Professional Documents
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PROJECT REPORT ON
-------------------SUBMITTED BY
NAME ENROLLMENT NO STUDY CENTER CODE REGIONAL CENTER : : : : MRS. A.R. RAJALAKSHMI
2011
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CERTIFICATE OF ORIGINALITY
This is to certify that the project report entitled Working Capital Management of the L&T. submitted to Indira Gandhi National Open University in partial fulfillment of the requirement for the award of the Degree of Master of Business
The matter embodied in this project is genuine work done by the student and has not been submitted whether to this University or to any other University / Institute for the fulfillment of the requirement of any course of study.
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ACKNOWLEDGEMENT
With Candor and Pleasure I take opportunity to express my sincere thanks and obligation to my esteemed guide. It is because of his able and mature guidance and co-operation without which it would not have been possible for me to complete my project.
It is my pleasant duty to thank all the staff member of the computer center who never hesitated me from time during the project.
Finally, I gratefully acknowledge the support, encouragement & patience of my family, and as always, nothing in my life would be possible without God, Thank You!
(A.R. RAJALAKSHMI)
DECLARATION
I hereby declare that this project work titled Working Capital Management of the L&T. is my original work and no part of it has been submitted for any other degree purpose or published in any other from till date.
(A.R. RAJALAKSHMI)
CONTENTS
PAGE NO.
Title of the Project....7 Introduction ........8 Review of Literature .....35 Objectives of the Study..48 Research Methodology......49 Data Analysis.. ......50 Conclusion and Major Finds......82 Recommendation and Limitation .84 Bibliography...85
2. 3. 4. 5. 6. 7. 8. 9.
CHAPTER 1
INTRODUCTION
COMPANY PROFILE:
Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector. Seven decades of a strong, customer-focused approach and the continuous quest for world-class quality have enabled it to attain and sustain leadership in all its major lines of business. L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its overseas manufacturing footprint, with facilities in China and the Gulf region. The company's businesses are supported by a wide marketing and distribution network, and have established a reputation for strong customer support. L&T believes that progress must be achieved in harmony with the environment. A commitment to community welfare and environmental protection are an integral part of the corporate vision. M/s Larsen & Toubro Ltd. ECC Division is prestigious organization having business worldwide, its ECC Division undertake engineering contracts of various construction in the field of Electrical, Mechanical & Civil Engineering. The Company having its headquarter at Chennai, and whole India is distributed in regions having respective regional headquarters, viz. Mumbai, Ahmadabad, Kolkata, Delhi, Hyderabad, Chandigarh etc. which coordinate all activities of sites within their region.
Chattisgarh state have rich natural resources, coal is found in abundance thus various thermal power plant are established at various places, Sipat Super Thermal Power Plant is one of the biggest Thermal Power Plant, wherein our company execute construction of Boiler Erection & Electrical Cabling works and some other misc. works. Our Principal employer is M/s National Thermal Power Corporation Ltd. The workforces consist of 2500 workmen and Engineers and staff in various cadre, the workforce consist of employees from all over India.
Operating Divisions:
Engineering & Construction Projects (E&C) Heavy Engineering (HED) Construction Power Electrical & Electronics (EBG) Machinery & Industrial Products (MIPD) IT & Technology Services Financial Services Railway Project
HISTORY OF CONCERN
The evolution of L&T into the country's largest engineering and construction organization is among the most remarkable success stories in Indian industry. L&T was founded in Bombay (Mumbai) in 1938 by two Danish engineers, Henning Holck-Larsen and Soren Kristian Toubro. Both of them were strongly committed to developing India's engineering capabilities to meet the demands of industry.
Soren Kristian Toubro (27.02.1906 4.3.1982) Beginning with the import of machinery from Europe, L&T rapidly took on engineering and construction assignments of increasing sophistication. Today, the company sets global engineering benchmarks in terms of scale and complexity.
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EARLY DAYS
Henning Holck-Larsen and Soren Kristian Toubro, school-mates in Denmark, would
THE JOURNEY
not have dreamt, as they were learning about India in history classes that they would, one day, create history in that land. In 1944, ECC was incorporated. Around then, L&T decided to build a portfolio of In 1938, collaborations. the two friendsBy decided forgo the comforts of working Europe, andof foreign 1945, to the Company represented British in manufacturers started their used own to operation in India. All they was a dream. And the courage equipment manufacture products suchhad as hydrogenated oils, biscuits, soaps to and dare. glass. Their first , office Mumbai (Bombay) with was so small that only one of the partners In 1945 L&T in signed an agreement Caterpillar Tractor Company, USA, for could use the earthmoving office at a time! marketing equipment. At the end of the war, large numbers of warsurplus equipment were available at attractive prices, but the In the earlyCaterpillar years, they represented Danish manufacturers of dairy equipment required wereBut beyond the start capacity ofSecond the partners. This in prompted them modest retainer. with the of the World War 1939, imports finances for a to raise were
additional equity capital, and on 7th February 1946, Larsen & Toubro Limited restricted, compelling them to start a small work-shop to undertake jobs Private and provide was born. service facilities. Independence andof the subsequent demand for technology expertise offered L&T Germany's invasion Denmark in 1940 stopped supplies ofand Danish products. This the forced opportunity to consolidate andon expand. were set up in Kolkata crisis the partners to stand their Offices own feet and innovate. They (Calcutta), started Chennai (Madras) and New Delhi. In 1948,These fifty-five acres proved of undeveloped marsh and manufacturing dairy equipment indigenously. products to be a success, was acquired in Powai. Powai stands as a tribute to the vision of the andjungle L&T came to be recognised as Today, a reliable fabricator with high standards. men who transformed this uninhabitable swamp into a manufacturing landmark. The war-time need to repair and refit ships offered L&T an opportunity, and led to the formation of a new company, Hilda Ltd., to handle these operations. L&T also started twoPUBLIC repair and fabrication shops - the Company had begun to expand. LIMITED COMPANY: Again, the sudden internment of German engineers (because of the War) who were toRs.2 In December 1950 , L&T became a Public Company with a paid-up capital of putmillion. up a soda ash plant for the Tatas, L&T a chance to enter the field of The sales turnover in that gave year was Rs.10.9 million. installation - anorders area where their by capability becameduring well respected. Prestigious executed the Company this period included the Amul Dairy at Anand and Blast Furnaces at Rourkela Steel Plant. With the successful completion of these jobs, L&T emerged as the largest erection contractor in the country. In 1956, a major part of the company's Bombay office moved to ICI House in Ballard Estate. A decade later this imposing grey-stone building was purchased by L&T, and renamed as L&T House - its Corporate Office. 11
The sixties saw a significant change at L&T - S. K. Toubro retired from active management in 1962. The sixties were also a decade of rapid growth for the company, and witnessed the formation of many new ventures: UTMAL (set up in 1960), Audco India Limited (1961), Eutectic Welding Alloys (1962) and TENGL (1963).
EXPANDING HORIZONS:
By 1964, L&T had widened its capabilities to include some of the best technologies in the world. In the decade that followed, the company grew rapidly, and by 1973 had become one of the Top-25 Indian companies. In 1976, Holck-Larsen was awarded the Magsaysay Award for International Understanding in recognition of his contribution to India's industrial development. He retired as Chairman in 1978. In the decades that followed, the company grew into an engineering major under the guidance of leaders like N. M. Desai, S.R. Subramaniam, U. V. Rao, S. D. Kulkarni and A. M. Naik. Today, L&T is one of India's biggest and best known industrial organisations with a reputation for technological excellence, high quality of products and services, and strong customer orientation. It is also taking steps to grow its international presence. For an institution that has grown to legendary proportions, there cannot and must not be an 'end'. Unlike other stories, the L&T saga continues...
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VISION
The L&T vision reflects the collective goal of the company. It was drafted through a large scale interactive process which engaged employees at every level, worldwide.
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Indias Most Respected Company in the Infrastructure category. In the overall rankings, L&T emerged second. ICAI Bestows Top Honour on Mr. Y.M. Deosthalee, CFO, L&T The Institute of Chartered Accountants of India (ICAI) the countrys apex body of Chartered Accountants has bestowed its highest honour, Business Achiever Corporate for the year 2010 on Mr. Y.M. Deosthalee, CFO, L&T, for his outstanding contribution to business leadership as a finance professional. The institute saluted his role in providing strategic direction to the business of financial services, development projects and Information Technology of the L&T Group. (January 30, 2011) Finance Minister Presents Coveted ET Company of the Year Award to Mr. A.M. Naik
BOARD OF DIRECTORS:
Director Name A M Naik S N Talwar M M Chitale S Rajgopal Subodh Bhargav J S Bindra V K Magapu Y M Deosthalee M V Kotwal J P Nayak K V Rangaswami K Venkataramanan Ravi Uppal N Mohan Raj A K Jain Designation Chairman & Managing Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Whole-time Director & Senior Executive Vice President - IT & Technology Services Whole-time Director & CFO Whole-time Director & Senior Executive Vice President - Heavy Engineering Whole-time Director & President - Machiney & Industrial Products Whole Time Director & President Whole-time Director & President - Engineering & Constrution Projects Whole-time Director Nominee of LIC Nominee 15
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Every business needs funds for two purposes for its establishments and to carry out day to day operations. Long term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land and building, furniture etc. Investments in these assets are representing that part of firms capital which is blocked on a permanent or fixed basis and is called fixed capital. Funds are 17
also needed for short term purposes for the purchasing of raw materials, payments of wages and other day to day expenses etc. These funds are known as working capital. In simple words, Working capital refers to that part of the firms capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories.
