Working Capital Management

LOVELY PROFESSIONAL UNIVERSITY
DEPARTMENT OF MANAGEMENT
Report on Summer Training

WORKING CAPITAL MANAGEMENT
Of
Private ltd
Submitted to
Lovely Professional University
In partial fulfillment of the

Requirements for the award of Degree of
Master of Business Administration
Submitted by:
Abhishek Sharma
10804312.
DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA
(2009)
1
PREFACE
In today’s era of cut throat competition MBA’s are sure to have an edge over their counter parts.
During post graduation in master of business administration program, Students comes direct
contact with the real corporate world through the industrial training. An MBA program provides
its students with an in-depth study of various managerial activities that are performed in any
organization.
A detailed research/analysis of managerial activities conducted in various departments like

finance, marketing, human resources, production, credit management department etc. gives the
student the conceptual idea of what they are expected to manage and how to manage and how to
obtain the maximum output through minimum inputs of resources available and how to minimize
the wastage of resources.
As MBA students, I have taken our industrial training in SARASWATI DYNAMICS PVT
LTD ROORKEE.
(Abhishek Sharma)
2
ACKNOWLEDGEMENT
Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped
me in completing this summer project to the best of my ability. Being a part of this project has
certainly been a unique and a very productive experience on my part.
I am really thankful to Mr. Amitabh Gupta (Director commercial) & Mr. Arun Sharma
(Account Manager) for making all kinds of arrangements to carry the project successfully and
for guiding and helping me to solve all kinds of quarries regarding the project work. His
systematic way of working and incomparable guidance has inspired the pace of the project to a
great extent.
I would also like to thank my mentor and project – coordinator, Mr.Rajveer Gupta, (Finance &
Accounts) for assigning me a project of such a great learning experience and acquainting me
with real life project financing and appraisal.
I am very grateful to Mr. Rohit Duggal of LPU, Phagwara and very thankful for their useful
guidance and advise.
Last but not least I would like to thank all the employees of Saraswati Dynamics pvt ltd. who
have directly or indirectly helped me with their moral support for the completion of my project.
(Abhishek Sharma)
3
INDEX
S.N PARTICULARS PAGE NO.

1 PREFACE 2
2 ACKNOWLEDGMENT 3
3 INTRODUCTION OF WORKING CAPITAL 6
4 DETERMINANT OF WORKING CAPITAL 9
5 WORKING CAPITAL COMPONENT 10
6 TYPES OF WORKING CAPITAL 14
7 SOURCES OF WORKING CAPITAL 15
8 SIGNIFICANCE OF WORKING CAPITAL 18
9 IMPORTANCE OF WORKING CAPITAL RATIO 19
10 BLUE PRINT OF GOOD WORKING CAPITAL POLICY 24
11 LITERATURE REVIEW 28
12 INDUSTRY OVERVIEW 33
13 COMPANY PROFILE 36
14 MANAGEMENT 38
15 RECENT ACHIVEMENT &MILESTONE 39
16 MISSION & VISION 40
17 PRODUCT RANGE 41
18 IMAGES OF SARASWATI DYNAMICS 45
19 QUALITY OUTLOOK 49
20 OBJECTIVE & OBLIGATION 50
21 SWOT ANALYSIS 51
22 SATEMENT SHOWING CAHANGE IN W.C. 54
23 CALCULATION OF WORKING CAPITAL 55
24 VARIOUS COMPONENETS OF WORKING CAPITAL 56
25 WORKING CAPITAL RATIOS & ANALYSIS 66
26 OPERATING CYCLE 77
27 RESARCH METHODOLOGY 87
28 CONCLUSION,MAJORFINDING,SUGGESTION 91
29 APPENDIX 94
30 BIBLIOGRAPHY
4
5
An Introduction To Working Capital Management
“Working capital means the part of the total assets of the business that change from
one form to another form in the ordinary course of business operations.”
In a perfect world, there would be no necessity for current assets and liabilities because there
would be no uncertainty, no transaction costs, information search costs, scheduling costs, or
production and technology constraints. The unit cost of production would not vary with the
quantity produced. Borrowing and lending rates shall be same. Capital, labour, and product
market shall be perfectly competitive and would reflect all available information, thus in such an
environment, there would be no advantage for investing in short term assets.
However the world we live is not perfect. It is characterized by considerable amount of
uncertainty regarding the demand, market price, quality and availability of own products and
those of suppliers. There are transaction costs for purchasing or selling goods or securities.
Information is costly to obtain and is not equally distributed. There are spreads between the
borrowings and lending rates for investments and finanancings of equal risks. Similarly each
organization is faced with its own limits on the production capacity and technologies it can
employ there are fixed as well as variable costs associated with production goods. In other
words, the markets in which real firm operated are not perfectly competitive.
These real world circumstances introduce problem’s which require the necessity of maintaining
working capital. For example,, an organization may be faced with an uncertainty regarding
availability of sufficient quantity of crucial imputes in future at reasonable price. This may
necessitate the holding of inventory, current assets. Similarly an organization may be faced with
an uncertainty regarding the level of its future cash flows and insufficient amount of cash may
incur substantial costs. This may necessitate the holding of reserve of short term marketable
securities, again a short term capital asset. In corporate financial management, the term Working
capital management” (net) represents the excess of current assets over current liabilities.
Concept of working capital:-

The word working capital is made of two words 1.Working and 2. Capital
The word working means day to day operation of the business, whereas the word capital means
monetary value of all assets of the business.
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Working capital: -
Working capital may be regarded as the life blood of business. Working capital is of major
importance to internal and external analysis because of its close relationship with the current
day-to-day operations of a business. Every business needs funds for two purposes.
* Long term funds are required to create production facilities through purchase of fixed assets
such as plants, machineries, lands, buildings & etc
* Short term funds are required for the purchase of raw materials, payment of wages, and other
day-to-day expenses.
. It is otherwise known as revolving or circulating capital
It is nothing but the difference between current assets and current liabilities. i.e.
Working Capital = Current Asset – Current Liability.
Businesses use capital for construction, renovation, furniture, software, equipment, or machinery.
It is also commonly used to purchase inventory, or to make payroll. Capital is also used often by
businesses to put a down payment down on a piece of commercial real estate. Working capital is
essential for any business to succeed. It is becoming increasingly important to have access to
more working capital when we need it.
In simple words working capital is the excess of current Assets over current liabilities. Working
capital has ordinarily been defined as the excess of current assets over current liabilities.
Working capital is the heart of the business. If it is weak business cannot proper and survives. Sit
is therefore said the fate of large scale investment in fixed assets is often determined by a
relatively small amount of current assets. As the working capital is important to the company is
important to keep adequate working capital with the company. Cash is the lifeline of company. If
this lifeline deteriorates so does the company’s ability to fund operation, reinvest do meet capital
requitrents and payment. Understanding Company’s cash flow health is essential to making
investment decision. A good way to judge a company’s cash flow prospects is to look at its
working capital management. The company must have adequate working capital as much as
needed by the company. It should neither be excessive or nor inadequate. Excessive working
capital cuisses for idle funds laying with the firm without earning any profit, where as inadequate
working capital shows the company doesn’t have sufficient funds for financing its daily needs
working capital management involves study of the relationship between firm’s current assets and
current liabilities. The goal of working capital management is to ensure that a firm is able to
continue its operation. And that is has sufficient ability to satisfy both maturing short term debt
7
and upcoming operational expenses. The better a company managers its working capital, the less
the company needs to borrow. Even companies with cash surpluses need to manage working
capital to ensure those surpluses are invested in ways that will generate suitable returns for
investors.
The primary objective of working capital management is to ensure that sufficient cash is
available to”
Meet day to day cash flow needs.

Pay wages and salaries when they fall due
Pay creditors to ensure continued supplies of goods and services.
Pay government taxation and provider of capital – dividends and
Ensure the long term survival of the business entity.
Concept of working capital
• Gross Working Capital = Total of Current Asset

• Net Working Capital = Excess of Current Asset over Current Liability
Current Assets Current Liabilities

• Cash in hand / at bank • Bills Payable
• Bills Receivable • Sundry Creditors
• Sundry Debtors • Outstanding expenses
• Short term loans • Accrued expenses
• Investors/ stock • Bank Over draft
• Temporary investment
• Prepaid expenses
• Accrued incomes
8
Determinants of working capital
Working capital requirements of a concern depends on a number of factors, each of which should
be considered carefully for determining the proper amount of working capital. It may be however
be added that these factors affect differently to the different units and these keeps varying from
time to time. In general, the determinants of working capital which re common to all
organization’s can be summarized as under:
Nature of business
Need for working capital is highly depends on what type of business, the firm in. there are
trading firms, which needs to invest a lot in stocks, ills receivables, liquid cash etc. public
utilities like railways, electricity, etc., need much less inventories and cash. Manufacturing
concerns stands in between these two extends. Working capital requirement for manufacturing
concerns depends on various factors like the products, technologies, marketing policies.
Production policies
Production policies of the organization effects working capital requirements very highly.
Seasonal industries, which produces only in specific season requires more working capital . some
industries which produces round the year but sale mainly done in some special seasons are also
need to keep more working capital.
Size of business
Size of business is another factor to determines the need for working capital
Length of operating cycle.

Operating cycle of the firm also influence the working capital . longer the orating cycle, the
higher will be the working capital requirement of the organization.
Credit policy
Companies; follows liberal credit policy needs to keep more working capital with them.
Efficiency of debt collecting machinery is also relevant in this matter. Credit availability form
suppliers also effects the company’s working capital requirements. A company doesn’t enjoy a
liberal credit from its suppliers will have to keep more working capital
9
Business fluctuation
Cyclical changes in the economy also influence the level of working capital. During boom
period, the tendency of management is to pile up inventories of raw materials and finished goods
to avail the advantage of rising prove. This creates demand for more capital. Similarly, during
depression when the prices and demand for manufactured goods. Constantly reduce the industrial
and trading activities show a downward termed. Hence the demand for working capital is low.
Current asset policies.

