“WORKING CAPITAL MANAGEMENT”

Submitted in the partial fulfillment of the requirements for the award

of the degree in

MASTER OF BUSINESS ADMINISTRATION

By

J.BHARATHRAJ

(225052101016)

Under the guidance of

MS.S PADMAVATHY

FACULTY OF MANAGEMENT STUDIES

Dr. M.G.R. Educational and Research Institute

(Deemed to be university)

Maduravoyal, Chennai-600 095

(An ISO 9001-2008 certified Institution)
University with Special Autonomy
Status

MAY 2024

1
 DECLARATION

I, J.BHARATHRAJ J (225052101016) hereby declare that the project report entitled

“WORKING CAPITAL MANAGEMENT” is done by me under the guidance of MS
S.PADMAVATHYand is submitted in partial fulfillment of the requirements for the
award of the degree in MASTERS OF BUSINESS ADMINISTRATION.

DATE:

PLACE: Chennai SIGNATURE OF THE CANDIDATE

2
 FACULTY OF MANAGEMENT STUDIES

BONAFIDE CERTIFICATE

This is to certify that this project report is the bonafied work of Ms. J.BHARATHRAJ
(225052101016) who carried out the project entitled “WORKING CAPITAL
MANAGEMENT” under our supervision from Ms. S. Padmavathy.

Internal Guide Head of the Department

Submitted for viva voce Examination held on

3
 ACKNOWLEDGEMENT

To acknowledge here, all those who have been a helping hand in completing this
project, shall be an endeavor in itself.

I extremely thankful to our chancellor Thiru A.C.SHANMUGAM, B.A.,B.L., our

President Er.A.C.S.ARUNKUMAR, B.E., I express my sincere thanks to our secretary
Thiru A.RAVIKUMAR and our vice chancellor Dr.S.GEETHALAKSHMI, I would
like to take the opportunity to express my profound gratitude to Dr.G. BRINDHA,
Professor & Head, and my projrct guide Faculty of Management Studies, for her kind
permission to undergo project work successfully.
I thank MS S.PADMAVATHY for guiding me to execute my final year project in a
successful manner. I also thank all the faculties and batch mates in Faculty of
Management Studies, for their support and guidance throughout the course of final
year project.

I thank Mr. VENKATESH of “TEAM COMMOTRADE” for guiding and

supporting throughout my internship

I owe my wholehearted thanks and appreciation to entire staff of the company for
their cooperation and assistance during the project.

Name of the student

BHARATHRAJ J

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5
CHAPTER TITLE PAGE PAGE

ABSTRACT 07

CHAPTER 1

1.1 Introduction about the topic 08

1.2 Industry Profile 16

Company Profile 18

1.3 Objectives of the study 21

1.4 Importance or Need of the study 21

1.5 Scope of the study 22

1.6 Limitation of the study 23

CHAPTER 2 - Review of Literature (Books and Journals) 23

CHAPTER 3 – Research Methodology 24

3.1 Research Design 24

Research Hypothesis & Methodology 24

Data Analysis 24

Data collection approach 25

CHAPTER 4 - Data Analysis and interpretation 26

CHAPTER – 5

5.1 FINDINGS 37

5.2 SUGGESTION 37

5.3 CONCLUSION 38

REFERENCES 38

Questionnaire 39

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 ABSTRACT

Working Capital is required for carrying out day-to-day business operations. The present-day
competitive market environment calls for an efficient management of working capital.
Proper management of working capital is essential to a company’s fundamental financial
health and operational success as a business. A hallmark of good business management is the
ability to utilize working capital management to maintain a solid balance between growth,
profitability, andliquidity.

The Project titled ‘A Study of Working Capital Management in Kirloskar Brothers Limited ’
aims to study the various aspects of Working Capital Management.

This study is based on Kirloskar Brothers Limited (KBL) Pune, which is a pump manufacturing
company involved in the engineering and manufacture of systems for fluid management.

The period considered for the study is five years i.e. from the Financial year 2021-22 to 2022-2023.

The research methodology adopted for this study is a secondary source of data which
includesannual reports and other proprietary reports of Kirloskar Brothers Limited.

This project tries to evaluate how the management of working capital is done in Kirloskar
Brothers Limited through intra-firm Firm Ratio Analysis and Comparative Statement
Analysis. Thestudy of working capital management has shown that Kirloskar Brothers
Limited has a fairly strong working capital position. The Company is also enjoying
reasonable profits.

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 CHAPTER 1

WORKING CAPITAL MANAGEMENT

Introduction

One of the most important areas in day to day management of the firm is the management of working
capital.

Working capital management is the fictional area of a fiancé that covers all the current accounts of the
firm.

Working capital management involves the relationship between a firm's short-term assets and its short-
term liabilities the goal of Working capital management is to ensure that a firm can continue its
operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming
operational expenses.

In the general form, the Viewpoint of the chief financial officer (CFO) management of Working
capital is simple and a simple concept of ensuring the ability of the organization to finance the
difference between the current assets and current liabilities "Harris 2005".

However, a total approach should be followed which covers all the company’s activities relating
to vendor-customers and products (HALL 2002)

In reality, management of working capital has become one of the most important issues in the
organization where many financial executives are trying to identify moments of working capital and the
basic deter optimal level of working capital (lamberson 1995) consequently. Companies can minimize
risk and improve overall performance by understanding the role and determinants of working capital

The main objective of working capital management is to maintain an optimal balance between each of
the working capital components. Business success heavily on the ability of financial executives to
effectively manage receivables inventory and payables (e nd riiopiicse 5002 ). Firms can reduce their
financial costs and increase the amount of investment left up in short-term assets.

