DILEEP Final Project

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A SUMMER TRAINNING PROJECT REPORT

ON(WORKING CAPITAL MANAGEMENT)

A report submitted toMahamayaTechnical Universityfor the partial Fulfillment of MBA Degree 2010-12

Submitted to :-DR. SUNIL KUMAR YADAV Submitted by:

DILEEP -K- DWIVEDIMBA 3rd SEM.

ROLL NO. 1027270032

Greater Noida Institute of Technology(Management Institute) Code: 272

7, Knowledge Park-II, Greater Noida (U.P)2010-11

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CERTIFICATE

This is to certify that the SUMMER TRAINNING Project Reportentitled WORKING CAPITAL MANAGEMENT beingsubmitted by DILEEP KUMAR DWIVEDIfulfillment of therequirement of Mahamaya Technical University is a record of anindependent work done by his under my guidance and supervision.

Prof. Hari Praksh Faculty GuideDirector-MBA Dr. Sunil Kumar YadavGreater Noida Institute of Technology GNIT, Greater Noida

(Management Institute)-Code: 272

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DECLARATION

I DILEEP KUMAR DWIVEDIto declare that the project reportentitled WORKING CAPITAL MANAGEMENT beingsubmitted to the MAHAMAYA TECHNICAL UNIVERSITY for the

partial fulfillment of the requirement for the degree of Master of Business Administration is my own endeavors and it has not beensubmitted earlier to any institution/university for any degree.

Place:

Date: ( DILEEP KUMAR DWIVEDI)

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EXECUTIVE SUMMARY

Working capital management or simply the management of capital invested incurrent assets is the focus of my study. My topic is to study working capital

management of HCL Infosystems Ltd.

Working capital is the fund invested by a firm in current assets. Now in a cut throat

competitive era where each firm competes with each other to increase their

production and sales, holding of sufficient current assets have become mandatory as

current assets include inventories and raw materials which are required for smooth production runs. Holding of sufficient current assets will ensure smooth and un

interrupted production but at the same time, it will consume a lot of working capital.

Here creeps the importance and need of efficient working capital management.

Working capital management aims at managing capital assets at optimum level, the

level at which it will aid smooth running of production and also it will involve

investment of nominal working capital in capital assets.

OBJECTIVES OF THE STUDY4 | P a g e


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The objectives of this project were mainly to study the inventory, cash and

receivables at HCL Info systems Ltd., but there are some more and they are -

1. The main purpose of my study is to render a better understanding of the

concept Working Capital Management.

2. To understand the planning and management of working capital at HCL Info

systems Ltd.

3. To suggest ways for better management and control of working capital at the

concern.

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SCOPE OF THE STUDY

This project is vital for me in the following ways:-

1. This project will be a learning device for me as a finance student.

2. Through this project we would study the various methods of the working

capital management.

3. The project will be a learning of planning and financing of working capital.

4. The project would also be an effective tool for credit policies of thecompanies.

5. This project will show different methods of holding inventory and dealing

with cash and receivables.

6. This will show the liquidity position of the company and also how do they

maintain a particular liquidity position.

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VISION AND MISSION

VISION STATEMENT"Together we create the enterprises of tomorrow"

MISSION STATEMENT"To provide world-class information technology solutions and services to enable our

customers to serve their customers better"

QUALITY POLICY "We deliver defect-free products, services and solutions to meet the requirements of

our external and internal customers, the first time, every time"

OUR OBJECTIVESOUR MANAGEMENT OBJECTIVESTo fuel initiative and foster activity by allowing individuals freedom of action and

innovation in attaining defined objectives.

OUR PEOPLE OBJECTIVES

To help people in HCL Info systems Ltd. share in the company's

successes, which they make possible.

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To provide job security based on their performance.

To recognize their individual achievements; and help them gain a sense of

satisfaction and accomplishment from their work.

CORE VALUES

1. We shall uphold the dignity of the individual2. We shall honor all commitments

3. We shall be committed to Quality, Innovation and Growth in every endeavor

4. We shall be responsible corporate citizens.

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BRIEF HISTORY OF THE COMPANY

HCL Info systems Ltd is one of the pioneers in the Indian IT market, with its origins

in 1976. For over quarter of a century, we have developed and implemented

solutions for multiple market segments, across a range of technologies in India. We

have been in the forefront in introducing new technologies and solutions. The

highlights of the HCL saga are summarized below:

Y E A R H I G H L I G H T S

1976

- Foundation of the Company laid

- Introduces microcomputer-based programmable calculators with wide

acceptance in the scientific / education community

1977

- Launch of the first microcomputer-based commercial computer with a

ROM -based Basic interpreter

- Unavailability of programming skills with customers results in HCL

developing bespoke applications for their customers

1978- Initiation of application development in diverse segments such as

textiles, sugar, paper, cement , transport

1980- Formation of Far East Computers Ltd., a pioneer in the Singapore IT

market, for SI (System Integration) solutions

1981- Software Export Division formed at Chennai to support the bespoke

application development needs of Singapore

1983 - HCL launches an aggressive advertisement campaign with the theme '

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even a typist can operate' to make the usage of computers popular in the

SME (Small & Medium Enterprises) segment. This proposition

involved menu-based applications for the first time, to increase ease of

operations. The response to the advertisement was phenomenal.

- HCL develops special program generators to speed up the

development of applications

1985

- Bank trade unions allow computerization in banks. However, a

computer can only run one application such as Savings Bank, Current

account, Loans etc.

- HCL sets up core team to develop the required software - ALPM

(Advanced Ledger Posting Machines). The team uses reusable code to

reduce development efforts and produce more reliable code. ALPM

becomes the largest selling software product in Indian banks

- HCL designs and launches Unix- based computers and IBM PC clones

- HCL promotes 3rd party PC applications nationally

1986

- Zonal offices of banks and general insurance companies adopt

computerization

- Purchase specifications demand the availability of RDBMS products

on the supplied solution (Unify, Oracle). HCL arranges for such

products to be ported to its platform.

- HCL assists customers to migrate from flat-file based systems to

RDBMS

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1991

- HCL enters into a joint venture with Hewlett Packard

- HP assists HCL to introduce new services: Systems Integration, IT

consulting, packaged support services (basic line, team line)

- HCL establishes a Response Centre for HP products, which is

connected to the HP Response Centre in Singapore.

