A Study on

Working Capital Management

With Reference to Hdfc Bank, Visakhapatnam

A project report submitted to JNTU, Kakinada

In partial fulfillment of the requirements for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY

DHAKAVARAPU BHAVANI

(PIN. NO: 21L61E0026)

UNDER THE GUIDANCE OF

Mrs. K. JYOTHSNA
MBA
Asst. Professor

DEPARTMENT OF BUSINESS AND MANAGEMENT STUDIES

CHAITANYA ENGINEERING COLLEGE
KOMMADI, VISAKHAPATNAM-530048

(2021-2023)
 Mrs. M.PADMAJA Tel: Of office – 2793322
Head Fax: 0891 – 2793666
Department of Business and chaitanya engineering college
Management Studies Visakhapatnam – 530048

CERTIFICATE
This is to certify that the project report entitled “A STUD ON WORKING CAPITAL

MANAGEMENT with Reference to “HDFC BANK, VISAKHAPATNAM” submitted in

partial fulfillment for the award of Master of Business Administration by DHAKAVARAPU

BHAVANI, PIN No.21L61E0026during the academic year 2021-23 under my guidance and

supervision. This report has not been submitted previously for the award of any Degree,

Diploma, associate ship, Fellowship or similar title in this University or in any other University.

K.JYOTHSNA Mrs. M. PADMAJA

Project Supervisor Head of the Department
 DECLARATION

I hereby declare that the exposition “A STUDY ON WORKING CAPITAL

MANAGEMENT with Reference to “ HDFC BANK,VISAKHAPATNAM” submitted by
me to JNTU Kakinada in partial fulfillment for the Award of the Degree of Master`s in
Business administration is a original work carried out by me . I completed this work under the
guidance of Mrs.K.JYOTHSNA, Asst. Professor, Department of Business & management
studies, Chaitanya Engineering College, Visakhapatnam.

I also declare that this dissertation has not been previously formed the basis for the
award of any Degree, Diploma Associate ship, fellowship or similar title in this university or in
any other university.

PLACE: Visakhapatnam
DATE: DHAKAVARAPU BHAVANI
 ACKNOWLEDGMENTS
I take this opportunity to express my sincere gratitude to the following eminent
personalities without whose help & guidance, the successful completion of my project work
would have remained a dream.

I extend my sincere thanks to Sri. K. SURESH, Principal of Chaitanya engineering

college giving this opportunity to this project.I also thank to Mrs. M. PADMAJA for his advice
and giving me opportunity to do this project

I express my gratitude to my project work guide Mrs. M.PADMAJA for her valuable
guidance and input throughout the project work and for providing the relevant material needed
for the completion of my project.

I express my gratitude to Sri. N.APPA RAO, H.R.Manager and also I express

my gratitude to General Manager for continuous support and encouragement throughout
my project.

Place:
Date: DHAKAVARAPU BHAVANI
 CONTENTS
Pg.No

1.CHAPTER-I 1-8

 INTRODUCTION

2. CHAPTER-II 9-27

 INDUSTRY PROFILE

3. CHAPTER-III 28-39

 COMPANY PROFILE

4. CHAPTER-IV 40 -59

 THEORETICAL FRAME WORK OF THE STUDY

5. CHAPTER-V 60-78

 DATA ANALYSIS & INTERPRETATION OF THE STUDY

6. CHAPTER-VI 79-85

 SUMMARY
 FINDINGS
 SUGGESTIONS
 CONCLUSION
CHAPTER-I
 INTRODUCTION
Funds are required for two basic purposes in any organization. Firstly, funds are
required to create productive capacities. To purchase fixed assets and secondly, to finance a
part of the day to day running of the business Which is other work is the “WORKING
CAPITAL”

Working capital management is an integrated part of overall Corporate

management. The finance manager has to carry out the finance Functions in the face of risk
and certain the fact that cash flows cannot be Predicted with any certainty, makes the job
difficult.

Meaning:

working capital means Current Assets: cash, Bills, Receivables, stock etc., (-) Current
liabilities. Management of current assets is more important than management of fixed
assets. As this is problem relating to decision making regarding investment in various current
assets with an objective of marinating liquidity of funds so that all payments can be made on
due date. The capital of required for fixed assets and working capital, which is for routine
payment. The needs for capital of business are always for two purpose.

(a)For establishing a business unit and

(b)And for payment for routine expenses

A) LONG –TERM FUNDS

Long-term funds are needed for the purchase of fixed assets: Land and Building,
plants &Machinery, Furniture etc. Investment in such assets represents as a part of
corporate capital, which is blocked on a Permanent basic known as fixed capital.

B) SHORT –TERM FUNDS

 Short –term funds are funds needed for payment of Raw Material, payment of
wages and other daily expenditure. These short term Funds are known as working capital,

Definition:

“Working capital is the amount of funds necessary to cover the cost of operating
the enterprise”.

Shubin

Working capital management is concerned with the problem that arise in attempting
to: managing the current assets. The current liabilities and interrelationship that exists
between them thus it is also known as “Current Assets Management”. The interaction
between current assets and current liabilities is therefore, the main theme of the theory of
Working Capital Management.

The terms current assets refer to; those assets, which are in the ordinary course of
business can be turned into cash within one year. The Major current assets are cash,
Marketable, securities, Accounts, Receivables and Inventory. Current Liabilities are those
claims of outsiders, which are expected to nature of payment within an accounting year and
include creditors :bills Payables and bank O.D. and out standing expenses.

Working capital is often classified as gross working capital and net working capital;
Gross working and net working capital. Gross Working Capital is the sum of all current
assets. Net working capital is the difference between the total current assets and total current
liabilities. But generally, Net working capital is referred to simply as working capital . Net
Working capital can be defined as part of current, which are financed with long-terms
funds.
 NEED FOR THE STUDY

The process of may study focuses mainly on the analysis of financial ratios and working

capital funds flow statement, working CapitaLand in HDFC BANK.

The study has various benefits to various parties directly (or) indirectly and has great

significance.

 This study gives me a practical insight into the organizations activities and enables me to know

the practical problems and solutions in HDFC BANK main the area of Financial Management.

 It is beneficial to top Management of the company by providing crystal clear picture of

various aspects (contributing for co) i.e., Financial position etc.,

 The study is also beneficial to employees and offers motivation by showing various

activities contributing for company growth.

 The investors who are interested in the company’s shares will also get benefits by

going through the study and can easily take a decision whether to invest or not in the company

shares.

 It is helpful in financial as it focuses on daily cash flows management and funds flow

management in the organization. Finance plans are central instruments for directing and co-

ordination the financial effort.

 OBJECTIVES OF THE STUDY

 To find out of working capital position of the company through financial ratios.

 To examine about caucus for changes in working capital from time to time.

 To know the percentage of investment in each component of current assets.

 To measures the performance of cash, bills receivables and inventory.

 To find out the sources of working capital finance of the company.

 To giver suggestions to company regarding the performance of working capital.

 SCOPE OF THE STUDY

 The scope of the study covers all the finance that come under the working capital in the

management in an organization. It takes into consideration the capital activities that are implemented

for the benefit of the company and the management as a whole.

 Before examining the working capital in the management an attempt was made to explain the

concept, scope and importance of the participative forums in Hence study specially deals with the

measures of the participative forums.

 METHODOLOGY OF THE STUDY

The following are the main sources of date used for this study which are
Collected and compiled from published and unpublished sources of the Company data. The
published sources are as follows.
1) Management information system published by HDFC BANK
2) Status Report on HDFC BANK
3) Journals, books and other published reports.

 Primary data.
 Secondary data.

Primary data:
In the primary method the information has gathered by interacting to the higher
officials and the employees of the company and the large amount of information is
referred from the renowned books and articles of most famous authors on internal
marketing. And few of the information has acquired from the companies books and
presentations. The information secured by interacting with all the departments.

Secondary data:
In the secondary method of finding information is by conducting survey for the employees
feedback and maintained a form of it in which has all the information on the employees
perception. The analysis of the data is done and gathered information. And in this method
I have taken little infoand companies websites.
 LIMITATIONS OF THE STUDY

 During the project period most of the staff members are busy with auditing and other

works. So they could not afford give full information.

 Some of the information was not available due to the confidential matters.

 Since officials, executives and others were busy the study was primarily focused on

secondary data.

 Comparison of Coriander’s performance with other organizations was not possible since

the financial statements of other organizations were not available.

 Duration of time is also a limitation.

CHAPTER-II
 INDUSTRY PROFILE

PROFILE OF BANKING INDUSTRY

Banking in India in the modern sense originated in the last decades of the 18th century. The
first banks were Bank of Hindustan (1770-1829) and The General Bank of India, established
1786 and since defunct.

The largest bank, and the oldest still in existence, is the State Bank of India, which originated
in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal.
This was one of the three presidency banks, the other two being the Bank of Bombay and
the Bank of Madras, all three of which were established under charters from the British East
India Company. The three banks merged in 1921 to form the Imperial Bank of India, which,
upon India's independence, became the State Bank of India in 1955. For many years the
presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank
of India was established in 1935.

In 1969 the Indian government nationalised all the major banks that it did not already own and
these have remained under government ownership. They are run under a structure know as
'profit-making public sector undertaking' (PSU) and are allowed to compete and operate
as commercial banks. The Indian banking sector is made up of four types of banks, as well as
the PSUs and the state banks, they have been joined since the 1990s by new private
commercial banks and a number of foreign banks.

Banking in India was generally fairly mature in terms of supply, product range and reach-even
though reach in rural India and to the poor still remains a challenge. The government has
developed initiatives to address this through the State Bank of India expanding its branch
network and through the National Bank for Agriculture and Rural Development with things
likemicrofinance.

