(Submitted For the Degree Course Of B.Com. Honours in Accounting & Finance Under The
University Of Calcutta)
Name
Debasish Roy
CH-101
Supervised by
Date of submission
February, 2016
ACKNOWLEDGEMENT
Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped me
in completing this project to the best of my ability. Being a part of this project has certainly been a
unique and a very productive experience on my part.I take the privilege to acknowledge and extend
my heartfelt gratitude to prof. Sharmishta dasgupta for helping me to solve all kinds of queries
rgarding the project work.The books and project material given to me were of great use in building
the project. Lastly i would like to thank my private tutor miss. Sudipta mitra and friends who
encouraged me to do this research work and all those who contributed directly or indirectly in
completing this project.
TABLE OF CONTENTS
CHAPTER-1
INTRODUCTION
PAGE NO.
CHAPTER-1
INTRODUCTION
1.1BACKGROUND OF STUDY
A project entitled A study on working capital management of Asian Paints Ltd. was carried out with
an intention to analyze the utilization of working capital. The study helps to know the level of current
asset and current liability. Various analytical tools is been used to analyze and to make inference.
Findings are based on the analysis; the major finding was that the company has a good liquidity
position and profit percentage. Based on the findings various suggestions have been given for the
further improvement of the effective utilization of the working capital.
1.2REVIEW OF LITERATURE:
Article Published;
Author:
BELT B.&SMITH K.V.:-IN 1991,Working capital management practices of Australian firms, in
the last 15 years have seen a substaintial increasein the study of working capital
management.Published article on working capital management (also known as short term financial
management)have progressed from articles that described What we do in our shopto broader
treatises that look at how working capital management is integrated into the overall operations of the
firm and specifically, how working capital decisions contribute to the financial objective of
maximizing firm value[14:34-57]
raise bank capital level by 2012 & to tightly monitor the operations of banks so as to ensured that
Kenyan banks are more efficient in their operation while at the same time begin profitable.
1.3 THE NEED OF PROJECT:According to C.U guidelines relating to project work for B.Com (HONS) degree course.I have chosen
the project containing the title of Working Capital and it is gladly approved by my supervisor. The
need of the project to develop the different learning skill of a student. This project work will help a
student to develop their thinking and analyzing power, communication skill, research skill,
interpretation skill, public relationship skill while collecting secondary data, information &
technology skill, time management skill and this will also help to develop knowledge in different
aspect of learning process.
Management.
To estimate the working capital requirement of Asian Paint Ltd.
the operating and cash cycle of the Company.
1.5 RESEARCH METHODOLOGY:Research methodology is a way to systematically solve the research problem. It may be understood as
a science of studying now research is done systematically. In that various steps, those are generally
adopted by a researcher in studying his problem along with the logic behind them.
It is important for research to know not only the research method but also know methodology. The
procedures by which researcher goes about their work of describing, explaining and predicting
phenomenon are called methodology. Methods comprise the procedures used for generating,
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collecting and evaluating data. All this means that it is necessary for the researcher to design his
methodology for his problem as the same may differ from problem to problem. Data collection is
important step in any project and success of any project will be largely depend upon now much
accurate you will be able to collect and how much time, money and effort will be required to collect
that necessary data, this is also important step. Data collection plays an important role in research
work. Without proper data available for analysis you cannot do the research work accurately.
A) Secondary data collection:The secondary data are those which have already collected and stored. Secondary data easily
get those secondary data from records, journals, annual reports of the company etc. It will save the
time, money and efforts to collect the data. Secondary data also made available through trade
magazines, balance sheets, books etc.
This project is based on secondary data collected through internet but primary data collection had
limitation such as matter confidential information thus project is based on secondary information
collected through three years annual report of Asian Paints Ltd., supported by various books and
internet sides. The data collection was aimed at study of working capital management of the co.
Project is based on:
Limited data: - This project has completed with annual reports ; it just constitutes one part of data
collection i.e. secondary .There were limitation for primary data collection because of confidentiality.
Limited period: - This project is based on five year annual reports. Conclusion and
Recommendations are based on such limited data. The trend of last five year May or may not reflect
the real working capital position of the company.
Limited area: - Also it was difficult to collect the data regarding the competitors and their
financial information. Industry figures were also difficult to get.
Chapter 1: The first chapter is an introductory chapter. It addresses the research problem and
focuses on the research methodology adopted. It also undertakes literature review, justified/need,
objective and indicates the limitations of the study.
Chapter 2: In this chapter the theoretical aspects of Working Capital is discussed, with particular
emphasis on details of the subject matter. It also contain the theoretical underpinning of Working
Capital.
