A PROJTECT ON WORKING CAPITAL MANAGEMENT AT

KRAYONS INTERIOR PVT LIMITED

Report Submitted In Partial Fulfilment of the Requirements for the Award of

Degree in Master of Business Administration of Mahatma Gandhi University
By
SURAG V S
Reg.No:42556
Under the Guidance of
Mrs. Sony stephen
(Asst. Professor )

DEPARTMENT OF MANAGEMENT STUDIES

MANGALAM COLLEGE OF ENGINEERING
ETTUMANOOR, KOTTAYAM
2012-2014

DEPARTMENT OF MANAGEMENT STUDIES

MANGALAM COLLEGE OF ENGINEERING
ETTUMANOOR, KOTTAYAM

CERTIFICATE
This is to certify that the report titled working capital management with a
special reference to KRAYONS INTERIORS is a bonafide record of the
work done by Mr. SURAG V S as a part of project work during the fourth
semester at KRAYONS INTERIORS SYSTEMS PVT LTD in partial
fulfilment of the requirements for the award of the degree of MASTER OF
BUSINESS
ADMINISTRATION
of
MAHATHMA
GANDHI
UNIVERSITY

Project Guide

Head of the Department

Director of the Department

Department of Management Studies

DECLARATION

This is to state that the study entitled A PROJTECT ON WORKING CAPITAL

MANAGEMENT AT KRAYONS INTERIOR PVT LIMITED is based on the original
work carried by me under the supervision of Ms. Sony Stephen towards partial
fulfillment of the requirements for the M.B.A course of M.G University. This has
not been submitted in part or full towards any other degree or diploma. All the data
both primary and secondary- are true to the best of my knowledge

Place
Date

SURAG . V. S

ACKNOWLEDGEMENT
First of all I thank the god almighty for giving this opportunity for me to do a
project in the name PROJECT in the company A PROJTECT ON WORKING
CAPITAL MANAGEMENT AT

KRAYONS INTERIOR PVT LIMITED. This

project gave me a wonderful experience in the field of interior system industry

I would like to express my heartfelt thanks to Dierector of the department
Prof. DR FRANCIS CHERUNILAM, and DR.SIBU C CHITRAN, MBA,
M.phill, Ph.D, FDP(IIMK), AMT(AIMA), MAIMSI(USA) Head Of the Department
management studies for all academic facilities extended to me. I am immensely
thankful to my internal project guide Mrs. SONY STEPHEN, Assistant professor of
the Management department, for her creative and healthy suggestions regarding this
project work.
I express my sincere gratitude to the Mr LITTO. JOHNSON I would like to
extend my gratitude to the guide Mr. SAFEER V of the organization who permitted
me to do the organization study as I could get a wonderful live experience in the field
of business. Without their support this study would not have been possible. Last but
not the least I would like to thank my friends, family and rest of the faculty members
of my college who gave me the full encouragement.

SURAG V S

1.1 INTRODUCTION TO THE STUDY

The accounting principle board of American institute of certified public
accountants, USA, has defined working capital as follows:Working capital, sometimes called net working capital, is represented at the
excess of current asset over current liabilities and identifies the relatively liquid
portion of total enterprise capital which constitutes a margin or buffer for maturing
obligations within the ordinary operating cycle of the business".
Management of working capital therefore is concerned with the problem that is
attempting to manage the current assets, the current liabilities and the interrelationship
that exist between them .in other word it refers t administration of botl current assets
and 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 inadequate nor excessive.
This is because both inadequacy as well as excessive working capital implies
idle funds, which earns no profit for the business. Working capital management
policies of a firm have a great effect on its profitability, liquidity, and structural health
of the organization
Working capital is the life blood and nerve center of business. Working capital
is very essential to maintain smooth running of a business. No business can run
successfully without an adequate amount of working capital. The main advantages or
importance of working capital are as follows:

1. Strengthen the Solvency

Working capital helps to operate the business smoothly without any financial
problem for making the payment of short-term liabilities. Purchase of raw materials
and payment of salary, wages and overhead can be made without any delay. Adequate
working capital helps in maintaining solvency of the business by providing
uninterrupted flow of production.
2. Enhance Goodwill
Sufficient working capital enables a business concern to make prompt
payments and hence helps in creating and maintaining goodwill. Goodwill is
enhanced because all current liabilities and operating expenses are paid on time.
3. Easy Obtaining Loan
A firm having adequate working capital, high solvency and good credit rating
can arrange loans from banks and financial institutions in easy and favorable terms.
4. Regular Supply of Raw Material
Quick payment of credit purchase of raw materials ensures the regular supply
of raw materials from suppliers. Suppliers are satisfied by the payment on time. It
ensures regular supply of raw materials and continuous production.
5. Smooth Business Operation
Working capital is really a life blood of any business organization which
maintains the firm in well condition. Any day to day financial requirement can be met
without any shortage of fund. All expenses and current liabilities are paid on time.

6. Ability To Face Crisis

Adequate working capital enables a firm to face business crisis in emergencies
such as depression.

SCOPE OF THE STUDY

At Krayons interior systems pvt ltd a substantial part of the total assets are covered by
current assets. However this could be less profitable on the assumption that current
assets generate lesser returns as compared to fixed assets.
Here comes the need of working capital management or managing the investments in
current assets. Thus the initial stages of KRAYONS is not easy at all to implement a
good working capital management as it demands individual attention on its different
components.
The study of working capital management is very helpful for the organisation to know
its liquidity position. The study is relevant to the organization to know the day to day
expenditure. This study is relevant to give an idea to utilise the current assets.
This study is also relevant to the student as they can use it as a reference. This report
will help in conducting further research. Other researcher can use this project as
secondary data

OBJECTIVE OF THE STUDY:

Everything in life holds some kinds of objectives to be fulfilled. This study is not an
exception to it. The following are a few straight forward goals which i have tried to
fulfil in my project:
1) To study the various components of working capital.
2) To analyze the liquidity trend.
3) To analyze the working capital trend.
4) To appraise the utilization of current asset and current liabilities and find out shortcomings if any.
5) To suggest measure for effective management of working capital.

STATEMENT OF THE PROBLEM

Financial statements can provide valuable insights into a firms performance.
Analysis of financial statements is useful for the company to evaluate its own
performance and also it is of interest to lenders (short term as well as long term),
investors, security analysts, managers and others. To evaluate the effectiveness of
operations and to determine its success an analyst has to combine quantitative results
with qualitative factors. For instance a companys current profitability may be low.
However, because of actions initiated by the management like technology up
gradation, joint venture and collaboration with a foreign partner, etc. The prospects for
better performance of the company in future may be bright.
To fulfil its endeavour to maximize the shareholders wealth, firm has to earn
sufficient return from its operations, which needs a successful sales activity. The firm
has to invest sufficient funds in current asset to succeed in sales, as the sales do not
convert into cash instantaneously because of time gap between the sale of goods and
actual receipt in cash. Hence there is a need for Working Capital in the form of current
assets to sustain sales activity during that period.

PERIOD OF STUDY
The study is carried out for 45 days by collecting data for a period of three financial
year from 2010 to 2013

ASSUMPTIONS OF THE STUDY

It is assumed that all the information provided by the company and collected from the
annual report are true and fair.

METHODOLOGY OF THE STUDY

This study is mainly based on secondary data. The data required for the study was
collected from annual reports and other published documents of the company. This
study covers three years period starting from 2010 to 2013. The data collected from
these reports were compiled as per the requirement of the study. Some data were
grouped and sub grouped to arrive at various financial indicators. The collected and
compiled data was processed with the help of electronic medium to reduce the chance
of human error. Any fluctuations before or after the study period is not under
consideration.
For analyzing the behavior of above compiled data various statistical and financial
tools were applied.. The technique of financial statement analysis which were used in
the study was ratio analysis, schedule of changes in working capital, were used.
For analyzing the behavior of above ratios and compiled data were various statistical
techniques were used like arithmetic mean, average growth rate, standard deviation
and students t- test. All the above techniques were used to have a detailed project
study on the topic.

LIMITATIONS OF THE STUDY:

The span of study is confined to only 3 years. The comparison of various ratios
may not have the same conditions, which may result in unrelated comparisons.
This study was carried out only for 45 days. So all the necessary literature study
was not possible.

KRAYONS interiors systems pvt ltd not depends on for procurement of raw
materials & supply of finished goods. Hence the Working Capital Inventory
management techniques have to be adjusted on a timely basis, based on
KRAYONS interiors systems pvt ltd needs.

In this project report the Working Capital Management & Cash Management
system followed during the time of doing the project is recorded and analyzed.

The study is mainly based on secondary data, so the limitation of secondary data is
associated with this study.

2.1 INDUSTRY PROFILE

HISTORY

INTERIOR DESIGNING INDUSTRY

Interior design describes a group of various yet related projects that involve turning an
interior space into an "effective setting for the range of human activities" that are to
take place there.[1] An interior designer is someone who coordinates and manages such
projects. Interior design is a multifaceted profession that includes conceptual
development, communicating with the stakeholders of a project and the management
and execution of the design.

