INTRODUCTION TO THE SPORTS GOODS INDUSTRY.docx

7/21/2019 INTRODUCTION TO THE SPORTS GOODS INDUSTRY.docx

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1.1 INTRODUCTION TO WORKING CAPITAL MANAGEMENT

Working capital management has acquired great importance in recent times. The

brains in every organization is now days spending their previous time to resolve the

problems of working capital. Working capital is an integral part of the overall

financial management. The management of chart assets and chart team sources of

financing is working capital management.

Every business needs funds for two purposes.

For its establishment.

To carry out its day to day operation

Funds are required to create production facilities through purchase of fied assets

such as plant! machinery! land! building! furniture etc. "nvestments in these assets

represent that part of firm#s capital which is blocked on permanent basis and is called

fied capital. Funds are also needed for short term purposes for the purchase of raw

materials! payment of wages and other day to day epenses. These funds are known as

gross capital. "n layman language working capital refers to that part of firm#s capital

that is required for financing short term assets such as cash! debtor! inventory and

marketable securities. The main aim of financial management is to maimize

shareholder#s funds. "t is possible only when company earn profit. The amount of such

profit depends upon magnitude of value.

There is always a time gap between value of goods and receipt of cash. Working

$apital is required for this period. The main aim of working capital management is to

manage the firm#s current assets and current liabilities. This is because if firm can#t

maintain the proper level of working capital it becomes insolvent and forced into

bankruptcy. The interaction between current assets and current liabilities is main

theme of theory of working capital. Working capital is life blood and controlling

nerve of business.

MEANING OF WORKING CAPITAL

The term# working capital# refers to the firm%s total current assets. "t is also termed as

gross #working capital# since the term# working capital# according to the surrounding

terminology is used for the difference of current assets and current liabilities. "n case

the term working capital is used for current assets the term used for the ecess of

current assets over current liberalities is networking capital.

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1.1.1 CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital

&a' (alance sheet concept.

&b' )perating cycle or circular flow concept.

BALANCE SHEET CONCEPT

There are two interpretations of working capital under the balance sheet concept.

&a' *ross working capital

&b' +et working capital

"n the broad sense! the term working capital refers to the gross working capital and

represents the amount of funds invested in current assets. Thus! the gross working

capital is the capital invested in total current assets of the enterprise.

$urrent assets are those assets which in the ordinary course of business can be

converted into cash within a short period of normally one accounting year. Eamples

of current assets are,

Table 1.1 Constt!ents O" C!##ent Assets

- $ash in hand and bank balances

(ills /eceivables

0 1undry 2ebtors &less provision for bad debts'.

3 1hort4term loans and advances

5 "nventories of stocks! as

&a' /aw materials!

&b' Work4in4process

&c' 1tores and spares

&d' Finished goods

6 Temporary "nvestments of surplus funds.

7 8repaid Epenses.

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. Every management is more interested in the total current assets with which it has to

operate than the sources from where it is made available.

0. The gross concept takes into consideration the fact that every increase in the funds

of the enterprise would increase its working capital.

3. The gross concept of working capital is more useful in determining the rate of

return on investments in working capital.

The net working capital concept! however! is also important for the following reasons,

-. "t is a qualitative concept which indicates the firm#s ability to meet its operating

epenses and short4term liabilities.

. "t indicates the margin of protection available to the short4term creditors! i.e.! the

ecess of current assets over current liabilities.

0. "t is an indicator of the financial soundness of an enterprise.

3. "t suggests the need for financing a part of the working capital requirements out of

permanent sources of funds.

To conclude! it may be said that! both! gross and net! concepts of working capital are

important aspects of the working capital management. The net concept of working

capital may be suitable only for proprietary from of organizations such as sole4trader

or partnership firms. (ut the gross concept is very suitable to the company form of

organization where there is divorce between ownership! management and control.

?owever! it may be made clear that as per general practice! net working capital is

referred to simply as working capital. "n the words of ?oagland! @Working capital is

descriptive of that capital which is not fied. (ut the more common use of the

working capital is to consider. "t is the difference between the book value of the

current assets and current liabilities.

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1.1.$ CLASSIFICATION OR KINDS OF WORKING CAPITAL

Working capital may be classified in two ways

&a' )n the basis of concept.

&b' )n the basis of time

)n the basis of concept! working capital is classified as gross! working capital and net

working capital as discussed earlier.

This classification is important from the point of view of the financial manager. )n

the basis of time working capital may be classified as,

PERMANENT OR FI%ED WORKING CAPITAL,48ermanent or fied working

capital is the minimum amount which is required to ensure effective utilization of

fied facilities and for maintaining the circulation of current assets. There is always a

minimum level of current assets which is continuously required by the enterprise to

carry out its normal business operations. For eample! every firm has to maintain a

minimum level of raw @materials! work4in4process! finished goods and cash balance.

This minimum level of current assets is4 called> permanent or fied working capital as

this part of capital is permanently blocked in current assets.

:s the business grows! the requirements of permanent working capital also increase

due to the increase in current assets. The permanent working capital can further be

classified as regular working capital and reserve working capital required to ensure

circulation of current assets from> cash to inventories#! from inventories to receivables

and from receivables to cash and so on. /eserve working capital is the ecess amount

over the requirement for regular working capital> which may be provided for

contingencies that may arise at unstated periods such as strikes> rise in prices!

depression! etc.

TEMPORAR& OR 'ARIABLE WORKING CAPITAL(Temporary or variable

working capital is the amount of working capital which is required to meet the

seasonal demands and some special eigencies. Aariable working capital can be

further classified as seasonal working capital and special! working capital. Bost of the

enterprises have to provide additional working capital to meet the seasonal and special

needs.

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The capital required to meet the seasonal needs of the enterprise is called seasonal

working capital. 1pecial working capital is that part of working capital which is

required to meet special eigencies such as launching of etensive marketing

campaigns for conducting research etc.

1.1.) IMPORTANCE OR AD'ANTAGES OF ADE*UATE WORKING

CAPITAL(

Working capital is the life blood and nerve centre of a business. Cust as circulation of

blood is essential in the human body for maintaining life! working capital is very

essential to maintain the smooth running of a business. +o business can run

successfully without an adequate amount of working capital. The main advantages of

maintaining adequate amount of working capital are as follows,

-. SOL'ENC& OF THE BUSINESS, :dequate working capital helps in

maintaining solvency! of the business by providing uninterrupted flow of

production.

GOODWILL(1ufficient working capital enables a business concern to make

prompt payments and helps in creating and maintaining goodwill.

0. EAS& LOANS, : concern having adequate working capital! high solvency and

good credit standing can arrange loans from banks and others on easy and

favorable terms.

3. CASH DISCOUNTS. :dequate working capital also enables a concern to avail

cash discounts on the purchases and hence it reduces costs.

5. REGULAR SUPPL& OF RAW MATERIAL, 1ufficient working capital ensures

regular supply of raw materials and continuous production.

6. REGULAR PA&MENT OF SALARIES+ WAGES AND OTHER DA&,TO,

DA& COMMITMENTS. : company which has ample working capital can

make regular payment of salaries! wages mid other day4to4day commitments

which raises their morale of its employees! increases their efficiency! reduces

wastages and costs and enhances production and profits.

