Effect of Working CapitalManagement on Profitability of Reliance Communication

PROJECT PROPOSAL
Student Name: Prerna Shree Student No: PTM1101002 Email Address: prerna.shree77@gmail.com Award Name: MBA (FINANCE) Site Name: APIIT SD INDIA, PANIPAT Title of project: Impact of Efficient Working Capital Management for Profitability of Reliance Communication in Delhi. Proposed Supervisor (if known): Mr. Geetainder Handa Please record which modules your topic is related to: Managing Risk, Managing Finance

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Effect of Working CapitalManagement on Profitability of Reliance Communication

ABSTRACT
A firm, disregarding the size, type, and scale, should maintain the liquidity and profitability while operating in a daily basis. Liquidity is a precondition to ensure that firms are able to meet its short-term obligations and its continued flow can be guaranteed from a profitable venture. The importance of cash as an indicator of continuing financial health should not be surprising in view of its crucial role within the business. (Padachi, 2006) This requires that business must be run both efficiently and profitably. In the process, an asset-liability mismatch may occur which may increase firms profitability in the short run but at a risk of its insolvency. On the other hand, too much focus on liquidity will be at the expense of profitability. Therefore, the working capital of the firm should be set on return trade-offs inherent in alternative working capital policies. However, how can be a working capital management is efficient in a firm?

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Effect of Working CapitalManagement on Profitability of Reliance Communication

TABLE OF CONTENT
1. Introduction ................................................................................................................ 3-10 1.1 Overviews of the Working Capital Management ................................................ 3 1.2 Types of Working Capital Management .............................................................. 4 1.3 Theory of Working Capital Management......................................................... 5-6 1.4 Determinants of Working Capital Management .............................................. 7-8 1.5 Policy & Principals of Working Capital Management ..................................... 8-9 1.6 Overview of Company ...................................................................................... 10 2. Aims & Objectives .........................................................................................................11 3. Literature review ...................................................................................................... 11-14 4. Research Methodology ............................................................................................ 14-15 5. Deliverables ............................................................................................................. 15-17 6. Industrial Collaboration .................................................................................................18 7. Resources ....................................................................................................................... 19 8. Gantt chart ................................................................................................................ 20-22 9. References ................................................................................................................ 23-25 9.1 Appendix .................................................................................................................... Questionnaire ..................................................................................................... 26-27

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Effect of Working CapitalManagement on Profitability of Reliance Communication

INTRODUCTION
Working Capital- Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. (Satish, 2007) A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds 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. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Working capital management involves the relationship between a firm's short-term assets and its short-term liabilities. Concepts of Working Capital And Its Management Working capital is that part of companys capital which is used for purchasing raw material and involve in sundry debtors. We all know that current assets are very important for proper working of fixed assets. Suppose, if you have invested your money to purchase machines of company and if you have not any more money to buy raw material, then your machinery will no use for any production without raw material. From this example, you can understand that working capital is very useful for operating any business organization. We can also take one more liquid item of current assets that is cash. If you have not cash in hand, then you cannot pay for different expenses of company, and at that time, your many business works may delay for not paying certain expenses. If we define working capital in very simple form, then we can say that working capital is the excess of current assets over current liabilities. (Buck, 2002)

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Effect of Working CapitalManagement on Profitability of Reliance Communication Types of Working Capital Management 1. Gross working capital - Total or gross working capital is that working capital which is used for all the current assets. Total value of current assets will equal to gross working capital. 2. Net Working Capital - Net working capital is the excess of current assets over current liabilities. Net Working Capital = Total Current Assets Total Current Liabilities 3. Permanent Working Capital - Permanent working capital is that amount of capital which must be in cash or current assets for continuing the activities of business. 4. Temporary Working Capital - Sometime, it may possible that we have to pay fixed liabilities, at that time we need working capital which is more than permanent working capital, then this excess amount will be temporary working capital. In normal working of business, we dont need such capital. (Pandey, 2008) Theory of Working Capital Management The interaction between current assets and current liabilities is, therefore, the main theme of the theory of working capital management. Working capital management is concerned with the problem that arises in attempting to manage the current assets, the current liabilities and the inter relationship that exist between them. (Prasanna, 1984).The goal of working capital management is to manage a firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. Factors Influencing Working Capital Requirement Numerous factors can influence the size and need of working capital in a concern. So no set rule or formula can be framed. It is rightly observed that, There is no precise way to determine the exact amount of gross or net working capital for every enterprise. The data and problem of each company should be analyzed to determine the amount of working capital. (Alok, 2001)

