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“A STUDY ON WORKING CAPITAL MANAGEMENT WITH SPECIAL

REFERENCE TO TRACO CABLE COMPANY LTD ERNAKULAM. ”
PROJECT REPORT
Submitted by
SONI MARIAM SAJI
(Register Number: 1635F0108)
Under the guidance of
Mrs. S. NISHANTI MBA, (Phd)
professor
Towards partial fulfilment of the requirements
For the award of the degree
MASTER OF BUSINESS ADMINISTRATION
OF BHARATHIAR UNIVERSITY

DEPARTMENT OF M.B.A
Sankara College of Science and Commerce
Accredited by NAAC with ‘A’ grade
An ISO 9001:2000 certified institution
Recognized by UGC & Approved by AICTE, New Delhi
Saravanampatty, Coimbatore-641035
(2016-2018)

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CERTIFICATE

This is to certify that the project report entitled “A STUDY ON WORKING

CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO TRACO

CABLE COMPANT LTD ERNAKULAM .” submitted in partial fulfilment of the
requirement for the award of degree of MASTER OF BUSINESS ADMINISTRATION OF
BHARATHIAR UNIVERSITY.

Is a Bonafide record of the project carried out by

SONI MARIAM SAJI

(REG NO: 1635F0108)

_______________ ____________________

FACULTY GUIDE HEAD OF THE

DEPARTMENT

____________

PRINCIPAL

The Viva-Voce Examination is held on _________________

________________________ ________________________

INTERNAL EXAMINER EXTERNAL EXAMINER

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DECLARATION

I affirm that the project work titled “A STUDY ON WORKING CAPITAL

MANAGEMENT WITH SPECIAL REFERENCE TO TRACO CABLE
COMPANY LTD ERNAKULAM” being submitted in partial fulfilment for the award of
MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me. It has not
formed the part of any other project work submitted for award of any degree or diploma, either in
this or any other University.

I certify that the declaration made above by the candidate is true

Signature of the Candidate Signature of the guide

SONI MARIAM SAJI prof. S. NISHANTHI

Reg.No:1635F0108 Department of M.B.A,
Sankara College of science &Commerce

ACKNOWLEDGEMENT

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This Project Report is the blossom of an arduous endeavour coupled with the
compassionate blessing of the almighty.

I thank our honourable Secretary Shri. T.P. Ramachandran, Sankara Educational

institutions, Coimbatore for providing me an opportunity to undertake this MBA project work.

I thank our respected principal Dr.H.Balakrishnan, Sankara College of Science and

Commerce, for providing me valuable advice on this project work.

I wish to express my gratitude and sincere thanks to our Head of the Department, Dr.
B, Sudhakar Sankara College of Science and Commerce.

I have a great pleasure in expressing my sincere gratitude to my beloved faculty

guide,.Prof.s.Nishanthi, for giving valuable guidance during each stage of my study.

I wish to express my sincere thanks to the management and customers of “TRACO

CABLE COMPANY LTD. ”

I wish to thank my beloved parents, faculty members, colleagues, friends and all well-
wishers of mine for their support and encouragement throughout my study.

I wish to express my deep sense of gratitude to the humanity, for showing their blessings
at my entire endeavour.

SONI MARIAM SAJI

TABLE OF CONTENT

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S. NO CHAPTER NO PARTICULAR PAGE NO

1 1 INTRODUCTION

1.1 Industry profile

1.2 Company profile

1.3 Objective of the study

1.4 Scope of the study

1.5 Limitation of the study

2 2 REVIEW OF LITERATURE

3 3 RESEARCH METHODOLOGY

4 4 DATA ANALYSIS AND INTERPRETATION

5 5 FINDINGS SUGGESTIONS AND CONCLUSION

BIBLIOGRAPHY

APPENDIX

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CHAPTER :1

INTRODUCTION

INTRODUCTION

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The success and progress of any firm is depends upon the Financial performance. Finance is one
of the most requisites of a business and a modern management, obviously depends largely on the
efficient management of finance. Finance places a vital role in determining the strength,
weakness and control funds of the organization, without Finance no organization can perform its
activities in modern enterprises.

Every business in this world is directing its production activities towards the end goal of
economic development. A developing company requires an increasing volume of investments not
only in the fixed assets but also in working capital. Because of lack of proper investment, the rate
of growth of such entities depends to a great extent on the effective utilization of its capital.

Working capital is an important for efficiently carrying out the day to day operations of every
organization. In all concerns the problem of effective working capital management is of
paramount significance as considerable amount of funds are invested in the forms of various
current assets. In the absence of proper and efficient management of working capital, it would be
difficult to achieve the basic objectives of organizational efficiency.

The present study is undertaken with a view of analyzing the working capital position of the
company and to understand how the inventories, receivables management and cash management
works. The present study is expected to throw light into the way in which the working capital is
utilized in the TRACO CABLE LTD.

1.1 INDUSTRY PROFILE

World Scenario

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The economic liberalization and industrial globalization lead to spectacular development

of the infrastructure such as buildings, roads and cables are the crucial element that wire up the
length and breadth of the countries as power and telecom networks. Now the world is all set to
see a "war of the accesses" with ever increasing demand for cables and conductors. World have
learnt with time the “ philosophy of co-operation and co-existence” obviously leading to pooling
of both technical and financial resources for a better economically viable environment for
industrial growth and development.

Indian Scenario

INDIA has made remarkable progress in recent years in the manufacture of cables and
conductors. The country has not only achieved self sufficiency in this field but has also made a
big head way into the international market. Rural electrification and telecommunication networks
undertaken by various state governments as part of national policy lay the crucial infrastructure
backbone for the recently liberalized industry with increased Private Public Participation (PPP)
and privatization. The investment strategy of the government primarily relies on promoting
investment through a combination of public investment with private investment participation.
PPP will promote and streamline strategies for future development and management of the
economic and social infrastructures ensuring effective use of resources, access to modern
technology, timely implementation and operation for rapid economic growth. The Indian
economy grew at an average annual rate of 9% in 2008 before global economic meltdown.
Despite the adverse circumstances Indian economy grew by 6.7% in 2009, 7.9% in 2010, and
8.5% in 2011 and is expected to achieve a growth rate of 9% in the year 2012. The telecom
sector and the power sector needs infrastructure development which is crustal for fueling for the
growth for the economy however power shortage remain a problem in many part of the country
and the distribution segment (transition and distribution) shows steady growth in the requirement
for cables and conductors. In the telecom sector private investment increased from Rs.6crores in
2003 to Rs.51crores in 2010 and competition and access to consumers seems to be the driving
force. Therefore the pace of economic and social development of the nation depend to a very
large extend of the development of infrastructure in the power sector as well as in the
telecommunication sector.

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The market segmentation and structure of the cable industry in India are there both
in Power sector as well in Telecom sector. Power cables are segregated into high and low voltage
varieties. Telecom cables are classified as high capacity cables (Optic Fiber Cables) and low
capacity cables (Jelly Filled Telecom Cables). Organized players have higher presence in Indian
Telecom sector since it involves higher capital and technology inputs when the higher presence
of unorganized players in Indian power cables segment is evident for reasons of low investment.
The current scenario prevailing in the Indian cables industry has ample focus on government
policy along with demand- supply position. In this context, special focus has been given to the
impact of government decisions on the industry for direct foreign investment putting an end to
Public sector monopoly in the Industry

State Scenario

Emphasis is given for 100% electrification giving importance to rural electrification as a

government policy in Kerala State. Moreover telecommunication network is wide spread all over
the state including remote rural areas. Power connection and telephone connection have become
a basic need for everyone in the state. Due to the onslaught of the mobile phones, in the country,
the requirement for telecom cables are diminishing in the state also. TRACO in public sector and
around ten manufacturers in the private sector compete in the market for power cables and
conductors in the state. TRACO has got a manufacturing capacity of 6000 metric ton
conductors/per annum, where as the manufacturing capacity of all the private manufacturers
taken together constitute only 5500 metric ton/per annum. All the private companies are located
in the southern part of the state in Trivandrum and Kollam district. TRACO is logistically located
at central Kerala. When Kerala State Electricity Board floats tenders for conductors the private
manufacturers does not quote for consignees at northern part of Kerala due to high transportation
cost. Hence TRACO has got a monopoly in bare conductors, distribution cables and control
cable market when transmission cables are mostly dominated by private players of outside state.

INDUSTRY PROFILE

Early telegraph system were the first form of electrical cabling, but transmitted only small
amounts of power. Gutta-percha insulation used for the first time transatlantic cables was

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unsuitable for building writing use since Gutta-percha deteriorated rapidly when expose to air.
The first power distribution system developed by Thomas Edison used copper rods, wrapped in
jute and placed in rigid pipes filled with a bituminous compound. Although vulcanized rubber
had been patented by Charles Goodyear in 1844, it was not applied to cable insulation until the
1880s, when it was used for lighting circuits. Rubber-insulated cable was used for 11000 volt
circuits in 1897 installed for the Niagra Falls Power Project. Oil-impregnated paper insulated
high voltage cables were commercially practical by 1895. During Second World War several
varieties of synthetic rubber and polyethylene insulation were applied to cables. Modern power
came in variety of size, material and type, each particularly adapted to its uses. Large single
insulated conductors are also sometimes called power called power cables in the trade.

Cable consists of three major components, namely conductors, insulation protection. The
constructional detail individual cables will vary according to their application. The construction
and material are determined by three main factors:- working voltage, which determines the
thickness and composition of insulation ;- current carrying capacity, which determines the
cross-section of the size of conductors;- environmental conductors such as temperature, chemical
or sunlight size of exposure, and mechanical impact, which determines the form and composition
of the cable jacket enclosing conductors. Since power cable must be flexible, the copper or
aluminum conductors are made of stranded wire, although very small cable may use solid
conductors. The cable may includeaninsulated conductor used for the circuit neutral or for
ground [earth] connection.

The overall assembly may be round or flat. Filter strands may be added assembly to maintain its
shape. Special purpose power cable for overload vertical use may have additional elements such
as steel or Kevlar structural support. For circuits opening at 2400 volts between conductors or
more, shield may surround each conductor. The equalizes electrical stress on the cable insulation.
The technique was patented by Martin Hochstetler in 1916, and the shield is sometimes called
Hochstetler shield. The individual conductor shields of a cable are connected to earth ground at
one or both ends of a length of cable.

1.2 COMPANY PROFILE

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TRACO CABLE COMPANY, is incorporated in the year 1960; the foundation stone of
Irimpanam unit was laid down by Shri Manubhai M Shai. The company started its operation in
the year 1964. Shri M.D Jose was the first chairman and the managing director on whose
initiation Irimpanam unit of TRACO CABLE COMPANY commenced its operation.

TRACO CAABLE COMPANY, a Premier Kerala Government Company, commenced

operations in the year 1964, manufacturing high quality Electric Cables and Wires in Technical
Collaboration with M/s. Kelsey Engineering Ltd., Canada. Since then TRACO has been in the
forefront in meeting the needs of Public Sector Undertakings in India like Railways, Electricity
Boards of various states in the country and others for AAC/ACSR, Power and Signaling cables.

One of the India’s most sought after Paper Insulated Lead Sheathed Telecommunication Cables
were produced by TRACO in collaboration with Hindustan Cables, West Bengal under an
agreement signed in 1974 until the liberalization of Licensing policy in the country, TRACO was
one of the two manufactures of Telephone Cables in India and only one in the whole of South
India. Always playing its humble role in the process of nation building, TRACO’s cables carry
energy, actuate signals and help to connect people in far flying areas in this vast subcontinent,
that’s India with its quality products.

The superiority of TRACO cables is the result of better know-how combined with well equipped
machinery and efficient work force. Rigorous quality control is maintained during every stage of
production, which ensures, that the products going into the market are according to the IS
specifications. With the progress in Cable Technology, Paper Insulated Cables gave way to the
much more sophisticated Jelly Filled Telephone cables which are superbly suited for
communications. TRACO was one among those who first perceived the opportunities inherent in
this new development. It soon went into Technical collaboration with M/s. General Cables Inc.,
USA, world leaders in the Communication cable field and manufactured them in India to
exacting standards

The company started its function with a capital of Rupees one core divided into 250000
per: shares of Rs.10 each and 750000 equity shares of Rs.10 each. The unit was has been
manufacturing cables required for the Railways, the BSNL and the KSEB. Traco's power cable
manufacturing unit has a workforce of 210 and the telephone cable division around 450. The
estimated turnover of Traco cables is around Rs 44.8crore

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MAJOR CUSTOMERS

 Kerala State Electricity Board (KSEB) is the current customer

 All Kerala Electricity Board in India
 Railways
 Private firms

ORGANISATIONAL STRUCTURE OF TRACO CABLE COMPANY LTD

DIVISIONAL MANAGER

FINANCE HR Q& A STORE

DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT
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MARKETING MAINTENANCE PRODUCTION

DEPARTMENT DEPARTMENT DEPARTMENT

UNITS OF TRACO CABLE COMPANY LIMITED

1. Corporate office
The registered and corporate office of Traco cable Company is located in Cochin,
Panampally Nagar the industrial city of Kerala. Board of directors, MD’s office, and all main
heads of Traco Cable Company is located at the registered and corporate office.