7. E%PLOITATION OF FA'ORABLE MARKET CONDITIONS. )nly

concerns with adequate working capital can eploit favorable market conditions

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such as purchasing its requirements in bulk when the prices are lower and by

holding its inventories for higher prices.

9. ABILIT& TO LACE CRISIS. :dequate working capital enables a concern to

face business crisis in emergencies such as depression because during such

periods! generally! there is much pressure on working capital.

D. *UICK AND REGULAR RETURN ON IN'ESTMENTS. Every "nvestor

wants a quick and regular return on his investments. 1ufficiency of working

capital enables a concern to pay quick and regular dividends to its investors as

there may not be much pressure to plough back profits. This gains the confidence

of its investors and creates a favorable market to raise additional funds in the

future.

-. HIGH MORALE :dequacy of working capital creates an environment of

security confidence! high morale and creates overall efficiency in a business.

1.1.- E%CESS OR INADE*UATE WORKING CAPITAL

Every business concern should have adequate working capital to run its business

operations. "t should have neither redundant or ecess working capital nor inadequate

nor shortage of working capital. (oth ecess as well as short working capital positions

are bad for any business. ?owever! out of the two! it is the inadequacy of working

capital which is more dangerous from the point of view of the firm.

DISAD'ANTAGES OR DANGERS OF INADE*UATE WORKING CAPITAL

-. : concern winch has inadequate working capital cannot pay it%s shun term

liabilities in tune. Thus! it will lose its reputation and shall not be able to gel good

credit facilities.

. "t cannot buy us requirements in bulk and annul avail of discounts! etc.

0. "t becomes difficult for the firm to eploit favorable market conditions and

undertake profitable proects due to lack of working capital.

3. The firm cannot pay day4to4day epenses of its operations mid it creates

inefficiencies! increases costs and reduces the profits of the business.

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5. "t becomes impossible to utilize efficiently the fied assets due to non4 availability

of liquid funds.

6. The rate of return on investments also falls with the shortage of working capital.

1.1. THE NEED OR OB/ECTS OF WORKING CAPITAL

The need for working capital cannot be over emphasized. Every business needs some

amount of working capital. The need for working capital arises due to the time gap

between productions mid realization of! cash from sales. There is an operating cycle

involved in the sales band realization of cash. There are time gaps in purchase of raw

materials and production> production and sales> mid sales and realization of cash.

Thus! working capital is needed for the following purposes,

-.' For the purchase of raw materials! components and spares.

.' To pay wages and salaries.

0.' To incur day4to4day epenses and overhead costs such as fuel! power and office!

epenses! etc.

3' To meet the selling costs as packing! advertising! etc.

5.' To provide credit facilities to the customers.

6.' To maintain the inventories of raw material! work4in4progress! stores mid spares

mid finished stock.

For studying the need of working capital in a business! one has to study the business

under varying circumstances such as a new concern! as a growing concern mid as one

which has attained maturity. : new concern requires a lot of liquid funds to meet

initial epenses like promotion! formation! etc. These epense#s! are called

preliminary epenses mid are capitalized. The amount needed as working capital in a

new concern depends primarily@ upon its size and the ambitions of its promoters.

*reater the size of the business unit! generally! larger will be the requirements of

working capital. The amount of working capital needed goes on increasing with the

growth and epansion of business till it attains maturity. :t maturity! the amount of

working capital needed is called normal working capital. There are many other factors

which influence the use of working capital in the business. They are discussed later

on.

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1.1.0 IMPORTANCE OF WORKING CAPITAL MANAGEMENT

Following points emphasise the importance of working capital management,

&a' TIME IN'OL'ED. Financial manager has to devote the largest portion of his

time in day to day internal operations of the firm and hence the importance of

working capital management.

&b' RELATIONSHIP WITH SALES GROWTH. The need to finance current

assets is closely and directly related to growth of sales. "f sales increase! more

amounts are required to be invested in accounts receivable. Boreover! in

anticipation! greater stocks are to be kept for the increased sales.

&c' *UANTUM OF IN'ESTMENT. "n most of the concerns which are not

manufacturing! current assets may be even more than half of the total assets of a

business. =arge investment requires careful attention of the finance manager in

respect of the current assets management particularly since the investments lend

to be relatively volatile.

&d' IMPORTANCE FOR SMALL FIRMS. : small firm cannot avoid investments

in current assets and! therefore! for it the management of current assets assumes

special significance. "t is so because of the difficulty in arranging long4term loans

also 4 the effect being increased current liabilities on account of short4term loans.

DETERMINANTS OF WORKING CAPITAL

Following are the factors which determine the requirements of working capital,

&-' MANUFACTURING C&CLE. The production process consumes time right

from the purchase and use of raw materials to the completion of finished goods.

The longer the duration! the greater is the requirement of working capital. The

manufacturing cycle may shorter for certain concerns and longer for others it

depends on the type of

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the product to be manufactured! work to be done through machine labour and

hand "nborn! degree of rationalization of manufacturing procedure#! through lime!

motion mid fatigue studies etc.

&.' PRODUCTION POLIC&( "f the production is evenly spread over the entire

year! working capital requirements are greater! because the inventories will lie

unnecessarily accumulated during oil 4 season period. (ut if the production

schedule favors a varying production plan as per the seasonal requirements!

working capital is required to a greater etent during a specified season only.

The production policies are affected by so many factors4availability of raw

materials! labor! stocking facility etc. and therefore! whatever the production

policies are! the firm has to arrange its working capital requirements accordingly.

The decisions of management regarding automation also affect working capital

requirements. "n a labor intensive process! the requirement of working capital

will be higher. "n case of a highly automatic plant! the requirements of long4term

funds would be greater.

&0' NATURE AND SIE OF BUSINESS, Banufacturing firms require less working

capital as compared to trading and financial firms. ?owever! certain

manufacturing firms also require a heavy investment in working capital. 8ublic

utility concerns require less capital. The needs of working capital for a large

business are more than those of a small business.

:lso! shorter the manufacturing process! lower the requirement of working capital

because inventories are to be maintained at a lower level. Therefore! highly

capital intensive industries require large working capital to run their sophisticated

and long production process.

&3' SEASONAL AND C&CLICAL FLUCTUATIONS( )n account of market

boom! sales increase and! as a consequence! the requirements of inventories and

debtors "ncrease. 1lack seasons reduce the requirements of investment in working

capital.

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&5' CREDIT POLIC&(=iberal credit policy leads to higher sales and! therefore!

more working capital is required. Even if sales do not grow! liberal policy in

respect of credit period allowed will require more investment in debtors because

the collections would also be slower then. "n the same way! an organization which

has a very efficient debt collection system and offers strict credit terms will

require lesser working capital as compared to organization where debt collection

system is not so efficient.

&6' CREDIT FACILITIES, "f the credit period allowed to the company is more! the

requirements of working capital would be less for the company. "f the company

does not enoy liberal credit facilities from its suppliers! it will have to arrange for

greater funds for investment in current assets.