Most of the financial manager’s time and effort are allocated in optimizing the level of current assets and
liabilities back toward optimal levels (lamberson 1995).

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In general current assets are considered as one of the important components of total assets of a firm. A
firm may be able to reduce the investment of total assets by renting or leasing plant and machinery .
whereas the same policy cannot be followed for the components of working capital . the high level of
current assets the risk of liquidity associated with the opportunity cost of funds that may have been
invested in long-term assets . the impact of working capital policies on profitability is highly important ,
however a little empirical research has been carried out to examine this relationship.

 Thus efficient management of working capital in an important prerequisite for

successful working of a business concern it reduces the chances of business
failure generates a feeling of security and confidence in the minds of personnel in
the organization it assurance solvency of steady of organization CONCEPT OF
WORKING CAPITAL MANAGEMENT

Financial management can be divided into two broad areas of responsibility as the management
of long-term capital and the management of short-term funds or working capital. Working
capital means the funds available and used for day-to-day operations of an enterprise. It consists
broadly of that portion of assets of a business which are used in or related to its current
operations.
Efficient management of working capital is an essential pre–requisite for the successful operation
of a business enterprise and improving its rate of return on the capital invested in short-term
assets.

The components of Working Capital Management are as follows:

 Cash Management
 Inventory Management
 Receivables Management
 Payables Management

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  TYPES OF WORKING CAPITAL

According to the needs of business, the working capital may be classified as follows:

WORKING

CAPITAL

BASIS OF
BASIS OF TIME
CONCEPT

GROSS PERMANENT VARIABLE

NET ORKING
WORKING WORKING WORKING
CAPITAL

RESERVE REGULAR SEASONAL SPECIAL

MARGIN WORKING WORKING WORKING

A. ON THE BASIS OF PERIODICITY: On the basis of periodicity working capital can

be divided under two categories as under:

1) Permanent working capital: This refers to that minimum amount of investment in all
current assets which is required at all times to carry out minimum level of business activities.

i) Regular Working capital: Minimum amount of working capital required to keep the
primary circulation. Some amount of cash is necessary for the payment of wages, salaries, etc.

ii) Reserve Margin Working capital: Additional working capital may also be required for
contingencies that may arise at any time. The reserve working capital is the excess of capital
over the needs of the regular working capital that is kept aside as a reserve for
contingencies, such as strikes,business depression, etc.

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2) Variable or Temporary Working Capital: The amount of such working capital keeps on
fluctuating from time to time based on business activities. In other words, it represents
additional current assets required at different times during the operating year. For example,
extra inventory has to be maintained to support sales during peak sales periods. The variable
working capital may also be subdivided into the following two sub-groups:

i) Seasonal Variable Working capital: Seasonal working capital is the additional amount
thatis required during the active business seasons of the year. Raw materials like raw cotton jute
or sugarcane are purchased in a particular season. The industry has to borrow funds for a short
period. It is particularly suited to a business of a seasonal nature. In short, seasonal working
capital is required to meet the seasonal liquidity of the business.

ii) Special variable working capital: Additional working capital may also be needed to
provide additional current assets to meet unexpected events or special operations such as
extensive marketing campaigns or carrying of special jobs etc.

B. ON THE BASIS OF CONCEPT:

On the basis of the concept working capital is divided into two categories:

1) Gross Working Capital: Gross working capital refers to total investment in current assets.
The current assets employed in business give the idea about the utilization of working capital
and anidea about the economic position of the company. The gross working capital concept is a
popular and acceptable concept in the field of finance.

2) Net Working Capital: Net working capital means current assets minus current liabilities.
The difference between current assets and current liabilities is called the net working capital. If
the net working capital is positive, the business is able to meet its current liabilities. The net
working capitalconcept provides the measurement for determining the creditworthiness of the
company.

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 FACTORS DETERMINING WORKING CAPITAL

The following factors determine the requirement for working capital :

1. Nature of Companies: Needs for working capital are determined by the nature of an
enterprise. Small companies have smaller proportions of cash, receivables, and inventory than
large corporations. This difference becomes more marked in large corporations. A public
utility,for example, mostly employs fixed assets in its operations, while a merchandising
department depends generally on inventory and receivables.

2. Nature and Size of Business: The working capital requirements of a firm are influenced by
the nature of its business. Trading and financial firms have a very low investmentin fixed
assets but require a large sum of money to be invested in working capital. Retail stores,for
example, must carry large stocks of a variety of goods to satisfy the varied and continuous
demands of their customers.

3. Time: The level of working capital depends upon the time required to manufacture goods.
If the time is longer, the size of the working capital is great. Moreover, the amount of working
capital depends upon inventory turnover and the unit cost of the goods that are sold.

4. Volume of Sales: This is the most important factor affecting the size and components of
working capital. The volume of sales and the size of the working capital are directly related
to each other. As the volume of sales increases, there is an increase in the investment of
working capital in the cost of operations, inventories, and receivables.

5. Terms of Purchases and Sales: If the credit terms of purchases are more favorable and
those of sales liberal, less cash will be invested in inventory. With more favorable credit terms,
working capital requirements can be reduced.

6. Business Cycle: Business expands during periods of prosperity and declines during the period
of depression. Consequently, more working capital is required during periods of prosperity and
lessduring periods of depression.

