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CHAPTER I
INTRODUCTION
“In a modern money-using economy, finance may be defined as the
provision of money at the time it wanted.”1 It is undoubtedly the lifeblood of
business. The ambitious plan of a businessman would remain mere dream
unless adequate money is available to conquest them into reality. In the early
stages of industrial development, was not of much consequence and the
financial requirements of business were limited. The methods of production
were extremely simple, and the tools and equipment crude and inexpensive.
Labour was more important relatively than capital.
Production then can be termed as Labour Intensive. Under such a set up
finance did not pose any big problem. As industries grew, the method of
production became increasingly complex and round about, the tools and
equipment became more expensive and the financial requirements of the
industries also grew. The industrial revolution changed the very nature of
industry.
Production began to be carried on a mass scale for national and
international markets. This necessitated the use of huge and complex
machinery and very large quantities of raw materials. Manufacturing
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Bhusan, Y.K., Fundamentals of Business Organisation and Management, Sultan Chand and Sons, New Delhi
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operations had to be conducted in big factories employing a large number of
workers whose pay bills had to be met regularly in advance of the actual scale
of products. All these developments made industry Capital Intensive and the
capital became the most important factor of production.
The finance in the modern business world is the lifeblood of human
economy. One cannot imagine a business without finance because it is the
central point of all business activities, whether the business is big or small,
Government, semi-government or non-government. It is equally important to
profit and non profit organisations. This is the agent that produces the results.
Working Capital management needs special attention because of the
complexities involved in managing cash in the present day industrial set up.
The important aspect is the estimation of finance needed by a business
organisation to meet the day to day requirements.
The subject matter of working capital management is of immense
interest both to the academicians and practical managers. It is of great interest
to academicians because the subject is still developing and there are still
certain areas in working capital management where controversies exist for
which no unanimous solution has been reached as yet.
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WORKING CAPITAL MANAGEMENT - THEORETICAL REVIEW
Meaning:Working capital management is concerned with the problems that arise
in attempting to manage the current assets, the current liabilities and the interrelationships that exist between them.
Working capital means the fund available for day-to-day operations of
an enterprise.
According to Shubin,
“Working capital is the amount of funds necessary to cover the cost of
operating the enterprise”.
After determining the requirements of current assets in the aggregate
and in various components of Working Capital, the next important task before
a financial manager is to select an assortment of appropriate sources to finance
current assets.
A business firm has diverse source to meet its financial
requirements. In selecting a particular source, a financial manager has to
consider the merits and demerits of each source in the context of the
constraints of the firm.
Commercial banks play the most significant role in providing Working
Capital finance. In view of mounting inflation, the Reserve Bank of India has
adopted certain fiscal measures to check the money supply in the economy.
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The balancing need has to be managed either by long term borrowings or by
issuing equity or by earning sufficient profits and retaining the same coping
with the additional Working capital requirements.
CONCEPT OF WORKING CAPITAL
I.
Gross Working Capital: Firms total investment in current assets is
called gross working capital. It is equal to the total sum of current assets
II.
Net Working Capital: The difference between the current assets and
current liabilities is called net working capital. It is the excess of current
assets over current liabilities.
III.
Negative working capital: When current liabilities exceed current
assets negative working capital emerges. Such as Situation occurs when
a firm is nearing a crisis of some magnitude.
IV.
Balance sheet working capital: The balance sheet working capital is
one, which is calculated from the items appearing in the balance sheet.
Gross working capital and net working capital are examples of the
balance sheet working capital.
V.
Cash working capital: Cash working ca-petal is one, which is
calculated from the items, appearing in the profit and loss account. It
shows the real flow of money or value at a particular time and is
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considered to be the most realistic approach in working capital
management.
Classification of Working capital
Working capital may be classified further using time as basis.
