Project Report on To study the sources of financing of working capital Of The Hindu Co-operative Bank Ltd

Submitted by: RONIT REG NO: Submitted to: Dr.CHETAN MOHAN

In partial fulfillment for the award of the degree Of

MASTER OF BUSINESS ADMINISTRATION

SRI SAI COLLEGE, PATHANKOT Punjab Technical University, Jalandhar May- July, 2012

PREFACE

Experience is the best teacher. The saying plays a very pivotal role in our curriculum where in we try and understand the nuances of the theoretical world with a blend of practical experience. Its very important to understand how and where to implement what we have studied. Knowledge in itself is a continuous process. Getting practiced knowledge is an important thing for existence for any business concern in the competition prevailing in an industry a total awareness is the first and foremost thing necessary from all aspects, working smarter seems to be as important as working harder and longer. I completed this project on To study the sources of financing of Working capital in part fulfillment of our MBA curriculum. The knowledge we garnered through this exposure with the outside world will help us in taking a giant leap towards understanding customers behavior and preferences.

ACKNOWLEDGEMENT

It is my pleasure to acknowledge the help we have received from different individuals and all the teachers during the project period.My first sincere appreciation and gratitude goes to respected Miss Prabhjot Kaur, Project guide, for his guidance, constructive comments, valuable suggestions and inspirations. During the entire session, we have received endless help from him. Also, it gives me immense pleasure to again express my sincere and wholehearted sense of gratitude to our esteemed H.OD Mr. Chetan Mohan and all the teachers, for their invaluable and untiring guidance and supervision throughout our Project Period .To derive benefits of their enormous experience, it is a matter of great privilege for us. Finally, I wish to say thanks to all the people who have helped us for their kind cooperation.

Format of Declaration of Authenticity by student

DECLARATION

I, "Ronit, hereby declare that the work presented herein is genuine work done originally by me and has not been published or submitted elsewhere for the requirement of a degree programme. Any literature, data or works done by others and cited within this dissertation has been given due acknowledgement and listed in the reference section.

Ronit M.B.A (3rd SEM) Sri Sai College, Pathankot

Date: Place:

CERTIFICATE

TABLE OF CONTENT

SR.NO CONTENTS 1 2 3 4 5 6 7 8 9 10 11 12
INTRODUCTION INDUSTRY PROFILE ORGANISATION PROFILE INTRODUCTION OF TOPIC LITERATURE SURVEY OBJECTIVE OF STUDY RESEARCH METHODOLOGY SAMPLE DESIGN ANALYSIS & FINDINGS LIMITATIONS SUGGESTIONS AND RECOMMENDATIONS BIBLIOGRAPHY

PAGE NO.

INTODUCTION OF HCB

The Hindu Co-operative Bank Ltd. Pathankot has got the distinction of being the pioneer in the state because it is the largest Licensed Urban Bank of the state of Punjab.The bank is governed in a accordance with the directions of Reserve Bank of India and the provision of Punjab Cooperative Societies Act, 1961 and the rules made there under.The bank achieved its object with regard to economic up-liftmen of its members, by providing them modern banking facilities on easy term & conditions. Bank has been allotted A grade classification by Chief Auditor Cooperative Societies, Punjab in 2008..The bank created another land-mark in the area by installing first ATM in Gurdaspur District to provide 24 Hours banking service to its members and customers. The main mission of co-operative bank is not earning to the profit but to develop rural area. Co-operative bank are on the district level bank but the other bank are national and international level bank. The customer needs of co-operative bank are different from other bank customer needs.

PRODUCT & SERVICESThe Hindu Co-operative Bank Provides several Scheme and Services .These are: CURRENT ACCOUNT FIXED DEPOSITS RECURRING DEPOSITS SMS BANKING ATM SERVICES TERM LOAN/CASH CREDIT LOCKER FACILITY

Introduction of 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. 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. 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 dayto-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 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. Capital required for a business can be classified under two main categories via,

1. 2.

Fixed capital Working capital

Every business needs funds for two purposes for its establishment and to carry out its day to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that part of firms capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purposes for the purchase of raw material, payment of wages and other day to- day expenses etc. These funds are known as working capital. In simple words, working capital refers to that part of the firms capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.

LITERATURE REVIEW

Many researchers have studied working capital from different views and in different environments. The following are very interesting and useful for research:

1) The study of Grablowsky (1976) and others have showed a significant relationship between various success measures and the employment of formal working capital policies and procedures. Managing cash flow and cash conversion cycle is a critical component of overall financial management for all firms, especially those who are capital constrained and more reliant on short-term sources of finance (Walker and Petty, 1978; Deakins et al, 2001). For small and growing businesses, an efficient working capital management is a vital component of success and survival; i.e. both profitability and liquidity (Peel and Wilson, 1996). They further assert that smaller firms should adopt formal working capital management routines in order to reduce the probability of business closure, as well as to enhance business performance. Given these peculiarities, Peel and Wilson (1996) have stressed the efficient management of working capital, and more recently good credit management practice as being pivotal to the health and performance of the small firm sector. 2) Smith and Begemann 1997 - emphasized that working capital theory comprised of shared goals of profitability and liquidity. The problem was because the maximization of the firm's returns could seriously threaten its liquidity, and the pursuit of liquidity had a tendency to dilute the returns. The problem under investigation was to establish whether the more recently developed alternative working capital concepts showed improved association with return on investment to that of traditional working capital ratios or not. Results indicated that there were no significant differences amongst the years with respect to the independent variables. 3) The study conducted by De Chazal Du Mee (1998) revealed that 60% enterprises suffer from cash flow problems.