In the past, interiors were put together instinctively as a part of the process of
building.[1] The profession of interior design has been a consequence of the
development of society and the complex architecture that has resulted from the
development of industrial processes. The pursuit of effective use of space, user wellbeing and functional design has contributed to the development of the contemporary
interior design profession.

In ancient India, architects used to work as interior designers. This can be seen from
the references of Vishwakarma the architect - one of the gods in Indian mythology.
Additionally, the sculptures depicting ancient texts and events are seen in palaces built
in 17th century India.

Throughout the 17th and 18th century, and into the early 19th Century, interior
decoration was the concern of the homemaker or, an employed upholsterer or
craftsman who would advise on the artistic style for an interior space. Architects
would also employ craftsmen or artisans to complete interior design for their
buildings.

Commercial interior design & management

In the mid- to late-19th century, interior design services expanded greatly, as
the middle class in industrial countries grew in size and prosperity and began to desire
the domestic trappings of wealth to cement their new status. Large furniture firms
began to branch out into general interior design and management, offering full house
furnishings in a variety of styles. This business model flourished from the mid-century
to 1914, when this role was increasingly usurped by independent, often amateur,
designers. This paved the way for the emergence of the professional interior design in
the mid-20th century.

In the 1850s and 1860s, upholsterers began to expand their business remits. They
framed their business more broadly and in artistic terms and began to advertise their
furnishings to the public. To meet the growing demand for contract interior work on
projects such as offices,hotels, and public buildings, these businesses became much
larger and more complex, employing builders, joiners, plasterers, textile designers,
artists, and furniture designers, as well as engineers and technicians to fulfil the job.
Firms began to publish and circulate catalogswith prints for different lavish styles to
attract the attention of expanding middle classes.
As department stores increased in number and size, retail spaces within shops were
furnished in different styles as examples for customers. One particularly effective
advertising tool was to set up model rooms at national and international exhibitions in

showrooms for the public to see. Some of the pioneering firms in this regard
were Waring&Gillow, James Shoolbred, Mintons and Holland & Sons. These
traditional high-quality furniture making firms began to play an important role as
advisers to unsure

middle class customers on taste and style, and began taking out contracts to design
and furnish the interiors of many important buildings in Britain.
This type of firm emerged in America after the Civil War. The Herter Brothers,
founded by two German emigre brothers, began as an upholstery warehouse and
became one of the first firms of furniture makers and interior decorators. With their
own design office and cabinet-making and upholstery workshops, Herter Brothers
were prepared to accomplish every aspect of interior furnishing including decorative
paneling and mantels, wall and ceiling decoration, patterned floors and carpets and
draperies.
A pivotal figure in popularizing theories of interior design to the middle class was the
architect Owen Jones, one of the most influential design theorists of the nineteenth
century. Jones first project was his most important - in 1851 he was responsible for not
only the decoration of Joseph Paxtons gigantic Crystal Palace for the Great
Exhibition, but also for the arrangement of the exhibits within. He chose
a controversial palette of red, yellow and blue for the interior ironwork and, despite
initial negative publicity in the newspapers, was eventually unveiled by Queen
Victoria to much critical acclaim. His most significant work was The Grammar of
Ornament (1856), in which Jones formulated 37 key principles of interior design and
decoration.
Jones was employed by some of the leading interior design firms of the day; in the
1860s he worked in collaboration with the London firm Jackson & Graham to produce
furniture and other fittings for high-profile clients including art collector Alfred
Morrison and the Khedive of Egypt, Ismail Pasha.

In 1882 the London Directory of the Post Office listed 80 interior decorators. Some of
the most distinguished companies of the period were Crace, Waring&Gillow and
Holland & Sons; famous decorators employed by these firms, included Thomas
Edward

Collcutt,Edward

William

Godwin, Charles

Barry, Gottfried

Semper and George Edmund Street.

Transition to professional interior design

By the turn of the 20th century, amateur advisors and publications were increasingly
challenging the monopoly that the large retail companies had on interior design.
English feminist author Mary Haweis wrote a series of widely read essays in the
1880s in which she derided the eagerness with which aspiring middle-class people
furnished their houses according to the rigid models offered to them by the retailers.
[9]

She advocated the individual adoption of a particular style, tailor made to the

individual needs and preferences of the customer:

One of my strongest convictions, and one of the first canons of good taste, is that our
houses, like the fishs shell and the birds nest, ought to represent our individual taste
and habits.

The move towards decoration as a separate artistic profession unrelated to the

manufacturers and retailers, received an impetus with the 1899 formation of the
Institute of British Decorators; with John Dibblee Crace as its president it represented
almost 200 decorators around the country.[10] By 1915, the London Directory listed
127 individuals trading as interior decorators, of which 10 were women. Rhoda and
Agnes Garrett were the first women to train professionally as home decorators in

1874. The importance of their work on design was regarded at the time as on a par
with that of William Morris. In 1876, their work -Suggestions for House Decoration in
Painting, Woodwork and Furniture - spread their ideas on artistic interior design to a
wide middle-class audience.
Until recently when a man wanted to furnish he would visit all the dealers and select
piece by piece of furniture today he sends for a dealer in art furnishings and fittings
who surveys all the rooms in the house and he brings his artistic mind to bear on the
subject.

In America, Candace Wheeler was one of the first woman interior

designers and helped encourage a new style of American design. She was instrumental
in the development of art courses for women in a number of major American cities
and was considered a national authority on home decoration. An important influence
on the new profession was The Decoration of Houses, a manual of interior design
written by Edith Wharton with architect Ogden Codman in 1897 in America. In the
book, the authors denounced Victorian-styleinterior decoration and interior design,
especially those rooms that were decorated with heavy window curtains, Victorian
bric-a-brac and overstuffed furniture. They argued that such rooms emphasized
upholstery at the expense of proper space planning and architectural design and were,
therefore, uncomfortable and rarely used.The book is considered a seminal work and
its success led to the emergence of professional decorators working in the manner
advocated by its authors, most notably vElsie de WolfeElsie De Wolfe was one of the
first female interior designers. Rejecting the Victorian style she grew up with, she
chose a more vibrant scheme, along with more comfortable furniture in the home. Her
designs were light, with fresh colors and delicate Chinoiserie furnishings, as opposed
to the Victorian preference of heavy, red drapes and upholstery, dark wood and
intensely patterned wallpapers. Her designs were also more practical; [14] she
eliminated the clutter that occupied the Victorian home, enabling people to entertain
more guests comfortably. In 1905, de Wolfe was commissioned for the interior design
of the Colony Club on Madison Avenue; its interiors garnered her recognition almost

over night. She compiled her ideas into her widely read 1913 book, The House in
Good Taste.

In England, Syrie Maugham became a legendary interior designer credited with

designing the first all-white room. Starting her career in the early 1910s, her
international reputation soon grew; she later expanded her business to New
York and Chicago.[18] Born during the Victorian Era, a time characterized by dark
colors and small spaces, she instead designed rooms filled with light and furnished in
multiple shades of white and mirrored screens. In addition to mirrored screens, her
trademark

pieces included: books covered in white vellum, cutlery with white porcelain handles,
console tables with plaster palm-frond, shell, or dolphin bases, upholstered and
fringed sleigh beds, fur carpets, dining chairs covered in white leather, and lamps of
graduated glass balls.

Expansion
The interior design profession became more established
after World War II. From the 1950s onwards spending on the home increased. Interior
design courses were established, requiring the publication of textbooks and reference
sources. Historical accounts of interior designers and firms distinct from the
decorative arts specialists were made available. Organisations to regulate education,
qualifications, standards and practices, etc. were established for the profession.
Interior design was previously seen as playing a secondary role to
architecture. It also has many connections to other design disciplines, involving the
work of architects, industrial designers, engineers, builders, craftsmen, etc. For these
reasons the government of interior design standards and qualifications was often
incorporated
[17]

into

other

professional

organisations

that

involved

design.

Organisations such as the Chartered Society of Designers, established in the UK in

1986, and the American Designers Institute, founded in 1938, were established as
organisations that governed various areas of design.

It was not until later that specific representation for the interior design
profession was developed. The US National Society of Interior Designers was
established in 1957, while in the UK the Interior Decorators and Designers
Association was established in 1966. Across Europe, other organisations such as The
Finnish Association of Interior Architects (1949) were being established and in 1994
the International Interior Design Association was founded.

Ellen Mazur Thomson, author of Origins of Graphic Design

in America (1997), determined that professional status is achieved through education,
self-imposed standards and professional gate-keeping organizations. Having achieved
this, interior design became an accepted profession.

Interior designer
Interior Designer implies that there is more of an emphasis
on Planning, Functional design and effective use of space involved in this profession,
as compared to interior decorating. An interior designer can undertake projects that
include arranging the basic layout of spaces within a building as well as projects that
require an understanding of technical issues such as acoustics, lighting, temperature,
etc. Although an interior designer may create the layout of a space, they may not alter
load-bearing walls without having their designs stamped for approval by an architect.
Interior Designers often work directly with architectural firms.

