of deficit spending to satisfy their seasonal needs (Samuels, 2006).

Kakuru said that every organization must establish funds management policies or guidelines to

ensure that it has optimal funds balance at any time when it requires it. This can be achieved by

implementing the following funds management policies.  The organization must ensure that it

speeds up funds inflows through efficient credit policy. For example timely preparation and

delivering of customer invoices, making customers to pay their outstanding by allowing funds

discounts. This will enable the firm to keep in a liquid position and carry on its operations

efficiently (kakuru, 2000).

Firms hold funds for primary reasons but although the first two of these are generally satisfied by

holding actual funds (a checking account balance, the last two requirements may be meet, instead

by holding highly liquid marketable securities. Funds inflows and out flows are somewhat

unpredictable with the degree of predictability varying among firms and industries. Therefore

firms need to hold some funds (or more often marketable securities) in reserve for random,

unforeseen fluctuations in inflows and outflows. These ‘safely stock’ of funds are called the

precautionary balance and the less predictable the firm’s funds flows the larger the necessary

funds balance (Bodil, 1995).

Funds balance may also be held to enable the firm to take advantage of any bargain purchases

that might arise, these funds are defined as speculative balances. For example reduction in the

price of raw materials, any profitable short-term investment that may happen, the firm should

maintain such balance to take advantage of the investment opportunities that may

arise( Campsey ,2005).

Lending institutions such as banks, makes money by lending out funds that have been deposited

with it. So the larger its deposits, the better the bank profit position. If a bank is providing

services to a customer, it generally requires the customer to leave a minimum balance on deposit

to help offset the cost of providing the service (Campsey, 2008).

Funds balances are necessary in business operations because payments must be made in funds

and the receipts are deposited in the funds account. These funds balances are associated with

routine payments and collections are known as transaction balances ( Knott,2008).

Although a carefully prepared funds budget is a necessary starting point for managing the firm’s

funds, there are other elements of a good funds management programs. The primary funds

management activities are performed jointly by the firm and its main bank, but the financial

manager is responsible for the effectiveness of the funds management programs. The most

commonly funds management techniques  (Knott ,2008).

One way, in which a firm can keep its funds on hand longer, would simply be by delay

payments, but this would lead to such obvious difficulties as being labeled “a dead beat”. Firms

have always lengthened the collection period for their cheques so as to delay funds out flows.

Payables Centralization permits the financial manager to evaluate the payment coming, one for

the entire firm and to schedule funds transfers to meet the needs of the company wide basis.

Centralizing disbursements also permits more efficient monitoring of payables and float

balances (Van ,2000).

When a firm is actively trying to use floats, it will often arrange with its bank to have the use of

an overdraft system. In such a system, the firm writes cheques in excess of its actual balance and

its bank automatically extends loans to cover funds shortage. The overdraft is sometime interest

free so the firm can use it to carry out its operations, which can yield a return in the long run 

(Sanford etal ,2001).

2.2 Financial Performance  

A customer is the most important visitor on business premises; he is not dependent on business.

Business is dependent on him. He is not an interruption in business work. He is the purpose of it.

He is not an outsider in   business. He is part of it. Business men are not doing him a favor by

serving him. He is doing them a favor by giving them an opportunity to do so (Alm ,2000).

 

The profit motive is not only fundamental to our ability to reward shareholders and pay

employees; it's fundamental to excellent journalism. Far from corrupting the craft, profits

enhance it. Expansion drives diversity and diversity protects and strengthens our craft.

Nevertheless Money is only used for two things. One, it’s to make you comfortable, and the

more comfortable you are the more creative you will become. And the other purpose is it enables

you to extend the service you provide far beyond your own presence (Alm, 2003).

 

The country is now universally recognized as a nation on the move and takes its place amongst

the successful economies in the region. The future potential is enormous but the country's destiny

is in our hands. The time has come to move from small increments to bold, large initiatives. The

time has come to stretch the envelope and set goals which were earlier not seen to be possible.

The time has come for performance to be measured and for allocated funds of the government to

reach the people for whom they were intended (Matovu and Ritva 2001).

The theories discussed so far all recognize that the attitudes and abilities of the business owner

have an important impact on small firm growth and will be reflected in strategic choices and the

ways in which he or she operates the business. The following section will draw from a variety of

theoretical and empirical sources on small firm growth for the purpose of developing expected

theoretical relationships between particular sets of variables, or factors of growth, and business

growth (Matovu and Ritva ,2001).

It has been proposed in the literature that women may have fewer opportunities to develop

relevant experiences, may have fewer networks to get assistance and may have greater difficulty

in assembling resources (Sexton and Robinson , 1989). 

There is some evidence that banks may impose more stringent requirements on women business

owners in regard to collateral for loans, and therefore limit their ability to grow (Riding and

Swift, 1990).