4) The pioneer work of Shin and Soenen (1998) and the more recent study of Deloof (2003) have found a strong significant relationship between the measures of WCM and corporate profitability. Their findings suggest that managers can increase profitability by reducing the number of days accounts receivable and inventories. This is particularly important for small growing firms who need to finance increasing amounts of debtors. 5) The study undertaken by (Peel et al., 2000) revealed that small firms tend to have a relatively high proportion of current assets, less liquidity, exhibit volatile cash flows, and a high reliance on short-term debt. Narasimhan and Murty (2001) stress on the need for many industries to improve their return on capital employed (ROCE) by focusing on some critical areas such as cost containment, reducing investment in working capital and improving working capital efficiency. Narasimhan and Murty (2001) stress on the need for many industries to improve their return on capital employed (ROCE) by focusing on some critical areas such as cost containment, reducing investment in working capital and improving working capital efficiency. Along the same line, Berry et al (2002) finds that SMEs have not developed their financial management practices to any great extent and they conclude that ownermanagers should be made aware of the importance and benefits that can accrue from improved financial management practices. 6) S.K. Khathik & P.K.Singh (2003) made a study on working capital management in Indian Farmers Fertilizer Co-operative Limited. For this, they employed several statistical tools on different ratios, to examine the effective management of working capital. It was concluded that the overall positions of the working capital of IFFCO are satisfactory but there is a need of improvement in inventory.

7) The recent work of Howorth and Westhead (2003), suggest that small companies tend to focus on some areas of working capital management where they can expect to improve marginal returns. 8) Eljelly, 2004 - elucidated that efficient liquidity management involves planning and controlling current assets and current liabilities in such a manner that eliminates the risk of inability to meet due short-term obligations and avoids excessive investment in these assets. The relation between profitability and liquidity was examined, as measured by current ratio and cash gap (cash conversion cycle) on a sample of joint stock companies in Saudi Arabia using correlation and regression analysis. The study found that the cash conversion cycle was of more importance as a measure of liquidity than the current ratio that affects profitability. All the above studies provide us a solid base and give us idea regarding working capital management and its components. They also give us the results and conclusions of those researches already conducted on the same area for different countries and environment from different aspects. On basis of these researches done in different countries, we have developed our own methodology for research. Although working capital is the concern of all firms, it is the small firms that should address this issue more seriously. Given their vulnerability to a fluctuation in the level of working capital, they cannot afford to starve of cash.

CONCEPT OF WORKING CAPITAL:

There are two concepts of working capital: 1. 2. Gross working capital Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises current assets are those assets which can convert in to cash within a short period normally one accounting year. Gross Working Capital = Total of Current Asset Net Working Capital = Excess of Current Asset over Current Liability Current Assets Cash in hand / at bank Bills Receivable Sundry Debtors Short term loans Investors/ stock Temporary investment Prepaid expenses Accrued incomes In a narrow sense, the term working capital refers to the net working. Net working capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.

Current Liabilities Bills Payable Sundry Creditors Outstanding expenses Accrued expenses Bank Over draft

Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business. 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

Gross working capital: - It refers to the firms 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. The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits. The gross concept is sometimes preferred to the concept of working capital for the following reasons:

1.

It enables the enterprise to provide correct amount of working capital at

correct time. 2. Every management is more interested in total current assets with which it

has to operate then the source from where it is made available. 3. It take into consideration of the fact every increase in the funds of the

enterprise would increase its working capital. 4. This concept is also useful in determining the rate of return on investments

in working capital. The net working capital concept, however, is also important for following reasons: 1. It is qualitative concept, which indicates the firms ability to meet to its

operating expenses and short-term liabilities. 2. 3. 4. It indicates the margin of protection available to the short term creditors. It is an indicator of the financial soundness of enterprises. It suggests the need of financing a part of working capital requirement out of

the permanent sources of funds. Net working capital: - It is the difference between current assets and current liabilities or the excess of total current assets over total current liabilities. It is also can defined as that part of a firms 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. Net Working capital = current assets - current liabilities

Operating cycle concept: - The duration or time required completing 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.

CASH

RAW MATERIA L

DEBTOR S& BILLS RECEIVA BLES

OPERATING CYCLE

WORK IN PROGRE SS

SALES

FINISH GOODS

Types of working capital

CLASSIFICATION OF WORKING CAPITAL Working capital may be classified in to ways: A. B. A. On the basis of concept. On the basis of time. On the basis of concept working capital can be classified as gross working

capital and net working capital. On the basis of time, working capital may be classified as: Permanent or fixed working capital. Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of raw material, workin-process, finished goods and cash balance. This minimum level of current assts is called permanent or fixed working capital as this part of working is permanently blocked in current assets. As the business grow the requirements of working capital also increases due to increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research, etc. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business. 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 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.

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

DETERMINANTS OF WORKING CAPITAL There are no set rules or formula to determine the working capital requirements of firms. A large number of factors, each having a different importance, influence working capital needs of firms. Also, the importance of factors changes for a firm over time. Therefore, an analysis of relevant factors should be made in order to determine total investment in working capital. The following is the description of factors which generally influence the working capital requirements of firms. Nature of Business Sales and Demand Conditions Technology and Manufacturing Policy Credit Policy Availability of Credit

Operating Efficiency Price Level Changes Nature of Business: Working capital requirements of a firm are basically influenced by the nature of its business. Trading and financials of money to be invested in working capital. Retail stores, for example, must carry requires most of the manufacturing concerns to fall between the two extreme requirements of trading firms and public utilities. Such concerns have to make adequate investment in current assets depending upon the total assets structure large stocks of variety of goods to satisfy varied and continuous demand of their customers. Some manufacturing business, such as tobacco manufacturers and construction firm, also have to invest substantially in working CapitaLand a nominal amount in fixed assets. In contrast, public utilities have A very limited need for working capital and have to invest abundantly in fixedassets. Their working capital requirements are nominal because they may have only cash and supply services, not products. Thus, no funds will betide up in debtors and stock (inventories). Working capital and other variables.