The quantum of working capital of a company is significantly determined by its current assets.
Policies. A company with conservative assets policy may operate with relatively high level of
working capital than its sales volume. A company pursuing an aggressive amount assets policy
operates with a relatively lower level of working capital.
Fluctuations of supply and seasonal variations

Some companies need to keep large amount of working capital due to their irregular sales and
intermittent supply. Similarly companies using bulky materials also maintain large reserves’ of
raw material inventories. This increase the need of working capital . some companies
manufacture and sell goods only during certain seasons. Working capital requirements of such
industries will be higher during certain season of such industries period.
Other factors
Effective co ordination between production and distribution can reduce the need for working
capital . transportation and communication means. If developed helps to reduce the working
capital requirement/.
Working capital in terms of five components:
1. Cash and equivalents: - This most liquid form of working capital requires constant
supervision. A good cash budgeting and forecasting system provides answers to key questions
such as: Is the cash level adequate to meet current expenses as they come due? What is the
timing relationship between cash inflow and outflow? When will peak cash needs occur? When
and how much bank borrowing will be needed to meet any cash shortfalls? When will repayment
be expected and will the cash flow cover it?
2. Accounts receivable: - Many businesses extend credit to their customers. If you do, is the
amount of accounts receivable reasonable relative to sales? How rapidly are receivables being
10
collected? Which customers are slow to pay and what should be done about them?
3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it

requires continual scrutiny. Is the inventory level reasonable compared with sales and the nature
of your business? What's the rate of inventory turnover compared with other companies in your
type of business?
4. Accounts payable:- Financing by suppliers is common in small business; it is one of the

major sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable
relative to what you purchase? What is your firm's payment policy doing to enhance or detract
from your credit rating?
5. Accrued expenses and taxes payable: - These are obligations of your company at any given
time and represent a future outflow of cash.
Two different concepts of working capital are:-
• Balance sheet or Traditional concept

• Operating cycle concept.
Balance sheet or Traditional concept:- It shows the position of the firm at certain point of time. It
is calculated in the basis of balance sheet prepared at a specific date. In this method there are two
type of working capital:-
• Gross working capital

• Net working capital
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Gross working capital:- It refers to the firm’s investment in current assets. The sum of the current
assets is the working capital of the business. The sum of the current assets is a quantitative aspect of
working capital. Which emphasizes more on quantity than its quality, but it fails to reveal the true
financial position of the firm because every increase in current liabilities will decrease the gross
working capital
Net working capital:- It is the difference between current assets and current liabilities or the excess
of total current assets over total current liabilities.
Working capital= current assets - current liabilities.
Net working capital: - It is also can defined as that part of a firm’s current assets which is financed
with long term funds. It may be either positive or negative. When the current assets exceed the
current liability, the working capital is positive and vice versa.
Operating cycle concept:- The duration or time required to complete the sequence of events
right from purchase of raw material for cash to the realization of sales in cash is called the
operating cycle or working capital cycle.
12
RAW
CASH
MATERIAL
OPERATING CYCLE
DEBTORS &
WORK IN
BILLS
PROGRESS
RECEIVABLES
SALES FINISH GOODS
Each component of working capital (namely inventory, receivables and payables) has two
dimensions TIME and MONEY. When the comes to managing working capital TIME IS
MONEY. If you can get money to move fester around the cycle (collect monies due from debtors
more quickly) or reduce the amount of money tied up (i.e.., reduce inventory level relative to
sales). The business will generate more cash or it will need to borrow less money to fund
working capital. As a consequence, you could reduce the cost of bank interest or you will have
additional freee4 money available to support addition sales growth or investment. Similarly, if
you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit
limit, you festively create freed finance to help fund future sales a perusal of operational cycle
reveals that the cash invested in operations are recycled back in to cash. However it takes time to
reconvert the cash. Cash flows in cycle into around and out of a business it the business’s
lifeblood and every manager’s primary task to help keep it flowing and to use the cash flow to
generate profits. The shorter the period of operating cycle the larger will be the turnover of the
funds invested in various purposes.
13
Types of Working Capital:-
TYPES OF
WORKING
CAPITAL
ON THE BASIS ON THE BASIS

OF B/S CONCEPT OF TIME
GROSS REGULAR TEMPORARY

NET WORKING
WORKING WORKING WORKING
CAPITAL
CAPITAL CAPITAL CAPITAL
SEASONAL
WORKING
CAPITAL
SPECIFIC
WORKING
CAPITAL
14
Kinds of working capital
Working capital can be put in two categories:
1) fixed or permanent working capital and
2) fluctuating or temporary working capital
Fixed or permanent working capital

The volume of investment in current assets an change over a period of time. But always there is
minimum level of current assets that must be kept in order to carry on the business. This is the
irreducible minimum amount needed for maintaining the operating cycle. It is the investment in
current assets. This is permanently locked up in the business and therefore known as permanent
working capital.
Variable/temporary working capital

It is the volume of working capital. This is needed over and above the fixed working capital in
order to meet the unforced market changes and contingencies. In other words any amount over
and about the permanent level of working capital is variable or fluctuating working capital . this
type of working capital is generally financed from short ter souse of finance such as bank credit
because this amount is not permanently required and is usually paid back during off season or
after the contingency.
Sources of working capital
The company can choose to finance its current assets by
Long term sources

Short term sources
A combination of them. Long term sources of permanent working capital include equity and
preference shares, retained earnings, debentures and other long term debts from public deposits
and financial institution. The long term working capital needs should meet through long term
means of financing. Financing through long term means provides stability, reduces risk or
payment. And increases liquidity of the business concern. Various types of long term sources of
working capital are summarized as follow
Issue of shares
It is the primary and most important sources of regular or permanent working capital. Issuing
equity shares as it does not create and burden on the income of the concern. Nor the concern is
obliged to refund capital should preferably raise permanent working capital.
15
Retained earnings
Retained earnings accumulated profits are a permanent sources of regular working capital. It is
regular and cheapest. It creates not charge on future profits of the enterprises.
Issue of debentures
It creates a fixed charge on future earnings of the company. Company is obliged to pay interest.
Management should make wise choice in procuring funds by issue of debentures.
Long term debt

Company can raise fund from accepting public deposits, debts from financial institutions like
banks, corporations etc. the cost is higher than the other financial tools.
Other sources sale of idle fixed assets, securities received from employees and customers are
examples of other sources of finance.
Short term sources of temporary working capital
Temporary working capital is required to meet the day to day business expenditures. The
variable working capital would finance from short term sources of funds. And only the period
needed. it has the benefits of ,low cost and establishes closer relationships with banker.
Some sources of temporary working capital are given below;
Commercial bank
A commercial bank constitutes a significant sources for short term or temporary working capital
this will be in the form of short term loans, cash credit, and overdraft and though discounting the
bills of exchanges.
Public deposits
Most of the companies in recent years depends on this sources to meet their short term working
capital requirements ranging fro six month to three years.
Various credits
Trade credit, business credit papers and customer credit are other sources of short term working
capital. Credit from suppliers, advances from customers, bills of exchanges, promissnotes, etc
helps to raise temporary working capital
Reserves and other funds
Various funds of the company like depreciation fund. Provision for tax and other provisions kept
with the company can be used as temporary working capital.
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The company should meet its working capital needs through both long term and short term
funds. It will be appropriate to meet at least 2/3 of the permanent working capital equipments
form long term sources, whereas the variables working capital should be financed from short
term sources. The working capital financing mix should be designed in such a way that the
overall cost of working capital is the lowest, and the funds are available on time and for the
period they are really required.
SOURCES OF ADDITIONAL WORKING CAPITAL
Sources of additional working capital include the following
Existing cash reserves

Profits (when you secure it as cash)
Payables (credit from suppliers)
New equity or loans from shareholder
Bank overdrafts line of credit
Long term loans
If you have insufficient working capital and try to increase sales, you can easily over stretch the
financial resources of the business. This is called overtrading. Early warning signs include
Pressure on existing cash Exceptional cash generating activities. Offering high discounts for
clear cash payment Bank overdraft exceeds authorized limit Seeking greater overdrafts or lines
of credit Part paying suppliers or there creditor. Management pre occupation with surviving
rather than managing.
17
SIGNIFICANCE OF WORKING CAPITAL:-
PAYMENT
TO
SUPPLIERS
EASY LOAN DIVIDEND

FROM DISTRIBUTI-
BANKS ON
SIGNIFICAN-
-CE OF
WORKING
CAPITAL
INCREASE
INCREASE
DEBT
EFFECIENC-Y
CAPACITY
INCREASE IN
FIX ASSETS
18
The prime objective of the company is to obtain maximum profit thought the business. The
amount of profit largely depends upon the magnitude of sales. However the sale does not convert
into cash instantaneously. There is always a time gap between sale of goods and receipt of cash.
The time gap between the sales and their actual realization in cash is technically termed as
operating cycle. Additional capital required to have uninterrupted business operations, and the
amount will be locked up in the current assets. Regular availability of adequate working capital
is inevitable for sustained business operation. If the proper fund is not provided for the purpose,
the business operations will be effected. And hence this part of finance to be managed well.
Factors requiring consideration while estimating working capital.
• The average credit period expected to be allowed by suppliers.

