Working Capital

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT
TABLE OF CONTENTS
S. NO.
PAGE NO.
1.
CONTENTS
Title of the Project
05
2.
Introduction to financial management
06-12
3.
Introduction to the topic
13-52
4.
Company
profile
53-86
5.
Review
of
Literature
87-89
6.
Research
Design
90-94
7.
Data Analysis and interpretation.
95-118
8.
Conclusion and Major Findings.
119-121
Page 1
9.
Bibliography
122
TITLE OF THE PROJECT
FACTORS INFLUENCING WORKING

CAPITAL MANAGEMENT OF THE
(LCA PG)HAL
Page 2
CHAPTER 1
INTRODUCTION TO FINANCIAL
MANAGEMENT
INTRODUCTION
Financial as become so much important for every business
undertaking that all managerial activity is concerned with it.
Financial viability of various propositions influences decisions
on them. Finance functions have become so important that it
has given birth to financial management as a separate subject.
Financial management which is recognized as the most
important branch of business administration one cannot think
of any business activity in isolation from its financial
implication.
Financial management is that part of management with is
concerned mainly with raising fund in the most economic and
suitable manner, using these funds as profitability (for a given
risk level) as possible and future operation and controlling
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current performance and future development through financial

accounting, budgeting, statistics and other means.
It provides a best guide for future resources allocation by a
firm. It provides relatively uniform yards stick for judging most
of the enterprises operation projects. It implies the designing
and implementation of certain plan. Here plans aim at an
effective utilization of funds.
Financial management is the dynamic evolving or making of
day today financial decision in a
business of any size. It is
important because it has an impact on all the activities of a
firm. Its primary responsibilities are to discharge the finance
function successfully. All business decisions have financial
implication and a single decision may financially affect different
departments of an organization.
Financial management however should not be taken to be a

profit extracting device. No doubt, finance has to be so planned
as to contribute to profit-making activity, finance cannot be
generated without profit, but this is not at all.
It implies more comprehensive concept then the simple
objective of profit making or efficiency. Its roader mission is to
maximize the value of the firm. So that the interests of different
section of the community remain undistributive and protected
Financial management applies to an organization, irrespective
of its size, nature of ownership and control. Whether it is
manufacturing or service organization, it applies to any
activities o an organization which ha financial implication.
DEFINITIONS OF FINANCIAL MANAGEMENT

Financial management is an area of financial decision
making, harmonizing individual motives and enterprise goals.
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Financial management is the application of the planning and

control function the finance function.
By Archer and
Ambrosia.
Financial management is the operational activity of a business
that is responsible for obtaining and effectively utilizing the
funds necessary for efficient operation .
By Joseph and
massie
Financial management involves the application of general
management principles to particular financial operation.
By Howard and
Upton
MEANING OF FINANCIAL MANAGEMENT

Financial management is a subject which deals with the tools
and techniques of through which a companys balance sheet is
constructed. It offers ideas to the executives in building items
in liabilities and asset side of a balance sheet . It clearly guides
the financial manager to select long term as well as short term
funds and its allocation to capital and revenue expenditure,
hence ultimately used as a communication tool to convince the
investors about the performance of a corporate entity.
FEATURES OF FINANCIAL MANAGEMENT

It is an essential part of general management.
It is not a profit-extracting device.
It is applicable to all organization.
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It is dynamic in nature and different form accounting.

It doesnt handle merely routine day-to-day matters.
In modern sense it has become less descriptive in
nature and more scientific and analytical.
It presents the base for planning and control.
It is highly centralized function in nature.
SCOPE OF FINANCIAL MANAGEMENT

1. DECIDING CAPITAL STRUCTURE:
The capital
structure refers to the kind and proportion of different
securities for raising funds. After deciding about the quantum
of funds. After deciding about the quantum of fund required,
it should be decided which type of securities should be used
is an important decision, which influences the short term and
long-term financial planning of an enterprise.
2. SELECTING A SOURCE OF FINANCE:
After
preparing a capital structure, various sources from which
finance may be raised, including share capital, debenture,
financial institution commercial bank, public deposits etc.,
should be selected.
3. SELECTING A PATTERN OF INVESTMENT:
when
funds have been procured then a decision about investment
pattern is to be taken. The selection of investment pattern is
related to the use of funds. The funds will have to be spent
first on fixed assets and then inappropriate portion will be
retained for working capital. The decision-making techniques
such as capital budgeting, opportunity cost analysis may be
applied in making decisions about capital expenditures.
4. PROPRE CASH MANAGEMENT:
Cash management
is also an important task of finance managers. Cash may be
required to purchase raw material, make payment to
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creditors, meet wage bills, and meet day-to-day expenses. A

proper idea on sources of cash inflow enables to assess the
utility of various sources.
5. IMPLEMENTING
FINANCIAL
CONTROLS:
An
efficient system of financial management necessitates the
use of various control devices. Financial control devices
generally used are return on investment; break even
analysis; cost control; ratios analysis; cost and internal audit.
The use of various control techniques by the finance
manager will help in evaluating the performance in various
areas and take corrective measures whenever needed.
6. PROPER USE OF SURPLUSES:
The utilization of
profits or surpluses is also an important factor in financial
management. A judicious use of surpluses is essential for
expansion and diversification plans and also in protecting the
interest of share holders. A finance manager should consider
the influence of various factors, such as :
Expected earning in future.
Market value of shares.
Need for fund for financing, expansion etc.
A judicious policy for distributing surpluses will be essential for

maintaining proper growth of unit.
FINANCE MANAGER
Finance manager are a person who leads the department of
finance. He forms important activities in connection with each
of the general functions of management. He groups activities in
such a way that areas of responsibility and accountability are
clearly defined.
FUNCTIONS OF THE FINANCE MANAGER

He should anticipate the finance requirement.
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Selection of right source, at right time and at right cost.

Allocation of funds.
Analysis of the financial performance.
Administrates the financial activities.
Protection of interest of investors and creditors.
FUNCTIONAL AREAS OF FINANCIAL

MANAGEMENT
1.Estimation of the financial requirements:
The requirement of finance to a business concern is
continuous. it is needed in all the stage of business cycle
namely; initial growth, saturation and declining stages.
Funds are needed to establish the industry both for
meeting capital expenditure and revenue expenditure. If
the firms become sick, to rejuvenate the activities of such
business concern rescheduling, repackage of financial
services are needed. Hence, it is the first task of finance
manager.
2.SELECTION OF THE RIGHT SOURCES OF

FUNDS:
After estimating the second important step of the concern, it is
the second important step of the finance manager to select the
right type of sources of funds at the right time at right cost.
Equity has the cost of dividend or expectation of the share
holders, debenture or borrowings has the cost of interest,
preference share has the cost of dividend careful selection
has to be made out of the available alternative sources of
funds.
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3.ALLOCATION OF FUNDS:
After mobilizing the total funds of a firm, it is the
responsibility of finance manager to distribute the funds to
capital expenditure and revenue expenditure. The
evaluation of different proposal of project must be made
before making a final decision on investment.
4.ANALYSIS AND INTERPRETATION OF

FINANCIAL PERFORMANCE:
It is another important task of finance manager. He is
expected to watch the performance of each portfolio, than
can be measured in terms of profitability and returns on
the investments. Ratio analysis and comparison of actual
with standard helps the finance manager to have
maximum control over the entire operations of the
business unit.
5.ANALYSIS OF COST-VOLUME-PROFIT:
Make or buy decision. Deletion and continuation of a
product line decision can be made by adopting CVP/BEP
analysis.
6.CAPITAL BUDGETING:
It is a technique through which a finance manager
evaluates the investment proposal. In how many years the
original investment can be recovered? At what percentage
of returns a business should run? Payback period, AAR,
IRR, NPV are some of the modern techniques, very popular
in capital budgeting.
7.WORKING CAPITAL MANAGEMENT:

Working capital is rightly an adjunct of fixed capital
investment. It is a financial lubricant which keeps business
operations going. Cash account receivables (Drs) and
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investors are the components of working capital. They

rotate is in a sequence. The finance manager should weigh
the advantage of customer trade credit such as increase in
volume of sales, against limitation of costs and risks
involved there in.
8.PROFIT PLANNING AND CONTROL:

Profit planning guides the management in attaining the
corporate goals. Profit is the surplus of income over the
expenditure. It may be earned through sales, or through
operating revenue or by reducing the cost of operations
9.FAIR RETURNS TO THE INVESTORS:

Returns are the divisible profits available to the investors.
Equity holders normally expect fair amount of profits and
capital appreciation for their investment. Unless and until
this fulfilled by a company, the confidence of the investors
will be at stake. It also a social and economic obligation on
the part of the company protect the interest of the
investors.
10. MAINTAINING LIQUIDITY AND WEALTH

MAXIMIZATION:
Liquidity of a firm increases the borrowing capacity.
Expansion
and
diversification
activities
can
the
comfortably executed. Increased liquidity builds the firms
ability to meet short-term obligation, towards creditors or
bankers.
Flexibility in the planning for investment can be
introduced; in turn the overall profitability of the firm can
be maximized. This helps the firm to meet all types of
obligation to the target group like investors, creditors,
employees, management, government and society thus
wealth maximization takes place in the form of growth of
capital over the year.
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DECISIONS IN FINANCIAL MANAGEMENT
INVESTMENT DECISIONS: capital expenditure

and revenue expenditure.
FINANCING DECISIONS: Long-term and shortterm (D:E mix).

DIVIDEND DECISION: increased dividend and
increased capital gain.
CURRENT ASSET MANAGEMENT: Continuous

flow of materials and money, and maintaining
liquidates.
INTRODUCTION
TO THE TOPIC
WORKING CAPITAL MANAGEMENT
Working capital of regarded as lifeblood of a business. Its

effective provision can do match to ensure the success of a
business, while its efficient management can lead not only to
loss of profits but also the ultimate downfall of an promising
concern. The cost increase by organization due to wrong
planning of working capital is immeasurable. A study of working
capital is of major importance to internal and external analysis
because of its close relationship with the current day-to-day
operations of business.
Working capital is rightly an adjunct of fixed capital
investment. It is a financial lubricant which keeps business
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operations going. Cash accounts receivables (Drs) and

inventories are the components of working capital. The rotate
in sequence (cash to stock to sale to cash or account
receivables).
MEANING
Capital means the money or other assets with which a
company starts in business.
Capital required for a business can be classified
under two main categories viz.
(i)
Fixed capital
(ii)
Working capital
EVERY BUSINESS NEEDS FUNDS FOR TWO PURPOSES:

For its establishment and
To carry out its day-to-day operations.
Long term funds are required to create production facilities
through purchase of fixed assets such as plant and machinery,
land, buildings, furniture, etc. Investment in these assets
represents that part of firms capital which is blocked on a
permanents or fixed basis and is called fixed capital. Funds are
also needed of wages and other day-to-day expenses, etc.
These funds are known as working capitals.
In simple words, working capital refers o that part of the
working capital which is required for financing short-term or
current assets such as cash, marketable securities, debtors and
inventories.
DEFINITION OF WORKING CAPITAL
Page 12
The sum of the current assets is the working capital of

business.
J.S.MILL.
Any acquisition of funds which increases the current assets
increases working capital, for they are one and the same.
BONNERILLE.
Working capital is the excess of current assets over current

liabilities.
SHUBIN.
Working capital is the excess of current assets over current

liabilities.
HUSBAND AND DOCKERY
In accounting, working capital is the difference between the

inflow and outflow of funds. In other words, it is the net cash
inflow. It is defined as the excess of current assets over current
liabilities and provision.
Working capital, as an accountant defines; it is the difference
between current asset and current liabilities. This oversimplified definition simply tells us how working capital is
calculated.
NEED FOR WORKING CAPITAL
The needs for working capital (gross) or current assets cannot
be overemphasized. Given the objective of financial decision
making to maximize the shareholders wealth, it is necessary to
generate sufficient profits. A successful sales programmed is in
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other words, necessary for earning profits by business

enterprise. However, sales do not convert into cash instantly:
these are invariably a time-lag between the sale of good and
the receipt of cash. There is therefore a need for working
capital in form of current assets to deal with the problem
arising out of lack of immediate realization of cash against good
sold. Therefore, sufficient working capital is necessary to
sustain sales activity. Technically, this is referred to as the
operating or cash cycle. The operating cycle can be said to be
at the heart of need for working capital. The continuing flow
from cash to suppliers, to inventory, to accounts receivable and
back into cash is what is called the operating cycle. In other
words, the term cash cycle refers to the length of time
necessary to complete the following cycle of events:
1. Conversion of cash into inventory.