Indian Banking Industry currently employes 1,175,149, employees and has a total of 109,811
branches in India and 171 branches abroad and manages an aggregate deposit of 67504.54
billion (US$1.1 trillion or €840 billion) and bank credit of 52604.59 billion (US$880 billion or
€650 billion). The net profit of the banks operating in India was 1027.51 billion(US$17 billion
or €13 billion) against a turnover of 9148.59 billion (US$150 billion or €110 billion) for
the fiscal year 2012-13

In ancient India there is evidence of loans from the Vedic period (beginning 1750
BC).[2][3] Later during the Maurya dynasty (321 to 185 BC), an instrument called adesha was in
use, which was an order on a banker desiring him to pay the money of the note to a third
person, which corresponds to the definition of a bill of exchange as we understand it today.
During the Buddhist period, there was considerable use of these instruments. Merchants in
large towns gave letters of credit to one another.

Colonial era
During the period of British rule merchants established the Union Bank of Calcutta in 1829,
first as a private joint stock association, then partnership. Its proprietors were the owners of the
earlier Commercial Bank and the Calcutta Bank, who by mutual consent created Union Bank
to replace these two banks. In 1840 it established an agency at Singapore, and closed the one at
Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed that it had
been the subject of a fraud by the bank's accountant. Union Bank was incorporated in 1845 but
failed in 1848, having been insolvent for some time and having used new money from
depositors to pay its dividends.

The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock
bank in India, it was not the first though. That honor belongs to the Bank of Upper India,
which was established in 1863, and which survived until 1913, when it failed, with some of its
assets and liabilities being transferred to the Alliance Bank of Simla.

Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The Comptoir
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondicherry, then a French possession, followed. HSBC established
itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the
trade of the British Empire, and so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in
Lahore in 1895, which has survived to the present and is now one of the largest banks in
India.

Around the turn of the 20th Century, the Indian economy was passing through a relative
period of stability. Around five decades had elapsed since the Indian Mutiny, and the
social, industrial and other infrastructure had improved. Indians had established small
banks, most of which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange
banks and a number of Indian joint stock banks. All these banks operated in different
segments of the economy. The exchange banks, mostly owned by Europeans, concentrated
on financing foreign trade. Indian joint stock banks were generally under capitalised and
lacked the experience and maturity to compete with the presidency and exchange banks.
This segmentation let Lord Curzon to observe, "In respect of banking it seems we are
behind the times. We are like some old fashioned sailing ship, divided by solid wooden
bulkheads into separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by
the Swedish movement. The Swedish movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established
then have survived to the present such as Bank of India, Corporation Bank, Bank,
Bank, Canara Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks

in Dakshina Kannada and Udupi district which were unified earlier and known by the
name South Canara ( South Kanara ) district. Four nationalised banks started in this
district and also a leading private sector bank. Hence undivided Dakshina Kannada district
is known as "Cradle of Indian Banking".

During the First World War (1914–1918) through the end of the Second World
War (1939–1945), and two years thereafter until the independence of India were
challenging for Indian banking. The years of the First World War were turbulent, and it
took its toll with banks simply collapsing despite the Indian economy gaining indirect
boost due to war-related economic activities. At least 94 banks in India failed between
1913 and 1918 as indicated in the following table:

Number of banks Authorised Capital Paid-up Capital

Years
that failed ( Lakhs) ( Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Post-Independence

The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralysing banking activities for months. India's independence marked the end of
a regime of the Laissez-faire for the Indian banking. The Government of India initiated
measures to play an active role in the economic life of the nation, and the Industrial Policy
Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted
into greater involvement of the state in different segments of the economy including
banking and finance. The major steps to regulate banking included:

 The Reserve Bank of India, India's central banking authority, was established in
April 1935, but was nationalised on 1 January 1949 under the terms of the Reserve
Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). [6]
 In 1949, the Banking Regulation Act was enacted which empowered the Reserve
Bank of India (RBI) "to regulate, control, and inspect the banks in India".
 The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two banks could
have common directors.
Nationalization in the 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks in
India except the State Bank of India (SBI), continued to be owned and operated by private
persons. By the 1960s, the Indian banking industry had become an important tool to
facilitate the development of the Indian economy. At the same time, it had emerged as a
large employer, and a debate had ensued about the nationalization of the banking
industry. Indira Gandhi, the then Prime Minister of India, expressed the intention of
theGovernment of India in the annual conference of the All India Congress Meeting in a
paper entitled "Stray thoughts on Bank Nationalization."[7] The meeting received the paper
with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance
('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')
and nationalized the 14 largest commercial banks with effect from the midnight of 19 July
1969. These banks contained 85 percent of bank deposits in the country.[7]Jayaprakash
Narayan, a national leader of India, described the step as a "masterstroke of political
sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received
the presidential approval on 9 August 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The
stated reason for the nationalisation was to give the government more contr ol of credit
delivery. With the second dose of nationalisation, the Government of India controlled
around 91% of the banking business of India. Later on, in the year 1993, the government
merged New Bank of India with Punjab National Bank. It was the only merger between
nationalised banks and resulted in the reduction of the number of nationalised banks from
20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%,
closer to the average growth rate of the Indian economy

Liberalization in the 1990s In the early 1990s, the then government embarked on a
policy of liberalization, licensing a small number of private banks. These came to be
known as New Generation tech-savvy banks, and included Global Trust Bank (the first of
such new generation banks to be set up), which later amalgamated with Oriental Bank of
Commerce, UTI Bank (since renamedAxis Bank), ICICI Bank and HDFC Bank. This
move, along with the rapid growth in the economy of India, revitalised the banking sector
in India, which has seen rapid growth with strong contribution from all the three sectors of
banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in the
norms for foreign direct investment, where all foreign investors in banks may be given
voting rights which could exceed the present cap of 10% at present. It has gone up to 74%
with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were
used to the 4–6–4 method (borrow at 4%; lend at 6%; go home at 4) of functioning. The
new wave ushered in a modern outlook and tech-savvy methods of working for traditional
banks. All this led to the retail boom in India. People demanded more from their banks and
received more.

Current period

All banks which are included in the Second Schedule to the Reserve Bank of India Act,
1934 are Scheduled Banks. These banks comprise Scheduled Commercial Banks and
Scheduled Co-operative Banks. Scheduled Commercial Banks in India are categorized
into five different groups according to their ownership and/or nature of operation. These
bank groups are:

 State Bank of India and its Associates

 Nationalised Banks
 Private Sector Banks
 Foreign Banks
 Regional Rural Banks.

In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalised Banks.
Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and
Scheduled Urban Cooperative Banks.

Growth of Banking in India of Scheduled Commercial Banks

In 31 March of
dic
at
or 2013 2014 2015 2016 2017 2018 2019 2020 2021
s

Num
ber of
Com
merci 284 218 178 169 166 163 163 1609 151
al
Bank
s
Growth of Banking in India of Scheduled Commercial Banks

In 31 March of
dic
at
or 2013 2014 2015 2016 2017 2018 2019 2020 2021
s

Num
ber of
70,373 72,072 74,653 78,787 82,897 88,203 94,019 102,377 109,811
Bran
ches

Popul
ation
per
Bank 16 16 15 15 15 14 13 13 12
s(in
thous
ands)

67504.
Aggr 17002 21090 26119 31969 38341 44928 52078 59091
54
egate billion( billion( billion( billion( billion( billion( billion( billion(
billion(
Depo US$290 US$350 US$440 US$540 US$640 US$750 US$870 US$990
US$1.1
sits billion) billion) billion) billion) billion) billion) billion) billion)
trillion)
Growth of Banking in India of Scheduled Commercial Banks

In 31 March of
dic
at
or 2013 2014 2015 2016 2017 2018 2019 2020 2021
s

11004 15071 19312 23619 27755 32448 39421 46119 52605

Bank
billion( billion( billion( billion( billion( billion( billion( billion( billion(
Credi
US$180 US$250 US$320 US$400 US$470 US$550 US$660 US$770 US$880
t
billion) billion) billion) billion) billion) billion) billion) billion) billion)

Depo
sit as
perce
ntage
to G 62% 64% 69% 73% 77% 78% 78% 78% 79%
NP (a
t
factor
cost)

Per 16281( 19130( 23382( 28610( 33919( 39107( 45505( 50183( 56380 (
Capit US$270 US$320 US$390 US$480 US$570 US$660 US$760 US$840 US$950
a ) ) ) ) ) ) ) ) )
Depo
Growth of Banking in India of Scheduled Commercial Banks

In 31 March of
dic
at
or 2013 2014 2015 2016 2017 2018 2019 2020 2021
s

sit

Per
Capit 10752( 13869( 17541( 21218( 24617( 28431( 34187( 38874( 44028 (
a US$180 US$230 US$290 US$360 US$410 US$480 US$570 US$650 US$740
Credi ) ) ) ) ) ) ) ) )
t

Credi
t
Depo 63% 70% 74% 75% 74% 74% 76% 79% 79%
sit
Ratio

By 2010, banking in India was generally fairly mature in terms of supply, product range
and reach-even though reach in rural India still remains a challenge for the private sector
and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets relative to other banks in
comparable economies in its region. The Reserve Bank of India is an autonomous body,
with minimal pressure from the government.

With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail banking,
mortgages and investment services are expected to be strong. One may also expect M&As,
takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake
in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor
has been allowed to hold more than 5% in a private sector bank since the RBI announced
norms in 2005 that any stake exceeding 5% in the private sector banks would need to be
vetted by them.