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 enterprises. Current assets are those assets which are converted into cash within short periods of normally one accounting year. Example of current assets is: Constituents of Current Assets: Cash in hand and Bank balance Bills Receivable Sundry Debtors Short term Loans and Advances Inventories of Stock as: Raw Materials Work in Process Stores and Spaces 18
Finished Goods Temporary Investments of Surplus Funds Prepaid Expenses Accrued Incomes
The term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities or say:
The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital.
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And ends with the realization of cash from the sales of finished goods. It involves purchase of raw material and stores, its conversion into stocks of finished goods through work in progress with progressive increment of labor and service cost, conversion of finished stocks into sales, debtors and receivables and ultimately realization of cash and this cycle continuous again from cash to purchase of raw materials and so on. The speed/ time of duration required to complete one cycle determines the requirements of working capital longer the period of cycle, larger is the requirement of working capital.
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Receivable conversion period storage (RCP) Cash received form Debtors and paid to suppliers Of raw materials
Sales of finished Goods Finished Goods Produced Finished goods conversion Period (FGCP) period
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The gross operating cycle of a firm is equal to the length of the inventories and receivables conversion periods. Thus,
Net Operating Cycle Period = Gross Operating Cycle Period Payable Deferral period
Further, following formula can be used to determine the conversion periods. Raw Material Conversion Period
Average Stock of Finished Goods Total Cost of Goods sold per day
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On the basis of concept, working capital is classified as gross working capital and net working capital. The classification is important from the point of view of the financial manager. On the basis of time, working capital may be classified as: Permanent or Fixed working capital Temporary or Variable working capital.
1. PERMANENT OR FIXED WORKING CAPITAL: Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprises to carry out its normal business operations. 2. TEMPRORAY OR VARIABLE WORKING CAPITAL: Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies.Varibles working capital can be further classified as second working capital and special working capital. The capital required to meet the seasonal needs of the enterprises is called the seasonal working capital. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business
Regular payments of salaries, wages & other day to day commitments. Exploitation of favorable market conditions Ability of crisis Quick and regular return on investments High morals
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The nature and the working capital requirement of enterprises are interlinked. While a manufacturing industry has a long cycle of operation of the working capital, the same would be short in an enterprises involve in providing services. The amount required also varies as per the nature, an enterprises involved in production would required more working capital then a service sector enterprise. MANAFACTURE PRODUCTION POLICY:
Each enterprises in the manufacturing sector has its own production policy, some follow the policy of uniform production even if the demand varies from time to time and other may follow the principles of demand based production in which production is based on the demand during the particular phase of time. Accordingly the working capital requirements vary for both of them. OPERATIONS:
The requirement of working capital fluctuates for seasonal business. The working capital needs of such business may increase considerably during the busy.
MARKET CONDITION:
If there is a high competition in the chosen project category then one shall need to offer sops like credit, immediate delivery of goods etc for which the working capital requirement will be high. Otherwise if there is no competition or less competition in the market then the working capital requirements will be low.
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If raw material is readily available then one need not maintain a large stock of the same thereby reducing the working capital investment in the raw material stock . On other hand if raw material is not readily available then a large inventory stocks need to be maintained, there by calling for substantial investment in the same. GROWTH AND EXAPNSION:
Growth and Expansions in the volume of business result in enhancement of the working capital requirements. As business growth and expands it needs a larger amount of the working capital. Normally the needs for increased working capital funds processed growth in business activities.
Generally raising price level requires a higher investment in the working capital. With increasing prices, the same levels of current assets needs enhanced investments. MANAFACTURING CYCLE:
The manufacturing cycle starts with the purchase of raw material and is completed with the production of finished goods. If the manufacturing cycle involves a longer period the need for working capital would be more. At time business needs to estimate the requirement of working capital in advance for proper control and management. The factors discussed above influence the quantum of working capital in the business. The assessment of the working capital requirement is made keeping this factor in view. Each constituents of the working capital retains it form for a certain period and that holding period is determined by the factors discussed above. So for correct assessment of the working capital requirement the duration at various stages of the working capital cycle is estimated. Thereafter proper value is assigned to the respective current assets, depending on its level of completion. The basis for assigning value to each component is given below:
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COMPONENTS OF WORKING CAPITAL Stock of Raw Material Stock of Work -in- Process Stock of finished Goods Debtors Cash
BASIS OF VALUATION Purchase of Raw Material At cost of Market value which is lower Cost of Production Cost of Sales or Sales Value Working Expenses
Each constituent of the working capital is valued on the basis of valuation Enumerated above for the holding period estimated. The total of all such valuation becomes the total estimated working capital requirement. The assessment of the working capital should be accurate even in the case of small and micro enterprises where business operation is not very large. We know that working capital has a very close relationship with day-to-day operations of a business. Negligence in proper assessment of the working capital, therefore, can affect the day-to-day operations severely. It may lead to cash crisis and ultimately to liquidation. An inaccurate assessment of the working capital may cause either under-assessment or over-assessment of the working capital and both of them are dangerous.
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INVENTORY MANAGEMNT:
Inventory includes all type of stocks. For effective working capital management, inventory needs to be managed effectively. The level of inventory should be such that the total cost of ordering and holding inventory is the least. Simultaneously stock out costs should be minimized. Business therefore should fix the minimum safety stock level reorder level of ordering quantity so that the inventory costs is reduced and outs management become efficient.
Inventor y
Managemen t
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RECEIVABLE MANAGEMENT:
Given a choice, every business would prefer selling its produce on cash basis. However, due to factors like trade policies, prevailing market conditions etc. Business are compelled to sells their goods on credit. In certain circumstances a business may deliberately extend credit as a strategy of increasing sales. Extending credit means creating current assets in the form of debtors or account receivables. Investment in the type of current assets needs proper and effective management as, it gives rise to costs such as: Cost of carrying receivables Cost of bad debts losses Thus the objective of any management policy pertaining to accounts receivables would be to ensure the benefits arising due to the receivables are more than the costs incurred for the receivables and the gap between benefit and costs increased resulting in increase profits. An effective control of receivables help a great deal in properly managing it. Each business should therefore try to find out coverage credit extends to its clients using the below given formula:
Each business should project expected sales and expected investments in receivable based on various factor, which influence the working capital requirement. From this it would be possible to find out the average credit days using the above given formula. A business should continuously try to monitor the credit days and see that the average. Credit offer to clients is not crossing the budgeted period otherwise the requirement of investment in the working capital would increase and as a result, activities may get squeezed. This may lead to cash crisis.
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CASH BUDGET:
Cash budget basically incorporates estimates of future inflow and outflows of cash cover a projected short period of time which may usually be a year, a half or a quarter year. Effective cash management is facilities if the cash budget is further broken down into months, weeks or even a daily basis. There are two components of cash budget are: 1. Cash inflows 2. Cash outflows The main sources for these flows are given here under: 1. Cash Sales 2. Cash received from debtors 3. Cash received from Loans, deposits etc. 4. Cash receipts other revenue income 5. Cash received from sale of investment or assets.
CASH OUTFLOWS:
1. Cash Purchase 2. Cash payments to Creditors 3. Cash payment for other revenue expenditure 4. Cash payment for assets creation 5. Cash payments for withdrawals, taxes. 6. Repayments of Loan etc. A suggestive for, at for cash budget is given below:
MONTHS JANUARY
PARTICULARS Estimated cash inflows . I. Total cash inflows Estimated cash outflows .. .. II. Total cash outflows III. Opening cash balances IV. Add/deduct surplus/deflictduring the month ( III) V. Closing cash balances (III -IV) VI. Minimum level of cash balance VII. Estimated excess or short fall of cash (V-VI)
FERBUARY
MARCH
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CHAPTER 2
REVIEW OF LITERATURE
Every business needs funds for two purposes basically; they are for establishment and to carry day-to-day operations. Long term funds are required for establishment of the organization, it is required for production facility through purchase of fixed assets and it needs fixed capital and the funds which are needed for short term purposes for the purchase of raw materials, payment of wages, payment of day to day expenses etc, the funds required for these are known as WORKING CAPITAL. Working capital refers to that part of the firm's capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories. Funds, thus, invested in current assets keep revolving fast and are being constantly converted into cash and this cash flow out in exchange for other current assets. Hence it is also known as CIRCULATING CAPITAL or REVOLVING CAPITAL or SHORT TERM CAPITAL.