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  COMPONENTS OF WORKING CAPITAL MANAGEMENT

1. CASH MANAGEMENT

Cash management is one of the most important areas in the day-to-day management of the firm‘s
deals with the management of working capital, which is defined as all the short-term assets used
in daily operations. This consists primarily of cash, marketable securities, accounts receivable,
and inventory. The balances in these accounts can be highly volatile as they respond very
quickly to changes in the firm‘s operating environment. Healthy circulation of cash in the entire
business operation is the basis of business solvency. Ultimately every transaction in a business
results either in an inflow or an outflow of cash. There should be sufficient cash with a firm all
the time to meet the needs of the business. If the cash balance of a firm at any time is surplus or
deficit,it is obvious that the finances are mismanaged. Cash Management needs strategies to deal
with various facets of cash. Following are some of its facets.

2. INVENTORY MANAGEMENT

Inventory constitutes an important item in the working capital of many business concerns.
Inventory is a major item of current assets. The term inventory refers to the stocks of the product
a firm is offering for sale and the components that make up the product Inventory are stores of
goods and stocks. This includes raw materials, work-in-process, and finished goods. Raw
materials consist of those units or inputs that are used to manufacture goods that require further
processing to become finished goods. Finished goods are products ready for sale. The
classification of inventories and the levels of the components vary from organization to
organization depending upon the nature of the business.

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3. RECEIVABLES MANAGEMENT

Management of Receivables refers to planning and controlling debt owed to the firm from
customers on account of credit sales.

When large amounts of money are tied up in receivables, there are chances of bad debts. On the
contrary, if the investment in receivables is low, the sales may be low since competitors offer
liberal terms. Therefore, management of receivables requires proper policies and their
implementation.

There are three aspects of receivables management:

1. Credit Policy
2. Credit Analysis
3. Control of Receivables

4. PAYABLES MANAGEMENT

A considerable segment of procurement of products and services in a company are on credit

conditions to a certain extent. Account Payables Management refers to the set of policies,
procedures, and practices employed by a company concerning managing its trade credit purchases.
They consist of seeking trade credit lines, acquiring favorable terms of purchase, andmanaging the
flow and timing of purchases to efficiently control the company’s working capital.

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  WORKING CAPITAL CYCLE

Every business organisation needs adequate working capital because the conversion of cash into
finished goods to debtors and back to cash is not instantaneous. The continuing flow from cash
to suppliers, to inventory, to accounts receivable and back into cash is called the working capital
cycle or operating cycle. In other words, the term operating cycle refers to the length of time
which begins with the acquisition of raw materials of a firm and ends with the final realisation
of cash from debtors. The amount of working capital depends upon the length of working
capital cycle. Longer the working cycle, higher is the need of working capital to be maintained.
This is because the fund will then remain tied-up in various items of current assets for a longer
period. The length of operating cycle varies from industry to industry and from business to
business.

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INDUSTRY PROFILE

A financial market is a market in which people trade financial securities and derivatives at low
transaction costs. Some of the securities include stocks and bonds, raw materials, and precious
metals, which are known in the financial markets as commodities.

The term "market" is sometimes used for what are more strictly exchanges, organizations that
facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may
be a physical location (such as the New York Stock Exchange (NYSE), London Stock Exchange
(LSE), JSE Limited (JSE), Bombay Stock Exchange (BSE)), or an electronic system such as
NASDAQ. Much trading of stocks takes place on an exchange; still, corporate actions (merger,
spinoff) are outside an exchange, while any two companies or people, for whatever reason, may
agree to sell the stock from one to the other without using an exchange.

16
Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock
exchange, and people are building electronic systems for these as well, to stock exchanges. There are
also global initiatives such as the United Nations Sustainable Development Goal 10 which has a
target to improve regulation and monitoring of global financial markets.

Types of financial markets

Within the financial sector, the term "financial markets" is often used to refer just to the markets that
are used to raise finances. For long term finance, they are usually called the capital markets; for short
term finance, they are usually called money markets. The money market deals in short-term loans,
generally for a period of a year or less. Another common use of the term is as a catchall for all the
markets in the financial sector, as per examples in the breakdown below.

Capital markets which consist of:

• Stock markets, which provide financing through the issuance of shares or common stock, and
enable the subsequent trading thereof.
• Bond markets, which provide financing through the issuance of bonds, and enable the
subsequent trading thereof.
• Commodity markets, The commodity market is a market that trades in the primary economic
sector rather than manufactured products, Soft commodities is a term generally referred as to
commodities that are grown, rather than mined such as crops (corn, wheat, soybean, fruit and
vegetable), livestock, cocoa, coffee and sugar and Hard commodities is a term generally
referred as to commodities that are mined such as gold, gemstones and other metals and
generally drilled such as oil and gas.
• Money markets, which provide short term debt financing and investment.
• Derivatives markets, which provide instruments for the management of financial risk.[2]

• Futures markets, which provide standardized forward contracts for trading products at some
future date; see also forward market.
• Foreign exchange markets, which facilitate the trading of foreign exchange.

17
 • Cryptocurrency market which facilitate the trading of digital assets and financial technologies.

• Spot market

• Interbank lending

market Raising capital

Financial markets attract funds from investors and channels them to corporations—they thus allow
corporations to finance their operations and achieve growth. Money markets allow firms to borrow
funds on a short-term basis, while capital markets allow corporations to gain long-term funding to
support expansion (known as maturity transformation).

Without financial markets, borrowers would have difficulty finding lenders themselves.
Intermediaries such as banks, Investment Banks, and Boutique Investment Banks can help in this
process. Banks take deposits from those who have money to save on the form of savings a/c. They
can then lend money from this pool of deposited money to those who seek to borrow. Banks
popularly lend money in the form of loans and mortgages.

