WORKING CAPITAL MANAGEMENT

Working Capital is the amount of capital that a business has available to meet the day to day cash requirements of its operations.

It is concerned with the problem arise in attempting to manage the current assets, the current liabilities and the inter relationship that exist between them.

Working Capital refers to that part of the firm capital, which is

required for financing Short-Term or Current Assets such as Cash,

Marketable Securities, Debtors and Inventories. Working

Capital is also known as Revolving or Circulating Capital or Short Term Capital.

GOAL OF WORKING CAPITAL MANAGEMENT

The goal of working capital management is to manage the firms current assets and current liabilities in such way that the satisfactory level of working capital is mentioned.

The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety

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 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

CONCEPTS OF WORKING CAPITAL

Two concepts of working capital:

Balance Sheet concepts Operating Cycle or circular flow concept

BALANCE SHEET CONCEPT

Two interpretation of working capital under the balance sheet concept:

Gross Working Capital

Net Working Capital

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

The term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities or say:

Net Working Capital = Current Assets - Current Liabilities.

NET WORKING CAPITAL MAY BE NEGATIVE OR POSITIVE: When the current assets exceed the current liabilities, the working capital is positive and the negative working capital results when the current liabilities are more than the current assets. Current liabilities are those liabilities which are intended to be paid in the ordinary course of business within a short

period of normally one accounting year of the current assets or the income of
the business.

OPERATING CYCLE OR CIRCULATING CASH FORMAT

Working Capital refers to that part of firms 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 being constantly converted into cash and these cash flows out again in exchange for other current assets. Hence it is also known as revolving or circulating capital.

The circular flow concept of working capital is based upon this operating or working capital cycle of a firm. The cycle starts with the purchase of raw material and other resources

BRITANNIA INDUSTRIES LTD.

About Company:In 1918 The Company was Incorporated on 21st March, as a public limited company under the Indian Companies Act, VII of 1913.

In 1979 With effect from 3rd October, the name of the Company was changed from the Britannia Biscuit Co., Ltd., to Britannia Industries Ltd.

Company has its offices at Bangalore Headquarters, Mumbai, Chennai,

Delhi, Calcutta, Hyderabad

The Company is divided into two divisions

Biscuit & Bakery

AWARDS OF BRITANNIA INDUSTRIES

Britannia received the Most Respected Company Award 2011 from Businessworld.

Bourbon received the Most Popular Confectionery Product Preferred By Youth (Biscuit) Award.

Britannia was awarded the Global Performance Excellence Award (GPEA) by Asia Pacific Quality Organization (APQO)

LIMITATIONS

Large number of executive staff & their assistants are appointed, at the same time they are highly paid which affects to the profitability of

company.

Dead Stock & Wastage of Material affects to the cost of material. Delivery of Material is not as per the schedule/time commitment, so it also affects to the sales of company.

RECOMMENDATION

Company should increase the inventory holding period. It is the major part of working capital of company.

Company has to take control on cash balance because cash is non earning assets and increase cost of funds.

Company should raise it fund through short term sources for short term requirement of funds.