&7' IN'ENTOR& POLICIES, This has also an impact on working capital

requirements since large amount of funds is normally locked up in inventories.

:n efficient firm may stock raw material for smaller period and may require

lower working capital.

&9' EFFICIENC& OF OPERATIONS, "f the operations of the company are

efficiently managed! the operating costs would be low and the resources would be

utilized in the best possible manner resulting in speeding up of the working

capital cycle and! thus! reducing the working capital requirements.

&D' D&NAMIC ATTITUDES( "f the management of the firm is dynamic and is

thinking in terms of epanding the business or diversifying it! greater funds are

required by the business. The main reason why more funds are required early is

that advance planning is essential if the firm is to epand and grow.

-' PRICE FLUCTUATIONS( 8rice level changes! particularly inflation have a

great effect on the requirements of working capital in periods of rising prices

more funds are required to be invested in working capital. 1ame level of

operations can be conducted only with greater funds if the value of money falls.

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&--' SUPPL& FLUCTUATIONS, /egular supply of raw materials and labor would

cause lesser working capital requirements! large quantities of raw material are

required to be stored because of fear of non4availability at a later date or on

account of increased prices! and more funds are needed for working capital.

&-' ABNORMAL FACTORS. Factors such as strikes and lockouts require additional

working capital. /ecessionary conditions require more stock of finished goods

while inflationary conditions require more fund for working capital to maintain

same amount of current assets.

&-0' TA% LIABILIT&. *reater ta liability means greater requirements of working

capital. Ta liability can be reduced by proper ta planning and ta management

and thus the working capital requirements can also be reduced.

1.1.2 MANAGEMENT OF WORKING CAPITAL

Working capital management is really concerned with the administration of all the

current assets and current liabilities it is basically concerned with

&a' 2etermining the need for working capital.

&b' 2etermining the optimal levels of investment in various current assets! and

Eamining the latest patients upgrading each element of working capital.

&c' "t is obvious that given a constant level production higher the amount of working

capital! the lower will be the return on investment! since capital turnover ratio

will be less. )n the other hand! lower the amount of working capital> the higher

would be the amount of the /isk since the company would not have adequate

liquidity to meet its term obligations.

"n working capital management! therefore! we have to strike a balance between risk

and profitability. We have to find out that level of achievement in working capital

which gives a reasonable amount of liquidity to a good working capital turnover ratio.

1.1.3 FINANCING OF WORKING CAPITAL

: firm can adopt different financial policies to finance its current assets. There are

various types of sources for financing working capital. These are as follows,

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F4!#e 1.) So!#5es o" Wo#6n4 Ca7tal

- 1hares -. $ommercial banks

2ebentures . "ndigenous bankers

0 8ublic deposits 0. Trade creditors

3 8loughing back of profits 3. "nstallment credit

5 =oans from financial institutions 5. :dvances

6. :ccounts receivable

7. :ccrued epenses

9. $ommercial paper

FINANCING OF LONG TERM WORKING CAPITAL

8ermanent working capital should be financed in such a matter that the enterprise may

have its uninterrupted use for a long period. There are five sources of long term

working capital,

1. SHARES("ssue of shares is the most important source for raising long term

capital. : company can issue various types of shares like equity shares!

preference shares and deferred shares. :sGfar as possible! a company should

raise the maimum amount of permanent capital by issue of shares.

$. DEBENTURES( : debentures is an instrument issued by the company

acknowledging to its debt to its holder. The debenture holders are the creditors

of the company. : fied rate of interest is paid on the debentures. The

debentures may be of various kinds such as unsecured! secured! redeemable!

irredeemable! convertible debentures and non convertible debentures. The

debentures as a source of finance have a number of advantages both to investors

and company.

). PUBLIC DEPOSITS(8ublic deposits are the fied deposits accepted by a

business enterprise directly from the public. This source of raising short term

and medium term finance was very popular in absence of banking facilities.

8ublic deposits as a source of finance have a large number of advantages such a

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Sources of Working Capital

Permanent or Long Term Temporary or Short Term


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convenient source of finance! taation benefits! no need of securities and

inepensive source of finance.

-. PLOUGHING BACK OF PROFITS( "t means the reinvestment by the

concern of its surplus earning in its business. This method of finance has a large

number of advantages as it is the cheapest rather cost free source of finance!

there is no need to keep securities! it ensures stable dividend policy.

. LOAN FROM FINANCIAL INSTITUTIONS(Financial institutions such as

commercial banks! insurance corporations! idbi etc also provides short term!

medium term and long term loans. This source of finance is more suitable to

meet the medium term demands of working capital.

FINANCING OF SHORT TERM WORKING CAPITAL

The main source of short term working capital is as follows,

1. INDIGENOUS BANKERS, 8rivate money lenders and other country

bankers used to be the only source of finance prior to the establishment of

commercial banks. They used to charge very high rate of interest. Even today

some business houses have to depend upon indigenous bankers for obtaining

loans to meet their working capital requirements.

$. TRADE CREDIT, Trade credit refers to the credit etended by the suppliers

of goods in the normal course of business. :t present commerce is build upon

credit! trade credit arrangement of a firm with its suppliers is an important

source of finance. "t may also take the form of bills payable whereby the buyer

signs a bills of echange payable on a specified future date.

). INSTALLMENT CREDIT, This is another method by which the assets are

purchased and the possession of goods is taken immediately but the payment

is made in installments over a pre determined period of time. "n this interest is

charged on the unpaid price or it may be adusted in the price.

-. COMMERCIAL PAPER, "t is an important money market instrument for

raising short4term finances. $ommercial papers represent the unsecured

promissory notes issued by firms to raise short term funds. Firms! banks!

insurance companies! individuals etc. With short4term surplus funds invest in

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commercial papers. "nvestors would generally invest in commercial paper of a

financially sound and creditworthy

firm. "n "ndia! commercial papers of D- to -9 days maturity are being floated.

The interest rate will be determined in the market.

. AD'ANCES, 1ome business houses get advantages from their customers and

agents against orders and this source is a short term source of finance for

them. "t is a cheap source of finance and in order to minimize their investment

in working capital.

0. COMMERCIAL BANKS, $ommercial banks are most important source of

short term capital. The maor portion of working capital loans are provided by

commercial banks. They provide a large variety of loans to meet the specificrequirements of a firm. The different form in which the banks normally

provide loans and advances are as follows,

&a' =oans

&b' $ash credits

&c' )verdrafts

&d' 2iscounting of bills.

1.1.8 TECHNI*UES OF WORKING CAPITAL ANAL&SIS

The importance of working capital management cannot be over emphasized in view

of the 0 times and energy spent by management on working capital decision .Working

capital firm is analyzed by outsiders like banks! trade creditors! financial institutions

etc.

The obective of analysis is to evaluate solvency! liquidity and the cost of financing. :

study of chances in the uses and the sources of working capital are necessary to

evaluate the efficiency with which the working capital is employed in business. This

involves the need of working capital analysis! which can be done through thefollowing techniques

RATIO ANAL&SIS APPROACH(

/atio analysis is a technique of analysis and interpretation of financial statements. "t is

a process of establishing and interpreting various ratios for helping in making certain

decisions.

