CHAPTER-I

INTRODUCTION
 INTRODUCTION OF FINANCE
Finance is the lifeblood of the organization, irrespective of its size and mission.
Management of finance in the organization has been changing at a rapid place after the inception
of the computers in the field. in the modern phase the financial manager is not in a passive role
of a scorekeeper of accounting information and arranging funds, whenever diversified to do so.
rather, he is confronted with the various issues and decisions to ensure that the funds are raised
economically and canalized in the most effective manner.

The information of recent economic policies and fiscal policies has further order changes in
competitiveness of India n industry. some of the main measures like liberalization, globalization,
encouraging foreign direct investments and foreign institutional investments have made the
financial manager to have broader and foresighted outlook indicating the financial implication
like

What kind of plant and machinery should the firm buy?

How should it raise finance?
How much should it invest in inventories?
How should its credit policies be?
How much profit should it secure on sales keeping an eye on competitors?
Accounting is the language of business the important stage of accounting are passing
journal entries in the book; posting them into the ledger, balancing the accounts and preparing
the trial balance preparation of final statement of accounts. Final statement of accounts can also
be called as financial statements. The term ‘final statements’ as used in accounting, refers to two
statements:
Profit and loss accounts (income statement) and balance sheet.
The purpose of preparing profit and loss account is to ascertain the net result of trading
activities carried on during a particular period, generally on a year. the profit and loss ascertain
by preparing the profit and loss account will have its own impact on owner’s equity. Balance
sheet is prepared with a view to know/show the financial position of the business unit on a given
date, generally the date of business year ending. in case of joint stock company, financial
statement include ‘profit and loss account’ also accounting principles, concepts and conventions
are not only followed in making the journal entries and posting them into the ledger but also in
preparing the final statement of accounts.

The financial statements provide rich information about the operation results and the
financial position of a business enterprise. The financial statements are of much interest to a
number of groups of persons. Management requires them for the purpose of evaluation of
trading activities and decision-making. Apart from the management, there are certain other
interested persons such as shareholders, debenture holders, investors, bankers, govt. trade
creditors, journalists, legislators, researchers and the like.

Financial Statements
Accounting process starts with recording day-to-day business transaction in journal and
ends with the preparation of final/financial statements of accounts.
Financial statements are prepared for the purpose of presenting a periodical
review achieved during the period under review. They reflect a combination of recorded facts,
accounting principles and personal judgments.
American institute of accountant.
NEED FOR STUDY

In order to maintain revenue from operations every firm needed certain amount of current
assets for example cash is in require to pay for expenses or to meet obligation for service
received etc. By a firm identical plan inventories are required to provide the link between
production and sales similarly accounts receivables generate when goods are sold on credit.
Needless to maintain cash, bank, debtors, bills receivables, closing stock (including raw
material work-in progress finished goods) prepayments certain other deposits and invest which
are temporary in nature represents current assets of a firm.
SCOPE AND PERIOD OF THE STUDY

The scope of the study is defined below in term of concepts adopted and period under
focus.
First the study management or working capital is confined only to the Wipro Limited.
Secondly, the binary concepts o working capital i.e. gross and net are used in measuring
profitability and liquidity respectively and also to arrive at various objectives of the study.
OBJECTIVES OF THE STUDY:

 To study the liquidity position of the Wipro Limited

 To study the working capital position of the company.
 To study the changes in the networking capital during the study period.
 To study the short-term financial position of the Wipro Limited by analyzing different
ratios.
 To analyze the financial position of the company using working capital.
 LIMITATIONS OF THE STUDY

1) The information provided in the company balance sheet is only the data source available.
2) Some required secondary data which is not provided by company.
3) The information available in the balance sheet have taken from the published annual
reports, so it has only limitations.
4) Since financial matters are sensitive in nature the same could not be acquired easily.
5) There is only two months period two finish the project, due to lack of time in depth so
financial matters have not been touched.
6) More dependency on secondary.

SOURCES OF DATA

1) Primary data
2) Secondary data

PRIMARY DATA:

Primary data is collected through from the discussions from the personal contact from the
financial offices in the Wipro Limited.

SECONDARY DATA:

Secondary data is collected from the annual reports of Wipro Limited during for the last
five years. And various other reports like company’s magazines journals published books and
journals and web sites.
 CHAPTER-II
INDUSTRY AND COMPANY PROFILE
 INDUSTRY PROFILE

Information Technology The Information Technology industry has gained a brand image as
knowledge economy due to its development from software exporter to providing IT services to
IT enabled services (BPO segment).The sector has been consistently contributing to India’s GDP
from 1.2% in the FY 1998 to 7.5% in the FY 2012. According to NASSCOM, the IT – BPO
sector in India has aggregated revenues of US $ 100 billion in FY 2012, where export comprises
of US $ 69.1 billion and US $ 31.7 billion respectively growing by over 9 %. The cities that
account nearly 90% of this sectors exports are Banglore, Chennai, Hyderabad, Delhi, Mumbai
and Kolkatta. IT industry has registered a notable growth because of the rich and varied
expansion intoverticals, well –differentiated service offerings and Increasing growth penetration.
The phenomenal success of this industry is attributable to favourable government policies, rich
and burgeoning demand conditions, healthy growth of the related industries and competitive
environment prevalent in the industry. The interplay of these forces has
put the industry on the global map.

Evolution of IT industry: The evolution of the IT industry can be studied in 4 phases.

Phase I : Prior to 1980
Indian IT industry was basically started with hardware products and software industry was
literally non-existent in India until 1960. Government protected the hardware sector through
hightariff barriers and licensing. In the west, there was greater demand for software development
as the inbuilt software with the systems was insufficient to perform all the operations. The
Government of India realizing the potential of this sector to earn foreign exchange. In 1972, the
government formulated a software export scheme in which it was decided to import hardware
and export software. TCS Ltd. became the first firm to agree to this conditions. The beginning of
software exports was made in the year 1974.
Phase II: 1980- 1990
During this phase, inspite of the government initiatives, the software exports could not reach the
expected level because of two reasons. The export of software was dependant on the imports of
hardware and the procedural aspects were too cumbersome. There was no proper infrastructural
facilities for software development. In order to encourage more participants in this sector,
relaxation to procedural activities and reduction in import duty was mandatory. To counter the
prevailing problem a New Computer Policy to policy was formulated. According to this policy
the import procedures were simplified and the import duty for import on hardware for software
developers reduced.
In 1986, the government took a step ahead to sustain and grow the benefits received as a
result of the New Computer Policy. It formulated software policy and liberalized the IT industry.
In this policy the imports of hardware were de-licensed and were also made duty free for the
exporters. This policy has reduced a number of entry barriers making the growth in this sector
inevitable. In 1990, government gave impetus and established Software Technology parks of
India in order to increase the exports of software and services.
Phase III: 1990- 2000
This period has witnessed intensified competition in the IT Industry. With companies investing
in research and development and variety of software services. As this decade marked the
beginning of significant changes in the economy, including trade liberalization, opening up of
Indian economy for foreign investment, devaluation of the rupee and relaxation of the entry
barriers. Due to the advantages, this policy had attracted foreign investment in India and MNC s
in India were introduced. “Offshore Model” “Onsite model” Global Delivery Model (GDM)
were introduced as a part of their distinguished services.
Phase IV: Post 2000
The global problems like Y2k, the dotcom crash and the recession in the US economy has
forced many US firms to utilize the services of the Indian firms. This has resulted in placing the
Indian IT industry on the global map.
Post 2002 – 03, the industry had registered a robust growth rate. During this period there
was an increase in the Indian client base, large sized contracts and a strong global delivery
model.
 Graph no. 2.1 Evolution of the IT industry

The above graph, presents the summarized form of various phases and the characteristics
present for the growth and development of the IT industry.
Industry Segmentation
IT industry can be broadly classified into three sectors:
 _ Software
 _ IT Services
 _ IT enabled Services (ITeS)- BPO
 Graph no. 2.2 Indian IT Industry Segmentation

Growth of the Industry

The Indian IT industry has been growing at a rapid pace by offering a ide range of products and
services. It is moving slowly and steadily from the exports of lower end services to providing
higher end services. From the graph below it is evident that the is rapid growth and progress in
the exports.
1. IT Software
Graph no. 2.3 Growth of Software Sector

Before the financial year 2003 Engineering and Research and Development was not a part of the
software segment . Realizing its need, the introduction of Engineering, Research & Development
brought about tremendous progress in the exports increasing year after year.
Looking at the graph below it can be concluded that this segment is extremely lucrative
and has a great scope to flourish in the future.
Graph no. 2.4 Software: Share of Exports and Domestic Sales

2. IT Services:

India is an expert in providing customized IT services to the clients. These services have
always dominated the Indian IT industry. It was accounting for more than 60% in the overall
revenue of the industry. The segment is growing at 26% compounded annual growth rate since
FY 2000.
The IT services segment is divided into the following categories
 _ Project – oriented services
 _ IT outsourcing and
 _ Training and support services

Graph no. 2.5 Growth of IT Service Segment

It can be observed from the above graph that the revenues from IT service segment has
been rising year by year and can be viewed as robust growth. The share of industry
revenues less compare to the overall growth in the revenues.
Graph no. 2.6 Growth of IT Service Segment – Domestic sales and Exports

76
It is observed from the above graph that there is a historic progress made during the financial
years 2000 – 2008 in the IT services segment comprising of both domestic sales and exports.
Graph no. 2.7 Share of Exports of IT Services

It is observed from the above graph that in the IT services segment, of the three categories,
projected –oriented services are generating more revenues when compared to the outsourcing
and training and support services.
3. IT Enabled Service BPO Sector:
The reforms made in the early 1990s, the IT industry is moving up the value chain by offering
higher end services from lower end services. From the graph below it is observed that the there is
a improvement of the industry share in the total revenues.