Sales and Demand Conditions:

The working capital needs of a firm are related to its sales. It is difficult to precisely determine the relationship between volume of sales and working Capital needs. In practice, current assets will have to be employed before growth takes place. It is , therefore, necessary to make advance planning of Working capital for a growing firm on a continuous basis. A growing firm may need to invest funds in fixed assets in order to sustain its growing production and sales. This will, in turn, increase investment incurrent assets to support enlarged scale of operations. It should be realized that a growing firm needs funds continuously. It uses external sources aswell as internal sources to meet increasing needs of funds. Such a firm faces further financial problems when it retains substantial portion of its profits. It would not be able to pay dividends to shareholders. It is, therefore, Imperative that proper planning be done by such companies to finance their increasing needs for working capital. Sales depend on demand conditions. Most firms experience seasonal and cyclical fluctuations in the demand for their products and services. These business variations affect the working capital requirements, specially the temporary working capital requirement of the firm. When there is an upward swing in the economy, sales will increase; correspondingly, the firm investment in inventories and debtors will also increase. Under boom, additional investment in fixed assets may be made by some firms to increase their productive capacity. This act of firm will require further additions of working capital. To meet their requirements of funds for fixed assets and current assets under boom further additions of working capital. To meet their requirements of funds for fixed assets and current assets under boom period, firms generally resort to substantial borrowing. On the other hand, when there is a decline in the economy, sales will

fall and consequently, levels of inventories and debtors will also fall. Under recessionary conditions, firms try to reduce their short term borrowings. Seasonal fluctuations not only affect working capital requirements but also create production problems for the firm. During periods of peak demand, increasing production may be expensive for the firm. Similarly, it will be more expensive during slack periods when the firm has to sustain its working force and physical facilities without adequate production and sales. A firm may, thus, follow a policy of steady production, irrespective of seasonal changes in order to utilize its resources to the fullest extent. Such policy will mean accumulation of inventories during off season and their quick disposal during the peak season. The increasing level of inventories during the slack season will require increasing funds to be tied up in the working capital for some months. Unlike cyclical fluctuations, seasonal fluctuations generally conform to a steady pattern. Therefore, financial arrangements for seasonal working capital requirements can be made in advance. However, the financial plan or arrangement should be flexible enough to take care of some abrupt seasonal fluctuations.

Technology and Manufacturing Policy

The manufacturing cycle (or the inventory conversion cycle) comprises of the purchase and use of raw material the production of finished goods. Longer the manufacturing cycle, larger will be the firm working capital requirements. For example, the manufacturing cycle in the case of a boiler, depending on its size, may range between six to twenty- four months. On the other hand, the manufacturing cycle of products such as detergent powder, soaps, chocolate etc. may be a few hours. An extended manufacturing time span means a larger tie- up of funds in inventories. Thus, if there are alternative technologies of manufacturing a product, the technological process with the shortest manufacturing cycle may be chosen. Once a manufacturing technology has been selected, it should be ensured that manufacturing cycle is completed within the specified period. This needs proper planning and coordination at all levels of activity. Any delay in manufacturing process will results in accumulation of work- unprocessed waste of time. In order to minimize their investment in working capital, some firms, especially firm Manufacturing industrial products have a policy of asking for advance payment from their customers. Non-manufacturing firms, service and financial enterprises do not have a manufacturing cycle. A strategy of constant production may be maintained in order to resolve the working capital problems arising due to seasonal changes in the demand for the firm product. A steady production policy will cause inventories to accumulate during the off- reason periods and the firm will be exposed to greater inventory costs and risks. Thus, if costs and risks of maintaining a constant production policy, varying its production utilized for manufacturing varied products, can have the advantage of diversified Activities and solve their working capital problems. They will manufacture the original product line during its increasing demand and when it has an off- season,

other products may be manufactured to utilize physical resources and working force. Thus, production policies will differ from firm to firm, depending on the circumstances of individual firm. Credit Policy The credit policy of the firm affects the working capital by influencing the level of debtors. The credit terms to be granted to customers may depend upon the norms of the industry to which the firm belongs. But a firm has the flexibility of shaping its credit policy within the constraint of industry norms and practices. The firm hold be discretion in granting credit terms to its customers. Depending upon the individual case, different terms may be given to different customers. A liberal credit policy, without rating the creditworthiness of customers, will be detrimental to the firm and will create problem of collections. A high collection period will mean tie- up of large funds in book debts. Slack collection procedures can increase the chance of bad debts. In order to ensure that unnecessary funds are not tied up in debtors, the firm should follow a rationalized credit policy based on the credit standing of customers and periodically review the creditworthiness of the exiting customers. The case of delayed payments should be thoroughly investigated.

Availability of Credit

The working capital requirements of a firm are also affected by credit terms granted by its creditors. A firm will need less working capital if liberal credit terms are available to it. Similarly, the availability of credit from banks also influences the working capital needs of the firm. A firm which can get bank credit easily on favorable condition will operate with less working capital than a firm without such a facility.