=everage /atios which show the etent that debt is used in a company#s capital

structure.

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=iquidity /atios which give a picture of a company#s short term financial

situation or solvency.

)perational /atios which use turnover measures to show how efficient a

company is in its operations and use of assets.

8rofitability /atios which use margin analysis and show the return on sales

and capital employed.

NEED OF RATIO ANALYSIS:

The need of ratio analysis due to following facts,

-' (usiness facts shown in financial statements do not carry any importance individually.

There importance lies in the fact that they are interpreted. ?ence there is a needfor establishing relationship between various related items.

2) /atio4analysis is a tool for interpretation of financial statements is also needed

because ratios have analyst to have a deep peep into the data given in the

financial statements.

1everal ratios measure how effectively and efficiently working capital is being

used. &Hey Working $apital /atios , 1tock Turnover&in days'! /eceivables

/atio&in days' ! 8ayables /atio&in days' ! $urrent /atio! Iuick /atio! Working

$apital /atio'

1.$ INTRODUCTION TO THE SPORTS GOODS INDUSTR&

1ports goods industry in "ndia has witnessed a phenomenal growth over the past five

The decades and now occupies a place of prominence in the "ndian economy in terms

of its massive potential for employment generation and eport. There has been an

increasing emphasis on its planned development! aimed at optimal utilization of

resources for maimizing the returns! particularly from eports. 1ports *oods sector

is one of the largest providers of widest avenues of employment opportunities. This

chapter discusses maor 1ports *oods manufacturing clusters across "ndia.

S7o#ts Goo9s Cl!ste# o" /alan9:a#

The 1ports *oods manufacturing cluster of Calandhar is a unique eample of

transplanted cluster! where a maor segment of an eisting cluster shifted lock stock

and barrel &the entrepreneurs! the workers and the raw material suppliers' to a new

location due to political division of the country in the year -D37'. Calandhar is an

important supplier of quality 1ports goods to more than -0 countries including some

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of the most developed nations of the world. The Calandhar based industry is rapidly

embracing new technology and adapting its products to keep up with the changing

global trends so as to emerge as the most important centre for the manufacture of

1ports *oods. :ccording to the 1ports *oods Banufacturers and Eporters

:ssociation! total number of persons working in the industry is about -!7! . :

report by $hristian :id! however! gives a figure of around 0!! persons working

in the industry in Calandhar! either in the -!5factories and smaller manufacturing

units or as subcontract home4workers. "t is not clear how this large difference can be

eplained! but it may be noted that the former figure does not include the large

number of home4based workers who are working for the manufacturersJeporters via

the contractors. The number of home4based workers can only be roughly estimated as

there are no reliable data about them yet. "f the figure of 0!! is correct this would

mean that two out of three workers in the sports goods industry are in the informal!

unorganized sector. The 1ports *oods "ndustry was founded by 1ardar (ahadur!

1ardar *anda 1ingh )beroi in the year -990 at 1ialkot and 1ports Equipment became

the first "ndian "ndustrial 8roduct to be eported in -995. The items taken up for

manufacturing in the beginning were tennis! footballs! cricket bats! balls and field

hockey. With the passage of time new items were added and industry at 1ialkot

progressed and people flourished beyond imagination until the division of the country

checked the boom. The sports *oods manufacturing units are located at two localities

in the city (asti +au and (asti 2aneshmandan. +ow with the growth of the "ndustry it

has spread to adoining areas of +akodar /oad! (asti 1heikh /oad! "ndustrial :rea!

and 1ports $omple on Hapurthala road and *.T /oad towards :mritsar. 1killed

workers engaged in this industry are the most important parts elements in the

production and are settled in (hargav $amp! *andi $amp! (asti *uzan! (asti 1heikh

and (asti 2aneshmandan! adacent to the manufacturing unit. The entrepreneurs

setting up modern units with mechanized production systems are shifting to open

space with more area to achieve better results and are away from crowded localities.

?owever! the network of the traditional business process is so strong that almost all

these units have either their offices or some production facilities in (asti +au! (asti

2aneshmandan in order to remain in physical touch with the traditional locations.

Abo!t t:e Cl!ste# Detals(

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Table 1.1( /alan9:a# s7o#ts 4oo9s 5l!ste# 9etals

- +ame of the $luster Calandhar 1ports *oods

8lace Calandhar

0 2istrict Calandhar

3 1tate 8unab5 +o of firms &by type' -05

6 +o. of workers 979

7 Turnover /s. 3 Billion

9 :ssociations in cluster -. :ssociation of "ndian 1ports *oods

"ndustries &:"1*"'

. 1ports *oods Banufacturer and

Eporters :ssociation &1*BE:'

0. 1ports *ood Foundation of "ndia &1*F"'

D Baor products Wood , ?ockey 1ticks! $ricket (ats and

$ricket Wickets! $arom (oards

1ynthetic fabrics, Aolleyball! Football

and $overs! /ugby (alls and all types of

protective

equipment!

=eather, $ricket and ?ockey (alls!

(oing *loves and other 1oft =eather

goods.

/ubber, (ladders and Tennis (alls

(asket (all and other "nflated $overs.

Betal , (adminton K Tennis /ackets!

Fitness equipments! Weight =ifting

equipments! Trophies! Bedals

$otton, 1ports +ets! 1ports ?osiery and

other sports wear.

Feather, 1huttle $ocks.

- 1pecific and relevant technical

institutions &/K2! Testing =ab

accredited'

2istrict "ndustries $entre

=abor Welfare )ffice

1ports *oods Eport 8romotion $ouncil

&1*E8$'

1mall "ndustries 1ervice "nstitute!

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=udhiana! &1"1"'

$entral "nstitute for 8romotion of 8lastic

Engineering and Technology &$"8ET'

1ports :uthority of "ndia &1:"'

Iuality Barking $entre for 1ports *oods

(ranch office of the 1tate Trading

$orporation &1T$'

2r. (./ :mbedkar +ational "nstitute of

Technology & +"T'

/egional $entre of $entral =eather

/esearch "nstitute &/E$=/"'

Training $entre on leather garments of

Hhadi and Aillage "ndustries

$ommission &HA"$'

-- Baor markets 2omestic

- Baor problemsJprospects There are serious gaps in the technology

required for making competitive products

both for the domestic as well as the

eport markets.

Iuality :ssurance and product testing

are the other weak areas of the

manufacturing process.

+eed of $ommon Testing Facility

$E certification for protective gears

(esides! testing of the finished products!the testing of raw materials and bought4

out components is an important but

hidden need of the "ndustry.

:part from the lack of awareness among

a maority of the cluster based units

about the facilities available! the other

problem is that no standard specificationsare available for the materials to be used

20


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in sports goods.

-0 2ata source and updated on 2iagnostic study report of 1ports *oods $luster!

Calandhar! 8unab by L+"2) $28! +ew 2elhi!

prepared under the aegis of the L+"2) 8roect,

1upport to country effort to promote 1BE

$luster 2evelopment in "ndia! 45 in

Mear -

Ma;o# P#o9!5ts an9 Se#


21/60


22/60

conceptualized by our Banaging 8artner and Founder Br. /aghunath 1. /ana. "n

these over 5 years of eistence! this company grew strength to strength with sheer

hardwork and dedication. :nd now we are considered as market leaders and trend

setters in our field.