• Total costs incurred on material, wages.
• The length of time for which raw material are to remain in stores before they are
issued for production.
• The length of the production cycle (or) work in process.
• The length of sales cycle during which finished goods are to be kept waiting for
sales.
• The average period of credit allowed to customers
• The amount of cash required to make advance payment
Importance of Working Capital Ratios
Ratio analysis can be used by financial executives to check upon the efficiency with which
working capital is being used in the enterprise. The following are the important ratios to measure
the efficiency of working capital. The following, easily calculated, ratios are important measures
of working capital utilization.
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Formulae Result Interpretation
Stock Average Stock * = x days On average, you turn over the value of your entire stock
Turnover 365/ every x days. You may need to break this down into
(in days) Cost of Goods Sold product groups for effective stock management.
Obsolete stock, slow moving lines will extend overall
stock turnover days. Faster production, fewer product
lines, just in time ordering will reduce average days.
Receivables Debtors * 365/ = x days It takes you on average x days to collect monies due to
Ratio Sales you. If your official credit terms are 45 day and it takes
(in days) you 65 days. One or more large or slow debts can drag
out the average days. Effective debtor management will
minimize the days.
Payables Creditors * 365/ = x days On average, you pay your suppliers every x days. If you
Ratio Cost of Sales (or negotiate better credit terms this will increase. If you pay
(in days) Purchases) earlier, say, to get a discount this will decline. If you
simply defer paying your suppliers (without agreement)
this will also increase - but your reputation, the quality of
service and any flexibility provided by your suppliers may
suffer.
Current Ratio Total Current = x times Current Assets are assets that you can readily turn in to
Assets/ cash or will do so within 12 months in the course of
Total Current business. Current Liabilities are amount you are due to
Liabilities pay within the coming 12 months. For example, 1.5 times
means that you should be able to lay your hands on
$1.50 for every $1.00 you owe. Less than 1 times e.g.
0.75 means that you could have liquidity problems and
be under pressure to generate sufficient cash to meet
oncoming demands.
Quick Ratio (Total Current = x times Similar to the Current Ratio but takes account of the fact
Assets - Inventory)/ that it may take time to convert inventory into cash.
Total Current
Liabilities
Working (Inventory + As % A high percentage means that working capital needs are
Capital Ratio Receivables - Sales high relative to your sales.
Payables)/
Sales
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Advantages of adequate working capital
Adequate working capital provides certain benefits to the company they are:
1 increase in debt capacity and goodwill
Adequate working capital represents the financial soundness of the company. If one company
is financially sound it would be able to pay its creditors timely and properly. It will increase
companies’ goodwill. It crests confidence among investors and creditors. Thus a firm with
adequate working capital can raise requisite funds from market, borrow short term credit
form banks, and purchases inventories of raw material etc., for the smooth operations of its
business.
Increase in production inefficiency
With adequate working capital the firm can smoothly carryout research and development
actives and thus adds to it production efficiency.
Exploitation of favorable opportunities

In the presence of adequate working capital, a company can avail the benefits of favorable
opportunities. Adequate working capital will help the company to have bulk purchases,
seasonal storage of raw material etc., which would reduce the cost of production, thus adds to
its profit.
Meeting contingencies adverse changes:

A company can easily face certain business and economic crises a company having adequate
working capital can successfully meet contingencies such as business oscillations, financial
crisis arising from heavy losses etc.,
Available cash discount
Maintenance of adequate working capital enables a company to avail the advantage of cash
discount by making cash payment for to the suppliers of raw materials and merchandise.
Obviously it will reduce the cost of production and increase the profit of the company.
Solvency and efficiency fixed assets.
It helps to maintain the solvency of the company. So that payments could be made in time as
and when they fall due. Likewise, adequate working capital also increases the efficiency for
fixed assets insofar as their proper maintenance depends upon the availability of funds.
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Attractive dividend to shareholders
It enables the company to offer attractive dividend to the shareholders so that sense of
security and confidence will increase among them. It also increases the market values of its
shares.
Dangers of inadequate working capital
Having inadequate working capital les to so many of dangers as it doesn’t fulfill its purpose.
Some are given below:
Loss of goodwill and creditworthiness

As the firm fails to on or its current liabilities it loses it goodwill and creditworthiness among
its creditors. Consequently, the firm finds it difficult to procure the requisite funds for its
business operations on easy terms, which ultimately results in reduced profitability as well as
production interruption.
Firm can’t make use of favorable opportunities
The firm fails to undertake the profitable projects, which not only prevent the fir from
availing the benefits of favorable opportunities but also stagnate its growth.
Adverse effects of credit opportunities

The firm also fails to avail the attractive credit opportunities but also stagnate its growth
Operational inefficiencies
In leads the company to operating inefficiencies, as day to day commitments cannot be met.
Effects on financial capacity

Inadequacy of working capital also weakness the shock absorbing capacity of the firm
because it cannot meet the contingencies arising form business oscillations, financial losses,
due to shortage of working capital.
Non achievement of profit target
The firm cannot implement operational plans due to unavailability of fund. This will lead to
non achievement of profit margin.
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Dangers of redundant working capital
As the inadequate working capital is dangerous to the firm, redundant working capital also
brings hazardous condition in to the company. Let us discuss the dangers of redundant
working capital to the company.
Low rate of return on capital

Excessive or redundant working capital implies the presence of idle funds that earn no profit
to the firm. So it cannot earn a proper rate of return on its total investments, whereas profits
are distributed on its total investment, whereas profits are distributed on the whole of its
capital.
Decline in capital and efficiency
Since the rate of return on capital is low the company tempts to make some adjustment to
inflate profit to increase the dividend. Sometimes these unearned dividends paid out of the
company’s capital to keep up the show of prosperity by window dressing of accounts.
Certain provision, such as provision for depreciation, repairs and renewals are into made.
This leads to decline in operating efficiency of the firm.
Loss of goodwill and confidence.
Lower rate of return leads to lower dividend available to share holder. This leads to down fall
in market value of the company’s share and markets the shareholder lose their confident in
company.
Evils of over capitalization
Excessive working capital is often responsible for giving berth to the situation of
overcapitalization in the company with all its evils. Over capitalizations is not only disastrous
to the smooth survival of the company but also interests of those associated with the
company.
Destruction of turnover ratio
It destructs the control over turnover ratio. This is commonly used in the conduct of an
efficient business.
It is evident from the foregoing discussion that a company must have adequate working
capital pursuant to its requirements. It should neither be excessive not inadequate. Both
situations are dangerous. While inadequate working capital adversely affects the business
operations and profitability. Excessive working capital remains idle and earns no profits for
the company. So company must assure its working capital is adequate for its operations.
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Blueprint for a good working capital management policy
General action
Set planning standards for stock days. Debtor days and creditor’s days.
Having set planning standards (as above) KEEP TO THEM. Impress on staff that these
targets are just important operating budgets and standards cost.
Instill an understanding amongst the staff that working capital management produces profits.
Action on stocks
Keep stock levels as low as possible, consistent with not running out of stock and not
ordering stock in uneconomically small quantities. “just in time” stock management is fine,
as long as it is “just in time” and never fails to deliver on time.
Consider keeping stock in suppliers warehouses drawing on its as needed and saving
warehousing cost.
Action on debtors /customers

Assess ALL significant new customers for their ability to pay. Take references, examine
account , and ask around. Try not to take on new customers who would be poor payers.
Re assess ALL significant customers periodically. Stop supplying existing customers who are
poor payers, you may lose sales, but you are after QUALITY of business rather than
QUANTITY of business. Sometimes poor paying customers suddenly (and magically!!) find
cash to settle invoices if their supplies are being cut off. If customers can’t pay / won’t pay
let your competitor have them. Give your competitor a few more problems.
Consider factoring sales invoices the extra cost may be worth it in terms of quick payment of
sales revenue, less debtor administration and more time to carry out your business (rather
than spend time chasing debts)
Consider offering discounts for prompt settlement of invoices, but only if the discounts are
lower than the costs of borrowing the money owed from other sources.
Action on creditors
Do NOT pay invoices too early take advantage of credit offered by suppliers it’s free!!
Only pay early if the supplier is offering a discount. Even then, consider this to be an
investment. Will you get a better return by using working capital to settle the invoice and
take the discount than by investing the working capital in some other way?
Establish a register of creditors to ensure that creditors are paid on the correct date not earlier
an not later.
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THE CONCEPT OF ZERO WORKING CAPITAL
In today’s world of intense global competition, working capital management is receiving

increasing attention from managers striving for peak efficiency the goal of many leading
companies today, is zero working capital. Proponent of the zero working capital concept
claims that a movement toward this goal not only generates cash but also speeds up
production and helps business make more timely deliveries and operate more efficiently. The
concept has its own definition of working capital: inventories+ receivables- payables. The
rational here is (I) that inventories and receivables are the keys to making sales, but (II) that
inventories can be financed by suppliers through account payables.
Companies use about 20% of working capital for each sale. So, on average, working capital
is turned over five times per year. Reducing working capital and thus increasing turnover has
two major financial benefits. First every money freed up by reducing inventories or
receivables, by increasing payables, results in a onetime contribution to cash flow. Second, a
movement toward zero working capital permanently raises a company’s earnings.
The most important factor in moving toward zero working capital is increased speed. If the
production process is fast enough, companies can produce items as they are ordered rather
than having to forecast demand and build up large inventories that are managed by
bureaucracies. The best companies delivery requirements. This system is known as demand
flow or demand based management. And it builds on the just in time method of inventory
control.
Clearly it is not possible for most firms to achieve zero working capital and infinitely
efficient production. Still, a focus on minimizing receivables and inventories while
maximizing payables will help a firm lower its investment in working capital and achieve
financial and production economies.
ESTIMATION OF WORKING CAPITAL MANGEMENT
As discussed above a number of factors are responsible for determining the amount of
working capital required by affirm. Let us know discuss the various methods/ technique used
in assessment of firm’s working capital requirements. These methods are.
1) Estimation of components of working capital method.
This method is based on the basic definition of working capitalizes, excess of current assets over
the current liabilities. In other word the amount of different constituent of the working capital
such as debtors, cash inventories, creditors etc are estimated separately and the total amount of
working capital requirement is worked out accordingly.
25
(ii) Percent sales method
This is the most simple and widely used method in combination with other scientific methods.
According to this method a ratio is determined for estimating the future working capital
requirement. This is the generally based on the past experience of management as the ratio varies
from industry to industry. For example if the past experience shows that the amount of working
capital has been 20% of sales and projected amount of sales for the next year is Rs 10 lakes, the
required amount of working capital shall be Rs Two lakh.
As seen from above the above method is merely an estimation based on past experience. Their
fore a lot depends on the efficiency of decision maker, which may not be correct in all
circumstances. Moreover the basic assumptions regarding linear relationship between sales and
the working capital may not hold well in all the cases. Therefore this method is not dependable
and not universally acceptable. At best, this method gives a rough idea about the working capital.
(iii) Operating cycle approach

The need of working capital arises mainly because of them gap between the production of goods
and their actual realization after sales. This gap is technically referred as the “operating cycle” or
the “cash cycle” of the business. If it were possible to complete the entire job instantaneously,
there would be no need for current asset (working capital) but since it is not possible, every
business organization is forced to have current asset and hence operating cycle. It may be divided
into four stages.
1. Raw materials and stores storage space.