(i) Permanent Working capital
(ii) Temporary working capital
(i) Permanent Working capital:
Permanent working capital is required by a business to maintain
minimum levels of stock of raw material, semi manufactured and
manufactured products and to pay expenses such as wages, salaries, rents,
interests etc
Permanent working capital has the following characteristics:
a) It is classified on the basis of the time factor.
b) It constantly changes from one asset to another and continues to remain
in the business process.
c) Its size increases with the growth of business operations.
Permanent working capital divided into two:
1.Initial Working capital:
Company will need relatively large working capital funds to discharge
its liabilities on account of purchases of raw materials, payment of wages,
salaries and so on.
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2. Regular Working capital:
It is represented by excess of current assets over current liabilities and
has always to be maintained by a company.
(ii) Temporary working Capital:
It will depend on when and what purpose it is needed by the company.
It divided into two:
1. Seasonal Working Capital:
It is required to meet the financial needs of seasonal periods.
2. Special Working capital:
It is required to meet situation which cannot be foreseen and therefore,
no advance preparation can be made to face them as they arise.
Figures depict graphically permanent and temporary working capital needs for
stable and growing firms.
IMPORTANCE OF ADEQUATE WORKING CAPITAL
I.
A business with adequate working capital can avail of cash discount
allowed by supplier.
II.
Payment in business creates goodwill and increase debt capacity of
the firm.
III.
Adequate of working capital facilitates continuous production .
IV.
Adequate working capital improves the morale of the executives.
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V.
VI.
It increases the production efficiency.
An adequate working capital helps the company to borrow loan easily
from the bank.
NEED OF WORKING CAPITAL
It has already been stated in the preceding unit that the basic objective
of financial management is to maximize shareholders wealth. This is possible
only when the company earns sufficient profit. The amount of such profit
largely depends upon the magnitude of sales. However, sales do not convert
into cash instantaneously.
There is always a time gap between the sale of goods and receipt of
cash. Additional capital is required to have uninterrupted business operations,
the amount will be locked up in the current assets like accounts receivable,
stock etc. This actually happens due to the cash cycle or operating cycle.
By the time the cash is converted back to cash (Cash to stock to sales to
accounts Receivable to cash). The firm needs extra funds and hence the need
for working capital. If this is not provided, the business operations will be
affected to a greater extent and hence this part of finance has to be managed
well.
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PRINCIPLES OF WORKING CAPITAL
In managing working capital the finance manager must bear in mind
certain fundamental principles which serve as useful guidelines.
These
principles are spelt out as follows:
1. Principle of optimization:
According to this principle, the finance manage must aim at selecting
the level of working capital that optimizes the firms rate of return. This level
is defined as that point at which the incremental cost associated with a decline
in working capital investment is equal to the incremental gain associated it.
Optimization principle is based on the principle that a definite relation
exists between the degree of risk that a firm assumes and the rate of return.
The more risk that a firm assumes the greater is the opportunity fir gain or
loss.
2. Principle of suitability:
Principle of suitability should be followed while financing different
components of working capital. This stipulates that each asset should be
offset with a financing instrument of the same approximate maturity. Thus,
temporary or seasonal working capital would be financed by short term
borrowings and permanent working capital with long term sources.
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3. Principle of Investment in working capital.
This principle was evolved by professor walker. According to this
principle, capital should be invested in each component of working capital as
long as the equity position of the enterprise increases. This will strengthen the
financial position of the enterprise and reduce the risk involved in it.
Factors determining the Working Capital Requirements
1. Nature of Business:
A company working capital requirements are basically related to the
kinds of business it conduct. Large industrial units require more working
capital.
2. Terms of purchases and sales:
If the credit terms of purchases are more favourable and those of sales
liberal, less cash will be invested in inventory.
3. Credit Policy:
Credit policy plays a considerable role in influencing the working
capital needs of a concern.
4. Seasonal Variation:
Strong seasonal movements create certain special problems of working
capital in controlling the internal finance swings.
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5. Liquidity and profitability:
If a firm desires to take a greater risk for bigger gains or losses, it
reduces the size of its working capital in relation to its sales.
6. Operating Efficiency:
Operating efficiency has a significant bearing on the working capital.