According to GENESTENBERG:"Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another, as for example, from cash to inventories, inventories to receivables into cash." Need for working capital cannot be over emphasized. Every business needs some amount of working capital. The need of working capital arises due to the time gap between production and realization of cash from sales. Thus, the working capital is needed for the following purposes:a) For the purchase of raw materials, components and spares. b) To pay wages and salaries. c) To incur day-to-day expenses and overhead costs such as fuel, power and office expenses etc. d) To met the selling costs as packing, advertising etc. 34
e) To provide credit facility to customers. f) To maintain the inventories of raw material, work-in-progress, stores and spares and 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 going concern and as one which has attained maturity.
Many researchers have studied working capital from different views and in different environments. The following ones were very interesting and useful for our research According to Eljelly, in 2004:Elucidated that efficient liquidity management involves planning and controlling current assets and current liabilities in such a manner that eliminates the risk of inability to meet due short-term obligations and avoids excessive investment in these assets. The relation between profitability and liquidity was examined, as measured by current ratio and cash gap (cash conversion cycle) on a sample of joint stock companies in Saudi Arabia using correlation and regression analysis. The study found that the cash conversion cycle was of more importance as a measure of liquidity than the current ratio that affects profitability. The size variable was found to have significant effect on profitability at the industry level. The results were stable and had important implications for liquidity management in various Saudi companies. First, it was clear that there was a negative relationship between profitability and liquidity indicators such as current ratio and cash gap in the Saudi sample examined. Second, the study also revealed that there was great variation among industries with respect to the significant measure of liquidity. According to Deloof, in 2003:Discussed that most firms had a large amount of cash invested in working capital. It can therefore be expected that the way in which working capital is managed will have a significant impact on profitability of those firms. Using correlation and regression tests he found a significant negative relationship between gross operating income and the number of days accounts receivable, inventories and accounts payable of Belgian 35
firms. On basis of these results he suggested that managers could create value for their shareholders by reducing the number of days accounts receivable and inventories to a reasonable minimum. The negative relationship between accounts payable and profitability is consistent with the view that less profitable firms wait longer to pay their bills. According to Ghosh and Maji, in 2003:In this paper made an attempt to examine the efficiency of working capital management of the Indian cement companies during 1992 1993 to 2001 2002. For measuring the efficiency of working capital management, performance, utilization, and overall efficiency indices were calculated instead of using some common working capital management ratios. Setting industry norms as target-efficiency levels of the individual firms, this paper also tested the speed of achieving that target level of efficiency by an individual firm during the period of study. Findings of the study indicated that the Indian Cement Industry as a whole did not perform remarkably well during this period. According to Shin and Soenen, in 1998:highlighted that efficient Working Capital Management (WCM) was very important for creating value for the shareholders. The way working capital was managed had a significant impact on both profitability and liquidity. The relationship between the lengths of Net Trading Cycle, corporate profitability and risk adjusted stock return was examined using correlation and regression analysis, by industry and capital intensity. They found a strong negative relationship between lengths of the firms net trading Cycle and its profitability. In addition, shorter net trade cycles were associated with higher risk adjusted stock returns.
The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey F. Samiloglu and K. Demirgunes (2008) The aim of this study is to analyze the effect of working capital management on firm
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profitability. In accordance with this aim, to consider statistically significant relationships between firm profitability and the components of cash conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-2007 has been analyzed under a multiple regression model. Empirical findings of the study show that accounts receivables period, inventory period and leverage affect firm profitability negatively, while growth (in sales) affects firm profitability positively. All the above studies provide us a solid base and give us idea regarding working capital management and its components. They also give us the results and conclusions of those researches already conducted on the same area for different countries and environment from different aspects. On basis of these researches done in different countries, we have developed our own methodology for research. According to Smith and Begemann 1997:Emphasized that those who promoted working capital theory shared that profitability and liquidity comprised the salient goals of working capital management. The problem arose because the maximization of the firm's returns could seriously threaten its liquidity, and the pursuit of liquidity had a tendency to dilute returns. This article evaluated the association between traditional and alternative working capital measures and return on investment (ROI), specifically in industrial firms listed on the Johannesburg Stock Exchange (JSE). The problem under investigation was to establish whether the more recently developed alternative working capital concepts showed improved association with return on investment to that of traditional working capital ratios or not. Results indicated that there were no significant differences amongst the years with respect to the independent variables. The results of their stepwise regression corroborated that total current liabilities divided by funds flow accounted for most of the variability in Return on Investment (ROI). The statistical test results showed that a traditional working capital leverage ratio, current liabilities divided by funds flow, displayed the greatest associations with return on investment. Wellknown liquidity concepts such as the current and quick ratios registered 37
insignificant associations whilst only one of the newer working capital concepts, the comprehensive liquidity index, indicated significant associations with return on investment. All the above studies provide us a solid base and give us idea regarding working capital management and its components. They also give us the results and conclusions of those researches already conducted on the same area for different countries and environment from different aspects. On basis of these researches done in different countries, we have developed our own methodology for research. According to Marc Deloof 25th April 2003:The relation between working capital management and corporate profitablity is investigated for a sample of 1,009 large Belgian non-financial firms for the 1992-1996 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 comprehensice measure of working capital management. The results suggest that managers can increase corporate profitablity by reducing the number of days accounts receivable and inventories. Less profitable firms wait longer to pay their bills.
M. A., Zariyawati a, M. N., Annuar b and A.S., Abdul Rahim c a ,b & c Univeristi Putra Malaysia, Malaysia. Working capital management is important part in firm financial management decision. An optimal working capital management is expected to contribute positively to the creation of firm value. To reach optimal working capital management firm manager should control the trade off between profitability and liquidity accurately. The purpose of this study is to investigate the relationship between working capital management and firm profitability. Cash conversion cycle is used as measure of working capital management. This study is used panel data of 1628 firm-year for the period of 19962006 that consist of six different economic sectors which are listed in Bursa Malaysia. The coefficient results of Pooled OLS regression analysis provide a strong negative significant relationship between
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Amber Collins University of Phoenix:Working Capital Management Concepts Worksheet Concept Application of Concept in the Simulation Reference to Concept in Reading Describe the firm's cash conversion cycle: Cash inflow "Most firms keep track of the average time it takes customers to pay their bills. From this they can forecast what proportion of a quarter's sales is likely to be converted into cash in that quarter and what proportion is likely to be carried over to the next quarter as accounts receivable" (Allen, Brealey, & Myers 2005). Lawrence having a positive cash balance would have help in the event of emergencies as well as unplanned outflow of money. Cash flow comes from collections on accounts receivable (Allen, Brealey, & Myers 2005). Examine the effects of credit policy on cash conversion cycle and revenue: Commitment Lawrence had a commitment to the bank, Mayo, Murray, and Gartner. According to Carole Howorth and Paul Westhead March 2003:Working capital management routines of a large random sample of small companies in the UK are examined. Considerable variability in the take-up of 11 working capital management routines was detected. Principal components analysis and cluster analysis confirm the identification of four distinct types of companies with regard to patterns of working capital management. The first three types of companies focused upon cash management, stock or debtors routines respectively, whilst the fourth type were less likely to take-up any working capital management routines. Influences on the amount and focus of working capital management are discussed. Multinomial logistic regression analysis suggests that the selected independent variables successfully discriminated between the four types of companies. The results suggest that small companies focus only on areas of working capital management where they expect to improve marginal returns. The difficulties of establishing causality are highlighted and implications for academics, policy-makers and practitioners are reported. According to Maynard E. Rafuse, (1996):Argues that attempts to improve working capital by delaying payment to creditors is counter-productive to individuals and to the economy as a whole. Claims that altering debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit. Proposes that stock reduction generates system-wide financial 39
improvements and other important benefits. Urges those organizations seeking concentrated working capital reduction strategies to focus on stock management strategies based on lean supply-chain techniques. According to James A. Gentry, Dileep R. Mehta:Working capital literature is rather limited and the process of managing shortterm resources is not understood well by academicians. In contrast, corporate managers are continuously involved in the working capital decision-making process, but their perspective is limited to the practices within their firm. In order to fill this gap in the working capital literature, a study of management perceptions of the working capital process was undertaken. A survey was used to collect information from a sample of marketing, production, and financial executives in large corporations in Belgium, France, India, and the United States. The study interprets management ranking of working capital objectives and indicates the need to improve financial planning models to include explicitly short-run objectives; further, predictability of cash inflows and outflows is examined and the potential factors affecting predictability are evaluated. Finally, this study examines management perceptions of long-range objectives in order to provide a proper perspective to the shortrun financial planning. According to M.K. Kolay:The article analyses the pros and cons of different strategies to be adopted to manage and avoid working capital crisis situations in any organisation. The working capital position depends on many organisational parameters which are interrelated and interdependent, and also vary over time. In such a situation, the use of a system dynamics approach has been advocated to reflect the relevant dynamic cause-andeffect relationships for the development of appropriate long-term and short-term strategies. According to Wang Zhuquan et al 2007:Working capital management is the main contents of corporate finance, so the study in this field should gain much attention. Compared with the rapidly development of the practice, the development of the theory has been lagged obviously since 1990's.We 40
suggest that the study should begin from the reclassification of working capital, and then, the new framework of the theory should be set up, which is based on the supplychain management, the channel management and the customer relationship management. Meanwhile, we should launch on the survey of working capital management of Chinese companies and promulgate the results, which can offer the data for the study and evaluation of working capital management.