Women may also be more family oriented and be less keen in pursuing economic goals related

to expansion of the firm (Brush, 2002).

Cooperatal found that being female had a negative impact on the growth of small ventures but

had no impact on the survival of the firm (Cooperetal, 2004).

Younger individuals may be more willing to assume risks and grow their business. Following

Davidson's argument, a younger individual may have a higher need for additional income. The

burden of supporting a family and meeting mortgage payments generally declines with age. An

older individual who continues to be the owner- manager of a small firm is more likely to have

reached his/her initial aspirations. However, while younger individuals have more motivation to

expand their business they also may have fewer financial resources and fewer networks. The

limited empirical evidence suggests that the owner-manager's age tends to be negatively related

to growth (Boswell, 2003).

Evidence suggests that immigrants are more likely to become self-employed and that they are

more likely to create higher incomes from this activity than will native entrepreneurs. The

explanation for this differential is that immigrants create enclaves by concentrating in specific

geographic areas, which in turn create and expand opportunities for small entrepreneurial

ventures, in particular for immigrants of the same national background as the residents of the

enclave. However, it is suggested that there may be limits to the growth of entrepreneurial

ventures owned by immigrants as enclaves are in poor locations and offer limited access to the

general market. It is also suggested that immigrants may have fewer contacts and more difficulty

in obtaining insurance, credit from suppliers and access to prosperous customers. No study has

linked immigration status to business growth. However, there is some empirical evidence that

suggests that being part of a racial minority is linked to lower probabilities of both survival and

growth (Cooperetal ,2004).

The effect of education has been widely studied. Education is presumably related to knowledge

and skills, motivation, self-confidence, problem solving ability, commitment and discipline.

Higher education is expected to increase the ability of the entrepreneur to cope with problems

and seize opportunities that are important to the growth of the firm. Empirical evidence on the

effects of education on firm performance is mixed. In ten out of seventeen empirical studies

surveyed, found a positive relationship between prior level of education and firm performance.

He found that having a Bachelor's degree has a positive impact on both survival and growth of

small ventures (Cooperetal, 2004).

According to the small business literature, there is a distinct difference between the small

business owner and the entrepreneur (Birch,2007).

"Income substitute’s" and "entrepreneurs", the former substituting paid-employment income

with business income, the latter being committed to the growth of their business. Similarly, Hay

makes the distinction between "value builders" and "life-style’s." The latter seek long-term

stability instead of growth, and use the business as a means of generating income sufficient to

support a certain "life-style." Canadian evidence supports this finding. In an Ontario survey of

small business start-ups, half of new firm owners intended that their business would simply

generate enough income to make a living for themselves (Blatt, 2003). Therefore, for

entrepreneurial ventures the willingness of the owner-manager to grow is as important as his

ability to foster and manage growth (Hay , 1994).

Entrepreneurial intensity refers to the willingness of the individual to assume risk and be pro-

active as an indicator of commitment to growth McCelland. The level of active risk taking by the

owner-manager may also determine how willing he/she is to tap the various resources necessary

for developing the firm. Active risk taking is demonstrated by the owner-manager's willingness

to accept personal financial risk (McCelland , 2001).

Perren, in sixteen case studies of micro-enterprises, found that active risk taking was a key

factor that conditioned the owner-manager's willingness to tap the physical, material, financial

and intangible resources necessary for firm growth beyond the micro-enterprise phase (Perren,

2005).

It is likely that individuals who hold a concurrent paid-employment job may have neither the

time nor the motivation to invest in the growth of their business. It is likely that some of these

individuals are complementing their paid-employment income with some independent business

income, in order to support a certain lifestyle (Ridingetal 2008).

Management know-how embodied in the entrepreneur may be an important factor in the growth

of the firm. Management know-how may result from having had parents who were entrepreneurs

themselves, or from previous paid-employment experience in a similar business, or by previous

management experience of the owner. Furthermore, management know-how may be acquired

through the owner-manager having access to professional advisors or a network of contacts such

as suppliers, customers, business associations, etc., or from involvement of partners (Matovu

and Ritva, 2001).

A number of studies have shown that entrepreneurs are more likely to be from families in which

the parents owned a business. It is assumed that young individuals develop knowledge of what is

involved in running a business Dushenseau and Gardner and that they are more likely to perceive

entrepreneurship as a viable career choice (Dushenseau and Gardner, 1988).

There is indeed some empirical evidence to suggest that coming from an entrepreneurial family

background increases the likelihood of survival Cooperetal. However, there is little evidence on

the impact of family background on the growth prospects of an entrepreneurial venture. Though

one study has found no relationship between entrepreneurial background and growth of a small

venture Cooperetal, we will test whether coming from a family of entrepreneurs has a positive

impact on business growth (Cooperetal, 2004).

CHAPTER – 3

RESEARCH METHODOLOGY

3.1 MEANING OF RESEARCH

Research in general refers to the search of knowledge. One can also define research as a

scientific & systematic collection of information.