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Effect of Working CapitalManagement on Profitability of Reliance Communication The optimum level of current assets depends upon following determinants:- (Pandey, 2008) 1. Nature of business - Trading and industrial concerns require more funds for working capital. Concerns engaged in public utility services need less working capital. 2. Conditions of supply - If the supply of inventory is prompt and adequate, less funds will be needed. But, if the supply is seasonal or unpredictable, more funds will be invested in inventory. 3. Production policy - In case of seasonal fluctuations in sales, production will fluctuate accordingly and ultimately requirement of working capital will also fluctuate. However, sales department may follow a policy of off-season discount, so that sales and production can be distributed smoothly throughout the year and sharp, variations in working capital requirement are avoided. 4. Seasonal Operations - It is not always possible to shift the burden of production and sale to slack period. For example, in case of sugar mill more working capital will be needed at the time of crop and manufacturing. 5. Credit Availability - If credit facility is available from banks and suppliers on favorable terms and conditions, less working capital will be needed. If such facilities are not available more working capital will be needed to avoid risk. 6. Credit policy of enterprises - In some enterprises most of the sale is at cash and even it is received in advance while, in other sales is at credit and payments are received only after a month or two. In former case less working capital is needed than the later. The credit terms depend largely on norms of industry but enterprise some flexibility and discretion. In order to ensure that unnecessary funds are not tied up in book debts, the enterprise should follow a rationalized credit policy based on the credit standing of the customers and other relevant factors. 7. Growth and expansion - The need of working capital is increasing with the growth and expansion of an enterprise. It is difficult to precisely determine the relationship between volume of sales and the working capital needs. The critical fact, however, is that the need for increased working capital funds does not follow growth in business activities but precedes it. It is clear that advance planning is essential for a growing concern. 8. Price level change with the increase in price level more and more working capital will be needed for the same magnitude of current assets. The effect of rising prices will be different for different enterprises.

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Effect of Working CapitalManagement on Profitability of Reliance Communication 9. Circulation of working capital Less working capital will be needed with the increase in circulation of working capital and vice-versa. Circulation means time required to complete one cycle i.e. from cash to material, from material to work-in-progress, form work-in-progress to finished goods, from finished goods to accounts receivable and from accounts receivable to cash. 10. Volume of sale - This is directly indicated with working capital requirement, with the increase in sales more working capital is needed for finished goods and debtors, its vice versa is also true. 11. Liquidity and profitability - There is a negative relationship between liquidity and profitability. When working capital in relation to sales is increased it will reduce risk and profitability on one side and will increase liquidity on the other side. 12. Management ability Proper co-ordination in production and distribution of goods may reduce the requirement of working capital, as minimum funds will be invested in absolute inventory, non-recoverable debts, etc. 13. External Environment with development of financial institutions, means of communication, transport facility, etc., needs of working capital is reduced because it can be available as and when needed. Principles of Working Capital Management The following are the principles of working capital management: - (Kulkarni, 1983) 1. Principles of the risk variation Risk here refers to the inability of firm to maintain sufficient current assets to pay its obligations. If working capital is varied relative to sales, the amount of risk that a firm assumes is also varied and the opportunity for gain or loss is increased. In other words, there is a definite relationship between the degree of risk and the rate of return. As a firm assumes more risk, the opportunity for gain or loss increases. As the level of working capital relative to sales decreases, the degree of risk increases. When the degree of risk increases, the opportunity for gain and loss also increases. Thus, if the level of working capital goes up, amount of risk goes down, and vice-versa, the opportunity for gain is like-wise adversely affected. 2. Principle of equity position According to this principle, the amount of working capital invested in each component should be adequately justified by a firms equity position. Every rupee invested in the working capital should contribute to the net worth of the firm. APIIT SD INDIA
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Effect of Working CapitalManagement on Profitability of Reliance Communication 3. Principle of cost of capital This principle emphasizes that different sources of finance have different cost of capital. It should be remembered that the cost of capital moves inversely with risk. Thus, additional risk capital results in decline in the cost of capital. 4. Principle of maturity of payment A company should make every effort to relate maturity of payments to its flow of internally generated funds. There should be the least disparity between the maturities of a firms short-term debt instruments and its flow of internally generated funds, because a greater risk is generated with greater disparity. A margin of safety should, however, be provided for any short-term debt payment.

