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A PROJECT REPORT
ON
“EVALUATION OF WORKING CAPITAL MANAGEMENT INBAJAJ ALLIANZ LIFE INSURANCE”
SUBMITTED TO UNIVERSITY OF PUNE
IN PARTIAL FULLFILMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
BY
SURESH KUMAR
UNDER THE GUIDANCE OFPROF. SHALAKA SAKHREKAR
S.K.N. SINHGAD SCHOOL OF BUSINESS MANAGEMENT,AMBEGAON (BK.), PUNE-411041
2012-14
ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported me during the
completion of project.
My deep sense of gratitude to Mr.Santosh Singh Chief Branch Manager for support and
guidance. Thanks and appreciation to the helpful people at BAJAJ ALLIANZ LIFE
INSURANCE, for their support.
I would like to take this opportunity as privilege to express my deep senseof gratitude to
Professor M. N. Navale, Honorable Founder President, and Dr. (Mrs.) Sunanda. M. Navale,
Secretary, Sinhgad Technical Education Society, Pune &Dr.RajashreeShinde, Director S.K.N.
Sinhgad School of Business Management,Ambegaon (BK), Pune for their continuous
encouragement, invaluable guidance and help for completing the present research work. They
have been a source of inspiration to means I am indebted to them for initiating me in the field of
research.
My deepest thanks to Mrs. YogitaKadam, Mrs. SadhanaOgale and Mrs. ShalakaSakhrekar the
guide of the project for guiding and correcting various documents of mine with attention and
care.She has taken pain to go through the project and make necessary correction as and when
needed.
I would also thanks my institution and my faculty members without whom this project would
have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.
PLACE: PUNESURESH KUMAR
DECLARATION
I here by declare that the project work entitled “ EVALUATION OF WORKING CAPITAL
MANAGEMENT IN BAJAJ ALLIANZ LIFE INSURANCE” submitted to the Pune university,
is a record of an original work done by me under the guidance of SHALAKA SAKHREKAR,
faculty member, from SKN SINHGAD SCHOOL OF BUSINESS MANAGEMENT, PUNE
I further declare that this project is the result of my own efforts.
Place: Pune SURESH KUMAR
Date:
INDEX
Chapter No. Particulars Page No.
Executive Summary
1. Introduction 1-3
2. Profile of the organization 4-8
3. Research Methodology 9
4. Conceptual Background 10-24
5. Data presentation and interpretation 25-39
6. Finding, Suggestions and conclusion 40-42
7. Limitations 43
Bibliography
Appendix
EXECUTIVE SUMMARY
Executive Summary:
Working Capital is the required for maintenance of day to day business
operations. The present day competitive market environment calls for an
efficient management of working capital. The reason for this is attributed to the
fact that an ineffective working capital management mat force the form to stop
its business operations, may even lead to bankruptcy. Hence the goal of
working capital management is not just concerned with the management of
current assets and current liabilities but also in maintaining a satisfactory level
of working capital.
Holding current assets in substantial amount strengthens the liquidity position
and reduces the riskiness but only at the expense of profitability. Therefore
achieving risk-return tradeoff is significant in holding of current assets. While
cash outflows are predictable it runs contrary in case of case of cash inflows.
Sales program of any business concern does not bring back cash immediately.
There is a time lag that exists between sale of goods of services and sales
realization. The capital requirement during this time lag is maintained by the
operating cycle concept.
This study gives in detail the working capital management practices in BALIC.
Management of each current asset, namely cash management, accounts
receivable management is studied permanent to BALIC. Similarly management
of accounts payable, deposit are studied to understand the managing of current
liabilities. A part from this concept of operating cycle is studied.
The research methodology adopted for this study is mainly from secondary
source of data which include annual reports of BALIC, and website of the
company. The use of primary sources is limited to interviews with few of the
employees in credit department.
The study of working capital management has shown that BALIC has a strong
working capital position. The Company is also enjoying reasonable profits.
INTRODUCTION
The overall success of the company depends upon its working capital position. So it should
be handled properly because it shows the efficiency & financial strength of a company.
WCM is highly important in firms as it is used to generate further returns for the
stakeholders.
Working Capital Management is a very important fact of financialmanagement due to:
Investments in current assets represent a substantial portion of
total investment.
Investment in current assets & the level of current liabilities have tobe geared
quickly to change sales.
The working capital is the life blood & nerve center of a business firm. The importance of
working capital in any industry needs no special emphasis. No business can run effectively
without a sufficient quantity of working capital.
It is crucial to retain right level of working capital. WCM is one of the most important
functions of corporate management. A business enterprises with ample working capital is
always in a position to avail advantages of any favorable opportunity either to buy raw
material or to implement a special order or to wait for enhanced market status.
Working capital can be utilized for operating costs that are involved in the everyday life of
business. Even very successful business owners may need working capital funds when the
unexpected circumstances arise.
WCM is highly important in firms as it is used to generate further return for the
stakeholders. When working capital is managed improperly, allocating more than enough of
it will render management non-efficient & reduce the benefits of short term investments. On
the other hand, if working capital is too low, the company may miss a lot of profitable
investment opportunities or suffer short term liquidity crises, leading to degradation of
company credit, as it cannot respond effectively to temporary capital requirements.
1
2
Some the points to be studied under this topic are:
How much cash should a firm hold?
What should be the firm’s credit policy?
How to & when to pay the creditors of the firm?
OBJECTIVES
The objectives of project on evaluation of working capital are as
follows:
1. To study concept of working capital & components of
working capital.
2. To study change of working capital.
3. To analyze profitability, liquidity & working capital position
of the company.
SCOPE
The management of working capital helps us to maintain the working
capital at asatisfactory level by managing the current assets and current
liabilities. It also helps tomaintain proper balance between profitability,
risk and liquidity of the businesssignificantly.
By managing the working capital, current liabilities are paid in time. If
the firm makespayment to it creditors for raw material in time, it can
have the availability of rawmaterial regularly, which does not cause any
obstacles in production process. Adequateworking capital increases
paying capacity of the business but the excess working capitalcauses
more inventory, increases the possibility of delay in realization of
debts.On the other hand, absence of adequate working capital leads to
decrease in return oninvestment. The goodwill of the firm is also
adversely affected due to the inability to paycurrent liabilities in time.
Hence, the management of working capital helps to manage all the
factors affecting theworking capital in the most profitable manner.