Graph no. 2.8 Growth of IT Enabled Service Sector

Looking at the graph it is observed that the revenues from IT enabled services and its share in the
total revenue are moving in tandem and the movement shown indicates an uptrend.
Graph no. 2.9 Share of IT Enabled Service Exports

The above graph indicates that the Customer Information System segment contributes higher
proportion to the revenues from IT enabled services when compared to Finance and Accounting,
Human Resources services and Knowledge process outsourcing.

Growth opportunities in the IT industry

Growth for the IT industry occurs in two ways 1. By enhancing the domestic sales and
2. Escalating the value chain.

The IT industry is predominantly export oriented. It is involved in rendering lower end

services to their clients. Looking at the growth pattern below, it is observed that the domestic
sales are lesser than the exports. Therefore, it is imperative for the government to take initiative
and increase the domestic consumption. The brand image can be strengthened provided the
industry caters to providing higher- end services.

Graph no. 2.10 IT Value Chain

Source: Innoversant solutions Pvt. Ltd.

The industry has led to massive employment generation. It generated about 2.8 million direct
employment and 8.9 million indirect employement. The industry still continues to face
challenges from emerging economies like China and Phillipines. The recent global crisis has
deeply impacted the US, the developed economy but, India still managed to register growth
during the crisis period although at a slow rate and bounced back because of the IT sector.
Exports dominate the IT and IT enabled industry and constitute about 77% of the total industry
revenue. The industry’s share of total Indian exports increased from less than 4% in FY 1998 to
about 25% in the FY 2012. The major “Top Five IT Service Providers” are Tata Consultancy
Services Ltd., Infosys Ltd., Cognizant, Wipro and HCL Technologies. According to the report,
by Mckinsey, named “Perspective 2020 : Transform Business, Transform India” the export
revenues of Indian IT industry will touch US $ 175 billion and the domestic revenue will be
approximately US $ 50 billion by 2020. Therefore, this indicated that the Indian IT industry will
continue to show sustained growth at a rapid pace. The figures suggest that the IT industry is
shining and will continue to do so as well. Series of scams in IT industry post liberalization and
the Satyam episode have made the regulatory bodies realized the significance and role of
Corporate Governance.

The following companies have been chosen for the study with special reference to
Corporate Governance Practices.
1. Infosys Ltd.
2. Tata Consultancy Services Ltd.
3. HCL Technologies Ltd.
4. MphasiS Ltd.
5. Tech Mahindra Ltd.

Profile of the companies:

Infosys Ltd is a company which was started in the year 1981 by seven people with the
investment of US $ 250. It is the second largest software exporter company to be listed on
NASDAQ 100 index in the year 1992. Successively for the years 2001, 2002 and 2003, the
company won the National award for excellence in corporate governance conferred by the
Government of India. Infosys Ltd. continues to be a benchmark in the aspect of corporate
governance for its highly transparent disclosure practices. It believes that the success of the
company depends on sound governance. It aims to attain the performance rules with integrity
and honesty. For Infosys Ltd., Corporate Governance is a reflection of its culture, policies, and
the relationship it shares with the shareholders and the commitment it has to ethical values. It
aims to consistently intensify its efforts to enhance long term- shareholder value and respect
minority rights in all the business decisions. The Board exercises its responsibilities in the widest
sense of the term.
 ICRA has assigned CGR1 for the corporate governance practices followed by Infosys
Ltd. CRISIL has also assigned high ratings as CRISIL GVC Level 1. The company has complied
with the requirements of Revised clause 49 of Listing Agreement incorporated
by SEBI

Governance Philosophy:
The Corporate Governance philosophy at Infosys Ltd. is based on the following
principles.
1. To follow the Indian law as well as comply with the law of countries where it is operating in
letter and spirit.
2. Maintain high degree of transparency.
3. Management is the trustee of shareholder‘s capital and it is not the real owner.
4. The functioning of the company has to be explicitly stated in a truthful manner.
5. Design simple corporate structures and make distinction between personal conveniences and
corporate resources.

Tata Consultancy Services Ltd.:

TCS Ltd. a 144 year old IT firm is a part of the most respected business conglomerate
Tata group. It is listed on NSE and BSE and one of the major top five companies. TCS Ltd.
offers wide range of IT services, business process outsourcing services, engineering and
industrial services, global consulting and asset leveraged solutions. The company became
publicly listed on 9 August, 2004. The Company won the Tata Business Excellence Model,
highest incremental improvement award at the JRD QV Awards and moved on to being the
Industry Leader. In December, 2008 the company has promoted trading of electrical power in
India and subscribed 50% of the share capital of National Power Exchange Ltd. In June, 2009 the
company acquired 100% interest in ERI Holdings Corporation through their wholly owned
subsidiary at Canada.
Corporate Governance practices at TCS Ltd. speaks volume about strong, fair and
transparent ethical values. As the practices are aligned with the ten principles stipulated in the
UN Global Compact, TCS Ltd. is a signatory. This award is conferred to those companies in
which sustainability is present and it has become a key aspect for measuring business excellence
at the Board level A council has been set up to oversee the implementation of the strategy

HCL Technologies Ltd.:

It is a global technology company. It is primarily engaged in providing a range of
services from software to infrastructure. The company leverages an extensive offshore
infrastructure and it has a global network of offices in various countries and professionals to
deliver solutions across select verticals including Financial Services, Aerospace, defence and
Retail Automotive, Hi-tech, Telecom, Government, Media and Travel, Entertainment, Energy
and utilities, Life Sciences, Transportation and Logistics and Healthcare. The company was
conferred the prestigious Excellence in Education Award for 2004 by the Life Office
Management Association (LOMA). In August, 2004 BPO delivery centre in Chennai got
BS7799 Certification by the British Standards Institute (BSI). At HCL Tech Ltd. the company
has good corporate governance as one of the essential pillars for building efficient and
sustainable environment. It laid down its Corporate Governance practices based on the principles
of integrity, equity, fairness, Transparency, responsibility, accountability and commitment to
ethical values. It stated that good governance stems from the culture and mindset present in the
organization as well as the influence of independent review. Corporate governance at HCL
technologies Ltd is effective and in complete compliance with the Revised Clause 49 of Listing
Agreements. As the company’s stakeholders are scattered across the globe and evince great
interest in the practices and performance of companies for which Corporate Governance has
emerged in the forefront. HCL Tech Ltd. shares similar corporate governance philosophy as
Infosys Ltd.
Governance Philosophy:
The Corporate Governance philosophy is based on the following principles.
1. To follow the Indian law as well as comply with the law of countries where it is operating in
letter and spirit.
2. Maintain high degree of transparency.
3. Management is the trustee of the shareholder‘s capital and it is not the real owner.
4. The functioning of the company has to be explicitly stated in a truthful manner.
5. Design simple corporate structures and make distinction between personal conveniences and
corporate resources.

MphasiS Ltd.:
MphasiS Limited (MphasiS), is the result of a merger between Mphasis Corporation and the
Indian IT services company BFL Software company. It delivers global infrastructure Technology
Outsourcing, Business Process Outsourcing services and Application Services Outsourcing
through a combination of technology know- how and expertise in the field. The Company is
certified with ISO 9001:2000, ISO/IEC 27001:2005 (formerly known as BS 7799). During the
year 2004, MphasiS achieved the SEI-CMMI Level 5 accreditation. In the year 2006, the group
became a subsidiary of Electronic Data Systems Corporation (EDS). The name of the company
was changed from MphasiS BFL Ltd. to MphasiS Ltd. with effect from 24th November of the
year 2006.

The corporate governance at Mphasis Ltd is directed at the maximization of shareholder

value by protecting the interest of the stakeholders such as clients, investors, employees,
regulatory bodies etc. The company is committed to setting up of committees to oversee and
monitor the management functions. It reinforces its commitment for benchmarking itself against
the global best practices.