2. Thiruvalla unit

In Thiruvalla unit of Traco Cables having two major divisions they are power cable
division and telephone cable divisions
3. Irimpanam unit
In irimpanam unit also having two divisions
 Power cable division.
 Telephone cable division.
4. Kannur unit
Kannur unit mainly focused on house wiring cables.

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INFRASTRUCTURE AVAILABLE (IRUMPANAM UNIT)

Land : 15.38 Hectares

Plant area : 7500 sq.mtrs

Total built up area : 9500 sq. mtrs

Electricity : 2 nos. 1000KVA transformers in addition to

K.S.E.B. power connection.

Water : 3 nos. bore wells for process water and

3 nos. well for Drinking water (7000ltrs/day)

Cooling tower : 1 FRP/ Spray cooling tower with an

overhead tank and ground level tank

ORGANISATIONAL POLICY

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BOARD OF DIRECTORS

CHAIRMAN

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Shri. K.S. SRINIVAS, IAS,

ADDITIONAL SECRETARY TO GOVERNMENT,
INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM.
MANAGING DIRECTOR
Cdr. (Rtd) K. SHAMSUDDIN
MANAGING DIRECTOR
TRACO CABLE COMPANY LIMITED,
COCHIN – 682036.

DIRECTORS
1, Shri. K.S. SRINIVAS, IAS
ADDITIONAL SECRETARY TO GOVERNMENT,
INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM.
2, Cdr. (Retd) K. SHAMSUDDIN
MANAGING DIRECTOR,
TRACO CABLE COMPANY LIMITED,
COCHIN – 682036.
3, Shri. M. RADHAKRISHNAN
JOINT SECRETARY TO GOVERNMENT,
FINANCE DEPARTMENT,
GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM- 695001
4, Shri. R. MADHUSOODHANAN NAIR
MANAGING DIRECTOR
INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,
5, Shri. K. ASOKAN,
MEMBER (TRANSMISSION & TRANSMISSION),
KSEB,
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THIRUVANANTHAPURAM.
 MANAGING DIRECTOR,
TELK,
`
ANGAMALY SOUTH P.O,
ERNAKULAM DIST.

FUNCTIONAL DEPARTMENTS

The major functional departments at Traco Cables Ltd are:

MARKETING DEPARTMENT
Marketing department serves as the face of the organization, coordinating and producing
all materials representing the company. It is the marketing department's job to reach out to
potential customers, investors and the community, and create an image that represents the
company in a positive light. Marketing departments often collaborate with other divisions within
the company, such as advertising, promotions, sales, product development and market research.

The marketing department moreover plays a vital role in the production planning as a
constant feedback of the quality of finished products is verified regularly to check the possibility
of finishing the production of the uses specified products in time. Hence, the department plays an
overall significant role in the functioning of the organization. Marketing is a matching process by
which a producer provides a marketing mix (product, price, promotion and physical distribution)
that meets consumer demand of a target market within the limits of society. Since the inception
company has been managing its activities with a centralized control. Due to the increase in
competition and necessity to exert full control over the system the company has introduced a
Decentralized way of managing the departmental activities from this fiscal year.

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(a) Responsibilities of the marketing department.

Major responsibilities of a Marketing Department are as follows:

1. Focus on the Customer

2. Monitor the Competition
3. Find & Direct Outside Vendors
4. Create New Ideas
5. Communicate Internally
6. Manage a Budget
7. Understand the ROI
8. Set the Strategy, Plan the Attack, and Execute

(b) Functions of the marketing department

1. Order canvassing:

The department continuously monitors the media, newspapers, sites etc. for canvassing
the orders.

2. Tender participation:

The company participates in tenders. There are two types of bids namely price bid and
technical bid. The companies qualifying in the techno-commercial bid are allowed to participate
in the price bid. The Techno –Commercial bid includes details such as capability of the
company, quality of products and processes, status of past orders etc. If qualified in it, the
company can apply for the actual bid. Performance bank guarantee and security deposit bank
guarantee is required to participate in the bid.

3. Monitoring the activities of the agents:

All over India, the company has fixed agents for order canvassing. They are given a
commission of 1% or 2%.

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4. Giving information:

The department is entrusted with the responsibility of giving necessary information to all the
other departments. Once the order is received, it is forwarded to the costing department for
evaluation, finance department for funding purposes, purchase department for the purchase of
raw materials and finally to the factory for production planning.

PRODUCTION DEPARTMENT

The production department is the driving force turning the wheels of every manufacturing
company because without it there are no goods to sell to customers. Along with producing the
goods a manufacturer sell, the production department determines how much of those goods can
be produced in a certain time frame.

The main role of production is to turn inputs (raw materials) into outputs (finished goods).
Outputs refer to a finished product or service and inputs are the materials that are needed to
manufacture certain goods. When a business completes this process they are able to achieve
customer satisfaction by producing products that are ready to be used and fit for purpose.

The production department is responsible for ensuring quality is achieved in each item
produced. They will need to carry out inspections and implement suitable quality initiatives.

(a) Quality of goods

The production department's main duty is to ensure the goods being produced meet the
customer's quality expectations. Even though the quality assurance department inspects the
goods through the manufacturing process, the production department has certain quality duties
too. Each step measures the raw material to make sure it is within the tolerances recommended
before it goes to the next step.

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(b) Production scheduling

A production department can only manufacture or assemble so many products in a certain
amount of time. It is the duty of the production department to maintain a production schedule, so
other departments know what is being produced and how long it takes to produce that quantity.

(c) Co-ordinating duties

This is the last step in a long production process. The production department coordinates
the production of each part of the assembled goods to ensure all parts are being produced in
conjunction with each other. All parts of an assembled product are formed from raw material.
This process takes several steps from the production department to make sure each part of the
product is being produced simultaneously or within the same time frame.

(d) The production department in Traco

The production department in TRACO Cable Company is located in the factory

sites. The Production Department is headed by the Production Manager. His main objective is to
do production planning and to carry out the work according to the plans prepared. The
investigator analyses the Production process and notes the purchased raw materials. The major
raw materials are aluminums, steel and copper.
(e) Production planning

a. Material planning

On receipt of trial order / anticipated order /work order from the marketing department, a
material indent is prepared with reference to the customer specification showing quantity and
delivery time. The material indent is forwarded to the Head of Materials for procurement.
Material position is reviewed daily and intended to materials departments for corrective action.

b. Production scheduling

Monthly production planning and scheduling is prepared based on orders depending on

priority as informed by marketing department. The monthly planning schedule copy is giving to
the Materials, Marketing, Finance, and QA&IT and Stores departments to facilitate advance
arrangements in their respective areas.

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According to the schedule, different shifts are planned. And on completion, the
finished goods are handed over to the Quality Assurance Department. The Quality
Assurance Department conducts various tests and after testing, if they are satisfied they issue
a clearance and the finished goods are dispatched from the stores department.

(f) The books maintained in production department are:-

1) Production log book:- Quantity level assigned to each machine recorded in this
book.
2) Daily production report: - Records details of daily production.
3) Daily production review report:- It reviews weather the daily production is
Achieved as planned or not.
4) Raw material stock position :- Records the position of stock of raw materials.

PURCHASE DEPARTMENT

The Purchasing Department is an important player in any company's operations. For an

organization to excel, it must have a solid group of capable individuals executing agreements on
its behalf so that it's not over-paying for goods and services and so that it can focus on business
at hand. Purchasing provides a necessary support service to its organization. Inter-departmental
cooperation is another key duty of purchasing management, because the Purchasing Department
is the liaison between the organization and its suppliers. Excellent vendor relations are vital in
obtaining best value and best pricing. Most purchasing departments have two types of purchasing
agents: capital and non-capital. Non-capital purchasing agents must have a general knowledge of
materials acquisition, and they must possess the ability to use their professional judgment in
matters of pricing, bids and quotations, and vendor selection. Purchasing agents are the front-line
liaisons between vendors and company departments. . In addition, purchasing agents ensure that
departments follow company policy when they submit their requests for supplies. . In addition,
purchasing agents ensure that departments follow company policy when they submit their
requests for supplies. Capital purchasing agents perform many of the same duties described

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above, but they also have additional tasks. They not only purchase capital equipment and assist
with renovation projects; they monitor capital leases and compare purchase prices with the
allotted capital budget.
(a) Duties and responsibilities of purchase department

 Consults with users to develop specifications; makes recommendations regarding purchases.

 Contacts and receives informal quotes from appropriate vendors; compares costs and
evaluates the quality and suitability of equipment, materials and supplies.
 Prepares and processes requisition forms; recommends vendors.

 Prepares requests for removal and disposal of surplus items.

 Verifies budget codes and availability of funds.

(b) Purchase department in Traco

Main duties of purchase department are to purchase the raw materials, machinery, spares
and general goods. purchase department has a very important role to ensue the purchasing and
delivery of the materials on time then only the production process will done without any time
lag.

(c) Duties of purchase department:

Duties of purchase department are to purchase various materials for the production process.
Materials which are purchased by purchasing department are as follows:-

 General consumables, Calibrated equipments

 Machinery
 Packing materials
 Raw materials
 Spare parts etc.

(d) Packing materials:

Raw materials purchased for packing are as follows:-

 Wooden drum
 Wooden batten
 Packing paper

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 Hoop iron etc.

(e) Machinery:
Machineries are purchase according to the increase in number of orders for production.
Traco Cable Company has both imported machineries and Indian made machineries.

(f) Spare parts:

Any spare parts required for maintenance is also purchased by the purchasing department.

(g) Rating criteria

The vendors are assessed on the basis of a wide variety of factors are as following:
 Compliance with other specifications
 Co-operation
 Credit terms
 Discounts received
 Freight and delivery charges
 Installation cost
 Maintenance of specifications
 Management Competence
 Market information
 Price
 Promptness of delivery
 Service

(h) Purchasing process

1. Indents duly approved with delivery schedule for the procurement of raw materials and
packing materials are received by the materials department from the units and corporate
office.
2. The indents are scrutinized by the Materials department for its correctness, completeness
in specification / description.

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3. If any discrepancy is found in the indent will be returned to the respective intender for
rectification of discrepancies. Items for which specific details are available, the indents
will be rectified in the Corporate Office and the same will be intimated to the intender.

4. Depending upon the nature and status of the indent, Tenders / quotation will be invited
from approved list of suppliers and schedules will be given to the suppliers based on the
indent and stock position of different raw materials on day to day basis. In case of indents
from Irimpanam Unit for manufacture of Jelly Filled Telephone Cables, raw materials
will be arranged either by transfers from Thiruvalla unit or diverting from the suppliers.
Depending upon the urgency, raw materials are transferred between the two units.

5. Updating of the approved list of suppliers will be as detailed in the Work Instruction.

6. The tenders / quotations are analyzed on the basis of technical and commercial aspects. If
the offers are found technically and commercially viable, purchase proposal is prepared
and put up through the commercial advisory committee before the Chairman and
Managing Director/ Board for approval. In urgent cases orders will be placed and ratified
later.

7. Purchase proposal is made on self generated indents as per work instruction.

8. Once the purchase proposal is approved, purchase order will be prepared by the
respective officers. The purchase order will be signed by the Head of Materials / AM
(Mat) on behalf of Managing Director.

9. Details of indent, Purchase orders placed, supplies made, Stores Receipt Vouchers
indicating whether quality of material is as per the purchase order, quality of packing etc.,
will be entered in the Purchase Register. Steps will be taken to get the replacement for
rejected material.

10. Copies of the purchase order will be forwarded to the Indenter, Finance department and
Stores department.

11. If any changes are required in the Purchase Order, it will be intimated to the supplier by
amendments after necessary discussions with the concerned departments. Copies of the
amendments will be forwarded to the concerned departments as above.

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12. In case of advance payment/ clearance of documents from bank are required; assistance
from Finance Department will be obtained.

13. In case of rejection due to non-conformity to quality specification of the material,

appropriate action will be taken for alternate arrangement or replacement.

14. On receipt and acceptance of the consignment, intimation will be made to Finance
department to regularize/ release the payment based on the supplier’s invoice and Stores
Receipt Voucher.