Chapter 3: In this chapter the main focus is on the data analysis of the Asian paints limited of
different years of Working capital and of that particular industry, through Ratio Analysis and Trend
Analysis.
Chapter 4: This chapter includes the conclusion and recommendation of this particular project.
CHAPTER -2
CONCEPTUAL FRAMEWORK
2.1 What is working capital?
Apart from financing for investing in fixed assets,every business also requires funds on a continual
basis for carrying on its operations. These include amounts expenses incurred for purchase of raw
material,manufacturing,selling, and administration until such goods are sold and the monies
realized.Business transactions are generally carried on credit with a number of days elapsing
subsequent to the sale being affected for realization of proceeds1.While part of the raw material may
be purchased by credit, the business would still need to pay its employees, meet manufacturing &
selling expenses (wages, power, supplies, transportation and communication) and the balance of its
raw material purchases. Working capital refers to the source of financing required to by business
entities. On a continual basis for meeting these needs.
Thus the need for working capital from the prevalence of credit in business transactions, need to fund
manufacturing and to account for the variations in the supply of raw material and demand for finished
goods.
Net working capital can be positive or negative. A positive net working capital would arise
when current assets exceed current liabilities. A negative net working capital occurs when current
liabilities are in excess of current assets.
The above characteristics render limit based financing from banks ideal for working capital financing.
This is because the client is charged interest only on the average outstanding utilized and is saved
with the bother of reinvesting short term surpluses arising out of low working capital utilization at a
point in time.
Further since the transactions of the business are generally routed through a current account with a
bank, availing a credit limit from the same bank is really convenient. Thus , working capital
requirements are generally financed through limit based financing by banks.
following steps:
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OPERATING CYCLE
Here the total operating cycle will be the summation of the entire period,for trading house
procurement of raw materials and production would not be include into the operating cycle.
For a trading house as well as a producer is very important to understand as to how many times the
operating cycle repeats itself, this is quiet important while calculating the limit for raising finance
especially working capital finance.
outside the department can examine this balance by using ratio analysis or other techniques.
However, this gives only a limited assessment of inventory and is not adequate for internal
management. Good financial management necessities the careful analysis of individual inventory
lines. Inventory management is an important aspect of working capital management because
9neventories themselves do not earn any revenue. Holding either too little or too much inventory
incur costs.
13
Cash forecasting ;
Balance management;
Administration;
Internal control.
Cash Forecasting
Good cash management requires regular forecasting in order for these to be martially accurate; they
must be based on information provided by those manager responsible for the amounts and timing of
expenditure. Capital expenditure and operating expenditure must be taken into account. It is also
necessary to collection information about impending cash transactions from other financial systems,
such as creditor and payroll.
The individual components of working capital can be effectively managed by using various
techniques and strategies.
When considering these techniques and strategies, departments need to recognize that each
department has a unique mix of working capital components. The emphasis that needs to be placed on
each component varies according to department. For example, some departments have significant
inventory levels; others have little if any inventory.
Furthermore, working capital management is not an end in itself. It is an integral part of the
departments overall management. The needs of efficient working capital management must be
considered in relation together aspects of the departments financial and non-financial performance.
It is an indication of defective credit policy and slack collection period. Consequently, higher
It stagnates growth. It becomes difficult for the firm to undertake profitable projects for non
commitments.
Fixed assets are not efficiently utilized for the lack of working capital funds. Thus the firms
etc.
Paucity of working capital funds render the firm unable to avail attractive credit opportunities
etc.
The firm loses its reputation when it is not in a position to honor its short term obligations. As
a result, the firm faces tight credit terms.
15
An enlightened management should, therefore , maintain the right amount of working capital
on a continuous basis.
arrange loans from banks and other on easy and favorable terms.
CASH DISCOUNTS: Adequate working capital also enables a concern to avail cash
their efficiency, reduces wastage and cots and enhances production and profits.
ABILITY TO FACE CRISES: A concern can face the situation during the depression.
HIGH MORALE: Adequate working capital brings an environment of securities,
confidence , high morale which results in overall efficiency in a business.
11. Company Profile:Asian paints are Indias largest paint company in India and asias third largest paint company with a
turnover of 54.63 billion. The company operates in 20 countries and has 28 manufacturing facilities
in the world servicing consumers in over 65 countries. Besides Asian paints the group operates
around the world through its subsidiaries Berger International Limited,Apco Coatings ,SCIB Paints
and Taubmans.Forbes Global magamize USA ranked Asian Paints among the 200 bests small
16
companies in the world for 2002 and 2003 and presented the best under a Billion award,to the
company .The present MD and CEO of the company P.M. Murty.
