Financial Management Assignment - 1 Study On The Working Capital Practices of Reliance Company

FINANCIAL MANAGEMENT ASSIGNMENT -1
STUDY ON THE WORKING CAPITAL PRACTICES OF RELIANCE

COMPANY
Submitted by
Aparna m. c
FM-1876
INTRODUCTION
Managing working capital effectively is critical to your company’s long-term

success, and it is essential in assessing the organization’s overall financial
health. Working capital is simply the difference between a company’s current
assets and its current obligations, the ideal management of which provides a
balance between growth, profitability, and liquidity. Working capital
management is a business tool that helps companies effectively make use of
current assets, helping companies to maintain sufficient cash flow to meet short
term goals and obligations. By effectively managing working capital, companies
can free up cash that would otherwise be trapped on their balance sheets. As a
result, they may be able to reduce the need for external borrowing, expand their
businesses, fund mergers or acquisitions, or invest in R&D.
Working capital is essential to the health of every business, but managing it

effectively is something of a balancing act. Companies need to have enough cash
available to cover both planned and unexpected costs, while also making the
best use of the funds available. This is achieved by the effective management of
accounts payable, accounts receivable, inventory and cash.
INTRODUCTION OF RELIANCE
Reliance Industries Limited is a Fortune 500 company and the largest private
sector corporation in India. Reliance is India’s largest and most profitable
private sector company. Reliance continues to be a significant global player in
the integrated energy value chain while establishing leadership positions in the
retail and digital services business in India. First Indian company to cross 10
TRILLION in market capitalization Retains strong domestic an international
credit rating.
CAPITAL BUDGETING
Capital budgeting is the process of planning and managing a firm’s long-term

investments. It is the decision process that managers use to identify projects
that add value to a firm. In capital budgeting, the financial manager tries to
identify investment opportunities that add value to the firm. Capital Budget is
prepared by different discounting technique like;
1) Payback
2) Net Present Value
3) Internal Rate of Return
The subscription amount of Rs 1,894.5 crore has come in from Intel Capital for
0.39 per cent stake in Jio Platforms, and Rs 730 crore came from Qualcomm
Asia Pacific for 0.15 per cent stake. Jio Platforms is a next-generation
technology platform focused on providing quality and affordable digital
services across the country.
It has made significant investments across its digital ecosystem, backed by

technologies spanning broadband connectivity, smart devices, cloud and edge
computing, big data analytics, artificial intelligence, Internet of Things,
augmented and mixed reality and blockchain.
INVENTORY MANAGEMENT
Our inventory management system helps you improve and automate inventory
control. It is flexible and can be integrated to work with barcode scanners,
smartphones, and tablets. Save valuable time and money by accurately tracking
your stock inventory with the most configurable and easy-to-use inventory
management solution.
It can be used with Purchase and Sales Module, which takes decision on
ordering and selling inventory. This helps in product planning and product
availability in order to maximize sales opportunities.
Our inventory management system also helps in effective tracking of stock

items. The module ensures sufficient stocks are maintained to satisfy demand.
It is logically classified into Purchase and Sales along with corresponding
Returns
f
any discrepancy due to loss or destruction.
EOQ
Because the stock held by an organization represents money, the control of that
has serious financial implications for the organization. If the stock is controlled
inefficiently, it can cause high storage cost, obsolescence and reduction in
working capital. Therefore, stock control is very much concerned with ensuring
that stock is controlled very carefully. In many situations, the actual level of
profit earned by an organization will depend on the success of stock control. It
has been emphasized that service is the principal objectives of the store
function, but it is obviously desirable to provide those services economically.
The most important consideration here is to maintain the value of the inventory
at the lowest practicable level at all times in order to economize in the use of
working capital and to minimize the costs of storage. It will be readily
understood that there is some conflict between the need to give a good service
and the need to economize in stockholding. On the one hand, the more stock
held the easier it is to have required items readily available on demand. On the
other hand, the more stocks held the greater the cost incurred. It is necessary
to seek, find and operate a satisfactory compromise between these two
opposing forces and, in addition, to see that the stores organization itself is
economically worked and co-operates with other functions securing savings in
material and other cost where ever practicable.
MANAGEMENT OF WORKING CAPITALMANAGEMENT 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.
To finance working capital of the business Reliance uses sources like

commercial papers, commercial banks and advances from customers and
statutory dues. The working capital requirements decide the liquidity and
profitability of a firm and hence affect the financing and investing decisions.
Lesser requirement of working capital leads to less need for financing and less
cost for capital and hence availability of more cash for shareholders. However,
the lesser working capital may lead to lost sales and thus may affect the
profitability. The working capital of last five years are identified, studied and
interpreted in the light of company’s performance. Hence it is overall
responsibility of management to see that resource of the firm is used efficiently
and effectively and that firm’s financial position is good. Financial and
operational position of the firm also indicated what can be expected from the
firm in future.
COVID-19 IMPACT OF THE COMPANY
Last year I highlighted the audacity and ambition of India’s Reliance Industries
when it comes to capturing a share of Indian consumers’ spending in just about
every category of merchandise and services. A year later, while the world is still
in the midst of Covid-19 induced upheavals, Reliance has not only raised over
US$ 23.5 billion in the last four months and, in the process, become a net ‘zero
debt’ company but has also unveiled its vision for the future through two of its
business entities named Jio Platforms and JioMart.
Jio Platforms now boasts a pantheon of marquee investor partners that include
Google, Facebook, Qualcomm, BP, and Intel, among others. At its recent Annual
General Meeting, it demonstrated its own mixed-reality solutions with multiple
use cases that go beyond merchandise retail, while also claiming to have
developed its own 5G hardware and software platform that can potentially
allow it to roll out 5G anchored products and services in the near future with a
near total control on enterprise security and privacy of data.

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FINANCIAL MANAGEMENT ASSIGNMENT -1

STUDY ON THE WORKING CAPITAL PRACTICES OF RELIANCE

Managing working capital effectively is critical to your company’s long-term

Working capital is essential to the health of every business, but managing it

Capital budgeting is the process of planning and managing a firm’s long-term

2) Net Present Value

3) Internal Rate of Return

It has made significant investments across its digital ecosystem, backed by

Our inventory management system also helps in effective tracking of stock

MANAGEMENT OF WORKING CAPITALMANAGEMENT of working capital is

To finance working capital of the business Reliance uses sources like

COVID-19 IMPACT OF THE COMPANY

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