An interior designer may wish to specialize in a particular type of interior

design in order to develop technical knowledge specific to that area. Types of interior
design include residential design, commercial design, hospitality design, healthcare
design, universal design, exhibition design, spatial branding, etc. The profession of
Interior Design is relatively new, constantly evolving, and often confusing to the
public. It is an art form that is consistently changing and evolving. Not only is it an
art, but it also relies on research from many fields to provide a well-trained designer's
understanding of how people are influenced by their environments. NCIDQ, the board
for Interior Design qualifications, defines the profession in the best way:

Residential
Residential design is the design of the interior of private
residences. As this type design is very specific for individual situations, the needs and
wants of the individual are paramount in this area of interior design. The interior
designer may work on the project from the initial planning stage or may work on the
remodelling of an existing structure. It is often a very involved process that takes
months to fine tune and create a space with the vision of the client. Fine examples of
contemporary designers include Kelly Hoppen and David Collins who in keeping with
current trends have both a strong media presence and successful independent business

Commercial
Commercial design encompasses a wide range of sub specialties.

Retail: includes malls and shopping centres, department stores, specialty stores,
visual merchandising and showrooms.

Visual and Spatial Branding: The use of space as a media to express the Corporate
Brand

Corporate: office design for any kind of business such as banks

Healthcare: the design of hospitals, assisted living facilities, medical offices, dentist
offices, psychiatric facilities, laboratories, medical specialist facilities

Hospitality and Recreation: includes hotels, motels, resorts, cafes, bars, restaurants,
health clubs and spas, etc.

Institutional: government offices, financial institutions (banks and credit unions),

schools and universities, religious facilities, etc.

Industrial facilities: manufacturing and training facilities as well as import and

export facilities.

Teaching in a private institute that offer classes of Interior Design

Self-Employment

Employment in private sector firms

STYLES
Art Deco
The Art Deco style began in Europe in the early years of the 20th century,
with the waning of Art Nouveau. The term "Art Deco" was taken from the Exposition
Internationale des Arts Decoratifs ET IndustrielsModernes, a worlds fair held in Paris
in 1925 Art Deco rejected many traditional classical influences in favor of more
streamlined geometric forms and metallic color. The Art Deco style influenced all

areas of design, especially interior design, because it was the first style of interior
decoration to spotlight new technologies and materials.
Art Deco style is mainly based on geometric shapes, streamlining and clean lines. The
style offered a sharp, cool look of mechanized living utterly at odds with anything that
came before.
Art Deco rejected traditional materials of decoration and interior design, opting
instead to use more unusual materials such as chrome, glass,stainless steel, shiny
fabrics, mirrors, aluminium, lacquer, inlaid wood, sharkskin, and zebra skin. The use
of harder, metallic materials was chosen to celebrate the machine age. These materials
reflected the dawning modern age that was ushered in after the end of the First World
War. The innovative combinations of these materials created contrasts that were very
popular at the time - for example the mixing together of highly polished wood and
black lacquer with satin and furs.[28] The barber shop in the Austin Reed store in
London was designed by P. J. Westwood. It was soon regarded as the trendiest barber
shop in Britain due to its use of metallic materials.
The color themes of Art Deco consisted of metallic color, neutral color, bright color
and, black and white. In interior design, cool metallic colors including silver, gold,
metallic blue, charcoal grey and platinum tended to predominate.Serge Chermayeff, a
Russian-born British designer made extensive use of cool metallic colors and
luxurious surfaces in his room schemes. His 1930 showroom design for a British
dressmaking firm had a silver-grey background and black mirrored-glass wall panels.

Black and white was also a very popular color scheme during the 1920s
and 1930s. Black and white checkerboard tiles, floors and wallpapers were very
trendy at the time. As the style developed, bright vibrant colors became popular as
well.
Art Deco Furnishings and lighting fixtures had a glossy, luxurious
appearance with the use of inlaid wood and reflective finishes. The furniture pieces

often had curved edges, geometric shapes and clean lines. Art Deco lighting fixtures
tended to make use of stacked geometric patterns.

Arab Materials
Majlis painting, also called nagash painting is the decoration of
the majlis or front parlor of traditional Arabic homes in the Asir province of Saudi
Arabia and adjoining parts ofYemen These wall paintings, an arabesque form
of mural or fresco, show various geometric designs in bright colors: Called 'nagash'
in Arabic, the wall paintings were a mark of pride for a woman in her house.
The geometric designs and heavy lines seem to be adapted from the
areas textile and weaving patterns. In contrast with the sobriety of architecture and
decoration in the rest of Arabia, exuberant color and ornamentation characterize those
of 'Asir. The painting extends into the house over the walls and doors, up the
staircases, and onto the furniture itself. When a house is being painted, women from
the community help each other finish the job. The building then displays their shared
taste and knowledge. Mothers pass these on to their daughters. This artwork is based
on a geometry of straight lines and suggests the patterns common to textile weaving,
with solid bands of different colors. Certain motifs reappear, such as the
triangular mihrab or 'niche' and the palmette. In the past, paint was produced from
mineral and vegetable pigments. Cloves and alfalfa yielded green. Blue came from
the indigo plant. Red came from pomegranates and a certain mud. Paintbrushes were
created from the tough hair found in a goat's tail. Today, however, women use modern
manufactured paint to create new looks, which have become an indicator of social and
economic change.

Women in the Asir province often complete the decoration and

painting of the house interior. You could tell a familys wealth by the paintings, Um
Abdullah says: If they didnt have much money, the wife could only paint
the motholath, the basic straight, simple lines, in patterns of three to six repetitions in

red, green, yellow and brown. When women did not want to paint the walls
themselves, they could barter with other women who would do the work. Several
Saudi women have become famous as majlis painters, such as Fatima AbouGahas.
The interior walls of the home are brightly painted by the women,
who work in defined patterns with lines, triangles, squares, diagonals and tree-like
patterns. Some of the large triangles represent mountains. Zigzag lines stand for
water and also for lightning. Small triangles, especially when the widest area is at the
top, are found in pre-Islamic representations of female figures. That the small triangles
found in the wall paintings in Asir are called banat may be a cultural remnant of a
long-forgotten past.
"Courtyards and upper pillared porticoes are principal features of the
best Nadjdi architecture, in addition to the fine incised plaster wood (jiss) and painted
window shutters, which decorate the reception rooms. Good examples of plasterwork
can often be seen in the gaping ruins of torn-down buildings- the effect is light,
delicate and airy. It is usually around themajlis, around the coffee hearth and along the
walls above where guests sat on rugs, against cushions. Doughty wondered if this
"parquetting of jis", this "gypsum fretwork... all adorning and unenclosed" originated
from India. However, the Najd fretwork seems very different from that seen in the
Eastern Province and Oman, which are linked to Indian traditions, and rather
resembles the motifs and patterns found in ancient Mesopotamia.

The rosette, the star, the triangle and the stepped pinnacle pattern of dadoes are
all ancient patterns, and can be found all over the Middle East of antiquity. Al-Qassim
Province seems to be the home of this art, and there it is normally worked in hard
white plaster (though what you see is usually begrimed by the smoke of the coffee
hearth). In Riyadh, examples can be seen in unadorned clay."

Japanese materials
Japanese design is based strongly on craftsmanship, beauty, elaboration,
and delicacy. The design of interiors is very simple but made with attention to detail
and intricacy. This sense of intricacy and simplicity in Japanese designs is still valued
in modern Japan as it was in traditional Japan.
Japanese interior design is very efficient in the use of resources.
Traditional and modern Japanese interiors have been flexible in use and designed
mostly with natural materials. The spaces are used as multifunctional rooms. The
rooms can be opened to create more space for an occasion or more private and closedoff by pulling closed paper screens called shoji. A large portion of Japanese interior
walls are often made of shoji screens that can be pushed opened to join two rooms
together, and then close them allowing more privacy. The shoji screens are made of
paper attached in thin wooden frames that roll away on a track when they are pushed
opened. Another large importance of the shoji screen besides privacy and seclusion is
that they allow light through. This is an important aspect to Japanese design. Paper
translucent walls allow light to be diffused through the space and create light shadows
and patterns. Another way to connect rooms in Japans interiors is through Sliding
panels made of wood and paper, like the shoji screens, or cloth. These panels are
called Fusuma and are used as an entire wall. They are traditionally hand painted.

Tatami mats are rice straw floor mats often used as the actual floor in
Japans interiors; although in modern Japan, there usually are only one or two tatami
rooms. A Tokonoma is often present in traditional, as well as modern Japanese living
rooms. This determines the focus of the room and displays Japanese art; usually a

painting or calligraphy. Interiors are very simple, highlighting minimal and natural
decoration. Traditional Japanese interiors, as well as modern, incorporate mainly
natural materials including fine woods, bamboo, silk, rice straw mats, and paper shoji
screens. Natural materials are used to keep simplicity in the space that connects to
nature. Natural color schemes are used and neutral palettes including black, white, offwhite, gray, and brown.