In simple words research is the careful investigation or enquiry of markets especially through

search for new facts in any branch of knowledge.

Research is Scientific and systematic search for gaining information and knowledge on a specific

topic or phenomena.

Research refers to the systematic method consisting of :

Enunciating the problem,

Formulating a hypothesis,

Collecting the fact or data,

Analyzing the facts and

Reaching certain conclusions either in the form of solutions towards the concerned

problem or in certain generals for some theoretical formulation.

Research methodology is a way to systematically solve the research problem. It may be

understood as the science of studying how research is done. Research in the common parlance

refers to a search for knowledge.

3.2 JUSTIFICATION OF STUDY

This study helps in deciding the mix up of various sources and needs of advertising strategy.

This study also describes certain factors that explain measures that how we can make advertising

more effective. A right advertising strategy decision reduces the cost and increases the value of a

firm while a wrong decision can adversely affect the value of the firm. These all practical points

are very difficult to be understood through books therefore this study provides a practical

knowledge on the advertising strategy concept.

ENUNCIATING THE PROBLEM

FORMULATING A HYPOTHESIS

COLLECTING THE FACT OR DATA

ANALYZING THE FACTS

REACHING CERTAIN CONCLUSIONS

3.3 OBJECTIVES OF STUDY

MAIN OBJECTIVE

To analyze the Advertising Strategy in ‘GAURAV EXPORTS’.

Study of advertising strategy is important because all business are to make profits and a

merchandising concern can do that by increasing its sales at remunerative prices. This is

possible, if the product is widely polished to be audience the final consumers and through

convincing arguments it is persuaded to buy it, if an appropriate advertising strategy is followed.

Sub Objectives of the Study

To understand the advertising procedure of the company.

To study the advertising budget of the company.

To analyze the sales of the company.

Consumer satisfaction.

To ensure sufficient cost-effective flow of goods.

To verify the level from point of origin to point of consumption.

To study the availability of different concessional and duty drawback schemes available.

To study the advertising strategy for retaining existing customer.

3.4 SCOPE OF THE STUDY

This study has widened the scope for studying the company on various other parameters:-

The present study can be extended to access the  present working condition of

the company.

The study can be used to design a plan for short-term borrowings from the

market.

From the present study we can know the areas of short-term capital

utilization.

The result of marketing success can be interpreted to assess the credit paying

capacity of the company.

3.5 RESEARCH DESIGN

The research design constitutes the blueprint for the collection, measurement and analysis of

data. It aids the scientists in the allocation of his limited resources by posing actual choices.

“Research Design is the plan and structure of investigation so conceived as to obtain answer

to research questions.”

So in brief research design must contain at least following points:

Clear statement of research problem.

Procedure and techniques to be used for gathering information.

Methods used in processing and analyzing the data.

3.6 TYPES OF RESEARCH DESIGN:

Research design in case of exploratory research.

Research design in case of descriptive research.

3.7 RESEARCH DESIGN USED :

The research design used in this project report is descriptive research design. A Descriptive

research design is a scientific method which involves observing and describing the behavior of a

subject without influencing it in any way.

The methods used in context of this research design are:

The survey of concerning literature,

Experience Survey.

The important features of this research design are listed as follows:

The sampling design used is Non-Probability Sampling design and it is flexible in nature.

There is a no pre-planned design for the analysis.

No fixed decisions about the logistics operational procedures.

3.8 SOURCES OF DATA COLLECTION

Data collection is in fact, the most important aspect of a survey. While collecting data utmost

care must be exercised because data constitute the foundation on which the superstructure of

statistical analysis is built. If the data are inaccurate and inadequate the entire analysis may be

faulty and the decision taken would be misleading.

Both Primary and Secondary mode of data collection has been used in the project. The different

sources for collecting data are as follows-

Primary Data

Interview of Export House Owner

Through Export House Accountant

Secondary Data

Secondary data are those which have already been collected by someone else and which

have already been passed through the statistical process. The Secondary data consist of reality

available compendices already complied statistical statements. Secondary data consists of not

only published records and reports but also unpublished records.

Here we done the analysis on basis of secondary data, which included-

Balance sheet of company

PRIMARY DAT

A

SECONDARY

DATA

Profit and loss A/C of GAURAV EXPORTS

Cost sheets, & Trail balance of five years 

3.9 LIMITATIONS OF STUDY

Efforts had been made to collect the relevant information through the sources available; still

some relevant information could not be gathered.

The time duration could not provide ample opportunity to study every detail of

management in the company.

There are restrictions not to visit some specific areas such as cash room, storeroom etc.

Some figures have not been disclosed by the company on account of confidential report,

leading to restriction in analysis.

Since most of the data used is secondary in nature, this poses the constraints on the

validity and reliability of the data.

There was a problem in taking appointments from the managers.