2. Work in process stage.
3. Finished goods inventory stage.
4. Debtor’s collection stage,
Duration of operating cycle
The duration of the operating cycle is equal to sum of the duration of these stages less the credit
period allowed by the suppliers of the firm. In symbol
OC= R+W+F+D—C
WHERE
OC= Duration of the Operating Cycle
R= Raw materials and storage space periods
W= work in process periods.
F= finished goods storage periods
D= debtor collection period
C= Creditors collection period.
26
The component of the operating cycles has already been calculated in “ratio
Analysis” which is as follow.
R= average stock of raw material

---------------------------------
Average raw material consumption per day
F= Average stock of stores

---------------------------------------------
Average stores consumption per day
W= average work in process inventory

---------------------------------------------------
Average cost of production per day
D= average book debts

---------------------------------------------------
Average credit sales per day
C= ` average trade credit

----------------------------------------------------
Average trade credit purchase per day
27
28
Impact of Working Capital Management Policies on Corporate Performance—An
Empirical Study
Sushma Vishnani, Bhupesh Kr. Shah (2007)
It is felt that there is the need to study the role of working capital management policies on
profitability of a company. Conventionally, it has been seen that if a company desires to take a
greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its
sales. If it is interested in improving its liquidity, it increases the level of its working capital.
However, this policy is likely to result in a reduction of the sales volume, therefore of
profitability. Hence, a company should strike a balance between liquidity and profitability. In this
paper an effort has been made to make an empirical study of Indian Consumer Electronics
Industry for assessing the impact of working capital policies & practices on profitability during
the period 1994–95 to 2004–05. The impact of working capital policies on profitability has been
examined by computing coefficient of correlation and regression analysis between profitability
ratio and some key working capital policy indicator ratios.
Working Capital Management: A Study on British American

Tobacco Bangladesh Company Ltd.
Md. Sayaduzzaman (2007)
The efficiency of working capital management of British American Tobacco Bangladesh

Company Ltd. is highly satisfactory due to the positive cash inflows, planned approach in
managing the major elements of working capital. Applications of multi-dimensional models of
current assets mix may have positive impact on the continuous growth & development of this
multinational enterprise. This depends on co-operation of the stakeholders and business
environment in the context of globalization.
29
The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey
F. Samiloglu and K. Demirgunes (2008)
The aim of this study is to analyze the effect of working capital management on firm
profitability. In accordance with this aim, to consider statistically significant relationships
between firm profitability and the components of cash conversion cycle at length, a sample
consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-
2007 has been analyzed under a multiple regression model. Empirical findings of the study show
that accounts receivables period, inventory period and leverage affect firm profitability
negatively; while growth (in sales) affects firm profitability positively.
Working Capital Management, Growth and Performance of New Public Companies
By Beneda, Nancy, Zhang, Yilei (2008)
The current study contributes to the literature by examining impact of working capital
management on the operating performance and growth of new public companies. The study also
sheds light on the relationship of working capital with debt level, firm risk, and industry. Using a
sample of initial public offerings (IPO's), the study finds a significant positive association
between higher levels of accounts receivable and operating performance. The study further finds
that maintaining control (i.e. lower amounts) over levels of cash and securities, inventory, fixed
assets, and accounts payables appears to be associated with higher operating performance, as
well. We find that IPO firms which are experiencing unusually high growth tend not to perform
as well as those with low to moderate growth. Further firms which are experiencing high growth
tend to hold higher levels of cash and securities, inventory, fixed assets, and accounts payables.
These findings tend to suggest that firms are willing to sacrifice performance (accept low or
negative operating returns) to increase their growth levels. The higher level of growth is also
associated with higher operating and financial risk. The findings of this study suggest that
perhaps IPO firms should stay more focused on their operating performance than on maintaining
high growth levels.
30
Working Capital and Financial Management Practices in the Small Firm Sector
Michael J. Peel ,Nicholas Wilson (2008)
MICHAELJ. PEEL IS A LECTURER IN accountancy and finance at Cardiff Business School,

University of Wales, and Nicholas Wilson is Professor of Credit Management at the University
of Bradford, England. Very little research has been conducted on the capital budgeting and
working capital practices of small firms. The purpose of this paper is to present the results of a
preliminary study on the working capital and financial management practices of a sample of
small firms located in the north of England. In general, the results of the survey indicated that a
relatively high proportion of small firms in the sample claimed to use quantitative capital
budgeting and working capital techniques and to review various aspects of their companies'
working capital. In addition, the firms which claimed to use the more sophisticated discounted
cash flow capital budgeting techniques, or which had been active in terms of reducing stock
levels or the debtors' credit period, on average tended to be more active in respect of working
capital management practices. It is hoped that the issues raised will stimulate further theoretical
and empirical contributions on this neglected and important area of small business research.
Study on working capital management
Stuttgart/Munich, June 29, 2009
Roland Berger Strategy Consultants study on working capital management: Optimizing current
assets helps tap into cash potential and build buffers against insolvency
• Our study entitled "Working capital – Cash for recovery" looks at 216 European
companies with total sales of EUR 3,700 billion and total EBIT of EUR 422 billion
• Presently, the insolvency risk is increasing as higher cash requirements coincide with
reduced cash supply and high financing costs
• Internal sources of finance are becoming more interesting: one of the main lever is
tapping into the cash potential in working capital
• The companies surveyed had a combined potential of EUR 353 billion in Q1 2009,
roughly one third more than in 2008
• Relative to tied-up working capital, utilities and engineered products companies have the
greatest cash reserves hidden in their working capital
In the current economic situation, companies are facing a higher risk of insolvency. On the one
hand, they need more cash; on the other, lenders are more tightfisted than usual and the financing
costs are higher. In its study entitled "Working capital – Cash for recovery", Roland Berger
Strategy Consultants has analyzed 216 European companies by taking a close look at their
31
internal sources of finance. The result? At the moment, releasing the cash reserves hidden in
working capital offers the greatest potential for improving liquidity. According to the Roland
Berger experts, the companies surveyed had a total cash potential of EUR 353 billion. This
turned out to be especially true for utilities and engineered products companies.
"In the current recession, working capital is emerging as a key source of internal finance," says
Roland Schwientek, Partner at Roland Berger's Operations Strategy Competence Center.
Increased cash requirements and a reduced cash supply with higher financing costs combine to
increase the likelihood of insolvency. In their study called "Working capital – Cash for
recovery", the experts highlight alternative sources of internal finance: "As some traditional
sources of cash have dried up, the most promising solution is to tap into the liquidity potential
hidden in working capital," says Schwientek. According to the experts, internal finance based on
optimized working capital is much more effective than external finance. Even small
improvements in receivables, inventories and payables can generate significant reductions in
external finance requirements.
EXAMPLE
A recent example of business attempting to maximize working capital management is the

