1. A Report
on
of
Sultanate of Oman
Submitted by
R.Sasikumar
Course code : 406
Register No: 32118
Enrollment No: 08008PF103
Under the Guidance of
Prof. N. Aravindakshan
Submitted in partial fulfillment of the requirement
for the award of the degree of
of
M.G.UNIVERSITY
KOTTAYAM – KERALA
March – 2010

2. EXECUTIVE SUMMARY
This project is based on the study of working capital management in Arabian Industries LLC, An
insight view of the project will encompass – what it is all about, what it aims to achieve, what is
its purpose and scope, the various methods used for collecting data and their sources, including
literature survey done, further specifying the limitations of our study and in the last, drawing
inferences from the learning so far.
“Arabian Industries LLC” an Oman’s prestigious Engineering and Manufacturing Company; is a
well established engineering company. It is an Omani company which always maintained the
highest international standards of excellence through quality, technology and innovation. It has
the ability to provide the best in engineering and back up services for the petroleum and allied
industries. The company has ISO 9001-2000 certification and has executed projects in various
Middle East countries. It captured the various facets of the Oman economy in sectors ranging
from maintenance, manufacturing, fabrication and infrastructure, etc.
Working capital is the life-blood of all types of enterprises, manufacturing and trading both. It is
constantly required to buy raw materials for payment of wages and other day-to-day expenses.
Without adequate working capital, manufacturing operations will be crippled. It is a base on
which all the activities of business enterprise depend. The working capital management refers to
the management of working capital, or precisely to the management of current assets. A firm’s
working capital consists of its investments in current assets, which includes short-term assets—
cash and bank balance, inventories, receivable and marketable securities.
This project tries to evaluate how the management of working capital is done in Arabian
Industries LLC, through inventory ratios, working capital ratios, trends, computation of cash,
inventory and working capital, and short term financing. Working capital is primarily concerned
with inventories management, Receivable management, cash management & Payable
management.
The objective of the company now is to increase the scale of its business by increasing its profits
and the turnover and also by venturing into new line of business. It is now targeting to be the
World Class Industrial Enterprise from the present status. It is striving to have a huge global base.

3. AILLC/ADM/00101-2010 31ST March 2010
CERTIFICATE
This is to certify that Mr.Sasikumar.R. Register No.-32118 a IVth semester MBA student
of M.G.University - Kerala, has visited our Organization and conducted a study about it’s
Working Capital Management and he has successfully completed his Project works,
during the period from January to February 2010..
We wish all the best in his future endeavors.
Thanks with Regards,
Yours faithfully,
MaheshNair,
Finance Manager
Arabian Industries LLC.
CERTIFICATE

4. This is to certify, that Mr. Sasikumar.R is a bonafide student of Polyglot Institute,
Sultanate of Oman, and is presently pursuing a Post Graduate Degree in Master of
Business Administration in Finance and marketing.
Under our guidance, he has submitted his project report titled “Working Capital
Management” of Arabian Industries LLC, in partial fulfillment of the requirement for the
summer internship project during the Post Graduate Degree in Master of Business
Administration studies.
This report has not been previously submitted as part of another degree or diploma of
another Business School or University.
Centre Co-Ordinator:
Dr.K.Vijaya kumar Prof. N. Aravindakshan
. Dept. of Management
Polyglot Institute, Muscat,
Polyglot Institute Sultanate of Oman
Place: Muscat, Sultanate of Oman
Date: 31st March 2010

5. DECLARATION
I, Sasikumar.R., the undersigned, an MBA student of M.G.University, Kerala do hereby
declare that this report titled “Working Capital Management” of ArabianIndustries LLC,
under the guidance of Prof. N.Aravindakshan, Professor of Finance and Accounting,
Department of University Studies, Polyglot Institute, Sultanate of Oman, submitted in
partial fulfillment of the requirement for the summer internship project during the Post
Graduate Degree in Master of Business Administration studies.
This is my original work and has not been previously submitted as a part of another
degree or diploma of another Business school or University. The findings and conclusions
of this report are based on my personal study and experience, during the tenure of my
summer internship.
Place: Muscat, Sultanate of Oman.
Date: 31st March 2010.
Counter signed:
Prof. N.Aravindakshan,
Dept. of University Studies,
Polyglot Institute,
Muscat, Sultanate of Oman.