15. Once material acceptance is confirmed and payment is released, all records will be kept
in the respective files.

16. The vendor performance will be evaluated on the basis of quality, delivery, packing, and
service and unsatisfactory performance if any will be intimated to the supplier as detailed
in the work instruction.

17. In case of exigencies, raw material can be procured from stockiest/ other cable
manufacturer confirming to specifications/ standards.

STORE DEPARTMENT

TRACO Cable Company has a fell functioning store department. Duty of store
department is to take care of raw materials, finished goods, spares and tools. Materials required
for all departments are deals with general store. In TRACO Cable Company the store department
usually follows FIFO method of storage. This FIFO method will help to avoid deterioration of
materials and to avoid confusion on fluctuation of prices. A day book is maintained in this store
department for recording all the daily transaction taken place.
There are mainly three stores TRACO namely:
 General store
 Spare and tools store
 Finished goods store

(a) General store:

In general store all materials which required for all departments are maintained

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Materials handled by general store are as follows:-

 Raw materials
 Printed stationary and other stationary materials
 Packaging materials
 Miscellaneous materials
 Electrical consumable materials
 Building materials
 All consumable materials

(b) Spare and Tool Store:

In spare and tools store all tools, spares, machinery, etc. for production process

(c) Finished goods store:

In finished goods store all final products are stored here. After testing, the goods are packed and
dispatched.

(d) various auditing conducted in each financial year are as follows:-

 Statutory auditing
 Outside auditing
 Accounts general auditing etc.
(e) Short term objectives in store department

 Scrap due to deterioration of materials in storage should be ZERO

 Damage on raw materials and finished materials due to bad handling should be ZERO
 Time for dispatch for finished goods for which commercial clearance is available 48
hours
 Customer complaints on packing should be ZERO
(f) Responsibilities of personnel working in store department
a) Stores officer
Stores Officer is responsible for the maintenance of the system for the storage, packing,
preservation dispatch of both the incoming raw materials and the outgoing final
product.
b) Store keeper (general store)
 Storage and preservation of materials
 Preparation of stores receipt voucher

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 Monthly stock taking

 Materials receipt and issue
 Maintenance of stock with identification tags;
 Maintaining ledgers and material requisitions
 Intimating the material receipt to Inspection & Testing department for inspection and
testing
 Handling of raw materials, packing materials, consumables and stationery items
 Annual physical inventory taking

c) Store keeper (spares and tools)

 Storage and preservation of materials
 Preparation of stores receipt voucher
 Periodical stock taking
 Material receipt and issue
 Maintenance of stock with identification tags
 Maintaining ledgers and material requisitions
 Handling of spares, tools plant equipments & machines
 Annual physical inventory taking

d) Storekeeper (finished goods store)

 Packing and dispatching of finished goods ;
 In case of power cables, the inspection certificate is receiving from Quality Assurance/
Inspection& Testing department and accordingly packing is done as per
specification.

FINANCE DEPARTMENT
The roles and responsibilities of a finance manager require a sincere commitment and an
inexhaustible need for new challenges. Each industry has its own rules and spending regulations
so that finance managers must adhere to and more importantly hold each department of
the business accountable to in order to maintain a fully functioning and federally compliant
organization. Finance managers may allocate resources to each department and draw up plans for
future departmental budgeting in an effort to maximize company finances for optimal

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performance and also have final approval for all financial transactions for purchases occurring
from outside the business.

(a) Duties and responsibilities of finance department

Duties and responsibilities of finance manager are as follows:-
 Cheque payments.
 Control of bank and cash.
 Coordinating the audit of Statutory, Internal and Comptroller& Auditor General of India.
 Dealing with income tax matters.
 Dealing with sales accounting and cost accounting.
 Dealings with the sales tax cases.
 Finalization of accounts
 Furnishing of CMA data and other details with banks.
 Furnishing of sales tax returns.
 Overall supervision of the finance department.
 Passing of bills for payment like statutory dues.
 Preparation of pass orders.
 Preparation of various reports
 Preparing monthly report to the government.
(b) Functions of the department
The head of finance department is responsible for the control and financial accounting of
the company, budgeting and performance appraisal, funding of projects, control on budgeting
and non budgeted expenditures and liaison with banks, financial institutions and government.
The major functions of the Finance Department are:
1. Making Arrangements for Funds.
2. Working Capital Management.
3. Maintaining Accounts.
4. Costing System
a. Making arrangements for funds.
The Finance Department makes arrangements for funds from banks. Presently the
company has got an arrangement with a consortium of four banks for the arrangement of funds.

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The banks issue a credit monitoring arrangement in which the Finance Department has to
convince the bank for lending funds to the company. Every month the company has to submit a
stock statement to the bank containing the current position of the company’s raw materials, funds
available, debtors, stock etc. The bank is given an idea as to how much fund is required by the
company and according to that the bank lends funds to the company. Only 75% of funds are
issued by the bank. Rest has to be financed by the company’s funds.
Even if the sanctioned amount by the bank is high, the company can draw only according to the
present position of the company’s stock, funds, debtors etc.
b. Working capital management.
Working Capital Management is another important function of the Finance Department. The
raw materials are used for work in progress. It is then converted into finished goods. The finished
goods are then sold on credit, thereby resulting in the creation of debtors. On receiving the
payment from debtors, the cash is used as funds. The Finance Department assures that the
processes in the cycle are not blocked at any stage. This cycle can get blocked if there is a delay
in dispatch of finished goods or if there is a delay in payment of debts. Whenever there is a
shortage of funds the finance department assures maximum and apt use of available funds. There
are certain Working Capital facilities available to the organization. Some of these facilities are: 1.
Letter of Credit. 2. Bank Guarantee 3. Bills Discounting.
(c) Letter of credit
Here the organization opens letter of credit account and within about ninety days, if the
organization is not able to pay, the bank pays to the supplier. The supplier dispatches the supplies
only after the buyer opens a letter of credit account.
(d) Bank guarantee.
Once an order is taken up by the company for supplying the goods, a guarantee is given by
the company’s bank that the goods will be supplied as undertaken by the company. All the details
about the supply is given and also the time period within which the goods will be supplied.
(e) Bills discounting
The bills are discounted if there is a shortage of funds. For long term loans to the Finance
Department of the company approaches the banks.

(f) Maintaining of accounts.

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At present the accounting system in use is partially computerized and partially manual.
Till 2001 the accounts were maintained fully manually. In 2001 Tally 5.4 was introduced in the
organization for the purpose of keeping accounts. Here again the accounts maintained are not
fully computerized. Only the financial accounts are maintained in computerized form. The
transactions done are first recorded in vouchers manually and the net effect is taken and
recorded in the computer. Other functions of the Finance Department includes overseeing the
payment to Income Tax, payment of Sales Tax, TDS (Tax Deduction at Stores) and also to
comply along with the statutory requirements of the company.

(g) Costing system

When an order is received, the product is manufactured according to the specifications as
required by the customer. Here the machine centre is treated as the cost centre and the cost is
accumulated on it and then allocated to each product. On the basis of this cost sheet is prepared.
This is then sent to the Marketing Department. The price fixation is done by the marketing
department. The marketing department is provided with the cost of the product and according to
the cost incurred on the particular product and a specific profit margin the price of the product is
fixed. They are using the cost plus margin method.
(h) Accounting policies
(1) General
The financial statements are prepared under historical cost convention on accrual basis except
where otherwise stated and in accordance with applicable account standards.
(2) Fixed Assets and Depreciation
a. Fixed Assets are stated at acquisition cost less depreciation.
b. Depreciation is provided on written down value method.
(3) Inventories
Various items of closing stock have been valued as under:
a. Finished goods –At lower cost or net realizable price inclusive of excise duty
b. Work in Progress- At material cost plus the labour and overhead Expenses to material
consumed.

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c. Raw Material- At cost

d. Stores, Loose Tools and Packing materials- At cost.
e. Scrap – At net realizable price.
f. The company recognizes sales at the point of dispatch of goods to the customer. Sales are net
of duty and sales tax.
(i) Budgeting
The budget is prepared within the company itself. The budget is prepared by fixing an
estimate sale and accordingly all other expenses are fixed.

QUALITY ASSURANCE DEPARTMENT

Quality control is there to ensure that the product being sold is not in any way harmful
or defective. Quality control is a process employed to ensure a certain level of quality in a
product or service. It may include whatever actions a business deems necessary to provide for the
control and verification of certain characteristics of a product or service. The basic goal of
quality control is to ensure that the products, services, or processes provided meet specific
requirements and are dependable, satisfactory, and fiscally sound. Quality control involves the
examination of a product or process for certain minimum levels of quality. The goal of a quality
control team is to identify products or services that do not meet a company’s specified standards
of quality.

(a) Quality policy of the company

‘TRACO Cable Company Limited shall strive for continual improvement in its
performance, by meeting the needs of internal and external customers, complying with
regulations through the involvement of all its employees’.

Purpose of quality assurance department:

 To provide an instruction for functions of quality control department.

Objective of quality assurance department:

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 To provide a documented procedure for functions of quality control department.

Scope of quality assurance department:

 This procedure is applicable for functions of quality control department.

Procedure of quality assurance department:

 Testing and release or rejection of all incoming raw materials, packing materials, in-process /
intermediates and finished products as per specified specifications.
 Maintaining testing records as per standard procedures for raw materials, packing materials,
in-process / intermediates and finished products.

(b) Quality assurance in traco cable company

TRACO CABLE COMPANY has a well known label of quality products. Main duty of
quality assurance department is to ensure the products have reached its international standard
specification and also ensure that the quality is higher than the competitors. Traco has ISO
certification so that it is the responsibility to ensure the right quality for the products. It is also
the responsibility of the Quality Assurance Department to check whether the quality of
the finished goods match the International standard.

(c) Functions of the quality assurance department

The following are the major functions of the Quality Assurance Department :
 Incoming inspection
 In process inspection
 Finished goods inspection.
(d) Incoming inspection
Incoming inspection the inspection of raw materials that are brought into the
organization.
 The inspection and testing of raw materials carried against Raw Material receipt in
stores.
 Raw materials kept in the respective go downs are visually inspected.
 Samples are collected and tested according to the raw material specification.
(e) In process inspection and testing procedure

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Inspection and testing as per work instructions after the following stages of production.
 RBD
 fine wire drawing and insulating
 aging
 twinning
 stranding
 rewinding and printing
 co extrusion of conductors with fiber glass roving
 Records of inspection and testing after each stage shall be maintained.
 Identification tags in the drums, coils shall be marked with inspection status.
 In case of non conformity, non conformity report shall prepare and the material shall be kept
with “STOP CARD”. The non conformity report shall be forwarded to the head of
production.
 head of production and head of QA and IT will decide on the course of action to be taken for
disposal and the decision recorded in the “STOP CARD”
 The re worked material shall be re inspected to verify conformance.
(f) Final inspection and testing procedure

 Receiving finished materials from production department for inspection

 Carrying out tests on each drum of cable/ coil as per relevant work instruction
 Preparation of test reports and authorization
 Identification of accepted material with “QA PASSED / TESTED OK” stamp
 Holding up material with “STOP CARD”
 Decision on disposal
 Re inspection of re worked material.
(g) The various tests are as follows.

1. Tests for aluminium coil

 Breaking load
 Diameter is checked.
 Resistance
 Wrapping test.
2. Tests for steel wire

 Breaking load
 Diameter is checked.
 Wrapping test

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MAINTENANCEDEPARTMENT

TRACO cables have a well functioning maintenance department. The main duty of the
maintenance department is to maintenance and preservation of machinery and infrastructure. It is
the responsibility of the maintenance department to make sure that the factory premises are clean
and all the necessary facilities are available for a good working environment. The maintenance
department should ensure that all machines are well functioning for the production. The
machines which is used for production should be properly maintained and repaired whenever it
necessary. This will result in smooth working of the production process without any disruption.
(a) Responsibilities of maintenance department
The main responsibilities of maintenance department is to
 Timely inspection and servicing of equipment,
 Instructing workers on proper use of equipment,

 Raising timely indent for replacement of equipment or spare parts.

(b) Functions of the maintenance department

The main functions of the maintenance department are as follows:-
 Controlling maintenance personnel.
 Deciding inspection methods and routine.
 Developing and issuing standard instructions.

 Issuing maintenance work orders.

 Maintaining maintenance records.

 Measuring efficiency of maintenance.

 Planning maintenance work on a long term basis.

 Storing maintenance materials e.g., tools, spare parts, lubricants, etc.

(c) mainly there are two types of maintenance

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 Breakdown maintenance
 Preventive maintenance

Breakdown maintenance
Break down Maintenance is done when any of the machines in the production unit fails to
do its particular work. It refers to the repair work taken after the failure of a machine or
equipment. For example Replacement of the torn belt is a case of breakdown maintenance.
Breakdown maintenance is corrective maintenance as it is undertaken to restore equipment to an
accepted standard. It involves mainly the repair of defective equipment.