Operating Efficiency The operating efficiency of the firm relates to the optimum utilization of resources at minimum costs. The firm will be effectively contributing in keeping the working capital investment at a lower level if it is efficient in controlling operating costs and utilizing current assets. The use of working capital is improved and pace of cash conversion cycle is accelerated with operating efficiency. Better utilization of resources improves profitability and, thus, helps in releasing the pressure on working capital. Although it may not be possible for a firm to control prices of materials or wages overlabor, it can certainly ensure efficiency and effective use of its materials, labour and other resources.

Price Level Changes

The increasing shifts in price level make functions of financial manager she should anticipate the effect of price level changes on working capital requirement of the firm. Generally, rising price levels will require a firm to maintain higher amount of working capital. Same levels of current assets will need increased investment when price are increasing. However, companies which can immediately revise their product price levels will not face a server working capital problem. Further, effects of increasing general price level will be felt differently by firm as individual price may move differently. It is possible that some companies may not be affected by rising price will be different for companies. Some will face no working capital problem, while working capital problems of other may be aggravated.

REQUIREMENTS OF FUNDS

Funds Requirements of company Fixed Capital Preliminary Expenses Purchase of Fixed Establishment work exp. Fixed working capital Working Capital Raw Material Assets Inventories Goods in Process others

Every company requires funds for investing in two types of capitali.e. Fixed capital, which requires long-term funds, and working capital, which requires shortterm funds

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 earning, 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. Retained earnings: Retained earning accumulated profits are 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 institutution 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 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 DEPOSIT: Most of the companies in recent years depend on these 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, promissory notes, 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. 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

MANAGEMENT OF WORKING CAPITAL Management of working capital is concerned with the problem that arises in attempting to manage the current assets, current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations are bad for any firm. There should be no shortage of funds and also no working capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its probability, liquidity and structural health of the organization. So working capital management is three dimensional in nature as 1. It concerned with the formulation of policies with regard to profitability,

liquidity and risk. 2. It is concerned with the decision about the composition and level of current

assets.

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of devices, such as: 1. 2. 3. Ratio analysis. Fund flow analysis. Budgeting.

1.

RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis can be employed for measuring short-term liquidity or working capital position of a firm. The following ratios can be calculated for these purposes: 1. Current ratio. 2. Quick ratio 3. Absolute liquid ratio 4. Inventory turnover.

5. Receivables turnover. 6. Payable turnover ratio. 7. Working capital turnover ratio. 8. Working capital leverage 9. Ratio of current liabilities to tangible net worth.

2.

FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which additional funds were derived and the use to which these sources were put. The fund flow analysis consists of: a. b. Preparing schedule of changes of working capital Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position (working capital) business enterprise between beginning and ending of the financial dates.

3.

WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and polices to be pursued in the future period time. Working capital budget as a part of the total budge ting process of a business is prepared estimating future long term and short term working capital needs and sources to finance them, and then comparing the budgeted figures with actual performance for calculating the variances, if any, so that corrective actions may be taken in future. He objective working capital budget is to ensure availability of funds as and needed, and to ensure effective utilization of these resources. The successful implementation of working capital budget involves the preparing of separate budget for each element of working capital, such as, cash, inventories and receivables etc.

SIGNIFICANCE OF WORKING CAPITAL MANAGEMENT The management of working capital is important for several reasons: For one thing, the current assets of a typical manufacturing firm account for half of its total assets. For a distribution company, they account for even more.Working capital requires continuous day to day supervision. Working capital has the effect on company's risk, return and share prices. There is an inevitable relationship between sales growth and the level of current assets. The target sales level can be achieved only if supported by adequate working capital Inefficient working capital management may lead to insolvency of the firm if it is not in a position to meet its liabilities and commitments

CASH MANAGEMENT:

Cash management is one of the key areas of WCM. Apart from the fact that it is the most liquid asset, cash is the common denominator to which all current assets, that is, receivables & inventory get eventually converted into cash. Cash is oil of lubricate the ever-turning wheels of business: without it the process grinds to a shop. Motives for holding cash:: Cash with reference to cash management is used in two senses: It is used broadly to cover currency and generally accepted equivalents of cash, such as cheques, drafts and demand deposits in banks. It includes near-cash assets, such as marketable securities & time deposits in banks. The main characteristic of these is that they can be readily sold & converted into cash. They serve as a reserve pool of liquidity that provides cash quickly when needed. They provide short term investment outlet to excess cash and are also useful for meeting planned outflow of funds.

CASH IS MAINTAINED FOR FOUR MOTIVES:

A. Transaction motive:
Transaction motive refer to the holding of cash to meet routine cash requirements to finance the transactions which a firm carries on in a variety of transactions to accomplish its objectives which have to be paid for in the form of cash. E.g. payment for purchases, wages, operating expenses, financial charges like interest, taxes, dividends etc. Thus requirement of cash balances to meet routine need is known as the transaction motive and such motive refers to the holding of cash to meet anticipated obligations whose timing is not perfectly synchronized with cash receipts

B. Precautionary motive:
A firm has to pay cash for the purposes which can not be predicted or anticipated. The unexpected cash needs at the short notice may be due to: Floods, strikes & failure of customers low down in collection of current receivables Increase in cost of raw material Collection of some order of goods as customer is not satisfied The cash balance held in reserves for such random and unforeseen fluctuations in cash flows are called as precautionary balance. Thus, precautionary cash provides a cushion to meet unexpected contingencies. The more unpredictable are the cash flows, the larger is the need for such balance.