P#o9!5ts

$ricket Equipment!

(oing and Bartial :rts &BB:' Equipment!

*aelic Equipment!

FieldJ:gility Training Equipment!

:nd some bespoke equipments

1.- INTRODUCTION TO A.P.G. SPORTS INDUSTR&

:.8.*. 1ports "ndustry is a 1porting *oods manufacturing company located at 6-!

2ilbg +agar! (asti *uan! Calandhar. For the past 7 years! :.8.*. have

been Banufacturing! Eporting and 1upplying an impeccable range of 1ports (alls!

(adminton Equipments! $ricket Equipments and other 1ports Equipments. )ur range

comprises Footballs! Aolleyballs! ?ockey (alls! :8* 8urple $ricket (all! $ricket

(all! 1ports Wear! $ricket (all! =eather $ricket (all! /ed =eather $ricket (all!

=eather $ricket (alls! English =eather $ricket (all! $ricket =eather (all &8ampa'!

$ricket (all4*rade :! 8urple $ricket (all! /ed :nd White $ricket (all! )range

=eather $ricket (all! White =eather $ricket (all! Mellow =eather $ricket (all! 8ink

=eather $ricket (all! ?ockey (all! Turf ?ockey (all! )range ?ockey (all! =eather

?ockey (all! "ndoor (all! "ndoor $ricket (alls! "ndoor =eather $ricket (all! "ndoor

$ricket (all! $ricket Equipment! $ricket (atting ?elmet! (atting *loves! $ricket

(all Ballet! 1tar 1occer (all! 8ro 1tar 1occer (all! Bini 1occer (all! White (lack

1occer (all! White :nd /ed 1occer (all! =ight *reen 1occer (all! Aolleyball! (each

Aolleyball! 8L Aolleyball! +et (all! 8A$ Aolley (all! /ubber Aolley (all! Tennis

(all! 1ports Equipments! Iuoit /ing! Weightlifting (elt! 1kipping /ope! Whistles!

8lastic Whistles! /ope Whistles! 1ports 1hoes! Ben#s 1ports 1hoes! :thletic 1ports

1hoes! Football 1hoes! ?andballs! $ricket (at! =eather $ricket (all and many

more. These balls are made of hard wearing materials such as leather and rubber that

23


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provides them a long service life. )ur production eperts ensure that these sports

products are durable! dimensionally accurate and cost4effective.

:.8.*. have a dedicated team of professionals that work round the clock to present a

commendable range of products. )ur ability to manufacture sports balls! badminton

equipments! $ricket equipments and other sports equipments for various sports has

enabled us to establish strong ties with leading sport associations of the country. "n

addition! company have widespread distribution channel that allows us to serve the

sports sector in an efficient manner.

1. INTRODUCTION TO ANAND SPORTS INDUSTRIES

:nand 1ports "ndustry is a 1porting *oods manufacturing company located at -!

Hhanna Barket! (asti +au! +ear Football $howk! Calandhar.

$ompany%s mentor! Br. Huldeep Humar is highly eperienced in the 1ports "ndustry

and has played an integral part in the success of this company. ?is valuable insights

and creative approach have enabled us to constantly innovate and become a renowned

name in this domain. Br. Huldeep Humar has highly eperience of 3 years in

manufacturing of $ricket and ?ockey (alls! (adminton Equipments! Footballs and

many other sports goods.

(ased on our encompassing knowledge of product and industry epertise! :nand

1ports "ndustry have been able to offer advanced products that are as per changing

trends of the global market. Their 1ports goods find huge acceptance and usage by

sports enthusiasts! sportsmen! beginners! children and every one ehibiting the

passion for the sports.

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Re


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$. RE'IEW OF LITERATURE

Aarious studies on Working $apital Banagement had been conducted in foreign

countries. ?owever! in "ndian contet! the number is quite few. 2epending on the

various issues of working capital management! the review has been discussed in brief

as follows,

A9a>s ?$@@2conducted a research and eamined that the systematic assessment of

working capital requirement in construction proects deals with the analysis of various

quantitative and qualitative factors in which information is subective and based on

uncertainty. There eists an inherent difficulty in the classical approach to evaluate the

impact of qualitative factors for the assessment of working capital requirement.

Ra"!se ?$@@2 conducted a research and eamined that working capital can be

improved by delaying payment to creditors is counter4productive to individuals and

to the economy as a whole. $laims that altering debtor and creditor levels for

individual tiers within a value system will rarely produce any net benefit. 8roposes

that stock reduction generates system wide financial improvements and other

important benefits. Lrges those organizations seeking concentrated working capital

reduction strategies to focus on stock management strategies based on Nlean supply4

chainO techniques.

Anan9 ?$@@3states that most of the chief financial officer#s &$F)' time is devoted

to working capital management. 1till! a large number of business failures have been

attributed to an inability of financial managers to plan and control properly the current

assets and current liabilities of their respective firms. The obective

of working capital management of any firm is to mange the firm#s inventory!

receivables and payables in order to achieve a balance between risk and return and

thereby contribute positively to the creation of a firm value. The present empirical

survey has been designed to identify some quantitative working capital benchmarks in

order to help $orporate "ndia to manage its working capital more efficiently.

Ibal ?$@@8conducted a study and eamined that for increasing shareholder#s wealth

a firm has to analyze the effect of fied assets and current assets on its return and risk.Working $apital Banagement is related with the Banagement of current assets. The

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Banagement of current assets is different from fied assets on the basis of the

following points i.e. $urrent assets are for short period while fied assets are for more

than one Mear.

Deloo" ?$@1@ investigatedthe relationship between working capital management and

corporate profitability on a sample of -D large (elgian non4financial firms for the

-DD4-DD6 period. Trade credit policy and inventory policy are measured by number

of days accounts receivable! accounts payable and inventories! and the cash

conversion cycle is used as a comprehensive measure of working capital management.

The results suggest that managers can increase corporate profitability by reducing the

number of days accounts receivable and inventories. =ess profitable firms wait longer

to pay their bills.

Ho=o#t: ?$@1@ eamined that Working capital management routines of a large

random simple of small companies in the LH are eamined. $onsiderable variability

in the take4up of -- working capitalmanagement routines was detected. 8rincipal

components analysis and cluster analysis confirm the identification of four district

#types# of companies with regard to patterns of working capital management.

Mal:ot#a ?$@1@ conducted a study to develop quantitative benchmarks at the firmand the industry level! so as to evaluate the working capital management performance

of $orporate "ndia from time to time. :n earlier attempt was made by :nand &-'

based on the methodology designed by the $F) Europe and /E= $onsultancy *roup

for the year -DD64D7. "n another attempt! :nand and *upta &0' eperimented with

a number of parameters and different weights in the overall score to have a better

picture of working capital management performance of $orporate "ndia.