Elimination of wastes and inefficiency are essential to improve the operating
efficiency.
7. Growth and Expansion:
The growing concerns require more working capital than those which
are static. As a concern grows, larger amount of working capital will be
required.
DETERMINATION OF WORKING CAPITAL MANAGEMENT
There is no set of rules or formulae to determine the working capital
requirements of firms. Many factors influence working capital needs of firms.
They each have different importance. The importance of factors for a firm
changes over a period of time. The various factors which generally influence
the working capital requirements of firms are:
Nature of Business
The main factor which influences the working capital requirements of a
firm is the nature of business. Trading and non- manufacturing firms invest
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large amount of money in working capital, while fixed assets have a very
small investment.
For example, retail stores must carry large amount of varieties of goods
to satisfy various and continuous demands of their customers.
Construction firms also have to invest regularly in working capital and a
nominal amount in fixed assets.
Contemporarily, public utilities have a very small investment in
working capital and bulk investment in fixed assets.
They have small working capital because they may not have cash sales
and supply services. Therefore there is being no fund tied up in debtors and
stock.
Working capital requires most of the manufacturing concerns to fall
between trading firms and public utilities which form the two extreme
requirements.
Such manufacturing concerns have to make adequate investment in
current assets, depending upon the total structure of the assets and other
variable.
Credit policy
Another factor which influences the level of working capital is credit
police of the firm. The firm has to judge correctly in granting credit terms to
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its customers. Depending upon individual customers, credits can be given in
different terms. A lenient credit policy to an unworthy customer will create a
problem of collecting funds later on. The firm should prompt making
collections.
A high collection period means tie-up of large funds in book debts.
Slack collection procedures can increase the chance of bad debts.
Credit policy with a short period to good customers affects the level of sales.
Both these credit policies affect the company’s profitability
Availability of Credit
Credit terms, granted by its creditors, affect the working capital
requirements of a firm. Availability of liberal credit will enhance a firm with
less working capital.
This is similar to the credit from the banks, which also influence the
working capital needs of the firm.
If the bank credit is obtained on
favorable conditions, a firm will operate more effectively with less working
capital than a firm without such a facility.
4. Seasonality of operation
Firms whose operations change seasonally have a highly fluctuating
working capital requirement. The working capital need of such a firm is likely
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to increase rapidly during a season and will have a significant decrease during
another season.
5. Market conditions
Market conditions also play an important part in the working capital
need. If the competitions in the market are high, a large inventory of finish
goods is required to serve the customer’s need.
If not, the customers will shift to other manufacturers, who are ready to
meet their needs with further generous credit terms. Thus for greater
investment in finished goods, working capital needs should be high inventory
and accounts receivable.
6. Conditions of supply
The inventory of raw materials spares and stores depend on the
condition of supply. If the supply is in correct amount, the firm contain only
small inventory. Even though the supply is unpredictable, a continuous
production stock and inventory are made available at any time.
Supply cannot be always predictable. During that stage, the condition of
the production is affected. To overcome this, inventory is maintained. A
similar policy also has to be maintained, when the raw materials are available,
only one season and the production operation are carried out throughout the
year.
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IMPORTANCE OF WORKING CAPITAL MANAGEMENT
1. Continuous production
Excessive working capital helps to run the production continuously. It
helps to prevent the unpredictable supply of raw materials.
2. Solvency and Goodwill
If a firm has adequate working capital, it will enable him to pay the
payment to the creditors. This will create and maintain goodwill to the firm.
3. Easy loan facility
A firm with sufficient working capital enjoys high privileges of liquidity
and good credit standing. This enables them to secure loans from banks and
other financial institutions very easily.
4. Cash Discounts
Adequate working capital leads to cash discounts on purchases, which
in turn helps the organization in the reduction of cost.
5. Regular payment of expenses
Working capital helps to give a regular payment of salaries, wages and
other day-to-day commitments. This helps to raise the morale of employees
and increases their efficiency. This will result in minimum amount of costs
and maximum amount of profit.