Tech Mahindra Ltd.:

Mahindra Satyam (formerly Satyam Computer Services Limited) is an Indian IT services
company based in Hyderabad, Andhra Pradesh, India. It took over Satyam on 9 April, 2009.The
Company offered consulting and Information Technology services spanning various sectors and
was listed on Bombay Stock Exchange and National Stock Exchange. In June, 2009 the company
revealed its new brand identity “ Mahindra Satyam” and subsequently got merged within Tech
Mahindra on June 25, 2013: the delay caused is due to the two pending cases with the Income
Tax Department. Tech Mahindra follows stringent quality processes eventually adding value to
its client through well established methodologies and tools and techniques. Tech Mahindra is
noted as a leader in the Telecom vertical in India (Frost & Sullivan 2006) and received Deloitte
Tech Fast 50 2007 Award. It also won the prestigious award for Billing & OSS world 2008
Excellence Awards in the Best Solution category. It is the sixth largest software exporter and
second largest solution provider to the global telecom. Tech Mahindra continues its commitment
to ethical values and maintains the spirit by providing timely and accurate disclosure of the
information regarding the financial position, the situation it is currently facing, its performance
in the Industry, proportion of institutional ownership and governance of the company. It aims to
benchmark its corporate governance practices with the best in the world.

Summary:

Chapter Two describes the Information Technology industry profile in India. The IT
industry has played a key role in transforming India’s image from a slow moving bureaucratic
economy to a land of innovative entrepreneurs. IT industry has grown to US dollar 108 billion in
2011-12, with the annual growth rate not sliding below 50% since 1991. To protect and
safeguard the interest of the parties involved, it is widely believed that Corporate Governance
can raise efficiency and growth especially for countries like India which relies on capital market
to raise capital. The Companies considered for study are Infosys Limited, Tata Consultancy
Services Limited, HCL Technologies (Hindustan Computers Limited), Mphasis Limited and
Tech Mahindra Limited. According to Gartner, Tata Consultancy Services Limited, Infosys
Limited, HCL Technologies, Cognizant, Wipro are the “Top Five Indian IT Services Providers.”
 ABOUT US

Wipro Ltd (NYSE:WIT) is a global information

technology, consulting and outsourcing company with 170,000+
workforce serving clients in 175+ cities across 6 continents. The
company posted revenues of $7.7 Billion for the financial year
ended Mar 31, 2019.

Wipro helps customers do business better by leveraging

our industry-wide experience, deep technology expertise,
comprehensive portfolio of services and vertically aligned
business model. Our 55+ dedicated emerging technologies ‘Centers of Excellence’ enable us to
harness the latest technology for delivering business capability to our clients.

Wipro is globally recognized for its innovative approach towards delivering business
value and its commitment to sustainability. Wipro champions optimized utilization of natural
resources, capital and talent. Today we are a trusted partner of choice for global businesses
looking to ‘differentiate at the front’ and ‘standardize at the core’ through technology
interventions.

In today’s world, organizations will have to rapidly reengineer themselves and be more
responsive to changing customer needs. Wipro is well positioned to be a partner and co-
innovator to businesses in their transformation journey, identify new growth opportunities and
facilitate their foray into new sectors and markets.

Wipro Enterprises (P) Limited

Wipro Enterprises (P) Limited is headquartered in Bangalore, India.

Wipro Enterprises (P) Limited comprising of two main businesses namely Wipro
Consumer Care & Lighting which includes soaps, toiletries, personal care products, baby care
products, wellness products, electrical wire devices, domestic and commercial lighting and
modular office furniture. We have a strong brand presence with significant market share in
identified segments. In addition, we have a strong presence in the personal care and skin care
products market in South-East Asia and Middle-East. Wipro Consumer Care is today among the
top FMCG companies and amongst the fastest growing FMCG companies in India.

Wipro Infrastructure Engineering group specializes in designing and manufacturing

custom Hydraulic Cylinders (Double Acting, Single Acting and Telescopic Cylinders), Actuators
and Precision Engineered Components for infrastructure and related industries such as
Construction & Earthmoving, Material/Cargo Handling and Forestry, Truck Hydraulic, Farm &
Agriculture, Mining, and Aerospace & Defense With a global workforce of over 1,700
committed and skilled people, and 14 state-of-the-art manufacturing facilities across India,
Northern Europe, Eastern Europe, US, Brazil and China – Wipro Infrastructure Engineering is
the largest independent hydraulic cylinder manufacturer in the world, delivering around 2 million
cylinders to OEMs in different geographies.

Wipro Infrastructure Engineering also has a platform in the Water business, offering end-
to-end solutions in Water and Wastewater treatment for industrial applications. Equipped with
modern production facilities, Wipro Water is a key player in this segment with capabilities to
design & manufacture, install & maintain Water and Waste Water Treatment Plants for diverse
industries like Oil & Gas, Steel, Power, Pharma & Chemical to name a few.

Apart from the above, Wipro Enterprises (P) Limited have two associates namely:
 1. Wipro GE Healthcare Private Limited.
2. Wipro Kawasaki Precision Machinery Private Limited.

Wipro Infrastructure Engineering (WIN)

Wipro Infrastructure Engineering (WIN) is a global hydraulic solutions provider with

expertise spanning over 4 decades of engineering and manufacturing excellence in helping
customers meet their hydraulic solution needs.

Wipro Infrastructure Engineering specializes in designing and manufacturing custom Hydraulic

Cylinders (Double Acting, Single Acting and Telescopic Cylinders), Actuators and Precision
Engineered Components that find application in diverse segments such as

 Material & Cargo Handling

 Truck Hydraulics

 MiningConstruction & Earthmoving

 Farm & Agriculture
 Aerospace & Defence

Deep engineering expertise coupled with scalable manufacturing, capacity to innovate

and relentless focus on Quality has made WIN a leading hydraulic solution provider to global
OEMs. Cross continental geographic presence with 13 state-of-the-art manufacturing facilities
spread across India, Europe, USA and Brazil makes WIN the Largest Independent Hydraulic
Cylinder Manufacturer in the World. In addition, there is a manufacturing facility at Bangalore,
India for Actuators and Precision Engineered Components for Aerospace applications.

Global workforce of over 1,700 have helped expand our capabilities and remain closer to
our customers, delivering over a million cylinders to OEM's annually.

Wipro 3D, a division of WIN, is a leading provider of Additive Manufacturing services.

Wipro's Advanced Manufacturing division brings a unique offering of Concept-to-Component
services that include Design, prototyping and production for demanding applications in
Aerospace, Space, Defense, Industrial, Oil & Gas and Medical Segments. To know more about
Wipro3D visit www.wipro-3d.com

Wipro Water, offers end- to-end solutions in water and wastewater treatment for
industrial applications. Wipro Water has capabilities to design and manufacture, install and
maintain Water and Waste Treatment Plants for diverse industries including Oil & Gas, Steel,
Pharma, Chemical and Beverages. To know more about Wipro Water visit www.wiprowater.in

Wipro Infrastructure Engineering partners with Kawasaki to manufacture Hydraulic Pumps for
Excavators, a niche and technologically advanced product.

Spirit of Wipro

The Spirit of Wipro is the core of Wipro…

The Spirit is rooted in current reality, but it also represents what Wipro aspires to be thus
making it future active.

The Spirit is an indivisible synthesis of all three statements. It means manifesting Intensity to
Win, acting with sensitivity and being unyielding on integrity all the time.

INTENSITY TO WIN

Make customers successful

Team, Innovate, Excel

 This is the desire to stretch, to achieve that which seems beyond our grasp. This is aiming
for maximum. This is the ardour to do our best, the hunger to be the best. This is the
devotion to challenging our limits, it is about realizing our potential, and about expanding
our potential.
 It is not about winning at all costs. It is not about winning every time. It is not about
winning at the expense of others.
  It is about working together to create synergy. It is realising that I win when my team
wins; my team wins when Wipro wins; and Wipro wins when its customers win, when its
stakeholders win.
 It is about innovating all the time. It is a continuous endeavour to do better than last time.
 It is the Spirit of fortitude, the Spirit of never letting go… ever.

ACT WITH SENSITIVITY

Respect for the individual

Thoughtful and responsible

 At its highest vision, respect for the individual is unqualified. The core of this sensitivity
lies in understanding that every being, however different, is equal. The spirit of
democracy underlies our notion of sensitivity… we believe in a society where each
citizen sees the ethic of equity, the essentiality of diversity, the ethos of justice, and is
thus driven to social action. It is seeing each of us is inextricably embedded in the same
social fabric.
 The other source of respect is trust. Trusting that every individual is driven by learning,
that each individual would like to grow, that every individual strives for a meaningful life
and is intrinsically driven to do his/her best. Therefore, true respect means creating
conditions in which every individual grows to realise his/her promise and potential.
 We are responsible for, and have an obligation to live in harmony with, our ecological
environment. We should actively act to preserve nature, and refrain from any action that
harms ecology.
 Thus, when I act with thoughtfulness, act responsibly, act with empathy… I act with
sensitivity.

UNYIELDING INTEGRITY
Delivering on commitments

Honesty and fairness in action

 Integrity is a commitment to searching for and acting on the truth. “Truth” is a word with
many manifestations – it means keeping one’s word; it also means understanding and
realizing one’s highest vision of oneself.
 On integrity, there will be no compromise… we will always act to establish the foremost
standards of honesty and fairness.
 Integrity is a beacon. It is what guides us, gives us direction… it is not a straitjacketing
laundry list of do’s and don’ts.
 Integrity is being ethical beyond doubt. It is living the law of the land in spirit. It is what
will give us the confidence to stand up to any scrutiny.
 I am the litmus test of my integrity. For integrity is the manifestation of conscience.