- There is a vertical segment focus on Telecom, Manufacturing and

Financial Services

1994

- HCL acquires and executes the first offshore project from IBMThailand

- HCL sets up core group to define software development

methodologies

1995

- Starts execution of Information System Planning projects

- Execution projects for Germany and Australia

- Begins Help desk services

1996

- Sets up the STP ( Software Technology Park ) at Chennai to execute

software projects for international customers

- Becomes national integration partner for SAP

1997- Kolkatta and Noida STPs set up

- HCL buys back HP stake in HCL Hewlett Packard

1998- Chennai and Coimbatore development facilities get ISO 9001

certification

1999 - Acquires and sets up fully owned subsidiaries in USA and UK

- Sets up fully owned subsidiary in Australia

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- HCL ties up with Broad vision as an integration partner

2000

- Sets up fully owned subsidiary in Australia

- Chennai and Coimbatore development facilities get SEI Level 4

certification

- Bags Award for Top PC Vendor In India

- Becomes the 1st IT Company to be recommended for latest version of

ISO 9001 : 2000

- Bags MAIT's Award for Business Excellence

- Rated as No. 1 IT Group in India

2001

-Launched Pentium IV PCs at below Rs 40,000

-IDC rated HCL Info systems as No. 1 Desktop PC Company of 2001

2002

-Declared as Top PC Vendor by Dataquest

-HCL Info systems & Sun Microsystems enters into a Enterprise

Distribution Agreement

- Realigns businesses, increasing focus on domestic IT,

Communications & Imaging products, solutions & related services2003 - Became the first vendor to register sales of 50,000 PCs in a quarter

- First Indian company to be numero uno in the commercial PC market

- Enters into partnership with AMD

- Launched Home PC for Rs 19,999

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- HCL Info systems' Info Structure Services Division received ISO

9001:2000 certification

- Launches Infiniti Mobile Desktops on Intel Platform

- Launched Infiniti PCs, Workstations & Servers on AMD platform

2004

- 1st to announce PC price cut in India, post duty reduction, offers

Ezeebee at Rs. 17990

- IDC India-DQ Customer Satisfaction Audit rates HCL as No.1 Brandin Desktop PCs

- Maintains No.1 position in the Desktop PC segment for year 2003

- Enters into partnership with Port Wise to support & distribute security

& VPN solutions in India

- Partners with Microsoft & Intel to launch Beanstalk Neo PC

- Becomes the 1st company to cross 1 lac unit milestone in the Indian

Desktop PC market

- Partners with Union Bank to make PCs more affordable, introduces

lowest ever EMI for PC in India

- Launched RP2 systems to overcome power problem for PC users

- Registers a market share of 13.7% to become No.1 Desktop PC

company for year 2004

- Crosses the landmark of $ 1 billion in revenue in just nine months

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HCL Infosystems Ltd. Is one of the pioneers in the It market, with its origin in 1976.

the company has been in the forefront in introducing new technologies and

solutions. It has drawn its strength since 30 years of experience in handling the ever

changing IT scenario, strong customer relationships, ability to provide the cuttingedge technology at best value for money and on the top of it, an excellent service

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and support infrastructure. Today HCL is the countrys

premier information enabling company. It offers one stop shop convenience to its

diverse customers having a diverse set of requirements.

Since, last 30 years HCL has been continuing the relationship with the

customer, thereby increasing customer confidence in it.

The strengths of the company are:

Ability to understand customers business and offer right technology.

Long standing relationship with customers.

Best value for money offerings.

Technology Leadership

HCL Infosystems is known to harbinger of technology in the country. The company

has done technology introductions in the country either through research and

development or through partnerships with world technology leaders. Using own

research and development the company has:

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Created own UNIX and RDBMS capability (in80s).

Developed firewalls for enterprise and personal system security.

Launched own range of enterprise storage products.Launched own range of enterprise networking products.

HCL Infosystems Ltd. has initiated several pioneer technologies. Some of

them are as under:

.Countrys first desktop PC- Busy Bee in 1985.

Countrys first home PC- Beanstalk in 1995Countrys first Pentium IV based PC at sub 40k price point.

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INTRODUCTION TO WORKING CAPITAL

Working Capital Management is concerned with problems that arise in attempting to

manage the current assets, the current liabilities and the interrelationship that exist

between them.

The term current assetsrefer to those assets which in ordinary course of business can be, or will be converted into cash within one year without undergoing a

diminution in value and without disrupting the operations of the firm. The major

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current assets are cash, marketable securities, accounts

receivable and inventory.

Current liabilitiesare those liabilities which are intended, at their inception,to be paid in the ordinary course of business, within a year, out of current assets or

earnings of the concern. The basic current liabilities are accounts payable, bills

payable, bank overdraft and outstanding expenses.

The goal of Working Capital Management is to manage the firms current

assets and current liabilities in such a way that a satisfactory level of Working

Capital is maintained. This is so because if the firm cannot maintain a satisfactory

level of Working Capital, it is likely to become insolvent and may even be forced

into bankruptcy. The current assets of the company should be large enough to cover

its current liabilities in order to ensure a reasonable margin of safety. Nevertheless

the level of current assets should not be too high since in that case it will affect the

overall profitability of the firm. The interaction between current assets and current

liabilities is, therefore the main theme of Working Capital Management.

CONCEPT AND DEFINITIONS OF WORKINGCAPITAL:

Working Capital is the Life-Blood and Controlling Nerve Center of abusiness

Working capital is relative liquid (which can be converted into cash)portion of the total capital of the business. It is that portion of capital which is requiredfor holding current assets like stock of materials and finished goods, billsreceivables, and cash for meeting current expenses like salaries, wages,rent,etc.

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Working capital is commonly defined as the difference

between current assets and current liabilities.

Working Capital = Current Assets-Current Liabilities

There are two major concepts of working capital :1. Gross working capital2. Net working capital

Gross working capital:It refers to firm's investment in current assets. Current assets are the assets, which

can be converted into cash with in a financial year. The gross working capital

points to the need of arranging funds to finance current assets.

Net working capital:It refers to the difference between current assets and current liabilities. Net

working capital can be positive or negative. A positive net working capital will

arise when current assets exceed current liabilities. And vice-versa for negative

net working capital. Net working capital is a qualitative concept. It indicates the

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liquidity position of the firm and suggests the extent to which

working capital needs may be financed by permanent sources of funds. Net

working capital also covers the question of judicious mix of long-term and short-

term funds for financing current assets.

Thus, the goal of working capital management is to manage the current

assets and liabilities in such a way that an acceptable level of net working capital is

maintained.

Significance Of Working Capital Management

Adequate working capital is essential for the smooth running of any business. An

industrial organization needs capital for the following purposes-

1. To buy raw materials to produce finished goods.

2. To pay wages and salaries of labour, staff, etc.

3. To meet the overhead costs (other than wages and salaries)including those

of maintenance,service activities,fuel,power charges, taxes and general expenses

of administration.