Operating Cycle
The duration of time required to complete the following sequence of events, in case of manufacturing firm, is called the operating cycle: (Khan and Jain, 2011) 1. Conversion of cash into raw materials. 2. Conversion of raw materials into work-in-progress. 3. Conversion of work in process into finished goods. 4. Conversion of finished goods into debtors and bills receivables through sales. 5. Conversion of debtors and bills receivables into cash. The length of cycle will depend on the nature of business. Non manufacturing concerns, service concerns and financial concerns will not have raw material and work-in-process so their cycle will be shorter. Financial Concerns have a shortest operating cycle.

Source: http://www.tutor2u.net APIIT SD INDIA

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Effect of Working CapitalManagement on Profitability of Reliance Communication In working capital management, we analyze following three points Ist Point: What is the need for working capital? After study the nature of production, we can estimate the need for working capital. If company produces products at large scale and continues producing goods, then company needs high amount of working capital. (Gopala, 2006) 2nd Point: What is optimum level of Working capital in business? Have you achieved the optimum level of working capital which has invested in current assets? Because high amount of working capital will decrease the return on investment and low amount of working capital will increase the risk of business. So, it is very important decision to get optimum level of working capital where both profitability and risk will be balanced. For achieving optimum level of working capital, finance manager should also study the factors which affect the requirement of working capital and different elements of current assets. If he will manage cash, debtor and inventory, then working capital will automatically optimize. 3rd Point: What are main Working capital policies of businesses? Policies are the guidelines which are helpful to direct business. Finance manager can also make working capital policies. (Jain, 2005) 1. Liquidity policy: - Under this policy, finance manager will increase the amount of liquidity for reducing the risk of business. If business has high volume of cash and bank balance, then business can easily pays his dues at maturity. But finance manger should not forget that the excess cash will not produce and earning and return on investment will decrease. So liquidity policy should be optimized. 2. Profitability policy: - Under this policy, finance manger will keep low amount of cash in business and try to invest maximum amount of cash and bank balance. It will sure that profit of business will increase due to increasing of investment in proper way but risk of business will also increase because liquidity of business will decrease and it can create bankruptcy position of business. So, profitability policy should make after seeing liquidity policy and after this both policies will helpful for proper management of working capital.

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Effect of Working CapitalManagement on Profitability of Reliance Communication Company Profile Reliance Communications Limited (Reliance Communications or the Company) is Indias largest integrated communications service provider in the private sector with over 158 million individual, enterprise, and carrier customers. We operate pan-India across the full spectrum of wireless, wire line, and long distance, voice, data, video and internet communication services. We also have an extensive international presence through the provision of long distance voice, data and internet services and submarine cable network infrastructure globally. Reliance Communications Limited is the flagship Company of Reliance Group, one of the leading business houses in India. Reliance Communications is Indias foremost and truly integrated telecommunications service provider. The Company, with a customer base of 142 million as on March 31, 2011 including over 2.5 million individual overseas retail customers, ranks among the Top 4 Telecom companies in the world by number of customers in a single country. Reliance Communications corporate clientele includes over 35,000 Indian and multinational corporations including small and medium enterprises and over 800 global, regional and domestic carriers. Reliance Communications has established a pan-India, next generation, integrated (wireless and wire line), convergent (voice, data and video) digital network that is capable of supporting best-of-class services spanning the entire communications value chain, covering over 24,000 towns and 600,000 villages. COMPETITIORS- Reliance Communications competes with 14 other mobile operators throughout India. They are Aircel, Airtel, BSNL, Idea, Loop Mobile, MTNL, MTS, Ping

Mobile, S Tel, Tata Do Como, Tata Indicom, Uninor, Videocon, Virgin Mobile (GSM & CDMA) and Vodafone. PRODUCTS- Fixed-line and mobile telephony, broadband and fixed-line internet services, digital television, IT and network services. GEOGRAPHICAL AREA- Reliance Communications was the first Indian company to make handsets so popular in India. It is present in almost the whole of country Andhra Pradesh, Bihar, Chennai, Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Mumbai, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (E), Uttar Pradesh (W), and West Bengal.