INDIAN SCENERIO
Words of Indian origin such as calico, chintz, and madras indicate the importance of
Indian textiles in the history of Western interior design. Yet the Indians themselves
have never been very conscious of this role, their own domestic interiors being of the
utmost simplicity, with hardly more than a carpet or a prayermat to offset stone floors
and plain white walls. The impermanence of the materials used for the majority of
dwellings may have been a contributory factor. In more palatial buildings, however,
and commonly in both Hindu and Buddhist temples, walls were painted, a practice
that, according to literary references, may go back to the Maurya period (c. 321
185BCE). Paintings that survive in cave temples of the Gupta period (320600 CE)
usually depict groups of active mythical or human figures and are characterized by
their sinuous lines. A late example occurs in the unfinished early 17th-century murals
of the Mattancheri palace, in Kochi, Kerala. Inlay of semiprecious stones, carved and
bracketed pillars and capitals, and openwork marble panels also adorned the palaces
of local rulers. See also South Asian arts: Visual arts.

2.2, COMPANY PROFILE

Krayons Interiors is an ISO 9001: 2008 Certified turnkey interior fit out company that
offers concept-to-completion services to develop world-class office interiors. We
specialize in turnkey interior furnishing works including services and project
management for commercial, residential and hospitality sectors.

Our competent team of designers, engineers and project managers, coupled

with our reliable network of vendors, help us deliver on our promise of customer
satisfaction. An amalgamation of our expertise, dedication and discipline in managing
the projects enable us to execute projects on time, with high quality and within
budget.

Our Mission

To provide customer delight by offering highly professional service, maintain

high levels of discipline and ethics and remaining committed to customers and their
needs.
Our Vision
To become a globally preferred company in the corporate world for providing cost
effective turnkey interior fit-out solutions with quality, commitment, time-specified
delivery, safety, security and a long term client relation.
Guiding principles
Commitment and Quality
In accordance with our Quality Policy, Krayons Interiors offers hundred percent
commitments to high quality, timely delivery, and customer delight.
Professionalism
With Krayons Interiors, you can rest assured that you are dealing with a group of
highly professional experts. We also hire our team carefully to ensure that people at all
levels of share our passion for customer satisfaction.
Safety with Aesthetics
Your safety is paramount to us. We ensure that looks do not compromise safety.
With krayons Interiors, aesthetics and safety go hand in hand, complementing each
other.
Customer Satisfaction
We strongly believe in the adage that the customer is the king. We also believe that
happy customers are our passage to long term success.

Employee Empowerment
Our carefully chosen staff is trained to understand customer requirements quickly,
empowered to make strategic decisions, and given a mandate to deliver quality time
after time.
QUALITY POLICY
We shall deliver cost effective solutions to our customers the first time and
every time by complying with the requirements and continually improving
effectiveness of our Quality Management System.
We believe that word-of-mouth testimonials from our customers are worth more than
any other form of promotion. We also believe that every project should transcend into
a long term relationship. Hence, we commit to deliver the best for our customers. We
are committed to deliver excellence at every step to achieve customer delight. From
ensuring that we use the highest quality of raw material, engaging the best of people
and delivering projects on time, our commitment to you is paramount.
Here are just some of the steps we take to ensure that we deliver on our quality
commitment:

We work closely with you to understand your requirements clearly

We believe in extensive planning before execution to reduce negative surprises

Depending on your requirements, we put our best people on the job

We deal with the best contractors in the business

We source material from the most trustworthy vendors

We ensure that all our actions are centered around you

ORGANISATION CHART
MANAGING
DIRECTOR

Client
Servic
GM
CS

Registered
office Banglore

Branch

Director Operation

Director Operation

Design
Studio
Architec
t Design

Designer

QS

Project
Mgt:

Engineer

Finance
Account

Procurement

HR
& IT
Site
Mgt:

Staff

Executive

Project
Manager

Balling
Safety

Executive

Staff

Site
Engineer

Site
Engineer

Staff

Staff

Site
Supervisor

Store
Keeper

Staff

Site
Management

Executiv
e

Executive

Site
Superviso

Executive

Project
Manager

Site
Engineer

Site
Engineer

Store
Keeper

Staff

Accounts
& HR

Balling
Safety

SERVICE
For us at krayons Interiors, developing interiors is not about getting
the colors and paints right; it is about providing an atmosphere that soothes, inspires
and motivates.
We also understand that timely and cost effective delivery of projects is the key to the
success of any project. We accordingly use a scientific workflow that includes the
following steps:
Concept and Design
Milestone-based Project Scheduling
Project Execution
Project Monitoring (using project management and site management tools)
Project Completion and Sign-off
Post project services
We have an in-house team of designers with rich experience in the industry to
understand your requirements and suitably transform them into blueprints. Each
project is handled by a project head along with full time project engineer who ensure
that all milestones are reached on time.
Areas of Specialization
Turnkey interior solutions and general contracting includes

Civil Works

Joinery Works

False Ceiling

Paneling works

Floorings

Glazing Works

SS & MS Works

Painting & Polishing

Chairs, Sofas and Tables

Modular Furnitures

Electrical works

HVAC-Low side works and Equipments

Access Control Systems

Networking-Cablings, Server, Panels etc

Fire Alarm and Detectors

2.3, THEORITICAL FRAME WORK

Business as we know is concerned with the financial activities. In order to
ascertain the financial status of the business every enterprise prepares certain
statements, known as the financial statements. Financial statements refer to two
statements which are prepared by a business concern at the end of the year. These are
(i) Income Statement Or Trading And Profit And Loss Account which is prepared by a
business concern in order to know the profit earned and loss sustained during a
specified period; (ii) Position Statement Or Balance Sheet which is prepared by a
business concern on a particular date in order to know its financial position.

1) Income statement: Trading concerns, whose financial activities are restricted to

purchases and sales of goods prepare trading and Profit and Loss Account. The
trading and Profit and Loss Account in order to ascertain their net income/net loss.
Manufacturing concern require information regarding the cost of production also,
so they prepare one more additional Account, known as the manufacturing
Account. In case of Joint Stock Companies profit and loss appropriation is also
prepared to show the disposal of profit earned by the company. It furnishes the
information regarding purchases, sales, direct expenses, gross profit or gross loss
and net profit and net loss
2) Position statement: it is a mirror which reflects the true position of the assets and
liabilities of the business on a particular date. Assets include all current and noncurrent assets and the liabilities include creditors equities and proprietors equities.
It is traditionally known as the balance sheet

DEFINITIONS OF WORKING CAPITAL:

The following are the most important definitions of Working capital:

1. Working capital is the difference between the inflow and outflow of funds. In other words
it is the net cash inflow.
2. Working capital represents the total of all current assets. In other words it is the Gross
working capital, it is also known as Circulating capital or Current capital for current assets
are rotating in their nature.
3. Working capital is defined as The excess of current assets over current liabilities and
provisions. In other words it is the Net Current Assets or Net Working Capital.

3.1 Working Capital Management

A study of working capital is of major importance of internal and external analyst

because of its relationship with the current day-to-day operations of business.
Funds, collected from different sources are invested in the business for the
acquisition of assets. These assets are employed for earning revenue. The basic
problem facing the finance manager of an enterprise is to trade-off between
conflicting but equally important goals of liquidity and profitability. The greater
the liquid resources of the firm, the lesser will be its profitability and vice versa.
The firm has to maintain the working capital at such level as may ensure satisfying
earnings to the enterprise without jeopardizing its liquid position. Thus, working
capital management is concerned with the problems that arise in attempting to
discuss in details various tools and techniques, which can be gainfully employed
to solve the problem of determining optimum level of working capital.

In order to maintain flow of revenue from operations, every firm needs certain
amount of current assets. For example, funds required either to pay for expenses or to
meet obligations for services received or goods purchased etc by a firm. These funds
are known as working capital.
Working capital is defined as the excess of current assets over current
liabilities and provisions. That is, the amount of surplus of current assets which
remain after deducting current liabilities from total current assets which is equal to the

amount invested in working capital consisting of work-in-progress, raw materials and

component stocks, consumable items amounts owing by customers and cash at the
bank or in hand.
In accounting working capital is the difference between the inflow and outflow of
funds.
Other words, it is the net cash inflow. Working capital is also known as
Circulating Capital, Fluctuating Capital and Revolving Capital. The magnitude and
composition keep on changing continuously in the course of business.

3.2 Need for Working Capital

Working Capital is significant because of:
1) Adequate working capital is required to continue uninterrupted business operations.
2) It is essential to run the day-to-day business activities.
3) Greater volume of working capital required to invest in current assets for the
success of sales activities.
4) To ensure the maximizing the wealth of the firm.
5) To enable to increase the rate of return on investment.
6) To meet the short-term obligations of a business enterprise.
7) To increase the operational efficiency of a firm
Operating Cycle
The term operating cycle otherwise known as Cash Cycle. In order to earn
sufficient profits, a firm has to depend on its sales activities apart from others. We
know that sales are not always converted into cash immediately, ie., there is a time lag
between the sales of a product and the realization of cash. The continuing flow from
cash to suppliers, to investors, to account receivable and back in cash. The time gap is
technically termed as operating cycle. In other words, the duration of time required to

complete the following sequence of events, in case of a manufacturing firm, is called

the operating cycle.
(1) Conversion of cash into raw materials
(2) Conversion of raw materials into work-in-progress
(3) Conversion of work-in-progress into finished goods
(4) Conversion of finished goods into accounts receivable and
(5) Conversion of accounts receivable into cash.