4
Limitation of the study:
The scope of the present study has been limited interns of period of
study as well as sources and nature of data. The period covered by the
study extends over 5 years from F.Y 2008/9 to 2011/12. At the time of
study, the data could be available up to 2011/12. The limitations of this
study are as follows:
1. The study is mainly on secondary data. It is cone mostly on the
basis of and published financial documents, like balance sheet,
profit and loss account and other related journals, magazines
and books etc.
2. The study follows with specific tools financial ratio analysis.
3. The lack of sufficient time and resources is another limitation of
the study. The study is fully based on the student’s financial
resources and is to be completed within limited time. The report
has taken only 5-years data for the study from year 2008/09 to
2012/13.
4. The study is limited from the point of view of submission on
partial fulfillment of the requirement for the Master degree in
Business Administration(MBA).
5
BAJAJ ALLIANZ LIFE INSURANCE
Name and location of the Company:
Name: Bajaj Allianz Life Insurance Company
Address: GE Plaza, Airport Road, Yerawada, Pune
411006
Tel: +91 020 66026777
Fax : +91 020 66026789
E-mail : [email protected]
Introduction:
Bajaj Allianz Life Insurance is a union between Allianz SE, one of the
largest Insurance Company and Bajaj Finserv.
Allianz SE is a leading insurance conglomerate globally and one of the
largest asset managers in the world, managing assets worth over a
Trillion (Over INR. 55,00,000Crores). Allianz SE has over 119 years of
financial experience and is present in over 70 countries around the
world.
6
At Bajaj Allianz Life Insurance, customer delight is our guiding
principle. Our business philosophy is to ensure excellent insurance and
investment solutions by offering customized products, supported by the
best technology.
Vision:
To be the first choice insurer for customers
To be the preferred employer for staff in the insurance
industry
To be the number one insurer for creating shareholder
value
Mission:
As a responsible, customer focused market leader, we will strive to
understand the insurance needs of the consumers and translate it into
affordable products that deliver value for money.
Our Achievements:
Bajaj Allianz has received IAAA rating, From ICRA Limited, an
associate of Moody’s Investors Service, for Claims Paying ability. This
rating indicates highest claims paying ability and a fundamentally
strong position.
Awards:
Best Insurance Company in Private sector at the IPE Banking
Financial Service and Insurance (BFSI) 2013.
SKOCH Financial Inclusion-Organization of the year 2013.
7
Best Life Insurance Provider (Runner up) at the Outlook Money
Award 2012.
Best Investor Education and Category Enhancement.
Best utilization of Information Technology.
SKOCH Financial Inclusion Award.
Member in Board of Director:
Chairman Rahul Bajaj
Directors
Niraj Bajaj
Sanjiv Bajaj
S.H Khan
Ranjit Gupta
8
Sanjay Asher
Suraj Mehta
Manu Tandon
FACTSHEET
1Date of Incorporation 12th March 2001
2Started Operation on 3rd August 2001
3Head office Pune, India
4WorldWide Web Address www.bajajallianz.com
5Toll free number 1800-209-5858
6Brand Statement JiyoBefikar
7Chairman Mr. Sanjiv Bajaj
8MD & CEO Mr.V.Philip
9Total assets under Management 38,003 crore*
10Solvency ratio 643.31%**
11Claim Settlement Ratio NOP 91.56%**
9
12Total no. of lives covered 1.56crore**
13Total no. of office 992*
14Latest Award Won 1.SKOCH Financial Inclusion Award
2013- Organization of the Year2.SKOCH Financial Inclusion Award for Micro Insurance initiatives in the following categories:
Micro Insurance Initiative – Securing the Unsecured
Setting the Claims at Nominee’s doorsteps
Insurance Awareness & Education
Micro Insurance Renewals & Persistency Management
15Sour product cater to all the financial needs like – Protection, Savings, Retirements, Investment & Health for Individuals and Groups
Note: *The value are as on 31st March 2013** The values are for FY 2012-13
Growing at a breakneck pace with a strong pan Indian
presence Bajaj Allianz has emerged as a strong player in
India...
Bajaj Allianz Life Insurance Company Limited is a joint venture
between two leading conglomerates Allianz AG and Bajaj Auto
Limited.
Characterized by global presence with a local focus and driven by
customer orientation to establish high earnings potential and financial
strength, Bajaj Allianz Life Insurance Co. Ltd. was incorporated on
12th March 2001. The company received the Insurance Regulatory and
Development Authority (IRDA) certificate of Registration (R3) No 116
on 3rd August 2001 to conduct Life Insurance business in India.
Product:
10
Life Insurance
Motor Insurance
Health Insurance
Travel Insurance
Home Insurance
Channel Partner:
1. Standard Chartered Bank
2. Dhanlaxmi Bank
3. Team Life Care Co. India Ltd.
The data in this project is enabling in secondary in nature.
Financial reports, company records were referred for data analysis. The
study has been undertaken by collecting relevant data from the balance
sheet, profit and loss a/c, annul report & Audit report of the BALIC the
company is used financial tools for the analyzing and interpretation
data.
However primary data is also collected by observation
discussing with company officials. This primary data is used to fill in
the gaps while preparing this report and to know the latest procedures
adopted by the company. This has helped to draw inferences and
conclusions.
11
Sources of data
This study is based on Secondary data:-
The secondary data are those, which have been collected
by some other and which have been processed. Generally speaking
secondary data are information, which have been previously
collected by some organization to satisfy his own need. But the
department under reference for an entirely different reason is using
it.
For this project secondary sources used are:
1. Annual reports of the company.
2. Company website
3. Books
4. Other company documents
SAMPLING DESIGN
Sampling unit : Financial Statements & Audit Reports
Sampling Size :Last four years financial statements
WORKING CAPITAL:
Introduction:
Financial management looks after two types of capital need: for fixed
capital to invest it tings such as buildings, plants &equipments and
working capital principally to pay for stock and to cover the amount of
credit extended to customers. Fixed capital, as the name implies, tends
12
not vary in the short but to move up or down in jumps when major
investment decisions are made (or assets sold). Working capital on the
other hand, is much more fluid and fluctuates with level of business.
Working capital is a furnish investment in short term assets. Working
capital is the firm’s investment in short term assets cash, short term
securities. Account receivables and inventories.
Working capital management is the important branch of the financial
management which gives answers the questions such as:
1. How much should we invest in each category of current assets?
2. How should we finance this investment in current assets i.e.
appropriate mix of short and long term sources to finance?