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Effect of Working CapitalManagement on Profitability of Reliance Communication

RESEARCH AIM AND OBJECTIVES

The main aim of the study is to investigate the impact of working capital of the companies with recognizable market shares. In order to facilitate the investigation, there are some objectives that should be considered. 1. To examine the impact of accounts receivables days, inventories days, accounts payable days and cash conversion cycle on return on total assets ( ROA) of Reliance Communication and 2. To analyze the trend in working capital needs of firms and to examine the causes for significant differences in managing assets & liabilities of Reliance Communication from its competitors.

LITERATURE REVIEW
The purpose of this chapter is to present a review of literature relating to the working capital management. Although working capital is an important ingredient in the smooth working of business entities, it has not attracted much attention of scholars. Whatever studies have

conducted, those have exercised profound influence on the understanding of working capital management good number of these studies which pioneered work in this area have been conducted abroad, following which, Indian scholars have also conducted research studies exploring various aspects of working capital. Special studies have been undertaken, mostly economists, to study the dynamics of inventory investment which often represented largest component of total working capital. As such the previous studies may be grouped into three broad classes (1) studies conducted abroad, (2) studies conducted in India, and (3) studies relating to determine of inventory investment. Studies on Working Capital Management Studies adopting a new approach towards working capital management are reviewed here. 1. Sagan (1955), in his paper 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 inefficient working capital management. Sagan pointed out the money managers 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 APIIT SD INDIA
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Effect of Working CapitalManagement on Profitability of Reliance Communication component of working capital. Sagan indicated that the task of money manager was to provide funds as and when needed and to invest temporarily surplus funds as profitably as possible in view of his particular requirements of safety and liquidity of funds by examining the risk and return of various investment opportunities. He suggested that money manager should take his decisions on the basis of cash budget and total current assets position rather than on the basis of traditional working capital ratios. This is important because efficient money manager can avoid borrowing from outside even when his net working capital position is low. The study pointed out that there was a need to improve the collection of funds but it remained silent about the method of doing it. Moreover, this study is descriptive without any empirical support. Realizing the dearth of pertinent literature on working capital management, 2. Walker (1964), made a pioneering effort to develop a theory of working capital management by empirically testing, though partially, three propositions based on riskreturn 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. On the basis of this observation, Walker formulated three following propositions: Proposition I If the amount of working capital is to fixed capital, the amount of risk the firm assumes is also varied and the opportunities for gain or loss are increased. Walker further stated that if a firm wished to reduce its risk to the minimum, it should employ only equity capital for financing of working capital; however by doing so, the firm reduced its opportunities for higher gains on equity capital as it would not be taking advantage of leverage. In fact, the problem is not whether to use debt capital but how much debt capital to use, which would depend on management attitude towards risk and return. On the basis of this, he developed his second proposition. Proposition II The type of capital (debt or equity) used to finance working capital directly affects the amount of risk that a firm assumes as well as the opportunities for gain or loss. Walker again suggested that not only the debt-equity ratio, but also the maturity period of debt would affect the risk-return trade-off. The longer the period of debt, the lower be the risk. For, management would have enough opportunity to acquire funds from operations to meet the debt obligations. But at the same time, long-term debt is costlier. On the basis of this, he developed his third proposition:

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Effect of Working CapitalManagement on Profitability of Reliance Communication Proposition III The greater the disparity between the maturities of a firms debt instruments and its flow of internally generated funds, the greater the risk and viceversa. Thus, Walker tried to build-up a theory of working capital management by developing three prepositions. However, Walker tested empirically the first proposition only. Walkers Study would have been more useful had he attempted to test all the three propositions. 3. Weston and Brigham (1972) further extended the second proposition suggested by Walker by dividing debt into long-term debt and short-term debt. They suggested that short-term debt should be used in place of long-term debt whenever their use would lower the average cost of capital to the firm. They suggested that a business would hold short-term marketable securities only if there were excess funds after meeting short-term debt obligations. They further suggested that current assets holding should be expanded to the point where marginal returns on increase in these assets would just equal the cost of capital required to finance such increases. 4. Vanhorne (1969), recognizing working capital management as an area largely lacking in theoretical perspective, attempted to develop a framework in terms of probabilistic cash budget for evaluating decisions concerning the level of liquid assets and the maturity composition of debt involving risk-return trade-off. He proposed calculation of different forecasted liquid asset requirements along with their subjective probabilities under different possible assumptions of sales, receivables, payables and other related receipts and disbursements. He suggested preparing a schedule showing, under each alternative of debt maturity, probability distributions of liquid asset balances for future periods, opportunity cost, maximum probability of running out of cash and number of future periods in which there was a chance of cash stock-out. Once the risk and opportunity cost for different alternatives were estimated, the form could determine the best alternative by balancing the risk of running out of cash against the cost of providing a solution to avoid such a possibility depending on managements risk tolerance limits. Thus, Vanhorne study presented a risk-return trade-off of working capital management in entirely new perspective by considering some of the variables probabilistically. However, the usefulness of the framework suggested by Vanhorne is limited because of the difficulties in obtaining information about the probability distributions of liquid-asset balances, the opportunity cost and the probability of running out of cash for different alternative of debt maturities.