recurrent attention being given to the application of Six Sigma® methodology. Six Sigma®
methodologies help companies measure and ensure quality in all areas of the enterprise. When
used to identify and rectify discrepancies, inefficiencies and erroneous transactions in the
financial supply chain, Six Sigma® reduces Days Sales Outstanding (DSO), accelerates the
payment cycle, improves customer satisfaction and reduces the necessary amount and cost of
working capital needs. There appear to be many success stories, including Jennifer Towne’s
(2002) report of a 15 percent decrease in days that sales are outstanding, resulting in an increased
cash flow of approximately $2 million at Thibodaux Regional Medical Center. Furthermore, bad
debts declined from $3.4 million to $600,000. However, Waxer’s (2003) study of multiple firms
employing Six Sigma® finds that it is really a “get rich slow” technique with a rate of return
hovering in the 1.2 – 4.5 percent range
32
33
Indian Electrical Industry
Prospects of the Indian Electric/Electronic industry
Like every other industrial sector in India, the Indian Electrical/Electronics Industry too is slowly
emerging from out of its "protective cover". For far too long has Indian Industry remained
shackled and consequently inward looking. Over the past fifty years there was no exposure to
global players and competition, with the result that the Industry grew up in a sheltered
environment, dependent on the Government for everything, from licenses to protection to tariffs.
Each one of these interventions was aimed at securing protection for oneself and ensuring
growth of one’s own organization at the cost of industry and the nation at large. Lack of global
competition encouraged a "cost plus" approach, where every conceivable cost increase was
passed on to the customer. There was thus no motivation to reduce costs.
With delicensing, decontrol and deregulation, Indian Industry has suddenly been exposed to
global competition. Since last decade, India has witnessed what global players have achieved and
what they are capable of achieving. We are becoming aware of competition on our turf. In this
scenario, every company complains of increased competition, lower order books and shrinking
margins. The Indian Electrical/Electronics Industry is of course further besieged by the fact that
there is a dearth of business on account of lack of investment in the power infrastructure. Many
organizations in this industry are looking overseas to develop the export markets owing to reduce
demand at home.
At the outset, it must be stated that the reduced domestic demand is at best a temporary
phenomenon. The power sector in India is bound to grow and this will undoubtedly boost
demand from the Utilities, quite apart from the industrial demand which will continue to grow
with increased industrial output. The poor financial health of the SEBs is however a damper that
cannot be wished away in the short term. This will continue to plague corporate in the Electrical
Industry, until the SEB restructuring and unbundling brings a turnaround in the medium term.
Segments of Electrical and Electronics Industry
The global electrical and electronics industry centres around various adjunct sectors. Few of
them are Electronic Components, Computer & Office Equipments, Telecommunications,
Consumer Electronics as well as Industrial Electronics.
Electronic Components Industry
This particular industry is engaged in designing, manufacturing, marketing, supporting, selling and
distributing of broad range of electronic components such as bolts, clamps, fasteners, lighting,
semi conductors, integrated circuits, microprocessors, cables and wires, switches, sensors,
keyboards, sockets, sonar devices, test and inspection equipment etc. Worldwide market leaders
electronic components are United States of America, European, Asian countries like Japan,
China, India, Taiwan, and Hong Kong.
34
Future Prospects
The domestic market in India is itself large, and one must firstly satisfy this market with products
that meet international quality standards. With increasing globalization, every international
player is now operating in India, providing goods and services complying with international
quality. Once we deliver high quality products and services within the domestic market,
accessing the international market for exports should not pose a serious challenge. The
Electrical/Electronics Industry in India is growing to its full potential in the coming years and no
doubt that India will soon come to be recognized for quality products and services which in turn,
will bring this industry to a position of true leadership.
Indian electrical industry has grown because of government's thrust on it and also due to overall
economic growth. It has also reached a stage where the industry has demonstrated its
capabilities. The industry has seen a growth of 20% and should continue at the same level for the
next few years.
Factors Governing the Growth of this Industry
Every industry thrives on some supporting factors. In this connection, there are few factors
governing the growth of electrical and electronics industry: Research & development played an
important role to the increased productivity and higher-value added electrical and electronics
products.
Foreign investments accelerated growth in production and export as well. To expand their
business, foreign companies have done huge investments which lead developing countries in
establishing production units.
Global industries like Medical, Telecommunications, Industrial & Automotive industries have been
cordially supported by electrical & electronics industry.
Increase in income changed living standards of the common mass. As a result, it increased the
demand of electronics especially consumer electronics products globally.
Electric & Electrical industry is highly fragmented which comprises of many small and medium
size enterprises resulting into a huge industry.
Asia Pacific region is emerging as the most spinning place for the consumer electronics industry,
as the markets remain still unreached.
Innovation has played importantly in this industry. It led to a consistent demand for newer and
faster products and applications
35
Private ltd
36
Saraswati Dynamics pioneered the manufacturing of Electrodynamics vibration shakers in India
way back in the early 1970s. It continued the development cycle in coming years, adding newer
and related products to its stable of vibration testing equipment such as the combo-base
horizontal slip tables. In the two decades that followed, Saraswati raised the standards of its
products to match international quality.
The turn of new century revolutionized testing standard in India, with Saraswati offering an
additional range of test systems in the form of Environmental Simulation Chambers – both stand
–alone and the types that integrate with all brands of vibration systems for Combined Simulated
Testing.
This has positioned the company as an unrivalled market leader in the Asian sub-continent.
Each product from Saraswati Dynamics was a first, exemplifying topmost quality and
performance. The best names in automotive manufacturing in India became partners in the
progress – they received not only a highly dependable product suiting their applications but also
un-matched service support. Together, it spell true value for money.
Every product at Saraswati is conceptualized by qualified engineers, equipped with the

knowledge of both domestic and international markets and trained to understand the applications.
The turnkey expertise to integrate both vibration equipment and the chamber for combined
operation from a single control system comes as another jewel in the crown.
Our customers positioned us as a brand they recognize a niche in every product we manufacture,
which is comparable with the best brands in the world.
As we compete internationally, our key positioning strategy remains value pricing, product
performance and brand building. Pricing goes along with the other two. We will always be a
value for money player, and we owe it to a three pronged strategy – strong R&D, manufacturing
efficiencies and attending to the customer’s feedbacks.
37
Saraswati Dynamics is the world’s first company to manufacture the full range of vibration test
systems and Environmental test chambers under one roof. These systems are being extensively
used by export-oriented units and multinationals across the region. Having established its
credentials with multinationals giants and blue-chip companies in Asia, Saraswati Dynamic now
opens its door to the rest of the world with its strong value-for-money brand.
Management
Name Designation
1. Mrs. Kavita Goel (Director).
2. Mr. Mukesh Goel (MG Director).
3. Mr. Amitabh Gupta (Director commercial).
4. Mr. Hemant k Arora (CA)
5. Mr. Arun Sharma (Accounts manager).
6. Mr. Vijay Kohli (Purchase manager).
7. Mr. Ashish Goel (Material Manager).
38
Recent Achievements And Milestone Of Saraswati Dynamics
1. MOU with ENCOPIM, Spain.
2. MOU with IMV, Japan.
3. Saraswati Dynamics participated in two major exhibition-automotive testing expo 2007

China and America.
4. Saraswati brings to India servo-pneumatic and hydraulic test system.
5. Saraswati dynamics get the certificate of ISO9001:2000
6. Saraswati dynamics gets the certificate of recognition for indigenous product &
technology from SIAT.
39
MISSION & VISION
Mission:
To achieve international standards of excellence in all aspect of division and diversified
business with focus on customer delight through value of product, Services, cost and
reduction.
To provide technology and service through sustained research and development.
Vision:
Vision is to “SEE MORE”

.
• It describes Saraswati Dynamics products and services which delight its customers by
helping them see more in comfort, safety & security.
40
PRODUCT RANGE
Saraswati Dynamics' wide range of shakers are designed to meet today's challenging
applications by providing all the performance and capability demanded by design and
development, product qualification, stress screening and most importantly reliability.
The SEV & SEW series of shakers represent the state-of-the-art air and water cooled
technology and can be intergrated with all brands of Environmental chambers for combined,
integrated stress screening tests
Product Category
Special Air Cooled Shakers Workshop Equipment
Automotive Special Shakers Workshop Equipment
Combined integrated systems Workshop Equipment
Low Capacity Shakers Workshop Equipment
41
SEV 125 Series Shakers
• Air-cooled
• Solid trunion mounting
• Active suspension system
• Models
SEV 125/ SPA 500V
SEV 125/ SPA 1K
SEV 125/ SPA 2K

• Air-cooled
• Solid trunion mounting
• Low frequency isolation assembly
• Models
SEV 140/ SPA 2K
SEV 140/ SPA 3K
SEV 140/ SPA 4K

• Air-cooled
• Trunion mounted
• Models
SEV 180/ DSA 4K
SEV 180/ DSA 6K
SEV 180/ DSA 8K
42
• Air-cooled
• Trunion mounted
• Models
SEV 240/ DSA 8K
SEV 240/ DSA 10K
SEV 240/ DSA 15K

• Air-cooled
• Trunion mounted
• Models
SEV 400/ DSA 16K
SEV 400/ DSA 24K
SEV 400/ DSA 32K
43
SEV 360 Series Shaker
• Air-cooled
• Trunion mounted
• Models
SEV 360/ DSA 24K
SEV 360/ DSA 36K
SEV 360/ DSA 40K

• Air-cooled
• Trunion mounted
• Active and composite suspension system
• Models
SEV 440/ DSA 42K
SEV 440/ DSA 48K
SEV 440/ DSA 56K
SEV 440/ DSA 62K
44
IMAGES OF SARASWATI DYNAMICS PVT LTD
ECO FRIENDLY PLANT
45
IMAGES OF MAKING FINISHED GOODS
46
Customized service is not merely creating customer relations, it is oriented towards customer
delight. Every customer is an individual, hence special to us. When we are delighted to serve our
customers, our customers too find our services delightful.
Developing trust
Quality of service, knowledge, expertise, courtesy and promptness – these are the hallmarks on
which we develop trust and keep it.
Information exchange
Our customer relationship actually begins even before the sale. Each customer receives personal
attention, and we make ourselves available at any time should our services be required.
Extended services
Saraswati Dynamics offers comprehensive Annual Maintenance Contract (AMC) beyond the
warranties. Our readiness saves the customer, money and time both. Some of the highlights of
extended services include:
• High quality customer support