Procedure followed in the company:

 When there is a break down, the shift in charge first examines the nature of break down
and reports immediately on its occurrence to the Maintenance Department by sending the
“Requisition for Machine Maintenance” (RMM)
 Maintenance Department analyses the report and assigns a person for carrying out the
maintenance and records it in the Machine History book.
 If necessary the spares are arranged and the maintenance is carried out by the person
from the Maintenance Department.
 The authorized personnel from the Maintenance Department and User department shall
jointly inspect the machine/equipment after repair and RMM should be closed after
ensuring the smooth operation of the machine/equipment by the User department.

 The Engineer in charge keeps a record of the major maintenance works done. This is
record is known as the machine history book.
 The reports regarding the machine breakdown time shall be prepared and based in the
breakdown report, Monthly Machine availability will be presented in the review meeting
which will be held with the Unit chief and Maintenance Head.

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Preventive maintenance
Preventive Maintenance is a precautionary measure that is taken so as to prevent any kind of
machine breakdown in the future. It consists of routine actions taken in a planned manner to
prevent breakdowns.
There are two constituents of preventive maintenance they are:-
Lubrication: Lubrication ensures long and safe working of the equipment without
mishaps.
Inspection: Inspection facilitates detection of faults in equipment so that repairs
and replacements may be undertaken before the faults assume the proportion and shape
of a breakdown.

(d) Procedure followed in the company:

 The annual schedule for Preventive Maintenance for all critical machinery and auxiliary
equipments are prepared before the starting of the financial year. Also the detailed
monthly update schedule is prepared before the beginning of each month and distributed
to the concerned sections. This is done by the Head of Maintenance Department.
 The Engineer in charge sees that the instructions/check lists for carrying out inspection
and maintenance of each machines/auxiliary equipments are followed according to the
work instruction/check lists.
 Any suggestion/complaint that is brought up against the machine during the course of
preventive maintenance must be done with and records are properly maintained.
 Also during Preventive Maintenance the Engineer in charge does the calibration of
measuring devices which form part of the machines as and when required, as per the
work instructions/check list.
 After Preventive Maintenance is done the records of the work carried out and the spares
consumed is maintained in history books by the Engineer in charge.
 Also the modification made on the machine/equipment is recorded and maintained in the
history book.
 The status of Preventive Maintenance done is also shown on the equipment.

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PERSONNEL AND ADMINISTRATION DEPARTMENT

Personnel and Administration Department to providing a growth oriented, employee’s
friendly working environment. The Personnel and Administration Department takes care of
recruitment and selection as well as industrial relation. . It refers to a set of programs, activities
of functions designed to carry out in order to maximize both employee as well as organizational
effectiveness. A personnel administrative specialist provides support to the staff of the personnel
department by ensuring the department accomplishes assigned responsibilities on a daily basis.
This can include coordinating events, arranging meetings and travel plans, creating presentations,
preparing reports.
(a) Duties and functions of P&A department
 Utilize the human power at the right place at right time
 Develop the human resource by proper training.
 Administrative functions including canteen, security, housekeeping, vehicle for employees
 Determine and manage work environment

Basic functions of P&A department are as follows:-

 Discipline
 Grievance handling
 Industrial relations
 Job description
 Manpower planning
 Performance appraisal
 Recruitment
 Training
 Welfare function

(b) Functions of P&A department in Traco Cable Company

 Appointing of temporary hands/ casuals if required.
 Calculation of retirement/ Terminal benefits to retiring, resigning and terminated employees
or employees dying in service.

 Grievance handling.

 Issuing of promotions/ personal grade to each employee.

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 Maintaining of attendance of employees, late coming, early going, absenteeism, overtime etc.

 Maintaining of personnel files.

 Mede-claim policy, personal accidents claim etc.

 Providing facilities like housekeeping, lighting, telephone etc.

 Work connected with loans and advances of employees.

 Work related to Employment leave, deputation of employees to other organizations and

transfer of employees.

 Implementation of Long Term Agreement, promotion policy, pay revision, pay fixation etc.

(c)Time office
A well functioning Time office also functioned under the P&A department. Punching system is
following regularly
Main duty in time office is to maintain
 Attendance marking
 Salary details
 Leave marking
 Over time
 Short leave
 Late and cut etc.

(d) Recruitment and selection process in Traco cable company

Since TRACO is a Government Company, the recruitment is through Public Service

Commission (PSC) tests and through employment exchange. In this selection process it also
includes the selection of semi-skilled workers to the Grade 3 officer post. For the managerial
post advertisement are given in newspapers. According to the performance of the candidate in
the group discussions and interview, the selection is carried out. Recruitment and selection of the
managerial post were conducted in corporate office which is situated at Panampilly Nagar.
Unskilled workers will be promoted to the semi-skilled position after much experience and
training. The appointment procedure is as per government rules. Currently, no recruitment is
being done in the company since the existing employees are in excess.

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(e) Training
Training is very important for efficient performance in the job. There is a procedure called
TNA (Training Need Assessment). The higher level managers of all departments assess the
training needs of the employees under them. After this TNA report is forwarded to the Head
Office for approval. At the Head Office, the Managing Director decides as to what type of
training has to be provided. Based on the TNA an annual training plan is prepared in March of
every year. There are two types of training:
1. In house Training
Here, the training is given in the organization itself. It can be of two types, using Internal
Faculty and External Faculty.
2. External Training
Here the employees who need training are sent outside for training in institutions
that conduct training programs.
If there is more number of employees with training needs, the organization goes for an in-house
training programmed and if only a few employees need training, they are sent outside for
training. After the training programmed is completed the employee needs to submit a feedback
assessment of the training programmed based on how they can improve the performance. Later
the employee is observed as to whether any changes have happened in the performance of the
employee. It also helps in the promotion of employee.

(f) Performance appraisal

Performance appraisal is done twice a year. Its main objectives performance appraisal is:
 Personal grading of each person. Grading is done according to performance in their jobs.
 There are certain parameters that are established and according to these parameters the
employee’s job performance is measured.
 Parameters include: increase in productivity, inter personal relations, ability to adjust to
working environment etc.
 The main parameters are
1) Attendance,
2) Punctuality and
3) Job knowledge.

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It is then grouped into five categories such as poor, satisfactory, good, very good and
excellent. Points are given for each category and then grouped into grades. A skill matrix is
prepared and based on that training need is assessed.
(g) Wages and salaries
All employees are appointed in their respective scales of pay, which is finalized as part of
long term agreement made in periodic settlements. There is an increment in wages and
salaries every year. Here at TRACO, wages are also paid per work and additions are made
for overtime. Deductions are also made for reasons of leave, late entry etc.

(h) Discipline
There are certain standing orders set by the organization on the conduct of employees.
Standing orders works as the main guideline regarding the discipline. In case of misconduct, the
following steps are taken:
 First the management issues a note to the delinquent furnish replay on the allegation
regarding misconduct
 Then it sends a charge memo asking for explanation and the reasons for not taking
disciplinary action as per standing orders.
 An enquiry officer is appointed for a domestic enquiry considering the gravity of the
misconduct management witnesses as well as witnesses from the delinquent with opportunity
to give evidence and to produce documents related to the matter.
 Management side represented by presenting officer and delinquent side can be represented by
a co worker or an advocate.
 Then a decision is taken based on finding of the enquiry report
 Disciplinary authority communicates the enquiry report to the delinquent calling for his
explanation and if no satisfactory replay is furnished disciplinary action taken.
 Disciplinary actions like
 Barring increments without cumulative effect
 Barring increments with cumulative effect
 Warning MEMO or reprimand
Frequent instants of disciplinary action
 Absenteeism
 Failure to obey orders of superior’s affecting the work
 Causing damages to company property due to accidents
 Using abuse languages against superiors or co-workers
 Man handling other
(i) Incentives and fringe benefits

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Incentives are usually given to the workers. A production target will be given to the
workers. Incentives will be given accordingly by cash. Also, there is a special pay. Several fringe
benefits given by the company to employees such as regards fringe benefit they are:
 Milk allowance,
 Heavy duty allowance,

 Night shift allowance and

 Over time allowance.

 Special allowance.

(j) Welfare measures

There is a welfare fund provided by the company. On retirement, a fixed amount will be
given to the employees. This is applicable to the workers and officers. There is a provident fund
for the employees.

(k) Participatory management

As a part of participatory management, a production meeting is being held in the company.

All the trade unions are called together for discussions. There exists a works committee also in
TRACO. Under Industrial Disputes Act 1947, every establishment employing 100 or more
workers is required to constitute a works committee. Such a committee consists of equal number
of representatives of employer and workers. The main purpose of works committees is providing
measures for securing and preserving amity and good relations between the employer and
employees.

(l) Transfer and promotion

Transfer of the employees depends upon the vacancy created in the company. Job rotation is
not here. Promotion is done according to the performance appraisal.

(m) Trade unions

There are two recognized trade unions in the company. They are:
 TCEU –TRACO Cable Employees Union (CITU)

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 TCEA –TRACO Cable Employees Association (INTUC)

There are two more UN recognized but registered trade unions of AITUC and STU who
was not success full in the referendum.

(n) Manpower details

CATEGORY NUMBER

ADMINISTRATIVE AND MANAGERIAL 14

FOREMAN AND CHARGEHAND 11

SKILLED WORKMEN 45

SEMI-SKILLED WORKMEN 105

UNSKILLED 1

CASUAL LABOUR 8

1.3 OBJECTIVE OF THE STUDY

PRIMARY OBJECTIVES

 To forecast the working capital requirement of TRACO CABLE COMPANY for next two
years
 To examine the solvency and liquidity position of TRACO CABLE COMPANY

SECONDARY OBJECTIVES

 To study the activities in each department

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 To understand the production procedure

 To study the financial position of TRACO CABLE COMPANY

SIGNIFICANCE OF THE STUDY

Capital is the key input of the production, distribution and development. Therefore it can be
described as the life blood of industry and is pre- requisite for accelerating the process of
industrial development. Working capital is the nerve center of every business concern and
undertaking can work efficiently without adequate amount of working capital. Working capital
has to be regarded as one of the conditioning factors in the long run operation of the firm.
Because, the adequate amount of working capital or current assets, long term investments or
fixed assets cannot function.

The need of the study is to analyze the working capital position of the company and to
understand how the inventory, receivables management and cash management works. The study
in TRACO CABLE COMPANY is very important because of the scale of the company. The
study is very helpful to know the working capital management. It also helps in ascertaining how
the company performs in future. This study will help the firm to male projections of working
capital requirements for the next two years. This study also helps to understand the liquidity and
profitability of the company.

1.4 SCOPE OF THE STUDY

The scope of the study is limited to the working capital management of TRACO CABLE
COMPANY LTD, which is one of the Government undertakings functioning in Kerala. The
study has been done for a period of 5 years from 2012-2013 to 2015-2016

The study is designed to cover the analysis of working capital, liquidity and solvency position of
the company on the basis of figures taken from financial statement published by it. The study of
working capital is based on tools like ratio analysis, operating cycle, etc. using the study the

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firm can get the necessary information to analyze and formulate strategies to improve the
working capital position of the company

1.5 LIMITATION OF THE STUDY

Time is the most important constraint. The study is mainly based on secondary data. Findings
and conclusions of its study are based on the information given in the annual reports of the
company and are valued only with respect, to figures given there. Through adequate measures
have been taken to verify the reliability of the secondary data, possibility of normal errors
inherent to research, cannot be completely avoided.

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CHAPTER 2:

REVIEW OF LITEATURE

REVIEW OF LITERATURE

Sagan in his paper (1955), perhaps the first theoretical paper on the theory of working capital
management, emphasized the need for management of working capital accounts and warned that
it could vitally affect the health of the company. He realized the need to build up a theory of
working capital management. He discussed mainly the role and functions of money manager’s
operations were primarily in the area of cash flows generated in the course of business
transactions. However, money manager must be familiar with what is being done with the
control of inventories, receivables and payables because all these accounts affect cash position.
Thus, Sagan concentrated mainly on cash component of working capital.

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Realizing the death of pertinent literature on working capital management, Walker in his study
(1964) made a pioneering effort to develop a theory of working capital management by
empirically testing, though partially, three propositions based on risk-return trade-off of working
capital management. Walker studied the effect of the change in the level of working capital on
the rate of return in nine industries for the year 1961 and found the relationship between the level
of working capital and the rate of return to be negative.