6. ACKNOWLEDGEMENT
I take this opportunity to thank various people, who all have helped me to complete successfully
my internship programme with a project at Arabian Industries LLC. I would like to express my
gratitude towards thanking the following people:
Prof. N.Aravindakshan: (Former Co-Ordinator, Institute of Management in Kerala, University
of Kerala, Kollam Centre:)
Prof. N Aravindakshan, guided me with his valuable suggestion. He was a source of
inspiration for me to complete the study and make this report on time and was instrumental in
shaping this report.
Dr.K Vijaya Kumar.(Centre Co-ordinator)
I am highly indebted to the centre co-ordinator Dr.. K.Vijaya Kumar, Department of
Management Studies for inspiring me and for his valuable guidance and assistance provided.
Mrs. Sindhu Divakaran
Mrs.Sindhu Divakaran, Faculty of Management Studies, Polyglot Institute, has also guided me
with her valuable suggestions and advice for making this report a good success.
Mr.P.O. Jabir - Operation Manager-Polyglot Institute, Sultanate of Oma,
I take this opportunity to express my sincere and whole hearted thanks to Mr.P.O.Jabir, Operation
Manager, and all the staff members of Polyglot Institute, Sultanate of Oman., for their tremendous
help and support during the period of my project study.
Mr. Mahesh Nair
I express my sincere gratitude to Mr.Mahesh Nair-Manager Finance-Arabian Industries LLC, for
the valuable advice and guidance extended to me for the completion and shaping of the
dissertation.
Mr.Abdulkhadar Padiyath,
I wish to extend my sincere thanks to Mr.Abdulkhader Padiyath (Manager Finance -(Assistant),
for His help and support in shaping this report.
I also extend my sincere gratitude to all employees of Arabian Industries LLC, for their kind co-
operation and support for the completion of this report.

7. TABLE OF CONTENTS
1. Executive Summary
2. Certificate from organization
3. Certificate from Guide
4. Declaration
5. Acknowledgement
6. List of Tables and Chart
Chapter No: Page No.
1. Introduction 1
1.1 Background of the study 2
1.2 Statement of Problem 3
1.3 Need and Importance of the study 3
1.4 Objectives of the study 4
1.5 Hypothesis 5
1.6 Methodology 5
1.7 Limitations of the study 8
1.8 Chapterization- 8
2 Manufacturing Industry in Oman-A Profile 9
2.1 Introduction 10
2.2 Present Scenario 10
2.3 Foreign Investment 12
2.4 Oman Economy – A Review 13
2.5 Major Diversification 14
2.6 Manufacturing industry in Oman 15
2.7 Infrastructure Industry for Crude Oil 15
2.8 Aim of Mfg. Industry inOman 16
2.9 The Scope of Oil and Gas Industry 17
3 A profile of Arabian Industries LLC 18
3.1 Introduction 19
3.2 Industry Profile 20

8. 3.3 Subsidiary and Joint Venture 21
3.4 Mission and Vision 24
3.5 Objectives and Goals 28
3.6 Product and Project Profiles 31
3.7 Financial Highlights 35
3.8 Literature Review 44
4 A Theoretical Perspective of Working Capital Management 50
4.1 Introduction 51
4.2 Need of Working Capital 56
4.3 Concept of Working Capital 56
4.4 Classification of Working Capital 59
4.5 Determinants of Working Capital 61
5 Research Methodology 65
5.1 Introduction 66
5.2 Scope of the Study. 67
5.3 Type of Data Collection 67
5.4 Objective of the Study 68
5.5 Scope and Limitation of the Study 69
6 Working Capital Level and Analysis 71
6.1 Working Capital Level 72
6.2 Working Capital Trend Analysis 73
6.3 Current Asset Analysis 76
6.4 Current liability Analysis 79
6.5 Changes of Working Capital 80
6.6 Operating Cycle 83
6.7 Working Capital Leverage 90
7 Analysis of Financial Statements 92
7.1 Introduction 93

9. 7.2 Role of Ratio Analysis 93
7.3 Limitations of Ratio Analysis 94
7.4 Classification of WC Ratio 94
7.5 Efficiency Ratio 95
7.6 Liquidity Ratio 102
8 Working Capital Management-Finance and Estimation 109
8.1 Introduction 110
8.2 Receivables Management 110
8.3 Inventory Management 120
8.4 Cash Management 118
8.5 Working Capital – Finance and Estimation 124
8.6 Source of Working Capital 125
8.7 Estimation of working capital 128
9 Summary of Findings, Conclusion and Suggestions 130
9.1 Findings 131
9.2 Conclusions 132
9.3 Suggestions 133
BIBLIOGRAPHY
ABBREVIATION

10. LIST OF TABLES, AND FIGURES.
Sl. No. Description/name of the Table Table No. Page No.
1 Business Unit wise Performance-FBU 3-1 36
2 Business Unit wise Performance-MBU-TSU 3-2 36
3 Business Unit wise Performance-PDU 3-3 37
4 Business Unit wise Performance-EMU 3-4 37
5 Division Wise Performance 3-5 38
6 Financial Performance 3-6 38
7 Financial Summary 3-7 39
8 Cash Flow Analysis 3-8 41
9 Five Year Planned Turnover 3-9 41
10 Business Plan 3-10 43
11 Capital Expenditure 3-11 43
12 Size of Working Capital 6-1 72
13 Working Capital - Variance 6-2 74
14 Working Capital-size 6-3 74
15 Analysis of Current Asset and Liabilities 6-4 76
16 Current Asset - Size 6-5 76
17 Composition of Current Asset 6-6 77
18 Current Liabilities 6-7 79
19 Changes in Working Capital 6-8 82
20 Operating Cycle 6-9 89
21 Working Capital leverage 6-10 91
22 Working Capital Turnover Ratio 7-1 95
23 Inventory turnover 7-2 98
24 Debtors Turnover 7-3 100
25 Current Asset Turnover 7-4 101
26 Current Ratio 7-5 104
27 Quick Ratio 7-6 106