In most business, funds are deployed in assets which are in the form of
cash or bank deposits or will be turned into cash in a relatively short
period as part of normal business activities. In short the working capital
is the sources of financing current assets and it includes short as well as
long term financing.
The management of the funds of business can be described as financial
management. Financial management is mainly concerned with two
aspects. Firstly, Fixed assets and fixed liabilities, in other words, long
term investment and sources of funds. Secondly, current assets and
current liabilities. Both of these types of funds play a vital role in
business finance.
Management of working capital usually involves management or
administration of current assets, namely cash, marketable securities,
account receivables and inventories and also the administration of
current liabilities such as creditors, account payable, notes and bills
payables, bank overdraft, outstanding expenses, temporary loans and
provisions. A firm should always maintain the right cash balance so
that flow of funds is maintained at a desirable speed not allowing
13
slowdowns or stoppage. Thus, the enterprises can have a balance
between liquidity and profitability.
The term working capital is often used to refer the firm’s current assets
like primarily cash, marketable securities, account receivables and
inventories. Working capital refers to the fact that most of its
components have their impact over weeks and month rather than years.
For this reason, working capital management is often referred to as
short-term finance. The term working capital is closely related to the
term funds and has two common meaning. It is used to mean current
assets of current assets means current liabilities.
Working capital management is concerned with the problems that arise
in attempting to manage the current assets. The term current assets
refers to those assets which is ordinary course of business can be or will
be turned into cash within one year without undergoing a diminution in
value and with our disrupting the operations of the firm. The major
current assets are cash, marketable securities, account receivables and
inventory.
Current liabilities are those liabilities, which are intended at their
inception to be paid in the ordinary course of business within a year,
out of the current assets of earnings of the concern. The basis current
liabilities are accounts payable, bank overdraft and outstanding
expenses. The goal of working capital management is to management
the firm’s current assets and current liabilities in such a way that a
satisfactory level of working capital is maintained.
This is so because if the firm cannot maintainto satisfactory level of
working capital, it is likely to become insolvent and may be forced into
bankruptcy. The current assets should be large enough to cover its
current liabilities in order to ensure a reasonable margin of safety. Each
of the current assets must manage efficiently in order to maintain the
liquidity of the firm while not keeping too high level of any of them.
Each of the short-team sources of financing must be continuously
managed to ensure that they are abstained and used in the best possible
14
way. The interaction between current assets and current liabilities is,
therefore, the main theme of the theory of working capital management.
Working capital may be defined more particularly as the assets held for
current use within a business less the amount due to those who await
settlement in short term in whatever form. Working capital is an
important aspect manufacturing compares that have so far developed
country. Among all available options proper management of working
capital is the only best possible option to improve their operational
viability. Working capital is the financial management practice in
manufacturing enterprises. Working capital represents portion that
circulates from one form to another in the ordinary conduct of business.
This idea embraces recurring transaction from cash to inventories to
receivable to cash that forms the conventional chain of business
operations.
Fund deployed for short term are mainly for working capital or
operational purpose. Towards the day-to-day operation, a firm will have
to provide money towards the purchase of raw materials, payment of
wage and salaries to extend credit to buyers of goods as well as to meet
other day to day operations.
By analyzing about the working capital, we concluded that, all the
corporations. Weather public or private, manufacturing or non-
manufacturing have just adequate working capital to serve in
competitive market. It is because excessive or inadequate working
capital is dangerous from the firm’s point of view. Excessive
investment on working capital affects a firms’ profitability just idle
investment, yields nothing. In the same way, inadequate investment on
working capital affects the liquidity position of the company and leads
to financial embarrassment and failure of the company.
It is therefore, recognized fact that any mistake made in management of
working capital can lead to adverse effects in business and reduced the
liquidity, turnover, profitability and increases the cost of financing of
the enterprises.
15
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
CONCEPTS OF WORKING CAPITAL:
There are two concepts of working capital:- gross & net. Gross working
capital, simply called working capital, refers to the firm’s investment in
current assets. Current assets are the assets which can be converted into
cash within an accounting period (or operating cycle)and cash, short-
term securities, receivables, debtors and stock (inventory) are included
in current assets. Net working capital refers to the difference between
current assets and current liabilities. Current liabilities are those claims
of outsiders, which are expected to mature for payment within an
accounting periodand include creditors, bills payableand outstanding
expenses.
1) Gross working capital:
According to this concept, total current assets are working capital
which presents both owned capital as well as loan capital used for
financing current assets. It includes cash, short-term securities and
receivables inventories. These assets can be converted into cash within
a year. Generally, when it comes to current assets, cash is the most
valuable element because it is immediately available to settle bills and
16
debtors are more value than stock which is nearer to being turned into
cash. The gross concept of working capital refers to the amount funds
invested in short-term assets that are employed in the enterprise. Gross
working capital is the firm’s total current asset and net working capital
is current assets minus current liabilities.
Another name of gross working capital is circulating capital.
Circulating capital means circular flow of cash. This is also called
operating cycle in case of manufacturing firm. This cycle starts with
which is used to pay for raw materials. Raw materials are converted
into work-in progress which is again converted into finished goods.
When it is ready for sale, it is a circular cash-flow from cash into
inventories to receivables and back to cash, this cycle will be repeat
again for the whole life of the firm.
The value represented by current assets circulates from one working
capital to another working capital from purchase accounts to goods
manufacturing accounts. From inventory accounts to sales accounts,
from sales accounts to cash accounts, this is described as circulating
nature of current assets of in other work working capital has circulating
nature. The speed of circulating of working capital of the turnover of
current assets is an indicator of degree of efficiency of the management.
The faster the turnover shows the higher degree of efficiency.
The working capital cycle can be presented in the diagram as:
17
COLLECTION PAYMENTS
DEBTORS
SALES
PRODUCTION
VALUE ADDED CONVERSION
Figure: 4.1 The working capital cycle of manufacturing firms.
If the business is profitable the firm’s assets at the end of each cycle will be
greater than the original investment. In this manner, each cycle will
produce a gross profit, and the amount of net earnings for the year will
depend. In part, on number of times the cycle occurs or how measured
by the ratio of sales to current assets. The higher the ratio, the more
efficiency the operations, fewer current assets are needed to support
each dollar of sales.
The flow of working capital does not always proceeds as it is pre-
planned when it moves through different stage of cash cycle, for
example, sales may decline due to can in consumer taste, slow economy
and receivable become more difficult to collect the working capital
cycle will be interrupted. This leads to decline in profitability and firm
could suffer bankruptcy if this adverse situation prevails for sometimes.