17
CHAPTER 3
DATA ANALYSIS
CURRENT RATIO: CURRENT ASSET
CURRENT LIABILITIES
CURRENT
ASSETS
CURRENT
LIABILITIE
S
CURRENT
RATIO
2010-11
1730.44
2011-12
2777.59
YEAR
2012-13
3041.26
1745.98
2290.08
2358.66
2783.84
2757.82
0.99
1.21
1.28
1.43
1.51
2013-14
3982.41
2014-15
4169.27
CURRENT RATIO
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2010-11
2011-12
2012-13
2013-14
2014-15
INTERPRETATION
Current ratio of Asian paints was good in the year 2010-11. Again it was slowly increasing in
the year 2011-12, 2012-13, 2013-14. Again it increased a lot in the year 2014-15.
.It presents current ratio positioning is good.
18
LIQUID RATIO:
CURRENT
ASSETS
LESS:
STOCK
QUICK
ASSETS
CURRENT
LIABILITIES
LESS: BANK
OVERDRAF
T
QUICK
LIABILITIES
LIQUID
RATIO
2010-11
1730.44
2011-12
2777.59
YEAR
2012-13
3041.26
1071.76
658.68
1264.62
1512.97
1480.79
2317.36
1665.05
2317.36
1802.18
2367.09
1745.98
2290.08
2358.66
2783.84
2757.82
NIL
NIL
NIL
NIL
NIL
1745.98
2290.08
2358.66
2783.84
2757.82
0.37
2.19
2.05
2.39
1.51
2013-14
3982.41
2014-15
4169.27
LIQUID RATIO
3
2.5
2
1.5
1
0.5
0
2010-11
2011-12
2012-13
2013-14
INTERPRETATION:
19
2014-15
It indicates quick repayment capacity of short term loans and also creates safety measure for
the purpose of repayment of creditors.
In comparison to other years, 2013-14 liquid ratio being higher than year 2014-15 and
therefore it indicates liquidity condition mean to say not so satisfactory.
2010-11
RATIO 0.01
2011-12
0.22
2012-13
0.18
YEAR
2013-14
0.18
CASH RATIO
0.25
0.2
0.15
0.1
0.05
0
2010-11
2011-12
2012-13
INTERPRETATION
20
2013-14
2014-15
2014-15
0.01
Cash ratio implies that sufficient cash to meet the dues in time. In the year 2011-12 , high ratio
never to mean high profitability. Generally, it meets up short term cash commitment and not
for investment.
NIL
AVERAGE
ACCOUNT
PAYABLES
CREDITORS
TURNOVER
RATIO
NIL
YEAR
2011-12
4722.74
2012-13
5125.48
2013-14
5758.71
2014-15
6191.72
(NIL
+1069.06)/
2
=534.53
534.53
1356.48
1405.96
8.83
4.48
4.24
4.40
21
2012-13
2013-14
2014-15
INTERPRETATION
Creditors turnover ratio is gradually decreasing. In comparison to the year 2011-12. The level
of creditors turnover ratio remained more or less same in the respective three years that is
2012-13, 2013-14 and 2014-15.
22
2011-12
487.5
YEAR
2012-13
682.6
2013-14
1198.57
2014-15
1411.45
4980.03
5648.28
6681.71
7273.20
0.09
0.12
0.17
0.19
2011-12
2012-13
2013-14
2014-15
INTERPRETATION:
Working capital to total asset ratio is constantly increasing for last 5 years.
23
YEAR
2011-12
2012-13
7964.16
8921.13
2013-14
10300.22
2014-15
11485.67
(NIL+
500.24)/2
=250.12
(500.24+
633.88)/2
=567.06
(633.88+
712.36)/2
=673.12
(712.36+
728.87)/2
=720.61
NIL
NIL
NIL
NIL
NIL
NIL
250.12
567.06
673.12
720.61
NIL
31.84
15.73
15.30
15.93
2010-11
NIL
NET CREDIT
SALES
AVERAGE
NIL
TRADE
RECEIVABLES
AVERAGE
BILLS
RECEIVABLE
AVERAGE
ACCOUNT
RECEIVABLE
DEBTORS
TURNOVER
RATIO
2012-13
2013-14
INTERPRETATION:
24
2014-15
COST OF
GOODS
SOLD
AVERAGE
INVENTO
RY
INVENTO
RY
TURNOVE
R RATIO
2010-11
3947.32
2011-12
5064.37
YEAR
2012-13
5530.07
917.45
1168.09
1372.60
1572.92
1733.61
4.30
4.33
4.02
3.96
3.92
2013-14
6241.14
2014-15
6798.66
2011-12
2012-13
2013-14
INTERPRETATION:
25
2014-15
The present inventory turnover ratio in the year 2011-12 it has increased, thereafter it has
been constantly decreasing.