In recent years critics have charged that the non-government owned banks are too
aggressive in their loan recovery efforts in connexion with housing, vehicle and personal
loans. There are press reports that the banks' loan recovery efforts have driven defaulting
borrowers to suicide.

The IT[clarification needed] revolution has had a great impact on the Indian banking system. The
use of computers has led to the introduction of online banking in India. The use of
computers in the banking sector in India has increased many fold after the economic
liberalisation of 1991 as the country's banking sector has been exposed to the world's
market. Indian banks were finding it difficult to compete with the international banks in
terms of customer service, without the use of information technology.

The RBI set up a number of committees to define and co-ordinate banking

technology. These have included:

 In 1984 was formed the Committee on Mechanisation in the Banking Industry

(1984) [11] whose chairman was Dr. C Rangarajan, Deputy Governor, Reserve Bank of
India. The major recommendations of this committee were
introducing MICR technology in all the banks in the metropolises in India. [12] This
provided for the use of standardized cheque forms and encoders.
 In 1988, the RBI set up the Committee on Computerisation in Banks
(1988) [13] headed by Dr. C Rangarajan. It emphasized that settlement operation must
be computerized in the clearing houses of RBI
in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram. It further stated
that there should be National Clearing of inter-
city chequesat Kolkata, Mumbai, Delhi, Chennai and MICR should be made
operational. It also focused on computerisation of branches and increasing
connectivity among branches through computers. It also suggested modalities for
implementing on-line banking. The committee submitted its reports in 1989 and
computerisation began from 1993 with the settlement between IBA and bank
employees' associations.
 In 1994, the Committee on Technology Issues relating to Payment
systems, Cheque Clearing and Securities Settlement in the Banking Industry
(1994) was set up under Chairman W S Saraf. It emphasized Electronic Funds
Transfer (EFT) system, with the BANKNET communications network as its carrier. It
also said that MICR clearing should be set up in all branches of all those banks with
more than 100 branches.
 In 1995, the Committee for proposing Legislation on Electronic Funds Transfer
and other Electronic Payments (1995) again emphasized EFT system.

The total number of automated teller machines (ATMs) installed in India by various banks
as of end June 2012 is 99,218.[17] The new private sector banks in India have the most
ATMs, followed by off-site ATMs belonging to SBI and its subsidiaries and then by
nationalised banks and foreign banks, while on-site is highest for the nationalised banks of
India.

Branches and ATMs of Scheduled Commercial Banks as of end March 2017

 Number of On-site Off-site Total
Bank type
branches ATMs ATMs ATMs

Nationalised banks 33,627 3,205 1,567 4,772

State Bank of India 13,661 1,548 3,672 5,220

Old private sector

4,511 800 441 1,241
banks

New private sector

1,685 1,883 3,729 5,612
banks

Foreign banks 242 218 582 800

TOTAL 53,726 7,654 9,409 17,645

Expansion of banking infrastructure

As per the census of 2011, 58.7% of households are availing banking services in the
country. There are 102,343 branches of Scheduled Commercial Banks (SCBs) in the
country, out of which 37,953 (37%) bank branches are in the rural areas and 27,219 (26%)
in semi-urban areas, constituting 63% of the total numbers of branches in semi-urban and
rural areas of the country. However, a significant proportion of the households, especially
in rural areas, are still outside the formal fold of the banking system. To extend the reach
of banking to those outside the formal banking system, Government and Reserve Bank of
India (RBI) are taking various initiatives from time to time some of which are enumerated
below:
 Opening of bank branches: Government had issued detailed strategy and guidelines
on Financial Inclusion in October 2011, advising banks to open branches in all
habitations of 5,000 or more population in under-banked districts and 10,000 or more
population in other districts. Out of 3,925 such identified villages/habitations, branches
have been opened in 3,402 villages/habitations (including 2,121 Ultra Small Branches)
by end of April, 2013.
 Each household to have at least one bank account: Banks have been advised to
ensure service area bank in rural areas and banks assigned the responsibility in specific
wards in urban area to ensure that every household has at least one bank account.
 Business Correspondent model: With the objective of ensuring greater financial
inclusion and increasing the outreach of the banking sector, banks were permitted by
RBI in 2006 to use the services of intermediaries in providing financial and banking
services through the use of Business Facilitators (BFs) and Business Correspondents
(BCs). Business correspondents are retail agents engaged by banks for providing
banking services at locations other than a bank branch/ATM. BCs and the BC agents
(BCAs) represent the bank concerned and enable a bank to expand its outreach and
offer limited range of banking services at low cost, particularly where setting up a
brick and mortar branch is not viable. BCs as agents of the banks, thus, are an integral
part of the business strategy for achieving greater financial inclusion. Banks had been
permitted to engage individuals/entities as BC like retired bank employees, retired
teachers, retired government employees, ex-servicemen, individual owners of
kirana/medical/fair price shops, individual Public Call Office (PCO) operators, agents
of Small Savings Schemes of Government of India, insurance companies, etc. Further,
since September 2010, RBI had permitted banks to engage "for profit" companies
registered under the Indian Companies Act, 1956, excluding Non-Banking Financial
Companies (NBFCs), as BCs in addition to individuals/entities permitted earlier.
According to the data maintained by RBI, as in December, 2012, there were over
152,000 BCs deployed by Banks. During 2012-13, over 183.8 million transactions
valued at 165 billion (US$2.8 billion) had been undertaken by BCs till December
2012.
 Swabhimaan Campaign: Under "Swabhimaan" - the Financial Inclusion Campaign
launched in February 2011, banks had provided banking facilities by March, 2012 to
over 74,000 habitations having population in excess of 2000 using various models and
technologies including branchless banking through Business Correspondents Agents
(BCAs). Further, in terms of Finance Minister's Budget Speech 2012-13, the
"Swabhimaan" campaign has been extended to habitations with population of more
than 1,000 inNorth Eastern and Hilly States and to habitations which have crossed
population of 1,600 as per census 2001. About 40,000 such habitations have been
identified to be covered under the extended "Swabhimaan" campaign.
 Setting up of ultra-small branches (USBs): Considering the need for close
supervision and mentoring of the Business Correspondent Agents (BCAs) by the
respective banks and to ensure that a range of banking services are available to the
residents of such villages, Ultra Small Branches (USBs) are being set up in all villages
covered through BCAs under Financial Inclusion. A USB would comprise a small area
of 100 sq ft (9.3 m2) - 200 sq ft (19 m2 ) where the officer designated by the bank
would be available with a laptop on pre-determined days. While the cash services
would be offered by the BCAs, the bank officer would offer other services, undertake
field verification and follow up on the banking transactions. The periodicity and
duration of visits can be progressively enhanced depending upon business potential in
the area. A total of over 50,000 USBs have been set up in the country by March 2013.
 Banking facilities in Unbanked Blocks: All the 129 unbanked blocks (91 in North
East States and 38 in other States) identified in the country in July 2009, had been
provided with banking facilities by March 2012, either through Brick Mortar Branch
or Business Correspondents or Mobile van. As a next step it has been advised to cover
all those blocks with BCA and Ultra Small Branch which have so far been covered by
mobile van only.
 USSD Based Mobile Banking: National Payments Corporation of India (NPCI)
worked upon a "Common USSD Platform" for all banks and tacos who wish to offer
the facility of Mobile Banking using Unstructured Supplementary Service Data
(USSD) based Mobile Banking. The Department helped NPCI to get a common USSD
 Code *99# for all telcos. More than 20 banks have joined the National Uniform USSD
Platform (NUUP) of NPCI and the product has been launched by NPCI with BSNL
and MTNL. Other telcos are likely to join in the near future. USSD based Mobile
Banking offers basic Banking facilities like Money Transfer, Bill Payments, Balance
Enquiries, Merchant Payments etc. on a simple GSM based Mobile phone, without the
need to download application on a phone as required at present in the IMPS based
Mobile Banking.
Steps taken by Reserve Bank of India (RBI) to strengthen the banking infrastructure

 RBI has permitted domestic Scheduled Commercial Banks (excluding RRBs) to

open branches in tier 2 to tier 6 cities (with population up to 99,999 as per census
2001) without the need to take permission from RBI in each case, subject to reporting.
 RBI has also permitted SCBs (excluding RRBs) to open branches in rural, semi-
urban and urban centers in North Eastern States and Sikkim without having the need to
take permission from RBI in each case, subject to reporting.
 Regional Rural Banks (RRBs) are also allowed to open branches in Tier 2 to Tier 6
centers (with population up to 99,999 as per Census 2001) without the need to take
permission from RBI in each case, subject to reporting, provided they fulfill the
following conditions, as per the latest inspection report:
 CRAR of at least 9%;
 Net NPA less than 5%;
 No default in CRR / SLR for the last year;
 Net profit in the last financial year;
 CBS compliant.