18
CREDITORSCASH
RAW MATERIALS
FINISHED GOODS
WORK-IN-
PROGRESS
There is also a much shorter cycle of activity where in goods and
materials are held for manufacture and sale, and credit is advanced to
customers for rapid conversion into cash to provide the funds with
which to continue in business and to make a profit distribution
possible.
The working capital cycle shown in figure 4.1 is theoperating cycle for
non- manufacturing firm where, cash is required to purchase raw
materials which are needed to convert into work-in- progress, which is
again converted into finished goods. Are sold for cash and credit and
ultimately debtors will be realized.
The non manufacturing firms such as wholesalers and retailers do not
manufacture goods. So, they have the direct conversion of cash into stock of
finished goods into debtors and then into cash. This can be shown
graphically as:
CASH
19
DEBTORS STOCK OF FINISHED GOODS
Figure: 4.2 Operation cycle of non-manufacturing
firms.
Sometimes service and financial concerns may not have any inventory.
In this case the operations cycle will be shortest as follows:
CASH
Figure: 4.3 Operating cycle of service and financial
firms.
The gross capital working capital focuses on two aspects of
current assets management:
a) Optimum investment in current assets: As state earlier, both
excessive and inadequate investment is harmful for the business.
This aspectsthus, emphasis on the optimum adequate level of
current assets, working capital depends upon the business
activated. It also changes with the change in business activities.
This may cause excess or shortage of working capital
frequently. The management should be active and alert to
correct the imbalance.
b) Financing of current assets: This aspect focus on the need of
arranging funds to finance current assets when more working
capital is required due to the increase in business activities.
Then the arrangement should be made quickly. Similarly, when
surplus funds arise, then they should be invested in short term
securities.
2) Net working capital:
Net working capital comprises short term net assets: stock, debtors
and cash less creditors. Working capital management then is to do
20
DEBTORS
with management of all aspects of both current assets and current
liabilities, so as to minimize the risk of insolvency while
maximizing return on assets.
Net working capital represents the excess of total current assets
over total current liabilities. It is a qualitative concept which shows
the financial soundness of current financial position. Net working
capital may be positive or negative according to the size of current
assets and current liabilities. Current assets should be sufficiently in
excess of current liabilities for the positive working capital. This
concept lives idea about the case and cost of raising working capital
to the management.
Not only for the management, is it also a major importance to
investors and lenders. They always like a company to maintain
current assets should be two fold of current liabilities and these
concepts is measured by the current ratio via current assets ÷current
liabilities. Which should be 4:1. A large ratio indicates greater
solvency and makes it unsafe and unsound. A negative working
capital denotes negative liquidity which is also dangerous for the
company.
Management should always be alert to improve the imbalance in the
liquidity position of the firm. Mathematically, it is presented as:
Net working capital ˭ Current assets – Current liabilities
An alternatives definition of net working capital is that portion of a
firm’s current assets financed with long term funds.
For every firm today, minimum portion of working capital is
financed with the permanent sources of funds such as owners’
capital, debentures, long-term debt, and preference capital or
retained earnings; this portion of working capital which is financed
with long term funds is called permanent working capital.
Management must therefore, decide the extent to which current
21
assets should be financed with equity capital or/ and borrowed
capital.
Both the concepts of working capital, gross and net, are not
mutually exclusive, however. They are equally important from the
management point of view in the gross concept points out two
important aspects of current assets: (i) Optimum investment in each
of the component of current assets and (ii)Financing of these
current assets; while the net concept indicates (i) The liquidity
position and (ii) The extent to which working capital may be
financed by permanent sources of funds. Both the concepts have
their own advantages and disadvantages, which concept to choose
depend upon the purpose of the firm. The concept of gross capital is
a financial concept where as that of net concept is an accounting
concept. Management is interested in current assets to operate the
business with efficiency. To evaluate the efficiency, gross concept
is appropriate. On the other hand interest of investors and lenders is
in concept of net working capital because it helps in the judgment if
liquidity position of the enterprise.
4.3) Objective of Working capital:
Even profitability companies fail if they have inadequate cash flow.
Liabilities dare settled with cash and net profits. The primary
objective of working capital management is to ensure that sufficient
cash is available to:
Meet day to day cash flow needs;
Pay wages and salaries when they fall due;
Pay creditors to ensure continued suppliers of goods and
services;
Pay government taxation and providers of cash dividends; and
22
Ensure the long term survival of the business entity.
4.4) IMPORTANCE OF WORKING CAPITAL
Working capital may be regarded as the lifeblood of the business.
Without insufficient working capital, any business organization cannot
run smoothly or successfully.
In the business the Working capital is comparable to the blood of the
human body. Therefore the study of working capital is of major
importance to the internal and external analysis because of its close
relationship with the current day to day operations of a business. The
inadequacy or
mismanagement of working capital is the leading cause of business
failures.
To meet the current requirements of a business enterprise such as the
purchases of services, raw materials etc. working capital is essential. It
is also pointed out that workings.
Growth and Expansion Activities
As a company grows, logically, larger amount of working capital will
be needed, though it is difficult to state any firm rules regarding the
relationship between growth in the volume of a firm's business and its
working capital needs. The fact to recognize is that the need for
increased working capital funds may precede the growth in business
activities, rather than following it. The shift in composition of working
capital in a company may be observed with changes in economic
circumstances and corporate practices. Growing industries require more
working capital than those that are static.
Operating Efficiency
23
Operating efficiency means optimum utilization of resources. The firm
can minimize its need for working capital by efficiently controlling its
operating costs. With in-creased operating efficiency the use of
working capital is improved and pace of cash cycle is accelerated.
Better utilization of resources improves profitability and helps in
relieving the pressure on working capital.
Price Level Changes
Generally, rising price level requires a higher investment in working
capital. With increasing prices the same levels of current assets need
enhanced investment. However, firms which can immediately revise
prices of their products upwards may not face a severe working capital
problem in periods of rising levels. The effects of increasing price level
may, however, be felt differently by different firms due to variations in
individual prices. It is possible that some companies may not be
affected by the rising prices, whereas others may be badly hit by it.
Other Factors
There are some other factors, which affect the determination of the
need for working capital. A high net profit margin contributes towards
the working capital pool. The net profit is a source of working capital to
the extent it has been earned in cash. The cash inflow can be calculated
by adjusting non-cash items such as depreciation, out-standing
expenses, losses written off, etc, from the net profit, (as discussed in
Unit 6).