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4. To meet expenses on sales such as expenses on packaging, advertisement,

salaries, bonus and commission to salesforce, freight, etc.

5. Sufficient working capital enables the working concern to make prompt

payments and hence helps in creating and maintaining goodwill.

6. Adequate working capital enables a concern to face business crises in

emergencies such as depression because during such periods, generally, there is

much pressure on working capital.

Disadvantages of excessive working capital

1. Excessive working capital means idle funds which earn no profits for the

business and hence the business cannot earn a proper rate of return on its

investment.

2. It may result into overall inefficiency in the organization.

3. Due to low rate of return on investments, the value of share may also fall.

4. When there is excessive working capital, relations with banks and other

financial institutions may not be maintained.

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5. The redundant working capital gives rise to speculative transactions.

Types of Working Capital Needs

Another important aspect of working capital management is to analyze the total

working capital needs of the firm in order to find out the permanent and temporary

working capital. Working capital is required because of existence of operating

cycle. The lengthier the operating cycle, greater would be the need for working

capital. The operating cycle is a continuous process and therefore, the working

capital is needed constantly and regularly. However, the magnitude and quantum

of working capital required will not be same all the times, rather it will fluctuate.

The need for current assets tends to shift over time. Some of these changes reflect

permanent changes in the firm as is the case when the inventory and receivables

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increases as the firm grows and the sales become higher and

higher. Other changes are seasonal, as is the case with increased inventory

required for a particular festival season. Still others are random reflecting the

uncertainty associated with growth in sales due to firm's specific or general

economic factors.

The working capital needs can be bifurcated as:

Permanent working capital

Temporary working capital

Permanent working capital:

There is always a minimum level of working capital, which is continuouslyrequired by a firm in order to maintain its activities. Every firm must have a

minimum of cash, stock and other current assets, this minimum level of current

assets, which must be maintained by any firm al l the times, is known as

permanent working capital for that firm. This amount of working capital is

constantly and regularly required in the same way as fixed assets are required. So,

it may also be called fixed working capital .

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Temporary working capital:

Any amount over and above the permanent level of working capital is temporary,

fluctuating or variable working capital. The position of the required working

capital is needed to meet fluctuations in demand consequent upon changes in

production and sales as a result of seasonal changes.

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Permanent Permanent Working Capital Working Capital

The amount of current assets required toThe amount of current assets required tomeet a firmmeet a firm s longs long -- term minimum needs.term minimum needs.

Permanent current assetsPermanent current assets

TIME

R U P E E S A M

O U N T


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.

.

DETERMINING FINANCING MIX:

One of the most important decisions involved in the management of working

capital is how current assets will be financed. There are broadly two sources from

which funds can be raised for asset financing: i) short-term sources (current

liabilities) ii) long-term sources, such as share capital, long term borrowings,

internally generated resources like retained earnings and so

on. Now what portion of current assets should be financed by current liabilities and

how much by long-term resources?

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Temporary Temporary Working Capital Working Capital

The amount of current assets that variesThe amount of current assets that varieswith seasonal requirements.with seasonal requirements.

Permanent current assetsPermanent current assets

TIME

R U P E E S A M O U N T

Temporary current assetsTemporary current assets


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There are basically three approaches to determine an

appropriate financing mix:

i) Hedging approach (or Matching approach)

ii) Conservative approach

iii) Trade-off between these two.

Hedging Approach:

With reference to appropriate financing mix, the term hedging can be defined as a

process of matching maturing of debts with the maturities of financial needs. As per

this approach the maturity of the sources of funds should match the nature of the

assets to be financed. This approach suggest that long-term funds should be used to

finance the fixed portion of current assets requirements whereas the temporary

requirements, that is, the seasonal variations over and above the permanent

financing needs should be appropriately financed with short-term funds. This

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Short Short - - Term vs. Long Term vs. Long - - TermTermFinancing Financing

Financing Maturity

AssetMaturity

SHORT -TERM LONG -TERM

LowRisk -Profitability

ModerateRisk -Profitability

ModerateRisk -Profitability

HighRisk -Profitability

SHORT -TERM(Temporary Temporary )

LONG -TERM(Permanent Permanent )


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approach is a high profit high risk approach to determine an

appropriate financing mix.

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H ed ging (or M atu rity H ed ging (o r M aturity M atching ) A pp roachM atching ) A pp roach

A m ethod of f inancing w here each asset w ould beA m ethod of f inancing w here each asset wou ld bea f inancing instrum ent of the sam e approxim atea f inancing instrum ent of the sam e approxim ate

TIME


Long-term finan cin gFixed assetsFixed assets

Cu rrent assets* Cu rrent assets*

Shor t-term finan cing**


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Conservative Approach:

This approach suggests that the estimated requirements of total funds should be met

by long-term sources. The use of short-term sources should be restricted to only

emergency situations or when there is an unexpected outflow of funds. This

approach is high cost low risk approach to determine an appropriate financing mix.

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Risks vs. Costs TradeRisks vs. Costs Trade - - Off Off

(Conservative Approach)(Conservative Approach)Firm can reduce risks associated with shortFirm can reduce risks associated with short --term borrowingterm borrowing

by using a larger proportion of longby using a larger proportion of long --term financing.term financing.

TIME

R U P E E S A

M O U N T

Long -term financingFixed assetsFixed assets

Current assetsCurrent assets

Short Short - - term financing term financing


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Trade-off between two:

Neither of the above two approaches would serve the purpose of efficient working

capital management because of their extreme nature. A trade-off between these two

would give an acceptable financing strategy.

Aggressive approach:

This approach towards risk and profitability is such where the firm uses total short

term borrowings for financing its working capital needs. This approach is very risky

and always there is a chance of bankruptcy.

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Firm increases risks associated with shortFirm increases risks associated with short --term borrowing byterm borrowing byusing a larger proportion of shortusing a larger proportion of short --term financing.term financing.

TIME


Long-term financingFixed assetsFixed assets

Current assetsCurrent assets

Short-term financing

Risks vs. Costs TradeRisks vs. Costs Trade - - Off Off (Aggressive Approach)(Aggressive Approach)


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WORKING CAPITAL CYCLE:

The term operating cycle refers to the length of time necessary to complete thefollowing cycle of events:

1. Conversion of cash into inventory.

2. Conversion of inventory into receivables.

3. Conversion of receivables into cash.

Cash flows in a cycle into, around and out of a business. It is the business's

life blood and every manager's primary task is to help keep it flowing and to use

the cash flow to generate profits. If a business is operating profitably, then it

should, in theory, generate cash surpluses. If it doesn't generate surpluses, the

business will eventually run out of cash and expire.