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6. Exploitation of market condition
A firm with excessive working capital can create favourable market
condition. When the market price is lower, this will enable them to buy huge
amount of raw materials.
During unfavorable conditions, they are able to hold stocks of finished
goods, until there is an increase in the retail price.
7. High return on investments
Excessive working capital gives the facility of continuous production
and effective utilization of fixed assets. This makes the concern to get more
profits and ensure the firm a higher return on investments.
Now we can have a detailed look at, the big Parts of Working Capital.
The lists are to be studied:
1. Receivables Management
2. Inventory Management
3. Cash Management
RECEIVABLES MANAGEMENT
Trade credit occurs only when a firm sells its products or services on
credit and not receiving the cash immediately. It acts as a bridge for the
movement of goods through the stages of production and distribution to
customers. Thus it acts as an essential marketing tool.
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A firm will grant trade credit to protect its sales from the competitors.
This is done to attract the potential customers to buy its products at favourable
terms.
Sometimes the firm will not see the credit worthiness of the customers.
This leads to bad debts.
The main objective of the receivable management is to maximize the
sales and minimize the bad debts.
CAUSES FOR CREDIT SALES
 Competition
When the degree of competition is high, the credit granted by the firm
will also be high.
 Relationship with dealers
The companies provide extra facilities like extension of credit to
dealers. This is done to build a long- term relationship with them. The
companies also reward the customers for their loyalty.
 Buyer’s requirements
In many cases of business sectors, dealers are not able to operate
without extended credit. This is mainly seen in the cases of industrial products.
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 Marketing tool
Normally, the marketing promotional tools are 1) Advertising 2)
Personal selling 3) Publicity. The indirect marketing promotional tool is credit
sales.
FACTORS AFFECTING THE INVESTMENT IN ACCOUNT
RECEIVABLE
1. Volume of credit sales
The volume of credit sales is the policy of giving certain amount of
products in credit during a period of time.
2. Collection period
It means the time given to the debtors to pay the money for the credit
purchase.
CREDIT EVALUATION OF CUSTOMERS
Before giving the credit sales to the customers, the firm should analyse
and evaluate the credit worthiness of the customers. The firm should also
analyse the ability of the customers to repay the credit on time. To analyse the
credit worthiness of the customers, the firm collects information from various
sources. They are
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i. Financial Statement
It is one of the easiest methods to know the credit worthiness of the
customers. This method is made use of in public limited companies only, but
not in partnerships and individual firm method.
ii. Bank references
Bank, the place where the customers maintain their account, is the
another place of collecting credit information. In developed countries, like
USA, banks with credit department provide information about the customers’
credit worthiness.
If the creditor needs to know about the customers’
information, the bank will provide them.
But in India, bank does not act as a source of information, because of
their indifference in providing information. Even though the banks in India
provide information they won’t be accurate.
iii. Business references
A firm can ask the debtor or customer to know about the debtors’ credit
worthiness and trade references. This is the useful source of getting
information without any cost.
INVENTORY MANAGEMENT
Inventory is one of the significant parts of working capital. Inventories
have more than half of the percent of current assets in most of the public
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limited companies in India. Inventories are the main source to satisfy the
customer’s demand. If we fail to provide the right quality of goods in right
time it decreases our firm’s goodwill so effective and efficient inventory
management is necessary to run production and sale activities smoothly.
TYPES OF INVENTORIES
There are three types of inventories.
They are, 1. Raw materials 2. Work-in-Process and 3. Finished goods
1. Raw materials
This is a basic input which can be converted into finished goods through
manufacturing process. The stored units for the continuous production are
known as raw material inventories.
2. Work-in-process
Work-in-process inventories are the partly finished products. In order to
produce finished goods as per the demand, the work-in-process is stored. This
is known as work-in-process inventories.
3. Finished goods
The products which are ready for sale is known as finished operations.
Finished goods inventories are more important.
All the three inventories are not made use of in all the organizations.