COMPANY PROFILE

INTRODUCING THE COMPANY

TEAM Excavator & Dozer Parts is one of the largest manufacturers of heavy construction,
mining and earth moving equipment parts, such as Excavators & Bulldozers, in Southern India.
With a highly commendable full product range, manufactured, serviced and supported all over the
globe, we've got the right machine and the right solution for all your jobs. Incepted in the year
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2022, by Mr. Harish Srisailam, Founder & Director, the company has retained its position on the
top of the yellow table despite the fluctuations in the market. Based at the heart of Chennai in
Tamil Nadu, TEAM has been supplying the national and international market with quality spares
parts thus gaining stature in short time. The company has available full range of articulated and
rigid spare parts for all brands at any given time. TEAM offers efficient worldwide service at
any
operating site to ensure the availability of itsquality spare parts. With combined overall 30,000 sq.
ft., state- of-the-art service and technical facilities throughout the region, TEAM offers innovative
ways to always keep their dealers, service professionals and customers up-to-date with the latest
technology and hands-on know-how. A closely knit international network ensures satisfactory
customer service and the supply of quality spare parts around the clock.

TEAM also assists clients in locating, qualifying and mobilizing other right spare parts – on
time, every time. Quality, safety and passion are the core values that formTEAM’s common
base and are important components of our work culture. These core values permeate our
organization, our products and our way of working. They are an important part of our
promise for sustainability & social responsibility.

Commitment to our industry, integrity and accountability to our customers is our priority.

PROFILE

Mission

To increase the availability of mechanical equipment and spare parts. And become a global leader
in the industry through high-quality spare parts that bring about customer value.

Vision

To establish ourselves as business leaders in a short time with our efficient leadership,
durable equipment and sustainable technology for the mining &construction industry.

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 Values

Minimum impact to the environment, commitment to clients, connected business strategy, security
and quality life to our team family.

Quality Policy

Backend by our guarantee for excellence, we strive to provide world-class products with a strict
quality

ACTIVITIES OF THE COMPANY

Team commotrade pvt ltd pvt ltd (India) Pvt Ltd. Registered in 2014, India TEAM
COMMOTRADE PVT LTD PVT LTD(INDIA) PVT. LTD. Has gained immense expertise in
supplying & trading Earthmoving equipment’s spare parts, excavator’s undercarriage spare parts,
tooth points, etc. The supplier company is located in Chennai, Tamilnadu, and is one of the leading
sellers of listed products. Buy Earth moving equipment’s spare parts, excavator’s undercarriage
spare parts, tooth points in bulk from us for the best quality products and services. Team
commotrade pvt ltd pvt ltd (India) Private Limited (TCIPL) is a leading Private Limited Indian
Non-Government Company incorporated in India on 21 August 2022 and has a history of 11 years
and three months. Its registered office is in Chennai, Tamil Nadu, India. The Corporate is engaged
in manufacturing, excavator tooth point, importing and exporting a massive array of agriculture
harvester, excavator sprockets, wholesaling and track shoe plate.

Team commotrade pvt ltd pvt ltd (India) offers a wide range of products and services, including:

• Earthmoving Machinery Parts

• Excavator Parts
• Cranes, Forklift & Lifting Machines
• Crane Spare Parts

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 • Alloy, Metal and High Strength Bolts
• Bolts
• Ball Bearings and Bearing Assemblies
• Industrial Bearings
The Company's status is Active, and it has filed its Annual Returns and Financial Statements up
until 31 March 2022. It's a company limited by shares with an authorized capital of Rs 1.00 cr
and a paid-up capital of

Rs 0.40 cr. The Corporate currently has active open charges totaling ₹4.75 cr.

 1.3 OBJECTIVE OF THE STUDY

1. To examine the effectiveness of working capital management policies with the help of
accounting ratios.

2. To evaluate the financial performance of the company.

3. To test hypothesis.

4. To make suggestions for policymakers for effective management of Working capital

 1.4 NEED OF STUDY

l. The projects help know the company's position of funds maintenance and setting the standards for
working capital inventory levels, quick ratio current amount turnover level, and web torn turnover level.

2. This project is helpful to the management for expanding the dualism and the project viability
and present availability of funds.

3. This project is also useful as it compares the present year's data with the previous year's data
and thereby shows the trend analysis i.e. increasing funds or decreasing funds.

4. The project is useful in further expansion decisions to be taken by Management.

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  1.5 SCOPE OF THE STUDY

Factors Influencing Working

Capital:

Explore the various internal and external factors that impact working capital requirements. These may
include sales growth, seasonality, production cycles, supplier terms, customer payment behavior, interest
rates, inflation, and economic indicators.

Measurement and Analysis:

Identify the metrics and methodologies you will use to measure and analyze working capital efficiency
and effectiveness. Common metrics include the current ratio, quick ratio, days sales outstanding
(DSO), days inventory outstanding (DIO), and days payable outstanding (DPO).

Risk Management:

Assess the risks associated with working capital management, such as liquidity risk, operational risk,
credit risk, and market risk. Determine strategies to mitigate these risks while optimizing working
capital performance.

Technology and Innovation:

Consider how advancements in technology and innovation, such as automation, data analytics, and
blockchain, are impacting working capital management practices. Explore how companies are
leveraging these tools to streamline processes and improve efficiency.

Recommendations and Best Practices:

Finally, provide recommendations and best practices based on your findings. These may include
strategies for optimizing working capital levels, improving cash flow forecasting, enhancing liquidity
management, and strengthening financial performance

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  1.6 LIMITATION OF THE STUDY.