Sources were confounded some time to give proper information.

The time stipulated for the project to be completed is less and thus there

are chances that some information might have been left out, however due

care is taken to include all the relevant information needed.

More Dependence on the secondary data limits the information gathered.

3.10 MANAGERIAL USEFULNESS OF THE STUDY

The effectiveness of the training programmes can be established through this study.

This study helps to understand, analyze & apply the core concepts of training in an

organization.

Managers would be able to identify the need of training for its employees.

Managers would know what employees think of the training and development

programmes and make changes if necessary.

LIMITATIONS OF THE STUDY

As central purchase office, purchase raw material and central marketing yarn make sales.

Information that is so more detailed cannot be received about these.

Cash from debtors a collected by the corporate office through commission agents. So

efforts for collection of debtors cannot be clearly known from GAURAV EXPORTS,

PANIPAT.

CHAPTER:- 4

DATA ANALYSIS AND INTERPRETATION

4.1 WHY WORKING CAPITAL IS IMPORTANT FOR THE COMPANY?

The working capital plays an important role in managing the financial health of

the firm during the normal course of business. By far the major flow, in terms of its

yearly magnitude , is the working capital cycle. This is the loop which starts at the cash

and marketable securities account, goes through the current accruals accounts as direct

labour and materials are purchased and used to produce inventory, which is in turn sold

and generates accounts receivables, which are finally collected to replenish cash. The

major point to notice about this cycle is that the turnover of resources through this loop is

very high relative to the other inflows and outflows of the cash account.

To see why this cycle is critically important to the firm’s survival, visualize the cash

account as a bathtub with both the drain and the faucet open. While there are other

inflows and outflows, the major flow is the working capital cycle. As long as the firm has

cash and marketable securities on hand, it can pay bills and thus survive. But if for some

reason the resources stop flowing in, as when one of the working capital accounts slows

in turnover and starts draining off resources, the level of the tub starts to fall. Unless the

firm takes relatively costly action, such as raising new external funds, reducing dividend

outflows, or postponing capital expenditures, the resources will all drain out , the firm

will be unable to pay bills, and financial embarrassment will occur. It is clear that the

working capital cycle is the lifeblood of the firm.

Used in

Used in

Working capital cycle

production process generates used in purchases

used in

purchases

via salescollection used in

generation process

return to capital external

financing

It would seem a practical solution to this problem to keep a very high balance in the cash and

marketable securities account. In this way, when flow problems occur, hasty and painful

ACCRUED DIRECT LABOUR AND MATERIAL

ACCRUED FIXED OPERATING EXPENSES

CASH AND MARKETABLE SECURITIES

INVENTORY

ACCOUNTS RECEIVABLES

SUPPLIERS OF CAPITAL

FIXED ASSETS

remedial actions will not be necessary since the large reserves provides some safety; the leaks

can be plugged before the water is exhausted. However, such a strategy can depress the level of

a firm’s profitability, since cash and marketable securities are two of the firm’s least profitable

assets. A major function of decision making for working capital is the management of the

various working capital accounts with regard to the firm’s level of liquidity: not too much

liquidity and not too little liquidity.

WORKING CAPITAL ANALYSIS:-

As we know working capital is the life blood and the centre of a business. Adequate amount of

working capital is very much essential for the smooth running of the business. And the most

important part is the efficient management of working capital in right time. The liquidity position

of the firm is totally effected by the management of working capital. So, a study of changes in

the uses and sources of working capital is necessary to evaluate the efficiency with which the

working capital is employed in a business. This involves the need of working capital analysis.

The analysis of working capital can be conducted through a number of devices, such as:

1. Ratio analysis. 2. Fund flow analysis. 3. Budgeting.

1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis

can be employed for measuring short-term liquidity or working capital position of a firm. The

following ratios can be calculated for these purposes:

1. Current ratio. 2. Quick ratio

3. Absolute liquid ratio 4. Inventory turnover.

5. Receivables turnover. 6. Payable turnover ratio.

7. Working capital turnover ratio 8. Working capital leverage

9. Ratio of current liabilities to tangible net worth.

2. FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which additional

funds were derived and the use to which these sources were put. The fund flow analysis consists

of:

a. Preparing schedule of changes of working capital

b. Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position (working capital)

business enterprise between beginning and ending of the financial dates.

KEY WORKING CAPITAL RATIOS

The following, easily calculated, ratios are important measures of working capital utilization.

Ratio Formulae Result Interpretation

Stock

Turnover

(in days)

Average Stock *

365/

Cost of Goods

Sold

= x days On average, you turn over the value of your entire

stock every x days. You may need to break this

down into product groups for effective stock

management.

Obsolete stock, slow moving lines will extend

overall stock turnover days.

Receivables

Ratio

(in days)

Debtors * 365/

Sales

= x days It takes you on average x days to collect monies due

to you. If your official credit terms are 45 day and it

takes you 65 days.