The firm's appropriation policy, that is, the policy to retain or distribute
profits also has a bearing on working capital. Payment of dividend
consumes cash resources and thus reduces the firm ',s working capital
to that extent. If the profits are retained in the business, the firm 's
working capital position will be strengthened.
In general, working capital needs also depend upon the means of
transport and communication. If they are not well developed, the
24
industries will have to keep huge stocks of raw materials, spares,
finished goods, etc. at places of production, as well as at distribution
outlets.
4.5) Determinants of working capital:
There are no hard and fast rules or certain formulae to determine the
working capital requirement of the firm. The importance of efficient
working capital management is an aspect of overall financial
management. Thus a firm plans its operations with adequate working
capital requirement or it should have neither too excess nor too
inadequate working capital. A number of factors affect the working
capital. Generally, the following factors affect the working capital
requirement of the firm.
i)Nature and size of business:
The working capital requirement of a firm is basically related size and
nature of the business. If the size of the firm is bigger, then or requires
more working capital whereas small firm needs less working capital
relatively to public utilities.
ii) Manufacturing Cycle:
Working capital requirement of an enterprise are also influenced by the
manufacturing or production cycle. It refers to the time involved to
make finished goods from the raw materials. During the process of
manufacturing cycle funds are tied up longer the manufacturing cycle,
the larger will be working capital requirement and vice-versa.
iii) Production Policy:
Working capital requirement is also determined by its production
policy. If a firm produces seasonal foods, the its production and sales
volume fluctuate with different seasons. This type of fluctuating policy
affects the working capital policy of the firm.
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iv) Credit Policy:
Credit policy affects the working capital of a firm. Working capital
requirement depends on terms of sales. Different term may be followed
by different customers according to their credit worthiness. If the firm
follows the liberal credit policy, then it requires more working capital.
Conversely, if a firm follows the stringent policy, it requires less
working capital.
v) Availability of Credit:
Availability of credit facility is another factor that affects the working
capital requirement. If the creditors avail a liberal credit terms then the
firm will need less working capital and vice-versa. In other works, the
firm can get credit facility easily on favorable conditions. Thus, it
requires less working capital to run the firm otherwise more working
capital is required to operate the firm smoothly.
vi) Growth and Expansion:
Growth and expansion also affects the working capital requirement of
firm. However, it is difficult to precise; determine the relationship
between the growth and expansion of the firm and working capital
needs, however, the other things being the same growing firms needs
more working capital than those static ones.
vii) Price level Change:
Price level change also affects the working capital requirement of a
firm. Generally, a firm requires maintaining the higher amount of
working capital, if the price level rises. Because the same level of
current assets needs more due to the increasing price. In conclusion, the
implications of changing price level of working capital position will
vary from firm to firm depending on the nature and another relevant
consideration of the operation of the conserned firm.
viii) Operating Efficiency:
26
Operating efficiency is also an important factor, which influences the
working capital requirements of the firm. It refers to the efficient
utilization of available resources at minimum cost. Thus, financial
manager can contribute to strong working capital position through
operating efficiency. If a firm has strong operation efficiency then it
needs lesser amount of working capital and vice-versa.
ix) Profit Margin:
The level of profit margin differs from firm to firm. It depends upon the
nature and quality of product has a sound marketing management and
enjoy the monopoly power in the market then it earns quite high profit
and vice-versa. Profit is sources of working capital because it
contributes towards the working capital as a pol by generating more
internal funds.
x) Level of Taxes
The level of taxes also influences working capital requirement of firm.
The amount of taxes to be paid in advances is determined by the
prevailing tax regulations. But the firm’s profit is not constant, or can
note be predetermined. Tax liability in asense of short-term liquidity is
payable in cash. Therefore, the provision for tax amount is one of the
important aspects of working capital planning. If tax liability increase,
it needs to increase the working capital and vice-versa.
4.6) Financing of Working Capital:
The firm’s working capital assets policy is never set in a vacuum; it is
always established in conjunction with the firm’s working capital
policy. Every manufacturing concern of industry requires additional
assets whether they are instable or growing conditions. The most
important function of financial manager is to determine the level of
working capital and to decide how it is to financed. Financial of any
assets is concerned with two major factors- cost and risk. Therefore, the
financial manager must determine an appropriate financing mix, or
decide how current liabilities should be used to finance current assets.
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However, a number of financing mixes are available to the financial
manager. He can resort generally there kinds of financing.
i) Long-term financing:
Long-term financing has high liquidity and low profitability,
Ordinary share, Debenture, Preference share; retained earnings and
long-term debt of financial institution are major sources of long-
term finance.
ii) Short-term financing:
A firm must arrange its short-term credit in advance. The sources of
short-term financing of working capital are trade credit and bank
borrowing.
Bank credit: Bank credit is the primary institutional sources for
working capital financing for the purpose of bank credit, amount of
working capital requirement has to be estimated by the borrowers
and banks areapproached with the necessary supporting data.
After availability of this data, bank determines the maximum credit
based on the margin requirements of the security. The types of loan
provided by commercial banks are loan arrangement, overdraft
arrangement, commercial paper etc.
4.7) APPROACHES TO MANAGING WORKING CAPITAL
Two approaches are generally followed for the management of working
capital: (i) the conventional approach, and (ii) the operating cycle
approach.
The Conventional Approach
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This approach implies managing the individual components of working
capital (i.e. inventory, receivables, payables, etc.) efficiently and
economically so that there are neither idle funds nor paucity of funds.
Techniques have been evolved for the management of each of these
components. In India, more emphasis is given to the management of
debtors because they generally constitute the largest share of the
investment in working capital. On the other hand, inventory control has
not yet been practised on a wide scale perhaps due to scarcity of goods
(or commodities) and ever rising prices.
The Operating Cycle Approach
This approach views working capital as a function of the volume of
operating expenses. Under this approach the working capital is
determined by the duration of the operating cycle and the operating
expenses needed for completing the cycle. The duration of the
operating cycle is the number of day involved in the various stages,
commencing with acquisition of raw materials to the realization of
proceeds from debtors. The credit period allowed by creditors will have
to be set off in the process. The optimum level of working capital will
be the requirement of operating expenses for an operating cycle,
calculated on the basis of operating expenses required for a year.
In India, most of the organizations use to follow the conventional
approach earlier, but now the practice is shifting in favour of the
operating cycle approach. The banks usually apply this approach while
granting credit facilities to their clients.