Domestic SCBs have been advised that while preparing their Annual Branch
Expansion Plan (ABEP), they should allocate at least 25% of the total number of
branches proposed to be opened during the year in unbanked Tier 5 and Tier 6 centers
i.e. (population up to 9,999) centers which do not have a brick and mortar structure of
any SCB for customer based banking transactions.
 RRBs have also been advised to allocate at least 25% of the total number of
branches proposed to be opened during a year in unbanked rural (Tier 5 and Tier 6)
Centers).
 New private sector banks are required to ensure that at least 25% of their total
branches are in semi-urban and rural centers on an ongoing basis.
CHAPTER-III
 COMPANY PROFILE

INTRODUCTION:
HDFC was incorporated in 1977 as the first specialized Mortgage Company in India.
HDFC provides financial assistance to individuals, corporate and developers for the
purchase or construction of residential housing. It also provides property related services
(e.g. property identification, sales services and valuation), training and consultancy. Of
these activities, housing finance remains the dominant activity. HDFC has a client base of
around 9.51acborrowers, around 1 million depositors, over 91,000 shareholders and
50,000 deposit agents, asset June 30, 2007. HDFC has raised funds from international
agencies such as the World Bank,IFC (Washington), USAID, DEG, ADB and Kiwi,
international syndicated loans, domestic term loans from banks and insurance companies,
bonds and deposits. HDFC has received the highest rating for its bonds and deposits
program for the twelfth year in succession. HDFC\ Standard Life Insurance Company
Limited, promoted by HDFC was the first life insurance company in the private sector to
be granted a Certificate of Registration (on October 23, 2000)by the Insurance Regulatory
and Development Authority to transact life insurance business in India.
EMERGENCE
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies
Act, 1956, on December 10, 1999, and was approved to act as an Asset Management
Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.The
registered office of the AMC is situated at Ramon House, 3rd Floor, H.T.Parekh Marg,
169, Back bay Reclamation, Church gate, Mumbai - 400 020.In terms of the Investment
Management Agreement, the Trustee has appointed theHDFC Asset Management
Company Limited to manage the Mutual Fund. The paid up capital of them is Rs.25.161
corers. The present equity shareholding pattern of the AMC is as follows:

.
Particulars % of the paid up equity
capital
Housing Development Finance Corporation Limited 60
Standard Life Investments Limited 40
Table No:2.2

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual fund flowing a
review of its overall strategy, had decided to divest its Asset Management business in
India. The AMC had entered into an agreement with ZIC to acquire the said business,
subject to necessary regulatory approvals. In 2003, HDFC Asset Management Company
took over the asset management business of Zurich India Mutual Fund. Subsequently, all
the schemes of Zurich Mutual Fund in India had been transferred to HDFC Mutual Fund
and renamed as HDFC schemes.
Former Name New Name

Zurich India Equity Fund HDFC Equity Fund

Zurich India Prudence Fund HDFC Prudence Fund

Zurich India Capital Builder Fund HDFC Capital Builder Fund

Zurich India TaxSaver Fund HDFC TaxSaver

Zurich India Top 200 Fund HDFC Top 200 Fund

Zurich India High Interest Fund HDFC High Interest Fund

Zurich India Liquidity Fund HDFC Cash Management Fund

Zurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund*

HDFC Sovereign Gilt Fund has been wound up in March 2018:
HDFC Mutual funds has been one of the best Performing funds in recent years. The
sponsors of the fund are housing finance major HDFC and British investment company
standard investments as of Feb. 2018 , the funds as assets of Rs.31080 cars under
management The AMC, HDFC Asset management company limited , is owned between
HDFC and slandered life with HDFC holdings lightly more than 50 for cent of the shares.
Former head of BASF India P M Thump, and Reno S Kerned of HDFC. The management
of the AMC his headed by Melinda Brave managing director.

PRODUCTS

Equity/Growth Fund Liquid Funds

Invest primarily in equity and Provide high level of liquidity by
Equity related instruments. Investing in money market and deb
Instruments
Children`s Gift Fund Debt/Income Fund

Axed Maturity Plan Invest in money market and debt

Instruments and provide optimum
Vest primarily in debt balance of yields …….
Money Market Instruments
And Government Securities…
We Ogmerelatedinstant differ
We believe, that, by giving the investor long-term benefits, we have to constantly review
the markets for new trends, to identify new growth sectors and share this knowledge with
our\ investors in the form of product offerings. We have come up with various products
across asset and risk categories to enable investors to invest in line with their investment
objectives and risktaking capacity. Besides, we also offer Portfolio Management Services.
SPONSORS
Housing Development Finance Corporation Limited (HDFC)

HDFC was incorporated in 1977 as the first spliced Mortgage Company in India. HDFC
provides financial assistance to individuals, Corporate and developers for the purchase or
construction of residential housing. It also provides property related services (e.g. property
identification, sales services and valuation), training and consultancy. Of the activities,
housing finance remains the dominant activity. HDFC has a client base of around 10lack
borrowers, around 10 lack depositors, 1, 23,000 shareholders and 50,000 deposit agents, as
at March 31, 2009. HDFC has raised funds from international agencies such as the World
Bank, IFC (Washington), USAID, DEG, ADB and Kiwi, international syndicated loans,
domestic term loans from banks and insurance companies, bonds and deposits. HDFC has
received the highest rating for its bonds and deposits program for the fourteenth year in
succession. HDFC Standard Life Insurance Company Limited, promoted by HDFC was
the first life insurance company in the private sector to be granted a Certificate of
Registration (on October 23, 2000)by the Insurance Regulatory and Development
Authority to transact life insurance business in India

TRUSTEES
HDFC Trustee Company Limited, a company incorporated under the Companies
Act, 1956 is the Trustee to HDFC Mutual Fund vide the Trust deed dated June 8, 2000, as
amended from time to time. HDFC Trustee Company Ltd is wholly owned subsidiary of
HDFC
The Board of Directors of HDFC Trustee Company Limited consists of the following
Eminent persons.
Mr. Anil Kumar Hirjee
Mr. Anil Kumar Hire, the Chairman of the Board, is an independent Director Hardee has
45 years of experience in different areas of Business Management and his expertise
extends to finance, banking, legal, commercial, industrial and general administration.
Mr.Hirjee has been associated with The Bombay Burmah Trading Corporation Limited
since1976 and is presently its Vice Chairman.

Mr. Vincent Joseph O'Brien

Mr. Vincent Joseph O'Brien has been appointed as an associate Director on the Board of
the Trustee Company. He joined Standard Life Investments Limited in 2003 as Company
Secretary for Standard Life Investments Limited and a number of its subsidiary companies

He is responsible for compliance with relevant Company Law and best practice
Corporate Governance. In addition, he is also responsible for the Compliance, Risk and
Legal functions of the organization. He directly reports to the CEO of Standard Life
investments Limited. Prior to this, he joined Standard Life Bank in 1999 as its Company
Secretary where he was responsible for compliance with relevant Company Law and best
practice Corporate Governance as well as the Compliance, Risk and Legal functions of the
organization.
Mr. ShishaK.Diwanji
Mr. Shisha K. Diwanji, is an independent Director on the Board. He is a
Partnerwith Messrs. Desai and Diwanji, Advocates, Solicitors and Notaries. Mr. Diwanji
holdsaBachelor’s degree in Law.
Mr. RanjanSanghi
Mr. RanjanSanghi, is an independent Director on the Board. He is Director /Partner
with Sah&Sanghi Group of Companies. Mr. Singh is a Graduate in Commerce andLaw
from Bombay University.
Mr. V. SrinivasaRangan
Mr. V. SrinivasaRangan is associated with Housing Development Finance
Corporation Limited (HDFC Ltd.) since 1986. Presently, he is the Senior General
Manager -Corporate Planning and Finance of HDFC Ltd.
 His responsibilities include Budgeting, Management Information Systems (MIS),
Strategic and Portfolio Equity Investments in public and private markets, capital
management, structured financing options and Mortgage Backed Securitization (MBS).
Besides, he is also responsible for the regulatory compliance including liaison with the
National Housing Bank and reporting to the Audit Committee of Directors of HDFC Ltd.
Over the years, Mr. Rang an was involved in various functions in HDFC Ltd. Such as
retail and wholesale lending, branch operations, accounting, liaison with the Government
and regulators, mobilization of deposits from institutions, etc. Mr. Rang an is a Graduate
in Commerce, Grad. CWA and an Associate of the Institute of Chartered Accountants of
India.

ASSET MANAGEMENT COMPANY LIMITED

The AMC is also providing portfolio management / advisory services and such
activities are noting conflict with the activities of the mutual funds. The AMC has
renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated
December 8, 2019 to act as a Portfolio Manager under the SEBI (Portfolio Managers)
Regulations, 1993. The Certificates valid from January 1, 2021 to December 31, 2022.

The Board of Directors of the HDFC Asset Management Company Limited

(AMC)consists of the following eminent persons.

Mr. Deepak S. Parekh

Mr. N. Keith0 Skeoch
Mr. Kaki M. Mistry
Mr. James Aird
Mr. P. M. Thampi
Mr. HumayunDhanrajgir
Dr. Deepak B. Phatak
Mr. Hoshang S. Billimoria
Mr. Rajeshwar Raj Bajaaj
Mr. Vijay Merchant
Ms. Renu S. Karnad
Mr. MilindBarve