One or more large or slow debts can drag out the

average days. Effective debtor management will

minimize the days.

Payables

Ratio

(in days)

Creditors * 365/

Cost of Sales (or

Purchases)

= x days On average, you pay your suppliers every x days. If

you negotiate better credit terms this will increase.

If you pay earlier, say, to get a discount this will

decline

Current Ratio Total Current

Assets/

Total Current

Liabilities

= x times Current Assets are assets that you can readily turn in

to cash or will do so within 12 months in the course

of business. Current Liabilities are amount you are

due to pay within the coming 12 months.

Quick Ratio (Total Current

Assets -

Inventory)/

Total Current

Liabilities

= x times Similar to the Current Ratio but takes account of the

fact that it may take time to convert inventory into

cash.

Working

Capital Ratio

(Inventory +

Receivables -

Payables)/

Sales

As %

Sales

A high percentage means that working capital needs

are high relative to your sales.

Statement showing change in working capital for GAURAV EXPORTS :-

(Rs. in THOUSANDS)

Particulars 09-10 10-11 Increase ( + ) Decrease (- )

Current Assets

Inventories 12800. 18715. 5915 --

Sundry Debtors 6186. 7894. 1706 --

Cash & Bank 2930. 275. -- 2655.

Loan & Advances 7201. 3775. -- 3424.

Total ( A ) 29117. 30659.

Current Liabilities

C.L.and provisions 8872. 10160. -- 1288.

Total ( B ) 8872. 10160.

( A-B ) 20245. 20499. 7621. 7367.

↑ in working capital 254. 254.

Total 20499 20499 7621 7621

CALCULATION OF WORKING CAPITAL FOR GAURAV EXPORTS.

(Rs.in THOUSANDS)

YEAR 31.03.10 31.03.11

CURRENT ASSETS

INVENTORIES 12800. 18715.

SUNDRY DEBTORS 6186. 7894.

CASH AND BANK 2930. 275.

LOANS & ADVANCES 7201. 3775.

TOTAL CURRENT ASSESTS 29117. 30659.

LESS:-

CURRENT LIABILITIES AND PROVISIONS

C.L. & PROVISIONS 8872. 10160.

TOTAL C.L. 8872. 10160.

NET CURRENT ASSETS 20245. 20499.

BANK BORROWINGS FOR

W.C.

13822. 12500.

NET WORKING CAPITAL 6423 7999

ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials content in a store of factory at any given time.

Inventory means stock of three things:-

1. Raw materials

2. Semi finished goods.

3. Finished goods.

POSITION OF INVENTORY IN GAURAV EXPORTS

(Rs. in THOSANDS)

PARTICULAR 2010 2011

STORES 587. 482.

RAW

MATERIAL6474. 9746.

FINISHED

GOODS3834. 5545.

W.I.P 1905. 2942.

TOTAL 12800. 18715.

Analysis through chart:

2010 20110

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

STORESRAW MATERIALFINISHED GOODSW.I.P

INTERPRETATION:

As we analyze the financial statements of the company we come to know that the sale of the

company increases so as we know that the sales increases due increase in the demand of the

product. So in order to meet the demand of the customers company has to increases its

production. And in order to increase the production company needs more raw materials. So we

can see that Raw material for the financial year 2010 was 6474 and it is increase to 9746 IN

2011.We can say that raw material is increased by 3272 IN 2010 to 2011 fiscal year. This is

necessary for smooth production so that there is no shortage of raw material, and also to avoid

the unnecessary delays in production.

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under

current assets. Debtors will arise only when credit sales are made.

Position of Sundry Debtors in GAURAV EXPORTS

(Rs.in thousands)

PARTICULAR 2010 2011

Receivable other than

export and deferred

5696. 7457.00

Export receivable 490. 437.

TOTAL 6186. 7894.

Analysis through chart:

20102009

010002000300040005000600070008000

RECEIVABLE ANALYSIS

Recevinable other than export and deferred Export receivable

YEARS

AMO

UNTS

INTERPRETATION

As we analyze the above table we come to know that debtors in 2010 it increases by 1761 in

2011.

So we can say that credit sales of company also increases because debtors and bill receivables

only arises when credit sales are made.

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees

for a specific period of time and in return they will be liable to make timely repayment of that

amount in addition to interest on that loan.