The following are the various aspects involved in the analysis of the Study.

1. Study is limited to the accounting year 2020-2021

2. The study is based on information provided by the company

3. Study the working capital management does not take into account the price level changes

CHAPTER 2

REVIEW OF LITERATURE

Rao and Rao (1991) in their study of a few public enterprises belonging to the manufacturing sector in
the state of Karnataka, have attempted to probe into the capacity of the various techniques I evaluating
the working capital efficiency of business enterprises. The study revealed that the investment working
capital was considerably high when compared to the total investment. The Tandon Committee norms
were found to be yielding better results among the surveyed companies. However, the study also
revealed that the working capital planning and control was found to be disorderly and ineffective and
hence, the urgent need for full focus on working capital management.

Singh's (2004) study on Working capital in Lupin Laboratories Ltd. attempted to assess the significance
of the management of working capital through the working capital ratio and operating cycle. Having
analyzed seven years of data (1995 – 2002), he concluded that the liquidity position of the company was
good, the mean percentage of current assets was very high when compared to the percentage of net
fixed assets and the operating cycle showed a declining trend. The element-wise analysis of working
capital also revealed that trade debtors constituted the highest percentage of current assets followed by
loans and advances, inventories, and cash and bank balances.

Parasuraman's (2004) study attempts to understand the relationship between the credit period given by
companies and their actual performance in terms of sales and profitability. He has also attempted to find
the average level of other key financial parameters connected to working capital management. Having

23
emphasized Indian Pharmaceutical companies, he found out that leading companies have employed
greater working capital to enhance profitability. The study also revealed the day's sales outstanding had
gone up in the sample companies. The study inferred that the top pharmacy companies' strategies on
their working capital policy to relax the credit policy to achieve greater sales and greater profits.

Arindam Ghosh (2017) “Working Capital Management Practice in some selected industries in India –
A case study of the impact of working capital ratios on profitability in Cement Industry”. The study
attempted to examine the efficiency of working capital management of the Indian cement companies
from 92-93 to 2001–02.

Thappa Sankar (2017) focuses on the importance of proper working capital management of Sun
Pharmaceutical Company. The paper throws light on the concepts of working capital, working capital
policy, components of working capital, and factors affecting working capital in Sun Pharma Industries
Ltd during the last five years, and identifies certain factors that are responsible for the improvement of
the working capital of the company. The article concludes with a warning to the Company that if a
satisfactory level of working capital is not maintained, the company would become bankrupt.

CHAPTER 3

RESEARCH METHODOLOGY

RESEARCH DESIGN

In today’s competitive world maintaining financial strength on a day-to-day basis has become a
challenge. Every firm wants to see itself financially sound. Financial attributes like liquidity, solvency,
and profitability can be improved by the effective implementation of working capital management.
Working capital supports the day-to-day operations of the firm. As it includes items like cash, inventory,
receivables, payables, etc the working capital shows the activities of the companies. Empirical studies
have shown that ineffective management of working capital is one of the major causes of industrial
sickness. So, efficient management of working capital is one of the important indicators of financial
soundness.

STATEMENT OF PROBLEM This Project report tries to evaluate how the management of working
capital is carried out in Team Commotrade pvt ltd

24
DATA ANALYSIS

Data analysis is the process of systematically applying statistical and or logical techniques to describe
and illustrate, condense and recap, and evaluate data

TOOLS FOR DATA ANALYSIS

 Chats and graphs



• AREA OF STUDY

My area of study is Financial Management.

• PERIOD OF STUDY

Data from 8 years (2016 to 23) has been collected for the study.

• SAMPLE SIZE

The sample for the study has been selected from a company named Team commotrade pvt ltd pvt ltd

• TECHNIQUE OF ANALYSIS

The study is based on secondary data which is collected from the annual reports and other proprietary
reports of Team commotrade pvt ltd pvt ltd.

Ratio Analysis and Comparative Statement Analysis are used for the analysis of the data. The data is
presented using various graphs and charts.

DATA COLLECTION

APPROACH COLLECTION

OF DATA

As stated above, data was collected in several ways. These were: an initial industry sampling from
quantitative secondary data in annual reports, qualitative interviews, a quantitative questionnaire,
and quantitative secondary data from the questionnaire respondents’ quarterly reports. This approach
was chosen since it was possible to collect data from different sources and through triangulation
extract interesting information that could have otherwise been overlooked. Information collected
25
from the initial industry sample was together with insights gained for the interviews, used to
construct a

26
framework for the design of the questionnaire survey. The questionnaire provided the data for an in-
depth analysis of its respondents. The outcome was further analyzed in combination with
responding companies’ quarterly reports from Q1 2016 to Q4 2023.

CHAPTER 4

DATA ANALYSIS

WCM is important for every company, as the Head of Corporate Analytics phrased it, “if a consultant
books sales but never receives payment, the accounts receivable will grow. This is of course not a
sustainable way to run a business”. Nevertheless, industry is an important variable when making
comparisons of the working capital between companies because differences in operations will create
different requirements for working capital. The Head of Corporate Analytics means that WCM is in
essence the management of inventory, AR, and AP levels to ensure that excess capital is not being tied
up. Furthermore, the Head of Corporate Analytics means that these are the easiest accounts to influence
from a company perspective. This statement was partially supported by the Finance Director who found
inventory and AR to be the two most easily influenced from the company side. According to the Head
of Corporate Analytics, there are different ways of calculating working capital KPIs. However,
according to both interviewees, the most common KPIs used for WCM are DIO, DSO, and DPO, which
are all part of the CCC calculation. The Head of Corporate Analytics further argues that an efficient
WCM will monitor the levels of the components and know their relation as well as the effects that
different actions will have on the net working capital. Thus, the causalities between the components
must be acknowledged and considered when managing the working capital. “The working capital is
made up of several interconnected components. A well-functioning WCM will make sure that
knowledge about the relationships of the components and how they affect the total working capital is
established
through the entire organization” (the Head of Corporate Analytics). Furthermore, the Head of
Corporate Analytics argue that companies that do not have a centrally assigned responsibility regarding
the total working capital often are less efficient in their WCM. Thus, it is suggested that the
organizational structure and distribution of responsibility is important for the efficiency of WCM.