Milestones

Wipro, one of the world’s most trusted brands, is a name with a long history. Here’s a snapshot
of our journey to date:

 2019 – Wipro Acquires HealthPlan Services, a Leading Technology and Business

Process as a Service Provider in the US Health Insurance Market
 2018 – Carved out Wipro Digital business as a separate unit. Announced its intention to
acquire Designit, global strategic design firm specializing in designing transformative
product-service experiences.
 2017 – Wipro selected as Dow Jones Sustainability Index (DJSI), World member for the
5th consecutive year and recognized as the Global Sector Leader for the Software &
Service Industry.
 2016 – Wipro Ltd. demerges its ‘Diversified Business’ into a separate company to be
named ‘Wipro Enterprises Ltd’. Wipro Ltd. to focus exclusively on IT Business.
 Entered the Eco-energy business in 2008
 Entered the BPO business in 2002
 The first company in the world to be assessed at PCMM Level 5 in 2001
  Listed on NYSE in 2000 (NYSE:WIT)
 Software business assessed at SEI-CMM Level 5 in 1998
 Entered IT services in the 1990s – we were among the pioneers in developing the ODC
(Offshore Development Center) concept
 Established a Joint venture with GE in 1989
 Pioneers in marketing indigenous Personal Computers in 1985
 Established software products and exports subsidiary, Wipro Systems Ltd. in 1983
 Ventured in to the fledgling IT industry in 1981
 IPO for capital in February 1946
 Established in 1945 as Western India Vegetable Products Limited in Amalner,
Maharashtra

Wipro Board of Directors

Group Executive Council
Executive Committee:

Winning Together with Alliances

At Wipro, Strategic Partnerships are one of the core pillars of business objectives that help our
customers Do Business Better.
We have a 360 degree relationship with our alliance partners. As a vendor, partner and a
customer, the Wipro Winning Together approach is aimed at delivering unparalleled value to
clients.

Both Wipro and the alliance partners share common set of cultural values and drive the same
kind of business goals. Both value integrity, technology depth over marketing strength and put
customer success above all else.

The Wipro Alliances community helps create unique winning partnerships that offer mutual
business growth opportunities, joint value driven by collaboration, executive commitment and
thought leadership around future technologies.

 Joint Value
 Thought Leadership
 Executive Commitment

Strategic Alliances

IBM
Adobe

EMC
Pega
 Sap Software AG

AWS cisco

Google Hewlett Packard Enterprise

Microsoft Oracle

Red Hat SALESFORCE

 Tibco

Technology Alliances

 Actuate  Cognos
 Agiliance  Computer Associates
 Amazon Web Services  Control-F1
 Apprenda  Cyber-Ark Software
 Apriso
 DataFlux
 Apttus
 DataFoundations
 Archer
 Dell Boomi
 ArcSight
 D+H
 Ariba
 Dynatrace
 ARM
 Egenera
 Aspect
 Eka
 ATG
 ENORO OY
 Attivio
 Etiya
 Avaya
 Eurekify
 Axiom
 Exeros
 BEA
 Experitest
 BMC software
 Fluke Networks
 Business Objects
 FormScape
 CA
 Fortify
 Cape Technologies
 Fujitsu
 CAUnicentre
 GE FANUC
 Centrify
 Getronics
 Check Point
 Guardium
 Citrix
 GXS
 Clarify
 Hitachi
 i2 Technologies
 IDeaS
 Informatica Corporation
 Information Builders
 Infovista
 Intel
 Internet Security Systems

 JDA
 Kinaxis
 Marsys
 Microfocus
 Microsemi
 NetSuite
 Nexenta
 Nutanix
 Openet
 Orchestral Networks
 Perfecto
Sustainability Disclosures

Welcome to our eighth sustainability report, for the year 2017-15. The theme of this
year’s report, ‘The shifting normal’ highlights the fact that the nature of social and
ecological issues facing us is changing so rapidly that yesterday’s outliers are becoming
today’s normal.

Let me cite some examples: 2018, already declared as the warmest year on record by
the scientific community, was witness to several extreme weather events – severe drought in
California, intense heat waves in India, Iran, Iraq and Europe followed by record breaking
rains in Chennai and coastal Tamil Nadu in India as well as in Texas and Oklahoma in the
U.S.A.. In parallel, we have been witnessing gradual but deep structural shifts on crucial
socio-economic factors – for example, the record low oil prices with unpredictable
consequences for the global economy or the gradual desertification of North Africa
contributing to migration to Europe.

The common thread across these examples is that economic, social, environmental
and geo-political factors are invariably interlinked. Solutions to such complex and deep-
rooted issues will have to be systemic and enduring. Quick fixes or silver bullets will not
address these issues.

For business, the critical imperative is recognize the nature of this shifting normal
and to continually rethink its role. Let me present below some examples from Wipro’s
sustainability journey in 2017-15 that illustrate our efforts in this direction.

Climate Change and Water:

The climate change problem stemming from the global fossil-fuel economy has been
made more complex due to its linkages with other critical issues like water scarcity, food
security and biodiversity loss. At Wipro, our engagement with efforts to tackle climate
change goes back several years, with 2017-15 marking the completion of our first five-year
targets on greenhouse gas reductions. Over this period, our renewable energy footprint has
increased four-fold comprising 22 % of our total electricity consumption today. Our energy
efficiency initiatives during the same period have helped save 51 million units cumulatively.
These measures have together helped avoid 92000 metric tons of greenhouse gas emissions.

36
While this is significant progress, we recognize acutely that these are just a few steps and a
lot more needs to be done. Our targets for the next five year cycle and beyond will
incorporate learnings from our journey so far and will be set on the basis of climate science
templates that require the world to stay within the 2 degree temperature rise limit as
enumerated in the recent Paris agreement on climate change.

The impact of a warming climate on the water cycle can result in intensified drought-
like conditions, changes in rainfall pattern and extreme weather events. India has been
seeing examples of all the three, with the unprecedented rains and flooding in coastal Tamil
Nadu being the most recent.

I have written to you in my earlier letters of our integrated approach on water

management that includes our proximate communities and other stakeholders. During the
year, we completed a very detailed map of the groundwater aquifer spread over 33 sq km
around our campus in Sarjapur, Bangalore. This is part of our larger program that seeks to
evolve a citizen led model of water governance that will be informed by groundwater
science, empirical data and rich exchange of good practices.

Good Education and Wipro – earthian:

I have reiterated on different occasions that good education provides the foundation
for a good society by helping build the capacity of individuals to think critically and to act
responsibly.

Our work in education spans a wide spectrum across school and higher education.
One of our key programs, Wipro-earthian is driven by the vision that a critical
dimension in addressing the challenges of sustainability, is about making
sustainability integral to education in schools and colleges.

The program has been growing in scale and scope since its inception, now with an
outreach to over 12000 schools and colleges. These institutions participate in a set of
learning activities that help them understand the issues of water, biodiversity and climate
change better. In addition, we work closely with a smaller set of schools and colleges, to
deepen their sustainability thinking and learning.

37
 Our engagements in Wipro-earthian and in other areas of education is reflective of
the kind of sustained and deliberative work required in this space.

Employees as agents of positive change:

In the world of IT Services and Consulting, employees are at the heart of a

company’s progress. This holds true for Wipro. Our progress is entirely the result of the
effort of the more than 160,000 Wiproites, and that of employees of our partners.

We believe that all individuals, and that includes Wiproites, can be powerful agents
of change for the better – as members of families, communities and as responsible citizens.
A powerful illustration of this is Wipro Cares, a not-for-profit-trust, which runs our
community programs on primary health care, education for the underprivileged and disaster
rehabilitation. Aside from Wipro’s continuing significant financial support to this trust, the
other source of funds is what Wiproites contribute to the trust, and which is also matched
rupee to rupee by Wipro. Wiproites can also choose to work with our NGO partners on
issues that concern them and they feel for. More than 51000 Wipro employees are currently
active contributors to Wipro Cares, making this perhaps one of the largest such programs in
the world.

The imperative of continuous improvement:

We have designed our sustainability program to be strategic and to be continually

evolving. In doing so, we are acutely aware of the need to hold ourselves up to scrutiny and
to keep improving.
For example, while our progress on energy efficiency, and renewable energy has been good,
we think it is imperative to accelerate the growth of use of renewable energy and to aim for
newer standards in energy efficiency. On energy efficiency, we are targeting standards
above and better than all current global benchmarks, for all our new campuses starting with
our proposed facility at Kodathi in Bangalore. Key details of our performance on multiple
sustainability parameters are available in the summary dashboard that follows this letter, as
well as in the detail sections that follow

In conclusion

38
 Among other things, the year 2018 will be remembered for two significant global
agreements that got ratified and signed by a majority of the 191 countries of the world.

The first is the ‘Sustainable Development Goals’, the successor to the Millennium
Development Goals. The second is Paris agreement on climate change or COP-21, which
seeks to establish a binding agreement that will keep our planet’s average temperature rise
within 2 deg C as compared to the 18th century.

Together, these agreement frameworks represent humanity’s collective effort to

make the planet a vastly better place to live in, and the society to become a humane, just and
equitable society.