C. Speculative motive:

It refers to the desire of the firm to take advantage of opportunities which present themselves at unexpected moment & which are typically outside the normal course of business. If the precautionary motive is defensive immature, in that firms must make provisions to tide over unexpected contingencies, the speculative motive represents a positive and aggressive approach. The speculative motive helps to take advantages of: An opportunity to purchase raw material at reduced price on payment of immediate cash. A chance to speculate on interest rate movements by buying securities when interest rates are expected to decline. Make purchases at favorable price. Delay purchase of raw material on the anticipation of decline in prices.

OBJECTIVES OF CASH MANAGEMENT:

I. To meet the cash disbursement needs In the normal course of business firms have to make payment of cash on a continuous and regular basis to the supplier of goods, Employees and so son. Also the collection is done from thede4btorw. Basic objective is to meet payment schedule that is to have sufficient cash to meet the cash disbursement needs of the firm. I. To minimize the funds committed to cash balances First of all if we keep high cash balance, it will ensure prompt payment together with all the advantages. But it also implied that the large funds will remain idle, as cash is the non-earning asset and firm will have to forego profits. On the other hand, low cash balance mean failure to meet payment Schedule. Therefore we should have optimum level of cash balance. FACTORS DETERMININING CASH NEEDS: 1) Synchronization of cash - need for the cash balances arise from then onsynchronization of the inflows & outflows of cash. First need in determining cash needs is, the extent of non-synchronization of cash receipts & disbursements. For this purpose cash budget is to be prepared. Cash budget point out when the firm will have excess or shortage of cash. 2) Short cash Cash period reveals the period of cash shortages. Every shortage of cash whether expected or unexpected involves a cost depending upon the security, duration & frequency of shortfall & how the shortage is covered. Expenses incurred as a shortfall are called short costs.

There are following costs included in the short cash:

Transaction cost: this is usually the brokerage incurred in relation to the some short-term near-cash assets like marketable securities. Borrowing costs: these include interest on loan, commitment charges& other expenses relating to loan. Loss of cash discount: that s a loss because of temporary shortage of cash.

Cost associated with deterioration of credit rating. Penalty rates: By a bank to meet a shortfall in compensating balances. 1) Excess cash balance - cost associated with excessively large cash balances is known as excess cash balance cost. If large funds are idle the implication is that the firm has missed the opportunity to invest those funds and has thereby lost interest. This loss of interests primarily the excess cost. 2) Procurement & Management cost cost associated with establishing and operating cash management staff and activities. They are generally fixed and accounted for by salary, handling of securities. 3) Uncertainty the first requirement in cash management is Precautionary cushion to cope with irregularities in cash flows, unexpected delays in collection &disbursements, defaults and unexpected cash needs. Impact can be reduced through: Improved forecasting of tax payments, capital expenditure, dividendsetc. Increased ability to borrow through overdraft facility.

DETERMINING THE CASH NEEDS:

Cash needs can be determined though preparing cash budget, for year, month, week etc. Cash reports, providing a comparison of actual development with forecast figures, are helpful in controlling and revising cash forecasts on a continual basis The important cash reports are The daily cash reports Daily treasury reports The monthly cash report Monitoring collection and receivables: The Finance Manager must control the levels of cash balance at various points in the organization. This task assumes special importance on account of the fact that there is generally tendency amongst divisional manager to keep cash balance in excess of their needs. Hence a finance manager must devise a system whereby each division of organization retains enough cash to meet its day-to-day requirements without having surplus balance on hand. For this methods have to be employed to: 1) Speed up the mailing time of payment from customers 2) Reduce the time during which payments received by the firm remain 3) Uncollected and speed up the movement funds to disbursement banks.

For this purpose following can be helpful:

1 Prompt billing often there is time lag between the dispatched goods or provision of service and the sending of bills. By preparing ands sending the bills promptly, a firm can ensure earlier remittance. It should be realized that it is in the area of billing that the company control is high and there is a sizeable opportunity to free up cash. For this treasure should work with controller and others in: A) Accelerating invoice data B) Mailing bills promptly C) Identifying payment locations. 2 Expeditious collections of cheques - expediting collection of cheques Important and there are to methods 1. Concentration banking, 2.Lock box method Concentration banking: (decentralized collection) key elements are, The major bank account of the company is wetup with a concentration bank, generally situated in the same place where the company is head quartered. Customers are advised to mail their remittances to collection centre close to them. Payments collected in different collection centers are deposited in local banks which in turn transfer them to the concentration banks

Lock box method: Silent features are as follows

A number of post office boxes are rented by the companying different locations Customers are advised to mail there remittances to the lock boxes. Banks are authorized to picked up the cheques from the lock boxes and deposit them in the companies account. Controlling payables/disbursements: by proper control of payables company can manage cash resources. This involves Payment should be made as and when it fall due. Centralized disbursement payables and their disbursements may be centralized. This helps in consolidating the funds at head office scheduling payments, reducing unproductive bank balance and investing surplus funds more effectively. Proper synchronization of inflows and outflows helps accompany to get greater mileage from cash resources. Float: when firm issues cheques they reduce the balance in their books, but balance in banks book is not reduced till the payment is made by bank. This amount of cheques issued by the firm but not paid for by the bank is referred to as paymenfloat. When the cheques are deposited with bank the firm increases the balance in its books. The balance in the bank eBook however is cleared. The amount of cheques deposited by the firm in the bank but not cleared is referred to as collection float. Difference between payment float and collection float is called as net float. When the net float is positive the balance in the books of bank is higher than the balance in the books of firm. When the firm enjoys the positive float (net) it may issue cheques even if it has an overdrawn bank account in its books. Such an action is referred to a splaying the float It is considered risky. Accrual: accruals can be defined as current liabilities that represent a service or goods received by a firm but not yet paid for. For example remuneration to employee s that render services in advance and receive payment later. In a way, they extend credit to the firm for a period at the end of which theyre paid. Weekly is more important as compared to monthly. Other examples, rent to lessors, taxes to government.