11. 28 Absolute Liquid Ratio 7-7 108
29 Size of Receivable 8-1 111
30 Average Collection Period 8-2 112
31 Size of Inventory 8-3 115
32 Components of Inventory 8-4 115
33 Inventory turnover Ratio 8-5 117
34 Inventory Holding Period 8-6 117
35 Size and Index of Cash 8-7 121
36 Operating Cycle 8-8 123
37 Cash Conversion Cycle 8-9 127
38 Estimation of Working Capital 8-10 128
LIST OF GRAPHS
Sl. No. Description-Name of Charts Chart No Page No.
1 Performance Review-FBU 3-1 36
2 Performance Review-MBU-TSU 3-2 36
3 Performance Review-PDU 3-3 37
4 Performance Review-EMU 3-4 37
5 Finance Performance- 3-5 39
6 Financial Summary 3-6 40
7 Cash Flow Analysis 3-7 41
8 Permanent Working Capital 4-1 59
2 Temporary Working Capital 4-2 60
9 Working Capital Index 6-1 73
10 Current Asset Index 6-2 77
11 Current Asset Component 6-3 78
12 Current Liability Index 6-4 79
13 Changes in Working Capital 6-5 82
14 Net Operating Cycle 6-6 89
15 Working Capital Leverage 6-7 91
16 Working Capital Turnover Ratio 7-1 96
17 Inventory Turnover Ratio 7-2 97
18 Receivable Turnover Ratio 7-3 100
19 Current Asset Turnover Ratio 7-4 101
20 Current Ratio 7-5 104
21 Quick Ratio 7-6 106
22 Cash and Bank to Current Liabilities 7-7 108
23 Receivable Index 8-1 111

12. 24 Average Collection Period 8-2 112
25 Inventories Index 8-3 115
26 Components of Inventories 8-4 116
28 Inventory Turnover Ratio 8-5 117
29 Inventory Holding Period 8-6 118
30 Cash Index 8-7 121
31 Cash Conversion Cycle 8-8 123
32 Cash Conversion Cycle 8-9 124
127
33 Estimation of Working Capital-2010 8-10 129
LIST OF DIAGRAMS
Sl. No Descriptions Page No.
1 Structure of Arabian Industries LLC 19
2 Corporate Objectives 28
3 AI LLC-Holding Company Structure 40
2 Determinants of Working Capital 64
6 Research Methodology 66
7 Research Methodology – Data to Action 70

13. 8 Operating Cycle 84
9 Working Capital Cycle 87
10 Cash Conversion Cycle 122
13. BIBLIOGRAPHY
BOOKS REFERRED
1) Banarjee.A.K., Nair.R.K., Agarwal. V.K. – Organisational Behaviour
(2007) – Pragathi Publishers – Meerut
2) Gupta.R.L – Advanced Accountancy
(2006) – Sultan Chand and Sons
3) Khan M.Y. Jain P.K. – Financial Management
(2008) – Tata Mc Graw Hill Publishers – New Delhi
4) Maheshwari.Dr.S.N. – Management Accounting and Financial Control
(2006) – Sultan Chand and Sons – new Delhi
5) Maheshwari.Dr.S.N - Accounting for Management
(2005) – Sultan Chand and Sons
6) Pandey.I.M – Financial Management
(2008) – Vikas Publishing House – New Delhi

14. 7) Sharma.R.K., Shashi K Gupta - Business Management
(2008) – Kalyani Publishers – Ludhiana.
REPORTS REFERRED
 Financial Statement – (Annual Report for 2009)
 Company Journals – Arabian Industries LLC.
 Main Economic and Social Indicators – 2009 - Ministry of National Economy – Sultanate
of Oman.
ABBREVIATION
AI LLC Arabian Industries LLC
AIM LLC Arabian Industries Manufacturing LLc
AIP LLC Arabian Industries Project LLC
AITS LLC Arabian Industries Technical Support LLC
APO Account Payable Outstanding
ARO Account Receivable Outstanding
BUH Business Unit Head
CCC Cash Conversion Cycle
CFO A US Magazine
CNC Computed Numerically Controlled
COO Chief Operating Officer
CPP Creditors payment Period
DCP Debtors Conversion Period
DSS Decision Support System
EPC Engineering, Procurement and Construction
FGCP Finished Goods Conversion Period
GCC Gulf Co-Operation Council
GOC Gross Operating Cycle
GWC Grows Working Capital
ICP Inventory Conversion Period
IOD Inventory Over Days
LLC Liability Limited Company
MBU Manufacturing Business Unit
MD Managing Director
NWC Networking Capital
PBU Project Business Unit
PDO Petroleum Development Oman
PWC Permanent Working Capital
QAQC Quality Assurance and Quality Control
RCP Receivable Conversion Period
RMCP Raw Material Conversion Period
TOR Turn Over Ratio
TWC Temporary Working Capital
WCC Working Capital Cycle
WCM Working Capital Management
WIPCP Work in Progress Conversion Period