2. Conversion of cash into receivable.
3. Conversion of receivable into cash
The operating cycle consists of three phases. In phrasal, cash

gets converted into inventory.
This includes purchase of raw materials, conversion of raw
material into work-in-progress, finished goods and finally the
transfer of goods to stock at the end of the manufacturing
process. In the case of trading organization, this phase is
shorter as there would be no manufacturing activity and cash is
directly converted into inventory. The phase is, of course,
totally absent in the case of service organization.
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Credit sales are made to customers. Firms which do not sell on

credit obviously not have phase 2 of the operating cycle. The
last phase, phase 3 , represents the stage when receivables are
collected. This phase completes the operating cycles. Thus the
firm has moved from cash to inventory, to receivables and to
cash again.
CLASSIFICATION OR KINDS OF WORKING CAPITAL

Working capital may be classified in two ways:
(a)
On the basis of concept.
(b) On the basis of time.

On the basis of concept, working capital is classified as:
1. Gross working capital
2. Net working capital.
This classification is important from the point of view financial
manager
On the basis of time, working capital may be classified as:
1. Permanent or fixed working capital.
2. Temporary or variable working capital.
KINDS OF WORKING
CAPITAL
ON THE
BASIS OF
TIME
ON THE
BASIS OF
CONCEPT
GROSS
WORKIN
G
NET
WORKIN
G
PERMANE
REGULAR
NT
WORKING
WORKING
CAPITAL
CAPITAL
TEMPORA
SEASONA
L RY Page 15
WORKING
WORKING
CAPITAL
CAPITAL
RESERVE
WORKING
CAPITAL
SPECIAL
WORKIN
G
CAPITAL
Permanent or fixed working capital:

Permanent or fixed working capital is the minimum
amount which is requires ensuring effective utilization of
fixed facilities and for maintaining the circulation at
current assets. These are always a minimum level of
current assets which is continuously required by the
enterprises to carry out its normal business operations. For
example, every firm has to maintain a minimum level of
raw materials, work-in-progress, finished goods and cash
balance. This minimum level of current assets is called
permanent fixed working capital as this part of capital is
permanently blocked in current assets. The permanent
working capital can further be classified as regular
working capital and reserve working capital required
ensuring circulation of current assets from cash to
inventories to receivable and from receivables to cash and
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so on .Reserve working capital is the excess amount over

the requirement for regular working capital which may be
provided for contingencies that may arise at unstated
periods such as strikes, rise in prices, depression etc.
Temporary 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 variable working
capital can be further classified as seasonal working
capital and special working capital. Most of the enterprises
have to provide additional working capital to meet the
seasonal and special needs of the enterprises is called
seasonal working capital. Special working capital is that
part of working capital which is required to meet special
exigencies such as launching of extensive marketing
campaigns for conducting research etc.
Temporary working capital differs from permanent working
capital in the sense that is required for short period and
cannot be permanently employed gainfully in the
business. Figure given below illustrate the difference
between permanent and temporary working capital.
IMPORTANCE OR ADVANTAGES OF ADEQUATE

WORKING CAPITAL.
Working capital is the life blood and nerve centre
of a business. Just as circulation of blood is essential in the
human body for maintaining life, working capital is very
essential to maintain the smooth running of a business. No
business can run successfully without an adequate amount of
working capital. The main advantages of maintaining adequate
amount of working capital are as follows:
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1. Solvency of the business: Adequate working capital

helps in maintaining solvency of the business be providing
uninterrupted flow of production.
2. Good will: Sufficient working capital enables a
business concern to make prompt payments and helps in
the creating and maintaining good will.
3. Easy loans: A concern having adequate working
capital high solvency and good credit standing can
arrange loans from banks and others on easy and
favourable terms.
4. Cash discounts: Adequate working capital also
enables a concern to avail cash discounts on the
purchases and hence it is reduces costs.
5.
Regular supply of raw materials: sufficient
working capital ensures regular supply of raw material and
continuous production.
6. Regular payment of salaries, wages and other
day-to-day commitments: A company which has
sample working capital can make regular payment or
salaries, wages and other day-to-day commitments which
raise the morale of its environment of costs and enhance
production and profits.
7. Exploitation of favourable market conditions: only

concern with adequate working capital can exploit
favourable market conditions such as purchasing its
requirements in bulk when the prices are lower and by
holding its inventories for higher price.
8.
Ability to face crisis: Adequate working capital
enables a concern to face business crisis in emergencies
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such as depression because during such period, generally,

there is much pressure on working capital.
9. Quick and regular return on investment: every
investor wants a quick and return on his investments.
Sufficiency of working capital enables a concern to pay
quick and regular dividends to its investors as there may
not be much pressure to plough back profits. This gains
the confidence of its inventors and creates a favourable
market to raise additional funds in the future.
10. High morale: Adequate of working capital creates
an
environment of security, confidence, high morale
and creates overall efficiency in a business.
ADEQUACY OF WORKING CAPITAL
Working capital should be adequate for the following reasons;
It protects a business from the adverse effects of
shrinkage in the values of current assets.
It is possible to pay all the current obligation promptly and
to take advantage of cash discounts.
It enables a company to extend favourable credit terms to
customers.
They may be an unwise dividend policy.
INADEQUACY OF WORKING CAPITAL

It is not possible for it to utilize production facilities fully
for the want of working capital.
A company may not be able to take advantage of cash
discount facilities.
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The modernization of equipment and even routine repairs

and maintains facilities may be different to administer.
A company may have to borrow funds at exorbitant rates
of interest.
Its low liquidity may lead to low profitability in the same
ways as low profitability result in low liquidity.
DANGER IN EXCESSIVE WORKING CAPITAL
To much working capital is a dangerous as too little of it.
Excessive working capital raises the following problems:Company may be tempted to over trade and lose heavily.
A company may keep big inventories and tie up its
funds unnecessarily.
There may be an imbalance between liquidity and
profitability.
A firm cannot pay day to day expenses costs and
reduces the profits of the business.
The rate of return on investment also falls with the
shortage of working capital.
CONCEPTS OF WORKING CAPITAL.
There are two concepts of working capital:
A. Balance sheet concept
B. Operating cycle or circular flow concept.
Balance sheet concept:

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There are two interpretations of working capital

under the balance sheet concept:
l. Gross working capital
ll. Net working capital
In the broad sense the term working capital refers to the gross
working capital and represents the amount of funds invested in
current assets.
Thus, the gross working capital invested in total current asset
of the enterprise. Current assets are those assets which in the
ordinary course of business can be converted into cash within a
short period of normally one accounting year.
CONSTITUENTS OF CURRENT ASSETS
Cash in hand and balances
Bills receivables.
Sundry debtor (less provision for bad debts)
Short-term loans and advances.
Inventories of stock as:
(a) Raw materials.
(b) working-in-process.
(c) Stores and spares.
(d) Finished goods.
Temporary investments of surplus fund.
Prepaid expenses.
Accrued incomes.
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In a narrow sense, 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 positive or negative. When the
current assets exceed the current liabilities the working capital
is positive and the negative working capital results when the
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 out of the current assets or the
income of the business.
CONSTITUENT OF CURRENT LIABILITIES

Bills payable.
Sundry creditors and accounts payable.
Accrued or outstanding expenses.
Short-term loans, advances and deposits.
Dividend payable.
Bank overdraft.
Provision for taxation,
if it does not amount to appropriation of profits.
(b)Operating cycle or circular flow concept
Funds invested in current assets keep revolving
fast and are 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
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Capital cycle of a firm. The cycle starts with the purchase of

raw material and other resources and ends with the realization
of cash from the sale of finished
Goods. It involves purchase of raw material and stores, its

conversion into stock of finished goods through work-inprogress with progressive incensement of lab our and service
costs, conversion of and ultimately realization of cash and this
cycle continues again from cash to purchase raw material and
so on..
CASH
RAW
MATERIALS
DEBTORS
WORK
IN
PROCESS
Page 23
SALES
FINISHED
GOODS
FACTORS DETERMINING
CAPITAL REQUIREMENTS
THE
WORKING
The working capital requirement of a concern

depend upon a large number of factors such as nature and
size of business, the character of their operations, the
length of production cycles, the rate of stock turn over and
the state of economic situation. It is not possible to rank
them because all such factors are of different importance
and the influence of individual factors changes for a firm
over time. However, the following are the important factors
changes for a firm over time. However, the following are the
important factors generally influencing the working capital
requirements.
NATURE OF INDUSTRY: The composition of assets is
function of the size of a business and the industry to which
it belongs. Small companies have smaller propositions of
case, receivables and inventory than large corporation.
DEMAND OF INDUSTRY: Creditors are interested in the
security of loans. They want their obligation o be
sufficiently covered. They want the amount as security in
assets which are greater than liability.
CASH REQUIREMENTS: Cash is the one of the current
assets which is essential for successful operation of the
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production cycle. Cash should be adequate and properly

utilized. It would be very expensive to hold excessive
cash.
NATURE OF BUSINESS: The nature of a business is an
important determinant of the level of the working capital
requirement depends upon the general nature or type of
business.
MANUFACTURING TIME: If the time is longer, the size of
working capital is great. Moreover, the amount of working
capital depends upon inventory turnover and the unit cost
the goods that are sold.
VOLUME OF SALES: A firm maintains current assets

because they are needed to support the operational
activities which result in sales. As the volume of sales
increases, there is an increase in the investment of
working capital in the cost of operations, in inventories
and in receivables.
TERMS PURCHASES AND SALES: If the credit terms
with respect to purchases are more favourable and those
sales less liberal, less case will be invested in inventory.
INVENTORY TURN-OVER: If the inventory turn-over is

the high, the working capital requirements will be low.
With a better inventory control, a firm is able to reduce its
working capital requirements.
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RECEIVABLE TURN-OVER: A prompt collection of

receivable and good facilities for setting payable result
into low working capital.
PRODUCTION SCHEDULE: The production schedule of

an organization requires systematic planning and
organization of material for continuous production.
BUSINESS CYCLE: Business expands during the periods

of
prosperity and declines during the period of
depression. Consequently: more working capital is
required during period of prosperity and less during the
periods of depression.
VARIATION IN SALES: A seasonal business requires the
maximum amount of working capital for a relatively short
period of time.
VALUE OF CURRENT ASSETS: A decrease in the real

value as current assets as compare to their book value
reduces the size of the working capital. if the real value of
current assets increases, there is an increase in working
capital.
PRODUCTION CYCLE: The time taken to convert raw

materials into finished products is referred to as the
production cycle or operating cycle. The longer the
production cycle, the greater is the requirement of
working capital.
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CREDIT CONTROL: credit control includes such factors as

the volume of cash sales, the terms of credit sales, the
collection credit policy etc. with a sound credit policy; it is
possible for a firm to improve its cash inflow.
LIQUIDITY AND PROFITABILITY: If a firm desires to take

a greater risk for bigger gains or 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.
INFLATION: as a result of inflation, size of the working

capital is increased in order to make it easier for a firm to
achieve a better cash inflow.
SEASONAL FLUCTUATIONS: Seasonal fluctuation in

sales affects the level of variable working capital often;
the demand for products may be of a seasonal nature. Yet
inventories have got to be purchased during certain
seasons only.
PROFIT PLANNING AND CONTROL: Adequate profit

assists in substantial generation of cash. It makes it
possible for the management of plough backs a part of its
earning in the business and substantially builds up internal
financial resources.
REPAYMENT ABILITY: A firms repayment ability

determines the level of its working capital. The usual
practice of a firm is to prepare cash flow projection
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according to its plans of repayment and to fix working

capital levels accordingly.
CASH RESERVES: it would be necessary for a firm to

maintain some cash reserves to enables it to meet
contingent disbursement.
OPERATIONAL AND FINANCIAL EFFICIENCY: With a

greater working capital turn-over. It may be able to reduce
its working capital requirements.
CHANGES
IN
TECHNOLOGY:
Technological
developments related to the production process have a
sharp impact on the need for working capital.
FIRMS POLICIES: These affect the levels permanent and

variable working capital. Changes in credit policy,
production policy etc, are bound.
ACTIVITIES OF THE FIRM: A firms stocking on heavy

inventory or selling on easy credit terms calls for a higher
level of working capital than for selling services or making
cash sales.
ATTITUDE OF RISK: The greater the amount of working

capital, the lower is the risk of liquidity.
SOURCES OF WORKING CAPITAL

Page 28
The various sources for the financing of working capital are

as follows:
SOURCE OF WORKING CAPITAL
PERMANENT
OR
TEMPORARY OR
FIXED
VARIABLE
1. Shares
Commercial banks
1.
2. Debentures
Indigenous bankers
2.
3. Public deposits
creditors
3. Trade
4. ploughing back of profits