The faster a business expands the more cash it will need for working capital

and investment. The cheapest and best sources of cash exist as working capital

right within business. Good management of working capital will generate cash

will help improve profits and reduce risks. One must bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial

proportion of a firm's total profits.

There are two elements in the business cycle that absorb cash - Inventory

(stocks and work-in-progress) and Receivables (debtors owing you money). The

main sources of cash are Payables (your creditors) and Equity and Loans.

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Each component of working capital (namely inventory, receivables and

payables) has two dimensions........ Time ......... and Money. When it comes to

managing working capital Time is Money. If you can get money to move faster

around the cycle (e.g. collect monies due from debtors more quickly) or reduce

the amount of money tied up (e.g. reduce inventory levels relative to sales), the

business will generate more cash or it will need to borrow less money to fund

working capital. As a consequence, you could reduce the cost of bank interest or

you'll have additional free money available to support additional sales growth or

investment. Similarly, if you can negotiate improved terms with suppliers e.g. get

longer credit or an increased credit limit; you effectively create free finance tohelp fund future sales.

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It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant, vehicles etc.

If you do pay cash, remember that this is no longer available for working capital. Therefore, if

cash is tight, consider other ways of financing capital investment - loans, equity, leasing etc.

Similarly, if you pay dividends or increase drawings, these are cash outflows and, like water

flowing downs a plug hole, they remove liquidity from the business.

Computation of Operating Cycle:

Operating Cycle = R+W+F+D-C

R= Raw material storage period

W= Work-in-progress period

F= Finished goods storage period

D= Debtors collection period

C=Creditors deferral Period

The various components of operating cycle may be calculated as shown below:

i.

ii.

iii.

iv. (1) Raw Material storage period = Average stock of raw material

Average cost of raw material consumption

per day

v.

vi.

vii.

viii. (2) Work-in-progress holding period = Average work-in-progress inventory

Average cost of production per day

ix.

x. (3) Finished goods storage period = Average stock of finished goods


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INTRODUCTION:

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Cash management is one of the key areas of working capital management.

Apart from the fact that it is the most current liquid assets, cash is the most common

denominator to which all the current assets can be reduced because the other major

liquid assets, that is, receivables and inventory get eventually converted into cash.

This underlines the significance of cash management.

Sources of Cash:

Sources of additional working capital include the following:

1. Existing cash reserves

2. Profits (when you secure it as cash!)

3. Payables (credit from suppliers)

4. New equity or loans from shareholders

5. Bank overdrafts or lines of credit.

6. Long-term loans

If you have insufficient working capital resources of the business this is called

overtrading. and try to increase sales, you can easily over-stretch the financial .

Early warning signs include:

1. Pressure on existing cash

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2. Exceptional cash generating activities e.g. offering

high discounts for early cash payment

3. Bank overdraft exceeds authorized limit.

4. Seeking greater overdrafts or lines of credit

5. Part-paying suppliers or other creditors.

6. Paying bills in cash to secure additional supplies

7. Management pre-occupation with surviving rather than managing

8. Frequent short-term emergency requests to the bank (to help pay wages,

pending receipt of a cheque).

CASH MANAGEMENT IN HCL INFOSYSTEMS:

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The cash management system followed by the HCLInfosystems is mainly lock box system.

Cash Management System involves the following steps:

1. The branch offices of the company at various locations hold the collection of cheques of the customers.

2. Those cheques are either handed over to the CMS agencies or bank of the particular location take charge of whole collection.

3. These CMS agencies or bank send those cheques to the clearing house to

make them realized. These cheques can be local or outstation.

4. The CMS agencies or bank send information to the central hub of the compa-ny regarding realization/cheque bounced.

5. The central hub passes on the realized funds to the company as per the agreedagreements.

6. The CMS agencies or concerned bank provides the necessary MIS to thecompany as per requirement.

In cash management the collect float taken for the cheques to be realized into cash is

irrelevant and non-interfering because banks such as Standard Chartered, HDFC and

Citibank who give credit on the basis of these cheques after charging a very small

amount. These credits are given to immediately and the maximum time taken might

be just a day. The amount they charge is very low and this might cover the threat of

the cheque sent in by two or three customers bouncing. Even otherwise the time

taken for the cheques to be processed is instantaneous. Their Cash Management

System is quite efficient.

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MOTIVES FOR HOLDING CASH:

The term cash with reference to cash management is used in two senses. In a narrowsense, it is used to cover currency and generally accepted equivalents of cash, such

as cheques, drafts, demand deposits in banks. The broad view of cash also includes

near-cash such as marketable securities and time deposits in banks. The main

characteristics of these are that they can be readily sold and converted into cash.

Here, the term cash management is employed in the broader sense. Irrespective of

the form in which it is held, a distinguishing feature of cash, as an asset, is that it has

no earning power. If cash does not earn any return why it is held? There are four primary motives for maintaining cash balances:

Transaction Motive:

This is a motive of holding cash/near-cash to meet routine cash requirements to

finance the transactions which a firm carries on in the ordinary course of the

business. A firm enters into a variety of transactions to accomplish its objectives

which have to be paid for in the form of cash.

For e.g. cash payments have to be made for purchases, wages, operating expenses,

financial charges, and so on. Similarly, there is a regular inflow of cash to the from

sales operations, returns on investments and so on. These receipts and paymentsconstitute a continuous two way of cash, but they do not coincide or synchronize.

Hence, in case, the disbursements are in excess of current receipts the need of cash

balance is obvious.

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Precautionary Motive:

In addition to the non-synchronization of anticipated cash inflows and outflows inthe ordinary course of business, a firm may have to pay the cash for the purposes

which cannot be predicted or anticipated. The unexpected cash needs at the short

notice may be the result of floods, strikes, and bills may be presented for settlement

earlier than expected, unexpected slowdown in collection of accounts receivables,

cancellation of some order of goods from customers, sharp increase in cost of raw

materials, etc. hence precautionary balances to meet unpredictable obligations are

required to provide a cushion to meet unexpected contingencies. Such cash balancesare usually held in the form of marketable securities so that they earn a return.

Speculative Motive:

It refers to the desire of the firm to take advantage of opportunities which presentthemselves at unexpected moments and which are typically outside the normal

course of business. While the precautionary motive is defensive in nature, that firms

must make provisions to handle unexpected contingencies, the speculative motive

represents a positive and aggressive approach. Firms aim to exploit profitable

opportunities and keep cash in reserve to do so.