Position of Other Loans & Advances in GAURAV EXPORTS

(Rs. in lacks)

PARTICULAR 2009 2010 2011

ADVANCE TO SUPPILERS 1533.27 1450.00 1490.00

ADVANCE PAYMENT OF

TAXES

705.65 ------ ------

PREPAID EXPENSES &

ADVANCES

2378.11 2250.00 2335.00

DUTY DRAWBACK & CASH

INCENTIVES

82.18 75.00 146.50

INVESTMENT OTHER THAN

LONG TERM

2502.27 ----- ------

TOTAL 7201.48 3775.00 3971.50

Analysis through chart:

20092010

2011

0

500

1000

1500

2000

2500

3000

1533.271450 1490

705.65

00

2378.112250 2335

82.1875 146.5

2502.27

00

LOANS & ADVANCES

ADVANCE TO SUPPILERS

ADVANCE PAYMENT OF TAXES

PREPAID EXPENSES & ADVANCES

DUTY DRAWBACK & CASH INCENT-IVES

INVESTMENT OTHER THAN LONG TERM

YEARS

AMO

UNT

INTERPRETATION

From above we can see that the advance payment supplier is decreased by 5.43% for the

financial year 2010 from 1533.27 of the previous 2009 and then it is increased by 2.75% in 2011

i.e. 1490 so we can say that advance payment to the supplier is increased in 2011.so we can say

that company want to take advantage of cash discount which is provided by the supplier for the

advance cash payment made by the Company and it also have positive impact on goodwill of

company and it’s the sign of satisfactory financial position of the company.

CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current

liabilities that has to be paid by the firm within one year.

Position of Other Current Liabilities in GAURAV EXPORTS

(Rs.in thousands)

PARTICULARS 2009 2010 2011

i. Creditors for purchases 2716.71 3726.00 4278.00

ii. Bills payable under L/C for raw

material

3016.18 2475.80 2900.00

iii. Advance received from

customers

225.14 300.00 357.00

iv. Accrued expenses 1271.96 1402.50 1475.00

v. Statutory liability 257.86 290.00 332.00

vi. Installment of fixed asset loans

due to within a year

1380.96 1965.90 2088.36

TOTAL 8872.37 10160.20 11430.36

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Analysis through chart:

20092010

2011

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2716.71

37264278

3016.18

2475.82900

225.14300

357

1271.96 1402.51475

257.86290

332

1380.961965.9 2088.36

CURRENT LIABILITIES & PROVISIONS

Creditors for purchases

Bills payable under L/C for raw material

Advance received from customers

Accrued expenses

Statutory liability

Installment of fixed asset loans due to within a year

YEARS

AMO

UNT

INTERPRETATION

If we analysis the whole current liability we can see that current liability is increased by 1287.83

and 1270.16 for the financial year 2009-10 and 2010-11 respectively. It is increasing by 13.5

respectively. If we see only creditors for purchase we got can say that in 2010 it is increased by

1009.29 in 2010 from 2716.71 for the financial year of 2010 and it is increased by 552 in 2011.

So we can say that the purchase of the company is increasing in all financial year annually

increased by 12% and we can also see that advances received from customers are also increasing

that is in 2010 it is increased by 74.86 from 225.14 and 57 in 2011. So we can say that more cash

is coming so we can say that liquidity position of the company becoming strong.

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CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current

liabilities that has to be paid by the firm within one year.

Position of Other Current Liabilities in GAURAV EXPORTS:

(Rs.in thousands)

PARTICULARS 2009 2010 2011

i. Creditors for purchases 2716.71 3726.00 4278.00

ii. Bills payable under L/C for raw

material

3016.18 2475.80 2900.00

iii. Advance received from

customers

225.14 300.00 357.00

iv. Accrued expenses 1271.96 1402.50 1475.00

v. Statutory liability 257.86 290.00 332.00

vi. Installment of fixed asset loans

due to within a year

1380.96 1965.90 2088.36

TOTAL 8872.37 10160.20 11430.36

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Analysis through chart:

2009 2010 20110

500

1000

1500

2000

2500

3000

3500

4000

4500

2716.71

3726

4278

3016.18

2475.8

2900

225.14 300 357

1271.96 1402.5 1475

257.86 290 332

1380.96

1965.9 2088.36

CURRENT LIABILITIES & PROVISIONS

Creditors for purchases

Bills payable under L/C for raw mater-ial

Advance received from customers

Accrued expenses

Statutory liability

Installment of fixed asset loans due to within a year

YEARS

AMO

UNT

INTERPRETATION

If we analysis the whole current liability we can see that current liability is increased by 1287.83

and 1270.16 for the financial year 2009-10 and 2010-11 respectively. It is increasing by 13.5

respectively. If we see only creditors for purchase we got can say that in 2010 it is increased by

1009.29 in 2010 from 2716.71 for the financial year of 2010 and it is increased by 552 in 2011.

So we can say that the purchase of the company is increasing in all financial year annually

increased by 12% and we can also see that advances received from customers are also increasing

that is in 2010 it is increased by 74.86 from 225.14 and 57 in 2011. So we can say that more cash

is coming so we can say that liquidity position of the company becoming strong.