Solano ?$@11conducted research for the obect of the research presented in this

paper is to provide empirical evidence on the effects of working capital management

on the profitability of a sample of small and medium4sized 1panish firms. The results!

which are robust to the presence of endogeneity! demonstrate that managers can create

value by reducing their inventories and the number of days for which their accounts

are outstanding. Boreover! shortening the cash conversion cycle also improves the

firm%s profitability. The aim is to ensure that the relationships found in the analysis

carried out are due to the effects of the cash conversion cycle on corporate

profitability and not vice versa.

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Sn4: ?$@11 empirically analyzed that a firm%s working capital consists of its

investments in current assets! which includes short4term assetsPcash and bank

balance! inventories! receivable and marketable securities. Therefore! the working

capital management refers to the management of the levels of all these individual

current assets. )n the other hand! inventory! which is one of the important elements of

current assets! reflects the investment of a firm%s fund. ?ence! it is necessary to

efficiently manage inventories in order to avoid unnecessary investments.

Na# ?$@1$ conducted the study and investigated the traditional relationship

between working capital management policies and a firm%s profitability. Lsing thepanel data set for the period -DD945! the impact of

aggressive working capital investment and financing policies has been evaluated

using return on assets as well as Tobin%s q. Bany studies had been undertaken in

regards to working capital management but proper calculation and the effects were

not properly considered in a single research.

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need

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NEED OF THE STUD&

:s it is mentioned earlier that the working capital management is important in all the

organization. Bany studies had been done in this respect but proper calculation and

there effects are not properly considered. "n this study various ratioQs &current ratio!

liquidity ratio! turnover ratioQs etc' has been calculated to find out the position of the

organization in respect to their current position. 1o! need of the study is to know the

current financial position of the organization.

).$ SCOPE OF THE STUD&

The scope of the study is identified after and during the study is conducted. The study

of working capital is based on tools like trend :nalysis! /atio :nalysis! working

capital leverage! operating cycle etc. Further the study is based on last 5 years :nnual

/eports of /anson! :.8.*. and :nand 1ports "ndustries. :nd even factors like

competitor%s analysis! industry analysis were not considered while preparing this

proect.

The scope of study conducted i.e. Working $apital Banagement at /anson! :.8.*.

and :nand 1ports "ndustries in Calandharfor the year ended 9! D! -! --

and -.

).) OB/ECTI'ES OF THE STUD&

1tudy of the working capital management is important because unless the working

capital is managed effectively! monitored efficiently planed properly and reviewed

periodically at regular intervals to remove bottlenecks if any the company can not

earn profits and increase its turnover. With this primary obective of the study! the

following further obectives are framed for a depth analysis.

The study has been undertaken to achieve the following obectives.

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-. Baintenance of working capital at appropriate level and availability of ample

funds as and when they are needed.

. To know the efficiency of /anson! :.8.*. and :nand 1ports "ndustries in

managing working capital.

0. To know the level and composition of current assets and current liabilities.3. To calculate the liquidity position of the organization.

5. To know about the stock turnover ratio of the organization

6. To measure the debtor turnover ratio of the organization.

7. To know the working capital turnover ratio of the organization.

9. To study the optimum level of current assets and current liabilities of the

company.

D. To study the liquidity position through various working capital related ratios.

-. To study the working capital components such as receivables accounts! cash

management! "nventory position

--. To study the way and means of working capital finance of the company-. To study the operating and cash cycle of the company.

Resea#5: Met:o9olo4

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-.1 RESEARCH METHODOLOG&

Int#o9!5ton an9 >eann4

/esearch is a careful investigation or inquiry especially through for new facts in

branch of knowledge. Barket research specifies the information. /equired to address

these issue design the method for collecting information%s manage and implements the

data collection process analysis and communicate the findings and their implications

/esearch 8roblem is one which requires a researcher to find out their best solution for

giving problems that is to find out the course of action! the action! the obectives can

be obtained optimally in the contet of given environment

-.$ RESEARCH DESIGN

The current study was descriptive in nature.

DESCRIPTI'E RESEARCH,

The /esearch was a descriptive research as it was concerned with specific predictions!

with narration of facts and characteristics concerning individuals! groups or situations.

-.)DATA COLLECTION

8rimary K 1econdary data has been used for the study.

PRIMAR& DATA

/aw data is a term for data collected on source which has not been subected to

processing or any other manipulation. &8rimary data'! it is also known as primary

data.

PRIMAR& SOURCES

"n this proect various sources was used in order to get the data . for this purpose p

-' "nitial 8ermanent Working $apital

' +et "ncome 4 "ncreased 8rofit

0' Temporary Working $apital 4 1hort Term loan J )2! 2elayed 8ayments to$reditors and "ncreased $ash $ollection

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SECONDAR& DATA

The secondary data are those data which have already been collected by someone else

and which have already been passed through the statistical process. Bagazines!

ournals are used as source of secondary data.

SECONDAR& SOURCES

"n this proect various sources was used in order to get the data. For this purpose

previous years annual reports! reports on working capital for research! analysis and

comparison of the data gathered was done. While doing this proect! the data relating

to working capital! cash management! receivables management! inventory

management and short term financing was collected. : detailed study on the actual

working processes of the company is also done by timely studying the happenings at

the company.

-.- LIMITATION OF THE STUD&

2ue to constraints of time and resources! the study is likely to suffer from certain

limitations. 1ome of these are mentioned here under so that the findings of the studymay be understood in a proper perspective.

The limitations of the study were,

The research was carried out in a short period. Therefore the parameters were selected

accordingly so as to finish the work within the given time frame.

The information given by the organization might be biased they might not be

interested to give correct information.

The data given by the organization can be incorrect. 1ome personal mistakes can be

there while finding the ratio as human errors.

The data has been processed and analyzed so that findings can be communicated and

can be understood. The findings are presented in the best possible way.

2ata analysis K interpretation

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ANAL&SIS AND ITS INTERPRETATION

.1 CURRENT RATIO(

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$urrent ratio is the relationship between the current assets and current liabilities. This

ratio is also known as working capital ratio. "t is a measure of general liquidity and is

most widely used to make the analysis of a short4term financial position.

$urrent /atio ; $urrent :ssets

Current Liabilities

&ea#s $@@3 $@@8 $@1@ $@11 $@1$

Current ratio0.- 0.-0 0.00 0.00 .7

Table 5.1 Current Ratio of Ranson

&ea#s $@@3 $@@8 $@1@ $@11 $@1$

Current ratio0.37 0.-5 0.0 0.-0 0.6

Table 5.2 Current Ration of A.P.G.

&ea#s $@@3 $@@8 $@1@ $@11 $@1$

Current ratio-.5 -.9 -.9 -.09 -.60

Table 5.3 Current Ration of Anan

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!i"ure 5.1 Current Ratio of Ranson

2008 2009 2010 2011 2012

0

0.

1

1.

2

2.

!

!.

current ratio

!i"ure 5.2 Current Ratio of A.P.G.

2008 2009 2010 2011 2012

2.8

2.9

!

!.1

!.2

!.!

!."

!.

current ratio

!i"ure 5.3 Current Ratio of Anan

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2008 2009 2010 2011 2012

0

0.2

0."

0.#

0.81

1.2

1."