Welter in his study (1970) stated that the working capital originated because of the global delay
between the moment expenditure for purchase of raw material was made and the moment when
payment were received for the sale of finished product. Delay centers are located throughout
the production and marketing functions. The study requires specifying the delay and working
capital tied up in each delay center with the help of information regarding average delay and
added value. He recognized that by more rapid and precise information through computers and
improved professional ability of management, saving through reduction of working capital could
be possible by reducing the length of global delay among the different delay centers. However,
better information and improved staff involve cost.

Agarwal (1983) also studied working capital management on the basis of sample of 34 large
manufacturing and trading public limited companies in ten industries in private sector for the
period 1966-67 to 1976-77. Applying the same techniques of ratio analysis, responses to
questionnaire and interview, the study concluded the all though the working capital per rupee of
sales showed a declining trend over the years but still there appeared a sufficient scope for
reduction investment in almost all the segments of working capital.

Chakraborty (1973) approached working capital as a segment of capital employed rather than a
mere cover of creditors. He emphasized that working capital is the fund to pay all the operating
expenses of running a business. He pointed out that return of capital employed, an aggregate
measure of overall efficiency in running a business, would be adversely by excessive working
capital. Similarly, too little working capital might reduce the earning capacity of the fixed capital
employed over the succeeding period. For knowing the appropriateness of working capital
amount, he applied Operating Cycle(OC) Concept.

Warren and Shelton (1971) applied financial simulation to simulate future financial statements
of a firm, based on a set of simultaneous equations. Financial simulation approach makes it

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possible to incorporate both the uncertainty of the future and the many interrelationships between
currentassets, current liabilities and other balance sheet accounts. The strength of simulation as a
tool of analysis is that it permits the financial manager to incorporate in his planning both the
most likely value of an activity and the margin of error associated with this estimate. Warren and
Shelton presented a model in which twenty simultaneous equations were used to forecast future
balance sheet of the firm including forecasted current assets and forecasted current liabilities.
Current assets and current liabilities were forecasted in aggregate by directly relating to firm
sales. However, individual working capital accounts can also be forecasted in a larger simulation
system. Moreover, future financial statements can be simulated over a range of different
assumptions to portray inherent uncertainty of the future.

Verma (1989) evaluated working capital management in iron and steel industry by taking a
sample of selected units in both private and public sectors over the period 1978-79 to 1985-86.
Sample included Tata Iron and Steel Company Ltd. (TISCO) in private sector and Steel
Authority of India Ltd. (SAIL) and Indian Iron and Steel Company, a wholly owned subsidiary
of SAIL, in public sector. By using the techniques of ratio analysis, growth rates and simple
linear regression analysis, the study revealed that private sector had certainly an edge over public
sector in respect of working capital management. Simple regression results revealed that working
capital and sales were functionally related concepts. The study further showed that all the firms
in the industry had made excessive use of bank borrowings to meet their working capital
requirement vis-à-vis the norms suggested by Tandon Committee.

Wilson N describes working capital is a financial metric which represent the amount of day by
day operating liquidity available to a business. Along with fixed assets such as plant and
equipment, working capital is considered a part of operating capital. It is calculated as current
assets minus current liabilities. A company can be endowed with assets and profitability, but
short of liquidity, if these assets cannot readily be converted into cash.

According to P Chandra, under a flexible policy the investment in current assets is high. This
means a huge balance of cash and marketable securities, carries large amount of inventories, and
grants generous terms of credits to customers. Under a restrictive policy, the investment in
current assets is low this means that the firms keeps a small balance of low. Cash and marketable
securities, manage with small amount of inventories and offer stiff terms of credit.

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According to the article of Joshua Kennon “The number one reason most people look at balance
sheet is to find out a company’s working capital position. It reveals more about the financial
condition of a business than almost any other calculation. It tells you what would be left if a
company raised all of its short term resources, and used them to pay off its short term liabilities.
The more working capital, the less financial stain a company experiences. By studying
company’s position, you can clearly see if it has the resources necessary to expand internally or
if it will have to turn to a bank and take on debt”.

Bhatt V. V. (1972) widely touches upon a method of appraising working capital finance
applications of large manufacturing concerns. It states that similar methods need to be devised
for other sectors such as agriculture, trade etc. The author is of the view that banks while
providing short-term finance, concentrate their attention on adequacy of security and repayment
capacity. On being satisfied with these two criteria they do not generally carry out any detail
appraisal of the working of the concerns.

Smith Keith V. (1973) believes that Research which concerns shorter range or working capital
decision making would appear to have been less productive. The inability of financial managers
to plan and control properly the current assets and current liabilities of their respective firms has
been the probable cause of business failure in recent years. Current assets collectively represent
the single largest investment for many firms, while current liabilities account for a major part of
total financing in many instances. This paper covers eight distinct approaches to working capital
management. The first three - aggregate guidelines, constraints set and cost balancing are partial
models; two other approaches - probability models and portfolio theory, emphasize future
uncertainty and interdepends while the remaining three approaches - mathematical programming,
multiple goals and financial simulation have a wider systematic focus.
Natarajan Sundar (1980) is of the opinion that working capital is important at both, the national
and the corporate level. Control on working capital at the national level is exercised primarily
through credit controls. The Tandon Study Group has provided a comprehensive operational
framework for the same. In operational terms, efficient working capital consists of determining
the optimum level of working capital, financing it imaginatively and exercising control over it.
He concludes that at the corporate level investment in working capital is as important as
investment in fixed assets. And especially for a company which is not growing, survival will be

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possible only so long as it can match increase in operational cost with improved operational
efficiency, one of the most important aspects of which is management of working capital.

Kaveri V. S. (1985) has based his writing on the RBI‟s studies on finances of large public
limited companies. This review of working capital finance refers to two points of time i.e., the
accounting years ending in 1979 and 1983 and is based on the data as given in the Reserve Bank
of India on studies of these companies for the respective dates. He observes that the Indian
industry has by and large failed to change its pattern of working capital financing in keeping with
the norms suggested by the Chore Committee. While the position of working capital
management showed some investment between 1975-79 and 1979-83, industries have not
succeeded in widening the base of long-term funds to the desired extent. The author concludes
with the observation that despite giving sufficient time to the industries to readjust the capital
structure so as to shift from the first method to the second method, progress achieved towards
this end fell short of what was desired under the second method of working capital finance.
N. C. Gupta study (1987) examined that the determinants of total inventory investments in
aluminum and non- ferrous semi firms in private sector. The data had been taken from Stock
Exchange, Official Directory, Mumbai for 9 years 1966-67 to 1974 -75. Variables considered
were current sale change, one -lagged sales change, inventory stock at the beginning, gross fixed
investment during the year, flow of net debt (external finance) and profits net of dividend and
taxes but the gross of depreciation provision ( retained earnings or internal finance) . Demand
factor and external finance turned out to be significant determinants of aluminum. Both retained
earnings and external finance were important determinants in case of non- ferrous semis.
Competition for investment funds between fixed and inventory investment was suggested both in
aluminum and non-ferrous semis.
Cohn and Pringle in their study (1973) illustrated the extension of Capital Asset Pricing Model
(CAPM) for working capital management decisions. They tried to interrelate long – term
investment and financing decisions and working capital management decisions through CAPM.
They emphasized that an active working capital management policy based on CAPM could be
employed to keep the firm’s shares in a given risk class. By risk, he meant unsystematic risk, the
only risk deemed relevant by CAPM. Owing to the lumpy nature for long -term financial
decision, the firm is continually subjects to shifts in the risk of its equity. The fluid nature of
working capital, can be exploited so as to offset or moderate such swings.

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Wilson N describes working capital is the financial metric which represent the amount of day by
day operating liquidity available to a business. Along with fixed asset such as plant and
equipment, working capital is considered a part of operating capital. It is calculated as current
assets minus current liabilities. A company can endowed with assets and profitability, but short of
liquidity if these assets cannot readily be converted into cash.
Bhattacharyya Hrishikes (1987) tries to develop a comprehensive theory and tool of working
capital management from the system’s point of view. According to this study, capital is often
used to refer to capital goods consisting of a great variety of things, namely, machines of various
kinds, plants, houses, tools, raw materials and goods-in-process. A finance manager of a firm
looks for these things on the assets side of the balance sheet. For capital he turns his attention to
the other side of the balance sheet and never commits a mistake. His purpose is to balance the
two sides in such a way that net worth of the firm increases without increasing the riskiness of
the business. This balancing is financing, i.e., financing the assets of the firm by generating
streams of liabilities continuously to match with the dynamism of the former. The study is an
improvement of the concept of Park and Gladson who were not able to capture the entire techno-
financial operating structure of a firm.

Rao K.V. and Rao Chinta (1991) observe the strong and weak points of conventional
techniques of working capital analysis. The result has been obviously mixed while some of the
conventional techniques which could comprehend the working capital behavior well; others
failed in doing the job properly. The authors have attempted to evaluate the efficiency of working
capital management with the help of conventional techniques i.e., ratio analysis. The article
concludes prodding future scholars to search for a comprehensive and decisive yardstick in
evaluating the working capital efficiency.

Hamlin Alan P. and Heath field David F. (1991) opine that working capital is necessary input
to the production process and yet is ignored in most economic models of production. The
implications of modeling the time dimension of production, and hence, the working capital
requirements of firms are explored, with the particular stress placed on the competitive
advantage gained by firms that retained flexibility in the time structure of their production. In
this article they have attempted to explore only this most basic role of time in the production
process and so focus is on the implications of explicitly recognizing the need for working capital

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CHAPTER 3:

RESEARCH METHODOLOGY

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.

“The procedures by which researchers go about their work of describing, explaining and
predicting phenomenon are called methodology”

TYPE OF RESEARCH

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This project “A Study on Working Capital Management in TRACO CABLE COMPANY” is

considered as an analytical research.

Analytical Research is defined as the research in which, researcher has to use facts or
information already available, and analyze these to make a critical evaluation of the facts,
figures,data or material.

RESEARCH DSIGN

The type of research used in this study is analytical. This is an attempt to evaluate the
performance of the company through the financial statement analysis by the financial data which
are disclosed in accounting policies.

SOURCE OF DATA

The data is collected for this study is only secondary sources.

Secondary data:

The secondary data are those which already collected and stored. Secondary data easily get
those secondary data from records, annual reports of the company etc. It will save the money,
time and efforts collect data.

The major source of data for this project was collected through annual reports of 5 year period
from 2012-2016 and some more information collected from internet and text sources.

SAMPLING DESIGN

Sampling unit : Financial statement

Sampling size : Last five years financial statement (period from 2012-2016)

TOOLS USED FOR ANALYSIS OF DATA

The data were analyzed using the following tools. They are:

 Schedule of changes in working capital

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 Ratio analysis
 Trend analysis
 Dupont analysis

WORKING CAPITAL AND THEORATICAL FRAMEWORK

Working Capital is the life blood of every business concern. Business firm cannot make
progress without adequate working capital. Inadequate working capital means shortage of inputs,
whereas excess of it leads to extra cost. So the quantum of working capital in every business firm
should be neither more nor less than what is actually required. The management has to see that
funds invested as working capital in their organization earn return at least as much as they would
have earned return if it invested anywhere else. At the time of increasing capital costs and scare
funds, the area of working capital management assumes added importance as it deeply influences
a firm's liquidity and profitability. A notable feature of utilization of funds is that they are of
recurring nature. Therefore, efficient working capital management requires a proper balance
between generation and utilization of these funds without which either shortage of funds will
cause obstruction in the smoother functioning of the organization or excess funds will prevent
the firm from conducting its business efficiently. So the main objective of working capital
management is to arrange the needed funds on the right time from the right source and for the
right period, so that a tradeoff between liquidity and profitability may be achieved. A firm may
exist without making profits but cannot survive without liquidity. The function of working
capital management organization is similar that of heart in a human body. Also it is an important
function of financial management. The financial manager must determine the satisfactory level

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of working capital funds and also the optimum mix of current assets and current liabilities. He
must ensure that the appropriate sources of funds are used to finance working capital and should
also see that short term obligation of the business are met well in time.
In financial literature there are two concepts of working capital. They are,

 Gross working capital

 Net working capital

Under gross concept, working capital means the total of current assets, viz, cash, marketable
securities, inventories of raw materials, work in progress, finished goods and receivables.

