Anda di halaman 1dari 9

I Review

1. COMPANY :

Name : LINK UP TEXTILES LTD

Business : EXPORT GARMENTS

2. TOPIC :

Broad area : Finance

Exact title : A STUDY OF WORKING CAPITAL MANAGEMENT OF

LINK UP TEXTILES LTD

3. REVIEW OF LITERATURE :

• The research done by Herrfeldt B., “How to Understand Working Capital Management”
describes that “Cash is king”--so say the money managers who share the responsibility of
running this country's businesses. And with banks demanding more from their prospective
borrowers, greater emphasis has been placed on those accountable for so-called working
capital management. Working capital management refers to the management of current or
short-term assets and short-term liabilities. In essence, the purpose of that function is to make
certain that the company has enough assets to operate its business. Here are things you
should know about working capital management.
• The research done by, Samiloglu F. and Demirgunes K., “The Effect of Working Capital
Management on Firm Profitability: Evidence from Turkey” (2008) describes that the effect of
working capital management on firm profitability. In accordance with this aim, to consider
statistically significant relationships between firm profitability and the components of cash
conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed
manufacturing firms for the period of 1998-2007 has been analyzed under a multiple
regression model. Empirical findings of the study show that accounts receivables period,
inventory period and leverage affect firm profitability negatively; while growth (in sales)
affects firm profitability positively.
• The research done by, Hardcastle J., “Working Capital Management”, (2007) describes
that Working capital, sometimes called gross working capital, simply refers to the firm's total
current assets (the short-term ones), cash, marketable securities, accounts receivable, and
inventory. While long-term financial analysis primarily concerns strategic planning, working
capital management deals with day-to-day operations. By making sure that production lines
do not stop due to lack of raw materials, that inventories do not build up because production
continues unchanged when sales dip, that customers pay on time and that enough cash is on
hand to make payments when they are due. Obviously without good working capital
management, no firm can be efficient and profitable.

• The research done by, Thachappilly G., “Working Capital Management Manages Flow of
Funds”,(2009) describes that Working capital is the cash needed to carry on operations
during the cash conversion cycle, i.e. the days from paying for raw materials to collecting
cash from customers. Raw materials and operating supplies must be bought and stored to
ensure uninterrupted production. Wages, salaries, utility charges and other incidentals must
be paid for converting the materials into finished products. Customers must be allowed a
credit period that is standard in the business. Only at the end of this cycle does cash flow in
again.

• The research done by, R. Dubey “Working Capital Management-an Effective Tool for
Organizational Success” (2008) describes that The working capital in a firm generally arises
out of four basic factors like sales volume, technological changes, seasonal , cyclical changes
and policies of the firm. The strength of the firm is dependent on the working capital as
discussed earlier but this working capital is itself dependent on the level of sales volume of
the firm. The firm requires current assets to support and maintain operational or functional
activities. By current assets we mean the assets which can be converted readily into cash say
within a year such as receivables, inventories and liquid cash. If the level of sales is stable
and towards growth the level of cash, receivables and stock will also be on the high.

• The research done by, McClure B., “Working Capital Works” describes that Cash is the
lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund
operations, reinvest and meet capital requirements and payments. Understanding a company's
cash flow health is essential to making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management (WCM). Cash is
king, especially at a time when fund raising is harder than ever.. Analyzing a company's
working capital can provide excellent insight into how well a company handles its cash, and
whether it is likely to have any on hand to fund growth and contribute to shareholder value.

• The research done by, Gass D., “How To Improve Working Capital Management” (2006)
"Cash is the lifeblood of business" is an often repeated maxim amongst financial managers.
Working capital management refers to the management of current or short-term assets and
short-term liabilities. Components of short-term assets include inventories, loans and
advances, debtors, investments and cash and bank balances. Short-term liabilities include
creditors, trade advances, borrowings and provisions. The major emphasis is, however, on
short-term assets, since short-term liabilities arise in the context of short-term assets. It is
important that companies minimize risk by prudent working capital management.

• Working Capital and Financial Management Practices in the Small Firm Sector
MICHAEL J. PEEL IS A LECTURER IN accountancy and finance at Cardiff
Business
School, University of Wales and Nicholas Wilson is Professor of Credit Management at the
University of Bradford, England. Very little research has been conducted on the capital
budgeting and working capital practices of small firms. The purpose of this paper is to
present the results of a preliminary study on the working capital and financial management
practices of a sample of small firms located in the north of England. In general, the results of
the survey indicated that a relatively high proportion of small firms in the sample claimed to
use quantitative capital budgeting and working capital techniques and to review various
aspects of their company’s working capital.