OPTIMAL CASH BALANCE It a firm maintains a small cash balance, it has to sell its marketable securities more frequently than if it holds a large cash balance. Hence trading or transaction costs will tend to diminish if cash balance becomes larger. However, the opportunity costs of maintaining cash rise as the cash balance increases. From the figure, the total costs of holding cash are at a minimum when the size of the cash balance is C . This represents optimal cash balance. Deployment of surplus funds: Company s often have surplus funds for short period of time before they are required for capital expenditure, loan repayment or some other purposes. At the one end they are invested in term deposit in bank and on other end reinvested in equity shares. They can be invested in several options like Units of the unit 1964 scheme: This is the most important mutual fund scheme in India.

It has the following features1) It is a open ended scheme as it accepts funds from investors & also permits to withdraw their investments. 2) The units have face value of Rs. 10.00/- The sale & purchase price of units are not squarely based on the net asset per unit, as should be the case for a truly open ended scheme

DEBTORS MANAGEMENT

Assessing the credit worthiness of customers Before extending credit to a customer, a supplier should analyze the five Cs of credit worthiness, which will provoke a series of questions. These are Capacity: will the customer be able to pay the amount agreed within the allowable credit period? What is their past payment record? How large is the customer's business capital. what is the financial health of the customer? Is it a liquid and profitable concern, able to make payments on time? Character: do the customers management appear to be committed to prompt payment? Are they of high integrity? What are their personalities like? Collateral: what is the scope for including appropriate security in return for extending credit to the customer? Conditions: what are the prevailing economic conditions? How are these likely to impact on the customers ability to pay promptly? Whilst the materiality of the amount will dictate the degree of analysis involved, the major sources of information available to companies in assessing customers credit worthiness are: Bank references. These may be provided by the customers bank to indicate their financial standing. However, the law and practice of banking secrecy determines the way in which banks respond to credit enquiries, which can render such references uninformative, particularly when the customer is encountering financial difficulties. Trade references. Companies already trading with the customer may be willing to provide a reference for the customer. This can be extremely useful, providing that the companies approached are representative sample of all the clients suppliers. Such references can be misleading, as they are usually based on direct credit experience and contain no knowledge of the underlying financial strength of the customer. Financial accounts. The most recent accounts of the

customer can be obtained either direct from the business, or for limited companies, from Companies House. While subject to certain limitations past accounts can be useful in vetting customers. Where the credit risk appears high or where substantial levels of credit are required, the supplier may ask to see evidence of the ability to pay on time. This demands access to internal future budget data. Personal contact. Through visiting the premises and interviewing senior management, staff should gain an impression of the efficiency and financial resources of customers and the integrity of its management. Credit agencies. Obtaining information from a range of sources such as financial accounts, bank and newspaper reports, court judgments, payment records with other suppliers, in return for a fee, credit agencies can prove a mine of information. They will provide a credit rating for different companies. The use of such agencies has grown dramatically in recent years. Past experience. For existing customers, the supplier will have access to their past payment record. However, credit managers should be aware that many failing companies preserve solid payment records with key suppliers in order to maintain supplies, but they only do so at the expense of other creditors. Indeed, many companies go into liquidation with General sources of information. Credit managers should scout trade journals, business magazines and the columns of the business press to keep abreast of the key factors influencing customers businesses and their sector generally. Sales staffs who have their ears to the ground can also prove an invaluable source of information. Credit terms granted to customers Although sales representatives work under the premise that all sales are good (particularly, one may add, where commission is involved!),the credit manager must take a more dispassionate view. They must balance the sales representative's desire to extend generous credit terms, please customers and boost sales, with a cost/benefit analysis of the impact of such sales, incorporating the likelihood of

payment on time and the possibility of bad debts. Where a customer does survive the credit checking process, the specific credit terms offered to them will depend upon a range of factors. These include: Order size and frequency: companies placing large and/or frequent orders will be in a better position to negotiate terms than firms ordering on a one-off basis. Market position: the relative market strengths of the customer and supplier can be influential. For example, a supplier with a strong market share may be able to impose strict credit terms on a weak, fragmented customer base. Profitability: the size of the profit margin on the goods sold will influence the generosity of credit facilities offered by the supplier. If margins are tight, credit advanced will be on a much stricter basis than where margins are wider. Financial resources of the respective businesses: from the suppliers perspective, it must have sufficient resources to be able to offer credit and ensure that the level of credit granted represents inefficient use of funds. For the customer, trade credit may represent an important source of finance, particularly where finance is constrained. If credit is not made available, the customer may switch to an alternative, more understanding supplier. Industry norms: unless a company can differentiate itself in some manner (e.g., unrivalled after sales service), its credit policy will generally be guided by the terms

Offered by its competitors. Suppliers will have to get a feel for the sensitivity of demand to changes in the credit terms offered to customers. Business objectives: where growth in market share is an objective, trade credit may be used as a marketing device (i.e., liberalized to boost sales volumes).