According to both the Head of Corporate Analytics and the Finance Director, the structure of WCM
needs to be designed so that alignment between the different departments can exist. According to the
Finance Director this is one of the main challenges with WCM. To align and motivate teams on
27
department level to work towards a united working capital goal can prove difficult because of possible

28
conflicts between short-term and long-term goals. The Head of Corporate Analytics stressed the
importance of alignment between departments. “If the sales team runs a campaign on a specific goods
or service, it is important that they coordinate this with the rest of the organization in order to avoid
e.g. misallocations in inventory” (the Head of Corporate Analytics).

Both interviewees argue that it is possible to combine a focus on WCM and revenue growth without
considerable trade-offs. Furthermore, they mean that this is something companies should work with
continuously. WCM is a matter of efficiency that needs to be attended in order to use recourses
optimally and to achieve sustainable growth.

Regarding the argued increase and shift in focus connected to WCM, the opinions of the Finance
Director and the Head of Corporate Analytics divert. According to the Finance Director there has not
been any noticeable shift in focus either towards or away from WCM. They have been working with a
combined focus and consider WCM and revenue growth to be compatible. The Head of Corporate
Analytics however argue that there has been a noticeable shift, where WCM has started to receive more
attention because credit has become scarcer, forcing the companies towards internal efficiency.

4.2 QUESTIONNAIRE SURVEY

The questionnaire survey had a response-rate of 36%, which could be argued to be high due to its web-
based nature. As mentioned in the method, researchers in this field, using similar methods, have been
defending lower response-rates (Adams et al., 2017). Contact was made with 99 companies, 11 replied
directly with a rejection due to limitations in e.g. time. 36 companies decided to participate and
submitted their replies. Among the 36 companies there were 19 from small-, 9 from mid- and 8 from
large cap .8 companies were related to the industry of IT & Telecom, 12 to retail and 16 to
Manufacturing The sample had a similar distribution regarding size and industry as the actual
respondents, indicating that there are no obvious biases in the respondents compared to the non-
respondents regarding the size and industry parameters.

29
 Company Size Industry Representation

Large
Data, IT &
Mid
Wholesale
Small
Manufacturing

The most common respondents was the Chief Financial Officers (CFO) at the companies, which also
was the position initially targeted to answer the questionnaire survey due to their insights in both
managerial, operational, and financial aspects. In the cases where CFOs did not participate, there were
e.g. controllers, accountants, and finance directors who did instead. Thus, also positions connected to
managerial, operational, and financial aspects. A bias related to questionnaire respondents was that the
probability of participating might have been affected by the respondent’s interest and knowledge
regarding the topic. Potential questionnaire-respondents that did not posses the same interest or did not
see any relevance might have been missed out. (The survey is presented in Appendix 2.

WCM AND GROWTH

The results of the questionnaire survey showed that most of the companies that responded tended to
actively manage working capital on a daily basis. 64 % of the questionnaire-respondents answered that
their specific company was to a high extent managing working capital regularly. Answers were similar
between the industries .Regarding the question about how working capital was used as a tool for
performance measurement in internal reports, 53% answered that it was used to a high extent and an
additional 31% answered that it was used to some extent. There were also some differences between the
industries. The extent of use was reported to be similar among the IT & Telecom and Wholesale
companies while the use in Manufacturing was substantially higher

30
 Active WCM Use in Internal Reports
Data, IT Wholesale Data, IT &Wholesale
&
Manufacturing Manufacturing
7 6,12 7
5,62 5,67 6,06
6 6
4,88 5,00
5 5
4 4
3 3
2 2
1 Managemen t

1 Measuremen t

What could be noticed in the answers regarding how companies were handling working capital was
that there appeared to be a high focus on reaching an optimal level. The Manufacturing industry
showed the highest level of regular activity toward reaching such desired level while the two other
industries showed slightly less activity About each other, Manufacturing showed a 15% and 18%
higher activity
towards optimization than Wholesale and IT & Telecom respectively. Thus, working capital levels
were in general seen as acceptable at the same time as there was room for improvement. The
respondents were also confident about how working capital is being managed and believed that daily
operations are in line with the task of optimizing the levels of working capital. It is noticeable that the
industry that is showing the highest activity towards reaching an optimal level of working capital is not
the same that shows the highest current optimization

31
 Activity for Optimizing Current Optimizing
Data, IT Wholesale Data, IT
& &Wholesale
Manufacturing Manufacturing
7 7
6,06
6 5,12 5,25 6
5 5 4,50 4,44
4,00
4 4
3 3
2 2
1 1

Regarding companies’ perception about the relation between WCM and growth, the questionnaire
results show that most questionnaire-respondents were confident that it is possible to combine a high
focus on the two issues No substantial difference between the industries could be noticed, as all
respondents declared a high belief in that such a combination is possible with an average rating of 6,13
out of the maximum 7 for the industries combined. When it comes to measuring growth, revenue was
in general more commonly used than profit (56% to 42%) and it could be noticed in which issues
companies put effort when trying to generate growth. No major differences were noticed between the
industries in how their strategic focus for achieving growth ,