REGISTRAR & TRANSFER AGENTS

Computer Age Management Services Pvt. Ltd.,

Raylan Towers -1,

158 Anna Salami, Chennai 600002.
Tel: (+91)044 2852 0516
Fax: (+91) 0444203 2952
Website :www.camsonline.co

CUSTODIAN
HDFC BANK LIMITED

Kamala Mills Compound,

SenapatiBapatMarg, Lower
Parel, Mumbai400 013.
Website :www.hdfcbank.com
CITIBANK N.A.
Rexnord House,
77, Dr. Annie Besant Road,
World, Mumbai400 018.
Website :www.citibank.com
AUDITORS
DELOITTE HASKINS &SELLS
Chartered Accountants
12, Dr. Annie Besant Road,
Opp. Shiv Sager Estate,
World,
Mumbai400 018. Website:
www.deloitt
KEY STATISTICS:
As on 30 September 09
Average Asset under Management: Rs.90,427.25 cr.
No. of investors: 3,283,463
No. of ARN certified distributors: 30,282
OUR ACHIEVEMENTS:
HDFC Asset Management Company (AMC) is the first AMC in India to have been
assigned the'CRISIL Fund House Level - 1' rating. This is its highest Fund Governance
and ProcessQuality Rating which reflects the highest governance levels and fund
management practices atHDFC AMC It is the only fund house to have been assigned this
rating for third year in succession. Over the past, we have won a number of awards and
accolades for our performance.
AWARDS & REWARDS:
 HDFC Asset Management Company wins NDTV profit business leadership
award2009
 CNBC - TV 18 - CRISIL Mutual Fund of the Year Awards 2008
 HDFC Prudence Fund was the only scheme that won the CNBC - TV 18 –
CRISILMutual Fund of the Year Award 2008 in the Most Consistent Balanced Fund
underCRISIL ~ CPR for the calendar year 2007 (from amongst 3 schemes).
 HDFC Cash Management Fund - Savings Plan was the only scheme that won
theCNBC - TV 18 - CRISIL Mutual Fund of the Year Award 2008 in the
 Most Consistent Liquid Fund under CRISIL ~ CPR for the calendar year 2007 (from
amongst 5schemes).
 HDFC Cash Management Fund - Savings Plan was the only scheme that won the
 CNBC - TV 18 - CRISIL Mutual Fund of the Year Award 2008 in the Liquid Scheme
–Retail Category for the calendar year 2007 (from amongst 19 schemes).Lipper Fund
Awards 2008:
 HDFC Equity Fund - Growth has been awarded the 'Best Fund over Ten Years' in the'
Equity India Category' at the Lipper Fund Awards 2008 (form amongst 23schemes). It
was awarded the Best Fund over ten years in 2006 and 2007 as well. 2008makes it
three in a row.
Lipper Fund Awards 2009:
 HDFC Equity Fund - Growth has been awarded the 'Best Fund over Ten Years' in
the Equity India Category1 (form amongst 34 schemes) and HDFC Prudence Fund
–Growth Plan in the 'Mixed Asset INR Aggressive Category' (from amongst
6schemes), have been awarded the 'Best Fund over 10 Years' by Lipper Fund
Awards India 2009.
ICRA Mutual Fund Awards - 2018:
 HDFC MF Monthly Income Plan - Long Term Plan - Ranked a Seven Star Fund
and has been awarded the Gold Award for "Best Performance" in the category of
“Open Ended Marginal Equity" for the three year period ending December 31,
2007(from amongst 27 schemes).
 HDFC High Interest Fund - Short Term Plan - Ranked a Five Star Fund indicating
performance among the top 10% in the category of "Open Ended Debt - Short
Term “for one year period ending December 31, 2007 (from amongst 20 schemes).
CHAPTER-IV
 THEORITICAL FRAMEWORK

FINANCIAL MANAGEMENT:

Business concern needs finance to meet their requirements in the economic world.
Any kind of business activity depends on the finance. Hence, it is called as lifeblood of
business organization. Whether the business concerns are big or small, they need finance
to fulfil their business activities. In the modern world, all the activities are concerned with
the economic activities and very particular to earning profit through any venture or
activities. The entire business activities are directly related with making profit. (According
to the economics concept of factors of production, rent given to landlord, wage given to
labour, interest given to capital and profit given to shareholders or proprietors), a business
concern needs finance to meet all the requirements. Hence finance may be called as
capital, investment, fund etc., but each term is having different meanings and unique
characters. Increasing the profit is the main aim of any kind of economic activity.

MEANING OF FINANCE:

Finance may be defined as the art and science of managing money. It includes
financial service and financial instruments. Finance also is referred as the provision of
money at the time when it is needed. Finance function is the procurement of funds and
their effective utilization in business concerns.
The concept of finance includes capital, funds, money, and amount. But each word is
having unique meaning. Studying and understanding the concept of finance become an
important part of the business concern.
INTRODUCTION WORKING CAPITAL:

Funds are required for two basic purposes in any organization. Firstly, funds
are required to create productive capacities. To purchase fixed assets and secondly, to
finance a part of the day to day running of the business Which is other work is the
“WORKING CAPITAL”

Working capital management is an integrated part of overall Corporate

management. The finance manager has to carry out the finance Functions in the face of
risk and certain the fact that cash flows cannot be Predicted with any certainty, makes the
job difficult.

Meaning:

working capital means Current Assets: cash, Bills, Receivables, stock etc., (-) Current
liabilities. Management of current assets is more important than management of fixed
assets. As this is problem relating to decision making regarding investment in various
current assets with an objective of marinating liquidity of funds so that all payments can
be made on due date. The capital of required for fixed assets and working capital, which is
for routine payment. The needs for capital of business are always for two purpose.

(a)For establishing a business unit and

(b)And for payment for routine expenses

A) LONG –TERM FUNDS:

Long-term funds are needed for the purchase of fixed assets: Land and Building,
plants &Machinery, Furniture etc. Investment in such assets represents as a part of
corporate capital, which is blocked on a Permanent basic known as fixed capital.
B) LONG –TERM FUNDS:

Short –term funds are funds needed for payment of Raw Material, payment of
wages and other daily expenditure. These short term Funds are known as working capital,

Definition:

“Working capital is the amount of funds necessary to cover the cost of operating
the enterprise”.

Shubin

Working capital management is concerned with the problem that arise in

attempting to: managing the current assets. The current liabilities and interrelationship that
exists between them thus it is also known as “Current Assets Management”. The
interaction between current assets and current liabilities is therefore, the main theme of the
theory of Working Capital Management.

The terms current assets refer to; those assets, which are in the ordinary course
of business can be turned into cash within one year. The Major current assets are cash,
Marketable, securities, Accounts, Receivables and Inventory. Current Liabilities are those
claims of outsiders, which are expected to nature of payment within an accounting year
and include creditors :bills Payables and bank O.D. and out standing expenses.

Working capital is often classified as gross working capital and net working
capital; Gross working and net working capital. Gross Working Capital is the sum of
all current assets. Net working capital is the difference between the total current assets and
total current liabilities. But generally, Net working capital is referred to simply as wor king
capital. Net Working capital can be defined as part of current, which are financed with
long-terms funds.
 The task of the financial management in managing working capital efficiently is to
ensure sufficient liquidity in the operations of the enterprise. The liquidity of business
firm is measured by it ability to satisfy short – term obligations as they become due. The
three basic measures so, far firms over all liquidity are:

1. The Current Ratio

2. The Acid – Test Ratio and
3. Net working capital.

COMPONENTS OF WORKING CAPITAL AND

THEIR IMPORTANCE:

The components of working capital can be broadly categorized Into two they are
1) Current Assets, 2) Current Liabilities.

Current Assets refers to those assets which in ordinary course of Business can be
turned into cash within one year without under going any Diminution in value and without
disrupting the operations of the firms. The following are the important current Assets:

 Cash

 Accounts Receivable.

 Market Securities.

 Inventories.
CURRENT ASSETS:

Cash:

Cash is the crucial component of the working capital of a Concern. Cash is like
bloodstream in the human body gives strength to a Business unit. Without it, the firm is
not able to procure the other resources That are needed to continue the operations of the
business unit. Management Has a duty to see that the firm it manages has sufficient cash
balance at all Times to meet the day-to-day requirements.

Motives of Holding Cash

1. The reasons for holding cash can be classified into three Categories namely;

 Transaction motive is the need for cash balance to conduct the day- to -day
operations of the business.

2. Precautionary motive is the need for cash to meet unexpected

circumstances as cash inflows and out flows are some what

unpredictable. The less predictable the firm’s cash flows the

larger the cash balances held.

3. Speculative motive relate to holding cash to enable the firm to take advantage of any
buying opportunities by and large business firms do not indulge in speculations.
Therefore, the primary motives to hold cash are the transactions and precautionary
motive.
Accounts receivables:

Receivable and current assets representing amount owed to the firm as result of the
sales of goods or services on credit in the ordinary course of business. This term is also
applicable to subsidiaries and suppliers of raw materials stores, spare and equipments.

The investment of funds in receivables is no exception. The goals of maintaining

receivables are as follows;

1. Increase in sales:

Credit is considered to be the back done of modern business. To increase sales,

goods are sold to customers on credit who are not willing to pay cash when they purchase
goods. Where there is acute competition it may be necessary for a firm to extend larger
credit to its customers and establish credit Policies similar to the polices of competition.

2. Increase in profits:

If the direct objectives of maintaining receivables is to have increased volume of

sales, an indirect object is that the additional sales will lead to higher Profits.

MARKETABLE SECURITIES:

Modern business concerns making practice to invest their surplus cash in

marketable securities. Marketable securities are short-term money market instruments like
treasury bills, quoted corporate share, debenture etc. that what can be easily converted into
cash when the cash is needed in the business.

Marketable securities usually give lower yields then firms operating assets. There
are two reasons for marketing investment in these securities.

Firstly these serve as substitute for larger cash balance, liquidation part of the
securities to increase the cash balance when out flows exceeds cash Inflows Secondly,
these are used as a temporary investment to meet known financial requirement of the firms
in near future. These also serve as a cushion against seasonal purchased as soon as the
excess cash in hand so that income on excess cash may not be lost.

INVENTORIES:

Inventories represent major current assets. Assets investment in Most of the

manufacturing firms ranging, from perhaps 25% to 75% of there current assets, depending
upon the magnitude of the firm and the type of industry. Adequate inventory is essential
for the production sales process of an enterprise as insufficient inventory hampers
production and fails to great sufficient sales. Inventories also provide cushion when there
are planning errors. Further inventory being an in item which is quite amenable to control,
optimization of the working capital leads to increase in profits.

Profits can be achieved mainly through the rationalization ofinventory. It is therefore,

quite natural that inventory occupies the most important place among current assets

CURRENT LIBILITES:

Current liabilities are those liabilities which are their inceptions to be paid in the
ordinary course of business, within a year out of current assets or earning concern.