The speculative motive helps to take advantage of:

purchase raw material at a reduced price on payment of immediate cash, a chance tospeculate on interest rate movements by buying securities when interest rates are

expected to decline.

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Compensative Motive:Yet another motive to hold cash balances is to compensate banks for providing

certain services and loans. Banks provide a variety of services such as clearance of

cheques, supply of credit information and so on. While for some of this services

banks charge a commission or fee for other they seek indirect compensation.

Usually, the clients are required to maintain a minimum balance of cash at the bank

and the bank could return on such balances. Compensating balances are also

required by some loan agreements between a bank and its customers.

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FACTORS DETERMINING CASH NEEDS:

Synchronization of cash flows:The need of maintaining cash balances arises from the non-synchronization of the

inflows and outflows of cash. Hence the extent of non-synchronization of cash

receipts and disbursements determines the cash needs. For this a proper forecast

over period of time has to be made by making cash budgets.

Short costs: another factor to be considered in determining cash needs is the costsassociated with the shortfall in the cash needs. Some of the costs included in short

costs are as under:

1. Transaction costs associated with raising cash to cover the shortage.

2. Borrowing costs associated with the borrowing to cover the shortage like

interest, commitment charges, etc.

3. Loss of cash discount which cannot be availed because of the shortage of cash.

4. Cost associated with the deterioration of the credit rating which is reflected

in higher bang charges, stoppage of supplies, refusal to sell, loss of image.

5. Penalty rates by the bank to meet short fall in compensating balances.

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Excess cash balance costs:

The cost of having excessively large balances is known as excess cash balance cost.

Basically it is the loss of interest on idle funds which could have been earned if invested somewhere.

Procurement and management:

These are the costs associated with establishing and operating cash management

staff and activities. These are mainly fixed in nature like salaries, etc.

Uncertainty:

The impact of uncertainty on cash management strategy is also relevant as cash

flows cannot be predicted with precise accuracy. The motive is to provide a

precautionary cushion to cope up with irregularities in cash flows, unexpecteddelays in collections and disbursements.

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CASH BUDGET:

A firm is well advised to hold adequate cash balances but should avoid excessive

balances. The firm has; therefore, to assess its cash needs properly. The cash budget

is probably the most important tool in cash management. It is a device to help a firm

to plan and control the use of cash. It is a statement showing inflows and outflows

of cash over a period of time.

Purposes of cash budget:

1. To co-ordinate the timings of cash needs.

2. It pin-points the period when there is likely to be excess cash.

3. It enables a firm which has sufficient cash to take advantage of cash

discounts on its accounts payable, to pay obligations when due, to take

dividend decisions.

4. It helps to arrange needed funds on the most favourable terms and prevents

the accumulation of excess funds.

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ELEMENTS OF CASH BUDGET:

The principal aim of cash budget, as a tool to predict cash flows over a given period of time, is to ascertain whether at any point of time there is likely to be an

excess or shortage of cash. The elements of cash budget are as follows:

1. The first element of cash budget is the selection of the period of time to be

covered by the budget. It is referred to as the planning horizon. The coverage

of the cash budget will differ from firm to firm depending upon its nature

and the degree of accuracy with which the estimates can be made. However,the period selected should neither be too short or too long. If it is too short,

many important events which lie just beyond the period cannot be accounted

for and the work associated with the preparation of the budget becomes

excessive. If it is too long, the chances of inaccuracy will be high. The

planning horizon of cash budget depends upon the circumstances and

requirements of a particular case. If the flows are expected to be stable and

dependable, such from may prepare a cash budget covering a long period.

o However, in case of a firm whose flows are uncertain a short period

budget may be appropriate.

2. The second element of cash budget is the selection of the factors that have a

bearing on the cash flows. The items included in cash budget are only cash

items; non-cash items such as depreciation and amortization are excluded.

.

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INTRODUCTION

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The receivables represent an important component of the

current assets of any firm. The term receivables are defined as debt owe to the firm

by the customers arising from sale of goods and services in the ordinary course of

business. When a firm makes an ordinary sale of goods or services and does not

receive payment, the firm grants trade credit and creates accounts receivable. It is

also referred as trade credit management. Management should way the benefits as

well as the costs to determine the goal of receivables management.

The term Receivables management may be defined as collection of steps and

procedures required to properly weigh the costs and benefits attached with the credit

policies. The receivables management consists of matching the costs of increasing

sales(particularly credit sales) with the benefits arising out of increased sales with

the objective of maximizing the return on investment of the firm.

OBJECTIVES:

The credit sales are generally made on open account in the sense that there are no

formal acknowledgements of debt obligations through a financial instrument. As a

marketing tool, they are intended to promote sales and thereby profits. However,

extension of credit involves risks and costs. The objective of receivables

management is to promote sales and profit until that point is reached where the

return on investments in funding receivables is less than the cost of funds raised to

finance the additional credit. The specific costs and benefits which are relevant to

the determination of objectives of receivable management are stated below:

Costs:The major categories of costs associated with accounts receivable are: i)

collection costs ii) capital costs iii) delinquency cost iv) default costs.

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o Collection costs:

These are administrative costs incurred in collecting the

receivables from the customers to whom credit sales have

been made.

o Capital costs:

The increased level of account receivable is an investment in

assets. They have to be financed involving a cost. The cost

on the use of additional capital to support credit sales could

be profitably employed.

o Delinquency costs:

It is the costs arising out of failure of customers to pay on

due date. The important components of this cost are:

2. blocking of the funds for an extended period

3. costs associated with steps that have to be initiated to collect the overdues.

o Default costs:

These are the overdues that cannot be recovered. Such debts

are treated as bas debts and have to be written-off as they

cannot be realized.

Benefits:

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The benefits are the increased sales and anticipated

profits because of a more liberal policy. When firms extend trade credit, i.e.

invest in receivables, they intend to increase the sales. The impact of the

liberal trade credit policy is likely to take two forms. First, it is oriented to

sales expansion. In other words, a firm may grant trade credit either to

increase sales to existing customers or attract new customers. This motive

for investment in receivables is growth oriented. Secondly, the firm may

extend credit to protect its current sales against emerging competition. Here,

the motive is sales retention. As a result of increased sales the profit of the

firm will increase.

Credit standards:

These are the basic criteria/minimum requirement for extending credit to a

customer. The factors for establishing standards are credit rating, credit

references, average payment period, and financial ratios. The trade-off with

reference to credit standards cover i) the collection costs ii) average

collection period/cost of investment in accounts receivable iii) level of bad

debt losses iv) level of sales. The implications of the four factors are

explained below.