3.3 Types of Working Capital

The working capital admits the following broad classifications:

I. Gross Working Capital
II. Net Working Capital
(a) Positive Net Working Capital
(b) Negative Net Working Capital
III. Permanent Working Capital
IV. Temporary Working capital
V. Balance sheet Working capital
Cash Working Capital

I.Gross Working Capital

The term Gross Working capital refers to the total of all current assets. In other
words, the firms investments in total current or circulating assets. Current assets are
the assets, which can be converted into cash within the accounting year. It represents
short-term securities, sundry debtors, bills receivable, stock (inventories), etc.
Advantages of Gross Working Capital: Gross Working Capital is the amount of
funds invested in the various components of current assets. This concept has the
following advantages:
(1) It provides the amount of working capital at the right time.
(2) It enables a firm to realize the greatest return on its investment.
(3) It helps in the fixing of various financial responsibilities.
(4) It helps to the top executives to make plan and control funds and
maximize the return on investment.
(5) It enables a firm to operate its business more efficiently.

II.Net Working Capital

The net concept of working capital is qualitative, indicating the firms ability
to meet its operating expenses and current liability. The term Net Working Capital
refers to the difference between current assets and current liabilities. Alternatively, it
can be defined as the portion of a firms current assets, which is financed with longterm funds. This concept is commonly used for proprietary organization such as sole
trader and partnership firms. Net working capital can be grouped into Positive Net
Working Capital and Negative Net Working Capital.Net Working Capital can be
expressed as:

Net Working Capital

=Current Assets-Current Liabilities

Current assets = Cash+ Marketable Securities+ Accounts Receivables+ Notes and

Bills Receivables+ Inventories
Current Liabilities

=Accounts Payable + Notes and Bills + Outstanding Expenses

+Short-Term Loans

Positive net working capital will arise when the excess of current assets over
the current liabilities. On the other hand, where the current liabilities and provisions
exceed current assets, the difference is referred to as negative net working capital.

Difference between Net Working Capital and Gross Working Capital

Net Working Capital

1) Net working capital is the

concept of qualitative nature.

2) It is indicating the firms

ability to meet its operating

expenses and current liability.
3) It expressed as current asset

minus current liability.

4) It is a concept very popular in

accounting system.
5) Net concept is suitable for sole

trader and partnership firms.

6) It is useful to find out the true

financial position of a
company.
7) Increase in bank loan cannot

increase working capital.

Gross Working Capital

1) Gross concept of working

capital is quantitative in
nature.
2) It is pointing out the total

amount available for financing

the current assets.
3) It indicates the total sum of

current assets.
4) It is a concept very popular in

financial management circles.

5) Gross concept suitable for

companies.
6) It cannot reveal the true

financial position of a
company.
7) Every increase in borrowing

Retained profits, sale of fixed

will increase the gross

assets will increase net

working capital.

working capital.

Reasonsfor changes in Working Capital: The changes in the level of working

capital occur for the following reasons:

1. Changes in the level of sales activities.

2. Changes in the level of operating expenses.
3. Policy changes initiated by management.
4. Technological changes.
5. Cyclical changes in the economy.
6. Changes in operating cycle.
7. Source of change is seasonality in sales activity.
8.

Changes in the fixing the level of inventory and receivables.

Working Capital Gap

A portion of current assets is financed through trade creditors and a balance

portion by share capital, long-term borrowings, etc. That portion of working capital,
which is financed by long-term fund, is called working capital gap.

Excess and Inadequate Working Capital

The success and otherwise of a business depends on the adequacy of the said capital
maintaining a desired level. Both excessive and inadequate working capital poses a
serious problem to a company, which may even lead to its doom. Excessive working

capital means idle funds which earn no profits for the firm. Inadequate working
capital impairs firms profitability and liquidity.

Dangers of Excess Working Capital

When working capital is excessive, a firm faces the following problems;

1. It leads to unnecessary purchase and accumulation of inventories.
2. Excessive working capital results in imbalance between liquidity and profitability.
3. It is an indication of defective credit policy.
4. A company may not be tempted to overtrade and lose heavily.
5.

Excessive working capital leads to operational inefficiency because large volume

of funds not being used.

6.

This makes management complacent, which degenerates into managerial

inefficiency.

7.

High liquidity may induce a firm to undertake great production, which may not
have a matching demand.

Dangers of Inadequate Working Capital

When working capital is inadequate, a firm faces the following problems:

1. Inadequate working capital causes stagnates growth and expansion.

2. It may not able to utilize production facilities fully.
3. It becomes difficult to take advantages of profitable business opportunities.
4. It may not able to efficiently utilized fixed assets. This leads to low profitability.
5. A firm may not able to take advantages of cash discount facilities.
6. Inadequate working capital causes paucity of funds. This leads to damage credit
worthiness of the firm.
7. It may not able to meet short-term obligation.
8. Inadequate working capital causes unable to pay its dividends and interest.
9. A firm may not able to meet its day-to- day commitments. This leads to firm loses
its reputation.

3.3 Factors determining the working capital requirements

No standard formula can be laid down regarding factors determining
working capital. Working capital will vary from industry to industry and from
company to company. The major factors are:
1. Nature of business
The amount of working capital will depend upon the nature of business. In
this regards, working capital can divide business into two- public utility and trading
and manufacturing concerns.

2. Size of the business

The volume of business also play an important role in determining
working capital needs. Generally larger the size and of volume of business, greater
will be the amount of working capital requirements.

3. Nature of industry
The industry can be divided into labour intensive industries and capital
intensive industries. Labour intensive industries are those industries where labour is
the major factor of production. Labour intensive industries require more working
capital where as capital intensive industries require less working capital as there is
greater proportion of fixed assets.

4. Requirement of cash
The requirement of cash also determines the needs of working capital. The greater
the cash requirements, the higher will be the working capital requirements.

5. Working capital cycle

In a manufacturing concern, the working capital cycle starts with the purchase of
raw material and ends with the realization of cash from the sale of finished goods. The
speed with which the working capital complete one cycle determines the requirement
of working capital-longer the period of the cycle, larger is the requirement of working
capital.

6. Seasonal variations
This also influences the working capital requirements. There are certain
industries which have to buy raw material during a particular season and process them

throughout the year. Such industries require large amount of working capital during
such seasons.

7. Rate of stock Turnover:

There is an inverse co-relationship between working capital and the velocity or
speed of

stock. A firm having a high rate of stock turnover will needs lower

amount of working capital as compared to a firm having a low rate of turnover.

8.

Credit policy:

A concern that purchases its requirement on credit and sales its product/services on
cash requires lesser amount of working capital and vice versa.

9.

Business cycle:

In period of boom, when the business is prosperous, there is need for larger amount of
working capital due to rise in sales, rise in prices, optimistic expansion of business etc.
On the contrary in time of depression, the business contracts, sales decline, difficulties
are faced in collection from debtor and the firm may have a lesser amount of working
capital.
Working capital management is very important in modern business. Analysis and
interpretation of financial statement and working capital is very useful for short-term
management of funds.

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.

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

Solvency of the business:Adequate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.

Goodwill:Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

Easy loans:Adequate working capital leads to high solvency and credit standing

can arrange loans from banks and other on easy and favorable terms.

Cash Discounts:Adequate working capital also enables a concern to avail cash

discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material:Sufficient working capital ensures regular

supply of raw material and continuous production.

Regular Payment of Salaries, Wages and Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises the morale of its
employees, increases their efficiency, reduces wastage and costs and enhances
production and profits.

Exploitation of Favourable Market Conditions:If a firm is having adequate

working capital then it can exploit the favourable market conditions such as
purchasing its requirements in bulk when the prices are lower and holdings its
inventories for higher prices.
Ability to Face Crises:A concern can face the situation during the depression.

Quick and Regular Return on Investments:Sufficient working capital enables a

concern to pay quick and regular of dividends to its investors and gains confidence of
the investors and can raise more funds in future.

High Morale:Adequate working capital brings an environment of securities,

confidence, high morale which results in overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to
run its business operations. It should have neither redundant or excess working capital
nor inadequate nor shortages of working capital. Both excess as well as
Short working capital positions are bad for any business. However, it is the
inadequate working capital which is more dangerous from the point of view of the
firm.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL

1. Excessive working capital means ideal funds which earn no profit for the firm and
business cannot earn the required rale of return on its investments.
2. Redundant working capital leads to unnecessary purchasing and accumulation of
inventories.
3. Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.
4. It may reduce the overall efficiency of the business.
5. If a firm is having excessive working capital then the relations with banks and other
financial institution may not be maintained.
6. Due to lower rate of return n investments, the values of shares may also fall.
7. The redundant working capital gives rise to speculative transaction.

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working
capital arises due to the time gap between production and realization of cash from
sales. There is an operating cycle involved in sales and realization of cash.
There are time gaps in purchase of raw material and production; production and
sales; and realization of cash.