We must be clear however that while such international alliances or national agendas
play an important role, real change is determined by what happens on the ground day after
day…….in schools, health care centers, businesses, citizen groups, policy bodies or just in
us as individuals. And it’s we who must make this happen.

With Best Wishes

– Azim H Premji

39
Wipro Industries:

40
Wipro Service:

41
India

Email: info@wipro.com

Phone: +91 80 28440011

Fax: +91 80 28440256

Website: www.wipro.com

Corporate Office

Wipro Limited

Doddakannelli, Sarjapur Road,

Bangalore - 560035
Phone: +91 80 28440011
Fax No: +91 80 28440256

Hyderabad Offices:

Wipro Limited

203/1, Manikonda Village, Gatchibowli SEZ

Hyderabad - 500032
Phone: +91 40 30797979
Fax: +91 40 30797070

Wipro Limited

Survey No.124, & Part of 132/P SEZ

Gopanapally
Hyderabad - 501301
Phone: +91 40 30797979, 30970189
Fax: +91 40 30970700

42
Wipro Limited

InfoTech - G-Block,
6th Floor, Surya Towers
R.O. South 3, 105, S.P. Road
Secunderabad – 500003
Phone: +91 40 30794871
Fax: +91 40 30794876

43
 CHAPTER-III
THEORITICAL FRAMEWORK

44
 REVIEW OF LITERATURE
WORKING CAPITAL MANAGEMENT

INTRODUCTION:

Capital required for a business can be classified under two main categories viz.

(i) Fixed capital, and

(ii) Working capital

Every business needs funds for two purposes- for its establishment and to carry out
its day-to-day operations. Long-term funds are required to create production facilities
through purchase of fixed assets such as plant and machinery, land, building, furniture, etc.
Investments in these assets represent that part of firm’s capital which is blocked on a
permanent or fixed basis and is called fixed capital. Funds are also needed foe short-term
purposes for the purchase of raw materials, payment of wages and other day-to-day
expenses, etc. These funds are known as working capital. In simple words, working capital
refers to tat part of the firm’s capital which is required for financing short term or current
assets keep revolving fast and being constantly converted into cash and this cash flows out
again in exchange for other current assets. Hence, it is also known as revolving or
circulating capital or short-term capital.
In the words of Shubin, “working capital is the amount of funds necessary to cover
the cost of operating the enterprise. “
According to Genestenberg, “ Circulating capital means current assets of a company
that are changed in the ordinary course of business from to another, as for example, from
cash to inventories, inventories to receivables, receivables into cash.

CLASSIFICATION OR KINDS OF WORKING CAPITAL

45
Concept Time
Gross Working Capital PermanentWorkingTemporary
Capital Working Capital
Net
Working Capital

Working capital may be classified in two ways:

(a) On the basis of concept.

(b) On the basis of time.

GROSS WORKING CAPITAL

The gross working capital refers to the firms' investment in the total current assets of
the enterprise. The current assets are those assets with in the ordinary course of business can
converted into cash with in the short period of normally one accounting year.

46
NET WORKING CAPITAL

The net working capital can be defined into two ways the most common definition of
working capital is difference between current assets and current liabilities.
Net working capital can also be defined as that portion of firm's current assets.
Which are financed with long-term funds?
On the basis of concept, working capital is classified as gross working capital and net
working capital as discussed earlier. This classification is important from the point of view
of the financial manager. On the basis of time, working capital may be classified as:
1. Permanent or fixed working capital.
2. Temporary or variable working capital.

1. Permanent or fixed working capital.

Permanent or fixed working capital is the minimum amount which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of current
assets. There is always a minimum level of current assets which is continuously required by
the enterprise to carry out its normal business operations. For example, every firm has to
maintain a minimum level of raw materials, work-in-process, finished goods and cash
balance. This minimum level of current assets is called permanent or fixed working capital.
2. Temporary or variable working capital.
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Most of the enterprises
have to provide additional working capital to meet the seasonal and special needs. The
capital required to meet the seasonal needs of the enterprise is called seasonal working
capital. Special working capital is that part of working capital which is required to meet
special exigencies such as launching of extensive marketing campaigns for conducting
research, etc.

47
IMPORTANCE OR ADVANTAGES OF ADEQUATE WORKING CAPITAL
Working capital is the life of blood and nerve canter of a business. Just as circulation
of blood is essential in the human body for maintaining life, working capital is very essential
to maintain the smooth running of a business. No business can run successfully without an
adequate amount of working capital. The main advantages of maintaining adequate amount
of working capital are as follows:

1. Solvency of the business. Adequate working capital helps in maintaining

solvency of the business by providing uninterrupted flow of production.
2. Good will. Sufficient working capital enables a business concern to make
prompt payments and hence helps in creating and maintaining goodwill.
3. Easy loans. A concern having adequate working capital, high solvency and
good credit standing can arrange loans from banks and others on easy and
favorable terms.
4. Cash discounts. Adequate working capital also enables a concern to avail cash
discounts on the purchase and hence it reduces costs.
5. Regular supply of raw materials. Sufficient working capital ensures regular
supply of raw materials and continuous production.
6. Regular payment of salaries, wages and other day-to-day
commitments. A company which has ample working capital can make regular
payment of salaries, wages and other day-to-day commitments which raises the
morale of its employees, increases their efficiency, reduces wastages and costs
and enhances production and profits.
7. Exploitation of favorable market conditions. Only concerns with adequate
working capital can exploit favorable market conditions such as purchasing its
requirement in bulk when the prices are lower and by holding its inventories for
higher prices.
8. Ability to face crisis. Adequate working capital enables a concern to face
business crisis in emergencies such as depression because during such periods,
generally, there is much pressure on working capital.

48
 9. Quick and regular return on investments. Every Investor wants a quick
and regular return on his investments. Sufficiency of working capital enables a
concern to pay quick and regular dividends to its investors as there may not be
much pressure to plough back profits. This gains the confidence of its investors
and creates a favorable market to raise additional funds in the future.
10. High morale. Adequacy of working capital creates an environment of security,
confidence, high morale and creates overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPTIAL

Every business concern should have adequate working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortage of working capital. Both excess as well as short working capital positions are bad
for any business. However, out of the two, it is the inadequacy of working capital which is
more dangerous from the point of view of the firm.

Disadvantages of Redundant or Excessive Working Capital

1. Excessive Working Capital means idle funds which earn no profits for the
business and hence the business cannot earn a proper rate of return on its
investments.
2. When there is a redundant working capital, it may lead to unnecessary
purchasing and accumulation of inventories causing more chances of theft, waste
and losses.
3. Excessive working capital implies excessive debtors and defective credit policy
which may cause higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is excessive working capital, relations with banks and other financial
institutions may not be maintained.
6. Due to low rate of return on investments, the value of shares may also fall.
7. The redundant working capital gives rise to speculative transactions.
Disadvantages of Inadequate Working Capital

49
 1. A concern which has inadequate working capital cannot pay its short-term
liabilities in time. Thus, it will lose its reputation and shall not be able to get good
credit facilities.
2. It cannot buy its requirements in bulk and cannot avail of discounts, etc.
3. It becomes difficult for the firm to exploit favorable market conditions and
undertake profitable projects due to lack of working capital.
4. The firm cannot pay day-to-day expenses of its operations and it creates
inefficiencies, increases costs and reduces the profits of the business.
5. It becomes impossible to utilize efficiency the fixed assets due to non-availability
of liquid funds.
6. The rate of return on investments also falls with the shortage of working capital.

THE NEED OR OBJECTS OF WORKING CAPITAL

The needs for working capital cannot be over emphasized. Every business needs
some amount of working capital. The needs for working capital arises due to the time gap
between productions and realization of cash from sales. There is an operating cycle involved
in the sales and realization of cash. There are time gaps in purchase of raw materials and
production; production and sales; and sales and realization of cash. Thus working capital is
needed for the following purpose:
For the purchase of raw materials, components and spares.
1. To pay wages and salaries.
2. To incur day- to-day expenses and overhead costs such as fuel, power and
office expenses, etc.
3. To meet the selling costs as packing, advertising, etc.
4. To provide credit facilities to the customers.
5. To maintain the inventories of raw material, work-in-progress, stores and
spares and finished stock.

FACTORS DETERMINING THE WORKING CAPTIAL REQUIREMENTS

The working capital requirements of a concern depend upon a large number of

factors such as

50
1. Nature or Character of Business. The working capital requirements of a firm
basically depend upon the nature of its business. Public utility undertakings like
Electricity, Water Supply and Railways need very limited working capital because they
offer cash sales only and supply services, not products, and as such no funds are tied up
in inventories and receivables. On the other hand trading and financial firms require less
investments in fixed assets but have to invest large amounts in current assets like
inventories, receivables and cash; as such they need large amount of working capital.