According to James A. Gentry, Paul Newbold, David T. Whitford, (1984) The objectives of this study are to offer cash based funds flow components as an alternative to financial ratios for classifying the financial performance of companies; to test empirically the ability of funds flow components to distinguish between failed and no failed companies with special emphasis on working capital components; to analyze the empirical results and make recommendations for future study. According to Jeffrey Ashe 2000:Working Capital is the United States' largest peer-group lending program. This article reviews what Working Capital has learned about the market, its customers, program impact, and service delivery over its ten year history. It presents a model for understanding how participating in peer lending groups develops social and economic capital in poor communities. The article then discusses how participants judge the group model as they identify the characteristics of successful groups and the impact of the group on their businesses, on themselves personally, and on the larger community. The rest of the article discusses how Working Capital evolved from a start-up operation in a single town into a multistate program and explores the advantages and limitations of rapid expansion. A checklist for choosing affiliate partners is presented, along with a list of the lessons learned about delivering services though affiliates. According to Alan P. Hamlin, David F. Heathfield 2000:Working capital is a necessary input to the production process and yet is ignored in most economic models of production. The implications of modeling the time dimension of production, and hence the working capital requirements of firms, are
41
explored, with particular stress placed on the competitive advantage gained by firms that retain flexibility in the time structure of their production. According to VELLANKI S.S. KUMAR, AWAD S. HANNA, TERESA ADAMS, (2000):The systematic assessment of working capital requirement in construction projects deals with the analysis of various quantitative and qualitative factors in which information is subjective and based on uncertainty. There exists an inherent difficulty in the classical approach to evaluate the impact of qualitative factors for the assessment of working capital requirement. This paper presents a methodology to incorporate linguistic variables into workable mathematical propositions for the assessment of working capital using fuzzy set theory. This article takes into consideration the uncertainty associated with many of the project resource variables and these are reflected satisfactorily in the working capital computations. A case study illustrates the application of the fuzzy set approach. The results of the case study demonstrate the superiority of the fuzzy set approach to classical methods in the assessment of realistic working capital requirements for construction projects. According to Richard Petty, James Guthrie, (2000):The rise of the new economy, one principally driven by information and knowledge, is attributed to the increased prominence of intellectual capital (IC) as a business and research topic. Intellectual capital is implicated in recent economic, managerial, technological, and sociological developments in a manner previously unknown and largely unforeseen. Whether these developments are viewed through the filter of the information society, the knowledge-based economy, the network society, or innovation, there is much to support the assertion that IC is instrumental in the determination of enterprise value and national economic performance. First, we seek to review some of the most significant extant literature on intellectual capital and its developed path. The emphasis is on important theoretical and empirical contributions relating to the measurement and reporting of intellectual capital. The second part of this paper identifies possible future research issues into the nature, impact and value of intellectual management and reporting.
42
According to Sushma Vishnani, FCA, and Finance Faculty:It is felt that there is the need to study the role of working capital management policies on profitability of a company. Conventionally, it has been seen that if a company desires to take a greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its sales. If it is interested in improving its liquidity, it increases the level of its working capital. However, this policy is likely to result in a reduction of the sales volume, therefore of profitability. Hence, a company should strike a balance between liquidity and profitability. In this paper an effort has been made to make an empirical study of Indian Consumer Electronics Industry for assessing the impact of working capital policies & practices on profitability during the period 199495 to 200405. The impact of working capital policies on profitability has been examined by computing coefficient of correlation and regression analysis between profitability ratio and some key working capital policy indicator ratios.
According to Charles O. Egbu, (2004):Innovation is viewed as a major source of competitive advantage and is perceived to be a pre-requisite for organizational success and survival. The ability to innovate depends largely on the way in which an organisation uses and exploits the resources available to it. The paper explores the importance of knowledge management (KM) and intellectual capital (IC) in organisations. It also considers the critical factors that lead to successful innovations and the role of KM and IC in this regard. The paper argues that effective management of knowledge assets involves a holistic approach to a host of factors. It is also suggested that there are a host of factors that combine in different ways to produce successful organizational innovations. It recommends that more is needed on the education and training of construction personnel and that these education and training programmes should reflect the nature of innovation and KM dimensions as very complex social processes. According to Kenneth A. Froot and Jeremy C. Stein in 1998:We develop a framework for analyzing the capital allocation and capital structure decisions facing financial institutions. Our model incorporates two key features: (i) value-maximizing banks have a well-founded concern with risk management; and (ii) 43
not all the risks they face can be frictionlessly hedged in the capital market. This approach allows us to show how bank-level risk management considerations should factor into the pricing of those risks that cannot be easily hedged. We examine several applications, including: the evaluation of proprietary trading operations, and the pricing of unhedgeable derivatives positions. We also compare our approach to the RAROC methodology that has been adopted by a number of banks. According to Pradeep Singh (2008):Empirically analysed that a firms working capital consists of its investments in current assets, which includes short-term assetscash 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. On the other hand, inventory, which is one of the important elements of current assets, reflects the investment of a firms fund. Hence, it is necessary to efficiently manage inventories in order to avoid unnecessary investments. A firm, which neglects the management of inventories, will have to face serious problems relating to long-term profitability and may fail to survive. With the help of better inventory management, a firm can reduce the levels of inventories to a considerable degree. This paper tries to evaluate the effect of the size of inventory and the impact on working capital through inventory ratios, working capital ratios, trends, computation of inventory and working capital, and liquidity ranking. Finally, it was found that the size of inventory directly affects working capital and it's management. Size of the inventory and working capital of Indian Farmers Fertilizer Cooperative Limited (IFFCO) is properly managed and controlled compared to National Fertilizer Ltd. (NFL). According to Pedro Juan Garca-Teruel and Pedro Martnez-Solano (2007):Conducted research for the object 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 medium-sized Spanish 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. Moreover, shortening the cash conversion cycle also improves the firms profitability.
44
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. According to Naila Iqbal (2001):Examined that for increasing shareholder's wealth a firm has to analyze the effect of fixed assets and current assets on its return and risk. Working Capital Management is related with the Management of current assets. The Management of current assets is different from fixed assets on the basis of the following points i.e Current assets are for short period while fixed assets are for more than one Year.The large holdings of current assets, especially cash, strengthens Liquidity position but also reduces overall profitability, and to maintain an optimum level of liquidity and profitability, risk return trade off is involved holding Current assets.Only Current Assets can be adjusted with sales fluctuating in the short run. Thus, the firm has greater degree of flexibility in managing current Assets. The management of Current Assets helps affirm in building a good market reputation regarding its business and economic condition. According to Vellanki S. Kumar, Awad S.Hanna, Teresa Adams (2000):Conducted research and examined that the systematic assessment of working capital requirement in construction projects deals with the analysis of various quantitative and qualitative factors in which information is subjective and based on uncertainty. There exists an inherent difficulty in the classical approach to evaluate the impact of qualitative factors for the assessment of working capital requirement. This paper presents a methodology to incorporate linguistic variables into workable mathematical propositions for the assessment of working capital using fuzzy set theory. This article takes into consideration the uncertainty associated with many of the project resource variables and these are reflected satisfactorily in the working capital computations. A case study illustrates the application of the fuzzy set approach. The results of the case study demonstrate the superiority of the fuzzy set approach to classical methods in the assessment of realistic working capital requirements for construction projects.
45
According to Maynard E. Rafuse (1996):Argues that attempts to improve working capital by delaying payment to creditors is counter-productive to individuals and to the economy as a whole. Claims that altering debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit. Proposes that stock reduction generates system wide financial improvements and other important benefits. Urges those organizations seeking concentrated working capital reduction strategies to focus on stock management strategies based on lean supply-chain techniques.
46
CHAPTER 3
OBJECTIVES OF THE STUDY
Fixing the objective is like identifying the star. The objective decides where we want to go, what we want to achieve and what is our goal or destination. Every study is carried out for the achievement of certain objectives.
i. ii. iii.