Thus working capital is needed for the following purposes:

For the purpose of raw material, components and spares.
To pay wages and salaries.
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores and spares
and finished stock.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS
1. NATURE OF BUSINESS:The requirements of working is very limited in public
utility undertakings such as electricity, water supply and railways because they
offer cash sale only and supply services not products, and no funds are lied up in
inventories and receivables. On the other hand the trading and financial firms
requires less investment in fixed assets but have to invest large amt. of working
capital along wifh fixed investments.
2.SIZE OF THE BUSINESS:Greater the size of the business, greater is the
requirement of working capital.
3.PRODUCTION POLICY:If the policy is to keep production steady by
accumulating inventories it will require higher working capital.

4. LENTH OF PRDUCTION CYCLE:The longer the manufacturing time the raw

Material and other supplies have to be carried for a longer in the process with
progressive increment of labor and service costs before the final product is obtained.
So working capital is directly proportional to the length of the manufacturing process.
5. SEASONALS VARIATIONS:Generally, during the busy season, a firm requires
larger working capital than in slack season.
6. WORKING CAPITAL CYCLE:The speed with which the working cycle
completes one cycle determines the requirements of working capital. Longer the cycle
larger is the requirement of working capital.
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.
3. It is concerned with the decision about the composition and level of current
liabilities.

2.4, THEORETICAL BACKGROUND OF THE STUDY

Studies adopting a new approach towards working capital management are
reviewed here.
Van Horne (1997) Working capital management is the administration of current
assets in the name of cash, marketable securities, receivables, and inventories.
Working capital management as the regulation, adjustments, and control of the
balance of current assets and current liabilities of a firm such that maturing obligations
are met and the fixed assets are properly serviced. (Van Horne: Regulations and
Control of Working Capital Management).

Some related researches are presented below in the areas of Working Capital
Management and Profitability.
Sagan in his paper 1955 (1), perhaps the first theoretical paper on the theory of
working capital management, emphasized the need for management of working
capital accounts and warned that it could vitally affect the health of the company. He
realized the need to build up a theory of working capital management. He discussed
mainly the role and functions of money manager inefficient working capital
management. Sagan pointed out the money managers operations were primarily in
the area of cash flows generated in the course of business transactions. He suggested
that money manager should take his decisions on the basis of cash budget and total
current assets position rather than on the basis of traditional working capital ratios.

Lazaridis and Tryfonidis 2006 (2) investigated the relationship that is statistically
significant between corporate profitability, the cash conversion cycle and its
components. When the authors replaced cash conversion cycle with accounts
receivable and inventory, they found negative relationship with these two variables;
the opposite occurred with accounts payable. The authors conclude that companies
can create more profit by handling correctly the cash conversion cycle and keeping
each different component to an optimum level.
Walker in his study 1964(3) made a pioneering effort to develop a theory of
working capital management by empirically testing, though partially, three
propositions based on risk-return trade-off of working capital management. Walker
studied the effect of the change in the level of working capital on the rate of return in
nine industries for the year 1961 and found the relationship between the level of
working capital and the rate of return to be negative.
Deloof 2004 (4) Research with Belgian companies from 1992 to 1996. He found
negative relationship between gross operating profit and accounts receivable,
inventory and accounts payable. The latter might indicate that less profitable
companies wait longer to pay their bill staking advantage of credit period granted by
their suppliers.
Winakar and Smith 1935 (5) they have undertaken a trend of means of 19
financial ratios and found out that was a significant deteriotiation of average ratio
value of these firms which failed subsequently. They also have found that ratio of net
working capital to total asset was the most accurate and steady indicator of failure.
(Winakar and smith R.F: Changes in financial structure of unsuccessful industrial
companies).
Welter, in his study 1970 (6) stated that working capital originated because of the
global delay between the moment expenditure for purchase of raw material was made
and the moment when payment was received for the sale of finished product. The

study requires specifying the delay centers and working capital tied up in each delay
center with the help of information regarding average delay and added value.

In Christopher and Kamalavalli 2009(7) study, they investigated a sample of 14

corporate hospitals in India using panel data analysis for the period 96/97 to 2005/06.
The independent variables used were current ratio, quick ratio, inventory turnover
ratio, working capital turnover ratio and debtors turnover ratio, ratio of current asset
to total asset, ratio of current asset to operating income, comprehensive liquidity
index, net liquid balance size, leverage and growth. The dependent variable
profitability is measured in terms of return on investment ROI. Conclusion is that
hospitals should concentrate more on efficient use of working capital for increasing
the profitability which would increase the value of hospitals.

Lambrix and Singhvi 1979 (8) adopting the working capital cycle approach to the
working capital management, also suggested that investment in working capital could
be optimized and cash flows could be improved by reducing the time frame of the
physical flow from receipt of raw material to shipment of finished goods, i.e.
inventory management, and by improving the terms on which firm sells goods as well
as receipt of cash. However, the further suggested that working capital investment
could be optimized also (1) By improving the terms on which firms bought goods i.e.
creditors and payment of cash, and (2) By eliminating the administrative delays. i.e.
the deficiencies of paper-work flow which tended to extend the time-frame of the
movement of goods and cash.

Smith and Begermann 1997 (9) in their study of industrial companies listed in the
Johannesburg Stock Exchange, indicated that current liabilities divided by funds flow
(a working capital leverage ratio) displayed the greatest association with return on

investment. On the other hand, other indicators like current and quick rations
displayed no association.

Howorth and Westhead 2003 (10) have studied working capital management
practices of small firms in the UK. They found four types of firms: companies of the
first type concentrate on cash management routines. These firms are generally large
and young, and have most external financing. The second type firms with less external
financing concentrate on inventory management routines. The third type companies
emphasize revenue management routines, and the fourth type firms are less likely to
utilize any working capital management routines. The companies of the fourth type
have the lowest financial skills while the firms of the first and third type firms have
the highest, their operations are the least seasonal, they grow less than the other types
and have least external financing alongside with the second type firms. The cash
conversion cycle is shortest in the fourth type, which explains their lower need of
working capital management. According to the authors, the type of industry does not
affect the results.
National Council of Applied Economic Research (NCAER) in 1966 (11) with
reference to working capital management in three industries namely cement fertilizer
and sugar. This was the first study on nature and norms of working capital
management in countries with scarcity of investible resources. This study was
mainly devoted to the ratio analysis of composition, utilization and financing of
working capital for the period 1959 to 1963. This study classified these three
industries into private and public sector for comparing their performance as regards
the working capital management. The study revealed that inventory constituted a
major portion of working capital.
Eljelly 2004 (12) elucidated that efficient liquidity management involves planning
and controlling current assets and current liabilities in such a manner that eliminates

the risk of liability to meet due short term obligations and avoid excessive investment
in these assets. The relation between profitability and liquidity was examined, as
measured by current ratio and cash gap (cash conversion cycle).

The study founded that the cash conversion cycle was more important as
measure of liquidity than the current ratio that affects the profitability .The size
variable was found to have significant effect on profitability at the industry level. The
results had important implications for liquidity management in various Saudi
companies. First it is clear that it was a negative relationship between profitability and
liquidity indicators such a current ratios and cash gap in the Saudi sample examined
.second the study revealed that there was great variation among industries with respect
to the significant measure of liquidity.
Appavadhanulu 1971 (13) recognizing the lack of attention being given to
investment in working capital, analysed working capital management by examining
the impact of method of production on investment in working capital. He emphasized
that different production techniques require different amount of working capital by
affecting goods-in-process because different techniques have differences in the length
of production period, the rate of output flow per unit of time and time pattern of value
addition. Include. His study could not show significant relationship between choice of
technique and working capital. However, he pointed out that the idea could be tested
in some other industries like machine tools, ship building etc. by taking more
appropriate ratios representing production technique correctly.

The survey studies of Belt and Smith 1991 and Khoury et al. 1999 (14) which
study working capital management practices in Australian and Canadian companies
are based on the survey of Smith and Sell published in 1980. These surveys have used

the same questionnaire, which enables comparison of practices in the US, Canada and
Australia. The results show for example some differences in working capital
management policies between the countries due to institutional differences, such as
the banking system.

PaniGarahi 1990 (15) Examine the liquidity position of the large Indian
companies for the period of 1970-1971 to 1986-1987 with the help of standard
financial ratio and working capital ratio have been computed to explain the significant
of association between the ratio's. (PaniGarahi: Working Capital Management: case
of large Indian companies).

Jose et al. 1996 (16)They found that a shorter cash conversion cycle led to better
profitability. After that, this finding has been tested several times by other researchers
with different samples and mainly constant results. Relative profitability can be
improved with aggressive working capital management.

Copeland and Khoury 1980 (17) applied CAPM to develop a theory of credit
expansion. They argued that credit should be extended only if the expected rate of
return on credit is greater than or equal to market determined required rate of return.
They used CAPM to determine the required rate of return for the firm with its new
risk, arising from uncertainty regarding collection due to the extension of credit. Thus,
these studies show how CAPM can be used for decisions involved in working capital
management. One more approach, used mainly in empirical studies, towards working
capital management has been to apply regression analysis to determine the factors
influencing investment in working capital. Different studies in the past have
considered different explanatory variables to explain the investment in inventory. A
brief review12 of these studies is important as regression equation of investment in
working capital, in the present study, would be formulated on the basis of works on

investment in inventory. In inventory investment literature, there is basically one

school of thought according to which firms aim at an optimum or desired stock of
inventories in relation to a given level of output/sales. This is known as acceleration
principle.