32
Strategies connected to generating growth were proven to sustain over time since 54% of the companies
declared that no shift in focus had been noticed recently. However, 23% had noticed a recent shift in
strategic focus towards revenue growth and 11% towards WCM. In the question regarding whether or
not the questionnaire respondents had noticed any actual increase in working capital, 68% stated that no
such increase had been noticed

Noticed Increase in WC
100%
90%
80%
70%
60%
50% Don't Know
40% NO
30%
20% YES
10%
0%
Data, IT Wholesale Manufacturing Tota
Telecom l

WORKING CAPITAL, KPIS AND CCC

As previously stated, increasing levels of working capital could be a natural effect of growing revenue.
The questionnaire-respondents were asked how well justified an increase in working capital was by the
growth of revenues. Regarding working capital and revenue growth, independent of industry, the
questionnaire-respondents on average answered that a 10% increase in revenue justified of 6,0%
increase in working capital. There is however some difference depending on industry, where IT &
Telecom responded that 10% revenue growth justified an increase of 5,3% in NWC. For Wholesale,
the same ratio was 6,3% and for Manufacturing 6,4%.

In regards to what KPIs are used to measure working capital, the responses illustrated in Figure 11 show
the majority of companies in the Manufacturing and Wholesale industries use KPIs related to inventory,

33
AR and AP turnover rates and actual levels. The single most common measure for these companies is
inventory. In contrast, inventory is not even among the top three most common measures for companies
in the IT & Telecom industry. Instead, for this industry the three most common measures are AR, AP
and the current ratio (current assets/current liabilities). Except the KPIs presented in Figure 11,
questionnaire-respondents also mentioned the use of exact working capital levels and working capital
as percent of sales. As the respondents were allowed to choose several KPIs the results of combining
the industries show that the most frequently used KPI for measuring working capital is AR, with a total
of 29 respondents reporting a use (inventory 27 respondents, AP 25 respondents).

The KPIs commonly used

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Inventory

Receivables

Payables

Cash Conversion
Data, Telecom Wholesale
Current Ra3oManufacturing

Other

While all companies perform some kind of measuring of working capital, the extent to which the
measures are used for employee evaluation vary. In general, employee evaluation on working capital
KPIs is more frequent in the Manufacturing industry compared to the other two industries, as it is being
used 44% to 54% more frequently.

Companies in the Manufacturing industry consider their current CCC to be closer to optimal than
companies in the IT & Telecom, and Wholesale industries’, rating it 4,5 out of 7 compared to 3,6 and
3,1. Still, none of the industry averages indicate that the CCCs are optimized or close to optimized (See
Figure 12B). Furthermore, as previously discussed there is a difference in the extent to which the CCC
is used as a KPI for WCM. The measure is more common in the Manufacturing industry compared to
both the other two industries, being used by more than 50% of the Manufacturing companies.

34
 Evalua#on on KPIs Current CCC Op#mized

Data, IT & Data, IT &

Wholesale Wholesale
Manufacturing Manufacturing

7 7
6 5,38 6
5 5 4,50
3,75 3,50 3,63
4 4 3,08
3 3
2 2
1 1 Curren t

RESPONSIBILITY FOR WCM FOCUS AND IMPLEMENTATION

The responsibility of deciding how much focus that should be put on WCM are in most companies
assigned to the top management (55%), alternatively top management in combination with the board of
directors (17%) or the finance department (19%). There were also 3% of the companies that assigned
the responsibility to the top management in combination with purchasing, sales and production
managers. These companies all operate in the Manufacturing industry.

Regarding how the responsibility of turning working-capital-decisions into action is distributed

throughout the companies, in 34% of the companies the responsibility lies with the top management and
34% with the finance department. In the remaining 32% of companies the responsibility is distributed to

the treasury department or the combination purchasing, sales and production departments.

QUARTERLY DATA FINDINGS

CCC PER INDUSTRY

The CCC is bound to be different depending on the nature of the industry. From the secondary data
collected and displayed in Figure 13, the average CCCs for the three industries are plotted out and it is
possible to notice rather large variations. While there has been some variance in the CCCs, on average,
a decrease can be seen for all of the three industries. A general statement regarding all three industries is

35
that they all have reduced their CCC over the studied period. The industry of IT & Telecom has
reduced

36
its CCC with 54% (-101 to -221 days) whilst Manufacturing and Wholesale have reduced their CCC by
44% (43 to 24 days) respectively 32% (19 to 13 days).

The Manufacturing industry has had the longest cycle, meaning that it on average takes longer for the
companies to turn their raw materials back into cash and they have to carry the financing of a larger part
of their operations compared to the other two industries. The Wholesale industry had the second longest
cycle, similar to the Manufacturing industry. A significantly shorter CCC is found in the IT & Telecom
industry where the average CCC has been negative for the entire period. This means that the companies’
suppliers carry the costs of inventory and materials. In general, an industry specific feature of IT &
Telecom is low (or even absent) levels of physical inventory.

IT AND TELECOM

As can be seen in the IT & Telecom industry has shown a steady growth of revenue by a total of 105%
from the base year. At the same time as revenues doubled, the NWC remained relatively unchanged
growing only 17%. Thus, the industry has managed to grow revenues without growing the NWC at the
same rate.

Another fact about the data presented in Figure 14 is that every peak in revenue from the base year is
displayed in the fourth quarter, thus the most revenue is to be expected at the end of every year. The first

37
quarter is generally the worst when looking at revenue and the level of NWC has proved to be irregular
over the studied period.