They depend only on the nature of business.
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NEED TO HOLD INVENTORIES
 Transaction motive
It is impossible for a company to buy raw materials whenever it is
needed. There exists a difference between the demand for materials and its
supply. On many occasions, the raw materials bought are not within a certain
period of time. Therefore a company should have large stocks for a continuous
supply with an uninterrupted production.
 Precautionary motive
Since the production and sales are not similar, stocks of finished goods
are held. A firm cannot produce the goods immediately when a customer
demands them regularly. Therefore, for a continuous production of goods,
stocks are maintained. This will fulfill the growing demands of the customers.
If a firm cannot meet the demand of the customer, it would lose the
firm’s sales to competitors.
 Speculative motive
When the price of the raw materials becomes low, the firm has to buy
the raw materials excessively. This leads to minimize the cost of production
and maximize the profitability. This is another need to hold the inventories.
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OBJECTIVES OF INVENTORIES MANAGEMENT
We have already seen that the need of the inventories is important.
Normally the inventory forms the larger proportion in working capital. If we
take a wrong inventory decision, it will lead to incur most cost, and also it
directly affects the common goal of the organization.
Storing inventories helps to run the manufacturing and sales operations
very smoothly. This will lead to get more profit. In another point of view, if
we spend the money wrongly, it will result in less profitability.
The main objectives of inventory management
1. To maintain large inventories for smooth manufacturing operations.
2. To maintain a minimum investment in inventories to maximize
company’s profitability.
3. To maintain the sufficient finished goods for smooth marketing
operations.
4. To minimize the ordering and carrying cost.
5. Keeping investment in inventories at optimum level.
TECHNIQUES IN INVENTORY MANAGEMENT
To achieve the objectives, the company uses various techniques. They are
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1. Economic order quantity
One of the most used techniques in inventory management is economic
order quantity. The goods which are bought and stored undergo two costs.
They are,
i) Ordering cost, ii) Carrying Cost
i. Ordering cost
The expenses, which are incurred to buy the goods, are called ordering
cost. Ordering cost includes purchasing, ordering, transporting, receiving and
inspecting. When the frequent order of goods is high, the ordering cost is high.
When the frequent order of goods is low, the ordering cost is low.
ii. Carrying cost
The carrying cost means the cost incurred for maintaining the goods. In
contrast to the ordering cost, when the frequent order of goods is high, the
carrying cost is low. When the frequent order of goods is low, the carrying
cost is high. This technique is used to know the minimum level of both
ordering and carrying costs.
2. ABC Analysis
A firm will maintain different types of inventories. It is hard to keep the
same degree of control on all the items. A firm should pay less attention only
to the items of highest value. Thus according to the value of the item, the firm
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should classify inventories. The firm should be selective in his approach for
the controlled investment on inventories.
This analytical approach is called ABC analysis. This measures the
importance of each item’s value. “A items” classifies the high-value items
which forms the tightest control. “C items” represent the items with less value
under simple control. Items will fell between tightest and simple control is “B
items”.
CASH MANAGEMENT
Cash is the other important current asset in business operations. Cash is
one of the most liquid assets.
It forms the important part in day-to-day
business operations. Generally, cash is referred to as life blood of business
enterprises. Cash refers to coins, currency, the firm’s cheques and balances in
its bank accounts.
Objectives of cash management
We have already seen the important of current assets. Excessive cash in
business operations, may lead to the destruction of the profitability. If more
cash balance is held in banks and other financial institutions, it affects the
profitability. So the main objectives of cash management are,
1. To minimise the amount locked up as cash balance.
2. To meet the cash payment requirements regularly.
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TECHNIQUES USED FOR CASH MANAGEMENT
 Lock box system
Lock Box system is another method of reducing mail processing and
collecting time. A Lock Box acts like a post office box which works under the
control of a bank. The lock box services, provided by the bank, collect the
mail and deposits the cheques straightly into the firm’s account. As these
boxes are geographically located, it helps the customers to transact the mail in
a much less time. The intermediate local bank transfers the mail from the box
to the firm’s account.