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Effect of Working CapitalManagement on Profitability of Reliance Communication 5. Lambrix and Singhvi (1979), adopting the working capital cycle approach to the working capital management, also suggested that investment in working capital could be optimized and cash flows could be improved by reducing the time frame of the physical flow from receipt of raw material to shipment of finished goods, i.e. inventory management, and by improving the terms on which firm sells goods as well as receipt of cash. However, the further suggested that working capital investment could be optimized also (1) by improving the terms on which firms bought goods i.e. creditors and payment of cash, and (2) by eliminating the administrative delays i.e. the deficiencies of paper-work flow which tended to extend the time-frame of the movement of goods and cash. 6. Welter (1970), stated that working capital originated because of the global delay between the moment expenditure for purchase of raw material was made and the moment when payment was received for the sale of finished product. Delay centers are located throughout the production and marketing functions. The study requires specifying the delay centers and working capital tied up in each delay centre 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 by rescuing and/or favorable redistribution of this global delay among the different delay centers. However, better information and improved staff involve cost. Therefore, savings through reduction of working capital should be tried till these saving are greater or equal to the cost of these savings. Thus, this study is concerned only with return aspect of working capital management ignoring risk. Enterprises, following this approach, can adversely affect its short-term liquidity position in an attempt to achieve saving through reduction of working capital. Thus, firms should be conscious of the effect of law current assets on its ability to pay-off current liabilities. Moreover, this approach concentrated only on total amount of current assets ignoring the interactions between current assets and current liabilities. 7. Shin and Soenen ,(1998) use Net Trade Cycle (NTC) as a measure of working capital management in order to investigate the relationship between working capital management and corporate profitability. The NTC is calculated as (inventory + accounts receivable accounts payable)*365/Sales and represents the number of days sales that the company has to finance its working capital under ceteris paribus conditions.

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Effect of Working CapitalManagement on Profitability of Reliance Communication 8. Sathyamoorthi and Wally-Dima, (2008) On the other hand, it is possible to claim that the most popular measure of working capital management is the Cash Conversion Cycle (CCC). The CCC refers to the number of days between the expenditure of the firms cash for the purchase of raw materials and the collection of cash from sales. 9. Deloof, (2003) investigates the relationship between working capital management and firm profitability by using CCC as a measure of working capital management. He calculates CCC as (number of days accounts receivable + number of days inventory number of days accounts payable) and finds a significant negative relation between gross operating income and the number of days accounts receivable, inventories and accounts payable by using a sample of 1009 large Belgian non-financial firms for the 1992-1996 period. So he suggests that managers can create value for their shareholders by reducing the number of days accounts receivable and inventories to a reasonable minimum. 10. Lazaridis and Tryfonidis, (2006) find a negative relationship between profitability and CCC for 131 listed companies listed in Athens Stock Exchange for the period 2001 2004. Similar to the results of these studies focused on large firms. 11. Garcia-Teruel and Martinez-Solano, (2007) also indicates negative relationship between profitability and CCC for small and medium sized firms from Spain. 12. Zariyawati et al., (2009) investigate the relationship between CCC and profitability for the Malaysian firms for the period 1996-2006. 13. Dong and Su, (2010) analyzes the same relationship for the listed firms in Vietnam stock market for the period 2006-2008. And their findings are consistent with the similar studies.

RESEARCH METHODOLOGY
According to Clifford woody, research comprises defining and redefining problems, formulating hypothesis or suggested solution, collecting, organizing and evaluating data, making deduction and reaching conclusion, and at last carefully testing the conclusion to determine whether they fit the formulating hypothesis. (Clifford Woody, 2007) Research Design There are three types of research design: Exploratory research.
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Effect of Working CapitalManagement on Profitability of Reliance Communication Experimental research Descriptive research.