WHOLESALE

General levels of revenue for the Wholesale industry have been steadily increasing since 2016 and
peaked during Q4 2023 with an increase of 96% in relation to the base year. The industry is also, similar
to the industry of IT & Telecom, showing a regular increase in revenue every fourth quarter.

The industry’s general levels of NWC have, however, shown an irregular development over the years
starting with a decrease during Q4 2016 to negative 25%. Since the first noticed decrease in NWC, the
industry has shown increasing levels of NWC, with an ascending trend from Q2 2019, until Q1 2022.
Since Q1 2022 the industry has generally reported decreasing levels of NWC and in Q4 2023 it was
showing the lowest general levels in four years

38
MANUFACTURING

The Manufacturing industry has showed an overall increase in revenue since 2016 with 76%. The
increase dropped between the years of 2019 and 2020 but has since then shown increasing revenue, like
the other two industries with the most revenue generated at the end of every year.

The level of NWC has been following a similar development over the years but during the period Q3
2020 to Q2 2022 the indices went apart when revenues increased in a faster pace than NWC.
Changes in NWC and Revenue are more or less following the same trend over the studied period as
NWC has increased with 74% over the studied period

39
CHAPTER 5

FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS :

 The Current Ratio shows that the company’s liquidity position is not ideal as per the
standard ratio of 2:1 but still it is greater than 1 which indicates the company’s ability to
pay off its currentobligations.

 The Net Operating Cycle has increased from 22.21 days in 2021-22 to 40.59 days in 2022-2023.

 The Working Capital Ratio has declined over the years from 18.94 in 2021-22 to 7.8
in 2022-2023which is not favourable.

 Trade Payables Ratio, Quick Ratio and Receivables Ratio

is stable.Net Profit Ratio has shown increasing trend.

SUGGESTIONS :

There are no major deficiencies in the management of working capital, however, there is a
need for improvement in some ratios like Receivables and Working Capital Turnover to
enhance the liquidity and profitability position to a greater level.
The Working Capital Turnover Ratio can also be improved by maintaining an optimal level of
working capital withoutincurring liquidity risks which will be beneficial to the company’s daily
operations and long-terminvestments and the company can reduce the average collection days by
reviewing its credit terms and policies to shorten its Net Operating Cycle.

40
 CONCLUSION :

The Project Report was initiated to study the working capital management at Kirloskar Brothers
Limited. We can conclude that the company’s profitability has increased over the years. The
Ratios of the company are satisfactory and the company enjoysa balance of liquidity and
profitability. Based on the analysis, we can further conclude thatthe overall management of
working capital is sound.

REFERENCES

BIBLIOGRAPHY

Books:

1. Financial Management, Theory and Practice 10th Edition by Prasanna Chandra.

2. Financial Management for CA Intermediate by Institute of Chartered Accountants of India.
3. Financial Analysis & Control for M.Com by Nirali Prakashan.

Websites:
www.kirloskarpumps.com
www.moneycontrol.com

41
(QUESTIONNAIRE SURVEY)

1. To what extent does your company actively manage working capital?

Not At All -- - Neither/Nor + ++ Very High Don’t know

2. To what extent is working capital used as a performance measurement in your company’s internal reports?

Not At All -- - Neither/Nor + ++ Very High Don’t know

3. To what extent are employees evaluated on working capital KPIs?

Not At All -- - Neither/Nor + ++ Very High Don’t know

4. To what extent is your company currently working to optimize the level of working capital?

Not At All -- - Neither/Nor + ++ Very High Don’t know

5. To what extent do you consider your company’s current level of working capital to be optimized?

Not At All -- - Neither/Nor + ++ Very High Don’t know

6. What key ratios (KPIs) does your company use to measure working capital? (choose all that apply)

a. Inventory b. Receivables

c. Payables d. Cash Conversion Cycle

e. Current ratio d. Other (please specify)

7. To what extent do you consider your company's current Cash Conversion Cycle (CCC) to be at an
optimal level?
CCC = DIO + DSO - DPO

Far from Optimal -- - Neither/Nor + ++ Optimal Don’t know

8. What is your current primary strategic focus concerning the measurement of growth?

a. Revenue b. Profit c. Other (please specify)

9. To what extent do you believe it is possible to combine a high focus on working capital and long-
term growth?

Not At All -- - Neither/Nor + ++ Very High Don’t know

42
10. Have you recently noticed any difference in focus towards working capital management (WCM)
or long-term growth?

a. Yes, towards WCM b. Yes, towards growth

c. No, no shift in focus d. Don’t know e. Yes, other (please specify)

11. Have you recently noticed an increase in working capital?

a. Yes b. No c. Don’t know

12. To what extent do you consider increases in working capital to be justified by growth?

For growing revenue by 10% working capital is allowed to grow by approximately how many percent? %

13. Which position within your company is responsible for deciding how much focus that should be put
on working capital management (WCM)?

a. Owners b. Board of Directors c. Top Management

d. Finance e. Treasury f. Purchasing

g. Sales/Marketing h. Production & Logistics i. None

j. Other (please specify)

14. Which position within your company is responsible for working capital management (WCM) decisions
and follow-ups?

a. Owners b. Board of Directors c. Top Management

d. Finance e. Treasury f. Purchasing

g. Sales/Marketing h. Production & Logistics i. None

j. Other (please specify)

15. What is your position within your company?

16. What is your company's main industry?

a. IT & Telecom b. Wholesale c. Manufacturing

d. Other (please specify)

43
41