CIRCULATION SYSTEM OF WORKING CAPITAL

Working capital is also known as ‘circulating capital or current capital’. The funds in a business
are obtained from the issue of share, the issue of debentures, and other long-term arrangement
and from operations of business. A huge part of generated funds is used to acquire fixed assets,
viz, plant and machinery, land and some other fixed assets, while the remaining part of the
generated funds
is used for day to day operations of the business e.g. to pay wages and overheads
expenses for the raw materials processed. This makes possible the stocking
finished goods by whose sales either accounts receivables are created or cash is
received. In this process profits are generated. A part of the profit is used to pay tax,interest and
dividends, while the remaining part is ploughed back in the business.
Determinants of working capital:

Working capital requirements of a concern depends on a number of factors, each of which should
be considered carefully for determining the proper amount of working capital. It may be however
be added that these factors affect differently to the different units and these keeps varying from
time to time. In general, the determinants of working capital which re common to all
organization’s can be summarized as under:

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Nature of business:
Need for working capital is highly depends on what type of business, the firm in. there are
trading firms, which needs to invest a lot in stocks, ills receivables, liquid cash etc. public
utilities like railways, electricity, ete., need much less inventories and cash. Manufacturing
concerns stands in between these two extends. Working capital requirement for manufacturing
concerns depends on various factors like the products, technologies, marketing policies.

Production policies:
Production policies of the organization effects working capital requirements very
highly. Seasonal industries, which produces only in specific season requires more
working capital. Some industries which produces round the year but sale mainly done in some
special seasons are also need to keep more working capital.
Size of business:
Size of business is another factor to determines the need for working capital
Length of operating cycle:
Operating cycle of the firm also influence the working capital. Longer the orating
cycle, the higher will be the working capital requirement of the organization.
Credit policy:
Companies; follows liberal credit policy needs to keep more working capital with
them. Efficiency of debt collecting machinery is also relevant in this matter. Credit
availability form suppliers also effects the company’s working capital requirements. A company
doesn’t enjoy a liberal credit from its suppliers will have to keep more working capital
Business fluctuation:
Cyclical changes in the economy also influencing the working capital. During boom period, the
tendency of management is to pile up inventories of raw materials and finished goods to avail the
advantage of rising prove. This creates demand for more capital. Similarly during depression
when the prices and demand for manufactured goods. Constantly reduce the industrial and
trading activities show a downward termed. Hence the demand for working capital is low.
Current asset policies:
The quantum of working capital of a company is significantly determined by its

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current assets policies. A company with conservative assets policy may operate with relatively
high level of working capital than its sales volume. A company pursuing an aggressive amount
assets policy operates with a relatively lower level of working capital.
Fluctuations of supply and seasonal variations:
Some companies need to keep large amount of working capital due to their irregular sales and
intermittent supply. Similarly companies using bulky materials also maintain large reserves’ of
raw material inventories. This increase the need of working capital. Some companies
manufacture and sell goods only during certain seasons. Working capital requirements of such
industries will be higher during certain season of such industries period.
Other factors:
Effective co ordination between production and distribution can reduce the need for working
capital. Transportation and communication means. If developed helps to reduce the working
capital requirement.

EXCESS OR ADEQUATE WORKING CAPITAL

Every business concern should have adequate working capital to run its business
operations. It should not have either redundant / excess working capital or
inadequate/ shortage of working capital. Both excess as well as shortage of working capital
situations are bad for any business. However, out of the two, inadequacy or shortage of working
capital is more dangerous from the point of view of the firm.
Disadvantages of Redundant or Excess Working Capital:
1.Idle funds, non-profitable for business, poor ROI.
2. Unnecessary purchasing & accumulation of inventories over required level.
3. Excessive debtors and defective credit policy, higher incidence of B/D.
4.Overall inefficiency in the organization.
5. When there is excessive working capital, Credit worthiness suffers.
6. Due to low rate of return on investments, the market value of shares may fall.
Disadvantages or Dangers of Inadequate or Short Working Capital:
1Can not pay off its short-term liabilities in time.
2. Economies of scale are not possible.
3. Difficult for the firm to exploit favorable market situations.

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4. Day-to-day liquidity worsens.

5. Improper utilization the fixed assets and ROA/ROI falls sharply.
Need for working capital
The basic objective of financial management is to maximize shareholder’s wealth. For this it is
necessary to generate sufficient profits. The extent to it, which the profit can be earned, largely
depends on the magnitude of sales. However sales do not convert into cash instantly. There is
invariable the time gap between the sales of goods and receipts of cash. There is, therefore, a
need for working capital in the form of Current Assets to deal with the problem arising. Out of
the lack of immediate realization of cash again goods sold. Therefore, sufficient working capital
is necessary to sustain sales activity.
Working capital is needed for the following purpose:
1. For the purchase of raw material, components and spares.
2. To incur day to day expenses and overhead costs such as fuel, power and
office expenses, etc.
3. To meet selling costs as packing, advertisement etc.
4. To provide credit facilities to the customers.
5. To maintain the inventories of raw material, work in progress, stores and spare
and finished goods.
6. To pay wages and salaries

Working Capital Cycle

The working capital requirement of a firm depends, to a great extent upon the
operating cycle of the firm. The operating cycle may be defined as the time duration starting
from the procurement of goods or raw material and ending with the sales of realization. The
length and nature of the operating cycle may differ from one firm to another depending upon the
size and nature of the firm. In a trading concern, there is a series of activities starting from
procurement of goods (saleable goods) and ending with the realization of sales revenue (at the
time of sale itself in the case of cash sales and at the time of debtors realization in case of credit
sales).similarly in case of manufacturing concern, this series starts from the procurement of raw
materials and ending with the sales realization of finished goods. In both the cases, however,

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there is a time gap between the happening of the first event and the happening of the last event.
This time gap is called the operating cycle.
Thus, the operating cycle of a firm consists of the time required for the completion of the
chronological sequences of some or all of the following:
1. Procurement of raw material and services.
2. Conversion of raw material into work-in-progress.
3. Conversion of work-in-progress into finished goods.
4. sale of finished good(cash or credit)
5. Conversion of receivable into cash.

OPERATING CYCLE OF A MANUFACTURING FIRM

Cash

Debtors
Raw materials

Sales Work in progress

Finished goods

Operating cycle period

The length or time duration of the operating cycle of any firm can be defined as the sum of its
inventory conversion period and the receivable conversion period.
1. Inventory conversion period:

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It is the time required for the conversion of raw material into finished goods sales. In a
manufacturing firm the inventory conversion period is consisting of raw material conversion
period (RMCP), work-in-progress conversion period (WPCP) and finished goods conversion
period (FGCP).
Raw material conversion period refers to the period for which the raw material is
generally kept in stores before it is issued to the production department.
The work-in-progress conversion period (WPCP) refers to the period for which the raw
material remains in the production process before it is taken out as finished units.
The finished goods conversion period refers to the period for which finished units
remains in stores before being sold a customer.
2. Receivable conversion period (RCP):
It is the time required to convert the credit sales into cash realization. It refers to the period
between the occurrence of credit sales and collection from debtors.
The total of Inventory conversion period (ICP) and Receivable conversion period
(RCP) is also known as total operating cycle period (TOCP).the firm might be getting some
credit facilities from supplier of raw material, wages earners etc.This period for which the
payment to these parties are deferred or delayed is known as deferred period (DP).the net
operating cycle (NOC) of the firm is arrived at by deducting the DP from TOCP.

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CHAPTER :4
DATA ANALYSIS AND INTERPRETATION

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SCHEDULE OF CHANGES IN WOING CAPITAL

The information relating to the changes in current natured accounts between two periods of
time presented in the form of a statement is what we call as the schedule/ statement of changes in
working capital. Preparing the schedule/ statement of working capital requires us to present the
information relating to the current area of the balance sheet pertaining to the period in the format
and deriving and presenting the changes with them.

Schedule/ Statement of Changes in Working Capital for the period from 2012 to 2013

SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS 2012 2013 EFFECT ON W. C
INCREASE DECREASE

CURRENT ASSET

Inventory 1161.09 1738.48 577.39

Trade receivables 1873.72 2874.95 1001.23

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Cash& cash equivalance 297.73 594.92 297.19

Other current asset 4.18 68.01 63.83
Loans and advances 95.77 87.99 7.78
TOTAL C. A 3432.49 5364.35

CURRENT LIABILITIES

Short term borrowings 1131.36 2418.3 1286.94

Trade payable 522.67 1264.98 742.31
Other current liabilities 4259.12 1969.33 2289.79
Short term provision 391.32 519.38 128.06
TOTAL C.L 6304.47 6171.99

W.C ( C.A- C.L) -2871.98 -807.67 4229.43 2165.09

NET INCREASE IN W. C 2064.34 2064.34

-2871.98 -2871.98 4229.43 4229.43

INTERPRETATION
Working capital represents the difference between a firm’s current assets and current liabilities.
The impact of working capital changes are reflected in a firms cashflow statement. In the above

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statement shows that in 2012 and 2013 there is an increase in current liabilities more than current
assets. There is decrease in working capital position is the above two years. The has less cash
availability for their activities.

Schedule / Statement of Changes in Working Capital for the period from 2013 to 2014

SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS 2013 2014 EFFECT ON W. C
INCREASE DECREASE

CURRENT ASSET

Inventory 1738.48 1460.93 277.55

Trade receivables 2874.95 3214.68 339.73
Cash& cash equivalance 594.92 1747.47 1152.55
Other current asset 68.01 50.07 17.94
Loans and advances 87.99 257.05 169.06
TOTAL C. A 5364.35 6730.2

CURRENT LIABILITIES

Short term borrowings 2418.3 1860.95 557.35

Trade payable 1264.98 2672.16 1407.18
Other current liabilities 1969.33 1128.09 841.24
Short term provision 519.38 491.66 27.72
TOTAL C.L 6171.99 6152.86

W.C ( C.A- C.L) -807.67 577.34 3087.65 1702.67

NET INCREASE IN W. C 1384.98 1384.98
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577.34 577.34 3087.65 3087.65
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INTERPRETATION

The impact of working capital changes are reflected in a firms cash flow statement. Specially,
the operating cash flow section of the cash flow statement details changes in its short term
working capital needs. From the above schedule of changes in working capital statement shows
that in 2013 there is a decrease in working capital and in 2014 there is an increase in working
capital from negative to positive. That means the current asset is greater than the current
liabilities. In 2014 the working capital is 577.34. It requires additional cash to be tied up in
operation because an increase in current asset is a net inflow.

Schedule/ Statement of Changes in Working Capital for the period from 2014 to 2015

SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULARS 2014 2015 EFFECT ON W. C
INCREASE DECREASE

CURRENT ASSET

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Inventory 1460.93 1832.58 371.65

Trade receivables 3214.68 3132.2 82.48
Cash& cash equivalance 1747.47 1111.35 636.12
Other current asset 50.07 400.89 350.82
Loans and advances 257.05 50.27 206.78
TOTAL C. A 6730.2 6527.29

CURRENT LIABILITIES

Short term borrowings 1860.95 2363.73 502.78

Trade payable 2672.16 2365.98 306.18
Other current liabilities 1128.09 1941.15 813.06
Short term provision 491.66 549.4 57.74
TOTAL C.L 6152.86 7220.26

W.C ( C.A- C.L) 577.34 -692.97 1028.65 2298.96

NET INCREASE IN W. C 1270.31 1270.31

577.34 577.34 2298.96 2298.96

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INTERPRETATION
For well-run firms, managing working capital is simply a daily occurrence that can be handled
easily. From the above statement shows that in 2014 there is an increase in working capital of
577.34 lakhs. But in 2015 there is a decrease in working capital of -692.97 lakhs. It shows that an
increase in working capital means that the current asset is more than that of current liabilities. If
there is a decrease means that the liabilities of the company is greater than asset.

Schedule/ Statement of Changes in Working Capital for the period from 2015 to 2016
SCHEDULE OF CHANGES IN WORKING CAPITAL
PARTICULARS 2015 2016 EFFECT ON W. C
INCREASE DECREASE

CURRENT ASSET

Inventory 1832.58 2004.32 171.74

Trade receivables 3132.2 4573.04 1440.84
Cash& cash equivalance 1111.35 911.42 199.93
Other current asset 400.89 195.17 205.72
Loans and advances 50.27 59.79 9.52
TOTAL C. A 6527.29 7743.74

CURRENT LIABILITIES

Short term borrowings 2363.73 3443.17 1079.44

Trade payable 2365.98 2026.51 339.47

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Other current liabilities 1941.15 3604.15 1663

Short term provision 549.4 654.87 105.47
TOTAL C.L 7220.26 9728.7

W.C ( C.A- C.L) -692.97 -1984.96 1961.57 3253.56

NET INCREASE IN W. C 1291.99 1291.99

-1984.96 -1984.96 3253.56 3253.56

INTERPRETATION
Working capital represents the difference between a firms current assets and current liabilities.
The changes in working capital affects the firms cash flow statement. Specially the operating
cash flow. From the above statement both 2015 and 2016 the working capital figures shows a
decreasing trend. It shows that the working capital position of the company is low. The cause of
the decrease in working capital could be the result of several different factors, such as decreasing
sales revenue, mismanagement of inventory or problems with account receivables.