Collection costs:

The implications are: i) more credit ii) a large credit department to

service accounts receivable iii) increase in collection cost.

Investment in receivables:

The investment in account receivable involves a capital cost as funds

have to be arranged by the firm to finance them till customers make

payments. Higher the average accounts receivable, the higher will be

the capital or carrying costs.

Bad debt losses:

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These can be expected to increase with

relaxation in credit standards and decrease if credit standards become

more restrictive.

Level of Sales:

As standards are relaxed, sales are expected to increase; conversely,

a tightening is expected to cause a decline in sales.

Credit analysis:It involves obtaining credit information and analysis of credit information. It

is on the basis of credit analysis that the decisions to grant credit to a

customer as well as the quantum of credit would be taken.

Obtaining credit information:

The first step is to obtain credit information on which the base is the

evaluation of the customers.

The sources of information are:

i) internal

ii) external

Internal:

The firm requires the customers to fill various forms and documents

giving details about financial operations. Another internal source is

derived from the records of the firm contemplating an extension of

credit.

External:

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The availability of information from external;

sources to assess the credit worthiness of the customers depends upon

development of institutional facilities and industrial practices. The

external sources are financial statements, bank references, trade

references and credit bureau reports.

Analysis of credit information:

Once the credit information has been collected from different sources, it

should be analysed to determine the credit worthiness of the applicant. It

covers two aspects:

i) quantitative

ii) qualitative.

Quantitative:

It is based on the factual information available from financial

statements, the past records of the firm and so on.

Qualitative:

It would cover aspects related to quality of management. Here, the

references from other suppliers, bank references and specialists bureau

reports would form the basis for conclusions to be drawn.

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Introduction

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The term inventory refers to the stock of the products a firm is

offering for sale and the components that make up the product. That is, inventory is

composed of assets that will be sold in future in the normal course of business

operations. These assets are:

i) Raw materials

ii) Work-in-progress and

iii) Finished goods.

The purpose of inventory management is to keep the stock in such a manner that

neither there is over-stock nor under-stocking. The over-stocking will mean

reduction of liquidity and starving of other production processes; under-stocking, on

the other hand , will result in stoppage of work. The investments in inventory should

keep in reasonable limits.

The views concerning the appropriate level of inventory would differ among the

different functional areas.

Objectives

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Efficient management of inventory should ultimately result in

the maximization of owners wealth. The inventory should be turned over as quickly

as possible, avoiding stock-outs that might result in closing down the production

line or lead to a loss of sales. It implies that while the management should try to

pursue the financial objectives of turning inventory as quickly as possible, it should

at the same time ensure sufficient inventories to satisfy production and sale demand,

that is, these two conflicting requirements have to be reconciled. Alternatively, we

can say that the objective of inventory management is to minimize investment is

inventory and also to meet a demand for the product by efficiently organizing the

production and sales operation.

That is to say, an optimum level of inventory should be determined on

the basis of the trade-off between costs and benefits associated with the level of

inventory.

COST OF HOLDING INVENTORY

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The objective of inventory management is to minimize costs.

The costs associated with the inventory fall into two basic categories:

i) ordering costs, and

ii) carrying costs.

These costs are an important element of the optimal level of inventory

decisions and are described as under:

Ordering costs:

these are the costs associated with the acquisition or ordering of inventory. It is the fixed cost of placing and receiving an inventory order.

Included in the ordering costs are costs involved in one i)preparing a

purchase order or requisition form and ii) receiving, inspecting and

recording of the goods received to ensure both quality and quantity. These

are generally fixed irrespective of the amount of order. Hence, such costs

can be minimized by placing fewer orders for a larger amount. However,

acquisition of large quantity would increase the costs associated with the

maintenance of the inventory, that is, carrying costs.

Carrying costs:these costs are the variable costs per unit of holding an item in inventory for a specified time period. These

costs can be divided into two categories-

i) those that arise due to storing of inventory: the main components

of this category of costs are-

a) the storage costs, insurance, maintenance of the building ,

b) insurance of inventories against fire and theft,

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c) deterioration in inventory because of pilferage,

fire, technical obsolescence,

d) serving costs such as labour for handling,

ii) opportunity costs: this consists of expenses in raising funds. If funds

were not blocked up in inventory, they would have earned a return. This

is the opportunity cost of funds.

The sum of ordering and carrying costs represents the total cost of inventory.

TOTAL COST=ORDERING COST+CARRYING COST

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BENEFITS OF HOLDINGINVENTORY

The secondary element in the optimum inventory decision deals with the

benefits associated with holding inventory. The major benefits of holding inventory

is that they enable firms in the short run to produce at a rate greater than purchase of

raw materials and vice-versa, or sell at rate greater than production and vice-versa.

Inventory Management Techniques:

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Many sophisticated mathematical techniques are available to handle

inventory management problems.

Classification System:A B C System; The ABC system is a widely used classification technique to

identify various items of inventory for the purposes of inventory control.

This technique is based on the assumption that firm should not exercise the

same degree of control on all items of inventory. It should rather keep a

more rigorous control on items that are most costly and or slowest turning,

while items that are less expensive should be given a less control. Hence,ABC system is an inventory management technique that divides inventory

into three categories of descending importance based on rupee investment in

each.

The items included in group A involve the largest investment. Therefore,

inventory control should be most rigorous and intensive and the most

sophisticated inventory control, techniques should be applied to these items.

The C group items consist of items of inventory which involve relativelysmall investments, although the number of items is

fairly large. These items deserve minimum attention.

The group B stands mid-way. It deserves less attention than A but more

than C. It can be controlled by employing less sophisticated techniques.

The task of inventory management is to classify all the inventory items

Into one of these groups/categories.

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Order quantity problem:

EOQ model;

Economic order quantity model is the inventory management technique for determining items optimum order quantity which is the one that minimizes

the total of its ordering and carrying costs. It balances fixed ordering cost

against variable ordering costs. It is also known as economic lot size.

Mathematically it can be calculated by the following equation:

EOQ= 2AB/C

Where ,A= Annual usage in units

B= Ordering Cost

C= Carrying Cost

Setting of various stock levels:

Minimum level; It indicates the lowest figure of inventory balance,which must be maintained in hand at all times so that there is no

stoppages of production due to non-availability of inventory. The

main considerations for fixation of minimum level of inventory are

as follows:

1. Information about maximum consumption period and

maximum delivery period in respect of each item to

determine its re-order level.