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WORKING CAPITAL RATIO’S OF COMPANY

GROSS PROFIT RATIO OF GAURAV EXPORTS:

Gross Profit Ratio

Gross Profit * 100

Sales

2009 2010 2011

Gross Profit ratio: - 18.11 17.99 18.82

ANALYSIS THROUGH CHART

20092010

2011

17.5

18

18.5

19

18.1117.99

18.82

GROSS PROFIT RATIO

YEARS

Interpretation: Gross profit ratio of the company is 18.11% for the year 2009 and it is

decreased to 17.99% in 2010. It is because the cost of the company has minor increase because

of increase in raw material cost. Then company’s gross profit ratio increased to 18.82 which is

best for company so we can say that company’s position is strong for the financial year 2011.

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NET PROFIT RATIO OF GAURAV EXPORTS:

Net Profit Ratio

Net Profit * 100

Sales

2009 2010 2011

Net Profit ratio: - 4.72 4.02 5.38

Analysis through chart:

20092010

2011

0123456 4.72

4.025.38

NET PROFIT RATIO

YEARS

Interpretation

Company’s net profit is 4.72% in the year 2009 and then it is decreased to 4.02 in 2010. But in

2011 by covering minor decrease in previous year with, 70%. But from above data and by seeing

the overall earning we can say that company is in good position.

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POSITION OF RECEIVABLE RATIO IN GAURAV EXPORTS

FORMULA

DEBTORS

RECEIVABLE RATIO = ---------------- * 365

SALES

YEAR 31.03.2009 31.03.2010 31.03.2011

RECEIVABLE RATIO (IN DAYS) 62 65

70

Analysis through chart:

20092010

2011

58606264666870

6265

70

RECEIVEABLE RATIO (IN DAYS)

YEARS

DAYS

INTERPRETATION

From the above table and diagram we can say that company has good debt collection period

because the company have low debt collection period. But the company’s debt collection period

for the year 2009 is 62 and then it is increased to 65 in 2010 then 70 in 2011. So we can say that

the company’s debt collection period is increasing averagely by 4 days per year. We can say that

the company has no impact on slow down of economy. So we can say that overall position of the

company is satisfactory.

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POSITION OF CURRENT RATIO IN GAURAV EXPORTS:

FORMULA

TOTAL CURRENT ASSETS

CURRENT RATIO= --------------------------------------------

TOTAL CURRENT LIABILITIES

YEAR 31.03.09 31.03.10 31.03.11

CURRENT RATIO 1.28 1.35 1.46

Analysis through chart:

20092010

2011

1.151.2

1.251.3

1.351.4

1.451.5

1.28 1.351.46

Chart Title

YEAR

INTERPRETATION

The current ratio of the unit is less than standard. The current ratio should be 2:1 but it is not. But

the company have 1.28 in 2009 1.35 in 2010 and 2.46 in 2011. So we can say that the company

is in not in position as it need.

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POSITION OF DEBT-EQUITY RATIO IN GAURAV EXPORTS:

Formula = Debt / Equity

Calculation of debt-equity ratio:

Particulars 2008-09 2009-10 2010-11

Long Term Debt 18779.64 17511.01 16713.49

Net Worth 13290.28 15472.58 18911.22

D/E Ratio 1.41:1 1.13:1 0.88:1

Analysis through chart:

20092010

2011

0

0.5

1

1.5Chart Title

YEAR

D/E

Ratio

Interpretation

GAURAV EXPORTS has a decreasing trend in d/e ratio so we can say that it is using its funds

and not taking loans from banks. Equity is more than debt that shows a very strong position in

whole market. Using lower debts decreases the cost as well as risk. So company is in good

position.

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GAURAV EXPORTS enter into EXPORT Contract with buyer.

Overseas buyer sends an enquiry for placing order.

Firm sends the offer to prospective buyers abroad.

GAURAV Exports selects the mode for receiving Finance by negotiating with Buyer

overseas.

Letter of Credit (L/C)

Delivery against payment(D/A)

Delivery against acceptance (D/A)

Gaurav Exports selects the Domestic Bank i.e. Confirming bank for financing of

confirmed Export order and irrevocable L/C and negotiates with the Issuing Bank.

CANARA Bank

Eligibility and requirement criteria of Gaurav Exports for executing order is

verified by CANARA

Import-Export Code Number

Open general license (OGL)

Regulatory Norms of RBI

Quantum of sanctioning limit and time duration of production and packing finance

for Gaurav Exports is specified by Bank norms.

Foreign Documentary Bill Purchase (FDBP)

Packing Credit Limit (PCL)

Gaurav Exports enter into Export Contract with the buyer

The very initial step at Gaurav Exports is to receive an export order primarily from its major

importing countries i.e. Germany. It is being considered that the terms of the contract have to be

lawful and not in contravention of any legal provisions in either countries for it to be called a

valid contract.