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RATIO ANAYSIS
Ratio analysis is a powerful tool for the analysis of financial performance. It is an important
technique of financial analysis. Ratio means that it is one number expressed in terms of another
can be worked out by dividing.
1. LIQUIDITY RATIOS

CURRENT RATIO
This is the most widely used ratio. It is the ratio of current asset to current liabilities. It shows
a firm ability to cover its current liabilities with its current assets. The current ratio is mainly
used to give an idea of the company’s ability to payback its current liabilities with its current
assets. As such, current ratio can be used to take rough measurement of a company’s
financial health. Current ratio of 2 : 1 is considered as ideal ratio or standard ratio. A high
ratio indicates sound solvency position and a low ratio indicates inadequate working capital.

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

YEAR CURRENT ASSET CURRENT LIABLITY RATIO

2012 3432.49 2504.47 1.37
2013 5364.35 6171.99 0.86
2014 6730.2 6152.86 1.09
2015 6527.29 7220.26 0.9
2016 7743.74 9728.7 0.79

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INTERPRETATION
The standard current ratio of a firm is 2:1. It provides a margin of safety to the creditors. It is
an index of the firm’s financial stability. It is observed from the table that during the past
years of current ratio of the company shows a decreasing trend. During 2012 to 2015 the
current ratio was below the standard. It shows the poor management of working capital by
the firm. A relatively high value of current ratio is considered as an indication that the
company has the ability to meet its short term obligation on time.

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QUICK RATIO
The acid test ratio or quick ratio is very similar to the current ratio except for the fact that it
excludes inventory. This is the ratio of liquid asset to liquid liabilities. It shows a firm ability
to meet current liabilities with its most liquid assets. 1:1 ratio is considered as ideal ratio for a
concern because it is wise to keep the liquid assets at least equal to the liquid liabilities at all
times. Liquid liabilities include all items of current liabilities except bank overdraft.
QUICK RATIO = QUICK ASSETS
CURRENT LIABILITIES

YEAR QUICK ASSET CURRENT LIABILITY RATIO

2012 2271.4 2504.47 0.89
2013 3625.87 6171.99 0.58
2014 5269.27 6152.86 0.85
2015 4694.71 7220.26 0.65
2016 5739.42 9728.7 0.58

INTERPRETATION
Quick ratio shows the relationship between quick assets and liabilities. The standard quick
ratio for a firm is 1: 1. In 2012 it was 2.15. After 2012 there is a decreasing trend, this is

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because of an increase in current liabilities and a decrease in quick assets mainly due to low
cash and bank balance.

ABSOLUTE LIQUIDITY RATIO

Absolute liquidity ratio relates cash, bank and marketable securities to the current
liabilities. Since absolute liquidity ratio lays down very strict and exacting standard of
liquidity, therefore, acceptable norm of this ratio is 50 percent. It means absolute liquid assets
worth one half of the value of current liabilities are sufficient for satisfactory liquid position
of a business.

ABSOLUTE LIQUIDITY RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITIES
YEAR LIQUID ASSETS CURRENT LIABLITY RATIO

2012 297.73 2504.47 0.11

2013 594.92 6171.99 0.09
2014 1747.47 6152.86 0.28
2015 1111.35 7220.26 0.15
2016 911.42 9828.7 0.09

INTERPRETATION

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The absolute liquidity ratio includes cash and cash at bank. Absolute liquidity ratio shows
the relationship between absolute liquid asset and current liabilities. In the year 2012 the ratio
is 0.001.The ratio was increased to 0.19 during 2013. That is increased to 0.28 in 2014. The
increasing absolute liquidity ratio is mainly due to increase in cash balance. But in 2015 the
ratio is dropped to 0.18. Here, the ratio shows a fluctuating trend. The company is not good
in a good liquidity position. Company is needed to maintain sufficient liquidity to ensure
smooth running of the firms operation.

WORKING CAPITAL POSITIN ANALYSIS

GROSS WORKING CAPITAL

The term gross working capital represents the amount fund invested in current assets. Thus gross
working capital is the working capital invested in total assets of the enterprise.Gross working
capital is the sum of all of a company's current assets (assets that are convertible to cash within a
year or less). Gross working capital includes assets such as cash, checking and savings account
balances, accounts receivable, short-term investments, inventory and marketable securities

Table 1
CURRENT ASSETS 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Inventories 985.61 955.38 1466.04 848.01 627.98

Sundry debtors 2922.85 3511.71 183.53 1430.43 1318.27

Cash &bank
balance 230.69 183.06 140.95 171.13 203.16
Other current
assets 4.99 4.44 4.33 4.6 4.76
Loans and 427.42 32.16 466.07 508.06 447.82

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advances

GROSS WORKING CAPITAL

Interpretation:

This table shows the components of asset of the company, which are the main parts of the
working capital. In this table the current asset of each items shows variations in each year.The
amount of working capital of the company is analyzed by knowing the position of each items in
the current assets.

CURRENT ASSET TURN OVER RATIO

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from
its assets by comparing net sales with average total assets. In other words, this ratio shows how
efficiently a company can use its assets to generate sales.

The total asset turnover ratio calculates net sales as a percentage of assets to show how many sales
are generated from each dollar of company assets. For instance, a ratio of .5 means that each dollar of

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assets generates 50 cents of sales.The asset turnover ratio is calculated by dividing net sales by
average total assets.

CURRENT ASSET TURN OVER RATIO = NET SALES

CURRENT ASSETS
TABLE 3
YEAR SALES CURRENT ASSETS RATIO

2011-2012 8249.72 4571.56 1.8

2012-2013 9086.42 5026.75 1.81

2013-2014 3430.76 3909.52 0.88
2014-2015 2924.36 2962.23 0.99
2015-2016 2464.61 2601.99 0.95

INTERPRETATION
Current asset ratio is analyzed by the sales is divided with the current assets of the company. In
the above following table shows that the company’s current asset turnover ratio is very poor. The
company shows a fluctuating trend in current asset turnover. In 2012 – 2013 there is an increase

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of 0.1. And 2013 to 2015 there is variation in current asset turnover. This ratio is poor due to
decrease in sales.

WORKING CAPITAL TURN OVER RATIO

Working capital turnover is a measurement comparing the depletion of working capital used to fund
operations and purchase inventory, which is then converted into sales revenue for the company. The
working capital turnover ratio is used to analyze the relationship between the money that funds operations
and the sales generated from these operations.

WORKING CAPITALTURN OVER RATIO = NET SALES

NET WORKING CAPITAL

TABLE 4
YEAR SALES NET WORKING CAPITAL RATIO
2011-2012 8249.72 2816.35 2.93

2012-2013 9086.42 3046.49 2.98

2013-2014 3430.76 1813.06 1.87
2014-2015 2924.36 1038.95 2.81
2015-2016 246.61 1433.99 1.72

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INTERPRETATION
The working capital turnover ratio measures how well a company is utilizing its working capital
for supporting a given level of sales. Here, only in 2012 , 2013 and 2015 shows an increasing
trends. The least working capital ratio of Traco Company ltd is 1.72 in 2016.This will leads to an
excessive amount of bad debts and obsolete inventory.

FIXED ASSET TURNOVER RATIO

Fixed asset ratio is calculated to measure the efficiency with which resources of a firm have been utilized.
Fixed asset includes net fixed asset that is oirginal cost depreciation to date and trade investment
including shares in subsidiaries. Long term fund included share capital reserves and long term loans.

FIXED ASSET TURN OVER RATIO = NET SALES

FIXED ASSETS

YEAR NET SALES FIXED ASSET RATIO

2012 5369.53 1297.99 4.13

2013 4747.81 1166.99 4.06
2014 11123.54 1136.73 9.78

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2015 12185.18 1389.55 8.76

2016 12262.89 1922 6.38

INTERPRETATION
This ratio is calculated to measure the adequacy of investment in fixed assets.Fixed assets ratio
should not be more than 1.Here the fixed assets ratio is more than 1 in all years, if the fixed asset
ratio is less than 1, it shows that a part of working capital has been financed through long term
funds.

INVENTORY TURN OVER RATIO

Every firm has to maintain a certain level of inventory or stock of finished goods so as to be able to meet
the requirements of the business. But the level of inventory should neither be too high nor too low.
Inventory turnover ratio of cost of goods sold by a business to its average inventory during a given
accounting period. This ratio reveals the number of times finished stock is turned over during a given
accounting period.

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STOCK TURNOVER RATIO = NET SALES

AVERAGE STOCK
TABLE 6

YEAR INVENTORY SALES RATIO

2011-2012 985.61 8249.72 8.38

2012-2013 955.38 9086.42 9.51
2013-2014 1466.04 3430.76 2.34
2014-2015 848.01 2924.61 3.45

2015-2016 627.98 2464.61 3.93

INTERPRETATION
The inventory turnover ratio signifies the liquidity of the inventory. A high inventory turnover ratio
indicates the efficiency of the management is converting stock into cash quickly, sound liquidity position
and quality of goods maintained. In 2012 and 2013 it is an increasing trend, but there is a variation in the
stock turnover during 2014 to 2016.

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FINISHED GOODS TURN OVER RATIO

Finished goods turnover ratio helps in ascertaining the efficiency of the firm to sell the finished
goods in the market. If the finished goods are turned over faster, the amount of locking up of
funds would be less. Finished goods turnover is also called inventory turnover is a ratio showing
how many times a company’s inventory is sold and replaced over a period of time.

FINISHED GOODS TURNOVER RATIO = NET SALES

FINISHED GOODS

TABLE 8

NET SALES FINISHED GOODS RATIO

2011-2012 8249.72 138.31 59.65

2012-2013 9086.42 35.74 245.23
2013-2014 3430.76 478.25 7.17
2014-2015 2924.36 141.97 20.6

2015-2016 2464.61 80.64 30.56

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INTERPRETATION
Finished goods turnover ratio helps in ascertaining the efficiency of the firm to sell the finished
goods in the market. In the table shows that in 2012 to 2013 it is very high. And in 2013 to 2014
it is very low. The finished goods ae turned over faster, the amount of locking up of funds would
be less.
FINISHED GOODS STORAGE PERIOD

When the goods is completed as to manufacturing but not yet sold or distributed to the end
user, it is called finished goods. This is the last stage for the processing of goods. The goods are
ready to be consumed or distributed. The cost of finished goods considered a short term asset.
The formula for calculating finished goods storage period by this formula.
FINISHED GOODS STORAGE PERIOD = CLOSING STOCK OF FINISHED GOODS * 365
SALES

TABLE 9

YEAR FINISHED GOODS SALES PERIOD

2011-2012 138.31 8249.72 6.12

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2012-2013 35.74 9086.42 1.44

2013-2014 478.25 3430.76 50.88
2014-2015 141.97 2924.61 17.72

2015-2016 80.64 2464.61 11.94

INTERPRETATION
Finished goods storage period shows fluctuating trend in Traco cable company ltd. Less
finished goods storage period shows that a high sales take with the company. High finished
goods storage period shows that there is less sales. There is a high storage of finished goods in
2013- 2014 year that is 50.88. And there is less storage of finished goods in 2012- 2013.

RAW MATERIAL STORAGE PERIOD

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Raw material turnover gives the number of times raw materials turns into sales in a year. The
reciprocal of raw material turnover gives average raw material holding period in percentage
terms

RAW MATERIAL STORAGE PERIOD = CLOSING STOCK OF RAW MATERIAL * 365

SALES

TABLE 10

Year Closing stock of raw material Sales Period

2011-2012 269.3 8249.72 11.92
2012-2013 200.24 9086.42 8.04
2013-2014 409.28 3430.76 43.54
2014-2015 143.89 2924.61 18
2015-2016 163.37 2426.61 24.19

INTERPRETATION

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Raw material storage period in Traco cable company ltd is showing a fluctuating trend. The
raw material storage period is high in the year 2013- 2014. It shows that on that year the sales of
the company is less and the high sales is in 2012 to 2014.