2. Average rate of consumption for each inventory.

3. Average delivery period for each item.

The formula for calculation is as under:

Minimum level of inventory = Re-order level (Average rate of consumption xAverage time of inventory delivery)

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Maximum Level: It indicates the maximum figure of inventory

quantity held in stock at any time. The important considerations

which should govern the fixation of maximum levels of inventory

are as follows:

1. The information about its re-order level since it itself

depends upon its maximum rate of consumption and

maximum delivery period.

2. Knowledge about minimum consumption and minimum

delivery period for each inventory should also be known.

3. The figure of EOQ.

4. Availability of funds, storage space, nature of items and their

price per unit are also important for the fixation of maximum

level.


Maximum level of inventory = Re-order level + re-order quantity -(Minimum consumption x Minimum re-order period)

Re-order Level:

This level lies between the maximum and minimum levels in such a

way that before the material ordered is received into the stores, there

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is sufficient quantity on hand to cover both

normal and abnormal consumption situations. In other words, it is

the level at which fresh order should be placed for replenishment of

the stock.


Re-order level of inventory = Maximum re-order period xMaximum usage OR Minimum Level + (Average Rate of consumption x Average Time to obtain fresh supplies)

Danger Level:

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It is the level at which normal issues of the

raw material inventory are stopped and only emergency issues are

made.


Danger level of inventory = Average consumption x Lead time forEmergency purchases

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DATA COLLECTION SOURCES

The make conclusion and give recommendation it is necessary to research about the

given topic. As my topic is related to the working capital, the secondary data has

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been very useful for this purpose. The cost audit reports of

various years have been used in analyzing the data. Mainly secondary data has been

used. To know about the working capital management, I have talked to various

persons in accounts departments.

Main topics of Research Methodology are:

I. Research Methodology

II. Steps in Research Methodology

Collection of data

Organization of data

Interpretation of data

PROBLEM

To know the working capital requirement of the HCL INFOSYSTEMS LTD. and to

give some practicable suggestion in this regard.

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TYPES OF RESEARCH

This research employed four type of research:

I. Descriptive Research

II. Analytical Research

III. Qualitative research

IV. Quantitative Research

DESCRIPTIVE RESEARCH OR EX-POST FACTORESEARCH

To conduct the research work accurately, we conducted descriptive research.

It is done to know following facts:

1. The HCL INFOSYSTEMS LTD. sales are more influenced by

quality.2. Frequency of using HCL INFOFSYSTEMS LTD. products.

3. Liking in respect of quality.

4. Media for awareness of schemes.

ANALYTICAL RESEARCH

In it, we have to use facts and information already available and analysis theses to

make an evaluation for project.

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QUALITATIVE RESEARCH

In selection the appropriate research design of the study and the type of

Data needed, the choice of data collection techniques is four grouped. It is done for:1. Consumers needs

2. Consumers preference for brand

3. Availability for consumers.

QUANTITATIVE RESEARCH

Quantitative research is obtained to rate the different aspect on parameters.

1. Image of brands

2. Brand loyalty

3. Expectation of customers

4. Awareness among consumers for schemes

5. Switch ability of consumers.

6. Trails etc.

METHODOLOGY

The project includes secondary sources of data. The data collected through these

sources has been organized, analyses and interpreted so as to draw conclusion and

arrive at appropriate recommendation

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The secondary sources of data includes the annual reports,

website of

HCL INFOSYSTEMS LTD. Company, which contains details, which is helpful for

making my project report.

Data collection methodThe secondary data has been collected from the company and the market

respectively. The secondary data was also provided through the annual reports,

website etc. of the company .

Data collection instrumentsData once collected needed to be organized for further processing. Data collected by

me was carefully gone through then the relevant and useful matter was assorted and

properly organized.

Analysis of dataThe data is carefully analyzed keeping in consideration both the pros and cons for

purpose of arriving at concrete conclusions.

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Interpretation of dataAfter carefully analyzing the data, it has been aptly interpreted in order to give

concrete conclusions and proper recommendations.

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Annual results in brief

Jun ' 10 Jun ' 09Sales 11,979.45 12,203.07Operating profit 395.36 420.92Interest 37.44 44.66Gross profit 390.38 391.13EPS (Rs) 11.98 15.21

Annual results in details

Jun ' 10 Jun ' 09Other income 32.46 14.87Stock adjustment 140.85 -17.90

Raw material 1,828.661,860.6

7Power and fuel - -

Employee expenses 368.41 325.98Excise - -Admin and selling

expenses346.05 -

Research and

development expenses- -

Expenses capitalized- -

Other expenses 8,900.12

9,613.4

0Provisions made - -Depreciation 21.73 17.27Taxation 107.10 113.42

Net profit / loss 261.55 260.44Extra ordinary item - -Prior year adjustments - -Equity capital 43.65 34.24Equity dividend rate - -

Agg.of non-prom.shares (Lacs)

1086.02 778.54

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Jun ' 10Jun '

09Agg.of non

promotoHolding (%)49.76 45.47

OPM (%) 3.30 3.45GPM (%) 3.25 3.20

NPM (%) 2.18 2.13

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Jun ' 10 Jun ' 11Sources of fundsOwner's fundEquity share capital 43.65 44.58Share application money 17.67 0.00Preference share capital 0.00 0.00Reserves & surplus 1,860.94 1902.46Loan funds

Secured loans 152.02 110.43Unsecured loans 357.91 467.11Total 2,432.19 577.54Uses of fundsFixed assetsGross block 274.88 364.05Less : revaluation reserve - -Less : accumulated depreciation 103.66 131.99

Net block 171.22 232.06Capital work-in-progress 25.69 19.95Investments 911.19 705.05

Net current assetsCurrent assets, loans & advances 3,625.87 3608.81

Less : current liabilities & provisions 2,301.78 2041.29

Total net current assets 1,324.09 1567.52Miscellaneous expenses not written - -Total 2,432.19 1,359.21

Notes:

Book value of unquoted investments 911.19 276.10Market value of quoted investments - -Contingent liabilities 113.65 338.98

Number of equity sharesoutstanding (Lacs) 2182.59 1712.12

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Profit & Loss account of HCLInfosystems ------------------- in Rs. Cr. -------------------

Jun '11 Jun '10

12 mths 12 mths

IncomeSales Turnover 11,059.14 12,061.78Excise Duty 122.19 108.77

Net Sales 10,936.95 11,953.01

Other Income 87.19 46.93Stock Adjustments -230.80 -140.85Total Income 10,793.34 11,859.09ExpenditureRaw Materials 9,330.96 10,611.66Power & Fuel Cost 1.88 1.78Employee Cost 448.31 368.41Other Manufacturing Expenses 265.10 115.99Selling and Admin Expenses 0.00 290.53