ADEQUACY OF WORKING CAPITAL
The firm should maintain a sound working capital position. It should
haveadequate working capital to run its business operations. Both
excessive aswell as inadequate working capital positions are dangerous
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from the firms point of view. Excessive working capital not only
impairs the firmsprofitability but also result in production interruptions
and inefficiencies.
The dangers of excessive working capital are as follows:
It results in unnecessary accumulation of inventories. Thus,
chances of
inventory mishandling, waste, theft and losses increase.
It is an indication of defective credit policy slack collections
period.
Consequently, higher incidence of bad debts results, which adversely
affects profits.
Excessive working capital makes management complacent
which
degenerates into managerial inefficiency.
Tendencies of accumulating inventories tend to make
speculative
profits grow. This may tend to make dividend policy liberal and
difficult
to cope with in future when the firm is unable to make speculative
profits.
Inadequate working capital is also bad and has the following
dangers:
It stagnates growth. It becomes difficult for the firm to
undertake
profitable projects for non- availability of working capital funds.
It becomes difficult to implement operating plans and achieve
the firm s
profit target.
Operating inefficiencies creep in when it becomes difficult even
to meet
day commitments.
30
Fixed assets are not efficiently utilized for the lack of working
capital
funds. Thus, the firm s profitability would deteriorate.
Paucity of working capital funds render the firm unable to avail
attractive credit opportunities etc.
The firm loses its reputation when it is not in a position to honor
its
short-term obligations.
An enlightened management should, therefore, maintain the right
amount of working capital on a continuous basis. Only then a proper
functioning of business operations will be ensured. Sound financial and
statistical techniques, supported by judgment, should be used to predict
the quantum of working capital needed at different time periods.
A firm s net working capital position is not only important as an index
of liquidity but it is also used as a measure of the firm’s risk.
Risk in this regard means chances of the firm being unable to meet its
obligations on due date. The lender considers a positive net working as
a measure of safety. All other things being equal, the more the net
working capital a firm has, the less likely that it will default in meeting
its current financial obligations. Lenders such as commercial banks
insist that the firmshould maintain a minimum net working capital
position.
In this study four years data ( 2008 to 2012 have been presented and analyzed. It covers to analyze the ratio as well trend and composition of working capital, which means current assets, current liabilities, liquidity, turnover, leverage and profitability of BALIC.
5.1) Components of current assets:
For the day to day business operation different types of current assets are required. Current assets refer those assets that are cash or can be converted into cash within a year. The composition of current assets or the main components of current assets at BALIC are cash and bank balance, loan and advances and government securities. Miscellaneous
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current assets are also a component of current assets. Prepaid expenses, outstanding income like interest receivable and other current assets are also included in miscellaneous current assets. The following table shows the amount of cash and bank balance, money at call or short notice, loan and advanced government securities and other current assets of Bajaj Allianz Life Insurance Company Pvt. Ltd.
Table 1 :
Current Assets
Fiscal Year Sundry Debtors
Cash and Bank balance
Loan and advance
Other C.A Total
2008/09 639,948 3,515,993 76,970 1,148,475 5,381,386
2009/10 1,089,070 2,186,908 130,275 2,022,560 5,298,538
2010/11 1,341,359 4,285,098 147,078 2,344,020 8,217,555
2011/12 1,223,706 4,520,165 170,660 3,832,457 9,746,988
Source:- Annual Report of BALIC From 2008/09 to 2012/13
Assets of Company was amounted to Rs. 5,460,356 which included Rs. 3,552963 of cash and bank balance, Rs. 76,970 of loan and advance, Rs. 1,828,423 of miscellaneous current assets. Current assets of the company increase in all four years.
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INTERPRETATION 1 :
As stated in above figure the current assets of BALIC increases all the four year from FY 2008/09 t0 2011/12. In the cash of FY 2009/10, the increasing trend is low from FY 2008/09. But the overall increasing trend of current assets is higher.
5.2) Component of Current Liabilities:
Current liabilities is a short-term obligation which is payable within a year. The composition of current liabilities or the main components of current liabilities. Tax provision, staff bonus, proposed dividend payable and other liabilities are included in other current liabilities. The following table shows the amount of deposit and other accounts, short term loan, bills payable and other current liabilities of BALIC.
Table 2 :
Current Liabilities
Fiscal Year Creditors Deposit Bills Payable Other C.L Total
2008/09 2,249,357 3,318,900 87,607 2,396,492 8,052,356
2009/10 3,701,079 4,129,900 196,168 2,491,564 10,518711
2010/11 3,281,079 4,430,900 98,372 1,690,564 9,500,915
2011/12 4,246,449 4,142,491 97,087 2,368,827 10,654,854
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In the above table, the component of current liabilities which consists deposits.Source annual report of company.
INTERPRETATION 2 :
In the above figure shows that the current liabilities of the company is increasing In fiscal year 2008/09 the total amount of current liabilities Rs. 8,052,356 for the increasing impact of deposits and other current liabilities. In all four year deposits and other current liabilities are increased.
5.3) Working capital of BALIC:
Working capital is required to run business smoothly and efficiently in the context of set objectives. It is no doubt that no organization can achieve its goal without proper use of working capital. It means money invested on working capital should be neither more nor less because both the position of working capital affects not only liquidity but also profitability of the organization. The investment decision should be made on any type of current assets by considering their role in company and determining which one is more beneficial to the company and which is not. The following table shows the amount of working capital of BALIC of the study period.
Table 3 :
Working capital of Company
Fiscal Year Total C.A Total C.L WC= CA-CL
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2008/09 5,381,386 8,052,356 4,470,970
2009/10 5,298,538 9,500,915 4,202,377
2010/11 8,217,555 10,518,711 2,301,156
2011/12 9,746,988 10,654,854 907,866
Sources: Annual Report of company.
INTERPRETATION3:
In the above figure we clearly show the current assets, current liabilities and working capital condition of BALIC from fiscal year 2008/09 to 2011/12. Working capital condition of the company is at satisfactory level. All the year of the study period the working capital of the company is negative.
Liquidity Ratio:Liquidity ratios measures ability of the firms to meet its short-term obligations. Liquidity of any business organization is directly related with working capital or current assets and current liabilities of that organization. In other words, one of the main objectives of working capital management is keeping sound liquidity position. Company is a different organization which is engaged in Mobilization of funds. So, without sound liquidity position of ability to meet its short-term obligation various liquidity ratios are calculated and to know the trend of liquidity are trend analysis of major liquidity ratios have been considered.