To analyze the various components of working capital of L&T. To study the financing of working capital of L&T. To study and analyze the operating cycle of L&T.
47
CHAPTER 4
RESEARCH METHODOLOGY
sources. The methods that will be used to collect primary data are:
a) Questionnaire b) Interview SECONDARY DATA: Secondary data that will be used are web sites and
published materials related to working capital management as well as any relevant information on capital of the company at Heston Kuwait.
48
CHAPTER 5
DATA ANALYSIS
27.48 27.48 0.00 0.00 4,583.3 2 29.37 4,640.1 7 465.79 987.78 1,453.5 7 6,093.7 4 Mar '06 12 mths
56.65 56.65 0.00 0.00 5,683.85 27.93 5,768.43 245.40 1,832.35 2,077.75 7,846.18 Mar '07 12 mths
58.47 58.47 0.00 0.00 9,470.71 25.90 9,555.08 308.53 3,275.46 3,583.99 13,139.07 Mar '08 12 mths
12 mths 12 mths
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories 2,300.6 8 982.22 1,318.4 6 286.06 1,919.5 2 2,210.2 7 49 2,876.30 1,122.83 1,753.47 471.22 3,104.44 3,001.14 4,188.91 1,242.47 2,946.44 699.00 6,922.26 4,305.91 5,575.00 7,235.78 1,421.39 1,727.68 4,153.61 5,508.10 1,040.99 857.66 13,705.3 8,263.72 5 5,805.05 1,415.37
Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
4,814.1 6 398.71 7,423.1 4 2,061.5 0 184.49 9,669.1 3 0.00 6,106.0 4 1,015.3 7 7,121.4 1 2,547.7 2 21.98 6,093.7 4 305.59 335.61
5,504.64 993.68 9,499.46 2,449.14 100.75 12,049.35 0.00 8,362.01 1,180.13 9,542.14 2,507.21 9.84 7,846.18 270.22 202.65
7,365.01 779.86 12,450.78 3,861.10 184.60 16,496.48 0.00 11,892.75 2,035.42 13,928.17 2,568.31 3.06 13,139.07 1,013.51 325.98
5,557.14 5,041.36 0.00 25,112.4 19,015.72 7 1,371.86 1,719.39 212.32 303.28 0.26
15,030.81 17,983.37 25,280.49 34,249.85 37,187.50 253.86 338.08 334.38 393.31 317.31 14,776.95 17,645.29 24,946.11 33,856.54 36,870.19 527.52 459.80 616.69 1,612.58 2,321.67 -103.24 121.76 746.17 105.11 -422.99 15,201.23 18,226.85 26,308.97 35,574.23 38,768.87 4,510.78 5,320.98 50 8,256.46 9,316.38 9,593.53
Power & Fuel Cost 221.50 308.13 365.25 456.39 334.08 Employee Cost 890.03 1,258.21 1,535.44 1,998.02 2,379.14 Other Manufacturing 6,647.70 7,451.07 10,632.83 15,659.17 16,913.31 Expenses Selling and Admin Expenses 996.59 1,222.80 1,393.80 1,844.83 1,854.23 Miscellaneous Expenses 125.00 166.15 280.69 569.32 325.58 Preoperative Exp Capitalised -1.89 -3.30 -11.42 -24.48 -36.25 Total Expenses 13,389.71 15,724.04 22,453.05 29,819.63 31,363.62 Mar '06 Mar '07 Mar '08 Mar '09 Mar '10 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 12 mths 12 mths 12 mths 12 mths 1,284.00 2,043.01 3,239.23 4,142.02 5,083.58 1,811.52 2,502.81 3,855.92 5,754.60 7,405.25 321.34 331.46 501.83 770.00 995.37 1,490.18 2,171.35 3,354.09 4,984.60 6,409.88 107.12 160.13 195.94 284.83 383.65 0.00 0.00 15.66 21.16 30.95 1,383.06 2,011.22 3,142.49 4,678.61 5,995.28 -1.85 -5.34 12.21 -21.09 -45.13 1,381.21 2,005.88 3,154.70 4,657.52 5,950.15 366.12 601.87 982.05 1,176.19 1,577.02 1,012.14 1,403.02 2,173.42 3,481.66 4,375.52 8,878.93 10,403.06 14,196.59 20,503.25 21,770.09 0.00 0.00 0.00 0.00 0.00 302.25 368.25 495.32 614.97 752.75 42.39 53.34 76.26 101.83 110.25 1,373.86 73.67 1,100.00 335.61 2,832.71 49.53 650.00 202.65 2,923.27 74.35 850.00 325.98 5,856.88 59.45 525.00 212.32 6,021.95 72.66 625.00 303.28
51
CASH FLOW:
Larsen and Toubro Cash Flow
------------------- in Rs. Cr. ------------------Mar '06 12 mths Mar '07 12 mths 2004.89 2130.45 Mar '08 12 mths 3155.47 1945.24 Mar '09 12 mths 3940.41 1478.57 Mar '10 12 mths 5880.67 5482.75
Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents
1383.40 1369.25
-1326.30 -1588.17 -5241.89 -3308.53 -6071.73 -287.77 -244.82 828.02 583.20 -31.05 511.23 583.20 1094.43 3166.68 -129.97 1094.43 964.46 1640.79 -189.17 964.46 775.29 1245.56 656.58 775.29 1431.87
QUARTERLY RESULTS:
Larsen and Toubro Quarterly Results
------------------- in Rs. Cr. ------------------Mar '10 Jun '10 7,885.31 226.76 8,112.07 6,878.26 1,007.05 -----52 Sep '10 Dec '10 Mar '11
Sales Turnover Other Income Total Income Total Expenses Operating Profit Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses
9,330.76 11,413.08 15,384.21 382.19 247.18 369.82 9,712.95 11,660.26 15,754.03 8,325.08 10,175.19 13,042.35 1,005.68 1,237.89 2,341.86 ----------------
Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation Depreciation On Revaluation Of Assets PBT Tax Net Profit Prior Years Income/Expenses Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value
100.69 ---
----
70.84 ---
35.30 --1,485.07 175.71 1,344.66 128.09 -1,216.57 376.04 840.53 -----13.83 -121.56 -2.00
225.77 --2,711.68 136.17 2,801.28 235.77 -2,565.51 879.30 1,686.21 -----27.69 -121.77 -2.00
2,380.60 1,233.81 1,387.87 135.56 142.34 193.15 2,345.73 1,091.47 1,265.56 116.22 114.15 121.21 -2,229.51 791.41 1,438.10 -----23.88 -120.44 -2.00 ---
977.32 1,144.35 311.15 379.37 666.17 764.98 -----11.04 -120.63 -2.00 -----12.65 -120.99 -2.00
53
Sales Turnover 14,591.24 15,327.13 21,707.67 17,212.22 26,797.29 Other Income 336.57 440.34 469.91 597.29 617.00 Total Income 14,927.81 15,767.47 22,177.58 17,809.51 27,414.29 Total Expenses 13,235.88 13,658.01 18,561.24 15,187.83 23,217.54 Operating Profit 1,355.36 1,669.12 3,146.43 2,024.39 3,579.75 Profit On Sale Of Assets -----Profit On Sale Of -----Investments Gain/Loss On Foreign -----Exchange VRS Adjustment -----Other Extraordinary -----Income/Expenses Total Extraordinary -- 1,047.26 163.24 70.84 261.07 Income/Expenses Tax On Extraordinary Items -----Net Extra Ordinary -----Income/Expenses Gross Profit 1,691.93 2,109.46 3,616.34 2,621.68 4,196.75 Interest 107.24 240.55 264.76 335.49 311.88 PBDT 1584.69 2916.17 3514.82 2357.03 4145.94 Depreciation 138.93 193.86 220.74 235.36 363.86 Depreciation On Revaluation -----Of Assets PBT 1445.76 2722.31 3294.08 2121.67 3782.08 Tax 483.06 543.71 1,097.16 690.52 1,255.34 Net Profit 962.70 2,178.60 2,196.92 1,431.15 2,526.74 Prior Year Income/Expenses -----Depreciation for Previous Years Written Back/ -----Provided Dividend -----Dividend Tax -----Dividend (%) -----Earnings Per Share(Rs) 32.90 37.07 36.48 23.66 41.50 54
-58.52 -2.00
Sales Turnover 11,330.60 16,387.83 23,208.03 23,448.28 28,617.53 Other Income 258.15 335.67 639.99 661.07 840.53 Total Income 11,588.75 16,723.50 23,848.02 24,109.35 29,458.06 Total Expenses 10,393.90 14,688.18 21,069.06 20,764.15 25,351.31 Operating Profit 936.70 1,699.65 2,138.97 2,684.13 3,266.22 Profit On Sale Of Assets -----Profit On Sale Of -----Investments Gain/Loss On Foreign -----Exchange VRS Adjustment -----Other Extraordinary -----Income/Expenses Total Extraordinary --916.33 1,109.81 106.14 Income/Expenses Tax On Extraordinary Items -----Net Extra Ordinary -----Income/Expenses Gross Profit 1,194.85 2,035.32 2,778.96 3,345.20 4,106.75 Interest 27.60 72.80 204.77 369.75 511.20 PBDT 1,167.25 1,962.52 3,490.52 4,085.26 3,701.69 Depreciation 100.20 143.43 217.05 298.38 363.45 Depreciation On Revaluation -----Of Assets PBT 1,067.05 1,819.09 3,273.47 3,786.88 3,338.24 Tax 364.80 612.43 790.33 849.46 1,066.56 Net Profit 702.25 1,206.66 2,483.14 2,937.42 2,271.68 Prior Years Income/Expenses -----Depreciation for Previous -----55
Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value
YEARLY RESULTS:
Larsen and Toubro Yearly Results ------------------- in Rs. Cr. -------------------
Mar '07 Sales Turnover Other Income Total Income Total Expenses Operating Profit Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT
Mar '08
Mar '09
Mar '10
Mar '11
17,578.84 24,854.70 33,926.37 37,034.80 43,904.91 462.29 587.87 739.78 910.25 1,194.85 18,041.13 25,442.57 34,666.15 37,945.05 45,099.76 15,832.30 22,040.07 30,069.53 32,219.25 38,282.33 1,746.54 2,814.63 3,856.84 4,815.55 5,622.58 ------------2,208.83 33.93 2,174.90 ----87.23 --3,402.50 122.66 3,367.07 56 ----772.46 --4,596.62 350.22 5,018.86 ----1,210.50 --5,725.80 505.31 6,430.99 ----332.91 --6,817.43 647.37 6,502.97
Depreciation Depreciation On Revaluation Of Assets PBT Tax Net Profit Prior Years Income/Expenses Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value
------------74.34 59.44 72.66 65.01 ----58.47 117.14 120.44 121.77 9,470.71 12,317.96 18,142.82 21,702.36 2.00 2.00 2.00 2.00
CAPITAL STRUCTURE:
Larsen and Toubro Capital Structure Period Instrument From To 2009 2010 Equity Share 2008 2009 Equity Share 2007 2008 Equity Share
--- CAPITAL (Rs. cr) ---PAIDUPAuthorised Issued Shares (nos) Face Value Capital 214.75 120.44 602195408 2 120.44 214.75 117.14 585687862 2 117.14 214.75 58.47 292327390 2 58.47 57
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1987 1986 1985 1984 1982 1981 1979 1978 1975 1973 1972 1969 1967 1964 1962 1960 1959 1958 1957 1956 1955 1954 1950
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1987 1986 1985 1984 1982 1981 1979 1978 1975 1973 1972 1969 1967 1964 1962 1960 1959 1958 1957 1956 1955 1954
Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share
214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 115 80 74.98 74.98 74.98 38.83 38.83 28.83 18.83 13.83 8.5 8.5 8.5 4.8 4.8 2.8 1.8 1.8 1.8 0.8 0.8 0.8 0.8 0.8 0.8 58
56.65 27.48 25.98 24.88 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 213.24 213.24 129.61 75.42 68.08 60.75 51.99 51.99 32.5 24.02 23.07 14.42 11.53 7.45 5.96 4.52 3.99 3.63 2.64 1.65 1.1 0.8 0.6 0.5 0.55 0.4 0.35 0.32
283270748 137385777 129924182 124401796 248668756 248660346 248650346 248545098 248516393 248502885 248488155 248472703 228798916 211481630 209943247 129613652 75419968 68084408 60748844 51993354 51993354 27079675 24019714 23065344 14415840 11532672 7453395 5962716 4517209 3993000 3630000 2640000 1650000 1100000 800000 600000 500000 450000 400000 350000 320000
2 2 2 2 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10
56.65 27.48 25.98 24.88 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 214.75 211.48 209.94 129.61 75.42 68.08 60.75 51.99 51.99 27.08 24.02 23.07 14.42 11.53 7.45 5.96 4.52 3.99 3.63 2.64 1.65 1.1 0.8 0.6 0.5 0.45 0.4 0.35 0.32
0.8
0.19
185000
10
0.19
FINANCIAL RATIOS:
Larsen and Toubro Key Financial Ratios ------------------- in Rs. Cr. ------------------Mar '06 Investment Valuation Ratios Face Value 2.00 Dividend Per Share 22.00 Operating Profit Per Share 92.92 (Rs) Net Operating Profit Per 1,075.58 Share (Rs) Free Reserves Per Share (Rs) 324.46 Bonus in Equity Capital 12.40 Profitability Ratios Operating Profit Margin(%) 8.63 Profit Before Interest And 7.73 Tax Margin(%) Gross Profit Margin(%) 9.82 Cash Profit Margin(%) 7.40 Adjusted Cash Margin(%) 6.14 Net Profit Margin(%) 6.69 Adjusted Net Profit 5.43 Margin(%) Return On Capital 24.88 Employed(%) Return On Net Worth(%) 21.95 Adjusted Return on Net 17.90 Worth(%) Return on Assets Excluding 7.66 Revaluations Return on Assets Including 7.68 Revaluations Return on Long Term 26.15 Funds(%) Liquidity And Solvency Ratios Current Ratio 1.28 Quick Ratio 1.03 Debt Equity Ratio 0.32 59 Mar '07 2.00 13.00 71.77 622.91 197.15 55.44 11.52 10.34 13.24 8.63 8.60 7.74 7.72 29.82 24.44 24.39 202.30 203.29 32.59 1.16 0.93 0.36 Mar '08 2.00 17.00 110.81 853.36 319.09 53.71 12.98 11.97 12.19 8.78 8.78 8.54 8.54 26.72 22.81 21.21 325.87 326.76 28.73 1.09 0.86 0.38 Mar '09 2.00 10.50 70.72 578.06 205.21 76.77 12.23 11.14 11.39 8.50 8.50 10.06 10.06 24.14 27.99 21.21 212.31 212.73 25.62 1.22 0.97 0.53 Mar '10 2.00 12.50 84.42 612.26 294.74 74.67 13.78 12.41 12.74 9.21 9.21 11.56 11.56 22.49 23.95 16.81 303.28 303.66 23.19 1.19 1.15 0.37
Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times
0.25 11.56 0.32 5.03 4.48 6.84 3.37 6.95 11.45 2.45 6.50 33.67 4.93 62.07 30.52 45.81 1.06 21.50
0.25 25.07 0.36 7.52 5.72 6.03 3.42 6.11 9.52 2.27 6.21 34.05 5.56 51.15 30.15 49.28 1.13 21.36
0.28 28.57 0.38 7.41 5.75 6.00 3.88 6.00 6.09 1.92 6.09 34.14 5.21 37.06 33.09 39.78 1.28 22.67
0.44 13.09 0.53 6.35 5.92 6.01 3.89 6.01 6.23 1.80 6.23 38.11 4.02 59.09 27.51 44.34 0.92 21.70
0.33 11.17 0.37 6.09 5.81 28.73 3.48 28.73 5.20 1.48 5.20 32.32 3.54 49.22 26.01 54.43 0.83 18.62
73.67
Book Value
335.61
202.65
325.98
212.32
303.28
61
MARKET CAPITALISATION:
Company Name Larsen BHEL Suzlon Energy BGR Energy AIA Engineering Alfa Laval BEML Praj Industries Tecpro Systems Elecon Eng CMI FPE Shriram EPC Sanghvi Movers Walchandnagar TIL TRF Action Const Disa India Gujarat Apollo Kabra Extrusion GMM Pfaudler Eimco Elecon UB Engineering Kilburn Eng Windsor Int Combustion Josts Engineers Skyline Millars ATV Projects Cranex Sterling Strips Last Price 1,722.00 1,933.20 52.75 493.05 368.55 1,487.95 599.40 74.00 264.10 69.85 1,286.80 136.00 118.50 122.90 434.45 388.75 46.05 1,511.70 133.90 54.40 106.80 237.00 80.05 65.05 52.80 252.80 455.00 6.03 3.80 11.09 7.60 % Chg 1.27 0.91 1.05 2.28 0.97 2.26 -0.21 -0.20 -1.29 0.58 -0.25 0.22 0.04 0.33 -0.16 -0.47 -0.22 0.11 -0.52 -1.27 6.80 2.16 0.00 3.25 -0.09 -0.30 4.78 3.79 0.00 -3.40 0.00 52 wk High 2,212.00 2,695.00 66.30 871.00 479.90 1,806.00 1,238.00 88.90 454.25 103.70 1,632.00 313.80 210.05 248.40 750.05 970.00 75.20 1,980.00 246.95 103.25 129.90 398.00 239.40 89.50 107.35 421.00 517.95 12.50 11.90 12.10 14.98 52 wk Market Cap (Rs. cr) Low 1,475.00 104,664.02 1,890.10 94,634.01 42.80 9,375.52 402.10 3,556.58 305.00 3,476.18 1,114.00 2,702.19 565.00 2,496.17 61.45 1,367.36 225.10 1,333.01 59.30 648.64 1,275.00 635.40 123.00 601.97 103.65 512.96 103.00 467.88 424.00 435.76 382.00 427.80 37.35 427.74 1,270.00 228.30 124.00 221.94 54.15 173.55 86.00 156.11 213.00 136.71 73.50 136.62 58.20 86.23 46.00 68.83 212.50 60.43 295.00 34.79 4.26 24.26 3.30 20.18 3.41 6.65 5.95 3.11