 Concentration banking
This is one of the techniques used by cash management. Normally most
of the firms have several braches in various places. The firm will select any
one or two branches as its collection centers. Normally, this collection center
will be situated in the center of the city.
These collection centers collect the amount from the debtors and hold
the amounts in local banks. These local banks transfer the money as early as
possible to the central bank account of the company.
It is one of the useful techniques to collect the account receivable very
easily.
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Working Capital Finance
Funds available for a period of one year or less are called short –term
finance. In India, short-term funds are used to a finance working capital.
Three sources of short-term finance are 1) Trade credit 2) Bank borrowing
and 3) Commercial banking.
1. Trade Credit
Trade credit refers to the credit given to the customers from supplies of
goods in the normal form of business. As a result, the buyers don’t need to pay
cash immediately for the purchases note from the organizations. Trade credit
forms the major source of financing for firms
In India, it contributes about one-third of the short-term financing trade
credit act as a source of finance for the small firms, because they find it
difficult to raise funds from banks or other sources in the capital markets
Trade credit is mainly an informal arrangement and it forms on an open
account basis. The supplier will send the goods to the buyer on credit, while
the buyer accepts and agree to pay the amount his sales in time. But the buyer
will not formally call himself as a debtor
He will not sign any legal instrument once the mutual confidence and
mutual links is established. A regular activity will be periodically reviewed by
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the supplier. Open account trade credit will appear like sundry creditor on the
buyers balance.
Trade credit may also take the form of bills payable, when the buyer
signs a bill, which is a negotiable instrument to obtain trade credit. It will
appear on the buyers balance shelf as like the bills payable.
The further date for the bill is debited and it is usually used only when
buyer cannot pay the amount or when the supplier wants cash discount bill
form a bank. The bill is the form of acknowledgement for the buyer to replay
the amount.
2. Bank Finance
The main institutional sources of working capital finance in India are
the banks. After trade credit, bank credit forms the next important source of
financing working capital requirements of firms in India. To determine the
working capital requirements, a bank will consider a firms sale and production
plans and the desirable levels of current assets.
The amount approved by the bank for the firms working capital is
called credit limit. Credit limit is the maximum fund which a firm can obtain
from the banking system.
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If a firm undergoes any seasonal business, banks will fix separate limits
for the ‘peak level’ credit requirements and “normal non-peak level” credit
requirements.
This will indicate the period during which the separate limits will be
utilized by the borrower generally based on the principle called conservation
to ensure security.
If the margin requirement is 30 percent, then the bank will lend only
upto 70 percent, even if the value of the asset falls by 30percent.
Forms of bank finance
A Firm can draw funds from Bank through following forms
1) Over draft
2) Cash credit
3) Bills purchasing or discounting
4) Working capital loan
Over draft
In this facility, the borrower is allowed to withdraw his funds in excess
of the balance in his current account. This is done upto a certain specified limit
during a course of time.
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Cash credit
The cash credit facility is less similar to the overdraft arrangement. In
cash credit facility, a borrower will be allowed to withdraw funds from the
bank upto the sanctioned credit. The cash can be draw periodically to the
extent of his requirements and can reply by depositing surplus funds in his
cash credit account
Purchase or discounting of bills
Under the purchase or discounting of bills a borrower can obtain credit
from a bank against its bills. The bank purchases or discounts the borrower’s
bills. The amount, provided under this agreement is covered with the overall
cash credit or overdraft limit.
Letter of Credit
Foreign suppliers will insist the buyer bank to make the payment if the
buyer fails to pay the amount. This is done through a letter of credit
arrangement.
Working capital loan
A borrower may sometime require loan specifically or temporarily with
excess of sanctioned credit limit to meet a critical situations.
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Security to the loans in banks
Normally banks will not provide working capital finance without
adequate security. The four kinds of secured loans by banks are
1) Hypothecation 2) Pledge 3) Mortgage and 4) Lien.