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5.4) Current Ratio:This ratio indicates the short-term solvency position of bank. In other words current ratio indicates better liquidity position. It is calculated as follows:
Current assets (CA)
Current liabilities (CL)
The following table shows the current ratio to compare the following capital management of BALIC.
Table 4 :
Current ratio
Fiscal Year Total CA Total CL Current ratio
2008/09 5,381,386 8,052,356 0.67
2009/10 5,298,538 10,518,711 0.50
2010/11 8,217,555 9,500,915 0.86
2011/12 9,746,988 10,654,854 0.91Average=0.74
Sources: Annual Report of BALIC from 2008/09 to 2012.
Current Ratio of BALIC
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INTERPRETATION4 :
The above table shows the CA, CL and current ratio of the BALIC. The current ratio of the BALIC is fluctuating over the year. The highest current ratio is in fiscal year 2011/12 0.91. And in all year it is increasing. The average ratio is 0.74.
5.6) Cash and bank balance to Current Assets:
The cash and bank balance is almost liquids from the current assets, this ratio shows the percentage of readily available fund within the banks. It can be calculated by dividing cash and bank balance by current assets, which is given below.
Cash and bank balance
Current assets
This ratio shows that the percentage of current assets cover cash and bank balance. The following table and figure shows the cash and bank balance to current assets ratio of BALIC over the study period.
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Table 5 :
Cash and Bank to Current Assets Ratio of BALIC
Fiscal Year Cash& Bank Balance
Current Assets Ratio (%)
2008/09 3,552,963 5,381,386 0.67
2009/10 2,186,908 5,298,538 0.41
2010/11 4,385,098 8,217,555 0.53
2011/12 4,382.396 9,746,988 0.44
Sources: Annual Report of Company
INTERPRETATION5 :
Cash and Bank balance to current assets ratio of the company is in 2009/10 decreased and in 2010/11 it increased and again in 2011/12 is decreased.
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5.7) Cash and Bank Balance to Total deposit:
The ratio shows the ability of bank immediate funds to cover their deposits. It can be calculated by dividing cash and bank balance by deposits. The ratio can be expressed as:
The following table and figure shows the cash and bank balance to total deposits ratio of the BALIC over the study period.
Table 6 :
Cash and Bank balance to total Deposit Ratio of BALIC
Fiscal Year Cash & bank Total deposit Ratio
2008/09 3,552,963 2,318,900 1.53
2009/10 2,186,908 2,123,900 1.03
2010/11 4,385,098 2,899,500 1.51
2011/12 4,382.396 3,857,000 1.14
Sources: Annual report of Company
INTERPRETATION6 :
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The above figure depicts that the cash and bank balance to total deposit of BALIC has been slightly decreasing in FY 2009/10, 2010/11, 2011/12.
5.8) Net Profit to Total Assets:
This ratio is very much crucial for measuring the profitability of funds invested in the bank assets. It measures the return on assets it computed by using the following formula.
Net profit after tax
Total assets
Table 7
Net Profit to Total assets Ratio of BALIC
Fiscal Year Net Profit Total assets Ratio(%)
2008/09 5,605,846 5,336,042 1.05
2009/10 6,182,978 5,298,538 1.17
2010/11 10,387,412 8,217,555 1.26
2011/12 23,499,431 9,746,988 2.41
Sources: Annual Report of company
INTERPRETATION7:
40
Net Profit to total asset ratio in 2008/09 1.05 and it increasing slightly in financial year 2009/10, 2010/11 and 2011/12.
5.9) Debtors Turnover Ratio:
Concept: -
Debtors are expected to be converted into cash over a
short period of time and therefore are included in current assets. It
shows how many times debtors are converted into cash in a year.
Debtors Turnover Ratio = Net credit sales
Average Debtors
Table 8 :
Debtors Turnover Ratio
Year Credit sales Average Debtors Ratio2008/09 102,199,181 19,080,194 5.35
2009/10 132,858,985 27,192,101 4.88
2010/11 171,671,451 36,302,837 4.72
2011/12 221,246,824 42,584,634 5.19
Diagram:-
INTERPRETATION8 :
41
The debtor’s turnover ratio was very less in the year
2010/11 at 4.72 times, but them it has increased to 5.19, 5.66 times in
the year 2011/12 and 2008-09. This shows that the company is making
all the offers to speed up the collection process.
5.9) Creditors Turnover Ratio:
Concept: -
Creditors’ turnover ratio establishes relationship
between not credit purchases and average trade creditors and accounts
payable. The ratio indicates the velocity with which the creditors are
turned over in relation to purchases.
Creditors Turnover Ratio = Net Credit Purchases
Average creditors
Table 9 :
Creditors Turnover Ratio
Year Credit Purchases Average Creditors Ratio
2008/09 96,724,469 82,074,994 1.17
2009/10 127,553,879 112,554,635 1.13
2010/11 165,680,148 146,617,013 1.13
2011/12 213,323,185 189,501,666 1.12
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INTERPRETATION9 :
The creditors turnover ratio was 1.17 times in the year 2008/09& it decreased to 1.13 times in the year 2009-2010 but creditor turnover will be remain same two year 2009/10 and 2011/12.
5.10)Working Capital Turnover Ratio:-
It is taken as one of the
primary indicators of the short-term solvency of the business. It
establishes the relationship with the net sales. It measures the
efficiency with which the working capital is being used by the firm.
WORKING CAPITAL TURNOVER RATIO = Net Sales
Net Working
Capital
Table 10 :
Year Net Sales Net Working Capital Ratio
2008/09 102,199,181 20,229,751 5.05
2009/10 132,858,985 23,244,807 5.72
2010/11 171,671,451 36,879,727 4.65
2011/12 221,246,824 32,265,850 6.86
Source: Annual report of BALIC
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INTERPRETATION10 :
In The year 2008/09 working capital t/o ratio was5.05 time ,5.72 time in the year 2009/10. In the year 2009/10 the working capital has increases. And in financial year 2010/11 it decreased and again in financial year 2011/12 it increased.