• 24 hrs x 7 days “Service hot-line”
• Installation and Commissioning
• Operation and parts warranty
• Application guidance
• Training programmes.
• Original spares
Easy reach
Website contains all information about the company and products, product listing and their
specifications, technology updates and current news. Just fill up the feedback form and get
immediate response.
Design and Development
Do you have a specific product in mind? Draw out the edifications and hand them over to our
sales representative nearest to you. We will even advise you if your specifications need
modifying so that you get what you want – in the shortest time and at optimum cost.
47
Single Source Supplier
Saraswati Dynamics provide their customers all the information, product and after sales service
including technical and spares support which gives them the benefit of money and time saving.
Service Quality
The ISO 9001:2000 norms of the company are stretched beyond 100% satisfaction to define
customer delight. Saraswati Dynamics assures 12 months warranty including spares and labor.
The warranty period starts from the date of commissioning.
Add-on Warranty
Under our add-on warranty option, the warranty can be extended on mutually agreed terms and
cost. The add-on warranty comes with a number of benefits for the customers. Installation and
commissioning The Company’s engineers are given extensive training, who then ensure that
each installation meets the highest quality standards laid under ISO9001:2000
"In this new era of customised services, Saraswati Dynamics

goes beyond customer satisfaction."
Saraswati Dynamics having its factory at Roorkee (Hardwar) dealing in hi-tech, capital intensive,
multi-disciplinary, Electro-magnetic Vibration Shaker System used to simulate vibration
environments for product(s) qualification as per international standards besides production of
critical spares and sub-assemblies in mechanical and electronics for Defence. More details on our
vibration system can be seen by visiting our website at http://www.saraswatidynamics.com/
170 people at Roorkee (Hardwar) are pursuing development and production in the discipline of
mechanical, electro-magnetic, power electronics and DSP hardware/software for vibration group
including sales, marketing and other commercial activities besides 3-different profit centers for
defence sector.
Saraswati Dynamics enjoy brand leadership in the domestic market and presence in South East
Asia and Main Land China. The clientele includes DEFENCE - HAL, Ordnance Factories,
EME Workshops & DGQA Estt.; RESEARCH - DRDO's, BARC, IGCAR, ISRO, CSIR
and INDUSTRIAL - All major giants in automobile like Telco, Maruti, Hyundai, Hero-
Honda, Escorts etc. besides development and regular production for Defence Armament Stores.
48
49
OBJECTIVES & OBLIGATIONS
Objectives:
To maximize utilization of the existing facilities in order to improve efficiency and

increase productivity.
To work towards the achievement of self-sufficiency in the field of shakers market by

setting up adequate capacity and to build up expertise in lying of crude.
To further enhance distribution network for providing assured service to customers

throughout the country through expansion of reseller network as per Marketing Plan/
Government approval.
Obligations:
Towards Customers and Dealers: To provide prompt, courteous and efficient

service and quality products at fair and reasonable prices.
Towards Suppliers: To ensure prompt dealings with integrity, impartiality and

courtesy and promote ancillary industries.
Towards Employees: Develop their capability and advancement through appropriate

training and carrier planning.
Towards Community: To develop techno-economically viable and environment

friendly products for the benefit of the people.
50
SWOT ANALYSIS OF SRASWATI DYNAMICS PVTLTD
Strengths:-
1. Price of different range of product is more compatible than others.
2. Saraswati Dynamics pioneered the manufacturing of electrodynamic vibration shakers in

India.
3. Saraswati Dynamic is innovative in nature they make changes in their product on time to
time.
4. Saraswati Dynamics is the world first company to manufacture the full range of vibration
test system and environmental test chamber’s under one roof.
Weaknesses
1. Limited market and tough competition
2. Continuous increase in labor cost.
3. The Shortage of skilled laborers.
4. Appreciation of rupees against foreign currencies.
51
Opportunities
1. Increase in the production and sell of cement at different plants have increased the turnover
of the company.
2. The modernization, productivity improvement and cost control measures will improve the
performance of the division in times to come.
3. Explore the new market in the rest of the world.
Threats
1. The numbers of players are increasing which further increases the competition
2. Appreciation of rupees against foreign currencies affects the income of the company.
3. It is hard to find the skillful labor for the company.
52
53
Statement showing change in working capital for Saraswati Dynamics
Particulars 07-08 06-07 Increase ( + ) Decrease (- )

Current Assets
Inventories 1,4182750 14052466 130284
Sund. Debtors 48975443 30901152 18074291
Cash & Bank 2304500 1895049 409451
Loan & Advances 30660132 23485905 7174227
Total ( A ) 96122825 70334572
Current Liabilities
C.L. 34394235 19139989 15254246
Provisions 2980000 3184500 204500
Total ( B ) 37374235 22324489
( A-B ) 58748590 48010083 25992753 15254246

↑ in working 10738507 10738507
capital
Total 58748590 58748590 25992753 25992753
Statement showing change in working capital for Saraswati Dynamics
Particulars 06-07 05-06 Increase ( + ) Decrease ( - )

Current Assets
Inventories 14052466 13908710 143756
Sund. Debtors 30901152 12821864 18079288
Cash & Bank 1895049 1496214 398835
Loan & Adv. 23485905 13988679 9497226
Total ( A ) 70334572 42215467
Current Liabilities
C.L. 19139989 26021539 6881550
Provisions 3184500 1233000 1951500
Total ( B ) 22324489 27254539
( A-B ) 48010083 14960928 35000655 1951500

↑ in working 33049155 33049155
capital
Total 48010083 48010083 35000655 35000655
54
CALCULATION OF WORKING CAPITAL FOR SARASWATI DYNAMICS
Particular 31.03.06 31.03.07 31.03.08
CURRENT ASSETS
INVENTORIES 13908710 14052466 14182750

SUNDRY DEBTORS 12821864 30901152 48975443
CASH AND BANK 1496214 1895049 2304500
LOANS & ADVANCES 13988679 23485905 30660132
-------------- ------------- -----------

TOTAL CURRENT ASSESTS (a) 42215467 70334572 961225
--------------- --------------- -----------
LESS:-
CURRENT LIABILITIES AND PROVISIONS
CURRENT LIABILITIES 26021539 19139989 34394235

PROVISION 1233000 3184500 2980000
------------- -------------- -------------

TOTAL CURRENT LIABILITIES (b) 27254539 22324489 37374235
--------------- -------------- --------------
NET CURRENT ASSETS (a-b) 14960928 48010083 58748590
NET WORKING CAPITAL

70000000
58748590
60000000
48010803
50000000
AMOUNT
40000000
30000000
20000000 14960928
10000000
0
2006 2007 2008

YEAR
55
ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL
INVENTORY ANALYSIS
Inventory is total amount of goods and materials content in a store of factory at any given time.
Inventory means stock of three:-
1. Raw materials
2. Semi finished goods.
3. Finished goods.
Position of inventory
ory in Saraswati Dynamics
Particular 31.03.06 31.03.07 31.03.08
Raw material 3152145 2928101 2672500

Stock in process 10756565 11124365 11510250
--------------- ---- ------------- ----------------
13908710 14052466 14182750
----------------- --------------- ------------
Analysis through chart:
14182750
14200000 14052466
14100000
AMOUNT
13908710
14000000
13900000
13800000
13700000
2006 2007 2008
YEAR
56
INTERPRETATION:
By analyzing the 3 years data we see that the inventories are increased year by year. We are
looking increasing pattern in inventories. We can see that inventories are grown by 1% and 0.9%
in 06-07 and 07-08 respectively from previous year. By this growth we can say that the company
is growing. A company uses inventory when they have demand in market and Saraswati
Dynamics is having a demand in industry market. That is biggest reason for increase in
inventories. From other point of view we can say that the liquidity of firm is blocked in
inventories but to stock is very good due to uncertainty of availability of raw material in time.
SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under
current assets. Debtors will arise only when credit sales are made.
Position of Sundry Debtors inSaraswati Dynamics
Particular 31.03.06 31.03.07 31.03.08
Debts outstanding more than 6 months 781270 3888555 5672000
Other Debts 11091194 27012597 45946207

------------------ ------------------- -----------
Total (a) 11872464 30901152 51618207
---------------- --------------- ----------
Less:
Doubtful Debts 949400 -------- 2642764
Total (b) 949400 -------- 2642764

-------------- ----------------- -------
Total (a-b) 12821864 30901152 48975443
-------------- --------------- --------
57
60000000
48975443
50000000
40000000
Amount
30901152
30000000
20000000
12821864
10000000
0
2006 2007 2008
YEAR
INTERPRETATION
In the table and figure we see that there is continuous rise in the debtors of Saraswati Dynamics
in the successive years. A simple logic is that debtors increase only when sales increase and if
sales increases it is good sign for growth. We can see 141% and 58% growth in 06-07 06 and 07-08
respectively from previous years.
We can say that it is a good sign as well as negative also. Company policy of debtors is very
good but a risk of bad debts is always present in high debtors. When sales are increasing with a
great speed the profit also increases. If company decreases the Debtors they can use the money in
many investment plans.
CASH AND BANK BALANCE ANALYSIS
Cash is called the most liquid asset and vital current assets, it is an important component of
working capital. In a narrow sense, cash includes notes, bank draft, cheque etc while in a broader
sense it includes near cash assets such as marketable securiti
securities
es and time deposits with bank.
58
Position of Cash and Bank Balance in Saraswati Dynamics
Particular 31.03.06 31.03.07 31.03.08
Cash in hand 250748 80017 1033235
Fixed deposit 1059523 1367844 787961
Bank balances
With scheduled bank:

In Current Account 185943 447188 483304
-------------- ------------- -----------
Total 1496214 1895049 2304500
------------- ------------------ ---------
2500000
2000000
AMOUNT
1500000
1000000
500000
0
2006 2007 2008
YEAR
59
INTERPRETATION
If we analyze the above table and chart we find that it follows a increasing trend. In the year
2006 it had maintained a huge amount of cash and bank balance which has increase in the year
2007 and 2008. Although company’s cash is increasing but this is very good sign for company.
The analysis shows that the fix deposits of company are rapidly fallen in the year as 42.3% in 07-
08 respectively from previous year. Company is utilizing the fixed cash for exploding the
projects that is good for growth,
LOANS AND ADVANCES ANALYSIS
Loans and Advances here refers to any to amount given to different parties, company, employees
for a specific period of time and in return they will be liable to make timely repayment of that
amount in addition to interest on that loan.
Position of Other Loans & Advances in Saraswati Dynamics
Particular 31.03.06 31.03.07 31.03.08
Advance Tax & Tds 128878 353919 1926354
Loans & Advances (assets) 11684618 22079745 27466165
Prepaid Expenses 244335 43000 216326
Security Deposit & Earnest Money 770928 1009240 1051286
-- ---------------- -------------- --------------