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NET SALES:
Company Name Larsen BHEL Suzlon Energy BGR Energy BEML Tecpro Systems Shriram EPC Elecon Eng Alfa Laval TIL AIA Engineering TRF Praj Industries UB Engineering Action Const CMI FPE Sanghvi Movers Windsor Gujarat Apollo Kabra Extrusion Eimco Elecon GMM Pfaudler Disa India Int Combustion Kilburn Eng Josts Engineers ATV Projects Skyline Millars Cranex Sterling Strips Last Price 1,722.00 1,933.20 52.75 493.05 599.40 264.10 136.00 69.85 1,487.95 434.45 368.55 388.75 74.00 80.05 46.05 1,286.80 118.50 52.80 133.90 54.40 237.00 106.80 1,511.70 252.80 65.05 455.00 3.80 6.03 11.09 7.60 Change 21.55 17.45 0.55 11.00 -1.25 -3.45 0.30 0.40 32.90 -0.70 3.55 -1.85 -0.15 0.00 -0.10 -3.20 0.05 -0.05 -0.70 -0.70 5.00 6.80 1.70 -0.75 2.05 20.75 0.00 0.22 -0.39 0.00 % Change 1.27 0.91 1.05 2.28 -0.21 -1.29 0.22 0.58 2.26 -0.16 0.97 -0.47 -0.20 0.00 -0.22 -0.25 0.04 -0.09 -0.52 -1.27 2.16 6.80 0.11 -0.30 3.25 4.78 0.00 3.79 -3.40 0.00 Net Sales
(Rs. cr)
36,870.19 33,226.25 3,504.34 3,069.25 2,855.84 1,454.93 1,114.57 1,045.10 837.55 832.71 803.98 649.95 602.28 526.80 429.64 387.90 331.53 209.15 201.69 194.81 162.31 154.48 107.87 96.99 88.36 77.79 24.50 22.66 18.52 7.25
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NET PROFIT:
Company Name Larsen BHEL BEML BGR Energy AIA Engineering Praj Industries Tecpro Systems Alfa Laval Sanghvi Movers Elecon Eng TRF TIL Shriram EPC UB Engineering CMI FPE Gujarat Apollo Action Const Kabra Extrusion Disa India Windsor Eimco Elecon Int Combustion GMM Pfaudler ATV Projects Josts Engineers Kilburn Eng Skyline Millars Sterling Strips Cranex Suzlon Energy Last Price 1,722.00 1,933.20 599.40 493.05 368.55 74.00 264.10 1,487.95 118.50 69.85 388.75 434.45 136.00 80.05 1,286.80 133.90 46.05 54.40 1,511.70 52.80 237.00 252.80 106.80 3.80 455.00 65.05 6.03 7.60 11.09 52.75 Change 21.55 17.45 -1.25 11.00 3.55 -0.15 -3.45 32.90 0.05 0.40 -1.85 -0.70 0.30 0.00 -3.20 -0.70 -0.10 -0.70 1.70 -0.05 5.00 -0.75 6.80 0.00 20.75 2.05 0.22 0.00 -0.39 0.55 % Change 1.27 0.91 -0.21 2.28 0.97 -0.20 -1.29 2.26 0.04 0.58 -0.47 -0.16 0.22 0.00 -0.25 -0.52 -0.22 -1.27 0.11 -0.09 2.16 -0.30 6.80 0.00 4.78 3.25 3.79 0.00 -3.40 1.05 Net Profit
(Rs. cr)
4,375.52 4,310.64 222.85 201.02 122.56 113.89 110.07 108.12 90.42 66.18 47.18 46.86 44.66 30.68 27.29 26.93 24.44 21.46 15.10 13.16 12.80 11.96 11.06 4.74 4.40 4.31 4.24 0.72 -0.29 -1,414.09
TOTAL ASSETS:
Company Name Larsen BHEL Suzlon Energy BEML BGR Energy Shriram EPC Sanghvi Movers Elecon Eng AIA Engineering Last Price 1,722.00 1,933.20 52.75 599.40 493.05 136.00 118.50 69.85 368.55 % Chg 1.27 0.91 1.05 -0.21 2.28 0.22 0.04 0.58 0.97 64 Gross Net Total CWIP Block Block Assets 7,235.78 5,508.10 857.66 25,112.47 6,579.70 2,414.96 1,550.49 16,045.11 1,355.74 917.16 10.38 13,072.14 798.71 273.87 32.21 2,939.66 170.43 139.09 10.36 1,633.02 163.28 141.70 0.01 1,052.32 1,186.09 879.69 1.61 944.09 509.42 344.34 17.88 847.68 278.86 204.91 10.27 745.45
Tecpro Systems Praj Industries Alfa Laval TRF TIL ATV Projects Action Const Gujarat Apollo UB Engineering Eimco Elecon CMI FPE Kilburn Eng Kabra Extrusion GMM Pfaudler Int Combustion Disa India Skyline Millars Cranex Josts Engineers Sterling Strips Windsor
264.10 74.00 1,487.95 388.75 434.45 3.80 46.05 133.90 80.05 237.00 1,286.80 65.05 54.40 106.80 252.80 1,511.70 6.03 11.09 455.00 7.60 52.80
-1.29 -0.20 2.26 -0.47 -0.16 0.00 -0.22 -0.52 0.00 2.16 -0.25 3.25 -1.27 6.80 -0.30 0.11 3.79 -3.40 4.78 0.00 -0.09
136.73 173.71 189.38 55.80 191.29 397.07 88.53 62.97 48.18 93.70 73.92 20.53 62.13 61.92 47.73 35.00 3.70 3.01 10.17 3.93 71.14
113.63 137.42 96.49 27.47 109.01 228.54 72.09 51.09 48.18 30.50 28.23 16.31 39.29 28.05 19.08 12.17 1.90 1.26 1.76 1.41 13.11
11.01 47.90 11.65 1.74 19.54 0.00 1.95 7.78 1.80 0.26 0.09 2.97 8.49 0.77 0.13 1.01 0.00 0.00 0.00 2.03 0.00
633.26 531.88 422.23 315.69 295.54 240.69 201.09 181.49 163.48 140.30 107.81 107.30 95.53 91.95 74.19 55.59 34.36 13.61 9.48 4.00 -15.85
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2008-09 23,752.55
2009-10 26,346.51
Observations:It was observed that major source of liquidity problem is not the mismatch between current payments and current receipts from the Comparison of funds flow statements of AIL for five years. This company net working capital is continue increase and to the present level is good. The growth in working capital is a clear indication that the company does not utilizing its short term resources with efficiency. In year 2005-06 66
the company net working capital was 3378.6 and after 3 years it increasing and 200910 the company net working capital was 6902.74
CURRENT ASSETS
Total assets are basically classified in two parts as fixed assets and current assets. Fixed assets are in the nature of long term or life time for the organization. Current assets convert in the cash in the period of one year. It means that current assets are liquid assets or assets which can convert in to cash within a year.
693.13
1,104.89
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Observations:It was observed that the size of current assets is increasing with increases in the sales. The excess of current assets is showing positive liquidity position of the firm but it is not always good because excess current assets then required, it may adversely affects 68
on profitability. Current assets include some funds investments for which company pay interest.
CURRENT LIABILITIES
Current liabilities mean the liabilities which have to pay in current year. It includes sundry creditors means supplier whose payment is due but not paid yet, thus creditors called as current liabilities. Current liabilities also include short term loan and provision as tax provision. Current liabilities also includes bank overdraft. For some current assets like bank overdrafts and short term loan, company has to pay interest thus the management of current liabilities has importance
(Rs. In Cr.)
69
70
Observations:Current liabilities show continues growth each year because company creates the credit in the market by good transaction. To get maximum credit from supplier which is profitable to the company it reduces the need of working capital of firm. As a current liability increase in the year 2009-10 by 21,632.13. It increases the working capital size in the same year. And company enjoyed over creditors which may include indirect cost of credit terms.
2. Policy changes The second major case of changes in the level of working capital is because of policy changes initiated by management. The term current assets policy may be defined as the relationship between current assets and sales volume.