• Impact of Working Capital Management Policies on Corporate Performance—An


Empirical Study by Sushma Vishnani, Bhupesh Kr. Shah (2007)
It is felt that there is the need to study the role of working capital management policies on
Profitability of a company. Conventionally, it has been seen that if a company desires to
take a greater risk for bigger profits and losses , it reduces the size of its working capital in
relation to its sales. If it is interested in improving its liquidity, it increases the level of its
working capital.
4. RESEARCH METHODOLOGY:

The research methodology is the way to systematically solve research problems. The research
methodology refers behavior and instrument that is used in performing the research operation
such as making observations, recording data, the technique of processing data.

For the purpose of study only five year data is considered commencing from 2005 to 2010.

OUTLINE OF THE STUDY

The management of working capital is very important. It involves the study of day-to- day
affairs of the company. The motive behind the study is to develop an understanding about the
working capital management in the running business organization and to help the company in
developing the efficient working capital management. Therefore, it helps in future planning and
control decisions.

OBJECTIVES OF THE STUDY:

The objectives of the study are as follows:

 To analyze the working capital management of the organization.


 To understand the current liquidity position of the organization.
 To understand the changes in net working capital.
 To know the future need of working capital in the running organization.
 To render recommendations for the effective management of working capital.

SCOPE OF THE STUDY:

The study mainly focuses on effective utilization working capital so that ultimately resources are
better utilized.

SOURCES OF DATA:

The sources of data means from where we have to get all the data. There are mainly two sources.
PRIMARY DATA

Which is collected fresh or first hand, and for the first time which is original in character.
Primary data can be collected through various methods. In this study, personal interviews with
senior officials of different departments with LINK UP TEXT TILES LTD and various members
of finance and accounts department of the company to support the secondary data.

SECONDARY DATA

Secondary data are those which have already been collected by someone else and have already
been passed through statistical process. In this project report, both types of data’s are going to
be use. The study of working capital management is based on secondary data and these
secondary data is suppose to be relates to the period of last five years. All the information is
available within the company itself in the form of records.

TOOLS USED FOR ANALYSIS

Ratio analysis, z-score model and trend analysis

5. INTRODUCTION :

DEFINITION WORKING CAPITAL MANAGEMENT

“Working capital management involves the relationship between a firm's short-term assets
and its short-term liabilities. The goal of working capital management is to ensure that a firm
is able to continue its operations and that it has sufficient ability to satisfy both maturing
short-term debt and upcoming operational expenses. The management of working capital
involves managing inventories, accounts receivable and payable, and cash.”
6. PROFILE OF THE COMPANY

• Established in 1993

• 2300 Employees

• Three factories and one factory in srilanka

• 72 Million $ Turnover in 2009 - 2010

• 10,000 m2 Factory space

• Manufacturing in India and Sri-Lanka

• 800 machines+ 200 machines in srilanka

• 10 Million pieces per annum

• A strong consumer proposition has been developed for the Primark brand and embodied
in the line “Look Good, Pay Less” which communicates Primark’s value-based offering
in a precise manner, to its core target audience

• They can offer access to the best selling styles in the UK…

• They can offer the same value proposition that we offer the likes of Primark, Tescos and
Wallmart
ORGANISATIONAL STRUCTURE:

MANAGING
DIRECTOR

MANAGER-
FINANCE COMPLIANCE
OPERATIONS

ACCOUNTS EXPORT TECHNICAL


IMPORT

ENVIORNMENT
QUALITY SAFETY
ASSURANCE

FABRIC PERSONNEL
STORES

TRIM STORES

PRODUCTION

ADMINISTRATI
ON

MERCHANDISIN
G/MARKETING
Link up textiles manufactures and exports of the readymade textile garments to buyers of USA,
UK and other foreign countries. It is catering the requirement of global standards by offering
qualitative product at a competitive price. They are committed to offering the best product to the
global markets. They strongly believe in practicing unique business strategies by following the
laws of the land. They provide conductive work environment, health, safety and welfare
measures to all employees of the organization

KEY PEOPLES:

 Mr. V. Sundharam – Managing Director

 Mr. G. Palani kumar - General Manager

 Mr. Fiyaz Ahmed – Chief Merchandiser

 Mr. P. Nagarajan – Manager Finance

 Mr. M. Chandrasekeran – Manager Compliance

CORPORATE CULTURE:

Hard work is the result of its growth and retention of customer’s satisfaction.
Transparency is prevalent in its every activity. Technology updation is taking place without any
iota of hesitation. This organization is totally dependent on human skills hence employee
development is very essential. This is achieved through proper training and development. There
is no compromise in achieving technology change and client satisfaction. The company
associates with business partners who follow high standards on business ethics for producing
qualitative garments.
VISION STATEMENT:

“The aim of the company is to become one of the most renowned readymade textile
garments manufacturing facility and to possess unique identity for its highest standards of quality
and highest level of productivity in order to sustain in global competition”.

MISSION STATEMENT:

The company mission statement says that ”people is their strength and plan to achieve the
vision of the organization by following corporate social responsibilities with best management
practices, for producing proper qualitative products and thus making the most preferred factory
for customers to place orders comfortably without any hesitations”