Total 12828759 23485904 30660131
------------------ ----------------- --------------
60
35000000
30000000
25000000
AMOUNT In RS
20000000
15000000
10000000
5000000
0
2006 2007 2008
YEAR
INTERPRETATION
If we analyze the table and the chart we can see that it follows an increasing trend which is a
good sign for the company. We can see that the increase of 83% and 30.54% in 06-07
06 and 07-08
respectively from previous year.
The increasing pattern shows that company is giving advances for the expansion of plants and
machinery which is good sign for better production. Although company’s cash is blocked but
this is good that company is doing modernization of plan
plants
ts In time to compete with other
competitors in market.
CURRENT LIABILITIES ANALYSIS
Current liabilities are any liabilities that are incurred by the firm on a short term basis or current
liabilities that has to be paid by the firm within one year.
61
Position of Other Current Liabilities in Saraswati Dynamics
Particular 31.03.06 31.03.07 31.03.08
Advance From customer 523512 10084413 7536341
Bank O/D A/c 431 1482216 84248
Creditor for expenses 9674075 2487913 1503979
Creditor for good 12720801 3518381 11617976
Creditor for other ---------- ----- 11027760
Expenses payable&
Duties & Taxes 3102720 1567066 2623931
----------------- --------------- ---------

Total 26021539 19139989 3434235
343
------------------- --------------- --------
35000000
AMOUNT ( IN RS )
30000000
25000000
20000000
15000000
10000000
5000000
0
2006 2007 2008
YEAR
62
INTERPRETATION
If we analyze the above table then we can see that it follow an uneven trend. The important
component of current liabilities is sundry creditors and other liabilities. In 06-07 it decreased by
27% and in 07-08 it increased by 75%. In 07-08 it was increased because of growth in other
liabilities .This is liability for company so this should be less. When company have minimum
liabilities it creates a better goodwill in market. High current liabilities indicate that company is
using credit facilities by creditors.
PROVISIONS ANALYSIS
Position of Other Provisions in Saraswati Dynamics
Particular 31.03.06 31.03.07 31.03.08
Fringe Benefit Tax 562000 425000 300000
Income tax 671000 2759500 2680000
------------- -------------- -------------

Total 1233000 3184500 2980000
------------- ------------ -------------
63
3500000
3000000
AMOUNT ( IN RS )
2500000
2000000
1500000
1000000
500000
0
2006 2007 2008
YEAR
INTERPRETATION
From the above table we can see that provision shows an uneven trend and the huge amount is
being kept in these provisions. Though the profits of the company are increased income tax is
also increased which is good that company is creatin
creatingg goodwill in market by paying income tax
in time. The income tax is increased by 158% in 06
06-07 and fall 6% in 07-08
08 respectively from
previous year. Although company is paying more income tax but also they are earning more.
This is good sign for Company ggrowth.
64
65
Position of RECEIVABLE RATIO in Saraswati Dynamics
FORMULA
DEBTORS
RECEIVABLE RATIO = ---------------- * 365
SALES
YEAR 31.03.06 31.03.07 31.03.08
RECEIVABLE RATIO (IN DAYS) 62.41 89.79 133.59
160
140
120
100
DAYS
80
60
40
20
0
2006 2007 2008
YEAR
66
INTERPRETATION
Generally a low debtors turnover ratio implies that it considered congenial for the business as it
implies better cash flow. The ratio indicates the time at which the debts are collected on an
average during the year. Needless to say that a high Debtors Turnover Ratio implies a shorter
collection period which indicates prompt payment made by the customer.
Now if we analyze the three year data we can say that it holds a good position while receiving
its money from its debtors. The ratios are in an increasing trend, which implies that recovery
position is good and company should maintain these positions
Position of PAYABLE RATIO in Saraswati Dynamics
FORMULA
CREDITORS
PAYABLE RATIO= ----------------------------- * 365
COST OF SALES
YEAR 31.03.06 31.03.07 31.03.08
PAYABLE RATIO (IN DAYS) 116.66 28.83 113.81
67
140
120
100
DAYS
80
60
40
20
0
2006 2007 2008
YEAR
INTERPRETATION
Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers
throughout the year. Generally a low creditor’s turnover ratio implies favorable since the firm
enjoys lengthy credit period
Now if we analyze the three years data we find that in the year 2006 the ratio was very high
which means that its position of creditors that year was not good, but in the next years it is seen
that it has followed a decreasing trend which is very good sign for the company but in 2008 it
followed a increasing trend So we can say it not enjoys a very good credit facility from the from
the suppliers.
68
Position of CURRENT RATIO in Saraswati Dynamics
FORMULA
TOTAL CURRENT ASSETS

CURRENT RATIO= --------------------------------------------
TOTAL CURRENT LIABILITIES
YEAR 31.03.06 31.03.07 31.03.08
CURRENT RATIO 1.5 3.15 2.57
3.5
2.5
2
DAYS
1.5
0.5
0
2006 YEAR 2007 2008
69
INTERPRETATION
This ratio reflects the financial stability of the enterprise. The standard of the normal ratio is 2:1
but in most of companies standard is taken according to Tandon Committee which is taken as
1.33:1.
Now if we analyze the three years data it can be predicted that it holds a stable position all
throughout period but it is seen that it holds a low position in 2006 compare the standard one but
the company improve its position in 2007 &2008 which show improving position of the
company
Position of QUICK RATIO in Saraswati Dynamics
FORMULA
TOTAL CURRENT ASSETS - INVENTORIES

QUICK RATIO= -----------------------------------------------------------------
TOTAL CURRENT LIABILITIES
YEAR 31.03.06 31.03.07 31.03.08
QUICK RATIO 1.03 2.52 2.19
70
2.5
2
DAYS
1.5
0.5
0
2006 2007 2008
YEAR
INTERPRETATION
It is the ratio between quick liquid assets and quick liabilities. The normal value for such ratio is
taken to be 1:1. It is used as an assessment tool for testing the liquidity position of the firm. It
indicates the relationship between strictly liquid assets whose realizable value is almost certain
on one hand and strictly liquid liabilities on the other hand. Liquid assets comprise all current
assets minus stock.
By analyzing the three years data it can be said that its position was weak in the year 2006 but it
improved significantly in the next two years and was stable during that year and it is meet with
the standard & in the year 2007 & 2008 it was very satisfactory and it can be said that its
liquidity position is stable & good.
71
Position of WORKING CAPITAL RATIO in Saraswati Dynamics
FORMULA
COST OF GOOD SOLD

WORKING CAPITAL TURNOVER RATIO = -------------------------------------------------------
WORKING CAPITAL
YEAR 31.03.06 31.03.07 31.03.08
WORKING CAPITAL RATIO 4.68 1.57 1.31
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2006 2007 2008
YEAR
72
INTERPRETATION
This ratio indicates whether the investments in current assets or net current assets ( i.e., working
capital ) have been properly utilized. In order words it shows the relationship between sales and
working capital. Higher the ratio lower is the investment in working capital and higher is the
profitability. But too high ratio indicates over trading.
This ratio is an important indicator about the working capital position. Now if we analyze the
three years data, we find that it follows a decreasing trend which means that its investment in
working capital is higher and the company not utilizing more of its profit. But we find that it is
not a good sign for the company and the company is required to look into these matters closely.
Position of INVENTORY TURNOVER RATIO in Saraswati Dynamics
FORMULA
AVERAGE STOCK
STOCK TURN OVER RATIO (IN DAYS) = --------------------------------------- * 365
COST OF GOODS SOLD
YEAR 31.03.06 31.03.07 31.03.08
STOCK TURN OVER RATIO 65.02 67.16 36.14
73
80
70
60
50
DAYS
40
30
20
10
0
2006 2007 2008
YEAR
INTERPRETATION
This ratio tells the story by which stock is converted into sales. A high stock turnover ratio
reveals the liquidity of the inventory i.e., how many times on an average, inventory is turned
over or sold during the year. If a firm maintains a minimum stock level in order to maximize
sales by quick rotation of inventory and the holding cost of inventory will be minimum. A low
stock turnover ratio reveals undesirable accumulation of obsolete stock.
By analyzing the three year data it seen that it follows an uneven trend. We see that from the year
2006 to 2007 it is more which has been rectified in the year 2008. But it is needless to say that
ratio the company maintains is very high in 2006 &2007 and the company is required to take
measures to lower down this ratio as it affects the working capital cycle of company and the flow
of cash in the company. In 2008 we saw company take measure to lower down its ratio which is
good for company because A low stock turnover ratio reveals undesirable accumulation of
obsolete stock.
74
Position of Debt-Equity RATIO in Saraswati Dynamics
Formula = Debt / Equity
Calculation of debt-equity ratio at Saraswati dynamics
Particulars 2005-06 2006-07 2007-08

Debt 4750068 70518408 58513399
Equity 31543972 51077695 72736936
D/E Ratio 0.15:1 1.38:1 0.80:1
1.6
1.4
1.2
D/E Ratio
1
0.8
0.6
0.4
0.2
0
2005-06 2006-07 2007-08
YEAR
75
Interpretation
This ratio establishes a relationship between external liabilities and shareholder fund. The DER
is worked out to ascertain the relative proportion of debt & equity in financing the assets of the
firm. Generally, a debt equity ratio Of 1:1 is considered satisfactory
When a company has lower d/e ratio, it means that company is utilizing its own funds and
reserves rather than taking loans from outsiders. Saraswati Dynamic have a uneven trend in d/e
ratio so we can say that in 2006 which portray that debt is less than shareholder fund but in 2007
it increase due to it increase in debt more than its equity but in 2008 its lees than the equity
which show company in satisfactory position & the long term solvency position of the enterprise
is quite comfortable.
76
77
Material storage period position of Saraswati Dynamics
FORMULA
Average stock for the year

Material storage period (in days) = ---------------------------------------
Daily average consumption
Average stock = opening stock + closing stock

---------------------------------------
2
Daily average consumption = Annual average consumption

-----------------------------------------
360
YEAR 31.03.06 31.03.07 31.03.08
Material storage period (R) = 30 days 18 days 16days
78
16
2006
30
2007
2008
18
Production process period position of Saraswati Dynamics
FORMULA
Average work in process (WIP)