3. Commercial paper
Commercial paper is an important market instrument in developed
countries like USA, to raise short-term funds. Commercial paper, in advanced
Countries, is a form of unsecured promissory note given by the firms to raise
the short-term funds. USA, the commercial paper market acts like a blue chip
market.
Here financially sound and higher rated companies are able to issue
commercial papers. The buyers of commercial papers include banks, insurance
companies, unit trusts and firms, the firms have excessive funds to invest for a
short period with low risk. In India, the issue of commercial papers is
regulated by Reserve Bank of India
NEED FOR THE STUDY
The study on “Working Capital Management in Tube Investments
of India Limited, Chennai” by the researcher will be conducted in the
Finance and Accounts department of Tube Investments of India Limited,
Chennai. The research had done by taking the past ten years annual report
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(2001-2002 to 2010-2011) to find out the effectiveness of Receivables
Management,
Payables
Management,
Cash
Management,
Inventory
Management and Current Liabilities Management as well as to find out the
Liquidity, Capital Structure Position of the company through ratio analysis,
common size and Comparative Analysis.
The main objective of the study is to find out the present and future
working capital requirement of the company. The study will be undertaken
with certain objectives to solve the financial problems and working capital and
the prevention of problem arising in future period which is useful for effective
management of the working capital, receivables, payables and current
liabilities management.
SCOPE OF THE STUDY
In this study The Tube Investments of India Limited has been selected
to conduct a study on the comprehensive working capital management with
the help of financial statement analysis, such as ratio analysis in terms of
liquidity ratio, profitability ratio, leverage ratio and capital structure ratio,
comparative statement analysis, common size statement analysis, cost volume
profit analysis.
The study of The Tube Investments of India Limited has been
undertaken with certain objectives by highlighting the unique features,
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functions and
working as well as statutory regulations governing
the
company.
OBJECTIVES OF THE STUDY
Primary Objectives
The main aim of the study is to ascertain effectiveness of Working
Capital Management in the Tube Investment of India Limited for the past ten
years financial statement for the period from 2001-2002 to 2010-2011. An
attempt has been made to examine the Working Capital Management like
Receivables Management, Cash Management, Inventory Management Current
Liability Management, Payable Management, and Schedule of changes in
Working Capital position.
Secondary Objectives

To asses the working capital position of the company for ten years
(2001-2002 to 2010-2011).

To find out liquidity, solvency, leverage, profitability and inventory
position of the company.

To find out effectiveness of inventory management.

To find out the effectiveness of receivable and payable management.

To identify the experience of the company in the area of working
capital and to take measures for improving the working capital.
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RESEARCH METHODOLOGY
This study covers a deep analysis of the company’s working capital
funding. For this purpose both primary and secondary data were used.
Primary data
This study will be extensively covered using unstructured interviews,
informal discussions and observations to collect the required information from
the concerned person in charge.
Secondary Data
This study will be extensively used pre-existing data compiled from
published annual financial statements of Tube Investments of India Limited,
third party hosted web sites, magazines & year books, Published balance
sheets, P&L a/c, cash flow statements, and fund flow statements.
The research studies made by various agencies, universities & the
study carried out by technical journals & magazines were also taken into
considerations. This study has extensively drawn upon the ways & means of
descriptive research together appropriate details for its successful completion.
STATISTICAL TOOLS USED
1. Ratio Analysis
2. Comparative and Common size Statement Analysis
3. Trend Analysis
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4. Statement of schedule of changes in working capital
5. Working Capital Management
 Receivables Management
 Inventory Management
 Cash Management
 Payable Management
6. Cash Flow Statement
CHAPTER SCHEME
CHAPTER I
INTRODUCTION
CHAPTER II
CONCEPTS AND REVIEW OF LITERATURE
CHAPTER III
PROFILE OF THE STUDY AREA
CHAPTER IV
DATA ANALYSIS AND INTERPRETATION
CHAPTER V
FINDINGS, SUGGESTIONS AND CONCLUSION