 BILLSPAYBLE.
 BANK OVERDRAFT
 OUTSTNADING EXPENSES

BILLS PAYABLE

This is current liability which arises when a firm makes a credit purchase form the
vendors or suppliers.
BANK OVER DRAFT:

This also comes under the head of current liabilities. Bank overdraft can simply
be defined as drawing of amount in excess form the bank against the available balances
which is to be repaid shortly with interest.

OUTSTANDING EXPENSES:

This includes expenses outstanding for payment and which are to

be meet in the near future.

ADEQUACY OF WORKING CAPITAL

Working capital should be adequate for the following reasons:

It protects the business from the adverse effects of shrinkage in the value of current
assets.

It is possible to pay all the current obligations promptly and to take advantage of cash
discounts.

It ensures to greater extent the maintenance of a company’s credit standing and provides
for such emergencies like strikes floods etc.

It permits the carrying of inventories at a level that would enable a business to serve
satisfactory.

It enables a company to extent factorable credit terms to customers.

It enables a company to operate its business more efficiently becomes there is no delay in
obtaining materials etc., business of credit difficulties.

It enables a business firm to with stand in periods of depression smoothly.

 There may be operating losses or decreased retained earnings.

There may be excessive non –operating or extraordinary losses.

The management may fail to obtain funds from other sources for purpose of expansion.

o There may be an unwise dividend policy.

o Current funds may be invested in non-current assets.
o The management may fail to accumulate funds necessary for meeting debenture on
maturity.
o There may be increase in price necessitating bigger investments in inventorie s and
fixed assets.

DANGERS OF INADEQUATE WORKING CAPITAL:

o It id not possible for it utilize production facilities fully for want of working capital.
o A company may not be able to take advantage of cash discount facilities.
o The credit – worthiness of company is likely to be jeopardized because of liquidity.
o A company may not be able to take advantages of profitable business opportunities.
o The modernization of equipment and even routine repairs and maintenance facilities
may be difficult to administer.
o A company will not be able to pay its dividends because of the non –availabilities of
funds.
o A company cannot afford to increase its credit sales and may have to restrict its
activities to cash sales only.
o A company may have to borrow funds at excessive rate of interest.
o Its low liquidity may head to low profitability in the same way as low profitability
leads to low liquidity.
o Low liquidity would positively threaten the solvency of the business. A company is
considered liquid where it is not able to pay its debs on maturity. It must be wind up
section 433 of the companies Act, 1956, upon its inability to pay its debts.
ISSUES INWORKING CAPITAL MANAGEMENT:

The financial manager must determine levels and composition of

Current assets. He must see that right resources are tapped to finance current

Assets and those current liabilities are paid in time.

There are many aspects of working capital management can be which

Make it an important function of financial manager.

1. Time

2. Investment

3. Critically and

4. Growth.

TIME

Working capital management requires much of the financial Manager’s time.

INVESTMENT

Working capital management requires a large portion of total investment in assets.

CRITICALLY

Working capital management has great significance for all firms but it I very critical for
small firms.

GROWTH

The need for working capital is directly related to the firms growth.

CONCEPT OF WORKING CAPITAL:

The following are the two main concepts of working capital.

 o Gross working capital
o Net working capital

GROSS WORKING CAPITAL:

In this form working capital refers needed for current assets. These assets can be
converted in to cash with in a short period in general with in a year.

NET WORKING CAPITAL

It is associated with the excess of current assets over current liabilities in other
word current assets; current liabilities.

Net working capital can be positive or negative. Sometimes current liabilities are
more than current assets, is known as negative net working capital.

FACTORS DETERMINING WORKING CAPITAL:

Nature of industry: The composition of an asset is a function of the size of a business and
the industry to which it belongs. The nature of the assets depends on the nature of the
industry also like textile power etc, investment an asset varies from industry to industry.
Similarly working capital requirement also depend upon industry.

NATURE AND SIZE OF BUSINESS:

Working capital requirement of a firm basically influenced by the nature of

business trading and financing institutions have a very less investment in fixed assets but
require more working capital. Retail stores must carry large stocks. For manufacturing
industry and for public utility concerns also these assets mix varies. So automatically the
capital need also very. So working capital requirement varies with the nature of business.
Similarly size of business also affects working capital needs.
MANUFACTURING POLICY

Manufacturing cycle starts with purchase of raw material and

Completes with the production of finished goods. Longer the manufacturing cycle, large
with the firm’s working capital requirement.

BUSINESS FLUCTUATIONS

There may be seasonal demand for products. In those seasons more working capital
is needed to produce more and also to meet the demand of the customers. The company
will also may face cyclical (Business Cyclical) variation. During boom periods, company
has to produce more to meet the demands for this it need more money to invest it fixed
assets and also in inventory, debtors etc. so working capital requirement is effected by
both of these factors.

PRODUCTION POLICY

The company’s production policy also effects the requirements of the working
capital a company may adopt a steady or constant production policies or they may
manufacture more products during particular season. If the company is producing more
number of products i.e., more variety of products which have more demand according to
season. So production policy also effects the requirements of working capital need.

FIRMS CREDIT POLICY

The firm’s credit policy affects the working capital by influencing the book debts.
The policy should be designed in such a way the credit should be allowed for a long
period and proper follow up should also be there other wise as we know more the money
locked up with debts more there are changes for bad debts. Both reasons increase the need
of working capital.
AVAILABILITY OF CREDIT

The working capital requirement of a firm are also effected by credit terms granted
by its creditors firm will need less working capital if liberal credit terms are available to
it. Similarly credit facility available from the banks also affects the working capital need.
A firm, which can get bank finance easily on favorable condition, will ope rate with less
working capital.

GROWTH AND EXPANSION ACTIVITIES:

The working capital need of the firm increase as it flows in terms of sales or fixed
assets. We can’t determine exactly the relationship between volume of sales and working
capital needs. In practice current assets will have to employ before growth takes place so
working capital need is to be planned for a growing firm very carefully. If the company is
going to expansion it needs more working capital.

PROFIT PLANNING AND PROFIT APPROPRIATION:

Firms differ in their capacity to generate profit from business operation. This may
be due to company’s monopoly power or qualitative product or may other feature etc,. Or
may be due to competition. If there is a higher profit margin there will be higher
contribution towards working capital. Similarly profit appropriation also affects working
capital. If more dividends are declared less amount will be left from the working capital
pool. So dividend policy and profit margin also effects the working capital requirements.

PRICE LAVLE CHANGES

The increasing shifts in price level make functions of the financial manager
difficult. He should anticipate the effect of price level changes on working capital
requirements of the firm. Generally raising price level will require a firm to maintain
higher amount of working capital. However, if a company also revises the products price
when these changes occur, the effect on working capital high not is very much.
OPERATING EFFICIENCY

The operating efficiency of the firm relates to; the minimum utilization of
resources at minimum cost. The firm will be effectively contributing to its working capital
if it is efficient in controlling operating costs. The use of working capital is improved and
pace of cash cycle is accelerated with operating efficiency. Better utilization of resource
improves profitability and thus, helps in releasing the pressure on working capital.

INFLATION

As a result of inflation, size of working capital is increased in order to make it

easier for a firm to achieve to better cash inflow. Other facts influencing the need of
working capital are technology change attitude of the management to; take risk etc.,

THE NEED FOR WORKING CAPITAL:

The need for working capital to; run the day-to-day business activities cannot be
over emphasized we will hardly find a business firm, which does not require any, amount
of working capital. Indeed, firms differ in their requirements for the working capital.

Working capital management is to manager the firm’s current assets and current
liabilities in such a way that satisfactory level of working capital is maintained I.e., it is
neither in adequate nor excessive. The current assets should be sufficient enough to cover
current liabilities in order to maintain a reasonable safety margin. Moreover, different
components of the working capital (structure) are being properly balanced. So a finance
manager should involve working capital management policies so as to ensure higher
profitability, proper liquidity and sound structural health of the org.

We know that a firm should aim at maximum the wealth of its shareholders. In its
endeavor to do so, a firm should earn sufficient return from its operation. Earning a steady
amount of profit require successful sales activity. The firm has to; invest enough funds in
current assets are needs because sales do not convert into cash instantaneously. There is
always an “operating cycle” involved in the conversion of sales into cash.

TECHNIQUES FOR ASSEMENT OF WORKING CAPITAL REQUIRED

1. Estimation of components of working capital methods:

Since the working capital is the excess of current assets over current liabilities, an
assessment of working capital requirements can be made by estimating the amount of
different constituents of working capital e.g. inventories, account receivable, cash,
accounts payable etc.,

2. Percent of sales method:

According to this method, on the basis of past experience between sales and wages
requirements, a rate can be determine for estimating the working capital requirement in
future. The basic criticism of this method is that it presumes a linear relationship between
sales and working capital, which is not true in all cases, and this method is not universally
acceptable.

3. Operating cycle approach:

The time between purchase of inventory items (raw material or merchandise) and
their conversion into cash is known as operating cycle or working capital cycle. The
successive events into which are typically involved in an operating cycle are invested in
operations are re-cycled back into cash. The cycle, of course, takes some time to complete.
The longer the period of this conversion the longer is operation cycle. a standard operating
cycle may be for any time period but does not generally exceed a financial year.
Obviously, the shorter the operating cycle, the larger will be the turnover of funds invested
for various purposes. The channels of the investment are called current assets. Sometimes
the available funds may be in excess of the needs for investment in these assets, e.g.
inventory, receivables and minimum essential cash balance. Any surplus may be invested
in government securities rather than being retained as idle cash balance.
FIGURE 1: Operating cycle

DEBTORS
(Receivable)

FINISHED
CASH GOODS

WORK IN
RAW PROGRESS
MATERIAL

It may be broadly classified into four stages:

 Raw material and stores stage.