I will use descriptive research because it will help me to get effective result and analysis for my research. Collection of Data Data can be obtained from two important sources: 1) Primary data 2) Secondary Data Primary Data Primary data are the data that are collected afresh and for the first time. It can be collected from Observation, Interview, Schedule and Questionnaire. I will use Questionnaire method of data collection because generally it is relatively quick to collect information. I have prepared a questionnaire for collection of primary data and a sample of this is there in appendix. Secondary Data I will be using secondary data that are already collected and are only analyzed by different sources these sources are as follows:a) Corporate magazine b) Manuals of various companies c) Books, journals, newspaper d) Employment exchange The secondary data would be collected from financial statement, journal of national repute, books of national and international author as well as the annual report of the company. In addition to this internet access will make the study more effective and meaningful. Sample Design I will be using questionnaire method. I will personally send it to the company and will get the questionnaire filled from managers and employees.

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Effect of Working CapitalManagement on Profitability of Reliance Communication

Sample Size
My total population will be 60.I have used Judgmental sampling for sample size and I have selected 3 telecom sectors to fill my questionnaire. So, I will distribute among 20 respondents of each sector.

Sample Area
The sample area will be Delhi branch where employees are involved in reliance communication to generate profit for company.

Statistical Tools
The various statistical tools will be used such as data distribution tables, graphs and pie charts. Ratio analysis was used for determining the working capital management of RIL. Hypothesis testing through regression and correlation will be used.

DELIVARABLES
The deliverables from research proposal work are following:1. Dissertation proposal- Effect of working capital on profitability of Reliance Communication. 2. Introduction of Company Profile. 3. Concepts and theory of Working Capital Management. 4. Determinants of Working Capital Management. 5. What are main Working capital policies of businesses? 6. What are the principles of Working Capital Management? 7. Review of existing literature on Working Capital Management. 8. Dissertation Report.

COMMERCIAL/INDUSTRIAL COLLABORATION
This research will help the company: To know the better way to utilize the assets and liabilities. To evaluate the inventory, receivable and cash management performance. To assess the relative significance of various sources of financing of working capital.
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Effect of Working CapitalManagement on Profitability of Reliance Communication This work can be used by Indian Telecom Company as a methodological guideline about management of working capital Management. There will be organizations that willingly to collaborate the research projects. 1. Reliance Communication Ltd. 2. Dexter Consultancy Ltd. 3. UTBS India.

Limitation of Study
The study included collection of data through interaction with officials and the findings were based on the premise that the respondents have given correct information. The data was collected for 3 years. The limitation of the techniques of ratio analysis and trends analysis also hold well in their case. As Reliance Communication is private sector undertaking, sometimes we could not get the detailed information regarding financial aspects, which considered as confidential in nature.

RESOURCES
As a resource I will be using Primary & Secondary information. Primary data will be collected from standard questionnaire. Secondary data will be collected from: Research related documents & papers. Journal and articles in the field of Working Capital Management. College library, online Thompson Library of Staffordshire University (www.staffs.ac.uk), JRD Library (Panipat). Company Website (www.rcom.co.in). Project Supervisor. Annual Report, Balance sheet, P& L statement of the company. Employee of the company. The Hindu, Economic Times, Times of India (News Paper). Management Accountants, India. Chartered Accountant, New Delhi.
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DETAILED DATE BY SCHEDULED GRAPH

Process of six month thesis:Month 1 Period 2-3 Months 4-5 Month Dissertation Period 5-6 Month

End of 6 Month

Task-1

Task-2

Task-3

Task -4

Task -5

Selecting topic. Reading around the area, theory and methodology. Formulating a question

Reading focused. Drafting literature review.

Reading data.

Intensive writing phase.

Presentation of Report

a Drafting method and discussion sections.

Drafting and revising.

Reading for and planning method.

Developing the deliverables.

Editing.

Establishing supervision.