Installments credit
5. Loans and financial institution
4.
5. Advances
6. accounts
receivables
Credit/fact
oring
7.
Accrued expenses
8.
Commercial papers
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FINANCIAL OF PERMANENT/ FIXED LONG-TERM

OR
WORKING CAPITAL
Permanent working capital should be financed in such a
manner that the enterprise may have its interrupted use for a
sufficiently long period. These are five important sources of
permanent or long-term working capital.
SHARES: Issue of shares is the most important sources of

permanent or long term capital. A company can issue
various types of shares, preference shares and deferred
share.
DEBENTURES: a debenture is an instrument issued by

the company acknowledging its debt to its holder. Its also
an important method of raising long-term or permanent
working capital. The debenture may be of various kinds as
simple, naked or unsecured debenture, secured or
mortgaged
debenture,
redeemable
debenture,
irredeemable debenture, convertible debenture and nonconvertible debenture.
PUBLIC DEPOSITS: Public deposits are the fixed deposits

accepted by business enterprises directly from the public.
This source of raising short term and medium term finance
was very popular in the absence of banking facilities. The
reserve bank of India has also laid down certain limits on
public deposits. Non-banking concerns cannot borrow by
Page 30
way of public deposits more than 25% of its paid-up

capital and free reserves.
POLUGHING BACK OF PROFITS: Ploughing back of

profits means the reinvestments by concern of its surplus
earning in its business. It is an internal source of finance
and is most suitable for an establishment firm for its
expansion, modernization and replacement etc. this
method of finance has a number of advantages as it is the
cheapest rather cost-free sources of finance.
LOANS FROM FINANCIAL INSTITUTION: Financial
institution such as commercial banks, Life Insurance
Corporation, industrial finance corporation of India, state
financial corporation, state industrial development
corporations, industrial development bank of India, etc.
FINANCING OF TEMPORARAY, VARIABLE OR SHORT-TERM
WORKING CAPITAL:
The main sources of short-term working capital are as
follows:
INDIGENOUS BANKERS: private money-lender and other
country bankers used to be the only source of finance
prior to the establishment of commercial banks. They used
to change very high rates of interest and customers to the
largest extent possible.
TRADE CREDIT: Trade credit refers to the credit extended
by the suppliers of goods in the normal course of business.
As present day commerce is built upon credit, the trade
credit arrangement of a firm with its suppliers is an
important source short-term finance.
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INSTALLMENT CREDIT: This is another method by which

the assets are purchased and the possession of goods is
taken immediately but the payment is made in installment
over a pre-determined period of time.
FACTORING OR ACCOUNTS RECEIVABLE CREDIT:
Another method of raising short-term finance is through
accounts receivable credit offered by commercial banks
and factors. A commercial bank may provide finance by
discounting the bills or invoices of its customers.
ACCRUED EXPENSES: Accrued expenses are the

expenses which have been incurred but not yet due and
hence not yet paid also. These simply represent a liability
that firm has to pay for the services already received by it.
The most important items of accruals are wages and
salaries, interest, and taxes.
DEFERRED INCOMES: Deferred incomes are incomes
received in advance before supplying goods or services in
future. These funds increase the liquidity of a firm and
constitute an important source of short-term finance.
COMMERCIAL PAPERS: commercial papers represent
unsecured promissory notes issued by firm to raise shortterm funds. It is an important money market instruments
in the recommendation of the working group on money
market. But only large companies enjoying high credit
rating and sound financial health can issue commercial
paper to raise short-term funds.
WORKING CAPITAL FINANCE BY COMMERCIAL
BANKS: Commercial banks are the most important source
of short-term capital. The major portion of working capital
loans are provided by commercial banks. They provide a
Page 32
wide variety of loans tailored to meet the specific

requirement of a concern. The different forms in which the
banks normally provide loans and advances are as follows:
LOANS: When a bank makes an advance in lump-sum
against some security is it called a loan. In case of a
loan, a specified amount is sanctioned by the bank to
the customer. The entire loan amount is paid to the
borrower either in cash or by credit to his account.
CASH CREDIT: A cash credit is an arrangement by
which a bank allows his customer to borrow money up
to a certain limit against some tangible securities or
guarantees. The customer can withdraw from his cash
credit limit according to his needs and he can also
deposit any surplus amount with him.
OVERDRAFT: overdrafts means an agreement with a
bank by which a current account- holder is allowed to
withdraw more than the balance to his credit up to a
certain up to a certain limit.
PURCHASING AND DISCOUNTING OF BILLS:
purchasing and discounting of bills is the most
important from in which a bank lands without any
collateral security. Present day commerce is built upon
credit. The seller draws a bill of exchange on the
buyer of goods on credit. Such a bill may be either a
clean or a documentary bill which is accompanied by
documents of title to goods such as a railway receipt.
CASH MANAGEMENT
MEANING
Cash is one of the current assets of a business. It is
needed at all time to keep the business going. It includes
money and such instruments as cheques, money orders and
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bank drafts. A business concern should always keep sufficient

cash for meeting its obligations.
Cash is required to meet a firms transactions and
precautionary needs. A firm needs cash to make payments for
acquisition of resources and services for the normal conduct of
business. It keeps additional funds to meet any emergency
situations. Some firms may also maintain cash for taking
advantages of speculative changes in prices of input and
output.
Management of cash involves three things:
Managing cash flow into and out of the firm.
Managing cash flows within the firm.
Financing deficit or investing surplus cash and thus,
controlling cash balance at a point of time. It is an
important function in practice because it is difficult to
predict cash flows and there is hardly any synchronization
between inflow and outflows.
MOTIVES FOR HOLDING CASH

Cash is held by the firm with the following motives:
Transaction
Precautionary
Motives of holding cash
Speculative
Compensatory
Transaction motive: transaction motive requires a firm

to held cash to conduct its business in the ordinary course.
The firm needs cash to make payments for purchases,
wages, operating expenses, and other inevitable
Page 34
payments. For transaction purposes, a firm must invest its

cash in marketable securities. The cash needs arise due to
the fact that there is no complete synchronization
between cash receipts and payments.
Precautionary motive: cash is also maintained by the
firms and even by individuals to meet unforeseen
expenses a future date. There are incontrollable factors
like governments policies competition, natural calamities,
labor unrest, customer behavior which will have heavy
impact on business operations. Hence, the firm should
hold cash reserve to meet such contingencies.
Speculative motive : To advantages of unexpected
opportunities, a firm holds cash for investing in profitmaking opportunities. Such a motive is purely speculative
in nature.
The speculative motive relates to holding of cash
for investing in profitable opportunities as and when they
arise. Such opportunities cannot be scientifically
predicated but only conjectures can be made about their
occurrence.
Compensatory motive: A business form has to maintain

minimum amount of cash balance in saving bank account
and current account. The minimum balance of these
account will be insisted by the banks independently to
provide several facilities to the customers viz.., cheque
book, pass book, statement of transaction etc..
Cash management needs strategies to deal with
various facets of cash. Following are the some of the facts.
Cash planning
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Cash planning is a technique is a technique to

plan and control the use of cash. A projected cash flow
statement may be anticipated future activities. The cash
inflows from various sources may be anticipated future
activities. The cash inflows from various sources may be
anticipated and cash outflows will determine the possible
uses of cash.
Cash forecasts and budgeting:
A cash budget is the most important device
for the control of receipts and payments of cash. A cash
budget is an estimate of cash receipts and
disbursements during a future, short or long period of
time. It is a forecast of expected cash intake and outlay.
The short-term forecasts can be made with the
help of cash flow projections. The finance manager will
make estimates of likely receipts in the near future and
the expected disbursements in that period. Through it is
not possible to make exact forecasts even then
estimates of cash flows will noble the planners to make
arrangement for cash needs. It may so happen that
expected cash receipts may fall short or payments may
exceed estimates. A financial manager should keep in
mind the sources from where he will meet short-term
needs. He should also plan for productive use of surplus
cash for short periods.
The long-term cash forecasts are also essential for
proper Cass planning. These estimates may be for
three, four, five or more years.
Long-term forecasts indicate companys future financial
needs for working capital, capital projects etc..
Both short-term and long term cash
forecast may be made with the help of following
methods:
Receipts and disbursements method.
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Adjusted net income method.

Receipts and disbursements method
In this method the receipts and payments of cash
are estimated. The cash receipts may be from cash sales,
collection from debtors, sale of fixed assets, receipts of
dividend or other incomes of all the items; it is difficult to
forecast sales. The sales may be on cash as well as credit
basis. Cash sales will bring receipts at the time of sale while
credit sales will bring cash later on. The collections from
debtors (credit sales) will depend upon the credit policy of
the firm. Any fluctuations in sales will disturb the receipts of
cash. Payments may be made for cash purchases, to
creditors for goods, purchases such as wage bill, rent, rates,
taxes or other usual expenses, dividend to share holders
etc..
Adjusted net income method:
This method may also be known as sources and
uses approach. It generally has three sections; sources of
cash, uses of cash and adjusted cash balance.
The adjusted net income method helps in projecting
the companys need for cash at some future date and to
see whether the company will be able to generate
sufficient cash. It not, then it well have to decide about
borrowing or issuing shares etc. in preparing its statement
the items like net income, depreciation, dividend, taxes
etc. can easily be determined from companys annual
operating budget. The estimation of working capital
movement becomes difficult because items like receivable
and inventories are influenced by factors such as
fluctuation in raw material costs, changing demand for
companys products and likely delays in collections. This
method helps in keeping a control on working capital and
anticipating financial requirements.
Page 37
IMPORTANCE OF CASH MANAGEMENT

Cash management assume more importance than other
current assets because cash is the most significant and the
least productive assets that the firm holds cash is
unproductive and such, the aim of cash management is to
maintain adequate cash position to keep the firm sufficiently
liquid to use excess cash position to keep the firm sufficiently
liquid to use excess cash in some profitable way.
MANAGING CASH FLOWS
Cash management will be successfully only if cash collection
are accelerated and cash disbursement, as far as possible,
are delayed. The following methods of cash management will
help:
Methods of accelerating cash inflows
Prompt payment by customers:
In order to accelerate cash flows, the collections from
customers should be prompt. This will be possible by
prompt billing. The customers should be promptly
informed about the amount payable and the time by
which it should be paid.
QUICK CONVERSION OF PAYMENT INTO CASH:
Cash inflows can be accelerated by improving the cash
collecting process. Once the customer writes a cheque
in favor of the concern the collected can be quickened
by its early collection. There is a time gap between the
cheque sent by the customer and the amount collected
against it. This is due to many factors.
Postal float.
Lethargy
Bank float
Page 38
Deposit float
Decentralized collection:
A big firm operation over wide geographical area can
accelerate collections b using the system of
decentralized collections. A number of collecting centre
are opened in different areas instead of collecting
receipts at one place.
Lock box system:
Lock box system is another technique of reducing
mailing, processing and collecting time. Under this
system the firm selects some collecting centre at
different places. The places are selected on the basis of
number of customers and the remittances to be
received from a particular place.
Goal of cash management:

The basic aim of cash management is to trade-off between
liquidity and profitability in order to maximize long-term profit.
This is possible only if the firm is able to optimize the utilization
of working capital funds. The following are the important goals
of cash management:
To met the day-to-day requirements.
To provide for scheduled major payments.
To meet unexpected cash adversities.
To meet the credit-requirements of banks.
To built an image of storing credit-standing.
To maximize the operating cost of cash management.
Page 39
Following methods can be used to delay disbursement:

Paying on last date:
The disbursements can delayed on making payments on
the last due date only. If the credit is for 10 days then
payments should be made on 10th day only.
Payments through drafts:

A company can delay payments by issuing drafts to the
suppliers instead of giving cheques. When a cheque is
issued then the cheque is paid whenever it comes. On the
other hand a draft is payable only on presentation to the
issuer.
Adjusting payroll funds:

Some economy can be exercised a payroll funds also .
If the payments are made weekly then this period can be
extended to a month.
Centralization of payments:
The payment should be centralized and payment should
be made
through drafts or cheques when cheques
are issued from the main office then it will take time for
cheques to be cleared through post.
Interbank transfer:
Page 40
An efficient use of cash is also possible by inter-bank

transfers. If the company has accounts with more than
one bank then amounts can be transferred to the bank
where disbursements are to be made.
RECEIVBLE MANAGEMENT
Receivable constitute a significant portion of a current
assets of a firm. For investment in receivables, a firm has to
incur certain costs. Further, there is a list of bad debts also. It
is, therefore, very necessary to have a proper control and
management of receivables.
MEANING OF RECEIVABLE:
Receivable represent amounts owned to the firm as a result
of sales of goods or services in the ordinary course of business.
These are claims of firm against its customers and form part of
its current assets. Receivable are also known as accounts
receivables, trade receivables, customer receivable or book
debts.
Factors influencing the size of receivables

Size of credit sales.
Credit policies
Terms of trade
Page 41
Expansion plans
Relation with profits
Credit collection efforts
Habits of customers
Meaning and objective of receivable management

Receivable management is the process of making decision
relating to investment in receivable is necessary to increase
than sales and the profits of a firm.
The objective of receivable management is to take a sound
decision as regard investment in debtor. In the words of Bolton,
S.E. the objective of receivable management is to promoter
sales and profits until that point is reached where the return on
investment in further of receivables is less than cost of funds
raised to finance that additional credit.
Issue governing the accounts receivables or credit sales:
Credit sales volumes
Credit policies
Business terms
Competition
Location
New products
Page 42
Credit sales volume:

In order to increase the profit and push sales, many firms
will have credit sales. Higher the volume of credit sales,
higher will be accounts receivable.
The level of credit sales in that business determined by
the custom that exists in that business.
Credit police Another important factor which determines the

volume of accounts receivable is credit policy of the eorm . by
credit policy we mean the policy adopted to extend credit
sales which include
The time period allowed collecting the debts.
The types of discounts allowed.
The assessment of customers creditworthiness.
Collection policy etc.
Business terms:
The volume of accounts receivable also depends
on the terms and conditions relating to credit sales.
These conditions includes
The time period allowed paying back the
purchase price.
The types of discounts allowed.
Completion:
If a firm is having a competitive environment. It
will have liberal credit policy arid this increases the
size to the accounts receivable. They complete with
Page 43
the object of pushing sale and easy credit terms

become inevitable.
Location:
Location of business unit also contributes for the
size of accounts receivable. If the business firms are
located in far off places, they are forced to adopt a
credit policy which attracts the customer. If the
product is exclusive, location will not be problem and
customer development will be good.
New products:
When the new products are introduced the firm has
to extend the liberal credit policy till such time the
product catches the market and even influence the
policy has to continue to maintain customers. These
naturally increase the size of accounts receivables.
DIMENSIONS OF RECEIVABLES MANAGEMENT
Receivables management involves the careful
consideration of th following aspects:
Forming of cash policy.
Executing the credit policy.
Formulating and executing collection policy.
FACTORING
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Receivables constitute a significant portion of current

assets of a firm. But, for investment in receivables, a firm has
to incur certain costs such as costs of financing receivables
and costs of collection from receivables.
A factor is a financial institution which offers services
relating to management and financing of debts arising out of
credit sales.
Factoring may be broadly be defined as the relationship,
created by an agreement, between the seller of
goods/services amd a financial institutions called the factor,
where by the latter purchases the receivable of the former
and also controls and administer the receivables of the
former.
The mechanism of factoring

An agreement is entered into between the selling
firm and the factor firm. The agreement provides the
basis and the scope of the understanding reached
between the two for rendering factor services.
The sales documents should contain the instruction
to make payments directly to the factor who is
assigned the job of collection of receivables.
Functions of a factor
Page 45
Factor renders a number of services to the selling firms.

Some of the important services rendered or functions
performed by a factor are as below:
Bill discounting facilities.
Administration of credit sales.
Maintenance of sales ledger.
Collection of accounts receivables.
Credit control.
Protection against bad debts.
Provision for finance.
Rendering advisory services.
Benefits of a factor
It ensures a definite pattern of cash inflows from the
credit sale.
It serves as a source of short term finance.
It ensures better management of receivable as
factor firm is a specialized agency for the same.
It saves in cost as well as space as it is a substitute
for in house collection department.
The selling firm is also benefited by advisory
services rendered by a factor.
Types of factoring
Following are some of the important types of factoring
arrangements.
Page 46
RECOURSE AND NON RECOURSE FACTORING:

In a recourse factoring arrangement, the factor that
has recourse to the client [selling firm] if the
receivable purchased term out to be bad, i.e. the risk
of bad debts is to be borne by the client and the factor
does not assume the risk of default associated with
receivables.
ADVANCE AND MATURITY FACTORING:

Under this, certain percentage receivable is paid in
advance to the client the balance being paid on the
guaranteed payment date.
CONVENTIONAL OR FULL FACTORING:
In conventional or full factoring the factor performs
almost all the services of factoring including non-resources
and advance factoring.
DOMESTIC AND EXPORT FACTORING:
The basic difference between domestic and export
factoring is on account of the number of parties involved.
In domestic factoring three parties are involved, namely,
the selling firms (client), the factor and the customer of
the client (buyer).
INVENTORY MANAGEMENT
MEANING
The dictionary meaning of inventory is stock of goods, or
a list of goods.
The word inventory is understood differently by various
authors. In accounting language it may mean stock of finished
goods only. In a manufacturing concern, it may include rawmaterial, work-in-progress and stores, etc.
Page 47
INVENTORY INCLUDES THE FOLLOWING THINGS:

Raw-material: Raw-material form a major input into the
organization.
Work-in-progress: The work-in-progress is that stage of
stocks which are in between rawmaterial and finished
goods.
Consumables: These are the goods which are ready for
the consumers. The stock of finished goods provides a
buffer between production and market.
Spares: Spares also form a part of inventory. The
consumption pattern of raw-material, consumables,
finished goods are different from that of spares.
Inventory management:
Inventory management is one of component of working capital
management. It involves the processes of providing continuous
flow of raw-materials to production department. It refers to
stocks, raw-materials, components, spares or working progress
maintained in an organization to have continuous production
and sales.
Importance of inventory control:
The importance of inventory control is well explained in
terms of the objectives of inventory control as explained above.
A proper inventory control aims at lowering the cost of
inventory and production and maximizing the profits of the
firm. The following are the advantages from the efficient
inventory management.
Reduction in investment in inventories.
Proper and efficient use of raw-materials.
Ensuring continuous production and maximum sales.
Page 48
Maintaining sufficient stock of finished goods for

smooth and timely supply of goods to customers and
maintain their patronage.
Minimizing inventory costs.
Efficient and optimum use of physical as well as
financial resources.
Objectives of inventory management:
To provide continuous supply of raw-materials to carry
out uninterrupted production.
To reduce the wastage and to avoid loss of pilferage ,
breakage and deterioration.
To exploit the opportunities available and to reduce
the cost of purchase.
To
introduce
techniques.
scientific
inventory
management
To meet the demand for goods of ultimate consumers

on time.
Tools and techniques of inventory management
The following are the import tools and techniques of
inventory management and control:
Determination of stock levels.
Determination of safety stock.
Selecting a proper system of ordering for inventory
Determination of economic order quantity
ABC analysis
VED analysis
Inventory turnover ratios
Page 49
Aging schedule of inventories

Classification of codification of inventories
Preparation of inventory reports
Lead time
Perpetual inventory system
JIT control systems
Determination of stock levels
An efficient inventory management required that
a firm should maintain an optimal level of inventory where
inventory costs are the minimum and at the same time no
stock-out which may result in loss of sales or stoppage of
production various stock levels are discussed as such.
(a) Minimum level: This represents the quality which

must be maintained in hand at all times.
Lead time: A purchasing firm requires some
time to process the order and time is also
required by the supplying firm to executive.
Rate of consumption: It is the average
consumption of materials in the factory. The rate
of consumption will be decided on the basis of
past expenditure and production plans.
Nature of material: The nature of material
also affects the minimum level.
Minimum stock level= recording

level (normal consumption X
normal recorder period).
Page 50
(a)
Re-ordering level: when the quantity of materials

reaches at a certain figure then fresh order is sent to get
material again.
Reordering level=( maximum

consumption X minimum
reorder period).
(b) Maximum
level: maximum stock level will depend

upon the following factors :
The availability of capital for the purchase of
materials.
The maximum requirements of materials at any
point of time.
The availability of space for storing the materials.
The cost of maintaining the stores.
The possibility of fluctuation in prices
(c)
Danger level: It is the beyond which materials

should not fall in any case.
Maximum stock level=
Page 51
quantity (minimum
consumption
X minimum
A STUDY
ON FACTORS INFLUENCING
WORKING CAPITAL MANAGEMENT
reordering period).
Danger level= Average
consumption X maximum reorder
period for emergency purchases
(d) Average stock level: The average stock level is
calculated as such:
Average stock level = minimum

stock level+ of reorder
quantity.
(e) Determination of safety stocks:
The basic
problem is to determine the level of quantity of safety
stocks . two costs are involved in the determination of
this stock i.e., opportunities cost of stock-outs and the
carrying costs.
(f)
Ordering system of inventory: The recorder point

is determined with the help of these things:
Average consumption rate.
Duration of lead time.
Economic order quantity.
(g) Economic order quantity (EOQ):
economic order
quantity is the point at which inventory carrying costs
are equal to order costs. In determining economic order
quantity it is assumed that cost of managing inventory
is made up solely of two parts i.e. ordering costs and
carrying costs.
Page 52
(h) A-B-C-Analysis:
The materials are dividend in to a

number of categories for adopting a selective approach
for material control. Under A-B-C Analysis , the
materials are divided into 3 categories viz., A,B &C.
(i)
VED Analysis: The VED analysis is used generally

for space parts. The requirements and urgency of spare
parts is different from that of materials. Spare parts are
classified as vital(V), essential(E) and desirable(D).
(j)
Inventory turnover ratios: inventory turnover

ratios are calculated to indicate whether inventories
have been used efficiency or not . The purpose is to
ensure the blocking of only required minimum funds in
inventory:
Symbolically:
Inventory turn over ratio= cost of goods sold
Average inventory at
cost
Inventory conversion period = days in a year
Inventory turnover
ratio
(k) Again scheduled of inventories: classification of

inventories according to the period (age) of their
holding also helps in identifying slow moving
inventories there by helping in effective control and
management of inventories.
(l)
Classification and codification of inventories:

the inventories of a manufacturing concern may consist
of raw materials, work-in-process, finished goods,
spares, consumable stocks, etc. all these categories
may have their sub-divisions. The raw materials used
Page 53
may be of 3-4 types, finished goods may also be of

more than one type, spares may be of a number of
types and so on . a proper classification of various
types of items is essential.
The classification and controlling of inventories
enables the introduction of mechanized accounting. It
also helps in maintaining secrecy of description. It also
helps the prompt issue of stores.
(m)
Inventory reports: From effective inventory

control, the management should be kept informed with
the latest stock position of different items. This is
usually done by preparing periodical inventory reports.
These reports should contain all information necessary
for managerial action. On the basis of these reports
management takes corrective action wherever
necessary.
(n) Lead time: lead time is the period that elapses

between the recognition of a need and its fulfillment.
these are a direct relationship between lead time and
inventories lead time has two components:
Administrative lead time
Producers lead time
(o) Perpetual inventory system: the institute or cost

and management accountants. London, defines
perpetual inventory system as a system of records
maintained by the controlling department. Which
reflects the physical movements of stocks and their
current balance.
This facilitates regular checking of stores without
closing down the plant.
(p)
Just in time (JIT) inventory control system:

according to the official terminology of C.L., MA, JIT is
Page 54
a technique for the organization of work flows, to

allow rapid, high quality, flexible production whilst
minimizing manufacture work and stock level.
JIT inventory control system involves of the purchase
of materials in such a way that delivery of purchased
material is assured just before their use or demand.
INTRODUCTION TO THE COMPANY(HAL)
Hindustan Aeronautics Limited (HAL) came into existence on 1st