1. Technology changes
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The third major point if changes in working our business more working capital is required A change in operating expenses rise or full will have similar effects on the levels of working following working capital statement is prepared capital are changes in technology because changes in technology to install that technology in on the base of balance sheet of last two year
(Rs. In Cr.)
Increase
Decrease
4,389.68
7,198.85 23,752.55
15,211.04 3,066.53
4,232.73 878.17
72
(Rs. In cr.)
73
Observations:High working capital ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in working capital. Company working capital ratio shows mostly more than 3, except for the year 2006-07 In the year 200910 the ratio was around 5.34, it indicates that the capability of the company to achieve maximum sales with the minimum investment in working capital.
14776.95 9,484.64
1.557987441
17645.29 11,948.60
1.476766316
24946.11 16,311.88
1.52932157 4
33856.54 23,752.55
1.42538548 5
36870.19 26,346.51
1.399433549
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Observations
It was observed that current assets turnover ratio does not indicate any trend over the period of time. Turnover ratio was 1.55 in the year 2000-06 and decrease to 1.4767 in the year 2006-07. Company increased its sales with increased investment in current assets, thus current assets turnover ratio not increased.
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CURRENT RATIO
The current is calculated by dividing current assets by current liabilities: Current Ratio = ___Current assets__ Current liabilities
Current Ratio = Current Assets / Current Liabilities Or Current Assets : Current Liabilities
Current assets include cash and those assets which can be converted in to cash within a year, such marketable securities, debtors and inventories. All obligations within a year are include in current liabilities. Current liabilities include creditors, bills payable accrued expenses, short term bank loan income tax liabilities and long term debt maturing in the current year. Current ratio indicates the availability of current assets in rupees for every rupee of current liability.
Current Ratio
( Rs. In Cr.)
Particular
Current Assets
Current Liabilities Current Ratio
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Observations:
The current ratio indicates the availability of funds to payment of current liabilities in the form of current assets. A higher ratio indicates that there were sufficient assets available with the organization which can be converted in cash, without any reduction in the value. It is very high 1.56 in 2008-09, but regularly decreases. In 2009-10 it comes at 1.355.
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QUICK RATIO
Quick ratio is also known as acid test ratio or liquid ratios it is more rigorous test of liquidity than the current ratio. It establishes relationship between liquid assets & current liabilities. An asset is said to be liquid if it can be converted into cash within a shorter period without loss of value.
Quick ratio
Particular
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Observations:Quick ratio indicates that the company has sufficient liquid balance for the payment of current liabilities. The liquid ratio of 1:1 is suppose to be standard or ideal but here ratio is more than 1:1 over the period of time, it indicates that the firm maintains the over liquid assets than actual requirement of such assets.
[
DEBT EQUITY
( Rs. In Cr.) Particular 2005-06 1,453.57 27.48 52.89 2006-07 2,077.75 56.65 36.67 2007-08 3,583.99 58.47 61.29 2008-09 6,556.03 117.14 55.96 2009-10 6,800.83 120.44 56.46
Debt Equity
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Observations:The debt-equity ratio is normally defined as the long term debt divided by shareholders' equity, which is the sum of the equity capital, any preference capital issued, and free reserves and surplus with the company. A debt-equity ratio is also important for bond investors, since a highly leveraged company could face problems making interest payments.
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CHAPTER 6
CONCLUSION AND MAJOR FINDS
Conclusion
Working capital management is important aspect of financial management. The study of working capital management of L&T has revealed that the Net Working Capital was improving regularly from 3378.6 in 2005-06 and 6902.74 in 2009-10 which is as per standard industrial practice. The current Assets of the company showed an increasing Rs. 3524.14 Cr. in year 2005-06 from 2009-10, but in 2009-10 it stable at Rs.6902.74 cr. The study has been conducted on working capital ratio analysis, current ratio, and Change the working capital components which helped the company to manage its working capital efficiency and affectively. 1. Working capital of the company was increasing from year 207.99 cr. From 2005-06 to 2006-07, Rs.4122.38 cr. increases form 2007-08 to 2008-09. Rs. 6902.74 cr. in 2009-10 it comes down to Rs. 1638.77 cr. All
calculation is showing positive working capital per year. It shows good liquidity position. 2. Positive working capital indicates that company has the ability of payments of short terms liabilities. 3. Working capital increased because of increment in the current assets. Companys current assets were always more than requirement it affect on profitability of the company.
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4. In the year 2008-09 and 2009-10 working capital decreased because increased of expenses as manufacturing expenses and increase the price of raw material. 5. The size of the cash in the current assets of the company indicates the miss cash management of the company. The cash balance in the year 2009-10 was extremely increased. Company failed to proper investment of available cash.
Major Findings
Particular
2006-07
2007-08
2008-09
2009-10
Investments Inventories Sundry Debtors Cash & Bank Balance Current Liabilities Reserve
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CHAPTER 7
RECOMMENDATION AND LIMITATION
Limitations:[
Even though every effort will be taken to minimize the variation and present a factual picture with the help of statistical methods, but still there are some limitations, which are as follows: The preparation and interpretation of data may not be 100% free from errors and may be affected by the Respondents based mindset to some extent. Sampling size of the targeted employees of L&T is small, because nonreachable due to their busy schedule. The study will be based on the balance sheet of the company and depends directly on balance sheet and annual reports of the company.
Recommendation:Recommendation can be use by the firm for the betterment increased of the firm after study and analysis of project report on study and analysis of working capital. I would like to recommend. 1. Company should increase the inventory holding period. It is the major part of working capital of company. 2. Company has to take control on cash balance because cash is non earning assets and increase cost of funds. 3. Company should raise it fund through short term sources for short term requirement of funds.
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BIBLIOGRAPHY
[1] Afza, T. and M. S. Nazir, (2007). Working Capital Management Policies of Firms: Empirical Evidence from Pakistan. Conference Proceedings of 9th South Asian Management Forum (SAMF) on February 24-25, North South University, Dhaka, Bangladesh. [2] Afza, T. and M. S. Nazir, (2008). Working Capital Approaches and Firms Returns. Pakistan Journal of Commerce and Social Sciences. 1(1), 25-36. [3] Baltagi, B. H. (2001). Econometric Analysis of Panel Data. 2nd Edition, John Wiley & Sons. Chichester. [4] Blinder, A. S. and L. Macinni, (1991). Taking Stock: A critical Assessment of Recent Research on Inventories. Journal of Economic Perspectives. 5(1), 7396. [5] Czyzewski, A.B., and D.W. Hicks, (1992). Hold Onto Your Cash. Management Accounting. 27-30. [6] Deloof, M. (2003). Does Working Capital Management Affects profitability of Belgian Firms? Journal of Business Finance & Accounting. 30(3) & (4), 0306-686X. [7] Economic Survey of Pakistan, (2006-07). Finance Division, Government of Pakistan. [8] Eljelly, M.A. (2004). Liquidity Profitability Tradeoff: An empirical investigation in an emerging market. International Journal of Commerce & Management. 14(2). [9] Filbeck, G. and T. M. Krueger, (2005). An Analysis of Working Capital Management results across Industries. American Journal of Business. 20(2), 11-18. [10] Garcia-Teruel, P.J. and Martinez-Solano, P. (2007). Effects of Working Capital Management on SME Profitability. International Journal of Managerial Finance. 3(2), 164-177. International Research Journal of Finance and Economics - Issue 47 (2010) 162 [11] Gitman, L.J. (1991). Principles of Managerial Finance. Collins Publishers Inc. Harper. New York. [12] Hausman, J.A. (1978), Econometrica. 46, 1251-71. Specification Tests in Econometrics.
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[13] Jose, M. L., C. Lancaster, and J. L. Stevens, (1996). Corporate Returns and Cash Conversion Cycles. Journal of Economics and Finance. 20(1), 33-46. [14] Kargar, J. and R. A. Blumenthal, (1994). Leverage Impact of Working Capital in Small Businesses. TMA Journal. 14(6), 46-53. [15] Lazaridis, I. and D. Tryfonidis, (2006). Relationship between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange. Journal of Financial Management and Analysis. 19 (1), 26 35. [16] Mukhopadhyay, D. (2004). Working Capital Management in Heavy Engineering FirmsA Case Study. Accessed from myicwai.com/knowle dgebank /fm4 8. [17] Padachi, K. (2006). Trends in Working Capital Management and its Impact on Firms Performance: An Analysis of Mauritian Small Manufacturing Firms. International Review of Business Research Papers. 2(2), 45 - 58.
Reference of Books
1. Management Accounting and Business Finance-By R.K. Sharma and Shashi K Gupta-16th Edition 2008 2. Working Capital Management- By B. Murali Krishna 2010 3. Financial Management: Theory & Practice-By Prasanna Chandra 2004
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