Table 11 :
Statement of changes in working Capital for the year 2009/10
Particulars 31-3-2009 31-3-2010 Increase Decrease
Current assets
Sundry debtors 639,948 1,089,070 449,122
Cash& bank balance 3,515,993 2,186,908 1,366,055
Loan& advance 76,970 130,275 53,310
Other C.A 1,148,475 2,022,560 834,085
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Total 5,381,386 5,298,538 1,336,517 1,366,055
Current Liabilities
Sundry creditors 2,249,357 3,701,079 1,451,722
Deposit 3,318,900 4,129,900 811,000
Bills payable 87,607 196,168 108,561
Other C.L 2,396,492 2,491,564 95,072
Total 8,052,356 10,518,711 2,466,355
INTERPRETATION 11 :
Current assets for the year 2009/10 is increases and it is good condition for the company and current liabilities of the company is increased by 2,466,355.and by putting formula (W.C= C.A- C.L)working capital of the company for year 2009/10 is 4,470,970. Here working capital of company is increasing that means profitability of company also increasing.
Table 12 :
Statement of changes in working Capital for the year 2m,010/11
Particulars 31-3-2010 31-3-2011 Increase Decrease
Current assets
Sundry debtors 1,089,070 1,341,359 298,850
Cash& bank balance 2,186,908 4,285,098 2,198,190
Loan& advance 130,275 147,078 16,803
Other C.A 2,022,560 2,344,020 468,538
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Total 5,298,538 8,217,555 2,982,381
Current Liabilities
Sundry creditors 3,701,079 3,281,079 420,000
Deposit 4,129,900 4,430,900 301,000
Bills Payable 196,168 98,372 97,796
Other C.L 2,491,564 1,690,564 801,000
Total 10,518,711 9,500,915 301,000 1,318,796
INTERPRETATION12 :
Current assets for the year 2009/10 is increases and it is good condition for the company and current liabilities of the company is decreased by 1,017,796 that’s shows the working capital of the company is increased. Here debtors increased means cash balance of company decreased.
Table 13 :
Statement of changes in working Capital for the year 2011/12
Particulars 31-3-2011 31-3-2012 Increase Decrease
Current assets
Sundry debtors 1,341,359 1,223,706 117,653
Cash& bank balance
4,285,098 4,520,165 235,067
Loan& advance 147,078 170,660 23,582
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Other C.A 2,344,020 3,832,457 1,488,437
Total 8,217,555 9,746,988 1,747,086 117,653
Current liabilities
Sundry creditors 3,281,079 4,246,449 765,370
Deposit 4,430,900 4,142,491 - 288,409
Bills payable 98,372 97,087 1,285
Other C.L 1,690,564 2,368,827 678,263
Total 9,500,915 10,654,854 1,443,633 289,694
INTERPRETATION13 :
Current assets for the year 2009/10 is increases and it is good condition for the company and current liabilities of the company is increased by 1,153,939 that’s shows working capital of company decreased. Here debtors decreased that’s good for company it shows cash of company increased.
FINDINGS1. Current assets for the year 2009/10 is decreases and its
application for the company and current liabilities of the company is increased by 2,466,355.and by putting formula (W.C= C.A- C.L)working capital of the company for year 2009/10 is 4,470,970.
2. Current assets for the year 2009/10 is increases and it is good condition for the company and current liabilities of the company is decreased by 1,017,796 that’s shows the working capital of the company is increased. Here debtors increased means cash balance of company decreased.
3. Current assets for the year 2009/10 is increases and it is good condition for the company and current liabilities of the company
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is increased by 1,153,939 that’s shows working capital of company decreased. Here debtors decreased that’s good for company it shows cash of company increased.
4. Current ratio (C.R) of fiscal year 2008/09 to 2011/12 showed slightly increase i.e. 0.67 to 0.91. But in fiscal year 2009/10 C.R decreased comparatively in deposits and in fiscal year 2010/11 C.R is again increase 0.86 due to increase in factors which influence it.
5. Cash and Bank balance to current assets ratio of the company is in 2009/10 decreased and in 2010/11 it increased and again in 2011/12 is decreased.
6. The above figure depicts that the cash and bank balance to total deposit of BALIC has been slightly decreasing in FY 2009/10, 2010/11, 2011/12.
7. Net profit to total asset ratio in 2008/09 1.05 and it increasing slightly in financial year 2009/10, 2010/11 and 2011/12.
8. The debtor’s turnover ratio was very less in the year 2010/11 at
4.72 times, but them it has increased to 5.19, 5.66 times in the
year 2011/12 and 2008-09. This shows that the company is
making all the offers to speed up the collection process.
9. The creditors turnover ratio was 1.17 times in the year 2008/09& decreased to 1.13 times in the year 2009-2010 but creditor turnover will be remain same two year 2009/10 and 2011/12.
10. In The year 2008/09 working capital t/o ratio was5.05 time ,5.72 time in the year 2009/10. In the year 2009/10 the working capital has increases. And in financial year 2010/11 decreased and again in financial year 2011/12 increased.
SUGGESTIONOn the basis of the analysis and observation an attempt made to present some suggestions.
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1. In the year 2009-2010 the current assets of the company has
declined and current liability of the company has increases
therefore the net working capital declined. There for the current
ratio has declined. The net working capital of the company has
increased remaining year.
2. The company has able to repay the liability of the creditors
because the profit of the company has increased every year.
3. Because of the current assets has declined in the year 2010-2011
but profit of the company has increased in the year 2008-2009.
There for the return on current assets is high.
4. Company has able to full fill the standard level of current ratio
i.e. 2:1 .There for the company has able to repay the liability
and loan of company.
CONCLUSIONAt the end it is stated that the working capital management is a part of
money invested in the business.Working capital may be regarded as
49
lifeblood of a business. Its effective provision can do much to ensure
the success of a business.
The Working Capital Management contributes much in the over all
management of the organization affairs, efficiency of organization
operations depend on how it manages its short term business dealings.
Working Capital management contributes for the firm efficiency as
well as the finance manager is proper utilizing the available wealth and
maintaining the required liquidity.
Working capital is considered to be an important tool for
progress. Working capital management techniques are playing
significant role in assisting the management for decision making. The
study of working capital management at Bajaj Allianz Life Insurance
Pvt. Ltd.Is found to be very effective. The working capital contains the
management of Cash, Debtors, and creditors. The Bajaj Allianz Life
Insurance Pvt. Ltd has profit oriented company .The profit of the
company will be increases every year .The company has able to the
repay the amount of the creditor. The company has more working
capital and also sale has increases year to year.
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LIMITATIONS1. The analysis is limited to three years of data study (for the year
2008/09 to 2011/12 ) for financial analysis.
2. The estimation and expectation made in the financial statements
may differ from actual performance due to various economic
conditions, government policies and other related factors.
3. All the data accumulated and presented in this project is procured
from secondary sources which may have been subject to stealthy
biased nature.
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