2. Size of Business/Scale of Operations. The working capital requirements of a

concern are directly influenced by the size of its business which may be measured in
terms of scale of operations. Greater the size of a business unit, generally larger will be
the requirements of working capital. However, in some cases even a smaller concern
may need more working capital due to high overhead charges, inefficient use of
available resources and other economic disadvantages of small size.
3. Production Policy. In certain industries the demand is subject to wide fluctuations due
to seasonal variations. The requirements of working capital, in such cases, depend upon
the production policy. The production could be kept either steady by accumulating
inventories during slack periods with a view to meet high demand during the peak
season or the production could be curtailed during the slack season and increased during
the peak season. If the policy is to keep production steady by accumulating inventories it
will require higher working capital.
4. Manufacturing Process/Length of Production Cycle. In manufacturing business,
the requirements of working capital increase in direct proportion to length of
manufacturing process. Longer the process period of manufacture, larger is the amount
of working capital required. The longer the manufacturing time, the raw materials and
other supplies have to be carried for a longer period in the process with progressive
increment of labour and service costs before the finished product is finally obtained.

5. Seasonal Variations. In certain industries raw materials is not available throughout

the year. They have to buy raw materials in bulk during the season to ensure an
uninterrupted flow and process them during the entire year. A huge amount is, thus,
blocked in the form of material inventories during such season, which gives rise to more

51
 working capital requirements. Generally, during the busy season, a firm requires larger
working capital than in the slack season.
6. Working Capital Cycle. In a manufacturing concern, the working capital cycle starts
with the purchase of raw material and ends with the realization of cash from the sale of
finished products. The cycle involves purchase of raw materials and stores, its
conversion into stocks of finished goods through work-in-progress with progressive
increment of labour and services costs, conversion of finished stock into sales, debtors
and receivables and ultimately realization of cash and this cycle continues again from
cash to purchase of raw material and so on

The speed with which the working capital completes one cycle determines the
requirements of working capital-longer the period of the cycle larger are the requirement of
working capital.

52
PRINCIPLES OF WORKING CAPITAL MANAGEMENT/POLICY

The following are the general principal of a sound working capital management
policy:

1. Principle of Risk Variation. Risk here refers to the inability of a firm to meet
its obligations as and when they become due for payment. Larger investment in
current assets with less dependence on short-term borrowings increases liquidity,
reduces dependence on short-term borrowing increases liquidity, reduces risk and
thereby decreases the opportunity for gain or loss. On the other hand less
investment in current assets with greater dependence on short-term borrowing
increases risk, reduces liquidity and increases profitability. In other words, there
is a definite inverse relationship between the degree of risk and profitability. A
conservative management prefers to minimize risk by maintaining a higher level
of current assets or working capital while a liberal management should be
establish a suitable trade off between profitability and risk. The various working
capital policies indicating the relationship between current assets and sales are
depicted below:
2. Principle of Cost of Capital. The various sources of raising working capital
finance have different cost of capital and the degree of risk involved. Generally,
higher the risk lower is the cost and lower the risk higher is the cost. A sound
working capital management should always try to achieve a proper balance
between these two.

3. Principle of Equity Position. This principle is concerned with planning the

total investment in current assets. According to this principle, the amount of
working capital invested in each component should be adequately justified by a
firm’s equity position. Every rupee invested in the current assets should
contribute to the net worth of the firm. The level of current assets may be
measured with the help of two ratios: (i) current assets as a percentage of total
assets and (ii )current assets as a percentage of total sales. While deciding about
the composition of current assets, the financial manager considers the relevant
industrial averages.

53
 4. Principle of Maturity of payment. This principle is concerned with planning
the sources of finance for working capital. According to this principle, a firm
should make every effort to relate maturities of payment to its flow of internally
generated funds. Maturity pattern of various current obligations is an important
factor in risk assumptions and risk assessments. Generally,
shorter the maturity schedule of current liabilities in relation to expected cash
inflows, the greater the inability to meet its obligations in time.

ESTIMATED WORKING CAPITAL REQUIREMENT:

“Working capital is the life-blood and controlling nerve centre of business.” No

business can be successfully run without an adequate amount of working capital. To avoid
the shortage of working capital at once, an estimate of working capital requirements should
be made in advance so that arrangements can be made to procure adequate working capital.
But estimation of working capital requirements is not an easy task and a large number of
factors have to be considered before starting this exercise.

54
COMPONENTS OF CURRENT ASSETS:
(i) Cash (in hand, in bank, and in transit)
(ii) Investments (short-term only, and not long-term)
(iii) Inventories (raw materials and consumable stores and spares, work-
in-process, and finished goods)
(iv) Sundry Debtors (also known Bills Receivable and Accounts
Receivable)
(v) Loans and advances (granted by the Company)

COMPONENTS OF CURRENT LIABILITIES

(i) Sundry Creditors (also known as Bills Payable and Accounts Payable)
(ii) Trade Advances (given to the company for supply of goods)
(iii) Short-term Borrowings from Banks and Others
(iv) Provisions (for taxes, bad debts, exchange rate fluctuations, etc.)
Better business sense, however, calls for keeping the currents assets at the minimal
level, whereby minimum sources of funds, (both current and non-current Liabilities), may be
required to finance them, and thereby, the “inventory carrying Costs”, and the “interests
outgo” may as well be kept at the minimal level

WHY WORKING CAPITAL MANAGEMENT

Effective management and control of the various components of working capital has
been rated as one of the most important and vital functions of financial management in any
of the industrial and business units, based on varied parameters, discussed hereunder:

A. Flexibility
Working capital Management is highly flexible in nature, so much so that it can very
easily be adapted to suit even extreme conditions, like rising and falling demands in peak
and off seasons, buoyant and sluggish economic and market conditions, etc. Further, if some
inappropriate policy or procedure is detected at a later stage, remedial and right steps can be
adopted henceforth, any time. This, however, is not the position in the case of project
management.
55
 B. Level of investments in various components of current assets
Investments in current assets constitute a very substantial percentage (Usually more than
50%) of the total investments in most of the Indian companies and firms.

C. Criticality
The under mentioned fact itself can bring home the extent of crucially and Criticality of
Working Capital Management.
One of the components of the Working Capital can make such a dramatic difference, the
importance of meticulous management of all the components of the Working Capital (viz.
Current Assets, Current Liabilities and even a portion of the deferred liabilities) can very
well be imagined and appreciated.

D. Quantum of efforts and time

Empirical study and observations have revealed that a major portion of the time of the
Finance Managers, in most of the companies, is devoted (and rightly so) towards the
management of the various components of the working capital, with a view to maximizing
their profitability, and the prospects and prosperity therewith.

CHAPTER –IV
DATA ANALYSIS AND
INTERPRETATION
56
 DATA ANALYSIS
Table 1.1
STATEMENT OF CHANGES IN WORKING CAPITALOF 31-3-2015 & 31-
12-2016
(Rs.in lakhs)

increase or decrease
Particulars 31-3-2015 31-3-2016 in working capital
increase Decrease
Current assets
Inventories 3036 2693 - 343
Sundry debtors 3134 1838 - 1696
Cash & bank 4164 1371 - 2793
Loans & advances 3744 1983 - 1763
Total current assets 14478 7885 - -
Current liabilities

57
 Liabilities 3448 3557 - 109
Provisions 35 36 - 1
Total current liabilities 3483 3593 - -
NET Working capital 10996 4291 - -
INCREASE OR DECREASE
IN W.C 6705 6705

10996 10996 6705 6705

INTERPRETATION:
From the above table in the year 2015 the total assets are decreased by rs.9593 and
the total liabilities are increased by rs.110. Hence the working capital decreased by rs.6705

Table 1.2
STATEMENT OF CHANGES IN WORKING CAPITALOF 31-3-2016 & 31-
12-2017
(Rs.in lakhs)
increase or decrease in
working capital
PARTICULORS 31-3-2016 31-3-2017
INCREAS
DECREASE
E
Current assets
Inventories 2693 2281 - 412
Sundry debtors 1838 3109 1271 -
Cash & bank 1371 1716 345 -
Loans & advances 1983 1771 - 212
Total current assets 7885 8877
Current liabilities
Liabilities 3557 3827 - 270
Provisions 36 50 - 14

58
 Total current liabilities
3593 3877 - -

NET Working capital

4292 5000 - -

Increase or decrease in
708 708
working capital

5000 5000 1616 1616

INTERPRETATION:
This statement shows that working capital is increased when compare to the year
2016 of rs.708. The total debtors and cash and bank balances are increased respectively
rs.1271, rs.345
.

Table 1.3
STATEMENT OFCHANGES IN WORKING CAPITALOF 31-3-2017 & 31-12-
2018
(Rs.in lakhs)

CHANGES IN WC
PARTICULORS 31-3-2017 31-3-2018 INCREAS
DECREASE
E
Current assets
Inventories 2281 2503 222 -
Sundry debtors 3109 2467 - 642
Cash & bank 1716 1290 - 426
Loans & advances 1771 1960 135 -
Total current assets 8877 8767 - -
Current liabilities
Liabilities 3827 3381 446 -

59
 Provisions 50 127 - 77
Total current liabilities
3877 3509 - -

NET Working capital 5000 4658 - -

INCREASE OR
- 342 342 -
DECREASE IN W.C

5000 5000 1145 1145

INTERPRETATION:
This table shows that working capital is again decreased by Rs342 when compare to
the year 2018 the cash and bank balances and sundry debtors are decreased respectively by
rs.642.rs.426.