The main elements of a trade policy are: Terms of trade: the supplier must address the following questions: which customers should receive credit? How much credit should be advanced to particular customers and what length of credit period should be allowed? Cash discounts: suppliers must ponder on whether to provide incentives to encourage customers to pay promptly. A number of companies have abandoned the expensive practice of offering discounts as customers frequently accepted discounts without paying in the stipulated period. Collection policy: an efficient system of debt collection is essential. A good accounting system should invoice customers promptly, follow up disputed invoices speedily, issue statements and reminders at appropriate intervals, and generate management reports such as an aged analysis of debtors. A clear policy must be devised for overdue accounts, and followed up consistently, with appropriate procedures (such as withdrawing future credit and charging interest on overdue amounts). Materiality is important. Whilst it may appear nonsensical to spend time chasing a small debt, by doing so, a company may send a powerful signal to its customers that it is serious about the application of its credit and collection policies. Ultimately, a balance must be struck between the cost of implementing a

strict collection policy (i.e., the risk of alienating otherwise good customers) and the tangible benefits resulting from good credit management Problems in collecting debts Despite the best efforts of companies to research the companies to whom they extend credit, problems can, and frequently do, arise. These include disputes over invoices, late payment, deduction of discounts where payment is late, and the troublesome issue of bad debts. Space precludes detailed examination of debtor finance, so this next section concentrates solely on the frequently examined method of factoring. Factoring an evaluation Key elements: Factoring involves raising funds against the security of a company's trade debts, so that cash is received earlier than if the company waited for its credit customers to pay. Three basic services are offered, frequently through subsidiaries of major clearing banks: Sales ledger accounting, involving invoicing and the collecting of debts; Credit insurance, which guarantees against bad debts; Provision of finance, whereby the factor immediately advances about80% of the value of debts being collected.

There are two types of factoring service: Non-recourse factoring is where the factoring company purchases the debts without recourse to the client. This means that if the clients debtors do not pay what they owe, the factor will not ask for his money back from the client. Recourse factoring, on the other hand, is where the business takes the bad debt risk. With 80% of the value of debtors paid up front (usually electronically into the clients bank account, by the next working day), the remaining 20% is paid over when either the debtors pay the factor (in the case of recourse factoring), or, when the debt becomes due (non-recourse factoring).

Factors usually charge for their services in two ways:

administration fees and finance charges. Service fees typically range from0.5 3% of annual turnover. For the finance made available, factors levy a separate charge, similar to that of a bank overdraft. Advantages 1) provides faster and more predictable cash flows; 2) Finance provided is linked to sales, in contrast to overdraft limits, which tend to be determined by historical balance sheets; 3) The business can pay its suppliers promptly (perhaps benefiting from Discounts) and because they have sufficient cash to pay for stocks, The firm can maintain optimal stock levels; 4) Management can concentrate on managing, rather than chasingdebts;

5) The cost of running a sales ledger department is saved and the Company benefits from the expertise (and economies of scale) of the Factor in credit control

Disadvantages
1) The interest charge usually costs more than other forms of short-term Debt 2) The administration fee can be quite high depending on the number of Debtors, the volume of business and the complexity of the accounts 3) Communication system, which hinders the debt collection process; Traditionally the involvement of a factor was perceived in a negative Light (indicating that a company was in financial difficulties), though Attitudes are rapidly changing.

Conclusion: Working capital management is of critical importance to all companies. Ensuring that sufficient liquid resources are available to the company is a Pre-requisite for corporate survival. Companies must strike a balance Between minimizing the risk of insolvency (by having sufficient working Capital) with the need to maximize the return on assets, which demands a Far less conservative outlook.

CREDITORS MANAGEMENT

MANAGING PAYABLES (CREDITORS) Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Consider the following: Who authorizes purchasing in your company - is it tightly managed Or spread among a number of (junior) people? Are purchase quantities geared to demand forecasts? Do you use order quantities, which take account of stock holding and purchasing costs? Do you know the cost to the company of carrying stock? Do you have alternative sources of supply? If not, get quotes from major suppliers and shop around for the best discounts, credit terms, and reduce dependence on a single supplier. How many of your suppliers have a returns policy? Are you in a position to pass on cost increases quickly through price Increases to your customers? If a supplier of goods or services lets you down can you charge back the cost of the delay? Can you arrange (with confidence!) to have delivery of supplies staggered or on a just-in-time basis? There is an old adage in business that if you can buy well then you can sell well. Management of your creditors and suppliers is just as important as the management of your debtors. It is important to look after your creditors -slow payment by you may create ill feeling and can signal that your company is inefficient (or in trouble!).

INVENTORY MANAGEMENT
Managing inventory is a juggling act. Excessive stocks can place a heavy burden on the cash resources of a business. Insufficient stocks can result in lost sales, delays for customers etc.The key is to know how quickly your overall stock is moving or, put another way, how long each item of stock sit on shelves before being sold. Obviously, average stock-holding periods will be influenced by the nature of the business. For example, a fresh vegetable shop might turn over its entire stock every few days while a motor factor would be much slower as it may carry a wide range of rarely-used spare parts in case somebody needsthem.Nowadays, many large manufacturers operate on a Just-In-Time (JIT) basis where all the components to be assembled on a particular today, arrive at the factory early that morning, no earlier - no later. This helps to minimize manufacturing costs as JIT stocks take up little space, minimize stockholding and virtually eliminate the risks of obsolete or damaged stock. Because JIT manufacturers hold stock for a very short time, they are able to conserve substantial cash. JIT is a good model to strive for as it embraces all the principles of prudent stock management. The key issue for a business is to identify the fast and slow stock movers with the objectives of establishing optimum stock levels for each category and, thereby, minimize the cash tied up in stocks. Factors to be considered when determining optimum stock levels include: What are the projected sales of each product? How widely available are raw materials, components etc.?How long does it take for delivery by suppliers? an you remove slow movers from your product range without compromising best sellers? Remember that stock sitting on shelves for long periods

of time ties up money, which is not working for you. For better stock control, try thefollowing:Review the effectiveness of existing purchasing and inventorysystems.Know the stock turn for all major items of inventory. Apply tight controls to the significant few items and simplify controls for the trivial many. Sell off outdated or slow moving merchandise - it gets more difficult to sell the longer you keep it. Consider having part of your product outsourced to another manufacturer rather than make it yourself. Review your security procedures to ensure that no stock "is going out the backdoor! Higher than necessary stock levels tie up cash and cost more in insurance, accommodation costs and interest charges.

