A Study On WORKING CAPITAL MANAGEMENT

INDUSTRY PROFILE
An electrical battery is one or more electrochemical cells that convert stored
chemical energy into electrical energy. The invention of the first battery in 1800 by
Alessandro Volta. Batteries have become a common power source for many household
and industrial applications. According to a 200 estimate! the worldwide battery industry
generates "#$%8 billion in sales each year! with &' annual growth. Battery mar(et rising
from $20.) billion in global revenues in 2010 to $)0. billion by 201.
There are two types of batteries*
1+ ,rimary batteries
2+ #econdary batteries
Major battry !anu"a#tur$n% $ndu&tr$& $n Ind$a'
1. -.ide industries
2. #tandard batteries
). Amco batteries
%. Tudor /ndia
. Amara ra0a batteries
COMPANY PROFILE
Amara ra0a batteries limited 1ABB2+ incorporated under the
company3s act 14& in 1) 5eb. 148! and converted into public limited company on &
#eptember 1440.
The chairman and managing director of the company is 6#ri.7alla 8am 9handra
:aidu;. The company is setting up to 8s.1420 la(hs plant is in 18 acres in (ara(ambadi village
in Tirupathi. The company is engaged in the business of manufacturing of acid storage batteries.
A8B2 comprises of two ma0or divisions vi<.!
1. /ndustrial Battery =ivision 1/B=+
2. Automotive Battery =ivision 1AB=+
Produ#t&'
A>A8?: @/ABAC15?8 T"89D#+
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.
A Study On WORKING CAPITAL MANAGEMENT
A>A8?: @A8V-#T15?8 T8A9T?8#+
A>A8?: @/7@ 2/5-15?8 7-:-8AT?8#+
A>A8?: #@/-2= 15?8 /:V-8T-8#+
A>A8A 8AEA 7-:,8? 15?8 9A8#! ) B@--2-8#+
F"A:TA 1508 ",# BATT-8/-#+
A!ara Raja %rou( o" #o!(an$&'
A>A8A 8AEA BATT-8/-# 2/>/T-= 1A8B2+! (ara(ambadi! Tirupathi.
A>A8A 8AEA ,?B-8 #C#T-># ,VT.2T= 1A8,#,2+! Dara(ambadi! Tirupathi.
>A:7A2 ,8-9/#/?: ,8?="9T# ,VT 2T= 1>,,2+! (ara(ambadi! Tirupathi.
>A:7A2 ,8-9/#/?: ,8?="9T# ,VT 2T= 1>,,2+! petamitta! chittoor.
A>A8A 8AEA -2-9T8?:/9# ,VT. 2T= 1A8-,2+! =ighavamagham! 9hittoor.
7A22A 5??=# 2T=.
INTRODUCTION OF WORKING CAPITAL MANAGEMENT
Bor(ing capital management is concerned with the problem that
arises in attempting to manage the current assets! the current liabilities and the
interrelationship that arise between them.
9urrent assets refer to those assets! which in the ordinary course of business can
be or will be turned into cash within one year. The ma0or current assets are cash!
mar(etable securities! accounts receivables and /nventory. 9urrent liabilities are those
liabilities! which are intended! at their inception! to be paid in the ordinary course of
business! within a year. The basic current liabilities are Accounts payable! Bills payable!
Ban( ?verdraft and ?utstanding e.penses.
The goal of wor(ing capital management is to manage the firms 9urrent Assets
and 9urrent 2iabilities in such a way that a satisfactory level of wor(ing capital is
maintained.
Bor(ing capital! it ensures normal and smooth wor(ing of a business unit. /t is
reGuired for the raw materials and stores! payments of wages and other regular e.penses
li(e electricity! water charges! ta.es etc. Bor(ing capital is necessary when regular
manufacturing activities are under ta(en and normal production activities are conducted.
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.
A Study On WORKING CAPITAL MANAGEMENT
#uch capital is reGuired for a short period as it is recovered from the customers when the
products are sold to them.
Therefore interaction between current assets and current liabilities are in the
main theme of wor(ing capital management. ,rofits are earned with the help of assts!
which are partly fi.ed and partly current. Bor(ing capital sometimes referred to as
69/89"2AT/:7 9A,/TA2;.
69irculating capital means current assets of a company that are changed in the ordinary
course of business from one from to another! as for e.ample! from cash to inventories!
inventories to receivables! receivables in to cash;.
A Gn&tn br%
RESEARC) MET)ODOLOGY
Stat!nt o" t* (rob+!'
/t is very essential for organi<ation to leave a hold on liGuid
capital. Valuation of elements li(e cash! debtors! creditors itself is a difficult tas( for
any organi<ation managing wor(ing capital. Therefore is an impartial concern and
crucial for managing organi<ation on the financial frail. #o then arises a reGuirement for
assessing wor(ing capital reGuirement! monitoring wor(ing capital and managing it
from time to time for growth efficiencies.
Nd "or t* &tudy'
Bor(ing capital management plays a vital role in any organi<ation and
one should have a thorough (nowledge about the wor(ing capital position.
/n view of this conte.t! / have underta(en this study and it would be a
great advantage to the company also! to (now its wor(ing capital position.