Table 1.4
STATEMENT OFCHANGES IN WORKING CAPITALOF 31-3-2018 & 31-3-
2019
(Rs.in lakhs)
INCREASE OR
31-3- DECREASE IN WORKING
PARTICULORS 31-3-2019
2018 CAPITAL
INCREASE DECREASE
Current assets

Inventories 2503 3114 611 -

Sundry debtors 2467 943 - 1524
Cash & bank 1290 1383 93 -
Loans & advances 1906 5284 3378 -
Total current assets 8166 10724 - -
Current liabilities

60
 Liabilities 3381 3758 - 377
Provisions 127 163 - 36
Total current liabilities
3508 3921 - -

NET Working capital 4658 6802 - -

INCREASE OR
2145 - - 2145
DECREASE IN W.C
6803 6803 4082 4082

INTERPRETATION:
This table shows that the working capital is increased byrs.2145 when compare to
the year 2018 And the loans and advances are increased by rs.3378.

Table 1.5
STATEMENT OFCHANGES IN WORKING CAPITALOF 31-3-2019 & 31-3-
2020
(Rs.in lakhs)
INCREASE OR
31-3- DECREASE IN WORKING
PARTICULORS 31-3-2019
2020 CAPITAL
INCREASE DECREASE
Current assets
Inventories 3115 2889 - 226
Sundry debtors 943 886 - 57
Cash & bank 1383 1576 193 -
Loans & advances 5284 3095 - 2189
Total current assets 10724 8446 - -
Current liabilities
Liabilities 3758 5062 - 1304

61
 Provisions 163 326 - 163
Total current liabilities
3921 5388 - -

NET Working capital 6803 3058 - -

INCREASE OR
- 3745 3745 -
DECREASE IN W.C
6803 6803 3938 3938

INTERPRETATION:
In this above statement the total assets are decreased by Rs.2278 and current
liabilities are increased by Rs.1467. Hence the working capital is decreased by Rs.3745.

62
 WORKING CAPITAL CHANGES
(Rs.in lakhs)
Year Increase/Decrease in
working capital

2015-16 6705

2016-17 708
2017-18 -342

2018-19 2145

2019-20 -1298

8000
Changes in working capital

7000 6705
6000
5000
4000
3000 2145
2000
1000 708
0
-1000 2015-16 2016-17 2017-18
-342 2018-19 2019-20
-2000 -1298
years

INTERPRETATION: -
The data in the above table shows that there is a mixed trend changes in working
capital. That is both positive and negative changes. However, there is an increase and
decrease in changes of working capital, but the working capital trend shows a positive trend.

63
 RATIO ANALYSIS
TYPES OF RATIOS:
Several ratios calculated from the accounting data can be grouped in to various
classes according to financial activity or function to be evaluated. As stated earlier, the
parties interested in financial analysis are short-term and long-term creditors, owners and
management. Short-term creditors.
Main interest in the liquidity position or the short-term solvency of the firm long
term creditors on the other hand are more interested in the long term solvency and
profitability of the firm.
We may classifies them in to the following from important categories
1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio

1. LIQUIDITY RATIOS
Liquidity ratios measure the firm’s ability to meet current obligations.
2. LEVERAGE RATIOS
Leverage ratios show the proportion of debt and equity in financing the firm’s assets.
3. ACTIVITY RATIO
Activity ratios reflect the firm’s efficiency in utilizing its assets
4. PROFITABILITY RATIOS
Profitability ratios measure overall performance and Effectiveness of the firm.

64
WORKING CAPITAL TURN OVER RATIO

This ratio measures the relationship between working capital and sales. The ratio
shows the number of times the working capital results. In sales working capital as usual is
the excess of current assets over the current liabilities.

Working capital turnover ratio = sales/net working capital

Comment: Higher the ratio creates the greater the profit. A low working capital turn over
indicates that working capital is not efficiently utilize

Table 1.1
NET WORKING
YEAR SALES RATIO
CAPITAL
2015-16 31590 4292 7.4
2016-17 35851 5002 7.2
2017-18 39889 4658 8.6
2018-19 47306 6803 7.0
2019-20 50309 4058 12.3

65
 Working capital turnover ratio
14 12.3
12
10 8.6
8 7.4 7.2 7
Ratio

6
4
2
0
2015-16 2016-17 2017-18 2018-19 2019-20
Years

INTERPRETATION:

From the above table we can analyze that in the year 2018-2019 it will be decreased
to 7.0 and in the year 2019-2020 it will be higher that 12.3 remaining all years it will be
increasing in position.

66
 DEBTORS TURN OVER RATIO

It is also known as receivable turnover ratio it establishes relationship between credit

sales and average debtors.

Debtors turnover ratio = credit sales/average debtors

Average debtors = (opening debtors + closing debtors)/2
Collection period = 365/debtors turnover ratio

 The ratio indicates the days with in which debtors are collected.
 Higher the ratio more the chances of bad debts and lower the ratio less chance of bad
debts
Table 1.2

AVERAGE
YEAR SALES RATIO
DEBTORS
2015-16 31590 1838 17.2
2016-17 35851 3109 11.4
2017-18 39889 2467 16.16
2018-19 47306 943 50.16
2019-20 50309 1866 26.9

67
 Detors turn over ratio

60
50.16
50
40
26.9
Ratio

30
20 17.2 16.16
11.4
10
0
2015-16 2016-17 2017-18 2018-19 2019-20
Years

INTERPRETATION:

From the table we can analysis that in the year 2018-2019 debtors turnover ratio is
highest ratio of rs.50.16 and in the year 2016-2017 it had lower ratio of Rs. 11.4. and in the
last year it again decreased to rs.26.9.

68
 CREDITORS TURN OVER RATIO

It is also known as accounts payable turnover ratio this ratio gives the average credit
period enjoyed from the creditors and is calculated as under Creditors turnover ratio = credit
purchases / average creditors (accounts payable)

Average creditors = (opening creditors + closing creditors)/2

Average payable period = 365/creditors turnover ratio

 A higher ratio indicates that creditors are not paid in time a low ratio gives an idea that
the business is not taking full advantages of credit period allowed by the creditors

Table 1.3
AVERAGE
YEAR PURCHAGES RATIO
CREDITORS
2015-16 4106 3443 1.19
2016-17 3776 3201 1.17
2017-18 5858 3423 1.7
2018-19 7934 3470 2.3
2019-20 6233 4356 1.4

69
 Creditor turnover ratio

2.5 2.3
2 1.7
1.5 1.4
1.19 1.17
Ratio

1
0.5
0
2015-16 2016-17 2017-18 2018-19 2019-20
Years

INTERPRETATION:

From the table we can find out that in the year 2018-2019 it has high ratio of rs.2.3
and in the year 2019-2020 it has less ratio of Rs. 1.4. In the year 2015, 2016,2017 it is in Rs.
1.19, 1.17 after it is increased to rs.1.7.

70
 FINISHED GOODS TURN OVER RATIO:

This ratio indicates the relationship between cost of goods sold and average finished
goods.

Finished goods turnover ratio = (opening finished goods + closing finished    
goods)/2

Calculates days = 365/finished goods turnover ratio

Comment: ‘Higher the ratio better it is’.

Table 1.4
COST OF AVERAGE
YEAR GOODS FINISHED RATIO
SOLD GOODS
2015-16
38483 736 52.2
2016-17
32005 456 70.2
2017-18
34922 258 135.4
2018-19
37690 329 114.4
2019-20
30909 577 53.5

71
 Finished goods turnover ratio

160
140 135.4
120 114.4
100
70.2
Ratio

80
60 52.2 53.5
40
20
0
2015-16 2016-17 2017-18 2018-19 2019-20
Years

INTERPRETATION:

From the finished goods turnover ratio it shows the ratio is gradually increasing way
up to in the year 2015-2018 (52.2, 70.2, 135) after it will become decreased in the year
2018-2019,2019-2020(114.4, 53.5).

72
 INVENTORY TURNOVER RATIO

This ratio also knows as stock turnover ratio establishes relationship between cost of
goods sold during a given period and the average amount of inventory held during that
period.

Inventory turnover ratio = (opening inventory + closing inventory)/2

Calculate of Inventory turnover in days = 365/inventory turnover ratio.

Higher the ratio the better it is because it shows that finished stock is rapidly turned
over on the other hand a low stock turnover ratio is not desirable because it reveals the
accumulation of obsolete stock, or the carrying of too much stock.

Table 1.5

YEAR SALES INVENTORY RATIO

2015-16 31590 2693 11.7

2016-17
35851 2282 15.7
2017-18 39889 2563 15.9
2018-19 47306 3114 15.19
2019-20 50310 2889 17.4

73
 inventory turnover ratio
20 17.4
15.7 15.9 15.19
15 11.7
ratio

10
5
0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:
From the table we can analyze that in the year 2015-2016 it has low ratio of 11.7 and
it has high ratio of in the year 2019-2020 of 17.4. Remaining all years it is gradually
increased.