 Work in process stage.

 Finished goods stage.

 Receivable collection stage.

The duration of the operating cycle for the purpose of estimating the working capital
requirements is equivalent to the sum of the duration of each of these stages be the credit
period allowed by the supplies of the firm.

Symbolically, the direction of working capital cycle can be put as:

OC =R+W+F+D-C
 After computing the period of one operating cycle, the total number of operating
cycle that can be completed during the year can be completed by dividing 180days with
the number of operating days in a cycle. The total operation in a year when divided the
number of operating cycle in year will given average amount of working capital
requirement.

BENEFITS ON INVENTORY MANAGEMENT:

Inventories enable firms in the short run to provide at a rate of to sell at a rate
grater than production vice versa.

Benefits in purchasing;

In the purchasing Raw materials grater goods is not tied to production/sales. A firm
can purchase larger quantities that are warranted by usage in production of these sales
level firms can purchase goods, before anticipated or announced price increases. This will
lead to a decline in the cost of production. Inventory services as hedge against price
increase as well as shortage of raw materials.

Benefits of production:

Finished goods inventory serves to uncouple production and sales.Thisenable

production at a rate different from that of sales. That is production can be carried on a
higher or lower than the sales rate. In brief since inventory permits leads cost of
production scheduling production can be carried on more efficiently.

Benefits in sales

The maintenance of inventory also helps a firm to enhance its sales efforts. A firm
will not be able to meet demand instantaneously. There will be a large depending up on
production process. If firm has inventory, actual sales will not have to depend on lengthy
manufacturing process. A related aspect is this inventory serves a competitive market ing
tool, to meet customer demands. Inventory ensures the continued patronage of customers.
Ratios for evolution of performance of inventory management

Ratios are the tools for comparing various aspects in material terms, which helps
to assess the situation or evaluating the performance in the firm or department.

1 .Inventory Turnover ratio:

This ratio is comparison between cost of goods sold to that of inventory turnover
ratio. Cost of goods sold/ inventory.

2. Inventory holding period:

This Ratio, which yields the holding periods of inventory by a firm. This is shown
as IHP=ITR/365.

If the ITO increases the inventory-holding period decreases resulting in the reduction of
carrying cost associated with the inventory. But the ordering cost would increase. If the
inventories turnover ratio decreases the inventory holding period increases resulting in the
increase carrying cost of inventory. But the ordering cost would decrease. So, with the help
of above mentioned ratio comparison can be made easily and evaluate the performance of
inventory.
CHAPTER-V
 DATA ANALYSIS & INTERPRETATION

STATEMENT OF CHANGES IN WORKING CAPITAL OF HDFC for the

year ended 2017-2018

(Rs .in lakhs)

Particulars 2017 2018 Increase Decrease

(A)Current Assets:-
1.Inventories 16353.79 20451.32 4095.53
2.Sundry debtors 17608.91 17220.52 388.39
3.Cash & Bank 288.48 839.88 2046.60
4.Loans & Advances 11664.61 14302.07 2637.46
Total Current Assets 48513.79 52813.79
(B)Current liabilities:-
Current liabilities 30907.41 26312.34 4595.07
Provisions 2091.59 458.18 1633.41

Total Current Liabilities 32999.00 26770.52

Net working capital (A-B) 15514.79 26043.27 10528.48

Change in working capital 10528.48
26043.27 26043.27 12963.47 12963.47
Interpretation:
There has been an increase of working capital by Rs. 10528.48 lakhs for the year

2017-2018. Where the increase occurred due to increase in inventory by Rs 4095.53 lakhs.

The excess working capitals help to meet the business requirements and to repay claims

pending.
STATEMENT OF CHANGES IN WORKING CAPITAL OF HDFC for the

year ended 2018-2019

(Rs. in lakhs)

Particulars 2018 2019 Increase Decrease

(A)Current Assets:-

1.Inventories 20451.32 11586.70 8864.62

2.Sundry debtors 17220.52 12011.71 5208.81

3.Cash & Bank 839.88 489.55 350.33

4.Loans & Advances 14302.07 22517.09 8215.02

Total Current Assets 52813.79 46605.05

(B)Current liabilities:-

Current liabilities 26312.34 23166.71 3145.63

Provisions 458.18 515.32 57.14

Total Current Liabilities 26770.52 23682.03

Net working capital (A-B) 26043.27 22923.02

Change in working capital 3120.25 3120.25

26043.27 26043.27 14480.90 14480.90

Interpretation:

There has been decrease of working capital by Rs. 3120.25 lakhs for the year 2018-

2019 The decrease in the period 2018 and 2019 due to the high decrease in inventory and

sundry debtors. The company was struggled in these years to repay their claims.
STATEMENT OF CHANGES IN WORKING CAPITAL OF HDFC for the
year ended 2019-2020

Particulars 2019 2020 Increase Decrease

(A)Current Assets:-

1.Inventories 11586.70 19497.28 7910.58

2.Sundry debtors 12011.71 12772.64 760.93

3.Cash & Bank 489.55 542.11 52.56

4.Loans & Advances 22517.09 42160.79 19643.70

Total Current Assets 46605.05 74972.82

(B)Current liabilities:-
Current liabilities 23166.71 26348.91 3182.20

Provisions 515.32 923.20 407.88

Total Current Liabilities 23682.03 27272.11

Net working capital (A-B) 22923.02 47700.71 24777.69

Change in working capital 24777.69

47700.71 47700.71 28367.77 28367.77

Interpretation:
There has been an increase of working capital by Rs. 24777.69 lakhs for the year

2019-2020 The increase in the above period due to increase in assets like loans &Advances.

The excess working capital has been helpful to meet the company requirements .
STATEMENT OF CHANGES IN WORKING CAPITAL OF HDFC for the
year ended 2020-2021

(Rs. In lakhs)

Particulars 2020 2021 Increase Decrease

(A)Current Assets:-

1.Inventories 19497.28 21762.40 2265.12

2.Sundry debtors 12772.64 12557.52 215.12

3.Cash & Bank 542.11 344.35 197.76

4.Loans & Advances 42160.79 49266.94 7106.15

Total Current Assets 74972.82 83931.21

(B)Current liabilities:-
Current liabilities 26348.91 26262.18 86.73

Provisions 923.20 1814.39 891.19

Total Current Liabilities 27272.11 28076.57

Net working capital (A-B) 47700.71 55854.64 8153.93

Change in working capital 8153.93

55854.64 55854.64 9458.00 9458.00

Interpretation:
There has been an increase of working capital by Rs. 8153.93 lakhs for the year 2020-

2021. Where the increase occurred due to increase in sundry loans & Advances. The excess

working capital helps to meet the company day to day obligations.

STATEMENT OF CHANGES IN WORKING CAPITAL OF HDFC for the
year ended 2021-2022

(Rs. In lakhs)

Particulars 2021 2022 Increase Decrease

(A)Current Assets:-
1.Inventories 21762.40 86486.83 64724.43
2.Sundry debtors 12557.52 10258.95 2298.57

3.Cash & Bank 344.35 6631.64 6287.29

4.Loans & Advances 49266.94 59399.49 10132.55

Total Current Assets 83931.21 162776.91
(B)Current liabilities:-
Current liabilities 26262.18 73195.88 46933.7

Provisions 1814.39 10365.91 8551.52

Total Current Liabilities 28076.57 83561.79

Net working capital (A-B) 55854.64 79215.12 23360.48

Change in working capital 23360.48

79215.12 79215.12 81144.27 81144.27
Interpretation:

There has been an increase of working capital by Rs. 23360.48 lakhs for the year

2021-2022. Where the increase occurred due to increase in inventories Loans & Advances.

The excess working capital helps to meet the company day to day obligations.
SOME RATIOS PERTAINING TO WORKING CAPITAL

1. Current Ratio

2. Quick Ratio

3. Debtors Turnover Ratio

4. Inventory Turnover Ratio

5. Cash Ratio

6. Working Capital Turnover Ratio

CURRENT RATIO OF HDFC BANK, FOR THE LAST 5 YEARS 2017-
2022

Current ratio= current assets / current liabilities

Year Current Assets Current liabilities Ratio

2017-2018 52813.79 26770.52 1.97

2018-2019 46605.05 23682.03 1.97

2019-2020 74972.82 27272.11 2.75

BAR

2020-2021 83931.21 28076.57 2.99 DIA

GR
2021-2022 162776.91 83561.79 1.95
AM

SHOWING CURRENT RATIO OF HDFC BANK FOR THE LAST

5YEARS 2017-2022
Interpretation:

This Ratio explains the relationship between current assets to current liabilities. Even

through current ratio levels are increasing they are not up to the standard ratio of 2:1.Where

companies our ratios with these industrial standards. But during 2016-2021 its current ratio

levels crossed the standard ratio which indicates that the companies’ financial position is very

good.
BAR DIAGRAM SHOWING QUICK RATIO OF HDFC BANK FOR THE
LAST 5 YEARS 2017-2022

Quick Assets

Quick Ratio = --------------------------

Quick liabilities

Year Quick Assets Quick liabilities Ratio

2017-2018
32362.47 26770.52 1.21

2018-2019
35018.35 23682.03 1.48

2019-2020
55475.54 27272.11 2.03

2020-2021
62168.81 28076.57 2.21

2021-2022
76290.08 83561.79 0.91
QUICK RATIO OF HDFC BANK, FOR THE LAST 5 YEARS 2017-2022

Interpretation:
This Ratio explains the relationship between quick Assets to current liabilities. This

Ratio is also called Liquidity Ratio. Here, quick assets mean all current assets except stock,

prepaid expenses.