October 1964. The Company was formed by the merger of Hindustan Aircraft
Limited with Aeronautics India Limited and Aircraft Manufacturing Depot,
Kanpur.
The Company traces its roots to the pioneering efforts of an industrialist with
extraordinary vision, the late Seth Walchand Hirachand, who set up Hindustan
Aircraft Limited at Bangalore in association with the erstwhile princely State of
Mysore in December 1940. The Government of India became a shareholder in
March 1941 and took over the Management in 1942.
Page 55
Today, HAL has 19 Production Units and 10 Research & Design Centres in 8
locations in India. The Company has an impressive product track record - 15
types of Aircraft/Helicopters manufactured with in-house R & D and 14 types
produced under license. HAL has manufactured over 3658 Aircraft/Helicopters,
4178 Engines, Upgraded 272 Aircraft and overhauled over 9643 Aircraft and
29775 Engines.
HAL has been successful in numerous R & D programs developed for

both Defence and Civil Aviation sectors. Several Co-production and Joint
Ventures with international participation are under consideration. HAL's
supplies / services are mainly to Indian Defence Services, Coast Guard and
Border Security Force. Transport Aircraft and Helicopters have also been
supplied to Airlines as well as State Governments of India. The Company has
also achieved a foothold in export in more than 30 countries, having
demonstrated its quality and price competitiveness.
HAL has made substantial progress in its current projects :
Advanced Light Helicopter Weapon System Integration (ALH-WSI) .

Tejas - Light Combat Aircraft (LCA)
Intermediate Jet Trainer (IJT)
Light Combat Helicopter (LCH)
Dhruv was delivered to the Indian Army, Navy, Air Force and the Coast Guard
in March 2002, in the very first year of its production, a unique achievement.
Page 56
HAL has played a significant role for India's space programs by participating in
the manufacture of structures for Satellite Launch Vehicles like
PSLV (Polar Satellite Launch Vehicle)

GSLV (Geo-synchronous Satellite Launch Vehicle)
IRS (Indian Remote Satellite)
INSAT (Indian National Satellite)
HAL has formed the following Joint Ventures (JVs):
BAeHAL Software Limited

Indo-Russian Aviation Limited (IRAL)
Snecma-HAL Aerospace Pvt Ltd
SAMTEL-HAL Display System Limited
HALBIT Avionics Pvt Ltd
HAL-Edgewood Technologies Pvt Ltd
INFOTECH-HAL Ltd
TATA-HAL Technologies Ltd
HATSOFF Helicopter Training Pvt Ltd
International Aerospace Manufacturing Pvt Ltd
Multi Role Transport Aircraft Ltd
NATURE OF THE BUSINESS CARRIED

Manufacture of aircraft / helicopters, aero engines, accessories and avionic
Page 57
SOME OF THE PRESTIGIOUS AWARDS RECEIVED ARE:

HAL was conferred NAVRATNA status by the Government of India on
22nd June 2007.
The Company scaled new heights in the Financial Year 2010-11 with
Turnover of Rs.13, 116 Crores and PBT of Rs 2,841 Crores.
MoU Excellence Award for the top performing CPSEs for the year
2006-07(Top Ten Public Sector Enterprises). HAL has been receiving
awards consecutively since 2001-02.
Raksha Mantris Award for Excellence for the year 2007-08 under the
Institutional category.
Regional Export Award from EEPC, India for the year 2007-08.This
award was presented on 21st Feb 2010 in Maldives.
The Supplier of the year 2009 by Boeing, USA.
Foundry & Forge Division, Bangalore conferred with International
Diamond Star Award for Quality in the realm of customer satisfaction,
leadership, innovation and technology as established in QC100 TQM
Model.
Foundry & Forge Division, Bangalore conferred with Gargi HuttenesAlbertus Green Foundry Award of the year 2008-09 by Institute of
Indian Foundrymen. 2010-11
MoU Excellence Award for the top performing CPSEs for the year
2008-09.
Raksha Mantri's Award for Excellence for the years 2008-09, for Export
under the Institutional category.
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International Aerospace Awards (instituted by SAP Media Worldwide

Ltd) as mark of recognition to the Indian Industry for excellence in
innovation, indigenous technology and entrepreneurship under the
following categories: Golden Award for Quality and Business Prestige from Otherways
Management Association Club, France
Performance Excellence Award -2009 (Organisation) for the year 200809 by Institution of Industrial Engineering.
Foundry & Forge Division, Bangalore conferred with Casting of the
Year 2010 award to Main Gear Box (MGB) casting of ALH from the
Institute of Indian Foundrymen.
Aerospace Division, Bangalore: Runner-Up in Viswakarma Rashtriya
Puraskar and National Safety Award 2008 instituted by Ministry of
Labour, Government of India.
Aerospace Division, Bangalore was awarded Gold Medal by the Society
of Aerospace Manufacturing Engineers (SAME) for the year 2010 for
outstanding contribution in the field of Aerospace Manufacturing.
Engine Division, Bangalore won Rajiv Gandhi National Quality Awards
2009, instituted by Bureau of Indian Standards, New Delhi for
Commendation for Large Scale Manufacturing Industry-Engineering &
Others.
Shri A.Selvaraj, AGM (Mfg), Foundry & Forge Division, Bangalore was
awarded the Foundryman of the year 2010 by the Institute of Indian
Foundrymen.
VISION, MISSION, VALUES, QUALITY POLICY

VISION:
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To become a significant global player in the aerospace industry.
MISSION:
To achieve self reliance in design, development, manufacture, upgrade

and maintenance of aerospace equipment diversifying into related areas
and managing the business in a climate of growing professional
competence to achieve world class performance standards for global
competitiveness and growth in exports.
VALUES:
customer satisfaction
commitment to total quality
cost and time consciousness
innovation and creativity
trust and team spirit
respect for the individual
integrity
QUALITY POLICY:
Policy of the Vigilance Department of Hindustan Aeronautics Limited is to
achieve customers total satisfaction through result oriented Quality AntiCorruption Services with Trust, Integrity and Efficiency. The Vigilance
Department will consistently strive to exceed the customers
expectations
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through continual improvements by meeting all applicable Regulatory

requirements. InfoTech HAL Ltd. is qualified for AS9100 , ISO9001:2000
certification. We at InfoTech HAL Limited are committed to providing internal
and external customers with excellence in products and services through:
Ensure maximum customer satisfaction by adhering to quality
standards in the technologies, products and services that we deliver.
Our team of dedicated professionals works with passion to
maintain and continually improve the quality in keeping with our
mission objectives.
Strive for the highest level of customer satisfaction:
By constantly listening to the customer
By providing on time, error free and fit for use products and
services
Provide a work environment and culture, which promotes
initiative, innovation and teamwork.
Practice processes, which are defined and measurable
We integrate quality management systems to ensure the health and
safety of our people and environmental protection into all aspects
of our business.
PRODUCTS
INDIGENOUS DEVELOPMENT OF LINE REPLACEABLE UNITS (LRUs)
FOR LCA-TEJAS
LIGHT COMBAT AIRCRAFT (LCA) (Tejas)
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Tejas is a single engined, light weight, highly agile, multi-role supersonic

fighter. It has quadruplex digital fly-by-wire Flight Control System (FCS) with
associated advanced flight control laws. The aircraft with delta wing is designed
for air combat and offensive air support with reconnaissance and anti-ship
as its secondary roles. Extensive use of advanced composites in the airframe
gives a high strength to weight ratio, long fatigue life and low radar signatures.
Aeronautical Development Agency is the designated project manager for the
development of LCA.
Specification
Length:13.2 m,Span:8.2 m, Height:4.4 m, Max Take of Weight:13.5 t,

Payload:5.3 t,Speed:1.6M,Radius of Action: 300 km, Takeoff
distance:1700 m, Landing distance:1300 m, Service Ceiling:16 km.
Power Plant
GE 404F2/J-IN20 (1 in no.) (General Electric)
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Turbofan engine
Max. Thrust: 5618 kgf
INTERMEDIATE JET TRAINER (IJT)
HAL has undertaken development of IJT to replace the ageing Kiran trainer
aircraft in service with Defence Services. This aircraft will be used for Stage II
training of pilots. IJT has cockpit with twin tandem seats with good visibility for
the pilots, modern Active Matrix Liquid Crystal Displays and Head-Up Display
(HUD). The aircraft is equipped with a Mission Computer and Integrated
Avionics system. 1000 kg of external stores carrying capacity allows fitment of
various armaments and fuel drop tanks on the aircraft for effective training. The
aircraft is designed for a max. speed of 750 km/h, max. range of 1500 km, max.
endurance of 2 hrs. with internal fuel.
Technical Parameters
Length:11.0 m,Span:10.0 m,Height:4.4 m,Max Take of
Weight:4.5t,Payload:1.0 t ,Speed:0.75 M,Service Ceiling:9 km,
Takeoff
distance:880 m, Landing distance:890 m.

Power Plant
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Technical Parameters: Max. Thrust :1760 KgfDry, Weight :315 KgsThrust,

Weight Ratio:5.6Sp, Fuel Consumption:0.69 Kg/Kg/HrTBO:1200 hrs.
LIGHT COMBAT HELICOPTER (LCH)
Light Combat Helicopter (LCH) was proposed to meet IAFs requirement of a

dedicated light helicopter for combat operations. LCH will have maximum
possible commonality with ALH. LCH with a narrow fuselage will have pilot
and co-pilot/gunner in tandem configuration incorporating a number of stealth
features, Armour protection, Night attack capability and crashworthy landing
gear for better survivability. The major features of LCH are:
MTOW:5.5 t, Max. Speed: 265 Kmph, Range: 550 Km,
Service Ceiling: 6.5 km, Climb rate: 5 m/s.
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Power Plant
SHAKTI engine (2 no.)
Power is 895 kW
LIGHT UTILITY HELICOPTER (LUH)
Sanction for the development of LUH was accorded by GoI in Feb

09. The timeframe for development is 6 years.The helicopter in 3 Ton Weight
class with Glass Cockpit with MFDs will be deployed for Reconnaissance and
Surveillance role. It will be powered by a single engine. The helicopter will be
capable of flying at 220 Kmph; service ceiling of 6.5 Km and a range of 350
Km with 500 kg payload.
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Max. TOW: 2700 kg, Speed at Sea Level:Vcruise > 220 kmph VNE >
250kmph ROC:
> 7.5 m/s,VROC: > 5.5 m/s, Service Ceiling: 6.5 km,
Range:350 km, g:+2 to 0.5 g at SL,

Power Plant
Technical Parameters:
Max. Thrust :1760 Kgf, Dry Weight: 315 Kgs, Thrust / Weight Ratio:5.6,
Sp. Fuel Consumption: 0.69 Kg/Kg/Hr, TBO: 1200 hrs.
JAGUAR DARIN-III Upgrade