WORK IN PROGRESS CONVERTION PERIOD

Work in progress conversion period is the period required converting raw materials into
finished goods. Work in progress sometimes refers to as work in process, is the sum of all costs
put into the production process to manufacture products that are partially completed. Work in
progress refers to raw materials, labor and overhead costs incurred for products that are at
various stages of the production process. The calculation is done by using this formula
WORK IN PROGRESS CONVERSION PERIOD= CLOSING STOCK OF W I P * 365
SALES
TABLE 11

Year Closing stock of work in progress Sales Period

2011-2012 301.05 8249.72 13.32
2012-2013 462.04 9086.42 18.56
2013-2014 291.96 3430.76 31.06
2014-2015 322.3 2924.61 1.23
2015-2016 151.26 2426.61 22.4

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INTERPRETATION
Work in progress refers to raw materials, labor and overhead costs incurred for products that
are at various stages of the production process. Work in progress is showing a fluctuating
tendency during the period of study. It is high during the year 2014- 2015 and low during 2011-
2012

TRENG ANALYSIS

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Trend analysis helps in easily knowing the direction of movement of the activity of the
business i.e. whether upward or downward. The financial statements may be analyzed by
computing trends of series of information. Trend analysis determines the direction upwards or
downwards and involves the computation of the percentage relationship that each item bears to
the same item in the base year. In case of comparative statement, an item is compared with itself
in the previous year to know whether it has increased or decreased or remained constant.
Common size analysis is to ascertain whether the proportion of an item (say cost of revenue
from operations) is increasing or decreasing in the common base (say revenue from operations).
But in case of trend analysis, the behavior of the same item over a given period, during the last 5
years. The trend percentages are calculated in relation to this base year. If a figure in other year
is less than the figure in base year, the trend percentage will be less than 100 and it will be more
than 100 if figure is more than the base year figure.

Present year value

Trend Percentage = ____________________________________ * 100
Base year value

TREND ANALYSIS OF CURRENT ASSET

To analyze the CURRENT ASSET pattern of TRACO CABLE COMPANY LTD , 2012 is taken
as the base year.

YEAR CURRENT ASSET TREND

2012 3432.49 100
2013 5364.35 156.28
2014 6730.2 196.07
2015 6527.29 190.16
2016 7743.74 225.6

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INTERPRETION
The trend analysis of current asset in Traco cable company ltd from 2012 to 2016 shows a trend
percentage. Trend value for the current asset in 2012 to 2016 is an increasing trend. In the base
year the value of current asset is 3432.49. From 2013 to 2016 the trend for current asset is
increasing. It shows that the company has high liquid assets.

TREND ANALYSIS OF CURRENT LIABILITY

YEAR CURRENT LIABILITY TREND
2012 2504.7 100
2013 6171.99 246.39
2014 6152.86 245.67
2015 7220.26 288.29
2016 9728.7 388.45

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INTERPRETATION
Current liabilities are a company’s debts or obligations that ae due within one year, in the base
year to 2016 there is an increasing trend in current liabilities. It shows that the company has to
maintain a balance between the assets and the liabilities. The trend is high in 2016 that is 388.45.

TREND ANALYSIS IN SALES

YEAR SALES TREND
2012 5369.53 100
2013 4747.81 88.42
2014 11123.54 207.16
2015 12185.18 226.93
2016 12262.89 228.37

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INTERPRETATION
Sales is activity related to selling or the amount of goods or service sold in a given time period.
Sales trend analysis helps to determine the company that meets sales goal. The least trend
percentage in sales is 88.42. And from 2014 to 2016 there is an increasing trend.

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DU PONT ANALYSIS
DUPONT analysis is a method of performance measurement that was started by the
DUPONT corporation in the 1920s. With this method, assets are measured at their gross book
value rather than at net book value to produce a higher return on equity (ROE). It is also known
as DUPONT identity. According to Dupont analysis, ROE is affected by three things, operating
efficiency, which is measured by profit margin; asset use efficiency, which is measured by total
asset turn over; and financial leverage, which is measured by the equity multiplier.

RETURN ON NET ASSET

The return on net asset is a measure of financial performance calculated as net income divided
by fixed asset and net working capital. RONA can be used to discern how well a company is
performing versus others in its industry. It reveals if a company and its management are
deploying assets in economically valuable ways or if the company performing poorly versus its
peers.

YEAR EBIT NA RONA

2012 279.37 -2173.3 -0.12
2013 773.93 1973.54 0.39
2014 406.12 863.54 0.47
2015 960.99 59.95 16.02
2016 969.89 -909.94 1.06

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RETURN ON EQUITY

This is also known as return on net worth or return on proprietors’ funds. The preferred
shareholders get the dividend on their holdings at a fixed rate and before dividend to equity
shareholders, the real risk remains with the equity shareholders. Moreover, they are the owners
of total profits earned by the firms after paying dividends on preference shares. Therefore, this
ratio attempts to measure the firm’s profitability in terms of return to equity shareholders. This
ratio is calculated by dividing the profit after taxes and preference dividend by the equity
capital.
ROE = PROFIT AFTER TAX
NET WORTH

YEAR PAT NW ROE

2012 279.37 -2173.3 -0.12
2013 773.93 1973.54 0.39
2014 406.12 863.54 0.47
2015 960.99 59.95 16.02
2016 969.89 -909.94 1.06

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BALANCE SHEET ANALYSIS

BALANCE SHEET AS ON 31ST MARCH 2012

LIABILITY AMOUNT ASSET AMOUNT

SHARE HOLDERS FUND NON- CURRENT ASSET

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Share capital 1301.87 Fixed asset

Reserve and surplus -3678.23 Tangible asset 450.02
Share application money 173.12 Capital work in progress 847.97
Non – current investment 0.02
NON- CURRENT LIABILITY Long term loans and advances 11.07
Long term borrowings 740.4
CURRENT ASSETS
CURRENT LIABILITY Inventories 1161.09
Short term borrowings 1131.36 Trade receivables 1873.72
Trade payable 522.67 Cash and cash equivalents 297.73
Other current liability 4259.12 Short term loans and advances 95.77
Short term provisions 391.32 Other current asset 4.18

TOTAL 4841.57 4841.57

AS ON 2013

BAANCE SHEET AS ON 31 ST MARCH 2013

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EQUITY AND LIABILITIES ASSETS

Shareholder's fund Non current assets

Share capital 1301.81 FIXED ASSETS

Reserves and surplus -4452.17
SHARE APPLICATION 2705.65 Tangiable aasets 1166.85
MONEY
NON CURRENT LIABILITIES Capital work-in progress 0.14
Non-current investments 0.02
Long term borrowings 955.30 Long- term loans and advances 151.22

CURRENT LIABILITIES CURRENT ASSETS

Short term borrowings 2418.30 Inventories 1738.48

Trade payables 1264.98 Trade receivables 2874.95
Other current liablities 1969.33 Cash and cash equivalents 594.92
Short term provisions 519.38 Short term loans and advances 87.99
Other current assets 68.01

TOTAL 6682.58 TOTAL 6682.58

AS ON 2014

BAANCE SHEET AS ON 31 ST MARCH 2014

EQUITY AND LIABILITIES ASSETS

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Shareholder's fund Non current assets

Share capital 5721.82 FIXED ASSETS

Reserves and surplus -4858.28
Tangiable aasets 1062.33
NON CURRENT LIABILITIES Capital work-in progress 7.40
Non-current investments 0.02
Long term borrowings 1383.13 Long- term loans and advances 532.58

CURRENT LIABILITIES CURRENT ASSETS

Short term borrowings 1860.95 Inventories 1460.93

Trade payables 2672.16 Trade receivables 3214.68
Other current liablities 1128.09 Cash and cash equivalents 1747.47
Short term provisions 491.66 Short term loans and advances 257.05
Other current assets 50.07

TOTAL 8399.53 TOTAL 8399.53

AS ON 2015

BAANCE SHEET AS ON 31 ST MARCH 2015

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EQUITY AND LIABILITIES ASSETS

Shareholder's fund Non current assets

Share capital 5721.82 FIXED ASSETS

Reserves and surplus -
5661.87
Tangiable aasets 1089.22
NON CURRENT LIABILITIES Capital work-in progress 300.33
Non-current investments 0.02
Long term borrowings 1276.38 Long- term loans and advances 639.83

CURRENT LIABILITIES CURRENT ASSETS

Short term borrowings 2363.73 Inventories 1832.58

Trade payables 2365.98 Trade receivables 3132.2
Other current liablities 1941.15 Cash and cash equivalents 1111.35
Short term provisions 549.4 Short term loans and advances 400.89
Other current assets 50.27

TOTAL 8556.59 TOTAL 8556.59

AS ON 2016

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BALANCESHEET AS ON 31-03-2016

LIABILITIES AMOUNT ASSET AMOUNT

EQUITY AND LIABILITIES NON CURRENT ASSETS

Share capital 5721.82 Tangible assets 1818.04

Reserves and surplus -6631.76 Capital work in progress 103.96
Non current investment 0.02
NON CURRENT LIABILITIES Long terms loans and advances 236.38

Long term borrowings 1083.38 CURRENT ASSETS

CURRENT LIABILITIES Inventories 2004.32

Trade receivables 4573.04
Short term borrowings 3443.17 Cash and cash equivalance 911.42
Trade payable 2026.51 Short term loans and advances 195.17
Other current liabilities 3604.15 Other current assets 59.79
Short term provisions 654.87

TOTAL 9902.14 TOTAL 9902.14

FINDING , SUGGESTIONS AND CONCLUTION

The various findings, suggestions and conclusion of the study have been stated in the concerned
part of the analysis itself. However, it is considered relevant to reproduce the summary of
important findings and conclusion.

FINDINGS

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 Schedule of changes in working capital in each year shows variations. In 2012 it is

negative, that means the current liability is more than current asset. Only in 2014 the
working capital shows a positive trend. In 2015 and 2016 also it is negative trend.

 The current ratio shows fluctuation. The ideal current ratio is 2:1. But in each year the
ratio above from the ideal ratio. That means the company has poor management in
working capital

 The quick ratio of the company shows variations. The standard ratio is 1:1. The quick
ratio is high because the increasing of current liabilities.

Absolute liquidity ratio shows that the liquidity assets is decrease and current liabilities increases
in each year 2012 to 2016. It is due to decrese in cash balance.

The gross working capital of the company is showing a fluctuating trend. In the year

2012 to 2016 the current assets of the company is varying.

Current asset turnover ratio is poor because of decrease in sale. In 2013 to 2016 it shows

variations.

Fixed asset turnover ratio has been fluctuating in 2012 to 2016. This reveals that the

company efficiency in utilization of fixed asset is improving.

Inventory turnover ratio signifies the liquidity of the inventory. 2012 -2013 is an

increasing trend and variations starts from 2014 to 2016. It shows that the company has poor

managing in stock into cash quickly.

Finished goods storage period shows variation. High storage in 2013-2014, it means that

less sales happen during the year. Less storage period in 2012-2013, that means high sales during

the year. Ad also raw material storage period shows also fluctuation due to decrease and increase

in sales.

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Work in progress shows fluctuating trend. High during 2014-2015 and low during 2011-

2012.

Trend analysis in current asset shows an increasing trend. It shows that the company has

high liquidity position.

Trend analysis in current liability shows an increasing trend shows that the company had

a loss.

Trend analysis is sales shows an increasing trend. In 2013 is less that is 88.42. In 2014 to

2016 increasing trend

On the basis of DuPont analysis the Traco Cable Company’s return on total asset is less

than zero. And in 2015 it is 16 .02 It means the company is facing a high loss in that year. The

firm cannot able to obtain an adequate return on total asset.

Suggestions
To further improve in current ratio either increase the cash or bank balance or reduce the short

term liabilities
The company has to increase the return on share holder’s fund and it will help to strenghthen

the company in attracting future investment

Appropriate and immediate steps to improve the working capital position
The company should make more steps to meet competition by making significant investment in
technology.
The company must make more investment in advertising. That makes awareness to the
customers more about company’s product. It also helps to achieve more market share.
The company should borrow funds only if it is necessary for productive purpose. Through
reducing the loan amount the company can eliminate fixed interest charges.
If the company can sell more products, they can maintain the cash position or by reducing the
current liability by paying their amount from long term sources the cash position can be improved as
compared to current liability.

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The company should follow long term loans from banks and other financial institution or issue
long term securities.
Recruit efficient and skilled officials at the regional official who can make prompt effort in the
payment collection from the debtors.
To increase the efficiency of the receivables system computerization of the whole system is
preferable.

CONCLUTION
The study conducted on the topic working capital management undertaken in TRACO CABL
COMPANY LTD. The aim of the study to analyze the effectiveness of the company in managing
the different elements of working capital, the liquidity position of the company in meeting their
current obligation and the source of working capital during the past five years. Management of
working capital is concerned with the problems that arise in attempting to manage the current
assets, current liability and inter relation in that exist between them. The main tools used for this
study is schedule of changes in working capital, ratio analysis, trend analysis, dupont analysis. It
is a fact that the company is presently working in a loss, but the loss are not the result on the
managerial inefficiency or poor performance.

Bibliography
Books
 IM Pandey, Financial Management
 Prasanna Chadra, Financial Management, Tata McGraw Hill, New Delhi,2004
 Accountancy, S N Maheshwari, S K Maheshwari
 Sashi K.Gupta &R.K. Sharma, Management Accounting Principles and Practice
Reports
 Annual Reports of Traco Cable Company for the year 2011 to 2016
Websites

 www.tracocable.com

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