1.#

1.8

current ratio

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Anal#sis $

%n &urrent ratio$' rule of t(u)b is 2$1

Ranson

%n 2008$' &urrent ratio is 3.10$1. %t is )ore t(an t(e e*+e&te rule of

t(u)b. ,o t(e +osition of t(e &o)+an# is "oo.

%n 2009$' &urrent ratio is 3.13$1. T(ere is lit bit rise in &o)+arison to

2008 in 2009.

%n 2010 $' &urrent ratio is 3.33$1. T(ere is &ontinousel# risin" in t(e

-alue of &urrent ratio.

%n 2011$' &urrent ratio is 3.33$1. As &o)+are to 2010 t(ere is

unifor)it# t(e ratio it )eans t(ere is no &(a)"e in t(e -alue of C.R

%n 2012 $' &urrent ratio is 2.72$1 . T(ere is e&line in t(e ratio of

&o)+an# but &o)+an# still in t(e +osition. i.e abo-e t(e rule oft(u)b. Co)+an# in "oo +osition.

A.P.G.

%n 2008$' &urrent ratio is 3.47$1. %t is )ore t(an t(e e*+e&te rule of

t(u)b. ,o t(e +osition of t(e &o)+an# is "oo.

%n 2009$' &urrent ratio is 3.15$1. T(ere is lit bit e&line in &o)+arison

to 2008 in 2009.

%n 2010 $' &urrent ratio is 3.30$1. T(ere is &ontinousel# risin" in t(e

-alue of &urrent ratio.

%n 2011$' &urrent ratio is 3.13$1. As &o)+are to 2010 t(ere is


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%n 2012 $' &urrent ratio is 3.06$1 . T(ere is e&line in t(e ratio of

&o)+an# but &o)+an# still in t(e +osition. i.e abo-e t(e rule of

t(u)b. Co)+an# in "oo +osition.

Anan9

%n 2008$' &urrent ratio is 1.25$1. %t is less t(an t(e e*+e&te rule of

t(u)b. ,o t(e +osition of t(e &o)+an# is not "oo.

%n 2009$' &urrent ratio is 1.28$1. T(ere is lit bit rise in &o)+arison to

2008 in 2009.

%n 2010 $' &urrent ratio is 1.28$1. As &o)+are to 2009 t(ere is


%n 2011$' &urrent ratio is 1.38$1. A"ain little bit rise in &o)+arision to

2010.

%n 2012 $' &urrent ratio is 1.63$1 . T(ere is s)all rise in t(e ratio of

&o)+an#.. Co)+an# is in a-era"e +osition.

Inte#7#etaton,

From the table and figure it is quite clear that /anson and :.8.*. have financial

soundness and better capacity to meet their current obligations.

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.$ IN'ENTOR& TURNO'ER RATIO

"nventory turnover ratio also known as stock velocity is normally calculated as

salesJaverage inventory or cost of goods soldJaverage inventory. "t indicates whether

inventory has been efficiently used or not. "t indicates no. of times the stock has been

turned over during the period.

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F4!#e .- In


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2008 2009 2010 2011 2012

0

0.

1

1.

2

2.

!

!.

"

in$entory turno$er ratio

Analss(

Ranson

:s in 9 ".T./ is -.55 and comparison to net year i.e it goes to -.67 it means it

increase and in -4-- ! - the ".T./ is increasing -.99! .-D! .0.

:s a whole we can say that ".T./ is increasing.

A.P.G.

:s in 9 ".T./ is 0.D9 and comparison to net year i.e it goes to 0.93 it means it

decrease and in -4-- ! the ".T./ is decreasing 0.5! .D0 and in - ".T./

slightly increase.

:s a whole we can say that ".T./ is not increasing.

Anan9

:s in 9 ".T./ is .7- and comparison to net year i.e it goes to .96 it means it

increase and in -4-- ! - the ".T./ is increasing 0.7! 0.3! 0.D-.

:s a whole we can say that ".T./ is increasing.

Inte#7#etaton,

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From the above table and figure it is quite clear that /anson and :nand are good in

inventory turnover ratio which means that they have efficient management of

inventory as compared to :.8.*..

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.) DEBTORS TURNO'ER RATIO(

2ebtor%s turnover ratio indicates the velocity of debt collection of firm. "n simple

words! it indicates the number of times average debtors are turned over during a year.

Debto# t!#no


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2008 2009 2010 2011 20120

1

2

!

"

#

%

8

&e'tor turno$er ratio

F4!#e .3 Debto#s T!#no


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Analss an9 Inte#7#etaton,

Ranson

:s in 9 2.T./ is 3.0 but in year D it goes to 3.D and in -! --! - the

2.T./ is 3.96 ! 6.! 7.39 respectively. There is increase in debtors turnover ratio this

indicates there is efficient management of debtors or in their other words! there are

more liquid debtors of company.

A.P.G.

:s in 9 2.T./ is 0.75 but in year D it goes to 0.09! it means decrease and in

-! --! - the 2.T./ is 0.33 ! 0.6D! 3.D respectively. There is increase in

debtors turnover ratio after D! this indicates there is efficient management of

debtors or in their other words! ther are more liquid debtors of company.

Anan9

:s in 9 2.T./ is -D.0 than it goes to 0.9! 3.6! 3-.53! 30.57 in D! -!

--! - the 2.T./ is 3.96 ! 6.! 7.39 respectively. There is increase in debtors

turnover ratio this indicates there is efficient management of debtors or in their other

words! there are more liquid debtors of company.

Inte#7#etaton,

From the above table and figure it is quite clear that in all the three organisation

debtors turnover ratio is increasing which means that they have more liquid debtors

and there is efficient management of debtors and debts are being collected more

quickly.

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.- WORKING CAPITAL TURNO'ER RATIO(

Wo#6n4 capital is directly related with the sales of the firm. Working capital

turnover ratio indicates the velocity of the utilization of the net working capital. This

ratio indicates the number of time the working capital is turned over in the course of a

year.

Wo#6n4 Ca7tal T!#no


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F4!#e .1@ Wo#6n4 Ca7tal T!#no


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2008 2009 2010 2011 20120

0.

1

1.

2

2.

(orking capital turno$er ratio

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Anal#sis an inter+retation$'

Ranson

%n 2008 $' &o)+an# orin" &a+ital is 1.35 . %t )eans in t(is #ear

&o)+an# orin" &a+ital is use 1.35 ti)es in a #ear.


&o)+an# orin" &a+ital is use 1.48 ti)es (i&( s(os lit bit

in&reases in orin" &a+ital t(is ini&ate "oo si"n

%n 2010 $' %n &o)+arison to last to #ear ie 20082009 in 2010

orin" &a+ital is in&reases 1.69 ti)es .

%n 2011 $' orin" &a+ital in&reases 1.87 ti)es . %t s(os t(ere is

&onsistentl# rises in orin" &a+ital #ear b# #ear.

%n 2012 $' orin" &a+ital is 2.09 ti)es . %t s(os rises in orin"

&a+ital.

A.P.G.