Miscellaneous Expenses 402.82 39.43Preoperative Exp Capitalised 0.00 -0.54Total Expenses 10,449.07 11,427.26

Jun '11 Jun '10

12 mths 12 mths

Operating Profit 257.08 384.90PBDIT 344.27 431.83Interest 73.97 53.08

PBDT 270.30 378.75Depreciation 33.20 21.73Other Written Off 0.00 0.00Profit Before Tax 237.10 357.02Extra-ordinary items -1.79 11.68PBT (Post Extra-ord Items) 235.31 368.70Tax 58.08 107.10Reported Net Profit 177.23 261.55Total Value Addition 1,118.11 815.60

Preference Dividend 0.00 0.00

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Equity Dividend 176.30 170.73Corporate Dividend Tax 29.11 28.68Per share data (annualised)Shares in issue (lakhs) 2,228.80 2,182.59

Earnings Per Share (Rs) 7.95 11.98Equity Dividend (%) 400.00 375.00Book Value (Rs) 87.36 87.26

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Jun11 Jun10

Investment Valuation RatiosFace Value 2.00 2.00Dividend Per Share 8.00 7.50Operating Profit Per Share (Rs) 11.53 17.63

Net Operating Profit Per Share (Rs) 490.71 547.65Free Reserves Per Share (Rs) -- 84.90Bonus in Equity Capital 23.86 24.37Profitability RatiosOperating Profit Margin(%) 2.35 3.21Profit Before Interest And TaxMargin(%) 2.03 3.03

Gross Profit Margin(%) 2.04 3.03Cash Profit Margin(%) 1.92 2.08Adjusted Cash Margin(%) 1.92 2.08

Net Profit Margin(%) 1.60 2.18Adjusted Net Profit Margin(%) 1.60 2.18Return On Capital Employed(%) 12.32 15.94Return On Net Worth(%) 9.10 13.73Adjusted Return on Net Worth(%) 9.19 11.95Return on Assets ExcludingRevaluations 87.36 87.26

Return on Assets IncludingRevaluations 87.36 87.26

Return on Long Term Funds(%) 12.32 18.64Liquidity And Solvency RatiosCurrent Ratio 1.77 1.35

Quick Ratio 1.47 1.21Debt Equity Ratio 0.30 0.27Long Term Debt Equity Ratio 0.30 0.09Debt Coverage RatiosInterest Cover 4.21 10.36Total Debt to Owners Fund 0.30 0.27Financial Charges Coverage Ratio 4.65 7.72Financial Charges Coverage Ratio PostTax 3.84 6.34

Management Efficiency Ratios

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Inventory Turnover Ratio 18.86 15.91Debtors Turnover Ratio 5.41 6.92Investments Turnover Ratio 18.86 15.91Fixed Assets Turnover Ratio 30.04 45.83

Total Assets Turnover Ratio 4.33 4.94Asset Turnover Ratio 30.04 45.83

Average Raw Material Holding -- 32.84Average Finished Goods Held -- 18.47

Number of Days In Working Capital 51.60 39.88Profit & Loss Account RatiosMaterial Cost Composition 85.31 88.77Imported Composition of Raw

Materials Consumed85.99 77.21

Selling Distribution Cost Composition -- 1.15Expenses as Composition of TotalSales 0.73 0.86

Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 115.90 76.24Dividend Payout Ratio Cash Profit 97.61 70.39Earning Retention Ratio -14.74 12.41Cash Earning Retention Ratio 3.21 20.04

Adjusted Cash Flow Times 2.72 2.04

Jun'11 Jun '10

Earnings Per Share 7.95 11.98Book Value 87.36 87.26

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Year Month

Dividend

(%)2010 Aug 100

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Year Month Dividend

(%)2010 Apr 1002010 Jan 1002009 Sep 1502009 Apr 752009 Jan 752008 Sep 1002008 Apr 1002008 Jan 1002007 Aug 2002007 Apr 1002007 Jan 100

2006 Aug 2002006 Apr 1002006 Jan 1002005 Aug 2002005 Apr 702005 Jan 702004 Aug 1402004 Apr 602004 Jan 502003 Sep 130

2002 Aug -2001 Aug 702000 Aug 251999 Sep 251998 Aug 151997 Oct 10

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FINDINGS

The Analysis of working capital is primarily a test of short-term solvency. There is

danger in having too little or too much working capital.

Therefore: -

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The financial manager has to be very vigilant all throughout

about the trends in the items that make up working capital.

The questions to be studied and answered in connection with the analysis of

working capital include the following:-

Is the management utilizing working capital effectively?

Is the amount working capital adequate, excessive or insufficient?

Does the firm have a favourable credit rating?

Is the current financial position improving?

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LIMITATIONS

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1. We cannot do comparisons with other companies unless and until we have

the data of other companies on the same subject.

2. Only the printed data about the company will be available and not the back

end details.

3. Future plans of the company will not be disclosed to us.

4. Lastly, due to shortage of time it is not possible to cover all the factors and

details regarding the subject of study.

5. The latest financial data could not be reported as it is not available on the

companys website.

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The management of working capital plays a vital role in

running of a successful business. So, things should go with a proper understanding

for managing cash, receivables and inventory.

HCL Infosystems is managing its working capital in a good manner, but still there

is some scope for improvement in its management. This can help the company in

raising its profit level by making less investment in accounts receivables and

stocks etc. This will ultimately improve the efficiency of its operations.

Following are few recommendations given to the company in achieving its

desired objectives:

1. The business runs successfully with adequate amount of the working

capital but the company should see to it that the cash should not be tied up

in excessive amount of working capital.

2. Though the present collection system is near perfect, the company as

due to the increasing sales should adopt more effective measures so as to

counter the threat of bad debts.

3. The over purchasing function should be avoided as it could lead to

liquidity problems.

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4. The investment of cash in marketable securities should be increased,

as it is very profitable for the company.

5. Holding of excessive and insufficient stock must be avoided as it

creates a burden on the cash resources of a business and results in lost sales,

delays for customers, etc respectively.

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Following sources have been sought for the preparation of this project report:

1. Financial Statements (Annual Reports)

2. Internet ----www.hclinfosystems.in

3. www.google.co.in

4. Textbooks on financial management -

I. I.M.Pandey

II. Khan and Jain

III. Prasanna Chandra

DILEEP Final Project

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