Production process period (in days) = ---------------------------------------
Average production cost
79
Average WIP = opening WIP + closing WIP
---------------------------------------
2
Average production cost = Average daily cost of production

-----------------------------------------
360
YEAR 31.03.06 31.03.07 31.03.08
Production process period (W) 361days 171days 5days
171 2006
2007
2008
361
80
Finished goods storage period position of Saraswati Dynamics
FORMULA
Average stock of the finished good

Finished goods storage period (in days) = ---------------------------------------
Average cost of sales per day
Average finished good = opening finished goods + closing finished goods

-------------------------------------------------
2
Average cost of sales = Annual cost of goods sold

-----------------------------------------
360
YEAR 31.03.06 31.03.07 31.03.08
Finished goods storage period (F) 00 00 00
81
Interpretation
Saraswati Dynamics doesn’t hold the finished goods in stock. As the finished goods is
manufactured it made their goods after the demand of product from the customer. That’s why
the finished good storage period of saraswati dynamics is nil.
Debtor collection period of saraswati dynamics
FORMULA
Debtor collection period = average debtors

------------------------------
Daily average sales
Average debtors = opening debtor + closing debtor

-------------------------------------------
2
Daily average sales = Annual sales

-----------------------------
360
82
YEAR 31.03.06 31.03.07 31.03.08
Debtor collection period (D) = 51days 62days 1076days
51 62
2006
2007
2008
1076
83
Creditor payment period of Saraswti Dynamics
FORMULA
Creditor payment period = Average trade creditor

-------------------------------------------
Average credit purchase per day
Average payment period = opening creditor + closing creditor

---------------------------------------------------
2
Average credit purchase per day = Annual credit purchase

-------------------------------
360
YEAR 31.03.06 31.03.07 31.03.08
Creditor payment period(C) 228days 85days 37days
84
Analysis through chart
37
2006
85
2007
2008
228
Operating cycle period of Saraswati Dynamics
Formula
OC = R +W+F+D-C
85
YEAR 31.03.06 31.03.07 31.03.08
Operating cycle period 214days 166 days 1063days
Analysis through chart
214
166 2006
2007
2008
1063
86
87
OBJECTIVE OF THE RESARCH
The objective of this project work is to focus on the working capital of the SARAWATI
DYNAMICS PVT LTD and exploring its potential in the company. The project contain the
basic postulates of working capital, procedure of analysis of working capital, ratio being used to
define the working capital and the impact of working capital in the company in case of excess or
inadequacy. Also, the project contains analysis of estimation of working capital requirement and
the procedure to estimate working capital requirement in manufacturing and trading concern and
from the data available it can be concluded that it holds a very strong position in the market.
RESEARCH DESIGN
The research design for the comparative study is of exploratory type and the focus is given to
discover the possible measures, by detailed analysis, for the company which would be helpful up
to some extent to retain a good position in the competitive market. The research design is not
formal and rigid one as the focus depends upon the availability of new ideas and relationship
among variables.
88
DATA COLLECTION METHOD
Primary Data:
The primary data are which are collected afresh and for the first time, and thus happen to be
original in character.
Secondary sources:
The Secondary data are those which have already been collected and through processed the
statically process.
For the purpose of study both primary as well as secondary data have been used. The secondary
data have been collected from company broachers, newspapers, company annual reports, and
websites. For the collection of primary data personally asked the question.
For the purpose of knowing whereabouts of the company in the present market secondary data
has disclosed many important information as- market share of the company and its potential in
the electro dynamic vibration market leaders on the basis of various attributes .
Tools for analysis:
The following statistical tools have been used for analyzing the data.
Column diagram
Sampling percentage
Pie-Diagram
89
SIMPLE PERCENTAGE ANALYSIS
Percentage refers to a special kind of ratio. Percentages are used in making comparison between
two or more variables to find the efficacy of each variable. Percentages are used to describe
relationships among them replacing the common base say (100) so that comparisons can be made
easy and meaning full.
Percentage = current year * 100

Previous year
90
CONCLUSIONS
After completing my project on working capital management in Saraswati Dynamics, I can say
that now I understand working capital much better and in a practical way. This project helps me
in understanding the daily requirement in a manufacturing firm.
During my training period in Saraswati Dynamics I am able to know the importance of working
capital in any company especially if the concern is a big one. It enable the company to have
regular supply of raw material, regular payment of salary and wages, exploit the favorable
market conditions, have ability to face crisis and also make the good image of the company. In
Saraswati Dynamics the working capital requirements are very high as production is continuous
in the concern.
Working capital is also a major external source of capital for especially small and medium sized
firms. These firms have relatively limited access to capital markets and tend to overcome this
complication by short-term borrowing. Working capital position of such firms is not only an
internal firm-specific matter, but also an important indicator of risk for creditors. Higher amount
of working capital enables a firm to meet its short-term obligations easier. This results increase
in borrowing capability and decrease in default risk (and consequential decrease in cost of capital
and increase in firm value). So, it is possible to state that efficiency in working capital
management affects not only short-term financial performance (profitability), but also long-term
financial performance (firm value maximization).
From the discussion in this project we can say that Saraswati Dynamics manage its working
capital requirement in an effective and efficient manner. Its current assets are approx. twice of its
current liabilities which is the standard for any company and it means that the company always
have the sufficient amount of cash to meet any type of liability at any time.
91
Major Findings
Statement Showing Difference from Previous Year
Particulars 06-07 07-08
Investments 000000000 -100000

↑ by0% ↓.79%
Inventories 143756 130284

↑ by 1% ↑ by 0.92%
Sundry Debtors 108079288 18074291

↑ by 141% ↑ by 58%
Cash & Bank 398835 409451

↑ by 26.6% ↑ by 21.6%
Current Liabilities -6881550 15254246

↓ by 26.44% ↑ by 76.69%
Reserve & Surplus 19533723 21659241

↑ by 86.76% ↑ by 51.51%
92
1. Saraswati Dynamics profit is increasing day by day from last three years.
2. Saraswati Dynamics has shown that it is very strong competitor in Electrodynamics

shaker market in India.
3. Overall all ratios of the company are good and company need to work with more
efficiency
4. Lack of advertisement can be said as weak point of the Saraswati Dynamics.
5. Firm profitability can be increased by shortening accounts receivables and inventory

periods
6. Position of the stock is increasing per year that is good sign to face the competition
coming ahead.
7. Recession in the economy affect the Saraswati Dynamics.
8. Appreciation in rupees reduces the profit the company.
9. The major sources of raw materials are local sources and USA, UK, etc
10. Working capital management of the Saraswati Dynamics Is satisfactory due to efficient
management of inventory, debtors, cash balances and working funds.
11. The major elements of working capital are inventory, debtors, cash balances and short
term investments.
12. Cash management of the company is done through cash budget, cash flow statement and
other steps.
13. The company has bright prospects due to efficient management of mace, machine
materials & technology.
14. The company has successful uses of working capital due to planned inventory,
receivables, cash, finance and good cash inflow.
93
94
BIBLIOGRAPHY
Reference of book
Dr.A.K.Garg (2007), Basic Business Finance, Swati Prakashan Publisher, UP
C.R.Kothari (2009), Research Methodology, New Age International Publishers, New Delhi
Reference of web page
www.saraswatidynamics.com
http://aggregate-inventory-management-47605.htm
http://www.allelectricalproducts.com/indian-electricalindustry.html
http://isb.agepub:com/(g)/content/abstract/1412152
http://findarticles:com/P/articles/mi-qa3857/is200807/ai_n30992061
http://wwwfinanceweek:co.uk/item/6240
http://findarticle.com/P/article/mi-qa5439/is_200801/ai_n27996599
http://wwwemeraldinsight.com/insight/viewcontentservlet?filename=published/emeraldfull
text article/Articles/0010340208html
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LOVELY PROFESSIONAL UNIVERSITY

Report on Summer Training

In partial fulfillment of the

A detailed research/analysis of managerial activities conducted in various departments like

S.N PARTICULARS PAGE NO.

Concept of working capital:-

Working Capital = Current Asset – Current Liability.

Meet day to day cash flow needs.

Concept of working capital

• Gross Working Capital = Total of Current Asset

Current Assets Current Liabilities

Length of operating cycle.

Current asset policies.

Fluctuations of supply and seasonal variations

Working capital in terms of five components:

3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it

4. Accounts payable:- Financing by suppliers is common in small business; it is one of the

Two different concepts of working capital are:-

• Balance sheet or Traditional concept

• Gross working capital

Working capital= current assets - current liabilities.

SALES FINISH GOODS

ON THE BASIS ON THE BASIS

GROSS REGULAR TEMPORARY

Fixed or permanent working capital

Variable/temporary working capital

Sources of working capital

The company can choose to finance its current assets by

Long term sources

Long term debt

Short term sources of temporary working capital

Reserves and other funds

SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following

Existing cash reserves

EASY LOAN DIVIDEND

Factors requiring consideration while estimating working capital.

• The average credit period expected to be allowed by suppliers.

Importance of Working Capital Ratios

1 increase in debt capacity and goodwill

Increase in production inefficiency

Exploitation of favorable opportunities

Meeting contingencies adverse changes:

Available cash discount

Solvency and efficiency fixed assets.

Dangers of inadequate working capital

Loss of goodwill and creditworthiness

Firm can’t make use of favorable opportunities

Adverse effects of credit opportunities

Effects on financial capacity

Non achievement of profit target

Low rate of return on capital

Decline in capital and efficiency

Loss of goodwill and confidence.

Evils of over capitalization

Destruction of turnover ratio

Action on debtors /customers

In today’s world of intense global competition, working capital management is receiving

ESTIMATION OF WORKING CAPITAL MANGEMENT