/n order to maintain flows of revenue from operations every firm need
certain amount of current assets.
:eedless to maintain cash! ban(! debtors! bills receivables! closing stoc(
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.
A Study On WORKING CAPITAL MANAGEMENT
1including raw material! wor( in progress and finished goods+ prepayments and
certain other deposits and investments which are temporary in nature represents
current assets of a firm.
Analysis of financial statements of any enterprise is indispensable. This
analysis is greatly facilitated by accounting ratios. Accounting ratios eases in
ascertaining the financial strength and wea(ness of enterprise.
/n the study ratios are used as tools to evaluate the relationship between
the components of wor(ing capital.
Obj#t$,& o" t* &tudy'
To e.amine the financial performance of the company for the period from 200 to
2011.
To estimate the wor(ing capital position of 1A8B2+ company through ratios.
To suggest measures to improve the wor(ing capital practices.
To study and evaluate the cash! receivable and inventory management.
Too+& a((+$d $n t* &tudy'
Bor(ing capital ratios.
#chedule of changes in wor(ing capital management.
Sour#& o" data'
Data #o++#t$on'
The study is dependent on primary and secondary data from various
sources.
Pr$!ary Data'
The information is collected through the primary sources li(e*
HTal(ing with the employees of the department.
H7etting information by observations e.g. in manufacturing processes.
H=iscussion with the head of the department.
S#ondary Data'
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.
A Study On WORKING CAPITAL MANAGEMENT
The data is collected through the secondary sources li(e*
HAnnual 8eports of the company.
H?ffice manuals of the department.
H>aga<ines! 8eports in the company.
H,olicy documents of various departments.
S#o( o" t* &tudy'
The scope of the study is confined to A>A8A 8AEA BATTA8C
2/>/T-=! T@/8",AT@/ and ta(es into consideration only seven years data 200 to
2011.
L$!$tat$on& o" t* &tudy'
/t is based on the data supplied by the factory personnel.
/t is based on consultation! decisions of all concerned officials.
Time of two months is one of the limiting factors.
The analysis and interpretation is restricted of collected data is restricted to
necessary information.
#ince only I years data is used for the analysis the outcome may
:ot be generali<ed.
FINDINGS
Bor(ing capital or the A8B2 9ompany increased in the years of 200%A0! 200A
0&! 200&A0I! 200IA08! 2010A11 and 2008A04! 2004A2010 years it was decreased.
9urrent ratio of A8B2 2td is highest ).20 in the year 200IA2008! which is the
management of effective and efficient utili<ation.
Fuic( ratio in the all years is more than the standard norms i.e. 1*1.
Bor(ing 9apital position has strengthened over the years.
/n the year of 2004A10 the cash ratio is 0.14 there are no sufficient cash assets to
payA off the current liabilities and in the year 2010A11 the cash ratio is 0.12 this
is very less than the standards.
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.
A Study On WORKING CAPITAL MANAGEMENT
=ebtor3s turnover ratio is low in the year of 200%A0 i.e. %.1). /t3s high in the
year 2008A04 i.e. I.&. /t is in the year 2010A11 i.e. &.I4 respectively.
:et wor(ing capital turnover ratio is fluctuating year by year. 5rom 200&A0I to
2004A10 the turnover ratio is gradually increased. The year 2010A11 was .%8.
9urrent assets turnover ratio is increasing continuously from 200 to 2004 and
after year 2004A10 decreased. /n the year of 2010A11 it was 2.)I.
The inventory turnover ratio of A8B2 is highest in the year 2008A04 i.e. 4.82
and lowest in the year 200%A0 i.e. &.04. /t is in the year of 2010A11 i.e. I.24.
SUGGESTIONS
As per the above analysis! interpretation and findings following suggestions are
made. #o! these suggestions are may not be effective but these may help for a narrow
scope of improvements regarding wor(ing capital of A8B2.
The current ratio in the year of 200%A0! 200&A0I! 2008A04 and 2010A11 are
more than the standard. #o the current asset is (ept idle! it3s not should healthy
to the organi<ation.
The Guic( ratio is more than the standard in all years! so the Guic( ratio is (ept
idle.
/t is advisable that raw material conversion period should be reduced! as it is
high. /t can be achievement by following good production plan and utili<ing
men and machinery effectively.
/nventory maintenance cost has to be reduced by following the maintain good
inventory principles.
As company is going for e.pansion it should concentrate on recruiting s(illful
manpower! which in turn increase productivity.
The company has to spend little bit more on public awareness to get orders from
outside also.
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.
A Study On WORKING CAPITAL MANAGEMENT
CONCLUSION
The wor(ing capital position of the company 1Amara 8a0a Batteries 2td+ is
satisfactory. /t should focus on sales and mar(eting. The company is maintaining the
normal levels of current assets and current liabilities. #o it is not finding any difficulties
to discharge its obligations.
The company can utili<e the reserves and surplus by either capitali<ing or invest
the money some were as investment to get benefit. They should see that the debtors
should be collected within a specified time by the company. #o that they can discharge
some of its creditors or current liabilities and avoid payment of interest.
B-# 7roup ?f /nstitutions 17V/9+! >adanapalli.