Aircraft upgraded to DARIN-III standard would feature following
equipment/systems in addition to those integrated as part of the recent strike
aircraft produced (DARIN II + additional systems) :
Modified avionics Architecture
New cockpit with dual SMD on single seater A/C
Integration of MULTI MODE RADAR on single seater Aircraft
Engine and Flight Instrument system/Integrated Standby Instrument system
(EFIS/ISIS) Integration to replace existing electro-mechanical flight instruments
and/or engine instruments.
Solid State Flight Data Recorder and Solid State Video Recording System
Additional functionalities related to display, data transfer and Auto Pilot
New Weapons
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Development activities would involve major structural modification to the

airframe to accommodate the radar (on the nose cone of Strike aircraft). On the
Avionics front Mission computer software development, new cockpit design,
radar integration and solid state video recording system is to be addressed.
Modification will also be required to be carried out on the air-conditioning
system to meet the equipment cooling requirements.
MIRAGE UPGRADE
Mirage 2000 Upgrade is proposed in two Phases:
Phase-1: Development for Initial Operational Clearance (IOC) & Supply of IOC
Equipment by French OEMs (Thales & Dassault)
Phase-2: Development for Final Operational Clearance (FOC) and series
upgrade of the fleet by HAL:
Integration of Buyer Furnished Equipment (BFE)
Six subsystems viz. Laser Designation Pod (LDP), Air Combat Maneuvering
Instrumentation (ACMI) pod, Helmet Mounted Display System (HMDS),
Crystal Maze missile (CM), BDL-CMDS and Operational Data Link (ODLprovision only).
Design and development of HAL Mission computer
Upgrade of two IOC standard aircraft to FOC standard.
Series Upgrade of aircraft.
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FIFTH GENERATION FIGHTER AIRCRAFT
The proposed FGFA will have air combat superiority, high tactical capability,
group action capability in the regions even with poor communication support.
The aircraft will have advanced features like
Increased Stealth
Supersonic cruise
Data link and network centric warfare capability.
FGFA will be co-developed with Russians. Sukhoi Design Bureau (SDB) has
been selected as the Russian agency for this development project.
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MULTI-ROLE TRANSPORT AIRCRAFT (MTA)
Co-development and co-production of Multi-role Transport Aircraft, jointly by

Russian partners and HAL, is being launched to meet the requirement of
Russian and Indian Air Forces.
The aircraft will be designed for the roles of a 15-20 ton Cargo / Troop
transport, Para trooping / Airdrop of supplies including Low Altitude Parachute
Extraction System (LAPES) capability. It will be configured such that all types
of cargo can be transported and the aircraft would be capable of operating from
semi prepared runways.
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Length: 35.2 m, Height:11.0 m, MTOW: 60 Ton, Payload: 20 Ton,

Km/hr, Range
: 6000 km, Takeoff distance:1300 m,
Speed:800
Landing
distance:1200 m, Engine Thrust:2X11,000 kgf ,
HTT-40
Roles
Basic flying training
Aerobatics
Instrument Flying
Navigation
Night Flying
Close formation
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Max TOW: 2800 Kg, Speed: 450 Km/hr, Range:1000 KM,Engine Thrust:
950 SHP, Cockpit: Tandem seating, Air conditioned cockpit
Modern Aircraft System :All metal, FADEC control Turbo Prop trainer aircraft
with Zero-Zero ejection seats and Multifunction displays.
INDIAN MULTI ROLE HELICOPTER (IMRH)
Co-Design and co-production of a 10 Ton class Medium Lift Helicopter is

proposed to be taken with an international helicopter manufacturer to meet the
requirement of the 3 Indian Defence Services. This approach is taken to shorten
the development timeframe.
The Helicopter will be powered by twin engines and will feature blade folding
option for ship deck operations. The variant for Army/IAF will support Air
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assault, Air Transport, Combat logistic, Combat search & rescue and casualty
evacuation operations. The naval variant will be developed for Anti Submarine
Warfare and Anti Surface Vessel Strike roles.
SERVICES
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Aeroengines
Aircraft
Aircraft Accessories
Avionics
Helicopters
Helicopters Accessorie
Top Competitors for Hindustan Aeronautics Limited

Lockheed Martin Corporation
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BAE Systems plc

Kawasaki Heavy Industries, Ltd.
LOCKHEED MARTIN CORPORATION COMPANY PROFILE
Lockheed Martin takes flight in times of crisis. A leading global military
contractor, the company serves the civil and commercial sectors, but it is firmly
on the defense/government side of the aerospace industry; sales to the US
government accounts for about 82% of revenue, with the US DoD accounting
for about 61%. Electronic Systems is its largest segment, providing such
products as surface ship and submarine combat systems. Other segments
include Aeronautics (combat aircraft and UAVs), Information Systems & Global
Services (IS&GS; data protection and intelligence) and Space Systems
(satellites and space travel). Lockheed Martin also provides engineering,
logistics, and information services.
BAE SYSTEMS PLC COMPANY PROFILE

BAE Systems helped win the Battle of Britain in 1940 with
its Spitfire and Mosquito fighters; today it is a leading military
contractor and major foreign player in the US defense market. BAE's main
operating groups -- electronic systems, cyber & intelligence, and platforms &
services -- provide products and services that include electro-optical sensors,
flight controls, commercial and financial security, ship repair and
modernization, and aircraft. BAE's fighter aircraft include the Hawk, Tornado,
and the next-generation Eurofighter Typhoon. North America is BAE's biggest
market, with the US Department of Defense (DoD) its largest single customer.
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KAWASAKI HEAVY INDUSTRIES, LTD. COMPANY PROFILE

Through surf, turf, or space, machinery by Kawasaki Heavy Industries (KHI)
takes off. KHI straddles seven operations. A consumer products and machinery
segment, famous for its "Let the good times roll" marketing, makes the
Kawasaki brand motorcycle, all-terrain vehicles, and Jet Ski brand personal
watercraft. KHI's rolling stock and construction machinery segment produces
electric and diesel locomotives, material-handling equipment, and heavy
engines. Jet engines, satellites, and structural parts for passenger aircraft are
made by aerospace and gas turbine segments. The global conglomerate's lineup
includes industrial robots, precision machinery, ships, and snow plows. Asia
accounts for a majority of KHI sales.
FUTURE GROWTH AND PROSPECTS

Page 75
Up gradation of 61 Jaguar Aircraft to DARIN III (Display Attack

Ranging and Inertial Navigation) Standard progressively by 2018.
Manufacturing of Radome for Light Combat Aircraft.
Manufacturing of Radome for Jaguar DARIN III Upgrade.
Establishment of Repair and Overhaul facilities for 208 Hawk Aircraft
Accessories progressively by December 2012.
Facility Establishment for Major Servicing of HAWK Aircraft by 201415.
Setting-up of Infrastructure for Assembly, Integration and Testing for
UAV (Unmanned Aerial Vehicle) through Transfer of Technology.
Mid Life upgradation (MLU) of 51 Mirage Aircraft with state of art
Avionics progressively by 2020-21.
Series Upgradation of Jaguar Re-engineing to achieve high thrust. Project
is expected to start from 2015-16.
BANGALORE COMPLEX
Aircraft Division Bangalore
Engine Division Bangalore
Overhaul Division Bangalore
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Foundry & Forge Division Bangalore

Aerospace Division Bangalore
IMGT Division Bangalore
Airport Services Centre Bangalore
Facilities Management Division Bangalore
MiG COMPLEX
Aircraft Division Nasik

Aircraft Overhaul Division Nasik
Engine Division Koraput
Sukhoi Engine Division Koraput
ACCESSORIES COMPLEX
TAD-Kanpur Division
Accessories Division Lucknow
Avionics Division Hyderabad
Avionics Division Korwa
HELICOPTER COMPLEX
Helicopter Division Bangalore
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Helicopter MRO Division Bangalore

Barrackpore Division
CMD Division Bangalore
SWOT ANALYSIS
STRENGTHS
Highly skilled and competitive workforce.
Quality of the product.
Monopoly in overhauling of Industrial and Marine Gas Turbines of
higher capacity.
Have good testing facilities for all the Engines they produce and
Overhaul.
Maintain timely delivery of goods and services.
Brand name of HAL
WEAKNESS
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Lack of Research and development facility.

Lack of innovations.
Decision making process is prolonged due to the hierarchical nature of
the organization
OPPORTUNITIES
Tata power is planning to setup more power producing plants this serves
HAL (SUNABEDA) as an opportunity.
Reliance oil and corporation has plans to increase their production by
increasing the no. at the Godavari basin.
Demand may increase further due to the increased demand from the
44military ship programs around the world.
Demand for the power is increasing around the world so this serves as a
opportunity of industrial gas turbines.
THREATS
International competitor is a major threat.
INFRASTRUCTURE FACILITIES
Man Power and Infrastructure
Helicopter Division employs 1100 highly skilled persons, direct, indirect
and officers and is housed in 42000 sq. meters. of factory buildings in
which the manufacturing, assembly and other facilities have been
established.
Manufacturing Shops
Besides the conventional turning, milling, drilling and grinding
machines, Jig Grinding machine is available for manufacturing parts with
close tolerances. For manufacturing the various gears and components
gear shapers, gear hobbers, gear grinding, broaching and copy milling
Page 79
machines are used. Structural components are welded byoxy-acetylene,

argon arc welding and spot welding in the welding shop.
Special machines
NC drilling and boring machines, jig boring machine, CNC lathe and gear
grinder are some of the special machines for which a large number of
programmes have been developed. In addition Spiral Bevel Gear
generator, Hypoid generator and tester and cutter sharpeners supplied by
MI s Gleason Gear Machines are extensively used in the manufacture of
ALH gears.
Assembly Shops
In the final and structural assemblies, equipping of the helicopter and
assemblies and sub-assemblies of components are carried out with aid of
jigs. T transmission components are assembled in the transmissions
assembly which is provided with all the necessary testing facilities for
clearing the components. The blade assembly shop for fabricating main
and tail rotor blades is equipped with bonding fixtures and balancing aids.
Composite shop is equipped with bonding fixtures and balancing aids.
Composite shop is equipped with facilities for lay-up of composites and
autoclave for curing fabricated components.
Welding Shop
The welding Shop carries out precision welding of body structures, tail
boom, fuel tank, canopy, doors, seats and so on. Tubular structures of
thickness 0.8 mm to 3 mm are welded.
Range of jigs & fixtures ensure complete interchange ability. NDT
methodology is used to ensure integrity of weld.
Process Shop
In the Process Shop the finishing processes undertaken are: cad-plating,
chrome-plating, silver plating, phosphating (bondorite&parcolubrite),
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surface conversion coating on aluminium (alochrome) & normal

anodizing both in sulphuric acid and chromic acid.
The painting scheme undertaken includes the normal DTD-868 process,

finishing on glass & painting byanti-collusion paints. Reclamation by
nickel plating in nickel sulphate bath gives a very high rate of metal
deposition, reducing surface fatigue. The process shop has also facilities
for chemical milling of aluminium alloys including taper milling.
Mc Kinseys 7s frame work with special reference to organization

under study:
The model starts on the premise that an organization is not just Structure, but
consists of seven elements:
Structure
Strategy
Systems
Shared
Values
Skills
Style
Staff
Page 81
Those seven elements are distinguished in so called hard Ss and soft Ss.
The hard elements (green circles) are feasible and easy to identify. They can be
found in strategy statements, corporate plans, organizational charts and other
documentations.
The four soft Ss however, are hardly feasible. They are difficult to describe
since capabilities, values and elements of corporate culture are continuously
developing and changing. They are highly determined by the people at work in
the organization. Therefore it is much more difficult to plan or to influence the
characteristics of the soft elements. Although the soft factors are below the
surface, they can have a great impact of the hard Structures, Strategies and
Systems of the organization.
1. Structure:
Organization has clearly been segmented into different business sectors
and the structure is clearly demarcated for empowerment with regard to each
product and/or sector of economy which is managed by independent Strategic
Business Unit as independent profit / growth centers.
Organization Structure:
Page 82
2. Strategy:
Page 83
The company has a rolling plan called Strategic Plan which spans a
period of years. The strategic plans are dove-tailed to the companys Mission
and Vision statements. The plans are reviewed annually and changes / coursecorrections carried out in regard to additions of new products to its portfolio, in
line with the changing business, economic environment both domestic and
international.
Strategic plan for 2012-2013 is as follows.
Page 84
3. Systems:
Being a professionally-managed organization since, there are separate
Divisional Boards to oversee/supervise the operations of each Operating
Division. Further, there are sector wise business meetings to take stock of the
business parameters and take corrective action wherever required. has a very
strong communication network for propagating companys plans, policies and
procedures in order to keep everybody informed.
A number of software applications for different functions are provided by
Oracle. They are as follows
Inventory, Bills of Inventory, Costing, Purchasing, Receiving.
MPS/MRP Planning, Lead Times, Order Management, Invoicing.