Planning structure

Collecting data/ Proofing and & Testing. Production

collecting data

Start Date Task 1 Task 2 Task 3 Task 4 Task 5 14/Mar/12 6/Jun/12 17/Aug/12 8/Oct/12 10/Dec/12

Completed 40 55 64 58 0

Remaining 43 17 5 5 20

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GANTT CHART

Task 1

Task 2

Task 3

Task 4

Task 5

Completed

Remaining

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REFRENCE BOOKS:1. Alok, B., 2001, Working Capital Management, 1st ed., Bangalore, Himalaya, pp-41-56. 2. Buck, H., 2002, Working Capital, 7th ed., London, Routledge, pp 63-94. 3. Gopala, K., 2006, Towards Better Working Capital Management, 3rd ed., New Delhi, ICFAI, pp 91-105. 4. Jain, N., 2005, Working Capital Management, 2nd ed., New Delhi, APH, pp -33-57. 5. James, V. C., 1969, A Risk-Return Analysis of a firms Working Capital Position, 8th ed., London, Winter, pp. 50-58. 6. John, S., 1955, Towards a Theory of Working Capital Management, 4th ed., New Delhi, Addison Wesley, pp 121-139. 7. John.S., 1955, Towards a Theory of Working Capital Management,7th ed., London, Rinehart and Winston ,pp. 121-129. 8. Khan, M and Jain, K., 2011, Financial Management, 6th ed., New Delhi, Tata McGraw Hill Education Private Limited, pp 78-85. 9. Kothari, C. R., 2008, Research Methodology Methods and Techniques, 2nd ed., New Delhi, Wishwa Prakashan. 10. Kothari,C. R.,2010, Research Methodology Methods , 2nd ed., New Delhi, New Age International, pp111-134 11. Lambrix, R.J and Singhvi, S., 1979, Managing the Working Capital Cycle, 6th ed., London, Winter, pp.32-41. 12. Pandey, I.M., 2008, Financial Management, 10th ed.,New Delhi , Vikas Publishing House, pp 203-214. 13. Parasanna. C, 1984, Financial Management Theory And Practice, 8th ed., New Delhi, McGraw Hill Publishing Company Ltd, p.260. 14. Paul. W., 1970, How to Calculate Savings Possible through Reduction of Working Capital, 4th ed., Durban, Winter, pp. 50-58. 15. Satish, B., 2007, Working Capital Management and Control, 2nd ed., New Delhi, New Age International, pp 9-31. 16. Shukla, A., 2009, Working capital, 9th ed., New Delhi, RBSA, pp-79-102. 17. Walker, E.W., 1967, Towards A Theory of Working Capital, 4th ed., Pretoria, Winter, pp. 2135. APIIT SD INDIA
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Effect of Working CapitalManagement on Profitability of Reliance Communication 18. Weston, J.F and Brigham, E.F., 1972, Managerial Finance, 2nd ed., London, Rinehart and Winston, pp.19-42. JOURNALS:1. Deloof, M., 2003, Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance and Accounting, 30(), pp. 573-587. 2. Dong, H.P and Jhy-tay Su, 2010, The Relationship between Working Capital Management and Profitability: A Vietnam Case, International Research Journal of Finance and Economics, Issue 49, pp.59-67. 3. Garcia, T., Pedro, J and Pedro, M.S, 2007, Effects of Working Capital Management on SME Profitability, International Journal of Managerial Finance, 3(2), pp. 164-177. 4. Lazaridis, Ionannis and Dimitrios .T., 2006, Relationship between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange, Journal of Financial Management and Analysis, 19(1), pp. 26-35. 5. Sathyamoorthi, C. R. and Wally-Dima, L. B., 2008, Working Capital Management: The Case of Listed Retail Domestic Companies in Botswana, Journal of Management Research, 7(5) pp. 7-24. 6. Shin, H. H., and Soenen, L., 1998, Efficiency of Working Capital Management and Corporate Profitability, Financial Practice and Education, 8(2), pp. 37-45. 7. Zariyawati, M. A., Annuar, M. N., Taufiq, H.,and A. S. Abdul Rahim, 2009, Working Capital Management and Corporate Performance: Case of Malaysia, Journal of Modern Accounting and Auditing, 5(11), pp. 47-54.