%n 2008 $' &o)+an# orin" &a+ital is 2.08 . it )eans in t(is #ear


%n 2009 $' &o)+an# orin" &a+ital is 1.99 . it )eans in t(is #ear&o)+an# orin" &a+ital is use 1.99 ti)es (i&( s(os lit bit

e&rease in orin" &a+ital t(is ini&ate ba si"n

%n 2010 $' %n &o)+arison to last #ear i.e. 2008 in 2009 orin"

&a+ital is e&eases to1.83 ti)es .

%n 2011 $' orin" &a+ital in&reases 1.99 ti)es . it s(os t(ere is

rise in orin" &a+ital t(is #ear.

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%n 2012 $' orin" &a+ital e&reases 1.88 ti)es . %t s(os fall in

orin" &a+ital .

Anan



%n 2009 $' &o)+an# orin" &a+ital is 1.48 . it )eans in t(is #ear

&o)+an# orin" &a+ital is use 1.48 ti)es (i&( s(os lit bit

e&rease in orin" &a+ital as &o)+are to 2008.

%n 2010 $' %n &o)+arison to last #ear i.e. 2008 in 2009 orin"

&a+ital is in&reases to 1.69 ti)es .

%n 2011 $' orin" &a+ital in&reases 1.87 ti)es . %t s(os t(ere is

&onsistentl# rises in orin" &a+ital #ear b# #ear.

%n 2012 $' orin" &a+ital is 2.09 ti)es . %t s(os rises in orin"

&a+ital.

Inte#7#etaton,

From the above table and figure it is quite clear that /anson and :nand have better

efficiency in the utilization of working capital.

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Findings

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FINDINGS

:fter conducting the study on NWorking $apital BanagementO the findings of the

study were,

/anson

They are financing fied working capital from long term sources and

temporary working capital from short term sources.

The liquid ratio has been increased.

The inventory turnover ratio has increased.

There is increase in debtor%s turnover ratio.

There is increase &.D' in working capital turnover ratio in year -.

:.8.*.

The optimum current ratio is ,- but :.8.*. is achieving 0.6




There is decrease &-.99' in working capital turnover ratio in year -.

:nand

The optimum current ratio is ,- but :nand is achieving -.60




There is increase &.D' in working capital turnover ratio in year -.

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"t is quite clear that /anson and :.8.*. have financial soundness and better

capacity to meet their current obligations.

"t is quite clear that /anson and :nand are good in inventory turnover ratio which

means that they have efficient management of inventory as compared to :.8.*..

"t is quite clear that in all the three organisation debtors turnover ratio is increasing

which means that they have more liquid debtors and there is efficient management

of debtors and debts are being collected more quickly.

"t is quite clear that /anson and :nand have better efficiency in the utilization of

working capital.

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$onclusion K recommendations

2.1 CONCLUSION

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Working capital management is important aspect of financial management. The study

of working capital management of :.8.*.! :nand and /anson has revealed that the

current ration was as per the standard industrial practice but the liquidity position of

the company showed an increasing trend. The study has been conducted on working

capital ratio analysis! working capital leverage! working capital components which

helped the company to manage its working capital efficiency and affectively.

:fter the in depth study of working capital management in :.8.*.! :nand and /anson!

it was concluded that a good working capital management is that where the firm has

efficient funds to meet the requirements. There must not be inadequate or ecessive

working capital because working capital management policies of a firm have a great

effect on its profitability! liquidity and structural health of the organization.

"nadequacy of working capital may lead a firm to insolvency and working capital

implies idle funds! which earns no profits to the business.

There were few researches which were conducted earlier on working capital

management and the research concluded that these research eamined the systematic

assessment of working capital in constructing proects deals with the analysis of

various quantitative factors which are based on uncertainty. The scope of the study

was limited within the organisation as the obective was to know the efficiency of

:.8.*.! :nand and /anson in managing their working capital.

The working capital of the company was very efficiently utilised as the company was

able to meet their current obligations out of the current assets of the organisation as

they made the payment to the concerned parties well on time. This showed that the

company was having ample amount of working capital and that showed that the

liquidity position of the company was very strong.

Working capital management is important aspect of financial management. The studyof working capital management of :.8.*.! :nand and /anson. has revealed that the

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current ration was as per the standard industrial practice but the liquidity position of

the company showed an increasing trend. The study has been conducted on working

capital ratio analysis! working capital leverage! working capital components which

helped the company to manage its working capital efficiency and affectively.

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2.$ RECOMMENDATIONS

The company has to consider the composition of current

assets pool. The working capital position sets the various policies in the

business with respect to general operations like purchasing! financing!

epansion and dividend etc

Banagement should make the proper use of inventory control

techniques like fiation of minimum! maimum and ordering levels for all the

items for less blockage of money.

The company should keep more cash for the liquidity position of the company.

$ompany makes very quick payment to the creditors.(ut it is not required to

make payment so early. 1o! it should make use of credit given by its creditors

by etending its payment period.

"ts working capital turnover ratio is satisfactory and up to the mark. 1o! the

company needs to maintain that by making efficient utilization of working

capital.

The company is also required to reduce down the inventory conversion period

which helps the unit in reducing the cost also.

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.

$ompany should raise funds through short term sources for short term

requirement of funds! which comparatively economical as compare to long

term funds.

$ompany should take control on debtor%s collection period which is

maor part of current assets.

$ompany has to take control on cash balance because cash is non

earning assets and increasing cost of funds.

$ompany should reduce the inventory holding period with use of zero

inventory concepts.

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/eferences

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REFERENCES

:dams! * &7'. :nalysis of various quantitative and qualitative factors

affecting working capital available at http,JJssrn.comJabstract;D0-5D-.

:nand! B. &9'. Working $apital 8erformance of $orporate "ndiaavailable at

http,JJssrn.comJabstract ;D5966D.

2eloof! B. &-'. 2oes Working $apital Banagement :ffect 8rofitability of

(elgian Firmsavailable athttp,JJssrn.comJabstract;3-5063.

?aworth! $. &-'. The Focus of Working $apital Banagement in LH 1mall

Firms available at http,JJssrn.comJabstract;3-39.

"qbal! B. &D'. Effect of fied assets and current assets on the return and risk

available at http,JJssrn.comJabstract;39-593.

Balhotra! H. &-'. 2evelopment of quantitative benchmarks at firms and

industry level available athttp,JJssrn.comJabstract;-69D-.

/afuse, I.M. (2007). Financial Banagement. +ew 2elhi. Aikas 8ublishing

?ouse 8vt. =td.

1olano! :. &--'. Effect of working capital management on the profitability of

small and medium sized firms available at http,JJssrn.comJabstract; -53937.

www.apgindustries.com

www.ransonindustries.com

www.:nandindustries.com
http://ssrn.com/abstract=931591http://ssrn.com/abstract=414820http://ssrn.com/abstract=481584http://ssrn.com/abstract=1006891http://ssrn.com/abstract=1006891http://ssrn.com/abstracthttp://www.apgindustries.com/http://www.ransonindustries.com/http://www.anandindustries.com/http://ssrn.com/abstract=931591http://ssrn.com/abstract=414820http://ssrn.com/abstract=481584http://ssrn.com/abstract=1006891http://ssrn.com/abstracthttp://www.apgindustries.com/http://www.ransonindustries.com/http://www.anandindustries.com/

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