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY:- DESCRIPTIVE RESEARCH

Data collection:
There are two methods of collecting data: Primary data from - employees, customer, interview & observation Secondary data from- balance sheet, profit & loss a\c, internet

Objective of the study

To study the sources of financing of Working capital. To study whether the capital is enough for the working or it required more.

RESEARCH TYPE:

SAMPLING UNITS: - A bank i.e. HINDU COOPERATIVE BANK

SAMPLING TECHNIQUE: - CONVEINENCE SAMPLING has been done, different branches of the same bank in same district has been sampled.

RESEARCH INSTRUMENT: - Annual report, balance sheet

ANALYTICAL TOOL USED: - Ratios of various types, i.e., Financial (current and liquid) and cash reserve ratio, statutory liquidity ratio.

CONTACT METHOD:-Personal meeting with staff members or experts of finance department.

SAMPLE SIZE: - It is not there any perfect sample size .all the reports and books related with banks have been taken as sample for this report. It was not possible to cover the whole universe in the available time period. (100 employees and customer)

ANALYSIS OF WORKING CAPITAL

In the year 2008-09 Balance sheet HINDU COOPERATIVE BANK attain Rs 19661.38 laces. working capital more than last year i.e. of Rs.15668.21 in 2006-07 thereby registering a growth of Rs.3993.16 Laces. During the year .The bank is going in a profitability situation in such recession situation too. The figure of balance sheet has been attained if we done certain contra entries (entries that have been done on both sides of the balance sheet i.e. on credit as well as on debit side) Certain such types of transactions are given below: On Asset side: A) Interest receivable which is overdue of Rs. 297.87 laces B) Bill receivable of Rs.22.73 laces On Liability side: a) Bill for collection being receivable as per contra of Rs. 22.73 laces b) Overdue Interest Reserve of Rs.297.87 laces After eliminating all such transactions from the balance sheet we are able to get required working capital of the bank.

Finding 1: sources of funds Reserve Bank of India Advance Accounts Receivable Credit Accrued Expenses Commercial Papers Trade Creditors etc. Findings 2 The finding its operations like employees salaries, daily deficit financing, operating expenses. Of second objective is that the co-operative bank needs more working capital for

ANALYSIS AND INTERPRETATION:

The financial analysis

From the above table it is clear that the quick ratio of the company decreased for the period 2007-08 and then after it increased in the year 2009 and further decreased. Moreover quick ratio is more than the banker's rule of thumb i.e. 1:1 in all the years. The company is highly liquid to fulfill C.L well in time. In 2007-2008 company's quick ratio is 3.45 and 2.56 in 2008-2009. But from the analysis of B/S, we came to know that the major portion of quick assets consists of sundry debtors. if the company reveals that the liquidity position of the company is satisfying.

RECOMMENDATIONS

No doubt that the bank staff is well qualified in their work but their must be need of some expertise officers in the bank who can well explain the profitability position of the bank to its customers .Officers of the bank should recommend high investment to its right customers so profitability can be increased continuously .The bank need to make people aware about their service and basic benefits .they can derive out of it 40% of people even did not know about concept ,benefit and feature of bank .Bank should target small business units as it already does but there is need to give more stress on this work area .

Limitation of the study

No study is complete in itself, however good it may be and every study has some limitation which I had to face while conducting this research are as follows. Insufficient time and resources. Lack of availability of information as only few magazines and journals were available. Certain calculations have been taken as per static view, which might not match with real situations. Research has been conducted on the basis of secondary data so any misinterpretation from these data might effect on research. It is not possible to observe every aspect of working capital management practice .

CONCLUSION
After study the components of working capital management system of Hindu cooperative bank .It is found that bank has a sound and effective policy and its performance is very good even in the Bad recession situation bank has managed to post good profit . Bank is competing well at district as well as National level .The service of the bank is good as a result it attracts more and more customer and hence the revenue of the bank increases and so the profit is. The bank has one unique quality to retain its customer is if one has to take the loan from Hindu co-operative bank then he will have to become the permanent member of the bank by purchasing 2.5% share of the amount taken as loan The bank is a matured one and it has contributed well in countries banking growth and development and will also continue to perform and contribute to whole banking sector .In conclusion we can say that bank management is an effective one in term of managing the finance , whom bank has got status in money market and reach up to such heights and achieve such tremendous growth .

BIBLIOGRAPHY

BOOKS Sharma R.K., Gupta Shashi, Singh Jaswant, banking and Foreign trade laws & Procedures, Kalyani Publishers, New Delhi S. C. Gupta, V. K. Kapoor, Fundamental of Statistics, Sultan Chand and Sons, New Delhi S. P. Gupta, Statistical Methods,Sultan Chand & Sons,NewDelhi. INTERNET
www.indiainfoline.com www.google.com www.hcb.com

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