Attendance Recording system, Physical Attributes, Service, GroupWise
LAN
One of the screenshot representing the software used for ABC analysis is
represented.
Skills:
HAL has a very strong people-oriented process. For assessing the
performance of employees they have assessment process. For assessing the
availability of future leaders, they have leadership programs. There are a host of
training programs (both internal and external) covering performance-oriented
development programs, technical competence, personality development etc.
which cover the entire gamut of skills required for running the organization
effectively and profitably and also develop the individual as well.
Style/Culture:
Page 85
Organization culture:
It is a set of some shared values, norms and belief systems that controls
organization operations and interaction with the members both inside & outside
of the company.
HAL follows a very distinct and insular culture throughout the company. The
company incorporates various activities, which help in the betterment of four
factors that account for cultural differences among the organization:
Organizational ethics, Organization structure.
The property right system used by the organization.
The characteristics of people working in the organization.
Every employee needs to portray officer like qualities which makes
them different from their competitors. A unique characteristic of each employee
is that they contribute towards production and share the information to each
other as when required. The top managers are right to use organization
resources.
The work force may be given rights to participate in decision making
through various forums so that they can help in achieving the goals of an
organization of higher productivity, good quality and cost reduction. The
shareholders of the company are given the strongest property rights as they own
the resources of the employee and shares from profit.
MANAGEMENT STYLE:
Its all about the fundamental responsibility of employees in interacting with

each department:
Page 86
INFORMATIO
N
AND DATA
MANAGEMEN
T
TRAINING
PLANT &
EQUIPMENT
MAINTENANC
E
RESOURCE
PLANNING
AND
MANAGEMEN
T
CUSTOM
ER
MARKETI
NG /
SALES
PRODUCTI
ON
PLANNING
PRODU
CT
REALIS
A
CUSTOM
ER
CUSTOM
ER
TION
DESIGN &
DEVELOPMEN
T PLANNING
PRODU
CT
SERVIC
E
PURCHASI
NG
QUALITY
ASSURANCE
Shared Values:
Page 87
Integrity:
Aligning actions with words and consistently deliver what they promise.
Building and strenghtening reputation through trust.
To be respectful and behave in an open and honest manner.
Beleiving in ethical performance.
Excellence:
Being passionate about their people, process and products.
Quality of their products reflect what their processes are and how committed
their employees are.
They believe in continuous improvements and also significantly focus on
customer needs and dedication.
Team work:
They share their talents and knowledge with whom they were and take
decisions on time to strenghthen team work.
They respect and value people with different opinion experience and
background.
They shall always thrive to understand the big picture and work together for
consistently improving their performance.
Page 88
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.
e) To provide credit facility to customers.
f) To maintain the inventories of raw material, work-in-progress, stores and
spares and finished stock.
Page 89

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 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.
According to Ghosh and Maji, in 2003:In this paper made an attempt to examine the efficiency of working
capital
Page 90

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.
Chapter: 2
Page 91
Research
Design
INTRODUCTION TO THE TOPIC:
Page 92
Working capital management plays a vital role in an

organization. It merely means, firm analysis their effect on
return and risk. The management is fixed in various ways and
which mainly deals with the cash, inventory and receivable
management these are act as agent for the organization to
work on short and long term project which deals gross and net
working capital.
TITLE OF THE STUDY

A STUDY ON FACTORS INFLUENCING
CAPITAL MANAGEMENT
WORKING
[WITH REFERENCE TO HAL]
STATEMENT OF THE PROBLEM

Working capital
management is one of the core areas of
financial management which recognizes the working capital
management
under 3 classifications namely cash
management. Inventory and debtors management.
The success of any company largely depends on the
management of its working capital.HAL as a government
owned public sector undertaking has on existence of more than
48 years, such reputation of long existence comes only from
efficient management of fixed and working capital. Current
project is an effort made to test the efficiency of HAL in
managing the working capital.
The problem established for the research is evaluation of
working capital efficiency at HAL with emphasis on the factors
affecting the working capital.
Page 93
OBJECTIVES OF THE STUDY

To study the operating cycle of HAL LCA PG.
To analyze and identify the factors influencing
working capital management under three broad
heads cash, inventory and debtors.
To analyze various modes of financing working
capital requirements.
To examine various reasons for the changes in
working capital over two balance sheet period.
SCOPE OF THE STUDIES

The study restricts itself to analysis of working capital
management at LCA PG. HAL.
Further the scope is restricted to the analysis of three areas of
working capital management i.e.. cash ,debtors and inventory
management.
PURPOSE OF THE STUDY

* The purpose of this study is to analyse how far the
company made an effective decision in controlling %
utilization of working capital and also to identifying the
risk and profitability from those decisions
Page 94
LIMITATIONS OF THE STUDY

As the study was restricted only to the air craft division hence it
could not throw light upon the overall performance of working capital
management.
Time limitation
Therefore constructive analysis could not be carried out comparing
the performance over longer period thus may act as a hindrance to
conclude the overall efficiency of working capital management.
RESEARCH METHODOLOGY
For collecting the information about working capital
management, the descriptive type of research is used. The
descriptive methodology given on all over pictures of steps
taken for conducting the research. The major purpose of
descriptive research is description of the state of affairs as it
exists at present. Research the major purpose of descriptive
research is description of the state of affairs as it exists at
present.
METHODS OF DATA COLLECTION
Page 95
Data is collected from 2 sources namely, primary and

secondary data like direct interaction with financial manager
and previous year annual reports were also made.
Tools used for researching working capital management in H.A.L
are:
PRIMARY DATA :
Primary data is collected by means of
direct interaction with the executives,
financial affairs and accountants of
the company.
SECONDARY DATA:
Secondary data is derived form the
publication by the company like profit
and loss account, balance sheet, and
company profile of three years.
GEOGRAPHICAL SCOPE OF THE STUDY

The area selected for a study of working
capital management relates to H.A.L factory, particularly in
H.A.L,
Page 96
Page 97
Chapter: 5
Analysis and
Interpretation
Page 98
Statement of changes-in-Working Capital
PARTICULAR
2008
2009
(+)
(-)
TOTAL CURRENT ASSETS

Page 99
INVENTORIES
2658.72
11415.94
8757.22
Cash and bank balance
1195.25
1195.25
Loans and advances
7253.53
28580.84
21327.31
9912.25
41192.03
Others
8474.73
13358.58
4883.85
Non interest bearing
101725.6
2
114665.85
12940.23
Advances from other

customer
15586.30
9919.87
5666.43
Total B
125786.
64
137944.3
0
115874.3
9
96752.27
Total A
Total current liability
Sundry creditors
Net working capital (A-B )

Decrease in working capital
TOTAL
19122.12
115874.
39
115874.3
9
19122.12
36946.21
36946.21
Page 100
2009
2010
INVENTORIES
11415.94
34407.23
22991.29
1195.25
1195.25
Loans and advances
28580.84
24858.12
3722.72
41192.03
59265.35
Others
13358.58
8507.88
4850.7
114665.85
114665.85
9919.87
13524.44
3604.57
137944.3
136698.17
(-)96752.2
7
(-)19413.6
PARTICULAR
(+)
(-)
TOTAL CURRENT
ASSETS
TOTAL A
Sundry creditors
Advances from other

customer
TOTAL B
Net working capital (AB)
Page 101
Decrease in working
capital
TOTAL
(-)116165.
87
95506.14
95506.14
27841.99
27841.99

2010
2011
INVENTORIES
34407.23
56566.79
22159.56
Loans and advances
24858.12
15325.49
9532.63
59265.35
71892.56
Others
8507.88
9328.88
821
114665.85
276128.70
161462.
85
Advances from other

customer
13524.44
11844.78
1679.66
Total B
136698.1
7
297302.36
(-)77432.8
2
(-)225410.0
8
PARTICULAR
(+)
(-)
TOTAL CURRENT ASSETS
Total A
Sundry creditors
Net working capital (A-B )

Decrease in working capital
TOTAL
Page 102
(-)302842.9
225410.0
7
225410.07
23839.2
2
23839.2
2
RATIO ANALYSIS
a)
Current Ratio: current ratio is defined as the relationship between the

total current assets to the total current liabilities. It is calculated by
dividing current assets by current liabilities.
This ratio measures the short terms solvency i.e. its ability to meet short
term obligations. As a measure of current financial liquidity, it indicates the
rupee of current assets available for each rupee for each rupee of current
liability. It is calculated by dividing total of current assest by total of
current liabilities
Current Ratio= Current Assets/Current Liability

Table 1: Calculation of Current Ratio:
(RS IN LAKHS)
2009
Current
Asset
Current
Liability
Ratio
9912.24
125786.64
0.241
Page 103
2010
41192.03
137944.30
0.433
2011
59265.35
136698.17
0.298
2012
71892.28
297302.35
0.078
CURRENT RATIO
INTERPRETATION:
The higher the ratio, the larger the amount of rupee available per rupee of
current liability. Hence greater safety of funds of short term creditors. However
a very high ratio would indicate slackness in management practices.
Page 104
As conventional rule a current ratio of 2:1 is considered satisfactory. There is a

progressive decline in the ratio. Analysis reveals that there is sharp increase in
advances from the government of India for many projects like HAWK, AJT, and
JAGUAR etc.
b)Quick/Liquidity ratio:
Quick ratio is that ratio which expresses the
relationship between the liquid asset and liquid liability. It is a measure of

quick or acid liquidity. It is referred to as quick ratio because it is
measurement of a firm's ability to convert its current assets quickly into
cash in order to meet its current liabilities.
Quick ratio is calculated by dividing quick asset by the current
liabilities.
Quick Ratio = Quick assets/Current liabilities
Table 2: Calculation of quick Ratio:

(RS IN LAKHS)
2009
Quick
Quick
Asset
Liability
7253.53
125786.64
Ratio
0.057
Page 105
2010
29776.09
137944.30
0.21
2011
24858.12
136698.17
0.18
2012
15325.49
297302.35
0.051
QUICK RATIO
INTERPRETATION:
It is a rigorous measure of firm's ability to service short term liabilities. The
usefulness of the ratio lies in the fact that it is widely accepted as the best
available test of liquidity position of a firm.
A company with a higher quick ration suffers from shortage of funds. On the
other hand company with low ratio may be prospering and paying its current
Page 106
obligation in time. Quick ratio of 1:1 is considered ideal.