Export contract

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THE BUYER SENDS A QUERY

THE FIRM SENDS A QUOTATION

THE BUYER ACCEPTS AND SENDS A PURCHASE ORDER

THE FIRM ACCEPTS THE PURCHASE ORDER AND CONVEYS THE SAME TO THE

BUYER

THE EXPORT CONTRACT IS IN PLACE

An export order/contract normally covers the following:

The item

The description of the item

The quantity required

The price per unit

The terms of payment and delivery

Date of order/Reference to exporter’s Performa Invoice or quotation

Date of delivery

The kind of packaging required

The kind of labeling required

The kind of marking required

Insurance instructions, if required

Inspection instructions, if required

Documentation required

Production sample instructions, if required

Penalties for late delivery, if any

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Any other special condition.

Gaurav Exports selects the mode for receiving Finance by negotiating with buyer overseas

There are three modes of receiving funds followed at Gaurav Exports depending upon the

requirements and criteria of the Importer’s need and feasibility. These are discussed as follows-

Letter of Credit

A Letter of Credit can be defined as “an undertaking by importer’s bank stating that payment

will be made to the exporter if the required documents are presented to the bank within the

validity of the L/C”.

Delivery against Payment (D/P)

The sight draft or D/P is most commonly used in international trade at Gaurav Exports. In a

sight draft, the payment is on demand or on presentation of the negotiation documents to the

paying bank or the importer. The bank may pay within three (3) working days (not instantly)

after the receipt and review of the negotiation documents and if they are in order, that is, the

documents comply exactly with the letter of credit (L/C) stipulations. In certain countries where

the business relationships between the firm and the bank is well established, the bank may pay

the firm a few hours after the receipt of the negotiation documents that are in order .A sight draft

is used when the firm wants to retain title to the shipment until it reaches its destination and

payment is made The buyer's bank notifies the buyer when it has received these documents. As

soon as the draft is paid, the buyer's bank turns over the bill of lading, which allows the buyer to

claim the shipment. The sight draft still entails risk. If the buyer decides not to pay the draft, the

Surya Overseas itself is responsible for disposing of the goods that he has already transported to

another country.

Delivery against Acceptance (D/A)

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D/P or in a term draft the exporter extends the credit to the importer. If a term draft is accepted

by the issuing bank such draft becomes what is known as banker's acceptance Gaurav exports

may hold the banker's acceptance pending payment by the bank on the maturity date or discounts

it with the bank, thus provides the firm with immediate funds. In certain countries, the importer

may have access to the customs warehouse or docks and examine the goods before accepting

them. The risk is that the importer may intentionally reject the goods even when they are in good

order and condition, without paying or accepting the draft. The importer may reject the goods,

for example, if the local market prices of the goods have dropped.

CHAPTER: - 5

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RECOMMENDATIONS:-

Management should make the proper use of inventory control techniques like fixation of

minimum, maximum and ordering levels for all the items for less blockage of money.

The unit should also adopt proper inventory control like ABC analysis etc. This inventory

system can make the inventory management more result oriented The EOQ can be followed

in stores

Due to competition prices are market driven and for earning more margin company should

give the more concentration on cost reduction by improving its efficiency

The investments of surplus funds are made by the corporate office and the unit is not

generally involved while taking decisions with regard to structure of investment of surplus

funds. The corporate office should involve the units so as to better ascertain the future

requirements of funds and accordingly the investments are made in different securities.

The company is losing its overseas customers due to decrease in exports so the sufficient

amount of exports should the maintained.

CONCLUSION

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By concluding the study about the working capital it is finding that working capital management

of Gaurav is too good. Gaurav Exports has sufficient funds to meet its current obligation every

time which is due to sufficient profits and efficient management of Gaurav Exports.

Cash management and receivable management are too much good because of centralized control

on these. Raw material for the all units of Gaurav Exports is purchased by corporate office in

bulk which Is the best way. Safety measures for inventories are also quiet sufficient in company.

Overall the working capital management of GAURAV EXPORTS is very much efficient.

References

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1. Stephen Bush (2008) “Seizing new treasures with aggressive cash management” cash flow

magazine Paper No- 02-01.

2. Bebehuk L. and L. stole (2009) “Organize Turn tax dollars into working capital” Rush,

George pg- 02-01.

3. Allensius (2009) “MANAGEMENT WORKING CAPITAL” Working Paper No- 02-01.

4. Gamble, Richard H. (2005) “Working capital managers: muscling into a larger role” Cash

flow Magazine0196-6227

BOOKS

Financial management: Pandey IM, vikas publishing house.

ANNUAL REPORTS OF GAURAV EXPORTS

WEBSITES

http://www.economywatch.com/business-and-economy/textile-industry-

overview.html

http://www.economywatch.com/business-and-economy/textile-mills.html

http://www.allprojectreports.com/working_capital_analysis/

working_capital_analysis.htm

http://www.faqs.org/abstracts/

journal.org/submissions/

isfa2009_submission_13.doc+abstract+of+working+capital&cd=24&hl=en&ct=clnk

&gl=in

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