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Websites:1. Afza, T., & Nazir, M.S., 2007, Is it Better to be Aggressive or Conservative in Managing Working Capital? [Online] Available from: https://editorialexpress.com/ [Accessed 16 April 2012] 2. Agarwal,N.K.,2009, Analysis of Financial Management, New Delhi, National Publishing House, Available from http://www.oppapers.com/subjects, [Accessed 23rd March 2012] 3. Beckman,T.N.,2010,Credit and Collection Management and Theory, New York, McGraw Hill Company, Available from http://www.slideshare.net,[ Accessed 24th March 2012] 4. Bogen, J. J.,2009, Trends in Working Capital Management and its Impact on Firms,New York, The Ronald Press Company, Available from http://www.bizresearchpapers.com, [Accessed 25th March 2012] 5. Firth,M.,2008, Impact of efficient working capital management, New York, The McMillan Press, Available from: http://ivythesis.typepad.com/term_paper_topics, [Accessed 20th March 2012] 6. Ganesan, V., 2008, An Analysis of Working Capital Management Efficiency in Telecommunication Equipment Industry, Available from: http://www.rivier.edu/journal/ [Accessed 16 April 2012]. 7. Introduction of Reliance Communications, Available from http://www.relianceadagroup.com,[Accessed 18th February 2012] 8. Padachi, K., 2009, Trends in Working Capital Management and its Impact on Firms Performance,New York: McGraw Hill, Available from: http://www.bizresearchpapers.com/ [Accessed 16 April 2012]. 9. Raheman, A., & Nasr, M., 2010, Working Capital Management and Profitability, Available from: http://www.bizresearchpapers.com, [Accessed 18 August 2012]. 10. Vijaykumar,A.,2009,Working Capital and Profitability , New Delhi, National Publishing House, Available from http://shodhganga.inflibnet.ac.in, [Accessed 24th March 2012]

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APPENDIX

QUESTIONAIRE
EFFECT OF WORKING CAPITAL ON PROFITABLITY OF RELIANCE COMMUNICATION
Dear Respondent, I, student MBA (FINANCE) of APIIT SD INDIA (PANIPAT), would seek your humble response to the below mentioned questions as it is the part of my research project. The Objective behind this questionnaire is to help the company to develop a Working Capital Optimization Strategy. Company will be benefited from this research because it will help them to make it more profitable through developing working capital optimization strategy. We assure that the research work would definitely benefit you for your contribution. The first 30 immediate respondents would be awarded with a cash price of Rs.200. Instructions: - There are two sections in this questionnaire. In the first section you are required to fill your basic information in the given space. In the second section you are required to put a tick () in any one right option. It is also important to inform you that whatever information we get will be kept confidential and used for research purpose only.

SECTION-A
Name Age Group 25-40 41-65 Above 65 GenderMale Female

Occupation: _________________________________ Designation: _________________________________ APIIT SD INDIA

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SECTION- 2
Q. How do you control your working capital/ processing time? A. By way of optimization of working capital cycle. B. Maximizing credit to creditors. C. Minimizing credit of customers by best utilization of resources. D. Minimizing stock level. Q. How do you arrange for additional working capital? A. By taking credit facility for a temporary period. B. Adhoc facility. C. Seasonal facility. D. None of the above. Q. Do you get the higher level sanction? A. Branch manager. B. Higher level authority. C. All of the above D. None of the above. Q. How do estimate your working capital? A. Based on operating cycle. B. Based on working capital cycle. C. All the above. D. None of these.

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Effect of Working CapitalManagement on Profitability of Reliance Communication Q. What is the duration of operating cycle? A. 70 days B. 50 days. C. 30 days. D. None of the above. Q. How you finance your working capital requirement? A. Management credit facility from banks. B. Term Loan. C. Any financial institutions. D. All of the above. Q. Does your demand vary as per season? A. Sometimes. B. Always. C. All of the above. D. Cant be determined. Q. How do you get credit facility from your supplier? A. Depend on customer. B. Depend on Price C. Depend on Product. D. None of the above. Q. How long you get your credit facility from your suppliers? A. 30 days B. More than 30 days. C. Less than 30 days. D. None of the above. APIIT SD INDIA
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Effect of Working CapitalManagement on Profitability of Reliance Communication Q. How you control your working capital requirement? A. Realization of funds B. Negotiations with customers C. Negotiation with suppliers D. Maintaining optimum level of stock. Q. Is banking source to finance convenient for your working capital? A. Very convenient. B. Less convenient. C. Not convenient. D. depends on various factors. Any other comment if you wish to make? Thank You Regards Prerna Shree In case of any query please mail me any time and you will get response as soon as possible at Prerna.shree77@gmail.com. Address- APIIT SD INDIA Panipat (Haryana) G T Road, Karnal Road, Faridpur. 132103

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