Shulman and Coxs 1985(18) The study used shulman and Coxs (1985) net
liquidity balance and working capital requirement as a proxy for working capital
measurement and development multiple regression models. The empirical research
found thats firms capital expenditure has a significant impact on working capital
management. (Shulman and Coxs: Working Capital Measurement and Develop
Multiple Regression Models.)

Wilson 2009 (19) has put so much attention to the financial managers and factors
of impact on Working capital management. Therefore managers are always looking
for ways to balance the assets and liabilities, the study of factors affecting the
management of the looking capital in Brazilian companies were identified and
examined. The statistical sample of the study was 2976 companies and the sample
period was 2001 to 2008. The results indicated that debt ratio, size and growth are110
The Impact of Company Characteristics on Working Capital Management the factors
affecting the management of Working capital.

Nilsson, et al. 2010 (20) has an article featuring the company's impact on Working
capital management in the Swedish companies in which he compared the effects of
these characteristics on cash conversion cycle, which is a measure for the assessment
of Working capital management. The characteristics of the company included
profitability, operating cash flow, company size, sale growth, and current ratio, and
quick ratio, debt ratio and Pearson correlation and multiple regressions were used for
data analysis and hypotheses testing. The results suggest that profitability, operating

cash flow, company size, and sale growth had an impact on Working capital
management, the first results is that there is a positive relationship between
profitability and cash conversion cycle and the second is a negative correlation
between the size of the company's cash conversion cycle with sampling size, sale
growth and operating cash flow.

Zariyawati, et al. 2010 (21) stated that Working capital management is part of the
financial decisions and inefficient decisions had a negative effect on company value.
Therefore, managers should consider all the factors affecting Working capital
management. Their research was carried out on Malaysian companies in the period
2000-2006 and identified some of these factors. In their study, cash conversion cycle
was used as a measure of Working capital management. The results indicated that
company size, debt ratio and sale growth are factors affecting the Working capital
management.

Ghosh and Maji 2003(22) in this paper made an attempt to examine the efficiency
of working capital management of the Indian cement companies during 1992 1993
to 2001 2002. For measuring the efficiency of working capital management,
performance, utilization, and overall efficiency indices were calculated instead of
using some common working capital management ratios. Setting industry norms as
target-efficiency levels of the individual firms, this paper also tested the speed of
achieving that target level of efficiency by an individual firm during the period of
study. Findings of the study indicated that the Indian Cement Industry as a whole did
not perform remarkably well during this period.

Chiou and Cheng 2006 (23)analyzed the determinants of working capital

management from a different angle. Their study examined how working capital
management of a firm is influenced by different variables, such as business indicators,

industry effect, operating cash flows, growth opportunity for a firm, firm performance,
and size of the firm. The study provided consistent results of leverage and operating
cash flow for both net liquid balance and working capital requirements; however,
variables such as business indicator, industry effect, growth opportunities, firm
performance, and size of the firm were unable to produce consistent results for net
liquid balance and working capital requirements of firms.

RESEARCH METHODOLOGY
Research means search for knowledge. It aims at discovering the truth. It is an
essential and powerful tool in leading men towards progress. It is undertaken to
discover answers to questions by applying scientific method. It is the search for
knowledge through objective and systematic method of finding solution to problems.
Therefore research is a process of systematic and in-depth study or search of any
particular topic, subject or area of investigation backed by collection, computation,
presentation and interpretation of relevant data. Research methodology is a science. It
is a method that can be used to solve the research problems. It helps in studying how
research is done scientifically. Research Methodology provides various steps that can
be adopted by the researcher in studying his research problems.

TITLE OF THE STUDY

A STUDY ON THE ANALYSIS OF WORKING CAPITAL AT KRAYONS

INTERIOR SYSTEMS PVT LTD

FIELD STUDY

The study was conducted at krayons interior systems pvt ltd

RESEARCH DESIGN

The study is descriptive in nature. This is an attempt to evaluate the performance of

the company through the financial statement analysis by the financial data. Which are
disclosed in accounting policies. Descriptive research includes survey and fact finding
enquiries of different kinds. The major purpose of descriptive research is the
description of the state affairs as it exists at present.

RESEARCH METHOD

The method used in this research is statistical method. Statistical method is a system
of procedures and techniques of analysis applied to quantitative data. It consists of a
system of statistical techniques applicable to numerical data.

STEPS IN STATISTICAL METHOD

COLLECTION OF MATERIAL: The data must be collected in a systematic manner.

The data should be reliable, purposeful and adequate.
PRESENTATION OF DATA

: The classified data should be presented in a neat

manner with the help of tables,

ANALYSIS OF DATA: The analyzed with the help of statistical tool
INTERPRETATION OF DATA: The analysis of data helps to interpret what the data
tell us.

SOURCE OF DATA

The research has studied the existing system through data collections. The data has
been collected through secondary sources.

SECONDARY DATA

The study is basically confined to secondary data obtained from the annual report of
the company, books of accounts, periodical statistics given by official websites etc.
The source of data used for the study was balance sheet and profit and loss account of
the company. The secondary data was collected from the annual reports of the
company from 2009-10 to 2013-14.

TOOLS USED FOR ANALYSIS

1. SCHEDULE OF CHANGES IN WORKING CAPITAL

Schedule of changes in working capital is a measure of companies short term liquidity
or
Its ability to cover short term liabilities
2. RATIO ANALYSIS
Ratio analysis is one of the powerful tools of the financial analysis. A ratio can be
defined as the indicated quotient of two mathematical expressions and as the
relationship between two or more things. Ratio is thus, the numerical or arithmetical
relationship between two figures. Ratio analysis stands for the process of determining
and presenting the relationship of items and group of items in the financial statement.
It is an important technique of financial analysis. It is a way by which financial
stability and health of a concern can be judged
3. CORRELATION
Correlation is a term that refers to the strength of a relationship between two
variables. A strong, or high, correlation means that two or more variables have a
strong relationship with each other while a weak, or low, correlation means that the
variables are hardly related.
4. TREND ANALYSIS
Trend analysis is another important tool of financial statement, for analyzing the
financial performance of the company.

Trend analysis may be defined as a comparative analysis of a companys financial

ratios over time. The financial statement may be analyzed by computing trends of
series of information.

4.1

Ratio Analysis
Ratio analysis is a widely accepted tool of financial analysis. It is defined as a

systematic use of ratio to interpret the financial statements so that the strengths and
weakness of the firm as well historical performance and current financial conditions
can be determined. The term ratio refers to the numerical or quantitative relationship
between two items or variables.
Current Ratio
Concept:
Current ratio is a measure of firms short term solvency i.e. its ability to meet short
term obligations. This ratio is also known as Working Capital ratio. The current ratio
is the ratio of total current assets to total current liabilities.
Current Ratio

Current Assets / current liability

Table 4. 1: Current Ratio

Year

2010-

Current

Current

Ratio

Assets

Liabilities

3004308

3271227

0.91 : 1

10320678

10080369

1.02 : 1

20481624

22612660

0.90 : 1

2011
20112012
20122013

Interpretation:

The Current Ratio was 0.91 for 2010-11 and increased to 1.02 in the year
2011-12 and for 2012-13 the ratio decreased to 0.90.
The current ratio has met the standard of 2:1 ratio and hence it can be said that
there is enough working capital to meet the current liabilities. Hence it can be noted
that steps have been taken to increase the current ratio in the previous financial year.so
that enough working capital is not available to meet the current obligation. Thus the
liquidity position is not much fair and acceptable

CURRENT RATIO
4%

45%

50%

2010-2011

Figure - 4.1

2011-2012

2012-2013

Absolute Liquidity Ratio

Concept: Absolute liquidity ratio is a ratio of cash in hand and at bank to Current
Liabilities. The standard ratio is 0.5: 1.

Absolute Liquidity Ratio =

Cash in hand + Cash at bank / Current Liabilities

Table 4.2: Absolute Liquidity Ratio

Year

Cash

Current

Ratio

2010-

1020875

Liabilities
3271227

0.31 : 1

2011
2011-

5668852

10080369

0.56: 1

2012
2012-

99508

22612660

0.004 : 1

2013

Interpretation:
The absolute liquidity ratio was 0.31 for 2010-11 and increased to 0.56 in the year
2011-012 and for the year 2012-13 the ratio decreased to 0.004

The absolute liquidity ratio is below the standard of 0.5:1. It shows that the
liquidity position of the concern is not good. Hence adequate cash balance need to be
maintained by the company. But in the year 2011-12 the adequate cash balance was
good (0.56:1)

ABSOLUTE LIQUIDITY RATIO

0%

35%

64%

2010-2011

2011-2012

2012-2013

Figure 4.2

Working Capital Turnover Ratio

Concept:

This ratio indicates how efficiently the working capital of the firm is

being utilized.
Sales / Income
Working Capital Turnover Ratio =
Net working Capital

Table 4.3: Working Capital Turnover Ratio

Year

Income

Net Working

Ratio

Capital
2010-

6340288

(266919)

(23.75)times

7073639

240309

29.43 times

52746717

(2131036)

(24.75)times

2011
20112012
20122013

Interpretation:

The working capital turnover ratio was negative for the year 2010-2011 in the year
2011-2012 it has

increased to 29.43 times. But in the year 2012-2013 it has

considerably decreased to 24.75 times.