74
 CURRENT RATIO

Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio also known as working capital ratio current assets include cash and
these assets which can be converted in to cash with in a one year such as cash & bank,
marketable securities, debtors, inventories, prepaid expenses include the represent the
payments that will be made in future obligation like creditors, bills payable etc.

Generally current ratio is a measure of firms short-term solvency 2:1 is considered to

be ideal for the concern. It indicates the availability of current assets in rupees for every one
rupee of current liabilities worth of two rupee Current assets.

Curent assents
Curent ratio = -------------------------------
Curent labilités
Table 1.6

CURRENT CURRENT
YEAR RATIO
ASSETS LIABILITIES
2015-16 7885 3593 2.19
2016-17 8879 3877 2.29
2017-18 8167 3509 2.33
2018-19 10726 3823 2.81
2019-20 9427 5388 1.75

75
 current ratio

3 2.81
2.5 2.19 2.29 2.33
2 1.75
1.5
ratio

1
0.5
0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:

From the above table the current ratio is satisfactory because as conversional rule
current ratio is 2:1.except 31-3-2019 in all year’s cash ratio is above 2:1

76
 QUICK RATIO

This is the ratio of quick assets to current liabilities. It shows a firm’s ability to meet
current liabilities. The assets is liquid if it can be converted in to cash immediately like cash
or band & short investments & bills receivable. Generally 1:1 ratio is considered ideal ratio
for a concern because it is wise to keep the liquid assets at least equal to the liquid liabilities
at all times.

QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES

Table 1.7

Year Quick Assets Current liabilities Ratio

2015-16 5192 3593 1.45
2016-17 6597 3877 1.70
2017-18
5664 3509 1.61
2018-19
7611 3823 1.99
2019-20 6538 5388 1.21
.

77
 quick ratio
2.5
1.99
2 1.7 1.61
1.45
1.5 1.21
ratio

1
0.5
0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:

From the above table the quick assets ratio position is satisfactory. Normally the
quick assets ratio is 1:1.in all above years it is more than 1:1 (1.45, 1. 7, 1.61, 1.99, 1.21

78
 DEBT RATIO

This ratio is also known as funded debt to total capitalization. Total debt ratio is
obtained by dividing total debt by capital employed it is obtained by the following formula.

TOTAL DEBT RATIO = TOTAL DEBT / CAPITAL EMPLOYED

Here, total debt will include short and long-term borrowings from financial
institutions, debentures / bonds, deferred payment arrangements for buying capital
equipments, and bank borrowings, public deposits and any other interest-bearing loan.

Capital employed will include total debt and net worth. Capital employed equals net
assets, which consists of net fixed assets and net current assets. Net current assets include
current assets minus current liabilities excluding interest-bearing short-term debt.

Table 1.8

Year Total debt Net assets Debt ratio

2015-16 27130 74827 0.36
2016-17 28088 92785 0.30
2017-18 27198 91895 0.29
2018-19 25198 89895 0.28
2019-20 16555 81252 0.20

79
 debt ratio
0.4 0.36
0.3 0.29 0.28
0.3
0.2
0.2
ratio

0.1
0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:

From the above table we analyses that the debt ratio is gradually decreases. In the
year 31-3-2016 it has highest ratio 0.36 and it has lowest value of 0.20 in the year 31-3-
2020.

80
 DEBT EQUITY RATIO

The debt equity ratio is determined to ascertain the soundness of the long-term
financial policies of the company. It may be calculated as follows.

The terms debt refers to the total outside liabilities that consists of both short-term
and long-term liabilities and the term equity refers to share holder’s funds that consists of
the booth and preference capital and reserves and surplus.

Debt equity ratio = debt / Equity

This ratio provides margin of safety to creditors. The desirable norm for the ratio is
1:2 or 1:1

Table 1.9

Year Debt Net Worth Ratio

2015-16
27130 47697 0.57
2016-17
2800 64697 0.43
2017-18
27198 64697 0.42
2018-19
25198 64697 0.39
2019-20
16555 64697 0.25

81
 debt equity ratio
0.6 0.57
0.43 0.42 0.39
0.4
0.25
ratio

0.2

0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:

From the above table we analyses that the debt equity ratio is gradually decreases. In
the year 31-3-2016 it has highest values 0.57ratio and it has lowest ratio of 0.25 in the year
31-12 2020

82
 NET WORKING CAPITAL RATIO

The difference between current assets and current liabilities excluding short-term
borrowing is called net working capital (NWC) or net current assets (NCA). NWC is
sometimes used as a measure of a firm’s liquidity. It is considered that between two firms,
the one having the larger NWC has the greater ability to meet its current obligations. This is
not necessary so the measure of liquidity is a relationship, rather than the difference between
current assets and current liabilities. NEC however measures the firm’s potential reservoir
funds. It can be related to net assets.
Net working capital
Net working capital ratio = ---------------------------------------
Net assets

Net working capital means current assets minus current liabilities. Net assets refers
to the depreciation should be subtracted from the fixed assets.
Table 1.10

Year Net working capital Net assets Ratio

2015-16 4292 43380 0.09
2016-17 5002 41351 0.12
2017-18 4658 38430 0.12
2018-19 6803 38472 0.18
2019-20 4058 33826 0.12

83
 net working capital ratio

0.2 0.18
0.15 0.12 0.12 0.12
0.1 0.09
ratio

0.05

0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:

From the table we can analysis that the net working capital is high in the year 2018-
2019 (0.18), and low in the year 2015-2016(0.09) and remaining all years it is constant i.e.,
0.12.

84
 CASH RATIO

Cash is the most liquid asset; a financial analysis may examine cash ratio and its
equivalent to current liabilities. Trade investment or marketable securities are equivalent of
cash : their fore they may be included in the composition of cash ratio.

Cash ratio = cash + marketable securities/current liabilities.

Table 1.11

Year Cash Current liabilities Ratio

2015-16
1371 3593 0.38
2016-17
1716 3877 0.44
2017-18
1291 3509 0.36
2018-19
1383 3823 0.36
2019-20
1576 5388 0.29

85
 cash ratio
0.5
0.44
0.45
0.4 0.38 0.36 0.36
0.35
0.29
0.3
0.25
ratio

0.2
0.15
0.1
0.05
0
2015-16 2016-17 2017-18 2018-19 2019-20
years

INTERPRETATION:

From the table we can analysis that in the year 2016-2017 it has high ratio of 0.44
and it has low ratio in the year 2019-2020 i.e., 0.29in the year 2015-2016 it is in 0.38 and
remaining all years it is in constant ratio i.e., 0.36.

86
 CHAPTER-V
FINDINGS, SUGGESTIONS AND
CONCLUSION

87
 SUMMARY OF FINDINGS

 In the year 2016 the networking capital is decreasing by Rs6705 lakhs and in the
year 2017 it is increased by Rs708 lakhs and again in the year 2017 it is
decreased by rs.342 lakhs and in the year 2019 it is increased by rs.2145 lakhs.
So it is fluctuating more.
 It is find out that the current ratio is more than 2:1 except in the years 31-3-2020
(i.e1.75)
 It is find out that the quick ratio position is satisfactory because in all 5 years it is
more than the idle ratio ie.1:1.
 From the leverage ratios we can find out that the lenders contribution is
decreased and the owners contribution is increased.
 From the inventory ratio we can find out that converting finished goods to sales
period is increases.
 In the year 2019-20 the debtors turnover increased more (ie.50.16)
 In the year 2019-20 it has less collection period (i.e.7.5).
 From the networking capital the working capital position is in very low (i.e. 0.09,
0.12, 0.12, 0.18, 0.12).
 The working capital turnover ratio is also in low position (i.e. 7.4, 7.2, 8.6, 7.0,
12.3).
 In the year 2019-20 Creditors turn over ratio is very high (i.e. 2.3).

88
 SUGGESTIONS

 Working capital is fluctuating so it is better to maintain sufficient level.

 The company has high inventory turnover ratio is indicates high inventory cost. So, it
is better to maintain optimum level of inventory.
 Debtors turnover ratio is in last two years increased it creates more bad debts so it is
suggested that to decrease the debtors turnover ratio.
 Creditors turnover ratio is decreased it creates creditors are not utilizing credit
period. So it is better to increase.
 The cash ratio is in low position it is better to maintain idle ratio 1:1 to meet liquid
position.

89
 CONCLUSION

As Wipro Limited was entered a joint venture with italicementi which is the
second largest cement producer in Europe. So it needs to improve its activities in fewer
fields/activities to get its quality increase and also to increase the customer base in all the
places where it is functioning. And it is the right time to increase its operations because
it is the period of overcoming the Recession the company has more scope.

90
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Financial Management, 9th edition, Pandey .I.M.,

Vikas Publishing (Pvt) Ltd., New Delhi.

Financial Management Text, M.Y.Khan & P.K. Jain

problems & cases, 4th edition TATA MC grawhill
Publishing comp. Ltd., New Delhi.

Financial Management and Policy, Srivastava. R.M.

3rd edition, Himala ya Publishing House.

Investment Analysis & Portfolio

Publishing comp. Ltd., New Delhi. Prassanna ChandraManagement
,
TATA MC Grawhill

91