The industrial standard of this ratio 1: 1, the above workings shows that the hdfc bank.

Quick Assets policy is reached this standard for the past years.
DEBTORS TURNOVER RATIO OF HDFC BANK, FOR THE LAST 5
YEARS 2017-2022

Sales

Debtors Turnover Ratio = -----------------

Debtors

Year Sales Debtors Ratio

2017-2018
65418.16 17220.52 3.80

2018-2019
78063.25 12011.71 6.50

2019-2020
90587.42 12772.64 7.09

2020-2021
101618.78 12557.52 8.09

2021-2022
216845.35 10258.95 21.13
BAR DIAGRAM SHOWING DEBTORS TURNOVER RATIO OF HDFC
BANK FORTHE LAST 5 YEARS 2017-2022

Interpretation:
This Ratio shows the participation of Debtors in Total sales. The more of this ratio is a

sign of good credit policy. According to the above table it is true that the Debtors Turnover

Ratio is satisfactory level.

In 2017-18 and it is continuously increased. We can find a slight increased in 2019-20

at 7.09 and in 2020-21 at 8.09 and in 2021-22 at 21.13.It is in very good condition.
INVENTORY TO WORKING CAPITAL OF HDFC BANK, FOR THE
LAST 5 YEARS 2017-2022

Inventory

Inventory to Working capital Ratio = -------------------

Working capital

Year Inventory Working capital Ratio

2017-2018
20451.32 26043.27 0.79

2018-2019
11586.70 22923.02 0.50

2019-2020
19497.28 47700.91 0.40

2020-2021
21762.40 55854.64 0.39

2021-2022
86486.83 79215.12 1.09
BAR DIAGRAM SHOWING INVENTORY TO WORKING CAPITAL RATIO
OF HDFC BANKFOR THE LAST 5 YEARS 2017-2022

Interpretation:
In order to assertions that there is no over stocking the ratio of inventory to working

capital should be calculated. Increase in volume of sales required increase in size of inventory.

But a sound financial point of view, inventory should not exceed amount of working capital.

The desirable ratio is 1:1.

CASH RATIO OF HDFC BANK, FOR THE LAST 5 YEARS 2017-2022

Cash

Cash Ratio = -------------------

Current liabilities

Year Cash Current Liabilities Ratio

2017-2018
839.88 26770.52 0.03

2018-2019
489.55 23682.03 0.02

2019-2020
542.11 27272.11 0.02

2020-2021
344.35 28076.57 0.01

2021-2022
6631.64 83561.79 0.08

.
BAR DIAGRAM SHOWING CASH RATIO OF HDFC BANK FOR THE
LAST 5 YEARS 2017-2022

Interpretation:
The ratio is also called absolute liquidity ratio. How the company is maintaining cash

reserves to meet their day today obligations, revealed by this ratio. Here cash means, cash in

hand and cash at bank.

The industrial standard of this ratio is 0.5:1, where as in hdfc bank the situation is quite

different it did not reach the industrial standard any time for the past 5 years to utilize some

additional benefited like cash discounts etc, the company is needed to maintain some more

cash reserves.
WORKING CAPITAL TURNOVER RATIO HDFC BANK, FOR THE
LAST 5 YEARS 2017-2022

Sales

Working Capital Turnover Ratio = ---------------------------

Networking capital

Year Sales Networking capital Ratio

2017-2018
65418.16 26043.27 2.51

2018-2019
78063.25 22923.02 3.41

2019-2020
90587.42 47700.91 1.90

2020-2021
101618.78 55854.64 1.82

2021-2022
216845.35 79215.12 2.74
 BAR DIAGRAM SHOWING WORKING CAPITAL TURNOVER
RATIO OF HDFC BANKFORTHE LAST 5 YEARS 2017-2022

Interpretation

The participation of working capital in total sales is revealed by this ratio. The ratio

explains the relationship between working capital to total sales.

The actual situation of HDFC bank is very low from last 4 years. In the year 2017-18

it is 2.51, later it increase 3.41 in 2018-2019, later it decreased 1.90 in 2019-2020, 1.82 in

2020-21 and 2.74 in 2021-22 which is low among all 5 years.

CHAPTER-VI
 SUMMARY

Banking in india in the modern sense originated in the last decades of the 18 th
century. the first banks of Hindustan(1770-1829)and the general bank of india ,established
1786 and since defunct.

HDFC was incorporated in 1977 as the specialized mortgage company in India

.HDFC provides financial assistance to individuals, corporate and developers for the
purchase or construction of residential housing.

It also provides property related services .HDFC asset management company ltd
was incorporated under the companies act, 1956, on December 10, 1999, and was
approved to act as an asset management company for the HDFC mutual fund by SEBI
vide its letter dated july 3,2000.

The presentation of a Working capital is required a complete set of financial

statements. The working capital essentially provides information about how an entity
raised the cash required to fund its activities, and the manner in which the cash was used
during the period.

The working capital represents the movement in the opening and closing cash and
cash equivalents for a particular period, and identifies whether or not the cash in or
outflows were as a result of operating, investing and financing activities. The amounts
reflected in the financial statements therefore have to be adjusted for any no n-cash
transactions in order to arrive at the cash inflows and outflows for the
period. Non-cash transactions include, for example, depreciation, impairment losses, fair
value adjustments, and unrealized foreign exchange gains and losses.
 Cash is deemed to comprise cash on hand and demand deposits. Cash equivalents
are short-term, highly liquid investments that an entity can readily convert to known
amounts of cash, and which are subject to an insignificant risk of changes in value. The
working capital should present major classes of gross receipts and payments from
financing, investing and operating activities. cash is demand to comprise cash on hand and
demand deposits. cash equivalents are short-term highly liquid investments to the financial
activities.

Financing activities represent activities that result in changes in the size and
composition of the contributed capital and borrowings of the entity. Investing activities
represent the acquisition and disposal of long-term assets and other investments not
included in cash equivalents. Included in investing activities are the aggregate cash flows
arising from acquisitions and disposals of controlled entities, associates and joint ventures.
Operating activities represent the revenue producing activities of the entity, and are all
activities that are not investing or financing activities.

Working capital management is concerned with the problem that arise in

attempting to: managing the current assets. The current liabilities and interrelationship that
exists between them thus it is also known as “Current Assets Management”. The
interaction between current assets and current liabilities is therefore, the main theme of the
theory of Working Capital Management.

The terms current assets refer to; those assets, which are in the ordinary course
of business can be turned into cash within one year. The Major current assets are cash,
Marketable, securities, Accounts, Receivables and Inventory. Current Liabilities are those
claims of outsiders, which are expected to nature of payment within an accounting year
and include creditors :bills Payables and bank O.D. and out standing expenses.
 FINDINGS

 With reference to the working capital study of HDFC BANK, major part of the working

capital is contributed by short term sources of finance.

 It is seen that out of total current assets, inventory sundry debtors occupy the major part

of assets consumption.

 As the company is maintaining better arms of liquid current assets, the quick ratio of

company is much satisfactory.

 Production the current year was at all time high at 11.35 lakh tones compared to previous

year, recording a growth of 10.8%over the previous year.

 The average output of the plant has increase to 72 MT per hour as against to 65 mts. per

hour in the previous year, which has achieved through fine tuning of equipment are de-

bottlenecking in certain areas of operations.

 The company achieved a net turnover of Rs.1800.54 corer, including subsidy, for the year

2015-16, representing a growth of 18.46% over the previous year.

 The profit before tax and profit after tax increased by 76.97% and 88.85% respectively.

Over the previous year.

 The EPS WAS Rs.15.40 as against Rs.8.16 in the previous year.

The company is maintaining sufficient stock of inventory for smooth production process. The

ratio is low in previous year, but from last five years it is good.
 SUGGESTIONS

1. The company should explore the possibilities of financing the incremental working

capital in firm of entity which would reduce heavy incidence of interest and eliminate

the extent possible the firm’s interest obligation.

2. It is advisable to increase current assets and reduce cost of current liabilities in order to

increase its profit.

3. The firm should reduce the cost of production by using cost control techniques and

new technology for production in order to increase return on investment.

4. The company should explore the possibilities of cheaper and permanent sources of

finance.

5. The company should take necessary steps for expanding the sales through expanding
their branches.
 CONCLUSION

Cash is deemed to comprise cash on hand and demand deposits. Cash equivalents
are short-term, highly liquid investments that an entity can readily convert to known
amounts of cash, and which are subject to an insignificant risk of changes in value. The
working capital should present major classes of gross receipts and payments from
financing, investing and operating activities. cash is demand to comprise cash on hand and
demand deposits. cash equivalents are short-term highly liquid investments to the financial
activities.

Financing activities represent activities that result in changes in the size and
composition of the contributed capital and borrowings of the entity. Investing activities
represent the acquisition and disposal of long-term assets and other investments not
included in cash equivalents. Included in investing activities are the aggregate cash flows
arising from acquisitions and disposals of controlled entities, associates and joint ventures.
Operating activities represent the revenue producing activities of the entity, and are all
activities that are not investing or financing activities.
 BIBILIOGRAPHY

BOOKS AUTHOR
● FINANCIAL MANAGEMENT IM PANDEY

● FINANCIAL MANAGEMENT Dr.S.K.R.PAUL

● FINANCIAL MANAGEMENT MY KHAN, PK JAIN

● MANAGEMENT ACCOUNTING Dr.S.P.GUPA

●ADVANCED ACCOUNTANCY S.P. JAIN,NARANG

● ADVANCED FINANCIAL ACCOUNTING S.N.MAHESWARI

WEB SITES:

www.hdfc bank.com.