Working capital turnover is the ability to generate sales per rupee of working
capital. It should always be positive but in the initial years the ratio was negative
which not a favorable position to the company. For year 2011-2012 the ratio has
improved to 29.43 times and But in the year 2012-2013 it has decreased to 24.75
times which shows that the organization is not able to utilize its working capital full.

WORKING CAPITAL TURNOVER RATIO

30%

32%

38%
2010-2011

2011-2012

Figure 4.3

Current Asset Ratio

2012-2013

Concept: This ratio measures sales per rupee of investment in current assets. This
ratio measures the efficiency with which current assets are employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects
inefficient use of current assets.

Current Asset Ratio = Net Sales /Average Current Assets

Where, Average Current Assets = opening + closing

2
Table 4.4: Current asset Ratio
Year

Sales

Average

Ratio

Current Assets
2011-

70051065.15

6662493

10.51

52670472

15401551

3.41

2012
20122013

Interpretation:
The current asset ratio for the year 2011-12 was 10.51 and in 2012-13 it decreased
to
3, 41and it is a big fall it made a lot of problems in the working capital management

CURRENT ASSET RATIO

24%

76%

2011-2012

2012-2013

Figure 4.4

SCHEDULE OF CHANGES IN WORKING CAPITAL OF

KRAYONS INTERIORS SYSTEMS PVT LTD(2011-2012)

PARTICULARS
Current assets
a) Inventories
b) Cash and cash
equivalence
c) Short term
loans and
advances

2011

2012

INCREASE

1234300

1324740

90440

1020875

5668854

4647979

DECREASE
_
_
_

749133

3327087

3004308

10320681

2878782

7973038

293446

1307332

1013886

99000

800000

701000

Total current
liabilities (B)
Working capital

3271228

10080370

-266920

240311

Net increase in in
working capital

507231

Total

240311

Total current assets

(A)
Current liability
a) Trade payables
b) Other current
liabilities
c) Short term
provisions

2577954

5094256

507231

240311

7316373

7316373

Table- 4.4

Interpretation
In the year 2011-2012 schedule of changes in working capital shows a net
increase in the working capital and that is good in the working capital management in
that year working capital is properly utilised but in the year 2012-13 the net decrease
is occurred that condition is not favourable in the working capital management

KARL PERSONS COEFFICIENT OF CORRELETION:

The following table contains the amount of current liabilities (in 10 lakhs) and current
assets

(in 10 lakhs) from the period 2010-2011to 2012-2013

x=33.84 Y=35.96
YEAR

20102011
20112012
20122013
TOTAL

XY= 577.01

x2 = 535.17

y2 = 623.50

CURRENT
ASSETS
(x)
IN 10LAKHS

CURRENT
LIABILITY
(y)
IN 10LAKHS

XY
IN
10LAKH
S

3.04

3.27

9.94

9.24

10.62

10.32

10.08

104.08

106.50

101.60

20.48

22.61

463.05

419.43

571.21

33.84

35.96

577.01

535.17

623.50

X2

y2

IN
10LAKHS

IN
10LAKHS

Table- 4.7

Pearson's correlation coefficient (named after Karl Pearson, 1857-1936) is a number between
-1 and 1 that measures the strength of a linear relationship between two continuous
variables. The absolute value of the coefficient measures how closely the variables are related.

3*577.01-(33.84) (35.96)
3*535.17-(33.84)23*623.50-(35.96)2

514.23

21.45

24.02

514.23
515.22

r =

0.99

X = Current asset
Y = Current liability

From the Karl parsons correlation coefficient the current asset of the firm is greater
than current liability. So the calculation says that the company is keeping high positive
correlation

TREND ANALYSIS

TREND ANALYSIS EQUATION=

CURRENT YEAR 100

BASE YEAR

In the financial analysis the directions of change over a period of years is of

crucial importance. The trend analysis of ratio indicates the direction of change. The
basic tendency of the statistical data, to rise or fall or to remain the same with the
passage of time is known as trend. So the trend refers to long period changes. Trend
can be measured by various methods. For trend analysis, methods of least square
provide us with a mathematical curve, which will be fit to the given series. The
technique of obtaining this mathematical curve by the principle of least square is
known as a curve fitting.

A straight line trend can be fitted to the data by the method of curve fitting
based on the most popular principle called principle of least square. Such a straight
line is also known as line of best fit. It gives as a straight line from the line will be
equal to the total of vertical distances at various point on the other side of the straight
line. When some of deviations on either side is equal to zero, the sum of the squares of
these deviations will be least.

TREND ANALYSIS OF CURRENT ASSETS

YEAR

2010-2011

CURREN
T
ASSETS
3004308

Trend
percentag
e
100

2011-2012

10320678

343

2012-2013

20481624

681

Table -4.8

Current asset trend analysis

CURRENT

Trend percentage
20481624

10320678

3004308
100
2 001 0 - 2 0 1 1

Figure- 4.5

INTERPRETATION

343
2011-2012

681
2012-2013

In the above table, the trend analysis ratio is increasing.

This increase is good for the company. If the current asset
trend percentage increases, the company will get a good
asset management in future which is beneficial for the
company.

TREND ANALYSIS OF CURRENT LIBALITY

YEAR

CURRENT

TREND

LIABILITIES

PERCENTAGE

2010-2011

3271227

100

2011-2012

10080369

308

2012-2013

22612660

691

Table 4.9

current libality
25000000

22612660

20000000
15000000
10080369

10000000
5000000
0

3271227
100
2010-2011
CURRENT LIABILITIES

308
2011-2012

691
2012-2013

TREND PERCENTAGE

Figure- 4.6

TREND ANALYSIS OF WORKING CAPITAL

Year

Net Working

Trend

Capital

percentage

2010-2011

(266919)

100

2011-2012

240309

-90

2012-2013

(2131036)

798

Table -4.10

FINDINGS
From the ratio analysis found that the current ratio is not much favourable the
company cant meet their working capital obligations appropriately

The absolute liquidity ratio is below the standard of 0.5:1. It shows that the
liquidity position of the concern is not good. Hence adequate cash balance need to
be maintained by the company

 For year 2011-2012 the working capital ratio has improved to 29.43 times and But
in the year 2012-2013 it has decreased to 24.75 times which shows that the
organization is not able to utilize its working capital full

The current asset ratio also shows that the current assets are not helping to
managing the working capital

Schedule of changes in working capital shows that the company was having an
increase in working capital in the previous year but in the next year it has become
net decrease and that is not good for the company

From KARL PEARSONs coefficient of correlation the hypothesis is positive,

which means that the current asset of the firm is greater than current liability. So
the correlation between current assets and current liability is good

SUGESSIONS

 For improvement of organizations profitability, much emphasis is needed to

improve the better working capital management by decreasing the current liabilities
through reducing of unplanned overhead expenses
Effort should be made to maintain the current ratio at 2:1.
The company is maintaining a low liquidity position steps can be taken to
channelize the profit of the business attaining more returns
The company should take steps to decrease the current liabilities
Encouraging new technology for increasing operational profit.

operating cost.

Reducing

CONCLUSION

The study reveals the working capital management at Krayons interiors systems
private Ltd. The present financial position of the company is not good. Working
capital is controlling nerve centre of a business. No business can be successfully run
without an adequate amount of working capital. It is very essential to maintain the
smooth running of a business.
The concept of working capital management has its own importance in the
current scenario. The cash management is analyzed based on schedule of changes in
working capital, ratio analysis, and correlation method. It shows that the performance
of the company ineed an improvement in working capital management. From the tools
used, analysis and interpretation was made and on that useful findings and suggestions
have been given.

BIBLIOGRAPHY

BIBLIOGRAPHY
TEXT BOOKS:

1. Maheswari Dr S.n Financial management, Ninth edition, 2006 sultan chand& sons,
New Delhi
2.

Pandey I.M., Financial Management, Vikas Publishing House Pvt.Ltd. 8 th Edition

1999.

3. Prasanna Chandra, Financial management, Fourth edition 1999, Tata Mc.graw hill
publishing company ltd, New Delhi.
4. Gupta, sashi., financial management, 4th edition,2007, kalyani publisher, new delhi
5. Kothari C.R. Research Methodology, Wishvaprakashan, New Delhi, 2001.

ARTICLES:
An overview of working capital management and corporate financing.
Working capital management.
Working Capital Management Manages Flow of Funds (Year 2009)
Working Capital Management-an Effective Tool for Organisational Success Year
(2008)
Website:
www. Krayonsinteriors.co.in
www. Google.com
www. Investopedia.com
www.moneycontrol.com

www.wikipedia.com