26
CURRENT
ASSET
TOTAL
ASSET
CURRENT
ASSET TO
TOTAL
ASSET
RATIO
2010-11
1730.44
2011-12
2777.59
YEAR
2012-13
3041.26
2115.68
4980.03
5648.28
6681.71
7273.20
0.81
0.55
0.53
0.59
0.58
2013-14
3982.41
2014-15
4169.27
2011-12
2012-13
2013-14
2014-15
INTERPRETATION:
Current asset to total asset ratio was increasing in the year 2010-11. Then it gradually started
decreasing in the following next 4 years.
27
PARTICULA
RS
CURRENT
ASSET
INVESTMEN
T
SUNDRY
DEBTORS
CASH AND
BANK
BALANCE
OTHER
CURRENT
ASSET
TOTAL
CURRENT
LIABILITIES
TOTAL
NET
WORKING
CAPITAL
201213
3041.2
6
1480.7
9
633.88
201314
3982.4
1
482.00
2014-15
712.00
728.87
566.86
201.54
61.81
105.65
176.10
252.92
5828.4
4
2358.6
6
2358.6
6
3469.7
8
5554.0
5
2783.8
4
2783.8
4
2770.2
1
5330.93
4169.27
INCREAS DECREAS
E
E
118.06
2757.82
2757.82
2573.11
INTERPRETATION
1. Here cash balance of Asian paints ltd.Gradually decreasing.
2. Net working capital decrease in 2013-14 than 2012-13. Again slowly decreasing in 2014-15.
28
CHAPTER 4
CONCLUSION & RECOMMENDATION
CONCLUSION:
1. Current ratio was slowly increasing upto 2013-14. There after very good increase was
noticed in the year 2014-15.
2. Liquid ratio increased in the year 2011-12, 2013-14 and it was slowly decreasing in the year
of 2014-15.
3. The present cash ratio in the year 2014-15 is decreasing.
4. The present creditors turnover ratio in the year 2014-15 is slowly increasing.
5. Working capital to total asset ratio in the year 2014-15 is increasing and in the previous year it
was slowly decreasing.
6. Debtors turnover ratio in the year 2014-15 is decreasing and in the previous year it was
slowly increasing.
7. The present inventory turnover ratio 2014-15 is decreasing and in the previous year it was
slowly increasing.
8. Current asset to total asset ratio in the year 2014-15 is slowly increasing.
9. Working capital analysis in the year 2014-15 slowly decreasing and net working capital
decreased in 2013-14 than 2012-13.
29
Recommendation
1. As the current asset ratio is gradually decreasing, therefore the short term solvency of the
company gradually declined, therefore the company has to improve the current ratio.
2. As the inventory turnover ratio is gradually decreasing. Therefore working capital blocked in
current asset of the company, to increase the stock turnover ratio has improved.the company
has to reconsider its selling policy.
3. As the debtor turnover ratio is gradually decreasing as a result laging in collection from debtor
and bill recivable increases. To improve debtors turnover ratio the company has to moderate
its receivable collection policy collection.
4. It cannot be said that overall financial position of the company is normal but it is required to
be improved from the point of view of profitability.
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BIBLIOGRAPHY
www.economictimes.com
www.business standards.com
www.moneycontrol.com
www.wikipedia.com
www.realmarket.com
www.google.com
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ANNEXURE 1A
SUUPERVISORS CERTIFICATE
This is to certify that Mr. Debasish Roy a student of B.Com Honours In Accounting & Finance /
Marketing /Taxation /Computer Application in Business of DINABANDHU ANDREWS
COLLEGE Under the University Of Calcutta has worked under my supervision and guidance for
his/her Project Work and prepared a project report with the title THE STUDY OF WORKING
CAPITAL MANAGEMENT OF ASIAN PAINTS LIMITED.
The project report, which he/she is submitting, is his/her genuine and original work to the best of my
knowledge.
Place: Kolkata
Date:
Signature:
Name: Toseema Dey
Name of the college: Dinabandhu Andrews College
32
Annexure 1B:
STUDENTS DECLARATION
I hereby declare that the Project Work with the title THE STUDY OF WORKINGCAPITAL
MANAGEMENT OF ASIAN PAINTS LIMITED Submitted by me for the partial fulfillment of
the degree of B.Com Accounting & Finance under the University Of Calcutta is my original work and
has not been submitted earlier to any other University/ Institution for the fulfillment of the
requirement for any course of study. I also declare that no chapter of this manuscript in whole or in
part has been incorporated in this report from any earlier work done by others or by me.
However, extracts of any literature which has been used for this report has been duly acknowledged
providing details of such literature in the references.
Place: Kolkata
Date:
Signature:
Name: Debasish Roy
Registration no:
Roll no:
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