In the above years quick ratio is less than one indicating an undesirable position.
It is because of inventories constituting a major portion of current assets and a
large part of finance tied up in inventory. Besides current liability is high on
account of large scale borrowing from the government.
Inventory Turn over ratio:

It is computed by dividing the cost of goods sold by the average inventory. This
ratio indicates whether investment in inventory is efficiently used or not. The
ratio is determined as follows:
Inventory turnover Ratio= Sales/Average inventor
Table 3: Calculation of Inventory turnover ratio:

(RS IN LAKHS)
Years
Sales
Average
Ratio
inventory
2010
16388.47
7037.33
2.33
2011
19061.24
22911.58
0.83
2012
21282.22
45487.01
0.46
Page 107
INVENTORY TURN OVER RATIO
INTERPERTATION:
The above analysis shows that the inventory turnover ratio measures the
velocity of conversion of stock into sales. Usually, a high inventory turnover
Page 108
ratio indicates efficient management for inventory because more frequently

stock is sold, the lesser amount of money required financing the inventory. A
low inventory turnover ratio indicates an inefficient management of inventory. It
implies over in inventories ,dull business, and poor quality of goods, stock
accumulations, and accumulation of obsolete and slow moving goods and low
profit as compared to total investment. The company always keep the ratio has
high, it gives the better profits and high efficiency in management.
DEBT-EQUITY RATIO:
The ratio reflects the relative claims of creditor and shareholders against
the asset of the firm. This ratio indicates the relationship between the
external equities or the shareholder funds and the internal equities or the
shareholders fund. Debt Equity ratio can be calculated by dividing the debt
capital by shareholders fund plus reserves and surplus.
It is calculated as follows:
Debt Equity Ratio =
Debt Capital
Shareholder fund + Reserves & surplus
Table 4: Calculation of Debt-equity ratio:

YEAR
Debt
Equity
Ratio
Page 109
2009
235.83
0.004
2010
242.51
0.004
2011
397.70
350.95
1.13
2012
38.10
569.39
0.06
DEBT EQUITY RATIO
INTERPRETATION:
The above ratio indicates that the proportionate claims of owner & the
outsiders against the firms assets. The company debt-equity ratio is 1 i. e. total
debt is equal to equity considered as to quite satisfactory. A higher the ratio
indicates that the claims of outsiders (creditors) are greater than those of
owners, may not be considered by the creditors because it gives a lesser
margin of safety for them at the time of liquidation of firm. If the company
uses maximum outsiders funds in order to take lesser risk of investment & to
Page 110
increase their earnings by paying a lower fixed rate of interest to outsiders. The
company uses internal funds instead of outsiders funds.
Gross Profit Ratio:

Gross profit measures the percentage of each sales rupee remaining after
the firm has paid for its goods. This ratio expresses relationship between gross
profit and net sales. It is calculated as follows:
Gross Profit Ratio= Gross Profitx100/Net sales
Table 5: Calculation of Gross profit ratio:
YEAR
Gross profit
Net sales
Ratio
Page 111
2009
14567.09
13219.14
110.19
2010
17570.56
16388.47
107.2
2011
25999.67
19061.24
136.4
2012
27911.34
21282.22
131.14
GROSS PROFIT RATIO
Page 112
INTERPRETATION:
This ratio indicates the degree to which the selling price of goods per unit
may decline without resulting in losses from operations to the firm. It
also helps in ascertaining whether average percentage of mark up on the
goods is maintained.
Gross profit is obtained by deducting raw materials and components,

direct expenses, salaries and wages from the sales and adjusting changes
in WIP/SIT. This reflects the efficiency with which management
produces each unit of produced.
Net Profit Ratio:

It measures the percentage of each sales rupee remaining after all costs and
expenses including interest and taxes have been deducted, This ratio expresses
relationship between gross profit and net sales.
It is calculated as followed:
Net Profit Ratio = Net Profit X 100

Net sales
Page 113
Table 6: Calculation of Net profit ratio:
Years
Net profit
Sales
2009
235.83
13219.14
2010
242.51
16388.47
2011
350.96
19061.24
2012
569.39
21282.22
Ratio
1.78%
1.48%
1.84%
2.67%
NET PROFIT RATIO
INTERPRETATION:
This ratio helps in determining the efficiency with which the affairs of the
Page 114
business are being managed. An increase in the ratio over the previous period
indicates improvement in the operational constant. The ratio is thus an effective
measure to check the profitability of business. It is obtained when operating
expenses, interest and taxes are subtracted from the gross profit.
It establishes a relationship between net profit and sales and indicates
managements efficiency in manufacturing, administering and serving the
products. This ratio is overall measure of firms ability to turn every rupee
spent in expenses into sales and net profit.
Return on Investment:
Return on investment measures the overall effectiveness of the
management in generating profits with its available assets It is determined
by dividing Profit after tax by Shareholder Fund multiplied by 100.
Return on Investment =
Profit after
tax
X 100
Shareholder Funds
Table 7: Calculation of Return on investment
Page 115
Year
Net Profit After

Tax
Total assets
Ratio
2008
235.83
9958.68
2.37%
2009
242.51
41256.41
0.98%
2010
350.95
59341.73
0.59%
2011
569.39
71999.99
0.79%
RETURN ON INVESTMENT
Page 116
INTERPRETATION:
From the above analysis the return on total assets ratio
measures that the profitability of total funds / investment on fixed assets
of a firm. The objective of computing return on total assets is to be
finding out how effectively the funds pooled together have been used.
The above ratio shows the total assets utilization capacity of the company
& also the return on assets both have been decreased gradually. In the
current year 2011-12 the ratio has been increased slight.
INVENTORY TO WORKING CAPITAL RATIO:

It is determined by dividing inventory by working capital it is
calculated by using the following formula.
INVENTORY TO WORKING CAPITAL= INVENTORY

WORKING CAPITAL
Table 8: Calculation of inventory to working capital:
{RS. IN LAKHS)
Years
Inventory
Working Capital
Ratio
Page 117
2009
2658.72
-1158744
-0.002
2010
11415.94
-96752.27
-0.11
2011
34407.23
-77432.82
2012
56566.79
-225410.07
-0.44
-0.25
INVENTORY TO WORKING CAPITAL RATIO
INTERPRETATION:
Page 118
The ratio shows that the relationship between inventory & working
capital. The ratio indicates that the percentage of the inventory invested in
working capital as the ratio has increased high in the year 2010-11. After
that the ratio goes to negative. Because of the amount invested in working
capital is nil & negative. It means the current assets are less than current
liabilities. Here, the company trying to increase the amount invested in
inventory through increased in working capital.
TOTAL ASSETS TURN OVER RATIO:

It is determined by dividing net sales by total assets. It is calculated by
using the following formula.
TOTAL ASSETS TURN OVER RATIO=NET SALES

TOTAL ASSET
Table 8: Calculation of total assets turn over ratio:
Page 119
Years
Net Sales
Total
Assets
Ratio
2009
13219.14
9958.68
2010
16388.47
41256.41
0.39
2011
19061.24
59341.73
0.32
2012
21282.22
71999.99
1.33
0.29
TOTAL ASSETS TURN OVER RATIO
Page 120
INTERPRETATION:
Higher total assets turnover ratio indicates the efficient utilization of fixed assets
and current assets for the purpose of sales. In the above table the assets the
assets turnover ratio has been decreased to 0.29 in 2011-12, 0.32 in 2010-11,
0.39 in 2009-10 and 1.33 in 2008-09.
CURRENT ASSETS TO NET WORTH RATIO:

Page 121
It is determined by dividing current assets by net worth. It is calculated

by using the following formula.
CURRENT ASSETS TO NET WORTH RATIO=CURRENT ASSETS

NET WORTH
Table 9: Calculation of current asset to net worth ratio:
(Rs. In Lakhs)
Current Assets
2009
9912.24
Net Worth
Ratio
-115768.43
-0.321
2010
41192.03
-96544.98
-0.767
2011
59265.35
-77232.26
-0.426
2012
71892.28
-224077.02
-0.080
CURRENT ASSETS TO NET WORTH RATIO
Page 122
INTERPRETAION:
The ratio shows that the relationship between current assets & share holders
fund. The ratio indicates the extent to which promoters funds invested in
current assets. The ratio of the company in the year 2011-12 is increased to
-0.321 from -0.767 in 2010-11. It shows that the company invested in current
assets has been decreased. The main purpose of calculating ratio is to calculate
the percentage of share holders funds in current assets.
SUGGESTION:
Page 123
The company has to conduct a customer meeting at east once in a three

months so the problems of the product or default can be understood it
helps to increase the sales of the company product.
Company should give more periods to its customer and also take more
periods from its suppliers for high turnover.
The company should provide the more information of its company
website with product pictures.
The company liability is more, it should be in control.
Company should come with a new product.
Company should maintain quick services to its customer.
Infrastructure of the company should be improved.
The company should increase the working capital position.
ANALYSIS AND FINDING OF ORGANISATION
Page 124
HAL among the public sector claims to be the best and which is true.
HAL has learnt it hard way and has been continuously striving to
compete with others.
Competitors and has been successful.
HAL does not approach the customer instead it waits for the customer to
come to it.
Since its products are priced higher than other players in the field so it
thinks that those.
Who can afford its products will automatically approach it.
HAL is being showing consistent growth prospective.
There has been constant rise in HAL profit year after year.
HAL is managing its Human Resources and marketing very effectively

by conducting research.
CONCLUSION:
Page 125
Working capital management has so far been looked at as the driving seat of
the financial manager. By studying the working capital management in HAL,
LCA PG division , one can know the growth aspects of the company
All kinds of act in the operating field of production , procurement ,
marketing and services get ultimately interrupted by the final implication of
the management of working capital and its segment . the efficiency in the
use of working capital happens to be the most important condition for the
running of the business so has to earn adequate profit.
In HAL, LCA PG division, the use of working capital is efficient ,
affordable and can be even improved in order to have more profit for further
period .
With the passage of time and improvement in technology, there is further
scope for A STUDY ON WORKING CAPITAL MANAGEMENT .
By this i can conclude it has made up the complete effort in planning and
making strategy to have the good will in the corporate world.
Page 126
BIBLOGRAPY
FINANCIAL MANAGEMENT:
M.Y. KHAN
R.K. JIAN
S.K. GUPTA
N. GUPTA
I.M PANDEY
WEBSITES:
WWW.GOOGLE.COM
ANNUAL REPORTS OF THE COMPANY.
Page 127

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A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

Introduction to financial management

Introduction to the topic

Data Analysis and interpretation.

Conclusion and Major Findings.

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

TITLE OF THE PROJECT

FACTORS INFLUENCING WORKING

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

current performance and future development through financial

Financial management however should not be taken to be a

DEFINITIONS OF FINANCIAL MANAGEMENT

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

Financial management is the application of the planning and

MEANING OF FINANCIAL MANAGEMENT

FEATURES OF FINANCIAL MANAGEMENT

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

It is dynamic in nature and different form accounting.

SCOPE OF FINANCIAL MANAGEMENT

2. SELECTING A SOURCE OF FINANCE:

3. SELECTING A PATTERN OF INVESTMENT:

4. PROPRE CASH MANAGEMENT:

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

creditors, meet wage bills, and meet day-to-day expenses. A

6. PROPER USE OF SURPLUSES:

A judicious policy for distributing surpluses will be essential for

FUNCTIONS OF THE FINANCE MANAGER

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

Selection of right source, at right time and at right cost.

FUNCTIONAL AREAS OF FINANCIAL

2.SELECTION OF THE RIGHT SOURCES OF

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

4.ANALYSIS AND INTERPRETATION OF

7.WORKING CAPITAL MANAGEMENT:

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

investors are the components of working capital. They

8.PROFIT PLANNING AND CONTROL:

9.FAIR RETURNS TO THE INVESTORS:

10. MAINTAINING LIQUIDITY AND WEALTH

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

DECISIONS IN FINANCIAL MANAGEMENT

INVESTMENT DECISIONS: capital expenditure

FINANCING DECISIONS: Long-term and shortterm (D:E mix).

CURRENT ASSET MANAGEMENT: Continuous

WORKING CAPITAL MANAGEMENT

Working capital of regarded as lifeblood of a business. Its

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

operations going. Cash accounts receivables (Drs) and

EVERY BUSINESS NEEDS FUNDS FOR TWO PURPOSES:

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

The sum of the current assets is the working capital of

Working capital is the excess of current assets over current

Working capital is the excess of current assets over current

In accounting, working capital is the difference between the

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

other words, necessary for earning profits by business

1. Conversion of cash into inventory.

3. Conversion of receivable into cash

The operating cycle consists of three phases. In phrasal, cash

A STUDY ON FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

Credit sales are made to customers. Firms which do not sell on